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Texas Regional Bancshares Inc – ‘425’ on 10/20/04 re: Valley Mortgage Co, Inc.

On:  Wednesday, 10/20/04, at 11:49am ET   ·   As of:  10/18/04   ·   Accession #:  1047469-4-31424   ·   File #:  132-02284

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

10/18/04  Texas Regional Bancshares Inc     425        10/20/04    1:195K Valley Mortgage Co, Inc.          Merrill Corp/New/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 425         Business-Combination Transaction Communication      HTML    188K 

Filed by Texas Regional Bancshares, Inc. Pursuant to Rule 425
Under the Securities Act of 1933
And Deemed Filed Pursuant to Rule 14a-12
Under the Securities Exchange Act of 1934

Subject Company: Valley Mortgage Company
Commission File No. 333-118564

On October 18, 2004, Texas Regional Bancshares, Inc. issued a press release announcing third quarter 2004 earnings. The text of the press release follows:

FOR IMMEDIATE RELEASE October 18, 2004

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 2004 of $19,821,000, or $0.40 per diluted common share, compared to $15,569,000, or $0.35 per diluted common share, for the comparable 2003 period. Return on assets and return on shareholders' equity averaged 1.43 percent and 14.10 percent, respectively, compared to 1.51 percent and 15.09 percent, respectively, for the corresponding 2003 period.

        For the nine months ended September 30, 2004, net income totaled $55,810,000, or $1.16 per diluted common share, compared to $46,365,000, or $1.04 per diluted common share, for the corresponding 2003 period. Return on assets and return on shareholders' equity averaged 1.44 percent and 14.30 percent, respectively for the nine months ended September 30, 2004, compared to 1.55 percent and 15.50 percent, respectively, for the matching 2003 period. Net realized gains on sales of securities available for sale, net of taxes, represented $0.07 per diluted common share for the nine months ended September 30, 2004 compared to $0.14 for the comparable 2003 period.

        "Loan growth, adjusted to exclude the effect of acquisitions, totaled 17.8 percent during the last twelve months. Earnings per share growth exceeded 14 percent for third quarter 2004 over the respective 2003 period," commented Glen E. Roney, Chairman of the Board. "Total return to shareholders on Texas Regional stock exceeded 39 percent during the twelve months ended September 30, 2004 while total market value of our outstanding stock exceeded $1.5 billion for the first time."

        Texas Regional completed the acquisition through merger of Corpus Christi Bancshares, Inc. on February 14, 2003 and Southeast Texas Bancshares, Inc. ("Southeast Texas") on March 12, 2004. The results of operations for these acquisitions have been included in the consolidated financial statements since their respective purchase dates.

OPERATING HIGHLIGHTS

        Net interest income of $53,821,000 for third quarter 2004 improved $16,678,000 or 44.9 percent over third quarter 2003. Average total interest-earning assets, the primary factor in growth of net interest income, increased 32.6 percent from third quarter 2003 to $5,024,885,000 for third quarter 2004 in large part due to the Southeast Texas merger. The net yield, on a taxable-equivalent basis, on average total interest-earning assets increased thirty-six basis points to 4.34 percent for third quarter 2004 compared to the corresponding 2003 period.

        For the nine months ended September 30, 2004, net interest income totaled $148,659,000, reflecting a $40,215,000 or 37.1 percent increase from the equivalent 2003 period. This growth resulted principally from an increase of 27.2 percent in average total interest-earning assets to $4,705,768,000 for the nine months ended September 30, 2004 over the corresponding 2003 period. The net yield, on a taxable-equivalent basis, on average total interest-earning assets increased by thirty basis points to 4.30 percent for the nine months ended September 30, 2004 compared to the matching 2003 period.

        Provision for loan losses of $6,197,000 for third quarter 2004 increased $2,346,000 or 60.9 percent from third quarter 2003, primarily due to higher loan production. Loans held for investment grew

$99,762,000 or 2.9 percent during third quarter 2004 compared to $56,659,000 or 2.4 percent during third quarter 2003. The provision for loan losses represented 0.71 percent of average loans held for investment for third quarter 2004 compared to 0.64 percent for third quarter 2003. Net charge-offs totaled $5,000,000 for third quarter 2004, representing an increase of $1,707,000 from third quarter 2003.

        For the nine months ended September 30, 2004, provision for loan losses totaled $14,814,000, reflecting a $4,843,000 or 48.6 percent increase over the comparable prior year period. Provision for loan losses totaled 0.62 percent of average loans held for investment for the nine months ended September 30, 2004 compared to 0.57 percent for the nine months ended September 30, 2003.

        Noninterest income of $21,002,000 for third quarter 2004 increased $7,761,000 or 58.6 percent over third quarter 2003. Service charges on deposits amounted to $10,530,000 for third quarter 2004, an increase of $3,774,000 over third quarter 2003 principally due to growth in demand deposits. Other service charges increased $2,273,000 to $3,773,000 for third quarter 2004 primarily due to title insurance agency fee income of $1,332,000, which was derived from the title insurance agencies acquired in the Southeast Texas merger. Trust service fees of $1,674,000 for third quarter 2004 increased $964,000 over third quarter 2003. The fair value of assets held by the trust department increased $941,538,000 from September 30, 2003 to $1,420,664,000 at September 30, 2004. The increase in trust assets held resulted primarily from the Southeast Texas merger and additional trust business developed in the former Southeast Texas market areas. Net realized gains on sales of securities available for sale decreased $78,000 to $2,963,000 for third quarter 2004 measured against third quarter 2003. Loan servicing loss, net of amortization of the mortgage servicing rights ("MSR") asset, narrowed $599,000 to $677,000 for third quarter 2004 from third quarter 2003. MSR amortization decreased $800,000 from third quarter 2003 to $1,050,000 for third quarter 2004 due to a reduction in mortgage prepayments experienced during third quarter 2004.

        For the nine months ended September 30, 2004, noninterest income totaled $53,555,000 reflecting an increase of $14,263,000 or 36.3 percent over the corresponding 2003 period. Service charges on deposits increased 56.2 percent to $28,092,000 for the nine months ended September 30, 2004 compared to the same 2003 period while average demand deposits increased 53.3 percent from the comparable prior year. Other service charges increased $4,753,000 to $9,570,000 for the nine months ended September 30, 2004 primarily due to title insurance agency fees of $2,534,000 resulting from the Southeast Texas merger and an increase in debit card income of $789,000. Net realized gains on sales of securities available for sale of $4,845,000 for the nine months ended September 30, 2004 decreased $4,808,000 from the comparable prior year period as callable security sales were curtailed in the face of rising interest rates. Data processing service fees increased 17.0 percent during the nine months ended September 30, 2004 to $6,330,000 compared to the corresponding 2003 period. The increase was primarily related to increased volume of data processing business for existing data processing clients. The number of data processing clients totaled 26 at September 30, 2004 compared to 25 at September 30, 2003. Loan servicing loss, net which includes the amortization of the mortgage servicing rights (MSR) asset, decreased $2,064,000 to $1,138,000 for the nine months ended September 30, 2004 compared to the matching 2003 period. MSR amortization decreased $2,650,000 to $2,400,000 for the nine months ended September 30, 2004 compared to the corresponding 2003 period, primarily as a result of lower mortgage prepayments experienced during 2004 compared to 2003.

        Noninterest expense of $38,698,000 for third quarter 2004 increased $15,431,000 or 66.3 percent over third quarter 2003. This expansion generally corresponds with growth in business volumes as banking locations increased by 33 to 67 during the twelve months ended September 30, 2004, including 29 acquired in the Southeast Texas merger. The efficiency ratio was 51.72 percent for the quarter ended September 30, 2004, compared to 46.18 percent for the quarter ended September 30, 2003. Salaries and employee benefits increased 71.6 percent during third quarter 2004 to $20,514,000 compared to third quarter 2003 due to higher staffing levels as a result of the Southeast Texas acquisition, salary and other compensation increases and expansion of medical benefits for eligible part-time employees. The number of full-time equivalent employees of 1,914 at September 30, 2004 increased 50.8 percent from

September 30, 2003. Approximately 32.6 percent of the increase was a result of the Southeast Texas acquisition.

        For the nine months ended September 30, 2004, noninterest expense totaled $104,072,000 reflecting an increase of $35,969,000 or 52.8 percent over the corresponding 2003 period due to the above mentioned growth in banking operations, primarily through the Southeast Texas merger. Noninterest expense increased forty-two basis points to 2.69 percent of average total assets for the nine months ended September 30, 2004 compared to the corresponding 2003 period. Salaries and employee benefits increased $18,550,000 to $53,724,000 for the nine months ended September 30, 2004 compared to the matching 2003 period, representing an increase of twenty-two basis points to 1.39 percent of average total assets. The efficiency ratio totaled 51.47 percent for the nine months ended September 30, 2004 compared to 46.10 percent for the corresponding 2003 period.

FINANCIAL CONDITION

        Assets totaled $5,619,282,000 at September 30, 2004, reflecting an increase of $1,433,657,000, or 34.3 percent from September 30, 2003, primarily due to the Southeast Texas merger. Loans held for investment of $3,538,428,000 at September 30, 2004 increased $1,121,183,000 or 46.4 percent from September 30, 2003. Deposits increased to $4,572,113,000 at September 30, 2004, up $1,173,623,000 or 34.5 percent from September 30, 2003. Excluding volumes acquired through business combinations, internal growth rates for loans and deposits averaged 17.8 percent and 6.2 percent, respectively, for the twelve months ended September 30, 2004. Other assets at September 30, 2004 included goodwill and identifiable intangibles of $194,731,000.

        Shareholders' equity at September 30, 2004 increased $161,650,000 from September 30, 2003 to $571,391,000, reflecting a 39.5 percent increase. The increase resulted primarily from issuance of common stock in the Southeast Texas acquisition of $110,074,000. The total risk-based, tier 1 risk-based and leverage capital ratios of 11.85 percent, 10.78 percent and 8.17 percent at September 30, 2004, respectively, substantially exceeded regulatory requirements for a well-capitalized bank holding company.

ASSET QUALITY

        At September 30, 2004, total loans held for investment of $3,538,428,000 included $16,610,000 or 0.47 percent classified as nonperforming compared to 0.44 percent on September 30, 2003. The allowance for loan losses of $43,153,000 represented 1.22 percent of loans held for investment and 259.8 percent of nonperforming loans at September 30, 2004. Net charge-offs for third quarter 2004 averaged 0.57 percent of average loans held for investment compared to 0.55 percent for third quarter 2003. Total nonperforming assets at September 30, 2004 of $27,996,000 represented 0.79 percent of total loans held for investment and foreclosed and other assets compared to 0.88 percent at September 30, 2003. Accruing loans 90 days or more past due of $6,785,000 at September 30, 2004 totaled 0.19 percent of total loans held for investment and foreclosed and other assets compared to 0.18 percent at September 30, 2003.

OTHER INFORMATION

        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 a commercial banking business through 67 banking locations primarily located in the metropolitan areas of Beaumont-Port Arthur, Brownsville-Harlingen-San Benito, Corpus Christi, Houston, McAllen-Edinburg-Mission and Tyler.

        On July 26, 2004, Texas Regional announced the completion of a definitive agreement for its previously disclosed acquisition of Valley Mortgage Company, Inc. ("Valley Mortgage"). The transaction is expected to close during fourth quarter 2004. Valley Mortgage, locally owned and headquartered in McAllen, Texas, has additional offices in Brownsville, Corpus Christi, Del Rio, Harlingen, Laredo, San Antonio and Sugar Land. The agreement calls for total consideration of $13,625,000, to be paid up to 50% in cash and the balance in newly issued Texas Regional common stock in exchange for all of the

outstanding shares of Valley Mortgage. The transaction is subject to customary closing conditions, including approval of the Valley Mortgage shareholders.

        Texas Regional announced the execution on October 8, 2004 of a definitive agreement to acquire through merger Mercantile Bank & Trust, a Federal Savings Bank ("Mercantile"). Mercantile is a privately held bank headquartered at 5820 West Northwest Highway, Dallas, Texas with two additional banking locations in the Dallas metropolitan area. The agreement calls for total cash consideration of $35,640,000 to be paid in exchange for all of the outstanding shares of Mercantile. As of June 30, 2004, Mercantile had total assets of $176.8 million, loans of $119.9 million, deposits of $161.5 million and shareholders' equity of $14.1 million. The transaction is expected to close during the first quarter of 2005.

ADDITIONAL INFORMATION AND WHERE TO FIND IT

        Texas Regional has filed with the SEC a registration statement on Form S-4 concerning the transaction between Texas Regional and Valley Mortgage. The Form S-4 registration statement includes a proxy statement which Texas Regional and Valley Mortgage intend to mail to the Valley Mortgage shareholders concerning the transaction. Investors and security holders of Texas Regional and Valley Mortgage should read the proxy statement when it becomes available because it contains important information about Texas Regional, Valley Mortgage and the transaction. Investors and security holders may obtain a free copy of the proxy statement (when it is available) at the SEC's web site at www.sec.gov. A free copy of the proxy statement (when it is available) may also be obtained from Texas Regional or Valley Mortgage. Texas Regional and its executive officers and directors may be deemed to be participants in the solicitation of proxies from the shareholders of Valley Mortgage in favor of the transaction. Information regarding the interests of Texas Regional's officers and directors, and the interests of Valley Mortgage's officers and directors, in the transaction will be included in the proxy statement.

        In addition to the registration statement on Form S-4 filed by Texas Regional in connection with the Valley Mortgage transaction, and the related proxy statement to be mailed to the shareholders of Valley Mortgage, Texas Regional files annual, quarterly and special reports, proxy and information statements, and other information with the SEC. Investors may read and copy any of these reports, statements and other information at the SEC's public reference room located at 450 Fifth Street, N.W., Washington, D.C. 20549. Investors should call the SEC at 1-800-SEC-0330 for further information on the public reference room. The reports, statements and other information filed by Texas Regional with the SEC are also available free at the SEC's web site at www.sec.gov. You can also obtain a free copy of these reports, statements and other information from Texas Regional.

        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 by calling R.T. Pigott, Jr., Chief Financial Officer, at (956) 631-5400.

        This document 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. If any of these risks or uncertainties materializes 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 the SEC's website at www.sec.gov.

        CONTACT: Glen E. Roney, Chief Executive Officer, or R. T. Pigott, Jr., Chief Financial Officer, (956) 631-5400, both of Texas Regional.

Texas Regional Bancshares, Inc. and Subsidiaries
Financial Highlights (Unaudited)

(1)

Restated to retroactively give effect for the three-for-two stock split declared and distributed by Texas Regional during third quarter 2004, effected as a 50% stock dividend.

(2)

Ratio of Noninterest Expense divided by the sum of Net Interest Income and Noninterest Income.

(3)

Taxable equivalent adjustment computed based on a 35% tax rate.

(1)

Restated to retroactively give effect for the three-for-two stock split declared and distributed by Texas Regional during third quarter 2004, effected as a 50% stock dividend.

(2)

Ratio of Noninterest Expense divided by the sum of Net Interest Income and Noninterest Income.

(3)

Taxable-equivalent adjustment computed based on a 35% tax rate.

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Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘425’ Filing		Date		Other Filings
Filed on:		10/20/04
Filed as of:		10/18/04		8-K
		10/8/04		8-K
		9/30/04		10-Q
		7/26/04		8-K
		6/30/04		10-Q
		3/12/04		8-K
		9/30/03		10-Q
		2/14/03		4,  8-K,  SC 13G/A
				List all Filings

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Filing Submission 0001047469-04-031424   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

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