MUSKEGON, Mich., Oct. 30, 2007 (PRIME NEWSWIRE) -- Community Shores Bank Corporation (Nasdaq:CSHB), Muskegon's only locally-headquartered independent community banking organization, today reported a net loss of $103,000, or $0.07 per diluted share, for the third quarter of 2007 compared with net income of $363,000, or $0.25 per diluted share, for the third quarter of 2006, and $18,000, or $0.01 per diluted share, reported in the second quarter of 2007. Nine months year-to-date, earnings were $143,000, and $0.10 per diluted share, compared with $1.07 million and $0.73 per share for the prior-year nine-month period. Year-over-year results reflect strong loan growth, offset by the impact of margin compression, deteriorating asset quality, and increased noninterest expense due to branch expansion activities.
Heather D. Brolick, president and CEO of Community Shores Bank Corporation, commented, "This has been a challenging banking environment, not only for Community Shores, but also for the industry, and Michigan banks in particular. Margin compression has limited revenue growth, and the decline in asset quality has taken profits from the bottom line. Nonetheless, our organization has grown over the past twelve months - in terms of asset size, number of branches, and more lenders offering more products. The results have been strong loan growth, a growing deposit market share, and an increasingly diversified stream of fee income."
The Company's net interest income remained relatively unchanged at $2.1 million for both the third quarter of 2007 and 2006 in spite of a 12% increase in earning assets over the last twelve months; this resulted from the net interest margin declining 50 basis points between the two period ends. The net interest margin declined only 8 basis points compared to the linked quarter. Ms. Brolick commented, "Decreases to the Company's net interest margin are slowing. The recent 50 basis point rate cut should have a neutral to positive effect on the fourth quarter given the repricing opportunities on the deposit side."
Noninterest income was $417,000 for the third quarter of 2007, a 9.5 percent and 1.7 percent decline from the prior-year and linked quarters, respectively. Ms. Brolick added, "There has been volatility in the Company's noninterest income over the past year mostly related to the Bank's new revenue sources: SBA lending and mortgage banking. Unfortunately these strategies have been somewhat hampered by the soft Michigan economy and real estate climate; however, we remain firmly optimistic about future contributions that will be derived from these areas once the economy recovers."
Noninterest expense totaled $2.3 million for the third quarter of 2007, an increase of $398,000, or 21.1 percent, above the third quarter of 2006. Salaries and benefits accounted for approximately 74 percent of the increase due to the addition of 18 FTE employees, including staffing for the mortgage banking start-up during the second quarter of 2007. Additionally, increased FDIC insurance premium assessments of $34,000 per quarter and branch expansion activities, including the relocation of the Company's Grand Haven branch in September 2007, had an impact on this quarter's results.
Assets at September 30, 2007 totaled $267.3 million, an increase of $20.3 million or 8.2 percent year-to-date (10.9 percent annualized). For the same nine-month period, total loans, excluding loans held for sale, grew $22.5 million, or 10.9 percent (14.5 percent annualized), to $230.9 million. Ms. Brolick commented, "We have been selective in the loans we chose to originate. Most of our growth has been in commercial real estate, and the vast majority of these loans are collateralized by owner-occupied properties."
Nonperforming assets (including 90 days delinquent and OREO) were $4 million, or 1.48 percent of period-end assets, at September 30, 2007, compared with $3.2 million, or 1.21 percent of assets, for the linked quarter, and $1.5 million, or 0.64 percent of assets, for the year-ago quarter. Ms. Brolick stated, "The decline in our asset quality reflects the broader impact of Michigan's economic environment across all sectors. We have been diligent in our effort to identify early signs of weakness in our loan portfolio, and at the present time, we believe that we are adequately reserved." The allowance for loan and lease losses was 1.35 percent of total loans at September 30, 2007, up from 1.26 percent and 1.24 percent from the linked and prior-year quarters, respectively.
Ms. Brolick concluded by saying, "Despite our disappointing third quarter results, we believe we are well positioned for stronger performance going forward. We have completed significant investments in our infrastructure and our personnel, and our expenses are leveling off. Our margin is stabilizing; we have strong loan growth, and we believe we have identified present weaknesses within our loan portfolio. Our fee-based initiatives, especially mortgage banking, are ramping up to provide a more consistent source of revenue for our Company."
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 $267 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 Quarterly
thousands -------------------------------------------------------
except per 2007 2007 2007 2006 2006
share data) 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
---------- ---------- ---------- ---------- ----------
EARNINGS
Net interest
income 2,099 2,057 1,988 2,126 2,164
Provision for
loan and
lease losses 407 268 127 202 217
Noninterest
income 417 424 455 380 461
Noninterest
expense 2,284 2,209 2,047 1,958 1,886
Pre tax
income
(expense) (175) 4 269 346 522
Net Income (103) 18 229 247 363
Basic
earnings
per share $ (0.07) $ 0.01 $ 0.16 $ 0.17 $ 0.25
Diluted
earnings
per
share $ (0.07) $ 0.01 $ 0.15 $ 0.17 $ 0.25
Average
shares
outstanding 1,468,800 1,468,800 1,468,733 1,466,800 1,449,191
Average
diluted
shares
outstanding 1,474,236 1,481,462 1,488,589 1,489,014 1,476,876
PERFORMANCE
RATIOS
Return on
average
assets -0.16% 0.03% 0.37% 0.41% 0.62%
Return on
average
common
equity -2.51% 0.44% 5.64% 6.16% 9.33%
Net interest
margin 3.44% 3.52% 3.48% 3.80% 3.94%
Efficiency
ratio 90.78% 89.02% 83.85% 78.13% 71.84%
Full-time
equivalent
employees 84 86 82 72 66
CAPITAL
End of
period
equity to
assets 6.12% 6.23% 6.52% 6.53% 6.66%
Tier 1
capital
to end of
period
assets 6.16% 6.34% 6.58% 6.60% 6.74%
Book value
per
share $ 11.14 $ 11.09 $ 11.17 $ 10.99 $ 10.82
ASSET QUALITY
Gross loan
charge-offs 101 69 101 205 112
Net loan
charge-offs 92 60 88 200 107
Net loan
charge-offs
to avg loans
(annualized) 0.16% 0.11% 0.17% 0.39% 0.21%
Allowance for
loan and
lease losses 3,111 2,796 2,588 2,549 2,547
Allowance for
losses to
total loans 1.35% 1.26% 1.26% 1.23% 1.24%
Past due and
nonaccrual
loans (90
days) 3,099 2,356 1,942 1,131 1,394
Past due and
nonaccrual
loans to
total loans 1.34% 1.06% 0.94% 0.54% 0.68%
Other real
estate and
repossessed
assets 870 810 887 419 123
NPA +90 day
past due to
total assets 1.48% 1.21% 1.12% 0.63% 0.64%
END OF PERIOD
BALANCES
Loans 230,892 221,921 205,983 207,597 205,041
Total earning
assets 249,757 243,643 235,491 231,712 223,902
Total assets 267,284 261,305 251,549 246,981 238,377
Deposits 225,216 228,115 217,602 214,282 205,456
Shareholders'
equity 16,363 16,290 16,404 16,119 15,868
AVERAGE
BALANCES
Loans 227,546 213,402 207,449 206,365 202,432
Total earning
assets 247,069 237,008 231,944 226,880 222,200
Total assets 264,112 253,577 247,639 240,486 233,400
Deposits 223,540 216,749 213,807 206,514 196,493
Shareholders'
equity 16,411 16,430 16,251 16,035 15,569
Year to date
---------------------
(dollars in thousands except per 2007 2006
share data) ---------- ----------
EARNINGS
Net interest income 6,144 6,352
Provision for loan and lease losses 802 519
Noninterest income 1,297 1,137
Noninterest expense 6,540 5,432
Pre tax income (expense) 99 1,538
Net Income 143 1,069
Basic earnings per share $ 0.10 $ 0.74
Diluted earnings per share $ 0.10 $ 0.73
Average shares outstanding 1,468,771 1,440,976
Average diluted shares outstanding 1,485,129 1,470,930
PERFORMANCE RATIOS
Return on average assets 0.07% 0.62%
Return on average common equity 1.17% 9.42%
Net interest margin 3.48% 3.91%
Efficiency ratio 87.89% 72.54%
Full-time equivalent employees 84 66
CAPITAL
End of period equity to assets 6.12% 6.66%
Tier 1 capital to end of period assets 6.16% 6.74%
Book value per share $ 11.14 $ 10.82
ASSET QUALITY
Gross loan charge-offs 271 637
Net loan charge-offs 240 585
Net loan charge-offs to avg loans (annualized) 0.22% 0.30%
Allowance for loan and lease losses 3,111 2,547
Allowance for losses to total loans 1.35% 1.24%
Past due and nonaccrual loans (90 days) 3,099 1,394
Past due and nonaccrual loans to total loans 1.34% 0.68%
Other real estate and repossessed assets 870 123
NPA +90 day past due to total assets 1.48% 0.74%
END OF PERIOD BALANCES
Loans 230,892 205,041
Total earning assets 249,757 223,902
Total assets 267,284 238,377
Deposits 225,216 205,456
Shareholders' equity 16,363 15,868
AVERAGE BALANCES
Loans 216,206 196,018
Total earning assets 238,729 219,169
Total assets 255,171 229,368
Deposits 218,068 195,451
Shareholders' equity 16,365 15,134
Community Shores Bank Corporation
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
09/30/07 09/30/06 09/30/07 09/30/06
----------- ----------- ----------- -----------
Interest and
dividend income
Loans, including
fees $ 4,518,411 $ 4,098,809 $12,844,252 $11,468,639
Securities
(including FHLB
dividends) 213,087 181,241 632,891 541,281
Federal funds
sold and other
interest income 2,898 7,095 121,238 126,834
----------- ----------- ----------- -----------
Total interest
income 4,734,396 4,287,145 13,598,381 12,136,754
Interest expense
Deposits 2,306,697 1,833,631 6,628,072 5,050,865
Repurchase
agreements and
federal funds
purchased and
other debt 139,248 107,957 279,755 218,640
Federal Home Loan
Bank advances
and notes
payable 189,736 181,588 546,643 515,328
----------- ----------- ----------- -----------
Total interest
expense 2,635,681 2,123,176 7,454,470 5,784,833
Net interest
Income 2,098,715 2,163,969 6,143,911 6,351,921
Provision for
loan losses 406,675 216,873 802,006 518,625
----------- ----------- ----------- -----------
Net interest
income after
provision for
loan losses 1,692,040 1,947,096 5,341,905 5,833,296
Noninterest income
Service charges
on deposit
accounts 253,075 239,155 700,132 733,444
Mortgage loan
referral fees 9,995 0 9,995 1,437
Gain on sale of
loans 34,427 124,610 239,007 141,013
Gain on sale of
securities 0 0 1,986 0
Gain (loss) on
disposal of
equipment 378 0 458 (124)
Other 119,547 97,015 345,120 261,250
----------- ----------- ----------- -----------
Total
noninterest
income 417,422 460,780 1,296,698 1,137,020
Noninterest
expense
Salaries and
employee
benefits 1,288,097 992,048 3,709,793 2,930,124
Occupancy 146,642 100,828 430,217 275,902
Furniture and
equipment 170,928 113,069 480,927 311,323
Advertising 38,037 90,778 128,865 174,570
Data Processing 109,820 93,185 327,216 289,463
Professional
services 131,020 166,603 403,602 424,394
Other 399,612 329,173 1,059,198 1,026,462
----------- ----------- ----------- -----------
Total
noninterest
expense 2,284,156 1,885,684 6,539,818 5,432,238
Income before
income taxes (174,694) 522,192 98,785 1,538,078
Federal income
tax expense (71,690) 159,045 (44,616) 469,347
----------- ----------- ----------- -----------
Net Income $ (103,004) $ 363,147 $ 143,401 $ 1,068,731
=========== =========== =========== ===========
Weighted average
shares
outstanding 1,468,800 1,449,191 1,468,771 1,440,976
=========== =========== =========== ===========
Diluted average
shares
outstanding 1,474,236 1,476,893 1,485,129 1,471,044
=========== =========== =========== ===========
Basic income per
share $ (0.07) $ 0.25 $ 0.10 $ 0.74
=========== =========== =========== ===========
Diluted income
per share $ (0.07) $ 0.25 $ 0.10 $ 0.73
=========== =========== =========== ===========
Community Shores Bank Corporation
Condensed Consolidated Statements of Condition
Sept 30, December 31, Sept 30,
2007 2006 2006
(Unaudited) (Audited) (Unaudited)
------------ ------------ ------------
ASSETS
Cash and due from financial
institutions $ 3,901,052 $ 3,398,155 $ 4,134,507
Interest-bearing deposits
in other financial
institutions 66,121 72,115 54,455
Federal funds sold 0 5,600,000 450,000
------------ ------------ ------------
Total cash and cash
equivalents 3,967,173 9,070,270 4,638,962
Securities
Available for sale 13,550,547 13,184,437 13,096,118
Held to maturity 5,248,034 5,257,835 5,261,103
------------ ------------ ------------
Total securities 18,798,581 18,442,272 18,357,221
Loans held for sale 921,623 165,070 --
Loans 229,970,365 207,432,376 205,040,775
Less: Allowance for loan
losses 3,111,096 2,549,016 2,546,827
------------ ------------ ------------
Net loans 226,859,269 204,883,360 202,493,948
Federal Home Loan Bank stock 404,100 404,100 411,500
Premises and equipment, net 12,641,544 10,958,821 8,431,199
Accrued interest receivable 1,369,554 1,249,680 1,105,749
Other assets 2,322,197 1,807,258 2,938,675
------------ ------------ ------------
Total assets $267,284,041 $246,980,831 $238,377,254
============ ============ ============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits
Non interest-bearing $ 18,175,949 $ 17,179,082 $ 17,810,068
Interest-bearing 207,040,122 197,103,330 187,645,924
------------ ------------ ------------
Total deposits 225,216,071 214,282,412 205,455,992
Federal funds purchased and
repurchase agreements 13,506,499 4,494,614 5,026,652
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 1,106,043 400,000 400,000
Accrued expenses and other
liabilities 592,300 1,185,180 1,126,753
------------ ------------ ------------
Total liabilities 250,920,913 230,862,206 222,509,397
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 13,296,462 13,274,098 13,274,098
Retained earnings 3,171,175 3,027,774 2,781,193
Accumulated other
comprehensive deficit (104,509) (183,247) (187,434)
------------ ------------ ------------
Total shareholders' equity 16,363,128 16,118,625 15,867,857
------------ ------------ ------------
Total liabilities and
shareholders'
equity $267,284,041 $246,980,831 $238,377,254
============ ============ ============