TXUI Texas United Bancshares

Texas United Bancshares Reports 2004 Fourth Quarter Net Income of $1.4 Million, Up 20.2% Fiscal Year 2004 Net Income Up 15.4% LA GRANGE, Texas, Feb. 17 /PRNewswire-FirstCall/ -- Texas United Bancshares, Inc. (NASDAQ:TXUI), a growing community banking organization located in central and south central Texas and in areas north and south of the Dallas-Fort Worth metroplex, reported net income for the fourth quarter of 2004 of $1.4 million, an increase of 20.2 percent compared with $1.2 million for the fourth quarter of 2003. Diluted earnings per share for the fourth quarter of 2004 were $0.18 compared with $0.29 for the same period in 2003. Per share results reflect the sale of 2,300,000 shares of common stock through a public offering in August 2004 and the issuance of approximately 1,457,000 shares in connection with the acquisition of GNB Bancshares, Inc. in October 2004. Weighted average diluted shares outstanding for the fourth quarter of 2004 were 7,953,000, an increase of 91.5 percent compared with 4,154,000 weighted average diluted shares outstanding for the same period in 2003. For the year 2004, Texas United reported net income of $6.1 million, up 15.4 percent compared with $5.2 million reported for 2003. Diluted earnings per share for 2004 were $1.11 compared with $1.26 for 2003, reflecting the shares of common stock issued in connection with the aforementioned public offering and acquisition of GNB Bancshares. Weighted average diluted shares outstanding for 2004 were 5,442,000, a 31.2 percent increase compared with 4,149,000 weighted average shares outstanding for 2003. Don Stricklin, President and CEO, commented, "2004 was a year of growth and opportunity. We surpassed the $1.0 billion asset mark at year-end 2004, the result of our recent branch and bank acquisitions combined with strong organic loan growth in several lines of business. "Our reputation as a knowledgeable and responsive commercial lender was enhanced by the addition of four seasoned commercial lenders in 2004, as well as a specialist in SBA loans. Commercial loans, including commercial mortgages, outstanding totaled $266 million at December 31, 2004, an increase of $87 million, or 48.7 percent year-over-year. With the acquisition of Community Home Loan, Inc. last February, the opening of three new mortgage loan offices, and the hiring of 14 experienced mortgage lenders, our mortgage banking business has also become a significant contributor to our revenue stream. "The GNB Bancshares acquisition signals our entry into areas surrounding the Dallas-Fort Worth metroplex, reflecting our strategy of expansion into bedroom communities of larger metropolitan areas. Our geographic footprint now extends into some of the fastest growing suburban metropolitan markets in Texas. 2004 was a strong growth year for us, but looking forward, we are excited about the opportunities to expand our services through our network of banking locations and talented team of lending professionals." Total revenue, comprised of net interest income and non-interest income, was $16.2 million for the fourth quarter of 2004, an increase of 57.0 percent compared with the $10.3 million earned in the prior-year period. Net interest income, before the provision for loan losses, for the fourth quarter of 2004 increased 74.8 percent to $11.6 million compared with $6.6 million for the same period in 2003, primarily as a result of a 72.6 percent increase in average earning assets, partially offset by a five basis point decline in the net interest margin to 4.70 percent. The linked quarter net interest margin was 4.42 percent. Mr. Stricklin noted, "Net interest income trends were favorably impacted by our recent acquisition of GNB; we added quality earning assets and low-cost core deposits that improved our consolidated margin relative to the third quarter of 2004. The increase in interest rates has also had a positive impact on our margin, and we should continue to benefit from a rising interest rate environment going forward." Non-interest income for the fourth quarter of 2004 was $4.6 million, an increase of 25.2 percent compared with $3.7 million for the fourth quarter of 2004. The increase primarily reflected a $1.9 million gain on the sale of mortgage loans by Community Home Loan, Inc., partially offset by a $523,000 reduction in mortgage servicing revenue during the quarter. Total revenue was $51.8 million for the 2004 fiscal year, an increase of 29.3 percent compared with the $40.0 million earned during 2003. Net interest income, before the provision for loan losses, for 2004 increased 28.0 percent to $33.6 million compared with $26.2 million for 2003, primarily reflecting 35.1 percent growth in average earning assets, partially offset by a 25 basis point decline in the net interest margin to 4.56 percent. Non-interest income for 2004 was $18.2 million compared with $13.8 million for 2003, an increase of 31.8 percent. The increase primarily reflects a $7.5 million gain on the sale of mortgage loans by Community Home Loan, Inc., partially offset by a $1.4 million decrease in mortgage servicing revenue during the year and a $1.1 million decrease in gains on the sale of securities. Non-interest expense for the fourth quarter of 2004 was $13.4 million compared with $8.2 million for the same period in 2003, an increase of 64.7 percent. Employee compensation and benefits, the largest component of non-interest expense, grew 86.0 percent. Mr. Stricklin commented, "Our FTE employee base grew 66.8 percent due to our acquisitions and our commercial and mortgage banking expansion. We anticipate efficiency improvements as loan production grows into the infrastructure we have added." The efficiency ratio increased to 82.94 percent for the fourth quarter of 2004 compared with 79.09 percent for the same period in 2003. Non-interest expense for the 2004 fiscal year was $41.1 million compared with $30.0 million for 2003, an increase of 36.9 percent. The increase was primarily due to a 42.6 percent increase in employee compensation and benefits. Texas United's efficiency ratio increased to 79.49 percent for 2004 compared with 77.33 percent for 2003. Mr. Stricklin noted that asset quality remained strong and stable throughout 2004. "Despite an 80.5 percent increase in loans outstanding for the year," he added, "net charge-offs actually decreased by 58 percent. During the fourth quarter, we charged off $621,000 in problem assets, which resulted in elevated charge-offs levels in that quarter." Net charge-offs were $964,000 or 0.19 percent of average loans for fiscal year 2004, compared with $2.3 million or 0.61 percent of average loans for fiscal year 2003. Nonperforming assets were 0.33 percent of total assets at December 31, 2004, compared with 0.35 percent at December 31, 2003. The loan loss allowance was 0.96 percent of total loans at December 31, 2004. Total assets were $1.1 billion at year-end 2004, an increase of $503.7 million, or 79.0 percent, from year-end 2003. Loans rose $309.2 million, or 80.5 percent, during the same time period; of this total, approximately 30 percent represented organic growth. Deposits increased $378.9 million, or 75.6 percent, of which approximately 18 percent represented organic growth. Texas United continues to grow its low-cost deposit base; at year-end 2004, non-interest bearing deposits represented 21.3 percent of total deposits compared with 19.2 percent at year-end 2003. Shareholders' equity at December 31, 2004 was $104.8 million, an increase of $66.8 million, or 175.9 percent compared with 38.0 million at December 31, 2003. The increase reflects the issuance of 2,300,000 shares of common stock in the August 2004 public offering, which yielded net proceeds of $36.1 million, as well as the issuance of approximately 1,457,000 shares of common stock in connection with the acquisition of GNB and $6.1 million of 2004 earnings. Texas United's leverage ratio at December 31, 2004 was 9.34 percent, compared with 5.85 percent at December 31, 2003. About the Company Texas United Bancshares, Inc. is a registered financial holding company listed on the Nasdaq National Market under the symbol "TXUI". Texas United operates through two wholly owned subsidiary banks, State Bank and GNB Financial, n.a. and, offers a complete range of banking services through 20 full service State Bank banking centers located in the greater central and south central Texas area and seven full service GNB Financial banking centers located in Gainesville, Denton and Ennis, Texas. In addition, State Bank has 18 mortgage loan production offices located in Houston, San Antonio and Austin through the Bank and its wholly-owned subsidiary, Community Home Loan, Inc. Forward-Looking Statements Except for historical information, certain of the matters discussed in this news release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, including, but not limited to, the following: general business and economic conditions in the markets Texas United serves may be less favorable than expected which could decrease the demand for loan, deposit and other financial services and increase loan delinquencies and defaults; changes in the interest rate environment which could reduce Texas United's net interest margin; acquisition integration may be more difficult than anticipated; legislative or regulatory developments including changes in laws concerning taxes, banking, securities, insurance and other aspects of the financial securities industry; competitive factors may increase, including product and pricing pressures among financial services organizations; and changes in accounting principles, policies or guidelines. All written or oral forward-looking statements are expressly qualified in their entirety by these cautionary statements. Please also read the additional risks and factors described from time to time in Texas United's reports and registration statements filed with the Securities and Exchange Commission. We disclaim any obligation to update or revise any forward-looking statements contained in this release. Texas United Bancshares Fourth Quarter 2004 Results TEXAS UNITED BANCSHARES CONSOLIDATED FINANCIAL HIGHLIGHTS (dollars in thousands, except per share data) (Unaudited) Quarterly 2004 2004 2004 2004 2003 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr EARNINGS Net interest income $11,571 $8,191 $7,148 $6,664 $6,621 Provision for loan losses 700 700 300 150 800 NonInterest income 4,616 5,008 4,667 3,904 3,687 NonInterest expense 13,426 10,289 9,196 8,150 8,153 Net income 1,429 1,561 1,495 1,565 1,189 Basic earnings per share 0.18 0.30 0.37 0.39 0.30 Diluted earnings per share 0.18 0.29 0.36 0.37 0.29 Weighted average shares outstanding 7,776 5,249 4,020 4,010 4,000 Weighted average diluted shares outstanding 7,953 5,421 4,200 4,193 4,154 PERFORMANCE RATIOS Return on average assets 0.50% 0.76% 0.83% 0.97% 0.75% Return on average equity 5.40% 10.35% 15.75% 15.99% 12.86% Net interest margin 4.70% 4.42% 4.46% 4.63% 4.75% Efficiency ratio 82.94% 77.95% 78.01% 77.69% 79.09% Full-time equivalent employees 522 409 377 369 313 CAPITAL Average equity to average assets 9.34% 7.39% 5.30% 6.28% 5.85% Tier 1 leverage capital ratio 7.08% 9.07% 6.04% 6.46% 6.46% Tier 1 risk-based capital ratio 10.40% 13.53% 8.88% 9.61% 9.54% Total risk-based capital ratio 11.31% 14.39% 9.74% 10.56% 10.47% Book value per share $13.44 $12.43 $9.34 $10.17 $9.49 Cash dividend per share 0.07 0.07 0.07 0.07 0.07 ASSET QUALITY Gross charge-offs $621 $449 $392 $244 $1,007 Net charge-offs (recoveries) 456 287 271 (50) 803 Net charge-offs (recoveries) to average loans 0.63% 0.12% 0.26% (0.01)% 0.85% Allowance for loan losses $6,685 $4,535 $4,122 $4,093 $3,893 Allowance for loan losses to total loans 0.96% 0.91% 0.95% 1.01% 1.01% Nonperforming loans $2,970 $1,978 $976 $2,073 $1,988 Other real estate and repossessed assets 843 586 1,672 333 273 Nonperforming assets to total assets 0.33% 0.31% 0.35% 0.37% 0.35% END OF PERIOD BALANCES Loans $693,548 $498,632 $435,128 $406,840 $384,331 Total earning assets (before allowance) 999,194 754,385 676,414 589,071 568,878 Total assets 1,141,366 839,327 751,631 658,720 637,684 Deposits 880,075 688,899 567,440 536,749 501,136 Shareholders' equity 104,812 78,653 37,570 40,845 37,987 AVERAGE BALANCES Loans $679,149 $476,826 $424,805 $391,820 $376,623 Total earning assets (before allowance) 980,258 736,516 645,214 578,730 568,074 Total assets 1,128,209 811,834 716,168 650,610 632,285 Deposits 890,913 664,560 561,454 517,475 505,431 Shareholders' equity 105,320 59,999 37,960 39,373 36,970 Texas United Bancshares Fourth Quarter 2004 Results TEXAS UNITED BANCSHARES CONSOLIDATED FINANCIAL HIGHLIGHTS (continued) (dollars in thousands, except per share data) (Unaudited) Years ended December 31, 2004 2003 EARNINGS Net interest income $33,574 $26,223 Provision for loan losses 1,850 2,900 NonInterest income 18,195 13,804 NonInterest expense 41,061 29,992 Net income 6,050 5,241 Basic earnings per share 1.15 1.31 Diluted earnings per share 1.11 1.26 Weighted average shares outstanding 5,264 3,984 Weighted average diluted shares outstanding 5,442 4,149 PERFORMANCE RATIOS Return on average assets 0.74% 0.86% Return on average equity 9.97% 14.12% Net interest margin 4.56% 4.81% Efficiency ratio 79.49% 77.33% Full-time equivalent employees 522 313 CAPITAL Average equity to average assets 7.43% 6.07% Tier 1 leverage capital ratio 7.08% 6.46% Tier 1 risk-based capital ratio 10.40% 9.54% Total risk-based capital ratio 11.31% 10.47% Book value per share $13.44 $9.49 Cash dividend per share 0.28 0.28 ASSET QUALITY Gross charge-offs $1,706 $3,238 Net charge-offs (recoveries) 964 2,303 Net charge-offs (recoveries) to average loans 0.19% 0.61% Allowance for loan losses $6,685 $3,893 Allowance for loan losses to total loans 0.96% 1.01% Nonperforming loans $2,970 $1,988 Other real estate and repossessed assets 843 273 Nonperforming assets to total assets 0.33% 0.35% END OF PERIOD BALANCES Loans $693,548 $384,331 Total earning assets (before allowance) 999,194 568,878 Total assets 1,141,366 637,684 Deposits 880,075 501,136 Shareholders' equity 104,812 37,987 AVERAGE BALANCES Loans $493,490 $376,988 Total earning assets (before allowance) 735,847 544,778 Total assets 816,705 611,645 Deposits 639,850 486,441 Shareholders' equity 60,663 37,112 Texas United Bancshares Fourth Quarter 2004 Results TEXAS UNITED BANCSHARES CONSOLIDATED REPORTS OF INCOME (dollars in thousands) THREE MONTHS THREE MONTHS YEAR YEAR ENDED ENDED ENDED ENDED December 31, December 31, December 31, December 31, 2004 2003 2004 2003 (Unaudited) (Unaudited) (Unaudited) (Unaudited) INTEREST INCOME Loans $13,037 $7,289 $37,691 $30,295 Investment securities 2,685 1,748 8,616 6,315 Federal funds sold 16 21 30 91 Total interest income 15,738 9,058 46,337 36,701 INTEREST EXPENSE Deposits 3,079 1,744 9,223 7,487 Federal funds purchased 75 13 194 128 Junior subordinated deferrable interest debentures 391 192 1,189 746 Borrowings 622 488 2,157 2,117 Total interest expense 4,167 2,437 12,763 10,478 Net interest income 11,571 6,621 33,574 26,223 Provision for loan losses 700 800 1,850 2,900 Net interest income after provision for loan losses 10,871 5,821 31,724 23,323 NON INTEREST INCOME Service charges on deposit accounts 1,735 1,737 6,931 6,753 Mortgage servicing revenue 173 696 888 2,247 Net gain on sales of securities --- 3 114 1,244 Net gain on sale of loans from CHL, Inc. 1,946 --- 7,452 --- Other non interest income 762 1,251 2,810 3,560 Total non interest income 4,616 3,687 18,195 13,804 NON INTEREST EXPENSE Salaries and benefits 8,138 4,375 23,798 16,689 Occupancy 2,177 1,142 5,596 4,621 Other non interest expense 3,111 2,636 11,667 8,682 Total non interest expense 13,426 8,153 41,061 29,992 Income before provision for income tax expense 2,061 1,355 8,858 7,135 Provision for income tax expense 632 166 2,808 1,894 Net income $1,429 $1,189 $6,050 $5,241 Texas United Bancshares Fourth Quarter 2004 Results TEXAS UNITED BANCSHARES CONSOLIDATED BALANCE SHEETS (dollars in thousands) DECEMBER 31, DECEMBER 31, 2004 2003 (Unaudited) ASSETS Cash and due from banks $36,752 $17,268 Federal funds sold 4,015 --- Total cash and cash equivalents 40,767 17,268 Securities available for sale, at fair value 301,631 184,547 Total loans, including loans held for sale 693,548 384,331 Allowance for loan losses (6,685) (3,893) Total loans, net 686,863 380,438 Premises and equipment, net 39,730 25,802 Accrued interest receivable 5,214 2,984 Goodwill 40,117 9,073 Core deposit intangibles, net 5,341 393 Mortgage servicing rights, net 4,698 4,475 Other assets 17,005 12,704 Total assets $1,141,366 $637,684 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing $187,454 $96,337 Interest-bearing 692,621 404,799 Total deposits 880,075 501,136 Securities sold under agreement to repurchase 6,291 784 Federal funds purchased 15,125 6,891 Junior subordinated deferrable interest debentures 17,520 12,365 Borrowings 105,940 71,875 Other liabilities 11,603 6,646 Total liabilities 1,036,554 599,697 SHAREHOLDERS' EQUITY Common stock 7,802 4,008 Additional paid-in capital 75,935 16,911 Retained earnings 21,921 17,422 Accumulated other comprehensive income (729) (237) Less treasury stock, at cost (117) (117) Total shareholders' equity 104,812 37,987 Total liabilities and shareholders' equity $1,141,366 $637,684 DATASOURCE: Texas United Bancshares, Inc. CONTACT: Tom Adams of Texas United Bancshares, Inc., +1-979-968-7261

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