Cornerstone Community Bank President Barry Watson, Cornerstone Chairman Miller Welborn and SmartBank President and CEO Billy Carroll discuss the specifics of a partnership between SmartFinancial and Cornerstone Bancshares at a processing center for Cornerstone Bank in Chattanooga, Tenn.Cornerstone Banc-shares Inc. reported a drop in second quarter earnings compared with a year ago due to charges from the disposal of foreclosed properties and merger expenses related to its planned combination with SmartBank later this year.
The Chattanooga-based banking company that operates Cornerstone Bank said it earned $318,000 in the second quarter, down 22 percent from the $409,000 earned in the same period in 2014. The second quarter results for this year include $474,000 in expenses related to the disposition of foreclosed assets, which cut the bank's foreclosed assets by nearly 45 percent, and $222,000 in merger-related expenses preparing for its upcoming merger with the Knoxville-based SmartFinancial Inc., the parent company of SmartBank.
Cornerstone said its non-performing loans at the bank fell by nearly 69 percent from a year ago while loans were up 6 percent. Net interest margins rose from 3.9 percent to 4 percent.
Cornerstone assets rose 3.7 percent in the past year to $436 million as of June 30, 2015.
For the first half of the year, Cornerstone profits totaled $798,000, compared with $822,000 in the same period a year ago. The bank has been profitable for 18 consecutive quarters.
"This was another solid quarter of performance and positive momentum for Cornerstone, which positions us ideally for the upcoming merger with SmartFinancial," Cornerstone's Chairman Miller Welborn said in the bank's second quarterly earnings report.
Cornerstone shareholders last month voted in favor of the previously announced merger with SmartFinancial, which will create a combined bank with nearly $1 billion in assets and 12 offices in East Tennessee and the Florida Panhandle. SmartFinancial has applied to be listed for trading on the Nasdaq Capital Market.
While the banks will initially operate under their separate charters in their respective markets, plans are for the banks to eventually merge under the SmartBank name.
"The merger gives us the size and scale to go on offense and better compete in this new banking environment," Welborn said. "By combining our strengths, resources and earnings potential, we are building a solid foundation for a very bright future."