-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UJwbKeEKJnMXf6tqtGcvdyjHQ3oaSy0ESVjjn0imAcdlEqSoQmPOfOLEt6xYbEoD vqNPbzm8nrPbQ/64Bgmnzg== 0000950168-01-501200.txt : 20020410 0000950168-01-501200.hdr.sgml : 20020410 ACCESSION NUMBER: 0000950168-01-501200 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARDINAL BANKSHARES CORP CENTRAL INDEX KEY: 0001022759 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 541804471 STATE OF INCORPORATION: VA FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-28780 FILM NUMBER: 1786877 BUSINESS ADDRESS: STREET 1: P O BOX 215 CITY: FLOYD STATE: VA ZIP: 24091 BUSINESS PHONE: 5407454191 10QSB 1 d10qsb.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 September 30, 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 November 12, 2001 was 1,535,733. Transitional Small Business Disclosure Format (check one):Yes [_] No X__ 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, 2001 and December 31, 2000 ................................. 3 Consolidated Statements of Operations for the Nine and Three Months Ended September 30, 2001 and 2000 ...... 4 Consolidated Statements of Stockholders' Equity for the Nine Months Ended September 30, 2001 and the Year Ended December 31, 2000 ..................................................................... 5 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2001 and 2000 ................ 6 Notes to Consolidated Financial Statements ................................................................. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ............................................................................... 8-9 PART II. OTHER INFORMATION ................................................................................... 10
All schedules have been omitted because they are inapplicable or the required information is provided in the financial statements, including the notes thereto. - -------------------------------------------------------------------------------- Consolidated Balance Sheets September 30, 2001 and December 31, 2000 - --------------------------------------------------------------------------------
2001 2000 ------------- ------------- Assets Cash $ 3,269,752 $ 2,631,298 Interest-bearing deposits with banks - - Federal funds sold 9,800,000 4,475,000 Investment securities available for sale 27,111,198 37,320,415 Investment securities held to maturity 18,913,935 19,351,824 Restricted equity securities 841,898 630,700 Loans, net of allowance for loan losses $1,192,467 in 2001 and $1,133,993 in 2000 113,194,915 92,601,863 Property and equipment, net 2,355,520 2,486,648 Accrued income 1,228,391 1,288,241 Foreclosed assets 217,528 428,151 Other assets 905,454 2,025,775 ------------- ------------- Total assets $ 177,838,591 $ 163,239,915 ============= ============= Liabilities and Stockholders' Equity Liabilities Noninterest-bearing liabilities $ 24,180,525 $ 18,346,247 Interest-bearing liabilities 131,264,522 124,687,105 ------------- ------------- Total deposits 155,445,047 143,033,352 Accrued interest payable 330,576 272,507 Other liabilities 446,697 255,968 ------------- ------------- Total liabilities 156,222,320 143,561,827 Commitments and contingencies - - Stockholders' equity Common stock, $10 par value; 5,000,000 shares authorized; 1,535,733 and 511,911 shares issued in 2001 and 2000, respectively 15,357,330 5,119,110 Surplus 2,925,150 2,925,150 Retained earnings 2,989,570 11,764,483 Accumulated other comprehensive income 344,221 (130,655) ------------- ------------- Total stockholder's equity 21,616,271 19,678,088 ------------- ------------- Total liabilities and stockholder's equity $ 177,838,591 $ 163,239,915 ============= =============
See Notes to Consolidated Financial Statements 3 - -------------------------------------------------------------------------------- Consolidated Statements of Income For the nine and three months ended September 30, 2001 and 2000 - --------------------------------------------------------------------------------
For the nine months ended For the three months ended 9/30/2001 9/30/2000 9/30/2001 9/30/2000 ----------- ---------- ----------- ----------- Interest income Loans and fees on loans $ 6,948,280 $ 5,852,543 $ 2,474,936 $ 2,036,034 Federal funds sold and securities purchased under agreements to resell 225,397 214,545 55,386 44,275 Investment securities: Taxable 1,511,511 1,778,975 460,713 582,964 Exempt from federal income tax 714,064 710,348 235,598 254,239 Dividends 63,253 - 39,795 - Deposits with banks 38,381 21,995 35,139 1,704 ----------- ----------- ----------- ----------- Total interest income 9,500,886 8,578,406 3,301,567 2,919,216 ----------- ----------- ----------- ----------- Interest expense Deposits 4,907,570 4,403,829 1,671,820 1,499,325 Borrowings - - - - ----------- ----------- ----------- ----------- Total interest expense 4,907,570 4,403,829 1,671,820 1,499,325 ----------- ----------- ----------- ----------- Net interest income 4,593,316 4,174,577 1,629,747 1,419,891 Provision for loan losses 400,000 400,000 145,000 150,000 ----------- ----------- ----------- ----------- Net interest income after provision for loan losses 4,193,316 3,774,577 1,484,747 1,269,891 ----------- ----------- ----------- ----------- Noninterest income Service charges on deposit accounts 210,314 159,467 73,463 57,585 Other service charges and fees 58,413 40,889 20,063 17,759 Net realized gains on sales of securities 44,365 - 40,650 - Other income 136,021 55,189 35,890 15,415 ----------- ----------- ----------- ----------- Total noninterest income 449,113 255,545 170,066 90,759 ----------- ----------- ----------- ----------- Noninterest expense Salaries and employee benefits 1,304,812 1,295,096 555,700 437,216 Occupancy 155,587 132,770 60,861 50,086 Equipment 232,460 217,912 (41,770) 87,074 Data processing 13,809 - (65,541) - Foreclosed assets, net (144,176) - (116,508) - Other general and administrative 779,037 692,535 321,358 221,830 ----------- ----------- ----------- ----------- Total noninterest expense 2,341,529 2,338,313 714,100 796,206 ----------- ----------- ----------- ----------- Income before income taxes 2,300,900 1,691,809 940,713 564,444 Income tax expense 545,804 358,875 216,804 120,561 ----------- ----------- ----------- ----------- Net income $ 1,755,096 $ 1,332,934 $ 723,909 $ 443,883 =========== =========== =========== =========== Basic earnings per share $ 1.14 $ 0.88 $ 0.47 $ 0.30 =========== =========== =========== ===========
See Notes to Consolidated Financial Statements 4 ================================================================================ Consolidated Statements of Changes in Stockholders' Equity For the nine months ended September 30, 2001 (Unaudited) and the year ended December 31, 2000 (Audited) - --------------------------------------------------------------------------------
Accumulated Other Common Retained Comprehensive Stock Surplus Earnings Income (Loss) Total ------------ ------------ ------------ ------------- ------------ Balance, December 31, 1999 $ 5,117,710 $ 2,925,150 $ 10,514,759 $ (800,022) $ 17,757,597 Comprehensive income Net income - - 1,825,938 - 1,825,938 Net change in unrealized appreciation on investment securities available for sale, net of income taxes - - - 669,367 669,367 ------------ Total comprehensive income 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 ------------ ------------ ------------ ------------- ------------ Balance, December 31, 2000 5,119,110 2,925,150 11,764,483 (130,655) 19,678,088 Comprehensive income Net income - - 1,755,096 - 1,755,096 Net change in unrealized appreciation on investment securities available for sale, net of income taxes - - - 474,876 474,876 ------------ Total comprehensive income 2,229,972 Dividends paid ($0.57 per share) - - (291,789) - (291,789) Stock split (3 for 1) effected in the form of a dividend 10,238,220 - (10,238,220) - - ------------ ------------ ------------ ------------- ------------ Balance, September 30, 2001 $ 15,357,330 $ 2,925,150 $ 2,989,570 $ 344,221 $ 21,616,271 ============ ============ ============ ============= ============
See Notes to Consolidated Financial Statements 5 ================================================================================ Consolidated Statements of Cash Flows For the nine months ended September 30, 2001 and 2000 (Unaudited) - --------------------------------------------------------------------------------
2001 2000 ------------ ----------- Cash flows from operating activities Net income $ 1,755,096 $ 1,332,934 Adjustments to reconcile net income to net cash provided by operations; Depreciation and amortization 183,175 169,304 Accretion of discount on securities, net of amortization of premiums (12,480) 40,551 Provision for loan losses 400,000 400,000 Deferred income taxes 244,633 (109,392) Net realized (gains) losses on securities (44,365) - Deferred compensation and pension expense 77,066 71,215 Changes in assets and liabilities: Accrued income 59,850 (5,010) Other asssets 1,086,312 (677,847) Accrued income payable 58,069 34,638 Other liabilities 113,663 97,756 ------------ ------------ Net cash provided by operating activities 3,921,019 1,354,149 ------------ ------------ Cash flows from investing activites Net (increase) decrease in interest-bearing deposits - 2,000,000 Net (increase) decrease in federal funds sold (5,325,000) 2,375,000 Purchases of investment securities (8,609,944) (8,295,085) Sales of investment securities 1,000,000 - Maturities of investment securities 18,577,573 4,673,759 Net (increase) decrease in loans (20,993,052) (2,149,479) Net purchases of property and equipment (52,048) (273,625) ------------ ------------ Net cash used in investing activities (15,402,471) (1,669,430) ------------ ------------ Cash flows from financing activities Net increase (decrease) in noninterest-bearing deposits 5,834,278 1,365,445 Net increase in interest-bearing deposits 6,577,417 (950,620) Dividends paid (291,789) (271,816) Common stock purchased - (784,620) Common stock reissued - 31,401 ------------ ------------ Net cash provided by financing activities 12,119,906 (610,210) ------------ ------------ Net increase (decrease) in cash and cash equivalents 638,454 (925,491) Cash and cash equivalents, beginning 2,631,298 3,775,280 ------------ ------------ Cash and cash equivalents, ending $ 3,269,752 $ 2,849,789 ============ ============ Supplemental disclosures of cash flow information Interest paid $ 4,849,502 $ 4,369,191 ============ ============ Income taxes paid $ 400,986 $ 269,495 ============ ============ Supplemental disclosure of noncash investing activities Other real estate acquired in settlement of loans $ 210,623 $ 625,454 ============ ============
See Notes to Consolidated Financial Statements 6 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, 2001 and for the periods ended September 30, 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 a minority interest in an 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 inter-company accounts and transactions have been eliminated 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. 2001 2000 ---------------- --------------- Balance at January 1 $ 1,133,993 $ 1,661,521 Provision charged to operations 400,000 400,000 Loans charged off, net of recoveries (341,526) (941,553) ---------------- --------------- Balance at September 30 $ 1,192,467 $ 1,119,968 ================ =============== ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Comparision of Nine Months Ended September 30, 2001 and 2000 Net income for the nine months ended September 30, 2001 was $1,755,096, an increase of 31.67% compared to September 30, 2000. Net interest income increased 10.03% from September 30, 2000 to September 30, 2001. Provision for loan losses remained the same at $400,000. Management believes the provision and the resulting allowance for credit losses to be adequate. Interest income increased $922,480 from September 30, 2001 to 2000 as interest expense increased $503,741 over 2000. Noninterest income increased 75.75% in 2001 compared to 2000. Gains on sales of securities and charges on the growing number of deposit accounts were contributors to the increase. Noninterest expense increased only $3,216. Salaries and employee benefits increased $9,716 occupancy expense increased $22,817. Net foreclosed assets which consists of income from the sale of other assets less related expenses was $144,176 at September 30, 2001. Comparison of three months ended September 30, 2001 and 2000. For the quarter ended September 30, 2001, the Bank earned $723,909 in net income compared to $443,883 for the quarter ended September 30, 2000. Net interest income increased 14.78%. Interest income was $3,301,567 for the quarter ended September 30, 2001, compared to $2,919,216 for the same period of 2000, an increase of 13.10%. Interest expense for the quarter ended September 30, 2001 was $1,671,820, up $172,495 from $1,499,325 for the quarter ended September 30, 2000. The provision for credit losses was $145,000 for the quarter ended September 30, 2001 and $150,000 for the quarter ended September 30, 2000. Management believes the provision and the resulting allowance for credit losses is adequate. CHANGES IN FINANCIAL CONDITION Total assets at September 30, 2001 were $177,838,591 compared to $163,239,915 at December 31, 2000, an increase of $14,598,676. Federal funds sold increased by $5,325,000 and other assets decreased by $1,120,321 for the period. Gross loans increased $20,651,526 compared to December 31, 2000 and accounted for 64% of total assets at September 30, 2001. Deposits increased $12,411,695. Loans to deposits at September 30, 2001 was 74% compared to 66% at December 31, 2000. Allowance for loan losses at September 30, 2001 amounted to $1,192,467 and $1,133,993 at December 31, 2000. At September 30, 2001, the allowance was 1.04% of gross loans. At December 31, 2000, the allowance was 1.21% of gross loans. The allowance for loan losses is evaluated on a regular basis by management and is based upon management's periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. CAPITAL ADEQUACY Shareholder's equity amounted to $21,616,271 at September 30, 2001, an increase of $1,938,183 compared to the December 31, 2000 balance of $19,678,088. The increase was a result of earnings and an increase in the market value of securities offset by dividends paid. 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, 2001 the Bank had a ratio of Tier 1 capital to risk-weighted assets of 13.18%, a ratio of total risk-based capital to risk-weighted assets of 14.16% and a leverage ratio of Tier 1 capital to average total assets for the quarter ended September 30, 2001 of 8.91%. 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 have been retroactively restated to reflect the split. As a result, $10,238,200 was transferred from retained earnings to common stock. FORWARD LOOKING INFORMATION Certain statements in this Section and elsewhere in this report are forward-looking in nature and relate to trends and events that may affect the Company's future financial position and operating results. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The terms "expect", "anticipate", "intend" and "project" and similar words or expressions are intended to identify forward-looking statements. These statements speak only as of the date of this report. The statements are based on current expectations, are inherently uncertain, are subject to risks, and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors, including changes in economic conditions in the markets served by the Company, increasing competition, fluctuations in raw materials and energy prices, and other unanticipated events and conditions. It is not possible to foresee or identify all such factors. The Company makes no commitment to update any forward-looking statement or to disclose any facts, events, or circumstances after the date hereof that may affect the accuracy of any forward-looking statement. INTEREST RATE RISK (IRR) AND ASSET LIABILITY MANAGEMENT The Company's profitability is dependent to a large extent upon its net interest income (NII), which is the difference between its interest income on interest-bearing assets, such as loans and investments, and its interest expense on interest-bearing liabilities, such as deposits and borrowings. The Company, like other financial institutions, is subject to interest rate risk to the degree that its interest-earning assets reprice differently than its interest-bearing liabilities. The Company manages its mix of assets and liabilities with the goals of limiting its exposure to interest rate risk, ensuring adequate liquidity, and coordinating its sources and uses of funds. Specific strategies for management of interest rate risk (IRR) on the lending side of the balance sheet have included the use of ballooning fixed rate loans and maintaining a significant level of 1, 3 and 5-year adjustable rate mortgages. On the investment side the Company maintains a significant portion of its portfolio in adjustable rate securities. These strategies help to reduce the average maturity of the Company's interest-earning assets. The Company attempts to control its IRR exposure to protect net interest income and net earnings from fluctuations in the general level of interest rates. To measure its exposure to IRR, the Company performs monthly simulations of NII using financial models that project NII through a range of possible interest rate environments including rising, declining, flat and most likely rate scenarios. The result of these simulations indicate the existence and severity of IRR in each of those rate environments based upon the current balance sheet position and assumptions as to changes in the volume and mix of interest-earning assets and interest-bearing liabilitities and management's estimate of yields attainable in those future rate environments and rates which will be paid on various deposit instruments and borrowings. The Company runs these rate shock scenarios for twelve and twenty-four month projections out from the current month of the model. Changes to the Company's risk portfolio since December 31, 2000 reflects an increase in the Company's liability-sensitivity. The Company has experienced an increase in short-term deposits due in large part to the significant drop in interest rates. In this low rate environment the Company's customers are shifting their deposits from a longer term position to mainly terms of 12 months or less. The earnings sensitivity measurements completed on a monthly basis indicate that the performance criteria against which sensitivity is measured, are currently within the Company's defined policy limits. A more complete discussion of the overall interest rate risk is included in the Company's annual report for December 31, 2000. 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 12, 2001 By: s/Ronald Leon Moore President, Chief Executive Officer, and Principal Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----