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Cullen/Frost Reports First Quarter Results

Cullen/Frost increases quarterly common dividend by 6.0%

SAN ANTONIO, April 25, 2019 /PRNewswire/ -- Cullen/Frost Bankers, Inc. (CFR) today reported first quarter 2019 results. Net income available to common shareholders for the first quarter of 2019 was $114.5 million, compared to $104.5 million in the first quarter of 2018, representing an increase of 9.6 percent. On a per-share basis, net income for the first quarter of 2019 was $1.79 per diluted common share, up 11.2 percent compared to $1.61 per diluted common share reported a year earlier. Returns on average assets and average common equity were 1.48 percent and 14.08 percent, respectively, for the first quarter of 2019 compared to 1.36 percent and 13.62 percent, respectively, for the same period a year earlier.

For the first quarter of 2019, net interest income was $246.5 million, up 7.3 percent compared to the same quarter in 2018. Average loans for the first quarter of 2019 increased $910.6 million, or 6.8 percent, to $14.2 billion, from the $13.3 billion reported for the first quarter a year earlier. Average deposits for the quarter were $26.1 billion compared to $26.4 billion reported for last year's first quarter, a decrease of 1.2 percent.

"During the first quarter, Frost bankers throughout the state continued to execute soundly and consistently on our organic growth plan," said Cullen/Frost Chairman and CEO Phil Green.  "Our focus is on building and cultivating long-term relationships with our customers, and remaining true to the Frost culture that has sustained us for more than 150 years. "Noted financial data for the first quarter of 2019 follows:

  • The Common Equity Tier 1, Tier 1 and Total Risk-Based Capital Ratios at the end of the first quarter of 2019 were 12.34 percent, 13.00 percent and 14.68 percent, respectively, and continue to be in excess of well-capitalized levels and exceed Basel III minimum requirements.
  • Net interest income of $246.5 million represented a 7.3 percent increase over the prior year period. The net interest margin was 3.79 percent for the first quarter of 2019, up 7 basis points over the fourth quarter of 2018 net interest margin of 3.72 percent.
  • Non-interest income for the first quarter of 2019 totaled $96.8 million, an increase of $5.3 million, or 5.8 percent, from the $91.4 million reported for the first quarter of 2018. Insurance commissions and fees of $18.4 million increased $2.4 million, or 15.2 percent, from the previous year. The increase was driven by increases in benefits commissions, property and casualty commissions, and life insurance commissions. Trust and investment management fees were $31.7 million, up $2.1 million, or 7.1 percent, from the first quarter of 2018. Higher trust and investment management fees were primarily driven by strong performance in equity markets and higher oil and gas fees. Other non-interest income in the first quarter of 2019 was $13.6 million, up $661,000, or 5.1 percent, from the first quarter last year. The increase was partly impacted by gains on the sale of various branch and operational facilities which totaled $4.0 million in the first quarter of 2019 compared to $3.7 million in the same period last year.
  • Non-interest expense was $201.8 million for the quarter, up $5.2 million, or 2.6 percent, compared to the $196.6 million reported for the first quarter a year earlier. Total salaries and wages rose $5.8 million, or 6.7 percent, to $92.5 million, due to an increase in the number of employees and normal annual merit and market increases. Technology, furniture and equipment expense for the first quarter increased by $2.0 million, or 10.1 percent, from the first quarter of 2018. The increase was primarily driven by a $1.6 million increase in software maintenance expense. Deposit insurance expense decreased by $2.1 million compared to the first quarter of 2018, primarily due to the termination of the FDIC's quarterly surcharge in the fourth quarter of 2018 as the Deposit Insurance Fund reserve ratio exceeded the statutory minimum as of September 30, 2018. Other non-interest expense was down $1.5 million or 3.5 percent compared to the first quarter of 2018. The decrease from the year-ago period was mainly driven by a $3.7 million donation to the Frost Charitable Foundation in the first quarter of 2018.
  • For the first quarter of 2019, the provision for loan losses was $11.0 million, compared to net charge-offs of $6.8 million. This compares with $3.8 million in provisions and $9.2 million in net charge-offs for the fourth quarter of 2018, and $6.9 million in provisions and $12.4 million in net charge-offs in the first quarter of 2018. The allowance for loan losses as a percentage of total loans was 0.95 percent at March 31, 2019, compared to 0.94 percent at the end of the fourth quarter of 2018 and 1.12 percent at the end of the first quarter of 2018. Non-performing assets were $97.4 million at the end of the first quarter of 2019, compared to $74.9 million at the end of the fourth quarter of 2018 and $136.6 million at the end of the first quarter of 2018.

The Cullen/Frost board declared a second-quarter cash dividend of $0.71 per common share, representing a 6.0 percent increase over the previous year's dividend, payable June 14, 2019 to shareholders of record on May 31 of this year. The board of directors declared a cash dividend of $.3359375 per share of the Noncumulative Perpetual Preferred Stock, Series A, which is traded on the NYSE under the symbol "CFR PrA." The Series A Preferred Stock dividend is payable on June 17, 2019, to shareholders of record on May 31 of this year.

Cullen/Frost Bankers, Inc. will host a conference call on Thursday, April 25, 2019, 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 1-800-944-6430 or via webcast on our investor relations website linked below.

Playback of the conference call will be available after 2 p.m. CT on the day of the call until midnight Sunday, April 28, 2019 at 855-859-2056 with Conference ID # of 5498778. The call will also be available by webcast at the URL listed below after 2 p.m. CT on the day of the call.

Cullen/Frost investor relations website: www.frostbank.com/investor-relations/

Cullen/Frost Bankers, Inc. (CFR) is a financial holding company, headquartered in San Antonio, with $31.7 billion in assets at March 31, 2019. One of the 60 largest U.S. banks, 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, Permian Basin, 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 www.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 our future filings with the SEC, in press releases, and in oral and written statements made by us or with our approval 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, services or operations; (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 us and our customers and our assessment of that impact.
  • Volatility and disruption in national and international financial and commodity 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 effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which we and our subsidiaries must comply.
  • The soundness of other financial institutions.
  • Political instability.
  • Impairment of our 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 our borrowers.
  • Technological changes.
  • The cost and effects of failure, interruption, or breach of security of our systems.
  • Acquisitions and integration of acquired businesses.
  • Our ability to increase market share and control expenses.
  • Our ability to attract and retain qualified employees.
  • Changes in the competitive environment in our 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 our vendors, internal control systems or information systems.
  • Changes in our liquidity position.
  • Changes in our organization, compensation and benefit plans.
  • The costs and effects of legal and regulatory developments, the resolution of legal proceedings or regulatory or other governmental inquiries, the results of regulatory examinations or reviews and the ability to obtain required regulatory approvals.
  • Greater than expected costs or difficulties related to the integration of new products and lines of business.
  • Our 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. We do not undertake any 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)












2019


2018


1st Qtr


4th Qtr


3rd Qtr


2nd Qtr


1st Qtr

CONDENSED INCOME STATEMENTS










Net interest income

$

246,469



$

249,209



$

241,665



$

237,270



$

229,748


Net interest income (1)

271,179



273,810



265,687



260,531



252,536


Provision for loan losses

11,003



3,767



2,650



8,251



6,945


Non-interest income:










Trust and investment management fees

31,697



29,882



30,801



29,121



29,587


Service charges on deposit accounts

20,790



21,632



21,569



21,142



20,843


Insurance commissions and fees

18,406



11,394



11,037



10,556



15,980


Interchange and debit card transaction fees

3,280



3,774



3,499



3,446



3,158


Other charges, commissions and fees

9,062



9,371



9,580



9,273



9,007


Net gain (loss) on securities transactions



(43)



(34)



(60)



(19)


Other

13,550



11,108



11,205



11,588



12,889


Total non-interest income

96,785



87,118



87,657



85,066



91,445












Non-interest expense:










Salaries and wages

92,476



90,878



87,547



85,204



86,683


Employee benefits

23,526



19,066



18,355



17,907



21,995


Net occupancy

19,267



17,699



19,894



19,455



19,740


Technology, furniture and equipment

21,664



21,960



21,004



20,459



19,679


Deposit insurance

2,808



2,219



4,694



4,605



4,879


Intangible amortization

325



331



336



369



388


Other

41,734



47,544



41,838



40,909



43,247


Total non-interest expense

201,800



199,697



193,668



188,908



196,611


Income before income taxes

130,451



132,863



133,004



125,177



117,637


Income taxes

13,955



13,610



15,160



13,836



11,157


Net income

116,496



119,253



117,844



111,341



106,480


Preferred stock dividends

2,016



2,016



2,016



2,015



2,016


Net income available to common shareholders

$

114,480



$

117,237



$

115,828



$

109,326



$

104,464












PER COMMON SHARE DATA










Earnings per common share - basic

$

1.80



$

1.84



$

1.80



$

1.70



$

1.63


Earnings per common share - diluted

1.79



1.82



1.78



1.68



1.61


Cash dividends per common share

0.67



0.67



0.67



0.67



0.57


Book value per common share at end of quarter

54.68



51.19



49.49



49.53



48.58












OUTSTANDING COMMON SHARES










Period-end common shares

63,081



62,986



63,923



63,904



63,794


Weighted-average common shares - basic

63,009



63,441



63,892



63,837



63,649


Dilutive effect of stock compensation

819



811



1,022



1,062



1,013


Weighted-average common shares - diluted

63,828



64,252



64,914



64,899



64,662












SELECTED ANNUALIZED RATIOS










Return on average assets

1.48

%


1.48

%


1.49

%


1.43

%


1.36

%

Return on average common equity

14.08



14.85



14.40



14.03



13.62


Net interest income to average earning assets

3.79



3.72



3.66



3.64



3.52












(1) Taxable-equivalent basis assuming a 21% tax rate.

 

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)



2019


2018


1st Qtr


4th Qtr


3rd Qtr


2nd Qtr


1st Qtr

BALANCE SHEET SUMMARY










($ in millions)










Average Balance:










Loans

$

14,205



$

13,949



$

13,683



$

13,537



$

13,295


Earning assets

28,954



29,153



28,796



28,647



29,002


Total assets

31,356



31,330



30,918



30,758



31,131


Non-interest-bearing demand deposits

10,193



10,740



10,690



10,629



10,972


Interest-bearing deposits

15,919



15,767



15,462



15,440



15,457


Total deposits

26,112



26,507



26,152



26,069



26,429


Shareholders' equity

3,441



3,277



3,335



3,270



3,255












Period-End Balance:










Loans

$

14,406



$

14,100



$

13,815



$

13,712



$

13,364


Earning assets

29,283



29,894



29,042



28,494



29,414


Goodwill and intangible assets

658



659



659



659



660


Total assets

31,665



32,293



31,223



30,687



31,459


Total deposits

26,295



27,149



26,349



25,996



26,678


Shareholders' equity

3,594



3,369



3,308



3,310



3,243


Adjusted shareholders' equity (1)

3,500



3,433



3,449



3,373



3,297












ASSET QUALITY










($ in thousands)










Allowance for loan losses:

$

136,350



$

132,132



$

137,578



$

150,226



$

149,885


As a percentage of period-end loans

0.95

%


0.94

%


1.00

%


1.10

%


1.12

%











Net charge-offs:

$

6,785



$

9,213



$

15,298



$

7,910



$

12,424


Annualized as a percentage of average loans

0.19

%


0.26

%


0.44

%


0.23

%


0.38

%











Non-performing assets:










Non-accrual loans

$

92,162



$

73,739



$

82,601



$

119,181



$

123,152


Restructured loans

4,028









12,058


Foreclosed assets

1,175



1,175



3,765



3,643



1,371


Total

$

97,365



$

74,914



$

86,366



$

122,824



$

136,581


As a percentage of:










Total loans and foreclosed assets

0.68

%


0.53

%


0.62

%


0.90

%


1.02

%

Total assets

0.31



0.23



0.28



0.40



0.43












CONSOLIDATED CAPITAL RATIOS










Common Equity Tier 1 Risk-Based Capital Ratio (2)

12.34

%


12.27

%


12.56

%


12.33

%


12.30

%

Tier 1 Risk-Based Capital Ratio (2)

13.00



12.94



13.24



13.02



13.01


Total Risk-Based Capital Ratio (2)

14.68



14.64



14.99



14.85



14.89


Leverage Ratio

9.35



9.06



9.19



9.02



8.62


Equity to Assets Ratio (period-end)

11.35



10.43



10.60



10.78



10.31


Equity to Assets Ratio (average)

10.97



10.46



10.79



10.63



10.46












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


(2) After a review of risk-weight classifications during the first quarter of 2019, risk-weightings for certain loans were reclassified. Amounts reported prior to March 31. 2019 have been revised to reflect these reclassifications.

 

 

Cullen/Frost Bankers, Inc.

TAXABLE-EQUIVALENT YIELD/COST AND AVERAGE BALANCES (UNAUDITED)



2019


2018


1st Qtr


4th Qtr


3rd Qtr


2nd Qtr


1st Qtr

TAXABLE-EQUIVALENT YIELD/COST (1)










Earning Assets:










Interest-bearing deposits

2.50

%


2.35

%


2.05

%


1.93

%


1.55

%

Federal funds sold and resell agreements

2.58



2.41



2.14



1.92



1.66


Securities

3.37



3.39



3.41



3.36



3.36


Loans, net of unearned discounts

5.33



5.20



5.04



4.90



4.65


Total earning assets

4.27



4.15



4.04



3.93



3.71












Interest-Bearing Liabilities:










Interest-bearing deposits:










Savings and interest checking

0.09



0.08



0.09



0.08



0.07


Money market deposit accounts

1.09



1.00



0.93



0.74



0.41


Time accounts

1.43



1.14



0.87



0.66



0.51


Public funds

1.39



1.31



1.11



0.99



0.73


Total interest-bearing deposits

0.69



0.63



0.57



0.46



0.28












Total deposits

0.42



0.37



0.34



0.27



0.16












Federal funds purchased and repurchase agreements

1.72



1.56



0.90



0.25



0.24


Junior subordinated deferrable interest debentures

4.40



4.24



4.09



3.85



3.35


Subordinated notes payable and other notes

4.72



4.72



4.72



4.72



4.72


Total interest-bearing liabilities

0.81



0.74



0.64



0.50



0.33












Net interest spread

3.46



3.41



3.40



3.43



3.38


Net interest income to total average earning assets

3.79



3.72



3.66



3.64



3.52












AVERAGE BALANCES










($ in millions)










Assets:










Interest-bearing deposits

$

1,729



$

2,452



$

2,799



$

2,885



$

3,683


Federal funds sold and resell agreements

250



317



260



296



186


Securities

12,770



12,435



12,053



11,928



11,839


Loans, net of unearned discount

14,205



13,949



13,683



13,537



13,295


Total earning assets

$

28,954



$

29,153



$

28,796



$

28,647



$

29,002












Liabilities:










Interest-bearing deposits:










Savings and interest checking

$

6,774



$

6,673



$

6,675



$

6,688



$

6,635


Money market deposit accounts

7,696



7,792



7,620



7,578



7,590


Time accounts

895



836



799



787



778


Public funds

554



467



369



387



453


Total interest-bearing deposits

15,919



15,767



15,462



15,440



15,457












Total deposits

26,112



26,507



26,152



26,069



26,429












Federal funds purchased and repurchase agreements

1,180



1,138



1,011



1,020



1,050


Junior subordinated deferrable interest debentures

136



136



136



136



136


Subordinated notes payable and other notes

99



99



99



99



99


Total interest-bearing funds

$

17,334



$

17,140



$

16,708



$

16,695



$

16,742












(1) Taxable-equivalent basis assuming a 21% tax rate.

 

A.B. Mendez
Investor Relations
210.220.5234
or
Bill Day
Media Relations
210.220.5427

Cullen/Frost Bankers logo. (PRNewsFoto/Cullen/Frost Bankers)

 

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