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 September 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 October 31, 1995 there
were 11,190,225 shares of Common Stock, $5 par value, outstanding.
<PAGE>
Part I. Financial Information
<TABLE>
<CAPTION>
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Income
Cullen/Frost Bankers, Inc. and Subsidiaries
(in thousands, except per share amounts) Three Months Ended Nine Months Ended
September 30 September 30
-------------------- -------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $39,721 $27,821 $110,467 $76,823
Securities:
Taxable 24,951 24,259 73,813 70,313
Tax-exempt 84 84 258 265
------- ------- ------- -------
Total Securities 25,035 24,343 74,071 70,578
Time Deposits --- --- --- 2
Federal funds sold and securities
purchased under resale agreements 1,660 506 4,781 3,045
------- ------- ------- -------
Total Interest Income 66,416 52,670 189,319 150,448
INTEREST EXPENSE
Deposits 23,476 16,128 64,484 44,467
Federal funds purchased and securities
sold under repurchase agreements 3,506 1,739 11,731 4,372
Long-term notes payable and other borrowings 296 --- 403 ---
------- ------- ------- -------
Total Interest Expense 27,278 17,867 76,618 48,839
------- ------- ------- -------
Net Interest Income 39,138 34,803 112,701 101,609
Provision for possible loan losses 1,500 --- 4,772 ---
------- ------- ------- -------
Net Interest Income After Provision
For Possible Loan Losses 37,638 34,803 107,929 101,609
NON-INTEREST INCOME
Trust department 7,720 7,628 23,841 22,024
Service charges on deposit accounts 7,548 7,385 22,086 21,121
Other service charges, collection and
exchange charges, commissions and fees 2,900 2,483 8,096 7,001
Net gain (loss) on securities transactions --- (51) 93 (491)
Other 2,898 4,008 10,109 10,085
------- ------- ------- -------
Total Non-Interest Income 21,066 21,453 64,225 59,740
NON-INTEREST EXPENSE
Salaries and wages 15,094 13,030 43,026 39,436
Pension and other employee benefits 2,609 2,734 7,786 8,691
Net occupancy of banking premises 4,532 4,232 13,438 12,495
Furniture and equipment 2,780 2,770 7,890 7,870
Provision for real estate losses 100 --- 600 ---
Restructuring costs --- 830 400 830
Other 15,194 17,888 46,871 49,188
------- ------- ------- -------
Total Non-Interest Expense 40,309 41,484 120,011 118,510
------- ------- ------- -------
Income Before Income Taxes 18,395 14,772 52,143 42,839
Income Taxes 6,442 5,278 18,328 15,005
------- ------- ------- -------
Net Income $11,953 $ 9,494 $ 33,815 $27,834
======= ======= ======= =======
Net Income per common share:
Primary $ 1.05 $ .84 $ 2.99 $ 2.48
Fully diluted 1.05 .84 2.97 2.48
Dividends per share .35 .15 .79 .45
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
Cullen/Frost Bankers, Inc. and Subsidiaries
(dollars in thousands, except per share amounts)
September 30 December 31 September 30
1995 1994 1994
------------ ----------- ------------
<S> <C> <C> <C>
Assets
Cash and due from banks $ 365,435 $ 365,792 $ 320,819
Time deposits 11 12 12
Securities held to maturity 968,956 1,051,245 1,079,814
Securities available for sale 590,768 542,797 600,599
Federal funds sold and securities
purchased under resale agreements 105,667 167,550 82,241
Loans, net of unearned discount of $1,728 at
September 30, 1995, $3,487 at December 31, 1994
and $4,338 at September 30, 1994 1,761,272 1,483,293 1,370,476
Less: Allowance for possible loan losses (30,600) (25,741) (25,467)
---------- ---------- ----------
Net Loans 1,730,672 1,457,552 1,345,009
Banking premises and equipment 90,673 88,667 89,695
Accrued interest and other assets 150,605 120,105 125,765
---------- ---------- ----------
Total Assets $4,002,787 $3,793,720 $3,643,954
========== ========== ==========
Liabilities
Demand Deposits:
Commercial and individual $ 724,313 $ 710,138 $ 710,644
Correspondent banks 92,026 77,425 92,158
Public funds 41,511 44,740 37,782
---------- ---------- ----------
Total demand deposits 857,850 832,303 840,584
Time Deposits:
Savings and Interest-on-Checking 711,096 763,300 766,516
Money market deposit accounts 684,385 559,153 570,526
Time accounts 1,053,116 842,520 850,339
Public funds 163,250 90,686 73,934
---------- ---------- ----------
Total time deposits 2,611,847 2,255,659 2,261,315
---------- ---------- ----------
Total deposits 3,469,697 3,087,962 3,101,899
Federal funds purchased and securities
sold under repurchase agreements 119,547 370,235 199,047
Accrued interest and other liabilities 83,393 40,086 54,215
---------- ---------- ----------
Total Liabilities 3,672,637 3,498,283 3,355,161
Shareholders' Equity
Common stock, par value $5 per share 55,904 55,615 55,450
Shares authorized: 30,000,000
Shares outstanding: 11,180,822;
11,123,062; and 11,089,986
Surplus 117,912 116,362 115,519
Retained earnings 149,930 126,038 119,057
Unrealized gain (loss) on securities available
for sale, net of tax 6,404 (2,578) (1,233)
---------- ---------- ----------
Total Shareholders' Equity 330,150 295,437 288,793
---------- ---------- ----------
Total Liabilities and
Shareholders' Equity $4,002,787 $3,793,720 $3,643,954
========== ========== ==========
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 loss 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 nine months
ended September 30, 1995 33,815 33,815
Proceeds from employee stock
purchase plan and options 157 218 375
Tax benefit related to exercise
of stock options 254 254
Issuance of restricted stock 132 1,078 1,210
Restricted stock plan deferred
compensation expense, net (1,119) (1,119)
Adjustment to unrealized gain
on securities available for
sale, net of tax 8,982 8,982
Cash dividend (8,804) (8,804)
-------- -------- -------- -------- --------
Balance at September 30, 1995 $ 55,904 $117,912 $149,930 $ 6,404 $330,150
======== ======== ======== ======== ========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Cullen/Frost Bankers, Inc. and Subsidiaries
(dollars in thousands)
Nine Months Ended
September 30
------------------
1995 1994
------- -------
<S> <C> <C>
Operating Activities
Net income $ 33,815 $ 27,834
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses 4,772 ---
Provision for real estate losses 600 ---
(Provision) credit for deferred taxes (843) 2,123
Accretion of discounts on loans (1,535) (3,888)
Accretion of securities' discounts (12,796) (7,894)
Amortization of securities' premiums 1,691 2,748
Net (gain) loss on securities transactions (93) 491
Net gain on sale of assets (2,473) (1,648)
Depreciation and amortization 13,720 13,791
Increase in interest receivable (2,974) (1,525)
Increase in interest payable 1,957 439
Restructuring accrual (306) (1,067)
Net change in other assets and liabilities 23,674 10,573
--------- --------
Net cash provided by operating activities 59,209 41,977
Investing Activities
Proceeds from maturities of securities held to maturity 81,828 116,865
Purchases of securities held to maturity (833) (209,115)
Proceeds from sales of securities available for sale 28,412 10,515
Proceeds from maturities of securities available for sale 475,110 252,232
Purchases of securities available for sale (488,810) (256,168)
Net increase in loans (153,671) (119,390)
Net increase in bank premises and equipment (4,658) (10,271)
Proceeds from sales of repossessed properties 1,081 2,030
Net cash and cash equivalents received from
bank acquisitions/exchange 8,734 2,599
--------- --------
Net cash used by investing activities (52,807) (210,703)
Financing Activities
Net increase (decrease) in demand deposits,
IOC accounts, and savings accounts 75,282 (28,047)
Net increase (decrease) in certificates of deposit 122,707 (17,391)
Net increase (decrease) in short-term borrowings (259,413) 34,928
Proceeds from employee stock purchase
plan and options 1,585 2,318
Dividends paid (8,804) (4,971)
--------- --------
Net cash used by financing activities ( 68,643) (13,163)
--------- --------
Decrease in cash and cash equivalents ( 62,241) (181,889)
Cash and cash equivalents at beginning of year 533,354 584,961
--------- --------
Cash and cash equivalents at the end
of the period $471,113 $403,072
========= ========
Supplemental information:
Interest paid $ 74,661 $ 48,399
Loans originated to facilitate the sale
of repossessed properties 351 1,067
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>
Nine Months Ended
September 30
--------------------
(in thousands) 1995 1994
- -----------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of the period $25,741 $26,298
Provision for possible loan losses 4,772 ---
Changes related to disposition of bank subsidiary --- (2,684)
Net charge-offs:
Losses charged to the allowance (4,373) (3,214)
Recoveries 4,460 5,067
------- -------
Net recoveries 87 1,853
------- -------
Balance at end of the period $30,600 $25,467
======= =======
</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. At September 30, 1995, the recorded investment in
impaired loans totaled $8,009,000 of which $5,308,000 related to loans with no
valuation reserve and $2,701,000 related to loans with a valuation reserve of
$502,000. All the impaired loans were real estate loans and collectibility was
measured based on the fair value of the collateral. The average recorded
investment in the impaired loans during the three months and nine months ended
September 30, 1995, was approximately $8,734,000 and $8,595,000, respectively.
Interest payments on impaired loans are typically applied to principal unless
collectibility of the principal amount is fully assured, in which case
interest is recognized on the cash basis. The Corporation did not recognize
interest revenue on impaired loans for the three and nine months ended
September 30, 1995.
<PAGE>
SFAS 114 and SFAS 118 consider a loan 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. SFAS 114 and 118 do not apply to large groups of smaller balance
homogeneous loans that are collectively evaluated for impairment.
Earnings Per Common Share
The weighted average number of shares used to compute per common share
earnings, including common stock equivalents where applicable, were:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------ ------------------------
1995 1994 1995 1994
------------------------ ------------------------
<S> <C> <C> <C> <C>
Primary 11,364,097 11,241,686 11,316,543 11,214,416
Fully Diluted 11,373,158 11,245,899 11,369,554 11,225,500
</TABLE>
Income Taxes
Tax expense for the third quarter of 1995 was $6,442,000. This amount
consisted of current tax expense of $7,308,000 and deferred tax benefit of
$866,000. Year-to-date tax expense was $18,328,000, consisting of current tax
expense of $19,171,000 and deferred tax benefit of $843,000. Net deferred tax
assets were $12,473,000 at September 30, 1995, 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 third quarter of 1994 was $5,278,000. Income tax payments for the
first nine months of 1995 and 1994 were $17,936,000 and $12,513,000,
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. On July 21,
1995, the Corporation acquired the two San Antonio branches of Comerica Bank
Texas, with $34 million in deposits. In addition, on September 5, 1995, the
Corporation entered into a definitive agreement to acquire S.B.T. Bancshares,
Inc. which owns State Bank and Trust in San Marcos, Texas with $100 million in
deposits. Also, on October 20, 1995, the Corporation signed a definitive
agreement to acquire the five offices of Park National Bank in Houston, Texas
with $210 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 $11,953,000 or $1.05
per common share for the quarter ended September 30, 1995 compared to
$9,494,000 or $.84 per common share for the third quarter of 1994 and net
income of $11,223,000 or $.99 per common share for the second quarter of 1995.
Net income for the nine months ended September 30, 1995 was $33,815,000 or
$2.99 per common share compared to $27,834,000 or $2.48 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. On July 21, 1995, the
Corporation acquired the two San Antonio branches of Comerica Bank Texas with
approximately $34 million in deposits. 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 third quarter net income
and are not expected to have a material impact on the Corporation's 1995 net
income. In addition, during the third quarter of 1995, the Corporation
entered into definitive agreements to acquire S.B.T. Bancshares, Inc., which
owns State Bank and Trust Company, of San Marcos, Texas with $100 million in
deposits and Park National Bank of Houston, Texas, with $211 million in
deposits. These acquisitions are expected to be completed in the first
quarter of 1996 following shareholder action and the receipt of normal
regulatory approvals.
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
Nine Months Ended ----------------------------
September 30 1995 1994
------------------ ------------------ -------
1995 1994 Sept 30 June 30 Sept 30
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Taxable-equivalent net
interest income $113,332 $102,063 $39,401 $37,540 $34,960
Taxable-equivalent adjustment 631 454 263 189 157
-------- ------- ------- ------- -------
Net interest income 112,701 101,609 39,138 37,351 34,803
Provision for possible
loan losses 4,772 --- 1,500 2,772 ---
Non-Interest income:
Net gain (loss) on securities
transactions 93 (491) --- --- (51)
Other 64,132 60,231 21,066 22,743 21,504
------- ------- ------- ------- -------
Total non-interest income 64,225 59,740 21,066 22,743 21,453
Non-Interest expense:
Restructuring costs 400 830 --- --- 830
Provision for real estate losses 600 --- 100 --- ---
Other 119,011 117,680 40,209 39,932 40,654
------- ------- ------- ------- -------
Total non-interest expense 120,011 118,510 40,309 39,932 41,484
------- ------- ------- ------- -------
Income before income taxes 52,143 42,839 18,395 17,390 14,772
Income Taxes 18,328 15,005 6,442 6,167 5,278
------- ------- ------- ------- -------
Net Income $ 33,815 $ 27,834 $11,953 $11,223 $ 9,494
======= ======= ======= ======= =======
Net Income per common share:
Primary $ 2.99 $ 2.48 $ 1.05 $ .99 $ .84
Fully Diluted 2.97 2.48 1.05 .99 .84
Return on Average Assets 1.16% 1.02% 1.18% 1.16% 1.03%
Return on Average Equity 14.20 13.07 14.43 14.06 12.91
</TABLE>
Net Interest Income
The increase in net interest income from the second quarter of 1995 and
the third quarter of 1994 reflects increased loan volumes and the favorable
impact of the acquisitions. The net interest margin was 4.58 percent for the
third quarter of 1995 compared to 4.52 percent and 4.48 percent for the second
quarter of 1995 and third quarter of 1994, respectively. Net interest spread
of 3.81 percent increased nine basis points from the second quarter of 1995
and decreased seven basis points from the third quarter of 1994. The net
interest spread increase from the second quarter of 1995 was primarily a
result of lower deposit costs. The decrease from the third quarter of 1994
resulted from narrower spreads between loan yields and deposit costs.
<PAGE>
<TABLE>
<CAPTION>
Change in Net Interest Income
----------------------------------------------------------------
Third Quarter Third Quarter Year-to-Date
1995 1995 1995
vs. vs. vs.
Third Quarter Second 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 $ 4,273 96.22% $ 1,113 59.81% $ 9,845 87.36%
Due to interest rate
spread 168 3.78 748 40.19 1,424 12.64
------- ------- ------- ------- ------- -------
$ 4,441 100.00% $ 1,861 100.00% $11,269 100.00%
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Non-Interest Income
Nine Months Ended Three Months Ended
September 30 ------------------------------
------------------ 1995 1994
-------------------- -------
Non-Interest Income 1995 1994 Sept 30 June 30 Sept 30
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Trust department $23,841 $22,024 $ 7,720 $ 8,070 $ 7,628
Service charges on deposit accounts 22,086 21,121 7,548 7,484 7,385
Other service charges, collection
and exchange charges, commissions
and fees 8,096 7,001 2,900 2,840 2,483
Net gain (loss) on securities
transactions 93 (491) --- --- (51)
Other 10,109 10,085 2,898 4,349 4,008
------- ------- ------- ------- -------
Total $64,225 $59,740 $21,066 $22,743 $21,453
======= ======= ======= ======= =======
</TABLE>
For the third quarter 1995...
Total non-interest income was down $1.7 million or 7.4 percent compared
to the second quarter of 1995 and down 1.8 percent from the third quarter of
1994. Second quarter results were favorably impacted by the transfer of Frost
Bank's municipal bond administration business to The Bank of New York and the
absence of such business had a negative impact on third quarter non interest
income.
Trust fee income decreased 4.3 percent from last quarter and was up
slightly from the third quarter of 1994. The decrease from the second quarter
can be attributed to lower tax fees, which are typically highest in the second
quarter, and lower corporate trust income which is directly related to the
sale of the Corporation's municipal bond administration business to The Bank
of New York in the second quarter.
Service charges on deposit accounts were up slightly compared to the
second quarter of this year and increased 2.2 percent from the third quarter
of 1994. Most of the increase from the third quarter last year results from
service charges related to the recent acquisitions. Other service charges
increased 2.1 percent compared to the second quarter of 1995 and 16.8 percent
compared to the third quarter of 1994. The increase from the third quarter of
1994 is mainly due to bankcard discounts and fees from the sale of mutual
funds.
Other non-interest income decreased $1.5 million or 33.4 percent from the
second quarter of this year and $1.1 million or 27.7 percent compared to the
third quarter of 1994. Most of the decrease from the second quarter is due to
the gain recognized on the transfer of the bond administration business and
lower gains on the sales of foreclosed assets. The decrease from the third
quarter of 1994 is mostly due to lower income from foreclosed properties.
<PAGE>
For the nine months ended September 30, 1995...
Non-interest income rose $4.5 million or 7.5 percent compared to the same
period last year. Trust income increased $1.8 million or 8.3 percent due to
improved financial market conditions and a higher fee structure that was
implemented in the second quarter last year. Service charges on deposit
accounts increased $965,000 or 4.6 percent compared to the same period last
year. Most of the increase is due to higher volumes. Other service charges
rose $1.1 million or 15.6 percent compared to the same period one year ago.
The increase is mainly due to bankcard income, fees from the sale of mutual
funds and higher loan prepayment penalty fees. Other income is unchanged
compared to the same period last year, while income from securities
transactions is up $584,000 as a result of a loss recognized in the third
quarter of last year.
Non-Interest Expense
<TABLE>
<CAPTION>
Three Months Ended
Nine Months Ended ------------------------------
September 30 1995 1994
------------------ -------------------- -------
Non-Interest Expense 1995 1994 Sept 30 June 30 Sept 30
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Salaries and wages $ 43,026 $ 39,436 $15,094 $14,395 $13,030
Pension and other employee benefits 7,786 8,691 2,609 2,371 2,734
Net occupancy of banking premises 13,438 12,495 4,532 4,323 4,232
Furniture and equipment 7,890 7,870 2,780 2,550 2,770
Restructuring costs 400 830 --- --- 830
Other 46,871 49,188 15,194 16,293 17,888
-------- -------- ------- ------- -------
119,411 118,510 40,209 39,932 41,484
Provision for real estate losses 600 --- 100 --- ---
-------- -------- ------- ------- -------
Total $120,011 $118,510 $40,309 $39,932 $41,484
======== ======== ======= ======= =======
</TABLE>
For the third quarter 1995...
Non-interest expense was flat compared to last quarter and decreased $1.2
million or 2.8 percent compared to the third quarter of 1994.
Salaries and wages increased 4.9 percent from the second quarter of 1995
and 15.8 percent from the third quarter of 1994. The majority of the increase
from both periods is due to acquisitions. Pension and employee benefits
increased 10.0 percent compared to the second quarter of 1995 and decreased
4.6 percent compared to the third quarter of 1994. The second quarter
benefits expense was favorably impacted by a refund on workers' compensation
insurance, while the decrease from the third quarter of 1994 is primarily due
to lower medical insurance expense.
Net occupancy of banking premises expense increased 4.8 percent from the
second quarter of 1995 and 7.1 percent from the third quarter of 1994. Most
of the increase from both periods results from the recent acquisitions.
Furniture and equipment expense increased 9.0 percent from the second
quarter of 1995 and was flat compared to the third quarter of 1994.
Approximately 40 percent of the increase from the second quarter is due to the
recent acquisitions. The remainder of the increase is due to higher equipment
rental and service contracts expense.
Other non-interest expenses decreased 6.7 percent from the second quarter
of 1995 and 15.1 percent from the third quarter of 1994 mostly due to a
reduction in FDIC insurance premiums. Under current FDIC guidelines, the new
assessment rate imposed on banks ranges from 4 cents for each $100 of domestic
deposits (for well capitalized banks in the highest of three supervisory
rating categories) to 31 cents (for inadequately capitalized banks in the
lowest of the three supervisory rating categories). This is a decrease from
the previous assessment range of 23 cents to 31 cents for those respective
categories for each $100 of domestic deposits. Timing of charitable
contributions also accounts for a portion of the decrease from the third
quarter of 1994.
<PAGE>
For the nine months ended September 30, 1995...
Total non-interest expense was up $1.5 million or 1.3 percent compared to
the same period one year ago. Salaries and wages were up $3.6 million or 9.1
percent compared to the same period one year ago primarily because of the
acquisitions. Pension and other benefits decreased 10.4 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
$943,000 primarily due to higher property taxes, increased lease expense as a
result of acquisitions, and building maintenance expenses, while furniture and
equipment expense remained unchanged. Other non-interest expenses decreased
$2.3 million primarily because of the reduction in the required FDIC insurance
premium. Year-to-date 1995 non-interest expenses also include a $400,000
restructuring charge related to the market valuation of bank premises
available for sale and a $600,000 provision for foreclosed real estate losses.
The same period last year included an $830,000 restructuring charge and no
provision for foreclosed real estate losses.
Income Taxes
Tax expense for the third quarter of 1995 was $6,442,000. This compares
to tax expense of $5,278,000 for the third quarter of 1994. The Corporation
has an effective tax rate for 1995 and 1994 which approximates the statutory
rate of 35 percent.
Balance Sheet
The acquisitions, higher brokered deposits (which averaged $48,111,000
for the quarter) and public funds are the primary reasons for average balance
sheet increases from a year ago. Average assets of $4,031,926,000 increased
3.6 percent and 10.7 percent from the second quarter of 1995 and the third
quarter of 1994, respectively. Total deposits averaged $3,356,273,000 for the
current quarter, up 4.6 percent from the previous quarter and up 7.8 percent
when compared to the third quarter of 1994.
Loans
<TABLE>
<CAPTION>
1995 1994
------------------------ -------------------------
Loan Portfolio Percentage
Period-End Balances September 30 of Total December 31 September 30
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial $ 506,116 28.7% $ 375,085 $ 327,985
Consumer 380,559 21.6 331,039 312,422
Real estate 810,188 46.0 714,518 681,897
Other 66,137 3.8 66,138 52,510
Unearned discount (1,728) (.1) (3,487) (4,338)
---------- ------ ---------- ----------
Total Loans $1,761,272 100.0% $1,483,293 $1,370,476
========== ====== ========== ==========
</TABLE>
Average loans for the third quarter of 1995 were $1,747,810,000. This
represents an increase of 4.5 percent from the second quarter of 1995 and an
increase of 29.3 percent from the third quarter of last year. At September
30, 1995 period-end loans totaled $1,761,272,000, up 1.1 percent from the
previous quarter and up 28.5 percent from the same period last year. Most of
the increase from the second quarter is attributable to consumer and
commercial loans which increased $18 million and $11 million, respectively.
This increase was partially offset by a $13 million decrease in real estate
loans. During the third quarter, 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 acquisitions.
Real Estate Loans
Real estate loans at September 30, 1995 were $810,188,000 or 46.0 percent
of loans, compared to 49.8 percent a year ago. Residential permanent mortgage
loans at September 30, 1995 were $332,469,000 compared to $326,213,000 at June
30, 1995 and $278,711,000 at September 30, 1994. 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>
At September 30, 1995, real estate loans 90 days past due (excluding non-
accrual and restructured loans) were $3,858,000, compared with $5,179,000 at
June 30, 1995, and $3,685,000 at September 30, 1994.
<TABLE>
<CAPTION>
1995 1994
--------------------- --------
Real Estate Loans Percentage
Period-End Balances Sept 30 of Total Sept 30
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Construction $ 45,329 5.6% $ 37,827
Land 39,988 4.9 36,852
Permanent mortgages:
Commercial 200,519 24.8 163,823
Residential 332,469 41.0 278,711
Other 191,883 23.7 164,684
-------- ------ --------
$810,188 100.0% $681,897
======== ====== ========
Non-accrual and restructured $ 12,606 1.7% $ 14,659
</TABLE>
Mexico
The Corporation's cross border outstandings to Mexico, excluding
$14,305,000 in loans secured by assets held in the United States, totaled
$25,262,000 at September 30, 1995 or 1.4 percent of total loans. The peso
devaluation which occurred in the fourth quarter of last year will continue to
impact 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 68 percent are related to companies exporting
from Mexico. As of September 30, 1995, none of the Mexican related loans were
on non-performing status.
<TABLE>
<CAPTION>
MEXICAN LOANS
----------------------------------------
September 30, 1995 Amount Percentage of Total Loans
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Loans to financial institutions $25,246 1.4%
Loans to private firms or individuals 16 ---
------- ----
$25,262 1.4%
======= ====
</TABLE>
Non-Performing Assets
<TABLE>
<CAPTION>
NON-PERFORMING ASSETS
--------------------------
Real
September 30, 1995 Estate Other Total
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Non-accrual and restructured loans $12,606 $1,322 $13,928
Foreclosed assets 2,699 528 3,227
------- ------ -------
Total $15,305 $1,850 $17,155
======== ====== =======
As a percentage of total
non-performing assets 89.2% 10.8% 100.0%
</TABLE>
Non-performing assets totaled $17,155,000 at September 30, 1995, down 3.5
percent from $17,768,000 at June 30, 1995 and down 16.4 percent from
$20,509,000 at September 30, 1994. Non-performing assets as a percentage of
total loans and foreclosed assets decreased to .97 percent at September 30,
1995 from 1.49 percent one year ago.
<PAGE>
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 $278,000 or $.02 per common share for
the third quarter of 1995, compared to approximately $374,000 or $.03 per
common share for the third quarter of 1994 and $287,000 or $.03 per common
share for the second quarter of 1995. For the nine months ended September 30,
1995, the after-tax impact (assuming a 35 percent marginal tax rate) was
approximately $861,000 or $.08 per common share, compared with approximately
$1,152,000 or $.10 per common share for the comparable period last year.
Total loans 90 days past due (excluding non-accrual and restructured loans)
were $5,964,000 at September 30, 1995, compared to $6,440,000 at June 30,
1995, and $5,423,000 at September 30, 1994.
Allowance for Possible Loan Losses
The allowance for possible loan losses was $30,600,000 or 1.74 percent of
period-end loans at September 30, 1995, compared to $28,886,000 or 1.66
percent at June 30, 1995 and $25,467,000 or 1.86 percent at September 30,
1994. The allowance for possible loan losses as a percentage of non-accrual
and restructured loans was 219.7 percent at September 30, 1995, compared to
204.4 percent at June 30, 1995 and 159.0 percent at the end of the third
quarter of 1994.
The Corporation recorded a $1,500,000 provision for possible loan losses
during the third quarter of 1995. This compares to $2,772,000 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. Net recoveries in the third quarter of 1995 totaled $214,000,
compared to net charge-offs of $771,000 for the second quarter of 1995 and
$180,000 for the third quarter of 1994.
<TABLE>
<CAPTION>
NET CHARGE-OFFS (RECOVERIES)
---------------------------------------
1995 1994
---------------------------- --------
Third Percentage Second Third
Quarter of Total Quarter Quarter
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Real Estate $ (118) 55.1% $ (227) $ 805
Commercial and industrial (690) 322.5 (129) (810)
Consumer 608 (284.1) 1,127 221
Other, including foreign (14) 6.5 --- (36)
-------- ------- ------- --------
$ (214) 100.0% $ 771 $ 180
======== ======= ======= ========
Provision for possible loan losses $ 1,500 $ 2,772 $ ---
Allowance for possible loan losses 30,600 28,886 25,467
</TABLE>
Capital and Liquidity
At September 30, 1995, shareholders' equity was $330,150,000 compared to
$288,793,000 at September 30, 1994 and $321,660,000 at June 30, 1995. The
Corporation increased its cash dividend to $.35 per common share in the third
quarter of 1995 from $.22 per common share in the second quarter of 1995 and
$.15 per common share for the third quarter a year ago. This equates to a
dividend payout ratio of 32.7 percent, 21.8 percent and 17.5 percent for the
third and second quarters of 1995 and the third quarter of 1994, respectively.
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.
<PAGE>
The following summarizes capital information for the Corporation at
September 30, 1995 and September 30, 1994.
<TABLE>
<CAPTION>
September 30, 1995 September 30, 1994
------------------- -------------------
Capital Amount Ratio Amount Ratio
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Risk-Based
Tier 1 Capital $ 269,969 13.03% $ 248,947 14.88%
Tier 1 Capital Minimum requirement 82,905 4.00 66,917 4.00
Total Capital $ 295,935 14.28% $ 269,914 16.13%
Total Capital Minimum requirement 165,810 8.00 133,834 8.00
Risk-adjusted assets, net of goodwill $2,072,629 $1,672,931
Leverage ratio 6.80% 6.92%
Average equity as a percentage
of average assets 8.19 7.82
</TABLE>
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 September 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 September 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 flows
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*)
September 30, 1995 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 $ --- 3.88% $ 75 $ 2 3.41%
Securities:
U.S. Treasury 235,723 10,583 6.00 277,015 8,971 4.33
U.S. Government agencies
and corporations 1,308,612 62,711 6.39 1,362,043 60,058 5.88
States and political subdivisions 5,952 412 9.22 6,013 428 9.49
Other 10,441 504 6.43 31,141 1,264 5.43
--------- ------- ---------- -------
Total securities 1,560,728 74,210 6.34 1,676,212 70,721 5.63
Federal funds sold and securities
purchased under resale agreements 110,208 4,781 5.72 119,533 3,045 3.36
Loans, net of unearned discount 1,649,910 110,959 8.99 1,314,454 77,134 7.85
--------- ------- ---------- -------
Total Earning Assets and
Average Rate Earned 3,320,863 189,950 7.64 3,110,274 150,902 6.48
Cash and due from banks 365,313 337,551
Allowance for possible loan losses (27,602) (26,270)
Banking premises and equipment 90,653 89,320
Accrued interest and other assets 140,033 130,545
--------- ----------
Total Assets $3,889,260 $3,641,420
========== ==========
LIABILITIES
Demand deposits:
Commercial and individual $ 688,880 $ 669,699
Correspondent banks 124,648 126,787
Public funds 35,301 38,752
--------- ---------
Total demand deposits 848,829 835,238
Time deposits:
Savings and Interest-on-Checking 727,069 9,931 1.83 809,189 10,869 1.80
Money market deposit accounts 587,775 16,704 3.80 540,509 11,007 2.72
Time accounts 944,952 34,888 4.94 857,476 20,932 3.26
Public funds 93,696 2,961 4.23 81,253 1,659 2.73
--------- ------- --------- -------
Total Time deposits 2,353,492 64,484 3.66 2,288,427 44,467 2.60
--------- ---------
Total Deposits 3,202,321 3,123,665
Federal funds purchased and securities
sold under resale agreements 294,642 11,731 5.25 177,098 4,372 3.26
Long-term notes payable --- --- --- --- --- ---
Other borrowings 9,988 403 5.40 --- --- ---
--------- ------- ---------- -------
Total Interest-Bearing Funds
and Average Rate Paid 2,658,122 76,618 3.85 2,465,525 48,839 2.65
--------- ------- ---- ---------- ------- ----
Accrued interest and other liabilities 63,895 55,945
--------- ----------
Total Liabilities 3,570,846 3,356,708
SHAREHOLDERS' EQUITY 318,414 284,712
--------- ----------
Total Liabilities and
Shareholders' Equity $3,889,260 $3,641,420
========== ==========
Net interest income $113,332 $102,063
======= =======
Net interest spread 3.79% 3.85%
===== =====
Net interest income to total average earning assets 4.56% 4.39%
Net interest income to total average earning ===== =====
assets - with federal funds net 4.72% 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*)
September 30, 1995 June 30, 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 $ 15 $ --- 3.52% $ 21 $ --- 3.81%
Securities:
U.S. Treasury 255,079 3,848 5.99 227,406 3,489 6.15
U.S. Government agencies
and corporations 1,301,094 21,001 6.46 1,307,456 20,917 6.40
States and political subdivisions 5,647 134 9.49 6,551 144 8.77
Other 6,447 97 6.03 7,238 115 6.37
--------- ------- --------- -------
Total securities 1,568,267 25,080 6.39 1,548,651 24,665 6.37
Federal funds sold and securities
purchased under resale agreements 114,483 1,660 5.67 111,611 1,628 5.77
Loans, net of unearned discount 1,747,810 39,939 9.07 1,671,840 37,811 9.07
--------- ------- --------- -------
Total Earning Assets and
Average Rate Earned 3,430,575 66,679 7.73 3,332,123 64,104 7.71
Cash and due from banks 392,513 359,029
Allowance for possible loan losses (29,708) (27,176)
Banking premises and equipment 92,132 91,634
Accrued interest and other assets 146,414 137,257
--------- ---------
Total Assets $4,031,926 $3,892,867
========== ==========
LIABILITIES
Demand deposits:
Commercial and individual $ 705,914 $ 685,220
Correspondent banks 134,085 121,666
Public funds 37,277 32,193
---------- ----------
Total demand deposits 877,276 839,079
Time deposits:
Savings and Interest-on-Checking 720,160 2,908 1.60 727,039 3,562 1.97
Money market deposit accounts 638,351 6,238 3.88 564,081 5,408 3.85
Time accounts 1,006,887 13,061 5.15 992,628 12,737 5.15
Public funds 113,599 1 269 4.43 84,904 916 4.33
---------- ------- ---------- -------
Total time deposits 2,478,997 23,476 3.76 2,368,652 22,623 3.83
---------- ------- ---------- -------
Total Deposits 3,356,273 3,207,731
Federal funds purchased and securities
sold under resale agreements 258,409 3,506 5.31 290,927 3,834 5.21
Long term notes payable --- --- --- ---
Other borrowings 21,818 296 5.38 7,906 107 5.44
Total Interest-Bearing Funds
and Average Rate Paid 2,759,224 27,278 3.92 2,667,485 26,564 3.99
---------- ------- ----- ---------- ------- -----
Accrued interest and other liabilities 66,878 66,070
---------- ----------
Total Liabilities 3,703,378 3,572,634
SHAREHOLDERS' EQUITY 328,548 320,233
---------- ----------
Total Liabilities and
Shareholders' Equity $4,031,926 $3,892,867
========== ==========
Net interest income $39,401 $37,540
======= =======
Net interest spread 3.81% 3.72%
==== ====
Net interest income to total average earning assets 4.58% 4.52%
==== ====
Net interest income to total average earning
assets- with federal funds net 4.74% 4.67%
==== ====
*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*)
March 31, 1995 December 31, 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 $ 15 $ --- 3.77% $ 17 $ --- 3.65%
Securities:
U.S. Treasury 224,345 3,246 5.87 263,293 3,193 4.81
U.S. Government agencies
and corporations 1,317,465 20,793 6.31 1,361,448 20,896 6.14
States and political subdivisions 5,659 134 9.48 5,680 134 9.47
Other 17,763 292 6.65 23,265 355 6.04
--------- ------ ---------- -------
Total securities 1,565,232 24,465 6.26 1,653,686 24,578 5.94
Federal funds sold and securities
purchased under resale agreements 104,418 1,493 5.72 76,802 1,101 5.61
Loans, net of unearned discount 1,527,663 33,208 8.82 1,414,415 29,570 8.29
--------- ------ --------- ------
Total Earning Assets and
Average Rate Earned 3,197,328 59,166 7.47 3,144,920 55,249 6.99
Cash and due from banks 343,861 353,406
Allowance for possible loan losses (25,880) (25,763)
Banking premises and equipment 88,149 89,754
Accrued interest and other assets 139,338 145,624
--------- ---------
Total Assets $3,742,796 $3,707,941
========= =========
LIABILITIES
Demand deposits:
Commercial and individual $ 675,170 $ 685,828
Correspondent banks 118,016 117,378
Public funds 36,423 37,876
------- ---------
Total demand deposits 829,609 841,082
Time deposits:
Savings and Interest-on-Checking 734,161 3,461 1.91 757,568 3,556 1.86
Money market deposit accounts 560,032 5,057 3.66 567,203 4,703 3.29
Time accounts 833,435 9,090 4.42 846,069 8,432 3.95
Public funds 82,242 777 3.83 100,608 839 3.31
--------- ------ --------- -------
Total Time Deposits 2,209,870 18,385 3.37 2,271,448 17,530 3.06
--------- ------ --------- -------
Total Deposits 3,039,479 3,112,530
Federal funds purchased
and other borrowings 335,436 4,391 5.24 234,678 2,793 4.66
--------- ------ --------- ------
Total Interest-Bearing Funds
and Average Rate Paid 2,545,306 22,776 3.62 2,506,126 20,323 3.21
--------- ------ ---- --------- ------- ----
Accrued interest and other liabilities 61,667 66,924
--------- ---------
Total Liabilities 3,436,582 3,414,132
SHAREHOLDERS' EQUITY 306,214 293,809
--------- ---------
Total Liabilities and
Shareholders' Equity $3,742,796 $3,707,941
========= ==========
Net interest income $36,390 $34,926
======= =======
Net interest spread 3.85% 3.78%
===== =====
Net interest income to total average earning assets 4.58% 4.43%
===== =====
Net interest income to total average earning
assets - with federal funds net 4.74% 4.54%
===== =====
* 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*)
September 30, 1994
-------------------------
Interest
Average Income/ Yield/
Balance Expense Cost
--------- -------- -----
<S> <C> <C> <C>
ASSETS
Time deposits $ 15 $ --- 3.56%
Securities:
U.S. Treasury 284,653 3,047 4.25
U.S. Government agencies
and corporations 1,392,808 20,800 5.97
States and political subdivisions 5,689 135 9.48
Other 26,621 407 5.69
--------- -------
Total securities 1,709,771 24,389 5.70
Federal funds sold and securities
purchased under resale agreements 51,091 506 3.87
Loans, net of unearned discount 1,351,462 27,932 8.20
--------- ------
Total Earning Assets and
Average Rate Earned 3,112,339 52,827 6.76
Cash and due from banks 333,469
Allowance for possible loan losses (25,763)
Banking premises and equipment 90,840
Accrued interest and other assets 129,698
---------
Total Assets $3,640,583
=========
LIABILITIES
Demand deposits:
Commercial and individual $ 682,961
Correspondent banks 113,604
Public funds 39,251
---------
Total demand deposits 835,816
Time deposits:
Savings and Interest-on-Checking 790,578 3,595 1.80
Money market deposit accounts 557,601 4,257 3.03
Time accounts 851,708 7,668 3.57
Public funds 77,021 608 3.13
--------- -------
Total Time Deposits 2,276,908 16,128 2.81
--------- -------
Total Deposits 3,112,724
Federal funds purchased
and other borrowings 182,217 1,739 3.73
--------- ------
Total Interest-Bearing Funds
and Average Rate Paid 2,459,125 17,867 2.88
--------- ------- ----
Accrued interest and other liabilities 53,807
---------
Total Liabilities 3,348,748
SHAREHOLDERS' EQUITY 291,835
---------
Total Liabilities and
Shareholders' Equity $3,640,583
=========
Net interest income $34,960
=======
Net interest spread 3.88%
=====
Net interest income to total average earning assets 4.48%
=====
Net interest income to total average earning
assets - with federal funds net 4.56%
=====
* Taxable-equivalent basis assuming a 35% tax rate.
</TABLE>
<PAGE>
Part II: Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Statement regarding Computation of Earnings per Share
27 Statement regarding Financial Data Schedules
(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: November 6, 1995 By:
-----------------------
Phillip D. Green
Executive Vice President
and Treasurer
(Duly Authorized Officer and
Principal Accounting Officer)
<PAGE>
Cullen/Frost Bankers, Inc.
Form 10-Q
Exhibit Index
Exhibit Description
- ------- -----------
11 Statement re: Computation of Earnings per Share
27 Statement re: Financial Data Schedule
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)
Nine Months Ended Three Months Ended
September 30 September 30
-------------------- --------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Primary Earnings per Share
- --------------------------
Net income applicable to common stock $33,815 $27,834 $11,953 $ 9,494
======= ======= ======= =======
Weighted average shares outstanding 11,142 11,045 11,153 11,070
Addition from assumed exercise of
stock options 175 169 211 172
------- ------- ------- -------
Weighted average number of common
shares outstanding 11,317 11,214 11,364 11,242
======= ======= ======= =======
Primary earnings per common share $ 2.99 $ 2.48 $ 1.05 $ .84
Nine Months Ended Three Months Ended
September 30 September 30
-------------------- --------------------
1995 1994 1995 1994
------- ------- ------- -------
Fully Diluted Earnings per Share
- --------------------------------
<S> <C> <C> <C> <C>
Net income applicable to common stock $33,815 $27,834 $11,953 $ 9,494
======= ======= ======= =======
Weighted average shares outstanding 11,142 11,045 11,153 11,070
Addition from assumed exercise of
stock options 228 181 220 176
------- ------- ------- ------
Weighted average number of common
shares outstanding 11,370 11,226 11,373 11,246
======= ======= ======= ======
Fully diluted earnings per common share $ 2.97 $ 2.48 $ 1.05 $ .84
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 365,435
<INT-BEARING-DEPOSITS> 11
<FED-FUNDS-SOLD> 105,667
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 590,768
<INVESTMENTS-CARRYING> 968,956
<INVESTMENTS-MARKET> 963,725
<LOANS> 1,761,272
<ALLOWANCE> 30,600
<TOTAL-ASSETS> 4,002,787
<DEPOSITS> 3,469,697
<SHORT-TERM> 119,547
<LIABILITIES-OTHER> 83,393
<LONG-TERM> 0
<COMMON> 55,904
0
0
<OTHER-SE> 274,246
<TOTAL-LIABILITIES-AND-EQUITY> 4,002,787
<INTEREST-LOAN> 110,467
<INTEREST-INVEST> 74,071
<INTEREST-OTHER> 4,781
<INTEREST-TOTAL> 189,319
<INTEREST-DEPOSIT> 64,484
<INTEREST-EXPENSE> 76,618
<INTEREST-INCOME-NET> 112,701
<LOAN-LOSSES> 4,772
<SECURITIES-GAINS> 93
<EXPENSE-OTHER> 120,011
<INCOME-PRETAX> 52,143
<INCOME-PRE-EXTRAORDINARY> 52,143
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,815
<EPS-PRIMARY> 2.99
<EPS-DILUTED> 2.97
<YIELD-ACTUAL> 7.64
<LOANS-NON> 13,928
<LOANS-PAST> 5,964
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 11,945
<ALLOWANCE-OPEN> 25,741
<CHARGE-OFFS> 4,373
<RECOVERIES> 4,460
<ALLOWANCE-CLOSE> 30,600
<ALLOWANCE-DOMESTIC> 30,471
<ALLOWANCE-FOREIGN> 129
<ALLOWANCE-UNALLOCATED> 1,550
</TABLE>
