<PAGE> 1
Page 1 of _________
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarter ended March 31, 1998
Commission File Number 0-18209
CITIZENS BANCSHARES, INC.
-------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-1372535
- ---- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 East Main Street, Salineville, Ohio 43945
- -------------------------------------- -------
(Address of principal executive offices)
Registrant's telephone number, 330/679-2328
------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such report(s) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
On May 13, 1998 there were 6,893,482 shares of Common Stock, without par value,
of Citizens Bancshares, Inc., outstanding.
<PAGE> 2
CITIZENS BANCSHARES, INC.
-------------------------
FORM 10-Q
---------
QUARTER ENDED March 31, 1998
Part I - Financial Information
ITEM 1 FINANCIAL STATEMENTS
- ----------------------------
Interim Financial Information required by Rule 10-01 of Regulation S-X is
included in this Form 10-Q as referenced below:
<TABLE>
<CAPTION>
Page
Number
------
Financial Statements
- --------------------
<S> <C>
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Comprehensive Income 5
Condensed Consolidated Statements of Changes in
Shareholders' Equity 5
Condensed Consolidated Statements of
Cash Flows 6
Notes to the Consolidated Financial
Statements 7 - 13
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 14 - 18
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 18 - 19
PART II - OTHER INFORMATION 19 - 22
Exhibit Index 20 - 22
Signatures 23
</TABLE>
2
<PAGE> 3
CITIZENS BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, December 31,
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) .......................................... 1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks ................................................................. $ 31,773 $ 41,604
Federal funds sold ...................................................................... 4,700 10,725
----------- -----------
Total cash and cash equivalents .................................................... 36,473 52,329
Interest-bearing deposits with financial institutions ................................... 2,208 3,016
Securities available for sale (Note 2) .................................................. 393,713 364,659
Securities held to maturity (estimated market value of $61,449
at March 31 and $88,018 at December 31 (Note 2) ....................................... 60,815 87,207
Total loans (Note 3) .................................................................... 786,790 773,925
Less allowance for loan losses (Note 4) ............................................... (13,529) (13,559)
----------- -----------
Net loans .......................................................................... 773,261 760,366
Premises and equipment, net ............................................................. 18,212 19,232
Bank owned life insurance ............................................................... 23,453 23,080
Accrued interest receivable and other assets ............................................ 22,978 22,602
----------- -----------
Total assets ....................................................................... $ 1,331,113 $ 1,332,491
=========== ===========
LIABILITIES
Deposits
Noninterest-bearing deposits ............................................................ $ 89,409 $ 86,223
Interest-bearing deposits ............................................................... 920,052 901,164
----------- -----------
Total deposits ..................................................................... 1,009,461 987,387
Securities sold under repurchase agreements and
Federal funds purchased ............................................................... 82,016 79,188
Federal Home Loan Bank advances ......................................................... 108,805 136,765
Accrued interest payable and other liabilities .......................................... 10,863 8,564
----------- -----------
Total liabilities .................................................................. 1,211,145 1,211,904
----------- -----------
MINORITY INTEREST IN SUBSIDIARY .............................................................. 68 627
SHAREHOLDERS' EQUITY
Serial preferred stock, $10.00 par value; authorized
200,000 shares; none issued
Common stock, no par value; 12,000,000 shares
authorized; 6,893,482 shares issued ................................................... 24,827 24,827
Retained earnings ....................................................................... 93,920 93,283
Less treasury stock, 60,743 in 1998,
50,943 in 1997, shares at cost ........................................................ (1,814) (1,132)
ESOP obligations and unearned shares .................................................... (262) (325)
Unrealized gain on securities available for sale ........................................ 3,229 3,307
----------- -----------
Total shareholders' equity ......................................................... 119,900 119,960
----------- -----------
Total liabilities and shareholders' equity ......................................... $ 1,331,113 $ 1,332,491
=========== ===========
See notes to the consolidated financial statements
</TABLE>
3
<PAGE> 4
CITIZENS BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
For the three months
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) ended March 31,
1998 1997
-------- --------
<S> <C> <C>
INTEREST INCOME
Loans, including fees ............................................................................ $ 18,062 $ 16,457
Securities
Taxable ........................................................................................ 6,841 5,432
Nontaxable ..................................................................................... 258 278
Federal funds sold and other ..................................................................... 318 330
-------- --------
Total interest income ........................................................................ 25,479 22,497
-------- --------
INTEREST EXPENSE
Deposits ......................................................................................... 9,608 8,136
Federal Home Loan Bank advances .................................................................. 1,717 751
Federal funds, repurchase agreements and other ................................................... 1,137 1.323
-------- --------
Total interest expense ....................................................................... 12,462 10,210
-------- --------
NET INTEREST INCOME ................................................................................. 13,017 12,287
PROVISION FOR LOAN LOSSES (NOTE 4) .................................................................. 425 418
-------- --------
INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES ........................................................................ 12,592 11,869
-------- --------
OTHER INCOME
Service charges and fees on deposits ............................................................. 752 690
Other income ..................................................................................... 1,062 836
Increase in value in bank owned life insurance ................................................... 305 34
Investment gains (losses) (Note 2) ............................................................... 31 (4)
-------- --------
Total other income ............................................................................. 2,150 1,556
-------- --------
OTHER EXPENSE
Salaries and employee benefits ................................................................... 3,087 3,459
Occupancy expense ................................................................................ 507 477
Equipment expense ................................................................................ 700 569
Merger, integration and restructure expense ...................................................... 3,932
Other operating expense ........................................................................ 2,565 2,013
-------- --------
Total other expense .......................................................................... 10,791 6,518
-------- --------
INCOME BEFORE INCOME TAXES ......................................................................... 3,951 6,907
INCOME TAXES ....................................................................................... 1,186 2,286
-------- --------
NET INCOME ......................................................................................... $ 2,765 $ 4,621
======== ========
BASIC EARNINGS PER COMMON SHARE .................................................................... $ .20 $ .34
======== ========
DILUTED EARNINGS PER COMMON SHARE .................................................................. $ .20 $ .34
======== ========
See notes to the consolidated financial statements
</TABLE>
4
<PAGE> 5
CITIZENS BANCSHARES, INC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands of Dollars, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the three months
--------------------
ended March 31,
---------------
1998 1997
------- -------
<S> <C> <C>
Net Income $ 2,765 $ 4,621
Other comprehensive income, net of tax;
Unrealized losses on securities available for sale (78) (1,912)
------- -------
Comprehensive income $ 2,687 $ 2,709
======= =======
</TABLE>
CITIZENS BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months
--------------------
ended March 31,
---------------
1998 1997
---- ----
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Balances at January 1 as previously reported $ 103,277 $ 89,712
Restated to capital structure for pooling of interests (Note 8) 16,683 15,712
--------- ---------
Balances at January 1, as restated 119,960 105,424
Net income 2,765 4,621
Change in employee stock ownership plan obligation
and shares earned 63 63
Cash paid for treasury stock (682)
Cash dividends declared ($.16 per share in 1998 and
$.12 in 1997) and cash paid fractional shares (2,128) (1,706)
Change in unrealized gain (loss) on securities
available for sale (78) (1,912)
--------- ---------
Balances at March 31 $ 119,900 $ 106,490
========= =========
</TABLE>
See notes to the consolidated financial statements
5
<PAGE> 6
CITIZENS BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
--------------------
ENDED MARCH 31,
---------------
1998 1997
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES ........................... $ 2,424 $ 5,510
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale:
Proceeds from sales ........................................... 391
Proceeds from paydowns, maturities, calls ..................... 39,176 11,477
Purchases ..................................................... (62,128) (79,667)
Securities held to maturity:
Proceeds from paydowns, maturities, calls ..................... 20,260 25,661
Purchases ..................................................... (395) (27,304)
Net increase in loans ........................................... (3,955) (11,822)
Net change in interest-bearing deposits
with financial institutions .................................... 808 (115)
Purchases of premises and equipment ............................. (939) (693)
Sales of other real estate ...................................... 4
-------- --------
Net cash from investing activities .......................... (7,169) (82,072)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends and fractional shares paid ....................... (1,838) (1,587)
Net increase in deposit accounts ................................ 22,074 18,186
Net increase in repurchase agreements and Federal funds purchased (2,828) 37,732
Net change in short-term FHLB advances .......................... (58,210)
Proceeds from long-term FHLB advances ........................... 36,000 19,650
Repayment of long-term FHLB advances ............................ (5,750) (182)
Redemption of minority interest in subsidiary ................... (559) (561)
-------- --------
Net cash from financing activities .......................... (11,111) 73,238
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS ............................ (15,856) (3,324)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ..................... 52,329 57,437
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ......................... $ 36,473 $ 54,113
======== ========
</TABLE>
See notes to the consolidated financial statements
6
<PAGE> 7
CITIZENS BANCSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Citizens
Bancshares, Inc., ("Bancshares") and its wholly-owned subsidiaries, The Citizens
Banking Company ("Citizens"), Freedom Financial Life Insurance Company
("Insurance Company"), Freedom Express, Inc. and First National Bank of Chester
("FNB"). All significant inter-company transactions have been eliminated in
consolidation. Bancshares' consolidated financial statements have been restated
for prior periods due to the March 6, 1998 merger of UniBank, Steubenville,
Ohio, ("UniBank") into Citizens (See Note 8).
These interim consolidated financial statements are prepared without audit and
reflect all adjustments which, in the opinion of management, are necessary to
present fairly the consolidated financial position of Bancshares at March 31,
1998 and its results of operations and cash flows for the periods presented. All
such adjustments are of a normal, recurring nature. The consolidated financial
statements do not purport to contain all the necessary financial disclosures
required by generally accepted accounting principles that might otherwise be
necessary under the circumstances and should be read in conjunction with the
1997 consolidated financial statements and notes thereto of Bancshares included
in its Annual Report to Shareholders for the year ended December 31, 1997.
The provision for income taxes is based upon the effective tax rate expected to
be applicable for the entire year.
For the three months ended March 31, 1998 and 1997, Bancshares paid interest in
the amount of $12,511 and $9,911 respectively, and taxes in the amount of $(900)
and $400, respectively.
Bancshares' non-cash transactions resulting from transfers from loans to other
real estate owned were $0 for each of the three months ended March 31, 1998 and
1997, respectively. Securities with an amortized cost of $6,512 were transferred
from held to maturity to available for sale at March 06, 1998. These securities
were owned by UniBank prior to its merger with Citizens (Note 8) with no
significant differences between fair value and amortized cost. They were
transferred to conform the combined entity with Bancshares' existing interest
rate risk position.
Statement of Financial Accounting Standards (SFAS) No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities",
revises accounting treatment for transfers of financial assets, such as loans
and securities, and for distinguishing between sales and secured borrowings.
SFAS No. 125 did not materially impact Bancshares' financial statements for the
quarter or the three month period ended March 31, 1998.
Under a new accounting standard, comprehensive income is now reported for all
periods. Comprehensive income includes both net income and other comprehensive
income. Other comprehensive income includes the change in unrealized gains and
losses on securities available for sale.
Earnings per share are calculated on the basis of the weighted average number of
shares outstanding after considering the Bancshares common shares issued in the
merger discussed above. On May 11, 1998, the Board of Directors declared a 2 for
1 stock split to be paid on June 1, 1998, to shareholders of record May 12,
1998. All earnings and dividends per share disclosures have been restated to
reflect the stock split. Basic and diluted weighted shares outstanding at March
31, 1998 were 13,647,688 and 13,680,446, respectively. Basic and diluted
weighted shares outstanding at March 31, 1997 were 13,653,972 and 13,686,594,
respectively. Earnings per share were $.20 for the quarter ended March 31, 1998
for both basic and diluted earnings per share.
7
<PAGE> 8
CITIZENS BANCSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
NOTE 2 - INVESTMENT AND MORTGAGE-BACKED SECURITIES
The amortized costs, unrealized gains and losses and estimated fair values are
as follows:
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE:
U.S. Treasury securities $ 5,258 $ 45 $ (1) $ 5,302
U.S. Government agencies
and corporations 73,128 998 (199) 73,927
Obligations of states and
political subdivisions 100 1 101
Corporate and other securities 20,371 571 (161) 20,781
Mortgage-backed securities
GNMA, FHLMC and FNMA certificates 245,976 1,142 (551) 246,567
Agency collateralized mortgage obligations 20,654 19 (307) 20,366
Other 5,901 25 (3) 5,923
-------- -------- -------- --------
Total debt securities available for sale 371,388 2,801 (1,222) 372,967
Marketable equity securities 17,357 3,485 (96) 20,746
-------- -------- -------- --------
Total investment securities available for sale $388,745 $ 6,286 $ (1,318) $393,713
======== ======== ======== ========
SECURITIES HELD TO MATURITY:
U.S. Treasury securities $ 39,619 $ 185 $ (9) $ 39,795
U.S. Government agencies and corporations 100 (1) 99
Obligations of states and political
subdivisions 21,091 459 21,550
Corporate and other 5 5
-------- -------- -------- --------
Total investment securities held to maturity $ 60,815 $ 644 $ (10) $ 61,449
======== ======== ======== ========
</TABLE>
8
<PAGE> 9
CITIZENS BANCSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
NOTE 2 - INVESTMENT AND MORTGAGE-BACKED SECURITIES - CONTINUED
The amortized costs, unrealized gains and losses and estimated fair values are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE:
U.S. Treasury securities $ 14,994 $ 59 $ (3) $ 15,050
U.S. Government agencies
and corporations 58,993 935 (161) 59,767
Obligations of states and
political subdivisions 100 100
Corporate and other securities 23,882 291 (108) 24,065
Mortgage-backed securities
GNMA, FHLMC and FNMA certificates 223,590 1,183 (413) 224,360
Agency collateralized mortgage obligations 16,980 37 (157) 16,860
Other 4,832 26 4,858
-------- -------- -------- --------
Total debt securities available for sale 343,371 2,531 (842) 345,060
Marketable equity securities 16,203 3,397 (1) 19,599
-------- -------- -------- --------
Total investment securities available for sale $359,574 $ 5,928 $ (843) $364,659
======== ======== ======== ========
SECURITIES HELD TO MATURITY:
U.S. Treasury securities $ 38,618 $ 158 $ (8) $ 38,768
U.S. Government agencies and corporations 22,981 51 (13) 23,019
Obligations of states and political
subdivisions 22,013 428 22,441
Mortgage-backed securities
GNMA certificates 2,099 219 2,318
Other 1,496 (24) 1,472
-------- -------- -------- --------
Total investment securities held to maturity $ 87,207 $ 856 $ (45) $ 88,018
======== ======== ======== ========
</TABLE>
9
<PAGE> 10
CITIZENS BANCSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
NOTE 2 - INVESTMENT AND MORTGAGE-BACKED SECURITIES - CONTINUED
The amortized cost and estimated market value of debt securities at March 31,
1998 by contractual maturity are shown below. Expected maturities will likely
differ from contractual maturities because some issuers have the right to call
or repay obligations at any time with or without penalty.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ---------
<S> <C> <C>
DEBT SECURITIES AVAILABLE FOR SALE:
Due in one year or less $ 4,323 $ 4,329
Due after one year through five years 22,102 22,067
Due after five years through ten years 58,358 59,236
Due after ten years 14,074 14,479
Mortgage-backed securities 272,531 272,856
--------- ---------
Total debt securities available for sale $ 371,388 $ 372,967
======== ========
DEBT SECURITIES HELD TO MATURITY:
Due in one year or less $ 16,209 $ 16,283
Due after one year through five years 37,035 37,363
Due after five years through ten years 6,823 7,021
Due after ten years 748 782
--------- ---------
Total debt securities held to maturity $ 60,815 $ 61,449
======== ========
</TABLE>
There were no sales of securities for the quarter or three month period ended
March 31, 1998. Gains on securities sold resulted from calls within the UniBank
portfolio. There were sales of $391 for the three month period ended March 31,
1997. For the quarter ended March 31, 1997 related gross losses of $4 and gross
gains of $0 were recognized.
10
<PAGE> 11
CITIZENS BANCSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
NOTE 3 - LOANS
The loan portfolio at March 31, 1998 and December 31, 1997 was as follows:
<TABLE>
<CAPTION>
MARCH 31, December 31,
1998 1997
--------- ---------
<S> <C> <C>
Commercial, financial and agricultural $183,802 $197,135
Residential real estate mortgage 340,390 345,921
Commercial real estate 142,889 122,297
Construction 4,975 5,329
Consumer 99,559 96,908
Real estate mortgage loans held for sale 15,175 6,335
--------- ---------
Total loans $786,790 $773,925
======== ========
Nonaccrual and past due loans:
MARCH 31, December 31,
1998 1997
--------- ------------
Loans accounted for on a nonaccrual basis $1,247 $1,541
Loans past due more than 90 days and
still accruing interest 1,897 1,373
--------- ---------
$3,144 $2,914
======== ========
</TABLE>
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
A summary of the activity in the allowance for loan losses for the three months
ended March 31, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Balance at January 1 $13,559 $ 12,395
Provision for loan losses 425 418
Recoveries 219 259
Loans charged-off (674) (628)
--------- ---------
Balance at March 31 $13,529 $ 12,444
======== ========
</TABLE>
Information regarding impaired loans is as follows:
<TABLE>
<CAPTION>
For the three months ended March 31,
1998 1997
--------- ---------
<S> <C> <C>
Average investment in impaired loans $ 3,678 $ 3,091
Interest income recognized on impaired loans $ 67 $ 84
Interest income received on impaired loans $ 58 $ 68
</TABLE>
11
<PAGE> 12
CITIZENS BANCSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
NOTE 4 - ALLOWANCE FOR LOAN LOSSES - CONTINUED
<TABLE>
<CAPTION>
MARCH 31, December 31,
1998 1997
---- ----
<S> <C> <C>
Balance of impaired loans $5,936 $2,287
Specific allocation associated with
impaired loans 351 189
</TABLE>
The balance of impaired loans includes certain delinquent and nonaccrual loans
previously disclosed in Note 3 in the aggregate amount of $887 and $675 at March
31, 1998 and December 31, 1997, respectively.
NOTE 5 - CONCENTRATIONS OF CREDIT RISK
Bancshares, through its subsidiary banks, grants residential, consumer and
commercial loans to customers located primarily in the eastern Ohio counties of
Columbiana, Jefferson, Stark, Mahoning, Carroll and Belmont and in the West
Virginia county of Hancock.
Real estate mortgage loans, including construction loans and loans held for
sale, totaled $360,540 of loans at March 31, 1998, and are secured primarily by
1 - 4 family residences. Commercial real estate loans comprised 18.16% of loans
at March 31, 1998 and represent borrowings secured by commercial buildings and
real estate primarily in the Citizens and FNB market areas.
Also at March 31, 1998, 11.2% of total loans were to a group of related
enterprises involved in purchasing pools of one-to-four family residential, home
equity and other consumer loans. The primary repayment source for the latter is
the underlying pools of consumer and mortgage debt that represent diverse loan
types and geographic distribution.
Citizens and FNB are parties to financial instruments which involve off-balance
sheet risk. These instruments are entered into in the normal course of business
to meet the financing needs of their customers. These financial instruments
include commitments to make loans. There were $69,086 in variable rate
commitments and $10,943 in fixed rate commitments at March 31, 1998. The fixed
rate commitments have an interest rate range of 5.875% to 8.00%. There were
$72,353 in variable rate commitments and $4,824 in fixed rate commitments at
year end 1997. The fixed rate commitments have an interest rate range of 6.375%
to 8.00%. All fixed rate mortgage real estate commitments expire after sixty
days. Since many expire without being used, these amounts do not necessarily
represent future cash commitments.
The exposure to credit loss in the event of nonperformance by the other party to
the financial instrument for commitments to make loans and lines and letters of
credit is represented by the contractual amount of those instruments. Citizens
and FNB follow the same credit policy to make such commitments as is followed
for those loans recorded in the financial statements. In management's opinion,
these commitments represent normal banking transactions and no material losses
are expected to result therefrom. Collateral obtained upon exercise of the
commitments is determined using management's credit evaluation of the borrower
and may include real estate and/or business assets.
12
<PAGE> 13
CITIZENS BANCSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Citizens and FNB are involved in various legal actions arising in the ordinary
course of business. In the opinion of management, the outcome of these matters
will not have a material effect on Bancshares.
Bancshares' subsidiary banks were required to have approximately $16,440 of cash
on hand or on deposit with the Federal Reserve Bank to meet regulatory reserve
requirements at March 31, 1998. These balances do not earn interest.
NOTE 7 - FEDERAL HOME LOAN BANK ADVANCES
Bancshares' Federal Home Loan Bank advances at March 31, 1998 were:
<TABLE>
<CAPTION>
Maturity or first
Amount Rate repricing date
-------- ---- --------------
<S> <C> <C>
85,305 5.51% 1998
23,500 6.15 1999
$108,805
</TABLE>
NOTE 8 - ACQUISITIONS
Effective March 6, 1998, UniBank affiliated with Bancshares by mergering into
Citizens. The transaction was affected through the exchange of 13.25 common
shares of Bancshares for each of UniBank's 75,000 outstanding common shares
(total of 993,692) with cash paid in lieu of fractional shares. UniBank had
assets of $217,397 with ten offices in Jefferson County, and will be operated as
branches of Citizens. The following is a summary of separate results of
operations for Bancshares and UniBank for the quarter ended March 31, 1997:
<TABLE>
<CAPTION>
For the three months ended March 31, 1997
Net interest income Net income
------------------- ----------
<S> <C> <C>
Bancshares $10,472 $4,109
UniBank 1,815 512
--------- --------
Combined $12,287 $4,621
======= ======
</TABLE>
13
<PAGE> 14
CITIZENS BANCSHARES, INC.
-------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS.
- --------------
(Dollars in thousands, except per share data)
The purpose of this discussion is to focus on information concerning the
consolidated financial condition of Bancshares at March 31, 1998, compared to
December 31, 1997, and the results of operations for the quarter ended March 31,
1998, as compared to the same period in 1997, which is not otherwise apparent
from the financial statements. This discussion should be read in conjunction
with the interim consolidated financial statements and the footnotes thereto
included elsewhere in this Form 10-Q. Forward-looking statements contained in
this discussion involve risks and uncertainties and are subject to change based
on various important factors. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements, and the purpose of
this paragraph is to secure the use of the safe harbor provisions. While
Bancshares believes that the assumptions underlying the forward-looking
statements contained herein and in other public documents are reasonable, any of
the assumptions could prove to be inaccurate, and accordingly, actual results
and experience could differ materially from the anticipated results or other
experiences expressed by Bancshares in its forward-looking statements.
RESULTS OF OPERATIONS
Core earnings, which excludes the after tax financial impact of merger,
integration, and restructuring expense, and gains on sales of loans and
investments, were $5,211 a 12.8% increase from the $4,621 earned in the
comparable period in 1997. The core earnings per common share for the first
quarter of 1998 were $.38 representing an increase of 11.8% from the $.34 earned
per share in the comparable period in 1997.
Net income for the quarter ended March 31, 1998, included nonrecurring after tax
income and expense. The nonrecurring items for the quarter ended March 31, 1998,
were a $2,486 after tax merger, integration and restructuring charge related to
an acquisition and after tax gains on the sales of loans and securities of $40
The merger, integration and restructuring charge was for severance pay, branch
closures, service contracts, and transaction fees. Net income, as a result of
the after tax financial impact of the nonrecurring items previously discussed,
was $2,765 for the first quarter of 1998 and decreased 40.2% from the $4,621
earned in the comparable period in 1997. Basic earnings per share for the first
quarter of 1998 were $.20, with diluted earnings per share being $.20,
representing a decrease of 41.2% over the $.34 basic and diluted earnings per
share for the comparable period in 1997.
The provision for loan losses of $425 for the quarter ended March 31, 1998
increased $7 from the comparable period in 1997.
Total other income of $2,150 for the first quarter of 1998 increased $594 or 38%
from the comparable period in 1997. This increase was primarily the result of
income earned on the bank owned life insurance ("BOLI"). The cash surrender
value of the life insurance increased $271 for the first quarter of 1998.
Citizens implemented the single premium BOLI to offset the cost of employee
benefits. The rise in other income also was affected by an increase in services
charges on deposit accounts and higher fees on loans and ATMs.
Total other expense of $10,791 for the first quarter of 1998 increased $4,273 or
66% from the comparable period in 1997. This increase was primarily due to the
pretax merger, integration and restructure expense of $3,932 discussed above.
The increase in other operating expense also was affected by an increase in
amortization of intangible assets of $248.
14
<PAGE> 15
CITIZENS BANCSHARES, INC.
-------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- --------------------------------------------------------------------------
OPERATIONS (CONTINUED).
- -----------------------
(Dollars in thousands, except per share data)
RESULTS OF OPERATIONS - CONTINUED
Excluding the nonrecurring after tax expense and income items discussed above,
return on average shareholders' equity was 17.52% and return on average assets
was 1.58%. In addition, excluding the nonrecurring after tax expense and income,
the Corporation's efficiency ratio, a measure of operating efficiency, was
44.73% for the first quarter of 1998.
NET INTEREST INCOME
<TABLE>
<CAPTION>
For the three months ended March 31,
1998 1997
------- -------
<S> <C> <C>
Net interest income $13,017 $12,287
Taxable equivalent adjustment 230 242
------- -------
Net interest income taxable equivalent $13,247 $12,529
======= =======
Net interest margin 4.27% 4.62%
Taxable equivalent adjustment .08 .09
---- -----
Net interest margin taxable equivalent 4.35% 4.71%
==== ====
</TABLE>
Net interest income taxable equivalent, of $13,247, for the three months ended
March 31, 1998 increased $718 from the comparable period in 1997.
The net interest margin, fully taxable equivalent of 4.35% for the first three
months of 1998 decreased from 4.71% for the comparable period in 1997. The yield
on average earning assets was 8.31% for the first three months of 1998 compared
to 8.46% for the comparable period in 1997. The cost of interest bearing
liabilities was 4.51% for the first three months of 1998 compared to 4.36% for
the comparable period in 1997. Increases in interest rates paid on Federal Home
Loan Bank advances and securities sold under repurchase agreements have
contributed to the increase in the cost of interest bearing liabilities for the
first three months of 1998 compared to the same period in 1997.
Average gross earning assets increased $78,988 during the first quarter of 1998,
while the average rate earned on these assets decreased from 8.33% at December
31, 1997 to 8.31% at March 31, 1998.
15
<PAGE> 16
CITIZENS BANCSHARES, INC.
-------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- --------------------------------------------------------------------------
OPERATIONS (CONTINUED).
- -----------------------
(Dollars in thousands, except per share data)
CHANGES IN FINANCIAL CONDITION
Total assets of $1,331,113 at March 31, 1998 remained relatively constant
compared to year-end 1997. Total deposits at March 31, 1998 of $1,009,461
increased $22,074 from December 31, 1997. These lower cost sources of funds were
used to purchase investment and mortgage-backed securities available for sale
and to fund loan growth. Net loans totaled $773,261 at March 31, 1998,
representing an increase of $12,895 or 1.7% since year-end 1997.
NONPERFORMING ASSETS
Nonperforming loans as a percentage of total loans were .40% at March 31, 1998,
as compared to .38% at December 31, 1997. The allowance for loan losses as a
percentage of total loans at March 31, 1998 was 1.72% compared to 1.75% at
December 31, 1997. Nonperforming loans as a percentage of the allowance for loan
losses increased to 23.2% at March 31, 1998, from 21.5% at December 31, 1997.
Other real estate totaled $139 at March 31, 1998 and $166 at December 31, 1997,
respectively.
Bancshares continues to analyze the adequacy of its allowance for loan losses as
a percentage of total loans on a quarterly basis. Annualized net charge-offs
constituted .24% of average loans for the three months ended March 31, 1998, as
compared to .15% for the year ended December 31, 1997.
LIQUIDITY
Bancshares' liquidity position remained strong during the first quarter of 1998.
Core deposits, representing Bancshares' largest most stable and generally least
costly source of funds, totaled $920,184 and were 117.0% of total loans at March
31, 1998. The core deposit levels at March 31, 1998 approximated the levels at
year-end 1997.
Cash and cash equivalents, interest-bearing time deposits and securities
available for sale are Bancshares' most liquid assets. At March 31, 1998, these
assets totaled $432,394, an increase of $12,390 or 2.9% from December 31, 1997.
Management believes that Bancshares' liquidity position is strong based on its
high level of cash, cash equivalents, core deposits, the stability of its other
funding sources and its capital base.
16
<PAGE> 17
CITIZENS BANCSHARES, INC.
-------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- --------------------------------------------------------------------------
OPERATIONS (CONTINUED).
- -----------------------
(Dollars in thousands, except per share data)
CAPITAL RESOURCES
Shareholders' equity totaled $119,900 at March 31, 1998, compared to $119,960 at
December 31, 1997. The ratio of shareholders' equity to assets was 9.01% at
March 31, 1998 and 9.00% at December 31, 1997.
<TABLE>
<CAPTION>
MARCH 31, 1998 December 31, 1997
------------- -----------------
AMOUNT PERCENT Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Tier 1 risk-based capital
Actual $112,000 14.21 % $110,066 14.06 %
Required 31,524 4.00 31,307 4.00
Total risk-based capital
Actual $121,897 15.47% $119,721 15.30 %
Required 63,049 8.00 62,613 8.00
</TABLE>
The following table summarizes Bancshares' consolidated leverage capital ratio
and required amounts at March 31, 1998 and December 31, 1997.
<TABLE>
<CAPTION>
MARCH 31, 1998 December 31, 1997
---------------------- -------------------
Leverage Ratio AMOUNT PERCENT Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Actual $112,000 8.33% $110,066 8.90%
Minimum required 40,342 3.00 37,107 3.00
Maximum required 67,237 5.00 61,844 5.00
</TABLE>
The unrealized gain on securities available for sale, net of tax effect, was
$3,229 at March 31, 1998, compared to an unrealized gain of $3,307 at December
31, 1997. The decrease of $78 was primarily attributable to the changing
interest rate environment.
GENERAL
The Corporation acquired UniBank on March 6, 1998, and the branches of UniBank
became part of Bancshares' lead bank, Citizens . In the communities of
Steubenville and Wintersville, duplications of branch offices existed;
therefore, Citizens consolidated two offices without sacrificing customer
service while yielding greater efficiencies in operations. We are very pleased
that the technical conversion of customer accounts went smoothly. We are now in
the number one position in deposit and loan market share in Jefferson County,
where Citizens has 14 banking locations to serve its customers.
17
<PAGE> 18
CITIZENS BANCSHARES, INC.
-------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- --------------------------------------------------------------------------
OPERATIONS (CONTINUED).
- -----------------------
(Dollars in thousands, except per share data)
GENERAL - CONTINUED
Century Financial Corporation ("Century"), Bancshares' largest acquisition, was
completed May 12, 1998. The Rochester, Pennsylvania, based bank has 13 banking
offices in Beaver and Butler counties and will initially operate as a
wholly-owned bank subsidiary of Bancshares. As of March 31, 1998, Century had
assets of $453 million, loans totaling $352 million, and deposits totaling $392
million.
As with all financial institutions, Bancshares' operations depend almost
entirely on computer systems. Bancshares is addressing the potential problems
associated with the possibility that the computers that control or operate
Bancshares' operating systems, facilities and infrastructure may not be
programmed to read four-digit date codes and, upon arrival of the year 2000, may
recognize the two-digit "00" as the year 1900, causing systems to fail to
function or to generate erroneous data. Bancshares is working with the companies
that supply or service its computer-operated or -dependent systems to identify
and remedy any year 2000 related problems.
As of the date of this Form 10-Q, Bankshares has not identified any specific
expenses that are reasonably likely to be incurred in connection with this issue
and does not expect to incur significant expense to implement corrective
measures. No assurance can be given, however, that significant expense will not
be incurred in future periods. Bancshares has established a dedicated Year 2000
project team responsible for resolving this complex issue so that our customers
will not be adversely affected.
In the second quarter of 1997, Bancshares began offering trust and investments
services. The Trust Group, which is based in Boardman, Ohio, has already grown
to $73 million in assets. Considering recent and proposed acquisitions, plans
include expanding an office presence in the Steubenville area and the
continuation of Century's trust office in Rochester.
Bancshares expects to move into our new retail bank/trust and investment complex
in Boardman during the third quarter of 1998. Located on an out parcel of
Creekside Place Shopping Center at the intersection of Route 224
(Boardman-Poland Road) and Tippecanoe Road, the new facility will replace an
older branch in Boardman and will incorporate the administrative and operations
areas of the Trust Group in a separate section.
ITEM 3. QUANTITATIVE AND QUALITITIVE DISCLOSURE ABOUT MARKET RISK
Asset and Liability Management
The Corporation's 1997 annual report and Form 10-K provide information about the
Company's management of interest rate risk and , to a lesser extent, liquidity
risk. Bancshares does not maintain a trading account for any class of financial
instrument and is not affected by foreign currency exchange risk or commodity
price risk. Of the $17 million in equities held by Bancshares and subsidiaries,
$12 million represent FHLB stock and Federal Reserve Bank Stock.
18
<PAGE> 19
CITIZENS BANCSHARES, INC.
-------------------------
ITEM 3. QUANTITATIVE AND QUALITITIVE DISCLOSURE ABOUT MARKET RISK (CONTINUED)
Due to the pooling of UniBank, Steubenville, which was acquired on March 6,
1998, the market value of portfolio equity has changed, but the projected
volatility of +/- 200 bp change in interest rates still falls well within the
Board of Directors guidelines of +/- 30%.
<TABLE>
<CAPTION>
Projected change in net portfolio value
---------------------------------------
Change in rates $Amount $Change %Change
--------------- --------- -------- -------
<S> <C> <C> <C>
+200bp $ 168,549 $ 17,549 12%
Base 150,588
-200bp 165,917 15,329 10
</TABLE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There is no pending litigation, other than routine litigation
incidental to the business of Bancshares and its affiliates, or of a
material nature involving or naming Bancshares or any of its affiliates
as a defendant. Further, there are no material legal proceedings in
which any director, executive officer, principal shareholder or
affiliate of Bancshares is a party or has a material interest which is
adverse to Bancshares or any of its affiliates. None of the routine
litigation in which Bancshares or any of its affiliates are involved is
expected to have a material adverse impact upon the financial position
or results of operations of Bancshares or any of its affiliates.
ITEM 2. CHANGES IN SECURITIES.
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following Exhibits are included in this Form 10-Q or are
incorporated by reference as noted in the following index:
19
<PAGE> 20
CITIZENS BANCSHARES, INC.
-------------------------
PART II - OTHER INFORMATION - CONTINUED
---------------------------------------
EXHIBIT INDEX
-------------
EXHIBIT 3 Articles of Incorporation, By laws
(1) Registrant's Fourth Amended Articles of Incorporation,
(incorporated by reference in Exhibit 3 (1) to the Form 10-K
of Citizens Bancshares, Inc. for the quarter ended December
31, 1996).
(2) Registrant's Regulations, as amended (incorporated by
reference in Exhibit 3 (2) to the Form S-4 Registration
Statement No. 0-18209 of Citizens Bancshares, Inc.).
EXHIBIT 10 Material Contracts
(1) The Citizens Bancshares Inc. Profit-Sharing Plan and Trust
(formerly known as the CBC Salineville Profit Sharing Plan and
Trust) (incorporated by reference in Exhibit 10 (2) to the
Form S-4 Registration Statement No. 0-18209 of Citizens
Bancshares, Inc.).
(2) Citizens Bancshares, Inc. Employee Stock Ownership Plan
(incorporated by reference in Exhibit 10 (3) to the Form S-4
Registration Statement No. 0-18209 of Citizens Bancshares,
Inc.).
(3) Form of Indemnification Agreement between Citizens Bancshares,
Inc. and Individual Directors, Officers or Representatives
(incorporated by reference in Exhibit 10 (4) to the Form 10-K
of Citizens Bancshares, Inc. for the fiscal year ended
December 31, 1989).
(4) Employment Agreement by and among Citizens Bancshares, Inc.,
The Citizens Banking Company and Marty E. Adams (incorporated
by reference in Exhibit 10 (5) to the Form 10-K of Citizens
Bancshares, Inc. for the fiscal year ended December 31, 1992).
(5) Amendment to Executive Employment Agreement by and among
Citizens Bancshares, Inc., The Citizens Banking Company and
Marty E. Adams. (incorporated by reference in Exhibit 10 (8)
to the Form 10-K of Citizens Bancshares, Inc. for the fiscal
year ended December 31, 1993).
(6) Agreement by and among Citizens Bancshares, Inc., The Citizens
Banking Company and Frank J. Koch. (incorporated by reference
in Exhibit 10 (9) to the Form 10-K of Citizens Bancshares,
Inc. for the fiscal year ended December 31, 1993).
(7) Citizens Bancshares, Inc. Non-Statutory Stock Option and Stock
Appreciation Rights Plan.(incorporated by reference in Exhibit
10 (11) to the Form 10-Q of Citizens Bancshares, Inc. for the
quarter ended June 30, 1995).
20
<PAGE> 21
CITIZENS BANCSHARES, INC.
-------------------------
PART II - OTHER INFORMATION
---------------------------
EXHIBIT INDEX (CONTINUED)
-------------------------
(8) The Employee Retirement Plan for Citizens Bancshares, Inc.
(incorporated by reference in Exhibit 10 (12) to the Form 10-Q
of Citizens Bancshares, Inc. for the quarter ended June 30,
1995).
(9) Affiliation Agreement by and among Citizens Bancshares, Inc.,
The Citizens Banking Company, Western Reserve Bank of Ohio
(incorporated by reference in Exhibit 2 (1) to the Form S-4
Registration Statement No.33-99036 of Citizens Bancshares,
Inc.).
(10) Agreement of Merger by and among Citizens Bancshares, Inc.,
The Citizens Banking Company and Western Reserve Bank of Ohio
(incorporated by reference in Exhibit 10 (12) to the Form 10-K
of Citizens Bancshares, Inc. for the fiscal year ended
December 31, 1995).
(11) Plan and Agreement of Merger by and among Citizens Bancshares,
Inc., The Citizens Banking Company and the Navarre Deposit
Bank Company (incorporated by reference in Exhibit 10 (13) to
the Form 10-Q of Citizens Bancshares, Inc. for the quarter
ended March 31, 1996).
(12) Purchase and Assumption agreement between The Metropolitan
Savings Bank of Ohio and The Citizens Banking Company
(incorporated by reference in Exhibit 10 (12) to the Form 10-Q
of Citizens Bancshares, Inc. for the quarter ended June 30,
1997).
(13) Affiliation Agreement by and among Citizens Bancshares, Inc.,
The Citizens Banking Company and UniBank (incorporated by
reference in Exhibit 10 (13) to the Form 10-Q of Citizens
Bancshares, Inc. for the quarter ended September 30, 1997).
(14) Purchase Agreement between The Citizens Banking Company and
ValueNet Inc. (incorporated by reference in Exhibit 10 (14) to
the Form 10-Q of Citizens Bancshares, Inc. for the quarter
ended September 30, 1997).
(15) Affiliation Agreement by and among Citizens Bancshares, Inc.,
The Citizens Banking Company and UniBank (incorporated by
reference in Exhibit 2 (1) to the Form S-4 Registration
Statement No. 333-42911 of Citizens Bancshares, Inc.).
(16) Stock Option Agreement by and between Citizens Bancshares,
Inc. and Century Financial Corporation (incorporated by
reference in Exhibit (a) to the schedule 13D of Citizens
Bancshares, Inc. Filed with the Commission on November 26,
1997).
21
<PAGE> 22
CITIZENS BANCSHARES, INC.
-------------------------
PART II - OTHER INFORMATION
---------------------------
EXHIBIT INDEX (CONTINUED)
-------------------------
(17) Agreement and Plan of Merger by and between Citizens
Bancshares, Inc. and Century Financial Corporation
(incorporated by reference in Exhibit 2 to the Form 8-K of
Citizens Bancshares, Inc. filed with the Commission on
January 2, 1998).
EXHIBIT 11
Statement regarding Computation of Per Share Earnings
(included in Note 1 to the Consolidated Financial Statements).
EXHIBIT 27 Financial Data Schedules
REPORTS ON FORM 8-K
-------------------
None.
22
<PAGE> 23
Signatures
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 thereunto duly authorized.
Citizens Bancshares, Inc.
Date: May 13, 1998 Marty E. Adams
------------ --------------
Marty E. Adams
President & Chief Executive Officer
Vice Chairman
Date: May 13, 1998 William L. White III
------------ --------------------
William L. White III
Senior Vice President
Chief Financial Officer
23
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000855876
<NAME> CITIZENS BANCSHARES, INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 31,773
<INT-BEARING-DEPOSITS> 2,208
<FED-FUNDS-SOLD> 4,700
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 393,713
<INVESTMENTS-CARRYING> 60,815
<INVESTMENTS-MARKET> 61,449
<LOANS> 786,790
<ALLOWANCE> 13,529
<TOTAL-ASSETS> 1,331,113
<DEPOSITS> 1,009,461
<SHORT-TERM> 104,771
<LIABILITIES-OTHER> 10,863
<LONG-TERM> 86,050
0
0
<COMMON> 24,827
<OTHER-SE> 95,073
<TOTAL-LIABILITIES-AND-EQUITY> 1,331,113
<INTEREST-LOAN> 18,062
<INTEREST-INVEST> 7,099
<INTEREST-OTHER> 318
<INTEREST-TOTAL> 25,479
<INTEREST-DEPOSIT> 9,608
<INTEREST-EXPENSE> 12,462
<INTEREST-INCOME-NET> 13,017
<LOAN-LOSSES> 425
<SECURITIES-GAINS> 31
<EXPENSE-OTHER> 10,791
<INCOME-PRETAX> 3,951
<INCOME-PRE-EXTRAORDINARY> 3,951
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,765
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
<YIELD-ACTUAL> 8.31
<LOANS-NON> 1,247
<LOANS-PAST> 1,897
<LOANS-TROUBLED> 210
<LOANS-PROBLEM> 4,839
<ALLOWANCE-OPEN> 13,559
<CHARGE-OFFS> 674
<RECOVERIES> 219
<ALLOWANCE-CLOSE> 13,529
<ALLOWANCE-DOMESTIC> 1,989
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 11,540
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000855876
<NAME> CITIZENS BANCSHARES, INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 37,213
<INT-BEARING-DEPOSITS> 1,976
<FED-FUNDS-SOLD> 16,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 326,646
<INVESTMENTS-CARRYING> 90,052
<INVESTMENTS-MARKET> 89,813
<LOANS> 706,200
<ALLOWANCE> 12,444
<TOTAL-ASSETS> 1,203,983
<DEPOSITS> 887,136
<SHORT-TERM> 157,287
<LIABILITIES-OTHER> 8,630
<LONG-TERM> 43,813
0
0
<COMMON> 24,014
<OTHER-SE> 82,476
<TOTAL-LIABILITIES-AND-EQUITY> 1,203,983
<INTEREST-LOAN> 16,457
<INTEREST-INVEST> 5,710
<INTEREST-OTHER> 330
<INTEREST-TOTAL> 22,497
<INTEREST-DEPOSIT> 8,136
<INTEREST-EXPENSE> 10,210
<INTEREST-INCOME-NET> 12,287
<LOAN-LOSSES> 418
<SECURITIES-GAINS> (4)
<EXPENSE-OTHER> 6,518
<INCOME-PRETAX> 6,907
<INCOME-PRE-EXTRAORDINARY> 6,907
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,621
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
<YIELD-ACTUAL> 8.46
<LOANS-NON> 2,026
<LOANS-PAST> 1,198
<LOANS-TROUBLED> 411
<LOANS-PROBLEM> 1,348
<ALLOWANCE-OPEN> 12,395
<CHARGE-OFFS> 628
<RECOVERIES> 259
<ALLOWANCE-CLOSE> 12,444
<ALLOWANCE-DOMESTIC> 2,059
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 10,385
</TABLE>
