Registration No.           

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM S-1
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933

 

COMMUNITY SHORES BANK CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

 

Michigan	6022	38-3423227
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

 

1030 W. Norton Avenue
Muskegon, MI 49441

 

(231) 780-1800
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

 

Heather D. Brolick
President and Chief Executive Officer
Community Shores Bank Corporation
1030 W. Norton Avenue
Muskegon, MI 49441
(231) 780-1800
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

 

Copies to:

 

Bradley J. Wyatt, Esq.
Dickinson Wright PLLC
350 South Main Street
Suite 300
Ann Arbor, Michigan 48104
(734) 623-1905

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  o

 

If this Form is filed to register additional shares for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  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. (Check one):

 

Large accelerated filer	o		Accelerated filer	o
Non-accelerated filer (Do not check if a smaller reporting company)	o		Smaller reporting company	þ

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to be Registered		Proposed Maximum Aggregate Offering Price (1)				Amount of Registration Fee
Non-transferable Common Stock subscription rights			N/A					(2)
Common Stock, no par value		$	6,550,000			$	761.11

 

(1)	Estimated solely for the purpose of calculating the registration fee pursuant to Section 457(o) under the Securities Act.
(2)	The non-transferable subscription rights are being issued without consideration. Pursuant to Rule 457(g), no separate registration fee is payable with respect to the rights being offered hereby because the rights are being registered in the same registration statement as the securities to be offered pursuant to the rights.

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission acting pursuant to said Section 8(a), may determine.

 

 

 

PRELIMINARY PROSPECTUS

 

SUBJECT TO COMPLETION, DATED June 25, 2015

 

[•] Shares

 

 

Common Stock
Subscription Rights to Purchase Shares of Common Stock

 

We are distributing, at no charge, to holders of our common stock, no par value per share, as of [•], nontransferable subscription rights to purchase up to [•] shares of Common Stock at a price of $[•] per share in this rights offering. You will receive one right for each share of our Common Stock held by you of record as of 5:00 p.m. Eastern Time, on the Record Date. Each Right will entitle you to purchase [•] shares of Common Stock at a subscription price of $[•] per share (the “Basic Subscription Right”). If you timely and fully exercise your Basic Subscription Right and other rights holders do not exercise their Basic Subscription Right in full, you will, subject to availability and allocation, have an oversubscription privilege to subscribe for a portion of the rights offering shares that were not purchased by other rights holders (the “Oversubscription Privilege”). Subject to the discretion of the board of directors, your ability to purchase common stock in the rights offering is subject to an overall beneficial ownership limitation of 4.9% of our outstanding shares of common stock, after giving effect to your participation in the rights offering and taking into account the holdings of you and your affiliates. This limit will not apply to persons who own in excess of 4.9% of our common stock as of the record date. The rights offering will expire at 5:00 p.m., Eastern Time, [•], 2015 (“Expiration Date”). Any right not exercised at or before the Expiration Date will expire without any payment. We currently do not intend to extend the Expiration Date. All exercises of rights are irrevocable.

 

We intend to use the net proceeds of the rights offering to repay deferred interest on our trust preferred securities (“TRUPS”), contribute to the capital of the Bank to increase the Bank's capital and regulatory capital ratios, to repay our senior debt and for general corporate purposes. A portion of the net proceeds of the rights offering will be retained by the Company to pay its continuing operating expenses while the Company is unable to fund those expenses with dividends from the Bank.

 

 

 

The rights offering is being made directly by us. We are not using an underwriter or selling agent. We have engaged Computershare Trust Company, N.A. to serve as our subscription agent for this rights offering. The subscription agent will hold in escrow the funds we receive from subscribers until we complete or cancel the rights offering. Our common stock is currently quoted on the OTC Bulletin Board under the symbol “CSHB.” The last reported market price of the common stock on the OTC Bulletin Board on [•] was $[•] per share. The Common Stock issued in the rights offering will also be quoted on the OTCBB under the same symbol. The rights are not transferable and will not be quoted on the OTCBB or any other stock exchange or trading market. There is no minimum subscription amount required for the consummation of the rights offering. However, in the event we do not receive regulatory approval to pay the TRUPS interest deferral from the funds raised by this offering and/or from funds pledged by members of our board to pay the TRUPS interest deferral, we will cancel this offering and will return subscription commitments to our investors.

 

Investing in our common stock involves risks. Shareholders who subscribe may continue to own shares in the Company when it and the Bank do not satisfy all minimum regulatory capital requirements. Failure to meet minimum regulatory capital requirements could result in significant enforcement actions against the Company and the Bank, including a regulatory takeover of the Bank, in which case shareholders would receive little if anything for their investment. See "Risk Factors" beginning on page 22.

 

		Per Share				Total
Offering price		$				$	6,550,000
Proceeds to Community Shores Bank Corporation (before expenses) (1)							6,550,000

 

(1) Based on all shares offered being sold. No assurance can be given that all or any of the shares will be sold.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. The shares of common stock are not savings accounts, deposits or other obligations of a bank or savings institution and are not insured by the Federal Deposit Insurance Corporation or any other government agency.

 

The date of this prospectus is [•], 2015

 

 

TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS RELATING TO THE RIGHTS OFFERING	1
PROSPECTUS SUMMARY	6
RISK FACTORS	22
FORWARD-LOOKING STATEMENTS	32
USE OF PROCEEDS	32
CAPITALIZATION	33
MARKET FOR COMMON STOCK AND DIVIDEND INFORMATION	37
DESCRIPTION OF CAPITAL STOCK	38
THE RIGHTS OFFERING AND PLAN OF DISTRIBUTION	40
POTENTIAL IMPACT OF OFFERING ON DEFERRED TAX ASSETS	47
U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR INVESTORS	47
LEGAL MATTERS	49
EXPERTS	49
WHERE YOU CAN FIND MORE INFORMATION	49
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE	49

 

ABOUT THIS PROSPECTUS

 

You should rely only on the information contained in or incorporated by reference into this prospectus and any "free writing prospectus" we authorize to be delivered to you. We have not authorized anyone to provide you with additional information or information different from that contained in or incorporated by reference into this prospectus and any free writing prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. To the extent information in this prospectus and any free writing prospectus is inconsistent with any of the documents incorporated by reference into this prospectus and any free writing prospectus, you should rely on this prospectus and any free writing prospectus. You should assume that the information contained in or incorporated by reference into this prospectus and any free writing prospectus is accurate only as of their respective dates. Our business, financial condition, results of operations and prospects may have changed since those dates.

 

You should read this prospectus, all of the information incorporated by reference into this prospectus and the additional information about us described in the section entitled "Where You Can Find More Information" before making your investment decision. In this prospectus, we present and refer to information and statistics regarding the banking industry and the banking market in Michigan. We obtained this market data from independent publications or other publicly available information and are not responsible for the accuracy of our sources.

 

This prospectus does not offer to sell, or ask for offers to buy, any securities in any state or jurisdiction where it would not be lawful or where the person making the offer is not qualified to do so.

 

Unless otherwise stated or where the context suggests otherwise, references in this prospectus to “the Company,” “we,” “us,” “CSHB” or “our” include not only the business of Community Shores Bank Corporation, but also the business of the Bank and other consolidated entities. References to the “Bank” refer solely to Community Shores Bank and its subsidiaries, Community Shores Mortgage Company and Berryfield Development, LLC.

 

 

RISK FACTORS

 

An investment in our common stock involves significant risks. You should consider carefully the risk factors included below, together with all of the other information included in or incorporated by reference into this prospectus, before making a decision to invest in our common stock. This prospectus also contains forward-looking statements that involve risks and uncertainties. If any of the matters included in the following information about risk factors were to occur, our business, financial condition, results of operations, cash flows or prospects could be materially adversely affected. In such case, you may lose all or a substantial part of your investment.

 

Risks Related To the Company's Business and Capital Position

 

Community Shores Bank Corporation has only limited cash and cash equivalents available at the holding company level. If its cash and cash equivalents are exhausted and it is unable to access additional funds through capital raising efforts or other funding sources, it could be unable to meet its financial obligations as they come due, rendering the Company insolvent.

 

At March 31, 2015, Community Shores Bank Corporation held at the holding company level cash and cash equivalents of $245,000. As of the date of this prospectus, Community Shores Bank Corporation anticipates that its cash and cash equivalents could be exhausted, unless it is able to access additional funds through capital raising efforts or other funding sources. If Community Shores Bank Corporation's cash and cash equivalents are exhausted, it would be unable to meet its financial obligations as they come due, rendering Community Shores Bank Corporation insolvent. If Community Shores Bank Corporation were to become insolvent, it could be subject to voluntary or involuntary bankruptcy or similar insolvency proceedings and its business, financial condition and results of operations would be materially and adversely affected.

 

We are not in compliance with the Consent Order. This could result in enforcement action against us.

 

The Bank is subject to a Consent Order with the FDIC and the State of Michigan’s DIFS. The Bank is required to have and maintain a Tier 1 Leverage Capital Ratio of at least 8.5% and a Total Risk Based Capital Ratio of at least 11%. The Bank was not in compliance with these capital ratios at March 31, 2015. We are conducting this rights offering in an effort to reach and maintain the capital levels required by the Consent Order. Achievement of these capital levels could be impacted, positively or negatively, as a result of certain uncertainties, including, but not limited to, earnings levels, changing economic conditions, asset quality and property values. A failure to raise sufficient capital to satisfy the capital levels required by the Consent Order could materially adversely affect our ability to further expand our operations through organic growth. In addition, the Bank could become subject to an enforcement action, which could result in removal of directors, officers, employees and institution affiliated parties, and the imposition of civil money penalties and even ultimately closure of the Bank.

 

Failure to comply with the Written Agreement could result in enforcement action against us.

 

The Company is subject to a Written Agreement with the FRB. The Written Agreement provides that: (i) the Company must take appropriate steps to fully utilize its financial and managerial resources to serve as a source of strength to the Bank; (ii) the Company may not declare or pay any dividends or take dividends or any other payment representing a reduction in capital from the Bank or make any distributions of interest, principal or other sums on subordinated debentures or trust preferred securities without prior FRB approval; (iii) the Company may not incur, increase or guarantee any debt or purchase or redeem any shares of its stock without prior FRB approval; (iv) the Company must submit a written statement of its planned sources and uses of cash for debt service, operating expenses and other purposes to the FRB within 30 days of the Written Agreement; (v) the Company shall take all necessary actions to ensure that the Bank, the Company and all nonbank subsidiaries of both the Bank and the Company comply with sections 23A and 23B of the Federal Reserve Act and Regulation W of the Board of Governors (12 C.F.R. Part 223) in all transactions between affiliates; (vi) the Company may not appoint any new director or senior executive officer, or change the responsibilities of any senior executive officer so that the officer would assume a different senior executive officer position, without prior regulatory approval; and finally (vii) within 30 days after the end of each calendar quarter following the date of the Written Agreement, the board of directors shall submit to the FRB written progress reports detailing the form and manner of all actions taken to secure compliance with the provisions of the Written Agreement as well as current copies of the parent company only financial statements. The Company has not yet been able to meet the obligation detailed in part (i) above as the Company has limited resources with which to support the capital needs of the Bank. Other than having returned the Bank to a “safe and sound condition” through the restoration capital to the levels stipulated in the Bank’s consent Order, the Company believes that, as of the date of this prospectus, it was in compliance in all material respects with all of the provisions of the Written Agreement.

 

 

The failure of the Company to comply with the terms of the Written Agreement could result in proceedings to enforce the Written Agreement. Such proceedings could result in removal of directors, officers, employees and institution affiliated parties, the imposition of civil money penalties and other adverse actions.

 

The Company requires Federal Reserve Board approval to pay the deferred interest on its trust preferred securities.

 

In May of 2010, the Company exercised its option to defer regularly scheduled quarterly interest payments on its TRUPS beginning with the quarterly interest payment that was scheduled to be paid on June 30, 2010. The last allowable deferral period is March 31, 2015. All accrued and unpaid interest will be due and payable and a corresponding amount of distributions will be payable on the TRUPS on June 30, 2015. We expect the amount due will total approximately $625,000. Nonetheless, the Company is prohibited from making any distributions of interest, principal or other sums on subordinated debentures or trust preferred securities without prior FRB approval as a result of its FRB Written Agreement dated December 16, 2010. In the event the Company is unable to obtain FRB approval to pay the TRUPS interest deferral from the funds raised through this offering and/or from funds pledged by members of our board to pay the TRUPS interest deferral, the Company will cancel this offering and will return subscription commitments to our investors. This would result in the Company having incurred the expenses of this offering, estimated to be approximately $150,000, without receiving the benefit of a capital infusion and would adversely affect the financial position of the Company.

 

Conversion of senior debt will cause dilution. There is no guarantee we will raise sufficient funds to repay the senior debt or to service the debt obligation.

 

The Company is indebted in the principal amount of $1,280,000 to its senior debt holder, 1030 Norton LLC. The note bears interest at a fixed rate of 8.00% per annum, which is payable quarterly in arrears. The note is secured by a pledge of all of the issued and outstanding shares of the Bank and matures on March 31, 2017. 1030 Norton LLC is a Michigan limited liability company owned by nine individuals; including three directors of the Company, Gary F. Bogner, Robert L. Chandonnet and Bruce J. Essex, one former director and five local businessmen. The Company intends to retire the senior debt through (i) cash proceeds raised in connection with this offering; (ii) allowing the holders of senior debt to convert outstanding principal plus accrued and unpaid interest into shares of the Company’s common stock at a conversion price equal to [•], which is 75% of the per share subscription price of this offering; or (iii) a combination of the foregoing. Conversion of the senior debt will cause dilution to purchasers in this offering because it will occur at a per share price that is lower than the subscription price of this offering.

 

There can be no assurance that the senior debt holder will elect to convert all or any part of the senior debt into common stock. At March 31, 2015, Community Shores Bank Corporation held at the holding company level cash and cash equivalents of $245,000 with which to make the required interest payments on the senior debt. In the event we are unable to raise enough cash to retire the senior debt or secure conversion of the senior debt into equity, the Company intends to utilize a portion of the proceeds dedicated to working capital to make the interest payments on its senior debt. If this fails and we were to default upon the senior debt, the senior debt holder could foreclose upon the stock of our Bank and you could lose the value of your investment.

 

 

National, state and local economic conditions could have a material adverse effect on the Company's results of operations and financial condition.

 

The results of operations for financial institutions, including our Bank, may be materially and adversely affected by changes in prevailing national, state and local economic conditions. Our profitability is heavily influenced by the quality of the Company's loan portfolio and the stability of the Company's deposits. Unlike larger national or regional banks that are more geographically diversified, the Company provides banking and financial services to customers primarily in Muskegon and Ottawa Counties of Western Michigan. The local economic conditions in these areas have a significant impact on the demand for the Company's products and services, as well as the ability of the Company's customers to repay loans, the value of the collateral securing loans and the stability of the Company's deposit funding sources. A significant decline in general economic conditions, caused by inflation, recession, acts of terrorism, outbreak of hostilities or other international or domestic occurrences, unemployment, changes in securities, financial, capital or credit markets or other factors could impact national as well as these local economic conditions and, in turn, have a material adverse effect on the Company's results of operations and financial condition.

 

We could incur credit losses and our allowance for loan losses may not be adequate to cover actual loan losses.

 

The risk of nonpayment of loans is inherent in all lending activities and nonpayment of loans may have a material adverse effect on our earnings and overall financial condition, as well as the value of our common stock. We make various assumptions and judgments about the collectability of our loan portfolio and provide an allowance for potential losses based on a number of factors. If our assumptions are wrong, our allowance for loan losses may not be sufficient to cover our losses, which could have an adverse effect on our operating results, and may cause us to increase the allowance in the future. The actual amount of future provisions for loan losses cannot now be determined and may exceed the amounts of past provisions. Federal banking regulators, as an integral part of their supervisory function, periodically review our allowance for loan losses. These regulatory agencies may require us to increase our provision for loan losses or to recognize further loan charge-offs based upon their judgments, which may be different from ours. Any increase in the allowance for loan losses could have a negative effect on our regulatory capital ratios, net income, financial condition and results of operations.

 

We are subject to liquidity risk in our operations, which could adversely affect our ability to fund various obligations.

 

Liquidity risk is the possibility of being unable to meet obligations as they come due, pay deposits when withdrawn, and fund loan and investment opportunities as they arise because of an inability to liquidate assets or obtain adequate funding on a timely basis, at a reasonable cost and within acceptable risk tolerances. Liquidity is required to fund various obligations, including credit obligations to borrowers, mortgage originations, withdrawals by depositors, repayment of debt, operating expenses and capital expenditures. Liquidity of the Bank is derived primarily from retail deposit growth and retention, principal and interest payments on loans and investment securities, net cash provided from operation and access to other funding sources. Liquidity is essential to our business. We must maintain sufficient funds to respond to the needs of depositors and borrowers. An inability to raise funds through deposits, borrowings, the sale or pledging as collateral of loans and other assets could have a material adverse effect on our liquidity. An inability to retain the current level of deposits, including the loss of one or more of the Bank's larger deposit relationships, could have a material adverse effect on the Bank's liquidity. Our access to funding sources in amounts adequate to finance activities could be impaired by factors that affect us specifically or the financial services industry in general. Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of the business activity due to a market down turn or regulatory action that limits or eliminates access to alternate funding sources, such as brokered deposits or internet service deposits. Our ability to borrow could also be impaired by factors that are nonspecific to the Company, such as severe disruption of the financial markets or negative expectations about the prospects for the financial services industry as a whole, as evidenced by recent turmoil in the domestic and worldwide credit markets.

 

 

We have significant exposure to risks associated with commercial and residential real estate.

 

A substantial portion of our loan portfolio consists of commercial and residential real estate-related loans, including real estate development, construction and residential and commercial mortgage loans. As of March 31, 2015, we had approximately $53 million of commercial real estate loans outstanding, which represented approximately 42% of our loan portfolio. As of that same date, we had approximately $16 million in residential real estate loans outstanding, or approximately 13% of our loan portfolio. Consequently, real estate-related credit risks are a significant concern for us. The adverse consequences from real estate-related credit risks tend to be cyclical and are often driven by national economic developments that are not controllable or entirely foreseeable by us or our borrowers. General difficulties in our real estate markets have recently contributed to significant increases in our nonperforming loans, charge-offs, and decreases in our income.

 

Commercial loans may expose us to greater financial and credit risk than other loans.

 

Our commercial loan portfolio, excluding commercial mortgages, was approximately $51 million at March 31, 2015, comprising approximately 40% of our total loan portfolio. Commercial loans generally carry larger loan balances and can involve a greater degree of financial and credit risk than other loans. Any significant failure to pay on time by our customers would hurt our earnings. The increased financial and credit risk associated with these types of loans are a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the size of loan balances, the effects of general economic conditions on income-producing properties and the increased difficulty of evaluating and monitoring these types of loans. In addition, when underwriting a commercial or industrial loan, we may take a security interest in commercial real estate, and, in some instances upon a default by the borrower, we may foreclose on and take title to the property, which may lead to potential financial risks for us under applicable environmental laws. If hazardous substances were discovered on any of these properties, we may be liable to governmental agencies or third parties for the costs of remediation of the hazard, as well as for personal injury and property damage. Many environmental laws can impose liability regardless of whether we knew of, or were responsible for, the contamination.

 

Changes in interest rates may negatively affect our earnings and the value of our assets.

 

Our earnings and cash flows depend substantially upon our net interest income. Net interest income is the difference between interest income earned on interest-earnings assets, such as loans and investment securities, and interest expense paid on interest-bearing liabilities, such as deposits and borrowed funds. Interest rates are sensitive to many factors that are beyond our control, including general economic conditions, competition and policies of various governmental and regulatory agencies and, in particular, the policies of the Federal Reserve Board. Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and investment securities and the amount of interest they pay on deposits and borrowings, but such changes could also affect: (i) our ability to originate loans and obtain deposits; (ii) the fair value of our financial assets and liabilities, including our securities portfolio; and (iii) the average duration of our interest-earning assets. This also includes the risk that interest-earning assets may be more responsive to changes in interest rates than interest-bearing liabilities, or vice versa (repricing risk), the risk that the individual interest rates or rates indices underlying various interest-earning assets and interest-bearing liabilities may not change in the same degree over a given time period (basis risk), and the risk of changing interest rate relationships across the spectrum of interest-earning asset and interest-bearing liability maturities (yield curve risk), including a prolonged flat or inverted yield curve environment. Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations.

 

We are subject to significant government regulation, and any regulatory changes may adversely affect us.

 

The banking industry is heavily regulated under both federal and state law. These regulations are primarily intended to protect customers, not our creditors or shareholders. We are subject to extensive regulation by the FRB, the FDIC and DIFS, in addition to other regulatory and self-regulatory organizations. Regulations affecting banks and financial services companies undergo continuous change, and we cannot predict the ultimate effect of such changes, which could have a material adverse effect on our profitability or financial condition.

 

 

The Company could be adversely affected by the soundness of other financial institutions, including defaults by larger financial institutions.

 

The Company's ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of credit, trading, clearing, counterparty or other relationships between financial institutions. The Company has exposure to multiple counterparties, and the Company routinely executes transactions with counterparties in the financial industry. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by the Company or by other institutions. This is sometimes referred to as "systemic risk" and may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms and exchanges, with which the Company interacts on a daily basis, and therefore could adversely affect the Company.

 

The proposed rights offering may increase the risk of an "ownership change" for purposes of Section 382 of the Internal Revenue Code, which may materially impair our ability to use our net operating loss carryforward.

 

Our ability to use our net operating loss carryforward to offset future taxable income will be limited if we experience an "ownership change" as defined in Section 382 of the Internal Revenue Code. In general, an ownership change will occur if there is a cumulative increase in our ownership by "5-percent shareholders" (as defined in the Code) that exceeds 50 percentage points over a rolling three-year period. A corporation that experiences an ownership change will generally be subject to an annual limitation on the use of its pre-ownership change deferred tax assets equal to the equity value of the corporation immediately before the ownership change, multiplied by the long-term tax-exempt rate, which is currently 2.5% for ownership changes occurring in February 2015.

 

The offering could cause us to experience an "ownership change" as defined for U.S. federal income tax purposes. Even if the rights offering does not cause us to experience an "ownership change," the issuance of our shares of common stock in the rights offering materially increases the risk that we could experience an "ownership change" in the future. As a result, issuances or sales of common stock or other securities in the future, or certain other direct or indirect changes in ownership, could result in an "ownership change" under Section 382 of the Code. If an "ownership change" occurs, we could realize a permanent loss of a significant portion of our U.S. federal deferred tax assets (related to net operating loss carryforwards totaling $8.5 million at December 31, 2014) and lose certain built-in losses that have not been recognized for tax purposes. The amount of the permanent loss would depend on the size of the annual limitation (which is in part a function of our market capitalization at the time of an "ownership change") and the remaining carry forward period (U.S. federal net operating losses generally may be carried forward for a period of 20 years).

 

We rely heavily on our management and other key personnel, and the loss of any of them may adversely affect our operations.

 

We are and will continue to be dependent upon the services of our management team and other key personnel. Losing the services of one or more key members of our management team could adversely affect our operations. Our senior lenders are not subject to non-compete agreements and could compete with us for loan business in our market area. If substantial business were to be diverted from us, it would have a material adverse effect on our results of operations.

 

Our controls and procedures may fail or be circumvented.

 

Management regularly reviews and updates our internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. If we fail to identify and remediate control deficiencies, it is possible that a material misstatement of interim or annual financial statements will not be prevented or detected on a timely basis. In addition, any failure or circumvention of our other controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition.

 

 

 

We may be a defendant in a variety of litigation and other actions, which may have a material adverse effect on our financial condition and results of operations.

 

We may be involved from time to time in a variety of litigation arising out of our business. Our insurance may not cover all claims that may be asserted against us, and any claims asserted against us, regardless of merit or eventual outcome, may harm our reputation or cause us to incur unexpected expenses, which could be material in amount. Should the ultimate expenses, judgments or settlements in any litigation exceed our insurance coverage, they could have a material adverse effect on our financial condition and results of operations. In addition, we may not be able to obtain appropriate types or levels of insurance in the future, nor may it be able to obtain adequate replacement policies with acceptable terms, if at all.

 

Our future success is dependent on our ability to compete effectively in the highly competitive banking industry.

 

We face substantial competition in all phases of our operations from a variety of different competitors. Our future growth and success will depend on our ability to compete effectively in this highly competitive environment. We compete for deposits, loans and other financial services with numerous Michigan-based and out-of-state banks, thrifts, credit unions and other financial institutions as well as other entities which provide financial services. Some of the financial institutions and financial services organizations with which we compete are not subject to the same degree of regulation as we are. Most of our competitors have been in business for many years, have established customer bases, are larger, and have substantially higher lending limits than we do. The financial services industry is also likely to become more competitive as further technological advances enable more companies to provide financial services.

 

We depend upon the accuracy and completeness of information about customers.

 

In deciding whether to extend credit to customers, we may rely on information provided to us by our customers, including financial statements and other financial information. We may also rely on representations of customers as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. Our financial condition and results of operations could be negatively impacted to the extent that we extend credit in reliance on financial statements or other information provided by customers that is false or misleading.

 

We continually encounter technological change, and we may have fewer resources than our competitors to continue to invest in technological improvements.

 

The banking industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend, in part, on our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. There can be no assurance that we will be able to effectively implement new technology-driven products and services or be successful in marketing such products and services to our customers.

 

We face the risk of cyber-attack to our computer systems.

 

Our computer systems, software and networks have been and will continue to be vulnerable to unauthorized access, loss or destruction of data (including confidential client information), account takeovers, unavailability of service, computer viruses or other malicious code, cyber-attacks and other events. These threats may derive from human error, fraud or malice on the part of employees or third parties, or may result from accidental technological failure. If one or more of these events occurs, it could result in the disclosure of confidential client information, damage to our reputation with our clients and the market, additional costs to us (such as repairing systems or adding new personnel or protection technologies), regulatory penalties and financial losses, to both us and our clients and customers. Such events could also cause interruptions or malfunctions in our operations (such as the lack of availability of our online banking system), as well as the operations of our clients, customers or other third parties. Although we maintain safeguards to protect against these risks, there can be no assurance that we will not suffer losses in the future that may be material in amount.

 

 

Damage to our reputation could materially harm our business.

 

Our relationship with many of our clients is predicated upon our reputation as a fiduciary and a service provider that adheres to the highest standards of ethics, service quality and regulatory compliance. Adverse publicity, regulatory actions, litigation, operational failures, the failure to meet client expectations and other issues with respect to one or more of our businesses could materially and adversely affect our reputation, our ability to attract and retain clients or our sources of funding for the same or other businesses. Preserving and enhancing our reputation also depends on maintaining systems and procedures that address known risks and regulatory requirements, as well as our ability to identify and mitigate additional risks that arise due to changes in our businesses and the marketplaces in which we operate, the regulatory environment and client expectations. If any of these developments has a material effect on our reputation, our business will suffer.

 

Risks Associated With the Rights Offering and the Company’s Stock

 

The future price of the shares of common stock may be less than the purchase price per share in the rights offering.

 

If you purchase shares of common stock in the offering, you may not be able to sell them later at or above the purchase price. The actual market price of our common stock could be subject to wide fluctuations in response to numerous factors, some of which are beyond our control. These factors include, among other things, actual or anticipated variations in our costs of doing business, operating results and cash flow, the nature and content of our earnings releases and our competitors’ earnings releases, changes in financial estimates by securities analysts, business conditions in our markets and the general state of the securities markets and the market for other financial stocks, changes in capital markets that affect the perceived availability of capital to companies in our industry, governmental legislation or regulation, currency and exchange rate fluctuations, as well as general economic and market conditions, such as downturns in our economy and recessions.

 

Once you exercise your subscription rights, you may not revoke your subscription. If you exercise your subscription rights and, afterwards, the public trading market price of our shares of common stock decreases below the subscription price, you will have committed to buying shares of our common stock at a price above the prevailing market price and could have an immediate unrealized loss. We cannot assure you that the market price of our shares of common stock will not decline after you exercise your subscription rights. Moreover, we cannot assure you that following the exercise of your subscription rights you will be able to sell your common stock at a price equal to or greater than the subscription price.

 

The subscription price determined for the rights offering is not an indication of the fair value of our common stock.

 

In determining the subscription price for the rights offering, the board of directors considered a number of factors, including: the price at which shareholders and prospective shareholders are expected to be willing to purchase shares, the amount of proceeds desired to achieve our goals for the offering, shareholder’s equity relative to outstanding shares as of March 31, 2015, and the desire to provide an opportunity to our shareholders to participate in the rights offering on a pro rata basis. In conjunction with its review of these factors, the board of directors also reviewed our history and prospects, including our past and present earnings, our prospects for future earnings, our current financial condition and regulatory status. The Board of directors received advice, but did not receive a fairness opinion from a financial advisor in determining the subscription price or the terms of offering. The subscription price is not necessarily related to our book value, results of operations, cash flows, financial condition or net worth or any other established criteria of value and may or may not be considered the fair value of our common stock at the time the rights offering was approved by our board of directors or during the rights offering. After the date of this prospectus, our shares of common stock may trade at prices below the subscription price.

 

 

The Company may issue additional shares of its common stock in the future, which could dilute a shareholder’s ownership of common stock.

 

In connection with this offering, the Company will allow the holder of senior debt to convert outstanding principal plus accrued and unpaid interest into shares of the Company’s common stock at a conversion price equal to [•], which is 75% of the per share subscription price of this offering. Conversion of the senior debt will cause dilution to purchasers in this offering because it will occur at a per share price that is lower than the subscription price of this offering. Additionally, to the extent that the Company issues options or warrants to purchase common stock in the future and the options or warrants are exercised, the Company’s shareholders may experience dilution. Holders of shares of Company common stock have no preemptive rights that entitle holders to purchase their pro rata share of any offering of shares of any class or series and, therefore, shareholders may not be permitted to invest in future issuances of Company common or preferred stock.

 

Because of its capital requirements, the Company may find it necessary to sell common stock to raise capital under circumstances and at prices which result in extreme dilution.

 

The rights offering will dilute the ownership percentage of our existing shareholders and the ownership of our common stock may change significantly.

 

We intend to raise significant capital through the rights offering. Our directors and executive officers and individuals who reside in our markets currently hold a significant percentage of our common stock. Upon the successful completion of the rights offering, the ownership percentage of existing shareholders will be diluted unless they purchase shares in the rights offering in an amount proportional to their existing ownership. As a result, following the rights offering, a significant portion of our common stock may be held by individuals and institutions outside of our market area whose interests may differ from our current shareholders. In addition, one or more individuals or institutions may seek to acquire a significant percentage of ownership in our common stock in the rights offering, subject to any applicable regulatory approvals and the limitations set forth in this Prospectus. Those shareholders may have interests that differ from those of our current shareholder base, and they may vote in a way with which our current shareholders disagree.

 

The rights offering does not contain a minimum offering amount requirement. Your investment is subject to loss if we are unable to meet the capital requirements of the Consent Order.

 

The rights offering does not contain a minimum subscription condition, other than our commitment to cancel this offering and return subscription commitments to our investors in the event we do not receive regulatory approval to pay the TRUPS interest deferral from the funds raised and/or from funds pledged by members of our board. Shareholders who subscribe may continue to own shares in the Company when it and the Bank do not satisfy all minimum regulatory capital requirements. A failure to meet minimum regulatory capital requirements could result in significant enforcement actions against the Company and the Bank, including a regulatory takeover of the Bank, in which case shareholders would receive little if anything for their investment.

 

The Company’s ability to pay dividends is limited and it may be unable to pay future dividends.

 

We have not paid dividends on our common stock in order to preserve capital and we do not expect to pay dividends in the near term. Our ability to pay dividends is limited by regulatory restrictions and the need to maintain sufficient regulatory capital. The ability of the Bank to pay dividends to Community Shore Bank Corporation is limited by its obligation to maintain sufficient capital and by other general restrictions on dividends that are applicable to us under the terms of the Consent Order; the Bank may not declare or pay any dividend without the prior written consent of the regulators.

 

 

The market price of the Company’s common stock can be volatile, which may make it more difficult to resell Company common stock at a desired time and price.

 

Stock price volatility may make it more difficult for a shareholder to resell our common stock when a shareholder wants to and at prices a shareholder finds attractive or at all. Our stock price can fluctuate significantly in response to a variety of factors, regardless of operating results. These factors include, among other things:

 

	•	Variations in our anticipated or actual operating results or the results of our competitors;
	•	Changes in investors’ or analysts’ perceptions of the risks and conditions of our business;
	•	The size of the public float of our common stock;
	•	Regulatory developments;
	•	Interest rate changes or credit loss trends;
	•	Trading volume in our common stock;
	•	Market conditions; and
	•	General economic conditions.

 

You may not revoke your subscription, but we may terminate the rights offering.

 

Once you have exercised your subscription rights, you may not revoke the subscription even if you learn information about us that you consider to be unfavorable. We may terminate the rights offering at our discretion. If we terminate the rights offering, we will not have any obligation to you with respect to the rights except to return any payment received, without interest or penalty.

 

Although publicly traded, our common stock has substantially less liquidity than the average liquidity of stocks traded on the OTC Bulletin Board.

 

Although our common stock is quoted on the OTC Bulletin Board, our common stock has substantially less liquidity than the average liquidity for companies quoted on the OTC Bulletin Board. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of our common stock at any given time. This marketplace depends on the individual decisions of investors and general economic and market conditions over which we have no control. This limited market may affect your ability to sell your shares on short notice, and the sale of a large number of shares at one time could temporarily depress the market price of our common stock. For these reasons, our common stock should not be viewed as a short-term investment.

 

The Company’s common stock is not insured by any governmental entity.

 

Our common stock is not a deposit account or other obligation of any bank and is not insured by the FDIC or any other governmental entity. Investment in Company common stock is subject to risk, including possible loss.

 

The Company may issue debt and equity securities that are senior to Company common stock as to distributions and in liquidation, which could negatively affect the value of Company common stock.

 

The Company has in the past and may in the future increase its capital by entering into debt or debt-like financing or issuing debt or equity securities, which could include issuances of senior notes, subordinated notes, preferred stock or common stock. In the event of the Company’s liquidation, its lenders and holders of its debt securities would receive a distribution of the Company’s available assets before distributions to the holders of Company common stock. The Company’s decision to incur debt and issue securities in future rights offering will depend on market conditions and other factors beyond its control. The Company cannot predict or estimate the amount, timing or nature of its future offerings and debt financings. Future offerings could reduce the value of shares of Company common stock and dilute a shareholder’s interest in the Company.

 

 

Our articles of incorporation and bylaws and Michigan laws contain certain provisions that could make a takeover more difficult.

 

Our articles of incorporation and bylaws, and the laws of Michigan, include provisions which are designed to provide our Board of Directors with time to consider whether a hostile takeover offer is in our best interest and the best interest of our shareholders. These provisions could discourage potential acquisition proposals and could delay or prevent a change in control. The provisions also could diminish the opportunities for a holder of our common stock to participate in tender offers, including tender offers at a price above the then-current price for our common stock. These provisions could also prevent transactions in which our shareholders might otherwise receive a premium for their shares over then current market prices, and may limit the ability of our shareholders to approve transactions that they may deem to be in their best interests.

 

The Michigan Business Corporation Act contains provisions intended to protect shareholders and prohibit or discourage certain types of hostile takeover activities. In addition to these provisions and the provisions of our articles of incorporation and by-laws, Federal law requires the Federal Reserve Board’s approval prior to acquisition of “control” of a bank holding company. All of these provisions may have the effect of delaying or preventing a change in control at the company level without action by our shareholders, and therefore, could adversely affect the price of our common stock.

 

If, as a result of the rights offering or otherwise, an entity holds as little as a 5% interest in our outstanding securities, that entity could, under certain circumstances, be subject to regulation as a “bank holding company.”

 

Any entity, including a “group” composed of natural persons, owning or controlling with the power to vote 25% or more of our outstanding securities, or 5% or more if the holder otherwise exercises a “controlling influence” over us, may be subject to regulation as a “bank holding company” in accordance with the Bank Holding Company Act of 1956, as amended (the “BHC Act”). In addition, (i) any bank holding company or foreign bank with a U.S. presence may be required to obtain the approval of the Federal Reserve Board under the BHC Act to acquire or retain 5% or more of our outstanding securities and (ii) any person not otherwise defined as a company by the BHC Act and its implementing regulations may be required to obtain the approval of the Federal Reserve Board under the Change in Bank Control Act of 1978, as amended, to acquire or retain 10% or more of our outstanding securities. Becoming a bank holding company imposes statutory and regulatory restrictions and obligations, such as providing managerial and financial strength for its bank subsidiaries. Regulation as a bank holding company could require the holder to divest all or a portion of the holder’s investment in our securities or those nonbanking investments that may be deemed impermissible or incompatible with bank holding company status, such as a material investment in a company unrelated to banking.

 

 

FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and Community Shores Bank Corporation. Forward-looking statements are identifiable by words or phrases such as “outlook” or “strategy,” that an event or trend “may,” “should,” “will,” “is likely,” or is “probable” to occur or “continue” or “is scheduled” or “on track” or that the Company or its management “anticipates,” “believes,” “estimates,” “plans,” “forecasts,” “intends,” “predicts,” “projects,” or “expects” a particular result, or is “confident,” “optimistic” or has an “opinion” that an event will occur, or other words or phrases such as “ongoing,” “future,” or “tend” and variations of such words and similar expressions. Such statements are based upon current beliefs and expectations and involve substantial risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These statements include, among others, statements related to real estate valuation, economic and employment trends and projections, future levels of nonperforming loans, the rate of asset dispositions, future capital levels, capital raising activities (including the successful completion of the rights offering), dividends, future growth and funding sources, future liquidity levels, future profitability levels, our ability to comply with our Consent Order and Written Agreement, and the effects on earnings of changes in interest rates and the future level of other revenue sources. All of the information concerning interest rate sensitivity is forward-looking. All statements with references to future time periods are forward-looking.

 

Management’s determination of the provision and allowance for loan losses, the appropriate carrying value of intangible assets (including goodwill, mortgage servicing rights and tax deferred assets), other real estate owned and the fair value of investment securities (including whether any impairment on any investment security is temporary or other-than-temporary and the amount of any impairment) involves judgments that are inherently forward-looking. There can be no assurance that future loan losses will be limited to the amounts estimated. Our ability to fully comply with all of the provisions of our Consent Order and Written Agreement, improve regulatory capital ratios, raise additional capital, successfully implement new programs and initiatives, increase efficiencies, realize our deferred tax benefits, address regulatory issues, respond to declines in collateral values and credit quality, and improve profitability is not entirely within our control and is not assured. The future effect of changes in the financial and credit markets and the national and regional economy on the banking industry, generally, and on Community Shores Bank Corporation, specifically, are also inherently uncertain. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions (“risk factors”) that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements. Community Shores Bank Corporation undertakes no obligation to update, clarify or revise forward-looking statements to reflect developments that occur or information obtained after the date of this prospectus.

 

Risk factors include, but are not limited to, the risk factors described under “Risk Factors” beginning on page 22 of this prospectus. These and other factors are representative of the risk factors that may emerge and could cause a difference between an ultimate outcome and a preceding forward-looking statement.

 

USE OF PROCEEDS

 

We estimate the net proceeds from the rights offering, after estimated expenses, will be approximately $6,400,000. We intend to use the net proceeds of the rights offering in the following order of priority:

 

Payment of TRUPS Interest Deferral			625,000
General Working Capital			375,000
Contribution to Bank			4,100,000
Repayment of Senior Debt			1,300,000
Total		$	6,400,000

 

 

There is no assurance as to any particular level of proceeds from the rights offering and there is no minimum offering requirement for this offering. However, in the event we do not receive regulatory approval to pay the TRUPS interest deferral from the funds raised and/or from funds pledged by members of our board to pay the TRUPS interest deferral, we will cancel this offering and will return subscription commitments to our investors.

 

The use of proceeds outlined above assumes that the senior debt holder does not elect to convert any part of the senior debt. We intend to retire the senior debt through (i) cash proceeds raised in connection with this offering; (ii) allowing the holders of senior debt to convert outstanding principal plus accrued and unpaid interest into shares of the Company’s common stock at a conversion price equal to [•], which is 75% of the per share subscription price of this offering; or (iii) a combination of the foregoing. However, there can be no assurance that the senior debt holder will elect to convert all or any part of the senior debt into our common stock. The Company currently has limited liquidity with which to make the required interest payments on the senior debt. In the event we are unable to raise enough cash to retire the senior debt or secure conversion of the senior debt into equity, the Company intends to utilize a portion of the proceeds dedicated to working capital to service the interest payments on its senior debt. See “Risk Factors – Conversion of senior debt will cause dilution. There is no guarantee we will raise sufficient funds to repay the senior debt or to service the debt obligation” on page 23. To the extent we raise cash in this offering in excess of $5,100,000 and the holders of our senior debt elect to convert debt into equity, we will allocate the additional cash among working capital and contributions to the Bank in our discretion.

 

Funds contributed to the Bank will be used by the Bank for general operating purposes which may include, among others, funding of loans, investment in securities, and payment of expenses. The proceeds of the rights offering which are not contributed to the Bank will be used by the Company for general corporate purposes which may include, among others, debt service on our senior debt (on the conditions described in the preceding paragraph), payment of general operating expenses, and pursuing strategic opportunities which may be presented to the Company in the future.

 

There is no assurance that the rights offering and these or other strategies to comply with the capital requirements of the Consent Order will be successful. See “Risk Factors” on page 22.

 

CAPITALIZATION

 

The following table sets forth our consolidated capitalization as of March 31, 2015 and our pro forma consolidated capitalization after giving effect to the receipt of net proceeds from the rights offering, assuming in the alternative that the maximum amount of the offered shares are sold in the rights offering (referred to below as the “100% participation scenario”), and that half of the offered shares are sold in the rights offering (referred to below as the “50% participation scenario”). We are unable to predict the actual level of participation in the rights offering. There is no assurance that we will achieve even the 50% participation scenario. For these scenarios, we have assumed that the senior debt holder has not elected to convert any portion of the senior debt into shares of our common stock.

 

The following unaudited information should be read in conjunction with our consolidated financial statements for the year ended December 31, 2014, and related notes, included in our Annual Report on Form 10-K for the year ended December 31, 2014, and our Quarterly Report on Form 10-Q for the period ended March 31, 2015, which reports are incorporated by reference into this prospectus. See “Incorporation of Certain Information by Reference” on page 49.

 

 

100% PARTICIPATION SCENARIO

 

		As of March 31,
		2015
		Actual				As Adjusted
		(Unaudited)
		(Dollars in thousands)
Note Payable		$	1,280,000			$	0
Shareholders’ Equity:
Preferred stock, no par value, 1,000,000 shares authorized, none issued			0				0
Common stock, no par value, 9,000,000 shares authorized			13,296				19,696
Retained deficit			(4,912	)			(4,912	)
Accumulated other comprehensive loss			(211	)			(211	)
Total shareholders’ equity			$ 8,173]			$	14,574
Book value per share		$	[•]			$	[•]

 

50% PARTICIPATION SCENARIO

 

		As of March 31,
		2015
		Actual				As Adjusted
		(Unaudited)
		(Dollars in thousands)
Note Payable		$	1,280,000			$	1,280,000
Shareholders’ Equity:
Preferred stock, no par value, 1,000,000 shares authorized, none issued			0				0
Common stock, no par value, 9,000,000 shares authorized			13,296				16,496
Retained deficit			(4,912	)			(4,912	)
Accumulated other comprehensive loss			(211	)			(211	)
Total shareholders’ equity		$	8,173			$	11,373
Book value per share		$	[•]			$	[•]

 

 

Actual capital amounts and ratios for the Bank and, required capital amounts and ratios for the Bank to be adequately capitalized and to be at the level mandated by the Consent Order at March 31, 2015 were:

 

										Minimum Required								Minimum Required
										For Capital								Under
		Actual								Adequacy Purposes								Consent Order
		Amount				Ratio				Amount				Ratio				Amount				Ratio
March 31, 2015
Common Equity Tier 1 (CET1) to risk-weighted assets of the Bank		$	11,484,517				8.39	%		$	6,156,770				4.50	%			N/A				N/A
Total Capital (Tier 1 and Tier 2) to risk-weighted assets of the Bank			13,092,259				9.57				10,945,369				8.00			$	15,049,883				11.00	%
Tier 1 (Core) Capital to risk-weighted assets of the Bank			11,484,517				8.39				8,209,027				6.00				N/A				N/A
Tier 1 (Core) Capital to average assets of the Bank			11,484,517				6.26				7,334,767				4.00				15,586,379				8.50

 

Under the alternative scenarios described above, and assuming $4,100,000 and $2,200,000 of the proceeds of the rights offering are contributed to the Bank’s capital to increase the Bank’s regulatory capital ratios under the 100% Participation Scenario and the 50% Participation Scenario, respectively, the Bank’s regulatory capital ratios, as of March 31, 2015, would have been:

 

100% PARTICIPATION SCENARIO
$4,100,000 CONTRIBUTED TO THE BANK

 

										Minimum Required								Minimum Required
										For Capital								Under
		Pro Forma								Adequacy Purposes								Consent Order
		Amount				Ratio				Amount				Ratio				Amount				Ratio
March 31, 2015
Common Equity Tier 1 (CET1) to risk-weighted assets of the Bank		$	15,584,517				11.39	%		$	6,156,770				4.50	%			N/A				N/A
Total Capital (Tier 1 and Tier 2) to risk-weighted assets of the Bank			17,192,259				12.57				10,945,369				8.00			$	15,049,883				11.00	%
Tier 1 (Core) Capital to risk-weighted assets of the Bank			15,584,517				11.39				8,209,027				6.00				N/A				N/A
Tier 1 (Core) Capital to average assets of the Bank			15,584,517				8.50				7,334,767				4.00				15,586,379				8.50

 

 

50% PARTICIPATION SCENARIO
$2,200,000 CONTRIBUTED TO THE BANK

 

										Minimum Required								Minimum Required
										For Capital								Under
		Pro Forma								Adequacy Purposes								Consent Order
		Amount				Ratio				Amount				Ratio				Amount				Ratio
March 31, 2015
Common Equity Tier 1 (CET1) to risk-weighted assets of the Bank		$	13,684,517				10.00	%		$	6,156,770				4.50	%			N/A				N/A
Total Capital (Tier 1 and Tier 2) to risk-weighted assets of the Bank			1,652,259				11.46				10,945,369				8.00			$	15,049,883				11.00	%
Tier 1 (Core) Capital to risk-weighted assets of the Bank			13,684,517				10.00				8,209,027				6.00				N/A				N/A
Tier 1 (Core) Capital to average assets of the Bank			13,684,517				7.46				7,334,767				4.00				15,586,379				8.50

 

 

MARKET FOR COMMON STOCK AND DIVIDEND INFORMATION

 

The Company’s common stock is traded on the OTCBB under the ticker symbol “CSHB”. At March 23, 2015, there were approximately 164 record holders of the Company’s common stock. The Company has paid no dividends since its formation in 1998.

 

The following table shows the high and low sales prices for the common stock of the Company by quarter during 2014 and 2013, as reported by the OTCBB. The Company’s bid prices cannot be calculated due to limited market activity.

 

Sales Prices

 

		High				Low
Calendar Year 2015
First Quarter		$	3.24			$	1.50
Calendar Year 2014
First Quarter		$	3.25			$	2.55
Second Quarter			3.60				2.15
Third Quarter			3.35				2.50
Fourth Quarter			2.75				1.25
Calendar Year 2013
First Quarter		$	0.55			$	0.16
Second Quarter			4.00				0.50
Third Quarter			3.35				1.76
Fourth Quarter			4.95				2.85

 

Under the Consent Order, the Bank may not declare or pay any cash dividend without the prior written consent of its regulators. As funds for the payment of future cash dividends are primarily dependent upon cash currently held at the Company and from dividends received from the Bank out of its earnings, the Company does not expect to pay cash dividends in the near future. The Company does expect to reassess its ability to resume the payment of dividends on its common stock if and when the Consent Order is lifted, current levels of cash, earnings and capital return to acceptable levels and prospects are positive for sustained economic growth and improved Company performance. There can, however, be no assurance that we will resume payment of dividends in the future.

 

The Company has exercised its right to defer interest payments on its trust preferred securities for 20 consecutive quarters or until such earlier time as is determined by further action of the Board of Directors. During the deferral period, the Company may not declare or pay any dividends on its common stock or make any payment on any outstanding debt obligations that rank equally with or junior to the trust preferred securities. The end of the allowable deferral period will be March 31, 2015. The Company continues to accrue interest through this deferral period.

 

Additional information on restrictions on payment of dividends by the Company and the Bank, which is here incorporated by reference, may be found in:

 

	•	This prospectus above under the headings “Risk Factors - The Company’s ability to pay dividends is limited and it may be unable to pay future dividends” at page 29;
	•	Our Annual Report on Form 10-K for the year ended December 31, 2014 in “Part I, Item 1 - Business” under the headings “Regulation and Supervision” and “Recent Developments,” in “Part II, Item 5 - Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities,” in Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings “Capital Resources,” and in the Notes to our consolidated financial statements.

 

 

DESCRIPTION OF CAPITAL STOCK

 

Description of Common Stock

 

The Company’s articles of incorporation authorize the issuance of up to 9,000,000 shares of common stock. Holders of the Company’s common stock, which has no par value, are entitled to one vote for each share held on all matters submitted to a vote of shareholders and do not have cumulative voting rights. Thus, holders of a majority of the shares of common stock entitled to vote in any election of directors may elect all of the directors standing for election. Holders of common stock are entitled to receive any dividends that may be declared by the board of directors out of funds legally available for dividends, subject to the preferential dividend rights of outstanding preferred stock. If the Company liquidates, dissolves or winds up, the holders of common stock are entitled to receive ratably all of its assets available after payment of all debts and other liabilities, subject to the prior rights of any outstanding preferred stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights or any rights to share in any sinking fund. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of any preferred stock that we may designate and issue in the future. Shares of common stock to be issued in the rights offering, when issued and delivered against payment for the shares, will be fully paid and non-assessable.

 

Our common stock is quoted on the OTC Bulletin Board under the symbol “CSHB.” Computershare Trust Company, N.A. is the transfer agent and registrar for the Company’s common stock.

 

Description of Preferred Stock

 

The Company’s articles of incorporation authorize the issuance of up to 1,000,000 shares of preferred stock, no par value. The board of directors of the Company is authorized to cause the preferred stock to be issued from time to time in one or more series, with such designations and relative voting, dividend, liquidation and other rights, preferences and limitations as the board may express in a resolution or resolutions providing for the stock. As of the date of this prospectus, the Company does not have any preferred stock issued and outstanding.

 

Anti-Takeover Provisions of the Company’s Articles of Incorporation and Bylaws

 

Our articles of incorporation and bylaws, and the laws of Michigan, include provisions which are designed to provide our board of directors with time to consider whether a hostile takeover offer is in our best interest and the best interests of our shareholders. These provisions, however, could discourage potential acquisition proposals and could delay or prevent a change in control. The provisions also could diminish the opportunities for a holder of our common stock to participate in tender offers, including tender offers at a price above the then-current price for our common stock. These provisions could also prevent transactions in which our shareholders might otherwise receive a premium for their shares over then-current market prices, and may limit the ability of our shareholders to approve transactions that they may deem to be in their best interests.

 

The Michigan Business Corporation Act contains provisions intended to protect shareholders and prohibit or discourage certain types of hostile takeover activities. In addition to these provisions and the provisions of our articles of incorporation and bylaws, Federal law requires the Federal Reserve Board’s approval prior to acquisition of “control” of a bank holding company. All of these provisions may have the effect of delaying or preventing a change in control at the company level without action by our shareholders, and therefore, could adversely affect the price of our common stock.

 

 

Classification of Directors

 

The Company’s articles of incorporation provide for the division of the board of directors into three classes of nearly equal size with staggered three-year terms of office. The number of directors constituting the board of directors is determined from time to time by the board of directors. The board is currently composed of six members.

 

Advance Notice Provision

 

The Company’s articles of incorporation provide that shareholders may nominate a person to serve as director if the nominating shareholder provides written notice to the Company not later than sixty (60) nor more than ninety (90) days prior to the first anniversary date of the preceding year’s annual meeting. This provision may prevent or make it more difficult for shareholders to make nominations for directors at an annual meeting of shareholders.

 

Director Removal and Vacancies

 

A director may be removed from office only for cause and only by the affirmative vote of the holders of at least a majority of the voting power of all the shares of the corporation entitled to vote generally in the election of directors, voting together as a single class. The Company’s articles and bylaws generally provide that any board vacancy and any newly created directorships resulting from an increase in the authorized number of directors shall be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum, or by a sole remaining director.

 

Federal Law

 

The BHC Act requires any “bank holding company,” as defined in the BHC Act, to obtain the approval of the Federal Reserve Board before acquiring 5% or more of our common stock. Any entity that is a holder of 25% or more of our common stock, or a holder of 5% or more if such holder otherwise exercises a “controlling influence” over us, is subject to regulation as a bank holding company under the BHC Act. Any person, other than a bank holding company, is required to obtain the approval of the Federal Reserve Board before acquiring 10% or more of our common stock under the Change in Bank Control Act.

 

 

THE RIGHTS OFFERING AND PLAN OF DISTRIBUTION

 

Before exercising any subscription rights in the rights offering, you should read carefully the information set forth under “Risk Factors” beginning on page 21.

 

In General

 

Reasons for the Rights Offering. We are engaging in the rights offering to raise common equity capital to improve the Bank’s capital position, and to retain additional capital at Community Shores Bank Corporation.  We intend to use a portion of the net proceeds of the rights offering to contribute to the capital of the Bank to increase the Bank’s capital and regulatory capital ratios. We intend to retain a portion of the net proceeds at the Company to pay a portion of the Company’s direct operating expenses while the Company is unable to fund those expenses with dividends from the Bank. See “Why are we conducting the rights offering?” on page 2.

 

Shares Offered. We are offering for sale a total of [•] shares of common stock. Of such shares, [•] shares are being offering pursuant to subscription rights in the rights offering and [•] shares are being offered to accommodate over-subscriptions in the rights offering.

 

Subscription Price. The subscription price in the rights offering is $[•] per share of common stock. No change will be made to the subscription price to reflect changes in the trading price of our common stock or other factors prior to the expiration of the rights offering.

 

Determination of Subscription Price. Our board of directors determined the terms of the rights offering, including the subscription price, in its sole discretion. See “How was the $[•] per share subscription price determined?” on page 2.

 

Issuance of Our Common Stock. When issued, the shares will be registered in the name of the subscription rights holder of record. Unless we earlier terminate the rights offering, the shares of our common stock purchased in the rights offering will be issued as soon as practicable following the closing.

 

Our Determinations will be Binding. All questions concerning the timeliness, validity, form and eligibility of any exercise of subscription rights or subscription agreements will be determined by us, and our determinations will be final and binding. In our sole discretion, we may waive any defect or irregularity, or permit a defect or irregularity to be corrected within such time as we may determine, or reject the purported exercise of any subscription right or submission of any subscription agreement by reason of any defect or irregularity in any exercise. Subscriptions will not be deemed to have been received or accepted until all irregularities have been waived by us or cured within such time as we determine in our sole discretion. We will not be under any duty to notify you of any defect or irregularity in connection with the submission of a subscription rights certificate or subscription agreement or incur any liability for failure to give you that notice.

 

Director and Executive Officer Participation. Our directors and executive officers who are shareholders may participate in the rights offering based on their current ownership of common stock by exercising their basic subscription rights. In addition, our directors and executive officers may purchase additional shares in the rights offering by exercising their over-subscription privilege to the extent other shareholders do not exercise their basic subscription rights. Our directors and executive officers do not have any obligation and have not made any commitment to purchase any of the shares in the rights offering, and there can be no assurance as to the number of shares they may purchase in the rights offering, if any. Our directors and executive officers who purchase shares in the rights offering will pay the same per share price as any other investor who purchases shares in the rights offering. Based on non-binding expressions of interest, we expect our directors and executive officers to purchase approximately [•] shares in the rights offering having an aggregate purchase price of approximately $ [•].

 

 

As of March 31, 2015, our directors and executive officers as a group beneficially owned 225,099 shares, or approximately 15.3% of the outstanding shares of our common stock. Assuming the purchase by our directors and executive officers as a group of [•] of the shares in the rights offering and the sale of no additional shares offered in the rights offering, our directors and executive officers as a group would have owned [•] shares, or approximately [•]% of the issued and outstanding shares of our common stock as of March 31, 2015. Assuming the purchase by our directors and executive officers as a group of [•] of the shares in the rights offering and the sale of all of the shares offered in the rights offering, our directors and executive officers as a group would have owned [•] shares, or approximately [•]% of the issued and outstanding shares of our common stock as of March 31, 2015.

 

The Company is indebted in the principal amount of $1,280,000 to its senior debt holder, 1030 Norton LLC. The note bears interest at a fixed rate of 8.00% per annum, which is payable quarterly in arrears. The note is secured by a pledge of all of the issued and outstanding shares of the Bank and matures on March 31, 2017. 1030 Norton LLC is a Michigan limited liability company owned by nine individuals; including three directors of the Company, Gary F. Bogner, Robert L. Chandonnet and Bruce J. Essex, one former director and five local businessmen. The Company intends to retire the senior debt through (i) cash proceeds raised in connection with this offering; (ii) allowing the holders of senior debt to convert outstanding principal plus accrued and unpaid interest into shares of the Company’s common stock at a conversion price equal to [•], which is 75% of the per share subscription price of this offering; or (iii) a combination of the foregoing.

 

Conditions, Withdrawal and Termination. We reserve the right to terminate the rights offering at any time for any reason.  If we terminate the rights offering, all affected subscription rights will expire without value, and all subscription payments received by the subscription agent will be returned, without interest or penalty, as soon as practicable. Additionally, in the event we do not receive regulatory approval to pay the TRUPS interest deferral from the funds raised and/or from funds pledged by members of our board to pay the TRUPS interest deferral, we will cancel this offering and will return subscription commitments to our investors.

 

Shareholder Rights. You will have no rights as a holder of the shares of our common stock you purchase in the rights offering until the shares of our common stock are issued to you by crediting your book-entry account by our transfer agent or your account at your nominee is credited with the shares of our common stock purchased in the rights offering.

 

Regulatory Limitations. Subject to the discretion of the board of directors, a person, together with certain related persons and associates, may not purchase a number of shares such that upon completion of the rights offering the person owns in excess of 4.9% of the Company’s common stock outstanding. This limit will not apply to persons who own in excess of 4.9% of our common stock as of the record date. This limit is being imposed as a measure to help preserve the future availability of our deferred tax assets. In addition, we may, in the discretion of the board of directors or a board committee, not issue shares of our common stock to any purchaser in the rights offering, in our sole judgment, might be required to obtain prior clearance or approval from or submit a notice to any state or federal bank regulatory authority to acquire, own or control such shares if, as of the expiration of the rights offering, such clearance or approval has not been obtained or any applicable waiting period has not expired. We will not accept subscriptions from a person in any state or jurisdiction where it would not be lawful or where the person making the offer is not qualified to do so. If we elect not to issue shares in such a case, the unissued shares will become available to satisfy over-subscription by other shareholders pursuant to their subscription rights. We reserve the right to reject in whole or in part any or all exercise of subscription rights in the rights offering. See “Are there any limits on the number of shares I may purchase in the rights offering or own as a result of the rights offering?” on page 4.

 

The Rights Offering

 

We are distributing to the holders of our shares of common stock as of [•] non-transferable subscription rights to purchase shares of our common stock at a price of $ [•] per share in cash. The subscription rights entitle the holders of our common stock to purchase an aggregate of approximately [•] shares of our common stock for an aggregate purchase price of $ [•] million.

 

Each holder of record of our common stock will receive one subscription right for each share of our common stock owned by such holder as of 5:00 p.m., Eastern Time, on [•].  Each subscription right entitles the holder to a basic subscription right and an over-subscription privilege.

 

 

Basic Subscription Rights.  With your basic subscription rights, you may purchase up to [•] shares of our common stock per subscription right, subject to delivery of the required documents and payment of the subscription price of $ [•] per share, prior to the expiration of the rights offering.  Fractional shares of our common stock resulting from the exercise of the basic subscription rights will be eliminated by rounding down to the nearest whole share.  You may exercise all or a portion of your basic subscription rights.  However, if you exercise less than your full basic subscription rights, you will not be entitled to purchase shares under your over-subscription privilege.  

 

Over-Subscription Privilege.  If you purchase all of the shares of common stock available to you pursuant to your basic subscription rights, you may also choose to purchase a portion of any shares of our common stock that are not purchased by other shareholders through the exercise of their basic subscription rights.  If sufficient shares of common stock are available, we will seek to honor the over-subscription requests in full except as otherwise provided in this prospectus.  If over-subscription requests exceed the number of shares of common stock available, we will allocate the available shares of common stock among shareholders who over-subscribed by multiplying the number of shares requested by each shareholder through the exercise of their over-subscription privileges by a fraction which equals (x) the number of shares available to be issued through over-subscription privileges divided by (y) the total number of shares requested by all subscribers through the exercise of their over-subscription privileges.  As described above for the basic subscription rights, we will not issue fractional shares through the exercise of over-subscription privileges. We can provide no assurances that you will be able to purchase the number of shares issuable upon the exercise of your over-subscription privilege in full.

 

In order to properly exercise your over-subscription privilege, you must deliver the subscription payment related to your over-subscription privilege at the time you deliver payment related to your basic subscription rights.  Because we will not know the actual number of unsubscribed shares prior to the expiration of the rights offering, if you wish to maximize the number of shares you purchase pursuant to your over-subscription privilege, you will need to deliver payment in an amount equal to the aggregate subscription price for the maximum number of shares of our common stock that may be available to you.

 

To the extent the aggregate subscription price of the actual number of unsubscribed shares available to you pursuant to the over-subscription privilege is less than the amount you paid in connection with the exercise of the over-subscription privilege, you will be allocated only the number of unsubscribed shares actually available to you, and any excess subscription payments will be returned to you, without interest, as soon as practicable.

 

To the extent the amount you paid in connection with the exercise of the over-subscription privilege is less than the aggregate subscription price of the actual number of unsubscribed shares available to you pursuant to the over-subscription privilege, you will be allocated the number of unsubscribed shares for which you actually paid in connection with the over-subscription privilege.

 

Offering Period and Expiration. The rights offering will commence on [•] and the subscription rights will expire at 5:00 p.m., Eastern Time, on [•], unless we decide to extend the rights offering until no later than [•], in our sole discretion. If you do not exercise your subscription rights prior to that time, your subscription rights will expire and will no longer be exercisable.  We will not be required to issue shares of our common stock to you if the subscription agent receives your rights certificate or your subscription payment after that time.  We have the option to extend the rights offering without notice to you. If we elect to extend the expiration of the rights offering, we will issue a press release announcing such extension no later than the next business day after the board of directors or its delegate determines to extend the rights offering.

 

If you hold your shares of common stock in the name of a custodian bank, broker, dealer or other nominee, your nominee will exercise the subscription rights on your behalf in accordance with your instructions.  Your nominee may establish a deadline that may be before the expiration date that we have established for the rights offering.

 

No Recommendation to Rights Holders. Our board of directors is making no recommendation regarding your exercise of the subscription rights.  Shareholders who exercise subscription rights risk investment loss on new money invested.  We cannot assure you that the market price for our common stock will be above the subscription price or that anyone purchasing shares at the subscription price will be able to sell those shares in the future at the same price or a higher price.  You are urged to make your decision based on your own assessment of our business and the rights offering.  Please see “Risk Factors” beginning on page 22 for a discussion of the risks involved in investing in our common stock.

 

 

No Revocation of Subscriptions. The exercise of subscription rights is irrevocable and may not be cancelled or modified.  Once you send in your subscription rights certificate or have instructed your nominee of your subscription request, you cannot revoke your subscription, even if the offering period has not yet ended, we extend the offering period, you later learn information about us that you consider to be unfavorable or the market price of our common stock is below the $[•] per share purchase price. You should not exercise your subscription rights unless you are certain that you wish to purchase shares of our common stock at a price of $[•] per share.

 

Exercising of Subscription Rights. Please carefully read the instructions accompanying the subscription rights certificate and follow those instructions in detail. Do not send subscription rights certificates to us.

 

If you send documents and payments by mail, we recommend that you use registered mail, properly insured, with return receipt requested, and that you allow a sufficient number of days to ensure delivery to the subscription agent and clearance or payment before the rights offering expires. Do not send or deliver these materials to the Company or the Bank. If you deliver subscription documents or rights certificates in a manner different than that described in this prospectus, we may not honor the exercise of your subscription rights.

 

You may exercise your subscription rights as follows:

 

	•	Subscription by Registered Holders. To exercise your subscription rights, you must properly complete and execute the subscription rights certificate, together with any required signature guarantees, and forward it, together with payment in full of the subscription price for each common share you are subscribing for, to the subscription agent at the address set forth under the caption “Subscription Agent” beginning on page 46, prior to the expiration date or, if you cannot deliver your subscription rights certificate to the subscription agent prior to the expiration of the rights offering, you may follow the guaranteed delivery procedures described under the caption “Guaranteed Delivery Procedures” beginning on page 44. Your payment, in any case, must be received and cleared prior to 5:00 p.m., Eastern Time, on [•].
	•	Subscription by Beneficial Owners. If you are a beneficial owner of common shares, meaning that you hold your shares in “street name” through a broker, dealer, custodian bank or other nominee, we will ask your broker, dealer, custodian bank or other nominee to notify you of the rights offering. If you wish to exercise your subscription rights, you will need to have your broker, dealer, custodian bank or other nominee act for you and exercise your subscription rights and deliver all documents and payment on your behalf, including a “Nominee Holder Certification,” prior to 5:00 p.m., Eastern Time, on [•]. If you hold a Community Shores Bank Corporation share certificate directly and would prefer to have your broker, dealer, custodian bank or other nominee act for you, you should contact your nominee and request it to effect the transactions for you.
		To indicate your decision with respect to your subscription rights, you should complete and return to your broker, dealer, custodian bank or other nominee, the form entitled “Beneficial Owners Election Form.” You should receive this form from your broker, dealer, custodian bank or other nominee with the other subscription rights offering materials. If you wish to obtain a separate subscription rights certificate, you should contact the nominee as soon as possible and request that a separate subscription rights certificate form be issued to you. You should contact your broker, dealer, custodian bank or other nominee if you do not receive this form, but you believe you are entitled to participate in the rights offering. We are not responsible if you do not receive the form from your broker, dealer, custodian bank or other nominee or if you receive it without sufficient time to respond.

 

Your subscription rights will not be considered exercised unless the subscription agent actually receives from you, your broker, dealer, custodian bank or other nominee, as the case may be, all of the required documents (including those referenced under the caption “Guaranteed Delivery Procedures” beginning on page 44 if you are following the guaranteed delivery procedures) and your full subscription price payment (and your payment has cleared) prior to 5:00 p.m., Eastern Time, on [•], the scheduled expiration date of the rights offering.

 

 

Community Shores Bank Corporation 401(k) Participants. If you held shares of our common stock in your 401(k) Plan account as of the record date, you may exercise your subscription rights with respect to those shares of common stock by electing what amount (if any) of your subscription rights you would like to exercise by properly completing the rights certificate that is provided to you. You must return your properly completed form to the subscription agent in the prescribed manner. For the purposes of the rights offering, you will be treated as a record shareholder, and any shares that you elect to purchase in the rights offering will be credited to you directly in book-entry form, and will not be credited to you in the 401(k) Plan.

 

Community Shores Bank Corporation Employee or Director Stock Option Plan Participants. If you held shares of our common stock in your Community Shores Bank Employee or Director Stock Option Plan account as of the record date, you may exercise your subscription rights with respect to those shares of common stock by electing what amount (if any) of your subscription rights you would like to exercise by properly completing the rights certificate that is provided to you. You must return your properly completed form to the subscription agent in the prescribed manner. For the purposes of the rights offering, you will be treated as a record shareholder, and any shares that you elect to purchase in the rights offering will be credited to you directly in book-entry form, and will not be credited to your employee or director stock option plan account.

 

Method of Payment. Your payment of the subscription price in the rights offering must be made in U.S. dollars for the full number of shares of common stock that you wish to acquire. Your payment must be delivered in one of the following ways:

 

	•	uncertified personal check payable to “[•]”; or
	•	wire transfer of same day funds using the following wire instructions:

 

	For the Benefit Of:	[•] As Rights Offering Agent for Various Holders
	Account Number:	[•]
	Bank:	[•]
	ABA Number:	[•]

 

If you wish to make payment by wire transfer, you must reference the account number listed on your subscription rights election form.

 

Receipt of Payment. Your payment will be considered received by the subscription agent only upon:

 

	•	clearance of any personal check deposited by the subscription agent; or
	•	receipt by the subscription agent of any wire transfer of same day funds.

 

Clearance of Personal Checks. If you are paying by personal check, please note that payment will not be deemed to have been received by the subscription agent until the check has cleared, which could take at least five or more business days. If you wish to pay the subscription price by personal check, we urge you to make payment sufficiently in advance of the time the rights offering expires to ensure that your payment is received by the subscription agent and clears by the expiration of the rights offering period.

 

Guaranteed Delivery Procedures. If you want to exercise your subscription rights, but time will not permit your subscription rights certificate to reach the subscription agent on or prior to 5:00 p.m., Eastern Time, on [•], you may exercise your subscription rights using the following guaranteed delivery procedures:

 

 

	1.	On or before [•], you must have sent, and the subscription agent must have received, payment in full for each common share you are purchasing through your basic subscription right and your oversubscription privilege;
	2.	On or before [•], you must have sent, and the subscription agent must have received, a Notice of Guaranteed Delivery, substantially in the form provided with the attached instructions, from a member firm of a registered national securities exchange or a member of the Financial Industry Regulatory Authority, which we refer to as FINRA, or a commercial bank or trust company having an office or correspondent in the United States. The Notice of Guaranteed Delivery must state:

 

		•	your name,
		•	the number of subscription rights that you hold,
		•	the number of common shares that you wish to purchase pursuant to your basic subscription rights, and
		•	the number of common shares, if any, you wish to purchase pursuant to your oversubscription privilege.

 

		The Notice of Guaranteed Delivery must guarantee the delivery of your subscription rights certificate to the subscription agent within three trading days following the date of the Notice of Guaranteed Delivery; and
	3.	You must send, and the subscription agent must receive, your properly completed and duly executed subscription rights certificate, including any required signature guarantees, within three trading days following the date of your Notice of Guaranteed Delivery. You may physically deliver the Notice of Guaranteed Delivery via the enclosed envelope to the subscription agent. You can obtain additional copies of the Notice of Guaranteed Delivery from the subscription agent at the address set forth below under the caption “Subscription Agent” beginning on page 46 of this prospectus.

 

Signature Guarantee. Signatures on the subscription rights certificate must be guaranteed by an Eligible Guarantor Institution, as defined in Rule 17Ad-15 of the Exchange Act, subject to the standards and procedures adopted by the subscription agent. Eligible Guarantor Institutions that provide signature guarantee services include banks, brokers, dealers, credit unions, national securities exchanges and savings associations. Signatures on the subscription rights certificate do not need to be guaranteed if the subscription rights certificate:

 

		•	provides that the common shares you are purchasing are to be delivered directly to the record owner of the subscription rights; or
		•	is submitted for the account of a member firm of a registered national securities exchange or a member of the FINRA, or a commercial bank or trust company having an office or correspondent in the United States.

 

Notice to Nominees. If you are a broker, custodian bank or other nominee holder that holds shares of our common stock for the account of others on the record date, you should notify the beneficial owners of the shares for whom you are the nominee of the rights offering as soon as possible to learn their intentions with respect to exercising their subscription rights.  You should obtain instructions from the beneficial owners, as set forth in the instructions we have provided to you for your distribution to beneficial owners.  If a beneficial owner of our common stock so instructs, you should complete the rights certificate and submit it to the subscription agent with the proper subscription payment to be received by the expiration date. You may exercise the number of subscription rights to which all beneficial owners in the aggregate otherwise would have been entitled had they been direct holders of our common stock on the record date, provided that you, as a nominee record holder, make a proper showing to the subscription agent by submitting the form entitled “Nominee Holder Certification,” which is provided with your rights offering materials.  If you did not receive this form, please contact us to request a copy.

 

 

Ambiguities in Subscriptions. If you do not specify the number of shares of our common stock being subscribed for on your subscription rights certificate, or if your payment is not sufficient to pay the total purchase price for all of the shares that you indicated you wished to purchase, you will be deemed to have subscribed for the maximum number of shares of our common stock that could be subscribed for with the payment that you provided. If your payment exceeds the total purchase price for the number of shares of common shares that you have indicated you wish to exercise on your subscription rights certificate, your payment will be applied until depleted as follows:

 

	1.	to subscribe for the number of common shares that you indicated on the subscription rights certificate that you wish to purchase through your basic subscription rights;
	2.	to subscribe for additional common shares until your basic subscription right has been fully exercised; and
	3.	to subscribe for additional common shares pursuant to your oversubscription privilege (subject to any applicable limitation or proration).

 

Missing or Incomplete Subscription Forms or Payment. If you fail to complete and sign the required subscription forms or otherwise fail to follow the subscription procedures that apply to the exercise of your subscription rights before the rights offering expires, the subscription agent will reject your subscription or accept it to the extent of the payment received. Neither we nor our subscription agent undertakes any responsibility or action to contact you concerning an incomplete or incorrect subscription form, nor are we under any obligation to correct such forms. We have the sole discretion to determine whether a subscription exercise properly complies with the subscription procedures.

 

Subscription Agent. Computershare Trust Company, N.A. is acting as the subscription agent for the rights offering under an agreement with us. All subscription rights certificates, payments of the subscription price in the rights offering, and nominee holder certifications, to the extent applicable to your exercise of rights, must be delivered to:

 

	By mail:		By hand or overnight courier:
	[•] [•] [•] [•]		[•] [•] [•] [•]

 

Delivery to any address other than as set forth above does not constitute valid delivery.

 

We will pay the fees and expenses of the subscription agent and have agreed to indemnify it against any liability that it may incur in connection with the offering, including liabilities under the Securities Act of 1933, as amended, which we refer to as the Securities Act.

 

Questions regarding the Offering. If you have any questions regarding the rights offering, the Company, or Community Shores Bank, please contact Patricia Siembida, Executive Secretary of Community Shores Bank by calling 231-780-1858.

 

Non-Transferability of Subscription Rights. The subscription rights granted to you are non-transferable and, therefore, you may not sell, transfer or assign your subscription rights to anyone.  The subscription rights will not be quoted on the OTC Bulletin Board or listed for trading any other stock exchange or market. We intend to trade the shares of our common stock issuable upon exercise of the subscription rights on the OTC Bulletin Board under the symbol “CSHB.”

 

Foreign Shareholders. We will not mail this prospectus or rights certificates to shareholders with addresses that are outside the United States or that have an army post office or foreign post office address.  We will hold these rights certificates for their account.  To exercise subscription rights, our foreign shareholders must notify us prior to 5:00 p.m., Eastern Time, at least three business days prior to the expiration of the rights offering (or, if the rights offering is extended, on or before three business days prior to the extended expiration date) and demonstrate to our satisfaction that the exercise of such subscription rights does not violate the laws of the jurisdiction of such shareholder.

 

 

Fees and commissions. We are not charging any fee or sales commission to issue subscription rights to you or to issue shares to you if you exercise your subscription rights. If you exercise your subscription rights through a broker, dealer, custodian bank or other nominee, you are responsible for paying any fees your record holder may charge you.

 

POTENTIAL IMPACT OF OFFERING ON DEFERRED TAX ASSETS

 

Our accounting for income taxes involves the valuation of deferred tax assets and liabilities primarily associated with differences in the timing of the recognition of revenues and expenses for financial reporting and tax purposes. At December 31, 2014, we had gross deferred tax assets of $4.3 million, gross deferred tax liabilities of $279,000 and a valuation allowance of $0 million for the entire amount of net deferred tax assets. We may lose the ability to utilize our deferred tax assets (related to net operating loss carryforwards) if the rights offering results in an “ownership change” under Section 382 of the Internal Revenue Code. Please see “Risk Factors - The proposed rights offering may increase the risk of an “ownership change” for purposes of Section 382 of the Internal Revenue Code, which may materially impair our ability to use our deferred tax assets” on page 26.

 

U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR INVESTORS

 

In General. The following is a summary of U.S. federal income tax considerations for investors related to the subscription rights that will be distributed in the rights offering. The following is based upon provisions of the Internal Revenue Code of 1986, as amended (the “Code”), applicable U.S. Treasury Regulations, administrative rulings, judicial authorities and other applicable existing U.S. federal income tax authorities, all of which are subject to change or differing interpretations, possibly with retroactive effect, which could result in U.S. federal income tax consequences different from those discussed below.

 

This summary does not provide a complete analysis of all potential tax considerations. This summary is only applicable to U.S. holders (as defined below) of common stock who acquire the subscription rights pursuant to the terms of the rights offering, have held the common stock, as applicable, and will hold the subscription rights and any shares of common stock acquired upon the exercise of subscription rights, as capital assets (generally, property held for investment) within the meaning of Section 1221 of the Code. This summary does not deal with all tax consequences that may be relevant to holders in light of their personal circumstances or particular situations, such as holders who may be subject to special tax treatment under the Code, including (without limitation) partnerships, dealers in securities or currencies, financial institutions, insurance companies, regulated investment companies, real estate investment trusts, tax-exempt entities or traders in securities that elect to use a mark-to-market method of accounting for their securities, persons holding subscription rights or common stock as part of a hedging, integrated or conversion transaction or a straddle, persons deemed to sell subscription rights or common stock under the constructive sale provisions of the Code, persons whose “functional currency” is not the U.S. dollar, investors in pass-through entities, foreign taxpayers and holders who acquired our common stock pursuant to the exercise of compensatory stock options or otherwise as compensation. This opinion does not address any federal non-income, state, local or foreign tax consequences, estate or gift tax consequences, or alternative minimum tax consequences.

 

As used in this Prospectus, the term “U.S. holder” means a beneficial owner of common stock that is, for U.S. federal income tax purposes, (1) an individual who is a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or meets the substantial presence test under Section 7701(b) of the Code; (2) a corporation or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof or the District of Columbia; (3) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or (4) a trust, if it (i) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (ii) has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person. If a partnership (or entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our common stock, the tax treatment of a partner in the partnership will depend upon the status of the partner and the activities of the partnership. Partnerships and their partners should consult their tax advisors concerning the tax treatment of the receipt and exercise of subscription rights in the rights offering and the ownership and disposition of our common stock received on exercise of subscription rights.

 

 

Distribution of Subscription Rights. If you hold common stock on the record date for the rights offering, you will not recognize taxable income for U.S. federal income tax purposes upon receipt of the subscription rights.

 

Stockholder Basis and Holding Period of the Subscription Rights. In general, your basis in the subscription rights received in the rights offering will be zero. However, if either: (i) the fair market value of the subscription rights on their date of distribution is 15% or more of the fair market value on such date of the common stock with respect to which they are received; or (ii) you properly elect on your U.S. federal income tax return for the taxable year in which you receive the subscription rights to allocate part of the basis of such common stock to the subscription rights, then a percentage of your basis in our common stock with respect to which the subscription rights are received will be allocated to the subscription rights. Such percentage will equal the product of your basis in our common stock with respect to which the subscription rights are received and a fraction, the numerator of which is the fair market value of a subscription right and the denominator of which is the fair market value of a share of our common stock plus the fair market value of a subscription right, all as determined on the date the subscription rights are distributed. We have not obtained, and do not currently intend to obtain, an appraisal of the fair market value of the subscription rights on the date the subscription rights are distributed. In determining the fair market value of the subscription rights, you should consider all relevant facts and circumstances, including any difference between the subscription price of the subscription rights and the trading price of our common stock on the date that the subscription rights are distributed, the length of the period during which the subscription rights may be exercised and the fact that the subscription rights are non-transferable.

 

Your holding period with respect to the subscription rights you receive will include your holding period for the common stock with respect to which the subscription rights were distributed.

 

Lapse of the Subscription Rights. If you allow the subscription rights you receive to expire unexercised, you will not recognize any gain or loss on the expiration of your subscription rights, and the tax basis of the common stock you own with respect to which such subscription rights were distributed will equal the tax basis in such common stock immediately before the receipt of the subscription rights in this rights offering.

 

Exercise of the Subscription Rights; Basis and Holding Period of Common Stock Acquired Upon Exercise. You will not recognize any gain or loss upon the exercise of your subscription rights. Your basis in the shares of common stock acquired through exercise of the subscription rights will be equal to the sum of the subscription price you paid to exercise the subscription rights and your basis in such subscription rights, if any. The holding period for the shares of common stock acquired through exercise of the subscription rights will begin on the date you exercise your subscription rights.

 

YOU ARE URGED TO CONSULT WITH YOUR OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE RECEIPT OF SUBSCRIPTION RIGHTS IN THIS OFFERING AND THE OWNERSHIP, EXERCISE AND DISPOSITION OF THE SUBSCRIPTION RIGHTS APPLICABLE TO YOUR OWN PARTICULAR TAX SITUATION.

 

 

LEGAL MATTERS

 

The legality of the issuance of the securities to be offered by this prospectus will be the subject of an opinion of our legal counsel, Dickinson Wright PLLC, Ann Arbor, Michigan.

 

EXPERTS

 

The consolidated financial statements of the Company as of and for the years ended December 31, 2014 and December 31, 2013 have been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in its report, which is incorporated herein by reference from the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, and have been so incorporated in reliance upon the report of such firm given upon its authority as experts in accounting and auditing.

 

WHERE YOU CAN FIND MORE INFORMATION

 

CSHB files annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The address of the SEC’s Internet site is http://www.sec.gov.

 

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

 

The following documents filed by us with the SEC are incorporated by reference into this prospectus. You should carefully read and consider all of these documents before making an investment decision.

 

	•	Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed on March 31, 2015, and as amended May 15, 2015;
	•	Definitive Proxy Statement on Schedule 14A filed on April 13, 2015;
	•	Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, filed on May 15, 2015.
	•	Current Reports on Form 8-K filed on March 20, 2015, May 14, 2015, May 15, 2015 and June 16, 2015;
	•	All other reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act or proxy or information statements filed pursuant to Section 14 of the Exchange Act since December 31, 2014; and
	•	The description of our common stock included in our registration statement on S-8, filed with the Commission on March 8, 2003.

 

The Company also incorporates by reference all documents filed by it with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 between the date of the initial filing of the registration statement of which this prospectus is a part and the completion of the sale of the shares of common stock offered by this prospectus. These additional documents include periodic reports, such as annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as proxy statements. Notwithstanding the foregoing, information “furnished” by the Company under any item of any current report on Form 8-K, including the related exhibits, is not incorporated by reference in this prospectus. Upon written or oral request, the Company will provide without charge to each person, including any beneficial owner to whom a prospectus is delivered, a copy of any or all of the information that has been incorporated by reference in this prospectus.  If you would like to obtain this information from the Company, please direct your request, either in writing or by telephone, to the Secretary, Community Shores Bank Corporation, 1030 W. Norton Avenue, Muskegon, Michigan 49441, telephone number (231) 780-1800. Our SEC filings are also available to the public in the “Investor Relations” section of our website, www.communityshores.com.

 

 

PART II: INFORMATION NOT REQUIRED IN PROSPECTUS

 

Item 13.

Other Expenses of Issuance and Distribution

 

The following table sets forth all expenses to be paid by the registrant in connection with the rights offering. All amounts shown are estimates except for the Securities and Exchange Commission Registration Fee.

 

		Amount
Securities and Exchange Commission Registration Fee		$	761
Registrant’s Legal Fees and Expenses			100,000
Registrant’s Accounting Fees and Expenses			3,500
Printing Expenses			15,000
Other			30,789
Total		$	150,000

 

Item 14.

Indemnification of Directors and Officers

 

Sections 450.1561 through 450.1565 of the Michigan Business Corporation Act contain specific provisions relating to indemnification of directors and officers of Michigan corporations. In general, the statute provides that (a) a corporation must indemnify a director or officer who is wholly successful in his defense of a proceeding to which he is a party because of his status as such, and (b) a corporation may indemnify a director or officer if he is not wholly successful in such defense, if it is determined as provided in the statute that the director meets a certain standard of conduct and upon an evaluation of the reasonableness of expenses and amount paid in settlement. The statute also permits a director or officer of a corporation who is a party to a proceeding to apply to the courts for indemnification or advance of expenses, and the court may order indemnification or advancement of expenses under certain circumstances set forth in the statute. The statute further provides that a corporation may, in its articles of incorporation, in its bylaws, through a resolution, or through a contract provide indemnification in addition to that provided by statute, subject to certain conditions set forth in the statute.

 

Our articles of incorporation require indemnification of any Company director or officer who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding because he or she is or was a director or executive officer, or is or was serving at the request of the Company in another capacity, to the fullest extent permitted by law. We may also indemnify any person who is not a director or executive officer, if the indemnification is authorized by the board of directors.

 

Our bylaws implement the mandatory indemnification required by our articles of incorporation. The bylaws provide procedures and standards for determination, evaluation and authorization of indemnification. Under the bylaws, we are required to pay or reimburse the reasonable expenses incurred by a director or officer who is a party to a proceeding before final disposition of the proceeding if the person furnishes a written undertaking to repay the advance if it is ultimately determined that the person did not meet the applicable standard of conduct, if any, required by statute for indemnification. The indemnification provisions in our bylaws are enforceable as a contract.

 

In addition, the Company maintains policies of director and officer liability insurance, under which directors and officers of the Company are insured against certain liabilities arising in connection with the performance of their duties.

 

 

Item 15.

Recent Sales of Unregistered Securities

 

Sales of Common Shares

 

On March 20, 2013, the Company, with approval from the FRB, borrowed $1,280,000 from 1030 Norton LLC, a Michigan limited liability company owned by nine individuals; three directors of the Company, Gary F. Bogner, Robert L. Chandonnet and Bruce J. Essex, one former director and five local businessmen. On the same day, $500,000 of the proceeds was used to settle, in full, a defaulted debt with a financial institution1. The remaining proceeds of the senior debt are being used for interest carry and general operations. The note bears interest at a fixed rate of 8.00% per annum until paid in full. Interest is payable quarterly, in arrears. The note is secured by a pledge of all of the issued and outstanding shares of the Bank as evidenced by a pledge agreement between the Company and 1030 Norton LLC. The members of 1030 Norton LLC have agreed to extend the note for another two year period at the same terms. In a letter dated February 11, 2015, the FRB granted the Company permission to extend the note at the same terms and continue paying quarterly interest. The note now matures on March 31, 2017.

 

The Company intends to retire the senior debt through (i) cash proceeds raised in connection with this offering; (ii) allowing the holders of senior debt to convert outstanding principal plus accrued and unpaid interest into shares of the Company’s common stock at a conversion price equal to [•], which is 75% of the per share subscription price of this offering; or (iii) a combination of the foregoing. The terms of the senior debt, including the conversion right, were approved by an independent committee of our board of directors.

 

Item 16.

Exhibits and Financial Statement Schedules:

 

The exhibits and financial statement schedules filed as part of this registration statement are as follows:

 

Exhibit Number and Description

 

	3.1	Articles of Incorporation are incorporated by reference to exhibit 3.1 of the Company’s June 30, 2004 Form 10-QSB (SEC file no. 333-63769).
	3.2	Bylaws of the Company are incorporated by reference to exhibit 3(ii) of the Company’s 8-k filed July 5, 2006 (SEC file no. 000-51166).
	4.1	Second Amendment to Loan Agreement between the Company and Fifth Third Bank dated December 18, 2009, and Promissory Note dated December 18, 2009 payable to Fifth Third Bank are included as exhibit 10.17 herein.
	4.2	Form of Subscription Rights Certificate*
	5.1	Opinion of Dickinson Wright PLLC*
	10.1	1998 Employee Stock Option Plan is incorporated by reference to exhibit 10.1 of the Company’s Registration Statement on Form SB-2 (SEC file no. 333-63769), which became effective on December 17, 1998.
	10.2	First Amendment to 1998 Employee Stock Option Plan is incorporated by reference to exhibit 10.3 of the Company’s Registration Statement on Form SB-2 (SEC file no. 333-63769), which became effective on December 17, 1998.
	10.3	Director Stock Option Plan is incorporated by reference to exhibit 10.53 of the Company’s December 31, 2003 Form 10-KSB (SEC file no. 333-63769).

 

 

	10.4	Junior Subordinated Indenture between Community Shores Bank Corporation and Deutsche Bank Trust Company Americas, as Trustee dated as of December 17, 2004 is incorporated by reference to exhibit 10.20 of the Company’s December 31, 2004 Form 10-KSB (SEC file no. 000-51166).
	10.5	Amended and Restated Trust Agreement among Community Shores Bank Corporation, as Depositor, Deutsche Bank Trust Company Americas, as Property Trustee, Deutsche Bank Trust Company Delaware, as Delaware Trustee, and The Administrative Trustees Named Herein as Administrative Trustees dated as of December 17, 2004 is incorporated by reference to exhibit 10.21 of the Company’s December 31, 2004 Form 10-KSB (SEC file no. 000-51166).
	10.6	Guarantee Agreement between Community Shores Bank Corporation, as Guarantor, and Deutsche Bank Trust Company Americas, as Guarantee Trustee dated as of December 17, 2004 is incorporated by reference to exhibit 10.22 of the Company’s December 31, 2004 Form 10-KSB (SEC file no. 000-51166).
	10.7	Placement Agreement among Community Shores Bank Corporation, Community Shores Capital Trust I and Suntrust Capital Markets, Inc. dated as of December 17, 2004 is incorporated by reference to exhibit 10.23 of the Company’s December 31, 2004 Form 10-KSB (SEC file no. 000-51166).
	10.8	2005 Employee Stock Option Plan is incorporated by reference to Appendix A of the Company’s proxy statement for its May 12, 2005 annual meeting of shareholders (SEC file no. 000-51166).
	10.9	2005 Director Stock Option Plan is incorporated by reference to Appendix B of the Company’s proxy statement for its May 12, 2005 annual meeting of shareholders (SEC file no. 000-51166).
	10.10	Form of stock option agreement for options granted under the 2005 Employee Stock Option Plan is incorporated by reference to exhibit 10.3 of the Company’s Form 8-K filed May 17, 2005 (SEC file no. 000-51166).
	10.11	Form of stock option agreement for options granted to directors under the 2005 Director Stock Option Plan is incorporated by reference to exhibit 10.1 of the Company’s Form 8-K filed December 13, 2005 (SEC file no. 000-51166).
	10.12	Community Shores Bank Corporation Executive Incentive Plan is incorporated by reference to Appendix A of the Company’s proxy statement for its May 10, 2007 annual meeting of shareholders that was filed April 5, 2007 (SEC file no. 000-51166).
	10.13	Consent Order issued and effective September 2, 2010 is incorporated by reference to exhibit 10.1 of the Company’s Form 8-K filed September 9, 2010 (SEC file number 000-51166).
	10.14	Written Agreement dated December 16, 2010, effective December 16, 2010, by and between Community Shores Bank Corporation and the Federal Reserve Bank of Chicago is incorporated by reference to exhibit 10.2 of the Company’s Form 8-K filed December 21, 2010 (SEC file no. 000-51166).
	10.15	Convertible Secured Note Purchase Agreement, Note and Pledge Agreement between Community Shores Bank Corporation and 1030 Norton LLC dated March 20, 2013 is incorporated by reference to exhibit 10.2 of the Company’s Form 8-K filed March 25,2013 (SEC file no. 000-5166).
	10.16	Settlement and release between Community Shores Bank Corporation and Fifth Third Bank dated March 20, 2013 is incorporated by reference to exhibit 10.1 of the Company’s form 8-K filed March 25, 2013 (SEC file no. 000-5166).
	10.17	Amendment to Convertible Secured Note Purchase Agreement dated March 18, 2015, incorporated by reference to exhibit 10.1 of the Company’s Form 8-K filed March 20, 2015.

 

 

	10.10	Master Agreement between Community Shores Bank and Fiserv Solutions, LLC, incorporated by reference to exhibit 10.1 of the Company’s Form 8-K filed June 16, 2015.
	21	Subsidiaries of the Registrant.
	23.1	Consent of BDO USA, LLP
	23.2	Consent of Dickinson Wright PLLC (included in Exhibit 5 and here incorporated by reference).*
	24	Powers of Attorney (included in the signature page).
	99.1	Form of Instructions as to Use of Subscription Rights Certificates.*
	99.2	Form of Letter to Shareholders.*
	99.3	Form of Letter to Brokers and Other Nominee Holders.*
	99.4	Form of Beneficial Owner Election Form.*
	99.5	Form of Nominee Holder Certification.*
		*To be filed by an amendment.

 

Item 17.

Undertakings

 

The undersigned Registrant hereby undertakes that:

 

	(1)	For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
	(2)	For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
	(3)	Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been informed that in the opinion of the Securities and Exchange Commission such
		Indemnification is against public policy as expressed in the Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
	(4)	For purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

 

(5)

The undersigned registrant hereby undertakes to supplement the prospectus, after the expiration of the subscription period, to set forth the results of the subscription offer, the amount of unsubscribed securities, and the terms of any subsequent reoffering thereof. If any public offering is to be made on terms differing from those set forth on the cover page of the prospectus, a post-effective amendment will be filed to set forth the terms of such offering.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized on June 25, 2015.

 

		COMMUNITY SHORES BANK CORPORATION
		/s/ Heather D. Brolick
		By:  Heather D. Brolick
		Its:   President and Chief Executive Officer

 

Each person whose signature appears below hereby constitutes and appoints Heather D. Brolick his or her true and lawful agent, proxy and attorney-in-fact, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, (iii) act on and file any supplement to any prospectus included in this registration statement or any such amendment and (iv) take any and all actions which may be necessary or appropriate to be done, as fully for all intents and purposes as he might or could do in person, hereby approving, ratifying and confirming all that such agent, proxy and attorney-in-fact or any of his substitutes may lawfully do or cause to be done by virtue thereof.         

 

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on June 25, 2015.

 

/s/ Gary F. Bogner		/s/ Bruce J. Essex
Gary F. Bogner, Chairman of the Board		Bruce J. Essex , Director
(non-officer)
/s/ Heather D. Brolick		/s/ Julie K. Greene
Heather D. Brolick, President, Chief Executive Officer and Director (principal executive officer)		Julie K. Greene , Director
/s/ Stanley L. Boelkins		/s/ Tracey A. Welsh
Stanley L. Boelkins, Director		Tracey A. Welsh, Senior Vice President, Chief Financial Officer and Treasurer (principal financial and accounting officer)
/s/ Robert L. Chandonnet
Robert L. Chandonnet, Vice Chairman of the Board (non-officer)

 

 

EXHIBIT INDEX

 

	3.1	Articles of Incorporation are incorporated by reference to exhibit 3.1 of the Company’s June 30, 2004 Form 10-QSB (SEC file no. 333-63769).
	3.2	Bylaws of the Company are incorporated by reference to exhibit 3(ii) of the Company’s 8-k filed July 5, 2006 (SEC file no. 000-51166).
	4.1	Second Amendment to Loan Agreement between the Company and Fifth Third Bank dated December 18, 2009, and Promissory Note dated December 18, 2009 payable to Fifth Third Bank are included as exhibit 10.17 herein.
	4.2	Form of Subscription Rights Certificate*
	5.1	Opinion of Dickinson Wright PLLC*
	10.1	1998 Employee Stock Option Plan is incorporated by reference to exhibit 10.1 of the Company’s Registration Statement on Form SB-2 (SEC file no. 333-63769), which became effective on December 17, 1998.
	10.2	First Amendment to 1998 Employee Stock Option Plan is incorporated by reference to exhibit 10.3 of the Company’s Registration Statement on Form SB-2 (SEC file no. 333-63769), which became effective on December 17, 1998.
	10.3	Director Stock Option Plan is incorporated by reference to exhibit 10.53 of the Company’s December 31, 2003 Form 10-KSB (SEC file no. 333-63769).
	10.4	Junior Subordinated Indenture between Community Shores Bank Corporation and Deutsche Bank Trust Company Americas, as Trustee dated as of December 17, 2004 is incorporated by reference to exhibit 10.20 of the Company’s December 31, 2004 Form 10-KSB (SEC file no. 000-51166).
	10.5	Amended and Restated Trust Agreement among Community Shores Bank Corporation, as Depositor, Deutsche Bank Trust Company Americas, as Property Trustee, Deutsche Bank Trust Company Delaware, as Delaware Trustee, and The Administrative Trustees Named Herein as Administrative Trustees dated as of December 17, 2004 is incorporated by reference to exhibit 10.21 of the Company’s December 31, 2004 Form 10-KSB (SEC file no. 000-51166).
	10.6	Guarantee Agreement between Community Shores Bank Corporation, as Guarantor, and Deutsche Bank Trust Company Americas, as Guarantee Trustee dated as of December 17, 2004 is incorporated by reference to exhibit 10.22 of the Company’s December 31, 2004 Form 10-KSB (SEC file no. 000-51166).
	10.7	Placement Agreement among Community Shores Bank Corporation, Community Shores Capital Trust I and Suntrust Capital Markets, Inc. dated as of December 17, 2004 is incorporated by reference to exhibit 10.23 of the Company’s December 31, 2004 Form 10-KSB (SEC file no. 000-51166).
	10.8	2005 Employee Stock Option Plan is incorporated by reference to Appendix A of the Company’s proxy statement for its May 12, 2005 annual meeting of shareholders (SEC file no. 000-51166).
	10.9	2005 Director Stock Option Plan is incorporated by reference to Appendix B of the Company’s proxy statement for its May 12, 2005 annual meeting of shareholders (SEC file no. 000-51166).
	10.10	Form of stock option agreement for options granted under the 2005 Employee Stock Option Plan is incorporated by reference to exhibit 10.3 of the Company’s Form 8-K filed May 17, 2005 (SEC file no. 000-51166).

 

 

	10.11	Form of stock option agreement for options granted to directors under the 2005 Director Stock Option Plan is incorporated by reference to exhibit 10.1 of the Company’s Form 8-K filed December 13, 2005 (SEC file no. 000-51166).
	10.12	Community Shores Bank Corporation Executive Incentive Plan is incorporated by reference to Appendix A of the Company’s proxy statement for its May 10, 2007 annual meeting of shareholders that was filed April 5, 2007 (SEC file no. 000-51166).
	10.13	Consent Order issued and effective September 2, 2010 is incorporated by reference to exhibit 10.1 of the Company’s Form 8-K filed September 9, 2010 (SEC file number 000-51166).
	10.14	Written Agreement dated December 16, 2010, effective December 16, 2010, by and between Community Shores Bank Corporation and the Federal Reserve Bank of Chicago is incorporated by reference to exhibit 10.2 of the Company’s Form 8-K filed December 21, 2010 (SEC file no. 000-51166).
	10.15	Convertible Secured Note Purchase Agreement, Note and Pledge Agreement between Community Shores Bank Corporation and 1030 Norton LLC dated March 20, 2013 is incorporated by reference to exhibit 10.2 of the Company’s Form 8-K filed March 25,2013 (SEC file no. 000-5166).
	10.16	Settlement and release between Community Shores Bank Corporation and Fifth Third Bank dated March 20, 2013 is incorporated by reference to exhibit 10.1 of the Company’s form 8-K filed March 25, 2013 (SEC file no. 000-5166).
	10.17	Amendment to Convertible Secured Note Purchase Agreement dated March 18, 2015, incorporated by reference to exhibit 10.1 of the Company’s Form 8-K filed March 20, 2015.
	10.10	Master Agreement between Community Shores Bank and Fiserv Solutions, LLC, incorporated by reference to exhibit 10.1 of the Company’s Form 8-K filed June 16, 2015.
	21	Subsidiaries of the Registrant.
	23.1	Consent of BDO USA, LLP
	23.2	Consent of Dickinson Wright PLLC (included in Exhibit 5 and here incorporated by reference).*
	24	Powers of Attorney (included in the signature page).
	99.1	Form of Instructions as to Use of Subscription Rights Certificates.*
	99.2	Form of Letter to Shareholders.*
	99.3	Form of Letter to Brokers and Other Nominee Holders.*
	99.4	Form of Beneficial Owner Election Form.*
	99.5	Form of Nominee Holder Certification.*
		*To be filed by an amendment.