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 March 31, 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
May 1, 1997.
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Part I. Financial Information:
Citizens Bancshares Corporation and Subsidiary
Consolidated Balance Sheets
March 31, 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 $ 7,209 8,968
Federal funds sold 3,000 10,200
Investment securities:
Held to maturity 24,223 26,072
Available for sale 17,620 13,269
Total investments 41,843 39,341
Loans, net of unearned income 81,019 82,408
Less allowance for loan losses 1,449 1,441
Loans, net 79,570 80,967
Premises and equipment, net 2,753 2,891
Other assets 2,945 2,511
Total assets $ 137,320 144,878
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing $ 36,026 46,328
Interest-bearing 89,318 86,560
Total deposits 125,344 132,888
Treasury, tax and loan account 262 116
Long-term debt 720 765
Other liabilities 1,091 1,147
Total liabilities 127,417 134,916
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 on available for sale securities (144) (31)
Retained earnings 7,247 7,193
Total shareholders' equity 9,903 9,962
Total liabilities and shareholders'
equity $ 137,320 144,878
See accompanying notes to consolidated financial statements.
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Citizens Bancshares Corporation and Subsidiary
Consolidated Statements of Earnings
(unaudited-amounts in thousands, except per share amounts)
Three Months
Ended March 31,
1997 1996
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INTEREST INCOME:
Loans, including fees $ 1,765 1,588
Investment securities:
Taxable 653 656
Tax-exempt 18 22
Federal funds sold 82 133
Total interest income 2,518 2,399
INTEREST EXPENSE:
Deposits 823 703
Treasury tax, and loan account 1 2
Long-term debt 16 13
Total interest expense 840 718
Net interest income 1,678 1,681
Provision for loan losses - -
Net interest income after provision for
loan losses 1,678 1,681
NONINTEREST INCOME:
Service charges on deposit accounts 812 931
Other operating income 134 129
Total noninterest income 946 1,060
NONINTEREST EXPENSE:
Salaries and employee benefits 1,447 1,238
Net occupancy and equipment 409 498
Other operating expenses 678 666
Total other expense 2,534 2,402
Earnings before income taxes 90 339
Income tax expense 36 72
Net earnings $ 54 267
Net earnings per common share $ 0.04 0.20
Average outstanding shares 1,330 1,330
See accompanying notes to consolidated financial statements.
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Citizens Bancshares Corporation and Subsidiary
Consolidated Statements of Cash Flows
Three months ended March 31, 1997 and 1996
(unaudited-amounts in thousands, except per share amounts)
1997 1996
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Cash flows from operating activities:
Net earnings $ 54 267
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 187 149
Amortization (accretion), net 3 8
Accretion (amortization) of deferred loan fees 10 (25)
Increase in other assets (391) (170)
Decrease in accrued expenses and other liabilities (55) (161)
Net cash (used) provided by operating activities (192) 68
Cash flows from investing activities:
Proceeds from maturities of investment securities
held to maturity 1,855 6,008
Proceeds from maturities of investment securities
available for sale 1,587 500
Purchases of investment securities held to maturity - (6,500)
Purchases of investment securities available for sale (6,117) (3,999)
Net decrease (increase) in loans 1,400 (1,275)
Purchases of premises and equipment (49) (580)
Proceeds from sale of real estate acquired through
foreclosure - 54
Net cash used by investing activities (1,324) (5,792)
Cash flows from financing activities:
Net (decrease) increase in demand deposits and
savings accounts (10,302) 1,592
Net increase in time deposits 2,758 7,226
Principal payment on long-term debt (45) -
Net increase in treasury, tax and loan account 146 292
Net cash (used) provided by financing activities (7,443) 9,110
Net (decrease) increase in cash and cash equivalents (8,959) 3,386
Cash and cash equivalents at beginning of period 19,168 14,015
Cash and cash equivalents at end of period $ 10,209 17,401
Supplemental disclosures of cash paid during the period for:
Interest $ 857 719
Income taxes $ - 159
Supplemental disclosures of noncash transactions:
Real estate acquired through foreclosure $ - 14
See accompanying notes to consolidated financial statements.
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CITIZENS BANCSHARES CORPORATION AND SUBSIDIARY
Notes to the Consolidated Financial Statements
March 31, 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 March 31, 1997
and for the three months ended March 31,1997 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 128 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 Extinguishment 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
assets and extinguishment 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 loan s 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 March 31, 1997, the recorded investment in loans that are
considered to be impaired was approximately $2,581,000 an
i n c r ease of $622,000 from December 31, 1996 (of which
approximately $1,955,000 and $1,286,000, respectively, were on a
nonaccrual basis). The related allowance for loan losses for
each of these loans was approximately $393,000 and $302,000,
respectively. For the Three months ended March 31, 1997, the
Company recognized approximately $14,000 in interest income on
these impaired loans on an accrual basis.
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.
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 borrowers to comply with the loan repayment
terms.
Nonperforming loans increased approximately $652,000 to
$2,017,000 at March 31, 1997, from $1,365,000 at December 31,
1996. Real estate acquired through foreclosure decreased
approximately $6,000 or 10% from $63,000 at December 31, 1996 to
$57,000 at March 31, 1997. Nonperforming assets represented
2.56% of loans, net of unearned income and real estate acquired
through foreclosure at March 31, 1997 as compared to 1.73% at
December 31, 1996.
The table below presents a summary of the Company's
nonperforming assets at March 31, 1997 and December 31, 1996.
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1997 1996
(Amounts in thousands, except
financial ratios)
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Nonperforming assets:
Nonperforming loans:
Nonaccrual loans $ 1,955 1,286
Past-due loans 62 79
Nonperforming loans 2,017 1,365
Real estate acquired through foreclosure 57 63
Total nonperforming assets $ 2,074 1,428
Ratios:
Nonperforming loans to loans, net of
unearned income 2.49% 1.66
Nonperforming assets to loans(net of
unearned income) and real estate
acquired through foreclosure 2.56% 1.73
Nonperforming assets to total assets 1 .51% .99
Allowance for loan losses to
nonperforming loans 71.84% 105.57
Allowance for loan losses to
nonperforming assets 69.86% 100.91
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Interest income on nonaccrual loans which would have been
reported for the three months ended March 31, 1997 totaled
approximately $65,000. The Company recorded approximately
$41,000 in interest income on these loans for the three months
period.
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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 periods ended March 31, 1997 and December 31, 1996.
1997 1996
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Loans, net of unearned income $ 81,019 82,408
Average loans, net of unearned income
and the allowance for loan losses $ 79,311 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 44 237
Installment loans to individuals 49 76
Total loans charged off 96 424
Recoveries of loans previously charged off:
Commercial, financial, and agricultural 5 38
Real estate- mortgage 55 104
Installment loans to individuals 44 92
Total loans recovered 104 234
Net loans (recovered) charged off (8) 190
Additions to allowance for loan losses
charged to operating expense - 65
Allowance for loan losses at period end $ 1,449 1,441
Ratio of net loans (recovered) charged
off to average loans, net of unearned
income and the allowance for loan
losses (.01)% .26
Allowance for loan losses to loans,
net of unearned income 1.79% 1.75
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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 loan 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
experience, 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 March 31, 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 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 March 31, 1997 and the changes in the financial condition
and results of operations for the three month periods ended March
31, 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 first quarter 1997
remained stable compared to the three month period of 1996. The
combination of higher rates paid on interest bearing liabilities
and lower volume and yield on the investment portfolio decreased
the Company's net interest margin to 5.34% for the first quarter
1997 compared to 5.65% in 1996.
Noninterest income:
Noninterest income decreased approximately $114,000 or 11% for
the three month period ended March 31, 1997 as compared to the
same period in 1996. The decrease in noninterest income is due
primarily to a decrease in service charges on deposit accounts,
of approximately $119,000 or 13%, as a result of a decrease in
the volume of transactions.
Noninterest expense:
Noninterest expense increased approximately $132,000 or 6% during
the three month period as compared to the same period in 1996.
The increase is attributable to a combination of an increase in
salaries and employee benefits of $209,000 and a decrease in
occupancy expense of $90,000. The increase in salaries and
employee benefit costs is due to new hires , normal salary
adjustments and increased employee benefits. The decrease in
occupancy expense is due to the lease of computer equipment
during the first quarter of 1996.
Net earnings:
The Company had net earnings of approximately $54,000 or $0.04
per share during the first quarter ended 1997 as compared to
$267,000 or $0.20 per share in 1996. The $213,000 or 80%
decrease in net earnings as compared to 1996 is attributable to a
combination of stable net interest income, $114,000 decrease in
noninterest income and an increase in noninterest expense of
approximately $132,000.
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. The
Company continues to meet liquidity needs primarily through the
sale of federal funds and managing the maturities of investment
s e curities. At March 31,1997, approximately 14% of the
investment portfolio matures within the next year, 77% after one
year but before five years. In addition, federal funds sold
averaged approximately $6.3 million during the three month period
ended March 31, 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
Quantitive measures established by regulation to ensure capital
adequacy require the Company to maintain minimum amounts and
ratios of total and Tier 1 capital to risk weighted assets, and
Tier 1 capital to average assets. As of March 31, 1997, the
Company s total and Tier 1 capital to risk weighted assets and
Tier 1 to average assets were 13%, 11% and 7% respectively.
Management believes, as of March 31, 1997, that the Company meets
all capital adequacy requirements to which it is subject.
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
The annual shareholders meeting was held on April 30, 1997 and
the following individuals were elected to the Board of Directors
Herman J. Russell, William L. Gibbs, William G. Anderson, Thomas
E. Boland, Johnnie L. Clark, Norris L. Connally, H. Jerome
Russell, R. K. Sehgal and Odie C. Donald. There were 804,552.09
votes for, zero against and 525,131.91 non votes for the election
of the above mentioned Board members.
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 7, 1997 By: /s/ William L. Gibbs
William L. Gibbs
President and Chief Executive Officer
Date: May 7, 1997 By: /s/ Ann I. Scott
Ann I. Scott
Senior Vice President and Controller
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 7209
<INT-BEARING-DEPOSITS> 89318
<FED-FUNDS-SOLD> 3000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 17620
<INVESTMENTS-CARRYING> 24223
<INVESTMENTS-MARKET> 0
<LOANS> 81019
<ALLOWANCE> 1449
<TOTAL-ASSETS> 137320
<DEPOSITS> 125344
<SHORT-TERM> 262
<LIABILITIES-OTHER> 1091
<LONG-TERM> 720
0
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