MUSKEGON, Mich., Feb. 5, 2009 (GLOBE NEWSWIRE) -- Community Shores Bank Corporation ("Community Shores") (Nasdaq:CSHB), Muskegon's only locally headquartered independent community banking organization, today reported a net loss of $1.0 million, or $0.70 per diluted share, for the twelve months ended December 31, 2008. This compares with a net loss of $772,000, or $0.53 per diluted share, for the 2007 full year. The Company reported a net loss of $1.1 million, or $0.74 per diluted share, for the fourth quarter of 2008 compared with a net loss of $916,000, or $0.62 per diluted share, for the prior-year fourth quarter. Full-year and fourth quarter 2008 results reflect a declining net interest margin and deteriorating asset quality, both largely a function of the weaker economy, most notably in the real estate sector.
Heather D. Brolick, president and CEO of Community Shores Bank Corporation, stated, "As a local bank dedicated to serving the Greater Muskegon market, we are committed to meeting the banking needs of our local business and retail customers. We know this market well, and we have prospered together over the past ten years since we formed Community Shores Bank. Our commitment remains solid even as the economy weakens and the circumstances of the banking industry and our borrowers change.
"We have been proactively working with our borrowers to address factors that might impact loan repayment. The vast majority has responded constructively, recognizing that unprecedented conditions have increased credit risk factors. In addition to asset risk mitigation, we have taken steps to strengthen our bank -- cutting costs, improving our capital ratios by selectively reducing the balance sheet, and developing additional fee-based products to improve profitability. We realize that this economy might be with us for a while, and we are taking steps to protect our customers and shareholders from the growing level of uncertainty we face."
Operating Results
Total revenue, which includes net interest income and noninterest income, was $9.0 million for 2008, 6.8 percent lower than the $9.7 million recorded for the prior year. Net interest income was $6.9 million, down $1.1 million or 13.6 percent from 2007, primarily from a 58 basis point decline in the net interest margin, to 2.76 percent. Although average earning assets increased by 5.4 percent year over year, virtually all of the growth was in the securities portfolio, while average loan balances declined over the course of the year. Ms. Brolick commented, "Loan yields and cost of funds have stabilized over the most recent quarters; however, our net interest margin continues to be impacted by our changing asset mix and the interest lost from non-accruing loans."
For the fourth quarter, total revenue was $2.0 million, down 8.7 percent from 2007 total revenue of $2.2 million. Average loans declined 8.0 percent from the year-ago quarter, while earning assets declined by only 2.1 percent. The net interest margin was 2.66 percent, a decrease of 29 basis points or 9.8 percent from the fourth quarter 2007 net interest margin of 2.95 percent. Interest foregone from non-accruing loans reduced the 2008 fourth quarter margin by sixteen basis points.
Noninterest income for 2008 was $2.1 million, up $431,000, or 25.5 percent, above the $1.7 million recorded for fiscal 2007. Excluding one-time gains of $142,000 and $118,000, respectively, from the sale of real estate and a court settlement, both of which occurred in 2008, core noninterest income from banking activities grew 10.1 percent. "Given the difficult housing market, we are pleased with the growth of mortgage banking at Community Shores," added Brolick. Gains from loans sales were $369,000 for 2008, up $80,000 above 2007.
The 2008 provision for loan losses was $1.9 million, of which $1.5 million was taken in the fourth quarter. This compares with a 2007 loan loss provision of $1.9 million, with $1.1 million recorded in the fourth quarter. The loan loss reserve increased by $748,000, from $3.6 million (1.55 percent of total loans) at 2007 year-end to $4.4 million (2.10 percent of total loans) at December 31, 2008. The larger 2008 provision expense primarily reflects a higher level of net loan charge-offs and increased reserve levels to provide for potential future losses in the existing loan portfolio.
"Noninterest expense is an area where discipline can make a significant difference in this difficult operating environment. Our operating expense declined year-over-year, a major accomplishment in light of the added burden of regulatory and credit administration costs. I want to acknowledge the contributions of our dedicated staff in this area," Ms. Brolick stated. Noninterest expense was $8.7 million for 2008, down $306,000 or 3.4 percent from the prior-year level, primarily from a $353,000 or 7.1 percent decline in salary and benefits expense. During the course of the year, the number of FTE employees reduced by 11, ending the year at 75. Partially offsetting this improvement, the 2008 expenses associated with credit administration/collections and regulatory fees/insurance increased by $205,000 and $61,000, respectively, compared with 2007.
Balance Sheet and Asset Quality
Assets at December 31, 2008 were $255.6 million, a decline of $17.8 million or 6.5 percent since year-end 2007. Year over year, the balance sheet reflects a decline in total loans of $25.0 million, or 10.8 percent, to $207.5 million, partially offset by a $5.6 million, or 28.0 percent, increase in the securities portfolio, to $25.4 million. Construction and development loans accounted for the largest loan decline, down $15.0 million or 53.6 percent to $17.4 million, followed by a $9.1 million or 13.4 percent decline in commercial and industrial loans, to $59.3 million. The slowdown in business and real estate activity, combined with tighter underwriting standards, continues to slow the level of loan originations.
At December 31, 2008, nonperforming assets were $11.9 million, or 4.66 percent of total assets (including $6.1 million of foreclosed real estate); this compares with $7.8 million, or 3.03 percent of assets, for the linked quarter (including $2.5 million of foreclosed real estate) and $6.6 million, or 2.41 percent of assets, for December 31, 2007 (including $567,000 of foreclosed real estate). Ms. Brolick added, "The majority of our problem loans have a real estate related component. Increasingly, we are gaining control over our collateral, and actively pursuing opportunities for the disposition of assets. The level of foreclosures in our market is stabilizing, but market activity remains low."
Net charge-offs were $1.2 million for 2008, or 0.54 percent of average loans, of which $399,000 occurred in the fourth quarter; this compares with 2007 net charge-offs of $878,000, of which $638,000 was taken in the year-ago fourth quarter. On an annualized basis, quarterly charge-offs were 0.75 percent and 1.10 percent, respectively, of average loans for the 2008 and 2007 fourth quarters.
Deposits at December 31, 2008 were $219.6 million, down $18.4 million or 7.7 percent from year-end 2007. "As we downsized our loan portfolio this past year," commented Ms. Brolick, "we significantly improved our deposit mix. We reduced brokered deposits while increasing noninterest-bearing demand deposits. Non-maturity deposits now account for nearly 30 percent of total deposits." Brokered deposits declined by $13.5 million, or 14.5 percent, while demand deposits increased by $2.4 million, or 14.5 percent, over the past twelve months.
Consolidated shareholders' equity stands at $14.9 million at December 31, 2008, a decline of $0.7 million or 4.3 percent since the prior year-end. Tier I capital was 5.68 percent of year-end assets, virtually unchanged from 5.69 percent at 2007 year-end. The Bank remains well-capitalized, with Tier I Capital and Total Risk-Based Capital at 8.30 and 10.96 percent, respectively, at December 31, 2008. Shares outstanding totaled 1,468,800 at 2008 year-end.
Ms. Brolick summarized, "We continue to respond proactively to market conditions, mitigating the impact of our weakening economy through tighter underwriting standards and greater selectivity. At the same time, we are pursuing every opportunity to generate fee income and reduce operating expenses. We have become wiser and more efficient in response to the challenges we face, and this should bode well as our economy improves."
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 $256 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 2008 2008 2007 share data) 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr --------- --------- --------- --------- --------- EARNINGS Net interest income 1,601 1,749 1,688 1,850 1,830 Provision for loan and lease losses 1,465 95 153 231 1,130 Noninterest income 437 439 604 643 401 Noninterest expense 2,240 2,099 2,150 2,239 2,500 Pre tax income (expense) (1,667) (5) (10) 23 (1,398) Net Income (loss) (1,083) 12 11 32 (916) Basic earnings per share $ (0.74) $ 0.01 $ 0.01 $ 0.02 $ (0.62) Diluted earnings per share $ (0.74) $ 0.01 $ 0.01 $ 0.02 $ (0.62) Average shares outstanding 1,468,800 1,468,800 1,468,800 1,468,800 1,468,800 Average diluted shares outstanding 1,468,800 1,468,800 1,468,800 1,468,800 1,468,800 PERFORMANCE RATIOS Return on average assets -1.66% 0.02% 0.02% 0.05% -1.37% Return on average common equity -27.47% 0.31% 0.28% 0.82% -22.49% Net interest margin 2.66% 2.90% 2.72% 2.88% 2.95% Efficiency ratio 109.90% 95.90% 93.76% 89.81% 112.04% Full-time equivalent employees 75 75 78 80 86 CAPITAL End of period equity to assets 5.85% 6.10% 5.88% 5.67% 5.71% Tier 1 capital to end of period assets 5.68% 6.08% 5.88% 5.59% 5.69% Book value per share $ 10.18 $ 10.67 $ 10.63 $ 10.76 $ 10.63 ASSET QUALITY Gross loan charge-offs 404 220 314 323 650 Net loan charge-offs 399 207 281 309 638 Net loan charge-offs to avg loans (annualized) 0.75% 0.38% 0.51% 0.54% 1.10% Allowance for loan and lease losses 4,351 3,285 3,397 3,525 3,603 Allowance for losses to total loans 2.10% 1.51% 1.56% 1.57% 1.55% Past due and nonaccrual loans (90 days) 5,860 5,257 4,264 3,625 6,017 Past due and nonaccrual loans to total loans 2.82% 2.40% 1.94% 1.61% 2.59% Other real estate and repossessed assets 6,054 2,519 1,862 1,845 567 NPA +90 day past due to total assets 4.66% 3.03% 2.31% 1.96% 2.41% END OF PERIOD BALANCES Loans 207,508 219,182 219,616 224,796 232,505 Total earning assets 235,367 238,694 247,162 260,707 256,874 Total assets 255,612 256,891 265,348 278,758 273,458 Deposits 219,566 221,286 230,229 242,767 237,950 Shareholders' equity 14,946 15,669 15,613 15,805 15,614 AVERAGE BALANCES Loans 212,638 219,299 220,820 230,778 231,122 Total earning assets 246,819 246,701 254,201 262,269 251,989 Total assets 261,726 263,576 271,003 279,076 268,400 Deposits 224,895 227,563 235,501 243,825 230,252 Shareholders' equity 15,771 15,664 15,629 15,597 16,291 Year to date ----------------------- (dollars in thousands except per share data) 2008 2007 ---------- ---------- EARNINGS Net interest income 6,890 7,974 Provision for loan and lease losses 1,944 1,932 Noninterest income 2,122 1,691 Noninterest expense 8,727 9,033 Pre tax income (expense) (1,659) (1,300) Net Income (loss) (1,027) (772) Basic earnings per share $ (0.70) $ (0.53) Diluted earnings per share $ (0.70) $ (0.53) Average shares outstanding 1,468,800 1,468,778 Average diluted shares outstanding 1,468,800 1,476,778 PERFORMANCE RATIOS Return on average assets -0.38% -0.30% Return on average common equity -6.55% -4.71% Net interest margin 2.76% 3.34% Efficiency ratio 96.84% 93.48% Full-time equivalent employees 75 86 CAPITAL End of period equity to assets 5.85% 5.71% Tier 1 capital to end of period assets 5.68% 5.69% Book value per share $ 10.18 $ 10.63 ASSET QUALITY Gross loan charge-offs 1,261 921 Net loan charge-offs 1,196 878 Net loan charge-offs to avg loans (annualized) 0.54% 0.40% Allowance for loan and lease losses 4,351 3,603 Allowance for losses to total loans 2.10% 1.55% Past due and nonaccrual loans (90 days) 5,860 6,017 Past due and nonaccrual loans to total loans 2.82% 2.59% Other real estate and repossessed assets 6,054 567 NPA +90 day past due to total assets 4.66% 2.41% END OF PERIOD BALANCES Loans 207,508 232,505 Total earning assets 235,367 256,874 Total assets 255,612 273,458 Deposits 219,566 237,950 Shareholders' equity 14,946 15,614 AVERAGE BALANCES Loans 220,857 219,966 Total earning assets 255,041 242,071 Total assets 268,833 258,714 Deposits 232,912 221,139 Shareholders' equity 15,683 16,402 Community Shores Bank Corporation Condensed Consolidated Statements of Income (Unaudited) Three Three Twelve Twelve Months Months Months Months Ended Ended Ended Ended 12/31/08 12/31/07 12/31/08 12/31/07 ------------ ------------ ------------ ------------ Interest and dividend income Loans, including fees $ 3,437,248 $ 4,287,410 $ 14,884,209 $ 17,131,662 Securities (including FHLB dividends) 238,263 206,678 874,576 839,569 Federal funds sold and other interest income 22,036 14,365 211,377 135,603 ------------ ------------ ------------ ------------ Total interest income 3,697,547 4,508,453 15,970,162 18,106,834 Interest expense Deposits 1,876,862 2,389,428 8,208,550 9,017,500 Repurchase agreements and federal funds purchased and other debt 14,044 90,708 67,762 370,463 Federal Home Loan Bank advances and notes payable 205,234 197,985 803,613 744,628 ------------ ------------ ------------ ------------ Total interest expense 2,096,140 2,678,121 9,079,925 10,132,591 Net interest Income 1,601,407 1,830,332 6,890,237 7,974,243 Provision for loan losses 1,465,377 1,129,957 1,943,976 1,931,963 ------------ ------------ ------------ ------------ Net interest income after provision for loan losses 136,030 700,375 4,946,261 6,042,280 Noninterest income Service charges on deposit accounts 273,687 269,044 1,016,151 969,176 Mortgage loan referral fees 0 3,838 0 13,833 Gain on sale of loans 49,348 50,062 369,082 289,069 Gain on sale of securities 0 0 0 1,986 Gain on disposal of equipment 0 0 0 458 Gain (loss) on the sale of real estate 0 (15,742) 142,324 (22,696) Other 113,536 94,106 594,412 439,226 ------------ ------------ ------------ ------------ Total noninterest income 436,571 401,308 2,121,969 1,691,052 Noninterest expense Salaries and employee benefits 1,123,718 1,280,403 4,637,339 4,990,196 Occupancy 161,396 159,263 650,982 589,480 Furniture and equipment 172,166 168,483 689,695 649,410 Advertising 24,022 32,186 113,417 161,051 Data Processing 122,005 112,917 478,923 440,133 Professional services 100,082 146,642 495,309 550,244 Foreclosed asset impairments 83,271 149,583 83,271 155,783 Other 453,083 450,932 1,578,356 1,496,976 ------------ ------------ ------------ ------------ Total noninterest expense 2,239,743 2,500,409 8,727,292 9,033,274 Income before income taxes (1,667,142) (1,398,726) (1,659,062) (1,299,941) Federal income tax expense (584,431) (483,094) (631,603) (527,710) ------------ ------------ ------------ ------------ Net Income $ (1,082,711) $ (915,632) $ (1,027,459) $ (772,231) ============ ============ ============ ============ Weighted average shares outstanding 1,468,800 1,468,800 1,468,800 1,468,778 ============ ============ ============ ============ Diluted average shares outstanding 1,468,800 1,468,800 1,468,800 1,476,778 ============ ============ ============ ============ Basic income per share $ (0.74) $ (0.62) $ (0.70) $ (0.53) ============ ============ ============ ============ Diluted income per share $ (0.74) $ (0.62) $ (0.70) $ (0.53) ============ ============ ============ ============ Community Shores Bank Corporation Condensed Consolidated Statements of Condition December 31, December 31, December 31, 2008 2007 2006 (Unaudited) (Audited) (Audited) ------------ ------------- ------------- ASSETS Cash and due from financial institutions $ 3,192,789 $ 3,329,626 $ 3,398,155 Interest-bearing deposits in other financial institutions 2,479,012 201,290 72,115 Federal funds sold 0 4,346,000 5,600,000 ------------- ------------- ------------- Total cash and cash equivalents 5,671,801 7,876,916 9,070,270 Securities Available for sale 18,769,970 13,194,645 13,184,437 Held to maturity 6,609,620 6,627,534 5,257,835 ------------- ------------- ------------- Total securities 25,379,590 19,822,179 18,442,272 Loans held for sale 2,354,956 2,285,966 165,070 Loans 205,153,203 230,219,420 207,432,376 Less: Allowance for loan losses 4,350,903 3,602,948 2,549,016 ------------- ------------- ------------- Net loans 200,802,300 226,616,472 204,883,360 Federal Home Loan Bank stock 404,100 404,100 404,100 Premises and equipment,net 11,869,741 12,488,593 10,958,821 Accrued interest receivable 1,004,552 1,159,804 1,249,680 Other assets 8,124,924 2,804,033 1,807,258 ------------- ------------- ------------- Total assets $ 255,611,964 $ 273,458,063 $ 246,980,831 ============= ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Non interest- bearing $ 19,135,831 $ 16,708,504 $ 17,179,082 Interest-bearing 200,429,709 221,241,941 197,103,330 ------------- ------------- ------------- Total deposits 219,565,540 237,950,445 214,282,412 Federal funds purchased and repurchase agreements 5,813,605 4,400,611 4,494,614 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 586,365 786,639 1,185,180 Total -- -- -- liabilities 240,665,510 257,843,738 230,862,206 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 13,296,691 13,274,098 Retained earnings 1,228,084 2,255,543 3,027,774 Accumulated other comprehensive deficit 421,679 62,091 (183,247) ------------- ------------- ------------- Total shareholders' equity 14,946,454 15,614,325 16,118,625 Total liabilities and shareholders' equity $ 255,611,964 $ 273,458,063 $ 246,980,831