- Record quarterly average deposit growth of $725 million - FDIC
special assessment impacts expenses - Capital levels remain strong
SAN ANTONIO, July 22 /PRNewswire-FirstCall/ -- Cullen/Frost
Bankers, Inc. (NYSE:CFR) today reported net income for the second
quarter of 2009 of $37.9 million, or $.63 per diluted common share,
compared to second quarter 2008 earnings of $52.5 million, or $.89
per diluted share, despite solid increases over the same time
period in taxable equivalent net interest income, loans and record
deposit growth. An industry-wide FDIC special assessment impacted
the company's earnings by $7.3 million, or $.08 per share on an
after-tax basis. The provision for possible loan losses increased
to $16.6 million from $6.3 million for the same quarter a year ago,
while the allowance for possible loan losses as a percentage of
loans increased to 1.42 percent from 1.13 percent at last year's
second quarter. Returns on average assets and equity were .98
percent and 8.35 percent, respectively, compared to 1.56 percent
and 13.44 percent for the same period a year earlier. For the
second quarter of 2009, net interest income on a taxable-equivalent
basis rose 5.9 percent to $144.3 million, compared to the $136.2
million reported for the same quarter of 2008. Average loans were
$8.8 billion, up 7.3 percent from the $8.2 billion reported for the
second quarter of 2008, but were flat compared to the previous
quarter as businesses respond to the current economic conditions.
Average deposits for the quarter increased 17.0 percent to $12.2
billion from the $10.4 billion reported a year earlier. Average
deposits grew a record $725 million from the prior quarter, as the
company has seen deposits increase steadily as customers continue
to build cash reserves during these uncertain times, while also
seeking the safety and soundness of Frost. "We continue to operate
well in a difficult banking environment and are making sound
decisions to position our company to succeed when the national and
global economies improve," said Cullen/Frost CEO Dick Evans. "Our
strong capital levels continue to give me confidence, and in light
of the current economy, the increase in provision for loan losses
was prudent. Credit quality, although challenging, remains at
manageable levels. "Given the uncertainty customers are feeling
about the broader economy, we are helping them navigate through the
current environment. As they regain their confidence, they will
begin to reinvest," said Evans. "Texas remains well positioned for
growth, which is very positive for us. "We continue to open new
financial centers to serve our customers, with four locations
opening this year, including our first in Plano in the Dallas
region, and additional centers in Austin, San Antonio and Houston.
There is still good growth opportunity in the Texas markets we
serve, and we continue to bring in new relationships as customers
understand the benefit of our value proposition. "Just last month,
we received the Morningstar ratings on Frost Investment Advisors
mutual fund family, and I am pleased to say that six Frost funds
received the Five-Star Overall Morningstar Rating. This validates
our fund management expertise in providing outstanding service and
investment insight to both institutional and retail investors. "As
always, I thank our outstanding employees, whose determination,
enthusiasm and commitment to our company and its values help us
take good care of customers," Evans continued. For the first six
months of 2009, net income was $82.8 million, or $1.39 per diluted
common share, compared to $105.3 million, or $1.78 per diluted
common share, for the first six months of 2008. Returns on average
assets and average equity for the first six months of 2009 were
1.10 percent and 9.32 percent, respectively, compared to 1.57
percent and 13.66 percent for the same period in 2008. Other noted
financial data for the second quarter follows: -- Tier 1 and Total
Risk-Based Capital Ratios remained strong at 10.91 percent and
13.34 percent, respectively, at the end of the second quarter of
2009 and are in excess of well capitalized levels. The tangible
common equity ratio was 8.19 percent at the end of the second
quarter of 2009 compared to 7.53 percent for the same quarter last
year. -- Net interest income on a taxable-equivalent basis
increased $8.1 million, or 5.9 percent, to $144.3 million, from the
$136.2 million reported a year earlier. This increase primarily
resulted from an increase in the average volume of interest earning
assets and was partly offset by a decrease in the net interest
margin. The net interest margin was 4.28 percent for the second
quarter, compared to 4.33 for the first quarter this year and 4.68
for the second quarter of 2008. -- Non-interest income for the
second quarter of 2009 was $68.0 million, compared to the $70.6
million reported a year earlier. Trust fees were $16.9 million,
down $2.1 million or 11.4 percent, compared to $19.0 million in the
second quarter of 2008. Most of this decrease relates to lower oil
and gas trust management fees and lower investment fees. Investment
fees which represent approximately 70 percent of total trust fees
and are generally assessed based on the market value of trust
assets. Trust assets were $21.7 billion at the end of the second
quarter, compared to $23.9 billion for the second quarter a year
ago. This market value includes both assets that are managed and
those held in custody. Service charges on deposits were $25.2
million, up 16.3 percent, or $3.5 million, compared to the same
quarter the previous year. Impacting this increase was a $3.0
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, affected 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 service charges and fees were $6.3 million,
compared to $9.5 million reported in the same quarter a year
earlier. During the second quarter of 2008, the company recognized
$1.4 million in investment banking fees related to corporate
advisory services. Also contributing to the decline were decreases
in commission income for the sale of money market accounts,
annuities and mutual funds. Other income was $12.5 million,
compared to $13.5 million for the same quarter a year earlier. This
decrease was primarily the result of fewer gains on the sale of
student loans, down $1.0 million from the second quarter last year.
-- Non-interest expense for the quarter was $136.3 million, an
increase of $16.2 million or 13.5 percent over the $120.1 million
reported for the second quarter of last year. Most of the increase
in non-interest expense is due to an increase in FDIC insurance
expense of $11.0 million from the second quarter of 2008. Included
in the $11.0 million increase was a $7.3 million special assessment
recorded during the second quarter of 2009. Total salaries rose
$2.0 million or 3.7 percent, to $56.5 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 $1.9 million or 15.7
percent due primarily to increases in expenses related to the
company's retirement plan, 401(k) and profit sharing plans. Net
occupancy was up $773 thousand, compared to the second quarter of
2008, mainly due to an increase in lease expense. Furniture and
fixtures increased $1.5 million from the same quarter last year,
with most of the increase coming from software amortization and
maintenance expense, and depreciation expense, which were all
impacted by upgrades to our retail banking technology and teller
systems and new locations. Other non-interest expense decreased
$703 thousand from a year earlier. The second quarter 2008 results
included approximately $1.1 million from a settlement, release and
license agreement associated with certain patent infringement
claims. -- For the second quarter of 2009, the provision for
possible loan losses was $16.6 million, compared to net charge-offs
of $8.3 million. The loan loss provision for the second quarter of
2008 was $6.3 million, compared to net charge-offs of $4.3 million.
Non-performing assets for the second quarter of 2009 were $190.3
million, compared to $127.8 million last quarter and $49.6 million
a year earlier. The allowance for possible loan losses as a
percentage of loans at June 30, 2009 was 1.42 percent, compared to
1.13 percent at the end of the second quarter of 2008. Cullen/Frost
Bankers, Inc. will host a conference call on Wednesday, July 22,
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, July 26, 2009 at 1-800-642-1687 or
1-706-645-9291 for international calls, with Conference ID # of
19676201. 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 $15.8 billion
at June 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 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 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
----------------- ------------------------- 2nd Qtr 1st Qtr 4th Qtr
3rd Qtr 2nd Qtr ------- ------- ------- ------- ------- CONDENSED
INCOME STATEMENTS --------------------------- Net interest income
$134,464 $129,632 $138,081 $134,736 $131,328 Net interest income(1)
144,325 137,733 143,707 139,655 136,223 Provision for possible loan
losses 16,601 9,601 8,550 18,940 6,328 Non-interest income: Trust
fees 16,875 15,969 17,483 19,749 19,040 Service charges on deposit
accounts 25,152 24,910 23,697 22,642 21,634 Insurance commissions
and fees 7,106 10,751 6,470 8,261 7,015 Other charges, commissions
and fees 6,288 6,762 8,407 10,723 9,496 Net gain (loss) on
securities transactions 49 -- (133) 78 (56) Other 12,536 11,472
13,274 15,862 13,452 ------ ------ ------ ------ ------ Total
non-interest income 68,006 69,864 69,198 77,315 70,581 Non-interest
expense: Salaries and wages 56,540 56,776 58,468 57,803 54,534
Employee benefits 13,783 15,240 10,517 10,677 11,912 Net occupancy
10,864 10,690 10,384 10,342 10,091 Furniture and equipment 10,662
10,363 10,010 9,657 9,182 Deposit insurance 11,667 4,376 1,785
1,859 659 Intangible amortization 1,719 1,781 1,929 1,976 1,955
Other 31,054 30,273 30,450 30,658 31,757 ------ ------ ------
------ ------ Total non-interest expense 136,289 129,499 123,543
122,972 120,090 ------- ------- ------- ------- ------- Income
before income taxes 49,580 60,396 75,186 70,139 75,491 Income taxes
11,721 15,414 22,223 21,174 22,944 ------ ------ ------ ------
------ Net income $37,859 $44,982 $52,963 $48,965 $52,547 =======
======= ======= ======= ======= PER SHARE DATA -------------- Net
income - basic $0.64 $0.76 $0.89 $0.83 $0.89 Net income - diluted
0.63 0.76 0.89 0.83 0.89 Cash dividends 0.43 0.42 0.42 0.42 0.42
Book value at end of quarter 30.12 30.34 29.68 27.16 26.11
OUTSTANDING SHARES ------------------ Period-end shares 59,653
59,423 59,416 59,299 59,081 Weighted-average shares - basic 59,331
59,189 59,171 58,932 58,733 Dilutive effect of stock compensation
119 75 311 433 483 Weighted-average shares - diluted 59,450 59,264
59,482 59,365 59,216 SELECTED ANNUALIZED RATIOS
-------------------------- Return on average assets 0.98% 1.23%
1.47% 1.44% 1.56% Return on average equity 8.35 10.33 12.79 12.39
13.44 Net interest income to average earning assets(1) 4.28 4.33
4.60 4.74 4.68 (1) Taxable-equivalent basis assuming a 35% tax
rate. Cullen/Frost Bankers, Inc. CONSOLIDATED FINANCIAL SUMMARY
(UNAUDITED) 2009 2008 ----------------- --------------------------
2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr ------- ------- -------
------- ------- BALANCE SHEET SUMMARY --------------------- ($in
millions) Average Balance: Loans $8,784 $8,809 $8,712 $8,434 $8,187
Earning assets 13,632 12,942 12,435 11,712 11,717 Total assets
15,519 14,881 14,347 13,486 13,518 Non-interest-bearing demand
deposits 4,138 3,971 3,803 3,605 3,531 Interest-bearing deposits
8,045 7,487 7,106 6,797 6,885 Total deposits 12,183 11,458 10,909
10,402 10,416 Shareholders' equity 1,818 1,766 1,647 1,573 1,573
Period-End Balance: Loans $8,644 $8,779 $8,844 $8,596 $8,354
Earning assets 13,855 13,530 13,001 11,984 11,608 Goodwill and
intangible assets 549 551 551 553 554 Total assets 15,785 15,331
15,034 14,061 13,671 Total deposits 12,497 12,033 11,509 10,618
10,627 Shareholders' equity 1,797 1,803 1,764 1,611 1,542 Adjusted
shareholders' equity(1) 1,675 1,650 1,626 1,593 1,557 ASSET QUALITY
------------- ($in thousands) Allowance for possible loan losses
$122,501 $114,168 $110,244 $107,109 $94,520 as a percentage of
period-end loans 1.42% 1.30% 1.25% 1.25% 1.13% Net charge-offs
$8,268 $5,677 $5,415 $6,351 $4,306 Annualized as a percentage of
average loans 0.38% 0.26% 0.25% 0.30% 0.21% Non-performing assets:
Non-accrual loans $168,805 $114,233 $65,174 $45,475 $40,485
Foreclosed assets 21,478 13,533 12,866 9,683 9,146 --------
-------- ------- ------- ------- Total $190,283 $127,766 $78,040
$55,158 $49,631 As a percentage of: Total loans and foreclosed
assets 2.20% 1.45% 0.88% 0.64% 0.59% Total assets 1.21 0.83 0.52
0.39 0.36 CONSOLIDATED CAPITAL RATIOS ---------------------------
Tier 1 Risk-Based Capital Ratio 10.91% 10.64% 10.30% 10.33% 10.15%
Total Risk-Based Capital Ratio 13.34 12.98 12.58 12.67 12.68
Leverage Ratio 8.50 8.70 8.80 9.04 8.69 Equity to Assets Ratio
(period-end) 11.38 11.76 11.73 11.46 11.28 Equity to Assets Ratio
(average) 11.72 11.87 11.48 11.66 11.63 (1) Shareholders' equity
excluding accumulated other comprehensive income (loss).
Cullen/Frost Bankers, Inc. CONSOLIDATED FINANCIAL SUMMARY
(UNAUDITED) (In thousands, except per share amounts) Six Months
Ended June 30, ------------------ 2009 2008
------------------------------------------------------------
CONDENSED INCOME STATEMENTS --------------------------- Net
interest income $264,096 $261,208 Net interest income(1) 282,058
270,991 Provision for possible loan losses 26,202 10,333
Non-interest income Trust fees 32,844 37,322 Service charges on
deposit accounts 50,062 41,227 Insurance commissions and fees
17,857 18,173 Other charges, commissions and fees 13,050 16,427 Net
gain (loss) securities transactions 49 (104) Other 24,008 27,764
------- ------- Total non-interest income 137,870 140,809
Non-interest expense Salaries and wages 113,316 109,672 Employee
benefits 29,023 26,025 Net occupancy 21,554 19,738 Furniture and
equipment 21,025 18,132 Deposit insurance 16,043 953 Intangible
amortization 3,500 4,001 Other 61,327 61,609 ------- ------- Total
non-interest expense 265,788 240,130 Income before income taxes
109,976 151,554 Income taxes 27,135 46,227 ------- ------- Net
income $82,841 $105,327 ------- -------- PER SHARE DATA
-------------- Net income - basic $1.39 $1.79 Net income - diluted
1.39 1.78 Cash dividends 0.85 0.82 Book value at end of period
30.12 26.11 OUTSTANDING SHARES ------------------ Period-end shares
59,653 59,081 Weighted-average shares - basic 59,260 58,635
Dilutive effect of stock compensation 78 392 Weighted-average
shares - diluted 59,338 59,027 SELECTED ANNUALIZED RATIOS
-------------------------- Return on average assets 1.10% 1.57%
Return on average equity 9.32 13.66 Net interest income to average
earning assets(1) 4.30 4.67 (1) Taxable-equivalent basis assuming a
35% tax rate. Cullen/Frost Bankers, Inc. CONSOLIDATED FINANCIAL
SUMMARY (UNAUDITED) As of or for the Six Months Ended June 30,
---------------- 2009 2008
------------------------------------------------------------------
BALANCE SHEET SUMMARY --------------------- ($in millions) Average
Balance: Loans $8,796 $8,052 Earning assets 13,289 11,661 Total
assets 15,203 13,455 Non-interest-bearing demand deposits 4,055
3,524 Interest-bearing deposits 7,768 6,881 Total deposits 11,823
10,405 Shareholders' equity 1,793 1,551 Period-End Balance: Loans
$8,644 $8,354 Earning assets 13,855 11,608 Goodwill and intangible
assets 549 554 Total assets 15,785 13,671 Total deposits 12,497
10,627 Shareholders' equity 1,797 1,542 Adjusted shareholders'
equity(1) 1,675 1,557 ASSET QUALITY ------------- ($in thousands)
Allowance for possible loan losses $122,501 $94,520 As a percentage
of period-end loans 1.42% 1.13% Net charge-offs: $13,945 $8,152
Annualized as a percentage of average loans 0.32% 0.20%
Non-performing assets: Non-accrual loans $168,805 $40,485
Foreclosed assets 21,478 9,146 Total $190,283 $49,631 As a
percentage of: Total loans and foreclosed assets 2.20% 0.59% Total
assets 1.21 0.36 CONSOLIDATED CAPITAL RATIOS
--------------------------- Tier 1 Risk-Based Capital Ratio 10.91%
10.15% Total Risk-Based Capital Ratio 13.34 12.68 Leverage Ratio
8.50 8.69 Equity to Assets Ratio (period-end) 11.38 11.28 Equity to
Assets Ratio (average) 11.79 11.52 (1) Shareholders' equity
excluding accumulated other comprehensive income (loss).
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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