Cullen/Frost Bankers (NYSE:CFR), a regional bank based in Texas, reported its first-quarter results on Thursday, April 26th. Revenue and earnings both grew by double-digits once again and the company's metrics improved across the board. This broad-based prosperity enabled management to increase its dividend payment by 17.5%.

Let's put Frost's financial results under the microscope to see if the good times can continue.

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Image source: Getty Images.

Cullen/Frost Bankers Q1: The raw numbers

Metric Q1 2018 Q1 2017 Year-Over-Year Change 
Net interest income $229.7 million $208.5 million 

10%

Non-interest income $91.4 million $83.7 million 9%
Net income $104.5 million $82.9 million 26% 
Earnings per share $1.61 $1.28 26%

Data source: Cullen/Frost Bankers.

What happened with Cullen/Frost Bankers this quarter?

  • Net interest income rose 10%, thanks to a similar gain in average loan activity. Total lending for the period was $13.3 billion. 
  • Net interest margin for the period was 3.52%. That was up 13 basis points sequentially when adjusting for the changes in the company's tax rate.
  • Returns on average assets increased by 10 basis points sequentially, to 1.36%.
  • Returns on common equity jumped 96 basis points quarter over quarter, to 13.62%.
  • Book value per share came in at $48.58, which was up 5% year over year. 
  • The allowance for loan losses as a percentage of total loans fell to 1.12%.  
  • Non-performing assets fell sequentially, to $136.6 million. 
  • Cullen/Frost increased its quarterly dividend, to $0.67 per share, which represents an increase of 17.5%. 

What management had to say

Phil Green, Cullen/Frost's CEO, was quite pleased with how his company performed in the first quarter:

The solid first-quarter earnings represent a great start to 2018. Frost is well-positioned to benefit as interest rates tick higher, and our customers continue to benefit from the economic expansion in Texas and across the country. At the same time, our value proposition and commitment to customer service have helped us expand our customer base, and have paid off with recognition from third-party sources like J.D. Power and Associates, which for the ninth consecutive year gave Frost the highest customer satisfaction ranking among banks in Texas.

On the call with investors, Green noted that only 10.7% of Frost's loan portfolio was devoted to the energy sector, which is down considerably from more than 16% at its peak in 2015. He also noted that the company continues to make progress with expanding its online banking presence. Green stated that 21% of new accounts came from digital channels during the quarter.

Looking forward

Frost's management team doesn't share guidance with Wall Street, but CFO Jerry Salinas stated in his prepared remarks that "we currently believe that estimates for the second half of the year are low, given our current assumption of another rate hike in June." 

Overall, Frost started off 2018 with a bang and looks well-positioned to keep the momentum up throughout the remainder of the year. With interest rates poised to rise and the energy sector recovery in full swing, it's easy to understand why Wall Street feels bullish about this company's prospects.