<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File No. 333-63769
COMMUNITY SHORES BANK CORPORATION
(Exact name of small business issuer as specified in its charter)
Michigan 38-3423227
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1030 W. NORTON AVENUE, MUSKEGON, MICHIGAN 49441
(Address of principal executive offices)
(616) 780-1800
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
------ ------
At November 1, 2000, 1,170,000 shares of Common Stock of the issuer were
outstanding.
Transitional Small Business Disclosure Format:
Yes No X
------ ------
<PAGE> 2
Community Shores Bank Corporation Index
<TABLE>
<CAPTION>
PART 1. Financial Information Page No.
--------------------- --------
<S> <C> <C>
Item I. Financial Statements................................................. 1
Item 2. Management's Discussion and Analysis or Plan of
Operations........................................................... 11
PART II. Other Information
-----------------
Item 1. Legal Proceedings..................................................... 18
Item 2. Changes in Securities ................................................ 18
Item 3. Defaults upon Senior Securities....................................... 18
Item 4. Submission of Matters to a Vote of Security Holders................... 19
Item 5. Other Information..................................................... 19
Item 6. Exhibits and Reports on Form 8-K...................................... 19
Signatures...................................................................... 20
----------
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COMMUNITY SHORES BANK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
-------------------- --------------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from financial institutions $ 2,979,828 $ 1,964,847
Interest-bearing deposits in other financial institutions 158,350 1,727
Federal funds sold 900,000 0
-------------------- --------------------
Total cash and cash equivalents 4,038,178 1,966,574
Securities available for sale 19,623,434 10,767,804
Loans, net 86,646,920 55,946,379
Federal Home Loan Bank stock 210,000 138,200
Premises and equipment, net 3,303,247 3,469,953
Accrued interest receivable 691,100 326,484
Other assets 654,750 83,533
-------------------- --------------------
Total assets $ 115,167,629 $ 72,698,927
==================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non interest-bearing $ 6,802,071 $ 4,074,635
Interest-bearing 83,961,549 51,901,442
-------------------- --------------------
Total deposits 90,763,620 55,976,077
Federal funds purchased and repurchase agreements 12,430,426 6,934,491
Federal Home Loan Bank advances 1,500,000 0
Notes Payable 1,585,000 0
Accrued expenses and other liabilities 696,468 1,253,597
-------------------- --------------------
Total liabilities 106,975,514 64,164,165
Shareholders' Equity
Preferred Stock, no par value: no shares 0 0
authorized and none issued
Common Stock, no par value: 9,000,000 10,871,211 10,871,211
shares authorized and 1,170,000 shares
outstanding
Retained deficit (2,666,845) (2,240,334)
Accumulated other comprehensive loss (12,251) (96,115)
-------------------- --------------------
Total shareholders' equity 8,192,115 8,534,762
-------------------- --------------------
Total liabilities and shareholders' equity $ 115,167,629 $ 72,698,927
==================== ====================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 4
COMMUNITY SHORES BANK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE LOSS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
09/30/00 09/30/99 09/30/00 09/30/99
---------------- ---------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Interest and dividend income
Loans, including fees $ 1,962,650 $ 771,551 $ 5,016,580 $ 1,359,757
Securities, taxable 314,884 48,157 857,854 135,331
Federal funds sold, FHLB dividends and other income 78,299 110,694 116,129 299,970
---------------- ---------------- ----------------- ------------------
Total interest income 2,355,833 930,402 5,990,563 1,795,058
Interest expense
Deposits 1,353,631 478,949 3,255,019 874,086
Repurchase agreements and federal funds purchased 135,423 22,591 416,609 40,390
Federal Home Loan Bank advances and notes payable 54,090 0 101,583 0
---------------- ---------------- ----------------- ------------------
Total interest expense 1,543,144 501,540 3,773,211 914,476
NET INTEREST INCOME 812,689 428,862 2,217,352 880,582
Provision for loan losses 85,500 154,200 408,500 621,300
---------------- ---------------- ----------------- ------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 727,189 274,662 1,808,852 259,282
Noninterest income
Service charge income 62,006 19,465 158,892 31,667
Mortgage referral income 21,991 31,260 60,753 68,347
Other 21,902 948 72,058 9,475
---------------- ---------------- ----------------- ------------------
Total noninterest income 105,899 51,673 291,703 109,489
Noninterest expense
Salaries and employee benefits 504,984 355,428 1,403,003 980,098
Occupancy 55,990 50,131 154,130 141,159
Furniture and equipment 97,717 61,410 292,003 168,344
Advertising 26,787 17,129 68,588 50,292
Data Processing 29,119 16,496 83,245 31,763
Professional services 110,838 29,379 261,319 78,609
Telephone 8,770 9,577 27,696 25,240
Supplies 16,074 17,411 48,824 75,156
Directors and officers insurance 3,012 1,020 8,970 1,020
Other 85,816 66,610 179,288 233,936
---------------- ---------------- ----------------- ------------------
Total noninterest expense 939,107 624,591 2,527,066 1,785,617
LOSS BEFORE FEDERAL INCOME TAX (106,019) (298,256) (426,511) (1,416,846)
Federal income tax expense 0 0 0 0
---------------- ---------------- ----------------- ------------------
NET LOSS $ (106,019) $ (298,256) $ (426,511) $ (1,416,846)
================ ================ ================= ==================
Comprehensive Net Loss $ (68,594) $ (292,095) $ (438,762) $ (1,450,264)
================ ================ ================= ==================
Basic and diluted loss per share $ (0.09) $ (0.25) $ (0.36) $ (1.22)
================ ================ ================= ==================
Weighted average shares outstanding 1,170,000 1,170,000 1,170,000 1,164,872
================ ================ ================= ==================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
COMMUNITY SHORES BANK CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Other Total
Common Retained Comprehensive Shareholders'
Shares Stock Deficit Income (Loss) Equity
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1999 1,100,000 $10,227,604 $ (438,552) $ 0 $ 9,789,052
Comprehensive loss:
Net loss (1,416,846) (1,416,846)
Unrealized loss on
securities available for sale (33,417) (33,417)
-------------------
Total comprehensive loss (1,450,263)
Common stock sale, January 21, 1999 70,000 643,607 643,607
---------------------------------------------------------------------------------
Balance, September 30, 1999 1,170,000 $10,871,211 $(1,855,398) $ (33,417) $ 8,982,396
=================================================================================
Balance, January 1, 2000 1,170,000 $10,871,211 $(2,240,334) $ (96,115) $ 8,534,762
Comprehensive loss:
Net loss (426,511) (426,511)
Change in unrealized loss on
securities available for sale 83,864 83,864
-------------------
Total comprehensive loss (342,647)
---------------------------------------------------------------------------------
Balance, September 30, 2000 1,170,000 $10,871,211 $(2,666,845) $ (12,251) $ 8,192,115
=================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
COMMUNITY SHORES BANK CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended ended Ended
09/30/00 09/30/99 09/30/00 09/30/99
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (106,019) $ (298,256) $ (426,511) $ (1,416,846)
Adjustments to reconcile net loss to net cash
from operating activities
Provision for loan losses 85,500 154,200 408,500 621,300
Depreciation and amortization 92,277 74,099 272,689 204,770
Net accretion of securities (36,677) (6,585) (91,354) (36,832)
Net change in:
Accrued interest receivable (35,346) (21,610) (364,616) (253,022)
Other assets (491,469) 130,355 (571,217) (37,199)
Accrued interest payable and other liabilities 319,394 (13,155) (557,129) 65,770
------------ ------------ ------------ ------------
Net cash from (used in) operating activities (172,340) 19,048 (1,329,638) (852,059)
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in available-for-sale securities:
Sales 2,582,884 4,981,250 2,582,884 6,981,250
Maturities, prepayments and calls 1,052,030 34,850 1,631,908 14,534,850
Purchases (4,629,994) (2,977,878) (12,895,205) (30,190,209)
Loan originations and payments, net (6,219,646) (10,298,886) (31,109,041) (41,417,636)
Purchase of Federal Home Loan Bank stock 0 0 (71,800) 0
Additions to premises and equipment (31,804) (879,800) (105,982) (1,516,102)
------------ ------------ ------------ ------------
Net cash from investing activities (7,246,530) (9,140,464) (39,967,236) (51,607,847)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits 2,714,638 10,108,405 34,787,543 45,137,904
Net change in federal funds purchased and
repurchase agreements 2,128,793 1,114,177 5,495,935 2,761,794
Federal Home Loan Bank activity:
New Advances 0 0 9,600,000 0
Maturities and payments 0 0 (8,100,000) 0
Net proceeds from Note Payable 500,000 0 1,585,000 0
Net proceeds from stock offering 0 0 0 643,607
------------ ------------ ------------ ------------
Net cash used in financing activities 5,343,431 11,222,582 43,368,478 48,543,305
Net change in cash and cash equivalents (2,075,439) 2,101,166 2,071,604 (3,916,601)
Beginning cash and cash equivalents 6,113,617 5,710,000 1,966,574 8,612,377
------------ ------------ ------------ ------------
ENDING CASH AND CASH EQUIVALENTS $ 4,038,178 $ 7,811,166 $ 4,038,178 $ 4,695,776
============ ============ ============ ============
Supplemental cash flow information:
Cash paid during the period for interest $ 1,223,763 $ 474,415 $ 3,177,223 $ 820,955
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 7
COMMUNITY SHORES BANK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
The unaudited financial statements as of and for the three months and
nine months ended September 30, 2000 include the condensed consolidated
results of operations of Community Shores Bank Corporation ("Company")
and its wholly-owned subsidiary, Community Shores Bank ("Bank"). These
condensed consolidated financial statements have been prepared in
accordance with the instructions for Form 10-QSB and Item 310(b) of
Regulation S-B and do not include all disclosures required by generally
accepted accounting principles for a complete presentation of the
Company's financial condition and results of operations. In the opinion
of management, the information reflects all adjustments (consisting
only of normal recurring adjustments) which are necessary in order to
make the financial statements not misleading and for a fair
representation of the results of operations for such periods. The
results for the period ended September 30, 2000 should not be
considered as indicative of results for a full year. For further
information, refer to the condensed consolidated financial statements
and footnotes included in the Company's annual report on Form 10-KSB
for the period ended December 31, 1999.
2. SECURITIES AVAILABLE FOR SALE
The following tables represent the securities held in the Company's
portfolio at September 30, 2000 and at December 31, 1999:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(Unaudited) Cost Gains Losses Value %
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
US Government Agency $ 17,818,427 39,189 (41,295) $ 17,816,321 90.8 %
Mortgaged-backed securities,
guaranteed by GNMA 1,817,258 0 (10,145) 1,807,113 9.2
-------------------------------------------------------------------------------
Total securities at September 30, 2000 $ 19,635,685 $39,189 $ (51,440) $ 19,623,434 100.0 %
===============================================================================
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value %
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
US Government Agency $ 8,919,449 0 (51,659) $ 8,867,790 82.4 %
Mortgaged-backed securities,
guaranteed by GNMA 1,944,470 0 (44,456) 1,900,014 17.6
-------------------------------------------------------------------------------
Total securities at December 31, 1999 $ 10,863,919 $0 $ (96,115) $ 10,767,804 100.0 %
===============================================================================
</TABLE>
Securities available for sale increased $8,855,630 during the first three
quarters of 2000. Below is the schedule of maturities for investments held at
September 30, 2000:
<PAGE> 8
COMMUNITY SHORES BANK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
Available for sale
Amortized Fair
(Unaudited) Cost Value
---------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 7,653,765 $ 7,642,504
Due from one to five years 10,164,663 10,173,818
Mortgage-backed 1,817,258 1,807,112
----------------------------------
$19,635,686 $ 19,623,434
==================================
</TABLE>
3. LOANS
Loans made to customers totaled $31,102,030 since December 31, 1999.
The components of the outstanding balances, their percentage of the
total portfolio and the percentage increase from the end of 1999 to the
end of the third quarter of 2000 were as follows:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999 Percent
Balance Balance Increase/
(Unaudited) % % (Decrease)
------------------------- ------------------------- --------------
<S> <C> <C> <C> <C> <C>
Commercial, financial and other $70,064,686 79.7 % $47,570,725 83.8 % 47.3 %
Real estate-construction 3,142,776 3.6 1,445,789 2.5 117.4
Real estate-mortgages 2,403,063 2.7 1,957,393 3.4 22.8
Installment loans to individuals 12,289,884 14.0 5,824,472 10.3 111.0
------------------------- -------------------------
87,900,409 100.0 % 56,798,379 100.0 %
======== ========
Less allowance for loan losses 1,253,489 852,000
----------------- -----------------
$86,646,920 $55,946,379
================= =================
</TABLE>
4. ALLOWANCE FOR LOAN LOSSES
The following is a summary of activity in the allowance for loan losses
account for the nine month periods ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
(Unaudited) (Unaudited)
----------------- ---------------
<S> <C> <C>
Beginning Balance, January 1, $ 852,000 $ 0
Charge-offs (7,011) 0
Recoveries 0 0
Provision charged against operating expense 408,500 621,300
----------------- ---------------
Ending Balance, September 30, $ 1,253,489 $ 621,300
================= ===============
</TABLE>
<PAGE> 9
COMMUNITY SHORES BANK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. DEPOSITS
Deposit balances increased $34,787,543 since December 31, 1999. The
components of the outstanding balances, their percentage of the total
portfolio and the percentage increase from the end of 1999 to the end
of the third quarter of 2000 were as follows:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999 Percent
Balance Balance Increase/
(Unaudited) % % (Decrease)
----------------------------- ----------------------- -------------
<S> <C> <C> <C> <C> <C>
Noninterest-bearing
Demand $ 6,802,071 7.5% $ 4,074,635 7.3% 66.9 %
Interest-bearing
Checking 8,100,187 8.9 4,662,155 8.3 73.7
Money Market 8,559,359 9.4 3,068,971 5.5 178.9
Savings 952,246 1.1 565,741 1.0 68.3
Time, under $100,000 29,633,216 32.6 21,084,562 37.7 40.5
Time, over $100,000 36,716,541 40.5 22,520,013 40.2 63.0
---------------------------- ------------------------
Total Deposits $ 90,763,620 100.0% $ 55,976,077 100.0%
============================ ========================
</TABLE>
6. BORROWINGS
At September 30, 2000, the Bank's borrowings were made up of repurchase
agreements only. As such the third quarter information was as follows
(Unaudited):
<TABLE>
<CAPTION>
Repurchase
Agreements
-------------------
<S> <C>
Outstanding balance $ 12,430,426
Average interest rate 4.77%
Average balance $ 10,905,014
Average interest rate 4.85%
Maximum outstanding at any month end $ 14,815,900
</TABLE>
7. FEDERAL HOME LOAN BANK BORROWINGS
The Bank was approved in the third quarter of 1999 to be a member of
the Federal Home Loan Bank of Indianapolis. Based on its current
Federal Home Loan Bank Stock holdings the Bank has the capacity to
borrow $2,700,000. Each borrowing requires a direct pledge
<PAGE> 10
COMMUNITY SHORES BANK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
of securities or loans. At this time, the Bank has securities with a
par value of $2,500,000 pledged to the Federal Home Loan Bank to
support current and future borrowings. Details of the Bank's
outstanding borrowings at September 30, 2000 are:
<TABLE>
<CAPTION>
Maturity Date Interest Rate September 30, 2000 December 31, 1999
------------- ------------- ------------------ -----------------
<S> <C> <C> <C>
March 24, 2010 5.99% Fixed $1,500,000 $0
</TABLE>
8. NOTES PAYABLE
Since June 28, 2000, the Company borrowed $1,585,000 from four of its
Directors and Community Shores LLC. Community Shores LLC (the "LLC")
was formed by 7 of the Company's directors for the purpose of obtaining
and lending money to the Company. The members of the LLC are David C.
Bliss, Gary F. Bogner, Robert L. Chandonnet, Dennis L. Cherette, Bruce
J. Essex, Michael D. Gluhanich and Jose A. Infante. Two of the LLC
members lent money directly as well as taking part in the LLC. A
summary of the loans is given below:
<TABLE>
<CAPTION>
---------------------------------- ---------- ---------------- ---------------
Aggregate
Principal
Loans from: Amount Current Rate Maturity
---------------------------------- ---------- ---------------- ---------------
<S> <C> <C> <C>
Robert L. Chandonnet $200,000 11.0% June 30, 2006
Michael D. Gluhanich $100,000 11.0% June 30, 2006
Donald E. Hegedus $500,000 11.0% June 30, 2006
John L. Hilt $750,000 11.0% June 30, 2006
Community Shores LLC $ 35,000 11.0% June 30, 2006
---------------------------------- ---------- ---------------- ---------------
</TABLE>
The rate on the above notes is floating and is officially defined as
1.50% over the Firstar Bank, N.A. Prime rate. Firstar's current prime
rate is 9.50%. Interest is owed quarterly in arrears on the fifteenth
of April, July, October and January until the principal of these Notes
is paid or made available for payment. The notes may be prepaid without
any prepayment penalty with at least one day's prior written notice.
The principal and interest related to these Notes is expressly
subordinated to any and all Senior Debt of the Company. The proceeds
from these Notes were primarily used to infuse capital into the Bank to
maintain sufficient capital ratios to comply with banking regulations.
9. COMMITMENTS AND OFF-BALANCE SHEET RISK
Some financial instruments are used to meet financing needs and to
reduce exposure to interest rate changes. These financial instruments
include commitments to extend credit and standby letters of credit.
These involve, to varying degrees, credit and interest-rate risk in
excess of the amount reported in the financial statements. Commitments
to extend
<PAGE> 11
COMMUNITY SHORES BANK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
credit are agreements to lend to a customer as long as there is no
violation of any condition established in the commitment, and generally
have fixed expiration dates. Standby letters of credit are conditional
commitments to guarantee a customer's performance to a third party.
Exposure to credit loss if the other party does not perform is
represented by the contractual amount for commitments to extend credit
and standby letters of credit. Collateral or other security is normally
not obtained for these financial instruments prior to their use, and
many of the commitments are expected to expire without being used.
A summary of the notional and contractual amounts of outstanding
financing instruments with off-balance-sheet risk for the periods
September 30, 2000 (Unaudited) and December 31, 1999 follows:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
(Unaudited)
----------------- ------------------
<S> <C> <C>
Letters of credit $ 268,000 $ 278,000
Commercial unused lines of credit 22,829,000 22,513,000
Consumer unused lines of credit 3,360,000 1,570,000
Residential construction commitments 1,279,000 805,000
</TABLE>
Commitments to make loans generally terminate one year or less from the
date of commitment and may require a fee. Since many of the above
commitments expire without being used, the above amounts do not
necessarily represent future cash commitments. No losses are
anticipated as a result of these transactions.
10. REGULATORY MATTERS
The Company and Bank are subject to regulatory capital requirements
administered by the federal banking agencies. Capital adequacy
guidelines and prompt corrective action regulations involve
quantitative measures of assets, liabilities, and certain
off-balance-sheet items calculated under regulatory accounting
practices. Capital amounts and classifications are also subject to
qualitative judgments by regulators about components, risk weightings,
and other factors, and the regulators can lower classifications in
certain cases. Failure to meet various capital requirements can
initiate regulatory action that could have a direct material effect on
the financial statements.
The prompt corrective action regulations provide five classifications,
including well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and
<PAGE> 12
COMMUNITY SHORES BANK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
critically undercapitalized, although these terms are not used to
represent overall financial condition. If adequately capitalized,
regulator approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth
and expansion, and plans for capital restoration are required.
<TABLE>
<CAPTION>
Capital to risk weighted
assets
------------------------- Tier 1 Capital
Total Tier 1 to average assets
----------- ----------- --------------------
<S> <C> <C> <C>
Well capitalized 10 % 6 % 5 %
Adequately capitalized 8 4 4
Undercapitalized 6 3 3
</TABLE>
Actual capital levels (in thousands) and minimum required levels at
September 30, 2000 for the Company and Bank were:
<TABLE>
<CAPTION>
Actual Adequately Capitalized Well Capitalized
-------------------------- ---------------------- -----------------------
September 30, 2000 Amount Ratio Amount Ratio Amount Ratio
(Unaudited) -------------------------- ---------------------- -----------------------
------------------------
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk-
weighted assets)
Consolidated $ 11,015,245 11.24 % $ 7,843,417 8.00 % $ 9,804,272 10.00 %
Bank 10,653,523 10.87 7,843,417 8.00 9,804,272 10.00
Tier 1 capital (to risk-
weighted assets)
Consolidated 8,204,366 8.37 3,921,709 4.00 5,882,563 6.00
Bank 9,427,644 9.62 3,921,709 4.00 5,882,563 6.00
Tier 1 capital (to
average assets)
Consolidated 8,204,366 8.26 3,973,174 4.00 4,966,467 5.00
Bank 9,427,644 9.49 3,973,174 4.00 4,966,467 5.00
</TABLE>
The Company and the Bank were in the well capitalized category at
September 30, 2000. The Bank was given an additional requirement by the
regulators at the time of approval. For the first three years after
opening, a Tier 1 capital to total assets ratio of 8.00% must be
maintained. At September 30, 2000 the Bank had a ratio of 8.19%. The
Company is closely monitoring the Bank's growth and expects to infuse
additional capital as necessary to comply with this requirement.
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The discussion below details the financial results of the Company and
its wholly owned subsidiary, the Bank, through September 30, 2000 and is
separated into two parts which are labeled, Financial Condition and Results of
Operations. The Financial Condition compares the period ended September 30, 2000
to that which ended on December 31, 1999. The Results of Operations discusses
both the three month and nine month periods ended September 30, 2000 to the same
periods of 1999. Both parts should be read in conjunction with the interim
consolidated condensed financial statements and footnotes included in Item 1 of
this Form 10-QSB.
This discussion and analysis of financial condition and results of
operations, and other sections of the 10-QSB contains forward-looking statements
that are based on management's beliefs, assumptions, current expectations,
estimates and projections about the financial services industry, the economy,
and about the Company and the Bank. Words such as "anticipates", "believes",
"estimates", "expects", "forecasts", "intends", "is likely", "plans",
"projects", variations of such words and similar expressions are intended to
identify such forward-looking statements. These forward-looking statements are
intended to be covered by the safe-harbor provisions of the Private Securities
Litigation Reform Act of 1995. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions ("Future
Factors") that are difficult to predict with regard to timing, extent,
likelihood and degree of occurrence. The Company undertakes no obligation to
update, amend, or clarify forward looking statements, whether as a result of new
information, future events (whether anticipated or unanticipated), or otherwise.
Future Factors 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 the Company with
the Securities and Exchange Commission. These are representative of the Future
Factors that could cause a difference between an ultimate actual outcome and a
preceding forward-looking statement.
FINANCIAL CONDITION
Total assets increased by $42,468,702 to $115,167,629 at September 30,
2000 from $72,698,927 at December 31, 1999. This is a 58% increase in assets
during the first three quarters of 2000. Growth is mostly attributable to
tremendous commercial loan volume and growth in the bank's securities portfolio.
Management continues to focus on small- to medium-sized business customers, the
original strategy since opening in January 1999. Next quarter, the Company
anticipates continued growth but does not believe that the rate of increase will
be equivalent to that experienced in the first nine months of 2000.
<PAGE> 14
COMMUNITY SHORES BANK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Cash and cash equivalents increased by $2,071,604 to $4,038,178 at
September 30, 2000 from $1,966,574 at December 31, 1999. This increase was a
result of federal funds of $900,000 being sold at September 30, 2000 as well as
increased balances on deposit with our correspondent banks.
Securities available for sale increased $8,855,630 during the first
three quarters of 2000. Security purchases were driven by growth in repurchase
agreements. A repurchase agreement is not considered a deposit by the FDIC and
is therefore not eligible for FDIC insurance coverage. The recorded liability is
treated like a borrowing of the Bank. To secure the borrowing (repurchase
agreement), balances held by customers are typically collateralized by high
quality government securities held within the Bank's security portfolio. At the
end of 1999, there were few unpledged securities in the Bank's portfolio which
required us to purchase additional Treasuries and Agencies in 2000 to fulfill
the collateralization requirement as the repurchase balances increased.
Total loans climbed to $87,900,409 at September 30, 2000 from
$56,798,379 at December 31, 1999. Of the $31,102,030 increase experienced, 72%
occurred in the commercial loan portfolio. The "wholesale" banking focus used
throughout 1999 continued during the first nine months of 2000. Presently, the
commercial category of loans comprises 80% of the Bank's total loan portfolio.
There are five experienced commercial lenders on staff devoted to pursuing and
originating these types of loans. Significant growth was also experienced on the
"retail" lending side. Installment loans increased $6,465,412, or 111%, over the
balance reported at December 31, 1999. A large portion of this growth was the
result of new business in indirect automobile loans and the financing of secured
leases. Strength in home equity financing also continued during the quarter.
Overall, the growth in total loans exceeded expectations however management
anticipates that the rate of increase will slow during the remaining quarter of
2000. The loan maturities and rate sensitivity of the loan portfolio at
September 30, 2000 have been included below:
<TABLE>
<CAPTION>
Within Three to One to After
three twelve five five
months months years years Total
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, financial and other $10,724,017 $14,539,775 $39,308,050 $5,492,844 $70,064,686
Real estate-construction 397,474 2,745,302 0 0 3,142,776
Real estate-mortgages 0 0 185,883 2,217,180 2,403,063
Installment loans to individuals 105,777 481,270 8,009,182 3,693,655 12,289,884
-------------------------------------------------------------------------------
$11,227,268 $17,766,347 $47,503,115 $11,403,679 $87,900,409
===============================================================================
Loans at fixed rates 1,323,712 3,963,472 42,690,190 6,939,802 $54,917,176
Loans at variable rates 9,903,556 13,802,875 4,812,925 4,463,877 32,983,233
-------------------------------------------------------------------------------
$11,227,268 $17,766,347 $47,503,115 $11,403,679 $87,900,409
===============================================================================
</TABLE>
<PAGE> 15
COMMUNITY SHORES BANK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
The loan portfolio is reviewed and analyzed on a regular basis for the
purpose of estimating probable credit losses. The allowance is adjusted
accordingly to maintain an adequate level to absorb probable losses given the
risk characteristics of the loan portfolio. At September 30, 2000, the allowance
totaled $1,253,489 or approximately 1.43% of gross loans outstanding. Management
has determined that this is an appropriate level based on their estimate of
losses inherent in the loan portfolio after their detailed review as well as
from comparison with allowance levels maintained by other institutions with
similar, but seasoned loan portfolios. The allocation of the allowance at
September 30, 2000 was as follows:
<TABLE>
<CAPTION>
Percent of
allowance
Balance at End of Period Applicable to: related to
Amount loan category
----------------- ---------------
<S> <C> <C>
Commercial $982,571 78.4 %
Residential real estate 71,172 5.7
Installment 199,746 15.9
Unallocated 0 0.0
----------------- ---------------
Total loans $1,253,489 100.0 %
================= ===============
</TABLE>
Given the size and composition of the bank's loan portfolio and its
concentration of commercial loans, this allocation is felt to be in line with
the banking industry's historical loan loss experience. Management will continue
to monitor the allocation and make necessary adjustments based on portfolio
concentration levels, actual loss experience and the financial condition of the
borrowers. As such, an additional $408,500 was provided for since December 31,
1999. At the end of September, loans 30-59 days past due totaled $290,154 up
from $109,000 at December 31,1999. There was a total of $101,294 past due 60-89
days and $20,506 past due more than 89 days at September 30, 2000 compared to
none in either category at December 31, 1999. The Bank had no non-accrual loans
at September 30, 2000 or at December 31, 1999. The Bank recorded no credit
losses in 1999. In the second quarter of 2000, two loans were charged off. The
principal balances of these charge-offs aggregated $7,011.
Bank premises and equipment decreased $166,706 to $3,303,247 at
September 30, 2000 from $3,469,953 at December 31, 1999. Accumulated
depreciation and amortization represented $282,143 at year-end compared to
$467,913 at September 30, 2000. No significant capital expenditures were made in
the first three quarters of 2000. Fully depreciated leasehold improvements and
software totaling approximately $83,000 were written off the books earlier this
year.
Accrued interest receivable increased $364,616 or 111% over year-end
due to the large growth recorded in both securities available for sale and loans
during the first nine months of 2000. Other assets increased $571,217 to
$654,750 at September 30, 2000 from a balance of
<PAGE> 16
COMMUNITY SHORES BANK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
$83,533 at December 31, 1999. Included in the third quarter total was a $500,000
Par Value US Agency security that matured but had not settled because the last
day of the quarter fell on a weekend. The transaction settled and the proceeds
were received by the Bank on October 1, 2000.
Deposit balances were $90,763,620 at September 30, 2000 up from
$55,976,077 at December 31, 1999. Management has chosen to fund a portion of the
rapid loan growth by obtaining brokered deposits. Brokered deposits are time
deposits obtained from depositors located outside of our market area and are
placed with the Bank by a deposit broker. Approximately 31% of the total
deposits reported were brokered at September 30, 2000 compared to 19% at
year-end. The increase in brokered deposits only accounts for 49% of the
$34,787,543 increase in total deposits during the first three quarters of the
year. Significant growth was also recorded in money market accounts, as well as
regular and interest bearing demand deposit accounts.
Repurchase agreements increased $7,295,935 since December 31, 1999.
This represents an increase of 142% during the first three quarters of 2000. The
growth is attributable mainly to customers increasing their carrying balances
from those held at year-end. Federal funds purchased were reduced to zero from a
balance of $1,800,000 at year-end however the Bank borrowed $1,500,000 from the
Federal Home Loan Bank on March 24, 2000. The putable advance is fixed at 5.99%
for three years unless the Federal Home Loan Bank exercises its one time option
to call the note on March 24, 2001. At this time Management anticipates that the
advance will be called. In the event that the note is not called, the Bank has
the option to pay off the advance at the end of three years with no pre-payment
penalty otherwise the note will convert to a floating rate for an additional
seven years. The contractual final maturity barring any of these is March 24,
2010.
As of September 30, 2000, the Company had borrowed $1,585,000 from some
of its Directors and Community Shores LLC for the purpose of infusing capital
into the Bank. This debt is subordinated to all Senior Debt of the Company. The
notes have a floating rate and are currently accruing interest at 11.00%.
Interest payments are due quarterly on the fifteenth of the month. The next
scheduled interest payment is due on January 15, 2001.
Accrued expenses and other liabilities decreased $557,129 to $696,468
at September 30, 2000 from $1,253,597 at December 31, 1999. Included in 1999's
year-end balance were two US Agency securities purchased on December 30, 1999
with a par value of $1,000,000. The securities settled on January 4, 2000.
RESULTS OF OPERATIONS
It should be mentioned that comparative information on the results of
operations between the first three quarters of 2000 and that of 1999 is not
exactly equal in the number of days of operation because the Bank did not open
until January 18, 1999. As such, there were 274 days of operations in 2000
compared to 256 days in 1999. The net operating loss for the third quarter
<PAGE> 17
COMMUNITY SHORES BANK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
of 2000 was $106,019 ($0.09 per share) which compares favorably to the net loss
of $298,256 ($0.25 per share) recorded in 1999. The year-to-date net loss of
$426,511 at September 30, 2000 was less than a third of that recorded for the
same period in 1999. The loss at September 30, 1999 was $1,416,846 or $990,335
higher than that shown in 2000. The return on the Company's average total assets
was (.43) % for the first three quarters of 2000 and (.57) % annualized. The
return on average equity was (5.23) % and (6.97) % annualized. At September 30,
2000 the ratio of average equity to average assets was 8.21%. The Company's
retained deficit was $2,666,845 at September 30, 2000 compared to $2,240,334 at
December 31, 1999. Both the retained deficit and net losses were expected,
however the actual operating results for the first three quarters of 2000 were
better than management's internal, budgeted goal.
The following table sets forth certain information relating to the
Company's consolidated average interest earning assets and interest-bearing
liabilities and reflects the average yield on assets and average cost of
liabilities for the period indicated. Such yields and costs are derived by
dividing income or expenses by the average daily balance of assets or
liabilities, respectively, for the period presented.
<TABLE>
<CAPTION>
Nine months ended September 30, 2000
Average Average
balance Interest rate
------------- --------------- --------------
<S> <C> <C> <C>
Assets
Federal funds sold and interest-bearing
deposits with banks $ 2,475,608 $ 116,129 6.25 %
Investment securities-available for sale 17,379,920 857,854 6.58
Loans 74,205,631 5,016,580 9.01
------------- --------------- --------------
94,061,159 5,990,563 8.49
Other assets 5,268,182
-------------
$ 99,329,341
=============
Liabilities and Shareholders' Equity
Interest-bearing deposits $ 71,673,381 $ 3,255,019 6.06
Federal funds purchased, repurchase agreements,
Federal Home Loan Bank advance 12,837,495 486,086 5.05
Note Payable 389,164 32,106 11.00
------------- --------------- --------------
84,900,040 3,773,211 5.93
Noninterest-bearing deposits 5,854,985
Other liabilities 418,740
Shareholders' Equity 8,155,576
-------------
$ 99,329,341
=============
Net interest income $ 2,217,352
===============
Net interest spread on earning assets 2.56 %
==============
Net interest margin on earning assets 3.14 %
==============
</TABLE>
<PAGE> 18
COMMUNITY SHORES BANK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
The net interest spread on average earning assets increased 0.46% since
September 30, 1999. For the quarter, net interest income was $812,689 compared
to a figure of $428,862 for the same quarter in 1999. Year to date net interest
income was $2,217,352 at September 30, 2000; an increase of $1,336,770 (152%)
over September 30, 1999. Interest income generated during the quarter and year
to date was generated primarily from booking loans, purchasing securities, and
selling federal funds. Interest income for the third three month period of 2000
was $2,355,833 compared to $930,402 recorded in 1999. For the first nine months
of 2000, the Company had recorded $5,990,563 of interest income compared to
$1,795,058 at September 30, 1999. The nine month figures reflect 234% more
interest income in 2000 compared to 1999. Interest expense incurred on deposits,
repurchase agreements, federal funds purchased, Federal Home Loan Bank advances
and Notes Payable totaled $1,543,144 for the quarter and $3,773,211 year to
date. This category has increased $1,041,604 (208%) for the quarter and
$2,858,735 (313%) year to date compared to 1999. The significant increases shown
in both interest income and interest expense over last year are indicative of
the rising rate environment in which financial institutions have been operating
in the last twelve months. Since September 30, 1999 the Federal Reserve has
increased the national Federal Funds rate 4 times which in turn has caused the
Bank's internal prime rate to increase from 8.25% to 9.50%. Although the impact
of prime rate increases is positive on the interest income generated on variable
rate loan products, the rising rates have significantly increased the expense to
retain and attract both local and brokered deposits (cost of funds).
As the Bank's cost of funds continues to rise and prime rate changes
are always a possibility, asset liability management has become an important
tool for assessing interest rate sensitivity. Management of interest rate
sensitivity attempts to avoid widely varying net interest margins and achieve
consistent net interest income through periods of changing interest rates. Asset
liability management aids the Company in achieving reasonable and predictable
earnings and liquidity while maintaining a balance between interest earning
assets and interest bearing liabilities. Liquidity management involves the
ability to meet the cash flow requirements of the Company's customers. These
customers may be either borrowers with credit needs or depositors wanting to
withdraw funds.
Interest rate sensitivity varies with different types of earning assets
and interest bearing liabilities. Overnight investments, on which rates change
daily, and loans tied to the prime rate, differ considerably from long term
investment securities and fixed rate loans. Time deposits over $100,000 and
money market accounts are more interest sensitive than regular savings accounts.
Comparison of the repricing intervals of interest earning assets to interest
bearing liabilities is a measure of interest sensitivity gap. Balancing this gap
is a continual challenge in a changing rate environment. The Company uses a
sophisticated computer program to perform analysis of interest rate risk, assist
with asset liability management, and model and measure interest rate
sensitivity. Details of the gap at September 30, 2000 were:
<PAGE> 19
COMMUNITY SHORES BANK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
<TABLE>
<CAPTION>
Interest rate sensitivity period
Within Three to One to After
three twelve five five
months months years years Total
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earning assets
Interest-bearing deposits
in other financial institutions $ 158,350 $ 0 $ 0 $ 0 $ 158,350
Federal Funds Sold 900,000 0 0 0 900,000
Securities available for sale 469,891 6,674,172 10,672,260 2,017,111 19,833,434
Loans 33,339,423 7,147,672 46,693,688 719,626 87,900,409
----------------------------------------------------------------------------------
34,867,664 13,821,844 57,365,948 2,736,737 107,892,193
Interest-bearing liabilities
Savings and checking 17,611,792 0 0 0 17,611,792
Time deposits< $100,000 2,758,651 22,456,793 4,417,772 0 29,633,216
Time deposits>$100,000 8,340,447 24,549,833 3,826,261 0 36,716,541
Repurchase agreements and
Federal Home Loan Bank Advances 12,430,426 1,500,000 0 0 13,930,426
Notes Payable 1,585,000 0 0 0 1,585,000
----------------------------------------------------------------------------------
42,726,316 48,506,626 8,244,033 0 99,476,975
Net asset (liability) repricing gap $ (7,858,652) $ (34,684,782) $49,121,915 $ 2,736,737 $ 8,415,218
==================================================================================
Cumulative net asset (liability)
repricing gap $ (7,858,652) $ (42,543,434) $ 6,578,481 $ 9,315,218
===================================================================
</TABLE>
The provision for loan losses was $85,500 for the quarter and $408,500
for nine months in 2000 compared to $154,200 for the third quarter of 1999 and
$621,300 for the nine months ending September 30, 1999. Management believes that
the allowance level is adequate and justifiable based on the factors discussed
earlier (see Financial Condition). Management will continue to review the
allowance to make sure that it is maintained at an appropriate level. The
provision may be increased or decreased in the future as management continues to
monitor the loan portfolio and actual loan loss experience.
Non-interest income recorded in the third quarter of 2000 was $105,899
which reflects a $54,226 increase over the same period in 1999. On a year to
date basis, this category has increased 166% over 1999's figure of $109,489.
Service charge income is a major contributor to the increase shown in this
category, representing 78% of the change from 1999's third quarter results to
those at September 30, 2000. Management believes that the service charge portion
of non-interest income will continue to increase in future quarters due to
anticipated growth in the number of deposit accounts. Mortgage loan referral
fees were actually $9,269 lower in this three month period of 2000 compared to
1999. On a year to date basis, Mortgage loan referral fees are $7,594 lower than
what was recorded in 1999. It is difficult to predict future contributions by
Mortgage loan referral fees to non-interest income because of their dependence
on interest rates which are subject to market forces.
<PAGE> 20
COMMUNITY SHORES BANK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the third quarter, non-interest expenses were $939,107 which was an
increase of 50% over the third quarter of 1999. Non-interest expenses for the
nine month period, totaled $2,527,066 in 2000 compared to $1,785,617 in 1999.
Salaries and benefits comprised 57% of the year to date increase or $422,905.
There were an additional 5.0 full-time equivalent employees compared to
September 30, 1999. Professional Services expense increased $182,710 over the
same nine month period in 1999 and accounted for 25% of the overall increase in
non-interest expenses year to date. Nearly half (44%) of the increase in this
category was booked during the third quarter. The Company incurred additional
legal expenses to raise the capital necessary to support the Bank's growth.
Furniture and equipment expenses are responsible for 17% of the increase over
last year. Capital expenditures made throughout 1999 to establish the
operational foundation of the bank caused increased depreciation expense of
$67,919 in 2000 compared to the first three quarters of 1999.
Beginning January 1, 2001, a new accounting standard will require all
derivatives be recorded at fair value. Unless designated as hedges, changes in
these fair values will be recorded in the income statement. Fair value changes
involving hedges will generally be recorded by offsetting gains and losses on
the hedge and on the hedged item, even if the fair value of the hedged item is
not otherwise recorded. This is not expected to have a material effect but the
effect will depend on derivatives holdings when this standard applies.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company and the Bank may be involved in various
legal proceedings that are incidental to their business. In the opinion of
management, neither the Company nor the Bank is a party to any current legal
proceedings that are material to the financial condition of the Company or the
Bank, either individually or in the aggregate.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
<PAGE> 21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(10) Exhibits:
<TABLE>
<CAPTION>
Exhibit No. EXHIBIT DESCRIPTION
----------- -------------------
<S> <C>
3.1 Articles of Incorporation are incorporated by reference to exhibit 3.1 of the Company's
Registration Statement on Form SB-2 (Commission File No. 333-63769) that became
effective on December 17, 1998.
3.2 Bylaws of the Company are incorporated by reference to exhibit 3.2 of the Company's
Registration Statement on Form SB-2 (Commission File No. 333-63769) that became
effective on December 17, 1998.
10 a (i) Subordinated Note Purchase Agreement between Robert L. Chandonnet and Community Shores
Bank Corporation dated September 27, 2000.
10 a (ii) Floating Rate Subordinated Note issued to Robert L. Chandonnet by Community Shores
Bank Corporation dated September 27, 2000.
10 b (i) Subordinated Note Purchase Agreement between Michael D. Gluhanich and Community Shores
Bank Corporation dated September 27, 2000.
10 b (ii) Floating Rate Subordinated Note issued to Michael D. Gluhanich by Community Shores Bank
Corporation dated September 27, 2000.
10 c (i) Subordinated Note Purchase Agreement between Donald E. Hegedus and Community Shores
Bank Corporation dated September 27, 2000.
10 c (ii) Floating Rate Subordinated Note issued to Donald E. Hegedus by Community Shores Bank
Corporation dated September 27, 2000.
10 d (i) Subordinated Note Purchase Agreement between John L. Hilt, acting through his
individual retirement account, and Community Shores Bank Corporation dated September
27, 2000.
10 d (ii) Floating Rate Subordinated Note issued to John L. Hilt by Community Shores Bank
Corporation dated September 27, 2000.
10 e (i) Subordinated Note Purchase Agreement between Community Shores LLC and Community Shores
Bank Corporation dated September 27, 2000.
10 e (ii) Floating Rate Subordinated Note issued to Community Shores LLC by Community Shores Bank
Corporation dated September 27, 2000.
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this
report is filed.
<PAGE> 22
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, on November 13, 2000.
COMMUNITY SHORES BANK CORPORATION
By: /s/ Jose' A. Infante
--------------------------------------------
Jose' A. Infante
Chairman of the Board, President and Chief
Executive Officer (principal executive officer)
By: /s/ Tracey A. Welsh
--------------------------------------------
Tracey A. Welsh
(principal financial and accounting officer)
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
<S> <C>
3.1 Articles of Incorporation are incorporated by reference to exhibit 3.1 of the Company's
Registration Statement on Form SB-2 (Commission File No. 333-63769) that became
effective on December 17, 1998.
3.2 Bylaws of the Company are incorporated by reference to exhibit 3.2 of the Company's
Registration Statement on Form SB-2 (Commission File No. 333-63769) that became
effective on December 17, 1998.
10 a (i) Subordinated Note Purchase Agreement between Robert L. Chandonnet and Community Shores
Bank Corporation dated September 27, 2000.
10 a (ii) Floating Rate Subordinated Note issued to Robert L. Chandonnet by Community Shores
Bank Corporation dated September 27, 2000.
10 b (i) Subordinated Note Purchase Agreement between Michael D. Gluhanich and Community Shores
Bank Corporation dated September 27, 2000.
10 b (ii) Floating Rate Subordinated Note issued to Michael D. Gluhanich by Community Shores Bank
Corporation dated September 27, 2000.
10 c (i) Subordinated Note Purchase Agreement between Donald E. Hegedus and Community Shores
Bank Corporation dated September 27, 2000.
10 c (ii) Floating Rate Subordinated Note issued to Donald E. Hegedus by Community Shores Bank
Corporation dated September 27, 2000.
10 d (i) Subordinated Note Purchase Agreement between John L. Hilt, acting through his
individual retirement account, and Community Shores Bank Corporation dated September
27, 2000.
10 d (ii) Floating Rate Subordinated Note issued to John L. Hilt by Community Shores Bank
Corporation dated September 27, 2000.
10 e (i) Subordinated Note Purchase Agreement between Community Shores LLC and Community Shores
Bank Corporation dated September 27, 2000.
10 e (ii) Floating Rate Subordinated Note issued to Community Shores LLC by Community Shores Bank
Corporation dated September 27, 2000.
27 Financial Data Schedule.
</TABLE>