After posting in-line earnings for two consecutive quarters,
Cullen/Frost Bankers, Inc.
) reported fourth-quarter 2013 earnings of 99 cents per
share, beating the Zacks Consensus Estimate of 97 cents. Also,
this was above the prior-year quarter figure of 97 cents.
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For full-year 2013, Cullen/Frost's earnings per share of $3.80
beat the Zacks Consensus Estimate marginally. However, results
came in 1.6% below the prior-year figure.
Cullen/Frost's impressive results were driven by an improved top
line along with continued growth in loan and deposit balances.
However, higher operating expenses and increased provision for
credit losses acted as downsides.
The company's net income of $60.6 million in the reported quarter
reflects a marginal decline from the year-ago quarter. Also, for
2013, it was down 2.9% year over year to $231.1 million.
Performance in Detail
Cullen/Frost's total revenue (net of interest expenses) increased
6.2% year over year to $263.5 million. Further, it surpassed the
Zacks Consensus Estimate of $245.0 million.
For full-year 2013, total revenue (net of interest expenses)
stood at $1.0 billion, up 5.9% year over year. Moreover, it
outpaced the Zacks Consensus Estimate by 5.2%.
Cullen/Frost's net interest income on a taxable-equivalent basis
was $185.0 million, up 7.4% from the year-ago quarter. The
increase was primarily driven by a larger number of interest
earning assets, partly mitigated by a decline in net interest
margin (NIM), which reduced 9 basis points year over year to
Cullen/Frost's non-interest income of $78.5 million advanced 3.5%
year over year. The increase was mainly backed by a rise in trust
and investment management fees, insurance commissions and fees.
On the flip side, Cullen/Frost's non-interest expense climbed
5.8% year over year to $154.5 million. This was due to an
increase in personnel expenses and net occupancy costs, partially
offset by a decline in deposit insurance costs and intangible
Credit metrics were a mixed bag in the reported quarter.
Non-performing assets declined 33.7% year over year to $69.8
million. The allowance for loan losses as a percentage of total
loans stood at 0.97%, as of Sep 30, 2013, down 16 bps from the
However, provision for loan losses jumped 43.0% year over year to
$5.9 million, while net charge-offs increased 5 bps to 0.28%.
Average loans increased 5.4% year over year to $9.3 billion while
average deposits stood at $20.1 billion, up 9.1%.
Capital and Profitability Ratios
Cullen/Frost's capital ratios remained strong while profitability
ratios partially improved in the quarter.
Tier 1 Risk-Based Capital Ratio was 14.65%, compared with 13.68%
in the prior-year quarter. Total Risk-Based Capital Ratio was
15.79% versus 15.11% at the end of the prior-year quarter.
Return on average assets were down 12 bps year over year to
1.02%, while return on average common equity rose 15 bps to
Though Cullen/Frost started with a disappointing performance in
the first quarter of 2013, the following quarters delivered
better results. We believe continuously improving loan and
deposit balances and a strong equity market will drive the
company's profitability going forward.
However, we remain cautious owing to the prevalent low interest
rate environment, surging expenses and continuing pressure on
Cullen/Frost currently carries a Zacks Rank #2 (Buy).
Performance of other South-West Banks
Prosperity Bancshares Inc.
) beat the Zacks Consensus Estimate, while both
First Financial Bankshares Inc.
Texas Capital BancShares Inc.
) missed the Zacks Consensus Estimate in their latest