Texas Regional Bancshares, Inc. Reports Third Quarter Earnings

MCALLEN, Texas, Oct. 16  /PRNewswire-FirstCall/ -- Texas Regional Bancshares, Inc. (NASDAQ:TRBS) (Texas Regional or the Company), bank holding company for Texas State Bank, today reported net income for third quarter 2006 of $16,352,000, or $0.30 per diluted common share, compared to $19,829,000, or $0.36 per diluted common share, for third quarter 2005.  All per share amounts for prior periods have been adjusted for the 10 percent stock dividend distributed to shareholders of the Company during second quarter 2006.  Return on average assets and return on average shareholders' equity were 0.94 percent and 9.63 percent, respectively, compared to 1.26 percent and 12.46 percent, respectively, for the corresponding 2005 period.

For the nine months ended September 30, 2006, net income was $54,122,000, or $0.98 per diluted common share, compared to $65,542,000, or $1.19 per diluted common share, for the corresponding 2005 period.  Return on average assets and return on average shareholders' equity were 1.08 percent and 11.05 percent, respectively, for the nine months ended September 30, 2006, compared to 1.43 percent and 14.17 percent, respectively, for the corresponding 2005 period.

The results for the three and nine months ended September 30, 2006 compared to the three and nine months ended September 30, 2005 were primarily affected by two factors.  The nine months ended September 30, 2005 results include special distributions of $6,160,000 received during the first and second quarters of 2005 as a result of the merger of PULSE EFT Association with Discover Financial Services, a business unit of Morgan Stanley.  The Company's 2006 results have been adversely impacted by an increase in the provision for loan losses.  In the second quarter of 2006, the Company recorded additional provision for loan losses primarily as a result of charge-offs on three large loan relationships. In addition, in the third quarter of 2006, the Company recorded a specific reserve of $9,680,000 on one large nonperforming loan relationship in anticipation of the resolution of this credit.  If this relationship is resolved prior to the closing of the merger with Banco Bilbao Vizcaya Argentaria, S.A. (BBVA), the Company's shareholders may be entitled to a special dividend as described in the definitive merger agreement.

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

Operating Highlights

Net interest income of $63,357,000 for third quarter 2006 increased $3,711,000 or 6.2 percent over third quarter 2005.  Average interest-earning assets, the primary factor in net interest income growth, increased 10.5 percent from third quarter 2005 to $6,316,869,000 for third quarter 2006.  The net interest margin, on a tax-equivalent basis, for third quarter 2006 was 4.07 percent, a decrease of fifteen basis points compared to third quarter 2005.  The net interest margin was negatively impacted by the reversal of interest on loans placed on nonaccrual status during the third quarter 2006.

For the nine months ended September 30, 2006, net interest income totaled $187,865,000, reflecting a $12,726,000 or 7.3 percent increase from the corresponding 2005 period.  This growth resulted principally from an increase of 9.9 percent in average interest-earning assets to $6,153,355,000 for the nine months ended September 30, 2006 compared to the corresponding 2005 period.  The net interest margin, on a tax-equivalent basis, for the nine months ended September 30, 2006 was 4.18 percent, a decrease of seven basis points compared to the corresponding 2005 period.

The provision for loan losses was $13,453,000 for third quarter 2006 compared to $8,720,000 for third quarter 2005. The increase in the provision for loan losses is primarily attributable to the specific reserve recorded in the third quarter of 2006 discussed above.  Partially offsetting this increase is the additional provision of $2,500,000 for possible losses on loans to borrowers affected by Hurricane Rita recorded in the third quarter 2005.

For the nine months ended September 30, 2006, provision for loan losses was $35,073,000 compared to $19,928,000 for the corresponding 2005 period. The increase in the provision for loan losses is primarily attributable to net charge-offs of $24,513,000 during the nine months ended September 30, 2006, compared to $15,108,000 of net charge-offs for the corresponding 2005 period. In addition, as noted above, a specific reserve was recorded on one large loan relationship in the third quarter of 2006.

The allowance for loan losses as a percentage of loans held for investment and as a percentage of nonperforming loans were 1.42 percent and 113.60 percent, respectively, at September 30, 2006 compared to 1.30 percent and 125.66 percent, respectively, at September 30, 2005.

Noninterest income of $21,493,000 for third quarter 2006 increased $1,534,000 or 7.7 percent compared to third quarter 2005.  This increase is primarily attributable to a $719,000 increase in total services charges for the third quarter 2006 when compared to the third quarter 2005.  In addition, data processing service fees increased $470,000 and loan servicing income (loss), net, increased $419,000 for third quarter 2006 compared to third quarter 2005.

Total service charges of $13,376,000 for third quarter 2006 increased $719,000 or 5.7 percent compared to third quarter 2005. The increase in total service charges is primarily attributable to a $622,000 increase in non- sufficient funds and return item charges combined with increases of $398,000 in merchant credit and debit card income and $143,000 in automated teller machine income during third quarter 2006. These increases were partially offset by a $431,000 decrease in account analysis fees during third quarter 2006 compared to third quarter 2005 primarily due to an increase in the earnings credit rate. The earnings credit rate is based on the 90 day Treasury bill rate and is the value attributed to deposits maintained by customers using treasury management products. As the earnings credit rate has increased, the corresponding value given to deposits has increased resulting in customers being able to pay for more services with balances rather than fees.

Loan servicing income (loss), net, which includes amortization of the mortgage servicing rights (MSR) asset, increased $419,000 to $67,000 for third quarter 2006 compared to $(352,000) for the third quarter 2005.  The increase resulted primarily from a decrease in MSR amortization of $473,000 partially offset by a decrease of $54,000 in servicing fees.

For the nine months ended September 30, 2006, noninterest income was $61,710,000 reflecting a decrease of $4,200,000 or 6.4 percent compared to the corresponding 2005 period.  The decrease resulted primarily from the special distributions received during the first nine months of 2005 as a result of the merger of PULSE EFT Association with Discover Financial Services.  This decrease in noninterest income was partially offset by an increase in total service charges for the nine months ended September 30, 2006 compared to the corresponding 2005 period.

Total service charges of $38,812,000 for the nine months ended September 30, 2006 increased $1,953,000 or 5.3 percent compared to the corresponding 2005 period.  The increase is primarily attributable to a $1,335,000 increase in merchant credit and debit card income for the nine months ended September 30, 2006.  In addition, non-sufficient funds and return item charges increased $1,262,000 and automated teller machine income increased $392,000 for the nine months ended September 30, 2006 compared to the corresponding 2005 period. These increases were partially offset by a $1,006,000 decrease in account analysis fees due to the increase in the earnings credit rate attributed to deposits maintained by customers using the Company's treasury management services.

Other noninterest income of $2,133,000 for the nine months ended September 30, 2006 decreased by $5,982,000 compared to the corresponding 2005 period.  The decrease is primarily due to the above mentioned special distributions from the merger of PULSE EFT Association with Discover Financial Services received during the nine months ended September 30, 2005.

Noninterest expense of $47,147,000 for third quarter 2006 increased $6,164,000 or 15.0 percent compared to third quarter 2005. The efficiency ratio was 55.57 percent for third quarter 2006 compared to 51.48 percent for third quarter 2005.

Salaries and employee benefits of $25,099,000 increased $3,213,000 or 14.7 percent during third quarter 2006 compared to third quarter 2005. The increase is attributable to salary increases, increases in retirement plan and bonus expense, higher staffing levels in certain departments primarily due to expansion and enhancement of the Company's Bank Secrecy Act/Anti-Money Laundering compliance program and the effect of expensing stock options.  These increases were partially offset by staff reductions in other areas.  Retirement plan and bonus expense was $1,333,000 for the third quarter 2006 compared to $324,000 for the third quarter 2005. Stock-based compensation expense for third quarter 2006 was $796,000.

Other noninterest expense of $12,334,000 increased $2,320,000 or 23.2 percent compared to third quarter 2005.  The increase was primarily due to increases in advertising and public relations expenses, legal fees associated with the BBVA merger transaction, and writedowns on two repossessed assets to their net realizable values based upon offers to purchase those assets.

For the nine months ended September 30, 2006, noninterest expense was $133,478,000 reflecting an increase of $12,214,000 or 10.1 percent compared to the corresponding 2005 period.  The efficiency ratio was 53.48 percent for the nine months ended September 30, 2006 compared to 50.31 percent for the corresponding 2005 period.

Salaries and employee benefits of $72,426,000 increased $8,213,000 or 12.8 percent for the nine months ended September 30, 2006 compared to the corresponding 2005 period primarily due to salary increases, increases in retirement plan and bonus expense, higher staffing levels in certain departments due to expansion and enhancement of the Company's Bank Secrecy Act/Anti-Money Laundering compliance program and the effect of expensing stock options.  These increases were partially offset by staff reductions in other areas.  Retirement plan and bonus expense was $3,939,000 for the nine months ended September 30, 2006 compared to $734,000 for the corresponding 2005 period.  Stock-based compensation expense for the nine months ended September 30, 2006 was $2,201,000.  Salaries and employee benefits, annualized, represented 1.44 percent of average total assets for the nine months ended September 30, 2006, an increase of four basis points compared to the corresponding 2005 period.

Other noninterest expense of $33,793,000 increased $4,054,000 or 13.6 percent for the nine months ended September 30, 2006 compared to the corresponding 2005 period.  The increase was primarily due to increased fees for data processing, higher legal and professional fees and writedowns on two repossessed assets to their net realizable values based upon offers to purchase those assets.

Financial Condition

Assets totaled $6,951,782,000 at September 30, 2006, reflecting an increase of $648,310,000 or 10.3 percent compared to total assets at September 30, 2005. The increase was primarily attributable to increases in loans held for investment and securities.  Loans held for investment of $4,281,331,000 at September 30, 2006 increased $315,703,000 or 8.0 percent from September 30, 2005. Securities of $2,029,979,000 at September 30, 2006 increased $272,836,000 or 15.5 percent from September 30, 2005.  Other assets, net, of $338,781,000 at September 30, 2006 included goodwill and identifiable intangibles of $215,005,000.  Deposits increased to $5,711,884,000 at September 30, 2006, up $582,410,000 or 11.4 percent from September 30, 2005.

Shareholders' equity of $684,892,000 at September 30, 2006 increased $53,371,000 from September 30, 2005, an 8.5 percent increase. The increase primarily resulted from net income for the twelve months ended September 30, 2006 of $76,948,000, partially offset by dividends of $28,979,000. The total risk-based, tier 1 risk-based and leverage capital ratios of 12.51 percent, 11.27 percent and 8.21 percent, respectively, at September 30, 2006 substantially exceeded regulatory requirements for a well-capitalized bank holding company.

Asset Quality

Total nonperforming assets of $73,701,000 at September 30, 2006 increased $23,628,000 or 47.2 percent compared to $50,073,000 at September 30, 2005.  At September 30, 2006, total loans held for investment of $4,281,331,000 included $53,335,000 or 1.25 percent classified as nonperforming compared to 1.03 percent at September 30, 2005. This balance of nonperforming loans reflected an increase of $12,456,000 when compared to nonperforming loans of $40,879,000 at September 30, 2005. The increase primarily resulted from the addition of three nonaccrual loan relationships totaling $19,680,000 during the period.  These increases were partially offset by the foreclosure and charge-off of one loan relationship in the amount of $5,951,000 that was classified as nonaccrual at September 30, 2005.  Accruing loans 90 days or more past due of $5,921,000 at September 30, 2006 reflected a decrease of $7,603,000 compared to $13,524,000 at September 30, 2005.  The decrease is partially the result of the resolution of a $3,611,000 relationship, the majority of which was transferred to foreclosed and other loan related assets and the remainder was charged off.  The borrower involved in a second relationship totaling $2,797,000 paid off the majority of the relationship with the remainder transferred to foreclosed and other loan related assets. A third loan relationship, in the amount of $2,726,000, was returned to current status.  Partially offsetting these decreases is the addition of one loan relationship in the amount of $1,324,000.

Foreclosed and other loan related assets of $20,366,000 at September 30, 2006 increased $11,172,000 compared to $9,194,000 at September 30, 2005 primarily as a result of the addition of seven properties totaling $9,089,000 and one repossessed asset with a net book value of $1,154,000 at September 30, 2006.  Terms have been negotiated with third party purchasers to sell approximately $9,500,000 of these foreclosed and other loan related assets subject to completion of final documentation.  These transactions are expected to close in the fourth quarter 2006.

During the third quarter 2005, in connection with Hurricane Rita, the Company recorded an additional provision to the allowance for loan losses of $2,500,000 for possible losses on loans to borrowers affected by the hurricane. During the third quarter 2006, the Company recorded charge-offs of $279,000 against this allowance. Total charge-offs related to Hurricane Rita taken against this allowance were $1,491,000 at September 30, 2006. Consistent with the Company's loan policies, as information on loan customers is received and evaluated, the Company will continue to analyze the amount of additional provision for loan losses, if any, that may become necessary to properly account for additional losses sustained by the Company as a result of the hurricane and its aftermath.

Other Information

As previously announced, Texas Regional has signed a definitive merger agreement for the acquisition of the Company by BBVA.  The definitive agreement has been filed with the Securities and Exchange Commission (SEC).  Texas Regional has also filed a proxy statement and other relevant documents concerning the proposed merger transaction with the SEC.  The proxy statement relates to the special meeting of the shareholders of Texas Regional held on September 25, 2006, at which meeting the agreement and plan of merger with BBVA was approved and adopted by the shareholders.  The definitive agreement, proxy statement, and the other information contain important information concerning the transaction.  Investors are urged to read the definitive agreement and the proxy statement and all other relevant documents filed with the SEC.  You may obtain the documents at no charge at the website maintained by the SEC at http://www.sec.gov/ .  In addition, you may obtain copies of documents filed with the SEC by Texas Regional at no charge by contacting John A. Martin, Chief Financial Officer, Texas Regional Bancshares, Inc., 3900 North Tenth Street, Eleventh Floor, McAllen, Texas 78501.  Mr. Martin can also be reached by telephone at [phone].

Texas Regional paid a quarterly cash dividend of $0.14 per common share on October 13, 2006 to common shareholders of record on October 6, 2006.

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

This release and other information are available on Texas Regional's website at http://www.trbsinc.com/ . The information available on Texas Regional's website can also be obtained at no charge from John A. Martin, Chief Financial Officer, at the address and telephone number indicated above.

Forward-Looking Information

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

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

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

  Condensed Income
  Statements
   Interest Income
    Loans Held for
     Investment         $91,512    $86,781    $82,133    $79,214    $74,803
    Securities           21,687     19,775     18,056     17,166     16,429
    Other Interest-Earning
     Assets               1,277        791        627        583        502
      Total Interest
       Income           114,476    107,347    100,816     96,963     91,734
   Interest Expense
    Deposits             41,633     37,950     34,231     30,976     27,731
    Other Borrowed Money  9,486      6,529      4,945      4,616      4,357
      Total Interest
       Expense           51,119     44,479     39,176     35,592     32,088
      Net Interest Income
       before Provision
       for Loan Losses   63,357     62,868     61,640     61,371     59,646
    Provision for
     Loan Losses         13,453     16,749      4,871      6,143      8,720
      Net Interest Income
       after Provision for
       Loan Losses       49,904     46,119     56,769     55,228     50,926
    Service Charges on
     Deposit Accounts    10,399     10,041      8,999      8,802     10,082
    Other Service Charges 2,977      3,022      3,374      2,600      2,575
    Insurance Commission,
     Fees and
     Premiums, Net        1,240      1,193      1,006        829        997
    Trust Fees            2,087      1,971      1,901      1,868      1,892
    Mortgage Banking
     Revenues             1,682      1,440      1,185      1,399      1,710
    Realized Gains (Losses)
     on Sales of Securities
     Available for
     Sale, Net              ---        ---        (97)         2        475
    Data Processing
     Service Fees         2,629      2,108      2,284      2,222      2,159
    Loan Servicing Income
     (Loss), Net             67         83        (14)      (214)      (352)
    Other Noninterest
     Income                 412        583      1,138      1,229        421
      Total Noninterest
       Income            21,493     20,441     19,776     18,737     19,959
    Salaries and Employee
     Benefits            25,099     24,365     22,962     21,224     21,886
    Occupancy Expense,
     Net                  4,059      3,831      3,869      3,172      3,749
    Equipment Expense     3,805      3,674      3,416      3,439      3,515
    Other Real Estate
     (Income) Expense, Net  592       (354)       101        169        305
    Amortization of
     Identifiable
     Intangibles          1,258      1,390      1,618      1,597      1,514
    Other Noninterest
     Expense             12,334     11,689      9,770     10,298     10,014
      Total Noninterest
       Expense           47,147     44,595     41,736     39,899     40,983
      Income Before Income
       Tax Expense       24,250     21,965     34,809     34,066     29,902
    Income Tax Expense    7,898      7,206     11,798     11,240     10,073
      Net Income        $16,352    $14,759    $23,011    $22,826    $19,829

  Per Common Share Data (A)
    Net Income-Basic      $0.30      $0.27      $0.42      $0.42      $0.36
    Net Income-Diluted     0.30       0.27       0.42       0.42       0.36
    Market Value at
     Period End           38.45      37.92      29.49      25.73      26.17
    Book Value at
     Period End           12.49      11.98      11.99      11.75      11.55
    Cash Dividends
     Declared             0.140      0.140      0.140      0.109      0.109
  Share Data (A)
   (in Thousands)
    Basic                54,811     54,774     54,714     54,666     54,609
    Diluted              55,352     55,191     54,937     54,904     54,909
  Shares Outstanding at
   Period End (A)        54,841     54,788     54,766     54,682     54,654

  Selected Financial Data
    Return on Average
     Assets                0.94%      0.88%      1.42%      1.42%      1.26%
    Return on Average
     Shareholders' Equity  9.63       8.90      14.93      14.17      12.46
    Leverage Capital Ratio 8.21       8.26       8.30       8.26       8.11
    Expense Efficiency
     Ratio (B)            55.57      53.53      51.26      49.81      51.48
    TE Net Interest
     Income (C)         $64,848    $64,363    $63,004    $62,554    $60,762
    TE Adjustment (C)     1,491      1,495      1,364      1,183      1,116
      Net Interest Income,
       as Reported      $63,357    $62,868    $61,640    $61,371    $59,646
    TE Net Interest
     Margin (C)            4.07%      4.20%      4.26%      4.28%      4.22%
    Goodwill           $193,094   $193,094   $193,094   $192,740   $192,729
    Identifiable
     Intangibles, Net    21,911     22,985     24,191     25,624     27,224
    Trust Assets Held,
     at Fair Value    2,188,730  2,101,620  2,091,137  1,864,145  1,806,229



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

  Selected Financial
  Data - Continued
    Full-Time Equivalent
     Employees            2,019      2,030      1,985      1,954      1,976

  Condensed Balance Sheets
    Loans Held for
     Investment      $4,281,331 $4,162,284 $4,104,728 $4,109,615 $3,965,628
    Securities        2,029,979  2,002,662  1,889,781  1,840,780  1,757,143
    Other Interest-
     Earning Assets      92,034     71,705     66,707     34,875     23,612
      Total Interest-
       Earning Assets 6,403,344  6,236,651  6,061,216  5,985,270  5,746,383
    Cash and Due
     from Banks         117,983    152,796    139,452    179,829    138,986
    Premises and
     Equipment, Net     152,261    153,081    151,720    149,698    147,084
    Other Assets, Net   338,781    352,712    332,618    323,549    322,387
    Allowance for
     Loan Losses        (60,587)   (49,096)   (51,012)   (50,027)   (51,368)
      Total Assets   $6,951,782 $6,846,144 $6,633,994 $6,588,319 $6,303,472
    Savings and Time
     Deposits        $4,685,532 $4,401,203 $4,490,466 $4,288,830 $4,222,194
    Other Borrowed
     Money              517,669    678,483    315,960    523,375    499,177
      Total Interest-
       Bearing
       Liabilities    5,203,201  5,079,686  4,806,426  4,812,205  4,721,371
    Demand Deposits   1,026,352  1,077,657  1,116,110  1,104,501    907,280
    Other Liabilities    37,337     32,646     54,938     29,121     43,300
      Total
       Liabilities    6,266,890  6,189,989  5,977,474  5,945,827  5,671,951
    Shareholders'
     Equity             684,892    656,155    656,520    642,492    631,521
      Total Liabilities
       and Shareholders'
       Equity        $6,951,782 $6,846,144 $6,633,994 $6,588,319 $6,303,472

  Condensed Average
   Balance Sheets
    Loans Held for
     Investment      $4,202,873 $4,148,060 $4,098,702 $3,968,329 $3,930,179
    Securities        2,032,717  1,946,720  1,857,850  1,794,995  1,751,516
    Other Interest-
     Earning Assets      81,279     47,382     40,974     39,621     36,915
      Total Interest-
       Earning Assets 6,316,869  6,142,162  5,997,526  5,802,945  5,718,610
    Cash and Due
     from Banks         118,221    126,837    145,534    154,007    126,634
    Premises and
     Equipment, Net     152,295    152,122    151,145    147,508    143,910
    Other Assets, Net   350,771    338,736    326,776    323,268    321,672
    Allowance for
     Loan Losses        (52,115)   (50,552)   (52,147)   (51,331)   (48,998)
      Total Assets   $6,886,041 $6,709,305 $6,568,834 $6,376,397 $6,261,828
    Savings and Time
     Deposits        $4,439,023 $4,424,581 $4,377,604 $4,248,318 $4,238,064
    Other Borrowed
     Money              709,969    508,312    431,765    426,747    445,778
      Total Interest-
       Bearing
       Liabilities    5,148,992  4,932,893  4,809,369  4,675,065  4,683,842
    Demand Deposits   1,031,356  1,078,883  1,068,266  1,024,204    915,798
    Other Liabilities    32,173     32,425     65,991     38,122     30,734
      Total
       Liabilities    6,212,521  6,044,201  5,943,626  5,737,391  5,630,374
    Shareholders'
     Equity             673,520    665,104    625,208    639,006    631,454
      Total Liabilities
       and Shareholders'
       Equity        $6,886,041 $6,709,305 $6,568,834 $6,376,397 $6,261,828

  Nonperforming Assets
  & Past Due
   Loans
    Nonaccrual Loans    $53,014    $40,124    $46,624    $50,218    $38,752
    Restructured Loans      321        321        321      2,127      2,127
    Foreclosed and Other
     Loan Related Assets 20,366     19,494     16,981      8,028      9,194
      Total Nonperforming
       Assets           $73,701    $59,939    $63,926    $60,373    $50,073
    Accruing Loans
     90 Days or More
     Past Due            $5,921     $6,844    $13,706    $11,781    $13,524
    Net Charge-Offs       1,962     18,665      3,886      7,484      5,374
    Net Charge-Offs to
     Average Loans Held
     for Investment        0.19%      1.80%      0.38%      0.75%      0.54%



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

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



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

  Condensed Income Statements
   Interest Income
    Loans Held for Investment                     $260,426       $210,969
    Securities                                      59,518         46,033
    Other Interest-Earning Assets                    2,695          1,362
      Total Interest Income                        322,639        258,364
   Interest Expense
    Deposits                                       113,814         72,249
    Other Borrowed Money                            20,960         10,976
      Total Interest Expense                       134,774         83,225
      Net Interest Income before Provision
       for Loan Losses                             187,865        175,139
    Provision for Loan Losses                       35,073         19,928
      Net Interest Income after Provision
       for Loan Losses                             152,792        155,211
    Service Charges on Deposit Accounts             29,439         28,863
    Other Service Charges                            9,373          7,996
    Insurance Commission, Fees and Premiums, Net     3,439          2,974
    Trust Fees                                       5,959          5,636
    Mortgage Banking Revenues                        4,307          4,795
    Realized Gains (Losses) on Sales of
      Securities Available for Sale, Net               (97)           796
    Data Processing Service Fees                     7,021          6,931
    Loan Servicing Income (Loss), Net                  136           (196)
    Other Noninterest Income                         2,133          8,115
      Total Noninterest Income                      61,710         65,910
    Salaries and Employee Benefits                  72,426         64,213
    Occupancy Expense, Net                          11,759         10,905
    Equipment Expense                               10,895         10,448
    Other Real Estate Expense, Net                     339            952
    Amortization of Identifiable Intangibles         4,266          5,007
    Other Noninterest Expense                       33,793         29,739
      Total Noninterest Expense                    133,478        121,264
      Income Before Income Tax Expense              81,024         99,857
    Income Tax Expense                              26,902         34,315
      Net Income                                   $54,122        $65,542
  Per Common Share Data (A)
    Net Income-Basic                                 $0.99          $1.20
    Net Income-Diluted                                0.98           1.19
    Market Value at Period End                       38.45          26.17
    Book Value at Period End                         12.49          11.55
    Cash Dividends Declared                           0.42          0.309
  Share Data (A) (in Thousands)
    Basic                                           54,767         54,567
    Diluted                                         55,172         54,865
  Shares Outstanding at Period End (A)              54,841         54,654
  Selected Financial Data
    Return on Average Assets                          1.08%          1.43%
    Return on Average Shareholders' Equity           11.05          14.17
    Leverage Capital Ratio                            8.21           8.11
    Expense Efficiency Ratio (B)                     53.48          50.31
    TE Net Interest Income (C)                    $192,215       $178,175
    TE Adjustment (C)                                4,350          3,036
      Net Interest Income, as Reported            $187,865       $175,139
    TE Net Interest Margin (C)                        4.18%          4.25%
    Goodwill                                      $193,094       $192,729
    Identifiable Intangibles, Net                   21,911         27,224
    Trust Assets Held, at Fair Value             2,188,730      1,806,229
    Full-Time Equivalent Employees                   2,019          1,976



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

  Condensed Balance Sheets
    Loans Held for Investment                   $4,281,331     $3,965,628
    Securities                                   2,029,979      1,757,143
    Other Interest-Earning Assets                   92,034         23,612
      Total Interest-Earning Assets              6,403,344      5,746,383
    Cash and Due from Banks                        117,983        138,986
    Premises and Equipment, Net                    152,261        147,084
    Other Assets, Net                              338,781        322,387
    Allowance for Loan Losses                      (60,587)       (51,368)
      Total Assets                              $6,951,782     $6,303,472
    Savings and Time Deposits                   $4,685,532     $4,222,194
    Other Borrowed Money                           517,669        499,177
      Total Interest-Bearing Liabilities         5,203,201      4,721,371
    Demand Deposits                              1,026,352        907,280
    Other Liabilities                               37,337         43,300
      Total Liabilities                          6,266,890      5,671,951
  Shareholders' Equity                             684,892        631,521
        Total Liabilities and Shareholders'
         Equity                                 $6,951,782     $6,303,472
  Condensed Average Balance Sheets
    Loans Held for Investment                   $4,150,260     $3,888,498
    Securities                                   1,946,403      1,673,531
    Other Interest-Earning Assets                   56,692         37,693
      Total Interest-Earning Assets              6,153,355      5,599,722
    Cash and Due from Banks                        130,098        133,316
    Premises and Equipment, Net                    151,858        141,242
    Other Assets, Net                              338,849        319,250
    Allowance for Loan Losses                      (51,605)       (48,683)
        Total Assets                            $6,722,555     $6,144,847
    Savings and Time Deposits                   $4,413,961     $4,175,992
    Other Borrowed Money                           551,034        415,773
      Total Interest-Bearing Liabilities         4,964,995      4,591,765
    Demand Deposits                              1,059,367        905,064
    Other Liabilities                               43,406         29,660
      Total Liabilities                          6,067,768      5,526,489
    Shareholders' Equity                           654,787        618,358
        Total Liabilities and Shareholders'
         Equity                                 $6,722,555     $6,144,847
  Nonperforming Assets & Past Due Loans
    Nonaccrual Loans                               $53,014        $38,752
    Restructured Loans                                 321          2,127
    Foreclosed and Other Loan Related Assets        20,366          9,194
      Total Nonperforming Assets                   $73,701        $50,073
    Accruing Loans 90 Days or
      More Past Due                                 $5,921        $13,524
    Net Charge-Offs                                 24,513         15,108
    Net Charge-Offs to Average Loans Held for
     Investment                                       0.79%          0.52%



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

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


DATASOURCE: Texas Regional Bancshares, Inc.



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

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



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

Copyright