<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:
March 31, 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 Trial, 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 1934 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 par value 1,165,370
- ----------------------------------- ----------------------------------
Class Outstanding as of May 10, 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>
March 31, 2000 December 31, 1999
-------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 842,713 $ 2,529,344
Federal funds sold 16,249,000 15,766,000
------------ ------------
Total cash and cash equivalents 17,091,713 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 990,784 987,915
Loans 9,850,760 4,334,141
Less: Allowance for loss loans (60,636) (26,885)
------------ ------------
Net loans 9,790,124 4,307,256
------------ ------------
Restricted securities, Federal Home Loan Bank and
Federal Reserve Bank Stock, at cost 326,600 326,600
Premises and equipment, net 2,145,880 2,170,140
Accrued interest receivable 61,906 51,723
Other assets 78,887 52,024
------------ ------------
TOTAL ASSETS $ 32,536,654 $ 28,241,762
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 2,307,136 $ 1,591,318
Interest bearing 20,194,392 16,356,053
------------ ------------
Total deposits 22,501,528 17,947,371
Accrued interest 7,659 3,266
Accrued expenses and other liabilities (660) 156,558
------------ ------------
Total liabilities 22,508,527 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 (1,533,227) (1,223,787)
------------ ------------
Total shareholders' equity 10,028,127 10,134,567
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 32,536,654 $ 28,241,762
============ ============
</TABLE>
<PAGE> 3
CONSOLIDATED STATEMENTS OF OPERATIONS
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC. AND SUBSIDIARY
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
2000 1999
----------- ---------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 183,479 $ --
Interest on securities and other 54,851 --
Interest on federal funds sold 221,189 --
Interest other 14,482 911
----------- ---------
TOTAL INTEREST INCOME 474,001 911
----------- ---------
INTEREST EXPENSE
Interest on deposits 249,004 --
Interest on other borrowings -- 4,776
----------- ---------
TOTAL INTEREST EXPENSE 249,004 4,776
----------- ---------
NET INTEREST INCOME (LOSS) 224,997 (3,865)
Provision for loan losses (33,751) --
----------- ---------
NET INTEREST INCOME (LOSS) AFTER
PROVISION FOR LOAN LOSSES 191,246 (3,865)
NON-INTEREST INCOME
Service charges, commissions and fees 6,219 --
NON-INTEREST EXPENSE
Salaries and employee benefits 278,997 68,853
Occupancy 54,297 29,086
Equipment rental, depreciation and maintenance 42,378 --
General operating 131,233 16,213
----------- ---------
TOTAL NON-INTEREST EXPENSES 506,905 114,152
----------- ---------
LOSS BEFORE INCOME TAXES (309,440) (118,017)
INCOME TAXES -- --
----------- ---------
NET LOSS $ (309,440) $(118,017)
=========== =========
NET LOSS PER SHARE $ (0.27) $ (14.96)
=========== =========
AVERAGE SHARES OUTSTANDING 1,162,577 7,889
=========== =========
</TABLE>
<PAGE> 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC. AND SUBSIDIARY
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
2000 1999
------------ ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (309,440) $(118,017)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 44,161 97
Provision for loan losses 33,751 --
Net securities amortization and accretion (2,870) --
(Increase) decrease in accrued interest receivable (10,183) --
(Increase) decrease in other assets (26,863) (34,645)
Increase (decrease) in accrued interest payable 4,393 --
Increase (decrease) in accrued expenses and other liabilities (157,218) 50,216
------------ ---------
Total adjustments (114,829) 15,668
------------ ---------
NET CASH USED IN OPERATING ACTIVITIES (424,269) (102,349)
------------ ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans (5,516,619) --
Purchase of securities available for sale -- --
Maturity of securities available for sale -- --
------------ ---------
Purchase of premises and equipment (19,900) (179,673)
------------ ---------
NET CASH USED IN INVESTING ACTIVITIES (5,536,519) (179,673)
------------ ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock 203,000 90,000
Increase in deposits 4,554,155 --
Borrowings on loans payable -- 200,000
Repayments on organizers advances -- (10,000)
------------ ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,757,155 280,000
------------ ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (1,203,631) (2,022)
CASH AND CASH EQUIVALENTS
Beginning of period 18,295,344 115,057
End of period $ 17,091,713 $ 113,035
============ =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 244,863 $ 1,958
============ =========
</TABLE>
<PAGE> 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Citizens Bancshares of Southwest Florida, Inc. 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.
Financial Condition
Management continuously monitors the financial condition of Citizens
National Bank in order to maintain sufficient capital to support the operations
of Citizens National Bank and Citizens Bancshares and to protect the depositors
of Citizens National Bank. Further discussion of significant items affecting
Citizens National Bank's financial condition are discussed below.
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 will be made periodically 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> 6
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 $24,474,149 at March 31, 2000.
Below are the pertinent liquidity balances and ratios at March 31, 2000.
<TABLE>
<CAPTION>
AT
MARCH 31, 2000
--------------
<S> <C>
Cash and cash equivalents.......................... $19,064,335
Securities available for sale...................... $ 50,760
CDs over $100,000 to total deposits ratio.......... 33.1%
Loan to deposit ratio............................... 40.3%
</TABLE>
Cash and cash equivalents are the primary source of liquidity. At March 31,
2000, cash and cash equivalents amounted to $19.1 million, representing 55.2% of
total assets. Securities available for sale provide a secondary source of
liquidity. None of the $1.0 million in Citizens National Bank's securities
portfolio is scheduled to mature in 2000.
At March 31, 2000, large denomination certificates accounted for 33.1% 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.
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, non-cumulative 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.
<PAGE> 7
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 March 31, 2000:
<TABLE>
<CAPTION>
MINIMUM
MARCH 31, REGULATORY
CITIZENS NATIONAL BANK 2000 REQUIREMENT
--------- -----------
<S> <C> <C>
Tier 1 Capital........................................ 57.02% 4.00%
Total risk-based capital ratio.................... 57.45% 8.00%
Leverage ratio......................................... 27.41% 4.00%
Citizens Bancshares - Consolidated
Tier 1 Capital......................................... 69.06% 4.00%
Total risk-based capital ratio................... 69.48% 8.00%
Leverage ratio......................................... 32.06% 4.00%
</TABLE>
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> 8
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 March 31, 1999 to those for the quarter ended March 31, 2000 would
not be meaningful. This discussion will therefore concentrate on results of
operations for the quarter ended March 31, 2000.
Net income (loss) for the quarter ended March 31, 2000 amounted to
$(309,440), or $(.27) 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 March 31, 2000.
<TABLE>
<CAPTION>
Interest Interest
Earning Assets/ Average Income/ Yield/
Bearing Liabilities Balance Cost Cost
------------------- ----------- -------- ------
<S> <C> <C> <C>
Federal funds sold $15,677,659 $221,190 5.67%
Securities $ 3,366,263 $ 54,850 6.55%
Loans $ 7,315,192 $183,479 10.09%
----------- -------- -----
Total $26,359,114 $459,519 7.01%
===========
Deposits $21,029,574 $257,556 4.93%
=========== -------- -----
Net interest income $201,963 2.08%
======== =====
Net yield on earning assets 3.08%
=====
</TABLE>
(b) At December 31, 1999, the allowance for loan losses amounted
to $26,885. During the quarter ended March 31, 2000, an
additional $33,751 was provided to the allowance for loan
losses. There have been no charge-offs since the opening of
Citizens National Bank. As of March 31, 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
$6,219, or an annualized 0.09% of average assets, for the
quarter ended March 31, 2000.
(d) Non-interest expense for the quarter ended March 31, 2000
amounted to $506,905. As a percent of total average assets,
non-interest expense amounted to 6.95%. The components of
non-interest expense for the quarter ended March 31, 2000 are
set forth below:
<TABLE>
<S> <C>
Salaries and benefits........................................ $278,997
Occupancy expenses........................................... 54,297
Equipment rentals, depreciation and maintenance.............. 42,378
General operating expenses................................... 131,233
--------
Total non-interest expense................................... $506,905
========
</TABLE>
Citizens Bancshares is not aware of any current recommendation by any
regulatory authority which,
<PAGE> 9
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> 10
PART II. - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibit is filed with this Report.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
27 Financial Data Schedule (for SEC use only)
</TABLE>
(b) Reports on Form 8-K. No report on Form 8-K was filed during
the quarter ended March 31, 2000.
<PAGE> 11
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: May 12, 2000 By: /s/ Michael L. McMullan
--------------------------------------------------
Michael L. McMullan, Chief Executive Officer
Date: May 12, 2000 By: /s/ Thomas M. Whelan
--------------------------------------------------
Thomas M. Whelan, Chief Financial Officer
(principal financial and accounting officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
DATED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 842,713
<INT-BEARING-DEPOSITS> 2,000,000
<FED-FUNDS-SOLD> 16,249,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 50,760
<INVESTMENTS-CARRYING> 990,784
<INVESTMENTS-MARKET> 0
<LOANS> 9,850,760
<ALLOWANCE> (60,636)
<TOTAL-ASSETS> 32,536,654
<DEPOSITS> 22,501,528
<SHORT-TERM> 0
<LIABILITIES-OTHER> 6,999
<LONG-TERM> 0
0
0
<COMMON> 11,654
<OTHER-SE> 10,016,473
<TOTAL-LIABILITIES-AND-EQUITY> 32,536,654
<INTEREST-LOAN> 183,479
<INTEREST-INVEST> 54,851
<INTEREST-OTHER> 235,671
<INTEREST-TOTAL> 474,001
<INTEREST-DEPOSIT> 249,004
<INTEREST-EXPENSE> 249,004
<INTEREST-INCOME-NET> 224,997
<LOAN-LOSSES> 33,751
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 506,905
<INCOME-PRETAX> (309,440)
<INCOME-PRE-EXTRAORDINARY> (309,440)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (309,440)
<EPS-BASIC> (0.27)
<EPS-DILUTED> (0.27)
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 26,885
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 60,636
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
