The third quarter earnings report for Frost Bank’s parent company, Cullen/Frost Bankers Inc., shows more than its sunny earnings.

Its results also provide a snapshot view of economic trends statewide. Cullen/Frost is a major office employer and its banks lend primarily in Texas, so it is directly involved in many sectors of the economy.

The company reported earnings of $106.3 million, or $1.65 cents a share, on $362.5 million in revenue for the third quarter ending Sept. 30. Cullen/Frost Chairman and CEO Phil Green said it was a “solid quarter,” as “loans are trending upward and headwinds associated with the pandemic’s effects are beginning to diminish.”

The results were an improvement from the third quarter last year, when the company earned $95.1 million, or $1.50 a share, on $350.6 million in revenue.

As has been shown nationally, figures from the report suggest consumer spending is up. Income from card transaction fees and related fees are up more than 28% compared with the third quarter in 2020, for a total of $4.49 million. The report says this is primarily due to higher transaction volumes, though it may also be affected by new card products. Transaction volumes were depressed last year during the onset of the pandemic.

Relatedly, average deposits increased 19 percent over the third quarter last year.

The return to the office is happening, albeit slowly. Net occupancy expenses for the company increased 6.8% (or $1.7 million) over the third quarter in 2020. Cullen/Frost reports that this was due to increases in repairs and maintenance and service contracts, as well as depreciation on improvements made to rental properties.

The company began its “hybrid” working model in September, in which branch employees and those in other customer-facing roles work in the office, while certain other employees, such as those that work in back-office operations, have the option of working remotely on some days. The report also said net occupancy expenses were impacted by its expansion within the Houston market.

Reflecting a trend happening across industries, wages and other compensation are up, as companies compete for workers in a tight labor market. For its banking segment, the report shows that the quarter’s non-interest expenses increased 9.2% (or $15.6 million) compared with the same quarter last year. The report says this is “primarily due to increases in employee benefit expense; salaries and wages; net occupancy expense; and technology, furniture and equipment expense.” Similar figures were given for the banking company’s wealth advisors segment.

The report adds that the impact of these wage and compensation increases was offset by “a decrease in the number of employees, and decreases in stock-based compensation.”

Cullen/Frost’s large-scale lending gives it a perch view over many sectors. Some industries remain hard-hit by the pandemic and face a precarious future. While the company’s banking segment continues to lend money to hotels, restaurants, and entertainment businesses, it is keeping a careful eye on these industries. The report says that although the majority of these borrowers have been bolstered by Paycheck Protection Program funding, “management believes there is a significant amount of uncertainty associated with the long-term viability of many of these businesses when this government supplemented funding runs out.”

Gone from that category — and so suggesting a better recovery than the others — are retail and strip center businesses, which managers had included for the quarter ending Dec. 31, 2020. The retail industry has had a rocky but generally upward trajectory since the beginning of 2021.

Waylon Cunningham

Waylon Cunningham writes about business and technology. Contact him at waylon@sareport.org.