Cullen/Frost Bankers Inc. in San Antonio reported that second-quarter earnings rose 5.3% from a year earlier, to $55.7 million, although the company struggled to capitalize on a windfall of excessive liquidity.

At 91 cents a share, the $18 billion-asset company's results surpassed the average analysts' estimate by 4 cents, according to Thomson Reuters. The quarter's net income was the highest for Cullen/Frost since the third quarter of 2007.

The issue, however, continues to be lending, or specifically a lack of demand. The loan portfolio increased by a meager 0.5% from the first quarter and was flat from a year earlier, at $8.07 billion. Deposits jumped 2.7% from March 31 and 8.3% from a year earlier, to $15.1 billion, forcing the company to find other ways to reinvest the funds it brought in.

As a result, earning assets increased 3.4% from the first quarter and 9.6% from a year earlier, to $16.71 billion. One implication was a hit to the net interest margin, which shrank 8 basis points from the first quarter and 23 basis points from a year earlier, to 3.95%.

"An ongoing lack of confidence among business owners continues to pressure lending," Dick Evans, Cullen/Frost's chairman and chief executive, said in a press release.

Net interest income rose 1.8% from the first quarter and 1.7% from a year earlier, to $144.3 million. Noninterest income fell 2.1% from the first quarter but increased 1.2% from a year earlier, to $70.8 million. Noninterest expense fell 2.3% from the first quarter but increased 1.6% from a year earlier, to $136.8 million.

The loan-loss provision fell 0.5% from the first quarter but rose 3.9% from a year earlier, to $9 billion. Nonperforming assets rose 4.3% from the first quarter and 1.3% from a year earlier, to $161.4 million.

Evans said Texas is projected to have job growth of 3% to 3.5%, surpassing the national average. Texas' unemployment rate is also below the national average, he said. Cullen/Frost operates more than 110 branch offices of Frost Bank, all in Texas. Cullen/Frost is the top bank in metropolitan San Antonio by retail market share, and it's also a player in the metro areas of Dallas-Fort Worth, Houston and Austin.

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