EX-99.1 2 a2q23formxex991xpressrelea.htm EX-99.1 - 2Q23 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    
July 27, 2023



CULLEN/FROST REPORTS SECOND QUARTER RESULTS
Board increases quarterly common dividend by 5.7 percent to $0.92




SAN ANTONIO -- Cullen/Frost Bankers, Inc. (NYSE:CFR) today reported second quarter 2023 results.
Net income available to common shareholders for the second quarter of 2023 was $160.4 million compared to $117.4 million in the second quarter of 2022. On a per-share basis, net income available to common shareholders for the second quarter of 2023 was $2.47 per diluted common share, compared to $1.81 per diluted common share reported a year earlier, representing a 36.5 percent increase. Returns on average assets and average common equity were 1.30 percent and 19.36 percent, respectively, for the second quarter of 2023 compared to 0.92 percent and 13.88 percent, respectively, for the same period a year earlier.

For the second quarter of 2023, net interest income on a taxable-equivalent basis was $408.6 million, up 31.2 percent compared to the same quarter in 2022. Average loans for the second quarter of 2023 increased $1.0 billion, or 5.9 percent, to $17.7 billion, from the $16.7 billion reported for the second quarter a year earlier. Excluding PPP loans, second quarter average loans of $17.6 billion represented a 6.7 percent increase compared to the second quarter of 2022 and a 2.0 percent increase compared to the first quarter of 2023. Average deposits for the second quarter were $41.0 billion, down $3.7 billion, or 8.3 percent, compared to the $44.7 billion reported for last year's second quarter, and down $1.8 billion, or 4.1 percent, compared to the first quarter of 2023.


Average deposits during the second quarter continued to be impacted by the higher interest rate environment, as we saw a continuation of the declining trend in non-interest bearing deposit balances that began in the fourth quarter of 2022. Average non-interest bearing deposits were down $1.4 billion, or 8.4 percent, from the first quarter. Average interest-bearing deposits were down $345 million, or 1.3 percent, from the first quarter.

“We were pleased with the earnings growth we experienced during the quarter, and I’m proud of our great staff living our culture of going above and beyond for our customers," said Cullen/Frost Chairman and CEO Phil Green. "We also were excited to announce our decision to double our presence in the Austin region, the third largest deposit market in Texas. We expect to complete this move by 2026. This effort aligns with our successful expansions in the dynamic Houston and Dallas markets and complements our organic growth strategy which has resulted in record levels of customer acquisition.”

Noted financial data for the second quarter of 2023 follows:

•The Common Equity Tier 1, Tier 1 and Total Risk-Based Capital Ratios at the end of the second quarter of 2023 were 13.42 percent, 13.92 percent and 15.39 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 $408.6 million for the second quarter of 2023, an increase of 31.2 percent, compared to the prior year period. Net interest margin was 3.45 percent for the second quarter compared to 3.47 percent for the first quarter of 2023 and compared to 2.56 percent for the second quarter of 2022.
•Non-interest income for the second quarter of 2023 totaled $103.5 million, an increase of $5.6 million, or 5.7 percent, from the $97.9 million reported for the second quarter of 2022. Other charges, commissions and fees increased $2.2 million, or 22.3 percent, compared to the second quarter of 2022. The increase was mainly driven by an increase in capital markets advisory fees (up $648,000), other service charges (up $641,000), and income from the placement of money market accounts (up $472,000), among other things. Trust and investment management fees increased $1.6 million, or 4.3 percent, compared to the second quarter of 2022. The increase was primarily due to increases in real estate fees (up $1.0 million),


estate fees (up $821,000) and investment management fees (up $580,000) partly offset by a decrease in oil and gas fees (down $1.0 million). Insurance commissions and fees increased $1.2 million, or 9.9 percent, compared to the second quarter of 2022. The increase during the second quarter of 2023 was mainly driven by an increase in commission income (up $1.3 million) partly offset by a decrease in contingent income (down $133,000).
•Non-interest expense was $285.0 million for the second quarter of 2023, up $38.7 million, or 15.7 percent, compared to the $246.3 million reported for the second quarter a year earlier. Salaries and wages expense increased $16.3 million, or 14.0 percent, compared to the second 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 and Dallas markets, and also to the gradual rollout of our mortgage loan product offering. Employee benefits expense increased by $6.1 million, or 29.2 percent, compared to the second quarter of 2022. The increase in employee benefits expense was related to increases in 401(k) plan expense, payroll taxes and medical benefits expense, among other things. Other non-interest expense increased $7.4 million, or 16.0 percent, compared to the second quarter of 2022. The increase during the second quarter of 2023 included increases in advertising/promotions expense (up $2.9 million); professional services expense (up $2.8 million), which was primarily related to information technology services; and travel, meals and entertainment expense (up $956,000), among other things.
•For the second quarter of 2023, the company reported a credit loss expense of $9.9 million, and reported net charge-offs of $9.8 million. This compares to a credit loss expense of $9.1 million and net charge-offs of $8.8 million for the first quarter of 2023 and no credit loss expense and net charge-offs of $2.8 million for the second quarter of 2022. The allowance for credit losses on loans as a percentage of total loans was 1.32 percent at June 30, 2023, compared to 1.32 percent at the end of the first quarter of 2023 and 1.43 percent at the end of the second quarter of 2022. Non-accrual loans were $67.8 million at the end of the second quarter of 2023, compared to $38.4 million at the end of the first quarter of 2023 and $35.1 million at the end of the second quarter of 2022.

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The Cullen/Frost board declared a third-quarter cash dividend of $0.92 per common share. The dividend on common stock is payable September 15, 2023 to shareholders of record on August 31 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 September 15, 2023 to shareholders of record on August 31 of this year.
Cullen/Frost Bankers, Inc. will host a conference call on Thursday, July 27, 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, July 30, 2023 at 1-877-660-6853 with Conference ID # of 13739639. 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 $48.6 billion in assets at June 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 military conflict, including the current Russian invasion of Ukraine 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
2nd Qtr1st Qtr4th Qtr3rd Qtr2nd Qtr
CONDENSED INCOME STATEMENTS
Net interest income$385,266 $399,820 $398,457 $355,547 $288,208 
Net interest income (1)
408,594 425,844 423,892 379,518 311,377 
Credit loss expense9,901 9,104 3,000 — — 
Non-interest income:
Trust and investment management fees39,392 36,144 39,695 38,552 37,776 
Service charges on deposit accounts23,487 21,879 22,321 22,960 23,870 
Insurance commissions and fees12,940 18,952 11,674 13,152 11,776 
Interchange and card transaction fees 5,250 4,889 4,480 4,614 4,911 
Other charges, commissions and fees12,090 11,704 10,981 11,095 9,887 
Net gain (loss) on securities transactions33 21 — — — 
Other10,336 11,676 16,529 9,448 9,707 
Total non-interest income 103,528 105,265 105,680 99,821 97,927 
Non-interest expense:
Salaries and wages133,195 130,345 136,697 127,189 116,881 
Employee benefits26,792 33,922 21,975 21,680 20,733 
Net occupancy31,714 30,349 28,572 28,133 28,379 
Technology, furniture and equipment33,043 32,481 30,912 30,781 29,921 
Deposit insurance6,202 6,245 3,967 4,279 3,724 
Intangible amortization82 96 100 103 131 
Other 54,014 51,704 59,074 45,733 46,578 
Total non-interest expense 285,042 285,142 281,297 257,898 246,347 
Income before income taxes193,851 210,839 219,840 197,470 139,788 
Income taxes31,733 33,186 28,666 27,710 20,674 
Net income162,118 177,653 191,174 169,760 119,114 
Preferred stock dividends1,669 1,669 1,669 1,668 1,669 
Net income available to common shareholders$160,449 $175,984 $189,505 $168,092 $117,445 
PER COMMON SHARE DATA
Earnings per common share - basic$2.47 $2.71 $2.92 $2.60 $1.82 
Earnings per common share - diluted2.47 2.70 2.91 2.59 1.81 
Cash dividends per common share0.87 0.87 0.87 0.87 0.75 
Book value per common share at end of quarter50.55 51.59 46.49 41.53 49.93 
OUTSTANDING COMMON SHARES
Period-end common shares64,120 64,396 64,355 64,211 64,123 
Weighted-average common shares - basic64,241 64,374 64,303 64,158 64,113 
Dilutive effect of stock compensation187 258 344 343 354 
Weighted-average common shares - diluted64,428 64,632 64,647 64,501 64,467 
SELECTED ANNUALIZED RATIOS
Return on average assets1.30 %1.39 %1.44 %1.27 %0.92 %
Return on average common equity19.36 22.59 27.16 20.13 13.88 
Net interest income to average earning assets 3.45 3.47 3.31 3.01 2.56 
(1) Taxable-equivalent basis assuming a 21% tax rate.

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Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
20232022
2nd Qtr1st Qtr4th Qtr3rd Qtr2nd Qtr
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
Loans$17,664 $17,319 $17,063 $16,823 $16,674 
Loans excluding Paycheck Protection Program17,638 17,287 17,020 16,752 16,531 
Earning assets45,929 47,904 48,867 49,062 47,880 
Total assets49,317 51,307 52,284 52,383 51,088 
Non-interest-bearing demand deposits15,231 16,636 17,980 18,511 18,355 
Interest-bearing deposits25,776 26,121 26,779 27,292 26,371 
Total deposits41,007 42,757 44,759 45,803 44,726 
Shareholders' equity3,470 3,305 2,913 3,459 3,540 
Period-End Balance:
Loans$17,746 $17,486 $17,155 $16,951 $16,736 
Loans excluding Paycheck Protection Program17,724 17,458 17,120 16,900 16,644 
Earning assets45,146 47,870 49,402 49,517 48,404 
Goodwill and intangible assets655 655 655 655 656 
Total assets48,597 51,246 52,892 52,946 51,785 
Total deposits40,701 42,184 43,954 46,560 45,602 
Shareholders' equity3,387 3,468 3,137 2,812 3,347 
Adjusted shareholders' equity (1)
4,692 4,610 4,486 4,341 4,221 
ASSET QUALITY
($ in thousands)
Allowance for credit losses on loans:$233,619 $231,514 $227,621 $234,315 $239,632 
As a percentage of period-end loans1.32 %1.32 %1.33 %1.38 %1.43 %
Net charge-offs:$9,828 $8,782 $3,810 $2,854 $2,807 
Annualized as a percentage of average loans0.22 %0.21 %0.09 %0.07 %0.07 %
Non-accrual loans:$67,781 $38,410 $37,833 $29,904 $35,125 
As a percentage of total loans0.38 %0.22 %0.22 %0.18 %0.21 %
As a percentage of total assets0.14 0.07 0.07 0.06 0.07 
CONSOLIDATED CAPITAL RATIOS
Common Equity Tier 1 Risk-Based Capital Ratio13.42 %13.24 %12.85 %12.74 %12.64 %
Tier 1 Risk-Based Capital Ratio13.92 13.74 13.35 13.26 13.17 
Total Risk-Based Capital Ratio15.39 15.22 14.84 14.80 14.75 
Leverage Ratio8.11 7.69 7.29 7.09 7.03 
Equity to Assets Ratio (period-end)6.97 6.77 5.93 5.31 6.46 
Equity to Assets Ratio (average)7.04 6.44 5.57 6.60 6.93 
(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)
Six Months Ended
June 30,
20232022
CONDENSED INCOME STATEMENTS
Net interest income$785,086 $537,279 
Net interest income (1)
834,438 583,572 
Credit loss expense19,005 — 
Non-interest income:
Trust and investment management fees75,536 76,432 
Service charges on deposit accounts45,366 46,610 
Insurance commissions and fees31,892 28,384 
Interchange and card transaction fees 10,139 9,137 
Other charges, commissions and fees23,794 19,514 
Net gain (loss) on securities transactions54 — 
Other22,012 19,240 
Total non-interest income 208,793 199,317 
Non-interest expense:
Salaries and wages263,540 228,210 
Employee benefits60,714 44,953 
Net occupancy62,063 55,790 
Technology, furniture and equipment65,524 59,078 
Deposit insurance12,447 7,357 
Intangible amortization178 277 
Other 105,718 89,414 
Total non-interest expense 570,184 485,079 
Income before income taxes404,690 251,517 
Income taxes64,919 33,301 
Net income339,771 218,216 
Preferred stock dividends3,338 3,338 
Net income available to common shareholders$336,433 $214,878 
PER COMMON SHARE DATA
Earnings per common share - basic$5.18 $3.32 
Earnings per common share - diluted5.17 3.31 
Cash dividends per common share1.74 1.50 
Book value per common share at end of quarter50.55 49.93 
OUTSTANDING COMMON SHARES
Period-end common shares64,120 64,123 
Weighted-average common shares - basic64,307 64,082 
Dilutive effect of stock compensation225 383 
Weighted-average common shares - diluted64,532 64,465 
SELECTED ANNUALIZED RATIOS
Return on average assets1.35 %0.85 %
Return on average common equity20.92 11.53 
Net interest income to average earning assets 3.46 2.45 
(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
Six Months Ended
June 30,
20232022
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
Loans$17,493 $16,531 
Loans excluding Paycheck Protection Program17,463 16,308 
Earning assets46,911 47,611 
Total assets50,320 50,711 
Non-interest-bearing demand deposits15,930 18,159 
Interest-bearing deposits25,947 25,690 
Total deposits41,877 43,849 
Shareholders' equity3,388 3,903 
Period-End Balance:
Loans$17,746 $16,736 
Loans excluding Paycheck Protection Program17,724 16,644 
Earning assets45,146 48,404 
Goodwill and intangible assets655 656 
Total assets48,597 51,785 
Total deposits40,701 45,602 
Shareholders' equity3,387 3,347 
Adjusted shareholders' equity (1)
4,692 4,221 
ASSET QUALITY
($ in thousands)
Allowance for credit losses on loans:$233,619 $239,632 
As a percentage of period-end loans1.32 %1.43 %
Net charge-offs:18,610 9,102 
Annualized as a percentage of average loans0.21 %0.11 %
Non-accrual loans:$67,781 $35,125 
As a percentage of total loans0.38 %0.21 %
As a percentage of total assets0.14 0.07 
CONSOLIDATED CAPITAL RATIOS
Common Equity Tier 1 Risk-Based Capital Ratio13.42 %12.64 %
Tier 1 Risk-Based Capital Ratio13.92 13.17 
Total Risk-Based Capital Ratio15.39 14.75 
Leverage Ratio8.11 7.03 
Equity to Assets Ratio (period-end)6.97 6.46 
Equity to Assets Ratio (average)6.73 7.70 
(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
2nd Qtr1st Qtr4th Qtr3rd Qtr2nd Qtr
TAXABLE-EQUIVALENT YIELD/COST(1)
Earning Assets:     
Interest-bearing deposits5.05 %4.57 %3.70 %2.27 %0.80 %
Federal funds sold5.35 4.72 3.88 2.44 1.26 
Resell agreements5.26 4.77 4.14 2.39 1.32 
Securities3.24 3.24 3.09 2.94 2.87 
Loans, net of unearned discounts6.64 6.36 5.80 4.89 4.04 
Total earning assets4.77 4.57 4.14 3.43 2.71 
Interest-Bearing Liabilities:
Interest-bearing deposits:
Savings and interest checking0.41 0.36 0.27 0.07 0.04 
Money market deposit accounts2.68 2.47 1.94 1.08 0.35 
Time accounts3.77 2.40 1.52 0.99 0.64 
Total interest-bearing deposits1.87 1.52 1.16 0.62 0.22 
Total deposits1.18 0.93 0.69 0.37 0.13 
Federal funds purchased4.97 4.55 3.78 2.33 0.84 
Repurchase agreements3.52 3.20 2.69 1.50 0.41 
Junior subordinated deferrable interest debentures6.84 6.46 5.39 3.77 2.51 
Subordinated notes payable and other notes4.69 4.69 4.69 4.69 4.69 
Total interest-bearing liabilities2.11 1.79 1.37 0.71 0.26 
Net interest spread2.66 2.78 2.77 2.72 2.45 
Net interest income to total average earning assets3.45 3.47 3.31 3.01 2.56 
AVERAGE BALANCES
($ in millions)
Assets: 
Interest-bearing deposits$6,880 $8,687 $11,574 $12,776 $13,041 
Federal funds sold22 64 52 51 31 
Resell agreements85 90 49 10 3 
Securities21,278 21,744 20,129 19,402 18,130 
Loans, net of unearned discount17,664 17,319 17,063 16,823 16,674 
Total earning assets$45,929 $47,904 $48,867 $49,062 $47,880 
Liabilities:
Interest-bearing deposits:
Savings and interest checking$10,862 $11,662 $12,113 $12,235 $12,336 
Money market deposit accounts11,431 12,404 12,958 13,466 12,608 
Time accounts3,483 2,055 1,708 1,591 1,427 
Total interest-bearing deposits25,776 26,121 26,779 27,292 26,371 
Total deposits41,007 42,757 44,759 45,803 44,726 
Federal funds purchased33 51 37 42 36 
Repurchase agreements3,719 4,211 3,575 1,960 1,743 
Junior subordinated deferrable interest debentures123 123 123 123 123 
Subordinated notes payable and other notes99 99 99 99 99 
Total interest-bearing funds$29,750 $30,606 $30,613 $29,516 $28,372 
(1) Taxable-equivalent basis assuming a 21% tax rate.

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