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, 1996 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 November 8, 1996, there were 22,468,412 shares of Common Stock, $5 par value, outstanding.
<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 Nine Months Ended September 30 September 30 -------------------- ------------------- 1996 1995 1996 1995 ------- ------- ------- ------- <S> <C> <C> <C> <C> INTEREST INCOME Loans, including fees $47,229 $39,721 $135,080 $110,467 Securities: Taxable 24,451 24,951 75,405 73,813 Tax-exempt 81 84 244 258 ------- ------- ------- ------- Total Securities 24,532 25,035 75,649 74,071 Time Deposits 10 Federal funds sold and securities purchased under resale agreements 1,475 1,660 4,888 4,781 ------- ------- ------- ------- Total Interest Income 73,236 66,416 215,627 189,319 INTEREST EXPENSE Deposits 25,962 23,476 77,025 64,484 Federal funds purchased and securities sold under repurchase agreements 1,517 3,506 5,350 11,731 Long-term notes payable and other borrowings 307 296 760 403 ------- ------- ------- ------- Total Interest Expense 27,786 27,278 83,135 76,618 ------- ------- ------- ------- Net Interest Income 45,450 39,138 132,492 112,701 Provision for possible loan losses 2,300 1,500 5,500 4,772 ------- ------- ------- ------- Net Interest Income After Provision For Possible Loan Losses 43,150 37,638 126,992 107,929 NON-INTEREST INCOME Trust fees 8,652 7,720 25,368 23,841 Service charges on deposit accounts 9,825 7,548 28,266 22,086 Other service charges, collection and exchange charges, commissions and fees 2,053 2,900 6,835 8,096 Net gain (loss) on securities transactions 1 (997) 93 Other 2,648 2,898 11,074 10,109 ------- ------- ------- ------- Total Non-Interest Income 23,179 21,066 70,546 64,225 NON-INTEREST EXPENSE Salaries and wages 18,086 15,094 53,073 43,026 Pension and other employee benefits 3,764 2,609 11,720 7,786 Net occupancy of banking premises 4,736 4,532 14,262 13,438 Furniture and equipment 2,895 2,780 8,587 7,890 Provision for real estate losses 100 600 Intangible amortization 2,857 2,124 8,375 5,952 Other 12,279 13,070 38,340 41,319 ------- ------- ------- ------- Total Non-Interest Expense 44,617 40,309 134,357 120,011 ------- ------- ------- ------- Income Before Income Taxes 21,712 18,395 63,181 52,143 Income Taxes 7,727 6,442 22,603 18,328 ------- ------- ------- ------- Net Income $13,985 $11,953 $40,578 $33,815 ======= ======= ======= ======= Net Income per common share: Primary $ .61 $ .53 $ 1.77 $ 1.49 Dividends per share .21 .18 .60 .40 See notes to consolidated financial statements. </TABLE>
<TABLE> <CAPTION> Consolidated Balance Sheets Cullen/Frost Bankers, Inc. and Subsidiaries (dollars in thousands) September 30 December 31 September 30 1996 1995 1995 ---------- ---------- ---------- <S> <C> <C> <C> Assets Cash and due from banks $ 442,706 $ 533,333 $ 365,435 Time deposits 64 11 Securities held to maturity 183,829 210,731 968,956 Securities available for sale 1,304,698 1,325,836 590,768 Federal funds sold and securities purchased under resale agreements 108,625 100,550 105,667 Loans, net of unearned discount of $1,585 at September 30, 1996; $1,337 at December 31, 1995 and $1,728 at September 30, 1995 2,182,938 1,816,762 1,761,272 Less: Allowance for possible loan losses (36,230) (31,577) (30,600) ---------- ---------- ---------- Net Loans 2,146,708 1,785,185 1,730,672 Banking premises and equipment 101,820 89,493 90,673 Accrued interest and other assets 168,191 155,019 150,605 ---------- ---------- ---------- Total Assets $4,456,577 $4,200,211 $4,002,787 ========== ========== ========== Liabilities Demand Deposits: Commercial and individual $ 870,253 $ 792,879 $ 724,313 Correspondent banks 171,076 127,549 92,026 Public funds 57,494 71,581 41,511 ---------- ---------- ---------- Total demand deposits 1,098,823 992,009 857,850 Time Deposits: Savings and Interest-on-Checking 694,895 718,582 711,096 Money market deposit accounts 835,784 711,865 684,385 Time accounts 1,053,330 998,738 1,053,116 Public funds 201,517 224,539 163,250 ---------- ---------- ---------- Total time deposits 2,785,526 2,653,724 2,611,847 ---------- ---------- ---------- Total deposits 3,884,349 3,645,733 3,469,697 Federal funds purchased and securities sold under repurchase agreements 115,893 111,395 119,547 Accrued interest and other liabilities 94,961 101,619 83,393 ---------- ---------- ---------- Total Liabilities 4,095,203 3,858,747 3,672,637 Shareholders' Equity Common stock, par value $5 per share 112,286 55,997 55,904 Shares authorized: 30,000,000 Shares outstanding: 22,457,313; 22,398,900; and 22,361,644 Surplus 63,077 118,418 117,912 Retained earnings 185,760 158,563 149,930 Unrealized gain on securities available for sale, net of tax 251 8,486 6,404 ---------- ---------- ---------- Total Shareholders' Equity 361,374 341,464 330,150 ---------- ---------- ---------- Total Liabilities and Shareholders' Equity $4,456,577 $4,200,211 $4,002,787 ========== ========== ========== See notes to consolidated financial statements. </TABLE>
<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, 1995 $55,615 $116,362 $126,038 $(2,578) $295,437 Net income for the year ended December 31, 1995 46,279 46,279 Exercise of employee stock options and related tax benefit 250 978 (34) 1,194 Issuance of restricted stock 132 1,078 1,210 Restricted stock plan deferred compensation expense, net (997) (997) Adjustment to unrealized gain (loss) on securities available for sale, net of tax 11,064 11,064 Cash dividend (12,723) (12,723) ------- -------- ------- -------- ------- Balance at December 31, 1995 55,997 118,418 158,563 8,486 341,464 Net income for the nine months ended September 30, 1996 40,578 40,578 Exercise of employee stock options and related tax benefit 191 757 (381) 567 Restricted stock plan deferred compensation expense 352 352 Adjustment to unrealized gain (loss) on securities available for sale, net of tax ( 8,235) ( 8,235) Cash dividend (13,352) (13,352) Two for one stock split 56,098 (56,098) -------- -------- -------- ------- -------- Balance at September 30, 1996 $112,286 $ 63,077 $185,760 $ 251 $361,374 ======== ======== ======== ======= ======== See notes to consolidated financial statements. </TABLE>
<TABLE> <CAPTION> Consolidated Statements of Cash Flows Cullen/Frost Bankers, Inc. and Subsidiaries (dollars in thousands) Nine Months Ended September 30 ------------------ 1996 1995 ------- ------- <S> <C> <C> Operating Activities Net income $ 40,578 $ 33,815 Adjustments to reconcile net income to net cash provided by operating activities: Provision for possible loan losses 5,500 4,772 Provision for real estate losses 600 (Credit) provision for deferred taxes (3,763) (843) Accretion of discounts on loans (1,257) (1,535) Accretion of securities' discounts (11,948) (12,796) Amortization of securities' premiums 2,203 1,691 Net (gain) loss on securities transactions 997 (93) Net gain on sale of assets (1,358) (2,473) Depreciation and amortization 16,794 13,720 Increase in interest receivable (2,882) (2,974) Increase in interest payable 365 1,957 Net change in other assets and liabilities 9,827 23,368 --------- -------- Net cash provided by operating activities 55,056 59,209 Investing Activities Proceeds from maturities of securities held to maturity 26,695 81,828 Purchases of securities held to maturity (833) Proceeds from sales of securities available for sale 103,026 28,412 Proceeds from maturities of securities available for sale 474,074 475,110 Purchases of securities available for sale (483,667) (488,810) Net increase in loans (160,776) (153,671) Net increase in bank premises and equipment (9,533) (4,658) Proceeds from sales of repossessed properties 724 1,081 Net cash and cash equivalents received (paid) from bank acquisitions/exchange 19,198 8,734 --------- --------- Net cash used by investing activities (30,259) (52,807) Financing Activities Net increase (decrease) in demand deposits, IOC accounts, and savings accounts 56,245 75,282 Net increase (decrease) in certificates of deposits (155,284) 122,707 Net increase (decrease) in short-term borrowings 4,498 (259,413) Proceeds from employee stock purchase plan and options 480 1,585 Dividends paid (13,352) (8,804) --------- -------- Net cash used by financing activities (107,413) (68,643) --------- -------- (Decrease) in cash and cash equivalents (82,616) (62,241) Cash and cash equivalents at beginning of year 633,947 533,354 --------- -------- Cash and cash equivalents at the end of the period $551,331 $471,113 ========= ======== Supplemental information: Interest paid $ 27,420 $ 74,661 Loans originated to facilitate the sale of repossessed properties 848 351 See notes to consolidated financial statements. </TABLE>
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, 1995. The balance sheet at December 31, 1995 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 based on management's assessment of the adequacy of the allowance to absorb future possible loan losses. <TABLE> <CAPTION> Nine Months Ended September 30 -------------------- (in thousands) 1996 1995 - ----------------------------------------------------------------------- <S> <C> <C> Balance at beginning of the period $31,577 $25,741 Provision for possible loan losses 5,500 4,772 Net charge-offs: Losses charged to the allowance (6,967) (4,373) Recoveries 6,120 4,460 ------- ------- Net (charge-offs) recoveries (847) 87 ------- ------- Balance at the end of period $36,230 $30,600 ======= ======= </TABLE> Impaired Loans A loan within the scope of SFAS No. 114 is considered impaired when, based on 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 agreement, including scheduled principal and interest payments. At September 30, 1996, the majority of the impaired loans were real estate loans and collectibility was measured based on the fair value of the collateral. 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. No interest revenue was recognized on impaired loans for the third quarter of 1996 or 1995. The total allowance for possible loan losses includes activity related to allowances calculated in accordance with SFAS No. 114 and activity related to other loan loss allowances determined in accordance with SFAS No. 5. The following is a summary of loans considered to be impaired: <TABLE> <CAPTION> September 30 December 31 September 30 (in thousands) 1996 1995 1995 - --------------------------------------------- ----------- ---------- --------- <S> <C> <C> <C> Impaired loans with no valuation reserve $3,513 $4,565 $5,308 Impaired loans with a valuation reserve 2,137 4,547 2,701 ------ ------ ------ Total recorded investment in impaired loans $5,650 $9,112 $8,009 ====== ====== ====== Valuation reserve 1,300 712 502 </TABLE>
The average recorded investment in impaired loans was $6,716,000 and $8,051,000 during the third quarter and for the year ended September 30, 1996, respectively, and $8,734,000 and $8,595,000 during the same periods a year ago. Earnings Per Common Share On June 21, 1996, the Corporation completed the previously announced two- for-one stock split. As a result of the split, $56,098,000 was transferred from surplus to common stock. All related "share" amounts have been restated to make prior periods comparable. 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 ----------------------- ----------------------- 1996 1995 1996 1995 ----------------------- ----------------------- <S> <C> <C> <C> <C> Primary 22,917,828 22,728,194 22,871,025 22,633,086 Fully Diluted 22,956,738 22,746,316 22,954,535 22,739,108 </TABLE> Income Taxes The tax expense for the third quarter of 1996 was $7,727,000. This amount consisted of current tax expense of $9,283,000 and deferred tax benefit of $1,556,000. Year-to-date tax expense in 1996 is $22,603,000, consisting of current tax expense of $26,366,000 and deferred tax benefit of $3,763,000. Net deferred tax assets were $15,052,000 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. Year-to-date tax expense in 1995 was $18,328,000, consisting of current tax expense of $19,171,000 and deferred tax benefit of $843,000. The tax expense for the third quarter of 1995 was $6,442,000. Income tax payments for the first nine months of 1996 and 1995 were $23,440,000 and $17,936,000, respectively. Acquisitions On January 5, 1996, the Corporation paid approximately $17.7 million to acquire S.B.T. Bancshares, Inc., including its subsidiary, State Bank and Trust Company in San Marcos, Texas. The Corporation acquired loans of approximately $51 million and deposits of approximately $112 million. On February 15, 1996, the Corporation paid approximately $33.5 million to acquire Park National Bank in Houston, Texas. The Corporation acquired loans of approximately $157 million and deposits of approximately $225 million. 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 1996 net income. On April 4, 1995, the Corporation acquired Valley Bancshares, Inc., including its subsidiary, Valley National Bank in McAllen, Texas. The Corporation acquired loans of approximately $28 million and deposits of approximately $49 million. On May 19, 1995, the Corporation acquired National Commerce Bank in Houston, Texas. The Corporation acquired loans of approximately $95 million and deposits of approximately $101 million. On July 21, 1995, the Corporation acquired the two San Antonio branches of Comerica Bank Texas. The Corporation acquired loans of approximately $2 million and deposits of approximately $34 million. Pending Acquisitions On September 30, 1996, the Corporation entered into a definitive agreement to acquire Corpus Christi Bancshares, Inc., which owns the $180 million-deposit Citizens State Bank, based in Corpus Christi, Texas. The Corporation is expected to pay approximately $33 million, assuming the exercise of all outstanding options. At the completion of the acquisition, which is expected to be in the first quarter of 1997 following normal shareholder action and regulatory review, the former Citizens branch offices will become part of the Corporation's lead bank, Frost National Bank. This transaction will be accounted for as a purchase with total cash consideration being funded through internal sources.
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 The results of operations are included in the material that follows. The Corporation completed two acquisitions during the first quarter of 1996 and three for the entire year of 1995. These acquisitions, which are outlined in the footnotes to the financial statements on page seven, were accounted for as purchase transactions, and as such, their related results of operations are included in the financial information that follows from the date of acquisition. During the second quarter of 1996, the board of directors declared and paid a two for one stock split. Previous quarters have been restated to give effect to the split. Certain reclassifications have been made to make prior quarters comparable. All balance sheet figures are presented in averages unless otherwise noted. <TABLE> <CAPTION> Summary of Operations -------------------------------------------------- Three Months Ended Nine Months Ended ---------------------------- September 30 1996 1995 ------------------ ------------------ ------- 1996 1995 Sept 30 June 30 Sept 30 - -------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> Taxable-equivalent net interest income $133,226 $113,332 $45,688 $44,624 $39,401 Taxable-equivalent adjustment 734 631 238 250 263 ------- ------- ------- ------- ------- Net interest income 132,492 112,701 45,450 44,374 39,138 Provision for possible loan losses 5,500 4,772 2,300 1,325 1,500 Non-Interest income: Net gain (loss) on securities transactions (997) 93 1 (903) Other 71,543 64,132 23,178 25,544 21,066 ------- ------- ------- ------- ------- Total non-interest income 70,546 64,225 23,179 24,641 21,066 Non-Interest expense: Intangible amortization 8,375 5,952 2,857 2,903 2,124 Other 125,982 114,059 41,760 43,692 38,185 ------- ------- ------- ------- ------- Total non-interest expense 134,357 120,011 44,617 46,595 40,309 ------- ------- ------- ------- ------- Income before income taxes 63,181 52,143 21,712 21,095 18,395 Income Taxes 22,603 18,328 7,727 7,577 6,442 ------- ------- ------- ------- ------- Net Income $40,578 $33,815 $13,985 $13,518 $11,953 ======= ======= ======= ======= ======= Cash earnings* $46,569 $37,909 $16,039 $15,602 $13,457 Net Income per common share $ 1.77 $ 1.49 $ .61 $ .59 $ .53 Cash earnings per common share 2.04 1.67 .70 .68 .59 Return on Average Assets 1.22% 1.16% 1.24% 1.21% 1.18% Cash earnings ROA 1.42 1.32 1.44 1.42 1.34 Return on Average Equity 15.33 14.20 15.55 15.41 14.43 Cash earnings ROE 22.05 19.10 21.94 22.39 19.92 * Net income before intangible amortization (goodwill and core deposit intangibles, net of tax) </TABLE>
Cullen/Frost Bankers, Inc. reported net income of $13,985,000 or $.61 per common share for the quarter ended September 30, 1996 compared to $11,953,000 or $.53 per common share for the third quarter of 1995 and net income of $13,518,000 or $.59 per common share for the second quarter of 1996. Net income for the nine months ended September 30, 1996 was $40,578,000 or $1.77 per common share compared to $33,815,000 or $1.49 per common share for the same period of 1995. Return on average assets for the quarter was 1.24 percent compared to 1.18 percent for the third quarter last year and 1.21 percent for the second quarter of 1996. As noted in more detail in the footnotes to the financial statements, the Corporation has historically used the purchase method in accounting for its acquisitions which has resulted in the creation of intangible assets. These intangible assets are deducted from capital in the determination of regulatory capital. Thus, "cash" or "tangible" earnings represents the regulatory capital generated during the quarter and can be viewed as net income excluding intangible amortization. While the definition of "cash" or "tangible" earnings may vary by company, we believe this definition is appropriate as it measures the per share growth of regulatory capital, which impacts the amount available for dividends, stock repurchases and acquisitions. The following table reconciles reported earnings to net income excluding intangible amortization ("cash" earnings) for the quarter ended September 30, 1996: <TABLE> <CAPTION> Quarter ended (in thousands, except per share amounts) September 30, 1996 - --------------------------------------------------------------------------- Reported Intangible "Cash" earnings Amortization earnings - --------------------------------------------------------------------------- <S> <C> <C> <C> Net income before taxes $21,712 $2,857 $24,569 Income tax expense 7,727 803 8,530 -------- ------- ------- Net income $13,985 $2,054 $16,039 ======= ====== ======= Per common share $ .61 $ .09 $ .70 "Cash" earnings return on assets and return on equity excluding intangible amortization for the quarter ended September 30, 1996, were calculated as follows: "Cash" earnings Return on assets : A*/B = 1.44% "Cash" earnings Return on equity : A*/C = 21.94 (A) Net income before intangible amortization (goodwill and core deposit intangibles, net of tax) $ 16,039 (B) Total average assets less average intangible assets (average goodwill and average core deposit intangible, net of tax) 4,419,832 (C) Shareholders' equity excluding the SFAS 115 market value adjustment less intangible assets, net of tax 290,893 * Annualized </TABLE> Net Interest Income Net interest margin, which represents the average net effective yield on earning assets calculated as net interest income on a taxable-equivalent basis expressed as a percentage of average total earning assets, was 4.83 percent for the third quarter of 1996 compared to 4.74 percent and 4.58 percent for the second quarter of 1996 and third quarter of 1995, respectively. The increase in net interest income and net interest margin from the second quarter of 1996 is reflective of higher loan volumes. Higher loan volumes and lower deposit costs were responsible for the increase from the third quarter last year. Net interest spread of 4.03 percent increased six basis points from the second quarter of 1996 and 22 basis points from the third quarter of 1995. The net interest spread increased primarily because the Corporation was able to maintain its earnings on funds with higher loan volumes and the favorable impact of the acquisitions, while deposit costs decreased when compared to the third quarter of 1995.
<TABLE> <CAPTION> Change in Net Interest Income ------------------------------------------------------------------ Third Quarter Third Quarter Year-to-Date 1996 1996 1996 vs. vs. vs. Third Quarter Second Quarter Year-to-Date 1995 1996 1995 ------------------------------------------------------------------ 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 $ 5,830 92.73% $ 857 80.55% $17,758 89.26% Due to interest rate spread 457 7.27 207 19.45 2,136 10.74 ------- ------- ------- ------- ------- ------- $ 6,287 100.00% $1,064 100.00% $19,894 100.00% ======= ======= ====== ======= ======= ======= </TABLE> Non-Interest Income <TABLE> <CAPTION> Nine Months Ended Three Months Ended September 30 ------------------------------ ------------------ 1996 1995 -------------------- ------- Non-Interest Income 1996 1995 Sept 30 June 30 Sept 30 - ------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> Trust fees $25,368 $23,841 $ 8,652 $ 8,384 $ 7,720 Service charges on deposit accounts 28,266 22,086 9,825 9,656 7,548 Other service charges, collection and exchange charges, commissions and fees 6,835 8,096 2,053 2,154 2,900 Net gain (loss) on securities transactions (997) 93 1 (903) Other 11,074 10,109 2,648 5,350 2,898 ------- ------- -------- ------- ------- Total $70,546 $64,225 $23,179 $24,641 $21,066 ======= ======= ======== ======= ======= </TABLE> For the third quarter 1996... Total non-interest income was down $1.5 million or 5.9 percent, compared to the second quarter of 1996 and up $2.1 million or 10 percent compared to the third quarter of 1995. Trust fee income increased 3.2 percent compared to last quarter and increased 12.1 percent from the third quarter of 1995. The increase compared to both periods can be attributed to higher investment, personal, and employee benefit trust fees. Service charges on deposit accounts increased 1.8 percent from the second quarter of this year and increased 30.2 percent from the third quarter of 1995. The increase from both periods is a result from increased volumes processed for correspondent banks. The increase from the third quarter of last year also resulted from the impact of the acquisitions. Service charges from acquisitions represented approximately one-third of the increase compared to the same quarter one year ago. Other service charges were down 4.7 percent and 29.2 percent compared to the second quarter of 1996 and the third quarter of 1995, respectively. The decrease from both quarters is primarily due to lower income from bankcard discounts as a result of the Corporation's outsourcing of its bankcard processing operations, which was completed in May 1996. Other non-interest income decreased $2.7 million or 50.5 percent from the second quarter of this year and decreased $250,000 or 8.6 percent compared to the third quarter of 1995. The decrease from the second quarter is primarily due to the gains recorded in the second quarter on the disposition of certain loans and foreclosed assets and the gain recognized from the outsourcing of the Corporation's bankcard processing operations. Most of the decrease from the third quarter of 1995 is due to gains on the disposition of certain loans.
For the nine months ended September 30, 1996... Non-interest income rose $6.3 million or 9.8 percent compared to the same period last year. Trust income increased $1.5 million or 6.4 percent due to higher investment, employee benefit trust, and personal trust fees which offset lower corporate trust income. Service charges on deposit accounts increased $6.2 million or 28.0 percent compared to the same period one year ago. The increase is mainly due to higher volumes, primarily processing for correspondent banks, service charges on retail deposits and acquisitions, which account for approximately one-third of the increase. Other service charges and fees decreased $1.3 million or 15.6 percent mostly due to lower income from bankcard discounts as a result of the Corporation's outsourcing of its bankcard processing operations which was completed in May 1996. During the second quarter of 1996, the Corporation restructured a portion of its available for sale investment portfolio resulting in losses of $903,000. This portfolio restructuring of replacing lower-yielding securities with higher-yielding securities should have a favorable impact on net interest income in the future. Other income is up $965,000 or 9.5 percent compared to the same period last year primarily as a result of gains on the disposition of certain loans, acquisitions and the gain recognized from the outsourcing of the Corporation's bankcard processing operations during the second quarter of 1996. Non-Interest Expense <TABLE> <CAPTION> Three Months Ended Nine Months Ended ------------------------------ September 30 1996 1995 ------------------ -------------------- ------- Non-Interest Expense 1996 1995 Sept 30 June 30 Sept 30 - ------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> Salaries and wages $ 53,073 $ 43,026 $18,086 $18,350 $15,094 Pension and other employee benefits 11,720 7,786 3,764 4,498 2,609 Net occupancy of banking premises 14,262 13,438 4,736 4,665 4,532 Furniture and equipment 8,587 7,890 2,895 2,811 2,780 Intangible amortization 8,375 5,952 2,857 2,903 2,124 Other 38,340 41,319 12,279 13,368 13,070 ------- ------- ------- ------- ------- 134,357 119,411 44,617 46,595 40,209 Provision for real estate losses 600 100 ------- ------- ------- ------- ------- Total $134,357 $120,011 $44,617 $46,595 $40,309 ======= ======= ======= ======= ======= </TABLE> For the third quarter 1996.. Non-interest expense was down $2.0 million or 4.2 percent compared to last quarter and increased $4.3 million or 10.7 percent compared to the third quarter of 1995. The $1.6 million early retirement charge and higher sundry losses recorded in the second quarter of 1996 were the primary reason for the decrease from the second quarter. The primary reason for the increase in non- interest expenses from the third quarter a year ago was due to the acquisitions. Salaries and wages decreased 1.4 percent compared with the second quarter of 1996 and increased 19.8 percent from the third quarter of 1995. The increase from the third quarter of 1995 is primarily a result of the acquisitions. Pension and employee benefits decreased 16.3 percent compared to last quarter primarily due to the second quarter's early retirement charge and increased 44.3 percent compared to the third quarter of 1995 mostly because of acquisitions. Also contributing to the increase from the third quarter of 1995 is a premium adjustment related to workers' compensation insurance and higher payroll tax and medical insurance expense. Net occupancy of banking premises expense was flat when compared to the second quarter of 1996 and increased 4.5 percent from the third quarter of 1995. The increase from the third quarter of 1995 primarily results from higher lease, building maintenance, and property tax expenses related to the acquisitions. Amortization of intangibles was steady when compared to the second quarter of 1996 and increased 34.5 percent from the third quarter of 1995 due to the acquisitions. Other non-interest expenses decreased 8.1 percent from the second quarter mainly due to fewer sundry losses, lower advertising and printing and other professional expenses. Other non-interest expenses were down 6.1 percent compared to the third quarter of 1995, primarily due to decreases in FDIC insurance, sundry losses, federal reserve service charges franchise taxes and other professional expenses.
For the nine months ended September 30, 1996 Total non-interest expense was up $14.3 million or 12.0 percent compared to the same period one year ago. Salaries and wages were up $10.0 million or 23.4 percent compared to the same period one year ago primarily because of the acquisitions. Pension and other benefits increased $3.9 million or 50.5 percent from the same period last year due to higher retirement plan expense, payroll tax, and medical insurance expense related to the acquisitions and the impact of the early retirement charge. In addition, a premium adjustment related to workers' compensation insurance added to the increase from the same period one year ago. Net occupancy of banking premises increased $824,000, or 6.1 percent, primarily due to higher lease, building maintenance, and property tax expense related to the acquisitions. Furniture and equipment expense increased $697,000, or 8.8 percent, mostly due to higher depreciation expense associated with the acquisitions. Intangible amortization increased $2.4 million or 40.7 percent from the same period one year ago due to acquisitions. Other non-interest expenses decreased $3.0 million or 7.2 percent, primarily due to decreases in FDIC insurance, franchise taxes, and federal reserve service charges. The efficiency ratio measures what percentage of bank revenue is absorbed by non-interest expense. The Corporation's year-to-date efficiency ratio was 65.6 percent compared to 67.3 percent in 1995. Income Taxes Tax expense for the third quarter of 1996 was $7,727,000. This compares to tax expense of $6,442,000 for the third quarter of 1995. The Corporation has an effective tax rate for 1996 and 1995 which approximates the statutory rate of 35 percent. Balance Sheet Average assets of $4,494,317,000 were flat when compared with the second quarter of 1996 and increased 11.5 percent from the third quarter of 1995 principally because of the acquisitions. Total deposits averaged $3,905,479,000 for the current quarter, flat when compared to the previous quarter and up 16.4 percent from the third quarter of 1995. Loans <TABLE> <CAPTION> 1996 1995 ------------------------ ------------------------- Loan Portfolio Percentage Period-End Balances September 30 of Total December 31 September 30 - -------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Commercial $ 632,435 29.0% $ 508,990 $ 506,116 Consumer 465,574 21.3 402,169 380,559 Real estate 1,017,419 46.6 837,905 810,188 Other 69,095 3.2 69,035 66,137 Unearned discount (1,585) (.1) (1,337) (1,728) ---------- ------ ---------- ---------- Total Loans $2,182,938 100.0% $1,816,762 $1,761,272 ========== ====== ========== ========== </TABLE> Average loans for the third quarter of 1996 were $2,142,038,000. This represents an increase in average loans of 4.1 percent from the second quarter of 1996 and an increase of 22.6 percent from the third quarter of last year. At September 30, 1996, period-end loans totaled $2,182,938,000 up 3.6 percent from the previous quarter and up 23.9 percent from the same period last year. Approximately, 49 percent of the increase in loans from a year ago resulted from acquisitions. Real Estate Loans Real estate loans at September 30, 1996, were $1,017,419,000 or 46.6 percent of period-end loans, compared to 46.0 percent a year ago. Residential permanent mortgage loans at September 30, 1996, were $415,452,000 compared to $403,489,000 at June 30, 1996, and $332,469,000 at September 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. At September 30, 1996, real estate loans 90 days past due (excluding non- accrual and restructured loans) were $2,772,000, compared with $3,461,000 at June 30, 1996, and $3,858,000 at September 30, 1995.
<TABLE> <CAPTION> 1996 1995 --------------------- -------- Real Estate Loans Percentage Period-End Balances Sept 30 of Total Sept 30 - ------------------------------------------------------------------------------- <S> <C> <C> <C> Construction $ 66,747 6.5% $ 45,329 Land 47,577 4.7 39,988 Permanent mortgages: Commercial 233,623 23.0 200,519 Residential 415,452 40.8 332,469 Other 254,020 25.0 191,883 ---------- ------ -------- $1,017,419 100.0% $810,188 ========== ====== ======== Non-accrual and restructured $ 6,919 .7% $ 12,606 </TABLE> Mexico The Corporation's cross border outstandings to Mexico, excluding $16,310,000 in loans secured by assets held in the United States, totaled $30,434,000 at September 30, 1996, or 1.4 percent of total loans up from $25,345,000 and $25,262,000 at June 30, 1996 and September 30, 1995, respectively. All of the Corporation's Mexican loans are either secured by liquid U.S. assets or are unsecured loans to major financial institutions to finance international trade transactions. Of the trade-related credits, approximately 88 percent are related to companies exporting from Mexico. As of September 30, 1996, none of the Mexican related loans were on non-performing status. Non-Performing Assets <TABLE> <CAPTION> NON-PERFORMING ASSETS ------------------------- Real September 30, 1996 Estate Other Total - -------------------------------------------------------------------------- <S> <C> <C> <C> Non-accrual and restructured loans $6,919 $4,248 $11,167 Foreclosed assets 1,291 662 1,953 ------ ------ ------- Total $8,210 $4,910 $13,120 ====== ====== ======= As a percentage of total non-performing assets 62.6% 37.4% 100.0% </TABLE> Non-performing assets totaled $13,120,000 at September 30, 1996 down 12.4 percent and 23.5 percent, respectively, from $14,977,000 at June 30, 1996 and $17,155,000 at September 30, 1995. Non-performing assets as a percentage of total loans and foreclosed assets decreased to .60 percent at September 30, 1996 from .97 percent one year ago. 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 $203,000 or $.01 per common share for the third quarter of 1996, compared to approximately $231,000 or $.01 per common share for the second quarter of 1996 and $278,000 or $.01 per common share for the third quarter of 1995. For the nine months ended September 30, 1996, the after-tax impact (assuming a 35 percent marginal tax rate) was approximately $673,000 or $.03 per common share, compared with approximately $861,000 or $.04 per common share for the comparable period last year. Total loans 90 days past due (excluding non-accrual and restructured loans) were $5,497,000 at September 30, 1996, compared to $5,693,000 at June 30, 1996, and $5,964,000 at September 30, 1995.
Allowance for Possible Loan Losses The allowance for possible loan losses was $36,230,000 at September 30, 1996, compared to $35,035,000 at June 30, 1996 and $30,600,000 at September 30, 1995. The allowance for possible loan losses as a percentage of non-accrual and restructured loans was 324.4 percent at September 30, 1996, compared to 257.8 percent at June 30, 1996 and 219.7 percent at the end of the third quarter of 1995. The Corporation recorded a $2,300,000 provision for possible loan losses during the third quarter of 1996. This compares to $1,325,000 provision for possible loan losses during the second quarter of 1996 and $1,500,000 for the third quarter of 1995. The allowance for possible loan losses was maintained at 1.66 percent of period-end loans. Net charge-offs in the third quarter of 1996 totaled $1,105,000, compared to a net recoveries of $481,000 for the second quarter of 1996 and $214,000 for the third quarter of 1995. <TABLE> <CAPTION> NET CHARGE-OFFS (RECOVERIES) --------------------------- 1996 1995 ----------------- ------- Third Second Third Quarter Quarter Quarter - ------------------------------------------------------------------- <S> <C> <C> <C> Real Estate $ (414) $(1,306) $ (118) Commercial and industrial 1,345 401 (690) Consumer 288 424 608 Other, including foreign (114) (14) ------- ------- ------ $ 1,105 $ (481) $ (214) ======== ======= ======= Provision for possible loan losses $ 2,300 $ 1,325 $ 1,500 Allowance for possible loan losses 36,230 35,035 30,600 </TABLE> Capital and Liquidity At September 30, 1996, shareholders' equity was $361,374,000 compared to $347,850,000 at June 30, 1996 and $330,150,000 at September 30, 1995. The Corporation had an unrealized gain on securities available for sale, net of deferred taxes, of $251,000 as of September 30, 1996 compared to a $6.4 million unrealized gain as of September 30, 1995, reflecting a change of $6.2 million. The decrease in the unrealized gain since a year ago is primarily due to the increase in market interest rates in 1996. Currently, under regulatory requirements, the unrealized gain or loss on securities available for sale is not included in the calculation of risk-based capital and leverage ratios. The Corporation paid a cash dividend of $.21 per common share in the third and second quarters of 1996 compared to $.18 per common share for the third quarter a year ago. This equates to a dividend payout ratio of 33.7 percent, 34.9 percent and 32.7 percent for the third and second quarters of 1996 and the third quarter of 1995, respectively. The Federal Reserve Board (the "Board") utilizes capital guidelines designed to measure Tier 1 and Total Capital and take into consideration the risk inherent in both on-balance sheet and off-balance sheet items. The following table summarizes Tier 1 and Total Capital information for the Corporation at September 30, 1996 and 1995. As a result of the acquisitions, all the regulatory capital ratios are down when compared to the third quarter of 1995.
<TABLE> <CAPTION> September 30, 1996 September 30, 1995 ------------------- ------------------- Capital Amount Ratio Amount Ratio - ------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Risk-Based Tier 1 Capital $ 294,211 11.84% $ 269,969 13.03% Tier 1 Capital Minimum requirement 99,373 4.00 82,905 4.00 Total Capital $ 325,329 13.10% $ 295,935 14.28% Total Capital Minimum requirement 198,745 8.00 165,810 8.00 Risk-adjusted assets, net of goodwill $2,484,315 $2,072,629 Leverage ratio 6.65% 6.80% Average equity as a percentage of average assets 7.96 8.19 </TABLE> The FDIC Improvement Act of 1991 ("FDICIA") established five capital tiers for depository institutions and final rules relating to these tiers were adopted by the federal banking agencies. At September 30, 1996, the Corporation's subsidiary banks were considered "well capitalized" as defined by FDICIA, the highest rating, and the Corporation's capital ratios were in excess of "well capitalized" levels. 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, 1996. 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.
<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, 1996 September 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 $ 20 $ 1 3.50% $ 17 3.88% Securities: U.S. Treasury 287,358 11,421 5.31 235,723 $ 10,583 6.00 U.S. Government agencies and corporations 1,277,994 63,680 6.64 1,308,612 62,711 6.39 States and political subdivisions 5,478 388 9.45 5,952 412 9.22 Other 6,830 292 5.69 10,441 504 6.43 --------- ------- --------- ------ Total securities 1,577,660 75,781 6.41 1,560,728 74,210 6.34 Federal funds sold and securities purchased under resale agreements 122,653 4,888 5.24 110,208 4,781 5.72 Loans, net of unearned discount 2,045,473 135,691 8.86 1,649,910 110,959 8.99 --------- ------- ---------- ------- Total Earning Assets and Average Rate Earned 3,745,806 216,361 7.71 3,320,863 189,950 7.64 Cash and due from banks 482,272 365,313 Allowance for possible loan losses (34,337) (27,602) Banking premises and equipment 99,648 90,653 Accrued interest and other assets 166,821 140,033 --------- ---------- Total Assets $4,460,210 $3,889,260 ========== ========== LIABILITIES Demand deposits: Commercial and individual $ 820,404 $ 688,880 Correspondent banks 189,710 124,648 Public funds 43,966 35,301 --------- --------- Total demand deposits 1,054,080 848,829 Time deposits: Savings and Interest-on-Checking 729,156 7,499 1.37 727,069 9,931 1.83 Money market deposit accounts 793,210 23,193 3.91 587,775 16,704 3.80 Time accounts 1,050,864 38,488 4.89 944,952 34,888 4.94 Public funds 236,075 7,845 4.44 93,696 2,961 4.23 --------- ------- --------- ------- Total Time deposits 2,809,305 77,025 3.66 2,353,492 64,484 3.66 --------- --------- Total Deposits 3,863,385 3,202,321 Federal funds purchased and securities sold under repurchase agreements 145,862 5,350 4.82 294,642 11,731 5.25 Other borrowings 19,509 760 5.21 9,988 403 5.40 --------- ------- ---------- ------- Total Interest-Bearing Funds and Average Rate Paid 2,974,676 83,135 3.73 2,658,122 76,618 3.85 --------- ------- ---- ---------- ------- ---- Accrued interest and other liabilities 77,814 63,895 --------- ---------- Total Liabilities 4,106,570 3,570,846 SHAREHOLDERS' EQUITY 353,640 318,414 --------- ---------- Total Liabilities and Shareholders' Equity $4,460,210 $3,889,260 ========== ========== Net interest income $133,226 $113,332 ======= ======= Net interest spread 3.98% 3.79% ===== ===== Net interest income to total average earning assets 4.75% 4.56% ===== ===== *Taxable-equivalent basis assuming a 35% tax rate. </TABLE>
<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, 1996 June 30, 1996 ----------------------------------------------------- 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 $ 1 3.50% Securities: U.S. Treasury $ 273,301 $ 3,692 5.37% 301,233 3,899 5.21 U.S. Government agencies and corporations 1,235,556 20,660 6.69 1,287,518 21,316 6.62 States and political subdivisions 5,457 129 9.45 5,480 129 9.45 Other 6,672 95 5.67 6,235 91 5.86 --------- ------- --------- ------- Total securities 1,520,986 24,576 6.46 1,600,466 25,435 6.36 Federal funds sold and securities purchased under resale agreements 107,189 1,475 5.38 122,940 1,472 4.73 Loans, net of unearned discount 2,142,038 47,423 8.81 2,057,029 45,473 8.89 --------- ------- --------- ------- Total Earning Assets and Average Rate Earned 3,770,213 73,474 7.76 3,780,456 72,381 7.68 Cash and due from banks 486,938 486,828 Allowance for possible loan losses (35,541) (35,067) Banking premises and equipment 101,290 99,984 Accrued interest and other assets 171,417 177,254 --------- --------- Total Assets $4,494,317 $4,509,455 ========== ========== LIABILITIES Demand deposits: Commercial and individual $ 844,418 $ 839,300 Correspondent banks 208,050 193,535 Public funds 46,949 40,138 ---------- ---------- Total demand deposits 1,099,417 1,072,973 Time deposits: Savings and Interest-on-Checking 711,562 2,373 1.33 732,882 2,499 1.37 Money market deposit accounts 824,565 8,321 4.01 796,624 7,787 3.93 Time accounts 1,062,842 12,938 4.84 1,055,894 12,696 4.84 Public funds 207,093 2,330 4.48 252,071 2,826 4.51 ---------- ------- ---------- ------- Total time deposits 2,806,062 25,962 3.68 2,837,471 25,808 3.66 ---------- ------- ---------- ------- Total deposits 3,905,479 3,910,444 Federal funds purchased and securities sold under repurchase agreements 127,292 1,517 4.66 150,965 1,728 4.53 Other borrowings 23,376 307 5.23 16,936 221 5.25 ---------- ------- ---------- ------- Total Interest-Bearing Funds and Average Rate Paid 2,956,730 27,786 3.73 3,005,372 27,757 3.71 ---------- ------- ---- ---------- ------- ---- Accrued interest and other liabilities 80,427 78,243 ---------- ---------- Total Liabilities 4,136,574 4,156,588 SHAREHOLDERS' EQUITY 357,743 352,867 ---------- ---------- Total Liabilities and Shareholders' Equity $4,494,317 $4,509,455 ========== ========== Net interest income $45,688 $44,624 ======= ======= Net interest spread 4.03% 3.97% ==== ==== Net interest income to total average earning assets 4.83% 4.74% ==== ==== *Taxable-equivalent basis assuming a 35% tax rate. </TABLE>
<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, 1996 December 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 $ 27 3.50% $ 20 $ 2 3.51% Securities: U.S. Treasury 287,694 $ 3,829 5.35 248,598 3,559 5.68 U.S. Government agencies and corporations 1,311,374 21,705 6.62 1,287,154 21,054 6.54 States and political subdivisions 5,497 130 9.45 5,603 131 9.40 Other 7,585 106 5.57 5,971 89 6.01 --------- ------ ---------- ------- Total securities 1,612,150 25,770 6.40 1,547,326 24,833 6.41 Federal funds sold and securities purchased under resale agreements 138,001 1,941 5.57 137,784 1,951 5.54 Loans, net of unearned discount 1,936,289 42,795 8.89 1,779,371 40,238 8.97 --------- ------ --------- ------ Total Earning Assets and Average Rate Earned 3,686,467 70,506 7.67 3,464,501 67,024 7.69 Cash and due from banks 453,391 430,154 Allowance for possible loan losses (32,390) (31,040) Banking premises and equipment 97,654 90,738 Accrued interest and other assets 165,830 154,668 --------- --------- Total Assets $4,370,952 $4,109,021 ========= ========= LIABILITIES Demand deposits: Commercial and individual $ 777,229 $ 719,105 Correspondent banks 167,345 151,021 Public funds 44,780 41,139 --------- --------- Total demand deposits 989,354 911,265 Time deposits: Savings and Interest-on-Checking 743,216 2,628 1.42 700,966 2,729 1.54 Money market deposit accounts 758,097 7,085 3.76 703,450 6,971 3.93 Time accounts 1,033,725 12,853 5.00 1,024,321 13,136 5.09 Public funds 249,378 2,689 4.34 221,741 2,489 4.45 --------- ------ --------- ------- Total time deposits 2,784,416 25,255 3.65 2,650,478 25,325 3.79 --------- ------ --------- ------- Total deposits 3,773,770 3,561,743 Federal funds purchased and securities sold under repurchase agreements 159,535 2,105 5.22 123,052 1,565 4.98 Other borrowings 18,173 232 5.14 20,010 330 6.55 --------- ------ --------- ------ Total Interest-Bearing Funds and Average Rate Paid 2,962,124 27,592 3.74 2,793,540 27,220 3.86 --------- ------ ---- --------- ------- ---- Accrued interest and other liabilities 69,209 66,463 --------- --------- Total Liabilities 4,020,687 3,771,268 SHAREHOLDERS' EQUITY 350,265 337,753 --------- --------- Total Liabilities and Shareholders' Equity $4,370,952 $4,109,021 ========= ========= Net interest income $42,914 $ 39,804 ======= ======== Net interest spread 3.93% 3.83% ===== ===== Net interest income to total average earning assets 4.67% 4.58% ===== ===== * Taxable-equivalent basis assuming a 35% tax rate. </TABLE>
<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 --------------------------- Interest Average Income/ Yield/ Balance Expense Cost -------- ------- ----- <S> <C> <C> <C> ASSETS Time deposits $ 15 3.52% Securities: U.S. Treasury 255,079 $ 3,848 5.99 U.S. Government agencies and corporations 1,301,094 21,001 6.46 States and political subdivisions 5,647 134 9.49 Other 6,447 97 6.03 --------- ------- Total securities 1,568,267 25,080 6.39 Federal funds sold and securities purchased under resale agreements 114,483 1,660 5.67 Loans, net of unearned discount 1,747,810 39,939 9.07 --------- ------- Total Earning Assets and Average Rate Earned 3,430,575 66,679 7.73 Cash and due from banks 392,513 Allowance for possible loan losses (29,708) Banking premises and equipment 92,132 Accrued interest and other assets 146,414 --------- Total Assets $4,031,926 ========== LIABILITIES Demand deposits: Commercial and individual $ 705,914 Correspondent banks 134,085 Public funds 37,277 ---------- Total demand deposits 877,276 Time deposits: Savings and Interest-on-Checking 720,160 2,908 1.60 Money market deposit accounts 638,351 6,238 3.88 Time accounts 1,006,887 13,061 5.15 Public funds 113,599 1,269 4.43 ---------- ------- Total time deposits 2,478,997 23,476 3.76 ---------- ------- Total Deposits 3,356,273 Federal funds purchased and securities sold under repurchase agreements 258,409 3,506 5.31 Other borrowings 21,818 296 5.38 ---------- ------- Total Interest-Bearing Funds and Average Rate Paid 2,759,224 27,278 3.92 ---------- ------- ---- Accrued interest and other liabilities 66,878 ---------- Total Liabilities 3,703,378 SHAREHOLDERS' EQUITY 328,548 ---------- Total Liabilities and Shareholders' Equity $4,031,926 ========== Net interest income $39,401 ======= Net interest spread 3.81% ==== Net interest income to total average earning assets 4.58% ==== *Taxable-equivalent basis assuming a 35% tax rate. </TABLE>
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 Schedule (EDGAR Version) (b) Reports on Form 8-K None
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 14, 1996 By:/s/Phillip D. Green ----------------------- Phillip D. Green Executive Vice President and Chief Financial Officer (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 27 Statement re: Financial Data Schedule (EDGAR Version)