MUSKEGON, Mich., July 24, 2008 (PRIME NEWSWIRE) -- Community Shores Bank Corporation (Nasdaq:CSHB), Muskegon's only locally headquartered independent community banking organization, today reported second quarter 2008 net income of $11,000, or $0.01 per diluted share, compared with net income of $18,000, or $0.01 per diluted share for the second quarter of 2007. Six months year-to-date earnings were $43,000, or $0.03 per diluted share, compared with $246,000, or $0.17 per diluted share, for the first half of 2007. Year-over-year results reflect the impact of net interest margin compression and a decline in asset quality, partially offset by higher noninterest income.
"We are managing our business as conservatively as possible in the face of the daily shockwaves that impact the financial world," stated Heather D. Brolick, president and CEO of Community Shores Bank Corporation "Here in Michigan, we face additional challenges as our economy struggles to reinvent itself. We continue to maintain a strong reserve for loan losses, diligently monitor the condition of the local real estate market, and assess the impact of these factors on the financial health of our borrowers.
"We are making progress in several areas of our business," Brolick added. "Noninterest income is growing both in absolute terms and as a percentage of total revenue, thus reducing our reliance on interest income and swings in the credit market. In addition, we continue to take steps to streamline our operations and control expenses."
Total revenue, which includes net interest income and noninterest income, was $2.3 million for the second quarter of 2008, 7.6 percent lower than the year-ago level of $2.5 million. Driven by an 80 basis point decline in the net interest margin to 2.72 percent compared with the year-earlier margin of 3.52 percent, net interest income for the current quarter declined 17.9 percent to $1.69 million. The margin decline was partially offset by a 7.3 percent increase in average earning assets.
"Like many other commercially-oriented community banks, Community Shores is asset-sensitive," remarked Brolick. "The rapid decline in interest rates lowered our loan yield faster than our deposits could reprice, and our net interest margin has suffered as a result. Now that rates have leveled off, the repricing schedule for the remaining higher-rate deposits is accelerating and our net interest margin should begin to improve in the third quarter. We expect our margin to strengthen over the remainder of the year."
Noninterest income in the second quarter of 2008 grew 42.5 percent over the year-ago quarter, to $604,295, benefiting from recoveries and the settlement of a lawsuit which contributed approximately $118,000 to other income; in addition, service charges on deposits and gains on loan sales increased $13,308 and $40,047, respectively, over year-ago levels.
Expense management continues to be a key area of focus at Community Shores Bank. Noninterest expense was $2.1 million for the second quarter of 2008, down 2.7 percent from the prior-year second quarter, and 4.0 percent below first quarter 2008. Salaries and benefits were $1.2 million for the June quarter, an improvement of 7.0 percent from the year-ago quarter and 2.1 percent from the linked quarter. Staffing levels were reduced by eight FTE employees, or 9.3 percent, from year-earlier levels, which was a major factor contributing to lower salary and benefit costs in the current quarter.
Assets at June 30, 2008 totaled $265.3 million, an increase of $4.0 million, or 1.5 percent, over June 30, 2007. Total loans were $219.6 million, down $2.3 million, or 1.0 percent, from the year-ago quarter; compared with the first quarter of 2008, loans declined by $5.2 million, or 2.3 percent. "The economy is certainly not growing," acknowledged Ms. Brolick. "Given today's market conditions, our primary focus is servicing our existing customer base and adequately pricing for risk."
Deposits at June 30, 2008 were $230.2 million, up $2.1 million or 0.9 percent from the year-ago quarter; compared with the previous quarter, deposits declined by $12.5 million or 5.2 percent. Nearly 60% were brokered deposits intentionally allowed to run off.
Nonperforming assets (including 90 days past due and OREO) were $6.1 million, or 2.31 percent of total assets, at June 30, 2008; this compares with $5.5 million, or 1.96 percent of assets, at the end of first quarter 2008 and $3.2 million, or 1.21 percent of assets, for the year-ago quarter. The allowance for loan and lease losses was 1.56 percent of total loans at June 30, 2008, virtually unchanged from March 31, 2008 and substantially higher than the 1.26 percent reported for the year-ago quarter.
Shareholders' equity totaled $15.6 million at June 30, 2008, a decrease of $678,000 or 4.2 percent from June 30, 2007. The ratio of equity to assets was 5.88 percent at period-end, with shares outstanding totaling 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 $265 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 2008 2008 2007 2007 2007
share data) 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
---------- ---------- ---------- ---------- ----------
EARNINGS
Net
interest
income 1,688 1,850 1,830 2,099 2,057
Provision
for loan
and
lease
losses 153 231 1,130 407 268
Non-
interest
income 604 643 418 417 424
Non-
interest
expense 2,150 2,239 2,516 2,284 2,209
Pre tax
income (10) 23 (1,398) (175) 4
Net
Income 11 32 (866) (103) 18
Basic
earnings
per
share $ 0.01 $ 0.02 $ (0.63) $ (0.07) $ 0.01
Diluted
earnings
per
share $ 0.01 $ 0.02 $ (0.62) $ (0.07) $ 0.01
Average
shares
out-
standing 1,468,800 1,468,800 1,468,800 1,468,800 1,468,800
Average
diluted
shares
out-
standing 1,468,800 1,468,800 1,468,800 1,474,236 1,481,462
PERFORMANCE
RATIOS
Return on
average
assets 0.02% 0.05% -1.29% -0.16% 0.03%
Return on
average
common
equity 0.28% 0.82% -21.26% -2.51% 0.44%
Net
interest
margin 2.72% 2.88% 2.95% 3.44% 3.52%
Efficiency
ratio 93.76% 89.81% 111.96% 90.78% 89.02%
Full-time
equivalent
employees 78 80 86 84 86
CAPITAL
End of
period
equity to
assets 5.88% 5.67% 5.71% 6.12% 6.23%
Tier 1
capital to
end of
period
assets 5.88% 5.59% 5.69% 6.16% 6.34%
Book
value
per
share $ 10.63 $ 10.76 $ 10.63 $ 11.14 $ 11.09
ASSET
QUALITY
Gross
loan
charge-
offs 314 323 650 101 69
Net loan
charge-
offs 281 309 638 92 60
Net loan
charge-
offs to
avg loans
(annualized) 0.51% 0.54% 1.10% 0.16% 0.11%
Allowance
for loan
and lease
losses 3,397 3,525 3,603 3,111 2,796
Allowance
for losses
to total
loans 1.56% 1.57% 1.55% 1.35% 1.26%
Past due
and
nonaccrual
loans (90
days) 4,264 3,625 6,017 3,099 2,356
Past due
and
nonaccrual
loans
to
total
loans 1.94% 1.61% 2.59% 1.34% 1.06%
Other real
estate and
repossessed
assets 1,862 1,845 567 870 810
NPA +90 day
past due
to total
assets 2.31% 1.96% 2.41% 1.48% 1.21%
END OF
PERIOD
BALANCES
Loans
(including
held for
sale) 219,616 224,796 232,505 230,892 221,921
Total
earning
assets 247,162 260,707 256,874 249,757 243,643
Total
assets 265,348 278,758 273,458 267,284 261,305
Deposits 230,229 242,767 237,950 225,216 228,115
Share-
holders'
equity 15,613 15,805 15,614 16,363 16,290
AVERAGE
BALANCES
Loans 220,820 230,778 231,122 227,546 213,402
Total
earning
assets 254,201 262,269 251,989 247,069 237,008
Total
assets 271,003 279,076 268,400 264,112 253,577
Deposits 235,501 243,825 230,252 223,540 216,749
Share-
holders'
equity 15,629 15,597 16,291 16,411 16,430
Year to date
(dollars in thousands except per ----------------------
share data) 2008 2007
---------- ----------
EARNINGS
Net interest income 3,539 4,045
Provision for loan and lease losses 384 395
Noninterest income 1,247 879
Noninterest expense 4,389 4,256
Pre tax income 13 273
Net Income 43 246
Basic earnings per share $ 0.03 $ 0.17
Diluted earnings per share $ 0.03 $ 0.17
Average shares outstanding 1,468,800 1,468,767
Average diluted shares outstanding 1,468,800 1,485,129
PERFORMANCE RATIOS
Return on average assets 0.03% 0.20%
Return on average common equity 0.55% 3.01%
Net interest margin 2.80% 3.50%
Efficiency ratio 91.65% 86.42%
Full-time equivalent employees 78 86
CAPITAL
End of period equity to assets 5.88% 6.52%
Tier 1 capital to end of period assets 5.88% 6.58%
Book value per share $ 10.63 $ 11.17
ASSET QUALITY
Gross loan charge-offs 637 170
Net loan charge-offs 590 148
Net loan charge-offs to avg loans
(annualized) 0.52% 0.14%
Allowance for loan and lease losses 3,397 2,796
Allowance for losses to total loans 1.56% 1.26%
Past due and nonaccrual loans (90 days) 4,264 2,356
Past due and nonaccrual loans to total
loans 1.94% 1.06%
Other real estate and repossessed assets 1,862 810
NPA +90 day past due to total assets 2.31% 1.21%
END OF PERIOD BALANCES
Loans (including held for sale) 219,616 221,921
Total earning assets 247,162 243,643
Total assets 265,348 261,305
Deposits 230,229 228,115
Shareholders' equity 15,613 16,290
AVERAGE BALANCES
Loans 225,799 210,442
Total earning assets 234,490 234,490
Total assets 250,626 250,626
Deposits 239,663 215,286
Shareholders' equity 15,648 16,343
Community Shores Bank Corporation
Condensed Consolidated Statements of Income
(Unaudited)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
06/30/08 06/30/07 06/30/08 06/30/07
---------- ---------- ---------- ----------
Interest and dividend
income
Loans, including fees $3,669,248 $4,268,819 $7,814,750 $8,325,841
Securities (including
FHLB dividends) 213,074 218,331 428,568 419,804
Federal funds sold
and other interest
income 66,978 47,671 151,355 118,340
---------- ---------- ---------- ----------
Total interest
income 3,949,300 4,534,821 8,394,673 8,863,985
Interest expense
Deposits 2,061,904 2,209,884 4,414,159 4,321,375
Repurchase agreements
and federal funds
purchased and other
debt 14,462 89,508 36,564 140,507
Federal Home Loan Bank
advances and notes
payable 184,278 178,500 404,847 356,907
---------- ---------- ---------- ----------
Total interest
expense 2,260,644 2,477,892 4,855,570 4,818,789
Net interest Income 1,688,656 2,056,929 3,539,103 4,045,196
Provision for loan
losses 153,368 268,100 384,084 395,331
---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses 1,535,288 1,788,829 3,155,019 3,649,865
Noninterest income
Service charges on
deposit accounts 251,970 238,662 483,053 447,057
Gain on sale of loans 110,736 70,689 255,499 204,580
Gain on sale of
securities 0 0 0 1,986
Gain (loss) on
disposal of equipment 0 0 0 80
Other 241,589 114,809 508,277 225,573
---------- ---------- ---------- ----------
Total noninterest
income 604,295 424,160 1,246,829 879,276
Noninterest expense
Salaries and employee
benefits 1,196,539 1,285,974 2,418,926 2,421,696
Occupancy 151,651 140,286 327,431 283,575
Furniture and
equipment 171,082 163,653 342,644 309,999
Advertising 30,198 32,928 55,427 90,828
Data Processing 121,690 112,716 236,163 217,396
Professional services 120,491 131,631 280,145 272,582
Other 358,232 341,377 728,158 659,586
---------- ---------- ---------- ----------
Total noninterest
expense 2,149,883 2,208,565 4,388,894 4,255,662
Income before income
taxes (10,300) 4,424 12,954 273,479
Federal income tax
expense (21,143) (13,353) (29,822) 27,074
---------- ---------- ---------- ----------
Net Income $ 10,843 $ 17,777 $ 42,776 $ 246,405
========== ========== ========== ==========
Weighted average
shares outstanding 1,468,800 1,468,800 1,468,800 1,468,767
========== ========== ========== ==========
Diluted average
shares outstanding 1,468,800 1,481,462 1,468,800 1,485,129
========== ========== ========== ==========
Basic income per share $ 0.01 $ 0.01 $ 0.03 $ 0.17
========== ========== ========== ==========
Diluted income per
share $ 0.01 $ 0.01 $ 0.03 $ 0.17
========== ========== ========== ==========
Community Shores Bank Corporation
Condensed Consolidated Statements of Condition
June 30, December 31, June 30,
2008 2007 2007
(Unaudited) (Audited) (Unaudited)
------------ ------------ ------------
ASSETS
Cash and due from
financial institutions $ 4,384,505 $ 3,329,626 $ 4,268,013
Interest-bearing
deposits in other
financial institutions 57,900 201,290 78,256
Federal funds sold 8,245,000 4,346,000 2,650,000
------------ ------------ ------------
Total cash and cash
equivalents 12,687,405 7,876,916 6,996,269
Securities
Available for sale 12,624,510 13,194,645 13,742,318
Held to maturity 6,618,577 6,627,534 5,251,301
------------ ------------ ------------
Total securities 19,243,087 19,822,179 18,993,619
Loans held for sale 1,288,292 2,285,966 533,602
Loans 218,327,250 230,219,420 221,386,822
Less: Allowance for loan
losses 3,397,169 3,602,948 2,796,103
------------ ------------ ------------
Net loans 214,930,081 226,616,472 218,590,719
Federal Home Loan Bank
stock 404,100 404,100 404,100
Premises and equipment,
net 12,174,452 12,488,593 12,207,028
Accrued interest
receivable 943,828 1,159,804 1,239,181
Other assets 3,676,296 2,804,033 2,340,324
------------ ------------ ------------
Total assets $265,347,541 $273,458,063 $261,304,842
============ ============ ============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits
Non interest-bearing $ 18,080,753 $ 16,708,504 $ 19,519,568
Interest-bearing 212,148,621 221,241,941 208,595,407
------------ ------------ ------------
Total deposits 230,229,374 237,950,445 228,114,975
Federal funds purchased
and repurchase
agreements 4,158,428 4,400,611 5,018,681
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 4,206,043 800,000
Accrued expenses and
other liabilities 647,103 786,639 580,870
------------ ------------ ------------
Total liabilities 249,734,905 257,843,738 245,014,526
Shareholders' Equity
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 2,298,319 2,255,543 3,274,179
Accumulated other
comprehensive deficit 17,626 62,091 (280,325)
------------ ------------ ------------
Total shareholders'
equity 15,612,636 15,614,325 16,290,316
------------ ------------ ------------
Total liabilities and
shareholders' equity $265,347,541 $273,458,063 $261,304,842
============ ============ ============