TRBS Texas Regional Bancshares

MCALLEN, Texas, Jan. 17 /PRNewswire-FirstCall/ -- Texas Regional Bancshares, Inc. (NASDAQ:TRBS) ("Texas Regional"), bank holding company for Texas State Bank, today reported net income for fourth quarter 2005 of $22,826,000, or $0.46 per diluted common share, compared to $20,848,000, or $0.42 per diluted common share, for the comparable 2004 period. Return on assets and return on shareholders' equity averaged 1.42 percent and 14.17 percent, respectively, compared to 1.46 percent and 14.10 percent, respectively, for the corresponding 2004 period. For the year ended December 31, 2005, net income totaled $88,368,000, or $1.77 per diluted common share, compared to $76,658,000, or $1.59 per diluted common share, for the corresponding 2004 period. This represents a 15.3 percent improvement in net income and an 11.3 percent improvement in earnings per diluted common share. Return on assets and return on shareholders' equity averaged 1.42 percent and 14.17 percent, respectively for the year ended December 31, 2005, compared to 1.45 percent and 14.24 percent, respectively, for the corresponding 2004 period. Texas Regional completed the acquisitions of Southeast Texas Bancshares, Inc. ("Southeast Texas") on March 12, 2004, Valley Mortgage Company, Inc. ("Valley Mortgage") on November 23, 2004 and Mercantile Bank & Trust, FSB ("Mercantile") on January 14, 2005. The results of operations for Southeast Texas, Valley Mortgage and Mercantile have been included in the consolidated financial statements since their respective purchase dates. Texas Regional increased its number of banking centers during 2005, continuing its efforts to expand its banking center network to offer its brand of banking to more Texans. Including the three locations in Dallas added with the Mercantile acquisition and three new banking centers opened in Dallas, Houston and Weslaco, Texas Regional now has 73 locations statewide. "We are particularly pleased to have four banking centers in Houston and four in the Dallas market," said Glen E. Roney, Chairman of the Board and Chief Executive Officer of Texas Regional. "Since we have entered Houston in February 2002, our loans and deposits in that market have increased to $754,838,000 and $928,459,000, respectively." The Company has acquired three additional sites in the Houston area, including one located at Montrose Boulevard and Richmond Avenue which opens today. Late in the third quarter of 2005, Hurricane Rita struck the East Texas Coast near where the Company operates a number of banking centers. Mandatory evacuation orders were issued prior to the storm and continued for several weeks after the storm made landfall. Within days after landfall, Texas Regional bankers in the East Texas region began doing business, in many cases from remote locations or without essential services. As of the current date, only one small banking center has not re-opened. Soon after the storm, management began to evaluate the extent of damage and contacted remediation firms and contractors to begin the repair processes which included roof repairs, drying, and the replacement of sheetrock walls, carpet and signs. The Company estimates property damage claims for remediation and repairs may exceed $2,000,000. Insurance recoveries are being received as specific claims are closed by the adjuster and approved by the insurance company. Recoveries and certain repairs are expected to continue throughout the first quarter of 2006. The Company believes substantially all of the physical damage sustained by its banking centers in the affected areas, as well as certain costs incurred in reopening banking centers, are fully insured. Based upon its initial evaluation, the Company recorded an additional provision to the allowance for loan losses of $2,500,000 for possible losses on loans to borrowers affected by the hurricane. During the fourth quarter of 2005, the Company recorded charge-offs of $898,000 against this allowance. Consistent with the Company's loan policies, as information on loan customers is received and evaluated, the Company will continue to analyze the amount of additional provision for loan losses, if any, that may become necessary to properly account for additional losses sustained by the Company as a result of the hurricane and its aftermath. Operating Highlights Net interest income of $61,371,000 for fourth quarter 2005 increased $5,928,000, or 10.7 percent over fourth quarter 2004. Average total interest- earning assets, the primary factor in net interest income growth, increased 12.2 percent from fourth quarter 2004 to $5,802,945,000 for fourth quarter 2005. The net interest margin, on a tax-equivalent basis, decreased seven basis points to 4.28 percent for fourth quarter 2005 compared to the corresponding 2004 period. For the year ended December 31, 2005, net interest income totaled $236,510,000, reflecting a $32,408,000 or 15.9 percent increase from the same 2004 period. This growth resulted principally from an increase of 17.2 percent in average total interest-earning assets to $5,650,945,000 for the year ended December 31, 2005 as compared to the same 2004 period. The net interest margin, on a tax-equivalent basis, for the year ended December 31, 2005 was 4.26 percent, a decrease of five basis points when compared to the corresponding 2004 period. Provision for loan losses of $6,143,000 for fourth quarter 2005 increased $374,000 or 6.5 percent as compared to the provision for loan losses during fourth quarter 2004 primarily due to an increase in loan volume combined with a $3,585,000 increase in net charge-offs. The increase in net charge-offs during fourth quarter 2005 is primarily attributable to $3,059,000 charged off on three loan relationships. The provision for loan losses represented 0.61 percent of average loans held for investment for fourth quarter 2005 compared to 0.63 percent for fourth quarter 2004. Net charge-offs totaled $7,484,000 for fourth quarter 2005, representing 0.75 percent of average loans held for investment compared to 0.43 percent of average loans held for investment for fourth quarter 2004. For the year ended December 31, 2005, provision for loan losses totaled $26,071,000, reflecting a $5,488,000 or 26.7 percent increase over the comparable prior year period. Provision for loan losses totaled 0.67 percent of average loans held for investment for the year ended December 31, 2005 compared to 0.62 percent for the year ended December 31, 2004. Noninterest income of $18,602,000 for fourth quarter 2005 decreased $1,520,000 or 7.6 percent as compared to fourth quarter 2004. Service charges on deposits of $8,802,000 decreased $1,647,000 or 15.8 percent for the quarter ended December 31, 2005 compared to the quarter ended December 31, 2004 primarily due to a $1,324,000 reduction in non-sufficient and return item charges. The reduction in non-sufficient and return item charges resulted primarily from a decrease in the number of non-sufficient and return items processed in the East Texas region following Hurricane Rita in September 2005. This corresponds to an increase in the average deposit balances in the East Texas region since September 2005. Net realized gains on sales of securities available for sale decreased to $2,000 for fourth quarter 2005 compared to $1,010,000 for fourth quarter 2004, which resulted primarily from a rise in interest rates. Other noninterest income increased by $1,156,000 to $2,378,000 for fourth quarter 2005 compared to fourth quarter 2004, primarily due to a $648,000 increase in gains on sales of loans held for sale and gains on sales of mortgage servicing rights and a $231,000 increase in fees earned from penalties imposed on customers due to the early withdrawal of time deposits. For the year ended December 31, 2005, noninterest income totaled $84,214,000 reflecting an increase of $11,158,000 or 15.3 percent over the corresponding 2004 period. Service charges on deposits decreased $876,000 or 2.3 percent to $37,665,000 for the year ended December 31, 2005 compared to the same period in 2004 primarily due to a $1,368,000 reduction in non- sufficient and return item charges resulting from a decrease in the number of non-sufficient and return items processed during fourth quarter 2005 in the East Texas region. This decrease was partially offset by an increase of $696,000 in automated teller machine income. Other service charges increased $2,341,000 to $11,071,000 for the year ended December 31, 2005 compared to the same 2004 period, primarily due to a $1,420,000 increase in merchant credit and debit card income combined with a $428,000 increase in mortgage banking fees generated from Valley Mortgage. Trust service fees of $7,504,000 for the year ended December 31, 2005 increased 31.9 percent over the same period in 2004 primarily due to an increase in the average fair value of trust accounts, which increased by 42.1 percent during the year ended December 31, 2005 compared to the comparable period of the prior year. The increase in the average fair value of trust accounts was primarily due to the addition of $623,267,000 in trust assets with the Southeast Texas acquisition in March 2004 and additional trust business developed during the last twelve months. The fair value of assets managed by the trust department totaled $1,864,145,000 at December 31, 2005. Net realized gains on sales of securities available for sale of $798,000 for the year ended December 31, 2005 decreased $5,057,000 from the comparable prior year period primarily as a result of rising interest rates. Data processing service fees increased 7.3 percent during the year ended December 31, 2005 to $9,153,000 compared to the corresponding 2004 period. The increase was primarily related to an increase in account volumes from existing data processing clients. In addition, during first quarter 2005, the Company collected a $332,000 termination fee. The number of data processing clients totaled 25 at December 31, 2005 compared to 27 at December 31, 2004. Loan servicing loss, net, which includes amortization of the MSR asset, decreased $916,000 to $410,000 for the year ended December 31, 2005 compared to the net servicing loss for the comparable 2004 period. The decrease is due to a $325,000 increase in loan servicing income, as well as a $591,000 decrease in MSR amortization for the year ended December 31, 2005 compared to the corresponding 2004 period. Other noninterest income increased by $11,398,000 to $14,630,000 for the year ended December 31, 2005 compared to the same 2004 period. A substantial part of the increase is due to an aggregate $6,160,000 in special distributions received during the first two quarters of 2005 as a result of the merger of PULSE EFT Association with Discover Financial Services. In addition, the gains on sales of loans held for sale and gains on sales of mortgage servicing rights increased $4,604,000 during the year ended December 31, 2005 compared to the corresponding 2004 period. Noninterest expense of $39,764,000 for fourth quarter 2005 increased $1,232,000 or 3.2 percent over fourth quarter 2004. This increase corresponds generally with growth in business volumes during the twelve months ended December 31, 2005, including business volumes attributable to the acquisition of Mercantile and its three banking centers in January 2005 and increases from a new Weslaco banking center opened in February 2005, a new Dallas banking center opened in October 2005 and a new Houston banking center opened in November 2005. As of December 31, 2005, Texas State Bank had 73 banking centers. The efficiency ratio was 49.72 percent for fourth quarter 2005, compared to 50.99 percent for fourth quarter 2004. Salaries and employee benefits increased 3.4 percent during fourth quarter 2005 to $21,224,000 compared to fourth quarter 2004. The number of full-time equivalent employees of 1,954 at December 31, 2005 represented a decrease of 2.2 percent as compared to the number of full-time equivalent employees at December 31, 2004. For the year ended December 31, 2005, noninterest expense totaled $160,730,000 reflecting an increase of $18,762,000 or 13.2 percent over the corresponding 2004 period primarily due to the growth in banking operations. Noninterest expense related to the banking operations acquired from Southeast Texas are included for a full twelve month period in 2005, as compared to only 9 1/2 months during 2004. Noninterest expense for 2005 also reflects an entire year of expenses associated with the Valley Mortgage business acquired in November 2004 and expenses attributable to the Dallas banking operations acquired with the acquisition of Mercantile since January 2005. Noninterest expense as a percent of average total assets for the year ended December 31, 2005 was 2.59 percent, representing a decrease of nine basis points when compared to the same 2004 period. Salaries and employee benefits increased $11,333,000 to $85,437,000 for the year ended December 31, 2005 compared to the year ended December 31, 2004. In addition to growth through acquisitions, the increase in salaries and employee benefits was also affected by salaries and employee benefits associated with the three additional banking locations opened during 2005. The percent of salaries and employee benefits to average total assets was 1.38 percent for the year ending December 31, 2005 compared to 1.40 percent for the same 2004 period. The efficiency ratio totaled 50.11 percent for the year ended December 31, 2005 compared to 51.22 percent for the corresponding 2004 period. Financial Condition Assets totaled $6,588,319,000 at December 31, 2005, reflecting an increase of $748,972,000, primarily in loans held for investment and securities, or 12.8 percent, as compared to assets at December 31, 2004. Loans held for investment of $4,109,615,000 at December 31, 2005 increased $359,096,000 or 9.6 percent from December 31, 2004. Securities of $1,840,780,000 at December 31, 2005 increased $310,067,000 or 20.3 percent from December 31, 2004. Deposits increased to $5,393,331,000 at December 31, 2005, up $632,491,000 or 13.3 percent from December 31, 2004. Public fund deposits of $864,737,000 at December 31, 2005 decreased $199,798,000 or 18.8 percent compared to $1,064,535,000 at December 31, 2004. Excluding the reduction in public fund deposits, net deposits increased $832,289,000 or 22.5 percent. During 2005, demand deposits increased to 20.5 percent of total deposits. Internal growth rates for loans and deposits were 6.4 percent and 9.6 percent, respectively, for the twelve months ended December 31, 2005. Other assets, net at December 31, 2005 included total goodwill and identifiable intangibles of $218,364,000. Shareholders' equity at December 31, 2005 increased $48,434,000 from December 31, 2004 to $642,492,000, reflecting an 8.2 percent increase. The increase resulted primarily from comprehensive income for the twelve months ended December 31, 2005 of $68,017,000 less dividends of $22,843,000 during the period. Comprehensive income for the year included net income of $88,368,000 offset by a net unrealized loss on securities available for sale, net of tax and reclassification adjustment, of $20,351,000. The total risk- based, tier 1 risk-based and leverage capital ratios of 11.98 percent, 10.91 percent and 8.26 percent at period end, respectively, substantially exceeded regulatory requirements for a well-capitalized bank holding company. Asset Quality At December 31, 2005, total loans held for investment of $4,109,615,000 included $52,022,000 or 1.27 percent classified as nonperforming compared to 0.53 percent at December 31, 2004. This balance of nonperforming loans reflected an increase of $32,272,000 when compared to the balance of nonperforming loans of $19,750,000 at December 31, 2004. The increase resulted primarily from the addition of three loan relationships totaling $31,754,000. The allowance for loan losses of $50,027,000 represented 1.22 percent of loans held for investment and 96.17 percent of nonperforming loans at December 31, 2005. The allowance for loan losses of $45,024,000 at December 31, 2004 represented 1.20 percent of loans held for investment and 227.97 percent of nonperforming loans. Net charge-offs for fourth quarter 2005 were 0.75 percent of average loans held for investment compared to 0.43 percent for fourth quarter 2004. Total nonperforming assets at December 31, 2005 of $60,050,000 represented 1.46 percent of total loans held for investment and foreclosed and other assets compared to 0.72 percent at December 31, 2004. Accruing loans 90 days or more past due of $11,781,000 at December 31, 2005 totaled 0.29 percent of total loans held for investment and foreclosed and other assets compared to 0.52 percent at December 31, 2004. This balance of accruing loans 90 days or more past due reflected a decrease of $7,903,000 when compared to the balance of accruing loans 90 days or more past due of $19,684,000 at December 31, 2004. This decrease is primarily a result of a $7,211,000 loan relationship, a portion of which was paid off and the remainder of which is current and another relationship totaling $3,235,000 that was transferred to foreclosed and other assets. The Company has been in contact with a number of loan customers who were affected by Hurricane Rita. Based on customer by customer evaluations the Company has granted extensions, usually for no more than three months, on loan payments. As of December 31, 2005, the Company has deferred payments of $7,704,000 on loans with principal amounts outstanding of $148,952,000. Other Information Texas Regional will host a conference call with analysts and investment professionals on Tuesday, January 17, 2006 at 10:00 a.m. CST. Interested parties may listen to the live call by dialing (800) 289-0436 or can access the live webcast on the Internet at http://www.trbsinc.com/ . The broadcast can be accessed by clicking the webcast link from the home page. A telephone replay will be available through the end of the day on Friday, January 20th. To access the replay, dial (888) 203-1112 and, when prompted, enter identification number 1347984. The webcast of the conference call will be archived on the Company's website at http://www.trbsinc.com/ for at least 90 days. Texas Regional paid a quarterly cash dividend of $0.12 per share on January 13, 2006 to common shareholders of record on December 30, 2005. This dividend represents a $0.02 per share, or 20.0 percent increase over the dividend paid for the same period in 2004. Texas Regional is a McAllen-based bank holding company whose stock trades on The Nasdaq Stock Market(R) under the symbol TRBS. Texas State Bank, its wholly owned subsidiary, conducts a commercial banking business through over 70 banking centers across Texas primarily located in the metropolitan areas of Beaumont-Port Arthur, Brownsville-Harlingen-San Benito, Corpus Christi, Dallas, Houston, McAllen-Edinburg-Mission and Tyler. Additional financial, statistical and business-related information, as well as business trends, is included in a Financial Supplement. This release, the Financial Supplement and other information are available on Texas Regional's website at http://www.trbsinc.com/ . The Financial Supplement and other information available on Texas Regional's website can also be obtained at no charge by calling John A. Martin, Chief Financial Officer, at (956) 631-5400. Forward-Looking Information This document, information filed by Texas Regional with the SEC and information on Texas Regional's website may contain forward-looking information (including information related to plans, projections or future performance of Texas Regional and its subsidiaries and planned market opportunities, employment opportunities and synergies from mergers), the occurrence of which involve certain risks, uncertainties, assumptions and other factors which could materially affect future results. If any of these risks or uncertainties materializes or any of these assumptions prove incorrect, Texas Regional's results could differ materially from Texas Regional's expectations in these statements. Texas Regional assumes no obligation and does not intend to update these forward-looking statements. For further information, please see Texas Regional's reports filed with the SEC pursuant to the Securities Exchange Act of 1934, which are available at Texas Regional's website at http://www.trbsinc.com/ and the SEC's website at http://www.sec.gov/ . CONTACT: Glen E. Roney, Chief Executive Officer, or John A. Martin, Chief Financial Officer, at (956) 631-5400, both of Texas Regional. Texas Regional Bancshares, Inc. and Subsidiaries Financial Highlights (Unaudited) (Dollars in At / For Three Months Ended Thousands, Except Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Per Share Data) 2005 2005 2005 2005 2004 Condensed Income Statements Loans Held for Investment $79,214 $74,803 $70,035 $66,131 $62,186 Securities 17,166 16,429 15,462 14,142 13,288 Other Interest-Earning Assets 583 502 425 435 309 Total Interest Income 96,963 91,734 85,922 80,708 75,783 Deposits 30,976 27,731 24,280 20,238 17,538 Other Borrowed Money 4,616 4,357 3,561 3,058 2,802 Total Interest Expense 35,592 32,088 27,841 23,296 20,340 Net Interest Income 61,371 59,646 58,081 57,412 55,443 Provision for Loan Losses 6,143 8,720 5,801 5,407 5,769 Service Charges - Deposits 8,802 10,082 9,641 9,140 10,449 Other Service Charges 2,715 2,701 2,704 2,951 2,326 Insurance Commission, Fees and Premiums 829 997 979 998 1,259 Trust Fees 1,868 1,892 1,904 1,840 1,843 Net Realized Gains (Losses) on Sales of Securities Available for Sale 2 475 323 (2) 1,010 Data Processing Service Fees 2,222 2,159 2,148 2,624 2,201 Loan Servicing Income (Loss), Net (214) (352) 3 153 (188) Other Noninterest Income 2,378 1,894 3,133 7,225 1,222 Total Noninterest Income 18,602 19,848 20,835 24,929 20,122 Salaries and Employee Benefits 21,224 21,886 19,610 22,717 20,527 Net Occupancy Expense 3,172 3,749 3,742 3,414 2,982 Equipment Expense 3,439 3,515 3,610 3,323 3,668 Other Real Estate (Income) Expense, Net 169 305 418 229 (199) Amortization - Identifiable Intangibles 1,597 1,514 1,652 1,841 1,791 Other Noninterest Expense, Net 10,163 9,903 10,040 9,498 9,763 Total Noninterest Expense 39,764 40,872 39,072 41,022 38,532 Income Before Income Tax Expense 34,066 29,902 34,043 35,912 31,264 Income Tax Expense 11,240 10,073 12,129 12,113 10,416 Net Income $22,826 $19,829 $21,914 $23,799 $20,848 Per Common Share Data Net Income-Basic $0.46 $0.40 $0.44 $0.48 $0.42 Net Income-Diluted 0.46 0.40 0.44 0.48 0.42 Market Value at Period End 28.30 28.79 30.48 30.11 32.68 Book Value at Period End 12.92 12.71 12.53 12.12 11.99 Cash Dividends Declared 0.120 0.120 0.120 0.100 0.100 Share Data (in Thousands) Basic 49,698 49,646 49,606 49,570 49,185 Diluted 49,914 49,919 49,855 49,855 49,566 Shares Outstanding at Period End 49,712 49,687 49,624 49,592 49,553 Selected Financial Data Return on Average Assets 1.42% 1.26% 1.43% 1.60% 1.46% Return on Average Equity 14.17 12.46 14.26 15.90 14.10 Leverage Capital Ratio 8.26 8.11 7.98 7.83 8.32 Expense Efficiency Ratio (A) 49.72 51.42 49.51 49.82 50.99 TE Net Interest Income (B) $62,554 $60,762 $59,002 $58,411 $56,533 TE Adjustment (A) 1,183 1,116 921 999 1,090 Net Interest Income, as Reported $61,371 $59,646 $58,081 $57,412 $55,443 TE Net Interest Margin (B) 4.28% 4.22% 4.23% 4.32% 4.35% Goodwill $192,740 $192,729 $194,849 $194,963 $174,503 Identifiable Intangibles, Net 25,624 27,224 28,553 30,022 29,607 Selected Financial Data - Continued Trust Assets Held, at Fair Value $1,864,145 $1,806,229 $1,681,922 $1,475,545 $1,466,841 Full-Time Equivalent Employees 1,954 1,976 2,057 2,061 1,997 Condensed Balance Sheets Loans Held for Investment $4,109,615 $3,965,628 $3,903,850 $3,843,779 $3,750,519 Securities 1,840,780 1,757,143 1,741,827 1,652,438 1,530,713 Other Interest- Earning Assets 34,875 23,612 24,306 47,834 29,769 Total Interest- Earning Assets 5,985,270 5,746,383 5,669,983 5,544,051 5,311,001 Cash and Due from Banks 179,829 138,986 141,182 133,450 145,528 Premises and Equipment, Net 149,698 147,084 143,136 140,145 134,239 Other Assets, Net 323,549 322,387 319,886 319,140 293,603 Allowance for Loan Losses (50,027) (51,368) (48,022) (47,313) (45,024) Total Assets $6,588,319 $6,303,472 $6,226,165 $6,089,473 $5,839,347 Savings and Time Deposits $4,288,830 $4,222,194 $4,237,210 $4,081,869 $3,894,067 Other Borrowed Money 523,375 499,177 405,888 441,329 461,751 Total Interest- Bearing Liabilities 4,812,205 4,721,371 4,643,098 4,523,198 4,355,818 Demand Deposits 1,104,501 907,280 916,727 920,271 866,773 Other Liabilities 29,121 43,300 44,716 45,108 22,698 Total Liabilities 5,945,827 5,671,951 5,604,541 5,488,577 5,245,289 Shareholders' Equity 642,492 631,521 621,624 600,896 594,058 Total Liabilities and Equity $6,588,319 $6,303,472 $6,226,165 $6,089,473 $5,839,347 Condensed Average Balance Sheets Loans Held for Investment $3,968,329 $3,930,179 $3,876,051 $3,858,477 $3,631,640 Securities 1,794,995 1,751,516 1,685,893 1,581,314 1,517,518 Other Interest- Earning Assets 39,621 36,915 32,545 43,693 23,820 Total Interest- Earning Assets 5,802,945 5,718,610 5,594,489 5,483,484 5,172,978 Cash and Due from Banks 154,007 126,634 130,212 143,284 136,899 Premises and Equipment, Net 147,508 143,910 141,391 138,366 132,538 Other Assets, Net 323,268 321,672 321,237 314,765 294,784 Allowance for Loan Losses (51,331) (48,998) (48,500) (48,548) (44,804) Total Assets $6,376,397 $6,261,828 $6,138,829 $6,031,351 $5,692,395 Savings and Time Deposits $4,248,318 $4,238,064 $4,184,552 $4,103,985 $3,804,139 Other Borrowed Money 426,747 445,778 404,928 396,068 399,386 Total Interest- Bearing Liabilities 4,675,065 4,683,842 4,589,480 4,500,053 4,203,525 Demand Deposits 1,024,204 915,798 902,549 896,633 871,569 Other Liabilities 38,122 30,734 30,556 27,655 29,216 Total Liabilities 5,737,391 5,630,374 5,522,585 5,424,341 5,104,310 Shareholders' Equity 639,006 631,454 616,244 607,010 588,085 Total Liabilities and Equity $6,376,397 $6,261,828 $6,138,829 $6,031,351 $5,692,395 Nonperforming Assets & Past Due Loans Nonaccrual Loans $50,218 $38,752 $45,680 $41,518 $19,750 Restructured Loans 1,804 1,804 1,804 --- --- Foreclosed and Other Assets 8,028 9,194 9,323 8,002 7,398 Total Nonperforming Assets 60,050 49,750 56,807 49,520 27,148 Accruing Loans 90 Days or More Past Due 11,781 13,524 22,613 27,764 19,684 Net Charge-Offs 7,484 5,374 5,092 4,642 3,899 Net Charge-Offs to Average Loans 0.75% 0.54% 0.53% 0.49% 0.43% Texas Regional Bancshares, Inc. and Subsidiaries Financial Highlights (Unaudited) At / For Year Ended (Dollars in Thousands, Dec 31, Dec 31, Except Per Share Data) 2005 2004 Condensed Income Statements Loans Held for Investment $290,183 $219,446 Securities 63,199 51,390 Other Interest-Earning Assets 1,945 1,073 Total Interest Income 355,327 271,909 Deposits 103,225 59,799 Other Borrowed Money 15,592 8,008 Total Interest Expense 118,817 67,807 Net Interest Income 236,510 204,102 Provision for Loan Losses 26,071 20,583 Service Charges - Deposits 37,665 38,541 Other Service Charges 11,071 8,730 Insurance Commission, Fees and Premiums 3,803 3,805 Trust Fees 7,504 5,688 Net Realized Gains on Sales of Securities Available for Sale 798 5,855 Data Processing Service Fees 9,153 8,531 Loan Servicing Loss, Net (410) (1,326) Other Noninterest Income 14,630 3,232 Total Noninterest Income 84,214 73,056 Salaries and Employee Benefits 85,437 74,104 Net Occupancy Expense 14,077 11,591 Equipment Expense 13,887 12,852 Other Real Estate Expense, Net 1,121 437 Amortization - Identifiable Intangibles 6,604 6,178 Other Noninterest Expense, Net 39,604 36,806 Total Noninterest Expense 160,730 141,968 Income Before Income Tax Expense 133,923 114,607 Income Tax Expense 45,555 37,949 Net Income $88,368 $76,658 Per Common Share Data Net Income-Basic $1.78 $1.60 Net Income-Diluted 1.77 1.59 Market Value at Period End 28.30 32.68 Book Value at Period End 12.92 11.99 Cash Dividends Declared 0.460 0.367 Share Data (in Thousands) Basic 49,631 48,043 Diluted 49,885 48,355 Shares Outstanding at Period End 49,712 49,553 Selected Financial Data Return on Average Assets 1.42% 1.45% Return on Average Equity 14.17 14.24 Leverage Capital Ratio 8.26 8.32 Expense Efficiency Ratio (A) 50.11 51.22 TE Net Interest Income (B) $240,729 $207,966 TE Adjustment (B) 4,219 3,864 Net Interest Income, as Reported $236,510 $204,102 TE Net Interest Margin (B) 4.26% 4.31% Goodwill $192,740 $174,503 Identifiable Intangibles, Net 25,624 29,607 Trust Assets Held, at Fair Value 1,864,145 1,466,841 Full-Time Equivalent Employees 1,954 1,997 Condensed Balance Sheets Loans Held for Investment $4,109,615 $3,750,519 Securities 1,840,780 1,530,713 Other Interest-Earning Assets 34,875 29,769 Total Interest-Earning Assets 5,985,270 5,311,001 Cash and Due from Banks 179,829 145,528 Premises and Equipment, Net 149,698 134,239 Other Assets, Net 323,549 293,603 Allowance for Loan Losses (50,027) (45,024) Total Assets $6,588,319 $5,839,347 Savings and Time Deposits $4,288,830 $3,894,067 Other Borrowed Money 523,375 461,751 Total Interest-Bearing Liabilities 4,812,205 4,355,818 Demand Deposits 1,104,501 866,773 Other Liabilities 29,121 22,698 Total Liabilities 5,945,827 5,245,289 Shareholders' Equity 642,492 594,058 Total Liabilities and Equity $6,588,319 $5,839,347 Condensed Average Balance Sheets Loans Held for Investment $3,908,620 $3,304,499 Securities 1,704,147 1,490,140 Other Interest-Earning Assets 38,178 28,570 Total Interest-Earning Assets 5,650,945 4,823,209 Cash and Due from Banks 138,531 127,263 Premises and Equipment, Net 142,822 125,064 Other Assets, Net 320,263 259,778 Allowance for Loan Losses (49,351) (41,717) Total Assets $6,203,210 $5,293,597 Savings and Time Deposits $4,194,222 $3,622,656 Other Borrowed Money 418,540 310,764 Total Interest-Bearing Liabilities 4,612,762 3,933,420 Demand Deposits 935,093 793,121 Other Liabilities 31,793 28,854 Total Liabilities 5,579,648 4,755,395 Shareholders' Equity 623,562 538,202 Total Liabilities and Equity $6,203,210 $5,293,597 Nonperforming Assets & Past Due Loans Nonaccrual Loans $50,218 $19,750 Restructured Loans 1,804 --- Foreclosed and Other Assets 8,028 7,398 Total Nonperforming Assets 60,050 27,148 Accruing Loans 90 Days or More Past Due 11,781 19,684 Net Charge-Offs 22,592 15,588 Net Charge-Offs to Average Loans 0.58% 0.47% Certain amounts in the prior periods' presentation have been reclassified to conform to the current presentation. These reclassifications have no effect on previously reported net income. (A) Ratio of Noninterest Expense divided by the sum of Net Interest Income and Noninterest Income. (B) Tax-equivalent adjustment computed based on a 35% tax rate. DATASOURCE: Texas Regional Bancshares, Inc. CONTACT: Glen E. Roney, Chief Executive Officer, or John A. Martin, Chief Financial Officer, both of Texas Regional Bancshares, Inc., +1-956-631-5400 Web site: http://www.trbsinc.com/

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