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 12, 2007

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 12, 2007, the Registrant issued a press release reporting earnings results for the fiscal quarter ended December 31, 2006.

Item 9.01     Financial Statements and Exhibits.

(d)     Exhibits

99.1 Press release dated January 12, 2007 reporting earnings results for the fiscal quarter ended December 31, 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:  January 12, 2007
	By:	/s/ Nathaniel F. Hughes
		Nathaniel F. Hughes,
		President and Chief Operating Office

EX-99.1

Exhibit 99.1

Cornerstone Bancshares, Inc. Announces 4th Quarter 2006 Financial Results on
January 12, 2007

          HIXSON, Tenn., Jan. 12 /PRNewswire-FirstCall/ -- Cornerstone Bancshares, Inc. (OTC Bulletin Board: CSBQ) today announced the following:

          Cornerstone Bancshares, Inc saw its 4th quarter earnings increase to $1.45 million or $0.22 a share and $5.81 million year to date or $0.90 a share an increase of 26.4% over 2005’s earnings per share of $0.71.  The earnings were $0.025 a share better than its $0.875 earning per share guidance given in June.  The better than expected Company performance was a direct result of the continued above average net interest margin for the fourth quarter of 5.80% compared to comparable peer bank average of 4.23%.  The Bank’s loan portfolio finished the quarter with an average 4th quarter balance of $296 million, up 13.6% over the same period in 2005.  During the 4th quarter Cornerstone reevaluated the amortization of its intangible asset for Eagle Financial Inc. and accelerated the amortization by an additional $182 thousand.  The Corporation also set up and funded a corporate foundation to assist the Bank in civic and community gifting.  The foundation was initially funded with $500 thousand and will give 5% of its corpus annually.  These two non operating expenses reduced the quarterly and annual earnings by $430 thousand after taxes.

          Currently, Cornerstone has 6.5 million shares outstanding and expects earnings per share to increase to $1.00 per share in 2007 an increase of 11.1%.  During the fourth quarter Cornerstone completed the formation of a Loan Production Office in Dalton, GA and expects to assist small businesses in North GA with asset based loans from both Cornerstone Community Bank and Eagle Financial, Inc.

          The asset quality remained at the superior level during 2006 as non- performing loans as a percentage of average total loans remained at 0.37% while past due loans as a percentage of total loans decreased to 0.50%.  The Bank had net charge offs of $191 thousand during the fourth quarter and $394 thousand year to date, while providing $1.1 million 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 2006, and as a result the Bank was able to maintain a 1.33% allowance for possible loan losses.

          Cornerstone Bancshares, Inc. is a one-bank holding company serving the Chattanooga, Tennessee MSA with 5 branches and one loan production office with $375 million in assets specializing in business financial services.

CORNERSTONE BANCSHARES, INC.
Selected Financial Information
as of December 31, 2006
(in thousands)

	Three Months Ending December 31				% Change
EARNINGS SUMMARY	2006		2005
Interest income	$	7,936	$	6,064		30.87	%
Interest expense		2,931		1,872		56.57	%
Net interest income		5,005		4,192		19.39	%
Provision for loan loss		49		502		-90.24	%
Net interest income after provision		4,956		3,690		34.31	%
Noninterest income		370		382		-3.14	%
Noninterest expense		3,297		2,024		62.90	%
Pretax income		2,029		2,048		-0.93	%
Income taxes		582		706		-17.56	%
Net income	$	1,447	$	1,342		7.82	%
Earnings per common share	$	0.22	$	0.21		4.19	%
Weighted average common shares outstanding (1)		6,505,405		6,286,298

	Year-to-Date Ending December 31				% Change
EARNINGS SUMMARY	2006		2005
Interest income	$	29,165	$	20,669		41.11	%
Interest expense		10,306		6,076		69.62	%
Net interest income		18,859		14,593		29.23	%
Provision for loan loss		1,107		1,402		-21.04	%
Net interest income after provision		17,752		13,191		34.58	%
Noninterest income		1,861		1,334		39.51	%
Noninterest expense		10,473		7,644		37.01	%
Pretax income		9,140		6,881		32.83	%
Income taxes		3,328		2,557		30.15	%
Net income	$	5,812	$	4,324		34.41	%
Earnings per common share	$	0.90	$	0.71		26.36	%
Weighted average common shares outstanding (1)		6,479,441		6,091,250

	Three Months Ending December 31				% Change
AVERAGE BALANCE
SHEET SUMMARY	2006		2005
Loans, net of unearned income		295,787	$	260,384		13.60	%
Investment securities & Other		47,095		31,582		49.12	%
Earning assets		342,882		291,966		17.44	%
Total assets		362,059		311,794		16.12	%
Noninterest bearing deposits		39,773		37,334		6.53	%
Interest bearing transaction deposits		96,763		82,384		17.45	%
Certificates of deposit		140,064		115,688		21.07	%
Total deposits		276,600		235,405		17.50	%
Other interest bearing liabilities		44,922		42,939		4.62	%
Shareholder’s equity		38,131		31,088		22.66	%

	Year-to-Date Ending December 31				% Change
AVERAGE BALANCE
SHEET SUMMARY	2006		2005
Loans, net of unearned income	$	284,105	$	236,265		20.25	%
Investment securities & Other		40,904		32,681		25.16	%
Earning assets		325,009		268,946		20.85	%
Total assets		344,741		286,218		20.45	%
Noninterest bearing deposits		37,056		34,730		6.70	%
Interest bearing transaction deposits		93,178		79,175		17.69	%
Certificates of deposit		132,465		102,778		28.88	%
Total deposits		262,699		216,683		21.24	%
Other interest bearing liabilities		44,019		38,743		13.62	%
Shareholder’s equity		35,728		28,883		23.70	%

	Three Months Ending December 31
SELECTED RATIOS	2006			2005
Average equity to average assets		10.53	%		9.97	%
Average net loans to average total assets		81.70	%		83.51	%
Return on average assets		1.59	%		1.72	%
Return on average total equity		15.06	%		17.27	%
Actual Equity on December 31,	$	38,055,477		$	32,446,364
Actual # shares outstanding on December 31		6,503,318			6,402,668
Book value per common share (1)	$	5.85		$	5.07

	Year-to-Date Ending December 31
SELECTED RATIOS	2006			2005
Average equity to average assets		10.36	%		10.09	%
Average net loans to average total assets		82.41	%		82.55	%
Return on average assets		1.69	%		1.51	%
Return on average total equity		16.27	%		14.97	%
Actual Equity on December 31,
Actual # shares outstanding on December 31
Book value per common share (1)

SOURCE  Cornerstone Bancshares, Inc.
           -0-                                                  01/12/2007
           /CONTACT:  Frank Hughes, President & COO of Cornerstone Bancshares, Inc., +1-423-385-3009/
           /Web site:  http://www.cscbank.com /
           (CSBQ)