CSB Eyes Expansion Options

February 13, 2004
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ROOSEVELT PARK — Five years after the first account was opened, Community Shores Bank Corp. is laying the groundwork for a potential expansion.

The small Muskegon area-based community bank has a market analysis now underway that may lead to the relocation of two offices to better tap the market’s potential and the opening of additional branch locations in the future, possibly north of Muskegon and in neighboring counties.

“We’re five years old and we’re ready to take that next step forward,” said Chairman and Chief Executive Officer Jose Infante, who led the formation of Community Shores Bank.

“We’re going to keep growing up,” Infante said. “The opportunity here is still very good.”

The bank opened its first office in Roosevelt Park in late January 1999 amid the rising popularity of small community banks that emerged out of the industry’s consolidation wave in the 1990s, formed mostly by former executives who left the larger institutions that were created. Infante and several of his colleagues at Community Shores Bank are one-time executives at the former FMB Bank that sold to Huntington Bank in 1996.

Two other offices soon followed, in North Muskegon and Grand Haven, as Community Shores Bank began growing on the strength of catering to small businesses and retail banking customers.

In looking back at the first five years, Infante said Community Shores is “above target” for growth outlined in the bank’s original business plan.

And Community Shores has done it during a difficult economy for three of the five years of its existence that made for a harsh environment for new businesses. A recent analysis by economist George Erickcek, of the Upjohn Institute for Employment Research in Kalamazoo, showed that of the small businesses that started in Muskegon County in 1999, less than one in four were still operating after two years.

The tough business environment, Infante said, forced Community Shores to sharpen its focus and gave managers a far better understanding of what their customers were experiencing.

“Cutting your teeth in this kind of economy, and surviving and thriving — there couldn’t be anything better for a young company, and we’re all the more better for it,” he said. “It’s no different than any other small business — you grow and you adapt.”

Community Shores Bank ended 2003 with $184.1 million in total assets, up 6.1 percent from a year earlier. Loans grew 6 percent on the year, from $141.4 million to $149.9 million, and Infante expects lending growth to remain strong as the economy improves.

During the latter part of the fourth quarter, Community Shores Bank wrote more business loans than the previous two quarters combined. That volume should close in the present period and show up in the corporation’s financial statements for the first quarter of 2004.

Infante credits the strength in commercial lending during the fourth quarter to improving economic conditions that finally have businesses in the market, particularly manufacturers, making new investments as orders pick up.

“We are seeing a real change in the economy for us in the area,” he said. “Businesses, I think, have finally said, ‘We need more inventory, we need more equipment, we need that expansion.’”

In deposits, Community Shores Bank in five years has risen to the No. 5 bank in the market — behind much larger competitors Huntington, Comerica, National City and Fifth Third — and held a 10.2 percent market share in Muskegon County as of June 30, 2003, according to the most recent market share data from the FDIC.

Seeing the potential to grow that share further, Community Shores Bank recently retained a consultant to examine the market for possible new branch locations and perhaps relocating the Grand Haven and North Muskegon offices, both of which are hitting their capacity and need more room to accommodate growth, to sites in those markets that are more accessible.

In expanding the bank’s footprint in the future, Community Shores will weigh venturing into new markets with offices in northern Muskegon County — the Whitehall-Montague area for instance — and neighboring Oceana and Newaygo counties.

Once the location study comes back, executives will prioritize steps to take in the future, Infante said.

Financially, Community Shores Bank finished 2003 with net income of $1.06 million, or 75 cents per share, up 29 percent from the $832,020, or 65 cents per share, in 2002.

Fourth-quarter net income totaled $232,829, or 16 cents per share. That’s down from $250,937, or 19 cents a share, from the same period a year earlier but includes the effects of Community Shores becoming fully taxable during 2003. Pre-tax earnings in the quarter were $351,000, up nearly 40 percent from a year earlier.    

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