Community Shores Bank Corporation (OTCMKTS:CSHB) Reverse Tax Valuation Allowance

Community Shores Bank Corporation (OTCMKTS:CSHB) an independent community banking organization said that it reversed ‘deferred tax valuation’ allowance in 4Q2014. As a result, the company will get a one-time tax benefit of almost $4.1 million.

The details

Community Shores carried out a full valuation allowance against its deferred tax assets since 2Q2009. There were several factors, including asset quality trends and positive core earnings along with strong expectations related to the Company’s ability to post future taxable income that facilitated the recovery of the tax valuation allowance. Community Shores posted FY2014 earnings at $2.95 per common share or $4.3 million, including the tax valuation benefits. At fiscal-end 2014, the book value of Community per common share surged to $5.50.

The management view

Heather D. Brolick, the President and CEO of Community Shores Bank Corporation (OTCMKTS:CSHB) commented that management is pleased with the trends and improvements in company’s financial performance. The company has reported 12 successive quarters of profitability. The net interest margin compressed a nominal ten basis points from year-end 2013. It is significant especially at a time when industry is dealing with an unfavorable rate environment. Also, Community Shores expects minimal or almost no erosion in FY2015.

The other details

Talking about a five year continuous declining trend in non-performing assets, Brolick commented non-accruals, foreclosed assets, and past dues have improved appreciably with the Bank posting a 72% decline in non-performing loans since 2009. There were none commercial related past due loans in the last two years.

Reduced risk

The figures of Community Shores reflect that the overall risk related to the bank’s troubled assets has been significantly reduced, and when evaluated with recent earnings history, supported a reversal of the tax valuation allowance. It contributed to $3.01 rise in book value a share since FY2013. The reversal implies the bank’s commitment to risk metric enhancements.

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