TRBS Texas Regional Bancshares

MCALLEN, Texas, Oct. 16 /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 third quarter 2006 of $16,352,000, or $0.30 per diluted common share, compared to $19,829,000, or $0.36 per diluted common share, for third quarter 2005. All per share amounts for prior periods have been adjusted for the 10 percent stock dividend distributed to shareholders of the Company during second quarter 2006. Return on average assets and return on average shareholders' equity were 0.94 percent and 9.63 percent, respectively, compared to 1.26 percent and 12.46 percent, respectively, for the corresponding 2005 period. For the nine months ended September 30, 2006, net income was $54,122,000, or $0.98 per diluted common share, compared to $65,542,000, or $1.19 per diluted common share, for the corresponding 2005 period. Return on average assets and return on average shareholders' equity were 1.08 percent and 11.05 percent, respectively, for the nine months ended September 30, 2006, compared to 1.43 percent and 14.17 percent, respectively, for the corresponding 2005 period. The results for the three and nine months ended September 30, 2006 compared to the three and nine months ended September 30, 2005 were primarily affected by two factors. The nine months ended September 30, 2005 results include special distributions of $6,160,000 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. The Company's 2006 results have been adversely impacted by an increase in the provision for loan losses. 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. In addition, in the third quarter of 2006, the Company recorded a specific reserve of $9,680,000 on one large nonperforming loan relationship in anticipation of the resolution of this credit. If this relationship is resolved prior to the closing of the merger with Banco Bilbao Vizcaya Argentaria, S.A. (BBVA), the Company's shareholders may be entitled to a special dividend as described in the definitive merger agreement. 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 $63,357,000 for third quarter 2006 increased $3,711,000 or 6.2 percent over third quarter 2005. Average interest-earning assets, the primary factor in net interest income growth, increased 10.5 percent from third quarter 2005 to $6,316,869,000 for third quarter 2006. The net interest margin, on a tax-equivalent basis, for third quarter 2006 was 4.07 percent, a decrease of fifteen basis points compared to third quarter 2005. The net interest margin was negatively impacted by the reversal of interest on loans placed on nonaccrual status during the third quarter 2006. For the nine months ended September 30, 2006, net interest income totaled $187,865,000, reflecting a $12,726,000 or 7.3 percent increase from the corresponding 2005 period. This growth resulted principally from an increase of 9.9 percent in average interest-earning assets to $6,153,355,000 for the nine months ended September 30, 2006 compared to the corresponding 2005 period. The net interest margin, on a tax-equivalent basis, for the nine months ended September 30, 2006 was 4.18 percent, a decrease of seven basis points compared to the corresponding 2005 period. The provision for loan losses was $13,453,000 for third quarter 2006 compared to $8,720,000 for third quarter 2005. The increase in the provision for loan losses is primarily attributable to the specific reserve recorded in the third quarter of 2006 discussed above. Partially offsetting this increase is the additional provision of $2,500,000 for possible losses on loans to borrowers affected by Hurricane Rita recorded in the third quarter 2005. For the nine months ended September 30, 2006, provision for loan losses was $35,073,000 compared to $19,928,000 for the corresponding 2005 period. The increase in the provision for loan losses is primarily attributable to net charge-offs of $24,513,000 during the nine months ended September 30, 2006, compared to $15,108,000 of net charge-offs for the corresponding 2005 period. In addition, as noted above, a specific reserve was recorded on one large loan relationship in the third quarter of 2006. The allowance for loan losses as a percentage of loans held for investment and as a percentage of nonperforming loans were 1.42 percent and 113.60 percent, respectively, at September 30, 2006 compared to 1.30 percent and 125.66 percent, respectively, at September 30, 2005. Noninterest income of $21,493,000 for third quarter 2006 increased $1,534,000 or 7.7 percent compared to third quarter 2005. This increase is primarily attributable to a $719,000 increase in total services charges for the third quarter 2006 when compared to the third quarter 2005. In addition, data processing service fees increased $470,000 and loan servicing income (loss), net, increased $419,000 for third quarter 2006 compared to third quarter 2005. Total service charges of $13,376,000 for third quarter 2006 increased $719,000 or 5.7 percent compared to third quarter 2005. The increase in total service charges is primarily attributable to a $622,000 increase in non- sufficient funds and return item charges combined with increases of $398,000 in merchant credit and debit card income and $143,000 in automated teller machine income during third quarter 2006. These increases were partially offset by a $431,000 decrease in account analysis fees during third quarter 2006 compared to third 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. Loan servicing income (loss), net, which includes amortization of the mortgage servicing rights (MSR) asset, increased $419,000 to $67,000 for third quarter 2006 compared to $(352,000) for the third quarter 2005. The increase resulted primarily from a decrease in MSR amortization of $473,000 partially offset by a decrease of $54,000 in servicing fees. For the nine months ended September 30, 2006, noninterest income was $61,710,000 reflecting a decrease of $4,200,000 or 6.4 percent compared to the corresponding 2005 period. The decrease resulted primarily from the special distributions received during the first nine months of 2005 as a result of the merger of PULSE EFT Association with Discover Financial Services. This decrease in noninterest income was partially offset by an increase in total service charges for the nine months ended September 30, 2006 compared to the corresponding 2005 period. Total service charges of $38,812,000 for the nine months ended September 30, 2006 increased $1,953,000 or 5.3 percent compared to the corresponding 2005 period. The increase is primarily attributable to a $1,335,000 increase in merchant credit and debit card income for the nine months ended September 30, 2006. In addition, non-sufficient funds and return item charges increased $1,262,000 and automated teller machine income increased $392,000 for the nine months ended September 30, 2006 compared to the corresponding 2005 period. These increases were partially offset by a $1,006,000 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. Other noninterest income of $2,133,000 for the nine months ended September 30, 2006 decreased by $5,982,000 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 nine months ended September 30, 2005. Noninterest expense of $47,147,000 for third quarter 2006 increased $6,164,000 or 15.0 percent compared to third quarter 2005. The efficiency ratio was 55.57 percent for third quarter 2006 compared to 51.48 percent for third quarter 2005. Salaries and employee benefits of $25,099,000 increased $3,213,000 or 14.7 percent during third quarter 2006 compared to third quarter 2005. The increase is attributable to salary increases, increases in retirement 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. Retirement plan and bonus expense was $1,333,000 for the third quarter 2006 compared to $324,000 for the third quarter 2005. Stock-based compensation expense for third quarter 2006 was $796,000. Other noninterest expense of $12,334,000 increased $2,320,000 or 23.2 percent compared to third quarter 2005. The increase was primarily due to increases in advertising and public relations expenses, legal fees associated with the BBVA merger transaction, and writedowns on two repossessed assets to their net realizable values based upon offers to purchase those assets. For the nine months ended September 30, 2006, noninterest expense was $133,478,000 reflecting an increase of $12,214,000 or 10.1 percent compared to the corresponding 2005 period. The efficiency ratio was 53.48 percent for the nine months ended September 30, 2006 compared to 50.31 percent for the corresponding 2005 period. Salaries and employee benefits of $72,426,000 increased $8,213,000 or 12.8 percent for the nine months ended September 30, 2006 compared to the corresponding 2005 period primarily due to salary increases, increases in retirement 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. Retirement plan and bonus expense was $3,939,000 for the nine months ended September 30, 2006 compared to $734,000 for the corresponding 2005 period. Stock-based compensation expense for the nine months ended September 30, 2006 was $2,201,000. Salaries and employee benefits, annualized, represented 1.44 percent of average total assets for the nine months ended September 30, 2006, an increase of four basis points compared to the corresponding 2005 period. Other noninterest expense of $33,793,000 increased $4,054,000 or 13.6 percent for the nine months ended September 30, 2006 compared to the corresponding 2005 period. The increase was primarily due to increased fees for data processing, higher legal and professional fees and writedowns on two repossessed assets to their net realizable values based upon offers to purchase those assets. Financial Condition Assets totaled $6,951,782,000 at September 30, 2006, reflecting an increase of $648,310,000 or 10.3 percent compared to total assets at September 30, 2005. The increase was primarily attributable to increases in loans held for investment and securities. Loans held for investment of $4,281,331,000 at September 30, 2006 increased $315,703,000 or 8.0 percent from September 30, 2005. Securities of $2,029,979,000 at September 30, 2006 increased $272,836,000 or 15.5 percent from September 30, 2005. Other assets, net, of $338,781,000 at September 30, 2006 included goodwill and identifiable intangibles of $215,005,000. Deposits increased to $5,711,884,000 at September 30, 2006, up $582,410,000 or 11.4 percent from September 30, 2005. Shareholders' equity of $684,892,000 at September 30, 2006 increased $53,371,000 from September 30, 2005, an 8.5 percent increase. The increase primarily resulted from net income for the twelve months ended September 30, 2006 of $76,948,000, partially offset by dividends of $28,979,000. The total risk-based, tier 1 risk-based and leverage capital ratios of 12.51 percent, 11.27 percent and 8.21 percent, respectively, at September 30, 2006 substantially exceeded regulatory requirements for a well-capitalized bank holding company. Asset Quality Total nonperforming assets of $73,701,000 at September 30, 2006 increased $23,628,000 or 47.2 percent compared to $50,073,000 at September 30, 2005. At September 30, 2006, total loans held for investment of $4,281,331,000 included $53,335,000 or 1.25 percent classified as nonperforming compared to 1.03 percent at September 30, 2005. This balance of nonperforming loans reflected an increase of $12,456,000 when compared to nonperforming loans of $40,879,000 at September 30, 2005. The increase primarily resulted from the addition of three nonaccrual loan relationships totaling $19,680,000 during the period. These increases were partially offset by the foreclosure and charge-off of one loan relationship in the amount of $5,951,000 that was classified as nonaccrual at September 30, 2005. Accruing loans 90 days or more past due of $5,921,000 at September 30, 2006 reflected a decrease of $7,603,000 compared to $13,524,000 at September 30, 2005. The decrease is partially the result of the resolution of a $3,611,000 relationship, the majority of which was transferred to foreclosed and other loan related assets and the remainder was charged off. The borrower involved in a second relationship totaling $2,797,000 paid off the majority of the relationship with the remainder transferred to foreclosed and other loan related assets. A third loan relationship, in the amount of $2,726,000, was returned to current status. Partially offsetting these decreases is the addition of one loan relationship in the amount of $1,324,000. Foreclosed and other loan related assets of $20,366,000 at September 30, 2006 increased $11,172,000 compared to $9,194,000 at September 30, 2005 primarily as a result of the addition of seven properties totaling $9,089,000 and one repossessed asset with a net book value of $1,154,000 at September 30, 2006. Terms have been negotiated with third party purchasers to sell approximately $9,500,000 of these foreclosed and other loan related assets subject to completion of final documentation. These transactions are expected to close in the fourth quarter 2006. 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 third quarter 2006, the Company recorded charge-offs of $279,000 against this allowance. Total charge-offs related to Hurricane Rita taken against this allowance were $1,491,000 at September 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 BBVA. The definitive agreement has been filed with the Securities and Exchange Commission (SEC). Texas Regional has also filed a proxy statement and other relevant documents concerning the proposed merger transaction with the SEC. The proxy statement relates to the special meeting of the shareholders of Texas Regional held on September 25, 2006, at which meeting the agreement and plan of merger with BBVA was approved and adopted by the shareholders. The definitive agreement, proxy statement, and the other information 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. You may 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 October 13, 2006 to common shareholders of record on October 6, 2006. 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. This release and other information are available on Texas Regional's website at http://www.trbsinc.com/ . The 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, 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, Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Except Per Share Data) 2006 2006 2006 2005 2005 Condensed Income Statements Interest Income Loans Held for Investment $91,512 $86,781 $82,133 $79,214 $74,803 Securities 21,687 19,775 18,056 17,166 16,429 Other Interest-Earning Assets 1,277 791 627 583 502 Total Interest Income 114,476 107,347 100,816 96,963 91,734 Interest Expense Deposits 41,633 37,950 34,231 30,976 27,731 Other Borrowed Money 9,486 6,529 4,945 4,616 4,357 Total Interest Expense 51,119 44,479 39,176 35,592 32,088 Net Interest Income before Provision for Loan Losses 63,357 62,868 61,640 61,371 59,646 Provision for Loan Losses 13,453 16,749 4,871 6,143 8,720 Net Interest Income after Provision for Loan Losses 49,904 46,119 56,769 55,228 50,926 Service Charges on Deposit Accounts 10,399 10,041 8,999 8,802 10,082 Other Service Charges 2,977 3,022 3,374 2,600 2,575 Insurance Commission, Fees and Premiums, Net 1,240 1,193 1,006 829 997 Trust Fees 2,087 1,971 1,901 1,868 1,892 Mortgage Banking Revenues 1,682 1,440 1,185 1,399 1,710 Realized Gains (Losses) on Sales of Securities Available for Sale, Net --- --- (97) 2 475 Data Processing Service Fees 2,629 2,108 2,284 2,222 2,159 Loan Servicing Income (Loss), Net 67 83 (14) (214) (352) Other Noninterest Income 412 583 1,138 1,229 421 Total Noninterest Income 21,493 20,441 19,776 18,737 19,959 Salaries and Employee Benefits 25,099 24,365 22,962 21,224 21,886 Occupancy Expense, Net 4,059 3,831 3,869 3,172 3,749 Equipment Expense 3,805 3,674 3,416 3,439 3,515 Other Real Estate (Income) Expense, Net 592 (354) 101 169 305 Amortization of Identifiable Intangibles 1,258 1,390 1,618 1,597 1,514 Other Noninterest Expense 12,334 11,689 9,770 10,298 10,014 Total Noninterest Expense 47,147 44,595 41,736 39,899 40,983 Income Before Income Tax Expense 24,250 21,965 34,809 34,066 29,902 Income Tax Expense 7,898 7,206 11,798 11,240 10,073 Net Income $16,352 $14,759 $23,011 $22,826 $19,829 Per Common Share Data (A) Net Income-Basic $0.30 $0.27 $0.42 $0.42 $0.36 Net Income-Diluted 0.30 0.27 0.42 0.42 0.36 Market Value at Period End 38.45 37.92 29.49 25.73 26.17 Book Value at Period End 12.49 11.98 11.99 11.75 11.55 Cash Dividends Declared 0.140 0.140 0.140 0.109 0.109 Share Data (A) (in Thousands) Basic 54,811 54,774 54,714 54,666 54,609 Diluted 55,352 55,191 54,937 54,904 54,909 Shares Outstanding at Period End (A) 54,841 54,788 54,766 54,682 54,654 Selected Financial Data Return on Average Assets 0.94% 0.88% 1.42% 1.42% 1.26% Return on Average Shareholders' Equity 9.63 8.90 14.93 14.17 12.46 Leverage Capital Ratio 8.21 8.26 8.30 8.26 8.11 Expense Efficiency Ratio (B) 55.57 53.53 51.26 49.81 51.48 TE Net Interest Income (C) $64,848 $64,363 $63,004 $62,554 $60,762 TE Adjustment (C) 1,491 1,495 1,364 1,183 1,116 Net Interest Income, as Reported $63,357 $62,868 $61,640 $61,371 $59,646 TE Net Interest Margin (C) 4.07% 4.20% 4.26% 4.28% 4.22% Goodwill $193,094 $193,094 $193,094 $192,740 $192,729 Identifiable Intangibles, Net 21,911 22,985 24,191 25,624 27,224 Trust Assets Held, at Fair Value 2,188,730 2,101,620 2,091,137 1,864,145 1,806,229 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) 2006 2006 2006 2005 2005 Selected Financial Data - Continued Full-Time Equivalent Employees 2,019 2,030 1,985 1,954 1,976 Condensed Balance Sheets Loans Held for Investment $4,281,331 $4,162,284 $4,104,728 $4,109,615 $3,965,628 Securities 2,029,979 2,002,662 1,889,781 1,840,780 1,757,143 Other Interest- Earning Assets 92,034 71,705 66,707 34,875 23,612 Total Interest- Earning Assets 6,403,344 6,236,651 6,061,216 5,985,270 5,746,383 Cash and Due from Banks 117,983 152,796 139,452 179,829 138,986 Premises and Equipment, Net 152,261 153,081 151,720 149,698 147,084 Other Assets, Net 338,781 352,712 332,618 323,549 322,387 Allowance for Loan Losses (60,587) (49,096) (51,012) (50,027) (51,368) Total Assets $6,951,782 $6,846,144 $6,633,994 $6,588,319 $6,303,472 Savings and Time Deposits $4,685,532 $4,401,203 $4,490,466 $4,288,830 $4,222,194 Other Borrowed Money 517,669 678,483 315,960 523,375 499,177 Total Interest- Bearing Liabilities 5,203,201 5,079,686 4,806,426 4,812,205 4,721,371 Demand Deposits 1,026,352 1,077,657 1,116,110 1,104,501 907,280 Other Liabilities 37,337 32,646 54,938 29,121 43,300 Total Liabilities 6,266,890 6,189,989 5,977,474 5,945,827 5,671,951 Shareholders' Equity 684,892 656,155 656,520 642,492 631,521 Total Liabilities and Shareholders' Equity $6,951,782 $6,846,144 $6,633,994 $6,588,319 $6,303,472 Condensed Average Balance Sheets Loans Held for Investment $4,202,873 $4,148,060 $4,098,702 $3,968,329 $3,930,179 Securities 2,032,717 1,946,720 1,857,850 1,794,995 1,751,516 Other Interest- Earning Assets 81,279 47,382 40,974 39,621 36,915 Total Interest- Earning Assets 6,316,869 6,142,162 5,997,526 5,802,945 5,718,610 Cash and Due from Banks 118,221 126,837 145,534 154,007 126,634 Premises and Equipment, Net 152,295 152,122 151,145 147,508 143,910 Other Assets, Net 350,771 338,736 326,776 323,268 321,672 Allowance for Loan Losses (52,115) (50,552) (52,147) (51,331) (48,998) Total Assets $6,886,041 $6,709,305 $6,568,834 $6,376,397 $6,261,828 Savings and Time Deposits $4,439,023 $4,424,581 $4,377,604 $4,248,318 $4,238,064 Other Borrowed Money 709,969 508,312 431,765 426,747 445,778 Total Interest- Bearing Liabilities 5,148,992 4,932,893 4,809,369 4,675,065 4,683,842 Demand Deposits 1,031,356 1,078,883 1,068,266 1,024,204 915,798 Other Liabilities 32,173 32,425 65,991 38,122 30,734 Total Liabilities 6,212,521 6,044,201 5,943,626 5,737,391 5,630,374 Shareholders' Equity 673,520 665,104 625,208 639,006 631,454 Total Liabilities and Shareholders' Equity $6,886,041 $6,709,305 $6,568,834 $6,376,397 $6,261,828 Nonperforming Assets & Past Due Loans Nonaccrual Loans $53,014 $40,124 $46,624 $50,218 $38,752 Restructured Loans 321 321 321 2,127 2,127 Foreclosed and Other Loan Related Assets 20,366 19,494 16,981 8,028 9,194 Total Nonperforming Assets $73,701 $59,939 $63,926 $60,373 $50,073 Accruing Loans 90 Days or More Past Due $5,921 $6,844 $13,706 $11,781 $13,524 Net Charge-Offs 1,962 18,665 3,886 7,484 5,374 Net Charge-Offs to Average Loans Held for Investment 0.19% 1.80% 0.38% 0.75% 0.54% 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 Nine Months Ended (Dollars in Thousands, Sep 30, Sep 30, Except Per Share Data) 2006 2005 Condensed Income Statements Interest Income Loans Held for Investment $260,426 $210,969 Securities 59,518 46,033 Other Interest-Earning Assets 2,695 1,362 Total Interest Income 322,639 258,364 Interest Expense Deposits 113,814 72,249 Other Borrowed Money 20,960 10,976 Total Interest Expense 134,774 83,225 Net Interest Income before Provision for Loan Losses 187,865 175,139 Provision for Loan Losses 35,073 19,928 Net Interest Income after Provision for Loan Losses 152,792 155,211 Service Charges on Deposit Accounts 29,439 28,863 Other Service Charges 9,373 7,996 Insurance Commission, Fees and Premiums, Net 3,439 2,974 Trust Fees 5,959 5,636 Mortgage Banking Revenues 4,307 4,795 Realized Gains (Losses) on Sales of Securities Available for Sale, Net (97) 796 Data Processing Service Fees 7,021 6,931 Loan Servicing Income (Loss), Net 136 (196) Other Noninterest Income 2,133 8,115 Total Noninterest Income 61,710 65,910 Salaries and Employee Benefits 72,426 64,213 Occupancy Expense, Net 11,759 10,905 Equipment Expense 10,895 10,448 Other Real Estate Expense, Net 339 952 Amortization of Identifiable Intangibles 4,266 5,007 Other Noninterest Expense 33,793 29,739 Total Noninterest Expense 133,478 121,264 Income Before Income Tax Expense 81,024 99,857 Income Tax Expense 26,902 34,315 Net Income $54,122 $65,542 Per Common Share Data (A) Net Income-Basic $0.99 $1.20 Net Income-Diluted 0.98 1.19 Market Value at Period End 38.45 26.17 Book Value at Period End 12.49 11.55 Cash Dividends Declared 0.42 0.309 Share Data (A) (in Thousands) Basic 54,767 54,567 Diluted 55,172 54,865 Shares Outstanding at Period End (A) 54,841 54,654 Selected Financial Data Return on Average Assets 1.08% 1.43% Return on Average Shareholders' Equity 11.05 14.17 Leverage Capital Ratio 8.21 8.11 Expense Efficiency Ratio (B) 53.48 50.31 TE Net Interest Income (C) $192,215 $178,175 TE Adjustment (C) 4,350 3,036 Net Interest Income, as Reported $187,865 $175,139 TE Net Interest Margin (C) 4.18% 4.25% Goodwill $193,094 $192,729 Identifiable Intangibles, Net 21,911 27,224 Trust Assets Held, at Fair Value 2,188,730 1,806,229 Full-Time Equivalent Employees 2,019 1,976 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) 2006 2005 Condensed Balance Sheets Loans Held for Investment $4,281,331 $3,965,628 Securities 2,029,979 1,757,143 Other Interest-Earning Assets 92,034 23,612 Total Interest-Earning Assets 6,403,344 5,746,383 Cash and Due from Banks 117,983 138,986 Premises and Equipment, Net 152,261 147,084 Other Assets, Net 338,781 322,387 Allowance for Loan Losses (60,587) (51,368) Total Assets $6,951,782 $6,303,472 Savings and Time Deposits $4,685,532 $4,222,194 Other Borrowed Money 517,669 499,177 Total Interest-Bearing Liabilities 5,203,201 4,721,371 Demand Deposits 1,026,352 907,280 Other Liabilities 37,337 43,300 Total Liabilities 6,266,890 5,671,951 Shareholders' Equity 684,892 631,521 Total Liabilities and Shareholders' Equity $6,951,782 $6,303,472 Condensed Average Balance Sheets Loans Held for Investment $4,150,260 $3,888,498 Securities 1,946,403 1,673,531 Other Interest-Earning Assets 56,692 37,693 Total Interest-Earning Assets 6,153,355 5,599,722 Cash and Due from Banks 130,098 133,316 Premises and Equipment, Net 151,858 141,242 Other Assets, Net 338,849 319,250 Allowance for Loan Losses (51,605) (48,683) Total Assets $6,722,555 $6,144,847 Savings and Time Deposits $4,413,961 $4,175,992 Other Borrowed Money 551,034 415,773 Total Interest-Bearing Liabilities 4,964,995 4,591,765 Demand Deposits 1,059,367 905,064 Other Liabilities 43,406 29,660 Total Liabilities 6,067,768 5,526,489 Shareholders' Equity 654,787 618,358 Total Liabilities and Shareholders' Equity $6,722,555 $6,144,847 Nonperforming Assets & Past Due Loans Nonaccrual Loans $53,014 $38,752 Restructured Loans 321 2,127 Foreclosed and Other Loan Related Assets 20,366 9,194 Total Nonperforming Assets $73,701 $50,073 Accruing Loans 90 Days or More Past Due $5,921 $13,524 Net Charge-Offs 24,513 15,108 Net Charge-Offs to Average Loans Held for Investment 0.79% 0.52% 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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