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, 1999
() 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:
2,164,065 shares of Common Stock, $1.00 par value, outstanding on
April 30, 1999.
Part I. Financial Information:
Citizens Bancshares Corporation and Subsidiaries
Consolidated Balance Sheets
(unaudited-amounts in thousands, except per share amounts)
ASSETS March 31, December 31,
1999 1998
Cash and due from banks $ 11,003 $ 13,081
Interest bearing deposits 5,319 11,125
Federal funds sold 153 553
Investment securities:
Held to maturity 9,807 14,314
Available for sale 47,049 36,175
Other investments 1,271 1,271
Total investments 58,127 51,760
Loans, net of unearned income 117,434 118,063
Less allowance for loan losses (1,746) (1,703)
Loans, net 115,688 116,360
Loans held for sale 452 406
Premises and equipment, net 5,716 5,957
Cash value of life insurance 4,337 4,030
Other assets 5,552 3,555
Total assets $ 206,347 $ 206,827
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing $ 51,291 $ 49,612
Interest-bearing 132,163 135,060
Total deposits 183,454 184,672
Other borrowed funds 1,329 1,428
Accrued expenses and other liabilities 3,073 2,198
Total liabilities 187,856 188,298
Stockholders' equity:
Common stock-$1 par value. Authorized
5,000,000 shares; issued and outstanding
2,164,065 shares 2,164 2,164
Additional paid-in capital 6,174 6,174
Retained earnings 9,826 9,606
Accumulated other comprehensive income 327 585
Total stockholders' equity 18,491 18,529
Total liabilities and stockholders' equity $ 206,347 $ 206,827
Citizens Bancshares Corporation and Subsidiaries
Consolidated Statements of Income and Comprehensive Income
(unaudited-amounts in thousands, except per share amounts)
Three Months
Ended March 31,
1999 1998
INTEREST INCOME:
Loans, including fees $ 2,911 $ 2,866
Investment securities
Taxable 637 485
Tax-exempt 112 58
Interest bearing deposits 125 105
Federal funds sold 6 50
Total interest income 3,791 3,564
INTEREST EXPENSE:
Deposits 1,287 1,209
Other borrowed funds 31 24
Total interest expense 1,318 1,233
Net interest income 2,473 2,331
Provision for loan losses 62 -
Net interest income after provision for
loan losses 2,411 2,331
NONINTEREST INCOME:
Service charges on deposit accounts 931 941
Commission and fees 848 593
Other operating income 352 283
Total noninterest income 2,131 1,817
NONINTEREST EXPENSE:
Salaries and employee benefits 1,833 1,810
Net occupancy and equipment 650 644
Other operating expenses 1,294 956
Total other expense 3,777 3,410
Income before income taxes 765 738
548
Income tax expense 220 234
Net income 545 504
Other comprehensive income, net of tax:
Unrealized holding gains (losses) arising during the pe (255) 73
Less: reclassification adjustment for gains included
in net income (3) (11)
Comprehensive income $ 287 $ 566
Net income per common share, basis and diluted $ 0.25 $ 0.23
Weighted average outstanding shares, basis and diluted 2,164 2,164
Citizens Bancshares Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited-amounts in thousands, except per share amounts)
Three Months
Ended March 31,
1999 1998
Cash flows from operating activities:
Net income $ 545 $ 504
Adjustments to reconcile net income
to net cash used in operating activities:
Provision for loan losses 62 -
Depreciation and amortization 301 253
Amortization (accretion), net 7 (14)
Gain on investments (4) -
Loss on sale of assets 18 -
Net change in loans held for sale (46) 322
Increase in other assets (2,225) (1,201)
Increase (decrease) in accrued
expenses and other liabilities 875 (180)
Net cash used in operating activities (467) (316)
Cash flows from investing activities:
Proceeds from maturities of investment securities
held to maturity 4,507 4,330
Proceeds from maturities of investment securities
available for sale 4,623 5,263
Purchases of investment securities held to maturity - -
Purchases of investment securities available for sale (15,626) (6,494)
Net decrease in other investments - 682
Net decrease in loans 610 1,925
Increase in cash surrender value (307) (23)
Purchases of premises and equipment (60) (108)
Net change in interest bearing deposit 5,806 (11,190)
Net change in federal funds sold 400 971
Proceeds from sale of real estate acquired
through foreclosure 77 -
Net cash provided by (used in) investing activities 30 (4,644)
Cash flows from financing activities:
Net increase in demand deposits 1,679 1,227
Net increase (decrease) in time and savings deposits (2,897) 5,041
Net decrease in other borrowed funds (98) (391)
Principal payment on long-term debt - (45)
Dividends paid (325) -
Net cash provided by (used in) financing activities (1,641) 5,832
Net change in cash and due from banks (2,078) 872
Cash and due from banks at beginning of period 13,081 10,637
Cash and due from banks at end of period $ 11,003 $ 11,509
Supplemental disclosures of cash paid during the
period for:
Interest $ 1,322 $ 1,350
Income taxes $ 193 $ 75
Supplemental disclosures of noncash transactions:
Real estate acquired through foreclosure $ - $ 72
CITIZENS BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 1999 and 1998
(unaudited)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Citizens Bancshares Corporation and subsidiaries (the Company)
is a holding company that provides a full range of commercial
banking and mortgage brokerage services to individual and
corporate customers in metropolitan Atlanta through its wholly
owned subsidiaries, Citizens Trust Bank (the Bank) and Citizens
Trust Bank Mortgage Services, Inc. (Mortgage Services). The
Bank operates under a state charter and serves its customers in
metropolitan Atlanta through ten full-service branches.
Effective January 30, 1998, the Company consummated its merger
with First Southern Bancshares, Inc. and subsidiaries.
The accompanying consolidated financial 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.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the
reported amounts in the consolidated financial statements.
Actual results could differ significantly from those estimates.
Material estimates common to the banking industry that are
particularly susceptible to significant change in the near term
are the allowance for loan losses and valuation allowances
associated with the recognition of deferred tax assets. 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 Subsidiaries ( the "Company" ) as of March 31,
1999 and for the three months ended March 31,1999 and 1998 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. All significant intercompany accounts and transactions
have been eliminated in consolidation.
ACCOUNTING POLICIES
Reference is made to the accounting policies of the Company
described in the notes to the consolidated financial statements
contained in the Companys Annual Report on Form 10-KSB for the
year ended December 31, 1998. The Company has followed those
policies in preparing this report.
COMMON STOCK
The par value of the Companys common stock is $1, and 5,000,000
shares are authorized. The amount of dividends paid by the Bank
to the Company is limited by various banking regulatory agencies.
The Georgia Department of Banking and Finance requires prior
approval for a bank to pay dividends in excess of 50% of its
prior years earnings. The amount of dividends available from
the Bank without prior approval from the regulators for payment
in 1999 is approximately $799,000.
On March 15, 1999, the Company paid a cash dividends of
approximately $325,000 or $0.15 per share to shareholders on
record as of December 15, 1998.
NET INCOME PER SHARE
Basic net income per common share (EPS) is computed based on net
income divided by the weighted average number of common share
equivalents outstanding. Diluted EPS is computed based on net
income divided by the weighted average number of common and
potential common shares. The only potential common shares are
those related to stock options; however, such options were
antidilutive, so diluted EPS is the same as basic EPS.
IMPACT OF NEW ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (SFAS) No. 133,
Accounting for Derivative Instruments and Hedging Activities,
which will require that all derivative financial instruments be
recognized as either assets or liabilities on the balance sheet.
SFAS No. 133 will be effective no later than the Companys first
quarter of 2000. The Company is evaluating the effects of the
new statement and when to implement the new requirements.
RECLASSIFICATIONS
Certain 1998 amounts have been reclassified to conform to the
1999 presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
INTRODUCTION
Citizens Bancshares Corporation (the Company) is a holding
company that wholly owns two subsidiaries, Citizens Trust Bank
(the Bank) and Citizens Trust Bank Mortgage Services, Inc.
(Mortgage Services). The Company, through the Bank and
Mortgage Services, provides a full range of commercial banking
and mortgage brokerage services to individuals and corporate
customers in its primary market area , metropolitan Atlanta. The
Bank is a member of the Federal Reserve System and operates under
a state charter. The Company serves its customers through ten
full-service bank branches and the mortgage company headquarters.
The following discussion is of the Company's financial condition
as of March 31, 1999 and the changes in the financial condition
and results of operations for the three month periods ended March
31, 1999 and 1998.
FINANCIAL CONDITION
During the first quarter of 1999, the Company, interest bearing
deposits deceased $5,806,000 or 52.19% and federal funds sold
deceased $400,000. The decreases in interest bearing deposits
and federal funds sold are offset by a $6,367,000 increase in
investment securities.
INVESTMENT SECURITIES
The Company invests a portion of its assets in U.S. treasury
bills and notes, U.S. government sponsored agency securities,
mortgage backed bonds, as well as, some equity securities. Other
investments includes Federal Home Loan Bank stock and Federal
Reserve Bank stock. At March 31, 1999 and December 31, 1998, the
Company's investment securities portfolio represented
approximately 28.2% and 25.0% of total assets, respectively. The
carrying value of the investment portfolio increased by
$6,367,000 or 12.3% during the first quarter.
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 loans
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
placed 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 impaired loans is recognized on the cash basis.
At March 31, 1999, the recorded investment in loans that are
considered to be impaired was approximately $2,598,000, a
decrease of $800,000 from December 31, 1998. The related
allowance for loan losses for each of these loans was
approximately $514,000 and $568,000, respectively. For the three
months ended March 31, 1999, the Company recognized approximately
$29,000 in interest income on these impaired loans on an accrual
basis.
NONPERFORMING ASSETS
Nonperforming assets include nonperforming loans, real estate
acquired 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 decreased approximately $815,000 to
$1,338,000 at March 31, 1999 from $2,153,000 at December 31,
1998. Nonperforming assets represented 1.18% of loans, net of
unearned income and real estate acquired through foreclosure at
March 31, 1999 as compared to 1.95% at December 31, 1998.
The table below presents a summary of the Companys nonperforming
assets at March 31, 1999 and December 31, 1998.
1999 1998
(Amounts in thousands, except
financial ratios)
Nonperforming assets:
Nonperforming loans:
Nonaccrual loans $ 997 $ 1,683
Past-due loans 341 470
Nonperforming loans 1,338 2,153
Real estate acquired through
foreclosure 52 147
Total nonperforming assets $ 1,390 $ 2,300
Ratios:
Nonperforming loans to loans, net of
unearned income 1.14% 1.82%
Nonperforming assets to loans
(net of unearned income) and
real estate acquired through
foreclosure 1.18% 1.95%
Nonperforming assets to total assets 0.67% 1.11%
Allowance for loan losses to
nonperforming loans 130.54% 79.15%
Allowance for loan losses to
nonperforming assets 125.67% 74.08%
Interest income on nonaccrual loans which would have been
reported for the three months ended March 31, 1999 totaled
approximately $22,000.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is based on management's evaluation
of the loan portfolio under current economic conditions,
historical loan loss experience, adequacy of collateral, and such
other factors which, in management's judgment, deserve
recognition in estimating loan losses. The Company's process for
determining an appropriate allowance for loan losses includes
management's judgement and use of estimates. A general reserve
of .5% is applied to the portion of the loan portfolio that is
non-criticized. A specific reserve is applied to all criticized
loans using a percentage formula related to the degree of
impairment based on the standard industry and regulatory grading
systems as follows: 2.5% for loans graded "Special Mention", 15%
for loans graded "Substandard", 50% for loans graded "Doubtful",
and 100% for loans graded "Loss". For the three months ended
March 31, 1999 and the year ended December 31, 1998, the
allocation of the allowance for loan losses was expanded to
include a component for potential loan losses relating to Year
2000.
The aggregate of these reserves plus specific allowances as
needed is compared to the actual reserve to determine the
adequacy of the allowance for credit losses. The adequacy of the
allowance for loan losses is reviewed on a monthly basis by
management and the Board of Directors. This assessment is made
in the context of historical losses as well as existing economic
conditions, performance trends within specific portfolio segments
and individual concentrations of credit.
Additions to the allowance for loan losses are made by monthly
charges to the provision for loan losses. The level of the
provision for loan losses is established annually based on
historical net charge-offs, projected growth of the loan
portfolio and economic conditions.
Loans are charged against the allowance when, in the opinion of
management, such loans are deemed to be uncollectible and
subsequent recoveries are added to the allowance.
Management believes the allowance for loan losses is adequate.
While management uses available information to recognize losses
on loans, future additions to the allowance may be necessary
based on changes in economic conditions, particularly in the
metropolitan Atlanta area. In addition, regulatory agencies, as
an integral part of their examination process, periodically
review the Company's allowance for loan losses. Such agencies may
require the Company to recognize additions to the allowance based
on their judgments about information available to them at the
time of their examination.
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. The Company's loans
to area churches was approximately $35.9 million at March 31,
1999 compared to $36.7 at December 31, 1998 which is generally
secured by real estate. The accounting loss the Company would
incur if any party to the financial instrument failed completely
to perform according to the terms of the contract and the
collateral proved to be of no value, is equal to the outstanding
balance of the financial instrument.
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, 1999 and December 31, 1998.
1999 1998
(Amounts in thousands, except
financial ratios)
Loans, net of unearned income $117,434 $118,063
Average loans, net of unearned income and the
allowance for loan losses $116,073 $118,484
Allowance for loans losses at the
beginning of year $ 1,703 $ 1,752
Loans charged off:
Commercial,financial, and agricultural 1 145
Real estate - loan 2 85
Installment loans to individuals 46 215
Total loans charged off 49 445
Recoveries of loans previously charged off:
Commercial, financial, and agricultural - 21
Real estate - loan 1 69
Installment loans to individuals 29 131
Total loans recovered 30 221
Net loans charged off 19 224
Additions to allowance for loan losses
charged to operating expense 62 175
Allowance for loan losses at period end $ 1,746 $ 1,703
Ratio of net loans charged off to average loans, net
of unearned income and the allowance for
loan losses 0.02% 0.19%
Allowance for loan losses to loans, net of
unearned income 1.49% 1.44%
DEPOSITS
Total deposits deceased $1,218,000 or 0.7% for the three month
period. Noninterest bearing deposits increased $1,679,000 or
3.4%, while time deposit decreased $2,897,000 or 2.4%. This
growth in noninterest bearing deposits is attributed to several
marketing programs enacted by the Company as well as normal
growth. The decrease in interest-bearing deposits is primarily
due to interest sensitive customers shifting their funds out of
the Bank as they look for higher yields in a low interest rate
environment.
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 1999
increased $142,000 to $2,473,000 compared to $2,331,000 for the
three month period ended March 31, 1998. The combination of
reducing nonaccrual loans by $686,000 and past due loans by
$129,000, higher volume in the investment portfolio, lower rates
paid on interest bearing liabilities increased the Company's net
interest margin to 5.65% for the first quarter ended 1999
compared to 5.62% in the first quarter of 1998.
Noninterest income:
Noninterest income increased approximately $314,000 or 17% for
the three month period ended March 31, 1999 as compared to the
same period in 1998. The increase in noninterest income is due
primarily to an increase in commission and fees on mortgage loans
of approximately $255,000 or 43%, as a result of increase volume
in loan closings.
Noninterest expense:
Noninterest expense increased approximately $367,000 or 11%
during the three month period as compared to the same period in
1998. The increase is attributable to a combination of data
processing cost, professional services and costs associated with
the increased mortgage loan volume. Data processing costs
increased approximately $122,000 due to growth in the Company's
deposit base and having the information systems area outsourced.
For the same period in 1998 data processing was handled in-house.
Salaries and other costs related to mortgage loan lending
activity increased $174,000 compared to March 31, 1998.
Net income:
The Company had net income of approximately $545,000 or $0.25 per
share during the first quarter ended 1999 as compared to $504,000
or $0.23 per share in 1998. The $41,000 increase in net income
as compared to 1998 is attributable to an increase in net
interest income and noninterest income of approximately $142,000
and $314,000, respectively, which is partially offset by an
increase in noninterest expense of $367,000.
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
interest-bearing deposits and managing the maturities of
investment securities. At March 31,1999, approximately 11% of
the investment portfolio matures within the next year, 33% after
one year but before five years. In addition, interest bearing
deposits averaged approximately $11,170,000 during the three
month period ended March 31, 1999. 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 such 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 and Tier 1 capital to risk weighted assets, and
Tier 1 capital to average assets. As of March 31, 1999, the
Company's total and Tier 1 capital to risk weighted assets and
Tier 1 to average assets were 14%, 13% and 10% respectively.
Management believes, as of March 31, 1999, that the Company meets
all capital adequacy requirements to which it is subject.
YEAR 2000 PROCESSING RISK
The Board and management consider the Year 2000 ("Y2K") computer
processing risk to be a very serious risk for the banking and
financial services industry in particular and for all businesses
which depend on computer hardware and software to perform the
critical functions of their businesses. Y2K computer processing
risk is defined as the risk associated with computer hardware or
software that fails to process data or to operate in the manner
for it was designed as a result of century date changes. This
risk encompasses hardware and software owned, leased, licensed or
otherwise used by the Company or by vendors upon which the
Company depends for mission-critical functions or by customers
with which the Company have a material relationship. In 1997,
the Board established a Y2K Policy and Y2K Compliance Committee.
The Committee is headed by senior management, meets monthly and
regularly reports to the Audit and Compliance Committee of the
Board and to the full Board.
The Company and Bank do not use proprietary computer hardware or
software. Therefore, they depend upon outsourced data processing
services and third party software. Management has identified all
mission critical hardware and software applications and is
following the general guidelines promulgated by the FDIC to
assure that all mission critical applications will be renovated
with testing in progress or contingency plans in the process of
implementation. At this time, the servicing vendors appear to
have completed their assessments and have described to the Bank
their time lines for renovation and testing. Management has no
reason to believe at this time that all mission critical
applications for the Bank and Company will not be adequately
addressed by our vendors plans.
The Bank's core processing, which maintains all customer record
keeping and financial management information systems, is handled
by Alltel Information Services (Alltel), an international company
which provides application software and outsourcing services to
financial services, mortgage, telecommunication and health care
industries, serving more that 1,100 companies in 45 countries.
Alltel started testing its program renovations in the fall of
1998 and the majority of the testing has been completed.
Management is currently reviewing all of the Bank's significant
commercial loan relationships to determine how much Y2K risk may
exist in the Bank's customer base. To the extent that such risk
is identified, management will request such customers to develop
their own compliance strategy and will require those customers to
keep us informed of their progress. Management's current plans
are to help the Bank's customers understand the risks involved,
to share the Bank's strategies and to encourage those customers
to satisfy their compliance requirements on time lines that are
consistent with those of the Bank. The Bank's loan agreements
and credit review processes are being modified to address this
risk. The Bank's contingency plans for customers who fail to
adequately address this risk may include but will not be limited
to requiring such customers to pay off their loans.
The costs of implementing Y2K solutions on mission critical
systems have not been fully determined as of the date of this
report. The Bank's local area computer network was already
budgeted for upgrade in 1998 to ensure that workstations and file-
servers will be Y2K ready. These upgrades and Y2K consultant
services costed approximately $360,000 in 1998. As of March
1999, the Company has spent approximately $9,000 related to Y2K
cost in 1999. The Company expects to spend an additional
$91,000 related to Y2K system testing, renovations and equipment
purchases.
As part of its normal business practices, the Company maintains
contingency plans in the event of emergency situations, some of
which could arise from Y2K related problems. The Company has
formulated a detailed Y2K contingency plan which assesses several
possible scenarios to which the Company may be required to react.
However, the Company believes that it is not possible to know
with complete certainty all Y2K problems that could affect the
Company.
The most reasonable likely worse case Y2K scenario would be one
in which electrical service or phone service is disrupted for an
extended period of time. As noted above, the Company's computer
hardware and software, its commercial customer risk and its third
party vendors/supplier risk is progressing as planned. However,
the Company cannot accurately predict how many failures related
to the Y2K problem will occur with its suppliers, customers or
other third parties or the severity, duration or financial
consequences of such failures. As a result, it is possible the
Company could suffer the following consequences:
- A number of operational inconveniences and inefficiencies
for the Company, its service providers or its customers that may
divert the Company's time and attention and financial and human
resources from its ordinary business activities.
- System malfunctions that may require significant efforts by
the Company, its service providers or its customers to prevent or
alleviate material business disruptions.
Even if the Company does not incur significant costs in
connection with responding to Y2K issues, there can be no
assurance that the failure or delay of the Company's customers,
vendors or other third parties in addressing these issues or the
costs involved in such process will not have a material adverse
effect on the Company's business, financial condition and results
of operations.
The foregoing are forward-looking statements reflecting
management's current assessments and estimates with respect to
the Company's Y2K compliance efforts and the impact of Y2K issues
on the Company's business and operations. Various factors could
cause actual plans and results to differ materially from those
contemplated by such assessments, estimates and forward-looking
statements, many of which are beyond the control of the Company.
Some of these factors include, but are not limited to,
representations by the Company's vendors and customers,
technological advances, economic considerations and consumer
perceptions. The Y2K compliance program is an ongoing process
involving continual evaluation and may be subject to change in
response to new developments.
The Company has also been subject to regulatory review of its
overall Year 2000 plan and will continue to be monitored by its
regulators for its progress.
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 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
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 12, 1999 By: /s/ James E. Young
James E. Young
President and Chief Executive
Officer
Date: May 12, 1999 By: /s/ Willard C. Lewis
Willard C. Lewis
Senior Executive Vice President and
Chief Operating Officer
Date: May 12, 1999 By: /s/ Samuel J. Cox
Samuel J. Cox
Senior Vice President and Chief
Financial Officer
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0
0
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</TABLE>
