-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G0G41FmZAMJikiCD3qp0sl/3ZskMCOEawgSPNJQJqEOtHyR6C6TYHZekyf4PUARI BeckqSl2151zepMx7KssYg== 0000813640-97-000008.txt : 19970818 0000813640-97-000008.hdr.sgml : 19970818 ACCESSION NUMBER: 0000813640-97-000008 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970815 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITIZENS BANCSHARES CORP /GA/ CENTRAL INDEX KEY: 0000813640 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 581631302 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-14535 FILM NUMBER: 97664263 BUSINESS ADDRESS: STREET 1: 175 JOHN WESLEY DOBBS AVE NE STREET 2: P O BOX 4485 CITY: ATLANTA STATE: GA ZIP: 30303 BUSINESS PHONE: 4046595959 MAIL ADDRESS: STREET 1: 175 JOHN WESLEY DOBBS AVENUE, NE CITY: ATLANTA STATE: GA ZIP: 30303 10QSB 1 THIS CONFORMING PAPER FORMAT IS BEING SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10 - QSB ( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) TO THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 ( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (d) TO THE EXCHANGE ACT For the transition period from ____________ to _____________ Commission File No: 0 - 14535 CITIZENS BANCSHARES CORPORATION (Name of small business issuer in its charter) Georgia____________________________________________________ 58 - 1631302 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 175 John Wesley Dobbs Avenue, N.E., Atlanta, Georgia 30303 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (404) 659 - 5959 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months ( or for such shorter period that the registrant was required to file such reports ), and (2) has been subject to such filing requirements for the 90 days. Yes X No . State the number of shares outstanding if each of the issuer's classes of common equity as of the latest practicable date: 1,329,684 shares of Common Stock, $1.00 par value, outstanding on August 1, 1997.
Part I. Financial Information: Citizens Bancshares Corporation and Subsidiary Consolidated Balance Sheets June 30, 1997 and December 31, 1996 (unaudited-amounts in thousands, except per share amounts) ASSETS 1997 1996 Cash and due from banks $ 8,905 8,968 Federal funds sold 2,200 10,200 Investment securities: Held to maturity 20,392 26,072 Available for sale 8,822 13,269 Total investments 29,214 39,341 Loans, net of unearned income 80,392 82,408 Less allowance for loan losses 1,290 1,441 Loans, net 79,102 80,967 Premises and equipment, net 3,364 2,891 Real estate acquired through foreclosure 803 63 Other assets 4,789 2,448 Total assets $ 128,377 144,878 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Deposits: Noninterest-bearing $ 35,454 46,328 Interest-bearing 80,891 86,560 Total deposits 116,345 132,888 Treasury, tax and loan account 132 116 Federal Funds Purchased 0 - Long-term debt and obligations under capital le 675 765 Other liabilities 1,222 1,147 Total liabilities 118,374 134,916 Shareholders' equity: Common stock-$1 par value. Authorized 5,000,000 shares; issued and outstanding 1,329,684 shares 1,330 1,330 Additional Paid-In Capital 1,470 1,470 Unrealized (loss)gain on available for sale sec (26) (31) Retained earnings 7,229 7,193 Total shareholders' equity 10,003 9,962 Total liabilities and sharehol $ 128,377 144,878
Citizens Bancshares Corporation and Subsidiary Consolidated Statements of Earnings (unaudited-amounts in thousands, except per share amounts) Three Mon Six Months Ended June Ended June 30, 1997 1996 1997 1996 INTEREST INCOME: Loans, including fees $ 1,838 1,658 3,603 3,246 Investment securities Taxable 588 751 1,241 1,407 Tax-exempt 28 19 46 41 Federal funds sold 24 117 106 250 Total interest income 2,478 2,545 4,996 4,944 INTEREST EXPENSE: Deposits 782 700 1,605 1,403 Treasury tax, and loan account 2 1 3 3 Long-term debt 14 16 30 29 Total interest expense 798 717 1,638 1,435 Net interest income 1,680 1,828 3,358 3,509 Provision for loan losses - - - - Net interest income after provision for possible loan losses 1,680 1,828 3,358 3,509 NONINTEREST INCOME: Service charges on deposit accounts 809 938 1,621 1,869 Other operating income 116 57 250 186 Total noninterest income 925 995 1,871 2,055 NONINTEREST EXPENSE: Salaries and employee benefits 1,388 1,356 2,835 2,594 Net occupancy and equipment 419 359 828 857 Other operating expenses 839 796 1,517 1,462 Total other expense 2,646 2,511 5,180 4,913 (Loss) earnings before income taxes (41) 312 49 651 Income tax (benefit) expense (23) 70 13 142 Net (loss) earnings $ (18) 242 36 509 Net (loss) earnings per common share $ (0.01) 0.18 0.03 0.38 Average outstanding shares 1,330 1,330 1,330 1,330
Citizens Bancshares Corporation and Subsidiary Consolidated Statements of Cash Flows Six months ended June 30, 1997 and 1996 (unaudited-amounts in thousands, except per share amounts) 1997 1996 Cash flows from operating activities: Net earnings $ 36 509 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 375 305 Amortization (accretion), net 4 17 Amortization (accretion) of deferred loan fees 17 15 Gain on sale of securities (10) - Increase in other assets (2,370) (158) Increase (decrease) in accrued expenses and other lia 76 (346) Net cash (used) provided by operating activities (1,872) 342 Cash flows from investing activities: Proceeds from maturities of investment securities held to maturity 5,688 6,414 Proceeds from maturities of investment securities available for sale 10,969 1,000 Purchases of investment securities held to maturity - (6,500) Purchases of investment securities available for sale (6,517) (6,370) Net (decrease) increase in loans 1,039 (3,771) Purchases of premises and equipment ( 848) (841) Proceeds from sale of real estate acquired through forecl 95 121 Net cash provided (used) by investing activities 10,426 9,947) Cash flows from financing activities: Net (decrease) in demand deposits (10,874) 2,472 Net decrease in time deposits (5,669) (1,078) Net increase in federal funds purchased - 1,600 Principal payment on long-term debt (90) (45) Net increase in treasury, tax and loan account 16 394 Net cash (used) provided by financing activities (16,617) 3,343 Net decrease in cash and cash equivalents (8,063) (6,262) Cash and cash equivalents at beginning of period 19,168 14,015 Cash and cash equivalents at end of period $ 11,105 7,753 Supplemental disclosures of cash paid during the period for: Interest $ 1,667 1,412 Income taxes $ - 294 Supplemental disclosures of noncash transactions: Real estate acquired through foreclosure $ 836 92
CITIZENS BANCSHARES CORPORATION AND SUBSIDIARY Notes to the Consolidated Financial Statements June 30, 1997 and 1996 (unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited statements have been prepared pursuant to the rules and regulations for reporting on Form 10 - QSB. Accordingly, certain disclosures required by generally accepted accounting principles are not included herein. These interim statements should be read in conjunction with the financial statements and notes thereto included in the company's latest Annual Report on Form 10 - KSB. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Citizens Trust Bank ( the "Bank" ). The Bank has a wholly owned subsidiary, Atlanta Mortgage Brokerage and Servicing Co., whose accounts are also included. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements of Citizens Bancshares Corporation and Subsidiary ( the "Company" ) as of June 30, 1997 and for the three and six month periods ended June 30, 1997 and 1996 are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the financial position and results of operations and cash flows for the three month period have been included. All adjustments are of a normal recurring nature. 2. ACCOUNTING AND REGULATORY MATTERS During 1997, the Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 128, Earnings Per Share (SFAS 128). SFAS supersedes APB Opinion 15. SFAS 128 simplifies current standards by eliminating the presentation of primary EPS and requiring the presentation of basic EPS, which includes no potential common shares and thus no dilution. The Statement also requires entities with complex capital structures to present basic and diluted EPS on the face of the income statement and also eliminates the modified treasury stock method of computing potential common shares. The Statement is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. Early application is not permitted. On adoption, restatement of all prior-period EPS data presented is required. Based upon the current capital structure of the Company, this Statement should have no effect on the present EPS calculation. SERVICING RIGHTS The Financial Accounting Standards Board(FASB) has issued SFAS No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities which requires the Company to make certain disclosures regarding its servicing assets and liabilities, and may also affect the classification of certain servicing assets and liabilities. SFAS 125 is effective for transfers and servicing of financial a s sets and extinguishments of liabilities occurring after December 31, 1996. On January 1, 1997, the Company adopted the provisions of SFAS No. 125 which had no material impact on the consolidated financial statements. IMPAIRED LOANS Management considers a loan to be impaired when, based on current information and events, it is probable that all amounts due according to the contractual terms of the loan will not be collected. Impaired loans are measured based on the present value of expected future cash flows, discounted at the loan s effective interest rate, or at the loans observable market price, or the fair value of the collateral if the loan is collateral dependent. Loans are generally placed on nonaccrual status when the full and timely collection of principal or interest becomes uncertain or the loan becomes contractually in default for 90 days or more as to either principal or interest unless the loan is well collateralized and in the process of collection. When a loan is p l a ced on nonaccrual status, current period accrued and uncollected interest is charged to interest income on loans unless management feels the accrued interest is recoverable through the liquidation of collateral. Interest income, if any, on nonaccrual loans is generally recognized on the cash basis. At June 30, 1997, the recorded investment in loans that are considered to be impaired was approximately $1,292,000, a decrease of $667,000 from December 31, 1996 (of which approximately $1,093,000 and $1,955,000, respectively, were on a nonaccrual basis). The related allowance for loan losses for each of these loans was approximately $164,000 and $393,000, respectively. For the three month and six month periods ended June 30, 1997, the Company recognized approximately $5,000 and $19,000 interest income on these impaired loans on an accrual basis, respectively. NONPERFORMING ASSETS Nonperforming assets include nonperforming loans, real estate a c q uired through foreclosure and repossessed assets. Nonperforming loans consist of loans which are past due with respect to principal or interest more than 90 days or have been placed on nonaccrual status and restructured loans. Accrual of interest on loans is discontinued when reasonable doubt exists as to the full, timely collection of interest or principal or they become contractually in default for 90 days or more as to either interest or principal unless the loan is well secured and in process of collection. When a loan is placed on nonaccrual status, previously accrued and uncollected interest is charged against interest income on loans unless management feels the accrued interest is recoverable through the liquidation of the collateral. With the exception of the loans included within nonperforming assets in the table below, management is not aware of any loans classified for regulatory purposes as loss, doubtful, substandard, or special mention that have not been disclosed which(1) represent or result from trends or uncertainties which management reasonably expects will materially impact future operating results, liquidity, or capital resources, or (2) represent any information on material credits which management is aware that causes management to have serious doubts as to the abilities of such borrower to comply with the loan repayment terms. Nonperforming loans decreased approximately $223,000 to $1,142,000 at June 30, 1997, from $1,365,000 at December 31, 1996. Real estate acquired through foreclosure increased approximately $740,000 or 117% from $63,000 at December 31, 1996 to $803,000 at June 30, 1997. Nonperforming assets represented 2.40% of loans, net of unearned income and real estate acquired through foreclosure at June 30, 1997 as compared to 1.73% at December 31, 1996.
The decrease in nonperforming assets relative to loans, net of unearned income and real estate acquired through foreclosure, reflects management s continuous effort to reduce nonperforming assets. The table below presents a summary of the Company s nonperforming assets at June 30, 1997 and December 31, 1996. 1997 1996 (Amounts in thousands, except financial ratios) Nonperforming assets: Nonperforming loans: Nonaccrual loans $ 1,093 1,286 Past-due loans 49 79 Nonperforming loans 1,142 1,365 Real estate acquired through foreclosure 803 63 Total nonperforming assets $ 1,945 1,428 Ratios: Nonperforming loans to loans, net of unearned income 1.42% 1.66% Nonperforming assets to loans(net of unearned income) and real estate acquired through foreclosure 2.40% 1.73% Nonperforming assets to total assets 1 .52% .99% Allowance for loan losses to nonperforming loans 112.96% 105.57% Allowance for loan losses to nonperforming assets 66.32% 100.91%
Interest income on nonaccrual loan which would have been reported for the three and six months ended June 30, 1997 totaled approximately $24,000 and $91,000. The Company recorded approximately $2,000 and $43,000 interest income on these loans for the three and six months period ended June 30, 1997. ALLOWANCE FOR LOAN LOSSES The following table summarizes loans, changes in the allowance for loans losses arising from loans charged off, recoveries on loans previously charged off by loan category, and additions to the allowance which have been charged to operating expense as of and for the period ended June 30, 1997 and December 31, 1996. 1997 1996 Loans, net of unearned income $ 80,392 82,408 Average loans, net of unearned income and the allowance for loan losses $ 79,844 73,576 Allowance for loans losses at the beginning of year $ 1,441 1,566 Loans charged off: Commercial, financial, and agricultural 3 111 Real estate- mortgage 148 237 Installment loans to individuals 164 76 Total loans charged off 315 424 Recoveries of loans previously charged off: Commercial, financial, and agricultural 17 38 Real estate- mortgage 77 104 Installment loans to individuals 70 92 Total loans recovered 164 234 Net loans charged off 151 190 Additions to allowance for loan losses charged to operating expense - 65 Allowance for loan losses at period end $ 1,290 1,441 Ratio of net loans charged off to average loans, net of unearned income and the allowance for loan losses .19% .26 Allowance for loan losses to loans, net of unearned income 1.60% 1.75
Credit reviews of the loan portfolio designed to identify potential charges to the allowance for loan losses, as well as to determine the adequacy of the allowance for loans losses, are made on a continuous basis throughout the year. These reviews are conducted by management, lending officers, and independent third parties. These reviews are also reviewed by the Board of Directors, who consider such factors as the financial strength of borrowers, the value of applicable collateral, past loan loss e x p erience, anticipated loan losses, growth in the loan portfolio, and other factors including prevailing and anticipated economic conditions. Management believes the allowance for loan losses is adequate at June 30, 1997. A substantial portion of the Company s loan portfolio is secured by real estate in the metropolitan Atlanta market. Accordingly, the ultimate collectibility of a substantial portion of the Company s loan portfolio is susceptible to changes in the market conditions in the metropolitan Atlanta area. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS INTRODUCTION Citizens Bancshares Corporation ( the "Company" ), a one-bank holding company, provides a full range of commercial banking services to individual and corporate customers in metropolitan Atlanta through its wholly owned subsidiary, Citizens Trust Bank ( the "Bank" ). The Bank operates under a state charter and serves its customers through eight full service branches. The following discussion is of the Company's financial condition as of June 30, 1997 and the changes in financial condition and results of operations for the three and six month periods ended June 30, 1997 and 1996. RESULTS OF OPERATIONS Net Interest Income: Net interest income represents the excess of income received on interest-earning assets and interest paid on interest-bearing liabilities. Net interest income for the three month and six month periods ended June 30, 1997 decreased approximately $148,000 and $151,000 or 8% and 4% respectively. The combination of higher volune as well as higher rates paid on interest bearing liabilities decreased the Company's net interest margin to 5.45% for the period ended June 30, 1997 compared to 5.79% in 1996. Noninterest income: Noninterest income decreased approximately $70,000 or 7% for the three month period ended June 30, 1997 and approximately $184,000 or 9% for the six month period ended June 30, 1997 as compared to the same period in 1996. The decrease in noninterest income is due to a decrease in service charges on deposits of $248,000 or 13%. Noninterest expense: Noninterest expense increased approximately $135,000 and $267,000 or 5% for the three and six month periods ended June 30, 1997 respectively, as compared to the same period in 1996. The increase is attributable to a combination of an increase in salaries and employee benefits of $241,000, a decrease in occupancy expense of $29,000 and an increase in other operating expenses of $55,000. The increase in salaries and employee benefit costs is due to new hires, normal salary adjustments and increased employee benefits. Net earnings: The Company had a net loss of approximately ($18,000) or ($0.01) per share for the three month period ended June 30, 1997 and net earnings of $36,000 or $0.03 per share for the six month period ended June 30, 1997 as compared to $242,000 and $509,000 or $0.18 and $0.38 per share in 1996. The $473,000 or 93% decrease in net earnings as compared to 1996 is attributable to a combination of declining net interest income and noninterest income of $151,000 and $184,000 respectively, and an increase in noninterest expense of approximately $267,000. LIQUIDITY Liquidity is a bank's ability to meet deposit withdrawals, while also, providing for the credit needs of customers. In the normal course of business, the Company's cash flow is generated from interest and fees on loans and other interest-earning assets, repayments of loans, and maturities of investment securities. The Company continues to meet liquidity needs primarily through the sale of federal funds and managing the maturities of investment securities. At June 30,1997, approximately 9% of the investment portfolio matures within the next year, 61% after one year but before five years. In addition, federal funds sold averaged approximately $3.9 million during the six month period ended June 30, 1997. The Company is a member of the Federal Home Loan Bank of Atlanta, the Federal Reserve System and maintains relationships with several correspondent banks and, thus, could obtain funds on short notice. Company management closely monitors and maintains appropriate levels of interest-earning assets and interest-bearing liabilities, so that maturities of assets are s u c h that adequate funds are provided to meet customer withdrawals and loan demand. CAPITAL RESOURCES Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total Tier 1 capital to risk weighted assets and Tier 1 capital to average assets. As of June 30, 1997 the Company s actual capital amounts and ratios are as follows: For Capital Actual Adequacy Purposes (amounts in thousands) Amount Ratio Amount Ratio Total Capital (to Risk Weighted Assets): Consolidated $ 11,067 12% $7,254 >= 8% Bank $ 11,679 13% $7,251 >= 8% Tier 1 Capital (to Risk Weighted Assets): Consolidated $ 9,932 11% $3,627 >= 4% Bank $ 10,544 12% $3,625 >= 4% Tier 1 Capital (to Average Assets): Consolidated $ 9,932 7% $5,528 >= 4% Bank $ 10,544 7% $5,527 >= 4% PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS T h e Company is not aware of any material pending legal proceedings to which the Company or its subsidiary is a party or to which any of their property is subject. ITEM 2. CHANGES IN SECURITIES The Bank is restricted as to dividend payments to the Company by regulatory requirements. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION Effective July 1, 1997, Mr. William L. Gibbs resigned as the President and Chief Executive Officer of the Bank. Dr. Johnnie L. Clark, Vice Chairman of the Company s Board of Directors, was named as his temporary replacement. Effective July 27, 1997, the Company signed a letter of intent to merge with First Southern Bancshares, Inc.. The merger is contingent upon regulatory and shareholder approval. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CITIZENS BANCSHARES CORPORATION Date: August 13, 1997 By: /s/ Johnnie L. Clark Johnnie L. Clark President and Chief Executive Officer Date: August 13, 1997 By: /s/ Ann I. Scott Ann I. Scott Senior Vice President and Controller EX-1 2 [ARTICLE] 9 [CIK] [NAME] [PERIOD-TYPE] 6-MOS [FISCAL-YEAR-END] DEC-31-1997 [PERIOD-END] JUN-30-1997 [CASH] 8905 [INT-BEARING-DEPOSITS] 80891 [FED-FUNDS-SOLD] 2200 [TRADING-ASSETS] 0 [INVESTMENTS-HELD-FOR-SALE] 20392 [INVESTMENTS-CARRYING] 0 [INVESTMENTS-MARKET] 8822 [LOANS] 80392 [ALLOWANCE] 1290 [TOTAL-ASSETS] 128377 [DEPOSITS] 116345 [SHORT-TERM] 0 [LIABILITIES-OTHER] 1222 [LONG-TERM] 675 [PREFERRED-MANDATORY] 0 [PREFERRED] 0 [COMMON] 1330 [OTHER-SE] 8673 [TOTAL-LIABILITIES-AND-EQUITY] 128377 [INTEREST-LOAN] 3603 [INTEREST-INVEST] 1287 [INTEREST-OTHER] 106 [INTEREST-TOTAL] 4996 [INTEREST-DEPOSIT] 1605 [INTEREST-EXPENSE] 1638 [INTEREST-INCOME-NET] 3358 [LOAN-LOSSES] 0 [SECURITIES-GAINS] 10 [EXPENSE-OTHER] 5180 [INCOME-PRETAX] 49 [INCOME-PRE-EXTRAORDINARY] 49 [EXTRAORDINARY] 0 [CHANGES] 0 [NET-INCOME] 36 [EPS-PRIMARY] .03 [EPS-DILUTED] .03 [YIELD-ACTUAL] 5.45 [LOANS-NON] 1093 [LOANS-PAST] 49 [LOANS-TROUBLED] 200 [LOANS-PROBLEM] 0 [ALLOWANCE-OPEN] 1441 [CHARGE-OFFS] 315 [RECOVERIES] 164 [ALLOWANCE-CLOSE] 1290 [ALLOWANCE-DOMESTIC] 1290 [ALLOWANCE-FOREIGN] 0 [ALLOWANCE-UNALLOCATED] 0
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