CORNERSTONE BANCSHARES 
By 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.
SOURCE Cornerstone Bancshares, Inc.
