What changed in this filing

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Item 1. Business

2020-03-13 compared with 2019-03-15 · 111 added, 121 removed, 217 unchanged (52% of the section changed)

8 unchanged sentences

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.

December 31, 2018, the Bank was the largest bank headquartered in Neshoba County, Mississippi, with total assets of $958.630 million and total deposits of $756.222 million.

For more information regarding the assets, revenue and

profits of the Company, refer to the Consolidated Financial Statements of the Company contained in Item 8, Financial Statements and Supplementary Data. The Companys only reportable segment is the assets and cash flow of the Bank,

resulting in revenues of $40,106,707, operating profit of $7,011,807 and total assets of $975,454,918 for the Company as of December 31, 2018.

The principal executive offices of both the Company and the Bank are located at 521 Main Street, Philadelphia, Mississippi

39350, and the main telephone number is (601) 656-4692.

All references hereinafter to the activities or operations of the Company reflect the Companys activities or operations through the Bank.

December 31, 2019, the Bank was the largest bank headquartered in Neshoba County, Mississippi, with total assets of $1,195,261 and total deposits of $900,732.

For more information regarding the assets, revenue and profits of the Company, refer

to the Consolidated Financial Statements of the Company contained in Item 8, Financial Statements and Supplementary Data. The Companys only reportable segment is the assets and cash flow of the Bank, resulting in revenues of

$44,919, operating profit of $6,277 and total assets of $1,195,261 for the Company as of December 31, 2019.

principal executive offices of both the Company and the Bank are located at 521 Main Street, Philadelphia, Mississippi 39350, and the main telephone number is (601) 656-4692.

All references hereinafter to the

activities or operations of the Company reflect the Companys activities or operations through the Bank.

Through its ownership of the Bank, the Company engages in a wide range of commercial and personal banking activities, including

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Revenue from loan interest and fees made up 54.7% of gross revenues in 2019, 50.7% in 2018 and 48.3% in 2017.

Loan demand has improved, loan yields are gradually increasing and the investment portfolio is decreasing, all of which has contributed to

this percentage increasing from 2017.

Loan demand has improved and loan yields are gradually increasing, both of which has contributed to this percentage increasing from 2017.

The increase in lending has been distributed among the Banks leading products, including commercial, real estate, installment (direct and indirect) and credit card loans.

The Companys primary lending

area is East Central and South Mississippi, specifically Neshoba, Newton, Leake, Lamar, Forrest, Scott, Attala, Lauderdale, Oktibbeha, Lafayette, Rankin, Harrison, Jackson, Winston and Kemper counties and contiguous counties.

In 2008, the Company

entered the southern Mississippi market with the opening of a branch office in Hattiesburg, Mississippi, which is located in Lamar County.

In 2009, the Company opened a Loan Production Office (LPO) in Biloxi, Mississippi to serve the

Mississippi Gulf Coast and in April 2014 converted this office to a full service branch and at the same time opened another branch in Biloxi.

In 2011, the Company opened a branch in Flowood, Mississippi.

In December 2016, the Company opened a LPO in

Oxford, Mississippi to offer commercial loans to the people in North Mississippi.

On a very limited basis, the Company extends out-of-area credit to borrowers who are

considered to be low risk, as defined within the Banks lending policy.

The Company is not dependent upon any single customer or small group of customers, and it has no foreign operations.

The Companys market area is mainly rural, with Hattiesburg, population

50,233, Biloxi, population 50,644, and Meridian, population 38,314, being the largest markets.

Agriculture and some light industry comprise a significant portion of the economy of this area.

The largest employer in the Companys service area is

the Mississippi Band of Choctaw Indians.

Its schools, manufacturing plants and The Pearl River Resort (the Resort) generate a significant number of jobs in the area.

The Resort and its related services employ approximately 2,400 people

within the Companys market.

For more information regarding revenue from external customers for the last three fiscal years, attributed by geographic region, please refer to Item 7, Managements Discussion and Analysis of Financial

Condition and Results of Operations, which is included in the Companys Annual Report and attached as an exhibit hereto.

The Company has historically made, 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.

At December 31, 2018, approximately 81.1% of the Companys loan portfolio was attributed to real estate lending,

15.6% of the Companys loan portfolio was comprised of commercial, industrial and agricultural production loans, and consumer loans made up the remaining 3.3% of the Companys total loan portfolio.

The Companys primary lending area is East Central and South

Mississippi, specifically Neshoba, Newton, Leake, Lamar, Forrest, Scott, Attala, Lauderdale, Oktibbeha, Lafayette, Rankin, Harrison, Jackson, Winston and Kemper counties and contiguous counties.

In 2019, the Company expanded its presence on the

Mississippi Gulf Coast through the acquisition of Charter.

The Company continues to look for areas of growth within the state of Mississippi and surrounding states but, occasionally the Company extends out-of-area credit to borrowers who are considered to be low risk, as defined within the Banks lending policy.

The Company is not dependent upon any single customer or small group of customers, and it

has no foreign operations.

The Companys market area has historically been rural, however, since 2008,

the Company has continued to expand into larger metropolitan areas and now serves a number of larger growth areas with Gulfport, population 71,570, Hattiesburg, population 46,251, Biloxi, population 45,568, and Meridian, population 38,602, being the

largest markets.

The economy throughout Mississippi is becoming more diverse but agriculture and manufacturing continue to be the largest industries in Mississippi.

For more information regarding revenue from external customers for the last three

fiscal years, attributed by geographic region, please refer to Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, which is included in the Companys Annual Report and attached as an

exhibit hereto.

The Company has historically made, 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.

At December 31, 2019, approximately 79.8% of the Companys loan portfolio was attributed to

real estate lending, 17.3% of the Companys loan portfolio was comprised of commercial, industrial and agricultural production loans, and consumer loans made up the remaining 2.9% of the Companys total loan portfolio.

The Companys loan personnel have the authority to extend credit under guidelines established and approved by the

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Board of Directors of both the Company and the Bank since 2001.

McKee 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.

McKee 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.

Smith, 68, has been employed by the Bank since 1986.

He has served as Senior Vice-President and Chief Financial Officer of the Bank since January 2001.

He has served as Senior Vice-President and Chief Financial

Officer of the Bank since January 2001.

Prior to January 2001, Mr.

Smith held the title of Vice-President and Controller of the Bank

from 1987 until 2001 and Assistant Vice-President of the Bank from 1986 to 1987.

In addition to his position with the Bank, Mr.

Smith has served as Treasurer of the Company since February 1996 and Treasurer and Chief Financial Officer since

January 2001.

Smith held the title of Vice-President and Controller of the Bank from 1987 until 2001 and Assistant Vice-President of the Bank from 1986 to 1987.

In addition to his position

with the Bank, Mr.

Smith has served as Treasurer of the Company since February 1996 and Treasurer and Chief Financial Officer since January 2001.

The Company has no employees other than three Bank officers who provide services to the Company.

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In November 2017, a bipartisan group of U.S.

Senators, led by Senate Banking Committee Chairman, introduced the Economic

Growth, Regulatory Relief and Consumer Protection Act (the Economic Growth Act).

The Economic Growth Act, signed into law on May 24, 2018, provides relief from certain regulatory requirements under the Dodd-Frank Act.

Generally, the

Economic Growth Act addressed the following areas:

the threshold at which banks are classified as systemically important financial institutions (SIFIs), and therefore subject to stricter oversight;

targeted relief from Dodd-Frank Act requirements

for smaller banks;

Senators, led by Senate Banking

Committee Chairman, introduced the Economic Growth, Regulatory Relief and Consumer Protection Act (the Economic Growth Act).

The Economic Growth Act, signed into law on May 24, 2019, provides relief from certain regulatory

requirements under the Dodd-Frank Act.

Generally, the Economic Growth Act addressed the following areas:

the threshold at which banks are classified as systemically important financial institutions (SIFIs), and therefore subject to stricter

targeted relief from Dodd-Frank Act requirements for smaller banks;

capital formation;

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student borrower debt and provisions addressing veterans, consumers and homeowners.

While we expect the Economic Growth Act to have an overall positive impact on our business going forward, we

continue to evaluate its impact on our business and that impact remains uncertain.

While we expect the Economic Growth Act to have

an overall positive impact on our business going forward, we continue to evaluate its impact on our business and that impact remains uncertain.

Capital Standards.

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federal banking agencies adopted final rules relevant to us:

(1) the Basel III regulatory capital

and (2) the standardized approach of Basel II for non-core banks and bank holding companies, such as the Bank and the Company.

capital framework under Basel III will replace the existing regulatory capital rules for all banks, savings associations and U.S.

bank holding companies with greater than $500 million in total assets, and all savings and loan holding companies.

Beginning January 1, 2015, the Bank began to comply with the Basel III rules, although the rules were not fully phased-in until January 1, 2019.

(1) the Basel III regulatory capital reforms;

and (2) the standardized approach of Basel II for non-core

banks and bank holding companies, such as the Bank and the Company.

The capital framework under Basel III will replace the existing regulatory capital rules for all banks, savings associations and U.S.

bank holding companies with greater than

$500 million in total assets, and all savings and loan holding companies.

Beginning January 1, 2015, the Bank began to comply with the Basel III rules,

although the rules were not fully phased-in until January 1, 2019.

Among other things, the final Basel III rules impact regulatory capital ratios of banking organizations in the following manner:

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At December 31, 2019, the maximum amount available for transfer from the Bank to the Company in the form of a

dividend was approximately $81.5 million, or 99.3% of the Banks consolidated net assets.

FRB regulations limit

the amount the Bank may loan to the Company unless those loans are collateralized by specific obligations.

At December 31, 2018, the maximum amount available for transfer from the Bank in the form of loans was $8.2 million, or 10% of the

Banks consolidated net assets.

dividend was approximately $101,119, or 92.6% of the Banks consolidated net assets.

FRB regulations limit the

amount the Bank may loan to the Company unless those loans are collateralized by specific obligations.

At December 31, 2019, the maximum amount available for transfer from the Bank in the form of loans was $10,900, or 10% of the Banks

consolidated net assets.

The Bank does not have any outstanding loans with the Company.

FDIC Insurance Assessments.

The FDIC insures the deposits of federally insured banks up to prescribed statutory limits for each depositor, through

the Deposit Insurance Fund (DIF) and safeguards the safety and soundness of the banking and thrift industries.

The amount of FDIC assessments paid by each insured depository institution is based on its relative risk of default as

measured by regulatory capital ratios and other supervisory factors.

The FDICs deposit insurance premium assessment

is based on an institutions average consolidated total assets minus average tangible equity.

We are generally

unable to control the amount of premiums that we are required to pay for FDIC insurance.

At least semi-annually, the FDIC will update its loss and income projections for the DIF and, if needed, will increase or decrease assessment rates, following notice-and-comment rulemaking, if required.

If there are additional bank or financial institution failures or if the FDIC otherwise determines to increase assessment rates,

the Bank may be required to pay higher FDIC insurance premiums.

FDIC Insurance

Assessments .

The FDIC insures the deposits of federally insured banks up to prescribed statutory limits for each

depositor, through the Deposit Insurance Fund (DIF) and safeguards the safety and soundness of the banking and thrift industries.

The amount of FDIC assessments paid by each insured depository institution is based on its relative risk of

default as measured by regulatory capital ratios and other supervisory factors.

The FDICs deposit insurance premium

assessment is based on an institutions average consolidated total assets minus average tangible equity.

generally unable to control the amount of premiums that we are required to pay for FDIC insurance.

At least semi-annually, the FDIC will update its loss and income projections for the DIF and, if needed, will increase or decrease assessment rates,

following notice-and-comment rulemaking, if required.

If there are additional bank or financial institution failures or if the FDIC otherwise determines to increase

assessment rates, the Bank may be required to pay higher FDIC insurance premiums.

Any future increases in FDIC insurance premiums may have a material and adverse effect on our earnings.

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community to be served.

The BHC Act also prohibits a bank holding company, with certain exceptions, from engaging in or

from acquiring direct or indirect control of more than 5% of the voting shares of any company engaged in non-banking activities.

The principal exception to this rule is for engaging in or acquiring shares of a

company whose activities are found by the FRB to be so closely related to banking or managing banks as to be a proper incident thereto.

In making such determinations, the FRB is required to consider whether the performance of such activities by a

bank holding company or its subsidiaries can reasonably be expected to produce benefits to the public such as greater convenience, increased competition or gains in efficiency of resources that outweigh the risks of possible adverse effects such as

decreased or unfair competition, conflicts of interest or unsound banking practices.

The BHC Act prohibits the

acquisition by a bank holding company of more than 5% of the outstanding voting shares of a bank located outside the state in which the operations of its banking subsidiaries are principally conducted, unless such an acquisition is specifically

authorized by statute of the state in which the bank to be acquired is located.

The Company and the Bank are subject to

certain restrictions imposed by the Federal Reserve Act and the Federal Deposit Insurance Act on any extensions of credit to the Company or the Bank, on investments in the stock or other securities of the Company or the Bank, and on taking such

stock or other securities as collateral for loans of any borrower.

The BHC Act also prohibits a bank holding company, with certain exceptions, from

engaging in or from acquiring direct or indirect control of more than 5% of the voting shares of any company engaged in non-banking activities.

The principal exception to this rule is for engaging in or

acquiring shares of a company whose activities are found by the FRB to be so closely related to banking or managing banks as to be a proper incident thereto.

In making such determinations, the FRB is required to consider whether the performance of

such activities by a bank holding company or its subsidiaries can reasonably be expected to produce benefits to the public such as greater convenience, increased competition or gains in efficiency of resources that outweigh the risks of possible

adverse effects such as decreased or unfair competition, conflicts of interest or unsound banking practices.

prohibits the acquisition by a bank holding company of more than 5% of the outstanding voting shares of a bank located outside the state in which the operations of its banking subsidiaries are principally conducted, unless such an acquisition is

specifically authorized by statute of the state in which the bank to be acquired is located.

The Company and the Bank are

subject to certain restrictions imposed by the Federal Reserve Act and the Federal Deposit Insurance Act on any extensions of credit to the Company or the Bank, on investments in the stock or other securities of the Company or the Bank, and on

taking such stock or other securities as collateral for loans of any borrower.

The BHC Act was amended in 2000 by the

8 unchanged sentences

The regulations promulgated under CRA emphasize an assessment of actual performance in meeting local credit needs, rather than of the procedures followed by a bank

evaluate compliance with the CRA.

to evaluate compliance with the CRA.

CRA compliance is also a factor in evaluations of proposed mergers, acquisitions and applications to open new branches or facilities.

Overall CRA compliance is

rated across a four-point scale from outstanding to substantial noncompliance. Different evaluation methods are used depending on the asset size of the bank.

Overall CRA compliance is rated across a four-point scale from

outstanding to substantial noncompliance. Different evaluation methods are used depending on the asset size of the bank.

The FDIC examined the Bank on July 12, 2016 for its performance under the CRA.

The Bank was rated

Satisfactory during this examination.

The Bank was rated Satisfactory during this

No discriminatory practices or illegal discouragement of applications were found.

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requires publicly traded companies to give stockholders a non-binding vote on executive compensation at least every three years and on so-called golden

payments in connection with approvals of mergers and acquisitions.

The Dodd-Frank Act also authorizes the SEC to promulgate rules that would allow stockholders to nominate their own candidates

using a companys proxy materials.

Additionally, the Dodd-Frank Act directs the federal banking regulators to promulgate rules prohibiting excessive compensation paid to executives of depository institutions and their holding companies with

assets in excess of $1.0 billion, regardless of whether the company is publicly traded.

parachute payments in connection with approvals of mergers and acquisitions.

The Dodd-Frank Act also authorizes the SEC to promulgate rules that would allow stockholders to nominate their own candidates using a companys proxy materials.

regardless of whether the company is publicly traded.

The Dodd-Frank Act gives the SEC authority to prohibit broker discretionary voting on elections of directors and executive compensation matters.

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The banking business is highly competitive.

The Companys market consists principally of Neshoba, Newton, Leake, Lamar,

Forrest, Scott, Attala, Lafayette, Lauderdale, Oktibbeha, Lafayette, Rankin, Harrison, Jackson, Winston and Kemper and contiguous counties in Mississippi.

In 2008, the Company entered the southern Mississippi market with the opening of a branch

office in Hattiesburg, Mississippi, which is located in Lamar County, and in 2009, opened a loan production office in Biloxi, Mississippi, which in April 2014, was converted into a full service branch.

In 2011, the Company opened a branch in

Flowood, Mississippi.

In 2014, the Company established an additional branch in Biloxi to better serve the Gulf Coast.

In 2016, the Company entered North Mississippi with the establishment of a loan production office in Oxford, Mississippi.

Company competes with local, regional and national financial institutions in these counties and in surrounding counties in Mississippi in obtaining deposits, lending activities and providing many types of financial services.

The Company also

competes with larger regional banks for the business of companies located in the Companys market area.

All financial institutions, including the Company, compete for customers

The Company also competes with savings and loan associations, credit unions, production credit associations, federal land banks, finance companies, personal loan companies, money market funds and other

The Companys primary market area is East Central, South and North

Mississippi, specifically Neshoba, Newton, Leake, Lamar, Forrest, Scott, Attala, Lauderdale, Oktibbeha, Lafayette, Rankin, Harrison, Jackson, Winston and Kemper counties and contiguous counties.

In 2019, the Company expanded its presence on the

Mississippi Gulf Coast through the acquisition of Charter.

The Company continues to look for areas of growth in the state of Mississippi and surrounding states but, occasionally the Company extends out-of-area credit to borrowers who are considered to be low risk, as defined within the Banks lending policy.

The Company competes with local, regional and national financial institutions in these

counties and in surrounding counties in Mississippi in obtaining deposits, lending activities and providing many types of financial services.

The Company also competes with larger regional banks for the business of companies located in the

Companys market area.

All financial institutions, including the Company, compete for customers deposits.

Company also 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.

6 unchanged sentences

Furthermore, as a local institution, the Company believes it can provide such services faster than a larger institution not based in the Companys market area.

Changes in federal and state law have resulted in, and are expected to continue to result in, increased competition.

reductions in legal barriers to the acquisition of banks by out-of-state bank holding companies resulting from implementation of the Dodd-Frank Act and other banking

laws and regulations are expected to continue to further stimulate competition in the markets in which the Company operates, although it is not possible to predict the extent or timing of such increased competition.

Currently, there are approximately thirty different financial institutions in the Companys market competing for the same

customer base.

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 Dodd-Frank Act and other banking laws and regulations are expected to continue to further stimulate competition in the markets in which the Company operates, although it is not possible to predict the extent or timing of such increased

Currently, there are approximately forty different financial institutions in the Companys market

competing for the same customer base.

According to the FDICs Summary of Deposits that is collected as of June 30 each year, the Companys market share in its market area was approximately 5.51% at June 30, 2019.

The Company competes in its market for

loan and deposit products, along with many of the other services required by todays banking customer, on the basis of availability, quality and pricing.

The Company believes it is able to compete favorably in its markets, in terms of both the

rates the Company offers and the level of service that the Company provides to its customers.

competes in its market for loan and deposit products, along with many of the other services required by todays banking customer, on the basis of availability, quality and pricing.

The Company believes it is able to compete favorably in its

markets, in terms of both the rates the Company offers and the level of service that the Company provides to its customers.

AVAILABILITY OF INFORMATION

2 unchanged sentences

The information contained on our website is not incorporated into this report.

Upon request, the Company will provide to any record holder or beneficial holder of its shares a copy of such reports without

Upon request, the Company will provide to any record holder or beneficial holder of its shares a copy of such reports

without charge.

Requests should be made to Robert T.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business