Cornerstone Bancshares Inc. narrowed its losses, cut its loan volume and began issuing more stock last year.
But the Chattanooga bank reported Friday it still lost more than $4.7 million, or 73 cents per share, in 2010.
After profitable quarters in the spring and summer, Cornerstone directors took a fourth-quarter loss by putting more money aside for loan and lease losses. The bank also wrote off $2.5 million of its "goodwill" previously attached to its 1997 purchase of the former Bank of East Ridge.
Goodwill is an accounting adjustment that does not affect the cash flow of the bank.
"We had positive cash flow from operating activities all four quarters of 2010, which was a dramatic turnaround from the previous year," Cornerstone President Frank Hughes said.
Cornerstone trimmed its loan portfolio by $51 million last year to $285.2 million at the end of the year. The bank has assets of $440 million and operates five offices in Chattanooga and a loan production office in Dalton, Ga.
The bank boosted its loan loss reserves to $9.1 million - above the level of most peer banks - to cover more problem loans stemming from the recession, Hughes said.
To fortify its capital position, Cornerstone launched a convertible, preferred stock offering last fall. The offering will continue through June.
"Our goal is the further strengthen Cornerstone's foundations, so that we are solidly positioned to take advantage of the opportunities that lie ahead, for many years to come," Cornerstone Chairman Miller Welborn said.