Cullen/Frost Bankers Inc., the San Antonio-based parent company of Frost Bank, earned $169.3 million, or $2.65 a share, on $597.1 million in revenue in the first quarter. Analysts expected it to earn $2.48 a share. Shown is the bank’s headquarters building.
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Cullen/Frost Bankers Inc. Chairman and CEO Phil Green said he was “encouraged by the momentum” in Frost Bank’s commercial segment.
San Antonio Express-News file photo
Cullen/Frost Bankers Inc. posted higher first-quarter profit as it made more loans, even as signs emerge that the Iran war is beginning to weigh on Texas businesses.
The San Antonio-based parent company of Frost Bank said Thursday it earned $169.3 million, or $2.65 a share, on $597.1 million in revenue in the first quarter, compared with earnings of $149.3 million, or $2.30 a share, on $560.4 million in revenue in the same period a year ago.
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Analysts expected the company to earn $2.48 a share, according to Yahoo Finance.
The strong results come as a Federal Reserve Bank of Dallas survey found roughly half of Texas firms already are seeing negative effects from the Iran war, with many citing higher fuel costs, economic uncertainty and softer demand.
Those pressures eventually could ripple through banks like Frost, which depend on business activity and borrowing across the state.
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For now, Chairman and CEO Phil Green said the bank’s commercial business remains strong, pointing to a record 1,016 new relationships in the quarter. Nearly half of those had been with too-big-to-fail banks.
“I’m encouraged by the momentum we’re seeing in this segment,” he said during an analyst conference call.
The bank made more loans in the first quarter, with the average balance rising 5.9% from a year earlier to $22 billion.
That helped lift its main source of revenue — interest earned on loans and investments — to $460.8 million, up 5.6%.
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The bank also earned more on the gap between what it charges borrowers and pays depositors, known as net interest margin, while fee-based income rose 9.9% to $136.3 million.
Frost is continuing to expand in major Texas metros, including Austin, Dallas and Houston. The bank recently opened a branch in Austin’s Arboretum area, its 205th location.
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Since launching its Houston expansion in 2018, Frost has increased its branch count by more than 50%, with newer markets generating $2.6 billion in loans and $3.2 billion in deposits so far.
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Average deposits rose 1.4% from a year earlier to $42.2 billion but declined from the previous quarter, reflecting competition for customers seeking higher yields.
Noninterest expenses increased 5.1% to $365.7 million, driven by higher staffing and technology costs.
Credit quality remained strong. The bank set aside $6.7 million for potential loan losses, down from $13.1 million a year earlier.
Wall Street analysts remain cautious on Cullen/Frost, with most maintaining “hold” or equivalent ratings and price targets in the mid-$140s range, suggesting limited near-term upside. On Thursday, the stock rose $2.13 to close at $144.93.
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“This was another consistent quarter for the company,” RBC Capital Markets LLC analysts said in a brief report on the results.
Cullen/Frost also returned capital to shareholders, repurchasing $70 million in stock and raising its quarterly dividend to $1.03 a share.
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While the bank’s results point to continued strength — including in fast-growing markets like Austin — the Dallas Fed data suggests businesses across Texas are bracing for a tougher stretch if higher costs and uncertainty tied to the war persist.
Meanwhile, Frost now faces at least nine lawsuits tied to a recent data breach involving a third-party vendor, according to court records. The bank has said there has been no evidence of unauthorized access to its network and customers are able to safely use its services.