Cardinal Bankshares Corporation Reports Results for the Quarter ended June 30, 2014

Cardinal Bankshares Corporation Reports Results for the Quarter ended June 30,
                                     2014

PR Newswire

FLOYD, Va., July 17, 2014

FLOYD, Va., July 17, 2014 /PRNewswire/ --Cardinal Bankshares Corporation
(OTC-QB: CDBK), parent company of Bank of Floyd, announced today its
consolidated financial results for the second quarter of 2014 and reported net
income of $983 thousand, or $0.64 per share versus a $(173) thousand net loss,
or $(0.11) per share for the same quarter in 2013. The Company's net income
for the three-month period produced an annualized return on average assets of
1.48% and an annualized return on average equity of 21.03% as compared to
(0.25)% and (2.50)% for these measures in the same period last year. Net
income for the six-month period ended June 30, 2014 amounted to $1.1 million
compared to a net loss of $43 thousand in 2013.

Michael Larrowe, President and Chief Executive Officer added, "We are
encouraged that the Bank's business development activities are combining
positively with the infrastructure that has been placed over the last several
quarters. These are leading to increased net interest income and to an
increase in net interest margin for the quarter from 2.76% in the second
quarter of 2013 to 3.07% in the quarter ended June 30, 2014. As a result, we
are experiencing continuing increases in revenue associated with our core
operation. However, credit related charges have clearly been the largest
driver of operating results over the last two years, including the current
quarter. We are extremely pleased to have experienced a substantial reduction
in non-performing assets and a significant recovery during the quarter. We
believe the investment in skilled credit production and analysis teams are
beginning to deliver the results we expect."

Financial Highlights:

  oTotal assets decreased by $2.6 million from $268.8 million at December 31,
    2013 to $266.2 million at June 30, 2014.
  oTotal loans at June 30, 2014 were $154.0 million, representing an increase
    of $7.8 and $8.0 million, or 5.3% and 5.5% compared to March 31, 2014 and
    December 31, 2013, respectively.
  oDeposits remained relatively stable for the quarter decreasing $587
    thousand from March 31, 2014.
  oNet interest income increased 6.8% and 9.9% for the three and six-month
    periods ended June 30, 2014, respectively.
  oThe provision (negative provision) for loan losses for the three and
    six-month periods of $(1.58) million and $(1.56) million, respectively,
    was an improvement of $2.40 million and $2.68 million compared to the same
    periods in 2013 as credit related charges continue to decline.

Capital Levels

Both Bank and Company capital levels increased during the second quarter of
2014 and remain above regulatory defined well-capitalized ratios. The
Company's consolidated Tier 1 risk-based and total risk-based capital ratios
were 12.55% and 13.80%, respectively, at June 30, 2014, up from the 12.25% and
13.50% reported at March 31, 2014.

Nonperforming Assets

The Company's ratio of nonperforming assets as a percentage of total assets at
June 30, 2014, decreased to 2.07% compared to 4.15% one year earlier.
Nonperforming assets decreased $6.1 million from $11.6 million at June 30,
2013 to $5.5 million at June 30, 2014. Nonperforming assets at June 30, 2014
consisted of nonaccrual loans of $4.7 million, foreclosed assets of $759
thousand, and no loans that were past due greater than 90 days and still
accruing interest. Nonperforming assets at June 30, 2013 consisted of
nonaccrual loans of $7.5 million, foreclosed assets of $2.5 million, and loans
totaling $1.6 million that were past due greater than 90 days and still
accruing interest.

The Company recorded a provision (negative provision) for loan losses for the
second quarter of 2014 of $(1,582) thousand, as compared to a provision of
$818 thousand for the same period last year. Net charge-offs (recoveries)
annualized as a percentage of average loans outstanding was (3.89%) for the
second quarter of 2014, compared to 2.22% for the same quarter in the prior
year. Net charge-offs (recoveries) for the quarter ended June 30, 2014 were
$(1,427) thousand, in comparison to $754 thousand for the same quarter one
year ago.

The allowance for loan losses as a percentage of total loans increased from
1.32% at June 30, 2013 to 1.87% at June 30, 2014. At June 30, 2014, the
Company's total reserves were $2.9 million, which was comprised of $1.9
million in general reserves to cover estimated losses in the portfolio and
$1.0 million that are allocated to specific credits.

Financial Position

At June 30, 2014, the Company's total assets were $266.2 million, total
deposits were $236.4 million, total loans were $154.0 million and total
stockholders' equity was $20.5 million. Compared with December 31, 2013, the
Company's total assets decreased $2.6 million or 1.0%.

Total deposits decreased by $5.3 million or 2.2%, while advances from Federal
Home Loan Bank of Atlanta remained stable compared to December 31, 2013.

Stockholders' equity increased $3.2 million to $20.5 million at June 30, 2014
compared to $17.3 at December 31, 2013. Reduction of unrealized portfolio
losses resulted in an increase to total equity of $2.1 million as compared to
December 31, 2013. Net income of $1.1 million accounts for the remaining
increase to equity.

Net Interest Income

The Company's net interest income was $1.9 and $3.8 million for the three and
six-month periods ended June 30, 2014, an increase of $121 and $346 thousand
6.8% and 9.9% compared to same periods of 2013. The increase is a resulted
from an increase in interest income from new loan originations combined with
lower-costs on deposits and debt.

Noninterest Income

Noninterest income decreased $542 thousand for the three-month period ended
June 30, 2014, compared to the same period last year, due to a net change in
recognition of realized gains (losses) on sales of securities of $573 thousand
between the respective the three month periods ended June 30. However,
excluding gains (losses) taken on the sales of securities, noninterest income
increased $31 thousand or 23.0%.

Noninterest Expense

Noninterest expense for the second quarter of 2014 totaled $2.6 million, up
$377 thousand (exclusive of foreclosed asset charges) compared to the quarter
ended June 30, 2013. The increase in noninterest expense is due to salaries
and employee benefits as a result of experienced personnel additions,
occupancy and equipment expense as building improvements are ongoing, data
processing services as technology services offered continue to expand and
other operating expenses related to increased data transmission speeds.

For Further Information Contact:
Michael D. Larrowe, President and Chief Executive Officer
Alan Dickerson, Chief Financial Officer
(540) 745-4191



Consolidated Balance Sheets
(in thousands, except share data)
                                              June 30,  December 31,
                                              2014      2013
Assets
Cash and due from banks                       $3,990    $3,339
Interest-bearing deposits in banks            6,379     6,757
Investment securities, available for sale     86,209    96,932
Investment securities, held to maturity       -         -
Restricted equity securities                  1,175     999
Total loans                                   154,008   146,031
Allowance for loan losses                     (2,884)   (2,862)
 Net loans                                  151,124   143,169
Bank premises and equipment, net              4,937     4,971
Accrued interest receivable                   660       910
Foreclosed assets                             759       2,196
Bank owned life insurance                     6,655     6,571
Deferred tax asset                            5,826     6,891
Reserve deferred tax asset                    -5,139    -5,139
Prepaid assets                                1,142     800
Other assets                                  2,454     451
 Total assets                               $266,171  $268,847
Liabilities and Stockholders' Equity
Liabilities
Noninterest-bearing deposits                  $38,764   $40,882
Interest-bearing deposits                     197,645   200,861
 Total deposits                             236,409   241,743
FHLB advances                                 8,000     8,000
Accrued interest payable                      59        65
Bank owned life insurance SERP                833       828
Other liabilities                             410       891
 Total liabilities                          245,711   251,527
Stockholders' Equity
Common stock, $10 par value; 5,000,000
Shares authorized; 1,535,733 shares issued
Issued and outstanding                        15,357    15,357
Additional paid-in capital                    2,925     2,925
Retained earnings                             3,509     2,440
Accumulated other comprehensive income        (1,331)   (3,402)
 Total stockholders' equity                 20,460    17,320
 Total liabilities and stockholders' equity $266,171  $268,847



Consolidated Statements of Operations
(in thousands, except share data)


                        Three Months Ended June 30,  Six Months Ended June 30,
                        2014             2013        2014            2013
Interest and dividend
income
 Loans and fees on    $1,893           $1,849      $3,751          $3,572
loans
 Federal funds sold   -                -           -               -
 Investment           481              511         1,047           1,104
securities
 Dividend income      12               4           17              9
 Deposits with banks  4                10          7               16
 Total interest    2,390            2,374       4,822           4,701
income
Interest expense
 Deposits             475              581         964             1,192
 Borrowings           5                4           9               6
 Total interest    480              585         973             1,198
expense
 Net interest      1,910            1,789       3,849           3,503
income
Provision for loan      (1,582)          818         (1,560)         1,118
losses
 Net interest
income after provision
 for loan losses 3,492            971         5,409           2,385
Noninterest income
 Service charges on   45               40          83              82
deposit accounts
 Other service        34               26          61              52
charges and fees
 Net realized gains   (55)             518         (56)            814
on sales of securities
 Income on bank owned 44               45          84              88
life insurance
 Other income         43               24          142             67
 Total noninterest 111              653         314             1,103
income
Noninterest expense
 Salaries and         1,254            1,057       2,392           2,122
employee benefits
 Occupancy and        280              209         567             411
equipment
 Legal and            74               127         142             247
professional
 Data processing      141              94          265             165
services
 FDIC insurance       90               93          181             184
premiums
 Foreclosed assets,   420              162         439             196
net
 Other operating      362              244         669             469
expense
 Total noninterest 2,621            1,986       4,655           3,794
expense
 Income (loss)     982              (362)       1,068           (306)
before income taxes
 Income tax        (1)              (189)       (2)             (263
expense (benefit)
Net income (loss)       983              (173)       1,070           (43)
Basic earnings (loss)   0.64             (0.11)      0.70            (0.03)
per share





Cardinal Bankshares
Corporation
Financial Highlights
(Unaudited)
(in thousands)
                           Three Months Ended            Six Months Ended
                           June 30,       June 30,       June 30,    June 30,
                           2014           2013           2014        2013
Per Share
Earnings per share,        $          $          $       $    
basic and diluted          0.64          (0.11)          0.70      (0.03)
Book value                                               $       $    
                                                         13.32       16.69
Financial Ratios
Annualized Return on       1.48%          -0.25%
Average Assets
Annualized Return on       21.03%         -2.50%
Average Equity
Annualized Net Interest
Margin for the quarter     3.07%          2.76%
ended^1
Efficiency Ratio^2         106.02%        98.49%
Capital Ratios
Tier 1 risk-based          11.44%         11.57%
capital - Bank only
Total risk-based           12.69%         12.61%
capital - Bank only
Tier 1 risk-based          12.55%         14.47%
capital - consolidated
Total risk-based           13.80%         15.57%
capital - consolidated
Allowance for Loan                                       $       $    
Losses at Beginning of                                   3,040       1,825
Period
Loans Charged-off, net                                   1,427       (754)
of Recoveries
Provision for Loan                                       (1,583)     818
Losses
Allowance for Loan                                       $       $    
Losses at End of Period                                  2,884       1,889
Credit Quality Ratios
Nonperforming Assets as                                  2.07%       4.15%
a % of Total Assets
Total Allowance for
Loan Losses as a % of                                    1.87%       1.32%
Total Loans
Total Allowance for
Loan Losses as a % of                                    60.82%      20.82%
Nonperforming Loans
Annualized Net
Charge-offs as a % of                                    -3.89%      2.22%
Average Loans
Nonperforming Assets
Nonaccrual Loans                                         $       $    
                                                         4,742       7,505
Loans Past Due 90                                        -           1,566
Days+, still accruing
Total Nonperforming                                      4,742       9,071
Loans
Other Real Estate Owned                                  759         2,547
Total Nonperforming                                      $       $   
Assets                                                   5,501       11,618
^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).

SOURCE Cardinal Bankshares Corporation
 
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