Cardinal Bankshares reports third quarter results

FLOYD, Va., Nov. 27, 2012 /PRNewswire/ -- Cardinal Bankshares Corporation (OTC BB: CDBK), the parent company of Bank of Floyd, announced today its consolidated financial results for the third quarter of 2012.  The Company reported a net loss of $788,000, a net loss per diluted share of $0.51 for the quarter ended September 30, 2012.  Cardinal reported net income of $289,000, or $0.19 per diluted share, for the quarter ended September 30, 2011. For the nine months ended September 30, 2012, the Company reported a net loss of $3.77 million, compared with a net profit of $934,000 for the nine months ended September 30, 2011.

Lower property valuations and related expenses associated with real estate held as collateral for non-performing loans and foreclosed property resulted in charges of $956,000 during the third quarter.  Excluding these charges and other one-time expenses, the Company recorded pre-tax income of $76,000 in the third quarter of 2012.

"Charges associated with non-performing credits, which are primarily due to lower property valuations, dropped by over 80% from the second quarter of 2012 as we continue to take significant steps to strengthen our balance sheet," said Michael D. Larrowe, president and chief executive officer. "We are building momentum that is driven by improving asset quality, increasing loan production and continued improvement in net interest margins."

Financial Highlights

• Total assets increased to $280 million at September 30, 2012, from $276 million at June 30, 2012.
• Total deposits totaled $249 million at September 30, 2012, representing increases of $2 million from June 30, 2012, and $16 million from December 31, 2011.
• Total loans were $110 million at September 30, 2012, compared to $120 million at June 30, 2012.
• Total interest income was $2.22 million for the quarter ended September 30, 2012, versus $2.45 million for the quarter ended September 30, 2011.
• Net interest margin improved to 2.89% for the month ended September 30, 2012, compared to 2.52% for the six months ended June 30, 2012.
• Total nonperforming assets, which include foreclosed property and nonaccrual loans, decreased by $3.9 million to $9.2 million at September 30, 2012, compared to June 30, 2012.
• The ratio of non-performing assets to total assets declined to 3.29% at September 30, 2012, compared to 5.03% at September 30, 2011.
• At September 30, 2012, the ratio of allowance for loan losses to total loans was 1.26%, compared to 2.25% at September 30, 2011.

Excluding other than temporary impairment charges, noninterest income increased to $153,000 in the third quarter of 2012, compared to $134,000 in the third quarter of 2011. Total noninterest expense was $1.83 million for the quarter ended September 30, 2012, compared to $1.43 million for the same quarter last year. Provision for loan losses was $898,000 for the quarter ended September 30, 2012, and $4.89 million for the nine months ended September 30, 2012, compared to $76,000 and $515,000 for the quarter and nine months ended September 30, 2011.

The Company's capital ratios continue to rank among the top financial institutions regionally and in the state. Capital ratios at September 30, 2012 include Tier 1 leverage capital ratio of 9.60%, Tier 1 risk-based capital of 18.42%, and Total risk based capital of 19.40%.  Each measure continues well above federal capital guidelines for being "well-capitalized." Total shareholders' equity was $29.95 million at September 30, 2012, compared to $30.25 million at June 30, 2012.

Initiatives Continue

In response to declining loan production in recent years, the bank has invested in resources to reverse this trend, adding three experience lending officers, including a commercial lender in the third quarter.  As a result of this continuing focus, loan activity has picked up significantly since late September. The bank is expected to generate approximately $9 million in new loans before Christmas, significantly exceeding the pace of originations in recent years. Lending activity also has been spurred by the addition of small business and consumer loan officers in six of its seven banking offices.

"Improving our stream of interest income is an important contributor to operating income," Larrowe said. "With margins improving and lending on the rise, we believe the bank is on the right track."

Bank of Floyd has also launched several initiatives that are expected to expand its customer base and cement relationships with current clients. This month the bank will add a complete line of mortgages with variable and fixed rates and options on contract terms, including the typical 30-year mortgage. Nearing completion are two new business products:  "Business Internet Banking" and "Remote Deposit Capture," which will be introduced in December.

"Business Internet Banking" is an online product that will allow small business and commercial customers to conveniently conduct a number of transactions online, such as payroll related functions, vendor payments, and wire transfers. "Remote Deposit Capture" will enable merchants to deposit checks electronically from their place of business for immediate credit into their bank account. Scheduled for release in December 2012 and the first quarter of 2013 are electronic statement delivery and Mobile banking services.

Contact:

Michael D. Larrowe
President and CEO
Bank of Floyd
(540) 745-5210

SOURCE Cardinal Bankshares Corporation

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