Shares of Cullen/Frost Bankers, Inc. (CFR - Free Report) gained 4.7% after the company recorded a positive earnings surprise of 4.92% in its first-quarter 2017 results. The company reported earnings per share of $1.28, beating the Zacks Consensus Estimate of $1.22. Moreover, the reported figure was up from $1.07 per share recorded in the year-ago quarter.
Higher revenues primarily supported the beat. Both loans and deposits showed improvement. However, elevated expenses remained the downside.
Net income available to common shareholders came in at $82.9 million, exceeding the year-ago quarter figure by approximately 24.1%.
Revenue Growth Offsets Escalated Expenses
The company’s total revenue was $336.1 million, up 3.3% from the prior-year quarter. Moreover, it outpaced the Zacks Consensus Estimate of $320 million.
Net interest income on a taxable-equivalent basis increased 10.1% year over year to $252.4 million. The increase was primarily attributable to a rise in earning assets in loans and securities, higher yields on loans and increase in cash balances. Moreover, net interest margin increased 6 basis points (bps) year over year to 3.64%, as the Fed’s interest rate hikes led to higher yielding assets.
Non-interest income totaled $83.7 million, down 12.9% from the year-ago quarter. The decrease was mainly due to absence of net gain on securities transactions and lower insurance and commission fees.
Non-interest expenses of $187.9 million rose 4.9% year over year. The rise was primarily due to higher assessment rate as a result of new surcharge and an increase in assets.
Strong Balance Sheet
As of Mar 31, 2017, total loans were $12.2 billion, up 1.8% from the previous quarter. Total deposits amounted to $26.1 billion, up 1.3% sequentially.
Credit Quality: A Mixed Bag
As of Mar 31, 2017, non-performing assets were $118.2 million, down 34.3% from the year-ago quarter. Also, allowance for loan losses, as a percentage of total loans, was 1.26%, down 14 bps from the prior-year quarter.
However, net charge-offs, annualized as a percentage of average loans expanded 18 bps year over year to 0.27%. Provision for loan losses plunged 72% year over year to roughly $8 million.
Profitability and Capital Ratios Improve
As of Mar 31, 2017, Tier 1 risk-based capital ratio was 13.50% compared with 12.66% at the end of the prior-year quarter. Total risk-based capital ratio was 15.62%, up from 14.39% as of Mar 31, 2016. Further, leverage ratio increased to 8.34% from 7.96% as of Mar 31, 2016.
Return on average assets and return on average common equity were 1.12% and 11.55%, respectively, compared with 0.96% and 9.55% in the prior-year quarter.
Our Viewpoint
Cullen/Frost’s growth in loan and deposits indicates continued organic growth. However, escalating expenses may continue to curb the company’s bottom-line growth. In addition, significant exposure to the risky real estate loans and stringent regulations raise concerns.
Cullen/Frost currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Texas Capital Bancshares, Inc. (TCBI - Free Report) reported a negative earnings surprise of 9.1% in first-quarter 2017. Earnings per share of 80 cents missed the Zacks Consensus Estimate by 8 cents. However, the bottom line improved 63.3% from the prior-year quarter figure of 49 cents per share.
TCF Financial Corporation reported first-quarter 2017 earnings per share of 25 cents, lagging the Zacks Consensus Estimate and the prior-year quarter figure of 26 cents. The lower-than-expected results were primarily due to a decline in non-interest income as well as elevated expenses.
Huntington Bancshares Incorporated (HBAN - Free Report) reported adjusted earnings per share of 21 cents, missing the Zacks Consensus Estimate by a penny. Also, the figure was 15% below the prior-year quarter. The reported earnings exclude FirstMerit acquisition-related net expenses of 4 cents per share.
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Shares of Cullen/Frost Bankers, Inc. (CFR - Free Report) gained 4.7% after the company recorded a positive earnings surprise of 4.92% in its first-quarter 2017 results. The company reported earnings per share of $1.28, beating the Zacks Consensus Estimate of $1.22. Moreover, the reported figure was up from $1.07 per share recorded in the year-ago quarter.
Higher revenues primarily supported the beat. Both loans and deposits showed improvement. However, elevated expenses remained the downside.
Net income available to common shareholders came in at $82.9 million, exceeding the year-ago quarter figure by approximately 24.1%.
Revenue Growth Offsets Escalated Expenses
The company’s total revenue was $336.1 million, up 3.3% from the prior-year quarter. Moreover, it outpaced the Zacks Consensus Estimate of $320 million.
Net interest income on a taxable-equivalent basis increased 10.1% year over year to $252.4 million. The increase was primarily attributable to a rise in earning assets in loans and securities, higher yields on loans and increase in cash balances. Moreover, net interest margin increased 6 basis points (bps) year over year to 3.64%, as the Fed’s interest rate hikes led to higher yielding assets.
Non-interest income totaled $83.7 million, down 12.9% from the year-ago quarter. The decrease was mainly due to absence of net gain on securities transactions and lower insurance and commission fees.
Non-interest expenses of $187.9 million rose 4.9% year over year. The rise was primarily due to higher assessment rate as a result of new surcharge and an increase in assets.
Strong Balance Sheet
As of Mar 31, 2017, total loans were $12.2 billion, up 1.8% from the previous quarter. Total deposits amounted to $26.1 billion, up 1.3% sequentially.
Credit Quality: A Mixed Bag
As of Mar 31, 2017, non-performing assets were $118.2 million, down 34.3% from the year-ago quarter. Also, allowance for loan losses, as a percentage of total loans, was 1.26%, down 14 bps from the prior-year quarter.
However, net charge-offs, annualized as a percentage of average loans expanded 18 bps year over year to 0.27%. Provision for loan losses plunged 72% year over year to roughly $8 million.
Profitability and Capital Ratios Improve
As of Mar 31, 2017, Tier 1 risk-based capital ratio was 13.50% compared with 12.66% at the end of the prior-year quarter. Total risk-based capital ratio was 15.62%, up from 14.39% as of Mar 31, 2016. Further, leverage ratio increased to 8.34% from 7.96% as of Mar 31, 2016.
Return on average assets and return on average common equity were 1.12% and 11.55%, respectively, compared with 0.96% and 9.55% in the prior-year quarter.
Our Viewpoint
Cullen/Frost’s growth in loan and deposits indicates continued organic growth. However, escalating expenses may continue to curb the company’s bottom-line growth. In addition, significant exposure to the risky real estate loans and stringent regulations raise concerns.
Cullen/Frost currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Texas Capital Bancshares, Inc. (TCBI - Free Report) reported a negative earnings surprise of 9.1% in first-quarter 2017. Earnings per share of 80 cents missed the Zacks Consensus Estimate by 8 cents. However, the bottom line improved 63.3% from the prior-year quarter figure of 49 cents per share.
TCF Financial Corporation reported first-quarter 2017 earnings per share of 25 cents, lagging the Zacks Consensus Estimate and the prior-year quarter figure of 26 cents. The lower-than-expected results were primarily due to a decline in non-interest income as well as elevated expenses.
Huntington Bancshares Incorporated (HBAN - Free Report) reported adjusted earnings per share of 21 cents, missing the Zacks Consensus Estimate by a penny. Also, the figure was 15% below the prior-year quarter. The reported earnings exclude FirstMerit acquisition-related net expenses of 4 cents per share.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buys"" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 ""Strong Sells."" Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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