Cornerstone Community Bank Reports Financial Results for the Fourth Quarter and Full Year Ended Dece

Cornerstone Community Bank Reports Financial Results for the Fourth Quarter and Full Year Ended December 31, 2012

RED BLUFF, Calif.--(BUSINESS WIRE)-- Cornerstone Community Bank, (OTCBB: CRSB), announced today its financial results for the fourth quarter and full year ended December 31, 2012.

The Bank reported net income of $325,000 for the three months ended December 31, 2012 representing an increase of $117,000, or 56%, compared to net income of $208,000 for the same period last year. Diluted earnings per share for the three months ended December 31, 2012 were $0.25 compared to $0.17 for the same period last year. Net income for the year ended December 31, 2012 was $1,211,000, or $0.95 per diluted share compared to net income of $703,000, or $0.57 per diluted share, for the year ended December 31, 2011.


The return on average assets for the three months ended December 31, 2012 was 1.19% compared to 0.95% for the same period last year. The return on average equity was 11.16% for the three months ended December 31, 2012 compared to 8.25% for the same period last year. For the year ended December 31, 2012, the return on average assets was 1.17% and the return on average equity was 11.06% compared to 0.87% and 7.34%, respectively, for the year ended December 31, 2011.

President and CEO, Jeffrey Finck stated, "We are pleased with our 2012 performance. The significant growth in loans, deposits and net income has been a direct result of the tremendous efforts made by our employees, Board of Directors and shareholders. We thank our valued customers for their business and we look forward to continuing to provide the exceptional service they have become accustomed to."

Net Interest Income

Net interest income of $1,107,000 for the quarter ended December 31, 2012 represented an increase of $132,000, or 14%, from $975,000 for the same quarter one year earlier. The net interest margin decreased to 4.22% during the quarter ended December 31, 2012 compared to 4.64% during the same quarter last year. For the year ended December 31, 2012, net interest income was $4,347,000 compared to $3,758,000 for the year ending December 31, 2011 representing an increase of $589,000, or 16%. The net interest margin decreased to 4.42% for the year ended December 31, 2012 compared to 4.86% for the year ended December 31, 2011.

Provision for credit losses

There was no provision for credit losses for the quarter ended December 31, 2012 compared to $110,000 for the quarter ended December 31, 2011. The provision for credit losses for the year ended December 31, 2012 was $285,000 compared to $259,000 for the year ended December 31, 2011.

Non-Interest Income

The Bank's non-interest income for the quarter ended December 31, 2012 was $168,000 compared to $84,000 for the quarter ended December 31, 2011. For the year ended December 31, 2012, non-interest income was $859,000 compared to $318,000 for the same period last year. The increase in non-interest income for the year ended December 31, 2012 was primarily due to increases in mortgage loan fee income and a severance-related accrual reversal.

Non-Interest Expense

Non-interest expense was $974,000 for the quarter ended December 31, 2012 compared to $894,000 for the same period one year earlier. For the year ended December 31, 2012, non-interest expense was $3,806,000 compared to $3,583,000 for the same period last year, representing an increase of $223,000, or 6%.

Income Taxes

During the quarter ended December 31, 2012, the Bank recognized an income tax benefit of $24,000 compared to $153,000 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 December 31, 2012 of $111.7 million, compared to $91.3 million at December 31, 2011, representing growth of $20.4 million, or 22%.

Total loans outstanding at December 31, 2012, net of unearned income, were $73.8 million compared to $64.5 million at December 31, 2011, representing an increase of $9.3 million, or 14%.

Total deposits were $99.7 million at December 31, 2012 compared to total deposits of $80.6 million at December 31, 2011, representing an increase of $19.1 million, or 24%.

Credit Quality

The allowance for loan losses was $1,460,000, or 1.98% of loans, net of unearned income at December 31, 2012, compared to $1,270,000, or 1.97% of loans, net of unearned income at December 31, 2011. Nonperforming assets at December 31, 2012 were $392,000 compared to $185,000 at December 31, 2011.

The bank recognized $94,000 in net loan charge-offs during the year ended December 31, 2012, representing 0.14% of average loans.

Capital Adequacy

At December 31, 2012, shareholders' equity totaled $11.8 million compared to $10.2 million at December 31, 2011. At December 31, 2012, the total risk-based capital ratio, tier one capital ratio, and leverage ratio was 14.55%, 13.29% and 10.32%, 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 Bankis 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)

12/31/12

09/30/12

06/30/12

03/31/12

12/31/11

ASSETS

Cash and due from banks

$

3,091

$

2,389

$

3,507

$

3,542

$

1,957

Federal funds sold

-

-

-

-

-

Interest-bearing deposits

4,936

1,120

2,200

615

445

Investment securities

27,143

28,672

26,129

27,132

22,173

Loans held for sale

791

573

336

379

-

Loans, net of unearned income

73,820

72,240

68,459

63,433

64,504

Allowance for loan losses

(1,460

)

(1,469

)

(1,325

)

(1,246

)

(1,270

)

Loans, net

72,360

70,771

67,134

62,187

63,234

Premises and equipment, net

1,070

1,126

1,165

1,172

1,226

Other assets

2,301

2,294

2,354

2,291

2,312

Total assets

$

111,692

$

106,945

$

102,825

$

97,318

$

91,347

LIABILITIES

Deposits:

Demand noninterest-bearing

$

22,366

$

15,104

$

12,648

$

12,789

$

11,833

Demand interest-bearing

14,893

15,594

13,100

11,916

12,928

Money market and savings

37,634

39,509

42,072

37,762

32,322

Time deposits of less than $100,000

8,965

9,047

8,949

7,851

8,841

Time deposits of $100,000 or more

15,795

14,991

14,628

15,076

14,718

Total deposits

99,653

94,245

91,397

85,394

80,642

Other borrowings

-

1,000

-

1,000

-

Other liabilities

248

279

557

529

535

Total liabilities

99,901

95,524

91,954

86,923

81,177

SHAREHOLDERS' EQUITY

Common stock

11,959

11,959

11,959

11,959

11,959

Additional paid-in capital

801

772

741

714

685

Accumulated deficit

(1,439

)

(1,764

)

(2,178

)

(2,431

)

(2,650

)

Accumulated other comprehensive income (loss)

470

454

349

153

176

Total shareholders' equity

11,791

11,421

10,871

10,395

10,170

Total liabilities and shareholders' equity

$

111,692

$

106,945

$

102,825

$

97,318

$

91,347

CAPITAL ADEQUACY

Tier I leverage ratio

10.32

%

10.12

%

10.26

%

10.64

%

10.89

%

Tier I risk-based capital ratio

13.29

%

13.17

%

13.03

%

13.51

%

13.27

%

Total risk-based capital ratio

14.55

%

14.43

%

14.29

%

14.77

%

14.52

%

Total equity / total assets

10.56

%

10.68

%

10.57

%

10.68

%

11.13

%

Book value per share

$

9.83

$

9.52

$

9.06

$

8.66

$

8.48

CORNERSTONE COMMUNITY BANK

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Dollars in Thousands)

Three months ended

Year ended

12/31/12

09/30/12

12/31/11

12/31/12

12/31/11

INTEREST INCOME

Loans

$

1,096

$

1,067

$

1,014

$

4,333

$

3,920

Federal funds sold

-

-

-

-

-

Investment securities

176

172

126

709

487

Other

5

3

2

13

7

Total interest income

1,277

1,242

1,142

5,055

4,414

INTEREST EXPENSE

Deposits:

Interest-bearing demand

6

7

7

26

18

Money market and savings

90

99

91

382

380

Time deposits

73

73

69

299

257

Other

1

-

-

1

1

Total interest expense

170

179

167

708

656

Net interest income

1,107

1,063

975

4,347

3,758

Provision for credit losses

-

150

110

285

259

Net interest income after provision for credit losses

1,107

913