FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
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
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 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. |X| Yes | | No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of May 10, 2001.
Title Outstanding
Common Stock, $.20 par value 3,308,750
CITIZENS HOLDING COMPANY
FIRST QUARTER 2001 INTERIM FINANCIAL STATEMENTS
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Statements of Condition
March 31, 2001 and December 31, 2000
Consolidated Statements of Income
Three months ended March 31, 2001 and 2000
Consolidated Statements of Comprehensive Income
Three months ended March 31, 2001 and 2000
Consolidated Statements of Cash Flows
Three months ended March 31, 2001 and 2000
Notes to Consolidated Financial Statements
Item 2. Management=s Discussion and Analysis of
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures
PART 1.CONSOLIDATED FINANCIAL STATEMENTS
CITIZENS HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
March 31, December 31,
ASSETS 2001 2000
----------------------------
Cash and due from banks $ 12,320,017 $ 10,415,155
Interest bearing deposits with other banks 640,315 863,371
Federal Home Loan Bank stock 2,546,200 2,499,000
Federal Funds Sold 18,800,000 3,100,000
Investment securities available for sale, at fair value 95,069,217 101,034,174
Loans, net of allowance for loan losses of
$3,325,000 in 2001 and 2000 246,961,064 248,696,755
Premises and equipment, net 4,359,083 4,362,206
Other real estate owned, net 131,305 133,325
Accrued interest receivable 4,480,739 4,726,113
Cash value of life insurance 3,078,676 3,019,454
Goodwill (net) 636,134 654,160
Other assets 3,226,837 3,296,696
----------------------------
TOTAL ASSETS $392,249,587 $382,800,409
============================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing demand $ 37,100,659 $ 36,961,489
Interest-bearing NOW and money market accounts 77,005,056 68,499,167
Savings deposits 19,641,230 19,053,589
Certificates of deposit 172,755,829 165,393,512
----------------------------
Total deposits 306,502,774 289,907,757
Accrued interest payable 1,483,038 1,597,445
Federal Home Loan Bank advances 34,000,000 42,000,000
ABE loan liability 2,388,083 2,520,290
Treasury tax and loan note option 0 700,000
Directors deferred compensation payable 944,182 916,256
Other liabilities 742,593 329,709
----------------------------
Total liabilities 346,060,670 337,971,457
Minority interest in consolidated subsidiary 1,497,020 1,451,991
STOCKHOLDERS' EQUITY
Common stock; $.20 par value, 15,000,000 shares authorized,
and 3,308,750 shares outstanding at March 31, 2001, and
at December 31, 2000 670,750 670,750
Less: Treasury stock, at cost, 45,000 shares at
March 31, 2001 and at December 31, 2000 -239,400 -239,400
Additional paid-in capital 3,353,127 3,353,127
Retained earnings 40,391,749 39,431,650
Unrealized gain (loss) on securities available for sale, net of
deferred tax asset (liability) of $(265,648) in 2001 and ($85,635) in 2000 515,671 160,834
----------------------------
Total stockholders' equity 44,691,897 43,376,961
----------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $392,249,587 $382,800,409
============================
CITIZENS HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS
ENDED MARCH 31,
2001 2000
----------------------------------------
INTEREST INCOME:
Loan income including fees $5,745,729 $5,273,457
Investment securities 1,433,589 1,512,014
Other interest 79,818 5,893
----------------------------------------
Total interest income 7,259,136 6,791,364
INTEREST EXPENSE:
Deposits 3,066,090 2,659,745
Other borrowed funds 554,273 470,890
----------------------------------------
Total interest expense 3,620,363 3,130,635
----------------------------------------
NET INTEREST INCOME 3,638,773 3,660,729
PROVISION FOR LOAN LOSSES 119,769 84,862
----------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,519,004 3,575,867
OTHER INCOME:
Service charges on deposit accounts 661,466 578,917
Other service charges and fees 111,557 89,218
Other income 132,300 93,681
----------------------------------------
Total other income 905,323 761,816
OTHER EXPENSES:
Salaries and employee benefits 1,332,173 1,245,738
Occupancy expense 363,352 361,997
Other operating expense 673,575 570,981
Earnings applicable to minority interest 47,642 47,630
----------------------------------------
Total other expenses 2,416,742 2,226,346
----------------------------------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 2,007,585 2,111,337
PROVISION FOR INCOME TAXES 633,892 739,153
----------------------------------------
NET INCOME $1,373,693 $1,372,184
========================================
NET INCOME PER SHARE
-Basic $0.42 $0.41
========================================
-Diluted $0.41 $0.41
========================================
CITIZENS HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS
ENDED MARCH 31,
2001 2000
----------------------------------------
Net income $1,373,693 $1,372,184
Other comprehensive income, net of tax
Unrealized holding gains (losses) 354,837 114,538
Less reclassification adjustment for gains
(losses) included in net income 0 -15,233
Total other comprehensive income 354,837 99,305
----------------------------------------
Comprehensive income $1,728,530 $1,471,489
========================================
CITIZENS HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS
ENDED MARCH 31,
2001 2000
----------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Cash Provided by Operating Activities $ 2,017,855 $ 2,219,934
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities available for sale 15,286,313 5,805,319
Proceeds from sale of investment securities 0 4,442,059
Purchases of investment securities -8,873,292 -9,586,216
Purchases of bank premises and equipment -133,977 -192,970
Decrease in interest bearing deposits with other banks 223,056 -807,809
Net (increase) decrease in federal funds sold -15,700,000 0
Net increase in loans 1,735,691 -6,118,382
Net Cash Used by Investing Activities -7,462,209 -6,457,999
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 16,595,017 22,101,306
Net increase (decrease) in ABE loans -132,207 57,997
Increase (decrease) in TT&L Note Option -700,000 0
Increase in FHLB advances -8,000,000 -13,100,000
Increase in federal funds purchased 0 1,700,000
Payment of dividends -413,594 -330,875
Net Cash Provided by Financing Activities 7,349,216 10,428,428
Net Increase (Decrease) in Cash and Due from Banks 1,904,862 6,190,363
Cash and Due From Banks, beginning of year 10,415,155 13,312,028
Cash and Due from Banks, end of period 12,320,017 19,502,391
CITIZENS HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2001
1. These interim consolidated financial statements have been prepared in
accordance with generally accepted accounting principles. However, these
financial statements do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. The interim consolidated financial statements are unaudited
and reflect all adjustments and reclassifications which, in the opinion of
management, are necessary for a fair presentation of the results of
operations and financial condition of the interim period. All adjustments
and reclassifications are of a normal and recurring nature. Results for
the periods ending March 31, 2001 are not necessarily indicative of the
results that may be expected for any other interim periods or for the year
as a whole.
The interim consolidated financial statements of Citizens Holding Company
include the accounts of its 96.64% owned subsidiary, The Citizens Bank of
Philadelphia (collectively referred to as "the Corporation"). All
significant intercompany transactions have been eliminated in
consolidation.
2. Summary of Significant Accounting Policies. See note 1 of the Notes to
Consolidated Financial Statements of the Citizens Holding Company that were
included in the
Form 10-K Annual Report filed March 28, 2001.
Investment Securities B The Corporation classifies all of its securities as
available-for-sale and carries them at fair value with unrealized gains or
losses reported as a separate component of capital, net of any applicable
income taxes. Realized gains or losses on the sale of securities
available-for-sale, if any, are determined on an identification basis. The
Corporation does not have any securities classified as Held for Trading or
Held to Maturity.
3. In the ordinary course of business, the Corporation enters into commitments
to extend credit to its customers. The unused portion of these commitments
is not reflected in the accompanying financial statements. As of March 31,
2001, the Corporation had entered into commitments with certain customers
that had an unused balance of $13,684,475 compared to $13,745,594 unused at
December 31, 2000. There were $452,825 of letters of credit outstanding at
March 31, 2001 and at December 31, 2000.
4. Net income per share B Basic, has been computed based on the weighted
average number of shares outstanding during each period. Net income per
share B Diluted, has been computed based on the weighted average number of
shares outstanding during each period plus the dilutive effect of
outstanding granted options. Basic weighted average
shares have been adjusted to reflect the five-for-one stock split on the
common stock effective January 1, 1999. Earnings per share were computed as
follows:
FOR THE THREE MONTHS
ENDED MARCH 31,
2001 2000
-----------------------------
Basic weighted average
shares outstanding 3,308,750 3,308,750
Dilutive effect of granted options 6,927 8,033
-----------------------------
Diluted weighted average
shares outstanding 3,315,677 3,316,783
Net income $1,373,693 $1,372,186
Net income per share-basic $ 0.42 $ 0.41
Net income per share-diluted $ 0.41 $ 0.41
5. The Corporation is a party to lawsuits and other claims that arise in the
ordinary course of business, which are being vigorously contested. In the
regular course of business, Management evaluates estimated losses or costs
related to litigation, and the provision is made for anticipated losses
whenever Management believes that such losses are probable and can be
reasonably estimated. At the present time, Management believes, based on
the advice of legal counsel, that the final resolution of pending legal
proceedings will not have a material impact on the Corporation's
consolidated financial position or results of operations.
6. In June 1998, the Financial Accountings Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." In 2000, the FASB issued
SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities (an amendment of SFAS No. 133)." These statements
provide a comprehensive and consistent standard for the recognition and
measurement of derivatives and hedging activities. During 1999, the FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133-an
amendment of FASB No. 133," which concluded that it was appropriate to
defer the effective date of SFAS No. 133 to fiscal years beginning after
June 15, 2000. The effective date of SFAS No. 138 is also effective for
fiscal years beginning after June 15, 2000. The adoption of these
statements did not have a material effect on its consolidated financial
statements of the Corporation.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities (a
replacement of FASB Statement No. 125)." This statement revises the
standards for accounting for securitizations and other transfers of
financial assets and collateral and requires certain disclosures, but it
carries over most of the provisions of SFAS No. 125. SFAS No. 140 is
effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001. SFAS No.
140 is effective for recognition and reclassification of collateral and for
disclosures relating to securitization transactions and collateral for
fiscal years ending after December 15, 2000. The adoption of this
statement did not have a material effect on its consolidated financial
statements of the Corporation.
CITIZENS HOLDING COMPANY AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis is written to provide greater insight into
the results of operations and the financial condition of Citizens Holding
Company, (the "Corporation").
Statements concerning future performance, developments or events, concerning
expectations for growth and market forecasts, and any other guidance on future
periods, constitute forward-looking statements which are subject to a number of
risks and uncertainties which might cause actual results to differ materially
from stated expectations. These factors include, but are not limited to, the
approval of regulatory agencies and shareholders, the effect of interest rates
changes, the expansion of the Corporation, competition in the financial services
market for both deposits and loans, and general economic conditions.
LIQUIDITY
The Corporation has an asset and liability management program that assists
management in maintaining net interest margins during times of both rising and
falling interest rates and in maintaining sufficient liquidity. Liquidity of
the Corporation at March 31, 2001 was 46.54% and at March 31, 2000 was 42.74%.
Liquidity is the ratio of short-term investments to potentially volatile
liabilities. Management believes it maintains adequate liquidity for the
Corporation's current needs.
When the Corporation has more funds than it needs for its reserve requirements
or short-term liquidity needs, the Corporation increases its security
investments or sells federal funds. It is management's policy to maintain an
adequate portion of its portfolio of assets and liabilities on a short-term
basis to insure rate flexibility and to meet loan funding and liquidity needs.
The Corporation has secured and unsecured federal funds lines with correspondent
banks in the amount of $38,500,000. In addition, the Corporation has the
ability to draw on its line of credit with the Federal Home Loan Bank in excess
of $53,671,500 at March 31, 2001. At March 31, 2001, the Corporation had unused
and available $38,500,000 of its federal funds line of credit and $19,671,500 of
its line of credit with the Federal Home Loan Bank.
CAPITAL RESOURCES
The Corporation's equity capital was $44,691,897 at March 31, 2001. The main
source of capital for the Corporation has been the retention of net income.
On January 1, 1999, the Corporation issued a five-for-one (5:1) split to the
shareholders of the Corporation. This split increased the number of shares
outstanding to 3,308,750 from 661,750. The number of shares authorized
increased from 750,000 to 3,750,000 after the split. Additionally, the
shareholders approved an increase in authorized shares to 15,000,000 at the
annual meeting held April 13, 1999. Cash dividends in the amount of $413,594 or
$.125 per share were paid year to date March 31, 2001.
Quantitative measures established by regulation to ensure capital adequacy
require the Corporation to maintain minimum amounts and ratios of Total and Tier
1 capital (primarily common stock and retained earnings, less goodwill) to risk
weighted assets, and of Tier 1 capital to average assets. Management believes
that as of March 31, 2001, the Corporation meets all capital adequacy
requirements to which it is subject.
To Be Well
Capitalized Under
For Capital prompt Corrective
Actual Adequacy Purposes Actions Provisions
----------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
----------------------------------------------------------------------------
As of March 31, 2001
Total Capital $48,150,710 19.33% $19,927,026 >8.00% $24,908,783 >10.00%
(to Risk-Weighted Assets)
Tier 1 Capital 45,037,112 18.08% 9,963,513 >4.00% 14,945,270 >6.00%
(to Risk-Weighted Assets)
Tier 1 Capital 45,037,112 11.75% 15,330,376 >4.00% 19,162,969 >5.00%
(to Average Assets)
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated, certain items in the
consolidated statements of income of the Corporation and the related changes
between those periods:
For the three months
ended March 31,
2001 2000
----------------------------------
Interest Income, including fees $7,259,136 $6,791,364
Interest Expense 3,620,363 3,130,635
----------------------------------
Net Interest Income 3,638,773 3,660,729
Provision for Loan Losses 119,769 84,862
Net Interest Income after
Provision for Loan Losses 3,519,004 3,575,867
Other Income 905,323 761,816
Other Expense 2,416,742 2,226,346
----------------------------------
Income before Provision For
Income Taxes 2,007,585 2,111,337
Provision for Income Taxes 633,892 739,153
----------------------------------
Net Income $1,373,693 $1,372,184
==================================
Net Income Per share - Basic $ 0.42 $ 0.41
==================================
Net Income Per Share-Diluted $ 0.41 $ 0.41
==================================
Net Income Per Share -- Basic is calculated using weighted average number of
shares outstanding for the period. Net Income Per Share B Diluted is calculated
using the weighted average number of shares outstanding for the period, plus the
net dilutive effect of granted stock options determined using the treasury stock
method.
Annualized return on average equity was 12.37% for the three months ended March
31, 2001, and 13.68% for the three months ended March 31, 2000.
The book value per share increased to $13.51 at March 31, 2001 compared to
$13.11 at December 31, 2000. This increase is due to earnings exceeding
dividends paid during this period. Average assets for the three months ended
March 31, 2001, were $383,259,390 compared to $374,439,282 for the year ended
December 31, 2000, average equity increased to $44,415,517 for the three months
ended March 31, 2001, from $40,700,668 for the year ended December 31, 2000.
NET INTEREST INCOME/NET INTEREST MARGIN
One component of the Corporation=s earnings is net interest income, which is the
difference between the interest and fees earned on loans and investments and the
interest paid for deposits and borrowed funds. The net interest margin is net
interest income expressed as a percentage of average earning assets.
The annualized net interest margin was 4.26% for the three months ended March
31, 2001, compared to an annualized net interest margin of 4.33% for the three
months ended March 31, 2000. Earnings assets averaged $353,879,505 for the
three months ended March 31, 2001. This represented an increase of $12,845,312
or 3.8%, over average earning assets of $341,034,193 for the three months ended
March 31, 2000. This increase was from normal growth of the Corporation and not
from any special program or promotion.
The net interest income figures above include income from the Corporation=s
securities. The following table shows the interest and fees and corresponding
yields for loans only.
For the three months
ended March 31,
2001 2000
---------------------------------------------
Interest and Fees $ 5,745,729 $ 5,273,457
Average Loans 251,081,564 237,579,566
Annualized Yield 9.27% 8.88%
CREDIT LOSS EXPERIENCE
As a natural corollary to the Corporation=s lending activities, some loan losses
are to be expected. The risk of loss varies with the type of loan being made
and the creditworthiness of the borrower over the term of the loan. The degree
of perceived risk is taken into account in establishing the structure of, and
interest rates and security for, specific loans and for various types of loans.
The Corporation attempts to minimize its credit risk exposure by use of thorough
loan application and approval procedures.
The Corporation maintains a program of systematic review of its existing loans.
Loans are graded for their overall quality. Those loans which the Corporation=s
management determines require further monitoring and supervision are segregated
and reviewed on a periodic basis. Significant problem loans are reviewed on a
monthly basis by the Corporation=s Board of Directors.
The Corporation charges off that portion of any loan which management considers
to represent a loss. A loan is generally considered by management to represent
a loss in whole or in part when an exposure beyond the collateral value is
apparent, servicing of the unsecured portion has been discontinued or collection
is not anticipated based on the borrower's financial condition and general
economic conditions in the borrower's industry. The principal amount of any loan
which is declared a loss is charged against the Corporation=s allowance for loan
losses.
The Corporation's allowance for loan losses is designed to provide for loan
losses which can be reasonably anticipated. The allowance for loan losses is
established through charges to operating expenses in the form of provisions for
loan losses. Actual loan losses or recoveries are charged or credited to the
allowance for loan losses. The amount of the allowance is determined by
management of the Corporation. Among the factors considered in determining the
allowance for loan losses are the current financial condition of the
Corporation's borrowers and the value of security, if any, for their loans.
Estimates of future economic conditions and their impact on various industries
and individual borrowers are also taken into consideration, as are the
Corporation=s historical loan loss experience and reports of banking regulatory
authorities. Because these estimates, factors and evaluations are primarily
judgmental, no assurance can be given as to whether or not the Corporation will
sustain loan losses in excess or below its allowance or that
subsequent evaluation of the loan portfolio may not require material increases
or decreases in such allowance.
The following table summarizes the Corporation=s allowance for loan loss for the
dates indicated:
Amount of Percent of
March 31, December 31, Increase Increase
2001 2000 (Decrease) (Decrease)
-----------------------------------------------------------------------------------
BALANCES:
Gross Loans $253,156,340 $254,940,076 -$1,783,736 -0.70%
Allowance for Loan Losses 3,325,000 3,325,000 0 0.00%
Nonaccrual Loans 847,670 589,788 257,882 43.72%
Ratios:
Allowance for loan losses to
gross loans 1.31% 1.30%
Net loans charged off to
allowance for loan 3.60% 20.83%
losses
The provision for loan losses for the three months ended March 31, 2001 was
$119,769, an increase of $34,907 over the $84,862 for the same period in 2000.
Gross loans outstanding decreased .7% for the three months in 2001. For the
three months ended March 31, 2001, net loan losses charged to the allowance for
loan losses totaled $119,769, an increase of $109,907 over the same period in
2000.
Management of the Corporation reviews with the Board of Directors the adequacy
of the allowance for possible loan losses on a quarterly basis. The loan loss
provision is adjusted when specific items reflect a need for such an adjustment.
Management believes that there were no material loan losses during the last
fiscal year that have not been charged off. Management also believes that the
Corporation's allowance will be adequate to absorb probable losses inherent in
the Corporation's loan portfolio.
OTHER INCOME
Other operating income includes service charges on deposit accounts, wire
transfer fees, safe deposit box rentals and other revenue not derived from
interest on earning assets. Other operating income for the three months ended
March 31,2001, increased $143,507 or 18.8% over the respective period ended
March 31, 2000. Increased overdraft income and income from our Title Services,
LLC accounted for the most of the increase over 2000. The remainder of the
increase was due to the increased customer base. Especially
in periods of declining net interest margins, the Corporation has sought to
increase the income derived from these sources and will continue to seek
opportunities to do so.
OTHER EXPENSE
Other expenses include salaries and employee benefits, occupancy and equipment,
and other operating expenses. The continued growth of the Corporation has put
pressure on Management to control overhead expenses.
Other operating expenses for the three months ended March 31, 2001 were
$2,416,742 compared to the $2,226,346 for the three months ended March 31, 2000.
This represents a increase of $190,396 for the three months ended March 31,
2001. Normal increases in salaries were a part of the increase with increases in
the cost of employee benefits adding to this amount. Office supplies and postage
costs also increased during this period when compared to the previous year due
to the increase in the number of loans and deposit accounts. The Corporation's
efficiency ratio for the three months ended March 31, 2001 was 51.04%.
BALANCE SHEET ANALYSIS
Amount of Percent of
March 31, December 31, Increase Increase
2001 2000 (Decrease) (Decrease)
-----------------------------------------------------------------------------------
Cash and Cash Equivalents $ 12,960,332 $ 11,278,526 $ 1,681,806 14.91%
Investment Securities 95,069,217 101,034,174 -5,964,957 -5.90%
Loans, net 246,961,064 248,696,755 -1,735,691 -0.70%
Total Assets 392,249,587 382,800,409 9,449,178 2.47%
Total Deposits 306,502,774 289,907,757 16,595,017 5.72%
Total Stockholders' Equity 44,691,897 43,376,961 1,314,936 3.03%
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are made up of cash, balances at correspondent banks
and federal funds sold. The increase at March 31, 2001 was due to a temporary
increase in correspondent bank accounts.
INVESTMENT SECURITIES
The investment securities are made up of U. S. Treasury Notes, U. S. Agency
debentures, mortgage-backed securities, obligations of states, counties and
municipal governments and Federal Home Loan Bank Stock.
Investments decreased $5,964,957 or 5.9% as a result of the need for liquidity
to fund the strong loan demand.
LOANS
Loan demand continued to be strong in the service area of the Corporation even
though loans decreased by .7% during the three-month period ended March 31,
2001. This was caused mainly by a decrease in poultry related loans due to
refinancing with other sources. Residential housing loans continue to be in
demand along with commercial and industrial loans. No special loan programs
were initiated during this period to add to this growth.
DEPOSITS
The following shows the balance and percentage change in the various deposits:
Amount of Percent of
March 31, December 31, Increase Increase
2001 2000 (Decrease) (Decrease)
-----------------------------------------------------------------------------------
Noninteresting-bearing Deposits $ 37,100,659 $ 36,961,489 $ 139,170 0.38%
Interest-bearing Deposits 77,005,056 68,499,167 8,505,889 12.42%
Savings 19,641,230 19,053,589 587,641 3.08%
Certificates of Deposit 172,755,829 165,393,512 7,362,317 4.45%
----------------------------------------------------------------------------------
Total Deposits $306,502,774 $289,907,757 $16,595,017 5.72%
==================================================================================
The increase in deposits reflected in the above table is solely the result of
normal deposit growth for our service area. The Corporation does not have any
brokered deposits. There were no special deposit programs or incentives in
place during this period.
CITIZENS HOLDING COMPANY
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Overview
The definition of market risk is the possibility of loss that could result from
adverse changes in market prices and rates. The Corporation has taken steps to
assess the amount of risk that is associated with its asset and liability
structure. The Corporation measures the potential risk on a regular basis and
makes changes to its strategies to manage these risks. The Corporation does not
participate in some of the financial instruments that are inherently subject to
substantial market risk.
Market/Interest Rate Risk Management
The primary purpose in managing interest rate risk is to effectively invest
capital and preserve the value created by the core banking business. The
Corporation utilizes an investment portfolio to manage the interest rate risk
naturally created through its business activities. The quarterly interest rate
risk report is used to evaluate exposure to interest rate risk, project earnings
and manage the composition of the balance sheet and its growth.
Static gap analysis is also used in measuring interest rate risk. An analysis
of the Corporation's repricing opportunities indicates a negative gap position
over the next three- and twelve -month periods which indicates that the
Corporation would benefit somewhat from a decrease in market interest rates,
such as the recent interest rate reductions ordered by the Federal Reserve
Board. The Corporation has experienced an increased number of called investment
securities related to the decrease in rates.
Other than the recent interest rate decreases, there have been no material
change in the Corporation's market risk since the end of the last fiscal year
end of December 31, 2000.
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
/s/ Steve Webb /s/ Robert T. Smith
BY:_________________________ BY:__________________________
Steve Webb Robert T. Smith
Chairman, President and Treasurer (Chief Financial
Chief Executive Officer and Accounting Officer)
DATE: May 11, 2001 DATE: May 11, 2001
EXHIBIT INDEX
Exhibit Number Description
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