MUSKEGON, Mich., May 2, 2008 (PRIME NEWSWIRE) -- Community Shores Bank Corporation (Nasdaq:CSHB), Muskegon's only locally-headquartered independent community banking organization, today reported first quarter 2008 net income of $32,000, or $0.02 per diluted share, compared with net income of $229,000, or $0.15 per diluted share for the first quarter of 2007. First quarter 2008 results reflect a return to profitability as a result of a lower provision for loan losses and higher noninterest income, compared to the fourth quarter of 2007.
Heather D. Brolick, president and CEO of Community Shores Bank Corporation, commented, "We believe we are making progress in several areas of our business. Our aggressive provisioning in the fourth quarter of 2007 has allowed us to strengthen our loan loss reserve. We have the flexibility to manage our problem loans efficiently and are proactively monitoring the financial condition of our clients and continually reassessing collateral valuations.
"We are also beginning to generate a revenue stream that is independent of interest rates. Our mortgage originations are growing, allowing us to generate both fee income from sales to the secondary market and yield income from retaining a portion of these loans in portfolio."
Total revenue, comprised of net interest income and noninterest income, was $2.5 million for the first quarter of 2008, an increase of 2.0 percent from the $2.4 million reported for first quarter of 2007. Net interest income for the current quarter was $1.85 million, down 6.9 percent year over year, primarily from a 60 basis point decline in the net interest margin to 2.88 percent, partially offset by a 13.1 percent increase in average earning assets. "Our margin has declined as a result of the Federal Reserve's aggressive rate cuts over a relatively short period of time," said Brolick. "We, like many banks, are initially unable to re-price our liabilities as quickly as our variable rate assets. Fortunately, we anticipate improvement in our margin as $79.7 million in higher costing term deposits re-price over the next 9 months."
Noninterest income was $643,000 for the 2008 first quarter compared with $455,000 for the year-ago quarter, an increase of 41.2 percent. Excluding a one-time gain of $143,000 on the sale of foreclosed property, first quarter 2008 noninterest income was $500,000, up 9.9 percent over the prior-year first quarter, primarily from increased service charges on deposit accounts and gains on sale of mortgage loans.
A major factor contributing to Community Shores' improved profit performance this quarter was the $900,000 reduction in the loan loss provision compared to the fourth quarter of 2007, down from $1.13 million to $231,000. "Troubled asset management is a top priority. The strain of present economic conditions and the impact on our borrowing base remains a concern. We are pleased that, in this challenging environment, charge-offs and nonperforming assets improved this quarter," commented Brolick.
Expense control is another area where discipline is evident. Noninterest expense totaled $2.2 million for the first quarter of 2008, up 9.4 percent above the year-ago quarter but 11.0 percent below fourth quarter. Salaries and benefits were $1.2 million for the current quarter, up 7.6 percent from the year-ago quarter, but an improvement of 4.5 percent compared to the linked quarter. Staffing levels were reduced since year-end by six FTE employees, or 7.0 percent, holding salary and benefits costs in check.
Assets at March 31, 2008 totaled $278.8 million, an increase of $27.2 million, or 10.8 percent, over March 31, 2007. Total loans were $224.8 million, up $18.8 million, or 9.1 percent, from the year-ago quarter. Since year-end, loans declined 3.3 percent to $224.8 million. Ms. Brolick explained that as a result of the declining interest rate environment, fixed rate borrowers have been attempting to renegotiate their terms. "While we want to accommodate our borrowing relationships," she continued, "we also adhere to a high standard of underwriting that includes pricing for risk and profitability. We reluctantly accepted a few large loan payoffs this quarter, where we also collected $54,000 in prepayment penalties. Deposits for the first quarter of 2008 were $242.8 million, up $4.8 million, or 2.0 percent, from the linked quarter and $25.2 million, or 11.6 percent, year over year.
Nonperforming assets (including 90 days past due and OREO) were $5.5 million, or 1.96 percent of total assets, at March 31, 2008; this compares with $6.6 million, or 2.41 percent of assets, for the linked quarter, and $2.8 million, or 1.12 percent of assets, for the year-ago quarter. The allowance for loan and lease losses was 1.57 percent of total loans at March 31, 2008, compared with 1.55 percent at December 31, 2007 and 1.26 percent for the year-ago quarter.
Shareholders' equity totaled $15.8 million at March 31, 2008, a decrease of $599,000, or 3.7 percent, from March 31, 2007. The ratio of equity to assets was 5.67 percent for first quarter 2008. Shares outstanding totaled 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 $279 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 thousands except per share data)
Quarterly
-----------------------------------------------------
2008 2007 2007 2007 2007
1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
--------- --------- --------- --------- ---------
EARNINGS
Net interest
income 1,850 1,830 2,099 2,057 1,988
Provision for
loan and lease
losses 231 1,130 407 268 127
Noninterest
income 643 418 417 424 455
Noninterest
expense 2,239 2,516 2,284 2,209 2,047
Pre tax income
(expense) 23 (1,398) (175) 4 269
Net Income 32 (866) (103) 18 229
Basic earnings
per share $ 0.02 $ (0.63) $ (0.07) $ 0.01 $ 0.16
Diluted
earnings
per share $ 0.02 $ (0.62) $ (0.07) $ 0.01 $ 0.15
Average
shares
outstanding 1,468,800 1,468,800 1,468,800 1,468,800 1,468,733
Average
diluted
shares out-
standing 1,468,800 1,468,800 1,474,236 1,481,462 1,488,589
PERFORMANCE RATIOS
Return on average
assets 0.05% -1.29% -0.16% 0.03% 0.37%
Return on average
common equity 0.82% -21.26% -2.51% 0.44% 5.64%
Net interest
margin 2.88% 2.95% 3.44% 3.52% 3.48%
Efficiency
ratio 89.81% 111.96% 90.78% 89.02% 83.85%
Full-time
equivalent
employees 80 86 84 86 82
CAPITAL
End of period
equity to
assets 5.67% 5.71% 6.12% 6.23% 6.52%
Tier 1 capital
to end of
period assets 5.59% 5.69% 6.16% 6.34% 6.58%
Book value
per share $ 10.76 $ 10.63 $ 11.14 $ 11.09 $ 11.17
ASSET QUALITY
Gross loan
charge-offs 323 650 101 69 101
Net loan
charge-offs 309 638 92 60 88
Net loan
charge-offs
to avg loans
(annualized) 0.54% 1.10% 0.16% 0.11% 0.17%
Allowance for
loan and
lease losses 3,525 3,603 3,111 2,796 2,588
Allowance for
losses to
total loans 1.57% 1.55% 1.35% 1.26% 1.26%
Past due and
nonaccrual
loans
(90 days) 3,625 6,017 3,099 2,356 1,942
Past due and
nonaccrual
loans to
total loans 1.61% 2.59% 1.34% 1.06% 0.94%
Other real
estate and
repossessed
assets 1,845 567 870 810 887
NPA +90 day
past due to
total assets 1.96% 2.41% 1.48% 1.21% 1.12%
END OF PERIOD
BALANCES
Loans 224,796 232,505 230,892 221,921 205,983
Total earning
assets 260,707 256,874 249,757 243,643 235,491
Total assets 278,758 273,458 267,284 261,305 251,549
Deposits 242,767 237,950 225,216 228,115 217,602
Shareholders'
equity 15,805 15,614 16,363 16,290 16,404
AVERAGE BALANCES
Loans 230,778 231,122 227,546 213,402 207,449
Total earning
assets 262,269 251,989 247,069 237,008 231,944
Total assets 279,076 268,400 264,112 253,577 247,639
Deposits 243,825 230,252 223,540 216,749 213,807
Shareholders'
equity 15,597 16,291 16,411 16,430 16,251
Community Shores Bank Corporation
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended
03/31/08 03/31/07
----------- -----------
Interest and dividend income
Loans, including fees $ 4,145,502 $ 4,057,022
Securities (including FHLB dividends) 215,494 201,473
Federal funds sold and other interest income 84,377 70,669
----------- -----------
Total interest income 4,445,373 4,329,164
Interest expense
Deposits 2,352,255 2,111,491
Repurchase agreements and federal funds
purchased and other debt 22,102 50,999
Federal Home Loan Bank advances and
notes payable 220,569 178,407
----------- -----------
Total interest expense 2,594,926 2,340,897
Net interest Income 1,850,447 1,988,267
Provision for loan losses 230,716 127,231
----------- -----------
Net interest income after provision
for loan losses 1,619,731 1,861,036
Noninterest income
Service charges on deposit accounts 231,083 208,395
Gain on sale of loans 144,763 133,891
Gain on sale of securities 0 1,986
Gain (loss) on disposal of equipment 0 80
Other 266,688 110,764
----------- -----------
Total noninterest income 642,534 455,116
Noninterest expense
Salaries and employee benefits 1,222,387 1,135,722
Occupancy 175,780 143,289
Furniture and equipment 171,562 146,346
Advertising 25,229 57,900
Data Processing 114,473 104,680
Professional services 159,654 140,951
Other 369,926 318,209
----------- -----------
Total noninterest expense 2,239,011 2,047,097
Income before income taxes 23,254 269,055
Federal income tax expense (8,679) 40,427
----------- -----------
Net Income $ 31,933 $ 228,628
=========== ===========
Weighted average shares outstanding 1,468,800 1,468,733
=========== ===========
Diluted average shares outstanding 1,468,800 1,488,589
=========== ===========
Basic income per share $ 0.02 $ 0.16
=========== ===========
Diluted income per share $ 0.02 $ 0.15
=========== ===========
Community Shores Bank Corporation
Condensed Consolidated Statements of Condition
March 31, December 31, March 31,
2008 2007 2007
(Unaudited) (Audited) (Unaudited)
------------ ------------ ------------
ASSETS
Cash and due from
financial institutions $ 3,838,206 $ 3,329,626 $ 3,458,878
Interest-bearing deposits
in other financial
institutions 89,297 201,290 77,506
Federal funds sold 15,800,000 4,346,000 9,000,000
------------ ------------ ------------
Total cash and cash
equivalents 19,727,503 7,876,916 12,536,384
Securities
Available for sale 13,399,249 13,194,645 14,771,664
Held to maturity 6,623,055 6,627,534 5,254,568
------------ ------------ ------------
Total securities 20,022,304 19,822,179 20,026,232
Loans held for sale 2,144,713 2,285,966 135,371
Loans 222,651,068 230,219,420 205,848,341
Less: Allowance for
loan losses 3,524,600 3,602,948 2,588,475
------------ ------------ ------------
Net loans 219,126,468 226,616,472 203,259,866
Federal Home Loan Bank stock 404,100 404,100 404,100
Premises and equipment,net 12,317,909 12,488,593 11,683,835
Accrued interest receivable 1,061,760 1,159,804 1,197,759
Other assets 3,953,249 2,804,033 2,305,642
------------ ------------ ------------
Total assets $278,758,006 $273,458,063 $251,549,189
============ ============ ============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits
Non interest-bearing $ 17,669,347 $ 16,708,504 $ 17,029,107
Interest-bearing 225,097,928 221,241,941 200,573,367
------------ ------------ ------------
Total deposits 242,767,275 237,950,445 217,602,474
Federal funds purchased and
repurchase agreements 4,649,338 4,400,611 5,695,329
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 4,200,000 4,206,043 400,000
Accrued expenses and
other liabilities 836,287 786,639 947,813
------------ ------------ ------------
Total liabilities 262,952,900 257,843,738 235,145,616
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 13,296,462
Retained earnings 2,287,476 2,255,543 3,256,402
Accumulated other
comprehensive deficit 220,939 62,091 (149,291)
------------ ------------ ------------
Total shareholders' equity 15,805,106 15,614,325 16,403,573
------------ ------------ ------------
Total liabilities and
shareholders' equity $278,758,006 $273,458,063 $251,549,189
============ ============ ============