PR Newswire | Apr 29, 2021 09:01AM EDT

04/29 08:00 CDT

Cullen/Frost Reports First Quarter ResultsBoard declares second quarter dividend on common and preferred stock SAN ANTONIO, April 29, 2021

SAN ANTONIO, April 29, 2021 /PRNewswire/ -- Cullen/Frost Bankers, Inc. (NYSE:CFR) today reported first quarter 2021 results. Net income available to common shareholders for the first quarter of 2021 was $113.9 million, compared to $47.2 million in the first quarter of 2020. On a per-share basis, net income available to common shareholders for the first quarter of 2021 was $1.77 per diluted common share, compared to $0.75 per diluted common share reported a year earlier. Returns on average assets and average common equity were 1.09 percent and 11.13 percent, respectively, for the first quarter of 2021 compared to 0.57 percent and 4.88 percent, respectively, for the same period a year earlier.

For the first quarter of 2021, net interest income on a taxable-equivalent basis was $263.9 million, down 1.7 percent compared to the same quarter in 2020. Average loans for the first quarter of 2021 increased $2.7 billion, or 17.9 percent, to $17.7 billion, from the $15.0 billion reported for the first quarter a year earlier. Excluding PPP loans, first quarter average loans of $14.9 billion represented a 0.9 percent decrease compared to the first quarter of 2020. Average deposits for the quarter were $35.4 billion, up $8.0 billion, or 29.3 percent, compared to the $27.4 billion reported for last year's first quarter.

"Our first quarter results reflect the continued high level of effort put forth across our company," said Phil Green, Cullen/Frost Chairman and CEO. "We were ready to respond when the federal government's Paycheck Protection Program restarted early in the quarter, and the hard work our bankers have put into helping customers get PPP loans is showing up in the increased number of customer relationships we've built, as well as in our net promoter scores and overall customer satisfaction levels. Our new locations in Houston are performing above our projections. All of this has positioned us well to respond to increased economic activity as the country emerges from the pandemic."

Noted financial data for the first quarter of 2021 follows:

* The Common Equity Tier 1, Tier 1 and Total Risk-Based Capital Ratios at the end of the first quarter of 2021 were 13.45 percent, 14.07 percent and 16.07 percent, respectively, and continue to be in excess of well-capitalized levels and exceed Basel III minimum requirements. * Net interest income on a taxable-equivalent basis was $263.9 million, a decrease of 1.7 percent compared to the prior year period. Net interest margin was 2.72 percent for the first quarter of 2021, down 10 basis points compared to the fourth quarter of 2020 net interest margin of 2.82 percent. Net interest margin decreased 84 basis points compared to 3.56 percent in the year-ago period. * Non-interest income for the first quarter of 2021 totaled $93.2 million, a decrease of $119.7 million, from the $212.9 million reported for the first quarter of 2020. The first quarter of 2020 included $109.0 million in net gains on sales of securities, with $107.1 million of that related to the sale of approximately $500 million in 30-year U.S. Treasury securities. Excluding the total net gain on sale of securities, total non-interest income in the first quarter would have decreased approximately $10.7 million, or 10.3 percent, compared to the first quarter of 2020. Other non-interest income decreased $9.5 million compared to the first quarter of 2020. The primary driver of the decrease in other non-interest income was a $6.0 million gain realized on the sale of certain non-hedge related, short-term put options on U.S. Treasury securities with an aggregate notional amount of $500 million in the first quarter of 2020. Service charges on deposits decreased $2.7 million, or 11.7 percent, compared to the first quarter of 2020, mainly driven by a decrease in overdraft/insufficient funds charges, down $2.9 million. Other charges, commissions and fees decreased $1.1 million, or 11.3 percent, compared to the first quarter of 2020. The decrease was primarily related to a decrease in income from the placement of money market accounts (down $1.2 million), which was impacted by lower average market rates. These decreases were partly offset by increases in each of the following: trust and investment management fees, up $841,000; interchange and card transactions, up $838,000, and insurance commissions and fees, up $828,000 compared to the first quarter of 2020. * Non-interest expense was $210.1 million for the quarter, down $14.0 million, or 6.3 percent, compared to the $224.2 million reported for the first quarter a year earlier. Other non-interest expense decreased $10.0 million, or 21.3 percent, compared to the first quarter of 2020. The decrease included decreases in advertising/promotions expense, down $3.0 million; travel, meals and entertainment expense, down $2.9 million; professional services expense, down $1.9 million; business development expense, down $1.2 million; and outside computer services expense, down $1.1 million, among other things. The decrease was also partly due to an increase in costs deferred as loan origination costs, up $1.2 million mainly in connection with the high volume of PPP loan originations during the first quarter of 2021. Included in other non-interest expense for the first quarter of 2021 was a $1.5 million contribution to the Frost Bank Charitable Foundation. Total salaries and wages decreased $5.4 million, or 5.4 percent, to $93.5 million, compared to the first quarter of 2020. The decrease was primarily related to an increase in salary costs deferred as loan origination costs, up $3.6 million, also impacted by the high volume of PPP loan originations during the first quarter of 2021. Employee benefits expense decreased by $2.4 million, or 9.5 percent, primarily driven by decreases in certain discretionary benefit plan expenses and expenses related to our defined benefit retirement plan. These decreases were partly offset by technology, furniture and equipment expense, which increased by $2.8 million, or 11.0 percent, compared to the first quarter of 2020. The increase was primarily related to increases in cloud services expense, up $2.2 million, and depreciation of furniture and equipment expense, up $656,000. * For the first quarter of 2021, the company did not record a credit loss expense related to loans, and had net charge-offs of $1.9 million. This compares with $13.3 million in credit loss expense related to loans and $13.6 million in net charge-offs for the fourth quarter of 2020, and $172.9 million in credit loss expense related to loans and $38.6 million in net charge-offs in the first quarter of 2020. Our credit loss expense related to loans was elevated in the first quarter of 2020 as a result of COVID-19-related business closures and the challenges faced by our energy industry customers given the commodity price declines during that period. The allowance for credit losses on loans as a percentage of total loans was 1.46 percent at March 31, 2021, compared to 1.51 percent at the end of the fourth quarter of 2020 and 1.72 percent at the end of the first quarter of 2020. Excluding PPP loans, which carry a guarantee from the SBA, the allowance for credit losses on loans as a percentage of total loans was 1.77 percent at the end of the first quarter of 2021, compared to 1.75 percent at the end of the fourth quarter of 2020. Non-accrual loans were $51.0 million at the end of the first quarter of 2021, compared to $61.4 million at the end of the fourth quarter of 2020 and $66.7 million at the end of the first quarter of 2020. Credit loss expense related to off-balance-sheet credit exposures was $65,000 in the first quarter of 2021, compared to $2.3 million in the first quarter of 2020.

The Cullen/Frost board declared a second-quarter cash dividend of $0.72 per common share, payable June 15, 2021 to shareholders of record on May 28 of this year. The board of directors also declared a cash dividend of $11.125 per share of Series B Preferred Stock (or $0.278125 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 June 15, 2021, to shareholders of record on May 28 of this year.

Cullen/Frost Bankers, Inc. will host a conference call on Thursday, April 29, 2021, at 1 p.m. Central Time (CT) to discuss the results for the quarter. The media and other interested parties are invited to access the call in a "listen only" mode at 1-800-944-6430 or via webcast on our investor relations website linked below.

Playback of the conference call will be available after 2 p.m. CT on the day of the call until midnight Sunday, May 2, 2021 at 855-859-2056 with Conference ID # of 2745669. The call will also be available by webcast at the URL listed below after 5 p.m. CT on the day of the call.

Cullen/Frost investor relations website: https://investor.frostbank.com/

Cullen/Frost Bankers, Inc. (NYSE: CFR) is a financial holding company, headquartered in San Antonio, with $44.0 billion in assets at March 31, 2021. 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 www.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 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 of failure, interruption, or breach of security of our systems. * 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 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 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.

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

(In thousands, except per share amounts)



2021 2020

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

CONDENSED INCOME STATEMENTS

Net interest $240,881 $242,246 $243,423 $245,811 $244,521 income

Net interest 263,949 265,721 267,041 269,722 268,453 income ^(1)

Credit loss 63 13,756 20,302 31,975 175,197 expense

Non-interest income:

Trust and investment 35,314 32,270 31,469 31,060 34,473 management fees

Service charges on deposit 19,993 20,830 19,812 17,580 22,651 accounts

Insurance commissions and 17,313 11,704 11,456 10,668 16,485 fees

Interchange and card transaction4,093 3,746 3,503 2,966 3,255 fees

Other charges, commissions and 8,304 9,427 8,370 7,663 9,365 fees

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

Other 8,219 13,360 8,991 7,664 17,697

Total non-interest 93,236 91,337 83,601 77,601 212,915 income



Non-interest expense:

Salaries and 93,458 104,843 93,323 90,350 98,812 wages

Employee 22,536 15,852 16,074 18,861 24,889 benefits

Net occupancy 26,051 26,822 25,466 25,266 25,384

Technology, furniture and 28,016 27,464 26,482 26,046 25,240 equipment

Deposit 2,928 2,706 2,372 2,800 2,624 insurance

Intangible 202 208 212 241 257 amortization

Other 36,951 45,017 38,221 36,115 46,957

Total non-interest 210,142 222,912 202,150 199,679 224,163 expense

Income before 123,912 96,915 104,572 91,758 58,076 income taxes

Income taxes 7,897 8,645 9,516 (1,314) 3,323

Net income 116,015 88,270 95,056 93,072 54,753

Preferred stock 2,151 - - - 2,016 dividends

Redemption of - - - - 5,514 preferred stock

Net income available to $113,864 $88,270 $95,056 $93,072 $47,223 common shareholders



PER COMMON SHARE DATA

Earnings per common share - $1.78 $1.39 $1.50 $1.47 $0.75 basic

Earnings per common share - 1.77 1.38 1.50 1.47 0.75 diluted

Cash dividends 0.72 0.72 0.71 0.71 0.71 per common share

Book value per common share at 64.89 65.82 65.07 63.97 61.17 end of quarter



OUTSTANDING COMMON SHARES

Period-end 63,532 63,011 62,782 62,670 62,553 common shares

Weighted-average common shares - 63,306 62,940 62,727 62,596 62,643 basic

Dilutive effect of stock 510 311 193 205 407 compensation

Weighted-average common shares - 63,816 63,251 62,920 62,801 63,050 diluted



SELECTED ANNUALIZED RATIOS

Return on 1.09 %0.86 %0.96 %0.99 %0.57 %average assets

Return on average common 11.13 8.55 9.30 9.60 4.88 equity

Net interest income to 2.72 2.82 2.95 3.13 3.56 average earning assets



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

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)



2021 2020

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

BALANCE SHEET SUMMARY

($ in millions)

Average Balance:

Loans $17,684 $17,945 $18,149 $17,550 $14,995

Earning assets 39,804 38,262 36,749 35,128 30,804

Total assets 42,530 40,963 39,435 37,838 33,534

Non-interest-bearing 15,309 15,119 14,585 13,785 10,737 demand deposits

Interest-bearing 20,097 19,010 18,289 17,528 16,654 deposits

Total deposits 35,406 34,129 32,875 31,313 27,391

Shareholders' equity 4,295 4,175 4,065 3,899 4,009



Period-End Balance:

Loans $17,890 $17,481 $18,224 $17,972 $15,338

Earning assets 41,380 39,648 37,482 36,613 31,440

Goodwill and 656 657 657 657 657 intangible assets

Total assets 44,047 42,391 40,101 39,378 34,147

Total deposits 36,925 35,016 33,500 32,679 28,141

Shareholders' equity 4,268 4,293 4,085 4,009 3,827

Adjusted shareholders' equity 3,880 3,780 3,580 3,521 3,463 ^(1)



ASSET QUALITY

($ in thousands)

Allowance for credit $261,258 $263,177 $263,475 $250,061 $263,881 losses on loans:

As a percentage of 1.46 %1.51 %1.45 %1.39 %1.72 %period-end loans



Net charge-offs: $1,919 $13,565 $10,176 $41,048 $38,646

Annualized as a percentage of average0.04 %0.30 %0.22 %0.94 %1.04 %loans



Non-accrual loans: $50,976 $61,449 $91,578 $79,461 $66,727

As a percentage of 0.28 %0.35 %0.50 %0.44 %0.44 %total loans

As a percentage of 0.12 0.14 0.23 0.20 0.20 total assets



CONSOLIDATED CAPITAL RATIOS

Common Equity Tier 1 Risk-Based Capital 13.45 %12.86 %12.71 %12.48 %12.02 %Ratio

Tier 1 Risk-Based 14.07 13.47 12.71 12.48 12.02 Capital Ratio

Total Risk-Based 16.07 15.44 14.69 14.43 13.97 Capital Ratio

Leverage Ratio 7.97 8.07 7.85 8.01 8.84

Equity to Assets 9.69 10.13 10.19 10.18 11.21 Ratio (period-end)

Equity to Assets 10.10 10.19 10.31 10.30 11.95 Ratio (average)



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





Cullen/Frost Bankers, Inc.

TAXABLE-EQUIVALENT YIELD/COST (UNAUDITED)





2021 2020

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



TAXABLE-EQUIVALENT YIELD/COST ^(1)

Earning Assets:

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

Federal funds sold 0.24 0.31 0.18 0.18 1.17

Resell agreements 0.15 0.24 0.27 0.59 1.63

Securities 3.41 3.41 3.44 3.53 3.46

Loans, net of unearned discounts 3.87 3.74 3.73 3.95 4.65

Total earning assets 2.78 2.89 3.04 3.24 3.84



Interest-Bearing Liabilities:

Interest-bearing deposits:

Savings and interest checking 0.01 0.02 0.02 0.02 0.02

Money market deposit accounts 0.07 0.07 0.09 0.09 0.50

Time accounts 0.53 0.82 1.11 1.40 1.67

Public funds 0.02 0.02 0.02 0.09 0.85

Total interest-bearing deposits 0.07 0.09 0.12 0.14 0.39



Total deposits 0.04 0.05 0.07 0.08 0.24



Federal funds purchased 0.08 0.08 0.08 0.07 1.15

Repurchase agreements 0.09 0.11 0.12 0.15 0.95

Junior subordinated deferrable interest1.89 1.96 2.05 2.90 3.54 debentures

Subordinated notes payable and other 4.70 4.70 4.70 4.71 4.71 notes

Federal Home Loan Bank advances - - - 0.29 -

Total interest-bearing liabilities 0.10 0.13 0.15 0.19 0.47



Net interest spread 2.68 2.76 2.89 3.05 3.37

Net interest income to total average 2.72 2.82 2.95 3.13 3.56 earning assets



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

Cullen/Frost Bankers, Inc.

AVERAGE BALANCES (UNAUDITED)





2021 2020

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



AVERAGE BALANCES

($ in millions)

Assets:

Interest-bearing deposits $9,865 $7,718 $5,888 $4,986 $2,586

Federal funds sold 5 2 11 72 231

Resell agreements 3 15 20 20 29

Securities 12,247 12,852 12,680 12,501 12,963

Loans, net of unearned 17,684 17,945 18,149 17,550 14,995 discount

Total earning assets $39,804$38,262$36,749$35,128$30,804



Liabilities:

Interest-bearing deposits:

Savings and interest $9,094 $8,397 $8,077 $7,615 $7,030 checking

Money market deposit 9,192 8,884 8,555 8,230 7,874 accounts

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

Public funds 678 596 537 565 640

Total interest-bearing 20,097 19,010 18,289 17,528 16,654 deposits



Total deposits 35,406 34,129 32,875 31,313 27,391



Federal funds purchased 41 38 34 33 27

Repurchase agreements 1,840 1,705 1,544 1,262 1,232

Junior subordinated deferrable interest 136 136 136 136 136 debentures

Subordinated notes payable 99 99 99 99 99 and other notes

Federal Home Loan Bank - - - 440 - advances

Total interest-bearing funds$22,213$20,988$20,103$19,498$18,149





A.B. MendezInvestor Relations210.220.5234orBill DayMedia Relations210.220.5427

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SOURCE Cullen/Frost Bankers, Inc.