State National Bancshares, Inc. Announces Earnings for the Third Quarter of 2005

Share Name	Share Symbol	Market	Type
State National Bancshares	NASDAQ:SNBI	NASDAQ	Common Stock

State National Bancshares (NASDAQ:SNBI)
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* Earnings Per Share increases 27% to $0.42 (diluted) * Net income increased 31% * Net Interest Margin increased to 5.41% FORT WORTH, Texas, Oct. 25 /PRNewswire-FirstCall/ -- State National Bancshares, Inc. (NASDAQ:SNBI) ("SNBI"), the parent company of State National Bank, today announced net income for third quarter 2005 of $4.4 million, or $0.42 per diluted common share, compared to $3.3 million, or $0.33 per diluted common share, for the comparable 2004 period. Net income for the nine months ended September 30, 2005 was $11.7 million, or $1.14 per diluted common share, compared to $9.6 million, or $1.00 per diluted common share, for the comparable 2004 period. "Our core business strategy continues to show positive earnings results throughout our markets; the Metroplex, the Rio Grande region and the West Texas region," said Tom C. Nichols, Chairman, President and CEO of SNBI. "Our focus on Tarrant County and our concentration on net interest margin has validated itself in the third quarter performance results." Net interest margin increased to 5.41% for the third quarter in 2005 from 4.79% in the same quarter in the previous year and increased to 5.33% for the nine month period ended September 30, 2005 from 4.78% in the same period of 2004. On September 29, 2005, we completed our initial public offering ("IPO") of 1,907,692 shares of common stock which was priced at $26.00 per share. The net proceeds from the sale of the shares in the IPO were received by us on October 5, 2005. Due to the timing of the transaction, the receivable of cash was netted against equity at September 30, 2005. As such, we have elected to calculate some of the following ratios, where noted, without the effects of the additional shares from the IPO. On August 31, 2005, SNBI broke ground for a new building in downtown Fort Worth which will house its downtown banking center. Currently, SNBI has ten banking centers in Tarrant County. SNBI also has another banking center under construction in Lubbock which will bring the total banking centers in Lubbock to four. SNBI completed the acquisition of Mercantile Bank, Texas ("Mercantile") on July 30, 2004. The results of operations for Mercantile have been included in the consolidated financial statements since the purchase date. Results of Operations For the three months ended September 30, 2005, net income was $4.4 million compared to $3.3 million for the same period in 2004. Net income per diluted common share was $0.42 for the three months ended September 30, 2005 compared with $0.33 for the same period in 2004, which represents an increase of 27.3% per share. Return on average assets, average common equity and average tangible equity for the three months ended September 30, 2005 were 1.27%, 10.85% and 21.54%, respectively. State National's efficiency ratio was 63.93% for the three months ended September 30, 2005. Net income was $11.7 million for the nine month period ended September 30, 2005, compared to $9.6 million for the nine month period ended September 30, 2004. Net income per diluted common share was $1.14 for the nine month period ended September 30, 2005, compared to $1.00 for the comparable period in 2004 which represents an increase of 14.0% on a per share basis. Returns on average assets, average common equity and average tangible equity for the first nine months of 2005 were 1.15%, 9.86% and 19.85%, respectively. State National's efficiency ratio was 65.02% for the nine month period ended September 30, 2005. Our tax-equivalent net interest income was $15.7 million for the three months ended September 30, 2005 as compared to $13.6 million for the comparable period in 2004, an increase of 15.6%. Our net interest margin on a fully taxable-equivalent basis was 5.41% for third quarter of 2005 as compared to 4.79% in the same period in 2004. These increases were primarily attributable to higher interest rates earned on our loan portfolio as well as higher average loan volumes. Non interest income was $4.9 million for the three month period ended September 30, 2005 and $4.2 million for the three month period ended September 30, 2004, an 18.1% increase. This increase is primarily related to increased transactional and savings accounts resulting from our acquisition of Mercantile. Non interest expense was $14.0 million for the third quarter of 2005 as compared to $12.7 million for the same period in 2004, an increase of 10.1% which is primarily attributable to the acquisition of Mercantile. Our provision for loan losses for the three month period ended September 30, 2005 was $150,000 compared to $300,000 for the three month period ended September 30, 2004. Loans at September 30, 2005 totaled $973.3 million, an increase of $37.0 million, or 4.0% from $936.3 million at September 30, 2004. Deposits in total remained unchanged at September 30, 2005 at $1.15 billion, as compared to September 30, 2004. However, non interest bearing deposits increased from $368.4 million at September 30, 2004 to $428.8 million at September 30, 2005 an increase of 16.4%. This increase was offset by a decrease in interest bearing and time deposits from $480.3 million and $299.8 million, respectively at September 30, 2004 to $441.3 million and $280.7 million, respectively at September 30, 2005 or a decrease of 8.1% and 6.4%, respectively. The decrease in time deposit accounts was the result of management's intent to keep our rates at lower market levels in an effort to realign our deposit mix. ACQUISITIONS On October 6, 2005, we completed our previously announced acquisition of Heritage Financial Corporation ("Heritage"), parent company of Heritage National Bank, a bank with assets of $237 million and three branches located in Southwestern Tarrant County and one branch in neighboring Hood County. Heritage shareholders received $53.5 million in cash for all of the outstanding shares of common stock. FORWARD-LOOKING STATEMENTS This press release contains certain forward-looking information about State National that is intended to be covered by the safe harbor for "forward- looking statements" provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward- looking statements. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of State National. State National cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, implied or projected by, such forward-looking statements. Risks and uncertainties include, but are not limited to: the possibility that personnel changes will not proceed as planned; planned acquisitions and related cost savings cannot be realized or realized within the expected time frame; costs and uncertainties related to the outcome of pending litigation; revenues are lower than expected; competitive pressure among depository institutions increases significantly; the integration of acquired businesses costs more, takes longer or is less successful than expected; the cost of additional capital is more than expected; a change in the interest rate environment reduces interest margins; general economic conditions, either nationally or in the market areas in which State National operates, are less favorable than expected; legislative or regulatory requirements or changes that adversely affect State National's business or regulatory capital requirements, or that alter the regulatory capital treatment of the State National's trust preferred securities; changes in the securities markets and other risks that are described in State National's public filings with the U.S. Securities and Exchange Commission (the "SEC"). If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, State National's results could differ materially from those expressed in, implied or projected by such forward- looking statements. State National assumes no obligation to update such forward-looking statements. State National Bancshares, Inc. Financial Highlights (Dollars in thousands, except per share data) Three Months Ended Nine Months Ended Sept 30, Sept 30, Sept 30, Sept 30, 2005 2004 2005 2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Interest income $19,589 $16,019 $55,596 $43,583 Interest expense 3,882 2,435 9,998 6,564 Net interest income 15,707 13,584 45,598 37,019 Provision for loan losses 150 300 750 300 Net interest income after provision for loan losses 15,557 13,284 44,848 36,719 Non interest income 4,931 4,177 13,803 11,804 Non interest expense 14,025 12,738 41,119 34,385 Income before income taxes 6,463 4,723 17,532 14,138 Income tax expense 2,085 1,387 5,857 4,579 Net income $4,378 $3,336 $11,675 $9,559 Basic earnings per share $0.43 $0.34 $1.16 $1.02 Diluted earnings per share $0.42 $0.33 $1.14 $1.00 Period end shares outstanding (A) 10,063,415 10,042,793 10,063,415 10,042,793 Weighted average shares outstanding (basic) 10,080,154 9,850,538 10,066,186 9,365,945 Weighted average shares outstanding (diluted) 10,352,201 10,054,951 10,244,945 9,527,767 (A) Period end shares outstanding at September 30, 2005 does not reflect the effects of the IPO. Shares outstanding including the effects of the IPO would be 11,971,107. State National Bancshares, Inc. Average Balance Sheet Data (Dollars in thousands) Three Months Ended Nine Months Ended Sept 30, Sept 30, Sept 30, Sept 30, 2005 2004 2005 2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Total loans $963,379 $871,952 $958,497 $787,256 Securities 130,028 179,927 139,414 200,993 Fed funds sold and other earning assets 68,377 83,068 43,109 46,382 Total earning assets 1,161,784 1,134,947 1,141,020 1,034,631 Allowance for loan loss (11,627) (11,524) (11,511) (10,562) Cash and due from banks 62,622 59,560 61,594 50,932 Goodwill 70,818 53,915 70,818 43,261 Other intangible assets, net 13,357 12,801 14,189 12,889 Other Real Estate 2,036 2,867 1,962 2,317 Fixed assets, net 35,835 28,471 34,921 26,199 Other assets 44,677 41,690 44,271 38,038 Total assets $1,379,502 $1,322,727 $1,357,264 $1,197,705 Demand deposits $412,567 $332,183 $399,425 $295,879 Interest bearing deposits 721,498 767,693 721,592 696,097 Total deposits 1,134,065 1,099,876 1,121,017 991,976 Federal funds purchased and other interest bearing liabilities 23,869 23,600 20,919 21,954 Subordinated notes payable 47,000 45,023 47,000 43,563 Notes payable 823 937 851 967 Other liabilities 12,412 12,678 9,544 8,816 Shareholders' equity 161,333 140,613 157,933 130,429 Total liabilities and equity $1,379,502 $1,322,727 $1,357,264 $1,197,705 State National Bancshares, Inc. Income Statement Data (Dollars in thousands) Three Months Ended Nine Months Ended Sept 30, Sept 30, Sept 30, Sept 30, 2005 2004 2005 2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Interest on loans $17,728 $14,015 $50,519 $37,463 Interest on securities 1,277 1,737 4,100 5,727 Interest on federal funds sold and other earning assets 584 267 977 393 Total interest income 19,589 16,019 55,596 43,583 Interest expense - deposits 2,862 1,776 7,267 4,841 Interest expense - federal funds purchased and securities sold under agreement to repurchase 178 52 387 99 Interest expense - subordinated notes payable 832 596 2,314 1,587 Interest expense - notes payable 10 11 30 37 Total interest expense 3,882 2,435 9,998 6,564 Net interest income 15,707 13,584 45,598 37,019 Provision for loan losses 150 300 750 300 Net interest income after provision for loan losses 15,557 13,284 44,848 36,719 Service charges on deposit accounts 2,600 2,490 7,416 6,833 Gain on sale of loans 804 636 2,153 1,723 Bank owned life insurance 316 323 948 951 Other income 1,211 728 3,286 2,297 Total non interest income 4,931 4,177 13,803 11,804 Salaries and employee benefits 7,297 6,491 21,614 17,587 Net occupancy and equipment 2,322 1,983 6,628 5,654 Amortization of intangibles 824 778 2,471 2,035 Professional fees 326 276 1,017 806 Communication 300 267 856 718 Restructuring/merger 19 284 59 285 Other 2,937 2,659 8,474 7,300 Total non interest expense 14,025 12,738 41,119 34,385 Income before taxes 6,463 4,723 17,532 14,138 Income tax expense 2,085 1,387 5,857 4,579 Net income $4,378 $3,336 $11,675 $9,559 State National Bancshares, Inc. Common Share and Other Data (Dollars in thousands except per share data) Three Months Ended Nine Months Ended Sept 30, Sept 30, Sept 30, Sept 30, 2005 2004 2005 2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Book value per share (A) $16.03 $14.73 $16.03 $14.73 Tangible book value per share (A) 8.15 6.62 8.15 6.62 Period end shares outstanding (B) 10,063,415 10,042,793 10,063,415 10,042,793 Weighted average shares outstanding (basic) 10,080,154 9,850,538 10,066,186 9,365,945 Weighted average shares outstanding (diluted) 10,352,201 10,054,951 10,244,945 9,527,767 Nonaccrual loans $5,188 $6,723 $5,188 $6,723 Accruing loans 90 or more days past due --- 394 --- 394 Restructured loans 92 20 92 20 Total non-performing loans 5,280 7,137 5,280 7,137 Repossessed assets 1,836 2,662 1,836 2,662 Other real estate 15 12 15 12 Total non-performing assets $7,131 $9,811 $7,131 $9,811 Allowance for loan losses at end of period $11,620 $12,437 $11,620 $12,437 Net charge-offs $68 $50 $513 $299 Basic earnings per share $0.43 $0.34 $1.16 $1.02 Diluted earnings per share $0.42 $0.33 $1.14 $1.00 (A) Calculated assuming period end shares outstanding of 10,063,415 at September 30, 2005 which is the shares outstanding prior to the IPO. (B) Period end shares outstanding at September 30, 2005 does not reflect the effects of the IPO. Shares outstanding including the effects of the IPO would be 11,971,107. State National Bancshares, Inc. Performance and Asset Quality Ratios Three Months Ended Nine Months Ended Sept 30, Sept 30, Sept 30, Sept 30, 2005 2004 2005 2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Return on average assets (annualized) 1.27% 1.01% 1.15% 1.06% Return on average common equity (annualized) 10.85 9.49 9.86 9.77 Return on average tangible common equity (annualized) 21.54 15.00 19.85 18.69 Net interest margin (tax equivalent) (annualized) 5.41 4.79 5.33 4.78 Efficiency ratio 63.93% 67.28% 65.02% 66.21% Non performing assets to average earning assets 0.61% 0.86% 0.62% 0.95% Non performing assets to loans and other real estate 0.73 1.04 0.73 1.04 Net charge offs (annualized) to average loans 0.03 0.02 0.07 0.05 Allowance for loan losses to total loans 1.19 1.33 1.19 1.33 State National Bancshares, Inc. Balance Sheet Data (at period end) (Dollars in thousands) Sept 30, June 30, March 31, Dec 31, Sept 30, 2005 2005 2005 2004 2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Total loans $973,322 $965,853 $957,037 $946,166 $936,329 Securities and other investments 124,899 133,916 141,219 159,314 183,861 Federal funds sold and other earning assets 77,425 45,884 36,548 34,575 39,008 Total earning assets 1,175,646 1,145,653 1,134,804 1,140,055 1,159,198 Allowance for loan losses (11,620) (11,538) (11,386) (11,383) (12,437) Cash and due from banks 64,658 64,175 65,401 54,892 67,632 Goodwill 70,818 70,818 70,818 70,818 70,803 Other intangible assets, net 13,015 13,839 14,662 15,486 16,339 Other real estate 1,851 2,212 1,936 1,952 2,674 Premises and equipment, net 35,583 35,136 34,308 33,915 30,119 Other Assets 47,058 45,521 44,305 44,645 40,870 Total Assets $1,397,009 $1,365,816 $1,354,848 $1,350,380 $1,375,198 Demand deposits 428,795 $401,797 $407,898 $390,159 $368,431 Interest bearing deposits 721,981 725,785 717,466 736,235 780,094 Total deposits 1,150,776 1,127,582 1,125,364 1,126,394 1,148,525 Federal funds purchased and other interest bearing liabilities 27,470 21,273 18,572 18,530 23,919 Subordinated notes payable 47,000 47,000 47,000 47,000 47,000 Notes payable 810 840 870 899 928 Other liabilities 9,618 10,908 8,790 6,197 6,899 Total liabilities 1,235,674 1,207,603 1,200,596 1,199,020 1,227,271 Shareholders' equity 161,335 158,213 154,252 151,360 147,927 Total liabilities and equity $1,397,009 $1,365,816 $1,354,848 $1,350,380 $1,375,198 State National Bancshares, Inc. Performance, Asset Quality and Capital Ratios Three Months Ended Sept 30, June 30, March 31, Dec 31, Sept 30, 2005 2005 2005 2004 2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Return on average assets (annualized) 1.27% 1.14% 1.03% 1.11% 1.01% Return on average common equity (annualized) 10.85 9.70 8.97 10.03 9.49 Return on average tangible common equity (annualized) 21.54 19.51 18.91 21.62 15.00 Net interest margin (tax equivalent) (annualized) 5.41 5.35 5.24 5.14 4.79 Efficiency ratio 63.93% 65.22% 66.03% 65.38% 67.28% Non performing assets to average earning assets 0.61% 0.64% 0.73% 0.86% 0.86% Non performing assets to loans and other real estate 0.73 0.75 0.86 0.98 1.04 Net charge offs (annualized) to average loans 0.03 0.09 0.13 0.18 0.02 Allowance for loan losses to total loans 1.19 1.21 1.20 1.21 1.33 Tier 1 risk-based capital 11.74% 11.84% 11.13% 10.89% 10.50% Total risk-based capital 12.82 12.96 12.21 11.98 11.70 Tier 1 leverage capital 9.71 9.61 9.36 8.82 9.07 Tangible equity to tangible assets 6.23 6.10 5.80 5.55 5.14 Equity to assets 11.55 11.58 11.39 11.21 10.76 State National Bancshares, Inc. Yield Analysis Three Months Ended September 30, 2005 September 30, 2004 Interest Interest Average Income/ Yield/ Average Income/ Yield/ Balance Expenses Rate(A) Balance Expense Rate(A) (Dollars in thousands) Assets: Interest earnings assets: Loans, net of unearned income $963,379 $17,728 7.36% $871,952 $14,015 6.43% Securities 130,028 1,288 3.96% 179,927 1,752 3.89% Time deposits in other banks 13,591 127 3.74% 23,474 116 1.98% Federal funds sold 54,786 457 3.34% 59,594 151 1.01% Total interest- earnings assets 1,161,784 19,600 6.75% 1,134,947 16,034 5.65% Noninterest-earning assets: Cash and due from banks 62,622 59,560 Intangible assets 84,175 66,716 Premises and equipment, net 35,835 28,471 Accrued interest receivable and other assets 46,713 44,557 Allowance for loan losses (11,627) (11,524) Total noninterest- earning assets 217,718 187,780 Total assets $1,379,502 $1,322,727 Liabilities and shareholders equity: Interest-bearing liabilities: Demand, savings and money market deposits $443,542 1,104 1.00% $470,978 581 0.49% Time deposits 277,956 1,758 2.53% 296,715 1,195 1.61% Fed funds purchased and securities sold under agreement to repurchase 23,869 178 2.98% 23,600 52 0.88% Subordinated notes payable 47,000 832 7.08% 45,023 596 5.30% Note payable 823 10 4.86% 937 11 4.70% Total interest- bearing liabilities 793,190 3,882 1.96% 837,253 2,435 1.16% Noninterest-bearing liabilities: Demand deposits 412,567 332,183 Accrued interest payable and other liabilities 12,412 12,678 Total noninterest- bearing liabilities 424,979 344,861 Total liabilities 1,218,169 1,182,114 Shareholders' equity 161,333 140,613 Total liabilities and shareholders' equity $1,379,502 $1,322,727 Net interest income $15,718 $13,599 Net interest spread (B) 4.79% 4.49% Net interest margin (C) 5.41% 4.79% (A) Yields on tax-exempt securities are calculated on a fully taxable equivalent basis assuming a 35% tax rate. (B) Represents the average rate earned on interest-earning assets less the average rate paid on interest-bearing liabilities. (C) Represents net interest income on a fully taxable equivalent basis as a percentage of average interest-earning assets. State National Bancshares, Inc. Yield Analysis Nine Months Ended September 30, 2005 September 30, 2004 Interest Interest Average Income/ Yield/ Average Income/ Yield/ Balance Expenses Rate(A) Balance Expense Rate(A) (Dollars in thousands) Assets: Interest earnings assets: Loans, net of unearned income $958,497 $50,519 7.03% $787,256 $37,463 6.34% Securities 139,414 4,140 3.96% 200,993 5,766 3.82% Time deposits in other banks 10,807 237 2.92% 15,020 131 1.16% Federal funds sold 32,302 740 3.05% 31,362 262 1.11% Total interest- earnings assets 1,141,020 55,636 6.50% 1,034,631 43,622 5.62% Noninterest-earning assets: Cash and due from banks 61,594 50,932 Intangible assets 85,007 56,150 Premises and equipment, net 34,921 26,199 Accrued interest receivable and other assets 46,233 40,355 Allowance for loan losses (11,511) (10,562) Total noninterest- earning assets 216,244 163,074 Total assets $1,357,264 $1,197,705 Liabilities and shareholders equity: Interest-bearing liabilities: Demand, savings and money market deposits $444,520 2,768 0.83% $402,638 1,273 0.42% Time deposits 277,072 4,499 2.17% 293,459 3,568 1.62% Fed funds purchased and securities sold under agreement to repurchase 20,919 387 2.47% 21,954 99 0.60% Subordinated notes payable 47,000 2,314 6.56% 43,563 1,587 4.86% Note payable 851 30 4.70% 967 37 5.10% Total interest- bearing liabilities 790,362 9,998 1.69% 762,581 6,564 1.15% Noninterest-bearing liabilities: Demand deposits 399,425 295,879 Accrued interest payable and other liabilities 9,544 8,816 Total noninterest- bearing liabilities 408,969 304,695 Total liabilities 1,199,331 1,067,276 Shareholders' equity 157,933 130,429 Total liabilities and shareholders' equity $1,357,264 $1,197,705 Net interest income $45,638 $37,058 Net interest spread (B) 4.81% 4.47% Net interest margin (C) 5.33% 4.78% (A) Yields on tax-exempt securities are calculated on a fully taxable equivalent basis assuming a 35% tax rate. (B) Represents the average rate earned on interest-earning assets less the average rate paid on interest-bearing liabilities. (C) Represents net interest income on a fully taxable equivalent basis as a percentage of average interest-earning assets. DATASOURCE: State National Bancshares, Inc. CONTACT: Tom C. Nichols, Chairman, President and Chief Executive Officer, or Don E. Cosby, Executive Vice President and Chief Financial Officer, both of State National Bancshares, Inc., +1-817-547-1150, or fax, +1-817-547-1159 Web site: http://www.statenationalbank.com/

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SNBI State National Bancshares