Spring 2013 ShareholderS newSletter

ForwardMoMentuM

You can feel it at Texas Regional Bank

TRB Brownsville Banking Center

Carlos GarzaAssistant Vice President

Carlos RodriguezSenior Vice President

Market President

May 4th marked three years since our entry into banking. Today we have a franchise with four (4) banking centers, $175 million in assets, 62 employees, $90 million in loans and more than 4,500 customer accounts. We are proud and humbled by the bank’s accomplishments. The contributions of our team, directors and shareholders of many, not few, have made the difference. Thank you.

Second Capital OfferingOn February 26th we began our second capital campaign. Initially we scheduled the campaign to run through April 30th; however, subscription agreements came in stronger than anticipated. After only five weeks, we were fully subscribed and closed the campaign on April 3rd. We will add more than 150 new shareholders in the McAllen and Brownsville markets and approximately $19.2 million in new capital. Total outstanding shares will reach approximately 3.76 million with a capital level of more than $40 million. Our expanded shareholder base now consists of more than 300 influential families from Brownsville to Mission.

MomentumIn 2013 we will continue to focus on building market share either through organic growth or acquisition. During the first quarter of the year our asset growth exceeded 20% in our Valley markets. The McAllen market (which opened in November of 2012) has contributed $45 million in deposits and $40 million in loans, providing a good indication of where to focus on broadening our footprint. At the same time, our Brownsville location is on schedule for opening its permanent facility in June and we have a good jumpstart with more than $20 million in loans and $6 million in deposits. Recently, we completed a four year model outlining our continued expansion in the Valley market by adding one new facility a year. While we cannot expect to continue annual asset growth of 100%, our momentum should keep our growth above our peers and allow us to gain market share throughout the region for years to come.

Profitability and ValueSince late 2008 your Directors have met every Tuesday morning at 7:30 a.m. with few exceptions. They have been focused on building a company with increasing long-term value. The question our Directors often face is: Do you slow growth to allow profitability or do you push market share to drive value? In February of 2010 we raised capital at $10 per share based on a business plan and vision. Today we have a banking franchise with presence in the major markets of the Valley and a fully subscribed second offering at $14 per share. Creating long-term value by increasing market share is the path we continue to pursue. While we have invested more than $2 million in building the franchise, our market value continues to improve. In addition, every year we have aggressively improved earnings. Based on our current trend, 2013 should bring consistent profitability.

As always, it is our exceptional employees and shareholders that set Texas Regional Bank apart. Thank you for all you do as shareholders and customers of the bank.

Michael ScaiefChairman of the Board

Michael ScaiefChairman of the Board

2

Chairman’S meSSage

The vision that started Texas Regional Bank (TRB) began just a few years ago when four local businessmen saw an opportunity to bring community banking back to the Rio Grande Valley. In our first round of capital raising, we exceeded expectations and with our second round we continued to expand our base of shareholders to keep the momentum going. In four short years, TRB has grown faster than originally forecasted and continues to do so quarter after quarter. Our growth, however, does not just lie in our total assets.

We have also grown in the quality of people we have added to our team; with the new banking centers in the three major Rio Grande Valley markets; community involvement through volunteerism, product development, continued education and overall staff training.

In the past year we have added key people and staff to our loan, business development and marketing departments as each banking center has come online. Our McAllen Banking Center is performing exceedingly well all the while receiving praise from our customers and community leaders. The Brownsville Banking Center construction is moving along and is scheduled to open this

summer. With our temporary banking unit in place, the team has been able to open and maintain accounts in Brownsville and build relationships that will prove key in our continued growth in that market.

The TRB volunteer program, lead by Business Development, has helped TRB engage the community more. In these recent months alone, TRB staff have served more than 150 volunteer hours at local community events. We’ve received many thanks and

with so many of our staff proudly sporting TRB t-shirts, it was often assumed TRB was hosting the event! We are extremely proud of all our volunteer staff for their continuing effort to represent TRB in the community.

At TRB we understand the importance of keeping up to date with current market conditions. Thus, we have taken steps to revise our Business Products and expect them to be ready for market later this year. We also recognize the importance of banking technology and how it can affect the growth of our bank. With specialized team members dedicated to maintaining our mobile and online banking, we are keeping on top of the latest market trends. A special “Thank You” goes out to our dedicated account reps, tellers, loan officers and support team who work above and beyond to bring an exceptional level of customer service to TRB each day. Our HR department works hard in training our staff through continuing education courses to ensure we are ready and able to assist current and potential customers and help support their financial success.

As you can see, TRB is on a strong path. We have the vision, exceptional talent and driven leadership to ensure we reach our absolute highest potential in 2013 and beyond.

3

in the newS

“Capital isn’t scarce; vision is.” - Sam Walton

A Bank With A Vision!

Fourth-quarter payroll employment growth clocked in at a modest 2.2 percent annual rate in Texas, much slower than the 3.8 percent annual pace seen in the first quarter. Real estate construction continued to strengthen markedly, although energy sector growth decelerated somewhat from its 2012 peak. Employment growth of 2 to 3 percent for 2013 still seems likely, but there is little evidence that more robust growth is around the corner.

Employment Growth ModeratesPayroll employment increased at a tepid 1.3 percent annual rate in December and at a 2 percent annual rate in the second half of 2012 (Chart 1). While the second-half rate reflects slowing employment growth, it is in line with Texas’ long-term trend.

The unemployment rate plummeted in December to 6.1 percent, its lowest level in four years, down from 7.3 percent in January 2012 (Chart 2). Additionally, initial claims for unemployment insurance ticked down to the lowest level since the recession ended.

eConomiC Update: Federal reServe Bank oF dallaS

4

Regional Economy Grows at a Modest PaceFebruary 4, 2013

*Quarter/quarter; seasonally adjusted, annualized rate.NOTE: Quarterly employment is last month of a quarter.SOURCE: Bureau of Labor Statistics.

*Seasonally adjusted.SOURCE: Bureau of Labor Statistics.

Manufacturing Maintains Modest GrowthThe production and future production indexes from the Texas Manufacturing Outlook Survey (TMOS) ended the year near 2012 lows but rebounded somewhat in January (Chart 3). Manufacturing payroll employment expanded in 2012 at a 2.1 percent annualized rate.

The most recent Dallas Fed Beige Book paints a mixed picture of within-sector growth, with relatively strong performances from automotive manufacturers but with slightly weaker production and orders from high-tech manufacturers. Policy uncertainty was cited as a significant impediment to future growth. Bright spots were construction-related manufacturing for single-family housing and petrochemicals, for which export demand has remained strong despite an otherwise difficult global economic environment.

Construction Contract Values and Real Estate SolidResidential contract values rose 2.6 percent in December, while nonresidential and nonbuilding contract values fell back from recent highs (Chart 4).

Within residential, starts improved and single-family permits were flat in December (Chart 5). Existing-home inventory fell to 4.7 months in December, its lowest level in more than six years. However, multifamily permits increased again, even amid anecdotal reports that an improving economy is beginning to motivate would-be renters to buy.

5

*Seasonally adjusted.SOURCE: Federal Reserve Bank of Dallas’ Texas Manufacturing Outlook Survey (TMOS).

*Five-month moving average.SOURCES: Census Bureau; Bank of Tokyo-Mitsubishi.

Exports Rise as Mexico’s Outlook Improves From September to November of last year, Texas exports rose 1.5 percent as exports from the remainder of the U.S. declined 3.4 percent. This may indicate continued strength in U.S.–Mexico and U.S.–Latin America trade. Mexico’s gross domestic product grew 3.9 to 4 percent in 2012 and is expected to expand 3.5 percent in 2013.

Wage and Price Pressures: Steady as She GoesPrice pressures have been contained the past six weeks, with TMOS and Texas Service Sector Outlook Survey price measures remaining in the range they’ve occupied for the last year. Modest price increases were noted in the Beige Book for construction-related manufacturers and transportation services, with larger increases for accounting and legal firms. Two notable developments were a rise in freight charges and, for reasons relating to the ongoing drought, record-high prices for livestock feed.

Outlook Suggests Continued Modest GrowthThe Texas Leading Index rose by a modest 0.21 points from September to November (Chart 6). The relative weakening of energy components pulled down the index slightly in November. The employment forecast based on this index suggests slightly lower growth of 2.4 percent next year, compared with a 2.5 percent forecast earlier in 2012. Headwinds remain from energy price volatility, as well as global economic and national fiscal policy uncertainty. But the Texas economy is still growing at a rate slightly above trend, with the exception of December’s relatively low payroll figure, and the state continues to rapidly reduce the ranks of its unemployed.

About the Authors Daly is a research analyst and Saving is a senior research economist and advisor in the Research Department of the Federal Reserve Bank of Dallas.

eConomiC Update: Federal reServe Bank oF dallaS

6

*Real values, seasonally adjusted; five-month moving average.SOURCES: F.W. Dodge; Federal Reserve Bank of Dallas.

SOURCES: Federal Reserve Bank of Dallas’ Texas Leading Index; The Conference Board.

prodUCt Update

Texas Regional Bank (TRB) had a vision to establish a special program for our mature market. A program that would be as unique and adventurous as our customers. In November 2012, The Texas Freedom Club was introduced to a select group of seniors throughout the Rio Grande Valley. In less than six months, we’ve had tremendous response and continue to grow each month.

Our Texas Freedom Club staff has made it their mission to market this unique program. Jackie Russell and Thelma Sanford have done a great job building and promoting this program.

Through the continual promotion of TRB as the “Bank of Choice” and with select programs like The Texas Freedom Club, we are confident we will create a significant impact in the Valley.

Our first Texas Freedom Club “ChiliFest” event was truly memorable. Members from across the Valley attended for some of the best chili in Texas. Door prizes, community prizes, TRB branded items and the now famous “Texas Tornado” money blowing machine were enjoyed by all. In addition, a fantastic team of TRB volunteers contributed to ensure the first Texas Freedom Club event was a smashing success.

A Vision... Now RealityTexas Club

7

290the total number of attendees at the club meetings

Club Fun Facts By The Numbers!

20the number of club meetings held across the Valley

87the number of Freedom Club members who attended ChiliFest

366the number of members who had a chance inside the “Texas Tornado”

44the number of times “Bubba” , the singing bear, sang Happy Birthday at meetings December 2012 – April 2013

Brownsville Opening Soon! Construction of our Brownsville Banking Center is moving along right on track. Modeled after the McAllen Banking Center, the building is 5,415 sq. ft. and will be a full service banking center with a conference room and a comfortable aesthetic lobby. Inside, the walls will showcase images from Brownsville’s early history, capturing the nostalgia and strong ties we hold to the Rio Grande Valley and Brownsville.

With exposed rustic brick, classic lighting fixtures and contemporary décor, our customers will feel they were just transported to a remolded “downtown bank” from Brownsville’s Golden Era. With a spacious drive-thru featuring four lanes and a 3,082 sq. ft. canopy our customers will be able to get their banking done from their vehicles quickly and comfortably. There is a lot of buzz and excitement coming from the business and community leaders of Brownsville in anticipation of TRB opening. “Welcome to Brownsville, “said Commissioner John Villarreal. “We look forward to your Grand Opening this summer and know you will find continued success in Brownsville.”

There is currently a staff of six operating our temporary banking unit. However, with our grand opening on the horizon, we will soon begin the process of hiring and training additional staff. Stay up to date with the Brownsville construction progress at our website, www.texasregionalbank.com.

8

Carlos Rodriguez receives regular construction updates.

New ProductsTexas Regional Bank is excited to unveil two new Business Checking Products later this year. The Marketing Committee, directed by our Chairman Michael Scaief, took on an extensive project of researching a wide range of competitors and holding four focus groups of customers and employees to help guide this endeavor.

The robust new products will give the business community two options to help meet their banking needs. One account will help meet the needs of small to medium sized businesses; while the other was developed for larger businesses with more complex structuring and banking needs.

Our personal banking products will soon follow this redevelopment to ensure we stay competitive.

texaS regional Bank internal newS

The growth of Texas Regional Bank goes beyond the activity inside the walls of our banking centers across South Texas; it’s also happening online with the TRB Web Bank. Month after month we see increases in customers who access and manage their bank account(s) online. As we market ourselves, we continue to experience positive growth in total visitors who are researching and learning more about us. Pages like: Our History, Leadership and Our Directors are some of the highest visited pages on our website. All key website analytical data points to positive trends that mirror the positive growth we see across Texas Regional Bank.

Below are a few charts of our fast growing TRB Web Bank trends.

TRB Web Bank Report

9

online report

Top 10 Cities in South Texas In the 1st quarter, our website was visited by people in 512 cities from around the world. By percentage here is how the top 10 cities in South Texas rank.

Traffic Source By increasing our page rank on search engines like Google and Yahoo/Bing, we have seen an increase in traffic driven to our website from those search engines. Page rank is the order in which the results of an internet search appear. The higher a website appears in the search results the more likely the user will click on it. We have more people ‘Googling’ us looking for banking products or services in Brownsville, Falfurrias, Harlingen, McAllen and the surrounding cities.

Visit Increase Visits have increased by almost 100% when comparing April 2012 to April 2013 and 1st quarter 2012 to 1st quarter 2013. Month over month increases generally range in the 10-15% range. With a focus on mobile technologies we have also seen healthy increases in the visitors who use their mobile device to access the website.

Referral

Search

Direct

McAllen

Harlingen

Brownsville

Edinburg

Donna

Mission

Raymondville

Weslaco

San Benito

South Padre Island

35,000

30,000

25,000

20,000

15,000

10,000

5,000

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

April 2012

April 2013

1st Qrt 2012

1st Qrt 2013

1st Qrt ‘12 1st Qrt ‘13 April -12 April -13

Visits VisitsMobile Traffic Mobile Traffic

Volunteer Program Making Impact

texaS regional Bank eventS

10

Brownsville TeamAnika Portillo

Falfurrias TeamSandra ArevaloJanie BenavidesRolando CarrascoCorina Garcia Marcia GarzaDonna MartinAnabel NavarroAnnette SalinasLaura Tijerina

Harlingen TeamIrma AyalaJanie Cadenas Dominic ConsiglioNick ConsiglioDiana De La Fuente Marie De Leon Miriam EscobedoAnnie GallegosKarina Garcia Gaby Garza

Nora KoiteMichael LamonJorge Martinez Adriana McElrath Casey McNuttGeorge MukharMark Ramirez Jackie RussellThelma SanfordSylvia ShivesJuan Silva

McAllen TeamJessica AdameBrent BaldreeVeronica Castro Zinnia Fuentes Liz Garcia Rita GarciaJanie MartinezMiriam Lozano Nelda Rodriguez Keri SandvigBeverly SpeerFelicia Villarreal

“You make a living by what you get. You make a life by

what you give.”

– Winston Churchill

Texas Regional Bank started a volunteer program to actively give our team members an opportunity to get involved. A majority of our employees already volunteer each week with various organizations that serve our communities. Some of our team members also sit on boards of local non-profits, civic and faith based organizations which are often in need of volunteers to help reach their mission.

The TRB Volunteer Program assists those team members who sit on boards tap into the spirit of volunteerism within our very own people. We are committed to helping our communities succeed.

We’d like to recognize the TRB Team Members who have volunteered their time this year. From Falfurrias to McAllen, to Harlingen and down to Brownsville, we are proud to have contributed more than 150 volunteer hours so far this year!

A Big Thanks to the team members who have given some of their time and helped make a positive impact in our communities.

Member FDIC

We confidently develop trusting relationships by providing exceptional products and service

to support the success of every customer.

Texas Regional Bank Board of Directors L-R: William B. Wolfe; Michael Fallek; William L. Elliff; Robert R. Farris Vice Chairman; Michael F. Scaief Chairman; Paul S. Moxley Chief Executive Officer; Tudor G. Uhlhorn Secretary/Treasurer; Carlos Varela

3450 Pablo Kisel Blvd. • Brownsville, Texas • (956) 554-0155

401 N. St. Mary Street • Falfurrias, Texas • (361) 325-5646

2019 S. 77 Sunshine Strip • Harlingen, Texas • (956) 428-7400

4501 N. 10th Street • McAllen, Texas • (956) 618-3808

texasregionalbank.com