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)   October 14, 2005

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 14, 2005, the Registrant issued a press release reporting earnings results for the fiscal quarter ended September 30, 2005.

Item 9.01      Financial Statements and Exhibits.

(c)

Exhibits

 

 

99.1

Press release dated October 14, 2005 reporting earnings results for the fiscal quarter ended September 30, 2005.



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 14, 2005

 

 

 

By:

\s\  Nathaniel F. Hughes

 

 

 

 

Nathaniel F. Hughes,

 

 

President and Chief Operating Officer


Exhibit 99.1

Cornerstone Bancshares, Inc. Announces 3rd Quarter 2005 Financial Results October 14, 2005

          HIXSON, Tenn., Oct. 14 -- Cornerstone Bancshares, Inc. (OTC Bulletin Board: CSBQ) today announced the following:

          Cornerstone Bancshares, Inc. saw its 3rd quarter earnings increase to $1.23 million or $.40 a share and $2.98 million year to date an increase of 60.9% while book earnings per share increased to $.99 versus $.75, an increase of 32.9%. (The per share data is different than the nominal earnings due to a 500,000 stock issue completed in February 2005.)  The earnings growth was the result of continued strong balance sheet growth, especially loan generation and core deposit growth.  Loan fees generated from SBA 504 loans and conduit lending also contributed to top line earnings growth.  Once again, Cornerstone Bancshares Inc. proved that loan growth determines the speed of the growth of the balance sheet as the strong group of commercial lenders continued to grow the Bank’s loan portfolio while also generating loans for sale to participating banks or the open market.  The exceptional loan growth had the loan portfolio finishing the quarter with an average 3rd quarter balance of $245 million, up 28.9% over the same period in 2004.  The loan growth was concentrated in the business sector especially in asset based and commercial real estate lending as more customers choose service before price and went with a local organization that partnered with its customers.  Asset growth followed in line with loan growth as the Bank averaged $294 million in assets for the 3rd quarter of 2005 up from $235 million during the 3rd quarter of 2004 an increase of 25.1%. Earning assets for the Bank increased 25.7% in comparison to the 3rd quarter of 2004 driving the average earning asset ratio up to 94.2% well above the peer bank average. Leading the growth in deposits were interest bearing transaction accounts which on average grew 26.1% over the same period in 2004.  Cornerstone had several directors exercise non- qualified options during the 3rd quarter that were issued to them at the inception of the Company in 1996 (each director owns 20,000 options) and expects more to be exercised during the fourth quarter.  Cornerstone does not expect any dilution to the book value of the stock due to the company’s ability to deduct the director’s tax liability from these options.

          The asset quality improved slightly and remained at the superior level during the 3rd quarter of 2005 as non-performing loans as a percentage of average total loans increased to 0.24% while past due loans as a percentage of total loans decreased to 0.13%.  The Bank had net charge offs of $129 thousand during the third quarter and $290 thousand year to date, while providing $900 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 2005, and as a result the Bank was able to maintain a 1.30% allowance for possible loan losses.

          Cornerstone Bancshares, Inc. 3rd quarter 2005 earnings of $1.23 million represents a 73.9% increase over the 3rd quarter in 2004 earnings of $708 thousand.  Earnings per share for the 3rd quarter 2005 were $0.40 compared to $0.28 per share for the 3rd quarter of 2004.

          Cornerstone Bancshares, Inc. is a one-bank holding company serving the Chattanooga, Tennessee MSA with 5 branches and $310 million in assets specializing in business financial services.


CORNERSTONE BANCSHARES, INC.
Selected Financial Information
as of September 30, 2005
(in thousands)

 

 

Three Months
Ending Sept 30

 

%

 

 

 

 

 

EARNINGS SUMMARY

 

2005

 

2004

 

 

Change

 

 

 

 

 

Interest income

 

$

5,438

 

$

3,705

 

 

46.8

%

Interest expense

 

 

1,642

 

 

947

 

 

73.4

%

 

 

 

 

 

 

 

Net interest income

 

 

3,796

 

 

2,758

 

 

37.7

%

Provision for loan loss

 

 

350

 

 

175

 

 

99.8

%

 

 

 

 

 

 

 

Net interest income after provision

 

 

3,447

 

 

2,583

 

 

33.4

%

Noninterest income

 

 

492

 

 

314

 

 

56.6

%

Noninterest expense

 

 

1,970

 

 

1,741

 

 

13.1

%

 

 

 

 

 

 

 

Pretax income

 

 

1,969

 

 

1,155

 

 

70.4

%

Income taxes

 

 

738

 

 

448

 

 

64.8

%

 

 

 

 

 

 

 

Net income

 

$

1,231

 

$

708

 

 

73.9

%

 

 

 

 

 

 

 

Earnings per common share

 

$

0.40

 

$

0.28

 

 

41.3

%

Weighted average common shares outstanding (1)

 

 

3,061,312

 

 

2,487,234

 

 

 

 


 

 

Year-to-Date
Ending Sept 30

 

 

%

 

 

 

 

 

EARNINGS SUMMARY

 

2005

 

2004

 

Change

 

 

 

 

 

Interest income

 

$

14,604

 

$

10,187

 

 

43.4

%

Interest expense

 

 

4,204

 

 

2,572

 

 

63.4

%

 

 

 

 

 

 

 

Net interest income

 

 

10,400

 

 

7,615

 

 

36.6

%

Provision for loan loss

 

 

900

 

 

585

 

 

53.8

%

 

 

 

 

 

 

 

Net interest income after provision

 

 

9,501

 

 

7,030

 

 

35.2

%

Noninterest income

 

 

1,064

 

 

923

 

 

15.3

%

Noninterest expense

 

 

5,731

 

 

4,925

 

 

16.4

%

 

 

 

 

 

 

 

Pretax income

 

 

4,833

 

 

3,028

 

 

59.6

%

Income taxes

 

 

1,851

 

 

1,175

 

 

57.6

%

 

 

 

 

 

 

 

Net income

 

$

2,983

 

$

1,854

 

 

60.9

%

 

 

 

 

 

 

 

Earnings per common share

 

$

0.99

 

$

0.75

 

 

32.9

%

Weighted average common shares outstanding (1)

 

 

3,012,731

 

 

2,487,132

 

 

 

 



 

 

Three Months
Ending Sept 30

 

 

%

 

AVERAGE BALANCE
SHEET SUMMARY

 

 

 

 

2005

 

2004

 

Change

 

 

 

 

 

Loans, net of unearned income

 

$

245,014

 

$

190,151

 

 

28.9

%

Investment securities & Other

 

 

32,092

 

 

30,320

 

 

5.8

%

Earning assets

 

 

277,106

 

 

220,471

 

 

25.7

%

Total assets

 

 

294,367

 

 

235,397

 

 

25.1

%

Noninterest bearing deposits

 

 

35,371

 

 

29,491

 

 

19.9

%

Interest bearing transaction deposits

 

 

83,245

 

 

66,018

 

 

26.1

%

Certificates of deposit

 

 

105,662

 

 

86,766

 

 

21.8

%

Total deposits

 

 

224,278

 

 

182,275

 

 

23.0

%

Other interest bearing liabilities

 

 

39,125

 

 

33,406

 

 

17.1

%

Shareholder’s equity

 

 

28,901

 

 

18,410

 

 

57.0

%


 

 

Year-to-Date
Ending Sept 30

 

%

 

AVERAGE BALANCE
SHEET SUMMARY

 

 

 

 

2005

 

2004

 

Change

 

 

 

 

 

Loans, net of unearned income

 

$

228,142

 

$

176,210

 

 

29.5

%

Investment securities & Other

 

 

32,393

 

 

27,869

 

 

16.2

%

Earning assets

 

 

260,535

 

 

204,079

 

 

27.7

%

Total assets

 

 

276,952

 

 

217,881

 

 

27.1

%

Noninterest bearing deposits

 

 

33,853

 

 

26,431

 

 

28.1

%

Interest bearing transaction deposits

 

 

78,093

 

 

60,102

 

 

29.9

%

Certificates of deposit

 

 

98,427

 

 

82,293

 

 

19.6

%

Total deposits

 

 

210,373

 

 

168,826

 

 

24.6

%

Other interest bearing liabilities

 

 

37,328

 

 

30,009

 

 

24.4

%

Shareholder’s equity

 

 

27,486

 

 

17,808

 

 

54.3

%


 

 

Three Months
Ending Sept 30

 

Year-to-Date
Ending Sept 30

 

 

 

 

 

SELECTED RATIOS

 

2005

 

2004

 

2005

 

2004

 

 

 

 

 

 

Average equity to average assets

 

 

9.82

%

 

7.82

%

 

9.92

%

 

8.17

%

Average net loans to

 

 

 

 

 

 

 

 

 

 

 

 

 

average total assets

 

 

83.23

%

 

80.78

%

 

82.38

%

 

80.87

%

Return on average assets

 

 

1.67

%

 

1.20

%

 

1.44

%

 

1.13

%

Return on average total equity

 

 

17.03

%

 

15.37

%

 

14.47

%

 

13.88

%

Book value per common share (1)

 

$

9.78

 

$

7.53

 

 

 

 

 

 

 

 

(1)  Per share data is adjusted for a two for one stock split in the form of a 100% stock dividend