Cullen/Frost’s profits surge on strong loan, fee growth

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Cullen/Frost Bankers in San Antonio reported double-digit profit growth in the second quarter as it added loans, boosted fee income and kept expenses relatively flat.

The $30.7 billion-asset parent of Frost Bank posted net income of $109.3 million, up 31% from the year-ago quarter. Earnings per share totaled $1.68, beating by 5 cents the mean estimate of analysts polled by FactSet Research Systems.

In a news release, Chairman and CEO Phil Green attributed the growth to both the strength of the local economy and Frost's relationship approach to banking.

“The Texas economy continued to grow robustly in the second quarter, with year-to-date job growth of 3.6% through May, and Frost bankers in all our regions continued to deliver great experiences for our customers," Green said.

Net interest income rose 10.5% to $237.3 million, as average loans increased 10% to $13.5 billion. The net interest margin narrowed 6 basis points to 3.64% from the prior year, in part due to higher funding costs.

Total deposits increased 1.5% to $26.1 billion, but non-interest-bearing deposits shrank about 1% to $10.6 billion while interest bearing deposits climbed 3% to $15.4 billion.

Noninterest income rose 5% to $85.1 million, partly due to 5% increase in trust and investment management fees year over year and an 8.5% increase in insurance commissions and fees.

The company also benefited from a $4.7 million, or 68%, increase in other noninterest income to $11.6 million. This was largely due to $1.7 million in recoveries of prior write-offs, $1.2 million in distributions on private equity investments and $885,000 in gains on the sale of properties.

Noninterest expenses increased 0.5% to $188.9 million in the second quarter. Though employee salaries and technology and equipment expenses increased from last year, fraud losses and advertising and promotion expenses declined.

Net charge-offs in the second quarter totaled $7.9 million, compared with $11.9 million in the same quarter last year. The provision for loan losses was $8.3 million, compared with $8.4 million a year earlier.

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