EX-99.1 2 e19292ex991.txt PRESS RELEASE Exhibit 99.1 Cornerstone Bancshares, Inc. Announces 3rd Quarter 2004 Financial Results on October 15, 2004 HIXSON, Tenn., Oct. 15 /PRNewswire-FirstCall/ -- Cornerstone Bancshares, Inc. (OTC Bulletin Board: CSBQ) today announced the following: Cornerstone Bancshares, Inc saw its 3rd quarter earnings surge to $708 thousand or $.28 a share and $1.85 million year to date or $.75 a share (The per share data is adjusted for a two for one stock split in the form of a 100% stock dividend effective September 15, 2004). Due to these results the Company is adjusting its earning guidance for the third time in 2004 from $.975 per share to $1.00 per share for 2004 and is very optimistic about future earnings growth. The surprise in company performance is the result of continued above average loan growth throughout 2004 and recent non-interest bearing deposit growth. Both factors bode well for future top line earnings growth. Specifically, the Bank's loan portfolio finished the quarter with an average 3rd quarter balance of $190 million, up 27.7% over the same period in 2003 and surpassed the Bank's budgeted loan growth for 2005. The loan growth was concentrated in the business sector especially in asset based and commercial real estate lending as more and more Chattanooga business customers became disenchanted with their existing banking relationships and searched out a Chattanooga community bank. Asset growth followed in line with loan growth as the Bank averaged $235 million in assets for the 3rd quarter of 2004, up from $183 million during the 3rd quarter of 2003, an increase of 28.5%. Earning assets for the Bank increased 28.0% in comparison to the 3rd quarter of 2003, driving the average earning asset ratio up to 93.7%, well above the peer bank average. The asset quality remained at the superior level during the first three quarters of 2004 as non-performing loans as a percentage of average total loans remained at 0.01%, while past due loans as a percentage of total loans remained at 0.19%. The Bank had net charge offs of $27 thousand during the third quarter and $136 thousand year to date, while providing $585 thousand to the loan loss allowance year to date. The large provision was created to fully fund the loan loss allowance for the loan growth realized from the first three quarters of 2004, and as a result the Bank was able to maintain a 1.29% allowance for possible loan losses. Cornerstone Bancshares Inc. 3rd quarter 2004 earnings of $708 thousand represents a 44.0% increase over the 3rd quarter in 2003 earnings of $492 thousand. Earnings per share for the 3rd quarter 2004 was $0.28, compared to $0.20 per share for the 3rd quarter of 2003. Cornerstone is confident this earnings growth will continue throughout 2004 and anticipates earnings per share to grow to $1.00 a share an increase of 31.6% over 2003. Three Months Ending Sept 30 % EARNINGS SUMMARY 2004 2003 Change Interest income $3,705 $2,903 27.61% Interest expense 947 797 18.86% Net interest income 2,758 2,107 30.92% Provision for loan loss 175 255 -31.37% Net interest income after provision 2,583 1,852 39.49% Noninterest income 317 360 -11.87% Noninterest expense 1,744 1,412 23.54% Pretax income 1,155 799 44.56% Income taxes 448 308 45.52% Net income $708 $492 43.96% Earnings per common share $0.28 $0.20 Weighted average common shares outstanding (1) 2,486,931 2,486,334 Year-to-Date Ending Sept 30 % EARNINGS SUMMARY 2004 2003 Change Interest income $10,187 $8,347 22.04% Interest expense 2,572 2,414 6.55% Net interest income 7,615 5,933 28.34% Provision for loan loss 585 410 42.68% Net interest income after provision 7,030 5,523 27.27% Noninterest income 993 934 6.29% Noninterest expense 4,995 4,191 19.17% Pretax income 3,028 2,266 33.61% Income taxes 1,175 873 34.57% Net income $1,854 $1,393 33.01% Earnings per common share $0.75 $0.56 Weighted average common shares outstanding (1) 2,487,132 2,476,334 Three Months AVERAGE BALANCE Ending Sept 30 % SHEET SUMMARY 2004 2003 Change Loans, net of unearned income $190,151 $148,873 27.73% Investment securities & Other 30,320 23,391 29.62% Earning assets 220,471 172,264 27.98% Total assets 235,397 183,144 28.53% Noninterest bearing deposits 29,491 18,742 57.35% Interest bearing transaction deposits 66,018 47,251 39.72% Certificates of deposit 86,766 75,693 14.63% Total deposits 182,275 141,687 28.65% Other interest bearing liabilities 33,406 23,849 40.08% Shareholder's equity 18,410 16,352 12.59% Year-to-Date AVERAGE BALANCE Ending Sept 30 % SHEET SUMMARY 2004 2003 Change Loans, net of unearned income $176,210 $137,585 28.07% Investment securities & Other 27,869 25,765 8.17% Earning assets 204,079 163,350 24.93% Total assets 217,881 174,342 24.97% Noninterest bearing deposits 26,431 17,448 51.48% Interest bearing transaction deposits 60,102 46,797 28.43% Certificates of deposit 82,293 72,216 13.95% Total deposits 168,826 136,461 23.72% Other interest bearing liabilities 30,009 20,817 44.16% Shareholder's equity 17,808 15,898 12.01% Three Months Year-to-Date Ending Sept 30 Ending Sept 30 SELECTED RATIOS 2004 2003 2004 2003 Average equity to average assets 7.82% 8.93% 8.17% 9.12% Average net loans to average total assets 80.78% 81.29% 80.87% 78.92% Return on average assets 1.20% 1.07% 1.13% 1.07% Return on average total equity 15.37% 12.02% 13.88% 11.69% Book value per common share (1) $7.40 $6.58 (1) Per share data is adjusted for a two for one stock split in the form of a 100% stock dividend SOURCE Cornerstone Bancshares, Inc. -0- 10/15/2004 /CONTACT: Frank Hughes, President & Treasurer of Cornerstone Bancshares, Inc., +1-423-385-3009, or fax, +1-423-385-3100/ /Web site: http://www.cscbank.com / (CSBQ) CO: Cornerstone Bancshares, Inc. ST: Tennessee IN: FIN SU: ERN ERP