2014

Cullen/Frost Reports 4Th Quarter, Annual 2012 Results Annual earnings a record high

- Double-digit loan and deposit growth

- Assets top $23 billion

- Steady profitability in challenging regulatory and rate environment

- Continued improvement in asset quality

SAN ANTONIO, Jan. 30, 2013 /PRNewswire/ -- Cullen/Frost Bankers, Inc. today reported solid fourth quarter earnings and record-high annual earnings for the full year of 2012, as the Texas financial services leader continues to operate profitably in the face of regulatory and rate challenges and a sluggish but slowly improving economy. For the first time, the company exceeded $23 billion in assets, a 72 percent increase over year-end 2007.

(Logo:  http://photos.prnewswire.com/prnh/20030109/CFRLOGO)

Cullen/Frost reported net income for the fourth quarter of 2012 of $60.2 million, or $.97 per diluted common share, compared to fourth quarter 2011 earnings of $55.4 million, or $.90 per diluted common share. For the fourth quarter of 2012, returns on average assets and equity were 1.09 percent and 9.84 percent respectively, compared to 1.12 percent and 9.74 percent for the same period of 2011.

The company also reported annual earnings for 2012 of $238.0 million, a 9.4 percent increase over 2011 earnings of $217.5 million. On a per-share basis, 2012 earnings were $3.86 per diluted common share, an increase of 9.0 percent compared to the $3.54 per diluted common share reported in 2011. For the year, returns on average assets and equity were 1.14 percent and 10.03 percent respectively, compared to the 1.17 percent and 10.01 percent reported in 2011.

At the end of the fourth quarter of 2012, Cullen/Frost saw non-performing assets decline by $15.7 million from the fourth quarter of 2011 and $19.7 million from the third quarter of 2012.

"For 2012, Cullen/Frost's annual earnings were at the highest level in company history, a tribute to the hard work of every Frost employee," said Dick Evans, Cullen/Frost chairman and CEO. "We are executing our plan well in an environment of ongoing economic, regulatory and rate challenges. I was especially pleased that average loans grew 5.1 percent for the year, as we are seeing the results of our efforts to add relationships and build our company during the recession. Both new and existing customers continue to demonstrate their confidence in the strength of our institution, spurring a $2.1 billion year-over-year growth in average deposits. Even with the persistent challenges of a near-zero rate environment, I was encouraged to see a 4 percent growth in net interest income. Our capital levels remain very strong."

"For the fourth quarter, we were able to grow both average loans and deposits by double digits, with loans rising by 11.2 percent, to $8.9 billion and deposits up by 14.2 percent, to $18.4 billion compared to the fourth quarter of 2011. We are encouraged by the opportunities we see to leverage our new relationships," Evans continued.

"Our credit disciplines remain strong, as demonstrated by a significant decline in non-performing assets this quarter, both from the fourth quarter of 2011 and the third quarter of 2012.

"We are fortunate to operate in Texas, a state whose economy once again outpaced that of the nation in 2012. Texas grew jobs at a strong 3.1 percent in 2012, compared to the U.S. average of 1.4 percent.

"We are beginning to see some clarity with regard to the impact on business of the new health care law. But persistent uncertainty—fueled by concerns about the pace of the recovery and decisions coming out of Washington—is keeping many businesses on the sidelines, delaying hiring or capital expenditure decisions."

Well-respected third parties continue to validate Frost's service, culture and performance. Adding to high rankings Frost has received from J.D. Power and Associates and Greenwich Associates in 2012,  Moody's published bank  financial strength ratings rank Frost Bank with the highest rating in the U.S.  Along with the bank's A+ credit rating from Standard and Poor's, this reinforces Frost's strong capital, liquidity and solid credit performance. 

"Although regulatory reform is impacting all financial services companies, Cullen/Frost's culture and value proposition are enabling us to expand our customer base, increase profitability and bring value to shareholders. We have paid and increased the dividend we pay shareholders for 18 consecutive years.

Evans said the company opened three new financial centers in 2012, including two in Houston and one in Austin. Frost also reinforced its commitment to customer convenience by increasing its ATM network to more than 1,100 through its partnership with Valero Corner Stores and Cardtronics.

"As always, our outstanding employees bring their own skills, dedication and experience to the Frost culture. I thank them for their commitment to our company."

For the year ended December 31, 2012, average annual total loans were $8.5 billion, a 5.1 percent increase from the $8.0 billion reported the previous year. Average annual total deposits for 2012 rose to $17.3 billion, up 13.6 percent, or $2.1 billion, over the $15.2 billion reported in 2011. Net interest income on a taxable-equivalent basis increased to $668.2 million, up 4.1 percent over the $642.1 million reported a year earlier, reflecting the impact of the increasing volume of earning assets. For 2012, non-interest income was $288.8 million, compared to $290.0 million reported for 2011, while non-interest expense increased 3.0 percent over the previous year to $575.1 million.  

Noted financial data for the fourth quarter:

  • Tier 1 and Total Risk-Based Capital Ratios for the Corporation at the end of the fourth quarter of 2012 were 13.68 percent and 15.11 percent, respectively and are in excess of well-capitalized levels.  The ratio of tangible common equity to tangible assets was 8.30 percent at the end of the fourth quarter of 2012, compared to 8.82 percent for the same quarter last year. The tangible common equity ratio, which is a non-GAAP financial measure, is equal to end of period shareholders' equity less goodwill and intangible assets divided by end of period total assets less goodwill and intangible assets. Our current capital levels would result in our meeting today the fully phased-in Basel III capital requirements proposed by the U.S. bank regulators.
  • Net interest income on a taxable-equivalent basis for the fourth quarter totaled $172.2 million, an increase of 4.1 percent compared to the $165.3 million reported for the fourth quarter of 2011. This increase primarily resulted from an increase in the average volume of earning assets and was partly offset by a decrease in the net interest margin. The net interest margin was 3.48 percent for the fourth quarter, compared to 3.76 percent for the fourth quarter of 2011 and 3.54 percent for the third quarter of 2012.
  • Non-interest income for the fourth quarter of 2012 was $75.9 million, an increase of $8.2 million from the $67.7 million reported a year earlier. During the fourth quarter, Cullen/Frost recorded a $4.4 million gain on the sale of $596 million in short term treasuries. Trust and investment management fees were $20.5 million, up $1.7 million or 8.9 percent compared to $18.9 million a year earlier. Impacting trust fees was a $497,000 increase in investment fees, which are generally assessed based on the market value of trust assets that are managed and held in custody. Trust assets were $26.2 billion at the end of the fourth quarter of 2012, compared to $25.2 billion at December 31, 2011. Trust fees were also positively impacted by higher oil and gas fees ($165,000) and real estate fees ($171,000) from the fourth quarter of 2011. Insurance commissions and fees rose $986,000 to $8.4 million, from $7.5 million in the fourth quarter of 2011, with most of this increase the result of new business and rate increases.
  • Non-interest expense for the fourth quarter of 2012 was $146.1 million, up $2.2 million or 1.6 percent from the $143.8 million reported for the fourth quarter of 2011. Salaries were up $1.3 million over the same quarter a year earlier as a result of normal annual merit and market increases and incentive compensation. Other expense was $36.0 million, a $464,000 decrease from the $36.4 million reported for the fourth quarter of 2011.
  • For the fourth quarter of 2012, the provision for loan losses was $4.1 million, compared to net charge-offs of $5.1 million. For the fourth quarter of 2011, the provision for loan losses was zero, compared to net charge offs of $5.3 million. The allowance for loan losses as a percentage of total loans was 1.13 percent at December 31, 2012, compared to 1.38 percent at year-end 2011. Non-performing assets were $105.2 million at year-end, compared to $124.9 million the previous quarter, and $120.9 million at year-end 2011.

Cullen/Frost Bankers, Inc. will host a conference call on Wednesday, January 30, 2013 at 10 a.m. Central Time (CT) to discuss the results for the quarter and the year. The media and other interested parties are invited to access the call in a "listen only" mode at 800-944-6430. Digital playback of the conference call will be available after 12 p.m. CT until midnight Sunday, February 3, 2013 at 855-859-2056, with the Conference ID# of 87416492. The call will also be available by webcast on the company's website, frostbank.com, and available for playback after 2 p.m. CT.  After entering the website, go to "About Frost" on the top navigation bar, then click on Investor Relations.

Cullen/Frost Bankers, Inc. (NYSE: CFR) is a financial holding company, headquartered in San Antonio, with $23.1 billion in assets at December 31, 2012. Among the top 50 largest U.S. banks and one of 24 banks included in the KBW Bank Index, Frost provides a wide range of banking, investments and insurance services to businesses and individuals across Texas in the Austin, Corpus Christi, Dallas, Fort Worth, Houston, Rio Grande Valley and San Antonio regions. Founded in 1868, Frost has helped clients with their financial needs during three centuries. Additional information is available at frostbank.com.

Forward-Looking Statements and Factors that Could Affect Future Results

Certain statements contained in this Earnings Release that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"), notwithstanding that such statements are not specifically identified as such. In addition, certain statements may be contained in the Corporation's future filings with the SEC, in press releases, and in oral and written statements made by or with the approval of the Corporation that are not statements of historical fact and constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations of Cullen/Frost or its management or Board of Directors, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as "believes", "anticipates", "expects", "intends", "targeted", "continue", "remain", "will", "should", "may" and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

  • Local, regional, national and international economic conditions and the impact they may have on the Corporation and its customers and the Corporation's assessment of that impact.
  • Volatility and disruption in national and international financial markets.
  • Government intervention in the U.S. financial system.
  • Changes in the mix of loan geographies, sectors and types or the level of non-performing assets and charge-offs.
  • Changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements.
  • The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board.
  • Inflation, interest rate, securities market and monetary fluctuations.
  • The effects of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Corporation and its subsidiaries must comply.
  • The soundness of other financial institutions.
  • Political instability.
  • Impairment of the Corporation's goodwill or other intangible assets.
  • Acts of God or of war or terrorism.
  • The timely development and acceptance of new products and services and perceived overall value of these products and services by users.
  • Changes in consumer spending, borrowings and savings habits.
  • Changes in the financial performance and/or condition of the Corporation's borrowers.
  • Technological changes.
  • Acquisitions and integration of acquired businesses.
  • The ability to increase market share and control expenses.
  • The Corporation's ability to attract and retain qualified employees.
  • Changes in the competitive environment in the Corporation's markets and among banking organizations and other financial service providers.
  • The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters.
  • Changes in the reliability of the Corporation's vendors, internal control systems or information systems.
  • Changes in the Corporation's liquidity position.
  • Changes in the Corporation's organization, compensation and benefit plans.
  • The costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews.
  • Greater than expected costs or difficulties related to the integration of new products and lines of business.
  • The Corporation's success at managing the risks involved in the foregoing items.

Forward-looking statements speak only as of the date on which such statements are made. The Corporation undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.

Greg Parker
Investor Relations
210/220-5632
or
Renee Sabel
Media Relations
210/220-5416

 

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

(In thousands, except per share amounts)




2012


2011



4th Qtr


3rd Qtr


2nd Qtr


1st Qtr


4th Qtr


CONDENSED INCOME STATEMENTS
















        Net interest income

$

154,405


$

151,532


$

149,217


$

149,707


$

150,323


        Net interest income(1)


172,156



167,341



163,972



164,707



165,340


        Provision for loan losses


4,125



2,500



2,355



1,100



--


        Non-interest income:
















           Trust and investment management fees


20,543



20,843



21,279



20,652



18,861


           Service charges on deposit accounts


21,162



20,797



20,639



20,794



21,475


           Insurance commissions and fees


8,436



9,964



9,171



12,377



7,450


           Interchange and debit card transaction fees


4,330



4,194



4,292



4,117



4,166


           Other charges, commissions and fees


7,740



7,265



7,825



7,350



7,125


           Net gain (loss) on securities transactions


4,435



--



370



(491)



--


           Other


9,241



8,095



6,187



7,180



8,583


















           Total non-interest income


75,887



71,158



69,763



71,979



67,660


















        Non-interest expense:
















           Salaries and wages


67,442



64,984



62,624



63,702



66,126


           Employee benefits


12,867



14,019



14,048



16,701



12,574


           Net occupancy


11,772



13,193



12,213



11,797



11,413


           Furniture and equipment


13,932



14,193



13,734



13,420



13,454


           Deposit insurance


3,159



2,593



2,838



2,497



2,773


           Intangible amortization


918



973



994



1,011



1,052


           Other


35,977



34,495



36,085



32,912



36,441


















           Total non-interest expense


146,067



144,450



142,536



142,040



143,833


















        Income before income taxes


80,100



75,740



74,089



78,546



74,150


        Income taxes


19,912



17,071



16,027



17,513



18,736


















        Net income

$

60,188


$

58,669


$

58,062


$

61,033


$

55,414


















PER SHARE DATA
















        Net income – basic

$

0.98


$

0.95


$

0.94


$

0.99


$

0.90


        Net income - diluted


0.97



0.95



0.94



0.99



0.90


        Cash dividends


0.48



0.48



0.48



0.46



0.46


        Book value at end of quarter


39.32



39.35



38.48



37.81



37.27


















OUTSTANDING SHARES
















        Period-end shares


61,479



61,462



61,404



61,373



61,264


        Weighted-average shares - basic


61,382



61,317



61,291



61,201



61,154


        Dilutive effect of stock compensation


339



369



344



332



54


        Weighted-average shares - diluted


61,721



61,686



61,635



61,533



61,208


















SELECTED ANNUALIZED RATIOS
















        Return on average assets


1.09

%


1.11

%


1.14

%


1.23

%


1.12

%

        Return on average equity


9.84



9.75



9.95



10.59



9.74


        Net interest income to average earning assets(1)


3.48



3.54



3.61



3.73



3.76



(1) Taxable-equivalent basis assuming a 35% tax rate.

 

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)




2012



2011




4th Qtr


3rd Qtr


2nd Qtr


1st Qtr


4th Qtr



BALANCE SHEET SUMMARY

















          ($ in millions)

















        Average Balance:

















           Loans

$

8,868


$

8,635


$

8,268


$

8,050


$

7,975



           Earning assets


20,138



19,218



18,605



18,087



17,806



           Total assets


21,964



21,010



20,401



19,920



19,579



           Non-interest-bearing demand deposits


7,690



7,161



6,829



6,399



6,325



           Interest-bearing deposits


10,736



10,289



10,053



9,998



9,804



           Total deposits


18,426



17,450



16,882



16,397



16,129



           Shareholders' equity


2,433



2,393



2,347



2,317



2,258




















        Period-End Balance:

















           Loans

$

9,224


$

8,811


$

8,490


$

8,127


$

7,995



           Earning assets


21,148



20,024



19,033



18,583



18,498



           Goodwill and intangible assets


544



545



546



547



539



           Total assets


23,124



21,848



20,866



20,417



20,317



           Total deposits


19,497



18,245



17,277



16,909



16,757



           Shareholders' equity


2,417



2,419



2,363



2,321



2,284



           Adjusted shareholders' equity(1)


2,179



2,144



2,110



2,076



2,036




















ASSET QUALITY

















          ($ in thousands)

















        Allowance for loan losses

$

104,453


$

105,401


$

105,648


$

107,181


$

110,147



           as a percentage of period-end loans


1.13

%


1.20

%


1.24

%


1.32

%


1.38

%



















        Net charge-offs

$

5,073


$

2,747


$

3,888


$

4,066


$

5,286



          Annualized as a percentage of average loans


0.23

%


0.13

%


0.19

%


0.20

%


0.26

%




































        Non-performing assets:

















           Non-accrual loans

$

89,744


$

106,407


$

92,255


$

97,870


$

94,338



           Foreclosed assets


15,502



18,524



19,818



22,676



26,608




















             Total

$

105,246


$

124,931


$

112,073


$

120,546


$

120,946



           As a percentage of:

















             Total loans and foreclosed assets


1.14

%


1.41

%


1.32

%


1.48

%


1.51

%


             Total assets


0.46



0.57



0.54



0.59



0.60




















        CONSOLIDATED CAPITAL RATIOS

















        Tier 1 Risk-Based Capital Ratio


13.68

%


14.10

%


14.07

%


14.47

%


14.38

%


        Total Risk-Based Capital Ratio


15.11



15.62



15.61



16.10



16.24



        Leverage Ratio


8.28



8.59



8.65



8.68



8.66



        Equity to Assets Ratio (period-end)


10.45



11.07



11.32



11.37



11.24



        Equity to Assets Ratio (average)


11.08



11.39



11.51



11.63



11.53




    

(1) Shareholders' equity excluding accumulated other comprehensive income (loss).

 

Cullen/Frost Bankers, Inc.


CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)


(In thousands, except per share amounts)





Year Ended December 31



2012


2011


2010


2009


2008


















    CONDENSED INCOME STATEMENTS
















    Net interest income

$

604,861


$

581,776


$

563,459


$

536,679


$

534,025


    Net interest income(1)


668,176



642,066



616,319



577,716



554,353


    Provision for possible loan losses


10,080



27,445



43,611



65,392



37,823


    Non-interest income:
















      Trust fees and investment management fees


83,317



78,297



72,321



69,933



76,424


      Service charges on deposit accounts


83,392



86,125



91,025



96,525



82,526


      Insurance commissions and fees


39,948



35,421



34,015



33,096



32,904


      Interchange and debit card transaction fees


16,933



29,625



30,542



26,248



23,959

      Other charges, commissions and fees


30,180



27,750



25,380



23,826



32,726


      Net gain (loss) on securities transactions


4,314



6,414



6



(1,260)



(159)


      Other


30,703



26,370



28,744



45,338



38,942


      Total non-interest income


288,787



290,002



282,033



293,706



287,322




































    Non-interest expense:
















      Salaries and wages


258,752



252,028



239,589



230,643



225,943


      Employee benefits


57,635



52,939



52,352



55,224



47,219


      Net occupancy


48,975



46,968



46,166



44,188



40,464


      Furniture and equipment


55,279



51,469



47,651



44,223



37,799


      Deposit insurance


11,087



12,714



20,451



25,812



4,597


      Intangible amortization


3,896



4,387



5,125



6,537



7,906


      Other


139,469



137,593



124,207



125,611



122,717


      Total non-interest expense


575,093



558,098



535,541



532,238



486,645


    Income before income taxes


308,475



286,235



266,340



232,755



296,879


    Income taxes


70,523



68,700



57,576



53,721



89,624


















    Net income

$

237,952


$

217,535


$

208,764


$

179,034


$

207,255


































PER SHARE DATA
















    Net income - basic

$

3.87


$

3.55


$

3.44


$

3.00


$

3.51


    Net income - diluted


3.86



3.54



3.44



3.00



3.50


    Cash dividends


1.90



1.83



1.78



1.71



1.66


    Book value


39.32



37.27



33.74



31.55



29.68



OUTSTANDING SHARES
















    Period-end shares


61,479



61,264



61,108



60,038



59,416


    Weighted-average shares - basic


61,298



61,101



60,411



59,456



58,846


    Dilutive effect of stock compensation


345



177



175



58



324


    Weighted-average shares - diluted


61,643



61,278



60,586



59,514



59,170

















SELECTED ANNUAL RATIOS















    Return on average assets


1.14

%


1.17

%


1.21

%


1.14

%


1.51

%

    Return on average equity


10.03



10.01



10.30



9.78



13.11


    Net interest income to average earning assets(1)

3.59



3.88



4.08



4.23



4.67



 

(1)


Taxable-equivalent basis assuming a 35% tax rate.

 


Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)



Year Ended December 31



2012


2011


2010


2009


2008


BALANCE SHEET SUMMARY
















($ in millions)
















Average Balance:
















Loans

$

8,457


$

8,043


$

8,125


$

8,653


$

8,314


Earning assets


19,016



16,769



15,333



13,804



11,868


Total assets


20,827



18,569



17,187



15,702



13,685


Non-interest-bearing demand deposits


7,022



5,739



5,024



4,259



3,615


Interest bearing deposits


10,270



9,484



9,024



8,161



6,916


Total deposits


17,292



15,223



14,048



12,420



10,531


Shareholders' equity


2,373



2,172



2,028



1,831



1,580



















Period-End Balance:
















Loans

$

9,224


$

7,995


$

8,117


$

8,368


$

8,844


Earning assets


21,148



18,498



15,806



14,437



13,001


Goodwill and intangible assets


544



539



542



547



551


Total assets


23,124



20,317



17,617



16,288



15,034


Total deposits


19,497



16,757



14,479



13,313



11,509


Shareholders' equity


2,417



2,284



2,062



1,894



1,764


Adjusted shareholders' equity(1)


2,179



2,036



1,907



1,740



1,626


















ASSET QUALITY
















($ in thousands)
















Allowance for possible loan losses

$

104,453


$

110,147


$

126,316


$

125,309


$

110,244


As a percentage of period-end loans


1.13

%


1.38

%


1.56

%


1.50

%


1.25

%

















Net charge-offs:

$

15,774


$

43,614


$

42,604


$

50,327


$

19,918


As a percentage of average loans

0.19

%


0.54

%


0.52

%


0.58

%


0.24

%

















Non-performing assets:
















Non-accrual loans

$

89,744


$

94,338


$

137,140


$

146,867


$

65,174


Foreclosed assets


15,502



26,608



27,810



33,312



12,866


Total

$

105,246


$

120,946


$

164,950


$

180,179


$

78,040


As a percentage of:
















Total loans and foreclosed assets


1.14

%


1.51

%


2.03

%


2.14

%


0.88

%

Total assets


0.46



0.60



0.94



1.11



0.52



 

(1)

Shareholders' equity excluding accumulated other comprehensive income (loss).

SOURCE Cullen/Frost Bankers, Inc.



RELATED LINKS
http://www.frostbank.com

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