UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): March 15, 2017
INVESTAR HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana | 001-36522 | 27-1560715 | ||
(State of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
7244 Perkins Road Baton Rouge, Louisiana 70808 |
70808 | |||
(Address of principal executive offices) | (Zip code) |
Registrants telephone number, including area code: (225) 227-2222
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 8.01 | Other Events. |
On March 15, 2017, Investar Holding Corporation (Investar), the registered bank holding company for Investar Bank, Baton Rouge, Louisiana, issued a press release announcing the commencement of concurrent underwritten public offerings of its common stock and subordinated notes. A copy of Investars press release is attached hereto as Exhibit 99.1.
A copy of the investor presentation to be used by Investar in connection with the common stock offering is attached hereto as Exhibit 99.2. A copy of the investor presentation to be used by Investar in connection with the subordinated note offering is attached hereto as Exhibit 99.3.
Important Information
This Current Report on Form 8-K, including the Exhibits hereto, does not constitute an offer to sell or the solicitation of an offer to buy any securities of Investar, which is being made only by means of a written prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, nor shall there be any sale of Investars securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.
Forward-Looking Statements
This Current Report on Form 8-K and the Exhibits hereto contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements reflect the current views of Investars management with respect to, among other things, future events and Investars financial performance. These statements are often, but not always, made through the use of words or phrases such as may, should, could, predict, potential, believe, will likely result, expect, continue, will, anticipate, seek, estimate, intend, plan, project, pro forma, forecast, goal, target, would and outlook, or the negative variations of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about Investars industry, managements beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond Investars control. Accordingly, Investar cautions you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although Investar believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Factors that could cause actual results to differ materially from Investars expectations include successfully implementing its growth strategy, including identifying acquisition targets and consummating suitable acquisitions; continuing to sustain internal growth rate; providing competitive products and services that appeal to its customers and target market; continuing to have access to debt and equity capital markets and achieving its performance goals. The foregoing list of factors is not exhaustive. If one or more events related to these or other risks or uncertainties materialize, or if Investars underlying assumptions prove to be incorrect, actual results may differ materially from what Investar anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and Investar does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New risks and uncertainties arise from time to time, and it is not possible for us to predict those events or how they may affect us. In addition, Investar cannot assess the impact of each factor on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Item 9.01. | Financial Statements and Exhibits. |
(a) | Financial statements of business acquired |
(i) The audited consolidated balance sheet of Citizens Bancshares, Inc. as of December 31, 2016 and 2015, and related consolidated statements of comprehensive income, changes in shareholders equity and cash flows for the years ended December 31, 2016 and 2015, and the related notes and report of independent auditor thereto, required by this item are included as Exhibit 99.4 and incorporated by reference herein.
(d) | Exhibits. |
Exhibit
|
Description |
|
23.1 | Consent of Hannis T. Bourgeois, LLP | |
99.1 | Press release, dated March 15, 2017, announcing the offerings | |
99.2 | Investor presentation relating to common stock offering | |
99.3 | Investor presentation relating to subordinated note offering | |
99.4 | Audited Consolidated Financial Statements of Citizens Bancshares, Inc. as of and for the years ended December 31, 2016 and 2015 |
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.
Dated: March 15, 2017
INVESTAR HOLDING CORPORATION | ||
By: |
/s/ John J. DAngelo |
|
John J. DAngelo | ||
President and Chief Executive Officer |
EXHIBIT INDEX
Exhibit
|
Description |
|
23.1 | Consent of Hannis T. Bourgeois, LLP | |
99.1 | Press release, dated March 15, 2017, announcing the offerings | |
99.2 | Investor presentation relating to common stock offering | |
99.3 | Investor presentation relating to subordinated note offering | |
99.4 | Audited Consolidated Financial Statements of Citizens Bancshares, Inc. as of and for the years ended December 31, 2016 and 2015 |
Exhibit 23.1
Consent of Independent Auditor
We consent to the incorporation by reference in the Prospectus Supplement to the Registration Statement (No. 333-215238) on Form S-3 of Investar Holding Corporation of our report dated February 17, 2017, relating to the consolidated financial statements of Citizens Bancshares, Inc., appearing in this Current Report on Form 8-K.
We also consent to the reference of our firm under the heading Experts in such Prospectus Supplement.
/s/ Hannis T. Bourgeois, LLP
Baton Rouge, Louisiana
March 15, 2017
Exhibit 99.1
Investar Holding Corporation Announces Commencement of Subordinated Notes and Common Stock Offerings
BATON ROUGE, LA, March 15, 2017 /GLOBE NEWSWIRE/ Investar Holding Corporation (Investar) (NASDAQ: ISTR), the parent holding company of Investar Bank, today announced that it has commenced underwritten public offerings of its subordinated notes (Notes) and $30.0 million of its common stock (Common Stock). Investar also expects to grant the underwriters a 30-day option to purchase up to an additional 15% of the shares of its Common Stock sold in the Common Stock offering.
Investar intends to use the net proceeds of the Notes offering to fund a portion of the purchase price of its recently announced proposed merger transaction with Citizens Bancshares, Inc. and for general corporate purposes, including investments in Investar Bank. Investar expects to use the net proceeds from the Common Stock offering for general corporate purposes, including investments in Investar Bank and potential strategic acquisitions.
Sandler ONeill + Partners, L.P. will serve as the sole book-running manager for the Notes offering. Sandler ONeill + Partners, L.P. is the sole book-running manager for the Common Stock offering, Raymond James & Associates, Inc. will serve as lead manager, and Hovde Group, LLC and Piper Jaffray will serve as co-managers. The Common Stock offering and the Notes offering will be conducted as separate public offerings by means of separate prospectus supplements filed as part of an effective shelf registration statement on Form S-3 (File No. 333-215238) with the Securities and Exchange Commission (the SEC). Neither of these offerings is contingent upon the consummation of the other. Prospective investors, including current shareholders interested in participating in the offering, should read the prospectus in the registration statement, the preliminary prospectus supplements and other documents that Investar has filed with the SEC for more complete information about Investar and the offerings.
Copies of the preliminary prospectus supplement and accompanying base prospectus relating to the Notes offering and the Common Stock offering can be obtained without charge by visiting the SECs website at www.sec.gov, or may be obtained from Sandler ONeill + Partners, L.P., 1251 Avenue of the Americas, 6th Floor, New York, New York 10020, Attn: Syndicate Operations, Telephone Number: 1-866-805-4128.
This press release is for informational purposes only and does not constitute an offer to sell, a solicitation of an offer to buy, any securities. There will be no sale of securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. Any offering of the Notes or Common Stock is being made only by means of a written prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
About Investar
Investar Holding Corporation, headquartered in Baton Rouge, Louisiana, provides full banking services, excluding trust services, through its wholly-owned banking subsidiary, Investar Bank, a state chartered bank. Investars primary market is South Louisiana and it currently operates 10 full service banking offices located throughout its market. At December 31, 2016, Investar had 152 full-time equivalent employees.
Forward-Looking Statements
This press release may include forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon current expectations and assumptions about our business that are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from those described in this press release. You should not rely on forward-looking statements as a prediction of future events.
Additional information regarding factors that could cause actual results to differ materially from those discussed in any forward-looking statements are described in reports and registration statements we file with the SEC, including our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, copies of which are available on Investars internet website http://www.investarbank.com.
Investar disclaims any obligation to update any forward-looking statements or any changes in events, conditions or circumstances upon which any forward-looking statement may be based except as required by law.
Contact:
Investar Holding Corporation
Chris Hufft
Chief Financial Officer
(225) 227-2215
Chris.Hufft@investarbank.com
NASDAQ: ISTR John J. D’Angelo – President & Chief Executive Officer Christopher L. Hufft – Chief Financial Officer Travis M. Lavergne – Chief Credit Officer Investor Presentation Common Stock Offering Exhibit 99.2
Disclaimer FORWARD LOOKING STATEMENTS This presentation contains forward-looking statements. Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “could,” “may,” “will,” “should,” “seeks,” “likely,” “intends,” “plans,” “pro forma,” “projects,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). While forward-looking statements reflect our good-faith beliefs, they are not guarantees of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors of new information, data or methods, future events or other changes except as required by applicable law. All forward-looking statements are necessarily only estimates of future results. Accordingly, actual results may differ materially from those expressed in or contemplated by the particular forward-looking statement, and, therefore, you are cautioned not to place undue reliance on such statements. Any forward-looking statement is qualified in its entirety by reference to the matters discussed in this presentation. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law. Certain information contained in this presentation and statements made orally during this presentation relates to or is based on publications and other data obtained from third-party sources. While we believe these third-party sources to be reliable as of the date of this presentation, we have not independently verified, and make no representation as to the adequacy, fairness, accuracy or completeness of, any information obtained from such third-party sources. We have filed a registration statements (including prospectuses) with the SEC for the offerings to which this communication relates. Before you invest, you should read the prospectuses in the registration statements and other documents we have filed with the SEC for more complete information about us and these offerings. You may get these documents for free by visiting EDGAR on the SEC website at http://www.sec.gov. Alternatively, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it from Sandler O’Neill + Partners, L.P., 1251 Avenue of the Americas New York, New York 10020, by telephone at (866) 805-4128. This presentation includes certain non-GAAP financial measures intended to supplement, not substitute for, comparable GAAP measures. Reconciliations of certain non-GAAP financial measures to GAAP financial measures are provided throughout the presentation. Numbers in this presentation may not sum due to rounding. The pro forma financial data included in this presentation is presented for illustrative purposes only and does not necessarily indicate the financial results of the combined companies had the companies actually been combined as of the periods presented. The pro forma financial data also does not consider any potential impacts of current market conditions on revenues, potential revenue enhancements, anticipated cost savings and expense efficiencies or asset dispositions, among other factors. Additionally, the adjustments made in the pro forma financial data are preliminary and may be revised.
Terms of Proposed Common Equity Offering Investar Holding Corporation (NASDAQ: ISTR) Issuer Offering Structure Follow-on public offering (100% primary shares) Overallotment 15% Lock-Up 90 days Market Data¹ $21.40 per share ($153.4 million market capitalization) Use of Proceeds General corporate purposes, including investments in our banking subsidiary, and potential future strategic acquisitions Offering Size $30.0 million Co-Managers Hovde Group, LLC, Piper Jaffray Market data as of March 14, 2017. Market capitalization is based on 7,168,235 shares of common stock outstanding as of March 9, 2017 Sole Book-Running Manager Sandler O’Neill + Partners, L.P. Concurrent Offering Concurrently with this offering, the Company is offering $15.5 million of Fixed-to-Floating Rate Subordinated Notes due 2027 Lead Manager Raymond James
Leadership Team John J. D’Angelo President & CEO Christopher L. Hufft Chief Financial Officer Travis M. Lavergne Chief Credit Officer Founding President and Chief Executive Officer Prior to founding Investar, Mr. D’Angelo was president and director of Aegis Lending Corporation, a mortgage lending company with operations in 46 states and the District of Columbia Previously, Mr. D’Angelo held various senior positions at Hibernia National Bank (the predecessor to Capital One Bank, N.A.), focusing on the East Baton Rouge Parish, Louisiana market 2.3% of total beneficial ownership New Orleans native; graduate of Louisiana State University Joined Investar in February 2014 as Chief Accounting Officer, and assumed the role of Chief Financial Officer in October 2015 Prior to joining Investar, Mr. Hufft served for 9 years as the Vice President of Accounting at Amedisys, Inc., a publicly-traded home health and hospice company Mr. Hufft, a licensed certified public accountant, also spent seven years in public accounting, servicing both public and privately-held clients in the banking, healthcare and manufacturing sectors B.S. Accounting – Louisiana State University Served as Executive Vice President and Chief Credit Officer since March 2013 and Chief Risk Management Officer since joining in July 2012 Prior to joining Investar, Mr. Lavergne was a Senior Examiner at the Louisiana Office of Financial Institutions from September 2005 to July 2012 B.S. Finance – Louisiana State University M.B.A. – Southeastern Louisiana University
Investar Snapshot Company overview Financial highlights Chartered as a de novo commercial bank in June 2006 by John J. D’Angelo, the current President and Chief Executive Officer Completed initial public offering of 3.3 million shares in July 2014, generating net proceeds of $41.7 million Headquartered in Baton Rouge, LA, ISTR offers a wide range of commercial banking products to meet the needs of small to medium-sized businesses ISTR currently operates 10 full service banking offices located throughout its primary markets of Baton Rouge, New Orleans, Lafayette, and Hammond, Louisiana ISTR is ranked 17th in the Louisiana market with $867 million of total deposits as of June 30, 2016, and 12th for those headquartered in Louisiana Experienced management team that has generated strong organic growth complemented by two successful acquisitions since 2011 Strong capital position and disciplined credit philosophy ISTR had 152 full-time equivalents as of December 31, 2016 Note: Dollars in millions Efficiency ratio represents noninterest expenses divided by the sum of net interest income (before provision for loan losses) and noninterest income ISTR (10) Citizens Bancshares, Inc. (3)
Investar Timeline June 2006 Chartered with an initial capitalization of $10.1 million FY 2008 Achieved profitability in second full year of operations May 2009 Opened second branch in Baton Rouge 2Q 2011 Opened two additional branches in Baton Rouge Market October 2011 Acquired South Louisiana Business Bank December 2012 Entered the New Orleans market through the purchase of two closed branch locations and hiring of local bankers May 2013 Entered the Hammond market through the acquisition of First Community Bank July 2013 Entered Lafayette market by opening a de novo branch July 2014 Completed initial public offering of 3.3 million shares August 2014 Opened additional branch in Baton Rouge market March 2017 Announced the acquisition of Citizens Bancshares 10 Year CAGR: 44.2% Note: Bank level data shown for 2006 through 2012 (holding company incorporated in 2013)
Accomplishments Since IPO Announced Largest Acquisition Since Inception Shifted from Consumer Loans to C&I and CRE Focus Maintained High Quality Organic Loan Growth Continued to Add Experienced Bankers in Key Areas Further Established in Four Key Louisiana Markets Since IPO in June 2014, Investar has experienced significant progress : Transitioned from Transactional Banking to Relationship Banking
Attractive Markets Louisiana Deposit Market Share Market Share Opportunity Baton Rouge Louisiana’s second largest market by deposits and the state capital, deemed the major industrial, medical, research, motion picture, and growing technology center of the American South Hammond Commercial hub of a large agricultural segment of Louisiana, bedroom community of New Orleans, and home to Southeastern Louisiana University with 5.26% population growth projected from 2017 to 2022 Lafayette Louisiana’s third largest city by population and deposits with 9.56% household income growth projected from 2017 to 2022 New Orleans Louisiana’s largest city by population and deposits and a hub of hospitality, healthcare, universities, and energy Note: Large banks defined as having over $50 billion in assets Source: SNL Financial; Deposit data as of June 30, 2016 Baton Rouge: Total Deposits: $19.6 Billion Hammond: Total Deposits: $1.8 Billion Lafayette: Total Deposits: $10.8 Billion New Orleans: Total Deposits: $35.7 Billion
Historical Growth Total assets Total loans CAGR: 33% Note: Dollars in millions Total deposits CAGR: 32% CAGR: 31% Substantially all growth has been achieved organically 28% growth in business lending portfolio in 2016
Financial Performance Diluted earnings per share Efficiency ratio¹ Return on average assets Efficiency ratio represents noninterest expenses divided by the sum of net interest income (before provision for loan losses) and noninterest income
Loan Composition Gross loans includes loans held for sale of $32.1 million; there were no loans held for sale at 12/31/2016 June 30, 2014 (IPO) December 31, 2016 Gross Loans: $893.4 million Gross Loans¹: $596.1 million Since the initial public offering, the Company has transitioned its focus from consumer loans to commercial real estate and commercial and industrial loans Company made an affirmative decision to exit the indirect auto loan business in November 2015 and the Company discontinued accepting loan applications at that time Yield on loans was 4.50% for the quarter ended December 31, 2016 The Company has less than 1% direct exposure to the energy sector in the loan portfolio
Focus the organization on Business Banking and Commercial Lending Business Banking strategy requires fewer branches and branches of a smaller size Further develop the Treasury Management function to attract business noninterest-bearing deposits versus CDs Less reliance on CDs would drive down interest expense and save on marketing costs related to sourcing CDs A more automated platform can be achieved, reducing staffing needs Exit lines of business that do not provide the proper return for the level of compliance risk and monitoring costs Discontinued most consumer product lending by end of 2016 Continue to grow the franchise organically and through acquisitions into a regional bank Growth and Profitability Going Forward Note: Dollars in millions Business lending portfolio includes owner-occupied CRE and C&I loans as of December 31, 2016 Excludes loans held for sale Loan growth by segment² Business Lending Portfolio¹
Two whole bank transactions completed since 2011 Processes and infrastructure established to analyze selective opportunities going forward Announced: June 2011 Closed: October 2011 1 Branch in Prairieville, LA $31.5 million in gross loans and $38.6 million in deposits¹ Rationale: Entered Ascension Parish with 3.4% deposit market share Capital accretive Management talent South Louisiana Business Bank Announced: January 2013 Closed: May 2013 2 Branches – Hammond and Mandeville, LA $77.5 million in gross loans and $86.5 million in deposits¹ Rationale: Recorded bargain purchase gain Initial entrance into Hammond market plus another location in the New Orleans MSA First Community Bank Opportunistic Acquisitions Completed Branch map Whole bank acquisitions ISTR (10) Citizens Bancshares, Inc. (3) Based on fair values at time of closing
Recently Announced Acquisition of Citizens Bancshares, Inc. ISTR announced the acquisition of Citizens Bancshares, Inc., a $245 million asset bank headquartered in Louisiana, on March 8, 2017 Citizens is a historically profitable institution, with LTM ROAA of approximately 0.90% Citizens offers ISTR an attractive deposit base, with noninterest-bearing deposits of approximately 20% of total deposits and cost of funds of 0.50% Clean asset quality, with NPAs / Assets of 0.58% Deal value equal to $45.8 million (100% cash consideration) 128% of tangible book value at announcement Expected closing third quarter of 2017 Transaction overview Citizens historical financial highlights Note: Dollars in millions; bank level regulatory data shown for Citizens as of December 31, 2016 For the Year Ended 2014 2015 2016 Balance Sheet Total Assets $247 $247 $245 Net Loans 124 126 127 Deposits 213 212 208 Noninterest-Bearing Deposits 20% 20% 20% Gross Loans / Deposits 59% 61% 62% Capital Total Equity $32 $34 $36 TCE / TA 13.00% 13.66% 14.51% Total Capital Ratio 30.80% 31.83% 33.63% Earnings & Profitability Net Income $2.3 $2.2 $2.2 ROAA 0.92% 0.88% 0.87% Net Interest Margin 3.08% 2.99% 3.09% Efficiency Ratio 58.9% 59.8% 61.3% Asset Quality NPAs / Assets 0.27% 0.37% 0.58% Reserves / Loans 1.53% 1.50% 1.49% NCOs / Average Loans 0.00% 0.00% 0.01%
Historical Capital Position Consolidated Bank Note: Dollars in millions
Pro Forma Capitalization – Holding Company Note: Citizens merger adjustments include estimated cash consideration paid of $45.8 million and estimates of other purchase accounting adjustments, including goodwill of approximately $8.0 million; assumes risk weighting on net proceeds from $30.0 million common equity raise and $15.5 million subordinated debt raise equal to 20.0%; principal amount of subordinated debt qualifies as Tier 2 capital. Capital ratios for Citizens are bank-only. Pro Forma for Citizens Merger, Common Equity Offering, and Subordinated Debt Offering $ in thousands Pro Forma for Investar Citizens Common Subordinated Common Equity 12/31/2016 12/31/2016 Equity Debt and Sub Debt Balance Sheet Total assets $1,158,960 $245,203 $1,394,746 $1,381,663 $1,409,763 Loans, net 886,375 126,849 1,015,276 1,015,276 1,015,276 Total deposits 907,787 208,442 1,116,177 1,116,177 1,116,177 Borrowings 126,499 – 126,499 141,517 141,517 Stockholders' equity 112,757 35,678 139,070 110,970 139,070 Capital Ratios Tier 1 leverage ratio 10.10% 14.46% 9.68% 7.70% 9.58% Tier 1 risk-based capital ratio 11.75% 32.38% 12.19% 9.63% 12.16% Total 1 risk-based capital ratio 12.47% 33.63% 12.84% 11.71% 14.22% Common equity tier 1 capital ratio 11.40% 32.38% 11.87% 9.31% 11.84%
$908M $209M $1.1B Pro Forma Deposit Composition Source: SNL Financial; data as of December 31, 2016; bank level data shown for Citizens
Pro Forma Loan Composition Source: SNL Financial; data as of December 31, 2016; bank level data shown for Citizens $893M $129M $1.0B
ISTR Loan Credit Portfolio Summary $893M Note: Financial data as of December 31, 2016 No special mention or substandard loans with exposure to the energy industry
Asset Quality Trends NPAs / Assets NCOs / Average Loans Reserves / Loans Reserves / NPLs
Investment Opportunity Management 1 Market 2 Growth 3 Asset Quality 4 Profitability 5 Legacy team with proven industry expertise tied to the Southern Louisiana region Continue to add experienced bankers in new and existing markets Southern Louisiana focus with complementary new market expansion Loan portfolio diversity Disciplined credit philosophy – legacy delinquencies less than 1% Expected to increase as investment in infrastructure has already been made Leverage existing infrastructure in core markets Limited de novo branching Opportunistic, disciplined acquisition strategy Focus on relationship banking
Non-GAAP Reconciliation
NASDAQ: ISTR John J. D’Angelo – President & Chief Executive Officer Christopher L. Hufft – Chief Financial Officer Travis M. Lavergne – Chief Credit Officer Investor Presentation Subordinated Notes Offering Exhibit 99.3
Disclaimer FORWARD LOOKING STATEMENTS This presentation contains forward-looking statements. Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “could,” “may,” “will,” “should,” “seeks,” “likely,” “intends,” “plans,” “pro forma,” “projects,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). While forward-looking statements reflect our good-faith beliefs, they are not guarantees of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors of new information, data or methods, future events or other changes except as required by applicable law. All forward-looking statements are necessarily only estimates of future results. Accordingly, actual results may differ materially from those expressed in or contemplated by the particular forward-looking statement, and, therefore, you are cautioned not to place undue reliance on such statements. Any forward-looking statement is qualified in its entirety by reference to the matters discussed in this presentation. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law. Certain information contained in this presentation and statements made orally during this presentation relates to or is based on publications and other data obtained from third-party sources. While we believe these third-party sources to be reliable as of the date of this presentation, we have not independently verified, and make no representation as to the adequacy, fairness, accuracy or completeness of, any information obtained from such third-party sources. We have filed a registration statements (including prospectuses) with the SEC for the offerings to which this communication relates. Before you invest, you should read the prospectuses in the registration statements and other documents we have filed with the SEC for more complete information about us and these offerings. You may get these documents for free by visiting EDGAR on the SEC website at http://www.sec.gov. Alternatively, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it from Sandler O’Neill + Partners, L.P., 1251 Avenue of the Americas New York, New York 10020, by telephone at (866) 805-4128. This presentation includes certain non-GAAP financial measures intended to supplement, not substitute for, comparable GAAP measures. Reconciliations of certain non-GAAP financial measures to GAAP financial measures are provided throughout the presentation. Numbers in this presentation may not sum due to rounding. The pro forma financial data included in this presentation is presented for illustrative purposes only and does not necessarily indicate the financial results of the combined companies had the companies actually been combined as of the periods presented. The pro forma financial data also does not consider any potential impacts of current market conditions on revenues, potential revenue enhancements, anticipated cost savings and expense efficiencies or asset dispositions, among other factors. Additionally, the adjustments made in the pro forma financial data are preliminary and may be revised.
Terms of Proposed Subordinated Debt Offering Investar Holding Corporation (NASDAQ: ISTR) Issuer Security Subordinated Notes Size $15.5 million Term 10 years Covenants Consistent with regulatory requirements for Tier 2 Capital Use of Proceeds Funding of a portion of the purchase price of the proposed merger transaction with Citizens, and for general corporate purposes, including investments in our banking subsidiary. If the merger is not consummated, for general corporate purposes, potential strategic acquisitions, and investments in our banking subsidiary Kroll Bond Rating Agency BBB- Structure Fixed-to-Floating Rate Sole Book-Running Manager Sandler O’Neill + Partners, L.P. Concurrent Offering Concurrently with this offering, the Company is offering $30.0 million of Common Equity
Leadership Team John J. D’Angelo President & CEO Christopher L. Hufft Chief Financial Officer Travis M. Lavergne Chief Credit Officer Founding President and Chief Executive Officer Prior to founding Investar, Mr. D’Angelo was president and director of Aegis Lending Corporation, a mortgage lending company with operations in 46 states and the District of Columbia Previously, Mr. D’Angelo held various senior positions at Hibernia National Bank (the predecessor to Capital One Bank, N.A.), focusing on the East Baton Rouge Parish, Louisiana market 2.3% of total beneficial ownership New Orleans native; graduate of Louisiana State University Joined Investar in February 2014 as Chief Accounting Officer, and assumed the role of Chief Financial Officer in October 2015 Prior to joining Investar, Mr. Hufft served for 9 years as the Vice President of Accounting at Amedisys, Inc., a publicly-traded home health and hospice company Mr. Hufft, a licensed certified public accountant, also spent seven years in public accounting, servicing both public and privately-held clients in the banking, healthcare and manufacturing sectors B.S. Accounting – Louisiana State University Served as Executive Vice President and Chief Credit Officer since March 2013 and Chief Risk Management Officer since joining in July 2012 Prior to joining Investar, Mr. Lavergne was a Senior Examiner at the Louisiana Office of Financial Institutions from September 2005 to July 2012 B.S. Finance – Louisiana State University M.B.A. – Southeastern Louisiana University
Investar Snapshot Company overview Financial highlights Chartered as a de novo commercial bank in June 2006 by John J. D’Angelo, the current President and Chief Executive Officer Completed initial public offering of 3.3 million shares in July 2014, generating net proceeds of $41.7 million Headquartered in Baton Rouge, LA, ISTR offers a wide range of commercial banking products to meet the needs of small to medium-sized businesses ISTR currently operates 10 full service banking offices located throughout its primary markets of Baton Rouge, New Orleans, Lafayette, and Hammond, Louisiana ISTR is ranked 17th in the Louisiana market with $867 million of total deposits as of June 30, 2016, and 12th for those headquartered in Louisiana Experienced management team that has generated strong organic growth complemented by two successful acquisitions since 2011 Strong capital position and disciplined credit philosophy ISTR had 152 full-time equivalents as of December 31, 2016 Note: Dollars in millions Efficiency ratio represents noninterest expenses divided by the sum of net interest income (before provision for loan losses) and noninterest income ISTR (10) Citizens Bancshares, Inc. (3)
Investar Timeline June 2006 Chartered with an initial capitalization of $10.1 million FY 2008 Achieved profitability in second full year of operations May 2009 Opened second branch in Baton Rouge 2Q 2011 Opened two additional branches in Baton Rouge Market October 2011 Acquired South Louisiana Business Bank December 2012 Entered the New Orleans market through the purchase of two closed branch locations and hiring of local bankers May 2013 Entered the Hammond market through the acquisition of First Community Bank July 2013 Entered Lafayette market by opening a de novo branch July 2014 Completed initial public offering of 3.3 million shares August 2014 Opened additional branch in Baton Rouge market March 2017 Announced the acquisition of Citizens Bancshares 10 Year CAGR: 44.2% Note: Bank level data shown for 2006 through 2012 (holding company incorporated in 2013)
Accomplishments Since IPO Announced Largest Acquisition Since Inception Shifted from Consumer Loans to C&I and CRE Focus Maintained High Quality Organic Loan Growth Continued to Add Experienced Bankers in Key Areas Further Established in Four Key Louisiana Markets Since IPO in June 2014, Investar has experienced significant progress : Transitioned from Transactional Banking to Relationship Banking
Attractive Markets Louisiana Deposit Market Share Market Share Opportunity Baton Rouge Louisiana’s second largest market by deposits and the state capital, deemed the major industrial, medical, research, motion picture, and growing technology center of the American South Hammond Commercial hub of a large agricultural segment of Louisiana, bedroom community of New Orleans, and home to Southeastern Louisiana University with 5.26% population growth projected from 2017 to 2022 Lafayette Louisiana’s third largest city by population and deposits with 9.56% household income growth projected from 2017 to 2022 New Orleans Louisiana’s largest city by population and deposits and a hub of hospitality, healthcare, universities, and energy Note: Large banks defined as having over $50 billion in assets Source: SNL Financial; Deposit data as of June 30, 2016 Baton Rouge: Total Deposits: $19.6 Billion Hammond: Total Deposits: $1.8 Billion Lafayette: Total Deposits: $10.8 Billion New Orleans: Total Deposits: $35.7 Billion
Historical Growth Total assets Total loans CAGR: 33% Note: Dollars in millions Total deposits CAGR: 32% CAGR: 31% Substantially all growth has been achieved organically 28% growth in business lending portfolio in 2016
Financial Performance Diluted earnings per share Efficiency ratio¹ Return on average assets Efficiency ratio represents noninterest expenses divided by the sum of net interest income (before provision for loan losses) and noninterest income
Loan Composition Gross loans includes loans held for sale of $32.1 million; there were no loans held for sale at 12/31/2016 June 30, 2014 (IPO) December 31, 2016 Gross Loans: $893.4 million Gross Loans¹: $596.1 million Since the initial public offering, the Company has transitioned its focus from consumer loans to commercial real estate and commercial and industrial loans Company made an affirmative decision to exit the indirect auto loan business in November 2015 and the Company discontinued accepting loan applications at that time Yield on loans was 4.50% for the quarter ended December 31, 2016 The Company has less than 1% direct exposure to the energy sector in the loan portfolio
Focus the organization on Business Banking and Commercial Lending Business Banking strategy requires fewer branches and branches of a smaller size Further develop the Treasury Management function to attract business noninterest-bearing deposits versus CDs Less reliance on CDs would drive down interest expense and save on marketing costs related to sourcing CDs A more automated platform can be achieved, reducing staffing needs Exit lines of business that do not provide the proper return for the level of compliance risk and monitoring costs Discontinued most consumer product lending by end of 2016 Continue to grow the franchise organically and through acquisitions into a regional bank Growth and Profitability Going Forward Note: Dollars in millions Business lending portfolio includes owner-occupied CRE and C&I loans as of December 31, 2016 Excludes loans held for sale Loan growth by segment² Business Lending Portfolio¹
Two whole bank transactions completed since 2011 Processes and infrastructure established to analyze selective opportunities going forward Announced: June 2011 Closed: October 2011 1 Branch in Prairieville, LA $31.5 million in gross loans and $38.6 million in deposits¹ Rationale: Entered Ascension Parish with 3.4% deposit market share Capital accretive Management talent South Louisiana Business Bank Announced: January 2013 Closed: May 2013 2 Branches – Hammond and Mandeville, LA $77.5 million in gross loans and $86.5 million in deposits¹ Rationale: Recorded bargain purchase gain Initial entrance into Hammond market plus another location in the New Orleans MSA First Community Bank Opportunistic Acquisitions Completed Branch map Whole bank acquisitions ISTR (10) Citizens Bancshares, Inc. (3) Based on fair values at time of closing
Recently Announced Acquisition of Citizens Bancshares, Inc. ISTR announced the acquisition of Citizens Bancshares, Inc., a $245 million asset bank headquartered in Louisiana, on March 8, 2017 Citizens is a historically profitable institution, with LTM ROAA of approximately 0.90% Citizens offers ISTR an attractive deposit base, with noninterest-bearing deposits of approximately 20% of total deposits and cost of funds of 0.50% Clean asset quality, with NPAs / Assets of 0.58% Deal value equal to $45.8 million (100% cash consideration) 128% of tangible book value at announcement Expected closing third quarter of 2017 Transaction overview Citizens historical financial highlights Note: Dollars in millions; bank level regulatory data shown for Citizens as of December 31, 2016 For the Year Ended 2014 2015 2016 Balance Sheet Total Assets $247 $247 $245 Net Loans 124 126 127 Deposits 213 212 208 Noninterest-Bearing Deposits 20% 20% 20% Gross Loans / Deposits 59% 61% 62% Capital Total Equity $32 $34 $36 TCE / TA 13.00% 13.66% 14.51% Total Capital Ratio 30.80% 31.83% 33.63% Earnings & Profitability Net Income $2.3 $2.2 $2.2 ROAA 0.92% 0.88% 0.87% Net Interest Margin 3.08% 2.99% 3.09% Efficiency Ratio 58.9% 59.8% 61.3% Asset Quality NPAs / Assets 0.27% 0.37% 0.58% Reserves / Loans 1.53% 1.50% 1.49% NCOs / Average Loans 0.00% 0.00% 0.01%
Historical Capital Position Consolidated Bank Note: Dollars in millions
Pro Forma Capitalization – Holding Company Note: Citizens merger adjustments include estimated cash consideration paid of $45.8 million and estimates of other purchase accounting adjustments, including goodwill of approximately $8.0 million; assumes risk weighting on net proceeds from $30.0 million common equity raise and $15.5 million subordinated debt raise equal to 20.0%; principal amount of subordinated debt qualifies as Tier 2 capital. Capital ratios for Citizens are bank-only. Pro Forma for Citizens Merger, Common Equity Offering, and Subordinated Debt Offering $ in thousands Pro Forma for Investar Citizens Common Subordinated Common Equity 12/31/2016 12/31/2016 Equity Debt and Sub Debt Balance Sheet Total assets $1,158,960 $245,203 $1,394,746 $1,381,663 $1,409,763 Loans, net 886,375 126,849 1,015,276 1,015,276 1,015,276 Total deposits 907,787 208,442 1,116,177 1,116,177 1,116,177 Borrowings 126,499 – 126,499 141,517 141,517 Stockholders' equity 112,757 35,678 139,070 110,970 139,070 Capital Ratios Tier 1 leverage ratio 10.10% 14.46% 9.68% 7.70% 9.58% Tier 1 risk-based capital ratio 11.75% 32.38% 12.19% 9.63% 12.16% Total 1 risk-based capital ratio 12.47% 33.63% 12.84% 11.71% 14.22% Common equity tier 1 capital ratio 11.40% 32.38% 11.87% 9.31% 11.84%
Pro Forma Double Leverage and Interest Coverage Includes Citizens’ LTM actual financials; deposit interest adjusted for estimated full year amortization of purchase accounting mark; pre-tax income adjusted for estimated full year purchase accounting amortization and assumes 30% cost savings on Citizens’ LTM noninterest expense Assumes completion of $30.0 million gross equity offering, net of estimated offering expenses, invested at 1.50% Assumes 90% of $15.5 million gross subordinated debt offering, net of estimated offering expenses, offering downstreamed to the bank Assumes a 6.25% coupon
$908M $209M $1.1B Pro Forma Deposit Composition Source: SNL Financial; data as of December 31, 2016; bank level data shown for Citizens
Pro Forma Loan Composition Source: SNL Financial; data as of December 31, 2016; bank level data shown for Citizens $893M $129M $1.0B
ISTR Loan Credit Portfolio Summary $893M Note: Financial data as of December 31, 2016 No special mention or substandard loans with exposure to the energy industry
Asset Quality Trends NPAs / Assets NCOs / Average Loans Reserves / Loans Reserves / NPLs
Investment Opportunity Management 1 Market 2 Growth 3 Asset Quality 4 Profitability 5 Legacy team with proven industry expertise tied to the Southern Louisiana region Continue to add experienced bankers in new and existing markets Southern Louisiana focus with complementary new market expansion Loan portfolio diversity Disciplined credit philosophy – legacy delinquencies less than 1% Expected to increase as investment in infrastructure has already been made Leverage existing infrastructure in core markets Limited de novo branching Opportunistic, disciplined acquisition strategy Focus on relationship banking
Non-GAAP Reconciliation
Exhibit 99.4
Citizens Bancshares, Inc.
Ville Platte, Louisiana
Consolidated Financial Statements
and Independent Auditors Report
December 31, 2016 and 2015
Page | ||||
Independent Auditors 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 |
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
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.
Managements 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.
Auditors 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 auditors 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 entitys 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 entitys 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.
3
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
4
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.
5
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.
6
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 | | | |||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
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 | ) | ||||||||||||||||
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|
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|
|
|
|
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|
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Balance at December 31, 2016 |
$ | 546 | $ | 784 | $ | 34,344 | $ | | $ | 4 | $ | 35,678 | ||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
7
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.
8
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 Banks 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 Banks 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 managements opinion, the borrower may be unable to meet payments as they become due. Interest income |
9
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). Managements periodic evaluation of the adequacy of the allowance is based on the Banks past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrowers 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 Companys 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 years financial statements, which have no effect on net income as previously reported, to conform to current year reporting. |
(n) | Date of Managements 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.
10
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.
11
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 Companys 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 issuers 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 issuers 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.
12
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 managements close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Banks 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 | |||||||||
|
|
|
|
|
|
|
|
13
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.
14
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
|
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
|
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 | ||||||||||
|
|
|
|
|
|
|
|
|
|
15
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 | ||||||||||
|
|
|
|
|
|
|
|
|
|
16
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 | |||||
|
|
|
|
17
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.
18
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.
19
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 Banks 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 banks 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 banks daily federal funds rate.
In addition, the Bank may make advances from the Federal Reserve Bank of Atlantas 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 employees 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 executives 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.
20
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 employees 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 Banks 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 Banks assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Banks 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 Banks category. The Banks 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 | % |
21
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 | ||||
|
|
|
|
22
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 Shareholders 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 shareholders 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