8-K

UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OFTHE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): November 12, 2009

CORNERSTONE BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Tennessee	000-30497	62-1173944
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

835 Georgia Ave, Chattanooga, Tennessee 37402

(Address of principal executive offices) (Zip Code)

(423) 385-3000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.02 Termination of a Material Definitive Agreement.

The information included in paragraph (e) of Item 5.02 of this Current Report on Form 8-K is incorporated by reference in response to this Item 1.02.

Item 2.02 Results of Operations and Financial Condition.

On November 13, 2009, Cornerstone Bancshares, Inc. (the “Company”) issued a press release (the “Press Release”) announcing an additional provision for loan losses and updating earnings results for the fiscal quarter ended September 30, 2009. A copy of the Press Release is attached hereto as Exhibit 99.1.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(b)       Effective November 12, 2009, Gregory B. Jones resigned from his positions as the Chairman and Chief Executive Officer and as a director of the Company and from all other positions he holds as an officer or director of the Company and its subsidiaries and affiliates, including Cornerstone Community Bank (the “Bank”).  Mr. Jones’s resignation is not the result of a disagreement with the Company.

(c)       In connection with Mr. Jones’s resignation, the Board of Directors of the Company appointed Nathaniel F. Hughes, the President, Treasurer and a director of the Company, as the Company’s Interim Chief Executive Officer, and Miller Welborn, a non-employee director, as the Chairman of the Board of Directors, each such appointment effective on November 12, 2009.  Messrs. Hughes and Welborn have also been appointed to serve in the foregoing capacities for the Bank.  In addition to his responsibilities as Interim Chief Executive Officer, Mr. Hughes will continue to serve in his official capacities with the Company and the Bank immediately prior to Mr. Jones’s resignation.  The Company plans to conduct an executive search for a permanent Chief Executive Officer, giving consideration to both internal and external candidates.

Mr. Hughes, age 51, has served as the President and Treasurer of the Company, and the President and Chief Operating Officer of the Bank since June 2004.  Prior to this time, he served as President and Chief Financial Officer of the Company and the Bank from April 2003 to June 2004, and as Executive Vice President and Chief Financial Officer of the Company and the Bank from February 1999 to April 2003.  Mr. Hughes has been a director of the Company and the Bank since April 2003.

The Press Release issued by the Company on November 13, 2009 also includes information relating to the foregoing changes in management.

(e)       On November 12, 2009, in connection with Mr. Jones’s resignation, the Company and the Bank (collectively referred to herein as “Cornerstone”) entered into a separation agreement with Mr. Jones (the “Separation Agreement”).  The Separation Agreement provides Mr. Jones with a right of revocation for a period of seven days following its execution and will not become effective until this period has expired.  Under the terms of the Separation Agreement, assuming it is not revoked and continuing compliance therewith following its effectiveness, Mr. Jones will be entitled to receive the following benefits: (i) cash severance payments totaling $120,000, less appropriate withholdings, payable in equal bi-weekly installments for a period of six months from November 13, 2009 through May 7, 2010 (i.e., for a total of 13 bi-weekly payments of $9,230.77 each), in full satisfaction of any other severance payment obligations Cornerstone may have under any existing agreement or plan, including, without limitation, the Key Executive Employment Agreement and Severance Agreement, dated as of March 1, 1999, between the Bank and Mr. Jones (the “Employment Agreement”); and (ii) reimbursement of the costs of health insurance benefits continued under COBRA through May 31, 2010 or until Mr. Jones becomes eligible for replacement coverage, whichever occurs sooner.  The Separation Agreement also includes, among other terms, a general release in favor of Cornerstone, as well as continued confidentiality, non-disparagement and non-solicitation obligations by Mr. Jones.

In connection with the execution of the Separation Agreement, the Employment Agreement was terminated effective November 12, 2009.

Item 9.01. Financial Statements and Exhibits.

(d)	Exhibit
	99.1	Press release dated November 13, 2009 concerning management changes and additional provision for loan losses.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CORNERSTONE BANCSHARES, INC.
Date: November 13, 2009
	By: /s/ Nathaniel F. Hughes
	Nathaniel F. Hughes
	President and Chief Executive Officer

EXHIBIT INDEX

Exhibit No.	Exhibit Description
99.1	Press release dated November 13, 2009 concerning management changes and additional provision for loan losses.

EX-99.1

Exhibit 99.1

Cornerstone Bancshares, Inc. Announces Management Changes and
Additional 3^rd Quarter 2009 Provision for Loan Losses Following Joint Examination

CHATTANOOGA, Tenn.--(BUSINESS WIRE)--November 13, 2009--Cornerstone Bancshares, Inc. (OTC Bulletin Board: CSBQ) today announced that its Chairman and Chief Executive Officer, Gregory B. Jones, has resigned from all positions he holds as an officer or director of Cornerstone and its subsidiaries and affiliates, including Cornerstone Community Bank, effective November 12, 2009. Nathaniel F. Hughes, President, Chief Operating Officer and Treasurer, will also serve as Cornerstone’s Interim Chief Executive Officer while Cornerstone conducts an executive search for a permanent Chief Executive Officer, giving consideration to both internal and external candidates. Miller Welborn, a non-employee director, has been appointed to serve as the Chairman of the Board of Directors.

“On behalf of the Board of Directors, I want to thank Greg Jones for his dedicated service and contributions to Cornerstone. We wish him success in his future endeavors,” said Miller Welborn, the newly appointed Chairman of the Board of Directors. “As Cornerstone moves forward, we are grateful that Frank has agreed to serve as Interim CEO. His wealth of experience, including over 25 years in the banking industry, extensive knowledge of our business and strong leadership skills will serve our organization well during the transition and provide stable guidance for the day-to-day operations as we look to strengthen our financial position.”

Cornerstone also announced that, in connection with the conclusion of a joint examination of its wholly owned subsidiary, Cornerstone Community Bank (the “Bank”), by the Federal Deposit Insurance Corporation (FDIC) and the Tennessee Department of Financial Institutions (TDFI), the Bank was required to fund an additional provision of $1.625 million for loan losses for the third quarter of 2009, increasing the total provision for loan losses for the three and nine month periods ended September 30, 2009, to $3.39 million and $10.75 million, respectively. After giving effect to the increased provision for loan losses, Cornerstone had a net loss of $1.7 million, or ($.27) per share, for the three months ended September 30, 2009, and a net loss of $5.2 million, or ($.82) per share, for the nine months ended September 30, 2009. As a result, certain amounts described in and set forth in the financial tables included with Cornerstone’s earnings release on October 23, 2009 are no longer accurate and should not be relied upon. A corrected version of Cornerstone’s selected financial information for the three and nine month periods ended September 30, 2009 is set forth below. Cornerstone had previously announced that it anticipated funding a similar provision amount during the fourth quarter of 2009.

Cornerstone Bancshares, Inc. is a one-bank holding company serving the Chattanooga, Tennessee MSA with five branches and one loan production office in Dalton, Georgia, and $500 million in assets, specializing in business financial services.

CORNERSTONE BANCSHARES, INC.
Selected Financial Information
as of September 30, 2009
(in thousands)
	Three Months								Year-to-Date
	Ending September 30						%		Ending September 30						%
EARNINGS SUMMARY	2009			2008			Change		2009			2008			Change
Interest income	$	6,407		$	7,462		-14.15	%	$	19,699		$	23,279		-15.38	%
Interest expense		2,766			3,027		-8.62	%		8,428			9,720		-13.30	%
Net interest income		3,641			4,436		-17.93	%		11,271			13,559		-16.88	%
Provision for loan loss		3,390			440		670.45	%		10,749			927		1059.54	%
Net interest income after provision		251			3,996		-93.73	%		522			12,632		-95.87	%
Noninterest income		184			477		-61.35	%		1,178			1,396		-15.62	%
Noninterest expense		3,279			3,151		4.06	%		10,345			9,464		9.31	%
Pretax income		(2,844	)		1,321		-315.25	%		(8,646	)		4,564		-289.42	%
Income taxes		(1,145	)		461		-348.18	%		(3,432	)		1,616		-312.33	%
Net income	$	(1,700	)	$	860		-297.59	%	$	(5,214	)	$	2,948		-276.85	%
Earnings per common share	$	(0.27	)	$	0.14		-297.59	%	$	(0.82	)	$	0.46		-277.22	%
Weighted average common shares outstanding (1)		6,371,202			6,371,202					6,337,068			6,350,272
	Three Months								Year-to-Date
AVERAGE BALANCE	Ending September 30						%		Ending September 30						%
SHEET SUMMARY	2009			2008			Change		2009			2008			Change
Loans, net of unearned income		354,246			381,342		-7.11	%	$	369,394		$	383,966		-3.80	%
Investment securities & Other		99,812			48,578		105.47	%		81,926			46,724		75.34	%
Earning assets		454,058			429,920		5.61	%		451,320			430,690		4.79	%
Total assets		488,871			449,053		8.87	%		472,925			449,257		5.27	%
Noninterest bearing deposits		39,491			41,204		-4.16	%		41,756			42,688		-2.18	%
Interest bearing transaction deposits		56,799			78,576		-27.72	%		64,970			85,872		-24.34	%
Certificates of deposit		272,041			186,077		46.20	%		240,179			183,517		30.88	%
Total deposits		368,331			305,858		20.43	%		346,905			312,077		11.16	%
Other interest bearing liabilities		91,247			106,041		-13.95	%		94,037			99,347		-5.34	%
Shareholders' equity		32,838			37,741		-12.99	%		34,522			37,408		-7.71	%
	Three Months								Year-to-Date
	Ending September 30								Ending September 30
SELECTED RATIOS	2009			2008					2009			2008
Average equity to average assets		6.72	%		8.40	%				7.30	%		8.33	%
Average net loans to average total assets		72.46	%		84.92	%				78.11	%		85.47	%
Return on average assets		-1.39	%		0.77	%				-1.47	%		0.87	%
Return on average total equity		-20.70	%		9.12	%				-20.14	%		10.51	%
Actual Equity on September 30	$	31,303,705		$	37,487,451
Actual # shares outstanding on September 30		6,372,937			6,319,718
Book value per common share	$	4.91		$	5.93

CONTACT:
Cornerstone Bancshares, Inc.
Frank Hughes, 423-385-3009
Fax: 423-385-3100
fhughes@cscbank.com