The parent company of Cornerstone Bank in Chattanooga announced today that it has completed a $15 million stock issue to help strengthen the bank's balance sheet for future growth.
Cornerstone Bancshares Inc. sold the last of its 600,000 preferred shares at the end of 2012 after selling nearly $5 million of stock last fall -- nearly two and a half years after the bank first began issuing the additional shares.
Selling all of the stock took longer than bank officials initially hoped, especially with a relatively attractive 10 percent dividend on the preferred shares. But Cornerstone Chairman Miller Wellborn welcomed the full subscription of the bank stock, which helped shore up Cornerstone and remove it last year from a regulatory consent order.
"We are thrilled to meet our goal and to declare this capital campaign a resounding success," Wellborn said in a statement. "With this solid capital foundation, Cornerstone is in a much better position to continue growing and serving this market for many years to come."
Cornerstone will pay a 10 percent dividend on the new preferred stock as long as the bank is profitable. Cornerstone, which suffered losses during the recession from soured real estate and other commercial loans, has been profitable for the past two years.
"Completing this capital plan gives us a very solid footing in terms of capital and being able to grow in the next four or five years," Cornerstone President Frank Hughes said.
The preferred stock would be converted to common if it reaches $7.50 per share, but the stock now trades at $2.30 per share, which is still below the bank's book value of about $4 per share.
Cornerstone launched the stock issue in the third quarter of 2010, in an effort to shore up its capital reserves during the recession.
"Crossing the finish line with this capital campaign is a huge accomplishment," Hughes said. "What a great way to begin the New Year."
Founded in 1996, Cornerstone is a single-bank holding company with five offices and $421 million in assets.