CULLEN/FROST REPORTS FOURTH QUARTER AND 2023 ANNUAL RESULTS

Board declares first quarter dividend on common and preferred stock, and authorizes $150 million stock repurchase program

SAN ANTONIO, Jan. 25, 2024 /PRNewswire/ -- Cullen/Frost Bankers, Inc. (NYSE:CFR) today reported fourth quarter and full-year results for 2023. Net income available to common shareholders for the fourth quarter of 2023 was $100.9 million, and was impacted by a $51.5 million ($40.7 million net of tax) one-time surcharge expense associated with FDIC insurance. Excluding this one-time item, net income available to common shareholders for the fourth quarter would have been approximately $141.6 million, representing a 25.3 percent decrease compared to the fourth quarter of 2022. On a per-share basis, the company reported net income available to common shareholders of $1.55 per diluted common share for the fourth quarter of 2023, compared to $2.91 per diluted common share for the fourth quarter of 2022. Excluding the after-tax impact of the FDIC surcharge in the fourth quarter, EPS would have been $2.18, representing a 25.1 percent decrease from the fourth quarter of 2022. For the fourth quarter of 2023, returns on average assets and average common equity were 0.82 percent and 13.51 percent, respectively, compared to 1.44 percent and 27.16 percent for the same period in 2022. Adjusted for the FDIC insurance surcharge, returns on assets and average common equity for the fourth quarter would have been approximately 1.14 percent and 18.96 percent.

The company also reported 2023 annual net income available to common shareholders of $591.3 million, an increase of 3.3 percent compared to 2022 earnings available to common shareholders of $572.5 million. Excluding the impact of the one-time FDIC surcharge, net income available to common shareholders for 2023 would have been approximately $632.0 million, representing a 10.4 percent increase compared to 2022. On a per-share basis, 2023 earnings were $9.10 per diluted common share compared to $8.81 per diluted common share reported in 2022. For the year 2023, returns on average assets and average common equity were 1.19 percent and 18.66 percent respectively, compared to 1.11 percent and 16.86 percent reported in 2022.

"Our solid fourth quarter and record 2023 earnings are a result of continued strong execution by Frost bankers throughout the state, and were aided by our continued success with our organic expansion strategy in key growth markets in Texas," said Phil Green, Cullen/Frost Chairman and CEO.

For the fourth quarter of 2023, net interest income on a taxable-equivalent basis was $409.9 million, down 3.3 percent compared to the same period in 2022. Average loans for the fourth quarter of 2023 increased $1.5 billion, or 9.1 percent, to $18.6 billion, from the $17.1 billion reported for the fourth quarter a year earlier, and increased 3.6 percent compared to the third quarter of 2023. Average deposits for the quarter decreased $3.6 billion, or 8.0 percent to $41.2 billion compared to $44.8 billion in last year's fourth quarter, and increased 0.9 percent compared to the third quarter of 2023.

For full year 2023, average total loans were $17.9 billion, an increase of approximately $1.2 billion, or 6.9 percent, from the $16.7 billion reported in 2022. Average total deposits for 2023 were $41.4 billion, down $3.1 billion, or 7.0 percent, compared to the $44.6 billion reported for full year 2022.

Noted financial data for the fourth quarter:

• The Common Equity Tier 1, Tier 1 and Total Risk-Based Capital Ratios for Cullen/Frost at the end of the fourth quarter of 2023 were 13.25 percent, 13.73 percent, and 15.18 percent, respectively. Current capital ratios continue to be in excess of well-capitalized levels and exceed Basel III requirements.
• Net interest income on a tax-equivalent basis was $409.9 million for the fourth quarter of 2023, a decrease of 3.3 percent compared to the $423.9 million reported for the fourth quarter of 2022. The net interest margin was 3.41 percent for the fourth quarter of 2023 compared to 3.31 percent for the fourth quarter of 2022 and 3.44 percent for the third quarter of 2023.
• Non-interest income for the fourth quarter of 2023 was $113.8 million, up $8.1 million, or 7.6 percent, from the $105.7 million reported a year earlier. Other non-interest income increased $3.1 million, or 18.6 percent, compared to the fourth quarter of 2022. The increase was mainly driven by a $3.0 million increase in income from customer derivative and foreign exchange transactions. Other charges, commissions and fees increased $1.1 million, or 10.2 percent, compared to the fourth quarter of 2022. The increase was primarily related to an increase in income from the placement of money market accounts (up $642,000) and an increase in merchant services income (up $296,000). Service charges on deposit accounts increased by $2.2 million, or 9.9 percent, compared to the fourth quarter of 2022. The increase was driven by increases in overdraft fees and other service charges. Insurance commissions and fees increased by $1.1 million, or 9.2 percent, compared to the fourth quarter of 2022. The increase was mainly driven by increases in commission revenues.
• Non-interest expense for the fourth quarter of 2023 was $365.2 million, up $83.9 million, or 29.8 percent, compared to the $281.3 million reported for the fourth quarter of 2022. Excluding the one-time surcharge expense associated with FDIC insurance, non-interest expense for the fourth quarter of 2023 was $313.7 million, up $32.4 million, or 11.5 percent compared to the same quarter a year earlier. Salaries and wages expense increased by $9.9 million, or 7.3 percent, compared to the fourth quarter of 2022. The increase in salaries and wages was primarily related to an increases in employee headcount and an increase in salaries due to annual merit and market increases. The increase in the number of employees was partly related to our investments in organic expansion in the Houston, Dallas and Austin markets, as well as the rollout of our mortgage loan product offering, and was partially offset by a decrease in incentive compensation expenses. Employee benefits expense increased by $6.1 million, or 27.7 percent, compared with the fourth quarter of 2022. The increase in employee benefits expense was impacted by increases in headcount, medical benefits expense (up $2.1 million) and a decrease in the net periodic benefit related to our defined benefit retirement plan (down $1.6 million), among other things. Other non-interest expense increased by $8.0 million, or 13.6 percent, compared to the fourth quarter of 2022, impacted by increases in professional services expense (up $4.4 million), check card expense (up $1.0 million), and advertising and marketing expenses (up $904,000), among other things. Technology, furniture and equipment expense was up $3.6 million or 11.6 percent compared to the fourth quarter of 2022. The increase was primarily related to increases in cloud services expense (up $3.3 million).
• For the fourth quarter of 2023, the company reported a credit loss expense of $16.0 million and reported net charge-offs of $10.9 million, compared to a credit loss expense of $11.2 million and net charge-offs of $5.0 million for the third quarter of 2023. For the fourth quarter of 2022, the company reported a credit loss expense of $3.0 million and reported net charge-offs of $3.8 million. The allowance for credit losses on loans as a percentage of total loans was 1.31 percent at December 31, 2023, compared to 1.32 percent at September 30, 2023 and 1.33 percent at December 31, 2022. Non-accrual loans were $60.9 million at the end of 2023, compared to $67.2 million the previous quarter, and $37.8 million at year-end 2022.

The Cullen/Frost board declared a first-quarter cash dividend of $0.92 per common share, payable March 15, 2024 to shareholders of record on February 29 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 March 15, 2024, to shareholders of record on February 29 of this year.

In addition, the company's board of directors approved a new share repurchase program with authorization to purchase up to $150 million of Cullen/Frost common stock over a one-year period expiring on January 24, 2025. Share repurchases under the authorization may be made through a variety of methods, which may include open market purchases, in privately negotiated transactions, block trades, accelerated share repurchase transactions, and/or through other legally permissible means. The timing and amount of any share repurchases under the authorization will be determined by management at its discretion and based on market conditions and other considerations. The share repurchase program may be suspended or discontinued at any time at the company's discretion and does not obligate Cullen/Frost to purchase any amount of common stock.

Cullen/Frost Bankers, Inc. will host a conference call on Thursday, January 25, 2024, at 1:00 p.m. Central Time (CT) to discuss the results for the quarter and the year. The media and other interested parties are invited to access the call in a "listen only" mode at 877-709-8150. Playback of the conference call will be available after
5:00 p.m. CT on the day of the call until midnight Sunday, January 28 at 877-660-6853, with the Conference ID# of 13743292. A replay of the call will also be available by webcast at the URL listed below after 5:00 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 $50.8 billion in assets at December 31, 2023. One of the 50 largest U.S. banks, 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 frostbank.com.

Forward-Looking Statements and Factors that Could Affect Future Results

Certain statements contained in this press 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 global wars/military conflicts, terrorism, 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.

A.B. Mendez
Investor Relations
210.220.5234

or

Bill DayMedia Relations
210.220.5427

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SOURCE Cullen/Frost Bankers, Inc.