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 13, 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 October 13, 2006, the Registrant issued a press release reporting earnings results for the fiscal quarter ended September 30, 2006.


Item 9.01

Financial Statements and Exhibits.

 

(d)          Exhibits

 

 

 

99.1        Press release dated October 13, 2006 reporting earnings results for the fiscal quarter ended September 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.

 

CORNERSTONE BANCSHARES, INC.

 

 

(Registrant)

 

 

 

Date:  October 17, 2006

 

 

 

 

 

 

By:

/s/ Nathaniel F. Hughes

 

 

 

 

Nathaniel F. Hughes,

 

 

President and Chief Operating Officer


Exhibit 99.1

Cornerstone Bancshares, Inc. Announces 3rd Quarter 2006 Financial Results

HIXSON, Tenn., Oct. 13 /PRNewswire-FirstCall/ -- Cornerstone Bancshares, Inc. (OTC Bulletin Board: CSBQ) today announced the following:

Cornerstone Bancshares, Inc saw its 3rd quarter earnings increase to $1.55 million or $.48 a share and $4.37 million year to date an increase of 46.4% while book earnings per share increased to $1.35 versus $.99, an increase of 36.4%. 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 5.72%. Leading the growth in deposits were certificates of deposit which on average grew 28.9% over the same period in 2005. The Bank experienced continued exceptional loan growth as the loan portfolio finished the quarter with an average 3rd quarter balance of $287 million, up 17.3% 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 $350 million in assets for the 3rd quarter of 2006 up from $294 million during the 3rd quarter of 2005 an increase of 18.7%. 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.

The asset quality improved slightly and remained at the superior level during the first three quarters of 2006 as non-performing assets as a percentage of average total loans remained at 0.36%. The Bank had net charge offs of $90 thousand during the third quarter and $203 thousand year to date, while providing $1,058 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 2006, and as a result Cornerstone was able to maintain a 1.53% allowance for possible loan losses compared to average loans.

Cornerstone Bancshares Inc. 3rd quarter 2006 earnings of $1.55 million represent a 25.7% increase over the 3rd quarter in 2005 earnings of $1,230 thousand. Earnings per share for the 3rd quarter 2006 were $0.48 compared to $0.40 per share for the 3rd quarter of 2005.

Cornerstone Bancshares, Inc. is a one-bank holding company serving the Chattanooga, Tennessee MSA with 5 branches and $350 million in assets specializing in business financial services.


CORNERSTONE BANCSHARES, INC.
Selected Financial Information
as of September 30, 2006
(in thousands)

 

 

Three Months
Ending September 30

 

 

 

 

 

%
Change

 

EARNINGS SUMMARY

 

2006

 

2005

 

 

 

 

 

 

Interest income

 

$

7,534

 

$

5,438

 

 

38.54

%

Interest expense

 

 

2,781

 

 

1,642

 

 

69.37

%

Net interest income

 

 

4,753

 

 

3,796

 

 

25.21

%

Provision for loan loss

 

 

205

 

 

350

 

 

-41.43

%

Net interest income after provision

 

 

4,548

 

 

3,446

 

 

31.98

%

Noninterest income

 

 

418

 

 

492

 

 

-15.04

%

Noninterest expense

 

 

2,423

 

 

1,970

 

 

22.99

%

Pretax income

 

 

2,543

 

 

1,968

 

 

29.22

%

Income taxes

 

 

997

 

 

738

 

 

35.09

%

Net income

 

$

1,546

 

$

1,230

 

 

25.69

%

Earnings per common share

 

$

0.48

 

$

0.40

 

 

20.00

%

Weighted average common shares outstanding (1)

 

 

3,250,815

 

 

3,061,312

 

 

 

 


 

 

Year-to-Date
Ending September 30

 

 

 

 

 

%
Change

 

EARNINGS SUMMARY

 

2006

 

2005

 

 

 

 

 

 

Interest income

 

$

21,229

 

$

14,604

 

 

45.36

%

Interest expense

 

 

7,375

 

 

4,204

 

 

75.43

%

Net interest income

 

 

13,854

 

 

10,400

 

 

33.21

%

Provision for loan loss

 

 

1,058

 

 

900

 

 

17.56

%

Net interest income after provision

 

 

12,796

 

 

9,500

 

 

34.69

%

Noninterest income

 

 

1,535

 

 

1,064

 

 

44.27

%

Noninterest expense

 

 

7,221

 

 

5,731

 

 

26.00

%

Pretax income

 

 

7,110

 

 

4,833

 

 

47.11

%

Income taxes

 

 

2,745

 

 

1,851

 

 

48.30

%

Net income

 

$

4,365

 

$

2,982

 

 

46.38

%

Earnings per common share

 

$

1.35

 

$

0.99

 

 

36.36

%

Weighted average common shares outstanding (1)

 

 

3,235,682

 

 

3,012,731

 

 

 

 


 

 

Three Months
Ending September 30

 

 

 

 

 

%
Change

 

AVERAGE BALANCE SHEET SUMMARY

 

2006

 

2005

 

 

 

 

 

 

Loans, net of unearned income

 

 

287,354

 

$

245,014

 

 

17.28

%

Investment securities & Other

 

 

43,486

 

 

32,092

 

 

35.50

%

Earning assets

 

 

330,840

 

 

277,106

 

 

19.39

%

Total assets

 

 

349,508

 

 

294,367

 

 

18.73

%

Noninterest bearing deposits

 

 

35,752

 

 

35,371

 

 

1.08

%

Interest bearing transaction deposits

 

 

92,026

 

 

83,245

 

 

10.55

%

Certificates of deposit

 

 

136,164

 

 

105,662

 

 

28.87

%

Total deposits

 

 

263,942

 

 

224,278

 

 

17.69

%

Other interest bearing liabilities

 

 

46,708

 

 

39,125

 

 

19.38

%

Shareholder’s equity

 

 

36,359

 

 

28,901

 

 

25.81

%



 

 

Year-to-Date
Ending September 30

 

 

 

 

 

%
Change

 

AVERAGE BALANCE SHEET SUMMARY

 

2006

 

2005

 

 

 

 

 

 

Loans, net of unearned income

 

$

280,166

 

$

228,142

 

 

22.80

%

Investment securities & Other

 

 

38,817

 

 

32,393

 

 

19.83

%

Earning assets

 

 

318,983

 

 

260,535

 

 

22.43

%

Total assets

 

 

338,902

 

 

276,952

 

 

22.37

%

Noninterest bearing deposits

 

 

36,139

 

 

33,853

 

 

6.75

%

Interest bearing transaction deposits

 

 

91,970

 

 

78,093

 

 

17.77

%

Certificates of deposit

 

 

129,905

 

 

98,427

 

 

31.98

%

Total deposits

 

 

258,014

 

 

210,373

 

 

22.65

%

Other interest bearing liabilities

 

 

43,715

 

 

37,328

 

 

17.11

%

Shareholder’s equity

 

 

34,917

 

 

27,486

 

 

27.04

%


 

 

Three Months
Ending September 30

 

 

 

 

SELECTED RATIOS

 

2006

 

2005

 

 

 

 

Average equity to average assets

 

 

10.40

%

 

9.82

%

Average net loans to average total assets

 

 

82.22

%

 

83.23

%

Return on average assets

 

 

1.77

%

 

1.67

%

Return on average total equity

 

 

17.01

%

 

17.02

%

Actual Equity on September 30,

 

$

36,864,528 

 

$

30,042,401

 

Actual # shares outstanding on September 30

 

 

3,253,159

 

 

3,072,334

 

Book value per common share

 

$

11.33

 

$

9.78

 


 

 

Year-to-Date
Ending September 30

 

 

 

 

SELECTED RATIOS

 

2006

 

2005

 

 

 

 

Average equity to average assets

 

 

10.30

%

 

9.92

%

Average net loans to average total assets

 

 

82.67

%

 

82.38

%

Return on average assets

 

 

1.72

%

 

1.44

%

Return on average total equity

 

 

16.67

%

 

14.47

%

Actual Equity on September 30,

 

 

 

 

 

 

 

Actual # shares outstanding on September 30

 

 

 

 

 

 

 

Book value per common share

 

 

 

 

 

 

 

SOURCE  Cornerstone Bancshares, Inc.
     -0-                                        10/13/2006
     /CONTACT:  Frank Hughes, President & COO of Cornerstone Bancshares, Inc., +1-423-385-3009/
     /Web site:  http://www.cscbank.com /