Cornerstone Bancshares, Inc. Reports Positive Earnings for First Quarter of 2014

CHATTANOOGA, Tenn., April 28, 2014 /PRNewswire/ -- Cornerstone Bancshares, Inc. (OTCBB: CSBQ; CSBQP), parent company of Cornerstone Community Bank, today reported net income of $412,000 for the first quarter of 2014. This marks the thirteenth consecutive quarter of positive earnings for Cornerstone.

First Quarter Financial Highlights for March 31, 2014, Compared to March 31, 2013:

  • 7.5% increase in loans
  • 24.9% reduction in non-accruing loans
  • 1.4% increase in deposits
  • 40.6% reduction in foreclosed assets
  • 11.8% increase in market value per common share

"We continue to make great strides in strengthening the Bank and its solid earnings footprint," said Cornerstone's President and CEO Frank Hughes. "With a significant reduction in OREO, combined with strong growth in loans and deposits, Cornerstone can focus on our core competency of serving our local market and being Chattanooga's premier community bank."

Cornerstone is a single-bank holding company, with approximately $430 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

First Quarter Financial Highlights

March 31, 2014 and 2013

(Unaudited)








(Amounts in thousands, except per common share data)


2014


2013


% Change

Balance Sheet Data at March 31







Total assets


$   429,044


$    431,710


(0.6)

Interest-earning assets


403,553


396,867


1.7

Loans


292,952


272,550


7.5

Foreclosed assets


12,559


21,159


(40.6)

Deposits


341,725


336,903


1.4

Other interest-bearing liabilities


45,663


52,890


(13.7)

Shareholders' equity


40,696


40,887


(0.5)

Loan to deposit ratio


85.73%


80.90%


6.0

Tier 1 leverage ratio (Bank, est)


8.87%


8.64%


2.7

Total risk-based capital ratio (Bank, est)


13.11%


13.29%


(1.4)

Outstanding common shares 


6,627


6,547


1.2

Book value per common share


$         3.89


$          3.98


(2.2)

Tangible book value per common share


$         3.89


$          3.98


(2.2)

Market value per common share as of March 31


$         2.46


$          2.20


11.8








Loan Quality Data







Nonaccruing loans


4,779


6,364


(24.9)

Loans past due 90 days – accruing


-


-


-

Net charge-offs YTD


357


772


(53.8)

Allowance for loan losses


3,011


5,669


(46.9)

Allowance for loan losses to total loans


1.03%


2.08%



Nonperforming assets to total assets


4.04%


6.37%










Performance Data for the Year







Net income 


$          412


$           452


(8.8)

Return on average assets


0.39%


0.42%



Return on average equity


4.08%


4.40%



Net interest margin


3.90%


3.79%



Per common share data:







Net income – basic


$               -


$          0.01



Net income – diluted


$               -


$          0.01



Common dividends


$               -


$                -



Preferred dividends & accretion per common 


$          393


$           393



Average shares (000s):







Basic common stock


6,627


6,547



Diluted common stock


6,714


6,671



Preferred stock (actual)


600


600



 


Cornerstone Bancshares, Inc. and Subsidiary

Quarterly Earnings Summary






(Unaudited)





2014


2013

Q1-14 /



First


Fourth 

Third

Second

First

Q1-13

(Amounts in thousands)


Quarter


Quarter

Quarter

Quarter

Quarter

% Chg

Interest income









Loans, including fees


$     4,096


$     4,190

$     4,294

$    4,079

$  4,142

(1.1)

Securities and interest-bearing deposits at

other financial institutions


431


315

457

482

440

(2.2)

Federal funds sold and other earning assets


7


8

10

15

21

(66.5)

    Total interest income


4,533


4,513

4,761

4,576

4,603

(1.5)

Interest expense









Deposits


443


487

563

587

603

(26.6)

Short-term borrowings


19


18

21

17

18

3.7

FHLB advances and other borrowing


261


267

285

316

341

(23.3)

    Total interest expense


723


772

869

920

962

(24.9)

Net interest income


3,811


3,741

3,892

3,656

3,641

4.7

Provision for losses


165


-

-

-

300

(45.0)

Net interest income after the









  provision for loan losses


3,646


3,741

3,892

3,656

3,341

9.1

Noninterest income









Customer service fees


189


213

218

202

188

0.5

Other noninterest income


12


13

13

19

18

(33.3)

Gain on sale of assets


121


391

39

477

149

(18.8)

    Total noninterest income


322


617

270

698

355

(9.3)

Noninterest expense









Salaries and employee benefits


1,827


1,716

1,619

1,623

1,597

14.4

Net occupancy and equipment


309


324

334

340

337

(8.3)

Depository insurance


155


162

162

161

160

(3.2)

Foreclosed asset expense (1)


349


693

382

798

129

170.5

Other operating expense


661


810

967

780

752

(12.1)

    Total noninterest expense


3,301


3,705

3,464

3,702

2,975

10.9

Income before income taxes


667


653

698

652

721

(7.5)

Income tax expense


255


250

268

256

269

(5.4)

Net income


$         412


$        403

$        430

$       396

$     452

(8.8)










Preferred stock dividends & accretion on

preferred stock discount


393


393

393

393

393

(0.1)










Net income available to common 


21


11

36

3

59

(65.3)










Net income per common share:









  Basic


$        0.00


$       0.00

$       0.01

$      0.00

$    0.01

-

  Diluted


$        0.00


$       0.00

$       0.01

$      0.00

$    0.01

-

Average basic shares 


6,575


6,547

6,547

6,547

6,547

0.4

Average common diluted shares 


6,714


6,662

6,693

6,671

6,671

0.6

Performance Ratios









Return on average equity


4.08%


3.98%

4.25%

4.22%

4.40%

(7.3)

Return on average assets


0.39%


0.38%

0.40%

0.38%

0.42%

(8.7)

Net interest margin


3.90%


3.90%

3.89%

3.70%

3.79%

2.8

Average equity


40,447


40,447

40,382

37,501

41,135

(1.7)

Average assets


426,282


426,283

431,068

418,443

426,827

(0.1)

Average interest-earning assets


400,174


400,174

400,539

389,458

395,921

1.1










(1) Includes OREO adjustments to fair value

 

Cornerstone Bancshares, Inc. and Subsidiary

Loan Loss Allowance and Asset Quality Review









2014


2013


First


Fourth 

Third

Second

First 

(Amounts in thousands)

Quarter


Quarter

Quarter

Quarter

Quarter








Allowance for loan losses







Balance at beginning of period

$      3,203


$       3,159

$       5,095

$       5,669

$        6,141

Provision for loan losses

165


-

-

-

300

Net charge-offs

(357)


44

(1,936)

(574)

(772)

Balance at end of period

$      3,011


$       3,203

$       3,159

$       5,095

$        5,669








As a % of loans

1.03%


1.11%

1.11%

1.85%

2.08%

As a % of nonperforming loans

63.00%


89.81%

77.13%

74.02%

89.07%

As a % of nonperforming assets

17.37%


19.42%

16.61%

19.79%

20.60%








Net charge-offs as a % of  loans (a)

0.49%


-0.06%

2.73%

0.83%

1.13%








Risk element assets







Accruing troubled debt restructured

$      3,337


$       4,251

$       3,121

$       3,465

$        5,442

Loans past due 30-89 days

$      2,193


$       2,250

$       1,659

$       5,111

$        4,032








Nonaccruing loans

$      4,779


$       3,566

$       4,095

$       6,883

$        6,364

Loans past due 90 days – accruing

-


-

-

-

-

Total nonperforming loans

$      4,779


$       3,566

$       4,095

$       6,883

$        6,364

Foreclosed assets (b) (c)

$    12,559


$     12,926

$     14,924

$     18,867

$      21,159

Total nonperforming assets

$    17,338


$     16,492

$     19,019

$     25,750

$      27,523















Nonperforming loans as a % of loans

1.63%


1.23%

1.44%

2.49%

2.33%

Nonperforming assets as a % of loans







   and foreclosed assets

5.68%


5.45%

6.36%

8.73%

9.37%








Total loans

292,952


289,440

284,181

276,062

272,550








(a) Annualized

(b) Properties sold during 1st Q 2014

$          695






(c) Properties under contract to sell 

$       1,795






 

 

Cornerstone Bancshares, Inc. and Subsidiary

Net Interest Margin Analysis

Taxable Equivalent Basis


Three months ended


March 31

(Amounts in thousands)












Assets

2014


2013


Average


Income/


Yield/


Average


Income/


Yield/

Earning assets:

Balance


Expense


Rate


Balance


Expense


Rate

Loans, net of unearned income

$       291,830


$       4,095


5.69%


$     275,696


$       4,142


6.09%

Investment securities

95,968


430


1.98%


86,741


440


2.35%

Other earning assets

12,377


7


0.23%


33,484


21


0.26%

  Total earning assets

400,174


$       4,533


4.63%


395,921


$       4,603


4.78%

Allowance for loan losses

(3,106)






(5,933)





Cash and other assets

29,213






36,838





TOTAL ASSETS

$       426,282






$     426,827

















Liabilities and Shareholders' Equity
























Interest-bearing liabilities:












Interest-bearing demand deposits

$         27,972


$            10


0.14%


$       28,438


$            20


0.29%

Savings deposits

15,379


4


0.10%


11,620


7


0.26%

MMDA's

65,299


54


0.33%


74,215


110


0.60%

Time deposits 

160,384


375


0.95%


168,789


465


1.12%

Federal funds purchased and securities












  sold under agreements to repurchase

21,562


19


0.35%


21,090


18


0.35%

Federal Home Loan Bank and other borrowings

31,662


261


3.35%


32,713


340


4.22%

  Total interest-bearing liabilities

322,257


723


0.91%


336,865


962


1.16%

Net interest spread



$       3,810


3.72%




$       3,641


3.62%

Noninterest-bearing demand deposits

63,077






46,812





Accrued expenses and other liabilities

501






2,016





Shareholders' equity

40,447






41,135





TOTAL LIABILITIES AND












  SHAREHOLDERS' EQUITY

$       426,282






$     426,827





Net yield on earning assets





3.90%






3.79%













Taxable equivalent adjustment:












  Loans



0






0



  Investment securities



39






62



          Total adjustment



39






62















 

 

Cornerstone Bancshares, Inc. and Subsidiary

Loan Stratification








2014


2013



(Amounts in thousands)

First

% of

First

% of

% Dollar

Quarter

Total

Quarter

Total

Change

Non-residential real estate






    Owner occupied

$      68,653

23.4

$   62,460

22.9

9.9

    Non-owner occupied

70,089

23.9

64,483

23.7

8.7

    Multi-family real estate

7,809

2.7

8,255

3.0

(5.4)

    1-4 family construction

10,117

3.5

8,168

3.0

23.9

    Commercial land and lot development

17,187

8.7

18,965

7.0

(9.4)

Total non-residential real estate

173,855

60.1

162,331

59.6

7.1

Residential real estate






    First mortgage - 1-4 family

49,535

16.9

43,429

15.9

14.1

    Second mortgage - 1-4 family

1,790

0.6

2,185

0.8

(18.1)

    Home equity lines

18,633

6.4

16,391

6.0

13.7

Total residential real estate

69,958

23.6

62,005

22.7

12.8

Total real estate loans

243,812

83.2

224,336

82.3

8.7







Commercial

39,374

13.4

38,301

14.1

2.8

Agricultural & other

7,219

2.5

7,936

2.9

(9.0)

Consumer

2,547

0.9

1,977

0.7

28.8

Total loans, net of unearned fees

$   292,952

100.0

$272,550

100.0

7.5

 

 


Cornerstone Bancshares, Inc. and Subsidiary





Consolidated Balance Sheets


























Unaudited








March 31,


December 31,




ASSETS


2014


2013









Cash and due from banks


$              2,357,281


$                2,149,467

Interest-bearing deposits at other financial institutions


19,559,471


22,702,270



Total cash and cash equivalents


21,916,752


24,851,737









Securities available for sale


88,801,352


92,208,672

Securities held to maturity (fair value






$33,517 and $35,027 at March 31, 2014 and December 31, 2013, respectively)


32,618


34,165

Federal Home Loan Bank stock, at cost


2,322,900


2,322,900

Loans, net of allowance for loan losses of






$3,011,384 and $3,203,158 at March 31, 2014 and December 31, 2013, respectively


289,940,632


286,236,578

Bank premises and equipment, net


4,929,162


4,992,449

Accrued interest receivable


1,270,625


977,925

Foreclosed assets


12,559,374


12,925,748

Other assets


7,270,241


7,673,179




Total assets


$          429,043,656


$            432,223,353












LIABILITIES AND STOCKHOLDERS' EQUITY













Deposits:





Noninterest-bearing demand deposits


$            68,707,888


$              75,206,540

Interest-bearing demand deposits


30,169,513


24,563,987

Savings deposits and money market accounts


79,194,510


86,329,930

Time deposits


163,652,741


155,313,920




Total deposits


341,724,652


341,414,377









Accrued interest payable


86,736


82,320

Federal funds purchased and securities sold under






agreements to repurchase


18,923,068


22,974,117

Federal Home Loan Bank advances and other borrowings


26,740,000


26,740,000

Other liabilities


873,683


878,811




Total liabilities


388,348,139


392,089,625









Stockholders' equity:





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






600,000 shares issued and outstanding 






in 2014 and 2013


14,910,773


14,892,927

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






6,709,199 shares issued in 2014 and 2013;






6,627,398 and 6,547,074 shares outstanding in 2014 and 2013, respectively


6,627,398


6,547,074

Additional paid-in capital


21,700,560


21,549,883

Accumulated deficit


(3,080,146)


(3,099,451)

Accumulated other comprehensive income


536,932


243,295




Total stockholders' equity


40,695,517


40,133,728




Total liabilities and stockholders' equity


$          429,043,656


$            432,223,353

















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

 


Cornerstone Bancshares, Inc. and Subsidiary

Consolidated Statements of Income








Unaudited



Three months ended



March 31,



2014


2013

INTEREST INCOME





Loans, including fees


$      4,095,468


$       4,141,736

Securities and interest-bearing deposits at other





  financial institutions


430,490


439,906

Federal funds sold & other earning assets


7,163


21,472

Total interest income


4,533,121


4,603,114






INTEREST EXPENSE





Time deposits


375,490


465,256

Other deposits


67,074


137,930

Federal funds purchased and securities





    sold under agreements to repurchase


18,660


18,080

Federal Home Loan Bank advances and other borrowings


261,410


340,439

Total interest expense


722,634


961,705






Net interest income before provision for loan losses


3,810,487


3,641,409

Provision for loan losses


165,000


300,000

Net interest income after provision for loan losses


3,645,487


3,341,409






NONINTEREST INCOME





Customer service fees


188,911


188,481

Net gains from sale of securities


102,272


-

Net gains from sale of loans and other assets


18,914


149,200

Other noninterest income


12,216


17,818

Total noninterest income


322,313


355,499






NONINTEREST EXPENSE





Salaries and employee benefits


1,826,984


1,597,291

Net occupancy and equipment expense


308,832


337,879

Depository insurance


154,676


159,844

Foreclosed assets, net


349,370


128,692

Other operating expenses


661,187


752,174

Total noninterest expenses


3,301,049


2,975,880






Income before income tax expense


666,751


721,028

Income tax expense


254,600


268,900






Net income


412,151


452,128






Preferred stock dividend requirements


375,000


375,000

Accretion on preferred stock discount


17,846


17,845






Net income available to common shareholders


$         19,305


$            59,283






EARNINGS PER COMMON SHARE





Basic


$                   -


$                0.01

Diluted


$                   -


$                0.01






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 three months ended March 31, 2014
























Accumulated









Additional




Other


Total



Preferred


Common


Paid-in


Accumulated


Comprehensive


Stockholders'



Stock


Stock


Capital


Deficit


Income


Equity














BALANCE, December 31, 2013


$ 14,892,927


$ 6,547,074


$ 21,549,883


$ (3,099,451)


$ 243,295


$ 40,133,728














   Stock compensation expense


-


-


40,000


-


-


40,000














   Issuance of common stock, 80,324 shares


-


80,324


110,677


-


-


191,001














   Preferred stock dividends paid


-


-


-


(375,000)


-


(375,000)














   Accretion on preferred stock


17,846


-


-


(17,846)


-


-














   Net income


-


-


-


412,151


-


412,151














   Unrealized holding gains (losses) on securities available for sale, 

      net of reclassification adjustment


-


-


-


-


293,637


293,637














BALANCE, March 31, 2014















$ 14,910,773


$ 6,627,398


$ 21,700,560


$ (3,080,146)


$ 536,932


$ 40,695,517














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

 

SOURCE Cornerstone Bancshares, Inc.



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