CRSB Cornerstone Community Bancorp (PK)

Cornerstone Community Bank, (OTCBB: CRSB), announced today its financial results for the third quarter ended September 30, 2012.

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 %