Texas United Bancshares Reports 2005 First Quarter Net Income of $2.8 Million, or $0.35 Per Diluted Share

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

Texas United Bancshares (NASDAQ:TXUI)
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Texas United Bancshares Reports 2005 First Quarter Net Income of $2.8 Million, or $0.35 Per Diluted Share LA GRANGE, Texas, April 26 /PRNewswire-FirstCall/ -- Texas United Bancshares, Inc. (NASDAQ:TXUI), a community banking organization located in central and south central Texas and in areas north and south of the Dallas-Fort Worth metroplex, reported net income for the first quarter of 2005 of $2.8 million, an increase of 79.0 percent compared with $1.6 million for the first quarter of 2004 and an increase of 96.1 percent compared with the $1.4 million for the fourth quarter of 2004. The increase in the first quarter of 2005 compared with the same period in 2004 is primarily due to the acquisitions of Community Home Loan, Inc., on February 5, 2004, the Central Bank branches on July 30, 2004, and GNB Bancshares, Inc., on October 1, 2004. In addition, the increase in net income is also attributed to an improvement in the net interest margin and an increase in non-interest income. Diluted earnings per share for the first quarter of 2005 were $0.35 compared with $0.37 and $0.18, respectively, for the first and fourth quarters of 2004. Per share results for the fourth quarter of 2004 and first 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. Weighted average diluted shares outstanding for the first quarter of 2005 were 7,968,000 compared with 4,193,000 weighted average diluted shares outstanding for the same period in 2004. Don Stricklin, President and CEO, commented, "We are extremely pleased with our first quarter results. We worked hard to assimilate our fourth quarter 2004 acquisition of GNB Bancshares, and we are very satisfied with our progress. GNB Financial, one of our two banking subsidiaries, was a strong performer this past quarter." Net interest income for the first quarter of 2005 was $12.5 million compared with $11.6 million for the fourth quarter of 2004, an increase of 8.1 percent, primarily due to a 2.5 percent increase in average earning assets as a result of the GNB Bancshares acquisition combined with a 35 basis point improvement in the net interest margin to 5.05 percent. Net interest income for the first quarter of 2004 was $6.7 million. Mr. Stricklin noted, "Our net interest income has benefited from our recent acquisition of GNB Bancshares, which contributed quality earning assets and low-cost core deposits, as well as strong loan volume over the previous two quarters and our ability to control deposit cost in our markets." Noninterest income for the first quarter of 2005 was $5.9 million, an increase of 26.8 percent compared with the $4.6 million for the fourth quarter of 2004. The $1.3 million improvement primarily reflects $550,000 premiums received on the sale of SBA loans, commissions on investment products, and service charges on deposit accounts. Noninterest expense was $13.4 million for the first quarter of 2005, unchanged from the fourth quarter of 2004. During the first quarter of 2005, Texas United announced the beginning of construction of three full-service banking centers, two in Bryan-College Station and one in Magnolia (part of the Houston metropolitan area), which are all scheduled for completion during the third quarter of 2005. Over the past five quarters, Texas United also expanded its mortgage banking activities and acquired GNB Bancshares and the two Central Bank branches. For the first quarter of 2005, the efficiency ratio improved to 73.42 percent compared with 82.94 percent for the fourth quarter of 2004. Net charge-offs were $476,000 for the first quarter of 2005, or 0.27 percent of average loans compared with $456,000, or 0.27 percent of average loans for the fourth quarter of 2004, and net recoveries of $50,000 or 0.01 percent of average loans for the first quarter of 2004. Nonperforming assets were 0.33 percent of total assets at March 31, 2005, compared with 0.33 percent at December 31, 2004 and 0.37 percent at March 31, 2004. The loan loss allowance was 0.96 percent of total loans at March 31, 2005. Total assets were $1.2 billion at March 31, 2005, up $38.8 million or 3.4 percent from December 31, 2004. Since year-end, loans have grown $32.2 million or 4.6 percent, with growth notably strong in the residential real estate sector (up $14.4 million or 7.5 percent) and the commercial real estate sector (up $9.8 million or 4.4 percent). While deposits have remained stable since December 31, 2004, Texas United utilized federal funds purchased to fund loan growth. Since year-end, non-interest bearing deposits increased $5.3 million or 2.8 percent. At March 31, 2005, non-interest bearing deposits represented 21.9 percent of total deposits compared with 21.3 percent at December 31, 2004. Shareholders' equity at March 31, 2005 was $104.2 million, a decrease of $752,000 or 0.7% from the $104.9 million at December 31, 2004. The decrease is attributed to an unrealized loss adjustment on available for sale securities in the first quarter of 2005 of $2.9 million and dividends payable of $624,000, partially offset by earnings retention of $2.8 million. About the Company 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., and offers a complete range of banking services through 20 full service State Bank banking centers located in the greater central and south central Texas areas and seven full service GNB Financial banking centers located in Cooke, Denton and Ellis counties in Texas. In addition, State Bank has 18 mortgage loan production offices located in Houston, San Antonio and Austin through the Bank and its wholly-owned subsidiary, Community Home Loan, Inc. 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 First Quarter 2005 Results TEXAS UNITED BANCSHARES CONSOLIDATED FINANCIAL HIGHLIGHTS (dollars in thousands, except per share data) (Unaudited) Quarterly 2005 2004 2004 2004 2004 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr EARNINGS Net interest income $12,505 $11,571 $8,191 $7,148 $6,664 Provision for loan losses 722 700 700 300 150 NonInterest income 5,851 4,616 5,008 4,667 3,904 NonInterest expense 13,439 13,426 10,289 9,196 8,150 Net income 2,802 1,429 1,561 1,495 1,565 Basic earnings per share 0.36 0.18 0.30 0.37 0.39 Diluted earnings per share 0.35 0.18 0.29 0.36 0.37 Weighted average basic shares outstanding (in 000's) 7,798 7,776 5,249 4,020 4,010 Weighted average diluted shares outstanding (in 000's) 7,968 7,953 5,421 4,200 4,193 PERFORMANCE RATIOS Return on average assets 0.97% 0.50% 0.76% 0.83% 0.97% Return on average equity 10.66% 5.40% 10.35% 15.75% 15.99% Net interest margin 5.05% 4.70% 4.42% 4.46% 4.63% Efficiency ratio 73.42% 82.94% 77.95% 78.01% 77.69% Full-time equivalent employees 557 522 409 377 369 CAPITAL Average equity to average assets 9.08% 9.34% 7.39% 5.30% 6.28% Tier 1 leverage capital ratio 7.10% 7.08% 9.07% 6.04% 6.46% Tier 1 risk-based capital ratio 9.96% 10.40% 13.53% 8.88% 9.61% Total risk-based capital ratio 10.83% 11.31% 14.39% 9.74% 10.56% Book value per share $13.35 $13.44 $12.43 $9.34 $10.17 Cash dividend per share 0.08 0.07 0.07 0.07 0.07 ASSET QUALITY Gross charge-offs $684 $621 $449 $392 $244 Net charge-offs (recoveries) 476 456 287 271 (50) Net charge-offs (recoveries) to average loans 0.27% 0.27% 0.24% 0.26% (0.01)% Allowance for loan losses $6,931 $6,685 $4,535 $4,122 $4,093 Allowance for loan losses to total loans 0.96% 0.96% 0.91% 0.95% 1.01% Nonperforming loans $3,208 $2,970 $1,978 $976 $2,073 Other real estate and repossessed assets 641 843 586 1,672 333 Nonperforming assets to total assets 0.33% 0.33% 0.31% 0.35% 0.37% END OF PERIOD BALANCES Loans $725,724 $693,548 $498,632 $435,128 $406,840 Total earning assets (before allowance) 1,035,947 999,194 754,385 676,414 589,071 Total assets 1,180,166 1,141,366 839,327 751,631 658,720 Deposits 880,306 880,075 688,899 567,440 536,749 Shareholders' equity 104,177 104,812 78,653 37,570 40,845 AVERAGE BALANCES Loans $699,763 $679,149 $476,826 $424,805 $391,820 Total earning assets (before allowance) 1,004,551 980,258 736,516 645,214 578,730 Total assets 1,157,872 1,128,209 811,834 716,168 650,610 Deposits 884,117 890,913 664,560 561,454 517,475 Shareholders' equity 105,190 105,320 59,999 37,960 39,373 Year ended December 31, 2004 2003 EARNINGS Net interest income $33,574 $26,223 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 000's) 5,264 3,984 Weighted average diluted shares outstanding (in 000's) 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 4.56% 4.81% 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 (recoveries) 964 2,303 Net charge-offs (recoveries) 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) 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) 735,847 544,778 Total assets 816,705 611,645 Deposits 639,850 486,441 Shareholders' equity 60,663 37,112 Texas United Bancshares First Quarter 2005 Results TEXAS UNITED BANCSHARES CONSOLIDATED STATEMENTS OF EARNINGS (dollars in thousands) THREE THREE MONTHS MONTHS ENDED ENDED YEAR ENDED YEAR ENDED March 31, March 31, December 31, December 31, 2005 2004 2004 2003 (Unaudited) (Unaudited) INTEREST INCOME Loans $14,105 $7,517 $37,710 $30,295 Investment securities 2,864 1,685 8,597 6,315 Federal funds sold 8 4 30 91 Total interest income 16,977 9,206 46,337 36,701 INTEREST EXPENSE Deposits 3,077 1,789 9,223 7,487 Federal funds purchased 196 14 194 128 Junior subordinated deferrable interest debentures 390 266 1,189 746 Borrowings 809 473 2,157 2,117 Total interest expense 4,472 2,542 12,763 10,478 Net interest income 12,505 6,664 33,574 26,223 Provision for loan losses 722 150 1,850 2,900 Net interest income after provision for loan losses 11,783 6,514 31,724 23,323 NONINTEREST INCOME Service charges on deposit accounts 1,834 1,597 6,931 6,753 Mortgage servicing revenue 296 208 888 2,247 Net (loss) gain on sales of securities (38) 77 114 1,244 Net gain on sale of loans from CHL, Inc. 1,642 1,238 7,452 - Other noninterest income 2,117 784 2,810 3,560 Total noninterest income 5,851 3,904 18,195 13,804 NONINTEREST EXPENSE Salaries and benefits 7,061 4,274 23,798 16,689 Occupancy 1,805 1,088 5,596 4,621 Other noninterest expense 4,573 2,788 11,667 8,682 Total noninterest expense 13,439 8,150 41,061 29,992 Earnings before provision for income tax expense 4,195 2,268 8,858 7,135 Provision for income tax expense 1,393 703 2,808 1,894 Net earnings $2,802 $1,565 $6,050 $5,241 Texas United Bancshares First Quarter 2005 Results TEXAS UNITED BANCSHARES CONSOLIDATED BALANCE SHEETS (dollars in thousands) March 31, December 31, 2005 2004 (Unaudited) ASSETS Cash and due from banks $34,334 $36,752 Federal funds sold 5,235 4,015 Total cash and cash equivalents 39,569 40,767 Securities available for sale, at fair value 304,988 301,631 Total loans, including loans held for sale 725,724 693,548 Allowance for loan losses (6,931) (6,685) Total loans, net 718,793 686,863 Premises and equipment, net 40,983 39,730 Accrued interest receivable 5,311 5,214 Goodwill 40,117 40,117 Core deposit intangibles, net 5,155 5,341 Mortgage servicing rights, net 4,740 4,698 Other assets 20,510 17,005 Total assets $1,180,166 $1,141,366 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing $192,727 $187,454 Interest-bearing 687,579 692,621 Total deposits 880,306 880,075 Securities sold under agreement to repurchase 5,243 6,291 Federal funds purchased 53,825 15,125 Junior subordinated deferrable interest debentures 17,520 17,520 Borrowings 107,593 105,940 Other liabilities 11,502 11,603 Total liabilities 1,075,989 1,036,554 SHAREHOLDERS' EQUITY Common stock 7,811 7,802 Additional paid-in capital 75,976 75,935 Retained earnings 24,099 21,921 Accumulated other comprehensive (loss) income (3,592) (729) Less treasury stock, at cost (117) (117) Total shareholders' equity 104,177 104,812 Total liabilities and shareholders' equity $1,180,166 $1,141,366 DATASOURCE: Texas United Bancshares, Inc. CONTACT: Tom Adams of Texas United Bancshares, Inc., +1-979-968-7261

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