Form 8-K CULLEN/FROST BANKERS, For: Jul 28
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 28, 2015
CULLEN/FROST BANKERS, INC.
(Exact name of issuer as specified in its charter)
Texas | 001-13221 | 74-1751768 |
(State or other jurisdiction | (Commission | (IRS Employer |
of incorporation) | File Number) | Identification No.) |
100 West Houston Street, San Antonio, Texas | 78205 |
(Address of principal executive offices) | (Zip Code) |
(210) 220-4011
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
Attached as Exhibit 99.1 and incorporated into this item by reference is a press release issued by the Registrant on July 29, 2015 regarding its financial results for the quarter ended June 30, 2015. The information furnished by the Registrant pursuant to this item shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Cullen/Frost Bankers, Inc. (“Cullen/Frost”) announced today a plan of succession in which Phillip D. Green will become the new Chief Executive Officer of Cullen/Frost, effective March 31, 2016. Mr. Green currently serves as President of Cullen/Frost and will succeed Richard W. Evans, Jr. as Chief Executive Officer of Cullen/Frost. Mr. Evans will continue as Chief Executive Officer of Cullen/Frost until Mr. Green assumes that office on March 31, 2016, and as Chairman of Cullen/Frost’s Board of Directors until his retirement from the Board of Directors on March 31, 2016. Additionally, on July 28, 2015, the Board of Directors elected Mr. Green as a Director and Chairman of Cullen/Frost’s Board of Directors, effective upon Mr. Evans’ retirement from those positions on March 31, 2016. The Board of Directors has not yet determined the committees to which Mr. Green is to be appointed.
Mr. Green, age 60, has served as President of Cullen/Frost since January 28, 2015 and previously served as Chief Financial Officer of Cullen/Frost since 1995. No material plan, contract, or arrangement was entered into or materially amended in connection with Mr. Green’s appointment as Chief Executive Officer and election as Chairman of Cullen/Frost, and there was no grant or award to Mr. Green or modification thereto under any such plan, contract, or arrangement in connection with his appointment and election. Mr. Green has (i) no family relationship with any director or other executive officer of Cullen/Frost or any person nominated or chosen by Cullen/Frost to become a director or executive officer; (ii) is not a party to any related person transaction with Cullen/Frost; and (iii) has no arrangements or understandings with any other person pursuant to which he was appointed as Chief Executive Officer and elected as Chairman of Cullen/Frost.
As part of the plan of succession, Cullen/Frost today also announced the appointment of Paul H. Bracher, age 58, as President of Cullen/Frost effective March 31, 2016, succeeding Mr. Green in the office of President. Mr. Bracher has served as Chief Banking Officer of Frost since January 28, 2015 and previously served as President, State Regions since 2001. Following his appointment as President of Cullen/Frost effective March 31, 2016, Mr. Bracher will continue as Chief Banking Officer of Frost. No material plan, contract, or arrangement was entered into or materially amended in connection with Mr. Bracher’s appointment as President of Cullen/Frost, and there was no grant or award to Mr. Bracher or modification thereto under any such plan, contract, or arrangement in connection with his appointment. Mr. Bracher has (i) no family relationship with any director or other executive officer of Cullen/Frost or any person nominated or chosen by Cullen/Frost to become a director or executive officer; (ii) is not a party to any related person transaction with Cullen/Frost; and (iii) has no arrangements or understandings with any other person pursuant to which he was appointed as President of Cullen/Frost.
Cullen/Frost today also announced that (i) Emily A. Skillman, Group Executive Vice President of Human Resources and Chief Human Resources Officer of Frost Bank, will retire on March 31, 2016, and that Annette Alonzo will succeed Ms. Skillman in the office of Group Executive Vice President of Human Resources effective today and will succeed Ms. Skillman as Chief Human Resources Officer of Frost Bank effective March 31, 2016, (ii) Gary McKnight has been appointed Group Executive Vice President, Technology and Operations, and (iii) Candace Wolfshohl has been appointed to the newly created position of Group Executive Vice President of Culture and People Development.
Additional information regarding Mr. Green, Mr. Evans, their compensation and Cullen/Frost’s compensation plans and programs is contained in Cullen/Frost’s Annual Report on Form 10-K for the year ended December 31, 2014 and its definitive proxy statement filed with the Securities and Exchange Commission on March 23, 2015.
A copy of the related press release is attached as Exhibit 99.2 hereto.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits:
99.1 | Press Release dated July 29, 2015 with respect to the Registrant's financial results for the quarter ended June 30, 2015. |
99.2 | Press Release dated July 29, 2015 with respect to the Registrant's executive leadership transition. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CULLEN/FROST BANKERS, INC.
By: /s/ Jerry Salinas
Jerry Salinas
Group Executive Vice President
and Chief Financial Officer
Dated: July 29, 2015
EXHIBIT INDEX
Exhibit Number | Description | |
99.1 | Press Release dated July 29, 2015 with respect to the Registrant's financial results for the quarter ended June 30, 2015 | |
99.2 | Press Release dated July 29, 2015 with respect to the Registrant's executive leadership transition | |
Exhibit 99.1
Greg Parker
Investor Relations
210.220.5632
or
Renee Sabel
Media Relations
210.220.5416
FOR IMMEDIATE RELEASE
July 29, 2015
CULLEN/FROST REPORTS SECOND QUARTER RESULTS
• | Average loans up 11.7 percent |
• | Net income increases by 9.9 percent |
• | Net interest margin up 6 basis points from first quarter |
SAN ANTONIO -- 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
1
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 |
2
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 |
3
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.
4
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.
5
Cullen/Frost Bankers, Inc. | |||||||||||||||||||
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED) | |||||||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||||||
2015 | 2014 | ||||||||||||||||||
2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr(1) | 2nd Qtr(1) | |||||||||||||||
CONDENSED INCOME STATEMENTS | |||||||||||||||||||
Net interest income | $ | 182,809 | $ | 180,703 | $ | 178,992 | $ | 177,641 | $ | 169,966 | |||||||||
Net interest income (2) | 220,131 | 216,702 | 212,627 | 208,253 | 199,263 | ||||||||||||||
Provision for loan losses | 2,873 | 8,162 | 4,400 | 390 | 4,924 | ||||||||||||||
Non-interest income: | |||||||||||||||||||
Trust and investment management fees | 26,472 | 27,161 | 27,271 | 26,807 | 26,748 | ||||||||||||||
Service charges on deposit accounts | 20,033 | 19,777 | 20,691 | 20,819 | 20,462 | ||||||||||||||
Insurance commissions and fees | 10,130 | 14,635 | 10,818 | 11,348 | 9,823 | ||||||||||||||
Interchange and debit card transaction fees | 4,917 | 4,643 | 4,783 | 4,719 | 4,627 | ||||||||||||||
Other charges, commissions and fees | 10,113 | 8,441 | 9,619 | 9,804 | 8,550 | ||||||||||||||
Net gain (loss) on securities transactions | — | 228 | 3 | 33 | 2 | ||||||||||||||
Other | 7,317 | 8,330 | 9,457 | 7,332 | 8,938 | ||||||||||||||
Total non-interest income | 78,982 | 83,215 | 82,642 | 80,862 | 79,150 | ||||||||||||||
Non-interest expense: | |||||||||||||||||||
Salaries and wages | 76,633 | 76,072 | 77,903 | 73,756 | 70,473 | ||||||||||||||
Employee benefits | 17,339 | 20,227 | 13,318 | 14,639 | 14,806 | ||||||||||||||
Net occupancy | 16,429 | 15,081 | 15,010 | 14,049 | 13,733 | ||||||||||||||
Furniture and equipment | 15,649 | 15,534 | 15,849 | 16,078 | 15,207 | ||||||||||||||
Deposit insurance | 3,563 | 3,613 | 3,549 | 3,421 | 3,145 | ||||||||||||||
Intangible amortization | 849 | 894 | 996 | 1,052 | 783 | ||||||||||||||
Other | 42,777 | 40,090 | 42,376 | 40,856 | 45,800 | ||||||||||||||
Total non-interest expense | 173,239 | 171,511 | 169,001 | 163,851 | 163,947 | ||||||||||||||
Income before income taxes | 85,679 | 84,245 | 88,233 | 94,262 | 80,245 | ||||||||||||||
Income taxes | 12,602 | 12,082 | 15,529 | 16,881 | 13,541 | ||||||||||||||
Net income | 73,077 | 72,163 | 72,704 | 77,381 | 66,704 | ||||||||||||||
Preferred stock dividends | 2,015 | 2,016 | 2,016 | 2,016 | 2,015 | ||||||||||||||
Net income available to common shareholders | $ | 71,062 | $ | 70,147 | $ | 70,688 | $ | 75,365 | $ | 64,689 | |||||||||
PER COMMON SHARE DATA | |||||||||||||||||||
Earnings per common share - basic | $ | 1.12 | $ | 1.11 | $ | 1.12 | $ | 1.19 | $ | 1.04 | |||||||||
Earnings per common share - diluted | 1.11 | 1.10 | 1.11 | 1.18 | 1.03 | ||||||||||||||
Cash dividends per common share | 0.53 | 0.51 | 0.51 | 0.51 | 0.51 | ||||||||||||||
Book value per common share at end of quarter | 43.17 | 43.80 | 42.87 | 42.40 | 41.73 | ||||||||||||||
OUTSTANDING COMMON SHARES | |||||||||||||||||||
Period-end common shares | 63,180 | 63,164 | 63,149 | 63,058 | 62,951 | ||||||||||||||
Weighted-average common shares - basic | 63,119 | 63,094 | 63,061 | 62,939 | 61,551 | ||||||||||||||
Dilutive effect of stock compensation | 832 | 685 | 866 | 934 | 916 | ||||||||||||||
Weighted-average common shares - diluted | 63,951 | 63,779 | 63,927 | 63,873 | 62,467 | ||||||||||||||
SELECTED ANNUALIZED RATIOS | |||||||||||||||||||
Return on average assets | 1.03 | % | 1.02 | % | 1.02 | % | 1.12 | % | 1.05 | % | |||||||||
Return on average common equity | 10.34 | 10.34 | 10.36 | 11.29 | 10.36 | ||||||||||||||
Net interest income to average earning assets (2) | 3.47 | 3.41 | 3.34 | 3.39 | 3.49 | ||||||||||||||
(1) Certain prior financial information has been restated to reflect adjustments to initially reported provisional amounts recognized in business combinations so that prior financial information is reported as if the adjusted amounts had been know as of the measurement date of the business combination. | |||||||||||||||||||
(2) Taxable-equivalent basis assuming a 35% tax rate. | |||||||||||||||||||
6
Cullen/Frost Bankers, Inc. | |||||||||||||||||||
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED) | |||||||||||||||||||
2015 | 2014 | ||||||||||||||||||
2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr(1) | 2nd Qtr(1) | |||||||||||||||
BALANCE SHEET SUMMARY ($ in millions) | |||||||||||||||||||
Average Balance: | |||||||||||||||||||
Loans | $ | 11,259 | $ | 11,073 | $ | 10,909 | $ | 10,611 | $ | 10,080 | |||||||||
Earning assets | 25,597 | 25,827 | 25,569 | 24,636 | 23,020 | ||||||||||||||
Total assets | 27,677 | 27,936 | 27,599 | 26,592 | 24,829 | ||||||||||||||
Non-interest-bearing demand deposits | 9,950 | 9,961 | 10,054 | 9,532 | 8,736 | ||||||||||||||
Interest-bearing deposits | 13,741 | 13,951 | 13,639 | 13,216 | 12,481 | ||||||||||||||
Total deposits | 23,691 | 23,912 | 23,693 | 22,748 | 21,217 | ||||||||||||||
Shareholders' equity | 2,902 | 2,897 | 2,851 | 2,794 | 2,648 | ||||||||||||||
Period-End Balance: | |||||||||||||||||||
Loans | $ | 11,401 | $ | 11,215 | $ | 10,988 | $ | 10,747 | $ | 10,677 | |||||||||
Earning assets | 25,565 | 25,926 | 26,052 | 25,203 | 24,293 | ||||||||||||||
Goodwill and intangible assets | 665 | 666 | 667 | 668 | 669 | ||||||||||||||
Total assets | 27,782 | 28,159 | 28,278 | 27,371 | 26,525 | ||||||||||||||
Total deposits | 23,841 | 24,150 | 24,136 | 23,491 | 22,517 | ||||||||||||||
Shareholders' equity | 2,872 | 2,911 | 2,851 | 2,818 | 2,772 | ||||||||||||||
Adjusted shareholders' equity (2) | 2,789 | 2,751 | 2,710 | 2,663 | 2,611 | ||||||||||||||
ASSET QUALITY ($ in thousands) | |||||||||||||||||||
Allowance for loan losses: | $ | 106,607 | $ | 105,708 | $ | 99,542 | $ | 98,312 | $ | 98,286 | |||||||||
As a percentage of period-end loans | 0.94 | % | 0.94 | % | 0.91 | % | 0.91 | % | 0.92 | % | |||||||||
Net charge-offs: | $ | 1,974 | $ | 1,996 | $ | 3,170 | $ | 364 | $ | 1,794 | |||||||||
Annualized as a percentage of average loans | 0.07 | % | 0.07 | % | 0.12 | % | 0.01 | % | 0.07 | % | |||||||||
Non-performing assets: | |||||||||||||||||||
Non-accrual loans | $ | 50,053 | $ | 56,314 | $ | 59,925 | $ | 57,100 | $ | 59,631 | |||||||||
Restructured loans | — | — | — | — | — | ||||||||||||||
Foreclosed assets | 2,381 | 3,293 | 5,251 | 5,866 | 8,935 | ||||||||||||||
Total | $ | 52,434 | $ | 59,607 | $ | 65,176 | $ | 62,966 | $ | 68,566 | |||||||||
As a percentage of: | |||||||||||||||||||
Total loans and foreclosed assets | 0.46 | % | 0.53 | % | 0.59 | % | 0.59 | % | 0.64 | % | |||||||||
Total assets | 0.19 | % | 0.21 | % | 0.23 | % | 0.23 | 0.26 | |||||||||||
CONSOLIDATED CAPITAL RATIOS (3) | |||||||||||||||||||
Common Equity Tier 1 Risk-Based Capital Ratio (4) | 11.70 | % | 11.55 | % | N/A | N/A | N/A | ||||||||||||
Tier 1 Risk-Based Capital Ratio | 12.74 | 12.60 | 13.67 | % | 13.90 | % | 13.82 | % | |||||||||||
Total Risk-Based Capital Ratio | 14.06 | 13.93 | 14.55 | 14.80 | 14.74 | ||||||||||||||
Leverage Ratio | 8.07 | 7.89 | 8.16 | 8.27 | 8.65 | ||||||||||||||
Equity to Assets Ratio (period-end) | 10.34 | 10.34 | 10.08 | 10.30 | 10.45 | ||||||||||||||
Equity to Assets Ratio (average) | 10.48 | 10.37 | 10.33 | 10.51 | 10.66 | ||||||||||||||
(1) Certain prior financial information has been restated to reflect adjustments to initially reported provisional amounts recognized in business combinations so that prior financial information is reported as if the adjusted amounts had been know as of the measurement date of the business combination. | |||||||||||||||||||
(2) Shareholders' equity excluding accumulated other comprehensive income (loss). | |||||||||||||||||||
(3) Capital ratios in 2015 were calculated in accordance with the Basel III Capital Rules which became effective on January 1, 2015, subject to transition provisions. Capital ratios for prior periods were calculated in accordance with previous capital rules. | |||||||||||||||||||
(4) The Common Equity Tier 1 Risk-Based Capital Ratio is a newly required ratio under the Basel III Capital Rules and represents common equity, net of any accumulated other comprehensive income (loss), less goodwill and intangible assets, net of any associated deferred tax liabilities, divided by risk-weighted assets, subject to transition provisions. | |||||||||||||||||||
7
Cullen/Frost Bankers, Inc. | |||||||||||||
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED) | |||||||||||||
(In thousands, except per share amounts) | |||||||||||||
Six Months Ended | |||||||||||||
June 30, | |||||||||||||
2015 | 2014(1) | ||||||||||||
CONDENSED INCOME STATEMENTS | |||||||||||||
Net interest income | $ | 363,512 | $ | 330,301 | |||||||||
Net interest income (2) | 436,834 | 387,057 | |||||||||||
Provision for loan losses | 11,035 | 11,524 | |||||||||||
Non-interest income: | |||||||||||||
Trust and investment management fees | 53,633 | 52,159 | |||||||||||
Service charges on deposit accounts | 39,810 | 40,436 | |||||||||||
Insurance commissions and fees | 24,765 | 22,949 | |||||||||||
Interchange and debit card transaction fees | 9,560 | 8,870 | |||||||||||
Other charges, commissions and fees | 18,554 | 16,757 | |||||||||||
Net gain (loss) on securities transactions | 228 | 2 | |||||||||||
Other | 15,647 | 15,467 | |||||||||||
Total non-interest income | 162,197 | 156,640 | |||||||||||
Non-interest expense: | |||||||||||||
Salaries and wages | 152,705 | 140,690 | |||||||||||
Employee benefits | 37,566 | 32,194 | |||||||||||
Net occupancy | 31,510 | 26,686 | |||||||||||
Furniture and equipment | 31,183 | 30,160 | |||||||||||
Deposit insurance | 7,176 | 6,262 | |||||||||||
Intangible amortization | 1,743 | 1,472 | |||||||||||
Other | 82,867 | 84,424 | |||||||||||
Total non-interest expense | 344,750 | 321,888 | |||||||||||
Income before income taxes | 169,924 | 153,529 | |||||||||||
Income taxes | 24,684 | 25,637 | |||||||||||
Net income | 145,240 | 127,892 | |||||||||||
Preferred stock dividends | 4,031 | 4,031 | |||||||||||
Net income available to common shareholders | $ | 141,209 | $ | 123,861 | |||||||||
PER COMMON SHARE DATA | |||||||||||||
Earnings per common share - basic | $ | 2.23 | $ | 2.01 | |||||||||
Earnings per common share - diluted | 2.22 | 1.99 | |||||||||||
Cash dividends per common share | 1.04 | 1.01 | |||||||||||
Book value per common share at end of quarter | 43.17 | 41.73 | |||||||||||
OUTSTANDING COMMON SHARES | |||||||||||||
Period-end common shares | 63,180 | 62,951 | |||||||||||
Weighted-average common shares - basic | 63,107 | 61,129 | |||||||||||
Dilutive effect of stock compensation | 760 | 902 | |||||||||||
Weighted-average common shares - diluted | 63,867 | 62,031 | |||||||||||
SELECTED ANNUALIZED RATIOS | |||||||||||||
Return on average assets | 1.02 | % | 1.02 | % | |||||||||
Return on average common equity | 10.34 | 10.17 | |||||||||||
Net interest income to average earning assets (2) | 3.44 | 3.46 | |||||||||||
(1) Certain prior financial information has been restated to reflect adjustments to initially reported provisional amounts recognized in business combinations so that prior financial information is reported as if the adjusted amounts had been know as of the measurement date of the business combination. | |||||||||||||
(2) Taxable-equivalent basis assuming a 35% tax rate | |||||||||||||
8
Cullen/Frost Bankers, Inc. | |||||||||||||
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED) | |||||||||||||
As of or for the | |||||||||||||
Six Months Ended | |||||||||||||
June 30, | |||||||||||||
2015 | 2014(1) | ||||||||||||
BALANCE SHEET SUMMARY ($ in millions) | |||||||||||||
Average Balance: | |||||||||||||
Loans | $ | 11,167 | $ | 9,830 | |||||||||
Earning assets | 25,711 | 22,632 | |||||||||||
Total assets | 27,807 | 24,420 | |||||||||||
Non-interest-bearing demand deposits | 9,955 | 8,446 | |||||||||||
Interest-bearing deposits | 13,846 | 12,420 | |||||||||||
Total deposits | 23,801 | 20,866 | |||||||||||
Shareholders' equity | 2,899 | 2,601 | |||||||||||
Period-End Balance: | |||||||||||||
Loans | $ | 11,401 | $ | 10,677 | |||||||||
Earning assets | 25,565 | 24,293 | |||||||||||
Goodwill and intangible assets | 665 | 669 | |||||||||||
Total assets | 27,782 | 26,525 | |||||||||||
Total deposits | 23,841 | 22,517 | |||||||||||
Shareholders' equity | 2,872 | 2,772 | |||||||||||
Adjusted shareholders' equity (2) | 2,789 | 2,611 | |||||||||||
ASSET QUALITY ($ in thousands) | |||||||||||||
Allowance for loan losses: | $ | 106,607 | $ | 98,286 | |||||||||
As a percentage of period-end loans | 0.94 | % | 0.92 | % | |||||||||
Net charge-offs: | $ | 3,970 | $ | 5,676 | |||||||||
Annualized as a percentage of average loans | 0.07 | % | 0.12 | % | |||||||||
Non-performing assets: | |||||||||||||
Non-accrual loans | $ | 50,053 | $ | 59,631 | |||||||||
Restructured loans | — | — | |||||||||||
Foreclosed assets | 2,381 | 8,935 | |||||||||||
Total | $ | 52,434 | $ | 68,566 | |||||||||
As a percentage of: | |||||||||||||
Total loans and foreclosed assets | 0.46 | % | 0.64 | % | |||||||||
Total assets | 0.19 | 0.26 | |||||||||||
CONSOLIDATED CAPITAL RATIOS (3) | |||||||||||||
Common Equity Tier 1 Risk-Based Capital Ratio (4) | 11.70 | % | N/A | ||||||||||
Tier 1 Risk-Based Capital Ratio | 12.74 | % | 13.82 | % | |||||||||
Total Risk-Based Capital Ratio | 14.06 | 14.74 | |||||||||||
Leverage Ratio | 8.07 | 8.65 | |||||||||||
Equity to Assets Ratio (period-end) | 10.34 | 10.45 | |||||||||||
Equity to Assets Ratio (average) | 10.43 | 10.65 | |||||||||||
(1) Certain prior financial information has been restated to reflect adjustments to initially reported provisional amounts recognized in business combinations so that prior financial information is reported as if the adjusted amounts had been know as of the measurement date of the business combination. | |||||||||||||
(2) Shareholders' equity excluding accumulated other comprehensive income (loss). | |||||||||||||
(3) Capital ratios in 2015 were calculated in accordance with the Basel III Capital Rules which became effective on January 1, 2015, subject to transition provisions. Capital ratios for prior periods were calculated in accordance with previous capital rules. | |||||||||||||
(4) The Common Equity Tier 1 Risk-Based Capital Ratio is a newly required ratio under the Basel III Capital Rules and represents common equity, net of any accumulated other comprehensive income (loss), less goodwill and intangible assets, net of any associated deferred tax liabilities, divided by risk-weighted assets, subject to transition provisions. | |||||||||||||
9
Exhibit 99.2
Greg Parker
Investor Relations
210.220.5632
or
Renee Sabel
Media Relations
210.220.5416
RELEASE
July 29, 2015
CULLEN/FROST ANNOUNCES EXECUTIVE LEADERSHIP TRANSITION
Dick Evans to Retire March 31, 2016; Phil Green to Succeed as Chairman and CEO
SAN ANTONIO-Cullen/Frost Bankers, Inc. today announced that Cullen/Frost Chairman and CEO Dick Evans will retire effective March 31, 2016. At that time, Cullen/Frost President Phillip D. Green will become chairman and CEO and will replace Evans on the Cullen/Frost board of directors.
“With the company’s financial strength, unique culture and outstanding people, this is the right time for Cullen/Frost to move forward with an executive leadership team that will be bolstered by the addition of three veteran Frost leaders,” said Evans, who has served at Frost for nearly 45 years, almost 18 as CEO. “Over the next eight months, Phil and I will work closely to ensure an effective, orderly and transparent transition. No one is more committed to the future of Cullen/Frost than I am. The company’s future is in great hands with Phil, the executive team and more than 4,200 dedicated employees. I am proud of what they have helped us achieve and look forward to working with them in the months ahead.”
“It’s been an honor to learn and serve beside a remarkable leader like Dick Evans,” said Phil Green. “I am grateful to Dick and the board for their confidence in me. As CEO during this company’s longest era of expansion and technological improvements, as well as one of its most challenging periods, Dick has been a transformational leader. With his stewardship of this company and his commitment to move forward and bring the team along, Dick has established a legacy of achievement and growth. I value my relationship with Dick and will continue to call upon his wisdom and guidance.”
Evans will serve as a strategic counselor to Phil Green and be available for customer relationships and other activities for at least five years after his retirement.
In addition to Evans’ retirement, the company announced that Emily Skillman, group executive vice president of human resources, will also retire on March 31, 2016, after 27 years of service. Skillman will continue as
1
chief human resources officer through the date of her retirement. Annette Alonzo, who has been with Frost for 26 years, will replace Skillman as group executive vice president of Human Resources and a member of the executive team, effective today.
The company announced two other additions to Cullen/Frost’s executive team, effective immediately: Gary McKnight, a 43-year employee, has been named group executive vice president, Technology and Operations, and Candace Wolfshohl, a Frost employee for 32 years, has been promoted to group executive vice president of Culture and People Development.
“Transitions at Frost have been consistent and continuous throughout our 147 years. I have been talking to the board about this succession plan for more than a year,” said Evans. “The existing management team remains in place, with Paul Bracher continuing as chief banking officer and adding the title of president of Cullen/Frost when Phil becomes chairman and CEO next March.
“Annette, Gary and Candace will be strong additions to an executive team that is already performing at a very high level,” said Evans. “Paul Bracher has done an exceptional job managing region leadership and serving as chief banking officer. Jerry Salinas has been chief financial officer since January, and he has made instrumental contributions to our success. Bill Perotti’s insight as chief risk officer has been invaluable to me. Pat Frost has done an outstanding job as president of the bank, president of Frost Insurance, and serving on the board of directors.
“I am also grateful to Paul Olivier, who has been a strong leader for our award-winning consumer banking operation for many years; Richard Kardys, who has spearheaded the dynamic growth of Frost Wealth Advisors; and Bobby Berman, who has been an innovative leader in the company’s research and strategy. And I want to express my deepest thanks to Emily Skillman, whose knowledge of our company and culture has ensured that we hire, retain and develop the right people to help us grow and move forward.”
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.
###
2
Biographical Information
Dick Evans joined Frost in 1971 and has been Cullen/Frost CEO since 1997. Under Evans’ leadership, Cullen/Frost became a strong regional banking company, more than doubling asset size, while expanding into new lines of business and services that broaden and deepen customer relationships. In 2008, Frost became the first bank in the nation to turn down federal TARP bailout funds. Evans served as a member of the Federal Advisory Council to the Board of Governors of the Federal Reserve System and was a member of the board of directors of the Federal Reserve Bank of Dallas. Evans is a 1968 graduate of the University of Texas at Austin, with a bachelor of business administration degree.
Phil Green has been with Frost for 35 years, serving as Cullen/Frost president since January. Green joined the company in 1980 and held a number of managerial positions in the financial division before serving as chief financial officer from 1995 to 2015. Green has also had oversight for Frost’s technology, operations and capital markets areas. He has worked closely with the CEO on all matters involving the board of directors and investor relations. He serves on the board of Frost Insurance. Green graduated with honors from the University of Texas at Austin with a bachelor of business administration degree in Accounting.
Emily Skillman joined Frost in 1988 as an assistant in commercial lending. She served as an executive assistant on the management platform before moving to human resources, where she held several leadership positions. In 2003, Skillman was named group executive vice president of human resources and a direct report to Evans. She is responsible for employment, benefits, executive compensation and staff and leadership development.
New to the executive team:
Annette Alonzo has been with Frost for 26 years, the past 10 years as corporate human resources manager, overseeing employee relations, recruitment, affirmative action and diversity programs, Frost A-Team and human resources technology. Alonzo joined Frost in 1989 as a teller, rising over the years to recruiter and employee relations supervisor, and both regional and statewide HR manager. She was named corporate HR manager in 2005 and was named a senior executive vice president in January 2015.
Gary McKnight, a 42-year Frost veteran, has been operations division manager since 2001, overseeing all information technology, loan operations, data processing and processing operations for the company. Over the years, he has held management positions in item processing, data processing and operations. He was named senior executive vice president in 2005.
3
Candace Wolfshohl joined Frost in 1983, rising to become leadership development manager and director of training and development in 2006. She served as a personal banker, a training specialist in staff development, retail operations strategist and statewide call center manager. She worked as a manager of the client service application support team in IT. She was named senior executive vice president in January 2015. Wolfshohl is a graduate of Texas A&M University with a bachelor of science in Sociology.
Continuing on the executive team:
Bobby Berman has been with Frost since 1985 and serves as group executive vice president of research and strategy. He worked in several positions in the treasury division before spearheading the implementation of the bank’s data warehouse strategy. He was named director of internet banking and e-commerce in 2000 and added research and strategy in 2001. He also directs the strategy for treasury management statewide. Berman is a graduate of Trinity University with a bachelor of business administration degree.
Paul Bracher has served as chief banking officer since January, with responsibility for directing the activities of region presidents and as a steward of banking operations. Since joining Frost in 1981, Bracher has worked in commercial lending, special assets and management. He also managed the Corpus Christi market and led commercial lending in San Antonio for the bank. Bracher earned a bachelor of science degree from Texas A&M University, with a major in Agricultural Economics.
Pat Frost is president of Frost Bank and a director of Cullen/Frost. He joined the company founded by his great-great grandfather in 1984, serving as a credit analyst and commercial loan officer before being named to the executive committee in 1992 and president in 1993. In addition, he is a president of the bank’s insurance subsidiary, Frost Bank, and oversees the management of leasing and public finance. Frost is a summa cum laude graduate of Vanderbilt University with a B.A. in Economics and earned an MBA from the University of Texas at Austin.
Richard Kardys is group executive vice president of Frost Wealth Advisors, which offers trust and brokerage services throughout Texas. Kardys joined Frost in 1977 as a business development officer in the trust division, rising over the years to become senior executive vice president in 1998 and group executive vice president and executive trust officer in 2001. He oversees Frost Wealth Advisors and Frost Investment Advisors and is a certified trust financial advisor and a certified wealth strategist®. Kardys received a B.A. degree from Texas A&M with a major in government and received his J.D. degree from the University of Texas School of Law.
Paul Olivier is group executive vice president of consumer banking. He joined the company in 1976 and has worked in commercial credit, treasury management, bank card operations, personnel and retail lending. In 1987, he coordinated the consolidation of Frost’s affiliate banks into a branch organization and was named group executive vice president in 2001. He has been responsible for overseeing retail bank administration, human resources, bank
4
operations, cash management and credit. Olivier earned both a bachelor’s degree and an MBA in business from Louisiana State University.
Bill Perotti is group executive vice president and chief risk officer. Since joining Frost in 1981, Perotti has served in several roles in asset review and credit before being named head of Credit Administration in 1991. He served as chief risk officer and chief credit officer and was named group executive vice president in 2001. Perotti earned a bachelor of business administration degree, cum laude, in Accounting from George Washington University.
Jerry Salinas is group executive vice president and chief financial officer and served as the company’s treasurer for 18 years. Since joining Frost in1986, Salinas has held various financial positions within Frost and Cullen/Frost. He was named bank and corporate controller in 1989 and treasurer in 1997. A San Antonio native, Salinas earned a bachelor of business administration degree in Accounting from the University of Texas at San Antonio and is a CPA.
5