PR Newswire | Jan 28, 2021 09:02AM EST

01/28 08:00 CST

Cullen/Frost Reports 4th Quarter And 2020 Annual ResultsBoard declares first quarter dividend on common and preferred stock, and authorizes $100 million stock repurchase program SAN ANTONIO, Jan. 28, 2021

SAN ANTONIO, Jan. 28, 2021 /PRNewswire/ -- Cullen/Frost Bankers, Inc. (NYSE: CFR) today reported fourth quarter and full year results for 2020. Net income available to common shareholders for the fourth quarter of 2020 was $88.3 million, or $1.38 per diluted common share, compared to $101.7 million, or $1.60 per diluted common share, for the fourth quarter of 2019. For the fourth quarter of 2020, returns on average assets and average common equity were 0.86 percent and 8.55 percent, respectively, compared to 1.21 percent and 10.74 percent for the same period in 2019.

The company also reported 2020 annual net income available to common shareholders of $323.6 million, a decrease of 25.7 percent compared to 2019 earnings available to common shareholders of $435.5 million. On a per-share basis, 2020 earnings were $5.10 per diluted common share compared to $6.84 per diluted common share reported in 2019. For the year 2020, returns on average assets and average common equity were 0.85 percent and 8.11 percent respectively, compared to 1.36 percent and 12.24 percent reported in 2019.

"In 2020, Frost Bankers made the best of a challenging environment, as we neared completion of our 25-branch Houston expansion and made $3.3 billion of PPP loans, providing timely assistance to over 19,000 customers. And last week we began accepting new PPP loan applications as the second phase of the PPP program gets under way," said Phil Green, Cullen/Frost chairman and CEO. "Our commitment to our organic growth strategy puts us in a strong position as we move ahead into the coming year."

For the fourth quarter of 2020, net interest income on a taxable-equivalent basis was $265.7 million, down 3.4 percent compared to the same period in 2019. Average loans for the fourth quarter of 2020 increased $3.2 billion, or 22.0 percent, to $17.9 billion, from the $14.7 billion reported for the fourth quarter a year earlier. Excluding PPP loans, fourth quarter average loans of $15.0 billion represented a 2.3 percent increase compared to the fourth quarter of 2019. Average deposits for the quarter were $34.1 billion, an increase of 25.5 percent, or $6.9 billion, compared to $27.2 billion in last year's fourth quarter.

For 2020, average total loans were $17.2 billion, an increase of approximately $2.7 billion, or 18.9 percent, from the $14.4 billion reported the previous year. Excluding PPP loans, 2020 average loans of $15.0 billion represented a 3.9 percent increase compared to 2019. Average total deposits for 2020 were $31.4 billion, up 19.0 percent, or $5.0 billion, compared to the $26.4 billion reported in 2019.

Noted financial data for the fourth quarter

* The Common Equity Tier 1, Tier 1 and Total Risk-Based Capital Ratios for Cullen/Frost at the end of the fourth quarter of 2020 were 12.86 percent, 13.47 percent, and 15.44 percent, respectively. Current capital ratios continue to be in excess of well-capitalized levels and exceed Basel III requirements. * Net interest income on a tax-equivalent basis was $265.7 million, a decrease of 3.4 percent compared to the $275.0 million reported for the fourth quarter of 2019. The net interest margin was 2.82 percent for the fourth quarter compared to 3.62 percent for the fourth quarter of 2019 and 2.95 percent for the third quarter of 2020. * Non-interest income for the fourth quarter of 2020 was $91.3 million, down $3.9 million, or 4.1 percent, from the $95.3 million reported a year earlier. Service charges on deposits decreased $2.6 million, or 11.2 percent, compared to the fourth quarter of 2019, mainly driven by a decrease in overdraft and NSF fees, down $2.7 million compared to the fourth quarter of 2019. Other income decreased $719,000 or 5.1 percent compared to the fourth quarter of 2019, primarily driven by a $454,000 decrease in derivative revenue. Trust and investment management fees decreased by $658,000, or 2.0 percent, compared to the fourth quarter of 2019. The decrease in trust and investment management fees was primarily the result of a $1.7 million decrease in oil & gas fees and a $1.1 million decrease in estate fees when compared with the fourth quarter of 2019, partly offset by a $1.0 million increase in investment fees. * Non-interest expense for the fourth quarter of 2020 was $222.9 million, up $2.1 million, or 1.0 percent, compared to the $220.8 million reported for the fourth quarter of 2019. Salaries and wages expense increased $6.9 million compared to the fourth quarter of 2019. The increase was impacted by severance expense of $5.2 million related to organizational restructurings. Employee benefits expense decreased by $5.8 million compared with the fourth quarter of 2019. The decrease in employee benefits expense was primarily related to a decrease in certain discretionary benefit plan expenses. Fourth quarter net occupancy expense increased $2.0 million compared to the fourth quarter of 2019, impacted by our Houston expansion. The total increase was primarily driven by increases in depreciation on leasehold improvements (up $857,000), property taxes (up $797,000) and building depreciation (up $176,000), among other things. Technology, furniture and equipment expense was up $1.7 million or 6.6 percent compared to the fourth quarter of 2019. The increase was primarily driven by a $1.6 million increase in software expenses. Other non-interest expense decreased by $2.9 million or 6.1 percent compared to the fourth quarter of 2019, primarily driven by a $3.2 million decrease in travel and entertainment expense. * For the fourth quarter of 2020, credit loss expense related to loans was $13.3 million, compared to net charge-offs of $13.6 million. For the fourth quarter of 2019, the credit loss expense related to loans was $8.4 million, compared to net charge-offs of $12.7 million. The allowance for credit losses on loans as a percentage of total loans was 1.51 percent at December 31, 2020, compared to 1.45 percent last quarter and 0.90 percent at year-end 2019. Excluding PPP loans, which carry a guarantee from the SBA, the allowance for credit losses on loans as a percentage of total loans was 1.75 percent at the end of the fourth quarter of 2020. Non-performing assets were $62.3 million at year end, compared to $96.4 million the previous quarter, and $109.5 million at year-end 2019. Credit loss expense related to off-balance-sheet exposures was $489,000 in the fourth quarter of 2020. * As described further below, we have declared the first dividend payment on our 4.450% Non-Cumulative Perpetual Preferred Stock, Series B, issued on November 19, 2020, which will take place during the first quarter and will total $2.151 million. This preferred stock is represented by depositary shares, each representing a 1/40th interest in a share of preferred stock. Each subsequent quarterly dividend payment to holders of our Preferred Stock will total $1.669 million.

The Cullen/Frost board declared a first-quarter cash dividend of $0.72 per common share, payable March 15, 2021 to shareholders of record on February 26 of this year. The board of directors also declared a cash dividend of $14.3388889 per share of Series B Preferred Stock (or $0.3584722 per depositary share). The depositary shares representing the Series B Preferred Stock are traded on the NYSE under the symbol "CFR PrB." The Series B Preferred Stock dividend is payable on March 15, 2021, to shareholders of record on February 26 of this year.

In addition, the Corporation's board of directors authorized a new $100.0 million stock repurchase plan. Under the plan, shares may be repurchased over a one-year period from time to time at various prices in the open market or through private transactions.

Cullen/Frost Bankers, Inc. will host a conference call on Thursday, January 28, 2021, at 1:00 p.m. Central Time (CT) to discuss the results for the quarter and the year. The media and other interested parties are invited to access the call in a "listen only" mode at 800-944-6430. Digital playback of the conference call will be available after 5:00 p.m. CT on the day of the call until midnight Sunday, January 31, 2021 at 855-859-2056, with the Conference ID# of 6337817. A replay of the call will also be available by webcast at the URL listed below after 5:00 p.m. CT on the day of the call.

Cullen/Frost investor relations website: www.frostbank.com/investor-relations/

Cullen/Frost Bankers, Inc. (NYSE: CFR) is a financial holding company, headquartered in San Antonio, with $42.4 billion in assets at December 31, 2020. One of the 50 largest U.S. banks, Frost provides a wide range of banking, investments and insurance services to businesses and individuals across Texas in the Austin, Corpus Christi, Dallas, Fort Worth, Houston, Permian Basin, Rio Grande Valley and San Antonio regions. Founded in 1868, Frost has helped clients with their financial needs during three centuries. Additional information is available at frostbank.com.

Forward-Looking Statements and Factors that Could Affect Future Results

Certain statements contained in this Earnings Release that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"), including statements regarding the potential effects of the ongoing COVID-19 pandemic on our business, financial condition, liquidity and results of operations, notwithstanding that such statements are not specifically identified as such. In addition, certain statements may be contained in our future filings with the SEC, in press releases, and in oral and written statements made by us or with our approval that are not statements of historical fact and constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations of Cullen/Frost or its management or Board of Directors, including those relating to products, services or operations; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as "believes", "anticipates", "expects", "intends", "targeted", "continue", "remain", "will", "should", "may" and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

* Local, regional, national and international economic conditions and the impact they may have on us and our customers and our assessment of that impact. * Volatility and disruption in national and international financial and commodity markets. * Government intervention in the U.S. financial system. * Changes in the mix of loan geographies, sectors and types or the level of non-performing assets and charge-offs. * Changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements. * The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board. * Inflation, interest rate, securities market and monetary fluctuations. * The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which we and our subsidiaries must comply. * The soundness of other financial institutions. * Political instability. * Impairment of our goodwill or other intangible assets. * Acts of God or of war or terrorism. * The timely development and acceptance of new products and services and perceived overall value of these products and services by users. * Changes in consumer spending, borrowings and savings habits. * Changes in the financial performance and/or condition of our borrowers. * Technological changes. * The cost and effects cyber incidents or other failures, interruptions or security breaches of our systems or those of third-party providers. * Acquisitions and integration of acquired businesses. * Our ability to increase market share and control expenses. * Our ability to attract and retain qualified employees. * Changes in the competitive environment in our markets and among banking organizations and other financial service providers. * The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters. * Changes in the reliability of our vendors, internal control systems or information systems. * Changes in our liquidity position. * Changes in our organization, compensation and benefit plans. * The impact of the ongoing COVID-19 pandemic and any other pandemic, epidemic or health-related crisis. * The costs and effects of legal and regulatory developments, the resolution of legal proceedings or regulatory or other governmental inquiries, the results of regulatory examinations or reviews and the ability to obtain required regulatory approvals. * Greater than expected costs or difficulties related to the integration of new products and lines of business. * Our success at managing the risks involved in the foregoing items

Further, statements about the potential effects of the ongoing COVID-19 pandemic on our business, financial condition, liquidity and results of operations may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, clients, third parties and us.

Forward-looking statements speak only as of the date on which such statements are made. We do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.

A.B. MendezInvestor Relations210.220.5234

Bill DayMedia Relations210.220.5427

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

(In thousands, except per share amounts)



2020 2019

4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr

CONDENSED INCOME STATEMENTS

Net interest income $242,246 $243,423 $245,811 $244,521 $251,098

Net interest income ^(1) 265,721 267,041 269,722 268,453 275,038

Credit loss expense 13,756 20,302 31,975 175,197 8,355

Non-interest income:

Trust and investment management fees 32,270 31,469 31,060 34,473 32,928

Service charges on deposit accounts 20,830 19,812 17,580 22,651 23,454

Insurance commissions and fees 11,704 11,456 10,668 16,485 12,138

Interchange and debit card transaction fees 3,746 3,503 2,966 3,255 3,608

Other charges, commissions and fees 9,427 8,370 7,663 9,365 9,020

Net gain (loss) on securities transactions - - - 108,989 28

Other 13,360 8,991 7,664 17,697 14,079

Total non-interest income 91,337 83,601 77,601 212,915 95,255



Non-interest expense:

Salaries and wages 104,843 93,323 90,350 98,812 97,951

Employee benefits 15,852 16,074 18,861 24,889 21,651

Net occupancy 26,822 25,466 25,266 25,384 24,864

Technology, furniture and equipment 27,464 26,482 26,046 25,240 25,759

Deposit insurance 2,706 2,372 2,800 2,624 2,374

Intangible amortization 208 212 241 257 264

Other 45,017 38,221 36,115 46,957 47,943

Total non-interest expense 222,912 202,150 199,679 224,163 220,806

Income before income taxes 96,915 104,572 91,758 58,076 117,192

Income taxes 8,645 9,516 (1,314) 3,323 13,511

Net income 88,270 95,056 93,072 54,753 103,681

Preferred stock dividends - - - 2,016 2,016

Redemption of preferred stock - - - 5,514 -

Net income available to common shareholders $88,270 $95,056 $93,072 $47,223 $101,665



PER COMMON SHARE DATA

Earnings per common share - basic $1.39 $1.50 $1.47 $0.75 $1.61

Earnings per common share - diluted 1.38 1.50 1.47 0.75 1.60

Cash dividends per common share 0.72 0.71 0.71 0.71 0.71

Book value per common share at end of quarter 65.82 65.07 63.97 61.17 60.11



OUTSTANDING COMMON SHARES

Period-end common shares 63,011 62,782 62,670 62,553 62,669

Weighted-average common shares - basic 62,940 62,727 62,596 62,643 62,609

Dilutive effect of stock compensation 311 193 205 407 625

Weighted-average common shares - diluted 63,251 62,920 62,801 63,050 63,234



SELECTED ANNUALIZED RATIOS

Return on average assets 0.86 %0.96 %0.99 %0.57 %1.21 %

Return on average common equity 8.55 9.30 9.60 4.88 10.74

Net interest income to average earning assets ^(1)2.82 2.95 3.13 3.56 3.62



(1) Taxable-equivalent basis assuming a 21% tax rate.



Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)



2020 2019

4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr

BALANCE SHEET SUMMARY

($ in millions)

Average Balance:

Loans $17,945 $18,149 $17,550 $14,995 $14,705

Earning assets 38,262 36,749 35,128 30,804 30,621

Total assets 40,963 39,435 37,838 33,534 33,314

Non-interest-bearing demand deposits 15,119 14,585 13,785 10,737 10,772

Interest-bearing deposits 19,010 18,289 17,528 16,654 16,414

Total deposits 34,129 32,875 31,313 27,391 27,186

Shareholders' equity 4,175 4,065 3,899 4,009 3,900



Period-End Balance:

Loans $17,481 $18,224 $17,972 $15,338 $14,750

Earning assets 39,648 37,482 36,613 31,440 31,281

Goodwill and intangible assets 657 657 657 657 657

Total assets 42,391 40,101 39,378 34,147 34,027

Total deposits 35,016 33,500 32,679 28,141 27,640

Shareholders' equity 4,293 4,085 4,009 3,827 3,912

Adjusted shareholders' equity ^(1) 3,780 3,580 3,521 3,463 3,644



ASSET QUALITY

($ in thousands)

Allowance for credit losses on loans: $263,177 $263,475 $250,061 $263,881 $132,167

As a percentage of period-end loans 1.51 %1.45 %1.39 %1.72 %0.90 %



Net charge-offs: $13,565 $10,176 $41,048 $38,646 $12,747

Annualized as a percentage of average loans 0.30 %0.22 %0.94 %1.04 %0.34 %



Non-performing assets:

Non-accrual loans $61,449 $91,578 $79,461 $66,727 $102,303

Restructured loans - 3,932 4,932 - 6,098

Foreclosed assets 850 850 806 806 1,084

Total $62,299 $96,360 $85,199 $67,533 $109,485

As a percentage of:

Total loans and foreclosed assets 0.36 %0.53 %0.47 %0.44 %0.74 %

Total assets 0.15 0.24 0.22 0.20 0.32



CONSOLIDATED CAPITAL RATIOS

Common Equity Tier 1 Risk-Based Capital Ratio12.86 %12.71 %12.48 %12.02 %12.36 %

Tier 1 Risk-Based Capital Ratio 13.47 12.71 12.48 12.02 12.99

Total Risk-Based Capital Ratio 15.44 14.69 14.43 13.97 14.57

Leverage Ratio 8.07 7.85 8.01 8.84 9.28

Equity to Assets Ratio (period-end) 10.13 10.19 10.18 11.21 11.50

Equity to Assets Ratio (average) 10.19 10.31 10.30 11.95 11.71



(1) Shareholders' equity excluding accumulated other comprehensive income (loss).



Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

(In thousands, except per share amounts)



Year Ended December 31,

2020 2019 2018 2017 2016

CONDENSED INCOME STATEMENTS

Net interest income $976,001 $1,004,005 $957,892 $866,422 $776,336

Net interest income ^(1) 1,070,937 1,100,586 1,052,564 1,043,431 939,958

Credit loss expense ^(2) 241,230 33,759 21,685 35,888 51,673

Non-interest income:

Trust and investment management fees 129,272 126,722 119,391 110,675 104,240

Service charges on deposit accounts 80,873 88,983 85,186 84,182 81,203

Insurance commissions and fees 50,313 52,345 48,967 46,169 47,154

Interchange and debit card transaction fees ^(3) 13,470 14,873 13,877 23,232 21,369

Other charges, commissions and fees 34,825 37,123 37,231 39,931 39,623

Net gain (loss) on securities transactions 108,989 293 (156) (4,941) 14,975

Other 47,712 43,563 46,790 37,222 41,144

Total non-interest income ^(3) 465,454 363,902 351,286 336,470 349,708



Non-interest expense:

Salaries and wages 387,328 375,029 350,312 337,068 318,665

Employee benefits 75,676 86,230 77,323 74,575 72,615

Net occupancy 102,938 89,466 76,788 75,971 71,627

Technology, furniture and equipment 105,232 91,995 83,102 74,335 71,208

Deposit insurance 10,502 10,126 16,397 20,128 17,428

Intangible amortization 918 1,168 1,424 1,703 2,429

Other ^(2)(3) 166,310 180,665 173,466 174,861 178,988

Total non-interest expense ^(2)(3) 848,904 834,679 778,812 758,641 732,960

Income before income taxes 351,321 499,469 508,681 408,363 341,411

Income taxes 20,170 55,870 53,763 44,214 37,150

Net income 331,151 443,599 454,918 364,149 304,261

Preferred stock dividends 2,016 8,063 8,063 8,063 8,063

Redemption of preferred stock 5,514 - - - -

Net income available to common shareholders $323,621 $435,536 $446,855 $356,086 $296,198



PER COMMON SHARE DATA

Earnings per common share - basic $5.11 $6.89 $6.97 $5.56 $4.73

Earnings per common share - diluted 5.10 6.84 6.90 5.51 4.70

Cash dividends per common share 2.85 2.80 2.58 2.25 2.15

Book value per common share at end of quarter 65.82 60.11 51.19 49.68 45.03



OUTSTANDING COMMON SHARES

Period-end common shares 63,011 62,669 62,986 63,476 63,474

Weighted-average common shares - basic 62,727 62,742 63,705 63,694 62,376

Dilutive effect of stock compensation 277 700 982 968 593

Weighted-average common shares - diluted 63,004 63,442 64,687 64,662 62,969



SELECTED ANNUALIZED RATIOS

Return on average assets 0.85 %1.36 %1.44 %1.17 %1.03 %

Return on average common equity 8.11 12.24 14.23 11.76 10.16

Net interest income to average earning assets ^(1) 3.09 3.75 3.64 3.69 3.56



(1) Taxable-equivalent basis assuming a 21% tax rate for 2020, 2019 and 2018 and 35% tax rate for 2016-2017.

(2) Prior to 2020, credit loss expense related to off-balance-sheet credit exposures was previously reported as a component of other non- interest expense. In connection with the adoption of a new accounting standard in 2020, such amounts have been reclassified to credit loss expense to make prior periods comparable to the current presentation.

(3) Beginning in 2018, in connection with the adoption of a new accounting standard, interchange and debit card transaction fees are reported net of related network costs. Prior to 2018, such network costs were reported separately as a component of other non-interest expense. For comparative purposes, interchange and debit card transaction fees reported net of related network costs would have totaled $11,289 in 2017 and $8,473 in 2016.

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)



Year Ended December 31,

2020 2019 2018 2017 2016

BALANCE SHEET SUMMARY ($ in millions)

Average Balance:

Loans $17,164 $14,441 $13,618 $12,460 $11,555

Earning assets 35,248 29,600 28,900 28,359 26,717

Total assets 37,961 32,086 31,030 30,450 28,832

Non-interest-bearing demand deposits 13,564 10,358 10,757 10,819 10,034

Interest-bearing deposits 17,875 16,055 15,532 15,085 14,478

Total deposits 31,438 26,413 26,289 25,905 24,512

Shareholders' equity 4,039 3,702 3,284 3,173 3,059



Period-End Balance:

Loans $17,481 $14,750 $14,100 $13,146 $11,975

Earning assets 39,648 31,281 29,894 29,595 28,025

Goodwill and intangible assets 657 657 659 660 662

Total assets 42,391 34,027 32,293 31,748 30,196

Total deposits 35,016 27,640 27,149 26,872 25,812

Shareholders' equity 4,293 3,912 3,369 3,298 3,003

Adjusted shareholders' equity ^(1) 3,780 3,644 3,433 3,218 3,027



ASSET QUALITY ($ in thousands)

Allowance for credit losses on loan: $263,177 $132,167 $132,132 $155,364 $153,045

As a percentage of period-end loans 1.51 %0.90 %0.94 %1.18 %1.28 %



Net charge-offs: $103,435 $33,724 $44,845 $33,141 $34,487

Annualized as a percentage of average loans 0.60 %0.23 %0.33 %0.27 %0.30 %



Non-performing assets:

Non-accrual loans $61,449 $102,303 $73,739 $150,314 $100,151

Restructured loans - 6,098 - 4,862 -

Foreclosed assets 850 1,084 1,175 2,116 2,440

Total $62,299 $109,485 $74,914 $157,292 $102,591

As a percentage of:

Total loans and foreclosed assets 0.36 %0.74 %0.53 %1.20 %0.86 %

Total assets 0.15 0.32 0.23 0.50 0.34



CONSOLIDATED CAPITAL RATIOS

Common Equity Tier 1 Risk-Based Capital Ratio12.86 %12.36 %12.27 %12.42 %12.52 %

Tier 1 Risk-Based Capital Ratio 13.47 12.99 12.94 13.16 13.33

Total Risk-Based Capital Ratio 15.44 14.57 14.64 15.15 14.93

Leverage Ratio 8.07 9.28 9.06 8.46 8.14

Equity to Assets Ratio (period-end) 10.13 11.50 10.43 10.39 9.94

Equity to Assets Ratio (average) 10.64 11.54 10.58 10.42 10.61



(1) Shareholders' equity excluding accumulated other comprehensive income (loss).



Cullen/Frost Bankers, Inc.

TAXABLE-EQUIVALENT YIELD/COST AND AVERAGE BALANCES (UNAUDITED)



2020 2019

4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr

TAXABLE-EQUIVALENT YIELD/COST^(1)

Earning Assets:

Interest-bearing deposits 0.10 %0.10 %0.10 %1.24 %1.64 %

Federal funds sold and resell agreements 0.25 0.24 0.27 1.22 1.71

Securities 3.41 3.44 3.53 3.46 3.37

Loans, net of unearned discounts 3.74 3.73 3.95 4.65 4.88

Total earning assets 2.89 3.04 3.24 3.84 3.98



Interest-Bearing Liabilities:

Interest-bearing deposits:

Savings and interest checking 0.02 0.02 0.02 0.02 0.04

Money market deposit accounts 0.07 0.09 0.09 0.50 0.66

Time accounts 0.82 1.11 1.40 1.67 1.72

Public funds 0.02 0.02 0.09 0.85 1.05

Total interest-bearing deposits 0.09 0.12 0.14 0.39 0.49



Total deposits 0.05 0.07 0.08 0.24 0.29



Federal funds purchased and repurchase agreements 0.11 0.12 0.15 0.95 1.21

Junior subordinated deferrable interest debentures 1.96 2.05 2.90 3.54 3.83

Subordinated notes payable and other notes 4.70 4.70 4.71 4.71 4.71

Federal Home Loan Bank advances - - 0.29 - -

Total interest-bearing liabilities 0.13 0.15 0.19 0.47 0.59



Net interest spread 2.76 2.89 3.05 3.37 3.39

Net interest income to total average earning assets2.82 2.95 3.13 3.56 3.62



AVERAGE BALANCES

($ in millions)

Assets:

Interest-bearing deposits $7,718 $5,888 $4,986 $2,586 $2,000

Federal funds sold and resell agreements 17 31 92 260 275

Securities 12,582 12,680 12,501 12,963 13,641

Loans, net of unearned discount 17,945 18,149 17,550 14,995 14,705

Total earning assets $38,262 $36,749 $35,128 $30,804 $30,621



Liabilities:

Interest-bearing deposits:

Savings and interest checking $8,397 $8,077 $7,615 $7,030 $6,850

Money market deposit accounts 8,884 8,555 8,230 7,874 7,905

Time accounts 1,133 1,120 1,118 1,109 1,069

Public funds 596 537 565 640 590

Total interest-bearing deposits 19,010 18,289 17,528 16,654 16,414



Total deposits 34,129 32,875 31,313 27,391 27,186



Federal funds purchased and repurchase agreements 1,743 1,578 1,295 1,259 1,418

Junior subordinated deferrable interest debentures 136 136 136 136 136

Subordinated notes payable and other notes 99 99 99 99 99

Federal Home Loan Bank advances - - 440 - -

Total interest-bearing funds $20,988 $20,103 $19,498 $18,149 $18,067



(1) Taxable-equivalent basis assuming a 21% tax rate.

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SOURCE Cullen/Frost Bankers, Inc.