CULLEN/FROST REPORTS SECOND QUARTER RESULTS

Jul 28th, 2022 9:00 EST

Board increases quarterly common dividend by 16 percent to $0.87

SAN ANTONIO, July 28, 2022 /PRNewswire/ -- Cullen/Frost Bankers, Inc. (NYSE: CFR) today reported second quarter 2022 results. Net income available to common shareholders for the second quarter of 2022 was $117.4 million compared to $116.4 million in the second quarter of 2021. On a per-share basis, net income available to common shareholders for the second quarter of 2022 was $1.81 per diluted common share, compared to $1.80 per diluted common share reported a year earlier. Returns on average assets and average common equity were 0.92 percent and 13.88 percent, respectively, for the second quarter of 2022 compared to 1.02 percent and 11.18 percent, respectively, for the same period a year earlier.

For the second quarter of 2022, net interest income on a taxable-equivalent basis was $311.4 million, up 11.2 percent, compared to the same quarter in 2021. Average loans for the second quarter of 2022 decreased $572 million, or 3.3 percent, to $16.7 billion, from the $17.2 billion reported for the second quarter a year earlier. Excluding PPP loans, second quarter average loans of $16.5 billion represented a 13.2 percent  increase compared to the second quarter of 2021 and a 2.8 percent increase compared to the first quarter of 2022. Average deposits for the quarter were $44.7 billion, up $6.5 billion, or 16.9 percent, compared to the $38.3 billion reported for last year's second quarter. 

"I'm proud of the success we achieved in the second quarter as we continued to execute our organic growth strategy, and I thank our staff for their performance in generating double digit growth for both loans and deposits," said Phil Green, Cullen/Frost Chairman and CEO.

Noted financial data for the second quarter of 2022 follows:

  • The Common Equity Tier 1, Tier 1 and Total Risk-Based Capital Ratios at the end of the second quarter of 2022 were 12.64 percent, 13.17 percent and 14.75 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 $311.4 million, an increase of 11.2 percent, compared to the prior year period. Net interest margin was 2.56 percent for the second quarter of 2022 compared to 2.33 percent for the first quarter of 2022 and 2.65 percent for the second quarter of 2021.
  • Non-interest income for the second quarter of 2022 totaled $97.9 million, an increase of $6.7 million, or 7.3 percent, from the $91.2 million reported for the second quarter of 2021. Service charges on deposit accounts increased $4.0 million, or 20.3 percent, compared to the second quarter of 2021. The increase was mainly driven by increases in overdraft charges (up $2.7 million) and commercial service charges (up $1.1 million). Other charges, commissions and fees increased $1.2 million, or 14.4 percent, compared to the second quarter of 2021. The increase was primarily related to increases in income from the placement of money market accounts (up $1.1 million) and merchant services rebates/bonuses (up $472,000), among other things, partly offset by a decrease in income from the sale of mutual funds (down $448,000). Insurance commissions and fees increased $1.0 million, or 9.3 percent, compared to the second quarter of 2021. The increase was the result of increases in commission income (up $774,000) and contingent income (up $229,000).
  • Non-interest expense was $246.3 million for the quarter, up $31.1 million, or 14.4 percent, compared to the $215.3 million reported for the second quarter a year earlier. Salaries and wages expense increased $19.8 million, or 20.5 percent, compared to the second quarter of 2021. The increase in salaries and wages was primarily related to increases in salaries due to annual merit and market increases as well as the implementation of a $20 per hour minimum wage in December, 2021. Salaries and wages was also impacted by increases in the number of employees and increases in incentive compensation. We are experiencing an increasingly competitive labor market which has resulted in and could continue to result in an increase in our staffing costs. Employee benefits expense of $20.7 million represented an increase of $2.0 million, or 10.7 percent, compared to the second quarter of 2021. The increase was primarily related to increases in payroll taxes, 401(k) plan expense, and medical benefits plan expense. Other non-interest expense increased $4.8 million, or 11.5 percent, compared to the second quarter of 2021. The increase included increases in travel, meals and entertainment (up $1.7 million); professional services expense (up $1.2 million); sundry and other miscellaneous expenses (up $1.1 million); and advertising/promotions expense (up $661,000). Technology, furniture and equipment expense increased $1.9 million, or 6.9 percent, compared to the second quarter of 2021. The increase was primarily related to increases in cloud services expense (up $1.1 million) and service contracts expense (up $466,000), among other things, partly offset by a decrease in software maintenance (down $199,000). Net occupancy expense increased $1.7 million, or 6.5 percent, compared to the second quarter of 2021. The increase was primarily related to an increase in repairs and maintenance/service contracts expense (up $1.0 million) and was also impacted by our expansion activities in the Houston and Dallas regions, among other things.
  • For the second quarter of 2022, the company did not report a credit loss expense, and reported net charge-offs of $2.8 million. This compares to no credit loss expense and net charge-offs of $6.3 million for the first quarter of 2022 and no credit loss expense and net charge-offs of $1.6 million for the second quarter of 2021. The allowance for credit losses on loans as a percentage of total loans was 1.43 percent at June 30, 2022, compared to 1.49 percent at the end of the first quarter of 2022 and 1.54 percent at the end of the second quarter of 2021. Excluding PPP loans, which carry a guarantee from the SBA, the allowance for credit losses on loans as a percentage of total loans was 1.44 percent at the end of the second quarter of 2022, compared to 1.51 percent at the end of the first quarter of 2022 and 1.74 percent at the end of the second quarter of 2021. Non-accrual loans were $35.1 million at the end of the second quarter of 2022, compared to $49.0 million at the end of the first quarter of 2022 and $57.3 million at the end of the second quarter of 2021.

The Cullen/Frost board declared a third-quarter cash dividend of $0.87 per common share, representing an increase of $0.12, or 16 percent. The dividend on common stock is payable September 15, 2022 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 on September 15, 2022, to shareholders of record on August 31 of this year.

Cullen/Frost Bankers, Inc. will host a conference call on Thursday, July 28, 2022, 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 31, 2022 at 1-877-660-6853 with Conference ID # of 13731744. 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 $51.8 billion in assets at June 30, 2022. 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.

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) and their application 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 potential impact of climate change.
  • 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.
  • Changes in the financial performance and/or condition of our borrowers.
  • 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.
  • 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 ongoing 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.

In addition, financial markets and global supply chains may be adversely affected by the current or anticipated impact of military conflict, including the current Russian invasion of Ukraine, terrorism or other geopolitical events.

Further, statements about the potential effects of the ongoing 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.

A.B. MendezInvestor Relations210.220.5234orBill DayMedia Relations210.220.5427

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

(In thousands, except per share amounts)

2022

2021

2nd Qtr

1st Qtr

4th Qtr

3rd Qtr

2nd Qtr

CONDENSED INCOME STATEMENTS

Net interest income

$ 288,208

$ 249,071

$ 240,708

$ 246,122

$ 257,156

Net interest income (1)

311,377

272,194

264,049

269,321

279,997

Credit loss expense

Non-interest income:

Trust and investment management fees

37,776

38,656

38,425

37,381

37,874

Service charges on deposit accounts

23,870

22,740

22,234

21,216

19,849

Insurance commissions and fees

11,776

16,608

11,714

11,748

10,773

Interchange and card transaction fees

4,911

4,226

4,237

4,490

4,641

Other charges, commissions and fees

9,887

9,627

10,107

9,785

8,640

Net gain (loss) on securities transactions

69

Other

9,707

9,533

22,270

8,569

9,470

Total non-interest income

97,927

101,390

109,056

93,189

91,247

Non-interest expense:

Salaries and wages

116,881

111,329

105,541

99,463

97,035

Employee benefits

20,733

24,220

19,189

21,576

18,728

Net occupancy

28,379

27,411

27,435

27,208

26,650

Technology, furniture and equipment

29,921

29,157

28,230

28,494

27,998

Deposit insurance

3,724

3,633

3,339

3,088

2,877

Intangible amortization

131

146

153

157

185

Other

46,578

42,836

54,708

38,017

41,781

Total non-interest expense

246,347

238,732

238,595

218,003

215,254

Income before income taxes

139,788

111,729

111,169

121,308

133,149

Income taxes

20,674

12,627

10,148

13,333

15,081

Net income

119,114

99,102

101,021

107,975

118,068

Preferred stock dividends

1,669

1,669

1,669

1,668

1,669

Net income available to common shareholders

$ 117,445

$   97,433

$   99,352

$ 106,307

$ 116,399

PER COMMON SHARE DATA

Earnings per common share - basic

$       1.82

$       1.51

$       1.54

$       1.66

$       1.81

Earnings per common share - diluted

1.81

1.50

1.54

1.65

1.80

Cash dividends per common share

0.75

0.75

0.75

0.75

0.72

Book value per common share at end of quarter

49.93

56.65

67.11

66.39

66.44

OUTSTANDING COMMON SHARES

Period-end common shares

64,123

64,094

63,986

63,668

63,646

Weighted-average common shares - basic

64,113

64,051

63,879

63,652

63,606

Dilutive effect of stock compensation

354

410

462

445

496

Weighted-average common shares - diluted

64,467

64,461

64,341

64,097

64,102

SELECTED ANNUALIZED RATIOS

Return on average assets

0.92 %

0.79 %

0.81 %

0.90 %

1.02 %

Return on average common equity

13.88

9.58

9.26

9.87

11.18

Net interest income to average earning assets

2.56

2.33

2.31

2.47

2.65

(1) Taxable-equivalent basis assuming a 21% tax rate.

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

2022

2021

2nd Qtr

1st Qtr

4th Qtr

3rd Qtr

2nd Qtr

BALANCE SHEET SUMMARY

($ in millions)

Average Balance:

Loans

$   16,674

$   16,386

$   15,984

$   16,189

$   17,246

Loans excluding Paycheck Protection Program

16,531

16,084

15,391

14,824

14,598

Earning assets

47,880

47,339

46,008

43,980

42,916

Total assets

51,088

50,323

48,897

46,774

45,665

Non-interest-bearing demand deposits

18,355

17,961

17,885

16,999

16,456

Interest-bearing deposits

26,371

25,001

23,142

22,117

21,815

Total deposits

44,726

42,962

41,027

39,116

38,271

Shareholders' equity

3,540

4,270

4,400

4,417

4,320

Period-End Balance:

Loans

$   16,736

$   16,543

$   16,336

$   15,833

$   16,596

Loans excluding Paycheck Protection Program

16,644

16,335

15,908

15,005

14,670

Earning assets

48,404

48,107

48,063

44,964

43,943

Goodwill and intangible assets

656

656

656

656

656

Total assets

51,785

51,296

50,878

47,860

46,698

Total deposits

45,602

44,431

42,696

39,613

38,734

Shareholders' equity

3,347

3,776

4,440

4,372

4,374

Adjusted shareholders' equity (1)

4,221

4,148

4,092

4,022

3,961

ASSET QUALITY

($ in thousands)

Allowance for credit losses on loans:

$ 239,632

$ 246,835

$ 248,666

$ 250,150

$ 255,288

As a percentage of period-end loans

1.43 %

1.49 %

1.52 %

1.58 %

1.54 %

Net charge-offs:

$     2,807

$     6,295

$     2,789

$     2,115

$     1,591

Annualized as a percentage of average loans

0.07 %

0.16 %

0.07 %

0.05 %

0.04 %

Non-accrual loans:

$   35,125

$   48,966

$   53,713

$   57,055

$   57,250

As a percentage of total loans

0.21 %

0.30 %

0.33 %

0.36 %

0.34 %

As a percentage of total assets

0.07

0.10

0.11

0.12

0.12

CONSOLIDATED CAPITAL RATIOS

Common Equity Tier 1 Risk-Based Capital Ratio

12.64 %

12.78 %

13.13 %

13.42 %

13.60 %

Tier 1 Risk-Based Capital Ratio

13.17

13.32

13.70

14.01

14.21

Total Risk-Based Capital Ratio

14.75

14.97

15.45

15.90

16.17

Leverage Ratio

7.03

7.08

7.34

7.52

7.60

Equity to Assets Ratio (period-end)

6.46

7.36

8.73

9.14

9.37

Equity to Assets Ratio (average)

6.93

8.48

9.00

9.44

9.46

(1) Shareholders' equity excluding accumulated other comprehensive income (loss).

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

(In thousands, except per share amounts)

Six Months Ended

June 30,

2022

2021

CONDENSED INCOME STATEMENTS

Net interest income

$ 537,279

$ 498,037

Net interest income (1)

583,572

543,946

Credit loss expense

63

Non-interest income:

Trust and investment management fees

76,432

73,188

Service charges on deposit accounts

46,610

39,842

Insurance commissions and fees

28,384

28,086

Interchange and card transaction fees

9,137

8,734

Other charges, commissions and fees

19,514

16,944

Net gain (loss) on securities transactions

Other

19,240

17,689

Total non-interest income

199,317

184,483

Non-interest expense:

Salaries and wages

228,210

190,493

Employee benefits

44,953

41,264

Net occupancy

55,790

52,701

Technology, furniture and equipment

59,078

56,014

Deposit insurance

7,357

5,805

Intangible amortization

277

387

Other

89,414

78,732

Total non-interest expense

485,079

425,396

Income before income taxes

251,517

257,061

Income taxes

33,301

22,978

Net income

218,216

234,083

Preferred stock dividends

3,338

3,820

Net income available to common shareholders

$ 214,878

$ 230,263

PER COMMON SHARE DATA

Earnings per common share - basic

$       3.32

$       3.59

Earnings per common share - diluted

3.31

3.57

Cash dividends per common share

1.50

1.44

Book value per common share at end of quarter

49.93

66.44

OUTSTANDING COMMON SHARES

Period-end common shares

64,123

63,646

Weighted-average common shares - basic

64,082

63,457

Dilutive effect of stock compensation

383

512

Weighted-average common shares - diluted

64,465

63,969

SELECTED ANNUALIZED RATIOS

Return on average assets

0.85 %

1.05 %

Return on average common equity

11.53

11.16

Net interest income to average earning assets

2.45

2.68

(1) Taxable-equivalent basis assuming a 21% tax rate.

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

As of or for the

Six Months Ended

June 30,

2022

2021

BALANCE SHEET SUMMARY

($ in millions)

Average Balance:

Loans

$   16,531

$   17,464

Loans excluding Paycheck Protection Program

16,308

14,725

Earning assets

47,611

41,369

Total assets

50,711

44,102

Non-interest-bearing demand deposits

18,159

15,888

Interest-bearing deposits

25,690

20,960

Total deposits

43,849

36,848

Shareholders' equity

3,903

4,308

Period-End Balance:

Loans

$   16,736

$   16,596

Loans excluding Paycheck Protection Program

16,644

14,670

Earning assets

48,404

43,943

Goodwill and intangible assets

656

656

Total assets

51,785

46,698

Total deposits

45,602

38,734

Shareholders' equity

3,347

4,374

Adjusted shareholders' equity (1)

4,221

3,961

ASSET QUALITY

($ in thousands)

Allowance for credit losses on loans:

$ 239,632

$ 255,288

As a percentage of period-end loans

1.43 %

1.54 %

Net charge-offs:

9,102

3,510

Annualized as a percentage of average loans

0.11 %

0.04 %

Non-accrual loans:

$   35,125

$   57,250

As a percentage of total loans

0.21 %

0.34 %

As a percentage of total assets

0.07

0.12

CONSOLIDATED CAPITAL RATIOS

Common Equity Tier 1 Risk-Based Capital Ratio

12.64 %

13.60 %

Tier 1 Risk-Based Capital Ratio

13.17

14.21

Total Risk-Based Capital Ratio

14.75

16.17

Leverage Ratio

7.03

7.60

Equity to Assets Ratio (period-end)

6.46

9.37

Equity to Assets Ratio (average)

7.70

9.77

(1) Shareholders' equity excluding accumulated other comprehensive income (loss).

Cullen/Frost Bankers, Inc.

TAXABLE-EQUIVALENT YIELD/COST AND AVERAGE BALANCES (UNAUDITED)

2022

2021

2nd Qtr

1st Qtr

4th Qtr

3rd Qtr

2nd Qtr

TAXABLE-EQUIVALENT YIELD/COST(1)

Earning Assets:

Interest-bearing deposits

0.80 %

0.18 %

0.15 %

0.15 %

0.11 %

Federal funds sold

1.26

0.37

0.22

0.48

0.15

Resell agreements

1.32

0.27

0.25

0.29

0.20

Securities

2.87

2.88

3.08

3.35

3.36

Loans, net of unearned discounts

4.04

3.74

3.89

4.16

4.28

Total earning assets

2.71

2.39

2.36

2.53

2.71

Interest-Bearing Liabilities:

Interest-bearing deposits:

Savings and interest checking

0.04

0.01

0.01

0.01

0.01

Money market deposit accounts

0.35

0.12

0.11

0.10

0.09

Time accounts

0.64

0.29

0.21

0.24

0.32

Total interest-bearing deposits

0.22

0.08

0.07

0.07

0.06

Total deposits

0.13

0.05

0.04

0.04

0.04

Federal funds purchased

0.84

0.17

0.12

0.13

0.08

Repurchase agreements

0.41

0.10

0.10

0.11

0.11

Junior subordinated deferrable interest debentures

2.51

1.90

1.81

1.85

1.87

Subordinated notes payable and other notes

4.69

4.69

4.70

4.70

4.70

Total interest-bearing liabilities

0.26

0.11

0.10

0.10

0.10

Net interest spread

2.45

2.28

2.26

2.43

2.61

Net interest income to total average earning assets

2.56

2.33

2.31

2.47

2.65

AVERAGE BALANCES

($ in millions)

Assets:

Interest-bearing deposits

$ 13,041

$ 13,766

$ 15,549

$ 15,278

$ 13,347

Federal funds sold

31

14

31

2

21

Resell agreements

3

6

8

8

8

Securities

18,130

17,166

14,436

12,503

12,294

Loans, net of unearned discount

16,674

16,386

15,984

16,189

17,246

Total earning assets

$ 47,880

$ 47,339

$ 46,008

$ 43,980

$ 42,916

Liabilities:

Interest-bearing deposits:

Savings and interest checking

$ 12,336

$ 11,954

$ 11,205

$ 10,910

$ 10,882

Money market deposit accounts

12,608

11,859

10,823

10,086

9,790

Time accounts

1,427

1,187

1,114

1,121

1,143

Total interest-bearing deposits

26,371

25,001

23,142

22,117

21,815

Total deposits

44,726

42,962

41,027

39,116

38,271

Federal funds purchased

36

28

27

27

34

Repurchase agreements

1,743

2,052

2,368

2,188

2,059

Junior subordinated deferrable interest debentures

123

123

126

137

136

Subordinated notes payable and other notes

99

99

99

99

99

Total interest-bearing funds

$ 28,372

$ 27,302

$ 25,762

$ 24,568

$ 24,143

(1) Taxable-equivalent basis assuming a 21% tax rate.

SOURCE Cullen/Frost Bankers, Inc.

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