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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended: September 30, 2002
 
Commission file number: 33-42286
 
 
HENDERSON CITIZENS BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
 
Texas
  
6712
  
75-2371232
(State or other jurisdiction
of incorporation or organization)
  
(Primary Standard Industrial
Classification Code Number)
  
(IRS Employer
Identification No.)
 
201 West Main Street, P.O. Box 1009
Henderson, Texas 75653-1009
(903) 657-8521
(Address, including ZIP code, and telephone number, including
area code, of registrant’s principal executive offices)
 
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  ¨
 
At October 31, 2002, 1,994,218 shares of Common Stock, $5.00 par value, were outstanding.

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Table of Contents
 
HENDERSON CITIZENS BANCSHARES, INC.
QUARTER ENDED SEPTEMBER 30, 2002
 
Table of Contents
 
    
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Table of Contents
 
Part I.    FINANCIAL INFORMATION
Item 1.    Financial Statements
 
HENDERSON CITIZENS BANCSHARES, INC.
 
Consolidated Balance Sheets—unaudited
(dollars in thousands, except share and per share amounts)
 
    
September 30,
2002
     
December 31,
2001
  
Assets
                
Cash and due from banks
   
$
14,536
 
   
14,390
 
Interest-bearing deposits with financial institutions
   
 
1,317
 
   
4,659
 
Federal funds sold
   
 
12,170
 
   
16,860
 
    
  
Total cash and cash equivalents
   
 
28,023
 
   
35,909
 
Interest-bearing time deposits
   
 
695
 
   
7,287
 
Securities available for sale, at fair value
   
 
166,061
 
   
185,410
 
Securities held to maturity, estimated fair value of $98,171 in 2002 and $57,171 in 2001
   
 
94,940
 
   
57,170
 
Loans, net
   
 
224,589
 
   
212,665
 
Premises and equipment, net
   
 
11,199
 
   
11,302
 
Accrued interest receivable
   
 
3,496
 
   
4,157
 
Goodwill
   
 
5,876
 
   
5,876
 
Intangible assets
   
 
5,020
 
   
4,201
 
Other assets
   
 
5,324
 
   
2,208
 
    
  
    
$
545,223
 
   
526,185
 
    
  
Liabilities and Stockholders’ Equity
                
Deposits:
                
Demand—non interest-bearing
   
$
73,887
 
   
70,527
 
Interest-bearing transaction accounts
   
 
82,758
 
   
87,781
 
Money market and savings
   
 
81,071
 
   
94,844
 
Certificates of deposit and other time deposits
   
 
250,867
 
   
220,578
 
    
  
Total deposits
   
 
488,583
 
   
473,730
 
Accrued interest payable
   
 
1,113
 
   
1,394
 
Other borrowings
   
 
3,029
 
   
4,098
 
Other liabilities
   
 
5,159
 
   
3,029
 
    
  
    
 
497,884
 
   
482,251
 
Stockholders’ equity:
                
Preferred stock, $5 par value; 2,000,000 shares authorized, none issued or outstanding
   
 
—  
 
   
—  
 
Common stock, $5 par value; 10,000,000 shares authorized, 2,160,000 issued
   
 
10,800
 
   
10,800
 
Surplus
   
 
5,400
 
   
5,400
 
Retained earnings
   
 
32,771
 
   
29,243
 
Accumulated other comprehensive income
   
 
785
 
   
903
 
Treasury stock, 165,782 shares in 2002 and 165,582 shares in 2001, at cost
   
 
(2,417
)
   
(2,412
)
    
  
Total stockholders’ equity
   
 
47,339
 
   
43,934
 
    
  
    
$
545,223
 
   
526,185
 
    
  
 
See accompanying notes to consolidated financial statements.

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Table of Contents
 
HENDERSON CITIZENS BANCSHARES, INC.
 
Consolidated Statements of Income—unaudited
(dollars in thousands, except share and per share amounts)
 
    
Three months
ended September 30,
   
Nine months
ended September 30,
    
2002
   
2001
   
2002
   
2001
Interest income:
                      
Loans, including fees
   
$
4,016
   
4,277
   
11,956
   
11,478
Securities:
                      
Taxable—available for sale
   
 
1,697
   
2,277
   
5,534
   
6,927
Taxable—held to maturity
   
 
604
   
125
   
1,762
   
376
Tax-exempt—held to maturity
   
 
490
   
496
   
1,459
   
1,476
Federal funds sold
   
 
70
   
155
   
253
   
640
Interest-bearing deposits with financial institutions
   
 
28
   
318
   
160
   
699
    
  
  
  
Total interest income
   
 
6,905
   
7,648
   
21,124
   
21,596
    
  
  
  
Interest expense:
                      
Deposits:
                      
Transaction accounts
   
 
222
   
318
   
730
   
1,034
Money market and savings
   
 
232
   
544
   
922
   
1,515
Certificates of deposit and other time deposits
   
 
2,251
   
3,021
   
6,806
   
9,088
Other borrowed funds
   
 
16
   
10
   
45
   
30
    
  
  
  
Total interest expense
   
 
2,721
   
3,893
   
8,503
   
11,667
    
  
  
  
Net interest income
   
 
4,184
   
3,755
   
12,621
   
9,929
Provision for loan losses
   
 
250
   
159
   
740
   
389
    
  
  
  
Net interest income after provision for loan losses
   
 
3,934
   
3,596
   
11,881
   
9,540
    
  
  
  
Noninterest income:
                      
Service charges, commissions, and fees
   
 
1,657
   
1,287
   
4,649
   
3,439
Income from fiduciary activities
   
 
369
   
328
   
1,106
   
985
Net realized gains on securities transactions
   
 
31
   
52
   
1,065
   
65
Other
   
 
302
   
318
   
838
   
783
    
  
  
  
Total noninterest income
   
 
2,359
   
1,985
   
7,658
   
5,272
    
  
  
  
Noninterest expenses:
                      
Salaries and employee benefits
   
 
2,885
   
2,444
   
8,246
   
6,566
Occupancy and equipment
   
 
674
   
607
   
1,855
   
1,574
Other
   
 
1,407
   
1,002
   
3,539
   
2,746
    
  
  
  
Total other expenses
   
 
4,966
   
4,053
   
13,640
   
10,886
    
  
  
  
Income before income tax expense
   
 
1,327
   
1,528
   
5,899
   
3,926
Income tax expense
   
 
250
   
228
   
1,354
   
598
    
  
  
  
Net income
   
$
1,077
   
1,300
   
4,545
   
3,328
    
  
  
  
Basic earnings per common share
   
$
0.54
   
0.65
   
2.28
   
1.67
    
  
  
  
Weighted average number of shares outstanding
   
 
1,994,218
   
1,995,016
   
1,994,243
   
1,995,149
    
  
  
  
 
See accompanying notes to consolidated financial statements.

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Table of Contents
HENDERSON CITIZENS BANCSHARES, INC.
 
Consolidated Statements of Changes in Stockholders’ Equity—unaudited
Nine months ended September 30, 2002 and 2001
(dollars in thousands, except share and per share amounts)
 
    
Preferred Stock
   
Common Stock
   
Surplus
   
Retained Earnings
       
Accumulated Other Comprehensive Income (Loss)
     
Treasury Stock
     
Total
  
Balances at January 1, 2001
   
$
—  
   
10,800
   
5,400
   
25,894
 
     
(575
)
   
(2,397
)
   
39,122
 
Comprehensive income:
                                               
Net Income
   
 
—  
   
—  
   
—  
   
3,328
 
     
—  
 
   
—  
 
   
3,328
 
Other comprehensive income:
                                               
Unrealized gain (loss) on available-for-sale securities arising during the period
   
 
—  
   
—  
   
—  
   
—  
 
     
2,870
 
   
—  
 
   
2,870
 
Reclassification adjustment for net realized (gains) losses on available-for- sale securities included in net income
   
 
—  
   
—  
   
—  
   
—  
 
     
(65
)
   
—  
 
   
(65
)
                              
         
Net unrealized gain
   
 
—  
   
—  
   
—  
   
—  
 
     
2,805
 
   
—  
 
   
2,805
 
Tax effect of other comprehensive income
   
 
—  
   
—  
   
—  
   
—  
 
     
(954
)
   
—  
 
   
(954
)