Definitive Proxy Statement

Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No.__ )

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

The Directors of Cardinal Bankshares Corporation invite you to attend our 2004 Annual Meeting of Shareholders to be held in the Bank of Floyd Conference Room (located adjacent to the Bank of Floyd) at 101 Jacksonville Circle, Floyd, Virginia on Wednesday, April 28, 2004, at 2:00 p.m.

The attached Notice of 2004 Annual Meeting and Proxy Statement describe the formal business to be transacted at the Meeting. At the Meeting, Shareholders will vote to elect eight directors of Cardinal Bankshares Corporation.

Whether or not you plan to attend in person, it is important that your shares be represented at the Meeting. Please complete, sign, date and return promptly the enclosed proxy. A postage-paid envelope is enclosed for your convenience. If you later decide to attend the Meeting and vote in person, or if you wish to revoke your proxy for any reason prior to the vote at the Meeting, you may do so and your proxy will have no further effect.

After the Annual Meeting, shareholders are invited to remain for light refreshments and visiting. If you plan to attend, please include the enclosed card with your proxy.

The Board of Directors and management of Cardinal Bankshares Corporation appreciate your continued support and look forward to seeing you at the Annual Meeting.


Sincerely,

/s/ Leon Moore
Leon Moore Chairman of the Board, President and CEO

NOTICE IS HEREBY GIVEN that the Annual Meeting of the holders of shares of common stock of Cardinal Bankshares Corporation will be held on Wednesday, April 28, 2004, at 2:00 p.m., in the Bank of Floyd Conference Room (located adjacent to the Bank of Floyd) at 101 Jacksonville Circle, Floyd, Virginia, for the following purposes:

The Board of Directors has fixed the close of business on March 25, 2004 as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting or any adjournment thereof.


By Order of the Board of Directors

/s/ Leon Moore
Leon Moore Chairman of the Board, President and CEO

YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER OF SHARES YOU OWN. EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE ENVELOPE PROVIDED.

This proxy statement is furnished to holders of common stock of Cardinal Bankshares Corporation (“Cardinal”) in connection with the solicitation by and on behalf of the Board of Directors of Cardinal of the enclosed proxy to be used at the 2004 Annual Meeting of Shareholders of Cardinal to be held in the Bank of Floyd Conference Room (located adjacent to the Bank of Floyd) at 101 Jacksonville Circle, Floyd, Virginia, on Wednesday, April 28, 2004, at 2:00 p.m., and at any adjournment thereof. The principal executive offices of Cardinal are located at 101 Jacksonville Circle, P. O. Box 215, Floyd, Virginia 24091. The approximate mailing date of this Proxy Statement, the accompanying proxy and the Annual Report to Shareholders (which is not part of Cardinal’s soliciting materials) is April 9, 2003.

The cost of solicitation of proxies will be borne by Cardinal. Such costs include charges by brokers, fiduciaries and custodians for forwarding proxy materials to beneficial owners of Cardinal stock held in their names. Solicitations will be made only by use of the mails, except that if necessary, officers, directors and employees of Cardinal may without additional compensation solicit proxies by telephone, personal contact, telegraph, facsimile or other electronic means.

The proxy solicited hereby, if properly signed and returned to Cardinal and not revoked prior to its use, will be voted in accordance with the instructions contained thereon. If no choice is specified and/or no contrary instructions are given on an executed and returned proxy, the proxy will be voted “for” the nominees listed in Item 1 of the proxy, and in the discretion of the proxies on any other matter which may properly come before the Meeting and all adjournments or postponements of the Meeting. Any shareholder giving a proxy has the power to revoke it at any time before it is exercised by (i) filing written notice thereof with Cardinal at Cardinal Bankshares Corporation, 101 Jacksonville Circle, P. O. Box 215, Floyd, Virginia 24091, Attention: Ronald Leon Moore; (ii) submitting a duly executed proxy bearing a later date to Cardinal at Cardinal Bankshares Corporation, 101 Jacksonville Circle, P. O. Box 215, Floyd, Virginia 24091, Attention: Ronald Leon Moore; or (iii) appearing at the Annual Meeting or at any adjournment thereof and giving the designated official at such Meeting notice of his or her intention to vote in person. Presence at the Annual Meeting does not of itself revoke the proxy. Proxies solicited hereby may be exercised only at the Annual Meeting and at any adjournment thereof and will not be used for any other meeting.

Only holders of record of common stock at the close of business on March 25, 2004 (the “Record Date”) are entitled to notice of and to vote at the Annual Meeting and any adjournments thereof. As of February 28, 2004, Cardinal had 1,535,733 shares of common stock outstanding. A majority of the outstanding shares of common stock must be represented at the Annual Meeting in person or by proxy in order to constitute a quorum for the transaction of business. Each share of common stock is entitled to one vote at the Annual Meeting. For the purpose of determining the presence of a quorum, shares represented on any matter will be counted as present and represented on all matters to be acted upon, including any matter with respect to which the holder of such shares abstains from voting (“abstentions”). Broker non-votes (in which brokers do not vote shares on behalf of the beneficial owners thereof) will not be treated as present or represented at the Meeting, and will not be included in determining whether a quorum is present.

Election of Directors. Directors are elected by a plurality of the votes of the shares represented in person or by proxy at the Annual Meeting. “Plurality” means that the individuals who receive the largest number of votes cast are elected as directors up to the maximum number of directors to be chosen at the Meeting. Only shares that are voted in favor of a nominee will be counted toward that nominee’s achievement of a plurality. Abstentions and broker non-votes will not be counted toward a nominee’s achievement of a plurality.

Other Matters. Approval of any other matter that properly comes before the Meeting will require the affirmative vote of a majority of the shares represented at the Meeting and entitled to vote on the particular matter. In tabulating votes cast on any such other matter, abstentions will be considered votes cast, and accordingly will have the same effect as a negative vote. Broker non-votes, on the other hand, will not be counted as shares entitled to be voted on the particular matter, and therefore will have no impact on the outcome of the vote.

The following table sets forth as of February 28, 2004 certain information regarding those persons (including any “group” as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934) who Cardinal knows were the beneficial owners of 5% or more of the outstanding shares of Cardinal’s common stock:

The following table sets forth as of February 28, 2004 the beneficial ownership of the Cardinal’s common stock by all (1) directors, (2) named executive officers and (3) directors and named executive officers as a group. Unless otherwise indicated, based on information furnished by such shareholders, management believes that each person has sole voting and investment power with respect to all shares beneficially owned by such person and the address of each shareholder is the same as the Cardinal’s address.

Section 16(a) of the Securities Exchange Act of 1934 requires that Cardinal’s directors and executive officers, and persons who own more than 10% of a registered class of Cardinal’s equity securities, file with the Securities and Exchange Commission initial reports of ownership and reports of

change in ownership of common stock and other equity securities of Cardinal. The same persons are also required by Securities and Exchange Commission regulation to furnish Cardinal with copies of all Section 16(a) forms that they file. To Cardinal’s knowledge, based solely on Cardinal’s review of the copies of such reports furnished to it or written representations from certain reporting persons that all such reports were filed with the Commission on a timely basis during the year ended December 31, 2003, Cardinal believes all Section 16(a) filing requirements applicable to officers, directors and more than 10% shareholders were complied with in a timely manner.

At the Annual Meeting, eight directors are to be elected to hold office. If elected, K. Venson Bolt, Dr. Joseph Howard Conduff, Jr., William R. Gardner, Jr., Kevin D. Mitchell, Ronald Leon Moore, Dr. A. Carole Pratt, Dorsey H. Thompson and G. Harris Warner, Jr. shall hold office until the 2005 Annual Meeting of Shareholders, or until their respective successors are duly elected and qualify. It is the intention of the named proxies, unless otherwise directed, to vote in favor of the election of the eight nominees for director named in this paragraph for a one-year term.

Each nominee has agreed to serve if elected. In the event any named nominee shall unexpectedly be unable to serve, proxies will be voted for the remaining named nominees and such other person or persons as may be designated by the Board of Directors.

The following information, including the principal occupation during the past five years, is given with respect to the nominees for election to the Board at the Annual Meeting and for all executive officers. All of the nominees for election as directors currently serve as directors of Cardinal and of Bank of Floyd, Cardinal’s wholly owned subsidiary. No director or nominee serves as a director of any company which has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 or is subject to the requirements of Section 15(d) of the Exchange Act or of any company registered as an investment company under the Investment Company Act of 1934.

Ronald Leon Moore, 62 – Chairman, President and Chief Executive Officer of Cardinal and Bank of Floyd.

Mr. Moore joined Bank of Floyd in 1988 as a Senior Vice President. In 1990 he became President and Chief Executive Officer at Bank of Floyd. Since Cardinal’s formation in 1996, he has served as President and Chief Executive Officer of Cardinal. He has served in the capacity of Chairman of Cardinal and of Bank of Floyd since 2000. Mr. Moore has served as a director of Bank of Floyd since 1989 and of Cardinal since 1996.

Ray A. Fleming, 51 – Executive Vice President, Comptroller and Principal Financial Officer of Cardinal and Bank of Floyd.

Mr. Fleming joined Cardinal in 2003 as Executive Vice President and Chief Financial Officer and was named Chief Financial Officer and Cashier of Bank of Floyd. In 2004, he became Executive Vice President, Comptroller and Principal Financial Officer of Cardinal and Bank of Floyd.

Larrowe & Company, P.C. acted as Cardinal’s independent auditors for the fiscal year ending December 31, 2003. The Board of Directors has approved Larrowe & Company, PLC, as Cardinal’s independent auditors for the fiscal year ending December 31, 2004. Representatives of Larrowe & Company, PLC are expected to be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions posed by the shareholders.

The Board of Directors held seventeen meetings during 2003. In 2003, the Audit Committee of the Board met four times, the Executive Committee met one time, the Asset Liability Management Committee met three times and the Nominating Committee met one time. During 2003, each director attended more than 75% of the aggregate of (i) the total number of meetings of the Board held during the period for which the director was on the Board and (ii) the total number of meetings of the Board Committees on which he served.

The Board of Directors has standing Audit, Executive and Asset Liability Management Committees. The Board of Directors also appoints a Nominating Committee specifically for Cardinal’s annual shareholders meeting.

Cardinal does not have a standing Compensation Committee. The Board of Directors itself is responsible for overseeing the compensation and benefits structure of Cardinal and administers any executive compensation plans and reviews management succession plans. The Board of Directors reviews the performance and establishes the compensation of Mr. Moore, who is a member of the Board of Directors and Cardinal’s Chairman, President and Chief Executive Officer, Mr. Fleming, the Principal Financial Officer. Mr. Moore does not participate in Board discussions or decisions involving his own performance or compensation.

The Audit Committee assists the Board of Directors in fulfilling its fiduciary responsibilities relating to Cardinal’s corporate accounting and reporting practices and internal controls. The Audit Committee is also responsible for investigating concerns regarding accounting and financial reporting matters from employees and others. The Audit Committee recommends to the Board of Directors for approval the firm to be employed as its independent accountants to audit Cardinal’s consolidated financial statements; reviews and approves the scope, purpose and type of audit services to be performed

by the internal and external auditors; reviews the activities and findings of the internal and external auditors to determine the effectiveness of the audit function; reviews procedures for ensuring compliance with Cardinal’s policies on conflict of interest; ensures that standards of ethical behavior and proper compliance programs are established and maintained throughout Cardinal and renders regular reports to the Board of Directors on its activities and findings.

The Audit Committee consists of five members. They are: K. Venson Bolt (Chairman), Dr. J. Howard Conduff, Jr., William R. Gardner, Jr., Kevin D. Mitchell and Dorsey H. Thompson. The Board of Directors has determined that each of the five members is independent as defined in Rule 4200(a)(15) of the National Association of Securities Dealers, Inc. listing standards. The Board has adopted for the Audit Committee a written charter, which is reviewed and reassessed periodically for adequacy.

The Executive Committee exercises all the powers of the Board that may be lawfully delegated when the Board of Directors is not in session.

The Executive Committee consists of Ronald Leon Moore (Chairman), K. Venson Bolt, William R. Gardner, Jr. and Dorsey H. Thompson.

The Asset Liability Management Committee is responsible for maintaining and ensuring adherence to Cardinal’s Risk/Asset Liability Policy, managing interest rate risk, capital risk, earnings risk and reports to the Board.

The Asset Liability Management Committee consists of Ronald Leon Moore (Chairman), Joseph Howard Conduff, Jr. and William R. Gardner, Jr.

The Nominating Committee is responsible for finding, evaluating, considering and proposing nominees to stand for election to the Board of Directors. The Nominating Committee does not have a Charter. The Nominating Committee is specifically appointed by the Board of Directors to evaluate, consider and propose nominees for election to Cardinal’s Board of Directors at the annual shareholders meeting next following the Committee’s appointment.

Generally, candidates should be highly qualified by business, professional or comparable experience, affirmatively desirous of serving on the Board, able to develop meaningful new customer relationships, knowledgeable about the business markets served by Cardinal, and able to represent the interests of all shareholders in a balanced way and not merely those of any special interest group. Candidates should be able to work well with others and free of any conflict of interest that would violate any law or interfere with the proper performance of a director’s duties. The candidate must be able and willing to devote sufficient time to the business of the Board to be an effective director. Shareholders wishing to suggest candidate(s) for consideration at the 2005 Annual Meeting of Shareholders should

submit their proposals in accordance with the timeframe and procedures set forth in the paragraph entitled “SUBMISSION OF SHAREHOLDER PROPOSALS” in this Proxy Statement.

The Nominating Committee will consider director candidates properly recommended by shareholders. These candidates must have the qualifications, described above, applicable to all candidates. In addition to candidates properly recommended by shareholders, the Committee considers candidates from other directors, management and employees. The Committee also considers and evaluates current directors for renomination. In evaluating current directors, in addition to the factors set forth above, the Committee considers the director’s performance and participation as a director and the value of the director’s length of service and experience with Cardinal.

The Nominating Committee meets at least once before the upcoming annual shareholders’ meeting to consider the renomination of the existing directors and to consider any other candidates brought to the Committee’s attention properly by outside shareholders or other non-shareholder sources. The Nominating Committee does not utilize the services of a third party search firm. This process includes reviewing and evaluating the credentials of all candidates in respect to the nominee positions to be filled under the criteria described above. The Nominating Committee compares the experience, expertise and personal qualities of potential candidates with the experience, expertise and personal qualities that are identified as being desirable for the Board of Directors at any given time.

The Nominating Committee consists of William R. Gardner, Jr. (Chairman), and K. Venson Bolt.

The Board of Directors has determined that all Nominating Committee members are “independent” as defined in Rule 4200(a)(15) of the National Association of Securities Dealers, Inc. standards.

The Board of Directors has a process for shareholders to communicate with it. Shareholders are encouraged to communicate with the full Board or with individual directors. Shareholders may send their written communication in writing to Board of Directors, c/o Corporate Secretary, P.O. Box 215, Floyd, Virginia, 24091 indicating whether it is intended for the Board as a whole, for the Chairman of a Committee of the Board or for one or more named individual directors. All such communications will be forwarded to the appropriate director(s) for whom they appear intended as soon as practicable.

The Board of Directors recognize that attendance by directors at annual meetings of the shareholders benefits Cardinal by giving directors an opportunity to meet, talk with and hear the suggestions or concerns of shareholders and by giving shareholders access to directors that they may not otherwise have. The Board also recognizes that directors have their own business and personal interests and are not employees. Their attendance at annual shareholder meetings is not mandatory. However, it is the policy of the Board of Directors that directors be strongly encouraged to attend each annual shareholders’ meeting. At the 2003 annual meeting of shareholders, all of the directors were present.

Members of the Board of Directors are paid a $300 fee for each board meeting they attend and $85 for each committee meeting they attend.

The following table presents information relating to the annual compensation of the Chief Executive Officer and the Principal Financial Officer for the fiscal years ended December 31, 2003, 2002 and 2001. No other officer received in excess of $100,000 for the fiscal year ended December 31, 2003.

Ronald Leon Moore serves as Chairman, President and Chief Executive Officer of Cardinal and Bank of Floyd pursuant to an employment agreement entered into during February 2001 for a term of five years. The agreement, as amended during March 2002, provides for base salary of $155,000 per year (subject to annual review), participation in all incentive compensation, retirement and other employee benefit plans provided by Cardinal and Bank of Floyd to their employees, and participation in Bank of Floyd’s Supplemental Executive Retirement Plan further described below. Additionally, under a deferred compensation arrangement between Cardinal and Mr. Moore, he may elect annually to defer receipt of all or a portion of his compensation. In 2003, 2002 and 2001, twenty five thousand dollars of his annual salary was deferred. The deferred compensation is invested for his benefit by a trustee and distributed to him later under some circumstances.

Ray A. Fleming serves as Executive Vice President, Comptroller and Principal Financial Officer of Cardinal and Bank of Floyd pursuant to an employment agreement entered into during March 2003 for a term of three years. The agreement provides for base salary of $120,000 per year (subject to annual review), participation in all incentive compensation, retirement and other employee benefit plans provided by Cardinal and Bank of Floyd to their employees.

Cardinal has an employee pension plan in which Mr. Moore participates. Assuming normal retirement at age 65, as provided in the plan, Mr. Moore’s projected annual retirement benefit is approximately 37.9% of his ending salary assuming his annual compensation remains level in future years.

Cardinal’s Chief Executive Officer, Ronald Leon Moore, participates in a Supplemental Executive Retirement Plan (the “SERP”) established by Bank of Floyd during 2002. Under the SERP, Mr. Moore will receive monthly payments of $3,750 for a period of 20 years following retirement from his employment with Bank of Floyd after his “normal retirement date” of January 1, 2007. The retirement benefit under the SERP becomes vested at the rate of 20% per year, but immediately becomes 100% vested if Mr. Moore dies or becomes disabled prior to his normal retirement date or if there is a “change in control” of Bank of Floyd. Upon Mr. Moore’s death before retirement or after he has begun receiving payments, his benefits will be paid to his estate or designated beneficiary.

Cardinal does not have a compensation committee as such. The Board (without Mr. Moore participating) determines the compensation of the Chief Executive Officer and (with Mr. Moore participating) the compensation of the Principal Financial Officer.

The Audit Committee has reviewed and discussed with management the audited financial statements. The Audit Committee has discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standard No. 61 (Communication with Audit Committee). In addition, the Audit Committee has received from the independent auditors the written disclosures and letter required by Independent Standards Board Standard No. 1 (Independence Discussions with Audit Committees) and discussed with the independent auditors their independence from Cardinal and its management.

Based on the reviews and discussions described above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in Cardinal’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003, for filing with the Securities and Exchange Commission.

The following fees were paid to Larrowe & Company, PLC, for services provided to Cardinal for the fiscal years ended December 31, 2003 and 2002, respectively.

The Audit Fees are for professional services rendered for the audit of Cardinal’s annual consolidated financial statements and for the reviews of the consolidated financial statements included in Cardinal’s quarterly reports on Form 10-QSB. During the years ended December 31, 2003 and 2002, Larrowe & Company, PLC did not render any professional services to Cardinal in connection with the design and implementation of financial information systems. The Audit-Related Fees are for services rendered related to the proposed merger transaction, assistance with accounting and disclosures related to bank owned life insurance and with various regulatory issues, including compliance with the Sarbanes-Oxley Act of 2002. Tax fees were for tax compliance services and tax consulting services. The Audit Committee approved the non-audit and audit related services provided by Larrowe & Company, PLC, and believes that the independent auditor’s provision of these services to Cardinal is compatible with the maintenance of the auditor’s independence in the conduct of its auditing functions. Finally, the Audit Committee recommended to the Board of Directors that Larrowe & Company, PLC be reappointed as Cardinal’s independent auditors for the fiscal year ending December 31, 2004.

We do not have a “financial expert” (as defined in the Sarbanes-Oxley Act of 2002) on the Audit Committee. Cardinal is a small bank holding company located in a rural community. Cardinal is also highly regulated and frequently examined by federal and state banking authorities. In light of these facts, we have not located such an expert who we believe will add value to the Audit Committee.

All audit related services, tax services and other services are approved as the need for such services arise by the Audit Committee, which concluded that the provision of such services by Larrowe & Company, PLC was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. The Audit Committee approves, consistent with the requirements of the federal securities laws, all auditing services and non-audit services provided to Cardinal by its independent auditors other than certain non-audit services prohibited by law to be performed by the primary independent auditors.

Cardinal has in place a written Code of Ethics for the Chief Executive Officer and Senior Financial Officers. Any shareholder desiring a copy of the Code may receive one without charge by writing Annette Battle, Executive Secretary, P.O. Box 215, Floyd, Virginia, 24091.

J. Howard Conduff, Jr., a director, is the son of Joseph H. Conduff who owns more than 5% of the outstanding shares of Cardinal common stock (a “Principal Shareholder”). Other than the foregoing, there are no family relationships among the directors, officers and Principal Shareholders of Cardinal.

Cardinal’s officers, directors and Principal Shareholders, and other corporations, business organizations, and persons, with which some of Cardinal’s officers, directors and Principal Shareholders are associated, customarily have banking transactions with the Bank of Floyd. All such transactions were made in the ordinary course of business on substantially the same terms, including interest rates and security for loans, as those prevailing at the time in comparable transactions with others and did not involve more than the normal risk of collectibility or present other unfavorable features.

Submission of Shareholder Proposals for Inclusion in Cardinal Proxy Statement and Form of Proxy for 2005 Annual Meeting

Proposals of shareholders intended to be presented at the 2005 Annual Meeting of Shareholders of Cardinal must be received by Cardinal not later than December 10, 2004 and comply with all the requirements of Rule 14a-8 of the Securities Exchange Act of 1934, in order to be included in the proxy statement and form of proxy relating to such Annual Meeting. Such proposals, including shareholder nominations of candidates for election as Cardinal directors, should be sent to Cardinal’s principal office at 101 Jacksonville Circle, P.O. Box 215, Floyd, Virginia 24091, Attn: Ronald Leon Moore by certified mail, return receipt requested. Any proposal that is received by Cardinal after December 10, 2004, will be considered untimely for inclusion in the proxy statement and form of proxy for the 2005 Annual Meeting.

Shareholder proposals and nominations for the Board of Directors to be considered at an annual meeting of shareholders must meet the requirements set forth in Cardinal’s Bylaws as in effect for such meeting.

Cardinal’s Bylaws currently provide for the 2004 Annual Shareholders’ Meeting that no business may be transacted at a shareholders’ meeting except such business as shall be (a) specified in the meeting notice; (b) brought before the meeting at the Board’s direction; or (3) brought before the meeting by a shareholder of record entitled to vote at the meeting in compliance with Rule 14a-8 of the Securities Exchange Commission. A shareholder must mail to Cardinal’s principal office at 101 Jacksonville Circle, P.O. Box 215, Floyd, Virginia 24091, Attn: Ronald Leon Moore, notice of the shareholder’s proposal no less than 120 days prior to the mailing date of the proxy statement for the previous year’s annual shareholder meeting. The notice of action a shareholder proposes to bring before an annual meeting must include (a) a brief description of the business and the reasons for bringing the business before the meeting; (b) the shareholder’s name and address as they appear on Cardinal’s books; (c) the classes and number of shares of Cardinal owned of record or beneficially by such shareholder; and (d) any material interest of the shareholder in such business, other than his interest as a shareholder of Cardinal.

Cardinal Bylaws currently provide for the 2004 Annual Shareholders’ Meeting that any shareholder desiring to nominate one or more persons for election at an annual meeting must submit the name of the proposed nominee(s) in writing, together with a statement signed by each proposed nomineee agreeing to serve, if elected, and a confirmation from the applicable regulatory agencies that each such nominee is qualified to serve. This submission must be submitted to Cardinal at 101 Jacksonville Circle,

P.O. Box 215, Floyd, Virginia 24091, Attn: Ronald Leon Moore not less than 30 days prior to the date set for the annual shareholders meeting.

Cardinal’s 2003 Annual Report, which includes audited consolidated balance sheets as of December 31, 2003 and December 31, 2002, consolidated statements of income, stockholders’ equity and cash flows for the years ended December 31, 2003, 2002 and 2001 along with the related footnotes is being mailed with this Proxy Statement to shareholders of record as of the close of business on March 25, 2004.

The Board of Directors does not know of any matters to be presented for consideration at the Meeting other than those specifically set forth in the Notice of Annual Meeting. However, in the event that any other matters are properly presented for action at the Meeting or any adjournment thereof, it is the intention of the proxy holders named in the enclosed Proxy to take such action as shall be in accordance with their best judgment with respect to such matters.

Shareholders are urged to complete, sign, date and return promptly the enclosed proxy. Your prompt response and cooperation is appreciated.

By Order of the Board of Directors

/s/ Leon Moore

Leon Moore

Chairman of the Board

President and CEO

The undersigned hereby appoints Douglas W. Densmore, Dorsey H. Thompson, Ronald Leon Moore and William R. Gardner, Jr. each of whom may act, as proxies, with full power of substitution, to vote all the shares of Common Stock of Cardinal Bankshares Corporation held of record by the undersigned on March 25, 2004, at the Annual Meeting of Shareholders, to be held on April 28, 2004, at 2:00 p.m., and at any adjournment thereof, as follows:

THE STOCK REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED. IF NO DIRECTION IS GIVEN, THE PROXY WILL BE VOTED FOR PROPOSAL NO. 1

The undersigned hereby acknowledges receipt of the Notice and Proxy Statement dated April 9, 2004 with respect to the 2004 Annual Meeting.

NOTE: When signing as attorney, trustee, administrator, executive or guardian, please give your full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by an authorized person. In the case of joint tenants, each joint owner must sign.

PLEASE COMPLETE, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.

o	Preliminary Proxy Statement
o	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x	Definitive Proxy Statement
o	Definitive Additional Materials
o	Soliciting Material Pursuant to §240.14a-12

x	No fee required.
o	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	(1)	Title of each class of securities to which transaction applies:
	(2)	Aggregate number of securities to which transaction applies:
	(3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
	(4)	Proposed maximum aggregate value of transaction:
	(5)	Total fee paid:
o	Fee paid previously with preliminary materials.

o	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	(1)	Amount Previously Paid:
	(2)	Form, Schedule or Registration Statement No.:
	(3)	Filing Party:
	(4)	Date Filed:


Title of Class	Name and Address Of Beneficial Owner	Amount and Nature Of Beneficial Ownership		Percent of Class
Common Stock	Joseph H. Conduff P.O. Box 113 Floyd, VA 24091	146,736	⁽¹⁾	9.55

Common Stock	Millenco, L.P. 666 Fifth Avenue, 8^th Floor New York, New York 10103	125,356		8.16


Title of Class	Name of Beneficial Owner	Amount and Nature Of Beneficial Ownership	Percent of Class
Common Stock	K. Venson Bolt	8,868⁽²⁾	⁽¹⁾
Common Stock	Dr. Joseph Howard Conduff, Jr.	31,473⁽³⁾	2.0
Common Stock	Ray A. Fleming	2,000⁽⁴⁾	⁽¹⁾
Common Stock	William R. Gardner, Jr.	1,420⁽⁵⁾	⁽¹⁾
Common Stock	Kevin D. Mitchell	20,910⁽⁶⁾	1.4
Common Stock	Ronald Leon Moore	7,905⁽⁷⁾	⁽¹⁾
Common Stock	Dr. A. Carole Pratt	225	⁽¹⁾
Common Stock	Dorsey H. Thompson	8,727⁽⁸⁾	⁽¹⁾
Common Stock	George Harris Warner, Jr.	300	⁽¹⁾
Common Stock	All directors and named executive officers as a group (nine persons)	81,828	5.3


Director (Age)	Position with Cardinal, Principal Occupation and Other Business Experience	Director Since
K. Venson Bolt (78)	Vice Chairman of the Board, Cardinal and Bank of Floyd Farmer Willis, Virginia	3/12/96

Dr. Joseph Howard Conduff, Jr. (45)	Dentist in private practice. Floyd, Virginia	4/24/02


Name and Principal Position	Year	Annual Compensation Salary⁽¹⁾		All Other Compensation⁽²⁾
Ronald Leon Moore	2003	$	155,000	$	98,225
Chairman, President and Chief Executive Officer, Cardinal and Bank of Floyd	2002 2001		155,000 155,000		86,439 7,150

Ray A. Fleming Executive Vice President, Comptroller and Principal Financial Officer	2003	$	115,400	$	5,490


	2003		2002
Audit Fees	$	55,912	$	49,453
Audit-Related Fees	$	28,793	$	77,010
Tax Fees	$	7,575	$	4,253
Other Fees	$	—	$	—


K. Venson Bolt (Chairman)		Kevin D. Mitchell
J. Howard Conduff, Jr.		Dorsey H. Thompson
William R. Gardner, Jr.


K. Venson Bolt		Ronald Leon Moore
Dr. Joseph Howard Conduff, Jr.		Dr. A. Carole Pratt
William R. Gardner, Jr.		Dorsey H. Thompson
Kevin D. Mitchell		G. Harris Warner, Jr.





(Signature of Shareholder) (Date)				(Signature of Shareholder) (Date)