Cardinal State Bank Reports Increased Quarterly Earnings

DURHAM, N.C., Oct. 18  /PRNewswire-FirstCall/ -- Cardinal State Bank (NASDAQ:CSNC), a North Carolina state chartered bank headquartered in Durham, North Carolina, announced today that its net income for the third quarter ended September 30, 2006 totaled $294,000, compared to net income of $210,000 for the third quarter of 2005, an increase of 40.0%.  For the nine months ended September 30, 2006, net income amounted to $729,000, compared to $609,000 for the first nine months of 2005, an increase of 19.7%.  In compliance with current accounting regulations which became effective January 1, 2006, results for the 2006 periods include $65,000 and $202,000, respectively, in stock option expense.

Total assets as of September 30, 2006 were $180.1 million, compared to $152.1 million at September 30, 2005, an increase of $28.0 million or 18.4%. Similar gains were experienced in loans and deposits.  Total loans were $151.8 million, an increase of $30.5 million or 25.1%, over the $121.3 million reported for the same period in 2005.  Total deposits were $151.9 million, an increase of $26.6 million or 21.2% over third quarter 2005 deposits of $125.3 million.

"The third quarter of 2006 was another good quarter for Cardinal State Bank," said John W. Mallard, Jr., President and CEO of Cardinal State Bank. "We achieved strong financial results and also opened our Hillsborough Office on September 5, 2006.  Community response in Hillsborough has been excellent. We are anticipating further improvement in our growth and profitability in the fourth quarter."

Cardinal State Bank is a full-service community bank.  Founded in 2001, the Bank has three offices in Durham:  Homestead Market, Independence Park and Westgate Drive and one office in Hillsborough at 100 S. Churton Street.

This news release may contain, among other things, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements regarding certain of Cardinal State Bank's goals and expectations with respect to earnings, earnings per share, revenue, expenses and the growth rate in such items, as well as other measures of economic performance, including statements relating to estimates of credit quality trends, and (ii) statements preceded by, followed by or that include the words "may", "could", "should", "would", "believe", "anticipate", "estimate", "expect", "intend", "plan", "projects", "outlook" or similar expressions. These statements are based upon the current beliefs and expectations of Cardinal State Bank's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. These forward-looking statements involve certain risks and uncertainties that are subject to change based on various factors (many of which are beyond Cardinal State Bank's control).

                             CARDINAL STATE BANK
                        ($000's Except Per Share Data)

                                  As of or For The       As of or For The
                                 Three Months Ended      Nine Months Ended
                                    September 30            September 30
                                   2006      2005          2006     2005
  Income Statement:
  Interest Income                 $3,186     2,279        $9,036   6,237
  Interest Expense                 1,503       887         4,079   2,273
  Net Interest Income              1,683     1,392         4,957   3,964
  Loan Loss Provision                 41        60           409     171
  Net Interest Income
    After Provision                1,642     1,332         4,548   3,793
  Other Income                       120       134           417     320
  Other Expense (1)                1,468     1,256         4,236   3,504
  Income Before Taxes                294       210           729     609
  Income Taxes                        --        --            --      --
  Net Income                        $294       210          $729     609

  (1) Includes stock option
      expense                        $65        --          $202      --

  Income Per Share:
  Basic                              .13       .09           .32     .27
  Diluted                            .13       .09           .32     .26
  Average Shares
  Outstanding (000's):
  Basic                            2,263     2,261         2,262   2,261
  Diluted                          2,263     2,288         2,262   2,288

  Balance Sheet Data:
  Total Assets                  $180,149   152,080            --      --
  Total Deposits                 151,926   125,253            --      --
  Total Loans                    151,754   121,270            --      --
  Loan Loss Reserve                1,971     1,522            --      --
  Total Shareholders' Equity      20,022    18,945            --      --

  Asset Quality:
  Non-Performing Loans             1,208       453            --      --
  Non-Performing Loans
    To Total Assets (%)              .67       .30            --      --
  Net Loan Charge-Offs                54        17           121      39
  Net Loan Charge-Offs
    To Average Loans (%)             .14       .06           .11     .05

  Performance Ratios:
  Return On Average Assets (%)       .65       .56           .56     .56
  Return On Average Equity (%)      5.84      4.41          4.97    4.35
  Net Interest Margin (%)           3.87      3.86          3.96    3.80


DATASOURCE: Cardinal State Bank



CONTACT:  John W. Mallard, Jr., President and Chief Executive Officer of

Cardinal State Bank, [phone], or 

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