Texas continues to deliver higher profits to Cullen/Frost Bankers (CFR).

The San Antonio company's third-quarter profits rose 7.6% from a year earlier, to $58.7 million, on loan growth and improved credit.

Loans increased 9% from a year earlier, to $8.8 billion, offsetting a net interest margin that contracted by 27 basis points from a year earlier, to 3.54%. As a result, net interest income increased by 4% from a year earlier, to $167.3 million.

The loan-loss provision fell by 72% from a year earlier, to $2.5 million.

"The positive loan growth continues with the best quarter for new loan commitments in four years," Dick Evans, the $21.8 billion-asset company's chairman and chief executive, said during a conference call Wednesday. Evans said that the company's relationship managers "quickly increased their calling efforts on prospects" after loan requests tapered off a quarter earlier.

The gains offset higher costs. Noninterest expenses rose 5% from a year earlier, to $144.5 million. The company has added employees and opened five branches in the last 12 months as it has tried to add to its loan portfolio. Deposits grew 13% from a year earlier, to $18.2 billion, contributing to the margin shrinkage.

Still, Evans said that the company wants new deposits because they will fund future growth.

"Throughout the recession we have focused on building new relationships," Evans said. "Those new relationships account for much of our deposit growth and are the foundation for the future growth, especially as the economy recovers."

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