Cornerstone Community Bank Reports Financial Results for the Second Quarter Ended June 30, 2009

Cornerstone Community Bank (OTCBB:CRSB) announced today its financial results for the second quarter ended June 30, 2009.

The Bank reported a net loss of $(21,000), or $(0.02) per diluted share, for the three months ended June 30, 2009 compared to a net loss of $(250,000), or $(0.21) per diluted share, for the same period last year. The net loss for the six months ended June 30, 2009 was $(63,000), or $(0.05) per diluted share compared to a net loss of $(541,000), or $(0.45) per diluted share, for the first six months of 2008.

President and CEO Jeffrey Finck stated, “We are continuing to make significant progress in reducing expenses and increasing revenues. The Bank is ahead of expectations for the first six months of 2009 and we look forward to continued financial progress as we approach the end of our third year of operations.”

Net Interest Income and Margin

Net interest income of $679,000 for the quarter ended June 30, 2009 represented an increase of approximately $149,000, or 28%, from $530,000 for the same quarter one year earlier. Average earning assets of $61.2 million increased 51% from $40.6 million for the same quarter in 2008.

For the six months ended June 30, 2009, net interest income of $1,294,000 increased $294,000, or 29%, from $1,000,000 for the first six months of 2008. Average earning assets of $58.4 increased 46% from $40.0 million for the same period in 2008.

The Bank’s net interest margin for the quarter ended June 30, 2009 was 4.45% compared to 5.24% for the same period in 2008. For the six months ended June 30, 2009, the bank’s net interest margin was 4.47% compared to 5.02% for the same period in the prior year.

Non-Interest Income

The Bank’s non-interest income for the quarter and six months ended June 30, 2009 was $49,000 and $82,000, respectively, compared to $37,000 and 70,000, respectively for the same periods one year ago.

Net interest income and non-interest income comprised total revenue of $728,000 for the three months ended June 30, 2009 compared to $567,000 for the same period one year earlier, representing an increase of $161,000, or 28%. For the six months ended June 30, 2009, total revenue was $1,376,000 compared to $1,070,000 for the same period of 2008, representing an increase of $306,000, or 29%.

Non-Interest Expense

Non-interest expense was $712,000 for the quarter ended June 30, 2009 compared to $709,000 for the same period one year earlier, representing an increase of $3,000, or 0.4%. For the six months ended June 30, 2009, non-interest expense was $1,358,000 compared to $1,414,000 for the same period of 2008, representing a decrease of $56,000, or 4%. Salaries and benefits expense for the quarter ended June 30, 2009 was $354,000 compared to $435,000 for the same period in the prior year, representing a decrease of $81,000, or 19%. For the six months ended June 30, 2009, salaries and benefits expense was $678,000 compared to $863,000 for the same period in the prior year, representing a decrease of $185,000, or 21%. The decrease in salaries and benefits expense for both the quarter and six months ended June 30, 2009 was primarily due to a company-wide expense control program implemented by management during the fourth quarter of 2008. At June 30, 2009, the Bank employed 19 full-time equivalent employees (FTEs) compared to 20 FTEs at June 30, 2008.

The Bank’s efficiency ratio, the ratio of non-interest expense to revenues, was 97.80% during the quarter ended June 30, 2009 compared to 125.04% during the quarter ended June 30, 2008. For the six months ended June 30, 2009, the efficiency ratio was 98.69% compared to 132.15% during the same period of 2008.

Balance Sheet

The Bank had total assets at June 30, 2009 of $65.4 million, compared to $46.7 million at June 30, 2008, representing growth of $18.7 million, or 40%.

Total gross loans outstanding at June 30, 2009 were $49.2 million compared to $37.8 million at June 30, 2008, representing an increase of $11.4 million, or 30%.

Total deposits were $56.6 million at June 30, 2009 compared to total deposits of $37.3 million at June 30, 2008, representing an increase of $19.3 million, or 52%.

Credit Quality

The allowance for loan losses was $770,000, or 1.57% of total loans, at June 30, 2009, compared to $506,000, or 1.34% of total loans, at June 30, 2008. The provision for credit losses for the quarter ended June 30, 2009 was $37,000 compared to 108,000 for the quarter ended June 30, 2008. For the six months ended June 30, 2009, the provision for credit losses was $80,000 compared to $196,000 for the same period in the prior year.

Nonperforming assets at June 30, 2009 consisted of non-accrual loans of $2,000 compared to non-accrual loans of $49,000 at June 30, 2008.

The bank recognized $225,000 in loan charge-offs during the six months ended June 30, 2009 compared to $38,000 for the same period in the prior year. The Bank recognized $125,000 and $7,000 in loan recoveries for the six months ended June 30, 2009 and 2008, respectively.

Capital Adequacy

At June 30, 2009, shareholders’ equity totaled $8.6 million compared to $9.3 million at June 30, 2008. The total risk-based capital ratio, tier one capital ratio, and leverage ratio was 16.82%, 15.57% and 13.33%, respectively, all exceeding the regulatory standards for “well-capitalized” institutions of 10.00%, 6.00%, 5.00%, respectively.

About Cornerstone Community Bank

Cornerstone Community Bank is a California state-charted bank with its headquarters office in Red Bluff and a loan production office in Redding. The Bank provides commercial banking services, including a wide variety of deposit products and real estate, construction, commercial and consumer loans to small businesses, professionals and individuals. Additional information about the Bank is available on its website at www.ccbca.com.

Forward-Looking Statements

Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are subject to the safe harbors created by that Act. 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,” “anticipate,” “intend,” “plan,” “estimate,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” Forward-looking statements describe future plans, strategies and expectations. Forward-looking statements are based on currently available information, expectations, assumptions, projections, and management’s judgment about the Bank, the banking industry and general economic conditions. These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date. Future events are difficult to predict, and the expectations described above are necessarily subject to risk and uncertainty that may cause actual results to differ materially and adversely.

Forward-looking statements involve significant risks and uncertainties and actual results may differ materially from those presented, either expressed or implied, in this press release. Factors that might cause such differences include, but are not limited to: the Bank’s ability to successfully execute its business plans and achieve its objectives; changes in general economic, real estate and financial market conditions, either nationally or locally in areas in which the Bank conducts its operations; changes in interest rates; new litigation or changes in existing litigation; future credit loss experience; increased competitive challenges and expanding product and pricing pressures among financial institutions; legislation or regulatory changes which adversely affect the Bank’s operations or business; loss of key personnel; and changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies.

The Bank undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.