EX-99.4 6 d337201dex994.htm EX-99.4 EX-99.4
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Exhibit 99.4

Citizens Bancshares, Inc.

Ville Platte, Louisiana

Consolidated Financial Statements

and Independent Auditor’s Report

December 31, 2016 and 2015


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C O N T E N T S

 

     Page  

Independent Auditor’s Report

     3 - 4  

Consolidated Financial Statements

  

Balance Sheets - December 31, 2016 and 2015

     5  

Statements of Comprehensive Income - Years Ended December 31, 2016 and 2015

     6  

Statements of Shareholders’ Equity - Years Ended December 31, 2016 and 2015

     7  

Statements of Cash Flows - Years Ended December 31, 2016 and 2015

     8  

Notes to Consolidated Financial Statements

     9 - 23  


Table of Contents

2322 Tremont Drive • Baton Rouge, LA 70809

178 Del Orleans Avenue, Suite C • Denham Springs, LA 70726

650 Poydras Street, Suite 1200 • New Orleans, LA 70130

Phone: 225.928.4770 • Fax: 225.926.0945

www.htbcpa.com

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors and Audit Committee of

Citizens Bancshares, Inc.

Report on the Financial Statements

We have audited the accompanying consolidated financial statements of Citizens Bancshares, Inc. and its subsidiary, which comprise the consolidated balance sheets as of December 31, 2016 and 2015, and the related consolidated statements of comprehensive income, shareholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

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Opinion

In our opinion, the 2016 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Citizens Bancshares, Inc. and its subsidiary as of December 31, 2016, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Prior Period Financial Statements

The consolidated financial statements as of December 31, 2015 were audited by Roy Chenevert, CPA, whose firm was acquired by Hannis T. Bourgeois, LLP as of September 1, 2016, and whose report dated February 29, 2016 expressed an unmodified opinion on those statements.

/s/ Hannis T. Bourgeois, LLP

Baton Rouge, Louisiana

February 17, 2017

 

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CITIZENS BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2016 AND 2015

(In thousands of dollars)

 

     2016      2015  

Assets

     

Cash and due from banks

   $ 4,440      $ 4,645  

Federal funds sold

     1,000        1,000  

Federal Reserve Bank excess balance account

     21,650        16,150  
  

 

 

    

 

 

 

Cash and cash equivalents

     27,090        21,795  

Interest-bearing deposits with banks

     10,172        9,930  

Securities available for sale, at fair values

     76,197        83,904  

Securities held to maturity, fair values of $20 in 2015

     —          20  

Loans receivable, net of allowance for loan losses of $1,915 in 2016 and $1,923 in 2015

     126,849        126,400  

Accrued interest receivable

     761        768  

Premises and equipment

     2,004        2,182  

Foreclosed real estate

     89        —    

Deferred tax asset

     673        571  

Other assets

     1,368        1,323  
  

 

 

    

 

 

 

Total assets

   $ 245,203      $ 246,893  
  

 

 

    

 

 

 

Liabilities and Shareholders’ Equity

     

Liabilities

     

Demand deposits

   $ 41,011      $ 42,431  

Savings, NOW, and money-market deposits

     68,929        66,140  

Time deposits $250,000 and more

     16,444        20,336  

Other time deposits

     82,058        83,057  
  

 

 

    

 

 

 

Total deposits

     208,442        211,964  

Accrued interest payable

     140        145  

Accrued expenses and other liabilities

     943        794  
  

 

 

    

 

 

 

Total liabilities

     209,525        212,903  
  

 

 

    

 

 

 

Shareholders’ equity

     

Common stock, $5 par value, 300,000 shares authorized; 109,255 shares issued and outstanding

     546        546  

Additional paid-in capital

     784        784  

Retained earnings

     34,344        32,514  

Accumulated other comprehensive income

     4        146  
  

 

 

    

 

 

 

Total shareholders’ equity

     35,678        33,990  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 245,203      $ 246,893  
  

 

 

    

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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CITIZENS BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31, 2016 AND 2015

(In thousands of dollars, except per share amounts)

 

     2016     2015  

Interest income

    

Loans receivable

   $ 7,119     $ 7,036  

Taxable securities

     955       982  

Tax-exempt securities

     172       189  

Federal funds sold

     4       2  

Deposits with banks

     211       134  
  

 

 

   

 

 

 

Total interest income

     8,461       8,343  
  

 

 

   

 

 

 

Interest expense

    

Deposits

    

Savings, NOW, and money-market deposits

     222       204  

Time deposits

     791       822  
  

 

 

   

 

 

 

Total interest expense

     1,013       1,026  
  

 

 

   

 

 

 

Net interest income

     7,448       7,317  

Provision for loan losses

     —         —    
  

 

 

   

 

 

 

Net interest income after provision for loan losses

     7,448       7,317  
  

 

 

   

 

 

 

Noninterest income

    

Service charges

     828       878  

Insurance commissions

     35       54  

Other income

     48       62  
  

 

 

   

 

 

 

Total noninterest income

     911       994  
  

 

 

   

 

 

 

Noninterest expense

    

Salaries and employee benefits

     3,308       3,248  

Occupancy and equipment expense

     504       501  

Data processing expense

     138       141  

Director fees

     177       171  

Other expense

     1,056       968  
  

 

 

   

 

 

 

Total noninterest expense

     5,183       5,029  
  

 

 

   

 

 

 

Income before income taxes

     3,176       3,282  

Income tax expense

     1,018       1,047  
  

 

 

   

 

 

 

Net income

     2,158       2,235  

Other comprehensive income

    

Unrealized holding (loss) on securities arising during the year, net of taxes of $(73) in 2016 and $(56) in 2015

     (142     (109
  

 

 

   

 

 

 

Comprehensive income

   $ 2,016     $ 2,126  
  

 

 

   

 

 

 

Net income per share of common stock

   $ 19.75     $ 20.46  
  

 

 

   

 

 

 

Average shares outstanding

     109,255       109,255  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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CITIZENS BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

YEARS ENDED DECEMBER 31, 2016 AND 2015

(In thousands of dollars)

 

     Common
Stock
    Additional
Paid-in
Capital
    Retained
Earnings
    Treasury
Stock
    Accumulated
Other
Comprehensive
Income
    Total
Shareholders’
Equity
 

Balance at December 31, 2014

   $ 575     $ 825     $ 31,268     $ (742   $ 255     $ 32,181  

Net income for 2015

     —         —         2,235       —         —         2,235  

Other comprehensive (loss) for 2015

     —         —         —         —         (109     (109

Cash dividends - $2.90 per share

     —         —         (317     —         —         (317

Reclassification of Treasury Stock for change in Louisiana Law

     (29     (41     (672     742       —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2015

     546       784       32,514       —         146       33,990  

Net income for 2016

     —         —         2,158       —         —         2,158  

Other comprehensive (loss) for 2016

     —         —         —         —         (142     (142

Cash dividends - $3.00 per share

     —         —         (328     —         —         (328
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2016

   $ 546     $ 784     $ 34,344     $ —       $ 4     $ 35,678  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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CITIZENS BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2016 AND 2015

(In thousands of dollars)

 

     2016     2015  

Cash flows from operating activities

    

Net income

   $ 2,158     $ 2,235  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Deferred income tax (benefit) expense

     (29     2  

Provision for loan losses

     —         —    

Depreciation and amortization

     154       147  

Foreclosed real estate and other losses

     —         17  

Net amortization of securities

     194       220  

(Increase) decrease in accrued interest receivable

     7       (46

(Increase) in other assets

     (45     (10

(Decrease) in accrued interest payable

     (5     (3

Increase (decrease) in accrued expenses and other liabilities

     149       (39

Other

     58       —    
  

 

 

   

 

 

 

Net cash provided by operating activities

     2,641       2,523  
  

 

 

   

 

 

 

Cash flows from investing activities

    

Net (increase) in interest-bearing deposits with other banks

     (242     (395

Purchases of securities available for sale

     (15,395     (30,125

Maturities, prepayments and calls of securities available for sale

     22,693       17,805  

Maturities, prepayments and calls of securities held to maturity

     20       20  

Net (increase) in loans

     (662     (2,217

Sales of foreclosed real estate

     124       25  

Purchases of premises and equipment

     (34     (245
  

 

 

   

 

 

 

Net cash provided (used) by investing activities

     6,504       (15,132
  

 

 

   

 

 

 

Cash flows from financing activities

    

Net (decrease) in deposits

     (3,522     (1,473

Dividends paid

     (328     (317
  

 

 

   

 

 

 

Net cash (used) by financing activities

     (3,850     (1,790
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     5,295       (14,399

Cash and cash equivalents at beginning of year

     21,795       36,194  
  

 

 

   

 

 

 

Cash and cash equivalents at end of year

   $ 27,090     $ 21,795  
  

 

 

   

 

 

 

Interest paid

   $ 1,018     $ 1,029  
  

 

 

   

 

 

 

Income taxes paid

   $ 997     $ 1,074  
  

 

 

   

 

 

 

Foreclosed real estate acquired in satisfaction of loans

   $ 213     $ 25  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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CITIZENS BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015

 

(1) Summary of Significant Accounting Policies

The accounting and reporting policies of Citizens Bancshares, Inc. (the “Company”) and its subsidiary are based on generally accepted accounting principles and conform to predominant banking industry practices. Citizens Bank, Ville Platte, Louisiana (the “Bank”) is wholly owned by the Company.

 

(a) Principles of consolidation - The consolidated financial statements of the Company include the accounts of the Company and its subsidiary. All material intercompany transactions and accounts have been eliminated.

 

(b) Nature of operations - The Bank provides a variety of financial services to individual and business customers through its three offices in Evangeline Parish, Louisiana, which is primarily an agricultural area. The Bank’s primary deposit products are checking and savings accounts and certificates of deposit. Its primary lending products are commercial, agricultural, real estate and consumer loans.

 

(c) Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for losses on loans and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with the determination of the allowances for losses on loans and foreclosed real estate, management obtains independent appraisals for significant properties. While management uses available information to recognize losses on loans and foreclosed real estate, future additions to the allowances may be necessary based on changes in local economic conditions, which depends heavily on the agricultural industry. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowances for losses on loans and foreclosed real estate. Such agencies may require the Bank to recognize additions to the allowances based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the allowances for losses on loans and foreclosed real estate may change materially in the near term.

 

(d) Cash equivalents - For the purpose of presentation in the consolidated statements of cash flows, the Company considers due from bank accounts, federal funds sold and the Federal Reserve Bank excess balance account to be cash equivalents.

 

(e) Securities held to maturity - Bonds and notes for which the Bank has the positive intent and ability to hold to maturity are reported at cost, adjusted for premiums and discounts that are recognized in interest income using the interest method over the period to maturity. Declines in the fair value of individual securities below cost that are other than temporary result in write-downs of the individual securities to their fair value. The related write-downs are included in earnings as realized losses.

 

(f) Securities available for sale - Securities available for sale consist of bonds and notes not classified as held to maturity. Unrealized holding gains and losses, net of tax, on these securities are reported as accumulated other comprehensive income in shareholders’ equity. Gains and losses on the sale of securities available for sale are determined using the specific-identification method. Premiums and discounts are recognized in interest income using the interest method over the period to maturity. Declines in the fair value of individual securities below cost that are other than temporary result in write-downs of the individual securities to their fair value. The related write-downs are included in earnings as realized losses.

 

(g)

Loans receivable and allowance for loan losses - Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal adjusted for any charge-offs, the allowance for loan losses, and unearned income. Unearned income on discounted loans is recognized as income over the term of the loans using a method that approximates the interest method. Interest on other loans is calculated by using the simple interest method on daily balances of the principal amount outstanding. The accrual of interest on impaired loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due. Interest income

 

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CITIZENS BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015

 

generally is not recognized on these loans unless the likelihood of further loss is remote. Interest payments received on such loans are applied as a reduction of the loan principal balance. The allowance for loan losses is increased by charges to income and decreased by charge-offs (net of recoveries). Management’s periodic evaluation of the adequacy of the allowance is based on the Bank’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, and current economic conditions.

 

(h) Premises and equipment - Land is carried at cost. Bank premises, furniture and equipment are carried at cost, less accumulated depreciation and amortization computed principally by the straight-line method.

 

(i) Foreclosed real estate - Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and are initially recorded at fair value at the date of foreclosure establishing a new cost basis. After foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in operations.

 

(j) Income taxes - Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

 

(k) Net income per share - Net income per share of common stock has been computed on the basis of the weighted-average number of shares of common stock outstanding.

 

(l) Shareholders’ equity - On January 1, 2015, the Louisiana Business Corporation Act (the Act) became effective. Under the provisions of the Act, the concept of “Treasury Shares” is eliminated. Rather, shares purchased by the Company constitute authorized but unissued shares. Under the Accounting Standards Codification (ASC 505-30-05-3, Treasury Stock), accounting for treasury stock shall conform to applicable laws. Accordingly, the Company’s Consolidated Balance Sheet as of December 31, 2015 reflects this change. The cost of shares purchased by the Company has been allocated to common stock, additional paid-in capital and retained earnings balances.

 

(m) Reclassifications - Certain reclassifications have been made to the prior year’s financial statements, which have no effect on net income as previously reported, to conform to current year reporting.

 

(n) Date of Management’s Review of Subsequent Events - Management has evaluated subsequent events through February 17, 2017, the date which the financial statements were available to be issued.

(2) Restrictions

The Bank is required to maintain reserve balances by the Federal Reserve Bank. The amounts of these reserves as of December 31, 2016 and 2015 were $1,323,000 and $1,628,000, respectively.

In addition, prior approval of the Commissioner of the Louisiana Office of Financial Institutions is required for the Bank to pay dividends if the total of all dividends declared and paid during any one year would exceed the total of net profits of that year combined with the net profits from the immediately preceding year.

 

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CITIZENS BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015

 

(3) Investment Securities

The amortized costs and approximate fair values of investments in debt securities at December 31 follow (in thousands of dollars):

 

     December 31, 2016  
            Gross      Gross         
     Amortized      Unrealized      Unrealized      Fair  
     Cost      Gains      Losses      Value  

Securities available for sale

           

U. S. Treasury securities

   $ 9,010      $ 1      $ 30      $ 8,981  

U. S. Government agencies and corporations

     34,088        33        203        33,918  

Mortgage-backed securities

     23,979        310        71        24,218  

State and political subdivisions

     9,115        61        96        9,080  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 76,192      $ 405      $ 400      $ 76,197  
  

 

 

    

 

 

    

 

 

    

 

 

 

Securities pledged to secure public deposits and for other purposes

   $ 31,568            $ 31,460  
  

 

 

          

 

 

 

 

     December 31, 2015  
            Gross      Gross         
     Amortized      Unrealized      Unrealized      Fair  
     Cost      Gains      Losses      Value  

Securities available for sale

           

U. S. Treasury securities

   $ 8,006      $ —        $ 40      $ 7,966  

U. S. Government agencies and corporations

     43,509        114        245        43,378  

Mortgage-backed securities

     24,576        360        72        24,864  

State and political subdivisions

     7,591        140        35        7,696  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 83,682      $ 614      $ 392      $ 83,904  
  

 

 

    

 

 

    

 

 

    

 

 

 

Securities held to maturity

           

States and political subdivisions

   $ 20      $ —        $ —        $ 20  
  

 

 

    

 

 

    

 

 

    

 

 

 

Securities pledged to secure public deposits and for other purposes

   $ 31,720            $ 31,618  
  

 

 

          

 

 

 

The scheduled maturities of securities available for sale and held to maturity at December 31, 2016 were as follows (in thousands of dollars):

 

     Available for sale  
     Amortized      Fair  
     Cost      Value  

Contractual maturities

     

One year or less

   $ 11,504      $ 11,545  

After one year through five years

     53,187        53,203  

After five years through ten years

     10,158        10,100  

After ten years

     1,343        1,349  
  

 

 

    

 

 

 
   $ 76,192      $ 76,197  
  

 

 

    

 

 

 

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. No securities were sold in 2016 and 2015.

 

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CITIZENS BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015

 

Information pertaining to securities with gross unrealized losses at December 31, 2016 and 2015, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows (in thousands of dollars):

 

     Less Than 12 Months      12 Months or Greater      Total  
            Gross             Gross             Gross  
     Fair      Unrealized      Fair      Unrealized      Fair      Unrealized  
     Value      Losses      Value      Losses      Value      Losses  

2016

                 

U. S. Treasury securities

   $ 5,982      $ 30      $ —        $ —        $ 5,982      $ 30  

U. S. Government agencies and corporations

     28,885        195        991        8        29,876        203  

Municipal securities

     4,186        73        396        23        4,582        96  

Mortgage-backed securities

     6,877        44        2,105        27        8,982        71  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 45,930      $ 342      $ 3,492      $ 58      $ 49,422      $ 400  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

2015

                 

U. S. Treasury securities

   $ 7,966      $ 40      $ —        $ —        $ 7,966      $ 40  

U. S. Government agencies and corporations

     27,384        157        5,907        88        33,291        245  

Municipal securities

     1,384        25        659        10        2,043        35  

Mortgage-backed securities

     7,448        47        1,166        25        8,614        72  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 44,182      $ 269      $ 7,732      $ 123      $ 51,914      $ 392  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

At December 31, 2016, the 75 securities with unrealized losses have depreciated 0.75% from the Company’s amortized cost basis. These securities are guaranteed by either the U. S. Government or other governments. These unrealized losses relate principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available for sale, no declines are deemed to be other-than-temporary.

 

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CITIZENS BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015

 

(4) Loans Receivable

The components of loans in the statements of financial condition at December 31 were as follows (in thousands of dollars):

 

     2016      2015  

Real estate

     

Construction and development

   $ 5,531      $ 5,326  

1-4 family residential

     64,915        66,701  

Multifamily

     4,505        4,777  

Farmland

     4,974        4,500  

Nonfarm, nonresidential

     22,838        20,082  
  

 

 

    

 

 

 

Total real estate

     102,763        101,386  

Agricultural

     2,464        3,328  

Commercial and industrial

     12,814        12,021  

Consumer

     10,673        11,449  

Other

     50        139  
  

 

 

    

 

 

 
     128,764        128,323  

Allowance for loan losses

     (1,915      (1,923
  

 

 

    

 

 

 
   $ 126,849      $ 126,400  
  

 

 

    

 

 

 

Credit Quality Indicators

Loans are categorized into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The following definitions are utilized for risk ratings, which are consistent with the definitions used in supervisory guidance:

Special Mention - Loans classified as special mention have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Bank’s credit position at some future date.

Substandard - Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Loans not meeting the criteria above are considered to be Pass rated loans.

Loan Analysis by Credit Quality Indicators (in thousands of dollars)

 

     December 31, 2016  
   Pass or
Not Rated
     Special
Mention
     Substandard      Total  

Construction and development

   $ 5,531      $ —        $ —        $ 5,531  

1-4 family residential

     64,362        478        75        64,915  

Multifamily

     4,505        —          —          4,505  

Farmland

     4,974        —          —          4,974  

Nonfarm, nonresidential

     21,614        —          1,224        22,838  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate

     100,986        478        1,299        102,763  

Agricultural

     2,464        —          —          2,464  

Commercial and industrial

     12,756        58        —          12,814  

Consumer

     10,649        —          24        10,673  

Other

     50        —          —          50  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 126,905      $ 536      $ 1,323      $ 128,764  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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CITIZENS BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015

 

     December 31, 2015  
   Pass or Not
Rated
     Special
Mention
     Substandard      Total  

Construction and development

   $ 5,275      $ —        $ 51      $ 5,326  

1-4 family residential

     66,216        143        342        66,701  

Multifamily

     4,777        —          —          4,777  

Farmland

     4,500        —          —          4,500  

Nonfarm, nonresidential

     19,629        —          453        20,082  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate

     100,397        143        846        101,386  

Agricultural

     3,328        —          —          3,328  

Commercial and industrial

     11,966        —          55        12,021  

Consumer

     11,393        —          56        11,449  

Other

     139        —          —          139  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 127,223      $ 143      $ 957      $ 128,323  
  

 

 

    

 

 

    

 

 

    

 

 

 

The following is a summary loan aging analysis as of December 31 (in thousands of dollars):

 

December 31, 2016

          Past Due 90 Days or More                       
   Past Due
30 - 89 Days
     And
Accruing
     And Not
Accruing
     Total
Past Due
     Current      Total
Loans
 

Construction and development

   $ 18      $ —        $ —        $ 18      $ 5,513      $ 5,531  

1-4 family residential

     2,169        81        75        2,325        62,590        64,915  

Multifamily

     —          —          —          —          4,505        4,505  

Farmland

     528        —          —          528        4,446        4,974  

Nonfarm, nonresidential

     136        —          —          136        22,702        22,838  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate

     2,851        81        75        3,007        99,756        102,763  

Agricultural

     —          —          —          —          2,464        2,464  

Commercial and industrial

     69        24        —          93        12,721        12,814  

Consumer

     168        14        24        206        10,467        10,673  

Other

     —          —          —          —          50        50  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 3,088      $ 119      $ 99      $ 3,306      $ 125,458      $ 128,764  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2015

          Past Due 90 Days or More                       
   Past Due
30 - 89 Days
     And
Accruing
     And Not
Accruing
     Total
Past Due
     Current      Total
Loans
 

Construction and development

   $ 21      $ —        $ 51      $ 72      $ 5,254      $ 5,326  

1-4 family residential

     1,263        92        303        1,658        65,043        66,701  

Multifamily

     —          —          —          —          4,777        4,777  

Farmland

     173        —          —          173        4,327        4,500  

Nonfarm, nonresidential

     73        —          —          73        20,009        20,082  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate

     1,530        92        354        1,976        99,410        101,386  

Agricultural

     —          —          —          —          3,328        3,328  

Commercial and industrial

     409        —          55        464        11,557        12,021  

Consumer

     190        15        56        261        11,188        11,449  

Other

     6        —          —          6        133        139  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 2,135      $ 107      $ 465      $ 2,707      $ 125,616      $ 128,323  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following tables outline the changes in the allowance for loan losses by collateral type, the allowances for loans individually and collectively evaluated for impairment, and the amount of loans individually and collectively evaluated for impairment at December 31.

 

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CITIZENS BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015

 

Allowance for Loan Losses and Recorded Investment in Loans Receivable (in thousands of dollars)

 

     Allowance for Loan Losses  
   Beginning
Balance
     Provision for
Loan Losses
     Charge-offs      Recoveries      Ending
Balance
 

Year Ended December 31, 2016

              

Commercial

   $ 953      $ —        $ 9      $ 1      $ 945  

Consumer

     970        —          31        31        970  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,923      $ —        $ 40      $ 32      $ 1,915  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Year Ended December 31, 2015

              

Commercial

   $ 952      $ —        $ —        $ 1      $ 953  

Consumer

     973        —          18        15        970  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,925      $ —        $ 18      $ 16      $ 1,923  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     December 31, 2016  
     Allowance for Loan Losses      Loans Receivable  
     Balance
for Loans
Individually
Evaluated for
Impairment
    

Balance
for Loans
Collectively
Evaluated for
Impairment

     Total
Ending
Balance
     Balance
of Loans
Individually
Evaluated for
Impairment
     Balance
of Loans
Collectively
Evaluated for
Impairment
 

Commercial

   $ —        $ 945      $ 63,756      $ 1,224      $ 62,532  

Consumer

     —          970        65,008        99        64,909  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ —        $ 1,915      $ 128,764      $ 1,323      $ 127,441  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     December 31, 2015  
     Allowance for Loan Losses      Loans Receivable  
     Balance
for Loans
Individually
Evaluated for
Impairment
    

Balance
for Loans
Collectively
Evaluated for
Impairment

     Total
Ending
Balance
     Balance
of Loans
Individually
Evaluated for
Impairment
     Balance
of Loans
Collectively
Evaluated for
Impairment
 

Commercial

   $ 3      $ 950      $ 60,971      $ 508      $ 60,463  

Consumer

     10        960        67,352        449        66,903  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 13      $ 1,910      $ 128,323      $ 957      $ 127,366  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Impaired Loans

The following table summarizes information relative to impaired loans at December 31, 2016 and 2015 (in thousands of dollars):

 

            Unpaid
Principal
Balance
            Average
Recorded
Investment
     Interest
Income
Recognized
 

December 31, 2016

   Recorded
Investment
        Related
Allowance
       

With no allowance recorded

              

Construction and development

   $ 75      $ 75      $ —        $ 82      $ 4  

1-4 family residential

     —          —          —          —          —    

Multifamily

     —          —          —          —          —    

Farmland

     —          —          —          —          —    

Nonfarm, nonresidential

     1,224        1,224        —          1,235        72  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate

     1,299        1,299        —          1,317        76  

Agricultural

     —          —          —          —          —    

Commercial and industrial

     —          —          —          —          —    

Consumer

     24        24        —          27        1  

Other

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,323      $ 1,323      $ —        $ 1,344      $ 77  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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CITIZENS BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015

 

            Unpaid             Average      Interest  
     Recorded      Principal      Related      Recorded      Income  

December 31, 2016

   Investment      Balance      Allowance      Investment      Recognized  

With an allowance recorded

              

Construction and development

   $ —        $ —        $ —        $ —        $ —    

1-4 family residential

     —          —          —          —          —    

Multifamily

     —          —          —          —          —    

Farmland

     —          —          —          —          —    

Nonfarm, nonresidential

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate

     —          —          —          —          —    

Agricultural

     —          —          —          —          —    

Commercial and industrial

     —          —          —          —          —    

Consumer

     —          —          —          —          —    

Other

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ —        $ —        $ —        $ —        $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

              

Construction and development

   $ 75      $ 75      $ —        $ 82      $ 4  

1-4 family residential

     —          —          —          —          —    

Multifamily

     —          —          —          —          —    

Farmland

     —          —          —          —          —    

Nonfarm, nonresidential

     1,224        1,224        —          1,235        72  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate

     1,299        1,299        —          1,317        76  

Agricultural

     —          —          —          —          —    

Commercial and industrial

     —          —          —          —          —    

Consumer

     24        24        —          27        1  

Other

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,323      $ 1,323      $ —        $ 1,344      $ 77  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
            Unpaid             Average      Interest  
     Recorded      Principal      Related      Recorded      Income  

December 31, 2015

   Investment      Balance      Allowance      Investment      Recognized  

With no allowance recorded

              

Construction and development

   $ 51      $ 51      $ —        $ 51      $ —    

1-4 family residential

     342        342        —          348        11  

Multifamily

     —          —          —          —          —    

Farmland

     —          —          —          —          —    

Nonfarm, nonresidential

     453        453        —          458        19  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate

     846        846        —          857        30  

Agricultural

     —          —          —          —          —    

Commercial and industrial

     —          —          —          —          —    

Consumer

     —          —          —          —          —    

Other

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 846      $ 846      $ —        $ 857      $ 30  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

With an allowance recorded

              

Construction and development

   $ —        $ —        $ —        $ —        $ —    

1-4 family residential

     —          —          —          —          —    

Multifamily

     —          —          —          —          —    

Farmland

     —          —          —          —          —    

Nonfarm, nonresidential

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate

     —          —          —          —          —    

Agricultural

     —          —          —          —          —    

Commercial and industrial

     55        55        3        55        2  

Consumer

     56        56        10        58        1  

Other

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 111      $ 111      $ 13      $ 113      $ 3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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CITIZENS BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015

 

            Unpaid             Average      Interest  
     Recorded      Principal      Related      Recorded      Income  

December 31, 2015

   Investment      Balance      Allowance      Investment      Recognized  

Total

              

Construction and development

   $ 51      $ 51      $ —        $ 51      $ —    

1-4 family residential

     342        342        —          348        11  

Multifamily

     —          —          —          —          —    

Farmland

     —          —          —          —          —    

Nonfarm, nonresidential

     453        453        —          458        19  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate

     846        846        —          857        30  

Agricultural

     —          —          —          —          —    

Commercial and industrial

     55        55        3        55        2  

Consumer

     56        56        10        58        1  

Other

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 957      $ 957      $ 13      $ 970      $ 33  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

No commitments to loan additional funds to borrowers of impaired loans were outstanding at December 31, 2016.

Troubled Debt Restructurings

The following tables summarize information relative to loan modifications determined to be troubled debt restructurings as of December 31, 2016 (in thousands of dollars). All troubled debt restructurings are included in impaired loans.

 

            Pre-      Post-  
            Modification      Modification  
            Outstanding      Outstanding  
     Number of      Recorded      Recorded  

Troubled debt restructurings

   Contracts      Investment      Investment  
December 31, 2016         

Nonfarm, nonresidential

     1      $ 1,224      $ 1,224  
  

 

 

    

 

 

    

 

 

 

Total

     1      $ 1,224      $ 1,224  
  

 

 

    

 

 

    

 

 

 

(5) Premises and Equipment

Components of premises and equipment included in the consolidated balance sheets at December 31 were as follows (in thousands of dollars):

 

     2016      2015  

Land

   $ 356      $ 356  

Buildings

     3,698        3,664  

Furniture and equipment

     433        433  

Automobiles

     55        55  

Capital improvement construction

     —          58  
  

 

 

    

 

 

 

Total cost

     4,542        4,566  

Accumulated depreciation

     (2,538      (2,384
  

 

 

    

 

 

 
   $ 2,004      $ 2,182  
  

 

 

    

 

 

 

 

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CITIZENS BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015

 

(6) Deposits

At December 31, 2016, the scheduled maturities of time deposits are as follows (in thousands of dollars):

 

Year maturing

      

2017

   $ 73,966  

2018

     16,010  

2019

     1,333  

2020

     707  

2021 and thereafter

     6,486  
  

 

 

 
   $ 98,502  
  

 

 

 

(7) Fair Value Measurements

Fair Value Disclosures - The Company groups its financial assets and liabilities measured at fair value in three levels. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Applicable accounting guidance establishes a fair value hierarchy that prioritizes the inputs used to develop assumptions and measure fair value. The hierarchy requires companies to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Level 1 - Includes the most reliable sources and includes quoted prices in active markets for identical assets or liabilities.

Level 2 - Includes observable inputs other than quoted prices that are observable for the asset or liability (for example, interest rates and yield curves at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates) as well as inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).

Level 3 - Includes unobservable inputs and should be used only when observable inputs are unavailable.

Recurring Basis - Fair values of investment securities available for sale were primarily measured using information from a third-party pricing service. This pricing service provides information by utilizing evaluated pricing models supported with market data information. Standard inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers, and reference data from market research publications.

Fair values that are measured on a recurring basis at December 31 are as follows (in thousands of dollars):

 

Securities available for sale

   2016      2015  

Fair value

   $ 76,197      $ 83,904  

Fair value measurement based on significant other observable inputs (Level 2)

   $ 76,197      $ 83,904  

Nonrecurring Basis - The fair value of impaired loans is measured at the fair value of the collateral for collateral-dependent loans. Impaired loans are Level 2 assets measured using appraisals from external parties of the collateral less any prior liens. Foreclosed real estate is initially recorded at fair value less estimated costs to sell. The fair value of foreclosed real estate is based on property appraisals and an analysis of similar properties available. As such, foreclosed real estate properties are Level 2 assets.

 

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CITIZENS BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015

 

     2016      2015  

Impaired Loans

     

Fair value

   $ 1,323      $ 957  

Fair value measurement based on significant other observable inputs (Level 2)

   $ 1,323      $ 957  

Foreclosed Real Estate

     

Fair value

   $ 89      $ —    

Fair value measurement based on significant other observable inputs (Level 2)

   $ 89      $ —    

(8) Income Taxes

The consolidated provision for income taxes consisted of the following for the years ended December 31 (in thousands of dollars):

 

     2016      2015  

Current expense

   $ 1,047      $ 1,045  

Deferred expense (benefit)

     (29      2  
  

 

 

    

 

 

 

Income tax expense

   $ 1,018      $ 1,047  
  

 

 

    

 

 

 

The effective tax rates differed from the statutory federal income tax rates as follows:

 

     2016     2015  

Statutory federal income tax rate

     34.0     34.0

Nontaxable income

     (2.1 %)      (2.3 %) 

Nondeductible expenses

     0.2     0.2
  

 

 

   

 

 

 

Effective tax rate

     32.1     31.9
  

 

 

   

 

 

 

Deferred tax assets and (liabilities) at December 31 consist of the following (in thousands of dollars):

 

     2016      2015  

Net (appreciation) of securities available for sale

   $ (2    $ (75

Allowance for loan losses

     467        469  

Accumulated depreciation

     (118      (135

Deferred compensation payable

     321        307  

Tax basis of land over book

     25        25  

Other

     (20      (20
  

 

 

    

 

 

 

Net deferred tax asset

   $ 673      $ 571  
  

 

 

    

 

 

 

No valuation allowance was recorded to reduce the deferred tax assets at December 31, 2016 and 2015.

The Company and its subsidiary bank file a consolidated federal income tax return in the U.S. federal jurisdiction. In addition, a Louisiana income tax return is filed individually by the Company in accordance with state statutes. With few exceptions, the Company is no longer subject to federal and state income tax examinations by tax authorities for years before 2013.

 

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CITIZENS BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015

 

(9) Related Parties

The Bank has entered into transactions with its directors, executive officers, significant shareholders, and their affiliates. The aggregate amount of loans to such related parties at December 31, 2016 and 2015 was $876,000 and $1,316,000, respectively. During 2016, new loans to such related parties amounted to $150,000 and repayments amounted to $590,000. Deposits held by the Bank at December 31, 2016 and 2015 for related parties were $7,754,000 and $7,783,000, respectively. Fees paid for goods and services provided by related parties amounted to $41,000 in 2016 and $18,000 in 2015.

(10) Commitments and Contingencies

The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit, which involve credit risk in excess of the amounts recognized in the statement of financial condition. The Bank’s exposure to credit loss in the event of nonperformance by the other party to these financial instruments is represented by the contractual amounts of the instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments, including collateral or other security to support the financial instruments.

At December 31, 2016 and 2015, commitments to extend credit totaled $18,752,000 and $19,096,000, respectively. These commitments are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

At December 31, 2016 and 2015, commitments under standby letters of credit totaled $487,000 and $511,000, respectively. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.

At December 31, 2016 and 2015, the Bank had an unused line of credit of $13,000,000 and $12,800,000, respectively, with an unrelated bank. This line is unsecured and has a variable interest rate based on the lending bank’s daily federal funds rate. In addition, at December 31, 2016 and 2015 the Bank had an unused line of credit with another unrelated bank of $7,000,000. Security for this line of credit may be required by the lending bank prior to funding, and interest is based on the lending bank’s daily federal funds rate.

In addition, the Bank may make advances from the Federal Reserve Bank of Atlanta’s discount window. At December 31, 2016 and 2015, no advances were outstanding. A pledge of collateral, such as investment securities and loans, is necessary before the Bank may borrow from the discount window.

(11) Employee Benefit Plans

Effective January 1, 1997, the Bank offers a Savings Incentive Match Plan for Employees (SIMPLE) with no minimum age or years of service eligibility requirements. All employees who are reasonably expected to receive at least $5,000 during the current calendar year are eligible to participate. In general, participants could elect to defer up to $12,500 of their compensation as elective contributions in 2016 and in 2015. The Bank is required to match employee contributions up to 3% of each employee’s total compensation. The Bank contributed $68,000 in each of the years 2016 and 2015.

The Bank has nonqualified deferred compensation plans for several of its key executives. Under the related “Executive Officers’ Death or Retirement Benefits Contract,” the Bank is required to pay each executive fixed amounts for 10 years upon attainment of age 65 and retirement. Should the executive die before age 65 and while in the employ of the Bank, the Bank is also required to pay each executive’s beneficiary fixed amounts for 10 years. Any amounts payable are to be paid from the general assets of the Bank, and the executives’ rights under the contracts are those of an unsecured creditor. At December 31, 2016 and 2015, amounts payable under the plans totaled $945,000 and $904,000, respectively. Deferred compensation expense for each of the years 2016 and 2015 were $41,000.

 

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CITIZENS BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015

 

In addition, the Bank has entered into agreements with two of these key executives that provide for benefits should either become disabled before age 65. In the event an executive is certified disabled, the Bank will pay the employee cash in the amount of the cash surrender value of life insurance policies covering the respective employee’s life. In lieu of receiving cash, the employee may elect to receive ownership of the policies. At December 31, 2016 and 2015, the cash surrender values of the aforementioned policies totaled $783,000 and $754,000, respectively.

(12) Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios including total capital, tier 1 capital, and common equity tier 1 capital to risk-weighted assets (as defined in the regulations), and leverage capital, which is tier 1 capital to adjusted average total assets (as defined). Management believes, as of December 31, 2016, that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 2016, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain a total risk-based capital ratio of 10% or higher, tier 1 risk-based capital ratio of 8% or higher, common equity tier 1 risk-based capital ratio of 6.5% or higher, and tier 1 leverage capital ratio of 5% or higher. No conditions or events have occurred since that notification that management believes have changed the Bank’s category. The Bank’s actual and required capital amounts and ratios are as follows (dollars in thousands):

 

     Actual     For Capital
Adequacy Purposes
    To Be Well Capitalized
under the Prompt
Corrective Action
Provisions
 
    

Amount

    

Ratio

   

Amount

    

Ratio

   

Amount

    

Ratio

 

At December 31, 2016

               

Total Capital (to Risk Weighted Assets)

   $ 36,986        33.6   >$ 8,797        >8.0     >$10,997        >10.0

Tier 1 Capital (to Risk Weighted Assets)

   $ 35,605        32.4   >$ 6,598        >6.0     >$8,797        >8.0

Common Tier 1 Capital (to Risk Weighted Assets)

   $ 35,605        32.4   >$ 4,949        >4.5     >$7,148        >6.5

Tier 1 Capital (to Adjusted Total Assets)

   $ 35,605        14.5   >$ 9,848        >4.0     >$12,310        >5.0

At December 31, 2015

               

Total Capital (to Risk Weighted Assets)

   $ 34,993        31.8   >$ 8,796        >8.0     >$10,995        >10.0

Tier 1 Capital (to Risk Weighted Assets)

   $ 33,612        30.6   >$ 6,597        >6.0     >$8,796        >8.0

Common Tier 1 Capital (to Risk Weighted Assets)

   $ 33,612        30.6   >$ 4,948        >4.5     >$7,147        >6.5

Tier 1 Capital (to Adjusted Total Assets)

   $ 33,612        13.5   >$ 9,988        >4.0     >$12,485        >5.0

 

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CITIZENS BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015

 

(13) Parent Company Statements

The financial statements of Citizens Bancshares, Inc. (parent company only) at December 31 and for the years then ended follow (in thousands of dollars):

 

     2016     2015  

Balance Sheets

    

Assets

    

Investment in Citizens Bank, at equity

   $ 35,608     $ 33,759  

Cash and equivalents

     70       231  
  

 

 

   

 

 

 

Total assets

   $ 35,678     $ 33,990  
  

 

 

   

 

 

 

Liabilities and Shareholders’ Equity

    

Total liabilities

   $ —       $ —    
  

 

 

   

 

 

 

Common stock

     546       546  

Additional paid-in capital

     784       784  

Retained earnings

     34,344       32,514  

Accumulated other comprehensive income

     4       146  
  

 

 

   

 

 

 

Total shareholders’ equity

     35,678       33,990  
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 35,678     $ 33,990  
  

 

 

   

 

 

 

Statements of Income

    

Income

    

Equity in undistributed net income of Citizens Bank

   $ 1,993     $ 1,775  

Dividends received from Citizens Bank

     167       460  
  

 

 

   

 

 

 

Total income

     2,160       2,235  
  

 

 

   

 

 

 

Expenses

    

Other expense

     2       —    
  

 

 

   

 

 

 

Net income

   $ 2,158     $ 2,235  
  

 

 

   

 

 

 

Statements of Cash Flows

    

Cash flows from operating activities

    

Net income

   $ 2,158     $ 2,235  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Equity in undistributed net income of Citizens Bank

     (1,993     (1,775

Other

     2       (1
  

 

 

   

 

 

 

Net cash provided by operating activities

     167       459  
  

 

 

   

 

 

 

Cash flows from investing activities

     —         —    
  

 

 

   

 

 

 

Cash flows from financing activities

    

Dividends paid

     (328     (317
  

 

 

   

 

 

 

Net cash (used) by financing activities

     (328     (317
  

 

 

   

 

 

 

Net increase (decrease) in cash and equivalents

     (161     142  

Cash and equivalents at beginning of year

     231       89  
  

 

 

   

 

 

 

Cash and equivalents at end of year

   $ 70     $ 231  
  

 

 

   

 

 

 

 

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CITIZENS BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015

 

(14) Bank Subsidiary Statements

The balance sheets and income of Citizens Bank (bank only) at December 31 and for the years then ended follow (in thousands of dollars):

 

     2016      2015  

Balance Sheets

     

Assets

     

Cash and due from banks

   $ 4,440      $ 4,645  

Federal funds sold

     1,000        1,000  

Federal Reserve Bank excess balance account

     21,650        16,150  

Interest-bearing deposits with banks

     10,172        9,930  

Investment securities

     76,197        83,924  

Loans receivable

     126,849        126,400  

Accrued interest receivable

     761        768  

Premises and equipment

     2,004        2,124  

Foreclosed real estate

     89        —    

Deferred tax asset

     673        571  

Other assets

     1,526        1,523  
  

 

 

    

 

 

 

Total assets

   $ 245,361      $ 247,035  
  

 

 

    

 

 

 

Liabilities and Shareholder’s Equity

     

Deposits

   $ 208,670      $ 212,338  

Accrued interest payable

     140        145  

Accrued expenses and other liabilities

     943        795  

Common stock

     575        575  

Additional paid-in capital

     9,425        9,425  

Retained earnings

     25,604        23,611  

Accumulated other comprehensive income

     4        146  
  

 

 

    

 

 

 

Total liabilities and shareholder’s equity

   $ 245,361      $ 247,035  
  

 

 

    

 

 

 

Statements of Income

     

Interest income

     

Loans

   $ 7,119      $ 7,036  

Investment securities

     1,127        1,171  

Federal funds sold

     4        2  

Deposits with banks

     211        134  
  

 

 

    

 

 

 

Total interest income

     8,461        8,343  

Interest expense

     1,013        1,026  
  

 

 

    

 

 

 

Net interest income

     7,448        7,317  

Provision for loan losses

     —          —    
  

 

 

    

 

 

 

Net interest income after provision for loan losses

     7,448        7,317  

Noninterest income

     911        994  

Noninterest expense

     5,181        5,029  

Income tax expense

     1,018        1,047  
  

 

 

    

 

 

 

Net income

   $ 2,160      $ 2,235  
  

 

 

    

 

 

 

 

23