Cullen/Frost Bankers, Inc. (NYSE:CFR) Q4 2017 Earnings Conference Call - Final Transcript

Jan 25, 2018 • 11:00 am ET


Cullen/Frost Bankers, Inc. (NYSE:CFR) Q4 2017 Earnings Conference Call - Final Transcript


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Good morning, and welcome to the Cullen/Frost Bank Fourth Quarter and Year-End Earnings Conference Call. My name is Kirsten, and I will be facilitating the audio portion of today's interactive broadcast. (Operator Instructions)

At this time, I would like to turn the call over to Mr. Greg Parker, EVP and Director of IR. Mr. Parker, you may begin.

Greg Parker

Thank you, Kirsten. This morning's call -- conference call will be led by Phil Green, Chairman and CEO; and Jerry Salinas, Group Executive Vice President and CFO. Before I turn the call over to Phil and Jerry, I need to take a moment to address the safe harbor provisions.

(Forward-Looking Cautionary Statements)

At this time, I'll turn the call over to Phil.

Phillip Green

Thank you, Greg. Good morning, and thanks for joining us. Today, I'll review fourth quarter and full year 2018 results for Cullen/Frost; and our Chief Financial Officer, Jerry Salinas, will also provide additional comments before we open it up to your questions.

In the fourth quarter, Cullen/Frost earned $1.53 per diluted common share compared with $1.28 in the same quarter last year and $1.41 in the third quarter of this year. For the full year 2017, Cullen/Frost earned $5.51 per diluted common share, which is up from $4.70 in 2016. Fourth quarter and full year 2017 results include the benefit on net basis of $4 million or $0.06 a share to adjust deferred taxes as a result of the Tax Cuts and Jobs Act.

As you can see, a strong fourth quarter capped a very good year overall in 2017. Besides the excellent earnings, our return on average assets reached 1.17% for the full year and it was 1.26% in the fourth quarter. One area of focus in 2017 was balanced, quality loan growth and we had good results.

During the fourth quarter, average loans were $12.9 billion. This represents an increase of more than $1.15 billion over the fourth quarter last year. Our provision for loan losses fell to $8.1 million in the fourth quarter compared to $11 million in the third quarter. Nonperforming assets totaled $157.3 million in the fourth quarter, a slight increase from the total of $150 million in the third quarter. The increase was basically attributable to one credit, a longtime customer that has ceased operations. Net charge-offs in the fourth quarter were $7 million compared with $6.2 million in the previous quarter and $5.7 million in the fourth quarter of 2016.

For the past six quarters, we've experienced near-normal levels of charge-offs and we expect this trend to continue. Fourth quarter annualized net charge-offs represent just 22 basis points of average loans. Overall delinquencies for accruing loans at the end of the fourth quarter were only 82 basis points of period-end loans, a number well within our standards and one of the lowest totals in more than two years. Total problem loans, defined as risk grade 10 and higher, were flat compared to the third quarter.

Finally, outstanding energy loans at the end of the