Business Wire | Jul 23, 2020 04:06PM EDT

Cornerstone Community Bancorp Reports Financial Results for the Second Quarter Ended June 30, 2020

Jul. 23, 2020

RED BLUFF, Calif.--(BUSINESS WIRE)--Jul. 23, 2020--Cornerstone Community Bancorp (OTC Pink: CRSB) announced today its financial results for the second quarter ended June 30, 2020.

The Company reported net income of $1,284,000 for the three months ended June 30, 2020 compared to net income of $911,000 for the same period last year. Diluted earnings per share were $0.84 for the three months ended June 30, 2020 compared to $0.60 for the same period last year.

The return on average assets for the three months ended June 30, 2020 was 1.18% and the return on average equity was 18.92%. The net interest margin was 3.06% for the three months ended June 30, 2020 compared to 4.36% for the same period last year and the efficiency ratio declined to 42.00% for the three months ended June 30, 2020 compared to 56.05% for the same period last year.

For the six months ended June 30, 2020, the Company reported net income of $1,331,000 compared to net income of $1,696,000 for the same period last year. Diluted earnings per share were $0.87 for the six months ended June 30, 2020 compared to $1.12 for the same period last year.

The return on average assets for the six months ended June 30, 2020 was 0.72% and the return on average equity was 9.90%.

Net income for the six months ended June 30, 2020 reflects a $1.6 million provision for credit losses related to the economic uncertainties of the COVID-19 pandemic.

President and CEO, Jeff Finck stated, "We've funded $82 million in Small Business Administration Paycheck Protection Program loans, with an average loan size of $129,000, to 637 businesses, positively impacting over 10,000 employees throughout the greater Redding and Red Bluff areas. We've also helped 145 of our customers with loan payment relief requests."

Net Interest Income

Net interest income increased to $3,153,000 for the quarter ended June 30, 2020 compared to $2,691,000 for the same quarter last year. For the six months ended June 30, 2020, net interest income increased to $5,995,000 compared to $5,320,000 for the same period last year.

The Company's net interest margin was 3.06% for the second quarter of 2020, down 103 basis points from 4.09% for the first quarter of 2020 primarily due to the decrease in short and long term interest rates that occurred in the first quarter and the increase in the percentage of interest earning assets invested in interest-bearing deposits.

Provision for credit losses

The Company recorded a $150,000 provision for credit losses for the quarter ended June 30, 2020 compared to $110,000 for the same quarter last year. For the six months ended June 30, 2020, the Company recorded a $1,600,000 provision for credit losses compared to $200,000 for the same period last year.

Non-Interest Income

Non-interest income for the quarter ended June 30, 2020 was $204,000 compared to $476,000 for the quarter ended June 30, 2019. For the six months ended June 30, 2020, non-interest income was $598,000 compared to $801,000 for the same period last year.

Non-Interest Expense

Non-interest expense was $1,410,000 for the quarter ended June 30, 2020 compared to $1,775,000 for the same period last year. For the six months ended June 30, 2020, non-interest expense was $3,308,000 compared to $3,531,000 for the same period last year. The decreases in non-interest expense were primarily due to lower salaries and benefits expense from Small Business Administration ("SBA") Paycheck Protection Program ("PPP")-related deferred loan origination costs.

Income Taxes

The provision for income taxes for the six months ended June 30, 2020 was impacted by tax benefits from the exercise of stock options.

Balance Sheet

Interest-bearing deposits increased $65.1 million at June 30, 2020 compared to June 30, 2019. The increase was primarily due to increases in SBA PPP borrowers' deposit accounts and the Company's participation in the Federal Reserve's Paycheck Protection Program Liquidity Facility.

Total loans, net of unearned income at June 30, 2020 were $333.6 million compared to $222.2 million at June 30, 2019. The increase was due, in large part, to the $82 million in SBA PPP loans originated.

Total deposits were $341.4 million at June 30, 2020 compared to total deposits of $256.2 million at June 30, 2019. The increase was primarily due to increases in deposits from SBA PPP borrowers.

Borrowings and other obligations were $83.1 million at June 30, 2020 compared to 3.0 million at June 30, 2019. The increase was primarily due to the Company's participation in the Federal Reserve's Paycheck Protection Program Liquidity Facility.

Credit Quality

The allowance for loan losses was $4,009,000, or 1.20% of loans, net of unearned income at June 30, 2020, compared to $2,345,000, or 1.06% of loans, net of unearned income at June 30, 2019. There were no nonperforming assets at June 30, 2020 and $99,000 at June 30, 2019.

Capital

At June 30, 2020, shareholders' equity totaled $27.6 million compared to $24.0 million at June 30, 2019. Book value per share was $18.50 per share at June 30, 2020 compared to $16.71 per share at June 30, 2019.

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 release may contain certain forward-looking statements that are based on management's current expectations regarding economic, legislative, and regulatory issues that may impact Cornerstone Community Bancorp's earnings in future periods. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words "believe," "expect," "intend," "estimate" or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could" or "may." Factors that could cause future results to vary materially from current management expectations include, but are not limited to, natural disasters (such as wildfires and earthquakes), pandemics such as COVID-19 and the economic impact caused directly by the disease and by government responses thereto, general economic conditions, economic uncertainty in the United States and abroad, changes in interest rates, deposit flows, real estate values, costs or effects of acquisitions, competition, changes in accounting principles, policies or guidelines, legislation or regulation (including the Tax Cuts & Jobs Act of 2017 and the Coronavirus Aid, Relief and Economic Security Act of 2020), interruptions of utility service in our markets for sustained periods, and other economic, competitive, governmental, regulatory and technological factors (including external fraud and cybersecurity threats) affecting Cornerstone Community Bancorp's operations, pricing, products and services. 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 BANCORPCONSOLIDATED BALANCE SHEETS (UNAUDITED)(Dollars in Thousands) 06/30/20 03/31/20 12/31/19 09/30/19 06/30/19 ASSETSCash and due from $ 6,350 $ 4,965 $ 6,038 $ 9,271 $ 11,122 banksFederal funds sold 10,402 17,385 4,575 21,117 13,520

Interest-bearing 73,310 18,928 2,825 15,779 8,166 depositsInvestment 16,173 13,144 13,355 5,577 7,010 securitiesLoans held for sale - - - - -

Loans, net of 333,620 250,353 241,662 233,342 222,199 unearned incomeAllowance for loan (4,009 ) (3,859 ) (2,409 ) (2,317 ) (2,345 )lossesLoans, net 329,611 246,494 239,253 231,025 219,854

Premises and 11,095 11,180 11,216 11,297 11,316 equipment, netOther assets 11,882 11,330 11,093 10,428 18,359

Total assets $ 458,823 $ 323,426 $ 288,355 $ 304,494 $ 289,347

LIABILITIESDeposits:Demand $ 96,395 $ 58,357 $ 52,352 $ 59,432 $ 54,439 noninterest-bearingDemand 90,633 51,608 52,058 52,024 48,839 interest-bearingMoney market and 79,550 77,273 74,560 81,926 79,614 savingsTime deposits of 22,925 26,503 18,395 18,957 19,331 less than $100,000Time deposits of 51,919 54,274 56,016 57,854 53,940 $100,000 or moreTotal deposits 341,422 268,015 253,381 270,193 256,163

Borrowings and 83,136 23,000 3,000 3,000 3,000 other obligationsSubordinated 4,920 4,917 4,914 4,911 4,908 debenturesInterest payable 1,765 1,382 1,235 1,543 1,325 and otherliabilitiesTotal liabilities 431,243 297,314 262,530 279,647 265,396

SHAREHOLDERS'EQUITYCommon stock 15,440 15,336 15,264 15,146 15,122

Retained Earnings 11,841 10,557 10,510 9,626 8,753

Accumulated other 299 219 51 75 76 comprehensiveincome (loss)Total shareholders' 27,580 26,112 25,825 24,847 23,951 equityTotal liabilities $ 458,823 $ 323,426 $ 288,355 $ 304,494 $ 289,347 and shareholders'equity Total equity / 6.01 % 8.07 % 8.96 % 8.16 % 8.28 %total assetsBook value per $ 18.50 $ 17.63 $ 17.79 $ 17.34 $ 16.71 shareShares outstanding 1,491,041 1,481,041 1,452,041 1,433,041 1,433,041

CORNERSTONE COMMUNITY BANCORPCONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)(Dollars in Thousands) Three months ended Six months ended 06/30/20 03/31/20 06/30/19 06/30/20 06/30/19INTEREST INCOMELoans $ 3,612 $ 3,356 $ 3,210 $ 6,968 $ 6,340

Federal funds 4 17 60 21 74 soldInvestment 82 90 55 172 118 securitiesOther 45 45 80 90 201

Total interest 3,743 3,508 3,405 7,251 6,733 income INTEREST EXPENSEDeposits:Interest-bearing 40 35 27 75 49 demandMoney market and 119 186 206 305 422 savingsTime deposits 260 331 373 591 717

Other 171 114 108 285 225

Total interest 590 666 714 1,256 1,413 expenseNet interest 3,153 2,842 2,691 5,995 5,320 incomeProvision for 150 1,450 110 1,600 200 credit lossesNet interestincome afterprovisionfor credit 3,003 1,392 2,581 4,395 5,120 losses NON-INTERESTINCOMEService charges 46 72 85 118 130 on depositaccountsGain on sale of - 186 268 186 417 loansGain (loss) onsale of other - - - - - real estateownedGain (loss) on - - - - - sale ofsecuritiesOther 158 136 123 294 254 non-interestincomeTotal 204 394 476 598 801 non-interestincome OPERATINGEXPENSESSalaries and 392 939 908 1,331 1,842 benefitsPremises and 257 252 210 509 392 fixed assetsOther 761 707 657 1,468 1,297

Total operating 1,410 1,898 1,775 3,308 3,531 expensesIncome before 1,797 (112 ) 1,282 1,685 2,390 income taxesIncome taxes 513 (159 ) 371 354 694

NET INCOME $ 1,284 $ 47 $ 911 $ 1,331 $ 1,696

EARNINGS PERSHAREBasic earnings $ 0.86 $ 0.03 $ 0.64 $ 0.90 $ 1.18 per shareDiluted earnings $ 0.84 $ 0.03 $ 0.60 $ 0.87 $ 1.12 per shareAverage common 1,485,217 1,480,668 1,433,041 1,482,942 1,432,627 sharesoutstandingAverage commonand equivalentshares 1,523,322 1,532,685 1,519,821 1,528,547 1,518,216 outstanding PERFORMANCEMEASURESReturn on 1.18 % 0.06 % 1.34 % 0.72 % 1.26 %average assetsReturn on 18.92 % 0.71 % 15.47 % 9.90 % 14.67 %average equityNet interest 3.06 % 4.09 % 4.36 % 3.48 % 4.35 %marginEfficiency ratio 42.00 % 58.65 % 56.05 % 50.17 % 57.69 %

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CONTACT: Jeffrey P. Finck President & CEO 530.222.1460

CONTACT: Patrick E. Phelan Chief Financial Officer 530.222.1460