TRBS Texas Regional Bancshares

MCALLEN, Texas, Oct. 17 /PRNewswire-FirstCall/ -- Texas Regional Bancshares, Inc. ("Texas Regional") (NASDAQ:TRBS), bank holding company for Texas State Bank, today reported net income for third quarter 2005 of $19,829,000, or $0.40 per diluted common share, compared to $19,821,000, or $0.40 per diluted common share, for the comparable 2004 period. Return on assets and return on shareholders' equity averaged 1.26 percent and 12.46 percent, respectively, compared to 1.43 percent and 14.10 percent, respectively, for the corresponding 2004 period. For the nine months ended September 30, 2005, net income totaled $65,542,000, or $1.31 per diluted common share, compared to $55,810,000, or $1.16 per diluted common share, for the corresponding 2004 period. This represents a 17.4 percent improvement in net income and a 12.9 percent improvement in earnings per diluted common share. Return on assets and return on shareholders' equity averaged 1.43 percent and 14.17 percent, respectively for the nine months ended September 30, 2005, compared to 1.44 percent and 14.30 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. On October 6, 2005, the Company opened a new banking center in Downtown Dallas at Republic Center, increasing the number of banking centers to four in Dallas and 72 statewide. "The Company is excited about opening a new office in this historic location and is looking forward to serving the banking needs of the Downtown Dallas business community," said Glen E. Roney, Chairman of the Board and Chief Executive Officer of Texas Regional. The Company has banking centers presently under construction in Bishop and the Woodlands, and management believes that those locations will be open for business before the end of the year. In addition, the Company has acquired sites for additional banking centers in both Corpus Christi and Houston. As Hurricane Rita approached the Gulf Coast on Thursday, September 22, 2005, several coastal areas were subject to mandatory evacuation. As a result, Texas State Bank closed 36 banking centers including 31 in East Texas, three in Houston and two in the Corpus Christi area. The Company's banking centers in Corpus Christi, Houston, San Augustine and Tyler re-opened on Monday, September 26, 2005. As of Friday, October 14, 2005, only one motor bank and two small banking centers, all located in East Texas, had not re-opened. "Our bankers, not only in East Texas, but throughout the state did a tremendous job of meeting our customers' needs in the areas affected by Hurricane Rita," said Glen E. Roney, Chairman of the Board. "Working under difficult conditions, our bankers returned to the area as soon as possible to provide banking services. We continue to work with our customers to meet their banking needs." Texas Regional continues to assess both the physical damage to facilities and the potential for losses arising from Hurricane Rita. The Company has begun the process of preparing insurance claims and 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. Management of the Company also continues to assess the continuing impact of Hurricane Rita on other aspects of the Company's operations, including the loss of income, unusual expenses and potential losses on loans to borrowers that experience financial difficulty. As of September 30, 2005, 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. 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 $59,646,000 for third quarter 2005 increased $5,825,000, or 10.8 percent over third quarter 2004. Average total interest- earning assets, the primary factor in net interest income growth, increased 13.8 percent from third quarter 2004 to $5,718,610,000 for third quarter 2005. The net interest margin, on a tax-equivalent basis, decreased twelve basis points to 4.22 percent for third quarter 2005 compared to the corresponding 2004 period. For the nine months ended September 30, 2005, net interest income totaled $175,139,000, reflecting a $26,481,000 or 17.8 percent increase from the same 2004 period. This growth resulted principally from an increase of 19.0 percent in average total interest-earning assets to $5,599,722,000 for the nine months ended September 30, 2005 as compared to the same 2004 period. The net interest margin, on a tax-equivalent basis, for the nine months ended September 30, 2005 was 4.25 percent, a decrease of five basis points when compared to the corresponding 2004 period. Provision for loan losses of $8,720,000 for third quarter 2005 increased $2,523,000 or 40.7 percent as compared to the provision for loan losses during third quarter 2004, primarily due to the $2,500,000 provision recorded for possible losses on loans to borrowers affected by Hurricane Rita. The provision for loan losses represented 0.88 percent of average loans held for investment for third quarter 2005 compared to 0.71 percent for third quarter 2004. Net charge-offs totaled $5,373,000 for third quarter 2005, representing 0.54 percent of average loans held for investment compared to 0.57 percent of average loans held for investment for third quarter 2004. For the nine months ended September 30, 2005, provision for loan losses totaled $19,928,000, reflecting a $5,115,000 or 34.5 percent increase over the comparable prior year period. Provision for loan losses totaled 0.69 percent of average loans held for investment for the nine months ended September 30, 2005 compared to 0.62 percent for the nine months ended September 30, 2004. Noninterest income of $19,848,000 for third quarter 2005 decreased $747,000 or 3.6 percent as compared to third quarter 2004. Service charges on deposits of $10,082,000 decreased $448,000 or 4.3 percent for the quarter ended September 30, 2005 compared to the quarter ended September 30, 2004 primarily due to a $347,000 reduction in non-sufficient and return item charges. Other service charges increased $507,000 or 23.1 percent to $2,701,000 due to an increase in merchant credit and debit card income of $302,000 and mortgage banking fees generated from Valley Mortgage of $128,000. Net realized gains on sales of securities available for sale decreased to $475,000 for third quarter 2005 compared to $2,963,000 for third quarter 2004. Loan servicing loss, net of amortization of the mortgage servicing rights ("MSR") asset, decreased $325,000 to a $352,000 net servicing loss for third quarter 2005 from third quarter 2004. The decrease resulted primarily from $185,000 in servicing income generated from Valley Mortgage, as well as a decrease in MSR amortization of $172,000 during third quarter 2005 compared to third quarter 2004 resulting from a slowdown in prepayments. Other noninterest income increased by $1,236,000 to $1,894,000 for third quarter 2005 compared to third quarter 2004, primarily due to a $1,403,000 increase in gains on sale of loans held for sale and mortgage servicing rights. For the nine months ended September 30, 2005, noninterest income totaled $65,612,000 reflecting an increase of $12,678,000 or 24.0 percent over the corresponding 2004 period. Service charges on deposits increased $771,000 or 2.7 percent to $28,863,000 for the nine months ended September 30, 2005 compared to the same period in 2004 primarily due to growth in deposits combined with a $558,000 increase in automated teller machine income. Other service charges increased $1,952,000 to $8,356,000 for the nine months ended September 30, 2005 compared to the same 2004 period, primarily due to a $1,143,000 increase in merchant credit and debit card income combined with a $363,000 increase in mortgage banking fees generated from Valley Mortgage. Trust service fees of $5,636,000 for the nine months ended September 30, 2005 increased 46.6 percent over the same period in 2004 primarily due to an increase in the average fair value of trust accounts by 48.8 percent during the nine months ended September 30, 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 $1,806,229,000 at September 30, 2005. Net realized gains on sales of securities available for sale of $796,000 for the nine months ended September 30, 2005 decreased $4,049,000 from the comparable prior year period as callable security sales were decreased during a period of rising interest rates. Data processing service fees increased 9.5 percent during the nine months ended September 30, 2005 to $6,931,000 compared to the corresponding 2004 period. The increase was primarily related to an increase in account volume for one data processing client. In addition, during first quarter 2005, the Company collected a $332,000 termination fee. The number of data processing clients totaled 24 at September 30, 2005 compared to 26 at September 30, 2004. Loan servicing loss, net, which includes amortization of the MSR asset, decreased $942,000 to a $196,000 net servicing loss for the nine months ended September 30, 2005 compared to the net servicing loss for the comparable 2004 period. The decrease is primarily due to $536,000 in servicing income generated from Valley Mortgage, as well as a $648,000 decrease in MSR amortization for the nine months ended September 30, 2005 compared to the corresponding 2004 period. Other noninterest income increased by $10,242,000 to $12,252,000 for the nine months ended September 30, 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 mortgage servicing rights increased $3,956,000 during the nine months ended September 30, 2005 compared to the corresponding 2004 period. Noninterest expense of $40,872,000 for third quarter 2005 increased $2,588,000 or 6.8 percent over third quarter 2004. This increase corresponds generally with growth in business volumes during the twelve months ended September 30, 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. As of September 30, 2005, Texas State Bank had over 70 banking centers. The efficiency ratio of 51.42 percent for third quarter 2005 was comparable to the efficiency ratio of 51.45 percent for third quarter 2004. Salaries and employee benefits increased 7.4 percent during third quarter 2005 to $21,886,000 compared to third quarter 2004 primarily due to an increase in salaries of $2,263,000 which was partially offset by a $1,264,000 decrease in bonus and pension plan expense. The number of full-time equivalent employees of 1,976 at September 30, 2005 represented an increase of 3.2 percent as compared to the number of full-time equivalent employees at September 30, 2004. For the nine months ended September 30, 2005, noninterest expense totaled $120,966,000 reflecting an increase of $17,530,000 or 16.9 percent over the corresponding 2004 period due to the growth in banking operations. Noninterest expense as a percent of average total assets for the nine months ended September 30, 2005 was 2.63 percent, representing a decrease of five basis points when compared to the same 2004 period. Salaries and employee benefits increased $10,636,000 to $64,213,000 for the nine months ended September 30, 2005 compared to the nine months ended September 30, 2004 primarily due to an increase in salaries of $11,053,000 which was partially offset by a $2,313,000 decrease in bonus and pension plan expense. The percent of salaries and employee benefits to average total assets was 1.40 percent for the nine months ending September 30, 2005 compared to 1.39 percent for the same 2004 period. The efficiency ratio totaled 50.25 percent for the nine months ended September 30, 2005 compared to 51.31 percent for the corresponding 2004 period. Financial Condition Assets totaled $6,303,472,000 at September 30, 2005, reflecting an increase of $684,190,000, or 12.2 percent from September 30, 2004, primarily due to an increase in loan production. Loans held for investment of $3,965,628,000 at September 30, 2005 increased $427,200,000 or 12.1 percent from September 30, 2004. Deposits increased to $5,129,474,000 at September 30, 2005, up $557,361,000 or 12.2 percent from September 30, 2004. Excluding volumes acquired through business combinations, internal growth rates for loans and deposits were 8.8 percent and 8.4 percent, respectively, for the twelve months ended September 30, 2005. Other assets, net at September 30, 2005 included total goodwill and identifiable intangibles of $219,953,000. Shareholders' equity at September 30, 2005 increased $60,130,000 from September 30, 2004 to $631,521,000, reflecting a 10.5 percent increase. The increase resulted primarily from net income for the twelve months ended September 30, 2005 of $86,390,000, offset by dividends paid during that twelve month period of $21,835,000. The total risk-based, tier 1 risk-based and leverage capital ratios of 12.03 percent, 10.89 percent and 8.12 percent at period end, respectively, substantially exceeded regulatory requirements for a well-capitalized bank holding company. Asset Quality At September 30, 2005, total loans held for investment of $3,965,628,000 included $40,556,000 or 1.02 percent classified as nonperforming compared to 0.47 percent at September 30, 2004. Nonperforming loans increased by $23,946,000 to $40,556,000 at September 30, 2005 compared to $16,610,000 at September 30, 2004. The increase resulted primarily from the addition of four loan relationships totaling $22,351,000. The allowance for loan losses of $51,368,000 represented 1.30 percent of loans held for investment and 126.66 percent of nonperforming loans at September 30, 2005. The allowance for loan losses of $43,153,000 at September 30, 2004 represented 1.22 percent of loans held for investment and 259.80 percent of nonperforming loans. Net charge-offs for third quarter 2005 were 0.54 percent of average loans held for investment compared to 0.57 percent for third quarter 2004. Total nonperforming assets at September 30, 2005 of $49,750,000 represented 1.25 percent of total loans held for investment and foreclosed and other assets compared to 0.79 percent at September 30, 2004. Accruing loans 90 days or more past due of $13,524,000 at September 30, 2005 totaled 0.34 percent of total loans held for investment and foreclosed and other assets compared to 0.19 percent at September 30, 2004. Accruing loans 90 days or more past due increased by $6,739,000 to $13,524,000 at September 30, 2005 compared to $6,785,000 at September 30, 2004. This increase is primarily a result of the addition of three loan relationships totaling $9,135,000 during the last year. The increase was partially offset by a $3,097,000 relationship, of which $2,898,000 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 two months, on loan payments. As of September 30, 2005, the Company has deferred payments of $880,000 on loans with principal amounts outstanding of $17,733,000. Other Information Texas Regional will host a conference call with analysts and investment professionals on Monday, October 17, 2005 at 10:00 a.m. CDT. Interested parties may listen to the live call by dialing (800) 289-0743 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 day Friday, October 21st. To access the replay, dial (888) 203-1112; ID number 2945551. The webcast of the conference call will be archived on the Company's website at http://www.trbsinc.com/. Texas Regional paid a quarterly cash dividend of $0.12 per share on October 14, 2005 to common shareholders of record on September 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 commercial banking business through over 70 banking centers 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. In addition to risks and uncertainties described by Texas Regional in prior filings with the SEC, other risks and uncertainties potentially impacting Texas Regional are those related to Texas Regional's business in East Texas in the areas impacted by Hurricane Rita, including the continuing effect of the storm and its aftermath on the Company's operating expenses and on the Company's borrowers and other customers. If any of these risks or uncertainties materialize 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) At / For Three Months Ended (Dollars in Thousands, Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Except Per Share Data) 2005 2005 2005 2004 2004 Condensed Income Statements Loans Held for Investment $74,803 $70,035 $66,131 $62,186 $57,969 Securities 16,429 15,462 14,142 13,288 13,399 Other Interest-Earning Assets 502 425 435 309 189 Total Interest Income 91,734 85,922 80,708 75,783 71,557 Deposits 27,731 24,280 20,238 17,538 15,638 Other Borrowed Money 4,357 3,561 3,058 2,802 2,098 Total Interest Expense 32,088 27,841 23,296 20,340 17,736 Net Interest Income 59,646 58,081 57,412 55,443 53,821 Provision for Loan Losses 8,720 5,801 5,407 5,769 6,197 Service Charges - Deposits 10,082 9,641 9,140 10,449 10,530 Other Service Charges 2,701 2,704 2,951 2,326 2,194 Insurance Commission, Fees and Premiums 997 979 998 1,259 1,173 Trust Service Fees 1,892 1,904 1,840 1,843 1,674 Net Realized Gains (Losses) on Sales of Securities Available for Sale 475 323 (2) 1,010 2,963 Data Processing Service Fees 2,159 2,148 2,624 2,201 2,080 Loan Servicing Income (Loss), Net (352) 3 153 (188) (677) Other Noninterest Income 1,894 3,133 7,225 1,222 658 Total Noninterest Income 19,848 20,835 24,929 20,122 20,595 Salaries and Employee Benefits 21,886 19,610 22,717 20,527 20,372 Net Occupancy Expense 3,749 3,742 3,414 2,982 3,136 Equipment Expense 3,515 3,610 3,323 3,668 3,222 Other Real Estate (Income) Expense, Net 305 418 229 (199) (57) Amortization - Identifiable Intangibles 1,514 1,652 1,841 1,791 1,987 Other Noninterest Expense, Net 9,903 10,040 9,498 9,763 9,624 Total Noninterest Expense 40,872 39,072 41,022 38,532 38,284 Income Before Income Tax Expense 29,902 34,043 35,912 31,264 29,935 Income Tax Expense 10,073 12,129 12,113 10,416 10,114 Net Income $19,829 $21,914 $23,799 $20,848 $19,821 Per Common Share Data Net Income-Basic $0.40 $0.44 $0.48 $0.42 $0.41 Net Income-Diluted 0.40 0.44 0.48 0.42 0.40 Market Value at Period End 28.79 30.48 30.11 32.68 31.09 Book Value at Period End 12.71 12.53 12.12 11.99 11.67 Cash Dividends Declared 0.120 0.120 0.100 0.100 0.100 Share Data (in Thousands) Basic 49,646 49,606 49,570 49,185 48,921 Diluted 49,919 49,855 49,855 49,566 49,500 Shares Outstanding at Period End 49,687 49,624 49,592 49,553 48,960 Selected Financial Data Return on Average Assets 1.26% 1.43% 1.60% 1.46% 1.43% Return on Average Equity 12.46 14.26 15.90 14.10 14.10 Leverage Capital Ratio 8.12 7.98 7.83 8.32 8.17 Expense Efficiency Ratio (1) 51.42 49.51 49.82 50.99 51.45 TE Net Interest Income (2) $60,762 $59,002 $58,411 $56,533 $54,813 TE Adjustment (1) 1,116 921 999 1,090 992 Net Interest Income, as Reported $59,646 $58,081 $57,412 $55,443 $53,821 TE Net Interest Margin (2) 4.22% 4.23% 4.32% 4.35% 4.34% Goodwill, Net $192,729 $194,849 $194,963 $174,503 $163,928 Identifiable Intangibles, Net 27,224 28,553 30,022 29,607 30,803 Trust Assets Held, at Fair Value $1,806,229 $1,681,922 $1,475,545 $1,466,841 $1,420,664 Full-Time Equivalent Employees 1,976 2,057 2,061 1,997 1,914 Condensed Balance Sheets Loans Held for Investment $3,965,628 $3,903,850 $3,843,779 $3,750,519 $3,538,428 Securities 1,757,143 1,741,827 1,652,438 1,530,713 1,513,536 Other Interest-Earning Assets 23,612 24,307 47,834 29,769 20,471 Total Interest-Earning Assets 5,746,383 5,669,984 5,544,051 5,311,001 5,072,435 Cash and Due from Banks 138,986 141,181 133,450 145,528 138,860 Premises and Equipment, Net 147,084 143,136 140,145 134,239 131,443 Other Assets, Net 322,387 319,886 319,140 293,603 319,697 Allowance for Loan Losses (51,368) (48,022) (47,313) (45,024) (43,153) Total Assets $6,303,472 $6,226,165 $6,089,473 $5,839,347 $5,619,282 Savings and Time Deposits $4,222,194 $4,237,210 $4,081,869 $3,894,067 $3,721,681 Other Borrowed Money 499,177 405,888 441,329 461,751 437,970 Total Interest-Bearing Liabilities 4,721,371 4,643,098 4,523,198 4,355,818 4,159,651 Demand Deposits 907,280 916,727 920,271 866,773 850,432 Other Liabilities 43,300 44,716 45,108 22,698 37,808 Total Liabilities 5,671,951 5,604,541 5,488,577 5,245,289 5,047,891 Shareholders' Equity 631,521 621,624 600,896 594,058 571,391 Total Liabilities and Equity $6,303,472 $6,226,165 $6,089,473 $5,839,347 $5,619,282 Condensed Average Balance Sheets Loans Held for Investment $3,930,179 $3,876,051 $3,858,477 $3,631,640 $3,483,354 Securities 1,751,516 1,685,893 1,581,314 1,517,518 1,523,544 Other Interest-Earning Assets 36,915 32,545 43,693 23,820 17,987 Total Interest-Earning Assets 5,718,610 5,594,489 5,483,484 5,172,978 5,024,885 Cash and Due from Banks 126,634 130,212 143,284 136,899 126,523 Premises and Equipment, Net 143,910 141,391 138,366 132,538 129,560 Other Assets, Net 321,672 321,237 314,765 294,784 292,067 Allowance for Loan Losses (48,998) (48,500) (48,548) (44,804) (43,108) Total Assets $6,261,828 $6,138,829 $6,031,351 $5,692,395 $5,529,927 Savings and Time Deposits $4,238,064 $4,184,552 $4,103,985 $3,804,139 $3,758,880 Other Borrowed Money 445,778 404,928 396,068 399,386 312,575 Total Interest- Bearing Liabilities 4,683,842 4,589,480 4,500,053 4,203,525 4,071,455 Demand Deposits 915,798 902,549 896,633 871,569 864,818 Other Liabilities 30,734 30,556 27,655 29,216 34,473 Total Liabilities 5,630,374 5,522,585 5,424,341 5,104,310 4,970,746 Shareholders' Equity 631,454 616,244 607,010 588,085 559,181 Total Liabilities and Equity $6,261,828 $6,138,829 $6,031,351 $5,692,395 $5,529,927 Nonperforming Assets & Past Due Loans Nonaccrual Loans $38,752 $44,884 $41,518 $19,750 $16,610 Restructured Loans 1,804 1,804 - - - Foreclosed and Other Assets 9,194 9,322 8,002 7,398 11,386 Total Nonperforming Assets 49,750 56,010 49,520 27,148 27,996 Accruing Loans 90 Days or More Past Due 13,524 22,782 27,764 19,684 6,785 Net Charge-Offs 5,373 5,092 4,642 3,898 5,000 Net Charge-Offs to Average Loans 0.54% 0.53% 0.49% 0.43% 0.57% Texas Regional Bancshares, Inc. and Subsidiaries Financial Highlights (Unaudited) At / For Nine Months Ended (Dollars in Thousands, Sep 30, Sep 30, Except Per Share Data) 2005 2004 Condensed Income Statements Loans Held for Investment $210,969 $157,259 Securities 46,033 38,102 Other Interest-Earning Assets 1,362 765 Total Interest Income 258,364 196,126 Deposits 72,249 42,261 Other Borrowed Money 10,976 5,207 Total Interest Expense 83,225 47,468 Net Interest Income 175,139 148,658 Provision for Loan Losses 19,928 14,813 Service Charges - Deposits 28,863 28,092 Other Service Charges 8,356 6,404 Insurance Commission, Fees and Premiums 2,974 2,546 Trust Service Fees 5,636 3,845 Net Realized Gains on Sales of Securities Available for Sale 796 4,845 Data Processing Service Fees 6,931 6,330 Loan Servicing Loss, Net (196) (1,138) Other Noninterest Income 12,252 2,010 Total Noninterest Income 65,612 52,934 Salaries and Employee Benefits 64,213 53,577 Net Occupancy Expense 10,905 8,608 Equipment Expense 10,448 9,184 Other Real Estate Expense, Net 952 636 Amortization - Identifiable Intangibles 5,007 4,387 Other Noninterest Expense, Net 29,441 27,044 Total Noninterest Expense 120,966 103,436 Income Before Income Tax Expense 99,857 83,343 Income Tax Expense 34,315 27,533 Net Income $65,542 $55,810 Per Common Share Data Net Income-Basic $1.32 $1.17 Net Income-Diluted 1.31 1.16 Market Value at Period End 28.79 31.09 Book Value at Period End 12.71 11.67 Cash Dividends Declared 0.340 0.266 Share Data (in Thousands) Basic 49,608 47,659 Diluted 49,879 48,196 Shares Outstanding at Period End 49,687 48,960 Selected Financial Data Return on Average Assets 1.43% 1.44% Return on Average Equity 14.17 14.30 Leverage Capital Ratio 8.12 8.17 Expense Efficiency Ratio (1) 50.25 51.31 TE Net Interest Income (2) $178,175 $151,432 TE Adjustment (2) 3,036 2,774 Net Interest Income, as Reported $175,139 $148,658 TE Net Interest Margin (2) 4.25% 4.30% Goodwill, Net $192,729 $163,928 Identifiable Intangibles, Net 27,224 30,803 Trust Assets Held, at Fair Value 1,806,229 1,420,664 Full-Time Equivalent Employees 1,976 1,914 Condensed Balance Sheets Loans Held for Investment $3,965,628 $3,538,428 Securities 1,757,143 1,513,536 Other Interest-Earning Assets 23,612 20,471 Total Interest-Earning Assets 5,746,383 5,072,435 Cash and Due from Banks 138,986 138,860 Premises and Equipment, Net 147,084 131,443 Other Assets, Net 322,387 319,697 Allowance for Loan Losses (51,368) (43,153) Total Assets $6,303,472 $5,619,282 Savings and Time Deposits $4,222,194 $3,721,681 Other Borrowed Money 499,177 437,970 Total Interest-Bearing Liabilities 4,721,371 4,159,651 Demand Deposits 907,280 850,432 Other Liabilities 43,300 37,808 Total Liabilities 5,671,951 5,047,891 Shareholders' Equity 631,521 571,391 Total Liabilities and Equity $6,303,472 $5,619,282 Condensed Average Balance Sheets Loans Held for Investment $3,888,498 $3,194,656 Securities 1,673,531 1,480,947 Other Interest-Earning Assets 37,693 30,165 Total Interest-Earning Assets 5,599,722 4,705,768 Cash and Due from Banks 133,316 124,028 Premises and Equipment, Net 141,242 122,554 Other Assets, Net 319,250 248,025 Allowance for Loan Losses (48,683) (40,680) Total Assets $6,144,847 $5,159,695 Savings and Time Deposits $4,175,992 $3,561,721 Other Borrowed Money 415,773 281,007 Total Interest-Bearing Liabilities 4,591,765 3,842,728 Demand Deposits 905,064 766,781 Other Liabilities 29,660 28,732 Total Liabilities 5,526,489 4,638,241 Shareholders' Equity 618,358 521,454 Total Liabilities and Equity $6,144,847 $5,159,695 Nonperforming Assets & Past Due Loans Nonaccrual Loans $38,752 $16,610 Restructured Loans 1,804 - Foreclosed and Other Assets 9,194 11,386 Total Nonperforming Assets 49,750 27,996 Accruing Loans 90 Days or More Past Due 13,524 6,785 Net Charge-Offs 15,107 11,690 Net Charge-Offs to Average Loans 0.52% 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. (1) Ratio of Noninterest Expense divided by the sum of Net Interest Income and Noninterest Income. (2) 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, +1-956-631-5400, both of Texas Regional Web site: http://www.trbsinc.com/

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