Texas United Bancshares Announces Third Quarter 2005 Earnings; Net Income Increases 72.3% and Diluted EPS Increases 17.2%

Share Name	Share Symbol	Market	Type
Texas United Bancshares	NASDAQ:TXUI	NASDAQ	Common Stock

Texas United Bancshares (NASDAQ:TXUI)
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Third Quarter 2005 Highlights: LA GRANGE, Texas, Nov. 8 /PRNewswire-FirstCall/ -- Texas United Bancshares, Inc. (NASDAQ:TXUI), a community banking organization and parent company of State Bank, La Grange, Texas and GNB Financial, n.a., Gainesville, Texas, today reported net income of $2.7 million for the third quarter ended September 30, 2005, an increase of $1.1 million or 72.3% compared with $1.6 million in the same quarter of 2004. Diluted earnings per share for the third quarter of 2005 were $0.34, up $0.05 or 17.2% compared with $0.29 per diluted share for the third quarter of 2004. The higher net income and diluted share earnings for the third quarter of 2005, compared with the same quarter of 2004, were primarily due to the effect of the acquisitions of the two Central Bank branches and GNB Bancshares, Inc. in the third and fourth quarters of 2004, in addition to internal growth and higher market interest rates on earning assets resulting in net interest margin improvement. The return on average tangible equity for the third quarter 2005 was 18.44%. Diluted earnings per share for the third quarter of 2005 reflect the sale of 2,300,000 shares of common stock through a public offering in August 2004 and the issuance of approximately 1,457,000 shares in connection with the acquisition of GNB Bancshares, Inc. in October 2004. The weighted average diluted shares outstanding for the third quarter of 2005 were approximately 7,979,000 compared with 5,421,000 for the same quarter of 2004. Net income for the nine months ended September 30, 2005 was $8.1 million, an increase of $3.5 million or 75.4% compared with $4.6 million for the same period in 2004. Diluted earnings per share for the nine months ended September 30, 2005 were $1.02, up $0.02 per diluted share compared with the same period in 2004. The higher net income and diluted share earnings for the nine months ended September 30, 2005, compared with the same period in 2004, were primarily due to the effect of the 2004 acquisitions, higher market interest rates and increased gains on sales of mortgage loans. The diluted per share results for the nine months ended September 30, 2005 were also affected by the above-mentioned issuance of common stock. The weighted average diluted shares outstanding for the nine months ended September 30, 2005 were approximately 7,965,000 compared with 4,605,000 for the same period in 2004. Don Stricklin, President and CEO of Texas United Bancshares, Inc., commented, "Our third quarter results reflect our continued efforts with our strategic expansion and we were pleased to announce our pending acquisition of The Express Bank of Texas which will enhance our market share in the Austin- metro area. The acquisition of Gateway Holding Company, Inc. is scheduled to close in the fourth quarter of 2005, pending shareholder approval, further enhancing our presence in the north Texas market. Our recent expansions have required us to enhance our back office operations and we have added experienced staff and technology accordingly; positioning our infrastructure for future growth." Net interest income, before the provision for loan losses, for the third quarter ended September 30, 2005 was $13.7 million, up $5.7 million or 71.7% compared with $8.0 million for the same quarter in 2004. The net interest margin for the third quarter ended September 30, 2005 was 4.85%, up 52 basis points compared with 4.33% for the same quarter in 2004. Net interest income, before the provision for loan losses, for the nine months ended September 30, 2005 was $38.2 million, up $16.9 million or 79.5% compared with $21.3 million for the same period in 2004. The net interest margin for the nine months ended September 30, 2005 was 4.81%, up 46 basis points compared with 4.35% for the same period in 2004. The net interest margin for both periods benefited from the gradual increase in short-term market interest rates over the past twelve to fifteen months. The increases in net interest income and the improved net interest margins for both periods were primarily the result of additional interest income earned on larger earning-asset volumes coupled with higher earning-asset yields that were partially offset by additional interest expense on a higher volume of interest-bearing liabilities coupled with higher interest rates paid for those funding sources. Noninterest income for the third quarter ended September 30, 2005 was $6.4 million, up $1.2 million or 23.7% compared with $5.2 million for the same quarter of 2004. Noninterest income for the nine months ended September 30, 2005 was $18.9 million, up $4.6 million or 32.4% compared with $14.3 million for the same period in 2004. The increases in both periods were primarily the result of increased fees collected on additional loan and deposit accounts as a result of the 2004 acquisitions and internal growth. The increased gains on sales of mortgage loans for the nine months ended September 30, 2005 was primarily the result of increased mortgage banking activities and higher mortgage loan origination volumes. Noninterest expense for the third quarter ended September 30, 2005 was $15.2 million, an increase of $4.9 million or 47.8% compared with $10.3 million for the same quarter in 2004. Noninterest expense for the nine months ended September 30, 2005 was $42.3 million, up $14.6 million or 53.0% compared with $27.6 million for the same period in 2004. The increase in both periods reflect the impact of Texas United's expansion activities over the past six quarters, including additional staffing to handle expanded back office operations, professional fees related to compliance and acquisition projects, the construction of three full-service banking centers, expanded mortgage banking activities, the acquisition of GNB Bancshares, Inc. and the acquisition of the two Central Bank branches. For the third quarter of 2005, the efficiency ratio was 75.12%, an improvement of 283 basis points compared with 77.95% for the same quarter in 2004. For the nine months ended September 30, 2005 the efficiency ratio was 73.73%, an improvement of 394 basis points compared with 77.67% for the same period in 2004. Nonperforming assets at September 30, 2005 were $6.1 million or 0.49% of total assets, compared with $2.6 million or 0.31% of total assets at September 30, 2004. Net charge-offs for the third quarter of 2005 were $584,000 or 0.28% of average loans, compared with $287,000 or 0.24% of average loans at September 30, 2004. The allowance for loan losses at September 30, 2005 was $7.8 million or 0.92% of total loans. Total assets at September 30, 2005 were $1.3 billion, up $114.2 million or 10.0% compared with $1.1 billion at December 31, 2004. Total investment securities at September 30, 2005 were $248.2 million, down $53.4 million or 17.7% compared with $301.6 million at December 31, 2004. Total loans at September 30, 2005 were $847.9 million, up $154.3 million or 22.2% compared with $693.5 million at December 31, 2004. Total deposits at September 30, 2005 were $880.7 million, up $653,000 or 0.07% compared with $880.1 million at December 31, 2004. Total borrowings at September 30, 2005 were $227.9 million, up $121.9 million or 115.1% compared with $105.9 million at December 31, 2004. Loan growth during the nine months ended September 30, 2005 was primarily funded by bank borrowings as deposit growth has softened due to increased competition. Shareholders' equity at September 30, 2005 was $109.0 million, an increase of $4.2 million or 4.0% compared with $104.8 million at December 31, 2004. Outstanding shares at September 30, 2005 (period-end) were 7,845,472. Texas United Bancshares, Inc. is a registered financial holding company listed on the NASDAQ National Market under the symbol "TXUI". Texas United operates through two wholly-owned subsidiary banks, State Bank and GNB Financial, n.a., which offer a complete range of banking services through 29 full-service banking centers located in central and south central Texas and in areas north and south of the Dallas-Fort Worth metroplex. In addition, State Bank operates four loan production offices and 13 limited service branches located in Houston, San Antonio and Austin. Forward-Looking Statements: Except for historical information, certain of the matters discussed in this news release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, including, but not limited to, the following: general business and economic conditions in the markets Texas United serves may be less favorable than expected which could decrease the demand for loan, deposit and other financial services and increase loan delinquencies and defaults; changes in the interest rate environment which could reduce Texas United's net interest margin; acquisition integration may be more difficult than anticipated; legislative or regulatory developments including changes in laws concerning taxes, banking, securities, insurance and other aspects of the financial securities industry; competitive factors may increase, including product and pricing pressures among financial services organizations; and changes in accounting principles, policies or guidelines. All written or oral forward-looking statements are expressly qualified in their entirety by these cautionary statements. Please also read the additional risks and factors described from time to time in Texas United's reports and registration statements filed with the Securities and Exchange Commission. We disclaim any obligation to update or revise any forward-looking statements contained in this release. TEXAS UNITED BANCSHARES. INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands) Sept. 30, Dec. 31, 2005 2004 2004 (Unaudited) ASSETS Cash and due from banks $41,282 $19,196 $36,752 Federal funds sold 6,600 --- 4,015 Total cash and cash equivalents 47,882 19,196 40,767 Securities available for sale, at fair value 223,668 255,753 301,631 Securities held to maturity, at cost 24,563 --- --- Total loans, including loans held for sale 847,861 498,632 693,548 Allowance for loan losses (7,835) (4,535) (6,685) Total loans, net 840,026 494,097 686,863 Premises and equipment, net 43,807 29,196 39,730 Accrued interest receivable 6,207 3,559 5,214 Goodwill 39,835 17,537 40,117 Core deposit intangibles, net 4,783 316 5,341 Mortgage servicing rights, net 4,834 4,769 4,698 Other assets 19,917 14,904 17,005 Total assets $1,255,522 $839,327 $1,141,366 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing $217,638 $126,107 $187,454 Interest-bearing 663,090 562,792 692,621 Total deposits 880,728 688,899 880,075 Securities sold under agreement to repurchase 6,698 8,900 6,291 Federal funds purchased --- 973 15,125 Junior subordinated deferrable interest debentures 17,520 12,365 17,520 Borrowings 227,882 39,925 105,940 Other liabilities 13,708 9,612 11,603 Total liabilities 1,146,536 760,674 1,036,554 SHAREHOLDERS' EQUITY Common stock 7,851 6,336 7,802 Additional paid-in capital 76,171 51,007 75,935 Retained earnings 28,149 21,037 21,921 Accumulated other comprehensive (loss) income (3,068) 390 (729) Less treasury stock, at cost (117) (117) (117) Total shareholders' equity 108,986 78,653 104,812 Total liabilities and shareholders' equity $1,255,522 $839,327 $1,141,366 TEXAS UNITED BANCSHARES, INC. CONSOLIDATED STATEMENTS OF EARNINGS (Dollars in thousands, except per share data) For the For the Three For the Nine Year Months Ended Months Ended Ended Sept. 30, Sept. 30, Dec. 31, 2005 2004 2005 2004 2004 (Unaudited) INTEREST INCOME Loans $17,079 $8,966 $45,452 $23,956 $36,822 Investment securities - taxable 2,356 2,227 7,994 5,639 8,161 Investment securities - tax-exempt 296 97 529 292 436 Federal funds sold and other temporary investments 144 7 58 14 30 Total interest income 19,875 11,297 54,033 29,901 45,449 INTEREST EXPENSE Deposits 3,499 2,320 9,927 6,144 9,223 Federal funds purchased 378 57 851 119 194 Junior subordinated deferrable interest debentures 391 266 1,171 798 1,189 Borrowings 1,853 643 3,840 1,535 2,157 Total interest expense 6,121 3,286 15,789 8,596 12,763 Net interest income 13,754 8,011 38,244 21,305 32,686 Provision for loan losses 1,035 700 2,798 1,150 1,850 Net interest income after provision for loan losses 12,719 7,311 35,446 20,155 30,836 NONINTEREST INCOME Service charges on deposit accounts 2,398 1,869 6,696 5,196 6,931 Mortgage servicing revenue 358 217 917 715 888 Net (loss) gain on sale of securities (63) 19 (184) 167 114 Net gain on sale of loans 2,521 2,544 7,496 6,204 9,213 Other noninterest income 1,206 539 3,984 1,995 1,937 Total noninterest income 6,420 5,188 18,909 14,277 19,083 NONINTEREST EXPENSE Salaries and benefits 9,492 5,664 24,733 15,660 23,798 Occupancy 1,986 1,214 5,786 3,419 5,596 Other noninterest expense 3,724 3,411 11,754 8,556 11,667 Total noninterest expense 15,202 10,289 42,273 27,635 41,061 Earnings before provision for income tax expense 3,937 2,210 12,082 6,797 8,858 Provision for income tax expense 1,247 649 3,978 2,176 2,808 Net earnings $2,690 $1,561 $8,104 $4,621 $6,050 Earnings per common share: Basic $0.34 $0.30 $1.04 $1.04 $1.15 Diluted $0.34 $0.29 $1.02 $1.00 $1.11 Dividends per common share $0.28 Weighted average shares outstanding - basic 7,815 5,249 7,806 4,427 5,264 Weighted average shares outstanding - diluted 7,979 5,421 7,965 4,605 5,442 TEXAS UNITED BANCSHARES, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Dollars in thousands, except per share data) Quarterly 2005 2005 2005 2004 2004 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr (Unaudited) EARNINGS Net interest income $13,754 $12,942 $12,059 $11,381 $8,011 Provision for loan losses 1,035 1,041 722 700 700 Noninterest income 6,420 5,246 6,297 4,806 5,118 Noninterest expense 15,202 13,197 13,439 13,426 10,289 Net income 2,690 2,612 2,802 1,429 1,561 Basic earnings per share $0.34 $0.33 $0.36 $0.18 $0.30 Diluted earnings per share $0.34 $0.33 $0.35 $0.18 $0.29 Weighted average basic shares outstanding (in 000s) 7,815 7,805 7,798 7,776 5,249 Weighted average diluted shares outstanding (in 000s) 7,979 7,964 7,968 7,953 5,421 PERFORMANCE RATIOS Return on average assets 0.84% 0.86% 0.97% 0.50% 0.76% Return on average equity 10.01% 9.88% 10.66% 5.40% 10.35% Net interest margin 4.85% 4.88% 4.87% 4.64% 4.33% Efficiency ratio 75.12% 73.02% 73.42% 82.94% 77.95% Full-time equivalent employees 573 595 557 522 409 CAPITAL Average equity to average assets 8.41% 8.75% 9.08% 9.34% 7.39% Tier 1 leverage capital ratio 6.92% 6.97% 7.10% 7.08% 9.07% Tier 1 risk-based capital ratio 9.14% 9.61% 9.96% 10.40% 13.53% Total risk-based capital ratio 9.99% 10.48% 10.83% 11.31% 14.39% Book value per share $13.89 $13.75 $13.35 $13.44 $12.43 Cash dividend per share $0.08 $0.08 $0.08 $0.07 $0.07 ASSET QUALITY Gross charge-offs $833 $857 $684 $621 $449 Net charge-offs $584 $589 $476 $456 $287 Net charge-offs to average loans 0.28% 0.30% 0.27% 0.27% 0.24% Allowance for loan losses $7,835 $7,383 $6,931 $6,685 $4,535 Allowance for loan losses to total loans 0.92% 0.94% 0.96% 0.96% 0.91% Nonperforming loans $4,953 $4,765 $3,208 $2,970 $1,978 Other real estate and repossessed assets $1,167 $896 $641 $843 $586 Nonperforming assets to total assets 0.49% 0.46% 0.33% 0.33% 0.31% END OF PERIOD BALANCES Loans $847,861 $786,675 $725,724 $693,548 $498,632 Total earning assets (before allowance for loan losses) 1,102,692 1,084,723 1,035,947 999,194 754,385 Total assets 1,255,522 1,242,003 1,180,166 1,141,366 839,327 Deposits 880,728 902,356 880,306 880,075 688,899 Shareholders' equity 108,986 107,445 104,177 104,812 78,653 AVERAGE BALANCES Loans $822,938 $754,879 $699,763 $679,149 $476,826 Total earning assets (before allowance for loan losses) 1,124,095 1,063,221 1,004,551 980,258 736,516 Total assets 1,267,287 1,212,045 1,157,872 1,128,209 811,834 Deposits 885,055 895,889 884,117 890,913 664,560 Shareholders' equity 106,598 106,065 105,190 105,320 59,999 TEXAS UNITED BANCSHARES, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Continued) (Dollars in thousands, except per share data) Year ended December 31, 2004 2003 EARNINGS Net interest income $32,686 $24,172 Provision for loan losses 1,850 2,900 Noninterest income 18,195 13,804 Noninterest expense 41,061 29,992 Net income 6,050 5,241 Basic earnings per share $1.15 $1.31 Diluted earnings per share $1.11 $1.26 Weighted average basic shares outstanding (in 000s) 5,264 3,984 Weighted average diluted shares outstanding (in 000s) 5,442 4,149 PERFORMANCE RATIOS Return on average assets 0.74% 0.86% Return on average equity 9.97% 14.12% Net interest margin 4.44% 4.44% Efficiency ratio 79.49% 77.33% Full-time equivalent employees 522 313 CAPITAL Average equity to average assets 7.43% 6.07% Tier 1 leverage capital ratio 7.08% 6.46% Tier 1 risk-based capital ratio 10.40% 9.54% Total risk-based capital ratio 11.31% 10.47% Book value per share $13.44 $9.49 Cash dividend per share $0.28 $0.28 ASSET QUALITY Gross charge-offs $1,706 $3,238 Net charge-offs $964 $2,303 Net charge-offs to average loans 0.19% 0.61% Allowance for loan losses $6,685 $3,893 Allowance for loan losses to total loans 0.96% 1.01% Nonperforming loans $2,970 $1,988 Other real estate and repossessed assets $843 $273 Nonperforming assets to total assets 0.33% 0.35% END OF PERIOD BALANCES Loans $693,548 $384,331 Total earning assets (before allowance for loan losses) 999,194 568,878 Total assets 1,141,366 637,684 Deposits 880,075 501,136 Shareholders' equity 104,812 37,987 AVERAGE BALANCES Loans $493,490 $376,988 Total earning assets (before allowance for loan losses) 735,847 544,778 Total assets 816,705 611,645 Deposits 639,850 486,441 Shareholders' equity 60,663 37,112 TEXAS UNITED BANCSHARES, INC. CONSOLIDATED YIELD/RATE ANALYSIS (Unaudited) For the Three Months Ended September 30, 2005 2004 Average Interest Average Average Interest Average Outstanding Earned / Yield / Outstanding Earned / Yield / Balance Paid Rate Balance Paid Rate (Dollars in Thousands) ASSETS Interest- earning assets: Total loans $822,938 $17,079 8.23% $476,826 $8,966 7.48% Taxable securities 271,008 2,483 3.63% 248,203 2,227 3.57% Tax-exempt securities 28,419 296 4.13% 8,687 97 4.44% Federal funds sold 1,730 17 3.90% 2,800 7 0.99% Total interest- earning assets 1,124,095 19,875 7.01% 736,516 11,297 6.10% Less: allowance for loan losses (ALL) (7,391) (4,253) Total interest- earning assets, net of ALL 1,116,704 732,263 Noninterest- earning assets 150,583 79,571 Total assets $1,267,287 $811,834 LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities: Interest- bearing demand deposits $204,378 $646 1.25% $196,222 $665 1.35% Saving and money market accounts 153,559 507 1.31% 115,974 351 1.20% Time deposits 316,919 2,346 2.94% 219,076 1,304 2.37% Federal funds purchased 36,502 378 4.11% 7,568 57 3.00% Junior subordinated deferrable interest debentures 17,520 391 8.85% 12,365 266 8.56% Other borrowings 209,111 1,853 3.52% 60,126 643 4.25% Total interest- bearing liabilities 937,989 6,121 2.59% 611,331 3,286 2.14% Noninterest- bearing liabilities: Noninterest- bearing demand deposits 209,065 133,288 Other liabilities 13,635 7,216 Total liabilities 1,160,689 751,835 Shareholders' equity 106,598 59,999 Total liabilities and shareholders' equity $1,267,287 $811,834 Net interest income $13,754 $8,011 Net interest spread 4.43% 3.96% Net interest margin 4.85% 4.33% TEXAS UNITED BANCSHARES, INC. CONSOLIDATED YIELD/RATE ANALYSIS (Unaudited) For the Nine Months Ended September 30, 2005 2004 Average Interest Average Average Interest Average Outstanding Earned / Yield / Outstanding Earned / Yield / Balance Paid Rate Balance Paid Rate (Dollars in Thousands) ASSETS Interest- earning assets: Total loans $759,217 $45,452 8.00% $431,255 $23,956 7.42% Taxable securities 285,426 7,994 3.74% 212,208 5,639 3.55% Tax-exempt securities 16,604 529 4.26% 8,729 292 4.47% Federal funds sold 2,468 58 3.14% 1,887 14 0.99% Total interest- earning assets 1,063,715 54,033 6.79% 654,079 29,901 6.11% Less: allowance for loan losses (ALL) (7,079) (4,061) Total interest- earning assets, net of ALL 1,056,636 650,018 Noninterest- earning assets 155,765 75,432 Total assets $1,212,401 $725,450 LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities: Interest- bearing demand deposits $220,908 $2,134 1.29% $173,328 $1,617 1.25% Saving and money market accounts 156,829 1,468 1.25% 100,410 838 1.11% Time deposits 310,286 6,325 2.73% 200,184 3,689 2.46% Federal funds purchased 30,410 851 3.74% 9,887 119 1.61% Junior subordinated deferrable interest debentures 17,520 1,171 8.94% 12,365 798 8.62% Other borrowings 152,067 3,840 3.38% 69,222 1,535 2.96% Total interest- bearing liabilities 888,020 15,789 2.38% 565,396 8,596 2.03% Noninterest- bearing liabilities: Noninterest- bearing demand deposits 200,351 112,010 Other liabilities 18,079 2,113 Total liabilities 1,106,450 679,519 Shareholders' equity 105,951 45,931 Total liabilities and shareholders' equity $1,212,401 $725,450 Net interest income $38,244 $21,305 Net interest spread 4.41% 4.08% Net interest margin 4.81% 4.35% DATASOURCE: Texas United Bancshares, Inc. CONTACT: Jeffrey A. Wilkinson, Executive Vice President and Chief Financial Officer of Texas United Bancshares, Inc., +1-979-968-8451, or

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