Exhibit 99.1

Cardinal Bankshares Corporation

101 Jacksonville Circle

Floyd, Virginia 24091

Contact:	Leon Moore	Telephone: (540) -745-4191
	Chairman of the Board, President and CEO	FAX: (540-) 745-4133
	Stephanie Kent Senior Vice President and Principal Financial Officer

August 21, 2006 For Immediate Release Traded: OTC Bulletin Board         Symbol: CDBK

Cardinal Bankshares Corporation Announces Increased Earnings for the First Six Months of 2006

FLOYD, VA – Cardinal Bankshares Corporation is pleased to report increased year to date earnings for the first half of 2006 as compared to the first half of 2005. “As the bank continues to expand, we are quite pleased to report this increase in earnings”, stated Leon Moore, chairman and chief executive officer.

Net income for the first six months of 2006 amounted to $1,270,000, a slight increase of $167,000 from the income of $1,103,000 for the same period in 2005. Basic earnings amounted to $.83 per share as compared to $.72 per share for the first 6 months of 2005. This represents an increase of 15.1% above ending figures of June 2005.

Noninterest expense increased approximately $57,000 the first six months of 2006 compared to the first six months of 2005. The largest portion of that amount was attributed to personnel expenses related to Tanglewood and Salem branches added during 2005.

Total assets at June 30, 2006 were $191,122,000. Net loans ended the first six months at $123,342,000. Deposits at June 2006 were $162,068,000.

Mr. Moore stated, “Asset quality remains good and our capital position remains strong.”

Moore added, “Plans are underway to open our eighth branch in early 2007. This branch in Pulaski County, Virginia will serve the Fairlawn community. With this expansion, I believe the bank is well positioned for future growth and success. We appreciate the support of our customers, shareholders and employees. We welcome your comments and the opportunity to serve you.”

Mr. Moore commented on a recent article in the Roanoke, Virginia newspaper concerning the ongoing lawsuit between Cardinal and its former Chief Financial Officer David Welch. The newspaper article refers to a court filing by Welch in which Welch presents as fact his speculation about how much Cardinal has spent defending against his efforts to be reinstated as CFO. Mr. Moore said, “Mr. Welch could not know whether his speculation—which he passed off as fact in his court filing—is true or not. In reality, Mr. Welch’s speculation is false and greatly overstates Cardinal’s expenses in the case. Cardinal is troubled that its former CFO would go on record with these conjectures about Cardinal’s finances. The remarks reveal a casual willingness to pass off provocative speculation as fact. If anything, Welch’s statements illustrate exactly why Cardinal so vigorously opposes his reinstatement as CFO. Cardinal finds it unacceptable that its former CFO would make public representations about the finances of the company without knowing whether they were right or wrong. Like the vast majority of public companies, Cardinal has had to spend substantial amounts to comply with the new requirements of the Sarbanes Oxley Act. These expenses have nothing to do with Welch’s suit. Even so, Cardinal’s results are gratifying”.

Cardinal provides a wide range of commercial banking services to individuals and small to medium-sized businesses through its main office located in Floyd, Virginia and its branch locations in Christiansburg, Hillsville, Roanoke, Salem and Willis, Virginia.

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This press release may contain “forward-looking statements,” within the meaning of federal securities laws, that involve risks and uncertainties. Statements herein are based on certain assumptions and analyses by the Company and other factors it believes are appropriate in the circumstances. However, the Company’s expectations are subject to a number of risks and uncertainties and other factors that could cause actual results, events and developments to differ materially from those contemplated by any forward-looking statements herein. Consequently, all forward-looking statements made herein are qualified by these cautionary statements and the cautionary language in the Company’s most recent Form 10-K report and other documents filed with the Securities and Exchange Commission.

Cardinal Bankshares Corporation and Subsidiary

Consolidated Balance Sheets

(In thousands, except share data)	(Unaudited) June 30, 2006			(Audited) December 31, 2005
Assets
Cash and due from banks	$	4,378		$	4,292
Interest-bearing deposits		7,438			9,042
Federal funds sold		6,600			5,125
Investment securities available for sale, at fair value		19,771			19,308
Investment securities held to maturity (fair value June 30, 2006 - $17,488; December 31, 2005 - $17,743)		17,455			17,470
Restricted equity securities		554			546
Total loans		124,809			129,981
Allowance for loan losses		(1,467	)		(1,427	)
Net loans		123,342			128,554
Bank premises and equipment, net		3,918			3,997
Accrued interest receivable		1,019			998
Foreclosed properties		212			418
Bank owned life insurance		4,709			4,631
Other assets		1,726			1,854
Total assets	$	191,122		$	196,235
Liabilities and Stockholders’ Equity
Noninterest-bearing deposits	$	28,915		$	26,747
Interest-bearing deposits		133,153			141,101
Total deposits		162,068			167,848
Securities sold under agreements to repurchase		—			134
Accrued interest payable		137			134
Other liabilities		1,109			1,061
Total liabilities		163,314			169,177
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		9,688			8,833
Accumulated other comprehensive income, net		(162	)		(57	)
Total stockholders’ equity		27,808			27,058
Total liabilities and stockholders’ equity	$	191,122		$	196,235

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)	2006			2005		2006			2005
Interest income
Loans and fees on loans	$	2,267		$	2,165	$	4,583		$	4,167
Federal funds sold and securities purchased under agreements to resell		47			32		74			58
Investment securities:
Taxable		207			208		399			418
Exempt from federal income tax		213			229		431			468
Deposits with banks		85			17		196			34
Total interest income		2,819			2,651		5,683			5,145
Interest expense
Deposits		987			844		1,956			1,619
Borrowings		—			10		—			22
Total interest expense		987			854		1,956			1,641
Net interest income		1,832			1,797		3,727			3,504
Provision for loan losses		10			12		30			36
Net interest income after provision for loan losses		1,822			1,785		3,697			3,468
Noninterest income
Service charges on deposit accounts		64			71		132			129
Other service charges and fees		26			26		49			49
Net realized gains on sales of securities		—			6		3			9
Other operating income		92			77		222			162
Total noninterest income		182			180		406			349
Noninterest expense
Salaries and employee benefits		741			702		1,488			1,385
Occupancy and equipment		167			173		340			365
Foreclosed assets, net		(9	)		—		(9	)		—
Other operating expense		314			349		621			660
Total noninterest expense		1,213			1,224		2,440			2,410
Income before income taxes		791			741		1,663			1,407
Income tax expense		184			164		393			304
Net Income	$	607		$	577	$	1,270		$	1,103
Basic earnings per share	$	0.40		$	0.38	$	0.83		$	0.72
Diluted earnings per share	$	0.40		$	0.38	$	0.83		$	0.72
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