Cornerstone Bancshares, Inc. Reports Fourth Quarter 2012 Earnings

 

CHATTANOOGA, Tenn.--(PR Newswire)— January 28, 2013--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.

 

Contact:

N. Frank Hughes, President & Chief Executive Office

423-385-3009

 

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
		Fourth				% of				Fourth				% of				% Dollar
(Amounts in thousands)		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

 

										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.