EX-99.1 3 v090616_ex99-1.htm Unassociated Document

Cornerstone Bancshares, Inc. Announces 3rd Quarter 2007 Financial Results
Thursday, October 18, 2007 8:00 AM
- PR Newswire
 
Chattanooga, Tenn., October 18, 2007 /PRNewswire-FirstCall via COMTEX/ -- Cornerstone Bancshares, Inc. (OTC Bulletin Board: CSBQ) today announced the following:
 
Cornerstone Bancshares, Inc posted 3rd quarter earnings of $559 thousand or $.09 a share, outpacing performance by many in Financial Services sector. These positive net results occurred despite significant volatility experienced in the financial services industry. The Bank had no sub prime losses to report. It maintains a strong position against risk from sub prime issues due to proactive management policy and underwriting guidelines established internally over two years ago restricting lending practices in this arena.
 
Total year to date earnings through September 2007 were reported at $3.78 million resulting in a year-to-date earnings per share of $.58. Earnings for the same period last year were $4.37 million with earnings per share of $.68. Year-to-date net interest income increased 12.5% from last year, and was the result of continued above average growth in the Bank’s balance sheet. The Bank experienced continued exceptional loan growth as the loan portfolio finished the 3rd quarter with an average balance of $367 million, up 27.7% over the same period last year. Asset growth followed this upward direction as the Bank ended the 3rd quarter with an average balance of $434 million, up 24.2% from the same period last year. Total deposits increased 19.1% from the 3rd quarter last year to September 2007, ending with an average balance of $314 million. Overall, the Bank’s double digit growth represents results that exceed national trends for the sector.

The Bank’s outlook for the remainder of 2007 and into 2008 remains strong with above industry average yields expected. The strategic position of the Bank in the marketplace remains highly favorable as it continues to capitalize on market opportunities created by the continued fallout from other financial institutions with sub prime lending problems and the consolidation of regional and national banks. Growing consumer dissatisfaction with declining customer service levels and increased offshore account servicing operations of larger banking institutions provides the Bank with a highly attractive business proposition relative to its competitors due to its low fee structure, personal service approach and consistent record of performance.

The Bank did experience a slight compression in the net interest margin this quarter, largely due to the Bank’s deposits repricing at a faster rate than the earning assets. The Bank’s year to date net interest margin for 2007 was 5.42% compared to 5.82% for the same period in 2006. The Company expects its net interest margin to continue to compress over the next 12 months until it reaches a more sustainable range of 4.85% to 5.00%. Other corrective action in the 3rd quarter was taken by management to address potential financial implications of an isolated loan matter announced last quarter. The Bank provided $2.5 million to the loan loss allowance this quarter specifically to offset the potential impact of this particular loan. During the 3rd quarter, the Bank successfully executed arrangements resulting in continued operation of the responsible entity, greatly increasing the prospects for positive repayment of the $5.5 million in collateralized debt associated with the account. Management determined in consultation with external accountants the appropriate allowance level in order to offset any potential shortfalls of collateral if the company were to unexpectedly discontinue operations and to satisfy the requirements of FAS 114. While the Company’s earnings forecast for 2007 year-end has been adjusted to $5.4 million or $.83 per share, down from $6.5 million or $1.00 per share to adjust for the specific loan loss provision previously reported and general economic conditions, the Company’s overall earnings record continues to show exceptional performance compared to the industry and its peers.
 
 
Cornerstone Bancshares, Inc. is a one-bank holding company headquartered in Chattanooga, Tennessee with 5 branches and loan production offices in Dalton, GA and Knoxville, TN. The Bank has $450 million in assets and specializes in financial and banking services for businesses.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which contains a safe harbor for forward-looking statements. The Company relies on this safe harbor in making such disclosures. The statements are based on management's current beliefs and assumptions about expectations, estimates, strategies and projections. These statements are not guarantees of future performance or results and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements.


Media Contact:
Frank Hughes, President & COO of Cornerstone Bancshares, Inc.
Phone number: 423-385-3009


CORNERSTONE BANCSHARES, INC.
Selected Financial Information
as of September 30, 2007
(in thousands)

   
Three Months
      
Year-to-Date
      
   
Ending September 30
  
%
  
Ending September 30
  
%
  
EARNINGS SUMMARY
  
2007
  
2006
  
Change
  
2007
  
2006
  
Change
  
Interest income
  
$
9,131
  
$
7,534
    
21.2
%
$
25,978
  
$
21,229
    
22.4
%
Interest expense
    
3,785
   
2,781
   
36.1
%
  
10,388
   
7,375
   
40.8
%
Net interest income
    
5,346
   
4,753
   
12.5
%
  
15,590
   
13,854
   
12.5
%
Provision for loan loss
    
2,964
   
205
   
1345.6
%
  
3,201
   
1,058
   
202.5
%
Net interest income after provision
    
2,383
   
4,548
   
-47.6
%
  
12,390
   
12,796
   
-3.2
%
Noninterest income
    
359
   
418
   
-14.2
%
  
1,162
   
1,535
   
-24.3
%
Noninterest expense
    
2,371
   
2,423
   
-2.1
%
  
8,115
   
7,221
   
12.4
%
Pretax income
    
370
   
2,543
   
-85.4
%
  
5,437
   
7,110
   
-23.5
%
Income taxes
    
(189
)
  
997
   
-119.0
%
  
1,662
   
2,745
   
-39.5
%
Net income
  
$
559
  
$
1,546
    
-63.8
%
$
3,775
  
$
4,365
    
-13.5
%
                               
Earnings per common share
  
$
0.09
  
$
0.24
    
-64.3
%
$
0.58
  
$
0.68
    
-14.2
%
Weighted average common shares
outstanding (1)
    
6,520,059
   
6,501,630
       
6,517,249
   
6,471,364
     

   
Three Months
      
Year-to-Date
      
AVERAGE BALANCE
  
Ending September 30
  
%
  
Ending September 30
  
%
  
SHEET SUMMARY
  
2007
  
2006
  
Change
  
2007
  
2006
  
Change
  
Loans, net of unearned income
    
367,056
   
287,354
   
27.7
%
$
344,890
  
$
280,166
    
23.1
%
Investment securities & Other
    
43,561
   
43,486
   
0.2
%
  
40,453
   
38,817
   
4.2
%
Earning assets
    
410,618
   
330,840
   
24.1
%
  
385,343
   
318,983
   
20.8
%
Total assets
    
434,018
   
349,508
   
24.2
%
  
407,445
   
338,902
   
20.2
%
Noninterest bearing deposits
    
46,673
   
35,752
   
30.5
%
  
42,541
   
36,139
   
17.7
%
Interest bearing transaction deposits
    
93,978
   
92,026
   
2.1
%
  
91,263
   
91,970
   
-0.8
%
Certificates of deposit
    
173,773
   
136,164
   
27.6
%
  
161,730
   
129,905
   
24.5
%
Total deposits
    
314,425
   
263,942
   
19.1
%
  
295,534
   
258,014
   
14.5
%
Other interest bearing liabilities
    
75,625
   
46,708
   
61.9
%
  
68,977
   
43,715
   
57.8
%
Shareholder's equity
    
41,729
   
36,359
   
14.8
%
  
40,561
   
34,917
   
16.2
%

 
  
Three Months
  
Year-to-Date
  
   
Ending September 30
  
Ending September 30
  
SELECTED RATIOS
  
2007
  
2006
  
2007
  
2006
  
   
 
  
 
  
 
  
 
  
Average equity to average assets
    
9.61
%
  
10.40
%
  
9.95
%
  
10.30
%
Average net loans to average total assets
    
84.57
%
  
82.22
%
  
84.65
%
  
82.67
%
Return on average assets
    
0.52
%
  
1.77
%
  
1.24
%
  
1.72
%
Return on average total equity
    
5.36
%
  
17.01
%
  
12.41
%
  
16.67
%
Actual Equity on September 30,
  
$
41,273,694
  
$
36,864,528
              
Actual # shares outstanding on Sept. 30
    
6,519,718
   
6,506,318
             
Book value per common share
 
$
6.33
  
$
5.67