SNBI State National Bancshares

* Earnings Per Share increases 10.8% for the quarter (12.4% full year) * Net income increased 31.9% for the quarter (24.9% full year) * Net Interest Margin increased to 5.36% for the quarter (5.34% full year) FORT WORTH, Texas, Jan. 25 /PRNewswire-FirstCall/ -- State National Bancshares, Inc. (NASDAQ:SNBI) ("SNBI"), the parent company of State National Bank, today announced net income for fourth quarter 2005 of $5.0 million, or $0.41 per diluted common share, compared to $3.8 million, or $0.37 per diluted common share, for the comparable 2004 period. Net income for the year ended December 31, 2005 was $16.7 million, or $1.54 per diluted common share, compared to $13.4 million, or $1.37 per diluted common share, for the comparable 2004 period. "All of our markets continue to perform well, as evidenced by our impressive net interest margin. We remain committed to increasing shareholder value through strategic acquisitions and expense efficiencies," said Tom C. Nichols, Chairman, President and CEO of SNBI. Net interest margin increased to 5.36% for the fourth quarter in 2005 from 5.14% in the same quarter in the previous year and increased to 5.34% for the year ended December 31, 2005 from 4.87% in the same period of 2004. SNBI completed the acquisition of Heritage Financial Corporation ("Heritage") on October 6, 2005. The results of operations for Heritage have been included in the consolidated financial statements since the purchase date. 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 December 31, 2005, net income was $5.0 million compared to $3.8 million for the same period in 2004. Net income per diluted common share was $0.41 for the three months ended December 31, 2005 compared with $0.37 for the same period in 2004, which represents an increase of 10.8% per share. Return on average assets, average common equity and average tangible equity for the three months ended December 31, 2005 were 1.22%, 9.44% and 17.95%, respectively, and 1.11%, 10.03% and 21.62%, respectively for the three months ended December 31, 2004. State National's efficiency ratio was 63.99% and 65.33% for the three months ended December 31, 2005 and December 31, 2004, respectively. Net income was $16.7 million for the year ended December 31, 2005, compared to $13.4 million for the year ended December 31, 2004. Net income per diluted common share was $1.54 for the year ended December 31, 2005, compared to $1.37 for the comparable period in 2004 which represents an increase of 12.4% on a per share basis. Returns on average assets, average common equity and average tangible equity for 2005 were 1.17%, 9.73% and 19.33%, respectively, and 1.08%, 9.84% and 17.42%, respectively for 2004. State National's efficiency ratio was 64.73% and 65.96% for the year ended December 31, 2005 and December 31, 2004, respectively. Our tax-equivalent net interest income was $18.4 million for the three months ended December 31, 2005 as compared to $14.9 million for the comparable period in 2004, an increase of 23.4%. Our net interest margin on a fully taxable-equivalent basis was 5.36% for forth quarter of 2005 as compared to 5.14% in the same period in 2004. These increases were primarily attributable to higher interest rates earned on our loan portfolio. Net interest margin decreased slightly on a linked quarter basis from 5.41% at September 30, 2005 to 5.36% at December 31, 2005. This slight decline in net interest margin was related to the deposit mix acquired from Heritage and we expect this to improve after realignment of the Heritage deposit mix. Noninterest income was $4.9 million for the three month period ended December 31, 2005 and $4.0 million for the three month period ended December 31, 2004, a 22.0% increase. This increase is primarily related to increased transactional and savings accounts resulting from our acquisition of Heritage as well as increased gain on sale of loans due to increased originations in the three month period ended December 31, 2005. Noninterest expense was $15.9 million for the fourth quarter of 2005 as compared to $13.2 million for the same period in 2004, an increase of 20.6% which is primarily attributable to the acquisition of Heritage. We incurred costs associated with two unusual events during the three month period ended December 31, 2005. Included in noninterest expense is $230,000 in merger expenses related to the Heritage acquisition and included in salaries and employee benefits is $125,000 in severance costs related to a reduction in our mortgage origination department. Our provision for loan losses for each of the three month periods ended December 31, 2005 and December 31, 2004 was $150,000. Loans at December 31, 2005 totaled $1.09 billion, an increase of $140.0 million, or 14.8% from $946.2 million at December 31, 2004. Deposits in total at December 31, 2005 totaled $1.36 billion, an increase of $230.7 million, or 20.5% from $1.13 billion at December 31, 2004. 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 Years Ended Dec 31, 2005 Dec 31, 2004 Dec 31, 2005 Dec 31, 2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Interest income $23,474 $17,406 $79,070 $60,989 Interest expense 5,230 2,529 15,228 9,093 Net interest income 18,244 14,877 63,842 51,896 Provision for loan losses 150 150 900 450 Net interest income after provision for loan losses 18,094 14,727 62,942 51,446 Noninterest income 4,886 4,006 18,689 15,810 Noninterest expense 15,912 13,199 57,031 47,584 Income before income taxes 7,068 5,534 24,600 19,672 Income tax expense 2,061 1,738 7,918 6,317 Net income $5,007 $3,796 $16,682 $13,355 Basic earnings per share $0.42 $0.38 $1.58 $1.40 Diluted earnings per share $0.41 $0.37 $1.54 $1.37 Period end shares outstanding 11,971,107 10,054,582 11,971,107 10,054,582 Weighted average shares outstanding (basic) 11,971,107 10,042,972 10,546,331 9,536,114 Weighted average shares outstanding (diluted) 12,297,044 10,254,217 10,812,169 9,735,874 State National Bancshares, Inc. Average Balance Sheet Data (Dollars in thousands) Three Months Ended Years Ended Dec 31, 2005 Dec 31, 2004 Dec 31, 2005 Dec 31, 2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Total loans $1,082,133 $942,156 $989,406 $825,981 Securities 235,434 175,509 163,419 194,622 Fed funds sold and other earning assets 52,253 41,270 45,395 45,104 Total earning assets 1,369,820 1,158,935 1,198,220 1,065,707 Allowance for loan loss (13,127) (12,310) (11,915) (10,999) Cash and due from banks 69,898 61,524 63,670 53,580 Goodwill 100,494 70,812 78,237 50,149 Other intangible assets, net 16,281 15,861 14,712 13,632 Other real estate 1,266 2,449 1,788 2,350 Fixed assets, net 47,505 31,791 38,067 27,597 Other assets 52,239 42,954 46,263 39,267 Total assets $1,644,376 $1,372,016 $1,429,042 $1,241,283 Demand deposits $466,397 $377,191 $416,168 $316,207 Interest bearing deposits 873,044 764,701 759,455 713,248 Total deposits 1,339,441 1,141,892 1,175,623 1,029,455 Federal funds purchased and other interest bearing liabilities 29,939 22,862 23,174 22,181 Junior subordinated debentures 47,000 47,000 47,000 44,423 Notes payable 4,199 910 1,688 952 Other liabilities 11,540 7,995 10,043 8,611 Shareholders' equity 212,257 151,357 171,514 135,661 Total liabilities and equity $1,644,376 $1,372,016 $1,429,042 $1,241,283 State National Bancshares, Inc. Income Statement Data (Dollars in thousands) Three Months Ended Years Ended Dec 31, 2005 Dec 31, 2004 Dec 31, 2005 Dec 31, 2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Interest on loans $20,471 $15,488 $70,990 $52,951 Interest on securities 2,480 1,727 6,580 7,454 Interest on federal funds sold and other earning assets 523 191 1,500 584 Total interest income 23,474 17,406 79,070 60,989 Interest expense - deposits 4,031 1,795 11,298 6,636 Interest expense - federal funds purchased and securities sold under agreement to repurchase 248 77 635 176 Interest expense - subordinated notes payable 898 646 3,212 2,233 Interest expense - notes payable 53 11 83 48 Total interest expense 5,230 2,529 15,228 9,093 Net interest income 18,244 14,877 63,842 51,896 Provision for loan losses 150 150 900 450 Net interest income after provision for loan losses 18,094 14,727 62,942 51,446 Service charges on deposit accounts 2,750 2,500 10,166 9,333 Gain on sale of loans 797 538 2,950 2,261 Bank owned life insurance 416 308 1,364 1,259 Other income 923 660 4,209 2,957 Total noninterest income 4,886 4,006 18,689 15,810 Salaries and employee benefits 8,176 6,920 29,790 24,507 Net occupancy and equipment 2,547 2,024 9,175 7,678 Amortization of intangibles 1,031 853 3,502 2,888 Professional fees 281 337 1,298 1,143 Communication 371 298 1,227 1,016 Merger 230 --- 289 285 Other 3,276 2,767 11,750 10,067 Total noninterest expense 15,912 13,199 57,031 47,584 Income before taxes 7,068 5,534 24,600 19,672 Income tax expense 2,061 1,738 7,918 6,317 Net income $5,007 $3,796 $16,682 $13,355 State National Bancshares, Inc. Common Share and Other Data (Dollars in thousands except per share data) Three Months Ended Years Ended Dec 31, Dec 31, Dec 31, Dec 31, 2005 2004 2005 2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Book value per share $17.73 $15.05 $17.73 $15.05 Tangible book value per share 9.23 7.01 9.23 7.01 Period end shares outstanding 11,971,107 10,054,582 11,971,107 10,054,582 Weighted average shares outstanding (basic) 11,971,107 10,042,972 10,546,331 9,536,114 Weighted average shares outstanding (diluted) 12,297,044 10,254,217 10,812,169 9,735,874 Nonaccrual loans $8,654 $6,926 $8,654 $6,926 Accruing loans 90 or more days past due --- 68 --- 68 Restructured loans 88 226 88 226 Total non-performing loans 8,742 7,220 8,742 7,220 Other real estate 927 1,943 927 1,943 Repossessed assets 8 9 8 9 Total non-performing assets $9,677 $9,172 $9,677 $9,172 Allowance for loan losses at end of period $12,591 $11,383 $12,591 $11,383 Net charge-offs $856 $1,204 $1,369 $1,503 Basic earnings per share $0.42 $0.38 $1.58 $1.40 Diluted earnings per share $0.41 $0.37 $1.54 $1.37 State National Bancshares, Inc. Performance and Asset Quality Ratios Three Months Ended Years Ended Dec 31, Dec 31, Dec 31, Dec 31, 2005 2004 2005 2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Return on average assets (annualized) 1.22 % 1.11 % 1.17 % 1.08 % Return on average common equity (annualized) 9.44 10.03 9.73 9.84 Return on average tangible common equity (annualized) 17.95 21.62 19.33 17.42 Net interest margin (tax equivalent) (annualized) 5.36 5.14 5.34 4.87 Efficiency ratio 63.99 % 65.33 % 64.73 % 65.96 % Non performing assets to average earning assets 0.71 % 0.79 % 0.81 % 0.86 % Non performing assets to loans and other real estate 0.89 0.98 0.89 0.98 Net charge offs (annualized) to average loans 0.32 0.51 0.14 0.18 Allowance for loan losses to total loans 1.16 1.21 1.16 1.21 State National Bancshares, Inc. Balance Sheet Data (at period end) (Dollars in thousands) Dec 31, Sept 30, June 30, March 31, Dec 31, 2005 2005 2005 2005 2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Total loans $1,086,195 $973,322 $965,853 $957,037 $946,166 Securities and other investments 214,881 124,899 133,916 141,219 159,314 Federal funds sold and other earning assets 81,713 77,425 45,884 36,548 34,575 Total earning assets 1,382,789 1,175,646 1,145,653 1,134,804 1,140,055 Allowance for loan losses (12,591) (11,620) (11,538) (11,386) (11,383) Cash and due from banks 72,922 64,658 64,175 65,401 54,892 Goodwill 100,486 70,818 70,818 70,818 70,818 Other intangible assets, net 17,936 13,015 13,839 14,662 15,486 Other real estate 935 1,851 2,212 1,936 1,952 Premises and equipment, net 48,769 35,583 35,136 34,308 33,915 Other Assets 51,631 47,058 45,521 44,305 44,645 Total Assets $1,662,877 $1,397,009 $1,365,816 $1,354,848 $1,350,380 Demand deposits 487,369 428,795 $401,797 $407,898 $390,159 Interest bearing deposits 869,709 721,981 725,785 717,466 736,235 Total deposits 1,357,078 1,150,776 1,127,582 1,125,364 1,126,394 Federal funds purchased and other interest bearing liabilities 28,597 27,470 21,273 18,572 18,530 Subordinated notes payable 47,000 47,000 47,000 47,000 47,000 Notes payable 5,841 810 840 870 899 Other liabilities 12,104 9,618 10,908 8,790 6,197 Total liabilities 1,450,620 1,235,674 1,207,603 1,200,596 1,199,020 Shareholders' equity 212,257 161,335 158,213 154,252 151,360 Total liabilities and equity $1,662,877 $1,397,009 $1,365,816 $1,354,848 $1,350,380 State National Bancshares, Inc. Performance, Asset Quality and Capital Ratios Three Months Ended Dec 31, Sept 30, June 30, March 31, Dec 31, 2005 2005 2005 2005 2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Return on average assets (annualized) 1.22% 1.27% 1.14% 1.03% 1.11% Return on average common equity (annualized) 9.44 10.85 9.70 8.97 10.03 Return on average tangible common equity (annualized) 17.95 21.54 19.51 18.91 21.62 Net interest margin (tax equivalent) (annualized) 5.36 5.41 5.35 5.24 5.14 Efficiency ratio 63.99% 63.93% 65.22% 66.03% 65.33% Non performing assets to average earning assets 0.71% 0.61% 0.64% 0.73% 0.79% Non performing assets to loans and other real estate 0.89 0.74 0.75 0.86 0.98 Net charge offs (annualized) to average loans 0.32 0.03 0.09 0.13 0.51 Allowance for loan losses to total loans 1.16 1.20 1.21 1.20 1.21 Tier 1 risk-based capital 11.98% 11.74% 11.84% 11.13% 10.89% Total risk-based capital 13.04 12.82 12.96 12.21 11.98 Tier 1 leverage capital 8.69 9.71 9.61 9.36 8.82 Tangible equity to tangible assets (A) 6.19 6.23 6.10 5.80 5.55 Equity to assets 12.76 11.55 11.58 11.39 11.21 (A) This ratio is calculated based on regulatory tangible common equity. State National Bancshares, Inc. Yield Analysis Three Months Ended December 31, 2005 December 31, 2004 Interest Interest Average Income/ Yield/ Average Income/ Yield/ Balance Expenses Rate(A) Balance Expenses Rate(A) (Dollars in thousands) Assets: Interest earnings assets: Loans, net of unearned income $1,082,133 $20,471 7.57% $942,156 $15,488 6.58% Securities 235,434 2,607 4.43% 175,509 1,742 3.97% Time deposits in other banks 35,495 161 1.81% 8,944 44 1.97% Federal funds sold 16,758 362 8.64% 32,326 147 1.82% Total interest- earnings assets 1,369,820 23,601 6.89% 1,158,935 17,421 6.01% Noninterest- earning assets: Cash and due from banks 69,898 61,524 Intangible assets 116,775 86,673 Premises and equipment, net 47,505 31,791 Accrued interest receivable and other assets 53,505 45,403 Allowance for loan losses (13,127) (12,310) Total noninterest- earning assets 274,556 213,081 Total assets $1,644,376 $1,372,016 Liabilities and shareholders equity: Interest-bearing liabilities: Demand, savings and money market deposits $521,784 1,473 1.13% $472,450 581 0.49% Time deposits 351,260 2,558 2.91% 292,251 1,214 1.66% Fed funds purchased and securities sold under agreement to repurchase 29,939 248 3.31% 22,862 77 1.35% Subordinated notes payable 47,000 898 7.64% 47,000 646 5.50% Note payable 4,199 53 5.05% 910 11 4.84% Total interest- bearing liabilities 954,182 5,230 2.19% 835,473 2,529 1.21% Noninterest- bearing liabilities: Demand deposits 466,397 377,191 Accrued interest payable and other liabilities 11,540 7,995 Total noninterest- bearing liabilities 477,937 385,186 Total liabilities 1,432,119 1,220,659 Shareholders' equity 212,257 151,357 Total liabilities and shareholders' equity $1,644,376 $1,372,016 Net interest income $18,371 $14,892 Net interest spread(B) 4.70% 4.80% Net interest margin(C) 5.36% 5.14% (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 Years Ended December 31, 2005 December 31, 2004 Interest Interest Average Income/ Yield/ Average Income/ Yield/ Balance Expenses Rate(A) Balance Expenses Rate(A) (Dollars in thousands) Assets: Interest earnings assets: Loans, net of unearned income $989,406 $70,990 7.18% $825,981 $52,951 6.41% Securities 163,419 6,747 4.13% 194,622 7,508 3.86% Time deposits in other banks 16,979 398 2.34% 13,501 175 1.30% Federal funds sold 28,416 1,102 3.88% 31,603 409 1.29% Total interest- earnings assets 1,198,220 79,237 6.61% 1,065,707 61,043 5.73% Noninterest- earning assets: Cash and due from banks 63,670 53,580 Intangible assets 92,949 63,781 Premises and equipment, net 38,067 27,597 Accrued interest receivable and other assets 48,051 41,617 Allowance for loan losses (11,915) (10,999) Total noninterest- earning assets 230,822 175,576 Total assets $1,429,042 $1,241,283 Liabilities and shareholders equity: Interest-bearing liabilities: Demand, savings and money market deposits $463,836 4,241 0.91% $420,091 1,854 0.44% Time deposits 295,619 7,057 2.39% 293,157 4,782 1.63% Fed funds purchased and securities sold under agreement to repurchase 23,174 635 2.74% 22,181 176 0.79% Subordinated notes payable 47,000 3,212 6.83% 44,423 2,233 5.03% Note payable 1,688 83 4.92% 952 48 5.04% Total interest- bearing liabilities 831,317 15,228 1.83% 780,804 9,093 1.16% Noninterest- bearing liabilities: Demand deposits 416,168 316,207 Accrued interest payable and other liabilities 10,043 8,611 Total noninterest- bearing liabilities 426,211 324,818 Total liabilities 1,257,528 1,105,622 Shareholders' equity 171,514 135,661 Total liabilities and shareholders' equity $1,429,042 $1,241,283 Net interest income $64,009 $51,950 Net interest spread(B) 4.78% 4.57% Net interest margin(C) 5.34% 4.87% (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) when dividends have not been 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 December 31, 2005 and December 31, 2004 and for the years ended December 31, 2005 and December 31, 2004. Three Months Ended Years Ended Dec 31, 2005 2004 2005 2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) GAAP EPS $0.41 $0.37 $1.54 $1.37 fully diluted Intangible amortization expense per share tax effected 0.05 0.05 0.21 0.19 Cash EPS fully diluted $0.46 $0.42 $1.75 $1.56 Cash earnings per diluted common share was $0.46 for the three months ended December 31, 2005 compared with $0.42 for the same period in 2004, which represents an increase of 9.5% per share. Net income per diluted common share was $1.75 for the year ended December 31, 2005, compared to $1.56 for the comparable period in 2004 which represents an increase of 12.2% on a per share basis. Tangible Book Value Tangible book value is another important value and regulatory measurement. Due to the Heritage acquisition, we will create a significant deferred tax asset as we amortize the goodwill and core deposit intangible balances for tax purposes. The table below details the estimated amount of the deferred tax asset that would be created if all intangibles were written off for tangible book value calculation purposes. Year Ended Dec 31, 2005 (unaudited) Stockholders' equity $212,257 Less goodwill (100,486) Less other intangible assets (17,936) Plus estimated deferred tax asset related to goodwill and other intangibles 16,661 Tangible book value $110,496 Shares outstanding 11,971,107 Tangible book value per share $9.23 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/

Copyright