SmartFinancial (SMBK) 8-K Cornerstone Bancshares, Inc. Announces 1st Quarter 2010 Financial Results

Exhibit 99.1

Cornerstone Bancshares, Inc. Announces 1^st Quarter 2010 Financial Results

CHATTANOOGA, Tenn.--(BUSINESS WIRE)--April 23, 2010--Cornerstone Bancshares, Inc. (OTC Bulletin Board: CSBQ) today announced the following:

Cornerstone Bancshares, Inc. (“Cornerstone”) reported positive net income for the first quarter 2010 of $344,000, or $0.5 per diluted share. This represents an increase of 111.8 percent compared to the first quarter of 2009’s loss of $(2.9) million or $(0.45) per share. Cornerstone saw a 12.8 percent increase in its net interest margin driven by top-line interest revenue growth and lower interest expense. Cornerstone added $1.0 million to the loan loss provision to fund identified loan impairments, and this amount represents a decrease compared to the first quarter of 2009. Other growth and performance ratios are included in the attached financial tables.

Total assets increased 16.7 percent to $562.1 million at March 31, 2010, up $80.6 million from $481.5 million at March 31, 2009. Loans totaled $325.9 million as of March 31, 2010, compared with $379.0 million as of March 31, 2009, a decrease of 14.0 percent. The Bank increased its security portfolio to $150.6 million as of March 31, 2010, from $52.3 million as of March 31, 2009, an increase of 190 percent. These changes allowed the Bank to greatly increase the reliability and amount of its liquidity. This was funded with an increase of the Bank’s deposits to $429.2 million as of March 31, 2010 from $349.9 million as of March 31, 2009, an increase of 22.7 percent.

As of March 31, 2010, Cornerstone Community Bank (“Bank”) returned to a well-capitalized status, as a result of the Bank’s reduced risk profile and growth of its total capital account generated by net income for the current quarter.

“Given the aggressive steps we’ve taken over the past year to improve our loan credit quality and to reshape our balance sheet, we’re especially pleased to record a profit this first quarter,” said Cornerstone President and CEO Frank Hughes. “Our directors and officers own more than 20 percent of Cornerstone’s common shares and are fully engaged and invested to keep Cornerstone tracking in the right direction.”

Cornerstone’s allowance for loan losses was $6.8 million or 2.1 percent of total loans as of March 31, 2010, compared to $5.9 million or 1.8 percent as of December 31, 2009. Nonperforming assets were $17.2 million or 3.1 percent of total assets at March 31, 2010, compared to $17.9 million or 3.4 percent at December 31, 2009. Net charge-offs were $160,000 for the first quarter of 2010, compared to $5.6 million for the fourth quarter of 2009. Cornerstone has seen a leveling off of loan deterioration in the Chattanooga, Tennessee MSA and has experienced a slight decrease in non-performing assets.

“In this ever-changing economy, Cornerstone remains steadfast in our commitment to provide exceptional products, service and value for each and every one of our customers,” said Hughes. “These fundamental tenets and our solid earnings footprint will serve as the foundation on which Cornerstone will build, to take full advantage of the opportunities that lie ahead.”

Cornerstone is a one-bank holding company, with $560 million in assets, serving the Chattanooga, Tennessee MSA, with five branches throughout Chattanooga and one loan production office in Dalton, Georgia. Locally owned and locally operated, Cornerstone specializes in providing a comprehensive range of customized financial solutions for businesses and individuals.

Certain of the statements made in this release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements, including statements regarding the intent, belief or current expectations of Cornerstone and its management regarding the company’s strategic directions, prospects and future results, involve certain risks and uncertainties. Certain factors may cause actual results to differ materially from those contained in the forward-looking statements, including economic and other conditions in the markets in which Cornerstone operates, governmental regulations, the company’s competitive environment, cyclical and seasonal fluctuations in its operating results, and other risks discussed in Cornerstone’s Form 10-K and other filings with the Securities and Exchange Commission.

Cornerstone Bancshares Inc.
First Quarter Financial Highlights
March 31, 2010 and 2009
(Unaudited)
(Amounts in thousands, except per share data)	2010			2009			% Change
Balance Sheet Data at March 31
Total assets	$	562,064		$	481,545		16.7
Interest-earning assets		533,989			467,568		14.2
Loans		325,948			378,993		(14.0	)
Other real estate owned		8,241			2,476		232.8
Deposits		429,198			349,892		22.7
Interest-bearing liabilities		102,256			95,947		6.6
Shareholders' equity		28,583			33,707		(15.2	)
Loan to deposit ratio		75.94	%		108.32	%	(29.9	)
Tier 1 Leverage Ratio (Bank)		5.65	%		7.32	%	(22.8	)
Total Risk-Based Capital Ratio (Bank)		10.01	%		10.07	%	(0.6	)
Outstanding shares (000s)		6,500			6,500		0.0
Book value per share	$	4.40		$	5.62		(21.7	)
Tangible book value per share	$	4.00		$	4.75		(15.8	)
Market value per share as of Mar 31	$	2.70		$	4.74		(43.0	)
Loan Quality Data
Nonaccruing loans		8,468		$	8,620		(1.8	)
Loans past due 90 days – accruing		-			-		-
Net charge-offs		160			2,458		(93.5	)
Allowance for loan losses		6,760			12,885		(47.5	)
Allowance for loan losses to total loans		2.07	%		3.40	%
Nonperforming assets to total assets		2.97	%		2.30	%
Performance Data for the First Quarter
Net income		344			(2,912	)	111.8
Return on average assets		0.26	%		-2.48	%
Return on average equity		4.80	%		-31.54	%
Net interest margin		3.64	%		3.61	%
Per share data:
Net income – basic	$	0.05		$	(0.45	)
Net income – diluted	$	0.05		$	(0.45	)
Dividends	$	-		$	0.07
Average shares (000s):
Basic		6,500			6,500
Diluted		6,500			6,500

Cornerstone Bancshares Inc.
Loan Loss Allowance and Asset Quality Review
	2010			2009
	First			Fourth			Third			Second			First
(Amounts in thousands)	Quarter			Quarter			Quarter			Quarter			Quarter
Allowance for loan losses
Balance at beginning of period	$	5,905		$	7,398		$	7,383		$	12,885		$	9,618
Provision for loan losses		1,015			4,150			3,390			1,634			5,725
Net charge-offs	$	(160	)	$	(5,643	)	$	(3,375	)	$	(7,136	)	$	(2,458	)
Balance at end of period	$	6,760		$	5,905		$	7,398		$	7,383		$	12,885
As a % of loans		2.07	%		1.75	%		2.12	%		2.05	%		3.40	%
As a % of nonperforming loans		79.83	%		80.24	%		91.47	%		55.11	%		149.48	%
As a % of nonperforming assets		39.34	%		32.98	%		46.58	%		40.21	%		113.50	%
Net charge-offs as a % of loans (a)		0.20	%		6.70	%		3.87	%		7.92	%		2.59	%
Risk element assets
Nonaccruing loans	$	8,468		$	7,360		$	8,088		$	13,397		$	8,620
Loans past due 90 days – accruing		-			-			-			-			-
Total nonperforming loans		8,468			7,360			8,088			13,397			8,620
Repossessed assets		473			217			98			181			256
Other real estate owned		8,241			10,327			7,695			4,783			2,476
Total nonperforming assets	$	17,183		$	17,904		$	15,881		$	18,361		$	11,352
Loans past due 30-89 days	$	6,588		$	5,027		$	19,062		$	9,636		$	9,224
Nonperforming loans as a % of loans		2.60	%		2.19	%		2.32	%		3.71	%		2.27	%
Nonperforming assets as a % of loans and other real estate owned		5.14	%		5.16	%		4.45	%		5.02	%		2.98	%
Total Loans		325,948			336,692			349,050			360,615			378,993
(a) Annualized

Cornerstone Bancshares Inc.
Net Interest Margin Analysis
Taxable Equivalent Basis
	Three months ended
	March 31
(Amounts in thousands)
Assets	2010							2009
	Average			Income/		Yield/		Average			Income/		Yield/
Earning assets:	Balance			Expense		Rate		Balance			Expense		Rate
Loans, net of unearned income	$	330,024		$	5,948	7.31	%	$	383,739		$	6,442	6.73	%
Investment securities		134,834			1,129	3.62	%		53,082			414	3.58	%
Other earning assets		45,528			24	0.21	%		13,960			8	0.00	%
Total earning assets		510,386		$	7,101	5.70	%		450,781		$	6,864	6.16	%
Allowance for loan losses		(5,993	)						(9,138	)
Cash and other assets		29,919							28,419
TOTAL ASSETS	$	534,312						$	470,062
Liabilities and Shareholder's Equity
Interest bearing liabilities:
Interest bearing demand deposits	$	27,908		$	30	0.44	%	$	28,823		$	26	0.36	%
Savings deposits		8,727			11	0.51	%		7,818			10	0.50	%
MMDA's		23,718			57	0.97	%		33,056			80	0.97	%
Time deposits of $100,000 or more		79,714			427	2.17	%		59,628			529	3.56	%
Time deposits of $100,000 or less		227,320			1,257	2.24	%		165,618			1,466	3.55	%
Federal funds purchased and securities sold under agreements to repurchase		23,637			35	0.61	%		24,550			54	0.88	%
Other borrowings		72,306			779	4.37	%		71,433			706	3.96	%
Total interest bearing liabilities		463,330			2,596	2.27	%		390,926			2,871	2.95	%
Net interest spread				$	4,505	3.43	%				$	3,993	3.22	%
Noninterest bearing demand deposits		48,211							43,064
Accrued expenses and other liabilities		(5,897	)						(854	)
Shareholders' equity		28,669							36,926
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY	$	534,312						$	470,062
Net yield on earning assets						3.64	%						3.61	%
Taxable equivalent adjustment:
Loans					0							0
Investment securities					74							60
Total adjustment					74							60

Cornerstone Bancshares Inc.
Quarterly Earnings Summary
	(Unaudited)
	2010			2009												Q1-10 /
	First			Fourth			Third			Second			First			Q1-09
	Quarter			Quarter			Quarter			Quarter			Quarter			% Chg
Interest Income
Loans, including fees	$	5,948		$	5,907		$	6,018		$	6,035		$	6,442		(7.7	)
Investment securities		1,129			683			358			386			397		184.5
Other		24			20			30			7			25		(5.7	)
Total interest income		7,101			6,610			6,406			6,428			6,864		3.5
Interest expense
Deposits		1,782			2,075			1,971			1,979			2,111		(15.6	)
Short-term borrowings		128			-			108			125			73		74.7
FHLB advances		687			687			687			687			687		0.0
Total interest expense		2,596			2,762			2,766			2,791			2,871		(9.6	)
Net interest income		4,505			3,848			3,640			3,637			3,993		12.8
Provision for loan losses		1,015			4,150			3,390			1,634			5,725		(82.3	)
Net interest income after the provision for loan losses		3,490			(302	)		250			2,003			(1,732	)	(301.5	)
Noninterest income
Customer Service Fees		342			370			417			435			408		(16.2	)
Other non-interest income		31			28			29			52			28		9.8
(Loss) on sale of assets		(53	)		(1,035	)		(262	)		(150	)		(173	)	(69.6	)
Gain on sale of securities		-			-			-			394			-		NM
Total noninterest income		320			(637	)		184			730			263		21.7
Noninterest expense
Salaries and employee benefits		1,633			1,642			1,623			1,848			1,857		(12.0	)
Net Occupancy and equipment		355			371			383			388			407		(12.7	)
Other operating expense		1,328			1,918			1,274			1,537			1,029		29.0
Total noninterest expense		3,316			3,931			3,279			3,773			3,293		0.7
Income (loss) before income taxes		493			(4,870	)		(2,845	)		(1,040	)		(4,761	)	NM
Income tax (benefit) expense		150			(1,904	)		(1,145	)		(437	)		(1,850	)	NM
Net income (loss)	$	344		$	(2,965	)	$	(1,700	)	$	(603	)	$	(2,911	)	NM
Net income (loss) per share:
Basic	$	0.05		$	(0.46	)	$	(0.26	)	$	(0.09	)	$	(0.45	)	NM
Diluted	$	0.05		$	(0.46	)	$	(0.26	)	$	(0.09	)	$	(0.45	)	NM
Average basic shares (000s)(1)		6,500			6,500			6,500			6,500			6,500		0.1
Average diluted shares (000s)(1)		6,500			6,500			6,500			6,500			6,500		(0.2	)
Performance Ratios
Return on average equity		4.80	%		-38.13	%		-20.71	%		-7.12	%		-31.54	%	NM
Return on average assets		0.26	%		-2.28	%		-1.39	%		-0.52	%		-2.48	%	NM
Net interest margin		3.64	%		3.24	%		3.18	%		3.35	%		3.61	%	(9.2	)
Average equity		28,669			31,104			32,838			33,857			36,926		3.4
Average assets		534,312			519,520			488,870			459,645			470,062		7.3
Average interest-earning assets		510,386			499,047			454,058			438,461			450,781		5.7
NM=Not Material
(1) The 2009 average number of common shares outstanding have been retroactively adjusted to reflect two stock dividends that occurred during 2009.

Cornerstone Bancshares Inc.
Loan Stratification
	2010			2009
(Amounts in thousands)	First		% of	First		% of	% Dollar
	Quarter		Total	Quarter		Total	Change
Non-residential real estate
Owner occupied	$	76,016	23.3	$	85,015	22.4	(10.6	)
Non-owner occupied		74,690	22.9		67,166	17.7	11.2
Multi-family real estate		13,172	4.0		15,764	4.2	(16.4	)
Construction		6,318	1.9		14,886	3.9	(57.6	)
Commercial land and lot development		33,121	10.2		53,005	14.0	(37.5	)
Total non-residential real estate		203,317	62.4		235,836	62.2	(13.8	)
Residential real estate
Owner-occupied – 1-4 family		48,351	14.8		44,833	11.8	7.8
Home equity lines		10,073	3.1		13,381	3.5	(24.7	)
Total residential real estate		58,424	17.9		58,214	15.4	0.4
Total real estate loans		261,741	80.3		294,050	77.6	(11.0	)
Commercial		54,814	16.8		77,017	20.3	(28.8	)
Agricultural & other		6,013	1.8		2,564	0.7	134.5
Consumer		3,380	1.0		5,362	1.4	(37.0	)
Total loans, net of unearned fees	$	325,948	100.0	$	378,993	100.0	(14.0	)

Cornerstone Bancshares Inc.
Consolidated Balance Sheets
		Unaudited
		March 31		December 31,
ASSETS		2010		2009
Cash and due from banks		$	55,068,317	$	38,202,205
Cash and cash equivalents			55,068,317		38,202,205
Securities available for sale			150,520,500		124,415,318
Securities held to maturity			129,150		135,246
Federal Home Loan Bank stock, at cost			2,322,900		2,229,200
Loans, net of allowance for loan losses of $6,760,484 at March 31, 2010 and $5,905,054 at December 31, 2009			319,187,929		330,787,382
Bank premises and equipment, net			7,783,678		8,098,059
Accrued interest receivable			1,981,123		1,520,699
Goodwill and amortizable intangibles			2,575,753		2,579,211
Foreclosed assets			8,240,322		10,327,297
Other assets			14,254,948		14,109,769
	Total Assets	$	562,064,620	$	532,404,386
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits		$	46,844,104	$	41,971,956
Interest-bearing demand deposits			38,594,782		26,533,329
Savings deposits and money market accounts			31,191,149		31,029,587
Time deposits of $100,000 or more			115,386,130		91,064,094
Time deposits of less than $100,000			197,181,620		214,143,147
Total deposits			429,197,785		404,742,113
Federal funds purchased and securities sold under agreements to repurchase			29,956,284		26,321,885
Federal Home Loan Bank advances and line of credit			72,300,000		72,350,000
Accrued interest payable			387,987		351,360
Other liabilities			1,639,667		801,549
	Total Liabilities		533,481,723		504,566,907
Stockholders' Equity
Preferred stock - no par value; 2,000,000 shares authorized; no shares issued			-		-
Common stock - $1.00 par value; 10,000,000 shares authorized; 6,709,199 issued in 2010 and 2009; 6,500,396 outstanding in 2010 and 2009			6,500,396		6,500,396
Additional paid-in capital			21,181,339		21,162,686
Retained earnings			768,641		424,854
Accumulated other comprehensive income			132,521		(250,457	)
	Total Stockholders' Equity		28,582,897		27,837,479
	Total Liabilities and Stockholders' Equity	$	562,064,620	$	532,404,386

Cornerstone Bancshares Inc.
Consolidated Statements of Income
	Unaudited
	Three months ended
	March 31
	2010			2009
INTEREST INCOME
Loans, including fees	$	5,948,246		$	6,442,106
Investment securities		1,129,279			396,958
Federal funds sold & other earning assets		23,661			25,051
Total interest income		7,101,186			6,864,115
INTEREST EXPENSE
Time deposits of more than $100,000		546,026			529,176
Other deposits		1,235,724			1,581,615
Federal funds purchased and securities sold under agreements to repurchase		35,415			54,049
Other borrowings		779,197			705,836
Total interest expense		2,596,362			2,870,676
Net interest income before provision for loan losses		4,504,824			3,993,439
Provision for loan losses		1,015,000			5,725,000
Net interest income / (loss) after the provision for loan losses		3,489,824			(1,731,561	)
NONINTEREST INCOME
Customer service fee		341,914			408,143
Other noninterest income		30,922			28,174
Net (losses) from sale of loans and other assets		(52,691	)		(173,203	)
Total noninterest income		320,145			263,114
NONINTEREST EXPENSE
Salaries and employee benefits		1,633,344			1,856,560
Net occupancy and equipment expense		355,183			406,700
Depository insurance		247,337			61,726
Other operating expense		1,080,617			967,757
Total noninterest expense		3,316,481			3,292,743
Income / (loss) before provision for income taxes		493,488			(4,761,190	)
Provision for income taxes		149,701			(1,849,687	)
NET INCOME / (LOSS)	$	343,787		$	(2,911,503	)
EARNINGS / (LOSS) PER COMMON SHARE
Basic net income / (loss) per common share	$	0.05		$	(0.45	)
Diluted net income / (loss) per common share	$	0.05		$	(0.45	)
DIVIDENDS DECLARED PER COMMON SHARE	$	-		$	0.07

Cornerstone Bancshares Inc.
Consolidated Statement of Changes in Stockholders' Equity - Unaudited
For the three months ended March 31, 2010
					Additional				Other			Total
	Comprehensive		Common		Paid-in		Retained		Comprehensive			Stockholders'
	Income		Stock		Capital		Earnings		Income			Equity
BALANCE, December 31, 2009			$	6,500,396	$	21,162,686	$	424,854	$	(250,457	)	$	27,837,479
Employee compensation stock option expense				-		18,653		-		-			18,653
Comprehensive income
Net income	$	343,787		-		-		343,787		-			343,787
Other comprehensive income, net of tax:
Unrealized holding gains on securities available for sale, net of reclassification adjustment		382,978		-		-		-		382,978			382,978
Total comprehensive income	$	726,765
BALANCE, March 31, 2010			$	6,500,396	$	21,181,339	$	768,641	$	132,521		$	28,582,897

CONTACT:
Cornerstone Bancshares, Inc.
Frank Hughes, President and CEO, 423-385-3009