TRBS Texas Regional Bancshares

MCALLEN, Texas, April 17 /PRNewswire-FirstCall/ -- Texas Regional Bancshares, Inc. (NASDAQ:TRBS) (Texas Regional or the Company), bank holding company for Texas State Bank, today reported net income for first quarter 2006 of $23,011,000, or $0.42 per diluted common share, compared to $23,799,000, or $0.43 per diluted common share, for the comparable 2005 period. All per share amounts for prior periods have been adjusted for the 10 percent stock dividend declared by Texas Regional on March 14, 2006 and distributed on April 13, 2006 to common shareholders of record on March 31, 2006. Return on assets and return on shareholders' equity averaged 1.42 percent and 14.93 percent, respectively, compared to 1.60 percent and 15.90 percent, respectively, for the corresponding 2005 period. Texas Regional completed the acquisition of Mercantile Bank & Trust, FSB (Mercantile) on January 14, 2005. The results of operations for Mercantile have been included in the consolidated financial statements since the date of acquisition. "After adjusting the 2005 first quarter earnings for the gain recognized from the merger of Pulse EFT with Discover Financial Services, Texas Regional increased its net income and diluted earnings per share by $2,626,000 and $0.05, respectively. These increases represent a 12.9 percent and 13.5 percent change, respectively, over the same quarter of 2005," said Glen E. Roney, Chairman of the Board and Chief Executive Officer of Texas Regional. "On March 14, 2006, the Board of Directors approved an increase in the cash dividend and declared a 10 percent stock dividend. Taken together, these actions resulted in a 28.4 percent increase in the cash dividend for first quarter 2006 over fourth quarter 2005." Operating Highlights Net interest income of $61,640,000 for first quarter 2006 increased $4,228,000 or 7.4 percent over first quarter 2005. Average total interest- earning assets, the primary factor in net interest income growth, increased 9.4 percent from first quarter 2005 to $5,997,526,000 for first quarter 2006. The net interest margin, on a tax-equivalent basis, decreased six basis points to 4.26 percent for first quarter 2006 compared to the corresponding 2005 period. Provision for loan losses of $4,871,000 for first quarter 2006 decreased 9.9 percent as compared to the provision for loan losses during first quarter 2005. The decrease in the provision is partially attributable to management's decision to reduce the amount of the provision as a result of net paydowns in loans during first quarter 2006 compared to net loan growth during first quarter 2005. The provision for loan losses represented 0.48 percent of average loans held for investment for first quarter 2006 compared to 0.57 percent for first quarter 2005. Net charge-offs totaled $3,886,000 for first quarter 2006, representing 0.38 percent of average loans held for investment as compared to net charge-offs for first quarter 2005, which represented 0.49 percent of average loans held for investment. Noninterest income of $19,776,000 for first quarter 2006 decreased $5,230,000 or 20.9 percent as compared to first quarter 2005. The decrease in noninterest income resulted primarily from a $4,990,000 decrease in other noninterest income attributable to the $5,252,000 special distribution received during first quarter 2005 as the Company's share of the proceeds from the merger of PULSE EFT with Discover Financial Services. The decrease in other noninterest income was partially offset by a $277,000 gain recognized during first quarter 2006 arising out of the receipt of insurance proceeds for damages incurred as a result of Hurricane Rita. Total service charges increased $376,000 or 3.1 percent for first quarter 2006 compared to first quarter 2005. The increase in total service charges is primarily attributable to a $507,000 increase in merchant credit and debit card income during first quarter 2006, combined with an increase of $130,000 in automated teller machine income. The increase was partially offset by a $308,000 decrease in service charges on account analysis during first quarter 2006 compared to the same period in 2005. Data processing service fees of $2,284,000 decreased $340,000 or 13.0 percent for the first quarter of 2006 compared to the first quarter of 2005 primarily due to a $332,000 nonrecurring termination fee received during first quarter 2005 from a data processing service client who terminated services during that quarter. The number of data processing clients totaled 26 at both March 31, 2006 and March 31, 2005. Noninterest expense of $41,736,000 for first quarter 2006 remained comparable to first quarter 2005 increasing by only $637,000 or 1.5 percent. The efficiency ratio was 51.26 percent for first quarter 2006, compared to 49.87 percent for first quarter 2005. Salaries and employee benefits increased 1.1 percent during first quarter 2006 to $22,962,000 compared to first quarter 2005. The number of full-time equivalent employees of 1,985 at March 31, 2006 represented a decrease of 3.7 percent as compared to the number of full-time equivalent employees at March 31, 2005. Net occupancy expense increased $455,000 or 13.3 percent for first quarter 2006 compared to first quarter 2005. The increase is primarily due to an increase in utilities and property insurance expense. Financial Condition Assets totaled $6,633,994,000 at March 31, 2006, reflecting an increase of $544,521,000, or 8.9 percent, as compared to assets at March 31, 2005. The increase was primarily attributable to increases in loans held for investment and securities. Loans held for investment of $4,104,728,000 at March 31, 2006 increased $260,949,000 or 6.8 percent from March 31, 2005. Securities of $1,889,781,000 at March 31, 2006 increased $237,343,000 or 14.4 percent from March 31, 2005. Deposits increased to $5,606,576,000 at March 31, 2006, up $604,436,000 or 12.1 percent from March 31, 2005. Other assets, net at March 31, 2006 included total goodwill and identifiable intangibles of $217,285,000. Shareholders' equity at March 31, 2006 increased $55,624,000 from March 31, 2005 to $656,520,000, reflecting a 9.3 percent increase. The increase resulted primarily from net income for the twelve months ended March 31, 2006 of $87,580,000, offset by dividends of $25,549,000. The total risk-based, tier 1 risk-based and leverage capital ratios of 12.34 percent, 11.26 percent and 8.30 percent at period end, respectively, substantially exceeded regulatory requirements for a well-capitalized bank holding company. Asset Quality At March 31, 2006, total loans held for investment of $4,104,728,000 included $48,195,000 or 1.17 percent classified as nonperforming compared to 1.08 percent at March 31, 2005. This balance of nonperforming loans reflected an increase of $6,677,000 when compared to the balance of nonperforming loans of $41,518,000 at March 31, 2005. The increase resulted primarily from the addition of one loan relationship totaling $8,450,000. The increase was further affected by a $1,571,000 increase in restructured loans. During 2005, the Company reduced the interest rates on two loans and identified them as troubled debt restructured loans. The increase in nonperforming loans was partially offset by a $4,000,000 payment received on one loan relationship during the third quarter of 2005. The allowance for loan losses of $51,012,000 represented 1.24 percent of loans held for investment and 105.8 percent of nonperforming loans at March 31, 2006. The allowance for loan losses of $47,313,000 at March 31, 2005 represented 1.23 percent of loans held for investment and 113.96 percent of nonperforming loans. Net charge-offs totaled $3,886,000 for first quarter 2006, representing 0.38 percent of average loans held for investment as compared to net charge-offs for first quarter 2005, which represented 0.49 percent of average loans held for investment. Total nonperforming assets at March 31, 2006 of $65,176,000 represented 1.58 percent of total loans held for investment and foreclosed and other assets compared to 1.29 percent at March 31, 2005. Accruing loans 90 days or more past due of $13,706,000 at March 31, 2006 totaled 0.33 percent of total loans held for investment and foreclosed and other assets compared to 0.72 percent at March 31, 2005. This balance of accruing loans 90 days or more past due reflected a decrease of $14,058,000 when compared to the balance of accruing loans 90 days or more past due of $27,764,000 at March 31, 2005. This decrease is primarily a result of a $7,193,000 loan relationship, a portion of which was paid off and the remainder of which is current, a second relationship totaling $4,085,000 that is now current and a third relationship totaling $3,690,000, a majority of which was transferred to foreclosed and other assets and the remainder of which was paid off, transferred to nonaccrual or charged-off. Foreclosed and other assets of $16,981,000 at March 31, 2006 increased $8,979,000 compared to $8,002,000 at March 31, 2005 primarily as a result of the addition of seven properties totaling $7,356,000. In connection with Hurricane Rita, 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. Since this additional provision was recorded, the Company has recorded charge-offs of $898,000 against this allowance. There has been no increase in the total charge-offs against this allowance from fourth quarter 2005 to first quarter 2006. 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. Other Information Texas Regional will host a conference call with analysts and investment professionals on Monday, April 17, 2006 at 10:00 a.m. CDT. Interested parties may listen to the live call by dialing (800) 289-0504 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 Thursday, April 20th. To access the replay, dial (888) 203-1112 and, when prompted, enter identification number 3590492. 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 distributed a 10 percent stock dividend and paid a quarterly cash dividend of $0.14 per common share on April 13, 2006 to common shareholders of record on March 31, 2006. This cash dividend represents a $0.049 per share, or 53.8 percent increase over the same period in 2005. The cash dividend was paid on the common shares issued in the stock dividend. 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 quarterly 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 from John A. Martin, Chief Financial Officer, at (956) 631-5400. Forward-Looking Information This release, the financial supplement, 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 Thousands, At / For Three Months Ended Except Per Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Share Data) 2006 2005 2005 2005 2005 Condensed Income Statements Loans Held for Investment $82,133 $79,214 $74,803 $70,035 $66,131 Securities 18,056 17,166 16,429 15,462 14,142 Other Interest- Earning Assets 627 583 502 425 435 Total Interest Income 100,816 96,963 91,734 85,922 80,708 Deposits 34,231 30,976 27,731 24,280 20,238 Other Borrowed Money 4,945 4,616 4,357 3,561 3,058 Total Interest Expense 39,176 35,592 32,088 27,841 23,296 Net Interest Income 61,640 61,371 59,646 58,081 57,412 Provision for Loan Losses 4,871 6,143 8,720 5,801 5,407 Service Charges - Deposits 8,999 8,802 10,082 9,641 9,140 Other Service Charges 3,374 2,600 2,575 2,564 2,857 Insurance Commission, Fees and Premiums 1,006 829 997 979 998 Trust Fees 1,901 1,868 1,892 1,904 1,840 Mortgage Banking Revenues 1,185 1,399 1,710 1,817 1,268 Net Realized Gains (Losses) on Sales of Securities Available for Sale (97) 2 475 323 (2) Data Processing Service Fees 2,284 2,222 2,159 2,148 2,624 Loan Servicing Income (Loss), Net (14) (214) (352) 3 153 Other Noninterest Income 1,138 1,229 421 1,566 6,128 Total Noninterest Income 19,776 18,737 19,959 20,945 25,006 Salaries and Employee Benefits 22,962 21,224 21,886 19,610 22,717 Net Occupancy Expense 3,869 3,172 3,749 3,742 3,414 Equipment Expense 3,416 3,439 3,515 3,610 3,323 Other Real Estate Expense, Net 101 169 305 418 229 Amortization - Identifiable Intangibles 1,618 1,597 1,514 1,652 1,841 Other Noninterest Expense, Net 9,770 10,298 10,014 10,150 9,575 Total Noninterest Expense 41,736 39,899 40,983 39,182 41,099 Income Before Income Tax Expense 34,809 34,066 29,902 34,043 35,912 Income Tax Expense 11,798 11,240 10,073 12,129 12,113 Net Income $23,011 $22,826 $19,829 $21,914 $23,799 Per Common Share Data (C) Net Income- Basic $0.42 $0.42 $0.36 $0.40 $0.44 Net Income- Diluted 0.42 0.42 0.36 0.40 0.43 Market Value at Period End 29.49 25.73 26.17 27.71 27.37 Book Value at Period End 11.99 11.75 11.55 11.39 11.02 Cash Dividends Declared 0.140 0.109 0.109 0.109 0.091 Share Data (C) (in Thousands) Basic 54,714 54,666 54,609 54,565 54,526 Diluted 54,937 54,904 54,909 54,839 54,839 Shares Outstanding at Period End (C) 54,766 54,682 54,654 54,584 54,550 Selected Financial Data Return on Average Assets 1.42% 1.42% 1.26% 1.43% 1.60% Return on Average Equity 14.93 14.17 12.46 14.26 15.90 Leverage Capital Ratio 8.30 8.26 8.11 7.98 7.83 Expense Efficiency Ratio(A) 51.26 49.81 51.48 49.58 49.87 TE Net Interest Income(B) $63,004 $622,554 $60,762 $59,002 $58,411 TE Adjustment(B) 1,364 1,183 1,116 921 999 Net Interest Income, as Reported $61,640 $61,371 $59,646 $58,081 $57,412 TE Net Interest Margin(B) 4.26% 4.28% 4.22% 4.23% 4.32% Goodwill $193,094 $192,740 $192,729 $194,849 $194,963 Identifiable Intangibles, Net 24,191 25,624 27,224 28,553 30,022 Trust Assets Held, at Fair Value $2,091,137 $1,864,145 $1,806,229 $1,681,922 $1,475,545 Selected Financial Data - Continued Full-Time Equivalent Employees 1,985 1,954 1,976 2,057 2,061 Condensed Balance Sheets Loans Held for Investment $4,104,728 $4,109,615 $3,965,628 $3,903,850 $3,843,779 Securities 1,889,781 1,840,780 1,757,143 1,741,827 1,652,438 Other Interest- Earning Assets 66,707 34,875 23,612 24,306 47,834 Total Interest- Earning Assets 6,061,216 5,985,270 5,746,383 5,669,983 5,544,051 Cash and Due from Banks 139,452 179,829 138,986 141,182 133,450 Premises and Equipment, Net 151,720 149,698 147,084 143,136 140,145 Other Assets, Net 332,618 323,549 322,387 319,886 319,140 Allowance for Loan Losses (51,012) (50,027) (51,368) (48,022) (47,313) Total Assets $6,633,994 $6,588,319 $6,303,472 $6,226,165 $6,089,473 Savings and Time Deposits $4,490,466 $4,288,830 $4,222,194 $4,237,210 $4,081,869 Other Borrowed Money 315,960 523,375 499,177 405,888 441,329 Total Interest- Bearing Liabilities 4,806,426 4,812,205 4,721,371 4,643,098 4,523,198 Demand Deposits 1,116,110 1,104,501 907,280 916,727 920,271 Other Liabilities 54,938 29,121 43,300 44,716 45,108 Total Liabilities 5,977,474 5,945,827 5,671,951 5,604,541 5,488,577 Shareholders' Equity 656,520 642,492 631,521 621,624 600,896 Total Liabilities and Equity $6,633,994 $6,588,319 $6,303,472 $6,226,165 $6,089,473 Condensed Average Balance Sheets Loans Held for Investment $4,098,702 $3,968,329 $3,930,179 $3,876,051 $3,858,477 Securities 1,857,850 1,794,995 1,751,516 1,685,893 1,581,314 Other Interest- Earning Assets 40,974 39,621 36,915 32,545 43,693 Total Interest- Earning Assets 5,997,526 5,802,945 5,718,610 5,594,489 5,483,484 Cash and Due from Banks 145,534 154,007 126,634 130,212 143,284 Premises and Equipment, Net 151,145 147,508 143,910 141,391 138,366 Other Assets, Net 326,776 323,268 321,672 321,237 314,765 Allowance for Loan Losses (52,147) (51,331) (48,998) (48,500) (48,548) Total Assets $6,568,834 $6,376,397 $6,261,828 $6,138,829 $6,031,351 Savings and Time Deposits $4,377,604 $4,248,318 $4,238,064 $4,184,552 $4,103,985 Other Borrowed Money 431,765 426,747 445,778 404,928 396,068 Total Interest- Bearing Liabilities 4,809,369 4,675,065 4,683,842 4,589,480 4,500,053 Demand Deposits 1,068,266 1,024,204 915,798 902,549 896,633 Other Liabilities 65,991 38,122 30,734 30,556 27,655 Total Liabilities 5,943,626 5,737,391 5,630,374 5,522,585 5,424,341 Shareholders' Equity 625,208 639,006 631,454 616,244 607,010 Total Liabilities and Equity $6,568,834 $6,376,397 $6,261,828 $6,138,829 $6,031,351 Nonperforming Assets & Past Due Loans Nonaccrual Loans $46,624 $50,218 $38,752 $45,680 $41,518 Restructured Loans 1,571 2,127 2,127 1,804 --- Foreclosed and Other Assets 16,981 8,028 9,194 9,323 8,002 Total Nonperforming Assets 65,176 60,373 50,073 56,807 49,520 Accruing Loans 90 Days or More Past Due 13,706 11,781 13,524 22,613 27,764 Net Charge-Offs 3,886 7,484 5,374 5,092 4,642 Net Charge-Offs to Average Loans 0.38% 0.75% 0.54% 0.53% 0.49% 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. (C) Restated to retroactively give effect for the 10% stock dividend declared by the Company during first quarter 2006 and distributed during second quarter 2006. 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.sec.gov/ Web site: http://www.trbsinc.com/

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