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Employee Benefit Plans
 12 Months Ended
Dec. 31, 2023
Retirement Benefits [Abstract]  
Employee Benefit Plans Employee Benefit Plans
Retirement Plans
Retirement Plan and Restoration Plan. We maintain a non-contributory defined benefit plan (the “Retirement Plan”) that was frozen as of December 31, 2001. The plan provides pension and death benefits to substantially all employees who were at least 21 years of age and had completed at least one year of service prior to December 31, 2001. Defined benefits are provided based on an employee’s final average compensation and years of service at the time the plan was frozen and age at retirement. The freezing of the plan provides that future salary increases will not be considered. Our funding policy is to contribute yearly, at least the amount necessary to satisfy the funding standards of the Employee Retirement Income Security Act (“ERISA”).
Our Restoration of Retirement Income Plan (the “Restoration Plan”) provides benefits for eligible employees that are in excess of the limits under Section 415 of the Internal Revenue Code of 1986, as amended, that apply to the Retirement Plan. The Restoration Plan is designed to comply with the requirements of ERISA. The entire cost of the plan, which was also frozen as of December 31, 2001, is supported by our contributions.
We use a December 31 measurement date for our defined benefit plans. Combined activity in our defined benefit pension plans was as follows:
202320222021
Change in plan assets:
Fair value of plan assets at beginning of year$161,823 $197,747 $182,088 
Actual return on plan assets22,477 (26,108)24,908 
Employer contributions1,105 1,114 1,236 
Benefits paid(10,794)(10,930)(10,485)
Fair value of plan assets at end of year174,611 161,823 197,747 
Change in benefit obligation:
Benefit obligation at beginning of year143,944 185,925 197,593 
Interest cost6,983 4,017 3,341 
Actuarial (gain) loss2,239 (35,068)(4,524)
Benefits paid(10,794)(10,930)(10,485)
Benefit obligation at end of year142,372 143,944 185,925 
Funded status of the plan at end of year and accrued benefit (liability) recognized
$32,239 $17,879 $11,822 
Accumulated benefit obligation at end of year$142,372 $143,944 $185,925 
Certain disaggregated information related to our defined benefit pension plans as of year-end was as follows:
Retirement PlanRestoration Plan
2023202220232022
Projected benefit obligation$130,750 $131,648 $11,622 $12,296 
Accumulated benefit obligation130,750 131,648 11,622 12,296 
Fair value of plan assets174,611 161,823 — — 
Funded status of the plan at end of year and accrued benefit (liability) recognized
43,861 30,175 (11,622)(12,296)
The components of the combined net periodic cost (benefit) for our defined benefit pension plans are presented in the table below.
202320222021
Expected return on plan assets, net of expenses$(10,959)$(13,966)$(12,839)
Interest cost on projected benefit obligation6,983 4,017 3,341 
Net amortization and deferral3,479 2,964 6,116 
Net periodic expense (benefit)$(497)$(6,985)$(3,382)
Amounts related to our defined benefit pension plans recognized as a component of other comprehensive income were as follows:
202320222021
Net actuarial gain (loss)$12,757 $(2,041)$22,709 
Deferred tax (expense) benefit(2,679)429 (4,769)
Other comprehensive income (loss), net of tax$10,078 $(1,612)$17,940 
Amounts recognized as a component of accumulated other comprehensive loss as of year-end that have not been recognized as a component of the combined net periodic benefit cost of our defined benefit pension plans are presented in the following table.
20232022
Net actuarial loss$(30,918)$(43,675)
Deferred tax benefit6,493 9,172 
Amounts included in accumulated other comprehensive income/loss, net of tax(24,425)(34,503)
The weighted-average assumptions used to determine the benefit obligations as of the end of the years indicated and the net periodic benefit cost for the years indicated are presented in the table below. Because the plans were frozen, increases in compensation are not considered after 2001.
202320222021
Benefit obligations:
Discount rate4.95 %5.14 %2.79 %
Net periodic benefit cost:
Discount rate5.14 %2.79 %2.43 %
Expected return on plan assets7.00 7.25 7.25 
Management uses an asset allocation optimization model to analyze the potential risks and rewards associated with various asset allocation strategies on a quarterly basis. As of December 31, 2023, management’s investment objective for our defined benefit plans is to achieve current income with growth through price appreciation. This strategy provides for a target asset allocation of approximately 31% invested in equity securities, approximately 63% invested in fixed income debt securities with any remainder invested in cash or short-term cash equivalents. The asset allocation optimization process provides portfolio allocations which best represent the potential risk associated with a given asset allocation over a full market cycle. This is used to help management determine an appropriate mix of assets in order to achieve the plan's long term investment goals. The plan assets are reviewed annually to determine if the obligations can be met with the current investment mix and funding strategy.
The major categories of assets in our Retirement Plan as of year-end are presented in the following table. Assets are segregated by the level of the valuation inputs within the fair value hierarchy established by ASC Topic 820 “Fair Value Measurements and Disclosures,” utilized to measure fair value (see Note 16 - Fair Value Measurements). Our Restoration Plan is unfunded.
20232022
Level 1:
Mutual funds and ETFs$38,793 $154,391 
U.S. Treasury26,633 — 
Common stock13,001 — 
Cash and cash equivalents1,241 7,432 
Level 2:
Corporate bonds and notes58,669 — 
U.S. government agency securities7,041 — 
States and political subdivisions29,233 — 
Total fair value of plan assets$174,611 $161,823 
Mutual funds and exchange traded funds (“ETFs”) include various equity, fixed-income and blended funds with varying investment strategies. Approximately 85% of mutual fund investments consist of equity investments as of December 31, 2023. The investment objective of equity funds and other equity investments is long-term capital appreciation with current income. The remaining mutual fund investments consist of U.S. fixed-income securities, including investment-grade U.S. Treasury securities, U.S. government agency securities and mortgage-backed securities, corporate bonds and notes and collateralized mortgage obligations. The investment objective of fixed-income funds and other fixed-income investments is to maximize investment return while preserving investment principal. Our investment strategies prohibit selling assets short and the use of derivatives. Additionally, our defined benefit plans do not directly invest in real estate, commodities, or private investments.
The asset allocation optimization model is used to estimate the expected long-term rate of return for a given asset allocation strategy. Expectations of returns for each asset class are based on comprehensive reviews of historical data and economic/financial market theory. During periods with volatile interest rates and equity security prices, the model may call for changes in the allocation of plan investments to achieve desired returns. Management assumed a long-term rate of return of 7.00% in the determination of the net periodic benefit cost for 2023. The expected long-term rate of return on assets was selected from within the reasonable range of rates determined by historical real returns, net of inflation, for the asset classes covered by the plan’s investment policy and projections of inflation over the long-term period during which benefits are payable to plan participants.
As of December 31, 2023, expected future benefit payments related to our defined benefit plans were as follows:
2024$12,022 
202511,966 
202611,967 
202711,874 
202811,511 
2029 through 203350,461 
$109,801 
We expect to contribute $1.1 million to the defined benefit plans during 2024.
Savings Plans
401(k) Stock Purchase Plan and Other Plans. We maintain a 401(k) stock purchase plan that permits each participant to make before-tax contributions in an amount not less than 2% and not exceeding 50% of eligible compensation and subject to dollar limits from Internal Revenue Service regulations. We match 100% of the employee’s contributions to the plan based on the amount of each participant’s contributions up to a maximum of 6% of eligible compensation. Eligible employees must complete 30 days of service in order to enroll and vest in our matching contributions immediately. Our matching contribution is initially invested in the common stock of Cullen/Frost. Employees may immediately reallocate our matching portion, as well as invest their individual contribution,
to any of a variety of investment alternatives offered under the 401(k) Plan. We may also make discretionary profit sharing contributions to eligible participants.
All profit sharing contributions to the plan are made at our discretion and may be made without regard to current or accumulated profits. Contributions are generally allocated to eligible participants uniformly, based upon compensation, age and/or other factors. Plan participants self-direct the investment of allocated contributions by choosing from a menu of investment options. Profit sharing contributions are subject to withdrawal restrictions and participants vest in their allocated contributions after three years of service. Expense related to the plan, including both 401(k) and profit sharing contributions, totaled $32.3 million in 2023, $28.0 million in 2022 and $23.8 million in 2021.
We maintain a thrift incentive stock purchase plan and a separate non-qualified profit sharing plan to offer certain employees, whose participation in the 401(k) plan is limited, an alternative means of receiving comparable benefits. Expense related to these plans was not significant during 2023, 2022 and 2021.
Stock Compensation Plans
We have three active stock compensation plans (the 2005 Omnibus Incentive Plan, the 2007 Outside Directors Incentive Plan and the 2015 Omnibus Incentive Plan). All of the plans have been approved by our shareholders. During 2015, the 2015 Omnibus Incentive Plan (“2015 Plan”) was established to replace both the 2005 Omnibus Incentive Plan (“2005 Plan”) and the 2007 Outside Directors Incentive Plan (the “2007 Directors Plan”). All remaining shares authorized for grant under the superseded 2005 Plan and 2007 Directors Plan were transferred to the 2015 Plan. Our stock compensation plans were established to (i) motivate superior performance by means of performance-related incentives, (ii) encourage and provide for the acquisition of an ownership interest in our company by employees and non-employee directors and (iii) enable us to attract and retain qualified and competent persons as employees and to serve as members of our board of directors.
Under the 2015 Plan, we may grant, among other things, nonqualified stock options, incentive stock options, stock awards, stock appreciation rights, restricted stock units, performance share units or any combination thereof to certain employees and non-employee directors. Any of the authorized shares may be used for any type of award allowable under the Plan. The Compensation and Benefits Committee (“Committee”) of our Board of Directors has sole authority to (i) establish the awards to be issued, (ii) select the employees and non-employee directors to receive awards, and (iii) approve the terms and conditions of each award contract. Each award under the stock plans is evidenced by an award agreement that specifies the award price, the duration of the award, the number of shares to which the award pertains, and such other provisions as the Committee determines. For stock options, the option price for each grant is at least equal to the fair market value of a share of Cullen/Frost’s common stock on the date of grant. Options granted expire at such time as the Committee determines at the date of grant and in no event does the exercise period exceed a maximum of ten years. As defined in the plans, outstanding awards may immediately vest upon a change-in-control of Cullen/Frost and, in the case of awards granted under the 2015 Plan, subsequent termination resulting from the change in control.
A combined summary of activity in our active stock plans is presented in the table. Performance stock units outstanding are presented assuming attainment of the maximum payout rate as set forth by the performance criteria. The target award level for performance stock units granted in 2023, 2022 and 2021 was 66,471, 35,015 and 30,723, respectively. As of December 31, 2023, there were 205,090 shares remaining available for grant for future awards.
Director Deferred
Stock Units
Outstanding		Non-Vested
Restricted Stock Units
Outstanding		Performance Stock Units OutstandingStock Options
Outstanding
Number of UnitsWeighted-
Average
Fair Value
at Grant		Number
of Shares/Units		Weighted-
Average
Fair Value
at Grant		Number of UnitsWeighted-
Average
Fair Value
at Grant		Number
of Shares		Weighted-
Average
Exercise
Price
January 1, 202052,860 $75.47 470,359 $86.24 201,257 $77.18 1,739,559 $66.11 
Granted5,940 117.90 95,258 130.36 46,086 121.46 — — 
Exercised/vested(2,499)92.03 (88,250)98.90 (35,131)92.27 (861,878)63.14 
Forfeited/expired— — (28,030)87.08 (9,752)75.70 — — 
December 31, 202156,301 79.21 449,337 93.05 202,460 84.71 877,681 69.02 
Granted5,382 133.67 119,176 142.56 52,527 133.40 — — 
Exercised/vested(16,022)74.89 (97,154)94.81 (25,180)87.18 (261,454)63.72 
Forfeited/expired— — (6,040)93.28 (16,058)87.18 — — 
December 31, 202245,661 87.15 465,319 105.36 213,749 96.20 616,227 71.27 
Granted8,503 103.47 217,561 85.39 99,710 74.71 — — 
Exercised/vested— — (108,920)94.00 (28,151)85.74 (130,286)71.37 
Forfeited/expired— — (7,154)114.53 (18,254)85.74 — — 
December 31, 202354,164 89.71 566,806 99.77 267,054 89.99 485,941 71.25 
Options awarded to employees generally have a ten-year life and vest in equal annual installments over a four-year period. Non-vested restricted stock units awarded to employees generally have a three-year-cliff vesting period for awards granted in 2023, 2022 and 2021 and a four-year-cliff vesting period for awards granted prior to 2021. Director deferred stock units awarded to non-employee directors generally have immediate vesting. Upon retirement from our board of directors, non-employee directors will receive one share of our common stock for each director deferred stock unit held. Outstanding non-vested restricted stock units and director deferred stock units receive equivalent dividend payments as such dividends are declared on our common stock.
Performance stock units represent shares potentially issuable in the future. For performance stock units granted in 2023, 2022 and 2021, issuance is based upon the measure of our achievement of growth in adjusted net revenue, averaged over the three-year performance period, compared to the 2023, 2022 and 2021 base-year amounts, respectively. For performance stock units granted prior to 2021, issuance is based upon the measure of our achievement of relative return on assets over a three-year performance period compared to an identified peer group's achievement of relative return on assets over the same three-year performance period.
Performance stock units are eligible to receive equivalent dividend payments as such dividends are declared on our common stock during the performance period. Equivalent dividend payments are based upon the ultimate number of shares issued under each performance award and are deferred until such time that the units vest and shares are issued.
Other information regarding options outstanding and exercisable as of December 31, 2023 is as follows:
Options OutstandingOptions Exercisable
Range of
Exercise Prices		Number
of Shares		Weighted-
Average
Exercise Price		Weighted-
Average
Remaining
Contractual Life
in Years		Number
of Shares		Weighted-
Average
Exercise
Price
$65.01 to$70.00 270,031 $65.11 1.80270,031 $65.11 
75.01 to80.00 215,910 78.92 0.82215,910 78.92 
Total485,941 71.25 1.37485,941 71.25 
Total intrinsic value$18,098 $18,098 
Shares issued in connection with stock compensation awards are issued from available treasury shares. If no treasury shares are available, new shares are issued from available authorized shares. Shares issued in connection with stock compensation awards along with other related information were as follows:
202320222021
New shares issued from available authorized shares49,887 118,389 — 
Shares issued from available treasury stock217,470 281,421 987,758 
Total267,357 399,810 987,758 
Proceeds from stock option exercises$9,299 $16,659 $54,417 
Intrinsic value of stock options exercised3,614 19,616 43,904 
Fair value of restricted/director deferred stock units vested13,445 19,308 15,751 
Stock-based Compensation Expense. Stock-based compensation expense is recognized ratably over the requisite service period for all awards. For most stock option awards, the service period generally matches the vesting period. For stock options granted to certain executive officers and for non-vested restricted stock units granted to all participants, the service period does not extend past the date the participant reaches 65 years of age. Director deferred stock units granted to non-employee directors generally have immediate vesting and the related expense is fully recognized on the date of grant. For performance stock units, the service period generally matches the three-year performance period specified by the award, however, the service period does not extend past the date the participant reaches 65 years of age. Expense recognized each period is dependent upon our estimate of the number of shares that will ultimately be issued.
Stock-based compensation expense and the related income tax benefit is presented in the following table. The service period for performance stock units granted each year begins on January 1 of the following year.
202320222021
Non-vested restricted stock units$16,734 $13,162 $9,977 
Director deferred stock units880 720 700 
Performance stock units6,976 4,440 2,076 
Total$24,590 $18,322 $12,753 
Income tax benefit$4,120 $2,969 $1,713 
Unrecognized stock-based compensation expense and the weighted-average period over which the expense is expected to be recognized at December 31, 2023 is presented in the table below. Unrecognized stock-based compensation expense related to performance stock units is presented assuming attainment of the maximum payout rate as set forth by the performance criteria.
Unrecognized ExpenseWeighted-Average Number of Years for Expense Recognition
Non-vested restricted stock units$22,665 2.13
Performance stock units9,784 2.25
Total$32,449 
Valuation of Stock-Based Compensation. For the purposes of recognizing stock-based compensation expense, the fair value of non-vested restricted stock units and director deferred stock units is generally the market price of the stock on the measurement date, which, for us, is the date of the award. The fair value of performance stock units is determined in a similar manner except that the market price of the stock on the measurement date is discounted by the present value of the dividends expected to be paid on our common stock during the service period of the award because dividend equivalent payments on performance stock units are deferred until such time that the units vest and shares are issued. In applying this discount to the market price of our stock on the measurement date, we assumed we would pay a flat quarterly dividend during the service period equal to our most recent dividend payment, which was $0.92, $0.87 and $0.75 in 2023, 2022 and 2021, respectively, discounted at a weighted-average risk-free rate of 5.01%, 4.45% and 0.77% in 2023, 2022 and 2021, respectively.
The fair value of employee stock options granted is estimated on the measurement date, which, for us, is the date of grant. The fair value of stock options is estimated using a binomial lattice-based valuation model that takes into account employee exercise patterns based on changes in our stock price and other variables, and allows for the use of dynamic assumptions about interest rates and expected volatility. No stock options have been granted since 2015.