Cornerstone Community Bancorp Reports Financial Results for the Fourth Quarter and Full Year Ended December 31, 2018

Cornerstone Community Bancorp (OTC Pink: CRSB) announced today its financial results for the fourth quarter and full year ended December 31, 2018.

The Company reported net income of $884,000 for the three months ended December 31, 2018 compared to net income of $184,000 for the same period last year. Diluted earnings per share were $0.57 for the three months ended December 31, 2018 compared to $0.13 for the same period last year.

The return on average assets for the three months ended December 31, 2018 was 1.36% and the return on average equity was 15.99%.

For the year ended December 31, 2018, the Company reported net income of $2,776,000 compared to net income of $1,638,000 for the same period last year. Diluted earnings per share were $1.84 for the year ended December 31, 2018 compared to $1.20 for the same period last year.

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The return on average assets for the year ended December 31, 2018 was 1.13% and the return on average equity was 13.51%.

President and CEO, Jeff Finck, stated, We are pleased with our 2018 results. The Company, once again, continues to show solid growth in loans, deposits and earnings. During 2018, our newly constructed Red Bluff building along the riverfront opened for business. In 2019, we look forward to moving down the street from our East Cypress Avenue location to our new building on Hartnell Avenue.

Net Interest Income

Net interest income increased to $2,599,000 for the quarter ended December 31, 2018 compared to $2,226,000 for the same quarter last year. For the year ended December 31, 2018, net interest income increased to $9,660,000 compared to $8,100,000 for the same period last year.

Provision for credit losses

The Company recorded a $130,000 provision for credit losses for the quarter ended December 31, 2018. There was no provision for credit losses recorded during the same period last year. For the year ended December 31, 2018, the Company recorded a $309,000 provision for credit losses compared to $215,000 for the same period last year.

Non-Interest Income

Non-interest income for the quarter ended December 31, 2018 was $161,000 compared to $243,000 for the quarter ended December 31, 2017. For the year ended December 31, 2018, non-interest income was $695,000 compared to $1,223,000 for the same period last year.

Non-Interest Expense

Non-interest expense was $1,677,000 for the quarter ended December 31, 2018 compared to $1,477,000 for the same period last year. For the year ended December 31, 2018, non-interest expense was $6,459,000 compared to $5,645,000 for the same period last year.

Income Taxes

Income tax expense was $69,000 for the quarter ended December 31, 2018 compared to $808,000 for the same period last year. For the year ended December 31, 2018, income tax expense was $811,000 compared to $1,825,000 for the same period last year. Fourth quarter 2017 income tax expense was impacted by a $400,000 net charge related to a revaluation of the net deferred tax asset associated with the passage of the Tax Cuts and Jobs Act. Fourth quarter and full year 2018 income tax expense was impacted by the reduction in the U.S. federal income tax rate from 34% to 21% and tax benefits from the exercise of stock options.

Balance Sheet

The Company had total assets at December 31, 2018 of $266.4 million compared to $229.0 million at December 31, 2017.

Total loans, net of unearned income at December 31, 2018 were $209.3 million compared to $184.8 million at December 31, 2017.

Total deposits were $232.3 million at December 31, 2018 compared to total deposits of $196.6 million at December 31, 2017.

Credit Quality

The allowance for loan losses was $2,152,000, or 1.03% of loans, net of unearned income at December 31, 2018, compared to $1,847,000, or 1.00% of loans, net of unearned income at December 31, 2017. There were no nonperforming assets at December 31, 2018 and December 31, 2017.

Capital

At December 31, 2018, shareholders equity totaled $22.1 million compared to $17.7 million at December 31, 2017. Book value per share increased by 11.2% to $15.56 per share at December 31, 2018 compared to $13.99 per share at December 31, 2017. During the second quarter of 2018, the Company completed a private placement of $2.1 million of its common stock. In the offering, the Company issued 119,285 shares of its common stock at a purchase price of $17.5 per share.

About Cornerstone Community Bancorp

Cornerstone Community Bancorp, a bank holding company headquartered in Red Bluff, California, serves the Red Bluff and Redding communities through its wholly-owned subsidiary, Cornerstone Community Bank with a headquarters office in Red Bluff and two banking offices in Redding. The Bank provides commercial banking services to small and mid-size businesses, including professional service firms, real estate developers and investors and not-for-profit organizations and to their owners and other 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 Bancorp 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 Bancorps 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 Bancorp is engaged; (6) competitors may have greater financial resources and develop products that enable such competitors to compete more successfully than Cornerstone Community Bancorp; 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 Bancorp does not undertake to update forward-looking statements to reflect subsequent circumstances or events.

CORNERSTONE COMMUNITY BANCORP
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in Thousands)
12/31/1809/30/1806/30/1803/31/1812/31/17
ASSETS
Cash and due from banks$7,002$5,275$4,139$3,364$4,630
Federal funds sold2020202020
Interest-bearing deposits24,73023,68624,06624,93217,077
Investment securities9,2849,54810,65110,94212,274
Loans held for sale1,849
Loans, net of unearned income209,330202,300193,989188,883184,814
Allowance for loan losses(2,152)(2,022)(1,947)(1,907)(1,847)
Loans, net207,178200,278192,042186,976182,967
Premises and equipment, net8,7407,7776,9585,8465,121
Other assets9,4076,9306,8776,7536,950
Total assets$266,361$253,514$244,753$240,682$229,039
LIABILITIES
Deposits:
Demand noninterest-bearing$50,862$49,063$44,751$42,223$38,348
Demand interest-bearing37,87534,31229,56527,51426,311
Money market and savings75,01571,72972,31973,93668,715
Time deposits of less than $100,00015,77816,45619,48217,95918,510
Time deposits of $100,000 or more52,76348,15545,67145,93344,731
Total deposits232,293219,715211,788207,565196,615
Federal Home Loan Bank borrowings6,0006,0006,0009,0009,000
Subordinated debentures4,9034,9004,8974,8954,892
Interest payable and other liabilities1,1001,1611,021933821
Total liabilities244,296231,776223,706222,393211,328
SHAREHOLDERS’ EQUITY
Common stock15,00115,58415,55113,42913,333
Retained Earnings7,0586,1735,5074,8434,282

Accumulated other comprehensive income (loss)

6(19)(11)1796
Total shareholders’ equity22,06521,73821,04718,28917,711
Total liabilities and shareholders’ equity$266,361$253,514$244,753$240,682$229,039
Total equity / total assets8.28%8.57%8.60%7.60%7.73%
Book value per share$15.56$15.47$14.97$14.22$13.99
CORNERSTONE COMMUNITY BANCORP
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in Thousands)
Three months endedYear ended
12/31/1809/30/1812/31/1712/31/1812/31/17
INTEREST INCOME
Loans$2,966$2,818$2,495$10,988$9,068
Federal funds sold
Investment securities707378299313
Other19815598565317
Total interest income3,2343,0462,67111,8529,698
INTEREST EXPENSE
Deposits:
Interest-bearing demand2221137047
Money market and savings177165120614415
Time deposits3172791851,026623
Other119119127482513
Total interest expense6355844452,1921,598
Net interest income2,5992,4622,2269,6608,100
Provision for credit losses13075309215

Net interest income after provision for credit losses

2,4692,3872,2269,3517,885
NON-INTEREST INCOME
Service charges on deposit accounts595747223181
Gain on sale of loans5710274662
Gain (loss) on sale of other real estate owned
Gain (loss) on sale of securities
Other non-interest income10210194398380
Total non-interest income1612152436951,223
OPERATING EXPENSES
Salaries and benefits8878657993,4423,058
Premises and fixed assets173156143627562
Other6176375352,3902,025
Total operating expenses1,6771,6581,4776,4595,645
Income before income taxes9539449923,5873,463
Income taxes692788088111,825
NET INCOME$884$666$184$2,776$1,638
EARNINGS PER SHARE
Basic earnings per share$0.63$0.47$0.15$2.03$1.32
Diluted earnings per share$0.57$0.43$0.13$1.84$1.20
Average common shares outstanding1,407,7851,405,5411,261,6471,365,9441,244,544

Average common and equivalent shares outstanding

1,541,1331,551,4751,382,5651,508,6841,363,429
PERFORMANCE MEASURES
Return on average assets1.36%1.06%0.32%1.13%0.77%
Return on average equity15.99%12.37%4.11%13.51%9.63%
Net interest margin4.26%4.14%4.09%4.18%3.99%
Efficiency ratio60.76%61.94%59.82%62.38%60.55%

Jeffrey P. Finck
President & CEO
530.222.1460

Patrick E. Phelan
Chief Financial Officer
530.222.1460