Cullen/Frost Bankers Inc.

10/31/2024 | Press release | Distributed by Public on 10/31/2024 07:10

Cullen/Frost Reports Q3 2024 Results

Board declares fourth quarter dividend on common and preferred stock

SAN ANTONIO, Oct. 31, 2024/PRNewswire/ -- Cullen/Frost Bankers, Inc. (NYSE: CFR) today reported third quarter 2024 results. Net income available to common shareholders for the third quarter of 2024 was $144.8 million compared to $154.0 million for the third quarter of 2023. On a per-share basis, net income available to common shareholders for the third quarter of 2024 was $2.24 per diluted common share, compared to $2.38 per diluted common share reported a year earlier. Returns on average assets and average common equity were 1.16 percent and 15.48 percent, respectively, for the third quarter of 2024 compared to 1.25 percent and 18.93 percent, respectively, for the same period a year earlier.

For the third quarter of 2024, net interest income on a taxable-equivalent basis was $425.2 million, up 4.4 percent compared to the same quarter in 2023. Average loans for the third quarter of 2024 increased $2.1 billion, or 11.8 percent, to $20.1 billion, from the $18.0 billion reported for the third quarter a year earlier, and increased $431.6 million, or 2.2 percent, compared to the second quarter of 2024. Average deposits for the third quarter decreased $94.7 million, or 0.2 percent, to $40.7 billion, compared to the $40.8 billion reported for last year's third quarter, and increased $223.3 million, or 0.6 percent, compared to the second quarter of 2024. Average non-interest-bearing deposits were down $20.2 million, or 0.1 percent, from the second quarter. Average interest-bearing deposits were up $243.4 million, or 0.9 percent, from the second quarter.

"In the third quarter we saw the beginning of an expected seasonal increase in deposits and continued growth in loans and new relationships," said Cullen/Frost Chairman and CEO Phil Green. "Frost bankers continued to provide outstanding experiences to customers across all of our regions and all areas of the business. That includes our Frost Mortgage product, where total loan originations have recently passed $200 million, allowing more customers to get a Frost experience as they go through one of the most important financial events of their lives."

For the first nine months of 2024, net income available to common shareholders was $422.7 million, down 13.8 percent compared to $490.4 million for the first nine months of 2023. Diluted EPS available to common shareholders for the first nine months of 2024 was $6.51 compared to $7.54 in the year-earlier period. Returns on average assets and average common equity for the first nine months of 2024 were 1.15 percent and 15.90 percent, respectively, compared to 1.32 percent and 20.25 percent, respectively, for the same period in 2023.

Noted financial data for the third quarter of 2024 follows:

  • The Common Equity Tier 1, Tier 1 and Total Risk-Based Capital Ratios at the end of the third quarter of 2024 were 13.55 percent, 14.02 percent and 15.50 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 $425.2 million for the third quarter of 2024, an increase of 4.4 percent, compared to $407.4 million for the third quarter of 2023. Net interest margin was 3.56 percent for the third quarter compared to 3.54 percent for the second quarter of 2024 and 3.44 percent for the third quarter of 2023.
  • Non-interest income for the third quarter of 2024 totaled $113.7 million, an increase of $7.7 million, or 7.3 percent, from the $106.0 million reported for the third quarter of 2023. Trust and investment management fees increased $3.4 million, or 9.0 percent, compared to the third quarter of 2023. The increase in trust and investment management fees during the third quarter was primarily related to an increase in investment management fees (up $3.4 million). Service charges on deposit accounts increased $3.8 million, or 16.1 percent, compared to the third quarter of 2023. The increase in the third quarter was primarily related to increases in commercial and consumer overdraft charges (up $2.8 million) and commercial service charges (up $1.3 million). Insurance commissions and fees increased $1.2 million, or 8.8 percent, compared to the third quarter of 2023. The increase was mainly driven by an increase in commercial lines property & casualty commissions (up $944,000). Other non-interest income decreased by $1.4 million, or 10.5 percent, compared to the third quarter of 2023. The decrease was primarily related to a decrease in sundry and other miscellaneous income (down $1.4 million).
  • Non-interest expense was $323.4 million for the third quarter of 2024, up $30.2 million, or 10.3 percent, compared to the $293.3 million reported for the third quarter a year earlier. Salaries and wages expense increased $19.1 million, or 13.9 percent, compared to the third quarter of 2023. The increase in salaries and wages was primarily related to increases in salaries due to annual merit and market increases and to an increase in the number of employees. The increase in the number of employees was partly related to our investment in organic expansion in various markets. Employee benefits expense increased by $2.5 million, or 9.5 percent, compared to the third quarter of 2023. The increase in employee benefits expense was primarily related to increases in medical/dental benefits expense (up $1.3 million) and payroll taxes (up $1.2 million). Other non-interest expense increased $3.9 million, or 7.0 percent, compared to the third quarter of 2023. The increase in other non-interest expense during the third quarter of 2024 included increases in professional services expense (up $1.3 million), which was primarily related to information technology services; sundry and other miscellaneous expense (up $959,000); travel, meals and entertainment (up $618,000); and business development expense (up $592,000). Technology, furniture, and equipment expense increased $2.5 million, or 7.1 percent, compared to the third quarter of 2023. The increase was primarily related to increased cloud services expense (up $1.9 million), service contracts expense (up $854,000), and software amortization (up $371,000). The increases from these items were partly offset by a decrease in depreciation on furniture and equipment (down $612,000).
  • For the third quarter of 2024, the company reported a credit loss expense of $19.4 million, and reported net loan charge-offs of $9.6 million. This compares to a credit loss expense of $15.8 million and net loan charge-offs of $9.7 million for the second quarter of 2024 and a credit loss expense of $11.2 million and net loan charge-offs of $5.0 million for the third quarter of 2023. The allowance for credit losses on loans as a percentage of total loans was 1.31 percent at September 30, 2024, compared to 1.28 percent at the end of the second quarter of 2024 and 1.32 percent at the end of the third quarter of 2023. Non-accrual loans were $104.9 million at the end of the third quarter of 2024, compared to $75.0 million at the end of the second quarter of 2024 and $67.2 million at the end of the third quarter of 2023.

The Cullen/Frost board declared a fourth-quarter cash dividend of $0.95 per common share. The dividend on common stock is payable December 13, 2024 to shareholders of record on November 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 December 16, 2024 to shareholders of record on November 29 of this year.

Cullen/Frost Bankers, Inc. will host a conference call on Thursday, October 31, 2024, 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, November 3, 2024 at 1-877-660-6853 with Conference ID # of 13749468. 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 $51.0 billion in assets at September 30, 2024. One of the 50 largest commercial banks in the U.S., 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 atwww.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"), 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.

Cullen/Frost Bankers, Inc
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share amounts)
2024
2023
3rd Qtr
2nd Qtr
1st Qtr
4th Qtr
3rd Qtr
CONDENSED INCOME STATEMENTS
Net interest income
$ 404,331
$ 396,712
$ 390,051
$ 388,152
$ 385,426
Net interest income(1)
425,160
417,621
411,367
409,904
407,353
Credit loss expense
19,386
15,787
13,650
15,981
11,185
Non-interest income:
Trust and investment management fees
41,016
41,404
39,085
40,163
37,616
Service charges on deposit accounts
27,412
26,114
24,795
24,535
23,603
Insurance commissions and fees
14,839
13,919
18,296
12,743
13,636
Interchange and card transaction fees
5,428
5,351
4,474
4,608
4,672
Other charges, commissions, and fees
13,060
13,020
12,060
12,104
13,128
Net gain (loss) on securities transactions
16
-
-
-
12
Other
11,936
11,382
12,667
19,598
13,331
Total non-interest income
113,707
111,190
111,377
113,751
105,998
Non-interest expense:
Salaries and wages
156,637
151,237
148,000
146,616
137,562
Employee benefits
29,060
28,802
35,970
28,065
26,527
Net occupancy
32,497
32,374
31,778
30,752
31,581
Technology, furniture, and equipment
37,766
35,951
34,995
34,484
35,278
Deposit insurance
7,238
8,383
14,724
58,109
6,033
Other
60,212
60,217
60,750
67,196
56,275
Total non-interest expense
323,410
316,964
326,217
365,222
293,256
Income before income taxes
175,242
175,151
161,561
120,700
186,983
Income taxes
28,741
29,652
25,871
18,149
31,332
Net income
146,501
145,499
135,690
102,551
155,651
Preferred stock dividends
1,668
1,669
1,669
1,669
1,668
Net income available to common shareholders
$ 144,833
$ 143,830
$ 134,021
$ 100,882
$ 153,983
PER COMMON SHARE DATA
Earnings per common share - basic
$ 2.24
$ 2.21
$ 2.06
$ 1.55
$ 2.38
Earnings per common share - diluted
2.24
2.21
2.06
1.55
2.38
Cash dividends per common share
0.95
0.92
0.92
0.92
0.92
Book value per common share at end of quarter
62.41
55.02
54.36
55.64
44.59
OUTSTANDING COMMON SHARES
Period-end common shares
63,931
63,989
64,251
64,185
64,017
Weighted-average common shares - basic
63,958
64,193
64,216
64,139
64,067
Dilutive effect of stock compensation
127
140
156
176
172
Weighted-average common shares - diluted
64,085
64,333
64,372
64,315
64,239
SELECTED ANNUALIZED RATIOS
Return on average assets
1.16 %
1.18 %
1.09 %
0.82 %
1.25 %
Return on average common equity
15.48
17.08
15.22
13.51
18.93
Net interest income to average earning assets
3.56
3.54
3.48
3.41
3.44
(1) Taxable-equivalent basis assuming a 21% tax rate
Cullen/Frost Bankers, Inc
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
2024
2023
3rd Qtr
2nd Qtr
1st Qtr
4th Qtr
3rd Qtr
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
Loans
$ 20,084
$ 19,652
$ 19,112
$ 18,609
$ 17,965
Earning assets
46,100
45,527
45,883
45,579
45,366
Total assets
49,467
48,960
49,324
49,087
48,804
Non-interest-bearing demand deposits
13,659
13,679
13,976
14,697
14,823
Interest-bearing deposits
27,074
26,831
26,748
26,487
26,005
Total deposits
40,733
40,510
40,724
41,184
40,828
Shareholders' equity
3,868
3,533
3,687
3,108
3,372
Period-End Balance:
Loans
$ 20,055
$ 19,996
$ 19,388
$ 18,824
$ 18,399
Earning assets
47,424
45,344
46,164
47,124
45,218
Total assets
51,008
48,843
49,505
50,845
48,747
Total deposits
41,721
40,318
40,806
41,921
40,992
Shareholders' equity
4,135
3,666
3,638
3,716
3,000
Adjusted shareholders' equity(1)
5,051
4,975
4,914
4,836
4,779
ASSET QUALITY
($ in thousands)
Allowance for credit losses on loans:
$ 263,129
$ 256,307
$ 250,297
$ 245,996
$ 242,235
As a percentage of period-end loans
1.31 %
1.28 %
1.29 %
1.31 %
1.32 %
Net charge-offs:
$ 9,640
$ 9,726
$ 7,349
$ 10,884
$ 4,992
Annualized as a percentage of average loans
0.19 %
0.20 %
0.15 %
0.23 %
0.11 %
Non-accrual loans:
$ 104,877
$ 74,987
$ 71,515
$ 60,907
$ 67,175
As a percentage of total loans
0.52 %
0.38 %
0.37 %
0.32 %
0.37 %
As a percentage of total assets
0.21
0.15
0.14
0.12
0.14
CONSOLIDATED CAPITAL RATIOS
Common Equity Tier 1 Risk-Based Capital Ratio
13.55 %
13.35 %
13.41 %
13.25 %
13.32 %
Tier 1 Risk-Based Capital Ratio
14.02
13.82
13.89
13.73
13.81
Total Risk-Based Capital Ratio
15.50
15.27
15.35
15.18
15.28
Leverage Ratio
8.80
8.62
8.44
8.35
8.17
Equity to Assets Ratio (period-end)
8.11
7.51
7.35
7.31
6.15
Equity to Assets Ratio (average)
7.82
7.22
7.47
6.33
6.91
(1) Shareholders' equity excluding accumulated other comprehensive income (loss)
Cullen/Frost Bankers, Inc
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share amounts)
Nine Months Ended
September 30,
2024
2023
CONDENSED INCOME STATEMENTS
Net interest income
1,191,094
1,170,512
Net interest income(1)
1,254,148
1,241,791
Credit loss expense
48,823
30,190
Non-interest income:
Trust and investment management fees
121,505
113,152
Service charges on deposit accounts
78,321
68,969
Insurance commissions and fees
47,054
45,528
Interchange and card transaction fees
15,253
14,811
Other charges, commissions and fees
38,140
36,922
Net gain (loss) on securities transactions
16
66
Other
35,985
35,343
Total non-interest income
336,274
314,791
Non-interest expense:
Salaries and wages
455,874
401,102
Employee benefits
93,832
87,241
Net occupancy
96,649
93,644
Technology, furniture and equipment
108,712
100,802
Deposit insurance
30,345
18,480
Other
181,179
162,171
Total non-interest expense
966,591
863,440
Income before income taxes
511,954
591,673
Income taxes
84,264
96,251
Net income
427,690
495,422
Preferred stock dividends
5,006
5,006
Net income available to common shareholders
$ 422,684
$ 490,416
PER COMMON SHARE DATA
Earnings per common share - basic
$ 6.52
$ 7.56
Earnings per common share - diluted
6.51
7.54
Cash dividends per common share
$ 2.79
$ 2.66
Book value per common share at end of quarter
62.41
44.59
OUTSTANDING COMMON SHARES
Period-end common shares
63,931
64,017
Weighted-average common shares - basic
64,122
64,226
Dilutive effect of stock compensation
141
208
Weighted-average common shares - diluted
64,263
64,434
SELECTED ANNUALIZED RATIOS
Return on average assets
1.15 %
1.32 %
Return on average common equity
15.90
20.25
Net interest income to average earning assets
3.52
3.45
(1) Taxable-equivalent basis assuming a 21% tax rate
Cullen/Frost Bankers, Inc
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
As of or for the
Nine Months Ended
September 30,
2024
2023
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
Loans
$ 19,618
$ 17,652
Earning assets
45,838
46,390
Total assets
49,240
49,849
Non-interest-bearing demand deposits
13,771
15,557
Interest-bearing deposits
26,885
25,967
Total deposits
40,656
41,524
Shareholders' equity
3,697
3,383
Period-End Balance:
Loans
$ 20,055
$ 18,399
Earning assets
47,424
45,218
Total assets
51,008
48,747
Total deposits
41,721
40,992
Shareholders' equity
4,135
3,000
Adjusted shareholders' equity(1)
5,051
4,779
ASSET QUALITY
($ in thousands)
Allowance for credit losses on loans:
$ 263,129
$ 242,235
As a percentage of period-end loans
1.31 %
1.32 %
Net charge-offs:
26,715
23,602
Annualized as a percentage of average loans
0.18 %
0.18 %
Non-accrual loans:
$ 104,877
$ 67,175
As a percentage of total loans
0.52 %
0.37 %
As a percentage of total assets
0.21
0.14
CONSOLIDATED CAPITAL RATIOS
Common Equity Tier 1 Risk-Based Capital Ratio
13.55 %
13.32 %
Tier 1 Risk-Based Capital Ratio
14.02
13.81
Total Risk-Based Capital Ratio
15.50
15.28
Leverage Ratio
8.80
8.17
Equity to Assets Ratio (period-end)
8.11
6.15
Equity to Assets Ratio (average)
7.51
6.79
(1) Shareholders' equity excluding accumulated other comprehensive income (loss)
Cullen/Frost Bankers, Inc
TAXABLE-EQUIVALENT YIELD/COST AND AVERAGE BALANCES (UNAUDITED)
2024
2023
3rd Qtr
2nd Qtr
1st Qtr
4th Qtr
3rd Qtr
TAXABLE-EQUIVALENT YIELD/COST(1)
Earning Assets:
Interest-bearing deposits
5.32 %
5.40 %
5.40 %
5.39 %
5.33 %
Federal funds sold
5.65
5.78
5.76
5.73
5.65
Resell agreements
5.48
5.60
5.60
5.60
5.53
Securities(2)
3.40
3.38
3.32
3.24
3.24
Loans, net of unearned discounts
7.12
7.08
7.00
6.92
6.83
Total earning assets
5.26
5.23
5.13
5.00
4.92
Interest-Bearing Liabilities:
Interest-bearing deposits:
Savings and interest checking
0.38 %
0.39 %
0.42 %
0.40 %
0.38 %
Money market deposit accounts
2.80
2.83
2.82
2.83
2.78
Time accounts
4.73
4.77
4.73
4.59
4.34
Total interest-bearing deposits
2.41
2.39
2.34
2.27
2.12
Total deposits
1.60
1.58
1.54
1.46
1.35
Federal funds purchased
5.33
5.39
5.38
5.40
5.32
Repurchase agreements
3.72
3.75
3.76
3.75
3.67
Junior subordinated deferrable interest debentures
7.14
7.47
7.34
7.45
7.34
Subordinated notes payable and other notes
4.69
4.69
4.69
4.69
4.69
Total interest-bearing liabilities
2.60
2.59
2.54
2.48
2.33
Net interest spread
2.66
2.64
2.59
2.52
2.59
Net interest income to total average earning assets
3.56
3.54
3.48
3.41
3.44
AVERAGE BALANCES
($ in millions)
Earning Assets:
Interest-bearing deposits
$ 7,073
$ 7,156
$ 7,356
$ 7,047
$ 6,747
Federal funds sold
4
5
5
3
13
Resell agreements
41
85
85
86
85
Securities - carrying value(2)
18,898
18,629
19,324
19,834
20,557
Securities - amortized cost(2)
20,324
20,400
20,813
21,969
22,250
Loans, net of unearned discount
20,084
19,652
19,112
18,609
17,965
Total earning assets
46,100
45,527
45,883
45,579
45,366
Interest-Bearing Liabilities:
Interest-bearing deposits:
Savings and interest checking
$ 9,470
$ 9,716
$ 9,918
$ 9,986
$ 10,202
Money market deposit accounts
11,122
11,009
11,058
11,219
11,144
Time accounts
6,482
6,106
5,773
5,282
4,659
Total interest-bearing deposits
27,074
26,831
26,748
26,487
26,005
Total deposits
40,733
40,510
40,724
41,184
40,828
Federal funds purchased
20
40
33
18
21
Repurchase agreements
3,777
3,827
3,787
3,761
3,536
Junior subordinated deferrable interest debentures
123
123
123
123
123
Subordinated notes payable and other notes
100
100
100
99
99
Total interest-bearing liabilities
31,094
30,921
30,791
30,488
29,785
(1) Taxable-equivalent basis assuming a 21% tax rate
(2) Average securities include unrealized gains and losses on securities available for sale while yields are based on average amortized cost

A.B. Mendez
Investor Relations
210.220.5234

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Bill Day
Media Relations
210.220.5427

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SOURCE Cullen/Frost Bankers, Inc.