Cornerstone Bancshares, Inc. Reports Fourth Quarter 2012 Earnings

Jan 28, 2013, 15:19 ET from Cornerstone Bancshares, Inc.

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:

  • $15 million capital raise completion
  • Four consecutive quarters of positive earnings for 2012
  • 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 common share data)

2012

2011

% Change

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 (Bank, est)

12.91%

12.99%

(0.6)

Outstanding common shares 

6,500

6,500

-

Book value per common share

$         4.01

$          3.89

3.0

Tangible book value per common share

$         4.01

$          3.89

3.0

Market value per common share as of December 31

$         2.29

$          1.50

52.7

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 loans

2.22%

2.76%

Nonperforming assets to total assets

5.98%

6.26%

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

$     4,718

$     4,242

$     4,186

$      4,144

$    4,437

6.3

Securities and interest-bearing deposits at other financial institutions

440

478

618

467

548

(19.7)

Federal funds sold and other earning assets

16

15

13

15

16

5.1

    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 borrowing

391

394

426

462

454

(13.8)

    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 losses

3,763

3,463

3,600

3,312

3,296

14.2

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 income

241

258

252

267

274

(11.9)

Noninterest expense

Salaries and employee benefits

1,600

1,566

1,570

1,591

1,614

(0.9)

Net occupancy and equipment

408

355

348

336

314

30.0

Depository insurance

121

237

207

203

255

(52.5)

Foreclosed asset expense (1)

156

314

481

150

538

(71.0)

Other operating expense

1,192

731

817

794

780

52.8

    Total noninterest expense

3,477

3,203

3,423

3,074

3,501

(0.7)

Income before income taxes

527

518

429

505

69

664.7

Income tax (benefit) expense

156

154

118

149

(44)

(454.5)

Net income

$         371

$        364

$        311

$         356

$       113

228.4

Preferred stock dividends & accretion on preferred stock discount

393

325

296

280

267

47.2

Net income / (loss) available to common 

(22)

39

15

76

(154)

(85.7)

Net income / (loss) per common share:

  Basic

$      (0.00)

$       0.01

$           -

$        0.01

$    (0.02)

(85.7)

  Diluted

$      (0.00)

$       0.01

$           -

$        0.01

$    (0.02)

(85.7)

Average basic shares 

6,500

6,500

6,500

6,500

6,500

-

Average common diluted shares 

6,503

6,503

6,581

6,586

6,500

0.0

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 assets

391,197

389,458

380,631

378,335

390,756

0.1

(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 period

$      5,280

$       6,029

$   6,024

$     7,400

$    6,864

Provision for loan losses

330

100

-

-

300

Net charge-offs

531

(849)

5

(1,376)

236

Balance at end of period

$      6,141

$       5,280

$   6,029

$     6,024

$    7,400

As a % of loans

2.22%

1.93%

2.29%

2.29%

2.76%

As a % of nonperforming loans

102.24%

66.26%

84.63%

55.95%

93.90%

As a % of nonperforming assets

23.32%

17.40%

20.60%

20.27%

28.03%

Net charge-offs as a % of  loans (a)

-0.77%

1.24%

-0.01%

2.10%

-0.35%

Risk element assets

Accruing troubled debt restructured

$      5,316

$       5,328

$   2,775

$     2,418

$    2,750

Loans past due 30-89 days

$      6,534

$       3,685

$   2,495

$     5,040

$    8,158

Nonaccruing loans

$      6,006

$       7,968

$   7,124

$   10,767

$    7,882

Loans past due 90 days – accruing

-

-

-

-

-

Total nonperforming loans

$      6,006

$       7,968

$   7,124

$   10,767

$    7,882

Repossessed assets

32

39

83

-

-

Other real estate owned (b)(c)

$   20,300

$     22,337

$ 22,061

$   18,957

$  18,524

Total nonperforming assets

$   26,338

$     30,344

$ 29,268

$   29,724

$  26,406

Nonperforming loans as a % of loans

2.17%

2.91%

2.70%

4.10%

2.94%

Nonperforming assets as a % of loans

   and other real estate owned

8.86%

10.25%

10.24%

10.55%

9.22%

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 income

$       276,694

$       4,718

6.76%

$     268,349

$       4,437

6.56%

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

$       5,174

5.31%

390,756

$       5,001

5.14%

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 deposits

$         26,355

$            21

0.32%

$       22,845

$            19

0.33%

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 to repurchase

18,343

17

0.37%

21,079

28

0.52%

Federal Home Loan Bank and other borrowings

37,175

392

4.18%

43,045

455

4.19%

  Total interest-bearing liabilities

336,652

1,081

1.27%

339,723

1,405

1.64%

Net interest spread

$       4,093

4.04%

$       3,596

3.50%

Noninterest-bearing demand deposits

43,662

43,728

Accrued expenses and other liabilities

1,368

198

Shareholders' equity

38,926

32,912

TOTAL LIABILITIES AND

  SHAREHOLDERS' EQUITY

$       420,608

$     416,562

Net yield on earning assets

4.21%

3.72%

Taxable equivalent adjustment:

  Loans

0

0

  Investment securities

63

64

          Total adjustment

63

64

 

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 income

$   268,828

$      17,289

6.43%

$     273,523

$       18,129

6.63%

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

$      19,353

5.09%

405,460

$       20,494

5.12%

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

$              84

0.33%

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 repurchase

21,312

94

0.44%

22,808

125

0.55%

Federal Home Loan Bank and other borrowings

39,282

1,673

4.26%

47,745

2,044

4.28%

  Total interest-bearing liabilities

337,768

4,785

1.42%

361,913

6,362

1.76%

Net interest spread

$      14,568

3.67%

$       14,132

3.36%

Noninterest-bearing demand deposits

39,936

39,042

Accrued expenses and other liabilities

222

(10)

Shareholders' equity

37,115

29,740

TOTAL LIABILITIES AND

  SHAREHOLDERS' EQUITY

$   415,041

$     430,685

Net yield on earning assets

3.85%

3.55%

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 development

25,551

9.2

18,629

7.0

37.2

Total non-residential real estate

165,889

59.9

161,384

60.3

2.8

Residential real estate

    First mortgage - 1-4 family

44,145

15.9

41,226

15.4

7.1

    Second mortgage - 1-4 family

3,348

1.2

3,662

1.4

(8.6)

    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 fees

$   276,992

100.0

$   267,765

100.0

3.4

 

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 institutions

54,575,759

37,222,487

    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 in 2011)

45,086

68,643

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 2011

270,850,465

260,364,569

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 borrowings

37,175,000

43,045,000

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 outstanding in 2012 and 2011, respectively.

14,821,546

9,899,544

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 deposits at other financial institutions

440,187

548,211

2,003,620

2,311,690

Federal funds sold & other earning assets

16,329

15,542

60,404

53,139

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 repurchase

17,209

27,688

94,402

125,538

Federal Home Loan Bank advances and other borrowings

391,468

453,756

1,672,478

2,044,361

Total interest expense

1,081,424

1,405,101

4,784,827

6,361,868

Net interest income before provision for loan losses

4,092,754

3,595,994

14,568,052

14,131,868

Provision for loan losses

330,000

300,000

430,000

445,000

Net interest income after provision for loan losses

3,762,754

3,295,994

14,138,052

13,686,868

NONINTEREST INCOME

Customer service fees

201,144

212,058

803,251

868,935

Net gains from sale of securities

-

-

-

107,413

Net gains from sale of loans and other assets

27,601

47,131

151,710

134,997

Other noninterest income

12,675

14,476

64,519

71,542

Total noninterest income

241,420

273,665

1,019,480

1,182,887

NONINTEREST EXPENSE

Salaries and employee benefits

1,600,177

1,613,574

6,327,226

6,117,063

Net occupancy and equipment expense

408,908

313,736

1,447,204

1,431,863

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 expenses

1,191,695

780,505

3,498,867

3,126,998

Total noninterest expenses

3,477,359

3,500,712

13,177,869

13,651,503

Income before provision for income taxes

526,815

68,947

1,979,663

1,218,252

Provision (benefit) for income taxes

156,100

(43,875)

577,600

188,200

Net income

370,715

$       112,822

1,402,063

1,030,052

Preferred stock dividend requirements

375,000

252,493

1,229,780

651,119

Accretion on preferred stock discount

17,845

14,299

63,924

36,718

Net (loss) income available to common shareholders

$       (22,130)

$     (153,970)

$       108,359

$       342,215

(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, 2011

$         9,899,544

$    6,500,396

$  21,316,438

$        (3,627,208)

$           1,119,135

$       35,208,305

   Employee compensation stock option expense

-

-

74,048

-

-

74,048

   Issuance of Series A Convertible Preferred Stock

4,858,078

-

-

-

-

4,858,078

0

   Preferred stock dividends paid

-

-

-

(985,917)

-

(985,917)

   Accretion on preferred stock

63,924

-

-

(63,924)

-

-

   Net income

-

-

-

1,402,063

-

1,402,063

   Other comprehensive income, net of tax

-

-

-

-

332,259

332,259

BALANCE, December 31, 2012

$       14,821,546

$    6,500,396

$  21,390,486

$        (3,274,986)

$           1,451,394

$       40,888,836

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

 

SOURCE Cornerstone Bancshares, Inc.



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