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, 1999 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, 1999
CITIZENS BANCSHARES, INC. AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
INDEX
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets -
June 30, 1999 and December 31, 1998
Condensed Consolidated Statements of Income -
Six months ended
June 30, 1999 and June 30, 1998
Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 1999
and June 30, 1998
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
PART I. CITIZENS BANCSHARES, INC. AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998 (UNAUDITED)
(in thousands of dollars)
06/30/99 12/31/98
ASSETS
Cash and due from banks $ 1,926 $ 1,857
Federal funds sold 8,680 6,625
CASH AND CASH EQUIVALENTS 10,606 8,482
Interest-bearing deposits with banks 5,448 5,142
Securities available for sale,
at fair values 26,871 26,513
Securities held to maturity, fair values
of $8,910 & $8,274 8,924 8,125
TOTAL SECURITIES 35,795 34,638
Loans receivable, net of allowance for
loan losses of $1,033 in 1999 and
$1,001 in 1998 57,778 52,119
Accrued interest receivable 972 940
Premises and equipment, net 3,120 2,979
Foreclosed real estate -- --
Deferred tax asset 100 81
Other assets 853 743
TOTAL ASSETS $114,672 $105,124
LIABILITIES
Demand deposits $11,005 $10,683
Savings, NOW and money-market deposits 18,791 15,351
Time deposits $100,000 or more 23,254 22,674
Other time deposits 49,754 45,223
TOTAL DEPOSITS 102,804 93,931
Accrued interest payable 590 557
Accrued expenses and other liabilities 566 257
TOTAL LIABILITIES 103,960 94,745
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) (6)
Retained earnings 9,513 8,952
Accumulated other comprehensive income (195) 33
TOTAL SHAREHOLDERS' EQUITY 10,712 10,379
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $114,672 $105,124
CITIZENS BANCSHARES, INC. AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
SIX MONTHS ENDED JUNE 30, 1999 & 1998
(in thousands of dollars, except per share data)
SIX MONTHS SIX MONTHS
ENDED ENDED
06/30/99 06/30/98 06/30/99 06/30/98
Interest income
Loans receivable $ 2,575 $ 2,306 $ 1,322 $ 1,166
U.S. Treasury Securities 35 76 16 35
U.S. Government Agencies 751 774 385 381
State & Political Subdivisions 180 146 90 75
Federal Funds sold 226 248 111 117
Deposits with banks 139 147 70 74
Total interest income 3,906 3,697 1,994 1,848
Interest expense
Deposits
Savings, NOW and IMMA 163 208 79 104
Time deposits >$100,000 728 659 381 346
Other time deposits 1,280 1,198 648 593
Total interest expense 2,171 2,065 1,108 1,043
Net interest income 1,735 1,632 886 805
Provision for loan losses 47 57 27 27
Net interest income after provision
for loan losses 1,688 1,575 859 778
Noninterest income
Service charges 260 222 128 112
Other income 29 29 10 36
Total noninterest income 289 251 138 148
Noninterest expense
Salaries & employee benefits 643 530 315 263
Occupancy & equipment expense 259 220 129 111
Other expense 299 298 144 161
Total noninterest expense 1,201 1,048 588 535
Income before income taxes 776 778 409 391
Income tax expense 216 224 114 104
Net Income $ 560 $ 554 $ 295 $ 287
Net income per share of
common stock $ 4.87 $ 4.82 $ 2.57 $ 2.50
Net Income $ 560 $ 554 $ 295 $ 287
Other comprehensive income,
net of tax ( 228) 25 (195) 61
Comprehensive income $ 332 $ 579 $ 100 $ 253
CITIZENS BANCSHARES, INC AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED
JUNE 30, 1999 AND 1998
JUNE JUNE
30, 1999 30, 1998
Cash flows from operating activities:
Net Income $ 560 $ 547
Adjustments to reconcile net income to
net cash provided by operating activities -
Provision for possible loan losses 47 58
Depreciation & Amortization 121 89
Net (accretion) of investment securities 38 11
(Gain) on sale of other real estate -- --
(Increase) in interest receivable (32) 81
(Increase) in other assets (110) (249)
Increase in interest payable 33 43
Increase in other liabilities 309 145
Net cash provided by operating activities 966 725
Cash flows from investing activities:
Proceeds from maturities and calls of
investment securities 2,348 11,610
Purchase of investment securities (7,953) (12,535)
(Increase) in interest-bearing
deposits with other banks (306) (394)
Proceeds from sales of foreclosed real estate -- --
Increase in loans (1,520) (2,514)
Purchase of premises and equipment (284) (11)
Net cash (used) by investing activities (7,715) (3,844)
Cash flows from financing activities:
Increase in deposits 8,873 3,756
Net cash provided by financing activities 8,873 3,756
Net increase in cash and cash equivalents 2,124 637
Cash and cash equivalents, beginning of year 8,482 8,748
Cash and cash equivalents, end of period $10,606 $ 9,385
Cash paid for income taxes $ 161 $ 146
Cash paid for interest expense $ 2,138 $ 2,022
Foreclosed real estate acquired in
satisfaction of loans $ --- $ ---
Total Increase (decrease) in Fair Value of
Securities Available for Sale $ (345) $ 38
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,
1998 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, 1999.
CITIZENS BANCSHARES, INC. AND
CITIZENS BANK, VILLE PLATTE, LOUISIANA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JUNE 30, 1999
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
Total assets of the Company increased by $9,548,000 or 9.08%, from
$105,124,000 at December 31, 1998 to $114,672,000 at June 30, 1999.
Most of this increase is attributed to a $5,659,000 or 10.86% increase
in loans. Cash and cash equivalents, which consists of interest-bearing
and non-interest bearing deposits and cash on hand, increased by
$2,124,000 or 25.04%.
Earning assets, which include loans, investment securities, federal
funds sold, and deposits in other banks were 94.04% of total assets at
June 30, 1999.
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 $1,033,000 at June 30, 1999, which represents a 1.76%
of total loans outstanding on that date. Provisions to the allowance
for loan losses, which were charged to net income as of June 30, 1999,
totaled $47,000. 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. At June 30, 1999 the following ratios were:
Charge-Off Loans to Total Loans .04%
Past Due Loans to Total Loans 1.13%
Classified Loans to Total Loans .75%
With interest earned on investments securities being one of the primary
source of income, investment securities increased by $1,157,000 or 3.34%
at June 30, 1999. For the period ending June 30, 1999, the following
chart shows what our portfolio consists of:
US Treasury Securities 2.22%
US Government Agencies 35.05%
Mortgage-Backed Securities 40.62%
Municipal 22.11%
As of June 30, 1999, securities classified as "held-to-maturity" had an
amortized cost/recorded value of $8,924,000 and a fair value of
$8,910,000; securities classified as "available-for-sale" had a fair
value of $27,165,000 and an amortized cost of $26,871,000.
With deposits being the bank's primary source of funds, both time and
demand, total deposits increased $8,873,000 or 9.45% from $93,931,000 at
December 31, 1998 to $102,804,000 at June 30, 1999. Money-Market
accounts increased by $3,340,000 or 22.41%, other time deposits
increased $4,531,000 or 10.02% and time deposits $100,000 or more also
showed a slight increase of $580,000 or 2.56%. At June 30, 1999,
$49,754,000 or 48.40%, of the Company's total deposits were other time
deposits.
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. As of June 30, 1999, the
Bank's liquidity ratio was 41.23%.
RESULTS OF OPERATIONS
The Company reported net income of $560,000 or $4.87 per average share
for the period ended June 30, 1999. Net return on assets was 1.00% and
net return on equity was 9.43%.
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,
1999, the Bank's net interest margin was 3.11%, a slight decrease from
June 30, 1998 which at that time the net interest margin was 3.21%.
Management is aware of the decrease and continues to monitor growth,
income and expenses.
Noninterest income, which consists primarily of service charges and fees
on financial services increased $38,000 or 15.14% in comparing June 30,
1999 to June 30, 1998. With the 3% growth in demand deposits, more
monthly service charges are generated and effective January 1, 1999, the
Bank increased its NSF fees from $15.00 per item to $18.00 per item. In
comparing June 30, 1999 to June 30, 1998 on NSF charges, June 30, 1999
shows a $20,000 increase.
Noninterest expense includes salaries and employee benefits, occupancy
and equipment expense, and other expense. Noninterest expense amounted
to $1,201,000 at June 30, 1999, a $153,000 or 14.60% increase from June
30, 1998. Salaries and employee benefits being the main expense showed
an increase of $133,000 or 21.32%.
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, 1999, the Bank's ratios
were as follows:
Capital to Assets 9.61%
Risk Based Capital 18.57%
Tier 1 Capital 17.32%
Leverage Ratio 9.57%
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.
YEAR 2000
In late 1997, Citizens Bank decided to convert its data processing
operations from an outsourced service bureau operations to an in-house
operation. When this decision was made, all hardware and software data
processing acquisitions were made with the awareness and objective of
satisfying the Year 2000 compliance and conformity issues. After
successful conversion of data processing operations from a service
bureau to an in-house operation, Citizens Bank's Board of Directors
adopted an Electric Data Processing Policy which included a Year 2000
Program policy.
A Y2K Committee, chaired by a board-appointed Y2K Coordinator, was
formed in early 1998 to address Year 2000 issues. The Committee's
objective is to monitor and report the Bank's progress in achieving Year
2000 compliance for all mission critical applications. In addition to
monitoring, testing and identifying appropriate changes to in house
operations, the Y2K committee continues to monitor Year 2000 status of
the Bank's customers, service providers, and suppliers.
As of June 30, 1999, Citizens Bank had substantially completed
remediating and obtaining Y2K compliance certifications on its mission
critical systems. Testing and validations of mission critical systems
are scheduled for completion in early 1999 and monitoring of Year 2000
compliance will be accomplished throughout 1999. Written
acknowledgments have been received from all mission critical hardware
and software providers, utility and telephone service providers, and
date processing service providers assuring timely remediation, testing
and validation for Year 2000 compliance.
The Bank expects to continue incurring expense charges related to Year
2000 compliance through the remainder of 1999 ; the majority of costs
associated with Year 2000 compliance, however, is the responsibility of
the Bank's data processing vendors and service providers. Estimated
expenses charges to be borne directly by the Bank will total $3,000 per
month through 1999. The Year 2000 expenses will be included in
noninteret expense categories and do not include equipment and software
scheduled replacement in the ordinary course of business.
The Bank's estimate of Year 2000 investment costs and the estimated time
periods set forth above by which the Bank expects to substantially
complete mission critical system programming and testing and
implementation are based upon management's best current estimates, which
were delivered utilizing numerous assumptions about future events.
There can be no guarantee that these estimates will be achieved, and
actual results could differ from those anticipated. Because of the
critical nature of the Year 2000 issues to our business and to all of
the financial services industry, if necessary modifications are not
made, the Bank's operations could be materially impacted. Citizens Bank
and its data processing vendors remain scheduled to ensure achievement
of Year 2000 compliance, therefore, an adverse impact on the Bank's
operations is not expected.
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 8, 1999
accompanied by a proxy statement, the annual meeting of
shareholders was held April 8, 1999. 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, 1999.
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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