EX-99.1 2 a3q21formxex991xpressrelea.htm EX-99.1 2021 THIRD QUARTER 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 28, 2021



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 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

2

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,

3

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/



4

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.

5

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.

6

Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share amounts)
20212020
3rd Qtr2nd Qtr1st Qtr4th Qtr3rd 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 fees37,381 37,874 35,314 32,270 31,469 
Service charges on deposit accounts21,216 19,849 19,993 20,830 19,812 
Insurance commissions and fees11,748 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 fees9,785 8,640 8,304 9,427 8,370 
Net gain (loss) on securities transactions— — — — — 
Other8,569 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 wages99,463 97,035 93,458 104,843 93,323 
Employee benefits21,576 18,728 22,536 15,852 16,074 
Net occupancy27,208 26,650 26,051 26,822 25,466 
Technology, furniture and equipment28,494 27,998 28,016 27,464 26,482 
Deposit insurance3,088 2,877 2,928 2,706 2,372 
Intangible amortization157 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 taxes121,308 133,149 123,912 96,915 104,572 
Income taxes13,333 15,081 7,897 8,645 9,516 
Net income107,975 118,068 116,015 88,270 95,056 
Preferred stock dividends1,668 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 - diluted1.65 1.80 1.77 1.38 1.50 
Cash dividends per common share0.75 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 shares63,668 63,646 63,532 63,011 62,782 
Weighted-average common shares - basic63,652 63,606 63,306 62,940 62,727 
Dilutive effect of stock compensation445 496 510 311 193 
Weighted-average common shares - diluted64,097 64,102 63,816 63,251 62,920 
SELECTED ANNUALIZED RATIOS
Return on average assets0.90 %1.02 %1.09 %0.86 %0.96 %
Return on average common equity9.87 11.18 11.13 8.55 9.30 
Net interest income to average earning assets 2.47 2.65 2.72 2.82 2.95 
(1) Taxable-equivalent basis assuming a 21% tax rate.

7

Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
20212020
3rd Qtr2nd Qtr1st Qtr4th Qtr3rd Qtr
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
Loans$16,189 $17,246 $17,684 $17,945 $18,149 
Earning assets43,980 42,916 39,804 38,262 36,749 
Total assets46,774 45,665 42,530 40,963 39,435 
Non-interest-bearing demand deposits16,999 16,456 15,309 15,119 14,585 
Interest-bearing deposits22,117 21,815 20,097 19,010 18,289 
Total deposits39,116 38,271 35,406 34,129 32,875 
Shareholders' equity4,417 4,320 4,295 4,175 4,065 
Period-End Balance:
Loans$15,833 $16,596 $17,890 $17,481 $18,224 
Earning assets44,964 43,943 41,380 39,648 37,482 
Goodwill and intangible assets656 656 656 657 657 
Total assets47,860 46,698 44,047 42,391 40,101 
Total deposits39,613 38,734 36,925 35,016 33,500 
Shareholders' equity4,372 4,374 4,268 4,293 4,085 
Adjusted shareholders' equity (1)
4,022 3,961 3,880 3,780 3,580 
ASSET QUALITY
($ in thousands)
Allowance for credit losses on loans:$250,150 $255,288 $261,258 $263,177 $263,475 
As a percentage of period-end loans1.58 %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 loans0.05 %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 loans0.36 %0.34 %0.28 %0.35 %0.50 %
As a percentage of total assets0.12 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 Ratio14.01 14.21 14.07 13.47 12.71 
Total Risk-Based Capital Ratio15.90 16.17 16.07 15.44 14.69 
Leverage Ratio7.52 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).


8


Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share amounts)
Nine Months Ended
September 30,
20212020
CONDENSED INCOME STATEMENTS
Net interest income$744,159 $733,755 
Net interest income (1)
813,266 805,216 
Credit loss expense63 227,474 
Non-interest income:
Trust and investment management fees110,569 97,002 
Service charges on deposit accounts61,058 60,043 
Insurance commissions and fees39,834 38,609 
Interchange and debit card transaction fees 13,224 9,724 
Other charges, commissions and fees26,729 25,398 
Net gain (loss) on securities transactions— 108,989 
Other26,258 34,352 
Total non-interest income 277,672 374,117 
Non-interest expense:
Salaries and wages289,956 282,485 
Employee benefits62,840 59,824 
Net occupancy79,909 76,116 
Technology, furniture and equipment84,508 77,768 
Deposit insurance8,893 7,796 
Intangible amortization544 710 
Other 116,749 121,293 
Total non-interest expense 643,399 625,992 
Income before income taxes378,369 254,406 
Income taxes36,311 11,525 
Net income342,058 242,881 
Preferred stock dividends5,488 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 - diluted5.22 3.71 
Cash dividends per common share2.19 2.13 
Book value per common share at end of quarter66.39 65.07 
OUTSTANDING COMMON SHARES
Period-end common shares63,668 62,782 
Weighted-average common shares - basic63,523 62,655 
Dilutive effect of stock compensation489 263 
Weighted-average common shares - diluted64,012 62,918 
SELECTED ANNUALIZED RATIOS
Return on average assets1.00 %0.85 %
Return on average common equity10.72 7.95 
Net interest income to average earning assets 2.61 3.20 
(1) Taxable-equivalent basis assuming a 21% tax rate.

9


Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
As of or for the
Nine Months Ended
September 30,
20212020
BALANCE SHEET SUMMARY ($ in millions)
Average Balance:
Loans$17,034 $16,903 
Earning assets42,249 34,236 
Total assets45,004 36,954 
Non-interest-bearing demand deposits16,262 13,041 
Interest-bearing deposits21,350 17,493 
Total deposits37,612 30,535 
Shareholders' equity4,345 3,991 
Period-End Balance:
Loans15,833 18,224 
Earning assets44,964 37,482 
Goodwill and intangible assets656 657 
Total assets47,860 40,101 
Total deposits39,613 33,500 
Shareholders' equity4,372 4,085 
Adjusted shareholders' equity (1)
4,022 3,580 
ASSET QUALITY ($ in thousands)
Allowance for credit losses on loans:$250,150 $263,475 
As a percentage of period-end loans1.58 %1.45 %
Net charge-offs:$5,625 $89,870 
Annualized as a percentage of average loans0.04 %0.71 %
Non-accrual loans:$57,055 $91,578 
As a percentage of total loans0.36 %0.50 %
As a percentage of total assets0.12 0.23 
CONSOLIDATED CAPITAL RATIOS
Common Equity Tier 1 Risk-Based Capital Ratio13.42 %12.71 %
Tier 1 Risk-Based Capital Ratio14.01 12.71 
Total Risk-Based Capital Ratio15.90 14.69 
Leverage Ratio7.52 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).









10



Cullen/Frost Bankers, Inc.
TAXABLE-EQUIVALENT YIELD/COST (UNAUDITED)
20212020
3rd Qtr2nd Qtr1st Qtr4th Qtr3rd Qtr
TAXABLE-EQUIVALENT YIELD/COST (1)
Earning Assets:     
Interest-bearing deposits0.15 %0.11 %0.10 %0.10 %0.10 %
Federal funds sold 0.48 0.15 0.24 0.31 0.18 
Resell agreements0.29 0.20 0.15 0.24 0.27 
Securities3.35 3.36 3.41 3.41 3.44 
Loans, net of unearned discounts4.16 4.28 3.87 3.74 3.73 
Total earning assets2.53 2.71 2.78 2.89 3.04 
Interest-Bearing Liabilities:
Interest-bearing deposits:
Savings and interest checking0.01 0.01 0.01 0.02 0.02 
Money market deposit accounts0.11 0.09 0.07 0.07 0.09 
Time accounts0.25 0.33 0.53 0.82 1.11 
Public funds0.02 0.02 0.02 0.02 0.02 
Total interest-bearing deposits0.07 0.06 0.07 0.09 0.12 
Total deposits0.04 0.04 0.04 0.05 0.07 
Federal funds purchased0.13 0.08 0.08 0.08 0.08 
Repurchase agreements0.11 0.11 0.09 0.11 0.12 
Junior subordinated deferrable interest debentures1.85 1.87 1.89 1.96 2.05 
Subordinated notes payable and other notes4.70 4.70 4.70 4.70 4.70 
Total interest-bearing liabilities0.10 0.10 0.10 0.13 0.15 
Net interest spread2.43 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.

11


Cullen/Frost Bankers, Inc.
AVERAGE BALANCES (UNAUDITED)
20212020
3rd Qtr2nd Qtr1st Qtr4th Qtr3rd Qtr
AVERAGE BALANCES
($ in millions)
Assets:     
Interest-bearing deposits$15,278 $13,347 $9,865 $7,718 $5,888 
Federal funds sold2 21 5 2 11 
Resell agreements8 8 3 15 20 
Securities12,503 12,294 12,247 12,582 12,681 
Loans, net of unearned discount16,189 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 accounts10,024 9,731 9,192 8,884 8,555 
Time accounts1,102 1,133 1,133 1,133 1,120 
Public funds674 665 678 596 537 
Total interest-bearing deposits22,117 21,815 20,097 19,010 18,289 
Total deposits39,116 38,271 35,406 34,129 32,875 
Federal funds purchased27 34 41 38 34 
Repurchase agreements2,188 2,059 1,840 1,705 1,544 
Junior subordinated deferrable interest debentures137 136 136 136 137 
Subordinated notes payable and other notes99 99 99 99 99 
Total interest-bearing funds$24,568 $24,143 $22,213 $20,988 $20,103 

12