- Surpassing $16 billion in assets - Deposit growth remains robust
- Capital levels continue to be strong SAN ANTONIO, Oct. 21
/PRNewswire-FirstCall/ -- Cullen/Frost Bankers, Inc. (NYSE:CFR)
today reported earnings for the third quarter of 2009 of $44.7
million, a decrease of 8.2 percent compared to the $49.0 million
reported for the same period in 2008. On a per-share basis, net
income for the quarter was $.75 per diluted common share, compared
to the $.83 per diluted common share reported a year earlier.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030109/CFRLOGO) Return
on average assets and return on average equity for the third
quarter of 2009 were 1.11 percent and 9.7 percent, respectively,
compared to 1.44 percent and 12.39 percent for the same quarter in
2008. The provision for possible loan losses was $16.9 million,
compared to $18.9 million reported a year earlier, while the
allowance for possible loan losses as a percentage of loans
increased to 1.45 percent from 1.25 percent for the same quarter of
2008. For the third quarter of 2009, net interest income on a
tax-equivalent basis increased 3.8 percent to $144.9 million,
compared to the $139.7 million reported for the same quarter of
2008. Average loans for the third quarter of 2009 rose slightly to
$8.6 billion, compared to the $8.4 billion reported for the third
quarter a year earlier, but were down compared to the $8.8 billion
reported in the second quarter, as both business and consumer
customers respond to the recession. Average deposits for the
quarter were $12.8 billion, $613 million over the previous quarter,
and an increase of 23.0 percent over the $10.4 billion reported for
the third quarter of 2008. "Cullen/Frost continues to navigate
through a challenging environment, preparing our company for the
economic rebound," said Cullen/Frost CEO Dick Evans. "Texas went
into the recession later than the rest of the nation, in November
of 2008. Today, businesses and consumers are conserving cash and
reining in spending, as you would expect. Amid current economic
conditions, charge-offs and the provision for loan losses remain at
elevated levels. While some measure of volatility is inevitable in
this type of credit environment, I feel confident that our credit
quality levels continue to be manageable." "Since the beginning of
the fourth quarter of 2008, we have seen robust growth in deposits
from both consumers and businesses moving their money and
relationships to Frost, bringing in an additional $2.4 billion in
average deposits, including $613 million this quarter. We are
helping our customers get through this cycle and will be there for
them when they are ready to reinvest in the economy. "This quarter
we completed construction on the $50 million Frost Technology
Center, a new, state-of-the-art facility that will ensure our
ability and capacity to meet our future data and information
technology needs. Designed with reinforced mission-critical
equipment areas and improved workflow and communications, the
center will significantly strengthen the company's technology
infrastructure. "Our commitment to Texas remains strong. The Texas
markets Frost serves appear in several studies and publications as
cities poised to do well coming out of a recession. And we continue
to grow, opening three new financial centers in Austin, Houston and
the Dallas region during the third quarter. I remain confident in
our future. "It has been almost a year since Cullen/Frost announced
we would turn down federal TARP bailout funds. Our capital levels
were strong then, and are even stronger now. It was a good decision
for our company, allowing us to focus on growing new relationships,
taking good care of existing customers and preparing Texas to be
among the first wave of states to come out of recession. Going
forward, our success will be based not only on financial capital,
but also human capital, and I appreciate our employees' continued
efforts to help this company perform well in this environment,"
Evans said. For the first nine months of 2009, earnings were $127.5
million down 17.3 percent, compared to $154.3 million reported for
the same period of 2008. On a per-share basis, earnings for the
year to date were $2.14 per diluted common share, compared to $2.61
per diluted common share, for the same period in 2008. Returns on
average assets and equity for the first nine months of 2009 were
1.10 percent and 9.45 percent respectively, compared to 1.53
percent and 13.23 percent for the same period a year earlier. Noted
financial data for the third quarter of 2009 follows. -- Tier 1 and
Total Risk-Based Capital Ratios for the Corporation at the end of
the third quarter of 2009 were 11.49 percent and 13.72 percent,
respectively and are in excess of well capitalized levels. The
tangible common equity ratio was 8.70 percent at the end of the
third quarter of 2009 compared to 7.83 percent for the same quarter
last year. -- Net-interest income on a taxable equivalent basis for
the third quarter totaled $144.9 million, an increase of 3.8
percent compared to $139.7 million for the same period a year ago.
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 4.12 percent for
the third quarter of 2009, compared to 4.74 percent for the third
quarter of 2008, and 4.28 percent for the second quarter of 2009.
-- Non-interest income for the third quarter of 2009 totaled $69.5
million, compared to $77.3 million reported for the third quarter
of 2008. Trust fee income was $16.8 million, compared to $19.7
million a year earlier. Most of this decrease relates to lower oil
and gas trust management fees, down $1.9 million from last year's
third quarter. Oil and natural gas prices have decreased impacting
the amount of royalties received. Investment fees, which represent
approximately 73 percent of total trust fees, are also down.
Investment fees are generally assessed based on the market value of
trust assets, which were $22.3 billion at the end of the third
quarter, compared to $23.1 billion for the third quarter a year
ago. This market value includes both assets that are managed and
those held in custody. Service charges on deposit accounts were
$26.4 million, up $3.8 million, or 16.6 percent, compared to $22.6
million for the third quarter of 2008. Impacting this rise was a
$3.1 million increase in service charges on commercial accounts,
resulting from higher treasury management fees. A drop in the
earnings credit rate for commercial accounts, compared to a year
earlier, impacted treasury management fees. When interest rates are
lower, customers earn less credit for their deposit balances, and
this, in turn, increases the amount of service charges to be paid
for through fees. Other charges, commissions and fees were $6.8
million for the third quarter of 2009, down $3.9 million, from last
year's third quarter of $10.7 million. Money market fees for the
quarter were down $1.0 million compared to the same quarter a year
ago. Last year's third quarter included a $2.6 million investment
banking fee. Other non-interest income was $11.0 million, down $4.9
million, compared to the $15.9 million reported for the same
quarter a year earlier. Most of this decrease is due to income of
$2.2 million recognized in the third quarter of last year for the
collection of loan interest and other charges written off in
previous years. Also impacting the decrease was a $1.0 million gain
on sale of assets recorded in last year's third quarter. --
Non-interest expense was $132.2 million for the quarter, up $9.3
million, or 7.5 percent, from the $123.0 million reported a year
earlier. A large part of this increase is due to an increase in
FDIC insurance expense of $2.8 million from the third quarter of
2008. Total salaries rose $788 thousand or 1.4 percent to $58.6
million, and were impacted by normal annual merit increases and an
increase in the number of employees, which was offset, in part, by
a decrease in incentive compensation. Employee benefits were up
$2.8 million or 25.9 percent, primarily due to increases in
expenses related to the company's medical costs, 401(k) and profit
sharing plans, and retirement plan. Net occupancy expense was $11.1
million, an increase of $769 thousand from the third quarter last
year due mainly to increases in lease expense for new locations.
Furniture and equipment was $11.1 million, which was up $1.5
million from the same quarter last year. This increase occurred due
to increases in depreciation expense related to furniture and
fixtures, primarily for new locations, amortized software and
software maintenance expense. Other expenses rose $1.1 million,
from the third quarter last year. Most of this increase was due to
the recognition of losses from the sale/write-down of foreclosed
assets. -- For the third quarter of 2009, the provision for
possible loan losses was $16.9 million, compared to net charge-offs
of $16.3 million. For the third quarter of 2008, the provision for
possible loan losses was $18.9 million, compared to net charge-offs
of $6.4 million. Approximately $10 million of the provision for
possible loan losses for the third quarter of 2008 was related to
Hurricane Ike, which impacted the Corporation's operations in
Houston and Galveston during the third quarter of 2008. The
allowance for possible loan losses as a percentage of total loans
was 1.45 percent at September 30, 2009, compared to 1.25 percent at
the end of the third quarter last year and 1.42 percent at the end
of the second quarter of 2009. Cullen/Frost Bankers, Inc. will host
a conference call on Wednesday, October 21, 2009, at 10:00 a.m.
Central Time (CT) to discuss the results for the quarter. The media
and other interested parties are invited to access the call in a
"listen only" mode at 1-800-944-6430. Digital playback of the
conference call will be available after 2:00 p.m. CT until midnight
Sunday, October 25, 2009 at 800-642-1687 with Conference ID # of
34963885. The call will also be available by webcast at the URL
listed below and available for playback after 2:00 p.m. CT. After
entering the Web site, http://www.frostbank.com/, go to "About
Frost" on the top navigation bar, then click on Investor Relations.
Cullen/Frost Bankers, Inc. (NYSE:CFR) is a financial holding
company, headquartered in San Antonio, with assets of $16.2 billion
at September 30, 2009. The corporation provides a full range of
commercial and consumer banking products, investment and brokerage
services, insurance products and investment banking services. Frost
operates more than 110 financial centers across Texas in the
Austin, Corpus Christi, Dallas, Fort Worth, Houston, Rio Grande
Valley and San Antonio regions. Founded in 1868, Frost is the
largest Texas-based banking organization that operates only in
Texas, with a legacy of helping clients with their financial needs
during three centuries. 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 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. -- Political
instability. -- 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. -- Changes in the competitive
environment among financial holding companies and other financial
service providers. -- The effect 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 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 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) 2009 2008
----------------------------- ------------------ 3rd Qtr 2nd Qtr
1st Qtr 4th Qtr 3rd Qtr ------- ------- ------- ------- -------
CONDENSED INCOME STATEMENTS ---------------- Net interest income
$133,989 $134,464 $129,632 $138,081 $134,736 Net interest income(1)
144,915 144,325 137,733 143,707 139,655 Provision for possible loan
losses 16,940 16,601 9,601 8,550 18,940 Non-interest income: Trust
fees 16,755 16,875 15,969 17,483 19,749 Service charges on deposit
accounts 26,395 25,152 24,910 23,697 22,642 Insurance commissions
and fees 8,505 7,106 10,751 6,470 8,261 Other charges, commissions
and fees 6,845 6,288 6,762 8,407 10,723 Net gain (loss) on
securities transactions -- 49 -- (133) 78 Other 10,991 12,536
11,472 13,274 15,862 ------- ------- ------- ------- ------- Total
non-interest income 69,491 68,006 69,864 69,198 77,315 Non-interest
expense: Salaries and wages 58,591 56,540 56,776 58,468 57,803
Employee benefits 13,445 13,783 15,240 10,517 10,677 Net occupancy
11,111 10,864 10,690 10,384 10,342 Furniture and equipment 11,133
10,662 10,363 10,010 9,657 Deposit insurance 4,643 11,667 4,376
1,785 1,859 Intangible amortization 1,564 1,719 1,781 1,929 1,976
Other 31,747 31,054 30,273 30,450 30,658 ------- ------- -------
------- ------- Total non-interest expense 132,234 136,289 129,499
123,543 122,972 ------- ------- ------- ------- ------- Income
before income taxes 54,306 49,580 60,396 75,186 70,139 Income taxes
9,607 11,721 15,414 22,223 21,174 ------- ------- ------- -------
------- Net income $44,699 $37,859 $44,982 $52,963 $48,965 =======
======= ======= ======= ======= PER SHARE DATA -------------- Net
income - basic $0.75 $0.64 $0.76 $0.89 $0.83 Net income - diluted
0.75 0.63 0.76 0.89 0.83 Cash dividends 0.43 0.43 0.42 0.42 0.42
Book value at end of quarter 31.80 30.12 30.34 29.68 27.16
OUTSTANDING SHARES ------------------ Period-end shares 59,929
59,653 59,423 59,416 59,299 Weighted-average shares - basic 59,537
59,331 59,189 59,171 58,932 Dilutive effect of stock compensation
91 119 75 311 298 Weighted-average shares - diluted 59,628 59,450
59,264 59,482 59,230 SELECTED ANNUALIZED RATIOS -------------------
Return on average assets 1.11% 0.98% 1.23% 1.47% 1.44% Return on
average equity 9.70 8.35 10.33 12.79 12.39 Net interest income to
average earning assets(1) 4.12 4.28 4.33 4.60 4.74 (1)
Taxable-equivalent basis assuming a 35% tax rate. Cullen/Frost
Bankers, Inc. CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED) 2009 2008
------------------------------ ------------------ 3rd Qtr 2nd Qtr
1st Qtr 4th Qtr 3rd Qtr ------- ------- ------- ------- -------
BALANCE SHEET SUMMARY --------------------- ($in millions) Average
Balance: Loans $8,582 $8,784 $8,809 $8,712 $8,434 Earning assets
14,121 13,632 12,942 12,435 11,712 Total assets 16,047 15,519
14,881 14,347 13,486 Non-interest-bearing demand deposits 4,343
4,138 3,971 3,803 3,605 Interest-bearing deposits 8,453 8,045 7,487
7,106 6,797 Total deposits 12,796 12,183 11,458 10,909 10,402
Shareholders' equity 1,829 1,818 1,766 1,647 1,573 Period-End
Balance: Loans $8,519 $8,644 $8,779 $8,844 $8,596 Earning assets
14,436 13,855 13,530 13,001 11,984 Goodwill and intangible assets
549 549 551 551 553 Total assets 16,158 15,785 15,331 15,034 14,061
Total deposits 12,922 12,497 12,033 11,509 10,618 Shareholders'
equity 1,906 1,797 1,803 1,764 1,611 Adjusted shareholders'
equity(1) 1,709 1,675 1,650 1,626 1,593 ASSET QUALITY -------------
($in thousands) Allowance for possible loan losses $123,122
$122,501 $114,168 $110,244 $107,109 as a percentage of period-end
loans 1.45% 1.42% 1.30% 1.25% 1.25% Net charge-offs $16,319 $8,268
$5,677 $5,415 $6,351 Annualized as a percentage of average loans
0.75% 0.38% 0.26% 0.25% 0.30% Non-performing assets: Non-accrual
loans $191,754 $168,805 $114,233 $65,174 $45,475 Foreclosed assets
29,112 21,478 13,533 12,866 9,683 -------- -------- --------
------- ------- Total $220,866 $190,283 $127,766 $78,040 $55,158 As
a percentage of: Total loans and foreclosed assets 2.58% 2.20%
1.45% 0.88% 0.64% Total assets 1.37 1.21 0.83 0.52 0.39
CONSOLIDATED CAPITAL RATIOS --------------------------- Tier 1
Risk-Based Capital Ratio 11.49% 10.91% 10.64% 10.30% 10.33% Total
Risk-Based Capital Ratio 13.72 13.34 12.98 12.58 12.67 Leverage
Ratio 8.47 8.50 8.70 8.80 9.04 Equity to Assets Ratio (period-end)
11.80 11.38 11.76 11.73 11.46 Equity to Assets Ratio (average)
11.40 11.72 11.87 11.48 11.66 (1) Shareholders' equity excluding
accumulated other comprehensive income (loss). Cullen/Frost
Bankers, Inc. CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED) (In
thousands, except per share amounts) Nine Months Ended September
30, 2009 2008 ---- ---- CONDENSED INCOME STATEMENTS
--------------------------- Net interest income $398,085 $395,944
Net interest income(1) 426,972 410,647 Provision for possible loan
losses 43,142 29,273 Non-interest income Trust fees 49,599 57,071
Service charges on deposit accounts 76,457 63,869 Insurance
commissions and fees 26,362 26,434 Other charges, commissions and
fees 19,895 27,150 Net gain (loss) on securities transactions 49
(26) Other 34,999 43,626 ------- ------- Total non-interest income
207,361 218,124 Non-interest expense Salaries and wages 171,907
167,475 Employee benefits 42,468 36,702 Net occupancy 32,665 30,080
Furniture and equipment 32,158 27,789 Deposit insurance 20,686
2,812 Intangible amortization 5,064 5,977 Other 93,074 92,267
-------- -------- Total non-interest expense 398,022 363,102 Income
before income taxes 164,282 221,693 Income taxes 36,742 67,401
-------- -------- Net income $127,540 $154,292 -------- --------
PER SHARE DATA -------------- Net income - basic $2.14 $2.62 Net
income - diluted 2.14 2.61 Cash dividends 1.28 1.24 Book value at
end of period 31.80 27.16 OUTSTANDING SHARES ------------------
Period-end shares 59,929 59,299 Weighted-average shares - basic
59,353 58,736 Dilutive effect of stock compensation 69 361
Weighted-average shares - diluted 59,422 59,097 SELECTED ANNUALIZED
RATIOS -------------------------- Return on average assets 1.10%
1.53% Return on average equity 9.45 13.23 Net interest income to
average earning assets(1) 4.24 4.69 (1) Taxable-equivalent basis
assuming a 35% tax rate. Cullen/Frost Bankers, Inc. CONSOLIDATED
FINANCIAL SUMMARY (UNAUDITED) As of or for the Nine Months Ended
September 30, 2009 2008 ---- ---- BALANCE SHEET SUMMARY
--------------------- ($in millions) Average Balance: Loans $8,724
$8,181 Earning assets 13,569 11,678 Total assets 15,488 13,463
Non-interest-bearing demand deposits 4,152 3,551 Interest-bearing
deposits 7,999 6,853 Total deposits 12,151 10,404 Shareholders'
equity 1,805 1,558 Period-End Balance: Loans $8,519 $8,596 Earning
assets 14,436 11,984 Goodwill and intangible assets 549 553 Total
assets 16,158 14,061 Total deposits 12,922 10,618 Shareholders'
equity 1,906 1,611 Adjusted shareholders' equity(1) 1,709 1,593
ASSET QUALITY ------------- ($in thousands) Allowance for possible
loan losses $123,122 $107,109 As a percentage of period-end loans
1.45% 1.25% Net charge-offs: $30,264 $14,503 Annualized as a
percentage of average loans 0.46% 0.24% Non-performing assets:
Non-accrual loans $191,754 $45,475 Foreclosed assets 29,112 9,683
-------- ------- Total $220,866 $55,158 As a percentage of: Total
loans and foreclosed assets 2.58% 0.64% Total assets 1.37 0.39
CONSOLIDATED CAPITAL RATIOS --------------------------- Tier 1
Risk-Based Capital Ratio 11.49% 10.33% Total Risk-Based Capital
Ratio 13.72 12.67 Leverage Ratio 8.47 9.04 Equity to Assets Ratio
(period-end) 11.80 11.46 Equity to Assets Ratio (average) 11.65
11.57 (1) Shareholders' equity excluding accumulated other
comprehensive income (loss).
http://www.newscom.com/cgi-bin/prnh/20030109/CFRLOGO
http://photoarchive.ap.org/ DATASOURCE: Cullen/Frost Bankers, Inc.
CONTACT: Investor Relations, Greg Parker, +1-210-220-5632, or Media
Relations, Renee Sabel, +1-210-220-5416, both of Cullen/Frost
Bankers, Inc. Web Site: http://www.frostbank.com/
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