10QSB/A 1 0001.txt AM.#1 TO 10-QSB FOR PERIOD ENDING 09/30/1999 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB/A (Mark One) X Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1999 or ____ Transition Report under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the transition period from_______________ to__________________. Commission File No. -0-28780- CARDINAL BANKSHARES CORPORATION (Exact name of the registrant as specified in its charter) Virginia 54-1804471 (State of Incorporation) (I.R.S. Employer Identification No.) 101 Jacksonville Circle (P. O. Box 215), Floyd VA 24091 (Address of principal executive offices) (540) 745-4191 (Issuer's telephone number, including area code) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: The number of shares outstanding of the Issuer's Common Stock, $10 Par Value, as of September 30, 1999 was 511,771. Transitional Small Business Disclosure Format (check one):Yes No X Page 1 of 14. CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES FORM 10-QSB INDEX ----------------------------------------------------------------------------- PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The consolidated financial statements of Cardinal Bankshares Corporation (the "Company") are set forth in the following pages. Consolidated Balance Sheets as of September 30, 1999 and December 31,1998........................................................3 Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 1999 and 1998......................4 Consolidated Statements of Stockholders' Equity for the Periods Ended September 30, 1999 and 1998...............................5 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1999 and 1998.....................................6-7 Notes to Consolidated Financial Statements.............................8-9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................................10 PART II. OTHER INFORMATION................................................11 All schedules have been omitted because they are inapplicable or the required information is provided in the financial statements, including the notes thereto. CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets September 30, 1999 and December 31, 1998 --------------------------------------------------------------------------------
September 30, December 31, 1999 1998 ------------ ------------ (Unaudited) (Audited) ASSETS Cash and due from banks $ 3,642,805 $ 2,985,331 Interest-bearing deposits with banks 0 7,100,000 Federal funds sold 7,210,000 11,825,000 Investment securities available for sale 31,872,106 25,981,443 Investment securities held to maturity 18,408,406 15,347,979 Loans, net of allowance for credit losses of $1,625,856 in 1999 and $1,668,201 in 1998 85,443,484 85,809,506 Property and equipment, net 2,442,281 2,173,693 Accrued income 1,097,992 984,457 Other assets 2,491,636 1,202,294 ----------- ----------- Total assets $152,608,710 $153,409,703 =========== =========== LIABILITIES Demand deposits $ 16,131,228 $ 15,553,868 Interest-bearing deposits 10,190,700 9,991,178 Savings deposits 19,657,487 18,476,177 Large denomination time deposits 15,704,269 15,666,927 Other time deposits 72,417,387 75,522,910 ----------- ----------- Total deposits 134,101,071 135,211,060 Federal funds purchased 0 0 Other borrowed funds 0 0 Accrued interest payable 267,616 240,709 Other liabilities 542,341 636,809 ----------- ----------- Total liabilities 134,911,028 136,088,578 ----------- ----------- Commitments and contingencies STOCKHOLDERS'EQUITY: Common stock, $10 par value, authorized 5,000,000 shares, issued 511,771 shares in 1999 and 511,911 in 1998 5,117,710 5,119,110 Surplus 2,925,150 2,925,150 Retained earnings 10,276,374 9,123,733 Unrealized appreciation (depreciation) on investment securities available for sale (621,552) 153,132 ----------- ----------- Total stockholders' equity 17,697,682 17,321,125 ----------- ----------- Total liabilities and stockholders' equity $152,608,710 $153,409,703 =========== ===========
See Notes to Consolidated Financial Statements 3 CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations For the Quarter and Nine Months ended September 30, 1999 and 1998 (Unaudited) --------------------------------------------------------------------------------
Nine Nine Quarter Quarter Months Months Ended Ended Ended Ended Sept 30, Sept 30, Sept 30, Sept 30, 1999 1998 1999 1998 (Unaudited) (Unaudited) (Unaudited) (Unaudited) INTEREST INCOME: Loans and fees on loans $ 1,909,501 $ 2,035,113 $ 5,762,139 $ 6,058,998 Federal funds sold 128,570 126,767 362,913 320,749 Interest-bearing deposits 0 0 187,741 0 Taxable investment securities 136,946 492,524 1,364,165 1,663,411 Investment securities exempt from federal tax 537,585 169,700 564,854 460,811 -------------- --------------- -------------- --------------- Total interest income 2,712,602 2,824,104 8,241,812 8,503,969 INTEREST EXPENSE ON DEPOSITS: Deposits 1,386,150 1,442,340 4,201,647 4,345,718 -------------- --------------- -------------- --------------- Net interest income 1,326,452 1,381,764 4,040,165 4,158,251 PROVISION FOR CREDIT LOSSES 40,000 70,000 96,721 205,000 -------------- --------------- -------------- --------------- Net interest income after provision for loan loss 1,286,452 1,311,764 3,943,444 3,953,251 -------------- --------------- -------------- --------------- NON INTEREST INCOME: Service charges on deposit Accounts 58,109 37,662 141,667 107,651 Other service charges 36,288 9,393 36,288 21,651 Net realized gains on sales of securities 4,768 7,606 4,768 27,189 Gains on sales of other real estate 10,000 0 10,000 0 Other income 21,534 124,308 111,495 177,887 -------------- --------------- -------------- --------------- Total non interest income 130,699 178,969 304,218 334,378 -------------- --------------- -------------- --------------- NON INTEREST EXPENSE: Salaries and employee benefits 409,830 470,391 1,443,120 1,339,294 Occupancy expense 39,960 32,798 111,740 92,690 Equipment expense 88,781 61,474 214,471 181,643 Other expense 199,777 197,470 548,405 554,299 -------------- --------------- -------------- --------------- Total non interest expense 738,348 762,133 2,317,736 2,167,926 -------------- --------------- -------------- --------------- Income before income taxes 678,803 728,600 1,929,926 2,119,703 Income tax expense 188,534 193,972 500,087 576,996 -------------- --------------- -------------- --------------- Net income $ 490,269 $ 534,628 $ 1,429,839 $ 1,542,707 ============== =============== ============== =============== BASIC EARNINGS PER SHARE $ .96 $ 1.04 $ 2.79 $ 3.01 ============= =============== ============== ===============
See Notes to Consolidated Financial Statements 4 CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES Consolidated Statement of Changes in Stockholders' Equity For the Nine Months ended September 30, 1999 and 1998 (Unaudited) --------------------------------------------------------------------------------
ACCUMULATED TOTAL OTHER STOCK- COMMON RETAINED COMPREHENSIVE HOLDERS' STOCK SURPLUS EARNINGS INCOME(LOSS) EQUITY ---------- ------- --------- ------------- -------- January 1, 1998 $5,119,110 $2,925,150 $ 7,727,506 $ 212,385 $15,984,151 Net income 1,938,852 1,938,852 Change in market value of investment securities available for sale, net of income taxes (31,938) (31,938) Reclassification adjustment (27,315) (27,315) ---------- 1,879,599 Dividends paid ($1.06 per share) (542,625) (542,625) Common stock purchased (2,500) (11,000) (13,500) Common stock reissued 2,500 11,000 13,500 --------- --------- ---------- -------- ---------- December 31, 1998 $5,119,110 $2,925,150 $ 9,123,733 $ 153,132 $17,321,125 --------- --------- ---------- -------- ---------- Net income 1,429,839 1,429,839 Net change in unrealized Depreciation on investment Securities available for Sale (774,684) (774,684) ---------- Total Comprehensive Income 655,155 Dividends paid ($.53 per share) (271,239) (271,239) Common stock purchased (1,400) (5,959) (7,359) Common stock reissued 0 0 0 --------- --------- ---------- -------- ---------- Sept 30, 1999 $5,117,710 $2,925,150 $10,276,374 $(621,552) $17,697,682 ========= ========= ========== ======== ==========
See Notes to Consolidated Financial Statements 5 CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows For the Nine Months ended September 30, 1999 and 1998 (Unaudited) -------------------------------------------------------------------------------
Nine Months Ended September 30, 1999 1998 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,429,839 $ 1,542,707 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 145,885 117,463 Accretion of discounts on securities 53,333 38,130 Amortization of loan fees (81,636) (91,438) Provision for loan losses 96,721 205,000 Deferred income taxes 399,080 0 Net realized gains on securities (4,768) (27,189) Deferred compensation & pension expense (1,351) 49,038 Changes in assets and liabilities: Accrued income (113,535) 14,674 Other assets (1,294,604) (199,106) Accrued interest payable 26,907 22,969 Other liabilities (93,117) (147,944) ---------- ----------- Net cash provided by operating activities 562,754 1,524,304 CASH FLOWS FROM INVESTING ACTIVITIES: Net (increase) in federal funds sold 4,615,000 (6,935,000) Purchases of investment securities (23,426,058) (12,216,872) Sale of investment securities 493,672 12,125 Net decrease in int-bearing deposits 7,100,000 (99,231) Maturity of investment securities 12,754,199 17,381,446 Net decrease in loans 350,937 1,032,957 Proceeds from sale of other real estate 10,000 87,979 Purchases of properties and equipment (414,473) (612,837) Proceeds from sale of Bank Land 0 90,000 __________ __________ Net cash (used) in investing activities 1,483,277 (1,259,433) __________ __________ CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in demand, NOW, and savings deposits 1,958,192 2,296,966 Net (decrease) in time deposits (3,068,181) (1,933,001) Dividends paid (271,239) (266,195) Net (decrease) fed funds purchased 0 0 Common Stock Purchased (7,329) 0 Common Stock Reissued 0 0 __________ __________ Net cash used in financing activities (1,388,557) 97,770 __________ __________ Net increase in cash & cash equivalents 657,474 362,641 CASH AND CASH EQUIVALENTS, BEGINNING $ 2,985,331 $ 1,941,494 ========== =========== CASH AND CASH EQUIVALENTS, ENDING $ 3,642,805 $ 2,304,135 ========== ===========
See Notes to Consolidated Financial Statements 6 CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows, continued For the Nine Months ended September 30, 1999 and 1998 (Unaudited) -------------------------------------------------------------------------------
1999 1998 ---- ---- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid $ 4,174,740 $ 4,322,749 ============ =========== Income taxes paid $ 438,077 $ 724,089 ============ =========== SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES: Other real estate acquired in settlement of loans $ 0 $ 0 ============ ===========
See Notes to Consolidated Financial Statements 7 CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------------------------------------------------------------- ITEM 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION NOTE 1. BASIS OF PRESENTATION: Cardinal Bankshares Corporation (the Company) was incorporated as a Virginia corporation on March 12, 1996 to acquire the stock of The Bank of Floyd (the Bank). The Bank was acquired by the Company on July 1, 1996 and used the pooling of interests accounting method. The consolidated financial statements as of September 30, 1999 and for the periods ended September 30, 1999 and 1998 included herein, have been prepared by Cardinal Bankshares Corporation, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the information furnished in the interim consolidated financial statements reflects all adjustments necessary to present fairly the Company's consolidated financial position, results of operations, changes in stockholders' equity and cash flows for such interim periods. Management believes that all interim period adjustments are of a normal recurring nature. These consolidated financial statements should be read in conjunction with the Company's audited financial statements and the notes thereto as of December 31, 1998, included in the Company's Annual Report for the fiscal year ended December 31, 1998. The Bank of Floyd and its wholly owned subsidiary, FBC, Inc. are organized and incorporated under the laws of the Commonwealth of Virginia. As a state chartered Federal Reserve member, the Bank is subject to regulation by the Virginia Bureau of Financial Institutions and the Federal Reserve. FBC, Inc.'s assets and operations consist primarily of a minority interest in a title insurance company. The Bank serves the counties of Floyd, Montgomery, and Roanoke, Virginia and the City of Roanoke, Virginia through three banking offices. All significant intercompany accounts and transactions have been elimi- nated in consolidation. Certain prior year amounts have been reclassified to conform to the current year presentation. NOTE 2. ALLOWANCES FOR CREDIT LOSSES The following is an analysis of the allowance for credit losses for the nine months ended September 30.
1999 1998 ---- ---- Balance at January 1 $ 1,668,201 $ 1,452,126 Provision charged to operations 96,721 205,000 Loans charged off, net of recoveries (139,066) (8,810) ---------- ---------- Balance at September 30 $ 1,625,856 $ 1,648,316 ========== ==========
8 NOTE 3. COMMITMENTS AND CONTINGENCIES The Bank's exposure to credit loss in the event of nonperformance by the other party for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as for on-balance-sheet instruments. A summary of the Bank's commitments at September 30, 1999 and 1998 is as follows:
1999 1998 ---- ---- Commitments to extend credit $ 5,284,424 $ 4,980,531 Standby letters of credit 30,000 368,600 ---------- ---------- $ 5,314,424 $ 5,349,131 ========== ==========
9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS For the quarter ended September 30, 1999, the Bank earned $490,269 in net income compared to $534,628 for the quarter ended September 30, 1998. The decrease of $44,359 was due primarily to a decrease in net interest income. Interest income was $2,712,602 for the quarter ended September 30, 1999, compared to $2,824,104 for the same period of 1998. The quarterly decrease was due mainly to a decrease in yields on average earning assets. Interest expense for the quarter ended September 30, 1999 was $1,386,150, down $56,190 from $1,442,340 for the quarter ended September 30, 1998. The decrease was due to a decrease in interest bearing deposits and lower interest rates when compared to the quarter ended September 30, 1998. The provision for credit losses was $40,000 for the quarter ended September 30, 1999 and $70,000 for the quarter ended September 30, 1998. Management believes the provision and the resulting allowance for credit losses is adequate. CHANGES IN FINANCIAL CONDITION Total assets at September 30, 1999 were $152,608,710 compared to $153,409,703 at December 31, 1998. Net loans decreased by $366,022. CAPITAL ADEQUACY Shareholder's equity amounted to $17,697,682 at September 30, 1999, an increase of $376,557 over the December 31, 1998 balance of $17,321,125. The increase was a result of the earnings for the nine months offset by a decrease in the market value of securities that are classified as available for sale and the payment of $271,239 in dividends. Regulatory guidelines relating to capital adequacy provide minimum risk-based ratios at the Bank level which assess capital adequacy while encompassing all credit risks, including those related to off-balance sheet activities. The Bank of Floyd (a wholly owned subsidiary of Cardinal Bankshares Corporation) exceeds all regulatory capital guidelines and is considered to be well capitalized. At September 30, 1999 the Bank had a ratio of Tier 1 capital to risk-weighted assets of 14.80%, a ratio of total risk-based capital to risk-weighted assets of 16.06% and a leverage ratio of Tier 1 capital to average total assets for the quarter ended September 30, 1999 of 9.20%. 10 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There are no matters pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is subject. ITEM 2. CHANGES IN SECURITIES (a) Not applicable. (b) Not applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None. (b) Reports on Form 8-K None. SIGNATURES Pursuant to the requirements of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CARDINAL BANKSHARES CORPORATION Date: November 15, 1999 By: s/Ronald Leon Moore President, Chief Executive Officer, and Principal Financial Officer 11