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, 1998 Commission file number 0-12425
Citizens Bancshares, Inc.
(Exact name of small business issuer as specified in its charter)
Louisiana 72-0759135
(State or other jurisdiction of (I.R.S. Employer Identification)
incorporation or organization)
841 West Main Street, Ville Platte, La. 70586
(Address of principal executive offices)
Issuer's telephone number, including area code 318-363-5643
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months, and
(2) had been subject to such filing requirements for the past 90 days.
Yes (x) No ( )
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Number of
Class of Common Stock Shares Outstanding As of
Common Stock $5 Par Value 114,855 June 30, 1998
CITIZENS BANCSHARES, INC. AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
INDEX
PART I. FINANCIAL INFORMATION PAGE
Condensed Consolidated Balance Sheets -
June 30, 1998 and December 31, 1997.......................3
Condensed Consolidated Statements of Income -
Six and Three months ended
June 30, 1998 and June 30, 1997...........................4
Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 1998
and June 30, 1997.........................................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, 1998 AND DECEMBER 31, 1997 (UNAUDITED)
(in thousands of dollars)
06/30/98 12/31/97
ASSETS
Cash and due from banks $ 2,070 $ 1,848
Federal funds sold 7,315 6,900
CASH AND CASH EQUIVALENTS 9,385 8,748
Interest-bearing deposits with banks 5,152 4,758
Securities available for sale,
at fair values 25,065 25,316
Securities held to maturity, fair values
of $7,433 & $8,399 7,365 8,329
TOTAL SECURITIES 32,430 33,645
Loans receivable, net of allowance for
loan losses of $975 in 1998 and
$937 in 1997 50,660 46,051
Accrued interest receivable 879 960
Premises and equipment, net 3,022 3,064
Foreclosed real estate 47 14
Deferred tax asset -- 68
Other assets 898 649
TOTAL ASSETS $102,473 $97,957
LIABILITIES
Demand deposits $10,430 $ 9,308
Savings, NOW and money-market deposits 13,739 13,261
Time deposits $100,000 or more 23,431 22,397
Other time deposits 43,589 42,467
TOTAL DEPOSITS 91,189 87,433
Accrued interest payable 611 568
Accrued expenses and other liabilities 627 482
TOTAL LIABILITIES 92,427 88,483
SHAREHOLDERS' EQUITY
Common Stock $5 par value, 300,000
shares authorized, 114,855 shares
issued and (145 shares held in
Treasury Stock) 575 575
Additional paid-in capital 825 825
Treasury Stock, @ cost (6) ---
Retained earnings 8,580 8,027
Unrealized gain on Available-for-Sale
Securities, net of applicable deferred
income taxes 72 47
TOTAL SHAREHOLDERS' EQUITY 10,046 9,474
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $102,473 $97,957
CITIZENS BANCSHARES, INC. AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
SIX AND THREE MONTHS ENDED JUNE 30, 1998 AND 1997
(in thousands of dollars, except per share data)
SIX MONTHS THREE MONTHS
ENDED ENDED
06/30/98 06/30/97 06/30/98 06/30/97
Interest income
Loans receivable $ 2,260 $ 2,085 $ 1,166 $ 1,080
U.S. Treasury Securities 76 162 35 81
U.S. Government Agencies 774 837 381 426
State & Political Subdivisions 146 128 75 65
Federal Funds sold 248 150 117 64
Deposits with banks 147 114 74 58
Total interest income 3,651 3,476 1,848 1,774
Interest expense
Deposits
Savings, NOW and IMMA 208 287 104 198
Time deposits $100,000 and more 659 580 346 282
Other time deposits 1,198 1,046 593 490
Total interest expense 2,065 1,913 1,043 970
Net interest income 1,586 1,563 805 804
Provision for loan losses 57 47 27 25
Net interest income after provision
for loan losses 1,529 1,516 778 779
Noninterest income
Service charges 222 206 112 106
Other income 75 71 36 40
Total noninterest income 297 277 148 146
Noninterest expense
Salaries & employee benefits 530 468 263 232
Occupancy & equipment expense 220 113 111 57
Other expense 298 312 161 158
Total noninterest expense 1,048 893 535 447
Income before income taxes 778 900 391 478
Income tax expense 224 240 104 135
Net Income $ 554 $ 660 $ 287 $ 343
Net income per share of
common stock $ 4.82 $ 5.74 $ 2.50 $ 2.99
Net Income $ 554 $ 660 $ 287 $ 343
Other comprehensive income,
net of tax 25 (62) 61 (90)
Comprehensive income $ 579 598 $ 348 $ 253
CITIZENS BANCSHARES, INC AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED
JUNE 30, 1998 AND JUNE 30, 1997
JUNE JUNE
30, 1998 30, 1997
Cash flows from operating activities:
Net Income $ 547 $ 660
Adjustments to reconcile net income to
net cash provided by operating activities -
Provision for possible loan losses 58 47
Depreciation & Amortization 89 42
Net (accretion) of investment securities 11 (38)
(Gain) on sale of other real estate -- --
Decrease (Increase) in interest receivable 81 (34)
(Increase) in other assets (249) (44)
Increase in interest payable 43 3
Increase (decrease) in other liabilities 145 (1)
Net cash provided by operating activities 725 635
Cash flows from investing activities:
Proceeds from maturities and calls of
investment securities 11,610 6,796
Purchase of investment securities (12,535) (6,307)
(Increase) in interest-bearing
deposits with other banks (394) (99)
Proceeds from sales of foreclosed real estate -- --
(Increase) in loans (2,514) (4,102)
Purchase of premises and equipment (11) (641)
Net cash (used) by investing activities (3,844) (4,353)
Cash flows from financing activities:
Increase in deposits 3,756 4,872
Net cash provided by financing activities 3,756 4,872
Net increase in cash and cash equivalents 637 1,154
Cash and cash equivalents, beginning of year 8,748 6,077
Cash and cash equivalents, end of period $ 9,385 $ 7,231
Cash paid for income taxes $ 146 $ 276
Cash paid for interest expense $ 2,022 $ 1,910
Foreclosed real estate acquired in
satisfaction of loans $ --- $ 17
Total Increase (decrease) in Fair Value of
Securities Available for Sale $ 38 $ (93)
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,
1997 balance sheet data was derived from audited financial
statements but does not include all disclosures required by
generally accepted accounting principles. The interim financial
statements and notes thereto should be read in conjunction with
the financial statements and notes included in the Company's
latest annual report on Form 10-KSB. In the opinion of
management, the interim financial statements reflect all
adjustments of a normal recurring nature necessary for a fair
statement of the results for interim periods. The current
period results of operations are not necessarily indicative of
results which ultimately will be reported for the full year
ending December 31, 1998.
CITIZENS BANCSHARES, INC. AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JUNE 30, 1998
GENERAL STATEMENT
For a comprehensive review of financial condition and results of
operations of Citizens Bancshares, Inc. (the Company), this discussion
and analysis should be reviewed along with the information and financial
statements presented elsewhere in this report. The Company is a one-
bank holding company whose sole subsidiary is Citizens Bank, Ville
Platte, Louisiana (the Bank).
Citizens Bank, Ville Platte, Louisiana is a commercial banking
institution formed in 1975 under the banking laws of the State of
Louisiana. The bank operates a main office located in the City of Ville
Platte, Louisiana and also operates branch facilities in the Town of
Mamou, Louisiana and the Village of Pine Prairie, Louisiana. The Bank
offers a full range of traditional commercial banking services,
including demand, savings, and time deposits, consumer, commercial,
agriculture, and real estate loans, safe-deposit boxes, two credit card
plans, VISA and MASTERCARD. Drive-in facilities are located at all
banking locations with ATM service at the main office.
FINANCIAL CONDITION
The Bank's total assets increased in the second quarter of 1998 from
$97,957,000 to $102,473,000, a $4,516,000 or 4.61% increase. The
increase is attributable to an increase in deposits and loans. In the
first quarter of 1998 deposits had a 4.08% increase while in the second
quarter of 1998 loans increased by 10.00%.
Earning assets, which include loans, investment securities, federal
funds sold, and deposits in other banks were 93.50% of total assets at
June 30, 1998.
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 $975,000 as of June 30, 1998, which represents a 1.89%
of total loans outstanding on that date. Provisions to the allowance
for loan losses, which were charged to net income in the second quarter
of 1998, totaled $357,500. Management evaluates the adequacy of the
allowance for loan losses on a monthly basis by monitoring the balance
in total loans as well as the past due, nonaccrual, classified, and
other problem loans. On the basis of this evaluation, the allowance for
loan losses is considered adequate to meet possible future charges for
losses in the existing loan portfolio. At June 30, 1998 past due loans
to total loans were 1.57%.
Another primary source of income is interest earned on investment
securities. The Bank's investment objectives and activities are guided
by a written Investment Policy. As of June 30, 1998, securities
classified as "held-to-maturity" had an amortized cost/recorded value of
$7,365,000 and a fair value of $7,433,000; securities classified as
"available-for-sale" had a fair recorded value of $25,065,000 and an
amortized cost of $24,955,000.
With deposits being the bank's primary source of funds, both time and
demand, total deposits increased $3,756,000 or 4.29% since December 31,
1997. Noninterest-bearing deposits increased by $1,122,000 and
interest-bearing deposits increased by $2,634,000. At June 30, 1998 the
Bank's Loan to Deposit Ratio was 56.59%.
The primary functions of asset/liability management are to assure
adequate liquidity and maintain an appropriate spread between interest-
earning assets and interest-bearing liabilities. Liquidity management
involves the ability to meet cash flow requirements of customers who may
be either depositors wanting to withdraw funds or borrowers needing
assurance that sufficient funds will be available to meet their credit
needs. Major elements of the Bank's overall liquidity management
capabilities and financial resources are (1) core deposits, (2) closely
managed maturity structure of loans and deposits, (3) sale and maturity
of assets (primarily investment securities), and, if necessary, (4)
extensions of credit, including federal funds purchased and securities
sold under repurchase agreements. With the Bank's asset/liability
management program, most loan and deposit changes can be anticipated
without an adverse impact on earnings. At June 30, 1998 the
Bank's liquidity ratio was 46.22%.
RESULTS OF OPERATIONS
The Bank reported a net income of $548,000 or $4.77 per average share
outstanding at June 30, 1998. Net return on assets was 1.08% and net
return on equity was 10.20%.
Net interest income is the Bank's principal source of revenue and is
measured by the difference between interest income earned on loans and
investments and interest expense incurred on deposits. At June 30,
1998, the Bank's net interest income increased slightly from June 30,
1997.
Noninterest income, which consists primarily of service charges and fees
on financial services increased by $20,000 as of June 30, 1998. With
the increase in deposits, service charges on deposit accounts increased
by 7.77% and the ATM/EFT service charge income increased by 65.00%.
Noninterest expense as of June 30, 1998 increased by $161,000 from June
30, 1997. With salary adjustments and additional staff added, salaries
increased by $62,000 or 13.25% from June 30, 1997. However, the main
increase is attributed to occupancy and equipment expenses which
increased by $107,000 or 94.69% from June 30, 1997, due to the
completion of the addition of the main office and the conversation of
our in-house data processing.
CAPITAL ADEQUACY
Primary capital (shareholders' equity plus a portion of the allowance
for loan losses) as a percent of adjusted total assets is one of the
standard measures of capital adequacy used by bank regulators. This and
other measurement ratios serve as the underlying basis for evaluating
the Bank's capital adequacy and for determining the Bank's insurance
fund deposit assessment charges. At June 30, 1998, the Bank's ratios
were as follows:
Capital to Assets 9.84%
Risk Based Capital 19.10%
Tier 1 Capital 17.85%
Leverage Ratio 9.51%
To be categorized as well capitalized, the Bank must maintain a total
risk-based capital ratio of 10% or higher, Tier 1 risk-based capital
ratio of 6% or higher, and leverage capital ratio of 5% or higher.
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 9, 1998
accompanied by a proxy statement, the annual meeting of
shareholders wad held on April 9, 1998. 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 Fontenot Roderick Young
Jules Hebert
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, 1998.
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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