CRSB Cornerstone Community Bancorp (PK)

Cornerstone Community Bank, (OTCBB:CRSB), announced today its financial results for the third quarter ended September 30, 2014.

The Bank reported net income of $225,000 for the three months ended September 30, 2014 compared to net income of $295,000 for the same period last year. Current quarter results were impacted by the $151,000 provision for income taxes as the Bank became fully taxable during 2014. Income before income taxes increased by 27% for the three months ended September 30, 2014 compared to the same period last year. Diluted earnings per share for the three months ended September 30, 2014 were $0.17 compared to $0.23 for the same period last year.

Net income for the nine months ended September 30, 2014 was $525,000, or $0.40 per diluted share compared to net income of $817,000, or $0.63 per diluted share, for the nine months ended September 30, 2013. Current year results were impacted by the $348,000 provision for income taxes as the Bank became fully taxable during 2014. Income before income taxes increased by 7% for the nine months ended September 30, 2014 compared to the same period last year.

The return on average assets for the three months ended September 30, 2014 was 0.60% and the return on average equity was 6.78%. For the nine months ended September 30, 2014, the return on average assets was 0.51% and the return on average equity was 5.38%.

President and CEO, Jeff Finck, stated “During the last twelve months, the loan portfolio has increased by an average of $2.4 million per month. Credit quality remains excellent with only $60,000 in nonperforming assets at quarter-end. Our continuing growth is the direct result of a dedicated staff and customers who appreciate a true community bank experience.”

Net Interest Income

Net interest income of $1,563,000 for the quarter ended September 30, 2014 represented an increase of $387,000, or 33%, from $1,176,000 for the same quarter one year earlier. The net interest margin increased to 4.32% during the quarter ended September 30, 2014 compared to 4.10% during the same quarter last year. For the nine months ended September 30, 2014, net interest income was $4,235,000 compared to $3,545,000 for the nine months ended September 30, 2013 representing an increase of $690,000, or 19%. The net interest margin increased to 4.35% for the nine months ended September 30, 2014 compared to 4.26% for the nine months ended September 30, 2013.

Provision for credit losses

The provision for credit losses for the quarter ended September 30, 2014 was $150,000. The Bank recorded a negative provision for credit losses of $50,000 for the quarter ended September 30, 2013. The provision for credit losses for the nine months ended September 30, 2014 was $224,000 compared to $35,000 for the nine months ended September 30, 2013.

Non-Interest Income

The Bank’s non-interest income for the quarter ended September 30, 2014 was $251,000 compared to $148,000 for the quarter ended September 30, 2013. For the nine months ended September 30, 2014 and 2013, non-interest income was $521,000.

Non-Interest Expense

Non-interest expense was $1,288,000 for the quarter ended September 30, 2014 compared to $1,079,000 for the same period one year earlier. For the nine months ended September 30, 2014, non-interest expense was $3,659,000 compared to $3,214,000 for the same period last year.

Balance Sheet

The Bank had total assets at September 30, 2014 of $144.9 million, compared to $122.8 million at September 30, 2013, representing growth of $22.1 million, or 18%.

Total loans outstanding at September 30, 2014, were $116.0 million compared to $87.4 million at September 30, 2013, representing an increase of $28.6 million, or 33%.

Total deposits were $131.1 million at September 30, 2014 compared to total deposits of $110.2 million at September 30, 2013, representing an increase of $20.9 million, or 19%.

Credit Quality

The allowance for loan losses was $1,607,000, or 1.39% of loans, net of unearned income at September 30, 2014, compared to $1,397,000, or 1.65% of loans, net of unearned income at September 30, 2013. Nonperforming assets at September 30, 2014 were $60,000 compared to $250,000 at September 30, 2013.

The bank recognized $15,000 in net loan charge-offs during the nine months ended September 30, 2014, representing 0.02% of average loans on an annualized basis.

Capital Adequacy

At September 30, 2014, shareholders’ equity totaled $13.3 million compared to $12.2 million at September 30, 2013. At September 30, 2014, the total risk-based capital ratio, tier one capital ratio, and leverage ratio was 11.81%, 10.56% and 8.81%, 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)           09/30/14     06/30/14     03/31/14     12/31/13     09/30/13   ASSETS Cash and due from banks $ 2,657 $ 4,268 $ 3,203 $ 2,025 $ 2,717 Federal funds sold - - - - - Interest-bearing deposits 10,401 11,113 533 875 6,296 Investment securities 11,378 14,988 15,250 21,131 21,866 Loans held for sale - 3,072 3,134 2,726 2,622 Loans, net of unearned income 115,954 108,796 99,960 90,173 84,751 Allowance for loan losses   (1,607 )       (1,464 )       (1,415 )       (1,399 )       (1,397 ) Loans, net 114,347 107,332 98,545 88,774 83,354 Premises and equipment, net 958 1,010 1,049 1,109 1,015 Other assets   5,202         5,288         5,134         5,234         4,900   Total assets $ 144,943       $ 147,071       $ 126,848       $ 121,874       $ 122,770     LIABILITIES Deposits: Demand noninterest-bearing $ 23,566 $ 23,434 $ 19,198 $ 15,984 $ 20,377 Demand interest-bearing 15,817 17,128 19,404 17,521 18,220 Money market and savings 45,221 45,942 41,072 42,814 41,044 Time deposits of less than $100,000 17,824 17,719 13,298 11,045 11,118 Time deposits of $100,000 or more   28,656         29,321         18,579         18,736         19,416   Total deposits 131,084 133,544 111,551 106,100 110,175 Other borrowings - - 2,000 3,000 - Other liabilities   510         454         464         300         391   Total liabilities   131,594         133,998         114,015         109,400         110,566     SHAREHOLDERS' EQUITY Common stock 12,171 12,057 12,057 12,057 11,959 Additional paid-in capital 924 924 903 877 886 Retained Earnings 160 (65 ) (234 ) (365 ) (623 ) Accumulated other comprehensive income (loss)   94         157         107         (95 )       (18 ) Total shareholders' equity   13,349         13,073         12,833         12,474         12,204   Total liabilities and shareholders' equity $ 144,943       $ 147,071       $ 126,848       $ 121,874       $ 122,770    

CAPITAL ADEQUACY

Tier I leverage ratio 8.81 % 9.70 % 9.81 % 10.00 % 9.97 % Tier I risk-based capital ratio 10.56 % 10.57 % 11.35 % 12.02 % 12.36 % Total risk-based capital ratio 11.81 % 11.78 % 12.60 % 13.27 % 13.61 % Total equity / total assets 9.21 % 8.89 % 10.12 % 10.24 % 9.94 % Book value per share $ 10.84 $ 10.79 $ 10.59 $ 10.29 $ 10.17                   CORNERSTONE COMMUNITY BANK CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Dollars in Thousands)         Three months ended Nine months ended 09/30/14     06/30/14     09/30/13 09/30/14     09/30/13   INTEREST INCOME Loans $ 1,565 $ 1,397 $ 1,150 $ 4,237 $ 3,477 Federal funds sold - - - - - Investment securities 104 69 152 328 485 Other   19         10         15     39         19   Total interest income   1,688         1,476         1,317     4,604         3,981     INTEREST EXPENSE Deposits: Interest-bearing demand 5 5 6 15 19 Money market and savings 31 47 66 136 215 Time deposits 89 70 69 216 202 Other   -         1         -     2         -   Total interest expense   125         123         141     369         436     Net interest income 1,563 1,353 1,176 4,235 3,545 Provision for credit losses   150         50         (50 )   224         35  

Net interest income after provision for credit losses

  1,413         1,303         1,226     4,011         3,510     NON-INTEREST INCOME Service charges on deposit accounts 31 26 27 76 87 Gain on sale of SBA loans - - - - - Gain (loss) on sale of other real estate owned (23 ) - - (23 ) - Gain on sale of securities 107 - - 101 86 Other non-interest income   136         134         121     367         348   Total non-interest income   251         160         148     521         521     OPERATING EXPENSES Salaries and benefits 671 620 535 1,929 1,643 Premises and fixed assets 149 139 137 427 391 Other   468         420         407           1,303         1,180   Total operating expenses   1,288         1,179         1,079           3,659         3,214     Income before income taxes 376 284 295 873 817 Income taxes 151 115 - 348 -                       NET INCOME $ 225       $ 169       $ 295   $ 525       $ 817     EARNINGS PER SHARE Basic earnings per share $ 0.18       $ 0.14       $ 0.25   $ 0.43       $ 0.68   Diluted earnings per share $ 0.17       $ 0.13       $ 0.23   $ 0.40       $ 0.63   Average common shares outstanding   1,216,783         1,212,000         1,200,000     1,213,612         1,200,000  

Average common and equivalent shares outstanding

  1,324,252         1,321,752         1,302,209     1,321,085         1,297,859     PERFORMANCE MEASURES Return on average assets 0.60 % 0.51 % 0.98 % 0.51 % 0.93 % Return on average equity 6.78 % 5.18 % 9.74 % 5.38 % 9.00 % Net interest margin 4.32 % 4.32 % 4.10 % 4.35 % 4.26 % Efficiency ratio 71.00 % 77.92 % 81.50 % 76.93 % 79.05 %  

Cornerstone Community BankJeffrey P. Finck, 530-222-1460PresidentChief Executive Officerjfinck@bankcornerstone.comorPatrick E. Phelan, 530.222.1460Executive Vice PresidentChief Financial Officerpphelan@bankcornerstone.com