SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
(x) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Fee Required)
For the Fiscal Year Ended December 31, 1996
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No fee required)
For the transition period from to
Commission file number 0-12425
CITIZENS BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Louisiana 72-0759135
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
P.O. Box 598
Ville Platte, Louisiana 70586-0598
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (318) 363-5643
Securities registered under Section 12(b) of the Exchange Act:
Name of each exchange
Title of each class: on which registered:
None None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $5.00 par value per share
(Title of Class)
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
(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
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-KSB or any amendment to this Form 10 -
KSB.(x)
State issuer's revenues for its most recent year. $ 6,989,000
State the aggregate market value of the voting stock held by non-
affiliates* of the Registrant as of March 15, 1997 (based on $13.00 per
share).
$587,548
Indicate the number of shares outstanding of each of the Registrant's
classes of Common Stock as of the latest practicable date.
Common Stock, $5.00 par value, 115,000 shares outstanding as of March
15, 1996.
DOCUMENTS INCORPORATED BY REFERENCE:
Part of Form 10-KSB
Documents Incorporated into which Incorporated
Definitive Proxy Statement Part III
for the 1997 Annual
Meeting of Shareholders
1996 Annual Report to Shareholders Part II
*For the purposes of this computation only, shares held by directors,
executive officers, and principal shareholders have been excluded.
Transitional Small Business Disclosure Format: yes no x
FORM 10-KSB CROSS REFERENCE INDEX
PART I PAGE
ITEM 1 BUSINESS....................................................4
SUPPLEMENTAL FINANCIAL INFORMATION:
INVESTMENT SECURITIES.......................................7
LOANS.......................................................8
LOAN MATURITY AND INTEREST RATE SENSITIVITY.................8
INTEREST RATE SENSITIVITY AND LIQUIDITY.....................9
RISK ELEMENTS..............................................10
ALLOWANCE FOR POSSIBLE LOAN LOSSES.........................11
DEPOSITS...................................................13
RETURN ON EQUITY AND ASSETS................................13
RATE/VOLUME ANALYSIS.......................................14
AVERAGE BALANCE SHEETS AND NET INTEREST YIELD ANALYSIS.....15
ITEM 2 PROPERTIES.................................................16
ITEM 3 LEGAL PROCEEDINGS..........................................16
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........16
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS........................................17
ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.........................*
ITEM 7 FINANCIAL STATEMENTS .......................................*
CONSOLIDATED BALANCE SHEETS.................................*
CONSOLIDATED STATEMENTS OF INCOME...........................*
CONSOLIDATED STATEMENTS OF CASH FLOWS.......................*
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY..*
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..................*
REPORT OF INDEPENDENT AUDITORS..............................*
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE........................18
PART III
ITEM 9 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.........**
ITEM 10 EXECUTIVE COMPENSATION.....................................**
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.............................................**
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............**
PART IV
ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K...........................18
SIGNATURES.................................................19
* INCORPORATED BY REFERENCE TO CITIZENS BANCSHARES, INC. ANNUAL REPORT
** INCORPORATED BY REFERENCE TO CITIZENS BANCSHARES, INC. PROXY STATEMENT
PART I.
ITEM 1. BUSINESS
GENERAL
Citizens Bancshares, Inc. (the "Company") is a Louisiana business
corporation and a one-bank holding company registered under the federal
Bank Holding Company act of 1956. It was formed in 1983 primarily for the
purpose of holding all of the outstanding stock of Citizens Bank (the
"Bank"), which is the Company's sole subsidiary.
The Bank was formed in 1975 under the banking laws of the State of
Louisiana. The Bank conducts a general commercial banking business through
its main office at Ville Platte, Louisiana and branch offices in Mamou,
Louisiana, and Pine Prairie, Louisiana, all of which are in Evangeline
Parish, Louisiana. The Bank offers a full range of traditional commercial
banking services, including demand, savings and time deposits, consumer,
commercial and real estate loans, safe-deposit boxes and access to two
retail credit plans -- "VISA" and "MASTERCARD". The Bank does not offer
trust services. Drive-in banking facilities are located at all banking
locations.
COMPETITION
The Bank competes actively with national and state banks and savings and
loan institutions in Louisiana for all types of loans and deposits. The
Bank competes for loans with other financial institutions, such as
insurance companies, real estate investment trusts, savings and loans,
small loan companies, credit unions and certain government agencies. There
are 6 financial institutions in Evangeline Parish with a total of 12
banking offices.
EMPLOYEES
As of December 31, 1996, the Company and the Bank had approximately 35
full-time equivalent employees. The Company has no salaried employees,
although certain executive officers hold parallel positions with the Bank.
No employees are represented by unions or other bargaining units, and
management considers its relations with employees to be satisfactory.
SUPERVISION AND REGULATION
General
The Company and the Bank are extensively regulated under both federal and
state laws. To the extent that the following information describes
particular statutory provisions, it is qualified in its entirety by
reference to the particular statutory and regulatory provisions. Any
change in applicable law or regulation may have a material effect on the
business and prospects of the Company.
The Company
The Company is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended (the "Act"), and, as such, is
subject to the provisions of the Act and to regulation and supervision by
the Board of Governors of the Federal Reserve System (the "Board"). The
Company is required to file with the Board annual reports containing such
information as the Board may require pursuant to the Act and also is
subject to periodic examination by the Board.
Under the Act, a bank holding company may not acquire more than 5% of the
voting shares, or substantially all the assets, of any bank without the
prior approval of the Board.
The Act also limits, with certain exceptions, the business in which a bank
holding company may engage, directly or through subsidiaries, to banking,
managing or controlling banks, and furnishing or performing activities so
closely related to banking or managing or controlling banks as to be a
proper incident thereto. In determining whether a particular activity is
a proper incident to banking or managing or controlling banks, the Board
must consider whether its performance by an affiliate of a bank holding
company can reasonably be expected to produce benefits to the public, such
as greater convenience, increased competition or gains in efficiency that
outweigh possible adverse effects, such as undue concentrations of
resources, decreased or unfair competition, conflicts of interest or other
unsound banking practices.
The Board has adopted regulations implementing the provisions of
the Act with respect to the activities of bank holding companies. Whether
or not a particular non-banking activity is permitted under the Act, the
Board is authorized to require a bank holding company to terminate any
activity or to divest itself of any non-banking subsidiary if its actions
represent unsafe or unsound practices or violations of law.
Under the Act, a bank holding company and its subsidiaries are prohibited
from engaging in certain tie-in arrangements in connection with the
extension of credit, the lease or sale of property or provision of any
services.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ( the
"1991 Act") subject bank holding companies as well as banks to
significantly increased regulation and supervision. Among other things,
the 1991 Act provides that undercapitalized institutions, as defined by
regulatory authorities, must submit recapitalization plans, and a parent
company of such an institution must either (1) guarantee the institution's
compliance with the capital plan, up to an amount equal to the lesser of
five percent of the institution's assets at the time it becomes
undercapitalized or the amount of the capital deficiency when the
institution fails to comply with the plan, or (2) suffer certain adverse
consequences such as a prohibition of dividends by the parent company to
its shareholders.
The Company is also subject to the Louisiana Bank Holding Company Act, as
amended (the "Louisiana Act") which, among other things, provided that a
bank holding company and its subsidiaries may not engage in any insurance
activity in which a bank may not engage. The Louisiana Commissioner of
Financial Institutions is authorized to administer the Louisiana Act and
to issue orders and regulations thereunder.
Federal and Louisiana laws provide for the enforcement of any pro rate
assessment of shareholders of a bank to cover impairment of capital stock
by sale, to the extent necessary, of the stock of any assessed shareholder
failing to pay the assessment. The Company, as shareholder of the Bank,
is subject to these provisions.
The Bank
Both federal and state laws extensively regulate various aspects of the
banking business, including requirements regarding the maintenance of
reserves against deposits, limitations on the rates that can be charged on
loans or paid on deposits, branching and restrictions on the nature and
amounts of loans and investments that can be made.
As a state bank, the Bank is subject to the supervisory authority of the
Louisiana Commissioner of Financial Institutions, whose office conducts
periodic examinations of the Bank. As a federally insured bank, the Bank
is also subject to supervision and regulation by the Federal Deposit
Insurance Corporation (the "FDIC"). The foregoing regulation is primarily
intended to protect the Bank's creditors and depositors rather than the
Company's security holders.
Under certain circumstances, regulatory authorities may prohibit the
payment of dividends by a bank or its parent holding company.
The 1991 Act and regulations promulgated thereunder classify banks into
five categories generally relating to their regulatory capital ratios and
institute a system of supervisory actions indexed to a bank's particular
classification. Generally, banks that are classified as "well
capitalized," or "adequately capitalized" are not subject to the
supervisory actions specified in the 1991 Act for prompt corrective action,
but may be restricted from taking certain actions that will lower their
classification. Banks classified as "undercapitalized," significantly
undercapitalized," or "critically undercapitalized" are subject to
restrictions in supervisory actions of increasing stringency based on the
level of classification.
Under present regulation, the Bank is "well capitalized." While such a
classification would exclude the Bank from the restrictions and actions
envisioned by the prompt corrective action provisions of the 1991 Act, the
regulatory agencies have broad powers under other provisions of federal law
that would permit them to place restrictions on the Bank or to take other
supervisory action regardless of such classification.
SUPPLEMENTAL FINANCIAL INFORMATION
Supplemental financial information for Citizens Bancshares, Inc. and
subsidiary is set forth below and on the following pages:
INVESTMENT SECURITIES
Maturities and weighted average yields on investments as of December
31, 1996 (in thousands of dollars):
Held-to-Maturity Available-for-Sale
U.S. Treasury Securities
Within 1 year $ 1,703 5.68% $ 1,854 5.97%
After 1 but within 5 years 497 5.13% 1,701 5.51%
$ 2,200 5.55% $ 3,555 5.75%
U.S. Government Securities
Within 1 year 2,430 5.45% 2,202 5.19%
After 1 but within 5 years 997 5.85% 12,633 6.38%
$ 3,427 5.57% $14,835 6.20%
State and Political subdivisions
With 1 year 618 5.60% --- ---
After 1 but within 5 years 3,754 5.51% --- ---
After 5 but within 10 years 640 6.50% --- ---
$ 5,012 5.65% $ --- ---
Mortgaged-backed securities 270 5.50% 7,609 6.33%
$10,909 5.60% $25,999 6.18%
The above weighted average yields on tax exempt obligations are not computed
on a tax equivalent basis. Yields on available-for-sale securities are
computed on historial amortized cost.
No securities of any single issuer which totaled 10% or more of shareholders
equity were held at December 31, 1996.
LOANS
A distribution of the loan portfolio at December 31, 1996 and 1995 is summarized
as follows (in thousands of dollars):
1996 1995
Commercial $ 9,705 23.20% $ 7,923 22.06%
Municipal 22 0.05% 119 0.69%
Real Estate - Mortgage 20,425 48.83% 18,015 46.38%
Agricultural 3,895 9.31% 3,211 12.06%
Consumer 9,115 21.79% 8,157 22.63%
Overdrafts 17 0.04% 17 0.05%
43,179 103.22% 37,442 103.77%
Unearned income (488) (1.17%) (526) (1.46%)
Allowance for possible loan loss (859) (2.05%) (832) (2.31%)
$41,832 100.00% $36,084 100.00%
LOAN MATURITY AND INTEREST RATE SENSITIVITY
Maturities of commercial and agricultural loans at December 31, 1996 are
summarized below (in thousands of dollars):
Over
One Year One to Over Five
Total or Less Five Yrs Years
Commercial $9,705 $5,797 $2,782 $1,126
Agricultural 3,895 3,109 277 509
Commercial and Agricultural loans due after one (1) year that have fixed and
adjustable rates are as follows (in thousands of dollars):
Fixed Adjustable
Total Rates Rates
Commercial $3,908 $3,908 $ 0
Agricultural 786 786 0
INTEREST RATE SENSITIVITY AND LIQUIDITY
The following table shows the interest rate sensitivity gaps for different
time periods and the cumulative interest rate sensitivity gaps for the same
periods as of December 31, 1996. Loans for which the accrual of interest has
been discontinued and overdrafts have not been included (in thousands of
dollars)
1-3 4-6 7-12 13-18 19-24 OVER
FLOAT MTHS MTHS MTHS MTHS MTHS 2 YRS TOTAL
Securities $3,574 $2,236 $5,638 $5,121 $4,430 $15,839 $36,838
Fixed Loans $1,037 $6,014 $4,761 $7,237 $3,136 $3,014 $ 9,770 $34,969
Floating Lns $ 327 $4,809 $ 576 $1,994 $ 7,706
Fed Funds $3,725 $1,786 $1,881 $ 99 $ 7,491
& CD
$5,089 $16,183 $9,454 $14,968 $8,257 $7,444 $25,609 $87,004
CD's & IRA's
> 100M $ 6,775 $5,699 $ 6,899 $ 300 $ 500 $ 600 $20,773
CD's & IRA's
< 100M $ 756 $15,868 $9,767 $10,071 $1,568 $1,239 $ 513 $39,782
IMM ACCTS $2,329 $ 2,329
CHRISTMAS CLUB $ 38 $ 38
SAVINGS $ 115 $ 9,665 $ 9,780
$ NOW
$3,200 $22,643 $15,466 $17,008 $1,868 $1,739 $10,778 $72,702
GAP $1,889 ($ 6,460)($ 6,012)($ 2,040)$6,389 $5,705 $14,831 ($14,302)
CUMULATIVE
GAP $1,889 ($ 4,571)($10,583)($12,623)($6,234) ($529) $14,313
RISK ELEMENTS
The following summarizes nonperforming loans at December 31, 1996 and 1995
(in thousands of dollars):
1996 1995
Nonaccrual Loans $ 0 $ 36
Loans past due 90 days or more as to
principal or interest and still
accruing interest 32 155
Restructured loans not included above 241 245
$ 273 $ 436
Interest on such loans, had they remained current and in accordance with their
original terms, would have been (in thousands of dollars):
1996 1995
Nonaccruals $ 11 $ 6
Restructured 28 31
$ 39 37
Interest collected on nonaccrual and restructured loans amounted to $11,570 for
1996 and $26,459 for 1995.
Other nonperforming assets are:
(in thousands of dollars):
1996 1995
Real estate and other assets acquired
in satisfaction of loans $ 0 $ 28
NONACCRUAL POLICY:
Citizens Bank follows a close policy in scrutinizing past due loans and their
placement in nonaccrual status, as dictated by the Bank's loan policy. Policy
dictates that any loan delinquent for a period of ninety (90) days, unless the
collateral supporting the loan is sufficient to cover the accrued interest in
addition to the principal balance and in process of collection, will be
placed in nonaccrual status. Such loans are not charged-off; however,
interest is no longer accruing. Accrued interest is charged against either
interest income or the allowance for possible loan losses at the time a loan
becomes nonaccrual, depending on the reporting period in which such interest
had accrued. The officers' Loan Committee reviews the Bank's nonaccrual listing
monthly and determines whether a loan should remain on nonaccrual status, be
returned to accruing status, or be charged-off. The Board of Directors is
provided a listing of nonaccrual loans at its monthly meetings. After review,
the Board recommends to management to take any appropriate steps for collection
and/or measures to protect the Bank's position.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
A detail of the activity in the allowance for possible loan losses for the
past two (2) years and its relationship to year-end loans outstanding follows
(in thousands of dollars):
1996 1995
Allowance of possible loan losses af January 1 $ 832 $ 774
Loans charged off:
Commercial 29 20
Municipal -- --
Real estate - Mortgage 22 --
Agricultural 11 --
Consumer 21 35
Other (overdrafts & credit cards) 8 4
Total Charged-Off 91 59
Recoveries:
Commercial 20 10
Municipal -- --
Real estate - Mortgage -- --
Agricultural 2 --
Consumer 20 26
Other (overdrafts) 1 1
Total Recoveries 43 37
Net loans charged off 48 22
Provision charged to operating expense 75 80
Allowance at December 31 $ 859 $ 832
Loans outstanding at December 31 $42,691 $36,916
Average Loans outstanding for the year $39,938 $36,291
Ratio of net charge-offs to average loans
outstanding 0.12% 0.02%
Ratio of allowance to loans outstanding
at year end 2.01% 2.25%
The provision for possible loan losses which is charged to income from
operations, is based upon the changes in the loan portfolio, the amount of net
loan losses incurred and management's estimates of potential future losses
based on several factors including, but not limited to, current economic
conditions, loan portfolio composition, nonaccrual loans, problem loans, and
prior loan loss experience. The provision for possible loan losses was $75,000
in 1996 and $80,000 in 1995.
The allowance for possible loan losses at December 31, 1996 was approximately
$859,000 or 2.01% of net loans outstanding, compared to approximately $832,000
or 2.25% of net loans outstanding at December 31, 1995. It is management's
opinion that the allowance for possible loan losses at December 31, 1996 is
adequate, based upon the Bank's aggressive charge-off and collection practices.
The following chart represents management's estimate of the manner in which the
allowance for possible loan losses might be allocated to categories of loans
if the Company was required to do so under generally accepted accounting
principles uniformly applied. The reader is cautioned that, in the opinion
of management, it is not possible to predict with complete accuracy what amount
of the allowance will be required to absorb future losses in each category.
Furthermore, under generally accepted accounting principles as well as
regulations promulgated by federal and state banking regulatory agencies,
the entire allowance is available to absorb losses in all categories, so the
critical function of the allowance is to be adequate in view of the aggregate
risk of all losses.
An allocation of the allowance for possible loan losses by major categories of
loans follows (in thousands of dollars)
1996 1995
Percent of Percent of
Allowance loans in each Allowance loans in each
Amount category to Amount category to
total loans total loans
Commercial 271 22.48% 283 21.16%
Municipal --- .05% --- .32%
Real Estate 209 47.30% --- 48.11%
Agriculture 109 9.02% --- 8.58%
Installment 198 21.11% 497 21.78%
Other 72 .04% 52 .05%
$859 100.00% $ 832 100.00%
DEPOSITS
The following is a distribution of average deposits for the two years
ended December 31 (in thousands of dollars)
1996 1995
Demand Deposits $ 8,535 $ 8,092
Savings and NOW Accounts 12,310 12,638
Time Deposits, $100,00 or more 19,160 17,842
Other Time Deposits 38,080 35,617
$78,085 $74,188
The following is a maturity distribution of certificate of deposits of
$100,000 or more as of December 31 (in thousands of dollars):
1996 1995
Three months and under $ 6,775 $ 4,647
Over three through six months 5,699 4,475
Over six through twelve months 6,898 6,595
Over twelve months 1,400 2,112
$20,772 $17,829
RETURN ON EQUITY AND ASSETS
1996 1995
Return on average assets 1.21% 1.10%
Return on average equity 13.33% 12.90%
Dividend payout ratio 6.55% 6.39%
Average equity to average assets 9.11% 8.53%
RATE/VOLUME ANALYSIS
A comparative analysis of the increases and decreases in the major
categories of interest income and expense resulting from changes in rate
and volume for the periods indicated follows. Changes which are not due
solely to rate or volume have been allocated proportionally.
1996/1995 1995/1994
Due to Due to
Rate Volume Total Rate Volume Total
(in thousand of dollars)
Interest earning assets:
Interest bearing deposits ($20) $ 3 (17) $82 ($54) 28
Federal Funds Sold ( 21) 46 25 64 24 88
U.S. Treasury Securities 37 (106) (69) 32 (132) (100)
U.S. Government Securities 65 63 128 173 289 462
State & Municipal (1) (13) 102 89 (1) 48 47
Loans, net 42 356 398 102 222 324
Total interest income (1) 90 464 554 452 397 849
Interest bearing funds:
Savings & NOW accounts 3 (9) (6) 1 5 6
Time deposits $100,000> 26 74 100 209 33 242
Other Time Deposits 117 136 253 429 123 552
Total interest expense 146 201 347 639 161 800
Net interest income (1) ( 56) 263 207 (187) 236 49
(1) Fully taxable equivalent basis using a 34% tax rate.
AVERAGE BALANCES, INTEREST and AVERAGE RATES
The following table shows the major consolidated assets and liabilities,
together with their respective interest amounts and rates earned or paid
by the Company. Cash basis and renegoiated loans are included in the
averages to determine an effective yield on all loans. The average
balances are principally daily averages (in thousands of dollars):
Int. Avg Int. Avg
Inc. Yield Inc. Yield
Avg. Bal Exp Rate Avg. Bal Exp. Rate
1996 1995
Earning Assets
Int. bearing deps. $3,729 216 5.79 $3,689 233 6.32
Federal Funds sold 4,691 245 5.22 3,834 220 5.74
U.S. Treasury 5,305 300 5.66 7,232 369 5.10
U.S. Government 24,541 1,498 6.10 23,487 1,370 5.83
State & Municipal (1) 5,100 398 7.80 3,802 309 8.13
Loans, net 39,097 3,864 9.88 35,492 3,466 9.77
Total earning assets 82,463 6,521 7.91 77,536 5,967 7.70
Cash & due from banks 1,922 2,002
Premises & equipment 919 812
Other assets 1,390 1,404
Total assets $86,694 $81,754
Liabilities and
Shareholders Equity
Int. bearing funds
Savings & NOW $12,310 353 2.87 $12,639 359 2.84
Time Dep. $100,000 19,160 1,082 5.65 17,842 982 5.50
Other Time Deps. 38,086 2,146 5.63 35,616 1,893 5.32
Total int. bearing 69,556 3,581 5.15 66,097 3,234 4.89
Demand deposits 8,535 8,092
Accr. interest
& other liab. 703 590
Total Liabilities 78,794 74,779
Shareholders'equity 7,900 6,975
Total Liabilities &
Sharholders Equity $86,694 $81,754
Net int income, taxable
equivalent basis 2,940 2,733
Taxable equivalent adjustment 135 105
2,805 2,628
Spread 2.76 2.81
Net interest yield (1) 3.57 3.52
(1) Fully taxable equivalent basis using 34% tax rate.
ITEM 2. PROPERTIES
The Bank's main office is located at 841 West Main Street, Ville Platte,
Louisiana. This property includes the Bank's parking lot containing 60
parking places. The Bank's office building is approximately 5600 square
feet and includes staff and storage rooms and drive-up facilities.
One of the Bank's branch offices is located at 601 Poinciana Avenue,
Mamou, Louisiana. This property includes the branch office's parking
lot containing 30 parking spaces. The branch office building is
approximately 3600 square feet and contains staff and storage rooms and
drive-up facilities.
The Bank's other branch office is located at Sanders & Hwy 13, Pine
Prairie, Louisiana. This property includes the branch office's parking
lot containing 20 parking spaces. The branch office building is
approximately 2400 square feet and contains staff and storage rooms and
drive-in facilities.
ITEM 3. LEGAL PROCEEDINGS
Other than normal and routine collection matters in which demand
letters, lawsuits filed seeking personal judgment or mortgage
foreclosures and/or real estate as well as proofs of claim in bankruptcy
and/or reorganization proceedings, none of which are considered to be of
a material nature, the Company and its subsidiary are not engaged in any
litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters voted upon by the shareholders of the Company
during the fourth quarter of 1996.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There is no established public trading market for the Company's
common stock. The primary market area for the Company's common stock is
Evangeline Parish. All sales of the Company's common stock that have
come to the attention of management during 1996 and 1995 have occurred
at $13-$16 per share. Such prices reflect only those limited number of
transactions that have come to the attention of management, and other
transactions may have occurred at higher or lower sales prices during
the periods indicated. No assurance can be given that such prices
represent the actual market value of the Company's common stock.
The approximate number of holders of record of each class of the
Company's equity securities as of March 15, 1997 was as follows:
Title of Class Number of Record Holders
Common Stock - $5.00 par value 439
Dividend History and Restrictions
The Board of Directors has declared cash dividends in 1989, 1990, 1991,
1992, 1993, 1994, 1995 and 1996. These dividends were declared and paid
to shareholders in December of each year. 1989 dividend - .10 per
share, 1990 dividend - .12 per share, 1991 dividend - .15 per share,
1992 dividend - .18 per share, 1993 dividend - .25 per share, 1994
dividend - .50 per share, 1995 dividend - .50 per share and 1996
dividend - .60 per share. Management currently expects that cash
dividends will be paid in the future years at approximately the same
rate as in the past with a small increase per year, should the profits
allow.
Prior approval of the Commissioner of the Louisiana Office of Financial
Institutions is required for the Bank to pay dividends if the total of
all dividends declared and paid during any one year would exceed the
total of net profits of that year combined with the net profits of the
immediately preceding year.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information appearing in the Company's 1996 Annual Report is
incorporated herein by reference in response to this item.
ITEM 7. FINANCIAL STATEMENTS
The information appearing in the Company's 1996 Annual Report is
incorporated herein by reference in response to this item.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements with our independent accountants on any
matter of accounting principles or practice, financial statement
disclosure or auditing scope or procedure.
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference to Citizens Bancshares, Inc. Proxy Statement.
ITEM 10. EXECUTIVE COMPENSATION
Incorporated by reference to Citizens Bancshares, Inc. Proxy Statement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to Citizens Bancshares, Inc. Proxy Statement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to Citizens Bancshares, Inc. Proxy Statement.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 Regulation S-B:
Exhibit 13 - 1996 Annual Report to Shareholders
Exhibit 27 - Financial Data Schedule
Other exhibits have been omitted because they are either not
applicable or have been filed in previous reports.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the last quarter of 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused the report to be
signed on its behalf by the undersigned, thereunto duly authorized.
March 20, 1997 CITIZENS BANCSHARES, INC.
Date REGISTRANT
s/Carl W. Fontenot
Carl W. Fontenot
President & Director
s/Wayne Vidrine
Wayne Vidrine
Treasurer
s/Fredrick Phillips
Fredrick Phillips
Director
s/JB Veillon
J.B. Veillon
Director
s/Otis Fontenot
Otis Fontenot
Director
s/Eugene Fontenot
Eugene S. Fontenot
Director
Citizens Bancshares, Inc.
Annual Report
1996
PRESIDENT'S MESSAGE
March, 1997
Dear Shareholder:
Management expresses its appreciation to you, our shareholder and
customer for the support and confidence you have entrusted in us,
and we provide assurance of continued expansion of quality
service and products.
Citizens Bancshares, Inc. and Citizens Bank is pleased to report
to you another year of excellent earnings and asset growth. This
demonstrates your Bank's commitment of servicing the needs of
Evangeline Parish and its surrounding area. Total assets for
1996 increased over 7 million dollars, up 9.5% over 1995. Total
loans for 1996 increased near 6 million dollars, up 15.9% over
1995. Cash dividends declared in 1996 were $.60 per share,
compared to $.50 for 1995 which represents a 20% increase. This
strong financial achievement places your Bank among the
industry's high performers.
The expansion and renovation of the Bank's main office should be
completed by the beginning of the fourth quarter this year. This
project will provide needed space to accommodate increased
operations and to continue personal, quality service to you, our
customer.
Your Bank's new facility will include a five lane drive through
along with an ATM (automated teller machine). A new product of
debit cards and ATM cards are in the process of being introduced
and will be available very shortly.
We say THANK YOU for allowing Citizens Bank to serve you and ask
for your continued support and promotion of your Bank.
We understand that in order to carry this progress forward, it
all depends on one simple thing...our ability to provide you, our
customer with excellent service. This is our pledge to you now,
and in the future.
Sincerely,
Carl W. Fontenot
President & CEO
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 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, agricultural and real estate loans, safe deposit
boxes, and two credit card plans, VISA and MasterCard. Drive-
through facilities are located at all banking locations.
FINANCIAL CONDITION
Total assets increased by $7,881,000 to $91,050,000, a 9.48%
increase over the year end 1995 total asset level. Management
feels that growth represents core deposits and envisions a
moderate continuing growth in the future, especially when the
construction of the Ville Platte expansion is complete.
Earning assets, which include loans, investment securities,
federal funds sold and deposits in other banks were 94.71% of
total assets.
Loans constitute a primary source of income for the Bank. The
Bank desires to make all sound loans its resources will permit.
This lending objective is specifically articulated in the Bank's
written Loan Policy and its written Community Reinvestment Act
Policy. As of December 31, 1996, loans net of the allowance for
loan losses increased $5,748,000 or 15.93%. The Bank's loan to
deposit ratio at December 31, 1996 was 51.05%.
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 $859,000 as of December 31, 1996,
which represented 2.01% of total loans outstanding on that date
and which constituted an increase of $27,000 when compared to the
prior year end balance. Provisions to the allowance for loan
losses which were charged to net income of 1996 totaled $75,000.
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.
Interest income on loans is recognized on the accrual basis for
performing loans. These performing loans included past due loans
which comprised 1.31% of total loans at December 31, 1996. Of
the past due loans, $32,000 are 90 days or more past due and
continuing to accrue interest. For nonperforming loans, on which
doubt exists as to the borrower's ability to repay principal and
interest, interest accrual is terminated and interest income is
recognized as collected. This group of nonperforming loans are
referred to as nonaccrual loans and totaled $0 at December 31,
1996.
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 that
established liquidity guidelines be observed. Under Financial
Accounting Standards Board Statement number 115, the Bank
categorizes and accounts for debt securities investments as
either "held to maturity" or "available for sale." No investment
securities are held in trading accounts. At December 31, 1996,
securities classified as held to maturity had an amortized cost
of $10,909,000 and a fair value of $10,997,000. Securities
classified as available for sale had an amortized cost of
$25,929,000 and a fair value of $25,999,000.
Deposits, both time and demand, represent the chief source of
funds for the Bank. At the end of 1996, total deposits increased
$6,922,000 or 9.23%. The Bank's noninterest-bearing deposit
accounts increased by $1,462,000 at December 31, 1996. The
Bank's interest-bearing deposits increased by $5,460,000 at
December 31, 1996. Management finds the depositors continue to
select interest-bearing deposit accounts over noninterest-bearing
deposit accounts and are staying short-term.
RESULTS OF OPERATIONS
The Company reported a net income of $1,053,000 or $9.16 per
average share outstanding as of December 31, 1996. Net return on
assets was 1.21% and net return on equity was 11.40%.
Net interest income is the Company'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 Company's net interest income for December 31,
1996 increased $177,000 or 6.74%.
Noninterest income, which consists primarily of service charges,
fees on financial services and investment security transactions,
was $603,000 as of December 31, 1996 as compared to $585,000 as
of December 31, 1995, a 3.08% increase.
In 1996 noninterest expense decreased by $20,000 which is mainly
due to the FDIC assessment fees paid in 1996, which were reduced
in November of 1995 due to the FDIC classification.
LIQUIDITY
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 and provided for without an
adverse impact on earnings. The liquidity ratio for the Bank at
year end was 53.52%.
CAPITAL ADEQUACY
As of December 31, 1996, the most recent notification from the
Federal Deposit Insurance Corporation categorized the Bank as
well capitalized under the regulatory framework for prompt
corrective action. 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 Tier
1 leverage capital ratio of 5% or higher. No conditions or
events have occurred since that notification that management
believes have changed the Bank's category. The following table
presents the Bank's actual capital amounts and ratios as of
December 31, 1996 (dollars in thousands):
Amount Ratio
Total Capital (to Risk Weighted Assets) $8,618 20.0%
Tier 1 Capital (to Risk Weighted Assets) $8,079 18.7%
Tier 1 Capital (to Average Assets) $8,079 9.4%
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of Citizens Bancshares, Inc.
We have audited the accompanying consolidated statements of
financial condition of Citizens Bancshares, Inc. and its
subsidiary as of December 31, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity, and cash
flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Citizens Bancshares, Inc. and its
subsidiary as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
Basil M. Lee And Company
Baton Rouge, Louisiana
January 31, 1997
CITIZENS BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1996 AND 1995
(In thousands of dollars)
1996 1995
Assets
Cash and due from banks (Note 2) $2,352 $2,498
Federal funds sold 3,725 3,575
Cash and cash equivalents 6,077 6,073
Interest-bearing deposits with banks 3,766 3,765
Securities available for sale, at fair values 25,999 25,224
(Note 3)
Securities held to maturity, fair values of
$10,997 in 1996 and $9,849 in 1995 (Note 3) 10,909 9,695
Loans receivable, net of allowance for loan
losses of $859 in 1996 and $832 in 1995 (Note 4) 41,832 36,084
Accrued interest receivable 890 868
Premises and equipment (Note 5) 1,017 850
Foreclosed real estate, net of allowance of $16 - 28
in 1996 and $27 in 1995 (Note 6)
Deferred tax asset (Note 9) 44 -
Other assets 516 582
Total assets $91,050 $83,169
Liabilities and Shareholders' Equity
Liabilities
Demand deposits $ 9,235 $ 7,773
Savings, NOW, and money-market deposits 12,146 12,693
Time deposits $100,000 and more (Note 7) 20,772 17,829
Other time deposits (Note 7) 39,780 36,716
Total deposits 81,933 75,011
Accrued interest payable 540 480
Deferred tax liability (Note 9) - 20
Accrued expenses and other liabilities 117 106
Total liabilities 82,590 75,617
Shareholders' equity (Note 12)
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 (Note 2) 7,013 6,029
Net unrealized appreciation on securities
available for sale, net of tax of $24 in
1996 and $64 in 1995 47 123
Total shareholders' equity 8,460 7,552
Total liabilities and shareholders' equity $91,050 $83,169
CITIZENS BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996 AND 1995
(In thousands of dollars, except per share amounts)
1996 1995
Interest income
Loans receivable $3,864 $3,466
Taxable securities 1,798 1,739
Tax-exempt securities 263 204
Federal funds sold 245 220
Deposits with banks 216 233
Total interest income 6,386 5,862
Interest expense
Deposits
Savings, NOW, and money-market deposits 353 359
Time deposits $100,000 and more 1,082 982
Other time deposits 2,146 1,893
Total interest expense 3,581 3,234
Net interest income 2,805 2,628
Provision for loan losses (Note 4) 75 80
Net interest income after provision for loan 2,730 2,548
losses
Noninterest income
Service charges 426 385
Insurance commissions 101 73
Net realized gains on sales of securities - 12
available for sale (Note 3)
Credit to provision for foreclosed real estate - 55
Other income 76 60
Total noninterest income 603 585
Noninterest expense
Salaries and employee benefits 1,086 1,002
Occupancy and equipment expense 214 193
Computer and courier 138 128
Stationery and supplies 61 64
Professional fees 62 88
FDIC assessment 2 81
Other expense 297 324
Total noninterest expense 1,860 1,880
Income before income taxes 1,473 1,253
Income tax expense (Note 9) 420 353
Net income $1,053 $900
Net income per share of common stock $9.16 $7.83
Average shares outstanding 115,000 115,000
CITIZENS BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1995
(In thousands of dollars)
Net
Unrealized
Appreci-
ation
Addi- (Depreci-
tional ation) Total
Com- Paid- on Share-
mon in Retained Available holders'
Stock Capital Earnings for Sale Equity
Securities
Balance at $575 $825 $5,186 $(538) $6,048
December 31,
1994
Net income - - 900 - 900
for 1995
Cash - - (57) - (57)
dividends
paid - $0.50
per share
Net change in
unrealized
appreciation
of
securities - - - 661 661
available for
sale, net of
tax of $341
Balance at 575 825 6,029 123 7,552
December 31,
1995
Net income - - 1,053 - 1,053
for 1996
Cash - - (69) - (69)
dividends
paid - $0.60
per share
Net change in
unrealized
appreciation
of
securities - - - (76) (76)
available for
sale, net of
tax of $39
Balance at $575 $825 $7,013 $ 47 $8,460
December 31,
1996
CITIZENS BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
(In thousands of dollars)
1996 1995
Cash flows from operating activities
Net income $1,053 $900
Adjustments to reconcile net income to net
cash provided by
operating activities:
Deferred income tax expense (benefit) (24) 27
Depreciation and amortization 87 78
Provision for loan losses 75 80
Net realized (gains) on sales of securities - (12)
available for sale
Net (accretion) of securities (46) (54)
Credit to provision for foreclosed real - (55)
estate
(Increase) in accrued interest receivable (22) (38)
(Increase) decrease in other assets 41 (353)
Increase in accrued interest payable 60 156
Increase in accrued expenses and other 11 13
liabilities
Net cash provided by operating activities 1,235 742
Cash flows from investing activities
Net (increase) decrease in interest-bearing (1) 196
deposits with banks
Purchases of securities available for sale (14,429) (10,599)
Maturities of securities available for sale 13,577 3,490
Purchases of securities held to maturity (7,105) (4,977)
Maturities of securities held to maturity 5,898 8,330
Net (increase) in loans (5,973) (2,275)
Sales of foreclosed real estate 178 32
Purchases of premises and equipment (229) (246)
Net cash (used) by investing activities (8,084) (6,049)
Cash flows from financing activities
Net increase in deposits 6,922 7,313
Dividends paid (69) (57)
Net cash provided by financing activities 6,853 7,256
Net increase in cash and cash equivalents 4 1,949
Cash and cash equivalents at beginning of 6,073 4,124
year
Cash and cash equivalents at end of year $6,077 $6,073
Interest paid $3,521 $3,078
Income taxes paid $393 $350
Foreclosed real estate acquired in
satisfaction of loans $150 $60
(1) Summary of Significant Accounting Policies
The accounting and reporting policies of Citizens Bancshares,
Inc. (the "Company") and its subsidiary are based on generally
accepted accounting principles and conform to predominant banking
industry practices. Citizens Bank, Ville Platte, Louisiana (the
"Bank") is wholly owned by the Company.
a) Principles of consolidation - The consolidated financial
statements of the Company include the accounts of the Company and
its subsidiary. All material intercompany transactions and
accounts have been eliminated.
b) Nature of operations - The Bank provides a variety of
financial services to individual and business customers through
its three offices in Evangeline Parish, Louisiana, which is
primarily an agricultural area. The Bank's primary deposit
products are checking and savings accounts and certificates of
deposit. Its primary lending products are agricultural, real
estate and consumer loans.
c) Use of estimates - The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates. Material estimates that are particularly
susceptible to significant change relate to the determination of
the allowance for losses on loans and the valuation of real
estate acquired in connection with foreclosures or in
satisfaction of loans. In connection with the determination of
the allowances for losses on loans and foreclosed real estate,
management obtains independent appraisals for significant
properties. While management uses available information to
recognize losses on loans and foreclosed real estate, future
additions to the allowances may be necessary based on changes in
local economic conditions, which depends heavily on the
agricultural industry. In addition, regulatory agencies, as an
integral part of their examination process, periodically review
the Bank's allowances for losses on loans and foreclosed real
estate. Such agencies may require the Bank to recognize
additions to the allowances based on their judgments about
information available to them at the time of their examination.
Because of these factors, it is reasonably possible that the
allowances for losses on loans and foreclosed real estate may
change materially in the near term.
d) Cash equivalents - For the purpose of presentation in the
consolidated statements of cash flows, the Company considers due
from bank accounts and federal funds sold to be cash equivalents.
e) Securities held to maturity - Bonds and notes for which the
Bank has the positive intent and ability to hold to maturity are
reported at cost, adjusted for premiums and discounts that are
recognized in interest income using the interest method over the
period to maturity. Declines in the fair value of individual
securities below their cost that are other than temporary result
in write-downs of the individual securities to their fair value.
The related write-downs are included in earnings as realized
losses.
f) Securities available for sale - Securities available for
sale consist of bonds and notes not classified as held to
maturity. Unrealized holding gains and losses, net of tax, on
these securities are reported as a net amount in a separate
component of shareholders' equity until realized. Gains and
losses on the sale of securities available for sale are
determined using the specific-identification method. Premiums
and discounts are recognized in interest income using the
interest method over the period to maturity. Declines in the
fair value of individual securities below their cost that are
other than temporary result in write-downs of the individual
securities to their fair value. The related write-downs are
included in earnings as realized losses.
g) Loans receivable and allowance for loan losses - Loans
receivable that management has the intent and ability to hold for
the foreseeable future or until maturity or pay-off are reported
at their outstanding principal adjusted for any charge-offs, the
allowance for loan losses, and unearned income. Unearned income
on discounted loans is recognized as income over the term of the
loans using a method that approximates the interest method.
Interest on other loans is calculated by using the simple
interest method on daily balances of the principal amount
outstanding. The accrual of interest on impaired loans is
discontinued when, in management's opinion, the borrower may be
unable to meet payments as they become due. Interest income
generally is not recognized on these loans unless the likelihood
of further loss is remote. Interest payments received on such
loans are applied as a reduction of the loan principal balance.
The allowance for loan losses is increased by charges to income
and decreased by charge-offs (net of recoveries). Management's
periodic evaluation of the adequacy of the allowance is based on
the Bank's past loan loss experience, known and inherent risks in
the portfolio, adverse situations that may affect the borrower's
ability to repay, the estimated value of any underlying
collateral, and current economic conditions.
h) Premises and equipment - Land is carried at cost. Bank
premises, furniture and equipment are carried at cost, less
accumulated depreciation and amortization computed principally by
the straight-line method.
i) Foreclosed real estate - Real estate properties acquired
through, or in lieu of, loan foreclosure are to be sold and are
initially recorded at fair value at the date of foreclosure
establishing a new cost basis. After foreclosure, valuations are
periodically performed by management and the real estate is
carried at the lower of carrying amount or fair value less cost
to sell. Revenue and expenses from operations and changes in the
valuation allowance are included in operations.
j) Income taxes - Deferred tax assets and liabilities are
reflected at currently enacted income tax rates applicable to the
period in which the deferred tax assets or liabilities are
expected to be realized or settled. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are
adjusted through the provision for income taxes.
k) Net income per share - Net income per share of common stock
has been computed on the basis of the weighted-average number of
shares of common stock outstanding.
l) Reclassifications - Certain reclassifications have been made
to the prior year's financial statements, which have no effect on
net income as previously reported, to conform to current year
reporting.
(2) Restrictions
The Bank is required to maintain average reserve balances by
the Federal Reserve Bank. The average amounts of these
reserves for the years ended December 31, 1996 and 1995 were
$206,000 and $204,000, respectively.
In addition, prior approval of the Commissioner of the
Louisiana Office of Financial Institutions is required for the
Bank to pay dividends if the total of all dividends declared
and paid during any one year would exceed the total of net
profits of that year combined with the net profits from the
immediately preceding year.
(3) Investment Securities
The amortized costs and approximate fair values of investments
in debt securities at December 31 follow (in thousands of
dollars):
December 31, 1996
Gross Gross
Amort- Unreal- Unreal- Fair
ized ized ized
Securities available for Cost Gains Losses Value
sale
U. S. Treasury securities $3,560 $ 7 $12 $3,555
U. S. Government agencies 14,798 77 40 14,835
and corporations
Mortgage-backed securities 7,571 73 35 7,609
$25,929 $157 $87 $25,999
Securities held to
maturity
U. S. Treasury securities $2,200 $ 2 $ 2 $2,200
U. S. Government agencies 3,427 2 5 3,424
and corporations
States and political 5,012 98 4 5,106
subdivisions
Mortgage-backed securities 270 - 3 267
$10,909 $102 $14 $10,997
Securities pledged to
secure public deposits
and for other purposes $5,892 $5,876
Securities available for December 31, 1995
sale
U. S. Treasury securities $2,995 $ 27 $ 4 $3,018
U. S. Government agencies 19,001 142 57 19,086
and corporations
Mortgage-backed securities 3,044 84 8 3,120
$25,040 $253 $69 $25,224
Securities held to
maturity
U. S. Treasury securities $2,199 $ 11 $ - $2,210
U. S. Government agencies 2,585 25 9 2,601
and corporations
States and political 4,579 132 6 4,705
subdivisions
Mortgage-backed securities 332 1 - 333
$9,695 $169 $15 $9,849
Securities pledged to
secure public deposits
and for other purposes $4,507 $4,530
The scheduled maturities of securities available for sale and
held to maturity at December 31, 1996 were as follows (in
thousands of dollars):
Available for sale Held to maturity
Amort- Fair Amort- Fair
ized ized
Contractual maturities Cost Value Cost Value
One year or less $4,049 $4,057 $4,851 $4,851
After one year through 14,309 14,333 4,236 4,281
five years
After five years through - - 1,552 1,598
ten years
Mortgage-backed securities 7,571 7,609 270 267
$25,929 $25,999 $10,909 $10,997
Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
Gross realized gains and gross realized losses on sales of
securities available for sale were $12,000 and $0 in 1995. No
securities were sold in 1996.
(4) Loans Receivable
The components of loans in the consolidated statements of
financial condition at December 31 were as follows (in
thousands of dollars):
1996 1995
Commercial $9,705 $7,923
Agricultural 3,895 3,211
Real estate mortgage 20,425 18,015
Consumer 9,115 8,157
Other 39 136
43,179 37,442
Unearned income (488) (526)
Allowance for loan losses (859) (832)
$41,832 $36,084
An analysis of the change in the allowance for loan losses
follows (in thousands of dollars):
1996 1995
Balance at January 1 $832 $774
Loans charged off (91) (59)
Recoveries 43 37
Net loans charged off (48) (22)
Provision for loan losses 75 80
Balance at December 31 $859 $832
At December 31, 1996 and 1995, loans totaling $109,000 and
$171,000 were classified as impaired. Of the total impaired
loans at December 31, 1996 and 1995, $109,000 and $171,000 had a
related allowance for loan losses of $18,000 and $37,000,
respectively. The average balances of these loans in 1996 and
1995 were approximately $111,000 and $172,000. In 1996 and 1995,
interest income recognized on impaired loans was approximately
$9,000 and $10,000, respectively. No commitments to loan
additional funds to borrowers of impaired loans were outstanding
at December 31, 1996.
(5) Premises and Equipment
Components of premises and equipment included in the consolidated
statements of financial condition at December 31 were as follows
(in thousands of dollars):
1996 1995
Cost:
Land $241 $241
Buildings 725 715
Furniture and equipment 421 378
Automobiles 37 37
Construction in progress 176 -
1,600 1,371
Accumulated depreciation (583) (521)
$1,017 $850
(6) Foreclosed Real Estate
Activity in the allowance for losses on foreclosed real estate is
as follows (in thousands of dollars):
1996 1995
Balance at January 1 $ 27 $174
Provision charged (credited) to income - (55)
Charge-offs, net of recoveries (11) (92)
Balance at December 31 $ 16 $ 27
(7) Deposits
At December 31, 1996, the scheduled maturities of time deposits
are as follows (in thousands of dollars):
$100,000 Other time
Year maturing and more deposits
1997 $19,372 $36,460
1998 800 2,808
1999 600 512
$20,772 $39,780
(8) Financial Instruments
The Bank is a party to financial instruments with off-balance
sheet risk in the normal course of business to meet the financing
needs of its customers. These financial instruments include
commitments to extend credit and standby letters of credit, which
involve credit risk in excess of the amounts recognized in the
statement of financial condition. The Bank's exposure to credit
loss in the event of nonperformance by the other party to these
financial instruments is represented by the contractual amounts
of the instruments. The Bank uses the same credit policies in
making commitments and conditional obligations as it does for on-
balance sheet instruments, including collateral or other security
to support the financial instruments.
At December 31, 1996 and 1995, commitments to extend credit
totaled $3,183,000 and $1,336,000, respectively. These
commitments are agreements to lend to a customer as long as there
is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many
of the commitments may expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash
requirements.
At December 31, 1996 and 1995, commitments under standby letters
of credit totaled $212,000 and $340,000, respectively. Standby
letters of credit are conditional commitments issued by the Bank
to guarantee the performance of a customer to a third party. The
credit risk involved in issuing letters of credit is essentially
the same as that involved in extending loans to customers.
(9) Income Taxes
The consolidated provision for income taxes consisted of the
following for the years ended December 31 (in thousands of
dollars):
1996 1995
Current expense $444 $326
Deferred expense (benefit) (24) 27
Income tax expense $420 $353
The effective tax rates differed from the statutory federal
income tax rates as follows:
1996 1995
Statutory federal income tax rate 34.0% 34.0%
Nontaxable income (7.2%) (6.0%)
Nondeductible expenses 2.5% 1.2%
Other (0.8%) (1.0%)
Effective tax rate 28.5% 28.2%
Deferred tax assets and (liabilities) at December 31 consist of
the following (in thousands of dollars):
1996 1995
Net (appreciation) of securities available $(24) $(64)
for sale
Allowance for loan losses 108 98
Allowance for foreclosed real estate losses 6 9
Accumulated depreciation (72) (74)
Deferred compensation payable 32 10
Accreted discount on investments (31) (24)
Tax basis over book value of land 25 25
Deferred tax asset (liability) $ 44 $(20)
No valuation allowance was recorded to reduce the deferred tax
asset at December 31, 1996 and 1995.
(10) Related Parties
The Bank has entered into transactions with its directors,
executive officers, significant shareholders, and their
affiliates. The aggregate amount of loans to such related
parties at December 31, 1996 and 1995 was $885,000 and $959,000,
respectively. During 1996, new loans to such related parties
amounted to $1,100,000 and repayments amounted to $1,174,000.
Deposits held by the Bank at December 31, 1996 and 1995 for
related parties were $3,580,000 and $3,460,000, respectively.
Fees paid for goods and services provided by related parties
amounted to $50,000 in 1996 and $24,000 in 1995.
(11) Commitments
At December 31, 1996 and 1995, the Bank had unused lines of
credit with other banks which totaled $2,750,000 and $1,750,000.
The lines were unsecured and have variable interest rates based
on the lending bank's daily federal funds rate.
In December, 1995, the Bank contracted with a company to develop
and implement a planned expansion of the main office. Estimated
cost of the expansion is between $1,300,000 and $1,500,000.
Construction began in the last quarter of 1996 and should be
completed in 12 to 15 months.
(12) Regulatory Matters
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and
possibly discretionary, actions by regulators that, if
undertaken, could have a direct material effect on the Bank's
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must
meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities, and certain off-
balance sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are
also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios
of total and Tier 1 capital, as defined in the regulations, to
risk-weighted assets, as defined, and of Tier 1 capital to
average assets, as defined. Management believes, as of December
31, 1996, that the Bank meets all capital adequacy requirements
to which it is subject.
As of December 31, 1996, the most recent notification from the
Federal Deposit Insurance Corporation categorized the Bank as
well capitalized under the regulatory framework for prompt
corrective action. 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 Tier
1 leverage capital ratio of 5% or higher. No conditions or
events have occurred since that notification that management
believes have changed the Bank's category. The following table
presents the Bank's actual capital amounts and ratios as of
December 31, 1996 (dollars in thousands):
Amount Ratio
Total Capital (to Risk Weighted Assets) $8,618 20.0%
Tier 1 Capital (to Risk Weighted Assets) $8,079 18.7%
Tier 1 Capital (to Average Assets) $8,079 9.4%
(13) Parent Company Statements
The financial statements of Citizens Bancshares, Inc. (parent
company only) at December 31 and for the years then ended follow
(in thousands of dollars):
Statements of Financial Condition 1996 1995
Assets
Investment in Citizens Bank, at equity $8,455 $7,548
Cash and equivalents 5 4
Total assets $8,460 $7,552
Liabilities and Shareholders' Equity
Total liabilities $- $-
Common stock 575 575
Additional paid-in capital 825 825
Retained earnings 7,013 6,029
Net unrealized appreciation on
securities available for sale 47 123
Total shareholders' equity 8,460 7,552
Total liabilities and shareholders' equity $8,460 $7,552
Statements of Income 1996 1995
Income
Equity in undistributed net income of $983 $841
Citizens Bank
Dividends received from Citizens Bank 74 61
Total income 1,057 902
Expenses
Other expense 4 2
Total expenses 4 2
Net income $1,053 $900
Statements of Cash Flows
Cash flows from operating activities
Net income $1,053 $900
Adjustments to reconcile net income to net
cash provided
by operating activities:
Equity in undistributed net income of (983) (841)
Citizens Bank
Net cash provided by operating activities 70 59
Cash flows from investing activities - -
Cash flows from financing activities
Dividends paid (69) (57)
Net cash (used) by financing activities (69) (57)
Net increase in cash and equivalents 1 2
Cash and equivalents at beginning of year 4 2
Cash and equivalents at end of year $5 $4
(14) Bank Subsidiary Statements
The statements of financial condition and income of Citizens Bank
(bank only) at December 31 and for the years then ended follow
(in thousands of dollars):
Statements of Financial Condition 1996 1995
Assets
Cash and due from banks $ 2,352 $2,498
Federal funds sold 3,725 3,575
Interest-bearing deposits with banks 3,766 3,765
Investment securities 36,908 34,919
Loans receivable 41,832 36,084
Accrued interest receivable 890 868
Premises and equipment 1,017 850
Foreclosed real estate - 28
Deferred tax asset 44 -
Other assets 517 582
Total assets $91,051 $83,169
Liabilities and Shareholder's Equity
Deposits $81,938 $75,015
Accrued interest payable 540 480
Deferred tax liability - 20
Accrued expenses and other liabilities 118 106
Common stock 575 575
Additional paid-in capital 4,000 4,000
Retained earnings 3,833 2,850
Net unrealized appreciation on
securities available for sale 47 123
Total liabilities and shareholder's equity $91,051 $83,169
Statements of Income 1996 1995
Interest income
Loans $3,864 $3,466
Investment securities 2,062 1,943
Federal funds sold 245 220
Deposits with banks 216 233
6,387 5,862
Interest expense on deposits 3,581 3,234
Net interest income 2,806 2,628
Provision for loan losses 75 80
Net interest income after provision for 2,731 2,548
loan losses
Noninterest income 603 585
Noninterest expense 1,857 1,878
Income tax expense 420 353
Net income $1,057 $902
DESCRIPTION OF BUSINESS
Citizens Bancshares, Inc. (the "Company") is a Louisiana business
corporation and a one-bank holding company registered under the
federal Bank Holding Company Act of 1956. The Company was formed
in 1983 primarily for the purpose of holding all of the
outstanding stock of Citizens Bank, Ville Platte, Louisiana (the
"Bank"), which is the Company's sole subsidiary.
The Bank was formed under the banking laws of the State of
Louisiana. The Bank conducts a general commercial banking
business through its main office in Ville Platte, Louisiana and
branch offices in Mamou, Louisiana and Pine Prairie, Louisiana.
The Bank offers a full range of traditional commercial banking
services, including demand, savings and time deposits, consumer,
credit card, and commercial and real estate loans, and safe-
deposit boxes. The Bank does not offer trust services. Drive-in
banking facilities are located at all banking locations.
The Bank competes actively with national and state banks, savings
institutions, and credit unions in Louisiana for all types of
loans and deposits. The Bank also competes with other financial
institutions such as insurance companies, real estate investment
trusts, small loan companies, and certain government agencies.
As of December 31, 1996, the Company and the Bank had
approximately 35 full-time equivalent employees. The Company has
no salaried employees, although certain executive officers hold
parallel positions with the Bank. No employees are represented
by unions or other bargaining units, and management considers its
relations with employees to be satisfactory.
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Citizens Bancshares, Inc. stock is not listed on any stock
exchange or over-the-counter market. The transaction prices
listed below reflect only a limited number of transactions that
have come to the attention of management. No assurance can be
given that such prices represent the actual market value of the
Company's common stock. At December 31, 1996, there were 441
holders of record of the Company's common stock.
1996 1995
Per share stock transactions High Low High Low
First quarter $15 $13 $13 $11
Second quarter 15 14 13 11
Third quarter 15 15 15 12
Fourth quarter 16 15 15 12
AVAILABILITY OF ANNUAL REPORT ON FORM 10-KSB
The annual report of Citizens Bancshares, Inc. and subsidiary as
filed with the Securities and Exchange Commission of For 10-KSB
is available on request to any shareholder free of charge by
writing to Carl Fontenot, President, Citizens Bancshares, Inc.,
Post Office Box 598, Ville Platte, Louisiana, 70586.
DIRECTORS AND EXECUTIVE OFFICERS
Directors and executive officers of the Company and its only
subsidiary, Citizens Bank, their principal occupations and the
year each of the directors took office are as follows:
Curley Courville-Director of the Bank since 1975; Director of the
the Company since 1983; Retired investor.
Carl W. Fontenot-Director of the Bank since 1975; Director of the
Company since 1983; President and CEO of the Bank and Company.
Eugene S. Fontenot-Director and Secretary of the Bank since 1975;
Director and Secretary of the Company since 1983; Owner and
President of Euco Finance Company, Inc.
J. Jake Fontenot-Director of the Bank since 1977; Director of the
Company since 1983; Attorney at Law.
Otis Fontenot-Director of the Bank since 1975; Director of the
Company since 1983; Retired planter.
Fredrick Phillips-Director of the Bank since 1975; Director of the
Company since 1983; Owner of F. Phillips General Contractors, Inc.
J. B. Veillon-Director and Vice President of Bank since 1975;
Director and Vice President of the Company since 1983; Retired
retailer.
Roderick Young-Director of the Bank since 1977; Director of the
Company since 1983; Owner of R&R Auto Parts.
Jule Hebert-Director of the Bank since 1980; Director of the
Company since 1983; Owner and President of Farmers Gas Company,
Inc., propane and butane gas distributor.
Wayne Vidrine-Executive Vice President and Cashier of the Bank;
Treasurer of the Company.
Stephen P. Mayeux-Senior Vice President of the Bank.
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