THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

State National Bancshares, Inc. (SNBI)

4/19/2006 Proxy Information

As of June 30, 2005, Castle Creek Capital, LLC beneficially owned approximately 25.8% of SNBI common stock. Since 1995, Mr. Merlo has served as Senior Vice President of Castle Creek.

Under Section 402 of the Sarbanes-Oxley Act of 2002, it is now unlawful for any issuer to extend, renew or arrange for the extension of credit in the form of a personal loan to or for any director or executive officer of that issuer. This prohibition does not apply to loans that were made on or prior to July 30, 2002, or certain types of loans described in Section 402 that are:

• made available by the issuer in the ordinary course of the issuer’s consumer credit business;

• of a type generally made available by such issuer to the public; and

• made by the issuer on market terms, or terms that are no more favorable than those offered by the issuer to the general public.

Section 402 also does not apply to loans by an insured depository institution, if the loan is subject to the insider lending restrictions of Section 22(h) of the Federal Reserve Act or the Federal Reserve’s Regulation O.

Certain of our officers, directors and principal shareholders and their affiliates have had transactions with State National Bank, including borrowings and investments in certificates of deposit. Our management believes that all such loans and investments have been and will continue to be made in the ordinary course of business of State National Bank on substantially the same terms, including interest rates paid and collateral required, as those prevailing at the time for comparable transactions with unaffiliated persons, and do not involve more than the normal risk of collectibles or present other features unfavorable to us. Therefore, we believe that all of these transactions comply with Section 402 of the Sarbanes-Oxley Act or have been made pursuant to a valid exception from Section 402 of the Sarbanes-Oxley Act. As of March 31, 2006, the aggregate amount of all loans outstanding which individually exceed $60,000 to our executive officers and directors, members of their immediate families and the firms and corporations in which they have at least a 10.0% beneficial interest was approximately $4,595,341.

As discussed above, in 1997 and 2000, we adopted collateral assignment Split Dollar Plan Agreements with Messrs. Nichols and Cosby, respectively. Section 402 of the Sarbanes-Oxley Act prohibits a direct or indirect extension of credit from a publicly traded company or its subsidiary to any of its directors or executive officers. The Sarbanes-Oxley Act provides that an extension of credit maintained on the date of enactment of the Sarbanes-Oxley Act will be “grandfathered” and will not be subject to Section 402, so long as there is no material modification to any term of any such extension of credit. The ongoing payment of premiums by us, which are repaid to us from the proceeds of the policy on the death of the executive as set forth in the policy, may be considered a loan for purposes of the Sarbanes-Oxley Act. However, the Split Dollar Plan Agreements do not permit us to unilaterally discontinue the payment of premiums on the policies. On the basis of these facts, we believe that to the extent that the split dollar arrangements may be considered loans, the arrangements are grandfathered under the Sarbanes-Oxley Act and are not prohibited. See “Health and Insurance Benefits” above for additional information.

Castle Creek Capital, LLC, the general partner of three private equity funds (Castle Creek Capital Partners Fund I, LP, Castle Creek Capital Partners Fund IIa, LP, and Castle Creek Capital Partners Fund IIb, LP), and Castle Creek Financial, LLC, a registered broker-dealer, combine to form a San Diego-based merchant bank dedicated to investing in companies operating within the financial services industry.

Since its inception, Castle Creek Capital, LLC has utilized the financial resources of its three private equity funds to provide expansion capital for its portfolio of companies. Castle Creek Financial, LLC has also acted as financial advisor to its portfolio companies on mergers and acquisitions.

Castle Creek Capital, LLC’s general partners have operating agreements that require the sharing of certain fees originated by Castle Creek Financial, LLC. Those fees are shared based upon a percentage of ownership that each fund has in a portfolio company from which a fee is generated by Castle Creek Financial, LLC.

On May 19, 1999, we entered into an agreement with Castle Creek Financial, LLC as our exclusive financial advisor. The agreement provides payments of $9,000 per quarter for general financial advisory services and additional fees for acquisitions or in the event of a sale of the Company. The general financial advisory fee of $9,000 per quarter was terminated in the fourth quarter of 2005. During 2004, we paid Castle Creek Financial $945,000 to serve as placement agent in connection with the issuance of stock in order to raise capital for the purchase of Mercantile Bank Texas. Castle Creek Financial also provided financial advisory services, including analysis and modeling, in connection with the purchase of Mercantile. In 2005, we paid Castle Creek Financial $451,000 in fees related to the acquisition of Heritage Financial Corporation. These fees were based on a percentage of the acquisition price and were related to analysis, modeling and other acquisition support provided by Castle Creek Financial. Castle Creek Financial is an affiliate of Castle Creek Capital, LLC, which manages Castle Creek Capital Partners Funds I, IIa and IIb. Collectively, as of March 31, 2006, affiliates of Castle Creek Financial owned 15.63% of our outstanding common stock.