MUSKEGON — After more than six years of operating under increased regulatory scrutiny, CEO Heather Brolick wants people to know that Community Shores Bank Corp. is “back on track” and growing again.
The final step in rebounding from the difficulties of the Great Recession came a month ago, when federal regulators terminated a December 2010 order that required the bank to strengthen its operations and imposed various limits and additional oversight.
While the Federal Reserve order did not affect Community Shores’ day-to-day operations over the last two years, its termination removes a lingering “dark shadow hanging out there” and “helps the market see us as a healthy community bank again,” Brolick told MiBiz.
“It does send a message to the market,” she said. “It’s one more affirmation that Community Shores is back to complete health. We’re definitely back on track.”
The Muskegon-based Community Shores Bank (OTC: CSHB) has three offices in Muskegon County and one in Grand Haven in neighboring Ottawa County. As of June 2016, the bank ranked fifth out of 11 banks in the Muskegon County market with a 9.56 percent share of local deposits, according to the FDIC’s annual Summary of Deposits.
Community Shores ended 2016 with total assets of $191.4 million, a nearly 6-percent increase from a year earlier and a reversal of a steady seven-year slide in the size of the bank. Deposits grew as well in 2016 to $167.7 million, a 4-percent increase.
The corporation recorded 2016 net income of $163,128, versus a net loss in 2015 of $439,704.
Net loans grew nearly 15 percent in 2016 to $139.2 million, which came despite the bank not having a full staff of commercial bankers for part of the year, Brolick said.
Brolick believes Community Shores benefitted from consolidation in the market and personnel shifts to other banks or to companies outside of the industry. For instance, in September 2015, Community Shores hired a chief lending officer, Mike Skinner, who previously worked at The Bank of Holland before its parent company was acquired by Chemical Financial Corp.
Brolick credits the loan growth in part to a re-capitalization of the bank in March 2016 that led to “renewed support and a resurgence of business opportunities,” she wrote in an annual report to shareholders in which she called 2016 a “pivotal” year for the 18-year-old Community Shores Bank.
“Last year was a good year for us and we’re showing that we’re rebounding, and I expect us to continue to rebound,” she told MiBiz. “Having the order go away, having us put the new capital into the bank, it’s just freed everybody up. And then attracting new talent, it was just a perfect set of dynamics to really propel us forward. That’s what we were hoping for.
“It’s giving us a good opportunity to move into this year with some bright prospects, too.”
Under the Federal Reserve Board order, Community Shores needed permission from regulators to pay dividends, incur debt, and appoint or change the duties of directors or senior executive officers. The corporation also regularly had to report progress and improve its capital position.
Community Shores finally re-capitalized in March 2016 with a private stock placement to 1030 Norton LLC, a company owned by three directors — Gary Bogner, Robert Chandonnet and Bruce Essex — and other area business people. The private placement netted $4.77 million. The corporation directed $3.35 million to the bank, paid off $722,000 in trust preferred securities, and retained $900,000 for general operations, according financial reports filed with federal securities regulators.
The re-capitalization “worked very well for us,” Brolick said. That, combined with the improved financial condition of the bank, led to the Federal Reserve Board terminating its order March 16.
As Community Shores now operates without the constraints of the Federal Reserve order, it continues to focus its priorities on credit quality. The bank also has a better understanding of what it’s like for clients that are working their way through difficulty, Brolick said.
“We’ve learned a lot. We came through tough times, and we certainly know what that means and understand it from a customer perspective as well. I think that differentiates us,” she said. “We have important insight that business owners are going to appreciate, and as we look to the future, we’re excited about our potential growth in 2017 and 2018.
“We will recover in the next couple of years to make up for all of the hardship that happened for the years before.”