CULLEN/FROST BANKERS, INC. 
By SAN ANTONIO, Jan. 25, 2012 /PRNewswire/ -- Cullen/Frost Bankers, Inc. today reported results for the fourth quarter and full year of 2011, as the Texas financial services leader posted record-high annual earnings, operating effectively in a challenging economic, regulatory and rate environment. For the first time, the company exceeded $20 billion in assets, which is a 50 percent increase over year-end 2007.
(Logo: http://photos.prnewswire.com/prnh/20030109/CFRLOGO)
Cullen/Frost reported net income for the fourth quarter of 2011 of $55.4 million, or $.90 per diluted common share, compared to fourth quarter 2010 earnings of $53.1 million, or $.87 per diluted common share. For the fourth quarter of 2011, returns on average assets and equity were 1.12 percent and 9.74 percent respectively, compared to 1.18 percent and 9.96 percent for the same period of 2010.
The company also reported annual earnings for 2011 of $217.5 million, a rise of 4.2 percent over 2010 earnings of $208.8 million. On a per-share basis, 2011 earnings were $3.54 per diluted common share, an increase of 2.9 percent compared to the $3.44 per diluted common share reported in 2010. For the year, returns on average assets and equity were 1.17 percent and 10.01 percent respectively, compared to the 1.21 percent and 10.30 percent reported in 2010.
At the end of the fourth quarter of 2011, Cullen/Frost saw non-performing assets decline by $44.0 million from the fourth quarter of 2010 and $18.3 million from the previous quarter.
"I am pleased to report that in 2011Cullen/Frost achieved record annual earnings, demonstrating steady performance amid continued economic challenges and regulatory headwinds," said Dick Evans, Cullen/Frost chairman and CEO. "It is a credit to our dedicated employees and strong value proposition that we were able to post record earnings. Although uncertainty about the economy and healthcare legislation continue to constrain the lending environment, we were able to maintain loans at the same level as in 2010. Deposits grew again this quarter, both from new business and consumer relationships as well as from existing customers. In this persistent low-rate environment, it was encouraging to see net interest income rise, as we were able to deploy some of our additional liquidity into the investment portfolio. Our capital levels remain very strong.
"Non-performing assets this quarter were down significantly from both the same period a year ago and the previous quarter. This is evidence of our credit disciplines. This quarter, we saw the best improvement in asset quality in the last eight quarters," said Evans.
"The Texas economy continues to outpace the U.S., with growth in oil and gas energized by the Eagle Ford Shale. Even with stronger job growth and lower unemployment than the nation, uncertainty about the broader economy and the impact of regulation persists. Businesses have reduced debt but remain cautious about hiring or capital expenditures.
"As we have since the recession began, we are working to build new relationships and believe these new relationships form the foundation for future loan growth when confidence returns."
Adding to high rankings Frost has received from J.D. Power and Associates, Greenwich Associates and Allegiance, in December Frost Bank received an A+ credit rating from Standard and Poor's. The agency cited Frost's "strong capital, excellent liquidity, consistent profitability and solid credit performance relative to peers," reinforced by the company's "conservative strategy and solid market position in Texas." With this rating upgrade, Frost becomes one of the highest ranked financial institutions in the U.S., Evans noted.
"Financial services regulation poses challenges for our industry, but at Cullen/Frost, our value proposition is helping us take great care of customers while meeting our commitment to providing outstanding value to our shareholders, as shown by our consistent history of paying and increasing the dividend.
Evans said the company opened six new financial centers in 2011, including three in Houston, two in Austin and one in the Dallas region. In December 2011 the company announced the acquisition of Stone Partners, Inc., a Houston-based human resource consulting firm that will operate as a division of Frost Insurance.
"Our employees, as always, keep the Frost culture alive and thriving and make our company's success possible. I am grateful for their loyalty and commitment to Frost."
For the year ended December 31, 2011, average annual total loans were $8.0 billion, compared to $8.1 billion for the previous year. Average annual total deposits for 2011 rose to $15.2 billion, up 8.4 percent, or $1.2 billion, over the $14.0 billion reported in 2010. Net interest income on a taxable-equivalent basis increased to $642.1 million, up 4.2 percent over the $616.3 million reported a year earlier, reflecting the impact of the increasing volume of earning assets. For 2011, non-interest income was $290.0 million, compared to $282.0 million reported for 2010, while non-interest expense increased 4.2 percent over the previous year to $558.1 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 2011 were 14.38 percent and 16.24 percent,
respectively and are in excess of well capitalized levels. The ratio of
tangible common equity to tangible assets was 8.82 percent at the end of
the fourth quarter of 2011, compared to 8.90 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.
-- Net interest income on a taxable-equivalent basis for the fourth quarter
totaled $165.3 million, compared to the $155.2 million reported for the
fourth quarter of 2010. 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
3.76 percent for the fourth quarter, compared to 3.93 percent for the
fourth quarter of 2010 and 3.81 percent for the third quarter of 2011.
-- Non-interest income for the fourth quarter of 2011 was $67.7 million,
down $2.6 million from the $70.3 million a year earlier. The Durbin
Amendment negatively impacts non-interest income by approximately $5
million per quarter. In the fourth quarter, that impact was most
evident in other income, which was down $3.4 million and in service
charges on deposits, which were down $1.0 million. Positively impacting
the quarter were several factors. Other charges, commissions and fees
were $8.6 million, up $838,000 from the $7.8 million reported for the
prior year's fourth quarter, primarily relating to an increase in
investment banking income. Insurance commissions and fees rose $673,000
to $7.5 million, from $6.8 million in the fourth quarter of 2010, with
$459,000 of the increase resulting from benefit commissions. Trust fees
were $17.6 million, up $233,000 compared to $17.4 million a year
earlier. Impacting trust fees was a $427,000 increase in investment
fees, which are generally assessed based on the market value of trust
assets that are managed and held in custody. These values were $25.2
billion at the end of the fourth quarter of 2011, compared to $24.9
billion at December 31, 2010. Trust fees were offset, in part, by lower
estate fees.
-- Non-interest expense for the fourth quarter of 2011 was $143.8 million,
up $10.1 million from the $133.7 million for the fourth quarter of 2010.
Salaries were up $5.4 million, or 8.9 percent, over the same quarter a
year earlier as a result of normal annual merit and market increases,
and increases in stock-based compensation expense and incentive
compensation. Other expense was $36.4 million, a $5.6 million increase
from the $30.9 million reported for the fourth quarter of 2010,
primarily from a $2.4 million increase in brand marketing and
advertising expense and a $2.0 million contribution to the Frost
Charitable Foundation for donations. Furniture and equipment expense was
$13.5 million, up $1.1 million mainly due to amortization expense for
software upgrades. Offsetting these increases, in part, was a $2.1
million decrease in FDIC expense, compared to the same quarter in 2010.
The decrease was related to a change in the deposit insurance assessment
base and a change in the method by which the assessment rate is
determined for large financial institutions.
-- For the fourth quarter of 2011, the provision for possible loan losses
was zero, compared to net charge-offs of $5.3 million. For the fourth
quarter of 2010, the provision for possible loan losses was $11.3
million, compared to net charge offs of $11.1 million. The allowance for
possible loan losses as a percentage of total loans was 1.38 percent at
December 31, 2011, compared to 1.56 percent at year-end 2010.
Non-performing assets were $120.9 million at year-end, compared to
$139.3 million the previous quarter, and $165.0 million at year-end
2010.
Cullen/Frost Bankers, Inc. will host a conference call on Wednesday, January 25, 2012 at 10 am 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 pm CT until midnight Sunday, January 29, 2012 at 800-642-1687, with the Conference ID# of 43571634. The call will also be available by webcast on the company's website, frostbank.com, and available for playback after 2 pm 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 $20.3 billion in assets at December 31, 2011, and more than 115 financial centers throughout Texas. One of 24 U.S. banks included in the KBW Bank Index, Frost provides a wide range of banking, investments and insurance services to businesses and individuals 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.
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 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.
Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share amounts)
2011 2010
----
4th
4th Qtr 3rd Qtr 2nd Qtr 1st Qtr Qtr
----
CONDENSED
INCOME
STATEMENTS
---------------
Net interest
income $150,323 $145,361 $144,333 $141,759 $141,563
Net interest
income(1) 165,340 160,579 159,509 156,638 155,221
Provision for
loan losses -- 9,010 8,985 9,450 11,290
Non-interest
income:
Trust fees 17,632 18,405 18,976 18,220 17,399
Service
charges on
deposit
accounts 23,074 24,306 23,619 23,368 24,082
Insurance
commissions
and fees 7,450 9,569 7,908 10,494 6,777
Other charges,
commissions
and fees 8,634 8,134 8,478 8,759 7,796
Net gain
(loss) on
securities
transactions -- 6,409 -- 5 --
Other 10,870 12,394 11,811 11,487 14,224
------ ------ ------ ------ ------
Total non-
interest
income 67,660 79,217 70,792 72,333 70,278
Non-interest
expense:
Salaries and
wages 66,126 61,697 61,775 62,430 60,744
Employee
benefits 12,574 12,004 13,050 15,311 12,458
Net occupancy 11,413 12,080 11,823 11,652 11,197
Furniture and
equipment 13,454 13,106 12,628 12,281 12,335
Deposit
insurance 2,773 2,583 2,598 4,760 4,918
Intangible
amortization 1,052 1,108 1,107 1,120 1,217
Other 36,441 34,829 33,816 32,507 30,872
------ ------ ------ ------ ------
Total non-
interest
expense 143,833 137,407 136,797 140,061 133,741
------- ------- ------- ------- -------
Income before
income taxes 74,150 78,161 69,343 64,581 66,810
Income taxes 18,736 23,654 13,657 12,653 13,759
------ ------ ------ ------ ------
Net income $55,414 $54,507 $55,686 $51,928 $53,051
------- ------- ------- ------- -------
PER SHARE DATA
--------------
Net income -
basic $0.90 $0.89 $0.91 $0.85 $0.87
Net income -
diluted 0.90 0.89 0.91 0.85 0.87
Cash dividends 0.46 0.46 0.46 0.45 0.45
Book value at
end of
quarter 37.27 36.69 35.54 34.25 33.74
OUTSTANDING
SHARES
-----------
Period-end
shares 61,264 61,245 61,245 61,242 61,108
Weighted-
average
shares -
basic 61,154 61,137 61,094 61,018 60,772
Dilutive
effect of
stock
compensation 54 102 297 316 176
Weighted-
average
shares -
diluted 61,208 61,239 61,391 61,334 60,948
SELECTED
ANNUALIZED
RATIOS
-----------
Return on
average
assets 1.12% 1.15% 1.23% 1.19% 1.18%
Return on
average
equity 9.74 9.79 10.45 10.11 9.96
Net interest
income to
average
earning
assets(1) 3.76 3.81 3.95 4.03 3.93
(1) Taxable-equivalent basis assuming a 35% tax rate.
Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
2011 2010
----
1st
4th Qtr 3rd Qtr 2nd Qtr Qtr 4th Qtr
BALANCE
SHEET
SUMMARY
($
in
millions)
Average
Balance:
Loans $7,975 $8,036 $8,080 $8,081 $8,033
Earning
assets 17,806 17,053 16,356 15,822 15,953
Total
assets 19,579 18,825 18,170 17,678 17,855
Non-
interest-
bearing
demand
deposits 6,325 5,905 5,464 5,248 5,371
Interest-
bearing
deposits 9,804 9,524 9,379 9,221 9,264
Total
deposits 16,129 15,429 14,843 14,469 14,635
Shareholders'
equity 2,258 2,209 2,137 2,083 2,114
Period-
End
Balance:
Loans $7,995 $8,090 $8,068 $8,025 $8,117
Earning
assets 18,498 17,728 16,710 16,160 15,806
Goodwill
and
intangible
assets 539 540 541 541 542
Total
assets 20,317 19,490 18,478 17,942 17,617
Total
deposits 16,757 16,064 15,104 14,710 14,479
Shareholders'
equity 2,284 2,247 2,177 2,097 2,062
Adjusted
shareholders'
equity(1) 2,036 2,003 1,974 1,943 1,907
ASSET
QUALITY
($
in
thousands)
Allowance
for
loan
losses $110,147 $115,433 $122,741 $124,321 $126,316
as
a
percentage
of
period-
end
loans 1.38% 1.43% 1.52% 1.55% 1.56%
Net
charge-
offs $5,286 $16,318 $10,565 $11,445 $11,131
Annualized
as
a
percentage
of
average 0.26% 0.81% 0.52% 0.57% 0.55%
loans
Non-
performing
assets:
Non-
accrual
loans $94,338 $110,178 $130,528 $123,811 $137,140
Foreclosed
assets 26,608 29,114 30,822 30,892 27,810
Total $120,946 $139,292 $161,350 $154,703 $164,950
As
a
percentage
of:
Total
loans
and
foreclosed
assets 1.51% 1.72% 1.99% 1.92% 2.03%
Total
assets 0.60 0.71 0.87 0.86 0.94
CONSOLIDATED
CAPITAL
RATIOS
Tier
1
Risk-
Based
Capital
Ratio 14.38% 14.59% 14.37% 14.22% 13.82%
Total
Risk-
Based
Capital
Ratio 16.24 16.57 16.42 16.31 15.91
Leverage
Ratio 8.66 8.82 8.94 8.99 8.68
Equity
to
Assets
Ratio
(period-
end) 11.24 11.53 11.78 11.69 11.70
Equity
to
Assets
Ratio
(average) 11.53 11.73 11.76 11.78 11.84
(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
----------------------
2011 2010 2009 2008 2007
CONDENSED
INCOME
STATEMENTS
Net
interest
income $581,776 $563,459 $536,679 $534,025 $518,737
Net
interest
income(1) 642,066 616,319 577,716 554,353 534,195
Provision
for
possible
loan
losses 27,445 43,611 65,392 37,823 14,660
Non-
interest
income:
Trust
fees 73,233 68,428 67,268 74,554 70,359
Service
charges
on
deposit
accounts 94,367 98,796 102,474 87,566 80,718
Insurance
commissions
and
fees 35,421 34,015 33,096 32,904 30,847
Other
charges,
commissions
and
fees 34,005 30,452 27,699 35,557 32,558
Net
gain
(loss)
on
securities
transactions 6,414 6 (1,260) (159) 15
Other 46,562 50,336 64,429 56,900 53,734
Total
non-
interest
income 290,002 282,033 293,706 287,322 268,231
Non-
interest
expense:
Salaries
and
wages 252,028 239,589 230,643 225,943 209,982
Employee
benefits 52,939 52,352 55,224 47,219 47,095
Net
occupancy 46,968 46,166 44,188 40,464 38,824
Furniture
and
equipment 51,469 47,651 44,223 37,799 32,821
Deposit
insurance 12,714 20,451 25,812 4,597 1,220
Intangible
amortization 4,387 5,125 6,537 7,906 8,860
Other 137,593 124,207 125,611 122,717 123,644
Total
non-
interest
expense 558,098 535,541 532,238 486,645 462,446
Income
before
income
taxes 286,235 266,340 232,755 296,879 309,862
Income
taxes 68,700 57,576 53,721 89,624 97,791
Net
income $217,535 $208,764 $179,034 $207,255 $212,071
PER
SHARE
DATA
Net
income
-
basic $3.55 $3.44 $3.00 $3.51 $3.59
Net
income
-
diluted 3.54 3.44 3.00 3.50 3.57
Cash
dividends 1.83 1.78 1.71 1.66 1.54
Book
value 37.27 33.74 31.55 29.68 25.18
OUTSTANDING
SHARES
Period-
end
shares 61,264 61,108 60,038 59,416 58,662
Weighted-
average
shares
-
basic 61,101 60,411 59,456 58,846 58,952
Dilutive
effect
of
stock
compensation 177 175 58 324 645
Weighted-
average
shares
-
diluted 61,278 60,586 59,514 59,170 59,597
SELECTED
ANNUALIZED
RATIOS
Return
on
average
assets 1.17% 1.21% 1.14% 1.51% 1.63%
Return
on
average
equity 10.01 10.30 9.78 13.11 15.20
Net
interest
income
to
average
earning 3.88 4.08 4.23 4.67 4.69
assets(1)
(1) Taxable-equivalent basis assuming a 35%
tax rate.
Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
Year Ended December 31
2011 2010 2009 2008 2007
BALANCE
SHEET
SUMMARY
($
in
millions)
Average
Balance:
Loans $8,043 $8,125 $8,653 $8,314 $7,464
Earning
assets 16,769 15,333 13,804 11,868 11,340
Total
assets 18,569 17,187 15,702 13,685 13,042
Non-
interest-
bearing
demand
deposits 5,739 5,024 4,259 3,615 3,524
Interest
bearing
deposits 9,484 9,024 8,161 6,916 6,689
Total
deposits 15,223 14,048 12,420 10,531 10,213
Shareholders'
equity 2,172 2,028 1,831 1,580 1,395
Period-
End
Balance:
Loans $7,995 $8,117 $8,368 $8,844 $7,769
Earning
assets 18,498 15,806 14,437 13,001 11,556
Goodwill
and
intangible
assets 539 542 547 551 558
Total
assets 20,317 17,617 16,288 15,034 13,485
Total
deposits 16,757 14,479 13,313 11,509 10,530
Shareholders'
equity 2,284 2,062 1,894 1,764 1,477
Adjusted
shareholders'
equity(1) 2,036 1,907 1,740 1,626 1,484
ASSET
QUALITY
($
in
thousands)
Allowance
for
possible
loan
losses $110,147 $126,316 $125,309 $110,244 $92,339
As
a
percentage
of
period-
end
loans 1.38% 1.56% 1.50% 1.25% 1.19%
Net
charge-
offs: $43,614 $42,604 $50,327 $19,918 $18,406
As
a
percentage
of
average
loans 0.54% 0.52% 0.58% 0.24% 0.25%
Non-
performing
assets:
Non-
accrual
loans $94,338 $137,140 $146,867 $65,174 $24,443
Foreclosed
assets 26,608 27,810 33,312 12,866 5,406
Total $120,946 $164,950 $180,179 $78,040 $29,849
As
a
percentage
of:
Total
loans
and
foreclosed
assets 1.51% 2.03% 2.14% 0.88% 0.38%
Total
assets 0.60 0.94 1.11 0.52 0.22
(1) Shareholders' equity excluding accumulated
other comprehensive income (loss).
SOURCE Cullen/Frost Bankers, Inc.
