Exhibit 99.1
Cornerstone Bancshares, Inc. Announces 2nd Quarter 2009 Financial Results on July 31, 2009
CHATTANOOGA, Tenn.--(BUSINESS WIRE)--July 31, 2009--Cornerstone Bancshares, Inc. (OTC Bulletin Board: CSBQ) today announced the following:
Cornerstone Bancshares, Inc. announced financial results for the second quarter of 2009 with a net loss of $603,000 or ($.10) per share. Year-to-date, Cornerstone reports a net loss of $3.5 million or ($.56) per share. The second quarter 2009 loss was a direct result of Cornerstone’s continued commitment to reduce problem assets as the Bank provided $1.5 million of additional provision for loan losses. At this time management believes that it has identified all the material substandard loans and has not identified any new problem loans within the last 90 days. If the economy does not deteriorate further, the Bank should see a material improvement in its asset quality metrics and should see improvements in earnings as problem assets become less of a drag on earnings generation. Cornerstone’s net interest margin remained at a historically low rate of 3.48% year-to-date; however, management expects an improvement as the amount of nonaccrual loans decreases and the certificate of deposit portfolio re-prices to lower current rates. The Bank is committed to reducing expenses and improving core earnings. During the second quarter the Bank closed its Loan Production Office in Knoxville, TN and reduced its annualized employee expense by 10%. The savings from this reduction in expenses will be realized during the fourth quarter of 2009 but will be partially offset by higher FDIC assessment fees expected in the second half of 2009.
Cornerstone expects earnings to improve during the second half of 2009, and expects to break even for the third quarter and make a small profit for the fourth quarter. This reduced income profile should allow the Bank to complete its program to purge the balance sheet of problem assets during 2009 and focus on a profitable 2010. Not included in this forecast are TARP funds under the CPP program. If Cornerstone receives an injection of preferred capital then the Bank’s profit profile will improve materially.
The Bank’s asset quality deteriorated during the second quarter in 2009 as non-performing loans as a percentage of QTD average total loans increased to 3.62%, while past-due loans as a percentage of total loans increased to 2.63%. Cornerstone had net charge-offs of $7.3 million during the second quarter. The Bank’s total non-performing assets increased to $18.4 million, as problem loans identified during the fourth quarter of 2008 and the first quarter of 2009 progressed through the collection cycle. The Bank believes these numbers have reached their height and will begin reducing steadily during the third and fourth quarters of 2009 and continuing into 2010.
Overall, Cornerstone remains well-capitalized and has retained its strong earnings platform that, once its asset quality issues improve, will return as a high performance Bank.
Cornerstone Bancshares, Inc. is a one-bank holding company serving the Chattanooga, Tennessee MSA, with five full-service branches and one loan production office in Dalton, GA, and $465 million in assets, specializing in business financial services.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which contains a safe harbor for forward-looking statements. The Company relies on this safe harbor in making such disclosures. The statements are based on management's current beliefs and assumptions about expectations, estimates, strategies and projections. These statements are not guarantees of future performance or results and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements.
CORNERSTONE BANCSHARES, INC. | |||||||||||||||||||||
Selected Financial Information | |||||||||||||||||||||
as of June 30, 2009 | Page 1 | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||
Three Months | Year-to-Date | ||||||||||||||||||||
Ending June 30 | % | Ending June 30 | % | ||||||||||||||||||
EARNINGS SUMMARY | 2009 | 2008 | Change | 2009 | 2008 | Change | |||||||||||||||
Interest income | $ | 6,428 | $ | 7,757 | -17.1 | % | $ | 13,292 | $ | 15,817 | -16.0 | % | |||||||||
Interest expense | 2,791 | 3,223 | -13.4 | % | 5,662 | 6,693 | -15.4 | % | |||||||||||||
Net interest income | 3,637 | 4,533 | -19.8 | % | 7,630 | 9,124 | -16.4 | % | |||||||||||||
Provision for loan loss | 1,559 | 170 | 720.5 | % | 7,284 | 487 | 1336.7 | % | |||||||||||||
Net interest income after provision | 2,078 | 4,363 | -52.2 | % | 346 | 8,637 | -96.0 | % | |||||||||||||
Noninterest income | 655 | 525 | 24.9 | % | 918 | 919 | -0.1 | % | |||||||||||||
Noninterest expense | 3,773 | 3,216 | 18.1 | % | 7,066 | 6,313 | 12.3 | % | |||||||||||||
Pretax income | (1,040 | ) | 1,672 | -162.2 | % | (5,801 | ) | 3,243 | -278.9 | % | |||||||||||
Income taxes | (437 | ) | 599 | -173.0 | % | (2,287 | ) | 1,155 | -298.0 | % | |||||||||||
Net income | $ | (603 | ) | $ | 1,073 | -156.2 | % | $ | (3,514 | ) | $ | 2,088 | -268.3 | % | |||||||
Earnings per common share | $ | (0.10 | ) | $ | 0.17 | -156.2 | % | $ | (0.56 | ) | $ | 0.33 | -268.5 | % | |||||||
Weighted average common shares | |||||||||||||||||||||
outstanding | 6,319,718 | 6,319,718 | 6,319,718 | 6,328,234 | |||||||||||||||||
Three Months | Year-to-Date | ||||||||||||||||||||
AVERAGE BALANCE | Ending June 30 | % | Ending June 30 | % | |||||||||||||||||
SHEET SUMMARY | 2009 | 2008 | Change | 2009 | 2008 | Change | |||||||||||||||
Loans, net of unearned income | $ | 370,524 | $ | 384,487 | -3.6 | % | $ | 377,095 | $ | 385,294 | -2.1 | % | |||||||||
Investment securities & other | 67,938 | 49,141 | 38.2 | % | 67,493 | 45,786 | 47.4 | % | |||||||||||||
Earning assets | 438,461 | 433,628 | 1.1 | % | 444,588 | 431,080 | 3.1 | % | |||||||||||||
Total assets | 459,645 | 452,246 | 1.6 | % | 464,825 | 449,359 | 3.4 | % | |||||||||||||
Noninterest bearing deposits | 42,752 | 42,375 | 0.9 | % | 42,907 | 43,438 | -1.2 | % | |||||||||||||
Interest bearing transaction deposits | 68,557 | 85,682 | -20.0 | % | 69,123 | 89,559 | -22.8 | % | |||||||||||||
Certificates of deposit | 222,736 | 181,919 | 22.4 | % | 223,984 | 182,222 | 22.9 | % | |||||||||||||
Total deposits | 334,044 | 309,977 | 7.8 | % | 336,014 | 315,219 | 6.6 | % | |||||||||||||
Other interest bearing liabilities | 94,933 | 105,291 | -9.8 | % | 95,455 | 95,963 | -0.5 | % | |||||||||||||
Shareholder's equity | 33,857 | 37,350 | -9.4 | % | 35,384 | 37,238 | -5.0 | % | |||||||||||||
Three Months | Year-to-Date | ||||||||||||||||||||
Ending June 30 | Ending June 30 | ||||||||||||||||||||
SELECTED RATIOS | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||
Average equity to | |||||||||||||||||||||
average assets | 7.37 | % | 8.26 | % | 7.61 | % | 8.29 | % | |||||||||||||
Average net loans to | |||||||||||||||||||||
average total assets | 80.61 | % | 85.02 | % | 81.13 | % | 85.74 | % | |||||||||||||
Return on average assets | -0.52 | % | 0.95 | % | -1.51 | % | 0.93 | % | |||||||||||||
Return on average total equity | -7.12 | % | 11.49 | % | -19.86 | % | 11.21 | % | |||||||||||||
Actual equity on June 30, | $ | 32,699,086 | $ | 37,099,164 | |||||||||||||||||
Actual # shares outstanding on June 30, | 6,319,718 | 6,319,718 | |||||||||||||||||||
Book value per common share | $ | 5.17 | $ | 5.87 |
CONTACT:
Cornerstone Bancshares, Inc.
Frank Hughes, President & Treasurer, 423-385-3009