Cullen/Frost Bankers, Inc.
) reported third-quarter 2013 earnings of 96 cents per share. The
results were in line with the Zacks Consensus Estimate, while it
beat the prior-year figure by a penny.
Top-line growth and a strong capital position were the tailwinds
for the quarter. Further, increase in loans and deposits were
impressive. However, higher provision for credit losses and
elevated operating expenses remain concerns.
Net income available to common shareholders came in at $58.4
million, compared with $58.7 million in the prior-year quarter.
Quarter in Detail
Total revenue, net of interest expenses, increased 6.1% year over
year to $253.1 million. Revenues also surpassed the Zacks
Consensus Estimate of $244 million.
Cullen/Frost's net interest income on a taxable-equivalent basis
was $179.1 million, up 7.1% from the year-ago quarter. The
increase was primarily driven by better interest earning assets,
partly mitigated by a decline in net interest margin (NIM), which
reduced 16 basis points year over year to 3.38%.
Cullen/Frost's non-interest income of $74.0 million advanced 4.0%
year over year. The increase was mainly backed by a rise in trust
and investment management fees, insurance commissions and fees,
other charges, commissions and fees.
On the flip side, Cullen/Frost's non-interest expense rose 5.1%
year over year to $151.8 million. This was due to an increase in
salaries and employee benefit expenses, furniture and equipment
costs and other expenditures. These negatives were partially
offset by a decline in intangible amortization costs.
Credit metrics was a mixed bag during the reported quarter. As of
Sep 30, 2013, non-performing assets were $98.1 million, down from
$101.7 million in the prior-year quarter. The allowance for loan
losses as a percentage of total loans stood at 1.00% as of Sep
30, 2013, down from 1.20% in the prior-year quarter.
Non-accrual loans decreased and came in at $79.1 million,
compared with $106.4 million in the prior-year quarter. However,
provisions for credit losses were $5.1 million, up from $2.5
million in the prior-year quarter.
Net charge-offs jumped to $5.4 million from $2.7 million in the
prior-year quarter. Net charge-offs as a percentage of average
loans were 0.23%, up 10 basis points year over year.
Cullen/Frost had a strong capital position. Tier 1 Risk-Based
Capital Ratio was 14.53%, compared with 14.10% in the prior-year
quarter. Total Risk-Based Capital Ratio was 15.68%, compared with
15.62% in prior-year quarter.
Leverage ratio was 8.61%, up from 8.59% in the prior-year
quarter. The tangible common equity ratio was 7.81%, compared
with 8.80% in the last-year quarter.
Total loans increased 5.7% to $9.3 billion on a year-over-year
basis. Additionally, total deposits surged 9.9% to $20.0 billion.
Adjusted stockholders' equity rose 9.5% year over year to $2.3
billion as of Sep 30, 2013.
Growth in total loans and deposits are expected to drive
Cullen/Frost's profitability going forward. However, the
prevalent low interest rate environment and continuing pressure
on NIM remain areas of concern. Moreover, surging expenses pose a
challenge to bottom-line growth. Nevertheless, with an eventual
revival of the economy, we expect the company to deliver better
In Aug 2013, in an attempt to expand its footprint in Texas,
Cullen/Frost signed a definitive merger agreement with WNB
Bancshares, Inc. The merger will enable Cullen/Frost to reinforce
its Texas franchise and enter the profitable Midland and Odessa
markets and thereby aid expansion.
Cullen/Frost currently carries a Zacks Rank #2 (Buy). Other
better performing Southwest banks include
Banc of California, Inc.
Southside Bancshares Inc.
) with a Zacks Rank #1 (Strong Buy), while
First Financial Bankshares Inc.
) carries a Zacks Rank #2.
BANC OF CA INC (BANC): Free Stock Analysis
CULLEN FROST BK (CFR): Free Stock Analysis
FIRST FIN BK-TX (FFIN): Free Stock Analysis
SOUTHSIDE BANCS (SBSI): Free Stock Analysis
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