EX-99.1 2 v366653_ex99-1.htm EXHIBIT 99.1

Cornerstone Bancshares, Inc. Reports Positive Earnings for Fourth Quarter of 2013

CHATTANOOGA, Tenn. – January 28, 2014 -- (PR Newswire) 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.

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

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