MUSKEGON, Mich., April 28, 2009 (GLOBE NEWSWIRE) -- Community Shores Bank Corporation ("Community Shores") (Nasdaq:CSHB), Muskegon's only locally headquartered independent community banking organization, today reported a first quarter net loss of $271,000, or ($0.18) per diluted share, compared with net income of $32,000, or $0.02 per diluted share for the first quarter of 2008. Compared with a fourth quarter 2008 net loss of $1.08 million, or ($0.74) per diluted share, the significantly reduced loss in the current quarter reflects a lower provision for loan losses, while earnings from core banking activities remained stable.
Heather D. Brolick, president and CEO of Community Shores Bank Corporation, stated, "We are beginning to feel we have reached a steady state in our banking activities. Improvements in the profitability and efficiency of our business are more or less balanced by the ongoing uncertainties of the economy which continue to erode the ability of some borrowers to repay their outstanding loans. Credit quality remains an ongoing concern. We continuously seek to identify credits with signs of weakness and respond proactively. Recently, we have seen some cash flow improvements and improved financial performance on watch-listed credits. The bank remains "well-capitalized" and we have increased our liquidity significantly since year-end 2008.
"Earnings from our core banking activities appear to have stabilized. Our revenue has increased modestly from the 2008 fourth quarter, following a year of quarterly declines. Although net interest income continues to be impacted by lower levels of earning assets and interest foregone from nonaccruing assets, our noninterest income continues to benefit from a strong pipeline of mortgage originations and subsequent sales into the secondary market. Also, we anticipate net interest margin improvement in the second half of 2009 when higher-rate time deposits - both brokered and local - mature or re-price to current market rates.
"Our operating expenses have likewise stabilized. Our expense control efforts continue to provide minor savings which together have helped in offsetting the rising costs of credit administration and FDIC insurance premium assessments. In the aggregate, we are running more efficiently with fewer resources."
Operating Results
Total revenue, which consists of net interest income and noninterest income, was $2.16 million for the first quarter of 2009, 13.4 percent lower than the $2.49 million recorded for the year-ago period. Net interest income was $1.58 million, down 14.5 percent from first quarter 2008. Average earning assets declined by 8.7 percent from the year-ago quarter, while average loans declined by 12.8 percent. The net interest margin was 2.71 percent for the current quarter, a decrease of 17 basis points, or 5.9 percent, from the year-ago period.
Compared to the fourth quarter of 2008, net interest income declined by 1.2 percent; average earning assets declined by 3.0 percent while the net interest margin improved by five basis points, to 2.66 percent. Both quarters were affected by foregone interest income from nonaccruing loans which reduced the margin by 12 basis points in the current quarter and 16 basis points for the linked quarter. Ms. Brolick added, "We are achieving ongoing improvements in our funding costs which have been masked by the higher level of nonperforming loans. Our variable-rate loans have already reached our prime rate floor, so further maturities of higher-priced time deposits will have a positive impact on our net interest margin in the second half of 2009."
Noninterest income for the first quarter of 2009 was $577,000, down $66,000, or 10.3 percent, from the $643,000 recorded for first quarter 2008. Excluding a one-time gain of $129,000 from securities sales in the 2009 quarter and a gain of $142,000 from the sale of foreclosed property in the year-ago quarter, noninterest income from operations declined $53,000, or 10.5 percent. Originations of residential mortgages have been a stable source of noninterest income. For the current quarter, gains on loan sales were $101,000, up $52,000 from the previous quarter but still below the year-ago level of $145,000. Ms. Brolick added, "We are seeing a strong level of originations, but the spreads have declined. Slowly but surely, buyers are discovering the attractive financial benefits available to first-time owners, despite the continued uncertainties of the economy."
The first quarter 2009 provision for loan losses was $348,000 compared with $1.47 million and $231,000, respectively, taken in the prior-year fourth and first quarters. At year-end 2008, the allowance for loan and lease losses stood at $4.35 million, or 2.10 percent of total loans. A majority of the $2.0 million of net-charge-offs recorded in the first quarter of 2009 had specific reserves allocated in prior quarters. The allowance now stands at 1.38 percent of loans outstanding at March 31, 2009.
Noninterest expense was $2.25 million for the 2009 first quarter, virtually unchanged from the year-ago first and fourth quarters. Controllable expenses have been managed aggressively, offsetting increased credit administration and FDIC assessments which together totaled $248,000 for the current quarter, more than double the year-ago level. Salaries and employee benefits, which account for 50.0 percent of noninterest expense, were $1.12 million for the current quarter, a decrease of $101,000, or 8.3 percent, from first quarter 2008. Over the past twelve months, staffing levels were reduced by six FTE employees, ending the current period at 74.
Balance Sheet and Asset Quality
Assets at March 31, 2009 were $267.1 million, a decline of $11.6 million, or 4.2 percent, since first quarter-end 2008. Year-over-year, the balance sheet reflects a $26.6 million, or 11.8 percent, decline in total loans to $198.2 million, partially offset by a $7.3 million, or 36.6 percent increase in the securities portfolio, to $27.4 million. Commercial and industrial loans, which comprised 37.6 percent of total loans as of March 31, 2009, accounted for the largest decline, down $13.7 million, or 15.6 percent, to $74.5 million. Commercial real estate loans, which comprised 38.6 percent of total loans, declined by $9.2 million, or 10.7 percent, to $76.4 million at first quarter-end. The level of loan originations continues to be affected by tighter underwriting standards and the lower level of business activity.
At March 31, 2009, nonperforming loans were $5.99 million, or 3.02 percent of total loans, in addition to foreclosed real estate of $6.45 million; this compares to $5.86 million, or 2.82 percent of total loans, in addition to $6.05 million of foreclosed real estate, for the linked quarter and $3.63 million, or 1.61 percent of loans, for March 31, 2008 (plus $1.85 million of foreclosed real estate). Ms. Brolick added, "Our internal market evaluations indicate that property values may be stabilizing. We are cautiously optimistic that opportunities to move nonperforming assets off the balance sheet will begin to present themselves." Net charge-offs were $2.0 million for first quarter 2009, or an annualized 3.90 percent of average loans; this compares with net charge-offs of $399,000, or 0.75 percent of average loans for the linked quarter and $309,000, or 0.54 percent of average loans for the year-ago period, both on an annualized basis.
Deposits at March 31, 2009 were $231.5 million, down $11.2 million or 4.6 percent from first quarter-end 2008. "As we downsized our loan portfolio this past year," commented Ms. Brolick, "we made two important improvements in our deposit mix. We increased the level of non-interest bearing demand balances by $3.2 million, or 18.1 percent, over the past twelve months, while reducing brokered deposits (>$100,000) by $16.1 million, or 18.4 percent. Non interest bearing demand increases are partially the result of the expanded FDIC insurance programs and from Bank-wide sales initiatives. The resulting impact was a reduction in our cost of deposits from 4.15 percent for the year-ago quarter, to 3.29 percent for the first quarter of 2009.
Consolidated shareholders' equity stood at $14.6 million at March 31, 2009, a decline of $1.2 million, or 7.6 percent since first quarter 2008. The Bank remains "well-capitalized", with Tier I Capital and Total Risk-Based Capital at 8.35 and 11.08 percent, respectively, at March 31, 2009. Shares outstanding totaled 1,468,800 for both the first quarter 2008 and 2009 period-ends.
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 $267 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 thousands except per share data)
Quarterly
------------------------------------------------------
2009 2008 2008 2008 2008
1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
---------- ---------- ---------- ---------- ----------
EARNINGS
Net interest
income 1,582 1,601 1,749 1,688 1,850
Provision for
loan and
lease losses 348 1,465 95 153 231
Noninterest
income 577 437 439 604 643
Noninterest
expense 2,249 2,240 2,099 2,150 2,239
Pre tax income
(expense) (438) (1,667) (5) (10) 23
Net Income (271) (1,083) 12 11 32
Basic earnings
per share $ (0.18)$ (0.74)$ 0.01 $ 0.01 $ 0.02
Diluted
earnings per
share $ (0.18)$ (0.74)$ 0.01 $ 0.01 $ 0.02
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 1,468,800
PERFORMANCE
RATIOS
Return on
average
assets -0.42% -1.66% 0.02% 0.02% 0.05%
Return on
average
common
equity -7.53% -27.47% 0.31% 0.28% 0.82%
Net interest
margin 2.71% 2.66% 2.90% 2.72% 2.88%
Efficiency
ratio 104.17% 109.90% 95.90% 93.76% 89.81%
Full-time
equivalent
employees 74 75 75 78 80
CAPITAL
End of period
equity to
assets 5.47% 5.85% 6.10% 5.88% 5.67%
Tier 1 capital
to end of
period assets 5.34% 5.68% 6.08% 5.88% 5.59%
Book value
per share $ 9.94 $ 10.18 $ 10.67 $ 10.63 $ 10.76
ASSET QUALITY
Gross loan
charge-offs 1,980 404 220 314 323
Net loan
charge-offs 1,960 399 207 281 309
Net loan
charge-offs
to avg loans
(annualized) 3.90% 0.75% 0.38% 0.51% 0.54%
Allowance for
loan and
lease losses 2,739 4,351 3,285 3,397 3,525
Allowance for
losses to
total loans 1.38% 2.10% 1.51% 1.56% 1.57%
Past due and
nonaccrual
loans
(90 days) 5,992 5,860 5,257 4,264 3,625
Past due and
nonaccrual
loans to
total loans 3.02% 2.82% 2.40% 1.94% 1.61%
Other real
estate and
repossessed
assets 6,453 6,054 2,519 1,862 1,845
NPA +90 day
past due to
total assets 4.66% 4.66% 3.03% 2.31% 1.96%
END OF PERIOD
BALANCES
Loans 198,171 207,508 219,182 219,616 224,796
Total earning
assets 245,923 235,367 238,694 247,162 260,707
Total assets 267,109 255,612 256,891 265,348 278,758
Deposits 231,548 219,566 221,286 230,229 242,767
Shareholders'
equity 14,603 14,946 15,669 15,613 15,805
AVERAGE
BALANCES
Loans 201,236 212,638 219,299 220,820 230,778
Total earning
assets 239,499 246,819 246,701 254,201 262,269
Total assets 257,968 261,726 263,576 271,003 279,076
Deposits 223,007 224,895 227,563 235,501 243,825
Shareholders'
equity 14,390 15,771 15,664 15,629 15,597
Community Shores Bank Corporation
Condensed Consolidated Statements of Income
(Unaudited)
Three Three
Months Months
Ended Ended
03/31/09 03/31/08
---------- ----------
Interest and dividend income
Loans, including fees $3,171,300 $4,145,502
Securities (including FHLB dividends) 261,069 215,494
Federal funds sold and other interest income 5,695 84,377
---------- ----------
Total interest income 3,438,064 4,445,373
Interest expense
Deposits 1,679,238 2,352,255
Repurchase agreements and federal funds
purchased and other debt 7,125 22,102
Federal Home Loan Bank advances and notes
payable 169,455 220,569
---------- ----------
Total interest expense 1,855,818 2,594,926
Net interest Income 1,582,246 1,850,447
Provision for loan losses 348,243 230,716
---------- ----------
Net interest income after provision for loan
losses 1,234,003 1,619,731
Noninterest income
Service charges on deposit accounts 224,376 231,083
Gain on sale of loans 101,290 144,763
Gain on sale of securities 129,107 0
Gain (loss) on disposal of other real estate
owned 0 142,324
Other 121,932 124,364
---------- ----------
Total noninterest income 576,705 642,534
Noninterest expense
Salaries and employee benefits 1,121,402 1,222,387
Occupancy 174,285 175,780
Furniture and equipment 168,572 171,562
Advertising 18,731 25,229
Data processing 122,182 114,473
Professional services 110,280 159,654
Foreclosed asset impairment 83,412 0
Other 450,113 369,926
---------- ----------
Total noninterest expense 2,248,977 2,239,011
Income before income taxes (438,269) 23,254
Federal income tax expense (167,355) (8,679)
---------- ----------
Net Income $ (270,914) $ 31,933
========== ==========
Weighted average shares outstanding 1,468,800 1,468,800
========== ==========
Diluted average shares outstanding 1,468,800 1,468,800
========== ==========
Basic income per share $ (0.18) $ 0.02
========== ==========
Diluted income per share $ (0.18) $ 0.02
========== ==========
Community Shores Bank Corporation
Condensed Consolidated Statements of Condition
March 31, December 31, March 31,
2009 2008 2008
(Unaudited) (Audited) (Unaudited)
------------ ------------ ------------
ASSETS
Cash and due from financial
institutions $ 2,569,591 $ 3,192,789 $ 3,838,206
Interest-bearing deposits in
other financial institutions 19,988,716 2,479,012 89,297
Federal funds sold 0 0 15,800,000
------------ ------------ ------------
Total cash and cash
equivalents 22,558,307 5,671,801 19,727,503
Securities
Available for sale 20,753,522 18,769,970 13,399,249
Held to maturity 6,605,141 6,609,620 6,623,055
------------ ------------ ------------
Total securities 27,358,663 25,379,590 20,022,304
Loans held for sale 1,173,289 2,354,956 2,144,713
Loans 196,997,658 205,153,203 222,651,068
Less: Allowance for loan
losses 2,739,408 4,350,903 3,524,600
------------ ------------ ------------
Net loans 194,258,250 200,802,300 219,126,468
Federal Home Loan Bank stock 404,100 404,100 404,100
Premises and equipment,net 11,715,025 11,869,741 12,317,909
Accrued interest receivable 948,609 1,004,552 1,061,760
Other assets 8,692,289 8,124,924 3,953,249
------------ ------------ ------------
Total assets $267,108,532 $255,611,964 $278,758,006
============ ============ ============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits
Non interest-bearing $ 20,860,888 $ 19,135,831 $ 17,669,347
Interest-bearing 210,686,901 200,429,709 225,097,928
------------ ------------ ------------
Total deposits 231,547,789 219,565,540 242,767,275
Federal funds purchased and
repurchase agreements 5,653,402 5,813,605 4,649,338
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 4,200,000 4,200,000
Accrued expenses and other
liabilities 603,893 586,365 836,287
------------ ------------ ------------
Total liabilities 252,505,084 240,665,510 262,952,900
Shareholders' Equity
Preferred Stock, no par
value: 1,000,000 shares
authorized and none issued 0 0 0
Common Stock, no par value:
9,000,000 shares
authorized, 1,468,800
issued 13,296,691 13,296,691 13,296,691
Retained earnings 957,170 1,228,084 2,287,476
Accumulated other
comprehensive deficit 349,587 421,679 220,939
------------ ------------ ------------
Total shareholders' equity 14,603,448 14,946,454 15,805,106
------------ ------------ ------------
Total liabilities and
shareholders' equity $267,108,532 $255,611,964 $278,758,006
============ ============ ============