Cornerstone Community Bank Reports Financial Results for the Third Quarter Ended September 30, 2012

RED BLUFF, Calif.--(BUSINESS WIRE)--Cornerstone Community Bank, (OTCBB: CRSB), announced today its financial results for the third quarter ended September 30, 2012.

“The bank continues to make solid progress in loan and deposit growth”

The Bank reported net income of $414,000 for the three months ended September 30, 2012 representing an increase of $237,000, or 134%, compared to net income of $177,000 for the same period last year. Diluted earnings per share for the three months ended September 30, 2012 were $0.32 compared to $0.14 for the same period last year. Net income for the nine months ended September 30, 2012 was $886,000, or $0.70 per diluted share compared to net income of $495,000, or $0.40 per diluted share, for the first nine months of 2011.

The return on average assets for the three months ended September 30, 2012 was 1.54% compared to 0.89% for the same period last year. The return on average equity was 14.88% for the three months ended September 30, 2012 compared to 7.20% for the same period last year. For the nine months ended September 30, 2012, the return on average assets was 1.17% and the return on average equity was 11.03% compared to 0.84% and 7.02%, respectively, for the first nine months of 2011.

“The bank continues to make solid progress in loan and deposit growth,” stated Jeffrey Finck, President and CEO. “We look forward to our continued investments in both the Red Bluff and Redding communities.”

Net Interest Income

Net interest income of $1,063,000 for the quarter ended September 30, 2012 represented an increase of $99,000, or 10%, from $964,000 for the same quarter one year earlier. The net interest margin decreased to 4.10% during the quarter ended September 30, 2012 compared to 5.04% during the same quarter last year. For the nine months ended September 30, 2012, net interest income was $3,240,000 compared to $2,783,000 for the first nine months of 2011 representing an increase of $457,000, or 16%. The net interest margin decreased to 4.47% for the first nine months of 2012 compared to 4.94% during the same period last year.

Provision for credit losses

The provision for credit losses for the quarter ended September 30, 2012 was $150,000 compared to $60,000 for the quarter ended September 30, 2011. The provision for credit losses for the nine months ended September 30, 2012 was $285,000 compared to $149,000 for the nine months ended September 30, 2011.

Non-Interest Income

The Bank’s non-interest income for the quarter ended September 30, 2012 was $454,000 compared to $110,000 for the quarter ended September 30, 2011. For the nine months ended September 30, 2012, non-interest income was $691,000 compared to $234,000 for the same period last year. The increase in non-interest income was primarily due to increases in mortgage loan fee income and a severance-related accrual reversal.

Non-Interest Expense

Non-interest expense was $977,000 for the quarter ended September 30, 2012 compared to $870,000 for the same period one year earlier. For the nine months ended September 30, 2012, non-interest expense was $2,832,000 compared to $2,689,000 for the same period last year, representing an increase of $143,000, or 5%.

Income Taxes

During the quarter ended September 30, 2012, the Bank recognized an income tax benefit of $24,000 compared to $33,000 for the same period last year. These benefits were primarily due to the recognition of deferred tax assets.

Balance Sheet

The Bank had total assets at September 30, 2012 of $106.9 million, compared to $81.8 million at September 30, 2011, representing growth of $25.1 million, or 31%.

Total loans outstanding at September 30, 2012, net of unearned income, were $72.2 million compared to $60.6 million at September 30, 2011, representing an increase of $11.6 million, or 19%.

Total deposits were $94.2 million at September 30, 2012 compared to total deposits of $71.2 million at September 30, 2011, representing an increase of $23.0 million, or 32%.

Credit Quality

The allowance for loan losses was $1,469,000, or 2.03% of loans, net of unearned income at September 30, 2012, compared to $1,180,000, or 1.95% of loans, net of unearned income at September 30, 2011. Nonperforming assets at September 30, 2012 were $75,000 compared to $89,000 at September 30, 2011.

The bank recognized $86,000 in net loan charge-offs during the nine months ended September 30, 2012, representing 0.17% of average loans on an annualized basis.

Capital Adequacy

At September 30, 2012, shareholders’ equity totaled $11.4 million compared to $10.0 million at September 30, 2011. At September 30, 2012, the total risk-based capital ratio, tier one capital ratio, and leverage ratio was 14.43%, 13.17% and 10.12%, respectively, all exceeding the regulatory standards for “well-capitalized” institutions of 10.00%, 6.00% and 5.00%, respectively.

About Cornerstone Community Bank

Cornerstone Community Bank is a California state-chartered bank with its headquarters office in Red Bluff and a branch office in Redding. The Bank provides commercial banking services, including a wide variety of deposit products and real estate, construction, commercial and consumer loans to small businesses, professionals and individuals. Additional information about the Bank is available on its website at www.bankcornerstone.com.

Forward-Looking Statements

This press release contains forward-looking statements. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of the management of Cornerstone Community Bank and on information available to management at the time these statements were made. There are a number of factors, many of which are beyond Cornerstone Community Bank’s control, which could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) competitive pressures among depository and other financial institutions may increase significantly; (2) revenues may be lower than expected; (3) changes in the interest rate environment may reduce interest margins; (4) general economic conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit; (5) legislative or regulatory changes, including changes in accounting standards and tax laws, may adversely affect the businesses in which Cornerstone Community Bank is engaged; (6) competitors may have greater financial resources and develop products that enable such competitors to compete more successfully than Cornerstone Community Bank; and (7) adverse changes may occur in the securities markets or with respect to inflation. Forward-looking statements speak only as of the date they are made. Except as required by law, Cornerstone Community Bank does not undertake to update forward-looking statements to reflect subsequent circumstances or events.

CORNERSTONE COMMUNITY BANK
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in Thousands)
		09/30/12			06/30/12			03/31/12			12/31/11			09/30/11
ASSETS
Cash and due from banks	$	2,389		$	3,507		$	3,542		$	1,957		$	1,944
Federal funds sold		-			-			-			-			-
Interest-bearing deposits		1,120			2,200			615			445			3,790
Investment securities		28,672			26,129			27,132			22,173			13,652
Loans held for sale		573			336			379			-			-
Loans, net of unearned income		72,240			68,459			63,433			64,504			60,595
Allowance for loan losses		(1,469	)		(1,325	)		(1,246	)		(1,270	)		(1,180	)
Loans, net		70,771			67,134			62,187			63,234			59,415
Premises and equipment, net		1,126			1,165			1,172			1,226			1,105
Other assets		2,294			2,354			2,291			2,312			1,917
Total assets	$	106,945		$	102,825		$	97,318		$	91,347		$	81,823
LIABILITIES
Deposits:
Demand noninterest-bearing	$	15,104		$	12,648		$	12,789		$	11,833		$	9,995
Demand interest-bearing		15,594			13,100			11,916			12,928			9,013
Money market and savings		39,509			42,072			37,762			32,322			33,393
Time deposits of less than $100,000		9,047			8,949			7,851			8,841			8,376
Time deposits of $100,000 or more		14,991			14,628			15,076			14,718			10,449
Total deposits		94,245			91,397			85,394			80,642			71,226
Other borrowings		1,000			-			1,000			-			-
Other liabilities		279			557			529			535			577
Total liabilities		95,524			91,954			86,923			81,177			71,803
SHAREHOLDERS' EQUITY
Common stock		11,959			11,959			11,959			11,959			11,959
Additional paid-in capital		772			741			714			685			656
Accumulated deficit		(1,764	)		(2,178	)		(2,431	)		(2,650	)		(2,858	)
Accumulated other comprehensive income (loss)		454			349			153			176			263
Total shareholders' equity		11,421			10,871			10,395			10,170			10,020
Total liabilities and shareholders' equity	$	106,945		$	102,825		$	97,318		$	91,347		$	81,823
CAPITAL ADEQUACY
Tier I leverage ratio		10.12	%		10.26	%		10.64	%		10.89	%		11.87	%
Tier I risk-based capital ratio		13.17	%		13.03	%		13.51	%		13.27	%		14.11	%
Total risk-based capital ratio		14.43	%		14.29	%		14.77	%		14.52	%		15.36	%
Total equity / total assets		10.68	%		10.57	%		10.68	%		11.13	%		12.25	%
Book value per share	$	9.52		$	9.06		$	8.66		$	8.48		$	8.35

CORNERSTONE COMMUNITY BANK
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in Thousands)
	Three months ended									Nine months ended
		09/30/12			06/30/12			09/30/11			09/30/12			09/30/11
INTEREST INCOME
Loans	$	1,067		$	1,180		$	1,006		$	3,237		$	2,906
Federal funds sold		-			-			-			-			-
Investment securities		172			181			117			533			361
Other		3			3			2			8			5
Total interest income		1,242			1,364			1,125			3,778			3,272
INTEREST EXPENSE
Deposits:
Interest-bearing demand		7			7			4			20			11
Money market and savings		99			100			92			292			289
Time deposits		73			75			64			226			188
Other		-			-			1			-			1
Total interest expense		179			182			161			538			489
Net interest income		1,063			1,182			964			3,240			2,783
Provision for credit losses		150			135			60			285			149
Net interest income after provision for credit losses		913			1,047			904			2,955			2,634
NON-INTEREST INCOME
Service charges on deposit accounts		23			29			23			75			61
Gain on sale of SBA loans		-			-			-			-			37
Gain on sale of securities		-			-			37			-			37
Other non-interest income		431			93			50			616			99
Total non-interest income		454			122			110			691			234
OPERATING EXPENSES
Salaries and benefits		497			499			445			1,474			1,469
Premises and fixed assets		125			119			108			358			294
Other		355			322			317			1,000			926
Total operating expenses		977			940			870			2,832			2,689
Income before income taxes		390			229			144			814			179
Income taxes		(24	)		(24	)		(33	)		(72	)		(316	)
NET INCOME	$	414		$	253		$	177		$	886		$	495
EARNINGS PER SHARE
Basic earnings per share	$	0.35		$	0.21		$	0.15		$	0.74		$	0.41
Diluted earnings per share	$	0.32		$	0.20		$	0.14		$	0.70		$	0.40
Average common shares outstanding		1,200,000			1,200,000			1,200,000			1,200,000			1,200,000
Average common and equivalent shares outstanding		1,283,926			1,278,307			1,222,139			1,273,994			1,229,078
PERFORMANCE MEASURES
Return on average assets		1.54	%		1.00	%		0.89	%		1.17	%		0.84	%
Return on average equity		14.88	%		9.47	%		7.20	%		11.03	%		7.02	%
Net interest margin		4.10	%		4.90	%		5.04	%		4.47	%		4.94	%
Efficiency ratio		64.40	%		72.09	%		81.01	%		72.04	%		89.13	%