8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)   October 14, 2005

CORNERSTONE BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Tennessee	000-30497	62-1175427
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)
5319 Highway 153, Chattanooga, Tennessee		37343
(Address of principal executive offices)		(Zip Code)
Registrant’s telephone number, including area code   (423) 385-3000
(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):

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

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

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

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

Item 2.02.     Results of Operations and Financial Condition

          On October 14, 2005, the Registrant issued a press release reporting earnings results for the fiscal quarter ended September 30, 2005.

Item 9.01      Financial Statements and Exhibits.

(c)	Exhibits
99.1	Press release dated October 14, 2005 reporting earnings results for the fiscal quarter ended September 30, 2005.

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.
	(Registrant)
Date:  October 14, 2005
	By:	\s\  Nathaniel F. Hughes
		Nathaniel F. Hughes,
		President and Chief Operating Officer

EX-99.1

Exhibit 99.1

Cornerstone Bancshares, Inc. Announces 3rd Quarter 2005 Financial Results October 14, 2005

          HIXSON, Tenn., Oct. 14 -- Cornerstone Bancshares, Inc. (OTC Bulletin Board: CSBQ) today announced the following:

          Cornerstone Bancshares, Inc. saw its 3rd quarter earnings increase to $1.23 million or $.40 a share and $2.98 million year to date an increase of 60.9% while book earnings per share increased to $.99 versus $.75, an increase of 32.9%. (The per share data is different than the nominal earnings due to a 500,000 stock issue completed in February 2005.)  The earnings growth was the result of continued strong balance sheet growth, especially loan generation and core deposit growth.  Loan fees generated from SBA 504 loans and conduit lending also contributed to top line earnings growth.  Once again, Cornerstone Bancshares Inc. proved that loan growth determines the speed of the growth of the balance sheet as the strong group of commercial lenders continued to grow the Bank’s loan portfolio while also generating loans for sale to participating banks or the open market.  The exceptional loan growth had the loan portfolio finishing the quarter with an average 3rd quarter balance of $245 million, up 28.9% over the same period in 2004.  The loan growth was concentrated in the business sector especially in asset based and commercial real estate lending as more customers choose service before price and went with a local organization that partnered with its customers.  Asset growth followed in line with loan growth as the Bank averaged $294 million in assets for the 3rd quarter of 2005 up from $235 million during the 3rd quarter of 2004 an increase of 25.1%. Earning assets for the Bank increased 25.7% in comparison to the 3rd quarter of 2004 driving the average earning asset ratio up to 94.2% well above the peer bank average. Leading the growth in deposits were interest bearing transaction accounts which on average grew 26.1% over the same period in 2004.  Cornerstone had several directors exercise non- qualified options during the 3rd quarter that were issued to them at the inception of the Company in 1996 (each director owns 20,000 options) and expects more to be exercised during the fourth quarter.  Cornerstone does not expect any dilution to the book value of the stock due to the company’s ability to deduct the director’s tax liability from these options.

          The asset quality improved slightly and remained at the superior level during the 3rd quarter of 2005 as non-performing loans as a percentage of average total loans increased to 0.24% while past due loans as a percentage of total loans decreased to 0.13%.  The Bank had net charge offs of $129 thousand during the third quarter and $290 thousand year to date, while providing $900 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 2005, and as a result the Bank was able to maintain a 1.30% allowance for possible loan losses.

          Cornerstone Bancshares, Inc. 3rd quarter 2005 earnings of $1.23 million represents a 73.9% increase over the 3rd quarter in 2004 earnings of $708 thousand.  Earnings per share for the 3rd quarter 2005 were $0.40 compared to $0.28 per share for the 3rd quarter of 2004.

          Cornerstone Bancshares, Inc. is a one-bank holding company serving the Chattanooga, Tennessee MSA with 5 branches and $310 million in assets specializing in business financial services.

CORNERSTONE BANCSHARES, INC.
Selected Financial Information
as of September 30, 2005
(in thousands)

	Three Months Ending Sept 30				%
EARNINGS SUMMARY	2005		2004			Change
Interest income	$	5,438	$	3,705		46.8	%
Interest expense		1,642		947		73.4	%
Net interest income		3,796		2,758		37.7	%
Provision for loan loss		350		175		99.8	%
Net interest income after provision		3,447		2,583		33.4	%
Noninterest income		492		314		56.6	%
Noninterest expense		1,970		1,741		13.1	%
Pretax income		1,969		1,155		70.4	%
Income taxes		738		448		64.8	%
Net income	$	1,231	$	708		73.9	%
Earnings per common share	$	0.40	$	0.28		41.3	%
Weighted average common shares outstanding (1)		3,061,312		2,487,234

	Year-to-Date Ending Sept 30					%
EARNINGS SUMMARY	2005		2004		Change
Interest income	$	14,604	$	10,187		43.4	%
Interest expense		4,204		2,572		63.4	%
Net interest income		10,400		7,615		36.6	%
Provision for loan loss		900		585		53.8	%
Net interest income after provision		9,501		7,030		35.2	%
Noninterest income		1,064		923		15.3	%
Noninterest expense		5,731		4,925		16.4	%
Pretax income		4,833		3,028		59.6	%
Income taxes		1,851		1,175		57.6	%
Net income	$	2,983	$	1,854		60.9	%
Earnings per common share	$	0.99	$	0.75		32.9	%
Weighted average common shares outstanding (1)		3,012,731		2,487,132

	Three Months Ending Sept 30					%
AVERAGE BALANCE SHEET SUMMARY
	2005		2004		Change
Loans, net of unearned income	$	245,014	$	190,151		28.9	%
Investment securities & Other		32,092		30,320		5.8	%
Earning assets		277,106		220,471		25.7	%
Total assets		294,367		235,397		25.1	%
Noninterest bearing deposits		35,371		29,491		19.9	%
Interest bearing transaction deposits		83,245		66,018		26.1	%
Certificates of deposit		105,662		86,766		21.8	%
Total deposits		224,278		182,275		23.0	%
Other interest bearing liabilities		39,125		33,406		17.1	%
Shareholder’s equity		28,901		18,410		57.0	%

	Year-to-Date Ending Sept 30				%
AVERAGE BALANCE SHEET SUMMARY
	2005		2004		Change
Loans, net of unearned income	$	228,142	$	176,210		29.5	%
Investment securities & Other		32,393		27,869		16.2	%
Earning assets		260,535		204,079		27.7	%
Total assets		276,952		217,881		27.1	%
Noninterest bearing deposits		33,853		26,431		28.1	%
Interest bearing transaction deposits		78,093		60,102		29.9	%
Certificates of deposit		98,427		82,293		19.6	%
Total deposits		210,373		168,826		24.6	%
Other interest bearing liabilities		37,328		30,009		24.4	%
Shareholder’s equity		27,486		17,808		54.3	%

	Three Months Ending Sept 30						Year-to-Date Ending Sept 30
SELECTED RATIOS	2005			2004			2005			2004
Average equity to average assets		9.82	%		7.82	%		9.92	%		8.17	%
Average net loans to
average total assets		83.23	%		80.78	%		82.38	%		80.87	%
Return on average assets		1.67	%		1.20	%		1.44	%		1.13	%
Return on average total equity		17.03	%		15.37	%		14.47	%		13.88	%
Book value per common share (1)	$	9.78		$	7.53
(1)  Per share data is adjusted for a two for one stock split in the form of a 100% stock dividend