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Drop In Net Interest Income Hurts Cullen/Frost

Cullen/Frost Bankers reported that its earnings fell nearly 15% in the first quarter.

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On April 22, 2009,

Cullen/Frost Bankers


reported that its Q1 FY09 earnings fell 14.8%, hurt by a drop in non-interest and net interest income, along with an increase in provisions for possible loan losses. Net income declined to $44.98 million, or $0.76 per share, from $52.78 million, or $0.89 per share, in Q1 FY08. The latest quarterly earnings missed the consensus estimate of $0.83 per share.

Total interest income dropped 12.3% to $154.06 million, primarily due to lower interest income on loans, federal funds sold, and resell agreements. Total average earning assets rose 11.5% to $12.94 billion, while yield on interest earnings assets slipped 115 basis points to 5.10%. On the other hand, total interest expense plunged 46.7% to $24.42 million. Total average interest bearing liabilities spiked 8.5% to $8.86 billion, while the rate paid on interest bearing liabilities declined to 1.11% from 2.25% a year ago. Net interest income, before provision for loan losses, fell marginally to $129.63 million from $129.88 million. Consequently, the net interest margin dipped to 4.33% from 4.67%, and the net interest spread decreased to 3.99% from 4.00% a year ago. Moreover, non-interest income inched down 0.5% to $69.86 million, while non-interest expense increased 7.9% to $129.50 million.

For the first quarter, provisions for credit losses more than doubled to $9.60 million from $4.01 million. Net charge-offs swelled 47.6% to $5.68 million, while net charge-offs as a percentage of average loans rose to 0.26% from 0.20% in Q1 FY08. Non-performing assets (NPAs) more than tripled to $127.77 million, while as a percentage of total assets, NPAs advanced to 0.83% from 0.27% in the prior year quarter. The company continued to be well-capitalized, having a total risk-based capital ratio of 12.98% and a Tier-1 risk-based capital ratio of 10.64% as of March 31, 2009.

During the quarter, CFR paid a quarterly cash dividend of $0.42 per share to its common stockholders.