Cullen/Frost Reports Second Quarter Results

SAN ANTONIO, July 25, 2019 /PRNewswire/ -- Cullen/Frost Bankers, Inc. CFR today reported second quarter 2019 results. Net income available to common shareholders for the second quarter of 2019 was $109.6 million, compared to $109.3 million in the second quarter of 2018. On a per-share basis, net income available to common shareholders for the second quarter of 2019 was $1.72 per diluted common share, compared to $1.68 per diluted common share reported a year earlier. Returns on average assets and average common equity were 1.40 percent and 12.60 percent, respectively, for the second quarter of 2019 compared to 1.43 percent and 14.03 percent, respectively, for the same period a year earlier.

For the second quarter of 2019, net interest income on a taxable-equivalent basis was $277.8 million, up 6.6 percent compared to the same quarter in 2018. Average loans for the second quarter of 2019 increased $838.6 million, or 6.2 percent, to $14.4 billion, from the $13.5 billion reported for the second quarter a year earlier. Average deposits for the quarter were $26.0 billion, basically flat compared to the $26.1 billion reported for last year's second quarter.

"Frost bankers' commitment to sustainable, organic growth has resulted in another solid quarter," said Cullen/Frost Chairman and CEO Phil Green.  "During the second quarter, we continued our expansion in the Houston market by opening two more new financial centers, and after six years of planning and implementation, we also moved to our new corporate headquarters in San Antonio."

For the first six months of 2019, net income available to common shareholders was $224.1 million, up 4.8 percent compared to $213.8 million for the first six months of 2018. Diluted EPS available to common shareholders for the first six months of 2019 was $3.51 compared to $3.30 in the year-earlier period, representing an increase of 6.4 percent. Returns on average assets and average common equity for the first six months of 2019 were 1.44 percent and 13.32 percent, respectively, compared to 1.39 percent and 13.83 percent, respectively, for the same period in 2018.

Noted financial data for the second quarter of 2019 follows:

  • The Common Equity Tier 1, Tier 1 and Total Risk-Based Capital Ratios at the end of the second quarter of 2019 were 12.29 percent, 12.94 percent and 14.60 percent, respectively, and continue to be in excess of well-capitalized levels and exceed Basel III minimum requirements.
  • Net interest income on a taxable-equivalent basis was $277.8 million, an increase of 6.6 percent over the prior year period. Net interest margin was 3.85 percent for the second quarter of 2019, up 6 basis points over the first quarter of 2019 net interest margin of 3.79 percent.
  • Non-interest income for the second quarter of 2019 totaled $82.6 million, a decrease of $2.4 million, or 2.9 percent, from the $85.1 million reported for the second quarter of 2018. Trust and investment management fees were $30.4 million, up $1.3 million, or 4.6 percent, from the second quarter of 2018. The increase in trust and investment management fees was primarily the result of an increase in trust investment fees due to higher average equity valuations and an increase in the number of accounts. Insurance commissions and fees of $10.1 million decreased $438,000, or 4.1 percent, from the previous year. The decrease in commission income during the second quarter was primarily related to a decrease in benefit plan commissions due to fluctuations in business volumes. Other non-interest income in the second quarter of 2019 was $7.3 million, down $4.3 million compared to the second quarter of 2018. The decrease was primarily related to other income recorded in the year-ago period from recoveries of prior write-offs ($1.7 million), distributions on private equity investments ($1.2 million), and gains on the sale of various branch and operational facilities ($502,000).
  • Non-interest expense was $203.2 million for the quarter, up $14.3 million, or 7.6 percent, compared to the $188.9 million reported for the second quarter a year earlier. Total salaries and wages rose $5.6 million, or 6.6 percent, to $90.8 million, primarily due to an increase in the number of employees and normal annual merit and market increases. Employee benefits expense increased $2.1 million, or 12.0 percent, compared to the second quarter of 2018. The increase was primarily related to increases in medical benefits expense (up $562,000), expenses related to our defined benefit retirement plans (up $585,000) and expenses related to our 401(k) plan (up $505,000). Other non-interest expense increased $5.4 million, or 13.2 percent, compared to the second quarter of 2018. The increase was mainly driven by increases in advertising and sponsorships (up $3.3 million); platform fees related to investment services (up $1.0 million); and travel, meals and entertainment expense (up $1.0 million). Second quarter net occupancy expense increased by $1.7 million, or 8.6 percent, compared to the same period in 2018, primarily driven by a $1.8 million increase in lease expenses impacted by our move in June to our new corporate headquarters building in San Antonio and other leases related to existing facilities and our expansion within the Houston market area. Technology, furniture and equipment expense for the second quarter increased by $1.7 million, or 8.3 percent, from the second quarter of 2018. The increase was primarily driven by a $1.5 million increase in software maintenance expense.
  • For the second quarter of 2019, the provision for loan losses was $6.4 million, compared to net charge-offs of $7.8 million. This compares with $11.0 million in provisions and $6.8 million in net charge-offs for the first quarter of 2019, and $8.3 million in provisions and $7.9 million in net charge-offs in the second quarter of 2018. The allowance for loan losses as a percentage of total loans was 0.93 percent at June 30, 2019 compared to 0.95 percent at the end of the first quarter of 2019 and 1.10 percent at the end of the second quarter of 2018. Non-performing assets were $76.4 million at the end of the second quarter of 2019, compared to $97.4 million at the end of the first quarter of 2019 and $122.8 million at the end of the second quarter of 2018.

The Cullen/Frost board declared a third-quarter cash dividend of $0.71 per common share, representing a 6.0 percent increase over the previous year's dividend, payable September 13, 2019 to shareholders of record on August 30 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 September 16, 2019, to shareholders of record on August 30 of this year.

In addition, the Corporation's board of directors authorized a new $100.0 million stock repurchase plan. Under the plan, shares may be repurchased over a one-year period from time to time at various prices in the open market or through private transactions.

Cullen/Frost Bankers, Inc. will host a conference call on Thursday, July 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, July 28, 2019 at 855-859-2056 with Conference ID # of 1479579. 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 $31.8 billion in assets at June 30, 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



2nd Qtr



1st Qtr



4th Qtr



3rd Qtr



2nd Qtr

CONDENSED INCOME STATEMENTS



















Net interest income

$

253,431





$

246,469





$

249,209





$

241,665





$

237,270



Net interest income (1)

277,751





271,179





273,810





265,687





260,531



Provision for loan losses

6,400





11,003





3,767





2,650





8,251



Non-interest income:



















Trust and investment management fees

30,448





31,697





29,882





30,801





29,121



Service charges on deposit accounts

21,798





20,790





21,632





21,569





21,142



Insurance commissions and fees

10,118





18,406





11,394





11,037





10,556



Interchange and debit card transaction fees

3,868





3,280





3,774





3,499





3,446



Other charges, commissions and fees

8,933





9,062





9,371





9,580





9,273



Net gain (loss) on securities transactions

169









(43)





(34)





(60)



Other

7,304





13,550





11,108





11,205





11,588



Total non-interest income

82,638





96,785





87,118





87,657





85,066























Non-interest expense:



















Salaries and wages

90,790





92,476





90,878





87,547





85,204



Employee benefits

20,051





23,526





19,066





18,355





17,907



Net occupancy

21,133





19,267





17,699





19,894





19,455



Technology, furniture and equipment

22,157





21,664





21,960





21,004





20,459



Deposit insurance

2,453





2,808





2,219





4,694





4,605



Intangible amortization

305





325





331





336





369



Other

46,320





41,734





47,544





41,838





40,909



Total non-interest expense

203,209





201,800





199,697





193,668





188,908



Income before income taxes

126,460





130,451





132,863





133,004





125,177



Income taxes

14,874





13,955





13,610





15,160





13,836



Net income

111,586





116,496





119,253





117,844





111,341



Preferred stock dividends

2,015





2,016





2,016





2,016





2,015



Net income available to common shareholders

$

109,571





$

114,480





$

117,237





$

115,828





$

109,326























PER COMMON SHARE DATA



















Earnings per common share - basic

$

1.73





$

1.80





$

1.84





$

1.80





$

1.70



Earnings per common share - diluted

1.72





1.79





1.82





1.78





1.68



Cash dividends per common share

0.71





0.67





0.67





0.67





0.67



Book value per common share at end of quarter

57.42





54.68





51.19





49.49





49.53























OUTSTANDING COMMON SHARES



















Period-end common shares

62,638





63,081





62,986





63,923





63,904



Weighted-average common shares - basic

62,789





63,009





63,441





63,892





63,837



Dilutive effect of stock compensation

765





819





811





1,022





1,062



Weighted-average common shares - diluted

63,554





63,828





64,252





64,914





64,899























SELECTED ANNUALIZED RATIOS



















Return on average assets

1.40

%



1.48

%



1.48

%



1.49

%



1.43

%

Return on average common equity

12.60





14.08





14.85





14.40





14.03



Net interest income to average earning assets

3.85





3.79





3.72





3.66





3.64























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

 

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)





2019



2018



2nd Qtr



1st Qtr



4th Qtr



3rd Qtr



2nd Qtr

BALANCE SHEET SUMMARY



















($ in millions)



















Average Balance:



















Loans

$

14,375





$

14,205





$

13,949





$

13,683





$

13,537



Earning assets

29,114





28,954





29,153





28,796





28,647



Total assets

31,491





31,356





31,330





30,918





30,758



Non-interest-bearing demand deposits

10,148





10,193





10,740





10,690





10,629



Interest-bearing deposits

15,845





15,919





15,767





15,462





15,440



Total deposits

25,993





26,112





26,507





26,152





26,069



Shareholders' equity

3,632





3,441





3,277





3,335





3,270























Period-End Balance:



















Loans

$

14,459





$

14,406





$

14,100





$

13,815





$

13,712



Earning assets

29,218





29,283





29,894





29,042





28,494



Goodwill and intangible assets

658





658





659





659





659



Total assets

31,819





31,665





32,293





31,223





30,687



Total deposits

25,985





26,295





27,149





26,349





25,996



Shareholders' equity

3,741





3,594





3,369





3,308





3,310



Adjusted shareholders' equity (1)

3,522





3,500





3,433





3,449





3,373























ASSET QUALITY



















($ in thousands)



















Allowance for loan losses:

$

134,929





$

136,350





$

132,132





$

137,578





$

150,226



As a percentage of period-end loans

0.93

%



0.95

%



0.94

%



1.00

%



1.10

%





















Net charge-offs:

$

7,821





$

6,785





$

9,213





$

15,298





$

7,910



Annualized as a percentage of average loans

0.22

%



0.19

%



0.26

%



0.44

%



0.23

%





















Non-performing assets:



















Non-accrual loans

$

71,521





$

92,162





$

73,739





$

82,601





$

119,181



Restructured loans

3,973





4,028















Foreclosed assets

907





1,175





1,175





3,765





3,643



Total

$

76,401





$

97,365





$

74,914





$

86,366





$

122,824



As a percentage of:



















Total loans and foreclosed assets

0.53

%



0.68

%



0.53

%



0.62

%



0.90

%

Total assets

0.24





0.31





0.23





0.28





0.40























CONSOLIDATED CAPITAL RATIOS



















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

12.29

%



12.34

%



12.27

%



12.56

%



12.33

%

Tier 1 Risk-Based Capital Ratio (2)

12.94





13.00





12.94





13.24





13.02



Total Risk-Based Capital Ratio (2)

14.60





14.68





14.64





14.99





14.85



Leverage Ratio

9.40





9.35





9.06





9.19





9.02



Equity to Assets Ratio (period-end)

11.76





11.35





10.43





10.60





10.78



Equity to Assets Ratio (average)

11.53





10.97





10.46





10.79





10.63























(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.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

(In thousands, except per share amounts)















Six Months Ended















June 30,















2019



2018

CONDENSED INCOME STATEMENTS







































Net interest income













$

499,900





$

467,018



Net interest income (1)













548,930





513,067



Provision for loan losses













17,403





15,196



Non-interest income:



















Trust and investment management fees













62,145





58,708



Service charges on deposit accounts













42,588





41,985



Insurance commissions and fees













28,524





26,536



Interchange and debit card transaction fees













7,148





6,604



Other charges, commissions and fees













17,995





18,280



Net gain (loss) on securities transactions













169





(79)



Other













20,854





24,477



Total non-interest income













179,423





176,511























Non-interest expense:



















Salaries and wages













183,266





171,887



Employee benefits













43,577





39,902



Net occupancy













40,400





39,195



Furniture and equipment













43,821





40,138



Deposit insurance













5,261





9,484



Intangible amortization













630





757



Other (2)













88,054





84,156



Total non-interest expense (2)













405,009





385,519



Income before income taxes













256,911





242,814



Income taxes













28,829





24,993



Net income













228,082





217,821



Preferred stock dividends













4,031





4,031



Net income available to common shareholders













$

224,051





$

213,790























PER COMMON SHARE DATA



















Earnings per common share - basic













$

3.53





$

3.33



Earnings per common share - diluted













3.51





3.30



Cash dividends per common share













1.38





1.24



Book value per common share at end of quarter













57.42





49.53























OUTSTANDING COMMON SHARES



















Period-end common shares













62,638





63,904



Weighted-average common shares - basic













62,899





63,743



Dilutive effect of stock compensation













791





1,044



Weighted-average common shares - diluted













63,690





64,787























SELECTED ANNUALIZED RATIOS



















Return on average assets













1.44

%



1.39

%

Return on average common equity













13.32





13.83



Net interest income to average earning assets (1)













3.82





3.58























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



 

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)



































As of or for the















Six Months Ended















June 30,















2019



2018

BALANCE SHEET SUMMARY ($ in millions)



















Average Balance:



















Loans













$

14,291





$

13,416



Earning assets













29,035





28,824



Total assets













31,391





30,940



Non-interest-bearing demand deposits













10,170





10,799



Interest-bearing deposits













15,882





15,449



Total deposits













26,052





26,248



Shareholders' equity













3,537





3,263























Period-End Balance:



















Loans













$

14,459





$

13,712



Earning assets













29,218





28,494



Goodwill and intangible assets













658





659



Total assets













31,819





30,687



Total deposits













25,985





25,996



Shareholders' equity













3,741





3,310



Adjusted shareholders' equity (1)













3,522





3,373























ASSET QUALITY ($ in thousands)



















Allowance for loan losses:













$

134,929





$

150,226



As a percentage of period-end loans













0.93

%



1.10

%





















Net charge-offs:













$

14,606





$

20,334



Annualized as a percentage of average loans













0.21

%



0.31

%





















Non-performing assets:



















Non-accrual loans













$

71,521





$

119,181



Restructured loans













3,973







Foreclosed assets













907





3,643



Total













$

76,401





$

122,824



As a percentage of:



















Total loans and foreclosed assets













0.53

%



0.90

%

Total assets













0.24





0.40























CONSOLIDATED CAPITAL RATIOS



















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











12.29

%



12.33

%

Tier 1 Risk-Based Capital Ratio (2)













12.94





13.02



Total Risk-Based Capital Ratio (2)













14.60





14.85



Leverage Ratio













9.40





9.02



Equity to Assets Ratio (period-end)













11.76





10.78



Equity to Assets Ratio (average)













11.27





10.55























(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



2nd Qtr



1st Qtr



4th Qtr



3rd Qtr



2nd Qtr

TAXABLE-EQUIVALENT YIELD/COST (1)



















Earning Assets:



















Interest-bearing deposits

2.64

%



2.50

%



2.35

%



2.05

%



1.93

%

Federal funds sold and resell agreements

2.48





2.58





2.41





2.14





1.92



Securities

3.42





3.37





3.39





3.41





3.36



Loans, net of unearned discounts

5.34





5.33





5.20





5.04





4.90



Total earning assets

4.33





4.27





4.15





4.04





3.93























Interest-Bearing Liabilities:



















Interest-bearing deposits:



















Savings and interest checking

0.08





0.09





0.08





0.09





0.08



Money market deposit accounts

1.03





1.09





1.00





0.93





0.74



Time accounts

1.66





1.43





1.14





0.87





0.66



Public funds

1.51





1.39





1.31





1.11





0.99



Total interest-bearing deposits

0.68





0.69





0.63





0.57





0.46























Total deposits

0.41





0.42





0.37





0.34





0.27























Federal funds purchased and repurchase agreements

1.69





1.72





1.56





0.90





0.25



Junior subordinated deferrable interest debentures

4.34





4.40





4.24





4.09





3.85



Subordinated notes payable and other notes

4.71





4.72





4.72





4.72





4.72



Total interest-bearing liabilities

0.80





0.81





0.74





0.64





0.50























Net interest spread

3.53





3.46





3.41





3.40





3.43



Net interest income to total average earning assets

3.85





3.79





3.72





3.66





3.64























AVERAGE BALANCES



















($ in millions)



















Assets:



















Interest-bearing deposits

$

1,171





$

1,729





$

2,452





$

2,799





$

2,885



Federal funds sold and resell agreements

246





250





317





260





296



Securities

13,322





12,770





12,435





12,053





11,928



Loans, net of unearned discount

14,375





14,205





13,949





13,683





13,537



Total earning assets

$

29,114





$

28,954





$

29,153





$

28,796





$

28,647























Liabilities:



















Interest-bearing deposits:



















Savings and interest checking

$

6,774





$

6,774





$

6,673





$

6,675





$

6,688



Money market deposit accounts

7,588





7,696





7,792





7,620





7,578



Time accounts

970





895





836





799





787



Public funds

513





554





467





369





387



Total interest-bearing deposits

15,845





15,919





15,767





15,462





15,440























Total deposits

25,993





26,112





26,507





26,152





26,069























Federal funds purchased and repurchase agreements

1,242





1,180





1,138





1,011





1,020



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

$

17,322





$

17,334





$

17,140





$

16,708





$

16,695























(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)

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/cullenfrost-reports-second-quarter-results-300890708.html

SOURCE Cullen/Frost Bankers, Inc.

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