Cullen/Frost Bankers Inc. reported higher second-quarter profit Thursday as the San Antonio-based bank holding company continued to add customers while increasing lending and deposits, extending a run of steady expansion across Texas.
The parent company of Frost Bank earned $170.4 million, or $2.70 per diluted share, on about $576 million in revenue, versus $155.3 million, or $2.39 per share, on $546.9 million in revenue a year earlier. Analysts surveyed by Yahoo Finance had expected earnings of $2.57 per share.
Chairman and CEO Phil Green said lending and deposits increased at a faster pace during the quarter. The bank also opened four branches, one each in San Antonio, Austin, Dallas and Fort Worth, bringing the total to seven this year.
Average loans increased 7.4% from a year earlier to $22.6 billion during the quarter, while average deposits rose 2.1% to $42.6 billion, according to the company.
Net interest margin — a key measure of bank profitability — improved to 3.75% from 3.67% a year earlier.
The results largely mirrored the Federal Reserve Bank of Dallas’ June survey of bankers, which found robust loan demand across Texas and growing optimism about business conditions despite expectations that loan performance could soften slightly in the months ahead.
One measure of credit quality weakened for Frost. Non-accrual loans — loans on which borrowers have stopped making scheduled payments — increased to $112.7 million at the end of the quarter from $62.4 million a year earlier.
At the same time, the bank’s credit-loss expense declined to $9.8 million from $13.1 million, while net charge-offs — which represent loans the bank has determined are unlikely to be collected — fell to $9.5 million from $11.2 million.
In a statement, Green attributed the second-quarter results to continued success in attracting customers despite intense competition, saying Frost bankers “continue to compete and win in an intensely competitive environment” while economic trends in the bank’s Texas markets remain strong.
The bank said its number of consumer and business customers increased 5.9% from a year earlier.
The results came after Wall Street firms Raymond James and Jefferies changed their ratings on Frost this month, according to Investing.com. Raymond James downgraded the stock to “market perform,” saying its strong performance had left it fully valued, while Jefferies upgraded it to a “hold.”
On Thursday, its stock was down about 2.5% in midmorning trading.
The board increased the quarterly common-stock dividend to $1.03 per share from $1.00.
Frost, with nearly $54 billion in assets, is the largest bank headquartered in San Antonio and among the nation’s 50 largest banks.
This story will be updated later today.