Cardinal Bankshares Corporation Announces Second Quarter 2015 Earnings

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Aug 17, 2015, 06:06 ET

FLOYD, Va., Aug. 17, 2015 /PRNewswire/ -- Cardinal Bankshares Corporation (OTC-QB: CDBK), parent company of Bank of Floyd, announced its consolidated financial results for the second quarter ended June 30, 2015. The Company reported consolidated net income of $102 thousand for the second quarter and $173 thousand for the six months ended June 30, 2015.

Second quarter financial highlights include:

Annualized net interest margin improved to 3.25% during the three months ended June 30, 2015 from 3.07% during the same three month period in 2014.
Service charges on deposit accounts and other service charges and fees increased 131% during the three months ended June 30, 2015 when compared to the same three month period in 2014.
Non-performing Assets as a percentage of total assets declined to .12% at June 30, 2015 compared to 2.07% at June 30, 2014.
Total loans increased from $172.7 million to $177.3 million from March 31, 2015 to June 30, 2015.
645 net new checking accounts were created in the twelve month period from June 30, 2014 to June 30, 2015 which equated to a 9.64% increase.

According to Mark A. Smith, Interim President & CEO, "The implementation of strategies to improve profitability and attract new customers to the Bank continued to produce results in the second quarter. We are also pleased with the additional progress that was made in cleaning up legacy credit issues. With legacy credit issues substantially behind us, we can increase our focus on operational profitability and work toward achieving consistent and improving results. While we focus on core earnings, we still face headwinds associated with a lukewarm economy and ever increasing regulatory burdens; however, we believe we have assembled the team, products and services needed to compete successfully in this environment".

A Warning about Forward-Looking Statements
This news release contains forward-looking statements. The Company may also make written forward-looking statements in proxy statements, offering circulars and prospectuses, press releases and other written materials and oral statements made by Cardinal Bankshares' officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. These statements are based on beliefs and assumptions of the Company's management, and on information currently available to such management. Forward-looking statements include statements preceded by, followed by or that include the words "believes," "expects," "estimates," "anticipates," "plans," or similar expressions. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events.

Forward-looking statements involve inherent risks and uncertainties. Management cautions the readers that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, but are not limited to, the following: competitive pressures among depository and other financial institutions may increase significantly; changes in the interest rate environment may reduce margins; general economic or business conditions may lead to a deterioration in credit quality or a reduced demand for credit; legislative or regulatory changes, including changes in accounting standards, may adversely affect the business in which Cardinal is engaged; changes may occur in the securities markets; and competitors of the Company may have greater financial resources and develop products that enable such competitors to compete more successfully than Cardinal.

Other factors that may cause actual results to differ from the forward-looking statements include the following: the timely development of competitive new products and services by the Company and the acceptance of such products and services by customers; changes in consumer spending and savings habits; the effects of competitors' pricing policies; the Company's success in managing the costs associated with the expansion of existing distribution channels and developing new ones, and in realizing increased revenues from such distribution channels, including cross-selling initiatives; and mergers and acquisitions and their integration into the Company and management's ability to manage these other risks.

Management of Cardinal believes these forward-looking statements are reasonable; however undue reliance should not be placed on such forward-looking statements, which are based on current expectations. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The future results and stockholder values of Cardinal may differ materially from those expressed in forward-looking statements contained in this report. Many of the factors that will determine these results and values are beyond the Company's ability to control or predict.

Consolidated Balance Sheets
(in thousands, except share data)

	June 30,		December 31,
	2015		2014
Assets
Cash and due from banks	$	4,211	$	3,578
Interest-bearing deposits in banks	3,773		6,034
Investment securities, available for sale	68,723		82,845
Restricted equity securities	1,577		1,535

Total loans	177,295		170,062
Allowance for loan losses	(2,159)		(3,098)
Net loans	175,136		166,964

Bank premises and equipment, net	5,685		5,776
Accrued interest receivable	654		669
Foreclosed assets	222		735
Bank owned life insurance	6,819		6,737
Deferred tax asset	5,599		5,487
Reserve deferred tax asset	(5,136)		(5,139)
Prepaid assets	726		490
Other assets	1,119		1,105
Total assets	$	269,108	$	276,816

Liabilities and Stockholders' Equity

*Liabilities*
Noninterest-bearing deposits	$	37,624	$	39,785
Interest-bearing deposits	191,915		195,325
Total deposits	229,539		235,110
FHLB advances	18,000		20,000
Accrued interest payable	50		57
Bank owned life insurance SERP	716		727
Other liabilities	521		589
Total liabilities	248,826		256,483

*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	2,899		2,726
Accumulated other comprehensive income	(899)		(675)
Total stockholders' equity	20,282		20,333
Total liabilities and stockholders' equity	$	269,108	$	276,816

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Interest and dividend income
Loans and fees on loans	$	2,113	$	1,768	$	4,135	$	3,613
Federal funds sold		-		-		-		-
Investment securities		356		481		787		1,047
Dividend income		17		12		28		17
Deposits with banks		4		4		7		7
Total interest income		2,490		2,265		4,957		4,684

*Interest expense*
Deposits		409		475		836		964
Borrowings		11		5		21		9
Total interest expense		420		480		857		973
Net interest income		2,070		1,785		4,100		3,711

*Provision for loan losses*		(559)		(1,582)		(526)		(1,560)
Net interest income after provision
for loan losses		2,629		3,367		4,626		5,271

*Noninterest income*
Service charges on deposit accounts		77		45		145		83
Other service charges and fees		92		28		171		52
Net realized gains on sales of securities		30		(55)		33		(56)
Income on bank owned life insurance		42		44		81		84
Other income		25		43		62		142
Total noninterest income		266		105		492		305

*Noninterest expense*
Salaries and employee benefits		1,148		1,123		2,276		2,245
Occupancy and equipment		356		280		699		567
Legal and professional		164		74		230		142
Data processing services		167		141		331		265
FDIC insurance premiums		94		90		186		181
Foreclosed assets, net		536		420		548		439
Other operating expense		328		362		675		669
Total noninterest expense		2,793		2,490		4,945		4,508
Income (loss) before income taxes		102		982		173		1,068
Income tax expense (benefit)		-		(1)		-		(2)
*Net income (loss)*	$	102	$	983	$	173	$	1,070
*Basic earnings (loss) per share*	$	0.07	$	0.64	$	0.11	$	0.70

Cardinal Bankshares Corporation
Financial Highlights (Unaudited)
(in thousands)
	Three Months Ended		Six Months Ended
	June 30, 2015	June 30, 2014	June 30, 2015	June 30, 2014

Per Share
Earnings per share, basic and diluted	$ 0.07	$ 0.64	$ 0.01	$ 0.70
Book value			$ 13.21	$ 13.32

Financial Ratios
Annualized Return on Average Assets	0.15%	1.48%
Annualized Return on Average Equity	1.98%	21.03%
Annualized Net Interest Margin for the quarter ended¹	3.25%	3.07%
Efficiency Ratio²	97.88%	106.02%

Capital Ratios
Tier 1 risk-based capital - Bank only	10.44%	11.44%
Total risk-based capital - Bank only	11.58%	12.69%

Tier 1 risk-based capital - consolidated	11.32%	12.55%
Total risk-based capital - consolidated	12.48%	13.80%

Allowance for Loan Losses at Beginning of Period			$ 2,567	$ 3,040
Loans Charged-off, net of Recoveries			151	1,427
Provision for Loan Losses			(559)	(1,583)
Allowance for Loan Losses at End of Period			$ 2,159	$ 2,884

Credit Quality Ratios
Nonperforming Assets as a % of Total Assets			0.12%	2.07%
Total Allowance for Loan Losses as a % of Total Loans			1.22%	1.87%
Total Allowance for Loan Losses as a % of Nonperforming Loans			2180.81%	60.82%
Annualized Net Charge-offs as a % of Average Loans			-0.35%	-3.89%

Nonperforming Assets
Nonaccrual Loans			$ 99	$ 4,742
Loans Past Due 90 Days+, still accruing			-	-

*Total Nonperforming Loans*			99	4,742
Other Real Estate Owned			222	759
Total Nonperforming Assets			$ 321	$ 5,501

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).