SAN ANTONIO - Cullen/Frost Bankers, Inc.(NYSE: CFR)today reported net income for the fourth quarter of 2006 of $48.4 million, or $.84 per diluted common share, a 7.7 percent increase over fourth quarter 2005 earnings of $44.9 million, or $.81 per diluted common share. For the fourth quarter of 2006, returns on average assets and equity were 1.59 percent and 16.04 percent respectively, compared to 1.63 percent and 18.52 percent for the same period of 2005. Included in the fourth quarter of 2006 results were $2.0 million in conversion expenses relating to the December acquisition of Summit Bancshares, Inc. The company also reported record annual earnings for 2006 of $193.6 million, or $3.42 per diluted common share, up 17.0 percent from 2005 earnings of $165.4 million, or $3.07 per diluted common share. For the year, returns on average assets and equity were 1.67 percent and 18.03 percent respectively, compared to the 1.63 percent and 18.78 percent reported in 2005. "I am pleased to report another record year for our company," said Dick Evans, Cullen/Frost chairman and CEO. "During 2006, we completed three acquisitions- Texas Community Bancshares, Inc. in Dallas, Alamo Corporation of Texas in the Rio Grande Valley and Summit Bancshares, Inc. in Fort Worth- expanding our physical presence to more than 100 locations statewide and bringing an outstanding group of employees and customers into our Frost family. I am also pleased to announce we were able to complete all the systems conversions of these three acquisitions as well. "Our net interest margin for the year increased to 4.67 percent, the highest annual level since 2001, due in part to a one-percent increase in interest rates during the first half of 2006. At year-end, both loans and deposits were at all-time highs, with total loans reaching $7.4 billion and total deposits at $10.4 billion. Both volume levels were impacted by our acquisitions. "This strong performance for 2006 would not be possible without our superb employees and their commitment to achieving company goals and living up to our core values. In an increasingly challenging competitive environment, they continue to focus on executing our sales discipline and taking care of our customers, helping us build long-term customer relationships." For the year ended December 31, 2006, average annual total loans were $6.5 billion, up 16.6 percent compared to $5.6 billion for the previous year. Average annual total deposits for 2006 rose to $9.2 billion, an increase of 12.9 percent over the $8.1 billion reported in 2005. Net interest income on a taxable-equivalent basis grew to $479.1 million, a 20.1 percent increase over the $398.9 million reported a year earlier. The increase reflected increasing volumes as a result of organic growth and our acquisitions and a rise in interest rates during the first half of the year. For 2006, non-interest income increased to $240.7 million, up 4.5 percent over the $230.4 million reported for 2005, while non-interest expenses increased 11.8 percent over the previous year to $410.4 million. Noted financial data for the fourth quarter: |
w | Net interest income on a taxable-equivalent basis increased 12.8 percent to $124.0 million from the $110.0 million reported for the fourth quarter of 2005. This increase in net interest income was impacted by a $1.0 billion increase in the average volume of earning assets, combined with an improvement in the earning asset mix, as average loans for the quarter rose to $6.7 billion, 11.2 percent higher than the $6.0 billion reported for the same period a year earlier. A rising rate environment during the first half of 2006 also had a positive impact on the Corporation's net interest income and net interest margin compared to the fourth quarter a year ago. The net interest margin was 4.62 percent for the fourth quarter, compared to 4.54 percent for the fourth quarter of 2005. When compared to the third quarter of 2006, the net interest margin contracted seven basis points from 4.69 percent primarily from increases in short term liquidity funded by growth in customer time deposits. |
w | For the fourth quarter of 2006, non-interest income was $58.4 million, compared to the $56.6 million reported a year earlier. Trust fees rose 6.3 percent to $16.0 million, compared to $15.1 million for the fourth quarter of 2005. Insurance commissions and fees were $5.9 million for the fourth quarter of 2006, up 6.6 percent compared to $5.5 million the same quarter of 2005. Service charges on deposits were $19.1 million, compared to $19.7 million reported for the previous year's fourth quarter. The decrease is primarily due to a higher interest rate environment when compared to the fourth quarter last year. Commercial treasury management customers currently earn more credit for their deposit balances, which, in turn, reduces the amount of fees paid for these services. Other non-interest income was $11.3 million, a 12.5 percent increase over the $10.1 million reported a year earlier. The largest factors contributing to this increase were higher income from Visa checkcard usage and higher earnings received from balances the Corporation maintains related to its official checks program. |
w | For the fourth quarter of 2006, non-interest expense was $105.6 million, up $10.5 million or 11.1 percent from the $95.1 million for the fourth quarter of 2005. Combined, salaries and wages and employee benefits were up $6.2 million over the same quarter a year earlier, as a result of normal annual merit and market increases, along with an increase in the number of employees, which were impacted by the three acquisitions completed during 2006. Net occupancy expense was up $542 thousand to $8.8 million, primarily the result of higher lease expenses associated with the additional locations from the acquisitions made during the year. Furniture and fixtures were up $1.1 million to $7.1 million, due mainly to higher depreciation expense for furniture and fixtures and higher software maintenance costs. Both of these expenses were impacted in part by the company's decision to bring certain data processing functions in-house, as well as the acquisitions. The additional expense that resulted from br inging certain data processing functions in-house, was more than offset in other expense by a decrease in outside computer service costs. Other expenses were up $2.2 million from the same quarter the previous year, and were also impacted primarily by the Summit acquisition, including conversion-related expenses of $2.0 million, with $1.7 million impacting this category of expense. |
w | For the fourth quarter of 2006, the provision for possible loan losses was $3.4 million, compared to net charge-offs of $3.3 million. For the fourth quarter of 2005, the provision for possible loan losses was $3.0 million, compared to net charge offs of $2.9 million. The allowance for possible loan losses as a percentage of total loans was 1.30 percent at December 31, 2006, compared to 1.32 percent at year-end 2005. Non-performing assets were $57.7 million at year-end, compared to $35.0 million the previous quarter and $38.9 million at year-end 2005. The fourth quarter increase in non-performing assets was impacted by two commercial real estate loans totaling $23.2 million that were placed on non-accrual status. These two loans were previously reported as potential problem loans during the third quarter of 2006. |
Cullen/Frost intends to redeem its outstanding $100 million 8.42 percent trust preferred securities issued by Cullen/Frost Capital Trust I. As a result of the anticipated redemption on February 21, 2007, the corporation expects to incur approximately $5.3 million in expense in the first quarter of 2007 related to the prepayment penalty and the write-off of the un-amortized debt issuance costs. Cullen/Frost Bankers, Inc. will host a conference call on Wednesday, January 24, 2007 at 10:00 a.m. 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 12:00 p.m. CT until midnight Sunday, January 28, 2007 at 800-642-1687, with the Conference ID # of 6757092. 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 $13.2 billion at December 31, 2006. 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 one of the largest banks headquartered in Texas, with a legacy of helping Texans with their financial needs during three centuries.
|
