Cullen/Frost Reports Second Quarter Results

SAN ANTONIO, July 29, 2021 /PRNewswire/ -- Cullen/Frost Bankers, Inc. (NYSE:CFR) today reported second quarter 2021 results. Net income available to common shareholders for the second quarter of 2021 was $116.4 million, compared to $93.1 million in the second quarter of 2020. On a per-share basis, net income available to common shareholders for the second quarter of 2021 was $1.80 per diluted common share, compared to $1.47 per diluted common share reported a year earlier. Returns on average assets and average common equity were 1.02 percent and 11.18 percent, respectively, for the second quarter of 2021 compared to 0.99 percent and 9.60 percent, respectively, for the same period a year earlier.

For the second quarter of 2021, net interest income on a taxable-equivalent basis was $280.0 million, up 3.8 percent, compared to the same quarter in 2020. Average loans for the second quarter of 2021 decreased $303.2 million, or 1.7 percent, to $17.2 billion, from the $17.5 billion reported for the second quarter a year earlier. Excluding PPP loans, second quarter average loans of $14.6 billion represented a 3.0 percent  decrease compared to the second quarter of 2020. Average deposits for the quarter were $38.3 billion, up $7.0 billion, or 22.2 percent, compared to the $31.3 billion reported for last year's second quarter. 

"Since the end of the quarter, we've begun to see stabilization in non-PPP loans," said Phil Green, Cullen/Frost Chairman and CEO. "As we emerge from the pandemic lockdown and the economy reopens, our company is in a strong position to benefit from the rebound in economic activity. During the second quarter, we completed our 25-branch expansion program in the Houston market area. Based on the success of our new Houston area locations to date, we've announced a similar organic expansion effort in Dallas, as well as some follow-on new location openings in the Houston area. At the same time, we continue to take steps to enhance the Frost experience for our customers and our employees."

For the first six months of 2021, net income available to common shareholders was $230.3 million, up 64.1 percent compared to $140.3 million for the first six months of 2020. Diluted EPS available to common shareholders for the first six months of 2021 was $3.57 compared to $2.21 in the year-earlier period, representing an increase of 61.5 percent. Returns on average assets and average common equity for the first six months of 2021 were 1.05 percent and 11.16 percent, respectively, compared to 0.79 percent and 7.24 percent, respectively, for the same period in 2020.

Noted financial data for the second quarter of 2021 follows:

• The Common Equity Tier 1, Tier 1 and Total Risk-Based Capital Ratios at the end of the second quarter of 2021 were 13.60 percent, 14.21 percent and 16.17 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 $280.0 million, an increase of 3.8 percent, compared to the prior year period. Net interest margin was 2.65 percent for the second quarter of 2021, down 7 basis points compared to the first quarter of 2021 net interest margin of 2.72 percent. Net interest margin decreased 48 basis points compared to 3.13 percent for the same period in 2020.
• Non-interest income for the second quarter of 2021 totaled $91.2 million, an increase of $13.6 million, or 17.6 percent, from the $77.6 million reported for the second quarter of 2020. Trust and investment management fees increased $6.8 million, or 21.9 percent, compared to the second quarter of 2020. The increase in trust and investment management fees was primarily the result of increases in equity valuations and the number of customer accounts as well as an increase in estate fees. Service charges on deposit accounts increased $2.3 million or 12.9 percent compared to the second quarter of 2020. The increase was mainly driven by increases in overdraft charges on consumer and commercial accounts (up $887,000 and $314,000, respectively) and an increase in commercial service charges (up $974,000). Other income for the second quarter increased by $1.8 million, or 23.6 percent compared to the year-earlier period. This increase was largely driven by gains on sales of assets, up $1.1 million in the second quarter of 2021, due to a $1.8 million gain on sale of real estate. Net interchange and card transaction fees increased by $1.7 million, or 56.5 percent, compared to the second quarter of 2020, driven by increased transaction volumes as well as new card products and partly offset by increases in network costs. Other charges, commissions and fees increased $1.0 million, or 12.7 percent, compared to the second quarter of 2020. The increase was primarily related to an increase in income from the sale of mutual fund accounts (up $1.1 million).
• Non-interest expense was $215.3 million for the quarter, up $15.6 million, or 7.8 percent, compared to the $199.7 million reported for the second quarter a year earlier. Salaries and wages expense increased $6.7 million, or 7.4 percent, compared to the second quarter of 2020, impacted by decreased PPP-related expense deferrals in the second quarter of 2021. Salaries and wages during the second quarter of 2020 were impacted by $5.5 million of salary costs deferred as loan origination costs in connection with the high volume of PPP loan originations during that quarter, which reduced salaries expense. The comparable PPP-related salaries expense deferral for the second quarter of 2021 was $399,000. Other non-interest expense increased $5.7 million, or 15.7 percent, compared to the second quarter of 2020. The overall increase included increases in donations expense (up $2.0 million); advertising/promotions expense (up $1.8 million); and fraud losses (up $873,000); among other things. Donations expense during the second quarter of 2021 was impacted by a $1.8 million contribution to the Frost Charitable Foundation. The increase in other non-interest expense was also partly due to a decrease in costs deferred as loan origination costs, down $1.6 million compared to the prior-year period, primarily in connection with the high volume of PPP loan originations during the second quarter of 2020. Technology, furniture and equipment expense increased $2.0 million, or 7.5 percent, compared to the second quarter of 2020. The increase was primarily related to increases in cloud services expense (up $1.1 million), depreciation of furniture and equipment (up $689,000) and software maintenance (up $407,000). Net occupancy expense increased $1.4 million, or 5.5 percent, compared to the second quarter of 2020. The increase was primarily related to increases in repairs and maintenance/service contracts expense (up $1.4 million) and depreciation on leasehold improvements (up $532,000), among other things, partly offset by a decrease in lease expense (down $754,000).
• For the second quarter of 2021, the company did not report a credit loss expense. For the second quarter of 2020, the company recorded a $27.2 million credit loss expense related to loans and $41.0 million in net charge-offs. The allowance for credit losses on loans as a percentage of total loans was 1.54 percent at June 30, 2021, compared to 1.46 percent at the end of the first quarter of 2021 and 1.39 percent at the end of the second quarter of 2020. Excluding PPP loans, which carry a guarantee from the SBA, the allowance for credit losses on loans as a percentage of total loans was 1.74 percent at the end of the second quarter of 2021, compared to 1.77 percent at the end of the first quarter of 2021 and 1.69 percent at the end of the second quarter of 2020. Non-accrual loans were $57.3 million at the end of the second quarter of 2021, compared to $51.0 million at the end of the first quarter of 2021 and $79.5 million at the end of the second quarter of 2020.

The Cullen/Frost board declared a third-quarter cash dividend of $0.75 per common share, representing an increase of 4 percent from the previous quarterly dividend of $0.72. The dividend on common stock is payable September 15, 2021 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, 2021, to shareholders of record on August 31 of this year.

Cullen/Frost Bankers, Inc. will host a conference call on Thursday, July 29, 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 1-800-944-6430 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, August 1, 2021 at 855-859-2056 with Conference ID # of 5893015. 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 $46.7 billion in assets at June 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.

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.

A.B. Mendez
Investor Relations
210.220.5234

or

Bill Day
Media Relations
210.220.5427

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SOURCE Cullen/Frost Bankers, Inc.