Cardinal Bankshares Corporation Reports Results for the Quarter ended June 30, 2013

Cardinal Bankshares Corporation Reports Results for the Quarter ended June 30,
                                     2013

PR Newswire

FLOYD, Va., Aug. 5, 2013

FLOYD, Va., Aug. 5, 2013 /PRNewswire/ --Cardinal Bankshares Corporation (OTC:
CDBK), parent company of Bank of Floyd, announced today its consolidated
financial results for the second quarter of 2013 and reported a net loss of
$173 thousand, or $0.11 per share, for the quarter. The quarterly results
represent an improvement from the net loss of $3.3 million, or $2.13 per
share, reported for the quarter ended June 30, 2012. The Company's net loss
for the three-month period produced an annualized net loss on average total
assets of (0.25) % and an annualized net loss on average stockholders' equity
of (2.50) % as compared to (2.30) % and (18.22) % for these measures in the
same period last year.

Michael Larrowe, President and Chief Executive Officer added, "We continue to
pursue the operational path set forth in our strategic plan, and believe that
the Bank is making good progress measured against those objectives. We
believe these efforts have positioned the Bank to bring value to our customers
and shareholders through our vastly improved product and service offerings.
Our ability to be competitive has substantially improved, while retaining
capital levels well above required amounts."

Financial Highlights:

  oTotal assets remain relatively stable, decreasing by $2 million from $282
    million at December 31, 2012 to $280 million at June 30, 2013.
  oThe net loss for the second quarter of 2013 was $173 thousand, or $0.11
    per share, improving from a net loss of $3.2 million for the comparable
    quarter of 2012. The net loss of $43 thousand for the six-month period
    ending June 30, 2013 compared to a net loss of $3.0 million for the
    six-months ended June 30, 2012.
  oDecreases in Federal funds sold and investment securities of $20.0 million
    were used primarily to fund increases in loans of $14.4 million or 11.2%
    over year-end balances.
  oTotal loans at June 30, 2013 were $143.0 million, which is an increase of
    $2.2 million and $14.4 million from March 31, 2013 and December 31, 2012,
    respectively.
  oWe experienced an increase in noninterest-bearing deposits of $1.1 and
    $1.3 million from March 31, 2013 and December 31, 2012, respectively.
  oA decrease in higher cost interest-bearing deposits of $12.8 million in
    the six-month period helped to improve the net interest margin.
  oWe experienced a decrease in the second quarter 2013 provision for loan
    losses of $3.2 million relative to the comparable period of 2012 as losses
    from legacy loans continue to decrease.
  oNoninterest expense decreased $718 thousand or 26.5% when compared to the
    prior year's second quarter. This resulted primarily from decreased legal
    and other non-recurring expenses associated with the 2012 proxy contest
    and decreased expenses associated with foreclosed assets

Net loss for the six-month period ended June 30, 2013 was $43 thousand
compared to a net loss of $3.0 million for the same period last year. Net loss
per share was $0.03 for the six-month period ended June 30, 2013, compared to
a net loss per share of $1.94 per share for the same period last year.

Capital Levels

Both the Bank's and the Company's capital levels remain well above the
regulatory well-capitalized ratios. The Company's consolidated Tier 1
risk-based and total risk-based capital ratios were 14.47% and 15.57%,
respectively, at June 30, 2013, down from the 16.49% and 17.48% reported at
December 31, 2012. The decline reported in capital ratios relates primarily
to the increase in risk-weighted assets associated with increased loans.

Nonperforming Assets

The Company's ratio of nonperforming assets as a percentage of total assets
decreased 57 basis points to 4.15% as compared to 4.72% one year earlier.
Nonperforming assets decreased $1.5 million from $13.1 million at June 30,
2012 to $11.6 million at June 30, 2013. Nonperforming assets at June 30, 2013
consisted of nonaccrual loans of $7.5 million, foreclosed assets of $2.5
million, and loans that were past due greater than 90 days and still accruing
interest of $1.6 million. Nonperforming assets at June 30, 2012 consisted of
nonaccrual loans of $8.9 million, foreclosed assets of $3.5 million, and loans
totaling $680 thousand that were past due greater than 90 days and still
accruing interest.

The Company recorded a provision for loan losses for the second quarter of
2013 of $818 thousand, as compared to a provision of $4.0 million for the same
period last year. Net charge-offs annualized as a percentage of average loans
outstanding was 2.22% for the second quarter of 2013, compared to 6.17% for
the same quarter in the prior year. Net charge-offs for the quarter ended
June 30, 2013 were $754 thousand, in comparison to $3.9 million for the same
quarter one year ago.

The ratio of allowance for loan losses as a percentage of total loans
decreased from 2.50% at June 30, 2012 to 1.32% at June 30, 2013. The
reduction in the allowance from June 30, 2012 is primarily due to the
charge-off of reserves approximating $1.8 million which were identified with
specific credits. At June 30, 2013, the Company's total reserves amounted to
$1.9 million, all of which were general reserves to cover estimated losses in
the portfolio and none of which are allocated to specific credits.

Financial Position

At June 30, 2013, the Company's total assets were $279.7 million, total
deposits were $240.6 million, total loans stood at $143.0 million and total
stockholders' equity was $25.6 million. Compared with December 31, 2012, the
Company's total assets decreased $2.4 million or 0.8% while total loans
increased $14.4 million. A shift in the mix of interest-earning assets funded
the increase in loans.

Total deposits decreased by $11.6 million or 4.6%, while new advances of $12.0
million were drawn on the Federal Home Loan Bank of Atlanta during the first
six months of 2013. This shift allowed the Bank to reduce its cost of funds
as rates paid on these borrowings are lower than rates paid on most of our
deposits.

In anticipation of a possible rising interest rate environment, management
made a strategic decision to sell its held-to-maturity investment portfolio in
the second quarter of 2013. This action resulted in the realization of gains
on those securities. The recognition of those gains and the rising interest
rate levels late in the second quarter, combined to increase an unrealized
loss in the portfolio to $2.3 million at June 30, 2013. Recognition of the
gains and the increased unrealized portfolio losses resulted in a reduction to
total equity of $2.7 million as compared to December 31, 2012. Dividends paid
of $154 thousand and net loss of $43 thousand account for the remaining
reduction to equity.

Net Interest Income

The Company's net interest income was $1.8 million for the three months ended
June 30, 2013, an increase of $347 thousand or 24.1% compared to same period
last year. The increase is a result interest income from new loan
originations combined with lower-costs on deposits and debt.

Noninterest Income

Noninterest income increased $491 thousand for the three-month period ended
June 30, 2013, compared to the same period last year, from $162 thousand to
$653 thousand. However, excluding gains taken on the sales of securities,
noninterest income decreased $18 thousand or 11.8%.

Noninterest Expense

Noninterest expense for the second quarter of 2013 totaled $2.0 million, down
$718 thousand or 26.5% as compared to the quarter ended June 30, 2012. These
expenses for 2013 compare favorably with both the three and the six-months
ended June 30, 2012. However, the six-month period ended June 30, 2012
contains approximately $800,000 associated with that year's proxy contest,
while 2013 contains non-recurring product and service development costs of
approximately $175,000 associated with the Bank's continuing infrastructure
improvement.

Consolidated Balance Sheets
(in thousands, except share data)


                                                                   
                                                       June 30,    December
                                                                   31,
                                                       2013        2012
Assets
                                                       $       $     
Cash and due from banks              3,069
                                                       3,463
Interest-bearing deposits in banks      7,233       14,600
Investment securities, available for sale     105,336     106,576
Investment securities, held to maturity       -           11,380
Restricted equity securities     1,012       693
Total loans    143,004     128,635
Allowance for loan losses        (1,889)     (1,514)
 Net loans        141,115     127,121
Bank premises and equipment, net             3,854       3,385
Accrued interest receivable               837         938
Foreclosed assets                 2,547       2,763
Bank owned life insurance          6,488       6,401
Other assets  7,839       5,186
 Total assets                                   $       $     
                                                        279,724   282,112
Liabilities and Stockholders' Equity
Liabilities 
Noninterest-bearing deposits     $       $     
                                                         35,826   34,555
Interest-bearing deposits     204,745     217,613
 Total deposits         240,571     252,168
Accrued interest payable              73          81
FHLB Advances                  12,000      -
Other liabilities                           1,441       1,325
 Total liabilities                         254,085     253,574
Stockholders' Equity
Common stock, $10 par value; 5,000,000
 shares authorized; 1,535,733 shares issued
 and outstanding          15,357      15,357
Additional paid-in capital                  2,925       2,925
Retained earnings                         9,629       9,826
Accumulated other comprehensive income              (2,272)     430
 Total stockholders' equity           25,639      28,538
 Total liabilities and stockholders'            $       $     
equity                                            279,724   282,112

Consolidated Statements of Operations
(in thousands, except share data)
                                                                                       
                                                                    Three Months
                                                                    Ended June         Six
                                                                    30,  Months Ended June
                                                                                       30,
                                                                    2013      2012     2013        2012
Interest and dividend income
                                                                    $      $     $       $   
 Loans and fees on loans                                                    
                                                                                  3,572       
                                                                    1,848     1,623                3,397
 Federal funds sold                                       -         10       -           21
 Investment securities                                       511       597      1,104       1,133
 Dividend income                                          5         6        9           11
 Deposits with banks                                           10        1        16          2
 Total interest income                              2,374     2,237    4,701       4,564
Interest expense
 Deposits                                               581       795      1,192       1,584
 Borrowings                                                  4         -        6           -
 Total interest expense                              585       795      1,198       1,584
 Net interest income                              1,789     1,442    3,503       2,980
Provision for loan losses                                        818       3,995    1,118       3,988
 Net interest income after provision
 for loan losses                                        971       (2,553)  2,385       (1,008)
Noninterest income
 Service charges on deposit accounts                        36        43       82          87
 Other service charges and fees                               26        31       52          59
 Net realized gains on sales of                                  519       10       814         26
securities
 Income on bank owned life                                       45        47       88          85
insurance
 Other income           27        31       67          72
 Total noninterest income                                  653       162      1,103       329
Noninterest expense
 Salaries and employee benefits                            1,057     1,361    2,122       2,200
 Occupancy and                                                   208       156      411         314
equipment
 Legal and                                                       127       410      247         505
professional
 Data processing                                                 95        58       165         124
services
 FDIC insurance                                                  93        88       184         167
premiums
 Foreclosed assets,                                              162       407      196         388
net
 Other operating expense                                         245       225      469         395
 Total noninterest expense                                 1,987     2,705    3,794       4,093
 Income (loss) before income taxes                       (363)     (5,096)  (306)       (4,772)
 Income tax expense (benefit)                              (190)     (1,818)  (263)       (1,787)
                                                                    $      $     $       $   
Net income (loss)                                                                      
                                                                                           
                                                                    (173)    (3,278)  (43)       (2,985)
                                                                    $      $     $       $   
Basic earnings (loss) per share                                 
                                                                                 (0.03)     
                                                                    (0.11)    (2.13)               (1.94)





Cardinal Bankshares
Corporation
Financial Highlights
(Unaudited)
(in thousands)
                            Three Months Ended           Six Months Ended
                            June 30,       June 30,      June 30,   June 30,
                            2013           2012          2013       2012
Per Share
 Earnings per share,       $         $        $      $    
basic and diluted             (0.11)       (2.13)              
                                                         (0.03)     (1.94)
                                                         $      $    
 Book value                                                       
                                                         16.69      19.70
Financial Ratios
 Annualized Return on      0.25%          -2.30%
Average Assets
 Annualized Return on      -2.50%         -18.22%
Average Equity
 Annualized Net
Interest Margin for the     2.76%          2.83%
quarter ended^1
 Efficiency Ratio^2        94.90%         144.17%
Capital Ratios
 Tier 1 risk-based         11.57%         15.65%
capital - Bank only
 Total risk-based          12.61%         16.90%
capital - Bank only
 Tier 1 risk-based         14.47%         19.41%
capital - consolidated
 Total risk-based          15.57%         20.57%
capital - consolidated
Allowance for Loan                                       $      $    
Losses at Beginning of                                             
Period                                                   1,825      2,873
Loans Charged-off, net                                   (754)      (3,869)
of Recoveries
Provision for Loan                                       818        3,995
Losses
 Allowance for Loan                                     $      $    
Losses at End of Period                                            
                                                         1,889      2,999
Credit Quality Ratios
 Nonperforming Assets                                   4.15%      4.72%
as a % of Total Assets
 Total Allowance for
Loan Losses as a % of                                    1.32%      2.50%
Total Loans
 Total Allowance for
Loan Losses as a % of                                    20.82%     31.21%
Nonperforming Loans
 Annualized Net
Charge-offs as a % of                                    2.22%      6.17%
Average Loans
Nonperforming Assets
                                                         $      $    
 Nonaccrual Loans                                                 
                                                         7,505      8,929
 Loans Past Due 90                                      1,566      680
Days+, still accruing
Total Nonperforming                                      9,071      9,609
Loans
Other Real Estate Owned                                  2,547      3,517
Total Nonperforming                                      $      $    
Assets                                                              13,126
                                                         11,618
^1Net interest margin equals net interest income divided by
interest-earning average assets.
^2Efficiency ratio equals noninterest expense (excluding OREO valuations and
OREO operating expenses) divided by net interest income plus noninterest
income (excluding net realized gains on sales of securities).

For Further Information Contact:

Michael D. Larrowe, President and Chief Executive Officer
Alan Dickerson, Chief Financial Officer
(540) 745-4191



SOURCE Cardinal Bankshares Corporation

Website: http://www.bankoffloyd.com
 
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