- $549 million increase in average deposits a new quarterly record
- Average loans up 11.3 percent over first quarter of 2008, but flat on linked quarter
- Record $15.3 billion in assets
SAN ANTONIO, April 22 /PRNewswire-FirstCall/ -- Cullen/Frost today reported net income for the first quarter of 2009 of $45.0 million, or $.76 per diluted common share, compared to first quarter 2008 earnings of $52.8 million, or $.89 per diluted common share. Returns on average assets and equity were 1.23 percent and 10.33 percent respectively, compared to 1.59 percent and 13.89 percent for the same period of 2008.
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"Given the challenging global and U.S. economy, I was pleased with our performance for the first quarter," said Dick Evans, chairman and CEO of Cullen/Frost. "For the second consecutive quarter, we generated a record quarter-over-quarter increase in average deposits as Texans, trusting Frost as a safe haven, brought in an additional $549 million. While average loans were up 11.3 percent over the first quarter of 2008, we have seen them level off recently, as many commercial clients are wisely building up liquidity and delaying new projects until the economic uncertainty subsides. Capital levels continue to be strong, as they were when we declined to apply for funding under the TARP last year.
"At the same time our revenue growth was impacted by the Fed's unprecedented reduction of interest rates to near zero at the end of 2008. In addition, our expense growth was affected by a $4.1 million increase in FDIC premiums.
"As expected, Texas is not immune to the effects of the broader U.S. recession. The state's overall economy is slowing, impacted by weaknesses in the job market, lowered rig counts and reduced exports linked to Mexico's economic problems. Although our non-performing asset levels have been impacted by the recent slowdown in the Texas economy, we remain confident in our ability to manage credit quality. Cullen/Frost is well positioned to navigate through difficult times, as our executive team was with the company during the 1980s. We know how to manage through economic uncertainty and have the disciplines, experience and commitment to guide this company and our customers through the challenges ahead.
"Our outstanding employees continue to inspire me as they meet our strategic priorities, live our value system and take great care of customers every day."
For the first quarter of 2009, net interest income on a taxable-equivalent basis increased 2.2 percent to $137.7 million, compared to the $134.8 million reported for the first quarter of 2008. Average loans for the quarter rose 11.3 percent to $8.8 billion, from the $7.9 billion reported a year earlier. Average deposits for the quarter were $11.5 billion, an increase of 10.2 percent from the $10.4 billion reported in the first quarter of 2008 and 5.0 percent from the $10.9 billion the previous quarter.
Noted financial data for the first quarter follows:
-- Net interest income on a taxable-equivalent basis increased $3.0
million or 2.2 percent to $137.7 million, from the $134.8 million reported
a year earlier. This increase primarily resulted from an increase in the
average volume of interest earning assets, which was partly offset by a
decrease in the net interest margin and the effect of one less day in the
first quarter of 2009 due to leap year in 2008. A record linked-quarter
increase in average deposits of $549 million helped to fund the increase
in the volume of interest earning assets. The net interest margin was 4.33
percent, compared to the 4.67 percent reported in the first quarter of
last year. The drop was due, in part, to rate cuts by the Federal Reserve
totaling 200 basis points since the end of the first quarter of 2008. When
compared to the fourth quarter of 2008, the net interest margin decreased
by 27 basis points from 4.60.
-- Non-interest income for the first quarter of 2009 was $69.9 million,
compared to $70.2 million reported a year earlier.
Trust fees fell to $16.0 million, from the $18.3 million reported in
the first quarter of 2008. Impacting trust fees was a $1.6 million
decrease in the level of investment fees, which are generally assessed
based on the market values of trust assets that are managed and held in
custody. These values were $21.3 billion at the end of the first quarter
of 2009 compared to $24.4 billion at March 31, 2008. Oil and gas trust
management fees were also down $566 thousand from the first quarter of
2008.
Service charges on deposits were $24.9 million, up $5.3 million or 27.1
percent compared to the same quarter a year earlier. Impacting this rise
was a $5.2 million increase in service charges on commercial accounts,
primarily related to an increase in 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 through fees.
Insurance commissions and fees were $10.8 million for the quarter, a
decrease of 3.6 percent from the $11.2 million reported for a year
earlier.
Other income decreased $2.8 million to $11.5 million, compared to $14.3
million for the first quarter of 2008. Impacting other income a year
earlier was a $1.9 million gain related to the Visa Inc. initial public
offering that resulted from a partial redemption of the corporation's Visa
shares. Also impacting this decrease was a $743 thousand decrease in gains
on the sale of student loans.
-- Non-interest expense for the first quarter of 2009 was $129.5
million, up $9.5 million or 7.9 percent from the $120.0 million reported
for the first quarter of 2008. Salaries and related employee benefits
were up $2.8 million or 4.0 percent over the same period a year ago, due
primarily to normal annual merit increases and the addition of new
employees, which was offset, in part, by a decrease in incentive
compensation. Net occupancy expense was $10.7 million for the first
quarter of 2009, up $1.0 million or 10.8 percent compared to the same
period in 2008. The increase was due primarily to an increase in lease
expense (up $468 thousand) and an increase in utilities (up $170
thousand). Furniture and equipment expense was $10.4 million for the
first three months in 2009, an increase of $1.4 million or 15.8 percent
from the same quarter last year. The increase from the first three months
in 2008 was primarily related to an increase in software amortization
expense (up $534 thousand) and software maintenance expense (up $528
thousand). Deposit insurance expense was $4.4 million for the first
quarter of 2009, increasing $4.1 million from the same period a year ago.
-- For the first quarter of 2009 the provision for possible loan losses
was $9.6 million, compared to net charge-offs for the quarter of $5.7
million or .26 percent of average loans on an annualized basis. The loan
loss provision for the first quarter of 2008 was $4.0 million, compared to
net charge-offs of $3.8 million. Non-performing assets at quarter end
were $127.8 million, compared to $36.6 million a year earlier and $78.0
million the previous quarter. In general, this increasing trend in non-
performing assets is reflective of the current economic weakness. The
allowance for possible loan losses as a percentage of loans increased to
1.30 percent at March 31, 2009, compared to 1.15 percent at the end of the
first quarter of 2008 and 1.25 percent at December 31, 2008.
Cullen/Frost Bankers, Inc. will host a conference call on Wednesday, April 22, 2009 at 10:00 a.m. Central Daylight Time (CDT) 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 800-944-6430. Digital playback of the conference call will be available after 12:00 p.m. CT until midnight Sunday, April 26, 2009 at 800-642-1687, with the Conference ID # of 94661695. 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 website, 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 $15.3 billion at March 31, 2009. The corporation provides a full range of commercial and consumer banking products, investment and brokerage services, insurance products and investment banking services. Its subsidiary, Frost Bank, operates more than 100 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 banking organization headquartered in Texas that operates only in Texas, with a legacy of helping clients with their financial needs during three centuries.
Greg Parker
Investor Relations
210/220-5632
or
Renee Sabel
Media Relations
210/220-5416
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.
Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share amounts)
2009 2008
---------------------------------------------------
1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
------- ------- ------- ------- -------
CONDENSED INCOME
STATEMENTS
----------------
Net interest
income $129,632 $138,081 $134,736 $131,328 $129,880
Net interest
income(1) 137,733 143,707 139,655 136,223 134,767
Provision for
possible loan
losses 9,601 8,550 18,940 6,328 4,005
Non-interest
income:
Trust fees 15,969 17,483 19,749 19,040 18,282
Service charges
on deposit
accounts 24,910 23,697 22,642 21,634 19,593
Insurance
commissions and
fees 10,751 6,470 8,261 7,015 11,158
Other charges,
commissions and
fees 6,762 8,407 10,723 9,496 6,931
Net gain (loss)
on securities
transactions -- (133) 78 (56) (48)
Other 11,472 13,274 15,862 13,452 14,312
------- ------- ------- ------- -------
Total
non-interest
income 69,864 69,198 77,315 70,581 70,228
Non-interest
expense:
Salaries and
wages 56,776 58,468 57,803 54,534 55,138
Employee
benefits 15,240 10,517 10,677 11,912 14,113
Net occupancy 10,690 10,384 10,342 10,091 9,647
Furniture and
equipment 10,363 10,010 9,657 9,182 8,950
Deposit
insurance 4,376 1,785 1,859 659 294
Intangible
amortization 1,781 1,929 1,976 1,955 2,046
Other 30,273 30,450 30,658 31,757 29,852
------- ------- ------- ------- -------
Total
non-interest
expense 129,499 123,543 122,972 120,090 120,040
------- ------- ------- ------- -------
Income before
income taxes 60,396 75,186 70,139 75,491 76,063
Income taxes 15,414 22,223 21,174 22,944 23,283
------- ------- ------- ------- -------
Net income $44,982 $52,963 $48,965 $52,547 $52,780
======= ======= ======= ======= =======
PER SHARE DATA
--------------
Net income -
basic $0.76 $0.89 $0.83 $0.89 $0.90
Net income -
diluted 0.76 0.89 0.83 0.89 0.89
Cash dividends 0.42 0.42 0.42 0.42 0.40
Book value at
end of quarter 30.34 29.68 27.16 26.11 26.85
OUTSTANDING SHARES
------------------
Period-end
shares 59,423 59,416 59,299 59,081 58,747
Weighted-average
shares - basic 59,189 59,171 58,932 58,733 58,538
Dilutive effect
of stock
compensation 75 311 433 483 520
Weighted-average
shares - diluted 59,264 59,482 59,365 59,216 59,058
SELECTED
ANNUALIZED
RATIOS
-----------
Return on
average assets 1.23% 1.47% 1.44% 1.56% 1.59%
Return on
average equity 10.33 12.79 12.39 13.44 13.89
Net interest
income to
average earning
assets(1) 4.33 4.60 4.74 4.68 4.67
(1) Taxable-equivalent basis assuming a 35% tax rate.
Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
2009 2008
------------------------------------------------
1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
------- ------- ------- ------- -------
BALANCE
SHEET
SUMMARY
--------
($in millions)
Average Balance:
Loans $8,809 $8,712 $8,434 $8,187 $7,918
Earning assets 12,942 12,435 11,712 11,717 11,605
Total assets 14,881 14,347 13,486 13,518 13,382
Non-interest-bearing
demand
deposits 3,971 3,803 3,605 3,531 3,518
Interest-bearing
deposits 7,487 7,106 6,797 6,885 6,876
Total deposits 11,458 10,909 10,402 10,416 10,394
Shareholders' equity 1,766 1,647 1,573 1,573 1,529
Period-End Balance:
Loans $8,779 $8,844 $8,596 $8,354 $8,013
Earning assets 13,530 13,001 11,984 11,608 11,874
Goodwill and
intangible
assets 551 551 553 554 556
Total assets 15,331 15,034 14,061 13,671 13,794
Total deposits 12,033 11,509 10,618 10,627 10,728
Shareholders' equity 1,803 1,764 1,611 1,542 1,577
Adjusted shareholders'
equity(1) 1,650 1,626 1,593 1,557 1,513
ASSET QUALITY
-------------
($in thousands)
Allowance for
possible
loan losses $114,168 $110,244 $107,109 $94,520 $92,498
as a percentage of
period-end loans 1.30% 1.25% 1.25% 1.13% 1.15%
Net charge-offs $5,677 $5,415 $6,351 $4,306 $3,846
Annualized as a
percentage
of average loans 0.26% 0.25% 0.30% 0.21% 0.20%
Non-performing assets:
Non-accrual loans $114,233 $65,174 $45,475 $40,485 $28,642
Foreclosed assets 13,533 12,866 9,683 9,146 7,944
-------- ------- ------- ------- -------
Total $127,766 $78,040 $55,158 $49,631 $36,586
As a percentage
of:
Total loans and
foreclosed assets 1.45% 0.88% 0.64% 0.59% 0.46%
Total assets 0.83 0.52 0.39 0.36 0.27
CONSOLIDATED CAPITAL
RATIOS
-------------------
Tier 1 Risk-Based
Capital Ratio 10.64% 10.30% 10.33% 10.15% 9.98%
Total Risk-Based
Capital Ratio 12.98 12.58 12.67 12.68 12.55
Leverage Ratio 8.70 8.80 9.04 8.69 8.51
Equity to Assets Ratio
(period-end) 11.76 11.73 11.46 11.28 11.43
Equity to Assets Ratio
(average) 11.87 11.48 11.66 11.63 11.42
(1) Shareholders' equity excluding accumulated other comprehensive
income(loss).
SOURCE Cullen/Frost Bankers, Inc.
Contact: Greg Parker, Investor Relations, +1-210-220-5632, or Renee Sabel, Media Relations, +1-210-220-5416, both of Cullen/Frost Bankers, Inc.