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)   January 13, 2006

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 January 13, 2006, the Registrant issued a press release reporting earnings results for the fiscal quarter ended December 31, 2005.

Item 9.01 Financial Statements and Exhibits.

(d)	Exhibits
99.1	Press release dated January 13, 2006 reporting earnings results for the fiscal quarter ended December 31, 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:  January 13, 2006
	By:	\s\  Nathaniel F. Hughes
		Nathaniel F. Hughes,
		President and Chief Operating Officer

EX-99.1

Exhibit 99.1

Cornerstone Bancshares, Inc. Announces 4th Quarter 2005 Financial Results on
January 13, 2006

          HIXSON, Tenn., Jan. 13 /PRNewswire-FirstCall/ -- Cornerstone Bancshares, Inc. (OTC Bulletin Board: CSBQ) today announced the following:

          Cornerstone Bancshares, Inc. saw its 4th quarter earnings increase to $1.34 million or $.43 a share and $4.32 million year to date or $1.42 a share an increase of 37.6% over 2004’s earning per share of $1.03.  The earnings were $.17 a share better than its $1.25 earning per share guidance given in September.  The surprise in Company performance is the result of the bank’s asset sensitivity that allowed Cornerstone’s assets to reprice quicker than its deposits.  The result was an above average net interest margin for the 4th quarter of 5.71% compared to comparable peer bank average of 4.45%.  The Bank’s loan portfolio finished the quarter with an average 4th quarter balance of $260 million, up 32.5% over the same period in 2004.  The company plans to continue deploying the capital raised from the 2005 stock offering and the funds raised from the expiration of its director’s stock options.  Currently, Cornerstone has 3.2 million shares outstanding and expects earnings per share to increase to $1.61 per share in 2006 an increase of 13.3%.  During the 4th quarter Cornerstone completed the purchase of the assets of Eagle Financial LLC and formed Eagle Financial Inc.  The new company will provide commercial factoring and loan brokerage services and will give the corporation a vehicle to provide new and cash deprived companies access to liquidity.  Cornerstone expects Eagle to be accretive to earning in 2006.

          The asset quality remained at the superior level during 2005 as non- performing loans as a percentage of average total loans remained at 0.28% while past due loans as a percentage of total loans remained at 0.58%.  The Bank had net charge offs of $232 thousand during the 4th quarter and $557 thousand year to date, while providing $845 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 during 2005, and as a result the Bank was able to maintain a 1.30% allowance for possible loan losses.

          Cornerstone Bancshares Inc. 4th quarter 2005 earnings of $1.34 million represents an 87.0% increase over the 4th quarter in 2004 earnings of $718 thousand.  Earnings per share for the 4th quarter 2005 were $0.43 compared to $0.29 per share for the 4th quarter of 2004.

CORNERSTONE BANCSHARES, INC.
Selected Financial Information
as of December 31, 2005
(in thousands)

	Three Months Ending Dec 31
					% Change
	2005		2004
EARNINGS SUMMARY
Interest income	$	6,064	$	3,872		56.6	%
Interest expense		1,872		1,003		86.6	%
Net interest income		4,192		2,869		46.1	%
Provision for loan loss		502		255		96.9	%
Net interest income after provision		3,690		2,614		41.2	%
Noninterest income		382		297		28.4	%
Noninterest expense		2,024		1,775		14.0	%
Pretax income		2,048		1,136		80.3	%
Income taxes		706		418		68.9	%
Net income	$	1,342	$	718		87.0	%
Earnings per common share	$	0.43	$	0.29		48.9	%
Weighted average common shares outstanding (1)		3,143,149		2,503,825

	Year-to-Date Ending Dec 31
					% Change
	2005		2004
EARNINGS SUMMARY
Interest income	$	20,669	$	14,059		47.0	%
Interest expense		6,076		3,575		69.9	%
Net interest income		14,592		10,483		39.2	%
Provision for loan loss		1,402		840		66.9	%
Net interest income after provision		13,191		9,643		36.8	%
Noninterest income		1,334		1,175		13.5	%
Noninterest expense		7,644		6,655		14.9	%
Pretax income		6,881		4,164		65.3	%
Income taxes		2,557		1,593		60.5	%
Net income	$	4,325	$	2,571		68.2	%
Earnings per common share	$	1.42	$	1.03		37.6	%
Weighted average common shares outstanding (1)		3,045,625		2,491,339

	Three Months Ending Dec 31
					% Change
	2005		2004
AVERAGE BALANCE SHEET SUMMARY
Loans, net of unearned income	$	260,384	$	196,542		32.5	%
Investment securities & Other		31,582		29,494		7.1	%
Earning assets		291,966		226,036		29.2	%
Total assets		311,794		241,365		29.2	%
Noninterest bearing deposits		37,334		32,329		15.5	%
Interest bearing transaction deposits		82,384		64,163		28.4	%
Certificates of deposit		115,688		89,468		29.3	%
Total deposits		235,405		185,960		26.6	%
Other interest bearing liabilities		42,939		32,598		31.7	%
Shareholder’s equity		31,088		21,046		47.7	%

	Year-to-Date Ending Dec 31
					% Change
	2005		2004
AVERAGE BALANCE SHEET SUMMARY
Loans, net of unearned income	$	236,265	$	181,335		30.3	%
Investment securities & Other		32,681		28,333		15.3	%
Earning assets		268,946		209,668		28.3	%
Total assets		286,218		223,801		27.9	%
Noninterest bearing deposits		34,730		27,918		24.4	%
Interest bearing transaction deposits		79,175		61,125		29.5	%
Certificates of deposit		102,778		84,101		22.2	%
Total deposits		216,683		173,144		25.1	%
Other interest bearing liabilities		38,743		30,663		26.4	%
Shareholder’s equity		28,883		18,586		55.4	%

	Three Months Ending Dec 31						Year-to-Date Ending Dec 31
	2005			2004			2005			2004
SELECTED RATIOS
Average equity to average assets		9.97	%		8.72	%		10.09	%		8.30	%
Average net loans to average total assets		83.51	%		81.43	%		82.55	%		81.03	%
Return on average assets		1.72	%		1.19	%		1.51	%		1.15	%
Return on average total equity		17.26	%		13.64	%		14.97	%		13.83	%
Actual Equity on Dec. 31,	$	32,446,364		$	24,807,320
Actual # shares outstanding on Dec. 31,		3,201,334			2,868,823
Book value per common share (1)	$	10.14		$	8.65

(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-                                                       01/13/2006
           /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)