Cullen/Frost Reports First Quarter Results - Loans grow by 13.2 percent

- Deposits up by 14.2 percent

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.



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