TXUI Texas United Bancshares

Highlights of second quarter performance include: LA GRANGE, Texas, Aug. 2 /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, reported net income for the second quarter of 2005 of $2.6 million, an increase of 74.7 percent compared with $1.5 million for the second quarter of 2004 and a decline of 6.8 percent compared with the $2.8 million reported for the first quarter of 2005. The second quarter year-over-year increase was primarily due to the acquisition of the two Central Bank branches on July 30, 2004, and GNB Bancshares, Inc. on October 1, 2004, as well as improvement in the net interest margin. Diluted earnings per share for the second quarter of 2005 were $0.33 compared with $0.36 for the second quarter of 2004 and $0.35 for the first quarter of 2005. Per share results 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 second quarter of 2005 were 7,964,000, compared with 4,200,000 for prior year quarter and 7,968,000 for the first quarter of this year. For the first six months of 2005, the Company reported net income of $5.4 million, an increase of 77.0 percent compared with $3.1 million for the first six months of 2004. The increase reflects the acquisitions of GNB Bancshares, the Central Bank branches and Community Home Loan, Inc. Diluted earnings per share for the first six months of 2005 were $0.68 compared with $0.73 for the same period in 2004. Per share results were affected by the above-mentioned issuance of stock; weighted average diluted shares outstanding for the first six months of 2005 were 7,966,000 compared with 4,197,000 weighted average diluted shares outstanding for the same period in 2004. Don Stricklin, President and CEO of Texas United, commented, "Our expansion initiatives continue. Through a combination of acquisitions and organic growth, we have selectively increased our presence in targeted suburban metro markets with some of the strongest demographics in Texas: Dallas, Houston, Austin and San Antonio. "Our pending acquisition of Gateway Holding Company, Inc. is progressing well. Gateway's six banking locations in the Dallas market will complement GNB's seven full-service banking offices in the Dallas/Fort Worth metroplex and substantially expand our presence in this attractive market. The transaction is expected to be completed during the fourth quarter of 2005." Net interest income for the second quarter of 2005 was $14.3 million compared with $7.1 million for the same quarter in 2004 and $12.5 million for the first quarter of 2005. This represents increases of 101.4 percent and 14.4 percent, respectively. The previous quarter comparison reflects a 5.8 percent increase in average earning assets combined with a 34 basis point improvement in the net interest margin to 5.39 percent. Much of the improvement in the linked quarter net interest income is the result of the merger of Community Home Loan into State Bank as of April 30, 2005. Prior to the merger, gains on the sale of loans originated by Community were recorded as noninterest income. Subsequent to the merger, these fees have been recorded as loan fee income, and will continue to be recorded as loan fee income going forward. The impact of this change for the current quarter was $864,000. Noninterest income for the second quarter of 2005 was $3.9 million compared with $5.9 million for the first quarter of 2005 and $4.7 million for the second quarter of 2004. The previous quarter difference reflects lower service charges on deposit accounts coupled with the aforementioned impact on income generated on the sale of loans associated with the merger of Community Home Loan into State Bank. Overall, noninterest expense has been stable since the acquisition of GNB Bancshares was consummated, despite the addition of 73 FTE employees since the beginning of the year. Noninterest expense for the current quarter was $13.2 million, a decline of $0.2 million from the $13.4 million reported for the first quarter of 2005. Compared with the year-ago quarter, noninterest expense rose by $4.0 million or 43.5 percent, reflecting the impact of Texas United's expansion activities over the past four quarters, including: (i) Construction of three full-service banking centers, two in Bryan-College Station, Texas and one in Magnolia, Texas (part of the Houston metropolitan area), which are all scheduled for completion during the third quarter of 2005; (ii) expanded mortgage banking activities and the conversion of ten mortgage offices to limited service branches of State Bank; (iii) the acquisition of GNB Bancshares and (iv) the acquisition of two Central Bank branches. For the second quarter of 2005, the efficiency ratio improved to 73.02 percent compared with 73.42 percent for the first quarter of 2005 and 78.01 percent for the second quarter of 2004. Asset quality remains strong, despite an increase in nonperforming assets. Net charge-offs were $589,000 for the second quarter of 2005, or an annualized 0.31 percent of average loans, compared with $476,000 for the first quarter of 2005, or an annualized 0.27 percent of average loans and $271,000, or an annualized 0.26 percent of average loans for the second quarter of 2004. Nonperforming assets were 0.46 percent of total assets at June 30, 2005, compared with 0.33 percent of total assets at March 31, 2005, and 0.35 percent at June 30, 2004. The loan loss allowance was 0.94 percent of total loans at June 30, 2005. Total assets were $1.2 billion at June 30, 2005, up $101.0 million or 8.9 percent from year-end 2004. Since December 31, 2004, loans have grown $93.1 million or 13.4 percent, with growth notably strong in the residential real estate sector (up $45.7 million or 23.7 percent) and the commercial real estate sector (up $26.4 million or 11.8 percent). Deposits increased $22.3 million, or 2.5 percent, from December 31, 2004 to $902.4 million. In particular, noninterest bearing deposits rose $24.9 million or 13.3 percent during that six-month time period, and now comprise 23.6 percent of total deposits. The remainder of loan growth was funded by increased borrowings. Shareholders' equity at June 30, 2005 was $107.4 million, an increase of $3.3 million or 3.1 percent from $104.2 million at March 31, 2005. The risk- based capital ratio was a strong 10.48 percent. Shares outstanding at period- end were 7,805,372. 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., which offer a complete range of banking services through 27 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 through State Bank and Community Home Loan. 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 FINANCIAL HIGHLIGHTS (dollars in thousands, except per share data) (Unaudited) Quarterly 2005 2004 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr EARNINGS Net interest income $14,291 $12,505 $11,571 $8,191 $7,148 Provision for loan losses 1,041 722 700 700 300 NonInterest income 3,897 5,851 4,616 5,008 4,667 NonInterest expense 13,197 13,439 13,426 10,289 9,196 Net income 2,612 2,802 1,429 1,561 1,495 Basic earnings per share 0.33 0.36 0.18 0.30 0.37 Diluted earnings per share 0.33 0.35 0.18 0.29 0.36 Weighted average basic shares outstanding (in 000's) 7,805 7,798 7,776 5,249 4,020 Weighted average diluted shares outstanding (in 000's) 7,964 7,968 7,953 5,421 4,200 PERFORMANCE RATIOS Return on average assets 0.86% 0.97% 0.50% 0.76% 0.83% Return on average equity 9.88% 10.66% 5.40% 10.35% 15.75% Net interest margin 5.39% 5.05% 4.70% 4.42% 4.46% Efficiency ratio 73.02% 73.42% 82.94% 77.95% 78.01% Full-time equivalent employees 595 557 522 409 377 CAPITAL Average equity to average assets 8.75% 9.08% 9.34% 7.39% 5.30% Tier 1 leverage capital ratio 6.97% 7.10% 7.08% 9.07% 6.04% Tier 1 risk-based capital ratio 9.61% 9.96% 10.40% 13.53% 8.88% Total risk-based capital ratio 10.48% 10.83% 11.31% 14.39% 9.74% Book value per share $13.75 $13.35 $13.44 $12.43 $9.34 Cash dividend per share 0.08 0.08 0.07 0.07 0.07 ASSET QUALITY Gross charge-offs $857 $684 $621 $449 $392 Net charge-offs 589 476 456 287 271 Net charge-offs to average loans 0.31% 0.27% 0.27% 0.24% 0.26% Allowance for loan losses $7,383 $6,931 $6,685 $4,535 $4,122 Allowance for loan losses to total loans 0.94% 0.96% 0.96% 0.91% 0.95% Nonperforming loans $4,765 $3,208 $2,970 $1,978 $976 Other real estate and repossessed assets 896 641 843 586 1,672 Nonperforming assets to total assets 0.46% 0.33% 0.33% 0.31% 0.35% END OF PERIOD BALANCES Loans $786,675 $725,724 $693,548 $498,632 $435,128 Total earning assets (before allowance) 1,084,723 1,035,947 999,194 754,385 676,414 Total assets 1,242,003 1,180,166 1,141,366 839,327 751,631 Deposits 902,356 880,306 880,075 688,899 567,440 Shareholders' equity 107,445 104,177 104,812 78,653 37,570 AVERAGE BALANCES Loans $754,879 $699,763 $679,149 $476,826 $424,805 Total earning assets (before allowance) 1,063,221 1,004,551 980,258 736,516 645,214 Total assets 1,212,045 1,157,872 1,128,209 811,834 716,168 Deposits 895,889 884,117 890,913 664,560 561,454 Shareholders' equity 106,065 105,190 105,320 59,999 37,960 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 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) 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 Second Quarter 2005 Results TEXAS UNITED BANCSHARES CONSOLIDATED STATEMENTS OF EARNINGS (dollars in thousands) THREE THREE SIX SIX MONTHS MONTHS MONTHS MONTHS YEAR ENDED ENDED ENDED ENDED ENDED June 30, June 30, June 30, June 30, December 31, 2005 2004 2005 2004 2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) INTEREST INCOME Loans $16,189 $7,991 $30,294 $15,508 $37,710 Investment securities 2,907 1,922 5,771 3,607 8,597 Federal funds sold 31 3 39 7 30 Total interest income 19,127 9,916 36,104 19,122 46,337 INTEREST EXPENSE Deposits 3,376 2,035 6,473 3,824 9,223 Federal funds purchased 331 48 507 62 194 Junior subordinated deferrable interest debentures 391 266 781 532 1,189 Borrowings 738 419 1,547 892 2,157 Total interest expense 4,836 2,768 9,308 5,310 12,763 Net interest income 14,291 7,148 26,796 13,812 33,574 Provision for loan losses 1,041 300 1,763 450 1,850 Net interest income after provision for loan losses 13,250 6,848 25,033 13,362 31,724 NONINTEREST INCOME Service charges on deposit accounts 1,978 2,228 3,812 3,825 6,931 Mortgage servicing revenue 263 290 559 498 888 Net (loss) gain on sales of securities (84) 71 (122) 148 114 Net gain on sale of loans 1,036 1,238 3,180 3,142 7,452 Other noninterest income 704 840 2,319 958 2,810 Total noninterest income 3,897 4,667 9,748 8,571 18,195 NONINTEREST EXPENSE Salaries and benefits 8,180 5,722 15,241 9,996 23,798 Occupancy 1,970 1,117 3,775 2,205 5,596 Other noninterest expense 3,047 2,357 7,620 5,145 11,667 Total noninterest expense 13,197 9,196 26,636 17,346 41,061 Earnings before provision for income tax expense 3,950 2,319 8,145 4,587 8,858 Provision for income tax expense 1,338 824 2,731 1,527 2,808 Net earnings $2,612 $1,495 $5,414 $3,060 $6,050 Texas United Bancshares Second Quarter 2005 Results TEXAS UNITED BANCSHARES CONSOLIDATED BALANCE SHEETS (dollars in thousands) June 30, June 30, December 31, 2005 2004 2004 (Unaudited) (Unaudited) ASSETS Cash and due from banks $36,927 $18,501 $36,752 Federal funds sold 4,085 --- 4,015 Total cash and cash equivalents 41,012 18,501 40,767 Securities available for sale, at fair value 291,631 241,286 301,631 Securities held to maturity, at cost 12,825 --- --- Total loans, including loans held for sale 786,675 435,128 693,548 Allowance for loan losses (7,383) (4,122) (6,685) Total loans, net 779,292 431,006 686,863 Premises and equipment, net 42,288 28,005 39,730 Accrued interest receivable 6,114 3,489 5,214 Goodwill 40,117 9,573 40,117 Core deposit intangibles, net 4,969 341 5,341 Mortgage servicing rights, net 4,738 4,790 4,698 Other assets 19,017 14,640 17,005 Total assets $1,242,003 $751,631 $1,141,366 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing $212,516 $107,597 $187,454 Interest-bearing 689,840 459,843 692,621 Total deposits 902,356 567,440 880,075 Securities sold under agreement to repurchase 6,367 7,957 6,291 Federal funds purchased 31,921 33,037 15,125 Junior subordinated deferrable interest debentures 17,520 12,365 17,520 Borrowings 164,529 87,330 105,940 Other liabilities 11,865 5,932 11,603 Total liabilities 1,134,558 714,061 1,036,554 SHAREHOLDERS' EQUITY Common stock 7,811 4,031 7,802 Additional paid-in capital 75,978 17,155 75,935 Retained earnings 26,087 19,919 21,921 Accumulated other comprehensive (loss) income (2,314) (3,418) (729) Less treasury stock, at cost (117) (117) (117) Total shareholders' equity 107,445 37,570 104,812 Total liabilities and shareholders' equity $1,242,003 $751,631 $1,141,366 DATASOURCE: Texas United Bancshares, Inc. CONTACT: Jeff Wilkinson of Texas United Bancshares, Inc., +1-979-968-7230

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