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 March 31, 2002
Commission file number 0-12425
Citizens Bancshares, Inc.
(Exact name of small business issuer
as specified in its charter)
Louisiana 72-0759135
(State of 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 March 31, 2002
$5 Par Value
CITIZENS BANCSHARES, INC. AND SUBSIDIARY
CONTENTS
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheet - March 31, 2002
Condensed Consolidated Statements of Income and Comprehensive
Income - Three months ended March 31, 2002 and 2001
Condensed Consolidated Statements of Cash Flows - Three months
ended March 31, 2002 and 2001
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)
MARCH 31, 2002
(In thousands of dollars)
ASSETS
Cash and due from banks $3,733
Federal funds sold 6,725
Cash & cash equivalents 10,458
Interest-bearing deposits with banks 4,354
Securities available for sale, at fair values 42,931
Securities held to maturity 7,330
Loans receivable, net of allowance for loan
losses of $1,206 65,296
Premises and equipment 2,777
Other assets 1,872
Total assets $135,018
LIABILITIES
Demand deposits $13,525
Savings, NOW and money-market deposits 21,280
Time deposits $100,000 and more 33,721
Other time deposits 51,886
Total deposits 120,412
Accrued expenses and other liabilities 939
Total liabilities 121,351
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 12,230
Accumulated other comprehensive income 43
Total shareholders' equity 13,667
Total liabilities and shareholders' equity $135,018
CITIZENS BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2002 & 2001
(In thousands of dollars, except per share data)
2002 2001
Interest income
Loans receivable $1,382 $1,483
Taxable securities 503 438
Tax-exempt securities 78 76
Federal funds sold 36 178
Deposits with banks 44 52
Total interest income 2,043 2,227
Interest expense
Savings, NOW & money-market deposits 121 131
Time deposit $100,000 and more 378 470
Other time deposits 540 749
Total interest expense 1,039 1,350
Net interest income 1,004 877
Provision for loan losses 20 30
Net interest income after provision
for loan losses 984 847
Non-interest income
Gain on securities called 1 97
Other non-interest income 192 216
Total non-interest income 193 313
Non-interest expense
Salaries and employee benefits 381 386
Other expense 330 321
Total non-interest expense 711 707
Income before income taxes 466 453
Income tax expense 138 130
Net income $328 $323
Other comprehensive income, net of tax (214) 105
Comprehensive income $114 $428
Net income per share of common stock $2.86 $2.81
CITIZENS BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(In thousands of dollars)
2002 2001
Cash flows from operating activities
Net income $ 328 $ 323
Adjustments to reconcile net income
to net cash provided by operating
activities (14) 321
Net cash provided by operating
activities 314 644
Cash flows from investing activities
Maturities and calls of securities 4,662 6,210
Purchases of securities (9,497) (8,186)
Net decrease/(increase) in interest-
bearing deposits with banks 598 (2,080)
Net (increase)/decrease in loans (167) 3,129
Purchases of premises and equipment (15) (36)
Net cash (used) by investing
activities (4,419) (963)
Cash flows from financing activities
Net increase in deposits 3,376 9,455
Net cash provided by financing
activities 3,376 9,455
Net increase (decrease)in cash and
cash equivalents (729) 9,136
Cash and cash equivalents at
beginning of year 11,187 11,681
Cash and cash equivalents at
end of period $10,458 $20,817
Income taxes paid $ - $ -
Interest paid $ 1,237 $ 1,443
Foreclosed real estate acquired in
satisfaction of loans $ - $ 69
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, 2002.
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, 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 $3,460,000 or 2.63%,
from $131,558,000 at December 31, 2001 to $135,018,000 at
March 31, 2002. The increase is attributed to an increase in
Securities (Available for Sale) and deposits.
Earning assets, which include loans, investment securities,
federal funds sold, and deposits in other banks were 93.79% of
total assets at March 31, 2002.
Securities (Available for Sale) showed an increase of
$5,122,000 or 13.55% at March 31, 2002. There was an increase
in Savings, Now and Money Market Deposit accounts of
$2,742,000 or 14.79% at March 31, 2002.
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 $1,206,000 at March 31,
2002, which represents 1.81% of total loans outstanding on
that date. Provisions to the allowance for loan losses, which
were charged to net income as of March 31, 2002, totaled
$20,000. 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 March 31, 2002, past due loans to
total loans were 2.51%.
With interest earned on investment securities being one of the
primary sources of income, investment securities increased by
$4,507,000 or 9.85% at March 31, 2002. The following chart
shows what our portfolio is made up of as of March 31, 2002:
U.S. Government Agencies 55.57%
Mortgage-Backed Securities 29.83%
Municipal Securities 14.60%
As of March 31, 2002, securities classified as "held to
maturity" had an amortized cost/recorded value of $7,330,000
and a fair value of $7,459,000; securities classified as
"available for sale" had a fair value of $42,931,000 and an
amortized cost of $42,866,000.
With deposits being the Bank's primary source of funds, both
time and demand, total deposits increased $3,376,000 or 2.88%
from $117,036,000 at December 31, 2001 to $120,412,000 at
March 31, 2002.
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 March
31, 2002, the Bank's liquidity ratio was 45.97%.
RESULTS OF OPERATIONS
For the first quarter of 2002, the Company reported net income
of $328,000 or $2.86 per average share. Net return on assets
was 0.97% and net return on equity was 9.95%.
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 March 31, 2002, the Bank's net
interest margin was 2.97%, a slight increase from March 31,
2001, which at that time the net interest margin was 2.88%.
Net interest income increased $127,000, or 14.48% in 2002 to
$1,004,000 compared to $877,000 at March 31, 2001. The reason
for such increase was $184,000 or 8.26% decrease in interest
income which was offset by a $311,000 or 23.04% decrease in
interest expense.
Non-interest income decreased by $120,000 or 38.34% due
primarily to a decrease in called securities in 2002 as
compared to 2001. Premiums paid to the bank in 2001 totaled
$97,000 from calls.
Non-interest expense includes salaries and employee benefits,
occupancy and equipment expense, and other expense. Non-
interest expense amounted to $711,000 at March 31, 2002, a
$4,000 or .57% increase from March 31, 2001.
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 March 31, 2002, the Bank's
ratios were as follows:
Risk Based Capital 21.05%
Tier 1 Capital 19.82%
Leverage Ratio 9.85%
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 March 31, 2002.
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