Cullen/Frost Bankers (NYSE:CFR), a regional bank based in Texas, released its second-quarter earnings on Thursday, July 27. The company posted results that were in line with what Wall Street had expected, thanks to the continued recovery in the energy markets.

Let's put the bank's second-quarter results under the microscope to see if its recovery remains on track.

woman at ATM

Image source: Getty Images.

Cullen/Frost Bankers Q2: The raw numbers

Metric Q2 2017 Q2 2016 Year-Over-Year Change 
Net interest income $258 million $230.2 million 


Non-interest income $81.1 million $78 million 3.9%
Net income $83.5 million $69. million 20.2% 
Earnings per share $1.29 $1.11 16.2%

Data source: Cullen/Frost Bankers.

What happened with Cullen/Frost Bankers this quarter?

  • Loan volume increases and higher interest rates once again helped the company's net interest income grow at a double-digit rate.
  • Earnings per share (EPS) grew 16%, to $1.29. That figure matched what Wall Street had wanted to see.
  • Net interest margin jumped to 3.7%. This figure was 13 basis points ahead of the same period last year. The increase was credited to higher yields on earning assets.
  • Average deposits increased 6.8%, to $25.7 billion.
  • Average loans grew 6.4%, to $12.3 billion.
  • Return on average assets recovered to 1.11%, which was up nicely from the 0.99% reported in the same quarter last year.
  • Return on average common equity was slightly over 11%.
  • Book value per share declined by 1% year over year, to $47.95 at quarter end.
  • Loan losses provisions fell 8%, to $8.4 million.
  • Net charge-offs declined 44%, to $11.9 million.
  • Nonperforming loans increased slightly, to $90.2 million.
  • The company announced a 6% increase to its dividend in April. The new quarterly dividend payment is $0.57 per share. This marks the 24th year in a row of consecutive dividend increases.

What management had to say

Cullen/Frost CEO Phil Green kept his remarks short and to the point: "We continue to benefit from increases in loan volumes throughout our portfolio, and we're well-positioned as interest rates rise."

CEO Green also mentioned that the company continues to successfully expand its footprint in Texas. The company opened a new financial center in Houston a few months ago, and it has since opened a new financial center in Tarrant County within the last few weeks.

Finally, he also commented that the bank continues to win awards for the outstanding customer service that it provides:

For the eighth consecutive year, Frost received the highest ranking in customer satisfaction among Texas banks in the J.D. Power U.S. Retail Banking Satisfaction Study. In the American Banker/Reputation Institute annual bank survey, Frost once again placed in the top five in the country in overall reputation rankings.

Looking forward

The company's shares declined slightly in the early-morning hours following this report. The bank's shares are trading within a few dollars of their all-time high and at just over two times books value, so a slight pullback shouldn't be all that surprising, since the company simply met Wall Street's expectations.

Short-term price movements aside, Frost Bankers' results clearly show that the bank is back to its winning ways now that the energy markets have stabilized. With the majority of the company's financial metrics heading in the right direction and the recently announced dividend increase, income investors should continue to feel good about this company's long-term potential.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.