Page 4 - Annual Report 2017

Dear Shareholders

Annually I am tasked with writing an Annual Letter to our Shareholders with the goal of sharing
what was accomplished during the year as well as providing a glimpse into the strategic plans of

our Company. As you read this letter and the accompanying Audited Consolidated Financial
Statements and footnotes, I am confident you will be pleased with the accomplishments we have

made as well as our plans and goals for the future.

FINANCIAL REPORT

The ensuing paragraphs are meant as a summary of our 2016 financial performance, but you are

encouraged to read the accompanying Audited Consolidated Financial Statements and footnotes
for a more complete and detailed summary.

Total Assets grew during 2016 and ended the year at $571 million compared to $543 million at
year-end 2015. The Loan Portfolio, net of the allowance for possible credit losses, ended the

year at $384 million, up from its 2015 ending balance of $344 million. Investment Securities,

consisting of United States Agency securities, Municipal bonds, and Mortgage-Backed securities
decreased $15 million from their year-end 2015 as those Assets where reinvested in lending

activities. On the Liabilities side of the Balance Sheet, we had Total Deposits increase by more
than $19 million to end the year at $486 million. Lastly, but always important, Shareholder’s

equity, including unrealized gains or losses in our bond portfolio, ended the year at $59 million

compared to $58 million in 2015.
Transitioning to the Income Statement, Total Interest Income, comprised primarily from loans

and investments was $21.4 million in 2016 compared to $20.3 million the previous year. Total
Interest Expense was $1.7 million compared to $1.5 million in 2015. The Provision for Possible

Loan Loss expense for 2016 was $600 thousand compared to $175 thousand in 2015, resulting in
Net Interest Income after Provisions for Loan Losses of $19.1 million compared to $18.6 million

TEXAS GULF BANCSHARES, INC. AND SUBSIDIARY TEXAS GULF BANK

ESTABLISHED 1913