MUSKEGON, Mich., July 30, 2009 (GLOBE NEWSWIRE) -- Community Shores Bank Corporation ("Community Shores") (Nasdaq:CSHB), Muskegon's only locally-headquartered, independent community banking organization, today reported a second quarter net loss of $1.46 million, or ($0.99) per diluted share, compared with net income of $11,000, or $0.01 per diluted share, for the second quarter of 2008. The net loss for the first six months of 2009 totaled $1.73 million, or ($1.17) per diluted share, compared to net income of $43,000, or $0.03 per diluted share, for the 2008 six-month period. Second quarter and six months year-to-date results reflect a non-cash charge of $1.11 million associated with a tax valuation allowance on deferred tax assets, higher FDIC assessment fees, including the one-time FDIC special assessment charge of $114,000 pre-tax ($74,100 after-tax, or $0.05 per diluted share) and higher credit administration expenses.
Excluding the impact of the tax valuation allowance and the FDIC special assessment charge, the pre-tax loss from core banking operations for the second quarter of 2009 was $63,000, or ($0.04) per diluted share, and for the first half of 2009, $0.50 million, or ($0.34) per diluted share.
"We have some good results to report this quarter," commented Heather D. Brolick, president and chief executive officer of Community Shores Bank Corporation. "However, two significant charges are included in this quarter's financial results that distort the progress we made improving the core profitability of our operations.
"Similar to many banks," Ms. Brolick continued, "Community Shores has a net deferred tax asset for expected future tax deductions. This quarter, we established a tax valuation allowance against the entire balance of net deferred tax assets. The non-cash charge does not affect the Bank's liquidity position and was already excluded from regulatory capital calculations. The Bank remains well-capitalized, with an 11.12 percent ratio of total risk-based capital that improved four basis points over the linked quarter. We plan to reverse the tax valuation allowance in accordance with accounting rules once a trend of profitability resumes, just as we did in 2003.
"We have seen a strong improvement in funding costs that has almost offset the combined negative impact on net interest income of our shrinking balance sheet, a shift in earning asset mix to a higher level of lower-yielding investment securities, and a growing level of nonaccruing problem assets. On the expense side, we have continued to reduce controllable costs, which are now below year-ago levels. While problem assets continue to be of concern, we are seeing some improvement in borrowers' financial performance and indications that the local market for commercial real estate may be stabilizing. We are optimistic about our ability to reduce our nonperforming asset levels over the next six months; however, we recognize that significant improvements will take time, given the severity of the present economic cycle.
"The Board of Directors, management and staff are firmly committed to community banking. One of the benefits we have derived from this recession is the significant improvement in our operational efficiency. We have learned important lessons from the many challenges we have faced, and they will serve to enhance our performance as market conditions improve."
Operating Results
Total revenue, which consists of net interest income and noninterest income, was $2.28 million for the second quarter of 2009, compared to $2.30 million for the year-ago quarter. Net interest income for the second quarter was $1.64 million, a decline of 2.7 percent from the $1.69 million reported in the second quarter of 2008. Average earning assets declined by 7.2 percent from the year-ago quarter, partially offset by a 13 basis point (4.8 percent) improvement in the net interest margin year over year, to 2.85 percent.
Compared to the first quarter of 2009, net interest income improved by 3.9 percent, which translated into a 14 basis point (5.2 percent) improvement in the net interest margin. Ms. Brolick added, "As we discussed last quarter when our variable-rate loans reached our prime rate floor, further maturities of higher-priced time deposits would have a positive impact on our net interest margin which is the case in this most recent quarter. We anticipate beneficial time deposit repricing opportunities for the remainder of 2009."
Noninterest income for the second quarter of 2009 was $640,000, an increase of $36,000, or 6.0 percent, from the $604,000 recorded for the year-ago period. Excluding the 2009 one-time securities gain of $144,000, noninterest income from operations declined $108,000, or 17.9 percent. Service charges on deposit accounts declined 12 percent as customers became more efficient at managing their checking accounts, reducing overdraft charges in the process. Gains on the sale of mortgage loans held up well, despite a more narrow spread on sales, offset by an increased volume of originations.
The provision for loan losses for the second quarter of 2009 was $130,000 compared with $348,000 and $153,000, respectively, reported for the linked and prior-year second quarters. At second quarter-end 2009, the allowance for loan losses was $2.56 million, or 1.31 percent of total loans, compared with 1.38 percent and 1.56 percent of total loans, respectively, for the linked and year-ago quarters. Ms. Brolick commented, "The overall risk profile of our loan portfolio has declined as a direct result of the clean-up efforts made in the preceding quarter, and our allowance reflects this reduction of risk."
Noninterest expense was $2.33 million for the second quarter of 2009 compared to $2.15 million for the year-ago quarter. Improvement to controllable expenses, which together declined 6.8 percent, to $1.67 million, were more than offset by expenses associated with the FDIC assessments and credit administration, namely repossession and collection costs. Salaries and employee benefits, which account for nearly half of noninterest expense, were $1.08 million, a decrease of $113,000, or 9.5 percent, from second quarter 2008. Over the past twelve months, staffing levels were reduced by six FTE employees, ending the current quarter at 72. FDIC assessments were $256,000 for the second quarter, including the one-time special assessment of $114,000, compared to $52,000 for the second quarter of 2008. Repossession and collection expense totaled $145,000 in the current quarter, up $97,000 from the prior-year period.
Balance Sheet and Asset Quality
"Over the past 12 months," Ms. Brolick commented, "we have contracted our loan portfolio as a trade off to improved liquidity. This has allowed us to conserve capital without diluting our future earnings." Total assets at June 30, 2009 were $248.4 million, decline of $17.0 million, or 6.4 percent, from June 30, 2008. Year-over-year, the balance sheet reflects a $24.0 million, or 10.9 percent, decline in total loans to $195.6 million, partially offset by an $8.56 million, or 44.5 percent, increase in the securities portfolio to $27.8 million. Total loans comprise 78.8 percent of assets at June 30, 2009 compared to 82.7 percent at the prior-year quarter-end.
At June 30, 2009, nonperforming loans were $6.72 million, or 3.44 percent of total loans; this compares to $5.99 million, or 3.02 percent of total loans, for the linked quarter, and $4.26 million, or 1.94 percent of total loans, at June 30, 2008. Including foreclosed real estate of $7.07 million in the current quarter, nonperforming assets at June 30, 2009 were 5.55 percent of total assets compared with 4.66 percent for the linked quarter and 2.31 percent for the year-ago quarter. Ms. Brolick added, "Our internal market evaluations indicate that property values may be stabilizing. We are cautiously optimistic that opportunities to move nonperforming assets off the balance sheet will begin to present themselves." Net charge-offs were $311,000 for the second quarter of 2009, or 0.64 percent (annualized) of average loans; this compares with net charge-offs of $1.96 million, or 3.90 percent of average loans for the linked-quarter and $281,000, or 0.51 percent of average loans for the prior-year period, both on an annualized basis.
Deposits at June 30, 2009 were $211.7 million, down $18.6 million, or 8.1 percent, from June 30, 2008 quarter-end. "We successfully implemented two important improvements to our deposit mix this past year," commented Ms. Brolick. "We increased the level of non-interest bearing demand balances over the past twelve months by $5.0 million, or 27.7 percent, to $23.1 million; concurrently, we reduced brokered deposits by $22.3 million, or 27.9 percent. In addition to bank-wide deposit-gathering initiatives, we were assisted by the flight from equities and the expanded FDIC insurance programs. In the process, we reduced our cost of deposits from 3.84 percent for the year-ago quarter, to 3.09 percent for the recent quarter."
At June 30, 2009, consolidated shareholders' equity stood at $13.0 million, a decline of $2.64 million, or 16.9 percent, from second quarter 2008. The Bank remains "well-capitalized", with Tier I and Total Risk-Based Capital at 9.94 and 11.12 percent, respectively, at June 30, 2009. Shares outstanding totaled 1,468,800 at period-end.
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 $248 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
Quarterly
(dollars in -----------------------------------------------------
thousands except 2009 2009 2008 2008 2008
per share data) 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
--------- --------- --------- --------- ---------
EARNINGS
Net interest
income 1,643 1,582 1,601 1,749 1,688
Provision for
loan and lease
losses 130 348 1,465 95 153
Noninterest
income 640 577 437 439 604
Noninterest
expense 2,335 2,249 2,240 2,099 2,150
Pre tax income
(expense) (183) (438) (1,667) (5) (10)
Net Income (1,459) (271) (1,083) 12 11
Basic earnings
per share $ (0.99) $ (0.18) $ (0.74) $ 0.01 $ 0.01
Diluted
earnings per
share $ (0.99) $ (0.18) $ (0.74) $ 0.01 $ 0.01
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 -2.25% -0.42% -1.66% 0.02% 0.02%
Return on
average common
equity -40.45% -7.53% -27.47% 0.31% 0.28%
Net interest
margin 2.85% 2.71% 2.66% 2.90% 2.72%
Efficiency
ratio 102.28% 104.17% 109.90% 95.90% 93.76%
Full-time
equivalent
employees 72 74 75 75 78
CAPITAL
End of period
equity to
assets 5.22% 5.47% 5.85% 6.10% 5.88%
Tier 1 capital
to end of
period assets 5.15% 5.34% 5.68% 6.08% 5.88%
Book value per
share $ 8.83 $ 9.94 $ 10.18 $ 10.67 $ 10.63
ASSET QUALITY
Gross loan
charge-offs 318 1,980 404 220 314
Net loan
charge-offs 311 1,960 399 207 281
Net loan
charge-offs to
avg loans
(annualized) 0.64% 3.90% 0.75% 0.38% 0.51%
Allowance for
loan and lease
losses 2,559 2,739 4,351 3,285 3,397
Allowance for
losses to
total loans 1.31% 1.38% 2.10% 1.51% 1.56%
Past due and
nonaccrual
loans (90
days) 6,721 5,992 5,860 5,257 4,264
Past due and
nonaccrual
loans to total
loans 3.44% 3.02% 2.82% 2.40% 1.94%
Other real
estate and
repossessed
assets 7,068 6,453 6,054 2,519 1,862
NPA +90 day
past due to
total assets 5.55% 4.66% 4.66% 3.03% 2.31%
END OF PERIOD
BALANCES
Loans 195,609 198,171 207,508 219,182 219,616
Total earning
assets 226,148 245,923 235,367 238,694 247,162
Total assets 248,369 267,109 255,612 256,891 265,348
Deposits 211,657 231,548 219,566 221,286 230,229
Shareholders'
equity 12,976 14,603 14,946 15,669 15,613
AVERAGE BALANCES
Loans 195,487 201,236 212,638 219,299 220,820
Total earning
assets 235,958 239,499 246,819 246,701 254,201
Total assets 258,881 257,968 261,726 263,576 271,003
Deposits 221,576 223,007 224,895 227,563 235,501
Shareholders'
equity 14,427 14,390 15,771 15,664 15,629
Year to date
--------------------
(dollars in thousands except per share data) 2009 2008
--------- ---------
EARNINGS
Net interest income 3,225 3,539
Provision for loan and lease losses 478 384
Noninterest income 1,217 1,247
Noninterest expense 4,584 4,389
Pre tax income (expense) (621) 13
Net Income (1,730) 43
Basic earnings per share $ (1.17) $ 0.03
Diluted earnings per share $ (1.17) $ 0.03
Average shares outstanding 1,468,800 1,468,800
Average diluted shares outstanding 1,468,800 1,468,800
PERFORMANCE RATIOS
Return on average assets -1.34% 0.03%
Return on average common equity -23.85% 0.55%
Net interest margin 2.81% 2.80%
Efficiency ratio 103.21% 91.65%
Full-time equivalent employees 72 78
CAPITAL
End of period equity to assets 5.22% 5.88%
Tier 1 capital to end of period assets 5.15% 5.88%
Book value per share $ 8.83 $ 10.63
ASSET QUALITY
Gross loan charge-offs 2,298 637
Net loan charge-offs 2,271 590
Net loan charge-offs to avg loans (annualized) 2.29% 0.52%
Allowance for loan and lease losses 2,559 3,397
Allowance for losses to total loans 1.31% 1.56%
Past due and nonaccrual loans (90 days) 6,721 4,264
Past due and nonaccrual loans to total loans 3.44% 1.94%
Other real estate and repossessed assets 7,068 1,862
NPA +90 day past due to total assets 5.55% 2.31%
END OF PERIOD BALANCES
Loans 195,609 219,616
Total earning assets 226,148 247,162
Total assets 248,369 265,348
Deposits 211,657 230,229
Shareholders' equity 12,976 15,613
AVERAGE BALANCES
Loans 198,346 225,799
Total earning assets 235,125 234,490
Total assets 258,627 250,626
Deposits 222,391 239,663
Shareholders' equity 14,506 15,648
Community Shores Bank Corporation
Condensed Consolidated Statements of Income
(Unaudited)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
06/30/09 06/30/08 06/30/09 06/30/08
----------- ----------- ----------- -----------
Interest and
dividend income
Loans, including
fees $ 3,100,128 $ 3,669,248 $ 6,271,428 $ 7,814,750
Securities
(including FHLB
dividends) 239,475 213,074 500,544 428,568
Federal funds sold
and other interest
income 17,817 66,978 23,512 151,355
----------- ----------- ----------- -----------
Total interest
income 3,357,420 3,949,300 6,795,484 8,394,673
Interest expense
Deposits 1,528,441 2,061,904 3,207,679 4,414,159
Repurchase
agreements and
federal funds
purchased and
other debt 12,514 14,462 19,639 36,564
Federal Home Loan
Bank advances and
notes payable 173,938 184,278 343,393 404,847
----------- ----------- ----------- -----------
Total interest
expense 1,714,893 2,260,644 3,570,711 4,855,570
Net interest
Income 1,642,527 1,688,656 3,224,773 3,539,103
Provision for loan
losses 130,157 153,368 478,400 384,084
----------- ----------- ----------- -----------
Net interest income
after provision
for loan losses 1,512,370 1,535,288 2,746,373 3,155,019
Noninterest income
Service charges on
deposit accounts 222,008 251,970 446,384 483,053
Gain on sale of
loans 105,452 110,736 206,742 255,499
Gain on sale of
securities 143,903 0 273,010 0
Gain (loss) on
disposal of other
real estate owned (11,041) 0 (11,041) 142,324
Other 179,325 241,589 301,257 365,953
----------- ----------- ----------- -----------
Total noninterest
income 639,647 604,295 1,216,352 1,246,829
Noninterest expense
Salaries and
employee benefits 1,083,478 1,196,539 2,204,880 2,418,926
Occupancy 156,179 151,651 330,464 327,431
Furniture and
equipment 169,285 171,082 337,857 342,644
Advertising 13,486 30,198 32,217 55,427
Data processing 130,273 121,690 252,455 236,163
Professional
services 118,567 120,491 228,847 280,145
Foreclosed asset
impairment 36,330 0 119,742 0
Other 627,287 358,232 1,077,400 728,158
----------- ----------- ----------- -----------
Total noninterest
expense 2,334,885 2,149,883 4,583,862 4,388,894
Income before
income taxes (182,868) (10,300) (621,137) 12,954
Federal income tax
expense 1,276,465 (21,143) 1,109,110 (29,822)
----------- ----------- ----------- -----------
Net Income $(1,459,333) $ 10,843 $(1,730,247) $ 42,776
=========== =========== =========== ===========
Weighted average
shares
outstanding 1,468,800 1,468,800 1,468,800 1,468,800
=========== =========== =========== ===========
Diluted average
shares
outstanding 1,468,800 1,468,800 1,468,800 1,468,800
=========== =========== =========== ===========
Basic income per
share $ (0.99) $ 0.01 $ (1.17) $ 0.03
=========== =========== =========== ===========
Diluted income per
share $ (0.99) $ 0.01 $ (1.17) $ 0.03
=========== =========== =========== ===========
Community Shores Bank Corporation
Condensed Consolidated Statements of Condition
June 30, December 31, June 30,
2009 2008 2008
(Unaudited) (Audited) (Unaudited)
------------ ------------ ------------
ASSETS
Cash and due from financial
institutions $ 4,259,726 $ 3,192,789 $ 4,384,505
Interest-bearing deposits in
other financial institutions 2,328,577 2,479,012 57,900
Federal funds sold 0 0 8,245,000
------------ ------------ ------------
Total cash and cash
equivalents 6,588,303 5,671,801 12,687,405
Securities
Available for sale 21,709,522 18,769,970 12,624,510
Held to maturity 6,096,842 6,609,620 6,618,577
------------ ------------ ------------
Total securities 27,806,364 25,379,590 19,243,087
Loans held for sale 3,334,761 2,354,956 1,288,292
Loans 192,273,994 205,153,203 218,327,250
Less: Allowance for loan
losses 2,558,541 4,350,903 3,397,169
------------ ------------ ------------
Net loans 189,715,453 200,802,300 214,930,081
Federal Home Loan Bank stock 404,100 404,100 404,100
Premises and equipment,net 11,547,857 11,869,741 12,174,452
Accrued interest receivable 922,210 1,004,552 943,828
Foreclosed Assets 6,740,673 5,884,093 1,730,605
Other assets 1,309,402 2,240,831 1,945,691
------------ ------------ ------------
Total assets $248,369,123 $255,611,964 $265,347,541
============ ============ ============
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits
Non interest-bearing $ 23,096,326 $ 19,135,831 $ 18,080,753
Interest-bearing 188,560,238 200,429,709 212,148,621
------------ ------------ ------------
Total deposits 211,656,564 219,565,540 230,229,374
Federal funds purchased and
repurchase agreements 7,576,367 5,813,605 4,158,428
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 5,000,000 4,200,000 4,200,000
Accrued expenses and other
liabilities 660,654 586,365 647,103
------------ ------------ ------------
Total liabilities 235,393,585 240,665,510 249,734,905
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 13,296,691
Retained earnings (502,163) 1,228,084 2,298,319
Accumulated other
comprehensive deficit 181,010 421,679 17,626
------------ ------------ ------------
Total shareholders' equity 12,975,538 14,946,454 15,612,636
------------ ------------ ------------
Total liabilities and
shareholders' equity $248,369,123 $255,611,964 $265,347,541
============ ============ ============