10-Q

U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

Commission File No. 0-28780

CARDINAL BANKSHARES CORPORATION

(Exact name of registrant as specified in its charter)

Virginia	54-1804471
(State of Incorporation)	(I.R.S. Employer Identification No.)

101 Jacksonville Circle, P. O. Box 215, Floyd,

Virginia 24091

(Address of principal executive offices)

(540) 745-4191

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ¨.    No  ¨.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  x.     No  ¨.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. (Check one):

Large accelerated filer    ¨	Accelerated filer                      ¨
Non-accelerated filer      ¨	Smaller reporting company    x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ¨.     No  x.

The number of shares outstanding of the issuer’s Common Stock, $10 par value as of August 14, 2012 was 1,535,733.

CARDINAL BANKSHARES CORPORATION

FORM 10-Q

June 30, 2012

INDEX

		Page
Part I.	Financial Statements
Item 1.	Consolidated Balance Sheets as of June 30, 2012 (Unaudited) and December 31, 2011 (Audited)		2
	Consolidated Statements of Income for the three and six months ended June 30, 2012 and 2011 (Unaudited)		3
	Consolidated Statement of Comprehensive Income for the three and six months ended June 30, 2012 and 2011 (Unaudited)		4
	Consolidated Statements of Changes in Stockholders’ Equity as of June 30, 2012 (Unaudited)		5
	Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011 (Unaudited)		6
	Notes to Consolidated Financial Statements (Unaudited)		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		26
Item 4.	Controls and Procedures		26
Part II.	Other Information
Item 1.	Legal Proceedings		27
Item 1A.	Risk Factors		27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		27
Item 3.	Defaults Upon Senior Securities		27
Item 4.	Mine Safety Disclosures		27
Item 5.	Other Information		27
Item 6.	Exhibits		27
SIGNATURES			28
INDEX TO EXHIBITS			29

Cardinal Bankshares Corporation and Subsidiary

Consolidated Balance Sheets

(In thousands, except share data)	(Unaudited) June 30, 2012			(Audited) December 31, 2011
Assets
Cash and due from banks	$	47,166		$	4,255
Interest-bearing deposits		164			14,758
Federal funds sold		—			33,700
Total cash and cash equivalents		47,330			52,713
Investment securities available for sale, at fair value		82,552			57,105
Investment securities held to maturity (fair value June 30, 2012 $13,500 - December 31, 2011 $13,662)		12,824			12,950
Restricted equity securities		615			592
Total loans		119,924			130,158
Allowance for loan losses		(2,998	)		(2,867	)
Net loans		116,926			127,291
Bank premises and equipment, net		2,797			2,895
Accrued interest receivable		827			824
Foreclosed assets		3,517			3,418
Bank owned life insurance		6,322			5,437
Other assets		4,184			2,935
Total assets	$	277,894		$	266,160
Liabilities and Stockholders’ Equity
Liabilities
Noninterest-bearing deposits	$	31,679		$	32,135
Interest-bearing deposits		214,758			200,276
Total deposits		246,437			232,411
Accrued interest payable		89			88
Other liabilities		1,118			628
Total liabilities		247,644			233,127
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		11,153			14,292
Accumulated other comprehensive income, net		815			459
Total stockholders’ equity		30,250			33,033
Total liabilities and stockholders’ equity	$	277,894		$	266,160

See Notes to Consolidated Financial Statements.

2

Cardinal Bankshares Corporation and Subsidiary

Consolidated Statements of Income (Unaudited)

	Three months ended June 30,					Six months ended June 30,
(In thousands, except share data)	2012			2011		2012			2011
Interest and dividend income
Loans and fees on loans	$	1,623		$	2,005	$	3,397		$	4,156
Federal funds sold and securities purchased under agreements to resell		8			12		21			24
Investment securities:
Taxable		429			345		795			684
Exempt from federal income tax		176			168		349			341
Deposits with banks		1			—		2			1
Total interest income		2,237			2,530		4,564			5,206
Interest expense
Deposits		795			748		1,584			1,537
Total interest expense		795			748		1,584			1,537
Net interest income		1,442			1,782		2,980			3,669
Provision for loan losses		3,995			253		3,988			439
Net Interest Income after provision for loan losses		(2,553	)		1,529		(1,008	)		3,230
Noninterest income
Service charges on deposit accounts		43			55		87			102
Other service charges and fees		31			31		59			57
Net realized gains on sales of securities		10			43		26			43
Other operating income		78			94		157			170
Total noninterest income		162			223		329			372
Noninterest expense
Salaries and employee benefits		1,361			823		2,200			1,615
Occupancy and equipment		156			135		314			312
Foreclosed assets, Net		407			27		388			34
Loss on sale of fixed assets		—			12		—			82
Other operating expense		781			419		1,191			826
Total noninterest expense		2,705			1,416		4,093			2,869
Income before income taxes		(5,096	)		336		(4,772	)		733
Income tax expense (benefit)		(1,818	)		15		(1,787	)		89
Net Income	$	(3,278	)	$	321	$	(2,985	)	$	644
Basic earnings per share	$	(2.13	)	$	0.21	$	(1.94	)	$	0.42
Diluted earnings per share	$	(2.13	)	$	0.21	$	(1.94	)	$	0.42
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

See Notes to Consolidated Financial Statements.

3

Cardinal Bankshares Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011
Net income	$	(3,278	)	$	321		$	(2,985	)	$	644
Other comprehensive income, net of tax:
Unrealized gains on securities:
Unrealized holding gains arising during period,		430			198			517			280
less income taxes		(146	)		(67	)		(178	)		(95	)
		284			131			339			185
Less: reclassification adjustment for gains included		10			43			26			43
less income taxes		(3	)		(15	)		(9	)		(15	)
		7			28			17			28
Other comprehensive income		291			159			356			213
Comprehensive income	$	(2,987	)	$	480		$	(2,629	)	$	857

See Notes to Consolidated Financial Statements

4

Cardinal Bankshares Corporation and Subsidiary

Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)

(In thousands)	Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)		Total
Balance, December 31, 2011	$	15,357	$	2,925	$	14,292		$	459	$	33,033
Net Income		—		—		(2,985	)				(2,985	)
Other comprehensive income									356		356
Cash dividend declared		—		—		(154	)		—		(154	)
Balance, June 30, 2012	$	15,357	$	2,925	$	11,153		$	815	$	30,250

See Notes to Consolidated Financial Statements

5

Cardinal Bankshares Corporation and Subsidiary

Consolidated Statements of Cash Flows (Unaudited)

(In thousands) Six Months Ended June 30,	2012			2011
Cash flows from operating activities
Net (loss) income	$	(2,985	)	$	644
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization		108			120
Accretion of discounts on securities, net of amortization of premiums		352			185
Provision for loan losses		3,988			439
Deferred income taxes benefit		(1,787	)		—
Income on Bank Owned Life Insurance		85			80
Net realized gain on securities		(26	)		(43	)
Net realized (gain) loss on sale of foreclosed assets		—			20
Changes in assets and liabilities:
Accrued income		(3	)		51
Other Assets		(713	)		(524	)
Accrued interest payable		1			(24	)
Other liabilities		490			456
Net cash (used) provided by operating activities		(490	)		1,404
Cash flows from investing activities
Purchases of available for sale securities		(33,182	)		(13,063	)
Sales of available for sale securities		6,204			2,849
Maturities, calls and paydowns of available for sale securities		1,750			5,101
Purchases of held to maturity securities		(371	)		—
Maturities, calls and paydowns of held to maturity securities		490			605
Call (purchase) of restricted equity securities		(23	)		(27	)
Proceeds from sale of foreclosed assets		—			210
Net decrease in loans		6,377			6,594
Net purchases (sales) of bank premises and equipment		(10	)		763
Net cash (used) provided by investing activities		(18,765	)		3,032
Cash flows from financing activities
Net (decrease) increase in noninterest-bearing deposits		(456	)		96
Net increase (decrease) in interest-bearing deposits		14,482			(4,098	)
Dividends Paid		(154	)		(123	)
Net cash provided (used) by financing activities		13,872			(4,125	)
Net (decrease) increase in cash and cash equivalents		(5,383	)		311
Cash and cash equivalents, beginning		52,713			32,290
Cash and cash equivalents, ending	$	47,330		$	32,601
Supplemental disclosures of cash flow information
Interest paid	$	1,583		$	1,561
Income taxes paid	$	90		$	296
Supplemental disclosures of noncash activities
Other real estate acquired in settlement of loans	$	529		$	—

6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1. Basis of Presentation

The accompanying unaudited consolidated financial statements of Cardinal Bankshares Corporation (the “Company”) have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all of the disclosures and notes required by generally accepted accounting principles. In the opinion of management, all material adjustments (which are of a normal recurring nature) considered necessary for a fair presentation have been made. The results for the interim period are not necessarily indicative of the results to be expected for the entire year or any other interim period. The information reported herein should be read in conjunction with the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. Certain previously reported amounts have been reclassified to conform to current presentations. The December 31, 2011 information is derived from audited financial statements and the June 30, 2012 information is derived from unaudited financial statements.

Principles of Consolidation

The consolidated financial statements of the Company include the accounts of the Company, the Bank of Floyd (“the Bank”) and FBC, Inc. All material intercompany transactions and balances have been eliminated.

Cash and Cash Equivalents

For purpose of presentation in the consolidated statements of cash flows, cash and cash equivalents are defined as those amounts included in the balance sheet captions Cash and due from banks, Interest bearing deposits in banks and Federal funds sold.

Subsequent Events

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.

7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2. Loans and Allowance for Loan Losses

The major components of loans in the Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011 are summarized below:

	2012			2011
Commercial	$	2,777		$	5,873
Real estate
Construction and land development		8,692			8,868
Residential, 1-4 families		28,075			26,568
Residential, 5 or more families		3,746			4,717
Farmland		1,275			1,306
Nonfarm, nonresidential		70,681			75,879
Agricultural		39			9
Consumer		937			2,487
Other		4,012			4,765
Gross loans		120,234			130,472
Unearned discount and net deferred loan fees and costs		(310	)		(314	)
Total loans		119,924			130,158
Allowance for loan losses		(2,998	)		(2,867	)
Net loans	$	116,926		$	127,291

Overdrafts that were reclassified as part of gross loans totaled $13 thousand and $7 thousand at June 30, 2012 and December 31, 2011, respectively.

As a part of the ongoing monitoring of the credit quality of the loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk grade assigned to commercial and consumer loans, (ii) the level of classified commercial loans, (iii) net charge-offs, (iv) nonperforming loans, and (v) the general economic conditions in the Company’s geographic markets.

The Company categorizes loans receivable into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans and leases individually by classifying the loans receivable as to credit risk. The Company uses the following definitions for risk ratings:

Pass - Loans in this category are considered to have a low likelihood of loss based on relevant information analyzed about the ability of the borrowers to service their debt and other factors.

Special Mention - Loans in this category are currently protected but are potentially weak, including adverse trends in borrower’s operations, credit quality or financial strength. Those loans constitute an undue and unwarranted credit risk but not to the point of justifying a substandard classification. The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances. Special mention loans have potential weaknesses which may, if not checked or corrected, weaken the loan or inadequately protect the Company’s credit position at some future date.

Substandard - A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful - Loans classified Doubtful have all the weaknesses inherent in loans classified Substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable.

8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2. Loans and Allowance for Loan Losses (continued)

The following table presents the loan portfolio by credit quality indicator (risk grade) as of June 30, 2012 and December 31, 2011. Those loans with a risk grade above special mention have been combined in the pass column for presentation purposes.

June 30, 2012 (In thousands)	Pass		Special Mention		Sub- Standard		Doubtful		Total Loans
Commercial	$	2,777	$	—	$	—	$	—	$	2,777
Real Estate
Construction and land development		3,613		1,893		3,186		—		8,692
Residential, 1-4 families		27,855		—		220		—		28,075
Residential, 5 or more families		3,746		—		—		—		3,746
Farmland		1,275		—		—		—		1,275
Nonfarm, nonresidential		62,548		1,853		6,280		—		70,681
Agriculture		39		—		—		—		39
Consumer		937		—		—		—		937
Other		4,012		—		—		—		4,012
Total loans	$	106,802	$	3,746	$	9,686	$	—	$	120,234

December 31, 2011 (In thousands)	Pass		Special Mention		Sub- Standard		Doubtful		Total Loans
Commercial	$	3,161	$	—	$	2,712	$	—	$	5,873
Real Estate
Construction and land development		5,671		—		3,197		—		8,868
Residential, 1-4 families		25,730		—		838		—		26,568
Residential, 5 or more families		3,890		827		—		—		4,717
Farmland		1,306		—		—		—		1,306
Nonfarm, nonresidential		64,401		2,436		9,042		—		75,879
Agriculture		9		—		—		—		9
Consumer		2,487		—		—		—		2,487
Other		4,765		—		—		—		4,765
Total loans	$	111,420	$	3,263	$	15,789	$	—	$	130,472

A loan’s risk grade is assigned at the inception of the loan and is based on the financial strength of the borrower and the type of collateral. Loan risk grades are subject to reassessment at various times throughout the year as part of the Company’s ongoing loan review process. Loans with an assigned risk grade of substandard or below and an outstanding amount of $500 thousand or more are reassessed on a quarterly basis. During this reassessment process individual reserves may be identified and placed against certain loans that are considered impaired.

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Generally, loans are placed on nonaccrual status if principal or interest payments become 90 days past due or when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provision. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due.

9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2. Loans and Allowance for Loan Losses (continued)

The following table represents an age analysis of past due loans and nonaccrual loans, segregated by class of loans, as of June 30, 2012 and December 31, 2011.

	Accruing Loans
June 30, 2012 (In thousands)	30-89 Days Past Due		90 Days or More Past Due		Total Accruing Loans Past Due		Nonaccrual Loans		Current Loans		Total Loans
Commercial	$	7	$	—	$	7	$	—	$	2,770	$	2,777
Real Estate
Construction and land development		—		—		—		3,186		5,506		8,692
Residential, 1-4 families		75		680		755		139		27,181		28,075
Residential, 5 or more families		—		—		—		—		3,746		3,746
Farmland		—		—		—		—		1,275		1,275
Nonfarm, nonresidential		2,070		—		2,070		5,604		63,007		70,681
Agriculture		—		—		—		—		39		39
Consumer		6		—		6		—		931		937
Other		—		—		—		—		4,012		4,012
Total loans	$	2,158	$	680	$	2,838	$	8,929	$	108,467	$	120,234

	Accruing Loans
December 31, 2011 (In thousands)	30-89 Days Past Due		90 Days or More Past Due		Total Accruing Loans Past Due		Nonaccrual Loans		Current Loans		Total Loans
Commercial	$	1	$	2,700	$	2,701	$	—	$	3,172	$	5,873
Real Estate
Construction and land development		—		—		—		3,197		5,671		8,868
Residential, 1-4 families		—		—		—		612		25,956		26,568
Residential, 5 or more families		—		—		—		—		4,717		4,717
Farmland		—		—		—		—		1,306		1,306
Nonfarm, nonresidential		107		—		107		5,489		70,283		75,879
Agriculture		—		—		—		—		9		9
Consumer		3		—		3		—		2,484		2,487
Other		—		—		—		—		4,765		4,765
Total loans	$	111	$	2,700	$	2,811	$	9,298	$	118,363	$	130,472

10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2. Loans and Allowance for Loan Losses (continued)

The following table details impaired loan data as of June 30, 2012 and December 31, 2011:

June 30, 2012 (In thousands)	Impaired Balance		Related Allowance		Average Recorded Investment		Interest Income Recorded		Interest Income Collected
With No Related Allowance Recorded
Commercial	$	—	$	—	$	—	$	—	$	—
Real Estate
Construction and land development		2,479		—		2,489		49		48
Residential, 1-4 families		139		—		137		2		2
Nonfarm, nonresidential		2,602		—		3,421		12		19
		5,220		—		6,047		63		69
With an Allowance Recorded
Commercial		—		—		—		—		—
Real Estate
Construction and land development		3,186		1,295		3,221		—		—
Residential, 1-4 families		—		—		—		—		—
Nonfarm, nonresidential		4,736		550		4,738		34		33
		7,922		1,845		7,959		34		33
Total
Commercial		—		—		—		—		—
Real Estate
Construction and land development		5,665		1,295		5,710		49		48
Residential, 1-4 families		139		—		137		2		2
Nonfarm, nonresidential		7,338		550		8,159		46		52
	$	13,142	$	1,845	$	14,006	$	97	$	102

December 31, 2011 (In thousands)	Impaired Balance		Related Allowance		Average Recorded Investment		Interest Income Recorded			Interest Income Collected
With No Related Allowance Recorded
Commercial	$	—	$	—	$	—	$	—		$	—
Real Estate
Construction and land development		2,504		—		2,529		87			108
Nonfarm, nonresidential		2,500		—		2,500		(32	)		—
		5,004		—		5,029		55			108
With an Allowance Recorded
Commercial		12		12		12		—			—
Real Estate
Construction and land development		3,197		584		3,902		—			—
Residential, 1-4 families		612		73		791		13			16
Nonfarm, nonresidential		4,961		589		5,233		90			149
		8,782		1,258		9,938		103			165
Total
Commercial		12		12		12		—			—
Real Estate
Construction and land development		5,701		584		6,431		87			108
Residential, 1-4 families		612		73		791		13			16
Nonfarm, nonresidential		7,461		589		7,733		58			149
	$	13,786	$	1,258	$	14,967	$	158$			273

The Company is generally not committed to advance additional funds in connection with impaired loans.

11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2. Loans and Allowance for Loan Losses (continued)

As a result of adopting the amendments in Accounting Standards Update (“ASU”) 2011-02, the Bank reassessed all loan restructurings that occurred on or after the beginning of the fiscal year of adoption, January 1, 2011, to determine whether they are considered troubled debt restructurings (“TDRs”) under the amended guidance. The determination is based on whether the restructuring constitutes a concession and whether the debtor is experiencing financial difficulty as both events must be present. The Bank identified as TDRs certain loans for which the allowance for loan losses had previously been measured under a general allowance methodology. Upon identifying those loans as TDRs, the Bank identified them as impaired under the guidance in Accounting Standards Codification (“ASC”) 310-10-35. The amendments in ASU 2011-02 require prospective application of the impairment measurement guidance in ASC 310-10-35 for those loans newly identified as impaired. At June 30, 2012, the recorded investment in loans for which the allowance was previously measured under a general allowance methodology and are now impaired under ASC 310-10-35 was $6.6 million, and the allowance for loan losses associated with those loans, on the basis of a current evaluation of loss exposure was approximately $1.3 million.

The following is a schedule of loans that are considered TDRs at June 30, 2012.

	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
(In thousands)
Real Estate		3	$	6,570	$	6,570
Total		3	$	6,570	$	6,570

During the three months ended June 30, 2012, the Bank modified no loans that were considered to be TDRs. We extended the maturity date term for none of these loans, lowered the interest rate for none of these loans, and entered into forbearance agreements on none of these loans.

The following is a schedule of loans that had been previously restructured and have subsequently defaulted at June 30, 2012.

	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
(In thousands)
Real Estate		—	$	—	$	—
Total		—	$	—	$	—

During the three months ended June 30, 2012, no loan that had previously been restructured, was in default, none of which went into default in the quarter. The Bank considers a loan in default when it is 90 days or more past due or on nonaccrual status.

In the determination of the allowance for loan losses, management considers troubled debt restructurings and subsequent defaults in these restructurings. All troubled debt restructurings are considered impaired loans. Loss exposure related to these loans are determined by management quarterly.

At June 30, 2012, there were $6.6 million in loans that are classified as TDRs compared to $6.6 million at December 31, 2011.

The Company generally does not make commitments to lend additional funds to customers classified as trouble debt restructures.

12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2. Loans and Allowance for Loan Losses (continued)

The following tables detail activity in the allowance for loan losses, segregated by class of loan, for the six month periods ended June 30, 2012 and June 30, 2011. Allocation portion of the allowance to one category of loans does not preclude its activity to absorb losses in other loan categories and periodically may result in reallocation within the provision categories.

June 30, 2012 (In thousands)	Beginning Balance		Charge- Offs		Recoveries		Provision		Ending Balance
Commercial	$	35	$	2,694	$	9	$	2,682	$	32
Real Estate
Construction and land development		1,243		—		10		202		1,455
Residential, 1-4 families		155		97		23		24		105
Residential, 5 or more families		—		—		—		—		—
Farmland		—		—		—		—		—
Nonfarm, nonresidential		1,255		1,119		8		1,080		1,224
Agriculture		3		—		—		—		3
Consumer		50		—		—		—		50
Other		126		—		3		—		129
	$	2,867	$	3,910	$	53	$	3,988	$	2,998

June 30, 2011 (In thousands)	Beginning Balance		Charge- Offs		Recoveries		Provision			Ending Balance
Commercial	$	79	$	50	$	1	$	47		$	77
Real Estate
Construction and land development		1,729		123		—		349			1,955
Residential, 1-4 families		385		295		2		103			195
Residential, 5 or more families		—		—		—		—			—
Farmland		—		—		—		—			—
Nonfarm, nonresidential		710		—		2		(60	)		652
Agriculture		3		—		—		—			3
Consumer		47		—		3		—			50
Other		120		—		2		—			122
	$	3,073	$	468	$	10	$	439		$	3,054

13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2. Loans and Allowance for Loan Losses (continued)

The following table indicates the allocation of the allowance for loan losses based on loans evaluated specifically for impairment and loans evaluated collectively for the periods ended June 30, 2012 and December 31, 2011.

June 30, 2012 (In thousands)	Individually Evaluate for Impairment			Ending Balance Collectively Evaluated Impairment			Total
Commercial	$	—		$	32		$	32
Real Estate
Construction and land development		1,295			160			1,455
Residential, 1-4 families		—			105			105
Residential, 5 or more families		—			—			—
Farmland		—			—			—
Nonfarm, nonresidential		550			674			1,224
Agriculture		—			3			3
Consumer		—			50			50
Other		—			129			129
Ending balance of allowance for loan losses	$	1,845		$	1,153		$	2,998
Ending balance of allowance to total allowance		61.54	%		38.46	%		100	%
December 31, 2011 (In thousands)
Commercial	$	12		$	23		$	35
Real Estate
Construction and land development		584			659			1,243
Residential, 1-4 families		73			82			155
Residential, 5 or more families		—			—			—
Farmland		—			—			—
Nonfarm, nonresidential		589			666			1,255
Agriculture		—			3			3
Consumer		—			50			50
Other		—			126			126
Ending Balance	$	1,258		$	1,609		$	2,867
Ending balance of allowance to total allowance		43.88	%		56.12	%		100	%

Note 3. Commitments and Contingencies

The Company’s exposure to credit loss in the event of nonperformance by the other party for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as for on-balance sheet instruments. A summary of the Company’s commitments at June 30, 2012 and December 31, 2011 are as follows:

(In thousands)	June 30, 2012		December 31, 2011
Commitments to extend credit	$	13,633	$	11,612
Standby letters of credit		397		300
Total	$	14,030	$	11,912

14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 4. Employee Benefit Plan

The Bank participates in the Pentegra Defined Benefit Plan for Financial Institutions (“Pentegra Plan”). The Pentegra Plan is a tax-qualified defined-benefit pension plan. The Pentegra Plan’s Employer Identification Number is 13-5645888 and the Plan Number is 333. The Pentegra Plan operates as a multi-employer plan for accounting purposes and is a multiple-employer plan under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. There are no collective bargaining agreements in place that require contributions to the Pentegra Plan.

The Pentegra Plan is a single plan under Internal Revenue Code Section 413 (C) and, as a result, all of the assets stand behind all of the liabilities. Accordingly, under the Pentegra Plan contributions made by a participating employer may be used to provide benefits to participants of other participating employers.

As of June 30, 2012, the required employer contribution of $258 thousand for the plan year ending June 30, 2012, has been made.

Note 5. Fair Value

The estimated fair values of the Company’s financial instruments are as follows:

(In thousands)	June 30, 2012				December 31, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Cash and due from banks	$	47,166	$	47,166	$	4,255	$	4,255
Interest-bearing deposits with banks		164		164		14,758		14,758
Federal funds sold		—		—		33,700		33,700
Securities, available for sale		82,552		82,552		57,105		57,105
Securities, held to maturity		12,824		13,500		12,950		13,662
Restricted equity securities		615		615		592		592
Total loans		119,924		122,683		130,158		132,837
Accrued interest receivable		827		827		824		824
Bank Owned Life Insurance		6,322		6,322		5,437		5,437
Financial liabilities
Deposits		246,437		248,768		232,411		234,816
Accrued interest payable		89		89		88		88
Off-balance sheet assets (liabilities)
Commitments to extend credit and standby letter of credit		—		14,030		—		11,912

15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 5. Fair Value (continued)

Generally accepted accounting principles of the United States (“GAAP”) provides a framework for measuring and disclosing fair value of assets and liabilities recognized in the balance sheet, whether the measurements are made on a recurring basis (for example, available for sale investment securities) or on a nonrecurring basis (for example, impaired loans).

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company utilizes fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Securities available for sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as loans held for sale, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

Fair Value Hierarchy

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine the fair value. These levels are:

Level 1 -	Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2 -	Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3 -	Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques.

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value:

Investment Securities Available for Sale

Investment securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange such as the New York Stock Exchange, Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.

16

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 5. Fair Value (continued)

Loans

The Company does not record loans at fair value on a recurring basis, however, from time to time, a loan is considered impaired and an allowance for loan loss is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan are considered impaired. Once a loan is identified as individually impaired, management measures impairment. The fair value of impaired loans is estimated using one of several methods, including the collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring a specific allowance represents loans for which the fair value of expected repayments or collateral exceed the recorded investment in such loans. Impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observerable market price or a current appraised value, the Company records the loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the loan as nonrecurring Level 3.

Foreclosed Assets

Foreclosed assets are adjusted for fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised value of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the foreclosed asset as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the foreclosed asset at nonrecurring Level 3.

Assets and Liabilities Recorded as Fair Value on a Recurring Basis

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis.

(In thousands)
June 30, 2012	Total		Level 1		Level 2		Level 3
Government sponsored enterprises	$	5,947	$	—	$	5,947	$	—
State and municipal securities		7,275		584		6,691		—
Mortgage-backed securities		67,228		—		67,228		—
Other securities		2,102		—		2,102		—
Total assets at fair value	$	82,552	$	584	$	81,968	$	—
(In thousands)
December 31, 2011	Total		Level 1		Level 2		Level 3
Government sponsored enterprises	$	1,952	$	—	$	1,952	$	—
State and municipal securities		5,493		355		5,138		—
Mortgage-backed securities		46,928		—		46,928		—
Other securities		2,732		—		2,732		—
Total assets at fair value	$	57,105	$	355	$	56,750	$	—

There were no liabilities measured at fair value on a recurring basis at June 30, 2012 and December 31, 2011.

17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 5. Fair Value (continued)

Assets and Liabilities Recorded as Fair Value on a Nonrecurring Basis

The Company may be required from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis are included in the table below:

(In thousands)
June 30, 2012	Total		Level 1		Level 2		Level 3
Loans:
Commercial	$	—	$	—	$	—	$	—
Real Estate
Construction and land development		1,891		—		1,891		—
Residential, 1-4 families		—		—		—		—
Nonfarm, nonresidential		4,186		—		4,186		—
Impaired Loans		6,077		—		6,077		—
Foreclosed assets		3,517		—		3,517		—
Total assets at fair value	$	9,594	$	—	$	9,594	$	—
(In thousands)
December 31, 2011	Total		Level 1		Level 2		Level 3
Loans:
Real Estate
Construction and land development	$	2,613	$	—	$	2,613	$	—
Residential, 1-4 families		539		—		539		—
Nonfarm, nonresidential		4,372		—		4,372		—
Impaired Loans		7,524		—		7,524		—
Foreclosed assets		3,418		—		3,418		—
Total assets at fair value	$	10,942	$	—	$	10,942	$	—

There were no liabilities measured at fair value on a nonrecurring basis at June 30, 2012 and December 31, 2011.

18

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 6. Securities

Debt and equity securities have been classified in the consolidated balance sheets according to management’s intent. The carrying amount of securities and their approximate fair values follow:

June 30, 2012 (In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Available for sale
Government sponsored enterprises	$	5,943	$	27	$	23	$	5,947
State and municipal securities		6,891		384		—		7,275
Mortgage-backed securities		66,265		1,068		105		67,228
Other securities		2,219		—		117		2,102
	$	81,318	$	1,479	$	245	$	82,552
Held to maturity
State and municipal securities	$	12,801	$	676	$	—	$	13,477
Mortgage-backed securities		23		—		—		23
	$	12,824	$	676	$	—	$	13,500
December 31, 2011 (In thousands)
Available for sale
Government sponsored enterprises	$	1,933	$	21	$	2	$	1,952
State and municipal securities		5,226		267		—		5,493
Mortgage-backed securities		46,293		755		120		46,928
Other securities		2,957		18		243		2,732
	$	56,409	$	1,061	$	365	$	57,105
Held to maturity
State and municipal securities	$	12,925	$	712	$	—	$	13,637
Mortgage-backed securities		25		—		—		25
	$	12,950	$	712	$	—	$	13,662

Restricted equity securities, carried at cost, consist of investments in stock of the Federal Home Loan Bank of Atlanta (“FHLB”) and The Federal Reserve Bank of Richmond (“Federal Reserve”), which are upstream correspondents of the Bank. The FHLB requires financial institutions to make equity investments in the FHLB in order to borrow from it. The Bank is required to hold that stock so long as it borrows from the FHLB. The Federal Reserve requires banks to purchase stock as a condition of membership in the Federal Reserve system.

Investment securities with amortized cost of approximately $5.6 million and $6.3 million at June 30, 2012 and December 31, 2011, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.

Gross realized gains and losses for the three-month and six-month periods ended June 30, 2012 and 2011:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
(In thousands)
Realized gains, available for sale securities	$	10	$	43	$	26	$	43
Realized gains, held to maturity securities		—		—		—		—
	$	10	$	43	$	26	$	43

19

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 6. Securities (continued)

The scheduled maturities of debt securities available for sale and held to maturity at June 30, 2012 were as follows:

	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
(In thousands)
Due in one year or less	$	415	$	419	$	1,235	$	1,255
Due after one year through five years		1,719		1,704		4,155		4,292
Due after five years through ten years		5,361		5,629		2,827		3,037
Due after ten years		73,823		74,800		4,607		4,916
	$	81,318	$	82,552	$	12,824	$	13,500

For mortgage-backed securities, the Company reports maturities based on anticipated lives. Actual results may differ due to interest rate fluctuations.

The following tables show the unrealized losses and related fair values in the Company’s held to maturity and available for sale investment securities portfolios. This information is aggregated by investment category and by the length of time that individual securities have been in a continuous unrealized loss position at June 30, 2012 and December 31, 2011, respectively.

	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
June 30, 2012 (In thousands)	Value		Losses		Value		Losses		Value		Losses
Government sponsored enterprises	$	1,977	$	23	$	—	$	—	$	1,977	$	23
State and municipal securities		—		—		—		—		—		—
Mortgage-backed securities		9,943		68		3,052		36		12,995		104
Other Securities		—		—		1,392		118		1,392		118
Total temporarily impaired securities	$	11,920	$	91	$	4,444	$	154	$	16,364	$	245
	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2011 (In thousands)	Value		Losses		Value		Losses		Value		Losses
Government sponsored enterprises	$	948	$	2	$	—	$	—	$	948	$	2
State and municipal securities		275		—		—		—		275		—
Mortgage-backed securities		9,936		47		4,652		73		14,588		120
Other Securities		866		151		908		92		1,774		243
Total temporarily impaired securities	$	12,025	$	200	$	5,560	$	165	$	17,585	$	365

Management considers the nature of the investment, the underlying causes of the decline in market or fair value, the severity and duration of the decline and other evidence, on a security-by-security basis, in determining if the decline in fair value is other than temporary.

At June 30, 2012, the Company had two government-sponsored securities with an aggregate unrealized loss of approximately $23 thousand, 16 mortgaged-backed securities with an aggregate unrealized loss of approximately $104 thousand and four other securities with an aggregate unrealized loss of approximately $118 thousand. Management does not believe that gross unrealized losses, which totals 1.5% of the amortized costs of the related investment securities, represent an other-than-temporary impairment. The Company has both the ability and the intent to hold all of these securities for a period of time necessary to recover the amortized cost.

At December 31, 2011, the Company had one government-sponsored securities with an aggregate unrealized loss of approximately $2 thousand, one state and municipal securities with no aggregate unrealized loss, 27 mortgaged-backed securities with an aggregate unrealized loss of approximately $120 thousand and five other securities with an aggregate unrealized loss of approximately $243 thousand. Management does not believe that gross unrealized losses, which totals 2.1% of the amortized costs of the related investment securities, represent an other-than-temporary impairment.

20

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 7. Recent Accounting Pronouncements

There were no additional accounting standards updates applicable to the company issued by the Financial Accounting Standards Board (“FASB”) during the second quarter ending June 30, 2012. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Note 8. Reclassifications

Certain reclassifications have been made to the prior years’ financial statements to place them on a comparable basis with the current year. Net income and stockholders’ equity previously reported were not affected by these reclassifications.

Note 9. Supplemental Executive Retirement Plan (“SERP”)

Due to the outcome of the 2012 Annual Meeting, the SERP of a member of executive management experienced accelerated vesting and became 100% vested. As a result, the net present value of future payments net of deferred tax must be recorded in the period full vesting occurs, creating a net expense of $219,426 being recognized in the 2^nd quarter of 2012.

21

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

Organization

Cardinal Bankshares Corporation (the “Company” and “Cardinal Bankshares”), a Virginia corporation, is a bank holding company headquartered in Floyd, Virginia. The Company serves the marketplace primarily through its wholly owned banking subsidiary, Bank of Floyd (the “Bank”), a Virginia chartered, Federal Reserve member commercial bank. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (the “FDIC”) to the extent provided by law. Bank of Floyd is supervised and examined by the Federal Reserve and the Bureau of Financial Institutions of the State Corporation Commission of the Commonwealth of Virginia (the “SCC”). At June 30, 2012, the Bank operated seven branch facilities in the counties of Floyd, Montgomery, Roanoke, Pulaski and Carroll. The main office is in Floyd with a limited service office located in Willis. The Roanoke office is in the Cave Spring area of Roanoke County. The Salem office is located on West Main Street in Salem, Virginia. The Hillsville office is located in Carroll County. The Christiansburg office serves Montgomery County. The Bank’s Pulaski County office is located in the Fairlawn community.

Services

Through Bank of Floyd’s network of banking facilities, Cardinal Bankshares provides a wide range of commercial and retail banking services to individuals, small to medium-sized businesses, institutions and governments located in Virginia. The Company conducts substantially all of the business operations of a typical independent commercial bank, including the acceptance of checking and savings deposits, and the making of commercial, real estate, personal, home improvement, automobile and other installment loans. The Company also offers other related services, such as traveler’s checks, safe deposit boxes, depositor transfer, customer note payment, collection, notary public, escrow, drive-in and ATM facilities, and other customary banking services. Cardinal Bankshares does not offer trust services.

Overview

The management of Cardinal Bankshares, in conjunction with its Board of Directors, continues to focus on shareholder value while maintaining a safe and sound institution for its customers. Several aspects of Cardinal’s current financial condition demonstrate this core value.

Banks are evaluated in light of three major regulatory capital ratios. Cardinal maintains these ratios at levels well in excess of the minimum standards required for both the holding company and bank. While capital ratios are an excellent indicator of a bank’s financial strength they are also an indicator of a bank’s ability to withstand financial turmoil such as the recent economic recession.

Cardinal’s management recognized the increased level of risk inherent in lending due to the recession we have experienced. Accordingly, Cardinal has prudently increased its allowance for loan losses as necessary. This action has wisely prevented placing Cardinal in a vulnerable position. Cardinal’s capital position combined with its loan loss reserve allows the Company to address any actual or potential loan losses while continuing to maintain a solid financial position with which to serve its customers.

Cardinal maintains abundant liquidity in order to maintain adequate funding for customer withdraws, loans, investments and daily clearing of transactions. Although the amount of liquidity has some negative impact on earnings, the highly liquid position allows Cardinal to have great flexibility to react to economic conditions.

Although Cardinal incurred a loss in the 2^nd quarter of 2012, Cardinal continues to pay a regular semi-annual dividend and maintain strong capital ratios, well in excess of required minimums.

The following discussion provides information about the major components of the financial condition, results of operations, asset quality, liquidity, and capital resources of Cardinal Bankshares. The discussion and analysis should be read in conjunction with the Consolidated Financial Statements.

22

Critical Accounting Policy

Management believes the policy with respect to the methodology for the determination of the allowance for loan losses involve a high degree of complexity. Management must make difficult and subjective judgments, assumptions or estimates that could cause reported results to differ materially. This critical policy and its application are periodically reviewed with the Audit Committee and Board of Directors.

FINANCIAL CONDITION

Total assets as of June 30, 2012 were $277.9 million, an increase of 4.4% or $11.7 million from year-end 2011. Total loans decreased 7.9% or $10.2 million during the first six months of this year to $119.9 million. Loan demand is soft due to the slow economic recovery, however, the Company has added a Chief Lending Officer and Chief Credit Officer in an effort to increase loan production and accommodate all regulatory requirements. As we begin to see indications of an increase in loan demand we will be ready, willing and able, thanks to our strong capital position and liquidity, to meet that demand.

The investment securities portfolio reflected an increase of 35.9% or $25.3 million during the first six months of the year as a result of increasing deposits and soft loan demand. During the 2^nd quarter, Federal Funds sold was decreased to zero and Interest-bearing deposits were decreased by 99.0% as a result of consolidating excess cash deposits at the Federal Reserve to increase the overnight rate paid.

As of June 30, 2012, total deposits were $246.4 million an increase of 6.0% or $14.0 million compared to year-end 2011. Non-interest-bearing core deposits decreased to $31.7 million as compared to $32.1 million at year-end 2011. Interest-bearing deposits increased 7.2% or $14.5 million to $214.8 million. Deposits greater than $100 thousand amounted to $66.0 million at June 30, 2012 as compared to $58.7 million at year-end 2011. While we have reduced interest rates on deposits, due to stock market volatility and uncertainty, customers continue to seek the security of deposits with our safe and sound bank even at the lower rates we are paying.

Stockholders’ equity was $30.3 million as of June 30, 2012 compared to $33.0 million as of December 31, 2011. Net loss of $3.0 million for the period combined with an increase in accumulated other comprehensive income of $356 thousand less dividends paid of $154 thousand accounted for the decrease in stockholders’ equity.

RESULTS OF OPERATIONS

Net loss for the three months ended June 30, 2012 was $3.3 million compared to $321 thousand profit for the three months ended June 30, 2011. Net loss for the six months ended June 30, 2012 was $3.0 million compared to $644 thousand profit for the six months ended June 30, 2011. The decrease is due principally to write-offs and provisions for weaker credits and one-time charges associated with the Company’s contested proxy. Diluted earnings (loss) per share was $(2.13) for the three months ended June 30, 2012. Diluted earnings per share for the same period a year earlier was $.21. Diluted earnings (loss) per share was $(1.94) for the six months ended June 30, 2012. Diluted earnings per share for the same period a year earlier was $.42. The provision for loan losses was $4.0 million during the three months ended June 30, 2012, representing an increase of $3.7 million over the same period for the previous year. The provision for loan losses was $4.0 million during the six months ended June 30, 2012, representing an increase of $3.5 million over the same period for the previous year. Interest expense for the three months ended June 30, 2012, was $795 thousand, an increase of $47 thousand or 6.3% compared to $748 thousand for the three months ended June 30, 2011. Interest expense for the six months ended June 30, 2012, was $1.6 million, an increase of $47 thousand or 3.1% compared to $1.5 million for the six months ended June 30, 2011. Interest expense increased due to increasing deposits even though interest rates paid decreased. Non-interest income for the three months ended June 30, 2012 decreased $61 thousand due to decreased service charges on deposit accounts, decreased net realized gains on sales of securities and decreased other operating expense. Non-interest income for the six months ended June 30, 2012 decreased $43 thousand due to decreased service charges on deposit accounts, decreased net realized gains on sales of securities and decreased other operating expense. Non-interest expense for the three months ended June 30, 2012 increased $1.3 million due to increases in salaries and employee benefits related to former executive expenses and the supplemental executive retirement plan expense recorded for the current CEO & President, increases in reserves for other real estate owned and increases in other operating expenses related primarily to legal expenses incurred as a result of the contested proxy relating to the 2012 Annual Meeting and the settlement of an employment related lawsuit. Non-interest expense for the six months ended June 30, 2012 increased approximately $1.2 million due to the aforementioned 2^nd quarter expenses.

23

Total interest income for the three months ended June 30, 2012 decreased $293 thousand to $2.2 million, a decrease of 11.6% over the same prior year period. Total interest income for the six months ended June 30, 2012 decreased $642 thousand to $4.6 million, a decrease of 12.3% over the same prior year period. This resulted from decreased income on loans and fees on loans as the loan portfolio decreased due to continued poor economic conditions.

Due to decreased earnings for the three months ended June 30, 2012, an income tax benefit of $1.8 million was incurred versus an income tax expense of $15 thousand for the same period in the previous year. Due to decreased earnings for the six months ended June 30, 2012, an income tax benefit of $1.8 million was incurred versus an income tax expense of $89 thousand for the same period in the previous year.

ASSET QUALITY

The allowance for loan losses represents management’s estimate of an amount adequate to absorb potential future losses inherent in the loan portfolio. In assessing the adequacy of the allowance, management relies predominately on its ongoing review of the lending process and the risk characteristics of the portfolio in the aggregate. Among other factors, management considers the Company’s loan loss experience, the amount of past-due loans, current and anticipated economic conditions, and the estimated current values of collateral securing loans in assessing the level of the allowance for loan losses. For the three months ended June 30, 2012, the provision for loan losses was $4.0 million as compared to $253 thousand provision for the same period in 2011. For the six months ended June 30, 2012, the provision for loan losses was $4.0 million as compared to $439 thousand provision for the same period in 2011. Based upon management’s periodic reviews of the loan portfolio using the above-mentioned factors, the current year increase in the provision for loan losses was believed to be appropriate. Management believes the provision recorded in 2012 maintains the allowance at a level adequate to cover probable losses.

The allowance for loan losses totaled $3.0 million at June 30, 2012. The allowance for loan losses to period end loans was 2.50% at June 30, 2012 compared to 2.20% and 2.15% at December 31, 2011 and June 30, 2011, respectively. The Company recovered balances previously charged off on loans in the amount of $53 thousand during the first six months of 2012. This compares with recoveries for the six months ended June 30, 2011 of $10 thousand. The Company charge-offs during the first six months of 2012 was $3.9 million as compared to $468 thousand in charge-offs for the same six months of 2011.

The allowance for loan losses represents management’s estimate of an amount adequate to provide for probable losses inherent in the loan portfolio. The adequacy of the loan loss reserve and the related provision are based upon management’s evaluation of the risk characteristics of the loan portfolio under current economic conditions with consideration to such factors as financial condition of the borrowers, collateral values, growth and composition of the loan portfolio, the relationship of the allowance to outstanding loans and delinquency trends. In addition, management took into account not only the current state of the economy, but information from various sources, including government economic data, Federal Reserve economic reports, the local economy including local real estate activity and safety and soundness discussions with primary regulators, which not only expected the current economic downturn to persist, but also expected continued significant losses in commercial real estate. Geographic location was taken into account regarding the depth of economic decline, valuation for certain loans and corresponding collateral. Management also collected additional financial data from certain customers to ascertain current financial strength and cash flow Finally, management maintained the historical overall conservative approach of the Company in calculating additions to the allowance for loan losses. While management uses all available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions. Various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

The Board and executive management recognize the increased inherent risks associated with lending during these difficult economic times; In order to mitigate these risks and better evaluate and serve our current and potential customers, a chief credit officer and a chief lending officer have been added to the executive management team along with the adoption of a more conservative philosophy of risk evaluation.

Notwithstanding the slow economic recovery and its negative effects on bank asset quality generally, our asset quality as of June 30, 2012 has improved as compared with year-end of 2011. Nonperforming assets, which consist of nonaccrual loans, loans 90 days or more past due and other real estate owned, were $13.1 million as of June 30, 2012 compared to $15.4 million as of December 31, 2011. The decrease in nonperforming assets occurred as a result of write-offs and increased reserves for both loans and other real estate owned. Management is taking

24

aggressive actions to mitigate any further material losses related to nonperforming assets. As of June 30, 2012, the Company’s impaired loans with a valuation allowance amounted to $7.9 million, compared to $8.7 million as December 31, 2011. The valuation allowance related to the impaired loans was $1.8 million at June 30, 2012 and $1.3 million at December 31, 2011.

LIQUIDITY

In determining the Company’s liquidity requirements, both sides of the balance sheet are managed to ensure that adequate funding sources are available to support loan growth, deposit withdrawals or any unanticipated need for funds.

Securities available for sale that mature within one year, or securities that have a weighted average life of one year or less are sources of liquidity. Anticipated mortgage-backed securities pay downs and maturing loans also generate cashflows to meet liquidity requirements. Wholesale funding sources are also used to supply liquidity such as federal funds purchased and large denomination certificates of deposit. The Company considers its liquidity to be sufficient to meet its anticipated needs.

CAPITAL RESOURCES

Cardinal Bankshares and Bank of Floyd believes its capital positions are strong and provide the necessary assurance required to support anticipated asset growth when the recovery occurs and to absorb potential losses.

The Cardinal Bankshares Tier I capital position was $27.2 million at June 30, 2012, or 19.41% of risk-weighted assets. Total risk-based capital was $29.0 million or 20.67% of risk-weighted assets. The Bank of Floyd Tier I capital position was $21.1 million at June 30, 2012, or 15.65% of risk-weighted assets. Total risk-based capital was $22.8 million or 16.90% of risk-weighted assets.

Tier I capital consists primarily of common stockholders’ equity, while total risk-based capital includes the allowance for loan losses. Risk weighted assets are determined by assigning various levels of risk to different categories of assets and off-balance sheet activities. To be well capitalized under current risk-based capital standards, all banks are required to have Tier I capital of at least 4% and total capital of 8%. Based on these standards, both Cardinal Bankshares and Bank of Floyd are categorized as well capitalized at June 30, 2012.

In addition to the risk-based capital guidelines, banking regulatory agencies have adopted leverage capital ratio requirements. The leverage ratio – or core capital to assets ratio – works in tandem with the risk-capital guidelines. The minimum leverage ratios range from three to five percent. At June 30, 2012, Cardinal Bankshares and Bank of Floyd leverage capital ratios were 10.09% and 7.91%, respectively.

During the first six months of 2012, Cardinal Bankshares and Bank of Floyd have seen an increase in deposits and a decrease in loans and provision for loan losses, while maintaining their history of being well capitalized and maintaining strong liquidity far exceeding minimum standards.

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company may also make written forward-looking statements in periodic reports to the Securities and Exchange Commission, proxy statements, offering circulars and prospectuses, press releases and other written materials and oral statements made by Cardinal Bankshares’ officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements. These statements are based on beliefs and assumptions of the Company’s management, and on information currently available to management. Forward-looking statements include statements preceded by, followed by or that include the words “believes,” “expects,” “estimates,” “anticipates,” “plans,” or similar expressions. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events.

Forward-looking statements involve inherent risks and uncertainties. Management cautions the readers that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, but are not limited to, the following: competitive pressures among depository and other financial institutions may increase significantly; changes in the interest rate environment may reduce margins; general economic or business conditions may lead to a deterioration in credit quality or a reduced demand for credit; legislative or regulatory changes, including changes in accounting standards, may adversely

25

affect the business in which Cardinal Bankshares is engaged; changes may occur in the securities markets; and competitors of the Company may have greater financial resources and develop products that enable such competitors to compete more successfully than Cardinal Bankshares.

Other factors that may cause actual results to differ from the forward-looking statements include the following: the timely development of competitive new products and services by the Company and the acceptance of such products and services by customers; changes in consumer spending and savings habits; the effects of competitors’ pricing policies; the Company’s success in managing the costs associated with the expansion of existing distribution channels and developing new ones, and in realizing increased revenues from such distribution channels, including cross-selling initiatives; and mergers and acquisitions and their integration into the Company and management’s ability to manage these other risks.

Management of Cardinal Bankshares believes these forward-looking statements are reasonable; however undue reliance should not be placed on such forward-looking statements, which are based on current expectations.

Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The future results and stockholder values of Cardinal Bankshares may differ materially from those expressed in forward-looking statements contained in this report. Many of the factors that will determine these results and values are beyond the Company’s ability to control or predict.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Under the filer category of “smaller reporting company”, as defined in Rule 12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”), the Company is not required to provide information requested by Part I, Item  3 of its Form 10-Q.

Item 4. CONTROLS AND PROCEDURES

As of the end of the period to which this report relates, the Company has carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures in accordance with Rule 13a-15(b) of the Exchange Act.

The design of any system of controls is based in part upon certain assumptions about the likelihood of future events. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, there can be no assurance that any design will succeed in achieving its stated goal under every potential condition, regardless of how remote. While we have evaluated the operation of our disclosure controls and procedures and found them effective, there can be no assurance that they will succeed in every instance to achieve their objective.

Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in enabling us to record, process, summarize and report effectively and in a timely manner the information required to be disclosed in reports we file under the Exchange Act. There have not been any changes in our internal control over financial reporting that occurred during the last quarter that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

26

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 1A. Risk Factors

Under the category of “smaller reporting company”, as defined in Rule 12b-2 of the Exchange Act, the Company is not required to provide information requested by Part II, Item 1A of its Form 10-Q.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

None

Item 6. Exhibits

Number	Description of Exhibit
3.(i)	Articles of Incorporation – incorporated by reference from the Registrant’s Registration Statement on Form 8-A filed on August 16, 1996.
3.(ii)	Bylaws of Registrant – incorporated by reference from the Registrant’s Annual Report filed on March 16, 2012.
10.1	Supplemental Executive Retirement Agreement between Registrant and Michael D. Larrowe dated May 15, 2012 (filed herewith).
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C Section 1359, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1	Certification of Chief Executive officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
101	The following materials from the Company’s 10-Q Report for the quarterly period ended June 30, 2012, formatted in XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Changes in Shareholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) the Notes to the Condensed Consolidated Financial Statements.*

* Furnished, not filed

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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 thereunto duly authorized.

CARDINAL BANKSHARES CORPORATION

/s/ Michael D. Larrowe

Michael D. Larrowe

President & Chief Executive Officer

/s/ J. Alan Dickerson

J. Alan Dickerson

Chief Financial Officer & Senior Vice President

Date: August 14, 2012

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INDEX TO EXHIBITS

Number	Description of Exhibit
3.(i)	Articles of Incorporation – incorporated by reference from the Registrant’s Registration Statement on Form 8-A filed on August 16, 1996.
3.(ii)	Bylaws of Registrant – incorporated by reference from the Registrant’s Annual Report filed on March 16, 2012.
10.1	Supplemental Executive Retirement Agreement between Registrant and Michael D. Larrowe dated May 15, 2012 (filed herewith).
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C Section 1359, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1	Certification of Chief Executive officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
101	The following materials from the Company’s 10-Q Report for the quarterly period ended June 30, 2012, formatted in XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Changes in Shareholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) the Notes to the Condensed Consolidated Financial Statements.*

* Furnished, not filed

29

EX-10.1

Exhibit 10.1

Bank of Floyd

Supplemental Executive Retirement Plan

409A Restatement

Participation Agreement

This Bank of Floyd Supplemental Executive Retirement Plan 409A Restatement Participation Agreement (the “Participation Agreement”) is entered into as of this 15th day of May, 2012 by and between Bank of Floyd (the “Employer”), and Michael Larrowe an executive of the Employer (the “Participant”), as evidenced by the execution of this Participation Agreement by the Employer and Participant and the commencement of Participant’s in the Employer’s Internal Revenue Code Section 409A compliant supplemental executive retirement plan.

RECITALS:

WHEREAS, the Employer has adopted the (“Plan”) effective as January 1, 2005, and the Administrator has determined that the Participant shall be eligible to participate in the Plan on the terms and conditions set forth in this Participation Agreement and the Plan.

NOW, THEREFORE, in consideration of the foregoing and the agreements and covenants set forth herein, the parties agree as follows:

1. Definitions. Except as otherwise provided, or unless the context otherwise requires, the terms used in this Participation Agreement shall have the same meanings as set forth in the Plan.

2. Plan. Plan means the Bank of Floyd Supplemental Executive Retirement Plan 409A Restatement, as the same may be altered or supplemented in any validly executed Participation Agreement.

3. Incorporation of Plan. The Plan, a copy of which is attached hereto as Exhibit A, is hereby incorporated into this Participation Agreement as if fully set forth herein and the parties hereby agree to be bound by all of the terms and provisions contained in the Plan. The Participant hereby acknowledges receipt of a copy of the Plan and, subject to the foregoing, confirms his understanding and acceptance of all of the terms and conditions contained therein.

4. Effective Date of Participation. The effective date of the Participant’s participation in the Plan shall be April 6, 2012 (the “Participation Date”).

5. Normal Retirement Age. The Participant’s Normal Retirement Age for purposes of the Plan and this Participation Agreement is age seventy (70).

6. Year of Participation. For each full calendar year a Participant participates in this Plan, such Participant shall be credited with one (1) year of participation.

7. Prohibition Against Funding. Should any investment be acquired in connection with the liabilities assumed under this Plan and Participation Agreement, it is expressly understood and agreed that the Participants and Beneficiaries shall not have any right with respect to, or claim against, such assets nor shall any such purchase be construed to create a trust of any kind or a fiduciary relationship between the Employer and the Participants, their Beneficiaries, or any other person. Any such assets shall be and remain a part of the general, unpledged, unrestricted assets of the Employer, subject to the claims of its general creditors. It is the express intention of the parties hereto that this arrangement shall be unfunded for tax purposes and for purposes of Title I of ERISA. The Participant shall be required to look to the provisions of the Plan and to the Employer itself for enforcement of any and all benefits due under this Participation Agreement, and, to the extent the Participant acquires a right to receive payment under the Plan and this Participation Agreement, such right shall be no greater than the right of any unsecured general creditor of the Employer. The Employer shall be designated the owner and beneficiary of any investment acquired in connection with its obligation under the Plan and this Participation Agreement.

8. Provisions Related to SERP Benefit.

(a) SERP Benefit. Upon Participant’s Separation from Service from the Employer upon Participant’s attainment of their Normal Retirement Age, or subsequent thereto, such Participant shall be entitled to an annual SERP Benefit equal to forty-five thousand dollars ($45,000) per year, subject to the vesting requirements as provided for herein below.

(b) Vesting. Subject to Article IV and Article VI of the Plan, and Sections 8(f) and 8(g) of this Participation Agreement, Participant shall vest in their SERP Benefit in the following manner:

Years of Participation	Participant’s vested SERP Benefit
1		20	%
2		40	%
3		60	%
4		80	%
5		100	%

Participant shall be 100% vested in his or her SERP Benefit upon Participant’s attainment of Normal Retirement Age if then in the employ of Employer.

(c) Normal Retirement SERP Benefit Payment. Subject to the restrictions found in Plan Section 4.3, Distributions to Specified Employees, the vested annual SERP Benefit shall be paid in substantially equal monthly installments as of the first day of each calendar month for fifteen (15) years following the Participant’s Separation from Service. The monthly distribution in any given year in which a SERP Benefit is distributed, shall be equal to one-twelfth of the above-described SERP Benefit each year for a total of fifteen (15) years.

2

(d) Post Retirement Death Benefit. In the event of the Participant’s death during the fifteen (15) year SERP Benefit distribution period, Participant’s Beneficiary, as designated pursuant to this Participation Agreement, will continue to receive the balance of the remaining SERP Benefit distributions, up to and including, the distributions in year fifteen (15).

(e) Disability. A Participant who incurs a Disability shall be one hundred percent (100%) vested in his or her accrue liability of Participant’s SERP Benefit as of the date of Disability. A Participant shall be considered disabled if: (i) the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; (ii) the Participant is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Participant’s Employer; or (iii) determined to be totally disabled by the Social Security Administration. Upon a Participant’s Disability, Participant shall be entitled to receive the accrued liability of Participant’s SERP Benefit in a lump sum distribution as soon as administratively feasible, but no later than 90 days, following the Participant’s death. For purposes of this Plan and Participation Agreement, accrued liability of Participant’s SERP Benefit shall mean the amount accrued by the Employer to fund the future benefit expense associated with this Plan and Participation Agreement. The Employer shall account for this benefit using Generally Accepted Accounting Principles, regulatory accounting guidance of the Employer’s primary federal regulator, and other applicable accounting guidance, including APB 12 and FAS 106. Accordingly, the Employer shall establish a liability retirement account for the Executive into which appropriate accruals shall be made using a reasonable discount rate, which is at least equal to the Applicable Federal Rate (AFR), and which may be adjusted from time to time.

(f) Change in Control. A Participant shall be one hundred percent (100%) vested in his or her SERP Benefit upon a Change in Control. Notwithstanding any distribution mandate to the contrary, if a Change in Control occurs and a Participant incurs a Separation from Service during the period beginning on the date of the Change in Control and ending on the second anniversary of the Change in Control, the Participant’s vested SERP Benefit shall be paid to the Participant or his or her beneficiary in a single lump-sum payment as soon as administratively possible, but no later than ninety (90) days following such Separation from Service.

3

(g) Death Benefit Prior to Attaining Normal Retirement Age. Upon Participant’s death prior to attaining Normal Retirement Age, Participant’s estate shall be entitled to receive the accrued liability of Participant’s SERP Benefit in a lump sum distribution as soon as administratively feasible, but no later than 90 days, following the Participant’s death. For purposes of this Plan and Participation Agreement, accrued SERP Liability shall mean the amount accrued by the Employer to fund the future benefit expense associated with this Plan and Participation Agreement. The Employer shall account for this benefit using Generally Accepted Accounting Principles, regulatory accounting guidance of the Employer’s primary federal regulator, and other applicable accounting guidance, including APB 12 and F AS 106. Accordingly, the Employer shall establish a liability retirement account for the Executive into which appropriate accruals shall be made using a reasonable discount rate, which is at least equal to the Applicable Federal Rate (AFR), and which may be adjusted from time to time.

(h) Distribution due to other Separation from Service. In the event the Participant has a Separation from Service other than through Normal Retirement, Disability, death or following a Change in Control such Participant shall be twenty percent (20%) vested in their accrued liability of Participant’s SERP Benefit for each completed Year of Participation as of the effective date of Separation from Service. Subject to the restrictions found in Plan Section 4.3, Distributions to Specified Employees, the Participant’s vested accrued liability of Participant’s SERP Benefit under this subsection shall be distributed to Participant as soon as administratively feasible, but no later than ninety (90) days following Participant’s Separation from Service, in a single lump sum. For purposes of this subsection, the accrued liability of the Participant’s SERP Benefit shall mean the amount accrued by the Employer to fund the future benefit expense associated with this Plan and Participation Agreement. The Employer shall account for this benefit using Generally Accepted Accounting Principles, regulatory accounting guidance of the Employer’s primary federal regulator, and other applicable accounting guidance, including APB 12 and FAS 106. Accordingly, the Employer shall establish a liability retirement account for the Executive into which appropriate accruals shall be made using a reasonable discount rate, which is at least equal to the Applicable Federal Rate (AFR), and which may be adjusted from time to time. Notwithstanding anything to the contrary contained herein, in the event the Separation form Service was for Cause, as defined in the Plan, Participant shall forfeit all vested and unvested benefits under this Plan and Participation Agreement and the Employer shall be relieved from all liability to provide any benefit hereunder.

4

9. General Provisions.

(a) No Assignment. No benefit under the Participation Agreement shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any such action shall be void for all purposes of the Participation Agreement No benefit shall in any manner be subject to the debts, contracts, liabilities, engagements, or torts of any person, nor shall it be subject to attachments or other legal process for or against any person, except to such extent as may be required by law.

(b) Headings. The headings contained in the Participation Agreement are inserted only as a matter of convenience and for reference and in no way define, limit, enlarge, or describe the scope or intent of this Plan nor in any way shall they affect this Participation Agreement or the construction of any provision thereof.

(c) Terms. Capitalized terms shall have meanings as defined herein. Singular nouns shall be read as plural, masculine pronouns shall be read as feminine, and vice versa, as appropriate.

(d) Successors. This Participation Agreement shall be binding upon each of the parties and shall also be binding upon their respective successors the Employer’s assigns.

(e) Amendments. This Participation Agreement may not be modified or amended except by a duly executed instrument in writing signed by the Employer and the Participant

IN WITNESS WHEREOF, each of the parties has caused this Participation Agreement to be executed as of the day first above written.

Employer: Bank of Floyd:		Participant:
By:	/s/ Ronald Leon Moore	By:	/s/ Michael D. Larrowe
Ronald Leon Moore, Chairman,		Michael D. Larrowe
Printed Name President & CEO		Printed Name

5

LIST OF COLLATERAL DOCUMENTS

EXHIBIT A

409A RESTATEMENT

BANK OF FLOYD

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

EXHIBIT B

409A RESTATEMENT

BANK OF FLOYD

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

BENEFICIARY DESIGNATION

6

EXHIBITB

BANK OF FLOYD

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

409A RESTATEMENT

BENEFICIARY DESIGNATION

In the event of the Participant’s death, any benefits to which the Participant may be entitled shall be paid to the Beneficiary designated below. This Beneficiary Designation shall be subject to the terms and conditions set forth in the Plan and shall supersede all prior Beneficiary Designations made by the Participant. This Beneficiary Designation shall be attached to and become part of that certain Participation Agreement, dated as of May 15, 2012, between the Employer and the Participant.

Primary Beneficiary: Nikki E. Larrowe

Secondary Beneficiary: Estate

IN WITNESS WHEREOF, the Participant has executed this Beneficiary Designation as of the date indicated.

Participant:
By:	/s/ Michael D. Larrowe
Printed Name: Michael D. Larrowe
Dated:	5/15/2012

7

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Michael D. Larrowe, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cardinal Bankshares Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2012

/s/ Michael D. Larrowe

Michael D. Larrowe

President & Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, J. Alan Dickerson, certify that:

1. I have reviewed this report on Form 10-Q of Cardinal Bankshares Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2012

/s/ J. Alan Dickerson

J. Alan Dickerson

Chief Financial Officer & Senior Vice President

EX-32.1

EXHIBIT 32.1

CERTIFICATION

(Pursuant to 18 U.S.C. Section 1350)

The undersigned hereby certify on the date hereof that (i) the Quarterly Report on Form 10-Q (the “Report”) for the quarter ended June 30, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant as of and for the period covered in the Report.

Date: August 14, 2012	/s/ Michael D. Larrowe
	Michael D. Larrowe
	President & Chief Executive Officer
Date: August 14, 2012	/s/ J. Alan Dickerson
	J. Alan Dickerson
	Chief Financial Officer & Senior Vice President

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Securities (Maturities Of Debt Securities Available For Sale and Held To Maturity) (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Contractual Maturity Of Securities Available For Sale And Securities Held To Maturity [Line Items]
Available for Sale securities, Due in one year or less, Amortized Cost	$ 415
Available for Sale securities, Due after one year through five years, Amortized Cost	1,719
Available for Sale securities, Due after five years through ten years, Amortized Cost	5,361
Available for Sale securities, Due after ten years, Amortized Cost	73,823
Available for Sale securities, Amortized Cost	81,318
Available for Sale securities, Due in one year or less, Fair Value	419
Available for Sale securities, Due after one year through five years, Fair Value	1,704
Available for Sale securities, Due after five years through ten years, Fair Value	5,629
Available for Sale securities, Due after ten years, Fair Value	74,800
Available for sale securities, Fair Value	82,552	57,105
Held to Maturity securities, Due in one year or less, Amortized Cost	1,235
Held to Maturity securities, Due after one year through five years, Amortized Cost	4,155
Held to Maturity securities, Due after five years through ten years, Amortized Cost	2,827
Held to Maturity securities, Due after ten years, Amortized Cost	4,607
Held to Maturity securities, Amortized Cost	12,824	12,950
Held to Maturity securities, Due in one year or less, Fair Value	1,255
Held to Maturity securities, Due after one year through five years, Fair Value	4,292
Held to Maturity securities, Due after five years through ten years, Fair Value	3,037
Held to Maturity securities, Due after ten years, Fair Value	4,916
Held to Maturity securities, Fair Value	$ 13,500	$ 13,662

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Fair Value (Estimated Fair Values Of The Company's Financial Instruments) (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Financial assets
Cash and due from banks	$ 47,166	$ 4,255
Interest-bearing deposits with banks	164	14,758
Federal funds sold		33,700
Securities, available for sale	82,552	57,105
Securities, held to maturity	12,824	12,950
Restricted equity securities	615	592
Total loans	119,924	130,158
Accrued interest receivable	827	824
Bank Owned Life Insurance	6,322	5,437
Financial liabilities
Deposits	246,437	232,411
Accrued interest payable	89	88
Off-balance sheet assets (liabilities)
Commitments to extend credit and standby letter of credit	14,030	11,912
Carrying Amount [Member]
Financial assets
Cash and due from banks	47,166	4,255
Interest-bearing deposits with banks	164	14,758
Federal funds sold		33,700
Securities, available for sale	82,552	57,105
Securities, held to maturity	12,824	12,950
Restricted equity securities	615	592
Total loans	119,924	130,158
Accrued interest receivable	827	824
Bank Owned Life Insurance	6,322	5,437
Financial liabilities
Deposits	246,437	232,411
Accrued interest payable	89	88
Off-balance sheet assets (liabilities)
Commitments to extend credit and standby letter of credit
Fair Value [Member]
Financial assets
Cash and due from banks	47,166	4,255
Interest-bearing deposits with banks	164	14,758
Federal funds sold		33,700
Securities, available for sale	82,552	57,105
Securities, held to maturity	13,500	13,662
Restricted equity securities	615	592
Total loans	122,683	132,837
Accrued interest receivable	827	824
Bank Owned Life Insurance	6,322	5,437
Financial liabilities
Deposits	248,768	234,816
Accrued interest payable	89	88
Off-balance sheet assets (liabilities)
Commitments to extend credit and standby letter of credit	$ 14,030	$ 11,912

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Loans And Allowance For Loan Losses (Age Analysis Of Past Due Loans And Nonaccrual Loans) (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans 30-89 Days Past Due	$ 2,158	$ 111
Accruing Loans 90 Days or More Past Due	680	2,700
Total Accruing Loans Past Due	2,838	2,811
Nonaccrual Loans	8,929	9,298
Current Loans	108,467	118,363
Total Loans	120,234	130,472
Commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans 30-89 Days Past Due	7	1
Accruing Loans 90 Days or More Past Due		2,700
Total Accruing Loans Past Due	7	2,701
Nonaccrual Loans
Current Loans	2,770	3,172
Total Loans	2,777	5,873
Construction And Land Development [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans 30-89 Days Past Due
Accruing Loans 90 Days or More Past Due
Total Accruing Loans Past Due
Nonaccrual Loans	3,186	3,197
Current Loans	5,506	5,671
Total Loans	8,692	8,868
Residential, 1-4 Families [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans 30-89 Days Past Due	75
Accruing Loans 90 Days or More Past Due	680
Total Accruing Loans Past Due	755
Nonaccrual Loans	139	612
Current Loans	27,181	25,956
Total Loans	28,075	26,568
Residential, 5 Or More Families [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans 30-89 Days Past Due
Accruing Loans 90 Days or More Past Due
Total Accruing Loans Past Due
Nonaccrual Loans
Current Loans	3,746	4,717
Total Loans	3,746	4,717
Farmland [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans 30-89 Days Past Due
Accruing Loans 90 Days or More Past Due
Total Accruing Loans Past Due
Nonaccrual Loans
Current Loans	1,275	1,306
Total Loans	1,275	1,306
Nonfarm, Nonresidential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans 30-89 Days Past Due	2,070	107
Accruing Loans 90 Days or More Past Due
Total Accruing Loans Past Due	2,070	107
Nonaccrual Loans	5,604	5,489
Current Loans	63,007	70,283
Total Loans	70,681	75,879
Agriculture [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans 30-89 Days Past Due
Accruing Loans 90 Days or More Past Due
Total Accruing Loans Past Due
Nonaccrual Loans
Current Loans	39	9
Total Loans	39	9
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans 30-89 Days Past Due	6	3
Accruing Loans 90 Days or More Past Due
Total Accruing Loans Past Due	6	3
Nonaccrual Loans
Current Loans	931	2,484
Total Loans	937	2,487
Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans 30-89 Days Past Due
Accruing Loans 90 Days or More Past Due
Total Accruing Loans Past Due
Nonaccrual Loans
Current Loans	4,012	4,765
Total Loans	$ 4,012	$ 4,765

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Securities (Narrative) (Detail) (USD $)	12 Months Ended
	Dec. 31, 2011 Security	Jun. 30, 2012
Investment Securities [Line Items]
Investment securities pledged as collateral	$ 6,300,000	$ 5,600,000
Percentage of gross unrealized losses on amortized costs of investment securities	2.10%
Government Sponsored Enterprises [Member]
Investment Securities [Line Items]
Number of investment securities	1
Aggregate unrealized loss on investment securities	2,000	23,000
State And Municipal Securities [Member]
Investment Securities [Line Items]
Number of investment securities	1
Aggregate unrealized loss on investment securities
Mortgage-Backed Securities [Member]
Investment Securities [Line Items]
Number of investment securities	27
Aggregate unrealized loss on investment securities	120,000	104,000
Other Securities [Member]
Investment Securities [Line Items]
Number of investment securities	5
Aggregate unrealized loss on investment securities	$ 243,000	$ 118,000

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Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2012

Loans and Allowance for Loan Losses

Note 2. Loans and Allowance for Loan Losses

The major components of loans in the Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011 are summarized below:

	2012			2011
Commercial	$	2,777		$	5,873
Real estate
Construction and land development		8,692			8,868
Residential, 1-4 families		28,075			26,568
Residential, 5 or more families		3,746			4,717
Farmland		1,275			1,306
Nonfarm, nonresidential		70,681			75,879
Agricultural		39			9
Consumer		937			2,487
Other		4,012			4,765
Gross loans		120,234			130,472
Unearned discount and net deferred loan fees and costs		(310	)		(314	)
Total loans		119,924			130,158
Allowance for loan losses		(2,998	)		(2,867	)
Net loans	$	116,926		$	127,291

Overdrafts that were reclassified as part of gross loans totaled $13 thousand and $7 thousand at June 30, 2012 and December 31, 2011, respectively.

As a part of the ongoing monitoring of the credit quality of the loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk grade assigned to commercial and consumer loans, (ii) the level of classified commercial loans, (iii) net charge-offs, (iv) nonperforming loans, and (v) the general economic conditions in the Company’s geographic markets.

The Company categorizes loans receivable into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans and leases individually by classifying the loans receivable as to credit risk. The Company uses the following definitions for risk ratings:

Pass - Loans in this category are considered to have a low likelihood of loss based on relevant information analyzed about the ability of the borrowers to service their debt and other factors.

Special Mention - Loans in this category are currently protected but are potentially weak, including adverse trends in borrower’s operations, credit quality or financial strength. Those loans constitute an undue and unwarranted credit risk but not to the point of justifying a substandard classification. The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances. Special mention loans have potential weaknesses which may, if not checked or corrected, weaken the loan or inadequately protect the Company’s credit position at some future date.

Substandard - A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful - Loans classified Doubtful have all the weaknesses inherent in loans classified Substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable.

The following table presents the loan portfolio by credit quality indicator (risk grade) as of June 30, 2012 and December 31, 2011. Those loans with a risk grade above special mention have been combined in the pass column for presentation purposes.

June 30, 2012 (In thousands)	Pass		Special Mention		Sub- Standard		Doubtful		Total Loans
Commercial	$	2,777	$	—	$	—	$	—	$	2,777
Real Estate
Construction and land development		3,613		1,893		3,186		—		8,692
Residential, 1-4 families		27,855		—		220		—		28,075
Residential, 5 or more families		3,746		—		—		—		3,746
Farmland		1,275		—		—		—		1,275
Nonfarm, nonresidential		62,548		1,853		6,280		—		70,681
Agriculture		39		—		—		—		39
Consumer		937		—		—		—		937
Other		4,012		—		—		—		4,012
Total loans	$	106,802	$	3,746	$	9,686	$	—	$	120,234

December 31, 2011 (In thousands)	Pass		Special Mention		Sub- Standard		Doubtful		Total Loans
Commercial	$	3,161	$	—	$	2,712	$	—	$	5,873
Real Estate
Construction and land development		5,671		—		3,197		—		8,868
Residential, 1-4 families		25,730		—		838		—		26,568
Residential, 5 or more families		3,890		827		—		—		4,717
Farmland		1,306		—		—		—		1,306
Nonfarm, nonresidential		64,401		2,436		9,042		—		75,879
Agriculture		9		—		—		—		9
Consumer		2,487		—		—		—		2,487
Other		4,765		—		—		—		4,765
Total loans	$	111,420	$	3,263	$	15,789	$	—	$	130,472

A loan’s risk grade is assigned at the inception of the loan and is based on the financial strength of the borrower and the type of collateral. Loan risk grades are subject to reassessment at various times throughout the year as part of the Company’s ongoing loan review process. Loans with an assigned risk grade of substandard or below and an outstanding amount of $500 thousand or more are reassessed on a quarterly basis. During this reassessment process individual reserves may be identified and placed against certain loans that are considered impaired.

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Generally, loans are placed on nonaccrual status if principal or interest payments become 90 days past due or when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provision. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due.

The following table represents an age analysis of past due loans and nonaccrual loans, segregated by class of loans, as of June 30, 2012 and December 31, 2011.

	Accruing Loans
June 30, 2012 (In thousands)	30-89 Days Past Due		90 Days or More Past Due		Total Accruing Loans Past Due		Nonaccrual Loans		Current Loans		Total Loans
Commercial	$	7	$	—	$	7	$	—	$	2,770	$	2,777
Real Estate
Construction and land development		—		—		—		3,186		5,506		8,692
Residential, 1-4 families		75		680		755		139		27,181		28,075
Residential, 5 or more families		—		—		—		—		3,746		3,746
Farmland		—		—		—		—		1,275		1,275
Nonfarm, nonresidential		2,070		—		2,070		5,604		63,007		70,681
Agriculture		—		—		—		—		39		39
Consumer		6		—		6		—		931		937
Other		—		—		—		—		4,012		4,012
Total loans	$	2,158	$	680	$	2,838	$	8,929	$	108,467	$	120,234

	Accruing Loans
December 31, 2011 (In thousands)	30-89 Days Past Due		90 Days or More Past Due		Total Accruing Loans Past Due		Nonaccrual Loans		Current Loans		Total Loans
Commercial	$	1	$	2,700	$	2,701	$	—	$	3,172	$	5,873
Real Estate
Construction and land development		—		—		—		3,197		5,671		8,868
Residential, 1-4 families		—		—		—		612		25,956		26,568
Residential, 5 or more families		—		—		—		—		4,717		4,717
Farmland		—		—		—		—		1,306		1,306
Nonfarm, nonresidential		107		—		107		5,489		70,283		75,879
Agriculture		—		—		—		—		9		9
Consumer		3		—		3		—		2,484		2,487
Other		—		—		—		—		4,765		4,765
Total loans	$	111	$	2,700	$	2,811	$	9,298	$	118,363	$	130,472

The following table details impaired loan data as of June 30, 2012 and December 31, 2011:

June 30, 2012 (In thousands)	Impaired Balance		Related Allowance		Average Recorded Investment		Interest Income Recorded		Interest Income Collected
With No Related Allowance Recorded
Commercial	$	—	$	—	$	—	$	—	$	—
Real Estate
Construction and land development		2,479		—		2,489		49		48
Residential, 1-4 families		139		—		137		2		2
Nonfarm, nonresidential		2,602		—		3,421		12		19
		5,220		—		6,047		63		69
With an Allowance Recorded
Commercial		—		—		—		—		—
Real Estate
Construction and land development		3,186		1,295		3,221		—		—
Residential, 1-4 families		—		—		—		—		—
Nonfarm, nonresidential		4,736		550		4,738		34		33
		7,922		1,845		7,959		34		33
Total
Commercial		—		—		—		—		—
Real Estate
Construction and land development		5,665		1,295		5,710		49		48
Residential, 1-4 families		139		—		137		2		2
Nonfarm, nonresidential		7,338		550		8,159		46		52
	$	13,142	$	1,845	$	14,006	$	97	$	102

December 31, 2011 (In thousands)	Impaired Balance		Related Allowance		Average Recorded Investment		Interest Income Recorded			Interest Income Collected
With No Related Allowance Recorded
Commercial	$	—	$	—	$	—	$	—		$	—
Real Estate
Construction and land development		2,504		—		2,529		87			108
Nonfarm, nonresidential		2,500		—		2,500		(32	)		—
		5,004		—		5,029		55			108
With an Allowance Recorded
Commercial		12		12		12		—			—
Real Estate
Construction and land development		3,197		584		3,902		—			—
Residential, 1-4 families		612		73		791		13			16
Nonfarm, nonresidential		4,961		589		5,233		90			149
		8,782		1,258		9,938		103			165
Total
Commercial		12		12		12		—			—
Real Estate
Construction and land development		5,701		584		6,431		87			108
Residential, 1-4 families		612		73		791		13			16
Nonfarm, nonresidential		7,461		589		7,733		58			149
	$	13,786	$	1,258	$	14,967	$	158$			273

The Company is generally not committed to advance additional funds in connection with impaired loans.

As a result of adopting the amendments in Accounting Standards Update (“ASU”) 2011-02, the Bank reassessed all loan restructurings that occurred on or after the beginning of the fiscal year of adoption, January 1, 2011, to determine whether they are considered troubled debt restructurings (“TDRs”) under the amended guidance. The determination is based on whether the restructuring constitutes a concession and whether the debtor is experiencing financial difficulty as both events must be present. The Bank identified as TDRs certain loans for which the allowance for loan losses had previously been measured under a general allowance methodology. Upon identifying those loans as TDRs, the Bank identified them as impaired under the guidance in Accounting Standards Codification (“ASC”) 310-10-35. The amendments in ASU 2011-02 require prospective application of the impairment measurement guidance in ASC 310-10-35 for those loans newly identified as impaired. At June 30, 2012, the recorded investment in loans for which the allowance was previously measured under a general allowance methodology and are now impaired under ASC 310-10-35 was $6.6 million, and the allowance for loan losses associated with those loans, on the basis of a current evaluation of loss exposure was approximately $1.3 million.

The following is a schedule of loans that are considered TDRs at June 30, 2012.

	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
(In thousands)
Real Estate		3	$	6,570	$	6,570
Total		3	$	6,570	$	6,570

During the three months ended June 30, 2012, the Bank modified no loans that were considered to be TDRs. We extended the maturity date term for none of these loans, lowered the interest rate for none of these loans, and entered into forbearance agreements on none of these loans.

The following is a schedule of loans that had been previously restructured and have subsequently defaulted at June 30, 2012.

	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
(In thousands)
Real Estate		—	$	—	$	—
Total		—	$	—	$	—

During the three months ended June 30, 2012, no loan that had previously been restructured, was in default, none of which went into default in the quarter. The Bank considers a loan in default when it is 90 days or more past due or on nonaccrual status.

In the determination of the allowance for loan losses, management considers troubled debt restructurings and subsequent defaults in these restructurings. All troubled debt restructurings are considered impaired loans. Loss exposure related to these loans are determined by management quarterly.

At June 30, 2012, there were $6.6 million in loans that are classified as TDRs compared to $6.6 million at December 31, 2011.

The Company generally does not make commitments to lend additional funds to customers classified as trouble debt restructures.

The following tables detail activity in the allowance for loan losses, segregated by class of loan, for the six month periods ended June 30, 2012 and June 30, 2011. Allocation portion of the allowance to one category of loans does not preclude its activity to absorb losses in other loan categories and periodically may result in reallocation within the provision categories.

June 30, 2012 (In thousands)	Beginning Balance		Charge- Offs		Recoveries		Provision		Ending Balance
Commercial	$	35	$	2,694	$	9	$	2,682	$	32
Real Estate
Construction and land development		1,243		—		10		202		1,455
Residential, 1-4 families		155		97		23		24		105
Residential, 5 or more families		—		—		—		—		—
Farmland		—		—		—		—		—
Nonfarm, nonresidential		1,255		1,119		8		1,080		1,224
Agriculture		3		—		—		—		3
Consumer		50		—		—		—		50
Other		126		—		3		—		129
	$	2,867	$	3,910	$	53	$	3,988	$	2,998

June 30, 2011 (In thousands)	Beginning Balance		Charge- Offs		Recoveries		Provision			Ending Balance
Commercial	$	79	$	50	$	1	$	47		$	77
Real Estate
Construction and land development		1,729		123		—		349			1,955
Residential, 1-4 families		385		295		2		103			195
Residential, 5 or more families		—		—		—		—			—
Farmland		—		—		—		—			—
Nonfarm, nonresidential		710		—		2		(60	)		652
Agriculture		3		—		—		—			3
Consumer		47		—		3		—			50
Other		120		—		2		—			122
	$	3,073	$	468	$	10	$	439		$	3,054

The following table indicates the allocation of the allowance for loan losses based on loans evaluated specifically for impairment and loans evaluated collectively for the periods ended June 30, 2012 and December 31, 2011.

June 30, 2012 (In thousands)	Individually Evaluate for Impairment			Ending Balance Collectively Evaluated Impairment			Total
Commercial	$	—		$	32		$	32
Real Estate
Construction and land development		1,295			160			1,455
Residential, 1-4 families		—			105			105
Residential, 5 or more families		—			—			—
Farmland		—			—			—
Nonfarm, nonresidential		550			674			1,224
Agriculture		—			3			3
Consumer		—			50			50
Other		—			129			129
Ending balance of allowance for loan losses	$	1,845		$	1,153		$	2,998
Ending balance of allowance to total allowance		61.54	%		38.46	%		100	%
December 31, 2011 (In thousands)
Commercial	$	12		$	23		$	35
Real Estate
Construction and land development		584			659			1,243
Residential, 1-4 families		73			82			155
Residential, 5 or more families		—			—			—
Farmland		—			—			—
Nonfarm, nonresidential		589			666			1,255
Agriculture		—			3			3
Consumer		—			50			50
Other		—			126			126
Ending Balance	$	1,258		$	1,609		$	2,867
Ending balance of allowance to total allowance		43.88	%		56.12	%		100	%

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Loans And Allowance For Loan Losses (Summary Of Activity In Allowance For Loan Losses) (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	$ 2,867	$ 3,073
Charge-Offs	3,910	468
Recoveries	53	10
Provision	3,988	439
Ending Balance	2,998	3,054
Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	35	79
Charge-Offs	2,694	50
Recoveries	9	1
Provision	2,682	47
Ending Balance	32	77
Construction And Land Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	1,243	1,729
Charge-Offs		123
Recoveries	10
Provision	202	349
Ending Balance	1,455	1,955
Residential, 1-4 Families [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	155	385
Charge-Offs	97	295
Recoveries	23	2
Provision	24	103
Ending Balance	105	195
Residential, 5 Or More Families [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance
Charge-Offs
Recoveries
Provision
Ending Balance
Farmland [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance
Charge-Offs
Recoveries
Provision
Ending Balance
Nonfarm, Nonresidential [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	1,255
Charge-Offs	1,119
Recoveries	8
Provision	1,080
Ending Balance	1,224
Agriculture [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	3	3
Charge-Offs
Recoveries
Provision
Ending Balance	3	3
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	50	47
Charge-Offs
Recoveries		3
Provision
Ending Balance	50	50
Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	126	120
Charge-Offs
Recoveries	3	2
Provision
Ending Balance	129	122
Nonfarm, Nonresidential [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance		710
Charge-Offs
Recoveries		2
Provision		(60)
Ending Balance		$ 652

XML

Loans And Allowance For Loan Losses (Schedule Of Loans Previously Restructured And Have Subsequently Defaulted) (Detail) (USD $)	3 Months Ended
	Jun. 30, 2012 Contract
Financing Receivable, Modifications [Line Items]
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment

XML

Loans And Allowance For Loan Losses (Allocation Of Allowance For Loan Losses Based On Loans Evaluated Specifically For Impairment And Loans Evaluated Collectively) (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Financing Receivable, Impaired [Line Items]
Ending balance of allowance to total allowance	100.00%	100.00%
Individually Evaluate for Impairment	$ 1,845	$ 1,258
Ending Balance Collectively Evaluated Impairment	1,153	1,609
Total	2,998	2,867
Individually Evaluate For Impairment [Member]
Financing Receivable, Impaired [Line Items]
Ending balance of allowance to total allowance	61.54%	43.88%
Ending Balance Collectively Evaluated Impairment [Member]
Financing Receivable, Impaired [Line Items]
Ending balance of allowance to total allowance	38.46%	56.12%
Commercial [Member]
Financing Receivable, Impaired [Line Items]
Individually Evaluate for Impairment		12
Ending Balance Collectively Evaluated Impairment	32	23
Total	32	35
Construction And Land Development [Member]
Financing Receivable, Impaired [Line Items]
Individually Evaluate for Impairment	1,295	584
Ending Balance Collectively Evaluated Impairment	160	659
Total	1,455	1,243
Residential, 1-4 Families [Member]
Financing Receivable, Impaired [Line Items]
Individually Evaluate for Impairment		73
Ending Balance Collectively Evaluated Impairment	105	82
Total	105	155
Residential, 5 Or More Families [Member]
Financing Receivable, Impaired [Line Items]
Individually Evaluate for Impairment
Ending Balance Collectively Evaluated Impairment
Total
Farmland [Member]
Financing Receivable, Impaired [Line Items]
Individually Evaluate for Impairment
Ending Balance Collectively Evaluated Impairment
Total
Nonfarm, Nonresidential [Member]
Financing Receivable, Impaired [Line Items]
Individually Evaluate for Impairment	550	589
Ending Balance Collectively Evaluated Impairment	674	666
Total	1,224	1,255
Agriculture [Member]
Financing Receivable, Impaired [Line Items]
Individually Evaluate for Impairment
Ending Balance Collectively Evaluated Impairment	3	3
Total	3	3
Consumer [Member]
Financing Receivable, Impaired [Line Items]
Individually Evaluate for Impairment
Ending Balance Collectively Evaluated Impairment	50	50
Total	50	50
Other [Member]
Financing Receivable, Impaired [Line Items]
Individually Evaluate for Impairment
Ending Balance Collectively Evaluated Impairment	129	126
Total	$ 129	$ 126

XML

Commitments And Contingencies (Summary Of Commitments) (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Commitments And Contingencies [Line Items]
Commitments to extend credit	$ 14,030	$ 11,912
Commitments To Extend Credit [Member]
Commitments And Contingencies [Line Items]
Commitments to extend credit	13,633	11,612
Standby Letters Of Credit [Member]
Commitments And Contingencies [Line Items]
Commitments to extend credit	$ 397	$ 300

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2012

Basis of Presentation

Note 1. Basis of Presentation

The accompanying unaudited consolidated financial statements of Cardinal Bankshares Corporation (the “Company”) have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all of the disclosures and notes required by generally accepted accounting principles. In the opinion of management, all material adjustments (which are of a normal recurring nature) considered necessary for a fair presentation have been made. The results for the interim period are not necessarily indicative of the results to be expected for the entire year or any other interim period. The information reported herein should be read in conjunction with the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. Certain previously reported amounts have been reclassified to conform to current presentations. The December 31, 2011 information is derived from audited financial statements and the June 30, 2012 information is derived from unaudited financial statements.

Principles of Consolidation

The consolidated financial statements of the Company include the accounts of the Company, the Bank of Floyd (“the Bank”) and FBC, Inc. All material intercompany transactions and balances have been eliminated.

Cash and Cash Equivalents

For purpose of presentation in the consolidated statements of cash flows, cash and cash equivalents are defined as those amounts included in the balance sheet captions Cash and due from banks, Interest bearing deposits in banks and Federal funds sold.

Subsequent Events

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.

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Employee Benefit Plan (Narrative) (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Defined Benefit Plan Disclosure [Line Items]
Employer contribution	$ 258

XML

Securities (Unrealized Losses And Related Fair Values In Securities Portfolios) (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Government Sponsored Enterprises [Member]
Schedule Of Available For Sale Securities And Held To Maturity Securities [Line Items]
Less Than 12 Months, Fair Value	$ 1,977	$ 948
Less Than 12 Months, Unrealized Losses	23	2
Total, Fair Value	1,977	948
Total, Unrealized Losses	23	2
State And Municipal Securities [Member]
Schedule Of Available For Sale Securities And Held To Maturity Securities [Line Items]
Less Than 12 Months, Fair Value		275
Total, Fair Value		275
Total, Unrealized Losses
Mortgage-Backed Securities [Member]
Schedule Of Available For Sale Securities And Held To Maturity Securities [Line Items]
Less Than 12 Months, Fair Value	9,943	9,936
Less Than 12 Months, Unrealized Losses	68	47
12 Months Or More, Fair Value	3,052	4,652
12 Months Or More, Unrealized Losses	36	73
Total, Fair Value	12,995	14,588
Total, Unrealized Losses	104	120
Other Securities [Member]
Schedule Of Available For Sale Securities And Held To Maturity Securities [Line Items]
Less Than 12 Months, Fair Value		866
Less Than 12 Months, Unrealized Losses		151
12 Months Or More, Fair Value	1,392	908
12 Months Or More, Unrealized Losses	118	92
Total, Fair Value	1,392	1,774
Total, Unrealized Losses	118	243
Total Temporarily Impaired Securities [Member]
Schedule Of Available For Sale Securities And Held To Maturity Securities [Line Items]
Less Than 12 Months, Fair Value	11,920	12,025
Less Than 12 Months, Unrealized Losses	91	200
12 Months Or More, Fair Value	4,444	5,560
12 Months Or More, Unrealized Losses	154	165
Total, Fair Value	16,364	17,585
Total, Unrealized Losses	$ 245	$ 365

XML

Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Assets
Cash and due from banks	$ 47,166	$ 4,255
Interest-bearing deposits	164	14,758
Federal funds sold		33,700
Total cash and cash equivalents	47,330	52,713
Investment securities available for sale, at fair value	82,552	57,105
Investment securities held to maturity (fair value June 30, 2012 $13,500 - December 31, 2011 $13,662)	12,824	12,950
Restricted equity securities	615	592
Total loans	119,924	130,158
Allowance for loan losses	(2,998)	(2,867)
Net loans	116,926	127,291
Bank premises and equipment, net	2,797	2,895
Accrued interest receivable	827	824
Foreclosed assets	3,517	3,418
Bank Owned Life Insurance	6,322	5,437
Other assets	4,184	2,935
Total assets	277,894	266,160
Liabilities
Noninterest-bearing deposits	31,679	32,135
Interest-bearing deposits	214,758	200,276
Total deposits	246,437	232,411
Accrued interest payable	89	88
Other liabilities	1,118	628
Total liabilities	247,644	233,127
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	11,153	14,292
Accumulated other comprehensive income, net	815	459
Total stockholders' equity	30,250	33,033
Total liabilities and stockholders' equity	$ 277,894	$ 266,160

XML

Consolidated Statement of Stockholders Equity (USD $) In Thousands	Total	Common Stock [Member]	Additional Paid-In Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Balance, December 31, 2011 at Dec. 31, 2011	$ 33,033	$ 15,357	$ 2,925	$ 14,292	$ 459
Net income	(2,985)			(2,985)
Other comprehensive income	356				356
Cash dividend declared	(154)			(154)
Balance, June 30, 2012 at Jun. 30, 2012	$ 30,250	$ 15,357	$ 2,925	$ 11,153	$ 815

XML

Fair Value (Schedule Of Fair Value Of Assets And Liabilities Recorded On A Nonrecurring Basis) (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis	$ 9,594	$ 10,942
Commercial [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis
Real Estate [Member] | Construction And Land Development [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis	1,891	2,613
Real Estate [Member] | Residential, 1-4 Families [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis		539
Real Estate [Member] | Nonfarm, Nonresidential [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis	4,186	4,372
Impaired Loans [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis	6,077	7,524
Foreclosed Assets [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis	3,517	3,418
Level 1 [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis
Level 1 [Member] | Commercial [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis
Level 1 [Member] | Real Estate [Member] | Construction And Land Development [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis
Level 1 [Member] | Real Estate [Member] | Residential, 1-4 Families [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis
Level 1 [Member] | Real Estate [Member] | Nonfarm, Nonresidential [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis
Level 1 [Member] | Impaired Loans [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis
Level 1 [Member] | Foreclosed Assets [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis
Level 2 [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis	9,594	10,942
Level 2 [Member] | Commercial [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis
Level 2 [Member] | Real Estate [Member] | Construction And Land Development [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis	1,891	2,613
Level 2 [Member] | Real Estate [Member] | Residential, 1-4 Families [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis		539
Level 2 [Member] | Real Estate [Member] | Nonfarm, Nonresidential [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis	4,186	4,372
Level 2 [Member] | Impaired Loans [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis	6,077	7,524
Level 2 [Member] | Foreclosed Assets [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis	3,517	3,418
Level 3 [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis
Level 3 [Member] | Commercial [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis
Level 3 [Member] | Real Estate [Member] | Construction And Land Development [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis
Level 3 [Member] | Real Estate [Member] | Residential, 1-4 Families [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis
Level 3 [Member] | Real Estate [Member] | Nonfarm, Nonresidential [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis
Level 3 [Member] | Impaired Loans [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis
Level 3 [Member] | Foreclosed Assets [Member]
Fair Value Assets And Liabilities Measured On Nonrecurring Basis [Line Items]
Assets recorded as fair value on a nonrecurring basis

XML

Loans And Allowance For Loan Losses (Major Components Of Loans) (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	$ 120,234	$ 130,472
Unearned discount and net deferred loan fees and costs	(310)	(314)
Total loans	119,924	130,158
Allowance for loan losses	(2,998)	(2,867)
Net loans	116,926	127,291
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	2,777	5,873
Allowance for loan losses	(32)	(35)
Construction And Land Development [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	8,692	8,868
Allowance for loan losses	(1,455)	(1,243)
Residential, 1-4 Families [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	28,075	26,568
Allowance for loan losses	(105)	(155)
Residential, 5 Or More Families [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	3,746	4,717
Allowance for loan losses
Farmland [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	1,275	1,306
Allowance for loan losses
Nonfarm, Nonresidential [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	70,681	75,879
Agriculture [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	39	9
Allowance for loan losses	(3)	(3)
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	937	2,487
Allowance for loan losses	(50)	(50)
Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	4,012	4,765
Allowance for loan losses	$ (129)	$ (126)

XML

Securities (Carrying Amount Of Securities And Approximate Fair Values) (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Investment Securities [Line Items]
Available for sale securities, Amortized Cost	$ 81,318	$ 56,409
Available for sale securities, Unrealized Gains	1,479	1,061
Available for sale securities, Unrealized Losses	245	365
Available for sale securities, Fair Value	82,552	57,105
Held to maturity securities, Amortized Cost	12,824	12,950
Held to maturity securities, Unrealized Gains	676	712
Held to maturity securities, Unrealized Losses
Held to Maturity securities, Fair Value	13,500	13,662
State And Municipal Securities [Member]
Investment Securities [Line Items]
Available for sale securities, Amortized Cost	6,891	5,226
Available for sale securities, Unrealized Gains	384	267
Available for sale securities, Fair Value	7,275	5,493
Held to maturity securities, Amortized Cost	12,801	12,925
Held to maturity securities, Unrealized Gains	676	712
Held to maturity securities, Unrealized Losses
Held to Maturity securities, Fair Value	13,477	13,637
Mortgage-Backed Securities [Member]
Investment Securities [Line Items]
Available for sale securities, Amortized Cost	66,265	46,293
Available for sale securities, Unrealized Gains	1,068	755
Available for sale securities, Unrealized Losses	105	120
Available for sale securities, Fair Value	67,228	46,928
Held to maturity securities, Amortized Cost	23	25
Held to maturity securities, Unrealized Losses
Held to Maturity securities, Fair Value	23	25
Government Sponsored Enterprises [Member]
Investment Securities [Line Items]
Available for sale securities, Amortized Cost	5,943	1,933
Available for sale securities, Unrealized Gains	27	21
Available for sale securities, Unrealized Losses	23	2
Available for sale securities, Fair Value	5,947	1,952
Other Securities [Member]
Investment Securities [Line Items]
Available for sale securities, Amortized Cost	2,219	2,957
Available for sale securities, Unrealized Gains		18
Available for sale securities, Unrealized Losses	117	243
Available for sale securities, Fair Value	$ 2,102	$ 2,732

XML

Loans And Allowance For Loan Losses (Loan Portfolio By Credit Quality Indicator) (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Financing Receivable, Recorded Investment [Line Items]
Gross loans	$ 120,234	$ 130,472
Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	2,777	5,873
Construction And Land Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	8,692	8,868
Residential, 1-4 Families [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	28,075	26,568
Residential, 5 Or More Families [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	3,746	4,717
Farmland [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	1,275	1,306
Nonfarm, Nonresidential [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	70,681	75,879
Agriculture [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	39	9
Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	937	2,487
Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	4,012	4,765
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	106,802	111,420
Pass [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	2,777	3,161
Pass [Member] | Construction And Land Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	3,613	5,671
Pass [Member] | Residential, 1-4 Families [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	27,855	25,730
Pass [Member] | Residential, 5 Or More Families [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	3,746	3,890
Pass [Member] | Farmland [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	1,275	1,306
Pass [Member] | Nonfarm, Nonresidential [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	62,548	64,401
Pass [Member] | Agriculture [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	39	9
Pass [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	937	2,487
Pass [Member] | Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	4,012	4,765
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	3,746	3,263
Special Mention [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans
Special Mention [Member] | Construction And Land Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	1,893
Special Mention [Member] | Residential, 1-4 Families [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans
Special Mention [Member] | Residential, 5 Or More Families [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans		827
Special Mention [Member] | Farmland [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans
Special Mention [Member] | Nonfarm, Nonresidential [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	1,853	2,436
Special Mention [Member] | Agriculture [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans
Special Mention [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans
Special Mention [Member] | Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans
Sub-Standard [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	9,686	15,789
Sub-Standard [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans		2,712
Sub-Standard [Member] | Construction And Land Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	3,186	3,197
Sub-Standard [Member] | Residential, 1-4 Families [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	220	838
Sub-Standard [Member] | Residential, 5 Or More Families [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans
Sub-Standard [Member] | Farmland [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans
Sub-Standard [Member] | Nonfarm, Nonresidential [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	6,280	9,042
Sub-Standard [Member] | Agriculture [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans
Sub-Standard [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans
Sub-Standard [Member] | Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans
Doubtful [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans
Doubtful [Member] | Construction And Land Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans
Doubtful [Member] | Residential, 1-4 Families [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans
Doubtful [Member] | Residential, 5 Or More Families [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans
Doubtful [Member] | Farmland [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans
Doubtful [Member] | Nonfarm, Nonresidential [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans
Doubtful [Member] | Agriculture [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans
Doubtful [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans
Doubtful [Member] | Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans

XML

Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Cash flows from operating activities
Net (loss) income	$ (2,985)	$ 644
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization	108	120
Accretion of discounts on securities, net of amortization of premiums	352	185
Provision for loan losses	3,988	439
Deferred income taxes benefit	(1,787)
Income on Bank Owned Life Insurance	85	80
Net realized gain on securities	(26)	(43)
Net realized (gain) loss on sale of foreclosed assets		20
Changes in assets and liabilities:
Accrued income	(3)	51
Other Assets	(713)	(524)
Accrued interest payable	1	(24)
Other liabilities	490	456
Net cash (used) provided by operating activities	(490)	1,404
Cash flows from investing activities
Purchases of available for sale securities	(33,182)	(13,063)
Sales of available for sale securities	6,204	2,849
Maturities, calls and paydowns of available for sale securities	1,750	5,101
Purchases of held to maturity securities	(371)
Maturities, calls and paydowns of held to maturity securities	490	605
Call (purchase) of restricted equity securities	(23)	(27)
Proceeds from sale of foreclosed assets		210
Net decrease in loans	6,377	6,594
Net purchases (sales) of bank premises and equipment	(10)	763
Net cash (used) provided by investing activities	(18,765)	3,032
Cash flows from financing activities
Net (decrease) increase in noninterest-bearing deposits	(456)	96
Net increase (decrease) in interest-bearing deposits	14,482	(4,098)
Dividends Paid	(154)	(123)
Net cash provided (used) by financing activities	13,872	(4,125)
Net (decrease) increase in cash and cash equivalents	(5,383)	311
Cash and cash equivalents, beginning	52,713	32,290
Cash and cash equivalents, ending	47,330	32,601
Supplemental disclosures of cash flow information
Interest paid	1,583	1,561
Income taxes paid	90	296
Supplemental disclosures of noncash activities
Other real estate acquired in settlement of loans	$ 529

XML

Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Investment securities held to maturity, fair value	$ 13,500	$ 13,662
Common stock, par value	$ 10	$ 10
Common stock, shares authorized	5,000,000	5,000,000
Common stock, shares issued	1,535,733	1,535,733
Common stock, shares outstanding	1,535,733	1,535,733

XML

Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2012

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements of the Company include the accounts of the Company, the Bank of Floyd (“the Bank”) and FBC, Inc. All material intercompany transactions and balances have been eliminated.

Cash and Cash Equivalents

Cash and Cash Equivalents

For purpose of presentation in the consolidated statements of cash flows, cash and cash equivalents are defined as those amounts included in the balance sheet captions Cash and due from banks, Interest bearing deposits in banks and Federal funds sold.

Subsequent Events

Subsequent Events

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Aug. 14, 2012
Entity Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Trading Symbol	CDBK
Entity Registrant Name	Cardinal Bankshares Corporation
Entity Central Index Key	0001022759
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		1,535,733

XML

Loans and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2012

Major Components of Loans

The major components of loans in the Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011 are summarized below:

	2012			2011
Commercial	$	2,777		$	5,873
Real estate
Construction and land development		8,692			8,868
Residential, 1-4 families		28,075			26,568
Residential, 5 or more families		3,746			4,717
Farmland		1,275			1,306
Nonfarm, nonresidential		70,681			75,879
Agricultural		39			9
Consumer		937			2,487
Other		4,012			4,765
Gross loans		120,234			130,472
Unearned discount and net deferred loan fees and costs		(310	)		(314	)
Total loans		119,924			130,158
Allowance for loan losses		(2,998	)		(2,867	)
Net loans	$	116,926		$	127,291

Loan Portfolio by Credit Quality Indicator

The following table presents the loan portfolio by credit quality indicator (risk grade) as of June 30, 2012 and December 31, 2011. Those loans with a risk grade above special mention have been combined in the pass column for presentation purposes.

June 30, 2012 (In thousands)	Pass		Special Mention		Sub- Standard		Doubtful		Total Loans
Commercial	$	2,777	$	—	$	—	$	—	$	2,777
Real Estate
Construction and land development		3,613		1,893		3,186		—		8,692
Residential, 1-4 families		27,855		—		220		—		28,075
Residential, 5 or more families		3,746		—		—		—		3,746
Farmland		1,275		—		—		—		1,275
Nonfarm, nonresidential		62,548		1,853		6,280		—		70,681
Agriculture		39		—		—		—		39
Consumer		937		—		—		—		937
Other		4,012		—		—		—		4,012
Total loans	$	106,802	$	3,746	$	9,686	$	—	$	120,234

December 31, 2011 (In thousands)	Pass		Special Mention		Sub- Standard		Doubtful		Total Loans
Commercial	$	3,161	$	—	$	2,712	$	—	$	5,873
Real Estate
Construction and land development		5,671		—		3,197		—		8,868
Residential, 1-4 families		25,730		—		838		—		26,568
Residential, 5 or more families		3,890		827		—		—		4,717
Farmland		1,306		—		—		—		1,306
Nonfarm, nonresidential		64,401		2,436		9,042		—		75,879
Agriculture		9		—		—		—		9
Consumer		2,487		—		—		—		2,487
Other		4,765		—		—		—		4,765
Total loans	$	111,420	$	3,263	$	15,789	$	—	$	130,472

Age Analysis of Past Due Loans and Nonaccrual Loans

The following table represents an age analysis of past due loans and nonaccrual loans, segregated by class of loans, as of June 30, 2012 and December 31, 2011.

	Accruing Loans
June 30, 2012 (In thousands)	30-89 Days Past Due		90 Days or More Past Due		Total Accruing Loans Past Due		Nonaccrual Loans		Current Loans		Total Loans
Commercial	$	7	$	—	$	7	$	—	$	2,770	$	2,777
Real Estate
Construction and land development		—		—		—		3,186		5,506		8,692
Residential, 1-4 families		75		680		755		139		27,181		28,075
Residential, 5 or more families		—		—		—		—		3,746		3,746
Farmland		—		—		—		—		1,275		1,275
Nonfarm, nonresidential		2,070		—		2,070		5,604		63,007		70,681
Agriculture		—		—		—		—		39		39
Consumer		6		—		6		—		931		937
Other		—		—		—		—		4,012		4,012
Total loans	$	2,158	$	680	$	2,838	$	8,929	$	108,467	$	120,234

	Accruing Loans
December 31, 2011 (In thousands)	30-89 Days Past Due		90 Days or More Past Due		Total Accruing Loans Past Due		Nonaccrual Loans		Current Loans		Total Loans
Commercial	$	1	$	2,700	$	2,701	$	—	$	3,172	$	5,873
Real Estate
Construction and land development		—		—		—		3,197		5,671		8,868
Residential, 1-4 families		—		—		—		612		25,956		26,568
Residential, 5 or more families		—		—		—		—		4,717		4,717
Farmland		—		—		—		—		1,306		1,306
Nonfarm, nonresidential		107		—		107		5,489		70,283		75,879
Agriculture		—		—		—		—		9		9
Consumer		3		—		3		—		2,484		2,487
Other		—		—		—		—		4,765		4,765
Total loans	$	111	$	2,700	$	2,811	$	9,298	$	118,363	$	130,472

Impaired Loan Data

The following table details impaired loan data as of June 30, 2012 and December 31, 2011:

June 30, 2012 (In thousands)	Impaired Balance		Related Allowance		Average Recorded Investment		Interest Income Recorded		Interest Income Collected
With No Related Allowance Recorded
Commercial	$	—	$	—	$	—	$	—	$	—
Real Estate
Construction and land development		2,479		—		2,489		49		48
Residential, 1-4 families		139		—		137		2		2
Nonfarm, nonresidential		2,602		—		3,421		12		19
		5,220		—		6,047		63		69
With an Allowance Recorded
Commercial		—		—		—		—		—
Real Estate
Construction and land development		3,186		1,295		3,221		—		—
Residential, 1-4 families		—		—		—		—		—
Nonfarm, nonresidential		4,736		550		4,738		34		33
		7,922		1,845		7,959		34		33
Total
Commercial		—		—		—		—		—
Real Estate
Construction and land development		5,665		1,295		5,710		49		48
Residential, 1-4 families		139		—		137		2		2
Nonfarm, nonresidential		7,338		550		8,159		46		52
	$	13,142	$	1,845	$	14,006	$	97	$	102

December 31, 2011 (In thousands)	Impaired Balance		Related Allowance		Average Recorded Investment		Interest Income Recorded			Interest Income Collected
With No Related Allowance Recorded
Commercial	$	—	$	—	$	—	$	—		$	—
Real Estate
Construction and land development		2,504		—		2,529		87			108
Nonfarm, nonresidential		2,500		—		2,500		(32	)		—
		5,004		—		5,029		55			108
With an Allowance Recorded
Commercial		12		12		12		—			—
Real Estate
Construction and land development		3,197		584		3,902		—			—
Residential, 1-4 families		612		73		791		13			16
Nonfarm, nonresidential		4,961		589		5,233		90			149
		8,782		1,258		9,938		103			165
Total
Commercial		12		12		12		—			—
Real Estate
Construction and land development		5,701		584		6,431		87			108
Residential, 1-4 families		612		73		791		13			16
Nonfarm, nonresidential		7,461		589		7,733		58			149
	$	13,786	$	1,258	$	14,967	$	158$			273

Schedule of Loans Considered as TDRs

The following is a schedule of loans that are considered TDRs at June 30, 2012.

	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
(In thousands)
Real Estate		3	$	6,570	$	6,570
Total		3	$	6,570	$	6,570

Schedule of Loans Previously Restructured and Subsequently Defaulted

The following is a schedule of loans that had been previously restructured and have subsequently defaulted at June 30, 2012.

	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
(In thousands)
Real Estate		—	$	—	$	—
Total		—	$	—	$	—

Activity in Allowance for Loan Losses

The following tables detail activity in the allowance for loan losses, segregated by class of loan, for the six month periods ended June 30, 2012 and June 30, 2011. Allocation portion of the allowance to one category of loans does not preclude its activity to absorb losses in other loan categories and periodically may result in reallocation within the provision categories.

June 30, 2012 (In thousands)	Beginning Balance		Charge- Offs		Recoveries		Provision		Ending Balance
Commercial	$	35	$	2,694	$	9	$	2,682	$	32
Real Estate
Construction and land development		1,243		—		10		202		1,455
Residential, 1-4 families		155		97		23		24		105
Residential, 5 or more families		—		—		—		—		—
Farmland		—		—		—		—		—
Nonfarm, nonresidential		1,255		1,119		8		1,080		1,224
Agriculture		3		—		—		—		3
Consumer		50		—		—		—		50
Other		126		—		3		—		129
	$	2,867	$	3,910	$	53	$	3,988	$	2,998

June 30, 2011 (In thousands)	Beginning Balance		Charge- Offs		Recoveries		Provision			Ending Balance
Commercial	$	79	$	50	$	1	$	47		$	77
Real Estate
Construction and land development		1,729		123		—		349			1,955
Residential, 1-4 families		385		295		2		103			195
Residential, 5 or more families		—		—		—		—			—
Farmland		—		—		—		—			—
Nonfarm, nonresidential		710		—		2		(60	)		652
Agriculture		3		—		—		—			3
Consumer		47		—		3		—			50
Other		120		—		2		—			122
	$	3,073	$	468	$	10	$	439		$	3,054

Allocation of Allowance for Loan Losses Based on Loans Evaluated Specifically for Impairment and Loans Evaluated Collectively

The following table indicates the allocation of the allowance for loan losses based on loans evaluated specifically for impairment and loans evaluated collectively for the periods ended June 30, 2012 and December 31, 2011.

June 30, 2012 (In thousands)	Individually Evaluate for Impairment			Ending Balance Collectively Evaluated Impairment			Total
Commercial	$	—		$	32		$	32
Real Estate
Construction and land development		1,295			160			1,455
Residential, 1-4 families		—			105			105
Residential, 5 or more families		—			—			—
Farmland		—			—			—
Nonfarm, nonresidential		550			674			1,224
Agriculture		—			3			3
Consumer		—			50			50
Other		—			129			129
Ending balance of allowance for loan losses	$	1,845		$	1,153		$	2,998
Ending balance of allowance to total allowance		61.54	%		38.46	%		100	%
December 31, 2011 (In thousands)
Commercial	$	12		$	23		$	35
Real Estate
Construction and land development		584			659			1,243
Residential, 1-4 families		73			82			155
Residential, 5 or more families		—			—			—
Farmland		—			—			—
Nonfarm, nonresidential		589			666			1,255
Agriculture		—			3			3
Consumer		—			50			50
Other		—			126			126
Ending Balance	$	1,258		$	1,609		$	2,867
Ending balance of allowance to total allowance		43.88	%		56.12	%		100	%

XML

Consolidated Statements of Income (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Interest and dividend income
Loans and fees on loans	$ 1,623	$ 2,005	$ 3,397	$ 4,156
Federal funds sold and securities purchased under agreements to resell	8	12	21	24
Investment securities:
Taxable	429	345	795	684
Exempt from federal income tax	176	168	349	341
Deposits with banks	1		2	1
Total interest income	2,237	2,530	4,564	5,206
Interest expense
Deposits	795	748	1,584	1,537
Total interest expense	795	748	1,584	1,537
Net interest income	1,442	1,782	2,980	3,669
Provision for loan losses	3,995	253	3,988	439
Net Interest Income after provision for loan losses	(2,553)	1,529	(1,008)	3,230
Noninterest income
Service charges on deposit accounts	43	55	87	102
Other service charges and fees	31	31	59	57
Net realized gains on sales of securities	10	43	26	43
Other operating income	78	94	157	170
Total noninterest income	162	223	329	372
Noninterest expense
Salaries and employee benefits	1,361	823	2,200	1,615
Occupancy and equipment	156	135	314	312
Foreclosed assets, Net	407	27	388	34
Loss on sale of fixed assets		12		82
Other operating expense	781	419	1,191	826
Total noninterest expense	2,705	1,416	4,093	2,869
Income before income taxes	(5,096)	336	(4,772)	733
Income tax expense (benefit)	(1,818)	15	(1,787)	89
Net Income	$ (3,278)	$ 321	$ (2,985)	$ 644
Basic earnings per share	$ (2.13)	$ 0.21	$ (1.94)	$ 0.42
Diluted earnings per share	$ (2.13)	$ 0.21	$ (1.94)	$ 0.42
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

XML

Fair Value

6 Months Ended

Jun. 30, 2012

Fair Value

Note 5. Fair Value

The estimated fair values of the Company’s financial instruments are as follows:

(In thousands)	June 30, 2012				December 31, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Cash and due from banks	$	47,166	$	47,166	$	4,255	$	4,255
Interest-bearing deposits with banks		164		164		14,758		14,758
Federal funds sold		—		—		33,700		33,700
Securities, available for sale		82,552		82,552		57,105		57,105
Securities, held to maturity		12,824		13,500		12,950		13,662
Restricted equity securities		615		615		592		592
Total loans		119,924		122,683		130,158		132,837
Accrued interest receivable		827		827		824		824
Bank Owned Life Insurance		6,322		6,322		5,437		5,437
Financial liabilities
Deposits		246,437		248,768		232,411		234,816
Accrued interest payable		89		89		88		88
Off-balance sheet assets (liabilities)
Commitments to extend credit and standby letter of credit		—		14,030		—		11,912

Generally accepted accounting principles of the United States (“GAAP”) provides a framework for measuring and disclosing fair value of assets and liabilities recognized in the balance sheet, whether the measurements are made on a recurring basis (for example, available for sale investment securities) or on a nonrecurring basis (for example, impaired loans).

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company utilizes fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Securities available for sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as loans held for sale, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

Fair Value Hierarchy

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine the fair value. These levels are:

Level 1 -	Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2 -	Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3 -	Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques.

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value:

Investment Securities Available for Sale

Investment securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange such as the New York Stock Exchange, Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.

Loans

The Company does not record loans at fair value on a recurring basis, however, from time to time, a loan is considered impaired and an allowance for loan loss is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan are considered impaired. Once a loan is identified as individually impaired, management measures impairment. The fair value of impaired loans is estimated using one of several methods, including the collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring a specific allowance represents loans for which the fair value of expected repayments or collateral exceed the recorded investment in such loans. Impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observerable market price or a current appraised value, the Company records the loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the loan as nonrecurring Level 3.

Foreclosed Assets

Foreclosed assets are adjusted for fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised value of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the foreclosed asset as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the foreclosed asset at nonrecurring Level 3.

Assets and Liabilities Recorded as Fair Value on a Recurring Basis

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis.

(In thousands)
June 30, 2012	Total		Level 1		Level 2		Level 3
Government sponsored enterprises	$	5,947	$	—	$	5,947	$	—
State and municipal securities		7,275		584		6,691		—
Mortgage-backed securities		67,228		—		67,228		—
Other securities		2,102		—		2,102		—
Total assets at fair value	$	82,552	$	584	$	81,968	$	—
(In thousands)
December 31, 2011	Total		Level 1		Level 2		Level 3
Government sponsored enterprises	$	1,952	$	—	$	1,952	$	—
State and municipal securities		5,493		355		5,138		—
Mortgage-backed securities		46,928		—		46,928		—
Other securities		2,732		—		2,732		—
Total assets at fair value	$	57,105	$	355	$	56,750	$	—

There were no liabilities measured at fair value on a recurring basis at June 30, 2012 and December 31, 2011.

Assets and Liabilities Recorded as Fair Value on a Nonrecurring Basis

The Company may be required from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis are included in the table below:

(In thousands)
June 30, 2012	Total		Level 1		Level 2		Level 3
Loans:
Commercial	$	—	$	—	$	—	$	—
Real Estate
Construction and land development		1,891		—		1,891		—
Residential, 1-4 families		—		—		—		—
Nonfarm, nonresidential		4,186		—		4,186		—
Impaired Loans		6,077		—		6,077		—
Foreclosed assets		3,517		—		3,517		—
Total assets at fair value	$	9,594	$	—	$	9,594	$	—
(In thousands)
December 31, 2011	Total		Level 1		Level 2		Level 3
Loans:
Real Estate
Construction and land development	$	2,613	$	—	$	2,613	$	—
Residential, 1-4 families		539		—		539		—
Nonfarm, nonresidential		4,372		—		4,372		—
Impaired Loans		7,524		—		7,524		—
Foreclosed assets		3,418		—		3,418		—
Total assets at fair value	$	10,942	$	—	$	10,942	$	—

There were no liabilities measured at fair value on a nonrecurring basis at June 30, 2012 and December 31, 2011.

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Employee Benefit Plan

6 Months Ended

Jun. 30, 2012

Employee Benefit Plan

Note 4. Employee Benefit Plan

The Bank participates in the Pentegra Defined Benefit Plan for Financial Institutions (“Pentegra Plan”). The Pentegra Plan is a tax-qualified defined-benefit pension plan. The Pentegra Plan’s Employer Identification Number is 13-5645888 and the Plan Number is 333. The Pentegra Plan operates as a multi-employer plan for accounting purposes and is a multiple-employer plan under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. There are no collective bargaining agreements in place that require contributions to the Pentegra Plan.

The Pentegra Plan is a single plan under Internal Revenue Code Section 413 (C) and, as a result, all of the assets stand behind all of the liabilities. Accordingly, under the Pentegra Plan contributions made by a participating employer may be used to provide benefits to participants of other participating employers.

As of June 30, 2012, the required employer contribution of $258 thousand for the plan year ending June 30, 2012, has been made.

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Loans And Allowance For Loan Losses (Narrative) (Detail) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2012 Day	Jun. 30, 2012 Day	Dec. 31, 2011
Accounts, Notes, Loans and Financing Receivable [Line Items]
Overdrafts reclassified as part of gross loans	$ 13,000	$ 13,000	$ 7,000
Loans with an assigned risk grade	500,000	500,000
Days, Loans placed on nonaccrual status become past due	90	90
Loans classified as trouble debt restructurings	$ 6,600,000	$ 6,600,000	$ 6,600,000

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2012

Company's commitments

A summary of the Company’s commitments at June 30, 2012 and December 31, 2011 are as follows:

(In thousands)	June 30, 2012		December 31, 2011
Commitments to extend credit	$	13,633	$	11,612
Standby letters of credit		397		300
Total	$	14,030	$	11,912

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Reclassifications

6 Months Ended

Jun. 30, 2012

Reclassifications

Note 8. Reclassifications

Certain reclassifications have been made to the prior years’ financial statements to place them on a comparable basis with the current year. Net income and stockholders’ equity previously reported were not affected by these reclassifications.

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Securities

6 Months Ended

Jun. 30, 2012

Securities

Note 6. Securities

Debt and equity securities have been classified in the consolidated balance sheets according to management’s intent. The carrying amount of securities and their approximate fair values follow:

June 30, 2012 (In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Available for sale
Government sponsored enterprises	$	5,943	$	27	$	23	$	5,947
State and municipal securities		6,891		384		—		7,275
Mortgage-backed securities		66,265		1,068		105		67,228
Other securities		2,219		—		117		2,102
	$	81,318	$	1,479	$	245	$	82,552
Held to maturity
State and municipal securities	$	12,801	$	676	$	—	$	13,477
Mortgage-backed securities		23		—		—		23
	$	12,824	$	676	$	—	$	13,500
December 31, 2011 (In thousands)
Available for sale
Government sponsored enterprises	$	1,933	$	21	$	2	$	1,952
State and municipal securities		5,226		267		—		5,493
Mortgage-backed securities		46,293		755		120		46,928
Other securities		2,957		18		243		2,732
	$	56,409	$	1,061	$	365	$	57,105
Held to maturity
State and municipal securities	$	12,925	$	712	$	—	$	13,637
Mortgage-backed securities		25		—		—		25
	$	12,950	$	712	$	—	$	13,662

Restricted equity securities, carried at cost, consist of investments in stock of the Federal Home Loan Bank of Atlanta (“FHLB”) and The Federal Reserve Bank of Richmond (“Federal Reserve”), which are upstream correspondents of the Bank. The FHLB requires financial institutions to make equity investments in the FHLB in order to borrow from it. The Bank is required to hold that stock so long as it borrows from the FHLB. The Federal Reserve requires banks to purchase stock as a condition of membership in the Federal Reserve system.

Investment securities with amortized cost of approximately $5.6 million and $6.3 million at June 30, 2012 and December 31, 2011, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.

Gross realized gains and losses for the three-month and six-month periods ended June 30, 2012 and 2011:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
(In thousands)
Realized gains, available for sale securities	$	10	$	43	$	26	$	43
Realized gains, held to maturity securities		—		—		—		—
	$	10	$	43	$	26	$	43

The scheduled maturities of debt securities available for sale and held to maturity at June 30, 2012 were as follows:

	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
(In thousands)
Due in one year or less	$	415	$	419	$	1,235	$	1,255
Due after one year through five years		1,719		1,704		4,155		4,292
Due after five years through ten years		5,361		5,629		2,827		3,037
Due after ten years		73,823		74,800		4,607		4,916
	$	81,318	$	82,552	$	12,824	$	13,500

For mortgage-backed securities, the Company reports maturities based on anticipated lives. Actual results may differ due to interest rate fluctuations.

The following tables show the unrealized losses and related fair values in the Company’s held to maturity and available for sale investment securities portfolios. This information is aggregated by investment category and by the length of time that individual securities have been in a continuous unrealized loss position at June 30, 2012 and December 31, 2011, respectively.

	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
June 30, 2012 (In thousands)	Value		Losses		Value		Losses		Value		Losses
Government sponsored enterprises	$	1,977	$	23	$	—	$	—	$	1,977	$	23
State and municipal securities		—		—		—		—		—		—
Mortgage-backed securities		9,943		68		3,052		36		12,995		104
Other Securities		—		—		1,392		118		1,392		118
Total temporarily impaired securities	$	11,920	$	91	$	4,444	$	154	$	16,364	$	245
	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2011 (In thousands)	Value		Losses		Value		Losses		Value		Losses
Government sponsored enterprises	$	948	$	2	$	—	$	—	$	948	$	2
State and municipal securities		275		—		—		—		275		—
Mortgage-backed securities		9,936		47		4,652		73		14,588		120
Other Securities		866		151		908		92		1,774		243
Total temporarily impaired securities	$	12,025	$	200	$	5,560	$	165	$	17,585	$	365

Management considers the nature of the investment, the underlying causes of the decline in market or fair value, the severity and duration of the decline and other evidence, on a security-by-security basis, in determining if the decline in fair value is other than temporary.

At June 30, 2012, the Company had two government-sponsored securities with an aggregate unrealized loss of approximately $23 thousand, 16 mortgaged-backed securities with an aggregate unrealized loss of approximately $104 thousand and four other securities with an aggregate unrealized loss of approximately $118 thousand. Management does not believe that gross unrealized losses, which totals 1.5% of the amortized costs of the related investment securities, represent an other-than-temporary impairment. The Company has both the ability and the intent to hold all of these securities for a period of time necessary to recover the amortized cost.

At December 31, 2011, the Company had one government-sponsored securities with an aggregate unrealized loss of approximately $2 thousand, one state and municipal securities with no aggregate unrealized loss, 27 mortgaged-backed securities with an aggregate unrealized loss of approximately $120 thousand and five other securities with an aggregate unrealized loss of approximately $243 thousand. Management does not believe that gross unrealized losses, which totals 2.1% of the amortized costs of the related investment securities, represent an other-than-temporary impairment.

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2012

Recent Accounting Pronouncements

Note 7. Recent Accounting Pronouncements

There were no additional accounting standards updates applicable to the company issued by the Financial Accounting Standards Board (“FASB”) during the second quarter ending June 30, 2012. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

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Supplemental Executive Retirement Plan ("SERP")

6 Months Ended

Jun. 30, 2012

Supplemental Executive Retirement Plan ("SERP")

Note 9. Supplemental Executive Retirement Plan (“SERP”)

Due to the outcome of the 2012 Annual Meeting, the SERP of a member of executive management experienced accelerated vesting and became 100% vested. As a result, the net present value of future payments net of deferred tax must be recorded in the period full vesting occurs, creating a net expense of $219,426 being recognized in the 2^nd quarter of 2012.

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Fair Value (Schedule Of Fair Value Of Assets And Liabilities Recorded On Recurring Basis) (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items]
Assets recorded as fair value on a recurring basis	$ 82,552	$ 57,105
Government Sponsored Enterprises [Member]
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items]
Assets recorded as fair value on a recurring basis	5,947	1,952
State And Municipal Securities [Member]
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items]
Assets recorded as fair value on a recurring basis	7,275	5,493
Mortgage-Backed Securities [Member]
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items]
Assets recorded as fair value on a recurring basis	67,228	46,928
Other Securities [Member]
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items]
Assets recorded as fair value on a recurring basis	2,102	2,732
Level 1 [Member]
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items]
Assets recorded as fair value on a recurring basis	584	355
Level 1 [Member] | Government Sponsored Enterprises [Member]
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items]
Assets recorded as fair value on a recurring basis
Level 1 [Member] | State And Municipal Securities [Member]
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items]
Assets recorded as fair value on a recurring basis	584	355
Level 1 [Member] | Mortgage-Backed Securities [Member]
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items]
Assets recorded as fair value on a recurring basis
Level 1 [Member] | Other Securities [Member]
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items]
Assets recorded as fair value on a recurring basis
Level 2 [Member]
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items]
Assets recorded as fair value on a recurring basis	81,968	56,750
Level 2 [Member] | Government Sponsored Enterprises [Member]
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items]
Assets recorded as fair value on a recurring basis	5,947	1,952
Level 2 [Member] | State And Municipal Securities [Member]
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items]
Assets recorded as fair value on a recurring basis	6,691	5,138
Level 2 [Member] | Mortgage-Backed Securities [Member]
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items]
Assets recorded as fair value on a recurring basis	67,228	46,928
Level 2 [Member] | Other Securities [Member]
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items]
Assets recorded as fair value on a recurring basis	2,102	2,732
Level 3 [Member]
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items]
Assets recorded as fair value on a recurring basis
Level 3 [Member] | Government Sponsored Enterprises [Member]
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items]
Assets recorded as fair value on a recurring basis
Level 3 [Member] | State And Municipal Securities [Member]
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items]
Assets recorded as fair value on a recurring basis
Level 3 [Member] | Mortgage-Backed Securities [Member]
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items]
Assets recorded as fair value on a recurring basis
Level 3 [Member] | Other Securities [Member]
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items]
Assets recorded as fair value on a recurring basis

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Securities (Tables)

6 Months Ended

Jun. 30, 2012

Carrying Amount of Securities and Approximate Fair Values

The carrying amount of securities and their approximate fair values follow:

June 30, 2012 (In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Available for sale
Government sponsored enterprises	$	5,943	$	27	$	23	$	5,947
State and municipal securities		6,891		384		—		7,275
Mortgage-backed securities		66,265		1,068		105		67,228
Other securities		2,219		—		117		2,102
	$	81,318	$	1,479	$	245	$	82,552
Held to maturity
State and municipal securities	$	12,801	$	676	$	—	$	13,477
Mortgage-backed securities		23		—		—		23
	$	12,824	$	676	$	—	$	13,500
December 31, 2011 (In thousands)
Available for sale
Government sponsored enterprises	$	1,933	$	21	$	2	$	1,952
State and municipal securities		5,226		267		—		5,493
Mortgage-backed securities		46,293		755		120		46,928
Other securities		2,957		18		243		2,732
	$	56,409	$	1,061	$	365	$	57,105
Held to maturity
State and municipal securities	$	12,925	$	712	$	—	$	13,637
Mortgage-backed securities		25		—		—		25
	$	12,950	$	712	$	—	$	13,662

Schedule of Gross Realized Gains and Losses

Gross realized gains and losses for the three-month and six-month periods ended June 30, 2012 and 2011:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
(In thousands)
Realized gains, available for sale securities	$	10	$	43	$	26	$	43
Realized gains, held to maturity securities		—		—		—		—
	$	10	$	43	$	26	$	43

Maturities of Debt Securities Available for Sale and Held to Maturity

The scheduled maturities of debt securities available for sale and held to maturity at June 30, 2012 were as follows:

	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
(In thousands)
Due in one year or less	$	415	$	419	$	1,235	$	1,255
Due after one year through five years		1,719		1,704		4,155		4,292
Due after five years through ten years		5,361		5,629		2,827		3,037
Due after ten years		73,823		74,800		4,607		4,916
	$	81,318	$	82,552	$	12,824	$	13,500

Unrealized Losses and Related Fair Values in Securities Portfolios

This information is aggregated by investment category and by the length of time that individual securities have been in a continuous unrealized loss position at June 30, 2012 and December 31, 2011, respectively.

	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
June 30, 2012 (In thousands)	Value		Losses		Value		Losses		Value		Losses
Government sponsored enterprises	$	1,977	$	23	$	—	$	—	$	1,977	$	23
State and municipal securities		—		—		—		—		—		—
Mortgage-backed securities		9,943		68		3,052		36		12,995		104
Other Securities		—		—		1,392		118		1,392		118
Total temporarily impaired securities	$	11,920	$	91	$	4,444	$	154	$	16,364	$	245
	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2011 (In thousands)	Value		Losses		Value		Losses		Value		Losses
Government sponsored enterprises	$	948	$	2	$	—	$	—	$	948	$	2
State and municipal securities		275		—		—		—		275		—
Mortgage-backed securities		9,936		47		4,652		73		14,588		120
Other Securities		866		151		908		92		1,774		243
Total temporarily impaired securities	$	12,025	$	200	$	5,560	$	165	$	17,585	$	365

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Loans And Allowance For Loan Losses (Impaired Loan Data) (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Financing Receivable, Impaired [Line Items]
Impaired Balance With No Related Allowance Recorded	$ 5,220	$ 5,004
Related Allowance With No Related Allowance Recorded
Average Recorded Investment With No Related Allowance Recorded	6,047	5,029
Interest Income Recorded With No Related Allowance Recorded	63	55
Interest Income Collected With No Related Allowance Recorded	69	108
Impaired Balance With an Allowance Recorded	7,922	8,782
Related Allowance With an Allowance Recorded	1,845	1,258
Average Recorded Investment With an Allowance Recorded	7,959	9,938
Interest Income Recorded With an Allowance Recorded	34	103
Interest Income Collected With an Allowance Recorded	33	165
Impaired Balance	13,142	13,786
Related Allowance	1,845	1,258
Average Recorded Investment	14,006	14,967
Interest Income Recorded	97	158
Interest Income Collected	102	273
Commercial [Member]
Financing Receivable, Impaired [Line Items]
Impaired Balance With No Related Allowance Recorded
Related Allowance With No Related Allowance Recorded
Average Recorded Investment With No Related Allowance Recorded
Interest Income Recorded With No Related Allowance Recorded
Interest Income Collected With No Related Allowance Recorded
Impaired Balance With an Allowance Recorded		12
Related Allowance With an Allowance Recorded		12
Average Recorded Investment With an Allowance Recorded		12
Interest Income Recorded With an Allowance Recorded
Interest Income Collected With an Allowance Recorded
Impaired Balance		12
Related Allowance		12
Average Recorded Investment		12
Interest Income Recorded
Interest Income Collected
Construction And Land Development [Member]
Financing Receivable, Impaired [Line Items]
Impaired Balance With No Related Allowance Recorded	2,479	2,504
Related Allowance With No Related Allowance Recorded
Average Recorded Investment With No Related Allowance Recorded	2,489	2,529
Interest Income Recorded With No Related Allowance Recorded	49	87
Interest Income Collected With No Related Allowance Recorded	48	108
Impaired Balance With an Allowance Recorded	3,186	3,197
Related Allowance With an Allowance Recorded	1,295	584
Average Recorded Investment With an Allowance Recorded	3,221	3,902
Interest Income Recorded With an Allowance Recorded
Interest Income Collected With an Allowance Recorded
Impaired Balance	5,665	5,701
Related Allowance	1,295	584
Average Recorded Investment	5,710	6,431
Interest Income Recorded	49	87
Interest Income Collected	48	108
Residential, 1-4 Families [Member]
Financing Receivable, Impaired [Line Items]
Impaired Balance With No Related Allowance Recorded	139
Related Allowance With No Related Allowance Recorded
Average Recorded Investment With No Related Allowance Recorded	137
Interest Income Recorded With No Related Allowance Recorded	2
Interest Income Collected With No Related Allowance Recorded	2
Impaired Balance With an Allowance Recorded		612
Related Allowance With an Allowance Recorded		73
Average Recorded Investment With an Allowance Recorded		791
Interest Income Recorded With an Allowance Recorded		13
Interest Income Collected With an Allowance Recorded		16
Impaired Balance	139	612
Related Allowance		73
Average Recorded Investment	137	791
Interest Income Recorded	2	13
Interest Income Collected	2	16
Nonfarm, Nonresidential [Member]
Financing Receivable, Impaired [Line Items]
Impaired Balance With No Related Allowance Recorded	2,602	2,500
Related Allowance With No Related Allowance Recorded
Average Recorded Investment With No Related Allowance Recorded	3,421	2,500
Interest Income Recorded With No Related Allowance Recorded	12	(32)
Interest Income Collected With No Related Allowance Recorded	19
Impaired Balance With an Allowance Recorded	4,736	4,961
Related Allowance With an Allowance Recorded	550	589
Average Recorded Investment With an Allowance Recorded	4,738	5,233
Interest Income Recorded With an Allowance Recorded	34	90
Interest Income Collected With an Allowance Recorded	33	149
Impaired Balance	7,338	7,461
Related Allowance	550	589
Average Recorded Investment	8,159	7,733
Interest Income Recorded	46	58
Interest Income Collected	$ 52	$ 149

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Supplemental Executive Retirement Plan ("SERP") (Narrative) (Detail) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012
Defined Benefit Plan Disclosure [Line Items]
SERP of a member of executive management experienced accelerated vesting and became vested		100.00%
SERP, net expense recognized	$ 219,426

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012
Net income	$ (3,278)	$ 321	$ (2,985)
Unrealized gains on securities:
Unrealized holding gains arising during period,	430	198	517
less income taxes	(146)	(67)	(178)
Unrealized holding gains arising during period, net of income taxes	284	131	339
Less: reclassification adjustment for gains included	10	43	26
less income taxes	(3)	(15)	(9)
Reclassification adjustment for gains included, net of income taxes	7	28	17
Other comprehensive income	291	159	356
Comprehensive income	$ (2,987)	$ 480	$ (2,629)

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2012

Commitments and Contingencies

Note 3. Commitments and Contingencies

The Company’s exposure to credit loss in the event of nonperformance by the other party for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as for on-balance sheet instruments. A summary of the Company’s commitments at June 30, 2012 and December 31, 2011 are as follows:

(In thousands)	June 30, 2012		December 31, 2011
Commitments to extend credit	$	13,633	$	11,612
Standby letters of credit		397		300
Total	$	14,030	$	11,912

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Loans And Allowance For Loan Losses (Schedule Of Loans Considered As TDRs) (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012 Contract
Financing Receivable, Modifications [Line Items]
Number of Contracts	3
Pre-Modification Outstanding Recorded Investment	$ 6,570
Post-Modification Outstanding Recorded Investment	6,570
Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	3
Pre-Modification Outstanding Recorded Investment	6,570
Post-Modification Outstanding Recorded Investment	$ 6,570

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Securities (Schedule Of Gross Realized Gains And Losses) (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Gain (Loss) on Investments [Line Items]
Realized gains, available for sale securities	$ 10	$ 43	$ 26	$ 43
Realized gains, held to maturity securities
Gross realized gains and losses	$ 10	$ 43	$ 26	$ 43

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Fair Value (Tables)

6 Months Ended

Jun. 30, 2012

Estimated Fair Values of Financial Instruments

The estimated fair values of the Company’s financial instruments are as follows:

(In thousands)	June 30, 2012				December 31, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Cash and due from banks	$	47,166	$	47,166	$	4,255	$	4,255
Interest-bearing deposits with banks		164		164		14,758		14,758
Federal funds sold		—		—		33,700		33,700
Securities, available for sale		82,552		82,552		57,105		57,105
Securities, held to maturity		12,824		13,500		12,950		13,662
Restricted equity securities		615		615		592		592
Total loans		119,924		122,683		130,158		132,837
Accrued interest receivable		827		827		824		824
Bank Owned Life Insurance		6,322		6,322		5,437		5,437
Financial liabilities
Deposits		246,437		248,768		232,411		234,816
Accrued interest payable		89		89		88		88
Off-balance sheet assets (liabilities)
Commitments to extend credit and standby letter of credit		—		14,030		—		11,912

Assets and Liabilities Measured at Fair Value on Recurring Basis

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis.

(In thousands)
June 30, 2012	Total		Level 1		Level 2		Level 3
Government sponsored enterprises	$	5,947	$	—	$	5,947	$	—
State and municipal securities		7,275		584		6,691		—
Mortgage-backed securities		67,228		—		67,228		—
Other securities		2,102		—		2,102		—
Total assets at fair value	$	82,552	$	584	$	81,968	$	—
(In thousands)
December 31, 2011	Total		Level 1		Level 2		Level 3
Government sponsored enterprises	$	1,952	$	—	$	1,952	$	—
State and municipal securities		5,493		355		5,138		—
Mortgage-backed securities		46,928		—		46,928		—
Other securities		2,732		—		2,732		—
Total assets at fair value	$	57,105	$	355	$	56,750	$	—

Assets Measured at Fair Value on Nonrecurring Basis

Assets measured at fair value on a nonrecurring basis are included in the table below:

(In thousands)
June 30, 2012	Total		Level 1		Level 2		Level 3
Loans:
Commercial	$	—	$	—	$	—	$	—
Real Estate
Construction and land development		1,891		—		1,891		—
Residential, 1-4 families		—		—		—		—
Nonfarm, nonresidential		4,186		—		4,186		—
Impaired Loans		6,077		—		6,077		—
Foreclosed assets		3,517		—		3,517		—
Total assets at fair value	$	9,594	$	—	$	9,594	$	—
(In thousands)
December 31, 2011	Total		Level 1		Level 2		Level 3
Loans:
Real Estate
Construction and land development	$	2,613	$	—	$	2,613	$	—
Residential, 1-4 families		539		—		539		—
Nonfarm, nonresidential		4,372		—		4,372		—
Impaired Loans		7,524		—		7,524		—
Foreclosed assets		3,418		—		3,418		—
Total assets at fair value	$	10,942	$	—	$	10,942	$	—