Cullen/Frost Bankers reported soaring profits driven by rising interest rates and loan growth as the company continues to expand in Texas.
The firm's net interest income grew 65% during the fourth quarter from the same period last year, and profits nearly doubled, even though noninterest income fell by 3%.
"You don't get to say that very often," CEO Phil Green said about the company's performance during a fourth-quarter earnings presentation.
Rising interest rates and income generated by the bank's $17 billion loan portfolio, which grew 6.7% from the year-ago period, drove the company's performance, Green said in an interview.
The San Antonio bank's recent expansion in the Dallas and Houston markets helped drive new commercial loan commitments of $2.2 billion, while the consumer portfolio grew by 26,000 households throughout last year, Green said.
Commercial real estate loans were flat, and analysts asked questions about the portfolio's credit quality heading into a possible recession.
Cullen/Frost, the $52.3 billion-asset parent company of Frost Bank, held $1.8 billion in outstanding commercial real estate loans at the end of last year.
The company did not provide guidance for net interest income growth during 2023, but it estimated that the expansion of its net interest margin will peak in the second half of the year. Loan growth is expected to continue in the mid-single-digit percentage points.
The "bigger unknown" for 2023 is whether the bank can continue growing deposits, Chief Financial Officer Jerry Salinas told analysts during the earnings call. In the fourth quarter, total deposits rose 9% to $44.8 billion from the same period last year.
Noninterest income of $105.7 million was helped by a 3.3% increase in trust and investment management fees from the same period last year, while noninterest expenses increased 17.8% to $281.3 million. Cullen/Frost paid more in salaries and employee benefits as part of its branch expansion.
The company reported net income of $191.2 million, up by 89% from the year-ago period.
Earnings per share of $2.91 rose by 88%, exceeding the average estimate of $2.76 by analysts surveyed by FactSet Research Systems.
