Community Shores Reports 2011 Second Quarter Results

MUSKEGON, Mich., Aug. 4, 2011 (GLOBE NEWSWIRE) -- Community Shores Bank Corporation CSHB ("Community Shores"), Muskegon's only locally headquartered independent community banking organization, today reported a second quarter net loss of $522,000, or ($0.36) per diluted share, a 56.1 percent improvement compared with the second quarter 2010 net loss of $1.19 million, or ($0.81) per diluted share. For the six-month period year-to-date, the Company recorded a net loss of $1.26 million, or ($0.86) per diluted share, compared to a loss of $1.63 million, or ($1.11) per diluted share, for the first six months of 2010. Results for the June 2011 quarter and 2011 year-to-date period were impacted by improved net interest income and lower provision expense.

Heather D. Brolick, president and chief executive officer of Community Shores Bank Corporation, commented, "We are pleased with the quarterly improvement in our Company's performance. While still posting a loss, we have made significant progress over the past 12 months and are consistently trending toward a return to profitability. As anticipated, we have seen progressive improvement in the net interest margin and continue to forecast further improvement throughout the remainder of the year as higher priced time deposits mature. This positively impacted our net interest income.

"Since the beginning of 2011 there have been notable reductions in expenses related to troubled assets; both loan loss provision and collection related expenses. We feel that this is reflective of improving credit quality. We continue to make reductions in other non-interest expenses as well and have been pleased with ongoing efforts by staff to improve efficiency.

"In spite of a stabilization in credit quality and efforts to reduce general operating expenses, the duration and intensity of this credit cycle has gradually eroded the Bank's capital base. Since year-end 2010, the Bank was considered under-capitalized according to prompt corrective action guidance. At June 30, 2011, the Bank's total risk based capital ratio was 6.66% and its tier one ratio was 3.98%.

"The Board of Directors and management are vigilantly monitoring the bank's capital position and are working on initiatives to restore capital levels to those mandated by our regulatory agencies," added Ms. Brolick.  

Operating Results

Net interest income for the first half of 2011 was $3.74 million or $261,000 more than that recorded for the same period in 2010. The corresponding net interest margin was 3.38 percent; a 28 basis point improvement year over year. Net interest income for the 2011 second quarter was $1.87 million, up $101,000, or 5.7 percent, over the year-ago quarter. This improvement reflected a 38 basis point expansion of the net interest margin to 3.42 percent despite average earning assets decreasing 6.1 percent; or $14.4 million. "There was a significant decrease in the Company's average cost of funds as maturing time deposits re-price to current market rates. We anticipate continued margin improvement in the last quarter of 2011 on into 2012 as brokered deposits of $22.5 million mature at an average rate of 4.73 percent and are re-priced at rates that are more than 350 basis points lower," added Ms. Brolick.

Noninterest income for the second quarter of 2011 was $360,000, roughly the same as the $366,000 recorded for the second quarter of 2010. Lower levels of mortgage banking income contributed to the year-over-year quarterly decline. Ms. Brolick added, "We are disappointed in the level of income being generated from secondary residential mortgage sales. While originations remain good, appraisal and underwriting conditions are challenging resulting in approximately a 50% closure rate. Unfortunately, we anticipate continued weakness in this area." Non interest income for the first half of 2011 was $880,000 compared to $850,000 in the first half of 2010.   

The provision for loan and lease losses for the 2011 second quarter was $498,000 compared to $705,000 and $833,000, respectively, for the linked and year-ago quarters. Year-to-date, Community Shores added $1.20 million to its loan and lease loss reserves compared to $1.36 million for the first half of 2010. The allowance for loan losses now stands at $4.94 million, or 3.04 percent of total loans, compared to $3.14 million, or 1.74 percent of total loans as of June 30, 2010. 

Noninterest expense for the second quarter of 2011 was $2.25 million compared to $2.49 million for the second quarter of 2010 and $4.67 million for the first half of 2011 and $4.60 million for the similar period in 2010. Collection expenses associated with the resolution and administration of problem assets decreased by $110,000 when comparing the second quarter of 2011 to the similar quarter of 2010.

Balance Sheet

Total assets as of June 30, 2011 were $223.8 million, a decrease of $18.6 million or 7.7 percent, from March 31, 2011 and $37.6 million, or 14.4 percent smaller than the year-ago quarter-end. Community Shores has used its balance sheet liquidity to repay its brokered deposits during the past year. Brokered deposits were $26.0 million at June 30, 2011, down $30.1 million or 53.7 percent from the year-ago quarter.

Asset Quality

Nonperforming assets, consisting of nonperforming loans (nonaccrual loans plus loans > 90 days past due and still accruing), OREO, and other repossessed assets, were $11.5 million, or 5.16 percent of total assets, as of June 30, 2011, down approximately $375,000 from the first quarter 2011. Since year-end 2010, there were three properties added to ORE and seven properties liquidated. Net charge-offs for the 2011 second quarter were $818,000, or 2.0 percent of average loans on an annualized basis, compared to $1.0 million (2.2 percent annualized) in the similar period last year. Year-to-date, the Bank has charged-off $1.1 million (1.3 percent annualized) compared to net charge-offs of $2.0 million (2.2 percent annualized) for the first six months of 2010.

Ms. Brolick concluded, "We are encouraged by positive trends in critical asset quality metrics. We are also very pleased with our margin improvement. These factors, combined with further re-pricing of higher costing funds, should expedite a return to profitability and assist in the curtailment of further capital erosion." 

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 $224 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.