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) August 4, 2011 (August 5, 2010)

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 8.01. Other Items

On August 4, 2011, Cardinal Bankshares Corporation (“Cardinal Bankshares”) Board of Directors issued a letter in response to Shaller Equity Partners (shareholder) letter dated July 27, 2011. A copy of the Company’s letter is attached as Exhibit 99.1 hereto and is hereby incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(99) The Letter.

*                              *                             *

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: August 5, 2011	By:	/s/ Ronald Leon Moore
	Name:	Ronald Leon Moore
	Title:	Chairman, President and Chief Executive Officer
	By:	/s/ J. Alan Dickerson
	Name:	J. Alan Dickerson
	Title:	Chief Financial Officer & Vice-President

EXHIBIT INDEX

Exhibit No.	Description
(99)	The News Release.

EX-99

Exhibit 99

Cardinal Bankshares Corporation

Post Office Box 215

Floyd, Virginia 24091

Phone: (540) 745-4191

Fax: (540) 745-4133

August 4, 2011

FIRST CLASS MAIL AND E-MAIL (doug.schaller@gmail.com)

Schaller Equity Partners

324 Indera Mills Court

Winston-Salem, North Carolina 27101

Attn: Mr. Douglas E. Schaller, President

Re: July 27, 2011 Letter to Board of Directors

Dear Mr. Schaller:

We received your letter of July 27, 2011 and are writing in reply. We recognize that you are entitled to your opinions regarding our performance as directors. We would, however, point out that we all live and work in the market served by the Bank of Floyd and are customers of the Bank; collectively we, together with our families, have a very sizeable investment in Cardinal; and, our investment has been and remains for the long term. Many, perhaps most, of the shareholders are our friends and neighbors. So, we take our responsibilities seriously and exercise our business judgment in the interest of Cardinal and all of its shareholders and not just for the short term.

In reviewing your complaints, we see that you first acquired stock in Cardinal in February, 2011. With two exceptions, every concern you listed in your letter occurred before you acquired your first share of Cardinal stock. All of the matters giving rise to these concerns were clearly disclosed in our filings with the Securities and Exchange Commission and were available to you before you bought any of our stock. Knowing those facts when you proceeded to acquire 9% of our stock over a period of a few months, we find it doubtful that you really believe that we were not fulfilling our fiduciary duties in respect to any of these matters, unless your intent from the beginning was to force a sale of Cardinal. So far as the whistleblower case is concerned, as you well know, we were successful in defending that case. We believe if more companies defended spurious cases like this rather than taking the easy way out and settling them, there would be fewer nuisance suits, and shareholders would be better served.

With respect to the personnel changes that did occur after you accumulated most of your shares: we do not intend to disclose any further information about the departure of Mr. Logue. We believe that is a confidential employment matter, as we have stated clearly in the past. We have made the public disclosures regarding it that are required by law, and we will not give you, or any other shareholder, confidential personnel-related information. We note parenthetically that you continued to purchase our stock after Mr. Logue’s departure, in spite of our refusal to provide you with nonpublic information regarding that matter as you had demanded. Not

knowing this information does not seem to have abated your desire to acquire more of our shares.

Obviously we disagree with your assessment of our new Executive Vice President, Michael Larrowe. Mr. Larrowe has a fine financial background, decades of experience working with banks, a great deal of respect in the banking community, and, we believe, the personality and character necessary to be a fine bank executive. He also is a native of the area, growing up about 35 miles away. We have also observed Mr. Larrowe for many years as the company’s lead outside auditor and, as a result, have a far better sense of his ultimate fit for our company and the markets we serve than many others we might hire without having similar familiarity. Our business judgment is that Mr. Larrowe will make a fine executive for our Bank.

Your attempt to make an issue of facts already known when you first bought your stock, your extreme and somewhat inexplicable reaction to Mr. Logue’s departure while continuing to accumulate our shares, and your attempt now to try to influence a sale of this company are all quite curious. It makes us wonder whether you intended from the beginning to try to force a sale of this company, notwithstanding your initial 13D filing.

Sincerely,

BOARD OF DIRECTORS OF CARDINAL BANKSHARES:

Joseph Howard Conduff, & DDS.

Dr. Joseph Howard Conduff, Jr. Chair of the Audit Committee

William R. Gardner, Jr.

William R. Gardner, Jr., Vice/Chairman of the Board

Kevin D. Mitchell

Kevin D. Mitchell, Director and Member of the Audit Committee

G. Harris Warner, Jr.

G. Harris Warner, Jr., Chairman of the Personnel Committee

Ronald Leon Moore

Ronald Leon Moore, Chairman of the Board

Copy: Jeffrey Skinner, Kilpatrick Townsend & Stockton LLP