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

  • Total assets decreased by $2.6 million from $268.8 million at December 31, 2013 to $266.2 million at June 30, 2014.
  • Total 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.
  • Deposits remained relatively stable for the quarter decreasing $587 thousand from March 31, 2014.
  • Net interest income increased 6.8% and 9.9% for the three and six-month periods ended June 30, 2014, respectively.
  • The 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 loans

$1,893


$1,849


$3,751


$3,572

   Federal funds sold

-


-


-


-

   Investment securities

481


511


1,047


1,104

   Dividend income

12


4


17


9

   Deposits with banks

4


10


7


16

      Total interest income

2,390


2,374


4,822


4,701









Interest expense








   Deposits

475


581


964


1,192

   Borrowings

5


4


9


6

      Total interest expense

480


585


973


1,198

      Net interest income

1,910


1,789


3,849


3,503









Provision for loan losses

(1,582)


818


(1,560)


1,118

      Net interest income after provision








        for loan losses

3,492


971


5,409


2,385









Noninterest income








   Service charges on deposit accounts

45


40


83


82

   Other service charges and fees

34


26


61


52

   Net realized gains on sales of securities

(55)


518


(56)


814

   Income on bank owned life insurance

44


45


84


88

   Other income

43


24


142


67

      Total noninterest income

111


653


314


1,103









Noninterest expense








   Salaries and employee benefits

1,254


1,057


2,392


2,122

   Occupancy and equipment

280


209


567


411

   Legal and professional

74


127


142


247

   Data processing services

141


94


265


165

   FDIC insurance premiums

90


93


181


184

   Foreclosed assets, net

420


162


439


196

   Other operating expense

362


244


669


469

      Total noninterest expense

2,621


1,986


4,655


3,794

      Income (loss) before income taxes

982


(362)


1,068


(306)

      Income tax expense (benefit)

(1)


(189)


(2)


(263

Net income (loss)

983


(173)


1,070


(43)

Basic earnings (loss) per share

0.64


(0.11)


0.70


(0.03)

 

 

Cardinal Bankshares Corporation









Financial Highlights (Unaudited)









(in thousands)









Three Months Ended


Six Months Ended



June 30, 2014


June 30, 2013


June 30, 2014


June 30, 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 Average Assets


1.48%


-0.25%





Annualized Return on Average Equity


21.03%


-2.50%





Annualized Net Interest Margin for the quarter ended1


3.07%


2.76%





Efficiency Ratio2


106.02%


98.49%














Capital Ratios









Tier 1 risk-based capital - Bank only


11.44%


11.57%





Total risk-based capital - Bank only


12.69%


12.61%














Tier 1 risk-based capital - consolidated


12.55%


14.47%





Total risk-based capital - consolidated


13.80%


15.57%














Allowance for Loan Losses at Beginning of Period






$         3,040


$         1,825

Loans Charged-off, net of Recoveries






1,427


(754)

Provision for Loan Losses






(1,583)


818

Allowance for Loan Losses at End of Period






$         2,884


$         1,889










Credit Quality Ratios









Nonperforming Assets as a % of Total Assets






2.07%


4.15%

Total Allowance for Loan Losses as a % of Total Loans






1.87%


1.32%

Total Allowance for Loan Losses as a % of Nonperforming Loans






60.82%


20.82%

Annualized Net Charge-offs as a % of Average Loans






-3.89%


2.22%










Nonperforming Assets









Nonaccrual Loans






$         4,742


$         7,505

Loans Past Due 90 Days+, still accruing






-


1,566










Total Nonperforming Loans






4,742


9,071

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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