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

PR Newswire

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.



















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