EX-99.1 2 a6262833ex991.htm EXHIBIT 99.1

Exhibit 99.1

Cornerstone Bancshares, Inc. Announces 1st Quarter 2010 Financial Results

CHATTANOOGA, Tenn.--(BUSINESS WIRE)--April 23, 2010--Cornerstone Bancshares, Inc. (OTC Bulletin Board: CSBQ) today announced the following:

Cornerstone Bancshares, Inc. (“Cornerstone”) reported positive net income for the first quarter 2010 of $344,000, or $0.5 per diluted share. This represents an increase of 111.8 percent compared to the first quarter of 2009’s loss of $(2.9) million or $(0.45) per share. Cornerstone saw a 12.8 percent increase in its net interest margin driven by top-line interest revenue growth and lower interest expense. Cornerstone added $1.0 million to the loan loss provision to fund identified loan impairments, and this amount represents a decrease compared to the first quarter of 2009. Other growth and performance ratios are included in the attached financial tables.

Total assets increased 16.7 percent to $562.1 million at March 31, 2010, up $80.6 million from $481.5 million at March 31, 2009. Loans totaled $325.9 million as of March 31, 2010, compared with $379.0 million as of March 31, 2009, a decrease of 14.0 percent. The Bank increased its security portfolio to $150.6 million as of March 31, 2010, from $52.3 million as of March 31, 2009, an increase of 190 percent. These changes allowed the Bank to greatly increase the reliability and amount of its liquidity. This was funded with an increase of the Bank’s deposits to $429.2 million as of March 31, 2010 from $349.9 million as of March 31, 2009, an increase of 22.7 percent.

As of March 31, 2010, Cornerstone Community Bank (“Bank”) returned to a well-capitalized status, as a result of the Bank’s reduced risk profile and growth of its total capital account generated by net income for the current quarter.

“Given the aggressive steps we’ve taken over the past year to improve our loan credit quality and to reshape our balance sheet, we’re especially pleased to record a profit this first quarter,” said Cornerstone President and CEO Frank Hughes. “Our directors and officers own more than 20 percent of Cornerstone’s common shares and are fully engaged and invested to keep Cornerstone tracking in the right direction.”

Cornerstone’s allowance for loan losses was $6.8 million or 2.1 percent of total loans as of March 31, 2010, compared to $5.9 million or 1.8 percent as of December 31, 2009. Nonperforming assets were $17.2 million or 3.1 percent of total assets at March 31, 2010, compared to $17.9 million or 3.4 percent at December 31, 2009. Net charge-offs were $160,000 for the first quarter of 2010, compared to $5.6 million for the fourth quarter of 2009. Cornerstone has seen a leveling off of loan deterioration in the Chattanooga, Tennessee MSA and has experienced a slight decrease in non-performing assets.

“In this ever-changing economy, Cornerstone remains steadfast in our commitment to provide exceptional products, service and value for each and every one of our customers,” said Hughes. “These fundamental tenets and our solid earnings footprint will serve as the foundation on which Cornerstone will build, to take full advantage of the opportunities that lie ahead.”

Cornerstone is a one-bank holding company, with $560 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.

First Quarter Financial Highlights

March 31, 2010 and 2009
(Unaudited)
             

(Amounts in thousands, except per share data)

  2010   2009   % Change
Balance Sheet Data at March 31
Total assets $ 562,064 $ 481,545 16.7
Interest-earning assets 533,989 467,568 14.2
Loans 325,948 378,993 (14.0 )
Other real estate owned 8,241 2,476 232.8
Deposits 429,198 349,892 22.7
Interest-bearing liabilities 102,256 95,947 6.6
Shareholders' equity 28,583 33,707 (15.2 )
Loan to deposit ratio 75.94 % 108.32 % (29.9 )
Tier 1 Leverage Ratio (Bank) 5.65 % 7.32 % (22.8 )
Total Risk-Based Capital Ratio (Bank) 10.01 % 10.07 % (0.6 )
Outstanding shares (000s) 6,500 6,500 0.0
Book value per share $ 4.40 $ 5.62 (21.7 )
Tangible book value per share $ 4.00 $ 4.75 (15.8 )
Market value per share as of Mar 31 $ 2.70 $ 4.74 (43.0 )
 
Loan Quality Data
Nonaccruing loans 8,468 $ 8,620 (1.8 )
Loans past due 90 days – accruing - - -
Net charge-offs 160 2,458 (93.5 )
Allowance for loan losses 6,760 12,885 (47.5 )
Allowance for loan losses to total loans 2.07 % 3.40 %
Nonperforming assets to total assets 2.97 % 2.30 %
 
Performance Data for the First Quarter
Net income 344 (2,912 ) 111.8
Return on average assets 0.26 % -2.48 %
Return on average equity 4.80 % -31.54 %
Net interest margin 3.64 % 3.61 %
Per share data:
Net income – basic $ 0.05 $ (0.45 )
Net income – diluted $ 0.05 $ (0.45 )
Dividends $ - $ 0.07
Average shares (000s):
Basic 6,500 6,500
Diluted 6,500 6,500

 

Cornerstone Bancshares Inc.

Loan Loss Allowance and Asset Quality Review

         

2010

2009
First Fourth Third Second First
(Amounts in thousands)   Quarter   Quarter   Quarter   Quarter   Quarter
 
Allowance for loan losses
Balance at beginning of period $ 5,905 $ 7,398 $ 7,383 $ 12,885 $ 9,618
Provision for loan losses 1,015 4,150 3,390 1,634 5,725
Net charge-offs   $ (160 )   $ (5,643 )   $ (3,375 )   $ (7,136 )   $ (2,458 )
Balance at end of period   $ 6,760     $ 5,905     $ 7,398     $ 7,383     $ 12,885  
 
As a % of loans 2.07 % 1.75 % 2.12 % 2.05 % 3.40 %
As a % of nonperforming loans 79.83 % 80.24 % 91.47 % 55.11 % 149.48 %
As a % of nonperforming assets 39.34 % 32.98 % 46.58 % 40.21 % 113.50 %
 
Net charge-offs as a % of loans (a) 0.20 % 6.70 % 3.87 % 7.92 % 2.59 %
 
Risk element assets
Nonaccruing loans $ 8,468 $ 7,360 $ 8,088 $ 13,397 $ 8,620
Loans past due 90 days – accruing     -       -       -       -       -  
Total nonperforming loans 8,468 7,360 8,088 13,397 8,620
Repossessed assets 473 217 98 181 256
Other real estate owned     8,241       10,327       7,695       4,783       2,476  
Total nonperforming assets   $ 17,183     $ 17,904     $ 15,881     $ 18,361     $ 11,352  
 
Loans past due 30-89 days $ 6,588 $ 5,027 $ 19,062 $ 9,636 $ 9,224
 
Nonperforming loans as a % of loans 2.60 % 2.19 % 2.32 % 3.71 % 2.27 %

Nonperforming assets as a % of loans and other real estate owned

5.14 % 5.16 % 4.45 % 5.02 % 2.98 %
 
Total Loans 325,948 336,692 349,050 360,615 378,993
 
(a) Annualized

 

Cornerstone Bancshares Inc.

Net Interest Margin Analysis

Taxable Equivalent Basis

 

Three months ended

March 31
(Amounts in thousands)                      
Assets 2010   2009
Average   Income/   Yield/ Average   Income/   Yield/
Earning assets: Balance   Expense   Rate Balance   Expense   Rate
Loans, net of unearned income $ 330,024 $ 5,948 7.31 % $ 383,739 $ 6,442 6.73 %
Investment securities 134,834 1,129 3.62 % 53,082 414 3.58 %
Other earning assets   45,528     24 0.21 %   13,960     8 0.00 %
Total earning assets 510,386 $ 7,101 5.70 % 450,781 $ 6,864 6.16 %
Allowance for loan losses (5,993 ) (9,138 )
Cash and other assets   29,919     28,419  
TOTAL ASSETS $ 534,312   $ 470,062  
 
Liabilities and Shareholder's Equity
 
Interest bearing liabilities:
Interest bearing demand deposits $ 27,908 $ 30 0.44 % $ 28,823 $ 26 0.36 %
Savings deposits 8,727 11 0.51 % 7,818 10 0.50 %
MMDA's 23,718 57 0.97 % 33,056 80 0.97 %
Time deposits of $100,000 or more 79,714 427 2.17 % 59,628 529 3.56 %
Time deposits of $100,000 or less 227,320 1,257 2.24 % 165,618 1,466 3.55 %

Federal funds purchased and securities sold under agreements to repurchase

23,637 35 0.61 % 24,550 54 0.88 %
Other borrowings   72,306     779 4.37 %   71,433     706 3.96 %
Total interest bearing liabilities 463,330   2,596 2.27 % 390,926   2,871 2.95 %
Net interest spread $ 4,505 3.43 % $ 3,993 3.22 %
Noninterest bearing demand deposits 48,211 43,064
Accrued expenses and other liabilities (5,897 ) (854 )
Shareholders' equity 28,669 36,926
TOTAL LIABILITIES AND    
SHAREHOLDERS' EQUITY $ 534,312   $ 470,062  
Net yield on earning assets 3.64 % 3.61 %
 
Taxable equivalent adjustment:
Loans 0 0
Investment securities   74   60
Total adjustment   74   60

 

Cornerstone Bancshares Inc.

Quarterly Earnings Summary

   

(Unaudited)

2010

  2009   Q1-10 /

First

Fourth   Third   Second  

First

Q1-09
 

Quarter

  Quarter   Quarter   Quarter  

Quarter

  % Chg

Interest Income

Loans, including fees

$

5,948

$ 5,907 $ 6,018 $ 6,035 $ 6,442 (7.7 )
Investment securities

1,129

683 358 386 397 184.5
Other  

24

    20       30       7       25   (5.7 )
Total interest income  

7,101

      6,610       6,406       6,428       6,864   3.5

Interest expense

Deposits

1,782

2,075 1,971 1,979 2,111 (15.6 )
Short-term borrowings

128

- 108 125 73 74.7
FHLB advances  

687

      687       687       687       687   0.0
Total interest expense  

2,596

      2,762       2,766       2,791       2,871   (9.6 )

Net interest income

4,505

3,848 3,640 3,637 3,993 12.8
Provision for loan losses  

1,015

      4,150       3,390       1,634       5,725   (82.3 )

Net interest income after the provision for loan losses

 

3,490

      (302 )     250       2,003       (1,732 ) (301.5 )
Noninterest income
Customer Service Fees

342

370 417 435 408 (16.2 )
Other non-interest income

31

28 29 52 28 9.8
(Loss) on sale of assets

(53

)

(1,035 ) (262 ) (150 ) (173 ) (69.6 )
Gain on sale of securities  

-

      -       -       394       -   NM
Total noninterest income  

320

      (637 )     184       730       263   21.7
Noninterest expense
Salaries and employee benefits

1,633

1,642 1,623 1,848 1,857 (12.0 )
Net Occupancy and equipment

355

371 383 388 407 (12.7 )
Other operating expense  

1,328

      1,918       1,274       1,537       1,029   29.0
Total noninterest expense  

3,316

      3,931       3,279       3,773       3,293   0.7
Income (loss) before income taxes

493

(4,870 ) (2,845 ) (1,040 ) (4,761 ) NM
Income tax (benefit) expense  

150

      (1,904 )     (1,145 )     (437 )     (1,850 ) NM
Net income (loss)

$

344

    $ (2,965 )   $ (1,700 )   $ (603 )   $ (2,911 ) NM
Net income (loss) per share:
Basic

$

0.05

   

$

(0.46

)

  $ (0.26 )   $ (0.09 )   $ (0.45 ) NM
Diluted

$

0.05

    $ (0.46 )   $ (0.26 )   $ (0.09 )   $ (0.45 ) NM

Average basic shares (000s)(1)

6,500

6,500 6,500 6,500 6,500 0.1

Average diluted shares (000s)(1)

6,500

6,500 6,500 6,500 6,500 (0.2 )
Performance Ratios
Return on average equity

4.80

%

-38.13 % -20.71 % -7.12 % -31.54 % NM
Return on average assets 0.26 % -2.28 % -1.39 % -0.52 % -2.48 % NM
Net interest margin

3.64

%

3.24 % 3.18 % 3.35 % 3.61 % (9.2 )
Average equity

28,669

31,104 32,838 33,857 36,926 3.4
Average assets

534,312

519,520 488,870 459,645 470,062 7.3
Average interest-earning assets

510,386

499,047 454,058 438,461 450,781 5.7
 
NM=Not Material

(1) The 2009 average number of common shares outstanding have been retroactively adjusted to reflect two stock dividends that occurred during 2009.


         

Cornerstone Bancshares Inc.

Loan Stratification

 

2010

2009

(Amounts in thousands) First % of First % of % Dollar
    Quarter   Total   Quarter   Total   Change
Non-residential real estate
Owner occupied $ 76,016 23.3 $ 85,015 22.4 (10.6 )
Non-owner occupied 74,690 22.9 67,166 17.7 11.2
Multi-family real estate 13,172 4.0 15,764 4.2 (16.4 )
Construction 6,318 1.9 14,886 3.9 (57.6 )
Commercial land and lot development     33,121   10.2     53,005   14.0   (37.5 )
Total non-residential real estate     203,317   62.4     235,836   62.2   (13.8 )
Residential real estate
Owner-occupied – 1-4 family 48,351 14.8 44,833 11.8 7.8
Home equity lines     10,073   3.1     13,381   3.5   (24.7 )
Total residential real estate     58,424   17.9     58,214   15.4   0.4  
Total real estate loans 261,741 80.3 294,050 77.6 (11.0 )
 
Commercial 54,814 16.8 77,017 20.3 (28.8 )
Agricultural & other 6,013 1.8 2,564 0.7 134.5
Consumer     3,380   1.0     5,362   1.4   (37.0 )
Total loans, net of unearned fees   $ 325,948   100.0   $ 378,993   100.0   (14.0 )

   

Cornerstone Bancshares Inc.

Consolidated Balance Sheets

 
Unaudited
March 31 December 31,
ASSETS 2010 2009
 
Cash and due from banks $ 55,068,317 $ 38,202,205  
Cash and cash equivalents 55,068,317 38,202,205
 
Securities available for sale 150,520,500 124,415,318
Securities held to maturity 129,150 135,246
Federal Home Loan Bank stock, at cost 2,322,900 2,229,200

Loans, net of allowance for loan losses of $6,760,484 at March 31, 2010 and $5,905,054 at December 31, 2009

319,187,929 330,787,382
Bank premises and equipment, net 7,783,678 8,098,059
Accrued interest receivable 1,981,123 1,520,699
Goodwill and amortizable intangibles 2,575,753 2,579,211
Foreclosed assets 8,240,322 10,327,297
Other assets   14,254,948   14,109,769  

Total Assets

$ 562,064,620 $ 532,404,386  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Deposits:
Noninterest-bearing demand deposits $ 46,844,104 $ 41,971,956
Interest-bearing demand deposits 38,594,782 26,533,329
Savings deposits and money market accounts 31,191,149 31,029,587
Time deposits of $100,000 or more 115,386,130 91,064,094
Time deposits of less than $100,000   197,181,620   214,143,147  
Total deposits 429,197,785 404,742,113

Federal funds purchased and securities sold under agreements to repurchase

29,956,284 26,321,885
Federal Home Loan Bank advances and line of credit 72,300,000 72,350,000
Accrued interest payable 387,987 351,360
Other liabilities   1,639,667   801,549  
Total Liabilities   533,481,723   504,566,907  
 
Stockholders' Equity

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

- -

Common stock - $1.00 par value; 10,000,000 shares authorized; 6,709,199 issued in 2010 and 2009; 6,500,396 outstanding in 2010 and 2009

6,500,396 6,500,396
Additional paid-in capital 21,181,339 21,162,686
Retained earnings 768,641 424,854
Accumulated other comprehensive income   132,521   (250,457 )
Total Stockholders' Equity   28,582,897   27,837,479  
Total Liabilities and Stockholders' Equity $ 562,064,620 $ 532,404,386  

 

Cornerstone Bancshares Inc.

Consolidated Statements of Income

     
Unaudited
Three months ended
March 31
2010 2009

INTEREST INCOME

Loans, including fees $ 5,948,246 $ 6,442,106
Investment securities 1,129,279 396,958
Federal funds sold & other earning assets   23,661     25,051  
Total interest income   7,101,186     6,864,115  
 
INTEREST EXPENSE
Time deposits of more than $100,000 546,026 529,176
Other deposits 1,235,724 1,581,615

Federal funds purchased and securities sold under agreements to repurchase

35,415 54,049
Other borrowings   779,197     705,836  
Total interest expense   2,596,362     2,870,676  
 
Net interest income before provision for loan losses 4,504,824 3,993,439
Provision for loan losses   1,015,000     5,725,000  
Net interest income / (loss) after the provision for loan losses   3,489,824     (1,731,561 )
 
NONINTEREST INCOME
Customer service fee 341,914 408,143

Other noninterest income

30,922 28,174
Net (losses) from sale of loans and other assets   (52,691 )   (173,203 )
Total noninterest income   320,145     263,114  
 
NONINTEREST EXPENSE
Salaries and employee benefits 1,633,344 1,856,560
Net occupancy and equipment expense 355,183 406,700
Depository insurance 247,337 61,726
Other operating expense   1,080,617     967,757  
Total noninterest expense   3,316,481     3,292,743  
 
Income / (loss) before provision for income taxes 493,488 (4,761,190 )
Provision for income taxes   149,701     (1,849,687 )
 
NET INCOME / (LOSS) $ 343,787   $ (2,911,503 )
 
EARNINGS / (LOSS) PER COMMON SHARE

Basic net income / (loss) per common share

$ 0.05 $ (0.45 )
Diluted net income / (loss) per common share $ 0.05 $ (0.45 )
 
DIVIDENDS DECLARED PER COMMON SHARE $ - $ 0.07

 

Cornerstone Bancshares Inc.

Consolidated Statement of Changes in Stockholders' Equity - Unaudited

For the three months ended March 31, 2010
           
Additional Other Total
Comprehensive Common Paid-in Retained Comprehensive Stockholders'
Income Stock Capital Earnings Income Equity
 
BALANCE, December 31, 2009 $ 6,500,396 $ 21,162,686 $ 424,854 $ (250,457 ) $ 27,837,479

Employee compensation stock option expense

- 18,653 - - 18,653
Comprehensive income
Net income $ 343,787 - - 343,787 - 343,787
Other comprehensive income, net of tax:

Unrealized holding gains on securities available for sale, net of reclassification adjustment

382,978 - - - 382,978 382,978
Total comprehensive income $ 726,765
BALANCE, March 31, 2010 $ 6,500,396 $ 21,181,339 $ 768,641 $ 132,521   $ 28,582,897

CONTACT:
Cornerstone Bancshares, Inc.
Frank Hughes, President and CEO, 423-385-3009