SAN ANTONIO, July 29, 2015 /PRNewswire/ -- Cullen/Frost Bankers, Inc. (NYSE: CFR) today reported results for the second quarter of 2015, with solid increases in average loans and net interest income.

Separately, Cullen/Frost today announced an executive leadership team transition: Cullen/Frost Chairman and CEO Dick Evans will retire March 31, 2016. At that time, Cullen/Frost President Phillip D. Green will become chairman and CEO and replace Evans on the Cullen/Frost board of directors.

Cullen/Frost's net income available to common shareholders for the second quarter of 2015 was $71.1 million, a 9.9 percent increase from second quarter of 2014 earnings of $64.7 million. On a per-share basis, net income was $1.11 per diluted common share, compared to $1.03 per diluted common share reported a year earlier. Returns on average assets and common equity were 1.03 percent and 10.34 percent respectively, compared to 1.05 percent and 10.36 percent for the same period a year earlier.

For the second quarter of 2015, average deposits increased $2.5 billion, or 11.7 percent, to $23.7 billion, compared to the $21.2 billion reported for last year's second quarter. Average loans increased $1.2 billion, or 11.7 percent, to $11.3 billion, from the $10.1 billion reported for the second quarter a year earlier.

"I am pleased to report another good quarter for Cullen/Frost, as customers continue to respond to our value proposition and to the unique experience of doing business with Frost," said Dick Evans, Cullen/Frost chairman and CEO. "Even with the lingering slowdown in the energy sector and a highly competitive lending environment, we increased average loans over the same quarter last year by double digits through our disciplined calling effort and our Western National Bank acquisition. We are staying in close contact with our energy clients in this low oil price environment.

"I am grateful for our dedicated employees, who add value to customer relationships and provide superior service and innovation. They ensure a consistent customer experience at Frost, and I appreciate their hard work and loyalty," Evans continued.

"In April, Frost Bank received the highest ranking in customer satisfaction in Texas in the J.D. Power and Associates 2015 U.S. Retail Banking Satisfaction StudySM for the sixth consecutive year. Frost continues to set the bar for the industry in terms of excellence in customer satisfaction as we work continually to improve the customer experience across all regions of our company and across all platforms and touch points.

"Even with the challenges in the energy sector, the Texas economy is extraordinarily diversified and resilient, and construction continues to be strong, both in commercial and residential," Evans continued. "Jobs in Texas are expected to grow 1.2 percent this year compared to projected U.S. job growth of 2.0 percent. The June Texas unemployment rate of 4.2 percent is well below the national average of 5.3 percent.

"Capital levels remain strong, and we have plenty of liquidity as loans continue to increase. We have consistently paid a shareholder dividend and have increased the dividend annually for the past 22 years.

For the first six months of 2015, net income available to common shareholders was $141.2 million, or $2.22 per diluted common share, compared to $123.9 million, or $1.99 per diluted common share, for the first six months of 2014. Returns on average assets and average common equity for the first six months of 2015 were 1.02 percent and 10.34 percent, respectively, compared to 1.02 percent and 10.17 percent for the same period in 2014.

Noted financial data for the second quarter:

• The Corporation acquired WNB Bancshares, Inc., the parent of Western National Bank -- with loans of $670.6 million and deposits of $1.6 billion -- at the close of business on May 30, 2014. These loans and deposits, and the results of operations, are included from the date of acquisition.
• Tier 1 and Total Risk-Based Capital Ratios remained strong at 12.74 percent and 14.06 percent, respectively, at the end of the second quarter of 2015 and are in excess of well capitalized levels. The Common Equity Tier 1 ratio was 11.70 percent at June 30, 2015. The tangible common equity ratio was 7.60 percent at the end of the second quarter of 2015 compared to 7.57 percent for the same quarter last year. The tangible common equity ratio, which is a non-GAAP financial measure, is equal to end of period shareholders' equity less preferred stock, less goodwill and intangible assets divided by end of period total assets less goodwill and intangible assets. Frost's current capital levels today would meet the fully phased-in Basel III requirements issued by the U.S. bank regulators.
• Net interest income on a taxable-equivalent basis increased $20.9 million, or 10.5 percent, to $220.1 million, from the $199.3 million reported a year earlier. This increase primarily resulted from an increase in the average volume of interest earning assets. Solid deposit growth helped to fund the increase in the volume of earning assets. The net interest margin was 3.47 percent for the second quarter, a six basis point increase from the 3.41 reported in the first quarter of 2015 and a two basis point decrease from the 3.49 percent reported in the second quarter of 2014.
• Non-interest income for the second quarter of 2015 was $79.0 million, a decrease of $168,000, compared to the $79.2 million reported a year earlier. Trust and investment management fees were $26.5 million, down $276,000, compared to $26.7 million in the second quarter of 2014. Most of the decrease was due to oil and gas fees, down $1.0 million, and securities lending fees, down $838,000. These decreases were offset, in part, by a $1.4 million increase in investment fees, which are generally assessed based on the market value of trust assets that are managed and held in custody. Other charges, commissions and fees were up $1.6 million to $10.1 million from the $8.6 million reported a year earlier, due mainly to capital market fees related to advisory services, up $1.0 million. Other income decreased $1.6 million to $7.3 million, due mainly to decreases in sundry and miscellaneous income, down $2.2 million and mineral interest income, down $955,000. These decreases were offset, in part, by a $1.6 million increase in public finance underwriting fees.
• Non-interest expense for the quarter was $173.2 million, an increase of $9.3 million, or 5.7 percent, compared to the $163.9 million reported for the second quarter of last year. Salaries and wages rose $6.2 million, or 8.7 percent, to $76.6 million from an increase in the number of employees, partly related to the acquisition of WNB and normal annual merit and market increases. Employee benefits were up $2.5 million to $17.3 million from $14.8 million in last years second quarter. This increase was due to increases in our defined benefit retirement plans, up $1.3 million, payroll taxes, up $431,000, and 401(k) and profit sharing plans, up $333,000. Net occupancy rose $2.7 million, or 19.6 percent, to $16.4 million, from last year's second quarter, impacted by our new operations and support center coming on-line during the second quarter of 2015, as well as, new branch locations and costs associated with the WNB acquisition. Other expense decreased $3.0 million or 6.6 percent, primarily from $4.8 million in expenses related to the WNB Bancshares acquisition in the second quarter of 2014. Offsetting this decrease from 2014 were increases in advertising expense, up $926,000, and guard service expense, up $435,000.
• For the second quarter of 2015, the provision for possible loan losses was $2.9 million, compared to net charge-offs of $2.0 million. The loan loss provision for the second quarter of 2014 was $4.9 million, compared to net charge-offs of $1.8 million. Non-performing assets for the second quarter of 2015 were $52.4 million, compared to $59.6 million last quarter and $68.6 million a year earlier. The allowance for possible loan losses as a percentage of loans at June 30, 2015 was 0.94 percent, compared to 0.94 percent last quarter and 0.92 percent at the end of the second quarter of 2014.

Cullen/Frost Bankers, Inc. will host a conference call on Wednesday, July 29, 2015, at 10 a.m. Central Time (CT) to discuss the results for the quarter. The media and other interested parties are invited to access the call in a "listen only" mode at 800-944-6430. Digital playback of the conference call will be available after 2 p.m. CT until midnight Sunday, August 2, 2015 at 855-859-2056, with Conference ID # 84054399. The call will also be available by webcast at the URL listed below and available for playback after 2 p.m. CT. After entering the website, www.frostbank.com, scroll down to the bottom of the home page. Under Company Information, click on Investor Relations.

Cullen/Frost Bankers, Inc. (NYSE: CFR) is a financial holding company, headquartered in San Antonio, with $27.8 billion in assets at June 30, 2015. Among the top 50 largest U.S. banks and one of 24 banks included in the KBW Bank Index, Frost provides a wide range of banking, investments and insurance services to businesses and individuals across Texas in the Austin, Corpus Christi, Dallas, Fort Worth, Houston, Permian Basin, Rio Grande Valley and San Antonio regions. Founded in 1868, Frost has helped clients with their financial needs during three centuries. Additional information is available at frostbank.com.

Forward-Looking Statements and Factors that Could Affect Future Results

Certain statements contained in this Earnings Release that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"), notwithstanding that such statements are not specifically identified as such. In addition, certain statements may be contained in our future filings with the SEC, in press releases, and in oral and written statements made by us or with our approval that are not statements of historical fact and constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations of Cullen/Frost or its management or Board of Directors, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as "believes", "anticipates", "expects", "intends", "targeted", "continue", "remain", "will", "should", "may" and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

• Local, regional, national and international economic conditions and the impact they may have on us and our customers and our assessment of that impact.
• Volatility and disruption in national and international financial markets.
• Government intervention in the U.S. financial system.
• Changes in the mix of loan geographies, sectors and types or the level of non-performing assets and charge-offs.
• Changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements.
• The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board.
• Inflation, interest rate, securities market and monetary fluctuations.
• The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which we and our subsidiaries must comply.
• The soundness of other financial institutions.
• Political instability.
• Impairment of our goodwill or other intangible assets.
• Acts of God or of war or terrorism.
• The timely development and acceptance of new products and services and perceived overall value of these products and services by users.
• Changes in consumer spending, borrowings and savings habits.
• Changes in the financial performance and/or condition of our borrowers.
• Technological changes.
• Acquisitions and integration of acquired businesses.
• The ability to increase market share and control expenses.
• Our ability to attract and retain qualified employees.
• Changes in the competitive environment in our markets and among banking organizations and other financial service providers.
• The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters.
• Changes in the reliability of our vendors, internal control systems or information systems.
• Changes in our liquidity position.
• Changes in our organization, compensation and benefit plans.
• The costs and effects of legal and regulatory developments, the resolution of legal proceedings or regulatory or other governmental inquiries, the results of regulatory examinations or reviews and the ability to obtain required regulatory approvals.
• Greater than expected costs or difficulties related to the integration of new products and lines of business.
• Our success at managing the risks involved in the foregoing items.

Forward-looking statements speak only as of the date on which such statements are made. We do not undertake obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.

Greg Parker Investor Relations 210.220.5632 or Renee Sabel Media Relations 210.220.5416

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SOURCE Cullen/Frost Bankers, Inc.