11-K 1 k27666e11vk.htm COMMUNITY SHORES BANK CORPORATION 11-K COMMUNITY SHORES BANK CORPORATION 11-K
 
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
     
þ   ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 2007
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from                      to                     
Commission File Number: < >
COMMUNITY SHORES BANK 401(k) PLAN
COMMUNITY SHORES BANK CORPORATION
1030 W. NORTON AVENUE
MUSKEGON, MICHIGAN 49441
(231) 780-1800
 
 

 

 

COMMUNITY SHORES BANK 401(k) PLAN
TABLE OF CONTENTS
         
    PAGE
    1  
 
        
Financial Statements for the Years Ended December 31, 2007 and 2006
        
 
        
    2  
 
        
    3  
 
        
    4-7  
 
        
       
 
        
    8-10  
Note:   All other schedules required by Section 2520.103-10 of the Department of Labor’s Rules and Regulations for Reporting and disclosure under the Employee Retirement Income Security Act of 1974, have been omitted because they are not applicable.

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Plan Administrator and Participants
Community Shores Bank 401(k) Plan
Muskegon, Michigan
We have audited the accompanying statements of net assets available for benefits of Community Shores Bank 401(k) Plan as of December 31, 2007 and 2006, and the related statements of changes in net assets available for benefits for the years then ended and the December 31, 2007 supplemental schedule of assets (held at year end) as listed in the accompanying table of contents. These financial statements and supplemental schedule are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of Community Shores Bank 401(k) Plan as of December 31, 2007 and 2006, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The December 31, 2007 supplemental schedule of assets (held at end of year) is presented for the purpose of additional analysis and is not a required part of the basic 2007 financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan’s management. This supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic 2007 financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic 2007 financial statements taken as a whole.
/s/ Rehmann Robson
REHMANN ROBSON, P.C.
June 26, 2008
Grand Rapids, Michigan

 

 

COMMUNITY SHORES BANK 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
 
                 
    December 31  
    2007     2006  
ASSETS
                
 
                
Investments at fair value
                
Pooled separate accounts
   $ 1,920,388     $ 1,794,784  
Community Shores Bank Corporation common stock
     198,674       604,497  
Guaranteed investment contract
     3,267       1,968  
Participant loans
     7,075       10,948  
 
            
 
                
Total investments at fair value
     2,129,404       2,412,197  
 
                
Cash
     2,473       2,219  
 
            
 
                
Total assets (equal to net assets available for benefits)
   $ 2,131,877     $ 2,414,416  
 
            
The accompanying notes are an integral part of these financial statements.

-2-

 

COMMUNITY SHORES BANK 401(k) PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
                 
    Year Ended December 31  
    2007     2006  
Additions to net assets attributed to
                
Net investment (loss) income
                
Net appreciation (depreciation) in aggregate fair value of investments in
                
Pooled separate accounts
   $ 160,593     $ 180,360  
Common stock
     (289,768 )     (75,059 )
Interest and dividends
     783       492  
 
            
 
                
Net investment (loss) income
     (128,392 )     105,793  
 
            
 
                
Contributions
                
Participant
     231,637       214,531  
Employer
     128,788       115,946  
Rollover
     —       149,283  
 
            
 
                
Total contributions
     360,425       479,760  
 
            
 
                
Total additions
     232,033       585,553  
 
            
 
                
Deductions from net assets attributed to
                
Benefits paid to participants
     497,139       6,148  
Administrative expenses
     17,433       15,837  
 
            
 
                
Total deductions
     514,572       21,985  
 
            
 
                
Net (decrease) increase
     (282,539 )     563,568  
 
            
 
                
Net assets available for plan benefits
                
Beginning of year
     2,414,416       1,850,848  
 
            
 
                
End of year
   $ 2,131,877     $ 2,414,416  
 
            
The accompanying notes are an integral part of these financial statements.

-3-

 

COMMUNITY SHORES BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
1.   DESCRIPTION OF THE PLAN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    The following description of the Community Shores Bank (the “Bank” or “Sponsor”) 401(k) Plan (the “Plan”) provides only general information. Participants should refer to the plan agreement for a more complete description of the Plan’s provisions.
 
    Description of the Plan
    General
 
    The Plan is a defined contribution plan covering all employees of the Bank who have six months of service and are 21 or older. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).
 
    Contributions
 
    Participants may contribute annual compensation as defined in the Plan up to a maximum allowed by the Internal Revenue Code. Participants who have attained age 50 before the end of the Plan year are eligible to make catch-up contributions. Participants may also contribute amounts representing distributions from other qualified defined benefit or defined contribution plans. The Bank may, at the discretion of its Board of Directors, make a matching contribution to the Plan on behalf of each participant. The matching formula during the 2007 and 2006 plan years was 100% of the first 3% of the compensation contributed and 50% of the next 3%, with a maximum contribution of 4.50%. Participants direct the investment of contributions into various investment options offered by the Plan. In addition to Community Shores Bank Corporation common stock, the Plan currently offers one-hundred and forty-six pooled separate accounts, of which fifty-three were invested in as of December 31, 2007 and a guaranteed investment contract with John Hancock Life Insurance Company (“John Hancock”) as investment options for participants. Contributions to the plan are subject to certain limitations.
 
    Participant Accounts
 
    Each participant’s account is credited with the participant’s contribution and allocations of the Bank’s matching contribution, and Plan earnings and charged with an allocation of administrative expenses. Allocations are based participant earnings or account balances as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.
 
    Vesting
 
    Participants are immediately vested in their contributions, the Bank’s contributions, and allocated earnings thereon.

-4-

 

COMMUNITY SHORES BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
    Participant Loans
 
    Participants may borrow from their accounts a minimum of $1,000, up to a maximum of 50% of the participants elective contributions account balance. Additionally, to be non-taxable, the loan cannot exceed $50,000 reduced by the participant’s highest outstanding loan balance during the 12 months immediately preceding the loan disbursement date. Loan terms range from 1 to 5 years, or up to 30 years for the purchase of a primary residence. The loans are secured by the balance in the participant’s account and bear interest based upon the prime rate. Principal and interest is paid ratably through payroll deductions.
 
    Payment of Benefits
 
    On termination of service due to death, disability, retirement, or other reasons, a participant or his or her beneficiary may elect to receive a lump-sum amount equal to the value of the participant’s account.
 
    Administrative Expenses
 
    The Plan’s administrative expenses, including salaries, accounting, recordkeeping, and legal, are paid by the Bank and qualify as party-in-interest transactions which are exempt from prohibited transaction rules. Custodial service fees related to John Hancock are paid by the Plan. Fees for common stock transactions through Northwestern Mutual Investment Services, LLC, the custodian of the common stock, are allocated to the accounts of those participants electing this investment option.
    Summary of Significant Accounting Policies
    Basis of Accounting
 
    The financial statements of the Plan are prepared using the accrual method of accounting.
 
    Use of Estimates
 
    The preparation of financial statements in conformity with generally accepted accounting principles requires the Plan administrator to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosures of contingent assets and liabilities. Actual results could differ from those estimates.
 
    Investment Valuation and Income Recognition
 
    The Plan’s investments in pooled separate accounts with John Hancock are stated at estimated fair values, which have been determined based on the unit values of the funds. Unit values are determined by John Hancock, the insurance company sponsoring the funds, based upon the net asset values of the underlying securities held by the funds. The value of the guaranteed interest contract is estimated using a market approach based on prices of similar contracts. Investment in the Plan Sponsor’s common stock is valued at fair value, based on quoted market prices. Participant loans are valued at their outstanding balance, which approximates fair values.

-5-

 

COMMUNITY SHORES BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
    Unrealized appreciation or depreciation in the aggregate fair value of investments represents the net change in the difference between aggregate fair value and the cost of investments, including reinvestment of earnings. The realized gain or loss on sale of investments is the difference between the proceeds received and the average cost of investments sold.
 
    Purchases and sales are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
 
    Management fees and operating expenses charged to the Plan for investments in pooled separate accounts are deducted from income earned on a daily basis and are not separately reflected. Consequently, management fees and operating expenses are reflected as a reduction of net appreciation in fair value of investments for such investments.
 
    Payment of Benefits
 
    Benefits are recorded when paid.
2.   INVESTMENTS
 
    Investments representing 5% or more of the Plan’s net assets available for benefits are as follows at December 31:
                 
    2007   2006
Pooled separate accounts:
                
John Hancock Lifestyle Balanced
   $ 472,593     $ 440,669  
John Hancock Lifestyle Growth
     181,623       197,780  
John Hancock Lifestyle Moderate
     117,201       —  
Money Market Fund
     224,376       —  
 
                
Community Shores Bank Corporation common stock
     198,674       604,497  
3.   RELATED PARTY TRANSACTIONS
 
    Parties-in-interest are defined under Department of Labor (DOL) regulations as any fiduciary of the Plan, any party rendering service to the Plan, the employer, and certain others. Certain Plan investments are pooled separate accounts and an investment contract managed by of John Hancock. John Hancock as the custodian of the Plan and, therefore, these transactions qualify as party-in-interest. Substantially all professional fees for the administration and audit of the Plan are paid by the Bank. Other professional fees related to the trustee and custodial services for the Plan’s assets were paid by the Plan to John Hancock and amounted to $15,785 and $14,950 for 2007 and 2006, respectively.

-6-

 

COMMUNITY SHORES BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
    The Bank is a wholly owned subsidiary of Community Shores Bank Corporation, and accordingly the Plan’s investment in Community Shores Bank Corporation common stock as of December 31, 2007 and 2006, represents a party-in-interest transaction. The 34,552 and 45,588 shares of Community Shores Bank Corporation common stock held by the Plan as of December 31, 2007 and 2006, respectively, represent approximately 2.4% and 3.1% of the Company’s outstanding shares as of each of those dates.
 
4.   INCOME TAX STATUS
 
    The Bank’s Board of Directors adopted the Prototype Non-Standardized Profit Sharing Plan with Cash or Deferred Arrangement (“CODA”). The Plan document has received an opinion letter from the Internal Revenue Service dated November 27, 2001, stating that the written form of the underlying prototype plan document is qualified under Section 401(a) of the Internal Revenue Code (the “Code”) and that any employer adopting this form of the Plan will be considered to have a plan qualified under Section 401(a) of the Code. Although the Plan has been amended since receiving the determination letter, the Plan administrator and the Plan’s legal counsel believe the Plan is being operated in compliance with the applicable requirements of the Code.
 
5.   PLAN TERMINATION
 
    Although it has not expressed any intent to do so, the Plan Sponsor has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA.
 
6.   RISKS AND UNCERTAINTIES
 
    The Plan provides for various investment options in the Company’s common stock, a guaranteed investment contract, and in pooled separate accounts with underlying assets consisting of any combination of stocks, bonds, fixed income securities, mutual funds and other investment securities. Investment securities are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the Statements of Net Assets Available for Benefits.
 
7.   SUBSEQUENT EVENT
 
    Subsequent to December 31, 2007, the market value of the shares held in Community Shores Bank Corporation common stock decreased from $5.75 per share as of December 31, 2007 to $4.50 per share as of June 25, 2008.
* * * * *

-7-

 

SUPPLEMENTARY INFORMATION

 

 

COMMUNITY SHORES BANK 401(k) PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2007
PLAN #001
EIN 38-3438092
                     
        (c) Description of    
    (b) Identity of   Investment Including    
    Issue, Borrower,   Maturity Date, Rate of   (e)
    Lessor, or   Interest, Collateral, Par or   Current
(a)   Similar Party   Maturity Value   Value
   
Pooled separate accounts
                
*  
JH Lifestyle Balanced
   2,138 units   $ 472,593  
*  
JH Lifestyle Growth
   554 units     181,623  
*  
JH T. Rowe Price Science & Technology
   1,783 units     72,590  
*  
JH Fidelity Advisor Dividend Growth
   612 units     35,765  
*  
JH PIMCO Total Return
   4,004 units     68,352  
*  
500 Index Fund
   71 units     56,378  
*  
JH T. Rowe Price Blue Chip
   715 units     37,984  
*  
JH Lifestyle Aggressive
   51 units     18,338  
*  
JH Lifestyle Moderate
   714 units     117,201  
*  
Total Stock Market Index Fund
   2,616 units     38,346  
*  
JH Energy
   662 units     69,449  
*  
JH American Funds Am Balanced
   1,705 units     39,406  
*  
JH Lifestyle Conservative
   339 units     58,854  
*  
JH American Century Small Co
   704 units     8,044  
*  
JH Oppenheimer Developing Market
   791 units     44,922  
*  
JH MFS Utilities
   2,963 units     68,014  
*  
JH Excelsior Value & Restructuring
   289 units     17,715  
*  
JH Lord Abbett All Value
   1 unit     52  
*  
JH T. Rowe Price Spectrum Inc
   136 units     3,676  
*  
JH Oppenheimer Global
   4 units     170  
*  
JH Short-Term Federal
   1,428 units     26,080  
*  
JH Lord Abbett Mid Cap Value
   21 units     626  
*  
JH T. Rowe Price Small Cap Val
   352 units     17,064  
*  
JH American Funds Inv Co Am
   10 units     402  
*  
JH PIMCO Real Return
   546 units     8,035  
*  
JH Davis New York Venture
   293 units     9,563  
*  
JH Mutual Beacon
   5 units     688  
*  
JH Franklin Balance Sheet
   303 units     31,358  
(Continued)

 

 

COMMUNITY SHORES BANK 401(k) PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2007
PLAN #001
EIN 38-3438092
                     
        (c) Description of        
    (b) Identity of   Investment Including        
    Issue, Borrower,   Maturity Date, Rate of     (e)  
    Lessor, or   Interest, Collateral, Par or     Current  
(a)   Similar Party   Maturity Value     Value  
     
   
Pooled separate accounts
                
*  
JH American Funds Growth Fund
   874 units   $ 33,110  
*  
JH American Century Mason Select Bond
   314 units     3,703  
*  
JH PIMCO Global Bond
   286 units     3,804  
*  
JH AmCentury Mason High Yield Bond
   265 units     3,569  
*  
JH American Funds Wash Mutual
   38 units     1,536  
*  
JH T. Rowe Price Equity Inc
   36 units     1,495  
*  
JH DWS RREEF Real Estate
   99 units     11,075  
*  
JH Domini Social Equity
   18 units     727  
*  
JH John Hancock U.S. Global Lead
   210 units     4,217  
*  
JH Templeton World
   19 units     808  
*  
JH American Funds EuroPacific
   375 units     23,522  
*  
JH Davis Financial
   159 units     7,875  
*  
JH Allianz RCM Tech Fund
   292 units     15,295  
*  
JH LM Partners Glb High Yield
   167 units     4,403  
*  
JH Mutual Discovery
   32 units     2,250  
*  
JH BlackRock Large Value
   1,005 units     22,483  
*  
JH Templeton Foreign Small Co
   1,171 units     29,436  
*  
JH American Century Vista
   78 units     3,845  
*  
Money Market Fund
   17,501 units     224,376  
*  
International Value Fund
   57 units     1,389  
*  
Quantitative All Cap Fund
   34 units     781  
*  
Quantitative Mid Cap Fund
   3 units     426  
*  
Mid Cap Index Fund
   2 units     43  
*  
Intl Equity Index Fund
   408 units     7,960  
*  
Emerging Growth Fund
   406 units     8,972  
   
 
              
   
 
                
   
Total pooled separate accounts
             1,920,388  
(continued)

 

 

COMMUNITY SHORES BANK 401(k) PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2007
PLAN #001
EIN 38-3438092
                 
        (c) Description of      
    (b) Identity of   Investment Including      
    Issue, Borrower,   Maturity Date, Rate of   (e)  
    Lessor, or   Interest, Collateral, Par or   Current  
(a)   Similar Party   Maturity Value   Value  
 
    Common stock  
 
        
*   Community Shores Bank Corporation  
34,552 shares of common stock
   $ 198,674  
       
 
        
    Guaranteed investment contract  
 
        
*   Guarantee Interest Account  
3,267 units, annual interest rate of 3.35%
     3,267  
       
 
      
       
 
        
       
 
        
*   Participant loans  
Loans, maturating in 1 to 9 years, annual interest rate 5.25% to 8.25%, secured by – participant account balances
     7,075  
    Total investments  
 
   $ 2,129,404  
       
 
      

 

 

Exhibits:
     
EXHIBIT NO.   EXHIBIT DESCRIPTION
 
    
23
  Independent Auditors’ Consent.
 
    
32.1
  Certification of chief executive officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
    
32.2
  Certification of chief financial officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
         
 
  COMMUNITY SHORES BANK 401(K) PLAN    
 
        
Date: June 26, 2008
  /s/     Tracey A. Welsh
 
          Tracey A. Welsh
                         Trustee