Community Shores Bank Corporation, organized in 1998, is a Michigan corporation
and a bank holding company. The Company owns all of the common stock of Community
Shores Bank (the "Bank"). The Bank was organized and commenced operations
in January, 1999 as a Michigan chartered bank with depository accounts insured
by the FDIC to the extent permitted by law. The Bank provides a full range of
commercial and consumer banking services primarily in the communities of Muskegon
County and Northern Ottawa County. The Bank's services include checking and
savings accounts, certificates of deposit, electronic banking services, safe
deposit boxes, courier service, and loans for commercial and consumer purposes.
Community Shores Mortgage Company (the “Mortgage Company”) was incorporated
on December 13, 2001. The Mortgage Company, a wholly owned subsidiary of the
Bank, can originate both commercial and residential real estate loans. Most
fixed rate residential real estate loans originated by the Mortgage Company
are sold to a third party. Commercial and residential real estate loans that
are held in the Mortgage Company’s portfolio are serviced by the Bank
pursuant to a servicing agreement.
The Bank offers a broad range of deposit services, including checking accounts,
savings accounts and time deposits of various types. Transaction accounts and
time certificates are tailored to the principal market area at rates competitive
with those offered in the area. Electronic banking services such as ACH and
online bill pay are offered to both personal and business customers. All qualified
deposit accounts are insured by the FDIC up to the maximum amount permitted
by law. The Bank solicits these accounts from individuals, businesses, schools,
associations, churches, nonprofit organizations, financial institutions and
government authorities. The Bank also uses alternative funding sources as needed,
including advances from the Federal Home Loan Bank and obtaining deposits through
an internet deposit listing service. Additionally, the Bank makes available
mutual funds and annuities, which are not FDIC insured, through an alliance
with Sorrento Pacific.
Commercial Loans. The Bank's commercial lending group originates commercial
loans primarily in the western Michigan Counties of Muskegon and Northern Ottawa,
but may include contiguous counties as well. Commercial loans are originated
by experienced lenders under the leadership of the Chief Lending Officer. Loans
are originated for general business purposes, including working capital, accounts
receivable financing, machinery and equipment acquisition and commercial real
estate financing, including new construction and land development.
Working capital loans that are structured as a line of credit are reviewed periodically.
These loans generally are secured by assets of the borrower and have an interest
rate tied to either the Bank’s internal prime rate or national prime rate.
Loans for machinery and equipment purposes typically have a maturity of five
to seven years and are fully amortizing. Commercial real estate loans may have
an interest rate that is fixed to maturity or floats with a spread to either
the Bank’s internal prime rate or the national prime rate.
The Bank evaluates many aspects of a commercial loan transaction in order to
minimize credit and interest rate risk. Underwriting commercial loans requires
an assessment of management, products, markets, cash flow, capital, income and
collateral. The analysis includes a review of historical and projected financial
results. On certain transactions, where real estate is the primary collateral,
and in some cases where equipment is the primary collateral, appraisals are
obtained from licensed or certified appraisers. In certain situations, for creditworthy
customers, the Bank may accept title reports instead of requiring lenders' policies
of title insurance.
Commercial real estate lending involves more risk than residential lending,
because loan balances are greater and repayment is dependent upon the borrower's
operations. The Bank attempts to minimize risk associated with these transactions
by generally limiting its exposure to non-owner operated properties of well-known
customers or new customers with an established history of profitability.
Single Family Residential Real Estate Loans. The Bank originates first mortgage
residential real estate loans in its market area according to secondary market
underwriting standards. These loans are likely to provide borrowers with a fixed
or adjustable interest rate with terms up to 30 years. A majority of the single
family residential real estate loans are expected to be sold on a servicing-released
basis in the secondary market with all interest rate risk and credit risk passed
to the purchaser. The Bank may periodically elect to underwrite certain residential
real estate loans to be held in its own loan portfolio.
Consumer Loans. The Bank originates consumer loans for a variety of personal
financial needs. Consumer loans are likely to include fixed home equity and
equity lines of credit, new and used automobile loans, boat loans, personal
unsecured lines of credit, credit cards and overdraft protection for checking
account customers. Consumer loans generally have shorter terms and higher interest
rates than residential mortgage loans and usually will involve greater credit
risk due to the type and nature of the collateral securing the debt. Strong
emphasis is placed on the amount of the down payment, credit quality, employment
stability, monthly income and appropriate insurance coverage.
Consumer loans are generally repaid on a monthly basis with the source of repayment
tied to the borrower's periodic income. It is recognized that consumer loan
delinquency and losses are dependent on the borrower's continuing financial
stability. Job loss, illness and personal bankruptcy may adversely affect repayment.
In many cases, repossessed collateral (on a secured consumer loan) may not be
sufficient to satisfy the outstanding loan balance. This is a common occurrence
due to depreciation of the underlying collateral. The Bank believes that the
generally higher yields earned on consumer loans compensate for the increased
credit risk associated with such loans. Consumer loans are expected to be an
important component in the Bank's efforts to meet the credit needs of the communities
and customers that it serves.