Cardinal Bankshares Corporation Reports Results For the Quarter ended September 30, 2013

    Cardinal Bankshares Corporation Reports Results For the Quarter ended
                              September 30, 2013

PR Newswire

FLOYD, Va., Nov. 22, 2013

FLOYD, Va., Nov. 22, 2013 /PRNewswire/ --Cardinal Bankshares Corporation
(OTC: CDBK), parent company of Bank of Floyd, announced today its consolidated
financial results for the third quarter of 2013 and reported a net loss of
$1.3 million, or $0.88 per share, for the quarter. The quarterly net loss
represents an increase from the net loss of $841 thousand, or $0.55 per share,
reported for the quarter ended September 30, 2012. However, the Company's net
loss for the nine-month period ended at that date of $1.4 million represents a
$2.4 million improvement from the net loss of $3.8 million incurred for the
comparable period of 2012.

Michael Larrowe, President and Chief Executive Officer added, "Although not
yet reflecting in financial results, our Board and Management remain confident
in the positive direction of the Bank and the continued efforts to achieve our
long-term goals. The Bank is delivering more services by way of additional
delivery channels, improving efficiencies by leveraging technology, dealing
with the remaining issues of legacy credits while maintaining strong capital
levels and continuing to build loan loss reserves."

Larrowe continued, "Fundamentally the Bank was later in the recent economic
downturn to recognize credit losses from our borrowers' financial challenges
than most of our peer institutions. And while improvement is happening, that
delay combined with the expense associated with necessary systems and skills
development undertaken by the Bank over the last 16 months has caused our
financial results to improve more slowly than any of us would like."

Financial Highlights

Results for the three-month period ending September 30, 2013 included losses
recognized on legacy credits of $971 thousand, a deferred tax asset write-down
of $482 thousand and additions to general reserves of $275 thousand. Net
interest income for the period increased an encouraging 26.0% over the
comparable 2012 period as income from loans continues to increase while
interest expense on deposits continues to decline. Capital remains well above
required levels.

Net loss for the nine-month period ended September 30, 2013 was $1.4 million
compared to a net loss of $3.8 million for the same period last year. Net loss
per share was $0.90 for the nine-month period ended September 30, 2013,
compared to a net loss per share of $2.49 for the same period last year.

Other highlights include:

  oTotal assets decreased by $11.1 million from $282.1 million at December
    31, 2012 to $271.0 million at September 30, 2013.
  oThe net loss for the third quarter of 2013 was $1.3 million, or $0.88 per
    share, increasing from a net loss of $841 thousand for the comparable
    quarter of 2012. The net loss of $1.4 million for the nine-month period
    ending September 30, 2013 decreased by $2.4 million from a net loss of
    $3.8 million for the nine-months ended September 30, 2012.
  oDecreases in interest bearing deposits and investment securities of $24.3
    million were used to fund increases in loans of $8.9 million or 6.9% over
    year-end balances and offset the decrease in total deposits of $14.4
    million or 5.7% over year-end balances.
  oTotal loans at September 30, 2013 were $137.6 million, which is an
    increase of $8.9 million from December 31, 2012.
  oAn increase in noninterest-bearing deposits of $3.0 million from December
    31, 2012.
  oA decrease in higher cost interest-bearing deposits of $17.4 million in
    the nine-month period helped to improve net interest margin.
  oAn increase in the third quarter 2013 provision for loan losses of $274
    thousand relative to the comparable period of 2012 as losses from legacy
    loans continue to work through the system.
  oNoninterest expense increased $113 thousand or 5.6% when compared to the
    prior year's third quarter. This resulted primarily from increased
    salaries and employee benefits associated with the addition of personnel
    in key positions.
  oIncome (loss) before income taxes improved over both the three and
    nine-month periods ended September 30, 2013 relative to the comparable
    periods from 2012. The loss before income taxes decreased by $2 thousand
    and $4.5 million in the three and nine-month periods, respectively.
  oA write-down of the deferred tax asset of $482 thousand was taken in the
    quarter ended September 30, 2013 and is reflected in the income tax
    expense (benefit) line of the Consolidated Statements of Operations.

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 13.53% and 14.77%,
respectively, at September 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
increased 35 basis points to 3.64% as compared to 3.29% one year earlier.
Nonperforming assets increased $675 thousand from $9.2 million at September
30, 2012 to $9.9 million at September 30, 2013. Nonperforming assets at
September 30, 2013 consisted of nonaccrual loans of $4.3 million, foreclosed
assets of $3.9 million, and loans that were past due greater than 90 days and
still accruing interest of $1.7 million. Nonperforming assets at September
30, 2012 consisted of nonaccrual loans of $547 thousand and foreclosed assets
of $8.7 million.

The Company recorded a provision for loan losses for the third quarter of 2013
of $1.2 million, as compared to a provision of $897 thousand for the same
period last year. Net charge-offs annualized as a percentage of average loans
outstanding was 1.65% for the third quarter of 2013, compared to 7.05% for the
same quarter in the prior year. Net charge-offs for the quarter ended
September 30, 2013 were $925 thousand, in comparison to $2.5 million for the
same quarter one year ago.

The ratio of allowance for loan losses as a percentage of total loans
increased from 1.26% at September 30, 2012 to 1.53% at September 30, 2013.
The increase in the allowance from September 30, 2012 is primarily due to the
addition of $700 thousand added to the allowance in the form of general
reserves. At September 30, 2013, the Company's total reserves amounted to
$2.1 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 September 30, 2013, the Company's total assets were $271.0 million, total
deposits were $237.8 million, total loans stood at $137.6 million and total
stockholders' equity was $23.9 million. Compared with December 31, 2012, the
Company's total assets decreased $11.1 million or 3.9% while total loans
increased $8.9 million. A shift in the mix of interest-earning assets funded
the increase in loans.

Total deposits decreased by $14.4 million or 5.7%, while new advances of $8.0
million were drawn on the Federal Home Loan Bank of Atlanta during the first
nine 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 deposits.

Rising interest rates created an unrealized loss in the investment portfolio
that was recognized as a decrease to equity in the amount of $3.1 million at
September 30, 2013. Dividends paid of $154 thousand and net loss of $1.4
million account for the remaining reduction to equity for a total decrease in
equity of $4.7 million for the period ending September 30, 2013.

Net Interest Income

The Company's net interest income was $1.7 million for the three months ended
September 30, 2013, an increase of $361 thousand or 26.0% compared to same
period last year. The increase is a result of interest income from new loan
originations combined with lower-costs on deposits and debt.

Noninterest Income

Noninterest income increased $28 thousand for the three-month period ended
September 30, 2013, compared to the same period last year, from $152 thousand
to $180 thousand. 

Noninterest Expense

Noninterest expense for the third quarter of 2013 totaled $2.1 million, up
$113 thousand or 5.6% as compared to the quarter ended September 30, 2012.

Larrowe commented further, "The rapid change in technology and the costs of an
ever increasing regulatory burden require more resources to adapt in the
short-term while also requiring us to take advantage of available efficiencies
over the longer-term. Although these changes are difficult, we are working
through those as quickly as possible after much deliberate consideration of
the needs of the Bank, its customers, its employees, and long-term shareholder
reward.

Forward Looking Statements

Information in this press release contains "forward-looking statements." These
statements involve risks and uncertainties that could cause actual results to
differ materially, including without limitation, the effects of future
economic conditions, governmental fiscal and monetary policies, legislative
and regulatory changes, the risks of changes in interest rates and the effects
of competition.



Consolidated Balance Sheets
(in thousands, except share data)
                                                                     September  
                                                                     30,     December
                                                                                31,
                                                                     2013       2012
Assets
                                                                     $      $   
Cash and due from banks               
                                                                     3,378      3,069
Interest-bearing deposits in banks   6,808      14,600
Investment securities, available for sale     101,001    106,576
Investment securities, held to maturity       -          11,380
Restricted equity securities  1,179      693
Total                                                                137,567    128,635
loans
Allowance for loan losses   (2,102)    (1,514)
 Net                                                              135,465    127,121
loans
Bank premises and equipment, net      4,157      3,385
Accrued interest receivable      808        938
Foreclosed assets    3,902      2,763
Bank owned life insurance          6,529      6,401
Deferred tax asset      5,592      3,681
Accrued taxes receivable          20         -
Other assets     2,207      1,505
                                                                     $      $   
 Total assets     271,046   
                                                                                282,112
Liabilities and Stockholders' Equity
Liabilities
                                                                     $      $   
Noninterest-bearing deposits                             
                                                                     37,545     34,555
Interest-bearing deposits                200,238    217,613
 Total deposits           237,783    252,168
Accrued interest payable                 68         81
FHLB Advances                8,000      -
Other liabilities          1,341      1,325
 Total liabilities         247,192    253,574
Stockholders' Equity
Common stock, $10 par value; 5,000,000 shares authorized; 1,535,733
shares issued and                                                    15,357     15,357
outstanding
Additional paid-in capital        2,925      2,925
Retained earnings                                                8,285      9,826
Accumulated other comprehensive income                      (2,713)    430
 Total stockholders' equity          23,854     28,538
                                                                     $      $   
 Total liabilities and stockholders' equity               271,046   
                                                                                282,112





Consolidated Statements of Operations
(in thousands, except share data)
                               Three Months Ended   Nine Months Ended
                              September 30,        September 30,
                              2013         2012       2013         2012
Interest and dividend income
 Loans and fees on loans   $       $      $       $     
                              1,782         1,577    5,354        4,974
 Federal funds sold     -            1          -            22
 Investment                509          553        1,613        1,687
securities
 Dividend income          9            5          18           15
 Deposits with banks   5            27         21           29
 Total interest    2,305        2,163      7,006        6,727
income
Interest expense
 Deposits            553          777        1,745        2,361
 Borrowings         5            -          11           -
 Total interest    558          777        1,756        2,361
expense
 Net interest      1,747        1,386      5,250        4,366
income
Provision for loan            1,171        897        2,289        4,885
losses
 Net interest income
after provision for loan      576          489        2,961        (519)
losses
Noninterest income
 Service charges on        50           46         132          133
deposit accounts
 Other service charges and 32           30         84           89
fees
 Net realized gains on     (1)          1          813          27
sales of securities
 Income on bank owned life 40           47         128          132
insurance
 Other income      59           28         125          100
 Total noninterest     180          152        1,282        481
income
Noninterest expense
 Salaries and employee     1,104        884        3,226        3,084
benefits
 Occupancy and             259          306        670          620
equipment
 Legal and                 186          109        433          614
professional
 Data processing           111          64         276          188
services
 FDIC insurance            78           91         262          258
premiums
 Foreclosed assets,        79           114        275          502
net
 Other operating           308          444        777          839
expense
 Total noninterest     2,125        2,012      5,919        6,105
expense
 Income (loss) before  (1,369)      (1,371)    (1,676)      (6,143)
income taxes
 Income tax expense    (25)         (530)      (289)        (2,317)
(benefit)
Net income (loss)         $        $      $        $    
                              (1,344)       (841)  (1,387)     (3,826)
Basic earnings (loss) per     $       $      $       $     
share                        (0.88)       (0.55)  (0.90)      (2.49)





Cardinal Bankshares Corporation
Financial Highlights (Unaudited)
(in thousands)
                          Three Months Ended          Nine Months Ended
                          September     September     September    September
                          30, 2013      30, 2012      30, 2013     30, 2012
Per Share
Earnings per share, basic $   (0.88)  $   (0.55)  $          $  
and diluted                                           (0.90)       (2.49)
Book value as of                                      $  15.53   $  19.50
September 30, 2013
Financial Ratios
Annualized Return on      -1.93%        -1.13%        -0.66%       -1.88%
Average Assets
Annualized Return on      -21.61%       -10.45%       -6.92%       -15.96%
Average Equity
Annualized Net Interest
Margin for the period     2.69%         2.77%         2.72%        2.60%
ended^1
Efficiency Ratio^2        106.12%       223.77%       98.67%       222.94%
                                                      as of September 30,
                                                      2013         2012
Capital Ratios
Tier 1 risk-based capital                             12.18%       14.76%
- Bank only
Total risk-based capital                              13.35%       15.66%
- Bank only
Tier 1 risk-based capital                             13.53%       18.42%
- consolidated
Total risk-based capital                              14.77%       19.40%
- consolidated
                          Three Months Ended          Nine Months Ended
                          September     September     September    September
                          30, 2013      30, 2012      30, 2013     30, 2012
Allowance for Loan Losses $   1,889   $   2,998   $   1,514  $   2,867
at Beginning of Period
Loans Charged-off, net of (925)         (2,511)       (1,668)      (6,368)
Recoveries
Provision for Loan Losses 1,138         897           2,256        4,885
Allowance for Loan Losses $   2,102   $   1,384   $   2,102  $   1,384
at End of Period
                                                      as of September 30,
Credit Quality Ratios                                 2013         2012
Nonperforming Assets as a % of Total                  3.64%        3.29%
Assets
Total Allowance for Loan Losses as a % of Total       1.53%        1.26%
Loans
Total Allowance for Loan Losses as a % of             35.17%       253.02%
Nonperforming Loans
Annualized Net Charge-offs as a % of Average Loans    1.65%        7.05%
Nonperforming Assets
Nonaccrual Loans                                      $   4,321  $    547
Loans Past Due 90 Days+, still accruing               1,656        -
Total Nonperforming Loans                             5,977        547
Other Real Estate Owned                               3,902        8,657
Total Nonperforming Assets                            $   9,879  $   9,204
^1 Net interest margin equals net interest income divided by interest-earning
average assets.
^2 Efficiency 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