Texas Regional Bancshares, Inc. Reports Annual Earnings

MCALLEN, Texas, Jan. 17  /PRNewswire-FirstCall/ -- Texas Regional Bancshares, Inc. (NASDAQ:TRBS) ("Texas Regional"), bank holding company for Texas State Bank, today reported net income for fourth quarter 2005 of $22,826,000, or $0.46 per diluted common share, compared to $20,848,000, or $0.42 per diluted common share, for the comparable 2004 period.  Return on assets and return on shareholders' equity averaged 1.42 percent and 14.17 percent, respectively, compared to 1.46 percent and 14.10 percent, respectively, for the corresponding 2004 period.

For the year ended December 31, 2005, net income totaled $88,368,000, or $1.77 per diluted common share, compared to $76,658,000, or $1.59 per diluted common share, for the corresponding 2004 period.  This represents a 15.3 percent improvement in net income and an 11.3 percent improvement in earnings per diluted common share.  Return on assets and return on shareholders' equity averaged 1.42 percent and 14.17 percent, respectively for the year ended December 31, 2005, compared to 1.45 percent and 14.24 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.

Texas Regional increased its number of banking centers during 2005, continuing its efforts to expand its banking center network to offer its brand of banking to more Texans.  Including the three locations in Dallas added with the Mercantile acquisition and three new banking centers opened in Dallas, Houston and Weslaco, Texas Regional now has 73 locations statewide.  "We are particularly pleased to have four banking centers in Houston and four in the Dallas market," said Glen E. Roney, Chairman of the Board and Chief Executive Officer of Texas Regional.  "Since we have entered Houston in February 2002, our loans and deposits in that market have increased to $754,838,000 and $928,459,000, respectively."  The Company has acquired three additional sites in the Houston area, including one located at Montrose Boulevard and Richmond Avenue which opens today.

Late in the third quarter of 2005, Hurricane Rita struck the East Texas Coast near where the Company operates a number of banking centers.  Mandatory evacuation orders were issued prior to the storm and continued for several weeks after the storm made landfall.  Within days after landfall, Texas Regional bankers in the East Texas region began doing business, in many cases from remote locations or without essential services.  As of the current date, only one small banking center has not re-opened.

Soon after the storm, management began to evaluate the extent of damage and contacted remediation firms and contractors to begin the repair processes which included roof repairs, drying, and the replacement of sheetrock walls, carpet and signs.  The Company estimates property damage claims for remediation and repairs may exceed $2,000,000.  Insurance recoveries are being received as specific claims are closed by the adjuster and approved by the insurance company.  Recoveries and certain repairs are expected to continue throughout the first quarter of 2006.  The Company 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.

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.  During the fourth quarter of 2005, the Company recorded charge-offs of $898,000 against this allowance. 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 $61,371,000 for fourth quarter 2005 increased $5,928,000, or 10.7 percent over fourth quarter 2004.  Average total interest- earning assets, the primary factor in net interest income growth, increased 12.2 percent from fourth quarter 2004 to $5,802,945,000 for fourth quarter 2005.  The net interest margin, on a tax-equivalent basis, decreased seven basis points to 4.28 percent for fourth quarter 2005 compared to the corresponding 2004 period.

For the year ended December 31, 2005, net interest income totaled $236,510,000, reflecting a $32,408,000 or 15.9 percent increase from the same 2004 period.  This growth resulted principally from an increase of 17.2 percent in average total interest-earning assets to $5,650,945,000 for the year ended December 31, 2005 as compared to the same 2004 period.  The net interest margin, on a tax-equivalent basis, for the year ended December 31, 2005 was 4.26 percent, a decrease of five basis points when compared to the corresponding 2004 period.

Provision for loan losses of $6,143,000 for fourth quarter 2005 increased $374,000 or 6.5 percent as compared to the provision for loan losses during fourth quarter 2004 primarily due to an increase in loan volume combined with a $3,585,000 increase in net charge-offs.  The increase in net charge-offs during fourth quarter 2005 is primarily attributable to $3,059,000 charged off on three loan relationships.  The provision for loan losses represented 0.61 percent of average loans held for investment for fourth quarter 2005 compared to 0.63 percent for fourth quarter 2004.  Net charge-offs totaled $7,484,000 for fourth quarter 2005, representing 0.75 percent of average loans held for investment compared to 0.43 percent of average loans held for investment for fourth quarter 2004.

For the year ended December 31, 2005, provision for loan losses totaled $26,071,000, reflecting a $5,488,000 or 26.7 percent increase over the comparable prior year period.  Provision for loan losses totaled 0.67 percent of average loans held for investment for the year ended December 31, 2005 compared to 0.62 percent for the year ended December 31, 2004.

Noninterest income of $18,602,000 for fourth quarter 2005 decreased $1,520,000 or 7.6 percent as compared to fourth quarter 2004.  Service charges on deposits of $8,802,000 decreased $1,647,000 or 15.8 percent for the quarter ended December 31, 2005 compared to the quarter ended December 31, 2004 primarily due to a $1,324,000 reduction in non-sufficient and return item charges.  The reduction in non-sufficient and return item charges resulted primarily from a decrease in the number of non-sufficient and return items processed in the East Texas region following Hurricane Rita in September 2005. This corresponds to an increase in the average deposit balances in the East Texas region since September 2005.

Net realized gains on sales of securities available for sale decreased to $2,000 for fourth quarter 2005 compared to $1,010,000 for fourth quarter 2004, which resulted primarily from a rise in interest rates.  Other noninterest income increased by $1,156,000 to $2,378,000 for fourth quarter 2005 compared to fourth quarter 2004, primarily due to a $648,000 increase in gains on sales of loans held for sale and gains on sales of mortgage servicing rights and a $231,000 increase in fees earned from penalties imposed on customers due to the early withdrawal of time deposits.

For the year ended December 31, 2005, noninterest income totaled $84,214,000 reflecting an increase of $11,158,000 or 15.3 percent over the corresponding 2004 period.  Service charges on deposits decreased $876,000 or 2.3 percent to $37,665,000 for the year ended December 31, 2005 compared to the same period in 2004 primarily due to a $1,368,000 reduction in non- sufficient and return item charges resulting from a decrease in the number of non-sufficient and return items processed during fourth quarter 2005 in the East Texas region.  This decrease was partially offset by an increase of $696,000 in automated teller machine income.  Other service charges increased $2,341,000 to $11,071,000 for the year ended December 31, 2005 compared to the same 2004 period, primarily due to a $1,420,000 increase in merchant credit and debit card income combined with a $428,000 increase in mortgage banking fees generated from Valley Mortgage.  Trust service fees of $7,504,000 for the year ended December 31, 2005 increased 31.9 percent over the same period in 2004 primarily due to an increase in the average fair value of trust accounts, which increased by 42.1 percent during the year ended December 31, 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 $1,864,145,000 at December 31, 2005.  Net realized gains on sales of securities available for sale of $798,000 for the year ended December 31, 2005 decreased $5,057,000 from the comparable prior year period primarily as a result of rising interest rates.

Data processing service fees increased 7.3 percent during the year ended December 31, 2005 to $9,153,000 compared to the corresponding 2004 period. The increase was primarily related to an increase in account volumes from existing data processing clients.  In addition, during first quarter 2005, the Company collected a $332,000 termination fee.  The number of data processing clients totaled 25 at December 31, 2005 compared to 27 at December 31, 2004. Loan servicing loss, net, which includes amortization of the MSR asset, decreased $916,000 to $410,000 for the year ended December 31, 2005 compared to the net servicing loss for the comparable 2004 period.  The decrease is due to a $325,000 increase in loan servicing income, as well as a $591,000 decrease in MSR amortization for the year ended December 31, 2005 compared to the corresponding 2004 period.  Other noninterest income increased by $11,398,000 to $14,630,000 for the year ended December 31, 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 gains on sales of mortgage servicing rights increased $4,604,000 during the year ended December 31, 2005 compared to the corresponding 2004 period.

Noninterest expense of $39,764,000 for fourth quarter 2005 increased $1,232,000 or 3.2 percent over fourth quarter 2004.  This increase corresponds generally with growth in business volumes during the twelve months ended December 31, 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, a new Dallas banking center opened in October 2005 and a new Houston banking center opened in November 2005.  As of December 31, 2005, Texas State Bank had 73 banking centers.  The efficiency ratio was 49.72 percent for fourth quarter 2005, compared to 50.99 percent for fourth quarter 2004.  Salaries and employee benefits increased 3.4 percent during fourth quarter 2005 to $21,224,000 compared to fourth quarter 2004.  The number of full-time equivalent employees of 1,954 at December 31, 2005 represented a decrease of 2.2 percent as compared to the number of full-time equivalent employees at December 31, 2004.

For the year ended December 31, 2005, noninterest expense totaled $160,730,000 reflecting an increase of $18,762,000 or 13.2 percent over the corresponding 2004 period primarily due to the growth in banking operations. Noninterest expense related to the banking operations acquired from Southeast Texas are included for a full twelve month period in 2005, as compared to only 9 1/2 months during 2004.  Noninterest expense for 2005 also reflects an entire year of expenses associated with the Valley Mortgage business acquired in November 2004 and expenses attributable to the Dallas banking operations acquired with the acquisition of Mercantile since January 2005.  Noninterest expense as a percent of average total assets for the year ended December 31, 2005 was 2.59 percent, representing a decrease of nine basis points when compared to the same 2004 period.  Salaries and employee benefits increased $11,333,000 to $85,437,000 for the year ended December 31, 2005 compared to the year ended December 31, 2004.  In addition to growth through acquisitions, the increase in salaries and employee benefits was also affected by salaries and employee benefits associated with the three additional banking locations opened during 2005.  The percent of salaries and employee benefits to average total assets was 1.38 percent for the year ending December 31, 2005 compared to 1.40 percent for the same 2004 period.  The efficiency ratio totaled 50.11 percent for the year ended December 31, 2005 compared to 51.22 percent for the corresponding 2004 period.

Financial Condition

Assets totaled $6,588,319,000 at December 31, 2005, reflecting an increase of $748,972,000, primarily in loans held for investment and securities, or 12.8 percent, as compared to assets at December 31, 2004.  Loans held for investment of $4,109,615,000 at December 31, 2005 increased $359,096,000 or 9.6 percent from December 31, 2004.  Securities of $1,840,780,000 at December 31, 2005 increased $310,067,000 or 20.3 percent from December 31, 2004.  Deposits increased to $5,393,331,000 at December 31, 2005, up $632,491,000 or 13.3 percent from December 31, 2004.  Public fund deposits of $864,737,000 at December 31, 2005 decreased $199,798,000 or 18.8 percent compared to $1,064,535,000 at December 31, 2004.  Excluding the reduction in public fund deposits, net deposits increased $832,289,000 or 22.5 percent. During 2005, demand deposits increased to 20.5 percent of total deposits. Internal growth rates for loans and deposits were 6.4 percent and 9.6 percent, respectively, for the twelve months ended December 31, 2005.  Other assets, net at December 31, 2005 included total goodwill and identifiable intangibles of $218,364,000.

Shareholders' equity at December 31, 2005 increased $48,434,000 from December 31, 2004 to $642,492,000, reflecting an 8.2 percent increase.  The increase resulted primarily from comprehensive income for the twelve months ended December 31, 2005 of $68,017,000 less dividends of $22,843,000 during the period.  Comprehensive income for the year included net income of $88,368,000 offset by a net unrealized loss on securities available for sale, net of tax and reclassification adjustment, of $20,351,000.  The total risk- based, tier 1 risk-based and leverage capital ratios of 11.98 percent, 10.91 percent and 8.26 percent at period end, respectively, substantially exceeded regulatory requirements for a well-capitalized bank holding company.

Asset Quality

At December 31, 2005, total loans held for investment of $4,109,615,000 included $52,022,000 or 1.27 percent classified as nonperforming compared to 0.53 percent at December 31, 2004.  This balance of nonperforming loans reflected an increase of $32,272,000 when compared to the balance of nonperforming loans of $19,750,000 at December 31, 2004.  The increase resulted primarily from the addition of three loan relationships totaling $31,754,000.  The allowance for loan losses of $50,027,000 represented 1.22 percent of loans held for investment and 96.17 percent of nonperforming loans at December 31, 2005.  The allowance for loan losses of $45,024,000 at December 31, 2004 represented 1.20 percent of loans held for investment and 227.97 percent of nonperforming loans.  Net charge-offs for fourth quarter 2005 were 0.75 percent of average loans held for investment compared to 0.43 percent for fourth quarter 2004.  Total nonperforming assets at December 31, 2005 of $60,050,000 represented 1.46 percent of total loans held for investment and foreclosed and other assets compared to 0.72 percent at December 31, 2004.  Accruing loans 90 days or more past due of $11,781,000 at December 31, 2005 totaled 0.29 percent of total loans held for investment and foreclosed and other assets compared to 0.52 percent at December 31, 2004. This balance of accruing loans 90 days or more past due reflected a decrease of $7,903,000 when compared to the balance of accruing loans 90 days or more past due of $19,684,000 at December 31, 2004.  This decrease is primarily a result of a $7,211,000 loan relationship, a portion of which was paid off and the remainder of which is current and another relationship totaling $3,235,000 that 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 three months, on loan payments. As of December 31, 2005, the Company has deferred payments of $7,704,000 on loans with principal amounts outstanding of $148,952,000.

Other Information

Texas Regional will host a conference call with analysts and investment professionals on Tuesday, January 17, 2006 at 10:00 a.m. CST.  Interested parties may listen to the live call by dialing [phone] or can access the live webcast on the Internet at http://www.trbsinc.com/ .  The broadcast can be accessed by clicking the webcast link from the home page.  A telephone replay will be available through the end of the day on Friday, January 20th. To access the replay, dial [phone] and, when prompted, enter identification number 1347984.  The webcast of the conference call will be archived on the Company's website at http://www.trbsinc.com/ for at least 90 days.

Texas Regional paid a quarterly cash dividend of $0.12 per share on January 13, 2006 to common shareholders of record on December 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 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 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 [phone].

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.  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 [phone], both of Texas Regional.

   Texas Regional Bancshares, Inc. and Subsidiaries

  Financial Highlights
   (Unaudited)
   (Dollars in                    At / For Three Months Ended
    Thousands, Except   Dec 31,   Sep 30,    Jun 30,    Mar 31,    Dec 31,
    Per Share Data)      2005      2005       2005       2005       2004
  Condensed Income
   Statements
    Loans Held for
     Investment        $79,214    $74,803    $70,035    $66,131    $62,186
    Securities          17,166     16,429     15,462     14,142     13,288
    Other
     Interest-Earning
     Assets                583        502        425        435        309
      Total Interest
       Income           96,963     91,734     85,922     80,708     75,783
    Deposits            30,976     27,731     24,280     20,238     17,538
    Other Borrowed
     Money               4,616      4,357      3,561      3,058      2,802
      Total Interest
       Expense          35,592     32,088     27,841     23,296     20,340
      Net Interest
       Income           61,371     59,646     58,081     57,412     55,443
    Provision for
     Loan Losses         6,143      8,720      5,801      5,407      5,769
    Service Charges -
     Deposits            8,802     10,082      9,641      9,140     10,449
    Other Service
     Charges             2,715      2,701      2,704      2,951      2,326
    Insurance
     Commission,
     Fees and
     Premiums              829        997        979        998      1,259
    Trust Fees           1,868      1,892      1,904      1,840      1,843
    Net Realized
     Gains (Losses)
     on Sales of
     Securities
     Available for
     Sale                    2        475        323         (2)     1,010
    Data Processing
     Service Fees        2,222      2,159      2,148      2,624      2,201
    Loan Servicing
     Income (Loss),
     Net                  (214)      (352)         3        153       (188)
    Other
     Noninterest
     Income              2,378      1,894      3,133      7,225      1,222
      Total
       Noninterest
       Income           18,602     19,848     20,835     24,929     20,122
    Salaries and
     Employee
     Benefits           21,224     21,886     19,610     22,717     20,527
    Net Occupancy
     Expense             3,172      3,749      3,742      3,414      2,982
    Equipment
     Expense             3,439      3,515      3,610      3,323      3,668
    Other Real
     Estate
     (Income)
     Expense, Net          169        305        418        229       (199)
    Amortization -
     Identifiable
     Intangibles         1,597      1,514      1,652      1,841      1,791
    Other
     Noninterest
     Expense, Net       10,163      9,903     10,040      9,498      9,763
      Total
       Noninterest
       Expense          39,764     40,872     39,072     41,022     38,532
      Income Before
       Income Tax
       Expense          34,066     29,902     34,043     35,912     31,264
    Income Tax
     Expense            11,240     10,073     12,129     12,113     10,416
      Net Income       $22,826    $19,829    $21,914    $23,799    $20,848

  Per Common
   Share Data
    Net Income-Basic     $0.46      $0.40      $0.44      $0.48      $0.42
    Net Income-Diluted    0.46       0.40       0.44       0.48       0.42
    Market Value
     at Period End       28.30      28.79      30.48      30.11      32.68
    Book Value at
     Period End          12.92      12.71      12.53      12.12      11.99
    Cash Dividends
     Declared            0.120      0.120      0.120      0.100      0.100
  Share Data
   (in Thousands)
    Basic               49,698     49,646     49,606     49,570     49,185
    Diluted             49,914     49,919     49,855     49,855     49,566
  Shares Outstanding
   at Period End        49,712     49,687     49,624     49,592     49,553

  Selected Financial
   Data
    Return on
     Average Assets       1.42%      1.26%      1.43%      1.60%      1.46%
    Return on
     Average Equity      14.17      12.46      14.26      15.90      14.10
    Leverage
     Capital Ratio        8.26       8.11       7.98       7.83       8.32
    Expense
     Efficiency
     Ratio (A)           49.72      51.42      49.51      49.82      50.99
    TE Net Interest
     Income (B)        $62,554    $60,762    $59,002    $58,411    $56,533
    TE Adjustment (A)    1,183      1,116        921        999      1,090
      Net Interest
       Income, as
       Reported        $61,371    $59,646    $58,081    $57,412    $55,443
    TE Net
     Interest
      Margin (B)          4.28%      4.22%      4.23%      4.32%      4.35%
    Goodwill          $192,740   $192,729   $194,849   $194,963   $174,503
    Identifiable
     Intangibles,
     Net                25,624     27,224     28,553     30,022     29,607

  Selected Financial
   Data - Continued
    Trust Assets
     Held, at
     Fair Value     $1,864,145 $1,806,229 $1,681,922 $1,475,545 $1,466,841
    Full-Time
     Equivalent
     Employees           1,954      1,976      2,057      2,061      1,997

  Condensed Balance
   Sheets
    Loans Held for
     Investment     $4,109,615 $3,965,628 $3,903,850 $3,843,779 $3,750,519
    Securities       1,840,780  1,757,143  1,741,827  1,652,438  1,530,713
    Other
     Interest-
     Earning
     Assets             34,875     23,612     24,306     47,834     29,769
      Total
       Interest-
       Earning
       Assets        5,985,270  5,746,383  5,669,983  5,544,051  5,311,001
    Cash and
     Due from
     Banks             179,829    138,986    141,182    133,450    145,528
    Premises and
     Equipment,
     Net               149,698    147,084    143,136    140,145    134,239
    Other Assets,
     Net               323,549    322,387    319,886    319,140    293,603
    Allowance for
     Loan Losses       (50,027)   (51,368)   (48,022)   (47,313)   (45,024)
        Total
         Assets     $6,588,319 $6,303,472 $6,226,165 $6,089,473 $5,839,347
    Savings and
     Time
     Deposits       $4,288,830 $4,222,194 $4,237,210 $4,081,869 $3,894,067
    Other
     Borrowed
     Money             523,375    499,177    405,888    441,329    461,751
      Total
       Interest-
       Bearing
       Liabilities   4,812,205  4,721,371  4,643,098  4,523,198  4,355,818
    Demand
     Deposits        1,104,501    907,280    916,727    920,271    866,773
    Other
     Liabilities        29,121     43,300     44,716     45,108     22,698
      Total
       Liabilities   5,945,827  5,671,951  5,604,541  5,488,577  5,245,289
    Shareholders'
      Equity           642,492    631,521    621,624    600,896    594,058
        Total
         Liabilities
         and
         Equity     $6,588,319 $6,303,472 $6,226,165 $6,089,473 $5,839,347

  Condensed Average
   Balance Sheets
    Loans Held
     for
     Investment     $3,968,329 $3,930,179 $3,876,051 $3,858,477 $3,631,640
    Securities       1,794,995  1,751,516  1,685,893  1,581,314  1,517,518
    Other
     Interest-
     Earning
     Assets             39,621     36,915     32,545     43,693     23,820
      Total
       Interest-
       Earning
       Assets        5,802,945  5,718,610  5,594,489  5,483,484  5,172,978
    Cash and Due
     from Banks        154,007    126,634    130,212    143,284    136,899
    Premises and
     Equipment,
     Net               147,508    143,910    141,391    138,366    132,538
    Other Assets,
     Net               323,268    321,672    321,237    314,765    294,784
    Allowance for
     Loan Losses       (51,331)   (48,998)   (48,500)   (48,548)   (44,804)
        Total
         Assets     $6,376,397 $6,261,828 $6,138,829 $6,031,351 $5,692,395
    Savings and
     Time
     Deposits       $4,248,318 $4,238,064 $4,184,552 $4,103,985 $3,804,139
    Other
     Borrowed
     Money             426,747    445,778    404,928    396,068    399,386
      Total
       Interest-
       Bearing
       Liabilities   4,675,065  4,683,842  4,589,480  4,500,053  4,203,525
    Demand
     Deposits        1,024,204    915,798    902,549    896,633    871,569
    Other
     Liabilities        38,122     30,734     30,556     27,655     29,216
      Total
       Liabilities   5,737,391  5,630,374  5,522,585  5,424,341  5,104,310
    Shareholders'
     Equity            639,006    631,454    616,244    607,010    588,085
        Total
         Liabilities
         and
         Equity     $6,376,397 $6,261,828 $6,138,829 $6,031,351 $5,692,395

  Nonperforming
   Assets & Past
   Due Loans
      Nonaccrual
       Loans           $50,218    $38,752    $45,680    $41,518    $19,750
      Restructured
       Loans             1,804      1,804      1,804        ---        ---
      Foreclosed
       and Other
       Assets            8,028      9,194      9,323      8,002      7,398
        Total
         Nonperforming
         Assets         60,050     49,750     56,807     49,520     27,148
      Accruing Loans
       90 Days or
       More Past Due    11,781     13,524     22,613     27,764     19,684
  Net Charge-Offs        7,484      5,374      5,092      4,642      3,899
  Net Charge-Offs
   to Average
   Loans                  0.75%      0.54%      0.53%      0.49%      0.43%



   Texas Regional Bancshares, Inc. and Subsidiaries

  Financial Highlights (Unaudited)                 At / For Year Ended
   (Dollars in Thousands,                          Dec 31,        Dec 31,
   Except Per Share Data)                           2005           2004

  Condensed Income Statements
    Loans Held for Investment                     $290,183       $219,446
    Securities                                      63,199         51,390
    Other Interest-Earning Assets                    1,945          1,073
      Total Interest Income                        355,327        271,909
    Deposits                                       103,225         59,799
    Other Borrowed Money                            15,592          8,008
      Total Interest Expense                       118,817         67,807
      Net Interest Income                          236,510        204,102
    Provision for Loan Losses                       26,071         20,583
    Service Charges - Deposits                      37,665         38,541
    Other Service Charges                           11,071          8,730
    Insurance Commission, Fees and Premiums          3,803          3,805
    Trust Fees                                       7,504          5,688
    Net Realized Gains on Sales of
     Securities Available for Sale                     798          5,855
    Data Processing Service Fees                     9,153          8,531
    Loan Servicing Loss, Net                          (410)        (1,326)
    Other Noninterest Income                        14,630          3,232
      Total Noninterest Income                      84,214         73,056
    Salaries and Employee Benefits                  85,437         74,104
    Net Occupancy Expense                           14,077         11,591
    Equipment Expense                               13,887         12,852
    Other Real Estate Expense, Net                   1,121            437
    Amortization - Identifiable Intangibles          6,604          6,178
    Other Noninterest Expense, Net                  39,604         36,806
      Total Noninterest Expense                    160,730        141,968
      Income Before Income Tax Expense             133,923        114,607
    Income Tax Expense                              45,555         37,949
      Net Income                                   $88,368        $76,658

  Per Common Share Data
    Net Income-Basic                                 $1.78          $1.60
    Net Income-Diluted                                1.77           1.59
    Market Value at Period End                       28.30          32.68
    Book Value at Period End                         12.92          11.99
    Cash Dividends Declared                          0.460          0.367
  Share Data (in Thousands)
    Basic                                           49,631         48,043
    Diluted                                         49,885         48,355
  Shares Outstanding at Period End                  49,712         49,553

  Selected Financial Data
    Return on Average Assets                          1.42%          1.45%
    Return on Average Equity                         14.17          14.24
    Leverage Capital Ratio                            8.26           8.32
    Expense Efficiency Ratio (A)                     50.11          51.22
    TE Net Interest Income (B)                    $240,729       $207,966
    TE Adjustment (B)                                4,219          3,864
      Net Interest Income, as Reported            $236,510       $204,102
    TE Net Interest Margin (B)                        4.26%          4.31%
    Goodwill                                      $192,740       $174,503
    Identifiable Intangibles, Net                   25,624         29,607
    Trust Assets Held, at Fair Value             1,864,145      1,466,841
    Full-Time Equivalent Employees                   1,954          1,997

  Condensed Balance Sheets
    Loans Held for Investment                   $4,109,615     $3,750,519
    Securities                                   1,840,780      1,530,713
    Other Interest-Earning Assets                   34,875         29,769
      Total Interest-Earning Assets              5,985,270      5,311,001
    Cash and Due from Banks                        179,829        145,528
    Premises and Equipment, Net                    149,698        134,239
    Other Assets, Net                              323,549        293,603
    Allowance for Loan Losses                      (50,027)       (45,024)
        Total Assets                            $6,588,319     $5,839,347
    Savings and Time Deposits                   $4,288,830     $3,894,067
    Other Borrowed Money                           523,375        461,751
    Total Interest-Bearing Liabilities           4,812,205      4,355,818
    Demand Deposits                              1,104,501        866,773
    Other Liabilities                               29,121         22,698
      Total Liabilities                          5,945,827      5,245,289
    Shareholders' Equity                           642,492        594,058
        Total Liabilities and Equity            $6,588,319     $5,839,347

  Condensed Average Balance Sheets
    Loans Held for Investment                   $3,908,620     $3,304,499
    Securities                                   1,704,147      1,490,140
    Other Interest-Earning Assets                   38,178         28,570
      Total Interest-Earning Assets              5,650,945      4,823,209
    Cash and Due from Banks                        138,531        127,263
    Premises and Equipment, Net                    142,822        125,064
    Other Assets, Net                              320,263        259,778
    Allowance for Loan Losses                      (49,351)       (41,717)
        Total Assets                            $6,203,210     $5,293,597
    Savings and Time Deposits                   $4,194,222     $3,622,656
    Other Borrowed Money                           418,540        310,764
      Total Interest-Bearing Liabilities         4,612,762      3,933,420
    Demand Deposits                                935,093        793,121
    Other Liabilities                               31,793         28,854
      Total Liabilities                          5,579,648      4,755,395
    Shareholders' Equity                           623,562        538,202
        Total Liabilities and Equity            $6,203,210     $5,293,597

  Nonperforming Assets & Past Due Loans
    Nonaccrual Loans                               $50,218        $19,750
    Restructured Loans                               1,804            ---
    Foreclosed and Other Assets                      8,028          7,398
      Total Nonperforming Assets                    60,050         27,148
    Accruing Loans 90 Days or
      More Past Due                                 11,781         19,684
    Net Charge-Offs                                 22,592         15,588
    Net Charge-Offs to Average Loans                  0.58%          0.47%

   Certain amounts in the prior periods' presentation have been reclassified
   to conform to the current presentation. These reclassifications have no
   effect on previously reported net income.

   (A)  Ratio of Noninterest Expense divided by the sum of Net Interest
        Income and Noninterest Income.
   (B)  Tax-equivalent adjustment computed based on a 35% tax rate.


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.,

[phone]



Web site:  http://www.trbsinc.com/ 

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