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) February 12, 2007 (February 9, 2007)

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 February 9, 2007, Cardinal Bankshares Corporation (“Cardinal Bankshares”) issued a news release announcing financial results for the quarter and year ended December 31, 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: February 12, 2007	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 Sigman

Senior Vice President and Principal Financial Officer

February 9, 2007	Traded: OTC Bulletin Board	Symbol: CDBK
For Immediate Release

Cardinal Bankshares Corporation Announces Increase in Net Earnings for 2006

FLOYD, VA – Cardinal Bankshares Corporation announces increase in 4^th quarter earnings and record earnings for 2006.

Net income for the 4^th quarter of 2006 increased by 5.50% over 2005, ending at $631 thousand, compared to $598 thousand in the 4^th quarter 2005.

Net income amounted to $2.5 million, over the 2005 net income of $2.2 million. Basic earnings per share amounted to $1.63, compared to $1.44 per share in 2005. Total interest income for the year increased $1.2 million to $11.9 million. Interest expense increased by $795 thousand for the year to $4.3 million. Non-interest income increased $165 thousand to $924 thousand for the year, which included a one time gain of $126 thousand due to adjustment in a benefit plan.

Total assets ended the year at $207.8 million. Net loans ended the year at $121.3 million, a slight decline from 2005. The decline was primarily due to payout of several loan participations and a slow down in commercial activity. Total deposits increased by $9.4 million and ended the year at $177.3 million.

Leon Moore, Chairman of the Board, commented, “With the increased pressure on interest margins and a cooling loan demand, we are pleased that our net income remained strong. We were also able to produce a positive value for our shareholders with a 9% increase in cash dividends for the year. Cardinal Bankshares paid a record 58¢ per common share for the year 2006. This was a record 15^th consecutive increase in cash dividends for the company.”

The company’s capital position remains very strong with an equity to asset ratio of 13.66% ending the year at $28.4 million.

Asset quality remained good with non-performing assets ending the year at $656 thousand. The company added an additional $208 thousand to reserve for loan loss. Moore stated, “Due to the uncertainty of the economy and commercial activity we felt it appropriate to increase the provision.”

“We look forward to 2007 for potential growth and expansion of Cardinal’s franchise,” stated Moore.

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. The opening of a new branch in Fairlawn, Pulaski County is on target for Spring 2007.

****

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-KSB report and other documents filed with the Securities and Exchange Commission.

Cardinal Bankshares Corporation and Subsidiaries

Consolidated Balance Sheets

December 31, (In thousands, except share data)	2006			2005
Assets
Cash and due from banks	$	3,416		$	4,292
Interest-bearing deposits in banks		21,135			9,042
Federal funds sold		8,800			5,125
Investment securities available for sale, at fair value		23,654			19,308
Investment securities held to maturity		17,248			17,470
Restricted equity securities		554			546
Total loans		122,974			129,981
Allowance for loan losses		(1,640	)		(1,427	)
Net loans		121,334			128,554
Bank premises and equipment, net		4,071			3,997
Accrued interest receivable		974			998
Foreclosed properties		212			418
Bank owned life insurance		4,789			4,631
Other assets		1,662			1,854
Total assets	$	207,849		$	196,235
Liabilities and Stockholders’ Equity
Liabilities
Noninterest-bearing deposits	$	28,279		$	26,747
Interest-bearing deposits		148,993			141,101
Total deposits		177,272			167,848
Securities sold under agreements to repurchase		—			134
Accrued interest payable		221			134
Other liabilities		1,966			1,061
Total liabilities		179,459			169,177
Commitments and contingencies		—			—
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		10,453			8,833
Accumulated other comprehensive income		(345	)		(57	)
Total stockholders’ equity		28,390			27,058
Total liabilities and stockholders’ equity	$	207,849		$	196,235

Cardinal Bankshares Corporation and Subsidiaries

Consolidated Statements of Income

Years ended December 31, (In thousands, except share and per share data)	2006			2005
Interest income
Loans and fees on loans	$	9,399		$	8,698
Federal funds sold and securities purchased under agreements to resell		249			142
Investment securities:
Taxable		835			759
Exempt from federal income tax		852			918
Deposits with banks		582			167
Total interest income		11,917			10,684
Interest expense
Deposits		4,317			3,500
Borrowings		4			26
Total interest expense		4,321			3,526
Net interest income		7,596			7,158
Provision for loan losses		208			48
Net interest income after provision for loan losses		7,388			7,110
Noninterest income
Service charges on deposit accounts		281			262
Other service charges and fees		100			100
Net realized gains on sales of securities		3			9
Other income		540			388
Total noninterest income		924			759
Noninterest expense
Salaries and employee benefits		2,984			2,991
Occupancy and equipment		681			710
Foreclosed assets, net		(7	)		(13	)
Other operating expense		1,380			1,382
Total noninterest expense		5,038			5,070
Income before income taxes		3,274			2,799
Income tax expense		763			596
Net income	$	2,511		$	2,203
Basic earnings per share	$	1.63		$	1.44
Diluted earnings per share	$	1.63		$	1.44
Weighted average basic shares outstanding		1,535,733			1,535,733
Weighted average diluted shares outstanding		1,535,733			1,535,733