PR Newswire | Oct 28, 2021 09:03AM EDT

10/28 08:00 CDT

Cullen/Frost Reports Third Quarter ResultsBoard declares fourth quarter dividend on common and preferred stock SAN ANTONIO, Oct. 28, 2021

SAN ANTONIO, Oct. 28, 2021 /PRNewswire/ -- Cullen/Frost Bankers, Inc. (NYSE: CFR) today reported third quarter 2021 results. Net income available to common shareholders for the third quarter of 2021 was $106.3 million compared to $95.1 million in the third quarter of 2020. On a per-share basis, net income available to common shareholders for the third quarter of 2021 was $1.65 per diluted common share, compared to $1.50 per diluted common share reported a year earlier. Returns on average assets and average common equity were 0.90 percent and 9.87 percent, respectively, for the third quarter of 2021 compared to 0.96 percent and 9.30 percent, respectively, for the same period a year earlier.

For the third quarter of 2021, net interest income on a taxable-equivalent basis was $269.3 million, up 0.9 percent, compared to the same quarter in 2020. Average loans for the third quarter of 2021 decreased $2.0 billion, or 10.8 percent, to $16.2 billion, from the $18.1 billion reported for the third quarter a year earlier. Excluding PPP loans, third quarter average loans of $14.8 billion represented a 0.8 percent decrease compared to the third quarter of 2020 and a 1.6 percent increase compared to the second quarter of 2021. Average deposits for the quarter were $39.1 billion, up $6.2 billion, or 19.0 percent, compared to the $32.9 billion reported for last year's third quarter.

"These results are reflective of a solid quarter, and we're optimistic going forward, both for the company and the economy in general," said Phil Green, Cullen/Frost Chairman and CEO. "Loans are trending upward and headwinds associated with the pandemic's effects are beginning to diminish.

"Our team has made excellent progress helping our PPP borrowers through the forgiveness process, and I'm proud to report that approximately 85 percent of our PPP loans have been forgiven as of mid-October. At the same time, we've made investments to bolster access to our services and locations. We built strong relationships during these extraordinary times, and that puts us in a good position for the future."

For the first nine months of 2021, net income available to common shareholders was $336.6 million, up 43.0 percent compared to $235.4 million for the first nine months of 2020. Diluted EPS available to common shareholders for the first nine months of 2021 was $5.22 compared to $3.71 in the year-earlier period, representing an increase of 40.7 percent. Returns on average assets and average common equity for the first nine months of 2021 were 1.00 percent and 10.72 percent, respectively, compared to 0.85 percent and 7.95 percent, respectively, for the same period in 2020.

Noted financial data for the third quarter of 2021 follows:

* The Common Equity Tier 1, Tier 1 and Total Risk-Based Capital Ratios at the end of the third quarter of 2021 were 13.42 percent, 14.01 percent and 15.90 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 $269.3 million, an increase of 0.9 percent, compared to the prior year period. Net interest margin was 2.47 percent for the third quarter of 2021, down 18 basis points compared to the second quarter of 2021 net interest margin of 2.65 percent. Net interest margin decreased 48 basis points compared to 2.95 percent for the same period in 2020. * Non-interest income for the third quarter of 2021 totaled $93.2 million, an increase of $9.6 million, or 11.5 percent, from the $83.6 million reported for the third quarter of 2020. Trust and investment management fees increased $5.9 million, or 18.8 percent, compared to the third quarter of 2020. The increase in trust and investment management fees was primarily due to increases in investment management fees (up $3.6 million, or 13.1%), oil and gas fees (up $1.6 million) and custody fees (up $519,000). Service charges on deposit accounts increased $1.4 million or 7.1 percent compared to the third quarter of 2020. The increase was mainly driven by an increase in commercial service charges (up $1.1 million) and overdraft charges on commercial accounts (up $517,000) partly offset by a decrease in overdraft charges on consumer accounts (down $332,000). Other charges, commissions and fees increased $1.4 million, or 16.9 percent, compared to the third quarter of 2020. The increase was primarily related to an increase in income from the sale of mutual fund accounts (up $1.3 million). * Non-interest expense was $218.0 million for the quarter, up $15.9 million, or 7.8 percent, compared to the $202.2 million reported for the third quarter a year earlier. Salaries and wages expense increased $6.1 million, or 6.6 percent, compared to the third quarter of 2020. The increase in salaries and wages during the comparable periods was primarily related to an increase in incentive compensation. Employee benefits expense of $21.6 million represented an increase of $5.5 million, or 34.2 percent, compared to the third quarter of 2020. The increase was mainly driven by an increase in certain discretionary benefit plan expenses. Technology, furniture and equipment expense increased $2.0 million, or 7.6 percent, compared to the third quarter of 2020. The increase was primarily related to increases in cloud services expense (up $1.4 million) and depreciation of furniture and equipment (up $604,000). Net occupancy expense increased $1.7 million, or 6.8 percent, compared to the third quarter of 2020. The increase was primarily related to increases in repairs and maintenance/service contracts expense (up $920,000) and depreciation on leasehold improvements (up $420,000), and was also impacted by our expansion activity in the Houston market area. * For the third quarter of 2021, the company did not report a credit loss expense, and reported net charge-offs of $2.1 million. For the third quarter of 2020, the company recorded a $20.3 million credit loss expense and reported net charge-offs of $10.2 million. The allowance for credit losses on loans as a percentage of total loans was 1.58 percent at September 30, 2021, compared to 1.54 percent at the end of the second quarter of 2021 and 1.45 percent at the end of the third 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 1.67 percent at the end of the third quarter of 2021, compared to 1.74 percent at the end of the second quarter of 2021 and 1.76 percent at the end of the third quarter of 2020. Non-accrual loans were $57.1 million at the end of the third quarter of 2021, compared to $57.3 million at the end of the second quarter of 2021 and $91.6 million at the end of the third quarter of 2020.

The Cullen/Frost board declared a fourth-quarter cash dividend of $0.75 per common share. The dividend on common stock is payable December 15, 2021 to shareholders of record on November 30 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 December 15, 2021, to shareholders of record on November 30 of this year.

Cullen/Frost Bankers, Inc. will host a conference call on Thursday, October 28, 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 1-877-709-8150 or via webcast on our investor relations website linked below.

Playback of the conference call will be available after 5 p.m. CT on the day of the call until midnight Sunday, October 31, 2021 at 1-877-660-6853 with Conference ID # of 13723263. A replay of 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 $47.9 billion in assets at September 30, 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 and the speed of digital transformation. * The cost and effects of failure, interruption, or breach of security of our systems or those of our outside providers and our customers. * Our customers' vulnerability to internal and external fraud (including fraudulent e-mail and other communications). * 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.

A.B. MendezInvestor Relations210.220.5234

or

Bill DayMedia Relations210.220.5427

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

(In thousands, except per share amounts)



2021 2020

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

CONDENSED INCOME STATEMENTS

Net interest income $246,122 $257,156 $240,881 $242,246 $243,423

Net interest income ^(1) 269,321 279,997 263,949 265,721 267,041

Credit loss expense - - 63 13,756 20,302

Non-interest income:

Trust and investment management fees 37,381 37,874 35,314 32,270 31,469

Service charges on deposit accounts 21,216 19,849 19,993 20,830 19,812

Insurance commissions and fees 11,748 10,773 17,313 11,704 11,456

Interchange and card transaction fees 4,490 4,641 4,093 3,746 3,503

Other charges, commissions and fees 9,785 8,640 8,304 9,427 8,370

Net gain (loss) on securities transactions - - - - -

Other 8,569 9,470 8,219 13,360 8,991

Total non-interest income 93,189 91,247 93,236 91,337 83,601



Non-interest expense:

Salaries and wages 99,463 97,035 93,458 104,843 93,323

Employee benefits 21,576 18,728 22,536 15,852 16,074

Net occupancy 27,208 26,650 26,051 26,822 25,466

Technology, furniture and equipment 28,494 27,998 28,016 27,464 26,482

Deposit insurance 3,088 2,877 2,928 2,706 2,372

Intangible amortization 157 185 202 208 212

Other 38,017 41,781 36,951 45,017 38,221

Total non-interest expense 218,003 215,254 210,142 222,912 202,150

Income before income taxes 121,308 133,149 123,912 96,915 104,572

Income taxes 13,333 15,081 7,897 8,645 9,516

Net income 107,975 118,068 116,015 88,270 95,056

Preferred stock dividends 1,668 1,669 2,151 - -

Net income available to common shareholders $106,307 $116,399 $113,864 $88,270 $95,056



PER COMMON SHARE DATA

Earnings per common share - basic $1.66 $1.81 $1.78 $1.39 $1.50

Earnings per common share - diluted 1.65 1.80 1.77 1.38 1.50

Cash dividends per common share 0.75 0.72 0.72 0.72 0.71

Book value per common share at end of quarter66.39 66.44 64.89 65.82 65.07



OUTSTANDING COMMON SHARES

Period-end common shares 63,668 63,646 63,532 63,011 62,782

Weighted-average common shares - basic 63,652 63,606 63,306 62,940 62,727

Dilutive effect of stock compensation 445 496 510 311 193

Weighted-average common shares - diluted 64,097 64,102 63,816 63,251 62,920



SELECTED ANNUALIZED RATIOS

Return on average assets 0.90 %1.02 %1.09 %0.86 %0.96 %

Return on average common equity 9.87 11.18 11.13 8.55 9.30

Net interest income to average earning assets2.47 2.65 2.72 2.82 2.95



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

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)



2021 2020

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

BALANCE SHEET SUMMARY

($ in millions)

Average Balance:

Loans $ 16,189 $ 17,246 $17,684 $17,945 $18,149

Earning assets 43,980 42,916 39,804 38,262 36,749

Total assets 46,774 45,665 42,530 40,963 39,435

Non-interest-bearing demand deposits 16,999 16,456 15,309 15,119 14,585

Interest-bearing deposits 22,117 21,815 20,097 19,010 18,289

Total deposits 39,116 38,271 35,406 34,129 32,875

Shareholders' equity 4,417 4,320 4,295 4,175 4,065



Period-End Balance:

Loans $ 15,833 $ 16,596 $17,890 $17,481 $18,224

Earning assets 44,964 43,943 41,380 39,648 37,482

Goodwill and intangible assets 656 656 656 657 657

Total assets 47,860 46,698 44,047 42,391 40,101

Total deposits 39,613 38,734 36,925 35,016 33,500

Shareholders' equity 4,372 4,374 4,268 4,293 4,085

Adjusted shareholders' equity ^(1) 4,022 3,961 3,880 3,780 3,580



ASSET QUALITY

($ in thousands)

Allowance for credit losses on loans: $ 250,150 $ 255,288 $261,258 $263,177 $263,475

As a percentage of period-end loans 1.58 %1.54 % 1.46 % 1.51 % 1.45 %



Net charge-offs: $ 2,115 $ 1,591 $1,919 $13,565 $10,176

Annualized as a percentage of average loans 0.05 %0.04 % 0.04 % 0.30 % 0.22 %



Non-accrual loans: $ 57,055 $ 57,250 $50,976 $61,449 $91,578

As a percentage of total loans 0.36 %0.34 % 0.28 % 0.35 % 0.50 %

As a percentage of total assets 0.12 0.12 0.12 0.14 0.23



CONSOLIDATED CAPITAL RATIOS

Common Equity Tier 1 Risk-Based Capital Ratio13.42 %13.60 % 13.45 % 12.86 % 12.71 %

Tier 1 Risk-Based Capital Ratio 14.01 14.21 14.07 13.47 12.71

Total Risk-Based Capital Ratio 15.90 16.17 16.07 15.44 14.69

Leverage Ratio 7.52 7.60 7.97 8.07 7.85

Equity to Assets Ratio (period-end) 9.14 9.37 9.69 10.13 10.19

Equity to Assets Ratio (average) 9.44 9.46 10.10 10.19 10.31



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





Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

(In thousands, except per share amounts)

Nine Months Ended

September 30,

2021 2020

CONDENSED INCOME STATEMENTS

Net interest income $744,159 $733,755

Net interest income ^(1) 813,266 805,216

Credit loss expense 63 227,474

Non-interest income:

Trust and investment management fees 110,569 97,002

Service charges on deposit accounts 61,058 60,043

Insurance commissions and fees 39,834 38,609

Interchange and debit card transaction fees 13,224 9,724

Other charges, commissions and fees 26,729 25,398

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

Other 26,258 34,352

Total non-interest income 277,672 374,117



Non-interest expense:

Salaries and wages 289,956 282,485

Employee benefits 62,840 59,824

Net occupancy 79,909 76,116

Technology, furniture and equipment 84,508 77,768

Deposit insurance 8,893 7,796

Intangible amortization 544 710

Other 116,749 121,293

Total non-interest expense 643,399 625,992

Income before income taxes 378,369 254,406

Income taxes 36,311 11,525

Net income 342,058 242,881

Preferred stock dividends 5,488 2,016

Redemption of preferred stock - 5,514

Net income available to common shareholders $336,570 $235,351



PER COMMON SHARE DATA

Earnings per common share - basic $5.25 $3.72

Earnings per common share - diluted 5.22 3.71

Cash dividends per common share 2.19 2.13

Book value per common share at end of quarter 66.39 65.07



OUTSTANDING COMMON SHARES

Period-end common shares 63,668 62,782

Weighted-average common shares - basic 63,523 62,655

Dilutive effect of stock compensation 489 263

Weighted-average common shares - diluted 64,012 62,918



SELECTED ANNUALIZED RATIOS

Return on average assets 1.00 % 0.85 %

Return on average common equity 10.72 7.95

Net interest income to average earning assets 2.61 3.20



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

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)



As of or for the

Nine Months Ended

September 30,

2021 2020

BALANCE SHEET SUMMARY ($ in millions)

Average Balance:

Loans $17,034 $16,903

Earning assets 42,249 34,236

Total assets 45,004 36,954

Non-interest-bearing demand deposits 16,262 13,041

Interest-bearing deposits 21,350 17,493

Total deposits 37,612 30,535

Shareholders' equity 4,345 3,991



Period-End Balance:

Loans 15,833 18,224

Earning assets 44,964 37,482

Goodwill and intangible assets 656 657

Total assets 47,860 40,101

Total deposits 39,613 33,500

Shareholders' equity 4,372 4,085

Adjusted shareholders' equity ^(1) 4,022 3,580



ASSET QUALITY ($ in thousands)

Allowance for credit losses on loans: $250,150 $263,475

As a percentage of period-end loans 1.58 %1.45 %



Net charge-offs: $5,625 $89,870

Annualized as a percentage of average loans 0.04 %0.71 %



Non-accrual loans: $57,055 $91,578

As a percentage of total loans 0.36 %0.50 %

As a percentage of total assets 0.12 0.23



CONSOLIDATED CAPITAL RATIOS

Common Equity Tier 1 Risk-Based Capital Ratio 13.42 %12.71 %

Tier 1 Risk-Based Capital Ratio 14.01 12.71

Total Risk-Based Capital Ratio 15.90 14.69

Leverage Ratio 7.52 7.85

Equity to Assets Ratio (period-end) 9.14 10.19

Equity to Assets Ratio (average) 9.65 10.80



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





Cullen/Frost Bankers, Inc.



TAXABLE-EQUIVALENT YIELD/COST (UNAUDITED)





2021 2020

3rd Qtr2nd Qtr1st Qtr4th Qtr3rd Qtr



TAXABLE-EQUIVALENT YIELD/COST ^(1)

Earning Assets:

Interest-bearing deposits 0.15% 0.11% 0.10% 0.10% 0.10%

Federal funds sold 0.48 0.15 0.24 0.31 0.18

Resell agreements 0.29 0.20 0.15 0.24 0.27

Securities 3.35 3.36 3.41 3.41 3.44

Loans, net of unearned discounts 4.16 4.28 3.87 3.74 3.73

Total earning assets 2.53 2.71 2.78 2.89 3.04



Interest-Bearing Liabilities:

Interest-bearing deposits:

Savings and interest checking 0.01 0.01 0.01 0.02 0.02

Money market deposit accounts 0.11 0.09 0.07 0.07 0.09

Time accounts 0.25 0.33 0.53 0.82 1.11

Public funds 0.02 0.02 0.02 0.02 0.02

Total interest-bearing deposits 0.07 0.06 0.07 0.09 0.12



Total deposits 0.04 0.04 0.04 0.05 0.07



Federal funds purchased 0.13 0.08 0.08 0.08 0.08

Repurchase agreements 0.11 0.11 0.09 0.11 0.12

Junior subordinated deferrable interest debentures 1.85 1.87 1.89 1.96 2.05

Subordinated notes payable and other notes 4.70 4.70 4.70 4.70 4.70

Total interest-bearing liabilities 0.10 0.10 0.10 0.13 0.15



Net interest spread 2.43 2.61 2.68 2.76 2.89

Net interest income to total average earning assets2.47 2.65 2.72 2.82 2.95



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

Cullen/Frost Bankers, Inc.



AVERAGE BALANCES (UNAUDITED)





2021 2020

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



AVERAGE BALANCES

($ in millions)

Assets:

Interest-bearing deposits $15,278$13,347$9,865 $7,718 $5,888

Federal funds sold 2 21 5 2 11

Resell agreements 8 8 3 15 20

Securities 12,503 12,294 12,247 12,582 12,681

Loans, net of unearned discount 16,189 17,246 17,684 17,945 18,149

Total earning assets $43,980$42,916$39,804$38,262$36,749



Liabilities:

Interest-bearing deposits:

Savings and interest checking $10,317$10,286$9,094 $8,397 $8,077

Money market deposit accounts 10,024 9,731 9,192 8,884 8,555

Time accounts 1,102 1,133 1,133 1,133 1,120

Public funds 674 665 678 596 537

Total interest-bearing deposits 22,117 21,815 20,097 19,010 18,289



Total deposits 39,116 38,271 35,406 34,129 32,875



Federal funds purchased 27 34 41 38 34

Repurchase agreements 2,188 2,059 1,840 1,705 1,544

Junior subordinated deferrable interest debentures137 136 136 136 137

Subordinated notes payable and other notes 99 99 99 99 99

Total interest-bearing funds $24,568$24,143$22,213$20,988$20,103





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SOURCE Cullen/Frost Bankers, Inc.