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 March 31, 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
 
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o(Do not check if a smaller
reporting company)
    
    Smaller reporting company þ
  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
    
    
    17Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    27Item 4. Controls and Procedures
    
    
    27PART II. Other InformationItem 1. Legal Proceedings
    
    
    28Item 1A. Risk Factors
    
    
    28Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 3. Defaults upon Senior Securities
    
    
    28Item 4. Submission of Matters to a Vote of Security Holders
    
    
    28Item 5. Other Information
    
    
    28Item 6. Exhibits
    
    
    28Signatures
    
    
    29




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##### 



March 31,
    
    
    December 31,2009
    
    
    2008ASSETSCash and due from financial institutions
    
    $
    2,569,591
    
    
    $
    3,192,789Interest-bearing deposits in other financial institutions
    
    
    19,988,716
    
    
    
    2,479,012Cash and cash equivalents
    
    
    22,558,307
    
    
    
    5,671,801SecuritiesAvailable for sale (at fair value)
    
    
    20,753,522
    
    
    
    18,769,970Held to maturity (fair value of $6,660,524 at March 31, 2009 and
$6,706,991 at December 31, 2008)
    
    
    6,605,141
    
    
    
    6,609,620Total securities
    
    
    27,358,663
    
    
    
    25,379,590Loans held for sale
    
    
    1,173,289
    
    
    
    2,354,956Loans
    
    
    196,997,658
    
    
    
    205,153,203Less: Allowance for loan losses
    
    
    2,739,408
    
    
    
    4,350,903Net loans
    
    
    194,258,250
    
    
    
    200,802,300Federal Home Loan Bank stock
    
    
    404,100
    
    
    
    404,100Premises and equipment, net
    
    
    11,715,025
    
    
    
    11,869,741Accrued interest receivable
    
    
    948,609
    
    
    
    1,004,552Foreclosed assets
    
    
    6,259,616
    
    
    
    5,884,093Other assets
    
    
    2,432,673
    
    
    
    2,240,831$
    267,108,532
    
    
    $
    255,611,964LIABILITIES AND SHAREHOLDERS EQUITYDepositsNon-interest bearing
    
    $
    20,860,888
    
    
    $
    19,135,831Interest bearing
    
    
    210,686,901
    
    
    
    200,429,709Total deposits
    
    
    231,547,789
    
    
    
    219,565,540Federal funds purchased and repurchase agreements
    
    
    5,653,402
    
    
    
    5,813,605Federal Home Loan Bank advances
    
    
    6,000,000
    
    
    
    6,000,000Subordinated debentures
    
    
    4,500,000
    
    
    
    4,500,000Notes payable
    
    
    4,200,000
    
    
    
    4,200,000Accrued expenses and other liabilities
    
    
    603,893
    
    
    
    586,365Total liabilities
    
    
    252,505,084
    
    
    
    240,665,510Shareholders equityPreferred stock, no par value 1,000,000
Shares authorized, none issued
    
    
    0
    
    
    
    0Common stock, no par value; 9,000,000 shares authorized; 1,468,800
issued and outstanding March 31, 2009 and December 31, 2008
    
    
    13,296,691
    
    
    
    13,296,691Retained earnings
    
    
    957,170
    
    
    
    1,228,084Accumulated other comprehensive income
    
    
    349,587
    
    
    
    421,679Total shareholders equity
    
    
    14,603,448
    
    
    
    14,946,454Total liabilities and shareholders equity
    
    $
    267,108,532
    
    
    $
    255,611,964
  - 1 -




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##### 



Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31, 2009
    
    
    March 31, 2008Interest and dividend incomeLoans, including fees
    
    $
    3,171,300
    
    
    $
    4,145,502Securities and FHLB dividends
    
    
    261,069
    
    
    
    215,494Federal funds sold and other income
    
    
    5,695
    
    
    
    84,377Total interest income
    
    
    3,438,064
    
    
    
    4,445,373Interest expenseDeposits
    
    
    1,679,238
    
    
    
    2,352,255Repurchase agreements, federal funds purchased,
and other debt
    
    
    7,125
    
    
    
    22,102Federal Home Loan Bank advances and subordinated debentures
    
    
    169,455
    
    
    
    220,569Total interest expense
    
    
    1,855,818
    
    
    
    2,594,926Net interest income
    
    
    1,582,246
    
    
    
    1,850,447Provision for loan losses
    
    
    348,243
    
    
    
    230,716Net interest income after provision for loan losses
    
    
    1,234,003
    
    
    
    1,619,731Noninterest incomeService charges on deposit accounts
    
    
    224,376
    
    
    
    231,083Gain on sale of loans
    
    
    101,290
    
    
    
    144,763Gain on sale of securities
    
    
    129,107
    
    
    
    0Gain on sale of other real estate owned
    
    
    0
    
    
    
    142,324Other
    
    
    121,932
    
    
    
    124,364Total noninterest income
    
    
    576,705
    
    
    
    642,534Noninterest expenseSalaries and employee benefits
    
    
    1,121,402
    
    
    
    1,222,387Occupancy
    
    
    174,285
    
    
    
    175,780Furniture and equipment
    
    
    168,572
    
    
    
    171,562Advertising
    
    
    18,731
    
    
    
    25,229Data processing
    
    
    122,182
    
    
    
    114,473Professional services
    
    
    110,280
    
    
    
    159,654Foreclosed asset impairment
    
    
    83,412
    
    
    
    0Other
    
    
    450,113
    
    
    
    369,926Total noninterest expense
    
    
    2,248,977
    
    
    
    2,239,011Income (loss) before federal income taxes
    
    
    (438,269
    )
    
    
    23,254Federal income benefit
    
    
    (167,355
    )
    
    
    (8,679
    )Net Income (loss)
    
    $
    (270,914
    )
    
    $
    31,933Comprehensive Income (loss)
    
    $
    (343,006
    )
    
    $
    190,781Weighted average shares outstanding
    
    
    1,468,800
    
    
    
    1,468,800Diluted average shares outstanding
    
    
    1,468,800
    
    
    
    1,468,800Basic earnings per share
    
    $
    (0.18
    )
    
    $
    0.02Diluted earnings per share
    
    $
    (0.18
    )
    
    $
    0.02
  - 2 -




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##### 



AccumulatedOther
    
    
    TotalCommon
    
    
    Retained
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Stock
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBalance at January 1, 2008
    
    
    1,468,800
    
    
    $
    13,296,691
    
    
    $
    2,255,543
    
    
    $
    62,091
    
    
    $
    15,614,325Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    31,933
    
    
    
    
    
    
    
    31,933Unrealized gain on securities
available-for-sale, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    158,848
    
    
    
    158,848Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190,781Balance at March 31, 2008
    
    
    1,468,800
    
    
    $
    13,296,691
    
    
    $
    2,287,476
    
    
    $
    220,939
    
    
    $
    15,805,106Balance at January 1, 2009
    
    
    1,468,800
    
    
    $
    13,296,691
    
    
    $
    1,228,084
    
    
    $
    421,679
    
    
    $
    14,946,454Comprehensive income:Net loss
    
    
    
    
    
    
    
    
    
    
    (270,914
    )
    
    
    
    
    
    
    (270,914
    )Unrealized loss on securities
available-for-sale, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (72,092
    )
    
    
    (72,092
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (343,006
    )Balance at March 31, 2009
    
    
    1,468,800
    
    
    $
    13,296,691
    
    
    $
    957,170
    
    
    $
    349,587
    
    
    $
    14,603,448
  - 3 -




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##### 



Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31, 2009
    
    
    March 31, 2008Cash flows from operating activitiesNet Income (loss)
    
    $
    (270,914
    )
    
    $
    31,933Adjustments to reconcile net income to net cash
from operating activitiesProvision for loan losses
    
    
    348,243
    
    
    
    230,716Depreciation and amortization
    
    
    174,441
    
    
    
    175,279Net amortization of securities
    
    
    14,989
    
    
    
    1,885Gain on sale of securities
    
    
    (129,107
    )
    
    
    0Gain on sale of loans
    
    
    (101,290
    )
    
    
    (144,763
    )Gain on sale of other real estate owned
    
    
    0
    
    
    
    (142,324
    )Foreclosed asset impairment
    
    
    83,412
    
    
    
    0Originations of loans for sale
    
    
    (7,476,793
    )
    
    
    (9,075,712
    )Proceeds from loan sales
    
    
    8,759,750
    
    
    
    9,361,728Net change in:Accrued interest receivable and other assets
    
    
    (98,758
    )
    
    
    (7,731
    )Accrued interest payable and other liabilities
    
    
    17,528
    
    
    
    49,648Net cash from (used in) operating activities
    
    
    1,321,501
    
    
    
    480,659Cash flows from investing activitiesActivity in available-for-sale securities:Sales
    
    
    1,596,050
    
    
    
    0Maturities, prepayments and calls
    
    
    1,590,925
    
    
    
    573,168Purchases
    
    
    (5,161,163
    )
    
    
    (534,500
    )Loan originations and payments, net
    
    
    5,736,872
    
    
    
    5,878,398Additions to premises and equipment, net
    
    
    (19,725
    )
    
    
    (4,595
    )Proceeds from the sale of other real estate owned
    
    
    0
    
    
    
    397,943Net cash from (used in) investing activities
    
    
    3,742,959
    
    
    
    6,310,414Cash flow from financing activitiesNet change in deposits
    
    
    11,982,249
    
    
    
    4,816,830Net change in federal funds purchased and
repurchase agreements
    
    
    (160,203
    )
    
    
    248,727Paydowns on notes payable and line of credit
    
    
    0
    
    
    
    (6,043
    )Net cash from (used in) financing activities
    
    
    11,822,046
    
    
    
    5,059,514Net change in cash and cash equivalents
    
    
    16,886,506
    
    
    
    11,850,587Beginning cash and cash equivalents
    
    
    5,671,801
    
    
    
    7,876,916Ending cash and cash equivalents
    
    $
    22,558,307
    
    
    $
    19,727,503Supplemental cash flow information:Cash paid during the period for interest
    
    $
    1,926,780
    
    
    $
    2,511,981Cash paid for federal income tax
    
    
    0
    
    
    
    0Transfers from loans to foreclosed assets during the period
    
    
    458,935
    
    
    
    1,380,890
  - 4 -




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##### 



1.
    
    BASIS OF PRESENTATION AND RECENT ACCOUNTING DEVELOPMENTS:The unaudited, consolidated financial statements as of and for the three months ended March
31, 2009 include the consolidated results of operations of Community Shores Bank Corporation
(Company) and its wholly-owned subsidiaries, Community Shores Bank (Bank) and Community
Shores Financial Services, and a wholly-owned subsidiary of the Bank, Community Shores
Mortgage Company (Mortgage Company). Community Shores Capital Trust I (the Trust) is
not consolidated and exists solely to issue capital securities. These consolidated financial
statements have been prepared in accordance with the instructions for Form 10-Q and Article
8 of Regulation S-X 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 March 31, 2009 should not
be considered as indicative of results for a full year. For further information, refer to
the consolidated financial statements and footnotes included in the Companys annual report
on Form 10-K for the period ended December 31, 2008. Some items in the prior year financial
statements may be reclassified to conform to the current presentation.In December 2007, the FASB issued FAS No. 141 (revised 2007), Business Combinations(FAS
141(R)), which establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the liabilities
assumed, and any noncontrolling interest in an acquiree, including the recognition and
measurement of goodwill acquired in a business combination. FAS No. 141(R) is effective for
fiscal years beginning on or after December 15, 2008. The adoption of this standard had no
effect on the Companys results of operations or financial position.In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interest in Consolidated
Financial Statements, an amendment of ARB No. 51 (SFAS No. 160), which will change the
accounting and reporting for minority interests, which will be recharacterized as
noncontrolling interests and classified as a component of equity within the consolidated
balance sheets. FAS No. 160 is effective as of the beginning of the first fiscal year
beginning on or after December 15, 2008. The adoption of FAS No. 160 had no impact on the
Companys results of operations or financial position.
 - 5 -




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##### 



1.
    
    BASIS OF PRESENTATION AND RECENT ACCOUNTING DEVELOPMENTS (Continued):In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities, an amendment of SFAS No. 133. FAS No. 161 amends and expands the
disclosure requirements of SFAS No. 133 for derivative instruments and hedging activities.
FAS No. 161 requires qualitative disclosure about objectives and strategies for using
derivative and hedging instruments, quantitative disclosures about fair value amounts of the
instruments and gains and losses on such instruments, as well as disclosures about
credit-risk features in derivative agreements. FAS No. 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November 15, 2008.
The adoption of this standard had no effect on the Companys results of operations or
financial position.In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities. This FSP
addresses whether these types of instruments are participating prior to vesting and,
therefore need to be included in the earning allocation in computing earnings per share
under the two class method described in FASB Statement No. 128, Earnings Per Share. This
FSP is effective for fiscal years beginning after December 15, 2008, and interim
periods within those years. All prior-period earnings per share data presented shall be
adjusted retrospectively. The adoption of this FSP on January 1, 2009 had no effect on the
Companys results of operations or financial position.Recently Issued and Not Yet Effective Accounting Standards: In April 2009, the FASB
issued Staff Position (FSP) No. 115-2 and No. 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments, which amends existing guidance for determining whether
impairment is other-than-temporary for debt securities. The FSP requires an entity to
assess whether it intends to sell, or it is more likely than not that it will be required to
sell a security in an unrealized loss position before recovery of its amortized cost basis.
If either of these criteria is met, the entire difference between amortized cost and fair
value is recognized in earnings. For securities that do not meet the above criteria, the
amount of impairment recognized in earnings is limited to the amount related to credit
losses, while impairment related to other factors is recognized in other comprehensive
income. Additionally, the FSP expands and increases the frequency of existing disclosures
about other-than-temporary impairments for debt and equity securities. This FSP is
effective for interim and annual reporting periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. The Company plans to adopt this
FSP in the second quarter, however, does not expect the adoption to have a material effect
on the results of operations or financial position.
 - 6 -




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##### 



1.
    
    BASIS OF PRESENTATION AND RECENT ACCOUNTING DEVELOPMENTS (Continued):In April 2009, the FASB issued Staff Position (FSP) No. 157-4, Determining Fair Value When
the Volume and Level of Activity for the Asset and Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly. This FSP emphasizes that even if there
has been a significant decrease in the volume and level of activity, the objective of a fair
value measurement remains the same. Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction (that is, not a forced
liquidation or distressed sale) between market participants. The FSP provides a number of
factors to consider when evaluating whether there has been a significant decrease in the
volume and level of activity for an asset or liability in relation to normal market
activity. In addition, when transactions or quoted prices are not considered orderly,
adjustments to those prices based on the weight of available information may be needed to
determine the appropriate fair value. The FSP also requires increased disclosures. This
FSP is effective for interim and annual reporting periods ending after June 15, 2009, and
shall be applied prospectively. Early adoption is permitted for periods ending after March
15, 2009. The Company plans to adopt this FSP in the second quarter, however, does not
expect the adoption to have a material effect on the results of operations or financial
position.In April 2009, the FASB issued Staff Position (FSP) No. 107-1 and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments. This FSP amends FASB Statement No.
107, Disclosures about Fair Value of Financial Instruments, to require disclosures about
fair value of financial instruments for interim reporting periods of publicly traded
companies that were previously only required in annual financial statements. This FSP is
effective for interim reporting periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009. The Company plans to adopt this FSP in
the second quarter.2.
    
    SECURITIESThe following tables represent the securities held in the Companys portfolio at
March 31, 2009 and at December 31, 2008:
 Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    FairMarch 31, 2009
    
    Cost
    
    Gains
    
    Losses
    
    ValueAvailable for sale:US Government and federal agency
    
    
    
    
    
    $
    142,930
    
    
    $
    (245
    )
    
    $
    9,432,344Municipal securities
    
    
    
    
    
    
    11,413
    
    
    
    0
    
    
    
    879,699Mortgage-backed securities
    
    
    
    
    
    
    378,527
    
    
    
    (2,948
    )
    
    
    10,441,479532,870
    
    
    
    (3,193
    )
    
    
    20,753,522Held to maturity:Municipal securities
    
    $
    6,605,141
    
    
    
    87,945
    
    
    
    (32,562
    )
    
    
    6,660,524
 - 7 -




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##### 



2.
    
    SECURITIES (Continued)
 Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    FairDecember 31, 2008
    
    Cost
    
    Gains
    
    Losses
    
    ValueAvailable for sale:US Government and federal agency
    
    
    
    
    
    $
    297,146
    
    
    $
    0
    
    
    $
    6,906,470Municipal securities
    
    
    
    
    
    
    20,879
    
    
    
    0
    
    
    
    890,542Mortgage-backed securities
    
    
    
    
    
    
    326,285
    
    
    
    (5,402
    )
    
    
    10,972,958644,310
    
    
    
    (5,402
    )
    
    
    18,769,970Held to maturity:Municipal securities
    
    $
    6,609,620
    
    
    $
    105,373
    
    
    $
    (8,002
    )
    
    $
    6,706,991
 The Company evaluates securities for other-than-temporary impairment on a quarterly basis.
No unrealized losses have been recognized into income as a result. In performing the
evaluation, consideration is given to the length of time and the extent to which the fair
value has been less than cost, the intent and ability of the Company to retain its
investment in the issuer for a period of time sufficient to allow for any anticipated
recovery in fair value and whether the securities are issued by the federal government or
its agencies.At March 31, 2009, nine debt securities had unrealized losses with aggregate depreciation of
1.14% from the Companys amortized cost basis. Four of the nine securities are issued by
government agencies. As the Company has the ability to hold these debt securities until
maturity, or for the foreseeable future if classified as available for sale, no declines are
deemed to be other-than-temporary.Below is the schedule of maturities for investments held at March 31, 2009:
 Available for Sale
    
    Held to MaturityFair
    
    Amortized
    
    FairValue
    
    Cost
    
    ValueDue in one year or less
    
    $
    221,192
    
    
    $
    0
    
    
    $
    0Due from one to five years
    
    
    8,872,002
    
    
    
    1,773,999
    
    
    
    1,823,752Due in more than five years
    
    
    1,218,849
    
    
    
    4,831,142
    
    
    
    4,836,772Mortgage-backed
    
    
    10,441,479
    
    
    
    0
    
    
    
    0$
    20,753,522
    
    
    $
    6,605,141
    
    
    $
    6,660,524
 - 8 -




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##### 



3.
    
    LOANSThe components of the outstanding loan balances:
 March 31, 2009
    
    December 31, 2008Balance
    
    BalanceCommercial
    
    $
    74,474,966
    
    
    $
    76,710,342Real Estate:Commercial
    
    
    76,391,377
    
    
    
    81,257,794Residential
    
    
    16,235,030
    
    
    
    16,275,219Construction
    
    
    3,720,781
    
    
    
    3,850,176Consumer
    
    
    26,251,984
    
    
    
    27,146,251197,074,138
    
    
    
    205,239,782Less: allowance for loan losses
    
    
    (2,739,408
    )
    
    
    (4,350,903
    )Net deferred loan fees
    
    
    (76,480
    )
    
    
    (86,579
    )$
    194,258,250
    
    
    $
    200,802,300
 Loans held for sale totaled $1,173,289 at March 31, 2009 and $2,354,956 at December 31,
2008.
 4.
    
    ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANSThe following is a summary of activity in the allowance for loan losses for the three month
periods ended March 31, 2009 and 2008:
 Three Months
    
    
    Three MonthsEnded
    
    
    Ended03/31/09
    
    
    03/31/08Beginning Balance
    
    $
    4,350,903
    
    
    $
    3,602,948Charge-offsCommercial
    
    
    (1,909,893
    )
    
    
    (178,538
    )Real Estate-Commercial
    
    
    (38,602
    )
    
    
    (50,000
    )Real Estate-Residential
    
    
    0
    
    
    
    (10,276
    )Consumer
    
    
    (31,504
    )
    
    
    (83,735
    )Total Charge-offs
    
    
    (1,979,999
    )
    
    
    (322,549
    )RecoveriesCommercial
    
    
    9,818
    
    
    
    1,576Real Estate- Commercial
    
    
    150
    
    
    
    0Consumer
    
    
    10,293
    
    
    
    11,909Total Recoveries
    
    
    20,261
    
    
    
    13,485Provision for loan losses
    
    
    348,243
    
    
    
    230,716Ending Balance
    
    $
    2,739,408
    
    
    $
    3,524,600
 - 9 -




---



##### 



4.
    
    ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS (Continued):Impaired loans were as follows:
 March 31,
    
    
    December 31,2009
    
    
    2008End of period loans with no allocated allowance for loan losses
    
    $
    5,540,848
    
    
    $
    2,684,532End of period loans with allocated allowance for loan losses
    
    
    5,611,716
    
    
    
    9,092,437Total
    
    $
    11,152,564
    
    
    $
    11,776,969Amount of the allowance for loan losses allocated
    
    $
    680,593
    
    
    $
    2,465,185
 Three Months
    
    Three MonthsEnded
    
    Ended3/30/09
    
    3/30/08Average of impaired loans during the period:
    
    $
    10,852,661
    
    
    $
    11,546,904Interest income recognized during impairment:
    
    
    93,771
    
    
    
    193,486Cash-basis interest income recognized:
    
    
    68,565
    
    
    
    45,756
 Non-performing loans were as follows:
 March 31,
    
    December 31,2009
    
    2008Loans past due over 90 days still on accrual
    
    $
    589,670
    
    
    $
    79,828Non-accrual loans
    
    
    5,401,995
    
    
    
    5,779,835
 Non-performing loans and impaired loans are defined differently. Some loans may be included
in both categories, whereas other loans may only be included in one category.5.
    
    FORECLOSED ASSETSOther real estate owned activity:
 March 31,
    
    
    March 31,2009
    
    
    2008Beginning of year
    
    $
    5,884,093
    
    
    $
    567,000Additions
    
    
    458,935
    
    
    
    1,380,890Proceeds from sales
    
    
    0
    
    
    
    (255,619
    )Direct write-downs
    
    
    (83,412
    )
    
    
    0End of period
    
    $
    6,259,616
    
    
    $
    1,692,271
 Expenses related to foreclosed assets include:
 March 31,
    
    March 31,2009
    
    2009Operating expenses, net of rental income
    
    $
    39,391
    
    
    $
    4,489
 - 10 -




---



##### 



6.
    
    PREMISES AND EQUIPMENTPeriod end premises and equipment were as follows:
 March 31,
    
    
    December 31,2009
    
    
    2008Land & land improvements
    
    $
    5,447,328
    
    
    $
    5,447,328Buildings & building improvements
    
    
    5,959,371
    
    
    
    5,959,371Furniture, fixtures and equipment
    
    
    3,587,487
    
    
    
    3,587,487Construction in Process
    
    
    43,179
    
    
    
    23,45415,037,365
    
    
    
    15,017,640Less: accumulated depreciation
    
    
    3,322,340
    
    
    
    3,147,899$
    11,715,025
    
    
    $
    11,869,741
 7.
    
    DEPOSITSThe components of the outstanding deposit balances at March 31, 2009 and December 31, 2008
were as follows:
 March 31, 2009
    
    December 31, 2008Balance
    
    BalanceNon-interest bearingDemand
    
    $
    20,860,888
    
    
    $
    19,135,831Interest bearingChecking
    
    
    26,406,521
    
    
    
    16,327,722Money Market
    
    
    18,804,864
    
    
    
    18,784,620Savings
    
    
    11,752,959
    
    
    
    10,891,294Time, under $100,000
    
    
    37,364,329
    
    
    
    40,384,321Time, over $100,000
    
    
    116,358,228
    
    
    
    114,041,752Total Deposits
    
    $
    231,547,789
    
    
    $
    219,565,540
 8.
    
    SHORT-TERM BORROWINGSThe Companys short-term borrowings typically consist of repurchase agreements and federal
funds purchased. The March 31, 2009 and December 31, 2008 information was as follows:
 Repurchase
    
    Federal Funds
    
    BorrowingsAgreements
    
    Purchased
    
    From FRBOutstanding at March 31, 2009
    
    $
    5,653,402
    
    
    $
    0
    
    
    $
    0Average interest rate at period end
    
    
    0.66
    %
    
    
    0.00
    %
    
    
    0.00
    %Average balance during period
    
    
    5,275,074
    
    
    
    0
    
    
    
    15,000Average interest rate during period
    
    
    0.54
    %
    
    
    0.00
    %
    
    
    0.49
    %Maximum month end balance during period
    
    
    5,653,402
    
    
    
    0
    
    
    
    0Outstanding 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
 - 11 -




---



##### 



9.
    
    FEDERAL HOME LOAN BANK BORROWINGSThe Bank is 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 an additional $1,159,560. Each borrowing
requires a direct pledge of securities or loans. At March 31, 2009,
the Bank had assets with a market value of $8,834,903 pledged to the
Federal Home Loan Bank to support current borrowings. Details of the
Banks outstanding borrowings are:
 Current
    
    March 31,
    
    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
 10.
    
    SUBORDINATED DEBENTURESCommunity Shores Capital Trust I (the Trust), a business trust formed by the Company, sold
4,500 Cumulative Preferred Securities (trust preferred securities) at $1,000 per security
in a December 2004 offering. The proceeds from the sale of the trust preferred securities
were used by the Trust to purchase an equivalent amount of subordinated debentures from the
Company. The trust preferred securities and subordinated debentures carry a floating rate of
2.05% over the 3-month LIBOR and was 3.28% at March 31, 2009. The stated maturity is
December 30, 2034. The securities are redeemable at par after five years and are, in effect,
guaranteed by the Company. Interest on the subordinated debentures is payable quarterly on
March 30th, June 30th, September 30th and December
30th. Under certain circumstances, interest payments may be deferred up to 20
calendar quarters. However, during any such deferrals, interest accrues on any unpaid
distributions. The subordinated debentures are carried on the Companys consolidated balance
sheet as a liability and the interest expense is recorded on the Companys consolidated
statement of income.11.
    
    NOTES PAYABLEThe Company has a $5 million revolving line of credit with Fifth Third Bank (Fifth Third).
The total balance outstanding at March 31, 2009 and December 31, 2008 was $4,200,000. The
outstanding principal bears interest at a rate of 100 basis points above Fifth Thirds prime
rate. The current interest rate on the outstanding principal balance is 4.25%. Interest is
owed quarterly in arrears on the first business day of February, May, August, and November
until the principal of this note is paid. The borrowings may be prepaid in whole or in part
without any prepayment fee. The note has a maturity date of September 1, 2009. The terms of
the note may change at the time of renegotiation but it is managements intention to retain
an active line of credit.
 - 12 -




---



##### 



12.
    
    COMMITMENTS AND OFF-BALANCE SHEET RISKSome financial arrangements, such as loan commitments, credit lines, letters of credit, and
overdraft protection are used to meet customer financing needs. These financial instruments
involve, to varying degrees, credit and interest-rate risk in excess of the amount reported
in the financial statements. Commitments to extend credit are agreements to provide credit
or to support the credit of others, as long as conditions established in the contract are
met, and usually have expiration dates. Since many of the above commitments on lines of
credit and letters of credit expire without being used, the above amounts related to those
categories do not necessarily represent future cash commitments. Off-balance sheet risk to
credit loss exists up to the face amount of these instruments, although material losses are
not anticipated. The same credit policies are used to make such commitments as are used for
loans, including obtaining collateral at exercise of the commitment.A summary of the notional and contractual amounts of outstanding financing arrangements with
off-balance-sheet risk as of March 31, 2009 and December 31, 2008 follows:
 March 31,
    
    December 31,2009
    
    2008Unused lines of credit and letters of credit
    
    $
    27,580,026
    
    
    $
    30,622,425Commitments to make loans
    
    
    423,378
    
    
    
    80,758
 Commitments to make loans are generally made for periods of 60 days or less. Commitments may
expire without being used. Lines and letters of credit have various terms which are
generally longer than one year.
 13.
    
    FAIR VALUE OPTION AND FAIR VALUE MEASUREMENTSStatement 157 defines fair value as the exchange price that would be received for an asset
or paid to transfer a liability (an exit price) in the principal or most advantageous market
for the asset or liability in an orderly transaction between market participants on the
measurement date. Statement 157 establishes a fair value hierarchy which requires an entity
to maximize the use of observable inputs and minimize the use of unobservable inputs when
measuring fair value. The statement describes three levels of inputs that may be used to
measure fair value.Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets
that the entity has the ability to access as of the measurement date.Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices
for similar assets or liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable market data.
 - 13 -




---



##### 



13.
    
    FAIR VALUE OPTION AND FAIR VALUE MEASUREMENTS (Continued)Level 3: Significant unobservable inputs that reflect a reporting entitys own assumptions
about the assumptions that market participants would use in pricing an asset or liability.The Company used the following methods and significant assumptions to estimate fair value.Securities: The fair values of securities are obtained from a third party who utilizes
quoted prices on nationally recognized securities exchanges or matrix pricing, which is a
mathematical technique used widely in the industry to value debt securities without relying
exclusively on quoted prices for the specific securities but rather by relying on the
securities relationship to other benchmark quoted securities.Servicing rights: The fair value of SBA servicing rights is obtained from a third party. The
individual servicing rights are valued individually taking into consideration the original
term to maturity, the current age of the loan and the remaining term to maturity. Their
valuation methodology utilized for the servicing rights begins with generating future cash
flows for each servicing asset, based on its unique characteristics and market-based
assumptions for prepayment speeds. The present value of the future cash flows are then
calculated utilizing the vendors market-based discount rate assumption.Assets and liabilities measured at fair value on a recurring basis are summarized below for
the periods ended March 31, 2009 and December 31, 2008:
 Fair Value Measurements at March 31, 2009 UsingQuoted Prices in
    
    SignificantActive Markets
    
    Other
    
    Significantfor Identical
    
    Observable
    
    UnobservableMarch 31,
    
    Assets
    
    Inputs
    
    Inputs2009
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:Available for sale securities
    
    $
    20,753,522
    
    
    $
    4,105,859
    
    
    $
    16,647,663
    
    
    $
    0Servicing assets
    
    
    43,040
    
    
    
    0
    
    
    
    43,040
    
    
    
    0
 Fair Value Measurements at December 31, 2008 UsingQuoted Prices in
    
    SignificantActive Markets
    
    Other
    
    Significantfor Identical
    
    Observable
    
    UnobservableDecember 31,
    
    Assets
    
    Inputs
    
    Inputs2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:Available for sale securities
    
    $
    18,769,970
    
    
    $
    553,000
    
    
    $
    18,236,970
    
    
    $
    0Servicing assets
    
    
    42,365
    
    
    
    0
    
    
    
    42,365
    
    
    
    0
 - 14 -




---



##### 



13.
    
    FAIR VALUE OPTION AND FAIR VALUE MEASUREMENTS (Continued)Assets and liabilities measured at fair value on a non-recurring basis are summarized below
for the periods ended March 31, 2009 and December 31, 2008:
 Fair Value Measurements at March 31, 2009 UsingSignificantQuoted Prices in
    
    Other
    
    SignificantActive Markets for
    
    Observable
    
    UnobservableMarch 31,
    
    Identical Assets
    
    Inputs
    
    Inputs2009
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:Impaired loans
    
    $
    4,931,123
    
    
    
    0
    
    
    
    0
    
    
    $
    4,931,123Other Real Estate Owned
    
    
    1,584,452
    
    
    
    
    
    
    
    
    
    
    
    1,584,452
 Fair Value Measurements at December 31, 2008 UsingSignificantQuoted Prices in
    
    Other
    
    SignificantActive Markets for
    
    Observable
    
    UnobservableDecember 31,
    
    Identical Assets
    
    Inputs
    
    Inputs2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:Impaired loans
    
    $
    6,627,252
    
    
    
    0
    
    
    
    0
    
    
    $
    6,627,252
 The following represents impairment charges recognized during the first quarter of 2008:Impaired loans, which are collateral dependent loans, are measured using the fair value of
the collateral. At March 31, 2009, impaired loans had a carrying amount of $5,611,716, with
a valuation allowance of $680,593 compared to impaired loans with a carrying value of
$9,092,437 and a valuation allowance of $2,465,185 at December 31, 2008. The fair values of
the collateral on these loans were determined primarily using independent appraisals and are
adjusted for anticipated disposition costs.At March 31, 2009, other real estate owned carried at fair value was $1,584,452. During the
period ended March 31, 2009, nine properties included in this total were written down by
$83,000. There were also five properties totaling $459,000 (at fair value) added to other
real estate owned during this period.14.
    
    REGULATORY MATTERSBanks 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. Failure to meet various capital requirements can
initiate regulatory action.Prompt corrective action regulations provide five classifications, including well
capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and
critically undercapitalized, although these terms are not used to represent overall
financial condition. If a bank is not well capitalized, regulatory approval is required to
 - 15 -




---



##### 



14.
    
    REGULATORY MATTERS (Continued)accept brokered deposits. Subject to limited exceptions, a bank may not make a capital
distribution if, after making the distribution, it would be
undercapitalized. If a bank is undercapitalized, it is subject to being closely monitored by its principal federal
regulator, its asset growth and expansion are restricted, and plans for capital restoration
are required. In addition, further specific types of restrictions may
be imposed on the bank at the discretion of the federal regulator. The Bank was designated as well-capitalized
under the regulatory framework for prompt corrective action at both March 31, 2009 and
December 31, 2008.Actual and required capital amounts and ratios at March 31, 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
    
    
    RatioMarch 31. 2009Total Capital (Tier 1 and Tier 2) to risk weighted assets of the Bank
    
    $
    24,205,490
    
    
    
    11.08
    %
    
    $
    17,481,096
    
    
    
    8.00
    %
    
    $
    21,851,370
    
    
    
    10.00Tier 1 (Core) Capital to risk-weighted assets of the Bank
    
    
    21,473,970
    
    
    
    9.83
    
    
    
    8,740,548
    
    
    
    4.00
    
    
    
    13,110,822
    
    
    
    6.00Tier 1 (Core) Capital to average assets of the Bank
    
    
    21,473,970
    
    
    
    8.35
    
    
    
    10,288,245
    
    
    
    4.00
    
    
    
    12,860,306
    
    
    
    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
    
    
    
    10.00Tier 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
 - 16 -




---



##### 



COMMUNITY SHORES BANK CORPORATION
 
     FINANCIAL CONDITION
   - 17 -




---



##### 



COMMUNITY SHORES BANK CORPORATION
     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. - 18 -




---



##### 



COMMUNITY SHORES BANK CORPORATION
 Within
    
    Three to
    
    One to
    
    AfterThree
    
    Twelve
    
    Five
    
    FiveMonths
    
    Months
    
    Years
    
    Years
    
    TotalCommercial, financial and other
    
    $
    19,228,136
    
    
    $
    30,729,042
    
    
    $
    21,942,273
    
    
    $
    2,499,035
    
    
    $
    74,398,486Real estate:Commercial
    
    
    14,083,917
    
    
    
    15,796,908
    
    
    
    44,646,177
    
    
    
    1,864,375
    
    
    
    76,391,377Construction
    
    
    964,910
    
    
    
    1,741,872
    
    
    
    22,714
    
    
    
    991,285
    
    
    
    3,720,781Residential
    
    
    116,998
    
    
    
    396,922
    
    
    
    2,455,700
    
    
    
    13,265,410
    
    
    
    16,235,030Consumer
    
    
    1,151,298
    
    
    
    3,605,666
    
    
    
    17,026,037
    
    
    
    4,468,983
    
    
    
    26,251,984$
    35,545,259
    
    
    $
    52,270,410
    
    
    $
    86,092,901
    
    
    $
    23,089,088
    
    
    $
    196,997,658Loans at fixed rates
    
    $
    5,312,427
    
    
    $
    23,701,713
    
    
    $
    77,945,211
    
    
    $
    22,083,157
    
    
    $
    129,042,508Loans at variable rates
    
    
    30,232,832
    
    
    
    28,568,697
    
    
    
    8,147,690
    
    
    
    1,005,931
    
    
    
    67,955,150$
    35,545,259
    
    
    $
    52,270,410
    
    
    $
    86,092,901
    
    
    $
    23,089,088
    
    
    $
    196,997,658
    - 19 -




---



##### 



COMMUNITY SHORES BANK CORPORATION
   March 31, 2009
    
    December 31, 2008Percent of
    
    
    
    
    
    Percent ofLoans in Each
    
    
    
    
    
    Loans in EachCategory to
    
    
    
    
    
    Category toAmount
    
    Total Loans
    
    Amount
    
    Total LoansBalance at End of Period Applicable to:Commercial
    
    $
    1,214,337
    
    
    
    1.6
    %
    
    $
    2,640,269
    
    
    
    3.4
    %Real estate:Commercial
    
    
    1,101,004
    
    
    
    1.4
    
    
    
    1,237,913
    
    
    
    1.5Residential
    
    
    77,967
    
    
    
    .05
    
    
    
    104,033
    
    
    
    0.6Construction
    
    
    42,789
    
    
    
    1.9
    
    
    
    49,667
    
    
    
    1.3Consumer
    
    
    303,311
    
    
    
    1.2
    
    
    
    319,021
    
    
    
    1.2Total
    
    $
    2,739,408
    
    
    
    1.4
    %
    
    $
    4,350,903
    
    
    
    2.1
    %
  March 31,
    
    
    December 31,
    
    
    Increase2009
    
    
    2008
    
    
    (Decrease)Loans Past Due:30-59 days
    
    
    $
    4,148,897
    
    
    $
    3,182,098
    
    
    $
    966,79960-89 days
    
    
    
    2,473,356
    
    
    
    1,257,315
    
    
    
    1,216,04190 days and greater
    
    
    
    589,670
    
    
    
    79,828
    
    
    
    509,842Non accrual loans
    
    
    
    5,401,995
    
    
    
    5,779,835
    
    
    
    (377,840
    )
    - 20 -




---



##### 



COMMUNITY SHORES BANK CORPORATION
        - 21 -




---



##### 



COMMUNITY SHORES BANK CORPORATION
    RESULTS OF OPERATIONS
    - 22 -




---



##### 



COMMUNITY SHORES BANK CORPORATION
 Three months ended March 31:2009
    
    2008Average
    
    
    
    
    
    Average
    
    Average
    
    
    
    
    
    AverageBalance
    
    Interest
    
    Yield/Rate
    
    Balance
    
    Interest
    
    Yield/RateAssetsFederal funds sold and interest-
bearing deposits with banks
    
    $
    12,130,042
    
    
    $
    5,695
    
    
    
    0.19
    %
    
    $
    11,172,789
    
    
    $
    84,377
    
    
    
    3.02
    %Securities (including FHLB stock)1
    
    
    26,132,581
    
    
    
    299,362
    
    
    
    4.58
    
    
    
    20,318,598
    
    
    
    252,297
    
    
    
    4.97Loans 2
    
    
    201,236,490
    
    
    
    3,171,300
    
    
    
    6.30
    
    
    
    230,778,019
    
    
    
    4,145,502
    
    
    
    7.19239,499,113
    
    
    
    3,476,357
    
    
    
    5.81
    
    
    
    262,269,406
    
    
    
    4,482,176
    
    
    
    6.84Other assets
    
    
    18,468,942
    
    
    
    
    
    
    
    
    
    
    
    16,807,085$
    257,968,055
    
    
    
    
    
    
    
    
    
    
    $
    279,076,491Liabilities and Shareholders EquityInterest bearing deposits
    
    $
    203,879,636
    
    
    $
    1,679,238
    
    
    
    3.29
    
    
    $
    226,767,840
    
    
    $
    2,352,255
    
    
    
    4.15Federal funds purchased and
repurchase agreements
    
    
    5,290,074
    
    
    
    7,125
    
    
    
    0.54
    
    
    
    4,370,041
    
    
    
    22,102
    
    
    
    2.02Note Payable, subordinated debentures and FHLB Advances
    
    
    14,700,000
    
    
    
    169,455
    
    
    
    4.61
    
    
    
    14,702,059
    
    
    
    220,569
    
    
    
    6.00223,869,710
    
    
    
    1,855,818
    
    
    
    3.32
    
    
    
    245,839,940
    
    
    
    2,594,926
    
    
    
    4.22Non-interest bearing deposits
    
    
    19,127,438
    
    
    
    
    
    
    
    
    
    
    
    17,056,601Other liabilities
    
    
    581,055
    
    
    
    
    
    
    
    
    
    
    
    582,747Shareholders Equity
    
    
    14,389,852
    
    
    
    
    
    
    
    
    
    
    
    15,597,203$
    257,968,055
    
    
    
    
    
    
    
    
    
    
    $
    279,076,491Net interest income (tax equivalent basis)
    
    
    
    
    
    
    1,620,539
    
    
    
    
    
    
    
    
    
    
    
    1,887,250Net interest spread on earning assets (tax
equivalent basis)
    
    
    
    
    
    
    
    
    
    
    2.49
    %
    
    
    
    
    
    
    
    
    
    
    2.62
    %Net interest margin on earning assets (tax
equivalent basis)
    
    
    
    
    
    
    
    
    
    
    2.71
    %
    
    
    
    
    
    
    
    
    
    
    2.88
    %Average interest-earning assets to average interest-bearing liabilities
    
    
    
    
    
    
    
    
    106.98
    %
    
    
    
    
    
    
    
    
    
    
    106.68
    %Tax equivalent adjustment
    
    
    
    
    
    
    38,293
    
    
    
    
    
    
    
    
    
    
    
    36,803Net interest income
    
    
    
    
    
    $
    1,582,246
    
    
    
    
    
    
    
    
    
    
    $
    1,850,447
   
 1
    
    Adjusted to fully tax equivalent basis.2
    
    Includes loans held for sale and non-accrual loans. - 23 -




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##### 



COMMUNITY SHORES BANK CORPORATION
     - 24 -




---



##### 



COMMUNITY SHORES BANK CORPORATION
  Interest Rate Sensitivity PeriodWithin
    
    Three to
    
    One to
    
    AfterThree
    
    Twelve
    
    Five
    
    FiveMonths
    
    Months
    
    Years
    
    Years
    
    TotalEarning assetsInterest-bearing deposits
In other financial institutions
    
    $
    19,988,716
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    19,988,716Federal funds sold
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Securities (including FHLB stock)
    
    
    1,457,951
    
    
    
    5,597,807
    
    
    
    12,795,873
    
    
    
    7,911,132
    
    
    
    27,762,763Loan held for sale
    
    
    9,204
    
    
    
    37,116
    
    
    
    229,140
    
    
    
    897,829
    
    
    
    1,173,289Loans
    
    
    81,885,357
    
    
    
    22,737,952
    
    
    
    76,313,469
    
    
    
    16,060,880
    
    
    
    196,997,658103,341,228
    
    
    
    28,372,875
    
    
    
    89,338,482
    
    
    
    24,869,841
    
    
    
    245,922,426Interest-bearing liabilitiesSavings and checking
    
    
    56,964,344
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    56,964,344Time deposits <$100,000
    
    
    2,962,522
    
    
    
    19,273,700
    
    
    
    15,128,107
    
    
    
    0
    
    
    
    37,364,329Time deposits >$100,000
    
    
    27,753,801
    
    
    
    29,266,836
    
    
    
    59,337,591
    
    
    
    0
    
    
    
    116,358,228Repurchase agreements and
Federal funds purchased
    
    
    5,653,402
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    5,653,402Notes payable, subordinated debentures and FHLB advances
    
    
    14,700,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    14,700,000108,034,069
    
    
    
    48,540,536
    
    
    
    74,465,698
    
    
    
    0
    
    
    
    231,040,303Net asset (liability) repricing gap
    
    $
    (4,692,841
    )
    
    $
    (20,167,661
    )
    
    $
    14,872,784
    
    
    $
    24,869,841
    
    
    $
    14,882,123Cumulative net asset (liability)
Repricing gap
    
    $
    (4,692,841
    )
    
    $
    (24,860,502
    )
    
    $
    (9,987,718
    )
    
    $
    14,882,123
   - 25 -




---



##### 



COMMUNITY SHORES BANK CORPORATION
        - 26 -




---



##### 



COMMUNITY SHORES BANK CORPORATION
   
   
   - 27 -




---



##### 



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.
 - 28 -




---



##### 



COMMUNITY SHORES BANK CORPORATIONMay 15, 2009
    
    
    
    By:
    
    /s/ Heather D. BrolickDate
    
    
    
    Heather D. BrolickPresident and Chief Executive Officer(principal executive officer)May 15, 2009
    
    
    
    By:
    
    /s/ Tracey A. WelshDate
    
    
    
    Tracey A. WelshSenior Vice President, Chief Financial Officer andTreasurer (principal financial and accounting officer)
 - 29 -




---



##### 



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.
 - 30 -