Cullen/Frost Reports First Quarter Results

- Loans grow by 13.2 percent

- Deposits up by 14.2 percent

Apr 24, 2013, 09:00 ET from Cullen/Frost Bankers, Inc.

SAN ANTONIO, April 24, 2013 /PRNewswire/ -- Cullen/Frost Bankers, Inc. today released results for the first quarter of 2013, as the Texas financial services leader posted solid fundamentals and demonstrated its ability to operate effectively in a challenging regulatory and interest rate environment.

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Cullen/Frost net income available to common shareholders for the first quarter of 2013 was $55.1 million, or $.91 per diluted common share, compared to net earnings of $61.0 million, or $.99 per diluted common share for the first quarter 2012. For the first quarter of 2013, return on average assets and return on average common equity were 1.01 percent and 9.47 percent, respectively, compared to 1.23 percent and 10.59 percent for the same period of 2012.

"I am very pleased with our loan and deposit growth for the first quarter compared to last year's first quarter," said Dick Evans, Cullen/Frost Chairman and CEO. "Although many businesses remain somewhat cautious, we are seeing the results of our disciplined calling effort, as both new and established customers generated average loan growth of 13.2 percent. Deposits continue to be strong, with average deposits up a solid 14.2 percent, or $2.3 billion, since the first quarter of 2012. Fee income growth this quarter was broad-based, including a 6 percent increase in trust and investment management fees and a 5.6 percent increase in insurance commissions and fees."

The provision for loan losses was $6.0 million, compared to $1.1 million for the first quarter of 2012 and $4.1 million for the fourth quarter of 2012. Net charge-offs for the first quarter of 2013 were $16.9 million compared to $4.1 million for the first quarter of 2012. Included in the first quarter's charge-offs was a $15 million charge-off associated with a single commercial and industrial loan relationship. "Aside from this one loan, all traditional measures of credit quality remain positive," said Evans. Non-performing assets at March 31, 2013 were $105.9 million, compared to $120.5 million for the first quarter of 2012.

"Our capital levels and liquidity are stronger today than before the financial crisis began in 2008. Even as other banks suspended dividends during the recession, Cullen/Frost continued to pay – and even increase – the dividend we pay our shareholders. We have increased our dividend for 18 consecutive years.

"As always, I thank our outstanding employees for their hard work, loyalty and commitment to ensuring that our customers have a positive experience at Frost.

"Just this past week, J.D. Power and Associates' 2013 Retail Banking Satisfaction Study ranked Frost highest in customer satisfaction with retail banking in Texas for the fourth consecutive year. I am grateful to our employees for making this possible," Evans continued.

For the first quarter of 2013, average total loans were $9.1 billion, an increase of $1.1 billion, or 13.2 percent, compared to $8.0 billion for the first quarter of 2012. Average total deposits for the first quarter 2013 rose to $18.7 billion, up 14.2 percent, or $2.3 billion, over the $16.4 billion reported for the first quarter of 2012. Net interest income on a taxable-equivalent basis increased to $172.8 million, up 4.9 percent over the $164.7 million reported for the first quarter a year ago.

Noted financial data for the first quarter:

  • Tier 1 and Total Risk-Based Capital Ratios for the Corporation at the end of the first quarter of 2013 were 14.23 percent and 15.44 percent, respectively, and are in excess of well-capitalized levels. The ratio of tangible common equity to tangible assets was 8.00 percent at the end of the first quarter of 2013, compared to 8.93 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 common shareholders' equity less goodwill and intangible assets divided by end of period total assets less goodwill and intangible assets.
  • Net interest income on a taxable-equivalent basis for the first quarter totaled $172.8 million, an increase of 4.9 percent compared to the $164.7 million reported for the first quarter of 2012. The increase was driven primarily 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 3.45 percent for the first quarter, compared to 3.73 percent for the first quarter of 2012 and 3.48 percent for the fourth quarter of 2012.
  • Non-interest income for the first quarter of 2013 was $77.8 million, compared to the $72.0 million reported a year earlier. Trust and investment management fees increased $1.2 million, or 6.0 percent, to $21.9 million, from the $20.7 million reported in the first quarter of 2012. Most of this increase was due to investment fees, up $1.3 million from the first quarter last year. Insurance commissions and fees were $13.1 million, a 5.6 percent increase over the $12.4 million reported for the first quarter of 2012. Other income was $11.0 million, up $3.8 million from the $7.2 million reported for the previous year's first quarter. The increase was due to a gain recognized from the sale of a bank owned downtown San Antonio office building and parking garage of $4.3 million that occurred in the first quarter of 2013.  
  • Non-interest expense for the first quarter of 2013 was $155.8 million, up $13.8 million, from the $142.0 million for the first quarter of 2012. Salaries and employee benefits were up $4.1 million, or 5.0 percent, over the same quarter a year earlier, as a result of normal annual merit and market increases, and an increase in incentive compensation offset in part by a decrease in employee stock compensation expense. Other expense was $41.5 million, an $8.6 million increase from the $32.9 million reported for the first quarter of 2012. Approximately $6.2 million of the increase was from the write-down of land that is part of the headquarters facility that was recently made available for sale. Frost also had an $812,000 increase in ATM expense, related to a branding arrangement that began in 2012 and more than doubled the number of Frost ATMs. In addition, fraud losses were up $488,000 when compared to the first quarter of 2012.
  • For the first quarter of 2013, the provision for loan losses was $6.0 million, compared to net charge-offs of $16.9 million. For the first quarter of 2012, the provision for loan losses was $1.1 million, compared to net charge offs of $4.1 million. The allowance for loan losses as a percentage of total loans was 1.02 percent at March 31, 2013, compared to 1.32 percent at the end of the first quarter of 2012. Non-performing assets were $105.9 million at the end of the first quarter of 2013, compared to $120.5 million at the end of the first quarter of 2012 and $105.2 million for the fourth quarter of 2012.

Cullen/Frost Bankers, Inc. will host a conference call on Wednesday, April 24, 2013 at 10 a.m. Central Daylight Time (CDT) to discuss the results for the quarter. 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. CDT until midnight Sunday, April 28, 2013 at 855-859-2056, with Conference ID# 35821897. The call will also be available by webcast on the company's website, frostbank.com, and available for playback after 2 p.m. CDT. 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 $22.5 billion in assets at March 31, 2013. 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.

 

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

(In thousands, except per share amounts)

2013

2012

1st Qtr

4th Qtr

3rd Qtr

2nd Qtr

1st Qtr

CONDENSED INCOME STATEMENTS

Net interest income

$

152,813

$

154,405

$

151,532

$

149,217

$

149,707

Net interest income(1)

172,802

172,156

167,341

163,972

164,707

Provision for loan losses

6,000

4,125

2,500

2,355

1,100

Non-interest income:

   Trust and investment management fees

21,885

20,543

20,843

21,279

20,652

   Service charges on deposit accounts

20,044

21,162

20,797

20,639

20,794

   Insurance commissions and fees

13,070

8,436

9,964

9,171

12,377

   Interchange and debit card transaction fees

4,011

4,330

4,194

4,292

4,117

   Other charges, commissions and fees 

7,755

7,740

7,265

7,825

7,350

   Net gain (loss) on securities transactions

5

4,435

--

370

(491)

   Other

11,010

9,241

8,095

6,187

7,180

   Total non-interest income

77,780

75,887

71,158

69,763

71,979

Non-interest expense:

   Salaries and wages

66,465

67,442

64,984

62,624

63,702

   Employee benefits

17,991

12,867

14,019

14,048

16,701

   Net occupancy

11,979

11,772

13,193

12,213

11,797

   Furniture and equipment

14,185

13,932

14,193

13,734

13,420

   Deposit insurance

2,889

3,159

2,593

2,838

2,497

   Intangible amortization

820

918

973

994

1,011

   Other

41,485

35,977

34,495

36,085

32,912

   Total non-interest expense

155,814

146,067

144,450

142,536

142,040

Income before income taxes

68,779

80,100

75,740

74,089

78,546

Income taxes

13,591

19,912

17,071

16,027

17,513

Net income

55,188

60,188

58,669

58,062

61,033

Preferred stock dividends and accretion

137

--

--

--

--

Net income available to common shareholders

$

55,051

$

60,188

$

58,669

$

58,062

$

61,033

PER COMMON SHARE DATA

Earnings per common share - basic

$

0.91

$

0.98

$

0.95

$

0.94

$

0.99

Earnings per common share - diluted

0.91

0.97

0.95

0.94

0.99

Cash dividends per common share

0.48

0.48

0.48

0.48

0.46

Book value per common share

        at end of quarter

 

38.33

 

39.32

 

39.35

 

38.48

 

37.81

OUTSTANDING COMMON SHARES

Period-end common shares

59,970

61,479

61,462

61,404

61,373

Weighted-average common shares - basic

60,593

61,382

61,317

61,291

61,201

Dilutive effect of stock compensation

581

339

369

344

332

Weighted-average common shares - diluted

61,174

61,721

61,686

61,635

61,533

SELECTED ANNUALIZED RATIOS

Return on average assets

1.01

%

1.09

%

1.11

%

1.14

%

1.23

%

Return on average common equity

9.47

9.84

9.75

9.95

10.59

Net interest income to average earning assets(1)

3.45

3.48

3.54

3.61

3.73

(1)

Taxable-equivalent basis assuming a 35% tax rate.

 

 

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

2013

2012

1st Qtr

4th Qtr

3rd Qtr

2nd Qtr

1st Qtr

    BALANCE SHEET SUMMARY

    ($ in millions)

    Average Balance:

      Loans

$

9,109

$

8,868

$

8,635

$

8,268

$

8,050

      Earning assets

20,415

20,138

19,218

18,605

18,087

      Total assets

22,213

21,964

21,010

20,401

19,920

      Non-interest-bearing demand deposits

7,431

7,690

7,161

6,829

6,399

      Interest-bearing deposits

11,292

10,736

10,289

10,053

9,998

      Total deposits

18,723

18,426

17,450

16,882

16,397

      Shareholders' equity

2,431

2,433

2,393

2,347

2,317

    Period-End Balance:

      Loans

$

9,162

$

9,224

$

8,811

$

8,490

$

8,127

      Earning assets

20,787

21,148

20,024

19,033

18,583

      Goodwill and intangible assets

543

544

545

546

547

      Total assets

22,498

23,124

21,848

20,866

20,417

      Total deposits

19,044

19,497

18,245

17,277

16,909

      Shareholders' equity

2,443

2,417

2,419

2,363

2,321

      Adjusted shareholders' equity(1)

2,229

2,179

2,144

2,110

2,076

    ASSET QUALITY

    ($ in thousands)

    Allowance for loan losses

$

93,589

$

104,453

$

105,401

$

105,648

$

107,181

      as a percentage of period-end loans

1.02

%

1.13

%

1.20

%

1.24

%

1.32

%

    Net charge-offs

$

16,864

$

5,073

$

2,747

$

3,888

$

4,066

      Annualized as a percentage of average loans

0.75

%

0.23

%

0.13

%

0.19

%

0.20

%

    Non-performing assets:

      Non-accrual loans

$

91,644

$

89,744

$

106,407

$

92,255

$

97,870

      Restructured loans

1,613

--

--

--

--

      Foreclosed assets

12,630

15,502

18,524

19,818

22,676

        Total

$

105,887

$

105,246

$

124,931

$

112,073

$

120,546

         As a percentage of:

      Total loans and  foreclosed assets

1.15

%

1.14

%

1.41

%

1.32

%

1.48

%

      Total assets

0.47

0.46

0.57

0.54

0.59

     CONSOLIDATED CAPITAL RATIOS

     Tier 1 Risk-Based Capital Ratio

14.23

%

13.68

%

14.10

%

14.07

%

14.47

%

     Total Risk-Based Capital Ratio

15.44

15.11

15.62

15.61

16.10

     Leverage Ratio

8.42

8.28

8.59

8.65

8.68

     Equity to Assets Ratio (period-end)

10.86

10.45

11.07

11.32

11.37

     Equity to Assets Ratio (average)

10.94

11.08

11.39

11.51

11.63

 

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

 

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

SOURCE Cullen/Frost Bankers, Inc.



RELATED LINKS

http://www.frostbank.com