CRSB Cornerstone Community Bancorp (PK)

Cornerstone Community Bank, (OTCBB:CRSB), announced today its financial results for the third quarter ended September 30, 2013 and the appointment of Mark Korth to the Board of Directors.

The Bank reported net income of $295,000 for the three months ended September 30, 2013 compared to net income of $414,000 for the same period last year which included a severance-related accrual reversal. Diluted earnings per share for the three months ended September 30, 2013 were $0.23 compared to $0.32 for the same period last year. Net income for the nine months ended September 30, 2013 was $817,000, or $0.63 per diluted share compared to net income of $886,000, or $0.70 per diluted share, for the nine months ended September 30, 2012.

The return on average assets for the three months ended September 30, 2013 was 0.98% compared to 1.54% for the same period last year. The return on average equity was 9.74% for the three months ended September 30, 2013 compared to 14.88% for the same period last year. For the nine months ended September 30, 2013, the return on average assets was 0.93% and the return on average equity was 9.00% compared to 1.17% and 11.03%, respectively, for the nine months ended September 30, 2012.

President and CEO, Jeff Finck stated, “With year-over-year loan and deposit growth of 20% and 17%, respectively, the Bank continues to make solid progress in serving the Red Bluff and Redding communities.”

Net Interest Income

Net interest income for the three months ended September 30, 2013 was $1,176,000 compared to $1,063,000 for the same period last year. The net interest margin of 4.10% was consistent with the net interest margin for the same period last year. For the nine months ended September 30, 2013, net interest income was $3,545,000 compared to $3,240,000 for the nine months ended September 30, 2012, representing an increase of $305,000, or 9%. The net interest margin decreased to 4.26% for the nine months ended September 30, 2013 compared to 4.47% for the nine months ended September 30, 2012.

Provision for credit losses

The Bank recorded a negative provision for credit losses for the quarter ended September 30, 2013 of $50,000 compared to a provision for credit losses of $150,000 for the same period last year. The provision for credit losses for the nine months ended September 30, 2013 was $35,000 compared to $285,000 for the nine months ended September 30, 2012.

Non-Interest Income

The Bank’s non-interest income for the quarter ended September 30, 2013 was $148,000 compared to $454,000 for the quarter ended September 30, 2012. For the nine months ended September 30, 2013, non-interest income was $521,000 compared to $691,000 for the same period last year. Non-interest income for the three and nine months ended September 30, 2012 was impacted by a severance-related accrual reversal.

Non-Interest Expense

Non-interest expense was $1,079,000 for the quarter ended September 30, 2013 compared to $977,000 for the same period one year earlier. For the nine months ended September 30, 2013, non-interest expense was $3,214,000 compared to $2,832,000 for the same period last year.

Balance Sheet

The Bank had total assets at September 30, 2013 of $122.8 million, compared to $106.9 million at September 30, 2012, representing growth of $15.8 million, or 15%.

Total loans outstanding, including loans held for sale, at September 30, 2013, were $87.4 million compared to $72.8 million at September 30, 2012, representing an increase of $14.6 million, or 20%.

Total deposits were $110.2 million at September 30, 2013 compared to total deposits of $94.2 million at September 30, 2012, representing an increase of $15.9 million, or 17%.

Credit Quality

The allowance for loan losses was $1,397,000, or 1.65% of loans, net of unearned income at September 30, 2013, compared to $1,469,000, or 2.03% of loans, net of unearned income at September 30, 2012. Nonperforming assets at September 30, 2013 were $250,000 compared to $75,000 at September 30, 2012.

The bank recognized $100,000 in net loan charge-offs during the nine months ended September 30, 2013, representing 0.16% of average loans.

Capital Adequacy

At September 30, 2013, shareholders’ equity totaled $12.2 million compared to $11.4 million at September 30, 2012. At September 30, 2013, the total risk-based capital ratio, tier one capital ratio, and leverage ratio was 13.61%, 12.36% and 9.97%, respectively, all exceeding the regulatory standards for “well-capitalized” institutions of 10.00%, 6.00% and 5.00%, respectively.

Board of Directors Welcome New Member

Mark Korth, President of Dignity Health North State and Mercy Medical Center Redding, has joined the Cornerstone Community Bank Board of Directors. Dignity Health North State includes Mercy Medical Center Mt. Shasta, Mercy Medical Center Redding and St. Elizabeth Community Hospital in Red Bluff. “Mr. Korth’s skills and experience, along with his relationships in the medical profession and the related professional healthcare disciplines, will be a tremendous asset to the Bank and we welcome him to our Board,” stated Ken Robison, Chairman of Cornerstone Community Bank.

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)       09/30/13     06/30/13     03/31/13     12/31/12     09/30/12   ASSETS Cash and due from banks $ 2,717 $ 2,950 $ 4,009 $ 3,091 $ 2,389 Federal funds sold - - - - - Interest-bearing deposits 6,296 2,796 1,241 4,936 1,120 Investment securities 21,866 23,104 25,745 27,143 28,672 Loans held for sale 2,622 2,603 1,961 791 573 Loans, net of unearned income 84,751 82,381 80,467 73,820 72,240 Allowance for loan losses   (1,397 )       (1,450 )       (1,411 )       (1,460 )       (1,469 ) Loans, net 83,354 80,931 79,056 72,360 70,771 Premises and equipment, net 1,015 1,041 1,100 1,070 1,126 Other assets   4,900         4,854         2,230         2,301         2,294   Total assets $ 122,770       $ 118,279       $ 115,342       $ 111,692       $ 106,945     LIABILITIES Deposits: Demand noninterest-bearing $ 20,377 $ 19,892 $ 18,260 $ 22,366 $ 15,104 Demand interest-bearing 18,220 16,110 14,318 14,893 15,594 Money market and savings 41,044 40,123 44,996 37,634 39,509 Time deposits of less than $100,000 11,118 11,236 8,218 8,965 9,047 Time deposits of $100,000 or more   19,416         18,578         17,241         15,795         14,991   Total deposits 110,175 105,939 103,033 99,653 94,245 Other borrowings - - - - 1,000 Other liabilities   391         311         226         248         279   Total liabilities   110,566         106,250         103,259         99,901         95,524     SHAREHOLDERS' EQUITY Common stock 11,959 11,959 11,959 11,959 11,959 Additional paid-in capital 886 859 830 801 772 Accumulated deficit (623 ) (917 ) (1,199 ) (1,439 ) (1,764 ) Accumulated other comprehensive income (loss)   (18 )       128         493         470         454   Total shareholders' equity   12,204         12,029         12,083         11,791         11,421   Total liabilities and shareholders' equity $ 122,770       $ 118,279       $ 115,342       $ 111,692       $ 106,945     CAPITAL ADEQUACY Tier I leverage ratio 9.97 % 10.06 % 10.13 % 10.32 % 10.12 % Tier I risk-based capital ratio 12.36 % 12.45 % 12.81 % 13.29 % 13.17 % Total risk-based capital ratio 13.61 % 13.71 % 14.06 % 14.55 % 14.43 % Total equity / total assets 9.94 % 10.17 % 10.48 % 10.56 % 10.68 % Book value per share $ 10.17 $ 10.02 $ 10.07 $ 9.83 $ 9.52                     CORNERSTONE COMMUNITY BANK CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Dollars in Thousands)     Three months ended Nine months ended 09/30/13   06/30/13   09/30/12 09/30/13   09/30/12   INTEREST INCOME Loans $ 1,150 $ 1,143 $ 1,067 $ 3,477 $ 3,237 Federal funds sold - - - - - Investment securities 152 163 172 485 533 Other   15       2       3     19       8   Total interest income   1,317       1,308       1,242     3,981       3,778     INTEREST EXPENSE Deposits: Interest-bearing demand 6 7 7 19 20 Money market and savings 66 75 99 215 292 Time deposits 69 64 73 202 226 Other   -       -       -     -       -   Total interest expense   141       146       179     436       538     Net interest income 1,176 1,162 1,063 3,545 3,240 Provision for credit losses   (50 )     -       150     35     285  

Net interest income after provision for credit losses

  1,226       1,162       913     3,510       2,955     NON-INTEREST INCOME Service charges on deposit accounts 27 33 23 87 75 Gain on sale of SBA loans - - - - - Gain on sale of securities - 86 - 86 - Other non-interest income   121       115       431     348       616   Total non-interest income   148       234       454     521       691     OPERATING EXPENSES Salaries and benefits 535 554 497 1,643 1,474 Premises and fixed assets 137 128 125 391 358 Other   407       432       355     1,180       1,000   Total operating expenses   1,079       1,114       977     3,214       2,832     Income before income taxes 295 282 390 817 814 Income taxes - - (24 ) - (72 )                 NET INCOME $ 295     $ 282     $ 414   $ 817     $ 886     EARNINGS PER SHARE Basic earnings per share $ 0.25     $ 0.24     $ 0.35   $ 0.68     $ 0.74   Diluted earnings per share $ 0.23     $ 0.22     $ 0.32  

$

0.63     $ 0.70   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

  1,302,209       1,298,059       1,283,926     1,297,859       1,273,994     PERFORMANCE MEASURES Return on average assets 0.98 % 0.97 % 1.54 % 0.93 % 1.17 % Return on average equity 9.74 % 9.24 % 14.88 % 9.00 % 11.03 % Net interest margin 4.10 % 4.20 % 4.10 % 4.26 % 4.47 % Efficiency ratio 81.50 % 79.80 % 64.40 % 79.05 % 72.04 %  

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