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 30,2002
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, 2002
$5 Par Value
CITIZENS BANCSHARES, INC. AND SUBSIDIARY
CONTENTS
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheet - September 30, 2002
Condensed Consolidated Statements of Income and Comprehensive
Income - Nine and three months ended September 30, 2002 and 2001
Condensed Consolidated Statements of Cash Flows - Nine months
ended September 30, 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)
September 30, 2002
(In thousands of dollars)
ASSETS
Cash and due from banks $4,186
Federal funds sold 8,275
Cash & cash equivalents 12,461
Interest-bearing deposits with banks 3,265
Securities available for sale, at fair values 42,037
Securities held to maturity 6,626
Loans receivable, net of allowance for loan
losses of $1,226 70,549
Premises and equipment 2,691
Other assets 1,657
Total assets $139,286
LIABILITIES
Demand deposits $13,304
Savings, NOW and money-market deposits 20,769
Time deposits $100,000 and more 36,541
Other time deposits 52,566
Total deposits 123,180
Accrued expenses and other liabilities 1,028
Total liabilities 124,208
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 12,982
Accumulated other comprehensive income 702
Total shareholders' equity 15,078
Total liabilities and shareholders' equity $139,286
CITIZENS BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME (UNAUDITED)
NINE AND THREE MONTHS ENDED September 30, 2002 & 2001
(In thousands of dollars, except per share data)
Year-to-Date Quarter-to-Date
2002 2001 2002 2001
Interest income
Loans receivable $4,274 $4,521 $1,474 $1,543
Taxable securities 1,453 1,285 464 449
Tax-exempt securities 219 235 69 68
Federal funds sold 94 456 28 106
Deposits with banks 115 165 31 55
Total interest income 6,155 6,662 2,066 2,221
Interest expense
Savings, NOW & money-
market deposits 342 405 115 134
Time deposits
$100,000 and more 1,063 1,433 333 467
Other time deposits 1,499 2,193 468 703
Total interest expense 2,904 4,031 916 1,304
Net interest income 3,251 2,631 1,150 917
Provision for loan losses 90 90 40 30
Net interest income after
provision for loan losses 3,161 2,541 1,110 887
Non-interest income
Gain on securities called 16 138 1 -
Other non-interest income 569 589 187 177
Total non-interest income 585 727 188 177
Non-interest expense
Salaries and employee
Benefits 1,192 1,162 424 404
Other expense 982 978 324 347
Total non-interest expense 2,174 2,140 748 751
Income before income taxes 1,572 1,128 550 313
Income tax expense 491 332 175 89
Net income $1,081 $796 $375 $224
Other comprehensive income, 444 56 287 (78)
net of tax
Comprehensive income $1,525 $852 $662 $146
Net income per share of $9.41 $6.93 $3.26 $1.95
common stock
CITIZENS BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(In thousands of dollars)
2002 2001
Cash flows from operating activities
Net income $ 1,081 $ 796
Adjustments to reconcile net income
to net cash provided by operating
Activities 99 547
Net cash provided by operating
Activities 1,180 1,343
Cash flows from investing activities
Maturities and calls of securities 15,211 23,166
Purchases of securities (17,441) (25,514)
Net decrease/(increase) in interest-
bearing deposits with banks 1,687 (2,377)
Net (increase) in loans (5,490) (2,855)
Purchases of premises and equipment (17) (68)
Net cash (used) by investing
Activities (6,050) (7,648)
Cash flows from financing activities
Net increase in deposits 6,144 8,583
Net cash provided by financing
Activities 6,144 8,583
Net increase in cash and cash
equivalents 1,274 2,278
Cash and cash equivalents at
beginning of year 11,187 11,681
Cash and cash equivalents at
end of period $12,461 $13,959
Income taxes paid $ 463 $ 301
Interest paid $ 3,183 $ 4,066
Foreclosed real estate acquired in
satisfaction of loans $ 101 $ 86
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, 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 $7,728,000 or 5.87%,
from $131,558,000 at December 31, 2001 to $139,286,000 at
September 30, 2002. 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 94% of
total assets at September 30, 2002.
Net loans showed an increase of $5,400,000 or 8.29% for the
nine months ended September 30, 2002. There was an increase
in securities of $2,909,000 or 6.36% 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 $1,226,000 at September 30,
2002, which represents 1.71% of total loans outstanding on
that date. Provisions to the allowance for loan losses, which
were charged to net income as of September 30, 2002, 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, 2002, past due
loans to total loans were 2.33%.
Investment securities increased by $2,909,000 or 6.36% for
the nine months ended September 30, 2002. The following chart
lists the makeup of the portfolio, based on amortized costs,
as of September 30, 2002:
U.S. Government Agencies 59.57%
Mortgage-Backed Securities 26.51%
Municipal Securities 13.92%
As of September 30, 2002, securities classified as "held to
maturity" had an amortized cost/recorded value of $6,626,000
and a fair value of $6,935,000; securities classified as
"available for sale" had a fair value of $42,037,000 and an
amortized cost of $40,973,000.
Deposits are the Bank's primary source of funds. Total
deposits increased $6,144,000 or 5.25% from $117,036,000 at
December 31, 2001 to $123,180,000 at September 30, 2002. Time
deposits $100,000 and more increased by $2,694,000 or 7.96%
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, 2002, the Bank's liquidity ratio was 44.64%.
RESULTS OF OPERATIONS
For the nine months ended September 30, 2002, the Company
reported net income of $1,081,000 or $9.41 per average share
outstanding. Net return on assets was 1.07% and net return on
equity was 10.23%.
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, 2002, the Bank's net
interest margin was 3.03%, an increase from September 30,
2001, which at that time the net interest margin was 2.72%.
Net interest income increased $620,000, or 23.57% in 2002 to
$3,251,000, compared to $2,631,000 at September 30, 2001. The
reason for such increase was a $507,000 or 7.61% decrease in
interest income, which was offset by a $1,127,000 or 27.96%
decrease in interest expense.
Non-interest income decreased by $142,000 or 19.53% 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 $2,174,000 at September 30, 2002,
a $34,000 or 1.59% increase from September 30, 2001. Salaries
and employee benefits are the main expense and increased by
$30,000 or 2.58%.
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, 2002, the Bank's
ratios were as follows:
Risk Based Capital 21.40%
Tier 1 Capital 20.15%
Leverage Ratio 10.29%
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, 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
CERTIFICATIONS*
I, Carl W. Fontenot, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Citizens Bancshares, Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a. all significant deficiencies in the design or operations of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: November 21, 2002
__________________________
CARL W. FONTENOT
PRESIDENT/CEO
CERTIFICATIONS*
I, Wayne Vidrine, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Citizens Bancshares, Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a. all significant deficiencies in the design or operations of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: November 21, 2002
__________________________
WAYNE VIDRINE
EXECITIVE VICE PRESIDENT-TREASURER