Cullen/Frost Bankers Inc. was able to beat Wall Street's earnings expectations largely because of record deposit growth, said Dick Evans, the San Antonio company's chairman and chief executive officer.

"Both individuals and businesses are looking for a safe place so they don't have to worry," Mr. Evans said in an interview Wednesday. "We've had that reputation for over 100 years, going through the Great Depression and the 1980s' oil and real estate bust in Texas — which felt like a depression."

The $15 billion-asset Cullen/Frost had its largest-ever quarter-to-quarter increase in average deposits without the benefit of an acquisition, Mr. Evans said. Deposits rose 5% from the third quarter and 6.5% from a year earlier, to $10.9 billion.

Loan growth was also good, considering the state of the economy, Mr. Evans said. Loans rose 3% from the third quarter and 15.2% from a year earlier, to $8.7 billion. As a result, net interest income rose 6.2% from a year earlier, to $143.7 million.

Overall, Cullen/Frost said fourth-quarter net income fell 3%, to $53 million, or 89 cents a share. But that was 2 cents better than the average estimate of analysts polled by Thomson Reuters.

Bob Patten, an analyst at Regions Financial Corp.'s Morgan Keegan & Co., said in an interview Wednesday that Cullen/Frost beat expectations because it is "sticking to the basic fundamentals of banking."

Cullen/Frost's decision not to participate in the Treasury's Department's Capital Purchase Programs enables it to manage its capital better and continue paying a 42-cent quarterly dividend to common shareholders, Mr. Patten said.

"That's very attractive to investors who are worried about what to do with" bank stocks, he said.

Cullen/Frost's stock rose 13.5% Wednesday.

The company's credit costs are picking up with the economy worsening, but they should remain manageable for the year, Mr. Evans and Mr. Patten said.

Its provision more than doubled from a year earlier, to $8.6 million. That was half the third quarter's provision, which had included $10 million for possible loan losses related to Hurricane Ike.

Though Cullen/Frost's nonperforming assets rose 41% from the third quarter and more than doubled from a year earlier, to $78 million, they were just 0.52% of total assets.

Net chargeoffs rose 41% from a year earlier, to $5.4 million, or 0.25% of assets. Net chargeoffs should remain at the same level in 2009, but the company will continue to build its reserves to more than cover losses, Mr. Evans said.

Noninterest income was $69.2 million, up 4.2% from a year earlier.

Deposit service fees rose 12.6% from a year earlier, to $23.7 million, as commercial customers received less credit for their deposit balances because of reduced interest rates. As a result, their fees for services such as cash and treasury management increased, Mr. Evans said.

Cullen/Frost also raised fees for those services because it is passing on its increased Federal Deposit Insurance Corp. premium to customers. Mr. Evans said most U.S. banks are likely doing the same thing.

Phil Green, Cullen/Frost's chief financial officer, said on its earnings conference call Wednesday that the company's premiums, $4 million in 2008, will increase to $15 million in 2009.

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