MUSKEGON, Mich., Nov. 3, 2009 (GLOBE NEWSWIRE) -- Community Shores Bank Corporation ("Community Shores") (Nasdaq:CSHB), Muskegon's only locally-headquartered, independent community banking organization, today reported a third quarter 2009 net loss of $566,000, or ($0.39) per diluted share, compared with third quarter 2008 net income of $12,000, or $0.01 per diluted share. Results reflect an increased provision for loan losses as well as a higher level of expenses associated with credit administration and FDIC insurance premiums compared to the year-ago quarter.
The net loss for the first nine-months of 2009 totaled $2.17 million, or ($1.48) per diluted share, compared to net income of $55,000, or $0.04 per diluted share, for the 2008 nine-month period. Nine-month year-to-date results include a non-cash charge of $986,000 associated with the establishment in the second quarter of a tax valuation allowance on the Company's deferred tax asset, higher FDIC assessment fees, including the one-time FDIC special assessment charge of $114,000 ($74,100 after-tax, or $0.05 per diluted share) and higher credit administration expenses compared to the 2008 period. Excluding from the first nine-months of 2009 the impact of the tax valuation allowance and the FDIC special assessment charge, the net loss from core banking operations was $1.07 million, or ($0.73) per diluted share.
Heather D. Brolick, president and chief executive officer of Community Shores Bank Corporation, commented, "The duration of the real estate downturn, combined with Michigan's growing unemployment rate, continue to be a concern. We have developed strategies in response that have partially mitigated the negative impact of adverse conditions. However, Community Shores is first of all a community bank, and the West Michigan market is our home.
"We are beginning to see signs of price stabilization in certain commercial and residential properties along the West Michigan lakeshore. But we are still experiencing declines in collateral values. In response, we have been reducing our exposure to certain classes of risks. Since year-end 2008, we reduced our loan portfolio by 8.4 percent, or $17 million, with more than half of that decline representing commercial real estate. Construction lending now only constitutes one percent of our portfolio.
"We are focusing on initiatives that we can control to improve our pretax, pre-provision core bank earnings," added Ms. Brolick. "Excluding additional costs relating to problem assets and regulations, we earned 39 percent more this quarter than a year ago, mainly from net interest margin improvement and lower operating expenses. However, these profitability improvements have been overshadowed by the impact of our nonperforming assets, which have increased."
Operating Results
Total revenue, consisting of net interest income and noninterest income, was $2.20 million for the third quarter of 2009, compared to $2.19 million for the year-ago quarter. Net interest income for the third quarter was $1.80 million, a $48,000, or 2.8 percent, increase from the $1.75 million reported in the third quarter of 2008. Year over year, the net interest margin improved 24 basis points (up 8.3 percent) to 3.14 percent, partially offset by a 5.4 percent decline in average earning assets over the same period.
Compared to the second quarter of 2009, net interest income improved by $155,000, or 9.5 percent, as a result of an expanded net interest margin, up 29 basis points or 10.2 percent. Ms. Brolick added, "We are managing our balance sheet to optimize the trade-off between liquidity and margin improvement. Just as the third quarter came to a close, a large block of brokered deposits, bearing an average rate of 4.95 percent, matured and rolled off the books. We should begin to see the incremental positive impact on our margin in the fourth quarter. In addition, we are implementing a rate floor of five percent on all new and renewing loans."
Noninterest income for the third quarter of 2009 was $405,000, a decrease of $34,000, or 7.6 percent, from the $439,000 recorded for the prior-year third quarter. Service charges on deposits declined 8.8 percent as customers became more watchful concerning overdrafts. Meanwhile, gains from the sale of mortgage loans were unchanged for both quarters at $64,000, reflecting a stable level of originations in both years.
The loan loss provision for the third quarter of 2009 was $445,000 compared with $130,000 and $95,000, respectively, for the linked and year-ago quarters. As of September 30, 2009, the allowance for loan losses was $2.8 million, or 1.47 percent of total loans, compared with 1.31 percent and 1.51 percent of total loans, respectively, for the linked and prior-year periods. Ms. Brolick commented, "We increased our loan loss reserves to reflect the additional loans transferred to nonperforming status this past quarter."
Noninterest expense was $2.32 million for the third quarter of 2009 compared to $2.1 million for the prior-year third quarter, an increase of 10.8 percent year-over-year. "We are making every effort to reduce those operating expenses over which we have discretionary control; unfortunately, given the stressed economic environment, costs associated with problem asset resolution continue to grow." For the current quarter, expenses associated with problem assets and FDIC insurance premium assessments totaled $452,000 including OREO write-downs of $178,000, collection/ repo expenses of $128,000 and FDIC premiums of $146,000; these same expenses for the year-ago quarter totaled $148,000, up 205 percent. Overhead expenses, excluding credit- and FDIC-related expenses, declined by $78,000 or 4.0 percent. Salaries and employee benefits for the current quarter were $1.02 million, a decline of 7.1 percent compared to third quarter 2008, reflecting a reduction of three FTE employees to 72 over the past 12 months.
Balance Sheet
Total assets at September 30, 2009 were $241.2 million, a decline of $14.4 million, or 5.6 percent, from year-end 2008. During the same nine-month period, total loans declined $18.2 million, or 8.8 percent; partially offset by a $3.5 million, or 14.0 percent, increase in the securities portfolio. Total loans comprised 78.5 percent of assets as of September 30, 2009, compared to 81.2 percent at December 31, 2008.
Ms. Brolick commented, "Our balance sheet has contracted moderately since year-end 2008, enabling us to allocate our existing capital more efficiently and maintain our well capitalized status without further dilution. Third quarter average cash and securities was 16.8 percent of average assets compared to 10.4 percent of average assets for the year-ago quarter.
"We are also improving our deposit mix," continued Brolick. "While deposits declined overall, we have shifted our mix toward non-maturity deposits and away from jumbo CDs." Deposits at September 30, 2009 were $203.4 million, down $16.2 million, or 7.4 percent, from December 31, 2008. Demand deposits (interest and non interest-bearing) grew by $15.8 million, or 44.5 percent, since year-end 2008. Concurrently, time deposits reduced by $30.6 million, or 19.8 percent, with jumbo deposits accounting for the lion's share of the decline: $26.2 million. As of September 30, 2009, less expensive non-maturity deposits represented 39.1 percent of total deposits compared to 29.7 percent at year-end, contributing to lower funding costs. The cost of deposits reduced from 3.64 percent for the December 2008 quarter, to 2.79 percent for the current quarter.
Asset Quality
"While the dollar amount of our problem credits has grown, the number of troubled and past due relationships has declined," added Brolick. "We are increasingly confident that we have identified our major credit risks, and have reserved appropriately. The bulk of our nonaccrual loans consists of four relationships which account for approximately 72 percent of total nonaccruing loans."
At September 30, 2009, nonperforming loans were $8.4 million, or 4.41 percent of total loans; this compares to $6.7 million (3.44 percent of total loans) and $5.26 million (2.40 percent of total loans), respectively, for the linked and year-ago periods. Including foreclosed real estate of $6.7 million in the third quarter of 2009, nonperforming assets were 6.23 percent of total assets compared with 5.55 percent for the linked quarter and 3.03 percent at September 30, 2008.
Net charge-offs were $213,000 for the third quarter of 2009, or an annualized 0.45 percent of average loans; this compares to 0.64 percent and 0.38 percent of average loans, respectively, for the linked and year-ago quarters.
Capitalization
At September 30, 2009, consolidated shareholders' equity stood at $12.6 million, a decline of $3.04 million, or 19.4 percent, from the third quarter of 2008. The Bank remains in excess of regulatory requirements for a "well-capitalized" institution. Shares outstanding totaled 1,468,800 at September 30, 2009.
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 $241 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: http://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
Quarterly
-----------------------------------------------------------------------
(dollars in
thousands except
per share data) 2009 2009 2009 2008 2008
3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
--------- --------- --------- --------- ---------
EARNINGS
Net interest
income 1,798 1,643 1,582 1,601 1,749
Provision for
loan and
lease losses 445 130 348 1,465 95
Noninterest
income 405 640 577 437 439
Noninterest
expense 2,324 2,335 2,249 2,240 2,099
Pre tax
income
(expense) (566) (183) (438) (1,667) (5)
Net Income (566) (1,336) (271) (1,083) 12
Basic
earnings
per share $ (0.39) $ (0.91) $ (0.18) $ (0.74) $ 0.01
Diluted
earnings
per share $ (0.39) $ (0.91) $ (0.18) $ (0.74) $ 0.01
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 -0.89% -2.06% -0.42% -1.66% 0.02%
Return on
average
common
equity -17.33% -37.04% -7.53% -27.47% 0.31%
Net interest
margin 3.14% 2.85% 2.71% 2.66% 2.90%
Efficiency
ratio 105.52% 102.28% 104.17% 109.90% 95.90%
Full-time
equivalent
employees 72 72 74 75 75
CAPITAL
End of
period
equity to
assets 5.24% 5.22% 5.47% 5.85% 6.10%
Tier 1
capital
to end of
period assets 5.12% 5.15% 5.34% 5.68% 6.08%
Book value
per share $ 8.60 $ 8.83 $ 9.94 $ 10.18 $ 10.67
ASSET QUALITY
Gross loan
charge-offs 232 318 1,980 404 220
Net loan
charge-offs 213 311 1,960 399 207
Net loan
charge-offs
to avg
loans
(annualized) 0.45% 0.64% 3.90% 0.75% 0.38%
Allowance
for loan
and lease
losses 2,790 2,559 2,739 4,351 3,285
Allowance
for losses
to total
loans 1.47% 1.31% 1.38% 2.10% 1.51%
Past due
and
nonaccrual
loans
(90 days) 8,351 6,721 5,992 5,860 5,257
Past due
and
nonaccrual
loans
to total
loans 4.41% 3.44% 3.02% 2.82% 2.40%
Other real
estate and
repossessed
assets 6,685 7,068 6,453 6,054 2,519
NPA +90 day
past due
to total
assets 6.23% 5.55% 4.66% 4.66% 3.03%
END OF PERIOD
BALANCES
Loans 189,325 195,609 198,171 207,508 219,182
Total
earning
assets 220,974 226,148 245,923 235,367 238,694
Total assets 241,228 248,369 267,109 255,612 256,891
Deposits 203,382 211,657 231,548 219,566 221,286
Shareholders'
equity 12,631 12,976 14,603 14,946 15,669
AVERAGE
BALANCES
Loans 190,813 195,487 201,236 212,638 219,299
Total earning
assets 233,498 235,958 239,499 246,819 246,701
Total assets 254,550 258,881 257,968 261,726 263,576
Deposits 216,491 221,576 223,007 224,895 227,563
Shareholders'
equity 13,065 14,427 14,390 15,771 15,664
Year to date
-------------------------
2009 2008
---------- ----------
EARNINGS
Net interest income 5,023 5,289
Provision for loan and lease losses 923 479
Noninterest income 1,621 1,685
Noninterest expense 6,908 6,488
Pre tax income (expense) (1,188) 8
Net Income (2,174) 55
Basic earnings per share $ (1.48) $ 0.04
Diluted earnings per share $ (1.48) $ 0.04
Average shares outstanding 1,468,800 1,468,800
Average diluted shares outstanding 1,468,800 1,468,800
PERFORMANCE RATIOS
Return on average assets -1.13% 0.03%
Return on average common equity -20.56% 0.47%
Net interest margin 2.92% 2.83%
Efficiency ratio 103.98% 93.02%
Full-time equivalent employees 72 75
CAPITAL
End of period equity to assets 5.24% 6.10%
Tier 1 capital to end of period 5.12% 6.08%
assets
Book value per share $ 8.60 $ 10.67
ASSET QUALITY
Gross loan charge-offs 2,530 857
Net loan charge-offs 2,484 797
Net loan charge-offs to avg loans
(annualized) 1.69% 0.48%
Allowance for loan and lease losses 2,790 3,285
Allowance for losses to total loans 1.47% 1.51%
Past due and nonaccrual loans (90
days) 8,351 5,257
Past due and nonaccrual loans to
total loans 4.41% 2.40%
Other real estate and repossessed
assets 6,685 2,519
NPA +90 day past due to total assets 6.23% 3.03%
END OF PERIOD BALANCES
Loans 189,325 219,182
Total earning assets 220,974 238,694
Total assets 241,228 256,891
Deposits 203,382 221,286
Shareholders' equity 12,631 15,669
AVERAGE BALANCES
Loans 195,808 223,617
Total earning assets 234,576 254,362
Total assets 257,253 271,214
Deposits 220,323 235,600
Shareholders' equity 14,100 15,654
Community Shores Bank Corporation
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
09/30/09 09/30/08 09/30/09 09/30/08
------------ ------------ ------------ ------------
Interest and
dividend income
Loans, including
fees $ 3,104,682 $ 3,632,211 $ 9,376,110 $ 11,446,961
Securities
(including
FHLB dividends) 230,606 207,745 731,150 636,313
Federal funds
sold and
other interest
income 8,728 37,986 32,240 189,341
------------ ------------ ------------ ------------
Total
interest
income 3,344,016 3,877,942 10,139,500 12,272,615
Interest
expense
Deposits 1,357,813 1,917,529 4,565,492 6,331,688
Repurchase
agreements
and federal
funds
purchased
and other debt 16,653 17,154 36,292 53,718
Federal Home
Loan Bank
advances and
notes
payable 171,614 193,532 515,007 598,379
------------ ------------ ------------ ------------
Total
interest
expense 1,546,080 2,128,215 5,116,791 6,983,785
Net interest
Income 1,797,936 1,749,727 5,022,709 5,288,830
Provision for
loan
losses 444,900 94,515 923,300 478,599
------------ ------------ ------------ ------------
Net interest
income after
provision for
loan losses 1,353,036 1,655,212 4,099,409 4,810,231
Noninterest
income
Service
charges on
deposit
accounts 236,544 259,411 682,928 742,464
Gain on sale
of loans 64,312 64,235 271,054 319,734
Gain on sale
of securities 0 0 273,010 0
Gain (loss)
on disposal
of other
real estate
owned (11,046) 0 (22,087) 142,324
Other 115,211 114,923 416,468 480,876
------------ ------------ ------------ ------------
Total
noninterest
income 405,021 438,569 1,621,373 1,685,398
Noninterest
expense
Salaries and
employee
benefits 1,016,636 1,094,695 3,221,516 3,513,621
Occupancy 155,044 162,155 485,508 489,586
Furniture and
equipment 165,540 174,885 503,397 517,529
Advertising 28,028 33,968 60,245 89,395
Data processing 118,442 120,755 370,897 356,918
Professional
services 142,906 115,082 371,753 395,227
Foreclosed
asset
impairment 178,320 0 298,062 0
Other 519,548 397,115 1,596,948 1,125,273
------------ ------------ ------------ ------------
Total
noninterest
expense 2,324,464 2,098,655 6,908,326 6,487,549
Income before
income taxes (566,407) (4,874) (1,187,544) 8,080
Federal income
tax
expense 0 (17,350) 985,961 (47,172)
------------ ------------ ------------ ------------
Net Income $ (566,407) $ 12,476 $ (2,173,505) $ 55,252
============ ============ ============ ============
Weighted average
shares
outstanding 1,468,800 1,468,800 1,468,800 1,468,800
============ ============ ============ ============
Diluted average
shares
outstanding 1,468,800 1,468,800 1,468,800 1,468,800
============ ============ ============ ============
Basic income
per share $ (0.39) $ 0.01 $ (1.48) $ 0.04
============ ============ ============ ============
Diluted income
per share $ (0.39) $ 0.01 $ (1.48) $ 0.04
============ ============ ============ ============
Community Shores Bank Corporation
Condensed Consolidated Statements of Condition
Sept. 30, Dec. 31, Sept. 30,
2009 2008 2008
(Unaudited) (Audited) (Unaudited)
------------- ------------- -------------
ASSETS
Cash and due from
financial institutions $ 3,013,420 $ 3,192,789 $ 3,992,982
Interest-bearing deposits
in other financial
institutions 2,316,738 2,479,012 147,716
Federal funds sold 0 0 0
------------- ------------- -------------
Total cash and
cash equivalents 5,330,158 5,671,801 4,140,698
Securities
Available for sale 22,833,676 18,769,970 12,345,937
Held to maturity 6,094,131 6,609,620 6,614,098
------------- ------------- -------------
Total securities 28,927,807 25,379,590 18,960,035
Loans held for sale 1,439,564 2,354,956 1,493,455
Loans 187,885,202 205,153,203 217,688,634
Less: Allowance for
loan losses 2,790,416 4,350,903 3,284,668
------------- ------------- -------------
Net loans 185,094,786 200,802,300 214,403,966
Federal Home Loan Bank
stock 404,100 404,100 404,100
Premises and equipment,net 11,384,618 11,869,741 12,035,597
Accrued interest receivable 950,944 1,004,552 1,003,941
Foreclosed Assets 6,524,040 5,884,093 2,388,642
Other assets 1,171,626 2,240,831 2,060,227
------------- ------------- -------------
Total assets $ 241,227,643 $ 255,611,964 $ 256,890,661
============= ============= =============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits
Non interest-bearing $ 21,567,499 $ 19,135,831 $ 18,564,500
Interest-bearing 181,814,969 200,429,709 202,721,549
------------- ------------- -------------
Total deposits 203,382,468 219,565,540 221,286,049
Federal funds purchased
and repurchase
agreements 9,150,085 5,813,605 4,414,944
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 5,000,000 4,200,000 4,200,000
Accrued expenses and
other liabilities 563,831 586,365 821,013
------------- ------------- -------------
Total liabilities 228,596,384 240,665,510 241,222,006
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 (945,421) 1,228,084 2,310,795
Accumulated other
comprehensive deficit 279,989 421,679 61,168
------------- ------------- -------------
Total shareholders'
equity 12,631,259 14,946,454 15,668,654
Total liabilities and
shareholders' equity $ 241,227,643 $ 255,611,964 $ 256,890,660
============= ============= =============