EX-99.1 2 a1q23formxex991xpressrelea.htm EX-99.1 - 1Q23 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    
April 27, 2023



CULLEN/FROST REPORTS FIRST QUARTER RESULTS
Board declares second quarter dividend on common and preferred stock




SAN ANTONIO -- Cullen/Frost Bankers, Inc. (NYSE:CFR) today reported first quarter 2023 results.
Net income available to common shareholders for the first quarter of 2023 was $176.0 million compared to $97.4 million in the first quarter of 2022. On a per-share basis, net income available to common shareholders for the first quarter of 2023 was $2.70 per diluted common share, compared to $1.50 per diluted common share reported a year earlier, representing an 80.0 percent increase. Returns on average assets and average common equity were 1.39 percent and 22.59 percent, respectively, for the first quarter of 2023 compared to 0.79 percent and 9.58 percent, respectively, for the same period a year earlier.

For the first quarter of 2023, net interest income on a taxable-equivalent basis was $425.8 million, up 56.4 percent, compared to the same quarter in 2022. Average loans for the first quarter of 2023 increased $932.6 million, or 5.7 percent, to $17.3 billion, from the $16.4 billion reported for the first quarter a year earlier. Excluding PPP loans, first quarter average loans of $17.3 billion represented a 7.5 percent increase compared to the first quarter of 2022 and a 1.6 percent increase compared to the fourth quarter of 2022. Average deposits for the first quarter were $42.8 billion, down $204.5 million, or 0.5 percent, compared to the $43.0 billion reported for last year's first quarter, and down $2.0 billion, or 4.5 percent, compared to the fourth quarter of 2022. During the first quarter, impacted by the higher interest rate environment, 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 $1.3 billion or 7.5 percent from the fourth quarter. Average interest-bearing deposits were down $658 million or 2.5 percent from the fourth quarter but the decrease was mostly offset by a $636 million increase in Average repurchase account balances due to some customer movement between products.

“These strong results reflect the enduring soundness of our business model and provide further evidence that our organic growth strategy is both durable and scalable,” said Phil Green, Cullen/Frost Chairman and CEO. “Frost employees are doing a great job of executing our organic growth strategy, taking advantage of the opportunities we have to continue adding new relationships and growing the business in our markets across the state. Our investments in expansion, in our employees, and in other strategic areas of the business continue to position us well to provide our customers with outstanding experiences over the long term.”
Noted financial data for the first quarter of 2023 follows:

•The Common Equity Tier 1, Tier 1 and Total Risk-Based Capital Ratios at the end of the first quarter of 2023 were 13.24 percent, 13.74 percent and 15.22 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 $425.8 million, an increase of 56.4 percent, compared to the prior year period. Net interest margin was 3.47 percent for the first quarter of 2023 compared to 3.31 percent for the fourth quarter of 2022 and compared to 2.33 percent for the first quarter of 2022.
•Non-interest income for the first quarter of 2023 totaled $105.3 million, an increase of $3.9 million, or 3.8 percent, from the $101.4 million reported for the first quarter of 2022. Insurance commissions and fees increased $2.3 million, or 14.1 percent, compared to the first quarter of 2022. The increase during the first quarter of 2023 was primarily the result of increases in contingent income (up $1.4 million) and commission income (up $971,000). Other non-interest income increased $2.1 million, or 22.5 percent, compared to the first quarter of 2022. The increase was mainly driven by increases in sundry and other miscellaneous income (up $1.3 million) and income from customer derivative and securities trading


transactions (up $482,000), among other things. Other charges, commissions and fees increased $2.1 million, or 21.6 percent, compared to the first quarter of 2022. The increase was primarily related to increases in income from the placement of money market accounts (up $1.5 million), other service charges (up $609,000), among other things, partly offset by a decrease in income from the sale of mutual funds (down $862,000). The increases in these items was partly offset by a decrease of $2.5 million, or 6.5 percent, in trust and investment management fees, primarily due a decrease in investment management fees (down $2.1 million).
•Non-interest expense was $285.1 million for the quarter, up $46.4 million, or 19.4 percent, compared to the $238.7 million reported for the first quarter a year earlier. Salaries and wages expense increased $19.0 million, or 17.1 percent, compared to the first 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 as well as preparations for our mortgage loan product offering. Employee benefits expense increased by $9.7 million, or 40.1 percent, compared with the first 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 $8.9 million, or 20.7 percent, compared to the first quarter of 2022. The increase during the first quarter of 2023 included increases in professional services expense (up $2.3 million), primarily driven by IT-related services; travel, meals and entertainment (up $1.4 million); sundry and other miscellaneous expenses (up $1.4 million), advertising/promotions expense (up $1.2 million); check card expense (up $903,000); and business development expense (up $719,000).
•For the first quarter of 2023, the company reported a credit loss expense of $9.1 million, and reported net charge-offs of $8.8 million. This compares to a credit loss expense of $3.0 million and net loan charge-offs of $3.8 million for the fourth quarter of 2022 and no credit loss expense and net loan charge-offs of $6.3 million for the first quarter of 2022. The allowance for credit losses on loans as a percentage of total loans was 1.32 percent at March 31, 2023, compared to 1.33 percent at the end of the fourth quarter of 2022 and 1.49 percent at the end of the first quarter of 2022. Non-accrual loans were $38.4 million at the

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end of the first quarter of 2023, compared to $37.8 million at the end of the fourth quarter of 2022 and $49.0 million at the end of the first quarter of 2022.
The Cullen/Frost board declared a second-quarter cash dividend of $0.87 per common share. The dividend on common stock is payable June 15, 2023 to shareholders of record on May 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 June 15, 2023 to shareholders of record on May 31 of this year.
Cullen/Frost Bankers, Inc. will host a conference call on Thursday, April 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, April 30, 2023 at 1-877-660-6853 with Conference ID # of 13737708. 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 $51.2 billion in assets at March 31, 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
1st Qtr4th Qtr3rd Qtr2nd Qtr1st Qtr
CONDENSED INCOME STATEMENTS
Net interest income$399,820 $398.457 $355,547 $288,208 $249,071 
Net interest income (1)
425,844 423,892 379,518 311,377 272,194 
Credit loss expense9,104 3,000 — — — 
Non-interest income:
Trust and investment management fees36,144 39,695 38,552 37,776 38,656 
Service charges on deposit accounts21,879 22,321 22,960 23,870 22,740 
Insurance commissions and fees18,952 11,674 13,152 11,776 16,608 
Interchange and card transaction fees 4,889 4,480 4,614 4,911 4,226 
Other charges, commissions and fees11,704 10,981 11,095 9,887 9,627 
Net gain (loss) on securities transactions21 — — — — 
Other11,676 16,529 9,448 9,707 9,533 
Total non-interest income 105,265 105,680 99,821 97,927 101,390 
Non-interest expense:
Salaries and wages130,345 136,697 127,189 116,881 111,329 
Employee benefits33,922 21,975 21,680 20,733 24,220 
Net occupancy30,349 28,572 28,133 28,379 27,411 
Technology, furniture and equipment32,481 30,912 30,781 29,921 29,157 
Deposit insurance6,245 3,967 4,279 3,724 3,633 
Intangible amortization96 100 103 131 146 
Other 51,704 59,074 45,733 46,578 42,836 
Total non-interest expense 285,142 281,297 257,898 246,347 238,732 
Income before income taxes210,839 219,840 197,470 139,788 111,729 
Income taxes33,186 28,666 27,710 20,674 12,627 
Net income177,653 191,174 169,760 119,114 99,102 
Preferred stock dividends1,669 1,669 1,668 1,669 1,669 
Net income available to common shareholders$175,984 $189,505 $168,092 $117,445 $97,433 
PER COMMON SHARE DATA
Earnings per common share - basic$2.71 $2.92 $2.60 $1.82 $1.51 
Earnings per common share - diluted2.70 2.91 2.59 1.81 1.50 
Cash dividends per common share0.87 0.87 0.87 0.75 0.75 
Book value per common share at end of quarter51.59 46.49 41.53 49.93 56.65 
OUTSTANDING COMMON SHARES
Period-end common shares64,396 64,355 64,211 64,123 64,094 
Weighted-average common shares - basic64,374 64,303 64,158 64,113 64,051 
Dilutive effect of stock compensation258 344 343 354 410 
Weighted-average common shares - diluted64,632 64,647 64,501 64,467 64,461 
SELECTED ANNUALIZED RATIOS
Return on average assets1.39 %1.44 %1.27 %0.92 %0.79 %
Return on average common equity22.59 27.16 20.13 13.88 9.58 
Net interest income to average earning assets 3.47 3.31 3.01 2.56 2.33 
(1) Taxable-equivalent basis assuming a 21% tax rate.

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Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
20232022
1st Qtr4th Qtr3rd Qtr2nd Qtr1st Qtr
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
Loans$17,319 $17,063 $16,823 $16,674 $16,386 
Loans excluding Paycheck Protection Program17,287 17,020 16,752 16,531 16,084 
Earning assets47,904 48,867 49,062 47,880 47,339 
Total assets51,307 52,284 52,383 51,088 50,323 
Non-interest-bearing demand deposits16,636 17,980 18,511 18,355 17,961 
Interest-bearing deposits26,121 26,779 27,292 26,371 25,001 
Total deposits42,757 44,759 45,803 44,726 42,962 
Shareholders' equity3,305 2,913 3,459 3,540 4,270 
Period-End Balance:
Loans$17,486 $17,155 $16,951 $16,736 $16,543 
Loans excluding Paycheck Protection Program17,458 17,120 16,900 16,644 16,335 
Earning assets47,870 49,402 49,517 48,404 48,107 
Goodwill and intangible assets655 655 655 656 656 
Total assets51,246 52,892 52,946 51,785 51,296 
Total deposits42,184 43,954 46,560 45,602 44,431 
Shareholders' equity3,468 3,137 2,812 3,347 3,776 
Adjusted shareholders' equity (1)
4,610 4,486 4,341 4,221 4,148 
ASSET QUALITY
($ in thousands)
Allowance for credit losses on loans:$231,514 $227,621 $234,315 $239,632 $246,835 
As a percentage of period-end loans1.32 %1.33 %1.38 %1.43 %1.49 %
Net charge-offs:$8,782 $3,810 $2,854 $2,807 $6,295 
Annualized as a percentage of average loans0.21 %0.09 %0.07 %0.07 %0.16 %
Non-accrual loans:$38,410 $37,833 $29,904 $35,125 $48,966 
As a percentage of total loans0.22 %0.22 %0.18 %0.21 %0.30 %
As a percentage of total assets0.07 0.07 0.06 0.07 0.10 
CONSOLIDATED CAPITAL RATIOS
Common Equity Tier 1 Risk-Based Capital Ratio13.24 %12.85 %12.74 %12.64 %12.78 %
Tier 1 Risk-Based Capital Ratio13.74 13.35 13.26 13.17 13.32 
Total Risk-Based Capital Ratio15.22 14.84 14.80 14.75 14.97 
Leverage Ratio7.69 7.29 7.09 7.03 7.08 
Equity to Assets Ratio (period-end)6.77 5.93 5.31 6.46 7.36 
Equity to Assets Ratio (average)6.44 5.57 6.60 6.93 8.48 
(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
1st Qtr4th Qtr3rd Qtr2nd Qtr1st Qtr
TAXABLE-EQUIVALENT YIELD/COST(1)
Earning Assets:     
Interest-bearing deposits4.57 %3.70 %2.27 %0.80 %0.18 %
Federal funds sold4.72 3.88 2.44 1.26 0.37 
Resell agreements4.77 4.14 2.39 1.32 0.27 
Securities3.24 3.09 2.94 2.87 2.88 
Loans, net of unearned discounts6.36 5.80 4.89 4.04 3.74 
Total earning assets4.57 4.14 3.43 2.71 2.39 
Interest-Bearing Liabilities:
Interest-bearing deposits:
Savings and interest checking0.36 0.27 0.07 0.04 0.01 
Money market deposit accounts2.47 1.94 1.08 0.35 0.12 
Time accounts2.40 1.52 0.99 0.64 0.29 
Total interest-bearing deposits1.52 1.16 0.62 0.22 0.08 
Total deposits0.93 0.69 0.37 0.13 0.05 
Federal funds purchased4.55 3.78 2.33 0.84 0.17 
Repurchase agreements3.20 2.69 1.50 0.41 0.10 
Junior subordinated deferrable interest debentures6.46 5.39 3.77 2.51 1.90 
Subordinated notes payable and other notes4.69 4.69 4.69 4.69 4.69 
Total interest-bearing liabilities1.79 1.37 0.71 0.26 0.11 
Net interest spread2.78 2.77 2.72 2.45 2.28 
Net interest income to total average earning assets3.47 3.31 3.01 2.56 2.33 
AVERAGE BALANCES
($ in millions)
Assets: 
Interest-bearing deposits$8,687 $11,574 $12,776 $13,041 $13,766 
Federal funds sold64 52 51 31 14 
Resell agreements90 49 10 3 6 
Securities21,744 20,129 19,402 18,130 17,166 
Loans, net of unearned discount17,319 17,063 16,823 16,674 16,386 
Total earning assets$47,904 $48,867 $49,062 $47,880 $47,339 
Liabilities:
Interest-bearing deposits:
Savings and interest checking$11,662 $12,113 $12,235 $12,336 $11,955 
Money market deposit accounts12,404 12,958 13,466 12,608 11,859 
Time accounts2,055 1,708 1,591 1,427 1,187 
Total interest-bearing deposits26,121 26,779 27,292 26,371 25,001 
Total deposits42,757 44,759 45,803 44,726 42,962 
Federal funds purchased51 37 42 36 28 
Repurchase agreements4,211 3,575 1,960 1,743 2,052 
Junior subordinated deferrable interest debentures123 123 123 123 123 
Subordinated notes payable and other notes99 99 99 99 99 
Total interest-bearing funds$30,606 $30,613 $29,516 $28,372 $27,302 
(1) Taxable-equivalent basis assuming a 21% tax rate.

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