<PAGE> 1
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended Commission File Number:
September 30, 2000 333-74997
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Florida 59-3535315
------------------------------ -------------------
State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
3411 Tamiami Trail North, Suite 200, Naples, Florida 34103
---------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 941-643-4646
------------
Not applicable
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 19834 during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has 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:
Common Stock, $0.01 per value 1,165,370
----------------------------- ----------------------------------
Class Outstanding as of October 31, 2000
Transitional Small Business Disclosure Format:
Yes [ ] No [X]
===============================================================================
<PAGE> 2
PART I. - FINANCIAL INFORMATION
Item 1. - Financial Statements
CONSOLIDATED BALANCE SHEETS
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash & due from banks $ 1,026,370 $ 2,529,344
Federal funds sold 5,558,000 15,766,000
------------ ------------
Total cash and cash equivalents 6,584,370 18,295,344
------------ ------------
Interest-bearing deposits in banks 2,000,000 2,000,000
Securities available for sale 50,760 50,760
Securities held to maturity 996,492 987,915
Loans 27,251,391 4,334,141
Less: allowance for loan losses (173,547) (26,885)
------------ ------------
Net loans 27,077,844 4,307,256
------------ ------------
Restricted securities, Federal Home Loan Bank and
Federal Reserve Bank Stock, at cost 326,600 326,600
Premises and equipment, net 2,186,437 2,170,140
Accrued interest receivable 156,422 51,723
Other assets 104,977 52,024
------------ ------------
TOTAL ASSETS $ 39,483,902 $ 28,241,762
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 3,515,950 $ 1,591,318
Interest bearing 26,488,724 16,356,053
------------ ------------
Total deposits 30,004,674 17,947,371
Accrued interest 19,917 3,266
Accrued Expenses and other liabilities 19,095 156,558
------------ ------------
TOTAL LIABILITIES 30,043,686 18,107,195
------------ ------------
Preferred stock, par value $.01 per share,
1,000,000 shares authorized; no shares issued
and outstanding -- --
Common stock, par value $.01 per share,
20,000,000 shares authorized; 1,165,370 and 1,145,070
shares issued and outstanding, respectively 11,654 11,451
Additional paid-in capital 11,549,700 11,346,903
Accumulated deficit (2,121,138) (1,223,787)
Unrealized loss on securities available for sale -- --
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 9,440,216 10,134,567
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 39,483,902 $ 28,241,762
============ ============
</TABLE>
<PAGE> 3
CONSOLIDATED STATEMENTS OF OPERATIONS
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC. AND SUBSIDIARY
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
September 30,
2000 1999
----------- ---------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 594,997 $ 5,173
Interest on securities and other 54,980 --
Interest on federal funds sold 96,351 42,765
Interest other -- 21,903
----------- ---------
TOTAL INTEREST INCOME 746,328 69,841
----------- ---------
INTEREST EXPENSE
Interest on deposits 367,147 7,430
Interest on other borrowings -- 3,095
----------- ---------
TOTAL INTEREST EXPENSE 367,147 10,525
----------- ---------
NET INTEREST INCOME (LOSS) 379,181 59,316
Provision for loan losses (29,211) (2,571)
----------- ---------
NET INTEREST INCOME (LOSS) AFTER PROVISION
FOR LOAN LOSSES 349,970 56,745
NON-INTEREST INCOME
Service charges, commissions and fees 11,721 638
NON-INTEREST EXPENSES
Salaries and employee benefits 315,592 264,435
Occupancy expenses 63,629 61,601
Equipment rental, depreciation & maintenance 55,281 --
General operating 220,230 94,949
----------- ---------
TOTAL NON-INTEREST EXPENSES 654,732 420,985
----------- ---------
LOSS BEFORE INCOME TAXES (293,041) (363,602)
INCOME TAXES -- --
----------- ---------
NET LOSS $ (293,041) $(363,602)
=========== =========
NET LOSS PER SHARE $ (0.25) $ (0.73)
=========== =========
AVERAGE SHARES OUTSTANDING 1,165,370 500,874
=========== =========
</TABLE>
<PAGE> 4
CONSOLIDATED STATEMENTS OF OPERATIONS
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC. AND SUBSIDIARY
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
2000 1999
----------- ---------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 1,184,133 $ 5,173
Interest on securities and other 165,020 --
Interest on federal funds sold 493,792 42,765
Interest other 14,482 78,293
----------- ---------
TOTAL INTEREST INCOME 1,857,427 126,231
----------- ---------
INTEREST EXPENSE
Interest on deposits 894,597 7,430
Interest on other borrowings -- 19,080
----------- ---------
TOTAL INTEREST EXPENSE 894,597 26,510
----------- ---------
NET INTEREST INCOME (LOSS) 962,830 99,721
Provision for loan losses (149,182) (2,571)
----------- ---------
NET INTEREST INCOME (LOSS) AFTER PROVISION
FOR LOAN LOSSES 813,648 97,150
NON-INTEREST INCOME
Service charges, commissions and fees 26,777 638
NON-INTEREST EXPENSES
Salaries and employee benefits 886,452 502,349
Occupancy expenses 100,397 37,450
Equipment rental, depreciation & maintenance 208,564 93,135
General operating 542,363 188,912
----------- ---------
TOTAL NON-INTEREST EXPENSES 1,737,776 821,846
----------- ---------
LOSS BEFORE INCOME TAXES (897,351) (724,058)
INCOME TAXES -- --
----------- ---------
NET LOSS $ (897,351) $(724,058)
=========== =========
NET LOSS PER SHARE $ (0.77) $ (4.08)
=========== =========
AVERAGE SHARES OUTSTANDING 1,164,123 177,394
=========== =========
</TABLE>
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
Nine months ended September 30,
2000 1999
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Loss $ (897,351) $ (724,058)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 129,820 9,129
Provision for loan losses 146,662 2,571
Net securities amortization and accretion (8,578) --
(Increase) Decrease in accrued interest receivable (104,698)
(Increase) Decrease in other assets (52,955) 9,409
Increase (Decrease) in accrued interest payable 16,651
Increase (Decrease) in accrued expenses and other liabilities (137,465) 70,268
------------ ------------
Total adjustments (10,563) 91,377
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (907,914) (632,681)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans (22,917,247) (833,697)
Purchase of securities available for sale -- (291,000)
Maturity of securities available for sale --
Purchase of premises and equipment (146,116) (607,207)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (23,063,363) (607,207)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock 203,000 10,773,353
Increase in deposits 12,057,301 2,965,426
Borrowings on loans payable -- 1,100,000
Payments on loans payable -- (2,600,000)
Repayments on organizers advances -- (10,000)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 12,260,301 12,228,779
------------ ------------
NET INCREASE (DECREASE) IN CASH (11,710,974) 9,864,194
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
Beginning of period 18,295,344 115,057
------------ ------------
End of period $ 6,584,370 $ 9,979,251
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 877,946 $ 108,894
============ ============
</TABLE>
<PAGE> 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion of the financial condition and results of
operations of Citizens Bancshares of Southwest Florida, Inc. should be read in
conjunction with the consolidated financial statements included elsewhere
herein.
Citizens Bancshares was incorporated in Florida in September 1998 to
serve as a holding company for Citizens National Bank of Southwest Florida, a
national banking association then in organization. For approximately the first
eleven months following its incorporation, the main activities of Citizens
Bancshares centered on applying for a national bank charter, applying to become
a bank holding company, hiring and training bank employees, preparing the
banking facilities and premises for opening, and conducting an initial public
offering of common stock to raise a minimum of $10 million to fund the startup
of Citizens National Bank. By August 1999, Citizens Bancshares had received
subscriptions to purchase common stock in an amount in excess of the required
minimum, and on August 24, 1999, Citizens National Bank commenced operations at
its office located at 3401 Tamiami Trail North in Naples, Florida.
The third full quarter of consolidated operations ended September 30,
2000 and is not comparable to the same quarter of 1999 due to the significant
change in the operation of Citizens Bancshares represented by the opening of
Citizens National Bank.
Financial Condition
Asset Quality
A major key to long-term earnings growth is the maintenance of a
high-quality loan portfolio. Citizens National Bank's directive in this regard
is carried out through its policies and procedures for extending credit to
Citizens National Bank's customers. The goal of these policies and procedures
is to provide a sound basis for new credit extensions and an early recognition
of problem assets to allow the most flexibility in their timely disposition.
Principal banking operations commenced on August 24, 1999, and
management has not identified any non-performing assets. Additions to the
allowance for loan losses are made monthly to maintain the allowance at an
appropriate level based upon management's analysis of potential risk in the
loan portfolio. The amount of the loan loss provision will generally be
determined by an evaluation of the level of loans outstanding, the level of
non-performing loans, historical loan loss experience, delinquency trends, the
amount of actual losses charged to the reserve in a given period, and
assessment of present and anticipated economic conditions.
<PAGE> 7
Liquidity
Liquidity represents the ability to provide steady sources of funds
for loan commitments and investment activities, as well as to maintain
sufficient funds to cover deposit withdrawals and payment of debt and operating
obligations. Citizens National Bank's liquidity position was initially
established through Citizens Bancshares' purchase of $9,700,000 of the common
stock of Citizens National Bank. As Citizens National Bank grows, liquidity
needs can be met either by converting assets to cash or by attracting new
deposits. Citizens National Bank had deposits of $32,172,324 at September 30,
2000. Below are the pertinent liquidity balances and ratios at June 30, 2000.
At
September 30,
2000
-------------
Cash and cash equivalents ................. $6,584,370
Securities available for sale ............. $ 50,760
CDs over $100,000 to total deposits ratio.. 37.9%
Loan to deposit ratio ..................... 85.1%
Cash and cash equivalents are the primary source of liquidity. At
September 30, 2000, cash and cash equivalents amounted to $6.6 million,
representing 16.6% of total bank assets. Securities available for sale provide
a secondary source of liquidity. None of the approximately $1.0 million in
Citizens National Bank's securities portfolio is scheduled to mature in 2000.
The bank has established lines of credit totaling $3,000,000 with correspondent
banks as another secondary source of liquidity.
At September 30, 2000, large denomination certificates accounted for
47.9% of total deposits. Large denomination CDs are generally more volatile
than other deposits. As a result, management continually monitors the
competitiveness of the rates it pays on its large denomination CDS and
periodically adjusts its rates in accordance with market demands. Significant
withdrawals of large denomination CDs may have a material adverse effect on
Citizens National Bank's liquidity. Management believes that since a majority
of the above certificates were obtained from Citizens National Bank customers
residing in Collier County, Florida, the volatility of such deposits is lower
than if such deposits were obtained from depositors residing outside of Collier
County, as outside depositors are generally considered to be more likely to be
interest rate sensitive.
Management knows of no trends, demands, commitments, events or
uncertainties that should result in or are reasonably likely to result in
Citizens Bancshares' liquidity increasing or decreasing in any material way in
the foreseeable future.
<PAGE> 8
Capital Adequacy
There are two primary measures of capital adequacy for banks and bank
holding companies: (i) risk-based capital guidelines and (ii) the leverage
ratio.
The risk-based capital guidelines measure the amount of a bank's
required capital in relation to the degree of risk perceived in its assets and
its off-balance sheet items. Under the risk-based capital guidelines, capital
is divided into two "tiers." Tier 1 capital consists of common shareholders'
equity, noncumulative perpetual preferred stock and any related surplus and
minority interest in the equity accounts of consolidated subsidiaries. Goodwill
is subtracted from the total. Tier 2 capital consists of the allowance for loan
losses, hybrid capital instruments, term subordinated debt and intermediate
term preferred stock:
Banks are required to maintain a minimum risk-based capital ratio of
8.0% , with at least 4.0% consisting of Tier 1 capital.
The second measure of capital adequacy is the leverage ratio, which is
computed by dividing Tier 1 capital into average total assets. The OCC has
established a 4.0% minimum leverage ratio requirement for all banks that are
not rated CAMELS 1.
The table below illustrates Citizens National Bank's and Citizen
Bancshares' regulatory capital ratios at September 30, 2000:
MINIMUM
SEPT 30, REGULATORY
2000 REQUIREMENT
-------- -----------
CITIZENS NATIONAL BANK
Tier 1 Capital ...................... 27.98% 4.00%
Total risk-based capital ratio .. 28.63% 8.00%
Leverage ratio ...................... 19.70% 4.00%
CITIZENS BANCSHARES - CONSOLIDATED
Tier 1 Capital ...................... 35.06% 4.00%
Total risk-based capital ratio .. 35.70% 8.00%
Leverage ratio ...................... 25.06% 4.00%
The above ratios indicate that the capital positions of Citizens
Bancshares and Citizens National Bank are sound and that Citizens Bancshares is
well positioned for future growth.
<PAGE> 9
Results of Operations
Since Citizens National Bank did not begin operations until the third
quarter of 1999, a comparison of the company's results of operations for the
quarter ended September 30, 1999 to those for the quarter ended September 30,
2000 would not be meaningful. This discussion will therefore concentrate on
results of operations for the quarter ended September 30, 2000.
Net loss for the quarter ended September 30, 2000 amounted to
$(293,041), or $(.25) per share. The following is a brief discussion of the
more significant components of net income:
(a) Net interest income represents the difference between
interest received on interest earning assets and interest
paid on interest bearing liabilities. The following table
sets forth the main components of interest earning assets and
interest bearing liabilities for the quarter ended September
30, 2000.
Interest Interest
Earning Assets/ Average Income/ Yield/
Bearing Liabilities Balance Cost Cost
------------------- ----------- -------- ----
Federal funds sold ........... $ 5,882,435 $ 96,351 6.50%
Securities ................... $ 3,372,001 $ 54,980 6.47%
Loans ........................ $24,889,067 $594,997 9.48%
----------- -------- ----
Total .................. $34,143,503 $746,328 8.67%
Deposits ..................... $29,859,958 $386,849 5.14%
Net interest income .......... $359,479 3.53%
Net yield on earning assets .. 4.18%
(b) At December 31, 1999, the allowance for loan losses amounted
to $26,885. During the quarter ended September 30, 2000, an
additional $29,211 was provided to the allowance for loan
losses. There have been three charge-offs totaling $2,520
since the opening of Citizens National Bank. As of September
30, 2000, management considers the allowance for loan losses
to be adequate to absorb expected future losses. However,
there can be no assurance that charge-offs in future periods
will not exceed the allowance for loan losses or that
additional provisions to the allowance will not be required.
(c) Non-interest income, which consists primarily of service fees
on deposit accounts and other miscellaneous fees, amounted to
$11,721, or an annualized 0.12% of average assets, for the
quarter ended September 30, 2000.
(d) Non-interest expense for the quarter ended September 30, 2000
amounted to $654,732. As a percent of total average assets,
non-interest expense amounted to 6.94 %. The components of
non-interest expense for the quarter ended September 30, 2000
are set forth below:
Salaries and benefits ........................... $315,592
Occupancy expenses .............................. 63,629
Equipment rentals, depreciation and maintenance.. 55,281
General operating expenses ...................... 220,230
--------
Total non-interest expense ............. $654,732
--------
<PAGE> 10
Citizens Bancshares is not aware of any current recommendation by any
regulatory authority which, if implemented, would have a material effect on
Citizens Bancshares' liquidity, capital resources or results of operations.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Citizens Bancshares may, from time to time, make written or oral
forward-looking statements, including statements contained in Citizens
Bancshares' filings with the Securities and Exchange Commission and its reports
to stockholders. Such forward-looking statements are made based on management's
belief as well as assumptions made by, and information currently available to,
management pursuant to "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. Citizens Bancshares' actual results may differ
materially from the results anticipated in these forward-looking statements due
to a variety of factors, including governmental monetary and fiscal policies,
deposit levels, loan demand, loan collateral values, securities portfolio
values and interest rate risk management; the effects of competition in the
banking business from other commercial banks, savings and loan associations,
mortgage banking firms, consumer finance companies, credit unions, securities
brokerage firms, insurance companies, money market mutual funds and other
financial institutions operating in Citizens Bancshares' market area and
elsewhere, including institutions operating through the Internet; changes in
government regulations relating to the banking industry, including regulations
relating to branching and acquisitions; failure of assumptions underlying the
establishment of reserves for loan losses, including the value of collateral
underlying delinquent loans, and other factors. Citizens Bancshares cautions
that such factors are not exclusive. Citizens Bancshares does not undertake to
update any forward-looking statements that may be made from time to time by, or
on behalf of, Citizens Bancshares.
<PAGE> 11
PART II. - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibit is filed with this Report.
Exhibit No. Description
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K. No report on Form 8-K was filed during the
quarter ended September 30, 2000.
<PAGE> 12
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.
Date: October 23, 2000 By: /s/ Michael L. McMullan
-------------------------------
Michael L. McMullan,
Chief Executive Officer
Date: October 23, 2000 By: /s/ Thomas M. Whelan
-------------------------------
Thomas M. Whelan,
Executive Vice President
(principal financial and
accounting officer)
