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.
<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, 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.
<PAGE>
CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1999 and December 31, 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION> September 30, December 31,
1999 1998
------------ ------------
(Unaudited) (Audited)
<S> <C> <C>
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
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements 3
<PAGE>
CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
For the Quarter and Nine Months ended September 30, 1999 and 1998 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C>
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
============= =============== ============== ===============
</TABLE>
See Notes to Consolidated Financial Statements 4
<PAGE>
CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity
For the Nine Months ended September 30, 1999 and 1998 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATED TOTAL
OTHER STOCK-
COMMON RETAINED COMPREHENSIVE HOLDERS'
STOCK SURPLUS EARNINGS INCOME(LOSS) EQUITY
---------- ------- --------- ------------- --------
<S> <C> <C> <C> <C> <C>
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
========= ========= ========== ======== ==========
</TABLE>
See Notes to Consolidated Financial Statements 5
<PAGE>
CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Nine Months ended September 30, 1999 and 1998 (Unaudited)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
1999 1998
---- ----
<S> <C> <C>
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
========== ===========
</TABLE>
See Notes to Consolidated Financial Statements 6
<PAGE>
CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
For the Nine Months ended September 30, 1999 and 1998 (Unaudited)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
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
============ ===========
</TABLE>
See Notes to Consolidated Financial Statements 7
<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, 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.
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
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
========== ==========
</TABLE>
8
<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, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Commitments to extend credit $ 5,284,424 $ 4,980,531
Standby letters of credit 30,000 368,600
---------- ----------
$ 5,314,424 $ 5,349,131
========== ==========
</TABLE>
9
<PAGE>
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
<PAGE>
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
