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CHATTANOOGA, Tenn., July 18, 2008 /PRNewswire-FirstCall via COMTEX/----Cornerstone Bancshares, Inc. (OTC Bulletin Board: CSBQ) todayannounced the following: Cornerstone Bancshares, Inc. saw itsearnings bearing increase to $1.1 million for the 2nd quarter of 2008 or$.17 per share compared to $1.0 million for the 1st quarter of2008, an increase of 5.7%. Year-to-date, Cornerstone has earned$2.1 million or $.33 per share. These earnings represent more thana 30% decrease from 2007 earnings period over period. The decreasefrom the last year's earnings level has mostly been caused by netinterest rate margin compression of approximately 135 basis points.The compression was created when the Federal Reserve rapidlyreduced its Federal Funds rate 325 basis points over the lastseveral months and has been exacerbated by the severe liquiditycrisis created by large money center banks early this year. Thisliquidity crisis has caused the failure of a couple of large bankssuch as Bear Stearns that were heavily concentrated in housingcredit risk and were highly leveraged. As a result of thisliquidity crunch other banks, especially smaller banks, have seenthe cost of funds from products such as certificates of depositcost 100 basis points more than would be expected given the presentFederal Funds rate during previous periods. In the past,Cornerstone has been able to grow its balance sheet to offsetinterest rate compression, but in 2008 there is much moreuncertainty and not as much readily available capital to fund suchgrowth. Cornerstone believes the rest of 2008 will be a challengeand will use the time to build its capital and liquidity. The Bankcontinued to grow loans during 2008 but at a slower rate as loans,especially commercial real estate loans, increased to $384 million,an increase of 10.9% over the same period during 2007. TheCompany's performance metrics pulled back to normal peer levels.ROA was 0.95% for the second quarter of 2008 compared to 1.54%during the second quarter in 2007. ROE was 11.5% during the secondquarter in 2008 compared to 15.4% in 2007.

Presently the Company is operating at a comfortable 8.26% capitalleverage ratio and has the ability to continue to grow, but willspend the remainder of 2008 building capital until the economicenvironment improves.

The asset quality improved to the superior level during the secondquarter of 2008, non-performing loans as a percentage of averagetotal loans decreased to 0.39% while past-due loans as a percentageof total loans decreased to .95%.

Cornerstone Bancshares, Inc. is a one-bank holding company servingthe Chattanooga, Tennessee MSA with 5 branches and one loanproduction office in Dalton, Georgia and one loan production officein Knoxville, Tennessee and $450 million in assets specializing inbusiness financial services.

This press release contains forward-looking statements within themeaning of the Private Securities Litigation Reform Act of 1995,which contains a safe harbor for forward-looking statements. TheCompany relies on this safe harbor in making such disclosures. Thestatements are based on management's current beliefs andassumptions about expectations, estimates, strategies andprojections. These statements are not guarantees of futureperformance or results and involve risks, uncertainties andassumptions that are difficult to predict. Therefore, actualoutcomes and results may differ materially from what is expressedor forecasted in such forward-looking statements.

SOURCE Cornerstone Bancshares, Inc.