UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

MESSAGE

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) April 20, 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 April 20, 2006, the Registrant issued a press release reporting earnings results for the fiscal quarter ended March 31, 2006.

Item 9.01     Financial Statements and Exhibits.

(d)     Exhibits

99.1

Press release dated April 20, 2006 reporting earnings results for the fiscal quarter ended March 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:  April 21, 2006

 

 

 

By:

\s\ Nathaniel F. Hughes

 

 

 

 

Nathaniel F. Hughes,

 

 

President and Chief Operating Officer


Exhibit 99.1

Cornerstone Bancshares, Inc. Announces 1st Quarter 2006 Financial Results

          HIXSON, Tenn., April 20 /PRNewswire-FirstCall/ -- Cornerstone Bancshares, Inc. (OTC Bulletin Board: CSBQ) today announced the following:

          Cornerstone Bancshares, Inc. saw its 1st quarter 2006 earnings increase to $1.36 million versus $840 thousand, an increase of 61.3% over first quarter 2005 while book earnings per share increased in the first quarter of 2006 to $.42 versus $.29, an increase of 47.8% over first quarter 2005. (The per share data is different than the nominal earnings due to a 500,000 stock issue completed in February 2005 and maturity of non-qualified director stock options.)  The earnings growth was the result of continued strong balance sheet growth, especially loan generation.  Loan growth was lead by C & I and Commercial Real Estate lending which grew on average 28.9% over the same period in 2005. Due to this growth and the Bank’s “positive gap” (interest bearing assets repricing quicker than interest bearing liabilities) the Bank’s net interest margin increased to 5.65% in 1st quarter of 2006 compared to 5.29% during the first quarter of 2005.  The Company’s performance metrics continued to improve due the Bank’s net interest margin, ROA was 1.65% for the first quarter of 2006 compared to 1.31% during the first quarter in 2005. ROE was 16.18% during the first quarter in 2006 compared to 13.02% in 2005.

          The company completed the exercise of the Board of Director’s initial non- qualified stock option grant and deployed and additional 235,500 shares of common stock and foresees no material additional exercises until 2009. Presently the Company is operating at a comfortable 10.2% leverage ratio and has the ability to continue to grow its balance sheet in excess of its retained earnings ability to fund growth for the foreseeable future. Given this positive capital position and an above average net interest margin, management remains confident with the $1.62 earnings per share guidance given at the beginning of the year.

          The asset quality remained at the superior level during first quarter of 2006 with the exception of one well collateralized loan in the amount of $1.8 million which was placed on non-accrual and as result, non-performing loans as a percentage of average total loans increased to 0.98% while past due loans as a percentage of total loans increased slightly to 0.84%.  The Bank had net charge offs of $31 thousand during the first quarter, while providing $378 thousand to the loan loss allowance. The large provision was created to fully fund the loan loss allowance for the loan growth realized during the quarter, and protect the Bank against any unforeseen issues.  As a result, the Bank was able to increase its allowance for possible loan losses to 1.41%.

          Cornerstone Bancshares, Inc. is a one-bank holding company serving the Chattanooga, Tennessee MSA with 5 branches and $340 million in assets specializing in business financial services.

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

 

 

Three Months
Ending March 2006

 

 

 

 

 

 

 

%
Change

 

EARNINGS SUMMARY

 

2006

 

2005

 

 

 

 

 

 

Interest income

 

$

6,509

 

$

4,322

 

 

50.6

%

Interest expense

 

 

2,154

 

 

1,135

 

 

89.8

%

Net interest income

 

 

4,355

 

 

3,187

 

 

36.6

%

Provision for loan loss

 

 

378

 

 

210

 

 

80.0

%

Net interest income after provision

 

 

3,977

 

 

2,977

 

 

33.6

%

Noninterest income

 

 

433

 

 

218

 

 

98.6

%

Noninterest expense

 

 

2,242

 

 

1,821

 

 

23.1

%

Pretax income

 

 

2,168

 

 

1,374

 

 

57.8

%

Income taxes

 

 

813

 

 

534

 

 

52.2

%

Net income

 

$

1,355

 

$

840

 

 

61.3

%

Earnings per common share

 

$

0.42

 

$

0.29

 

 

47.8

%

Weighted average common shares outstanding

 

 

3,215,271

 

 

2,947,594

 

 

 

 



 

 

Year-to-Date
Ending March 2006

 

 

 

 

 

 

 

%
Change

 

EARNINGS SUMMARY

 

2006

 

2005

 

 

 

 

 

 

Interest income

 

$

6,509

 

$

4,322

 

 

50.6

%

Interest expense

 

 

2,154

 

 

1,135

 

 

89.8

%

Net interest income

 

 

4,355

 

 

3,187

 

 

36.6

%

Provision for loan loss

 

 

378

 

 

210

 

 

80.0

%

Net interest income after provision

 

 

3,977

 

 

2,977

 

 

33.6

%

Noninterest income

 

 

433

 

 

218

 

 

98.6

%

Noninterest expense

 

 

2,242

 

 

1,821

 

 

23.1

%

Pretax income

 

 

2,168

 

 

1,374

 

 

57.8

%

Income taxes

 

 

813

 

 

534

 

 

52.2

%

Net income

 

$

1,355

 

$

840

 

 

61.3

%

Earnings per common share

 

$

0.42

 

$

0.29

 

 

47.8

%

Weighted average common shares outstanding

 

 

3,215,271

 

 

2,947,594

 

 

 

 


 

 

Three Months
Ending March 31

 

 

 

 

 

 

 

%
Change

AVERAGE BALANCE SHEET SUMMARY

 

2006

 

2005

 

 

 

 

 

 

Loans, net of unearned income

 

$

271,650

 

$

210,665

 

 

28.9

%

Investment securities & Other

 

 

35,835

 

 

30,089

 

 

19.1

%

Earning assets

 

 

307,485

 

 

240,754

 

 

27.7

%

Total assets

 

 

328,569

 

 

256,459

 

 

28.1

%

Noninterest bearing deposits

 

 

36,644

 

 

36,875

 

 

-0.6

%

Interest bearing transaction deposits

 

 

34,551

 

 

32,684

 

 

5.7

%

Certificates of deposit

 

 

128,963

 

 

90,869

 

 

41.9

%

Total deposits

 

 

200,158

 

 

160,428

 

 

24.8

%

Other interest bearing liabilities

 

 

40,576

 

 

36,019

 

 

12.7

%

Shareholder’s equity

 

 

33,488

 

 

25,806

 

 

29.8

%


 

 

Year-to-Date
Ending March 31

 

 

 

 

 

 

 

%
Change

 

AVERAGE BALANCE SHEET SUMMARY

 

2006

 

2005

 

 

 

 

 

 

Loans, net of unearned income

 

$

271,650

 

$

210,665

 

 

28.9

%

Investment securities & Other

 

 

35,835

 

 

30,089

 

 

19.1

%

Earning assets

 

 

307,485

 

 

240,754

 

 

27.7

%

Total assets

 

 

328,569

 

 

256,459

 

 

28.1

%

Noninterest bearing deposits

 

 

36,644

 

 

36,875

 

 

-0.6

%

Interest bearing transaction deposits

 

 

34,551

 

 

32,684

 

 

5.7

%

Certificates of deposit

 

 

128,963

 

 

90,869

 

 

41.9

%

Total deposits

 

 

200,158

 

 

160,428

 

 

24.8

%

Other interest bearing liabilities

 

 

40,576

 

 

36,019

 

 

12.7

%

Shareholder’s equity

 

 

33,488

 

 

25,806

 

 

29.8

%


 

 

Three Months
Ending March 2006

 

Year-to-Date
Ending March 2006

 

 

 

 

 

SELECTED RATIOS

 

2006

 

2005

 

2006

 

2005

 

 

 

 

 

 

Average equity to average assets

 

 

10.19

%

 

10.06

%

 

10.19

%

 

10.06

%

Average net loans to average total assets

 

 

82.68

%

 

82.14

%

 

82.68

%

 

82.14

%

Return on average assets

 

 

1.65

%

 

1.31

%

 

1.65

%

 

1.31

%

Return on average total equity

 

 

16.18

%

 

13.02

%

 

16.18

%

 

13.02

%

Actual Equity on March 31,

 

$

33,777,189

 

$

27,385,960

 

 

 

 

 

 

 

Actual # shares outstanding on March 31,

 

 

3,223,284

 

 

3,011,334

 

 

 

 

 

 

 

Book value per common share

 

$

10.48

 

$

9.09

 

 

 

 

 

 

 

SOURCE  Cornerstone Bancshares, Inc.
          -0-                              04/20/2006
          /CONTACT:  Frank Hughes, President & COO of Cornerstone Bancshares, Inc.,
+1-423-385-3009/
          /Web site:  http://www.cscbank.com /
          (CSBQ)