Cullen/Frost Reports Second Quarter Results

- Double-digit growth in loans and deposits

- Asset quality continues to improve

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

SAN ANTONIO, July 24, 2013 /PRNewswire/ -- Cullen/Frost Bankers, Inc. (NYSE: CFR) today reported results for the second quarter of 2013, as the Texas financial services leader continues to demonstrate its ability to operate effectively in a challenging regulatory and interest rate environment.

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Cullen/Frost's net income available to common shareholders for the second quarter of 2013 was $57.0 million, compared to second quarter 2012 earnings of $58.1 million. On a per-share basis, net income was $0.94 per diluted common share, compared to $0.94 per diluted common share reported a year earlier. The second quarter of 2013 included Cullen Frost's initial preferred stock dividend of $2.7 million. Returns on average assets and common equity were 1.03 percent and 9.93 percent respectively, compared to 1.14 percent and 9.95 percent for the same period a year earlier.

"Cullen/Frost delivered another solid quarter for our shareholders, amid a slowly recovering economy, increasing regulatory challenges and continued low interest rates," said Dick Evans, Cullen/Frost chairman and CEO. "I was pleased to see average loans increase by 11.4 percent over the same quarter of 2012, the result of our hard work and disciplined calling effort. With an 11.2 percent increase in average deposits and 6.0 percent growth in trust fees this quarter, we believe that our value proposition continues to resonate well with customers. We continue to manage expenses well.

"As always, we are fortunate to be in Texas, with its diversified economy and strong job growth," Evans said. "Jobs in Texas are expected to grow about 2.5 percent this year, close to a percentage point faster than the national average. The Texas unemployment rate is likely to end the year at close to 6.2 percent, remaining about a percentage point below the national average. Fueled by robust energy and technology sectors and stable housing markets, Texas remains one of the strongest states in the nation.

"Despite evolving regulatory challenges, Frost is moving forward confidently, providing outstanding technology, convenience and service. With the Frost app for iPhone introduced earlier this year, we are strengthening our digital services significantly. Once again, we added locations in key Frost markets, opening two financial centers in the Dallas region and one in the Houston region this quarter. Through our marketing efforts, we are increasing brand awareness to help more Texans understand the Frost difference.

"Our dedicated employees continue to add value to customer relationships and provide exceptional, award-winning service. I am grateful to each of them for their commitment to bringing our culture to life every day," Evans continued.

Average loans for the second quarter of 2013 were $9.2 billion, up $939,000 over the $8.3 billion reported for last year's second quarter. Average deposits were up $1.9 billion to $18.8 billion compared to $16.9 billion a year earlier.

For the first six months of 2013, net income available to common shareholders was $112.2 million, or $1.85 per diluted common share, compared to $119.1 million, or $1.93 per diluted common share, for the first six months of 2012. Returns on average assets and average common equity for the first six months of 2013 were 1.02 percent and 9.71 percent, respectively, compared to 1.19 percent and 10.27 percent for the same period in 2012.

Other noted financial data for the second quarter follows:

  • Tier 1 and Total Risk-Based Capital Ratios remained strong at 14.22 percent and 15.39 percent, respectively, at the end of the second quarter of 2013 and are in excess of well capitalized levels. The tangible common equity ratio was 7.90 percent at the end of the second quarter of 2013 compared to 8.94 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 preferred stock, less goodwill and intangible assets divided by end of period total assets less goodwill and intangible assets. In July 2013, the company's primary federal regulator, the Federal Reserve,  released their new capital adequacy guidelines which become effective on January 1, 2015 and include a phase in period. The company meets these guidelines today on a fully phased-in basis.
  • Net interest income on a taxable-equivalent basis increased $10.0 million, or 6.1 percent, to $174.0 million, from the $164.0 million reported a year earlier. This increase primarily resulted from an increase in the average volume of interest earning assets and was partly offset by a decrease in the net interest margin. Strong growth in deposits helped to fund the increase in the volume of earning assets. The net interest margin was 3.43 percent for the second quarter, compared to 3.61 percent for the second quarter of 2012 and 3.45 percent for the first quarter this year.
  • Non-interest income for the second quarter of 2013 was $72.5 million, compared to the $69.8 million reported a year earlier. Trust and investment management fees were $22.6 million, up $1.3 million or 6.0 percent, compared to $21.3 million in the second quarter of 2012. Most of the increase resulted from a $1.2 million increase in investment fees from the second quarter last year. Other charges, commissions and fees were $8.6 million, up $753,000, or 9.6 percent, when compared to $7.8 million reported in the same quarter a year earlier, primarily due to increases in income from the sale of mutual funds (up $497,000) and income related to the sale of annuities (up $348,000). Other income increased $1.6 million to $7.8 million, primarily related to sundry income (up $952,000) and mineral interest income (up $533,000). The increase in sundry income from various miscellaneous items included the benefit of $1.8 million related to the reversal of an accrual associated with an acquisition contingency.
  • Non-interest expense for the quarter was $149.8 million, an increase of $7.2 million, or 5.1 percent, compared to the $142.5 million reported for the second quarter of last year. Salaries and wages rose $3.9 million, or 6.2 percent, to $66.5 million as a result of normal annual merit and market increases, as well as increases in incentive compensation. Furniture and equipment expense increased $1.3 million, or 9.1 percent, from the same quarter last year, with most of the increase coming from service contracts expense and software amortization. Other non-interest expense increased $1.3 million or 3.6 percent, from a year earlier, primarily related to an increase of $985,000 in advertising/promotion, partly due to increased promotion of mobile banking products.
  • For the second quarter of 2013, the provision for possible loan losses was $3.6 million, compared to net charge-offs of $3.8 million. The loan loss provision for the second quarter of 2012 was $2.4 million, compared to net charge-offs of $3.9 million. Non-performing assets for the second quarter of 2013 were $101.7 million, compared to $105.9 million last quarter and $112.1 million a year earlier. The allowance for possible loan losses as a percentage of loans at June 30, 2013 was 1.01 percent, compared to 1.02 percent last quarter and 1.24 percent at the end of the second quarter of 2012.

Cullen/Frost Bankers, Inc. will host a conference call on Wednesday, July 24, 2013, at 10 a.m. Central Time (CT) 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 2 p.m. CT until midnight Sunday, July 28, 2013 at 855-859-2056, with Conference ID # 18691369. The call will also be available by webcast at the URL listed below and available for playback after 2 p.m. CT. After entering the website, www.frostbank.com, 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 $22.6 billion in assets at June 30, 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.

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)

2013

2012

2nd Qtr

1st Qtr

4th Qtr

3rd Qtr

2nd Qtr

       CONDENSED INCOME STATEMENTS

        Net interest income

$

153,181

$

152,813

$

154,405

$

151,532

$

149,217

        Net interest income(1) 

173,966

172,802

172,156

167,341

163,972

        Provision for loan losses

3,575

6,000

4,125

2,500

2,355

        Non-interest income:

         Trust and investment management fees

22,561

21,885

20,543

20,843

21,279

         Service charges on deposit accounts

20,044

20,044

21,162

20,797

20,639

         Insurance commissions and fees

9,266

13,070

8,436

9,964

9,171

          Interchange and debit card transaction fees

4,268

4,011

4,330

4,194

4,292

          Other charges, commissions and fees

8,578

7,755

7,740

7,265

7,825

          Net gain (loss) on securities transactions

6

5

4,435

--

370

          Other

7,786

11,010

9,241

8,095

6,187

         Total non-interest income

72,509

77,780

75,887

71,158

69,763

      Non-interest expense:

        Salaries and wages

66,502

66,465

67,442

64,984

62,624

        Employee benefits

14,629

17,991

12,867

14,019

14,048

        Net occupancy

12,645

11,979

11,772

13,193

12,213

        Furniture and equipment

14,986

14,185

13,932

14,193

13,734

        Deposit insurance

2,835

2,889

3,159

2,593

2,838

        Intangible amortization

788

820

918

973

994

          Other

37,373

41,485

35,977

34,495

36,085

      Total non-interest expense

149,758

155,814

146,067

144,450

142,536

      Income before income taxes

72,357

68,779

80,100

75,740

74,089

      Income taxes

12,694

13,591

19,912

17,071

16,027

     Net income

59,663

55,188

60,188

58,669

58,062

     Preferred stock dividends                 

2,688

--

--

--

--

     Net income available to common shareholders

$

56,975

$

55,188

$

60,188

$

58,669

$

58,062

     PER COMMON SHARE DATA

     Earning per common share - basic

$

0.95

$

0.91

$

0.98

$

0.95

$

0.94

     Earning per common - diluted

0.94

0.91

0.97

0.95

0.94

     Cash dividends per common share

0.50

0.48

0.48

0.48

0.48

     Book value per common share at end of  quarter

37.91

38.33

39.32

39.35

38.48

       OUTSTANDING COMMON SHARES

       Period-end common shares

60,236

59,970

61,479

61,462

61,404

       Weighted-average common shares - basic

60,011

60,593

61,382

61,317

61,291

       Dilutive effect of stock compensation

664

581

339

369

344

       Weighted-average common shares - diluted

60,675

61,174

61,721

61,686

61,635

       SELECTED ANNUALIZED RATIOS

       Return on average assets

1.03

%

1.01

%

1.09

%

1.11

%

1.14

%

       Return on average common equity

9.93

9.49

9.84

9.75

9.95

       Net interest income to average earning

           assets(1) 

 

3.43

 

3.45

 

3.48

 

3.54

 

3.61

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

 

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

2013

2012

2nd Qtr

1st Qtr

4th Qtr

3rd Qtr

2nd Qtr

       BALANCE SHEET SUMMARY

       ($ in millions)

      Average Balance:

        Loans

$

9,207

$

9,109

$

8,868

$

8,635

$

8,268

        Earning assets

20,468

20,415

20,138

19,218

18,605

        Total assets

22,232

22,213

21,964

21,010

20,401

        Non-interest-bearing demand deposits

7,452

7,431

7,690

7,161

6,829

        Interest-bearing deposits

11,319

11,292

10,736

10,289

10,053

        Total deposits

18,771

18,723

18,426

17,450

16,882

        Shareholders' equity

2,445

2,431

2,433

2,393

2,347

      Period-End Balance:

        Loans

$

9,233

$

9,162

$

9,224

$

8,811

$

8,490

        Earning assets

20,755

20,787

21,148

20,024

19,033

        Goodwill and intangible assets

542

543

544

545

546

        Total assets

22,572

22,498

23,124

21,848

20,866

        Total deposits

19,078

19,044

19,497

18,245

17,277

        Shareholders' equity

2,428

2,443

2,417

2,419

2,363

        Adjusted shareholders' equity(1)

2,272

2,229

2,179

2,144

2,110

      ASSET QUALITY

      ($ in thousands)

        Allowance for  loan losses

$

93,400

$

93,589

$

104,453

$

105,401

$

105,648

            as a percentage of period-end loans

1.01

%

1.02

%

1.13

%

1.20

%

1.24

%

      Net charge-offs:

$

3,764

$

16,864

$

5,073

$

2,747

$

3,888

           Annualized as a percentage of average

           loans

 

0.16

 

%

 

0.75

 

%

 

0.23

 

%

 

0.13

 

%

 

0.19

 

%

        Non-performing assets:

           Non-accrual loans

$

86,714

$

91,644

$

89,744

$

106,407

$

92,255

           Restructured loans

1,900

1,613

--

--

--

           Foreclosed assets

13,047

12,630

15,502

18,524

19,818

           Total

$

101,661

$

105,887

$

105,246

$

124,931

$

112,073

        As a percentage of:

           Total loans and foreclosed assets

1.10

%

1.15

%

1.14

%

1.41

%

1.32

%

           Total assets

0.45

0.47

0.46

0.57

0.54

      CONSOLIDATED CAPITAL RATIOS

      Tier 1 Risk-Based Capital Ratio

14.22

%

14.23

%

13.68

%

14.10

%

14.07

%

      Total Risk-Based Capital Ratio

15.39

15.44

15.11

15.62

15.61

      Leverage Ratio

8.60

8.42

8.28

8.59

8.65

      Equity to Assets Ratio (period-end)

10.76

10.86

10.45

11.07

11.32

      Equity to Assets Ratio (average)

11.00

10.94

11.08

11.39

11.51

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

 

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

(In thousands, except per share amounts)

Six Months Ended

June 30,

2013

2012

   CONDENSED INCOME STATEMENTS

   Net interest income

$

305,994

$

298,924

   Net interest income(1) 

346,767

328,679

   Provision for loan losses

9,575

3,455

   Non-interest income:

   Trust and investment management fees

44,446

41,931

   Service charges on deposit accounts

40,088

41,433

   Insurance commissions and fees

22,336

21,548

   Interchange and debit card transaction fees

8,279

8,409

   Other charges, commissions and fees

16,333

15,175

   Net gain (loss) securities transactions

11

(121)

   Other

18,796

13,367

   Total non-interest income

150,289

141,742

   Non-interest expense:

   Salaries and wages

132,967

126,326

   Employee benefits

32,620

30,749

   Net occupancy

24,624

24,010

   Furniture and equipment

29,171

27,154

   Deposit insurance

5,724

5,335

   Intangible amortization

1,608

2,005

  Other

78,858

68,997

   Total non-interest expense

305,572

284,576

   Income before income taxes

141,136

152,635

   Income taxes

26,285

33,540

   Net Income

114,851

119,095

   Preferred stock dividends

2,688

--

   Net income available to common shareholders

$

112,163

$

119,095

   PER COMMON SHARE DATA

   Earning per common share – basic

$

1.86

$

1.94

   Earning per common share– diluted

1.85

1.93

   Cash dividends per common share

0.98

0.94

   Book value per common share at end of period

37.91

38.48

   OUTSTANDING COMMON SHARES

   Period-end common shares

60,236

61,404

   Weighted-average common shares - basic

60,300

61,246

   Dilutive effect of stock compensation

629

339

   Weighted-average common shares - diluted

60,929

61,585

   SELECTED ANNUALIZED RATIOS

   Return on average assets

1.02

%

1.19

%

   Return on average common equity

9.71

10.27

   Net interest income to average earning assets(1)  

3.44

3.67

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

 

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

As of or for the

Six Months Ended

June 30,

2013

2012

   BALANCE SHEET SUMMARY

   ($ in millions)

   Average Balance:

   Loans

$

9,158

$

8,159

   Earning assets

20,442

18,346

   Total assets

22,223

20,161

   Non-interest-bearing demand deposits

7,442

6,614

   Interest-bearing deposits

11,305

10,025

   Total deposits

18,747

16,639

   Shareholders' equity

2,438

2,332

   Period-End Balance:

   Loans

$

9,233

$

8,490

   Earning assets

20,755

19,033

   Goodwill and intangible assets

542

546

   Total assets

22,572

20,866

   Total deposits

19,078

17,277

   Shareholders' equity

2,428

2,363

   Adjusted shareholders' equity(1) 

2,272

2,109

   ASSET QUALITY

($ in thousands)

   Allowance for loan losses

$

93,400

$

105,648

as a percentage of period-end loans

1.01

%

1.24

%

   Net charge-offs:

$

20,628

$

7,954

Annualized as a percentage of average loans

0.45

%

0.20

%

 Non-performing assets:

 Non-accrual loans

$

86,714

$

92,255

 Restructured Loans

1,900

--

 Foreclosed assets

13,047

19,818

Total

$

101,661

$

112,073

   As a percentage of:

Total loans and foreclosed assets

1.10

%

1.32

%

Total assets

0.45

0.54

 CONSOLIDATED CAPITAL RATIOS

Tier 1 Risk-Based Capital Ratio

14.22

%

14.07

%

Total Risk-Based Capital Ratio

15.39

15.61

Leverage Ratio

8.60

8.65

Equity to Assets Ratio (period-end)

10.76

11.32

Equity to Assets Ratio (average)

10.97

11.57

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

 

 

SOURCE Cullen/Frost Bankers, Inc.



RELATED LINKS

http://www.frostbank.com