Texas Regional Bancshares, Inc. Reports Second Quarter Earnings

MCALLEN, Texas, July 17  /PRNewswire-FirstCall/ -- Texas Regional Bancshares, Inc. (NASDAQ:TRBS) (Texas Regional or the Company), bank holding company for Texas State Bank, today reported net income for second quarter 2006 of $14,759,000, or $0.27 per diluted common share, compared to $21,914,000, or $0.40 per diluted common share, for second quarter 2005.  All per share amounts for prior periods have been adjusted for the 10 percent stock dividend declared by Texas Regional on March 14, 2006 and distributed on April 13, 2006 to common shareholders of record on March 31, 2006.  Return on average assets and return on average shareholders' equity were 0.88 percent and 8.90 percent, respectively, compared to 1.43 percent and 14.26 percent, respectively, for the corresponding 2005 period.

For the six months ended June 30, 2006, net income was $37,770,000, or $0.69 per diluted common share, compared to $45,713,000, or $0.83 per diluted common share, for the corresponding 2005 period.  Return on average assets and return on average shareholders' equity were 1.15 percent and 11.80 percent, respectively, for the six months ended June 30, 2006, compared to 1.51 percent and 15.07 percent, respectively, for the corresponding 2005 period.

The results for the second quarter and six months ended June 30, 2006 compared to the second quarter and six months ended June 30, 2005 were primarily affected by two factors.  The six months ended June 30, 2005 results include special distributions received during the first and second quarters of 2005, as a result of the merger of PULSE EFT Association with Discover Financial Services, a business unit of Morgan Stanley.  In the second quarter of 2006, the Company recorded additional provision for loan losses primarily as a result of charge-offs on three large loan relationships.

Texas Regional completed the acquisition of Mercantile Bank & Trust, FSB (Mercantile) on January 14, 2005. The results of operations for Mercantile have been included in the consolidated financial statements since the date of acquisition.

Operating Highlights

Net interest income of $62,868,000 for second quarter 2006 increased $4,787,000 or 8.2 percent over second quarter 2005. Average interest-earning assets, the primary factor in net interest income growth, increased 9.8 percent from second quarter 2005 to $6,142,162,000 for second quarter 2006.  The net interest margin, on a tax-equivalent basis, for second quarter 2006 was 4.20 percent, a decrease of three basis points compared to second quarter 2005.

For the six months ended June 30, 2006, net interest income totaled $124,508,000, reflecting a $9,015,000 or 7.8 percent increase from the corresponding 2005 period.  This growth resulted principally from an increase of 9.6 percent in average interest-earning assets to $6,070,243,000 for the six months ended June 30, 2006 compared to the corresponding 2005 period.  The net interest margin, on a tax-equivalent basis, for the six months ended June 30, 2006 was 4.23 percent, a decrease of four basis points compared to the corresponding 2005 period.

The provision for loan losses was $16,749,000 for second quarter 2006 compared to $5,801,000 for second quarter 2005. The increase in the provision for loan losses is primarily attributable to net charge-offs of $18,665,000 during the second quarter 2006, compared to net charge-offs of $5,092,000 during the second quarter 2005.  For the six months ended June 30, 2006, provision for loan losses was $21,620,000 compared to $11,208,000 for the corresponding 2005 period.  The increase in the provision for loan losses is primarily attributable to net charge-offs of $22,551,000 during the six months ended June 30, 2006, compared to $9,734,000 of net charge-offs for the corresponding 2005 period.

Net charge-offs during the second quarter 2006 were adversely impacted by losses sustained on three large nonaccruing loan relationships totaling $11,378,000.  The customers involved in each of the loan relationships continued to experience deteriorations in their respective businesses and prospects during the second quarter of 2006.  In connection with the Company's second quarter evaluation of these loan relationships, the Company decided to discontinue extending credit to these borrowers and the loan balances have been reduced to balances which management currently believes will be collectible.  The Company plans to continue to pursue collection of these notes.  After careful review, management determined that the increase in the amount of the provision for loan losses was necessary to maintain an adequate allowance for future probable losses in the loan portfolio, after giving effect to the charge-offs during the second quarter 2006.

The allowance for loan losses as a percentage of loans held for investment and as a percentage of nonperforming loans were 1.18 percent and 121.39 percent, respectively, at June 30, 2006 compared to 1.23 percent and 101.13 percent, respectively, at June 30, 2005.

Noninterest income of $20,441,000 for second quarter 2006 decreased $504,000 or 2.4 percent compared to second quarter 2005.  The decrease in noninterest income resulted primarily from a $908,000 special distribution received during second quarter 2005 from the merger of PULSE EFT Association with Discover Financial Services.  In addition, mortgage banking revenues for second quarter 2006 decreased $377,000 compared to second quarter 2005 due to rising interest rates and an increased competitive environment.  These decreases in noninterest income were partially offset by an $858,000 increase in total service charges for second quarter 2006 when compared to second quarter 2005.

Total service charges of $13,063,000 for second quarter 2006 increased $858,000 or 7.0 percent compared to second quarter 2005.  The increase in total service charges is primarily attributable to a $431,000 increase in merchant credit and debit card income during second quarter 2006 combined with an increase of $588,000 in non-sufficient funds and return item charges.  The increase was partially offset by a $268,000 decrease in service charges on account analysis during second quarter 2006 compared to second quarter 2005 primarily due to an increase in the earnings credit rate.  The earnings credit rate is based on the 90 day Treasury bill rate and is the value attributed to deposits maintained by customers using treasury management products.  As the earnings credit rate has increased, the corresponding value given to deposits has increased resulting in customers being able to pay for more services with balances rather than fees.

For the six months ended June 30, 2006, noninterest income was $40,217,000 reflecting a decrease of $5,734,000 or 12.5 percent compared to the corresponding 2005 period.  The decrease resulted primarily from an aggregate of $6,160,000 in special distributions received during the first six months of 2005 as a result of the merger of PULSE EFT Association with Discover Financial Services.

Total service charges of $25,436,000 for the six months ended June 30, 2006 increased $1,235,000 or 5.1 percent compared to the corresponding 2005 period. The increase is primarily attributable to a $938,000 increase in merchant credit and debit card income for the six months ended June 30, 2006 combined with an increase of $248,000 in automated teller machine income.  In addition, non- sufficient funds and return item charges increased $640,000 for the six months ended June 30, 2006 compared to the corresponding 2005 period.  The increase was partially offset by a $576,000 decrease in account analysis fees due to the increase in the earnings credit rate attributed to deposits maintained by customers using the Company's treasury management services.

Mortgage banking revenues of $2,625,000 for the six months ended June 30, 2006 decreased $460,000 or 14.9 percent compared to the corresponding 2005 period due to rising interest rates and an increased competitive environment.

Data processing service fees of $4,392,000 for the six months ended June 30, 2006 decreased $380,000 or 8.0 percent compared to the corresponding 2005 period primarily due to a $332,000 nonrecurring termination fee received during first quarter 2005.

Other noninterest income of $1,721,000 for the six months ended June 30, 2006 decreased by $5,973,000 compared to the corresponding 2005 period. The decrease is primarily due to the above mentioned special distributions from the merger of PULSE EFT Association with Discover Financial Services received during the six months ended June 30, 2005.

Noninterest expense of $44,595,000 for second quarter 2006 increased $5,413,000 or 13.8 percent compared to second quarter 2005.  The efficiency ratio was 53.53 percent for second quarter 2006 compared to 49.58 percent for second quarter 2005.

Salaries and employee benefits of $24,365,000 increased $4,755,000 or 24.2 percent during second quarter 2006 compared to second quarter 2005.  The increase is attributable to salary increases in the second quarter 2006, increases in pension plan and bonus expense, higher staffing levels in certain departments primarily due to expansion and enhancement of the Company's Bank Secrecy Act/Anti-Money Laundering compliance program and the effect of expensing stock options.  These increases were partially offset by staff reductions in other areas.  Pension plan and bonus expense was $1,299,000 for second quarter 2006.  During the second quarter 2005, the Company reversed $1,179,000 of pension plan and bonus expense accrued during the first quarter 2005.  Stock- based compensation expense for second quarter 2006 was $919,000.

Other real estate (income) expense, net, was ($354,000) for second quarter 2006 compared to $418,000 for second quarter 2005 primarily due to gains on sales of other real estate recorded in the second quarter 2006.  Other noninterest expense of $11,689,000 increased $1,539,000 or 15.2 percent compared to second quarter 2005.  The increase was primarily due to increased fees for data processing and higher professional fees.

For the six months ended June 30, 2006, noninterest expense was $86,331,000 reflecting an increase of $6,050,000 or 7.5 percent compared to the corresponding 2005 period.  Noninterest expense, annualized, as a percentage of average total assets for the six months ended June 30, 2006 was 2.62 percent, representing a decrease of four basis points when compared to the same 2005 period.  The efficiency ratio was 52.41 percent for the six months ended June 30, 2006 compared to 49.73 percent for the corresponding 2005 period.

Salaries and employee benefits of $47,327,000 increased $5,001,000 or 11.8 percent for the six months ended June 30, 2006 compared to the corresponding 2005 period primarily due to salary increases in the second quarter 2006, increases in pension plan and bonus expense, higher staffing levels in certain departments due to expansion and enhancement of the Company's Bank Secrecy Act/Anti-Money Laundering compliance program and the effect of expensing stock options.  These increases were partially offset by staff reductions in other areas.  Pension plan and bonus expense was $2,598,000 for the six months ended June 30, 2006 compared to $398,000 for the corresponding 2005 period.  As noted above, the Company reversed $1,179,000 of pension plan and bonus expense in the second quarter 2005.  Stock-based compensation expense for the six months ended June 30, 2006 was $1,405,000.  Salaries and employee benefits, annualized, represented 1.44 percent of average total assets for the six months ended June 30, 2006, an increase of four basis points compared to the corresponding 2005 period.

Occupancy expense, net, of $7,700,000 increased $544,000 or 7.6 percent for the six months ended June 30, 2006 compared to the corresponding 2005 period, primarily due to increases in utilities and property insurance expense.  Other real estate (income) expense, net, was ($253,000) for the six months ended June 30, 2006 compared to $647,000 for the corresponding 2005 period primarily due to gains on sales of other real estate recorded in 2006.  Other noninterest expense of $21,459,000 increased $1,733,000 or 8.8 percent for the six months ended June 30, 2006 compared to the corresponding 2005 period.  The increase was primarily due to increased fees for data processing and higher professional fees.

Financial Condition

Assets totaled $6,846,144,000 at June 30, 2006, reflecting an increase of $619,979,000 or 10.0 percent compared to total assets at June 30, 2005. The increase was primarily attributable to increases in loans held for investment and securities.  Loans held for investment of $4,162,284,000 at June 30, 2006 increased $258,434,000 or 6.6 percent from June 30, 2005.  Securities of $2,002,662,000 at June 30, 2006 increased $260,835,000 or 15.0 percent from June 30, 2005. Other assets, net, of $352,712,000 at June 30, 2006 included goodwill and identifiable intangibles of $216,078,000.  Deposits increased to $5,478,860,000 at June 30, 2006, up $324,923,000 or 6.3 percent from June 30, 2005.

Shareholders' equity of $656,155,000 at June 30, 2006 increased $34,531,000 from June 30, 2005, a 5.6 percent increase. The increase primarily resulted from net income for the twelve months ended June 30, 2006 of $80,425,000, partially offset by dividends of $27,265,000 and net unrealized losses on securities available for sale of $24,176,000.  The total risk-based, tier 1 risk-based and leverage capital ratios of 12.37 percent, 11.34 percent and 8.26 percent, respectively, at June 30, 2006 substantially exceeded regulatory requirements for a well-capitalized bank holding company.

Asset Quality

Total nonperforming assets of $59,939,000 at June 30, 2006 increased $3,132,000 or 5.5 percent compared to $56,807,000 at June 30, 2005.  At June 30, 2006, total loans held for investment of $4,162,284,000 included $40,445,000 or 0.97 percent classified as nonperforming compared to 1.22 percent at June 30, 2005.  This balance of nonperforming loans reflected a decrease of $7,039,000 when compared to nonperforming loans of $47,484,000 at June 30, 2005. The decrease primarily resulted from the foreclosure and charge-off of two loan relationships totaling $8,771,000 that were classified as nonaccrual at June 30, 2005.  These decreases were partially offset by the addition of one nonaccrual loan relationship of $2,519,000 during the period.

Accruing loans 90 days or more past due of $6,844,000 at June 30, 2006 reflected a decrease of $15,769,000 compared to $22,613,000 at June 30, 2005. The decrease is partially the result of the resolution of a $6,805,000 relationship, the majority of which was paid off.  The borrower involved in a second relationship totaling $2,444,000 brought the loan current during the second quarter 2006.  The majority of a third relationship, totaling $2,837,000, was transferred to foreclosed and other loan related assets and the remainder was paid off.

Foreclosed and other loan related assets of $19,494,000 at June 30, 2006 increased $10,171,000 compared to $9,323,000 at June 30, 2005 primarily as a result of the addition of seven properties totaling $8,457,000.

During the third quarter 2005, in connection with Hurricane Rita, the Company recorded an additional provision to the allowance for loan losses of $2,500,000 for possible losses on loans to borrowers affected by the hurricane. During the second quarter 2006, the Company recorded charge-offs of $314,000 against this allowance.  Total charge-offs related to Hurricane Rita taken against this allowance were $1,212,000 at June 30, 2006.  Consistent with the Company's loan policies, as information on loan customers is received and evaluated, the Company will continue to analyze the amount of additional provision for loan losses, if any, that may become necessary to properly account for additional losses sustained by the Company as a result of the hurricane and its aftermath.

Other Information

As previously announced, Texas Regional has signed a definitive merger agreement for the acquisition of the Company by Banco Bilbao Vizcaya Argentaria, S.A. (BBVA).  The definitive agreement has been filed with the Securities and Exchange Commission (SEC), and Texas Regional will also file a proxy statement and other relevant documents concerning the proposed merger transaction with the SEC.  The definitive agreement contains, and the other information will contain, important information concerning the transaction.  Investors are urged to read the definitive agreement and the proxy statement and all other relevant documents filed with the SEC when they become available.  You will be able to obtain the documents at no charge at the website maintained by the SEC at http://www.sec.gov/ .  In addition, you may obtain copies of documents filed with the SEC by Texas Regional at no charge by contacting John A. Martin, Chief Financial Officer, Texas Regional Bancshares, Inc., 3900 North Tenth Street, Eleventh Floor, McAllen, Texas 78501.  Mr. Martin can also be reached by telephone at [phone].

Texas Regional paid a quarterly cash dividend of $0.14 per common share on July 14, 2006 to common shareholders of record on June 30, 2006.  This cash dividend represents an increase of 28.4 percent or $0.031 per common share compared to second quarter 2005.

Texas Regional is a McAllen-based bank holding company whose stock trades on The NASDAQ Stock Market(R) under the symbol TRBS.  Texas State Bank, its wholly owned subsidiary, conducts a commercial banking business through over 70 banking centers across Texas primarily located in the metropolitan areas of Beaumont- Port Arthur, Brownsville-Harlingen-San Benito, Corpus Christi, Dallas, Houston, McAllen-Edinburg-Mission and Tyler.

Additional financial, statistical and business-related information, as well as business trends, is included in a quarterly financial supplement. This release, the financial supplement and other information are available on Texas Regional's website at http://www.trbsinc.com/ .  The financial supplement and other information available on Texas Regional's website can also be obtained at no charge from John A. Martin, Chief Financial Officer at the address and telephone number indicated above.

Forward-Looking Information

This release, the financial supplement, information filed by Texas Regional with the SEC and information on Texas Regional's website may contain forward- looking information (including information related to plans, projections or future performance of Texas Regional and its subsidiaries and planned market opportunities, employment opportunities and synergies from mergers, and information related to Texas Regional's proposed transaction with BBVA), the occurrence of which involve certain risks, uncertainties, assumptions and other factors which could materially affect future results.  If any of these risks or uncertainties materializes or any of these assumptions prove incorrect, Texas Regional's results could differ materially from Texas Regional's expectations in these statements.  Texas Regional assumes no obligation and does not intend to update these forward-looking statements.  For further information, please see Texas Regional's reports filed with the SEC pursuant to the Securities Exchange Act of 1934, which are available at Texas Regional's website at http://www.trbsinc.com/ and the SEC's website at http://www.sec.gov/ .

CONTACT: Glen E. Roney, Chief Executive Officer, or John A. Martin, Chief Financial Officer, at [phone], both of Texas Regional.

   Texas Regional Bancshares, Inc. and Subsidiaries
   Financial Highlights (Unaudited)     At / For Three Months Ended
   (Dollars in Thousands,  Jun 30,    Mar 31,    Dec 31,    Sep 30,    Jun 30,
    Except Per Share Data)  2006       2006        2005       2005      2005

  Condensed Income Statements
  Interest Income
   Loans Held
    for Investment      $  86,781  $  82,133  $  79,214  $  74,803  $  70,035
   Securities              19,775     18,056     17,166     16,429     15,462
   Other Interest-Earning
    Assets                    791        627        583        502        425
    Total Interest Income 107,347    100,816     96,963     91,734     85,922
  Interest Expense
   Deposits                37,950     34,231     30,976     27,731     24,280
   Other Borrowed Money     6,529      4,945      4,616      4,357      3,561
    Total Interest Expense 44,479     39,176     35,592     32,088     27,841
    Net Interest Income    62,868     61,640     61,371     59,646     58,081
   Provision
    for Loan Losses        16,749      4,871      6,143      8,720      5,801
    Net Interest Income
     after Provision
     for Loan Losses       46,119     56,769     55,228     50,926     52,280
   Service Charges
    on Deposit Accounts    10,041      8,999      8,802     10,082      9,641
   Other Service Charges    3,022      3,374      2,600      2,575      2,564
   Insurance Commission,
    Fees and Premiums, Net  1,193      1,006        829        997        979
   Trust Fees               1,971      1,901      1,868      1,892      1,904
   Mortgage Banking
    Revenues                1,440      1,185      1,399      1,710      1,817
   Realized Gains (Losses)
    on Sales of Securities
    Available for Sale, Net   ---        (97)         2        475        323
   Data Processing
    Service Fees            2,108      2,284      2,222      2,159      2,148
   Loan Servicing Income
    (Loss), Net                83        (14)      (214)      (352)         3
   Other Noninterest
    Income                    583      1,138      1,229        421      1,566
    Total Noninterest
     Income                20,441     19,776     18,737     19,959     20,945
   Salaries and Employee
    Benefits               24,365     22,962     21,224     21,886     19,610
   Occupancy Expense, Net   3,831      3,869      3,172      3,749      3,742
   Equipment Expense        3,674      3,416      3,439      3,515      3,610
   Other Real Estate
    (Income) Expense, Net    (354)       101        169        305        418
   Amortization of
    Identifiable
    Intangibles             1,390      1,618      1,597      1,514      1,652
   Other Noninterest
    Expense                11,689      9,770     10,298     10,014     10,150
    Total Noninterest
     Expense               44,595     41,736     39,899     40,983     39,182
    Income Before Income
     Tax Expense           21,965     34,809     34,066     29,902     34,043
   Income Tax Expense       7,206     11,798     11,240     10,073     12,129
   Net Income           $  14,759  $  23,011  $  22,826  $  19,829  $  21,914

   Per Common Share Data (A)
    Net Income-Basic    $    0.27  $    0.42  $    0.42  $    0.36  $    0.40
    Net Income-Diluted       0.27       0.42       0.42       0.36       0.40
    Market Value
     at Period End          37.92      29.49      25.73      26.17      27.71
    Book Value
     at Period End          11.98      11.99      11.75      11.55      11.39
    Cash Dividends
     Declared               0.140      0.140      0.109      0.109      0.109
   Share Data (A)
   (in Thousands)
    Basic                  54,774     54,714     54,666     54,609     54,565
    Diluted                55,191     54,937     54,904     54,909     54,839
   Shares Outstanding
    at Period End (A)      54,788     54,766     54,682     54,654     54,584

  Selected Financial Data
   Return on Average Assets  0.88%      1.42%      1.42%      1.26%      1.43%
   Return on Average
    Shareholders' Equity     8.90      14.93      14.17      12.46      14.26
   Leverage Capital Ratio    8.26       8.30       8.26       8.11       7.98
   Expense Efficiency
    Ratio (B)               53.53      51.26      49.81      51.48      49.58
   TE Net Interest
    Income (C)          $  64,363  $  63,004  $  62,554  $  60,762  $  59,002
   TE Adjustment (C)        1,495      1,364      1,183      1,116        921
    Net Interest Income,
     as Reported        $  62,868  $  61,640  $  61,371  $  59,646  $  58,081
   TE Net Interest
    Margin (C)               4.20%      4.26%      4.28%      4.22%      4.23%
   Goodwill             $ 193,093  $ 193,094  $ 192,740  $ 192,729  $ 194,849
   Identifiable
   Intangibles, Net        22,985     24,191     25,624     27,224     28,553
   Trust Assets Held,
    at Fair Value       2,101,620  2,091,137  1,864,145  1,806,229  1,681,922



   Texas Regional Bancshares, Inc. and Subsidiaries
   Financial Highlights
   (Unaudited)
   (Dollars in Thousands,            At / For Three Months Ended
    Except Per Share    Jun 30,    Mar 31,     Dec 31,     Sep 30,     Jun 30,
   Data)                 2006       2006        2005        2005        2005
  Selected Financial
   Data - Continued
  Full-Time Equivalent
   Employees            2,030       1,985       1,954       1,976       2,057
  Condensed Balance
   Sheets
   Loans Held
    for Investment $4,162,284  $4,104,728  $4,109,615  $3,965,628  $3,903,850
   Securities       2,002,662   1,889,781   1,840,780   1,757,143   1,741,827
   Other Interest-
    Earning Assets     71,705      66,707      34,875      23,612      24,306
    Total Interest-
     Earning Assets 6,236,651   6,061,216   5,985,270   5,746,383   5,669,983
   Cash and Due
    from Banks        152,796     139,452     179,829     138,986     141,182
   Premises and
    Equipment, Net    153,081     151,720     149,698     147,084     143,136
   Other Assets, Net  352,712     332,618     323,549     322,387     319,886
   Allowance for
    Loan Losses       (49,096)    (51,012)    (50,027)    (51,368)    (48,022)
    Total Assets   $6,846,144  $6,633,994  $6,588,319  $6,303,472  $6,226,165
   Savings and
    Time Deposits  $4,401,203  $4,490,466  $4,288,830  $4,222,194  $4,237,210
   Other Borrowed
    Money             678,483     315,960     523,375     499,177     405,888
    Total Interest-
     Bearing
     Liabilities    5,079,686   4,806,426   4,812,205   4,721,371   4,643,098
   Demand Deposits  1,077,657   1,116,110   1,104,501     907,280     916,727
   Other Liabilities   32,646      54,938      29,121      43,300      44,716
    Total
     Liabilities    6,189,989   5,977,474   5,945,827   5,671,951   5,604,541
   Shareholders'
    Equity            656,155     656,520     642,492     631,521     621,624
     Total
      Liabilities
      and
      Shareholders'
      Equity       $6,846,144  $6,633,994  $6,588,319  $6,303,472  $6,226,165
  Condensed Average
   Balance Sheets
   Loans Held
    for Investment $4,148,060  $4,098,702  $3,968,329  $3,930,179  $3,876,051
   Securities       1,946,720   1,857,850   1,794,995   1,751,516   1,685,893
   Other Interest-
    Earning Assets     47,382      40,974      39,621      36,915      32,545
     Total Interest-
      Earning
      Assets        6,142,162   5,997,526   5,802,945   5,718,610   5,594,489
   Cash and Due
    from Banks        126,837     145,534     154,007     126,634     130,212
   Premises and
    Equipment, Net    152,122     151,145     147,508     143,910     141,391
   Other Assets, Net  338,736     326,776     323,268     321,672     321,237
   Allowance for
    Loan Losses       (50,552)    (52,147)    (51,331)    (48,998)    (48,500)
     Total Assets  $6,709,305  $6,568,834  $6,376,397  $6,261,828  $6,138,829
   Savings and
    Time Deposits  $4,424,581  $4,377,604  $4,248,318  $4,238,064  $4,184,552
   Other Borrowed
    Money             508,312     431,765     426,747     445,778     404,928
     Total Interest-
      Bearing
      Liabilities   4,932,893   4,809,369   4,675,065   4,683,842   4,589,480
   Demand Deposits  1,078,883   1,068,266   1,024,204     915,798     902,549
   Other Liabilities   32,425      65,991      38,122      30,734      30,556
     Total
      Liabilities   6,044,201   5,943,626   5,737,391   5,630,374   5,522,585
   Shareholders'
    Equity            665,104     625,208     639,006     631,454     616,244
     Total
      Liabilities
      and
      Shareholders'
      Equity       $6,709,305  $6,568,834  $6,376,397  $6,261,828  $6,138,829

  Nonperforming
   Assets & Past
   Due Loans
   Nonaccrual
    Loans          $   40,124  $   46,624  $   50,218  $   38,752  $   45,680
   Restructured
    Loans                 321         321       2,127       2,127       1,804
   Foreclosed and
    Other Loan
   Related Assets      19,494      16,981       8,028       9,194       9,323
     Total
      Nonperforming
      Assets       $   59,939  $   63,926  $   60,373  $   50,073  $   56,807
   Accruing Loans
    90 Days or
    More Past Due  $    6,844  $   13,706  $   11,781  $   13,524  $   22,613
   Net Charge-Offs     18,665       3,886       7,484       5,374       5,092
   Net Charge-Offs
    to Average
    Loans Held
    for Investment       1.80%       0.38%       0.75%       0.54%       0.53%



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

  (A) Restated to retroactively give effect for the 10% stock dividend
      declared by the Company during first quarter 2006 and distributed during
      second quarter 2006.
  (B) Ratio of Noninterest Expense divided by the sum of Net Interest Income
      and Noninterest Income.
  (C) Tax-equivalent adjustment computed based on a 35% tax rate.



   Texas Regional Bancshares, Inc. and Subsidiaries
   Financial Highlights (Unaudited)                 At / For Six Months Ended
   (Dollars in Thousands,                             Jun 30,        Jun 30,
   Except Per Share Data)                              2006            2005

  Condensed Income Statements
   Interest Income
   Loans Held for Investment                       $168,914       $136,167
   Securities                                        37,831         29,604
   Other Interest-Earning Assets                      1,418            859
    Total Interest Income                           208,163        166,630
   Interest Expense
   Deposits                                          72,181         44,518
   Other Borrowed Money                              11,474          6,619
    Total Interest Expense                           83,655         51,137
    Net Interest Income                             124,508        115,493
   Provision for Loan Losses                         21,620         11,208
    Net Interest Income after Provision
     for Loan Losses                                102,888        104,285
   Service Charges on Deposit Accounts               19,040         18,781
   Other Service Charges                              6,396          5,420
   Insurance Commission, Fees and Premiums, Net       2,199          1,978
   Trust Fees                                         3,872          3,744
   Mortgage Banking Revenues                          2,625          3,085
   Realized Gains (Losses) on Sales of
    Securities Available for Sale, Net                  (97)           321
   Data Processing Service Fees                       4,392          4,772
   Loan Servicing Income (Loss), Net                     69            156
   Other Noninterest Income                           1,721          7,694
    Total Noninterest Income                         40,217         45,951
   Salaries and Employee Benefits                    47,327         42,326
   Occupancy Expense, Net                             7,700          7,156
   Equipment Expense                                  7,090          6,933
   Other Real Estate (Income) Expense, Net             (253)           647
   Amortization of Identifiable Intangibles           3,008          3,493
   Other Noninterest Expense                         21,459         19,726
    Total Noninterest Expense                        86,331         80,281
    Income Before Income Tax Expense                 56,774         69,955
   Income Tax Expense                                19,004         24,242
    Net Income                                      $37,770        $45,713

  Per Common Share Data (A)
   Net Income-Basic                                   $0.69          $0.84
   Net Income-Diluted                                  0.69           0.83
   Market Value at Period End                         37.92          27.71
   Book Value at Period End                           11.98          11.38
   Cash Dividends Declared                            0.280          0.200
  Share Data (A) (in Thousands)
   Basic                                             54,744         54,546
   Diluted                                           55,038         54,805
  Shares Outstanding at Period End (A)               54,788         54,584

  Selected Financial Data
   Return on Average Assets                            1.15%          1.51%
   Return on Average Shareholders' Equity             11.80          15.07
   Leverage Capital Ratio                              8.26           7.98
   Expense Efficiency Ratio (B)                       52.41          49.73
   TE Net Interest Income (C)                      $127,367       $117,413
   TE Adjustment (C)                                  2,859          1,920
    Net Interest Income, as Reported               $124,508       $115,493
   TE Net Interest Margin (C)                          4.23%          4.27%
   Goodwill                                        $193,093       $194,849
   Identifiable Intangibles, Net                     22,985         28,553
   Trust Assets Held, at Fair Value               2,101,620      1,681,922
   Full-Time Equivalent Employees                     2,030          2,057



   Texas Regional Bancshares, Inc. and Subsidiaries
   Financial Highlights (Unaudited)                At / For Six Months Ended
   (Dollars in Thousands,                            Jun 30,        Jun 30,
   Except Per Share Data)                             2006            2005

  Condensed Balance Sheets
   Loans Held for Investment                     $4,162,284     $3,903,850
   Securities                                     2,002,662      1,741,827
   Other Interest-Earning Assets                     71,705         24,306
    Total Interest-Earning Assets                 6,236,651      5,669,983
   Cash and Due from Banks                          152,796        141,182
   Premises and Equipment, Net                      153,081        143,136
   Other Assets, Net                                352,712        319,886
   Allowance for Loan Losses                        (49,096)       (48,022)
    Total Assets                                 $6,846,144     $6,226,165
   Savings and Time Deposits                     $4,401,203     $4,237,210
   Other Borrowed Money                             678,483        405,888
    Total Interest-Bearing Liabilities            5,079,686      4,643,098
   Demand Deposits                                1,077,657        916,727
   Other Liabilities                                 32,646         44,716
    Total Liabilities                             6,189,989      5,604,541
   Shareholders' Equity                             656,155        621,624
    Total Liabilities and Shareholders' Equity   $6,846,144     $6,226,165

  Condensed Average Balance Sheets
   Loans Held for Investment                     $4,123,518     $3,867,312
   Securities                                     1,902,530      1,633,892
   Other Interest-Earning Assets                     44,195         38,014
    Total Interest-Earning Assets                 6,070,243      5,539,218
   Cash and Due from Banks                          136,134        136,712
   Premises and Equipment, Net                      151,636        139,887
   Other Assets, Net                                332,790        318,019
   Allowance for Loan Losses                       (51,346)       (48,524)
    Total Assets                                 $6,639,457     $6,085,312
   Savings and Time Deposits                     $4,401,222     $4,144,416
   Other Borrowed Money                             470,250        400,523
    Total Interest-Bearing Liabilities            4,871,472      4,544,939
   Demand Deposits                                1,073,604        899,607
   Other Liabilities                                 49,115         29,114
    Total Liabilities                             5,994,191      5,473,660
   Shareholders' Equity                             645,266        611,652
    Total Liabilities and Shareholders' Equity   $6,639,457     $6,085,312

  Nonperforming Assets & Past Due Loans
   Nonaccrual Loans                                 $40,124        $45,680
   Restructured Loans                                   321          1,804
   Foreclosed and Other Loan Related Assets          19,494          9,323
    Total Nonperforming Assets                      $59,939        $56,807
   Accruing Loans 90 Days or
    More Past Due                                    $6,844        $22,613
   Net Charge-Offs                                   22,551          9,734
   Net Charge-Offs to Average Loans Held
    for Investment                                       1.10%           0.51%




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

   (A) Restated to retroactively give effect for the 10% stock dividend
       declared by the Company during first quarter 2006 and distributed
       during second quarter 2006.
   (B) Ratio of Noninterest Expense divided by the sum of Net Interest Income
       and Noninterest Income.
   (C) Tax-equivalent adjustment computed based on a 35% tax rate.


DATASOURCE: Texas Regional Bancshares, Inc.



CONTACT:  Glen E. Roney, Chief Executive Officer, or John A. Martin, Chief

Financial Officer, both of Texas Regional Bancshares, Inc., [phone]



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

Copyright