Cornerstone Bancshares, Inc.

Reports Positive Earnings for First Quarter of 2014

  

 

CHATTANOOGA, TN – April 28, 2014 -- 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.

 

Media Contact

Frank Hughes, President & CEO

Cornerstone Bancshares, Inc.

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

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	%			3.76	%			3.89	%			3.70	%			3.79	%			2.8
Average equity			40,447				40,487				40,382				37,501				41,135				(1.7	)
Average assets			426,282				426,660				431,068				418,443				426,827				(0.1	)
Average interest-earning assets			400,174				398,174				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
		First				% of				First				% of				% Dollar
(Amounts in thousands)			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 stockholder’s' 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 Statement 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.