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, 2000
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 10, 2000 was 492,400.
Transitional Small Business Disclosure Format (check one):Yes No X
Page 1 of 14.
<PAGE>
CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES
FORM 10-QSB
INDEX
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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, 2000 and
December 31,1999........................................................3
Consolidated Statements of Operations for the Nine
Months Ended September 30, 2000 and 1999.................................4
Consolidated Statements of Operations for the Three
Months Ended September 30, 2000 and 1999................................5
Consolidated Statements of Stockholders' Equity for the
Nine Months Ended September 30, 2000 and the Year Ended
December 31, 1999.......................................................6
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2000 and 1999.....................................7-8
Notes to Consolidated Financial Statements............................9-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.....................................11-12
PART II. OTHER INFORMATION................................................12
All schedules have been omitted because they are inapplicable or the
required information is provided in the financial statements, including the
notes thereto.
<PAGE>
CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 2000 and December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION> September 30, December 31,
2000 1999
------------ ------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 2,849,789 $ 3,775,280
Interest-bearing deposits with banks 0 2,000,000
Federal funds sold 4,600,000 6,975,000
Investment securities available for sale 35,351,397 33,213,933
Investment securities held to maturity 20,934,150 19,169,099
Loans, net of allowance for credit losses
of $1,119,968 in 2000 and $1,661,521 in
1999 89,434,404 87,684,925
Property and equipment, net 2,548,676 2,444,355
Accrued income 1,178,125 1,173,115
Other assets 2,382,625 1,704,778
____________ ____________
Total assets $159,279,166 $158,140,485
============ ============
LIABILITIES
Demand deposits $ 17,728,964 $ 16,783,239
Interest-bearing deposits 10,170,009 10,767,129
Savings deposits 19,918,075 18,901,235
Large denomination time deposits 17,560,767 18,142,525
Other time deposits 74,844,674 75,213,536
----------- -----------
Total deposits 140,222,489 139,807,664
Federal funds purchased 0 0
Other borrowed funds 0 0
Accrued interest payable 271,713 237,075
Other liabilities 507,120 338,149
----------- -----------
Total liabilities 141,001,322 140,382,888
----------- -----------
Commitments and contingencies
STOCKHOLDERS'EQUITY:
Common stock, $10 par value, authorized
5,000,000 shares, issued 492,411
shares in 2000 and 511,771 in 1999 4,924,110 5,117,710
Surplus 2,925,150 2,925,150
Retained earnings 11,016,258 10,514,759
Unrealized appreciation (depreciation) on
investment securities available for sale (587,674) (800,022)
----------- -----------
Total stockholders' equity 18,277,844 17,757,597
----------- -----------
Total liabilities and stockholders'
equity $159,279,166 $158,140,485
============ ============
</TABLE>
See Notes to Consolidated Financial Statements 3
<PAGE>
CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
For the Nine Months ended September 30, 2000 and 1999 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
(Unaudited) (Unaudited)
<S> <C> <C>
INTEREST INCOME:
Loans and fees on loans $ 5,852,543 $5,762,139
Federal funds sold 214,545 362,913
Taxable investment securities 1,778,975 1,364,165
Investment securities exempt
from federal tax 710,348 564,854
Deposits with banks 21,995 187,741
----------- ----------
Total interest income 8,578,406 8,241,812
INTEREST EXPENSE ON DEPOSITS:
Deposits 4,403,829 4,201,647
Federal funds purchased 0 0
Other borrowed funds 0 0
---------- ----------
Total interest expense 4,403,829 4,201,647
---------- ----------
Net interest income 4,174,577 4,040,165
PROVISION FOR CREDIT LOSSES 400,000 96,721
---------- ----------
Net interest income after
provision for loan loss 3,774,577 3,943,444
NON INTEREST INCOME:
Service charges on deposit
accounts 159,467 141,667
Other service charges and fees 40,889 36,288
Net realized gains on sales of
securities 0 4,768
Gains on sales of other real estate 0 10,000
Other income 55,189 111,495
---------- ----------
Total non interest income 255,545 304,218
NON INTEREST EXPENSE:
Salaries and employee benefits 1,295,096 1,443,120
Occupancy expense 132,770 111,740
Equipment expense 217,912 214,471
Other expense 692,535 548,405
---------- ----------
Total non interest expense 2,338,313 2,317,736
---------- ----------
Income before income taxes 1,691,809 1,929,926
Income tax expense 358,875 500,087
---------- ----------
Net income $1,332,934 $1,429,839
========== ==========
BASIC EARNINGS PER SHARE $ 2.65 $ 2.79
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements 4
<PAGE>
CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
For the Three Months ended September 30, 2000 and 1999 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
September 30,
2000 1999
(Unaudited) (Unaudited)
<S> <C> <C>
INTEREST INCOME:
Loans and fees on loans $ 2,036,034 $1,909,501
Federal funds sold 44,275 128,570
Taxable investment securities 582,964 136,946
Investment securities exempt
from federal tax 254,239 537,585
Deposits with banks 1,704 0
----------- ----------
Total interest income 2,919,216 2,712,602
INTEREST EXPENSE ON DEPOSITS:
Deposits 1,499,325 1,386,150
Federal funds purchased 0 0
Other borrowed funds 0 0
----------- ----------
Total interest expense 1,499,325 1,386,150
----------- ----------
Net interest income 1,419,891 1,326,452
PROVISION FOR CREDIT LOSSES 150,000 40,000
---------- ----------
Net interest income after
provision for loan loss 1,269,891 1,286,452
NON INTEREST INCOME:
Service charges on deposit
accounts 57,585 58,109
Other service charges and fees 17,759 36,288
Net realized gains on sales of
securities 0 4,768
Gains on sales of other real estate 0 10,000
Other income 15,415 21,534
---------- ----------
Total non interest income 90,759 130,699
NON INTEREST EXPENSE:
Salaries and employee benefits 437,216 409,830
Occupancy expense 50,086 39,960
Equipment expense 87,074 88,781
Other expense 221,830 199,777
---------- ----------
Total non interest expense 796,206 738,348
---------- ----------
Income before income taxes 564,444 678,803
Income tax expense 120,561 188,534
---------- ----------
Net income $ 443,883 $ 490,269
========== ==========
BASIC EARNINGS PER SHARE $ 0.90 $ 0.96
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements 5
<PAGE>
CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity
For the Nine Months ended September 30, 2000 (Unaudited) and the year
ended December 31, 1999 (Audited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATED TOTAL
OTHER STOCK-
COMMON RETAINED COMPREHENSIVE HOLDERS'
STOCK SURPLUS EARNINGS INCOME(LOSS) EQUITY
---------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
January 1, 1999 $5,119,110 $2,925,150 $ 9,123,733 $ 153,132 $17,321,125
Net income - - 1,965,133 - 1,965,133
Net change in unrealized
depreciation on investment
securities available for
sale, net of income taxes - - - (953,154) (953,154)
-----------
1,011,979
Dividends paid
($1.11 per share) - - (568,147) - (568,147)
Common stock purchased (4,300) - (18,385) - (22,685)
Common stock reissued 2,900 - 12,425 - 15,325
---------- ---------- ----------- ----------- ------------
December 31, 1999 $5,117,710 $2,925,150 $10,514,759 $ (800,022) $17,757,597
---------- ---------- ----------- ----------- ------------
Net income - - 1,332,934 - 1,332,934
Net change in unrealized
depreciation on investment
securities available for
sale, net of income taxes - - - 212,348 212,348
------------
- 1,545,282
Dividends paid
($0.55 per share) - - (271,816) - (271,816)
Common stock purchased (200,460) - (584,160) - (784,620)
Common stock reissued 6,860 - 24,541 - 31,401
---------- ---------- ----------- ----------- ------------
September 30, 2000 $4,924,110 $2,925,150 $11,016,258 $ (587,674) $ 18,277,844
========== ========== =========== =========== ============
</TABLE>
See Notes to Consolidated Financial Statements 6
<PAGE>
CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Nine Months ended September 30, 2000 and 1999 (Unaudited)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,332,934 $ 1,429,839
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 169,304 145,885
Accretion of discounts on securities 40,551 53,333
Amortization of loan fees 0 (81,636)
Provision for loan losses 400,000 96,721
Deferred income taxes (109,392) 399,080
Net realized gains on securities 0 (4,768)
Deferred compensation & pension expense 71,215 (1,351)
Changes in assets and liabilities:
Accrued income (5,010) (113,535)
Other assets (677,847) (1,294,604)
Accrued interest payable 34,638 26,907
Other liabilities 97,756 (93,117)
---------- ----------
Net cash provided by operating activities 1,354,149 562,754
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in federal funds sold 2,375,000 4,615,000
Purchases of investment securities (8,295,085) (23,426,058)
Sale of investment securities 0 493,672
Net decrease in int-bearing deposits 2,000,000 7,100,000
Maturity of investment securities 4,673,759 12,754,199
Net (increase) decrease in loans (2,149,479) 350,937
Proceeds from sale of other real estate 0 10,000
Purchases of properties and equipment (273,625) (414,473)
---------- ----------
Net cash (used) in investing activities (1,669,430) 1,483,277
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand, NOW,
and savings deposits 1,365,445 1,958,192
Net (decrease) in time deposits (950,620) (3,068,181)
Dividends paid (271,816) (271,239)
Net (decrease) fed funds purchased 0 0
Common Stock Purchased (784,620) (7,329)
Common Stock Reissued 31,401 0
---------- ----------
Net cash used in financing activities (610,210) (1,388,557)
---------- ----------
Net decrease in cash & cash equivalents (925,491) 657,474
CASH AND CASH EQUIVALENTS, BEGINNING 3,775,280 _2,985,331
---------- ----------
CASH AND CASH EQUIVALENTS, ENDING $ 2,849,789 $ 3,642,805
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements 7
<PAGE>
CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
For the Nine Months ended September 30, 2000 and 1999 (Unaudited)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 4,369,191 $ 4,174,740
=============== ===============
Income taxes paid $ 269,495 $ 438,077
=============== ===============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:
Other real estate acquired in
settlement of loans $ 625,454 $ 0
=============== ===============
</TABLE>
See Notes to Consolidated Financial Statements 8
<PAGE>
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, 2000 and for the
periods ended September 30, 2000 and 1999 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, 1999, included in
the Company's Annual Report for the fiscal year ended December 31, 1999.
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 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
nine months ended September 30.
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Balance at January 1 $ 1,661,521 $ 1,668,201
Provision charged to operations 400,000 96,721
Loans charged off, net of recoveries (941,553) (139,066)
----------- -----------
Balance at September 30 $ 1,119,968 $ 1,625,856
=========== ===========
</TABLE>
9
<PAGE>
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, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Commitments to extend credit $10,370,000 $ 5,284,424
Standby letters of credit 647,102 30,000
----------- -----------
$11,017,102 $ 5,314,424
=========== ===========
</TABLE>
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Comparision of nine months ended September 30, 2000 and 1999
Net income for the nine months ended September 30, 2000 was $1,332,934, a
decrease of 6.7% compared to September 30, 1999. This decrease was a result of a
credit loss provision of $400,000 in 2000 compared to $96,721 in 1999. The
provision increased due to a higher amount of loans placed on nonaccrual.
Management believes the provision and the resulting allowance for credit losses
to be adequate.
Interest income increased $336,594 from September 30, 2000 to 1999 as
interest expense increased $202,182 over 1999. Net interest income for the nine
months ended September 30, 2000 increased by 3.3% of net interest income for the
nine months ended September 30, 1999.
Comparison of three months ended September 30, 2000 and 1999.
For the three months ended September 30, 2000, the Bank earned $443,883 in
net income compared to $490,269 for the quarter ended September 30, 1999.
Interest income was $2,919,216 for the quarter ended September 30, 2000,
compared to $2,712,602 for the same period of 1999.
Interest expense for the quarter ended September 30, 2000 was $1,499,325,
up $113,175 from $1,386,150 for the quarter ended September 30, 1999.
The provision for credit losses was $150,000 for the quarter ended
September 30, 2000 and $40,000 for the quarter ended September 30, 1999.
Management believes the provision and the resulting allowance for credit losses
is adequate.
CHANGES IN FINANCIAL CONDITION
Total assets at September 30, 2000 were $159,279,166 compared to
$158,140,485 at December 31, 1999, an increase of $1,138,681. Cash and due from
Banks decreased $925,491 during the nine-month period as excess cash reserves,
which had been accumulated for Y2K concerns, were eliminated. Interest-bearing
deposits with banks and federal funds sold decreased collectively by $4,375,000.
The company is using these funds to invest in long-term, high-yield securities.
Other assets increased by $677,847 for the period. Foreclosures of real estate
and repossessions of equipment have attributed to this increase.
CAPITAL ADEQUACY
Shareholder's equity amounted to $18,277,844 at September 30, 2000, an
increase of $520,247 compared to the December 31, 1999 balance of $17,757,597.
The increase resulted from earnings for the nine months offset by a decrease in
the market value of securities, dividends paid, and shares of stock repurchased.
11
<PAGE>
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, 2000 the Bank had a ratio of Tier 1 capital to
risk-weighted assets of 14.6%, a ratio of total risk-based capital to
risk-weighted assets of 15.7% and a leverage ratio of Tier 1 capital to average
total assets for the quarter ended September 30, 2000 of 9.2%.
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 10, 2000 By: s/Ronald Leon Moore
President, Chief Executive
Officer, and Principal Financial
Officer
12
