Cornerstone Bancshares Inc. in Chattanooga, Tenn., said Friday that losses narrowed 42.1% in 2010.

The $440 million-asset company posted a $4.7 million loss for the year, compared with an $8.2 million loss in 2009. The loss was driven by a $2.5 million goodwill writeoff from its purchase of the Bank of East Ridge in 1997.

The company said it also decided to take a more conservative approach to its loan loss methodology, and boosted its provision for loan losses to $4.1 million, from $681,000 in the previous quarter. The move increased the allowance for loan losses, to $9.1 million, at Dec. 31, or 3.2% of total loans, compared to a ratio of 1.75% a year earlier.

The company continued to realign the loan portfolio, reducing construction and development loans by 50% over the past year. Total past due loans also declined 50% from a year earlier, to $2.3 million at Dec. 31.

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