Texas Regional Bancshares, Inc. Reports Third Quarter Earnings

MCALLEN, Texas, Oct. 17  /PRNewswire-FirstCall/ -- Texas Regional Bancshares, Inc. ("Texas Regional") (NASDAQ:TRBS), bank holding company for Texas State Bank, today reported net income for third quarter 2005 of $19,829,000, or $0.40 per diluted common share, compared to $19,821,000, or $0.40 per diluted common share, for the comparable 2004 period. Return on assets and return on shareholders' equity averaged 1.26 percent and 12.46 percent, respectively, compared to 1.43 percent and 14.10 percent, respectively, for the corresponding 2004 period.

For the nine months ended September 30, 2005, net income totaled $65,542,000, or $1.31 per diluted common share, compared to $55,810,000, or $1.16 per diluted common share, for the corresponding 2004 period. This represents a 17.4 percent improvement in net income and a 12.9 percent improvement in earnings per diluted common share. Return on assets and return on shareholders' equity averaged 1.43 percent and 14.17 percent, respectively for the nine months ended September 30, 2005, compared to 1.44 percent and 14.30 percent, respectively, for the corresponding 2004 period.

Texas Regional completed the acquisitions of Southeast Texas Bancshares, Inc. ("Southeast Texas") on March 12, 2004, Valley Mortgage Company, Inc. ("Valley Mortgage") on November 23, 2004 and Mercantile Bank & Trust, FSB ("Mercantile") on January 14, 2005. The results of operations for Southeast Texas, Valley Mortgage and Mercantile have been included in the consolidated financial statements since their respective purchase dates.

On October 6, 2005, the Company opened a new banking center in Downtown Dallas at Republic Center, increasing the number of banking centers to four in Dallas and 72 statewide. "The Company is excited about opening a new office in this historic location and is looking forward to serving the banking needs of the Downtown Dallas business community," said Glen E. Roney, Chairman of the Board and Chief Executive Officer of Texas Regional. The Company has banking centers presently under construction in Bishop and the Woodlands, and management believes that those locations will be open for business before the end of the year. In addition, the Company has acquired sites for additional banking centers in both Corpus Christi and Houston.

As Hurricane Rita approached the Gulf Coast on Thursday, September 22, 2005, several coastal areas were subject to mandatory evacuation. As a result, Texas State Bank closed 36 banking centers including 31 in East Texas, three in Houston and two in the Corpus Christi area. The Company's banking centers in Corpus Christi, Houston, San Augustine and Tyler re-opened on Monday, September 26, 2005. As of Friday, October 14, 2005, only one motor bank and two small banking centers, all located in East Texas, had not re-opened.

"Our bankers, not only in East Texas, but throughout the state did a tremendous job of meeting our customers' needs in the areas affected by Hurricane Rita," said Glen E. Roney, Chairman of the Board. "Working under difficult conditions, our bankers returned to the area as soon as possible to provide banking services. We continue to work with our customers to meet their banking needs."

Texas Regional continues to assess both the physical damage to facilities and the potential for losses arising from Hurricane Rita. The Company has begun the process of preparing insurance claims and believes substantially all of the physical damage sustained by its banking centers in the affected areas, as well as certain costs incurred in reopening banking centers, are fully insured.

Management of the Company also continues to assess the continuing impact of Hurricane Rita on other aspects of the Company's operations, including the loss of income, unusual expenses and potential losses on loans to borrowers that experience financial difficulty. As of September 30, 2005, based upon its initial evaluation, the Company recorded an additional provision to the allowance for loan losses of $2,500,000 for possible losses on loans to borrowers affected by the hurricane. Consistent with the Company's loan policies, as information on loan customers is received and evaluated, the Company will continue to analyze the amount of additional provision for loan losses, if any, that may become necessary to properly account for additional losses sustained by the Company as a result of the hurricane and its aftermath.

Operating Highlights

Net interest income of $59,646,000 for third quarter 2005 increased $5,825,000, or 10.8 percent over third quarter 2004. Average total interest- earning assets, the primary factor in net interest income growth, increased 13.8 percent from third quarter 2004 to $5,718,610,000 for third quarter 2005. The net interest margin, on a tax-equivalent basis, decreased twelve basis points to 4.22 percent for third quarter 2005 compared to the corresponding 2004 period.

For the nine months ended September 30, 2005, net interest income totaled $175,139,000, reflecting a $26,481,000 or 17.8 percent increase from the same 2004 period. This growth resulted principally from an increase of 19.0 percent in average total interest-earning assets to $5,599,722,000 for the nine months ended September 30, 2005 as compared to the same 2004 period. The net interest margin, on a tax-equivalent basis, for the nine months ended September 30, 2005 was 4.25 percent, a decrease of five basis points when compared to the corresponding 2004 period.

Provision for loan losses of $8,720,000 for third quarter 2005 increased $2,523,000 or 40.7 percent as compared to the provision for loan losses during third quarter 2004, primarily due to the $2,500,000 provision recorded for possible losses on loans to borrowers affected by Hurricane Rita. The provision for loan losses represented 0.88 percent of average loans held for investment for third quarter 2005 compared to 0.71 percent for third quarter 2004. Net charge-offs totaled $5,373,000 for third quarter 2005, representing 0.54 percent of average loans held for investment compared to 0.57 percent of average loans held for investment for third quarter 2004.

For the nine months ended September 30, 2005, provision for loan losses totaled $19,928,000, reflecting a $5,115,000 or 34.5 percent increase over the comparable prior year period. Provision for loan losses totaled 0.69 percent of average loans held for investment for the nine months ended September 30, 2005 compared to 0.62 percent for the nine months ended September 30, 2004.

Noninterest income of $19,848,000 for third quarter 2005 decreased $747,000 or 3.6 percent as compared to third quarter 2004. Service charges on deposits of $10,082,000 decreased $448,000 or 4.3 percent for the quarter ended September 30, 2005 compared to the quarter ended September 30, 2004 primarily due to a $347,000 reduction in non-sufficient and return item charges. Other service charges increased $507,000 or 23.1 percent to $2,701,000 due to an increase in merchant credit and debit card income of $302,000 and mortgage banking fees generated from Valley Mortgage of $128,000.

Net realized gains on sales of securities available for sale decreased to $475,000 for third quarter 2005 compared to $2,963,000 for third quarter 2004. Loan servicing loss, net of amortization of the mortgage servicing rights ("MSR") asset, decreased $325,000 to a $352,000 net servicing loss for third quarter 2005 from third quarter 2004. The decrease resulted primarily from $185,000 in servicing income generated from Valley Mortgage, as well as a decrease in MSR amortization of $172,000 during third quarter 2005 compared to third quarter 2004 resulting from a slowdown in prepayments. Other noninterest income increased by $1,236,000 to $1,894,000 for third quarter 2005 compared to third quarter 2004, primarily due to a $1,403,000 increase in gains on sale of loans held for sale and mortgage servicing rights.

For the nine months ended September 30, 2005, noninterest income totaled $65,612,000 reflecting an increase of $12,678,000 or 24.0 percent over the corresponding 2004 period. Service charges on deposits increased $771,000 or 2.7 percent to $28,863,000 for the nine months ended September 30, 2005 compared to the same period in 2004 primarily due to growth in deposits combined with a $558,000 increase in automated teller machine income. Other service charges increased $1,952,000 to $8,356,000 for the nine months ended September 30, 2005 compared to the same 2004 period, primarily due to a $1,143,000 increase in merchant credit and debit card income combined with a $363,000 increase in mortgage banking fees generated from Valley Mortgage. Trust service fees of $5,636,000 for the nine months ended September 30, 2005 increased 46.6 percent over the same period in 2004 primarily due to an increase in the average fair value of trust accounts by 48.8 percent during the nine months ended September 30, 2005 compared to the comparable period of the prior year. The increase in the average fair value of trust accounts was primarily due to the addition of $623,267,000 in trust assets with the Southeast Texas acquisition in March 2004 and additional trust business developed during the last twelve months. The fair value of assets managed by the trust department totaled $1,806,229,000 at September 30, 2005. Net realized gains on sales of securities available for sale of $796,000 for the nine months ended September 30, 2005 decreased $4,049,000 from the comparable prior year period as callable security sales were decreased during a period of rising interest rates.

Data processing service fees increased 9.5 percent during the nine months ended September 30, 2005 to $6,931,000 compared to the corresponding 2004 period. The increase was primarily related to an increase in account volume for one data processing client. In addition, during first quarter 2005, the Company collected a $332,000 termination fee. The number of data processing clients totaled 24 at September 30, 2005 compared to 26 at September 30, 2004. Loan servicing loss, net, which includes amortization of the MSR asset, decreased $942,000 to a $196,000 net servicing loss for the nine months ended September 30, 2005 compared to the net servicing loss for the comparable 2004 period. The decrease is primarily due to $536,000 in servicing income generated from Valley Mortgage, as well as a $648,000 decrease in MSR amortization for the nine months ended September 30, 2005 compared to the corresponding 2004 period. Other noninterest income increased by $10,242,000 to $12,252,000 for the nine months ended September 30, 2005 compared to the same 2004 period. A substantial part of the increase is due to an aggregate $6,160,000 in special distributions received during the first two quarters of 2005 as a result of the merger of PULSE EFT Association with Discover Financial Services. In addition, the gains on sales of loans held for sale and mortgage servicing rights increased $3,956,000 during the nine months ended September 30, 2005 compared to the corresponding 2004 period.

Noninterest expense of $40,872,000 for third quarter 2005 increased $2,588,000 or 6.8 percent over third quarter 2004. This increase corresponds generally with growth in business volumes during the twelve months ended September 30, 2005, including business volumes attributable to the acquisition of Mercantile and its three banking centers in January 2005 and increases from a new Weslaco banking center opened in February 2005. As of September 30, 2005, Texas State Bank had over 70 banking centers. The efficiency ratio of 51.42 percent for third quarter 2005 was comparable to the efficiency ratio of 51.45 percent for third quarter 2004. Salaries and employee benefits increased 7.4 percent during third quarter 2005 to $21,886,000 compared to third quarter 2004 primarily due to an increase in salaries of $2,263,000 which was partially offset by a $1,264,000 decrease in bonus and pension plan expense. The number of full-time equivalent employees of 1,976 at September 30, 2005 represented an increase of 3.2 percent as compared to the number of full-time equivalent employees at September 30, 2004.

For the nine months ended September 30, 2005, noninterest expense totaled $120,966,000 reflecting an increase of $17,530,000 or 16.9 percent over the corresponding 2004 period due to the growth in banking operations. Noninterest expense as a percent of average total assets for the nine months ended September 30, 2005 was 2.63 percent, representing a decrease of five basis points when compared to the same 2004 period. Salaries and employee benefits increased $10,636,000 to $64,213,000 for the nine months ended September 30, 2005 compared to the nine months ended September 30, 2004 primarily due to an increase in salaries of $11,053,000 which was partially offset by a $2,313,000 decrease in bonus and pension plan expense. The percent of salaries and employee benefits to average total assets was 1.40 percent for the nine months ending September 30, 2005 compared to 1.39 percent for the same 2004 period. The efficiency ratio totaled 50.25 percent for the nine months ended September 30, 2005 compared to 51.31 percent for the corresponding 2004 period.

Financial Condition

Assets totaled $6,303,472,000 at September 30, 2005, reflecting an increase of $684,190,000, or 12.2 percent from September 30, 2004, primarily due to an increase in loan production. Loans held for investment of $3,965,628,000 at September 30, 2005 increased $427,200,000 or 12.1 percent from September 30, 2004. Deposits increased to $5,129,474,000 at September 30, 2005, up $557,361,000 or 12.2 percent from September 30, 2004. Excluding volumes acquired through business combinations, internal growth rates for loans and deposits were 8.8 percent and 8.4 percent, respectively, for the twelve months ended September 30, 2005. Other assets, net at September 30, 2005 included total goodwill and identifiable intangibles of $219,953,000.

Shareholders' equity at September 30, 2005 increased $60,130,000 from September 30, 2004 to $631,521,000, reflecting a 10.5 percent increase. The increase resulted primarily from net income for the twelve months ended September 30, 2005 of $86,390,000, offset by dividends paid during that twelve month period of $21,835,000. The total risk-based, tier 1 risk-based and leverage capital ratios of 12.03 percent, 10.89 percent and 8.12 percent at period end, respectively, substantially exceeded regulatory requirements for a well-capitalized bank holding company.

Asset Quality

At September 30, 2005, total loans held for investment of $3,965,628,000 included $40,556,000 or 1.02 percent classified as nonperforming compared to 0.47 percent at September 30, 2004. Nonperforming loans increased by $23,946,000 to $40,556,000 at September 30, 2005 compared to $16,610,000 at September 30, 2004. The increase resulted primarily from the addition of four loan relationships totaling $22,351,000. The allowance for loan losses of $51,368,000 represented 1.30 percent of loans held for investment and 126.66 percent of nonperforming loans at September 30, 2005. The allowance for loan losses of $43,153,000 at September 30, 2004 represented 1.22 percent of loans held for investment and 259.80 percent of nonperforming loans. Net charge-offs for third quarter 2005 were 0.54 percent of average loans held for investment compared to 0.57 percent for third quarter 2004. Total nonperforming assets at September 30, 2005 of $49,750,000 represented 1.25 percent of total loans held for investment and foreclosed and other assets compared to 0.79 percent at September 30, 2004. Accruing loans 90 days or more past due of $13,524,000 at September 30, 2005 totaled 0.34 percent of total loans held for investment and foreclosed and other assets compared to 0.19 percent at September 30, 2004. Accruing loans 90 days or more past due increased by $6,739,000 to $13,524,000 at September 30, 2005 compared to $6,785,000 at September 30, 2004. This increase is primarily a result of the addition of three loan relationships totaling $9,135,000 during the last year. The increase was partially offset by a $3,097,000 relationship, of which $2,898,000 was transferred to foreclosed and other assets.

The Company has been in contact with a number of loan customers who were affected by Hurricane Rita. Based on customer by customer evaluations the Company has granted extensions, usually for no more than two months, on loan payments. As of September 30, 2005, the Company has deferred payments of $880,000 on loans with principal amounts outstanding of $17,733,000.

Other Information

Texas Regional will host a conference call with analysts and investment professionals on Monday, October 17, 2005 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 day Friday, October 21st.  To access the replay, dial [phone]; ID number 2945551.  The webcast of the conference call will be archived on the Company's website at http://www.trbsinc.com/.

Texas Regional paid a quarterly cash dividend of $0.12 per share on October 14, 2005 to common shareholders of record on September 30, 2005. This dividend represents a $0.02 per share, or 20.0 percent increase over the dividend paid for the same period in 2004.

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

Additional financial, statistical and business-related information, as well as business trends, is included in a Financial Supplement. This release, the Financial Supplement and other information are available on Texas Regional's website at http://www.trbsinc.com/. The Financial Supplement and other information available on Texas Regional's website can also be obtained at no charge by calling John A. Martin, Chief Financial Officer, at [phone].

Forward-Looking Information

This document, information filed by Texas Regional with the SEC and information on Texas Regional's website may contain forward-looking information (including information related to plans, projections or future performance of Texas Regional and its subsidiaries and planned market opportunities, employment opportunities and synergies from mergers), the occurrence of which involve certain risks, uncertainties, assumptions and other factors which could materially affect future results. In addition to risks and uncertainties described by Texas Regional in prior filings with the SEC, other risks and uncertainties potentially impacting Texas Regional are those related to Texas Regional's business in East Texas in the areas impacted by Hurricane Rita, including the continuing effect of the storm and its aftermath on the Company's operating expenses and on the Company's borrowers and other customers. If any of these risks or uncertainties materialize 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)  2005       2005       2005       2004      2004
  Condensed Income
   Statements
    Loans Held for
     Investment          $74,803    $70,035    $66,131    $62,186    $57,969
    Securities            16,429     15,462     14,142     13,288     13,399
    Other
     Interest-Earning
     Assets                  502        425        435        309        189
       Total Interest
        Income            91,734     85,922     80,708     75,783     71,557
    Deposits              27,731     24,280     20,238     17,538     15,638
    Other Borrowed Money   4,357      3,561      3,058      2,802      2,098
       Total Interest
        Expense           32,088     27,841     23,296     20,340     17,736
       Net Interest
        Income            59,646     58,081     57,412     55,443     53,821
    Provision for Loan
     Losses                8,720      5,801      5,407      5,769      6,197
    Service Charges -
     Deposits             10,082      9,641      9,140     10,449     10,530
    Other Service Charges  2,701      2,704      2,951      2,326      2,194
    Insurance Commission,
     Fees and Premiums       997        979        998      1,259      1,173
    Trust Service Fees     1,892      1,904      1,840      1,843      1,674
    Net Realized Gains
     (Losses) on Sales of
     Securities Available
     for Sale                475        323        (2)      1,010      2,963
    Data Processing Service
     Fees                  2,159      2,148      2,624      2,201      2,080
    Loan Servicing Income
     (Loss), Net            (352)         3        153       (188)     (677)
    Other Noninterest
     Income                1,894      3,133      7,225      1,222        658
       Total Noninterest
        Income            19,848     20,835     24,929     20,122     20,595
    Salaries and Employee
     Benefits             21,886     19,610     22,717     20,527     20,372
    Net Occupancy Expense  3,749      3,742      3,414      2,982      3,136
    Equipment Expense      3,515      3,610      3,323      3,668      3,222
    Other Real Estate
     (Income) Expense, Net   305        418        229      (199)       (57)
    Amortization -
     Identifiable
     Intangibles           1,514      1,652      1,841      1,791      1,987
    Other Noninterest
     Expense, Net          9,903     10,040      9,498      9,763      9,624
       Total Noninterest
        Expense           40,872     39,072     41,022     38,532     38,284
       Income Before
        Income Tax
        Expense           29,902     34,043     35,912     31,264     29,935
    Income Tax Expense    10,073     12,129     12,113     10,416     10,114
       Net Income        $19,829    $21,914    $23,799    $20,848    $19,821

  Per Common Share Data
    Net Income-Basic       $0.40      $0.44      $0.48      $0.42      $0.41
    Net Income-Diluted      0.40       0.44       0.48       0.42       0.40
    Market Value at
     Period End            28.79      30.48      30.11      32.68      31.09
    Book Value at
     Period End            12.71      12.53      12.12      11.99      11.67
    Cash Dividends
     Declared              0.120      0.120      0.100      0.100      0.100
  Share Data (in Thousands)
    Basic                 49,646     49,606     49,570     49,185     48,921
    Diluted               49,919     49,855     49,855     49,566     49,500
  Shares Outstanding at
   Period End             49,687     49,624     49,592     49,553     48,960

  Selected Financial Data
    Return on Average
     Assets                1.26%      1.43%      1.60%      1.46%      1.43%
    Return on Average
     Equity                12.46      14.26      15.90      14.10      14.10
    Leverage Capital
     Ratio                  8.12       7.98       7.83       8.32       8.17
    Expense Efficiency
     Ratio (1)             51.42      49.51      49.82      50.99      51.45
    TE Net Interest
     Income (2)          $60,762    $59,002    $58,411    $56,533    $54,813
    TE Adjustment (1)      1,116        921        999      1,090        992
      Net Interest Income,
       as Reported       $59,646    $58,081    $57,412    $55,443    $53,821
    TE Net Interest
     Margin (2)            4.22%      4.23%      4.32%      4.35%      4.34%
    Goodwill, Net       $192,729   $194,849   $194,963   $174,503   $163,928
    Identifiable
     Intangibles, Net     27,224     28,553     30,022     29,607     30,803
    Trust Assets Held,
     at Fair Value    $1,806,229 $1,681,922 $1,475,545 $1,466,841 $1,420,664
    Full-Time
     Equivalent
     Employees             1,976      2,057      2,061      1,997      1,914

  Condensed Balance
   Sheets
    Loans Held for
     Investment       $3,965,628 $3,903,850 $3,843,779 $3,750,519 $3,538,428
    Securities         1,757,143  1,741,827  1,652,438  1,530,713  1,513,536
    Other
     Interest-Earning
     Assets               23,612     24,307     47,834     29,769     20,471
       Total
        Interest-Earning
        Assets         5,746,383  5,669,984  5,544,051  5,311,001  5,072,435
    Cash and Due
     from Banks          138,986    141,181    133,450    145,528    138,860
    Premises and
     Equipment, Net      147,084    143,136    140,145    134,239    131,443
    Other Assets, Net    322,387    319,886    319,140    293,603    319,697
    Allowance for
     Loan Losses         (51,368)   (48,022)   (47,313)   (45,024)  (43,153)
       Total Assets   $6,303,472 $6,226,165 $6,089,473 $5,839,347 $5,619,282
    Savings and Time
     Deposits         $4,222,194 $4,237,210 $4,081,869 $3,894,067 $3,721,681
    Other Borrowed
     Money               499,177    405,888    441,329    461,751    437,970
       Total
        Interest-Bearing
        Liabilities    4,721,371  4,643,098  4,523,198  4,355,818  4,159,651
    Demand Deposits      907,280    916,727    920,271    866,773    850,432
    Other Liabilities     43,300     44,716     45,108     22,698     37,808
       Total
        Liabilities    5,671,951  5,604,541  5,488,577  5,245,289  5,047,891
    Shareholders'
     Equity              631,521    621,624    600,896    594,058    571,391
       Total
        Liabilities
        and Equity    $6,303,472 $6,226,165 $6,089,473 $5,839,347 $5,619,282

  Condensed Average
   Balance Sheets
    Loans Held for
     Investment       $3,930,179 $3,876,051 $3,858,477 $3,631,640 $3,483,354
    Securities         1,751,516  1,685,893  1,581,314  1,517,518  1,523,544
    Other
     Interest-Earning
     Assets               36,915     32,545     43,693     23,820     17,987
       Total
        Interest-Earning
        Assets         5,718,610  5,594,489  5,483,484  5,172,978  5,024,885
    Cash and Due
     from Banks          126,634    130,212    143,284    136,899    126,523
    Premises and
     Equipment, Net      143,910    141,391    138,366    132,538    129,560
    Other Assets, Net    321,672    321,237    314,765    294,784    292,067
    Allowance for
     Loan Losses         (48,998)   (48,500)   (48,548)   (44,804)  (43,108)
       Total
        Assets        $6,261,828 $6,138,829 $6,031,351 $5,692,395 $5,529,927
    Savings and
     Time Deposits    $4,238,064 $4,184,552 $4,103,985 $3,804,139 $3,758,880
    Other Borrowed
     Money               445,778    404,928    396,068    399,386    312,575
       Total
        Interest-
        Bearing
        Liabilities    4,683,842  4,589,480  4,500,053  4,203,525  4,071,455
    Demand Deposits      915,798    902,549    896,633    871,569    864,818
    Other Liabilities     30,734     30,556     27,655     29,216     34,473
       Total
        Liabilities    5,630,374  5,522,585  5,424,341  5,104,310  4,970,746
    Shareholders'
     Equity              631,454    616,244    607,010    588,085    559,181
       Total
        Liabilities
        and Equity    $6,261,828 $6,138,829 $6,031,351 $5,692,395 $5,529,927

  Nonperforming
   Assets & Past Due
   Loans
    Nonaccrual Loans     $38,752    $44,884    $41,518    $19,750    $16,610
    Restructured Loans     1,804      1,804          -          -          -
    Foreclosed and
     Other Assets          9,194      9,322      8,002      7,398     11,386
       Total
        Nonperforming
        Assets            49,750     56,010     49,520     27,148     27,996
    Accruing Loans
     90 Days or More
     Past Due             13,524     22,782     27,764     19,684      6,785
  Net Charge-Offs          5,373      5,092      4,642      3,898      5,000
  Net Charge-Offs to
   Average Loans           0.54%      0.53%      0.49%      0.43%      0.57%


  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)                            2005           2004
  Condensed Income Statements
    Loans Held for Investment                     $210,969       $157,259
    Securities                                      46,033         38,102
    Other Interest-Earning Assets                    1,362            765
       Total Interest Income                       258,364        196,126
    Deposits                                        72,249         42,261
    Other Borrowed Money                            10,976          5,207
       Total Interest Expense                       83,225         47,468
       Net Interest Income                         175,139        148,658
    Provision for Loan Losses                       19,928         14,813
    Service Charges - Deposits                      28,863         28,092
    Other Service Charges                            8,356          6,404
    Insurance Commission, Fees and Premiums          2,974          2,546
    Trust Service Fees                               5,636          3,845
    Net Realized Gains on Sales of
     Securities Available for Sale                     796          4,845
    Data Processing Service Fees                     6,931          6,330
    Loan Servicing Loss, Net                          (196)        (1,138)
    Other Noninterest Income                        12,252          2,010
       Total Noninterest Income                     65,612         52,934
    Salaries and Employee Benefits                  64,213         53,577
    Net Occupancy Expense                           10,905          8,608
    Equipment Expense                               10,448          9,184
    Other Real Estate Expense, Net                     952            636
    Amortization - Identifiable Intangibles          5,007          4,387
    Other Noninterest Expense, Net                  29,441         27,044
       Total Noninterest Expense                   120,966        103,436
    Income Before Income Tax Expense                99,857         83,343
    Income Tax Expense                              34,315         27,533
    Net Income                                     $65,542        $55,810

  Per Common Share Data
    Net Income-Basic                                 $1.32          $1.17
    Net Income-Diluted                                1.31           1.16
    Market Value at Period End                       28.79          31.09
    Book Value at Period End                         12.71          11.67
    Cash Dividends Declared                          0.340          0.266
  Share Data (in Thousands)
    Basic                                           49,608         47,659
    Diluted                                         49,879         48,196
  Shares Outstanding at Period End                  49,687         48,960

  Selected Financial Data
    Return on Average Assets                          1.43%          1.44%
    Return on Average Equity                         14.17          14.30
    Leverage Capital Ratio                            8.12           8.17
    Expense Efficiency Ratio (1)                     50.25          51.31
    TE Net Interest Income (2)                    $178,175       $151,432
    TE Adjustment (2)                                3,036          2,774
      Net Interest Income, as Reported            $175,139       $148,658
    TE Net Interest Margin (2)                        4.25%          4.30%
    Goodwill, Net                                 $192,729       $163,928
    Identifiable Intangibles, Net                   27,224         30,803
    Trust Assets Held, at Fair Value             1,806,229      1,420,664
    Full-Time Equivalent Employees                   1,976          1,914
  Condensed Balance Sheets
    Loans Held for Investment                   $3,965,628     $3,538,428
    Securities                                   1,757,143      1,513,536
    Other Interest-Earning Assets                   23,612         20,471
       Total Interest-Earning Assets             5,746,383      5,072,435
    Cash and Due from Banks                        138,986        138,860
    Premises and Equipment, Net                    147,084        131,443
    Other Assets, Net                              322,387        319,697
    Allowance for Loan Losses                      (51,368)       (43,153)
       Total Assets                             $6,303,472     $5,619,282
    Savings and Time Deposits                   $4,222,194     $3,721,681
    Other Borrowed Money                           499,177        437,970
       Total Interest-Bearing Liabilities        4,721,371      4,159,651
    Demand Deposits                                907,280        850,432
    Other Liabilities                               43,300         37,808
       Total Liabilities                         5,671,951      5,047,891
    Shareholders' Equity                           631,521        571,391
          Total Liabilities and Equity          $6,303,472     $5,619,282

  Condensed Average Balance Sheets
    Loans Held for Investment                   $3,888,498     $3,194,656
    Securities                                   1,673,531      1,480,947
    Other Interest-Earning Assets                   37,693         30,165
       Total Interest-Earning Assets             5,599,722      4,705,768
    Cash and Due from Banks                        133,316        124,028
    Premises and Equipment, Net                    141,242        122,554
    Other Assets, Net                              319,250        248,025
    Allowance for Loan Losses                      (48,683)       (40,680)
       Total Assets                             $6,144,847     $5,159,695
    Savings and Time Deposits                   $4,175,992     $3,561,721
    Other Borrowed Money                           415,773        281,007
       Total Interest-Bearing Liabilities        4,591,765      3,842,728
    Demand Deposits                                905,064        766,781
    Other Liabilities                               29,660         28,732
       Total Liabilities                         5,526,489      4,638,241
    Shareholders' Equity                           618,358        521,454
       Total Liabilities and Equity             $6,144,847     $5,159,695

  Nonperforming Assets & Past Due Loans
    Nonaccrual Loans                               $38,752        $16,610
    Restructured Loans                               1,804              -
    Foreclosed and Other Assets                      9,194         11,386
       Total Nonperforming Assets                   49,750         27,996
    Accruing Loans 90 Days or More Past Due         13,524          6,785
    Net Charge-Offs                                 15,107         11,690
    Net Charge-Offs to Average Loans                  0.52%          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.

  (1) Ratio of Noninterest Expense divided by the sum of Net Interest Income
      and Noninterest Income.
  (2) 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, [phone], both of Texas Regional 



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

Copyright