Cornerstone Bancshares, Inc. Announces 3rd Quarter 2009 Financial Results on October 23, 2009

Cornerstone Bancshares, Inc. announced financial results for the third quarter of 2009 with a net loss of $697,000 or ($.11) per share. Year-to-date, Cornerstone reports a net loss of $4.2 million or ($.66) per share. The third quarter 2009 loss was a direct result of Cornerstone's continued commitment to reduce problem assets as the Bank provided $1.8 million of additional provision for loan losses. During the third quarter management discovered additional problem loans and expects to fund further loan loss provision during the fourth quarter of 2009. As a result of the additional projected fourth quarter provision, Cornerstone anticipates losing an additional $1 million during the fourth quarter. If the economy does not deteriorate further in 2010, the Bank should see a material improvement in its asset quality metrics and should see improvements in earnings as problem assets become less of a drag on earnings generation. Cornerstone's net interest margin remained at a historically low rate of 3.44% year-to-date; however, management expects an improvement as the amount of nonaccrual loans decreases and the certificate of deposit portfolio re-prices to lower current rates. The Bank is committed to reducing expenses and improving core earnings. Aggressive cost-saving measures are being considered and will be implemented as long as the action does not damage the long-term value of the Bank.

Cornerstone expects earnings to improve during 2010, and expects to make $1.5 million for the year. The majority of the problem assets will be fully provided for, but the income figure for 2010 allows for $2.4 million in provision for any additional loan issues. Not included in this prediction are CPP funds under the TARP program. If the Bank receives an injection of preferred capital then the Bank's profit profile will improve materially.

The Bank's asset quality improved during the third quarter in 2009 as non-performing loans as a percentage of average total loans decreased to 2.28%. Cornerstone had net charge-offs of $3.6 million during the third quarter. The Bank's total non-performing assets decreased to $15.8 million, as problem loans identified during the first half of 2009 progressed through the collection cycle. The Bank believes these numbers have reached their height and will begin reducing steadily during 2010.

Overall, Cornerstone remains well-capitalized and has retained its strong core earnings platform that, once its asset quality issues improve, will return as a high performance Bank.

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 $500 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 September 30, 2009                                                                                      Page 1
(in thousands)
                                            Three Months                                     Year-to-Date
                                            Ending September 30                 %            Ending September 30               %
EARNINGS SUMMARY                               2009              2008           Change          2009             2008          Change
Interest income                             $  6,407          $  7,462          -14.15  %    $  19,699        $  23,279        -15.38  %
Interest expense                               2,766             3,027          -8.62   %       8,428            9,720         -13.30  %
Net interest income                            3,641             4,436          -17.93  %       11,271           13,559        -16.88  %
Provision for loan loss                        1,765             440            301.14  %       9,124            927           884.24  %
Net interest income after provision            1,876             3,996          -53.06  %       2,147            12,632        -83.00  %
Noninterest income                             184               477            -61.35  %       1,178            1,396         -15.62  %
Noninterest expense                            3,279             3,151          4.06    %       10,345           9,464         9.31    %
Pretax income                                  (1,219     )      1,321          -192.27 %       (7,021    )      4,564         -253.81 %
Income taxes                                   (523       )      461            -213.32 %       (2,810    )      1,616         -273.85 %
Net income                                  $  (697       )   $  860            -180.98 %    $  (4,211    )   $  2,948         -242.83 %
Earnings per common share                   $  (0.11      )   $  0.14           -180.33 %    $  (0.66     )   $  0.47          -242.56 %
Weighted average common shares
outstanding (1)                                6,371,202         6,319,718                      6,337,068        6,325,192
                                            Three Months                                     Year-to-Date
AVERAGE BALANCE                             Ending September 30                 %            Ending September 30               %
SHEET SUMMARY                                  2009              2008           Change          2009             2008          Change
Loans, net of unearned income                  354,246           381,342        -7.11   %    $  369,395       $  383,966       -3.79   %
Investment securities & Other                  99,812            48,578         105.47  %       81,926           46,724        75.34   %
Earning assets                                 454,058           429,920        5.61    %       451,321          430,690       4.79    %
Total assets                                   488,888           449,053        8.87    %       472,931          449,257       5.27    %
Noninterest bearing deposits                   39,491            41,204         -4.16   %       41,756           42,688        -2.18   %
Interest bearing transaction deposits          56,799            78,576         -27.72  %       64,970           85,872        -24.34  %
Certificates of deposit                        272,041           186,077        46.20   %       240,179          183,517       30.88   %
Total deposits                                 368,331           305,858        20.43   %       346,905          312,077       11.16   %
Other interest bearing liabilities             91,247            106,041        -13.95  %       94,037           99,347        -5.34   %
Shareholders' equity                           32,849            37,741         -12.96  %       34,526           37,408        -7.70   %
                                            Three Months                                     Year-to-Date
                                            Ending September 30                              Ending September 30
SELECTED RATIOS                                2009              2008                           2009             2008
Average equity to
average assets                                 6.72       %      8.40       %                   7.30      %      8.33      %
Average net loans to
average total assets                           72.46      %      84.92      %                   78.11     %      85.47     %
Return on average assets                       -0.57      %      0.77       %                   -1.19     %      0.87      %
Return on average total equity                 -8.48      %      9.12       %                   -16.26    %      10.51     %
Actual Equity on September 30               $  32,306,705     $  37,487,451
Actual # shares outstanding on September 30    6,372,937         6,319,718
Book value per common share                 $  5.07           $  5.93

SOURCE: Cornerstone Bancshares, Inc.

Cornerstone Bancshares, Inc. 
Frank Hughes, 423-385-3009 
President & Treasurer