Bank's Earnings Skyrocket During Troubled Times

March 20, 2002
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MUSKEGON — Coming off a year in which it more than doubled earnings, Community Shores Bank Corp. is planning to raise new capital this spring to finance further growth.

The three-year-old Community Shores plans to float a secondary public offering late this quarter or early in the second quarter, President and Chief Executive Officer Jose Infante said.

While specifics of the secondary offering still need formulating, including the number of new shares to offer and at what price, Community Shores needs to generate at least $3 million in new capital that will go toward supporting growing business volumes, Infante said.

The corporation is in the process of selecting an underwriter for the secondary offering, which will come a little more than three years following an initial public offering that raised $11 million to finance formation of the Muskegon-based community bank.

In preparing for the new stock offering, Infante is unconcerned with the present investing environment and bear market. He expects that most, if not all, of the new shares will sell to investors in West Michigan.

“The market conditions are what they are. You always wish to do better, but we’ll do fine,” Infante said. “It’s just a question of saying how we’re going to do it, who’s going to do it and go with it.”

Community Shores Bank opened its first banking office on Jan. 18, 1999, and has since added a second Muskegon-area office and a branch in Grand Haven. In the three years since its founding, the bank achieved or exceeded all of its growth, revenue and profitability targets, Infante said.

In 2001, Community Shores posted net income of $428,368, or 37 cents per share, a 213 percent increase from a net loss of $378,965, or 32 cents per share, recorded in the previous year. The earnings per share met the expectations of brokerage analysts.

More than half of the net income in 2001 occurred in the fourth quarter, where Community Shores posted earnings of $227,403, or 19 cents per share. That compares with a slight profit of $47,546, or 4 cents per share, in the fourth quarter of 2000.

The strong earnings growth came despite the recession and 11 interest rate cuts implemented during 2001 by the Federal Reserve that cut into loan margins and made the lending market more competitive. Community Shores was able to offset the lower lending margins through higher volumes that produced a 55 percent increase in fee income, most of which stems from a healthy mortgage business.

“By any measurement, 2001 was an exceptional year for our company,” Infante said. “It was just a matter of managing the bottom line and we’re still getting a lot of new business.”

During the year, Community Shores experienced solid growth in assets, deposits and lending.

Assets grew 18 percent — $125.1 million at the end of 2000 to $148 million as of Dec. 31, 2001. Deposits increased 13 percent, from $97.8 million to $110.1 million.

Total loans grew 23 percent, from $95.6 million to $118.1 million.

Infante expects the bank will experience similar or larger growth rates during 2002, especially with the expected economic rebound and upswing in business investment.

“We should see even better growth this year,” he said.

2001 also will see the bank extend its Internet banking service launched late last year for retail customers to business customers.

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