Cullen/Frost Bankers, Inc. (NYSE:CFR) Q2 2017 Earnings Conference Call - Final Transcript

Jul 27, 2017 • 11:00 am ET

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Cullen/Frost Bankers, Inc. (NYSE:CFR) Q2 2017 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

My name is Heidi, and I will be facilitating the audio portion of today's interactive broadcast. At this time, I would like to welcome everyone to the Cullen/Frost Second Quarter Earnings Conference Call. (Operator Instructions) I would now like to turn today's call over to Mr. Greg Parker, Executive Vice President and Director of Investor Relations. Mr. Parker, you may begin.

Executive
Greg Parker

Thank you, Heidi. This morning's conference call will be led by Phil Green, Chairman and CEO; and Jerry Salinas, Group Executive Vice President and CFO.

(Forward-Looking Cautionary Statements) At this time, I'll turn the call over to Phil.

Executive
Phil Green

Thank you, Greg, and good morning, and thanks for joining us. Today I'll review second quarter 2017 results for Cullen/Frost and our Chief Financial Officer, Jerry Salinas, will also provide additional comments and give insights into our outlook before we open it up to your question. In second quarter, Cullen/Frost earned $1.29 a share. And that compared to $1.11 same quarter of last year and $1.28 in the first quarter of this year. And our second quarter results represented a steady continuance of the momentum we built coming out of the second half of 2016.

During the second quarter, average loans were $12.3 billion, up more than 6% from the second quarter of last year and on a linked quarter annualized basis, at the end of the second quarter, loans were up more than 10%. Our provision for loan losses was $8.4 million in the second quarter, down from the $9.2 million reported in the second quarter of 2016. Nonperforming assets totaled $90.2 million in the second quarter, down by more than $28 million from the first quarter and this quarter-to-quarter improvement was primarily due to a combination of energy resolutions and charge-offs.

Net charge-offs in the second quarter of 2017 were $11.9 million compared with $7.9 million in the previous quarter and $21.4 million in the second quarter of 2016. Annualized net charge-offs represent 39 basis points of average loans for the second quarter. And one previously nonaccrual energy credit accounted for $6 million of second quarter charge-offs.

Overall, delinquencies for accruing loans at the end of the second quarter were only 58 basis points of period-end loans, which is the second lowest level of the delinquencies over the past 8 quarters. Total problem loans which we define as risk grade 10 and higher fell by about 6.5% in the second quarter when compared to the first quarter, and this is primarily the result of favorable resolutions like upgrades, paydowns and payoffs.

Energy-related non-accruals decreased to $55.5 million at the end of the second quarter compared to $78.7 million at the end of the first quarter. Finally, outstanding energy loans at the end of the second quarter totaled $1.4 billion or 11.3% of total loans and that compared with over 16% at its peak in 2015. Over the past several quarters, Frost has been building on momentum and we've concentrated our focus on steady and sustainable growth. We've got an attractive