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

News provided by

Cornerstone Bancshares, Inc.

Jan 28, 2014, 08:00 ET

CHATTANOOGA, Tenn., Jan. 28, 2014 /PRNewswire/ -- Cornerstone Bancshares, Inc. ("Cornerstone"; OTC Bulletin Board: CSBQ; CSBQP), holding company of Cornerstone Community Bank ("Bank"), today announced net income of $403,000 for the fourth quarter of 2013 and $1.68 million for the year, which represents an increase of 20 percent over 2012. This marks the twelfth consecutive quarter of positive earnings for Cornerstone.

Other financial highlights year-over-year include:

  • 20% increase in net income
  • 4.5% increase in loans
  • 36% decrease in foreclosed assets
  • 40% decrease in nonaccruals
  • 10% increase in core transactional deposits

"We are extremely pleased with this solid performance for the year," said Cornerstone's President and CEO Frank Hughes.  "The Bank continued to make steady progress in earnings and was able to use some of its revenue to accelerate the disposition of OREO (other real estate owned)."

Based on its positive quarterly earnings, Cornerstone was able to continue paying its Preferred Stock dividend all four quarters of 2013.

"At this new juncture of a new year, we anticipate continued improvement in asset quality and another strong year of OREO reduction," said Hughes. "Our focus will remain on taking care of our customers and delivering the greatest return on investment for all of our shareholders."

Founded in 1996, Cornerstone is a single-bank holding company, with $432 million in assets, serving the Chattanooga, Tennessee MSA, with five full-service branch locations throughout Chattanooga. Locally owned and 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



Fourth Quarter Financial Highlights





December 31, 2013 and 2012





(Unaudited)












(Amounts in thousands, except per common share data)

2013

2012

% Change

Balance Sheet Data at December 31





Total assets

$   432,223

$    443,446

(2.5)

Interest-earning assets

406,708

411,629

(1.2)

Loans

289,440

276,992

4.5

Foreclosed assets

12,926

20,332

(36.4)

Deposits

341,414

344,881

(1.0)

Other interest-bearing liabilities

49,714

56,762

(12.4)

Shareholders' equity

40,134

40,889

(1.8)

Loan to deposit ratio

84.78%

80.32%

5.5

Tier 1 leverage ratio (Bank, est)

8.56%

8.37%

2.3

Total risk-based capital ratio (Bank, est)

13.10%

12.91%

1.5

Outstanding common shares 

6,547

6,500

0.7

Book value per common share

$         3.86

$          4.01

(3.9)

Tangible book value per common share

$         3.86

$          4.01

(3.9)

Market value per common share as of December 31

$         2.37

$          2.29

3.5







Loan Quality Data





Nonaccruing loans

3,566

6,005

(40.6)

Loans past due 90 days – accruing

-

-

-

Net charge-offs YTD

3,238

1,689

91.7

Allowance for loan losses

3,203

6,141

(47.8)

Allowance for loan losses to total loans

1.11%

2.22%

Nonperforming assets to total assets

3.82%

5.94%








Performance Data for the Year





Net income 

$       1,681

$        1,402

19.9

Return on average assets

0.39%

0.34%

Return on average equity

4.12%

3.78%

Net interest margin

3.80%

3.85%

Per common share data:





Net income – basic

$         0.02

$          0.02

Net income – diluted

$         0.02

$          0.02

Common dividends

$              -

$                -

Preferred dividends & accretion per common 

$         0.24

$          0.20

Average shares (000s):





Basic common stock

6,547

6,500

Diluted common stock

6,662

6,523

Preferred stock (actual)

600

600








Cornerstone Bancshares, Inc. and Subsidiary




Quarterly Earnings Summary


















(Unaudited)




2013

2012

Q4-13 /


Fourth 

Third

Second

First

Fourth

Q4-12

(Amounts in thousands)

Quarter

Quarter

Quarter

Quarter

Quarter

% Chg

Interest income







Loans, including fees

$     4,190

$     4,294

$     4,079

$    4,142

$   4,718

(11.2)

Securities and interest-bearing deposits at other financial institutions

315

457

482

440

440

(28.5)

Federal funds sold and other earning assets

8

10

15

21

16

(50.5)

    Total interest income

4,513

4,761

4,576

4,603

5,174

(12.8)

Interest expense







Deposits

487

563

587

603

673

(27.6)

Short-term borrowings

18

21

17

18

17

3.1

FHLB advances and other borrowing

267

285

316

341

391

(31.9)

    Total interest expense

772

869

920

962

1,081

(28.6)

Net interest income

3,741

3,892

3,656

3,641

4,093

(8.6)

Provision for losses

-

-

-

300

330

(100.0)

Net interest income after the







  provision for loan losses

3,741

3,892

3,656

3,341

3,763

(0.6)

Noninterest income







Customer service fees

213

218

202

188

201

5.9

Other noninterest income

13

13

19

18

13

2.4

Gain on sale of assets

391

39

477

149

27

1,348.1

    Total noninterest income

617

270

698

355

241

156.0

Noninterest expense







Salaries and employee benefits

1,716

1,619

1,623

1,597

1,600

7.3

Net occupancy and equipment

324

334

340

337

408

(20.7)

Depository insurance

162

162

161

160

121

33.9

Foreclosed asset expense (1)

693

382

798

129

156

344.2

Other operating expense

810

967

780

752

1,192

(32.0)

    Total noninterest expense

3,705

3,464

3,702

2,975

3,477

6.6

Income before income taxes

653

698

652

721

527

24.0

Income tax expense

250

268

256

269

156

60.0

Net income

$         403

$        430

$        396

$       452

$      371

8.6









Preferred stock dividends & accretion on preferred stock discount

392

393

393

393

393

(0.2)









Net income available to common 

11

36

3

59

(22)

(152.0)









Net income per common share:







  Basic

$        0.00

$       0.01

$       0.00

$      0.01

$     0.00

-

  Diluted

$        0.00

$       0.01

$       0.00

$      0.01

$     0.00

-

Average basic shares 

6,547

6,547

6,547

6,547

6,500

0.7

Average common diluted shares 

6,662

6,693

6,671

6,671

6,503

2.4

Performance Ratios







Return on average equity

3.98%

4.25%

4.22%

4.40%

3.81%

4.4

Return on average assets

0.38%

0.40%

0.38%

0.42%

0.35%

7.1

Net interest margin

3.76%

3.89%

3.70%

3.79%

4.21%

(10.7)

Average equity

40,487

40,382

37,501

41,135

38,926

4.0

Average assets

426,660

431,068

418,443

426,827

420,608

1.4

Average interest-earning assets

398,174

400,539

389,458

395,921

391,197

1.8









(1) Includes OREO adjustments to fair value














Cornerstone Bancshares, Inc. and Subsidiary



Loan Loss Allowance and Asset Quality Review











2013

2012

Fourth 

Third

Second

First 

Fourth 

(Amounts in thousands)

Quarter

Quarter

Quarter

Quarter

Quarter







Allowance for loan losses





Balance at beginning of period

$   3,159

$    5,095

$    5,669

$    6,141

$    5,280

Provision for loan losses

-

-

-

300

330

Net charge-offs

44

(1,936)

(574)

(772)

531

Balance at end of period

$   3,203

$    3,159

$    5,095

$    5,669

$    6,141







As a % of loans

1.11%

1.11%

1.85%

2.08%

2.22%

As a % of nonperforming loans

89.81%

77.13%

74.02%

89.07%

102.26%

As a % of nonperforming assets

19.42%

16.61%

19.79%

20.60%

23.32%







Net charge-offs as a % of  loans (a)

-0.06%

2.73%

0.83%

1.13%

-0.77%







Risk element assets





Accruing troubled debt restructured

$   4,251

$    3,121

$    3,465

$    5,442

$    5,316

Loans past due 30-89 days

$   2,250

$    1,659

$    5,111

$    4,032

$    6,594







Nonaccruing loans

$   3,566

$    4,095

$    6,883

$    6,364

$    6,005

Loans past due 90 days – accruing

-

-

-

-

-

Total nonperforming loans

$   3,566

$    4,095

$    6,883

$    6,364

$    6,005

Foreclosed assets (b) (c)

$  12,926

$  14,924

$  18,867

$  21,159

$  20,332

Total nonperforming assets

$  16,492

$  19,019

$  25,750

$  27,523

$  26,337














Nonperforming loans as a % of loans

1.23%

1.44%

2.49%

2.33%

2.17%

Nonperforming assets as a % of loans





   and foreclosed assets

5.45%

6.36%

8.73%

9.37%

8.86%







Total loans

289,440

284,181

276,062

272,550

276,992







(a) Annualized

(b) Properties sold during 4th Q 2013

$    1,427




(c) Properties under contract to sell 

$    1,017

































Cornerstone Bancshares, Inc. and Subsidiary







Net Interest Margin Analysis










Taxable Equivalent Basis











Three months ended

December 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

$   286,003

$   4,190

5.81%

$ 276,694

$   4,718

6.76%

Investment securities

99,065

315

1.41%

82,917

440

2.41%

Other earning assets

13,106

8

0.23%

31,586

16

0.21%

  Total earning assets

398,174

$   4,513

4.53%

391,197

$   5,174

5.31%

Allowance for loan losses

(3,045)




(5,530)



Cash and other assets

31,531




34,941



TOTAL ASSETS

$   426,660




$ 420,608















Liabilities and Shareholders' Equity






















Interest-bearing liabilities:










Interest-bearing demand deposits

$     25,363

$          9

0.14%

$   26,355

$        21

0.32%

Savings deposits

14,149

5

0.15%

11,059

9

0.34%

MMDA's

74,607

73

0.39%

66,838

117

0.69%

Time deposits 

160,824

400

0.99%

176,882

525

1.18%

Federal funds purchased and securities










  sold under agreements to repurchase

21,184

18

0.33%

18,343

17

0.37%

Federal Home Loan Bank and other borrowings

33,095

267

3.20%

37,175

392

4.18%

  Total interest-bearing liabilities

329,222

772

0.93%

336,652

1,081

1.27%

Net interest spread

$   3,741

3.60%


$   4,093

4.04%

Noninterest-bearing demand deposits

55,398




43,662



Accrued expenses and other liabilities

1,553




1,368



Shareholders' equity

40,487




38,926



TOTAL LIABILITIES AND










  SHAREHOLDERS' EQUITY

$   426,661




$ 420,608



Net yield on earning assets



3.76%




4.21%












Taxable equivalent adjustment:










  Loans

0




0

  Investment securities

37




63

          Total adjustment

37




63













Cornerstone Bancshares, Inc. and Subsidiary







Net Interest Margin Analysis









Taxable Equivalent Basis










Twelve months ended

December 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

$ 278,975

$ 16,705

5.99%

$  268,828

$   17,289

6.43%

Investment securities

98,108

1,694

1.94%

89,587

2,004

2.53%

Other earning assets

20,749

54

0.26%

27,010

60

0.22%

  Total earning assets

397,832

$ 18,453

4.69%

385,425

$   19,353

5.09%

Allowance for loan losses

(4,547)




(6,140)



Cash and other assets

35,409




35,756



TOTAL ASSETS

$ 428,694




$  415,041















Liabilities and Shareholders' Equity






















Interest-bearing liabilities:










Interest-bearing demand deposits

$   26,196

$        55

0.21%

$    26,483

$          87

0.33%

Savings deposits

12,718

27

0.22%

10,504

38

0.36%

MMDA's

76,194

392

0.51%

52,454

422

0.80%

Time deposits 

165,748

1,766

1.07%

187,733

2,471

1.32%

Federal funds purchased and securities










  sold under agreements to repurchase

22,041

74

0.34%

21,312

94

0.44%

Federal Home Loan Bank and other borrowings

31,634

1,209

3.82%

39,282

1,673

4.26%

  Total interest-bearing liabilities

334,531

3,523

1.05%

337,768

4,785

1.42%

Net interest spread

$ 14,930

3.64%


$   14,568

3.67%

Noninterest-bearing demand deposits

51,614




39,936



Accrued expenses and other liabilities

1,785




222



Shareholders' equity

40,764




37,115



TOTAL LIABILITIES AND










  SHAREHOLDERS' EQUITY

$ 428,694




$  415,041



Net yield on earning assets



3.80%




3.85%












Taxable equivalent adjustment:










  Loans

0




0

  Investment securities

205




260

          Total adjustment

205




260













Cornerstone Bancshares, Inc. and Subsidiary


Loan Stratification











2013

2012

(Amounts in thousands)

Fourth

% of

Fourth

% of

% Dollar

Quarter

Total

Quarter

Total

Change

Non-residential real estate




    Owner occupied

$      65,765

22.7

$     58,425

21.1

12.6

    Non-owner occupied

64,053

22.1

66,468

24.0

(3.6)

    Multi-family real estate

8,249

2.9

8,508

3.1

(3.0)

    1-4 family construction

10,832

3.7

6,937

2.5

56.2

    Commercial land and lot development

25,254

8.7

25,551

9.2

(1.2)

Total non-residential real estate

174,153

60.1

165,889

59.9

5.0

Residential real estate




    First mortgage - 1-4 family

47,931

16.6

44,145

15.9

8.6

    Second mortgage - 1-4 family

1,960

0.7

3,348

1.2

(41.5)

    Home equity lines

18,175

6.3

15,194

5.5

19.6

Total residential real estate

68,066

23.6

62,687

22.6

8.6

Total real estate loans

242,219

83.7

228,576

82.5

6.0






Commercial

37,221

12.9

38,101

13.8

(2.3)

Agricultural & other

7,493

2.6

8,378

3.0

(10.6)

Consumer

2,507

0.9

1,937

0.7

29.4

Total loans, net of unearned fees

$   289,440

100.0

$   276,992

100.0

4.5






CORNERSTONE  BANCSHARES,  INC.  AND  SUBSIDIARY



CONSOLIDATED  BALANCE  SHEETS



December 31, 2013 and 2012



















Unaudited




2013

2012







ASSETS









Cash and due from banks

$     2,149,467

$      3,222,139

Interest-bearing deposits at other financial institutions

22,702,270

56,173,099







Total cash and cash equivalents

24,851,737

59,395,238






Securities available for sale

92,208,672

76,096,646

Securities held to maturity (fair value approximates



     $34,909 at 2013 and $46,212 at 2012)

34,165

45,086

Federal Home Loan Bank stock, at cost

2,322,900

2,322,900

Loans, net of allowance for loan losses of



     $3,203,158 in 2013 and $6,141,281 in 2012

286,236,578

270,850,465

Bank premises and equipment, net

4,992,449

5,399,340

Accrued interest receivable

977,925

1,213,778

Foreclosed assets


12,925,748

20,332,313

Other assets


7,673,179

7,790,634








Total assets

$ 432,223,353

$ 443,446,400








LIABILITIES AND STOCKHOLDERS' EQUITY









Deposits:



Noninterest-bearing demand deposits

$   75,206,540

$   60,053,838

Interest-bearing demand deposits

24,563,987

30,178,624

Savings deposits and money market accounts

86,329,930

80,994,239

Time deposits

155,313,920

173,653,892








Total deposits

341,414,377

344,880,593







Accrued interest payable

82,320

120,558

Federal funds purchased and securities sold under



     agreements to repurchase

22,974,117

19,587,387

Federal Home Loan Bank advances and other borrowings

26,740,000

37,175,000

Other liabilities


878,811

794,026








Total liabilities

392,089,625

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

14,892,927

14,821,546

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



     authorized in 2013 and 2012;



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



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

6,547,074

6,500,396

Additional paid-in capital

21,549,883

21,390,486

Accumulated deficit

(3,099,451)

(3,274,986)

Accumulated other comprehensive income

243,295

1,451,394








Total stockholders' equity

40,133,728

40,888,836








Total liabilities and stockholders' equity

$ 432,223,353

$  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



Years Ended December 31, 2013, 2012, and 2011




















Unaudited







2013

2012

2011









INTEREST INCOME






Loans, including fees

$16,705,237

$ 17,288,855

$18,128,907

Securities and interest-bearing deposits at other financial institutions

1,694,292

2,003,620

2,311,690

Federal funds sold

53,502

60,404

53,139










Total interest income

18,453,031

19,352,879

20,493,736









INTEREST EXPENSE






Time deposits

1,766,237

2,471,135

3,767,582

Other deposits

473,921

546,812

424,387

Federal funds purchased and securities





     sold under agreements to repurchase

73,903

94,402

125,538

Federal Home Loan Bank advances and other borrowings

1,208,490

1,672,478

2,044,361










Total interest expense

3,522,551

4,784,827

6,361,868










Net interest income before provision for loan losses

14,930,480

14,568,052

14,131,868









Provision for loan losses

300,000

430,000

445,000










Net interest income after provision for loan losses

14,630,480

14,138,052

13,686,868









NONINTEREST INCOME 






Customer service fees

821,072

803,251

868,935

Other noninterest income

62,457

64,519

71,542

Net gains from sale of securities

652,421

-

107,413

Net gains from sale of loans and other assets

403,569

151,710

134,997










Total noninterest income

1,939,519

1,019,480

1,182,887









NONINTEREST EXPENSES





Salaries and employee benefits

6,555,059

6,327,226

6,117,063

Net occupancy and equipment expense

1,335,126

1,447,204

1,431,863

Depository insurance

644,918

803,902

1,052,591

Foreclosed assets, net

2,001,755

1,100,670

1,922,988

Other operating expenses

3,309,532

3,498,867

3,126,998










Total noninterest expenses

13,846,390

13,177,869

13,651,503










Income before income tax expense

2,723,609

1,979,663

1,218,252









Income tax expense

1,042,800

577,600

188,200










Net income

1,680,809

1,402,063

1,030,052









Preferred stock dividend requirements

1,500,000

1,229,780

651,119

Accretion on preferred stock discount

71,381

63,924

36,718










Net income available to common stockholders

$     109,428

$     108,359

$     342,215


















EARNINGS PER COMMON SHARE





Basic

$          0.02

$          0.02

$          0.05

Diluted

0.02

0.02

0.05


















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 year ended December 31, 2013




























Accumulated






Additional


Other

Total

Preferred

Common

Paid-in

Accumulated

Comprehensive

Stockholders'

Stock

Stock

Capital

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












   Stock compensation expense

-

-

129,056

-

-

129,056












   Issuance of common stock

-

46,678

30,341

-

-

77,019












   Preferred stock dividends 

-

-

-

(1,433,893)

-

(1,433,893)












   Accretion on preferred stock

71,381

-

-

(71,381)

-

-












   Net income

-

-

-

1,680,809

-

1,680,809












   Unrealized holding losses on securities available for sale, net of reclassification adjustment and taxes










-

-

-

-

(1,208,099)

(1,208,099)
























BALANCE, December 31, 2013

$ 14,892,927

$ 6,547,074

$ 21,549,883

$ (3,099,451)

$    243,295

$ 40,133,728











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

















SOURCE Cornerstone Bancshares, Inc.

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