SAN ANTONIO - Cullen/Frost Bankers, Inc.today reported net income for the fourth quarter of 2007 of $54.7 million, or $.93 per diluted common share, a 13.1 percent increase over fourth quarter 2006 earnings of $48.4 million, or $.84 per diluted common share. For the fourth quarter of 2007, returns on average assets and equity were 1.65 percent and 15.18 percent respectively, compared to 1.59 percent and 16.04 percent for the same period of 2006. 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 2007 of $212.1 million, or $3.55 per diluted common share, up 9.5 percent from 2006 earnings of $193.6 million, or $3.42 per diluted common share. For the year, returns on average assets and equity were 1.63 percent and 15.20 percent respectively, compared to the 1.67 percent and 18.03 percent reported in 2006. "It is a pleasure for me to report another record year for our company," said Dick Evans, Cullen/Frost chairman and CEO. "As we navigate this challenging banking environment, our performance affirms the benefit of several strategic decisions that have positioned us well. In 2000, we got out of the residential mortgage business because we believed the industry had lost its relationship focus and had become a commoditized business with insufficient profitability. We also exited the indirect lending and credit card businesses in the past for the same reason. Credit quality continues to be good, and we have no direct exposure to the sub-prime lending crisis that has impacted the financial services industry since last summer. "In addition, last quarter we took steps to reduce the potential negative impact on our net interest income of a declining rate environment by entering into a seven-year $1.2 billion interest rate swap that has moved us to a more interest rate-neutral position. It was good to see our net interest margin for the year increase to 4.69 percent, despite the Fed cutting the prime rate 100 basis points during the second half of the year. For the year, average loans reached $7.5 billion and average deposits were $10.2 billion, both all-time high numbers. I was also pleased to see non-interest income rise 11.4 percent, to $268.2 million. "Continuing our commitment to expand in the Texas markets we serve, we added another new financial center to the growing Austin market and relocated our NASA financial center in the Houston area to a new building during the fourth quarter. In addition, in December, we announced the acquisition of Prime Benefits, an Austin-based independent insurance agency, which will complement our insurance team in Austin. Building on our strong base, we will continue to focus on growing Cullen/Frost and meeting the competitive challenges of other financial institutions that are scrambling to stake a claim in this great state that we have called home for 140 years. "As always, it is our outstanding employees who made these strong results for 2007 possible. I thank them for their dedication to taking good care of our customers and their commitment to teamwork." For the year ended December 31, 2007, average annual total loans were $7.5 billion, up 14.4 percent compared to $6.5 billion for the previous year. Average annual total deposits for 2007 rose to $10.2 billion, an increase of 11.2 percent over the $9.2 billion reported in 2006. Net interest income on a taxable-equivalent basis grew to $534.2 million, an 11.5 percent increase over the $479.1 million reported a year earlier, reflecting increasing volumes as a result of our acquisitions and organic growth. For 2007, non-interest income increased to $268.2 million, up 11.4 percent over the $240.7 million reported for 2006, while non-interest expenses increased 12.7 percent over the previous year to $462.4 million. Notedfinancial data for the fourth quarter: |
w | Net interest income on a taxable-equivalent basis for the fourth quarter totaled $135.3 million a 9.1 percent increase from the $124.0 million reported for the fourth quarter of 2006. Impacting this rise in net interest income, in part, was a 7.5 percent increase in average deposits from the fourth quarter of 2006 to $10.2 billion. This increase contributed to a $793 million increase in the average volume of earning assets, compared to the fourth quarter of 2006, to $11.4 billion. The earning asset mix has improved from the same period a year earlier, with average loans for the quarter rising to $7.6 billion, 13.2 percent higher than the $6.7 billion reported for the same period last year. The company purchased a seven-year $1.2 billion interest rate swap in October of 2007, moving its balance sheet to a more interest rate neutral position in order to reduce some of the potential negative earnings impact of a declining rate environment. The net interest margin was 4.70 percent for the fou rth quarter, compared to 4.62 percent for the fourth quarter of 2006 and up one basis point from 4.69 percent for the third quarter of 2007. |
w | Non-interest income for the fourth quarter of 2007 was $66.4 million, compared to the $58.4 million reported a year earlier.
Trustincome rose 12.5 percent to $18.0 million, compared to $16.0 million for the fourth quarter of 2006, primarily from higher investment fees resulting from improvements in the equities market and new accounts.
Service charges on depositwere $21.0 million, a rise of $1.9 million, compared to $19.1 million reported for the previous year's fourth quarter. This increase was due to higher retail and commercial overdrafts.
Othercharges, commissions and fees were $7.9 million, compared to $6.0 million reported for the fourth quarter of 2006. This increase was impacted by $700,000 in investment banking fees earned during the quarter.
Othernon-interest income was $13.4 million, an 18.1 percent increase over the $11.3 million reported a year earlier. The largest factor contributing to this increase was higher income from Visa checkcard usage. |
w | Non-interest expensefor the fourth quarter of 2007 was $114.2 million, up $8.6 million or 8.1 percent from the $105.6 million for the fourth quarter of 2006. Combined, salaries and wages and employee benefits were up $4.8 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. Net occupancy expense was up $1.4 million to $10.2 million, primarily the result of higher lease expenses associated with the additional locations from the acquisitions made during 2006 and new locations opened in 2007. Expenses for furniture and equipment were up $1.8 million to $8.9 million, due mainly to higher depreciation expense for furniture and equipment 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 ex pense that resulted from bringing certain data processing functions in-house was more than offset in other expense by a decrease in outside computer service costs. Other expense was $28.9 million, flat, when compared to the fourth quarter of 2006, which included $2.0 million in conversion related expenses relating to the Summit acquisition. |
w | For thefourth quarter of 2007, the provision for possible loan losses was $3.6 million, compared to net charge-offs of $3.5 million. 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. The allowance for possible loan losses as a percentage of total loans was 1.19 percent at December 31, 2007, compared to 1.30 percent at year-end 2006. Non-performing assets were $29.8 million at year-end, compared to $26.4 million the previous quarter and $57.7 million at year-end 2006. |
Cullen/Frost Bankers, Inc. will host a conference call on Wednesday, January 23, 2008, 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 27, 2008 at 800-642-1687 with the Conference ID # of 30604147. 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 $13.5 billion at December 31, 2007. 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 banking organizations headquartered in Texas, with a legacy of helping Texans with their financial needs during three centuries.
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