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

Jan 30, 2013, 09:00 ET from Cullen/Frost Bankers, Inc.

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