Exhibit 99.1

 

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

 

 

CHATTANOOGA, Tenn. -- October 27, 2014 -- (PR Newswire) Cornerstone Bancshares, Inc. (“Cornerstone”; OTC Bulletin Board: CSBQ; CSBQP), holding company of Cornerstone Community Bank (“Bank”), today announced net income of approximately $406,000 for the third quarter of 2014. This marks the fifteenth consecutive quarter of positive earnings for Cornerstone.

 

Some financial highlights for the year as of September 30, 2014, compared with the same period of 2013, include:

 

·

5% increase in total loans

·

26.3% reduction in foreclosed assets

·

12.1% reduction in non-accruing loans

·

22.4% increase in market value per common share

 

“We continue to make steady, gradual progress in cleaning up the balance sheet,” said Cornerstone's President and Chief Executive Officer Frank Hughes. “With a material reduction in foreclosed and non-performing assets, we are finally able to focus more of our time, energy and efforts on the production side of growing loans and deposits.”

 

Cornerstone’s common stock had a significant gain in market value at quarter end, from $2.45 per share as of September 30, 2013, to $3.00 per share as of September 30, 2014. In addition, Cornerstone continued paying its quarterly Preferred Stock dividend, based on positive earnings in preceding quarters. The most recent payment, made on August 26, 2014, marked the fourteenth consecutive quarterly dividend payment since the security was issued in the third quarter of 2010.

 

“This community has demonstrated its belief in and support of a strong community bank,” said Cornerstone’s Chairman Miller Welborn. “Just as Chattanooga continues to grow and thrive, Cornerstone is poised and ready to grow right along with the market.”

 

Founded in 1996, Cornerstone is a single-bank holding company, with approximately $413 million in assets, serving the Chattanooga, Tennessee MSA, with five full-service branch locations throughout Chattanooga and one loan production office in Dalton, Georgia. 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.

 

 

Contact: Frank Hughes, Cornerstone President & CEO, 423-385-3009

 

 

Cornerstone Bancshares, Inc. and Subsidiary

Third Quarter Financial Highlights

September 30, 2014 and 2013

(Unaudited)

 

(Amounts in thousands, except per common share data)		2014				2013				% Change
Balance Sheet Data at Sept 30
Total assets		$	413,378			$	429,681				(3.8	)
Interest-earning assets			390,301				400,929				(2.7	)
Loans			298,390				284,181				5.0
Foreclosed assets			10,994				14,924				(26.3	)
Deposits			316,314				340,756				(7.2	)
Other interest-bearing liabilities			55,336				47,249				17.1
Shareholders' equity			40,396				40,150				0.6
Loan to deposit ratio			94.33	%			83.40	%			13.1
Tier 1 leverage ratio (Bank, est)			9.19	%			8.45	%			8.8
Total risk-based capital ratio (Bank, est)			13.20	%			12.91	%			2.2
Outstanding common shares			6,627				6,547				1.2
Book value per common share		$	3.84			$	3.86				(0.5	)
Tangible book value per common share		$	3.84			$	3.86				(0.5	)
Market value per common share as of September 30		$	3.00			$	2.45				22.4

 

 

Loan Quality Data
Nonaccruing loans			3,600				4,095				(12.1	)
Loans past due 90 days – accruing			-				-				-
Net charge-offs YTD			244				3,282				(92.6	)
Allowance for loan losses			3,474				3,159				10.0
Allowance for loan losses to total loans			1.16	%			1.11	%
Nonperforming assets to total assets			3.53	%			4.43	%

 

 

Performance Data for the Year
Net income		$	1,227			$	1,277				(3.9	)
Return on average assets			0.58	%			0.40	%
Return on average equity			6.05	%			4.17	%
Net interest margin			3.89	%			3.81	%
Per common share data:
Net income – basic		$	0.01			$	0.01
Net income – diluted		$	0.01			$	0.01
Common dividends		$	-			$	-
Preferred dividends & accretion per common		$	0.18			$	0.18
Average shares (000s):
Basic common stock			6,610				6,547
Diluted common stock			6,790				6,675
Preferred stock (actual)			600				600

  

 

Cornerstone Bancshares, Inc. and Subsidiary

Adjusted Income Pre-tax & Pre-provision (PTPP)

Net of Security Gains & Foreclosed Assets Expense

 

		(Unaudited)
		2014												2013								Q3-14 /
		Third				Second				First				Fourth				Third				Q3-13
(Amounts in thousands)		Quarter				Quarter				Quarter				Quarter				Quarter				% Chg
Net interest income		$	3,811			$	3,856			$	3,811			$	3,741			$	3,891				(2.1	)
Total noninterest income			504				535				322				617				270				86.7
Sub-total			4,315				4,391				4,133				4,358				4,161				3.7
Total noninterest expense			3,659				3,375				3,301				3,704				3,464				5.6
Pre-tax, pre-provision income			656				1,016				832				654				697				(5.9	)
Net gains from sale of securiites			(169	)			(300	)			(102	)			(227	)			-				N/A
Foreclosed assets expense, net			688				363				349				693				382				80.1
Adjusted PTPP			1,175				1,079				1,079				1,120				1,079				8.9

 

 

 

Reconciliation of Non-GAAP Financial Measures		(Unaudited)
		2014												2013
		Third				Second				First				Fourth				Third
(Amounts in thousands)		Quarter				Quarter				Quarter				Quarter				Quarter
Pre-tax, pre-provision income		$	656			$	1,016			$	832			$	654			$	697
Income tax expense			(250	)			(257	)			(255	)			(250	)			(268	)
Provision for loan losses			-				(350	)			(165	)			-				-
Net income			406				409				412				404				429
Adjusted PTPP			1,175				1,079				1,079				1,120				1,079
Net gains from sale of securities			169				300				102				227				-
Foreclosed assets expense, net			(688	)			(363	)			(349	)			(693	)			(382	)
Provision for loan losses			-				(350	)			(165	)			-				-
Income tax expense			(250	)			(257	)			(255	)			(250	)			(268	)
Net income			406				409				412				404				429

  

 

Cornerstone Bancshares, Inc. and Subsidiary

Quarterly Earnings Summary

 

 

 

		(Unaudited)
		2014												2013								Q3-14 /
		Third				Second				First				Fourth				Third				Q3-13
(Amounts in thousands)		Quarter				Quarter				Quarter				Quarter				Quarter				% Chg
Interest income
Loans, including fees		$	4,168			$	4,225			$	4,095			$	4,190			$	4,294				(2.9	)
Securities and interest-bearing deposits at other financial institutions			327				347				431				315				457				(28.5	)
Federal funds sold and other earning assets			7				10				7				8				9				(21.1	)
Total interest income			4,502				4,582				4,533				4,513				4,760				(5.4	)
Interest expense
Deposits			442				442				442				487				563				(21.5	)
Short-term borrowings			19				21				19				18				21				(11.8	)
FHLB advances and other borrowing			231				263				261				267				285				(18.9	)
Total interest expense			692				726				722				772				869				(20.4	)
Net interest income			3,811				3,856				3,811				3,741				3,891				(2.1	)
Provision for losses			-				350				165				-				-				-
Net interest income after the
provision for loan losses			3,811				3,506				3,646				3,741				3,891				(2.1	)
Noninterest income
Customer service fees			215				210				189				213				218				(1.7	)
Other noninterest income			13				18				12				13				13				4.0
Gain on sale of assets			276				307				121				391				39				604.5
Total noninterest income			504				535				322				617				270				86.5
Noninterest expense
Salaries and employee benefits			1,702				1,723				1,827				1,716				1,619				5.1
Net occupancy and equipment			315				324				309				324				334				(5.7	)
Depository insurance			163				164				155				162				162				0.5
Foreclosed asset expense (1)			688				363				349				693				382				80.2
Other operating expense			791				801				661				810				967				(18.2	)
Total noninterest expense			3,659				3,375				3,301				3,705				3,464				5.6
Income before income taxes			655				666				667				653				697				(6.0	)
Income tax expense			250				257				255				250				268				(7.0	)
Net income		$	406			$	409			$	412			$	404			$	429				(5.4	)
Preferred stock dividends & accretion on preferred stock discount			393				393				393				393				393				(0.1	)
Net income available to common			13				16				19				11				36				(63.8	)
Net income per common share:
Basic		$	0.00			$	0.00			$	0.00			$	0.00			$	0.01				-
Diluted		$	0.00			$	0.00			$	0.00			$	0.00			$	0.01				-
Average basic shares			6,627				6,627				6,575				6,547				6,547				1.2
Average common diluted shares			6,844				6,807				6,714				6,662				6,693				2.3
Performance Ratios
Return on average equity			4.01	%			4.02	%			4.08	%			3.98	%			4.25	%			(5.7	)
Return on average assets			0.39	%			0.38	%			0.39	%			0.38	%			0.40	%			(2.1	)
Net interest margin			3.86	%			3.89	%			3.90	%			3.76	%			3.89	%			(0.9	)
Average equity			40,480				40,710				40,447				40,487				40,382				0.2
Average assets			416,247				426,951				426,282				426,660				431,068				(3.4	)
Average interest-earning assets			394,156				400,760				400,175				398,174				400,539				(1.6	)

  

(1) Includes OREO adjustments to fair value

 

 

Cornerstone Bancshares, Inc. and Subsidiary

Loan Loss Allowance and Asset Quality Review

 

 

 

		2014												2013
		Third				Second				First				Fourth				Third
(Amounts in thousands)		Quarter				Quarter				Quarter				Quarter				Quarter
Allowance for loan losses
Balance at beginning of period		$	3,330			$	3,011			$	3,203			$	3,159			$	5,095
Provision for loan losses			-				350				165				-				-
Net charge-offs			144				(32	)			(357	)			44				(1,936	)
Balance at end of period		$	3,474			$	3,330			$	3,011			$	3,203			$	3,159
As a % of loans			1.16	%			1.14	%			1.03	%			1.11	%			1.11	%
As a % of nonperforming loans			96.50	%			116.72	%			63.00	%			89.81	%			77.13	%
As a % of nonperforming assets			23.80	%			21.01	%			17.37	%			19.42	%			16.61	%
Net charge-offs as a % of  loans (a)			-0.19	%			0.04	%			0.49	%			-0.06	%			2.73	%
Risk element assets
Accruing troubled debt restructured		$	3,698			$	3,787			$	3,337			$	4,251			$	3,121
Loans past due 30-89 days		$	2,846			$	1,365			$	2,193			$	2,250			$	1,659
Nonaccruing loans		$	3,600			$	2,853			$	4,779			$	3,566			$	4,095
Loans past due 90 days – accruing			-				-				-				-				-
Total nonperforming loans		$	3,600			$	2,853			$	4,779			$	3,566			$	4,095
Foreclosed assets (b) (c)		$	10,994			$	12,996			$	12,559			$	12,926			$	14,924
Total nonperforming assets		$	14,594			$	15,849			$	17,338			$	16,492			$	19,019
Nonperforming loans as a % of loans			1.21	%			0.98	%			1.63	%			1.23	%			1.44	%
Nonperforming assets as a % of loans
and foreclosed assets			4.72	%			5.19	%			5.68	%			5.45	%			6.36	%
Total loans			298,390				292,369				292,952				289,440				284,181
(a) Annualized
(b) Properties sold during 3rdQ 2014		$	1,609
(c) Properties under contract to sell		$	4,424

 

 

Cornerstone Bancshares, Inc. and Subsidiary

Net Interest Margin Analysis

Taxable Equivalent Basis

 

 

		Three months ended
		September 30
(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		$	295,566			$	4,168				5.59	%		$	281,341			$	4,294				6.05	%
Investment securities			84,524				327				1.64	%			104,261				457				1.89	%
Other earning assets			14,066				7				0.20	%			14,937				9				0.24	%
Total earning assets			394,156			$	4,502				4.55	%			400,539			$	4,760				4.75	%
Allowance for loan losses			(3,489	)											(3,933	)
Cash and other assets			25,580												34,462
TOTAL ASSETS		$	416,247											$	431,068
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits		$	25,784			$	10				0.16	%		$	25,388			$	10				0.16	%
Savings deposits			14,105				4				0.10	%			12,858				7				0.22	%
MMDA's			72,628				76				0.42	%			78,715				100				0.50	%
Time deposits			155,184				352				0.90	%			166,401				445				1.06	%
Federal funds purchased and securities
sold under agreements to repurchase			21,445				19				0.35	%			25,102				22				0.34	%
Federal Home Loan Bank and other    borrowings			31,161				231				2.94	%			29,012				285				3.90	%
Total interest-bearing liabilities			320,307				692				0.86	%			337,476				869				1.02	%
Net interest spread						$	3,810				3.69	%						$	3,891				3.73	%
Noninterest-bearing demand deposits			54,400												51,727
Accrued expenses and other liabilities			1,060												1,483
Shareholders' equity			40,480												40,382
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY		$	416,247											$	431,068
Net yield on earning assets											3.86	%											3.89	%
Taxable equivalent adjustment:
Loans							0												0
Investment securities							22												39
Total adjustment							22												39

  

 

Cornerstone Bancshares, Inc. and Subsidiary

Net Interest Margin Analysis

Taxable Equivalent Basis

 

 

		Nine months ended
		September 30
(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		$	293,159			$	12,489				5.70	%		$	276,606			$	12,515				6.05	%
Investment securities			91,147				1,104				1.76	%			97,786				1,379				2.10	%
Other earning assets			13,855				24				0.24	%			23,232				45				0.26	%
Total earning assets			398,161			$	13,617				4.60	%			397,624			$	13,939				4.74	%
Allowance for loan losses			(3,237	)											(5,053	)
Cash and other assets			28,198												36,808
TOTAL ASSETS		$	423,122											$	429,379
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits		$	27,398			$	30				0.15	%		$	26,477			$	46				0.23	%
Savings deposits			14,841				11				0.10	%			12,235				22				0.24	%
MMDA's			67,916				192				0.38	%			76,729				319				0.56	%
Time deposits			158,560				1,093				0.92	%			167,406				1,366				1.09	%
Federal funds purchased and securities
sold under agreements to repurchase			21,862				58				0.36	%			22,330				56				0.34	%
Federal Home Loan Bank and other    borrowings			30,198				756				3.34	%			31,142				941				4.04	%
Total interest-bearing liabilities			320,775				2,140				0.89	%			336,319				2,750				1.09	%
Net interest spread						$	11,477				3.71	%						$	11,189				3.65	%
Noninterest-bearing demand deposits			60,970												50,338
Accrued expenses and other liabilities			831												1,865
Shareholders' equity			40,546												40,857
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY		$	423,122											$	429,379
Net yield on earning assets											3.89	%											3.81	%
Taxable equivalent adjustment:
Loans							0												0
Investment securities							94												156
Total adjustment							94												156

 

 

Cornerstone Bancshares, Inc. and Subsidiary

Loan Stratification

 

 

		2014								2013
		Third				% of				Third				% of				% Dollar
(Amounts in thousands)		Quarter				Total				Quarter				Total				Change
Non-residential real estate
Owner occupied		$	71,986				24.1			$	66,143				23.3				8.8
Non-owner occupied			72,163				24.2				66,454				23.4				8.6
Multi-family real estate			8,252				2.8				8,295				2.9				(0.5	)
1-4 family construction			10,320				3.5				9,865				3.5				4.6
Commercial construction			2,784				0.9				8,917				3.1				(68.8	)
Commercial land and lot development			14,199				4.8				14,245				5.0				(0.3	)
Total non-residential real estate			179,704				60.2				173,919				61.2				3.3
Residential real estate
First mortgage - 1-4 family			45,690				15.3				43,776				15.4				4.4
Second mortgage - 1-4 family			1,674				0.6				2,028				0.7				(17.5	)
Home equity lines			20,035				6.7				15,847				5.6				26.4
Total residential real estate			67,399				22.6				61,651				21.7				9.3
Total real estate loans			247,102				82.8				235,570				82.9				4.9
Commercial			41,581				13.9				38,095				13.4				9.2
Agricultural & other			6,960				2.3				8,381				2.9				(17.0	)
Consumer			2,747				0.9				2,135				0.8				28.6
Total loans, net of unearned fees		$	298,390				100.0			$	284,181				100.0				5.0

   

 

Cornerstone Bancshares, Inc. and Subsidiary

Consolidated Balance Sheets

  

 

		Unaudited
		September 30,				December 31,
ASSETS		2014				2013
Cash and due from banks		$	1,091,657			$	2,149,467
Interest-bearing deposits at other financial institutions			14,783,017				22,702,270
Total cash and cash equivalents			15,874,674				24,851,737
Securities available for sale			78,249,672				92,208,672
Securities held to maturity (fair value $29,524 and $35,027
at September 30, 2014 and December 31, 2013, respectively)			29,374				34,165
Federal Home Loan Bank stock, at cost			2,322,900				2,322,900
Loans, net of allowance for loan losses of $3,473,954 and $3,203,158
at September 30, 2014 and December 31, 2013, respectively			294,916,467				286,236,578
Bank premises and equipment, net			4,835,378				4,992,449
Accrued interest receivable			1,179,789				977,925
Foreclosed assets			10,993,825				12,925,748
Other assets			4,975,510				7,673,179
Total assets		$	413,377,589			$	432,223,353
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits		$	53,615,550			$	75,206,540
Interest-bearing demand deposits			25,246,319				24,563,987
Savings deposits and money market accounts			83,109,173				86,329,930
Time deposits			154,342,518				155,313,920
Total deposits			316,313,560				341,414,377
Accrued interest payable			78,425				82,320
Federal funds purchased and securities sold under
agreements to repurchase			27,335,750				22,974,117
Federal Home Loan Bank advances and other borrowings			28,000,000				26,740,000
Other liabilities			1,253,778				878,811
Total liabilities			372,981,513				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			14,946,464				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			21,780,560				21,549,883
Accumulated deficit			(3,050,663	)			(3,099,451	)
Accumulated other comprehensive income			92,317				243,295
Total stockholders' equity			40,396,076				40,133,728
Total liabilities and stockholders' equity		$	413,377,589			$	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								Unaudited
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2014				2013				2014				2013
INTEREST INCOME
Loans, including fees		$	4,167,994			$	4,293,583			$	12,488,587			$	12,514,688
Securities and interest-bearing deposits at other
financial institutions			327,135				457,299				1,104,132				1,379,322
Federal funds sold			7,129				9,510				24,404				45,515
Total interest income			4,502,258				4,760,392				13,617,123				13,939,525
INTEREST EXPENSE
Time deposits			352,255				445,397				1,093,282				1,365,993
Other deposits			89,574				117,327				232,613				386,791
Federal funds purchased and securities
sold under agreements to repurchase			18,983				21,435				58,264				56,258
Federal Home Loan Bank advances and other borrowings			230,915				284,882				755,526				941,269
Total interest expense			691,727				869,041				2,139,685				2,750,311
Net interest income before provision for loan losses			3,810,531				3,891,351				11,477,438				11,189,214
Provision for loan losses			-				-				515,000				300,000
Net interest income after provision for loan losses			3,810,531				3,891,351				10,962,438				10,889,214
NONINTEREST INCOME
Customer service fees			214,761				218,304				613,210				608,087
Net gains from sale of securities			169,037				-				571,510				424,971
Net gains from sale of loans and other assets			106,906				39,164				132,349				240,746
Other noninterest income			13,062				12,500				43,498				48,968
Total noninterest income			503,766				269,968				1,360,567				1,322,772
NONINTEREST EXPENSE
Salaries and employee benefits			1,702,352				1,619,030				5,251,839				4,838,822
Net occupancy and equipment expense			314,976				333,850				947,894				1,011,335
Depository insurance			162,798				161,956				481,641				482,920
Foreclosed assets, net			688,124				381,847				1,400,616				1,308,995
Other operating expenses			790,856				967,888				2,253,090				2,500,107
Total noninterest expenses			3,659,106				3,464,571				10,335,080				10,142,179
Income before income tax expense			655,191				696,748				1,987,925				2,069,807
Income tax expense			249,500				268,200				760,600				793,100
Net income			405,691				428,548				1,227,325				1,276,707
Preferred stock dividend requirements			375,000				375,000				1,125,000				1,125,000
Accretion on preferred stock discount			17,846				17,845				53,537				53,535
Net income available to common shareholders		$	12,845			$	35,703			$	48,788			$	98,172
EARNINGS PER COMMON SHARE
Basic		$	-			$	0.01			$	0.01			$	0.01
Diluted		$	-			$	0.01			$	0.01			$	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 nine months ended September 30, 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			-				-				120,000				-				-				120,000
Issuance of common stock, 80,324 shares			-				80,324				110,677				-				-				191,001
Preferred stock dividends paid			-				-				-				(1,125,000	)			-				(1,125,000	)
Accretion on preferred stock			53,537				-				-				(53,537	)			-				-
Net income			-				-				-				1,227,325				-				1,227,325
Unrealized holding losses on securities available for sale, net of reclassification adjustment			-				-				-				-				(150,978	)			(150,978	)
BALANCE, September 30, 2014
		$	14,946,464			$	6,627,398			$	21,780,560			$	(3,050,663	)		$	92,317			$	40,396,076

  

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