Cullen/Frost Reports Third Quarter Results

- Average deposits rise 11.5 percent

- Average loans increase 7.1 percent

- Trust and investment fees up 8.9 percent

- Frost to enter Permian Basin market

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

SAN ANTONIO, Oct. 30, 2013 /PRNewswire/ -- Cullen/Frost Bankers, Inc. (NYSE: CFR) today reported third quarter 2013 results, as the Texas financial services leader continues to post steady results in an uncertain economic environment.

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Cullen/Frost's net income available to common shareholders for the third quarter of 2013 was $58.4 million, compared to third quarter 2012 earnings of $58.7 million. On a per-share basis, net income was $0.96 per diluted common share, compared to $0.95 per diluted common share reported a year earlier. Returns on average assets and common equity were 1.01 percent and 10.07 percent respectively, compared to 1.11 percent and 9.75 percent for the same period a year earlier.

For the third quarter of 2013, net interest income on a tax-equivalent basis increased 7.0 percent to $179.1 million, compared to the $167.3 million reported for the same quarter of 2012. Average deposits for the quarter were $19.5 billion, an increase of $2.0 billion, or 11.5 percent, over the $17.5 billion reported for the third quarter of 2012. For the third quarter of 2013, average loans were $9.3 billion, an increase of 7.1 percent compared to the $8.6 billion reported for the third quarter a year earlier.

The provision for loan losses was $5.1 million, compared to $2.5 million reported a year earlier, while the allowance for loan losses as a percentage of loans decreased to 1.00 percent from 1.20 percent for the same quarter of 2012.

"Cullen/Frost continues to generate steady results in an extended low-interest rate environment and an economy that seems to be waiting on clarity," said CEO Dick Evans. "I was pleased to see double-digit deposit growth and strong increases in net-interest income and trust and investment management fees. During the third quarter, we announced a merger agreement with WNB Bancshares, Inc. When this merger is complete, it will bring Frost into Midland and Odessa for the first time. The Permian Basin is a significant driver of the state's strong oil and gas business, and we are delighted to expand our franchise into this dynamic region.

"Average loans increased more than 7 percent despite a highly competitive lending environment and the ongoing uncertainty in Washington that is causing concern and caution among business owners," Evans said. "Our focused calling effort continues to expand our customer base, and our relationship managers are working harder than ever to grow loans. Our credit quality is manageable, capital levels remain strong, and we have plenty of liquidity to fund loans.

"Since 2007, before the financial crisis began, year-to-date average deposits at Frost have risen $8.8 billion, a reflection of our efforts to build and extend relationships based on our well-accepted value proposition. The greater liquidity continues to pressure the net interest margin in this challenging rate environment.

"We are fortunate to be located in Texas, where job growth consistently outpaces the national average. The dynamic Texas markets we serve performed well during the recession and are among the strongest in the U.S.," said Evans. 

"It has been five years since the 2008 financial crisis put the U.S. and global economy on the brink of collapse. Decisions we made during that period paved the way for our good performance today. We have consistently paid a shareholder dividend, and have increased the dividend annually for the past 19 years. 

"As always, our exceptional and dedicated employees bring the Frost culture to life every day, taking care of customers, helping our company grow and making our success possible," Evans said.

For the first nine months of 2013, net income available to common shareholders was $170.6 million compared to $177.8 million reported for the same period of 2012. Year-to-date earnings were $2.81 per diluted common share, compared to $2.88 per diluted common share for the same period in 2012. Returns on average assets and average equity for the first nine months of 2013 were 1.02 percent and 9.83 percent respectively, compared to 1.16 percent and 10.09 percent for the same period a year earlier.

Noted financial data for the third quarter of 2013 follows:

  • Tier 1 and Total Risk-Based Capital Ratios for the Corporation at the end of the third quarter of 2013 were 14.53 percent and 15.68 percent, respectively, and continue to be in excess of well capitalized levels. The tangible common equity ratio was 7.81 percent at the end of the third quarter of 2013, compared to 8.80 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, 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 third quarter of 2013 totaled $179.1 million, an increase of 7.0 percent, compared to $167.3 million for the same period a year ago. This increase resulted primarily from an increase in the average volume of earning assets and was partly offset by a decrease in the net interest margin. Strong growth in deposits has helped to fund the increase in earning assets. The net interest margin was 3.38 percent for the third quarter of 2013, compared to 3.54 percent for the third quarter of 2012, and 3.43 percent for the second quarter of 2013.
  • Non-interest income for the third quarter of 2013 totaled $74.0 million, a 4.0 percent increase compared to $71.2 million reported for the third quarter of 2012. Trust and investment management fees were $22.7 million, up $1.8 million, or 8.9 percent, from the third quarter of 2012, with approximately $1.2 million of the increase related to investment fees. Insurance commissions and fees were $10.4 million, compared to the $10.0 million reported the third quarter a year earlier. Other charges, commissions and fees were up $2.0 million to $9.3 million, with approximately half of the increase related to higher annuity income. Other income was down $1.5 million from last year's third quarter and was impacted by decreases in income from securities trading and customer derivative transactions.
  • Non-interest expense was $151.8 million for the quarter, up $7.4 million compared to the $144.5 million reported for the third quarter a year earlier. Total salaries rose $3.5 million, or 5.4 percent, to $68.5 million, and were impacted by an increase in the number of employees, combined with normal annual merit and market increases. Employee benefits rose $970,000, primarily related to increases in medical insurance expense and payroll taxes. Other expense was $36.9 million, up 6.9 percent, or $2.4 million, from $34.5 million for the third quarter last year. This increase was impacted by higher professional services expense, including $853,000 of transaction-related expenses associated with the pending acquisition of WNB Bancshares. Inc.
  • For the third quarter of 2013, the provision for loan losses was $5.1 million, compared to net charge-offs of $5.4 million. For the third quarter of 2012, the provision for loan losses was $2.5 million, compared to net charge-offs of $2.7 million. The allowance for loan losses as a percentage of total loans was 1.00 percent at September 30, 2013, compared to 1.20 percent at the end of the third quarter last year and 1.01 percent at the end of the second quarter of 2013. Non-performing assets were $98.1 million at the end of the third quarter, compared to $101.7 million last quarter-end and $124.9 million at last year's third quarter.

Cullen/Frost Bankers, Inc. will host a conference call on Wednesday, October 30, 2013, at 10:00 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 1-800-944-6430. Digital playback of the conference call will be available after 2 p.m. CT until midnight Sunday, November 3, 2013 at 855-859-2056 with Conference ID # of 86218467. 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 Web site, 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 $23.5 billion in assets at September 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

3rd Qtr

2nd Qtr

1st Qtr

4th Qtr

3rd Qtr

CONDENSED INCOME STATEMENTS

Net interest income

$

155,353

$

153,181

$

152,813

$

154,405

$

151,532

Net interest income(1)

179,121

173,966

172,802

172,156

167,341

Provision for loan losses

5,108

3,575

6,000

4,125

2,500

Non-interest income:

    Trust and investment management fees

22,692

22,561

21,885

20,543

20,843

    Service charges on deposit accounts

20,742

20,044

20,044

21,162

20,797

    Insurance commissions and fees

10,371

9,266

13,070

8,436

9,964

    Interchange and debit card transaction fees

4,376

4,268

4,011

4,330

4,194

    Other charges, commissions and fees

9,266

8,578

7,755

7,740

7,265

    Net gain (loss) on securities transactions

(14)

6

5

4,435

--

    Other

6,558

7,786

11,010

9,241

8,095

    Total non-interest income

73,991

72,509

77,780

75,887

71,158

Non-interest expense:

    Salaries and wages

68,524

66,502

66,465

67,442

64,984

    Employee benefits

14,989

14,629

17,991

12,867

14,019

    Net occupancy

13,094

12,645

11,979

11,772

13,193

    Furniture and equipment

14,629

14,986

14,185

13,932

14,193

    Deposit insurance

2,921

2,835

2,889

3,159

2,593

    Intangible amortization

780

788

820

918

973

    Other

36,886

37,373

41,485

35,977

34,495

    Total non-interest expense

151,823

149,758

155,814

146,067

144,450

Income before income taxes

72,413

72,357

68,779

80,100

75,740

Income taxes

11,969

12,694

13,591

19,912

17,071

Net income

60,444

59,663

55,188

60,188

58,669

Preferred stock dividends

2,015

2,688

--

--

--

Net income available to common shareholders

$

58,429

$

56,975

$

55,188

$

60,188

$

58,669

PER COMMON SHARE DATA

Earning per common share – basic

$

0.96

$

0.95

$

0.91

$

0.98

$

0.95

Earning per common share- diluted

0.96

0.94

0.91

0.97

0.95

Cash dividends per common share

0.50

0.50

0.48

0.48

0.48

Book value per common share at end of quarter

38.63

37.91

38.33

39.32

39.35

OUTSTANDING COMMON SHARES

Period-end common shares

60,492

60,236

59,970

61,479

61,462

Weighted-average common shares - basic

60,340

60,011

60,593

61,382

61,317

Dilutive effect of stock compensation

866

664

581

339

369

Weighted-average common shares - diluted

61,206

60,675

61,174

61,721

61,686

SELECTED ANNUALIZED RATIOS

Return on average assets

1.01

%

1.03

%

1.01

%

1.09

%

1.11

%

Return on average common equity

10.07

9.93

9.49

9.84

9.75

Net interest income to average earning assets(1)

3.38

3.43

3.45

3.48

3.54

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

 

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

2013

2012

3rd Qtr

2nd Qtr

1st Qtr

4th Qtr

3rd Qtr

BALANCE SHEET SUMMARY

    ($ in millions)

Average Balance:

    Loans

$

9,251

$

9,207

$

9,109

$

8,868

$

8,635

    Earning assets

21,199

20,468

20,415

20,138

19,218

    Total assets

22,926

22,232

22,213

21,964

21,010

    Non-interest-bearing demand deposits

7,738

7,452

7,431

7,690

7,161

    Interest-bearing deposits

11,722

11,319

11,292

10,736

10,289

    Total deposits

19,460

18,771

18,723

18,426

17,450

    Shareholders' equity

2,447

2,445

2,431

2,433

2,393

Period-End Balance:

    Loans

$

9,306

$

9,233

$

9,162

$

9,224

$

8,811

    Earning assets

21,688

20,755

20,787

21,148

20,024

    Goodwill and intangible assets

541

542

543

544

545

    Total assets

23,530

22,572

22,498

23,124

21,848

    Total deposits

19,979

19,078

19,044

19,497

18,245

    Shareholders' equity

2,481

2,428

2,443

2,417

2,419

    Adjusted shareholders' equity(1)

2,335

2,272

2,229

2,179

2,144

ASSET QUALITY

    ($ in thousands)

Allowance for loan losses:

$

93,147

$

93,400

$

93,589

$

104,453

$

105,401

    As a percentage of period-end loans

1.00

%

1.01

%

1.02

%

1.13

%

1.20

%

Net charge-offs:

$

5,361

$

3,764

$

16,864

$

5,073

$

2,747

    Annualized as a percentage of average loans

0.23

%

0.16

%

0.75

%

0.23

%

0.13

%

Non-performing assets:

    Non-accrual loans

$

79,081

$

86,714

$

91,644

$

89,744

$

106,407

    Restructured loans

8,243

1,900

1,613

--

--

    Foreclosed assets

10,748

13,047

12,630

15,502

18,524

      Total

$

98,072

$

101,661

$

105,887

$

105,246

$

124,931

    As a percentage of:

      Total loans and foreclosed assets

1.05

%

1.10

%

1.15

%

1.14

%

1.41

%

      Total assets

0.42

0.45

0.47

0.46

0.57

CONSOLIDATED CAPITAL RATIOS

Tier 1 Risk-Based Capital Ratio

14.53

%

14.22

%

14.23

%

13.68

%

14.10

%

Total Risk-Based Capital Ratio

15.68

15.39

15.44

15.11

15.62

Leverage Ratio

8.61

8.60

8.42

8.28

8.59

Equity to Assets Ratio (period-end)

10.54

10.76

10.86

10.45

11.07

Equity to Assets Ratio (average)

10.67

11.00

10.94

11.08

11.39

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

 

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

(In thousands, except per share amounts)

Nine Months Ended

September 30,

2013

2012

CONDENSED INCOME STATEMENTS

Net interest income

$

461,347

$

450,456

Net interest income(1)

525,890

496,020

Provision for loan losses

14,683

5,955

Non-interest income:

    Trust and investment management fees

67,138

62,774

    Service charges on deposit accounts

60,830

62,230

    Insurance commissions and fees

32,707

31,512

    Interchange and debit card transaction fees

12,655

12,603

    Other charges, commissions and fees

25,599

22,440

    Net gain (loss) on securities transactions

(3)

(121)

    Other

25,354

21,462

    Total non-interest income

224,280

212,900

Non-interest expense:

    Salaries and wages

201,491

191,310

    Employee benefits

47,609

44,768

    Net occupancy

37,718

37,203

    Furniture and equipment

43,800

41,347

    Deposit insurance

8,645

7,928

    Intangible amortization

2,388

2,978

    Other

115,744

103,492

    Total non-interest expense

457,395

429,026

Income before income taxes

213,549

228,375

Income taxes

38,254

50,611

Net income

175,295

177,764

Preferred stock dividends

4,703

--

Net income available to common shareholders

$

170,592

$

177,764

PER COMMON SHARE DATA

Earning per common share - basic

$

2.82

$

2.89

Earning per common share – diluted

2.81

2.88

Cash dividends per common share

1.48

1.42

Book value per common share at end of period

38.63

39.35

OUTSTANDING COMMON SHARES

Period-end common shares

60,492

61,462

Weighted-average common shares – basic

60,313

61,270

Dilutive effect of stock compensation

724

347

Weighted-average common shares – diluted

61,037

61,617

SELECTED ANNUALIZED RATIOS

Return on average assets

1.02

%

1.16

%

Return on average common equity

9.83

10.09

Net interest income to average earning assets(1)

3.42

3.63

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

 

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

As of or for the

Nine Months Ended

September 30,

2013

2012

BALANCE SHEET SUMMARY

    ($ in millions)

Average Balance:

    Loans

$

9,190

$

8,319

    Earning assets

20,697

18,639

    Total assets

22,459

20,446

    Non-interest-bearing demand deposits

7,541

6,798

    Interest-bearing deposits

11,446

10,114

    Total deposits

18,987

16,912

    Shareholders' equity

2,441

2,352

Period-End Balance:

    Loans

$

9,306

$

8,811

    Earning assets

21,688

20,024

    Goodwill and intangible assets

541

545

    Total assets

23,530

21,848

    Total deposits

19,979

18,245

    Shareholders' equity

2,481

2,419

    Adjusted shareholders' equity(1)

2,335

2,144

ASSET QUALITY

    ($ in thousands)

Allowance for loan losses:

$

93,147

$

105,401

As a percentage of period-end loans

1.00

%

1.20

%

Net charge-offs:

$

25,989

$

10,701

    Annualized as a percentage of average loans

0.38

%

0.17

%

Non-performing assets:

    Non-accrual loans

$

79,081

$

106,407

    Restructured loans

8,243

--

    Foreclosed assets

10,748

18,524

      Total

$

98,072

$

124,931

As a percentage of:

      Total loans and foreclosed assets

1.05

%

1.41

%

      Total assets

0.42

0.57

CONSOLIDATED CAPITAL RATIOS

Tier 1 Risk-Based Capital Ratio

14.53

%

14.10

%

Total Risk-Based Capital Ratio

15.68

15.62

Leverage Ratio

8.61

8.59

Equity to Assets Ratio (period-end)

10.54

11.07

Equity to Assets Ratio (average)

10.87

11.51

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

SOURCE Cullen/Frost Bankers, Inc.



RELATED LINKS

http://www.frostbank.com