MUSKEGON, Mich., April 23, 2007 (PRIME NEWSWIRE) -- Community Shores Bank Corporation (Nasdaq:CSHB), Muskegon's only locally-headquartered independent community banking organization, today reported first quarter 2007 net income of $228,600, or $0.15 per diluted share, compared with $363,600, or $0.25 per diluted share, reported in the first quarter of 2006, a decline of 37 percent and 40 percent, respectively. Results reflect the impact of a declining net interest margin on revenue and increased spending to support expansion activities, partially offset by good commercial loan growth and fee income earned on the sale of small business loans.
Heather D. Brolick, president and CEO of Community Shores Bank Corporation, commented, "While the first quarter of 2007 was a difficult one for the banking industry in general, the impact on Community Shores was disproportionately greater because of the branching initiatives which have been in process for the last nine months. We are making progress towards our goal of attracting lower cost funds through an enhanced branch network; however, the benefits are slower to be realized than the associated expenses. This quarter, our two new branches -- North Muskegon and Harvey Street in Muskegon County -- have already attracted $4.5 million in deposits."
Ms. Brolick continued, "To counteract the growing impact of net interest margin compression, we are also seeking opportunities to boost non-interest-dependent income, and our Small Business Administration lending program is a good example of this diversification strategy. We have the right lenders in place, and we plan to leverage their expertise. We earned $118,000 from sales of SBA loans in this quarter alone. Additionally, in March, we pursued a unique opportunity in mortgage banking; we hired a full team of bankers and support staff that were available as a result of a bank consolidation in our market. Since this team was just recently hired, we have not yet benefited from loan sale income this quarter."
Total revenue, consisting of net interest income and non-interest income, was $2.4 million for first quarter 2007, an increase of $48,000 over the prior year's first quarter. A 4.2 percent decline in net interest income was offset by an increase in non interest income of $135,000, primarily from loan sales. "SBA lending was the bright spot in our performance this quarter," added Brolick.
Non-interest expense totaled $2.0 million for the first quarter of 2007, up $255,000, or 14.2 percent, from the first quarter of 2006. Much of the increase can be attributed to infrastructure expansion, including the addition of a fourth branch office (Harvey Street) in November 2006, and a move in January 2007 to a replacement facility for our North Muskegon location. Salaries and employee benefits rose $145,000, and were responsible for 57 percent of operating expense growth over the past twelve months. The increase of 19 FTE employees year over year include seven employees added to staff the Harvey Street branch, and nine members of the newly-acquired mortgage origination team. Occupancy, furniture, and equipment expenses accounted for the remainder of the increased spending, up $105,700 over the prior-year period. The efficiency ratio for the quarter was 83.85 percent in 2007 compared with 74.82 percent for the year-ago quarter.
Assets at March 31, 2007 totaled $251.5 million compared with $225.1 million twelve months ago, up $26.5 million, or 11.8 percent. Loans held for investment grew $14.1 million, or 7.3 percent, reaching $206.0 million at period end. Ms. Brolick commented, "Our pipeline is strong, and we continue to see high-quality opportunities in our marketplace. We anticipate that the two newly-opened branches will help us to grow our lower-cost core deposit base."
Net charge-offs declined appreciably over the past twelve months. Net charge-offs were $88,000 for the current quarter, or 0.17 percent annualized, a significant improvement over 0.39 percent reported for the linked quarter and 0.81 percent reported for the year-ago quarter. "However," Brolick added, "non-performing assets have increased due to weakness in the regional economy; we placed three credits totaling $1.2 million on non-accrual status this quarter. While this has negatively impacted our margin, all three loans are adequately collateralized by real estate. We do not anticipate material losses on these loans beyond our present reserve." Nonperforming assets were $2.8 million, or 1.12 percent of period-end assets, at March 31, 2007, compared with $1.6 million, or 0.63 percent of assets, for the linked quarter, and $1.6 million, or 0.70 percent of assets, for the year-ago quarter. The allowance for loan and lease losses was 1.26 percent of total loans at March 31, 2007.
Shareholders' equity totaled $16.4 million at March 31, 2007, up $1.6 million from twelve months ago. Tier I capital was 6.58 percent for the first quarter of 2007. Shares outstanding at period-end were 1,468,800. Ms. Brolick concluded, "We have made significant investments over the past year that should enhance and diversify our revenue stream, and build a more profitable future for shareholders of Community Shores Bank Corporation."
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 $252 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 BANK CORPORATION
CONSOLIDATED FINANCIAL HIGHLIGHTS
(dollars in thousands except per share data)
Quarterly
------------------------------------------------------
2007 2006 2006 2006 2006
1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
--------- --------- --------- --------- ---------
EARNINGS
Net interest
income 1,988 2,126 2,164 2,113 2,075
Provision for
loan and
lease losses 127 202 217 224 78
Noninterest
income 455 380 461 356 320
Noninterest
expense 2,047 1,958 1,886 1,755 1,792
Pre tax
income 269 346 522 491 525
Net Income 229 247 363 342 364
Basic
earnings
per share $ 0.16 $ 0.17 $ 0.25 $ 0.24 $ 0.25
Diluted
earnings
per share $ 0.15 $ 0.17 $ 0.25 $ 0.23 $ 0.25
Average
shares
outstanding 1,468,733 1,466,800 1,449,191 1,436,800 1,436,800
Average
diluted
shares
outstanding 1,488,589 1,489,014 1,476,876 1,461,201 1,474,279
PERFORMANCE
RATIOS
Return on
average
assets 0.37% 0.41% 0.62% 0.60% 0.64%
Return on
average
common
equity 5.64% 6.16% 9.33% 9.11% 9.89%
Net interest
margin 3.48% 3.80% 3.94% 3.94% 3.86%
Efficiency
ratio 83.85% 78.13% 71.84% 71.08% 74.82%
Full-time
equivalent
employees 82 72 66 63 63
CAPITAL
End of period
equity to
assets 6.52% 6.53% 6.66% 6.38% 6.57%
Tier 1
capital to
end of
period
assets 6.58% 6.60% 6.74% 6.51% 6.70%
Book value
per share $ 11.17 $ 10.99 $ 10.82 $ 10.52 $ 10.29
ASSET QUALITY
Gross loan
charge-offs 101 205 112 120 405
Net loan
charge-offs 88 200 107 94 384
Net loan
charge-offs
to avg loans
(annualized) 0.17% 0.39% 0.21% 0.19% 0.81%
Allowance for
loan and
lease losses 2,588 2,549 2,547 2,437 2,307
Allowance for
losses to
total loans 1.26% 1.23% 1.24% 1.22% 1.20%
Past due and
nonaccrual
loans (90
days) 1,942 1,131 1,394 1,428 1,579
Past due and
nonaccrual
loans to
total loans 0.94% 0.54% 0.68% 0.72% 0.82%
Other real
estate and
repossessed
assets 887 419 123 58 4
NPA +90 day
past due to
total assets 1.12% 0.63% 0.64% 0.63% 0.70%
END OF PERIOD
BALANCES
Loans 205,983 207,597 205,041 199,075 191,916
Total earning
assets 235,491 231,712 223,902 223,447 215,305
Total assets 251,549 246,981 238,377 236,677 225,079
Deposits 217,602 214,282 205,456 205,175 194,572
Shareholders'
equity 16,404 16,119 15,868 15,097 14,791
AVERAGE
BALANCES
Loans 207,449 206,365 202,432 195,783 189,698
Total earning
assets 231,944 226,880 222,200 216,868 218,397
Total assets 247,639 240,486 233,400 226,911 227,725
Deposits 213,807 206,514 196,493 192,696 197,173
Shareholders'
equity 16,251 16,035 15,569 15,034 14,716
Year to date
----------------------
2007 2006
--------- ---------
EARNINGS
Net interest income 1,988 2,075
Provision for loan and lease losses 127 78
Noninterest income 455 320
Noninterest expense 2,047 1,792
Pre tax income 269 525
Net Income 229 364
Basic earnings per share $ 0.16 $ 0.25
Diluted earnings per share $ 0.15 $ 0.25
Average shares outstanding 1,468,733 1,436,800
Average diluted shares outstanding 1,488,589 1,474,279
PERFORMANCE RATIOS
Return on average assets 0.37% 0.64%
Return on average common equity 5.64% 9.89%
Net interest margin 3.48% 3.86%
Efficiency ratio 83.85% 74.82%
Full-time equivalent employees 82 63
CAPITAL
End of period equity to assets 6.52% 6.57%
Tier 1 capital to end of period assets 6.58% 6.70%
Book value per share $ 11.17 $ 10.29
ASSET QUALITY
Gross loan charge-offs 101 405
Net loan charge-offs 88 384
Net loan charge-offs to avg loans (annualized) 0.17% 0.81%
Allowance for loan and lease losses 2,588 2,307
Allowance for losses to total loans 1.26% 1.20%
Past due and nonaccrual loans (90 days) 1,942 1,579
Past due and nonaccrual loans to total loans 0.94% 0.82%
Other real estate and repossessed assets 887 4
NPA +90 day past due to total assets 1.12% 0.70%
END OF PERIOD BALANCES
Loans 205,983 191,916
Total earning assets 235,491 215,305
Total assets 251,549 225,079
Deposits 217,602 194,572
Shareholders' equity 16,404 14,791
AVERAGE BALANCES
Loans 207,449 189,698
Total earning assets 231,944 218,397
Total assets 247,639 227,725
Deposits 213,807 197,173
Shareholders' equity 16,251 14,716
Community Shores Bank Corporation
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Three Months
Ended Ended
3/31/07 3/31/06
----------- -----------
Interest and dividend income
Loans, including fees $ 4,057,022 $ 3,528,551
Securities (including FHLB
dividends) 201,473 180,316
Federal funds sold and other
interest income 70,669 100,982
------------ -----------
Total interest income 4,329,164 3,809,849
Interest expense
Deposits 2,111,491 1,538,972
Repurchase agreements and
federal funds purchased and
other debt 50,999 34,766
Federal Home Loan Bank advances
and notes payable 178,407 161,323
------------ -----------
Total interest expense 2,340,897 1,735,061
Net interest Income 1,988,267 2,074,788
Provision for loan losses 127,231 78,153
------------ -----------
Net interest income after
provision for loan losses 1,861,036 1,996,635
Noninterest income
Service charges on deposit
accounts 208,395 238,113
Mortgage loan referral fees 0 0
Gain on sale of loans 133,891 4,735
Gain on sale of securities 1,986 0
Gain (loss) on disposal of
equipment 80 0
Other 110,764 77,599
------------ -----------
Total noninterest income 455,116 320,447
Noninterest expense
Salaries and employee benefits 1,135,722 991,046
Occupancy 143,289 87,298
Furniture and equipment 146,346 96,641
Advertising 57,900 42,857
Data Processing 104,680 93,764
Professional services 140,951 127,272
Other 318,209 353,170
------------ -----------
Total noninterest expense 2,047,097 1,792,048
Income before income taxes 269,055 525,034
Federal income tax expense 40,427 161,444
------------ -----------
Net Income $ 228,628 $ 363,590
============ ===========
Weighted average shares
outstanding 1,468,733 1,436,800
============ ===========
Diluted average shares
outstanding 1,488,589 1,474,279
============ ===========
Basic income per share $ 0.16 $ 0.25
============ ===========
Diluted income per share $ 0.15 $ 0.25
============ ===========
Community Shores Bank Corporation
Condensed Consolidated Statements of Condition
March 31, December 31, March 31,
2007 2006 2006
(Unaudited) (Audited) (Unaudited)
------------- ------------ -------------
ASSETS
Cash and due from
financial
institutions $ 3,458,878 $ 3,398,155 $ 3,555,515
Interest-bearing
deposits in other
financial
institutions 77,506 72,115 76,405
Federal funds sold 9,000,000 5,600,000 3,900,000
------------ ------------ ------------
Total cash and
cash equivalents 12,536,384 9,070,270 7,531,920
Securities
Available for sale 14,771,664 13,184,437 13,535,303
Held to maturity 5,254,568 5,257,835 5,452,700
------------ ------------ ------------
Total securities 20,026,232 18,442,272 18,988,003
Loans held for sale 135,371 165,070 --
Loans 205,848,341 207,432,376 191,915,548
Less: Allowance
for loan losses 2,588,475 2,549,016 2,307,087
------------ ------------ ------------
Net loans 203,259,866 204,883,360 189,608,461
Federal Home Loan
Bank stock 404,100 404,100 425,000
Premises and
equipment,net 11,683,835 10,958,821 6,292,954
Accrued interest
receivable 1,197,759 1,249,680 939,294
Other assets 2,305,642 1,807,258 1,293,587
------------ ------------ ------------
Total assets $251,549,189 $246,980,831 $225,079,219
============ ============ ============
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits
Non interest-bearing $ 17,029,107 $ 17,179,082 $ 17,343,816
Interest-bearing 200,573,367 197,103,330 177,228,398
------------ ------------ ------------
Total deposits 217,602,474 214,282,412 194,572,214
Federal funds
purchased and
repurchase
agreements 5,695,329 4,494,614 4,229,519
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 400,000 400,000 200,000
Accrued expenses
and other
liabilities 947,813 1,185,180 785,733
------------ ------------ ------------
Total liabilities 235,145,616 230,862,206 210,287,466
Shareholders' Equity
Common Stock, no par
value: 9,000,000 shares
authorized, 1,468,800,
1,466,800, 1,436,800
issued at March 31,
2007, December 31,
2006, and March 31,
2006 respectively 13,296,462 13,274,098 12,999,334
Retained earnings 3,256,402 3,027,774 2,076,278
Accumulated other
comprehensive
deficit (149,291) (183,247) (283,859)
------------ ------------ ------------
Total shareholders'
equity 16,403,573 16,118,625 14,791,753
------------ ------------ ------------
Total liabilities
and shareholders'
equity $251,549,189 $246,980,831 $225,079,219
============ ============ ============