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 June 30, 1996 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 115,000 June 30, 1996
CITIZENS BANCSHARES, INC. AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
INDEX
PART I. FINANCIAL INFORMATION PAGE
Condensed Consolidated Balance Sheets -
June 30, 1996 and December 31, 1995...................3
Condensed Consolidated Statements of Income -
Six and three months ended June 30, 1996 and
June 30, 1995.........................................4
Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 1996 and
June 30, 1995.........................................5
Notes to Consolidated Financial Statements..............6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ...........................................7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ............................10
Item 4. Submission of Matters to a Vote of
Security Holders..............................10
Item 6. Exhibits and Reports on Form 8-K .............10
PART I. CITIZENS BANCSHARES, INC. AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995 (UNAUDITED)
(in thousands of dollars)
JUNE 30, 1996 DECEMBER 31,1995
ASSETS
Cash and due from banks $ 1,978 $ 2,498
Federal funds Sold 2,950 3,575
CASH AND CASH EQUIVALENTS 4,928 6,073
Interest-bearing deposits in banks 4,064 3,765
Investment securities
Held to maturity (estimated fair values 9,726 9,695
of $ 9,776 and $ 9,849)
Available-for-Sale, at fair value 25,490 25,224
TOTAL SECURITIES 35,216 34,919
Loans, 40,741 37,444
Unearned income ( 465) ( 527)
Allowance for possible loan losses ( 840) ( 832)
NET LOANS 39,436 36,085
Premises and equipment, net 922 850
Foreclosed real estate 136 28
Deferred tax asset 73 -
Accrued interest receivable 863 868
Other assets 566 582
TOTAL ASSETS $86,204 $83,170
LIABILITIES
Deposits
Demand deposits $ 8,622 $ 7,773
Savings, NOW and money market accounts 12,313 12,693
Time deposits $100,000 or more 18,929 17,829
Other time deposits 37,879 36,717
TOTAL DEPOSITS 77,743 75,012
Accrued interest payable 512 480
Deferred tax liability - 20
Accrued expenses and other liabilities 135 106
TOTAL LIABILITIES 78,390 75,618
SHAREHOLDERS' EQUITY
Common Stock $5 par value, 300,000
shares authorized, 115,000 shares
issued and outstanding 575 575
Additional paid-in capital 825 825
Retained earnings 6,555 6,029
Unrealized (loss) on Available-for-Sale
Securities, net of applicable deferred
income taxes (141) 123
TOTAL SHAREHOLDERS' EQUITY 7,814 7,552
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $86,204 $83,170
CITIZENS BANCSHARES, INC. AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
SIX AND THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(in thousands of dollars, except per share data)
SIX MONTHS THREE MONTHS
ENDED ENDED
6/30/96 6/30/95 6/30/96 6/30/95
Interest income
Loans receivable $ 1,837 $ 1,671 $ 941 $ 850
U.S. Treasury securities 148 203 77 101
Other U.S. Government agencies 736 645 371 347
States and political subdivisions 130 96 67 50
Federal funds sold 134 116 65 55
Deposits with banks 111 117 55 59
Total interest income 3,096 2,848 1,576 1,462
Interest expense
Deposits
Savings, NOW and money market accts 178 181 89 59
Time deposits $100,000 and more 542 467 274 250
Other time deposits 1,032 865 520 493
Total interest expense 1,752 1,513 883 802
Net interest income 1,344 1,335 693 660
Provision for loan losses 30 30 15 15
Net interest income after provision
for loan losses 1,314 1,305 678 645
Noninterest income
Service charge on deposit accounts 193 173 94 87
Insurance commissions 49 41 27 21
Other income 36 87 12 67
Total noninterest income 278 301 133 175
Noninterest expense
Salaries & employee benefits 445 422 225 208
Occupancy and equipment expense 106 106 60 54
Other expense 288 399 141 192
Total noninterest expense 839 927 426 454
Income before income taxes 753 679 385 366
Income tax expense 227 216 125 87
Net Income $ 526 $ 463 $ 260 $ 279
Net income per share of common stock $ 4.57 $ 4.02 $ 2.26 $2.43
The accompanying notes are an integral part of these financial statements.
CITIZENS BANCSHARES, INC AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
JUNE 30, 1996 AND JUNE 30, 1995
JUNE JUNE
30, 1996 30, 1995
Cash flows from operating activities:
Net Income $ 526 $ 464
Adjustments to reconcile net income to
net cash provided by operating activities -
Provision for possible loan losses 30 30
Depreciation 27 21
Net (accretion) of investment securities (18) (22)
(Gain) on investment securities -- (1)
(Gain) on sale of other real estate (10) --
Decrease (increase) in interest receivable 4 (26)
(Increase) in other assets (17) (49)
(Decrease) increase in interest payable (32) 88
Increase in other liabilities 30 36
Net cash provided by operating activities 540 541
Cash flows from investing activities:
Proceeds from maturities and calls of
investment securities 11,860 5,225
Purchase of investment securities (13,072) (9,891)
Decrease in interest-bearing
deposits in other banks 299 307
Purchase of Bank Branch (342) (367)
Proceeds from sales of foreclosed real estate 31 --
(Increase) in loans (3,093) (1,181)
Purchase of premises and equipment (99) (256)
Net cash (used) by investing activities (4,416) (6,163)
Cash flows from financing activities:
Increase in deposits 2,731 7,014
Net cash provided by financing activities 2,731 7,014
Net increase in cash and cash equivalents (1,145) 1,392
Cash and cash equivalents, beginning of year 6,073 4,124
Cash and cash equivalents, end of period $ 4,928 $ 5,516
Cash paid for income taxes $ 187 $ 188
Cash paid for interest expense $ 1,720 $ 1,425
Other real estate acquired in satisfaction
of loans $ 141 $ 6
Total Increase (decrease) in Fair Value of
Securities Available for Sale $ (401) $ 788
The accompanying notes are an integral part of these financial statements.
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,
1995 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
ended December 31, 1996.
(2) On January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
Statement No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by the Company be
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. Measurement of an impairment loss on these assets
is based on fair value. In addition, long-lived assets and
certain identifiable intangibles to be disposed of are required
to be reported at the lower of carrying amount or fair value less
costs to sell. The adoption of this statement did not have a
material effect on the financial position as of June 30, 1996 or
the results of operations for the three and six month periods
then ended.
CITIZENS BANCSHARES, INC. AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JUNE 30, 1996
GENERAL STATEMENT
For a comprehensive review of financial condition and results of
operations of Citizens Bancshares, Inc. (the Company), this discussion
and anaylsis 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 access to
two retail credit card plans, VISA and MASTERCARD. Drive-in facilities
are located at all banking locations.
FINANCIAL CONDITION
The Bank's total assets increased during the first six months of 1996
from $83,170,000 to $86,204,000, a $3,034,000 or 3.65% increase
attributable primarily to a $3,351,000 increase in net loans.
Earning assets, which include loans, investment securities, federal
funds sold, and deposits in other banks were 95.17% of total assets.
The Bank maintains an allowance for loan losses against which imparied
or uncollectible loans are charged. The balance in the allowance for
loan losses was $840,000 as of June 30, 1996, which represents a 2.09%
of total loans outstanding on that date. Provisions to the allowance
for loan losses, which were charged to net income of 1996, totaled
$30,000. 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.
Another primary source of income is interest on investment securities.
The Bank's investment objectives and activities are guided by a written
Investment Policy. The Investment Policy directs that, to the extent
not needed to meet loan demand, funds be invested to earn maximum
returns with minimum risks, and established liquidity guidelines be
observed. At June 30, 1996, securities classified as "held-to-maturity"
had an amortized cost/recorded value of $9,726,000 and a fair value of
$9,776,000; securities classified as "available-for-sale" had a fair
recorded value of $25,490,000 and an amortized cost of $25,704,000.
The Bank's primary source of funds is customer deposits. Total deposits
increased by $2,731,000 in the first six months of 1996. At June 30,
1996, the Bank's Total Loans to Total Deposits ratio was 51.80%.
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 avaliable 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 pruchased 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 June 30, 1996 the Bank's
liquidity ratio was 53.91%.
RESULTS OF OPERATIONS
The Bank reported a net income of $526,000 or $4.57 per average share
outstanding for the first six months of 1996. Net return on assets was
1.23% and net return on equity was 12.03%.
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. The Bank's net
interest income through June 30, 1996 increased by $9,000 or 0.67% over
the same six month period in 1995.
Noninterest income, which consists primarily of service charges and fees
on financial services, was $279,000 as of June 30, 1996, as compared to
$301,000 as of June 30, 1995. Service charges on deposit accounts
increased by $21,000 in 1996, however other income shows a decrease due
to the gain on sale of assets in 1995 in which $55,000 was credited to
income for land which had been acquired in a prior year through
foreclosure was exchanged by the Company for other land for which the
Company will use in its banking operations. Permission for the exchange
was obtained from the State of Louisiana Office of Financial
Institutions, the Bank subsidiary's primary regulator, and is not cited
as the GAAP reference for recording the transaction. Prior to the
exchange, it was determined that the fair value of the foreclosed
property was $55,000 over its carrying amount (original cost less a
valuation allowance). In accordance with guidance in the AICPA's
Statement of Position 92-3, "Accounting for Foreclosed Assets," the
carrying amount of the property was increased by reducing the related
valuation allowance by $55,000, with a corresponding credit to income.
The new carrying amount at no time exceeded the foreclosed property's
original cost. This foreclosed property plus $15,000 cash was then
exchanged for the new property with a fair value of $70,000, and
accounted for in accordance with APB Option 29 for such nonmonetary
exchanges.
Noninterest expense as of June 30, 1996 was $839,000, a $88,000 decrease
from June 30, 1995. This decrease is primarily attributed to the rate
adjustment made by FDIC on assessment charges. As of June 30, 1995 the
Bank had expensed $77,000 for assessment charges and as of June 30, 1996
total amount expensed was $1,000.
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. As of June 30, 1996, the Bank's ratios
were as follows:
Capital to Assets 9.17%
Risk Based Capital 21.20%
Tier 1 Capital 19.95%
Leverage Ratio 9.78%
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 4. Submission of Matters to a Vote of Security Holders
Pursuant to a notice of meeting mailed March 11, 1996
accompanied by a proxy statement, the annual meeting of
shareholders was held on April 11, 1996. Proxies for
the annual meeting were solicited pursuant to Regulation
14A. There was no solicitation in opposition to
management's nominees for the Board of Directors as listed
in the Proxy Statement. All of the following nominees were
duly nominated and elected:
Carl W. Fontenot Otis Fontenot
Joseph Jake Fontenot J.B. Veillon
Curley Courville Fredrick Phillips
Eugene S. Fontenot Roderick Young
Jules Hebert
No other matters were submitted to the shareholders for their
consideration or vote at the annual meeting.
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 June 30, 1996.
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
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