MUSKEGON, Mich., Jan. 29, 2007 (PRIME NEWSWIRE) -- Community Shores Bank Corporation (Nasdaq:CSHB), Muskegon's only locally-headquartered independent community banking organization, today reported fiscal year 2006 net income of $1.3 million, or $0.89 per diluted share, compared with net income of $1.2 million, or $0.82 per diluted share, earned in fiscal year 2005, an increase of 8.5 percent. Results reflect strong commercial loan growth and fee income earned on the sale of small business loans, partially offset by a decline in the net interest margin and a higher level of net charge-offs.
For the fourth quarter of 2006, the Company reported net income of $246,600, up 107.7 percent compared with $119,000 reported in the fourth quarter of 2005. Diluted earnings per share were $0.17 compared with $0.08 reported for the prior-year period, an increase of 112.5 percent. Results for fourth quarter 2006 include expenses associated with the Company's fourth branch office, which opened in November of 2006; fourth quarter 2005 results reflect the significant loan loss provision taken to address credit quality issues that had emerged in last year's fourth quarter.
Heather D. Brolick, President and CEO, commented, "In what was a challenging year for the banking industry, we reported a respectable increase in earnings. We had good asset growth, and good results from our small business administration lending initiatives. However, further softening of the state's economic environment has slowly seeped into West Michigan. New business start-ups have slowed, and competition has increased. Facing these issues, we continue to rely upon our trademark service and strong customer relationships to retain and attract business and offset pressure on yields."
Total revenue, consisting of net interest income and non-interest income, was $10.0 million for 2006, an increase of 6.1 percent above the $9.4 million revenue reported for the prior fiscal year. Net interest income increased 3.9 percent to $8.5 million, reflecting a 7.8 percent increase in average earning assets, partially offset by an 11 basis point decline in net interest margin, to 3.89 percent.
Non-interest income for fiscal year 2006 was $1.5 million compared with $1.3 million for the previous year, an increase of $254,000 or 20.1 percent; $188,000 of the improvement was derived from gains on the sale of loans, most of which are SBA-affiliated. Ms. Brolick continued, "We hired the U.S. Small Business Administration's Michigan Financial Services Champion for 2006, and made guaranteed small business lending a top priority within our organization. As a result of our aggressive approach to this business line, we are now Muskegon's leading SBA lender, surpassing the efforts of many larger banks in our market."
For the fourth quarter of 2006, net interest income increased 0.6 percent, remaining essentially unchanged from the $2.1 million reported for the prior-year fourth quarter. Non-interest income increased 12.1 percent to $380,000, primarily as a result of a $69,000 gain on the sale of SBA loans.
Non-interest expense was $7.4 million for fiscal year 2006, up $605,000, or 8.9%, from $6.8 million in 2005; for the fourth quarter of 2006, non-interest expense was $2.0 million, up 9.2 percent from the year-ago quarter. The Company invested heavily in infrastructure expansion during 2006, adding one new office, with construction in progress on replacement facilities for two branches where growth has outpaced functionality. Ms. Brolick continued, "Community Shores is Muskegon's only locally headquartered community bank. The board of directors believes it imperative that we establish a solid footprint within our market area to service our existing customer base with a convenient network of well-designed branches; this should also discourage the entry of competitors into our market." Community Shores added eleven FTE employees in 2006 to staff the expansion, with salaries accounting for $201,000 of the increased spending. The remaining $404,000 was spent on occupancy, furniture, advertising and other expenses associated with expansion initiatives. Ms. Brolick added, "This past year we focused on investment in people and infrastructure; we look to 2007 for this investment to begin generating higher levels of revenue, which should improve efficiency levels going forward."
Assets at December 31, 2006 totaled $247.0 million, up $24.8 million or 11.2 percent, compared with $222.2 million at prior year-end. Earning assets grew $19.5 million, or 9.1% over 2005 with loans increasing $15.0 million or 7.8%. Growth in earning assets was primarily funded by a $23.8 million, or 12.5 percent increase in deposits to $214.3 million for the 2006 12-month period.
Net loan charge offs for FY 2006 were $785K, equivalent to 0.40% of average loans, compared to $280K or 0.15% of average loans for the prior year. According to Ms. Brolick, "We have worked through the large problem credits that surfaced in the fourth quarter of last year, and do not see any one thing of the same magnitude on the horizon. We consider high credit quality to be a core value at our bank, and we believe our underwriting and administration procedures are sound."
Shareholders' equity totaled $16.1 million at December 31, 2006, up from $14.5 million twelve months ago. Tier I capital was 6.60 percent for the fiscal year 2006 period, relatively unchanged from the 6.62 percent reported for the prior year. Shares outstanding at period-end were 1,466,800. Ms. Brolick concluded, "We continue to see healthy pockets of business expansion in our markets. We depend on our extensive knowledge of local markets, combined with an ongoing stream of business opportunities from our existing customer base, to fill our loan pipeline. We anticipate that we will achieve a comparable level of growth into 2007."
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 three branch offices. Community Shores Bank opened for business in January 1999, and has grown to $247 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; 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 CORPORATION
CONSOLIDATED FINANCIAL HIGHLIGHTS
Quarterly
(dollars in -----------------------------------------------------
thousands 2006 2006 2006 2006 2005
except per 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr
share data) --------- --------- --------- --------- ---------
EARNINGS
Net interest
income 2,126 2,164 2,113 2,075 2,114
Provision for
loan and lease
losses 202 217 224 78 508
Noninterest
income 380 461 356 320 339
Noninterest
expense 1,958 1,886 1,755 1,792 1,793
Pre tax income 346 522 491 525 153
Net Income 247 363 342 364 119
Basic earnings
per share $0.17 $ 0.25 $ 0.24 $ 0.25 $ 0.08
Diluted earnings
per share $0.17 $ 0.25 $ 0.23 $ 0.25 $ 0.08
Average shares
outstanding 1,466,800 1,449,191 1,436,800 1,436,800 1,436,800
Average diluted
shares
outstanding 1,489,014 1,476,876 1,461,201 1,474,279 1,482,431
PERFORMANCE RATIOS
Return on
average assets 0.41% 0.62% 0.60% 0.64% 0.22%
Return on
average common
equity 6.16% 9.33% 9.11% 9.89% 3.28%
Net interest
margin 3.80% 3.94% 3.94% 3.85% 4.05%
Efficiency
ratio 78.13% 71.84% 71.08% 74.82% 73.09%
Full-time
equivalent
employees 72 66 63 63 61
CAPITAL
End of period
equity to
assets 6.53% 6.66% 6.38% 6.57% 6.53%
Tier 1 capital
to end of
period assets 6.60% 6.74% 6.51% 6.70% 6.62%
Book value
per share $10.99 $ 10.82 $ 10.52 $ 10.29 $ 10.09
ASSET QUALITY
Gross loan
charge-offs 205 112 120 405 95
Net loan
charge-offs 200 107 94 384 89
Net loan
charge-offs
to avg loans
(annualized) 0.39% 0.21% 0.19% 0.81% 0.19%
Allowance for
loan and
lease losses 2,549 2,547 2,437 2,307 2,613
Allowance for
losses to
total loans 1.23% 1.24% 1.22% 1.20% 1.36%
Past due and
nonaccrual
loans
(90 days) 1,131 1,394 1,428 1,579 1,128
Past due and
nonaccrual
loans to
total loans 0.54% 0.68% 0.72% 0.82% 0.59%
Other real
estate and
repossessed
assets 419 123 58 4 22
END OF PERIOD
BALANCES
Loans 207,597 205,041 199,075 191,916 192,645
Total earning
assets 231,712 223,902 223,447 215,305 212,262
Total assets 246,981 238,377 236,677 225,079 222,166
Deposits 214,282 205,456 205,175 194,572 190,451
Shareholders'
equity 16,119 15,868 15,097 14,791 14,500
AVERAGE BALANCES
Loans 206,365 202,432 195,783 189,698 191,170
Total earning
assets 226,880 222,200 216,868 218,397 211,025
Total assets 240,486 233,400 226,911 227,725 220,061
Deposits 206,514 196,493 192,696 197,173 184,005
Shareholders'
equity 16,035 15,569 15,034 14,716 14,530
Year to date
---------------------
(dollars in thousands
except per share data) 2006 2005
--------- ---------
EARNINGS
Net interest income 8,478 8,161
Provision for loan and lease losses 721 854
Noninterest income 1,517 1,263
Noninterest expense 7,391 6,785
Pre tax income 1,884 1,785
Net Income 1,315 1,213
Basic earnings per share $0.91 $0.85
Diluted earnings per share $0.89 $0.82
Average shares outstanding 1,447,485 1,434,185
Average diluted shares outstanding 1,478,168 1,471,939
PERFORMANCE RATIOS
Return on average assets 0.57% 0.57%
Return on average common equity 8.59% 8.63%
Net interest margin 3.89% 4.00%
Efficiency ratio 73.94% 72.00%
Full-time equivalent employees 72 61
CAPITAL
End of period equity to assets 6.53% 6.53%
Tier 1 capital to end of period assets 6.60% 6.62%
Book value per share $ 10.99 $ 10.09
ASSET QUALITY
Gross loan charge-offs 842 318
Net loan charge-offs 785 280
Net loan charge-offs to avg loans (annualized) 0.40% 0.15%
Allowance for loan and lease losses 2,549 2,613
Allowance for losses to total loans 1.23% 1.36%
Past due and nonaccrual loans (90 days) 1,131 1,128
Past due and nonaccrual loans to total loans 0.54% 0.59%
Other real estate and repossessed assets 419 22
END OF PERIOD BALANCES
Loans 207,597 192,645
Total earning assets 231,712 212,262
Total assets 246,981 222,166
Deposits 214,282 190,451
Shareholders' equity 16,119 14,500
AVERAGE BALANCES
Loans 198,626 184,691
Total earning assets 221,113 205,116
Total assets 232,171 213,031
Deposits 198,240 176,740
Shareholders' equity 15,310 14,053
Community Shores Bank Corporation
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Twelve Months
Ended Ended
12/31/06 12/31/05 12/31/06 12/31/05
---------- ---------- ----------- -----------
Interest and
dividend income
Loans, including
fees $4,149,122 $3,525,798 $15,617,761 $12,781,600
Securities
(including FHLB
dividends) 185,892 182,127 727,173 694,420
Federal funds sold
and other interest
income 18,021 5,051 144,855 62,276
---------- ---------- ----------- -----------
Total interest
income 4,353,035 3,712,976 16,489,789 13,538,296
Interest expense
Deposits 1,993,615 1,358,655 7,044,480 4,530,508
Repurchase agreements
and federal funds
purchased and other
debt 52,862 81,876 271,502 253,864
Federal Home Loan
Bank advances and
notes payable 180,536 158,067 695,864 592,956
---------- ---------- ----------- -----------
Total interest
expense 2,227,013 1,598,598 8,011,846 5,377,328
Net interest Income 2,126,022 2,114,378 8,477,943 8,160,968
Provision for loan
losses 202,076 507,671 720,701 853,728
---------- ---------- ----------- -----------
Net interest income
after provision for
loan losses 1,923,946 1,606,707 7,757,242 7,307,240
Noninterest income
Service charges on
deposit accounts 222,044 259,056 955,488 929,258
Mortgage loan
referral fees 1,375 1,230 2,812 9,102
Gain on sale of loans 70,800 1,947 211,813 22,099
Gain (loss) on disposal
of equipment 0 0 (124) 11,925
Other 86,186 77,128 347,436 290,755
---------- ---------- ----------- -----------
Total noninterest
income 380,405 339,361 1,517,425 1,263,139
Noninterest expense
Salaries and employee
benefits 1,069,333 1,057,874 3,999,457 3,798,599
Occupancy 121,283 88,139 397,185 319,623
Furniture and
equipment 123,196 110,600 434,519 384,070
Advertising 52,118 21,888 226,688 140,373
Data Processing 91,572 95,290 381,035 360,912
Professional
services 115,127 78,625 539,521 475,153
Other 385,731 340,969 1,412,193 1,306,541
---------- ---------- ----------- -----------
Total noninterest
expense 1,958,360 1,793,385 7,390,598 6,785,271
Income before income
taxes 345,991 152,683 1,884,069 1,785,108
Federal income tax
expense 99,410 33,970 568,757 572,427
---------- ---------- ----------- -----------
Net Income $ 246,581 $ 118,713 $ 1,315,312 $ 1,212,681
========== ========== =========== ===========
Weighted average
shares outstanding 1,466,800 1,436,800 1,447,485 1,434,185
========== ========== =========== ===========
Diluted average
shares outstanding 1,489,014 1,482,431 1,478,168 1,471,939
========== ========== =========== ===========
Basic income per
share $ 0.17 $ 0.08 $ 0.91 $ 0.85
========== ========== =========== ===========
Diluted income per
share $ 0.17 $ 0.08 $ 0.89 $ 0.82
========== ========== =========== ===========
Community Shores Bank Corporation
Condensed Consolidated Statements of Condition
December 31, December 31, December 31,
2006 2005 2004
(Unaudited) (Audited) (Audited)
------------ ------------ ------------
ASSETS
Cash and due from financial
institutions $ 3,398,155 $ 4,361,277 $ 2,214,088
Interest-bearing deposits in
other financial
institutions 72,115 90,182 161,527
Federal funds sold 5,600,000 200,000 0
------------ ------------ ------------
Total cash and cash
equivalents 9,070,270 4,651,459 2,375,615
Securities
Available for sale 13,184,437 13,983,933 16,530,818
Held to maturity 5,257,835 4,918,499 399,523
------------ ------------ ------------
Total securities 18,442,272 18,902,432 16,930,341
Loans held for sale 165,070 -- --
Loans 207,432,376 192,644,742 171,451,202
Less: Allowance for
loan losses 2,549,016 2,612,581 2,039,198
------------ ------------ ------------
Net loans 204,883,360 190,032,161 169,412,004
Federal Home Loan Bank stock 404,100 425,000 425,000
Premises and equipment, net 10,958,821 5,922,886 2,542,997
Accrued interest receivable 1,249,680 994,219 734,707
Other assets 1,807,258 1,238,194 1,081,944
------------ ------------ ------------
Total assets $246,980,831 $222,166,351 $193,502,608
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non interest-bearing $ 17,179,082 $ 16,564,735 $ 13,153,038
Interest-bearing 197,103,330 173,886,366 145,667,485
------------ ------------ ------------
Total deposits 214,282,412 190,451,101 158,820,523
Federal funds purchased and
repurchase agreements 4,494,614 6,065,010 9,980,778
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 400,000 0 0
Accrued expenses and other
liabilities 1,185,180 650,329 801,975
------------ ------------ ------------
Total liabilities 230,862,206 207,666,440 180,103,276
Shareholders' Equity
Common Stock, no par
value: 9,000,000 shares
authorized, 1,466,800,
1,436,000, 1,430,000
issued at December 31,
2006, 2005, and 2004
respectively 13,274,098 12,998,670 12,922,314
Retained earnings 3,027,774 1,712,462 499,781
Accumulated other
comprehensive deficit (183,247) (211,221) (22,763)
------------ ------------ ------------
Total shareholders' equity 16,118,625 14,499,911 13,399,332
------------ ------------ ------------
Total liabilities and
shareholders' equity $246,980,831 $222,166,351 $193,502,608
============ ============ ============