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 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 October 13, 2006, the Registrant issued a press release reporting earnings results for the fiscal quarter ended September 30, 2006.

Item 9.01	Financial Statements and Exhibits.
(d)          Exhibits
99.1        Press release dated October 13, 2006 reporting earnings results for the fiscal quarter ended September 30, 2006.

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 17, 2006
	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 2006 Financial Results

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

Cornerstone Bancshares, Inc saw its 3rd quarter earnings increase to $1.55 million or $.48 a share and $4.37 million year to date an increase of 46.4% while book earnings per share increased to $1.35 versus $.99, an increase of 36.4%. The earnings growth was the result of continued balance sheet growth and core deposit growth coupled with an increase in Cornerstone’s net interest margin to 5.72%. Leading the growth in deposits were certificates of deposit which on average grew 28.9% over the same period in 2005. The Bank experienced continued exceptional loan growth as the loan portfolio finished the quarter with an average 3rd quarter balance of $287 million, up 17.3% over the same period in 2005. The loan growth was concentrated in the business sector especially in asset based and commercial real estate lending as more customers choose customer service and went with a local organization that partnered with its customers. Asset growth followed in line with loan growth as the Bank averaged $350 million in assets for the 3rd quarter of 2006 up from $294 million during the 3rd quarter of 2005 an increase of 18.7%. The elevated net interest margin is due to increased number of participated loan servicing fees and a timing difference between the Bank’s repricing of assets and liabilities.

The asset quality improved slightly and remained at the superior level during the first three quarters of 2006 as non-performing assets as a percentage of average total loans remained at 0.36%. The Bank had net charge offs of $90 thousand during the third quarter and $203 thousand year to date, while providing $1,058 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 2006, and as a result Cornerstone was able to maintain a 1.53% allowance for possible loan losses compared to average loans.

Cornerstone Bancshares Inc. 3rd quarter 2006 earnings of $1.55 million represent a 25.7% increase over the 3rd quarter in 2005 earnings of $1,230 thousand. Earnings per share for the 3rd quarter 2006 were $0.48 compared to $0.40 per share for the 3rd quarter of 2005.

Cornerstone Bancshares, Inc. is a one-bank holding company serving the Chattanooga, Tennessee MSA with 5 branches and $350 million in assets specializing in business financial services.

CORNERSTONE BANCSHARES, INC.
Selected Financial Information
as of September 30, 2006
(in thousands)

	Three Months Ending September 30
					% Change
EARNINGS SUMMARY	2006		2005
Interest income	$	7,534	$	5,438		38.54	%
Interest expense		2,781		1,642		69.37	%
Net interest income		4,753		3,796		25.21	%
Provision for loan loss		205		350		-41.43	%
Net interest income after provision		4,548		3,446		31.98	%
Noninterest income		418		492		-15.04	%
Noninterest expense		2,423		1,970		22.99	%
Pretax income		2,543		1,968		29.22	%
Income taxes		997		738		35.09	%
Net income	$	1,546	$	1,230		25.69	%
Earnings per common share	$	0.48	$	0.40		20.00	%
Weighted average common shares outstanding (1)		3,250,815		3,061,312

	Year-to-Date Ending September 30
					% Change
EARNINGS SUMMARY	2006		2005
Interest income	$	21,229	$	14,604		45.36	%
Interest expense		7,375		4,204		75.43	%
Net interest income		13,854		10,400		33.21	%
Provision for loan loss		1,058		900		17.56	%
Net interest income after provision		12,796		9,500		34.69	%
Noninterest income		1,535		1,064		44.27	%
Noninterest expense		7,221		5,731		26.00	%
Pretax income		7,110		4,833		47.11	%
Income taxes		2,745		1,851		48.30	%
Net income	$	4,365	$	2,982		46.38	%
Earnings per common share	$	1.35	$	0.99		36.36	%
Weighted average common shares outstanding (1)		3,235,682		3,012,731

	Three Months Ending September 30
					% Change
AVERAGE BALANCE SHEET SUMMARY	2006		2005
Loans, net of unearned income		287,354	$	245,014		17.28	%
Investment securities & Other		43,486		32,092		35.50	%
Earning assets		330,840		277,106		19.39	%
Total assets		349,508		294,367		18.73	%
Noninterest bearing deposits		35,752		35,371		1.08	%
Interest bearing transaction deposits		92,026		83,245		10.55	%
Certificates of deposit		136,164		105,662		28.87	%
Total deposits		263,942		224,278		17.69	%
Other interest bearing liabilities		46,708		39,125		19.38	%
Shareholder’s equity		36,359		28,901		25.81	%

	Year-to-Date Ending September 30
					% Change
AVERAGE BALANCE SHEET SUMMARY	2006		2005
Loans, net of unearned income	$	280,166	$	228,142		22.80	%
Investment securities & Other		38,817		32,393		19.83	%
Earning assets		318,983		260,535		22.43	%
Total assets		338,902		276,952		22.37	%
Noninterest bearing deposits		36,139		33,853		6.75	%
Interest bearing transaction deposits		91,970		78,093		17.77	%
Certificates of deposit		129,905		98,427		31.98	%
Total deposits		258,014		210,373		22.65	%
Other interest bearing liabilities		43,715		37,328		17.11	%
Shareholder’s equity		34,917		27,486		27.04	%

	Three Months Ending September 30
SELECTED RATIOS	2006			2005
Average equity to average assets		10.40	%		9.82	%
Average net loans to average total assets		82.22	%		83.23	%
Return on average assets		1.77	%		1.67	%
Return on average total equity		17.01	%		17.02	%
Actual Equity on September 30,	$	36,864,528		$	30,042,401
Actual # shares outstanding on September 30		3,253,159			3,072,334
Book value per common share	$	11.33		$	9.78

	Year-to-Date Ending September 30
SELECTED RATIOS	2006			2005
Average equity to average assets		10.30	%		9.92	%
Average net loans to average total assets		82.67	%		82.38	%
Return on average assets		1.72	%		1.44	%
Return on average total equity		16.67	%		14.47	%
Actual Equity on September 30,
Actual # shares outstanding on September 30
Book value per common share

SOURCE  Cornerstone Bancshares, Inc.
     -0-                                        10/13/2006
     /CONTACT:  Frank Hughes, President & COO of Cornerstone Bancshares, Inc., +1-423-385-3009/
     /Web site:  http://www.cscbank.com /