updated 2/8/2011 4:17:12 PM ET 2011-02-08T21:17:12

MUSKEGON, Mich., Feb. 8, 2011 (GLOBE NEWSWIRE) -- Community Shores Bank Corporation ("Community Shores") (OTCBB:CSHB), Muskegon's only locally-headquartered, independent community banking organization, today reported a 2010 net loss of $8.88 million, or ($6.05) per diluted share, compared to a net loss of $4.96 million, or ($3.38) per diluted share for 2009. For the 2010 fourth quarter, the Company reported a net loss of $3.33 million, or ($2.27) per diluted share, compared with a net loss of $2.79 million, or ($1.90) per diluted share, for the year-ago fourth quarter. Full-year and quarterly results continue to reflect declining property valuations in Community Shores' markets.

Heather D. Brolick, president and chief executive officer of Community Shores Bank Corporation, commented, "The fourth quarter losses are, primarily, a result of current appraisals on impaired loans with real estate collateral and foreclosed assets. While some properties stabilized and maintained value in excess of our projections, we experienced continued declination in values on certain non-owner occupied commercial property and development loans. Clearly, market values have been difficult to assess, even for the appraisers. On a positive note, the significant write-downs on foreclosed properties have fostered sales activity. In the fourth quarter alone, 13 foreclosed properties sold. Since year-end 2009, the Company's non-performing assets and 90 day past due totals declined by $4.1 million."

"While our nonperforming assets are slowly declining, the Bank continues to maintain large liquidity reserves. At year-end 2010, nearly 25 percent of our balance sheet was in cash and liquid investments. Much of the detrimental impact this tactic has had on interest income has been offset by lower costing funds. We believe the benefits of the liquidity position from a safety and soundness point of view offset the impact on earnings."

Operating Results

Total revenue, consisting of net interest income and noninterest income, was $8.52 million for 2010 compared to $8.76 million for the prior year. Net interest income for 2010 was $6.95 million, up $165,000 or 2.4 percent, from the $6.79 million earned in 2009. The net interest margin expanded 5 basis points in 2010. The net interest margin at 3.06% includes the favorable impact of a 67 basis point improvement in the Company's cost of funds which more than offset a smaller loan portfolio and interest reversed from loans moved to nonaccrual status. Ms. Brolick added, "We continue to benefit from maturing high priced time deposits. Since year-end 2009, the weighted average rate on the time deposit portfolio declined 126 basis points. Our fourth quarter net interest margin was 3.22 percent, 8 basis points behind last year's fourth quarter, but 39 basis points up from the linked quarter. We anticipate further margin improvements in 2011 as 35 percent of interest-bearing deposits are scheduled to re-price, primarily in the second half of the year."

Noninterest income was $1.57 million, a decrease of $403,000, or 20.4 percent, from the $1.97 million reported in 2009. Service charges and mortgage banking income, the Company's two primary noninterest revenue generators, together accounted for $1.10 million of 2010 noninterest income, a decline of $163,000 or 12.9 percent, from 2009 levels. Service charges on customer deposit accounts declined by $118,000, primarily due to lower overdraft fees.

The loan loss provision for 2010 was $6.02 million. This compares to the $2.61 million provision in 2009. Net charge-offs were $5.02 million, or 2.82 percent of average loans in 2010 compared to $3.18 million, or 1.64 percent of average loans in 2009. In the fourth quarter of 2010, the Company had a loan loss provision of $2.64 million and had net charge-offs of $2.39 million or 5.63 percent of average loans annualized. In the fourth quarter of 2009, loan loss provision of $1.69 million was recorded and net charge offs were $692,000. At year-end 2010, the allowance for loan losses was $4.79 million, or 2.88 percent of total loans, compared with 2.65 percent of total loans in the linked quarter and 2.05 percent of total loans in the year-ago quarter.

Noninterest expense was $11.4 million for 2010 compared to $11.0 million for 2009, up $395,000 or 3.6 percent. Foreclosed asset impairments increased $670,000 year over year. Ignoring the increase in this expense, non-interest expense decreased $274,000, or 2.5 percent. Overall, controllable operating expenses reflect continued improvement.

Balance Sheet

Total assets at December 31, 2010 were $237.9 million, up $6.5 million from December 31, 2009. Total loans, including loans held for sale, declined by $17.8 million, or 9.7 percent, to $166.5 million at year-end 2010. Conversely, cash and investments increased $29.8 million since year-end 2009. Ms. Brolick added, "Liquidity is important for the Company to successfully live within the parameters outlined in the Consent Order."

Total deposits were $219.3 million at December 31, 2010, up $20.7 million, or 10.4 percent from year-ago levels. Year-over-year, noninterest-bearing depository accounts increased by $8.44 million, or 34 percent, and now comprise approximately 15.2 percent of total deposits, up from 12.5 percent at 2009 year-end. "As the only locally headquartered community bank in our market area, we have continued to grow local deposits. Our customer base has been extremely supportive and improvements in our core funding mix will have a positive impact on margin," explained Brolick.

Asset Quality

Ms. Brolick continued, "We continue to make steady progress in reducing the number and dollar amount of our non-performing assets. We expect this trend to continue through the coming year, although we recognize that land development absorption will be slow and methodical. As announced earlier this year, we have one complete development, consisting of 47 lots, under contract. Positively, the first two lots in that development were purchased two months ahead of schedule." 

Nonperforming assets, consisting of nonperforming loans, loans >90 days past due and still accruing, and foreclosed real estate, were $11.6 million, or 4.89 percent of total assets at December 31, 2010, compared to $14.4 million (5.81 percent of total assets) and $15.7 million (6.82 percent of total assets), at September 30, 2010 and December 31, 2009, respectively. Nonperforming assets decreased by $4.1 million year-over-year, and $2.8 million compared to the previous quarter. Included in that were sales of foreclosed real estate of $3.4 million in 2010 with $1.6 million of those sales during the fourth quarter. Brolick added, "Economic conditions are positively impacting our clients and we were able to successfully restructure 18 troubled loans, with outstanding balances of $5.089 million at December 31, 2010."  

Capitalization

At December 31, 2010, consolidated shareholders' equity totaled $0.85 million, a decline of $8.89 million, or 91.3 percent, from December 31, 2009.  As of December 31, 2010, the Bank's Tier I leverage was 4.25 percent of total assets, while Tier I Capital and Total Risk-based Capital were at 5.79 percent and 7.06 percent of total risk-weighted assets, respectively.

Ms. Brolick concluded, "Our capital levels have been adversely impacted by our loan losses and the high level of associated legal, carrying and collection expenses. As projected by Management and the Board of Directors, our present capital position remains adequate. We know that positive effects from an improving economy will take an extended amount of time and that 2011 will continue to be challenging. We have continually reduced overhead and operating expenses and have become very proficient in managing our problem credits. We acknowledge that this has taken a significant toll on our shareholders. In response, we continue to work tirelessly to reduce the risk profile of the Bank, maintain a strong commitment to our local market by working with clients through this very challenging cycle, and seek resolution to our capital deficiency."

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 $238 million in assets. The Company's stock is traded over-the-counter on the OTC Bulletin Board 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 Year to date
(dollars in thousands except per share data) 2010

4th Qtr
2010

3rd Qtr
2010

2nd Qtr
2010

1st Qtr
2009

4th Qtr
2010 2009
               
EARNINGS              
 Net interest income 1,794 1,682 1,764 1,711 1,763 6,951 6,786
 Provision for loan and lease losses  2,640 2,023 833 529 1,684 6,025 2,608
 Noninterest income  350 369 366 485 350 1,569 1,971
 Noninterest expense 2,846 3,949 2,486 2,108 4,085 11,389 10,993
 Pre tax income (expense) (3,343) (3,921) (1,189) (440) (3,656) (8,893) (4,844)
 Net Income (loss) (3,332) (3,921) (1,189) (440) (2,789) (8,883) (4,962)
 Basic loss per share  $ (2.27)  $ (2.67)  $ (0.81)  $ (0.30)  $ (1.90)  $ (6.05)  $ (3.38)
 Diluted loss per share  $ (2.27)  $ (2.67)  $ (0.81)  $ (0.30)  $ (1.90)  $ (6.05)  $ (3.38)
 Average shares outstanding 1,468,800 1,468,800 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 1,468,800 1,468,800
               
PERFORMANCE RATIOS               
 Return on average assets -5.53% -6.04% -1.87% -0.73% -4.71% -3.57% -1.97%
 Return on average common equity -302.36% -195.41% -51.71% -16.26% -90.29% -109.72% -36.32%
 Net interest margin  3.22% 2.83% 3.04% 3.16% 3.30% 3.06% 3.01%
 Efficiency ratio 132.79% 192.56% 116.73% 95.96% 193.30% 133.67% 125.53%
 Full-time equivalent employees 70 72 71 69 71 70 71
               
CAPITAL              
 End of period equity to assets 0.36% 1.85% 3.21% 3.67% 4.21% 0.36% 4.21%
 Tier 1 capital to end of period assets 0.29% 1.62% 3.03% 3.60% 4.13% 0.29% 4.13%
 Book value per share  $ 0.58  $ 3.12  $ 5.71  $ 6.34  $ 6.63  $ 0.58  $ 6.63
               
ASSET QUALITY              
 Gross loan charge-offs 2,414 638 1,023 1,015 698 5,090 3,228
 Net loan charge-offs 2,392 617 1,012 994 692 5,015 3,176
 Net loan charge-offs to avg loans (annualized) 5.63% 1.40% 2.22% 2.18% 1.49% 2.82% 1.64%
 Allowance for loan and lease losses 4,792 4,544 3,138 3,318 3,782 4,792 3,782
 Allowance for losses to total loans 2.88% 2.65% 1.74% 1.83% 2.05% 2.88% 2.05%
 Past due and nonaccrual loans (90 days) 8,247 8,721 7,932 8,801 9,095 8,247 9,095
 Past due and nonaccrual loans to total loans 4.95% 5.08% 4.40% 4.86% 4.93% 4.95% 4.93%
 Other real estate and repossessed assets 3,383 5,676 6,843 6,975 6,627 3,383 6,627
 NPA +90 day past due to total assets 4.89% 5.81% 5.65% 6.25% 6.82% 4.89% 6.82%
               
END OF PERIOD BALANCES              
 Loans  166,507 171,673 180,146 181,219 184,318 166,507 184,318
 Total earning assets  225,056 230,772 240,019 232,753 212,877 225,056 212,877
 Total assets 237,945 247,737 261,411 253,356 231,430 237,945 231,430
 Deposits  219,263 222,844 229,153 220,513 198,577 219,263 198,577
 Shareholders' equity 846 4,579 8,387 9,309 9,740 846 9,740
               
AVERAGE BALANCES              
 Loans  170,097 175,708 182,003 182,556 186,075 177,552 193,355
 Total earning assets 224,698 239,779 234,185 220,295 217,766 229,779 230,339
 Total assets 241,180 259,462 254,174 240,924 237,094 248,965 252,168
 Deposits 217,491 231,433 221,394 205,582 198,962 219,042 214,938
 Shareholders' equity 4,408 8,026 9,198 10,824 12,356 8,096 13,657
 
Community Shores Bank Corporation
Condensed Consolidated Statements of Income
(Unaudited)
         
  Three Months

Ended

12/31/10
Three Months

Ended

12/31/09
Twelve Months

Ended

12/31/10
Twelve Months

Ended

12/31/09
         
Interest and dividend income        
Loans, including fees  $ 2,646,787  $ 2,921,581  $ 11,075,774  $ 12,297,691
Securities  215,595 221,788 849,702 952,938
Federal funds sold, FHLB dividends and other interest income 14,175 1,782 58,578 34,022
 Total interest income 2,876,557 3,145,151 11,984,054 13,284,651
Interest expense        
Deposits 960,937 1,183,804 4,304,290 5,749,296
Repurchase agreements and other debt 16,893 22,773 75,837 59,065
Federal Home Loan Bank advances and notes payable 104,839 175,447 652,616 690,454
 Total interest expense 1,082,669 1,382,024 5,032,743 6,498,815
         
Net interest income 1,793,888 1,763,127 6,951,311 6,785,836
Provision for loan losses 2,640,048 1,684,343 6,024,775 2,607,643
         
Net interest income after provision for loan losses (846,160) 78,784 926,536 4,178,193
Noninterest income        
Service charges on deposit accounts 208,325 223,055 787,980 905,983
Mortgage loan referral fees 0 0 0 17,114
Gain on sale of loans 125,741 73,405 316,525 344,459
Gain (loss) on sale of securities 0 (4,375) 79,814 268,635
Gain (loss) on the sale of real estate  (122,434) (51,746) (193,559) (73,833)
Other 137,979 109,732 578,020 509,086
 Total noninterest income 349,611 350,071 1,568,780 1,971,444
         
Noninterest expense        
Salaries and employee benefits 1,084,895 1,039,236 4,146,318 4,260,752
Occupancy 163,635 149,994 643,159 635,502
Furniture and equipment 135,208 164,588 578,156 667,985
Advertising 9,885 16,203 58,411 76,448
Data Processing 136,997 122,598 532,103 493,495
Professional services 107,858 125,604 513,458 497,357
Foreclosed asset impairments 602,340 1,607,560 2,575,129 1,905,622
Other 605,574 859,081 2,341,927 2,456,029
 Total noninterest expense 2,846,392 4,084,864 11,388,661 10,993,190
         
Loss before income taxes (3,342,941) (3,656,009) (8,893,345) (4,843,553)
Federal income tax expense (benefit) (10,618) (867,135) (10,618) 118,826
Net loss  $ (3,332,323)  $ (2,788,874)  $ (8,882,727)  $ (4,962,379)
         
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 loss per share  $ (2.27)  $ (1.90)  $ (6.05)  $ (3.38)
Diluted loss per share  $ (2.27)  $ (1.90)  $ (6.05)  $ (3.38)
       
Community Shores Bank Corporation
Condensed Consolidated Statements of Condition
   
  December 31,

2010

(Unaudited)
December 31,

2009

(Audited)
December 31,

2008

(Audited)
       
ASSETS      
Cash and due from financial institutions  $ 2,074,301  $ 2,161,388  $ 3,192,789
Interest-bearing deposits in other financial institutions 21,565,572 662,700 2,479,012
 Total cash and cash equivalents 23,639,873 2,824,088 5,671,801
       
Securities      
 Available for sale   36,503,903  21,650,026  18,769,970
 Held to maturity  0 5,841,421 6,609,620
 Total securities  36,503,903  27,491,447  25,379,590
       
Loans held for sale  1,263,263  1,070,692  2,354,956
       
Loans 165,243,881 183,247,827 205,153,203
Less: Allowance for loan losses 4,791,907 3,782,132 4,350,903
 Net loans 160,451,974 179,465,695 200,802,300
       
Federal Home Loan Bank stock  479,800  404,100  404,100
Premises and equipment,net 10,874,176 11,293,169 11,869,741
Accrued interest receivable 781,334 885,103 1,004,552
Foreclosed assets 3,382,594 6,440,916 5,884,093
Other assets  568,580  1,554,849  2,240,831
 Total assets  $ 237,945,497  $ 231,430,059  $ 255,611,964
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Deposits      
 Non interest-bearing  $ 33,326,683  $ 24,884,625  $ 19,135,831
 Interest-bearing  185,936,494  173,691,984  200,429,709
 Total deposits 219,263,177 198,576,609 219,565,540
       
Federal funds purchased and repurchase agreements 7,460,795 7,000,327 5,813,605
Federal Home Loan Bank advances 0 6,000,000 6,000,000
Subordinated debentures 4,500,000 4,500,000 4,500,000
Notes payable 5,000,000 5,000,000 4,200,000
Accrued expenses and other liabilities 875,738 613,132 586,365
 Total liabilities 237,099,710 221,690,068 240,665,510
       
Shareholders' equity      
 Common Stock, no par value: 9,000,000 shares authorized,      
 1,468,800 issued and outstanding 13,296,691 13,296,691 13,296,691
 Retained deficit  (12,617,022) (3,734,295) 1,228,084
 Accumulated other comprehensive income 166,118 177,595 421,679
       
 Total shareholders' equity 845,787 9,739,991 14,946,454
 Total liabilities and shareholders' equity  $ 237,945,497  $ 231,430,059  $ 255,611,964
CONTACT: Heather D. Brolick
         President and CEO
         1-231-780-1845
         hbrolick@communityshores.com
         
         Tracey A. Welsh
         Senior Vice President and CFO
         1-231-780-1847
         twelsh@communityshores.com

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