Cornerstone Bancshares, Inc. Reports Fourth Quarter 2011 Earnings

News provided by

Cornerstone Bancshares, Inc.

Feb 22, 2012, 11:04 ET

CHATTANOOGA, Tenn., Feb. 22, 2012 /PRNewswire/ -- Cornerstone Bancshares, Inc. (OTC Bulletin Board: CSBQ; CSBQP) today announced the following:

Cornerstone Bancshares, Inc. ("Cornerstone") reported net income of $112,822 for the fourth quarter of 2011, and net income of $1,030,052 for the 12 months ended December 31, 2011, which represents a 122 percent improvement from the $4.7 million loss for the previous year.  

There was a 42 percent reduction in non-accruing loans for the year, from approximately $13.6 million in 2010 to approximately $7.9 million in 2011.  Net charge-offs decreased 46 percent for the year, from $4.1 million in 2010 to $2.2 million in 2011.  The allowance for loan losses was reduced 19 percent for the year from $9.1 million in 2010 to $7.4 million in 2011.  Net interest margin increased 3 percent for the year, from 3.43 percent in 2010 to 3.55 percent in 2011.

"We are greatly encouraged by the continued improvement made in nearly every area across the board," said Cornerstone's President Frank Hughes. "We continue to work aggressively to improve asset quality, move OREO, raise capital and increase profitability," he said.  "With positive net earnings all four quarters of 2011 and the ability to make our quarterly preferred stock dividend payments, I'd say we're definitely moving in the right direction."

Cornerstone declared the payment of its quarterly Preferred Stock dividend February 15, 2012 for all shareholders of record as of September 30, 2011, at a rate of $0.625 per share, payable on February 28, 2012.   As of December 31, 2011, Cornerstone had raised in excess of $10 million in new capital through its Preferred Stock Offering ("Offering").  Launched in 2010, the Offering features a Series A Convertible Preferred Stock with a 10 percent annual cumulative dividend, paid in cash quarterly if, as and when declared.  Based on the success of the capital campaign, Cornerstone recently extended the Offering until June 30, 2012, or until it reaches its ultimate goal of $15 million.

Some specific trends include:

  • $10+ million capital raised through Preferred Stock Offering
  • Four consecutive quarters of positive earnings for 2011
  • Four consecutive payments of quarterly Preferred Stock dividends
  • Significant reduction in non-accruing loans and net charge-offs
  • Increase in net interest margin

"Prospects for the local economy and a strong community bank like Cornerstone are definitely bright," said Cornerstone's Chairman Miller Welborn.  "Our plan is to keep focusing our efforts on providing the best quality products, service and value to our customers, and the greatest return on investment for all of our shareholders."  

Cornerstone is a single-bank holding company, with $425 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 discussed in Cornerstone's Form 10-K and other filings with the Securities and Exchange Commission.

Cornerstone Bancshares, Inc. and Subsidiary

Fourth Quarter Financial Highlights

December 31, 2011 and 2010

(Unaudited)








(Amounts in thousands, except per common share data)

2011

2010

% Change

Balance Sheet Data at December 31






Total assets

$ 422,070

$ 441,499

(4.4)

Interest-earning assets

398,301

420,630

(5.3)

Loans

267,765

285,247

(6.1)

Foreclosed assets

18,524

12,809

44.6

Deposits

314,042

335,447

(6.4)

Other interest-bearing liabilities

72,436

79,040

(8.4)

Shareholders' equity

35,208

25,819

36.4

Loan to deposit ratio

85.26%

85.03%

0.3

Tier 1 leverage ratio (Bank)

8.04%

5.75%

39.8

Total risk-based capital ratio (Bank)

12.99%

10.06%

29.1

Outstanding common shares


6,500

6,500

-

Book value per common share

$       3.89

$       3.55

9.6

Tangible book value per common share

$       3.89

$       3.55

9.8

Market value per common share as of December 31

$       1.50

$       1.90

(21.1)








Loan Quality Data






Nonaccruing loans

7,881

13,633

(42.2)

Loans past due 90 days – accruing

-

-

-

Net charge-offs YTD

2,177

4,064

(46.4)

Allowance for loan losses

7,400

9,132

(19.0)

Allowance for loan losses to total loans

2.76%

3.20%


Nonperforming assets to total assets

6.26%

5.99%










Performance Data for the Year






Net income / (loss)

$     1,030

$   (4,708)

(121.9)

Return on average assets

0.24%

-0.94%


Return on average equity

3.46%

-15.79%


Net interest margin

3.55%

3.43%


Per common share data:






Net income – basic

$       0.05

$     (0.73)


Net income – diluted

$       0.05

$     (0.73)


Common dividends

$             -

$             -


Preferred dividends

$       1.89

$       0.63


Average shares (000s):






Basic common stock

6,500

6,500


Diluted common stock

6,500

6,500


Preferred stock

404

115


Cornerstone Bancshares, Inc. and Subsidiary 

Loan Loss Allowance and Asset Quality Review












2011

2010

Fourth

Third

Second

First

Fourth

(Amounts in thousands)

Quarter

Quarter

Quarter

Quarter

Quarter








Allowance for loan losses






Balance at beginning of period

$   6,864

$   6,814

$   7,914

$   9,132

$   6,271

Provision for loan losses

300

115

15

15

4,130

Net charge-offs

236

(65)

(1,115)

(1,233)

(1,269)

Balance at end of period

$   7,400

$   6,864

$   6,814

$   7,914

$   9,132








As a % of loans

2.76%

2.54%

2.52%

2.89%

3.20%

As a % of nonperforming loans

93.90%

80.20%

94.21%

126.20%

66.99%

As a % of nonperforming assets

28.03%

25.60%

24.97%

29.60%

34.54%








Net charge-offs as a % of  loans (a)

-0.35%

0.10%

1.65%

1.80%

1.78%








Risk element assets






Accruing troubled debt restructured

$   2,750

$   2,535

$   1,750

$   1,650

$      848

Loans past due 30-89 days

$   8,090

$   2,048

$   1,957

$   8,434

$   2,306








Nonaccruing loans

$   7,881

$   8,559

$   7,233

$   6,271

$ 13,633

Loans past due 90 days – accruing

-

-

-

-

-

Total nonperforming loans

$   7,881

$   8,559

$   7,233

$   6,271

$ 13,633

Repossessed assets

-

-

-

-

150

Other real estate owned (b)(c)

$ 18,524

$ 18,255

$ 20,058

$ 20,464

$ 12,659

Total nonperforming assets

$ 26,405

$ 26,814

$ 27,291

$ 26,735

$ 26,442
















Nonperforming loans as a % of loans

2.94%

3.17%

2.68%

2.29%

4.78%

Nonperforming assets as a % of loans






   and other real estate owned

9.22%

9.29%

9.40%

9.09%

8.88%








Total loans

267,765

270,401

270,171

273,750

285,247








(a) Annualized

(b) Properties sold during 4th Q 2011

$   2,447





(c) Properties under contract to sell

$   1,744





Cornerstone Bancshares, Inc. and Subsidiary           

Net Interest Margin Analysis          

Taxable Equivalent Basis          


Three months ended

December 31

(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

$ 268,349

$   4,437

6.56%

$ 288,923

$   4,896

6.72%

Investment securities

96,407

548

2.52%

112,570

534

2.17%

Other earning assets

26,000

16

0.24%

24,296

15

0.25%

 Total earning assets

390,756

$   5,001

5.14%

425,789

$   5,445

5.15%

Allowance for loan losses

(6,871)




(6,366)



Cash and other assets

32,677




34,242



TOTAL ASSETS

$ 416,562




$ 453,665















Liabilities and Shareholders' Equity






















Interest-bearing liabilities:










Interest-bearing demand deposits

$   22,845

$        19

0.33%

$   27,036

$        20

0.30%

Savings deposits

9,786

13

0.51%

9,418

12

0.51%

MMDA's

35,119

88

1.00%

23,539

58

0.97%

Time deposits

207,850

804

1.53%

248,805

1,149

1.83%

Federal funds purchased and securities










 sold under agreements to repurchase

21,079

28

0.52%

20,198

28

0.55%

Other borrowings

43,045

454

4.18%

60,251

651

4.29%

 Total interest-bearing liabilities

339,723

1,405

1.64%

389,247

1,918

1.96%

Net interest spread

$   3,596

3.50%


$   3,527

3.19%

Noninterest-bearing demand deposits

43,728




32,468



Accrued expenses and other liabilities

198




830



Shareholders' equity

32,912




31,120



TOTAL LIABILITIES AND










 SHAREHOLDERS' EQUITY

$ 416,562




$ 453,665



Net yield on earning assets



3.72%




3.36%












Taxable equivalent adjustment:










 Loans

0




0

 Investment securities

64




81

         Total adjustment

64




81













Cornerstone Bancshares, Inc. and Subsidiary           

Net Interest Margin Analysis          

Taxable Equivalent Basis          


Twelve months ended

December 31

(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

$ 273,523

$ 18,129

6.63%

$ 311,407

$ 21,498

6.90%

Investment securities

108,705

2,312

2.38%

128,795

3,633

3.06%

Other earning assets

23,232

53

0.23%

36,319

80

0.22%

 Total earning assets

405,460

$ 20,494

5.12%

476,521

$ 25,211

5.36%

Allowance for loan losses

(7,496)




(6,454)



Cash and other assets

32,721




31,277



TOTAL ASSETS

$ 430,685




$ 501,344















Liabilities and Shareholders' Equity






















Interest-bearing liabilities:










Interest-bearing demand deposits

$   25,741

$        84

0.33%

$   32,338

$      111

0.34%

Savings deposits

9,750

50

0.51%

9,198

47

0.51%

MMDA's

29,149

291

1.00%

23,042

222

0.96%

Time deposits

226,720

3,768

1.66%

281,251

5,839

2.08%

Federal funds purchased and securities










 sold under agreements to repurchase

22,808

126

0.55%

22,716

127

0.56%

Other borrowings

47,745

2,044

4.28%

66,208

2,856

4.31%

 Total interest-bearing liabilities

361,913

6,362

1.76%

434,753

9,202

2.12%

Net interest spread

$ 14,132

3.36%


$ 16,009

3.24%

Noninterest-bearing demand deposits

39,042




39,104



Accrued expenses and other liabilities

(10)




(2,333)



Shareholders' equity

29,740




29,820



TOTAL LIABILITIES AND










 SHAREHOLDERS' EQUITY

$ 430,685




$ 501,344



Net yield on earning assets



3.55%




3.43%












Taxable equivalent adjustment:










 Loans

0




0

 Investment securities

276




314

         Total adjustment

276




314

Cornerstone Bancshares, Inc. and Subsidiary 

Quarterly Earnings Summary











(Unaudited)




2011

2010

Q4-11 /


Fourth

Third

Second

First

Fourth

Q4-10

(Amounts in thousands)

Quarter

Quarter

Quarter

Quarter

Quarter

% Chg

Interest income







Loans, including fees

$ 4,437

$4,531

$  4,521

$   4,639

$   4,896

(9.4)

Investment securities and interest-bearing deposits

548

574

621

568

534

2.6

Other earning assets

16

9

17

11

15

1.9

    Total interest income

5,001

5,114

5,159

5,218

5,445

(8.2)

Interest expense







Deposits

924

1,012

1,112

1,145

1,239

(25.5)

Short-term borrowings

28

33

34

31

28

(1.1)

FHLB advances and other borrowing

454

466

545

580

651

(30.3)

    Total interest expense

1,405

1,510

1,691

1,756

1,918

(26.8)

Net interest income

3,595

3,604

3,468

3,462

3,527

1.9

Provision for loan losses

300

115

15

15

4,130

(92.7)

Net interest income after the







  provision for loan losses

3,295

3,489

3,453

3,447

(603)

(646.3)

Noninterest income







Customer service fees

212

216

225

215

280

(24.3)

Other noninterest income

15

15

22

20

63

(76.7)

Gain / (loss) on sale of assets

47

92

69

34

(681)

(106.9)

    Total noninterest income

274

323

316

269

(338)

(181.0)

Noninterest expense







Salaries and employee benefits

1,614

1,459

1,502

1,542

1,515

6.6

Net occupancy and equipment

314

362

350

406

380

(17.5)

Depository insurance

255

234

241

322

350

(27.3)

Goodwill impairment

-

-

-

-

2,541

-

Foreclosed asset expense (1)

538

306

716

-

-

-

Other operating expense

780

715

847

1,145

1,255

(37.8)

    Total noninterest expense

3,500

3,076

3,657

3,415

6,041

(42.1)

Income (loss) before income taxes

69

736

113

301

(6,982)

(101.0)

Income tax (benefit) expense

(44)

212

(28)

49

(1,699)

(97.4)

Net income (loss)


$    113

$   524

$     141

$      252

$ (5,283)

(102.1)









Preferred stock dividends & accretion on preferred stock discount

267

201

128

$        92

34









Net income / loss available to common


(154)

323

13

160

(5,317)









Net income (loss) per common share:







  Basic

$  (0.02)

$  0.05

$        -

$     0.02

$   (0.82)

(97.1)

  Diluted

$  (0.02)

$  0.05

$        -

$     0.02

$   (0.82)

(97.1)

Average basic shares


6,500

6,500

6,500

6,500

6,500

-

Average common diluted shares


6,500

6,500

6,500

6,500

6,500

-

Performance Ratios







Return on average equity

1.37%

6.64%

2.04%

3.78%

-67.91%

(102.0)

Return on average assets

0.11%

0.49%

0.13%

0.23%

-4.66%

(102.3)

Net interest margin

3.72%

3.69%

3.42%

3.44%

3.36%

10.6

Average equity

32,912

31,569

27,712

26,683

31,120

5.8

Average assets

416,562

423,200

445,472

437,821

453,665

(8.2)

Average interest-earning assets

390,756

396,872

416,605

418,263

425,789

(8.2)









(1) Includes OREO adjustments to fair value

Cornerstone Bancshares, Inc. and Subsidiary

Loan Stratification







2011

2010

(Amounts in thousands)

Fourth

% of

Fourth

% of

% Dollar

Quarter

Total

Quarter

Total

Change

Non-residential real estate




    Owner occupied

$  62,999

23.5

$  64,895

22.8

(2.9)

    Non-owner occupied

62,744

23.4

65,415

22.9

(4.1)

   Multi-family real estate

11,337

4.2

12,319

4.3

(8.0)

    1-4 family construction

5,775

2.2

2,346

0.8

146.2

    Commercial land and lot development

18,629

7.0

20,795

7.3

(10.4)

Total non-residential real estate

161,484

60.3

165,770

58.1

(2.6)

Residential real estate




    First mortgage - 1-4 family

41,226

15.4

39,935

14.0

3.2

   Second mortgage - 1-4 family

3,662

1.4

4,876

1.7

(24.9)

    Home equity lines

14,632

5.5

10,185

3.6

43.7

Total residential real estate

59,520

22.2

54,996

19.3

8.2

Total real estate loans

221,004

82.5

220,766

77.4

0.1






Commercial

35,608

13.3

51,962

18.2

(31.5)

Agricultural & other

8,493

3.2

9,213

3.2

(7.8)

Consumer

2,660

1.0

3,306

1.2

(19.5)

Total loans, net of unearned fees

$267,765

100.0

$285,247

100.0

(6.1)

Cornerstone Bancshares, Inc. and Subsidiary

Consolidated Balance Sheets


























Unaudited








December 31,

December 31,



ASSETS

2011

2010










Cash and cash equivalents


$   38,882,691

$   22,981,952










Securities available for sale


86,057,437

108,250,434

Securities held to maturity




68,643

95,702

Federal Home Loan Bank stock, at cost

2,322,900

2,322,900

Loans, net of allowance for loan losses of







   $7,400,049 at December 31, 2011





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

260,364,569

276,114,617

Bank premises and equipment, net


5,712,003

8,047,370

Accrued interest receivable


1,327,458

1,326,480

Foreclosed assets



18,523,960

12,808,838

Other assets



8,810,659

9,551,121

Total assets


$ 422,070,320

$ 441,499,414













LIABILITIES AND STOCKHOLDERS' EQUITY















Deposits:








Noninterest-bearing demand deposits

$   43,989,943

$   28,980,043

Interest-bearing demand deposits


22,353,384

24,834,214

Savings deposits and money market accounts

46,857,118

34,041,672

Time deposits





200,841,499

247,591,161

 Total deposits



314,041,944

335,447,090

Federal funds purchased and securities sold under  




   agreements to repurchase


29,390,810

24,325,372

Federal Home Loan Bank advances and other borrowings

43,045,000

54,715,000

Accrued interest payable


110,703

176,761

Other liabilities



273,558

1,016,038

Total liabilities


386,862,015

415,680,261










Stockholders' equity







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




   authorized; 403,989 shares issued and outstanding in 2011

9,899,544

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



21,316,438

21,237,298

Retained (deficit)



(3,627,208)

(4,317,130)

Accumulated other comprehensive income

1,119,135

(328,835)

Total stockholders' equity

35,208,305

25,819,153

Total liabilities and stockholders' equity

$ 422,070,320

$ 441,499,414

Cornerstone Bancshares, Inc. and Subsidiary

Consolidated Statements of Income



















Unaudited

Unaudited






Three months ended

Twelve months ended






December 31

December 31






2011

2010

2011

2010

INTEREST INCOME










Loans, including fees



$    4,437,342

$    4,895,965

$  18,128,907

$  21,498,120

Securities




548,211

534,005

2,311,690

3,633,367

Federal funds sold & other earning assets

15,542

15,259

53,139

79,941

Total interest income



5,001,095

5,445,229

20,493,736

25,211,428













INTEREST EXPENSE










Time deposits



803,803

1,149,363

3,767,582

5,838,571

Other deposits



119,854

90,044

424,387

379,810

Federal funds purchased and securities








   sold under agreements to repurchase

27,688

28,103

125,538

127,308

FHLB advances and other borrowings

453,756

651,164

2,044,361

2,856,125

Total interest expense



1,405,100

1,918,674

6,361,868

9,201,814













Net interest income before provision for loan losses

3,595,994

3,526,555

14,131,868

16,009,614

Provision for loan losses


300,000

4,130,000

445,000

7,291,000

Net interest income after the provision for loan losses

3,295,994

(603,444)

13,686,868

8,718,614













NONINTEREST INCOME










Customer service fees



212,058

280,274

868,935

1,272,893

Other noninterest income


14,476

34,684

71,542

90,268

Net gains from sale of securities


-

-

107,413

1,698,136

Net gains / (losses) from sale of loans and other assets

47,131

(144,917)

134,997

19,632

Total noninterest income


273,665

170,041

1,182,887

3,080,929













NONINTEREST EXPENSE









Salaries and employee benefits


1,613,574

1,514,633

6,117,063

6,194,504

Net occupancy and equipment expense

313,736

380,354

1,431,863

1,501,504

Depository insurance





254,844

372,311

1,052,591

1,287,676

Impairment of goodwill



-

2,541,476

-

2,541,476

Foreclosed assets, net



538,053

891,686

1,922,988

2,789,708

Other operating expense


780,505

848,465

3,126,998

3,727,493

Total noninterest expense


3,500,712

6,548,925

13,651,503

18,042,361













Income / (loss) before provision for income taxes

68,947

(6,982,328)

1,218,252

(6,242,818)

(Benefit)  / provision for income taxes

(43,875)

(1,699,200)

188,200

(1,535,297)













NET  INCOME / (LOSS)



$       112,822

$  (5,283,128)

$    1,030,052

$  (4,707,521)













Preferred stock dividend requirement

252,493

34,463

651,118

34,463

Accretion on preferred stock discount

14,299

-

36,718

-













Net income available to common stockholders

$     (153,970)

$  (5,317,593)

$       342,216

$  (4,741,984)













EARNINGS PER COMMON SHARE









Basic net income / (loss) per common share

$           (0.02)

$           (0.82)

$             0.05

$           (0.73)

Diluted net income / (loss) per common share

$           (0.02)

$           (0.82)

$             0.05

$           (0.73)













DIVIDENDS DECLARED PER COMMON SHARE

$                  -

$                  -

$                   -

$                  -

Cornerstone Bancshares, Inc. and Subsidiary  

Consolidated Statement of Changes in Stockholders' Equity - Unaudited

For the twelve months ended December 31, 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


-

-

79,140

-

-

79,140















  Issuance of Series A Convertible Preferred Stock


7,135,402

-

-

-

-

7,135,402















    Preferred stock dividends paid


-

-

-

(303,412)

-

(303,412)















   Accretion on preferred stock discount


36,718

-

-

(36,718)

-

-

  Comprehensive income:













       Net income

$      1,030,052

-

-

-

1,030,052

-

1,030,052















       Other comprehensive income, net of tax:













           Unrealized holding gains on securities available for sale, net of reclassification adjustment

1,447,970

-

-

-

-

1,447,970

1,447,970

       Total comprehensive income

$      2,478,022


























BALANCE, December 31, 2011


$ 9,899,544

$ 6,500,396

$ 21,316,438

$ (3,627,208)

$      1,119,135

$ 35,208,305

SOURCE Cornerstone Bancshares, Inc.

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