MUSKEGON, Mich., Oct. 23, 2008 (GLOBE NEWSWIRE) -- Community Shores Bank Corporation (Nasdaq:CSHB), Muskegon's only locally headquartered independent community banking organization, today reported third quarter 2008 net income of $12,500, or $0.01 per diluted share, compared with net income of $11,000, or $0.01 per diluted share, for the second quarter of 2008 and a loss of $103,000, or $0.07 per diluted share for the third quarter of 2007. Nine months year-to-date earnings were $55,000, or $0.04 per diluted share, compared with $143,000, or $0.10 per diluted share, for the first nine months of 2007.
Third quarter 2008 results reflect a continuation of expense control initiatives and a declining loan loss provision over the course of the past year; in addition, the net interest margin expanded for the first time this quarter since the Federal Reserve began its series of interest rate reductions in the third quarter of 2007.
Heather D. Brolick, president and CEO of Community Shores Bank Corporation, stated, "In response to the weak real estate market and deteriorating economy, our strategy throughout 2008 has been to service our existing quality borrowers but otherwise limit asset growth. As we reduce our loans outstanding, we are improving our funding base, with less reliance on time deposits. There have been positive signs emerging. Our net interest margin improved from its second quarter level, and operating expenses have been reducing despite the increased costs of credit administration and FDIC insurance.
"In the current banking environment," continued Brolick, "a strong balance sheet with surplus capital and conservative underwriting should position us to weather the cycle while we resolve our problem credit exposures. The outlook for our regional West Michigan economy, as with many areas of the country, is not particularly favorable in the near term; however, we are prepared to respond to its challenges while we patiently await a return to more normal conditions."
Operating Results
Total revenue, which includes net interest income and noninterest income, was $2.19 million for the third quarter of 2008, 13.0 percent lower than the $2.52 million recorded in the year-ago quarter. Net interest income was $1.75 million for the 2008 third quarter, down $350,000, or 16.6 percent from the year-ago third quarter, primarily from a 54 basis point decline in the net interest margin, to 2.90 percent from 3.44 percent for the year-ago quarter; average earning assets remained stable year over year at $246.7 million. "Our margin showed improvement this quarter as higher-cost time deposits matured and were replaced with incrementally lower-cost funds. We have also been able to reflect current market and economic risk levels in higher loan pricing; however, as the Federal Reserve continues to lower the discount rate, future downward pressure on our net interest margin is possible," said Brolick.
The provision for loan losses in the current quarter was $95,000 compared with net loan charge-offs of $207,000, or 0.38 percent of average loans annualized. Community Shores recorded a provision of $1.92 million in the preceding four quarters and charged off $1.32 million, raising the loan loss reserve to total loans from 1.35 percent for the year-ago quarter to 1.51 percent for the current quarter.
Noninterest income in the third quarter of 2008 was $439,000, 5.1 percent above the year-ago quarter, from a higher level of gains on mortgage loan sales.
Noninterest expense was $2.10 million for the third quarter of 2008, down 8.1 percent from the prior-year third quarter. Salaries and benefits were $1.1 million, an improvement of 15.0 percent from the year-ago quarter, reflecting a reduction of nine FTE employees, or 10.7 percent, from year-earlier levels. "The progress we've made in expense control is masked by the simultaneous growth of fees associated with the increased credit administration burden," added Ms. Brolick. Year-to-date, credit administration fees increased $97,000 while total noninterest expense declined by $52,000 compared with the first nine months of 2007.
Balance Sheet
Assets at September 30, 2008 totaled $256.9 million, a decrease of $16.6 million, or 6.1 percent, since year-end 2007. Total loans were $217.7 million, down $12.5 million, or 5.4 percent, from December 31, 2007, with commercial loans accounting for virtually the entire decline.
"We have not been actively seeking new commercial borrowing relationships; rather, we have focused our resources on our seasoned customer base, fulfilling their credit and transactional banking needs and building a strong base for future relationship expansion. Apart from these relationship borrowers, we have curtailed further balance sheet growth," said Brolick. "Our consumer loans have remained level; however, we are allowing our commercial loans to run off until our real estate market and local economy both gain in strength."
At September 30, 2008, nonperforming assets were $7.8 million, or 3.03 percent of total assets (including $2.52 million of foreclosed real estate); this compares with $6.1 million, or 2.31 percent of assets for the linked quarter (including $1.86 million of foreclosed real estate) and $4.0 million, or 1.48 percent for the year-ago quarter (including $835,000 of foreclosed real estate). "Again, we are seeing some positive signs. The higher level of nonperforming loans consists of problem credits identified earlier rather than any new surprises," continued Brolick. "Three loans account for approximately 64 percent of nonperforming loans, and we are working closely with these borrowers. The 30-89 day past due category is declining for the third consecutive quarter, to $1.8 million. We are also beginning to gain control over our collateral as we manage our way through the lengthy foreclosure process under Michigan law."
Deposits at September 30, 2008 were $221.3 million, down $16.7 million or 7.0 percent from year-end 2007, consistent with declining loans outstanding. "We have taken this opportunity to restructure our deposit portfolio, significantly reducing our reliance on high-cost time deposits," added Ms. Brolick. Non-maturity deposits grew $5.6 million, or 8.2 percent year-to-date, while time deposits declined by $22.3 million, or 13.5 percent. As a result, non-maturity deposits now constitute 33.3 percent of the deposit portfolio compared with 28.6 percent at December 31, 2007.
Community Shores' capital position continues to strengthen relative to the composition of its loan portfolio. The Bank is increasingly "well capitalized" with a Total Risk-Based Capital Ratio of 10.99 percent compared with 10.07 percent for the year-ago quarter. Consolidated shareholders' equity totaled $15.7 million at September 30, 2008, a decrease of $694,000 or 4.2 percent from September 30, 2007. The ratio of common equity to assets was 6.10 percent at period-end, with shares outstanding totaling 1,468,800.
"We continue to build our capital base and strengthen customer service, and that will remain our focus despite the distractions of our troubled economy," concluded Ms. Brolick.
About the Company
Community Shores Bank Corporation is the only independent community banking organization headquartered in Muskegon. The Company serves businesses and consumers in the western Michigan counties of Muskegon and Ottawa from four branch offices. Community Shores Bank opened for business in January 1999, and has grown to $257 million in assets. The Company's stock is listed on the NASDAQ Capital Market under the symbol 'CSHB.' For further information, please visit the Company's web site at: www.communityshores.com.
Forward-Looking Statements
This news release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Actual results may differ materially from the results expressed in forward-looking statements. Factors that might cause such a difference include changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking regulation; changes in tax laws; changes in prices, levies, and assessments; the impact of technological advances; governmental and regulatory policy changes; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; changes in the national and local economy; changes in the local real estate market; and other factors, including risk factors, referred to from time to time in filings made by Community Shores with the Securities and Exchange Commission. Community Shores undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.
COMMUNITY SHORES BANK CORPORATION
CONSOLIDATED FINANCIAL HIGHLIGHTS
(dollars in Quarterly
thousands -----------------------------------------------------
except per 2008 2008 2008 2007 2007
share data) 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
--------- --------- --------- --------- ---------
EARNINGS
Net interest
income 1,749 1,688 1,850 1,830 2,099
Provision for
loan and
lease losses 95 153 231 1,130 407
Noninterest
income 439 604 643 418 417
Noninterest
expense 2,099 2,150 2,239 2,516 2,284
Pre tax income (5) (10) 23 (1,398) (175)
Net Income 12 11 32 (866) (103)
Basic earnings
per share $ 0.01 $ 0.01 $ 0.02 $ (0.63) $ (0.07)
Diluted
earnings per
share $ 0.01 $ 0.01 $ 0.02 $ (0.62) $ (0.07)
Average shares
outstanding 1,468,800 1,468,800 1,468,800 1,468,800 1,468,800
Average
diluted
shares
outstanding 1,468,800 1,468,800 1,468,800 1,468,800 1,474,236
PERFORMANCE
RATIOS
Return on
average
assets 0.02% 0.02% 0.05% -1.29% -0.16%
Return on
average
common equity 0.31% 0.28% 0.82% -21.26% -2.51%
Net interest
margin 2.90% 2.72% 2.88% 2.95% 3.44%
Efficiency
ratio 95.90% 93.76% 89.81% 111.96% 90.78%
Full-time
equivalent
employees 75 78 80 86 84
CAPITAL
End of period
equity to
assets 6.10% 5.88% 5.67% 5.71% 6.12%
Tier 1 capital
to end of
period assets 6.08% 5.88% 5.59% 5.69% 6.16%
Book value
per share $ 10.67 $ 10.63 $ 10.76 $ 10.63 $ 11.14
ASSET QUALITY
Gross loan
charge-offs 220 314 323 650 101
Net loan
charge-offs 207 281 309 638 92
Net loan
charge-offs
to avg loans
(annualized) 0.38% 0.51% 0.54% 1.10% 0.16%
Allowance for
loan and
lease losses 3,285 3,397 3,525 3,603 3,111
Allowance for
losses to
total loans 1.51% 1.56% 1.57% 1.55% 1.35%
Past due and
nonaccrual
loans (90
days) 5,257 4,264 3,625 6,017 3,099
Past due and
nonaccrual
loans to
total loans 2.40% 1.94% 1.61% 2.59% 1.34%
Other real
estate and
repossessed
assets 2,519 1,862 1,845 567 870
NPA +90 day
past due to
total assets 3.03% 2.31% 1.96% 2.41% 1.48%
END OF PERIOD
BALANCES
Loans
(including
held for sale) 219,182 219,616 224,796 232,505 230,892
Total earning
assets 238,694 247,162 260,707 256,874 249,757
Total assets 256,891 265,348 278,758 273,458 267,284
Deposits 221,286 230,229 242,767 237,950 225,216
Shareholders'
equity 15,669 15,613 15,805 15,614 16,363
AVERAGE BALANCES
Loans 219,299 220,820 230,778 231,122 227,546
Total earning
assets 246,701 254,201 262,269 251,989 247,069
Total assets 263,576 271,003 279,076 268,400 264,112
Deposits 227,563 235,501 243,825 230,252 223,540
Shareholders'
equity 15,664 15,629 15,597 16,291 16,411
Year to date
--------------------
(dollars in thousands except per share data) 2008 2007
--------- ---------
EARNINGS
Net interest income 5,289 6,144
Provision for loan and lease losses 479 802
Noninterest income 1,685 1,297
Noninterest expense 6,488 6,540
Pre tax income 8 99
Net Income 55 143
Basic earnings per share $ 0.04 $ 0.10
Diluted earnings per share $ 0.04 $ 0.10
Average shares outstanding 1,468,800 1,468,771
Average diluted shares outstanding 1,468,800 1,485,129
PERFORMANCE RATIOS
Return on average assets 0.03% 0.07%
Return on average common equity 0.47% 1.17%
Net interest margin 2.83% 3.48%
Efficiency ratio 93.02% 87.89%
Full-time equivalent employees 75 84
CAPITAL
End of period equity to assets 6.10% 6.12%
Tier 1 capital to end of period assets 6.08% 6.16%
Book value per share $ 10.67 $ 11.14
ASSET QUALITY
Gross loan charge-offs 857 271
Net loan charge-offs 797 240
Net loan charge-offs to avg loans (annualized) 0.48% 0.15%
Allowance for loan and lease losses 3,285 3,111
Allowance for losses to total loans 1.51% 1.35%
Past due and nonaccrual loans (90 days) 5,257 3,099
Past due and nonaccrual loans to total loans 2.40% 1.34%
Other real estate and repossessed assets 2,519 870
NPA +90 day past due to total assets 3.03% 1.48%
END OF PERIOD BALANCES
Loans (including held for sale) 219,182 230,892
Total earning assets 238,694 249,757
Total assets 256,891 267,284
Deposits 221,286 225,216
Shareholders' equity 15,669 16,363
AVERAGE BALANCES
Loans 223,617 216,206
Total earning assets 254,362 238,729
Total assets 271,214 255,171
Deposits 235,600 218,068
Shareholders' equity 15,654 16,365
Community Shores Bank Corporation
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
09/30/08 09/30/07 09/30/08 09/30/07
----------- ----------- ----------- -----------
Interest and
dividend income
Loans, including
fees $ 3,632,211 $ 4,518,411 $11,446,961 $12,844,252
Securities
(including FHLB
dividends) 207,745 213,087 636,313 632,891
Federal funds sold
and other interest
income 37,986 2,898 189,341 121,238
----------- ----------- ----------- -----------
Total interest
income 3,877,942 4,734,396 12,272,615 13,598,381
Interest expense
Deposits 1,917,529 2,306,697 6,331,688 6,628,072
Repurchase
agreements and
federal funds
purchased and
other debt 17,154 139,248 53,718 279,755
Federal Home Loan
Bank advances and
notes payable 193,532 189,736 598,379 546,643
----------- ----------- ----------- -----------
Total interest
expense 2,128,215 2,635,681 6,983,785 7,454,470
Net interest Income 1,749,727 2,098,715 5,288,830 6,143,911
Provision for loan
losses 94,515 406,675 478,599 802,006
----------- ----------- ----------- -----------
Net interest income
after provision
for loan losses 1,655,212 1,692,040 4,810,231 5,341,905
Noninterest income
Service charges on
deposit accounts 259,411 253,075 742,464 700,132
Mortgage loan
referral fees 0 9,995 0 9,995
Gain on sale of
loans 64,235 34,427 319,734 239,007
Gain on sale of
securities 0 0 0 1,986
Gain (loss) on
disposal of
equipment 0 378 0 458
Gain (loss) on
disposal of real
estate 0 0 142,324 0
Other 114,923 119,547 480,876 345,120
----------- ----------- ----------- -----------
Total noninterest
income 438,569 417,422 1,685,398 1,296,698
Noninterest expense
Salaries and
employee benefits 1,094,695 1,288,097 3,513,621 3,709,793
Occupancy 162,155 146,642 489,586 430,217
Furniture and
equipment 174,885 170,928 517,529 480,927
Advertising 33,968 38,037 89,395 128,865
Data Processing 120,755 109,820 356,918 327,216
Professional
services 115,082 131,020 395,227 403,602
Other 397,115 399,612 1,125,273 1,059,198
----------- ----------- ----------- -----------
Total noninterest
expense 2,098,655 2,284,156 6,487,549 6,539,818
Income before
income taxes (4,874) (174,694) 8,080 98,785
Federal income tax
expense (17,350) (71,690) (47,172) (44,616)
----------- ----------- ----------- -----------
Net Income $ 12,476 $ (103,004) $ 55,252 $ 143,401
=========== =========== =========== ===========
Weighted
average shares
outstanding 1,468,800 1,468,800 1,468,800 1,468,771
=========== =========== =========== ===========
Diluted
average shares
outstanding 1,468,800 1,468,800 1,468,800 1,485,129
=========== =========== =========== ===========
Basic income
per share $ 0.01 $ (0.07) $ 0.04 $ 0.10
=========== =========== =========== ===========
Diluted income
per share $ 0.01 $ (0.07) $ 0.04 $ 0.10
=========== =========== =========== ===========
Community Shores Bank Corporation
Condensed Consolidated Statements of Condition
September 30, December 31, September 30,
2008 2007 2007
(Unaudited) (Audited) (Unaudited)
------------ ------------ ------------
ASSETS
Cash and due from financial
institutions $ 3,992,982 $ 3,329,626 $ 3,901,052
Interest-bearing deposits
in other financial
institutions 147,716 201,290 66,121
Federal funds sold 0 4,346,000 0
------------ ------------ ------------
Total cash and cash
equivalents 4,140,698 7,876,916 3,967,173
Securities
Available for sale 12,345,937 13,194,645 13,550,547
Held to maturity 6,614,098 6,627,534 5,248,034
------------ ------------ ------------
Total securities 18,960,035 19,822,179 18,798,581
Loans held for sale 1,493,455 2,285,966 921,623
Loans 217,688,634 230,219,420 229,970,365
Less: Allowance for loan
losses 3,284,668 3,602,948 3,111,096
------------ ------------ ------------
Net loans 214,403,966 226,616,472 226,859,269
Federal Home Loan Bank stock 404,100 404,100 404,100
Premises and equipment, net 12,035,597 12,488,593 12,641,544
Accrued interest receivable 1,003,941 1,159,804 1,369,554
Other assets 4,448,869 2,804,033 2,322,197
------------ ------------ ------------
Total assets $256,890,661 $273,458,063 $267,284,041
============ ============ ============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits
Non interest-bearing $ 18,564,500 $ 16,708,504 $ 18,175,949
Interest-bearing 202,721,549 221,241,941 207,040,122
------------ ------------ ------------
Total deposits 221,286,049 237,950,445 225,216,071
Federal funds purchased and
repurchase agreements 4,414,944 4,400,611 13,506,499
Federal Home Loan Bank
advances 6,000,000 6,000,000 6,000,000
Subordinated debentures 4,500,000 4,500,000 4,500,000
Notes payable 4,200,000 4,206,043 1,106,043
Accrued expenses and other
liabilities 821,013 786,639 592,300
------------ ------------ ------------
Total liabilities 241,222,006 257,843,738 250,920,913
Shareholders' Equity
Common Stock, no par value:
9,000,000 shares
authorized, 1,468,800
issued 13,296,691 13,296,691 13,296,462
Retained earnings 2,310,795 2,255,543 3,171,175
Accumulated other
comprehensive deficit 61,168 62,091 (104,509)
------------ ------------ ------------
Total shareholders' equity 15,668,654 15,614,325 16,363,128
------------ ------------ ------------
Total liabilities and
shareholders' equity $256,890,660 $273,458,063 $267,284,041
============ ============ ============