Cornerstone Community Bank Reports Financial Results For the Fourth Quarter and Full Year Ended December 31, 2011

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, 2011.
The Bank reported net income of $208,000 for the three months ended December 31, 2011 representing an increase of $83,000, or 66%, compared to net income of $125,000 for the same period last year. Diluted earnings per share for the three months ended December 31, 2011 were $0.17 compared to $0.10 for the same period last year. Net income for the year ended December 31, 2011 was $703,000, or $0.57 per diluted share compared to net income of $323,000, or $0.26 per diluted share, for the year ended December 31, 2010.
The return on average assets for the three months ended December 31, 2011 was 0.95% compared to 0.65% for the same period last year. The return on average equity was 8.25% for the three months ended December 31, 2011 compared to 5.38% for the same period last year. For the year ended December 31, 2011, the return on average assets was 0.87% and the return on average equity was 7.34% compared to 0.43% and 3.54%, respectively, for the year ended December 31, 2010.
President and CEO, Jeffrey Finck stated, “We are pleased with our 2011 performance. We opened our new Redding office in the third quarter which contributed to the 20% growth in deposits during the year. We look forward to continued success in 2012.”
Net Interest Income
Net interest income of $975,000 for the quarter ended December 31, 2011 represented an increase of approximately $107,000, or 12%, from $868,000 for the same quarter one year earlier. The net interest margin decreased to 4.64% during the quarter ended December 31, 2011 compared to 4.66% during the same quarter last year. For the year ended December 31, 2011, net interest income was $3,758,000 compared to $3,133,000 for the year ended December 31, 2010, representing an increase of $625,000, or 20%. The net interest margin increased to 4.86% for the year ended December 31, 2011 compared to 4.42% for the year ended December 31, 2010.
Provision for credit losses
The provision for credit losses for the quarter ended December 31, 2011 was $110,000 compared to $160,000 for the quarter ended December 31, 2010. The provision for credit losses for the year ended December 31, 2011 was $259,000 compared to $461,000 for the year ended December 31, 2010.
Non-Interest Income
The Bank’s non-interest income for the quarter ended December 31, 2011 was $84,000 compared to $140,000 for the quarter ended December 31, 2010. For the year ended December 31, 2011, non-interest income was $318,000 compared to $454,000 for the year ended December 31, 2010.
Non-Interest Expense
Non-interest expense was $894,000 for the quarter ended December 31, 2011 compared to $723,000 for the same period one year earlier. For the year ended December 31, 2011, non-interest expense was $3,583,000 compared to $2,802,000 for the year ended December 31, 2010. In April 2011, the Bank decided to exit the indirect auto lending business. As a result of this decision, the Bank incurred $252,000 of incremental charges during the second quarter of 2011.
Income Taxes
During the year ended December 31, 2011, the Bank recognized $470,000 of deferred tax assets which added to the Bank’s net income. The Bank determined that the historical progress in earnings performance met the standards for recognition of these assets in 2011.
Balance Sheet
The Bank had total assets at December 31, 2011 of $91 million, compared to $76 million at December 31, 2010, representing growth of $15 million, or 20%.
Total loans outstanding at December 31, 2011, net of unearned income, were $65 million compared to $55 million at December 31, 2010, representing an increase of $9 million, or 17%.
Total deposits were $81 million at December 31, 2011 compared to total deposits of $67 million at December 31, 2010, representing an increase of $14 million, or 20%.
Credit Quality
The allowance for loan losses was $1,270,000, or 1.97% of total loans at December 31, 2011, compared to $1,104,000, or 2.00% of total loans, at December 31, 2010. Nonperforming assets at December 31, 2011 were $185,000 compared to $232,000 at December 31, 2010.
The bank recognized $93,000 in net loan charge-offs during the year ended December 31, 2011, representing 0.16% of average loans.
Capital Adequacy
At December 31, 2011, shareholders’ equity totaled $10.2 million compared to $9.0 million at December 31, 2010. At December 31, 2011, the total risk-based capital ratio, tier one capital ratio, and leverage ratio was 14.52%, 13.27% and 10.89%, respectively, all exceeding the regulatory standards for “well-capitalized” institutions of 10.00%, 6.00%, 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
Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are subject to the safe harbors created by that Act. Forward-looking statements describe future plans, strategies and expectations. Forward-looking statements are based on currently available information, expectations, assumptions, projections, and management’s judgment about the Bank, the banking industry and general economic conditions. These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date. Future events are difficult to predict, and the expectations described above are necessarily subject to risk and uncertainty that may cause actual results to differ materially and adversely.
Forward-looking statements involve significant risks and uncertainties and actual results may differ materially from those presented, either expressed or implied, in this press release. The Bank undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.

CORNERSTONE COMMUNITY BANK
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in Thousands)
					12/31/11					09/30/11					06/30/11					03/31/11					12/31/10
ASSETS
Cash and due from banks				$	1,957				$	1,944				$	1,542				$	1,448				$	1,552
Federal funds sold					-					-					-					-					-
Interest-bearing deposits					445					3,790					1,945					4,381					1,535
Investment securities					22,173					13,652					14,496					14,677					16,465
Loans held for sale					-					-					-					-					-
Loans, net of unearned income					64,504					60,595					57,980					56,800					55,248
Allowance for loan losses					(1,270	)				(1,180	)				(1,140	)				(1,099	)				(1,104	)
Loans, net					63,234					59,415					56,840					55,701					54,144
Premises and equipment, net					1,226					1,105					1,067					1,042					777
Other assets					2,312					1,917					2,014					1,732					1,855
Total assets				$	91,347				$	81,823				$	77,904				$	78,981				$	76,328
LIABILITIES
Deposits:
Demand noninterest-bearing				$	11,833				$	9,995				$	8,256				$	8,075				$	10,169
Demand interest-bearing					12,928					9,013					7,145					6,558					7,416
Money market and savings					32,322					33,393					33,833					37,385					31,429
Time deposits of less than $100,000					8,841					8,376					9,088					9,377					7,717
Time deposits of $100,000 or more					14,718					10,449					9,433					8,158					10,309
Total deposits					80,642					71,226					67,755					69,553					67,040
Other liabilities					535					577					492					286					301
Total liabilities					81,177					71,803					68,247					69,839					67,341
SHAREHOLDERS’ EQUITY
Common stock					11,959					11,959					11,959					11,959					11,959
Additional paid-in capital					685					656					627					599					570
Accumulated deficit					(2,650	)				(2,858	)				(3,035	)				(3,224	)				(3,353	)
Accumulated other comprehensive income (loss)					176					263					106					(192	)				(189	)
Total shareholders’ equity					10,170					10,020					9,657					9,142					8,987
Total liabilities and shareholders’ equity				$	91,347				$	81,823				$	77,904				$	78,981				$	76,328
CAPITAL ADEQUACY
Tier I leverage ratio					10.89	%				11.87	%				11.65	%				12.06	%				11.85	%
Tier I risk-based capital ratio					13.27	%				14.11	%				14.23	%				14.69	%				14.80	%
Total risk-based capital ratio					14.52	%				15.36	%				15.49	%				15.95	%				16.05	%
Total equity / total assets					11.13	%				12.25	%				12.40	%				11.57	%				11.77	%
Book value per share				$	8.48				$	8.35				$	8.05				$	7.62				$	7.49

CORNERSTONE COMMUNITY BANK
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in Thousands)
				Three months ended																		Year ended
					12/31/11					09/30/11					12/31/10								12/31/11					12/31/10
INTEREST INCOME
Loans				$	1,014				$	1,006				$	944							$	3,920				$	3,507
Federal funds sold					-					-					-								-					-
Investment securities					126					117					92								487					361
Other					2					2					5								7					25
Total interest income					1,142					1,125					1,041								4,414					3,893
INTEREST EXPENSE
Deposits:
Interest-bearing demand					7					4					7								18					24
Money market and savings					91					92					91								380					341
Time deposits					69					64					75								257					394
Other					-					1					-								1					1
Total interest expense					167					161					173								656					760
Net interest income					975					964					868								3,758					3,133
Provision for credit losses					110					60					160								259					461
Net interest income after provision
for credit losses					865					904					708								3,499					2,672
NON-INTEREST INCOME
Service charges on deposit accounts					23					23					17								84					86
Gain on sale of SBA loans					-					-					-								37					11
Gain on sale of securities					-					37					97								37					254
Other non-interest income					61					50					26								160					103
Total non-interest income					84					110					140								318					454
OPERATING EXPENSES
Salaries and benefits					466					445					365								1,935					1,392
Premises and fixed assets					109					108					75								403					287
Other					319					317					283								1,245					1,123
Total operating expenses					894					870					723								3,583					2,802
Income before income taxes					55					144					125								234					324
Income taxes					(153	)				(33	)				-								(469	)				1
NET INCOME				$	208				$	177				$	125							$	703				$	323
EARNINGS PER SHARE
Basic earnings per share				$	0.17				$	0.15				$	0.10							$	0.59				$	0.27
Diluted earnings per share				$	0.17				$	0.15				$	0.10							$	0.57				$	0.26
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					1,200,000					1,218,056					1,280,289								1,224,701					1,258,183
PERFORMANCE MEASURES
Return on average assets					0.95	%				0.89	%				0.65	%							0.87	%				0.43	%
Return on average equity					8.25	%				7.20	%				5.38	%							7.34	%				3.54	%
Net interest margin					4.64	%				5.04	%				4.66	%							4.86	%				4.42	%
Efficiency ratio					84.42	%				81.01	%				71.73	%							87.90	%				78.12	%