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) July 17, 2006
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CORNERSTONE BANCSHARES, INC.
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(Exact name of registrant as specified in its charter)
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Tennessee
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000-30497
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62-1175427
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(I.R.S. Employer
Identification No.)
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5319 Highway 153, Chattanooga, Tennessee
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37343
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code (423) 385-3000
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(Former name or former address, if changed since last report.)
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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):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 2.02. Results of Operations and Financial Condition
On July 14, 2006, the Registrant issued a press release reporting earnings results for the fiscal quarter ended June 30, 2006.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1 Press release dated July 14, 2006 reporting earnings results for the fiscal quarter ended June 30, 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.
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CORNERSTONE BANCSHARES, INC.
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(Registrant)
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Date: July 17, 2006
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By:
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\s\ Nathaniel F. Hughes
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Nathaniel F. Hughes,
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President and Chief Operating Officer
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Exhibit 99.1
Cornerstone Bancshares, Inc. Announces 2nd Quarter 2006 Financial Results
HIXSON, Tenn., July 14 /PRNewswire-FirstCall/ -- Cornerstone Bancshares, Inc. (OTC Bulletin Board: CSBQ) today announced the following:
Cornerstone
Bancshares, Inc. saw its 2nd quarter earnings increase to $1.46 million or $.45
a share and $2.82 million year to date, an increase of 60.8% while book earnings
per share increased to $.87 versus $.59, an increase of 47.5%. The
earnings growth was the result of continued balance sheet growth and core
deposit growth coupled with an increase in Cornerstone’s net interest
margin to 5.89%. Leading the growth in deposits were certificates of
deposit which on average grew 33.7% over the same period in 2005. The Bank
experienced continued exceptional loan growth as the loan portfolio finished the
quarter with an average 2nd quarter balance of $281 million, up 23.2% over the
same period in 2005. The loan growth was concentrated in the business
sector especially in asset based and commercial real estate lending as more
customers choose customer service and went with a local organization that
partnered with its customers. Asset growth followed in line with loan
growth as the Bank averaged $338 million in assets for the 2nd quarter of 2006
up from $279 million during the 2nd quarter of 2005 an increase of 21.0%.
The elevated net interest margin is due to increased number of participated loan
servicing fees and a timing difference between the Bank’s repricing of
assets and liabilities.
Due to the above
mentioned performance Cornerstone’s Board announces an updated earnings
projection for nominal EPS during 2006. EPS guidance has been increased
from $1.62 per share to $1.75 per share.
The asset
quality improved slightly and remained at the superior level during the first
half of 2006 as non-performing assets as a percentage of average total loans
decreased to 0.36%. The Bank had net charge offs of $82 thousand during
the second quarter and $113 thousand year to date, while providing $853 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
two quarters of 2006, and as a result Cornerstone was able to maintain a 1.52%
allowance for possible loan losses compared to average loans.
Cornerstone Bancshares, Inc. 2nd quarter 2006 earnings of $1.46 million represent a 60.4% increase over the 2nd quarter in 2005 earnings of $912 thousand. Earnings per share for the 2nd quarter 2006 were $0.45 compared to $0.30 per share for the 2nd quarter of 2005.
Cornerstone Bancshares, Inc. is a one-bank holding company serving the Chattanooga, Tennessee MSA with 5 branches and $340 million in assets specializing in business financial services.
CORNERSTONE BANCSHARES, INC.
Selected Financial Information
as of June 30, 2006
(in thousands)
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Three Months
Ending June 30
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%
Change
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EARNINGS SUMMARY
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2006
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2005
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Interest income
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$
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7,184
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$
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4,844
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48.31
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%
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Interest expense
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2,438
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1,427
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70.85
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%
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Net interest income
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4,746
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3,417
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38.89
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%
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Provision for loan loss
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475
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340
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39.71
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%
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Net interest income after provision
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4,271
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3,077
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38.80
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%
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Noninterest income
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668
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271
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146.49
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%
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Noninterest expense
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2,541
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1,857
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36.83
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%
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Pretax income
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2,398
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1,491
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60.83
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%
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Income taxes
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935
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579
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61.49
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%
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Net income
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$
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1,463
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$
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912
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60.42
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%
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Earnings per common share
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$
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0.45
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$
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0.30
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50.00
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%
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Weighted average common shares outstanding
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3,241,674
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3,028,037
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Year-to-Date
Ending June 30
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%
Change
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EARNINGS SUMMARY
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2006
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2005
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Interest income
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$
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13,695
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$
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9,166
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49.41
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%
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Interest expense
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4,594
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2,563
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79.24
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%
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Net interest income
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9,101
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6,603
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37.83
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%
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Provision for loan loss
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853
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550
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55.09
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%
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Net interest income after provision
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8,248
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6,053
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36.26
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%
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Noninterest income
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1,102
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489
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125.36
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%
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Noninterest expense
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4,784
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3,677
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30.11
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%
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Pretax income
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4,566
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2,865
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59.37
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%
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Income taxes
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1,748
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1,113
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57.05
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%
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Net income
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$
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2,818
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$
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1,752
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60.84
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%
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Earnings per common share
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$
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0.87
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$
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0.59
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47.46
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%
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Weighted average common shares outstanding
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3,228,545
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2,988,038
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Three Months
Ending June 30
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%
Change
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AVERAGE BALANCE SHEET SUMMARY
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2006
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2005
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Loans, net of unearned income
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281,321
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$
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228,367
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23.19
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%
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Investment securities & Other
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37,045
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34,945
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6.01
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%
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Earning assets
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318,366
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263,312
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20.91
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%
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Total assets
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338,399
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279,585
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21.04
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%
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Noninterest bearing deposits
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36,032
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32,720
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10.12
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%
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Interest bearing transaction deposits
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96,915
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81,977
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18.22
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%
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Certificates of deposit
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124,507
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98,588
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26.29
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%
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Total deposits
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257,454
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213,285
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20.71
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%
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Other interest bearing liabilities
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43,796
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36,805
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18.99
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%
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Shareholder’s equity
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34,870
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27,768
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25.58
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%
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Year-to-Date
Ending June 30
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%
Change
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AVERAGE BALANCE SHEET SUMMARY
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2006
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2005
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Loans, net of unearned income
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$
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276,512
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$
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219,567
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25.94
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%
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Investment securities & Other
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36,443
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32,547
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11.97
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%
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Earning assets
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312,955
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252,114
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24.13
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%
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Total assets
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333,511
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268,102
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24.40
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%
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Noninterest bearing deposits
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36,336
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33,082
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9.84
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%
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Interest bearing transaction deposits
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91,944
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75,474
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21.82
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%
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Certificates of deposit
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126,723
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94,750
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33.74
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%
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Total deposits
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255,003
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203,306
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25.43
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%
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Other interest bearing liabilities
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42,194
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36,414
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15.87
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%
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Shareholder’s equity
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34,183
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26,768
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27.70
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%
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Three Months
Ending June 30
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Year-to-Date
Ending June 30
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SELECTED RATIOS
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2006
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2005
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2006
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2005
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Average equity to average assets
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10.30
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%
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9.93
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%
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10.25
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%
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9.98
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%
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Average net loans to average total assets
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83.13
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%
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81.68
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%
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82.91
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%
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81.90
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%
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Return on average assets
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1.73
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%
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1.30
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%
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0.84
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%
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0.65
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%
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Return on average total equity
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16.78
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%
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13.14
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%
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8.24
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%
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6.55
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%
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Actual Equity on June 30,
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$
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35,153,346
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$
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28,386,936
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Actual # shares outstanding on June 30,
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3,243,453
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3,051,334
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Book value per common share
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$
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10.84
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$
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9.30
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SOURCE Cornerstone Bancshares, Inc.
-0- 07/14/2006
/CONTACT: Frank Hughes, President & COO of Cornerstone Bancshares, Inc.,
+1-423-385-3009/
/Web site: http://www.cscbank.com /