UNITED STATES
SECURITIES AND EXCHANGE COMMSSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30,2001
Commission file number 0-12425
Citizens Bancshares, Inc.
(Exact name of small business issuer
as specified in its charter)
Louisiana 72-0759135
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
841 West Main Street, Ville Platte, LA 70586
(Address of principal executive offices)
Issuer's telephone number, including area code: 337-363-5643
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
Class of Number of Shares
Common Equity Outstanding As of
Common stock, 114,855 September 30, 2001
$5 Par Value
CITIZENS BANCSHARES, INC. AND SUBSIDIARY
CONTENTS
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheet - September 30, 2001
Condensed Consolidated Statements of Income and Comprehensive
Income - Nine and three months ended September 30, 2001 and 2000
Condensed Consolidated Statements of Cash Flows - Nine months
ended September 30, 2001 and 2000
Note to Condensed Consolidated Financial Statements
Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
PART I. FINANCIAL INFORMATION
CITIZENS BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
September 30, 2001
(In thousands of dollars)
ASSETS
Cash and due from banks $3,134
Federal funds sold 10,825
Cash & cash equivalents 13,959
Interest-bearing deposits with banks 4,457
Securities available for sale, at fair values 31,052
Securities held to maturity 7,705
Loans receivable, net of allowance for loan
losses of $1,185 66,274
Premises and equipment 2,804
Other assets 1,924
Total assets $128,175
LIABILITIES
Demand deposits $11,736
Savings, NOW and money-market deposits 17,624
Time deposits $100,000 and more 32,506
Other time deposits 51,804
Total deposits 113,670
Accrued expenses and other liabilities 1,152
Total liabilities 114,822
SHAREHOLDERS' EQUITY
Common Stock $5 par value, 300,000 shares
authorized, 115,000 shares issued and
Outstanding 575
Additional paid-in capital 825
Treasury stock at cost, 145 shares (6)
Retained earnings 11,847
Accumulated other comprehensive income 112
Total shareholders' equity 13,353
Total liabilities and shareholders' equity $128,175
CITIZENS BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME (UNAUDITED)
NINE AND THREE MONTHS ENDED September 30, 2001 & 2000
(In thousands of dollars, except per share data)
Year-to-Date Quarter-to-Date
2001 2000 2001 2000
Interest income
Loans receivable $4,521 $4,380 $1,543 $1,578
Taxable securities 1,285 1,432 449 498
Tax-exempt securities 235 267 68 73
Federal funds sold 456 381 106 110
Deposits with banks 165 174 55 41
Total interest income 6,662 6,634 2,221 2,300
Interest expense
Savings, NOW & money-
market deposits 405 466 134 247
Time deposits
$100,000 and more 1,433 1,139 467 320
Other time deposits 2,193 2,050 703 716
Total interest expense 4,031 3,655 1,304 1,283
Net interest income 2,631 2,979 917 1,017
Provision for loan losses 90 104 30 36
Net interest income after
provision for loan losses 2,541 2,875 887 981
Non-interest income
Gain on securities called 138 - - -
Other non-interest income 589 542 177 165
Total non-interest income 727 542 177 165
Non-interest expense
Salaries and employee
benefits 1,162 1,085 404 389
Other expense 978 877 347 295
Total non-interest expense 2,140 1,962 751 684
Income before income taxes 1,128 1,455 313 462
Income tax expense 332 416 89 166
Net income $796 $1,039 $224 $296
Other comprehensive income, 56 76 (78) 206
net of tax
Comprehensive income $852 $1,115 $146 $502
Net income per share of $6.93 $9.05 $1.95 $2.58
common stock
CITIZENS BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(In thousands of dollars)
2001 2000
Cash flows from operating activities
Net income $796 $1,039
Adjustments to reconcile net income
to net cash provided by operating
activities 547 449
Net cash provided by operating
activities 1,343 1,488
Cash flows from investing activities
Maturities and calls of securities 23,166 316
Purchases of securities (25,514) (5,451)
Net decrease/(increase) in interest-
bearing deposits with banks (2,377) 3,170
Net (increase) in loans (2,855) (2,398)
Purchases of premises and equipment (68) (129)
Net cash (used) by investing
activities (7,648) (4,492)
Cash flows from financing activities
Net increase in deposits 8,583 2,486
Net cash provided by financing
activities 8,583 2,486
Net increase/(decrease)in cash and
cash equivalents 2,278 (518)
Cash and cash equivalents at
beginning of year 11,681 8,648
Cash and cash equivalents at
end of period $13,959 $8,130
Income taxes paid $301 $429
Interest paid $4,066 $3,515
Foreclosed real estate acquired in
satisfaction of loans $86 $387
CITIZENS BANCSHARES, INC. AND SUBSIDIARY
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The interim financial statements are prepared pursuant to the
requirements for reporting on Form 10-QSB. The interim financial
statements and notes thereto should be read in conjunction with
the financial statements and notes included in the Company's
latest annual report on Form 10-KSB. In the opinion of
management, the interim financial statements reflect all
adjustments of a normal recurring nature necessary for a fair
statement of the results for interim periods. The current period
results of operations are not necessarily indicative of results
which ultimately will be reported for the full year ending
December 31, 2001.
CITIZENS BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL STATEMENT
For a comprehensive review of financial condition and results
of operations of Citizens Bancshares, Inc. (the Company), this
discussion and analysis should be reviewed along with the
information and financial statements presented elsewhere in
this report. The Company is a one-bank holding company whose
sole subsidiary is Citizens Bank, Ville Platte, Louisiana (the
Bank).
Citizens Bank, Ville Platte, Louisiana is a commercial banking
institution formed in 1975 under the banking laws of the State
of Louisiana. The bank operates a main office located in the
City of Ville Platte, Louisiana and also operates branch
facilities in the Town of Mamou, Louisiana and the Village of
Pine Prairie, Louisiana. The Bank offers a full range of
traditional commercial banking services, including demand,
savings, and time deposits, consumer, commercial, agriculture,
and real estate loans, safe-deposit boxes, and two credit card
plans, VISA and MASTERCARD. Drive-in facilities are located
at all banking locations with ATM service at the main office
and Mamou branch.
FINANCIAL CONDITION
Total assets of the Company increased by $9,525,000 or 8.03%,
from $118,650,000 at December 31, 2000 to $128,175,000 at
September 30, 2001. The increase is attributed to an increase
in loans and deposits.
Earning assets, which include loans, investment securities,
federal funds sold, and deposits in other banks were 93.87% of
total assets at September 30, 2001.
Net loans showed an increase of $2,679,000 or 4.21% for the
nine months ended September 30, 2001. There was an increase
in securities of $2,571,000 or 7.10% during the same period.
The Bank maintains an allowance for loan losses against which
impaired or uncollectible loans are charged. The balance in
the allowance for loan losses was $1,185,000 at September 30,
2001, which represents 1.76% of total loans outstanding on
that date. Provisions to the allowance for loan losses, which
were charged to net income as of September 30, 2001, totaled
$90,000. Management evaluates the adequacy of the allowance
for loan losses on a monthly basis by monitoring the balance
in total loans as well as the past due, nonaccrual,
classified, and other problem loans. On the basis of this
evaluation, the allowance for loan losses is considered
adequate to meet possible future charges for losses in the
existing loan portfolio. At September 30, 2001, past due
loans to total loans were 1.41%.
Investment securities increased by $2,571,000 or 7.10% for
the nine months ended September 30, 2001. The following chart
lists the makeup of the portfolio, based on amortized costs,
as of September 30, 2001:
U.S. Government Agencies 42.94%
Mortgage-Backed Securities 37.09%
Municipal Securities 19.97%
As of September 30, 2001, securities classified as "held to
maturity" had an amortized cost/recorded value of $7,705,000
and a fair value of $7,914,000; securities classified as
"available for sale" had a fair value of $31,052,000 and an
amortized cost of $30,881,000.
Deposits are the Bank's primary source of funds. Total
deposits increased $8,583,000 or 8.17% from $105,087,000 at
December 31, 2000 to $113,670,000 at September 30, 2001. Time
deposits $100,000 and more increased by $3,843,000 or 13.41%
during the same period.
The primary functions of asset/liability management are to
assure adequate liquidity and maintain an appropriate spread
between interest-earning assets and interest-bearing
liabilities. Liquidity management involves the ability to
meet cash flow requirements of customers who may be either
depositors wanting to withdraw funds or borrowers needing
assurance that sufficient funds will be available to meet
their credit needs. Major elements of the Bank's overall
liquidity management capabilities and financial resources are
(1) core deposits, (2) closely managed maturity structure of
loans and deposits, (3) sale and maturity of assets (primarily
investment securities), and, if necessary, (4) extensions of
credit, including federal funds purchased and securities sold
under repurchase agreements. With the Bank's asset/liability
management program, most loan and deposit changes can be
anticipated without an adverse impact on earnings. At
September 30, 2001, the Bank's liquidity ratio was 42.56%.
RESULTS OF OPERATIONS
For the nine months ended September 30, 2001, the Company
reported net income of $796,000 or $6.93 per average share
outstanding. Net return on assets was .83% and net return on
equity was 7.39%.
Net interest income is the Company's principal source of
revenue and is measured by the difference between interest
income earned on loans and investments and interest expense
incurred on deposits. At September 30, 2001, the Bank's net
interest margin was 2.72%, a decrease from September 30, 2000,
which at that time the net interest margin was 3.39%. During
the falling rate environment of the first nine months of 2001,
the Company has experienced a "squeeze" in its net interest
income. Net interest income decreased $348,000, or 11.68% in
2001 to $2,631,000, compared to $2,979,000 at September 30,
2000. The reason for such decrease was a $28,000 or .42%
increase in interest income, which was offset by a $376,000 or
10.29% increase in interest expense.
Non-interest income, increased by $185,000 or 34.13% mainly
due to gains on called securities of $138,000 for the nine
months ended September 30, 2001.
Non-interest expense includes salaries and employee benefits,
occupancy and equipment expense, and other expense. Non-
interest expense amounted to $2,140,000 at September 30, 2001,
a $178,000 or 9.07% increase from September 30, 2000.
Salaries and employee benefits are the main expense and
increased by $77,000 or 7.10%.
CAPITAL ADEQUACY
Primary capital (shareholders' equity plus a portion of the
allowance for loan losses) as a percent of adjusted total
assets is one of the standard measures of capital adequacy
used by bank regulators. This and other measurement ratios
serve as the underlying basis for evaluating the Bank's
capital adequacy and for determining the Bank's insurance fund
deposit assessment charges. At September 30, 2001, the Bank's
ratios were as follows:
Risk Based Capital 20.59%
Tier 1 Capital 19.34%
Leverage Ratio 10.06%
To be categorized as well capitalized, the Bank must maintain
a total risk-based capital ratio of 10% or higher, Tier 1 risk-
based capital ratio of 6% or higher, and leverage capital
ratio of 5% or higher.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Legal proceedings involving the Bank are limited to proceedings
arising from normal business activities, none of which are
considered material.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None.
(b) The Company has not filed any reports on Form 8-K during the
quarter ended September 30, 2001.
SIGNATURES
Pursuant to the requirements 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 BANCSHARES, INC.
CARL W. FONTENOT
PRESIDENT & CEO
WAYNE VIDRINE
EXECUTIVE VICE PRESIDENT-TREASURER