10QSB 1 form10qsb_50398.txt FORM 10-QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) X Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2001 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 May 10, 2001 was 1,535,733 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 March 31, 2001 and December 31,2000........................................................3 Consolidated Statements of Operations for the Three Months Ended March 31, 2001 and 2000....................................4 Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31, 2001 and the Year Ended December 31, 2000.......................................................5 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2001 and 2000.........................................6-7 Notes to Consolidated Financial Statements.............................8-9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.....................................9-10 PART II. OTHER INFORMATION.............................................10-11 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 March 31, 2001 and December 31, 2000 --------------------------------------------------------------------------------
March 31, December 31, 2001 2000 ------------ ------------ (Unaudited) (Audited) ASSETS Cash and due from banks $ 2,753,384 $ 2,631,298 Interest-bearing deposits with banks - - Federal funds sold 13,555,000 4,475,000 Investment securities available for sale 29,933,144 37,320,415 Investment securities held to maturity 19,492,461 19,351,824 Restricted equity securities 630,700 630,700 Loans, net of allowance for credit losses of $1,172,300 in 2001 and $1,133,993 in 2000 96,439,394 92,601,863 Property and equipment, net 2,439,986 2,486,648 Accrued income 1,105,176 1,288,241 Foreclosed assets 415,151 428,151 Other assets 1,156,869 2,025,775 ------------ ------------ Total assets $167,921,265 $163,239,915 ============ ============ LIABILITIES Noninterest-bearing deposits $ 18,517,654 $ 18,346,247 Interest-bearing deposits 128,489,551 124,687,105 ----------- ----------- Total deposits 147,007,205 143,033,352 Accrued interest payable 301,744 272,507 Other liabilities 183,072 255,968 ----------- ----------- Total liabilities 147,492,021 143,561,827 ----------- ----------- Commitments and contingencies STOCKHOLDERS'EQUITY: Common stock, $10 par value, authorized 5,000,000 shares, issued 1,535,733 shares in 2001 and 511,911 in 2000 15,357,330 5,119,110 Surplus 2,925,150 2,925,150 Retained earnings 2,067,504 11,764,483 Unrealized appreciation (depreciation) on investment securities available for sale 79,260 (130,655) ----------- ----------- Total stockholders' equity 20,429,244 19,678,088 ----------- ----------- Total liabilities and stockholders' equity $167,921,265 $163,239,915
See Notes to Consolidated Financial Statements 3 CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations For the Three Months ended March 31, 2001 and 2000 (Unaudited) --------------------------------------------------------------------------------
Three Months Ended March 31, 2001 2000 ---- ---- (Unaudited) (Unaudited) INTEREST INCOME: Loans and fees on loans $ 2,165,254 $ 1,958,625 Federal funds sold 73,353 111,043 Taxable investment securities 575,311 588,655 Investment securities exempt from federal tax 237,674 219,827 Deposits with banks 0 18,820 ---------- ---------- Total interest income 3,051,592 2,896,970 ---------- ---------- INTEREST EXPENSE ON DEPOSITS: Deposits 1,617,880 1,453,306 Federal funds purchased 0 0 Other borrowed funds 0 1,508 ---------- ---------- Total interest expense 1,617,880 1,454,814 ---------- ---------- Net interest income 1,433,712 1,442,156 PROVISION FOR CREDIT LOSSES 97,500 120,000 ---------- ---------- Net interest income after provision for loan loss 1,336,212 1,322,156 NON INTEREST INCOME: Service charges on deposit accounts 68,890 48,606 Other service charges and fees 17,609 9,773 Net realized gains on sales of Securities 3,420 0 Other income 41,258 19,571 ---------- ---------- Total non interest income 131,177 77,950 NON INTEREST EXPENSE: Salaries and employee benefits 451,700 389,953 Occupancy expense 53,483 40,976 Equipment expense 69,567 70,292 Foreclosed assets, net 1,878 0 Other expense 219,824 212,590 ---------- ---------- Total non interest expense 796,452 713,811 ---------- ---------- Income before income taxes 670,937 686,295 Income tax expense 129,696 160,549 ---------- ---------- Net income $ 541,241 $ 525,746 ========== ========== BASIC EARNINGS PER SHARE $ 0.35 $ 0.34
See Notes to Consolidated Financial Statements 4 CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES Consolidated Statement of Changes in Stockholders' Equity For the Three Months ended March 31, 2001 (Unaudited) and the Year ended December 31, 2000 (Audited) --------------------------------------------------------------------------------
ACCUMULATED TOTAL OTHER STOCK- COMMON RETAINED COMPREHENSIVE HOLDERS' STOCK SURPLUS EARNINGS INCOME(LOSS) EQUITY ---------- ------- --------- ------------- -------- January 1, 2000 $5,117,710 $2,925,150 $10,514,759 $ (800,022) $17,757,597 Net income - - 1,825,938 - 1,825,938 Net change in unrealized depreciation on investment securities available for sale, net of income taxes - - - 669,367 669,367 ---------- 2,495,305 Dividends paid ($1.18 per share) - - (582,014) - (582,014) Common stock purchased (200,640) - (584,763) - (785,403) Common stock reissued 202,040 - 590,563 - 792,603 --------- --------- ---------- -------- ---------- December 31, 2000 5,119,110 2,925,150 11,764,483 (130,655) 19,678,088 Net income - - 541,241 - 541,241 Net change in unrealized Depreciation on investment Securities available for Sale, net of taxes - - - 209,915 209,915 ----------- 751,156 Stock split (3 for 1) effected in the form of a dividend 10,238,220 - (10,238,220) - - ---------- ---------- ----------- --------- ----------- March 31, 2001 $15,357,330 $2,925,150 $ 2,067,504 $ 79,260 $20,429,244 =========== ========== =========== ========= ===========
See Notes to Consolidated Financial Statements 5 CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows For the Three Months ended March 31, 2001 and 2000 (Unaudited) -------------------------------------------------------------------------------
Three Months Ended March 31, 2001 2000 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 541,241 $ 525,746 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 61,208 50,715 Accretion of discounts on securities (3,126) 3,740 Provision for loan losses 97,500 120,000 Deferred income taxes 108,138 63,269 Net realized gains on securities 3,420 0 Deferred compensation & pension expense 25,689 23,738 Changes in assets and liabilities: Accrued income 183,065 5,044 Other assets 662,210 (113,832) Accrued interest payable 29,237 14,987 Other liabilities (98,585) 177,635 --------- --------- Net cash provided by operating activities 1,609,997 871,042 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Net (increase) decrease in federal funds sold (9,080,000) 1,985,000 Purchases of investment securities (3,945,111) (5,552,959) Sale of investment securities 0 0 Net decrease in interest-bearing deposits 0 2,000,000 Maturity of investment securities 11,512,924 955,142 Net (increase) decrease in loans (3,935,031) 127,496 Proceeds from sale of other real estate 0 0 Purchases of properties and equipment (14,546) (139,066) ----------- --------- Net cash (used) in investing activities (5,461,764) (624,387) ----------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) noninterest- bearing deposits 171,407 573,906 Net increase (decrease) in interest- bearing deposits 3,802,446 (2,287,931) Dividends paid 0 0 Common Stock Purchased 0 (24,120) Common Stock Reissued 0 31,401 ---------- --------- Net cash used in financing activities 3,973,853 (1,706,744) ---------- ---------- Net decrease in cash & cash equivalents 122,086 (1,460,089) CASH AND CASH EQUIVALENTS, BEGINNING 2,631,298 3,775,280 ---------- ---------- CASH AND CASH EQUIVALENTS, ENDING $ 2,753,384 $ 2,315,191 ========== ==========
See Notes to Consolidated Financial Statements 6 CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows, continued For the Three Months ended March 31, 2001 and 2000 (Unaudited) -------------------------------------------------------------------------------
2001 2000 ---- ---- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid $ 1,588,643 $ 1,439,827 ---------- ---------- Income taxes paid $ 0 $ 0 ---------- ---------- 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 March 31, 2001 and for the periods ended March 31, 2001 and 2000 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, 2000, included in the Company's Annual Report for the fiscal year ended December 31, 2000. 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 annuity sales and minority interests in an insurance company and a title insurance company. The Bank serves the counties of Floyd, Carroll, Montgomery, and Roanoke, Virginia and the City of Roanoke, Virginia through five 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 three months ended March 31.
2001 2000 ---- ---- Balance at January 1 $ 1,133,993 $ 1,661,521 Provision charged to operations 97,500 120,000 Loans charged off, net of recoveries (59,193) (207,708) ---------- ---------- Balance at March 31 $ 1,172,300 $ 1,573,813 =========== ===========
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 March 31, 2001 and 2000 is as follows:
2001 2000 ---- ---- Commitments to extend credit $18,678,000 $ 13,793,000 Standby letters of credit 941,000 46,000 ----------- ----------- $19,619,000 $13,839,000 =========== ===========
NOTE 4. SUBSEQUENT EVENTS On April 25, 2001, the Company announced a 3 for 1 stock split to be distributed to all stockholders of record as of April 25, 2001. ALL REFERENCES IN THE FINANCIAL STATEMENTS TO NUMBER OF SHARES AND PER SHARE AMOUNTS HAVE BEEN RETROACTIVELY RESTATED TO REFLECT THE SPLIT. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS For the quarter ended March 31, 2001, the Bank earned $541,241 in net income compared to $525,746 for the quarter ended March 31, 2000. Interest income was $3,051,592 for the quarter ended March 31, 2001, compared to $2,896,970 for the same period of 2000. Interest expense for the quarter ended March 31, 2001 was $1,617,880, an increase of 11.2% over the quarter ended March 31, 2000. The provision for credit losses was $97,500 for the quarter ended March 31, 2001 compared to $120,000 for the quarter ended March 31, 2000. Management believes the provision and the resulting allowance for credit losses is adequate. CHANGES IN FINANCIAL CONDITION Total assets at March 31, 2001 were $167,921,265 compared to $163,239,915 at December 31, 2000. Net loans increased almost $4 million over the quarter. CAPITAL ADEQUACY Shareholder's equity amounted to $20,429,244 at March 31, 2001, an increase of $751,156 over the December 31, 2000 balance of $19,678,088. The increase was a result of the earnings for the three months and an increase in the market value of securities that are classified as available for sale. 9 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 March 31, 2001 the Bank had a ratio of Tier 1 capital to risk-weighted assets of 14.4%, a ratio of total risk-based capital to risk-weighted assets of 15.5% and a leverage ratio of Tier 1 capital to average total assets for the quarter ended March 31, 2001 of 8.9%. 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: May 14, 2001 By: s/Ronald Leon Moore President, Chief Executive Officer, and Principal Financial Officer 10