CULLEN/FROST BANKERS, INC. 
By SAN ANTONIO, Jan. 30, 2013 /PRNewswire/ -- Cullen/Frost Bankers, Inc. today reported solid fourth quarter earnings and record-high annual earnings for the full year of 2012, as the Texas financial services leader continues to operate profitably in the face of regulatory and rate challenges and a sluggish but slowly improving economy. For the first time, the company exceeded $23 billion in assets, a 72 percent increase over year-end 2007.
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Cullen/Frost reported net income for the fourth quarter of 2012 of $60.2 million, or $.97 per diluted common share, compared to fourth quarter 2011 earnings of $55.4 million, or $.90 per diluted common share. For the fourth quarter of 2012, returns on average assets and equity were 1.09 percent and 9.84 percent respectively, compared to 1.12 percent and 9.74 percent for the same period of 2011.
The company also reported annual earnings for 2012 of $238.0 million, a 9.4 percent increase over 2011 earnings of $217.5 million. On a per-share basis, 2012 earnings were $3.86 per diluted common share, an increase of 9.0 percent compared to the $3.54 per diluted common share reported in 2011. For the year, returns on average assets and equity were 1.14 percent and 10.03 percent respectively, compared to the 1.17 percent and 10.01 percent reported in 2011.
At the end of the fourth quarter of 2012, Cullen/Frost saw non-performing assets decline by $15.7 million from the fourth quarter of 2011 and $19.7 million from the third quarter of 2012.
"For 2012, Cullen/Frost's annual earnings were at the highest level in company history, a tribute to the hard work of every Frost employee," said Dick Evans, Cullen/Frost chairman and CEO. "We are executing our plan well in an environment of ongoing economic, regulatory and rate challenges. I was especially pleased that average loans grew 5.1 percent for the year, as we are seeing the results of our efforts to add relationships and build our company during the recession. Both new and existing customers continue to demonstrate their confidence in the strength of our institution, spurring a $2.1 billion year-over-year growth in average deposits. Even with the persistent challenges of a near-zero rate environment, I was encouraged to see a 4 percent growth in net interest income. Our capital levels remain very strong."
"For the fourth quarter, we were able to grow both average loans and deposits by double digits, with loans rising by 11.2 percent, to $8.9 billion and deposits up by 14.2 percent, to $18.4 billion compared to the fourth quarter of 2011. We are encouraged by the opportunities we see to leverage our new relationships," Evans continued.
"Our credit disciplines remain strong, as demonstrated by a significant decline in non-performing assets this quarter, both from the fourth quarter of 2011 and the third quarter of 2012.
"We are fortunate to operate in Texas, a state whose economy once again outpaced that of the nation in 2012. Texas grew jobs at a strong 3.1 percent in 2012, compared to the U.S. average of 1.4 percent.
"We are beginning to see some clarity with regard to the impact on business of the new health care law. But persistent uncertainty--fueled by concerns about the pace of the recovery and decisions coming out of Washington--is keeping many businesses on the sidelines, delaying hiring or capital expenditure decisions."
Well-respected third parties continue to validate Frost's service, culture and performance. Adding to high rankings Frost has received from J.D. Power and Associates and Greenwich Associates in 2012, Moody's published bank financial strength ratings rank Frost Bank with the highest rating in the U.S. Along with the bank's A+ credit rating from Standard and Poor's, this reinforces Frost's strong capital, liquidity and solid credit performance.
"Although regulatory reform is impacting all financial services companies, Cullen/Frost's culture and value proposition are enabling us to expand our customer base, increase profitability and bring value to shareholders. We have paid and increased the dividend we pay shareholders for 18 consecutive years.
Evans said the company opened three new financial centers in 2012, including two in Houston and one in Austin. Frost also reinforced its commitment to customer convenience by increasing its ATM network to more than 1,100 through its partnership with Valero Corner Stores and Cardtronics.
"As always, our outstanding employees bring their own skills, dedication and experience to the Frost culture. I thank them for their commitment to our company."
For the year ended December 31, 2012, average annual total loans were $8.5 billion, a 5.1 percent increase from the $8.0 billion reported the previous year. Average annual total deposits for 2012 rose to $17.3 billion, up 13.6 percent, or $2.1 billion, over the $15.2 billion reported in 2011. Net interest income on a taxable-equivalent basis increased to $668.2 million, up 4.1 percent over the $642.1 million reported a year earlier, reflecting the impact of the increasing volume of earning assets. For 2012, non-interest income was $288.8 million, compared to $290.0 million reported for 2011, while non-interest expense increased 3.0 percent over the previous year to $575.1 million.
Noted financial data for the fourth quarter:
-- Tier 1 and Total Risk-Based Capital Ratios for the Corporation at the
end of the fourth quarter of 2012 were 13.68 percent and 15.11 percent,
respectively and are in excess of well-capitalized levels. The ratio of
tangible common equity to tangible assets was 8.30 percent at the end of
the fourth quarter of 2012, compared to 8.82 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
goodwill and intangible assets divided by end of period total assets
less goodwill and intangible assets. Our current capital levels would
result in our meeting today the fully phased-in Basel III capital
requirements proposed by the U.S. bank regulators.
-- Net interest income on a taxable-equivalent basis for the fourth quarter
totaled $172.2 million, an increase of 4.1 percent compared to the
$165.3 million reported for the fourth quarter of 2011. This increase
primarily resulted from an increase in the average volume of earning
assets and was partly offset by a decrease in the net interest margin.
The net interest margin was 3.48 percent for the fourth quarter,
compared to 3.76 percent for the fourth quarter of 2011 and 3.54 percent
for the third quarter of 2012.
-- Non-interest income for the fourth quarter of 2012 was $75.9 million, an
increase of $8.2 million from the $67.7 million reported a year earlier.
During the fourth quarter, Cullen/Frost recorded a $4.4 million gain on
the sale of $596 million in short term treasuries. Trust and investment
management fees were $20.5 million, up $1.7 million or 8.9 percent
compared to $18.9 million a year earlier. Impacting trust fees was a
$497,000 increase in investment fees, which are generally assessed based
on the market value of trust assets that are managed and held in
custody. Trust assets were $26.2 billion at the end of the fourth
quarter of 2012, compared to $25.2 billion at December 31, 2011. Trust
fees were also positively impacted by higher oil and gas fees ($165,000)
and real estate fees ($171,000) from the fourth quarter of 2011.
Insurance commissions and fees rose $986,000 to $8.4 million, from $7.5
million in the fourth quarter of 2011, with most of this increase the
result of new business and rate increases.
-- Non-interest expense for the fourth quarter of 2012 was $146.1 million,
up $2.2 million or 1.6 percent from the $143.8 million reported for the
fourth quarter of 2011. Salaries were up $1.3 million over the same
quarter a year earlier as a result of normal annual merit and market
increases and incentive compensation. Other expense was $36.0 million, a
$464,000 decrease from the $36.4 million reported for the fourth quarter
of 2011.
-- For the fourth quarter of 2012, the provision for loan losses was $4.1
million, compared to net charge-offs of $5.1 million. For the fourth
quarter of 2011, the provision for loan losses was zero, compared to net
charge offs of $5.3 million. The allowance for loan losses as a
percentage of total loans was 1.13 percent at December 31, 2012,
compared to 1.38 percent at year-end 2011. Non-performing assets were
$105.2 million at year-end, compared to $124.9 million the previous
quarter, and $120.9 million at year-end 2011.
Cullen/Frost Bankers, Inc. will host a conference call on Wednesday, January 30, 2013 at 10 a.m. Central Time (CT) to discuss the results for the quarter and the year. 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 12 p.m. CT until midnight Sunday, February 3, 2013 at 855-859-2056, with the Conference ID# of 87416492. The call will also be available by webcast on the company's website, frostbank.com, and available for playback after 2 p.m. CT. After entering the website, 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 $23.1 billion in assets at December 31, 2012. 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)
2012 2011
---- ----
4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr
------- ------- ------- ------- -------
CONDENSED INCOME STATEMENTS
---------------------------
Net interest income $154,405 $151,532 $149,217 $149,707 $150,323
Net interest income(1) 172,156 167,341 163,972 164,707 165,340
Provision for loan losses 4,125 2,500 2,355 1,100 --
Non-interest income:
Trust and investment
management fees 20,543 20,843 21,279 20,652 18,861
Service charges on deposit
accounts 21,162 20,797 20,639 20,794 21,475
Insurance commissions and fees 8,436 9,964 9,171 12,377 7,450
Interchange and debit card
transaction fees 4,330 4,194 4,292 4,117 4,166
Other charges, commissions and
fees 7,740 7,265 7,825 7,350 7,125
Net gain (loss) on securities
transactions 4,435 -- 370 (491) --
Other 9,241 8,095 6,187 7,180 8,583
----- ----- ----- ----- -----
Total non-interest income 75,887 71,158 69,763 71,979 67,660
Non-interest expense:
Salaries and wages 67,442 64,984 62,624 63,702 66,126
Employee benefits 12,867 14,019 14,048 16,701 12,574
Net occupancy 11,772 13,193 12,213 11,797 11,413
Furniture and equipment 13,932 14,193 13,734 13,420 13,454
Deposit insurance 3,159 2,593 2,838 2,497 2,773
Intangible amortization 918 973 994 1,011 1,052
Other 35,977 34,495 36,085 32,912 36,441
------ ------ ------ ------ ------
Total non-interest expense 146,067 144,450 142,536 142,040 143,833
------- ------- ------- ------- -------
Income before income taxes 80,100 75,740 74,089 78,546 74,150
Income taxes 19,912 17,071 16,027 17,513 18,736
------ ------ ------ ------ ------
Net income $60,188 $58,669 $58,062 $61,033 $55,414
------- ------- ------- ------- -------
PER SHARE DATA
--------------
Net income - basic $0.98 $0.95 $0.94 $0.99 $0.90
Net income - diluted 0.97 0.95 0.94 0.99 0.90
Cash dividends 0.48 0.48 0.48 0.46 0.46
Book value at end of quarter 39.32 39.35 38.48 37.81 37.27
OUTSTANDING SHARES
------------------
Period-end shares 61,479 61,462 61,404 61,373 61,264
Weighted-average shares -
basic 61,382 61,317 61,291 61,201 61,154
Dilutive effect of stock
compensation 339 369 344 332 54
Weighted-average shares -
diluted 61,721 61,686 61,635 61,533 61,208
SELECTED ANNUALIZED RATIOS
--------------------------
Return on average assets 1.09% 1.11% 1.14% 1.23% 1.12%
Return on average equity 9.84 9.75 9.95 10.59 9.74
Net interest income to average
earning assets(1) 3.48 3.54 3.61 3.73 3.76
(1) Taxable-equivalent
basis assuming a 35% tax
rate.
Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
2012 2011
---- ----
4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr
------- ------- ------- ------- -------
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
Loans $8,868 $8,635 $8,268 $8,050 $7,975
Earning assets 20,138 19,218 18,605 18,087 17,806
Total assets 21,964 21,010 20,401 19,920 19,579
Non-interest-bearing demand
deposits 7,690 7,161 6,829 6,399 6,325
Interest-bearing deposits 10,736 10,289 10,053 9,998 9,804
Total deposits 18,426 17,450 16,882 16,397 16,129
Shareholders' equity 2,433 2,393 2,347 2,317 2,258
Period-End Balance:
Loans $9,224 $8,811 $8,490 $8,127 $7,995
Earning assets 21,148 20,024 19,033 18,583 18,498
Goodwill and intangible assets 544 545 546 547 539
Total assets 23,124 21,848 20,866 20,417 20,317
Total deposits 19,497 18,245 17,277 16,909 16,757
Shareholders' equity 2,417 2,419 2,363 2,321 2,284
Adjusted shareholders'
equity(1) 2,179 2,144 2,110 2,076 2,036
ASSET QUALITY
-------------
($ in thousands)
Allowance for loan losses $104,453 $105,401 $105,648 $107,181 $110,147
as a percentage of period-end
loans 1.13% 1.20% 1.24% 1.32% 1.38%
Net charge-offs $5,073 $2,747 $3,888 $4,066 $5,286
Annualized as a percentage of
average loans 0.23% 0.13% 0.19% 0.20% 0.26%
Non-performing assets:
Non-accrual loans $89,744 $106,407 $92,255 $97,870 $94,338
Foreclosed assets 15,502 18,524 19,818 22,676 26,608
------ ------ ------ ------ ------
Total $105,246 $124,931 $112,073 $120,546 $120,946
As a percentage of:
Total loans and foreclosed
assets 1.14% 1.41% 1.32% 1.48% 1.51%
Total assets 0.46 0.57 0.54 0.59 0.60
CONSOLIDATED CAPITAL RATIOS
---------------------------
Tier 1 Risk-Based Capital
Ratio 13.68% 14.10% 14.07% 14.47% 14.38%
Total Risk-Based Capital Ratio 15.11 15.62 15.61 16.10 16.24
Leverage Ratio 8.28 8.59 8.65 8.68 8.66
Equity to Assets Ratio (period-
end) 10.45 11.07 11.32 11.37 11.24
Equity to Assets Ratio
(average) 11.08 11.39 11.51 11.63 11.53
(1) Shareholders' equity excluding
accumulated other comprehensive income
(loss).
Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share amounts)
Year Ended December 31
----------------------
2012 2011 2010 2009 2008
---- ---- ---- ---- ----
CONDENSED INCOME STATEMENTS
---------------------------
Net interest income $604,861 $581,776 $563,459 $536,679 $534,025
Net interest income(1) 668,176 642,066 616,319 577,716 554,353
Provision for possible loan losses 10,080 27,445 43,611 65,392 37,823
Non-interest income:
Trust fees and investment management fees 83,317 78,297 72,321 69,933 76,424
Service charges on deposit accounts 83,392 86,125 91,025 96,525 82,526
Insurance commissions and fees 39,948 35,421 34,015 33,096 32,904
Interchange and debit card transaction fees 16,933 29,625 30,542 26,248 23,959
Other charges, commissions and fees 30,180 27,750 25,380 23,826 32,726
Net gain (loss) on securities transactions 4,314 6,414 6 (1,260) (159)
Other 30,703 26,370 28,744 45,338 38,942
------ ------ ------ ------ ------
Total non-interest income 288,787 290,002 282,033 293,706 287,322
Non-interest expense:
Salaries and wages 258,752 252,028 239,589 230,643 225,943
Employee benefits 57,635 52,939 52,352 55,224 47,219
Net occupancy 48,975 46,968 46,166 44,188 40,464
Furniture and equipment 55,279 51,469 47,651 44,223 37,799
Deposit insurance 11,087 12,714 20,451 25,812 4,597
Intangible amortization 3,896 4,387 5,125 6,537 7,906
Other 139,469 137,593 124,207 125,611 122,717
------- ------- ------- ------- -------
Total non-interest expense 575,093 558,098 535,541 532,238 486,645
------- ------- ------- ------- -------
Income before income taxes 308,475 286,235 266,340 232,755 296,879
Income taxes 70,523 68,700 57,576 53,721 89,624
------ ------ ------ ------ ------
Net income $237,952 $217,535 $208,764 $179,034 $207,255
-------- -------- -------- -------- --------
PER SHARE DATA
--------------
Net income - basic $3.87 $3.55 $3.44 $3.00 $3.51
Net income - diluted 3.86 3.54 3.44 3.00 3.50
Cash dividends 1.90 1.83 1.78 1.71 1.66
Book value 39.32 37.27 33.74 31.55 29.68
OUTSTANDING SHARES
------------------
Period-end shares 61,479 61,264 61,108 60,038 59,416
Weighted-average shares - basic 61,298 61,101 60,411 59,456 58,846
Dilutive effect of stock compensation 345 177 175 58 324
Weighted-average shares - diluted 61,643 61,278 60,586 59,514 59,170
SELECTED ANNUAL RATIOS
----------------------
Return on average assets 1.14% 1.17% 1.21% 1.14% 1.51%
Return on average equity 10.03 10.01 10.30 9.78 13.11
Net interest income to average earning assets(1) 3.59 3.88 4.08 4.23 4.67
Taxable-
equivalent
basis
assuming a
35% tax
(1) rate.
Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
Year Ended December 31
----------------------
2012 2011 2010 2009 2008
---- ---- ---- ---- ----
BALANCE SHEET SUMMARY
---------------------
($ in millions)
Average Balance:
Loans $8,457 $8,043 $8,125 $8,653 $8,314
Earning assets 19,016 16,769 15,333 13,804 11,868
Total assets 20,827 18,569 17,187 15,702 13,685
Non-interest-bearing demand deposits 7,022 5,739 5,024 4,259 3,615
Interest bearing deposits 10,270 9,484 9,024 8,161 6,916
Total deposits 17,292 15,223 14,048 12,420 10,531
Shareholders' equity 2,373 2,172 2,028 1,831 1,580
Period-End Balance:
Loans $9,224 $7,995 $8,117 $8,368 $8,844
Earning assets 21,148 18,498 15,806 14,437 13,001
Goodwill and intangible assets 544 539 542 547 551
Total assets 23,124 20,317 17,617 16,288 15,034
Total deposits 19,497 16,757 14,479 13,313 11,509
Shareholders' equity 2,417 2,284 2,062 1,894 1,764
Adjusted shareholders' equity(1) 2,179 2,036 1,907 1,740 1,626
ASSET QUALITY
-------------
($ in thousands)
Allowance for possible loan losses $104,453 $110,147 $126,316 $125,309 $110,244
As a percentage of period-end loans 1.13% 1.38% 1.56% 1.50% 1.25%
Net charge-offs: $15,774 $43,614 $42,604 $50,327 $19,918
As a percentage of average loans 0.19% 0.54% 0.52% 0.58% 0.24%
Non-performing assets:
Non-accrual loans $89,744 $94,338 $137,140 $146,867 $65,174
Foreclosed assets 15,502 26,608 27,810 33,312 12,866
------ ------ ------ ------ ------
Total $105,246 $120,946 $164,950 $180,179 $78,040
As a percentage of:
Total loans and foreclosed assets 1.14% 1.51% 2.03% 2.14% 0.88%
Total assets 0.46 0.60 0.94 1.11 0.52
Shareholders'
equity
excluding
accumulated
other
comprehensive
(1) income (loss).
SOURCE Cullen/Frost Bankers, Inc.
