updated 5/4/2011 9:17:08 AM ET 2011-05-04T13:17:08

MUSKEGON, Mich., May 4, 2011 (GLOBE NEWSWIRE) -- Community Shores Bank Corporation ("Community Shores") (OTCBB:CSHB), Muskegon's only locally headquartered independent community banking organization, today reported a first quarter net loss of $734,000, or ($0.50) per diluted share, compared with a net loss of $440,000, or ($0.30) per diluted share for the first quarter of 2010. Heather D. Brolick, president and chief executive officer of Community Shores Bank Corporation, commented, "As expected, we continue to experience losses as we work through the final phase of problem credits. While we do not expect a return to profitability in 2011, we are content with this quarter's outcome when compared to the magnitude of the losses recorded in the last several linked quarters. We anticipate this fiscal year's performance will reflect stabilization and eventually there will be a consistent methodical return to health from an asset quality standpoint as internal and external indicators continue to show improvement."

Operating Results

Total revenue, which consists of net interest income and noninterest income, was $2.39 million for the first quarter of 2011, an improvement of 8.8 percent from the $2.20 million recorded for the year-ago period. Net interest income was $1.87 million, up 9.3 percent from first quarter 2010. The net interest margin was 3.34 percent for the current quarter, an increase of 18 basis points, or 5.7 percent, from the year-ago period due to improved pricing with respect to both loans and deposits as they were renewed or matured. "We expect continued improvement in the net interest margin throughout 2011," Ms. Brolick added, "primarily from the maturity of higher-priced time deposits. For the remainder of 2011 approximately $30 million of brokered time deposits will mature --mostly in the second half of the year--with an average interest rate of approximately 3.77 percent. The beneficial impact of these maturities is typically realized in the quarter following the maturity." Average earning assets grew by $5.2 million compared to the year-ago quarter, and the yield on the loan portfolio increased when comparing the same timeframes.

Noninterest income for the first quarter of 2011 was $520,000, up $35,000, or 7.2 percent, from the $485,000 recorded for first quarter 2010. "Community Shores was successful in selling several SBA loans which resulted in a $124,000 gain. While generating noninterest income for the Bank, Small Business Administration loans are advantageous to business borrowers, providing the funds needed for growth and expansion. Community Shores is pleased to partner with local companies in an effort to spur economic recovery and growth in Muskegon and Ottawa Counties." added Ms. Brolick. There were no SBA gains recorded in the comparable quarter of 2010 however there was a gain on the sale of securities of $80,000.

The 2011 first quarter provision for loan losses was $705,000 compared with $2.64 million for the linked-quarter and $529,000 recorded in the prior-year first quarter. During the past twelve months, Community Shores' provision expense more than offset net charge-offs, allowing the bank to build its loan reserves. At March 31, 2011, the allowance for loan and lease losses was $5.26 million, or 3.18 percent of total loans, compared to $3.32 million, or 1.83 percent of total loans, at March 31, 2010.

Noninterest expense was $2.42 million for the 2011 first quarter, an increase of $312,000, or 14.8 percent from the year-ago first quarter. Operating expenses continue to be well-managed, excluding increased regulatory costs and expenses associated with the management of foreclosed properties. These expenses were $637,000 for the first quarter of 2011; an increase of $357,000 compared to the similar quarter of 2010. As credit quality continues to stabilize and problem assets are sold or otherwise mitigated, these credit related expenses will decline proportionally.

Balance Sheet

Assets at March 31, 2011 were $242.4 million, up $4.5 million from year-end 2010, due to seasonal fluctuations in the balances of several public fund customers, who increased cash equivalents by $12.1 million since year-end 2010. Total loans (held for sale and for investment) declined by $1.4 million, and by $16.1 million, or 8.9 percent, from the year-ago quarter-end, and were $165.1 million at March 31, 2011. "We continue to evaluate good business opportunities; however, loan demand is generally down. Businesses continue to defer capital investment and consumers have increased savings and are wisely paying down debt. Although we are seeing improvement in local economic indicators, rising fuel costs continue to negatively impact public sentiment about our overall economic health," commented Ms. Brolick.

Asset Quality

At March 31, 2011, nonperforming assets, consisting of nonperforming loans (nonaccrual loans plus loans > 90 days past due and still accruing), foreclosed real estate ("OREO") and repossessed assets, totaled $11.9 million, or 4.9 percent of assets. Nonperforming assets have essentially stabilized since year-end 2010. There was a slight uptick of $289,000 since year-end 2010; however, nonperforming assets declined by $3.9 million since the like quarter a year ago. Net charge-offs were $241,000 for first quarter 2011, or .6 percent (annualized) of average loans; this compares with net charge-offs of $2.4 million , or 5.6 percent of average loans, for the linked quarter and $994,000, or 2.2 percent of average loans, for the year-ago period, both on an annualized basis. Over the past twelve months, the Bank has charged-off a net $4.3 million while adding $6.2 million to its allowance for loan and lease losses, which now stands at $5.26 million. "Clearly, we are addressing our problem loans and believe that our reserve levels are appropriate. We are working aggressively to gain possession and dispose of foreclosed real estate. Unfortunately, as circumstances dictate, the duration of the legal process may be as long as 12 to 24 months before possession occurs and properties can be actively marketed," stated Brolick.

Capital

At March 31, 2011, consolidated shareholders' equity totaled $142,000, a decline of $704,000 from December 31, 2010. As of March 31, 2011, the Bank's Tier I leverage was 4.03 percent of total assets, while Tier I Capital and Total Risk-based Capital were at 5.57 percent and 6.84 percent of total risk-weighted assets, respectively.

Ms. Brolick concluded, "The capital markets and investment environment have been tepid to virtually non-existent in Michigan. The Board of Directors is actively working on various scenarios to improve the Company's capital position." She continued, "Certainly, these past several quarters have been difficult for us but the recent traction in the liquidation of foreclosed assets and perceptible drop in early stage delinquency are tangible signs that asset quality has stabilized; however, this is tempered by continued volatility in real property valuations. Until we see consistency and stabilization in the market value of various types of real estate, I expect recovery will continue to be slow."

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 $242 million in assets. The Company's stock is listed 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
  2011 2010 2010 2010 2010
(dollars in thousands except per share data) 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
           
EARNINGS          
 Net interest income 1,871 1,794 1,682 1,764 1,711
 Provision for loan and lease losses  705 2,640 2,023 833 529
 Noninterest income  520 350 369 366 485
 Noninterest expense 2,420 2,846 3,949 2,486 2,108
 Pre tax income (expense) (734) (3,343) (3,921) (1,189) (440)
 Net loss (734) (3,332) (3,921) (1,189) (440)
 Basic loss per share  $ (0.50)  $ (2.27)  $ (2.67)  $ (0.81)  $ (0.30)
 Diluted loss per share  $ (0.50)  $ (2.27)  $ (2.67)  $ (0.81)  $ (0.30)
 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 -1.23% -5.53% -6.04% -1.87% -0.73%
 Return on average common equity -374.97% -302.36% -195.41% -51.71% -16.26%
 Net interest margin  3.34% 3.22% 2.83% 3.04% 3.16%
 Efficiency ratio 101.24% 132.79% 192.56% 116.73% 95.96%
 Full-time equivalent employees 70 70 72 71 69
           
CAPITAL          
 End of period equity to assets 0.06% 0.36% 1.85% 3.21% 3.67%
 Tier 1 capital to end of period assets -0.02% 0.29% 1.62% 3.03% 3.60%
 Book value per share  $ 0.10  $ 0.58  $ 3.12  $ 5.71  $ 6.34
           
ASSET QUALITY          
 Gross loan charge-offs 283 2,414 638 1,023 1,015
 Net loan charge-offs 241 2,392 617 1,012 994
 Net loan charge-offs to avg loans (annualized) 0.58% 5.63% 1.40% 2.22% 2.18%
 Allowance for loan and lease losses 5,256 4,792 4,544 3,138 3,318
 Allowance for losses to total loans 3.18% 2.88% 2.65% 1.74% 1.83%
 Past due and nonaccrual loans (90 days) 8,046 8,247 8,721 7,932 8,801
 Past due and nonaccrual loans to total loans 4.87% 4.95% 5.08% 4.40% 4.86%
 Other real estate and repossessed assets 3,873 3,383 5,676 6,843 6,975
 NPA +90 day past due to total assets 4.92% 4.89% 5.81% 5.65% 6.25%
           
END OF PERIOD BALANCES          
 Loans  165,130 166,507 171,673 180,146 181,219
 Total earning assets  229,387 225,056 230,772 240,019 232,753
 Total assets 242,396 237,945 247,737 261,411 253,356
 Deposits  223,434 219,263 222,844 229,153 220,513
 Shareholders' equity 142 846 4,579 8,387 9,309
           
AVERAGE BALANCES          
 Loans  165,999 170,097 175,708 182,003 182,556
 Total earning assets 225,471 224,698 239,779 234,185 220,295
 Total assets 239,597 241,180 259,462 254,174 240,924
 Deposits 221,682 217,491 231,433 221,394 205,582
 Shareholders' equity 783 4,408 8,026 9,198 10,824
 
Community Shores Bank Corporation
Condensed Consolidated Statements of Income
(Unaudited)
     
  Three Months Three Months
  Ended Ended
  03/31/11 03/31/10
     
Interest and dividend income    
Loans, including fees  $ 2,565,081  $ 2,805,607
Securities  214,163 211,435
FHLB dividends and other interest income 17,445 7,459
 Total interest income 2,796,689 3,024,501
Interest expense    
Deposits 811,595 1,107,977
Repurchase agreements and federal funds purchased    
 and other debt 11,502 20,571
Federal Home Loan Bank advances and notes payable 102,890 184,532
 Total interest expense 925,987 1,313,080
     
Net interest Income 1,870,702 1,711,421
Provision for loan losses 704,505 529,081
     
Net interest income after provision for loan losses 1,166,197 1,182,340
Noninterest income    
Service charges on deposit accounts 176,813 174,533
Gain on sale of loans 157,560 45,906
Gain on sale of securities 194 79,814
Gain (loss) on the sale of foreclosed assets (799) (8,689)
Other 185,742 193,271
 Total noninterest income 519,510 484,835
     
Noninterest expense    
Salaries and employee benefits 1,025,340 1,032,156
Occupancy 181,361 165,616
Furniture and equipment 132,486 159,128
Advertising 9,345 18,165
Data processing 132,406 122,779
Professional services 94,838 124,650
Foreclosed asset impairment 167,866 24,655
Other 676,284 460,431
 Total noninterest expense 2,419,926 2,107,580
     
Loss before income taxes (734,219) (440,405)
Federal income tax expense  0 0
Net loss  $ (734,219)  $ (440,405)
     
Weighted average shares outstanding 1,468,800 1,468,800
Diluted average shares outstanding 1,468,800 1,468,800
Basic loss per share  $ (0.50)  $ (0.30)
Diluted loss per share  $ (0.50)  $ (0.30)
 
Community Shores Bank Corporation
Condensed Consolidated Statements of Condition
       
  March 31, December 31, March 31,
  2011 2010 2010
  (Unaudited) (Audited) (Unaudited)
       
ASSETS      
Cash and due from financial institutions  $ 2,266,480  $ 2,074,301  $ 3,552,229
Interest-bearing deposits in other financial institutions 28,193,508 21,565,572 21,151,387
 Total cash and cash equivalents 30,459,988 23,639,873 24,703,616
       
Securities      
 Available for sale   35,583,067  36,503,903  29,978,208
 Held to maturity  0 0 0
 Total securities  35,583,067  36,503,903  29,978,208
       
Loans held for sale  3,012,189  1,263,263  611,103
       
Loans 162,117,482 165,243,881 180,608,114
Less: Allowance for loan losses 5,255,868 4,791,907 3,317,566
 Net loans 156,861,614 160,451,974 177,290,548
       
Federal Home Loan Bank stock  479,800  479,800  404,100
Premises and equipment,net 10,740,220 10,874,176 11,216,060
Accrued interest receivable 708,703 781,334 807,720
Foreclosed assets 3,872,996 3,382,594 6,827,813
Other assets  677,399  568,580  1,516,568
 Total assets  $ 242,395,976  $ 237,945,497  $ 253,355,736
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Deposits      
 Non interest-bearing  $ 42,093,347  $ 33,326,683  $ 21,777,790
 Interest-bearing  181,341,093  185,936,494  198,735,690
 Total deposits 223,434,440 219,263,177 220,513,480
       
Federal funds purchased and repurchase agreements 8,407,631 7,460,795 8,873,575
Federal Home Loan Bank advances 0 0 4,500,000
Subordinated debentures 4,500,000 4,500,000 4,500,000
Notes payable 5,000,000 5,000,000 5,000,000
Accrued expenses and other liabilities 912,151 875,738 659,502
 Total liabilities 242,254,222 237,099,710 244,046,557
       
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 deficit  (13,351,241) (12,617,022) (4,174,700)
 Accumulated other comprehensive income 196,304 166,118 187,188
       
 Total shareholders' equity 141,754 845,787 9,309,179
 Total liabilities and shareholders' equity  $ 242,395,976  $ 237,945,497  $ 253,355,736
CONTACT: Community Shores Bank Corporation:
         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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