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Cornerstone Bancshares, Inc. saw its average assets grow 5.3% from a year ago, while average deposits grew 5.5%. We expect this steady pattern of growth to continue through the remainder of 2009. As the economy continues its downward trend, the Company's loan growth has stalled, and as long as the economy remains weak the expectation for a substantial reversal of this trend are remote for the reminder of 2009. The slowdown in the economy has weakened commercial cash flow and subsequently made commercial lending more difficult in light of our strengthened credit underwriting standards. Operating earnings, before loan loss expenses and taxes, have also weakened from first quarter last year of $1.9 million to $963,000 for the first quarter 2009. Even though the Company's average earning assets grew at 5.2% since last year, the lower net interest margin resulted in lower operating earnings. This is primarily the result of the Company's cost of funds not decreasing as rapidly as the earning rates on assets. Cost of funds is market driven, and in this highly competitive market, deposit rates have been stubbornly slow to move lower. The Company's net interest margin for the first quarter last year was 4.33%, compared to 3.61% for the first quarter 2009. This historically low net interest margin will not move higher until the economy shows a more substantial improvement. The continuing recession has also caused the Company's credit quality in the loan portfolio to weaken. Cornerstone Bancshares is aggressively allocating more to the loss provision to adequately reserve for those potential loan losses. We expect subsequent quarters to have lower additions as the economy begins to inch its way into a recovery phase later this year. We have implemented enhanced credit quality controls to reduce our credit risk. In addition, we are partnering with our business clients to help them succeed through these troubled times. The first quarter of 2009 is expected to be the worst quarter for additions to the loss reserve. The recession, a lower net interest margin and weakened credit quality are reflected in the Company's first quarter net income loss of $2.91 million. Compared to the first quarter 2008 profit of $1.02 million, the difference represents a negative change of 387%. The remainder of 2009 should be profitable.
Cornerstone Bancshares, Inc. is a one-bank holding company serving the Chattanooga, Tennessee MSA, with five full-service branches and one loan production office in Dalton, GA and one loan production office in Knoxville, TN and $475 million in assets specializing in business financial services.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which contains a safe harbor for forward-looking statements. The Company relies on this safe harbor in making such disclosures. The statements are based on management's current beliefs and assumptions about expectations, estimates, strategies and projections. These statements are not guarantees of future performance or results and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements.
CORNERSTONE BANCSHARES, INC.
Selected Financial Information
as of March 31, 2009
(in thousands)
Three Months
Ending March 31 %
--------------- -
EARNINGS SUMMARY 2009 2008 Change
---------------- ---- ---- ------
Interest income $6,864 $8,060 -14.8%
Interest expense 2,871 3,470 -17.3%
----- -----
Net interest income 3,993 4,590 -13.0%
Provision for loan loss 5,725 317 1706.0%
----- ---
Net interest income after provision (1,732) 4,273 -140.5%
Noninterest income 263 394 -33.3%
Noninterest expense 3,293 3,097 6.3%
----- -----
Pretax income (4,761) 1,571 -403.1%
Income taxes (1,850) 556 -432.7%
------ ---
Net income $(2,912) $1,015 -386.9%
======= ======
Earnings per common share $(0.46) $0.16 -387.6%
Weighted average common shares
outstanding (1) 6,319,718 6,336,202
Year-to-Date
Ending March 31 %
--------------- -
EARNINGS SUMMARY 2009 2008 Change
---------------- ---- ---- ------
Interest income $6,864 $8,060 -14.8%
Interest expense 2,871 3,470 -17.3%
----- -----
Net interest income 3,993 4,590 -13.0%
Provision for loan loss 5,725 317 1706.0%
----- ---
Net interest income after provision (1,732) 4,273 -140.5%
Noninterest income 263 394 -33.3%
Noninterest expense 3,293 3,097 6.3%
----- -----
Pretax income (4,761) 1,571 -403.1%
Income taxes (1,850) 556 -432.7%
------ ---
Net income $(2,912) $1,015 -386.9%
======= ======
Earnings per common share $(0.46) $0.16 -387.6%
Weighted average common shares
outstanding (1) 6,319,718 6,336,202
Three Months
AVERAGE BALANCE Ending March 31 %
--------------- -
SHEET SUMMARY 2009 2008 Change
---- ---- ------
Loans, net of unearned income $383,739 $386,056 -0.6%
Investment securities & Other 67,042 42,456 57.9%
Earning assets 450,781 428,512 5.2%
Total assets 470,063 446,473 5.3%
Noninterest bearing deposits 43,064 44,503 -3.2%
Interest bearing transaction deposits 69,697 93,410 -25.4%
Certificates of deposit 225,246 182,539 23.4%
Total deposits 338,007 320,452 5.5%
Other interest bearing liabilities 95,983 86,642 10.8%
Shareholder's equity 36,926 37,131 -0.6%
Year-to-Date
AVERAGE BALANCE Ending March 31 %
--------------- -
SHEET SUMMARY 2009 2008 Change
---- ---- ------
Loans, net of unearned income $383,739 $386,056 -0.6%
Investment securities & Other 67,042 42,456 57.9%
Earning assets 450,781 428,512 5.2%
Total assets 470,063 446,473 5.3%
Noninterest bearing deposits 43,064 44,503 -3.2%
Interest bearing transaction deposits 69,697 93,410 -25.4%
Certificates of deposit 225,246 182,539 23.4%
Total deposits 338,007 320,452 5.5%
Other interest bearing liabilities 95,983 86,642 10.8%
Shareholder's equity 36,926 37,131 -0.6%
Three Months Year-to-Date
Ending March 31 Ending March 31
--------------- ------------
SELECTED RATIOS 2009 2008 2009 2008
---- ---- ---- ----
Average equity to
average assets 7.86% 8.32% 7.86% 8.32%
Average net
loans to average
total assets 81.64% 86.47% 81.64% 86.47%
Return on average
assets -2.48% 0.91% -2.48% 0.91%
Return on average
total equity -31.54% 10.93% -31.54% 10.93%
Actual Equity
on Mar. 31, $33,707,074 $36,754,223
Actual # shares
outstanding
on Mar. 31, 6,319,718 6,319,718
Book value per
common share $5.33 $5.82
SOURCE Cornerstone Bancshares, Inc.
http://www.cscbank.com
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