SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
May 20, 1998
CITIZENS BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Ohio 0-8209 34-1372535
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
10 East Main Street
Salineville, Ohio 43945
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (419) 327-6300
N/A
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
On May 21, 1998 Mid Am, Inc., an Ohio corporation ("Mid Am") and
Citizens Bancshares, Inc. ("Citizens") announced that they had entered into an
Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which Mid Am
and Citizens will combine in a merger-of-equals transaction. Under the Merger
Agreement, Mid Am will be merged with and into Citizens (the "Merger"), with
Citizens as the corporation surviving in the Merger. The Merger has been
approved unanimously by the Boards of Directors of each of Citizens and Mid Am.
The Merger is subject to certain regulatory approvals as well as to the approval
and adoption of the Merger Agreement by the stockholders of Citizens and Mid Am.
The Merger will be a tax free exchange and will be accounted for as a "pooling
of interests".
Under the terms of the Merger Agreement, each share of common stock,
without par value, of Mid Am outstanding at the effective time of the Merger
will be converted into 0.385 (the "Exchange Ratio") shares of common stock,
without par value per share, of Citizens ("Citizens Common Stock"). On June 1,
1998, the effective date of a previously announced stock split of Citizens
Common Stock in the form of a one-for-one stock dividend, the Exchange Ratio
will change to 0.77. Following the Merger, the shareholders of Mid Am and
Citizens will own 49.9% and 50.1% of the combined company, respectively. The
Board of Directors of the combined company will consist of 11 directors
nominated by Mid Am, and 11 directors nominated by Citizens. The headquarters of
the combined company will be in Bowling Green, Ohio, Mid Am's existing
headquarters.
This current report on Form 8-K, including the investor materials,
contains forward-looking statements that involve risk and uncertainty. It should
be noted that a variety of factors could cause the combined company's actual
results and experience to differ materially from the anticipated results or
other expectations expressed in the combined company's forward-looking
statements.
The risks and uncertainties that may affect the operations,
performance, development, growth projections and results of the combined
company's business include, but are not limited to, the growth of the economy,
interest rate movements, timely development by the combined company of
technology enhancements for its products and operating systems, the impact of
competitive products, services and pricing, customer business requirements,
Congressional legislation, acquisition cost savings and revenue enhancements and
similar matters. Readers of this report are cautioned not to place undue
reliance on forward-looking statements which are subject to influence by the
named risk factors and unanticipated future events. Actual results, accordingly,
may differ materially from management expectations.
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<PAGE>
Item 7. Exhibits.
99.1 Text of Press Release, dated May 21, 1998, issued by Citizens and
Mid Am.
99.2 Investor presentation materials used by Mid Am and Citizens on
May 21, 1998 related to the proposed Merger.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CITIZENS BANCSHARES, INC.
By: /s/ Matty E. Adams
--------------------------
Name: Matty E. Adams
Title: Chairman and
Chief Executive Officer
Date: May 21, 1998
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Contacts: Mid Am, Inc.
Dennis L. Nemec
Executive Vice President & CFO
(419) 373-6467
Citizens Bancshares, Inc.
William L. White III
Senior Vice President & CFO
(330) 679-2328 x 2805
Abernathy MacGregor Frank
Steven Bruce
(419) 327-6307
MID AM, INC. AND CITIZENS BANCSHARES, INC.
ANNOUNCE MERGER OF EQUALS
Combination Creates a Leading Financial Institution in Ohio
With Over $4 Billion in Assets
Company Will Rank as 75th Largest Financial Institution Holding
Company in United States In Terms of Market Capitalization
Citizens Bancshares, Inc., Salineville, Ohio (Nasdaq: CICS), and Mid
Am, Inc., Bowling Green, Ohio (Nasdaq: MIAM). May 21, 1998 - Citizens
Bancshares, Inc., and Mid Am, Inc., today announced that their Boards of
Directors have unanimously approved a definitive agreement for a merger of
equals.
The transaction will create one of the leading retail banks in Ohio,
with a market capitalization of $1.3 billion, over $4 billion in assets, 144
branches and over 2,300 employees. The combined company will be the 96th largest
in the United States in terms of total assets, and the 98th largest in terms of
deposits.
The merger will be accomplished through a tax-free exchange of shares
and will be accounted for as a "pooling-of-interests." Mid Am, Inc. shareholders
will receive 0.385 of a share of Citizens Bancshares, Inc. common stock for each
Mid Am, Inc. share owned. The exchange ratio will adjust to 0.770 on June 1,
1998, the effective date of a previously announced 2-for-1 split of Citizens
Bancshares, Inc. shares. Based on the closing price of Citizens Bancshares, Inc.
shares of $72.75 on May 20, 1998 on the Nasdaq National Market System, the
combined company would have an aggregate market capitalization of $1.3 billion.
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<PAGE>
"We are both high-performance 'super-community banks,' with very
similar business and operating philosophies," said Marty E. Adams, President and
CEO of Citizens Bancshares, Inc. and David R. Francisco, President and COO of
Mid Am, Inc., in a joint statement. "We know each other well, and our companies
are a strategic fit. By joining forces, we can both further our business
strategies through expanding the products we offer our customer base, reducing
our cost of doing business, and competing more effectively against the
mega-banks that operate in our region. We are absolutely complementary
organizations, and this is a merger of equals in every sense of the word. We
believe this transaction significantly enhances the interests of both sets of
shareholders and will benefit our respective customers, employees and the
communities we serve.
"We will take the best practices and products from both institutions so
that we can expand very quickly what we offer our customers in Ohio, Michigan,
Western Pennsylvania and West Virginia. We believe this merger will lead to
further growth and thus to expanded career opportunities for our employees and
an enhanced role in the communities we serve."
The new company will assume a new name at closing, not related to the
current name of either institution. Corporate headquarters will be located in
Bowling Green, Ohio, and the new company will maintain its operating presence in
Salineville, Ohio.
The new company's board of directors will include eleven
representatives of each institution. A newly-formed executive committee will
also have equal representation from each company.
David R. Francisco will become Chairman and Chief Executive Officer of
the combined company. Marty E. Adams will become President and Chief Operating
Officer. Under the terms of the transaction, Mr. Adams will succeed Mr.
Francisco as Chief Executive Officer on the fifth anniversary of the closing. In
the interim, Mr. Adams will be primarily responsible for the company's
commercial banking operations and related acquisitions. Edward J. Reiter of Mid
Am, Inc. will become Senior Chairman and Chairman of the Executive Committee.
James C. McBane of Citizens Bancshares, Inc. will become Vice Chairman.
Mr. Reiter said, "The transaction not only has great strategic
opportunities for our combined companies, it also allows a new generation of
leadership to take charge of the organization and me to enjoy a supporting role
working for the success of this merger."
Mr. McBane added that "This merger of equals transaction is a win-win
situation for both institutions and their shareholders, employees and
communities they serve."
- more -
<PAGE>
The combined company expects the merger to create cost reductions and
revenue enhancements sufficient to achieve significant earnings per share
accretion of 1999, the first full year of post-merger operations.
Cost reductions of approximately 8% to 10% of the combined company's
non-interest expense will be achieved primarily through consolidation of back
office operations. Because there is no geographic overlap between the companies,
there will be no merger-related branch closings. It is anticipated that any
reductions in the combined company's workforce will be achieved through normal
attrition. Revenue enhancements will result primarily from cross-selling each
company's products and services to the other's customer base. The combined
company intends to take a one-time pre-tax restructuring charge to cover the
expenses of the transaction between $20 million and $30 million prior to
closing.
The combined company expects to pay dividends at an annual rate of
$1.66 per share. This is the equivalent to Mid Am, Inc.'s current indicated
dividend rate of $0.64 per share, and represents an increase of 34% in Citizens
Bancshares, Inc.'s current dividend of $1.24 per share. Each of Citizens
Bancshares, Inc. and Mid Am, Inc. has granted to the other an option on 19.9% of
its outstanding common stock. The definitive agreement contains no collars or
walk-aways.
The merger is subject to normal regulatory approvals and to the
approval of the shareholders of both companies. Closing is expected in the
fourth quarter of 1998.
Citizens Bancshares, Inc. was advised by the investment banking firm of
Sandler O'Neill & Partners, L.P., and the law firms of Skadden, Arps, Slate,
Meagher & Flom and Squire, Sanders & Dempsey. Mid Am, Inc. was advised in the
transaction by the investment banking firm of McDonald & Company Securities,
Inc., and the law firm of Sullivan & Cromwell.
Citizens Bancshares, Inc., headquarter in Salineville, Ohio, is a $1.8
billion bank holding company and the parent of Freedom Financial Life Insurance
Company, Freedom Express, Inc., The Citizens Banking Company, which has 48
banking locations in six Ohio counties, Century National Bank, which has 13
banking locations in two Pennsylvania counties, and First National Bank of
Chester located in northern West Virginia.
Mid Am, Inc. is a $2.2 billion diversified financial services holding
company headquartered in Bowling Green, Ohio. The Company's banking affiliates
include Mid American National Bank and Trust Company, Toledo, Ohio; First
National Bank Northwest Ohio, Bryan, Ohio; American Community Bank, N.A., Lima,
Ohio; AmeriFirst Bank, N.A., Xenia, Ohio; and Adrian State Bank, Adrian,
Michigan. The Company's financial service affiliates include Mid Am Recovery
Services, Inc.,
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<PAGE>
Clearwater, Florida; MFI Investments Corp., Bryan, Ohio; Mid Am Credit Corp.,
Columbus, Ohio; Mid Am Private Trust, N.A., Cincinnati, Ohio; Mid Am Financial
Services, Inc., Carmel, Indiana; Simplicity Mortgage Consultants, Marion,
Indiana; Mid Am Title Insurance Agency, Inc., Adrian, Michigan; and Mid Am
Information Services, Inc., Bowling Green, Ohio.
************
The information contained in this press release contains
forward-looking statements regarding expected future financial performance which
are not historical facts and which involve risks and uncertainties. Actual
results and performance could differ materially from those contemplated by these
forward-looking statements.
- more -
[Citizens Bancshares, Inc. & Mid Am, Inc.. Synopsis of Merger. May 21, 1998]
This current report on Form 8-K, including the investor materials,
contains forward-looking statements that involve risk and uncertainty. It should
be noted that a variety of factors could cause the combined company's actual
results and experience to differ materially from the anticipated results or
other expectations expressed in the combined company's forward-looking
statements.
The risks and uncertainties that may affect the operations,
performance, development, growth projections and results of the combined
company's business include, but are not limited to, the growth of the economy,
interest rate movements, timely development by the combined company of
technology enhancements for its products and operating systems, the impact of
competitive products, services and pricing, customer business requirements,
Congressional legislation, acquisition cost savings and revenue enhancements and
similar matters. Readers of this report are cautioned not to place undue
reliance on forward-looking statements which are subject to influence by the
named risk factors and unanticipated future events. Actual results, accordingly,
may differ materially from management expectations.
-1-
<PAGE>
[Transaction Description - Term Sheet]
Structure: Merger of Equals. Tax Free exchange of common stock
accounted for as a "pooling of interests." Cross options
granted to each company for 19.9% of the other partner.
Exchange Ratio: Fixed exchange; ratio of 0.385* Citizens shares for each
share of Mid Am; Citizens shares remain outstanding
Pro forma diluted
shares outstanding: 18.1 million
Pro forma holding
company: Combined assets: $4.00 billion. Combined market
capitalization: $1.3 billion
Expected Closing: Fourth quarter 1998, subject to regulatory and shareholder
approval
* On May 12, 1998, Citizens announced a two-for-one stock split effective June
1, 1998. The fixed exchange ratio will then be adjusted to 0.77.
-2-
<PAGE>
[Transaction Description - Term Sheet]
Management:
Chairman & CEO - David R. Francisco (current Mid Am President & CEO)
President & COO - Marty E. Adams (current Citizens President & CEO)
Senior Chairman - Edward J. Reiter (current Mid Am Chairman & CEO)
Vice Chairman - James C. Mc Bane (current Citizens Chairman)
Board of Directors: Equal representation - Eleven directors from Mid Am
& eleven directors from Citizens.
Headquarters: Bowling Green, OH
Dividend: Current Mid Am indicated rate
-3-
<PAGE>
[Merger Benefits]
Merger creates a $4 billion asset size Ohio-based commercial banking franchise
with approximately $1.3 billion in market capitalization.
Combined cost savings of approximately 8-10% or $16-20 million will result in
projected 1999 EPS of approximately $4.00 vs. Citizens' projected 1999 EPS of
$3.50.
Accretive to both shareholder groups earning per share.
Pro forma institution creates significant opportunities in the merger market
arena.
Accelerates realization of non-bank revenue diversification strategy due to
larger customer base.
Potential for significant revenue enhancements based on cross-selling
opportunities.
-4-
<PAGE>
[Merger Benefits]
Combined geographic coverage provides broader regional reach and geographic
diversity.
Enhanced benefits to customers and communities in which institutions operate.
Combined management team provides enhanced intellectual capital positioning
company for continued superior profitability.
Organizations share similar "super-community" operational philosophies that can
facilitate integration and enhance business momentum.
-5-
<PAGE>
[Citizens Bancshares, Inc.}
[Map]
[Market Share Rank (Total County Deposits >$900mm)]
1. Jefferson, OH - #1
2. Columbiana, OH - #1
3. Beaver, PA - #3
4. Belmont, OH - #7
5. Stark, OH - #7
6. Mahoning, OH - #8
7. Butler, PA - #16
[Branch Details]
Number of Offices - 62
Avg. Deposits per Office - $23,366
[Balance Sheet Items (As of 3/31/98)]
Total Assets - $1,785,682
Total Deposits- $1,401,967
Total Equity - $157,578
[Income Statement Items (as of 3/31/98)]
ROAA (LQA) - 1.54%
ROAE (LQA) - 17.45%
Efficiency Ratio (Mar. Qtr.) - 49.90%
Diluted EPS (LQA) - $1.56
[Market Information]
Stock Price (Close 5/20/98) - $72.75
Market Capitalization - $643,895,000
Price/Tangible Book Value - 432.50%
Price/LQA EPS - 23.55x
-6-
<PAGE>
[Mid Am, Inc.}
[Map]
[Market Share Rank (Total County Deposits >$900mm)]
1. Wood, OH - #1
2. Greene, OH - #5
3. Lenawee, MI - #6
4. Allen, OH - #6
5. Lucas, OH - #8
6. Warren, OH - #20
7. Montgomery, OH - #17
[Branch Details]
Number of Offices - 84
Avg. Deposits per Office - $23,441
[Balance Sheet Items (As of 3/31/98)]
Total Assets - $2,239,113
Total Deposits- $1,781,482
Total Equity - $163,231
[Income Statement Items (as of 3/31/98)]
ROAA (LQA) - 1.34%
ROAE (LQA) - 17.62%
Efficiency Ratio (Mar. Qtr.) - 70.28%
Diluted EPS (LQA) - $1.24
[Market Information]
Stock Price (Close 5/20/98) - $27.00
Market Capitalization - $630,718,000
Price/Tangible Book Value - 407.85%
Price/LQA EPS - 21.59x
-7-
<PAGE>
[Citizens Bancshares, Inc. & Mid Am, Inc. Pro Forma Branch Locations]
[Map]
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<PAGE>
<TABLE>
<CAPTION>
CONTRIBUTION ANALYSIS
Citizens' Financials Include Century Acquisition (Pooling Accounting)
CITIZENS* MID AM
Quarter Ended QUARTER ENDED PRO FORMA
ASSETS 31-Mar-98 31-MAR-98 31-MAR-98
- ---------------------------------- ---------------------- ---------------------- ------------------
<S> <C> <C> <C>
SECURITIES 534,198 460,738 994,936
LOANS, NET 1,128,046 1,591,468 2,719,514
INTANGIBLES 8,701 8,586 17,287
OTHER ASSETS 114,737 178,321 293,058
- ---------------------------------- ---------------------- ---------------------- ------------------
TOTAL ASSETS $1,785,682 2,239,113 4,024,795
================================== ====================== ====================== ==================
LIABILITIES
DEPOSITS 1,401,967 1,781,482 3,183,449
BORROWINGS 210,821 269,400 480,221
OTHER LIABILITIES 15,316 25,000 40,316
- ---------------------------------- ---------------------- ---------------------- ------------------
TOTAL LIABILITIES $1,628,104 2,075,882 3,703,986
================================== ====================== ====================== ==================
TOTAL SHAREHOLDERS' EQUITY $157,578 $163,231 $320,809
- ---------------------------------- ---------------------- ---------------------- ------------------
TOTAL LIABILITIES & EQUITY $1,785,682 $2,239,113 $4,024,795
NET INCOME (MAR. QTR. ANNUALIZED) 27,520 29,772 57,292
================================== ====================== ====================== ==================
NET INCOME (LAST TWELVE MONTHS) 24,238 28,757 52,995
================================== ====================== ====================== ==================
</TABLE>
_____________________________________
* Earnings Exclude One-Time Deal Related Expenses
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<PAGE>
[The ProForma Company]
Twelve months ended March 31, 1998, including $16.8 million of pre-tax synergies
Return on Average Assets 1.62%
Return on Average Equity 20.33%
Loan Loss Reserves to Loans 1.34%
Loan Loss Reserves to NPL's 346.54%
Net Charge-off Ratio 0.16%
Leverage Ratio 7.19%
