CSNC Cardinal State Bank (MM)

DURHAM, N.C., July 17 /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 second quarter ended June 30, 2006 totaled $358,000, compared to net income of $193,000 for the second quarter of 2005, an increase of 85.5%. Excluding the required provision for loan losses and expense for stock options, Cardinal State Bank's net income for the second quarter of 2006 was $541,000, compared to net income of $256,000 for the second quarter of 2005, an increase of 111.3%. For the six months ended June 30, 2006, net income amounted to $435,000, compared to $399,000 for the first six months of 2005, an increase of 9.0%. Excluding the required provision for loan losses and expense for stock options, Cardinal State Bank's net income for the first six months of 2006 was $940,000, compared to net income of $511,000 for the first six months of 2005, an increase of 84.0%. Total assets as of June 30, 2006 were $175.8 million, compared to $144.8 million at June 30, 2005, an increase of $31.0 million or 21.4%. Similar gains were experienced in loans and deposits. Total loans were $152.0 million, an increase of $33.2 million or 27.9%, over the $118.8 million reported for the same period in 2005. Total deposits were $148.1 million, an increase of $29.8 million or 25.2% over second quarter 2005 deposits of $118.3 million. "The second quarter of 2006 was a great quarter for Cardinal State Bank," said John W. Mallard, Jr., President and CEO of Cardinal State Bank. "We not only achieved good financial results, at our annual meeting in April, we announced that our shareholders had approved the formation of a holding company. While we have not yet moved forward on this, we have the latitude to do so as soon as we determine it is prudent. "We celebrated our fifth anniversary in June, and simultaneously announced that we will open a loan production office in Hillsborough, NC in September, with plans for a full-service office to open there in 2007. We are excited about the new office, and the business community in Hillsborough seems extremely supportive of having us there. Loan demand across the company continues to be strong and we look forward to new opportunities in Hillsborough and beyond." Under new accounting guidelines, we began to expense stock options on January 1, 2006. The impact on net income for the first six months of 2006 was $137,000 in additional expense. 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. 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 Six Months Ended June 30 June 30 2006 2005 2006 2005 Income Statement: Interest Income $3,099 2,069 $5,850 3,958 Interest Expense 1,377 738 2,576 1,386 Net Interest Income 1,722 1,331 3,274 2,572 Loan Loss Provision 123 63 368 112 Net Interest Income After Provision 1,599 1,268 2,906 2,460 Other Income 181 86 297 186 Other Expense (1) 1,422 1,161 2,768 2,247 Income Before Taxes 358 193 435 399 Income Taxes -- -- -- -- Net Income $358 193 $435 399 (1) Includes stock option expense $60 -- $137 -- Income Per Share: Basic .16 .09 .19 .18 Diluted .16 .08 .19 .17 Average Shares Outstanding (000's): Basic 2,262 2,261 2,261 2,261 Diluted 2,262 2,285 2,261 2,287 Balance Sheet Data: Total Assets $175,780 144,779 -- -- Total Deposits 148,081 118,262 -- -- Total Loans 152,045 118,817 -- -- Loan Loss Reserve 1,983 1,480 -- -- Total Shareholders' Equity 19,664 18,735 -- -- Asset Quality: Non-Performing Loans 893 116 -- -- Non-Performing Loans To Total Assets (%) .51 .08 -- -- Net Loan Charge-Offs 66 14 67 22 Net Loan Charge-Offs To Average Loans (%) .17 .05 .09 .04 Performance Ratios: Return On Average Assets (%) .82 .54 .51 .57 Return On Average Equity (%) 7.34 4.14 4.51 4.32 Net Interest Margin (%) 4.08 3.83 4.00 3.77 DATASOURCE: Cardinal State Bank CONTACT: John W. Mallard, Jr., President and Chief Executive Officer of Cardinal State Bank, +1-919-403-2833,

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