EXHIBIT 99.1
Community Shores Reports Second Quarter 2007 Earnings
MUSKEGON, Mich., July 27, 2007 (PRIME NEWSWIRE) -- Community Shores Bank Corporation (Nasdaq:CSHB), Muskegon's only locally-headquartered independent community banking organization, today reported second quarter 2007 net income of $18,000, or $0.01 per diluted share, compared with $342,000, or $0.23 per diluted share, reported in the second quarter of 2006, and $229,000, or $0.15 per diluted share, reported in the first quarter of 2007. Six months year-to-date earnings were $246,000, and $0.17 per diluted share, compared with $706,000 and $0.48 per share, a decline of 65.2 percent and 64.6 percent, respectively, over the prior six-month period. Year over year results reflect the impact of margin compression and increased operating expenses to support expansion activities, partially offset by solid loan growth and non-interest income.
Heather D. Brolick, president and CEO of Community Shores Bank Corporation, commented, "We are making progress on several of our recent initiatives designed to enhance revenue, but we have not yet realized a consistent return on the significant investments we have made over the past nine months. Our new branches are attracting lower-costing, local funds which are changing our deposit mix and will be reflected in continued favorable trends in our net interest margin."
"Our fee-based initiatives are performing well, although they too are in the early stages of development. Both SBA and mortgage loan gains are on target for the year. Most of the gains on loan sales for the quarter were mortgage related. Our SBA program is solid; however, the production nature of the SBA business line income is such that non-interest income contributions will continue to be erratic."
"The bright spot for the quarter was definitely high quality loan growth and maintenance of asset quality," continued Ms. Brolick. "Despite an extremely competitive rate environment, we are finding quality growth opportunities in an otherwise slow environment. This is directly attributable to the business development efforts of our seasoned lending staff, working in conjunction with an enhanced market presence created by our branching activities."
Net interest income compared with the year-ago quarter declined $56,000, or 2.7 percent. Compared with the linked quarter, net interest income increased $69,000, or 3.5 percent, reflecting a stabilizing margin and growth in earning assets of 9.3 percent.
Non-interest income increased 19.1 percent year over year to $424,000, primarily due to additional gains on sales of SBA and mortgage loans in excess of $188,000. Ms. Brolick added, "We have experienced a substantial boost in mortgage originations and the pipeline remains strong."
Non-interest expense totaled $2.2 million for the second quarter of 2007, an increase of $454,000, or 25.9%, from the second quarter of 2006, and up $162,000, or 7.9 percent from the first quarter of 2007. The year-over-year increase is primarily attributable to branch expansion, while the second quarter increase is mostly due to costs associated with the mortgage lending start-up which included the addition of five mortgage originators and four mortgage support staff. The increase in personnel expenses was $484,000, most of which is due to the 23 FTE employees added year over year. The recruiting costs incurred to assemble the mortgage team will have a smaller impact on 2008's results, when the compensation formula for the originators becomes entirely commission-based. The efficiency ratio for the quarter was 89.02 percent, compared with 83.85 percent for prior quarter and 71.08 percent for the year-ago quarter.
Assets at June 30, 2007 totaled $261.3 million, an increase of $24.6 million, or 10.4 percent, compared with $236.7 million twelve months ago. Loans grew $22.8 million, or 11.5 percent, to $221.9 million; nearly 70 percent of the growth occurred during the second quarter of 2007. Deposits increased $22.9 million, or 11.2 percent, to $228.1 million as with the loan portfolio, growth accelerated during the second quarter of 2007; on an annualized basis, loans increased 31.0 percent, and deposits increased 19.3 percent. Ms. Brolick commented, "As a result of our new branching initiatives, we have opened more net new checking and savings accounts this year than in any year since we opened for business. This local activity has allowed us to reduce brokered deposits, which are down 21 percent since year-end 2006."
Net charge-offs were $60,000 or 0.11 percent of average loans annualized, an improvement of 6 and 8 basis points, respectively, over the 0.17 percent reported for the linked quarter and 0.19 percent for prior-year period. Nonperforming assets (including 90 days delinquent and OREO) were $3.2 million, or 1.21 percent of period-end assets, at June 30, 2007, compared with $2.8 million, or 1.12 percent of assets, for the linked quarter, and $1.5 million, or 0.63 percent of assets, for the year-ago quarter. While non accruals declined $92,000 from March 31, 2007, there was an increase in nonperforming assets due to a single relationship that became 90 days past due during the quarter. Ms. Brolick explained that this one C&I loan, for $728,000, was restructured in July of 2006 and had, until recently, been able to meet renegotiated terms. "We have multiple assets collateralizing the loan and we will continue to work with the borrower to minimize the Bank's exposure." The allowance for loan and lease losses was 1.26 percent of total loans at June 30, 2007, the same as it was at March 31, 2007 and only up slightly from 1.23 percent at year-end 2006. "The weakened Michigan economy," Ms. Brolick commented, "is reflected in our higher delinquency rates. While our provision expense has remained stable, delinquency could have a bearing on future expense."
Shareholders' equity totaled $16.3 million at June 30, 2007, up $1.2 million from twelve months ago. Tier I capital was 6.34 percent for the first quarter of 2007. Shares outstanding at period-end were 1,468,800.
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 $261 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 Quarterly ------------------------------------------------- (dollars in thousands except 2007 2007 2006 2006 2006 per share data) 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr --------- --------- --------- --------- --------- EARNINGS Net interest income 2,057 1,988 2,126 2,164 2,113 Provision for loan and lease losses 268 127 202 217 224 Noninterest income 424 455 380 461 356 Noninterest expense 2,209 2,047 1,958 1,886 1,755 Pre tax income 4 269 346 522 491 Net Income 18 229 247 363 342 Basic earnings per share $ 0.01 $ 0.16 $ 0.17 $ 0.25 $ 0.24 Diluted earnings per share $ 0.01 $ 0.15 $ 0.17 $ 0.25 $ 0.23 Average shares outstanding 1,468,800 1,468,733 1,466,800 1,449,191 1,436,800 Average diluted shares outstanding 1,481,462 1,488,589 1,489,014 1,476,876 1,461,201 PERFORMANCE RATIOS Return on average assets 0.03% 0.37% 0.41% 0.62% 0.60% Return on average common equity 0.44% 5.64% 6.16% 9.33% 9.11% Net interest margin 3.52% 3.48% 3.80% 3.94% 3.94% Efficiency ratio 89.02% 83.85% 78.13% 71.84% 71.08% Full-time equivalent employees 86 82 72 66 63 CAPITAL End of period equity to assets 6.23% 6.52% 6.53% 6.66% 6.38% Tier 1 capital to end of period assets 6.34% 6.58% 6.60% 6.74% 6.51% Book value per share $ 11.09 $ 11.17 $ 10.99 $ 10.82 $ 10.52 ASSET QUALITY Gross loan charge- offs 69 101 205 112 120 Net loan charge-offs 60 88 200 107 94 Net loan charge- offs to avg loans (annualized) 0.11% 0.17% 0.39% 0.21% 0.19% Allowance for loan and lease losses 2,796 2,588 2,549 2,547 2,437 Allowance for losses to total loans 1.26% 1.26% 1.23% 1.24% 1.22% Past due and nonaccrual loans (90 days) 2,356 1,942 1,131 1,394 1,428 Past due and nonaccrual loans to total loans 1.06% 0.94% 0.54% 0.68% 0.72% Other real estate and repossessed assets 810 887 419 123 58 NPA +90 day past due to total assets 1.21% 1.12% 0.63% 0.64% 0.63% END OF PERIOD BALANCES Loans 221,921 205,983 207,597 205,041 199,075 Total earning assets 243,643 235,491 231,712 223,902 223,447 Total assets 261,305 251,549 246,981 238,377 236,677 Deposits 228,115 217,602 214,282 205,456 205,175 Shareholders' equity 16,290 16,404 16,119 15,868 15,097 AVERAGE BALANCES Loans 213,402 207,449 206,365 202,432 195,783 Total earning assets 237,008 231,944 226,880 222,200 216,868 Total assets 253,577 247,639 240,486 233,400 226,911 Deposits 216,749 213,807 206,514 196,493 192,696 Shareholders' equity 16,430 16,251 16,035 15,569 15,034 Year to date ---------------------- 2007 2006 ---------- ---------- EARNINGS Net interest income 4,045 4,188 Provision for loan and lease losses 395 302 Noninterest income 879 676 Noninterest expense 4,256 3,547 Pre tax income 273 1,044 Net Income 246 706 Basic earnings per share $ 0.17 $ 0.49 Diluted earnings per share $ 0.17 $ 0.48 Average shares outstanding 1,468,767 1,436,800 Average diluted shares outstanding 1,485,129 1,468,181 PERFORMANCE RATIOS Return on average assets 0.20% 0.62% Return on average common equity 3.01% 9.47% Net interest margin 3.50% 3.90% Efficiency ratio 86.42% 72.92% Full-time equivalent employees 86 63 CAPITAL End of period equity to assets 6.52% 6.38% Tier 1 capital to end of period assets 6.58% 6.51% Book value per share $ 11.17 $ 10.52 ASSET QUALITY Gross loan charge-offs 170 525 Net loan charge-offs 148 478 Net loan charge-offs to avg loans (annualized) 0.14% 0.25% Allowance for loan and lease losses 2,796 2,437 Allowance for losses to total loans 1.26% 1.22% Past due and nonaccrual loans (90 days) 2,356 1,428 Past due and nonaccrual loans to total loans 1.06% 0.72% Other real estate and repossessed assets 810 58 NPA +90 day past due to total assets 1.21% 0.63% END OF PERIOD BALANCES Loans 221,921 199,075 Total earning assets 243,643 223,447 Total assets 261,305 236,677 Deposits 228,115 205,175 Shareholders' equity 16,290 15,097 AVERAGE BALANCES Loans 210,442 192,758 Total earning assets 234,490 217,628 Total assets 250,626 227,319 Deposits 215,286 194,922 Shareholders' equity 16,343 14,913 Community Shores Bank Corporation Condensed Consolidated Statements of Income (Unaudited) Three Three Six Six Months Months Months Months Ended Ended Ended Ended 06/30/07 06/30/06 06/30/07 06/30/06 ---------- ---------- ---------- ---------- Interest and dividend income Loans, including fees $4,268,819 $3,841,279 $8,325,841 $7,369,830 Securities (including FHLB dividends) 218,331 179,724 419,804 360,040 Federal funds sold and other interest income 47,671 18,757 118,340 119,739 ---------- ---------- ---------- ---------- Total interest income 4,534,821 4,039,760 8,863,985 7,849,609 Interest expense Deposits 2,209,884 1,678,261 4,321,375 3,217,233 Repurchase agreements and federal funds purchased and other debt 89,508 75,917 140,507 110,683 Federal Home Loan Bank advances and notes payable 178,500 172,417 356,907 333,740 ---------- ---------- ---------- ---------- Total interest expense 2,477,892 1,926,595 4,818,789 3,661,656 Net interest Income 2,056,929 2,113,165 4,045,196 4,187,953 Provision for loan losses 268,100 223,599 395,331 301,752 ---------- ---------- ---------- ---------- Net interest income after provision for loan losses 1,788,829 1,889,566 3,649,865 3,886,201 Noninterest income Service charges on deposit accounts 238,662 256,176 447,057 494,289 Mortgage loan referral fees 0 1,437 0 1,437 Gain on sale of loans 70,689 11,668 204,580 16,403 Gain on sale of securities 0 0 1,986 0 Gain (loss) on disposal of equipment 0 0 80 (124) Other 114,809 86,636 225,573 164,235 ---------- ---------- ---------- ---------- Total noninterest income 424,160 355,917 879,276 676,240 Noninterest expense Salaries and employee benefits 1,285,974 947,030 2,421,696 1,938,076 Occupancy 140,286 87,776 283,575 175,074 Furniture and equipment 163,653 101,737 309,999 198,254 Advertising 32,928 40,935 90,828 83,792 Data Processing 112,716 102,514 217,396 196,278 Professional services 131,631 130,519 272,582 257,791 Other 341,377 344,119 659,586 697,289 ---------- ---------- ---------- ---------- Total noninterest expense 2,208,565 1,754,630 4,255,662 3,546,554 Income before income taxes 4,424 490,853 273,479 1,043,662 Federal income tax expense (13,353) 148,859 27,074 310,303 ---------- ---------- ---------- ---------- Net Income $ 17,777 $ 341,994 $ 246,405 $ 705,584 ========== ========== ========== ========== Weighted average shares outstanding 1,468,800 1,436,800 1,468,767 1,436,800 ========== ========== ========== ========== Diluted average shares outstanding 1,481,462 1,461,201 1,485,129 1,468,181 ========== ========== ========== ========== Basic income per share $ 0.01 $ 0.24 $ 0.17 $ 0.49 ========== ========== ========== ========== Diluted income per share $ 0.01 $ 0.23 $ 0.17 $ 0.48 ========== ========== ========== ========== Community Shores Bank Corporation Condensed Consolidated Statements of Condition June 30, December 31, June 30, 2007 2006 2006 (Unaudited) (Audited) (Unaudited) ------------ ------------ ------------ ASSETS Cash and due from financial institutions $ 4,268,013 $ 3,398,155 $ 6,592,357 Interest-bearing deposits in other financial institutions 78,256 72,115 288,517 Federal funds sold 2,650,000 5,600,000 5,350,000 ------------ ------------ ------------ Total cash and cash equivalents 6,996,269 9,070,270 12,230,874 Securities Available for sale 13,742,318 13,184,437 13,043,976 Held to maturity 5,251,301 5,257,835 5,264,370 ------------ ------------ ------------ Total securities 18,993,619 18,442,272 18,308,346 Loans held for sale 533,602 165,070 -- Loans 221,386,822 207,432,376 199,074,571 Less: Allowance for loan losses 2,796,103 2,549,016 2,436,765 ------------ ------------ ------------ Net loans 218,590,719 204,883,360 196,637,806 Federal Home Loan Bank stock 404,100 404,100 425,000 Premises and equipment,net 12,207,028 10,958,821 6,767,643 Accrued interest receivable 1,239,181 1,249,680 1,002,209 Other assets 2,340,324 1,807,258 1,304,890 ------------ ------------ ------------ Total assets $261,304,842 $246,980,831 $236,676,768 ============ ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Non interest-bearing $ 19,519,568 $ 17,179,082 $ 18,439,578 Interest-bearing 208,595,407 197,103,330 186,735,865 ------------ ------------ ------------ Total deposits 228,114,975 214,282,412 205,175,443 Federal funds purchased and repurchase agreements 5,018,681 4,494,614 4,902,409 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 800,000 400,000 400,000 Accrued expenses and other liabilities 580,870 1,185,180 601,466 ------------ ------------ ------------ Total liabilities 245,014,526 230,862,206 221,579,318 Shareholders' Equity Common Stock, no par value: 9,000,000 shares authorized, 1,468,800, 1,466,800, 1,436,800 issued at June 30, 2007 December 31, 2006, and March 31, 2006 13,296,462 13,274,098 12,999,998 Retained earnings 3,274,179 3,027,774 2,418,046 Accumulated other comprehensive deficit (280,325) (183,247) (320,594) ------------ ------------ ------------ Total shareholders' equity 16,290,316 16,118,625 15,097,450 ------------ ------------ ------------ Total liabilities and shareholders' equity $261,304,842 $246,980,831 $236,676,768 ============ ============ ============
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