##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 000-51166
 Community Shores Bank Corporation
 
  Michigan
    
    38-3423227(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 1030 W. Norton Avenue, Muskegon, MI
    
    49441(Address of principal executive offices)
    
    (Zip Code)
 231) 780-1800
 Indicate by check mark whether the registrant (1) has filed reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.
 þ o
 Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
 o o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
 Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).
 o þ




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##### 



Page No.PART I. Financial InformationItem 1. Financial Statements (unaudited)
    
    
    1Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    35Item 4. Controls and Procedures
    
    
    35PART II. Other InformationItem 1. Legal Proceedings
    
    
    36Item 1A. Risk Factors
    
    
    36Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    36Item 3. Defaults upon Senior Securities
    
    
    36Item 4. Submission of Matters to a Vote of Security Holders
    
    
    36Item 5. Other Information
    
    
    37Item 6. Exhibits
    
    
    37Signatures
    
    
    38EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



June 30,
    
    
    December 31,2009
    
    
    2008(unaudited)ASSETSCash and due from financial institutions
    
    $
    4,259,726
    
    
    $
    3,192,789Interest-bearing deposits in other financial institutions
    
    
    2,328,577
    
    
    
    2,479,012Total cash and cash equivalents
    
    
    6,588,303
    
    
    
    5,671,801SecuritiesAvailable for sale (at fair value)
    
    
    21,709,522
    
    
    
    18,769,970Held to maturity (fair value of $6,122,530 at June 30, 2009 and
$6,706,991 at December 31, 2008)
    
    
    6,096,842
    
    
    
    6,609,620Total securities
    
    
    27,806,364
    
    
    
    25,379,590Loans held for sale
    
    
    3,334,761
    
    
    
    2,354,956Loans
    
    
    192,273,994
    
    
    
    205,153,203Less: Allowance for loan losses
    
    
    2,558,541
    
    
    
    4,350,903Net loans
    
    
    189,715,453
    
    
    
    200,802,300Federal Home Loan Bank stock
    
    
    404,100
    
    
    
    404,100Premises and equipment, net
    
    
    11,547,857
    
    
    
    11,869,741Accrued interest receivable
    
    
    922,210
    
    
    
    1,004,552Foreclosed assets
    
    
    6,740,673
    
    
    
    5,884,093Other assets
    
    
    1,309,402
    
    
    
    2,240,831Total assets
    
    $
    248,369,123
    
    
    $
    255,611,964LIABILITIES AND SHAREHOLDERS EQUITYDepositsNon-interest bearing
    
    $
    23,096,326
    
    
    $
    19,135,831Interest bearing
    
    
    188,560,238
    
    
    
    200,429,709Total deposits
    
    
    211,656,564
    
    
    
    219,565,540Federal funds purchased and repurchase agreements
    
    
    7,576,367
    
    
    
    5,813,605Federal Home Loan Bank advances
    
    
    6,000,000
    
    
    
    6,000,000Subordinated debentures
    
    
    4,500,000
    
    
    
    4,500,000Notes payable
    
    
    5,000,000
    
    
    
    4,200,000Accrued expenses and other liabilities
    
    
    660,654
    
    
    
    586,365Total liabilities
    
    
    235,393,585
    
    
    
    240,665,510Shareholders equityPreferred Stock, no par value: 1,000,000 shares
authorized and none issued
    
    
    0
    
    
    
    0Common Stock, no par value: 9,000,000 shares authorized;
1,468,800 June 30, 2009 and December 31, 2008
    
    
    13,296,691
    
    
    
    13,296,691Retained earnings (deficit)
    
    
    (379,014
    )
    
    
    1,228,084Accumulated other comprehensive income
    
    
    57,861
    
    
    
    421,679Total shareholders equity
    
    
    12,975,538
    
    
    
    14,946,454Total liabilities and shareholders equity
    
    $
    248,369,123
    
    
    $
    255,611,964
  - 1 -




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##### Table of Contents



Three Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJune 30, 2009
    
    
    June 30, 2008
    
    
    June 30, 2009
    
    
    June 30, 2008Interest and dividend incomeLoans, including fees
    
    $
    3,100,128
    
    
    $
    3,669,248
    
    
    $
    6,271,428
    
    
    $
    7,814,750Securities and FHLB dividends
    
    
    239,475
    
    
    
    213,074
    
    
    
    500,544
    
    
    
    428,568Federal funds sold and other income
    
    
    17,817
    
    
    
    66,978
    
    
    
    23,512
    
    
    
    151,355Total interest income
    
    
    3,357,420
    
    
    
    3,949,300
    
    
    
    6,795,484
    
    
    
    8,394,673Interest expenseDeposits
    
    
    1,528,441
    
    
    
    2,061,904
    
    
    
    3,207,679
    
    
    
    4,414,159Repurchase agreements, federal funds purchased,
and other debt
    
    
    12,514
    
    
    
    14,462
    
    
    
    19,639
    
    
    
    36,564Federal Home Loan Bank advances and
subordinated debentures
    
    
    173,938
    
    
    
    184,278
    
    
    
    343,393
    
    
    
    404,847Total interest expense
    
    
    1,714,893
    
    
    
    2,260,644
    
    
    
    3,570,711
    
    
    
    4,855,570Net interest income
    
    
    1,642,527
    
    
    
    1,688,656
    
    
    
    3,224,773
    
    
    
    3,539,103Provision for loan losses
    
    
    130,157
    
    
    
    153,368
    
    
    
    478,400
    
    
    
    384,084Net interest income after provision for loan losses
    
    
    1,512,370
    
    
    
    1,535,288
    
    
    
    2,746,373
    
    
    
    3,155,019Noninterest incomeService charges on deposit accounts
    
    
    222,008
    
    
    
    251,970
    
    
    
    446,384
    
    
    
    483,053Mortgage loan referral fees
    
    
    15,420
    
    
    
    0
    
    
    
    15,420
    
    
    
    0Gain on sale of loans
    
    
    105,452
    
    
    
    110,736
    
    
    
    206,742
    
    
    
    255,499Gain on sale of securities
    
    
    143,903
    
    
    
    0
    
    
    
    273,010
    
    
    
    0Gain (loss) on disposal of other real estate
    
    
    (11,041
    )
    
    
    0
    
    
    
    (11,041
    )
    
    
    142,324Other
    
    
    163,905
    
    
    
    241,589
    
    
    
    285,837
    
    
    
    365,953Total noninterest income
    
    
    639,647
    
    
    
    604,295
    
    
    
    1,216,352
    
    
    
    1,246,829Noninterest expenseSalaries and employee benefits
    
    
    1,083,478
    
    
    
    1,196,539
    
    
    
    2,204,880
    
    
    
    2,418,926Occupancy
    
    
    156,179
    
    
    
    151,651
    
    
    
    330,464
    
    
    
    327,431Furniture and equipment
    
    
    169,285
    
    
    
    171,082
    
    
    
    337,857
    
    
    
    342,644Advertising
    
    
    13,486
    
    
    
    30,198
    
    
    
    32,217
    
    
    
    55,427Data processing
    
    
    130,273
    
    
    
    121,690
    
    
    
    252,455
    
    
    
    236,163Professional services
    
    
    118,567
    
    
    
    120,491
    
    
    
    228,847
    
    
    
    280,145Foreclosed asset impairment
    
    
    36,330
    
    
    
    0
    
    
    
    119,742
    
    
    
    0Other
    
    
    627,287
    
    
    
    358,232
    
    
    
    1,077,400
    
    
    
    728,158Total noninterest expense
    
    
    2,334,885
    
    
    
    2,149,883
    
    
    
    4,583,862
    
    
    
    4,388,894Income (loss) before federal income taxes
    
    
    (182,868
    )
    
    
    (10,300
    )
    
    
    (621,137
    )
    
    
    12,954Federal income tax expense (benefit)
    
    
    1,153,316
    
    
    
    (21,143
    )
    
    
    985,961
    
    
    
    (29,822
    )Net Income (loss)
    
    $
    (1,336,184
    )
    
    $
    10,843
    
    
    $
    (1,607,098
    )
    
    $
    42,776Comprehensive (loss)
    
    $
    (1,627,910
    )
    
    $
    (192,470
    )
    
    $
    (1,970,916
    )
    
    $
    (1,689
    )Weighted average shares outstanding
    
    
    1,468,800
    
    
    
    1,468,800
    
    
    
    1,468,800
    
    
    
    1,468,800Diluted average shares outstanding
    
    
    1,468,800
    
    
    
    1,468,800
    
    
    
    1,468,800
    
    
    
    1,468,800Basic earnings (loss) per share
    
    $
    (0.91
    )
    
    $
    0.01
    
    
    $
    (1.09
    )
    
    $
    0.03Diluted earnings (loss) per share
    
    $
    (0.91
    )
    
    $
    0.01
    
    
    $
    (1.09
    )
    
    $
    0.03
  - 2 -




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##### Table of Contents



AccumulatedOther
    
    
    TotalCommon
    
    
    Retained
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Stock
    
    
    Earnings
    
    
    Income
    
    
    EquityBalance at January 1, 2008
    
    
    1,468,800
    
    
    $
    13,296,691
    
    
    $
    2,255,543
    
    
    $
    62,091
    
    
    $
    15,614,325Comprehensive loss:Net income
    
    
    
    
    
    
    
    
    
    
    42,776
    
    
    
    
    
    
    
    42,776Unrealized loss on securities
available-for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44,465
    )
    
    
    (44,465
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,689
    )Balance at June 30, 2008
    
    
    1,468,800
    
    
    $
    13,296,691
    
    
    $
    2,298,319
    
    
    $
    17,626
    
    
    $
    15,612,636Balance at January 1, 2009
    
    
    1,468,800
    
    
    $
    13,296,691
    
    
    $
    1,228,084
    
    
    $
    421,679
    
    
    $
    14,946,454Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    (1,607,098
    )
    
    
    
    
    
    
    (1,607,098
    )Unrealized loss on securities
available-for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (363,818
    )
    
    
    (363,818
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,970,916
    )Balance at June 30, 2009
    
    
    1,468,800
    
    
    $
    13,296,691
    
    
    $
    (379,014
    )
    
    $
    57,861
    
    
    $
    12,975,538
  - 3 -




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##### Table of Contents



Six Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30, 2009
    
    
    June 30, 2008Cash flows from operating activitiesNet Income (loss)
    
    $
    (1,607,098
    )
    
    $
    42,776Adjustments to reconcile net income to net cash
from operating activitiesProvision for loan losses
    
    
    478,400
    
    
    
    384,084Depreciation and amortization
    
    
    345,108
    
    
    
    349,393Net amortization of securities
    
    
    43,822
    
    
    
    4,803Gain on sale of securities
    
    
    (273,010
    )
    
    
    0Gain on sale of loans
    
    
    (206,742
    )
    
    
    (255,499
    )(Gain) loss on disposal of other real estate owned
    
    
    11,041
    
    
    
    (142,324
    )Foreclosed asset impairment
    
    
    119,742
    
    
    
    0Originations of loans for sale
    
    
    (18,160,858
    )
    
    
    (15,787,941
    )Proceeds from loan sales
    
    
    17,387,795
    
    
    
    17,041,114Establish deferred tax asset valuation
    
    
    1,203,189
    
    
    
    0Net change in:Accrued interest receivable and other assets
    
    
    (189,416
    )
    
    
    530,223Accrued interest payable and other liabilities
    
    
    74,289
    
    
    
    (139,536
    )Net cash from (used in) operating activities
    
    
    (773,738
    )
    
    
    2,027,093Cash flows from investing activitiesActivity in available-for-sale securities:Sales
    
    
    5,184,686
    
    
    
    0Maturities, prepayments and calls
    
    
    2,574,466
    
    
    
    1,041,419Purchases
    
    
    (10,825,558
    )
    
    
    (534,500
    )Activity in held to maturity securities:Maturities
    
    
    505,000
    
    
    
    0Loan originations and payments, net
    
    
    9,527,978
    
    
    
    9,802,083Additions to premises and equipment, net
    
    
    (23,224
    )
    
    
    (35,252
    )Proceeds from the sale of other real estate owned
    
    
    93,106
    
    
    
    478,943Net cash from (used in) investing activities
    
    
    7,036,454
    
    
    
    10,752,693Cash flow from financing activitiesNet change in deposits
    
    
    (7,908,976
    )
    
    
    (7,721,071
    )Net change in federal funds purchased and
repurchase agreements
    
    
    1,762,762
    
    
    
    (242,183
    )Other borrowing activity:Draws on note payable and line of credit
    
    
    800,000
    
    
    
    0Paydown on note payable
    
    
    0
    
    
    
    (6,043
    )Net cash from (used in) financing activities
    
    
    (5,346,214
    )
    
    
    (7,969,297
    )Net change in cash and cash equivalents
    
    
    916,502
    
    
    
    4,810,489Beginning cash and cash equivalents
    
    
    5,671,801
    
    
    
    7,876,916Ending cash and cash equivalents
    
    $
    6,588,303
    
    
    $
    12,687,405Supplemental cash flow information:Cash paid during the period for interest
    
    $
    3,642,647
    
    
    $
    4,793,824Cash paid during the period for federal income tax
    
    
    0
    
    
    
    0Transfers from loans to foreclosed assets during the period
    
    
    1,080,469
    
    
    
    1,500,224
  - 4 -




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##### Table of Contents



1.
    
    BASIS OF PRESENTATION AND RECENT ACCOUNTING DEVELOPMENTS:
  Business Combinations
 Noncontrolling Interest in Consolidated
Financial Statements, an amendment of ARB No. 51
 - 5 -




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##### Table of Contents



1.
    
    BASIS OF PRESENTATION AND RECENT ACCOUNTING DEVELOPMENTS (Continued):
 
 Disclosures about Derivative Instruments and
Hedging Activities, an amendment of SFAS No. 133
   - 6 -




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##### Table of Contents



1.
    
    BASIS OF PRESENTATION AND RECENT ACCOUNTING DEVELOPMENTS (Continued):
     - 7 -




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##### Table of Contents



1.
    
    BASIS OF PRESENTATION AND RECENT ACCOUNTING DEVELOPMENTS (Continued):
  2.
    
    SECURITIES
  Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    FairJune 30, 2009
    
    Cost
    
    Gains
    
    Losses
    
    ValueAvailable for sale:US Government and federal agency
    
    $
    13,416,633
    
    
    $
    116,862
    
    
    $
    (23,111
    )
    
    $
    13,510,384Municipal securities
    
    
    1,146,904
    
    
    
    9,172
    
    
    
    (1,615
    )
    
    
    1,154,461Mortgage-backed securities-residential
    
    
    6,870,896
    
    
    
    176,285
    
    
    
    (2,504
    )
    
    
    7,044,677$
    21,434,433
    
    
    $
    302,319
    
    
    $
    (27,230
    )
    
    $
    21,709,522Held to maturity:Municipal securities
    
    $
    6,096,842
    
    
    $
    58,143
    
    
    $
    (32,455
    )
    
    $
    6,122,530
 Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    FairDecember 31, 2008
    
    Cost
    
    Gains
    
    Losses
    
    ValueAvailable for sale:US Government and federal agency
    
    $
    6,609,324
    
    
    $
    297,146
    
    
    $
    0
    
    
    $
    6,906,470Municipal securities
    
    
    869,663
    
    
    
    20,879
    
    
    
    0
    
    
    
    890,542Mortgage-backed securities-residential
    
    
    10,652,075
    
    
    
    326,285
    
    
    
    (5,402
    )
    
    
    10,972,95818,131,062
    
    
    
    644,310
    
    
    
    (5,402
    )
    
    
    18,769,970Held to maturity:Municipal securities
    
    $
    6,609,620
    
    
    $
    105,373
    
    
    $
    (8,002
    )
    
    $
    6,706,991
 - 8 -




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##### Table of Contents



2.
    
    SECURITIES (Continued)
  Available for Sale
    
    Held to MaturityAmortized
    
    Fair
    
    Amortized
    
    FairCost
    
    Value
    
    Cost
    
    ValueDue in one year or less
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0Due from one to five years
    
    
    14,020,592
    
    
    
    14,121,459
    
    
    
    1,392,838
    
    
    
    1,437,241Due from five to ten years
    
    
    542,945
    
    
    
    543,386
    
    
    
    4,704,004
    
    
    
    4,685,289Due in more than ten years
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Mortgage-backed-residential
    
    
    6,870,896
    
    
    
    7,044,677
    
    
    
    0
    
    
    
    0$
    21,434,433
    
    
    $
    21,709,522
    
    
    $
    6,096,842
    
    
    $
    6,122,530
  Less than 12 Months
    
    12 Months or Longer
    
    TotalJune 30, 2009
    
    Fair
    
    Unrealized
    
    Fair
    
    Unrealized
    
    Fair
    
    UnrealizedAvailable for Sale
    
    Value
    
    Losses
    
    Value
    
    Losses
    
    Value
    
    Losses$
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0US Government and federal agency
    
    
    4,073,631
    
    
    
    (23,111
    )
    
    
    0
    
    
    
    0
    
    
    
    4,073,631
    
    
    
    (23,111
    )Municipal securities
    
    
    498,385
    
    
    
    (1,615
    )
    
    
    0
    
    
    
    0
    
    
    
    498,385
    
    
    
    (1,615
    )Mortgage-backed securities-res
    
    
    466,772
    
    
    
    (2,504
    )
    
    
    0
    
    
    
    0
    
    
    
    466,772
    
    
    
    (2,504
    )$
    5,038,788
    
    
    $
    (27,230
    )
    
    $
    0
    
    
    $
    0
    
    
    $
    5,038,788
    
    
    $
    (27,230
    )
 Less than 12 Months
    
    12 Months or Longer
    
    TotalJune 30, 2009
    
    Fair
    
    Unrealized
    
    Fair
    
    Unrealized
    
    Fair
    
    UnrealizedHeld to Maturity
    
    Value
    
    Losses
    
    Value
    
    Losses
    
    Value
    
    LossesMunicipal securities
    
    $
    2,102,412
    
    
    $
    (32,455
    )
    
    $
    0
    
    
    $
    0
    
    
    $
    2,102,412
    
    
    $
    (32,455
    )
 Less than 12 Months
    
    12 Months or Longer
    
    TotalDecember 31, 2008
    
    Fair
    
    Unrealized
    
    Fair
    
    Unrealized
    
    Fair
    
    UnrealizedAvailable for Sale
    
    Value
    
    Losses
    
    Value
    
    Losses
    
    Value
    
    LossesUS Government and federal agency
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0Municipal securities
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Mortgage-backed securities-res
    
    
    604,457
    
    
    
    (5,402
    )
    
    
    0
    
    
    
    0
    
    
    
    604,457
    
    
    
    (5,402
    )$
    604,457
    
    
    $
    (5,402
    )
    
    $
    0
    
    
    $
    0
    
    
    $
    604,457
    
    
    $
    (5,402
    )
 Less than 12 Months
    
    12 Months or Longer
    
    TotalDecember 31, 2008
    
    Fair
    
    Unrealized
    
    Fair
    
    Unrealized
    
    Fair
    
    UnrealizedHeld to Maturity
    
    Value
    
    Losses
    
    Value
    
    Losses
    
    Value
    
    LossesMunicipal securities
    
    $
    701,998
    
    
    $
    (8,002
    )
    
    $
    0
    
    
    $
    0
    
    
    $
    701,998
    
    
    $
    (8,002
    )
 - 9 -




---



##### Table of Contents



2.
    
    SECURITIES (Continued)
   Other-Than- -Impairment
 Accounting for Certain Investments in Debt
and Equity Securities
   - 10 -




---



##### Table of Contents



2.
    
    SECURITIES (Continued)
  Mortgage-backed Securities
  3.
    
    LOANS
  June 30, 2009
    
    
    December 31, 2008Commercial
    
    $
    74,500,442
    
    
    $
    76,710,342Real Estate:Commercial
    
    
    75,065,074
    
    
    
    81,257,794Residential
    
    
    16,267,295
    
    
    
    16,275,219Construction
    
    
    3,180,206
    
    
    
    3,850,176Consumer
    
    
    23,336,444
    
    
    
    27,146,251Subtotal:
    
    
    192,349,461
    
    
    
    205,239,782Allowance for loan losses
    
    
    (2,558,541
    )
    
    
    (4,350,903
    )Net deferred loan fees
    
    
    (75,467
    )
    
    
    (86,579
    )Loans, Net
    
    $
    189,715,453
    
    
    $
    200,802,300
  - 11 -




---



##### Table of Contents



4.
    
    ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS
  Three Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended6/30/09
    
    
    6/30/08
    
    
    6/30/09
    
    
    06/30/08Beginning Balance
    
    $
    2,739,408
    
    
    $
    3,524,600
    
    
    $
    4,350,903
    
    
    $
    3,602,948Charge-offsCommercial
    
    
    (223,919
    )
    
    
    (19,436
    )
    
    
    (2,133,813
    )
    
    
    (197,974
    )Real Estate-Commercial
    
    
    0
    
    
    
    (193,825
    )
    
    
    (38,602
    )
    
    
    (243,825
    )Real Estate-Residential
    
    
    0
    
    
    
    (28,325
    )
    
    
    0
    
    
    
    (38,601
    )Consumer
    
    
    (93,582
    )
    
    
    (72,152
    )
    
    
    (125,085
    )
    
    
    (155,887
    )Total Charge-offs
    
    
    (317,501
    )
    
    
    (313,738
    )
    
    
    (2,297,500
    )
    
    
    (636,287
    )RecoveriesCommercial
    
    
    1,010
    
    
    
    20,244
    
    
    
    10,828
    
    
    
    21,820Real Estate
 Commercial
    
    
    0
    
    
    
    0
    
    
    
    150
    
    
    
    0Consumer
    
    
    5,467
    
    
    
    12,695
    
    
    
    15,760
    
    
    
    24,604Total Recoveries
    
    
    6,477
    
    
    
    32,939
    
    
    
    26,738
    
    
    
    46,424Net Charge-Offs
    
    
    (311,024
    )
    
    
    (280,799
    )
    
    
    (2,270,762
    )
    
    
    (589,863
    )Provision for loan losses
    
    
    130,157
    
    
    
    153,368
    
    
    
    478,400
    
    
    
    384,084Ending Balance
    
    $
    2,558,541
    
    
    $
    3,397,169
    
    
    $
    2,558,541
    
    
    $
    3,397,169
  06/30/09
    
    
    12/31/08End of period loans with no allocated allowance for loan losses
    
    $
    4,768,327
    
    
    $
    2,684,532End of period loans with allocated allowance for loan losses
    
    
    5,546,415
    
    
    
    9,092,437Total
    
    $
    10,314,742
    
    
    $
    11,776,969Amount of the allowance for loan losses allocated
    
    $
    611,472
    
    
    $
    2,465,185
 Three Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended6/30/09
    
    
    6/30/08
    
    
    6/30/09
    
    
    6/30/08Average of impaired loans during the period:
    
    $
    11,008,273
    
    
    $
    14,279,597
    
    
    $
    10,930,467
    
    
    $
    12,913,251Interest income recognized during impairment:
    
    
    60,499
    
    
    
    255,442
    
    
    
    154,270
    
    
    
    448,928Cash-basis interest income recognized:
    
    
    74,758
    
    
    
    56,776
    
    
    
    143,323
    
    
    
    94,745
  06/30/09
    
    
    12/31/08Loans past due over 90 days still on accrual:
    
    $
    635,884
    
    
    $
    79,828Non-accrual loans:
    
    $
    5,858,264
    
    
    $
    5,779,835
  - 12 -




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##### Table of Contents



5.
    
    FORECLOSED ASSETS
  June 30,
    
    
    June 30,2009
    
    
    2008Beginning of year
    
    $
    5,884,093
    
    
    $
    567,000Additions
    
    
    1,080,469
    
    
    
    1,500,224Proceeds from sales
    
    
    (93,106
    )
    
    
    (336,619
    )Losses from sales
    
    
    (11,041
    )
    
    
    0Direct write-downs
    
    
    (119,742
    )
    
    
    0End of period
    
    $
    6,740,673
    
    
    $
    1,730,605
  June 30,
    
    
    June 30,2009
        
    2008Operating expenses, net of rental income
    
    $
    107,312
    
    
    $
    10,551
 6.
    
    PREMISES AND EQUIPMENT
  June 30,
    
    
    December 31,2009
    
    
    2008Land & land improvements
    
    $
    5,447,328
    
    
    $
    5,447,328Buildings & building improvements
    
    
    5,959,371
    
    
    
    5,959,371Furniture, fixtures and equipment
    
    
    3,616,548
    
    
    
    3,587,487Construction in Process
    
    
    17,618
    
    
    
    23,45415,040,865
    
    
    
    15,017,640Less: accumulated depreciation
    
    
    3,493,008
    
    
    
    3,147,899$
    11,547,857
    
    
    $
    11,869,741
 7.
    
    DEPOSITS
  June 30, 
2009
    
    
    December 31, 
2008Non-interest bearingDemand
    
    $
    23,096,326
    
    
    $
    19,135,831Interest bearingChecking
    
    
    30,590,557
    
    
    
    16,327,722Money Market
    
    
    18,668,071
    
    
    
    18,784,620Savings
    
    
    9,067,369
    
    
    
    10,891,294Time, under $100,000
    
    
    37,501,861
    
    
    
    40,384,321Time, over $100,000
    
    
    92,732,380
    
    
    
    114,041,752Total Deposits
    
    $
    211,656,564
    
    
    $
    219,565,540
 - 13 -




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##### Table of Contents



8.
    
    SHORT-TERM BORROWINGS
  Repurchase
    
    
    Federal Funds
    
    
    BorrowingsAgreements
    
    
    Purchased
    
    
    From FRBOutstanding at June 30, 2009
    
    $
    7,576,367
    
    
    $
    0
    
    
    $
    0Average interest rate at period end
    
    
    0.73
    %
    
    
    0.00
    %
    
    
    0.00
    %Average balance during period
    
    
    5,996,682
    
    
    
    0
    
    
    
    123,149Average interest rate during period
    
    
    0.64
    %
    
    
    0.00
    %
    
    
    0.50
    %Maximum month end balance during period
    
    
    7,576,367
    
    
    
    0
    
    
    
    2,120,000Outstanding at December 31, 2008
    
    $
    5,813,605
    
    
    $
    0
    
    
    $
    0Average interest rate at year end
    
    
    0.50
    %
    
    
    0.00
    %
    
    
    0.00
    %Average balance during year
    
    
    4,604,290
    
    
    
    55,497
    
    
    
    128,937Average interest rate during year
    
    
    1.38
    %
    
    
    2.14
    %
    
    
    2.22
    %Maximum month end balance during year
    
    
    5,856,382
    
    
    
    0
    
    
    
    0
 9.
    
    FEDERAL HOME LOAN BANK BORROWINGS
  Current
    
    June 30,
    
    December 31,Maturity Date
    
    Interest Rate
    
    2009
    
    2008March 24, 2010
    
    
    5.99
    
    
    
    1,500,000
    
    
    
    1,500,000November 3, 2010
    
    
    5.95
    
    
    
    2,000,000
    
    
    
    2,000,000December 13, 2010
    
    
    5.10
    
    
    
    2,500,000
    
    
    
    2,500,000$
    6,000,000
    
    
    $
    6,000,000
 - 14 -




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##### Table of Contents



10.
    
    SUBORDINATED DEBENTURES
 th th th th
 11.
    
    NOTES PAYABLE
  12.
    
    COMMITMENTS AND OFF-BALANCE SHEET RISK
  - 15 -




---



##### Table of Contents



12.
    
    COMMITMENTS AND OFF-BALANCE SHEET RISK (Continued)
  June 30,
    
    December 31,2009
    
    2008Unused lines of credit and letters of credit
    
    $
    29,835,717
    
    
    $
    30,622,425Commitments to make loans
    
    
    1,658,860
    
    
    
    80,758
  13.
    
    FAIR VALUE OPTION AND FAIR VALUE MEASUREMENTS
       - 16 -




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##### Table of Contents



13.
    
    FAIR VALUE OPTION AND FAIR VALUE MEASUREMENTS (Continued)
    Fair Value Measurements at June 30, 2009 UsingQuoted Prices in
    
    SignificantActive Markets
    
    Other
    
    Significantfor Identical
    
    Observable
    
    UnobservableAssets
    
    Inputs
    
    InputsJune 30, 2009
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:Available for sale
securities
    
    $
    21,709,522
    
    
    $
    0
    
    
    $
    21,709,522
    
    
    $
    0Servicing assets
    
    
    44,636
    
    
    
    0
    
    
    
    44,636
    
    
    
    0
 Fair Value Measurements at December 31, 2008 UsingQuoted Prices inActive Markets for
    
    Significant Other
    
    SignificantIdentical Assets
    
    Observable Inputs
    
    Unobservable InputsDecember 31, 2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:Available for sale
securities
    
    $
    18,769,970
    
    
    $
    533,000
    
    
    $
    18,236,970
    
    
    $
    0Servicing assets
    
    
    42,365
    
    
    
    0
    
    
    
    42,365
    
    
    
    0
  Fair Value Measurements at June 30, 2009 UsingQuoted Prices inActive Markets for
    
    Significant Other
    
    SignificantIdentical Assets
    
    Observable Inputs
    
    Unobservable InputsJune 30, 2009
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:Impaired loans
    
    $
    4,934,943
    
    
    
    0
    
    
    
    0
    
    
    $
    4,934,943Other Real Estate
Owned
    
    
    2,107,231
    
    
    
    
    
    
    
    
    
    
    
    2,107,231
 - 17 -




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##### Table of Contents



13.
    
    FAIR VALUE OPTION AND FAIR VALUE MEASUREMENTS (Continued)
 Fair Value Measurements at December 31, 2008 UsingQuoted Prices in
    
    SignificantActive Markets for
    
    Other
    
    SignificantIdentical
    
    Observable
    
    UnobservableDecember 31,
    
    Assets
    
    Inputs
    
    Inputs2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:Impaired loans
    
    $
    6,627,252
    
    
    
    0
    
    
    
    0
    
    
    $
    6,627,252Other Real Estate
Owned
    
    $
    911,557
    
    
    
    0
    
    
    
    0
    
    
    $
    911,577
     2009
    
    
    2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    Value(in thousands)Financial assetsCash and cash equivalents
    
    $
    6,588
    
    
    $
    6,588
    
    
    $
    5,672
    
    
    $
    5,672Securities available for sale
    
    
    21,710
    
    
    
    21,710
    
    
    
    18,770
    
    
    
    18,770Securities held to maturity
    
    
    6,097
    
    
    
    6,123
    
    
    
    6,610
    
    
    
    6,707Loans held for sale
    
    
    3,335
    
    
    
    3,335
    
    
    
    2,355
    
    
    
    2,355Loans, net
    
    
    189,715
    
    
    
    190,807
    
    
    
    200,802
    
    
    
    200,617FHLB stock
    
    
    404
    
    
    
    N/A
    
    
    
    404
    
    
    
    N/AAccrued interest receivable
    
    
    922
    
    
    
    922
    
    
    
    1,005
    
    
    
    1,005Financial liabilitiesDeposits
    
    
    211,657
    
    
    
    216,441
    
    
    
    219,566
    
    
    
    223,275Federal funds purchased
and repurchase agreements
    
    
    7,576
    
    
    
    7,576
    
    
    
    5,814
    
    
    
    5,814FHLB advances
    
    
    6,000
    
    
    
    5,999
    
    
    
    6,000
    
    
    
    5,999Subordinated debentures
    
    
    4,500
    
    
    
    4,367
    
    
    
    4,500
    
    
    
    4,362Notes payable
    
    
    5,000
    
    
    
    5,000
    
    
    
    4,200
    
    
    
    4,200Accrued interest payable
    
    
    234
    
    
    
    234
    
    
    
    326
    
    
    
    326
 - 18 -




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##### Table of Contents



13.
    
    FAIR VALUE OPTION AND FAIR VALUE MEASUREMENTS (Continued)
   14.
    
    INCOME TAXES
  15.
    
    REGULATORY MATTERS
   - 19 -




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##### Table of Contents



15.
    
    REGULATORY MATTERS (Continued)
  Actual and required capital amounts and ratios at June 30, 2009 and December 31, 2008 for
the Bank were:
 Minimum Required toBe Well CapitalizedMinimum Required
    
    
    Under PromptFor Capital
    
    
    Corrective ActionActual
    
    
    Adequacy Purposes
    
    
    ProvisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioJune 30, 2009Total Capital (Tier 1 and Tier 2) to risk weighted assets
of the Bank
    
    $
    24,061,858
    
    
    
    11.19
    %
    
    $
    17,205,395
    
    
    
    8.00
    %
    
    $
    21,506,744
    
    
    
    10.00
    %Tier 1 (Core) Capital
to risk-weighted
assets of the Bank
    
    
    21,503,317
    
    
    
    10.00
    
    
    
    8,602,698
    
    
    
    4.00
    
    
    
    12,904,046
    
    
    
    6.00Tier 1 (Core) Capital
to average assets
of the Bank
    
    
    21,503,317
    
    
    
    8.31
    
    
    
    10,355,393
    
    
    
    4.00
    
    
    
    12,944,241
    
    
    
    5.00December 31, 2008Total Capital (Tier 1 and Tier 2) to risk weighted assets
of the Bank
    
    $
    24,445,615
    
    
    
    10.96
    %
    
    $
    17,840,749
    
    
    
    8.00
    %
    
    $
    22,300,936
    
    
    
    10.00
    %Tier 1 (Core) Capital
to risk-weighted
assets of the Bank
    
    
    21,638,698
    
    
    
    9.70
    
    
    
    8,920,375
    
    
    
    4.00
    
    
    
    13,380,562
    
    
    
    6.00Tier 1 (Core) Capital
to average assets
of the Bank
    
    
    21,638,698
    
    
    
    8.30
    
    
    
    10,423,367
    
    
    
    4.00
    
    
    
    13,029,208
    
    
    
    5.00
  - 20 -




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##### Table of Contents



16.
    
    OTHER COMPREHENSIVE INCOME
  Three Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJune 30, 2009
    
    
    June 30, 2008
    
    
    June 30, 2009
    
    
    June 30, 2008Unrealized holding gains
(losses) on available-for-sale
securities
    
    $
    (110,686
    )
    
    $
    (173,308
    )
    
    $
    (90,808
    )
    
    $
    67,371Less reclassification
adjustments for (gains) and
losses
recognized in income
    
    
    (143,903
    )
    
    
    0
    
    
    
    (273,010
    )
    
    
    0Net unrealized gain (loss)
    
    
    (254,589
    )
    
    
    (173,308
    )
    
    
    (363,818
    )
    
    
    67,371Tax effect
    
    
    37,138
    
    
    
    (58,925
    )
    
    
    0
    
    
    
    (22,906
    )Other comprehensive income (loss)
    
    $
    (217,451
    )
    
    $
    (114,383
    )
    
    $
    (363,818
    )
    
    $
    (44,465
    )
 - 21 -




---



##### Table of Contents



FINANCIAL CONDITION
  - 22 -




---



##### Table of Contents



1
 
 1
    
    Extension risk, as related to loans, exists
when booking fixed rate loans with long final contractual maturities. When a
customer is contractually allowed longer to return its borrowed principal and
rates rise, the Bank is delayed from taking advantage of the opportunity to
reinvest the returning principal at the higher market rate. - 23 -




---



##### Table of Contents



Within
    
    
    Three to
    
    
    One to
    
    
    AfterThree
    
    
    Twelve
    
    
    Five
    
    
    FiveMonths
    
    
    Months
    
    
    Years
    
    
    Years
    
    
    TotalCommercial, financial and other
    
    $
    23,689,710
    
    
    $
    25,796,159
    
    
    $
    21,826,264
    
    
    $
    3,112,842
    
    
    $
    74,424,975Real estate:commercial
    
    
    10,824,471
    
    
    
    18,558,381
    
    
    
    43,917,492
    
    
    
    1,764,730
    
    
    
    75,065,074construction
    
    
    2,165,887
    
    
    
    531,370
    
    
    
    0
    
    
    
    482,949
    
    
    
    3,180,206mortgages
    
    
    119,616
    
    
    
    386,639
    
    
    
    2,385,734
    
    
    
    13,375,306
    
    
    
    16,267,295Consumer
    
    
    1,296,866
    
    
    
    2,994,703
    
    
    
    15,366,976
    
    
    
    3,677,899
    
    
    
    23,336,444$
    38,096,550
    
    
    $
    48,267,252
    
    
    $
    83,496,466
    
    
    $
    22,413,726
    
    
    $
    192,273,994Loans at fixed rates
    
    
    7,528,141
    
    
    
    24,327,872
    
    
    
    75,870,153
    
    
    
    22,302,860
    
    
    
    130,029,026Loans at variable rates
    
    
    30,568,410
    
    
    
    23,939,379
    
    
    
    7,626,313
    
    
    
    110,866
    
    
    
    62,244,968$
    38,096,551
    
    
    $
    48,267,251
    
    
    $
    83,496,466
    
    
    $
    22,413,726
    
    
    $
    192,273,994
    - 24 -




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##### Table of Contents



June 30, 2009
    
    December 31, 2008Percent of
    
    
    
    
    
    Percent ofAllowance
    
    
    
    
    
    AllowanceRelated to
    
    
    
    
    
    Related toAmount
    
    Loan Category
    
    Amount
    
    Loan CategoryBalance at End of Period Applicable to:Commercial
    
    $
    1,142,524
    
    
    
    1.5
    %
    
    $
    2,640,269
    
    
    
    3.4
    %Real estate:Commercial
    
    
    1,053,536
    
    
    
    1.4
    
    
    
    1,237,913
    
    
    
    1.5Residential
    
    
    71,788
    
    
    
    0.4
    
    
    
    104,033
    
    
    
    0.6Construction
    
    
    34,982
    
    
    
    1.1
    
    
    
    49,667
    
    
    
    1.3Consumer
    
    
    255,711
    
    
    
    1.1
    
    
    
    319,021
    
    
    
    1.2Total
    
    $
    2,558,541
    
    
    
    1.3
    %
    
    $
    4,350,903
    
    
    
    2.1
    %
  IncreaseJune 30, 2009
    
    December 31, 2008
    
    (Decrease)Loans Past Due:30-59 days
    
    $
    596,761
    
    
    $
    3,182,098
    
    
    $
    (2,585,337
    )60-89 days
    
    
    2,600,629
    
    
    
    1,257,315
    
    
    
    1,343,31490 days and greater
    
    
    635,884
    
    
    
    79,828
    
    
    
    556,056Non accrual loans
    
    
    5,858,264
    
    
    
    5,779,835
    
    
    
    78,429
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RESULTS OF OPERATIONS
   - 27 -




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Six months ended June 30,2009
    
    
    2008Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateAssetsFederal funds sold and interest-
bearing deposits with other financial
institutions
    
    $
    9,425,983
    
    
    $
    23,512
    
    
    
    0.50
    %
    
    $
    12,229,117
    
    
    $
    151,355
    
    
    
    2.48
    %Securities
    
    
    27,352,763
    
    
    
    574,848
    
    
    
    4.20
    
    
    
    20,206,816
    
    
    
    503,665
    
    
    
    4.99Loans (including held for sale and non
accrual)
    
    
    198,346,087
    
    
    
    6,271,428
    
    
    
    6.32
    
    
    
    225,799,177
    
    
    
    7,814,750
    
    
    
    6.92235,124,833
    
    
    
    6,869,788
    
    
    
    5.84
    
    
    
    258,235,110
    
    
    
    8,469,770
    
    
    
    6.56Other assets
    
    
    23,502,650
    
    
    
    
    
    
    
    
    
    
    
    16,840,158$
    258,627,483
    
    
    
    
    
    
    
    
    
    
    $
    275,075,268Liabilities and Shareholders EquityInterest-bearing deposits
    
    $
    201,976,379
    
    
    $
    3,207,679
    
    
    
    3.18
    
    
    $
    221,553,070
    
    
    $
    4,414,159
    
    
    
    3.98Federal funds purchased, repurchase
agreements and Federal Reserve Bank borrowings
    
    
    6,119,831
    
    
    
    19,639
    
    
    
    0.64
    
    
    
    4,383,266
    
    
    
    36,564
    
    
    
    1.67Subordinated Debentures, NotePayable and
Federal Home Loan Bank Advances
    
    
    14,951,934
    
    
    
    343,393
    
    
    
    4.59
    
    
    
    14,701,029
    
    
    
    404,847
    
    
    
    5.51223,048,144
    
    
    
    3,570,711
    
    
    
    3.20
    
    
    
    240,637,365
    
    
    
    4,855,570
    
    
    
    4.04Non-interest bearing deposits
    
    
    20,414,688
    
    
    
    
    
    
    
    
    
    
    
    18,109,919Other liabilities
    
    
    659,101
    
    
    
    
    
    
    
    
    
    
    
    679,573Shareholders Equity
    
    
    14,505,550
    
    
    
    
    
    
    
    
    
    
    
    15,648,411$
    258,627,483
    
    
    
    
    
    
    
    
    
    
    $
    275,075,268Net interest income (tax equivalent basis)
    
    
    
    
    
    
    3,299,077
    
    
    
    
    
    
    
    
    
    
    
    3,614,200Net interest spread on earning assets (tax
equivalent basis)
    
    
    
    
    
    
    
    
    
    
    2.64
    %
    
    
    
    
    
    
    
    
    
    
    2.52
    %Net interest margin on earning assets (tax
equivalent basis)
    
    
    
    
    
    
    
    
    
    
    2.81
    %
    
    
    
    
    
    
    
    
    
    
    2.80
    %Average interest-earning assets to average
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    105.41
    %
    
    
    
    
    
    
    
    
    
    
    107.31
    %Tax equivalent adjustment
    
    
    
    
    
    
    74,304
    
    
    
    
    
    
    
    
    
    
    
    75,097Net interest income
    
    
    
    
    
    $
    3,224,773
    
    
    
    
    
    
    
    
    
    
    $
    3,539,103
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Three months ended June 30,2009
    
    
    2008Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yield/Rate
    
    
    Balance
    
    
    Interest
    
    
    Yield/RateAssetsFederal funds sold and interest-
bearing deposits with other financial
institutions
    
    $
    11,911,328
    
    
    $
    17,817
    
    
    
    0.60
    %
    
    $
    13,285,444
    
    
    $
    66,978
    
    
    
    2.02
    %Securities
    
    
    28,559,536
    
    
    
    275,486
    
    
    
    3.86
    
    
    
    20,095,034
    
    
    
    251,367
    
    
    
    5.00Loans (including held for sale and
non accrual)
    
    
    195,487,447
    
    
    
    3,100,128
    
    
    
    6.34
    
    
    
    220,820,334
    
    
    
    3,669,248
    
    
    
    6.65235,958,311
    
    
    
    3,393,431
    
    
    
    5.75
    
    
    
    254,200,812
    
    
    
    3,987,593
    
    
    
    6.27Other assets
    
    
    22,922,576
    
    
    
    
    
    
    
    
    
    
    
    16,802,463$
    258,880,887
    
    
    
    
    
    
    
    
    
    
    $
    271,003,275Liabilities and Shareholders EquityInterest-bearing deposits
    
    $
    199,888,525
    
    
    $
    1,528,441
    
    
    
    3.06
    
    
    $
    216,338,298
    
    
    $
    2,061,904
    
    
    
    3.81Federal funds purchased, repur-
chase agreements and Federal
Reserve Bank borrowings
    
    
    6,940,470
    
    
    
    12,514
    
    
    
    0.72
    
    
    
    4,396,492
    
    
    
    14,462
    
    
    
    1.32Subordinated Debentures, Note
Payable and Federal Home
Loan Bank Advances
    
    
    15,201,099
    
    
    
    173,938
    
    
    
    4.58
    
    
    
    14,700,000
    
    
    
    184,278
    
    
    
    5.01222,030,094
    
    
    
    1,714,893
    
    
    
    3.09
    
    
    
    235,434,790
    
    
    
    2,260,644
    
    
    
    3.84Non-interest bearing deposits
    
    
    21,687,792
    
    
    
    
    
    
    
    
    
    
    
    19,163,239Other liabilities
    
    
    736,288
    
    
    
    
    
    
    
    
    
    
    
    776,398Shareholders Equity
    
    
    14,426,713
    
    
    
    
    
    
    
    
    
    
    
    15,628,848$
    258,880,887
    
    
    
    
    
    
    
    
    
    
    $
    271,003,275Net interest income (tax equivalent basis)
    
    
    
    
    
    
    1,678,538
    
    
    
    
    
    
    
    
    
    
    
    1,726,949Net interest spread on earning assets
(tax equivalent basis)
    
    
    
    
    
    
    
    
    
    
    2.66
    %
    
    
    
    
    
    
    
    
    
    
    2.43
    %Net interest margin on earning assets
(tax equivalent basis)
    
    
    
    
    
    
    
    
    
    
    2.85
    %
    
    
    
    
    
    
    
    
    
    
    2.72
    %Average interest-earning assets to average
interest-bearing
liabilities
    
    
    
    
    
    
    
    
    
    
    106.27
    %
    
    
    
    
    
    
    
    
    
    
    107.97
    %Tax equivalent adjustment
    
    
    
    
    
    
    36,011
    
    
    
    
    
    
    
    
    
    
    
    38,293Net interest income
    
    
    
    
    
    $
    1,642,527
    
    
    
    
    
    
    
    
    
    
    $
    1,688,656
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Interest Rate Sensitivity PeriodWithin
    
    
    Three to
    
    
    One to
    
    
    AfterThree
    
    
    Twelve
    
    
    Five
    
    
    FiveMonths
    
    
    Months
    
    
    Years
    
    
    Years
    
    
    TotalEarning assetsInterest-bearing deposits
in other financial institutions
    
    $
    2,328,577
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    2,328,577Federal Funds Sold
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Securities (including FHLB stock)
    
    
    1,061,096
    
    
    
    5,949,204
    
    
    
    16,660,706
    
    
    
    4,539,458
    
    
    
    28,210,464Loans Held for Sale
    
    
    19,586
    
    
    
    77,201
    
    
    
    461,808
    
    
    
    2,776,166
    
    
    
    3,334,761Loans1
    
    
    81,188,337
    
    
    
    21,600,641
    
    
    
    74,090,145
    
    
    
    15,394,871
    
    
    
    192,273,99484,597,596
    
    
    
    27,627,046
    
    
    
    91,212,659
    
    
    
    22,710,495
    
    
    
    226,147,796Interest-bearing liabilitiesSavings and checking
    
    
    58,325,997
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    58,325,997Time deposits <$100,000
    
    
    6,029,303
    
    
    
    16,356,768
    
    
    
    15,115,790
    
    
    
    0
    
    
    
    37,501,861Time deposits >$100,000
    
    
    12,076,913
    
    
    
    24,306,773
    
    
    
    56,348,693
    
    
    
    0
    
    
    
    92,732,379Repurchase agreements and
Federal funds purchased
    
    
    7,576,367
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    7,576,367Subordinated Debt and Federal
Home Loan Bank Advances
    
    
    15,500,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    15,500,00099,508,580
    
    
    
    40,663,541
    
    
    
    71,464,483
    
    
    
    0
    
    
    
    211,636,604Net asset (liability) repricing gap
    
    $
    (14,910,984
    )
    
    $
    (13,036,495
    )
    
    $
    19,748,176
    
    
    $
    22,710,495
    
    
    $
    14,511,192Cumulative net asset (liability)
Repricing gap
    
    $
    (14,910,984
    )
    
    $
    (27,947,479
    )
    
    $
    (8,199,303
    )
    
    $
    14,511,192
 
 1
    
    Includes non accrual loans. - 32 -




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- 33 -




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- 34 -




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COMMUNITY
SHORES BANK CORPORATION
 
  
   
   
   
   
   Votes
    
    Votes
    
    Votes
    
    Broker Non-Nominee
    
    For
    
    Withheld
    
    Abstained
    
    VotesSteven P. Moreland
    
    
    1,027,223
    
    
    
    224,882
    
    
    
    0
    
    
    
    0Roger W. Spoelman
    
    
    1,027,555
    
    
    
    224,550
    
    
    
    0
    
    
    
    0
   Votes
    
    Votes
    
    Votes
    
    Broker Non-For
    
    Against
    
    Abstained
    
    votes1,112,375
    
    
    
    38,973
    
    
    
    100,787
    
    
    
    0
 - 36 -




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##### Table of Contents



COMMUNITY SHORES BANK CORPORATION
 
   
  EXHIBIT NO.
    
    EXHIBIT DESCRIPTION3.1
    
    Articles of Incorporation are incorporated by reference to
exhibit 3.1 of the Companys June 30, 2004 Form 10-QSB (SEC
file number 333-63769).3.2
    
    Bylaws of the Company are incorporated by reference to exhibit
3(ii) of the Companys Form 8-K filed July 5, 2006 (SEC file
number 000-51166).31.1
    
    Rule 13a-14(a) Certification of the principal executive officer.31.2
    
    Rule 13a-14(a) Certification of the principal financial officer.32.1
    
    Section 1350 Chief Executive Officer Certification.32.2
    
    Section 1350 Chief Financial Officer Certification.
 - 37 -




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##### Table of Contents



COMMUNITY SHORES BANK CORPORATIONAugust 14,
2009
    
    By:
    
    /s/ Heather D. BrolickDate
    
    
    
    Heather D. BrolickPresident and Chief Executive Officer(principal executive officer)August 14,
2009
    
    By:
    
    /s/ Tracey A. WelshDate
    
    
    
    Tracey A. WelshSenior Vice President, Chief Financial Officer andTreasurer (principal financial and accounting officer)
 - 38 -




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EXHIBIT INDEX
 EXHIBIT NO.
    
    EXHIBIT DESCRIPTION3.1
    
    Articles of Incorporation are incorporated by reference to
exhibit 3.1 of the Companys June 30, 2004 Form 10-QSB (SEC
file number 333-63769).3.2
    
    Bylaws of the Company are incorporated by reference to exhibit
3(ii) of the Companys Form 8-K filed July 5, 2006 (SEC file
number 000-51166).31.1
    
    Rule 13a-14(a) Certification of the principal executive officer.31.2
    
    Rule 13a-14(a) Certification of the principal financial officer.32.1
    
    Section 1350 Chief Executive Officer Certification.32.2
    
    Section 1350 Chief Financial Officer Certification.
 - 39 -