Cardinal Bankshares (CDBK) in Floyd, Va., reported a steep quarterly loss as it continues to work through legacy credit losses.

The $271 million-asset company's third-quarter loss was 55% higher than that of a year earlier, at $1.3 million. Cardinal said part of the loss was tied to $971,000 in credit losses.

Cardinal's net interest income climbed 26% from a year earlier, to $1.7 million, because of income from new loans and lower costs from deposits and debt. Noninterest income rose 19% from a year earlier, to $152,000.

The company's noninterest expense increased 6% from a year earlier, to $2.1 million.

"The rapid change in technology and the costs of an ever increasing regulatory burden require more resources to adapt in the short-term while also requiring us to take advantage of available efficiencies over the longer-term," Chief Executive Michael Larrowe said in a Friday press release. "Although these changes are difficult, we are working through those as quickly as possible after much deliberate consideration of the needs of the bank, its customers, its employees, and long-term shareholder reward."

Cardinal's loan-loss provision rose 33% from a year earlier, to $1.2 million. Net chargeoffs fell 63% from a year earlier, to $925,000.

Cardinal is emerging from a turbulent period that included a proxy battle, a management shakeup that made Larrowe CEO and an overhaul of the company's internal operations.

"Fundamentally, the bank was later in the recent economic downturn to recognize credit losses from our borrowers' financial challenges than most of our peer institutions," Larrowe said. "While improvement is happening, that delay combined with the expense associated with necessary systems and skills development undertaken by the bank over the last 16 months has caused our financial results to improve more slowly than any of us would like."

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