Cornerstone Bancshares, Inc. Reports Positive Earnings for First Quarter of 2013

News provided by

Cornerstone Bancshares, Inc.

Apr 25, 2013, 08:00 ET

CHATTANOOGA, Tenn., April 25, 2013 /PRNewswire/ -- Cornerstone Bancshares, Inc. (OTC Bulletin Board: CSBQ; CSBQP), parent company of Cornerstone Community Bank, today reported net income of $452,000 for the first quarter of 2013, an increase of 26.8 percent over the same quarter of 2012.

"I am extremely pleased with the steady, gradual progress we continue to make in strengthening the Bank and our earnings footprint," said Cornerstone's President and CEO Frank Hughes. "The fact that we had marked improvement in earnings, in what is the shortest and typically weakest quarter of the year, is further testament that Cornerstone is on the right track and heading in the right direction."

First Quarter 2013 Highlights Year-Over-Year:

  • Net income increased 26.8%
  • Transactional deposit accounts grew 35.7%
  • Loans grew 3.7%
  • Non-accruing loans decreased 41.1%
  • Total assets increased 3.4%
  • Net interest margin increased from 3.59% to 3.79%
  • Shareholders' equity increased 13.9%
  • Well-capitalized status improved

"Cornerstone is at an exciting new juncture and now has a solid capital foundation on which to build for the future," said Cornerstone's Chairman Miller Welborn.  "Our goal is to continue focusing on our core competency of serving the Chattanooga market as a premier community bank and returning the greatest value possible for each of our customers and shareholders."

Cornerstone is a single-bank holding company, with approximately $430 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



First Quarter Financial Highlights





March 31, 2013 and 2012





(Unaudited)












(Amounts in thousands, except per common share data)

2013

2012

% Change

Balance Sheet Data at March 31





Total assets

$   431,710

$    417,475

3.4

Interest-earning assets

396,867

377,326

5.2

Loans

272,550

262,788

3.7

Foreclosed assets

21,159

18,957

11.6

Deposits

336,903

315,816

6.7

Other interest-bearing liabilities

52,890

64,055

(17.4)

Shareholders' equity

40,887

35,890

13.9

Loan to deposit ratio

80.90%

83.21%

(2.8)

Tier 1 leverage ratio (Bank, est)

8.64%

8.14%

6.1

Total risk-based capital ratio (Bank, est)

13.29%

12.99%

2.3

Outstanding common shares 

6,547

6,500

0.7

Book value per common share

$         3.98

$          3.91

1.6

Tangible book value per common share

$         3.98

$          3.91

1.6

Market value per common share as of March 31

$         2.20

$          2.50

(12.0)







Loan Quality Data





Nonaccruing loans

6,342

10,766

(41.1)

Loans past due 90 days – accruing

-

-

-

Net charge-offs YTD

772

1,376

(43.9)

Allowance for loan losses

5,669

6,024

(5.9)

Allowance for loan losses to total loans

2.08%

2.29%

Nonperforming assets to total assets

6.37%

7.12%








Performance Data for the Year





Net income 

$          452

$           357

26.8

Return on average assets

0.42%

0.35%

Return on average equity

4.40%

4.01%

Net interest margin

3.79%

3.59%

Per common share data:





Net income – basic

$         0.01

$          0.01

Net income – diluted

$         0.01

$          0.01

Common dividends

$               -

$                -

Preferred dividends & accretion

$          393

$           280

Average shares (000s):





Basic common stock

6,547

6,500

Diluted common stock

6,671

6,500

Preferred stock (actual)

600

425








Cornerstone Bancshares, Inc. and Subsidiary



Quarterly Earnings Summary


















(Unaudited)


2013

2012

Q1-13 /


First

Fourth

Third

Second

First

Q1-12

(Amounts in thousands)

Quarter

Quarter

Quarter

Quarter

Quarter

% Chg

Interest income







Loans, including fees

$     4,142

$     4,718

$     4,242

$      4,186

$   4,144

(0.0)

Securities and interest-bearing deposits at other financial institutions

440

440

478

618

467

(5.8)

Federal funds sold and other earning assets

21

16

15

13

15

41.8

    Total interest income

4,603

5,174

4,735

4,817

4,626

(0.5)

Interest expense







Deposits

603

673

756

768

820

(26.5)

Short-term borrowings

18

17

22

23

32

(44.2)

FHLB advances and other borrowing

341

391

394

426

462

(26.2)

    Total interest expense

962

1,081

1,172

1,217

1,314

(26.8)

Net interest income

3,641

4,093

3,563

3,600

3,312

9.9

Provision for loan losses

300

330

100

-

-

 N/A 

Net interest income after the







  provision for loan losses

3,341

3,763

3,463

3,600

3,312

0.9

Noninterest income







Customer service fees

188

201

198

207

197

(4.8)

Other noninterest income

18

13

12

19

20

(11.3)

Gain on sale of assets

149

27

48

26

50

200.0

    Total noninterest income

355

241

258

252

267

32.8

Noninterest expense







Salaries and employee benefits

1,597

1,600

1,566

1,570

1,591

0.4

Net occupancy and equipment

337

408

355

348

336

0.4

Depository insurance

160

121

237

207

203

(21.2)

Foreclosed asset expense (1)

129

156

314

481

150

(14.2)

Other operating expense

752

1,192

731

817

794

(5.3)

    Total noninterest expense

2,975

3,477

3,203

3,423

3,074

(3.2)

Income before income taxes

721

527

518

429

505

42.8

Income tax expense

269

156

154

118

149

80.5

Net income

$         452

$        371

$        364

$         311

$      356

27.0









Preferred stock dividends & accretion on preferred stock discount

393

393

325

296

280

40.2









Net income / (loss) available to common 

59

(22)

39

15

76

(22.6)









Net income / (loss) per common share:







  Basic

$        0.01

$           -

$       0.01

$           -

$     0.01

(23.1)

  Diluted

$        0.01

$           -

$       0.01

$           -

$     0.01

(24.5)

Average basic shares 

6,547

6,500

6,500

6,500

6,500

0.7

Average common diluted shares 

6,671

6,503

6,503

6,581

6,586

1.3

Performance Ratios







Return on average equity

4.40%

3.81%

3.88%

3.42%

4.01%

9.6

Return on average assets

0.42%

0.35%

0.35%

0.30%

0.35%

21.4

Net interest margin

3.79%

4.21%

3.70%

3.87%

3.59%

5.6

Average equity

41,135

38,926

37,501

36,423

35,587

15.6

Average assets

426,827

420,608

418,443

412,305

408,711

4.4

Average interest-earning assets

395,921

391,197

389,458

380,631

378,335

4.6









(1) Includes OREO adjustments to fair value














 

Cornerstone Bancshares, Inc. and Subsidiary


Loan Loss Allowance and Asset Quality Review











2013

2012

First 

Fourth 

Third

Second

First

(Amounts in thousands)

Quarter

Quarter

Quarter

Quarter

Quarter







Allowance for loan losses





Balance at beginning of period

$      6,141

$       5,280

$   6,029

$     6,024

$    7,400

Provision for loan losses

300

330

100

-

-

Net charge-offs

(772)

531

(849)

5

(1,376)

Balance at end of period

$      5,669

$       6,141

$   5,280

$     6,029

$    6,024







As a % of loans

2.08%

2.22%

1.93%

2.29%

2.29%

As a % of nonperforming loans

89.38%

102.24%

66.26%

84.63%

55.95%

As a % of nonperforming assets

20.61%

23.32%

17.40%

20.60%

20.27%







Net charge-offs as a % of  loans (a)

1.13%

-0.77%

1.24%

-0.01%

2.10%







Risk element assets





Accruing troubled debt restructured

$      5,442

$       5,316

$   5,328

$     2,775

$    2,418

Loans past due 30-89 days

$      4,732

$       6,534

$   3,685

$     2,495

$    5,040







Nonaccruing loans

$      6,342

$       6,006

$   7,968

$     7,124

$  10,767

Loans past due 90 days – accruing

-

-

-

-

-

Total nonperforming loans

$      6,342

$       6,006

$   7,968

$     7,124

$  10,767

Repossessed assets

5

32

39

83

-

Other real estate owned (b)(c)

$   21,159

$     20,300

$ 22,337

$   22,061

$  18,957

Total nonperforming assets

$   27,506

$     26,338

$ 30,344

$   29,268

$  29,724














Nonperforming loans as a % of loans

2.33%

2.17%

2.91%

2.70%

4.10%

Nonperforming assets as a % of loans





   and other real estate owned

9.37%

8.86%

10.25%

10.24%

10.55%







Total loans

272,550

276,992

273,820

263,749

262,788







(a) Annualized

(b) Properties sold during 1st Q 2013

$          235




(c) Properties under contract to sell 

$       2,101











Cornerstone Bancshares, Inc. and Subsidiary









Net Interest Margin Analysis










Taxable Equivalent Basis











Three months ended

March 31

(Amounts in thousands)










Assets

2013




2012


Average

Income/

Yield/

Average

Income/

Yield/

Earning assets:

Balance

Expense

Rate

Balance

Expense

Rate

Loans, net of unearned income

$       275,696

$       4,142

6.09%

$     265,814

$       4,144

6.27%

Investment securities

86,741

440

2.35%

88,641

467

2.43%

Other earning assets

33,484

21

0.26%

23,880

15

0.25%

  Total earning assets

395,921

$       4,603

4.78%

378,335

$       4,626

4.99%

Allowance for loan losses

(5,933)




(7,121)



Cash and other assets

36,838




37,497



TOTAL ASSETS

$       426,827




$     408,711















Liabilities and Shareholders' Equity






















Interest-bearing liabilities:










Interest-bearing demand deposits

$         28,438

$            20

0.29%

$       24,891

$            21

0.34%

Savings deposits

11,620

7

0.26%

9,859

10

0.40%

MMDA's

74,215

110

0.60%

39,373

90

0.92%

Time deposits 

168,789

465

1.12%

195,111

699

1.44%

Federal funds purchased and securities










  sold under agreements to repurchase

21,090

18

0.35%

26,291

32

0.49%

Federal Home Loan Bank and other borrowings

32,713

340

4.22%

42,634

461

4.35%

  Total interest-bearing liabilities

336,865

962

1.16%

338,159

1,314

1.56%

Net interest spread

$       3,641

3.62%


$       3,312

3.43%

Noninterest-bearing demand deposits

46,812




34,479



Accrued expenses and other liabilities

2,016




486



Shareholders' equity

41,135




35,587



TOTAL LIABILITIES AND










  SHAREHOLDERS' EQUITY

$       426,827




$     408,711



Net yield on earning assets



3.79%




3.59%












Taxable equivalent adjustment:










  Loans

0




0

  Investment securities

62




68

          Total adjustment

62




68













Cornerstone Bancshares, Inc. and Subsidiary


Loan Stratification











2013

2012

(Amounts in thousands)

First

% of

First

% of

% Dollar

Quarter

Total

Quarter

Total

Change

Non-residential real estate




    Owner occupied

$      62,460

22.9

$     61,830

23.5

1.0

    Non-owner occupied

64,483

23.7

61,295

23.3

5.2

    Multi-family real estate

8,255

3.0

10,249

3.9

(19.5)

    1-4 family construction

8,168

3.0

4,520

1.7

80.7

    Commercial land and lot development

18,965

7.0

16,421

6.2

15.5

Total non-residential real estate

162,331

59.6

154,315

58.7

5.2

Residential real estate




    First mortgage - 1-4 family

43,429

15.9

43,372

16.5

0.1

    Second mortgage - 1-4 family

2,185

0.8

3,528

1.3

(38.1)

    Home equity lines

16,391

6.0

15,288

5.8

7.2

Total residential real estate

62,005

22.7

62,188

23.7

(0.3)

Total real estate loans

224,336

82.3

216,503

82.4

3.6






Commercial

38,301

14.1

34,970

13.3

9.5

Agricultural & other

7,936

2.9

8,854

3.4

(10.4)

Consumer

1,977

0.7

2,461

0.9

(19.7)

Total loans, net of unearned fees

$   272,550

100.0

$   262,788

100.0

3.7






Cornerstone Bancshares, Inc. and Subsidiary



Consolidated Balance Sheets
























Unaudited






March 31,

December 31,



ASSETS

2013

2012








Cash and due from banks

$              5,074,926

$                3,222,139

Interest-bearing deposits at other financial institutions

30,826,261

56,173,099


Total cash and cash equivalents

35,901,187

59,395,238








Securities available for sale

91,125,829

76,096,646

Securities held to maturity (fair value approximates




$43,630 and $46,212 at March 31, 2013 and December 31, 2012, respectively)

42,579

45,086

Federal Home Loan Bank stock, at cost

2,322,900

2,322,900

Loans, net of allowance for loan losses of




$5,669,215 and $6,141,281 at March 31, 2013 and December 31, 2012

266,880,672

270,850,465

Bank premises and equipment, net

5,289,384

5,399,340

Accrued interest receivable

1,323,499

1,213,778

Foreclosed assets


21,159,242

20,332,313

Other assets


7,664,340

7,790,634



     Total assets

$          431,709,632

$            443,446,400











LIABILITIES AND STOCKHOLDERS' EQUITY











Deposits:






Noninterest-bearing demand deposits

$            55,400,253

$              60,053,838

Interest-bearing demand deposits

26,547,365

30,178,624

Savings deposits and money market accounts

89,564,444

80,994,239

Time deposits


165,391,211

173,653,892



Total deposits

336,903,273

344,880,593








Accrued interest payable

91,268

120,558

Federal funds purchased and securities sold under




agreements to repurchase

21,150,464

19,587,387

Federal Home Loan Bank advances and other borrowings

31,740,000

37,175,000

Other liabilities


938,088

794,026



Total liabilities

390,823,093

402,557,564








Stockholders' equity:





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




600,000 shares issued and outstanding 




in 2013 and 2012, respectively

14,839,391

14,821,546

Common stock - $1.00 par value; 20,000,000 shares authorized and




6,709,199 shares issued in 2013 and 2012;




6,547,074 and 6,500,396 shares outstanding in 2013 and 2012, respectively

6,547,074

6,500,396

Additional paid-in capital

21,420,827

21,390,486

Retained deficit


(3,149,596)

(3,274,986)

Accumulated other comprehensive income

1,228,843

1,451,394



Total stockholders' equity

40,886,539

40,888,836



Total liabilities and stockholders' equity

$          431,709,632

$            443,446,400
















The Notes to Consolidated Financial Statements are an integral part of these statements.









Cornerstone Bancshares, Inc. and Subsidiary



Consolidated Statements of Income










Unaudited






Three Months Ended






March 31, 






2013

2012









INTEREST INCOME





Loans, including fees


$4,141,736

$4,143,944

Securities and interest-bearing deposits at other financial institutions

439,906

467,006

Federal funds sold



21,472

15,087












Total interest income

4,603,114

4,626,037









INTEREST EXPENSE





Time deposits



465,256

699,094

Other deposits



137,930

121,243

Federal funds purchased and securities






sold under agreements to repurchase

18,080

32,230

Federal Home Loan Bank advances and other borrowings

340,439

461,207












Total interest expense

961,705

1,313,774












Net interest income before provision for loan losses

3,641,409

3,312,263









Provision for loan losses


300,000

-












Net interest income after provision for loan losses

3,341,409

3,312,263









NONINTEREST INCOME 





Customer service fees


188,481

197,434

Other noninterest income


17,818

20,288

Net gains from sale of loans and other assets

149,200

49,664












Total noninterest income

355,499

267,386









NONINTEREST EXPENSES




Salaries and employee benefits

1,597,291

1,591,135

Net occupancy and equipment expense

337,879

335,813

Depository insurance


159,844

202,783

Foreclosed assets, net


128,692

150,320

Other operating expenses


752,174

794,081












Total noninterest expenses

2,975,880

3,074,132












Income before income tax expense

721,028

505,517










Income tax expense

268,900

149,000



Net income

452,128

356,517













Preferred stock dividend requirements

375,000

265,856




Accretion on preferred stock discount

17,845

14,468












Net income available to common stockholders

$    59,283

$    76,193









EARNINGS PER COMMON SHARE



Basic




$        0.01

$        0.01

Diluted




0.01

0.01









DIVIDENDS DECLARED PER COMMON SHARE

$           -

$           -









The Notes to Consolidated Financial Statements are an integral part of these statements.










Cornerstone Bancshares, Inc. and Subsidiary









Consolidated Statement of Changes in Stockholders' Equity - Unaudited







For the three months ended March 31, 2013

































Accumulated







Additional


Other

Total


Preferred

Common

Paid-in

Retained

Comprehensive

Stockholders'


Stock

Stock

Capital

Earnings (Deficit)

Income

Equity













BALANCE, December 31, 2012

$       14,821,546

$    6,500,396

$  21,390,486

$        (3,274,986)

$           1,451,394

$       40,888,836













Issuance of common stock

-

46,678

30,341

-

-

77,019













Preferred stock dividends 

-

-

-

(308,893)

-

(308,893)













Accretion on preferred stock

17,845

-

-

(17,845)

-

-













Net income

-

-

-

452,128

-

452,128













Unrealized holding gains (losses) on securities available for sale,











     net of reclassification adjustment and taxes

-

-

-

-

(222,551)

(222,551)













BALANCE, March 31, 2013













$       14,839,391

$    6,547,074

$  21,420,827

$        (3,149,596)

$           1,228,843

$       40,886,539













The Notes to Consolidated Financial Statements are an integral part of these statements.




















SOURCE Cornerstone Bancshares, Inc.

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