TWST: What is Texas United Bancshares?

Mr. Stricklin: Texas United Bancshares is a community bank organization, headquartered in La Grange, Texas, which is roughly an hour outside of Austin, Texas, and about an hour from Houston. We primarily operate in the south central part of the state, covering suburban areas in Austin, north of Houston, San Antonio College Station and Bryan. We have a banking subsidiary up in the Dallas/Fort Worth area, and we will soon complete an acquisition in the fourth quarter of a $200 million community bank with six locations in the Dallas area itself. Texas United Bancshares traces its origin, the regional bank, back to 1868. But Texas United was actually formed in 1998. We did a merger of equals with another bank at that time; we put two companies together and formed Texas United Bancshares.

TWST: Give us a look at what the Dallas/Fort Worth area looks like as well as the more south central locations that you have.

Mr. Stricklin: We were primarily a rural-based bank for a number of years. In 2000, we made the decision to move more into metropolitan areas. So we actually implemented a twofold expansion strategy. One was based on de novo branching, which was primarily put into suburban growth markets in and around metropolitan areas. Acquisitions have been primarily in the more rural markets. The branches that we have today are primarily in suburban locations. The acquisition that we'll be doing in the fourth quarter is in the metropolitan area of Dallas. So that will be our first acquisition in what we would consider a metropolitan city. All the other acquisitions have been suburban locations and the de novo locations as well. It's a competitive landscape, and most of the markets we are in are doing very well. Most of them are growth areas. We are opening up new banking centers. We just opened up two, one in north Houston in Harris County and in the College Station market. We also have two on the drawing board in Austin that will be opening up sometime next year.

TWST: Do you have a positive outlook when you look at what your customers are facing as far as the business environment?

Mr. Stricklin: Most of our customers are doing very well and we see a lot of growth prospects in our markets. We don't see any economic slowdown at this point in time. It is a competitive landscape; obviously, there are a lot of players in these markets. We are not seeing underwriting pressure, but we are seeing pricing pressure from some regional type banks that are obviously trying to grow their loan portfolio. They are giving what we think is not very attractive pricing from a banking standpoint. From a customer standpoint it's very good.

TWST: What has been the environment as far as mergers and acquisitions around you? How has that had an impact on your own strategies and goals?

Mr. Stricklin: Obviously, we are always looking for acquisition candidates. In the last six months, the bid ask price has been out of our range. We think that some of the prices, especially in some of the more suburban markets have been too high to work for our model. We don't really see that changing. When acquisition candidates come up, there are going to be a substantial number of buyers, which is going to keep the prices fairly high for the next couple of years. There are a lot of buyers out there and not very many sellers.

TWST: Introduce us to your top-level management team. As you look at the growth you are undergoing and goals you have, are there areas or positions you will be looking to add or augment?

Mr. Stricklin: We've made a change in the CFO position in the last 30 days and that was announced in July. That was simply an issue of the company getting to the size where the current CFO was unable to handle the demands of that job to the level that we needed, especially with all the financial issues today like Sarbanes-Oxley and the number of subsidiaries that we have. We brought in a gentleman who was with RSM McGladrey. We are looking for him to expand our financial area. With that change, our team is fine. We are ready to continue our growth.

TWST: What historically has been the shareholder base with the company? Having gone through the merger recently, have there been any changes or evolutions in that base?

Mr. Stricklin: Up until our public offering about this time last year, we had primarily just local shareholders. The banks that we've acquired have become shareholders. But then we raised about $40 million in our secondary offering, so now about 30% of our shareholder base is institutional.

TWST: Do you have any coverage or much conversation with analysts in the industry?

Mr. Stricklin: Today, we have two companies covering our stock, Hoefer & Arnett out of San Francisco and Stifel Nicolaus out of St. Louis. They cover our stock and also did the underwriting for the secondary offering. Other than that, we don't really have anybody else covering our stock.

TWST: How proactive are you on the public relations or the investment community relations aspect? Do you see needs there that you have to address or do you feel that your current level is equivalent to the other strategies and goals?

Mr. Stricklin: Obviously, we would like to have more people covering our stock, but for us at this point in time, we think two is enough. If other people want to cover, that would be fine, but we are not out trying to drum up people to cover our stock. We are focusing on the long-term aspects of this business. I believe that if the fundamentals are sound, investors will find our company.

TWST: You mentioned that organic growth, because of the pricing on acquisitions, is probably a better strategy at this point. Do you require additional capital or resources to meet those goals?

Mr. Stricklin: No, we have enough capital for most of the internal growth that we are anticipating. If we were to do a large acquisition, more than probably $300 million, we would have to look at additional capital resources. Today, the only acquisition we have that we've announced is the $200 million Gateway Bank in Dallas.

TWST: What compels investors to consider Texas United Bancshares as a viable investment? What compels them to include TXUI within their current investments and longer-term investment strategies?

Mr. Stricklin: Primarily, they should go back and look at our history five years ago and see where our bank was as far as rural markets and where we are today. We shifted that strategy to more of an urban type market. Look at our loan growth and our internal organic growth not only from the deposit side but on the loan side. And look at the markets that we are in compared to the rest of the state of Texas. There are phenomenal growth prospects in all these markets that we are in. There is a lot of upside growth. When you look at the fundamentals of the company, they are very sound. That's what we have to focus on ' net interest margin, loan quality, loan growth and smart deposit growth.

TWST: Thank you. (DWA)

DON STRICKLIN President & CEO Texas United Bancshares, Inc. 202 W. Colorado Street La Grange, TX 78945 (979) 968-8451 (979) 968-9574 - FAX www.statebanktx.com

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