TRBS Texas Regional Bancshares

MCALLEN, Texas, July 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 second quarter 2006 of $14,759,000, or $0.27 per diluted common share, compared to $21,914,000, or $0.40 per diluted common share, for second quarter 2005. 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 average assets and return on average shareholders' equity were 0.88 percent and 8.90 percent, respectively, compared to 1.43 percent and 14.26 percent, respectively, for the corresponding 2005 period. For the six months ended June 30, 2006, net income was $37,770,000, or $0.69 per diluted common share, compared to $45,713,000, or $0.83 per diluted common share, for the corresponding 2005 period. Return on average assets and return on average shareholders' equity were 1.15 percent and 11.80 percent, respectively, for the six months ended June 30, 2006, compared to 1.51 percent and 15.07 percent, respectively, for the corresponding 2005 period. The results for the second quarter and six months ended June 30, 2006 compared to the second quarter and six months ended June 30, 2005 were primarily affected by two factors. The six months ended June 30, 2005 results include special distributions received during the first and second quarters of 2005, as a result of the merger of PULSE EFT Association with Discover Financial Services, a business unit of Morgan Stanley. In the second quarter of 2006, the Company recorded additional provision for loan losses primarily as a result of charge-offs on three large loan relationships. 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. Operating Highlights Net interest income of $62,868,000 for second quarter 2006 increased $4,787,000 or 8.2 percent over second quarter 2005. Average interest-earning assets, the primary factor in net interest income growth, increased 9.8 percent from second quarter 2005 to $6,142,162,000 for second quarter 2006. The net interest margin, on a tax-equivalent basis, for second quarter 2006 was 4.20 percent, a decrease of three basis points compared to second quarter 2005. For the six months ended June 30, 2006, net interest income totaled $124,508,000, reflecting a $9,015,000 or 7.8 percent increase from the corresponding 2005 period. This growth resulted principally from an increase of 9.6 percent in average interest-earning assets to $6,070,243,000 for the six months ended June 30, 2006 compared to the corresponding 2005 period. The net interest margin, on a tax-equivalent basis, for the six months ended June 30, 2006 was 4.23 percent, a decrease of four basis points compared to the corresponding 2005 period. The provision for loan losses was $16,749,000 for second quarter 2006 compared to $5,801,000 for second quarter 2005. The increase in the provision for loan losses is primarily attributable to net charge-offs of $18,665,000 during the second quarter 2006, compared to net charge-offs of $5,092,000 during the second quarter 2005. For the six months ended June 30, 2006, provision for loan losses was $21,620,000 compared to $11,208,000 for the corresponding 2005 period. The increase in the provision for loan losses is primarily attributable to net charge-offs of $22,551,000 during the six months ended June 30, 2006, compared to $9,734,000 of net charge-offs for the corresponding 2005 period. Net charge-offs during the second quarter 2006 were adversely impacted by losses sustained on three large nonaccruing loan relationships totaling $11,378,000. The customers involved in each of the loan relationships continued to experience deteriorations in their respective businesses and prospects during the second quarter of 2006. In connection with the Company's second quarter evaluation of these loan relationships, the Company decided to discontinue extending credit to these borrowers and the loan balances have been reduced to balances which management currently believes will be collectible. The Company plans to continue to pursue collection of these notes. After careful review, management determined that the increase in the amount of the provision for loan losses was necessary to maintain an adequate allowance for future probable losses in the loan portfolio, after giving effect to the charge-offs during the second quarter 2006. The allowance for loan losses as a percentage of loans held for investment and as a percentage of nonperforming loans were 1.18 percent and 121.39 percent, respectively, at June 30, 2006 compared to 1.23 percent and 101.13 percent, respectively, at June 30, 2005. Noninterest income of $20,441,000 for second quarter 2006 decreased $504,000 or 2.4 percent compared to second quarter 2005. The decrease in noninterest income resulted primarily from a $908,000 special distribution received during second quarter 2005 from the merger of PULSE EFT Association with Discover Financial Services. In addition, mortgage banking revenues for second quarter 2006 decreased $377,000 compared to second quarter 2005 due to rising interest rates and an increased competitive environment. These decreases in noninterest income were partially offset by an $858,000 increase in total service charges for second quarter 2006 when compared to second quarter 2005. Total service charges of $13,063,000 for second quarter 2006 increased $858,000 or 7.0 percent compared to second quarter 2005. The increase in total service charges is primarily attributable to a $431,000 increase in merchant credit and debit card income during second quarter 2006 combined with an increase of $588,000 in non-sufficient funds and return item charges. The increase was partially offset by a $268,000 decrease in service charges on account analysis during second quarter 2006 compared to second quarter 2005 primarily due to an increase in the earnings credit rate. The earnings credit rate is based on the 90 day Treasury bill rate and is the value attributed to deposits maintained by customers using treasury management products. As the earnings credit rate has increased, the corresponding value given to deposits has increased resulting in customers being able to pay for more services with balances rather than fees. For the six months ended June 30, 2006, noninterest income was $40,217,000 reflecting a decrease of $5,734,000 or 12.5 percent compared to the corresponding 2005 period. The decrease resulted primarily from an aggregate of $6,160,000 in special distributions received during the first six months of 2005 as a result of the merger of PULSE EFT Association with Discover Financial Services. Total service charges of $25,436,000 for the six months ended June 30, 2006 increased $1,235,000 or 5.1 percent compared to the corresponding 2005 period. The increase is primarily attributable to a $938,000 increase in merchant credit and debit card income for the six months ended June 30, 2006 combined with an increase of $248,000 in automated teller machine income. In addition, non- sufficient funds and return item charges increased $640,000 for the six months ended June 30, 2006 compared to the corresponding 2005 period. The increase was partially offset by a $576,000 decrease in account analysis fees due to the increase in the earnings credit rate attributed to deposits maintained by customers using the Company's treasury management services. Mortgage banking revenues of $2,625,000 for the six months ended June 30, 2006 decreased $460,000 or 14.9 percent compared to the corresponding 2005 period due to rising interest rates and an increased competitive environment. Data processing service fees of $4,392,000 for the six months ended June 30, 2006 decreased $380,000 or 8.0 percent compared to the corresponding 2005 period primarily due to a $332,000 nonrecurring termination fee received during first quarter 2005. Other noninterest income of $1,721,000 for the six months ended June 30, 2006 decreased by $5,973,000 compared to the corresponding 2005 period. The decrease is primarily due to the above mentioned special distributions from the merger of PULSE EFT Association with Discover Financial Services received during the six months ended June 30, 2005. Noninterest expense of $44,595,000 for second quarter 2006 increased $5,413,000 or 13.8 percent compared to second quarter 2005. The efficiency ratio was 53.53 percent for second quarter 2006 compared to 49.58 percent for second quarter 2005. Salaries and employee benefits of $24,365,000 increased $4,755,000 or 24.2 percent during second quarter 2006 compared to second quarter 2005. The increase is attributable to salary increases in the second quarter 2006, increases in pension plan and bonus expense, higher staffing levels in certain departments primarily due to expansion and enhancement of the Company's Bank Secrecy Act/Anti-Money Laundering compliance program and the effect of expensing stock options. These increases were partially offset by staff reductions in other areas. Pension plan and bonus expense was $1,299,000 for second quarter 2006. During the second quarter 2005, the Company reversed $1,179,000 of pension plan and bonus expense accrued during the first quarter 2005. Stock- based compensation expense for second quarter 2006 was $919,000. Other real estate (income) expense, net, was ($354,000) for second quarter 2006 compared to $418,000 for second quarter 2005 primarily due to gains on sales of other real estate recorded in the second quarter 2006. Other noninterest expense of $11,689,000 increased $1,539,000 or 15.2 percent compared to second quarter 2005. The increase was primarily due to increased fees for data processing and higher professional fees. For the six months ended June 30, 2006, noninterest expense was $86,331,000 reflecting an increase of $6,050,000 or 7.5 percent compared to the corresponding 2005 period. Noninterest expense, annualized, as a percentage of average total assets for the six months ended June 30, 2006 was 2.62 percent, representing a decrease of four basis points when compared to the same 2005 period. The efficiency ratio was 52.41 percent for the six months ended June 30, 2006 compared to 49.73 percent for the corresponding 2005 period. Salaries and employee benefits of $47,327,000 increased $5,001,000 or 11.8 percent for the six months ended June 30, 2006 compared to the corresponding 2005 period primarily due to salary increases in the second quarter 2006, increases in pension plan and bonus expense, higher staffing levels in certain departments due to expansion and enhancement of the Company's Bank Secrecy Act/Anti-Money Laundering compliance program and the effect of expensing stock options. These increases were partially offset by staff reductions in other areas. Pension plan and bonus expense was $2,598,000 for the six months ended June 30, 2006 compared to $398,000 for the corresponding 2005 period. As noted above, the Company reversed $1,179,000 of pension plan and bonus expense in the second quarter 2005. Stock-based compensation expense for the six months ended June 30, 2006 was $1,405,000. Salaries and employee benefits, annualized, represented 1.44 percent of average total assets for the six months ended June 30, 2006, an increase of four basis points compared to the corresponding 2005 period. Occupancy expense, net, of $7,700,000 increased $544,000 or 7.6 percent for the six months ended June 30, 2006 compared to the corresponding 2005 period, primarily due to increases in utilities and property insurance expense. Other real estate (income) expense, net, was ($253,000) for the six months ended June 30, 2006 compared to $647,000 for the corresponding 2005 period primarily due to gains on sales of other real estate recorded in 2006. Other noninterest expense of $21,459,000 increased $1,733,000 or 8.8 percent for the six months ended June 30, 2006 compared to the corresponding 2005 period. The increase was primarily due to increased fees for data processing and higher professional fees. Financial Condition Assets totaled $6,846,144,000 at June 30, 2006, reflecting an increase of $619,979,000 or 10.0 percent compared to total assets at June 30, 2005. The increase was primarily attributable to increases in loans held for investment and securities. Loans held for investment of $4,162,284,000 at June 30, 2006 increased $258,434,000 or 6.6 percent from June 30, 2005. Securities of $2,002,662,000 at June 30, 2006 increased $260,835,000 or 15.0 percent from June 30, 2005. Other assets, net, of $352,712,000 at June 30, 2006 included goodwill and identifiable intangibles of $216,078,000. Deposits increased to $5,478,860,000 at June 30, 2006, up $324,923,000 or 6.3 percent from June 30, 2005. Shareholders' equity of $656,155,000 at June 30, 2006 increased $34,531,000 from June 30, 2005, a 5.6 percent increase. The increase primarily resulted from net income for the twelve months ended June 30, 2006 of $80,425,000, partially offset by dividends of $27,265,000 and net unrealized losses on securities available for sale of $24,176,000. The total risk-based, tier 1 risk-based and leverage capital ratios of 12.37 percent, 11.34 percent and 8.26 percent, respectively, at June 30, 2006 substantially exceeded regulatory requirements for a well-capitalized bank holding company. Asset Quality Total nonperforming assets of $59,939,000 at June 30, 2006 increased $3,132,000 or 5.5 percent compared to $56,807,000 at June 30, 2005. At June 30, 2006, total loans held for investment of $4,162,284,000 included $40,445,000 or 0.97 percent classified as nonperforming compared to 1.22 percent at June 30, 2005. This balance of nonperforming loans reflected a decrease of $7,039,000 when compared to nonperforming loans of $47,484,000 at June 30, 2005. The decrease primarily resulted from the foreclosure and charge-off of two loan relationships totaling $8,771,000 that were classified as nonaccrual at June 30, 2005. These decreases were partially offset by the addition of one nonaccrual loan relationship of $2,519,000 during the period. Accruing loans 90 days or more past due of $6,844,000 at June 30, 2006 reflected a decrease of $15,769,000 compared to $22,613,000 at June 30, 2005. The decrease is partially the result of the resolution of a $6,805,000 relationship, the majority of which was paid off. The borrower involved in a second relationship totaling $2,444,000 brought the loan current during the second quarter 2006. The majority of a third relationship, totaling $2,837,000, was transferred to foreclosed and other loan related assets and the remainder was paid off. Foreclosed and other loan related assets of $19,494,000 at June 30, 2006 increased $10,171,000 compared to $9,323,000 at June 30, 2005 primarily as a result of the addition of seven properties totaling $8,457,000. During the third quarter 2005, 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. During the second quarter 2006, the Company recorded charge-offs of $314,000 against this allowance. Total charge-offs related to Hurricane Rita taken against this allowance were $1,212,000 at June 30, 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 As previously announced, Texas Regional has signed a definitive merger agreement for the acquisition of the Company by Banco Bilbao Vizcaya Argentaria, S.A. (BBVA). The definitive agreement has been filed with the Securities and Exchange Commission (SEC), and Texas Regional will also file a proxy statement and other relevant documents concerning the proposed merger transaction with the SEC. The definitive agreement contains, and the other information will contain, important information concerning the transaction. Investors are urged to read the definitive agreement and the proxy statement and all other relevant documents filed with the SEC when they become available. You will be able to obtain the documents at no charge at the website maintained by the SEC at http://www.sec.gov/ . In addition, you may obtain copies of documents filed with the SEC by Texas Regional at no charge by contacting John A. Martin, Chief Financial Officer, Texas Regional Bancshares, Inc., 3900 North Tenth Street, Eleventh Floor, McAllen, Texas 78501. Mr. Martin can also be reached by telephone at (956) 631-5400. Texas Regional paid a quarterly cash dividend of $0.14 per common share on July 14, 2006 to common shareholders of record on June 30, 2006. This cash dividend represents an increase of 28.4 percent or $0.031 per common share compared to second quarter 2005. 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 the address and telephone number indicated above. 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, and information related to Texas Regional's proposed transaction with BBVA), 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) At / For Three Months Ended (Dollars in Thousands, Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, Except Per Share Data) 2006 2006 2005 2005 2005 Condensed Income Statements Interest Income Loans Held for Investment $ 86,781 $ 82,133 $ 79,214 $ 74,803 $ 70,035 Securities 19,775 18,056 17,166 16,429 15,462 Other Interest-Earning Assets 791 627 583 502 425 Total Interest Income 107,347 100,816 96,963 91,734 85,922 Interest Expense Deposits 37,950 34,231 30,976 27,731 24,280 Other Borrowed Money 6,529 4,945 4,616 4,357 3,561 Total Interest Expense 44,479 39,176 35,592 32,088 27,841 Net Interest Income 62,868 61,640 61,371 59,646 58,081 Provision for Loan Losses 16,749 4,871 6,143 8,720 5,801 Net Interest Income after Provision for Loan Losses 46,119 56,769 55,228 50,926 52,280 Service Charges on Deposit Accounts 10,041 8,999 8,802 10,082 9,641 Other Service Charges 3,022 3,374 2,600 2,575 2,564 Insurance Commission, Fees and Premiums, Net 1,193 1,006 829 997 979 Trust Fees 1,971 1,901 1,868 1,892 1,904 Mortgage Banking Revenues 1,440 1,185 1,399 1,710 1,817 Realized Gains (Losses) on Sales of Securities Available for Sale, Net --- (97) 2 475 323 Data Processing Service Fees 2,108 2,284 2,222 2,159 2,148 Loan Servicing Income (Loss), Net 83 (14) (214) (352) 3 Other Noninterest Income 583 1,138 1,229 421 1,566 Total Noninterest Income 20,441 19,776 18,737 19,959 20,945 Salaries and Employee Benefits 24,365 22,962 21,224 21,886 19,610 Occupancy Expense, Net 3,831 3,869 3,172 3,749 3,742 Equipment Expense 3,674 3,416 3,439 3,515 3,610 Other Real Estate (Income) Expense, Net (354) 101 169 305 418 Amortization of Identifiable Intangibles 1,390 1,618 1,597 1,514 1,652 Other Noninterest Expense 11,689 9,770 10,298 10,014 10,150 Total Noninterest Expense 44,595 41,736 39,899 40,983 39,182 Income Before Income Tax Expense 21,965 34,809 34,066 29,902 34,043 Income Tax Expense 7,206 11,798 11,240 10,073 12,129 Net Income $ 14,759 $ 23,011 $ 22,826 $ 19,829 $ 21,914 Per Common Share Data (A) Net Income-Basic $ 0.27 $ 0.42 $ 0.42 $ 0.36 $ 0.40 Net Income-Diluted 0.27 0.42 0.42 0.36 0.40 Market Value at Period End 37.92 29.49 25.73 26.17 27.71 Book Value at Period End 11.98 11.99 11.75 11.55 11.39 Cash Dividends Declared 0.140 0.140 0.109 0.109 0.109 Share Data (A) (in Thousands) Basic 54,774 54,714 54,666 54,609 54,565 Diluted 55,191 54,937 54,904 54,909 54,839 Shares Outstanding at Period End (A) 54,788 54,766 54,682 54,654 54,584 Selected Financial Data Return on Average Assets 0.88% 1.42% 1.42% 1.26% 1.43% Return on Average Shareholders' Equity 8.90 14.93 14.17 12.46 14.26 Leverage Capital Ratio 8.26 8.30 8.26 8.11 7.98 Expense Efficiency Ratio (B) 53.53 51.26 49.81 51.48 49.58 TE Net Interest Income (C) $ 64,363 $ 63,004 $ 62,554 $ 60,762 $ 59,002 TE Adjustment (C) 1,495 1,364 1,183 1,116 921 Net Interest Income, as Reported $ 62,868 $ 61,640 $ 61,371 $ 59,646 $ 58,081 TE Net Interest Margin (C) 4.20% 4.26% 4.28% 4.22% 4.23% Goodwill $ 193,093 $ 193,094 $ 192,740 $ 192,729 $ 194,849 Identifiable Intangibles, Net 22,985 24,191 25,624 27,224 28,553 Trust Assets Held, at Fair Value 2,101,620 2,091,137 1,864,145 1,806,229 1,681,922 Texas Regional Bancshares, Inc. and Subsidiaries Financial Highlights (Unaudited) (Dollars in Thousands, At / For Three Months Ended Except Per Share Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, Data) 2006 2006 2005 2005 2005 Selected Financial Data - Continued Full-Time Equivalent Employees 2,030 1,985 1,954 1,976 2,057 Condensed Balance Sheets Loans Held for Investment $4,162,284 $4,104,728 $4,109,615 $3,965,628 $3,903,850 Securities 2,002,662 1,889,781 1,840,780 1,757,143 1,741,827 Other Interest- Earning Assets 71,705 66,707 34,875 23,612 24,306 Total Interest- Earning Assets 6,236,651 6,061,216 5,985,270 5,746,383 5,669,983 Cash and Due from Banks 152,796 139,452 179,829 138,986 141,182 Premises and Equipment, Net 153,081 151,720 149,698 147,084 143,136 Other Assets, Net 352,712 332,618 323,549 322,387 319,886 Allowance for Loan Losses (49,096) (51,012) (50,027) (51,368) (48,022) Total Assets $6,846,144 $6,633,994 $6,588,319 $6,303,472 $6,226,165 Savings and Time Deposits $4,401,203 $4,490,466 $4,288,830 $4,222,194 $4,237,210 Other Borrowed Money 678,483 315,960 523,375 499,177 405,888 Total Interest- Bearing Liabilities 5,079,686 4,806,426 4,812,205 4,721,371 4,643,098 Demand Deposits 1,077,657 1,116,110 1,104,501 907,280 916,727 Other Liabilities 32,646 54,938 29,121 43,300 44,716 Total Liabilities 6,189,989 5,977,474 5,945,827 5,671,951 5,604,541 Shareholders' Equity 656,155 656,520 642,492 631,521 621,624 Total Liabilities and Shareholders' Equity $6,846,144 $6,633,994 $6,588,319 $6,303,472 $6,226,165 Condensed Average Balance Sheets Loans Held for Investment $4,148,060 $4,098,702 $3,968,329 $3,930,179 $3,876,051 Securities 1,946,720 1,857,850 1,794,995 1,751,516 1,685,893 Other Interest- Earning Assets 47,382 40,974 39,621 36,915 32,545 Total Interest- Earning Assets 6,142,162 5,997,526 5,802,945 5,718,610 5,594,489 Cash and Due from Banks 126,837 145,534 154,007 126,634 130,212 Premises and Equipment, Net 152,122 151,145 147,508 143,910 141,391 Other Assets, Net 338,736 326,776 323,268 321,672 321,237 Allowance for Loan Losses (50,552) (52,147) (51,331) (48,998) (48,500) Total Assets $6,709,305 $6,568,834 $6,376,397 $6,261,828 $6,138,829 Savings and Time Deposits $4,424,581 $4,377,604 $4,248,318 $4,238,064 $4,184,552 Other Borrowed Money 508,312 431,765 426,747 445,778 404,928 Total Interest- Bearing Liabilities 4,932,893 4,809,369 4,675,065 4,683,842 4,589,480 Demand Deposits 1,078,883 1,068,266 1,024,204 915,798 902,549 Other Liabilities 32,425 65,991 38,122 30,734 30,556 Total Liabilities 6,044,201 5,943,626 5,737,391 5,630,374 5,522,585 Shareholders' Equity 665,104 625,208 639,006 631,454 616,244 Total Liabilities and Shareholders' Equity $6,709,305 $6,568,834 $6,376,397 $6,261,828 $6,138,829 Nonperforming Assets & Past Due Loans Nonaccrual Loans $ 40,124 $ 46,624 $ 50,218 $ 38,752 $ 45,680 Restructured Loans 321 321 2,127 2,127 1,804 Foreclosed and Other Loan Related Assets 19,494 16,981 8,028 9,194 9,323 Total Nonperforming Assets $ 59,939 $ 63,926 $ 60,373 $ 50,073 $ 56,807 Accruing Loans 90 Days or More Past Due $ 6,844 $ 13,706 $ 11,781 $ 13,524 $ 22,613 Net Charge-Offs 18,665 3,886 7,484 5,374 5,092 Net Charge-Offs to Average Loans Held for Investment 1.80% 0.38% 0.75% 0.54% 0.53% 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) Restated to retroactively give effect for the 10% stock dividend declared by the Company during first quarter 2006 and distributed during second quarter 2006. (B) Ratio of Noninterest Expense divided by the sum of Net Interest Income and Noninterest Income. (C) Tax-equivalent adjustment computed based on a 35% tax rate. Texas Regional Bancshares, Inc. and Subsidiaries Financial Highlights (Unaudited) At / For Six Months Ended (Dollars in Thousands, Jun 30, Jun 30, Except Per Share Data) 2006 2005 Condensed Income Statements Interest Income Loans Held for Investment $168,914 $136,167 Securities 37,831 29,604 Other Interest-Earning Assets 1,418 859 Total Interest Income 208,163 166,630 Interest Expense Deposits 72,181 44,518 Other Borrowed Money 11,474 6,619 Total Interest Expense 83,655 51,137 Net Interest Income 124,508 115,493 Provision for Loan Losses 21,620 11,208 Net Interest Income after Provision for Loan Losses 102,888 104,285 Service Charges on Deposit Accounts 19,040 18,781 Other Service Charges 6,396 5,420 Insurance Commission, Fees and Premiums, Net 2,199 1,978 Trust Fees 3,872 3,744 Mortgage Banking Revenues 2,625 3,085 Realized Gains (Losses) on Sales of Securities Available for Sale, Net (97) 321 Data Processing Service Fees 4,392 4,772 Loan Servicing Income (Loss), Net 69 156 Other Noninterest Income 1,721 7,694 Total Noninterest Income 40,217 45,951 Salaries and Employee Benefits 47,327 42,326 Occupancy Expense, Net 7,700 7,156 Equipment Expense 7,090 6,933 Other Real Estate (Income) Expense, Net (253) 647 Amortization of Identifiable Intangibles 3,008 3,493 Other Noninterest Expense 21,459 19,726 Total Noninterest Expense 86,331 80,281 Income Before Income Tax Expense 56,774 69,955 Income Tax Expense 19,004 24,242 Net Income $37,770 $45,713 Per Common Share Data (A) Net Income-Basic $0.69 $0.84 Net Income-Diluted 0.69 0.83 Market Value at Period End 37.92 27.71 Book Value at Period End 11.98 11.38 Cash Dividends Declared 0.280 0.200 Share Data (A) (in Thousands) Basic 54,744 54,546 Diluted 55,038 54,805 Shares Outstanding at Period End (A) 54,788 54,584 Selected Financial Data Return on Average Assets 1.15% 1.51% Return on Average Shareholders' Equity 11.80 15.07 Leverage Capital Ratio 8.26 7.98 Expense Efficiency Ratio (B) 52.41 49.73 TE Net Interest Income (C) $127,367 $117,413 TE Adjustment (C) 2,859 1,920 Net Interest Income, as Reported $124,508 $115,493 TE Net Interest Margin (C) 4.23% 4.27% Goodwill $193,093 $194,849 Identifiable Intangibles, Net 22,985 28,553 Trust Assets Held, at Fair Value 2,101,620 1,681,922 Full-Time Equivalent Employees 2,030 2,057 Texas Regional Bancshares, Inc. and Subsidiaries Financial Highlights (Unaudited) At / For Six Months Ended (Dollars in Thousands, Jun 30, Jun 30, Except Per Share Data) 2006 2005 Condensed Balance Sheets Loans Held for Investment $4,162,284 $3,903,850 Securities 2,002,662 1,741,827 Other Interest-Earning Assets 71,705 24,306 Total Interest-Earning Assets 6,236,651 5,669,983 Cash and Due from Banks 152,796 141,182 Premises and Equipment, Net 153,081 143,136 Other Assets, Net 352,712 319,886 Allowance for Loan Losses (49,096) (48,022) Total Assets $6,846,144 $6,226,165 Savings and Time Deposits $4,401,203 $4,237,210 Other Borrowed Money 678,483 405,888 Total Interest-Bearing Liabilities 5,079,686 4,643,098 Demand Deposits 1,077,657 916,727 Other Liabilities 32,646 44,716 Total Liabilities 6,189,989 5,604,541 Shareholders' Equity 656,155 621,624 Total Liabilities and Shareholders' Equity $6,846,144 $6,226,165 Condensed Average Balance Sheets Loans Held for Investment $4,123,518 $3,867,312 Securities 1,902,530 1,633,892 Other Interest-Earning Assets 44,195 38,014 Total Interest-Earning Assets 6,070,243 5,539,218 Cash and Due from Banks 136,134 136,712 Premises and Equipment, Net 151,636 139,887 Other Assets, Net 332,790 318,019 Allowance for Loan Losses (51,346) (48,524) Total Assets $6,639,457 $6,085,312 Savings and Time Deposits $4,401,222 $4,144,416 Other Borrowed Money 470,250 400,523 Total Interest-Bearing Liabilities 4,871,472 4,544,939 Demand Deposits 1,073,604 899,607 Other Liabilities 49,115 29,114 Total Liabilities 5,994,191 5,473,660 Shareholders' Equity 645,266 611,652 Total Liabilities and Shareholders' Equity $6,639,457 $6,085,312 Nonperforming Assets & Past Due Loans Nonaccrual Loans $40,124 $45,680 Restructured Loans 321 1,804 Foreclosed and Other Loan Related Assets 19,494 9,323 Total Nonperforming Assets $59,939 $56,807 Accruing Loans 90 Days or More Past Due $6,844 $22,613 Net Charge-Offs 22,551 9,734 Net Charge-Offs to Average Loans Held for Investment 1.10% 0.51% 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) Restated to retroactively give effect for the 10% stock dividend declared by the Company during first quarter 2006 and distributed during second quarter 2006. (B) Ratio of Noninterest Expense divided by the sum of Net Interest Income and Noninterest Income. (C) 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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