8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) November 17, 2006 (November 20, 2006)

Cardinal Bankshares Corporation

(Exact name of registrant as specified in its charter)

Virginia	0-28780	54-1804471
(State or other jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

101 Jacksonville Circle, PO Box 215 Floyd, Virginia	24091
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (540) 745-4191

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition

On November 17, 2006, Cardinal Bankshares Corporation (“Cardinal Bankshares”) issued a news release announcing financial results for the quarter ended September 30, 2006. The News Release (the “News Release”) is attached as Exhibit 99.1 to this report and is incorporated into this Item 8.01 by reference.

Item 9.01. Financial Statements and Exhibits.

(99.1) The News Release.

*                                         *                                        *

This Current Report on Form 8-K (including information included or incorporated by reference herein) may contain, among other things, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements regarding certain of Cardinal Bankshares’ goals and expectations with respect to earnings, earnings per share, revenue, expenses and the growth rate in such items, as well as other measures of economic performance, including statements relating to estimates of credit quality trends, and statements preceded by, followed by or that include the words “may”, “could”, “should”, “would”, “believe”, “anticipate”, “estimate”, “expect”, “intend”, “plan”, “projects”, “outlook” or similar expressions. These statements are based upon the current beliefs and expectations of Cardinal Bankshares’ management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. These forward-looking statements involve certain risks and uncertainties that are subject to change based on various factors (many of which are beyond Cardinal Bankshares’ control).

The following factors, among others, could cause Cardinal Bankshares’ financial performance to differ materially from that expressed in such forward-looking statements: (1) the strength of the United States economy in general and the strength of the local economies in which Cardinal Bankshares conducts operations may be different than expected resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on Cardinal Bankshares’ loan portfolio and allowance for loan losses; (2) the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; (3) inflation, interest rate, market and monetary fluctuations; (4) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions); (5) the timely development of competitive new products and services by Cardinal Bankshares and the acceptance of these products and services by new and existing customers; (6) the willingness of customers to accept third party products marketed by Cardinal Bankshares; (7) the willingness of customers to substitute competitors’ products and services for Cardinal Bankshares’ products and services and vice versa; (8) the impact of changes in financial services’ laws and regulations (including laws concerning taxes, banking, securities and insurance); (9) technological changes; (10) changes in consumer spending and saving habits; (11) the effect of corporate restructurings, acquisitions and/or dispositions; (12) the growth and profitability of Cardinal Bankshares’ noninterest or fee income being less than expected; (13) unanticipated regulatory or judicial proceedings or rulings; (14) the impact of changes in accounting principles; (15) adverse changes in financial performance and/or condition of Cardinal Bankshares’ borrowers which could impact repayment of such borrowers’ outstanding loans; (16) the impact on Cardinal Bankshares’ businesses, as well as on the risks set forth above, of various domestic or international military or terrorist activities or conflicts; and (17) Cardinal Bankshares’ success at managing the risks involved in the foregoing.

Cardinal Bankshares cautions that the foregoing list of factors is not exclusive. All subsequent written and oral forward-looking statements concerning Cardinal Bankshares or other matters and attributable to Cardinal Bankshares or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. Cardinal Bankshares does not undertake any obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this Current Report on Form 8-K.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CARDINAL BANKSHARES CORPORATION
Date: November 20, 2006	By:	/s/ Ronald Leon Moore
	Name:	Ronald Leon Moore
	Title:	Chairman, President and Chief Executive     Officer
	By:	/s/ Stephanie K. Sigman
	Name:	Stephanie K. Sigman
	Title:	Controller, Senior Vice President and     Principal Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
(99.1)	The News Release.

EX-99.1

Exhibit 99.1

Cardinal Bankshares Corporation

101 Jacksonville Circle

Floyd, Virginia 24091

Contact:	Leon Moore	Telephone: (540) -745-4191
	Chairman of the Board, President and CEO	FAX: (540-) 745-4133
	Stephanie K. Sigman
	Senior Vice President and Principal Financial Officer

November 16, 2006 Traded: OTC Bulletin Board Symbol: CDBK

For Immediate Release

Cardinal Bankshares Corporation Announces Increased Earnings for the First Nine Months of 2006

FLOYD, VA – Cardinal Bankshares Corporation is pleased to report increased year to date earnings for the first nine months of 2006 as compared to the same period for 2005. “With continued branch expansion, we are quite pleased to report this increase in earnings”, stated Leon Moore, chairman and chief executive officer.

Net income for the first nine months of 2006 amounted to $1,880,000, a slight increase of $275,000 from the income of $1,605,000 for the same period in 2005. Basic earnings amounted to $1.23 per share as compared to $1.05 per share for the first nine months of 2005. This represents an increase of 17.1% above ending figures of September 2005.

Noninterest expense decreased approximately $8,000 the first nine months of 2006 compared to the first nine months of 2005. Increases in personnel expenses related to Tanglewood and Salem branches added during 2005 have been offset by decreases in occupancy and equipment expenses and other operating expenses.

Total assets at September 30, 2006 were $191,431,000. Net loans ended the first nine months at $121,650,000. Deposits at September 30, 2006 were $161,521,000.

Mr. Moore stated, “Asset quality remains good and our capital position remains strong. Higher yields on loans and investments have helped us to continue seeing net income increase and a good interest margin.”

Moore added, “Construction has begun for our eighth branch. We still anticipate opening the branch in early 2007. This branch in Pulaski County, Virginia will serve the Fairlawn community. With this expansion, I believe the bank is well positioned for future growth and success. The bank continues to consider market strategies to attract and retain customers. We appreciate the support of our customers, shareholders and employees. We welcome your comments and the opportunity to serve you.”

Cardinal provides a wide range of commercial banking services to individuals and small to medium-sized businesses through its main office located in Floyd, Virginia and its branch locations in Christiansburg, Hillsville, Roanoke, Salem and Willis, Virginia.

****

This press release may contain “forward-looking statements,” within the meaning of federal securities laws, that involve risks and uncertainties. Statements herein are based on certain assumptions and analyses by the Company and other factors it believes are appropriate in the circumstances. However, the Company’s expectations are subject to a number of risks and uncertainties and other factors that could cause actual results, events and developments to differ materially from those contemplated by any forward-looking statements herein. Consequently, all forward-looking statements made herein are qualified by these cautionary statements and the cautionary language in the Company’s most recent Form 10-K report and other documents filed with the Securities and Exchange Commission.

Cardinal Bankshares Corporation and Subsidiary

Consolidated Balance Sheets

(In thousands, except share data)	(Unaudited) September 30, 2006			(Audited) December 31, 2005
Assets
Cash and due from banks	$	3,896		$	4,292
Interest-bearing deposits		9,655			9,042
Federal funds sold		7,775			5,125
Investment securities available for sale, at fair value		19,047			19,308
Investment securities held to maturity (fair value September 30, 2006 - $17,418; December 31, 2005 - $17,743)		17,238			17,470
Restricted equity securities		554			546
Total loans		123,242			129,981
Allowance for loan losses		(1,592	)		(1,427	)
Net loans		121,650			128,554
Bank premises and equipment, net		3,880			3,997
Accrued interest receivable		936			998
Foreclosed properties		212			418
Bank owned life insurance		4,749			4,631
Other assets		1,839			1,854
Total assets	$	191,431		$	196,235
Liabilities and Stockholders’ Equity
Noninterest-bearing deposits	$	27,044		$	26,747
Interest-bearing deposits		134,477			141,101
Total deposits		161,521			167,848
Securities sold under agreements to repurchase		—			134
Accrued interest payable		172			134
Other liabilities		1,217			1,061
Total liabilities		162,910			169,177
Commitments and contingent liabilities		—			—
Stockholders’ Equity
Common stock, $10 par value, 5,000,000 shares authorized, 1,535,733 shares issued and outstanding		15,357			15,357
Additional paid-in capital		2,925			2,925
Retained earnings		10,298			8,833
Accumulated other comprehensive income, net		(59	)		(57	)
Total stockholders’ equity		28,521			27,058
Total liabilities and stockholders’ equity	$	191,431		$	196,235

Cardinal Bankshares Corporation and Subsidiary

Consolidated Statements of Income (Unaudited)

	Three months ended September 30,					Nine months ended September 30,
(In thousands, except share data)	2006		2005			2006			2005
Interest income
Loans and fees on loans	$	2,493	$	2,211		$	7,076		$	6,378
Federal funds sold and securities purchased under agreements to resell		68		52			142			110
Investment securities:
Taxable		203		178			602			596
Exempt from federal income tax		210		227			641			695
Deposits with banks		111		55			307			89
Total interest income		3,085		2,723			8,768			7,868
Interest expense
Deposits		1,047		925			3,003			2,544
Borrowings		—		3			—			25
Total interest expense		1,047		928			3,003			2,569
Net interest income		2,038		1,795			5,765			5,299
Provision for loan losses		135		12			165			48
Net interest income after provision for loan losses		1,903		1,783			5,600			5,251
Noninterest income
Service charges on deposit accounts		73		68			205			197
Other service charges and fees		24		27			73			76
Net realized gains on sales of securities		—		—			3			9
Other operating income		90		82			312			244
Total noninterest income		187		177			593			526
Noninterest expense
Salaries and employee benefits		733		781			2,221			2,166
Occupancy and equipment		165		170			505			535
Foreclosed assets, net		—		(17	)		(9	)		(17	)
Other operating expense		396		398			1,017			1,058
Total noninterest expense		1,294		1,332			3,734			3,742
Income before income taxes		796		628			2,459			2,035
Income tax expense		186		126			579			430
Net Income	$	610	$	502		$	1,880		$	1,605
Basic earnings per share	$	0.40	$	0.33		$	1.23		$	1.05
Diluted earnings per share	$	0.40	$	0.33		$	1.23		$	1.05
Weighted average basic shares outstanding		1,535,733		1,535,733			1,535,733			1,535,733
Weighted average diluted shares outstanding		1,535,733		1,535,733			1,535,733			1,535,733