MUSKEGON, Mich., April 23, 2007 (PRIME NEWSWIRE) -- Community Shores Bank Corporation (Nasdaq:CSHB), Muskegon's only locally-headquartered independent community banking organization, today reported first quarter 2007 net income of $228,600, or $0.15 per diluted share, compared with $363,600, or $0.25 per diluted share, reported in the first quarter of 2006, a decline of 37 percent and 40 percent, respectively. Results reflect the impact of a declining net interest margin on revenue and increased spending to support expansion activities, partially offset by good commercial loan growth and fee income earned on the sale of small business loans.
Heather D. Brolick, president and CEO of Community Shores Bank Corporation, commented, "While the first quarter of 2007 was a difficult one for the banking industry in general, the impact on Community Shores was disproportionately greater because of the branching initiatives which have been in process for the last nine months. We are making progress towards our goal of attracting lower cost funds through an enhanced branch network; however, the benefits are slower to be realized than the associated expenses. This quarter, our two new branches -- North Muskegon and Harvey Street in Muskegon County -- have already attracted $4.5 million in deposits."
Ms. Brolick continued, "To counteract the growing impact of net interest margin compression, we are also seeking opportunities to boost non-interest-dependent income, and our Small Business Administration lending program is a good example of this diversification strategy. We have the right lenders in place, and we plan to leverage their expertise. We earned $118,000 from sales of SBA loans in this quarter alone. Additionally, in March, we pursued a unique opportunity in mortgage banking; we hired a full team of bankers and support staff that were available as a result of a bank consolidation in our market. Since this team was just recently hired, we have not yet benefited from loan sale income this quarter."
Total revenue, consisting of net interest income and non-interest income, was $2.4 million for first quarter 2007, an increase of $48,000 over the prior year's first quarter. A 4.2 percent decline in net interest income was offset by an increase in non interest income of $135,000, primarily from loan sales. "SBA lending was the bright spot in our performance this quarter," added Brolick.
Non-interest expense totaled $2.0 million for the first quarter of 2007, up $255,000, or 14.2 percent, from the first quarter of 2006. Much of the increase can be attributed to infrastructure expansion, including the addition of a fourth branch office (Harvey Street) in November 2006, and a move in January 2007 to a replacement facility for our North Muskegon location. Salaries and employee benefits rose $145,000, and were responsible for 57 percent of operating expense growth over the past twelve months. The increase of 19 FTE employees year over year include seven employees added to staff the Harvey Street branch, and nine members of the newly-acquired mortgage origination team. Occupancy, furniture, and equipment expenses accounted for the remainder of the increased spending, up $105,700 over the prior-year period. The efficiency ratio for the quarter was 83.85 percent in 2007 compared with 74.82 percent for the year-ago quarter.
Assets at March 31, 2007 totaled $251.5 million compared with $225.1 million twelve months ago, up $26.5 million, or 11.8 percent. Loans held for investment grew $14.1 million, or 7.3 percent, reaching $206.0 million at period end. Ms. Brolick commented, "Our pipeline is strong, and we continue to see high-quality opportunities in our marketplace. We anticipate that the two newly-opened branches will help us to grow our lower-cost core deposit base."
Net charge-offs declined appreciably over the past twelve months. Net charge-offs were $88,000 for the current quarter, or 0.17 percent annualized, a significant improvement over 0.39 percent reported for the linked quarter and 0.81 percent reported for the year-ago quarter. "However," Brolick added, "non-performing assets have increased due to weakness in the regional economy; we placed three credits totaling $1.2 million on non-accrual status this quarter. While this has negatively impacted our margin, all three loans are adequately collateralized by real estate. We do not anticipate material losses on these loans beyond our present reserve." Nonperforming assets were $2.8 million, or 1.12 percent of period-end assets, at March 31, 2007, compared with $1.6 million, or 0.63 percent of assets, for the linked quarter, and $1.6 million, or 0.70 percent of assets, for the year-ago quarter. The allowance for loan and lease losses was 1.26 percent of total loans at March 31, 2007.
Shareholders' equity totaled $16.4 million at March 31, 2007, up $1.6 million from twelve months ago. Tier I capital was 6.58 percent for the first quarter of 2007. Shares outstanding at period-end were 1,468,800. Ms. Brolick concluded, "We have made significant investments over the past year that should enhance and diversify our revenue stream, and build a more profitable future for shareholders of Community Shores Bank Corporation."
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 $252 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 BANK CORPORATION CONSOLIDATED FINANCIAL HIGHLIGHTS (dollars in thousands except per share data) Quarterly ------------------------------------------------------ 2007 2006 2006 2006 2006 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr --------- --------- --------- --------- --------- EARNINGS Net interest income 1,988 2,126 2,164 2,113 2,075 Provision for loan and lease losses 127 202 217 224 78 Noninterest income 455 380 461 356 320 Noninterest expense 2,047 1,958 1,886 1,755 1,792 Pre tax income 269 346 522 491 525 Net Income 229 247 363 342 364 Basic earnings per share $ 0.16 $ 0.17 $ 0.25 $ 0.24 $ 0.25 Diluted earnings per share $ 0.15 $ 0.17 $ 0.25 $ 0.23 $ 0.25 Average shares outstanding 1,468,733 1,466,800 1,449,191 1,436,800 1,436,800 Average diluted shares outstanding 1,488,589 1,489,014 1,476,876 1,461,201 1,474,279 PERFORMANCE RATIOS Return on average assets 0.37% 0.41% 0.62% 0.60% 0.64% Return on average common equity 5.64% 6.16% 9.33% 9.11% 9.89% Net interest margin 3.48% 3.80% 3.94% 3.94% 3.86% Efficiency ratio 83.85% 78.13% 71.84% 71.08% 74.82% Full-time equivalent employees 82 72 66 63 63 CAPITAL End of period equity to assets 6.52% 6.53% 6.66% 6.38% 6.57% Tier 1 capital to end of period assets 6.58% 6.60% 6.74% 6.51% 6.70% Book value per share $ 11.17 $ 10.99 $ 10.82 $ 10.52 $ 10.29 ASSET QUALITY Gross loan charge-offs 101 205 112 120 405 Net loan charge-offs 88 200 107 94 384 Net loan charge-offs to avg loans (annualized) 0.17% 0.39% 0.21% 0.19% 0.81% Allowance for loan and lease losses 2,588 2,549 2,547 2,437 2,307 Allowance for losses to total loans 1.26% 1.23% 1.24% 1.22% 1.20% Past due and nonaccrual loans (90 days) 1,942 1,131 1,394 1,428 1,579 Past due and nonaccrual loans to total loans 0.94% 0.54% 0.68% 0.72% 0.82% Other real estate and repossessed assets 887 419 123 58 4 NPA +90 day past due to total assets 1.12% 0.63% 0.64% 0.63% 0.70% END OF PERIOD BALANCES Loans 205,983 207,597 205,041 199,075 191,916 Total earning assets 235,491 231,712 223,902 223,447 215,305 Total assets 251,549 246,981 238,377 236,677 225,079 Deposits 217,602 214,282 205,456 205,175 194,572 Shareholders' equity 16,404 16,119 15,868 15,097 14,791 AVERAGE BALANCES Loans 207,449 206,365 202,432 195,783 189,698 Total earning assets 231,944 226,880 222,200 216,868 218,397 Total assets 247,639 240,486 233,400 226,911 227,725 Deposits 213,807 206,514 196,493 192,696 197,173 Shareholders' equity 16,251 16,035 15,569 15,034 14,716 Year to date ---------------------- 2007 2006 --------- --------- EARNINGS Net interest income 1,988 2,075 Provision for loan and lease losses 127 78 Noninterest income 455 320 Noninterest expense 2,047 1,792 Pre tax income 269 525 Net Income 229 364 Basic earnings per share $ 0.16 $ 0.25 Diluted earnings per share $ 0.15 $ 0.25 Average shares outstanding 1,468,733 1,436,800 Average diluted shares outstanding 1,488,589 1,474,279 PERFORMANCE RATIOS Return on average assets 0.37% 0.64% Return on average common equity 5.64% 9.89% Net interest margin 3.48% 3.86% Efficiency ratio 83.85% 74.82% Full-time equivalent employees 82 63 CAPITAL End of period equity to assets 6.52% 6.57% Tier 1 capital to end of period assets 6.58% 6.70% Book value per share $ 11.17 $ 10.29 ASSET QUALITY Gross loan charge-offs 101 405 Net loan charge-offs 88 384 Net loan charge-offs to avg loans (annualized) 0.17% 0.81% Allowance for loan and lease losses 2,588 2,307 Allowance for losses to total loans 1.26% 1.20% Past due and nonaccrual loans (90 days) 1,942 1,579 Past due and nonaccrual loans to total loans 0.94% 0.82% Other real estate and repossessed assets 887 4 NPA +90 day past due to total assets 1.12% 0.70% END OF PERIOD BALANCES Loans 205,983 191,916 Total earning assets 235,491 215,305 Total assets 251,549 225,079 Deposits 217,602 194,572 Shareholders' equity 16,404 14,791 AVERAGE BALANCES Loans 207,449 189,698 Total earning assets 231,944 218,397 Total assets 247,639 227,725 Deposits 213,807 197,173 Shareholders' equity 16,251 14,716 Community Shores Bank Corporation Condensed Consolidated Statements of Income (Unaudited) Three Months Three Months Ended Ended 3/31/07 3/31/06 ----------- ----------- Interest and dividend income Loans, including fees $ 4,057,022 $ 3,528,551 Securities (including FHLB dividends) 201,473 180,316 Federal funds sold and other interest income 70,669 100,982 ------------ ----------- Total interest income 4,329,164 3,809,849 Interest expense Deposits 2,111,491 1,538,972 Repurchase agreements and federal funds purchased and other debt 50,999 34,766 Federal Home Loan Bank advances and notes payable 178,407 161,323 ------------ ----------- Total interest expense 2,340,897 1,735,061 Net interest Income 1,988,267 2,074,788 Provision for loan losses 127,231 78,153 ------------ ----------- Net interest income after provision for loan losses 1,861,036 1,996,635 Noninterest income Service charges on deposit accounts 208,395 238,113 Mortgage loan referral fees 0 0 Gain on sale of loans 133,891 4,735 Gain on sale of securities 1,986 0 Gain (loss) on disposal of equipment 80 0 Other 110,764 77,599 ------------ ----------- Total noninterest income 455,116 320,447 Noninterest expense Salaries and employee benefits 1,135,722 991,046 Occupancy 143,289 87,298 Furniture and equipment 146,346 96,641 Advertising 57,900 42,857 Data Processing 104,680 93,764 Professional services 140,951 127,272 Other 318,209 353,170 ------------ ----------- Total noninterest expense 2,047,097 1,792,048 Income before income taxes 269,055 525,034 Federal income tax expense 40,427 161,444 ------------ ----------- Net Income $ 228,628 $ 363,590 ============ =========== Weighted average shares outstanding 1,468,733 1,436,800 ============ =========== Diluted average shares outstanding 1,488,589 1,474,279 ============ =========== Basic income per share $ 0.16 $ 0.25 ============ =========== Diluted income per share $ 0.15 $ 0.25 ============ =========== Community Shores Bank Corporation Condensed Consolidated Statements of Condition March 31, December 31, March 31, 2007 2006 2006 (Unaudited) (Audited) (Unaudited) ------------- ------------ ------------- ASSETS Cash and due from financial institutions $ 3,458,878 $ 3,398,155 $ 3,555,515 Interest-bearing deposits in other financial institutions 77,506 72,115 76,405 Federal funds sold 9,000,000 5,600,000 3,900,000 ------------ ------------ ------------ Total cash and cash equivalents 12,536,384 9,070,270 7,531,920 Securities Available for sale 14,771,664 13,184,437 13,535,303 Held to maturity 5,254,568 5,257,835 5,452,700 ------------ ------------ ------------ Total securities 20,026,232 18,442,272 18,988,003 Loans held for sale 135,371 165,070 -- Loans 205,848,341 207,432,376 191,915,548 Less: Allowance for loan losses 2,588,475 2,549,016 2,307,087 ------------ ------------ ------------ Net loans 203,259,866 204,883,360 189,608,461 Federal Home Loan Bank stock 404,100 404,100 425,000 Premises and equipment,net 11,683,835 10,958,821 6,292,954 Accrued interest receivable 1,197,759 1,249,680 939,294 Other assets 2,305,642 1,807,258 1,293,587 ------------ ------------ ------------ Total assets $251,549,189 $246,980,831 $225,079,219 ============ ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Non interest-bearing $ 17,029,107 $ 17,179,082 $ 17,343,816 Interest-bearing 200,573,367 197,103,330 177,228,398 ------------ ------------ ------------ Total deposits 217,602,474 214,282,412 194,572,214 Federal funds purchased and repurchase agreements 5,695,329 4,494,614 4,229,519 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 400,000 400,000 200,000 Accrued expenses and other liabilities 947,813 1,185,180 785,733 ------------ ------------ ------------ Total liabilities 235,145,616 230,862,206 210,287,466 Shareholders' Equity Common Stock, no par value: 9,000,000 shares authorized, 1,468,800, 1,466,800, 1,436,800 issued at March 31, 2007, December 31, 2006, and March 31, 2006 respectively 13,296,462 13,274,098 12,999,334 Retained earnings 3,256,402 3,027,774 2,076,278 Accumulated other comprehensive deficit (149,291) (183,247) (283,859) ------------ ------------ ------------ Total shareholders' equity 16,403,573 16,118,625 14,791,753 ------------ ------------ ------------ Total liabilities and shareholders' equity $251,549,189 $246,980,831 $225,079,219 ============ ============ ============