MUSKEGON, Mich., July 27, 2007 (PRIME NEWSWIRE) -- Community Shores Bank Corporation (Nasdaq:CSHB), Muskegon's only locally-headquartered independent community banking organization, today reported second quarter 2007 net income of $18,000, or $0.01 per diluted share, compared with $342,000, or $0.23 per diluted share, reported in the second quarter of 2006, and $229,000, or $0.15 per diluted share, reported in the first quarter of 2007. Six months year-to-date earnings were $246,000, and $0.17 per diluted share, compared with $706,000 and $0.48 per share, a decline of 65.2 percent and 64.6 percent, respectively, over the prior six-month period. Year over year results reflect the impact of margin compression and increased operating expenses to support expansion activities, partially offset by solid loan growth and non-interest income.
Heather D. Brolick, president and CEO of Community Shores Bank Corporation, commented, "We are making progress on several of our recent initiatives designed to enhance revenue, but we have not yet realized a consistent return on the significant investments we have made over the past nine months. Our new branches are attracting lower-costing, local funds which are changing our deposit mix and will be reflected in continued favorable trends in our net interest margin."
"Our fee-based initiatives are performing well, although they too are in the early stages of development. Both SBA and mortgage loan gains are on target for the year. Most of the gains on loan sales for the quarter were mortgage related. Our SBA program is solid; however, the production nature of the SBA business line income is such that non-interest income contributions will continue to be erratic."
"The bright spot for the quarter was definitely high quality loan growth and maintenance of asset quality," continued Ms. Brolick. "Despite an extremely competitive rate environment, we are finding quality growth opportunities in an otherwise slow environment. This is directly attributable to the business development efforts of our seasoned lending staff, working in conjunction with an enhanced market presence created by our branching activities."
Net interest income compared with the year-ago quarter declined $56,000, or 2.7 percent. Compared with the linked quarter, net interest income increased $69,000, or 3.5 percent, reflecting a stabilizing margin and growth in earning assets of 9.3 percent.
Non-interest income increased 19.1 percent year over year to $424,000, primarily due to additional gains on sales of SBA and mortgage loans in excess of $188,000. Ms. Brolick added, "We have experienced a substantial boost in mortgage originations and the pipeline remains strong."
Non-interest expense totaled $2.2 million for the second quarter of 2007, an increase of $454,000, or 25.9%, from the second quarter of 2006, and up $162,000, or 7.9 percent from the first quarter of 2007. The year-over-year increase is primarily attributable to branch expansion, while the second quarter increase is mostly due to costs associated with the mortgage lending start-up which included the addition of five mortgage originators and four mortgage support staff. The increase in personnel expenses was $484,000, most of which is due to the 23 FTE employees added year over year. The recruiting costs incurred to assemble the mortgage team will have a smaller impact on 2008's results, when the compensation formula for the originators becomes entirely commission-based. The efficiency ratio for the quarter was 89.02 percent, compared with 83.85 percent for prior quarter and 71.08 percent for the year-ago quarter.
Assets at June 30, 2007 totaled $261.3 million, an increase of $24.6 million, or 10.4 percent, compared with $236.7 million twelve months ago. Loans grew $22.8 million, or 11.5 percent, to $221.9 million; nearly 70 percent of the growth occurred during the second quarter of 2007. Deposits increased $22.9 million, or 11.2 percent, to $228.1 million as with the loan portfolio, growth accelerated during the second quarter of 2007; on an annualized basis, loans increased 31.0 percent, and deposits increased 19.3 percent. Ms. Brolick commented, "As a result of our new branching initiatives, we have opened more net new checking and savings accounts this year than in any year since we opened for business. This local activity has allowed us to reduce brokered deposits, which are down 21 percent since year-end 2006."
Net charge-offs were $60,000 or 0.11 percent of average loans annualized, an improvement of 6 and 8 basis points, respectively, over the 0.17 percent reported for the linked quarter and 0.19 percent for prior-year period. Nonperforming assets (including 90 days delinquent and OREO) were $3.2 million, or 1.21 percent of period-end assets, at June 30, 2007, compared with $2.8 million, or 1.12 percent of assets, for the linked quarter, and $1.5 million, or 0.63 percent of assets, for the year-ago quarter. While non accruals declined $92,000 from March 31, 2007, there was an increase in nonperforming assets due to a single relationship that became 90 days past due during the quarter. Ms. Brolick explained that this one C&I loan, for $728,000, was restructured in July of 2006 and had, until recently, been able to meet renegotiated terms. "We have multiple assets collateralizing the loan and we will continue to work with the borrower to minimize the Bank's exposure." The allowance for loan and lease losses was 1.26 percent of total loans at June 30, 2007, the same as it was at March 31, 2007 and only up slightly from 1.23 percent at year-end 2006. "The weakened Michigan economy," Ms. Brolick commented, "is reflected in our higher delinquency rates. While our provision expense has remained stable, delinquency could have a bearing on future expense."
Shareholders' equity totaled $16.3 million at June 30, 2007, up $1.2 million from twelve months ago. Tier I capital was 6.34 percent for the first quarter of 2007. Shares outstanding at period-end were 1,468,800.
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 $261 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
Quarterly
-------------------------------------------------
(dollars in
thousands except 2007 2007 2006 2006 2006
per share data) 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
--------- --------- --------- --------- ---------
EARNINGS
Net interest income 2,057 1,988 2,126 2,164 2,113
Provision for loan
and lease losses 268 127 202 217 224
Noninterest income 424 455 380 461 356
Noninterest expense 2,209 2,047 1,958 1,886 1,755
Pre tax income 4 269 346 522 491
Net Income 18 229 247 363 342
Basic earnings per
share $ 0.01 $ 0.16 $ 0.17 $ 0.25 $ 0.24
Diluted earnings
per share $ 0.01 $ 0.15 $ 0.17 $ 0.25 $ 0.23
Average shares
outstanding 1,468,800 1,468,733 1,466,800 1,449,191 1,436,800
Average diluted
shares
outstanding 1,481,462 1,488,589 1,489,014 1,476,876 1,461,201
PERFORMANCE RATIOS
Return on average
assets 0.03% 0.37% 0.41% 0.62% 0.60%
Return on average
common equity 0.44% 5.64% 6.16% 9.33% 9.11%
Net interest margin 3.52% 3.48% 3.80% 3.94% 3.94%
Efficiency ratio 89.02% 83.85% 78.13% 71.84% 71.08%
Full-time equivalent
employees 86 82 72 66 63
CAPITAL
End of period
equity to assets 6.23% 6.52% 6.53% 6.66% 6.38%
Tier 1 capital to
end of period
assets 6.34% 6.58% 6.60% 6.74% 6.51%
Book value per
share $ 11.09 $ 11.17 $ 10.99 $ 10.82 $ 10.52
ASSET QUALITY
Gross loan charge-
offs 69 101 205 112 120
Net loan charge-offs 60 88 200 107 94
Net loan charge-
offs to avg loans
(annualized) 0.11% 0.17% 0.39% 0.21% 0.19%
Allowance for loan
and lease losses 2,796 2,588 2,549 2,547 2,437
Allowance for losses
to total loans 1.26% 1.26% 1.23% 1.24% 1.22%
Past due and
nonaccrual loans
(90 days) 2,356 1,942 1,131 1,394 1,428
Past due and
nonaccrual loans
to total loans 1.06% 0.94% 0.54% 0.68% 0.72%
Other real estate
and repossessed
assets 810 887 419 123 58
NPA +90 day past
due to total assets 1.21% 1.12% 0.63% 0.64% 0.63%
END OF PERIOD
BALANCES
Loans 221,921 205,983 207,597 205,041 199,075
Total earning
assets 243,643 235,491 231,712 223,902 223,447
Total assets 261,305 251,549 246,981 238,377 236,677
Deposits 228,115 217,602 214,282 205,456 205,175
Shareholders'
equity 16,290 16,404 16,119 15,868 15,097
AVERAGE BALANCES
Loans 213,402 207,449 206,365 202,432 195,783
Total earning
assets 237,008 231,944 226,880 222,200 216,868
Total assets 253,577 247,639 240,486 233,400 226,911
Deposits 216,749 213,807 206,514 196,493 192,696
Shareholders'
equity 16,430 16,251 16,035 15,569 15,034
Year to date
----------------------
2007 2006
---------- ----------
EARNINGS
Net interest income 4,045 4,188
Provision for loan and lease losses 395 302
Noninterest income 879 676
Noninterest expense 4,256 3,547
Pre tax income 273 1,044
Net Income 246 706
Basic earnings per share $ 0.17 $ 0.49
Diluted earnings per share $ 0.17 $ 0.48
Average shares outstanding 1,468,767 1,436,800
Average diluted shares outstanding 1,485,129 1,468,181
PERFORMANCE RATIOS
Return on average assets 0.20% 0.62%
Return on average common equity 3.01% 9.47%
Net interest margin 3.50% 3.90%
Efficiency ratio 86.42% 72.92%
Full-time equivalent employees 86 63
CAPITAL
End of period equity to assets 6.52% 6.38%
Tier 1 capital to end of period assets 6.58% 6.51%
Book value per share $ 11.17 $ 10.52
ASSET QUALITY
Gross loan charge-offs 170 525
Net loan charge-offs 148 478
Net loan charge-offs to avg loans
(annualized) 0.14% 0.25%
Allowance for loan and lease losses 2,796 2,437
Allowance for losses to total loans 1.26% 1.22%
Past due and nonaccrual loans (90 days) 2,356 1,428
Past due and nonaccrual loans to total loans 1.06% 0.72%
Other real estate and repossessed assets 810 58
NPA +90 day past due to total assets 1.21% 0.63%
END OF PERIOD BALANCES
Loans 221,921 199,075
Total earning assets 243,643 223,447
Total assets 261,305 236,677
Deposits 228,115 205,175
Shareholders' equity 16,290 15,097
AVERAGE BALANCES
Loans 210,442 192,758
Total earning assets 234,490 217,628
Total assets 250,626 227,319
Deposits 215,286 194,922
Shareholders' equity 16,343 14,913
Community Shores Bank Corporation
Condensed Consolidated Statements of Income
(Unaudited)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
06/30/07 06/30/06 06/30/07 06/30/06
---------- ---------- ---------- ----------
Interest and dividend
income
Loans, including fees $4,268,819 $3,841,279 $8,325,841 $7,369,830
Securities (including
FHLB dividends) 218,331 179,724 419,804 360,040
Federal funds sold and
other interest income 47,671 18,757 118,340 119,739
---------- ---------- ---------- ----------
Total interest income 4,534,821 4,039,760 8,863,985 7,849,609
Interest expense
Deposits 2,209,884 1,678,261 4,321,375 3,217,233
Repurchase agreements
and federal funds
purchased and other
debt 89,508 75,917 140,507 110,683
Federal Home Loan Bank
advances and notes
payable 178,500 172,417 356,907 333,740
---------- ---------- ---------- ----------
Total interest expense 2,477,892 1,926,595 4,818,789 3,661,656
Net interest Income 2,056,929 2,113,165 4,045,196 4,187,953
Provision for loan
losses 268,100 223,599 395,331 301,752
---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses 1,788,829 1,889,566 3,649,865 3,886,201
Noninterest income
Service charges on
deposit accounts 238,662 256,176 447,057 494,289
Mortgage loan referral
fees 0 1,437 0 1,437
Gain on sale of loans 70,689 11,668 204,580 16,403
Gain on sale of
securities 0 0 1,986 0
Gain (loss) on disposal
of equipment 0 0 80 (124)
Other 114,809 86,636 225,573 164,235
---------- ---------- ---------- ----------
Total noninterest
income 424,160 355,917 879,276 676,240
Noninterest expense
Salaries and employee
benefits 1,285,974 947,030 2,421,696 1,938,076
Occupancy 140,286 87,776 283,575 175,074
Furniture and equipment 163,653 101,737 309,999 198,254
Advertising 32,928 40,935 90,828 83,792
Data Processing 112,716 102,514 217,396 196,278
Professional services 131,631 130,519 272,582 257,791
Other 341,377 344,119 659,586 697,289
---------- ---------- ---------- ----------
Total noninterest
expense 2,208,565 1,754,630 4,255,662 3,546,554
Income before income
taxes 4,424 490,853 273,479 1,043,662
Federal income tax
expense (13,353) 148,859 27,074 310,303
---------- ---------- ---------- ----------
Net Income $ 17,777 $ 341,994 $ 246,405 $ 705,584
========== ========== ========== ==========
Weighted average shares
outstanding 1,468,800 1,436,800 1,468,767 1,436,800
========== ========== ========== ==========
Diluted average shares
outstanding 1,481,462 1,461,201 1,485,129 1,468,181
========== ========== ========== ==========
Basic income per share $ 0.01 $ 0.24 $ 0.17 $ 0.49
========== ========== ========== ==========
Diluted income per
share $ 0.01 $ 0.23 $ 0.17 $ 0.48
========== ========== ========== ==========
Community Shores Bank Corporation
Condensed Consolidated Statements of Condition
June 30, December 31, June 30,
2007 2006 2006
(Unaudited) (Audited) (Unaudited)
------------ ------------ ------------
ASSETS
Cash and due from financial
institutions $ 4,268,013 $ 3,398,155 $ 6,592,357
Interest-bearing deposits
in other financial
institutions 78,256 72,115 288,517
Federal funds sold 2,650,000 5,600,000 5,350,000
------------ ------------ ------------
Total cash and cash
equivalents 6,996,269 9,070,270 12,230,874
Securities
Available for sale 13,742,318 13,184,437 13,043,976
Held to maturity 5,251,301 5,257,835 5,264,370
------------ ------------ ------------
Total securities 18,993,619 18,442,272 18,308,346
Loans held for sale 533,602 165,070 --
Loans 221,386,822 207,432,376 199,074,571
Less: Allowance for loan
losses 2,796,103 2,549,016 2,436,765
------------ ------------ ------------
Net loans 218,590,719 204,883,360 196,637,806
Federal Home Loan Bank
stock 404,100 404,100 425,000
Premises and equipment,net 12,207,028 10,958,821 6,767,643
Accrued interest receivable 1,239,181 1,249,680 1,002,209
Other assets 2,340,324 1,807,258 1,304,890
------------ ------------ ------------
Total assets $261,304,842 $246,980,831 $236,676,768
============ ============ ============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits
Non interest-bearing $ 19,519,568 $ 17,179,082 $ 18,439,578
Interest-bearing 208,595,407 197,103,330 186,735,865
------------ ------------ ------------
Total deposits 228,114,975 214,282,412 205,175,443
Federal funds purchased and
repurchase agreements 5,018,681 4,494,614 4,902,409
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 800,000 400,000 400,000
Accrued expenses and other
liabilities 580,870 1,185,180 601,466
------------ ------------ ------------
Total liabilities 245,014,526 230,862,206 221,579,318
Shareholders' Equity
Common Stock, no par
value: 9,000,000 shares
authorized, 1,468,800,
1,466,800, 1,436,800
issued at June 30, 2007
December 31, 2006, and
March 31, 2006 13,296,462 13,274,098 12,999,998
Retained earnings 3,274,179 3,027,774 2,418,046
Accumulated other
comprehensive deficit (280,325) (183,247) (320,594)
------------ ------------ ------------
Total shareholders'
equity 16,290,316 16,118,625 15,097,450
------------ ------------ ------------
Total liabilities and
shareholders' equity $261,304,842 $246,980,831 $236,676,768
============ ============ ============