Rising interest rates, loan growth and savings resulting from tax reform boosted fourth-quarter profits at Cullen/Frost Bankers in San Antonio.

Net income for the $31.1 billion-asset Cullen/Frost increased 20% to $100.5 million compared with the same quarter in 2016. Earnings per share were $1.53, beating the $1.35 mean estimate of analysts tracked by FactSet Research Systems.

“Our annual net interest income on a tax-equivalent basis topped $1 billion for the first time ever, and our bankers continue to do a great job increasing our loan portfolio at all levels," Chairman and CEO Phil Green said in a news release Thursday.

He also praised employees for working hard to help the company and its customers cope with hurricane damage along the Gulf Coast in August.

Phillip Green, Chairman and CEO of Cullen/Frost Bankers.
Rate impact
“Our annual net interest income on a tax-equivalent basis topped $1 billion for the first time ever," Cullen/Frost Chairman and CEO Phil Green says.

Cullen/Frost recorded a $4 million net benefit to adjust deferred taxes in accordance with the recent tax reform law. The company estimated 6 cents to the earnings per share.

Net interest income increased 9.7% to $268.6 million in the fourth quarter, lifted by both loan volume and rising rates. The net interest margin expanded by 15 basis points to 3.70%.

Average loans increased 9.8% to $12.9 billion. Average deposits increased 3.8% to $26.4 billion.

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Noninterest income declined 3.5% to $90.1 million. Cullen/Frost said that this was in large part because the fourth quarter of 2016 had contained a $10.3 million net gain on the sale of its downtown headquarters. That decline in other income was offset by a 9.7% increase in wealth management income and by a $2 million gain on the sale of a property in the fourth quarter of 2017.

Noninterest expenses increased 1.3% to $196.3 million.

The company charged off $7 million and recorded an $8.1 million provision for loan losses in the fourth quarter, compared with $5.7 million of net chargeoffs and an $8.9 million provision for the same quarter in 2016. Nonperforming assets were 1.20% of total assets in the fourth quarter, compared with 0.86% in the year-earlier quarter.

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Corrected January 25, 2018 at 12:44PM: An earlier version of this story misstated Chairman and CEO Phil Green's first name.