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): October 17, 2003
CORNERSTONE BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Tennessee 000-30497 62-1175427
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(State of Incorporation) (Commission File No.) (IRS Employer
Identification No.)
5319 Highway 153,
Chattanooga, Tennessee 37343
(Address of principal executive offices)
(423) 385-3000
(Registrant's telephone number, including area code)
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(Former name or former address, if changed since last report.)
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Item 9. Regulation FD Disclosure.
This information furnished under "Item 9. Regulation FD Disclosure" is provided under "Item 12. Results of Operation and Financial Condition" in accordance with SEC Release No. 33-8216.
On October 17, 2003, the Registrant issued a press release reporting earnings results for the fiscal quarter ending on September 30, 2003.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
99.1 Press release dated October 17, 2003 reporting earnings results for the fiscal quarter ending on September 30, 2003.
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.
Date: October 17, 2003 By: \s\ Nathaniel F. Hughes
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Nathaniel F. Hughes,
President and Treasurer
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EXHIBIT INDEX
Exhibit No. Description
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99.1 Press release dated October 17, 2003 reporting earnings
results for the fiscal quarter ending on September 30, 2003.
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Exhibit 99.1
HIXSON, Tenn., Oct. 17 /PRNewswire-FirstCall/ -- Cornerstone Bancshares, Inc. (OTC Bulletin Board: CSBQ) today announced the following:
Cornerstone Bancshares, Inc. saw its 3rd quarter earnings increase to $492 thousand or $.40 a share for the third quarter and $1.394 million year to date or $1.13 a share. Due to these results the company is adjusting its earning guidance from $1.45 per share to $1.50 per share for 2003; the second increase in as many quarters and is very optimistic about future earnings growth. Loan growth is at 39% over the same quarter in 2002 but saw a leveling of loan growth during the historically slow third quarter on a quarter-to-quarter basis. The Bank continues to see loan growth in the business lending part of the loan portfolio and is looking for ways to further leverage this segment of the Chattanooga market. Three factors have made Cornerstone's earnings growth so explosive first, the Bank, due to loan origination fees, has a very high net interest margin 4.92% when compared to peers, second, earning assets as a percentage of total assets have grown to 94%, third, non interest income has increased 52% compared with 2002 third quarter. All of which bode well for future earnings. On the horizon the Bank is in the final stages of completing the biding process for our new Ooltewah Branch and will commence the construction during the 4th quarter of 2003 and expects the branch to open during the first quarter of 2004.
The asset quality remained at the superior level during the first half of 2003 as non-performing loans as a percentage of average total loans dropped to 0.06% while past due loans as a percentage of total loans dropped to 0.29%. The Bank continued to recover more loans than it charged off for the second quarter in a row and as a result was able to increase the loan loss allowance to 1.44% with a $255 thousand provision for the quarter. The provision was in response to a possible loan loss that may occur during the fourth quarter of 2003. The Bank believes strongly that the most conservative approach should be used with the loan loss allowance and should align with any risk associated with the loan portfolio.
Cornerstone Bancshares, Inc. 3rd quarter 2003 earnings of $492 thousand represents an 85.0% increase over the 3rd quarter in 2002 earnings of $266 thousand. Earnings per share for the 3rd quarter 2003 was $0.40 compared to $0.22 per share for the 3rd quarter of 2002. Cornerstone is confident this earnings growth will continue throughout 2003 and anticipates earnings per share to grow to $1.50 a share an increase of 75% over 2002.
Cornerstone Bancshares, Inc. is a one-bank holding company serving the Chattanooga, Tennessee MSA with 4 branches and $185 million in assets specializing in business financial services.
CORNERSTONE BANCSHARES, INC.
Selected Financial Information
as of September 30, 2003
(in thousands)
Three Months Year-to-Date
Ending Sept 30 % Ending Sept 30 %
EARNINGS SUMMARY 2003 2002 Change 2003 2002 Change
Interest income $ 2,903 $ 2,455 18.23% $ 8,347 $ 7,109 17.43%
Interest expense 797 807 -1.30% 2,414 2,481 -2.71%
Net interest
income 2,107 1,648 27.79% 5,933 4,627 28.22%
Provision for loan
loss 255 150 70.00% 410 420 -2.38%
Net interest income
after provision 1,852 1,498 23.57% 5,523 4,207 31.28%
Noninterest income 360 235 52.75% 934 716 30.40%
Noninterest
expense 1,412 1,290 9.43% 4,191 3,672 14.14%
Pretax income 799 443 80.20% 2,266 1,252 81.06%
Income taxes 308 178 73.03% 873 499 74.98%
Net income $ 492 $ 266 85.00% $ 1,393 $ 753 85.09%
Earnings per
common share $ 0.40 $ 0.22 $ 1.13 $ 0.61
Weighted average
common shares
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outstanding 1,243,167 1,233,167 1,238,167 1,233,167
Three Months Year-to-Date
AVERAGE BALANCE Ending Sept 30 % Ending Sept 30 %
SHEET SUMMARY 2003 2002 Change 2003 2002 Change
Loans, net of
unearned
income $148,873 $107,130 38.96% $137,585 $104,371 31.82%
Investment
securities &
Other 23,391 24,713 -5.35% 25,765 24,286 6.09%
Earning assets 172,264 131,843 30.66% 163,350 128,657 26.97%
Total assets 183,144 143,967 27.21% 174,343 140,428 24.15%
Noninterest bearing
deposits 18,742 15,569 20.39% 17,448 13,985 24.76%
Interest bearing
transaction
deposits 47,251 39,649 19.17% 46,797 38,488 21.59%
Certificates of
deposit 75,693 62,603 20.91% 72,217 63,607 13.54%
Total deposits 141,687 117,820 20.26% 136,462 116,080 17.56%
Other interest
bearing
liabilities 23,849 10,520 126.71% 20,817 9,027 130.61%
Shareholder's
equity 16,352 14,802 10.47% 15,898 14,509 9.57%
Three Months Year-to-Date
Ending Sept 30 Ending Sept 30
SELECTED RATIOS 2003 2002 2003 2002
Average equity to
average assets 8.93% 10.28% 9.12% 10.33%
Average net loans to
average total assets 81.29% 74.41% 78.92% 74.32%
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Return on average assets 1.07% 0.74% 1.07% 0.71%
Return on average total
equity 12.02% 7.18% 11.69% 6.92% Book value per common share $13.15 $12.00 |
CORNERSTONE BANCSHARES, INC.
Selected Financial Information
as of September 30, 2003
(in thousands)
NONPERFORMING ASSETS
2003 2002
Quarter Ending 30-Sep 30-Jun 31-Mar 31-Dec 30-Sep
Avg loans, less
investor loans $ 148,873 $ 136,473 $ 125,363 $ 117,486 $ 107,130
Nonaccrual loans 83 0 49 49 125
Repossessed assets 0 4 0 0 40
Other real estate,
net 344 240 240 240 436
Total nonperforming
assets $ 428 $ 244 $ 289 $ 289 $ 601
Loans 90 days past
due $ 0 $ 0 $ 0 $ 0 $ 0
Total nonperforming
assets as a percentage
of average loans and
OREO 0.29% 0.18% 0.23% 0.25% 0.56%
Loans ninety days past
due as a percentage of
average loans 0.00% 0.00% 0.00% 0.00% 0.00%
Total nonperforming loans
as a percentage of
average loans 0.06% 0.00% 0.04% 0.04% 0.12%
ALLOWANCE FOR LOAN LOSS
2003 2002
Quarter Ending 30-Sep 30-Jun 31-Mar 31-Dec 30-Sep
Balance at beginning
of period $ 1,828 $ 1,692 $ 1,591 $ 1,351 $ 1,323
Loans charged-off 8 39 68 40 109
Loan recoveries 16 125 63 17 (13)
Net Charge-offs
(recoveries) (8) (86) 5 23 122
Add provision for
loan losses 255 50 105 263 150
Balance at end of
period $ 2,091 $ 1,828 $ 1,692 $ 1,591 $ 1,351
Loan loss reserve as
a percentage of
average loans 1.40% 1.34% 1.35% 1.35% 1.26%
Loan loss reserve as
a percentage of
nonperforming assets 488.83% 748.80% 585.99% 551.05% 224.62%
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Annualized net charge-offs
as a percentage of
average loans- QTD -0.02% -0.25% 0.01% 0.08% 0.46%
Annualized net charge-offs
as a percentage of
average loans- YTD -0.09% -0.12% 0.01% 0.33% 0.50%
CORNERSTONE BANCSHARES, INC.
CONSOLIDATED AVERAGE BALANCE
INTEREST INCOME/EXPENSE AND
YIELD/RATES
Taxable Equivalent
Basis Three months ended
(in thousands) September 30
Assets 2003 2002
Average Income/ Yield/ Average Income/ Yield/
Earning assets: Balance Expense Rate Balance Expense Rate
Loans, net of unearned
income $148,873 $2,672 7.20% $107,130 $2,167 8.03%
Investment securities 23,079 229 4.09% 22,461 274 4.83%
Other earning assets 312 2 2.00% 2,252 14 2.54%
Total earning assets 172,264 $2,903 6.77% 131,843 $2,455 7.39%
Allowance for loan
losses (1,916) (1,312)
Cash and other assets 12,796 13,437
TOTAL ASSETS $183,144 $143,967
Liabilities and
Shareholder's Equity
Interest bearing liabilities:
Interest bearing demand
deposits $22,038 $12 0.22% $20,155 $59 1.17%
Savings deposits 6,885 9 0.52% 5,961 19 1.24%
MMDA's 18,328 68 1.49% 13,533 72 2.11%
Time deposits of
$100,000 or less 57,227 394 2.76% 44,119 388 3.49%
Time deposits of
$100,000 or more 18,467 143 3.10% 18,484 172 3.69%
Federal funds purchased
and securities sold
under agreements to
repurchase 6,449 22 1.39% 2,128 8 1.47%
Other borrowings 17,400 148 3.41% 8,391 89 4.21%
Total interest bearing
liabilities 146,794 797 2.18% 112,771 807 2.84%
Net interest spread $2,107 4.60% $1,648 4.55%
Noninterest bearing
demand deposits 18,742 15,569
Accrued expenses and
other liabilities 1,256 825
Shareholder's equity 16,352 14,802
TOTAL LIABILITIES AND
SHAREHOLDER'S EQUITY $183,144 $143,967
Net yield on earning
assets 4.92% 4.96%
Taxable equivalent adjustment:
Loans 0 0
Investment securities 6 6
Total adjustment 6 6
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CORNERSTONE BANCSHARES, INC.
CONSOLIDATED AVERAGE BALANCE
INTEREST INCOME/EXPENSE AND
YIELD/RATES
Taxable Equivalent
Basis Year-to-Date
(in thousands) September 30
Assets 2003 2002
Average Income/ Yield/ Average Income/ Yield/
Earning assets: Balance Expense Rate Balance Expense Rate
Loans, net of unearned
income $137,585 $7,587 7.37% $104,371 $6,216 7.96%
Investment securities 24,051 743 4.23% 22,077 871 5.37%
Other earning assets 1,714 17 1.31% 2,209 37 2.23%
Total earning assets 163,350 $8,347 6.85% 128,657 $7,124 7.40%
Allowance for loan
losses (1,766) (1,313)
Cash and other assets 12,759 13,085
TOTAL ASSETS $174,343 $140,429
Liabilities and
Shareholder's Equity
Interest bearing liabilities:
Interest bearing demand
deposits $21,776 $51 0.31% $20,602 $190 1.23%
Savings deposits 6,837 38 0.74% 5,622 52 1.24%
MMDA's 18,184 218 1.61% 12,264 193 2.11%
Time deposits of
$100,000 or less 53,336 1,186 2.97% 44,400 1,242 3.74%
Time deposits of
$100,000 or more 18,881 460 3.26% 19,207 560 3.90%
Federal funds purchased
and securities sold
under agreements to
repurchase 5,125 49 1.29% 2,119 23 1.46%
Other borrowings 15,692 411 3.51% 6,908 220 4.26%
Total interest bearing
liabilities 139,831 2,414 2.31% 111,122 2,481 2.99%
Net interest spread $5,933 4.54% $4,643 4.42%
Noninterest bearing
demand deposits 17,448 13,985
Accrued expenses and
other liabilities 1,166 813
Shareholder's equity 15,898 14,509
TOTAL LIABILITIES AND
SHAREHOLDER'S EQUITY $174,343 $140,429
Net yield on earning
assets 4.87% 4.82%
Taxable equivalent adjustment:
Loans 0 0
Investment securities 18 15
Total adjustment 18 15
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CORNERSTONE BANCSHARES, INC.
Selected Financial Information
as of September 30, 2003
(in thousands)
NONINTEREST INCOME Three Months Year-to-Date
Ending Sept 30 % Ending Sept 30 %
2003 2002 Change 2003 2002 Change
Service charges on
deposits $176 $152 15.44% $486 $408 18.91%
Other fee income 175 72 142.66% 420 269 55.92%
Other income 9 11 -19.10% 29 39 -25.81%
TOTAL $360 $235 52.75% $934 $716 30.40%
NONINTEREST EXPENSE Three Months Year-to-Date
Ending Sept 30 % Ending Sept 30 %
2003 2002 Change 2003 2002 Change
Salaries and benefits $824 $661 24.67% $2,380 $1,905 24.94%
Net occupancy expense 91 92 -0.07% 288 264 9.27%
Furniture & Equipment 114 97 17.27% 318 271 17.22%
Other Operating Expense 382 440 -13.21% 1,205 1,232 -2.21%
TOTAL $1,412 $1,290 9.43% $4,191 $3,672 14.14%
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SOURCE Cornerstone Bancshares, Inc.
-0- 10/17/2003
/CONTACT: Frank Hughes, Executive Vice President & Treasurer of
Cornerstone Bancshares, Inc., +1-423-385-3009, or fax, +1-423-385-3100/
(CSBQ)
CO: Cornerstone Bancshares, Inc.
ST: Tennessee
IN: FIN OTC
SU: ERN ERP