State National Bancshares, Inc. Reports First Quarter 2006 Financial Results

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 Increase 15.2%, Net Income Increases 33.5% and Net Interest Margin Increases 5.40% Compared to First Quarter 2005 FORT WORTH, Texas, April 26 /PRNewswire-FirstCall/ -- State National Bancshares, Inc. (NASDAQ:SNBI) ("SNBI"), the parent company of State National Bank, today announced net income for the first quarter 2006 of $4.6 million, or $0.38 per diluted common share, compared to $3.4 million, or $0.33 per diluted common share, for the comparable 2005 period. SNBI completed the acquisition of Heritage Financial Corporation ("Heritage") on October 6, 2005. The results of operations for Heritage have been included in SNBI's consolidated financial statements since the date of acquisition. "During the first quarter, we made significant progress in reaching our financial goals, and are on track to impressive financial performance for the year," said Tom C. Nichols, Chairman, President and CEO of SNBI. "Our discipline in managing net interest margin, improving our efficiency ratio and increasing core deposits has contributed to our financial strength. Our financial growth is the result of devotion and commitment by our staff and the loyalty and support of our customers and shareholders. Moving forward, we will continue to focus our energies on increasing shareholder value through strategic acquisitions, impressive core funding and expense efficiencies." Results of Operations For the three months ended March 31, 2006, net income was $4.6 million compared to $3.4 million for the same period in 2005. Net income per diluted common share was $0.38 for the three months ended March 31, 2006 compared with $0.33 for the same period in 2005, which represents an increase of 15.2% per share. Though first quarter earnings were above budget, first quarter results have historically been lower than other quarters, primarily due to seasonality of loans and deposits and the fact that the first quarter has fewer calendar days than any other quarter. Return on average assets, average common equity and average tangible equity for the three months ended March 31, 2006 were 1.11%, 8.54% and 16.13%, respectively, compared to 1.03%, 8.97% and 18.91%, respectively for the three months ended March 31, 2005. State National's efficiency ratio was 63.56% and 66.03% for the three months ended March 31, 2006 and March 31, 2005, respectively. Our tax-equivalent net interest income was $18.5 million for the three months ended March 31, 2006 as compared to $14.7 million for the comparable period in 2005, an increase of 25.9%. Our net interest margin on a fully taxable-equivalent basis was 5.40% for first quarter of 2006 as compared to 5.24% in the same period in 2005. These increases were primarily attributable to higher loan volumes due primarily to the acquisition of Heritage as well as to higher interest rates earned on our loan portfolio. Provision for loan losses was $480,000 for the three month period ended March 31, 2006 as compared to $300,000 for the three month period ended March 31, 2005. This represents an increase of 60%. Management elected to increase the provision for loan losses for the first quarter of 2006 to provide amounts slightly above the long term average net charge offs and to increase the overall loan loss reserve percentage to approximate peer ratios. The provision for loan losses represented 0.18% of average total loans for the first quarter 2006 compared to 0.13% for the same period in 2005. Noninterest income was $4.7 million for the three month period ended March 31, 2006 and $4.4 million for the three month period ended March 31, 2005, a 7.6% increase. This increase is primarily related to increased transactional and savings accounts resulting from our acquisition of Heritage. Noninterest expense was $15.8 million for the first quarter of 2006 as compared to $13.4 million for the same period in 2005, an increase of 17.6% which is primarily attributable to the acquisition of Heritage Financial Corporation. Financial Condition Assets totaled $1.7 billion at March 31, 2006, reflecting an increase of $337.6 million, or 24.9%, as compared to assets at March 31, 2005. The increase was primarily attributable to the acquisition of Heritage. At March 31, 2006, assets related to Heritage represented approximately $234.6 million. Loans at March 31, 2006 totaled $1.1 billion, an increase of $137.9 million, or 14.4% from $957.0 million at March 31, 2005. The increase in loans was primarily related to the acquisition of Heritage, with loans related to Heritage totaling approximately $98.6 million at March 31, 2006 Total deposits at March 31, 2006 were $1.4 billion, an increase of $256.9 million, or 22.8% from $1.1 billion at March 31, 2005. The increase in deposits was primarily attributable to the acquisition of Heritage, with deposits related to Heritage totaling approximately $168.1 million at March 31, 2006. Other Information SNBI will host a conference call on Thursday, April 27, 2006 at 10:30 a.m. CDT to discuss SNBI's performance for the quarter ended March 31, 2006. Interested parties may listen to the live call by dialing (877) 407-0782 or can access the live webcast on the Internet at http://www.statenationalbank.com/ . The broadcast can be accessed by clicking the webcast link from the investor relations page. A telephone replay will be available through the end of the day on Thursday, May 11, 2006. To access the replay, dial (877) 660-6853 and when prompted, enter account number 286 and conference ID number 200837. The webcast of the conference call will be archived on the Company's website at http://www.statenationalbank.com/ until May 12, 2006. SNBI paid a quarterly cash dividend of $0.10 per common shares on March 13, 2006 to common shareholders of record on March 1, 2006. This was the first dividend paid by SNBI to its shareholders. The 2006 Annual Meeting of Shareholders will be held on May 24, 2006 at 2:00 pm CDT at the Gaylord Texas Resort, 1501 Gaylord Trail, Grapevine, Texas 76051. 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. All information in this release and its attachments is as of April 26, 2006. State National assumes no obligation to update such forward-looking statements. State National Bancshares, Inc. Financial Highlights (Unaudited) (Dollars in thousands, except per share data) As Of or For The Three Month Periods Ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2006 2005 2005 2005 2005 Income Statement Data: Total interest income $23,886 $23,474 $19,589 $18,572 $17,436 Total interest expense 5,512 5,230 3,882 3,385 2,732 Net interest income 18,374 18,244 15,707 15,187 14,704 Provision for loan losses 480 150 150 300 300 Net interest income after provision 17,894 18,094 15,557 14,887 14,404 Noninterest income 4,697 4,886 4,931 4,508 4,364 Noninterest expense 15,784 15,912 14,025 13,669 13,425 Income before income taxes and minority interest in income of consolidated subsidiary 6,807 7,068 6,463 5,726 5,534 Income tax expense 2,280 2,061 2,085 1,866 1,906 Minority interest in income of consolidated subsidiary 60 --- --- --- --- Net income $4,587 $5,007 $4,378 $3,860 $3,437 Balance Sheet Data: Total assets $1,692,678 $1,662,877 $1,397,009 $1,365,816 $1,355,030 Securities 218,491 214,881 124,899 133,916 141,218 Total loans 1,094,896 1,086,195 973,322 965,853 957,037 Intangibles, net 116,676 118,422 83,833 84,657 85,480 Total deposits 1,382,539 1,357,078 1,150,776 1,127,582 1,125,652 Junior subordinated debentures 47,000 47,000 47,000 47,000 47,000 Other borrowings 33,919 34,438 28,280 22,113 19,502 Stockholders' equity 216,072 212,257 161,335 158,213 154,252 Per Share Data: Earnings-basic $0.38 $0.42 $0.43 $0.38 $0.34 Earnings-diluted 0.38 0.41 0.42 0.37 0.33 Cash dividend 0.10 --- --- --- --- Book value 18.03 17.73 16.03 15.73 15.34 Tangible book value 9.65 9.23 8.15 7.79 7.35 Period end shares outstanding 11,984,083 11,971,107 10,063,415 10,059,915 10,054,915 Weighted average shares outstanding- basic 11,976,230 11,971,107 10,080,154 10,059,860 10,054,826 Weighted average shares outstanding- diluted 12,176,031 12,297,044 10,352,201 10,322,065 10,318,771 Performance Ratios: Return on average equity 8.54% 9.44% 10.85% 9.70% 8.97% Return on average assets 1.11 1.22 1.27 1.14 1.03 Return on average tangible common equity 16.13 17.95 21.54 19.51 18.91 Net interest margin 5.40 5.36 5.41 5.35 5.24 Efficiency ratio 63.56 63.99 63.93 65.22 66.03 Asset Quality Ratios: Nonperforming assets to loans and other real estate 0.92% 0.89% 0.73% 0.74% 0.85% Allowance for loan losses to nonperforming loans 139.17 144.03 220.08 231.36 181.88 Allowance for loan losses to total loans 1.19 1.16 1.19 1.19 1.19 Net charge-offs (recoveries) to average loans (0.00) 0.32 0.03 0.09 0.13 Liquidity and Capital Ratios: Average loans to average deposits 80.89% 80.79% 84.95% 86.45% 85.11% Total equity to total assets 12.77 12.76 11.55 11.58 11.38 Average equity to average assets 13.02 12.91 11.70 11.77 11.45 Tangible equity to tangible assets(A) 6.58 6.19 6.23 6.10 5.80 Leverage ratio 9.64 9.36 9.71 9.61 9.36 Tier 1 risk-based capital ratio 12.37 11.98 11.74 11.84 11.13 Total risk-based capital ratio 13.46 13.04 12.82 12.96 12.21 (A) This ratio is calculated based on regulatory tangible common equity. State National Bancshares, Inc. Consolidated Balance Sheets (Unaudited) (Dollars in thousands) March 31, Dec. 31, Sept. 30, June 30, March 31, 2006 2005 2005 2005 2005 ASSETS Cash and due from banks $71,236 $72,922 $64,658 $64,175 $65,019 Federal funds sold 65,700 36,950 60,900 34,500 30,000 Interest-bearing deposits in other banks 35,318 44,763 16,525 11,384 6,548 Cash and cash equivalents 172,254 154,635 142,083 110,059 101,567 Securities available- for-sale 210,399 206,787 116,958 126,001 133,324 Federal Reserve Bank stock and other investments 8,092 8,094 7,941 7,915 7,894 Loans held-for-sale 7,477 11,584 6,761 8,765 7,470 Loans held-for-investment: Total loans held- for-investment 1,087,419 1,074,611 966,561 957,088 949,567 Less allowance for loan losses 13,072 12,591 11,620 11,538 11,386 Net loans held- for-investment 1,074,347 1,062,020 954,941 945,550 938,181 Premises and equipment, net 50,643 48,769 35,583 35,136 34,309 Goodwill 99,351 100,486 70,818 70,818 70,818 Other intangible assets, net 17,325 17,936 13,015 13,839 14,662 Accrued interest receivable 7,921 8,919 6,766 6,142 5,932 Other real estate and other repossessed assets 696 935 1,851 2,212 1,936 Other Assets 44,173 42,712 40,292 39,379 38,937 TOTAL ASSETS $1,692,678 $1,662,877 $1,397,009 $1,365,816 $1,355,030 LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Noninterest bearing demand deposits $509,329 $487,369 $428,795 $401,797 $408,178 Interest bearing demand deposits 535,221 523,857 441,275 448,760 444,215 Interest bearing time deposits 337,989 345,852 280,706 277,025 273,259 Total deposits 1,382,539 1,357,078 1,150,776 1,127,582 1,125,652 Federal funds purchased and other interest bearing liabilities 32,718 28,597 27,470 21,273 18,572 Accrued interest payable 1,691 1,645 1,202 1,091 891 Other liabilities 10,591 10,459 8,416 9,817 7,733 Junior subordinated debentures 47,000 47,000 47,000 47,000 47,000 Notes payable 1,201 5,841 810 840 930 Total liabilities 1,475,740 1,450,620 1,235,674 1,207,603 1,200,778 Minority interest in consolidated subsidiary 866 --- --- --- --- SHAREHOLDERS' EQUITY Common Stock 11,984 11,971 11,971 10,060 10,055 Additional paid- in-capital 177,823 177,428 177,012 133,850 133,645 Retained earnings 27,553 24,164 19,157 14,779 10,919 Accumulated other comprehensive (loss) income (1,288) (1,306) (677) (476) (367) Subscription Receivable --- --- (46,128) --- --- Total shareholders' equity 216,072 212,257 161,335 158,213 154,252 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,692,678 $1,662,877 $1,397,009 $1,365,816 $1,355,030 State National Bancshares, Inc. Consolidated Statements of Operations (Unaudited) (Dollars in thousands) Three Month Periods Ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2006 2005 2005 2005 2005 Interest on loans $20,785 $20,471 $17,728 $16,989 $15,802 Interest on securities 2,320 2,480 1,277 1,342 1,481 Interest on federal funds sold and other earning assets 781 523 584 241 153 Total interest income 23,886 23,474 19,589 18,572 17,436 Interest expense - deposits 4,215 4,031 2,862 2,471 1,934 Interest expense - federal funds purchased and securities sold under agreement to repurchase 304 248 178 124 85 Interest expense - subordinated notes payable 942 898 832 780 702 Interest expense - notes payable 51 53 10 10 11 Total interest expense 5,512 5,230 3,882 3,385 2,732 Net interest income 18,374 18,244 15,707 15,187 14,704 Provision for loan losses 480 150 150 300 300 Net interest income after provision for loan losses 17,894 18,094 15,557 14,887 14,404 Service charges on deposit accounts 2,695 2,750 2,600 2,435 2,380 Gain on sale of loans 633 797 804 776 573 Bank owned life insurance 327 416 316 316 315 Other income 1,042 923 1,211 981 1,096 Total noninterest income 4,697 4,886 4,931 4,508 4,364 Salaries and employee benefits 8,251 8,176 7,297 7,248 7,069 Net occupancy and equipment 2,544 2,547 2,322 2,139 2,168 Amortization of intangibles 1,022 1,031 824 823 824 Professional fees 504 281 326 336 355 Communication 320 371 300 276 280 Merger --- 230 19 40 --- Other 3,143 3,276 2,734 2,807 2,729 Total noninterest expense 15,784 15,912 14,025 13,669 13,425 Income before income taxes and minority interest in income of consolidated subsidiary 6,807 7,068 6,463 5,726 5,343 Income tax expense 2,280 2,061 2,085 1,866 1,906 Minority interest in income of consolidated subsidiary 60 --- --- --- --- Net income $4,587 $5,007 $4,378 $3,860 $3,437 State National Bancshares, Inc. Selected Financial Information (Unaudited) (Dollars in thousands) Three Month Period Ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2006 2005 2005 2005 2005 Condensed Average Balance Sheet Total loans $1,083,370 $1,082,133 $963,379 $964,792 $947,320 Securities and other investments 216,846 235,434 130,028 137,497 150,717 Federal funds sold and other earning assets 72,482 52,253 68,377 34,611 26,339 Total earning assets 1,372,698 1,369,820 1,161,784 1,136,900 1,124,377 Allowance for loan losses (12,813) (13,127) (11,627) (11,438) (11,468) Cash and due from banks 70,120 69,898 62,622 61,063 61,097 Goodwill 100,012 100,494 70,818 70,818 70,818 Other intangible assets, net 17,669 16,281 13,357 14,191 15,019 Other real estate 804 1,266 2,036 1,744 2,106 Premises and equipment, net 49,451 47,505 35,835 34,994 33,934 Other Assets 51,556 52,239 44,677 44,726 45,515 Total assets $1,649,497 $1,644,376 $1,379,502 $1,352,998 $1,339,292 Noninterest bearing demand $476,067 $466,397 $412,567 $397,852 $387,856 Interest bearing demand, savings and money market 519,680 521,784 443,542 443,461 446,557 Time less than $100,000 192,444 198,860 153,975 156,724 161,024 Time greater than $100,000 151,113 152,400 123,981 117,918 117,594 Total deposits 1,339,304 1,339,441 1,134,065 1,115,955 1,113,031 Federal funds purchased and other interest bearing liabilities 31,649 29,939 23,869 20,871 18,017 Subordinated notes payable 47,000 47,000 47,000 47,000 47,000 Notes payable 4,203 4,199 823 850 880 Other liabilities 12,319 11,540 12,412 9,141 7,079 Total liabilities 1,434,475 1,432,119 1,218,169 1,193,817 1,186,007 Minority interest in consolidated subsidiary 289 --- --- --- --- Total shareholders' equity 214,733 212,257 161,333 159,181 153,285 Total liabilities and shareholders' equity $1,649,497 $1,644,376 $1,379,502 $1,352,998 $1,339,292 State National Bancshares, Inc. Selected Financial Information (Unaudited) (Dollars in thousands) As Of or For The Three Month Periods Ended March 31, Dec. 31, Sept. 30, June 30, March 31, 2006 2005 2005 2005 2005 Allowance for loan losses Balance, beginning of period $12,591 $11,620 $11,538 $11,386 $11,383 Provision for loan losses 480 150 150 300 300 Loan loss reserves of acquired banks --- 1,670 --- --- --- Charge-offs: Real estate - construction --- --- 15 --- 57 Real estate - 1-4 family 48 36 --- 38 22 Real estate - other --- --- --- --- --- Commercial loans --- 272 106 384 305 Consumer loans 126 257 212 180 171 Agriculture and other loans --- 500 --- --- --- Total charge-offs 174 1,065 333 602 555 Recoveries: Real estate - construction --- --- --- --- 45 Real estate - 1-4 family 1 1 3 12 2 Real estate - other 3 3 3 3 3 Commercial loans 54 87 210 219 130 Consumer loans 79 122 46 218 76 Agriculture and other loans 38 3 3 2 2 Total recoveries 175 216 265 454 258 Net charge-offs (1) 849 68 148 297 Balance, end of period $13,072 $12,591 $11,620 $11,538 $11,386 Nonperforming Assets Nonaccrual loans $9,087 $8,654 $5,188 $4,892 $6,052 Accruing loans 90 or more days past due 220 --- --- --- 99 Restructured loans 86 88 92 95 109 Total non-performing loans 9,393 8,742 5,280 4,987 6,260 Other real estate 684 927 1,836 2,212 1,934 Repossessed assets 13 8 15 6 2 Total non-performing assets $10,090 $9,677 $7,131 $7,205 $8,196 Ratios Allowance for loan losses to total loans 1.19% 1.16% 1.19% 1.19% 1.19% Allowance for loan losses to nonperforming loans 139.17 144.03 220.08 231.36 181.88 Nonperforming assets to loans and other real estate 0.92 0.89 0.73 0.74 0.85 Nonperforming loans to total loans 0.86 0.80 0.54 0.52 0.65 Nonperforming assets to total loans 0.92 0.89 0.73 0.75 0.86 Net charge-offs (recoveries) to average loans (annualized) (0.00) 0.32 0.03 0.09 0.13 State National Bancshares, Inc. Yield Analysis (Unaudited) (Dollars in thousands) Three Month Period Ended March 31, 2006 March 31, 2005 Interest Interest Average Income/ Yield/ Average Income/ Yield/ Balance Expenses Rate(A) Balance Expense Rate(A) Assets: Interest earnings assets: Loans, net of unearned income $1,083,370 $20,785 7.67% $947,320 $15,802 6.67% Securities 216,846 2,474 4.56% 150,717 1,496 3.97% Time deposits in other banks 32,355 426 5.27% 9,845 53 2.15% Federal funds sold 40,127 355 3.54% 16,494 100 2.43% Total interest- earnings assets 1,372,698 24,040 7.01% 1,124,376 17,451 6.21% Noninterest-earning assets: Cash and due from banks 70,120 61,097 Intangible assets 117,681 85,837 Premises and equipment, net 49,451 33,934 Accrued interest receivable and other assets 52,360 45,516 Allowance for loan losses (12,813) (11,468) Total noninterest- earning assets 276,799 214,916 Total assets $1,649,497 $1,339,292 Liabilities and shareholders equity: Interest-bearing liabilities: Demand, savings and money market deposits $519,680 1,570 1.21% $446,557 682 0.61% Time deposits 343,557 2,645 3.08% 278,618 1,252 1.80% Fed funds purchased and securities sold under agreement to repurchase 31,649 304 3.84% 18,017 85 1.89% Subordinated notes payable 47,000 942 8.02% 47,000 702 5.97% Note payable 4,203 51 4.85% 880 11 4.77% Total interest-bearing liabilities 946,089 5,512 2.33% 791,072 2,732 1.38% Noninterest-bearing liabilities: Demand deposits 476,067 387,856 Accrued interest payable and other liabilities 12,319 7,079 Total noninterest- bearing liabilities 488,386 394,935 Total liabilities 1,434,475 1,186,007 Minority interest in consolidated subsidiary 289 --- Shareholders' equity 214,733 153,285 Total liabilities and shareholders' equity $1,649,497 $1,339,292 Net interest income $18,528 $14,719 Net interest spread (B) 4.67% 4.83% Net interest margin (C) 5.40% 5.24% (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. Cash Earnings Per Share Our balance sheet has a significant amount of intangible assets and a corresponding amount of intangible amortization, creating a wide margin between GAAP and Cash (GAAP EPS plus tax effected intangible amortization expense per share) EPS. Cash EPS is a good indicator of the increase in tangible book value per share (see below) net of any dividends paid. Therefore, we believe Cash EPS is a very important performance measurement for our company. Below is a table reconciling GAAP EPS to Cash EPS for the quarters ended March 31, 2006 and March 31, 2005. Three Months Ended March 31, 2006 2005 (Unaudited) (Unaudited) GAAP EPS fully diluted $0.38 $0.33 Intangible amortization expense per share tax effected 0.05 0.05 Cash EPS fully diluted $0.43 $0.38 Cash earnings per diluted common share increased 13.2% for the three months ended March 31, 2006 as compared to the same period in 2005 Tangible Book Value Tangible book value is another important value and regulatory measurement. Due to the Heritage acquisition, we will create significant deferred taxes as we amortize the goodwill and core deposit intangible balances for tax purposes. The table below details the estimated amount of the deferred taxes if all intangibles were written off for tangible book value calculation purposes. Three Months Ended March 31, 2006 (unaudited) Stockholders' equity $216,072 Less goodwill (99,351) Less core deposit intangibles (16,932) Plus estimated deferred taxes related to goodwill and core deposit intangibles 15,913 Tangible book value $115,702 Shares outstanding 11,984,083 Tangible book value per share $9.65 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