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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