MUSKEGON, Mich., Jan. 30, 2008 (PRIME NEWSWIRE) -- Community Shores Bank Corporation (Nasdaq:CSHB), Muskegon's only locally-headquartered independent community banking organization, today reported a net loss of $723,000, or $0.49 per diluted share, for the 2007 fiscal year compared with net income of $1.3 million, or $0.89 per diluted share, for the 2006 fiscal year. For the fourth quarter, the company reported a net loss of $866,000, or $0.59 per diluted share, compared with net income of $247,000, or $0.17 per diluted share from the prior-year quarter, and a net loss of $103,000, or $0.07 per diluted share, for the third quarter of 2007. Year-end and quarter-end 2007 earnings reflect a higher level of loan loss reserve resulting from an increased level of nonperforming assets, a lower net interest margin, and higher expenses related to branch expansion activities, compared to prior year periods.
Heather D. Brolick, president and CEO of Community Shores Bank Corporation, commented, "Our 2007 financial performance was disappointing. Economic conditions in West Michigan increasingly reflect the deteriorating economy of the state, with higher levels of unemployment, declining property values and a weakening business climate. These conditions have negatively impacted certain of our borrowers. Our response has been proactive; during the fourth quarter, we pre-announced a $1 million provision for loan losses to address current and potential problems in our loan portfolio. We are aggressively controlling overhead expenses while focusing on fee-generating activities and attracting lower-cost local deposits. Our expanded branch network provides the infrastructure to grow our deposit base and help to alleviate the margin pressure created by the recently declining interest rate environment. We believe the investments we have made this past year will produce a stronger revenue base in the future."
Total revenue, comprised of net interest income and noninterest income, was $9.7 million for 2007, a decrease of 3.1 percent from the $10.0 million reported for 2006. Year-over-year net interest income decreased 5.9 percent to $8.0 million; a 4.5 percent increase in average earning assets was offset by a 55 basis point decline in the net interest margin to 3.34 percent. Ms. Brolick commented, "Our net interest margin was negatively impacted by a higher level of nonperforming loans, and while we have been gradually shifting our asset-sensitive portfolio to a more neutral position, the immediate re-pricing of our prime-based loans in a declining rate environment reduces our margin near term. This imbalance should diminish as deposit rates trend downward."
Noninterest income was $1.7 million for 2007, a 12.9 percent increase over the $1.5 million reported for the prior year. Gains on sale of loans were $289,000 for 2007, up $77,000 or 36.5 percent above 2006 results. Gains on mortgage loan sales increased by $129,000, partially offset by lower gains on the sale of SBA loans. Other revenue sources contributing to increased noninterest income were brokerage commissions and SBA loan servicing income.
Noninterest expense totaled $9.0 million for 2007, an increase of 21.5 percent over the $7.4 million reported for fiscal year 2006. The increase primarily reflects expenses associated with branch expansion and relocation activities as well as investments in diversifying revenue. Salaries and employee benefits grew $991,000. The higher level of salaries is related to an additional 14 FTE (full-time equivalent) employees. The other expense category increased primarily due to additional FDIC insurance premium assessments of approximately $142,000.
Assets at December 31, 2007 totaled $272.6 million, an increase of $25.7 million, or 10.4 percent over December 31, 2006. Loans grew $24.9 million, or 12.0 percent, to $232.5 million, and were funded primarily by deposit growth. Deposits grew $23.7 million, or 11.0 percent, compared to $214.3 million at the prior year-end. Ms. Brolick commented, "Our lending and branch staffs have done an excellent job developing strong loan and deposit relationships. We have increased our marketing activities on the origination of 1-4 family residential real estate loans to qualified homeowners, which we sell almost entirely in the secondary market. This provides us with an additional source of noninterest income, as well as opportunities to cross-sell checking and savings products."
Nonperforming assets (including 90 days delinquent and OREO) were $6.6 million or 2.41 percent of total assets at December 31, 2007; this compares with $1.6 million or 0.65 percent of assets for the year-ago period, and $4.0 million or 1.48 percent of assets for the linked quarter. Ms. Brolick stated, "Our borrowers are not immune to the effects of local economic conditions, and our nonperforming asset trends reflect those conditions. As we previously reported, we increased our loan loss provision in the fourth quarter to provide for the impact of the weakened real estate market on our residential and land development portfolio, and for the deterioration of a commercial and industrial loan. We believe we are proactive in our response to the identification and management of problem loans, and we are working diligently to reduce exposure in troubled areas." The allowance for loan and lease losses was increased to1.55 percent of total loans at December 31, 2007, compared with 1.35 percent for the previous quarter-end, and 1.23 percent at December 31, 2006.
Shareholders' equity totaled $15.7 million at December 31, 2007, a decrease of $455,000 or 2.8 percent. The ratio of equity to assets was 5.75 percent at year end. Shares outstanding totaled 1,468,800.
Ms. Brolick concluded, "Our West Michigan economy was initially stronger than the rest of the State; unfortunately, the prolonged nature of what is essentially a single-state recession, has taken its toll. While the present economic situation is troubling, Community Shores Bank continues to focus on providing quality banking services for our customers. At the same time, we are working to improve our branch network and introduce additional products to attract core deposits and fee income. We believe that these initiatives will provide new sources of revenue, attract new business, and enhance our efficiencies going forward."
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 $273 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 Quarterly
thousands -----------------------------------------------------
except per 2007 2007 2007 2007 2006
share data) 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr
--------- --------- --------- --------- ---------
EARNINGS
Net interest
income 1,830 2,099 2,057 1,988 2,126
Provision for
loan and
lease losses 1,130 407 268 127 202
Noninterest
income 417 417 424 455 380
Noninterest
expense 2,440 2,284 2,209 2,047 1,958
Pre tax
income
(expense) (1,322) (175) 4 269 346
Net Income (866) (103) 18 229 247
Basic
earnings
per share $ (0.59) $ (0.07) $ 0.01 $ 0.16 $ 0.17
Diluted
earnings
per share $ (0.59) $ (0.07) $ 0.01 $ 0.15 $ 0.17
Average
shares
outstanding 1,468,800 1,468,800 1,468,800 1,468,733 1,466,800
Average
diluted
shares
outstanding 1,468,800 1,474,236 1,481,462 1,488,589 1,489,014
PERFORMANCE
RATIOS
Return on
average
assets -1.29% -0.16% 0.03% 0.37% 0.41%
Return on
average
common
equity -21.26% -2.51% 0.44% 5.64% 6.16%
Net interest
margin 2.95% 3.44% 3.52% 3.48% 3.80%
Efficiency
ratio 108.55% 90.78% 89.02% 83.85% 78.13%
Full-time
equivalent
employees 86 84 86 82 72
CAPITAL
End of
period equity
to assets 5.75% 6.12% 6.23% 6.52% 6.53%
Tier 1
capital to
end of
period assets 5.72% 6.16% 6.34% 6.58% 6.60%
Book value
per share $ 10.66 $ 11.14 $ 11.09 $ 11.17 $ 10.99
ASSET QUALITY
Gross loan
charge-offs 650 101 69 101 205
Net loan
charge-offs 638 92 60 88 200
Net loan
charge-offs
to avg loans
(annualized) 1.10% 0.16% 0.11% 0.17% 0.39%
Allowance
for loan
and lease
losses 3,603 3,111 2,796 2,588 2,549
Allowance
for losses
to total
loans 1.55% 1.35% 1.26% 1.26% 1.23%
Past due and
nonaccrual
loans
(90 days) 6,017 3,099 2,356 1,942 1,131
Past due and
nonaccrual
loans to
total loans 2.59% 1.34% 1.06% 0.94% 0.54%
Other real
estate and
repossessed
assets 567 870 810 887 419
NPA +90 day
past due to
total assets 2.41% 1.48% 1.21% 1.12% 0.63%
END OF PERIOD
BALANCES
Loans 232,505 230,892 221,921 205,983 207,597
Total earning
assets 256,874 249,757 243,643 235,491 231,712
Total assets 272,640 267,284 261,305 251,549 246,981
Deposits 237,950 225,216 228,115 217,602 214,282
Shareholders'
equity 15,664 16,363 16,290 16,404 16,119
AVERAGE
BALANCES
Loans 231,122 227,546 213,402 207,449 206,365
Total earning
assets 251,989 247,069 237,008 231,944 226,880
Total assets 268,400 264,112 253,577 247,639 240,486
Deposits 230,252 223,540 216,749 213,807 206,514
Shareholders'
equity 16,291 16,411 16,430 16,251 16,035
Year to date
--------------------
(dollars in thousands except per share data) 2007 2006
--------- ---------
EARNINGS
Net interest income 7,974 8,478
Provision for loan and lease losses 1,932 721
Noninterest income 1,714 1,517
Noninterest expense 8,979 7,391
Pre tax income (expense) (1,223) 1,884
Net Income (723) 1,315
Basic earnings per share $ (0.49) $ 0.91
Diluted earnings per share $ (0.49) $ 0.89
Average shares outstanding 1,468,778 1,447,485
Average diluted shares outstanding 1,476,866 1,478,168
PERFORMANCE RATIOS
Return on average assets -0.28% 0.57%
Return on average common equity -4.41% 8.59%
Net interest margin 3.34% 3.89%
Efficiency ratio 92.69% 73.94%
Full-time equivalent employees 86 72
CAPITAL
End of period equity to assets 5.75% 6.53%
Tier 1 capital to end of period assets 5.72% 6.60%
Book value per share $ 10.66 $ 10.99
ASSET QUALITY
Gross loan charge-offs 921 842
Net loan charge-offs 878 785
Net loan charge-offs to avg loans (annualized) 0.40% 0.40%
Allowance for loan and lease losses 3,603 2,549
Allowance for losses to total loans 1.55% 1.23%
Past due and nonaccrual loans (90 days) 6,017 1,131
Past due and nonaccrual loans to total loans 2.59% 0.54%
Other real estate and repossessed assets 567 419
NPA +90 day past due to total assets 2.41% 0.63%
END OF PERIOD BALANCES
Loans 232,505 207,597
Total earning assets 256,874 231,712
Total assets 272,640 246,981
Deposits 237,950 214,282
Shareholders' equity 15,664 16,119
AVERAGE BALANCES
Loans 219,966 198,626
Total earning assets 242,071 221,113
Total assets 258,505 232,171
Deposits 221,139 198,240
Shareholders' equity 16,402 15,310
Community Shores Bank Corporation
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended Twelve Months Ended
12/31/07 12/31/06 12/31/07 12/31/06
----------- ----------- ----------- -----------
Interest and
dividend income
Loans, including
fees $ 4,287,410 $ 4,149,122 $17,131,662 $15,617,761
Securities
(including
FHLB dividends) 206,678 185,892 839,569 727,173
Federal funds
sold and other
interest income 14,365 18,021 135,603 144,855
----------- ----------- ----------- -----------
Total interest
income 4,508,453 4,353,035 18,106,834 16,489,789
Interest expense
Deposits 2,389,428 1,993,615 9,017,500 7,044,480
Repurchase
agreements and
federal funds
purchased and
other debt 90,708 52,862 370,463 271,502
Federal Home
Loan Bank
advances and
notes payable 197,985 180,536 744,628 695,864
----------- ----------- ----------- -----------
Total interest
expense 2,678,121 2,227,013 10,132,591 8,011,846
Net interest
Income 1,830,332 2,126,022 7,974,243 8,477,943
Provision for
loan losses 1,129,957 202,076 1,931,963 720,701
----------- ----------- ----------- -----------
Net interest
income after
provision for
loan losses 700,375 1,923,946 6,042,280 7,757,242
Noninterest income
Service charges on
deposit accounts 269,044 222,044 969,176 955,488
Mortgage loan
referral fees 3,838 1,375 13,833 2,812
Gain on sale of
loans 50,062 70,800 289,069 211,813
Gain on sale of
securities 0 0 1,986 0
Gain (loss) on
disposal of
equipment 0 0 458 (124)
Other 94,106 86,186 439,226 347,436
----------- ----------- ----------- -----------
Total
noninterest
income 417,050 380,405 1,713,748 1,517,425
Noninterest
expense
Salaries and
employee benefits 1,280,403 1,069,333 4,990,196 3,999,457
Occupancy 159,263 121,283 589,480 397,185
Furniture and
equipment 168,483 123,196 649,410 434,519
Advertising 32,186 52,118 161,051 226,688
Data Processing 112,917 91,572 440,133 381,035
Professional
services 146,642 115,127 550,244 539,521
Other 539,645 385,731 1,598,843 1,412,193
----------- ----------- ----------- -----------
Total
noninterest
expense 2,439,539 1,958,360 8,979,357 7,390,598
Income before
income taxes (1,322,114) 345,991 (1,223,329) 1,884,069
Federal income
tax expense (456,044) 99,410 (500,660) 568,757
----------- ----------- ----------- -----------
Net Income $ (866,070) $ 246,581 $ (722,669) $ 1,315,312
=========== =========== =========== ===========
Weighted average
shares outstanding 1,468,800 1,466,800 1,468,778 1,447,485
=========== =========== =========== ===========
Diluted average
shares outstanding 1,468,800 1,489,014 1,476,778 1,478,168
=========== =========== =========== ===========
Basic income per
share $ (0.59) $ 0.17 $ (0.49) $ 0.91
=========== =========== =========== ===========
Diluted income
per share $ (0.59) $ 0.17 $ (0.49) $ 0.89
=========== =========== =========== ===========
Community Shores Bank Corporation
Condensed Consolidated Statements of Condition
December 31, December 31, December 31,
2007 2006 2005
(Unaudited) (Audited) (Audited)
------------ ------------ ------------
ASSETS
Cash and due from
financial institutions $ 3,329,626 $ 3,398,155 $ 4,361,277
Interest-bearing deposits
in other financial
institutions 201,290 72,115 90,182
Federal funds sold 4,346,000 5,600,000 200,000
------------ ------------ ------------
Total cash and cash
equivalents 7,876,916 9,070,270 4,651,459
Securities
Available for sale 13,194,645 13,184,437 13,983,933
Held to maturity 6,627,534 5,257,835 4,918,499
------------ ------------ ------------
Total securities 19,822,179 18,442,272 18,902,432
Loans held for sale 2,285,966 165,070 --
Loans 230,219,420 207,432,376 192,644,742
Less: Allowance for loan
losses 3,602,948 2,549,016 2,612,581
------------ ------------ ------------
Net loans 226,616,472 204,883,360 190,032,161
Federal Home Loan Bank stock 404,100 404,100 425,000
Premises and equipment,net 12,488,593 10,958,821 5,922,886
Accrued interest receivable 1,159,804 1,249,680 994,219
Other assets 1,986,392 1,807,258 1,238,194
------------ ------------ ------------
Total assets $272,640,422 $246,980,831 $222,166,351
============ ============ ============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits
Non interest-bearing $ 16,708,504 $ 17,179,082 $ 16,564,735
Interest-bearing 221,241,941 197,103,330 173,886,366
------------ ------------ ------------
Total deposits 237,950,445 214,282,412 190,451,101
Federal funds purchased
and repurchase agreements 4,400,611 4,494,614 6,065,010
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 4,206,043 400,000 0
Accrued expenses and other
liabilities (80,564) 1,185,180 650,329
------------ ------------ ------------
Total liabilities 256,976,535 230,862,206 207,666,440
Shareholders' Equity
Common Stock, no par
value: 9,000,000
shares authorized,
1,468,800 issued at
September 30, 2007 and
1,466,800 issued at
December 31, 2006, and
September 30, 2006 13,296,691 13,274,098 12,998,670
Retained earnings 2,305,105 3,027,774 1,712,462
Accumulated other
comprehensive deficit 62,091 (183,247) (211,221)
------------ ------------ ------------
Total shareholders'
equity 15,663,887 16,118,625 14,499,911
------------ ------------ ------------
Total liabilities and
shareholders' equity $272,640,422 $246,980,831 $222,166,351
============ ============ ============