Cornerstone Community Bancorp Reports Financial Results For the Third Quarter Ended September 30, 2024

Business Wire

Wed, Oct 16, 2024, 4:50 PM 10 min read

The Company reported a net loss of $5,431,000 for the three months ended September 30, 2024 compared to net income of $1,920,000 for the same period last year. Diluted loss per share was $(3.56) for the three months ended September 30, 2024 compared to diluted earnings per share of $1.26 for the same period last year.

During the third quarter, the Company charged-off three related agricultural loans in the aggregate amount of $9.4 million due to the deteriorating financial condition of the borrowers. This represented 100% of the Company’s exposure. Although two of the loans were secured by certain equipment and all three loans have guarantors, any future recoveries cannot be reasonably predicted. As a result of these charge-offs, the Company recorded a $9.4 million provision for credit losses on loans for the third quarter.

For the nine months ended September 30, 2024, the Company reported a net loss of $2,594,000 compared to net income of $5,479,000 for the same period last year. Diluted loss per share was $(1.70) for the nine months ended September 30, 2024 compared to earnings per share of $3.60 for the same period last year.

President and CEO Matt Moseley stated, "On August 1st, the bank charged off an agricultural loan relationship which negatively impacted net income by approximately $7 million or $4.60 per share and reversed the associated interest accrual for that relationship totaling $558 thousand; both of which reduced net income and the latter reduced net interest margin for the quarter. We expect some level of recovery from the bank’s collateral but the timing and amount is still unknown. Core earnings, absent of the charge off, were approximately $1.6 million or $1.04 per share. The bank is well positioned to generate solid earnings going forward and did not have any past due or non-accrual loans as of 9/30/24."

Net Interest Income

Net interest income decreased to $4,420,000 for the quarter ended September 30, 2024 compared to $5,646,000 for the same quarter last year. For the nine months ended September 30, 2024, net interest income decreased to $14,412,000 compared to $16,366,000 for the same period last year.

The tax-equivalent net interest margin was 2.75% for the quarter ended September 30, 2024 compared to 3.68% for the same quarter of last year. For the nine months ended September 30, 2024, the tax-equivalent net interest margin was 3.04% compared to 3.69% for the same period last year. The tax-equivalent net interest margin was negatively impacted during the third quarter by the reversal of accrued interest income on the three charged-off loans mentioned above and the acceleration of interest expense as a result of a call by the Company on one of its callable time deposits. The tax-equivalent net interest margin would have been 3.16% for the three months ended September 30, 2024 and 3.18% for the nine months ended September 30, 2024 without the impact from these two items.

Provision for credit losses on loans

The Company recorded a $9.4 million provision for credit losses on loans for the three months ended September 30, 2024 compared to $200,000 for the three months ended September 30, 2023. For the nine months ended September 30, 2024, the Company recorded a $9.7 million provision for credit losses on loans compared to $530,000 for the same period last year.

Non-Interest Income

Non-interest income for the quarter ended September 30, 2024 was $354,000 compared to $369,000 for the quarter ended September 30, 2023. For the nine months ended September 30, 2024, noninterest income was $1,077,000 compared to $1,031,000 for the same period last year.

Non-Interest Expense

Non-interest expense was $3,085,000 for the quarter ended September 30, 2024 compared to $3,168,000 for the same period last year. For the nine months ended September 30, 2024, non-interest expense was $9,598,000 compared to $9,276,000 for the same period last year.

Balance Sheet

Total loans, net of unearned income, at September 30, 2024 were $487.1 million compared to $470.1 million at September 30, 2023.

Total deposits were $589.1 million at September 30, 2024 compared to total deposits of $575.7 million at September 30, 2023.

Credit Quality

The allowance for credit losses on loans was $6,164,000, or 1.27% of loans, net of unearned income, at September 30, 2024, compared to $5,813,000, or 1.24% of loans, net of unearned income, at September 30, 2023. There were no nonperforming assets at September 30, 2024 compared to $229,000 at September 30, 2023.

Capital

At September 30, 2024, shareholders’ equity totaled $40.9 million compared to $38.5 million at September 30, 2023. At September 30, 2024, the Company's book value per common share was $27.44 compared to $26.01 at September 30, 2023.

At September 30, 2024, the Bank’s estimated total risk-based capital ratio was 12.01% and its tier 1 capital to risk weighted assets ratio was 10.88%. The Bank remains well capitalized under the regulatory framework for prompt corrective action.

About Cornerstone Community Bancorp

Cornerstone Community Bancorp, a bank holding company headquartered in Red Bluff, California, serves the Red Bluff, Redding and Anderson communities through its wholly-owned subsidiary, Cornerstone Community Bank with a headquarters office in Red Bluff, two banking offices in Redding and one in Anderson. 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 Coronavirus Aid, Relief and Economic Security Act of 2023), 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 BANCORP
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in Thousands)



	09/30/24			06/30/24			03/31/24			12/31/23			09/30/23

ASSETS
Cash and due from banks	$	9,127		$	7,571		$	6,389		$	8,623		$	5,492
Federal funds sold		-			-			-			-			-
Interest bearing deposits in other financial institutions		40,306			43,025			45,955			19,694			23,970
Available for sale debt securities, at fair value		90,616			89,089			90,767			93,065			90,086
Loans held for sale		-			-			-			-			-
Loans, net of unearned income		487,125			498,048			488,179			482,212			470,060
Allowance for credit losses on loans		(6,164	)		(6,126	)		(5,957	)		(5,813	)		(5,813	)
Loans, net		480,962			491,922			482,222			476,399			464,247
Premises and equipment, net		14,405			14,418			14,433			14,326			14,437
Other assets		33,780			32,514			30,812			30,827			31,241
Total assets	$	669,197		$	678,537		$	670,578		$	642,934		$	629,472

LIABILITIES
Deposits:
Demand noninterest-bearing	$	91,936		$	102,419		$	99,278		$	101,396		$	100,791
Demand interest-bearing		166,505			167,720			159,542			166,221			190,645
Money market and savings		186,186			176,644			182,797			174,882			176,373
Time deposits		144,443			148,582			148,384			122,035			107,894
Total deposits		589,069			595,365			590,001			564,534			575,703
Borrowings and other obligations		20,000			20,000			20,000			20,000			-
Subordinated debentures		11,788			11,781			11,775			11,769			11,762
Interest payable and other liabilities		7,409			5,637			4,252			3,464			3,512
Total liabilities		628,266			632,784			626,028			599,767			590,977

SHAREHOLDERS' EQUITY
Common stock		15,337			15,268			15,231			15,163			15,130
Retained Earnings		35,045			40,476			39,033			37,639			35,747
Accumulated other comprehensive income (loss)		(9,452	)		(9,991	)		(9,714	)		(9,635	)		(12,382	)
Total shareholders' equity		40,930			45,754			44,550			43,167			38,495
Total liabilities and shareholders' equity	$	669,197		$	678,537		$	670,578		$	642,934		$	629,472

Total equity / total assets		6.12	%		6.74	%		6.64	%		6.71	%		6.12	%
Book value per share	$	27.44		$	30.78		$	29.99		$	29.16		$	26.01
Shares outstanding		1,491,692			1,486,692			1,485,472			1,480,472			1,479,862

CORNERSTONE COMMUNITY BANCORP
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in Thousands)




	Three months ended			Nine months ended
	09/30/24	06/30/24	09/30/23	09/30/24	09/30/23

INTEREST INCOME
Loans	$ 6,795	$ 7,363	$ 6,517	$ 21,164	$ 18,023
Federal funds sold	-	-	-	-	3
Investment securities	819	792	739	2,339	2,197
Other	650	611	558	1,680	1,692
Total interest income	8,264	8,766	7,814	25,183	21,915

INTEREST EXPENSE
Deposits:
Interest-bearing demand	378	331	289	1,010	745
Money market and savings	1,268	1,217	798	3,631	2,052
Time deposits	1,806	1,722	933	4,960	2,306
Other	392	389	148	1,170	446
Total interest expense	3,844	3,659	2,168	10,771	5,549

Net interest income	4,420	5,107	5,646	14,412	16,366
Provision for credit losses on loans	9,400	169	200	9,713	530
Net interest income after provision
for credit losses	(4,980)	4,938	5,446	4,699	15,836

NON-INTEREST INCOME
Service charges on deposit accounts	69	72	63	216	200
Gain on sale of loans	-	-	-	-	-
Gain (loss) on sale of other real estate owned	-	-	-	-	-
Gain (loss) on sale of securities	-	-	-	-	-
Other non-interest income	285	295	306	861	831
Total non-interest income	354	367	369	1,077	1,031

OPERATING EXPENSES
Salaries and benefits	1,615	1,880	1,781	5,296	5,098
Premises and fixed assets	266	265	268	798	847
Other	1,204	1,165	1,119	3,504	3,331
Total operating expenses	3,085	3,310	3,168	9,598	9,276

Income (loss) before income taxes	(7,711)	1,995	2,647	(3,822)	7,591
Income taxes (benefit)	(2,280)	552	727	(1,228)	2,112

NET (LOSS) INCOME	$ (5,431)	$ 1,443	$ 1,920	$ (2,594)	$ 5,479

EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share	$ (3.65)	$ 0.97	$ 1.30	$ (1.75)	$ 3.70
Diluted earnings (loss) per share	$ (3.56)	$ 0.94	$ 1.26	$ (1.70)	$ 3.60
Average common shares outstanding	1,487,344	1,486,370	1,479,862	1,486,016	1,479,862
Average common and equivalent
shares outstanding	1,525,781	1,529,714	1,524,640	1,528,514	1,524,029

PERFORMANCE MEASURES
Return on average assets	-3.24%	0.86%	1.21%	-0.52%	1.18%
Return on average equity	-51.59%	12.86%	19.58%	-7.93%	19.51%
Tax-equivalent net interest margin	2.75%	3.21%	3.68%	3.04%	3.69%
Efficiency ratio	64.62%	60.47%	52.67%	61.97%	53.32%