EX-99.1 2 a3q23formxex991xpressrelea.htm EX-99.1 - 3Q23 EARNINGS RELEASE Document

Exhibit 99.1



A.B. Mendez
Investor Relations
210.220.5234
or
Bill Day
Media Relations
210.220.5427


FOR IMMEDIATE RELEASE    
October 26, 2023



CULLEN/FROST REPORTS THIRD QUARTER RESULTS
Board declares fourth quarter dividend on common and preferred stock




SAN ANTONIO -- Cullen/Frost Bankers, Inc. (NYSE:CFR) today reported third quarter 2023 results.
Net income available to common shareholders for the third quarter of 2023 was $154.0 million compared to $168.1 million in the third quarter of 2022. On a per-share basis, net income available to common shareholders for the third quarter of 2023 was $2.38 per diluted common share, compared to $2.59 per diluted common share reported a year earlier, representing a 8.1 percent decrease. Returns on average assets and average common equity were 1.25 percent and 18.93 percent, respectively, for the third quarter of 2023 compared to 1.27 percent and 20.13 percent, respectively, for the same period a year earlier.
For the first nine months of 2023, net income available to common shareholders was $490.4 million, up 28.1 percent compared to $383.0 million for the first nine months of 2022. Diluted EPS available to common shareholders for the first nine months of 2023 was $7.54 compared to $5.90 in the year-earlier period, representing an increase of 27.8 percent. Returns on average assets and average common equity for the first nine months of 2023 were 1.32 percent and 20.25 percent, respectively, compared to 1.00 percent and 14.19 percent, respectively, for the same period in 2022.



For the third quarter of 2023, net interest income on a taxable-equivalent basis was $407.4 million, up 7.3 percent compared to the same quarter in 2022. Average loans for the third quarter of 2023 increased $1.1 billion, or 6.8 percent, to $18.0 billion, from the $16.8 billion reported for the third quarter a year earlier. Average deposits for the third quarter were $40.8 billion, down $5.0 billion, or 10.9 percent, compared to the $45.8 billion reported for last year's third quarter, and down $179 million, or 0.4 percent, compared to the second quarter of 2023. Average non-interest bearing deposits were down $408 million, or 2.7 percent, from the second quarter. Average interest-bearing deposits were up $229 million, or 0.9 percent, from the second quarter.

“Our third quarter results demonstrate that Frost bankers continue to provide our customers with top-quality service and that our long-term investments in sustained organic growth are paying dividends,” said Cullen/Frost Chairman and CEO Phil Green. “Loans continued to increase and our deposit volumes stabilized as expected. We continued our investments in market expansions and rolling out our new mortgage loan offering, as well as in strategic marketing initiatives and core technology platforms. We were excited to announce our Frost Bank Center naming rights agreement with the San Antonio Spurs during the third quarter, which will greatly enhance awareness of the Frost brand.
“We continue to be focused on making sound institutional decisions about near-term investments that will support our sustained growth and success over the longer term.”


Noted financial data for the third quarter of 2023 follows:

•The Common Equity Tier 1, Tier 1 and Total Risk-Based Capital Ratios at the end of the third quarter of 2023 were 13.32 percent, 13.81 percent and 15.28 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 $407.4 million for the third quarter of 2023, an increase of 7.3 percent, compared to the prior year period. Net interest margin was 3.44 percent for the third quarter compared to 3.45 percent for the second quarter of 2023 and compared to 3.01 percent for the third quarter of 2022.


•Non-interest income for the third quarter of 2023 totaled $106.0 million, an increase of $6.2 million, or 6.2 percent, from the $99.8 million reported for the third quarter of 2022. Other non-interest income increased $3.9 million, or 41.1 percent, compared to the third quarter of 2022. The increase was primarily related to increases in income from customer derivative and foreign exchange transactions (up $2.6 million) and public finance underwriting fees (up $751,000), among other things. Other charges, commissions, and fees increased $2.0 million, or 18.3 percent, compared to the third quarter of 2022. The increase was primarily related to increases in other service charges (up $711,000), capital markets advisory fees (up $428,000), and letter of credit fees (up $393,000), among other things. Insurance commissions and fees increased $484,000, or 3.7 percent, compared to the third quarter of 2022. The increase during the third quarter of 2023 was mainly driven by an increase in commission income.
•Non-interest expense was $293.3 million for the third quarter of 2023, up $35.4 million, or 13.7 percent, compared to the $257.9 million reported for the third quarter a year earlier. Other non-interest expense increased $10.4 million, or 22.8 percent, compared to the third quarter of 2022. The increase during the third quarter of 2023 included increases in advertising/promotions expense (up $3.6 million); professional services expense (up $3.5 million), which was primarily related to information technology services; and fraud losses (up $1.2 million), among other things. Salaries and wages expense increased $10.4 million, or 8.2 percent, compared to the third quarter of 2022. The increase in salaries and wages was primarily related to an increase in salaries, due to annual merit and market increases, and an increase in the number of employees. The increase in the number of employees was partly related to our investments in organic expansion in the Houston, Dallas and Austin markets, and also to the gradual rollout of our mortgage loan product offering. Employee benefits expense increased by $4.8 million, or 22.4 percent, compared to the third quarter of 2022. The increase in employee benefits expense was related to an increase in medical benefits expense (up $2.0 million), a decrease in the net periodic benefit related to our defined benefit retirement plan (down $1.6 million), and an increase in payroll taxes (up $850,000), among other things. Technology, furniture, and equipment expense increased $4.5 million, or 14.6 percent, compared to the third quarter of 2022. The increase was primarily related to increases in cloud services expense (up $3.3 million) and service contracts expense (up $1.3 million). Net occupancy expense increased $3.4 million, or 12.3 percent, compared to the third quarter of 2022. The increase was mainly driven by increases in

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depreciation on buildings and leasehold improvements (up $1.3 million) and repairs/maintenance/service contracts (up $867,000), among other things, driven partly by our expansion activity.
•For the third quarter of 2023, the company reported a credit loss expense of $11.2 million, and reported net charge-offs of $5.0 million. This compares to a credit loss expense of $9.9 million and net charge-offs of $9.8 million for the second quarter of 2023 and no credit loss expense and net charge-offs of $2.9 million for the third quarter of 2022. The allowance for credit losses on loans as a percentage of total loans was 1.32 percent at September 30, 2023, compared to 1.32 percent at the end of the second quarter of 2023 and 1.38 percent at the end of the third quarter of 2022. Non-accrual loans were $67.2 million at the end of the third quarter of 2023, compared to $67.8 million at the end of the second quarter of 2023 and $29.9 million at the end of the third quarter of 2022.

The Cullen/Frost board declared a fourth-quarter cash dividend of $0.92 per common share. The dividend on common stock is payable December 15, 2023 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 December 15, 2023 to shareholders of record on November 30 of this year.
Cullen/Frost Bankers, Inc. will host a conference call on Thursday, October 26, 2023, 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 29, 2023 at 1-877-660-6853 with Conference ID # of 13741829. 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/


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Cullen/Frost Bankers, Inc. (NYSE: CFR) is a financial holding company, headquartered in San Antonio, with $48.7 billion in assets at September 30, 2023. 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.

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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”), 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:
•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.
•Local, regional, national, and international economic conditions and the impact they may have on us and our customers and our assessment of that impact.
•Changes in the financial performance and/or condition of our borrowers.
•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 credit loss reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements.
•Changes in our liquidity position.
•Impairment of our goodwill or other intangible assets.
•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, borrowing and saving habits.
•Greater than expected costs or difficulties related to the integration of new products and lines of business.
•Technological changes.
•The cost and effects of cyber incidents or other failures, interruptions or security breaches of our systems or those of our customers or third-party providers.
•Acquisitions and integration of acquired businesses.
•Changes in the reliability of our vendors, internal control systems or information systems.
•Our ability to increase market share and control expenses.
•Our ability to attract and retain qualified employees.
•Changes in our organization, compensation, and benefit plans.
•The soundness of other financial institutions.
•Volatility and disruption in national and international financial and commodity markets.
•Changes in the competitive environment in our markets and among banking organizations and other financial service providers.
•Government intervention in the U.S. financial system.
•Political or economic instability.
•Acts of God or of war or terrorism.
•The potential impact of climate change.
•The impact of pandemics, epidemics or any other 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.
•The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, and insurance) and their application with which we and our subsidiaries must comply.
•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.
•Our success at managing the risks involved in the foregoing items.
In addition, financial markets and global supply chains may continue to be adversely affected by the current or anticipated impact of global wars/military conflicts, terrorism, or other geopolitical events.
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.

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Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share amounts)
20232022
3rd Qtr2nd Qtr1st Qtr4th Qtr3rd Qtr
CONDENSED INCOME STATEMENTS
Net interest income$385,426 $385,266 $399,820 $398,457 $355,547 
Net interest income (1)
407,353 408,594 425,844 423,892 379,518 
Credit loss expense11,185 9,901 9,104 3,000 — 
Non-interest income:
Trust and investment management fees37,616 39,392 36,144 39,695 38,552 
Service charges on deposit accounts23,603 23,487 21,879 22,321 22,960 
Insurance commissions and fees13,636 12,940 18,952 11,674 13,152 
Interchange and card transaction fees 4,672 5,250 4,889 4,480 4,614 
Other charges, commissions, and fees13,128 12,090 11,704 10,981 11,095 
Net gain (loss) on securities transactions12 33 21 — — 
Other13,331 10,336 11,676 16,529 9,448 
Total non-interest income 105,998 103,528 105,265 105,680 99,821 
Non-interest expense:
Salaries and wages137,562 133,195 130,345 136,697 127,189 
Employee benefits26,527 26,792 33,922 21,975 21,680 
Net occupancy31,581 31,714 30,349 28,572 28,133 
Technology, furniture, and equipment35,278 33,043 32,481 30,912 30,781 
Deposit insurance6,033 6,202 6,245 3,967 4,279 
Other 56,275 54,096 51,800 59,174 45,836 
Total non-interest expense 293,256 285,042 285,142 281,297 257,898 
Income before income taxes186,983 193,851 210,839 219,840 197,470 
Income taxes31,332 31,733 33,186 28,666 27,710 
Net income155,651 162,118 177,653 191,174 169,760 
Preferred stock dividends1,668 1,669 1,669 1,669 1,668 
Net income available to common shareholders$153,983 $160,449 $175,984 $189,505 $168,092 
PER COMMON SHARE DATA
Earnings per common share - basic$2.38 $2.47 $2.71 $2.92 $2.60 
Earnings per common share - diluted2.38 2.47 2.70 2.91 2.59 
Cash dividends per common share0.92 0.87 0.87 0.87 0.87 
Book value per common share at end of quarter44.59 50.55 51.59 46.49 41.53 
OUTSTANDING COMMON SHARES
Period-end common shares64,017 64,120 64,396 64,355 64,211 
Weighted-average common shares - basic64,067 64,241 64,374 64,303 64,158 
Dilutive effect of stock compensation172 187 258 344 343 
Weighted-average common shares - diluted64,239 64,428 64,632 64,647 64,501 
SELECTED ANNUALIZED RATIOS
Return on average assets1.25 %1.30 %1.39 %1.44 %1.27 %
Return on average common equity18.93 19.36 22.59 27.16 20.13 
Net interest income to average earning assets 3.44 3.45 3.47 3.31 3.01 
(1) Taxable-equivalent basis assuming a 21% tax rate.

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Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
20232022
3rd Qtr2nd Qtr1st Qtr4th Qtr3rd Qtr
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
Loans$17,965 $17,664 $17,319 $17,063 $16,823 
Loans excluding Paycheck Protection Program17,945 17,638 17,287 17,020 16,752 
Earning assets45,366 45,929 47,904 48,867 49,062 
Total assets48,804 49,317 51,307 52,284 52,383 
Non-interest-bearing demand deposits14,823 15,231 16,636 17,980 18,511 
Interest-bearing deposits26,005 25,776 26,121 26,779 27,292 
Total deposits40,828 41,007 42,757 44,759 45,803 
Shareholders' equity3,372 3,470 3,305 2,913 3,459 
Period-End Balance:
Loans$18,399 $17,746 $17,486 $17,155 $16,951 
Loans excluding Paycheck Protection Program18,381 17,724 17,458 17,120 16,900 
Earning assets45,218 45,146 47,870 49,402 49,517 
Total assets48,747 48,597 51,246 52,892 52,946 
Total deposits40,992 40,701 42,184 43,954 46,560 
Shareholders' equity3,000 3,387 3,468 3,137 2,812 
Adjusted shareholders' equity (1)
4,779 4,692 4,610 4,486 4,341 
ASSET QUALITY
($ in thousands)
Allowance for credit losses on loans:$242,235 $233,619 $231,514 $227,621 $234,315 
As a percentage of period-end loans1.32 %1.32 %1.32 %1.33 %1.38 %
Net charge-offs:$4,992 $9,828 $8,782 $3,810 $2,854 
Annualized as a percentage of average loans0.11 %0.22 %0.21 %0.09 %0.07 %
Non-accrual loans:$67,175 $67,781 $38,410 $37,833 $29,904 
As a percentage of total loans0.37 %0.38 %0.22 %0.22 %0.18 %
As a percentage of total assets0.14 0.14 0.07 0.07 0.06 
CONSOLIDATED CAPITAL RATIOS
Common Equity Tier 1 Risk-Based Capital Ratio13.32 %13.42 %13.24 %12.85 %12.74 %
Tier 1 Risk-Based Capital Ratio13.81 13.92 13.74 13.35 13.26 
Total Risk-Based Capital Ratio15.28 15.39 15.22 14.84 14.80 
Leverage Ratio8.17 8.11 7.69 7.29 7.09 
Equity to Assets Ratio (period-end)6.15 6.97 6.77 5.93 5.31 
Equity to Assets Ratio (average)6.91 7.04 6.44 5.57 6.60 
(1) Shareholders' equity excluding accumulated other comprehensive income (loss).


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Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share amounts)
Nine Months Ended
September 30,
20232022
CONDENSED INCOME STATEMENTS
Net interest income$1,170,512 $892,826 
Net interest income (1)
1,241,791 963,089 
Credit loss expense30,190 — 
Non-interest income:
Trust and investment management fees113,152 114,984 
Service charges on deposit accounts68,969 69,570 
Insurance commissions and fees45,528 41,536 
Interchange and card transaction fees 14,811 13,751 
Other charges, commissions, and fees36,922 30,609 
Net gain (loss) on securities transactions66 — 
Other35,343 28,688 
Total non-interest income 314,791 299,138 
Non-interest expense:
Salaries and wages401,102 355,399 
Employee benefits87,241 66,633 
Net occupancy93,644 83,923 
Technology, furniture, and equipment100,802 89,859 
Deposit insurance18,480 11,636 
Other 162,171 135,527 
Total non-interest expense 863,440 742,977 
Income before income taxes591,673 448,987 
Income taxes96,251 61,011 
Net income495,422 387,976 
Preferred stock dividends5,006 5,006 
Net income available to common shareholders$490,416 $382,970 
PER COMMON SHARE DATA
Earnings per common share - basic$7.56 $5.92 
Earnings per common share - diluted7.54 5.90 
Cash dividends per common share2.66 2.37 
Book value per common share at end of quarter44.59 41.53 
OUTSTANDING COMMON SHARES
Period-end common shares64,017 64,211 
Weighted-average common shares - basic64,226 64,108 
Dilutive effect of stock compensation208 369 
Weighted-average common shares - diluted64,434 64,477 
SELECTED ANNUALIZED RATIOS
Return on average assets1.32 %1.00 %
Return on average common equity20.25 14.19 
Net interest income to average earning assets 3.45 2.64 
(1) Taxable-equivalent basis assuming a 21% tax rate.


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Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
As of or for the
Nine Months Ended
September 30,
20232022
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
Loans$17,652 $16,630 
Loans excluding Paycheck Protection Program17,626 16,458 
Earning assets46,390 48,100 
Total assets49,849 51,276 
Non-interest-bearing demand deposits15,557 18,277 
Interest-bearing deposits25,967 26,230 
Total deposits41,524 44,507 
Shareholders' equity3,383 3,753 
Period-End Balance:
Loans$18,399 $16,951 
Loans excluding Paycheck Protection Program18,381 16,900 
Earning assets45,218 49,517 
Total assets48,747 52,946 
Total deposits40,992 46,560 
Shareholders' equity3,000 2,812 
Adjusted shareholders' equity (1)
4,779 4,341 
ASSET QUALITY
($ in thousands)
Allowance for credit losses on loans:$242,235 $234,315 
As a percentage of period-end loans1.32 %1.38 %
Net charge-offs:23,602 11,956 
Annualized as a percentage of average loans0.18 %0.10 %
Non-accrual loans:$67,175 $29,904 
As a percentage of total loans0.37 %0.18 %
As a percentage of total assets0.14 0.06 
CONSOLIDATED CAPITAL RATIOS
Common Equity Tier 1 Risk-Based Capital Ratio13.32 %12.74 %
Tier 1 Risk-Based Capital Ratio13.81 13.26 
Total Risk-Based Capital Ratio15.28 14.80 
Leverage Ratio8.17 7.09 
Equity to Assets Ratio (period-end)6.15 5.31 
Equity to Assets Ratio (average)6.79 7.32 
(1) Shareholders' equity excluding accumulated other comprehensive income (loss).

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Cullen/Frost Bankers, Inc.
TAXABLE-EQUIVALENT YIELD/COST AND AVERAGE BALANCES (UNAUDITED)
20232022
3rd Qtr2nd Qtr1st Qtr4th Qtr3rd Qtr
TAXABLE-EQUIVALENT YIELD/COST(1)
Earning Assets:     
Interest-bearing deposits5.33 %5.05 %4.57 %3.70 %2.27 %
Federal funds sold5.65 5.35 4.72 3.88 2.44 
Resell agreements5.53 5.26 4.77 4.14 2.39 
Securities3.24 3.24 3.24 3.09 2.94 
Loans, net of unearned discounts6.83 6.64 6.36 5.80 4.89 
Total earning assets4.92 4.77 4.57 4.14 3.43 
Interest-Bearing Liabilities:
Interest-bearing deposits:
Savings and interest checking0.38 0.41 0.36 0.27 0.07 
Money market deposit accounts2.78 2.68 2.47 1.94 1.08 
Time accounts4.34 3.77 2.40 1.52 0.99 
Total interest-bearing deposits2.12 1.87 1.52 1.16 0.62 
Total deposits1.35 1.18 0.93 0.69 0.37 
Federal funds purchased5.32 4.97 4.55 3.78 2.33 
Repurchase agreements3.67 3.52 3.20 2.69 1.50 
Junior subordinated deferrable interest debentures7.34 6.84 6.46 5.39 3.77 
Subordinated notes payable and other notes4.69 4.69 4.69 4.69 4.69 
Total interest-bearing liabilities2.33 2.11 1.79 1.37 0.71 
Net interest spread2.59 2.66 2.78 2.77 2.72 
Net interest income to total average earning assets3.44 3.45 3.47 3.31 3.01 
AVERAGE BALANCES
($ in millions)
Assets: 
Interest-bearing deposits$6,747 $6,880 $8,687 $11,574 $12,776 
Federal funds sold13 22 64 52 51 
Resell agreements85 85 90 49 10 
Securities20,557 21,278 21,744 20,129 19,402 
Loans, net of unearned discount17,965 17,664 17,319 17,063 16,823 
Total earning assets$45,366 $45,929 $47,904 $48,867 $49,062 
Liabilities:
Interest-bearing deposits:
Savings and interest checking$10,202 $10,862 $11,662 $12,113 $12,235 
Money market deposit accounts11,144 11,431 12,404 12,958 13,466 
Time accounts4,659 3,483 2,055 1,708 1,591 
Total interest-bearing deposits26,005 25,776 26,121 26,779 27,292 
Total deposits40,828 41,007 42,757 44,759 45,803 
Federal funds purchased21 33 51 37 42 
Repurchase agreements3,536 3,719 4,211 3,575 1,960 
Junior subordinated deferrable interest debentures123 123 123 123 123 
Subordinated notes payable and other notes99 99 99 99 99 
Total interest-bearing funds$29,785 $29,750 $30,606 $30,613 $29,516 
(1) Taxable-equivalent basis assuming a 21% tax rate.

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