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Cornerstone Bancshares, Inc. Reports Fourth Quarter 2012 Earnings



      Cornerstone Bancshares, Inc. Reports Fourth Quarter 2012 Earnings

PR Newswire

CHATTANOOGA, Tenn., Jan. 28, 2013

CHATTANOOGA, Tenn., Jan. 28, 2013 /PRNewswire/ -- Cornerstone Bancshares, Inc.
(OTC Bulletin Board: CSBQ; CSBQP) today announced the following:

Cornerstone Bancshares, Inc. ("Cornerstone") reported net income of $371,000
for the fourth quarter of 2012 and net income of $1,402,000 for the 12 months
ended December 31, 2012, which represents a 228.6 percent improvement in net
income quarter-over-quarter and a 36.1 percent improvement from the previous
year.  

Net interest margin increased from 3.55 percent in 2011 to 3.85 percent in
2012.  In addition, total assets increased 4.2 percent for the year, from
$422,655,000 in 2011 to $440,463,000.  There was a 3.4 percent growth in loans
for the year, from $267,765,000 in 2011 to $276,992,000 in 2012.  Deposits
increased 8.9 percent from $314,042,000 in 2011 to $341,897,000.  In addition,
Cornerstone's market value per common share increased 52.7 percent from $1.50
in 2011 to $2.29 in 2012.  As of December 31, 2012, Cornerstone had sold all
600,000 shares of its Series A Convertible Preferred Stock, raising $15
million in new capital.

Specific Accomplishments Include:

  o $15 million capital raise completion
  o Four consecutive quarters of positive earnings for 2012
  o Four consecutive payments of quarterly Preferred Stock dividends

"We've definitely turned a corner and are extremely pleased with our continued
improvement," said Cornerstone's President and CEO Frank Hughes.  "Our goal is
to continue strengthening Cornerstone's foundation, so that we can build for
the future and continue serving our Chattanooga market."

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 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, 2012 and 2011
(Unaudited)
(Amounts in thousands, except per  2012             2011             % Change
common share data)
Balance Sheet Data at December 31
Total assets                       $   440,463      $    422,655     4.2
Interest-earning assets            410,032          393,436          4.2
Loans                              276,992          267,765          3.4
Foreclosed assets                  20,332           18,524           9.8
Deposits                           341,897          314,042          8.9
Other interest-bearing liabilities 56,762           72,436           (21.6)
Shareholders' equity               40,889           35,208           16.1
Loan to deposit ratio              81.02%           85.26%           (5.0)
Tier 1 leverage ratio (Bank, est)  8.37%            8.04%            4.1
Total risk-based capital ratio     12.91%           12.99%           (0.6)
(Bank, est)
Outstanding common shares          6,500            6,500            -
Book value per common share        $         4.01   $          3.89  3.0
Tangible book value per common     $         4.01   $          3.89  3.0
share
Market value per common share as   $         2.29   $          1.50  52.7
of December 31
Loan Quality Data
Nonaccruing loans                  6,006            7,882            (23.8)
Loans past due 90 days – accruing  -                -                -
Net charge-offs YTD                1,689            2,177            (22.4)
Allowance for loan losses          6,141            7,400            (17.0)
Allowance for loan losses to total 2.22%            2.76%
loans
Nonperforming assets to total      5.98%            6.26%
assets
Performance Data for the Year
Net income                         $       1,402    $        1,030   36.1
Return on average assets           0.34%            0.24%
Return on average equity           3.78%            3.46%
Net interest margin                3.85%            3.55%
Per common share data:
Net income – basic                 $         0.02   $          0.05
Net income – diluted               $         0.02   $          0.05
Common dividends                   $                $              
                                   -                 -
Preferred dividends & accretion    $         2.50   $          1.89
Average shares (000s):
Basic common stock                 6,500            6,500
Diluted common stock               6,523            6,500
Preferred stock (actual)           600              404

 

Cornerstone Bancshares, Inc. and Subsidiary
Quarterly Earnings Summary
                           (Unaudited)
                           2012                               2011    Q4-12 /
                           Fourth    Third   Second  First    Fourth  Q4-11
(Amounts in thousands)     Quarter   Quarter Quarter Quarter  Quarter % Chg
Interest income
Loans, including fees      $         $       $       $        $       6.3
                           4,718     4,242   4,186    4,144    4,437
Securities and
interest-bearing deposits  440       478     618     467      548     (19.7)
at other financial
institutions
Federal funds sold and     16        15      13      15       16      5.1
other earning assets
    Total interest income  5,174     4,735   4,817   4,626    5,001   3.5
Interest expense
Deposits                   673       756     768     820      924     (27.2)
Short-term borrowings      17        22      23      32       27      (36.3)
FHLB advances and other    391       394     426     462      454     (13.8)
borrowing
    Total interest expense 1,081     1,172   1,217   1,314    1,405   (23.0)
Net interest income        4,093     3,563   3,600   3,312    3,596   13.8
Provision for loan losses  330       100     -       -        300     10.0
Net interest income after
the
  provision for loan       3,763     3,463   3,600   3,312    3,296   14.2
losses
Noninterest income
Customer service fees      201       198     207     197      212     (5.2)
Other noninterest income   13        12      19      20       15      (11.1)
Gain on sale of assets     27        48      26      50       47      (42.6)
    Total noninterest      241       258     252     267      274     (11.9)
income
Noninterest expense
Salaries and employee      1,600     1,566   1,570   1,591    1,614   (0.9)
benefits
Net occupancy and          408       355     348     336      314     30.0
equipment
Depository insurance       121       237     207     203      255     (52.5)
Foreclosed asset expense   156       314     481     150      538     (71.0)
(1)
Other operating expense    1,192     731     817     794      780     52.8
    Total noninterest      3,477     3,203   3,423   3,074    3,501   (0.7)
expense
Income before income taxes 527       518     429     505      69      664.7
Income tax (benefit)       156       154     118     149      (44)    (454.5)
expense
Net income                 $         $       $       $        $       228.4
                           371        364     311      356    113
Preferred stock dividends
& accretion on preferred   393       325     296     280      267     47.2
stock discount
Net income / (loss)        (22)      39      15      76       (154)   (85.7)
available to common 
Net income / (loss) per
common share:
  Basic                    $         $       $       $        $       (85.7)
                            (0.00)   0.01        -    0.01     (0.02)
  Diluted                  $         $       $       $        $       (85.7)
                            (0.00)   0.01        -    0.01     (0.02)
Average basic shares       6,500     6,500   6,500   6,500    6,500   -
Average common diluted     6,503     6,503   6,581   6,586    6,500   0.0
shares 
Performance Ratios
Return on average equity   3.81%     3.88%   3.42%   4.00%    1.37%   177.7
Return on average assets   0.35%     0.35%   0.30%   0.35%    0.11%   225.3
Net interest margin        4.21%     3.70%   3.87%   3.59%    3.72%   13.4
Average equity             38,926    37,501  36,423  35,587   32,912  18.3
Average assets             420,608   418,443 412,305 408,711  416,562 1.0
Average interest-earning   391,197   389,458 380,631 378,335  390,756 0.1
assets
(1) Includes OREO adjustments to fair value

Cornerstone Bancshares, Inc. and Subsidiary
Loan Loss Allowance and Asset Quality Review
                        2012                                        2011
                        Fourth      Third    Second    First        Fourth
(Amounts in thousands)  Quarter     Quarter  Quarter   Quarter      Quarter
Allowance for loan
losses
Balance at beginning of $           $        $   6,024 $     7,400  $    6,864
period                   5,280      6,029
Provision for loan      330         100      -         -            300
losses
Net charge-offs         531         (849)    5         (1,376)      236
Balance at end of       $           $        $   6,029 $     6,024  $    7,400
period                   6,141      5,280
As a % of loans         2.22%       1.93%    2.29%     2.29%        2.76%
As a % of nonperforming 102.24%     66.26%   84.63%    55.95%       93.90%
loans
As a % of nonperforming 23.32%      17.40%   20.60%    20.27%       28.03%
assets
Net charge-offs as a %  -0.77%      1.24%    -0.01%    2.10%        -0.35%
of  loans (a)
Risk element assets
Accruing troubled debt  $           $        $   2,775 $     2,418  $    2,750
restructured             5,316      5,328
Loans past due 30-89    $           $        $   2,495 $     5,040  $    8,158
days                     6,534      3,685
Nonaccruing loans       $           $        $   7,124 $   10,767   $    7,882
                         6,006      7,968
Loans past due 90 days  -           -        -         -            -
– accruing
Total nonperforming     $           $        $   7,124 $   10,767   $    7,882
loans                    6,006      7,968
Repossessed assets      32          39       83        -            -
Other real estate owned $   20,300  $        $ 22,061  $   18,957   $  18,524
(b)(c)                              22,337
Total nonperforming     $   26,338  $        $ 29,268  $   29,724   $  26,406
assets                              30,344
Nonperforming loans as  2.17%       2.91%    2.70%     4.10%        2.94%
a % of loans
Nonperforming assets as
a % of loans
   and other real       8.86%       10.25%   10.24%    10.55%       9.22%
estate owned
Total loans             276,992     273,820  263,749   262,788      267,765
(a) Annualized
(b) Properties sold     $      
during 4th Q 2012       3,090
(c) Properties under    $        
contract to sell         474

Cornerstone Bancshares, Inc. and
Subsidiary
Net Interest Margin
Analysis
Taxable Equivalent Basis
                          Three months ended
                          December 31
(Amounts in thousands)
Assets                               2012                      2011
                          Average    Income/  Yield/  Average  Income/  Yield/
Earning assets:           Balance    Expense  Rate    Balance  Expense  Rate
Loans, net of unearned    $          $        6.76%   $        $        6.56%
income                    276,694    4,718            268,349  4,437
Investment securities     82,917     440      2.41%   96,407   548      2.52%
Other earning assets      31,586     16       0.21%   26,000   16       0.24%
  Total earning assets    391,197    $        5.31%   390,756  $        5.14%
                                     5,174                     5,001
Allowance for loan losses (5,530)                     (6,871)
Cash and other assets     34,941                      32,677
TOTAL ASSETS              $                           $    
                          420,608                     416,562
Liabilities and
Shareholders' Equity
Interest-bearing
liabilities:
Interest-bearing demand   $          $        0.32%   $        $        0.33%
deposits                  26,355          21          22,845        19
Savings deposits          11,059     9        0.34%   9,786    13       0.51%
MMDA's                    66,838     117      0.69%   35,119   88       1.00%
Time deposits             176,882    525      1.18%   207,850  804      1.53%
Federal funds purchased
and securities
  sold under agreements   18,343     17       0.37%   21,079   28       0.52%
to repurchase
Federal Home Loan Bank    37,175     392      4.18%   43,045   455      4.19%
and other borrowings
  Total interest-bearing  336,652    1,081    1.27%   339,723  1,405    1.64%
liabilities
Net interest spread                  $        4.04%            $        3.50%
                                     4,093                     3,596
Noninterest-bearing       43,662                      43,728
demand deposits
Accrued expenses and      1,368                       198
other liabilities
Shareholders' equity      38,926                      32,912
TOTAL LIABILITIES AND
  SHAREHOLDERS' EQUITY    $                           $    
                          420,608                     416,562
Net yield on earning                          4.21%                     3.72%
assets
Taxable equivalent
adjustment:
  Loans                              0                         0
  Investment securities              63                        64
          Total                      63                        64
adjustment

 

Cornerstone Bancshares, Inc. and
Subsidiary
Net Interest Margin
Analysis
Taxable Equivalent Basis
                           Twelve months ended
                           December 31
(Amounts in thousands)
Assets                              2012                       2011
                           Average  Income/   Yield/  Average  Income/  Yield/
Earning assets:            Balance  Expense   Rate    Balance  Expense  Rate
Loans, net of unearned     $        $         6.43%   $        $        6.63%
income                     268,828   17,289           273,523  18,129
Investment securities      89,587   2,004     2.53%   108,705  2,312    2.38%
Other earning assets       27,010   60        0.22%   23,232   53       0.23%
  Total earning assets     385,425  $         5.09%   405,460  $        5.12%
                                     19,353                    20,494
Allowance for loan losses  (6,140)                    (7,496)
Cash and other assets      35,756                     32,721
TOTAL ASSETS               $                          $    
                           415,041                    430,685
Liabilities and
Shareholders' Equity
Interest-bearing
liabilities:
Interest-bearing demand    $        $                 $        $      
deposits                   26,483         87  0.33%   25,741            0.33%
                                                                84
Savings deposits           10,504   38        0.36%   9,750    50       0.51%
MMDA's                     52,454   422       0.80%   29,149   291      1.00%
Time deposits              187,733  2,471     1.32%   226,720  3,768    1.66%
Federal funds purchased
and securities
  sold under agreements to 21,312   94        0.44%   22,808   125      0.55%
repurchase
Federal Home Loan Bank and 39,282   1,673     4.26%   47,745   2,044    4.28%
other borrowings
  Total interest-bearing   337,768  4,785     1.42%   361,913  6,362    1.76%
liabilities
Net interest spread                 $         3.67%            $        3.36%
                                     14,568                    14,132
Noninterest-bearing demand 39,936                     39,042
deposits
Accrued expenses and other 222                        (10)
liabilities
Shareholders' equity       37,115                     29,740
TOTAL LIABILITIES AND
  SHAREHOLDERS' EQUITY     $                          $    
                           415,041                    430,685
Net yield on earning                          3.85%                     3.55%
assets
Taxable equivalent
adjustment:
  Loans                             0                          0
  Investment securities             260                        276
          Total adjustment          260                        276

 

Cornerstone Bancshares, Inc. and Subsidiary
Loan Stratification
                               2012                2011
(Amounts in thousands)         Fourth        % of  Fourth       % of  % Dollar
                               Quarter       Total Quarter      Total Change
Non-residential real estate
    Owner occupied             $      58,425 21.1  $     62,999 23.5  (7.3)
    Non-owner occupied         66,468        24.0  62,958       23.5  5.6
    Multi-family real estate   8,508         3.1   11,023       4.1   (22.8)
    1-4 family construction    6,937         2.5   5,775        2.2   20.1
    Commercial land and lot    25,551        9.2   18,629       7.0   37.2
development
Total non-residential real     165,889       59.9  161,384      60.3  2.8
estate
Residential real estate
    First mortgage - 1-4       44,145        15.9  41,226       15.4  7.1
family
    Second mortgage - 1-4      3,348         1.2   3,662        1.4   (8.6)
family
    Home equity lines          15,194        5.5   14,632       5.5   3.8
Total residential real estate  62,687        22.6  59,520       22.2  5.3
Total real estate loans        228,576       82.5  220,904      82.5  3.5
Commercial                     38,101        13.8  35,608       13.3  7.0
Agricultural & other           8,378         3.0   8,737        3.3   (4.1)
Consumer                       1,937         0.7   2,516        0.9   (23.0)
Total loans, net of unearned   $   276,992   100.0 $   267,765  100.0 3.4
fees

 

Cornerstone Bancshares, Inc. and Subsidiary
Consolidated Balance Sheets
                                             Unaudited
                                             December 31,     December 31,
                    ASSETS                   2012             2011
Cash and due from banks                      $                $            
                                              1,836,175        1,660,204
Interest-bearing deposits at other financial 54,575,759       37,222,487
institutions
    Total cash and cash equivalents
                                             56,411,934       38,882,691
Securities available for sale                76,096,646       86,057,437
Securities held to maturity (fair value 
    approximates $46,096 in 2012 and $70,484 45,086           68,643
in 2011)
Federal Home Loan Bank stock, at cost        2,322,900        2,322,900
Loans, net of allowance for loan losses of 
    $6,141,281 in 2012 and $7,400,049 in     270,850,465      260,364,569
2011
Bank premises and equipment, net             5,399,340        5,712,003
Accrued interest receivable                  1,213,778        1,327,458
Foreclosed assets                            20,332,313       18,523,960
Other assets                                 7,790,634        9,395,721
              Total Assets                   $                $        
                                              440,463,096      422,655,382
                    LIABILITIES AND
                    STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits          $                $          
                                              57,070,534       43,989,943
Interest-bearing demand deposits             30,178,624       22,353,384
Savings deposits and money market accounts   80,994,239       46,857,118
Time deposits                                173,653,892      200,841,499
                      Total deposits         341,897,289      314,041,944
Accrued interest payable                     120,558          110,703
Federal funds purchased and securities sold
under  
    agreements to repurchase                 19,587,387       29,390,810
Federal Home Loan Bank advances and other    37,175,000       43,045,000
borrowings
Other liabilities                            794,026          858,620
              Total Liabilities              399,574,260      387,447,077
Stockholders' equity:
  Preferred stock - no par value; 2,000,000
shares authorized;
    600,000 and 403,989 shares issued and    14,821,546       9,899,544
outstanding in 2012 and 2011, respectively.
Common stock - $l.00 par value; 20,000,000
shares authorized;
      6,709,199 issued in 2012 and 2011;
      6,500,396 outstanding in 2012 and 2011 6,500,396        6,500,396
Additional paid-in capital                   21,390,486       21,316,438
Retained deficit                             (3,274,986)      (3,627,208)
Accumulated other comprehensive income       1,451,394        1,119,135
              Total Stockholders' Equity     40,888,836       35,208,305
              Total Liabilities and          $                $        
              Stockholders' Equity            440,463,096      422,655,382
The Notes to Consolidated Financial Statements are an integral part of these
statements.

 

Cornerstone
Bancshares, Inc. and
Subsidiary
Consolidated
Statements of Income
                       Unaudited                 Unaudited
                       Three months ended        Twelve months ended
                       December 31,              December 31,
                       2012         2011         2012         2011
INTEREST INCOME
Loans, including fees  $            $            $            $
                        4,717,662    4,437,342    17,288,855   18,128,907
Securities and
interest-bearing       440,187      548,211      2,003,620    2,311,690
deposits at other
financial institutions
Federal funds sold &   16,329       15,542       60,404       53,139
other earning assets
Total interest income  5,174,178    5,001,095    19,352,879   20,493,736
INTEREST EXPENSE
Time deposits          524,794      803,803      2,471,135    3,767,582
Other deposits         147,953      119,854      546,812      424,387
Federal funds
purchased and
securities
    sold under
agreements to          17,209       27,688       94,402       125,538
repurchase
Federal Home Loan Bank
advances and other     391,468      453,756      1,672,478    2,044,361
borrowings
Total interest expense 1,081,424    1,405,101    4,784,827    6,361,868
Net interest income
before provision for   4,092,754    3,595,994    14,568,052   14,131,868
loan losses
Provision for loan     330,000      300,000      430,000      445,000
losses
Net interest income
after provision for    3,762,754    3,295,994    14,138,052   13,686,868
loan losses
NONINTEREST INCOME
Customer service fees  201,144      212,058      803,251      868,935
Net gains from sale of -            -            -            107,413
securities
Net gains from sale of 27,601       47,131       151,710      134,997
loans and other assets
Other noninterest      12,675       14,476       64,519       71,542
income
Total noninterest      241,420      273,665      1,019,480    1,182,887
income
NONINTEREST EXPENSE
Salaries and employee  1,600,177    1,613,574    6,327,226    6,117,063
benefits
Net occupancy and      408,908      313,736      1,447,204    1,431,863
equipment expense
Depository insurance   121,072      254,844      803,902      1,052,591
Foreclosed assets, net 155,507      538,053      1,100,670    1,922,988
Other operating        1,191,695    780,505      3,498,867    3,126,998
expenses
Total noninterest      3,477,359    3,500,712    13,177,869   13,651,503
expenses
Income before
provision for income   526,815      68,947       1,979,663    1,218,252
taxes
Provision (benefit)    156,100      (43,875)     577,600      188,200
for income taxes
Net income             370,715      $            1,402,063    1,030,052
                                    112,822
Preferred stock        375,000      252,493      1,229,780    651,119
dividend requirements
Accretion on preferred 17,845       14,299       63,924       36,718
stock discount
Net (loss) income      $            $            $            $      
available to common    (22,130)     (153,970)    108,359      342,215
shareholders
(LOSS) EARNINGS PER
COMMON SHARE
Basic                  $            $            $            $          
                            -       (0.02)         0.02         0.05
Diluted                $            $            $            $          
                            -       (0.02)         0.02         0.05
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 12
months ended
December 31,
2012
                                                                 Accumulated
                                      Additional                 Other          Total
              Preferred   Common      Paid-in      Retained      Comprehensive  Stockholders'
              Stock       Stock       Capital      Deficit       Income         Equity
BALANCE,      $           $           $            $             $              $      
December 31,  9,899,544    6,500,396   21,316,438   (3,627,208)  1,119,135      35,208,305
2011
   Employee
compensation  -           -           74,048       -             -              74,048
stock option
expense
   Issuance
of Series A
Convertible   4,858,078   -           -            -             -              4,858,078
Preferred
Stock
              0
   Preferred
stock         -           -           -            (985,917)     -              (985,917)
dividends
paid
   Accretion
on preferred  63,924      -           -            (63,924)      -              -
stock
   Net income -           -           -            1,402,063     -              1,402,063
   Other
comprehensive -           -           -            -             332,259        332,259
income, net
of tax
BALANCE,      $           $           $            $             $              $      
December 31,  14,821,546   6,500,396   21,390,486   (3,274,986)  1,451,394      40,888,836
2012
The Notes to Consolidated Financial Statements
are an integral part of these statements.

 

SOURCE Cornerstone Bancshares, Inc.

Website: http://www.cscbank.com
Contact: N. Frank Hughes, President & Chief Executive Officer, +1-423-385-3009
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