A.B. Mendez

Investor Relations

210.220.5234

or

Bill Day

Media Relations

210.220.5427

FOR IMMEDIATE RELEASE    

July 27, 2023

SAN ANTONIO -- Cullen/Frost Bankers, Inc. (NYSE:CFR) today reported second quarter 2023 results.

Net income available to common shareholders for the second quarter of 2023 was $160.4 million compared to $117.4 million in the second quarter of 2022. On a per-share basis, net income available to common shareholders for the second quarter of 2023 was $2.47 per diluted common share, compared to $1.81 per diluted common share reported a year earlier, representing a 36.5 percent increase. Returns on average assets and average common equity were 1.30 percent and 19.36 percent, respectively, for the second quarter of 2023 compared to 0.92 percent and 13.88 percent, respectively, for the same period a year earlier.

For the second quarter of 2023, net interest income on a taxable-equivalent basis was $408.6 million, up 31.2 percent compared to the same quarter in 2022. Average loans for the second quarter of 2023 increased $1.0 billion, or 5.9 percent, to $17.7 billion, from the $16.7 billion reported for the second quarter a year earlier. Excluding PPP loans, second quarter average loans of $17.6 billion represented a 6.7 percent increase compared to the second quarter of 2022 and a 2.0 percent increase compared to the first quarter of 2023. Average deposits for the second quarter were $41.0 billion, down $3.7 billion, or 8.3 percent, compared to the $44.7 billion reported for last year's second quarter, and down $1.8 billion, or 4.1 percent, compared to the first quarter of 2023.

Average deposits during the second quarter continued to be impacted by the higher interest rate environment, as we saw a continuation of the declining trend in non-interest bearing deposit balances that began in the fourth quarter of 2022. Average non-interest bearing deposits were down $1.4 billion, or 8.4 percent, from the first quarter. Average interest-bearing deposits were down $345 million, or 1.3 percent, from the first quarter.

“We were pleased with the earnings growth we experienced during the quarter, and I’m proud of our great staff living our culture of going above and beyond for our customers," said Cullen/Frost Chairman and CEO Phil Green. "We also were excited to announce our decision to double our presence in the Austin region, the third largest deposit market in Texas. We expect to complete this move by 2026. This effort aligns with our successful expansions in the dynamic Houston and Dallas markets and complements our organic growth strategy which has resulted in record levels of customer acquisition.”

Noted financial data for the second quarter of 2023 follows:

•The Common Equity Tier 1, Tier 1 and Total Risk-Based Capital Ratios at the end of the second quarter of 2023 were 13.42 percent, 13.92 percent and 15.39 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 $408.6 million for the second quarter of 2023, an increase of 31.2 percent, compared to the prior year period. Net interest margin was 3.45 percent for the second quarter compared to 3.47 percent for the first quarter of 2023 and compared to 2.56 percent for the second quarter of 2022.

•Non-interest income for the second quarter of 2023 totaled $103.5 million, an increase of $5.6 million, or 5.7 percent, from the $97.9 million reported for the second quarter of 2022. Other charges, commissions and fees increased $2.2 million, or 22.3 percent, compared to the second quarter of 2022. The increase was mainly driven by an increase in capital markets advisory fees (up $648,000), other service charges (up $641,000), and income from the placement of money market accounts (up $472,000), among other things. Trust and investment management fees increased $1.6 million, or 4.3 percent, compared to the second quarter of 2022. The increase was primarily due to increases in real estate fees (up $1.0 million), estate fees (up $821,000) and investment management fees (up $580,000) partly offset by a decrease in oil and gas fees (down $1.0 million). Insurance commissions and fees increased $1.2 million, or 9.9 percent, compared to the second quarter of 2022. The increase during the second quarter of 2023 was mainly driven by an increase in commission income (up $1.3 million) partly offset by a decrease in contingent income (down $133,000).

•Non-interest expense was $285.0 million for the second quarter of 2023, up $38.7 million, or 15.7 percent, compared to the $246.3 million reported for the second quarter a year earlier. Salaries and wages expense increased $16.3 million, or 14.0 percent, compared to the second quarter of 2022. The increase in salaries and wages was primarily related to an increase in salaries, due to annual merit and market increases, and an increase in the number of employees. The increase in the number of employees was partly related to our investments in organic expansion in the Houston and Dallas markets, and also to the gradual rollout of our mortgage loan product offering. Employee benefits expense increased by $6.1 million, or 29.2 percent, compared to the second quarter of 2022. The increase in employee benefits expense was related to increases in 401(k) plan expense, payroll taxes and medical benefits expense, among other things. Other non-interest expense increased $7.4 million, or 16.0 percent, compared to the second quarter of 2022. The increase during the second quarter of 2023 included increases in advertising/promotions expense (up $2.9 million); professional services expense (up $2.8 million), which was primarily related to information technology services; and travel, meals and entertainment expense (up $956,000), among other things.

•For the second quarter of 2023, the company reported a credit loss expense of $9.9 million, and reported net charge-offs of $9.8 million. This compares to a credit loss expense of $9.1 million and net charge-offs of $8.8 million for the first quarter of 2023 and no credit loss expense and net charge-offs of $2.8 million for the second quarter of 2022. The allowance for credit losses on loans as a percentage of total loans was 1.32 percent at June 30, 2023, compared to 1.32 percent at the end of the first quarter of 2023 and 1.43 percent at the end of the second quarter of 2022. Non-accrual loans were $67.8 million at the end of the second quarter of 2023, compared to $38.4 million at the end of the first quarter of 2023 and $35.1 million at the end of the second quarter of 2022.

The Cullen/Frost board declared a third-quarter cash dividend of $0.92 per common share. The dividend on common stock is payable September 15, 2023 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 September 15, 2023 to shareholders of record on August 31 of this year.

Cullen/Frost Bankers, Inc. will host a conference call on Thursday, July 27, 2023, 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 30, 2023 at 1-877-660-6853 with Conference ID # of 13739639. 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 $48.6 billion in assets at June 30, 2023. 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.

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 military conflict, including the current Russian invasion of Ukraine 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.