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, 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 May 10, 2000 was 511,911.
Transitional Small Business Disclosure Format (check one): Yes No X
Page 1 of 14.
<PAGE>
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, 2000 and
December 31,1999........................................................3
Consolidated Statements of Operations for the Three
Months Ended March 31, 2000 and 1999 ...................................4
Consolidated Statements of Stockholders' Equity for the
Three Months Ended March 31, 2000 and the Year Ended
December 31, 1999.......................................................5
Consolidated Statements of Cash Flows for the Nine Months
Ended March 31, 2000 and 1999.........................................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.
2
<PAGE>
CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION> March 31, December 31,
2000 1999
------------ ------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 2,315,191 $ 3,775,280
Interest-bearing deposits with banks 0 2,000,000
Federal funds sold 4,990,000 6,975,000
Investment securities available for sale 36,652,696 33,213,933
Investment securities held to maturity 20,138,329 19,169,099
Loans, net of allowance for credit losses
of $1,573,813 in 2000 and $1,661,521 in
1999 87,437,429 87,684,925
Property and equipment, net 2,532,706 2,444,355
Accrued income 1,168,071 1,173,115
Other assets 1,818,610 1,704,778
----------- -----------
Total assets $157,053,032 $158,140,485
============ ============
LIABILITIES
Demand deposits $ 15,754,185 $ 16,783,239
Interest-bearing deposits 10,653,907 10,767,129
Savings deposits 20,617,417 18,901,235
Large denomination time deposits 17,254,983 18,142,525
Other time deposits 73,813,147 75,213,536
----------- -----------
Total deposits 138,093,639 139,807,664
Federal funds purchased 0 0
Other borrowed funds 0 0
Accrued interest payable 252,062 237,075
Other liabilities 539,522 338,149
----------- -----------
Total liabilities 138,885,223 140,382,888
----------- -----------
Commitments and contingencies
STOCKHOLDERS'EQUITY:
Common stock, $10 par value, authorized
5,000,000 shares, issued 511,911
shares in 2000 and 511,771 in 1999 5,119,110 5,117,710
Surplus 2,925,150 2,925,150
Retained earnings 11,046,386 10,514,759
Unrealized appreciation (depreciation) on
investment securities available for sale (922,837) (800,022)
----------- -----------
Total stockholders' equity 18,167,809 17,757,597
----------- -----------
Total liabilities and stockholders'
equity $157,053,032 $158,140,485
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
For the Three Months ended March 31, 2000 and 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
(Unaudited) (Unaudited)
<S> <C> <C>
INTEREST INCOME:
Loans and fees on loans $ 1,958,625 $ 1,985,677
Federal funds sold 111,043 121,941
Taxable investment securities 588,655 707,952
Investment securities exempt
from federal tax 219,827 13,868
Deposits with banks 18,820 0
---------- ---------
Total interest income 2,896,970 2,829,438
INTEREST EXPENSE ON DEPOSITS:
Deposits 1,453,306 1,417,749
Federal funds purchased 0 0
Other borrowed funds 1,508 0
---------- ---------
Total interest expense 1,454,814 1,417,749
---------- ---------
Net interest income 1,442,156 1,411,689
PROVISION FOR CREDIT LOSSES 120,000 30,000
---------- ----------
Net interest income after
provision for loan loss 1,322,156 1,381,689
NON INTEREST INCOME:
Service charges on deposit
accounts 48,606 38,627
Other service charges and fees 9,773 0
Net realized gains on sales of
Securities 0 0
Other income 19,571 44,558
---------- ----------
Total non interest income 77,950 83,185
NON INTEREST EXPENSE:
Salaries and employee benefits 389,953 466,387
Occupancy expense 40,976 37,946
Equipment expense 70,292 58,038
Other expense 212,590 215,937
---------- ----------
Total non interest expense 713,811 778,308
---------- ----------
Income before income taxes 686,295 686,566
Income tax expense 160,549 178,669
---------- ----------
Net income $ 525,746 $ 507,897
========== ==========
BASIC EARNINGS PER SHARE $ 1.03 $ .99
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity
For the Three Months ended March 31, 2000 and 1999 (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, 1999 $5,119,110 $2,925,150 $ 9,123,733 $ 153,132 $17,321,125
Net income - - 1,965,133 - 1,965,133
Change in market value
of 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) $17,757,597
--------- --------- ---------- -------- ----------
Net income - - 525,746 - 525,746
Net change in unrealized
Depreciation on investment
Securities available for
Sale - - - (122,815) (122,815)
Total Comprehensive Income
Dividends paid ($.53 per share)
Common stock purchased (5,460) - (18,660) - (24,120)
Common stock reissued 6,860 - 24,541 - 31,401
---------- ---------- ----------- --------- -----------
March 31, 2000 $5,119,110 $2,925,150 $11,046,386 $(922,837) $18,167,809
========== ========== =========== ========= ===========
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Nine Months ended March 31, 2000 and 1999 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months
Ended March 31,
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 525,746 $ 507,897
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 50,715 38,895
Accretion of discounts on securities 3,740 8,684
Amortization of loan fees 0 (11,792)
Provision for loan losses 120,000 30,000
Deferred income taxes 63,269 0
Net realized gains on securities 0 0
Deferred compensation & pension expense 23,738 21,805
Changes in assets and liabilities:
Accrued income 5,044 (83,238)
Other assets (113,832) (151,228)
Accrued interest payable 14,987 38,945
Other liabilities 177,635 4,302
-------- -----------
Net cash provided by operating activities 871,042 404,270
-------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) in federal funds sold 1,985,000 325,000
Purchases of investment securities (5,552,959) (10,450,997)
Sale of investment securities 0 0
Net decrease in int-bearing deposits 2,000,000 1,879,852
Maturity of investment securities 955,142 6,613,120
Net decrease in loans 127,496 2,685,902
Proceeds from sale of other real estate 0 0
Purchases of properties and equipment (139,066) (210,931)
--------- ----------
Net cash (used) in investing activities (624,387) 841,946
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand, NOW,
and savings deposits 573,906 (4,936,847)
Net (decrease) in time deposits (2,287,931) 3,087,997
Dividends paid 0 0
Net (decrease) fed funds purchased 0 0
Common Stock Purchased (24,120) 0
Common Stock Reissued 31,401 0
---------- ----------
Net cash used in financing activities (1,706,744) (1,848,850)
---------- ----------
Net decrease in cash & cash equivalents(1,460,089) (602,634)
CASH AND CASH EQUIVALENTS, BEGINNING 3,775,280 2,985,331
---------- ----------
CASH AND CASH EQUIVALENTS, ENDING $ 2,315,191 $ 2,382,697
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE>
CARDINAL BANKSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
For the Three Months ended March 31, 2000 and 1999 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 1,439,827 $ 1,378,804
---------- ----------
Income taxes paid $ 0 $ 185,395
---------- ----------
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 March 31, 2000 and for the
periods ended March 31, 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 four 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.
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Balance at January 1 $ 1,661,521 $ 1,668,201
Provision charged to operations 120,000 30,000
Loans charged off, net of recoveries (207,708) (1,562)
__________ __________
- -
Balance at March 31 $ 1,573,813 $ 1,696,639
=========== ===========
</TABLE>
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,
2000 and 1999 is as follows:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Commitments to extend credit $13,792,682 $ 7,097,000
Standby letters of credit 46,000 132,000
----------- -----------
$13,838,682 $ 7,229,000
=========== ===========
</TABLE>
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the quarter ended March 31, 2000, the Bank earned $525,746 in net
income compared to $507,897 for the quarter ended March 31, 1999.
Interest income was $2,896,970 for the quarter ended March 31, 2000,
compared to $2,829,438 for the same period of 1999.
Interest expense for the quarter ended March 31, 2000 was $1,454,814, up
$37,065 from $1,417,749 for the quarter ended March 31, 1999.
The provision for credit losses was $120,000 for the quarter ended
March 31, 2000 and $30,000 for the quarter ended March 31, 1999. Management
believes the provision and the resulting allowance for credit losses is
adequate.
CHANGES IN FINANCIAL CONDITION
Total assets at March 31, 2000 were $157,053,032 compared to $158,140,485
at December 31, 1999. Net loans have decreased by $247,496.
CAPITAL ADEQUACY
Shareholder's equity amounted to $18,167,809 at March 31, 2000, an increase
of $410,212 over the December 31, 1999 balance of $17,757,597. The increase was
a result of the earnings for the three months offset by a decrease 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, 2000 the Bank had a ratio of Tier 1 capital to
risk-weighted assets of 13.9%, 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, 2000 of 8.6%.
9
<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.
10
<PAGE>
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 10, 2000 By: s/Ronald Leon Moore
President, Chief Executive
Officer, and Principal Financial
Officer
11
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CARDINAL BANKSHARES AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AT MARCH 31,
2000 AND THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,315,191
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,990,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 36,652,696
<INVESTMENTS-CARRYING> 20,138,329
<INVESTMENTS-MARKET> 19,021,945
<LOANS> 87,437,429
<ALLOWANCE> 1,573,813
<TOTAL-ASSETS> 157,053,032
<DEPOSITS> 138,093,639
<SHORT-TERM> 0
<LIABILITIES-OTHER> 791,584
<LONG-TERM> 0
0
0
<COMMON> 5,119,110
<OTHER-SE> 13,048,699
<TOTAL-LIABILITIES-AND-EQUITY> 157,053,032
<INTEREST-LOAN> 1,958,625
<INTEREST-INVEST> 808,482
<INTEREST-OTHER> 129,863
<INTEREST-TOTAL> 2,896,970
<INTEREST-DEPOSIT> 1,453,306
<INTEREST-EXPENSE> 1,454,814
<INTEREST-INCOME-NET> 1,442,156
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 713,811
<INCOME-PRETAX> 686,295
<INCOME-PRE-EXTRAORDINARY> 525,746
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 525,746
<EPS-BASIC> 1.03
<EPS-DILUTED> 1.03
<YIELD-ACTUAL> 3.76
<LOANS-NON> 0
<LOANS-PAST> 1,556,052
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,661,521
<CHARGE-OFFS> 228,410
<RECOVERIES> 20,702
<ALLOWANCE-CLOSE> 1,573,813
<ALLOWANCE-DOMESTIC> 1,573,813
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
