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

PR Newswire

CHATTANOOGA, Tenn., Oct. 21, 2013 /PRNewswire/ -- Cornerstone Bancshares, Inc. ("Cornerstone"; OTC Bulletin Board: CSBQ; CSBQP), holding company of Cornerstone Community Bank ("Bank"), today announced net income of $429,000 for the third quarter of 2013. This marks the eleventh consecutive quarter of positive earnings for Cornerstone and an increase of 17.9 percent from net income of $364,000 for the same quarter of 2012.  Net income for the year increased 23.9 percent from $1,031,000 in 2012 to $1,277,000 in 2013 at quarter-end.

Quarterly financial highlights year-over-year include:

  • 17.9% increase in net income
  • 9.2% increase in net interest income
  • 3.8% increase in total loans
  • 33.3% decrease in Other Real Estate Owned (OREO)
  • 37.3% decrease in total nonperforming assets

"We continue to make steady, gradual progress in nearly all sectors of the Bank," said Cornerstone's President and Chief Executive Officer Frank Hughes.  "We are especially pleased with the significant reduction of OREO and related expenses," he said. "The key to the Bank's success is the disposition of our nonperforming assets."

Based on positive earnings in preceding quarters, Cornerstone continued paying its quarterly Preferred Stock dividend.  The most recent payment, made on August 22, 2013, marks the tenth consecutive quarterly dividend payment since the new security was issued in the third quarter of 2010.  As of December 31, 2012, Cornerstone had sold all 600,000 shares of the convertible, preferred stock, successfully raising $15 million in new capital and refortifying its capital foundation for the future.

"Cornerstone is in a solid position to grow and thrive right along with the Chattanooga community," said Cornerstone's Chairman Miller Welborn.  "We will continue to keep a laser-sharp focus on smart business fundamentals and taking care of our customers, employees and shareholders."

Founded in 1996, Cornerstone is a single-bank holding company, with $430 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




Third Quarter Financial Highlights






September 30, 2013 and 2012






(Unaudited)












(Amounts in thousands, except per common share data)

2013


2012


% Change

Balance Sheet Data at September 30






Total assets

$   429,681


$    425,179


1.1

Interest-earning assets

400,929


391,685


2.4

Loans

284,181


273,820


3.8

Foreclosed assets

14,924


22,376


(33.3)

Deposits

340,756


328,963


3.6

Other interest-bearing liabilities

47,249


56,555


(16.5)

Shareholders' equity

40,150


38,128


5.3

Loan to deposit ratio

83.40%


83.24%


0.2

Tier 1 leverage ratio (Bank, est)

8.45%


8.30%


1.8

Total risk-based capital ratio (Bank, est)

12.91%


12.84%


0.5

Outstanding common shares 

6,547


6,500


0.7

Book value per common share

$         3.86


$          3.99


(3.3)

Tangible book value per common share

$         3.86


$          3.99


(3.3)

Market value per common share as of September 30

$         2.45


$          1.95


25.6







Loan Quality Data






Nonaccruing loans

4,095


7,971


(48.6)

Loans past due 90 days – accruing

-


-


-

Net charge-offs YTD

3,282


2,220


47.8

Allowance for loan losses

3,159


5,280


(40.2)

Allowance for loan losses to total loans

1.11%


1.93%



Nonperforming assets to total assets

4.43%


7.14%









Performance Data for the Year






Net income 

$       1,277


$        1,031


23.8

Return on average assets

0.40%


0.33%



Return on average equity

4.17%


3.77%



Net interest margin

3.81%


3.73%



Per common share data:






Net income – basic

$         0.01


$          0.02



Net income – diluted

$         0.01


$          0.02



Common dividends

$               -


$                -



Preferred dividends & accretion per common 

$         0.18


$          0.14



Average shares (000s):






Basic common stock

6,547


6,500



Diluted common stock

6,675


6,559



Preferred stock (actual)

600


494









 

Cornerstone Bancshares, Inc. and Subsidiary





Quarterly Earnings Summary

















(Unaudited)






2013


2012

Q3-13 /


Third

Second

First


Fourth

Third

Q3-12

(Amounts in thousands)

Quarter

Quarter

Quarter


Quarter

Quarter

% Chg

Interest income








Loans, including fees

$ 4,294

$ 4,079

$ 4,142


$  4,718

$   4,242

1.2

Securities and interest-bearing deposits at other financial institutions

457

482

440


440

478

(4.4)

Federal funds sold and other earning assets

10

15

21


16

15

(36.7)

    Total interest income

4,760

4,576

4,603


5,174

4,735

0.5

Interest expense








Deposits

563

587

603


673

756

(25.6)

Short-term borrowings

21

17

18


17

22

(2.1)

FHLB advances and other borrowing

285

316

341


391

394

(27.7)

    Total interest expense

869

920

962


1,081

1,172

(25.8)

Net interest income

3,891

3,656

3,641


4,093

3,563

9.2

Provision for losses

-

-

300


330

100

(100.0)

Net interest income after the








  provision for loan losses

3,891

3,656

3,341


3,763

3,463

12.4

Noninterest income








Customer service fees

218

202

188


201

198

10.3

Other noninterest income

13

19

18


13

12

4.2

Gain on sale of assets

39

477

149


27

48

(18.7)

    Total noninterest income

270

698

355


241

258

4.6

Noninterest expense








Salaries and employee benefits

1,619

1,623

1,597


1,600

1,566

3.4

Net occupancy and equipment

334

340

337


408

355

(6.0)

Depository insurance

162

161

160


121

237

(31.7)

Foreclosed asset expense (1)

382

798

129


156

314

21.6

Other operating expense

967

780

752


1,192

731

32.3

    Total noninterest expense

3,464

3,702

2,975


3,477

3,203

8.1

Income before income taxes

698

652

721


527

518

34.7

Income tax expense

268

256

269


156

154

73.8

Net income

$    429

$    396

$    452


$     371

$      364

18.1









Preferred stock dividends & accretion on preferred stock discount

393

393

393


393

325

20.8









Net income available to common 

36

3

59


(22)

39

(6.6)









Net income per common share:








  Basic

$   0.01

$   0.00

$   0.01


$        -

$     0.01

-

  Diluted

$   0.01

$   0.00

$   0.01


$        -

$     0.01

-

Average basic shares 

6,547

6,547

6,547


6,500

6,500

0.7

Average common diluted shares 

6,693

6,671

6,671


6,503

6,503

2.9

Performance Ratios








Return on average equity

4.25%

4.22%

4.40%


3.81%

3.88%

9.7

Return on average assets

0.40%

0.38%

0.42%


0.35%

0.35%

14.6

Net interest margin

3.89%

3.70%

3.79%


4.21%

3.70%

5.2

Average equity

40,382

37,501

41,135


38,926

37,501

7.7

Average assets

431,068

418,443

426,827


420,608

418,443

3.0

Average interest-earning assets

400,539

389,458

395,921


391,197

389,458

2.8









(1) Includes OREO adjustments to fair value







 

Cornerstone Bancshares, Inc. and Subsidiary




Loan Loss Allowance and Asset Quality Review












2013


2012


Third

Second

First 


Fourth 

Third

(Amounts in thousands)

Quarter

Quarter

Quarter


Quarter

Quarter








Allowance for loan losses







Balance at beginning of period

$   5,095

$   5,669

$    6,141


$   5,280

$   6,029

Provision for loan losses

-

-

300


330

100

Net charge-offs

(1,936)

(574)

(772)


531

(849)

Balance at end of period

$   3,159

$   5,095

$    5,669


$   6,141

$   5,280








As a % of loans

1.11%

1.85%

2.08%


2.22%

1.93%

As a % of nonperforming loans

77.13%

74.02%

89.07%


102.24%

66.26%

As a % of nonperforming assets

16.61%

19.79%

20.60%


23.32%

17.40%








Net charge-offs as a % of  loans (a)

2.73%

0.83%

1.13%


-0.77%

1.24%








Risk element assets







Accruing troubled debt restructured

$   3,121

$   3,465

$    5,442


$   5,316

$   5,328

Loans past due 30-89 days

$   1,659

$   5,111

$    4,032


$   6,594

$   3,819








Nonaccruing loans

$   4,095

$   5,864

$    6,364


$   6,005

$   7,971

Loans past due 90 days – accruing

-

-

-


-

-

Total nonperforming loans

$   4,095

$   6,883

$    6,364


$   6,005

$   7,971

Foreclosed assets (b)(c)

$ 14,924

$ 18,867

$  21,159


$ 20,300

$ 22,376

Total nonperforming assets

19019.225

25750

27523.24


26337

30347















Nonperforming loans as a % of loans

1.44%

2.49%

2.33%


2.17%

2.91%

Nonperforming assets as a % of loans







   and other real estate owned

6.36%

8.73%

9.37%


8.86%

10.25%








Total loans

284,181

276,062

272,550


276,992

273,820








(a) Annualized


(b) Properties sold during 3rd Q 2013

$     3,753






(c) Properties under contract to sell 

$     1,196






 

 

Cornerstone Bancshares, Inc. and Subsidiary





Net Interest Margin Analysis




Taxable Equivalent Basis




Three months ended


September 30

(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

$       281,341


$       4,294


6.05%


$     270,109


$       4,241


6.23%

Investment securities

104,261


457


1.89%


91,889


478


2.36%

Other earning assets

14,937


9


0.24%


27,460


16


0.23%

  Total earning assets

400,539


$       4,760


4.75%


389,458


$       4,735


4.89%

Allowance for loan losses

(3,933)






(5,892)





Cash and other assets

34,462






34,878





TOTAL ASSETS

$       431,068






$     418,443

















Liabilities and Shareholders' Equity
























Interest-bearing liabilities:












Interest-bearing demand deposits

$         25,388


$            10


0.16%


$       26,357


$            21


0.32%

Savings deposits

12,858


7


0.22%


10,702


10


0.36%

MMDA's

78,715


100


0.50%


56,761


114


0.79%

Time deposits 

166,401


445


1.06%


189,882


612


1.28%

Federal funds purchased and securities












  sold under agreements to repurchase

25,102


22


0.34%


19,471


22


0.45%

Federal Home Loan Bank and other borrowings

29,012


285


3.90%


37,336


394


4.19%

  Total interest-bearing liabilities

337,476


869


1.02%


340,509


1,173


1.37%

Net interest spread



$       3,891


3.73%




$       3,562


3.53%

Noninterest-bearing demand deposits

51,727






40,722





Accrued expenses and other liabilities

1,483






(288)





Shareholders' equity

40,382






37,501





TOTAL LIABILITIES AND












  SHAREHOLDERS' EQUITY

$       431,068






$     418,443





Net yield on earning assets





3.89%






3.70%













Taxable equivalent adjustment:












  Loans



0






0



  Investment securities



39






69



          Total adjustment



39






69



 

 

Cornerstone Bancshares, Inc. and Subsidiary





Net Interest Margin Analysis





Taxable Equivalent Basis





Nine months ended


September 30

(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

$   276,606


$      12,515


6.05%


$     266,187


$       12,571


6.31%

Investment securities

97,786


1,379


2.10%


91,827


1,563


2.58%

Other earning assets

23,232


45


0.26%


25,535


44


0.23%

  Total earning assets

397,624


$      13,939


4.74%


383,549


$       14,179


5.02%

Allowance for loan losses

(5,053)






(6,345)





Cash and other assets

36,808






35,968





TOTAL ASSETS

$   429,379






$     413,172

















Liabilities and Shareholders' Equity
























Interest-bearing liabilities:












Interest-bearing demand deposits

$     26,477


$             46


0.23%


$       26,526


$              65


0.33%

Savings deposits

12,235


22


0.24%


10,317


29


0.37%

MMDA's

76,729


319


0.56%


47,625


305


0.86%

Time deposits 

167,406


1,366


1.09%


191,378


1,946


1.36%

Federal funds purchased and securities












  sold under agreements to repurchase

22,330


56


0.34%


22,309


77


0.46%

Federal Home Loan Bank and other borrowings

31,142


941


4.04%


39,990


1,281


4.28%

  Total interest-bearing liabilities

336,319


2,750


1.09%


338,145


3,703


1.46%

Net interest spread



$      11,189


3.65%




$       10,475


3.55%

Noninterest-bearing demand deposits

50,338






38,684





Accrued expenses and other liabilities

1,865






(163)





Shareholders' equity

40,857






36,507





TOTAL LIABILITIES AND












  SHAREHOLDERS' EQUITY

$   429,379






$     413,172





Net yield on earning assets





3.81%






3.73%













Taxable equivalent adjustment:












  Loans



0






0



  Investment securities



156






212



          Total adjustment



156






212



 

 

Cornerstone Bancshares, Inc. and Subsidiary




Loan Stratification













2013


2012



(Amounts in thousands)

Third 

% of

Third

% of

% Dollar

Quarter

Total

Quarter

Total

Change

Non-residential real estate






    Owner occupied

$      66,143

23.3

$     61,229

22.4

8.0

    Non-owner occupied

66,454

23.4

65,501

23.9

1.5

    Multi-family real estate

8,295

2.9

8,626

3.2

(3.8)

    1-4 family construction

9,865

3.5

6,305

2.3

56.5

    Commercial land and lot development

23,162

8.1

21,767

7.9

6.4

Total non-residential real estate

173,919

61.2

163,428

59.7

6.4

Residential real estate






    First mortgage - 1-4 family

43,776

15.4

43,454

15.9

0.7

    Second mortgage - 1-4 family

2,028

0.7

3,138

1.1

(35.4)

    Home equity lines

15,847

5.6

15,832

5.8

0.1

Total residential real estate

61,651

21.7

62,424

22.8

(1.2)

Total real estate loans

235,570

82.9

225,852

82.5

4.3







Commercial

38,095

13.4

38,196

13.9

(0.3)

Agricultural & other

8,381

2.9

7,533

2.8

11.3

Consumer

2,135

0.8

2,239

0.8

(4.6)

Total loans, net of unearned fees

$   284,181

100.0

$   273,820

100.0

3.8

 

Cornerstone Bancshares, Inc. and Subsidiary




Consolidated Balance Sheets






















Unaudited







September 30,


December 31,




ASSETS

2013


2012








Cash and due from banks

$     2,148,352


$     3,222,139

Interest-bearing deposits at other financial institutions

19,106,638


56,173,099



Total cash and cash equivalents

21,254,990


59,395,238








Securities available for sale

95,282,416


76,096,646

Securities held to maturity (fair value approximates





$37,589 and $46,212 at September 30, 2013 and December 31, 2012, respectively)

36,620


45,086

Federal Home Loan Bank stock, at cost

2,322,900


2,322,900

Loans, net of allowance for loan losses of





$3,158,766 and $6,141,281 at September 30, 2013 and December 31, 2012, respectively

281,021,767


270,850,465

Bank premises and equipment, net

5,094,668


5,399,340

Accrued interest receivable

1,221,841


1,213,778

Foreclosed assets

14,923,933


20,332,313

Other assets


8,522,148


7,790,634




     Total assets

$ 429,681,283


$ 443,446,400











LIABILITIES AND STOCKHOLDERS' EQUITY











Deposits:






Noninterest-bearing demand deposits

$   54,452,293


$   60,053,838

Interest-bearing demand deposits

25,463,874


30,178,624

Savings deposits and money market accounts

90,665,979


80,994,239

Time deposits

170,174,142


173,653,892




Total deposits

340,756,288


344,880,593








Accrued interest payable

100,129


120,558

Federal funds purchased and securities sold under





agreements to repurchase

20,508,655


19,587,387

Federal Home Loan Bank advances and other borrowings

26,740,000


37,175,000

Other liabilities

1,426,357


794,026




Total liabilities

389,531,429


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

14,875,081


14,821,546

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





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

21,517,620


21,390,486

Accumulated deficit

(3,110,707)


(3,274,986)

Accumulated other comprehensive income

320,786


1,451,394




Total stockholders' equity

40,149,854


40,888,836




Total liabilities and stockholders' equity

$ 429,681,283


$ 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


Unaudited


Three months ended


Nine months ended


September 30,


September 30,


2013


2012


2013


2012

INTEREST INCOME








Loans, including fees

$ 4,293,583


$ 4,241,492


$  12,514,688


$    12,571,193

Investment securities

457,299


478,172


1,379,322


1,563,433

Federal funds sold & other earning assets

9,510


15,647


45,515


44,075

Total interest income

4,760,392


4,735,311


13,939,525


14,178,701









INTEREST EXPENSE








Time deposits

445,397


612,286


1,365,993


1,946,341

Other deposits

117,327


144,157


386,791


398,859

Federal funds purchased and securities








    sold under agreements to repurchase

21,435


21,889


56,258


77,193

Federal Home Loan Bank advances and other borrowings

284,882


394,066


941,269


1,281,010

Total interest expense

869,041


1,172,398


2,750,311


3,703,403









Net interest income before provision for loan losses

3,891,351


3,562,913


11,189,214


10,475,298

Provision for losses

-


100,000


300,000


100,000

Net interest income after provision for loan losses

3,891,351


3,462,913


10,889,214


10,375,298









NONINTEREST INCOME








Customer service fees

218,304


197,509


608,087


602,107

Net gains from sale of securities

-


-


424,971


-

Net gains from sale of loans and other assets

39,164


48,199


240,746


124,109

Other noninterest income

12,500


12,944


48,968


51,844

Total noninterest income

269,968


258,652


1,322,772


778,060









NONINTEREST EXPENSE








Salaries and employee benefits

1,619,030


1,566,359


4,838,822


4,727,049

Net occupancy and equipment expense

333,850


354,555


1,011,335


1,038,296

Depository insurance

161,956


236,927


482,920


682,830

Foreclosed assets, net

381,847


314,088


1,308,995


945,163

Other operating expenses

967,888


731,090


2,500,107


2,307,172

Total noninterest expenses

3,464,571


3,203,019


10,142,179


9,700,510









Income before provision for income taxes

696,748


518,546


2,069,807


1,452,848

Provision for income taxes

268,200


154,300


793,100


421,500









Net income

428,548


364,246


1,276,707


1,031,348









Preferred stock dividend requirements

375,000


308,893


1,125,000


854,780

Accretion on preferred stock discount

17,845


16,370


53,535


46,079









Net income available to common shareholders

$      35,703


$      38,983


$         98,172


$         130,489









EARNINGS PER COMMON SHARE








Basic

$          0.01


$          0.01


$             0.01


$               0.02

Diluted

$          0.01


$          0.01


$             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 nine months ended September 30, 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

-


-


96,793


-


-


$          96,793













   Issuance of common stock

-


46,678


30,341


-


-


$          77,019













   Preferred stock dividends 

-


-


-


(1,058,893)


-


$   (1,058,893)













   Accretion on preferred stock

53,535


-


-


(53,535)


-


-













   Net income

-


-


-


1,276,707


-


$     1,276,707













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












-


-


-


-


(1,130,608)


$   (1,130,608)

























BALANCE, September 30, 2013

$ 14,875,081


$ 6,547,074


$ 21,517,620


$  (3,110,707)


$           320,786


$   40,149,854













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





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