U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter ended March 31, 1999 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 (I.R.S. Employer Identification)
incorporation or organization)
841 West Main Street, Ville Platte, La. 70586
(Address of principal executive offices)
Issuer's telephone number, including area code 318-363-5643
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months, and
(2) had been subject to such filing requirements for the past 90 days.
Yes (x) No ( )
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Number of
Class of Common Stock Shares Outstanding As of
Common Stock $5 Par Value 114,855 March 31, 1999
CITIZENS BANCSHARES, INC. AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
INDEX
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets -
March 31, 1999 and December 31, 1998
Condensed Consolidated Statements of Income -
Three months ended
March 31, 1999 and March 31, 1998
Condensed Consolidated Statements of Cash Flows -
Three months ended March 31, 1999
and March 31, 1998
Notes to 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. CITIZENS BANCSHARES, INC. AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998 (UNAUDITED)
(in thousands of dollars)
03/30/99 12/31/98
ASSETS
Cash and due from banks $ 2,363 $ 1,857
Federal funds sold 10,820 6,625
CASH AND CASH EQUIVALENTS 13,183 8,482
Interest-bearing deposits with banks 5,152 5,142
Securities available for sale,
at fair values 26,458 26,513
Securities held to maturity, fair values
of $8,731 & $8,274 8,615 8,125
TOTAL SECURITIES 35,073 34,638
Loans receivable, net of allowance for
loan losses of $1,015 in 1999 and
$1,001 in 1998 54,029 52,119
Accrued interest receivable 939 940
Premises and equipment, net 3,065 2,979
Foreclosed real estate (3) --
Deferred tax asset 2 81
Other assets 883 743
TOTAL ASSETS $112,323 $105,124
LIABILITIES
Demand deposits $10,753 $10,683
Savings, NOW and money-market deposits 19,818 15,351
Time deposits $100,000 or more 21,796 22,674
Other time deposits 48,241 45,223
TOTAL DEPOSITS 100,608 93,931
Accrued interest payable 533 557
Accrued expenses and other liabilities 575 257
TOTAL LIABILITIES 101,716 94,745
SHAREHOLDERS' EQUITY
Common Stock $5 par value, 300,000
shares authorized, 114,855 shares
issued and (145 shares held in
Treasury Stock) 575 575
Additional paid-in capital 825 825
Treasury Stock, @ cost (6) (6)
Retained earnings 9,216 8,952
Accumulated other comprehensive income (3) 33
TOTAL SHAREHOLDERS' EQUITY 10,607 10,379
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $112,323 $105,124
CITIZENS BANCSHARES, INC. AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 1999 & 1998
(in thousands of dollars, except per share data)
THREE MONTHS THREE MONTHS
ENDED ENDED
03/31/99 03/31/98
Interest income
Loans receivable $ 1,226 $1,094
U.S. Treasury Securities 18 41
U.S. Government Agencies 366 393
State & Political Subdivisions 90 71
Federal Funds sold 115 131
Deposits with banks 69 73
Total interest income 1,884 1,803
Interest expense
Deposits
Savings, NOW and IMMA 84 104
Time deposits $100,000 and more 347 313
Other time deposits 631 605
Total interest expense 1,062 1,022
Net interest income 822 781
Provision for loan losses 20 30
Net interest income after provision
for loan losses 802 751
Noninterest income
Service charges 132 110
Commission on Insurance 27 20
Other income 19 19
Total noninterest income 178 149
Noninterest expense
Salaries & employee benefits 329 267
Occupancy & equipment expense 130 109
Other expense 155 143
Total noninterest expense 614 519
Income before income taxes 366 381
Income tax expense 102 120
Net Income $ 264 $ 261
Net income per share of
common stock $2.30 $ 2.27
Net Income $ 264 $ 261
Other comprehensive income,
net of tax (36) (36)
Comprehensive income $ 228 $ 225
CITIZENS BANCSHARES, INC AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED
MARCH 31, 1999 AND MARCH 31, 1998
MARCH MARCH
30, 1999 30, 1998
Cash flows from operating activities:
Net Income $ 264 $ 260
Adjustments to reconcile net income to
net cash provided by operating activities -
Provision for possible loan losses 20 30
Depreciation & Amortization 78 44
Net (accretion) of investment securities -- --
(Gain) on sale of other real estate -- --
Decrease in interest receivable 1 150
(Increase) in other assets (140) (269)
(Decrease) in interest payable (24) (36)
Increase in other liabilities 318 126
Net cash provided by operating activities 517 305
Cash flows from investing activities:
Proceeds from maturities and calls of
investment securities 1,705 7,155
Purchase of investment securities (4,502) (9,475)
(Increase) in interest-bearing
deposits with other banks (10) (395)
Proceeds from sales of foreclosed real estate -- --
Decrease in loans 489 656
Purchase of premises and equipment (175) 119
Net cash (used) by investing activities (2,493) (1,940)
Cash flows from financing activities:
Increase in deposits 6,677 3,570
Net cash provided by financing activities 6,677 3,570
Net increase in cash and cash equivalents 4,701 1,935
Cash and cash equivalents, beginning of year 8,482 8,748
Cash and cash equivalents, end of period $13,183 $10,683
Cash paid for income taxes $ --- $ ---
Cash paid for interest expense $ 1,087 $ 1,058
Foreclosed real estate acquired in
satisfaction of loans $ --- $ 47
Total Increase (decrease) in Fair Value of
Securities Available for Sale $ (54) $ (55)
CITIZENS BANCSHARES, INC. AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
(1) The interim financial statements are prepared pursuant to the
requirements for reporting on Form 10-QSB. The December 31,
1998 balance sheet data was derived from audited financial
statements but does not include all disclosures required by
generally accepted accounting principles. 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, 1999.
CITIZENS BANCSHARES, INC. AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MARCH 31, 1999
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.
FINANCIAL CONDITION
Total assets of the Company increased by $7,199,000 or 6.85%, from
$105,124,000 at December 31, 1998 to $112,323,000 at March 31, 1999.
The increase is attributable to an increase in loans and deposits.
Earning assets, which include loans, investment securities, federal
funds sold, and deposits in other banks were 93.85% of total assets at
March 31, 1999.
Loans showed an increase of $1,910,000 or 3.66% at March 31, 1999. In
comparing loan catorgies, residential 1-4 family dwelling loans
increased $1,904,000 or 33.18% during the first quarter of 1999.
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 $1,015,000 at March 31, 1999, which represents a 1.84%
of total loans outstanding on that date. Provisions to the allowance
for loan losses, which were charged to net income as of March 31, 1999,
totaled $19,500. 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, 1999 past due loans to total
loans were 2.21%.
With interest earned on investments securities being one of the primary
source of income, investment securities increased by $435,000 or 1.25%
at March 31, 1999. The following chart shows what our portfolio is made
up of as of March 31, 1999:
US Treasury Securities 3.71%
US Government Agencies 28.41%
Mortgage-Backed Securities 46.55%
Municipal 21.33%
As of March 31, 1999, securities classified as "held-to-maturity" had an
amortized cost/recorded value of $8,615,000 and a fair value of
$8,731,000; securities classified as "available-for-sale" had a fair
value of $26,463,000 and an amortized cost of $26,458,000.
With deposits being the bank's primary source of funds, both time and
demand, total deposits increased $6,677,000 or 7.11% from $93,931,000 at
December 31, 1998 to $112,332,000 at March 31,1999. Money-Market
accounts increased by $4,467,000 or 29.10% and time deposits less than
$100m increased by $3,018,000 or 6.67%. Time deposits greater than $100m
show a slight decrease.
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. As of March 31, 1999, the
Bank's liquidity ratio was 45.44%.
RESULTS OF OPERATIONS
For the first quarter of 1999, the bank reported a net income of
$264,000 or $2.30 per average share. Net return on assets was 0.97% and
net return on equity was 9.18%.
Net interest income is the Bank'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,
1999, the Bank's net interest margin was 3.12%, a slight decrease from
March 31, 1998 which at that time the net interest margin was 3.19%.
Net interest income increased $41,000, or 5.25%, in 1999 to $822,000
compared to $781,000 at March 31, 1998. The reason for such increase
was a $81,000 or 4.49%, increase in interest income which was offset by
a $40,000 or 3.91% increase in interest expense.
Noninterest income, which consists primarily of service charges and fees
on financial services increased $29,000 or 19.46% in comparing March 31,
1999 and 1998. Service charge on deposits accounts increased by $22,000
or 20.00%. Effective January 1, 1999, the Bank increased its NSF fees
from $15.00 per item to $18.00.
Noninterest expense includes salaries and employee benefits, occupancy
and equipment expense, and other expense. Noninterest expense amounted
to $614,000 at March 31, 1999, a $95,000 or 18.30% increase from March
31, 1998. Salaries and employee benefits being the main expense showed
a $62,000 or 23.22% increase. With the growth that the Bank continues
to experience, management welcomes it, however will monitor expenses
closely to try and keep cost down.
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, 1999, the Bank's ratios
were as follows:
Capital to Assets 9.70%
Risk Based Capital 18.90%
Tier 1 Capital 17.65%
Leverage Ratio 9.48%
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.
YEAR 2000
In late 1997, Citizens Bank decided to convert its data processing
operations from an outsourced service bureau operations to an in-house
operation. When this decision was made, all hardware and software data
processing acquisitions were made with the awareness and objective of
satisfying the Year 2000 compliance and conformity issues. After
successful conversion of data processing operations from a service
bureau to an in-house operation, Citizens Bank's Board of Directors
adopted an Electric Data Processing Policy which included a Year 2000
Program policy.
A Y2K Committee, chaired by a board-appointed Y2K Coordinator, was
formed in early 1998 to address Year 2000 issues. The Committee's
objective is to monitor and report the Bank's progress in achieving Year
2000 compliance for all mission critical applications. In addition to
monitoring, testing and identifying appropriate changes to in house
operations, the Y2K committee continues to monitor Year 2000 status of
the Bank's customers, service providers, and suppliers.
As of March 31, 1999, Citizens Bank had substantially completed
remediating and obtaining Y2K compliance certifications on its mission
critical systems. Testing and validations of mission critical systems
are scheduled for completion in early 1999 and monitoring of Year 2000
compliance will be accomplished throughout 1999. Written
acknowledgments have been received from all mission critical hardware
and software providers, utility and telephone service providers, and
date processing service providers assuring timely remediation, testing
and validation for Year 2000 compliance.
The Bank expects to continue incurring expense charges related to Year
2000 compliance through the remainder of 1999 ; the majority of costs
associated with Year 2000 compliance, however, is the responsibility of
the Bank's data processing vendors and service providers. Estimated
expenses charges to be borne directly by the Bank will total $3,000 per
month through 1999. The Year 2000 expenses will be included in
noninteret expense categories and do not include equipment and software
scheduled replacement in the ordinary course of business.
The Bank's estimate of Year 2000 investment costs and the estimated time
periods set forth above by which the Bank expects to substantially
complete mission critical system programming and testing and
implementation are based upon management's best current estimates, which
were delivered utilizing numerous assumptions about future events.
There can be no guarantee that these estimates will be achieved, and
actual results could differ from those anticipated. Because of the
critical nature of the Year 2000 issues to our business and to all of
the financial services industry, if necessary modifications are not
made, the Bank's operations could be materially impacted. Citizens Bank
and its data processing vendors remain scheduled to ensure achievement
of Year 2000 compliance, therefore, an adverse impact on the Bank's
operations is not expected.
CITIZENS BANCSHARES, INC. AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
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 - (27) Financial Data Schedule
(b) The Company has not filed any reports on Form 8-K
during the quarter ended March 31, 1999.
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 PRES.-TREASURER