Cullen/Frost Bankers (CFR) reported a dip in quarterly earnings because of a higher loan-loss provision and tighter margins.

The San Antonio company's second-quarter net income fell nearly 5% from a quarter earlier, to $58.1 million, after the provision more than doubled, to $2.4 million. Still, nonperforming assets fell 7% from the first quarter, to $112 million. Earnings at the $21 billion-asset company rose 4.3% from a year earlier.

Higher loan volumes were a double-edged sword, contributing to earnings but also prompting the company to record a higher provision. Average loans rose 2.3% from a year earlier. New loan commitments at Cullen/Frost reached their highest point in four years, said Dick Evans, the company's chairman and chief executive, during a conference call Wednesday.

“New relationships are the foundation for future growth especially when the economy recovers, Evans said. “Better teaming and collaboration is paying off significantly along with our disciplined calling effort.” As an example, Evans announced that the company had signed an agreement Wednesday with Cardtronics, the world's largest owner and servicer of automated teller machines. The agreement allows the company's customers to access all 615 ATMs at Valero Corner Stores in Texas by Aug. 15.

Net interest income rose nearly 3% from a year earlier, to $164 million, because of higher volumes of earnings assets. Offsetting the increase was the net interest margin, which compressed 12 basis points from the first quarter and 34 basis points from a year earlier, to 3.61%.

Evans warned that the Durbin Amendment in the Dodd-Frank Act is "pressuring" noninterest income by lowering interchange and debit card transaction fees. Noninterest income fell 1.4% from a year earlier, to $69.8 million. “As long the lingering economic uncertainty and poor policy decisions in Washington don't drag the economy down too much more our positive should continue in the fourth quarter,” Evans said.

Evans also shed some light on its relationship with its new regulators. In June, Frost switched from a national bank charter to a state charter regulated by the Texas Department of Banking and the Federal Reserve Board. The switch is estimated to save the company at least $1.3 million in annual regulatory costs.

“It is hard to go against the insanity of Dodd-Frank and the cost of this regulation and the fear Washington has put into the business man to the extent he doesn't want to borrow money,” Evans said. “Those are the headwinds and we are just going to keep riding our bicycle in to those headwinds and take good care of customer despite that insanity.” Frost remains exceedingly well-capitalized with a total risk-based capital ratio of 15.6% at June 30.

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