Press Release

Cullen/Frost Reports Third Quarter Results

Board declares fourth quarter dividend on common and preferred stock

Company Release - 10/31/2019 9:00 AM ET

SAN ANTONIO, Oct. 31, 2019 /PRNewswire/ -- Cullen/Frost Bankers, Inc. (NYSE:CFR) today reported third quarter 2019 results. Net income available to common shareholders for the third quarter of 2019 was $109.8 million, compared to $115.8 million in the third quarter of 2018. On a per-share basis, net income available to common shareholders for the third quarter of 2019 was $1.73 per diluted common share, compared to $1.78 per diluted common share reported a year earlier. Returns on average assets and average common equity were 1.35 percent and 11.83 percent, respectively, for the third quarter of 2019 compared to 1.49 percent and 14.40 percent, respectively, for the same period a year earlier.

For the third quarter of 2019, net interest income on a taxable-equivalent basis was $276.6 million, up 4.1 percent compared to the same quarter in 2018. Average loans for the third quarter of 2019 increased $788.1 million, or 5.8 percent, to $14.5 billion, from the $13.7 billion reported for the third quarter a year earlier. Average deposits for the quarter were $26.4 billion, basically flat compared to the $26.2 billion reported for last year's third quarter.

"The third quarter was another solid quarter for Frost as we continued our focus on sustainable organic growth and top-quality customer service," said Cullen/Frost Chairman and CEO Phil Green. "Our expansion in the Houston region continues to move forward, and we have now opened a total of seven new financial centers in that significant market."

For the first nine months of 2019, net income available to common shareholders was $333.9 million, up 1.3 percent compared to $329.6 million for the first nine months of 2018. Diluted earnings per share available to common shareholders for the first nine months of 2019 was $5.24 compared to $5.08 in the year-earlier period, representing an increase of 3.1 percent. Returns on average assets and average common equity for the first nine months of 2019 were 1.41 percent and 12.79 percent, respectively, compared to 1.42 percent and 14.02 percent, respectively, for the same period in 2018.

Noted financial data for the third quarter of 2019 follows:

  • The Common Equity Tier 1, Tier 1 and Total Risk-Based Capital Ratios at the end of the third quarter of 2019 were 12.35 percent, 12.99 percent and 14.63 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 $276.6 million, an increase of 4.1 percent over the prior year period. Net interest margin was 3.76 percent for the third quarter of 2019, down 9 basis points compared to the second quarter of 2019 net interest margin of 3.85 percent. Net interest margin increased 10 basis points compared to 3.66 percent in the year-ago period.
  • Non-interest income for the third quarter of 2019 totaled $89.2 million, an increase of $1.6 million, or 1.8 percent, from the $87.7 million reported for the third quarter of 2018. Third quarter non-interest income was impacted by a $2.6 million decrease in other income, compared to the third quarter of 2018. This decrease was mainly driven by $2.9 million in recoveries of prior write-offs and settlements recorded in the year-ago period. Service charges on deposits increased by $1.4 million, or 6.4 percent, primarily driven by an increase in overdraft fees of $1.2 million. Trust and investment management fees were $31.6 million, up $848,000, or 2.8 percent, from the third 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 $11.7 million increased $646,000, or 5.9 percent, from the previous year. The increase in commission income during the third quarter was primarily related to an increase in commercial property and casualty commissions.
  • Non-interest expense was $208.9 million for the quarter, up $15.2 million, or 7.8 percent, compared to the $193.7 million reported for the third quarter a year earlier. Total salaries and wages rose $6.3 million, or 7.2 percent, to $93.8 million, primarily due to an increase in the number of employees and normal annual merit and market increases and, to a lesser extent, an increase in incentive compensation. Employee benefits expense increased $2.6 million, or 14.4 percent, compared to the third quarter of 2018. The increase was primarily related to increases in medical benefits expense (up $838,000), expenses related to our defined benefit retirement plans (up $585,000), payroll taxes (up $562,000) and expenses related to our 401(k) plan (up $373,000). Third quarter net occupancy expense increased by $4.3 million, or 21.7 percent, compared to the same period in 2018, primarily driven by the commencement of the lease of our new corporate headquarters building in San Antonio and other leases related to existing facilities and our expansion within the Houston market area. We began recognizing expenses associated with the new corporate headquarters in June of 2019. Other non-interest expense increased $2.8 million, or 6.8 percent, compared to the third quarter of 2018. The increase was mainly driven by increases in professional services expense (up $2.3 million); platform fees related to investment services (up $558,000); losses on the sale of foreclosed and other assets (up $424,000) and computer services expense (up $325,000). The increase from these items was partly offset by a decrease in advertising/ promotions expense (down $1.3 million). Technology, furniture and equipment expense for the third quarter increased by $1.4 million, or 6.7 percent, from the third quarter of 2018. The increase was primarily driven by a $1.7 million increase in software maintenance expense. Deposit insurance expense decreased by $2.2 million compared to the third quarter of 2018, primarily due to the termination of the FDIC's quarterly surcharge in the fourth quarter of 2018.
  • For the third quarter of 2019, the provision for loan losses was $8.0 million, compared to net charge-offs of $6.4 million. This compares with $6.4 million in provisions and $7.8 million in net charge-offs for the second quarter of 2019, and $2.7 million in provisions and $15.3 million in net charge-offs in the third quarter of 2018. The allowance for loan losses as a percentage of total loans was 0.93 percent at September 30, 2019, unchanged compared to the end of the second quarter of 2019 and down 7 basis points compared to 1.00 percent at the end of the third quarter of 2018. Non-performing assets were $105.0 million at the end of the third quarter of 2019, compared to $76.4 million at the end of the second quarter of 2019 and $86.4 million at the end of the third quarter of 2018.

The Cullen/Frost board declared a fourth-quarter cash dividend of $0.71 per common share, representing a 6.0 percent increase over the previous year's dividend, payable December 13, 2019 to shareholders of record on November 29 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 December 16, 2019, to shareholders of record on November 29 of this year.

Cullen/Frost Bankers, Inc. will host a conference call on Thursday, October 31, 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, November 3, 2019 at 855-859-2056 with Conference ID # of 1057329. 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. (NYSE: CFR) is a financial holding company, headquartered in San Antonio, with $33.1 billion in assets at September 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.

A.B. Mendez
Investor Relations
210.220.5234

     or

Bill Day
Media Relations
210.220.5427

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

(In thousands, except per share amounts)












2019


2018


3rd Qtr


2nd Qtr


1st Qtr


4th Qtr


3rd Qtr

CONDENSED INCOME STATEMENTS










Net interest income

$

253,007



$

253,431



$

246,469



$

249,209



$

241,665


Net interest income (1)

276,618



277,751



271,179



273,810



265,687


Provision for loan losses

8,001



6,400



11,003



3,767



2,650


Non-interest income:










Trust and investment management fees

31,649



30,448



31,697



29,882



30,801


Service charges on deposit accounts

22,941



21,798



20,790



21,632



21,569


Insurance commissions and fees

11,683



10,118



18,406



11,394



11,037


Interchange and debit card transaction fees

4,117



3,868



3,280



3,774



3,499


Other charges, commissions and fees

10,108



8,933



9,062



9,371



9,580


Net gain (loss) on securities transactions

96



169





(43)



(34)


Other

8,630



7,304



13,550



11,108



11,205


Total non-interest income

89,224



82,638



96,785



87,118



87,657












Non-interest expense:










Salaries and wages

93,812



90,790



92,476



90,878



87,547


Employee benefits

21,002



20,051



23,526



19,066



18,355


Net occupancy

24,202



21,133



19,267



17,699



19,894


Technology, furniture and equipment

22,415



22,157



21,664



21,960



21,004


Deposit insurance

2,491



2,453



2,808



2,219



4,694


Intangible amortization

274



305



325



331



336


Other

44,668



46,320



41,734



47,544



41,838


Total non-interest expense

208,864



203,209



201,800



199,697



193,668


Income before income taxes

125,366



126,460



130,451



132,863



133,004


Income taxes

13,530



14,874



13,955



13,610



15,160


Net income

111,836



111,586



116,496



119,253



117,844


Preferred stock dividends

2,016



2,015



2,016



2,016



2,016


Net income available to common shareholders

$

109,820



$

109,571



$

114,480



$

117,237



$

115,828












PER COMMON SHARE DATA










Earnings per common share - basic

$

1.74



$

1.73



$

1.80



$

1.84



$

1.80


Earnings per common share - diluted

1.73



1.72



1.79



1.82



1.78


Cash dividends per common share

0.71



0.71



0.67



0.67



0.67


Book value per common share at end of quarter

59.76



57.39



54.64



51.19



49.49












OUTSTANDING COMMON SHARES










Period-end common shares

62,537



62,638



63,081



62,986



63,923


Weighted-average common shares - basic

62,566



62,789



63,009



63,441



63,892


Dilutive effect of stock compensation

593



765



819



811



1,022


Weighted-average common shares - diluted

63,159



63,554



63,828



64,252



64,914












SELECTED ANNUALIZED RATIOS










Return on average assets

1.35

%


1.40

%


1.48

%


1.48

%


1.49

%

Return on average common equity

11.83



12.60



14.08



14.85



14.40


Net interest income to average earning assets

3.76



3.85



3.79



3.72



3.66












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


 

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)



2019


2018


3rd Qtr


2nd Qtr


1st Qtr


4th Qtr


3rd Qtr

BALANCE SHEET SUMMARY










($ in millions)










Average Balance:










Loans

$

14,471



$

14,375



$

14,205



$

13,949



$

13,683


Earning assets

29,693



29,114

 



28,954



29,153



28,796


Total assets

32,248



31,491



31,356



31,330



30,918


Non-interest-bearing demand deposits

10,316



10,148



10,193



10,740



10,690


Interest-bearing deposits

16,036



15,845



15,919



15,767



15,462


Total deposits

26,352



25,993



26,112



26,507



26,152


Shareholders' equity

3,828



3,632



3,441



3,277



3,335












Period-End Balance:










Loans

$

14,635



$

14,459



$

14,406



$

14,100



$

13,815


Earning assets

30,358



29,216



29,281



29,894



29,042


Goodwill and intangible assets

658



658



658



659



659


Total assets

33,098



31,817



31,663



32,293



31,223


Total deposits

27,084



25,985



26,295



27,149



26,349


Shareholders' equity

3,881



3,739



3,592



3,369



3,308


Adjusted shareholders' equity (1)

3,576



3,520



3,498



3,433



3,449












ASSET QUALITY










($ in thousands)










Allowance for loan losses:

$

136,559



$

134,929



$

136,350



$

132,132



$

137,578


As a percentage of period-end loans

0.93

%


0.93

%


0.95

%


0.94

%


1.00

%











Net charge-offs:

$

6,371



$

7,821



$

6,785



$

9,213



$

15,298


Annualized as a percentage of average loans

0.17

%


0.22

%


0.19

%


0.26

%


0.44

%











Non-performing assets:










Non-accrual loans

$

97,446



$

71,521



$

92,162



$

73,739



$

82,601


Restructured loans

6,160



3,973



4,028






Foreclosed assets

1,427



907



1,175



1,175



3,765


Total

$

105,033



$

76,401



$

97,365



$

74,914



$

86,366


As a percentage of:










Total loans and foreclosed assets

0.72

%


0.53

%


0.68

%


0.53

%


0.62

%

Total assets

0.32



0.24



0.31



0.23



0.28












CONSOLIDATED CAPITAL RATIOS










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

12.35

%


12.29

%


12.34

%


12.27

%


12.56

%

Tier 1 Risk-Based Capital Ratio (2)

12.99



12.94



13.00



12.94



13.24


Total Risk-Based Capital Ratio (2)

14.63



14.60



14.68



14.64



14.99


Leverage Ratio

9.36



9.40



9.35



9.06



9.19


Equity to Assets Ratio (period-end)

11.73



11.75



11.34



10.43



10.60


Equity to Assets Ratio (average)

11.87



11.53



10.97



10.46



10.79












(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)









Nine Months Ended

September 30,








2019


2018

CONDENSED INCOME STATEMENTS




















Net interest income







$

752,907



$

708,683


Net interest income (1)







825,547



778,754


Provision for loan losses







25,404



17,846


Non-interest income:










Trust and investment management fees







93,794



89,509


Service charges on deposit accounts







65,529



63,554


Insurance commissions and fees







40,207



37,573


Interchange and debit card transaction fees







11,265



10,103


Other charges, commissions and fees







28,103



27,860


Net gain (loss) on securities transactions







265



(113)


Other







29,484



35,682


Total non-interest income







268,647



264,168












Non-interest expense:










Salaries and wages







277,078



259,434


Employee benefits







64,579



58,257


Net occupancy







64,602



59,089


Furniture and equipment







66,236



61,142


Deposit insurance







7,752



14,178


Intangible amortization







904



1,093


Other







132,722



125,994


Total non-interest expense







613,873



579,187


Income before income taxes







382,277



375,818


Income taxes







42,359



40,153


Net income







339,918



335,665


Preferred stock dividends







6,047



6,047


Net income available to common shareholders







$

333,871



$

329,618












PER COMMON SHARE DATA










Earnings per common share - basic







$

5.28



$

5.13


Earnings per common share - diluted







5.24



5.08


Cash dividends per common share







2.09



1.91


Book value per common share at end of quarter







59.76



49.49












OUTSTANDING COMMON SHARES










Period-end common shares







62,537



63,923


Weighted-average common shares - basic







62,787



63,794


Dilutive effect of stock compensation







725



1,037


Weighted-average common shares - diluted







63,512



64,831












SELECTED ANNUALIZED RATIOS










Return on average assets







1.41

%


1.42

%

Return on average common equity







12.79



14.02


Net interest income to average earning assets (1)







3.80



3.61












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


 

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)


















As of or for the

Nine Months Ended

September 30,








2019


2018

BALANCE SHEET SUMMARY ($ in millions)










Average Balance:










Loans







$

14,352



$

13,506


Earning assets







29,257



28,814


Total assets







31,678



30,933


Non-interest-bearing demand deposits







10,219



10,762


Interest-bearing deposits







15,934



15,454


Total deposits







26,153



26,216


Shareholders' equity







3,635



3,287












Period-End Balance:










Loans







$

14,635



$

13,815


Earning assets







30,358



29,042


Goodwill and intangible assets







658



659


Total assets







33,098



31,223


Total deposits







27,084



26,349


Shareholders' equity







3,881



3,308


Adjusted shareholders' equity (1)







3,576



3,449












ASSET QUALITY ($ in thousands)










Allowance for loan losses:







$

136,559



$

137,578


As a percentage of period-end loans







0.93

%


1.00

%











Net charge-offs:







$

20,977



$

35,632


Annualized as a percentage of average loans







0.20

%


0.35

%











Non-performing assets:










Non-accrual loans







$

97,446



$

82,601


Restructured loans







6,160




Foreclosed assets







1,427



3,765


Total







$

105,033



$

86,366


As a percentage of:










Total loans and foreclosed assets







0.72

%


0.62

%

Total assets







0.32



0.28












CONSOLIDATED CAPITAL RATIOS










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






12.35

%


12.56

%

Tier 1 Risk-Based Capital Ratio (2)







12.99



13.24


Total Risk-Based Capital Ratio (2)







14.63



14.99


Leverage Ratio







9.36



9.19


Equity to Assets Ratio (period-end)







11.73



10.60


Equity to Assets Ratio (average)







11.48



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.

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



2019


2018


3rd Qtr


2nd Qtr


1st Qtr


4th Qtr


3rd Qtr

TAXABLE-EQUIVALENT YIELD/COST (1)










Earning Assets:










Interest-bearing deposits

2.19

%


2.64

%


2.50

%


2.35

%


2.05

%

Federal funds sold and resell agreements

2.21



2.48



2.58



2.41



2.14


Securities

3.43



3.42



3.37



3.39



3.41


Loans, net of unearned discounts

5.16



5.34



5.33



5.20



5.04


Total earning assets

4.21



4.33



4.27



4.15



4.04












Interest-Bearing Liabilities:










Interest-bearing deposits:










Savings and interest checking

0.07



0.08



0.09



0.08



0.09


Money market deposit accounts

0.93



1.03



1.09



1.00



0.93


Time accounts

1.74



1.66



1.43



1.14



0.87


Public funds

1.34



1.51



1.39



1.31



1.11


Total interest-bearing deposits

0.63



0.68



0.69



0.63



0.57












Total deposits

0.39



0.41



0.42



0.37



0.34












Federal funds purchased and repurchase agreements

1.53



1.69



1.72



1.56



0.90


Junior subordinated deferrable interest debentures

4.18



4.34



4.40



4.24



4.09


Subordinated notes payable and other notes

4.71



4.71



4.72



4.72



4.72


Total interest-bearing liabilities

0.75



0.80



0.81



0.74



0.64












Net interest spread

3.46



3.53



3.46



3.41



3.40


Net interest income to total average earning assets

3.76



3.85



3.79



3.72



3.66












AVERAGE BALANCES










($ in millions)










Assets:










Interest-bearing deposits

$

1,566



$

1,171



$

1,729



$

2,452



$

2,799


Federal funds sold and resell agreements

212



246



250



317



260


Securities

13,444



13,322



12,770



12,435



12,053


Loans, net of unearned discount

14,471



14,375



14,205



13,949



13,683


Total earning assets

$

29,693



$

29,114



$

28,954



$

29,153



$

28,796












Liabilities:










Interest-bearing deposits:










Savings and interest checking

$

6,712



$

6,774



$

6,774



$

6,673



$

6,675


Money market deposit accounts

7,763



7,588



7,696



7,792



7,620


Time accounts

1,023



970



895



836



799


Public funds

538



513



554



467



369


Total interest-bearing deposits

16,036



15,845



15,919



15,767



15,462












Total deposits

26,352



25,993



26,112



26,507



26,152












Federal funds purchased and repurchase agreements

1,291



1,242



1,180



1,138



1,011


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

$

17,562



$

17,322



$

17,334



$

17,140



$

16,708












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

 

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

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/cullenfrost-reports-third-quarter-results-300948704.html

SOURCE Cullen/Frost Bankers, Inc.

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