Cornerstone Bancshares, Inc. Announces Second Quarter 2011 Financial Results

News provided by

Cornerstone Bancshares, Inc.

Aug 03, 2011, 02:25 ET

CHATTANOOGA, Tenn., Aug. 3, 2011 /PRNewswire/ -- Cornerstone Bancshares, Inc. (OTC Bulletin Board: CSBQ) today announced the following:

Cornerstone Bancshares, Inc. ("Cornerstone") reported positive earnings for the second consecutive quarter of 2011, with a net income for 2011 of $393,000 or $0.03 earnings per share. This represents an increase of 8.6 percent compared to the first six months of 2010 income of $362,000 or $0.06 per share. Cornerstone recorded net income of $141,000 for the second quarter of 2011, compared to $18,000 for the same quarter of 2010. Cornerstone fully funded its loan loss provision at the beginning of the year and has not been required to make any material provision to loan loss allowance during 2011.  In addition, the Bank has seen a contraction of its operating expense, which allowed Cornerstone to offset the reduced loan income compared to 2010.

Past-dues continued to decline to approximately $2.0 million, an improvement of 71 percent over the same quarter last year.  Cornerstone's allowance for loan losses was approximately $6.8 million or 2.52 percent of total loans as of June 30, 2011, compared to approximately $7.0 million or 2.19 percent for the same quarter of 2010. Nonperforming loans were approximately $7.2 million or 2.68 percent of total loans at June 30, 2011, compared to approximately $13.0 million or 4.09 percent at June 30, 2010. The Bank has seen a continued interest in its OREO holdings and currently has more than 50 percent of its holdings either leased or under contract to close during the third quarter of 2011.  

Since launching a Preferred Stock Offering in August of 2010, Cornerstone has been successful in raising more than $7.2 million in capital as of the date of this release.  Cornerstone plans to continue the offering through December 31, 2011.

"The success of our capital campaign is proof that Chattanooga believes in Cornerstone," said Cornerstone President Frank Hughes.  "Today's investment environment is difficult, which makes the capital raise that much more exciting and a true testament to the faith our community has in Cornerstone."

Specific Trends Include:

  • Continued reduction of past-due loans
  • Capital infusion in excess of $7.2 million

"The Bank is definitely moving in the right direction," Hughes said.  "I am extremely pleased with the progress we have achieved in strengthening the Bank's capital position and improving asset quality, which will help us progress to a more conservative banking model and a higher return for investors."

Cornerstone is a single-bank holding company, with $440 million in assets, serving the Chattanooga, Tennessee MSA, with five branches throughout Chattanooga and one loan production office in Dalton, Georgia. Locally owned and locally operated, Cornerstone specializes in providing a comprehensive range of customized financial solutions for businesses and individuals.

Certain of the statements made in this release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements, including statements regarding the intent, belief or current expectations of Cornerstone and its management regarding the company's strategic directions, prospects and future results, involve certain risks and uncertainties. Certain factors may cause actual results to differ materially from those contained in the forward-looking statements, including economic and other conditions in the markets in which Cornerstone operates, governmental regulations, the company's competitive environment, cyclical and seasonal fluctuations in its operating results, and other risks.

Cornerstone Bancshares, Inc. and Subsidiary





Second Quarter Financial Highlights





June 30, 2011 and 2010





(Unaudited)












(Amounts in thousands, except per common share data)

2011

2010

% Change

Balance Sheet Data at June 30





Total assets

$ 441,210

$ 523,426

(15.7)

Interest-earning assets

416,484

492,537

(15.4)

Loans

270,171

318,796

(15.3)

Foreclosed assets

20,058

10,212

96.4

Deposits

334,921

400,648

(16.4)

Other interest-bearing liabilities

75,491

91,355

(17.4)

Shareholders' equity

28,860

29,425

(1.9)

Loan to deposit ratio

80.67%

79.57%

1.4

Tier 1 leverage ratio (Bank)

6.09%

5.78%

5.4

Total risk-based capital ratio (Bank)

10.65%

10.48%

1.6

Outstanding common shares (000s)

6,500

6,500

-

Book value per common share

$       3.74

$       4.53

(17.4)

Tangible book value per common share

$       3.74

$       4.13

(9.5)

Market value per common share as of June 30

$       1.10

$       2.15

(48.8)







Loan Quality Data





Nonaccruing loans

7,233

13,030

(44.5)

Loans past due 90 days – accruing

-

-

-

Net charge-offs YTD

2,348

1,418

65.6

Allowance for loan losses

6,814

6,967

(2.2)

Allowance for loan losses to total loans

2.52%

2.19%

Nonperforming assets to total assets

6.19%

4.44%








Performance Data for the Year





Net income

$        393

362

8.6

Return on average assets

0.18%

0.14%

Return on average equity

2.84%

2.49%

Net interest margin

3.44%

3.52%

Per common share data:





Net income – basic

$       0.03

$       0.06

Net income – diluted

$       0.03

$       0.06

Common dividends

$            -

$            -

Preferred dividends

$       0.63

$            -

Average shares (000s):





Basic common stock

6,500

6,500

Diluted common stock

6,500

6,500

Preferred stock

189

-

Cornerstone Bancshares, Inc. and Subsidiary






Loan Loss Allowance and Asset Quality Review














2011

2010

Second

First

Fourth

Third

Second

(Amounts in thousands)

Quarter

Quarter

Quarter

Quarter

Quarter








Allowance for loan losses






Balance at beginning of period

$   7,914

$   9,132

$   6,271

$   6,967

$   6,760

Provision for loan losses

15

15

4,130

681

1,465

Net charge-offs

(1,115)

(1,233)

(1,269)

(1,377)

(1,258)

Balance at end of period

$   6,814

$   7,914

$   9,132

$   6,271

$   6,967








As a % of loans

2.52%

2.89%

3.20%

2.15%

2.19%

As a % of nonperforming loans

94.21%

108.10%

63.06%

38.97%

36.81%

As a % of nonperforming assets

24.97%

28.48%

33.46%

21.25%

23.91%








Net charge-offs as a % of  loans (a)

1.65%

1.80%

1.78%

1.89%

1.58%








Risk element assets






Accruing troubled debt restructured

$   1,750

$   1,650

$      848

$   5,853

$   5,895

Loans past due 30-89 days

$   1,957

$   8,434

$   2,306

$   1,500

$   6,655








Nonaccruing loans

$   7,233

$   6,271

$ 13,633

$ 10,237

$ 13,030

Loans past due 90 days – accruing

-

-

-

-

-

Total nonperforming loans

$   7,233

$   6,271

$ 13,633

$ 10,237

$ 13,030

Repossessed assets

-

-

150

285

350

Other real estate owned (b)(c)(d)

20,058

20,464

12,659

13,142

9,862

Total nonperforming assets

$ 27,291

$ 26,735

$ 26,442

$ 23,664

$ 23,242
















Nonperforming loans as a % of loans

2.68%

2.29%

4.78%

3.51%

4.09%

Nonperforming assets as a % of loans






   and other real estate owned

9.40%

9.09%

8.88%

7.75%

7.07%








Total loans

270,171

273,750

285,247

292,046

318,796








(a) Annualized

(b) Properties sold since quarter-end

$   2,379





(c) Properties rented

$ 10,416





(d) Properties under contract to sell

$   1,333





Cornerstone Bancshares, Inc.










Net Interest Margin Analysis










Taxable Equivalent Basis











Three months ended

June 30

(Amounts in thousands)










Assets

2011




2010


Average

Income/

Yield/

Average

Income/

Yield/

Earning assets:

Balance

Expense

Rate

Balance

Expense

Rate

Loans, net of unearned income

$ 271,952

$ 4,521

6.67%

$ 321,455

$ 5,494

6.86%

Investment securities

119,751

621

2.36%

151,220

1,216

3.44%

Other earning assets

24,902

17

0.28%

33,957

22

0.26%

 Total earning assets

416,605

$ 5,159

5.05%

506,632

$ 6,732

5.39%

Allowance for loan losses

(7,285)




(6,797)



Cash and other assets

36,152




29,821



TOTAL ASSETS

$ 445,472




$ 529,656















Liabilities and Shareholders' Equity






















Interest-bearing liabilities:










Interest-bearing demand deposits

$   28,402

$      23

0.33%

$   42,565

$      36

0.34%

Savings deposits

9,938

13

0.51%

9,090

12

0.51%

MMDA's

25,927

64

0.99%

21,952

52

0.95%

Time deposits

236,873

1,012

1.71%

299,720

1,619

2.17%

Federal funds purchased and securities










 sold under agreements to repurchase

24,288

34

0.56%

23,807

32

0.54%

Other borrowings

50,678

545

4.32%

69,833

760

4.36%

 Total interest-bearing liabilities

376,107

1,691

1.80%

466,967

2,511

2.16%

Net interest spread

$ 3,468

3.25%


$ 4,221

3.24%

Noninterest-bearing demand deposits

41,486




39,061



Accrued expenses and other liabilities

167




(5,477)



Shareholders' equity

27,712




29,105



TOTAL LIABILITIES AND










 SHAREHOLDERS' EQUITY

$ 445,472




$ 529,656



Net yield on earning assets



3.42%




3.41%












Taxable equivalent adjustment:










 Loans

0




0

 Investment securities

85




81

         Total adjustment

85




81

Cornerstone Bancshares, Inc.










Net Interest Margin Analysis










Taxable Equivalent Basis











Six months ended

June 30

(Amounts in thousands)










Assets

2011




2010


Average

Income/

Yield/

Average

Income/

Yield/

Earning assets:

Balance

Expense

Rate

Balance

Expense

Rate

Loans, net of unearned income

$ 278,090

$   9,160

6.64%

$ 325,715

$ 11,442

7.08%

Investment securities

114,825

1,190

2.39%

143,072

2,346

3.52%

Other earning assets

23,959

28

0.24%

39,927

45

0.23%

 Total earning assets

416,874

$ 10,378

5.10%

508,714

$ 13,833

5.55%

Allowance for loan losses

(8,173)




(6,397)



Cash and other assets

32,967




29,653



TOTAL ASSETS

$ 441,668




$ 531,970















Liabilities and Shareholders' Equity






















Interest-bearing liabilities:










Interest-bearing demand deposits

$   27,998

$        45

0.32%

$   35,277

$        66

0.38%

Savings deposits

9,720

25

0.51%

8,910

23

0.51%

MMDA's

25,186

123

0.99%

22,830

108

0.96%

Time deposits

240,427

2,064

1.73%

303,357

3,303

2.20%

Federal funds purchased and securities










 sold under agreements to repurchase

23,461

65

0.56%

23,723

68

0.57%

Other borrowings

52,507

1,125

4.32%

71,063

1,539

4.37%

 Total interest-bearing liabilities

379,299

3,447

1.83%

465,160

5,107

2.21%

Net interest spread

$   6,931

3.27%


$   8,726

3.33%

Noninterest-bearing demand deposits

35,259




43,610



Accrued expenses and other liabilities

(91)




(5,688)



Shareholders' equity

27,200




28,888



TOTAL LIABILITIES AND










 SHAREHOLDERS' EQUITY

$ 441,668




$ 531,970



Net yield on earning assets



3.44%




3.52%












Taxable equivalent adjustment:










 Loans

0




0

 Investment securities

170




155

         Total adjustment

170




155

Cornerstone Bancshares, Inc. and Subsidiary






Quarterly Earnings Summary


















(Unaudited)



2011

2010

Q2-11 /


Second

First

Fourth

Third

Second

Q2-10

(Amounts in thousands)

Quarter

Quarter

Quarter

Quarter

Quarter

% Chg

Interest income







Loans, including fees

$ 4,521

$  4,639

$  4,896

$   5,160

$  5,494

(17.7)

Investment securities and interest bearing deposits

621

568

534

754

1,216

(48.9)

Other earning assets

17

11

15

19

22

(21.3)

    Total interest income

5,159

5,218

5,445

5,933

6,732

(23.4)

Interest expense







Deposits

1,112

1,145

1,239

1,478

1,719

(35.3)

Short-term borrowings

34

31

28

32

32

5.9

FHLB advances and other borrowings

545

580

651

666

760

(28.2)

    Total interest expense

1,691

1,756

1,918

2,176

2,511

(32.7)

Net interest income

3,468

3,462

3,527

3,757

4,221

(17.8)

Provision for loan losses

15

15

4,130

681

1,465

(99.0)

Net interest income after the







  provision for loan losses

3,453

3,447

(603)

3,076

2,756

25.3

Noninterest income







Customer service fees

225

215

280

309

342

(34.1)

Other noninterest income

22

20

63

34

29

(25.8)

Gain / (loss) on sale of assets

69

34

(681)

544

439

(84.2)

    Total noninterest income

316

269

(338)

887

810

(61.0)

Noninterest expense







Salaries and employee benefits

1,502

1,542

1,515

1,525

1,521

(1.3)

Net occupancy and equipment

350

406

380

397

369

(5.1)

Depository insurance

241

322

350

386

237

1.9

Foreclosed asset expense

716

-

-

-

-

NM

Other operating expense

847

1,145

1,255

1,372

1,476

(42.6)

    Total noninterest expense

3,657

3,415

3,500

3,680

3,603

1.5

Income (loss) before income taxes

113

301

(4,441)

283

(37)

NM

Income tax (benefit) expense

(28)

49

(1,699)

69

(55)

NM

Net income (loss)


$    141

$     252

$ (2,742)

$      214

$       18

NM









Preferred stock dividends & accretion preferred stock discount

102

92

-

34

-









Net income (loss) per common share:







  Basic

$   0.01

$    0.02

$   (0.42)

$     0.03

$    0.00

NM

  Diluted

$   0.01

$    0.02

$   (0.42)

$     0.03

$    0.00

NM

Average basic shares (000s)      

6,500

6,500

6,500

6,500

6,500

NM

Average common diluted shares (000s)  


6,500

6,500

6,500

6,500

6,500

NM

Performance Ratios







Return on average equity

2.04%

3.78%

-35.24%

2.81%

0.25%

NM

Return on average assets

0.13%

0.23%

-2.42%

0.17%

0.01%

NM

Net interest margin

3.42%

3.44%

3.36%

3.36%

3.41%

NM

Average equity

27,712

26,683

31,120

30,355

29,105

(4.8)

Average assets

445,472

437,821

453,665

488,771

529,655

(15.9)

Average interest-earning assets

416,605

418,263

425,789

458,213

506,631

(17.8)









NM=Not Material

Cornerstone Bancshares, Inc. and Subsidiary




Loan Stratification











2011

2010


Second

% of

Second

% of

% Dollar

(Amounts in thousands)

Quarter

Total

Quarter

Total

Change

Non-residential real estate




    Owner occupied

$  63,801

23.6

$  73,124

22.9

(12.7)

    Non-owner occupied

62,060

23.0

71,767

22.5

(13.5)

   Multi-family real estate

10,929

4.0

12,957

4.1

(15.7)

    1-4 family construction

4,092

1.5

5,671

1.8

(27.8)

    Commercial land and lot development

18,528

6.9

27,604

8.7

(32.9)

Total non-residential real estate

159,410

59.0

191,123

60.0

(16.6)

Residential real estate




    First mortgage – 1-4 family

40,734

15.1

41,511

13.0

(1.9)

   Second mortgage - 1-4 family

4,404

1.6

5,165

1.6

(14.7)

    Home equity lines

11,963

4.4

11,012

3.5

8.6

Total residential real estate

57,101

21.1

57,688

18.1

(1.0)

Total real estate loans

216,511

80.1

248,811

78.0

(13.0)






Commercial

41,680

15.4

57,790

18.1

(27.9)

Agricultural & other

9,041

3.3

8,522

2.7

6.1

Consumer

2,939

1.1

3,673

1.2

(20.0)

Total loans, net of unearned fees

$270,171

100.0

$318,796

100.0

(15.3)

Cornerstone Bancshares, Inc. and Subsidiary



Consolidated Balance Sheets















Unaudited



June 30,

December 31,

ASSETS

2011

2010





Cash and cash equivalents

$   29,904,137

$   22,981,952





Securities available for sale

109,331,248

108,250,434

Securities held to maturity


81,534

95,702

Federal Home Loan Bank stock, at cost

2,322,900

2,322,900

Loans, net of allowance for loan losses of





   $6,814,385 at June 30, 2011



   and $9,132,171 at December 31, 2010

263,356,939

276,114,617

Bank premises and equipment, net

5,790,638

8,047,370

Accrued interest receivable

1,297,606

1,326,480

Foreclosed assets

20,057,587

12,808,838

Other assets

9,067,121

9,551,121

Total Assets

$ 441,209,710

$ 441,499,414






LIABILITIES AND STOCKHOLDERS' EQUITY








Deposits:



Noninterest-bearing demand deposits

$   42,354,816

$   28,980,043

Interest-bearing demand deposits

26,262,115

24,834,214

Savings deposits and money market accounts

38,425,489

34,041,672

Time deposits


227,878,545

247,591,161

 Total deposits

334,920,965

335,447,090

Federal funds purchased and securities sold under  



   agreements to repurchase

27,011,269

24,325,372

Federal Home Loan Bank advances and other borrowing

48,480,000

54,715,000

Accrued interest payable

180,223

176,761

Other liabilities

1,757,631

1,016,038

Total Liabilities

412,350,088

415,680,261





Stockholders' Equity



Preferred stock - no par value; 2,000,000 shares



   authorized; 188,820 shares issued and outstanding in 2011

4,540,516

2,727,424

   114,540 shares issued and outstanding in 2010



Common stock - $l.00 par value; 20,000,000 shares authorized;



     6,709,199 shares issued in 2011 and 2010;



     6,500,396 shares outstanding in 2011 and 2010

6,500,396

6,500,396

Additional paid-in capital

21,276,868

21,237,298

Retained deficit

(4,024,893)

(4,317,130)

Accumulated other comprehensive income

566,735

(328,835)

Total Stockholders' Equity

28,859,622

25,819,153

Total Liabilities and Stockholders' Equity

$ 441,209,710

$ 441,499,414

Cornerstone Bancshares, Inc. and Subsidiary







Consolidated Statements of Income


















Unaudited

Unaudited


Three months ended

Six months ended


June 30

June 30


2011

2010

2011

2010

INTEREST INCOME







Loans, including fees

$ 4,521,370

$ 5,493,946

$ 9,160,175

$ 11,442,192

Securities

621,108

1,216,300

1,189,780

2,345,579

Federal funds sold & other earning assets

17,325

21,732

28,328

45,393

Total interest income

5,159,803

6,731,978

10,378,283

13,833,164









INTEREST EXPENSE







Time deposits

1,011,776

1,619,243

2,064,225

3,303,270

Other deposits

99,936

99,606

192,548

197,329

Federal funds purchased and securities







   sold under agreements to repurchase

33,712

32,142

64,715

67,557

FHLB advances and other borrowing

545,413

759,803

1,125,071

1,539,000

Total interest expense

1,690,837

2,510,794

3,446,559

5,107,156









Net interest income before provision for loan losses

3,468,966

4,221,184

6,931,724

8,726,008

Provision for loan losses

15,000

1,465,000

30,000

2,480,000

Net interest income after the provision for loan losses

3,453,966

2,756,184

6,901,724

6,246,008









NONINTEREST INCOME







Customer service fee

225,263

342,126

440,714

684,040

Other noninterest income

21,531

20,758

41,810

41,371

Net gains from sale of loans and other assets

69,259

728,338

103,286

769,473

Total noninterest income

316,053

1,091,222

585,810

1,494,884









NONINTEREST EXPENSE







Salaries and employee benefits

1,501,836

1,521,216

3,044,538

3,154,560

Net occupancy and equipment expense

350,280

368,506

756,614

723,689

Depository insurance


241,505

259,904

564,160

529,643

Foreclosed asset expense

716,506

796,345

1,078,075

992,518

Other operating expense

847,280

938,389

1,630,635

1,883,947

Total noninterest expense

3,657,407

3,884,360

7,074,022

7,284,357









Income / (loss) income before provision for income taxes

112,612

(36,954)

413,512

456,535

(Benefit)  / provision for income taxes

(28,675)

(55,099)

19,950

94,602









NET  INCOME

$    141,287

$      18,145

$    393,562

$      361,933









Preferred stock dividends

93,075

-

185,400

-

Accretion on preferred stock dividend

9,000

-

9,000

-









Net income available to common stockholders

$      39,212

$      18,145

$    199,162

$      361,933









EARNINGS PER COMMON SHARE







Basic net income per common share

$          0.01

$              -

$          0.03

$            0.06

Diluted net income per common share

$          0.01

$              -

$          0.03

$            0.06









DIVIDENDS DECLARED PER COMMON SHARE

$               -

$               -

$               -

$                 -

Cornerstone Bancshares, Inc. and Subsidiary  

Consolidated Statement of Changes in Stockholders' Equity - Unaudited

For the six months ended June 30, 2011












Accumulated









Additional


Other

Total


Comprehensive

Preferred

Common

Paid-in

Retained

Comprehensive

Stockholders'


Income

Stock

Stock

Capital

Deficit

Income

Equity















BALANCE, December 31, 2010


$ 2,727,424

$ 6,500,396

$ 21,237,298

$ (4,317,130)

$       (328,835)

$ 25,819,153















  Employee compensation stock option expense


-

-

39,570

-

-

39,570















  Issuance of Series A Convertible Preferred Stock

1,804,092

-

-


-

1,804,092















  Preferred stock dividend


-

-

-

(92,325)

-

(92,325)















 Accretion on preferred stock


9,000

-

-

(9,000)

-

-

    Comprehensive income:













       Net income

$         393,562

-

-

-

393,562

-

393,562















       Other comprehensive income, net of tax:













           Unrealized holding gains on securities available












                for sale, net of reclassification adjustment

895,570

-

-

-

-

895,570

895,570

       Total comprehensive income

$      1,289,132


























BALANCE, June 30, 2011


$ 4,540,516

$ 6,500,396

$ 21,276,868

$ (4,024,893)

$         566,735

$ 28,859,622

SOURCE Cornerstone Bancshares, Inc.

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