THIS CONFORMING PAPER FORMAT IS BEING SUBMITTED PURSUANT TO RULE
901(d) OF REGULATION S-T
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
For the quarterly period ended June 30, 1997
( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (d) TO THE EXCHANGE ACT
For the transition period from ____________ to _____________
Commission File No: 0 - 14535
CITIZENS BANCSHARES CORPORATION
(Name of small business issuer in its charter)
Georgia____________________________________________________ 58 - 1631302
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
175 John Wesley Dobbs Avenue, N.E., Atlanta, Georgia 30303
(Address of principal executive office) (Zip Code)
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
classes of common equity as of the latest practicable date:
1,329,684 shares of Common Stock, $1.00 par value, outstanding on
August 1, 1997.
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Part I. Financial Information:
Citizens Bancshares Corporation and Subsidiary
Consolidated Balance Sheets
June 30, 1997 and December 31, 1996
(unaudited-amounts in thousands, except per share amounts)
ASSETS
1997 1996
<S> <C> <C> <C>
Cash and due from banks $ 8,905 8,968
Federal funds sold 2,200 10,200
Investment securities:
Held to maturity 20,392 26,072
Available for sale 8,822 13,269
Total investments 29,214 39,341
Loans, net of unearned income 80,392 82,408
Less allowance for loan losses 1,290 1,441
Loans, net 79,102 80,967
Premises and equipment, net 3,364 2,891
Real estate acquired through foreclosure 803 63
Other assets 4,789 2,448
Total assets $ 128,377 144,878
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing $ 35,454 46,328
Interest-bearing 80,891 86,560
Total deposits 116,345 132,888
Treasury, tax and loan account 132 116
Federal Funds Purchased 0 -
Long-term debt and obligations under capital le 675 765
Other liabilities 1,222 1,147
Total liabilities 118,374 134,916
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 (loss)gain on available for sale sec (26) (31)
Retained earnings 7,229 7,193
Total shareholders' equity 10,003 9,962
Total liabilities and sharehol $ 128,377 144,878
</TABLE>
<TABLE>
<CAPTION>
Citizens Bancshares Corporation and Subsidiary
Consolidated Statements of Earnings
(unaudited-amounts in thousands, except per share amounts)
Three Mon Six Months
Ended June Ended June 30,
1997 1996 1997 1996
INTEREST INCOME:
<S> <C> <S> <C> <C> <C> <C> <C>
Loans, including fees $ 1,838 1,658 3,603 3,246
Investment securities
Taxable 588 751 1,241 1,407
Tax-exempt 28 19 46 41
Federal funds sold 24 117 106 250
Total interest income 2,478 2,545 4,996 4,944
INTEREST EXPENSE:
Deposits 782 700 1,605 1,403
Treasury tax, and loan account 2 1 3 3
Long-term debt 14 16 30 29
Total interest expense 798 717 1,638 1,435
Net interest income 1,680 1,828 3,358 3,509
Provision for loan losses - - - -
Net interest income after provision for
possible loan losses 1,680 1,828 3,358 3,509
NONINTEREST INCOME:
Service charges on deposit accounts 809 938 1,621 1,869
Other operating income 116 57 250 186
Total noninterest income 925 995 1,871 2,055
NONINTEREST EXPENSE:
Salaries and employee benefits 1,388 1,356 2,835 2,594
Net occupancy and equipment 419 359 828 857
Other operating expenses 839 796 1,517 1,462
Total other expense 2,646 2,511 5,180 4,913
(Loss) earnings before income taxes (41) 312 49 651
Income tax (benefit) expense (23) 70 13 142
Net (loss) earnings $ (18) 242 36 509
Net (loss) earnings per common share $ (0.01) 0.18 0.03 0.38
Average outstanding shares 1,330 1,330 1,330 1,330
</TABLE>
<TABLE>
<CAPTION>
Citizens Bancshares Corporation and Subsidiary
Consolidated Statements of Cash Flows
Six months ended June 30, 1997 and 1996
(unaudited-amounts in thousands, except per share amounts)
1997 1996
Cash flows from operating activities:
<S> <C> <C> <C>
Net earnings $ 36 509
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 375 305
Amortization (accretion), net 4 17
Amortization (accretion) of deferred loan fees 17 15
Gain on sale of securities (10) -
Increase in other assets (2,370) (158)
Increase (decrease) in accrued expenses and other lia 76 (346)
Net cash (used) provided by operating activities (1,872) 342
Cash flows from investing activities:
Proceeds from maturities of investment
securities held to maturity 5,688 6,414
Proceeds from maturities of investment
securities available for sale 10,969 1,000
Purchases of investment securities held to maturity - (6,500)
Purchases of investment securities available for sale (6,517) (6,370)
Net (decrease) increase in loans 1,039 (3,771)
Purchases of premises and equipment ( 848) (841)
Proceeds from sale of real estate acquired through forecl 95 121
Net cash provided (used) by investing activities 10,426 9,947)
Cash flows from financing activities:
Net (decrease) in demand deposits (10,874) 2,472
Net decrease in time deposits (5,669) (1,078)
Net increase in federal funds purchased - 1,600
Principal payment on long-term debt (90) (45)
Net increase in treasury, tax and loan account 16 394
Net cash (used) provided by financing activities (16,617) 3,343
Net decrease in cash and cash equivalents (8,063) (6,262)
Cash and cash equivalents at beginning of period 19,168 14,015
Cash and cash equivalents at end of period $ 11,105 7,753
Supplemental disclosures of cash paid during the period for:
Interest $ 1,667 1,412
Income taxes $ - 294
Supplemental disclosures of noncash transactions:
Real estate acquired through foreclosure $ 836 92
</TABLE>
CITIZENS BANCSHARES CORPORATION AND SUBSIDIARY
Notes to the Consolidated Financial Statements
June 30, 1997 and 1996
(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 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.
The consolidated financial statements of Citizens Bancshares
Corporation and Subsidiary ( the "Company" ) as of June 30, 1997
and for the three and six month periods ended June 30, 1997
and 1996 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
month period have been included. All adjustments are of a normal
recurring nature.
2. ACCOUNTING AND REGULATORY MATTERS
During 1997, the Financial Accounting Standards Board has issued
Statement of Financial Accounting Standards No. 128, Earnings
Per Share (SFAS 128). SFAS supersedes APB Opinion 15. SFAS 128
simplifies current standards by eliminating the presentation of
primary EPS and requiring the presentation of basic EPS, which
includes no potential common shares and thus no dilution. The
Statement also requires entities with complex capital structures
to present basic and diluted EPS on the face of the income
statement and also eliminates the modified treasury stock method
of computing potential common shares. The Statement is effective
for financial statements issued for periods ending after December
15, 1997, including interim periods. Early application is not
permitted. On adoption, restatement of all prior-period EPS data
presented is required. Based upon the current capital structure
of the Company, this Statement should have no effect on the
present EPS calculation.
SERVICING RIGHTS
The Financial Accounting Standards Board(FASB) has issued SFAS
No. 125, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities which requires the
Company to make certain disclosures regarding its servicing
assets and liabilities, and may also affect the classification of
certain servicing assets and liabilities.
SFAS 125 is effective for transfers and servicing of financial
a s sets and extinguishments of liabilities occurring after
December 31, 1996.
On January 1, 1997, the Company adopted the provisions of SFAS
No. 125 which had no material impact on the consolidated
financial statements.
IMPAIRED LOANS
Management considers a loan to be impaired when, based on current
information and events, it is probable that all amounts due
according to the contractual terms of the loan will not be
collected. Impaired loans are measured based on the present
value of expected future cash flows, discounted at the loan s
effective interest rate, or at the loans observable market
price, or the fair value of the collateral if the loan is
collateral dependent.
Loans are generally placed on nonaccrual status when the full and
timely collection of principal or interest becomes uncertain or
the loan becomes contractually in default for 90 days or more as
to either principal or interest unless the loan is well
collateralized and in the process of collection. When a loan is
p l a ced on nonaccrual status, current period accrued and
uncollected interest is charged to interest income on loans
unless management feels the accrued interest is recoverable
through the liquidation of collateral. Interest income, if any,
on nonaccrual loans is generally recognized on the cash basis.
At June 30, 1997, the recorded investment in loans that are
considered to be impaired was approximately $1,292,000, a
decrease of $667,000 from December 31, 1996 (of which
approximately $1,093,000 and $1,955,000, respectively, were on a
nonaccrual basis). The related allowance for loan losses for
each of these loans was approximately $164,000 and $393,000,
respectively. For the three month and six month periods ended
June 30, 1997, the Company recognized approximately $5,000 and
$19,000 interest income on these impaired loans on an accrual
basis, respectively.
NONPERFORMING ASSETS
Nonperforming assets include nonperforming loans, real estate
a c q uired through foreclosure and repossessed assets.
Nonperforming loans consist of loans which are past due with
respect to principal or interest more than 90 days or have been
placed on nonaccrual status and restructured loans.
Accrual of interest on loans is discontinued when reasonable
doubt exists as to the full, timely collection of interest or
principal or they become contractually in default for 90 days or
more as to either interest or principal unless the loan is well
secured and in process of collection. When a loan is placed on
nonaccrual status, previously accrued and uncollected interest is
charged against interest income on loans unless management feels
the accrued interest is recoverable through the liquidation of
the collateral.
With the exception of the loans included within nonperforming
assets in the table below, management is not aware of any loans
classified for regulatory purposes as loss, doubtful,
substandard, or special mention that have not been disclosed
which(1) represent or result from trends or uncertainties which
management reasonably expects will materially impact future
operating results, liquidity, or capital resources, or (2)
represent any information on material credits which management
is aware that causes management to have serious doubts as to the
abilities of such borrower to comply with the loan repayment
terms.
Nonperforming loans decreased approximately $223,000 to
$1,142,000 at June 30, 1997, from $1,365,000 at December 31,
1996. Real estate acquired through foreclosure increased
approximately $740,000 or 117% from $63,000 at December 31, 1996
to $803,000 at June 30, 1997. Nonperforming assets represented
2.40% of loans, net of unearned income and real estate acquired
through foreclosure at June 30, 1997 as compared to 1.73% at
December 31, 1996.
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The decrease in nonperforming assets relative to loans, net of
unearned income and real estate acquired through foreclosure,
reflects management s continuous effort to reduce nonperforming
assets. The table below presents a summary of the Company s
nonperforming assets at June 30, 1997 and December 31, 1996.
1997 1996
(Amounts in thousands, except
financial ratios)
Nonperforming assets:
Nonperforming loans:
<S> <C> <C> <C>
Nonaccrual loans $ 1,093 1,286
Past-due loans 49 79
Nonperforming loans 1,142 1,365
Real estate acquired through foreclosure 803 63
Total nonperforming assets $ 1,945 1,428
Ratios:
Nonperforming loans to loans, net of
unearned income 1.42% 1.66%
Nonperforming assets to loans(net of unearned
income) and real estate acquired through
foreclosure 2.40% 1.73%
Nonperforming assets to total assets 1 .52% .99%
Allowance for loan losses to
nonperforming loans 112.96% 105.57%
Allowance for loan losses to
nonperforming assets 66.32% 100.91%
</TABLE>
Interest income on nonaccrual loan which would have been reported
for the three and six months ended June 30, 1997 totaled
approximately $24,000 and $91,000. The Company recorded
approximately $2,000 and $43,000 interest income on these loans
for the three and six months period ended June 30, 1997.
ALLOWANCE FOR LOAN LOSSES
The following table summarizes loans, changes in the allowance
for loans losses arising from loans charged off, recoveries on
loans previously charged off by loan category, and additions to
the allowance which have been charged to operating expense as of
and for the period ended June 30, 1997 and December 31, 1996.
<TABLE>
1997 1996
<S> <C> <C>
Loans, net of unearned income $ 80,392 82,408
Average loans, net of unearned
income and the allowance for
loan losses $ 79,844 73,576
Allowance for loans losses at
the beginning of year $ 1,441 1,566
Loans charged off:
Commercial, financial,
and agricultural 3 111
Real estate- mortgage 148 237
Installment loans to
individuals 164 76
Total loans charged off 315 424
Recoveries of loans previously
charged off:
Commercial, financial,
and agricultural 17 38
Real estate- mortgage 77 104
Installment loans to
individuals 70 92
Total loans recovered 164 234
Net loans charged off 151 190
Additions to allowance for loan
losses charged to operating expense - 65
Allowance for loan losses at
period end $ 1,290 1,441
Ratio of net loans charged off
to average loans, net of
unearned income and the allowance
for loan losses .19% .26
Allowance for loan losses to loans,
net of unearned income 1.60% 1.75
</TABLE>
Credit reviews of the loan portfolio designed to identify
potential charges to the allowance for loan losses, as well as
to determine the adequacy of the allowance for loans losses, are
made on a continuous basis throughout the year. These reviews
are conducted by management, lending officers, and independent
third parties. These reviews are also reviewed by the Board of
Directors, who consider such factors as the financial strength of
borrowers, the value of applicable collateral, past loan loss
e x p erience, anticipated loan losses, growth in the loan
portfolio, and other factors including prevailing and anticipated
economic conditions. Management believes the allowance for loan
losses is adequate at June 30, 1997.
A substantial portion of the Company s loan portfolio is secured
by real estate in the metropolitan Atlanta market. Accordingly,
the ultimate collectibility of a substantial portion of the
Company s loan portfolio is susceptible to changes in the market
conditions in the metropolitan Atlanta area.
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, 1997 and the changes in financial condition and
results of operations for the three and six month periods ended
June 30, 1997 and 1996.
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 three month and six
month periods ended June 30, 1997 decreased approximately
$148,000 and $151,000 or 8% and 4% respectively. The combination
of higher volune as well as higher rates paid on interest bearing
liabilities decreased the Company's net interest margin to
5.45% for the period ended June 30, 1997 compared to 5.79% in 1996.
Noninterest income:
Noninterest income decreased approximately $70,000 or 7% for the
three month period ended June 30, 1997 and approximately $184,000
or 9% for the six month period ended June 30, 1997 as compared to
the same period in 1996. The decrease in noninterest income is
due to a decrease in service charges on deposits of $248,000 or
13%.
Noninterest expense:
Noninterest expense increased approximately $135,000 and $267,000
or 5% for the three and six month periods ended June 30, 1997
respectively, as compared to the same period in 1996. The
increase is attributable to a combination of an increase in
salaries and employee benefits of $241,000, a decrease in
occupancy expense of $29,000 and an increase in other operating
expenses of $55,000. The increase in salaries and employee
benefit costs is due to new hires, normal salary adjustments and
increased employee benefits.
Net earnings:
The Company had a net loss of approximately ($18,000) or ($0.01)
per share for the three month period ended June 30, 1997 and net
earnings of $36,000 or $0.03 per share for the six month period
ended June 30, 1997 as compared to $242,000 and $509,000 or $0.18
and $0.38 per share in 1996. The $473,000 or 93% decrease in net
earnings as compared to 1996 is attributable to a combination of
declining net interest income and noninterest income of $151,000
and $184,000 respectively, and an increase in noninterest expense
of approximately $267,000.
LIQUIDITY
Liquidity is a bank's ability to meet deposit withdrawals, 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 30,1997, approximately 9% of the investment
portfolio matures within the next year, 61% after one year but
before five years. In addition, federal funds sold averaged
approximately $3.9 million during the six month period ended
June 30, 1997. The Company is a member of the Federal Home Loan
Bank of Atlanta, 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
s u c h that adequate funds are provided to meet customer
withdrawals and loan demand.
CAPITAL RESOURCES
Quantitative measures established by regulation to ensure capital
adequacy require the Company to maintain minimum amounts and
ratios of total Tier 1 capital to risk weighted assets and Tier 1
capital to average assets. As of June 30, 1997 the Company s
actual capital amounts and ratios are as follows:
For
Capital
Actual Adequacy Purposes
(amounts in thousands)
Amount Ratio Amount Ratio
Total Capital (to Risk
Weighted Assets):
Consolidated $ 11,067 12% $7,254 >= 8%
Bank $ 11,679 13% $7,251 >= 8%
Tier 1 Capital (to Risk
Weighted Assets):
Consolidated $ 9,932 11% $3,627 >= 4%
Bank $ 10,544 12% $3,625 >= 4%
Tier 1 Capital (to
Average Assets):
Consolidated $ 9,932 7% $5,528 >= 4%
Bank $ 10,544 7% $5,527 >= 4%
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
T h e 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 Bank is restricted as to dividend payments to the Company by
regulatory requirements.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
Effective July 1, 1997, Mr. William L. Gibbs resigned as the
President and Chief Executive Officer of the Bank. Dr. Johnnie L.
Clark, Vice Chairman of the Company s Board of Directors, was
named as his temporary replacement.
Effective July 27, 1997, the Company signed a letter of intent to
merge with First Southern Bancshares, Inc.. The merger is
contingent upon regulatory and shareholder approval.
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 13, 1997 By: /s/ Johnnie L. Clark
Johnnie L. Clark
President and Chief Executive
Officer
Date: August 13, 1997 By: /s/ Ann I. Scott
Ann I. Scott
Senior Vice President and Controller
[ARTICLE] 9
[CIK]
[NAME]
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<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] JUN-30-1997
[CASH] 8905
[INT-BEARING-DEPOSITS] 80891
[FED-FUNDS-SOLD] 2200
[TRADING-ASSETS] 0
[INVESTMENTS-HELD-FOR-SALE] 20392
[INVESTMENTS-CARRYING] 0
[INVESTMENTS-MARKET] 8822
[LOANS] 80392
[ALLOWANCE] 1290
[TOTAL-ASSETS] 128377
[DEPOSITS] 116345
[SHORT-TERM] 0
[LIABILITIES-OTHER] 1222
[LONG-TERM] 675
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 1330
[OTHER-SE] 8673
[TOTAL-LIABILITIES-AND-EQUITY] 128377
[INTEREST-LOAN] 3603
[INTEREST-INVEST] 1287
[INTEREST-OTHER] 106
[INTEREST-TOTAL] 4996
[INTEREST-DEPOSIT] 1605
[INTEREST-EXPENSE] 1638
[INTEREST-INCOME-NET] 3358
[LOAN-LOSSES] 0
[SECURITIES-GAINS] 10
[EXPENSE-OTHER] 5180
[INCOME-PRETAX] 49
[INCOME-PRE-EXTRAORDINARY] 49
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 36
[EPS-PRIMARY] .03
[EPS-DILUTED] .03
[YIELD-ACTUAL] 5.45
[LOANS-NON] 1093
[LOANS-PAST] 49
[LOANS-TROUBLED] 200
[LOANS-PROBLEM] 0
[ALLOWANCE-OPEN] 1441
[CHARGE-OFFS] 315
[RECOVERIES] 164
[ALLOWANCE-CLOSE] 1290
[ALLOWANCE-DOMESTIC] 1290
[ALLOWANCE-FOREIGN] 0
[ALLOWANCE-UNALLOCATED] 0
</TABLE>
