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Cullen/Frost Reports First Quarter Results

04/29/2021
Board declares second quarter dividend on common and preferred stock

SAN ANTONIO, April 29, 2021 /PRNewswire/ -- Cullen/Frost Bankers, Inc. (NYSE:CFR) today reported first quarter 2021 results. Net income available to common shareholders for the first quarter of 2021 was $113.9 million, compared to $47.2 million in the first quarter of 2020. On a per-share basis, net income available to common shareholders for the first quarter of 2021 was $1.77 per diluted common share, compared to $0.75 per diluted common share reported a year earlier. Returns on average assets and average common equity were 1.09 percent and 11.13 percent, respectively, for the first quarter of 2021 compared to 0.57 percent and 4.88 percent, respectively, for the same period a year earlier.

For the first quarter of 2021, net interest income on a taxable-equivalent basis was $263.9 million, down 1.7 percent compared to the same quarter in 2020. Average loans for the first quarter of 2021 increased $2.7 billion, or 17.9 percent, to $17.7 billion, from the $15.0 billion reported for the first quarter a year earlier. Excluding PPP loans, first quarter average loans of $14.9 billion represented a 0.9 percent decrease compared to the first quarter of 2020. Average deposits for the quarter were $35.4 billion, up $8.0 billion, or 29.3 percent, compared to the $27.4 billion reported for last year's first quarter. 

"Our first quarter results reflect the continued high level of effort put forth across our company," said Phil Green, Cullen/Frost Chairman and CEO. "We were ready to respond when the federal government's Paycheck Protection Program restarted early in the quarter, and the hard work our bankers have put into helping customers get PPP loans is showing up in the increased number of customer relationships we've built, as well as in our net promoter scores and overall customer satisfaction levels. Our new locations in Houston are performing above our projections. All of this has positioned us well to respond to increased economic activity as the country emerges from the pandemic."

Noted financial data for the first quarter of 2021 follows:

  • The Common Equity Tier 1, Tier 1 and Total Risk-Based Capital Ratios at the end of the first quarter of 2021 were 13.45 percent, 14.07 percent and 16.07 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 $263.9 million, a decrease of 1.7 percent compared to the prior year period. Net interest margin was 2.72 percent for the first quarter of 2021, down 10 basis points compared to the fourth quarter of 2020 net interest margin of 2.82 percent. Net interest margin decreased 84 basis points compared to 3.56 percent in the year-ago period.

  • Non-interest income for the first quarter of 2021 totaled $93.2 million, a decrease of $119.7 million, from the $212.9 million reported for the first quarter of 2020. The first quarter of 2020 included $109.0 million in net gains on sales of securities, with $107.1 million of that related to the sale of approximately $500 million in 30-year U.S. Treasury securities. Excluding the total net gain on sale of securities, total non-interest income in the first quarter would have decreased approximately $10.7 million, or 10.3 percent, compared to the first quarter of 2020. Other non-interest income decreased $9.5 million compared to the first quarter of 2020. The primary driver of the decrease in other non-interest income was a $6.0 million gain realized on the sale of certain non-hedge related, short-term put options on U.S. Treasury securities with an aggregate notional amount of $500 million in the first quarter of 2020. Service charges on deposits decreased $2.7 million, or 11.7 percent, compared to the first quarter of 2020, mainly driven by a decrease in overdraft/insufficient funds charges, down $2.9 million. Other charges, commissions and fees decreased $1.1 million, or 11.3 percent, compared to the first quarter of 2020. The decrease was primarily related to a decrease in income from the placement of money market accounts (down $1.2 million), which was impacted by lower average market rates. These decreases were partly offset by increases in each of the following: trust and investment management fees, up $841,000; interchange and card transactions, up $838,000, and insurance commissions and fees, up $828,000 compared to the first quarter of 2020.

  • Non-interest expense was $210.1 million for the quarter, down $14.0 million, or 6.3 percent, compared to the $224.2 million reported for the first quarter a year earlier. Other non-interest expense decreased $10.0 million, or 21.3 percent, compared to the first quarter of 2020. The decrease included decreases in advertising/promotions expense, down $3.0 million; travel, meals and entertainment expense, down $2.9 million; professional services expense, down $1.9 million; business development expense, down $1.2 million; and outside computer services expense, down $1.1 million, among other things. The decrease was also partly due to an increase in costs deferred as loan origination costs, up $1.2 million mainly in connection with the high volume of PPP loan originations during the first quarter of 2021. Included in other non-interest expense for the first quarter of 2021 was a $1.5 million contribution to the Frost Bank Charitable Foundation. Total salaries and wages decreased $5.4 million, or 5.4 percent, to $93.5 million, compared to the first quarter of 2020. The decrease was primarily related to an increase in salary costs deferred as loan origination costs, up $3.6 million, also impacted by the high volume of PPP loan originations during the first quarter of 2021. Employee benefits expense decreased by $2.4 million, or 9.5 percent, primarily driven by decreases in certain discretionary benefit plan expenses and expenses related to our defined benefit retirement plan. These decreases were partly offset by technology, furniture and equipment expense, which increased by $2.8 million, or 11.0 percent, compared to the first quarter of 2020. The increase was primarily related to increases in cloud services expense, up $2.2 million, and depreciation of furniture and equipment expense, up $656,000.

  • For the first quarter of 2021, the company did not record a credit loss expense related to loans, and had net charge-offs of $1.9 million. This compares with $13.3 million in credit loss expense related to loans and $13.6 million in net charge-offs for the fourth quarter of 2020, and $172.9 million in credit loss expense related to loans and $38.6 million in net charge-offs in the first quarter of 2020. Our credit loss expense related to loans was elevated in the first quarter of 2020 as a result of COVID-19-related business closures and the challenges faced by our energy industry customers given the commodity price declines during that period. The allowance for credit losses on loans as a percentage of total loans was 1.46 percent at March 31, 2021, compared to 1.51 percent at the end of the fourth quarter of 2020 and 1.72 percent at the end of the first 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 1.77 percent at the end of the first quarter of 2021, compared to 1.75 percent at the end of the fourth quarter of 2020. Non-accrual loans were $51.0 million at the end of the first quarter of 2021, compared to $61.4 million at the end of the fourth quarter of 2020 and $66.7 million at the end of the first quarter of 2020. Credit loss expense related to off-balance-sheet credit exposures was $65,000 in the first quarter of 2021, compared to $2.3 million in the first quarter of 2020.

The Cullen/Frost board declared a second-quarter cash dividend of $0.72 per common share, payable June 15, 2021 to shareholders of record on May 28 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 June 15, 2021, to shareholders of record on May 28 of this year.

Cullen/Frost Bankers, Inc. will host a conference call on Thursday, April 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 2 p.m. CT on the day of the call until midnight Sunday, May 2, 2021 at 855-859-2056 with Conference ID # of 2745669. 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 $44.0 billion in assets at March 31, 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.
  • The cost and effects of failure, interruption, or breach of security of our systems.
  • 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.


Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

(In thousands, except per share amounts)












2021


2020


1st Qtr


4th Qtr


3rd Qtr


2nd Qtr


1st Qtr

CONDENSED INCOME STATEMENTS








Net interest income

$

240,881



$

242,246



$

243,423



$

245,811



$

244,521


Net interest income (1)

263,949



265,721



267,041



269,722



268,453


Credit loss expense

63



13,756



20,302



31,975



175,197


Non-interest income:










Trust and investment management fees

35,314



32,270



31,469



31,060



34,473


Service charges on deposit accounts

19,993



20,830



19,812



17,580



22,651


Insurance commissions and fees

17,313



11,704



11,456



10,668



16,485


Interchange and card transaction fees

4,093



3,746



3,503



2,966



3,255


Other charges, commissions and fees

8,304



9,427



8,370



7,663



9,365


Net gain (loss) on securities transactions









108,989


Other

8,219



13,360



8,991



7,664



17,697


Total non-interest income

93,236



91,337



83,601



77,601



212,915












Non-interest expense:










Salaries and wages

93,458



104,843



93,323



90,350



98,812


Employee benefits

22,536



15,852



16,074



18,861



24,889


Net occupancy

26,051



26,822



25,466



25,266



25,384


Technology, furniture and equipment

28,016



27,464



26,482



26,046



25,240


Deposit insurance

2,928



2,706



2,372



2,800



2,624


Intangible amortization

202



208



212



241



257


Other

36,951



45,017



38,221



36,115



46,957


Total non-interest expense

210,142



222,912



202,150



199,679



224,163


Income before income taxes

123,912



96,915



104,572



91,758



58,076


Income taxes

7,897



8,645



9,516



(1,314)



3,323


Net income

116,015



88,270



95,056



93,072



54,753


Preferred stock dividends

2,151









2,016


Redemption of preferred stock









5,514


Net income available to common shareholders

$

113,864



$

88,270



$

95,056



$

93,072



$

47,223












PER COMMON SHARE DATA









Earnings per common share - basic

$

1.78



$

1.39



$

1.50



$

1.47



$

0.75


Earnings per common share - diluted

1.77



1.38



1.50



1.47



0.75


Cash dividends per common share

0.72



0.72



0.71



0.71



0.71


Book value per common share at end of quarter

64.89



65.82



65.07



63.97



61.17












OUTSTANDING COMMON SHARES









Period-end common shares

63,532



63,011



62,782



62,670



62,553


Weighted-average common shares - basic

63,306



62,940



62,727



62,596



62,643


Dilutive effect of stock compensation

510



311



193



205



407


Weighted-average common shares - diluted

63,816



63,251



62,920



62,801



63,050












SELECTED ANNUALIZED RATIOS









Return on average assets

1.09

%


0.86

%


0.96

%


0.99

%


0.57

%

Return on average common equity

11.13



8.55



9.30



9.60



4.88


Net interest income to average earning assets

2.72



2.82



2.95



3.13



3.56












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

 

Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)



2021


2020


1st Qtr


4th Qtr


3rd Qtr


2nd Qtr


1st Qtr

BALANCE SHEET SUMMARY









($ in millions)










Average Balance:










Loans

$

17,684



$

17,945



$

18,149



$

17,550



$

14,995


Earning assets

39,804



38,262



36,749



35,128



30,804


Total assets

42,530



40,963



39,435



37,838



33,534


Non-interest-bearing demand deposits

15,309



15,119



14,585



13,785



10,737


Interest-bearing deposits

20,097



19,010



18,289



17,528



16,654


Total deposits

35,406



34,129



32,875



31,313



27,391


Shareholders' equity

4,295



4,175



4,065



3,899



4,009












Period-End Balance:










Loans

$

17,890



$

17,481



$

18,224



$

17,972



$

15,338


Earning assets

41,380



39,648



37,482



36,613



31,440


Goodwill and intangible assets

656



657



657



657



657


Total assets

44,047



42,391



40,101



39,378



34,147


Total deposits

36,925



35,016



33,500



32,679



28,141


Shareholders' equity

4,268



4,293



4,085



4,009



3,827


Adjusted shareholders' equity (1)

3,880



3,780



3,580



3,521



3,463












ASSET QUALITY









($ in thousands)










Allowance for credit losses on loans:

$

261,258



$

263,177



$

263,475



$

250,061



$

263,881


As a percentage of period-end loans

1.46

%


1.51

%


1.45

%


1.39

%


1.72

%











Net charge-offs:

$

1,919



$

13,565



$

10,176



$

41,048



$

38,646


Annualized as a percentage of average loans

0.04

%


0.30

%


0.22

%


0.94

%


1.04

%











Non-accrual loans:

$

50,976



$

61,449



$

91,578



$

79,461



$

66,727


As a percentage of total loans

0.28

%


0.35

%


0.50

%


0.44

%


0.44

%

As a percentage of total assets

0.12



0.14



0.23



0.20



0.20












CONSOLIDATED CAPITAL RATIOS









Common Equity Tier 1 Risk-Based Capital Ratio

13.45

%


12.86

%


12.71

%


12.48

%


12.02

%

Tier 1 Risk-Based Capital Ratio

14.07



13.47



12.71



12.48



12.02


Total Risk-Based Capital Ratio

16.07



15.44



14.69



14.43



13.97


Leverage Ratio

7.97



8.07



7.85



8.01



8.84


Equity to Assets Ratio (period-end)

9.69



10.13



10.19



10.18



11.21


Equity to Assets Ratio (average)

10.10



10.19



10.31



10.30



11.95












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




 

Cullen/Frost Bankers, Inc.

TAXABLE-EQUIVALENT YIELD/COST  (UNAUDITED)













2021


2020


1st Qtr


4th Qtr


3rd Qtr


2nd Qtr


1st Qtr











TAXABLE-EQUIVALENT YIELD/COST (1)









Earning Assets:










Interest-bearing deposits

0.10

%


0.10

%


0.10

%


0.10

%


1.24

%

Federal funds sold

0.24



0.31



0.18



0.18



1.17


Resell agreements

0.15



0.24



0.27



0.59



1.63


Securities

3.41



3.41



3.44



3.53



3.46


Loans, net of unearned discounts

3.87



3.74



3.73



3.95



4.65


Total earning assets

2.78



2.89



3.04



3.24



3.84












Interest-Bearing Liabilities:










Interest-bearing deposits:










Savings and interest checking

0.01



0.02



0.02



0.02



0.02


Money market deposit accounts

0.07



0.07



0.09



0.09



0.50


Time accounts

0.53



0.82



1.11



1.40



1.67


Public funds

0.02



0.02



0.02



0.09



0.85


Total interest-bearing deposits

0.07



0.09



0.12



0.14



0.39












Total deposits

0.04



0.05



0.07



0.08



0.24












Federal funds purchased

0.08



0.08



0.08



0.07



1.15


Repurchase agreements

0.09



0.11



0.12



0.15



0.95


Junior subordinated deferrable interest debentures

1.89



1.96



2.05



2.90



3.54


Subordinated notes payable and other notes

4.70



4.70



4.70



4.71



4.71


Federal Home Loan Bank advances







0.29




Total interest-bearing liabilities

0.10



0.13



0.15



0.19



0.47












Net interest spread

2.68



2.76



2.89



3.05



3.37


Net interest income to total average earning assets

2.72



2.82



2.95



3.13



3.56












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

 

Cullen/Frost Bankers, Inc.

AVERAGE BALANCES (UNAUDITED)













2021


2020


1st Qtr


4th Qtr


3rd Qtr


2nd Qtr


1st Qtr











AVERAGE BALANCES









($ in millions)










Assets:










Interest-bearing deposits

$

9,865



$

7,718



$

5,888



$

4,986



$

2,586


Federal funds sold

5



2



11



72



231


Resell agreements

3



15



20



20



29


Securities

12,247



12,852



12,680



12,501



12,963


Loans, net of unearned discount

17,684



17,945



18,149



17,550



14,995


Total earning assets

$

39,804



$

38,262



$

36,749



$

35,128



$

30,804












Liabilities:










Interest-bearing deposits:










Savings and interest checking

$

9,094



$

8,397



$

8,077



$

7,615



$

7,030


Money market deposit accounts

9,192



8,884



8,555



8,230



7,874


Time accounts

1,133



1,133



1,120



1,118



1,109


Public funds

678



596



537



565



640


Total interest-bearing deposits

20,097



19,010



18,289



17,528



16,654












Total deposits

35,406



34,129



32,875



31,313



27,391












Federal funds purchased

41



38



34



33



27


Repurchase agreements

1,840



1,705



1,544



1,262



1,232


Junior subordinated deferrable interest debentures

136



136



136



136



136


Subordinated notes payable and other notes

99



99



99



99



99


Federal Home Loan Bank advances







440




Total interest-bearing funds

$

22,213



$

20,988



$

20,103



$

19,498



$

18,149













 

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.

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