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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 000-25221
CITIZENS HOLDING COMPANY
(Exact Name of Registrant as Specified in Its Charter)
MISSISSIPPI 64-0666512
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
521 Main Street, Philadelphia, MS 39350
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 601-656-4692
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- ----------------
Common Stock, $.20 par value American Stock Exchange
Securities registered pursuant to section 12(g) of the Act:
None
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 [X] NO [_]
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 registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). YES [_] NO [X]
As of June 30, 2002, the aggregate market value of the registrant's common
stock, $.20 par value, held by non-affiliates of the registrant was $61,085,221.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at March 14, 2003
Common stock, $.20 par value 4,974,578 Shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference to Part
II and III of the Form 10-K: 2002 Annual Report to Shareholders (Part II) and
the Definitive Proxy Statement dated March 21, 2003 for the registrant's Annual
Meeting of Stockholders to be held April 22, 2003 (Part III).
CITIZENS HOLDING COMPANY
FORM 10-K
INDEX
PAGE
----
PART I
ITEM 1. BUSINESS ................................................................ 1
ITEM 2. PROPERTIES .............................................................. 7
ITEM 3. LEGAL PROCEEDINGS ....................................................... 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ..................... 9
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ... 9
ITEM 6. SELECTED FINANCIAL DATA ................................................. 10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS ........................................................... 11
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .............. 11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ............................. 11
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE .............................................................. 12
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ...................... 12
ITEM 11. EXECUTIVE COMPENSATION .................................................. 12
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS ............................................. 12
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .......................... 12
ITEM 14. CONTROLS AND PROCEDURES ................................................. 12
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K ......... 13
SIGNATURES ........................................................................... 15
CITIZENS HOLDING COMPANY
FORM 10-K
PART I
In addition to historical information, this report contains statements
which constitute forward-looking statements and information which are based on
management's beliefs, plans, expectations, assumptions and on information
currently available to management. The words "may," "should," "expect,"
"anticipate," "intend," "plan," "continue," "believe," "seek," "estimate" and
similar expressions used in this report that do not relate to historical facts
are intended to identify forward-looking statements. These statements appear in
a number of places in this report, including, but not limited to, statements
found in Item 1 "Business" and in Item 7 "Management's Discussion and Analysis
of Financial Condition and Results of Operations." The Corporation notes that a
variety of factors could cause the actual results or experience to differ
materially from the anticipated results or other expectations described or
implied by such forward-looking statements. The risks and uncertainties that may
affect the operation, performance, development and results of the Corporation's
and the Bank's business include, but are not limited to, the following: (a) the
risk of adverse changes in business conditions in the banking industry generally
and in the specific markets in which the Corporation operates; (b) changes in
the legislative and regulatory environment that negatively impact the
Corporation and Bank through increased operating expenses; (c) increased
competition from other financial institutions; (d) the impact of technological
advances; (e) expectations about the movement of interest rates, including
actions that may be taken by the Federal Reserve Board in response to changing
economic conditions; (f) changes in asset quality and loan demand; (g)
expectations about overall economic strength and the performance of the economy
in the Corporation's market area; and (h) other risks detailed from time to time
in the Corporation's filings with the Securities and Exchange Commission. The
Corporation does not undertake any obligation to update or revise any
forward-looking statements subsequent to the date on which they are made.
ITEM 1. BUSINESS
BACKGROUND
Citizens Holding Company (the "Corporation") is a one-bank holding company
that holds 97.52% of the outstanding shares of The Citizens Bank of
Philadelphia, Mississippi (the "Bank"). The Corporation was incorporated under
Mississippi law on February 16, 1982, at the direction of the Board of Directors
of the Bank in order to facilitate the Bank's adoption of a one-bank holding
company structure.
The Bank was opened on February 8, 1908 as The First National Bank of
Philadelphia. In 1917, the Bank surrendered its national charter and obtained a
state charter at which time the name of the Bank was changed to The Citizens
Bank of Philadelphia, Mississippi. At December 31, 2002, the Bank was the
largest bank headquartered in Neshoba County with total assets of $517,895,749
and total deposits of $433,674,581.
The principal executive offices of both the Corporation and the Bank are
located at 521 Main Street, Philadelphia, Mississippi 39350 and its telephone
number is (601) 656-4692. All
1`
references hereinafter to the activities or operations of the Corporation
reflect the Corporation's activities or operations through the Bank.
The Corporation acquired by merger CB&T Capital Corporation and Citizens
Bank & Trust Company in Louisville, Mississippi in the second quarter of 2002.
This acquisition added approximately $70 million in assets to the Corporation.
The purchase price of the net assets totaled approximately $12.3 million cash
and was based on a multiple of approximately 1.505 times the book value, subject
to certain adjustments, of the acquired company. OPERATIONS
The Corporation, through the Bank, engages in a wide range of commercial
and personal banking activities, including accepting demand deposits, savings
and time deposit accounts, making secured and unsecured loans, issuing letters
of credit, originating mortgage loans, and providing personal and corporate
trust services; and provides certain services that are closely related to
commercial banking such as credit life insurance and title insurance for its
loan customers.
Revenues from the Corporation's lending activities constitute the largest
component of the Corporation's operating revenues. Such lending activities
include commercial, real estate, installment (direct and indirect) and credit
card loans. The Corporation's primary lending area is East Central Mississippi,
specifically Neshoba, Newton, Leake, Scott, Attala, Lauderdale, Winston and
Kemper counties and contiguous counties. The Corporation extends out-of-area
credit only to borrowers who are considered to be low risk, and only on a very
limited basis.
This eight county lending area is mainly rural with Meridian, at 41,036 in
population, being the largest city. Agriculture and some light industry are a
big part of the economy of this area. The largest employer in the Corporation's
service area is the Mississippi Band of Choctaw Indians with their schools,
manufacturing plants and their main source of income, The Pearl River Resort
(the "Resort"). The Resort and its related services employs approximately 5,000
people from the Corporation's service area.
The Corporation has in the past and intends to continue to make most types
of real estate loans, including, but not limited to, single and multi-family
housing, farm, residential and commercial construction and commercial real
estate loans. Historically, approximately 32.6% of the Corporation's loan
portfolio has been attributed to this category of lending. Another 48.2% of the
Corporation's loan portfolio has been comprised of commercial, industrial and
agricultural production loans, with consumer loans making up the remaining 19.2%
of the total loan portfolio.
The Corporation's loan personnel have the authority to extend credit under
guidelines established and approved by the Board of Directors. Any aggregate
credit that exceeds the authority of the loan officer is forwarded to the loan
committee for approval. The loan committee is composed of various Bank
directors, including the Chairman. All aggregate credits that exceed the loan
committee's lending authority are presented to the full Board of Directors for
ultimate approval or denial. The loan committee not only acts as an approval
body to ensure consistent application of the Corporation's loan policy, but also
provides valuable insight through the communication and pooling of knowledge,
judgment and experience of its members.
2
Of course, all loans in the Corporation's portfolio are subject to risk
based on the economy in the Corporation's area and also that of the nation.
However, because the Corporation's local economy has been strong and
unemployment has remained at historic lows, management continues to believe that
general risk levels are low.
In addition to lending services, the Corporation provides a wide range of
personal and corporate trusts and trust-related services, which include its
serving as executor of estates, as trustee under testamentary and inter vivos
trusts and various pension and other employee benefit plans, as the guardian of
the estates of minors and incompetents, and as escrow agent under various
agreements. The Corporation also offers discount brokerage services through
First Tennessee Bank.
Through such innovations as its VISA Checkcard program, the 24 Hour Phone
Teller and its Internet site (http://www.thecitizensbankphila.com), the
Corporation's customers have the ability to have easy and convenient access to
their funds and account balances 24 hours a day, 7 days a week. Additionally,
the Internet site enables the Corporation's customers to review their accounts
in detail, make transfers between their accounts and pay bills from anywhere in
the world.
EXECUTIVE OFFICERS OF THE REGISTRANT
From 1982 until his retirement on December 31, 2002, Steve Webb, who is 70
years old, served as Chief Executive Officer and President of the Corporation.
Mr. Webb had served as Chief Executive Officer of the Bank from 1978 until
December 31, 2002 and President of the Bank from 1978 until January 2002. Mr.
Webb has served as a member of the Board of Directors of the Corporation since
1982 and of the Bank since 1970. Mr. Webb has served as Chairman of the Board of
both the Bank and Corporation since 1997.
Greg L. McKee, who is 41 years old, was named President and Chief Executive
Officer of the Corporation and Chief Executive Officer of the Bank in January
2003. He has served as President of the Bank since January 2002 and served as
Chief Operating Office of the Bank from January 2002 until December 31, 2002. He
has also been a member of the Board of Directors of both the Corporation and the
Bank since 2001. Previous to this, he served as Executive Vice-President of the
Bank from 2001 to 2002, Senior Vice-President of the Bank from 2000 to 2001,
Vice-President of the Bank from 1992 to 2000, Assistant Vice-President of the
Bank from 1989 to 1992, and Assistant Cashier of the Bank from 1984 to 1989.
Robert T. Smith, who is 51 years old, has been employed by the Bank since
1986 and has been in his current position of Senior Vice-President and Chief
Financial Officer since January 2001. Prior to January 2001, Mr. Smith held the
title of Vice-President and Controller from 1987 until 2001 and Assistant
Vice-President from 1986 to 1987. In addition to his position with the Bank, Mr.
Smith has served as Treasurer of the Corporation since February 1996.
EMPLOYEES
The Corporation has no compensated employees. At December 31, 2002, the
Bank employed 192 full-time employees and 28 part-time employees. The Bank is
not a party to any collective bargaining agreements, and employee relations are
considered to be good.
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SUPERVISION AND REGULATION
The Bank is chartered under the banking laws of the State of Mississippi
and is subject to the supervision of, and is regularly examined by, the
Department of Banking and Consumer Finance and the FDIC. The Corporation is a
registered bank holding company within the meaning of the Bank Holding Company
Act ("BHC Act"), and is subject to the supervision of the Federal Reserve Board
("FRB"). Certain legislation and regulations affecting the businesses of the
Corporation and the Bank are discussed below.
General.
The FRB requires the Corporation to maintain certain levels of capital. The
FRB also has the authority to take enforcement action against any bank holding
company that engages in any unsafe or unsound practice or that violates certain
laws, regulations, or conditions imposed in writing by the FRB.
Capital Standards.
The FRB, FDIC and other federal banking agencies have established
risk-based capital adequacy guidelines intended to provide a measure of capital
adequacy that reflects the degree of risk associated with a bank's operations.
A banking organization's risk-based capital ratios are obtained by dividing
its qualifying capital by its total risk-adjusted assets and off-balance sheet
items. Since December 31, 1992, the federal banking agencies have required a
minimum ratio of qualifying total capital to risk-adjusted assets and
off-balance sheet items of 8%, and a minimum ratio of Tier 1 capital to
risk-adjusted assets and off-balance sheet items of 4%.
In addition to the risk-based guidelines, federal banking regulators
require banking organizations to maintain a minimum amount of Tier 1 capital to
total assets, referred to as the leverage ratio. For a banking organization
rated in the highest of the five categories used by regulators to rate banking
organizations, the minimum leverage ratio of Tier 1 capital to total assets is
3%.
Prompt Corrective Action and Other Enforcement Mechanisms.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") requires each federal banking agency to take prompt corrective action
to resolve the problems of insured depository institutions, including but not
limited to those that fall below one or more of the prescribed minimum capital
ratios. The law requires each federal banking agency to promulgate regulations
defining the following five categories in which an insured depository
institution will be placed, based on the level of its capital ratios: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. The Corporation and Bank are
classified as well capitalized under these guidelines.
Safety and Soundness Standards.
FDICIA also implemented certain specific restrictions on transactions and
required the regulators to adopt overall safety and soundness standards for
depository institutions related to
4
internal control, loan underwriting and documentation, and asset growth. Among
other things, FDICIA limits the interest rates paid on deposits by
undercapitalized institutions, the use of brokered deposits and the aggregate
extension of credit by a depository institution to an executive officer,
director, principal shareholder or related interest, and reduces deposit
insurance coverage for deposits offered by undercapitalized institutions for
deposits by certain employee benefits accounts.
Restrictions on Dividends and Other Distributions.
The power of the board of directors of an insured depository institution to
declare a cash dividend or other distribution with respect to capital is subject
to statutory and regulatory restrictions which limit the amount available for
such distribution depending upon the earnings, financial condition and cash
needs of the institution, as well as general business conditions.
The Corporation's ability to pay dividends depends in large part on the
ability of the Bank to pay dividends to the Corporation. Certain provisions of
state law restrict the payment of dividends by a Mississippi state bank.
FDIC Insurance Assessments.
The FDIC has established several mechanisms to increase funds to protect
deposits insured by the Bank Insurance Fund ("BIF") and the Savings Association
Insurance Fund ("SAIF"), both of which are administered by the FDIC. The Bank's
deposits are insured through BIF except for those deposits the Bank acquired
from the Resolution Trust Corporation in April, 1994. This acquisition consisted
of one branch of the former Security Federal Savings and Loan in Kosciusko,
Mississippi, and these deposits remain insured through SAIF.
Interstate Banking and Branching.
On September 29, 1994, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Act") was signed into law. The
Interstate Act effectively permits nationwide banking.
Interstate branching by consolidation of banks was permitted beginning June
1, 1997, except in states that have passed legislation prior to that date
"opting-out" of interstate branching. If a state opted-out prior to June 1,
1997, then banks located in that state may not participate in interstate
branching. Effective May 1, 1997, Mississippi "opted in" to the interstate
branching provision of the Interstate Act.
Community Reinvestment Act.
The revised Community Reinvestment Act ("CRA") regulations emphasize an
assessment of actual performance rather than of the procedures followed by a
bank, to evaluate compliance with the CRA. Overall CRA compliance continues to
be rated across a four-point scale from "outstanding" to "substantial
noncompliance," and continues to be a factor in review of applications to merge,
to establish new branches or for the formation of bank holding companies.
Different evaluation methods are used depending on the asset size of the bank.
5
The FDIC examined the Bank on June 1, 1999 and again most recently on
August 21, 2001, for its performance under the CRA. The Bank was rated
Satisfactory during both of these examinations. No discriminatory practices or
illegal discouragement of applications were found.
Impact of Monetary Policies.
Banking is a business that depends on interest rate differentials. In
general, the difference between the interest paid by a bank on its deposits and
other borrowings, and the interest rate earned by banks on loans, securities and
other interest-earning assets comprises the major source of banks' earnings.
Thus, the earnings and growth of banks are subject to the influence of economic
conditions generally, both domestic and foreign, and also to the monetary and
fiscal policies of the United States and its agencies. The nature and timing of
any future changes in such policies and their impact on the Corporation cannot
be predicted.
COMPETITION
The banking business is a highly competitive business. The Corporation's
market area consists principally of Neshoba, Newton, Leake, Scott, Attala,
Lauderdale, Winston and Kemper Counties in Mississippi, although the Corporation
also competes with other financial institutions in those counties and in
surrounding counties in Mississippi in obtaining deposits and providing many
types of financial services. The Corporation competes with larger regional banks
for the business of companies located in the Corporation's market area. A
healthy economy, such as the Corporation's market area is experiencing, invites
certain challenges, especially that of competition.
All financial institutions today are faced with the challenge of competing
for customers' deposits, and the Corporation is no exception. The Corporation
competes with savings and loan associations, credit unions, production credit
associations, federal land banks, finance companies, personal loan companies,
money market funds and other non-depository financial intermediaries. Many of
these financial institutions have resources many times greater than those of the
Corporation. In addition, new financial intermediaries such as money-market
mutual funds and large retailers are not subject to the same regulations and
laws that govern the operation of traditional depository institutions.
Recent changes in federal and state law have resulted in, and are expected
to continue to result in, increased competition. The reductions in legal
barriers to the acquisition of banks by out-of-state bank holding companies
resulting from implementation of the Interstate Act and other recent and
proposed changes are expected to continue to further stimulate competition in
the markets in which the Corporation operates, although it is not possible to
predict the extent or timing of such increased competition.
Currently, there are approximately fourteen different financial
institutions in the Corporation's market area competing for the same customer
base. Despite these challenges, the Corporation has not only been able to
maintain its market share, but has actually increased its share in recent years.
6
ITEM 2. PROPERTIES
The Corporation, through the Bank, currently operates from its main office
in downtown Philadelphia, and from 18 additional branches in Neshoba, Newton,
Leake, Scott, Attala, Lauderdale, Winston and Kemper counties, all located in
Mississippi. Information about these branches is set forth in the table below:
BANKING
LOCATION/ FUNCTIONS
NAME OF OFFICE TELEPHONE NUMBER OFFERED
Main Office 521 Main Street Full Service;
Philadelphia, Mississippi Trust
(601) 656-4692
Eastside Branch 585 East Main Street Drive-up
Philadelphia, Mississippi
(601) 656-4976
Westside Branch 912 West Beacon Street Full Service;
Philadelphia, Mississippi 24 Hour Teller
(601) 656-4978
Northside Branch 720 Pecan Avenue Deposits;
Philadelphia, Mississippi 24 Hour Teller
(601) 656-4977
Pearl River Branch 110 Choctaw Town Center Full Service;
Philadelphia, Mississippi 24 Hour Teller
(601) 656-4971
Union Branch Corner of Horne & Bank Full Service
Union, Mississippi
(601) 774-9231
Carthage Main Office 219 West Main Street Full Service
Carthage, Mississippi
(601) 267-4525
Crossroads Branch Highways 35 & 16 Drive-up
Carthage, Mississippi
(601) 267-4525
Madden Branch Highway 488 Deposits
Madden, Mississippi
(601) 267-7366
7
Sebastopol Branch 24 Pine Street Full Service;
Sebastopol, Mississippi 24-Hour Teller
(601) 625-7447
DeKalb Branch Corner of Main & Bell Full Service
DeKalb, Mississippi
(601) 743-2115
Kosciusko Branch 775 North Jackson Avenue Full Service;
Kosciusko, Mississippi 24-hour Teller
(662) 289-4356
Scooba Branch 1048 Johnston Street Full Service
Scooba, Mississippi
(662) 476-8431
Meridian Branch 1825 Highway 39 North Full Service;
Meridian, Mississippi 24-Hour Teller
(601) 693-8367
Decatur Branch 15520 Highway 15 South Full Service;
Decatur, Mississippi 24-Hour Teller
(601) 635-2321
Forest Branch 247 Woodland Drive North Full Service;
Forest, Mississippi 24-Hour Teller
(601) 469-3424
Louisville Main Branch 100 East Main Street Full Service
Louisville, MS
(662) 773-6261
Industrial Branch 803 South Church Street Drive-Up
Louisville, MS
(662) 773-6261
Noxapater Branch 45 Main Street Deposits
Noxapater, MS
(662) 724-4261
The Bank owns its main office and its branch offices, except for the Pearl
River Branch Office, which is leased. The main office facility, originally
occupied in 1966, is used solely by the Corporation and the Bank. This facility
contains approximately 20,000 square feet and houses the executive offices and
all operations related departments of the Corporation. The other branches range
in size from nearly 4,000 square feet to 1,000 square feet.
8
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than routine
litigation incidental to their business, to which either the Corporation or the
Bank is a party or to which any of their property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to the Company's shareholders during the
fourth quarter of 2002.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Price.
The Corporation's Common Stock is traded on the American Stock Exchange
("AMEX") under the symbol "CIZ." The stock began trading on the AMEX on October
19, 1999 and prior to that date was sold by private transactions between
parties. On December 31, 2002, the Common Stock's closing price was $16.00.
Dividends Declared
2001 High Low (per common share)
- --------------------------------------------------------------------------------
January - March 11.17 10.33 0.083
April - June 11.83 10.77 0.100
July - September 13.17 11.50 0.100
October - December 16.60 12.17 0.100
Dividends Declared
2002 High Low (per common share)
- --------------------------------------------------------------------------------
January - March 16.26 14.25 0.120
April - June 16.00 14.65 0.120
July - September 16.85 15.75 0.140
October - December 17.35 15.70 0.140
Per share information included in the above table has been adjusted to
reflect the three-for-two (3:2) common stock split effective January 2, 2002.
On March 14, 2003, the shares of Common Stock were held of record by
approximately 454 shareholders.
9
Dividends
Dividends, retroactively adjusted to give effect to the three-for-two stock
split, totaled $0.52 per share for 2002 compared to $0.383 in 2001 and $.283 in
2000. These dividends reflect a 36% increase in 2002 over 2001 and a 35%
increase in 2001 over 2000.
The Corporation declares dividends on a quarterly basis in March, June,
September and December with payment following at the end of the month in which
the dividend was declared.
Funds for the payment by the Corporation of cash dividends are obtained
from dividends received by the Corporation from the Bank. Accordingly, the
declaration and payment of dividends by the Corporation depend upon the Bank's
earnings and financial condition, general economic conditions, compliance with
regulatory requirements, and other factors.
ITEM 6. SELECTED FINANCIAL DATA
FIVE YEAR SUMMARY OF CONSOLIDATED STATEMENTS AND RELATED STATISTICS
(amounts in Thousands, Except Percent and Per Share Data)
(Per Share Data adjusted for 3:2 split of January 2, 2002)
2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ----------
Summary of Earnings
- -------------------
Total Interest Income $ 30,197 $ 29,119 $ 28,638 $ 25,476 $ 23,956
Total Interest Expense 9,746 13,399 14,064 10,974 10,860
Provision for loan losses 1,758 1,123 918 849 846
Non-interest income 4,435 3,980 3,285 3,122 2,2897
Non-interest expense 13,865 10,308 8,772 8,361 7,948
Income tax expense 2,965 2,558 2,635 2,793 2,487
Net Income 6,298 5,711 5,534 5,621 4,712
Per Share Data
- --------------
Earnings-basic $ 1.27 $ 1.15 $ 1.12 $ 1.13 $ 0.95
Earnings-diluted 1.26 1.15 1.11 1.13 0.95
Cash dividends 0.520 0.383 0.283 0.213 0.160
Book value at year end 10.81 9.51 8.74 7.57 7.15
Selected Year End Actual Balances
- ---------------------------------
Loans, net of unearned income $ 308,175 $ 264,278 $ 252,022 $ 234,349 $ 211,349
Allowance for possible loan losses (4,222) (3,375) (3,325) (3,100) (2,900)
Investment securities 162,276 122,567 103,533 102,451 91,539
Total assets 518,450 427,213 382,800 362,790 334,232
Deposits 432,768 359,309 289,908 284,462 282,242
Long term borrowings 24,606 14,629 10,000 10,000 10,000
Shareholder's equity 53,783 47,182 43,377 37,546 35,455
Selected Year End Average Balances
- ----------------------------------
Loans, net of unearned income $ 289,407 $ 255,185 $ 244,307 $ 221,165 $ 202,228
10
Allowance for possible loan losses (3,905) (3,335) (3,198) (2,974) (2,701)
Investment securities 153,726 106,632 102,325 97,219 79,401
Total assets 491,833 403,881 374,439 347,613 314,896
Deposits 414,135 327,536 290,704 288,176 268,514
Long term borrowings 19,301 14,815 10,000 10,000 7,630
Shareholders' equity 51,304 47,664 40,701 37,603 33,513
Selected Ratios
- ---------------
Return on average assets 1.28% 1.41% 1.48% 1.62% 1.50%
Return on average equity 12.28% 11.98% 13.60% 14.95% 14.08%
Dividend payout ratio 40.98% 33.31% 25.41% 18.84% 16.85%
Equity to year end assets 10.37% 11.04% 11.33% 10.35% 10.61%
Total risk-based capital to
risk-adjusted assets 15.57% 18.40% 18.88% 18.52% 18.13%
Leverage capital ratio 8.53% 10.51% 11.61% 11.06% 10.61%
Efficiency ratio 54.51% 51.32% 47.20% 45.48% 48.01%
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information on the Management's Discussion and Analysis of Financial
Condition and Results of Operations as of December 31, 2002, 2001, and 2000
required by this Item 7 can be found under the headings "Management's Discussion
and Analysis of Financial Condition and Results of Operations as of December 31,
2002, 2001 and 2000" and "Consolidated Financial Statements" in the 2002 Annual
Report to Shareholders, a copy of which is filed as an Exhibit to this Annual
Report on Form 10-K. Such information is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information on the Quantitative and Qualitative Disclosures about Market
Risk, required by this Item 7A can be found under the headings "Quantitative and
Qualitative Disclosures about Market Risk" in the 2002 Annual Report to
Shareholders, a copy of which is filed as an Exhibit to this Annual Report on
Form 10-K. Such information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information on Financial Statements and Supplementary Data required by this
Item 8 can be found under the headings "Management's Discussion and Analysis of
Financial Condition and Results of Operations as of December 31, 2002, 2001 and
2000", "Consolidated Financial Statements" and "Quarterly Financial Trends" in
the 2002 Annual Report to Shareholders, a copy of which is filed as an Exhibit
to this Annual Report on Form 10-K. Such information is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
11
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the Directors and Executive Officers of the
Corporation required by this Item 10 can be found under the headings "Executive
Officers of the Registrant" in Item 1 of this Annual Report on Form 10-K and
"Section 16(a) Beneficial Ownership Reporting Compliance" and "Board of
Directors" in the Corporation's Definitive Proxy Statement filed with the
Securities and Exchange Commission on March 21, 2003, relating to its 2003
Annual Meeting of Shareholders. Such information is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding the Executive Compensation paid by the Corporation
required by this Item 11 can be found under the headings "Executive
Compensation", "Compensation of the Board of Directors", "Stock Performance
Graph" and "Compensation Committee Interlocks and Insider Participation" in the
Corporation's Definitive Proxy Statement filed with the Securities and Exchange
Commission on March 21, 2003, relating to its 2003 Annual Meeting of
Shareholders. Such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
In partial response to this Item, the Corporation incorporates by reference
the information under the headings "Security Ownership of Directors, Nominees
and Executive Officers" and "Security Ownership of Certain Beneficial Owners" in
the Corporation's Definitive Proxy Statement filed with the Securities and
Exchange Commission on March 21, 2003, relating to its 2003 Annual Meeting of
Shareholders.
The following table summarizes the Company's equity compensation plan
information as of December 31, 2002. the underlying plans, which are more fully
described in Note 16 to the consolidated financial statements included in Item
8, have been previously approved by a vote of the shareholders.
12
Equity Compensation Plan Information
(c)
(a) Number of securities
Number of securities (b) remaining available for
to be issued upon Weighted-average future issuance under equity
exercise of exercise price of compensation plans
outstanding options, outstanding options, (excluding securities
Plan category warrants and rights warrants and rights in column (a))
------------- ------------------- ------------------- --------------
Equity compensation plans $11.65
approved by security holders 124,700 315,970 /(1)(2)/
Equity compensation plans not _____ _____ _____
approved by security holders
Total 124,700 $11.65 315,970
/(1)/ Includes 34,200 shares that remain available for future issuance under
the 1999 Directors' Stock Compensation Plan.
/(2)/ Includes 281,770 shares available for future issuance under the 1999
Employees' Long-Term Incentive Plan. Under the terms of this plan, the
number of shares that may be issued cannot exceed 7% of the total
number of shares issued and outstanding from time to time. In addition
to stock options, restricted stock may be granted or awarded under the
plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding Certain Relationships and Related Transactions
can be found under the headings "Indebtedness of Related Parties" and "Interests
of the Board of Directors" in the Corporation's Definitive Proxy Statement filed
with the Securities and Exchange Commission on March 21, 2003, relating to its
2003 Annual Meeting of Shareholders. Such information is incorporated herein by
reference.
ITEM 14. CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this Annual Report on Form
10-K, the Corporation carried out an evaluation, under the supervision and with
the participation of the Corporation's principal executive officer and principal
financial officer, of the effectiveness of the design and operation of the
Corporation's disclosure controls and procedures as defined in Rule 13a-14(c)
and Rule 15d-14(c) under the Securities Exchange Act of 1934, as amended. Based
on this evaluation, the Corporation's principal executive officer and principal
financial officer concluded that the Corporation's disclosure controls and
procedures are effective in timely alerting them to material information
required to be included in the Corporation's SEC reports. There have been no
significant changes in the Corporation's internal controls or in other factors
that could significantly affect internal controls subsequent to the date the
Corporation carried out its evaluation.
13
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements
Consolidated Financial Statements and Supplementary Information for
years ended December 31, 2000, 2001 and 2002, which include the
following:
(i) Independent Auditor's Report
(ii) Consolidated Statements of Financial Condition
(iii) Consolidated Statements of Income
(iv) Consolidated Statements of Comprehensive Income
(v) Consolidated Statements of Changes in Shareholders' Equity
(vi) Consolidated Statements of Cash Flows
(vii) Notes to Consolidated Financial Statements
(b) Reports on Form 8-K
The following report on form 8-K was filed by the Corporation during
the last quarter of the period covered by this Form 10-K:
On December 30, 2002, the Corporation filed on Form 8-K under Item 7(a)
and Item 9 a press release announcing the change in Chief Executive
Officer upon the retirement of Steve Webb.
(c) Exhibits required by Item 601 of Regulation S-K
3(i) Amended Articles of Incorporation of the Corporation
3(ii) Amended and Restated Bylaws of the Corporation *
4 Rights Agreement between Citizens Holding Company and The *
Citizens Bank of Philadelphia, Mississippi
10(a) Directors' Deferred Compensation Plan - Form of Agreement *
10(b) Citizens Holding Company 1999 Directors' Stock Compensation *
Plan
10(c) Citizens Holding Company 1999 Employees' Long-Term Incentive *
Plan
10(d) Change in Control Agreement dated December 10, 2002 between the
Company and Greg L. McKee
10(e) Summary of Consulting Agreement between the Company and Steve
Webb
13 2002 Annual Report to Shareholders
21 Subsidiaries of Registrant *
23 Consent of Independent Auditors
99(a) Section 906 Certification of Chief Executive Officer
99(b) Section 906 Certification of Treasurer
14
* Filed as an exhibit to the Form 10 Registration Statement of the
Corporation (File No. 000-25221) filed on December 30, 1998 and incorporated
herein by reference, and also filed as an exhibit to Amendment No. 1 to Form 10
Registration Statement of the Corporation (File No. 000-25221) filed on June 21,
1999 and incorporated herein by reference.
(d) Financial Statement Schedules.
None.
15
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
CITIZENS HOLDING COMPANY
Date: March 20, 2003 By: /s/ Greg L. McKee
---------------------------------
Greg L. McKee
President and Chief Executive Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:
SIGNATURES CAPACITIES DATE
/s/ Karl Brantley Director March 20, 2003
- ---------------------------
/s/ W. W. Dungan Director March 20, 2003
- ---------------------------
/s/ Don L. Fulton Director March 20, 2003
- ---------------------------
/s/ David A. King Director March 20, 2003
- ---------------------------
/s/ Herbert A. King Director March 20, 2003
- ---------------------------
/s/ William M. Mars Director March 20, 2003
- ---------------------------
/s/ Greg L. McKee Director, President and March 20, 2003
- --------------------------- Chief Executive Officer
/s/ Robert T. Smith Treasurer March 20, 2003
- ---------------------------
/s/ Steve Webb Chairman of the Board March 20, 2003
- ---------------------------
16
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Greg L. McKee, certify that:
1. I have reviewed this annual report on Form 10-K of The Citizens Holding
Company;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material weaknesses
in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation,
17
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: March 20, 2003 By: /s/ Greg L. McKee
----------------------
Greg L. McKee
Chief Executive Officer
18
CERTIFICATION OF TREASURER
I, Robert T. Smith, certify that:
1. I have reviewed this annual report on Form 10-K of The Citizens Holding
Company;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material weaknesses
in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation,
19
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: March 20, 2003 By: /s/ Robert T. Smith
-----------------------------
Robert T. Smith
Treasurer
20