Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1995 Commission file number 0-7275
Cullen/Frost Bankers, Inc.
(Exact name of registrant as specified in its charter)
Texas 74-1751768
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 W. Houston Street, San Antonio, Texas 78205
(Address of principal executive offices) (Zip code)
(210) 220-4011
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X. No .
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: At July 28, 1995 there were
11,151,033 shares of Common Stock, $5 par value, outstanding.
<PAGE>
<TABLE>
<CAPTION>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Income
Cullen/Frost Bankers, Inc. and Subsidiaries
(in thousands, except per share amounts) Three Months Ended Six Months Ended
June 30 June 30
-------------------- -------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $37,671 $25,371 $ 70,746 $49,002
Securities:
Taxable 24,526 23,643 48,862 46,054
Tax-exempt 90 85 174 181
------- ------- ------- -------
Total Securities 24,616 23,728 49,036 46,235
Time Deposits --- 1 --- 2
Federal funds sold and securities
purchased under resale agreements 1,628 937 3,121 2,539
------- ------- ------- -------
Total Interest Income 63,915 50,037 122,903 97,778
INTEREST EXPENSE
Deposits 22,623 14,619 41,008 28,339
Federal funds purchased and securities
sold under repurchase agreements 3,834 1,560 8,225 2,633
Long-term notes payable and other borrowings 107 --- 107 ---
------- ------- ------- -------
Total Interest Expense 26,564 16,179 49,340 30,972
------- ------- ------- -------
Net Interest Income 37,351 33,858 73,563 66,806
Provision for possible loan losses 2,772 --- 3,272 ---
------- ------- ------- -------
Net Interest Income After Provision
For Possible Loan Losses 34,579 33,858 70,291 66,806
NON-INTEREST INCOME
Trust department 8,070 7,114 16,121 14,396
Service charges on deposit accounts 7,484 6,927 14,538 13,736
Other service charges, collection and
exchange charges, commissions and fees 2,840 2,354 5,196 4,518
Net gain (loss) on securities transactions --- (446) 93 (440)
Other 4,349 3,002 7,212 6,077
------- ------- ------- -------
Total Non-Interest Income 22,743 18,951 43,160 38,287
NON-INTEREST EXPENSE
Salaries and wages 14,395 13,391 27,932 26,406
Pension and other employee benefits 2,371 2,888 5,177 5,957
Net occupancy of banking premises 4,323 3,860 8,906 7,890
Furniture and equipment 2,550 2,528 5,110 5,100
Provision for real estate losses --- --- 500 ---
Restructuring costs --- --- 400 ---
Other 16,293 15,939 31,677 31,673
------- ------- ------- -------
Total Non-Interest Expense 39,932 38,606 79,702 77,026
------- ------- ------- -------
Income Before Income Taxes 17,390 14,203 33,749 28,067
Income Taxes 6,167 4,961 11,887 9,727
------- ------- ------- -------
Net Income $11,223 $ 9,242 $21,862 $18,340
======= ======= ======= =======
Net Income per common share:
Primary $ .99 $ .82 $ 1.94 $ 1.64
Fully diluted .99 .82 1.93 1.64
Dividends per share .22 .15 .44 .30
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
Cullen/Frost Bankers, Inc. and Subsidiaries
(dollars in thousands)
June 30 December 31 June 30
1995 1994 1994
---------- ---------- ----------
<S> <C> <C> <C>
Assets
Cash and due from banks $ 378,131 $ 365,792 $ 302,963
Time deposits 20 12 6
Securities held to maturity 1,003,663 1,051,245 1,110,990
Securities available for sale 569,357 542,797 592,827
Federal funds sold and securities
purchased under resale agreements 111,425 167,550 44,266
Loans, net of unearned discount of $2,401 at
June 30, 1995 $3,487 at December 31, 1994
and $ 5,454 at June 30, 1994 1,742,644 1,483,293 1,334,388
Less: Allowance for possible loan losses (28,886) (25,741) (25,647)
---------- ---------- ----------
Net Loans 1,713,758 1,457,552 1,308,741
Banking premises and equipment 91,891 88,667 90,180
Accrued interest and other assets 136,497 120,105 125,310
---------- ---------- ----------
Total Assets $4,004,742 $3,793,720 $3,575,283
========== ========== ==========
Liabilities
Demand Deposits:
Commercial and individual $ 720,789 $ 710,138 $ 692,617
Correspondent banks 95,390 77,425 71,348
Public funds 43,619 44,740 38,111
---------- ---------- ----------
Total demand deposits 859,798 832,303 802,076
Time Deposits:
Savings and Interest-on-Checking 712,972 763,300 797,835
Money market deposit accounts 590,752 559,153 544,275
Time accounts 998,850 842,520 859,397
Public funds 90,646 90,686 73,590
---------- ---------- ----------
Total time deposits 2,393,220 2,255,659 2,275,097
---------- ---------- ----------
Total deposits 3,253,018 3,087,962 3,077,173
Federal funds purchased and securities
sold under repurchase agreements 348,922 370,235 169,647
Accrued interest and other liabilities 81,142 40,086 47,097
---------- ---------- ----------
Total Liabilities 3,683,082 3,498,283 3,293,917
Shareholders' Equity
Common stock, par value $5 per share 55,744 55,615 55,306
Shares authorized: 30,000,000
Shares outstanding: 11,148,804;
11,123,062; and 11,061,150
Surplus 116,711 116,362 114,656
Retained earnings 143,060 126,038 111,162
Unrealized gain (loss) on securities available
for sale 6,145 (2,578) 242
---------- ---------- ----------
Total Shareholders' Equity 321,660 295,437 281,366
---------- ---------- ----------
Total Liabilities and
Shareholders' Equity $4,004,742 $3,793,720 $3,575,283
========== ========== ==========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Changes in Shareholders' Equity
Cullen/Frost Bankers, Inc. and Subsidiaries
(dollars in thousands)
Unrealized
Gain (Loss)
on Securities
Common Retained Available
Stock Surplus Earnings for Sale Total
------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 $55,046 $113,385 $95,978 $ 9,124 $273,533
Net income for the year ended
December 31, 1994 37,423 37,423
Proceeds from employee stock
purchase plan and options 537 2,553 (29) 3,061
Tax benefit related to exercise
of stock options 256 256
Loan payments from employee stock
ownership plan 170 170
Issuance of restricted stock 32 168 200
Restricted stock plan deferred
compensation expense, net (89) (89)
Unrealized gain on securities
available for sale, net of tax (11,702) (11,702)
Cash dividend (7,415) (7,415)
------- -------- ------- --------- --------
Balance at December 31, 1994 55,615 116,362 126,038 (2,578) 295,437
Net income for the six months ended
June 30, 1995 21,862 21,862
Proceeds from employee stock purchase
plan and options 129 146 275
Tax benefit related to exercise
of stock options 203 203
Restricted stock plan deferred
compensation expense 60 60
Adjustment to unrealized gain (loss)
on securities available for
sale, net of tax 8,723 8,723
Cash dividend (4,900) (4,900)
------- -------- -------- -------- --------
Balance at June 30, 1995 $55,744 $116,711 $143,060 $ 6,145 $321,660
======= ======== ======== ======== ========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Cullen/Frost Bankers, Inc. and Subsidiaries
(dollars in thousands)
Six Months Ended
June 30
------------------
1995 1994
------- -------
<S> <C> <C>
Operating Activities
Net income $ 21,862 $ 18,340
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses 3,272 ---
Provision for real estate losses 500 ---
Credit for deferred taxes 23 1,074
Accretion of discounts on loans (946) (2,995)
Accretion of securities' discounts (8,240) (4,614)
Amortization of securities' premiums 1,047 2,056
Net (gain) loss on securities transactions (93) 440
Net gain on sale of assets (2,334) (1,556)
Depreciation and amortization 8,961 9,118
Increase in interest receivable (1,889) (1,303)
Increase (decrease) in interest payable 1,886 (210)
Restructuring accrual (52) (741)
Net change in other assets and liabilities 34,711 3,382
--------- --------
Net cash provided by operating activities 58,708 22,991
Investing Activities
Proceeds from sales of securities held to maturity --- ---
Proceeds from maturities of securities held to maturity 47,619 85,592
Purchases of securities held to maturity (833) (208,459)
Proceeds from sales of securities available for sale 28,309 10,567
Proceeds from maturities of securities available for sale 292,471 154,378
Purchases of securities available for sale (289,466) (151,420)
Net increase in loans (137,441) (80,202)
Net increase in bank premises and equipment (2,255) (8,068)
Proceeds from sales of repossessed properties 938 890
Net cash and cash equivalents (paid) received from
bank acquisitions/exchange (22,010) 2,599
--------- --------
Net cash used by investing activities (82,668) (194,123)
Financing Activities
Net decrease in demand deposits,
IOC accounts, and savings accounts (60,975) (61,831)
Net increase (decrease) in certificates of deposits 75,820 (8,333)
Net increase (decrease) in short-term borrowings (30,038) 5,528
Proceeds from employee stock purchase
plan and options 275 1,352
Dividends paid (4,900) (3,310)
--------- --------
Net cash used by financing activities ( 19,818) (66,594)
--------- --------
Decrease in cash and cash equivalents ( 43,778) (237,726)
Cash and cash equivalents at beginning of year 533,354 584,961
--------- --------
Cash and cash equivalents at the end
of the period $489,576 $347,235
========= ========
Supplemental information:
Interest paid $ 47,454 $ 31,181
Loans originated to facilitate the sale
of repossessed properties 351 800
See notes to consolidated financial statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
Cullen/Frost Bankers, Inc. and Subsidiaries
(tables in thousands)
Basis of Presentation
The consolidated financial statements include the accounts of the
Corporation and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. The
consolidated financial statements have not been audited by independent
accountants, but in the opinion of management, reflect all adjustments
necessary for a fair presentation of the financial position and results of
operations. All such adjustments were of a normal and recurring nature. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Corporation's annual report on Form 10-K for
the year ended December 31, 1994. The balance sheet at December 31, 1994 has
been derived from the audited financial statements at that date but does not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
Allowance for Possible Loan Losses
An analysis of the transactions in the allowance for possible loan losses
is presented below. The amount charged to operating expense is a reflection
of management's assessment of the adequacy of the allowance.
<TABLE>
<CAPTION>
Six Months Ended
June 30
--------------------
(in thousands) 1995 1994
-----------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of the period $25,741 $26,298
Provision for possible loan losses 3,272 ---
Changes related to disposition of bank subsidiary --- (2,684)
Net charge-offs:
Losses charged to the allowance (2,522) (1,604)
Recoveries 2,395 3,637
------- -------
Net (charge-offs) recoveries (127) 2,033
------- -------
Balance at the end of period $28,886 $25,647
======= =======
</TABLE>
The Corporation adopted Statement of Financial Accounting Standards No.
114("SFAS 114"), "Accounting by Creditors for Impairment of a Loan," as
amended by Statement of Financial Accounting Standards No. 118, "Accounting by
Creditors for Impairment of a Loan -- Income Recognition and Disclosure"
("SFAS 118"), effective January 1, 1995. In accordance with SFAS 114 and 118,
a loan is classified as in-substance foreclosure when the Corporation has
taken possession of the collateral regardless of whether formal foreclosure
proceedings take place. In accordance with SFAS 114 and 118, loans previously
classified as in-substance foreclosure but for which the Corporation had not
taken possession of the collateral were reclassified to loans. This
reclassification did not materially impact the Company's financial condition
or results of operations.
A loan is considered to be impaired when, based upon current information
and events, it is probable that the Corporation will be unable to collect all
amounts due according to the contractual terms of the loan. Impairment is
primarily measured based on the present value of the cash flows or the fair
value of the collateral for those loans that are collateral dependent. SFAS
114 and 118 does not apply to large groups of smaller balance homogeneous
loans that are collectively evaluated for impairment. Interest payments on
impaired loans are typically applied to principal unless collectability of the
principal amount is fully assured, in which case interest is recognized on the
cash basis.
<PAGE>
Earnings Per Common Share
Earnings per common share calculations for the six months ended June 30,
1995 and June 30, 1994 include the effect of common stock equivalents
applicable to stock option contracts.
The weighted average number of shares used to compute primary per common
share earnings, including the common stock equivalents where applicable, were
11,287,085, and 11,200,403 for the six months ended June 30, 1995, and 1994,
respectively and were 11,312,004 and 11,216,039 for the three months ended
June 30,1995, and 1994, respectively.
The weighted average number of shares used to compute fully diluted per
common share earnings, including the common stock equivalents where
applicable, were 11,325,517, and 11,200,403 for the six months ended June 30,
1995, and 1994, respectively and were 11,327,069 and 11,216,039 for the three
months ended June 30,1995, and 1994, respectively.
Income Taxes
The tax expense for the second quarter of 1995 was $6,167,000. This
amount consisted of current tax expense of $6,417,000 and deferred tax benefit
of $250,000. Year-to-date tax expense is $11,887,000, consisting of current
tax expense of $11,864,000 and deferred tax expense of $23,000. Net deferred
tax assets were $11,794,000 with no valuation allowance. The deferred tax
assets were supported by taxes paid in prior years and the future reversal of
existing taxable temporary differences. The tax expense for the second
quarter of 1994 was $4,961,000. Income tax payments for the first six months
of 1995 and 1994 were $10,174,000 and $7,746,000, respectively.
Acquisitions
On April 4, 1995, the Corporation acquired Valley Bancshares, Inc.,
including its subsidiary, Valley National Bank in McAllen, Texas with $49
million in deposits. On May 19, 1995, the Corporation acquired National
Commerce Bank in Houston, Texas with $101 million in deposits. In addition,
on July 21, 1995 the Corporation acquired the two San Antonio branches of
Comerica Bank Texas, with $34 million in deposits.
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Review
Cullen/Frost Bankers, Inc. and Subsidiaries
(taxable-equivalent basis - tables in thousands)
Results of Operations
Cullen/Frost Bankers, Inc. reported net income of $11,223,000 or $.99 per
common share for the quarter ended June 30, 1995 compared to $9,242,000 or
$.82 per common share for the second quarter of 1994 and net income of
$10,639,000 or $.94 per common share for the first quarter of 1995. Net
income for the six months ended June 30, 1995 was $21,862,000 or $1.94 per
common share compared to $18,340,000 or $1.64 per common share for the same
period of 1994.
On April 4, 1995, the Corporation completed the acquisition of Valley
Bancshares, Inc., including its subsidiary, Valley National Bank in McAllen,
Texas ("Valley") with $49 million in deposits. On May 19, 1995, the
acquisition of National Commerce Bank in Houston ("NCB") with its three branch
locations and $101 million in deposits was completed. These acquisitions were
accounted for as purchase transactions, and as such, the results of operations
are included in the financial information that follows from the date of
acquisition. The acquisitions did not have a material impact on the second
quarter results of operations and are not expected to have a material impact
on the Corporation's 1995 operating results. In addition, on July 21, 1995
the Corporation acquired the two San Antonio branches of Comerica Bank Texas
with approximately $34 million in deposits. This acquisition is also not
expected to have a material impact on the Corporation's 1995 operating
results.
The results of operations are included in the material that follows.
Certain balances have been reclassified as a result of the adoption of
Statement of Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan" ("SFAS 114"), as amended by Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors for Impairment of a
Loan--Income Recognition and Disclosure" ("SFAS 118"), effective January 1,
1995. The adoption of these standards did not have a material impact on the
Corporation's financial position or results of operations. Other
reclassifications have been made to make prior quarters comparable. All
balance sheet figures are presented in averages unless otherwise noted.
<PAGE>
<TABLE>
<CAPTION>
Summary of Operations
----------------------------------------------
Three Months Ended
Six Months Ended --------------------------
June 30 1995 1994
------------------ ------------------ ------
1995 1994 June 30 March 31 June 30
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Taxable-equivalent net
interest income $73,931 $67,103 $37,540 $36,390 $33,999
Taxable-equivalent adjustment 368 297 189 178 141
------- ------- ------- ------- -------
Net interest income 73,563 66,806 37,351 36,212 33,858
Provision for possible
loan losses 3,272 --- 2,772 500 ---
Non-Interest income:
Net gain (loss) on securities
transactions 93 (440) --- 93 (446)
Other 43,067 38,727 22,743 20,324 19,397
------- ------- ------- ------- -------
Total non-interest income 43,160 38,287 22,743 20,417 18,951
Non-Interest expense:
Restructuring costs 400 --- --- 400 ---
Provision for real estate losses 500 --- --- 500 ---
Other 78,802 77,026 39,932 38,870 38,606
------- ------- ------- ------- -------
Total non-interest expense 79,702 77,026 39,932 39,770 38,606
------- ------- ------- ------- -------
Income before income taxes 33,749 28,067 17,390 16,359 14,203
Income Taxes 11,887 9,727 6,167 5,720 4,961
------- ------- ------- ------- -------
Net Income $21,862 $18,340 $11,223 $10,639 $ 9,242
======= ======= ======= ======= =======
Net Income per common share $ 1.94 $ 1.64 $ .99 $ .94 $ .82
Return on Average Assets 1.16% 1.02% 1.16% 1.15% 1.01%
Return on Average Equity 14.07 13.16 14.06 14.09 13.14
</TABLE>
Net Interest Income
The increase in net interest income from the first quarter of 1995 and
the second quarter of 1994 reflects increased loan volumes. The net interest
margin was 4.52 percent for the second quarter of 1995 compared to 4.58
percent and 4.38 percent for the first quarter of 1995 and second quarter of
1994, respectively. Net interest spread of 3.72 percent decreased 13 basis
points from the first quarter of 1995 and second quarter of 1994. The net
interest spread decreased primarily because of higher deposit costs.
<PAGE>
<TABLE>
<CAPTION>
Change in Net Interest Income
----------------------------------------------------------------
Second Quarter Second Quarter Year-to-Date
1995 1995 1995
vs. vs. vs.
Second Quarter First Quarter Year-to-Date
1994 1995 1994
----------------------------------------------------------------
Percentage of Percentage of Percentage of
Amount Total Change Amount Total Change Amount Total Change
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Due to volume $3,411 96.33% $1,621 77.49% $5,524 80.90%
Due to interest rate
spread 130 3.67 (471) 22.51 1,304 19.10
------- ------- ------- ------- ------- -------
$3,541 100.00% $1,150 100.00% $6,828 100.00%
======= ======= ====== ======= ======= =======
</TABLE>
Non-Interest Income
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30 ------------------------------
------------------ 1995 1994
-------------------- -------
Non-Interest Income 1995 1994 June 30 March 31 June 30
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Trust department $16,121 $14,396 $ 8,070 $ 8,051 $ 7,114
Service charges on deposit accounts 14,538 13,736 7,484 7,054 6,927
Other service charges, collection
and exchange charges, commissions
and fees 5,196 4,518 2,840 2,356 2,354
Net gain (loss) on securities
transactions 93 (440) --- 93 (446)
Other 7,212 6,077 4,349 2,863 3,002
------- ------- -------- ------- -------
Total $43,160 $38,287 $22,743 $20,417 $18,951
======= ======= ======== ======= =======
For the second quarter 1995...
Total non-interest income was up $2.3 million or 11.4 percent compared to
the first quarter of 1995 and increased $3.8 million or 20.0 percent from the
second quarter of 1994.
Trust fee income was unchanged compared to last quarter and up 13.4
percent from the second quarter of 1994. The increase from the second quarter
of 1994 can be attributed to improved financial market conditions and a higher
fee structure.
Service charges on deposit accounts increased 6.1 percent from the first
quarter of this year and 8.0 percent from the second quarter of 1994. The
majority of the increase from the first quarter is due to higher volumes and,
to a lesser extent, certain repricing of services. Most of the increase from
the second quarter last year results from increased account activity. Service
charges from acquisitions represent approximately one third of the increase
from the first quarter and one fourth of the increase compared to the same
quarter one year ago. Other service charges were up approximately 21 percent,
compared to both the first quarter of 1995 and the second quarter of 1994
primarily due to bankcard discounts and higher loan prepayment penalty fees.
Other non-interest income increased $1.5 million or 51.9 percent from the
first quarter of this year and increased $1.3 million or 44.9 percent compared
to the second quarter of 1994. During the second quarter of 1995, Frost Bank
transferred its municipal bond administration business to The Bank of New
York. Most of the increase in other non-interest income is due to the gain
recognized on the transfer.
<PAGE>
For the six months ended June 30, 1995...
Non-interest income rose $4.9 million or 12.7 percent compared to the
same period last year. Trust income increased $1.7 million due to improved
financial market conditions and a higher fee structure that was not in effect
last year. Service charges on deposit accounts and other service charges and
fees increased $1.5 million compared to the same period one year ago. The
increase is mainly due to higher volumes and certain repricing of services,
bankcard discounts, and loan fees. Other income is up $1.1 million compared
to the same period last year primarily as a result of the gain recognized on
the transfer of Frost Bank's municipal bond administration business to The
Bank of New York.
Non-Interest Expense
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
Six Months Ended ------------------------------
June 30 1995 1994
------------------ -------------------- -------
Non-Interest Expense 1995 1994 June 30 March 31 June 30
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Salaries and wages $27,932 $26,406 $14,395 $13,537 $13,391
Pension and other employee benefits 5,177 5,957 2,371 2,806 2,888
Net occupancy of banking premises 8,906 7,890 4,323 4,583 3,860
Furniture and equipment 5,110 5,100 2,550 2,560 2,528
Restructuring costs 400 --- --- 400 ---
Other 31,677 31,673 16,293 15,384 15,939
------- ------- ------- ------- -------
79,202 77,026 39,932 39,270 38,606
Provision for real estate losses 500 --- --- 500 ---
------- ------- ------- ------- -------
Total $79,702 $77,026 $39,932 $39,770 $38,606
======= ======= ======= ======= =======
</TABLE>
For the second quarter 1995...
Excluding restructuring costs and the provision for real estate losses,
non-interest expense was up $1.1 million or 2.7 percent compared to last
quarter and increased $1.3 million or 3.4 percent compared to the second
quarter of 1994. Excluding the additional costs resulting from the second
quarter acquisitions, non-interest expense remained flat compared to last
quarter and the second quarter of 1994.
Salaries and wages increased 6.3 percent from the first quarter of 1995
and 7.5 percent from the second quarter of 1994. Most of the increase from
the first quarter is due to the recent acquisitions, while the increase from
the second quarter of 1994 is primarily due to those acquisitions and the
Creekwood acquisition which occurred in the fourth quarter of 1994. Pension
and employee benefits decreased 15.5 percent compared to last quarter and 17.9
percent compared to the second quarter of 1994 mostly because of a refund on
workers' compensation insurance. Lower medical insurance expense also
accounts for a portion of the decrease from the second quarter of 1994.
Net occupancy of banking premises expense decreased 5.7 percent from the
first quarter of 1995 and increased 12 percent from the second quarter of
1994. The increase from the second quarter of 1994 primarily results from
higher property taxes.
Furniture and equipment expense remained constant.
Excluding restructuring costs and the provision for real estate losses,
other non-interest expenses increased 5.9 percent from the first quarter of
1995 and 2.2 percent from the second quarter of 1994. Costs associated with
the acquisitions were responsible for the majority of the increase from the
first quarter. The remainder of the increase was primarily due to a lawsuit
settlement.
For the six months ended June 30, 1995
Excluding restructuring costs and the provision for real estate losses,
total non-interest expense was up $1.8 million or 2.3 percent compared to the
same period one year ago. Salaries and wages were up $1.5 million or 5.8
percent compared to the same period one year ago primarily because of the
acquisitions. Pension and other benefits decreased 13.1 percent from the same
period last year due to lower medical insurance expense and a refund on
workers' compensation insurance. Net occupancy of banking premises increased
$1 million primarily due to higher property tax and building maintenance
expense, while furniture and equipment expense remained unchanged. Other non-
interest expenses also remained virtually unchanged. Included in the year-to-
date 1995 other expenses are cost associated with acquisitions. Excluding
these amounts, other expenses decreased slightly from the same period last
year. Also included in year-to-date 1995 non-interest expenses are a $400
thousand restructuring charge related to market valuation of bank premises
available for sale and a $500 thousand provision for foreclosed real estate
losses.
<PAGE>
Income Taxes
Tax expense for the second quarter of 1995 was $6,167,000. This compares
to tax expense of $4,961,000 for the second quarter of 1994. The Corporation
has an effective tax rate for 1995 and 1994 which approximates the statutory
rate of 35 percent.
Balance Sheet
Average assets of $3,892,867,000 increased 4.0 percent and 6.3 percent
from the first quarter of 1995 and the second quarter of 1994, respectively.
Excluding the effects of the acquisition, average assets increased 2.6 percent
and 4.9 percent from the first quarter of 1995 and the second quarter of 1994,
respectively. Total deposits averaged $3,207,731,000 for the current quarter,
up 5.5 percent from the previous quarter and up 2.6 percent when compared to
the second quarter of 1994. Excluding the effects of the acquisitions,
deposits were up 4.0 percent from the first quarter of 1995 and up 1.2 percent
when compared to a year ago.
Loans
<TABLE>
<CAPTION>
1995 1994
--------------------- -----------------------
Loan Portfolio Percentage
Period-End Balances June 30 of Total December 31 June 30
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial $ 495,087 28.4% $ 375,085 $ 323,246
Consumer 362,574 20.8 331,039 294,344
Real estate 823,212 47.2 714,518 665,576
Other 64,172 3.7 66,138 56,676
Unearned discount (2,401) (.1) (3,487) (5,454)
---------- ------ ---------- ----------
Total Loans $1,742,644 100.0% $1,483,293 $1,334,388
========== ====== ========== ==========
</TABLE>
Average loans for the second quarter of 1995 were $1,671,840,000. This
represents an increase of 9.4 percent from the first quarter of 1995 and an
increase of 27.2 percent from the second quarter of last year. Most of the
increase from the first quarter is attributable to real estate and commercial
loans which increased $109 million and $62 million, respectively. In the
second quarter, the acquisitions added approximately $123 million to total
loans, accounting for approximately 78 percent and 56 percent of the increase
in real estate loans and commercial loans, respectively, compared to the first
quarter. Excluding the acquisitions, the Corporation continued its loan
growth which is reflective of the improved economic conditions in the Texas
markets served. Approximately one third of the increase in loans from a year
ago resulted from the recent acquisitions and the December 2, 1994,
acquisition of Creekwood Capital Corporation ("Creekwood") which added
approximately $23 million in commercial loans.
Real Estate Loans
Of the total real estate loans outstanding at June 30, 1995, 64 percent
were located in San Antonio, 21 percent in Houston/Galveston, 7 percent in
Austin, 5 percent in Corpus Christi and 3 percent in McAllen. Residential
permanent mortgage loans at June 30, 1995 were $326,214,000 compared to
$281,052,000 at March 31, 1995 and $271,656,000 at June 30, 1995. Real estate
loans classified as "other" are essentially amortizing commercial and
industrial loans with maturities of less than five years secured by real
property.
<PAGE>
<TABLE>
<CAPTION>
1995 1994
--------------------- --------
Real Estate Loans Percentage
Period-End Balances June 30 of Total June 30
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Construction $ 53,336 6.5% $ 37,814
Land 39,939 4.9 41,676
Permanent mortgages:
Commercial 201,048 24.4 154,545
Residential 326,213 39.6 271,656
Other 202,676 24.6 159,885
-------- ------ --------
$823,212 100.0% $665,576
======== ====== ========
Non-accrual and restructured $ 14,135 1.7% $ 20,780
</TABLE>
As part of the acquisition of New First City-Austin in 1993, certain
commercial and commercial real estate loans of that bank were protected by a
loss-sharing arrangement with the Federal Deposit Insurance Corporation
("FDIC") whereby losses were shared 80 percent to the FDIC and 20 percent to
the Corporation. At June 30, 1995, these loans approximated $18 million.
At June 30, 1995, real estate loans 90 days past due (excluding non-
accrual and restructured loans) were $5,179,000, compared with $2,729,000 at
June 30, 1994, and $1,137,000 at March 31, 1995.
Mexico
The Corporation's cross border outstandings to Mexico, excluding
$15,111,000 in loans secured by assets held in the United States, totaled
$25,232,000 at June 30, 1995 or 1.5 percent of total loans. The peso
devaluation will continue to lower the demand for trade-related cross-border
loans, except for those Mexican companies dealing in export trade. All of the
Corporation's Mexican loans are either secured by liquid U.S. assets or are
loaned to financial institutions to finance international trade transactions.
Of the trade-related credits, approximately 55 percent are related to companies
exporting from Mexico. As of June 30, 1995, none of the Mexican related loans
were on non-performing status.
<TABLE>
<CAPTION>
MEXICAN LOANS
----------------------------------------
June 30, 1995 Amount Percentage of Total Loans
----------------------------------------------------------------------------------------
<S> <C> <C>
Loans to financial institutions $25,214 1.5%
Loans to private firms or individuals 18
------- ----
$25,232 1.5%
======= ====
</TABLE>
Non-Performing Assets
<TABLE>
<CAPTION>
NON-PERFORMING ASSETS
--------------------------
Real
June 30, 1995 Estate Other Total
---------------------------------------------------------------------------
<S> <C> <C> <C>
Non-accrual and restructured loans $12,951 $1,184 $14,135
Foreclosed assets 2,984 649 3,633
------- ------ -------
Total $15,935 $1,833 $17,768
======== ====== =======
As a percentage of total
non-performing assets 89.7% 10.3% 100.0%
</TABLE>
<PAGE>
Non-performing assets totaled $17,768,000 at June 30, 1995 down 29.6
percent from $25,254,000 at June 30, 1994 and up 5.2 percent from $16,888,000
at March 31, 1995. The increase from the previous quarter was related to the
second quarter acquisitions. Non-performing assets as a percentage of total
loans and foreclosed assets decreased to 1.02 percent at June 30, 1995 from
1.89 percent one year ago. As a part of the acquisition of New First City,
certain commercial and commercial real estate loans were protected by a loss-
sharing arrangement with the FDIC (See "Loans"). At June 30, 1995, non-
performing assets covered by the loss-sharing arrangement totaled $1,532,000.
These assets were included in total non-performing assets at $229,000 which
represents the carrying value net of loss-sharing coverage and associated
discounts.
Foreclosed assets consist of property which has been formally
repossessed. Foreclosed assets are valued at the lower of the loan balance or
estimated fair value, less estimated selling costs, at the time of
foreclosure. Write-downs occurring at acquisition are charged against the
allowance for possible loan losses. On an ongoing basis, properties are
appraised as required by market indications and applicable regulations.
Write-downs are provided for subsequent declines in value. Expenses related
to maintaining foreclosed properties are included in other non-interest
expense.
The after-tax impact (assuming a 35 percent marginal tax rate) of lost
interest from non-performing assets was $287,000 or $.03 per common share for
the second quarter of 1995, compared to approximately $396,000 or $.04 per
common share for the second quarter of 1994 and $296,000 or $.03 per common
share for the first quarter of 1995. For the six months ended June 30, 1995,
the after-tax impact (assuming a 35 percent marginal tax rate) was
approximately $584,000 or $.05 per common share, compared with approximately
$778,000 or $.07 per common share for the comparable period last year. Total
loans 90 days past due (excluding non-accrual and restructured loans) were
$6,440,000 at June 30, 1995, compared to $4,310,000 at June 30, 1994, and
$3,266,000 at March 31, 1995.
Allowance for Possible Loan Losses
The allowance for possible loan losses was $28,886,000 or 1.66 percent of
period-end loans at June 30, 1995, compared to $25,647,000 or 1.92 percent at
June 30, 1994 and $26,885,000 or 1.74 percent at March 31, 1995. The
allowance for possible loan losses as a percentage of non-accrual and
restructured loans was 204.4 percent at June 30, 1995, compared to 114.8
percent at June 30, 1994 and 185.6 percent at the end of the first quarter of
1995.
The Corporation recorded a $2,772,000 provision for possible loan losses
during the second quarter of 1995. This compares to $500,000 for the previous
quarter and no provision for possible loan losses recorded during 1994. The
provision is reflective of the continued growth in the loan portfolio and
charge-offs recorded during the quarter. Net charge-offs in the second quarter
of 1995 totaled $771,000, compared to net recoveries of $779,000 for the second
quarter of 1994 and $644,000 for the first quarter of 1995.
<TABLE>
<CAPTION>
NET CHARGE-OFFS (RECOVERIES)
------------------------------------
1995 1994
---------------------------- -------
Second Percentage First Second
Quarter of Total Quarter Quarter
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Real Estate $ (227) (29.5)% $ (671) $ (335)
Commercial and industrial (129) (16.7) (347) (528)
Consumer 1,127 146.2 412 89
Other, including foreign --- --- (38) (5)
---------- ------ ------- ------
$ 771 100.0% $ (644) $ (779)
========== ====== ======= =======
Provision for possible loan losses $ 2,772 $ 500 $ ---
Allowance for possible loan losses 28,886 26,885 25,647
</TABLE>
<PAGE>
Capital and Liquidity
At June 30, 1995, shareholders' equity was $321,660,000 compared to
$281,366,000 at June 30, 1994 and $309,939,000 at March 31, 1995. The
Corporation paid a cash dividend of $.22 per common share in the second and
first quarters of 1995 compared to $.15 per common share for the second
quarter a year ago. This equates to a dividend payout ratio of 21.8 percent,
23.0 percent and 17.9 percent for the second and first quarters of 1995 and
the second quarter of 1994, respectively. On July 25, 1995, the Corporation
increased its quarterly cash dividend by 59 percent to $.35 per common share
payable in the third quarter of 1995.
The Federal Reserve Board (the "Board") utilizes capital guidelines
designed to measure Tier 1 and Total Capital on a risk adjusted basis taking
into consideration the risk inherent in both on-balance sheet and off-balance
sheet items.
The following summarizes Risked-Based Capital information for the
Corporation at June 30, 1995 and June 30, 1994.
<TABLE>
<CAPTION>
June 30, 1995 June 30, 1994
------------------- -------------------
Risk-Based Capital Amount Ratio Amount Ratio
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tier 1 Capital $ 260,589 12.79% $ 237,983 14.22%
Tier 1 Capital Minimum requirement 81,518 4.00 66,940 4.00
Total Capital $ 286,105 14.04% $ 258,960 15.48%
Total Capital Minimum requirement 163,037 8.00 133,881 8.00
Risk-adjusted assets, net of goodwill $2,037,960 $1,673,412
Leverage ratio 6.80% 6.59%
Average equity as a percentage
of average assets 8.21 7.72
</TABLE>
The Board guidelines also require a leverage capital ratio which measures
Tier 1 Capital against quarterly average total assets, net of certain
intangibles. A leverage ratio of 3.0 percent is the minimum requirement for
only the most highly rated banking organizations and most other banking
organizations are expected to maintain a leverage ratio of at least four to
five percent. The leverage ratio for the Corporation was 6.80 percent and
6.59 percent at June 30, 1995 and June 31, 1994, respectively.
In December of 1991, the FDIC Improvement Act of 1991 ("FDICIA")
established five capital tiers. Federal banking agencies adopted final rules
effective December 16, 1992 relating to these tiers. At June 30, 1995, both
of the Corporation's subsidiary banks were considered "well capitalized" as
defined by FDICIA, the highest regulatory category. A financial institution
is deemed to be well capitalized if the institution has a total risk-based
capital ratio of 10.0 percent or greater, a Tier 1 risk-based capital ratio of
6.0 percent or greater, and a leverage ratio of 5.0 percent or greater, and
the institution is not subject to an order, written agreement, capital
directive or prompt corrective action directive to meet and maintain a
specific level for any capital measure.
Funding sources available at the holding company level include a
$7,500,000 short-term line of credit. There were no borrowings outstanding
from this source at June 30, 1995.
Asset liquidity is provided by cash and assets which are readily
marketable or which will mature in the near future. These include cash, time
deposits in banks, securities available for sale, maturities and cash flow
from securities held to maturity, and Federal funds sold and securities
purchased under resale agreements. Liability liquidity is provided by access
to funding sources, principally core deposits and Federal funds purchased.
Additional sources of liability liquidity include brokered deposits and
securities sold under agreement to repurchase. The liquidity position of the
Corporation is continuously monitored and adjustments are made to the balance
between sources and uses of funds as deemed appropriate.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Average Balance Sheets and Interest Income Analysis-Year-to-Date
Cullen/Frost Bankers, Inc. and Subsidiaries
(dollars in thousands - taxable-equivalent basis*)
June 30, 1995 June 30, 1994
------------------------ --------------------------
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Cost Balance Expense Cost
-------- ------- ------ -------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Time deposits $ 18 $ --- 2.34% $ 106 $ 2 3.40%
Securities:
U.S. Treasury 225,884 6,735 6.01 273,132 5,924 4.37
U.S. Government agencies
and corporations 1,312,433 41,710 6.36 1,346,406 39,258 5.83
States and political subdivisions 6,107 278 9.10 6,178 293 9.49
Other 12,471 407 6.52 33,439 857 5.17
--------- ------- ---------- -------
Total securities 1,556,895 49,130 6.32 1,659,155 46,332 5.59
Federal funds sold and securities
purchased under resale agreements 108,035 3,121 5.75 154,320 2,539 3.27
Loans, net of unearned discount 1,600,150 71,020 8.95 1,295,634 49,202 7.71
--------- ------- ---------- -------
Total Earning Assets and
Average Rate Earned 3,265,098 123,271 7.59 3,109,215 98,075 6.36
Cash and due from banks 351,487 339,626
Allowance for possible loan losses (26,531) (26,528)
Banking premises and equipment 89,901 88,548
Accrued interest and other assets 136,109 130,984
--------- ----------
Total Assets $3,816,064 $3,641,845
========== ==========
LIABILITIES
Demand deposits:
Commercial and individual $ 680,222 $ 662,957
Correspondent banks 119,851 133,488
Public funds 34,296 38,499
--------- ---------
Total demand deposits 834,369 834,944
Time deposits:
Savings and Interest-on-Checking 730,580 7,023 1.94 818,649 7,274 1.79
Money market deposit accounts 562,068 10,465 3.75 531,821 6,750 2.56
Time accounts 913,472 21,827 4.82 860,408 13,264 3.11
Public funds 83,580 1,693 4.08 83,404 1,051 2.54
--------- ------- --------- -------
Total Time deposits 2,289,700 41,008 3.61 2,294,282 28,339 2.49
--------- ---------
Total Deposits 3,124,069 3,129,226
Federal funds purchased and securities
sold under resale agreements 313,058 8,225 5.23 174,496 2,633 3.00
Long-term notes payable --- --- --- --- --- ---
Other borrowings 3,975 107 5.44 --- --- ---
--------- ------- ---------- -------
Total Interest-Bearing Funds
and Average Rate Paid 2,606,733 49,340 3.81 2,468,778 30,972 2.53
--------- ------- ---- ---------- ------- ----
Accrued interest and other liabilities 61,700 57,031
--------- ----------
Total Liabilities 3,502,802 3,360,753
SHAREHOLDERS' EQUITY 313,262 281,092
--------- ----------
Total Liabilities and
Shareholders' Equity $3,816,064 $3,641,845
========== ==========
Net interest income $73,931 $67,103
======= =======
Net interest spread 3.78% 3.83%
===== =====
Net interest income to total average earning assets 4.55% 4.34%
Net interest income to total average earning ===== =====
assets - with federal funds net 4.61% 4.57%
===== =====
*Taxable-equivalent basis assuming a 35% tax rate.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Average Balance Sheets and Interest Income Analysis-By Quarter
Cullen/Frost Bankers, Inc. and Subsidiaries
(dollars in thousands - taxable-equivalent basis*)
June 30, 1995 March 31, 1995
-----------------------------------------------------
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Cost Balance Expense Cost
-------- ------- ----- -------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Time deposits $ 21 $ --- 3.81% $ 15 $ --- 3.77%
Securities:
U.S. Treasury 227,406 3,489 6.15 224,345 3,246 5.87
U.S. Government agencies
and corporations 1,307,456 20,917 6.40 1,317,465 20,793 6.31
States and political subdivisions 6,551 144 8.77 5,659 134 9.48
Other 7,238 115 6.37 17,763 292 6.65
--------- ------- --------- -------
Total securities 1,548,651 24,665 6.37 1,565,232 24,465 6.26
Federal funds sold and securities
purchased under resale agreements 111,611 1,628 5.77 104,418 1,493 5.72
Loans, net of unearned discount 1,671,840 37,811 9.07 1,527,663 33,208 8.82
--------- ------- --------- -------
Total Earning Assets and
Average Rate Earned 3,332,123 64,104 7.71 3,197,328 59,166 7.47
Cash and due from banks 359,029 343,861
Allowance for possible loan losses (27,176) (25,880)
Banking premises and equipment 91,634 88,149
Accrued interest and other assets 137,257 139,338
--------- ---------
Total Assets $3,892,867 $3,742,796
========== ==========
LIABILITIES
Demand deposits:
Commercial and individual $ 685,220 $ 675,170
Correspondent banks 121,666 118,016
Public funds 32,193 36,423
---------- ----------
Total demand deposits 839,079 829,609
Time deposits:
Savings and Interest-on-Checking 727,039 3,562 1.97 734,161 3,461 1.91
Money market deposit accounts 564,081 5,408 3.85 560,032 5,057 3.66
Time accounts 992,628 12,737 5.15 833,435 9,090 4.42
Public funds 84,904 916 4.33 82,242 777 3.83
---------- ------- ---------- -------
Total time deposits 2,368,652 22,623 3.83 2,209,870 18,385 3.37
---------- ------- ---------- -------
Total Deposits 3,207,731 3,039,479
Federal funds purchased and securities
sold under resale agreements 290,927 3,834 5.21 335,436 4,391 5.24
Long term notes payable --- --- --- --- --- ---
Other borrowings 7,906 107 5.44
Total Interest-Bearing Funds
and Average Rate Paid 2,667,485 26,564 3.99 2,545,306 22,776 3.62
---------- ------- ----- ---------- ------- -----
Accrued interest and other liabilities 66,070 61,667
---------- ----------
Total Liabilities 3,572,634 3,436,582
SHAREHOLDERS' EQUITY 320,233 306,214
---------- ----------
Total Liabilities and
Shareholders' Equity $3,892,867 $3,742,796
========== ==========
Net interest income $37,540 $36,390
======= =======
Net interest spread 3.72% 3.85%
==== ====
Net interest income to total average earning assets 4.52% 4.58%
==== ====
Net interest income to total average earning
assets- with federal funds net 4.67% 4.74%
==== ====
*Taxable-equivalent basis assuming a 35% tax rate.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Average Balance Sheets and Interest Income Analysis-By Quarter
Cullen/Frost Bankers, Inc. and Subsidiaries
(dollars in thousands - taxable-equivalent basis*)
December 31, 1994 September 30, 1994
-------------------------- -------------------------
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Cost Balance Expense Cost
--------- -------- ----- --------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Time deposits $ 17 $ --- 3.65% $ 15 $ --- 3.56%
Securities:
U.S. Treasury 263,293 3,193 4.81 284,653 3,047 4.25
U.S. Government agencies
and corporations 1,361,448 20,896 6.14 1,392,808 20,800 5.97
States and political subdivisions 5,680 134 9.47 5,689 135 9.48
Other 23,265 355 6.04 26,621 407 5.69
--------- ------ ---------- -------
Total securities 1,653,686 24,578 5.94 1,709,771 24,389 5.70
Federal funds sold and securities
purchased under resale agreements 76,802 1,101 5.61 51,091 506 3.87
Loans, net of unearned discount 1,414,415 29,570 8.29 1,351,462 27,932 8.20
--------- ------ --------- ------
Total Earning Assets and
Average Rate Earned 3,144,920 55,249 6.99 3,112,339 52,827 6.76
Cash and due from banks 353,406 333,469
Allowance for possible loan losses (25,763) (25,763)
Banking premises and equipment 89,754 90,840
Accrued interest and other assets 145,624 129,698
--------- ---------
Total Assets $3,707,941 $3,640,583
========= =========
LIABILITIES
Demand deposits:
Commercial and individual $ 685,828 $ 682,961
Correspondent banks 117,378 113,604
Public funds 37,876 39,251
------- ---------
Total demand deposits 841,082 835,816
Time deposits:
Savings and Interest-on-Checking 757,568 3,556 1.86 790,578 3,595 1.80
Money market deposit accounts 567,203 4,703 3.29 557,601 4,257 3.03
Time accounts 846,069 8,432 3.95 851,708 7,668 3.57
Public funds 100,608 839 3.31 77,021 608 3.13
--------- ------ --------- -------
Total Time Deposits 2,271,448 17,530 3.06 2,276,908 16,128 2.81
--------- ------ --------- -------
Total Deposits 3,112,530 3,112,724
Federal funds purchased
and other borrowings 234,678 2,793 4.66 182,217 1,739 3.73
--------- ------ --------- ------
Total Interest-Bearing Funds
and Average Rate Paid 2,506,126 20,323 3.21 2,459,125 17,867 2.88
--------- ------ ---- --------- ------- ----
Accrued interest and other liabilities 66,924 53,807
--------- ---------
Total Liabilities 3,414,132 3,348,748
SHAREHOLDERS' EQUITY 293,809 291,835
--------- ---------
Total Liabilities and
Shareholders' Equity $3,707,941 $3,640,583
========= ==========
Net interest income $34,926 $ 34,960
======= ========
Net interest spread 3.78% 3.88%
===== =====
Net interest income to total average earning assets 4.43% 4.48%
===== =====
Net interest income to total average earning
assets - with federal funds net 4.54% 4.56%
===== =====
* Taxable-equivalent basis assuming a 35% tax rate.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Average Balance Sheets and Interest Income Analysis-By Quarter
Cullen/Frost Bankers, Inc. and Subsidiaries
(dollars in thousands - taxable-equivalent basis*)
June 30, 1994
-------------------------
Interest
Average Income/ Yield/
Balance Expense Cost
--------- -------- -----
<S> <C> <C> <C>
ASSETS
Time deposits $ 51 $ 1 3.48%
Securities:
U.S. Treasury 282,892 3,112 4.41
U.S. Government agencies
and corporations 1,374,981 20,126 5.86
States and political subdivisions 5,738 135 9.43
Other 30,973 400 5.18
--------- -------
Total securities 1,694,584 23,773 5.61
Federal funds sold and securities
purchased under resale agreements 102,345 937 3.62
Loans, net of unearned discount 1,314,318 25,467 7.77
--------- ------
Total Earning Assets and
Average Rate Earned 3,111,298 50,178 6.46
Cash and due from banks 341,648
Allowance for possible loan losses (26,005)
Banking premises and equipment 89,859
Accrued interest and other assets 144,572
---------
Total Assets $3,661,372
=========
LIABILITIES
Demand deposits:
Commercial and individual $ 663,025
Correspondent banks 128,499
Public funds 38,588
---------
Total demand deposits 830,112
Time deposits:
Savings and Interest-on-Checking 825,322 3,608 1.75
Money market deposit accounts 526,783 3,500 2.67
Time accounts 864,218 6,956 3.23
Public funds 79,273 555 2.81
--------- -------
Total Time Deposits 2,295,596 14,619 2.55
--------- -------
Total Deposits 3,125,708
Federal funds purchased
and other borrowings 184,348 1,560 3.35
--------- ------
Total Interest-Bearing Funds
and Average Rate Paid 2,479,944 16,179 2.61
--------- ------- ----
Accrued interest and other liabilities 69,220
---------
Total Liabilities 3,379,276
SHAREHOLDERS' EQUITY 282,096
---------
Total Liabilities and
Shareholders' Equity $3,661,372
=========
Net interest income $33,999
=======
Net interest spread 3.85%
=====
Net interest income to total average earning assets 4.38%
=====
Net interest income to total average earning
assets - with federal funds net 4.53%
=====
* Taxable-equivalent basis assuming a 35% tax rate.
</TABLE>
<PAGE>
Part II: Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the Corporation was held on May 16,
1995. The following matters were submitted to a vote of the Corporation's
shareholders.
1. Election of Directors:
Election of all twenty-one director nominees to new one-year terms was
approved with no nominee receiving less than 9.0 million votes.
Nominee Total Votes For Total Votes Withheld
------- --------------- --------------------
Isaac Arnold, Jr. 9,053,333 713,685
Royce S. Caldwell 9,647,597 119,421
Ruben R. Cardenas 9,620,735 146,283
Henry E. Catto 9,630,384 136,634
Harry H. Cullen 9,629,537 137,481
Roy H. Cullen 9,629,537 137,481
Richard W. Evans, Jr. 9,628,346 138,672
W.N. Finnegan, III 9,658,615 108,403
Joseph H. Frost 9,111,446 655,572
T.C. Frost 9,598,999 168,019
James W. Gorman, Jr. 9,659,517 107,501
James L. Hayne 9,630,417 136,601
Harris L. Kempner, Jr. 9,630,417 136,601
Richard M. Kleberg III 9,658,967 108,051
Quincy Lee 9,618,039 148,979
Robert S. McClane 9,611,462 155,556
J. Gordon Muir, Jr. 9,629,422 137,614
William B. Osborn, Jr. 9,629,921 137,097
Robert G. Pope 9,649,835 117,183
Herman J. Richter 9,602,135 164,883
Curtis Vaughan, Jr. 9,629,227 137,791
2. Selection of Independent Auditors
Total Votes For 9,750,841
Total Votes Against 10,056
Total Abstentions 6,121
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Statement regarding Computation of Earnings per Share
(b) Reports on Form 8-K
None
<PAGE>
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 thereunto duly authorized.
Cullen/Frost Bankers, Inc.
(Registrant)
Date: August 9, 1995 By:/s/ Phillip D. Green
-----------------------
Phillip D. Green
Executive Vice President
and Treasurer
(Duly Authorized Officer and
Principal Accounting Officer)
Cullen/Frost Bankers, Inc.
Form 10-Q
Exhibit Index
Exhibit Description
------- -----------
11 Statement re: Computation of Earnings per Share
<PAGE>
Exhibit 11
<TABLE>
<CAPTION>
Cullen/Frost Bankers, Inc.
Computation of Earnings Per Common Share
Primary and Fully Diluted (Unaudited)
(in thousands, except per share amounts)
Six Months Ended Three Months Ended
June 30 June 30
-------------------- --------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Primary Earnings per Share
Net income applicable to common stock $21,862 $18,340 $11,223 $ 9,242
======= ======= ======= =======
Weighted average shares outstanding 11,135 11,032 11,141 11,044
Addition from assumed exercise of
stock options 152 168 171 172
------- ------- ------- -------
Weighted average number of common
shares outstanding 11,287 11,200 11,312 11,216
======= ======= ======= =======
Primary earnings per common share $ 1.94 $ 1.64 $ .99 $ .82
Six Months Ended Three Months Ended
June 30 June 30
-------------------- --------------------
1995 1994 1995 1994
------- ------- ------- -------
Fully Diluted Earnings per Share
Net income applicable to common stock $21,862 $18,340 $11,223 $ 9,242
======= ======= ======= =======
Weighted average shares outstanding 11,136 11,032 11,141 11,044
Addition from assumed exercise of
stock options 190 168 186 172
------- ------- ------- ------
Weighted average number of common
shares outstanding 11,326 11,200 11,327 11,216
======= ======= ======= ======
Fully diluted earnings per common share $ 1.93 $ 1.64 $ .99 $ .82
</TABLE>
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