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 ended March 31, 1995
CITIZENS BANCSHARES CORPORATION
(Name of small business issuer in its charter)
Georgia
(State or other jurisdiction of incorporation or organization)
175 Houston Street, N.E., Atlanta, Georgia
(Address of principal executive office)
Registrant's telephone number, including area code:
(404)659-5959
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
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Part I. Financial Information:
Citizens Bancshares Corporation and Subsidiary
Consolidated Balance Sheets
March 31, 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 $ 9,356 11,675
Federal funds sold 17,400 4,400
Investment securities:
Held to maturity 36,244 36,535
Available for sale 7,728 7,132
Total investments 43,972 43,667
Loans, net of unearned income 69,024 69,261
Less allowance for possible loan losses 1,223 1,047
Loans, net 67,801 68,214
Premises and equipment, net 2,368 2,425
Real estate acquired through foreclosure 579 823
Other assets 2,028 2,002
Total assets $ 143,504 133,206
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing $ 48,238 39,268
Interest-bearing 84,081 82,877
Total deposits 132,319 122,145
Treasury, tax and loan account 252 425
Long-term debt and obligations under capital lease 1,198 1,293
Other liabilities 1,134 1,057
Total liabilities 134,903 124,920
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 - securities 5 (77)
Retained earnings 5,796 5,563
Total shareholders' equity 8,601 8,286
Total liabilities and shareholders' equity 143,504 133,206
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<TABLE>
Citizens Bancshares Corporation and Subsidiary
Consolidated Statements of Earnings
(unaudited-amounts in thousands, except per share amounts)
<CAPTION>
Three Months
Ended March 31,
1995 1994
INTEREST INCOME:
<S> <C> <C> <C>
Loans $ 1,541 1,114
Investment securities 710 694
Federal funds sold 127 40
Total interest income 2,378 1,848
INTEREST EXPENSE:
Deposits 707 521
Treasury tax, and loan account 8 1
Long-term debt and obligations under capital leas 24 22
Total interest expense 739 544
Net interest income 1,639 1,304
Provision for possible loan losses 125 191
Net interest income after provision for
possible loan losses 1,514 1,113
NONINTEREST INCOME:
Service charges on deposit accounts 884 981
Gain on sale of real estate 37 111
Other operating income 66 118
Total noninterest income 987 1,210
NONINTEREST EXPENSE:
Salaries and employee benefits 1,167 1,058
Net occupancy and equipment 421 410
Other operating expenses 646 640
Total other expense 2,234 2,108
Earnings(loss) before income taxes 267 215
Income tax expense 33 42
Net earnings(loss) $ 234 173
Net earnings per common share $ 0.18 0.13
Average outstanding shares 1,330 1,330
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Citizens Bancshares Corporation and Subsidiary
Consolidated Statements of Cash Flows
Three months ended March 31, 1995 and 1994
(unaudited-amounts in thousands, except per share amounts)
1995 1994
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net earnings(loss) $ 234 173
Adjustments to reconcile net earnings(loss)
to net cash provided by operating activities:
Provision for possible loan losses 125 191
Depreciation and amortization 137 108
Amortization and (accretion), net (33) 20
Amortization of deferred loan fees 41 (30)
(Gain) on sale of real estate (37) (111)
(Increase) decrease in other assets (69) 173
Increase in accrued expenses and other liabi 77 224
Net cash provided by operating activities 475 748
Cash flows from investing activities:
Proceeds from maturities of investment securitie 2,082 9,056
Proceeds from maturities of investment securitie 550 -
Purchases of investment securities held to matur (1,761) (7,480)
Purchases of investment securities available for (1,019) -
Net decrease (increase) in loans 233 (3,931)
Purchases of premises and equipment (81) (8)
Proceeds from sale of real acquired through fore 297 735
Net cash provided (used) in investing acti 301 (1,628)
Cash flows from financing activities:
Net increase in demand deposits and savings acco 12,092 4,675
Net (decrease) in time deposits (1,918) (1,221)
Principal payment on long-term debt and
obligations under capital lease (96) (89)
Net (decrease)increase in treasury, tax and loan (173) 4
Net cash provided by financing activities 9,905 3,369
Net increase in cash and cash equivalents 10,681 2,489
Cash and cash equivalents at beginning of period 16,075 13,421
Cash and cash equivalents at end of period 26,756 15,910
Supplemental disclosures of cash paid during the year for:
Interest $ 682 491
Income taxes $ 109 -
Supplemental disclosures of noncash transactions:
Real estate acquired through foreclosure $ 15 441
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CITIZENS BANCSHARES CORPORATION AND SUBSIDIARY
Notes to the Consolidated Financial Statements
March 31, 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 interim
statements 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 March 31, 1995
and for the three months ended March 31,1995 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 three 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 March 31, 1995 and the changes in financial condition and
results of operations for the three month periods ended March 31,
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 increased $335,000 or 26% in
1995 as compared to 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 5.36%
compared to 4.90% 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
$66,000 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 March 31, 1995, the
allowance for possible loan losses was approximately 1.77% 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 $223,000 or 18.4% during
the first quarter of 1995 over the same period in 1994. Decrease
in noninterest income is due to a decline in service charges on
deposits of $97,000 or 9.9% and to a decline in other operating
income of $52,000 or 44%. 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 $126,000 or 6% during
the first quarter of 1995, as compared to a decrease of $87,000 or
3.96% during the first quarter of 1994. The increase is
attributable to salaries and employee benefits of $109,000, and
other operating expenses of $66,000. 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.
Net earnings:
The Company had net earnings of approximately $234,000 or $0.18 per
share during the first quarter 1995 as compared to $173,000 or
$0.13 per share in 1994. The $61,000 or 35% increase in net
earnings as compared to 1994 reflects improved net interest income
of $335,000 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 March 31,1995,
approximately 15.9% of the investment portfolio matures within the
next year and approximately 84.1% after one year but before five
years. In addition, federal funds sold averaged approximately $9
million during the three month period ended March 31, 1995. The
Company is a member of the Federal Reserve System and maintains
relationships 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 7.34% at
March 31, 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 includes
provisions on asset quality, capital adequacy and management
succession; requires the Bank to improve its information systems
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. On March
31,1995, the Bank received a large demand deposit of $8 million
which temporarily increased its total assets. Notwithstanding this
large deposit, the Bank would have been in compliance with all
capital requirements. As of April 30, 1995, the Bank's total
assets have declined $8 million due to the withdrawal of the large
deposit.
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: May 11, 1995 By:/s/ William L. Gibbs
William L. Gibbs
President and Chief Executive Officer
Date: May 11, 1995 By: /s/ Ann I. Scott
Ann I. Scott
Senior Vice President and Controller
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 9,356
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 17,400
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 7,728
<INVESTMENTS-CARRYING> 36,244
<INVESTMENTS-MARKET> 0
<LOANS> 69,024
<ALLOWANCE> 1,223
<TOTAL-ASSETS> 143,504
<DEPOSITS> 132,319
<SHORT-TERM> 252
<LIABILITIES-OTHER> 1,134
<LONG-TERM> 1,198
<COMMON> 8,601
0
0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 143,504
<INTEREST-LOAN> 1,541
<INTEREST-INVEST> 710
<INTEREST-OTHER> 127
<INTEREST-TOTAL> 2,378
<INTEREST-DEPOSIT> 707
<INTEREST-EXPENSE> 32
<INTEREST-INCOME-NET> 1,638
<LOAN-LOSSES> 125
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,337
<INCOME-PRETAX> 267
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 234
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
<YIELD-ACTUAL> 5.36
<LOANS-NON> 1,162
<LOANS-PAST> 25
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,047
<CHARGE-OFFS> 25
<RECOVERIES> 103
<ALLOWANCE-CLOSE> 1,223
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
