Cullen/Frost Reports 4th Quarter And 2017 Annual Results

SAN ANTONIO, Jan. 25, 2018 /PRNewswire/ -- Cullen/Frost Bankers, Inc. (NYSE:CFR) today reported fourth quarter results and annual earnings for 2017. Cullen/Frost reported net income available to common shareholders for the fourth quarter of 2017 of $98.5 million, or $1.53 per diluted common share, compared to fourth quarter 2016 earnings of $81.7 million, or $1.28 per diluted common share. For the fourth quarter of 2017, returns on average assets and common equity were 1.26 percent and 12.66 percent respectively, compared to 1.09 percent and 11.03 percent for the same period in 2016. Fourth quarter and full-year 2017 results were favorably impacted by a $4.0 million (or $.06 per share) net-benefit to adjust deferred taxes as a result of the Tax Cuts and Jobs Act.

The company also reported 2017 annual net income available to common shareholders of $356.1 million, an increase of 20.2 percent compared to 2016 earnings of $296.2 million. On a per-share basis, 2017 earnings were $5.51 per diluted common share, compared to $4.70 per diluted common share reported in 2016. For the year 2017, returns on average assets and common equity were 1.17 percent and 11.76 percent respectively, compared to 1.03 percent and 10.16 percent reported in 2016.

During the fourth quarter of 2017, average deposits rose by 3.8 percent to $26.4 billion, up $977.9 million from the $25.4 billion reported in the fourth quarter of 2016. Average loans increased 9.8 percent to $12.9 billion compared to $11.7 billion in the fourth quarter of 2016.

"A strong fourth quarter represented the perfect way to finish an excellent 2017," said Phil Green, Cullen/Frost chairman and CEO. "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. Our team got our customers and our locations through the hurricane that affected the Gulf Coast in August, and we're a stronger organization as we celebrate the 150th anniversary of our founding in 2018. We're all proud to be Frost bankers."

During 2017, Frost received further validation of its outstanding service culture and performance by well-regarded third parties. For the eighth consecutive year, Frost received the highest ranking in customer satisfaction in Texas in the J.D. Power and Associates 2017 U.S. Retail Banking Satisfaction Study. Frost Bank also received 33 Greenwich Excellence Awards for providing superior service, advice and performance to small-business and middle-market banking clients, marking the 12th consecutive year Frost has been recognized by Greenwich Associates.

For 2017, average total loans were $12.5 billion, an increase of $905.3 million, or 7.8 percent, from the $11.6 billion reported the previous year. Average total deposits for 2017 rose to $25.9 billion, up 5.7 percent, or $1.4 billion, over the $24.5 billion reported in 2016. Net interest income on a taxable-equivalent basis increased to $1.0 billion, up 11.0 percent, over the $940.0 million reported a year earlier, reflecting the impact of the increasing volume of earning assets and increasing interest rates.

Noted financial data for the fourth quarter:

• The Common Equity Tier 1, Tier 1 and Total Risk-Based Capital Ratios for the Corporation at the end of the fourth quarter of 2017 were 12.42 percent, 13.16 percent, and 15.15 percent, respectively, and continue to be in excess of well-capitalized levels. Current capital ratios exceed Basel III fully phased-in requirements.
• Net interest income on a taxable-equivalent basis for the fourth quarter totaled $268.6 million, an increase of 9.7 percent compared to the $245.0 million reported for the fourth quarter of 2016. This increase resulted primarily from both an increase in the average volume of earning assets and increasing interest rates. The net interest margin was 3.70 percent for the fourth quarter, compared to 3.55 percent for the fourth quarter of 2016 and 3.73 percent for the third quarter of 2017. A shift in the mix of earning assets to higher yielding assets, primarily in loans, and the Federal Reserve's three 25-basis-point rate increases, positively affected the net interest margin compared to a year ago.
• Non-interest income for the fourth quarter of 2017 was $90.1 million, down $3.3 million from the $93.4 million reported a year earlier. Other income was down $7.7 million and was primarily impacted by a $10.3 million net gain realized from the sale of the corporation's downtown headquarters and adjacent properties in San Antonio in the fourth quarter of 2016, partially offset by a $2.0 million gain from the sale of a property in the fourth quarter of 2017. Trust and investment management fees were up $2.6 million or 9.7 percent.
• Non-interest expense for the fourth quarter of 2017 was $196.3 million, up $2.4 million or 1.3 percent from the $193.9 million reported for the fourth quarter of 2016. Salaries and wages increased $7.3 million or 8.9 percent, impacted by normal annual merit and market increases and an increase in the number of employees, as well as performance based bonus/incentive compensation and $1.3 million in severance costs. Technology, furniture and equipment expense was up $1.6 million due mainly to technology initiatives combined with new financial centers. Other expense was down $6.6 million, resulting primarily from various property write-downs of $5.9 million and a $4.4 million contribution to our charitable foundation during the fourth quarter of 2016. The fourth quarter of 2017 includes legal settlements of $1.8 million, property write-downs of $900,000 and miscellaneous asset write-offs of $1.4 million.
• For the fourth quarter of 2017, the provision for loan losses was $8.1 million, compared to net charge-offs of $7.0 million. For the fourth quarter of 2016, the provision for loan losses was $8.9 million, compared to net charge-offs of $5.7 million. The allowance for loan losses as a percentage of total loans was 1.18 percent at December 31, 2017, compared to 1.21 percent last quarter and 1.28 percent at year-end 2016. Non-performing assets were $157.3 million at year end, compared to $150.0 million the previous quarter, and $102.6 million at year-end 2016.

The Cullen/Frost board also declared a first-quarter cash dividend of $.57 per common share, payable March 15, 2018 to shareholders of record on February 28 of this year. The board of directors also declared a cash dividend of $.3359375 per share of the Noncumulative Perpetual Preferred Stock, Series A, which is traded on the NYSE under the symbol "CFR PrA." The Series A Preferred Stock dividend is also payable on March 15, 2018, to shareholders of record on February 28 of this year.

Cullen/Frost Bankers, Inc. will host a conference call on Thursday, January 25, 2018, at 10 a.m. Central Time (CT) to discuss the results for the quarter and the year. 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 12 p.m. CT until midnight Sunday, January 28, 2018 at 855-859-2056, with the Conference ID# of 2873696. The call will also be available by audio webcast on the company's website, frostbank.com, 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 $31.7 billion in assets at December 31, 2017. One of the 50 largest U.S. banks, 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 and commodity 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 any 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

Bill Day
Media Relations
210.220.5427

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SOURCE Cullen/Frost Bankers, Inc.