Cullen/Frost Reports Second Quarter Results

- Double-digit growth in loans and deposits
- Asset quality continues to improve

PR Newswire

SAN ANTONIO, July 24, 2013 /PRNewswire/ -- Cullen/Frost Bankers, Inc. (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.

(Logo: http://photos.prnewswire.com/prnh/20030109/CFRLOGO)

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. (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).

 

 

Rates

View Comments (0)