MUSKEGON, Mich., Oct. 27, 2006 (PRIMEZONE) -- Community Shores Bank Corporation (Nasdaq:CSHB), Muskegon's only locally headquartered independent community banking organization, today reported third quarter 2006 earnings of $363,000, or $0.25 per diluted share. This compares with third quarter 2005 net income of $389,000, or $0.26 per diluted share, and $342,000 or $0.23 per diluted share for the second quarter of this year. Results reflect a stable performance year over year; solid loan growth and a steady net interest margin, partially offset by slightly higher expenses, contributed to earnings improvement over second quarter.
For the nine-month period, 2006 net income was $1.07 million compared with $1.09 million for the 2005 period, down 2.3 percent; diluted earnings per share were $0.73 compared with $0.75 last year.
Heather D. Brolick, President and CEO, commented, "We continue to make progress; substantial loan growth and stronger fee income are contributing to our growing revenue stream. In spite of competitive pricing pressures on both loans and deposits, our margin was unchanged this quarter; I believe we are in the minority of banks that can make this claim for the quarter. We are developing new products to accelerate growth and profitability, and we are pleased with what we see ahead."
Total revenue, consisting of net interest income and non-interest income, was $2.62 million for third quarter of 2006, up $194,000, or 8.0 percent, above the $2.43 million reported for the year-ago quarter. Net interest income increased 3.0 percent, to $2.16 million, reflecting a 4.6 percent increase in average earning assets partially offset by a six basis point decline in the net interest margin to 3.94 percent. Compared with the second quarter of 2006, net interest income increased $51,000 or 2.4 percent, primarily from growth in average earning assets; the net interest margin was unchanged at 3.94 percent.
Fee income is making an increasing contribution to total revenue. Non-interest income for the third quarter was $461,000 compared with $330,000 for the year-ago quarter, an increase of $131,000, or 39.6 percent, of which $121,000 was derived from gains on the sale of SBA loans. Community Shores recently hired an experienced SBA lender to provide financing to small businesses in its market area; the Bank elected to sell the majority of loans to generate additional fee income. As a percent of average assets, fee income was 0.79 percent for the current quarter compared with 0.58 percent a year ago.
For the third quarter of 2006, non-interest expense totaled $1.9 million, up $119,000 or 6.7 percent from the third quarter of 2005, and $131,000 higher than the linked quarter. Advertising and professional services accounted for the majority of expense growth compared to both earlier periods. Salaries and benefits increased $45,000 above the previous quarter, where salary expense was artificially low. The efficiency ratio for the third quarter of 2006 improved to 71.84 percent from 72.57 percent for the year-ago quarter.
Assets at September 30, 2006 totaled $238.4 million, up $19.5 million or 8.9 percent compared with $218.9 million reported twelve months ago. Loans held for investment increased $17.8 million, or 9.5 percent, reaching $205.0 million at September 30, 2006. Community Shores Bank continues to be primarily a commercial lender; C&I and CRE loans comprised 81.0 percent of loans outstanding at quarter-end compared to 79.6 percent a year-ago. Deposits were unchanged from the second quarter, at $205.5 million; they increased $19.4 million, or 10.4 percent, from $186.1 million for the year-ago quarter.
Ms. Brolick added, "We continue to work through the large commercial loan we identified earlier this year, which has kept our charge-offs elevated for the past three quarters. I am pleased to report that the process is nearing completion, and net loan charge-offs should return to more normal levels." Year-to-date 2006, net charge-offs were $585,000, or 0.30 percent of average loans on an annualized basis, compared with $191,000, or 0.10 percent for the prior-year nine months, which is more in line with historical experience. Non-performing loans plus delinquencies were $1.4 million or 0.68 percent of period-end loans at September 30, 2006, compared with 0.72 percent of loans for the second quarter, and $834,000 or 0.45 percent for the third quarter of 2005. The allowance for loan and lease losses stands at 1.24 percent of total loans at September 30, 2006.
Shareholders' equity totaled $15.9 million at September 30, 2006, up $1.4 million from twelve months ago. Tier I capital was 6.74 percent for the third quarter of 2006 compared with 6.66 percent for the prior year's third quarter. Shares outstanding at period-end were 1,466,800. Ms. Brolick concluded, "We are having a good growth year at Community Shores as our bankers continue to develop high quality relationships that fill our pipeline with loans. We have been able to manage interest rates successfully thus far in this challenging environment, and we are hopeful that we will end the year on a strong note."
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 three branch offices. Community Shores Bank opened for business in January 1999, and has grown to $238 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; 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 CORPORATION
CONSOLIDATED FINANCIAL HIGHLIGHTS
(dollars in thousands except per share data)
Quarterly
-----------------------------------------------------
2006 2006 2006 2005 2005
3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
EARNINGS --------- --------- --------- --------- ---------
Net interest
income 2,164 2,113 2,075 2,114 2,100
Provision for
loan and lease
losses 217 224 78 508 98
Noninterest
income 461 356 320 339 330
Noninterest
expense 1,886 1,755 1,792 1,793 1,767
Pre tax income 522 491 525 153 565
Net Income 363 342 364 119 389
Basic earnings
per share $ 0.25 $ 0.24 $ 0.25 $ 0.08 $ 0.27
Diluted
earnings
per share $ 0.25 $ 0.23 $ 0.25 $ 0.08 $ 0.26
Average shares
outstanding 1,449,191 1,436,800 1,436,800 1,436,800 1,435,757
Average diluted
shares out-
standing 1,476,876 1,461,201 1,474,279 1,482,431 1,480,317
PERFORMANCE RATIOS
Return on average
assets 0.62% 0.60% 0.64% 0.22% 0.71%
Return on average
common equity 9.33% 9.11% 9.89% 3.28% 10.89%
Net interest
margin 3.94% 3.94% 3.85% 4.05% 4.00%
Efficiency ratio 71.84% 71.08% 74.82% 73.09% 72.57%
Full-time
equivalent
employees 66 63 63 61 60
CAPITAL
End of period
equity to assets 6.66% 6.38% 6.57% 6.53% 6.60%
Tier 1 capital
to end of
period assets 6.74% 6.51% 6.70% 6.62% 6.66%
Book value per
share $ 10.82 $ 10.52 $ 10.29 $ 10.09 $ 10.05
ASSET QUALITY
Gross loan
charge-offs 112 120 405 95 62
Net loan
charge-offs 107 94 384 89 59
Net loan
charge-offs
to avg loans
(annualized) 0.21% 0.19% 0.81% 0.19% 0.13%
Allowance for
loan and lease
losses 2,547 2,437 2,307 2,613 2,194
Allowance for
losses to
total loans 1.24% 1.22% 1.20% 1.36% 1.17%
Past due and
non-accrual
loans (90 days) 1,394 1,428 1,579 1,128 834
Past due and
non-accrual
loans to total
loans 0.68% 0.72% 0.82% 0.59% 0.45%
Other real
estate and
repossessed
assets 123 58 4 22 6
END OF PERIOD
BALANCES
Loans 205,041 199,075 191,916 192,645 187,263
Total earning
assets 223,902 223,447 215,305 212,262 209,479
Total assets 238,377 236,677 225,079 222,166 218,864
Deposits 205,456 205,175 194,572 190,451 186,081
Shareholders'
equity 15,868 15,097 14,791 14,500 14,439
AVERAGE BALANCES
Loans 202,432 195,783 189,698 191,170 187,909
Total earning
assets 222,200 216,868 218,397 211,025 212,448
Total assets 233,400 226,911 227,725 220,061 220,101
Deposits 196,493 192,696 197,173 184,005 168,884
Shareholders'
equity 15,569 15,034 14,716 14,530 14,290
Year to date
----------------------
2006 2005
EARNINGS --------- ---------
Net interest income 6,352 6,047
Provision for loan and lease losses 519 346
Noninterest income 1,137 936
Noninterest expense 5,432 5,004
Pre tax income 1,538 1,632
Net Income 1,069 1,094
Basic earnings per share $ 0.74 $ 0.76
Diluted earnings per share $ 0.73 $ 0.75
Average shares outstanding 1,440,976 1,433,304
Average diluted shares outstanding 1,470,930 1,468,214
PERFORMANCE RATIOS
Return on average assets 0.62% 0.69%
Return on average common equity 9.42% 10.50%
Net interest margin 3.91% 3.99%
Efficiency ratio 72.54% 71.66%
Full-time equivalent employees 66 60
CAPITAL
End of period equity to assets 6.66% 6.60%
Tier 1 capital to end of period assets 6.74% 6.66%
Book value per share $ 10.82 $ 10.05
ASSET QUALITY
Gross loan charge-offs 637 223
Net loan charge-offs 585 191
Net loan charge-offs to avg loans (annualized) 0.30% 0.10%
Allowance for loan and lease losses 2,547 2,194
Allowance for losses to total loans 1.24% 1.17%
Past due and nonaccrual loans (90 days) 1,394 834
Past due and nonaccrual loans to total loans 0.68% 0.45%
Other real estate and repossessed assets 123 6
END OF PERIOD BALANCES
Loans 205,041 187,263
Total earning assets 223,902 209,479
Total assets 238,377 218,864
Deposits 205,456 186,081
Shareholders' equity 15,868 14,439
AVERAGE BALANCES
Loans 196,018 182,507
Total earning assets 219,169 203,539
Total assets 229,368 210,661
Deposits 195,451 174,292
Shareholders' equity 15,134 13,893
Community Shores Bank Corporation
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended Nine Months Ended
09/30/06 09/30/05 09/30/06 09/30/05
Interest and ----------- ----------- ----------- -----------
dividend income
-------------------
Loans, including
fees $ 4,098,809 $ 3,334,559 $11,468,639 $ 9,255,802
Securities (in-
cluding FHLB
dividends) 181,241 181,576 541,281 512,293
Federal funds sold
and other interest
income 7,095 39,953 126,834 57,225
----------- ----------- ----------- -----------
Total interest
income 4,287,145 3,556,088 12,136,754 9,825,320
Interest expense
----------------
Deposits 1,833,631 1,260,477 5,050,865 3,171,853
Repurchase agree-
ments and federal
funds purchased
and other debt 107,957 43,535 218,640 171,988
Federal Home Loan
Bank advances and
notes payable 181,588 151,781 515,328 434,889
----------- ----------- ----------- -----------
Total interest
expense 2,123,176 1,455,793 5,784,833 3,778,730
Net interest Income 2,163,969 2,100,295 6,351,921 6,046,590
Provision for loan
losses 216,873 98,300 518,625 346,057
----------- ----------- ----------- -----------
Net interest income
after provision
for loan losses 1,947,096 2,001,995 5,833,296 5,700,533
Noninterest income
Service charges on
deposit accounts 239,155 236,699 733,444 670,202
Mortgage loan
referral fees 0 5,752 1,437 7,872
Gain on sale of
loans 124,610 3,717 141,013 20,152
Loss on disposal
of equipment 0 11,578 (124) 11,925
Other 97,015 72,336 261,250 225,552
----------- ----------- ----------- -----------
Total noninterest
income 460,780 330,082 1,137,020 935,703
Noninterest expense
Salaries and employee
benefits 992,048 991,226 2,930,124 2,740,725
Occupancy 100,828 83,086 275,902 231,484
Furniture and
equipment 113,069 105,501 311,323 285,395
Advertising 90,778 32,058 174,570 118,485
Data Processing 93,185 86,884 289,463 265,622
Professional
services 166,603 131,219 424,394 396,528
Other 329,173 336,927 1,026,462 965,572
----------- ----------- ----------- -----------
Total noninterest
expense 1,885,684 1,766,901 5,432,238 5,003,811
Income before
income taxes 522,192 565,176 1,538,078 1,632,425
Federal income tax
expense 159,045 175,860 469,347 538,457
----------- ----------- ----------- -----------
Net Income $ 363,147 $ 389,316 $ 1,068,731 $ 1,093,968
=========== =========== =========== ===========
Weighted average
shares outstanding 1,449,191 1,435,757 1,440,976 1,433,304
=========== =========== =========== ===========
Diluted average
shares outstanding 1,476,876 1,480,317 1,470,930 1,468,214
=========== =========== =========== ===========
Basic income per
share $ 0.25 $ 0.27 $ 0.74 $ 0.76
=========== =========== =========== ===========
Diluted income per
share $ 0.25 $ 0.26 $ 0.73 $ 0.75
=========== =========== =========== ===========
Community Shores Bank Corporation
Condensed Consolidated Statements of Condition
September 30, December 31, September 30,
2006 2005 2005
(Unaudited) (Audited) (Unaudited)
------------ ------------ ------------
ASSETS
Cash and due from
financial institutions $ 4,134,507 $ 4,361,277 $ 4,461,764
Interest-bearing deposits
in other financial
institutions 54,455 90,182 54,718
Federal funds sold 450,000 200,000 3,150,000
------------ ------------ ------------
Total cash and
cash equivalents 4,638,962 4,651,459 7,666,482
Securities
Available for sale 13,096,118 13,983,933 14,564,811
Held to maturity 5,261,103 4,918,499 4,445,253
------------ ------------ ------------
Total securities 18,357,221 18,902,432 19,010,064
Loans 205,040,775 192,644,742 187,262,814
Less: Allowance for
loan losses 2,546,827 2,612,581 2,194,122
------------ ------------ ------------
Net loans 202,493,948 190,032,161 185,068,692
Federal Home Loan Bank stock 411,500 425,000 425,000
Premises and equipment,net 8,431,199 5,922,886 4,617,481
Accrued interest receivable 1,105,749 994,219 828,770
Other assets 2,938,675 1,238,194 1,247,843
------------ ------------ ------------
Total assets $238,377,254 $222,166,351 $218,864,332
============ ============ ============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits
Non interest-bearing $ 17,810,068 $ 16,564,735 $ 17,707,089
Interest-bearing 187,645,924 173,886,366 168,374,204
------------ ------------ ------------
Total deposits 205,455,992 190,451,101 186,081,293
Federal funds purchased
and repurchase
agreements 5,026,652 6,065,010 6,895,716
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 400,000 0 0
Accrued expenses and
other liabilities 1,126,753 650,329 948,594
------------ ------------ ------------
Total liabilities 222,509,397 207,666,440 204,425,603
Shareholders' Equity
Common Stock, no par
value: 9,000,000 shares
authorized, 1,466,800
issued at Sept 30, 2006
and 1,436,800 issued at
December 31 and
September 30, 2005 13,274,098 12,998,670 12,991,918
Retained earnings 2,781,193 1,712,462 1,593,751
Accumulated other
comprehensive deficit (187,434) (211,221) (146,940)
------------ ------------ ------------
Total shareholders'
equity 15,867,857 14,499,911 14,438,729
------------ ------------ ------------
Total liabilities
and shareholders'
equity $238,377,254 $222,166,351 $218,864,332
============ ============ ============