Community Shores Reports 2008 Full-Year and Fourth Quarter Results
- Press Release
- Source: Community Shores Bank Corporation
- On 4:30 pm EST, Thursday February 5, 2009
MUSKEGON, Mich., Feb. 5, 2009 (GLOBE NEWSWIRE) -- Community Shores Bank Corporation (``Community Shores'') (NasdaqCM:CSHB - News), Muskegon's only locally headquartered independent community banking organization, today reported a net loss of $1.0 million, or $0.70 per diluted share, for the twelve months ended December 31, 2008. This compares with a net loss of $772,000, or $0.53 per diluted share, for the 2007 full year. The Company reported a net loss of $1.1 million, or $0.74 per diluted share, for the fourth quarter of 2008 compared with a net loss of $916,000, or $0.62 per diluted share, for the prior-year fourth quarter. Full-year and fourth quarter 2008 results reflect a declining net interest margin and deteriorating asset quality, both largely a function of the weaker economy, most notably in the real estate sector.
Related Quotes
| Symbol | Price | Change |
|---|---|---|
| CSHB | 0.75 | +0.02 |
Heather D. Brolick, president and CEO of Community Shores Bank Corporation, stated, ``As a local bank dedicated to serving the Greater Muskegon market, we are committed to meeting the banking needs of our local business and retail customers. We know this market well, and we have prospered together over the past ten years since we formed Community Shores Bank. Our commitment remains solid even as the economy weakens and the circumstances of the banking industry and our borrowers change.
``We have been proactively working with our borrowers to address factors that might impact loan repayment. The vast majority has responded constructively, recognizing that unprecedented conditions have increased credit risk factors. In addition to asset risk mitigation, we have taken steps to strengthen our bank -- cutting costs, improving our capital ratios by selectively reducing the balance sheet, and developing additional fee-based products to improve profitability. We realize that this economy might be with us for a while, and we are taking steps to protect our customers and shareholders from the growing level of uncertainty we face.''
Operating Results
Total revenue, which includes net interest income and noninterest income, was $9.0 million for 2008, 6.8 percent lower than the $9.7 million recorded for the prior year. Net interest income was $6.9 million, down $1.1 million or 13.6 percent from 2007, primarily from a 58 basis point decline in the net interest margin, to 2.76 percent. Although average earning assets increased by 5.4 percent year over year, virtually all of the growth was in the securities portfolio, while average loan balances declined over the course of the year. Ms. Brolick commented, ``Loan yields and cost of funds have stabilized over the most recent quarters; however, our net interest margin continues to be impacted by our changing asset mix and the interest lost from non-accruing loans.''
For the fourth quarter, total revenue was $2.0 million, down 8.7 percent from 2007 total revenue of $2.2 million. Average loans declined 8.0 percent from the year-ago quarter, while earning assets declined by only 2.1 percent. The net interest margin was 2.66 percent, a decrease of 29 basis points or 9.8 percent from the fourth quarter 2007 net interest margin of 2.95 percent. Interest foregone from non-accruing loans reduced the 2008 fourth quarter margin by sixteen basis points.
Noninterest income for 2008 was $2.1 million, up $431,000, or 25.5 percent, above the $1.7 million recorded for fiscal 2007. Excluding one-time gains of $142,000 and $118,000, respectively, from the sale of real estate and a court settlement, both of which occurred in 2008, core noninterest income from banking activities grew 10.1 percent. ``Given the difficult housing market, we are pleased with the growth of mortgage banking at Community Shores,'' added Brolick. Gains from loans sales were $369,000 for 2008, up $80,000 above 2007.
The 2008 provision for loan losses was $1.9 million, of which $1.5 million was taken in the fourth quarter. This compares with a 2007 loan loss provision of $1.9 million, with $1.1 million recorded in the fourth quarter. The loan loss reserve increased by $748,000, from $3.6 million (1.55 percent of total loans) at 2007 year-end to $4.4 million (2.10 percent of total loans) at December 31, 2008. The larger 2008 provision expense primarily reflects a higher level of net loan charge-offs and increased reserve levels to provide for potential future losses in the existing loan portfolio.
``Noninterest expense is an area where discipline can make a significant difference in this difficult operating environment. Our operating expense declined year-over-year, a major accomplishment in light of the added burden of regulatory and credit administration costs. I want to acknowledge the contributions of our dedicated staff in this area,'' Ms. Brolick stated. Noninterest expense was $8.7 million for 2008, down $306,000 or 3.4 percent from the prior-year level, primarily from a $353,000 or 7.1 percent decline in salary and benefits expense. During the course of the year, the number of FTE employees reduced by 11, ending the year at 75. Partially offsetting this improvement, the 2008 expenses associated with credit administration/collections and regulatory fees/insurance increased by $205,000 and $61,000, respectively, compared with 2007.
Balance Sheet and Asset Quality
Assets at December 31, 2008 were $255.6 million, a decline of $17.8 million or 6.5 percent since year-end 2007. Year over year, the balance sheet reflects a decline in total loans of $25.0 million, or 10.8 percent, to $207.5 million, partially offset by a $5.6 million, or 28.0 percent, increase in the securities portfolio, to $25.4 million. Construction and development loans accounted for the largest loan decline, down $15.0 million or 53.6 percent to $17.4 million, followed by a $9.1 million or 13.4 percent decline in commercial and industrial loans, to $59.3 million. The slowdown in business and real estate activity, combined with tighter underwriting standards, continues to slow the level of loan originations.
At December 31, 2008, nonperforming assets were $11.9 million, or 4.66 percent of total assets (including $6.1 million of foreclosed real estate); this compares with $7.8 million, or 3.03 percent of assets, for the linked quarter (including $2.5 million of foreclosed real estate) and $6.6 million, or 2.41 percent of assets, for December 31, 2007 (including $567,000 of foreclosed real estate). Ms. Brolick added, ``The majority of our problem loans have a real estate related component. Increasingly, we are gaining control over our collateral, and actively pursuing opportunities for the disposition of assets. The level of foreclosures in our market is stabilizing, but market activity remains low.''
Net charge-offs were $1.2 million for 2008, or 0.54 percent of average loans, of which $399,000 occurred in the fourth quarter; this compares with 2007 net charge-offs of $878,000, of which $638,000 was taken in the year-ago fourth quarter. On an annualized basis, quarterly charge-offs were 0.75 percent and 1.10 percent, respectively, of average loans for the 2008 and 2007 fourth quarters.
Deposits at December 31, 2008 were $219.6 million, down $18.4 million or 7.7 percent from year-end 2007. ``As we downsized our loan portfolio this past year,'' commented Ms. Brolick, ``we significantly improved our deposit mix. We reduced brokered deposits while increasing noninterest-bearing demand deposits. Non-maturity deposits now account for nearly 30 percent of total deposits.'' Brokered deposits declined by $13.5 million, or 14.5 percent, while demand deposits increased by $2.4 million, or 14.5 percent, over the past twelve months.
Consolidated shareholders' equity stands at $14.9 million at December 31, 2008, a decline of $0.7 million or 4.3 percent since the prior year-end. Tier I capital was 5.68 percent of year-end assets, virtually unchanged from 5.69 percent at 2007 year-end. The Bank remains well-capitalized, with Tier I Capital and Total Risk-Based Capital at 8.30 and 10.96 percent, respectively, at December 31, 2008. Shares outstanding totaled 1,468,800 at 2008 year-end.
Ms. Brolick summarized, ``We continue to respond proactively to market conditions, mitigating the impact of our weakening economy through tighter underwriting standards and greater selectivity. At the same time, we are pursuing every opportunity to generate fee income and reduce operating expenses. We have become wiser and more efficient in response to the challenges we face, and this should bode well as our economy improves.''
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 $256 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: http://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
(dollars in Quarterly
thousands -----------------------------------------------------
except per 2008 2008 2008 2008 2007
share data) 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr
--------- --------- --------- --------- ---------
EARNINGS
Net interest
income 1,601 1,749 1,688 1,850 1,830
Provision for
loan and
lease losses 1,465 95 153 231 1,130
Noninterest
income 437 439 604 643 401
Noninterest
expense 2,240 2,099 2,150 2,239 2,500
Pre tax
income
(expense) (1,667) (5) (10) 23 (1,398)
Net Income
(loss) (1,083) 12 11 32 (916)
Basic
earnings
per share $ (0.74) $ 0.01 $ 0.01 $ 0.02 $ (0.62)
Diluted
earnings
per share $ (0.74) $ 0.01 $ 0.01 $ 0.02 $ (0.62)
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 -1.66% 0.02% 0.02% 0.05% -1.37%
Return on
average
common
equity -27.47% 0.31% 0.28% 0.82% -22.49%
Net interest
margin 2.66% 2.90% 2.72% 2.88% 2.95%
Efficiency
ratio 109.90% 95.90% 93.76% 89.81% 112.04%
Full-time
equivalent
employees 75 75 78 80 86
CAPITAL
End of
period
equity to
assets 5.85% 6.10% 5.88% 5.67% 5.71%
Tier 1
capital
to end of
period
assets 5.68% 6.08% 5.88% 5.59% 5.69%
Book value
per share $ 10.18 $ 10.67 $ 10.63 $ 10.76 $ 10.63
ASSET QUALITY
Gross loan
charge-offs 404 220 314 323 650
Net loan
charge-offs 399 207 281 309 638
Net loan
charge-offs
to avg loans
(annualized) 0.75% 0.38% 0.51% 0.54% 1.10%
Allowance for
loan and
lease losses 4,351 3,285 3,397 3,525 3,603
Allowance for
losses to
total loans 2.10% 1.51% 1.56% 1.57% 1.55%
Past due and
nonaccrual
loans
(90 days) 5,860 5,257 4,264 3,625 6,017
Past due and
nonaccrual
loans to
total loans 2.82% 2.40% 1.94% 1.61% 2.59%
Other real
estate and
repossessed
assets 6,054 2,519 1,862 1,845 567
NPA +90 day
past due to
total assets 4.66% 3.03% 2.31% 1.96% 2.41%
END OF PERIOD
BALANCES
Loans 207,508 219,182 219,616 224,796 232,505
Total earning
assets 235,367 238,694 247,162 260,707 256,874
Total assets 255,612 256,891 265,348 278,758 273,458
Deposits 219,566 221,286 230,229 242,767 237,950
Shareholders'
equity 14,946 15,669 15,613 15,805 15,614
AVERAGE
BALANCES
Loans 212,638 219,299 220,820 230,778 231,122
Total earning
assets 246,819 246,701 254,201 262,269 251,989
Total assets 261,726 263,576 271,003 279,076 268,400
Deposits 224,895 227,563 235,501 243,825 230,252
Shareholders'
equity 15,771 15,664 15,629 15,597 16,291
Year to date
-----------------------
(dollars in thousands except per share data) 2008 2007
---------- ----------
EARNINGS
Net interest income 6,890 7,974
Provision for loan and lease losses 1,944 1,932
Noninterest income 2,122 1,691
Noninterest expense 8,727 9,033
Pre tax income (expense) (1,659) (1,300)
Net Income (loss) (1,027) (772)
Basic earnings per share $ (0.70) $ (0.53)
Diluted earnings per share $ (0.70) $ (0.53)
Average shares outstanding 1,468,800 1,468,778
Average diluted shares outstanding 1,468,800 1,476,778
PERFORMANCE RATIOS
Return on average assets -0.38% -0.30%
Return on average common equity -6.55% -4.71%
Net interest margin 2.76% 3.34%
Efficiency ratio 96.84% 93.48%
Full-time equivalent employees 75 86
CAPITAL
End of period equity to assets 5.85% 5.71%
Tier 1 capital to end of period assets 5.68% 5.69%
Book value per share $ 10.18 $ 10.63
ASSET QUALITY
Gross loan charge-offs 1,261 921
Net loan charge-offs 1,196 878
Net loan charge-offs to avg loans
(annualized) 0.54% 0.40%
Allowance for loan and lease losses 4,351 3,603
Allowance for losses to total loans 2.10% 1.55%
Past due and nonaccrual loans (90 days) 5,860 6,017
Past due and nonaccrual loans to total loans 2.82% 2.59%
Other real estate and repossessed assets 6,054 567
NPA +90 day past due to total assets 4.66% 2.41%
END OF PERIOD BALANCES
Loans 207,508 232,505
Total earning assets 235,367 256,874
Total assets 255,612 273,458
Deposits 219,566 237,950
Shareholders' equity 14,946 15,614
AVERAGE BALANCES
Loans 220,857 219,966
Total earning assets 255,041 242,071
Total assets 268,833 258,714
Deposits 232,912 221,139
Shareholders' equity 15,683 16,402
Community Shores Bank Corporation
Condensed Consolidated Statements of Income
(Unaudited)
Three Three Twelve Twelve
Months Months Months Months
Ended Ended Ended Ended
12/31/08 12/31/07 12/31/08 12/31/07
------------ ------------ ------------ ------------
Interest and
dividend
income
Loans,
including
fees $ 3,437,248 $ 4,287,410 $ 14,884,209 $ 17,131,662
Securities
(including
FHLB
dividends) 238,263 206,678 874,576 839,569
Federal funds
sold and
other
interest
income 22,036 14,365 211,377 135,603
------------ ------------ ------------ ------------
Total
interest
income 3,697,547 4,508,453 15,970,162 18,106,834
Interest
expense
Deposits 1,876,862 2,389,428 8,208,550 9,017,500
Repurchase
agreements
and federal
funds
purchased
and other
debt 14,044 90,708 67,762 370,463
Federal Home
Loan Bank
advances and
notes payable 205,234 197,985 803,613 744,628
------------ ------------ ------------ ------------
Total
interest
expense 2,096,140 2,678,121 9,079,925 10,132,591
Net interest
Income 1,601,407 1,830,332 6,890,237 7,974,243
Provision for
loan losses 1,465,377 1,129,957 1,943,976 1,931,963
------------ ------------ ------------ ------------
Net interest
income after
provision for
loan losses 136,030 700,375 4,946,261 6,042,280
Noninterest
income
Service charges
on deposit
accounts 273,687 269,044 1,016,151 969,176
Mortgage loan
referral fees 0 3,838 0 13,833
Gain on sale
of loans 49,348 50,062 369,082 289,069
Gain on sale
of securities 0 0 0 1,986
Gain on
disposal of
equipment 0 0 0 458
Gain (loss)
on the sale
of real
estate 0 (15,742) 142,324 (22,696)
Other 113,536 94,106 594,412 439,226
------------ ------------ ------------ ------------
Total
noninterest
income 436,571 401,308 2,121,969 1,691,052
Noninterest
expense
Salaries and
employee
benefits 1,123,718 1,280,403 4,637,339 4,990,196
Occupancy 161,396 159,263 650,982 589,480
Furniture and
equipment 172,166 168,483 689,695 649,410
Advertising 24,022 32,186 113,417 161,051
Data Processing 122,005 112,917 478,923 440,133
Professional
services 100,082 146,642 495,309 550,244
Foreclosed
asset
impairments 83,271 149,583 83,271 155,783
Other 453,083 450,932 1,578,356 1,496,976
------------ ------------ ------------ ------------
Total
noninterest
expense 2,239,743 2,500,409 8,727,292 9,033,274
Income before
income taxes (1,667,142) (1,398,726) (1,659,062) (1,299,941)
Federal income
tax expense (584,431) (483,094) (631,603) (527,710)
------------ ------------ ------------ ------------
Net Income $ (1,082,711) $ (915,632) $ (1,027,459) $ (772,231)
============ ============ ============ ============
Weighted
average
shares
outstanding 1,468,800 1,468,800 1,468,800 1,468,778
============ ============ ============ ============
Diluted
average
shares
outstanding 1,468,800 1,468,800 1,468,800 1,476,778
============ ============ ============ ============
Basic income
per share $ (0.74) $ (0.62) $ (0.70) $ (0.53)
============ ============ ============ ============
Diluted
income per
share $ (0.74) $ (0.62) $ (0.70) $ (0.53)
============ ============ ============ ============
Community Shores Bank Corporation
Condensed Consolidated Statements of Condition
December 31, December 31, December 31,
2008 2007 2006
(Unaudited) (Audited) (Audited)
------------ ------------- -------------
ASSETS
Cash and due from
financial
institutions $ 3,192,789 $ 3,329,626 $ 3,398,155
Interest-bearing
deposits in other
financial
institutions 2,479,012 201,290 72,115
Federal funds sold 0 4,346,000 5,600,000
------------- ------------- -------------
Total cash and cash
equivalents 5,671,801 7,876,916 9,070,270
Securities
Available for sale 18,769,970 13,194,645 13,184,437
Held to maturity 6,609,620 6,627,534 5,257,835
------------- ------------- -------------
Total securities 25,379,590 19,822,179 18,442,272
Loans held for sale 2,354,956 2,285,966 165,070
Loans 205,153,203 230,219,420 207,432,376
Less: Allowance
for loan losses 4,350,903 3,602,948 2,549,016
------------- ------------- -------------
Net loans 200,802,300 226,616,472 204,883,360
Federal Home Loan
Bank stock 404,100 404,100 404,100
Premises and
equipment,net 11,869,741 12,488,593 10,958,821
Accrued interest
receivable 1,004,552 1,159,804 1,249,680
Other assets 8,124,924 2,804,033 1,807,258
------------- ------------- -------------
Total assets $ 255,611,964 $ 273,458,063 $ 246,980,831
============= ============= =============
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Deposits
Non interest-
bearing $ 19,135,831 $ 16,708,504 $ 17,179,082
Interest-bearing 200,429,709 221,241,941 197,103,330
------------- ------------- -------------
Total deposits 219,565,540 237,950,445 214,282,412
Federal funds
purchased and
repurchase
agreements 5,813,605 4,400,611 4,494,614
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 4,200,000 4,206,043 400,000
Accrued expenses
and other
liabilities 586,365 786,639 1,185,180
Total -- -- --
liabilities 240,665,510 257,843,738 230,862,206
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 13,296,691 13,296,691 13,274,098
Retained earnings 1,228,084 2,255,543 3,027,774
Accumulated other
comprehensive
deficit 421,679 62,091 (183,247)
------------- ------------- -------------
Total shareholders'
equity 14,946,454 15,614,325 16,118,625
Total liabilities
and shareholders'
equity $ 255,611,964 $ 273,458,063 $ 246,980,831
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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