Cullen/Frost Bankers (CFR 0.47%), the holding-company parent of the Texas-based regional banking institution Frost Bank, reported its fourth-quarter and full-year results on Thursday.

Revenue grew at a strong rate thanks to solid loan demand and rising interest rates. Expense control helped the company translate the sales gains into yet another double-digit jump in net income and earnings per share (EPS).

Cullen/Frost Bankers Q4: The raw numbers

Metric Q4 2018 Q4 2017  Change (YOY)
Net interest income $249.2 million $223.9 million


Non-interest income $87.1 million $90.1 million (3.3%)
Net income $117.2 million $98.5 million 19%
Earnings per share $1.82 $1.53 19%

Data source: Cullen/Frost Bankers. YOY = year over year.

Man getting money from bank clerk

Image source: Getty Images.

What happened with Cullen/Frost Bankers this quarter?

  • Average loans grew 8% to $13.9 billion. 
  • Average deposits nudged 0.5% higher to $26.5 billion.
  • Returns on average assets rose 22 basis points year over year to 1.48%. However, this number was down slightly on a sequential basis.  
  • Return on common equity remained robust at 14.9%.
  • Net interest margin expanded to 3.72%.
  • Book value per share at quarter-end was $51.19. This figure was up 3% year over year.
  • The allowance for loan losses as a percentage of total loans dropped to just 0.94%.
  • Net charge-offs dropped sequentially to just $9.2 million. 
  • Stock buybacks totaled $100 million during the quarter.
  • Energy-related problem loans totaled $115 million at the end of the fourth quarter. For context, this number was $600 million just a few years ago.

Zooming out to the full year, here's an overview of the company's key numbers from 2018:

  • Net interest income rose 10% to $957 million.
  • Non-interest income jumped 4% to $351 million.
  • Net income grew 26% to $447 million.
  • EPS grew 25% to $6.90.
  • Returns on average assets and common equity were 1.44% and 14.23%, respectively.

What management had to say

CEO Phil Green credited the company's solid results to consistent execution across the business: "We continue to realize high-single-digit loan growth while pursuing consistent, above-market, profitable organic growth across our enterprise.

He was also excited about the progress that's being made to expand the company's presence in Houston: "We opened the first of the 25 new financial centers planned over the next two years in the Houston area just before the end of the fourth quarter."

CEO Green stated on the call with investors that net new customer growth in the Houston area was up 46% when compared to the year-ago period.

Check out the latest Cullen/Frost earnings call transcript.

Looking forward

Management doesn't provide investors with specific guidance. However, on the call with investors, CFO Jerry Salinas stated that the current analyst estimate for $7.11 in earnings per share for the year is "reasonable." For context, that would represent a bottom line of about 3%. 

Overall, Frost Bank continues to be in a strong financial position. Its returns on capital are strong and the company's commitment to expand its presence in the Houston area seems like a great opportunity for growth. 

Market watchers currently predict that Frost Bank will grow its profits in excess of 10% annually over the next five years. Adding in the company's current dividend yield of 2.7% means that Cullen/Frost is well-positioned to drive strong returns for its long-term shareholders.