Cardinal Bankshares (CDBK) said that falling property valuations and foreclosure charges contributed to a loss during its third quarter.

The Floyd, Va., company reported a $788,000 loss late Tuesday, compared with net income of $289,000 a year earlier. The $280 million-asset company attributed its loss mainly to a $956,000 charge from lower property valuations and related expenses of real estate being held as collateral for nonperforming loans and foreclosures.

"Charges associated with nonperforming credits, which are primarily due to lower property valuations, dropped by over 80% from the second quarter of 2012 as we continue to take significant steps to strengthen our balance sheet," Michael Larrowe, the company's president and chief executive, said in a press release.

This is the first full quarter since Cardinal lost a proxy battle against Schaller Equity Partners that ousted the company's previous CEO and half its board. The company lost $3.3 million in the second quarter partly related to the costs of the proxy battle and other litigation. Larrowe, who was backed by a reconstituted board and allowed to reclaim his director's post, immediately stepped in to reestablish the bank after the year-long battle.

"We are building momentum that is driven by improving asset quality, increasing loan production and continued improvement in net interest margins," Larrowe said.

Total loans fell 22% from a year earlier, to $110 million, but Larrowe said management added three loan officers in the third quarter. The company said in its release that it expects to generate about $9 million in new loans before Christmas, "significantly exceeding the pace of originations in recent years."

"With margins improving and lending on the rise, we believe the bank is on the right track," Larrowe said.

Since the proxy battle, the company has been trying to rebuild and expand relationships. The company said it will add a complete line of mortgages this month. It also plans to launch a business internet banking and remote deposit capture service in December. In the first quarter of 2013, the company plans to offer are electronic statement delivery and mobile banking services.

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