Securities and Exchange Commission Washington, D.C. 20549 Form 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended March 31, 1998 Commission file number 0-7275 Cullen/Frost Bankers, Inc. (Exact name of registrant as specified in its charter) Texas 74-1751768 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 W. Houston Street, San Antonio, Texas 78205 (Address of principal executive offices) (Zip code) (210) 220-4011 (Registrant's telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X. No . Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: At May 10, 1998 there were 22,266,189 shares of Common Stock, $5 par value, outstanding.
Part I. Financial Information Item 1. Financial Statements (Unaudited) <TABLE> <CAPTION> Consolidated Statements of Income Cullen/Frost Bankers, Inc. and Subsidiaries (in thousands, except per share amounts) Three Months Ended March 31 --------------------- 1998 1997 ------- ------- <S> <C> <C> INTEREST INCOME Loans, including fees $60,416 $50,049 Securities: Taxable 25,490 23,794 Tax-exempt 72 97 ------- ------- Total Securities 25,562 23,891 Federal funds sold and securities purchased under resale agreements 1,882 2,402 ------- ------- Total Interest Income 87,860 76,342 INTEREST EXPENSE Deposits 29,815 26,687 Federal funds purchased and securities sold under repurchase agreements 1,885 1,398 Guaranteed preferred beneficial interest in the Corporation's subordinated debentures 2,119 1,271 Other borrowings 309 320 ------- ------- Total Interest Expense 34,128 29,676 ------- ------- Net Interest Income 53,732 46,666 Provision for possible loan losses 2,250 1,625 ------- ------- Net Interest Income After Provision for Possible Loan Losses 51,482 45,041 NON-INTEREST INCOME Trust fees 10,921 9,643 Service charges on deposit accounts 11,420 10,290 Other service charges, collection and exchange charges, commissions and fees 3,250 2,129 Net loss on securities transactions (3) Other 4,312 3,374 ------- ------- Total Non-Interest Income 29,900 25,436 NON-INTEREST EXPENSE Salaries and wages 22,562 19,234 Pension and other employee benefits 4,839 4,393 Net occupancy of banking premises 5,187 4,758 Furniture and equipment 3,433 2,866 Intangible amortization 3,348 2,710 Other 15,824 13,031 ------- ------- Total Non-Interest Expense 55,193 46,992 ------- ------- Income Before Income Taxes 26,189 23,485 Income Taxes 9,444 8,422 ------- ------- Net Income $16,745 $15,063 ======= ======= Net income per common share Basic $ .75 $ .67 Diluted .73 .65 Dividends per common share .25 .21 See notes to consolidated financial statements. </TABLE>
<TABLE> <CAPTION> Consolidated Balance Sheets Cullen/Frost Bankers, Inc. and Subsidiaries (dollars in thousands) March 31 December 31 March 31 1998 1997 1997 ---------- ---------- ---------- <S> <C> <C> <C> Assets Cash and due from banks $ 746,458 $ 604,227 $ 457,894 Securities held to maturity 140,764 148,759 171,011 Securities available for sale 1,479,787 1,342,759 1,374,554 Federal funds sold 115,200 190,000 255,375 Loans, net of unearned discount of $3,298 at March 31, 1998; $2,318 at December 31, 1997 and $3,768 at March 31, 1997 2,849,031 2,643,522 2,414,639 Less: Allowance for possible loan losses (43,107) (41,846) (40,047) ---------- ---------- ---------- Net Loans 2,805,924 2,601,676 2,374,592 Banking premises and equipment 116,344 109,654 105,969 Accrued interest and other assets 249,350 233,513 193,845 ---------- ---------- ---------- Total Assets $5,653,827 $5,230,588 $4,933,240 ========== ========== ========== Liabilities Demand Deposits: Commercial and individual $1,144,876 $1,101,862 $ 931,506 Correspondent banks 375,485 185,228 177,554 Public funds 40,195 51,733 52,340 ---------- ---------- ---------- Total demand deposits 1,560,556 1,338,823 1,161,400 Time Deposits: Savings and Interest-on-Checking 823,480 766,416 753,203 Money market deposit accounts 1,054,481 996,110 932,541 Time accounts 1,165,582 1,102,184 1,095,196 Public funds 242,755 280,378 286,799 ---------- ---------- ---------- Total time deposits 3,286,298 3,145,088 3,067,739 ---------- ---------- ---------- Total deposits 4,846,854 4,483,911 4,229,139 Federal funds purchased and securities sold under repurchase agreements 188,715 132,112 130,384 Accrued interest and other liabilities 101,952 107,757 91,650 Guaranteed Preferred Beneficial Interest in the Corporation's Junior Subordinated Deferrable Interest Debentures, net 98,417 98,403 98,366 ---------- ---------- ---------- Total Liabilities 5,235,938 4,822,183 4,549,539 Shareholders' Equity Common stock, par value $5 per share 112,710 112,710 112,539 Shares authorized:60,000,000; 60,000,000; 30,000,000 Shares issued: 22,541,991; 22,541,991; 22,507,928 Surplus 66,491 65,931 64,073 Retained earnings 243,844 233,412 205,330 Accumulated other comprehensive income, net of tax 7,777 8,668 1,759 Treasury stock at cost (277,502; 276,721) (12,933) (12,316) ---------- ---------- ---------- Total Shareholders' Equity 417,889 408,405 383,701 ---------- ---------- ---------- Total Liabilities and Shareholders' Equity $5,653,827 $5,230,588 $4,933,240 ========== ========== ========== See notes to consolidated financial statements. </TABLE>
<TABLE> <CAPTION> Consolidated Statements of Changes in Shareholders' Equity Cullen/Frost Bankers, Inc. and Subsidiaries (dollars in thousands) Accumulated Other Comprehesive Common Retained Income, Treasury Stock Surplus Earnings net of tax Stock Total --------- ------- -------- ---------- -------- -------- <S> <C> <C> <C> <C> <C> <C> Balance at January 1, 1997 $112,410 $63,480 $195,451 $7,602 $378,943 Net income for the year ended December 31, 1997 63,485 63,485 Unrealized gain on securities AFS, net of tax and reclassification adjustment 1,066 1,066 ------- Total Comprehensive income 64,551 ------- Proceeds from employee stock purchase plan and options 300 437 (1,949) $ 3,201 1,989 Tax benefit related to exercise of stock options 1,492 1,492 Purchase of treasury stock (17,814) (17,814) Issuance of restricted stock 522 2,297 2,819 Restricted stock plan deferred Compensation, net (2,112) (2,112) Cash dividend (21,463) (21,463) -------- ------- -------- ------ ------- ------- Balance at December 31, 1997 112,710 65,931 233,412 8,668 (12,316) 408,405 Net income for the three months ended March 31, 1998 16,745 16,745 Unrealized loss on securitites AFS, net of tax and reclassification adjustment (see disclosure) (891) (891) ------ Total Comprehensive income 15,854 ------ Proceeds from employee stock purchase plan and options (913) 1,102 189 Tax benefit related to exercise of stock options 497 497 Purchase of treasury stock (1,866) (1,866) Issuance of restricted stock 63 147 210 Restricted stock plan deferred Compensation, net 164 164 Cash dividend (5,564) (5,564) -------- ------- -------- ------ -------- -------- Balance at March 31, 1998 $112,710 $66,491 $243,844 $7,777 $(12,933) $417,889 ======== ======= ======== ====== ======== ======== Disclosure of reclassification amount: Unrealized loss on securities AFS for three month period ended 3/31/98 $(893) Less: reclassification adjustment for loss included in income (2) ------ Net unrealized loss on securities AFS, net of tax $(891) See notes to consolidated financial statements. </TABLE>
<TABLE> <CAPTION> Consolidated Statements of Cash Flows Cullen/Frost Bankers, Inc. and Subsidiaries (dollars in thousands) Three Months Ended March 31 ------------------- 1998 1997 -------- -------- <S> <C> <C> Operating Activities Net income $ 16,745 $ 15,063 Adjustments to reconcile net income to net cash provided by operating activities: Provision for possible loan losses 2,250 1,625 Credit for deferred taxes (1,190) (1,005) Accretion of discounts on loans (134) (64) Accretion of securities' discounts (634) (3,279) Amortization of securities' premiums 1,458 680 Net loss on securities transactions 3 Net gain on sale of assets (69) (78) Depreciation and amortization 6,564 5,441 Increase in interest receivable (1,991) (2,199) (Decrease) increase in interest payable (2,206) 1,561 Net change in other assets and liabilities 16,227 (6,824) --------- -------- Net cash provided by operating activities 37,023 10,921 Investing Activities Proceeds from maturities of securities held to maturity 7,930 6,091 Purchases of investment securities (566) Proceeds from sales of securities available for sale 95,515 86,766 Proceeds from maturities of securities available for sale 194,660 97,745 Purchases of securities available for sale (345,053) (221,805) Net increase in loans (84,667) (56,173) Net increase in bank premises and equipment (3,363) (2,580) Proceeds from sales of repossessed properties 177 298 Net cash and cash equivalents (paid) received from acquisitions (8,899) 14,277 --------- -------- Net cash used by investing activities (144,266) (75,381) Financing Activities Net increase (decrease) in demand deposits, IOC accounts, and savings accounts 237,260 (187,522) Net decrease in certificates of deposits (96,519) (9,555) Net increase (decrease) in short-term borrowings 41,174 (43,723) Proceeds from issuance of guaranteed preferred beneficial interest in Corporation's subordinated debentures 98,353 Proceeds from employee stock purchase plan and options 189 24 Purchase of treasury stock (1,866) Dividends paid (5,564) (4,726) --------- -------- Net cash provided (used) by financing activities 174,674 (147,149) --------- -------- Increase (decrease) in cash and cash equivalents 67,431 (211,609) Cash and cash equivalents at beginning of year 794,227 924,878 --------- -------- Cash and cash equivalents at the end of the period $861,658 $713,269 ========= ======== Supplemental information: Interest paid $ 36,334 $ 28,115 See notes to consolidated financial statements. </TABLE>
Notes to Consolidated Financial Statements Cullen/Frost Bankers, Inc. and Subsidiaries (dollars in tables in thousands) Basis of Presentation The consolidated financial statements include the accounts of the Corporation and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements have not been audited by independent accountants, but in the opinion of management, reflect all adjustments necessary for a fair presentation of the financial position and results of operations. All such adjustments were of a normal and recurring nature. For further information, refer to the consolidated financial statements and footnotes thereto included in the Corporation's annual report on Form 10-K for the year ended December 31, 1997. The balance sheet at December 31, 1997, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Allowance for Possible Loan Losses An analysis of the transactions in the allowance for possible loan losses is presented below. The amount charged to operating expense is based on management's assessment of the adequacy of the allowance to absorb future possible loan losses. <TABLE> <CAPTION> Three Months Ended March 31 ------------------- (in thousands) 1998 1997 - ---------------------------------------------------------------------- <S> <C> <C> Balance at beginning of the period $41,846 $37,626 Provision for possible loan losses 2,250 1,625 Loan loss reserve of acquired institution 1,250 2,105 Net charge-offs: Losses charged to the allowance (3,291) (2,042) Recoveries 1,052 733 ------- ------- Net charge-offs (2,239) (1,309) ------- ------- Balance at the end of period $43,107 $40,047 ======= ======= </TABLE> Impaired Loans A loan within the scope of SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," (SFAS No. 114) is considered impaired when, based on current information and events, it is probable that the Corporation will be unable to collect all amounts due according to the contractual terms of the loan agreement, including scheduled principal and interest payments. At March 31, 1998 and 1997, the majority of the impaired loans were real estate loans and collectibility was measured based on the fair value of the collateral. Interest payments on impaired loans are typically applied to principal unless collectibility of the principal amount is fully assured, in which case interest is recognized on the cash basis. Interest revenue recognized on impaired loans for the first quarter of 1998 and 1997 was $7,000 and $90,000, respectively. The total allowance for possible loans losses includes activity related to allowances calculated in accordance with SFAS No. 114 and activity related to other loan loss allowances determined in accordance with SFAS No. 5.
The following is a summary of loans considered to be impaired: <TABLE> <CAPTION> Three Months Ended March 31 ----------------------- (in thousands) 1998 1997 - -------------------------------------------------------------------------- <S> <C> <C> Impaired loans with no valuation reserve $2,851 $3,739 Impaired loans with a valuation reserve 2,483 2,306 ------ ------ Total recorded investment in impaired loans $5,334 $6,045 ====== ====== Average recorded investment in impaired loans $5,270 $5,189 Valuation reserve 1,708 909 </TABLE> Earnings Per Common Share In accordance with SFAS 128, the reconciliation of earnings per share follows: <TABLE> <CAPTION> Three Months Ended March 31 ------------------------ 1998 1997 - --------------------------------------------------------------------------- <S> <C> <C> Numerators for both basic and diluted earnings per share, net income $16,745,000 $15,063,000 =========== =========== Denominators: Denominators for basic earnings per share, average outstanding common shares 22,266,239 22,499,481 Dilutive effect of stock options 795,811 594,002 ----------- ----------- Denominator for diluted earnings per share 23,062,050 23,093,483 =========== =========== Earnings per share: Basic $ .75 $ .67 Diluted .73 .65 </TABLE> Capital The table below reflects various measures of regulatory capital at March 31, 1998 and 1997. As a result of the Harrisburg Bancshares, Inc. acquisition and the Corporation's stock repurchase program, all the regulatory capital ratios are down when compared to the first quarter of 1997. <TABLE> <CAPTION> March 31, 1998 March 31, 1997 ------------------- ------------------- Capital Amount Ratio Amount Ratio - ------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Risk-Based Tier 1 Capital $ 408,246 12.13% $ 400,000 14.52% Tier 1 Capital Minimum requirement 134,654 4.00 110,201 4.00 Total Capital $ 450,338 13.38% $ 434,464 15.77% Total Capital Minimum requirement 269,309 8.00 220,402 8.00 Risk-adjusted assets, net of goodwill $3,366,360 $2,755,023 Leverage ratio 7.62% 8.56% Average equity as a percentage of average assets 7.59 8.13 </TABLE> The FDIC Improvement Act of 1991 ("FDICIA") established five capital tiers for depository institutions and final rules relating to these tiers were adopted by the federal
banking agencies. At March 31, 1998 and 1997, the Corporation's subsidiary banks were considered "well capitalized" as defined by FDICIA, the highest rating, and the Corporation's capital ratios were in excess of "well capitalized" levels. A financial institution is deemed to be well capitalized if the institution has a total risk-based capital ratio of 10.0 percent or greater, a Tier 1 risk-based capital ratio of 6.0 percent or greater, and a leverage ratio of 5.0 percent or greater, and the institution is not subject to an order, written agreement, capital directive or prompt corrective action directive to meet and maintain a specific level for any capital measure. The Corporation is subject to the regulatory capital requirements administered by the Federal Reserve Bank. Regulators can initiate certain mandatory actions, if the Corporation fails to meet the minimum requirements, that could have a direct material effect on the Corporation's financial statements. The Corporation and its subsidiary banks currently exceed all minimum capital requirements. Income Taxes The tax expense for the first quarter of 1998 was $9,444,000. This amount consisted of current tax expense of $10,634,000 and deferred tax benefit of $1,190,000. As of March 31, 1998, net deferred tax assets were $7,624,000 with no valuation allowance. The deferred tax assets were supported by taxes paid in prior years. The tax expense for the first quarter of 1997 was $8,422,000. Income tax payments made in the first three months of 1998 were $1,600,000. No income tax payments were made in the first three months of 1997. Acquisitions On January 2, 1998, the Corporation paid approximately $55.3 million to acquire Harrisburg Bancshares, Inc., including its subsidiary Harrisburg Bank in Houston, Texas. This transaction has been accounted for as a purchase with total cash consideration being funded through currently available funds, including funds provided by the issuance of the $100 million Trust Preferred Capital Securities. The purchase price has been allocated to the underlying assets and liabilities based on estimated fair value at the date of acquisition. Such estimates may be subsequently revised. The Corporation acquired loans of approximately $125 million and deposits of approximately $222 million. Total intangibles associated with the acquisition amounted to approximately $34.2 million. This acquisition is not expected to have a material impact on the Corporation's 1998 net income. On March 7, 1997, the Corporation paid approximately $32.2 million to acquire Corpus Christi Bancshares, Inc., including its subsidiary Citizens State Bank, based in Corpus Christi, Texas. Total intangibles associated with the acquisition were approximately $20.9 million. The Corporation acquired loans of approximately $108 million and deposits of approximately $184 million. This acquisition did not have a material impact on the Corporation's 1997 net income. Definitive Agreement to Merge Overton Bancshares, Inc., - Fort Worth On February 15, 1998, the Corporation signed a definitive agreement providing for the merger of Overton Bancshares, Inc., in Fort Worth, Texas, which owns Overton Bank and Trust N.A., ("Overton"), into the Corporation. The merger, which will be accounted for as a pooling-of-interests transaction, will be the Corporation's first entry into the Fort Worth market and is expected to be consummated in the second quarter of this year. The merger is subject to approval by shareholders of Overton Bancshares, Inc. The Corporation will issue approximately 4.38 million common shares as part of this transaction. At December 31, 1997, Overton had $732 million in deposits, loans of $468 million, total assets of $863 million and had the sixth largest deposit share in the Fort Worth MSA.
Accounting Changes As of January 1, 1998, the Corporation adopted SFAS No. 130, "Reporting Comprehensive Income" (SFAS No. 130). SFAS No. 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of this statement had no impact on the Corporation's net income or shareholders' equity. SFAS No. 130 requires unrealized gains and losses on the Corporation's available-for-sale securities, which prior to adoption were reported separately in shareholders' equity to be included in other comprehensive income. Prior year financial statements have been reclassified to conform to the requirements of SFAS No. 130. Comprehensive income was $15,854,000 for the first quarter of 1998 (See Statement of Changes in Shareholder's Equity on page 4). This compares to $9,220,000 for the first quarter of 1997 which was composed of net income of $15,063,000 and unrealized losses on securities available-for-sale of $5,843,000, net of tax and reclassification adjustment. For the first quarter of 1998, the unrealized loss on securities available-for-sale before tax was $1,374,000 resulting in an after tax amount of $893,000. In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS No. 131). The statement establishes standards for the method that public entities use to report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographical areas and major customers. The provisions of SFAS No. 131 are effective for fiscal years beginning after December 15, 1997. Adoption in interim financial statements is not required until the year after initial adoption; however, comparative prior year information is required. The Corporation is currently evaluating the impact of this statement on the disclosures included in its annual and interim period financial statements. Financial Derivatives Derivatives are used to hedge interest rate exposure by modifying the interest rate characteristics of related balance sheet instruments. The specific criteria required for derivatives used for these purposes are described below. Derivatives that do not meet these criteria are carried at market value with changes in value recognized currently in earnings. Derivatives used as hedges must be effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the inception of the derivative contract. Derivatives currently used for hedging purposes include swaps and purchased floors. These swap transactions allow management to structure the interest rate sensitivity of the asset side of the Corporation's balance sheet to more closely match its view of the interest rate sensitivity of the Corporation's funding sources. The fair value of derivative contracts are carried off-balance sheet and the unrealized gains and losses on derivative contracts are generally deferred. The interest component associated with derivatives used as hedges or to modify the interest rate characteristics of assets and liabilities is recognized over the life of the contract in net interest income. Upon contract settlement or early termination, the cumulative change in the market value of such derivatives is recorded as an adjustment to the carrying value of the underlying asset or liability and recognized in net interest income over the expected remaining life of the related asset or liability. In instances where the underlying instrument is repaid, the cumulative change in the value of the associated derivative is recognized immediately in earnings.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Review Cullen/Frost Bankers, Inc. and Subsidiaries (taxable-equivalent basis - tables in thousands except per share amounts) Results of Operations Cullen/Frost reported net income of $16,745,000 or $.73 per diluted common share for the quarter ended March 31, 1998. This compares with $16,645,000 or $.72 per diluted common share and $15,063,000 or $.65 per diluted common share for the fourth and first quarters of 1997, respectively. Return on average equity and average assets were 16.37 percent and 1.24 percent, respectively, for the first quarter of 1998 compared to average equity and average assets of 15.80 percent and 1.28 percent respectively, for the first quarter of 1997. The results of operations are included in the material that follows. The Corporation completed an acquisition during the first quarter of 1998 and one in 1997. These acquisitions, which are outlined in the footnotes to the financial statements on page eight, were accounted for as purchase transactions, and as such, their related results of operations are included in the financial information that follows from the date of acquisition. Certain reclassifications have been made to make prior quarters comparable. All balance sheet figures are presented in averages unless otherwise noted. <TABLE> <CAPTION> Summary of Operations -------------------------------------- Three Months Ended -------------------------------------- 1998 1997 ---------- ------------------------ March 31 December 31 March 31 - ------------------------------------------------------------------------------- <S> <C> <C> <C> Taxable-equivalent net interest income $54,009 $51,500 $46,934 Taxable-equivalent adjustment 277 290 268 ------- ------- ------- Net interest income 53,732 51,210 46,666 Provision for possible loan losses 2,250 2,000 1,625 Non-Interest income: Net (loss) gain on securities transactions (3) 476 Other 29,903 27,885 25,436 ------- ------- ------- Total non-interest income 29,900 28,361 25,436 Non-Interest expense: Intangible amortization 3,348 3,029 2,710 Other 51,845 48,787 44,282 ------- ------- ------- Total non-interest expense 55,193 51,816 46,992 ------- ------- ------- Income before income taxes 26,189 25,755 23,485 Income Taxes 9,444 9,110 8,422 ------- ------- ------- Net Income $16,745 $16,645 $15,063 ======= ======= ======= Net income per diluted common share: $ .73 $ .72 $ .65 Return on Average Assets 1.24% 1.29% 1.28% Return on Average Equity 16.37 16.31 15.80 </TABLE>
Net Interest Income Net interest margin was 4.78 percent for the first quarter of 1998 compared to 4.74 percent and 4.73 percent for the fourth and first quarters of 1997, respectively. The increase in net interest margin from the fourth quarter of 1997 is due to higher loan volumes and a redeployment of investable funds out of Federal funds sold and into investment securities. The increase in net interest income from the fourth and first quarters of 1997 is reflective of the favorable impact of the acquisitions and higher loan volumes offset by higher deposit costs. Net interest spread of 3.96 percent increased six basis points from the fourth quarter of 1997. Net interest spread was 3.94 percent for the first quarter of 1997. The net interest spread increased from the previous quarter primarily because of the increase in securities and loan volumes. <TABLE> <CAPTION> Change in Taxable-Equivalent Net Interest Income ------------------------------------ First Quarter First Quarter 1998 1998 vs. vs. First Quarter Fourth Quarter 1997 1997 ------------------------------------- Amount Amount - ---------------------------------------------------------------------- <S> <C> <C> Due to volume $7,462 $3,110 Due to interest rate spread (387) (601) ------ ------ $7,075 $2,509 ====== ====== </TABLE> Non-Interest Income Total non-interest income was up $1.5 million or 5.4 percent compared to the fourth quarter of 1997 and was up $4.5 million or 17.5 percent from the first quarter of 1997. The non-interest income growth was favorably impacted by the acquisitions of Harrisburg Bancshares, Inc., and Corpus Christi Bancshares, Inc., in the first quarters of 1998 and 1997, respectively. The increase from the fourth and first quarter of 1997 is mostly due to higher service charge income and trust fees. <TABLE> <CAPTION> Three Months Ended --------------------------------- 1998 1997 -------- --------------------- Non-Interest Income March 31 December 31 March 31 - ---------------------------------------------------------------------------- <S> <C> <C> <C> Trust fees $10,921 $ 9,980 $ 9,643 Service charges on deposit accounts 11,420 11,374 10,290 Other service charges, collection and exchange charges, commissions and fees 3,250 2,663 2,129 Net (loss) gain on securities transactions (3) 476 Other 4,312 3,868 3,374 ------- ------- ------- Total $29,900 $28,361 $25,436 ======= ======= ======= </TABLE> Trust fee income increased 9.4 percent and 13.2 percent from the fourth and first quarters of 1997, respectively. The increase from the fourth and first quarters of 1997 is attributable to the increase in the number of accounts held and trust asset growth resulting from the continued improvement in the stock and bond market.
Service charges on deposit accounts were flat compared to the previous quarter and up 11.0 percent from the same quarter one year ago primarily as a result of higher service charges related to commercial deposits and overdraft charges. Other service charges were up 22.0 percent compared to the fourth quarter of 1997 and up 52.7 percent from the first quarter of 1997. These increases are primarily due to higher volumes and mutual fund fees. Other non-interest income was up 11.5 percent compared to the fourth quarter of 1997 and up 27.8 percent from the first quarter a year ago. The increase is primarily related to proceeds from an asset previously written-off and higher Visa check card fees. Non-Interest Expense Non-interest expense increased $3.4 million or 6.5 percent from the fourth quarter and $8.2 million or 17.5 percent from the same quarter last year. The acquisitions of Harrisburg Bancshares, Inc., and Corpus Christi Bancshares, Inc., in the first quarters of 1998 and 1997, respectively, impacted the growth in expenses. Higher personnel and operating expenses in response to higher volumes were the primary reasons for the increase. <TABLE> <CAPTION> Three Months Ended ------------------------------- 1998 1997 -------- --------------------- Non-Interest Expense March 31 December 31 March 31 - ----------------------------------------------------------------------------- <S> <C> <C> <C> Salaries and wages $22,562 $21,183 $19,234 Pension and other employee benefits 4,839 4,102 4,393 Net occupancy of banking premises 5,187 5,131 4,758 Furniture and equipment 3,433 3,457 2,866 Intangible amortization 3,348 3,029 2,710 Other 15,824 14,914 13,031 ------- ------- ------- Total $55,193 $51,816 $46,992 ======= ======= ======= </TABLE> Salaries and wages were up 6.5 percent from the fourth quarter of 1997 and were up 17.3 percent from the first quarter of 1997 as a result of higher staffing levels and merit increases. Pension and employee benefits were up 18.0 percent from the fourth quarter and 10.2 percent from the first quarter of 1997 because of higher payroll taxes, medical insurance expense and higher contributions to fund the employer match on the employee related stock plans. Net occupancy of banking premises expense was flat compared to the fourth quarter and increased 9.0 percent from the first quarter of 1997. This increase is attributable to higher property taxes and depreciation expense on buildings due to acquisitions and was partially offset by higher rental income. Furniture and equipment expense was flat from the fourth quarter of 1997 and was up 19.8 percent compared to a year ago. This increase was due to higher amortized software and service contracts. Intangible amortization expense was up 10.5 percent compared to last quarter and increased 23.5 percent compared to the same quarter last year due to the acquisitions. Other non-interest expense was up 6.1 percent compared to last quarter and increased 21.4 percent compared to the same quarter last year. The increase was primarily due to professional expenses, Visa check card expenses, guard services and outside computer services. Income Taxes The Corporation's effective tax rate for the first quarter of 1998 and the fourth and first quarters of 1997 approximated the statutory rate of 35 percent.
Cash Earnings The Corporation has historically paid cash and used the purchase method in accounting for its acquisitions which has resulted in the creation of intangible assets. These intangible assets are deducted from capital in the determination of regulatory capital. Thus, "cash" or "tangible" earnings represents the regulatory capital generated during the year and can be viewed as net income excluding intangible amortization, net of tax. While the definition of "cash" or "tangible" earnings may vary by company, we believe this definition is appropriate as it measures the per share growth of regulatory capital, which impacts the amount available for dividends, stock repurchases and acquisitions. The following table reconciles reported earnings to net income excluding intangible amortization ("cash" earnings): <TABLE> <CAPTION> Three Months Ended --------------------------------------------------------------- March 1998 December 1997 - -------------------------------------------------------------------------------------------- Reported Intangible "Cash" Reported Intangible "Cash" earnings amortization earnings earnings amortization earnings - ------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Income before income taxes $26,189 $ 3,348 $29,537 $25,755 $3,029 $28,784 Income taxes 9,444 844 10,288 9,110 783 9,893 ------- ------ ------- ------- ------ ------- Net income $16,745 $ 2,504 $19,249 $16,645 $2,246 $18,891 ======= ====== ======= ======= ====== ======= Net income per diluted common share $ .73 $ .10 $ .83 $ .72 $ .10 $ .82 Return on assets 1.24% 1.43%* 1.29% 1.46%* Return on equity 16.37 18.82 ** 16.31 18.51** * Calculated as A/B ** Calculated as A/C March 1998 December 1997 ----------------- ---------- ------------- (A) Net income before intangible amortization (including goodwill and core deposit intangibles, net of tax) $ 19,249 $ 18,891 (B) Total average assets 5,464,432 5,127,173 (C) Average shareholders' equity 414,733 404,851 </TABLE> <TABLE> <CAPTION> Three Months Ended --------------------------------------- March 1997 - --------------------------------------------------------------- Reported Intangible "Cash" earnings amortization earnings - --------------------------------------------------------------- <S> <C> <C> <C> Income before income taxes $23,485 $2,710 $26,195 Income taxes 8,422 750 9,172 ------- ------ ------- Net income $15,063 $1,960 $17,023 ======= ====== ======= Net income per diluted common share $ .65 $ .09 $ .74 Return on assets 1.28% 1.45%* Return on equity 15.80 17.86 ** * Calculated as A/B ** Calculated as A/C March 1998 ---------- (A) Net income before intangible amortization (including goodwill and core deposit intangibles, net of tax) $ 17,023 (B) Total average assets 4,756,209 (C) Average shareholders' equity 386,626 </TABLE>
Balance Sheet Average assets of $5,464,432,000 for the first quarter of 1998 were up 6.6 percent and 14.9 percent when compared with the fourth and first quarters of 1997, respectively, primarily because of the acquisitions. Total deposits averaged $4,686,365,000 for the current quarter, up 6.3 percent when compared to the previous quarter and up 14.7 percent from the first quarter of 1997. Average loans for the first quarter of 1998 were $2,799,923,000. This represents an increase in average loans of 7.6 percent and 21.6 percent from the fourth and first quarters of 1997, respectively. Loans <TABLE> <CAPTION> 1998 1997 ------------------------ ----------------------- Loan Portfolio Percentage Period-End Balances March 31 of Total December 31 March 31 - ------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Commercial $ 878,774 30.8% $ 804,257 $ 692,057 Consumer 649,445 22.8 602,415 550,896 Real estate 1,245,713 43.7 1,134,417 1,104,983 Other 78,397 2.8 104,751 70,471 Unearned discount (3,298) (.1) (2,318) (3,768) ---------- ------ ---------- ---------- Total Loans $2,849,031 100.0% $2,643,522 $2,414,639 ========== ====== ========== ========== </TABLE> At March 31, 1998, period-end loans totaled $2,849,031,000 up 7.8 percent from the previous quarter and up 18.0 percent from the same period last year. Approximately 71 percent of the increase in loans from a year ago resulted from internally generated growth. Real Estate Loans Real estate loans at March 31, 1998, were $1,245,713,000 or 43.7 percent of total loans, compared to 45.8 percent a year ago. Construction loans were $170,269,000 up 85 percent from levels a year ago primarily resulting from the acquisition and increased levels of retail construction. Residential permanent mortgage loans at March 31, 1998, were $484,215,000 compared to $461,635,000 at December 31, 1997, and $435,122,000 at March 31, 1997. Real estate loans classified as "other" are essentially amortizing commercial and industrial loans with maturities of less than five years secured by real property. At March 31, 1998, real estate loans 90 days past due (excluding non- accrual and restructured loans) were $2,855,000, compared with $1,993,000 at December 31, 1997, and $3,072,000 at March 31, 1997. <TABLE> <CAPTION> 1998 1997 ----------------------- ---------- Real Estate Loans Percentage Period-End Balances March 31 of Total March 31 - ------------------------------------------------------------------------------- <S> <C> <C> <C> Construction $ 170,269 13.6% $ 92,185 Land 57,316 4.6 54,918 Permanent mortgages: Commercial 266,439 21.4 247,166 Residential 484,215 38.9 435,122 Other 267,474 21.5 275,592 ---------- ----- ---------- $1,245,713 100.0% $1,104,983 ========== ===== ========== Non-accrual and restructured $ 7,213 .6% $ 8,970 </TABLE>
Mexico The Corporation's cross border outstandings to Mexico, excluding $16,471,000 in loans secured by assets held in the United States, totaled $51,824,000 or 1.8 percent of total loans up from $48,597,000 and $39,722,000 at December 31, 1997 and March 31,1997, respectively. The increase represents the additional usage of lines of credit extended to Mexican firms to support trade related transactions. Of the trade-related credits, approximately 96 percent are related to companies exporting from Mexico. In addition, loans insured by the Export Import Bank were made to Mexican businesses to purchase goods of the United States. As of March 31, 1998, none of the Mexican related loans were on non-performing status. <TABLE> <CAPTION> MEXICAN LOANS --------------------------------------- March 31, 1998 Amount Percentage of Total Loans - ----------------------------------------------------------------------------- <S> <C> <C> Financial institutions $33,889 1.2% Commercial and industrial 17,935 .6 ------- ---- $51,824 1.8% ======= ==== </TABLE> Non-Performing Assets <TABLE> <CAPTION> NON-PERFORMING ASSETS -------------------------- Real March 31, 1998 Estate Other Total - --------------------------------------------------------------------------- <S> <C> <C> <C> Non-accrual and restructured loans $ 7,213 $5,188 $12,401 Foreclosed assets 3,788 1,548 5,336 ------- ------ ------- $11,001 $6,736 $17,737 ======= ====== ======= As a percentage of total non-performing assets 62% 38% 100% </TABLE> Non-performing assets totaled $17,737,000 at March 31, 1998, compared with $17,213,000 at December 31, 1997, and $14,632,000 at March 31, 1997. Non- performing assets as a percentage of total loans and foreclosed assets decreased to .62 percent at March 31, 1998 from .68 percent one year ago. Foreclosed assets consist of property which has been formally repossessed. Foreclosed assets are valued at the lower of the loan balance or estimated fair value, less estimated selling costs, at the time of foreclosure. Write-downs occurring at acquisition are charged against the allowance for possible loan losses. On an ongoing basis, properties are appraised as required by market indications and applicable regulations. Write-downs are provided for subsequent declines in value. Expenses related to maintaining foreclosed properties are included in other non-interest expense. The after-tax impact (assuming a 35 percent marginal tax rate) of lost interest from non-performing assets was $255,000 or $.01 per diluted common share for the first quarter of 1998. This compares to $240,000 or $.01 per diluted common share and $180,000 or $.01 per diluted common share for the fourth and first quarters of 1997, respectively. Total loans 90 days past due (excluding non-accrual and restructured loans) were $6,116,000 at March 31, 1998, compared to $6,651,000 at December 31, 1997, and $7,703,000 at March 31, 1997. Allowance for Possible Loan Losses The allowance for possible loan losses was $43,107,000 or 1.51 percent of period-end loans at March 31, 1998, compared to $41,846,000 or 1.58 percent for the fourth quarter of 1997 and $40,047,000 or 1.66 percent at March 31, 1997. The allowance for possible loan losses as a percentage of non-accrual and restructured loans was 347.6 percent at March 31, 1998, compared to 329.4 percent and 281.4 percent at the end of the fourth and first quarters of 1997, respectively.
The Corporation recorded a $2,250,000 provision for possible loan losses during the first quarter of 1998, compared to $2,000,000 and $1,625,000 recorded during the fourth and first quarters of 1997. Net charge-offs in the first quarter totaled $2,239,000, compared to $1,870,000 and $1,309,000 for the fourth and first quarters of 1997, respectively. The increase from the first quarter a year ago is principally due to indirect consumer charge-offs, which are down from the fourth quarter of last year. <TABLE> <CAPTION> NET CHARGE-OFFS ------------------------------- 1998 1997 ------- ------------------ First Fourth First Quarter Quarter Quarter - --------------------------------------------------------------------------- <S> <C> <C> <C> Real Estate $ 43 $ (60) $ 26 Commercial and industrial 698 221 159 Consumer 1,497 1,731 1,039 Other, including foreign 1 (22) 85 ------- ------- ------- $ 2,239 $ 1,870 $ 1,309 ======= ======= ======= Provision for possible loan losses $ 2,250 $ 2,000 $ 1,625 Allowance for possible loan losses 43,107 41,846 40,047 </TABLE> Capital and Liquidity At March 31, 1998, shareholders' equity was $417,889,000 compared to $408,405,000 at December 31, 1997, and $383,701,000 at March 31, 1997. The increase in 1998 was due primarily to earnings growth partially offset by $5.6 million of dividends paid and $1.9 million paid for the repurchase of shares of the Corporation. The Corporation had an unrealized gain on securities available for sale, net of deferred taxes, of $7.8 million as of March 31, 1998 compared to $8.7 million unrealized gain as of December 31, 1997, reflecting a decrease of $.9 million. This decrease is primarily due to the decrease in market interest rates causing the adjustable-rate mortgage backed securities portfolio to experience a market loss. Currently, under regulatory requirements, the unrealized gain or loss on securities available for sale in not included in the calculation of risk-based capital and leverage ratios. See page seven for a discussion of the Corporation's regulatory capital ratios. The Corporation paid a cash dividend of $.25 per common share in the first quarter of 1998 and fourth quarter of 1997 compared to $.21 per common share for the first quarter of 1997. This equates to dividend payout ratios of 33.2 percent, 33.4 percent and 31.4 percent for the first quarter of 1998 and the fourth and first quarters of 1997, respectively. Funding sources available at the holding company level include a $7,500,000 short-term line of credit. There were no borrowings outstanding from this source at March 31, 1998. Asset liquidity is provided by cash and assets which are readily marketable, pledgeable or which will mature in the near future. These include cash, short-term time deposits in banks, securities available for sale, maturities and cash flow from securities held to maturity, and Federal funds sold and securities purchased under resale agreements. Liability liquidity is provided by access to funding sources, principally core deposits and Federal funds purchased. Additional sources of liability liquidity include brokered deposits and securities sold under agreement to repurchase. The liquidity position of the Corporation is continuously monitored and adjustments are made to the balance between sources and uses of funds as deemed appropriate.
Year 2000 The Corporation's Year 2000 compliance program includes modifying or replacing appropriate hardware and software utilized by the Corporation. Currently, the Corporation estimates that the dollar amount to be spent on incremental outside costs to remediate its Year 2000 issues will be approximately $3 million over a three year period beginning in 1997, funded out of its earnings. These costs are being expensed as incurred and were approximately $310,000 for the first quarter of 1998. The cost of compliance and expected completion dates are based upon management's best estimates which were derived utilizing assumptions of future events including the continued availability of certain resources, third party vendor remediation plans and other factors. Management expects all mission critical systems to be installed and certified by November 1998 and believes that its program is producing the appropriate level of preparedness. Regardless of the Year 2000 compliance of the Corporation's systems, there is no complete assurance that the Corporation will not be adversely affected to the extent other entities not affiliated with the Corporation are unsuccessful in properly addressing this issue. In an effort to minimize this possibility, active communication has been on-going between the Corporation and its external service providers and intermediaries. In addition, a risk reduction program was initiated in 1997 that addresses potential Year 2000 exposure in the loan portfolio. Public awareness sessions have been hosted by the Corporation for customers and suppliers in our marketplace during 1997, and such communication is planned to continue throughout 1998. Forward-Looking Statements The Corporation may from time to time make forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) with respect to earnings per share, credit quality, expected Year 2000 compliance program, corporate objectives and other financial and business matters. The Corporation cautions the reader that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, including economic conditions; actions taken by the Federal Reserve Board; legislative and regulatory actions and reforms; competition; as well as other reasons, all of which change over time. Actual results may differ materially from forward-looking statements.
<TABLE> <CAPTION> Consolidated Average Balance Sheets and Interest Income Analysis-By Quarter Cullen/Frost Bankers, Inc. and Subsidiaries (dollars in thousands - taxable-equivalent basis*) March 31, 1998 December 31, 1997 ----------------------------------------------------- Interest Interest Average Income/ Yield/ Average Income/ Yield/ Balance Expense Cost Balance Expense Cost -------- ------- ----- ---------- ------- ----- <S> <C> <C> <C> <C> <C> <C> ASSETS Securities: U.S. Treasury $ 304,817 $ 4,167 5.54% $ 269,415 $ 3,737 5.50% U.S. Government agencies and corporations 1,303,051 21,189 6.50 1,200,420 19,632 6.54 States and political subdivisions 5,060 116 9.13 5,035 115 9.13 Other 8,294 129 6.24 7,354 110 6.02 ---------- ------- ---------- ------- Total securities 1,621,222 25,601 6.33 1,482,224 23,594 6.36 Federal funds sold and securities purchased under resale agreements 133,312 1,882 5.65 237,202 3,357 5.54 Loans, net of unearned discount 2,799,923 60,654 8.78 2,602,340 57,572 8.78 ---------- ------- ---------- ------- Total Earning Assets and Average Rate Earned 4,554,457 88,137 7.82 4,321,766 84,523 7.77 Cash and due from banks 582,067 532,637 Allowance for possible loan losses (43,023) (41,793) Banking premises and equipment 115,978 108,386 Accrued interest and other assets 254,953 206,177 ---------- ---------- Total Assets $5,464,432 $5,127,173 ========== ========== LIABILITIES Demand deposits: Commercial and individual $1,084,640 $ 991,401 Correspondent banks 256,642 232,245 Public funds 40,247 43,739 ---------- ---------- Total demand deposits 1,381,529 1,267,385 Time deposits: Savings and Interest-on-Checking 805,455 2,383 1.20 750,099 2,184 1.16 Money market deposit accounts 1,028,662 9,733 3.84 1,023,501 10,235 3.97 Time accounts 1,162,040 14,614 5.10 1,103,212 13,813 4.97 Public funds 308,679 3,085 4.05 264,239 2,949 4.43 ---------- ------- ---------- ------- Total time deposits 3,304,836 29,815 3.66 3,141,051 29,181 3.69 ---------- ------- ---------- ------- Total Deposits 4,686,365 4,408,436 Federal funds purchased and securities sold under repurchase agreements 159,801 1,885 4.72 120,176 1,424 4.64 Guaranteed preferred beneficial interests in Corporation's subordinated debentures 98,409 2,119 8.61 98,395 2,119 8.61 Other borrowings 22,607 309 5.55 22,173 299 5.36 ---------- ------- ---------- ------- Total Interest-Bearing Funds and Average Rate Paid 3,585,653 34,128 3.86 3,381,795 33,023 3.87 ---------- ------- ----- ---------- ------- ----- Accrued interest and other liabilities 82,517 73,142 ---------- ---------- Total Liabilities 5,049,699 4,722,322 SHAREHOLDERS' EQUITY 414,733 404,851 ---------- ---------- Total Liabilities and Shareholders' Equity $5,464,432 $5,127,173 ========== ========== Net interest income $54,009 $51,500 ======= ======= Net interest spread 3.96% 3.90% ==== ==== Net interest income to total average earning assets 4.78% 4.74% ==== ==== *Taxable-equivalent basis assuming a 35% tax rate. </TABLE>
<TABLE> <CAPTION> Consolidated Average Balance Sheets and Interest Income Analysis-By Quarter Cullen/Frost Bankers, Inc. and Subsidiaries (dollars in thousands - taxable-equivalent basis*) September 30, 1997 June 30, 1997 --------------------------- ------------------------ Interest Interest Average Income/ Yield/ Average Income/ Yield/ Balance Expense Cost Balance Expense Cost --------- ------- ----- -------- ------- ----- <S> <C> <C> <C> <C> <C> <C> ASSETS Securities: U.S. Treasury $ 273,215 $ 3,727 5.41% $ 283,467 $ 3,778 5.35% U.S. Government agencies and corporations 1,187,824 19,625 6.61 1,229,527 20,510 6.67 States and political subdivisions 4,171 99 9.50 4,599 106 9.21 Other 7,354 110 5.99 7,760 111 5.70 ---------- ------- ---------- ------- Total securities 1,472,564 23,561 6.39 1,525,353 24,505 6.43 Federal funds sold 231,214 3,274 5.54 200,752 2,806 5.53 Loans, net of unearned discount 2,514,945 55,954 8.83 2,458,990 54,603 8.91 ---------- ------- ---------- ------- Total Earning Assets and Average Rate Earned 4,218,723 82,789 7.80 4,185,095 81,914 7.84 Cash and due from banks 488,397 471,513 Allowance for possible loan losses (41,191) (36,256) Banking premises and equipment 108,565 106,908 Accrued interest and other assets 193,900 195,656 ---------- ---------- Total Assets $4,968,394 $4,922,916 ========== ========== LIABILITIES Demand deposits: Commercial and individual $ 958,705 $ 927,391 Correspondent banks 219,614 210,002 Public funds 42,673 41,294 ---------- ---------- Total demand deposits 1,220,992 1,178,687 Time deposits: Savings and Interest-on-Checking 728,792 2,229 1.21 746,782 2,321 1.25 Money market deposit accounts 1,016,082 10,256 4.00 961,751 9,755 4.07 Time accounts 1,098,291 13,698 4.95 1,092,292 13,406 4.92 Public funds 216,833 2,564 4.69 261,920 3,016 4.62 ---------- ------- ---------- ------- Total time deposits 3,059,998 28,747 3.73 3,062,745 28,498 3.73 ---------- ------- ---------- ------- Total Deposits 4,280,990 4,241,432 Federal funds purchased and securities sold under repurchase agreements 106,069 1,262 4.65 109,140 1,327 4.81 Guaranteed preferred beneficial interests in Corporation's subordinated debentures 98,381 2,118 8.54 98,372 2,144 8.74 Other borrowings 24,997 356 5.65 22,657 318 5.64 ---------- ------- ---------- ------- Total Interest-Bearing Funds and Average Rate Paid 3,289,445 32,483 3.92 3,292,914 32,287 3.93 ---------- ------- ----- ---------- ------- ---- Accrued interest and other liabilities 59,890 59,876 ---------- ---------- Total Liabilities 4,570,327 4,531,477 SHAREHOLDERS' EQUITY 398,067 391,439 ---------- ---------- Total Liabilities and Shareholders' Equity $4,968,394 $4,922,916 ========== ========== Net interest income $50,306 $49,627 ======= ======= Net interest spread 3.88% 3.91% ===== ===== Net interest income to total average earning assets 4.74% 4.75% ===== ===== *Taxable-equivalent basis assuming a 35% tax rate. </TABLE>
<TABLE> <CAPTION> Consolidated Average Balance Sheets and Interest Income Analysis-By Quarter Cullen/Frost Bankers, Inc. and Subsidiaries (dollars in thousands - taxable-equivalent basis*) March 31, 1997 ---------------------------- Interest Average Income/ Yield/ Balance Expense Cost --------- -------- ------ <S> <C> <C> <C> ASSETS Securities: U.S. Treasury $ 255,412 $ 3,326 5.28% U.S. Government agencies and corporations 1,226,336 20,365 6.64 States and political subdivisions 6,356 154 9.68 Other 6,459 98 6.08 ---------- ------- Total securities 1,494,563 23,943 6.42 Federal funds sold 201,373 2,402 4.77 Loans, net of unearned discount 2,303,330 50,265 8.85 ---------- ------- Total Earning Assets and Average Rate Earned 3,999,266 76,610 7.74 Cash and due from banks 517,232 Allowance for possible loan losses (37,103) Banking premises and equipment 103,153 Accrued interest and other assets 173,661 ---------- Total Assets $4,756,209 ========== LIABILITIES Demand deposits: Commercial and individual $ 863,967 Correspondent banks 232,669 Public funds 45,021 ----------- Total demand deposits 1,141,657 Time deposits: Savings and Interest-on-Checking 718,760 2,279 1.29 Money market deposit accounts 894,150 8,761 3.97 Time accounts 1,045,539 12,580 4.88 Public funds 286,454 3,067 4.34 ---------- ------- Total time deposits 2,944,903 26,687 3.68 ---------- ------- Total Deposits 4,086,560 Federal funds purchased and securities sold under repurchase agreements 135,371 1,398 4.13 Guaranteed preferred beneficial interests in Corporation's subordinated debentures 59,299 1,271 8.69 Other borrowings 24,316 320 5.34 ---------- ------- Total Interest-Bearing Funds and Average Rate Paid 3,163,889 29,676 3.80 ---------- ------- ---- Accrued interest and other liabilities 64,037 ---------- Total Liabilities 4,369,583 SHAREHOLDERS' EQUITY 386,626 ---------- Total Liabilities and Shareholders' Equity $4,756,209 ========== Net interest income $46,934 ======= Net interest spread 3.94% ===== Net interest income to total average earning assets 4.73% ===== * Taxable-equivalent basis assuming a 35% tax rate. </TABLE>
Part II: Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 11 Statement regarding Computation of Earnings per Share 27 Statement regarding Financial Data Schedule (EDGAR Version) (b) Reports on Form 8-K During the quarter ended March 31, 1998, a Current Report on Form 8-K, dated February 26, 1998, was filed with the Commission by the Corporation.
Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Cullen/Frost Bankers, Inc. (Registrant) Date: May 15, 1998 By:/s/Phillip D. Green ----------------------- Phillip D. Green Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Accounting Officer)