Community Shores Bank Corp. (CSHB, Financial) filed Quarterly Report for the period ended 2009-09-30.
Community Shores Bank Corporation is the holding company for Community Shores Bank. The Bank provides a full range of commercial and consumer financial services across Muskegon and northern Ottawa counties. Community Shores Bank Corp. has a market cap of $1 million; its shares were traded at around $0.73 with and P/S ratio of 0.1.
Securities increased $3.5 million since December 31, 2008. During the first three quarters of the year the Company implemented a strategy to realize market value gains within its securities portfolio to supplement earnings and capital. Going forward it is not the Companys present intent to continue this practice. The activity in the first nine months of the year included purchases of $12.8 million, maturities of $4.1 million and sales of $5.2 million. The gain associated with the sales was $273,000. The Banks security portfolio was nearly 100% pledged at year-end 2008 compared to 92% pledged at September 30, 2009. In order to provide opportunity for additional pledging, to secure access to future liquidity and to maximize the return on the Banks deposits, securities are being strategically purchased. It is likely that the Bank will make additional security purchases in the last three months of 2009.
At September 30, 2009, there were 72% of the loan balances carrying a fixed rate and 28% a floating rate, and only 12% of the entire portfolio had a contractual maturity longer than five years. During 2008 and 2009 there has been an increase in the concentration of fixed rate loans. Some of the shift is a factor of the types of loans that have paid off or have been added to the portfolio. Some of the change is related to customer preference when a loan is being renewed. The maturity distribution of the loan portfolio has lengthened with the recent concentration on the mortgage business line; however the emphasis remains on loans salable into the secondary market. Management only expects to retain 10-15% of residential mortgages originated because of the longer contractual terms generally involved in mortgage products. Having a larger concentration of fixed rate loans is helpful in a declining rate environment but both types of loans are useful to protect interest income during periods of interest rate fluctuations.
During the first nine months of 2009, $923,000 was added to the allowance through the provision expense. At September 30, 2009, the allowance totaled $2.8 million or approximately 1.49% of gross loans outstanding, compared to 2.12% at December 31, 2008. Many of the loans that were charged off in the first three quarters of 2009 were fully allocated for or as referenced above some of the impaired loans that were charged down require no reserve allocation based on the outcome of the quarterly collateral analysis. Impaired loans with an allocated allowance decreased $3.5 million since December 31, 2008 and the impaired loans requiring no allocated allowance for loan losses increased by $4.5 million since year-end 2008. General allocations also increased in the first nine months of 2009 mostly as a result of modifications made to the distribution weighting that is given to historical losses. Management chose to more heavily weight recent loss history and trends.
Overall net charge-offs for the third quarter and first nine months of 2009 were $213,000 and $2.5 million compared to $207,000 and $797,000 for the comparable periods in 2008. The corresponding ratios of net charge-offs to average loans for the third quarter and first nine months of 2009 were 0.45% and 1.69% compared to 0.38% and 0.48% for the third quarter and first nine months of 2008. There were 58 loans charged off or down to collateral value in the first three quarters of 2009. Given the rise in non performing assets over the past year and the continued economic deterioration, it is likely that charge off ratios may remain elevated for a period of time.
For the first nine months and third quarter of 2009, the annualized return on the Companys average total assets was (1.13)% and (0.89)%, respectively, which is down from 0.03% and 0.02% annualized return for the same periods in 2008. The Companys annualized return on average equity was (20.56)% and (17.33)% for the first nine months and third quarter of 2009 and 0.47% and 0.31% for the first nine months and third quarter of 2008. The ratio of average equity to average assets was 5.48% and 5.13% for the first nine months and third quarter of 2009 and 5.77% and 5.94% for the same periods in 2008.
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Community Shores Bank Corporation is the holding company for Community Shores Bank. The Bank provides a full range of commercial and consumer financial services across Muskegon and northern Ottawa counties. Community Shores Bank Corp. has a market cap of $1 million; its shares were traded at around $0.73 with and P/S ratio of 0.1.
Highlight of Business Operations:
The overall economic environment is more challenging than we have ever seen and the lack of financial health in the state of Michigan only stands to exacerbate the problems. Unemployment in Muskegon and Ottawa counties has been increasing steadily over the last year. At September 30, 2009, unemployment was 16% for Muskegon County and 13% for Ottawa County. In addition to rising unemployment, property values have declined. A largeSecurities increased $3.5 million since December 31, 2008. During the first three quarters of the year the Company implemented a strategy to realize market value gains within its securities portfolio to supplement earnings and capital. Going forward it is not the Companys present intent to continue this practice. The activity in the first nine months of the year included purchases of $12.8 million, maturities of $4.1 million and sales of $5.2 million. The gain associated with the sales was $273,000. The Banks security portfolio was nearly 100% pledged at year-end 2008 compared to 92% pledged at September 30, 2009. In order to provide opportunity for additional pledging, to secure access to future liquidity and to maximize the return on the Banks deposits, securities are being strategically purchased. It is likely that the Bank will make additional security purchases in the last three months of 2009.
At September 30, 2009, there were 72% of the loan balances carrying a fixed rate and 28% a floating rate, and only 12% of the entire portfolio had a contractual maturity longer than five years. During 2008 and 2009 there has been an increase in the concentration of fixed rate loans. Some of the shift is a factor of the types of loans that have paid off or have been added to the portfolio. Some of the change is related to customer preference when a loan is being renewed. The maturity distribution of the loan portfolio has lengthened with the recent concentration on the mortgage business line; however the emphasis remains on loans salable into the secondary market. Management only expects to retain 10-15% of residential mortgages originated because of the longer contractual terms generally involved in mortgage products. Having a larger concentration of fixed rate loans is helpful in a declining rate environment but both types of loans are useful to protect interest income during periods of interest rate fluctuations.
During the first nine months of 2009, $923,000 was added to the allowance through the provision expense. At September 30, 2009, the allowance totaled $2.8 million or approximately 1.49% of gross loans outstanding, compared to 2.12% at December 31, 2008. Many of the loans that were charged off in the first three quarters of 2009 were fully allocated for or as referenced above some of the impaired loans that were charged down require no reserve allocation based on the outcome of the quarterly collateral analysis. Impaired loans with an allocated allowance decreased $3.5 million since December 31, 2008 and the impaired loans requiring no allocated allowance for loan losses increased by $4.5 million since year-end 2008. General allocations also increased in the first nine months of 2009 mostly as a result of modifications made to the distribution weighting that is given to historical losses. Management chose to more heavily weight recent loss history and trends.
Overall net charge-offs for the third quarter and first nine months of 2009 were $213,000 and $2.5 million compared to $207,000 and $797,000 for the comparable periods in 2008. The corresponding ratios of net charge-offs to average loans for the third quarter and first nine months of 2009 were 0.45% and 1.69% compared to 0.38% and 0.48% for the third quarter and first nine months of 2008. There were 58 loans charged off or down to collateral value in the first three quarters of 2009. Given the rise in non performing assets over the past year and the continued economic deterioration, it is likely that charge off ratios may remain elevated for a period of time.
For the first nine months and third quarter of 2009, the annualized return on the Companys average total assets was (1.13)% and (0.89)%, respectively, which is down from 0.03% and 0.02% annualized return for the same periods in 2008. The Companys annualized return on average equity was (20.56)% and (17.33)% for the first nine months and third quarter of 2009 and 0.47% and 0.31% for the first nine months and third quarter of 2008. The ratio of average equity to average assets was 5.48% and 5.13% for the first nine months and third quarter of 2009 and 5.77% and 5.94% for the same periods in 2008.
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