Texas Regional Bancshares, Inc. Reports

Third Quarter Earnings

MCALLEN, TEXAS—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 (800) 289-0743 or can access the live webcast on the Internet at 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 (888) 203-1112; ID number 2945551. The webcast of the conference call will be archived on the Company’s website at 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® 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 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 (956) 631-5400.

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 www.trbsinc.com and the SEC’s website at www.sec.gov.

CONTACT: Glen E. Roney, Chief Executive Officer, or John A. Martin, Chief Financial Officer, at (956) 631-5400, both of Texas Regional.

Texas Regional Bancshares, Inc. and Subsidiaries

Financial Highlights (Unaudited)

	At / For Three Months Ended
(Dollars in Thousands, Except Per Share Data)	Sep 30, 2005			Jun 30, 2005			Mar 31, 2005			Dec 31, 2004			Sep 30, 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

	At / For Three Months Ended
(Dollars in Thousands, Except Per Share Data)	Sep 30, 2005			Jun 30, 2005			Mar 31, 2005			Dec 31, 2004			Sep 30, 2004
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

	At / For Nine Months Ended
(Dollars in Thousands,	Sep 30,			Sep 30,
Except Per Share Data)	2005			2004
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.