Cullen/Frost Bankers : CULLEN/FROST REPORTS 4th QUARTER AND 2021 ANNUAL RESULTS - Form 8-K
January 27, 2022 at 09:29 am EST
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CULLEN/FROST REPORTS 4th QUARTER AND 2021 ANNUAL RESULTS
Board declares first quarter dividend on common and preferred stock,
and authorizes $100 million stock repurchase program
SAN ANTONIO -- Cullen/Frost Bankers, Inc. (NYSE:CFR) today reported fourth quarter and full year results for 2021. Net income available to common shareholders for the fourth quarter of 2021 was $99.4 million, or $1.54 per diluted common share, compared to $88.3 million, or $1.38 per diluted common share for the fourth quarter of 2020. For the fourth quarter of 2021, returns on average assets and average common equity were 0.81 percent and 9.26 percent, respectively, compared to 0.86 percent and 8.55 percent for the same period in 2020.
The company also reported 2021 annual net income available to common shareholders of $435.9 million, an increase of 34.7 percent compared to 2020 earnings available to common shareholders of $323.6 million. On a per-share basis, 2021 earnings were $6.76 per diluted common share compared to $5.10 per diluted common share reported in 2020. For the year 2021, returns on average assets and average common equity were 0.95 percent and 10.35 percent respectively, compared to 0.85 percent and 8.11 percent reported in 2020.
"In the fourth quarter and throughout 2021, we continued executing on our organic growth strategy by opening new locations, preparing for the Dallas expansion that's now under way, working to once again make mortgage loans, and helping more than 30,000 PPP borrowers through the loan forgiveness process," said Phil Green, Cullen/Frost chairman and CEO. "This strategy plus the outstanding dedication of our Frost bankers led to an acceleration in linked-quarter growth in loans excluding PPP, and puts us in a strong position as we move into the new year."
For the fourth quarter of 2021, net interest income on a taxable-equivalent basis was $264.0 million, down 0.6 percent compared to the same period in 2020. Average loans for the fourth quarter of 2021 decreased $2.0 billion, or 10.9 percent, to $16.0 billion, from the $17.9 billion reported for the fourth quarter a year earlier, and decreased 1.3 percent compared to the third quarter of 2021. Excluding PPP loans, fourth quarter average loans of $15.4 billion represented a 2.4 percent increase compared to the fourth quarter of 2020 and a 3.8 percent increase compared to the third quarter of 2021. Average deposits for the quarter were $41.0 billion, an increase of 20.2 percent, or $6.9 billion, compared to $34.1 billion in last year's fourth quarter.
For 2021, average total loans were $16.8 billion, a decrease of approximately $394.8 million, or 2.3 percent, from the $17.2 billion reported the previous year. Excluding PPP loans, 2021 average loans of $14.9 billion represented a 0.6 percent decrease compared to 2020. Average total deposits for 2021 were $38.5 billion, up 22.4 percent, or $7.0 billion, compared to the $31.4 billion reported in 2020.
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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 2021 were 13.13 percent, 13.70 percent, and 15.45 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 $264.0 million for the fourth quarter of 2021, a decrease of 0.6 percent compared to the $265.7 million reported for the fourth quarter of 2020. The net interest margin was 2.31 percent for the fourth quarter of 2021 compared to 2.82 percent for the fourth quarter of 2020 and 2.47 percent for the third quarter of 2021.
•Non-interest income for the fourth quarter of 2021 was $109.1 million, up $17.7 million, or 19.4 percent, from the $91.3 million reported a year earlier. During the fourth quarter, we recorded a $9.7 million gain on the exchange of a branch facility. Excluding the gain on this transaction, non-interest income for the fourth quarter of 2021 would have been up $8.0 million, or 8.7 percent, compared to the fourth quarter of 2020. Other non-interest income increased $8.9 million or 66.7 percent compared to the fourth quarter of 2020, primarily driven by the $9.7 million gain on the above-mentioned exchange transaction. Trust and investment management fees increased by $6.2 million, or 19.1 percent, compared to the fourth quarter of 2020. The increase in trust and investment management fees was primarily the result of a $3.7 million increase in investment management fees, a $1.7 million increase in oil and gas fees and a $1.3 million increase in estate fees. Service charges on deposits increased $1.4 million, or 6.7 percent, compared to the fourth quarter of 2020, mainly driven by a $1.4 million increase in commercial service charges related to treasury management services.
•Non-interest expense for the fourth quarter of 2021 was $238.6 million, up $15.7 million, or 7.0 percent, compared to the $222.9 million reported for the fourth quarter of 2020. Non-interest expense for the fourth quarter was impacted by a $5.5 million contribution to the Frost Charitable Foundation and $4.2 million of asset write-offs during the fourth quarter of 2021. Excluding these two items, total non-interest expense for the fourth quarter of 2021 would have increased by $5.9 million, or 2.7 percent compared to the fourth
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quarter of 2020. Other non-interest expense increased by $9.7 million or 21.5 percent compared to the fourth quarter of 2020, primarily driven by the increase in donations expense and the asset write-offs mentioned above. Employee benefits expense increased by $3.3 million compared with the fourth quarter of 2020. The increase in employee benefits expense was primarily related to a $3.0 million increase in discretionary benefit plan expense. Technology, furniture and equipment expense was up $766,000 or 2.8 percent compared to the fourth quarter of 2020. The increase was primarily related to increases in cloud services expense (up $1.2 million) and depreciation of furniture and equipment (up $600,000) partly offset by a decrease in software maintenance (down $1.3 million).
•For the fourth quarter of 2021, the company did not report a credit loss expense, and reported net charge-offs of $2.8 million. For the fourth quarter of 2020, the company reported a $13.8 million credit loss expense and reported net charge-offs of $13.6 million. The allowance for credit losses on loans as a percentage of total loans was 1.52 percent at December 31, 2021, compared to 1.58 percent at September 30, 2021 and 1.51 percent at year-end 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 1.56 percent at the end of the fourth quarter of 2021, compared to 1.67 percent at September 30, 2021 and 1.75 percent at year-end 2020. Non-accrual loans were $53.7 million at year end, compared to $57.1 million the previous quarter, and $61.4 million at year-end 2020.
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The Cullen/Frost board declared a first-quarter cash dividend of $0.75 per common share, payable March 15, 2022 to shareholders of record on February 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 March 15, 2022, to shareholders of record on February 28 of this year.
In addition, the Corporation's board of directors authorized a new $100.0 million stock repurchase plan. Under the
plan, shares may be repurchased over a one-year period from time to time at various prices in the open market or
through private transactions.
Cullen/Frost Bankers, Inc. will host a conference call on Thursday, January 27, 2022, 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 30, 2022 at 877-660-6853, with the Conference ID# of 13725840. 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 Bankers, Inc. (NYSE: CFR) is a financial holding company, headquartered in San Antonio, with $50.9 billion in assets at December 31, 2021. 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.
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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 ongoing 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) and their application 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 potential impact of climate change.
•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 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.
•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 ongoing 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 ongoing 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.
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Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share amounts)
2021
2020
4th Qtr
3rd Qtr
2nd Qtr
1st Qtr
4th Qtr
CONDENSED INCOME STATEMENTS
Net interest income
$
240,708
$
246,122
$
257,156
$
240,881
$
242,246
Net interest income (1)
264,049
269,321
279,997
263,949
265,721
Credit loss expense
-
-
-
63
13,756
Non-interest income:
Trust and investment management fees
38,425
37,381
37,874
35,314
32,270
Service charges on deposit accounts
22,234
21,216
19,849
19,993
20,830
Insurance commissions and fees
11,714
11,748
10,773
17,313
11,704
Interchange and card transaction fees
4,237
4,490
4,641
4,093
3,746
Other charges, commissions and fees
10,107
9,785
8,640
8,304
9,427
Net gain (loss) on securities transactions
69
-
-
-
-
Other
22,270
8,569
9,470
8,219
13,360
Total non-interest income
109,056
93,189
91,247
93,236
91,337
Non-interest expense:
Salaries and wages
105,541
99,463
97,035
93,458
104,843
Employee benefits
19,189
21,576
18,728
22,536
15,852
Net occupancy
27,435
27,208
26,650
26,051
26,822
Technology, furniture and equipment
28,230
28,494
27,998
28,016
27,464
Deposit insurance
3,339
3,088
2,877
2,928
2,706
Intangible amortization
153
157
185
202
208
Other
54,708
38,017
41,781
36,951
45,017
Total non-interest expense
238,595
218,003
215,254
210,142
222,912
Income before income taxes
111,169
121,308
133,149
123,912
96,915
Income taxes
10,148
13,333
15,081
7,897
8,645
Net income
101,021
107,975
118,068
116,015
88,270
Preferred stock dividends
1,669
1,668
1,669
2,151
-
Net income available to common shareholders
$
99,352
$
106,307
$
116,399
$
113,864
$
88,270
PER COMMON SHARE DATA
Earnings per common share - basic
$
1.54
$
1.66
$
1.81
$
1.78
$
1.39
Earnings per common share - diluted
1.54
1.65
1.80
1.77
1.38
Cash dividends per common share
0.75
0.75
0.72
0.72
0.72
Book value per common share at end of quarter
67.11
66.39
66.44
64.89
65.82
OUTSTANDING COMMON SHARES
Period-end common shares
63,986
63,668
63,646
63,532
63,011
Weighted-average common shares - basic
63,879
63,652
63,606
63,306
62,940
Dilutive effect of stock compensation
462
445
496
510
311
Weighted-average common shares - diluted
64,341
64,097
64,102
63,816
63,251
SELECTED ANNUALIZED RATIOS
Return on average assets
0.81
%
0.90
%
1.02
%
1.09
%
0.86
%
Return on average common equity
9.26
9.87
11.18
11.13
8.55
Net interest income to average earning assets (1)
2.31
2.47
2.65
2.72
2.82
(1) Taxable-equivalent basis assuming a 21% tax rate.
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Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
2021
2020
4th Qtr
3rd Qtr
2nd Qtr
1st Qtr
4th Qtr
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
Loans
$
15,984
$
16,189
$
17,246
$
17,684
$
17,945
Earning assets
46,008
43,980
42,916
39,804
38,262
Total assets
48,897
46,774
45,665
42,530
40,963
Non-interest-bearing demand deposits
17,885
16,999
16,456
15,309
15,119
Interest-bearing deposits
23,142
22,117
21,815
20,097
19,010
Total deposits
41,027
39,116
38,271
35,406
34,129
Shareholders' equity
4,400
4,417
4,320
4,295
4,175
Period-End Balance:
Loans
$
16,336
$
15,833
$
16,596
$
17,890
$
17,481
Earning assets
48,063
44,964
43,943
41,380
39,648
Goodwill and intangible assets
656
656
656
656
657
Total assets
50,878
47,860
46,698
44,047
42,391
Total deposits
42,696
39,613
38,734
36,925
35,016
Shareholders' equity
4,440
4,372
4,374
4,268
4,293
Adjusted shareholders' equity (1)
4,092
4,022
3,961
3,880
3,780
ASSET QUALITY
($ in thousands)
Allowance for credit losses on loans:
$
248,666
$
250,150
$
255,288
$
261,258
$
263,177
As a percentage of period-end loans
1.52
%
1.58
%
1.54
%
1.46
%
1.51
%
Net charge-offs:
$
2,789
$
2,115
$
1,591
$
1,919
$
13,565
Annualized as a percentage of average loans
0.07
%
0.05
%
0.04
%
0.04
%
0.30
%
Non-accrual loans:
$
53,713
$
57,055
$
57,250
$
50,976
$
61,449
As a percentage of total loans
0.33
%
0.36
%
0.34
%
0.28
%
0.35
%
As a percentage of total assets
0.11
0.12
0.12
0.12
0.14
CONSOLIDATED CAPITAL RATIOS
Common Equity Tier 1 Risk-Based Capital Ratio
13.13
%
13.42
%
13.60
%
13.45
%
12.86
%
Tier 1 Risk-Based Capital Ratio
13.70
14.01
14.21
14.07
13.47
Total Risk-Based Capital Ratio
15.45
15.90
16.17
16.07
15.44
Leverage Ratio
7.34
7.52
7.60
7.97
8.07
Equity to Assets Ratio (period-end)
8.73
9.14
9.37
9.69
10.13
Equity to Assets Ratio (average)
9.00
9.44
9.46
10.10
10.19
(1) Shareholders' equity excluding accumulated other comprehensive income (loss).
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Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share amounts)
Year Ended December 31,
2021
2020
2019
CONDENSED INCOME STATEMENTS
Net interest income
$
984,867
$
976,001
$
1,004,005
Net interest income (1)
1,077,315
1,070,937
1,100,586
Credit loss expense (2)
63
241,230
33,759
Non-interest income:
Trust and investment management fees
148,994
129,272
126,722
Service charges on deposit accounts
83,292
80,873
88,983
Insurance commissions and fees
51,548
50,313
52,345
Interchange and card transaction fees
17,461
13,470
14,873
Other charges, commissions and fees
36,836
34,825
37,123
Net gain (loss) on securities transactions
69
108,989
293
Other
48,528
47,712
43,563
Total non-interest income
386,728
465,454
363,902
Non-interest expense:
Salaries and wages
395,497
387,328
375,029
Employee benefits
82,029
75,676
86,230
Net occupancy
107,344
102,938
89,466
Technology, furniture and equipment
112,738
105,232
91,995
Deposit insurance
12,232
10,502
10,126
Intangible amortization
697
918
1,168
Other (2)
171,457
166,310
180,665
Total non-interest expense (2)
881,994
848,904
834,679
Income before income taxes
489,538
351,321
499,469
Income taxes
46,459
20,170
55,870
Net income
443,079
331,151
443,599
Preferred stock dividends
7,157
2,016
8,063
Redemption of preferred stock
-
5,514
-
Net income available to common shareholders
$
435,922
$
323,621
$
435,536
PER COMMON SHARE DATA
Earnings per common share - basic
$
6.79
$
5.11
$
6.89
Earnings per common share - diluted
6.76
5.10
6.84
Cash dividends per common share
2.94
2.85
2.80
Book value per common share at end of quarter
67.11
65.82
60.11
OUTSTANDING COMMON SHARES
Period-end common shares
63,986
63,011
62,669
Weighted-average common shares - basic
63,613
62,727
62,742
Dilutive effect of stock compensation
489
277
700
Weighted-average common shares - diluted
64,102
63,004
63,442
SELECTED ANNUALIZED RATIOS
Return on average assets
0.95
%
0.85
%
1.36
%
Return on average common equity
10.35
8.11
12.24
Net interest income to average earning assets (1)
2.53
3.09
3.75
(1) Taxable-equivalent basis assuming a 21% tax rate.
(2) Prior to 2020, credit loss expense related to off-balance-sheet credit exposures was previously reported as a component of other non-interest expense. In connection with the adoption of a new accounting standard in 2020, such amounts have been reclassified to credit loss expense to make prior periods comparable to the current presentation.
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Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
Year Ended December 31,
2021
2020
2019
BALANCE SHEET SUMMARY ($ in millions)
Average Balance:
Loans
$
16,770
$
17,164
$
14,441
Earning assets
43,196
35,248
29,600
Total assets
45,983
37,961
32,086
Non-interest-bearing demand deposits
16,671
13,564
10,358
Interest-bearing deposits
21,802
17,875
16,055
Total deposits
38,473
31,438
26,413
Shareholders' equity
4,359
4,039
3,702
Period-End Balance:
Loans
$
16,336
$
17,481
$
14,750
Earning assets
48,063
39,648
31,281
Goodwill and intangible assets
656
657
657
Total assets
50,878
42,391
34,027
Total deposits
42,696
35,016
27,640
Shareholders' equity
4,440
4,293
3,912
Adjusted shareholders' equity (1)
4,092
3,780
3,644
ASSET QUALITY ($ in thousands)
Allowance for credit losses on loan:
$
248,666
$
263,177
$
132,167
As a percentage of period-end loans
1.52
%
1.51
%
0.90
%
Net charge-offs:
$
8,414
$
103,435
$
33,724
Annualized as a percentage of average loans
0.05
%
0.60
%
0.23
%
Non-accrual loans:
$
53,713
$
61,449
$
102,303
As a percentage of total loans
0.33
%
0.35
%
0.69
%
As a percentage of total assets
0.11
0.14
0.30
CONSOLIDATED CAPITAL RATIOS
Common Equity Tier 1 Risk-Based Capital Ratio
13.13
%
12.86
%
12.36
%
Tier 1 Risk-Based Capital Ratio
13.70
13.47
12.99
Total Risk-Based Capital Ratio
15.45
15.44
14.57
Leverage Ratio
7.34
8.07
9.28
Equity to Assets Ratio (period-end)
8.73
10.13
11.50
Equity to Assets Ratio (average)
9.48
10.64
11.54
(1) Shareholders' equity excluding accumulated other comprehensive income (loss).
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Cullen/Frost Bankers, Inc.
TAXABLE-EQUIVALENT YIELD/COST AND AVERAGE BALANCES (UNAUDITED)
(1) Taxable-equivalent basis assuming a 21% tax rate.
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Cullen/Frost Bankers Inc. published this content on 27 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 January 2022 14:28:12 UTC.
Cullen/Frost Bankers, Inc. is a financial holding and bank holding company. The Company's segments include Banking and Frost Wealth Advisors. The Banking segment includes both commercial and consumer banking services and Frost Insurance Agency. Its commercial banking services are provided to corporations and other business clients and include a range of lending and cash management products. Its consumer banking services include direct lending and depository services. Its Frost Insurance Agency provides insurance brokerage services to individuals and businesses covering corporate and personal property and casualty products, as well as group health and life insurance products. The Frost Wealth Advisors segment includes fee-based services within private trust, retirement services, and financial management services, including personal wealth management and securities brokerage services. The Company serves a range of industries, including energy, manufacturing, construction, and others.