Cornerstone Bancshares, Inc. Reports Positive Earnings for Second Quarter of 2012

News provided by

Cornerstone Bancshares, Inc.

Jul 25, 2012, 12:53 ET

CHATTANOOGA, Tenn., July 25, 2012 /PRNewswire/ -- Cornerstone Bancshares, Inc. (OTC Bulletin Board: CSBQ; CSBQP) today announced the following:

Cornerstone Bancshares, Inc. ("Cornerstone"), parent company of Cornerstone Community Bank ("Bank"), reported continued positive earnings for the second quarter of 2012, with a net income of $310,585 for the quarter, compared with net income of $141,287 for the same quarter of 2011.  This marks the sixth consecutive quarter of positive earnings for Cornerstone and represents a 69.7 percent increase in net income year-over-year, from approximately $393,000 at June 30, 2011, to approximately $667,000 at June 30, 2012.

Other financial highlights year-over-year at quarter-end included an increase in the Bank's tier one leverage ratio from 6.09 percent to 8.24 percent; an increase in the total risk-based capital ratio from 10.65 percent to 13.11 percent; an increase in book value per common share of 5.8 percent, from $3.74 to $3.96; an increase in net interest margin from 3.44 percent to 3.73 percent; and a decrease in non-accruing loans from $7.2 million to $7.1 million.  In addition, Cornerstone has successfully raised in excess of $11 million in capital through its Preferred Stock Offering.

"The Directors are extremely pleased with the strong, positive strides made in every segment of the Bank's operations," said Cornerstone's Board Chairman Miller Welborn.  "We have a solid team in place and will continue to work diligently to strengthen the Bank's foundations, in order to continue serving our customers and this thriving Chattanooga market."

Founded in 1996, Cornerstone is a single-bank holding company, with $421 million in assets, serving the Chattanooga, Tennessee MSA, with five full-service branch locations 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, 2012 and 2011





(Unaudited)












(Amounts in thousands, except per common share data)

2012

2011

% Change

Balance Sheet Data at June 30





Total assets

$ 420,874

$ 441,210

(4.6)

Interest-earning assets

387,995

410,691

(5.5)

Loans

263,749

270,171

(2.4)

Foreclosed assets

22,144

20,058

10.4

Deposits

321,740

334,921

(3.9)

Other interest-bearing liabilities

60,909

75,491

(19.3)

Shareholders' equity

36,759

28,860

27.4

Loan to deposit ratio

81.98%

80.67%

1.6

Tier 1 leverage ratio (Bank)

8.24%

6.09%

35.3

Total risk-based capital ratio (Bank)

13.11%

10.65%

23.1

Outstanding common shares 

6,500

6,500

-

Book value per common share

$       3.96

$       3.74

5.8

Tangible book value per common share

$       3.96

$       3.74

6.0

Market value per common share as of June 30

$       1.75

$       1.10

59.1







Loan Quality Data





Nonaccruing loans

7,124

7,233

(1.5)

Loans past due 90 days – accruing

-

-

-

Net charge-offs YTD

1,381

2,348

(41.2)

Allowance for loan losses

6,029

6,814

(11.5)

Allowance for loan losses to total loans

2.29%

2.52%

Nonperforming assets to total assets

6.95%

6.19%








Performance Data for the Year





Net income 

$        667

$        394

69.3

Return on average assets

0.33%

0.18%

Return on average equity

3.71%

2.89%

Net interest margin

3.73%

3.44%

Per common share data:





Net income – basic

$       0.01

$       0.02

Net income – diluted

$       0.01

$       0.02

Common dividends

$             -

$             -

Preferred dividends & accretion

$       1.25

$       1.25

Average shares (000s):





Basic common stock

6,500

6,500

Diluted common stock

6,581

6,500

Preferred stock

448

189















  





Cornerstone Bancshares, Inc. and Subsidiary




Loan Loss Allowance and Asset Quality Review












2012

2011

Second

First

Fourth

Third

Second

(Amounts in thousands)

Quarter

Quarter

Quarter

Quarter

Quarter







Allowance for loan losses





Balance at beginning of period

$   6,024

$   7,400

$   6,864

$   6,814

$   7,914

Provision for loan losses

-

-

300

115

15

Net charge-offs

5

(1,376)

236

(65)

(1,115)

Balance at end of period

$   6,029

$   6,024

$   7,400

$   6,864

$   6,814







As a % of loans

2.29%

2.29%

2.76%

2.54%

2.52%

As a % of nonperforming loans

84.63%

55.95%

93.90%

80.20%

94.21%

As a % of nonperforming assets

20.60%

20.27%

28.03%

25.60%

24.97%







Net charge-offs as a % of  loans (a)

-0.01%

2.10%

-0.35%

0.10%

1.65%







Risk element assets





Accruing troubled debt restructured

$   2,775

$   2,418

$   2,750

$   2,535

$   1,750

Loans past due 30-89 days

$   2,399

$   5,098

$   8,090

$   2,048

$   1,957







Nonaccruing loans

$   7,124

$ 10,766

$   7,881

$   8,559

$   7,233

Loans past due 90 days – accruing

-

-

-

-

-

Total nonperforming loans

$   7,124

$ 10,766

$   7,881

$   8,559

$   7,233

Repossessed assets

83

-

-

-

-

Other real estate owned (b)(c)

$ 22,061

$ 18,957

$ 18,524

$ 18,255

$ 20,058

Total nonperforming assets

$ 29,268

$ 29,723

$ 26,405

$ 26,814

$ 27,291














Nonperforming loans as a % of loans

2.70%

4.10%

2.94%

3.17%

2.68%

Nonperforming assets as a % of loans





   and other real estate owned

10.24%

10.55%

9.22%

9.29%

9.40%







Total loans

263,749

262,788

267,765

270,401

270,171







(a) Annualized

(b) Properties sold during 2nd Q 2012

$        852




(c) Properties under contract to sell 

$     6,000











  

Cornerstone Bancshares, Inc. and Subsidiary







Net Interest Margin Analysis









Taxable Equivalent Basis










Three months ended

June 30

(Amounts in thousands)










Assets

2012




2011


Average

Income/

Yield/

Average

Income/

Yield/

Earning assets:

Balance

Expense

Rate

Balance

Expense

Rate

Loans, net of unearned income

$       262,598

$       4,186

6.39%

$     271,952

$       4,521

6.67%

Investment securities

94,949

618

2.91%

119,751

621

2.36%

Other earning assets

23,084

13

0.23%

24,902

17

0.28%

  Total earning assets

380,631

$       4,817

5.15%

416,605

$       5,159

5.05%

Allowance for loan losses

(6,028)




(7,285)



Cash and other assets

37,702




36,152



TOTAL ASSETS

$       412,305




$     445,472















Liabilities and Shareholders' Equity






















Interest-bearing liabilities:










Interest-bearing demand deposits

$         28,332

$            23

0.33%

$       28,402

$            23

0.33%

Savings deposits

10,387

9

0.36%

9,938

13

0.51%

MMDA's

46,639

101

0.87%

25,927

64

0.99%

Time deposits 

189,169

635

1.35%

236,873

1,012

1.71%

Federal funds purchased and securities










  sold under agreements to repurchase

21,198

23

0.44%

24,288

34

0.56%

Federal Home Loan Bank and other borrowings

40,028

426

4.27%

50,678

545

4.32%

  Total interest-bearing liabilities

335,751

1,217

1.45%

376,107

1,691

1.80%

Net interest spread

$       3,600

3.70%


$       3,468

3.25%

Noninterest-bearing demand deposits

40,829




41,486



Accrued expenses and other liabilities

(698)




167



Shareholders' equity

36,423




27,712



TOTAL LIABILITIES AND










 SHAREHOLDERS' EQUITY

$       412,305




$     445,472



Net yield on earning assets



3.87%




3.42%












Taxable equivalent adjustment:










  Loans

0




0

  Investment securities

71




85

          Total adjustment

71




85

Cornerstone Bancshares, Inc. and Subsidiary







Net Interest Margin Analysis









Taxable Equivalent Basis










Six months ended

June 30

(Amounts in thousands)










Assets

2012




2011


Average

Income/

Yield/

Average

Income/

Yield/

Earning assets:

Balance

Expense

Rate

Balance

Expense

Rate

Loans, net of unearned income

$   264,205

$        8,330

6.36%

$     278,090

$         9,160

6.64%

Investment securities

91,795

1,085

2.70%

114,825

1,190

2.39%

Other earning assets

24,913

28

0.23%

23,959

28

0.24%

  Total earning assets

380,913

$        9,443

5.07%

416,874

$       10,378

5.10%

Allowance for loan losses

(6,574)




(8,173)



Cash and other assets

36,169




32,967



TOTAL ASSETS

$   410,508




$     441,668















Liabilities and Shareholders' Equity






















Interest-bearing liabilities:










Interest-bearing demand deposits

$     26,611

$             44

0.33%

$       27,998

$              45

0.32%

Savings deposits

10,123

19

0.38%

9,720

25

0.51%

MMDA's

43,006

192

0.90%

25,186

123

0.99%

Time deposits 

192,139

1,334

1.40%

240,427

2,064

1.73%

Federal funds purchased and securities










  sold under agreements to repurchase

23,744

55

0.47%

23,461

65

0.56%

Federal Home Loan Bank and other borrowings

41,331

887

4.33%

52,507

1,125

4.32%

  Total interest-bearing liabilities

336,954

2,532

1.52%

379,299

3,447

1.83%

Net interest spread

$        6,912

3.56%


$         6,931

3.27%

Noninterest-bearing demand deposits

37,654




35,259



Accrued expenses and other liabilities

(105)




(91)



Shareholders' equity

36,005




27,200



TOTAL LIABILITIES AND










 SHAREHOLDERS' EQUITY

$   410,508




$     441,668



Net yield on earning assets



3.73%




3.44%












Taxable equivalent adjustment:










  Loans

0




0

  Investment securities

142




170

          Total adjustment

142




170

  

Cornerstone Bancshares, Inc. and Subsidiary




Quarterly Earnings Summary
















(Unaudited)



2012

2011

Q1-12 /


Second

First

Fourth

Third

Second

Q1-11

(Amounts in thousands)

Quarter

Quarter

Quarter

Quarter

Quarter

% Chg

Interest income







Loans, including fees

$     4,186

$          4,144

$             4,437

$        4,531

$    4,521

(7.4)

Investment securities

618

467

548

574

621

(0.4)

Other earning assets

13

15

16

9

17

(23.2)

    Total interest income

4,817

4,626

5,001

5,114

5,159

(6.6)

Interest expense







Deposits

768

820

924

1,012

1,112

(30.9)

Short-term borrowings

23

32

28

33

34

(31.9)

FHLB advances and other borrowing

426

462

454

465

545

(21.9)

    Total interest expense

1,217

1,314

1,406

1,510

1,691

(28.0)

Net interest income

3,600

3,312

3,595

3,604

3,468

3.8

Provision for loan losses

0

0

300

115

15

(100.0)

Net interest income after the







  provision for loan losses

3,600

3,312

3,295

3,489

3,453

4.3

Noninterest income







Customer service fees

207

197

212

216

225

(8.0)

Other noninterest income

19

20

15

15

22

(13.6)

Gain on sale of assets

26

50

47

92

69

(62.1)

    Total noninterest income

252

267

274

323

316

(20.3)

Noninterest expense







Salaries and employee benefits

1,570

1,591

1,614

1,459

1,502

4.5

Net occupancy and equipment

348

336

314

362

350

(0.7)

Depository insurance

207

203

255

234

241

(14.3)

Foreclosed asset expense (1)

481

150

538

306

716

(32.9)

Other operating expense

818

794

779

715

847

(3.4)

    Total noninterest expense

3,423

3,074

3,500

3,076

3,656

(6.4)

Income before income taxes

429

505

69

736

113

281.1

Income tax (benefit) expense

118

149

(44)

212

(28)

(514.8)

Net income

$         311

$             356

$                113

$           524

$       141

120.5









Preferred stock dividends & accretion on preferred stock discount

296

280

267

201

127

133.1









Net income / (loss) available to common 

15

76

(154)

323

14

7.4









Net income / (loss) per common share:







  Basic

$            -

$            0.01

$             (0.02)

$          0.05

$          -

-

  Diluted

$            -

$            0.01

$             (0.02)

$          0.05

$          -

-

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

3.42%

4.01%

1.37%

6.64%

2.04%

67.8

Return on average assets

0.30%

0.35%

0.11%

0.49%

0.13%

138.3

Net interest margin

3.87%

3.59%

3.72%

3.69%

3.42%

13.1

Average equity

36,423

35,587

32,912

31,569

27,712

31.4

Average assets

412,305

408,711

416,562

423,200

445,472

(7.4)

Average interest-earning assets

380,631

378,335

390,756

396,872

416,605

(8.6)









(1) Includes OREO adjustments to fair value





Cornerstone Bancshares, Inc. and Subsidiary


Loan Stratification











2012

2011

(Amounts in thousands)

Second

% of

Second

% of

% Dollar

Quarter

Total

Quarter

Total

Change

Non-residential real estate




    Owner occupied

$      60,068

22.8

$     63,801

23.6

(5.9)

    Non-owner occupied

61,671

23.4

62,060

23.0

(0.6)

    Multi-family real estate

10,279

3.9

10,929

4.0

(5.9)

    1-4 family construction

5,477

2.1

4,092

1.5

33.8

    Commercial land and lot development

17,210

6.5

18,528

6.9

(7.1)

Total non-residential real estate

154,705

58.7

159,410

59.0

(3.0)

Residential real estate




    First mortgage - 1-4 family

42,333

16.1

40,734

15.1

3.9

    Second mortgage - 1-4 family

3,252

1.2

4,404

1.6

(26.2)

    Home equity lines

16,180

6.1

11,963

4.4

35.3

Total residential real estate

61,765

23.4

57,101

21.1

8.2

Total real estate loans

216,470

82.1

216,511

80.1

(0.0)






Commercial

36,765

13.9

41,680

15.4

(11.8)

Agricultural & other

8,528

3.2

9,041

3.3

(5.7)

Consumer

1,986

0.8

2,939

1.1

(32.4)

Total loans, net of unearned fees

$   263,749

100.0

$   270,171

100.0

(2.4)

Cornerstone Bancshares, Inc. and Subsidiary


Consolidated Balance Sheets




























Unaudited







June 30,

December 31,



ASSETS

2012

2011









Cash and cash equivalents

$              36,879,105

$            38,882,691









Securities available for sale

86,538,060

86,057,437

Securities held to maturity 

56,880

68,643

Federal Home Loan Bank stock, at cost

2,322,900

2,322,900

Loans, net of allowance for loan losses of 




    $6,028,690 at June 30, 2012




    and $7,400,049 at December 31, 2011

257,720,495

260,364,569

Bank premises and equipment, net

5,574,683

5,712,003

Accrued interest receivable

1,246,603

1,327,458

Foreclosed assets

22,143,571

18,523,960

Other assets

8,391,530

9,395,721

Total assets

$            420,873,827

$          422,655,382











LIABILITIES AND STOCKHOLDERS' EQUITY











Deposits:



Noninterest-bearing demand deposits

$              43,006,586

$            43,989,943

Interest-bearing demand deposits

28,501,796

22,353,384

Savings deposits and money market accounts

60,693,247

46,857,118

Time deposits 


189,537,979

200,841,499

  Total deposits


321,739,608

314,041,944

Federal funds purchased and securities sold under  



    agreements to repurchase

23,299,119

29,390,810

Federal Home Loan Bank advances and other borrowings

37,610,000

43,045,000

Accrued interest payable

114,503

110,703

Other liabilities


1,351,440

858,620

Total liabilities

384,114,670

387,447,077









Stockholders' equity:





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


      448,049 and 403,989 shares issued and outstanding 

11,018,339

9,899,544

       in 2012 and 2011, respectively




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


      6,709,199 shares issued in 2012 and 2011;



      6,500,396 shares outstanding in 2012 and 2011

6,500,396

6,500,396

Additional paid-in capital

21,353,462

21,316,438

Retained deficit


(3,429,846)

(3,627,208)

Accumulated other comprehensive income

1,316,806

1,119,135

Total stockholders' equity

36,759,157

35,208,305

Total liabilities and stockholders' equity

$            420,873,827

$          422,655,382

Cornerstone Bancshares, Inc. and Subsidiary




Consolidated Statements of Income
























Unaudited

Unaudited






Three months ended

Six months ended






June 30,

June 30,






2012

2011

2012

2011

INTEREST INCOME







Loans, including fees

$    4,185,757

$    4,521,370

$    8,329,701

$    9,160,175

Investment securities

618,255

621,108

1,085,261

1,189,780

Federal funds sold & other earning assets

13,341

17,325

28,428

28,328

Total interest income

4,817,353

5,159,803

9,443,390

10,378,283













INTEREST EXPENSE







Time deposits

634,961

1,011,776

1,334,055

2,064,225

Other deposits

133,459

99,936

254,702

192,548

Federal funds purchased and securities







    sold under agreements to repurchase

23,074

33,712

55,304

64,715

FHLB advances and other borrowings

425,737

545,413

886,944

1,125,071

Total interest expense

1,217,231

1,690,837

2,531,005

3,446,559













Net interest income before provision for loan losses

3,600,122

3,468,966

6,912,385

6,931,724

Provision for loan losses

-

15,000

-

30,000

Net interest income after the provision for loan losses

3,600,122

3,453,966

6,912,385

6,901,724













NONINTEREST INCOME







Customer service fees

207,164

225,263

404,598

440,714

Net gains from sale of securities

-

47,742

-

47,742

Net gains from sale of loans and other assets

26,246

21,517

75,910

55,544

Other noninterest income

18,612

21,531

38,900

41,810

Total noninterest income

252,022

316,053

519,408

585,810













NONINTEREST EXPENSE







Salaries and employee benefits

1,569,555

1,501,836

3,160,690

3,044,538

Net occupancy and equipment expense

347,928

350,280

683,741

756,614

Depository insurance

206,866

241,505

409,649

564,160

Foreclosed assets, net

480,755

716,505

631,075

1,078,075

Other operating expense

818,255

847,281

1,612,336

1,630,635

Total noninterest expense

3,423,359

3,657,407

6,497,491

7,074,022













Income before provision for income taxes

428,785

112,612

934,302

413,512

Provision (benefit) for income taxes

118,200

(28,675)

267,200

19,950













Net income

310,585

141,287

667,102

393,562













Preferred stock dividend requirements

280,031

118,013

545,887

211,088

Accretion on preferred stock discount

15,241

9,000

29,709

9,000













Net income available to common shareholders

$         15,313

$         14,274

$         91,506

$       173,474













EARNINGS PER COMMON SHARE







Basic net income per common share

$                -

$                -

$             0.01

$             0.02

Diluted net income per common share

$                -

$                -

$             0.01

$             0.02













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 six months ended June 30, 2012





















Accumulated









Additional


Other

Total


Comprehensive

Preferred

Common

Paid-in

Retained

Comprehensive

Stockholders'


Income

Stock

Stock

Capital

(Deficit)

Income

Equity















BALANCE, December 31, 2011

$    9,899,544

$ 6,500,396

$        21,316,438

$         (3,627,208)

$         1,119,135

$         35,208,305















Employee compensation stock option expense

-

-

37,024

-

-

37,024















Issuance of Series A Convertible Preferred Stock

1,089,086

-

-

-

-

1,089,086















Preferred stock dividends paid

-

-

-

(440,031)

-

(440,031)















Accretion on preferred stock discount

29,709

-

-

(29,709)

-

-

Comprehensive income:












Net income

$            667,102

-

-

-

667,102

-

667,102















Other comprehensive income, net of tax:












Unrealized holding gains on securities available












for sale, net of reclassification adjustment

197,671

-

-

-

-

197,671

197,671

Total comprehensive income

$            864,773


























BALANCE, June 30, 2012

$  11,018,339

$ 6,500,396

$        21,353,462

$         (3,429,846)

$         1,316,806

$         36,759,157

 

SOURCE Cornerstone Bancshares, Inc.

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