Texas Regional Bancshares, Inc. Reports First Quarter Earnings

MCALLEN, Texas, April 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 first quarter 2006 of $23,011,000, or $0.42 per diluted common share, compared to $23,799,000, or $0.43 per diluted common share, for the comparable 2005 period.  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 assets and return on shareholders' equity averaged 1.42 percent and 14.93 percent, respectively, compared to 1.60 percent and 15.90 percent, respectively, for the corresponding 2005 period.

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.

"After adjusting the 2005 first quarter earnings for the gain recognized from the merger of Pulse EFT with Discover Financial Services, Texas Regional increased its net income and diluted earnings per share by $2,626,000 and $0.05, respectively.  These increases represent a 12.9 percent and 13.5 percent change, respectively, over the same quarter of 2005," said Glen E. Roney, Chairman of the Board and Chief Executive Officer of Texas Regional. "On March 14, 2006, the Board of Directors approved an increase in the cash dividend and declared a 10 percent stock dividend.  Taken together, these actions resulted in a 28.4 percent increase in the cash dividend for first quarter 2006 over fourth quarter 2005."

Operating Highlights

Net interest income of $61,640,000 for first quarter 2006 increased $4,228,000 or 7.4 percent over first quarter 2005.  Average total interest- earning assets, the primary factor in net interest income growth, increased 9.4 percent from first quarter 2005 to $5,997,526,000 for first quarter 2006. The net interest margin, on a tax-equivalent basis, decreased six basis points to 4.26 percent for first quarter 2006 compared to the corresponding 2005 period.

Provision for loan losses of $4,871,000 for first quarter 2006 decreased 9.9 percent as compared to the provision for loan losses during first quarter 2005.  The decrease in the provision is partially attributable to management's decision to reduce the amount of the provision as a result of net paydowns in loans during first quarter 2006 compared to net loan growth during first quarter 2005.  The provision for loan losses represented 0.48 percent of average loans held for investment for first quarter 2006 compared to 0.57 percent for first quarter 2005.  Net charge-offs totaled $3,886,000 for first quarter 2006, representing 0.38 percent of average loans held for investment as compared to net charge-offs for first quarter 2005, which represented 0.49 percent of average loans held for investment.

Noninterest income of $19,776,000 for first quarter 2006 decreased $5,230,000 or 20.9 percent as compared to first quarter 2005.  The decrease in noninterest income resulted primarily from a $4,990,000 decrease in other noninterest income attributable to the $5,252,000 special distribution received during first quarter 2005 as the Company's share of the proceeds from the merger of PULSE EFT with Discover Financial Services.  The decrease in other noninterest income was partially offset by a $277,000 gain recognized during first quarter 2006 arising out of the receipt of insurance proceeds for damages incurred as a result of Hurricane Rita.

Total service charges increased $376,000 or 3.1 percent for first quarter 2006 compared to first quarter 2005.  The increase in total service charges is primarily attributable to a $507,000 increase in merchant credit and debit card income during first quarter 2006, combined with an increase of $130,000 in automated teller machine income.  The increase was partially offset by a $308,000 decrease in service charges on account analysis during first quarter 2006 compared to the same period in 2005.

Data processing service fees of $2,284,000 decreased $340,000 or 13.0 percent for the first quarter of 2006 compared to the first quarter of 2005 primarily due to a $332,000 nonrecurring termination fee received during first quarter 2005 from a data processing service client who terminated services during that quarter.  The number of data processing clients totaled 26 at both March 31, 2006 and March 31, 2005.

Noninterest expense of $41,736,000 for first quarter 2006 remained comparable to first quarter 2005 increasing by only $637,000 or 1.5 percent. The efficiency ratio was 51.26 percent for first quarter 2006, compared to 49.87 percent for first quarter 2005.  Salaries and employee benefits increased 1.1 percent during first quarter 2006 to $22,962,000 compared to first quarter 2005.  The number of full-time equivalent employees of 1,985 at March 31, 2006 represented a decrease of 3.7 percent as compared to the number of full-time equivalent employees at March 31, 2005.  Net occupancy expense increased $455,000 or 13.3 percent for first quarter 2006 compared to first quarter 2005.  The increase is primarily due to an increase in utilities and property insurance expense.

Financial Condition

Assets totaled $6,633,994,000 at March 31, 2006, reflecting an increase of $544,521,000, or 8.9 percent, as compared to assets at March 31, 2005.  The increase was primarily attributable to increases in loans held for investment and securities.  Loans held for investment of $4,104,728,000 at March 31, 2006 increased $260,949,000 or 6.8 percent from March 31, 2005.  Securities of $1,889,781,000 at March 31, 2006 increased $237,343,000 or 14.4 percent from March 31, 2005.  Deposits increased to $5,606,576,000 at March 31, 2006, up $604,436,000 or 12.1 percent from March 31, 2005.  Other assets, net at March 31, 2006 included total goodwill and identifiable intangibles of $217,285,000.

Shareholders' equity at March 31, 2006 increased $55,624,000 from March 31, 2005 to $656,520,000, reflecting a 9.3 percent increase.  The increase resulted primarily from net income for the twelve months ended March 31, 2006 of $87,580,000, offset by dividends of $25,549,000.  The total risk-based, tier 1 risk-based and leverage capital ratios of 12.34 percent, 11.26 percent and 8.30 percent at period end, respectively, substantially exceeded regulatory requirements for a well-capitalized bank holding company.

Asset Quality

At March 31, 2006, total loans held for investment of $4,104,728,000 included $48,195,000 or 1.17 percent classified as nonperforming compared to 1.08 percent at March 31, 2005.  This balance of nonperforming loans reflected an increase of $6,677,000 when compared to the balance of nonperforming loans of $41,518,000 at March 31, 2005.  The increase resulted primarily from the addition of one loan relationship totaling $8,450,000.  The increase was further affected by a $1,571,000 increase in restructured loans.  During 2005, the Company reduced the interest rates on two loans and identified them as troubled debt restructured loans.  The increase in nonperforming loans was partially offset by a $4,000,000 payment received on one loan relationship during the third quarter of 2005.  The allowance for loan losses of $51,012,000 represented 1.24 percent of loans held for investment and 105.8 percent of nonperforming loans at March 31, 2006.  The allowance for loan losses of $47,313,000 at March 31, 2005 represented 1.23 percent of loans held for investment and 113.96 percent of nonperforming loans.  Net charge-offs totaled $3,886,000 for first quarter 2006, representing 0.38 percent of average loans held for investment as compared to net charge-offs for first quarter 2005, which represented 0.49 percent of average loans held for investment.

Total nonperforming assets at March 31, 2006 of $65,176,000 represented 1.58 percent of total loans held for investment and foreclosed and other assets compared to 1.29 percent at March 31, 2005.  Accruing loans 90 days or more past due of $13,706,000 at March 31, 2006 totaled 0.33 percent of total loans held for investment and foreclosed and other assets compared to 0.72 percent at March 31, 2005.  This balance of accruing loans 90 days or more past due reflected a decrease of $14,058,000 when compared to the balance of accruing loans 90 days or more past due of $27,764,000 at March 31, 2005. This decrease is primarily a result of a $7,193,000 loan relationship, a portion of which was paid off and the remainder of which is current, a second relationship totaling $4,085,000 that is now current and a third relationship totaling $3,690,000, a majority of which was transferred to foreclosed and other assets and the remainder of which was paid off, transferred to nonaccrual or charged-off.

Foreclosed and other assets of $16,981,000 at March 31, 2006 increased $8,979,000 compared to $8,002,000 at March 31, 2005 primarily as a result of the addition of seven properties totaling $7,356,000.

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.  Since this additional provision was recorded, the Company has recorded charge-offs of $898,000 against this allowance.  There has been no increase in the total charge-offs against this allowance from fourth quarter 2005 to first quarter 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

Texas Regional will host a conference call with analysts and investment professionals on Monday, April 17, 2006 at 10:00 a.m. CDT.  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 Thursday, April 20th.  To access the replay, dial [phone] and, when prompted, enter identification number 3590492.  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 distributed a 10 percent stock dividend and paid a quarterly cash dividend of $0.14 per common share on April 13, 2006 to common shareholders of record on March 31, 2006.  This cash dividend represents a $0.049 per share, or 53.8 percent increase over the same period in 2005.  The cash dividend was paid on the common shares issued in the stock dividend.

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 [phone].

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), 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
    Thousands,                      At / For Three Months Ended
    Except Per       Mar 31,      Dec 31,    Sep 30,    Jun 30,    Mar 31,
    Share Data)       2006         2005        2005       2005       2005

  Condensed Income
   Statements
    Loans Held for
     Investment      $82,133     $79,214     $74,803     $70,035    $66,131
    Securities        18,056      17,166      16,429      15,462     14,142
    Other Interest-
     Earning Assets      627         583         502         425        435
      Total Interest
       Income        100,816      96,963      91,734      85,922     80,708
    Deposits          34,231      30,976      27,731      24,280     20,238
    Other Borrowed
     Money             4,945       4,616       4,357       3,561      3,058
      Total Interest
       Expense        39,176      35,592      32,088      27,841     23,296
      Net Interest
       Income         61,640      61,371      59,646      58,081     57,412
    Provision for
     Loan Losses       4,871       6,143       8,720       5,801      5,407
    Service Charges
     - Deposits        8,999       8,802      10,082       9,641      9,140
    Other Service
     Charges           3,374       2,600       2,575       2,564      2,857
    Insurance
     Commission, Fees
     and Premiums      1,006         829         997         979        998
    Trust Fees         1,901       1,868       1,892       1,904      1,840
    Mortgage Banking
     Revenues          1,185       1,399       1,710       1,817      1,268
    Net Realized
     Gains (Losses)
     on Sales of
     Securities
     Available
     for Sale            (97)          2         475         323         (2)
    Data Processing
     Service Fees      2,284       2,222       2,159       2,148      2,624
    Loan Servicing
     Income (Loss),
     Net                 (14)       (214)       (352)          3        153
    Other
     Noninterest
     Income            1,138       1,229         421       1,566      6,128
      Total
       Noninterest
       Income         19,776      18,737      19,959      20,945     25,006
    Salaries and
     Employee
     Benefits         22,962      21,224      21,886      19,610     22,717
    Net Occupancy
     Expense           3,869       3,172       3,749       3,742      3,414
    Equipment
     Expense           3,416       3,439       3,515       3,610      3,323
    Other Real
     Estate
     Expense, Net        101         169         305         418        229
    Amortization -
     Identifiable
     Intangibles       1,618       1,597       1,514       1,652      1,841
    Other
     Noninterest
     Expense, Net      9,770      10,298      10,014      10,150      9,575
      Total
       Noninterest
       Expense        41,736      39,899      40,983      39,182     41,099
      Income Before
       Income Tax
       Expense        34,809      34,066      29,902      34,043     35,912
    Income Tax
     Expense          11,798      11,240      10,073      12,129     12,113
      Net Income     $23,011     $22,826     $19,829     $21,914    $23,799

  Per Common Share
   Data (C)
    Net Income-
     Basic             $0.42       $0.42       $0.36       $0.40      $0.44
    Net Income-
     Diluted            0.42        0.42        0.36        0.40       0.43
    Market Value at
     Period End        29.49       25.73       26.17       27.71      27.37
    Book Value at
     Period End        11.99       11.75       11.55       11.39      11.02
    Cash Dividends
     Declared          0.140       0.109       0.109       0.109      0.091
  Share Data (C)
   (in Thousands)
    Basic             54,714      54,666      54,609      54,565     54,526
    Diluted           54,937      54,904      54,909      54,839     54,839

  Shares Outstanding
   at Period End (C)  54,766      54,682      54,654      54,584     54,550

  Selected Financial
   Data
    Return on Average
     Assets             1.42%       1.42%       1.26%       1.43%      1.60%
    Return on Average
     Equity            14.93       14.17       12.46       14.26      15.90
    Leverage Capital
     Ratio              8.30        8.26        8.11        7.98       7.83
    Expense
     Efficiency
     Ratio(A)          51.26       49.81       51.48       49.58      49.87
    TE Net Interest
     Income(B)       $63,004    $622,554     $60,762     $59,002    $58,411
    TE Adjustment(B)   1,364       1,183       1,116         921        999
      Net Interest
       Income, as
       Reported      $61,640     $61,371     $59,646     $58,081    $57,412
    TE Net
     Interest
     Margin(B)          4.26%       4.28%       4.22%       4.23%      4.32%
    Goodwill        $193,094    $192,740    $192,729    $194,849   $194,963
    Identifiable
     Intangibles,
     Net              24,191      25,624      27,224      28,553     30,022
    Trust Assets
     Held, at
     Fair Value   $2,091,137  $1,864,145  $1,806,229  $1,681,922 $1,475,545

  Selected Financial
   Data - Continued
    Full-Time
     Equivalent
     Employees         1,985       1,954       1,976       2,057      2,061

  Condensed Balance
   Sheets
    Loans
     Held for
     Investment   $4,104,728  $4,109,615  $3,965,628  $3,903,850 $3,843,779
    Securities     1,889,781   1,840,780   1,757,143   1,741,827  1,652,438
    Other
     Interest-
     Earning
     Assets           66,707      34,875      23,612      24,306     47,834
      Total
       Interest-
       Earning
       Assets      6,061,216   5,985,270   5,746,383   5,669,983  5,544,051
    Cash and Due
     from Banks      139,452     179,829     138,986     141,182    133,450
    Premises and
     Equipment, Net  151,720     149,698     147,084     143,136    140,145
    Other Assets,
     Net             332,618     323,549     322,387     319,886    319,140
    Allowance for
     Loan Losses     (51,012)    (50,027)    (51,368)    (48,022)   (47,313)
      Total
       Assets     $6,633,994  $6,588,319  $6,303,472  $6,226,165 $6,089,473
    Savings
     and Time
     Deposits     $4,490,466  $4,288,830  $4,222,194  $4,237,210 $4,081,869
    Other Borrowed
     Money           315,960     523,375     499,177     405,888    441,329
      Total
       Interest-
       Bearing
       Liabilities 4,806,426   4,812,205   4,721,371   4,643,098  4,523,198
    Demand
     Deposits      1,116,110   1,104,501     907,280     916,727    920,271
    Other
     Liabilities      54,938      29,121      43,300      44,716     45,108
      Total
       Liabilities 5,977,474   5,945,827   5,671,951   5,604,541  5,488,577
    Shareholders'
     Equity          656,520     642,492     631,521     621,624    600,896
      Total
       Liabilities
       and Equity $6,633,994  $6,588,319  $6,303,472  $6,226,165 $6,089,473

  Condensed Average
   Balance Sheets
    Loans
     Held for
     Investment   $4,098,702  $3,968,329  $3,930,179  $3,876,051 $3,858,477
    Securities     1,857,850   1,794,995   1,751,516   1,685,893  1,581,314
    Other
     Interest-
     Earning
     Assets           40,974      39,621      36,915      32,545     43,693
      Total
       Interest-
       Earning
       Assets      5,997,526   5,802,945   5,718,610   5,594,489  5,483,484
    Cash and Due
     from Banks      145,534     154,007     126,634     130,212    143,284
    Premises and
     Equipment, Net  151,145     147,508     143,910     141,391    138,366
    Other Assets,
     Net             326,776     323,268     321,672     321,237    314,765
    Allowance for
     Loan Losses     (52,147)    (51,331)    (48,998)    (48,500)   (48,548)
      Total
       Assets     $6,568,834  $6,376,397  $6,261,828  $6,138,829 $6,031,351
    Savings
     and Time
     Deposits     $4,377,604  $4,248,318  $4,238,064  $4,184,552 $4,103,985
    Other Borrowed
     Money           431,765     426,747     445,778     404,928    396,068
      Total
       Interest-
       Bearing
       Liabilities 4,809,369   4,675,065   4,683,842   4,589,480  4,500,053
    Demand
     Deposits      1,068,266   1,024,204     915,798     902,549    896,633
    Other
     Liabilities      65,991      38,122      30,734      30,556     27,655
      Total
       Liabilities 5,943,626   5,737,391   5,630,374   5,522,585  5,424,341
    Shareholders'
     Equity          625,208     639,006     631,454     616,244    607,010
      Total
       Liabilities
       and Equity $6,568,834  $6,376,397  $6,261,828  $6,138,829 $6,031,351

  Nonperforming
   Assets & Past
   Due Loans
    Nonaccrual
     Loans           $46,624     $50,218     $38,752     $45,680    $41,518
    Restructured
     Loans             1,571       2,127       2,127       1,804        ---
    Foreclosed and
     Other Assets     16,981       8,028       9,194       9,323      8,002
      Total
       Nonperforming
       Assets         65,176      60,373      50,073      56,807     49,520
    Accruing Loans
     90 Days or
     More Past Due    13,706      11,781      13,524      22,613     27,764
    Net Charge-Offs    3,886       7,484       5,374       5,092      4,642
    Net Charge-Offs
     to Average Loans   0.38%       0.75%       0.54%       0.53%      0.49%



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

   (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.
   (C) Restated to retroactively give effect for the 10% stock dividend
       declared by the Company during first quarter 2006 and distributed
       during second quarter 2006.


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.sec.gov/ 

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

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