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Cullen/Frost Has Earned Its Premium, and More

McEvoy's price target for Cullen/Frost is $68, and he estimates the company will earn $3.85 a share this year, with earnings growing to $4.05 a share in 2014.

Following a meeting with Evans and Cullen/Frost CFO Phil Green, McEvoy wrote in a note to clients late on Monday that "we feel that, after slowing a bit in 1Q13, loan growth is set to accelerate through the rest of '13. A consistent calling effort supported by higher advertising in recent years is working."

"Calling" refers to commercial loan officers' visits to current and prospective customers for the bank. Commercial lenders focus on adding full relationships with business clients, including deposits, as well as credit lines and loans. Cullen/Frost grew its average deposits by 14% over the 12-month period ended March 31.

McEvoy also pointed out the bank's location advantage. "Management is the first to admit the benefits of being located in Texas and that the state has been attracting out-of-state competitors for years ( BB&T (BBT) is a recent example). In 2012, Texas job growth was 3.1% vs. the national average of 1.4%," he wrote.

"Building new relationships in the downturn should translate into accelerated loan and revenue growth once the economy shows more meaningful expansion," McEvoy wrote. He went on to compare Cullen/Frost's aggressive efforts to grow its customer base during and after the financial crisis to the company's previous success using the same strategy after a recession in the 80s.

For long-term investors looking for a well-managed, strong earnings performer with almost no downside surprises over a very long period, along with an attractive dividend that is very well supported by earnings, Cullen/Frost speaks for itself. The stock isn't cheap and it's not for day-traders. It isn't a recovery play. It is a long-term growth play, for investors who don't want to remain committed for many years.

CFR Chart CFR data by YCharts

Interested in more on Cullen/Frost Bankers? See TheStreet Ratings' report card for this stock.

-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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