CFR Cullen Frost Bankers Inc

Consistent Performance in Challenging Economy - Record deposit levels - Non-performing loans decline - Capital ratios remain strong SAN ANTONIO, Jan. 27 /PRNewswire-FirstCall/ -- Cullen/Frost Bankers, Inc. today reported results for the fourth quarter and full year of 2009, as the Texas financial services leader continued to operate well in a challenging economy and extended low rate environment. (Logo: http://www.newscom.com/cgi-bin/prnh/20030109/CFRLOGO) Cullen/Frost reported net income for the fourth quarter of 2009 of $51.5 million, or $.86 per diluted common share, compared to fourth quarter 2008 earnings of $53.0 million, or $.89 per diluted common share. For the fourth quarter of 2009, returns on average assets and equity were 1.25 percent and 10.70 percent respectively, compared to 1.47 percent and 12.79 percent for the same period of 2008. The company also reported annual earnings for 2009 of $179.0 million, or $3.00 per diluted common share, compared to 2008 earnings of $207.3 million, or $3.50 per diluted common share. For the year, returns on average assets and equity were 1.14 percent and 9.78 percent respectively, compared to the 1.51 percent and 13.11 percent reported in 2008. During the fourth quarter of 2009, Cullen/Frost saw non-performing assets decline by $40.6 million from the previous quarter. In addition, the company recognized a pre-tax net gain of $16.3 million related to the prepayment of certain debt and the termination of the related interest rate swap. "Overall, our company performed well in 2009 in the midst of a very difficult economy," said Dick Evans, Cullen/Frost chairman and CEO. "I was pleased to see a nearly $2 billion increase in average deposits for the year, a record for Cullen/Frost, from customers who see Frost as a safe haven. Today we have strong capital levels -- stronger even than when we declined TARP 15 months ago -- and are well positioned for growth. "I was encouraged to see a $40 million reduction in non-performers this quarter, and credit quality continues to be at manageable levels. Although the provision was higher, it exceeded net charge-offs, increasing the reserve level to 1.50 percent of loans," said Evans. Evans said that customer uncertainty about the Texas economy continued to impact the lending environment, noting that loans are down despite a strong calling effort that has brought in new relationships. Business owners, Evans said, are largely on the sidelines, paying down debt and reducing inventory. "We are working harder in this environment to grow the number of relationships and to broaden and deepen existing ones. When the economy begins to grow again, we will be well positioned to reap the benefits of this effort. "In November of 2009 we completed construction on the $50 million Frost Technology Center, a state-of-the-art facility that ensures our capacity to meet future data and information technology needs as the company grows. We have also updated our technology infrastructure and enhanced the security of our data processing systems and customer information." Evans said the company opened four new financial centers in 2009, including locations in Austin, San Antonio and Plano in the Dallas region. Late in the year, Frost opened a financial center in Houston that was a relocation of an older facility. The company also introduced Frost Mobile in 2009, which has been well received by customers who appreciate the added flexibility and convenience of doing business with Frost from their mobile phones. "We have a seasoned staff who knows how to adapt in a tough environment. We are fortunate to have that experience level and to operate in a pro-business state. I continue to be optimistic about our prospects. "I appreciate the efforts of our outstanding employees around the state, and I am inspired by their energy, their expertise and their commitment to our culture and to taking great care of our customers." For the year ended December 31, 2009, average annual total loans were $8.7 billion, an increase of 4.1 percent compared to $8.3 billion for the previous year. Average annual total deposits for 2009 rose to $12.4 billion, up 17.9 percent over the $10.5 billion reported in 2008. Net interest income on a taxable-equivalent basis grew to $577.7 million, a 4.2 percent increase over the $554.4 million reported a year earlier, reflecting the impact of increasing volumes. For 2009, non-interest income rose to $293.7 million, up 2.2 percent over the $287.3 million reported for 2008, while non-interest expense increased 9.4 percent over the previous year to $532.2 million and was heavily impacted by $21.2 million in higher FDIC insurance premiums. Noted financial data for the fourth quarter: -- Tier 1 and Total Risk-Based Capital Ratios for the Corporation at the end of the fourth quarter of 2009 were 11.91 percent and 14.19 percent, respectively and are in excess of well capitalized levels. The ratio of tangible common equity to tangible assets was 8.56 percent at the end of the fourth quarter of 2009, compared to 8.37 percent for the same quarter last year. -- Net interest income on a taxable-equivalent basis for the fourth quarter totaled $150.7 million, a 4.9 percent increase from the $143.7 million reported for the fourth quarter of 2008. This increase primarily resulted from an increase in the average volume of earning assets and was partly offset by a decrease in the net interest margin. The net interest margin was 4.20 percent for the fourth quarter, compared to 4.60 percent for the fourth quarter of 2008 and 4.12 percent for the third quarter of 2009. -- Non-interest income for the fourth quarter of 2009 was $86.3 million, up 24.8 percent over the $69.2million reported a year earlier. Other income increased $16.2 million from the fourth quarter of 2008 due primarily to the $17.7 million gain recognized from the termination of the interest rate swap associated with certain debt that was paid off early. Trust income was $17.7 million, compared to $17.5 million for the fourth quarter of 2008, with most of this increase resulting from higher investment fees due to increases in the equities market. Investment fees are assessed based on the market value of trust assets, which totaled $22.7 billion at December 31, 2009 up $1 billion from the fourth quarter a year ago. This increase was partially offset by lower oil and gas fees from the same period last year, as oil and natural gas prices have decreased, impacting the amount of royalties received. Service charges on deposits were $26.0 million, an increase of $2.3 million or 9.8 percent, compared to $23.7 million reported for the previous year's fourth quarter. Impacting this was a $2.0 million increase in service charges on commercial accounts, resulting from higher treasury management fees. A drop in the earnings credit rate for commercial accounts compared to a year earlier, impacted treasury management fees. When interest rates are lower, customers earn less credit for their deposit balances, which, in turn, increases the amount of service charges to be paid for through fees. -- Non-interest expense for the fourth quarter of 2009 was $134.2 million, up $10.7 million or 8.6 percent from the $123.5 million for the fourth quarter of 2008. A large part of this increase is due to higher FDIC insurance expense of $3.3 million. Total salaries were up $268 thousand over the same quarter a year earlier, as a result of normal annual merit and market increases, offset by a decrease in incentive compensation. Employees benefits were up $2.2 million or 21.3 percent, primarily due to increases in expenses related to the company's medical costs, 401(k) and profit sharing plans, and retirement plan. Net occupancy expense was $11.5 million, an increase of $1.1 million from the fourth quarter last year, due primarily to expenses associated with new locations. Expenses for furniture and equipment were up $2.1 million to $12.1 million, due mainly to increases in depreciation expense related to furniture and fixtures, primarily for new locations, amortized software and software maintenance expense. Other expense was $32.5 million, a $2.1 million increase when compared to the fourth quarter of 2008. Included in other expense is a $1.4 million prepayment penalty on the early termination of certain debt. -- For the fourth quarter of 2009, the provision for possible loan losses was $22.3 million, compared to net charge-offs of $20.1 million. For the fourth quarter of 2008, the provision for possible loan losses was $8.6 million, compared to net charge offs of $5.4 million. The allowance for possible loan losses as a percentage of total loans was 1.50 percent at December 31, 2009, compared to 1.25 percent at year-end 2008. Non-performing assets were $180.2 million at year-end, compared to $220.9 million the previous quarter, and $78.0 million at year-end 2008. Cullen/Frost Bankers, Inc. will host a conference call on Wednesday, January 27, 2010 at 10:00 a.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 800-944-6430. Digital playback of the conference call will be available after 12:00 p.m. CT until midnight Sunday, January 31, 2010 at 800-642-1687, with the Conference ID# of 49680053. The call will also be available by webcast at the URL listed below and available for playback after 2:00 p.m. CT. After entering the website, http://www.frostbank.com/, go to "About Frost" on the top navigation bar, then click on Investor Relations. Cullen/Frost Bankers, Inc. (NYSE:CFR) is a financial holding company, headquartered in San Antonio, with assets of $16.3 billion at December 31, 2009. The corporation provides a full range of commercial and consumer banking products, investment and brokerage services, insurance products and investment banking services. Its subsidiary, Frost Bank, operates more than 100 financial centers across Texas in the Austin, Corpus Christi, Dallas, Fort Worth, Houston, Rio Grande Valley and San Antonio regions. Founded in 1868, Frost is the largest banking organization headquartered in Texas that operates only in Texas, with a legacy of helping clients with their financial needs during three centuries. 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 the Corporation's future filings with the SEC, in press releases, and in oral and written statements made by or with the approval of the Corporation 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 or services; (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 the Corporation and its customers and the Corporation's assessment of that impact. -- Volatility and disruption in national and international financial markets. -- Government intervention in the U.S. financial system. -- Changes in 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. -- Political instability. -- 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 the Corporation's borrowers. -- Technological changes. -- Acquisitions and integration of acquired businesses. -- The ability to increase market share and control expenses. -- Changes in the competitive environment among financial holding companies and other financial service providers. -- The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Corporation and its 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. -- Changes in the Corporation's organization, compensation and benefit plans. -- The costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews. -- Greater than expected costs or difficulties related to the integration of new products and lines of business. -- The Corporation's success at managing the risks involved in the foregoing items. Forward-looking statements speak only as of the date on which such statements are made. The Corporation undertakes no 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. Greg Parker Investor Relations 210/220-5632 Or Renee Sabel Media Relations 210/220-5416 Cullen/Frost Bankers, Inc. CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED) (In thousands, except per share amounts) 2009 4th Qtr 3rd Qtr ------- ------- CONDENSED INCOME STATEMENTS --------------------------- Net interest income $138,594 $133,989 Net interest income(1) 150,743 144,915 Provision for possible loan losses 22,250 16,940 Non-interest income: Trust fees 17,669 16,755 Service charges on deposit accounts 26,017 26,395 Insurance commissions and fees 6,734 8,505 Other charges, commissions and fees 7,804 6,845 Net gain (loss) on securities transactions (1,309) -- Other 29,430 10,991 ------ ------ Total non-interest income 86,345 69,491 Non-interest expense: Salaries and wages 58,736 58,591 Employee benefits 12,756 13,445 Net occupancy 11,523 11,111 Furniture and equipment 12,065 11,133 Deposit insurance 5,126 4,643 Intangible amortization 1,473 1,564 Other 32,537 31,747 ------ ------ Total non-interest expense 134,216 132,234 ------- ------- Income before income taxes 68,473 54,306 Income taxes 16,979 9,607 ------ ----- Net income $51,494 $44,699 ======= ======= PER SHARE DATA -------------- Net income - basic $0.86 $0.75 Net income - diluted 0.86 0.75 Cash dividends 0.43 0.43 Book value at end of quarter 31.55 31.80 OUTSTANDING SHARES ------------------ Period-end shares 60,038 59,929 Weighted-average shares - basic 59,762 59,537 Dilutive effect of stock compensation 64 91 Weighted-average shares - diluted 59,826 59,628 SELECTED ANNUALIZED RATIOS -------------------------- Return on average assets 1.25 % 1.11% Return on average equity 10.70 9.70 Net interest income to average earning assets(1) 4.20 4.12 2009 2nd Qtr 1st Qtr ------- ------- CONDENSED INCOME STATEMENTS --------------------------- Net interest income $134,464 $129,632 Net interest income(1) 144,325 137,733 Provision for possible loan losses 16,601 9,601 Non-interest income: Trust fees 16,875 15,969 Service charges on deposit accounts 25,152 24,910 Insurance commissions and fees 7,106 10,751 Other charges, commissions and fees 6,288 6,762 Net gain (loss) on securities transactions 49 -- Other 12,536 11,472 ------ ------ Total non-interest income 68,006 69,864 Non-interest expense: Salaries and wages 56,540 56,776 Employee benefits 13,783 15,240 Net occupancy 10,864 10,690 Furniture and equipment 10,662 10,363 Deposit insurance 11,667 4,376 Intangible amortization 1,719 1,781 Other 31,054 30,273 ------ ------ Total non-interest expense 136,289 129,499 ------- ------- Income before income taxes 49,580 60,396 Income taxes 11,721 15,414 ------ ------ Net income $37,859 $44,982 ======= ======= PER SHARE DATA -------------- Net income - basic $0.64 $0.76 Net income - diluted 0.63 0.76 Cash dividends 0.43 0.42 Book value at end of quarter 30.12 30.34 OUTSTANDING SHARES ------------------ Period-end shares 59,653 59,423 Weighted-average shares - basic 59,331 59,189 Dilutive effect of stock compensation 119 75 Weighted-average shares - diluted 59,450 59,264 SELECTED ANNUALIZED RATIOS -------------------------- Return on average assets 0.98% 1.23% Return on average equity 8.35 10.33 Net interest income to average earning assets(1) 4.28 4.33 2008 ---- 4th Qtr ------- CONDENSED INCOME STATEMENTS --------------------------- Net interest income $138,081 Net interest income(1) 143,707 Provision for possible loan losses 8,550 Non-interest income: Trust fees 17,483 Service charges on deposit accounts 23,697 Insurance commissions and fees 6,470 Other charges, commissions and fees 8,407 Net gain (loss) on securities transactions (133) Other 13,274 ------ Total non-interest income 69,198 Non-interest expense: Salaries and wages 58,468 Employee benefits 10,517 Net occupancy 10,384 Furniture and equipment 10,010 Deposit insurance 1,785 Intangible amortization 1,929 Other 30,450 ------ Total non-interest expense 123,543 ------- Income before income taxes 75,186 Income taxes 22,223 ------ Net income $52,963 ======= PER SHARE DATA -------------- Net income - basic $0.89 Net income - diluted 0.89 Cash dividends 0.42 Book value at end of quarter 29.68 OUTSTANDING SHARES ------------------ Period-end shares 59,416 Weighted-average shares - basic 59,171 Dilutive effect of stock compensation 311 Weighted-average shares - diluted 59,482 SELECTED ANNUALIZED RATIOS -------------------------- Return on average assets 1.47 % Return on average equity 12.79 Net interest income to average earning assets(1) 4.60 (1) Taxable-equivalent basis assuming a 35% tax rate. Cullen/Frost Bankers, Inc. CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED) 2009 4th Qtr 3rd Qtr BALANCE SHEET SUMMARY --------------------- ($ in millions) Average Balance: Loans $8,440 $8,582 Earning assets 14,501 14,121 Total assets 16,335 16,047 Non-interest-bearing demand deposits 4,574 4,343 Interest-bearing deposits 8,644 8,453 Total deposits 13,218 12,796 Shareholders' equity 1,909 1,829 Period-End Balance: Loans $8,368 $8,519 Earning assets 14,437 14,436 Goodwill and intangible assets 547 549 Total assets 16,288 16,158 Total deposits 13,313 12,922 Shareholders' equity 1,894 1,906 Adjusted shareholders' equity(1) 1,740 1,709 ASSET QUALITY ------------- ($ in thousands) Allowance for possible loan losses $125,309 $123,122 as a percentage of period-end loans 1.50 % 1.45 % Net charge-offs $20,063 $16,319 Annualized as a percentage of average loans 0.94 % 0.75 % Non-performing assets: Non-accrual loans $146,867 $191,754 Foreclosed assets 33,312 29,112 ------ ------ Total $180,179 $220,866 As a percentage of: Total loans and foreclosed assets 2.14 % 2.58 % Total assets 1.11 1.37 CONSOLIDATED CAPITAL RATIOS --------------------------- Tier 1 Risk-Based Capital Ratio 11.91 % 11.49 % Total Risk-Based Capital Ratio 14.19 13.72 Leverage Ratio 8.50 8.47 Equity to Assets Ratio (period-end) 11.63 11.80 Equity to Assets Ratio (average) 11.69 11.40 2009 2008 2nd Qtr 1st Qtr BALANCE SHEET SUMMARY --------------------- ($ in millions) Average Balance: Loans $8,784 $8,809 Earning assets 13,632 12,942 Total assets 15,519 14,881 Non-interest-bearing demand deposits 4,138 3,971 Interest-bearing deposits 8,045 7,487 Total deposits 12,183 11,458 Shareholders' equity 1,818 1,766 Period-End Balance: Loans $8,644 $8,779 Earning assets 13,855 13,530 Goodwill and intangible assets 549 551 Total assets 15,785 15,331 Total deposits 12,497 12,033 Shareholders' equity 1,797 1,803 Adjusted shareholders' equity(1) 1,675 1,650 ASSET QUALITY ------------- ($ in thousands) Allowance for possible loan losses $122,501 $114,168 as a percentage of period-end loans 1.42 % 1.30 % Net charge-offs $8,268 $5,677 Annualized as a percentage of average loans 0.38 % 0.26 % Non-performing assets: Non-accrual loans $168,805 $114,233 Foreclosed assets 21,478 13,533 ------ ------ Total $190,283 $127,766 As a percentage of: Total loans and foreclosed assets 2.20 % 1.45 % Total assets 1.21 0.83 CONSOLIDATED CAPITAL RATIOS --------------------------- Tier 1 Risk-Based Capital Ratio 10.91 % 10.64 % Total Risk-Based Capital Ratio 13.34 12.98 Leverage Ratio 8.50 8.70 Equity to Assets Ratio (period-end) 11.38 11.76 Equity to Assets Ratio (average) 11.72 11.87 2008 4th Qtr BALANCE SHEET SUMMARY --------------------- ($ in millions) Average Balance: Loans $8,712 Earning assets 12,435 Total assets 14,347 Non-interest-bearing demand deposits 3,803 Interest-bearing deposits 7,106 Total deposits 10,909 Shareholders' equity 1,647 Period-End Balance: Loans $8,844 Earning assets 13,001 Goodwill and intangible assets 551 Total assets 15,034 Total deposits 11,509 Shareholders' equity 1,764 Adjusted shareholders' equity(1) 1,626 ASSET QUALITY ------------- ($ in thousands) Allowance for possible loan losses $110,244 as a percentage of period-end loans 1.25 % Net charge-offs $5,415 Annualized as a percentage of average loans 0.25 % Non-performing assets: Non-accrual loans $65,174 Foreclosed assets 12,866 ------ Total $78,040 As a percentage of: Total loans and foreclosed assets 0.88 % Total assets 0.52 CONSOLIDATED CAPITAL RATIOS --------------------------- Tier 1 Risk-Based Capital Ratio 10.30 % Total Risk-Based Capital Ratio 12.58 Leverage Ratio 8.80 Equity to Assets Ratio (period-end) 11.73 Equity to Assets Ratio (average) 11.48 (1) Shareholders' equity excluding accumulated other comprehensive income (loss). Cullen/Frost Bankers, Inc. CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED) (In thousands, except per share amounts) Year Ended December 31 2009 2008 CONDENSED INCOME STATEMENTS --------------------------- Net interest income $536,679 $534,025 Net interest income(1) 577,716 554,353 Provision for possible loan losses 65,392 37,823 Non-interest income: Trust fees 67,268 74,554 Service charges on deposit accounts 102,474 87,566 Insurance commissions and fees 33,096 32,904 Other charges, commissions and fees 27,699 35,557 Net gain (loss) on securities transactions (1,260) (159) Other 64,429 56,900 ------ ------ Total non-interest income 293,706 287,322 Non-interest expense: Salaries and wages 230,643 225,943 Employee benefits 55,224 47,219 Net occupancy 44,188 40,464 Furniture and equipment 44,223 37,799 Deposit insurance 25,812 4,597 Intangible amortization 6,537 7,906 Other 125,611 122,717 ------- ------- Total non-interest expense 532,238 486,645 ------- ------- Income before income taxes 232,755 296,879 Income taxes 53,721 89,624 ------ ------ Net income $179,034 $207,255 ======== ======== PER SHARE DATA -------------- Net income - basic $3.00 $3.51 Net income - diluted 3.00 3.50 Cash dividends 1.71 1.66 Book value 31.55 29.68 OUTSTANDING SHARES ------------------ Period-end shares 60,038 59,416 Weighted-average shares - basic 59,456 58,846 Dilutive effect of stock compensation 58 324 Weighted-average shares - diluted 59,514 59,170 SELECTED ANNUALIZED RATIOS -------------------------- Return on average assets 1.14% 1.51% Return on average equity 9.78 13.11 Net interest income to average earning assets(1) 4.23 4.67 Year Ended December 31 2007 2006 CONDENSED INCOME STATEMENTS --------------------------- Net interest income $518,737 $469,163 Net interest income(1) 534,195 479,138 Provision for possible loan losses 14,660 14,150 Non-interest income: Trust fees 70,359 63,469 Service charges on deposit accounts 80,718 77,116 Insurance commissions and fees 30,847 28,230 Other charges, commissions and fees 32,558 28,105 Net gain (loss) on securities transactions 15 (1) Other 53,734 43,828 ------ ------ Total non-interest income 268,231 240,747 Non-interest expense: Salaries and wages 209,982 190,784 Employee benefits 47,095 46,231 Net occupancy 38,824 34,695 Furniture and equipment 32,821 26,293 Deposit insurance 1,220 1,162 Intangible amortization 8,860 5,628 Other 123,644 105,560 ------- ------- Total non-interest expense 462,446 410,353 ------- ------- Income before income taxes 309,862 285,407 Income taxes 97,791 91,816 ------ ------ Net income $212,071 $193,591 ======== ======== PER SHARE DATA -------------- Net income - basic $3.59 $3.48 Net income - diluted 3.57 3.44 Cash dividends 1.54 1.32 Book value 25.18 23.01 OUTSTANDING SHARES ------------------ Period-end shares 58,662 59,839 Weighted-average shares - basic 58,952 55,467 Dilutive effect of stock compensation 645 1,043 Weighted-average shares - diluted 59,597 56,510 SELECTED ANNUALIZED RATIOS -------------------------- Return on average assets 1.63% 1.67% Return on average equity 15.20 18.03 Net interest income to average earning assets(1) 4.69 4.67 Year Ended December 31 2005 CONDENSED INCOME STATEMENTS --------------------------- Net interest income $391,266 Net interest income(1) 398,938 Provision for possible loan losses 10,250 Non-interest income: Trust fees 58,353 Service charges on deposit accounts 78,751 Insurance commissions and fees 27,731 Other charges, commissions and fees 23,125 Net gain (loss) on securities transactions 19 Other 42,400 ------ Total non-interest income 230,379 Non-interest expense: Salaries and wages 166,059 Employee benefits 41,577 Net occupancy 31,107 Furniture and equipment 23,912 Deposit insurance 1,110 Intangible amortization 4,859 Other 98,383 ------ Total non-interest expense 367,007 ------- Income before income taxes 244,388 Income taxes 78,965 ------ Net income $165,423 ======== PER SHARE DATA -------------- Net income - basic $3.14 Net income - diluted 3.09 Cash dividends 1.165 Book value 18.03 OUTSTANDING SHARES ------------------ Period-end shares 54,483 Weighted-average shares - basic 52,481 Dilutive effect of stock compensation 1,235 Weighted-average shares - diluted 53,716 SELECTED ANNUALIZED RATIOS -------------------------- Return on average assets 1.63% Return on average equity 18.78 Net interest income to average earning assets(1) 4.45 (1) Taxable-equivalent basis assuming a 35% tax rate. Cullen/Frost Bankers, Inc. CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED) Year Ended December 31 2009 2008 ---- ---- BALANCE SHEET SUMMARY --------------------- ($ in millions) Average Balance: Loans $8,653 $8,314 Earning assets 13,804 11,868 Total assets 15,702 13,685 Non-interest-bearing demand deposits 4,259 3,615 Interest bearing deposits 8,161 6,916 Total deposits 12,420 10,531 Shareholders' equity 1,831 1,580 Period-End Balance: Loans $8,368 $8,844 Earning assets 14,437 13,001 Goodwill and intangible assets 547 551 Total assets 16,288 15,034 Total deposits 13,313 11,509 Shareholders' equity 1,894 1,764 Adjusted shareholders' equity(1) 1,740 1,626 ASSET QUALITY ------------- ($ in thousands) Allowance for possible loan losses $125,309 $110,244 As a percentage of period-end loans 1.50 % 1.25 % Net charge-offs: $50,327 $19,918 As a percentage of average loans 0.58 % 0.24 % Non-performing assets: Non-accrual loans $146,867 $65,174 Foreclosed assets 33,312 12,866 ------ ------ Total $180,179 $78,040 As a percentage of: Total loans and foreclosed assets 2.14 % 0.88 % Total assets 1.11 0.52 Year Ended December 31 2007 2006 ---- ---- BALANCE SHEET SUMMARY --------------------- ($ in millions) Average Balance: Loans $7,464 $6,524 Earning assets 11,340 10,203 Total assets 13,042 11,581 Non-interest-bearing demand deposits 3,524 3,334 Interest bearing deposits 6,689 5,850 Total deposits 10,213 9,184 Shareholders' equity 1,395 1,074 Period-End Balance: Loans $7,769 $7,373 Earning assets 11,556 11,461 Goodwill and intangible assets 558 563 Total assets 13,485 13,224 Total deposits 10,530 10,388 Shareholders' equity 1,477 1,377 Adjusted shareholders' equity(1) 1,484 1,432 ASSET QUALITY ------------- ($ in thousands) Allowance for possible loan losses $92,339 $96,085 As a percentage of period-end loans 1.19 % 1.30 % Net charge-offs: $18,406 $11,110 As a percentage of average loans 0.25 % 0.17 % Non-performing assets: Non-accrual loans $24,443 $52,204 Foreclosed assets 5,406 5,545 ----- ----- Total $29,849 $57,749 As a percentage of: Total loans and foreclosed assets 0.38 % 0.78 % Total assets 0.22 0.44 Year Ended December 31 2005 ---- BALANCE SHEET SUMMARY --------------------- ($ in millions) Average Balance: Loans $5,594 Earning assets 8,969 Total assets 10,143 Non-interest-bearing demand deposits 3,009 Interest bearing deposits 5,124 Total deposits 8,133 Shareholders' equity 881 Period-End Balance: Loans $6,085 Earning assets 10,197 Goodwill and intangible assets 184 Total assets 11,741 Total deposits 9,146 Shareholders' equity 982 Adjusted shareholders' equity(1) 1,033 ASSET QUALITY ------------- ($ in thousands) Allowance for possible loan losses $80,325 As a percentage of period-end loans 1.32 % Net charge-offs: $8,921 As a percentage of average loans 0.16 % Non-performing assets: Non-accrual loans $33,179 Foreclosed assets 5,748 ----- Total $38,927 As a percentage of: Total loans and foreclosed assets 0.64 % Total assets 0.33 (1) Shareholders' equity excluding accumulated other comprehensive income (loss). http://www.newscom.com/cgi-bin/prnh/20030109/CFRLOGO http://photoarchive.ap.org/ DATASOURCE: Cullen/Frost Bankers, Inc. CONTACT: Greg Parker, Investor Relations, +1-210-220-5632, or Renee Sabel, Media Relations, +1-210-220-5416, both of Cullen/Frost Bankers, Inc. Web Site: http://www.frostbank.com/

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