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 September 30, 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 Sept 30, 1999
CITIZENS BANCSHARES, INC. AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
INDEX
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets -
Sept 30, 1999 and December 31, 1998
Condensed Consolidated Statements of Income -
Nine months ended
Sept 30, 1999 and Sept 30, 1998
Condensed Consolidated Statements of Cash Flows -
Nine months ended Sept 30, 1999
and Sept 30, 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
SEPT 30, 1999 AND DECEMBER 31, 1998 (UNAUDITED)
(in thousands of dollars)
09/30/99 12/31/98
ASSETS
Cash and due from banks $ 2,412 $ 1,857
Federal funds sold 9,025 6,625
CASH AND CASH EQUIVALENTS 11,437 8,482
Interest-bearing deposits with banks 5,349 5,142
Securities available for sale,
at fair values 24,594 26,513
Securities held to maturity, fair values
of $9,894 & $8,274 9,940 8,125
TOTAL SECURITIES 34,534 34,638
Loans receivable, net of allowance for
loan losses of $1,063 in 1999 and
$1,001 in 1998 59,309 52,119
Accrued interest receivable 998 940
Premises and equipment, net 3,074 2,979
Foreclosed real estate 31 --
Deferred tax asset 144 81
Other assets 883 743
TOTAL ASSETS $115,759 $105,124
LIABILITIES
Demand deposits $10,308 $10,683
Savings, NOW and money-market deposits 19,090 15,351
Time deposits $100,000 or more 24,362 22,674
Other time deposits 49,853 45,223
TOTAL DEPOSITS 103,613 93,931
Accrued interest payable 625 557
Accrued expenses and other liabilities 593 257
TOTAL LIABILITIES 104,831 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 9,813 8,952
Accumulated other comprehensive income (279) 33
TOTAL SHAREHOLDERS' EQUITY 10,928 10,379
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $115,759 $105,124
CITIZENS BANCSHARES, INC. AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
NINE MONTHS ENDED SEPT 30, 1999 & 1998
(in thousands of dollars, except per share data)
NINE MONTHS THREE MONTHS
ENDED ENDED
09/30/99 09/30/98 09/30/99 09/30/98
Interest income
Loans receivable $ 3,889 $ 3,524 $ 1,370 $ 1,263
U.S. Treasury Securities 40 101 6 26
U.S. Government Agencies 1,135 1,115 383 341
State & Political Subdivisions 275 222 95 76
Federal Funds sold 340 390 114 143
Deposits with banks 213 228 74 80
Total interest income 5,892 5,580 2,042 1,929
Interest expense
Deposits
Savings, NOW and IMMA 246 332 83 124
Time deposits >$100,000 1,119 1,015 391 356
Other time deposits 1,942 1,811 662 613
Total interest expense 3,307 3,158 1,136 1,093
Net interest income 2,585 2,422 906 836
Provision for loan losses 78 88 31 30
Net interest income after provision
for loan losses 2,507 2,334 875 806
Noninterest income
Service charges 403 344 143 123
Other income 123 114 38 38
Total noninterest income 526 458 181 161
Noninterest expense
Salaries & employee benefits 993 842 349 311
Occupancy & equipment expense 398 339 140 119
Other expense 451 449 152 152
Total noninterest expense 1,842 1,630 641 582
Income before income taxes 1,191 1,162 415 385
Income tax expense 330 327 114 103
Net Income $ 861 $ 835 $ 301 $ 282
Net income per share of
common stock $ 7.49 $ 7.27 $ 2.62 $ 2.45
Net Income $ 861 $ 835 $ 301 $ 282
Other comprehensive income,
net of tax ( 312) 24 ( 84) ( 1)
Comprehensive income $ 549 $ 859 $ 217 $ 281
CITIZENS BANCSHARES, INC AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED
SEPT 30, 1999 AND 1998
SEPT SEPT
30, 1999 30, 1998
Cash flows from operating activities:
Net Income $ 861 $ 829
Adjustments to reconcile net income to
net cash provided by operating activities -
Provision for possible loan losses 78 87
Depreciation & Amortization 181 133
Net (accretion) of investment securities 52 24
(Gain) on sale of other real estate -- --
(Increase) decrease in int receivable (58) 51
(Increase) in other assets (140) (258)
Increase in interest payable 68 20
Increase in other liabilities 336 138
Net cash provided by operating activities 1,378 1,024
Cash flows from investing activities:
Proceeds from maturities and calls of
investment securities 3,577 15,026
Purchase of investment securities (9,368) (16,683)
(Increase) in interest-bearing
deposits with other banks (207) (780)
Proceeds from sales of foreclosed real estate -- --
Increase in loans (1,815) (3,308)
Purchase of premises and equipment (292) (207)
Net cash (used) by investing activities (8,105) (5,952)
Cash flows from financing activities:
Increase in deposits 9,682 7,653
Net cash provided by financing activities 9,682 7,653
Net increase in cash and cash equivalents 2,955 2,725
Cash and cash equivalents, beginning of year 8,482 8,748
Cash and cash equivalents, end of period $11,437 $11,473
Cash paid for income taxes $ 284 $ 271
Cash paid for interest expense $ 3,239 $ 3,138
Foreclosed real estate acquired in
satisfaction of loans $ 31 $ ---
Total Increase (decrease) in Fair Value of
Securities Available for Sale $ (473) $ 37
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
SEPTEMBER 30, 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 $10,635,000 or 10.12%, from
$105,124,000 at December 31, 1998 to $115,759,000 at September 30, 1999.
Most of the increase is attributed to loans which had a $7,190,000 or
13.80% increase. Federal Funds also increased by $2,400,000 or 36.23%.
Earning assets, which include loans, investment securities, federal
funds sold, and deposits in other banks were 94.14% of total assets at
September 30, 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 $1,063,000 at September 30, 1999, which represents a
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, 1999, totaled $78,000. 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, 1999 the
following ratios were:
Charge-Off Loans to Total Loans .05%
Past Due Loans to Total Loans 1.94%
Classified Loans to Total Loans .72%
Another primary source of income is interest earned on investment
securities. The Bank's investment objectives and activities are guided
by a written investment policy. At September 30, 1999, investment
securities showed a slight decrease of $104,000 or .30% from December
30, 1998. Of the total portfolio, $2,489,000 or 7.22% will mature
within one (1) year, $27,385,000 or 79.42% mature within five (5) years
and $4,606,000 or 13.36% mature within ten (10) years. The following
charts shows a break-down of the Bank's portfolio:
US Treasury Securities 1.00%
US Government Agencies 37.32%
Mortgage-Backed Securities 36.26%
Municipal 25.42%
At of September 30, 1999, securities classified as "held-to-maturity"
had an amortized cost/recorded value of $9,940,000 and a fair value of
$9,894,000; securities classified as "available-for-sale" had a fair
value of $25,018,000 and an amortized cost of $24,594,000.
With deposits being the bank's primary source of funds, both time and
demand, total deposits increased $9,682,000 or 10.31% from $93,931,000
at December 31, 1998 to $103,613,000 at September 30, 1999. Money-
Market accounts increased by $3,440,000 or 22.41% and time deposits
increase $5,111,000 or 7.53%.
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, 1999, the
Bank's liquidity ratio was 39.83%.
RESULTS OF OPERATIONS
The Company reported net income of $861,000 or $7.49 per average share
for the period ended September 30, 1999. Net return on assets was 1.02%
and net return on equity was 9.39%.
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 September 30,
1999, the Bank's net interest margin was 3.14%, a slight decrease from
September 30, 1998 which at that time the net interest margin was 3.22%.
Management is aware of the decrease and continues to monitor growth,
income and expenses.
Noninterest income, which consists primarily of service charges and fees
on financial services increased $59,000 or 17.15% in comparing September
30, 1999 to September 30, 1998. With the growth in demand deposits,
more monthly service charges are generated which reflects a $19,000
increase from September 30, 1998. Effective January 1, 1999, the Bank
increased its NSF fees from $15.00 per item to $18.00 per item. In
comparing year to date totals at September 30, 1999 to September 30,
1998, NSF charges at September 30, 1999 show a $35,000 increase.
Noninterest expense includes salaries and employee benefits, occupancy
and equipment expense, and other expense. Noninterest expense amounted
to $1,842,000 at September 30, 1999, a $212,000 or 13.00% increase from
September 30, 1998. Salaries and employee benefits being the main
expense showed an increase of $151,000 or 17.93%.
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, 1999, the Bank's
ratios were as follows:
Capital to Assets 9.61%
Risk Based Capital 18.72%
Tier 1 Capital 17.47%
Leverage Ratio 9.74%
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 September 30, 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.
As of September 30, 1999, the Bank's Y2K Business Resumption Plan
testing was done and audited, with no problems to report.
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 September 30, 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