EX-99.1 3 v129663_ex99-1.htm
Exhibit 99.1
 
Cornerstone Bancshares, Inc. Announces Third Quarter 2008 Financial Results

CHATTANOOGA, Tenn., Oct. 17 /PRNewswire-FirstCall/ — Cornerstone Bancshares, Inc. (OTC Bulletin Board: CSBQ) today announced the following:

Cornerstone Bancshares, Inc saw its third quarter earnings increase to $860 thousand, or $0.14 a share, versus $559 thousand during the same period in 2007, an increase of 53.8%; while year-to-date earnings decreased to $2.95 million, compared with $3.78 million during the same time period in 2007. Year-to-date earnings per share decreased to $0.47 versus $0.58, a decrease of 16.4%. The decrease year over year has mostly been caused by net interest rate margin compression of approximately 120 basis points. The compression first began when the Federal Reserve rapidly reduced its Federal Funds rate 325 basis points then was compounded when a liquidity crisis erupted among several of the larger financial institutions on Wall Street. The result was higher cost of funds, especially in the certificate of deposit market. In most instances, the rate compressions and expansions are temporary; but until the inter-bank auctions and commercial paper markets stabilize, the banking industry will see their net interest margins remain below historical norms. The company's net interest margin for the third quarter of 2008 was 4.11%, a slight compression compared to the year-to-date margin of 4.22%. Cornerstone believes the present market is a difficult market to grow loans and the balance sheet, and is turning its attention to building stronger risk management and looking for strategic partnerships with institutions that need assistance dealing with this difficult environment.

The Bank continued to grow loans during 2008 but at a slower rate as loans increased to a year to date average of $384 million, an increase of 11.3% over the same period during 2007. The Company's performance metrics pulled back to normal peer levels, ROA was 0.77% for the third quarter of 2008, compared to 0.52% during the third quarter in 2007. ROE was 9.1% during the third quarter in 2008, compared to 5.4% in 2007.

Presently, the Company is operating at a comfortable 8.40% capital leverage ratio and has the ability to continue to grow but will spend the remainder of 2008 building capital until the economic environment improves.

The asset quality deteriorated to the peer level during the third quarter of 2008; non-performing loans, as a percentage of average total loans, increased to 0.54%; while past-due loans, as a percentage of total loans, increased to 1.36%.

Cornerstone Bancshares, Inc. is a one-bank holding company serving the Chattanooga, Tennessee MSA, with five branches and one loan production office in Dalton, GA, and one loan production office in Knoxville, TN, and $450 million in assets, specializing in business financial services.

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.


CORNERSTONE BANCSHARES, INC.
Selected Financial Information
as of September 30, 2008
(in thousands)

   
Three Months
      
   
Ending September 30
  
%
  
EARNINGS SUMMARY
  
2008
  
2007
  
Change
  
               
Interest income
  
$
7,462
  
$
9,109
    
-18.08
%
Interest expense
    
3,027
    
3,785
    
-20.04
%
Net interest income
    
4,436
    
5,324
    
-16.69
%
Provision for loan loss
    
440
    
2,964
    
-85.15
%
Net interest income after provision
    
3,996
    
2,361
    
69.25
%
Noninterest income
    
477
    
381
    
25.26
%
Noninterest expense
    
3,151
    
2,371
    
32.90
%
Pretax income
    
1,321
    
370
    
256.76
%
Income taxes
    
461
    
(189
)
  
-344.06
%
Net income
  
$
860
  
$
559
    
53.78
%
                     
Earnings per common share
  
$
0.14
  
$
0.09
    
51.22
%
                     
Weighted average common shares outstanding (1)
    
6,319,718
    
6,520,081
        

   
Year-to-Date
      
   
Ending September 30
  
%
  
EARNINGS SUMMARY
  
2008
  
2007
  
Change
  
               
Interest income
  
$
23,279
  
$
25,906
    
-10.14
%
Interest expense
    
9,720
    
10,388
    
-6.43
%
Net interest income
    
13,559
    
15,518
    
-12.62
%
Provision for loan loss
    
927
    
3,201
    
-71.04
%
Net interest income after provision
    
12,632
    
12,318
    
2.55
%
Noninterest income
    
1,396
    
1,234
    
13.12
%
Noninterest expense
    
9,464
    
8,115
    
16.62
%
Pretax income
    
4,564
    
5,437
    
-16.05
%
Income taxes
    
1,616
    
1,662
    
-2.74
%
Net income
  
$
2,948
  
$
3,775
    
-21.91
%
                     
Earnings per common share
  
$
0.47
  
$
0.58
    
-19.54
%
Weighted average common shares outstanding (1)
    
6,325,192
    
6,517,236
        

   
Three Months
      
AVERAGE BALANCE
  
Ending September 30
  
%
  
SHEET SUMMARY
  
2008
  
2007
  
Change
  
               
Loans, net of unearned income
    
381,342
    
367,056
    
3.89
%
Investment securities & Other
    
48,578
    
43,561
    
11.52
%
Earning assets
    
429,920
    
410,618
    
4.70
%
Total assets
    
449,053
    
434,018
    
3.46
%
Noninterest bearing deposits
    
41,204
    
46,673
    
-11.72
%
Interest bearing transaction deposits
    
78,576
    
93,978
    
-16.39
%
Certificates of deposit
    
186,077
    
173,773
    
7.08
%
Total deposits
    
305,858
    
314,425
    
-2.72
%
Other interest bearing liabilities
    
106,041
    
75,625
    
40.22
%
Shareholder's equity
    
37,741
    
41,729
    
-9.56
%

   
Year-to-Date
      
AVERAGE BALANCE
  
Ending September 30
  
%
  
SHEET SUMMARY
  
2008
  
2007
  
Change
  
               
Loans, net of unearned income
  
$
383,966
  
$
344,890
    
11.33
%
Investment securities & Other
    
46,724
    
40,453
    
15.50
%
Earning assets
    
430,690
    
385,343
    
11.77
%
Total assets
    
449,257
    
407,445
    
10.26
%
Noninterest bearing deposits
    
42,688
    
42,541
    
0.35
%
Interest bearing transaction deposits
    
85,872
    
91,263
    
-5.91
%
Certificates of deposit
    
183,517
    
161,730
    
13.47
%
Total deposits
    
312,077
    
295,534
    
5.60
%
Other interest bearing liabilities
    
99,347
    
68,977
    
44.03
%
Shareholder's equity
    
37,408
    
40,561
    
-7.77
%
 
   
Three Months
  
Year-to-Date
  
   
Ending September 30
  
Ending September 30
  
SELECTED RATIOS
  
2008
  
2007
  
2008
  
2007
  
                   
Average equity to average assets
    
8.40
%
  
9.61
%
  
8.33
%
  
9.95
%
Average net loans to average total assets
    
84.92
%
  
84.57
%
  
85.47
%
  
84.65
%
Return on average assets
    
0.77
%
  
0.52
%
  
0.87
%
  
1.24
%
Return on average total equity
    
9.12
%   
  
5.36
%  
  
10.51
%  
  
12.41
%
Actual Equity on September 30,
  
$
37,487,451
  
$
41,273,694
              
Actual # shares outstanding on September 30
    
6,319,718
    
6,519,718
              
Book value per common share
  
$
5.93
  
$
6.33