SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) TO THE SECURITIES
EXCHANGE ACT OF 1934
TRANSITION REPORT UNDER SECTION 13 OR 15 (d) TO THE EXCHANGE
ACT
For the quarterly period end June 30, 1995
CITIZENS BANCSHARES CORPORATION
(Name of small business issuer in its charter)
Georgia
(State or other jurisdiction of incorporation or organization)
175 John Wesley Dobbs Avenue, N.E., Atlanta, Georgia
(Address of principal executive office)
Registrant's telephone number, including area code:
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 90 days. Yes _X__ No ___.
State the number of shares outstanding if each of the issuer's
practicable date: 1,329,684 shares of Common Stock, $1.00 par
value, outstanding on August 1, 1995.
<TABLE>
Part I. Financial Information:
Citizens Bancshares Corporation and Subsidiary
Consolidated Balance Sheets
June 30, 1995 and December 31, 1994
(unaudited-amounts in thousands, except per share amounts)
<CAPTION>
ASSETS
1995 1994
<S> <C> <C> <C>
Cash and due from banks $ 9,686 11,675
Federal funds sold 9,000 4,400
Investment securities:
Held to maturity 33,946 36,535
Available for sale 9,832 7,132
Total investments 43,778 43,667
Loans, net of unearned income 70,112 69,261
Less allowance for possible loan losses 1,467 1,047
Loans, net 68,645 68,214
Premises and equipment, net 2,247 2,425
Real estate acquired through foreclosure 274 823
Other assets 1,893 2,002
Total assets $ 135,523 133,206
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing $ 40,989 39,268
Interest-bearing 82,829 82,877
Total deposits 123,818 122,145
Treasury, tax and loan account 436 425
Long-term debt and obligations under capital leas 1,101 1,293
Other liabilities 1,308 1,057
Total liabilities 126,663 124,920
Shareholders' equity:
Common stock-$1 par value. Authorized
5,000,000 shares; issued and outstanding
1,329,684 shares 1,330 1,330
Additional Paid-In Capital 1,470 1,470
Unrealized gain(loss) - securities 71 (77)
Retained earnings 5,989 5,563
Total shareholders' equity 8,860 8,286
Total liabilities and shareholders' e $ 135,523 133,206
</TABLE>
<TABLE>
Citizens Bancshares Corporation and Subsidiary
Consolidated Statements of Earnings
(unaudited-amounts in thousands, except per share amounts)
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30,
1995 1994 1995 1994
INTEREST INCOME:
<S> <C> <C> <C> <C>
Loans, including fees 1,625 1,225 3,166 2,339
Investment securities
Taxable 693 717 1,364 1,349
Tax-exempt 26 57 65 119
Federal funds sold 148 34 275 74
Total interest income 2,492 2,033 4,870 3,881
INTEREST EXPENSE:
Deposits 751 557 1,458 1,078
Treasury tax, and loan account 2 1 10 2
Long-term debt and obligations
under capital lease 22 24 46 46
Total interest expense 775 582 1,514 1,126
Net interest income 1,717 1,451 3,356 2,755
Provision for possible
loan losses 125 182 250 373
Net interest income after provision
for possible loan losses 1,592 1,269 3,106 2,382
NONINTEREST INCOME:
Service charges on deposit accounts 947 1,098 1,831 2,079
Gain on sale of real estate (32) 26 5 137
Other operating income 96 79 162 197
Total noninterest income 1,011 1,203 1,998 2,413
NONINTEREST EXPENSE:
Salaries and employee benefits 1,209 1,146 2,376 2,204
Net occupancy and equipment 397 446 81 846
Other operating expenses 762 661 1,408 1,311
Total other expense 2,368 2,253 4,602 4,361
Earnings before income taxes 235 219 502 434
Income tax expense 43 45 76 87
Net earnings 192 174 426 347
Net earnings per common share $ 0.14 0.13 0.32 0.26
Average outstanding shares 1,330 1,330 1,330 1,330
</TABLE>
<TABLE>
Citizens Bancshares Corporation and Subsidiary
Consolidated Statements of Cash Flows
Six months ended June 30, 1995 and 1994
(unaudited-amounts in thousands, except per share amounts)
<CAPTION>
1995 1994
Cash flows from operating activities:
<S> <C> <C> <C>
Net earnings $ 426 347
Adjustments to reconcile net earnings(loss)
to net cash provided by operating activities:
Provision for possible loan losses 250 373
Depreciation and amortization 291 222
Amortization and (accretion), net (57) (48)
Amortization of deferred loan fees (66) (22)
(Gain) on sale of real estate (5) (137)
Decrease(increase) in other assets 19 (1,046)
Increase in accrued expenses and other liabi 251 512
Net cash provided by operating activities 1,109 201
Cash flows from investing activities:
Proceeds from maturities of investment securitie 5,401 15,714
Proceeds from maturities of investment securitie 1,550 3,000
Purchases of investment securities held to matur (2,761) (20,382)
Purchases of investment securities available for (4,019) (500)
Net increase in loans (630) (6,692)
Purchases of premises and equipment (99) (205)
Proceeds from sale of real acquired through fore 569 848
Net cash used in investing activities 11 (8,217)
Cash flows from financing activities:
Net increase in demand deposits and savings acco 5,707 4,745
Net (decrease) increase in time deposits (4,035) 1,595
Principal payment on long-term debt and
obligations under capital lease (193) (180)
Net increase in treasury, tax and loan account 12 944
Proceeds from long-term debt - 900
Net cash provided by financing activities 1,491 8,004
Net increase(decrease) in cash and cash eq 2,611 (12)
Cash and cash equivalents at beginning of period 16,075 13,421
Cash and cash equivalents at end of period 18,686 13,409
Supplemental disclosures of cash paid during the year for:
Interest $ 1,432 1,021
Income taxes $ 159 65
Supplemental disclosures of noncash transactions:
Real estate acquired through foreclosure $ 15 441
</TABLE>
CITIZENS BANCSHARES CORPORATION AND SUBSIDIARY
Notes to the Consolidated Financial Statements
June 30, 1995 and 1994
(unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited statements have been prepared pursuant to the
rules and regulations for reporting on Form 10 - QSB. Accordingly,
certain disclosures required by generally accepted accounting principles
are not included herein. These interimstatements should be read in
conjunction with the financial statements and notes thereto included in the
company's latest Annual Report on Form 10 - KSB.
The consolidated financial statements of Citizens Bancshares Corporation
and Subsidiary( the "Company" ) as of June 30, 1995 and for the six
months ended June 30,1995 and 1994 are unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of the
financial position and results of operations and cash flows for the six
months period have been included. All adjustments are of a normal
recurring nature.
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Citizens Trust Bank ( the "Bank" ). The
Bank has a wholly owned subsidiary, Atlanta Mortgage Brokerage and
Servicing Co., whose accounts are also included. All significant
intercompany accounts and transactions have been eliminated in consolidation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
INTRODUCTION
Citizens Bancshares Corporation ( the "Company" ), a one-bank holding company,
provides a full range of commercial banking services to individual and corporate
customers in metropolitan Atlanta through its wholly owned subsidiary, Citizens
Trust Bank ( the "Bank" ). The Bank operates under a state charter and
serves its customers through eight full service branches.
The following discussion is of the Company's financial condition as of June 30,
1995 and the changes in financial condition and results of operations for the
six month periods ended June 30, 1995 and 1994.
RESULTS OF OPERATIONS
Net Interest Income:
Net interest income represents the excess of income received on interest-earning
assets and interest paid on interest-bearing liabilities. Net interest income
for the second quarter 1995 increased $266,000 or 18% for the three month period
and increased $601,000 or 22% for the six month period ended June 30, 1995,
over the three and six month periods of 1994. The combination of higher
levels of market interest rates and a $1.6 million increase in the excess of
average earning assets over average interest-bearing liabilities
increased the Company's net interest margin to 5.51% compared to 5.07% in 1994.
Provision for possible loan losses:
The provision for possible loan losses is a charge to earnings that management
considers necessary to maintain an adequate allowance for possible loan losses.
The provision for loan losses decreased $123,000 in 1995 as compared to the
provision in 1994. Higher levels of recoveries from loans previously charged
off as compared to prior years contributed to the decrease in the provision
for possible loan losses. The provision is determined based on growth of
the loan portfolio, the amount of net loan losses incurred, and management's
estimation of potential future loan losses based on an evaluation of
loan portfolio risks, adequacy of underlying collateral, and economic
conditions. As of June 30, 1995, the allowance for possible loan losses was
approximately 2.09% of loans, net of unearned income which is comparable
to prior year. Management feels that this level of allowance is adequate.
Noninterest income:
Noninterest income decreased approximately $192,000 or 16% for the three month
period ended June 30, 1995 and $415,000 or 17% for the six month period as
compared to the same periods in 1994. The decrease in noninterest income
is due to a decline in service charges on deposits of 248,000 or 12% and to
a decline in other operating income of $35,000 or 18%. In 1994, the Company
recognized a gain on sale of other real estate owned property of $111,000.
Total proceeds from the sale were $726,000 with a book value of $615,000.
Management continues to explore ways to maximize noninterest income through
fee income.
Noninterest expense:
Noninterest expense increased approximately $115,000 or 5% during the three
month period and $241,000 or 6% during the six month period ended June 30,
1995, as compared to a decrease of $65,000 or 2.8% and $149,000 or 3.3% during
the same periods of 1994. The increase is attributable to salaries and
employee benefits of $172,000, and other operating expenses of $97,000. The
increase in salaries and employee benefit costs is due to normal salary
adjustments coupled with high turnover costs. Advertising and other
operating losses contributed to the increase in other operating expenses.
The decrease in noninterest expense in 1994 from 1993 was due to a reduction
in other operating expenses, namely, professional services and operating
losses.
Net earnings:
The Company had net earnings of approximately $426,000 or $0.32 per share
during the second quarter ended 1995 as compared to $347,000 or $0.26
per share in 1994. The $79,000 or 23% increase in net earnings as compared
to 1994 reflects improved net interest income of $601,000 which offsets the
decrease in noninterest income and the increase noninterest expense.
LIQUIDITY
Liquidity is a bank's ability to meet all deposit withdrawals immediately, while
also,providing for the credit needs of customers. In the normal course of
business,the Company's cash flow is generated from interest and fees on
loans and other interest-earning assets, repayments of loans, and maturities
of investment securities. The Company continues to meet liquidity needs
primarily through the sale of federal funds and managing the maturities
of investment securities. At June 30,1995, approximately 11.4% of the
investment portfolio matures within the next year and approximately 83.6% after
one year but before five years. In addition, federal funds sold averaged
approximately $9 million during the six month period ended June 30, 1995.
The Company is a member of the Federal Reserve System and maintains relation-
ships with several correspondent banks and, thus, could obtain funds on short
notice. Company management closely monitors and maintains appropriate levels of
interest-earning assets and interest-bearing liabilities, so that maturities
of assets are such that adequate funds are provided to meet customer
withdrawals and loan demand.
CAPITAL RESOURCES
The Company has maintained an adequate level of primary capital as measured
by its shareholders' equity and the allowance for possible loan losses to
adjusted total assets of approximately 8.04% at June 30, 1995 and 7.66% at
December 31, 1994.
The Board of Directors of the Bank entered into a Board Resolution
(the "Resolution") dated March 15, 1995 with the Georgia Department of
Banking and Finance and the Federal Reserve Bank of Atlanta ("Regulatory
Authorities") to take certain corrective actions, which if not taken could
result in further regulatory sanctions. The Board Resolution replaces the
Memorandum of Understanding for which the Bank previously operated under.
The Resolution include provisions on asset quality, capital adequacy
and management succession; requires the Bank to improve its information system
controls; specifies that the Bank shall maintain at least a 7.53% primary
capital to adjusted total assets ratio during the term of the Agreement; and
limits the payment of dividends without the prior written consent of the
Regulatory Authorities.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not aware of any material pending legal proceedings to which
the Company or its subsidiary is a party or to which any of their property is
subject.
ITEM 2. CHANGES IN SECURITIES
The Company is restricted as to dividend payments to its shareholders by certain
covenants in its long-term debt agreement and the Bank is restricted as to
dividend payments to the Company by regulatory requirements and agreements.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CITIZENS BANCSHARES CORPORATION
Date: August 8, 1995 By: /s/ William L. Gibbs
William L. Gibbs
President and Chief Executive Officer
Date: August 8, 1995 By: /s/ Ann I. Scott
Ann I. Scott
Senior Vice President and Controller
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 9,686
<INT-BEARING-DEPOSITS> 82,829
<FED-FUNDS-SOLD> 9,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 9,832
<INVESTMENTS-CARRYING> 33,946
<INVESTMENTS-MARKET> 0
<LOANS> 70,112
<ALLOWANCE> 1,467
<TOTAL-ASSETS> 135,523
<DEPOSITS> 123,818
<SHORT-TERM> 436
<LIABILITIES-OTHER> 1,308
<LONG-TERM> 1,101
<COMMON> 1,330
0
0
<OTHER-SE> 7,530
<TOTAL-LIABILITIES-AND-EQUITY> 135,523
<INTEREST-LOAN> 3,166
<INTEREST-INVEST> 1,429
<INTEREST-OTHER> 275
<INTEREST-TOTAL> 4,870
<INTEREST-DEPOSIT> 1,458
<INTEREST-EXPENSE> 1,514
<INTEREST-INCOME-NET> 3,356
<LOAN-LOSSES> 250
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,602
<INCOME-PRETAX> 502
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 426
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
<YIELD-ACTUAL> 5.51
<LOANS-NON> 1,333
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,047
<CHARGE-OFFS> 96
<RECOVERIES> 266
<ALLOWANCE-CLOSE> 1,467
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
