10q10k10q10k.net

What changed in CULLEN/FROST BANKERS, INC.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of CULLEN/FROST BANKERS, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+465 added−455 removedSource: 10-K (2025-02-06) vs 10-K (2024-02-06)

Top changes in CULLEN/FROST BANKERS, INC.'s 2024 10-K

465 paragraphs added · 455 removed · 387 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

70 edited+21 added−21 removed154 unchanged
Biggest changeRisks and exposures related to cybersecurity attacks, including litigation and enforcement risks, are expected to be elevated for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our customers. 17 Table of Contents In March 2023, the SEC proposed to amend Regulation S-P to require broker-dealers, investment companies and investment advisers registered with the SEC to adopt written policies and procedures for incident response programs to address unauthorized access to or use of customer information.
Biggest changeWe expect this trend of state-level activity in those areas to continue and are continually monitoring developments in the states in which our customers are located. 17 Table of Contents Risks and exposures related to cybersecurity attacks, including litigation and enforcement risks, are expected to be elevated for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our customers.
Prompt Corrective Action The Federal Deposit Insurance Act, as amended (“FDIA”), requires among other things, the federal banking agencies to take “prompt corrective action” in respect of depository institutions that do not meet minimum capital requirements.
Prompt Corrective Action The Federal Deposit Insurance Act, as amended (the “FDIA”) requires among other things, the federal banking agencies to take “prompt corrective action” in respect of depository institutions that do not meet minimum capital requirements.
In October 2023, the Federal Reserve issued a proposal under which the maximum permissible interchange fee for an electronic debit transaction would be the sum of 14.4 cents per transaction and 4 basis points multiplied by the value of the transaction. Furthermore, the fraud-prevention adjustment would increase from a maximum of 1 cent to 1.3 cents.
In October 2023, the Federal Reserve issued a proposal under which the maximum permissible interchange fee for an electronic debit transaction would be the sum of 14.4 cents per transaction and 4 basis points multiplied by the value of the transaction. Furthermore, the fraud-prevention adjustment would increase from a maximum of 1 cent to 1.3 cents per debit card transaction.
The Basel III Capital Rules and the Capital Simplification Rules also provide for a number of deductions from and adjustments to CET1. These include, for example, the requirement that certain deferred tax assets and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 25% of CET1.
The Basel III Capital Rules also provide for a number of deductions from and adjustments to CET1. These include, for example, the requirement that certain deferred tax assets and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 25% of CET1.
The FDIA prohibits an insured depository institution from accepting brokered deposits or offering interest rates on any deposits significantly higher than the prevailing rate in the bank’s normal market area or nationally (depending upon where the deposits are solicited), unless it is well capitalized or is adequately capitalized and receives a waiver from the FDIC. 11 Table of Contents Additionally, the FDIA generally prohibits a depository institution from making any capital distributions (including payment of a dividend) or paying any management fee to its parent holding company if the depository institution would thereafter be “undercapitalized.” “Undercapitalized” institutions are subject to growth limitations and are required to submit a capital restoration plan.
The FDIA prohibits an insured depository institution from accepting brokered deposits or offering interest rates on any deposits significantly higher than the prevailing rate in the bank’s normal market area or nationally (depending upon where the deposits are solicited), unless it is (i) well capitalized, or (ii) adequately capitalized and receives a waiver from the FDIC. 11 Table of Contents Additionally, the FDIA generally prohibits a depository institution from making any capital distributions (including payment of a dividend) or paying any management fee to its parent holding company if the depository institution would thereafter be “undercapitalized.” “Undercapitalized” institutions are subject to growth limitations and are required to submit a capital restoration plan.
In August 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted. Among other things, the IRA imposes a new 1% excise tax on the fair market value of stock repurchased after December 31, 2022 by publicly traded U.S. corporations.
In August 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted. Among other things, the IRA imposes a 1% excise tax on the fair market value of stock repurchased after December 31, 2022 by publicly traded U.S. corporations.
In reviewing applications seeking approval of merger and acquisition transactions, the bank regulatory authorities will consider, among other things, the competitive effect and public benefits of the transactions, the applicant's managerial and financial resources, the capital position of the combined organization, the risks to the stability of the U.S. banking or financial system (e.g., systemic risk), the applicant’s performance record under the Community Reinvestment Act (see the section captioned “Community Reinvestment Act” elsewhere in this item) and its compliance with law, including fair lending, fair housing and other consumer protection laws, and the effectiveness of the subject organizations in combating money laundering activities.
In reviewing applications seeking approval of merger and acquisition transactions, the bank regulatory authorities will consider, among other things, the competitive effect and public benefits of the transactions, the applicant's managerial and financial resources, the capital position of the combined organization, the risks to the stability of the U.S. banking or financial system (e.g., systemic risk), the applicant’s performance record under the CRA (see the section captioned “Community Reinvestment Act” elsewhere in this item) and its compliance with law, including fair lending, fair housing and other consumer protection laws, and the effectiveness of the subject organizations in combating money laundering activities.
Frost Bank also operates approximately 1,733 automated-teller machines (“ATMs”) throughout the State of Texas, the majority of which are operated in connection with branding and licensing agreements with various retailers throughout the State of Texas. Frost Bank was originally chartered as a national banking association in 1899, but its origin can be traced to a mercantile partnership organized in 1868.
Frost Bank also operates approximately 1,766 automated-teller machines (“ATMs”) throughout the State of Texas, the majority of which are operated in connection with branding and licensing agreements with various retailers. Frost Bank was originally chartered as a national banking association in 1899, but its origin can be traced to a mercantile partnership organized in 1868.
The Volcker Rule does not significantly impact the operations of Cullen/Frost and its subsidiaries as we do not have any engagement in the businesses prohibited by the Volcker Rule.
The Volcker Rule does not significantly impact the operations of Cullen/Frost and its subsidiaries as we do not have any significant engagement in the businesses prohibited by the Volcker Rule.
Abusive acts or practices are defined as those that materially interfere with a consumer’s ability to understand a term or condition of a consumer financial product or service or take unreasonable advantage of a consumer’s (i) lack of financial savvy, (ii) inability to protect himself in the selection or use of consumer financial products or services, or (iii) reasonable reliance on a covered entity to act in the consumer’s interests.
Abusive acts or practices are defined as those that materially interfere with a consumer’s ability to understand a term or condition of a consumer financial product or service or take unreasonable advantage of a consumer’s (i) lack of financial savvy, (ii) inability to self-protect in the selection or use of consumer financial products or services, or (iii) reasonable reliance on a covered entity to act in the consumer’s interests.
We are dedicated to providing a workplace for our employees that is inclusive, supportive, and free of any form of discrimination or harassment; rewarding and recognizing our employees based on their individual results and performance as well as that of their department and the company overall; and recognizing and respecting all of the characteristics and differences that make each of our employees unique.
We are dedicated to providing a workplace for our employees that is supportive, and free of any form of unlawful discrimination or harassment; rewarding and recognizing our employees based on their individual results and performance as well as that of their department and the company overall; and recognizing and respecting all of the characteristics and differences that make each of our employees unique.
Frost Bank acts as correspondent for approximately 165 financial institutions, which are primarily banks in Texas. These banks maintain deposits with Frost Bank, which offers them a full range of services including check clearing, transfer of funds, fixed income security services, and securities custody and clearance services. • Trust Services.
Frost Bank acts as correspondent for approximately 179 financial institutions, which are primarily banks in Texas. These banks maintain deposits with Frost Bank, which offers them a full range of services including check clearing, transfer of funds, fixed income security services, and securities custody and clearance services. • Trust Services.
In March 2020, the federal bank regulatory agencies issued an interim final rule that maintains the three-year transition option of the 2019 CECL Rule and also provides banking organizations that were required under U.S.
In March 2020, the federal bank regulatory agencies issued an interim final rule that maintains the three-year transition option of the 2019 CECL Rule and also provided banking organizations that were required under U.S.
The USA PATRIOT Act of 2001, or the USA Patriot Act, substantially broadened the scope of United States anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the United States.
The USA Patriot Act substantially broadened the scope of United States anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the United States.
Furthermore, banking regulators take into account CRA ratings when considering a request for an approval of a proposed transaction. Frost Bank received a rating of “satisfactory” in its most recent CRA examination. In October 2023, the OCC, together with the Federal Reserve and FDIC, issued a joint final rule to modernize the CRA regulatory framework.
Furthermore, banking regulators take into account CRA ratings when considering a request for an approval of a proposed transaction. Frost Bank received a rating of “satisfactory” in its most recent CRA performance evaluations. In October 2023, the OCC, together with the Federal Reserve and FDIC, issued a joint final rule to modernize the CRA regulatory framework.
The final rule introduces new tests under which the performance of banks with over $2 billion in assets will be assessed. The new rule also includes data collection and reporting requirements, some of which are applicable only to banks with over $10 billion in assets, such as Frost Bank.
The final rule introduces new tests under which the performance of banks with over $2 billion in assets will be assessed. The new rule also includes data collection and reporting 15 Table of Contents requirements, some of which are applicable only to banks with over $10 billion in assets, such as Frost Bank.
The amended Regulation S-P would require covered entities to notify, within 30 days, individuals affected by an incident involving sensitive customer information and provide them with details about the incident and other information intended to help affected individuals respond appropriately. See Item 1A. Risk Factors for a further discussion of risks related to cybersecurity and Item 1C.
The amended Regulation S-P also requires covered entities to notify, within 30 days, individuals affected by an incident involving sensitive customer information and provide them with details about the incident and other information intended to help affected individuals respond appropriately. See Item 1A. Risk Factors for a further discussion of risks related to cybersecurity and Item 1C.
Under the foregoing dividend restrictions, and while maintaining its “well capitalized” status, Frost Bank could pay aggregate dividends of approximately $1.1 billion to Cullen/Frost, without obtaining affirmative governmental approvals, at December 31, 2023.
Under the foregoing dividend restrictions, and while maintaining its “well capitalized” status, Frost Bank could pay aggregate dividends of approximately $1.2 billion to Cullen/Frost, without obtaining affirmative governmental approvals, at December 31, 2024.
The BHC Act, the Bank Merger Act, the Texas Banking Code and other federal and state statutes regulate acquisitions of commercial banks and their parent holding companies.
The BHC Act, the Bank Merger Act, the Texas Finance Code and other federal and state statutes regulate acquisitions of commercial banks and their parent holding companies.
Activities that are 7 Table of Contents financial in nature include securities underwriting and dealing, insurance underwriting and making merchant banking investments.
Activities that are 7 Table of Contents financial in nature include securities underwriting and dealing, insurance underwriting and making merchant banking investments, among others.
In addition, we also compete with other providers of financial services, such as savings and loan associations, credit unions, consumer finance companies, securities firms, insurance companies, insurance agencies, commercial finance and leasing companies, full service brokerage firms, discount brokerage firms, and financial/wealth technology (“fintech/wealthtech”) firms.
In addition, we also compete with other providers of financial services, such as savings and loan associations, credit unions, consumer finance companies, securities firms, private equity and debt funds, insurance companies, insurance agencies, commercial finance and leasing companies, full service brokerage firms, discount brokerage firms, and financial/wealth technology (“fintech/wealthtech”) firms.
See “Prompt Corrective Action” above. If an institution fails to comply with such an order, the agency may seek to enforce such order in judicial proceedings and to impose civil money penalties.
See “Prompt Corrective Action” above. If an institution fails to comply with such an order, the agency may seek to enforce such order in judicial proceedings and to impose civil money penalties and cease and desist orders.
Any such data provider would also have to make such data available to third parties, with the consumer’s express authorization and through an interface that satisfies formatting, performance and security standards, for the purpose of such third parties providing the consumer with financial products or services requested by the consumer.
Any such data provider is also required to make such data available to third parties, with the consumer’s express authorization and through an interface that satisfies formatting, performance, and security standards, for the purpose of such third parties providing the consumer with financial products or services requested by the consumer.
In order for a financial holding company to commence any new activity permitted by the BHC Act or to acquire a company engaged in any new activity permitted by the BHC Act, each insured depository institution subsidiary of the financial holding company must have received a rating of at least “satisfactory” in its most recent examination under the Community Reinvestment Act.
In order for a financial holding company to commence any new activity permitted by the BHC Act or to acquire a company engaged in any new activity permitted by the BHC Act, each insured depository institution subsidiary of the financial holding company must have received a rating of at least “satisfactory” in its most recent Community Reinvestment Act “CRA” performance evaluation.
At December 31, 2023, Cullen/Frost had consolidated total assets of $50.8 billion and was one of the largest independent bank holding companies headquartered in the State of Texas. Our philosophy is to grow and prosper, building long-term relationships based on top quality service, high ethical standards, and safe, sound assets.
At December 31, 2024, Cullen/Frost had consolidated total assets of $52.5 billion and was one of the largest independent bank holding companies headquartered in the State of Texas. Our philosophy is to grow and prosper, building long-term relationships based on top quality service, high ethical standards, and safe, sound assets.
If a financial holding company ceases to meet these capital and management requirements, the Federal Reserve Board’s regulations provide that the financial holding company must enter into an agreement with the Federal Reserve Board to comply with all applicable capital and management requirements.
If a financial holding company ceases to meet these capital and management requirements, the BHC Act, and the Federal Reserve Board’s regulations provide that the financial holding company must enter into a confidential agreement with the Federal Reserve Board to comply with all applicable capital and management requirements.
The total amount of stock dividends that Frost Bank received from the Federal Reserve totaled $1.4 million in 2023, $1.2 million in 2022 and $532 thousand in 2021. Most of our non-bank subsidiaries also are subject to regulation by the Federal Reserve Board and other federal and state agencies.
The total amount of stock dividends that Frost Bank received from the Federal Reserve totaled $1.5 million in 2024, $1.4 million in 2023 and $1.2 million in 2022. Most of our non-bank subsidiaries also are subject to regulation by the Federal Reserve Board and other federal and state agencies.
The special assessment was based on estimated uninsured deposits as of December 31, 2022 (excluding the first $5.0 billion) and will be assessed at a quarterly rate of 3.36 basis points, over eight quarterly assessment periods, beginning in the first quarter of 2024.
The special assessment was based on estimated uninsured deposits as of December 31, 2022 (excluding the first $5.0 billion) and was assessed at a quarterly rate of 3.36 basis points, over eight quarterly assessment periods, that began in the first quarter of 2024.
Under a final rule adopted by federal banking agencies in 2021, banking organizations are required to notify their primary banking regulator within 36 hours of determining that a “computer-security incident” has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to carry out banking operations or deliver banking products and services to a material portion of its customer base, its businesses and operations that would result in material loss, or its operations that would impact the stability of the United States.
Banking organizations are required to notify their primary banking regulator within 36 hours of determining that a “computer-security incident” has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to carry out banking operations or deliver banking products and services to a material portion of its customer base, its businesses and operations that would result in material loss, or its operations that would impact the stability of the United States.
In November 2023, the FDIC issued a final rule to implement a special assessment to recover losses to the Deposit Insurance Fund ("DIF") incurred as a result of recent bank failures and the FDIC's use of the systemic risk exception to cover certain deposits that were otherwise uninsured.
In November 2023, the FDIC issued a final rule to implement a special assessment to recover losses to the DIF incurred as a result of bank failures earlier that year and the FDIC’s use of the systemic risk exception to cover certain deposits that were otherwise uninsured.
Cullen/Frost believes that, as of December 31, 2023, its bank subsidiary, Frost Bank, was “well capitalized” based on the aforementioned ratios. For further information regarding the capital ratios and leverage ratio of Cullen/Frost and Frost Bank see the discussion under the section captioned “Capital and Liquidity” included in Item 7.
As of December 31, 2024, Frost Bank, was “well capitalized” based on the aforementioned ratios. For further information regarding the capital ratios and leverage ratio of Cullen/Frost and Frost Bank see the discussion under the section captioned “Capital and Liquidity” included in Item 7.
Among other things, these standards revise the Basel Committee’s standardized approach for credit risk (including the recalibration of risk weights and introducing new capital requirements for certain “unconditionally cancellable commitments,” such as unused credit card lines of credit) and provide a new standardized approach for operational risk capital.
Among other things, these standards revised the Basel Committee’s standardized approach for credit risk (including the recalibration of risk weights and the introduction of new capital requirements for certain “unconditionally cancellable commitments,” such as unused credit card lines of credit) and provided a new standardized approach for operational risk capital.
Houston Street, San Antonio, Texas 78205, and its telephone number is (210) 220-4011. 4 Table of Contents Subsidiaries of Cullen/Frost Frost Bank Frost Bank, the principal operating subsidiary and sole banking subsidiary of Cullen/Frost, is a Texas-chartered bank primarily engaged in the business of commercial and consumer banking through approximately 180 financial centers across Texas in the Austin, Corpus Christi, Dallas, Fort Worth, Houston, Permian Basin, Rio Grande Valley and San Antonio regions.
Houston Street, San Antonio, Texas 78205, and its telephone number is (210) 220-4011. 4 Table of Contents Subsidiaries of Cullen/Frost Frost Bank Frost Bank, the principal operating subsidiary and sole banking subsidiary of Cullen/Frost, is a Texas-chartered bank primarily engaged in the business of commercial and consumer banking through approximately 194 financial centers across Texas in the Austin, Dallas, Fort Worth, Gulf Coast, Houston, Permian Basin, and San Antonio regions.
Prior to that, Mr. Wilson was Market President and Market Executive for Private Banking for Bank of America in both the San Antonio and Austin markets. Candace Wolfshohl Group Executive Vice President, Culture and People Development 63 Officer of Frost Bank since 1989. Group Executive Vice President, Culture and People Development since July 2015.
Wilson was Market President and Market Executive for Private Banking for Bank of America in both the San Antonio and Austin markets. Candace Wolfshohl Group Executive Vice President, Culture and People Development 64 Officer of Frost Bank since 1989. Group Executive Vice President, Culture and People Development since July 2015.
The Basel III Capital Rules prescribe a standardized approach for risk weightings that expanded the risk-weighting categories from the general risk-based capital rules to a much larger and more risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0% for U.S. government and agency 10 Table of Contents securities, to 600% for certain equity exposures (and higher percentages for certain other types of interests), and resulting in higher risk weights for a variety of asset categories.
The Basel III Capital Rules prescribe a standardized approach for risk weightings that expanded the risk-weighting categories from the general risk-based capital rules to a much larger and more risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0% for U.S. government and agency securities, to 600% for certain equity exposures (and higher percentages for certain other types of interests), and resulting in higher risk weights for a variety of asset categories. 10 Table of Contents In December 2017, the Basel Committee published standards that it described as the finalization of the Basel III post-crisis regulatory reforms.
Group Executive Vice President, Chief Consumer Banking Officer since January 2017. Kenny Wilson Group Executive Vice President, Chief Wealth Officer 71 Officer of Frost Bank since 2023. Group Executive Vice President, Chief Wealth Officer since August 2023. Prior to joining Frost, Mr. Wilson served as Chief Executive Officer for Haven for Hope from April 2016 to December 2021.
Kenny Wilson Group Executive Vice President, Chief Wealth Officer 72 Officer of Frost Bank since 2023. Group Executive Vice President, Chief Wealth Officer since August 2023. Prior to joining Frost, Mr. Wilson served as Chief Executive Officer for Haven for Hope from April 2016 to December 2021. Prior to that, Mr.
At December 31, 2023, Frost Bank had consolidated total assets of $51.0 billion and total deposits of $42.4 billion and was one of the largest commercial banks headquartered in the State of Texas. Significant services offered by Frost Bank include: • Commercial Banking. Frost Bank provides commercial banking services to corporations and other business clients.
At December 31, 2024, Frost Bank had consolidated total assets of $52.6 billion and total deposits of $43.1 billion and was one of the largest commercial banks headquartered in the State of Texas. Significant services offered by Frost Bank include: • Commercial Banking. Frost Bank provides commercial banking services to corporations and other business clients.
Accordingly, CECL transitional amounts have been added back to CET1 totaling $30.8 million and $46.2 million at December 31, 2023 and 2022, respectively.
Accordingly, CECL transitional amounts have been added back to CET1 totaling $15.4 million and $30.8 million at December 31, 2024 and 2023, respectively.
At December 31, 2023, the estimated fair value of trust assets was $47.2 billion, including managed assets of $23.8 billion and custody assets of $23.5 billion. • Capital Markets - Fixed-Income Services . Frost Bank’s Capital Markets Division supports the transaction needs of fixed-income institutional investors.
At December 31, 2024, the estimated fair value of trust assets was $51.4 billion, including managed assets of $26.2 billion and custody assets of $25.2 billion. • Capital Markets - Fixed-Income Services . Frost Bank’s Capital Markets Division supports the transaction needs of fixed-income institutional investors.
In October 2023, the CFPB proposed a new rule that would require a provider of payment accounts or products, such as a bank, to make data available to consumers upon request regarding the products or services they obtain from the provider.
In October 2024, the CFPB issued a final rule that requires a provider of payment accounts or products, such as a bank, to make data available to consumers, free upon request, regarding the products or services they obtain from the provider.
Kasanoff Group Executive Vice President, Chief Credit Officer 54 Officer of Frost Bank since June 1994. Group Executive Vice President, Chief Credit Officer since January 2023. Senior Executive Vice President, Director of Complex Risk from October 2017 to December 2022. Coolidge E. Rhodes, Jr. Group Executive Vice President, General Counsel and Secretary 48 Officer of Frost Bank since September 2021.
Senior Executive Vice President, Director of Complex Risk from October 2017 to December 2022. Coolidge E. Rhodes, Jr. Group Executive Vice President, General Counsel and Corporate Secretary 49 Officer of Frost Bank since September 2021. Group Executive Vice President, General Counsel since September 2021 and Secretary since October 2021.
Human Capital Resources At December 31, 2023, we employed 5,495 full-time equivalent employees. At that date, the average tenure of all of our full-time employees was approximately 9.3 years while the average tenure of our executive officers was approximately 29.3 years. None of our employees are represented by collective bargaining agreements. We believe our employee relations to be good.
At that date, the average tenure of all of our full-time employees was approximately 9.3 years while the average tenure of our executive officers was approximately 30.4 years. None of our employees are represented by collective bargaining agreements. We believe our employee relations to be good.
The Volcker Rule The so-called Volcker Rule under the Dodd-Frank Act restricts banks and their affiliates from engaging in proprietary trading and investing in and sponsoring hedge funds and private equity funds.
The final rule became effective October 1, 2024. 13 Table of Contents The Volcker Rule The so-called Volcker Rule under the Dodd-Frank Act restricts banks and their affiliates from engaging in proprietary trading and investing in and sponsoring hedge funds and private equity funds.
Annette Alonzo Group Executive Vice President, Chief Human Resources Officer 55 Officer of Frost Bank since 1993. Group Executive Vice President, Chief Human Resources Officer since April 2016. Robert A. Berman Group Executive Vice President, Research and Strategy 61 Officer of Frost Bank since 1989. Group Executive Vice President, Research and Strategy of Frost Bank since May 2001. Paul H.
Group Executive Vice President, Chief Human Resources Officer since April 2016. Robert A. Berman Group Executive Vice President, Research and Strategy 62 Officer of Frost Bank since 1989. Group Executive Vice President, Research and Strategy of Frost Bank since May 2001. Paul H. Bracher President, Group Executive Vice President, Chief Banking Officer 68 Officer of Frost Bank since 1982.
These limitations did not impact our regulatory capital during any of the reported periods. In addition, under the general risk-based capital rules, the effects of accumulated other comprehensive income items included in capital were excluded for the purposes of determining regulatory capital ratios.
In addition, under the general risk-based capital rules, the effects of accumulated other comprehensive income items included in capital were excluded for the purposes of determining regulatory capital ratios.
We believe employing a diverse workforce enhances our ability to serve our customers and our communities. By promoting and fostering a workforce that we believe is reflective of our customers and communities, we seek to better understand the financial needs of our prospects and customers and provide them with relevant financial service products.
By promoting and fostering a workforce that we believe is reflective of the values of our customers and communities, we seek to better understand the financial needs of our prospects and customers and provide them with relevant financial service products. This enables us to better serve our customers and communities, enhancing our success as an organization.
In August 2023, the FDIC proposed 13 Table of Contents amendments to the resolution planning requirements for IDIs with $50 billion or more in total assets. The amendments would require IDIs with between $50 billion and $100 billion in assets to submit informational filings on a two-year cycle, with an interim supplement updating key information submitted in the off years.
In June 2024, the FDIC finalized amendments to the resolution planning requirements for IDIs with $50 billion or more in total assets. The amendments require IDIs with between $50 billion and $100 billion in assets, which includes Frost Bank, to submit informational filings on a three-year cycle, with an interim supplement updating key information submitted in the off years.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) mandates that certain regulatory requirements applicable to these systemically important financial institutions be more stringent than those applicable to other financial institutions. In 2019, the Federal Reserve Board adopted new rules impacting certain capital and liquidity requirements and other enhanced prudential standards.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) mandates that certain regulatory requirements applicable to these systemically important financial institutions be more stringent than those applicable to other financial institutions.
Bracher President of Cullen/Frost and Frost Bank and Group Executive Vice President, Chief Banking Officer of Frost Bank 67 Officer of Frost Bank since 1982. Group Executive Vice President, Chief Banking Officer since January 2015. President of Cullen/Frost since April 2016. President of Frost Bank since January 2024. Howard L.
Group Executive Vice President, Chief Banking Officer since January 2015. President of Cullen/Frost since April 2016. President of Frost Bank since January 2024. Howard L. Kasanoff Group Executive Vice President, Chief Credit Officer 55 Officer of Frost Bank since June 1994. Group Executive Vice President, Chief Credit Officer since January 2023.
In July 2023, the federal banking regulators proposed revisions to the Basel III Capital Rules to implement the Basel Committee’s 2017 standards and make other changes to the Basel III Capital Rules. The proposal introduces revised credit risk, equity risk, operational risk, credit valuation adjustment risk and market risk requirements, among other changes.
In July 2023, the federal banking regulators proposed revisions to the Basel III Capital Rules to implement the Basel Committee’s 2017 standards and make other changes to the Basel III Capital Rules.
Under the final rule, the estimated loss pursuant to the systemic risk determination will be periodically adjusted, and the FDIC has retained the ability to cease collection early, extend the special assessment collection period and impose a final shortfall special assessment on a one-time basis.
This updated assessment was made under the FDIC’s final rule whereby the estimated loss pursuant to the systemic risk determination can be periodically adjusted. The FDIC has also retained the ability to cease collection early, extend the special assessment collection period and impose a final shortfall special assessment. The special assessments are tax deductible.
These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party.
These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party. These regulations affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors.
Cullen/Frost has established and currently maintains a risk committee. Resolution Planning The FDIC has required insured depository institutions (“IDIs”) with more than $50 billion in total consolidated assets to submit to the FDIC periodic plans for resolution in the event of the institution’s failure.
Cullen/Frost’s total consolidated assets surpassed $50 billion this year but it already maintains a risk committee that performs these functions. Resolution Planning The FDIC requires certain insured depository institutions (“IDIs”) with more than $50 billion in total consolidated assets to submit to the FDIC periodic plans for resolution in the event of the institution’s failure.
Green Chairman of the Board, Chief Executive Officer and Director 69 Officer of Frost Bank since 1980. Chairman of the Board and Chief Executive Officer since April 2016. Jerry Salinas Group Executive Vice President, Chief Financial Officer 65 Officer of Frost Bank since 1986. Group Executive Vice President, Chief Financial Officer since January 2015.
Green Chairman of the Board, Chief Executive Officer and Director 70 Officer of Frost Bank since 1980. Chairman of the Board and Chief Executive Officer since April 2016. Daniel J. Geddes Group Executive Vice President, Chief Financial Officer 50 Officer of Frost Bank since 1998. Group Executive Vice President, Chief Financial Officer since January 2025.
We dedicate resources to promote a safe and inclusive workplace; attract, develop and retain talented, diverse employees; promote a culture of integrity, caring and excellence; and reward and recognize employees for both the results they deliver and, importantly, how they deliver them.
We dedicate resources to promote a safe workplace; attract, develop and retain talented employees; promote a culture of integrity, caring and excellence; and reward and recognize employees for both the results they deliver and, importantly, how they deliver them. We also seek to design careers that are fulfilling ones, with competitive compensation and benefits alongside a positive work-life balance.
Under the CRA, each depository institution is required to help meet the credit needs of its market areas by, among other things, providing credit to low- and moderate-income individuals and communities. Depository institutions are periodically examined for compliance with the CRA and are assigned ratings.
Community Reinvestment Act The CRA requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practice. Under the CRA, each depository institution is required to help meet the credit needs of its market areas by, among other things, providing credit to low- and moderate-income individuals and communities.
Carol Severyn Group Executive Vice President, Chief Risk Officer 59 Officer of Frost Bank since 1993. Executive Vice President and Auditor from January 2004 to January 2019. Group Executive Vice President, Chief Risk Officer since January 2019. Jimmy Stead Group Executive Vice President, Chief Consumer Banking Officer 48 Officer of Frost Bank since 2001.
Jimmy Stead Group Executive Vice President, Chief Consumer Banking and Technology Officer 49 Officer of Frost Bank since 2001. Group Executive Vice President, Chief Consumer Banking and Technology Officer since January 2020. Group Executive Vice President, Chief Consumer Banking Officer from January 2017 to January 2020.
However, the revised capital requirements of the proposed rule would not apply to Cullen/Frost or Frost Bank because they have less than $100 billion in total consolidated assets and trading assets and liabilities below the threshold for market risk requirements.
Nonetheless, these revised capital requirements would not apply to Cullen/Frost or Frost Bank because they each have less than $100 billion in total consolidated assets and trading assets and liabilities below the threshold for market risk requirements. The Federal Reserve has indicated that it expects to work with the other federal banking regulators in 2025 on a revised proposal.
Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies. 16 Table of Contents In June 2010, the Federal Reserve Board, OCC and FDIC issued comprehensive final guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.
Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.
Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to be violating these obligations.
Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to be violating these obligations. In August 2024, Financial Crimes Enforcement Network (“FinCEN”), which drafts regulations implementing the U.S.
The proposal would adopt an approach for future adjustments to the interchange fee cap, which would occur every other year based on issuer cost data gathered by the Federal Reserve from large debit card issuers. Consumer Financial Protection We are subject to a number of federal and state consumer protection laws that extensively govern our relationship with our customers.
The proposal would adopt an approach for future adjustments to the interchange fee cap, which would occur every other year based on issuer cost data gathered by the Federal Reserve from large debit card issuers. The comment period for this proposal ended in May 2024.
Most provisions of the final rule will become effective on January 1, 2026, and the data reporting requirements will become effective on January 1, 2027. Financial Privacy The federal banking regulators adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about consumers to nonaffiliated third parties.
Financial Privacy The federal banking regulators have adopted rules under the Gramm-Leach-Bliley Act of 1999 that limit the ability of banks and other financial institutions to disclose non-public information about consumers to nonaffiliated third parties.
Incentive Compensation The Federal Reserve Board reviews, as part of its regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as Cullen/Frost, that are not “large, complex banking organizations.” These reviews are tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements.
Failure to comply with these sanctions could have serious financial, legal and reputational consequences, including the imposition of civil money penalties or causing applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required. 16 Table of Contents Incentive Compensation The Federal Reserve Board reviews, as part of its regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as Cullen/Frost, that are not “large, complex banking organizations.” These reviews are tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements.
These regulations affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. 15 Table of Contents Anti-Money Laundering and the USA Patriot Act A major focus of governmental policy on financial institutions in recent years has been aimed at combating money laundering and terrorist financing.
Anti-Money Laundering and the USA Patriot Act A major focus of governmental policy on financial institutions has been aimed at combating money laundering and terrorist financing. The U.S.
As we move forward, we will continue to embrace diversity and approach it in a manner consistent with our philosophy, by focusing on our employees, our customers, and our community. 19 Table of Contents Information About Our Executive Officers The names, ages, recent business experience and positions or offices held by each of the executive officers of Cullen/Frost are as follows: Name and Position Held Age Recent Business Experience Phillip D.
Our efforts are designed to enrich the lives of not only those that are in need but also the lives of our employees who participate in these meaningful and rewarding opportunities. 19 Table of Contents Information About Our Executive Officers The names, ages, recent business experience and positions or offices held by each of the executive officers of Cullen/Frost are as follows: Name and Position Held Age Recent Business Experience Phillip D.
The proposed rule is intended to give consumers control over their financial data, including with whom it is shared, and encourage competition in the provision of consumer financial products or services. For banks with over $50 billion and less than $500 billion in total assets, compliance would be required approximately one year after adoption of the final rule.
Data required to be made available under the rule includes transaction information, account balance, account and routing numbers, terms and conditions, upcoming bill information, and certain account verification data. The final rule is intended to give consumers control over their financial data, including with whom it is shared, and encourage competition in the provision of consumer financial products or services.
It could also affect our competitors differently than us, including in a manner that would make them more competitive. A change in statutes, regulations or regulatory policies applicable to Cullen/Frost or any of its subsidiaries could have a material, adverse effect on our business, financial condition and results of operations.
A change in statutes, regulations or regulatory policies applicable to Cullen/Frost or any of its subsidiaries could have a material, adverse effect on our business, financial condition and results of operations. 18 Table of Contents Human Capital Resources At December 31, 2024, we employed 5,854 full-time equivalent employees.
This commitment to our people has earned us a spot on Forbes magazine's Best Employers list in 2023. 18 Table of Contents Our employees are key to our success as an organization. We are committed to attracting, retaining and promoting top quality talent regardless of sex, sexual orientation, gender identity, race, color, national origin, age, religion and physical ability.
We are committed to providing equal opportunity to and avoiding unlawful discrimination against all applicants and employees and attracting, retaining and promoting top quality talent regardless of personal aspects such as sex, sexual orientation, gender identity, race, color, national origin and age.
The enhanced prudential standards rules, as amended in 2019, require publicly traded bank holding companies with $50 billion or more in total consolidated assets to establish risk committees. Prior to the amendment, the requirement to establish a risk committee was applicable to publicly traded bank holding companies with $10 billion or more in consolidated assets.
The enhanced prudential standards rules, as amended in 2019, require a bank holding company to establish a risk committee that approves and periodically reviews its risk-management policies and oversees its risk-management framework beginning on the first day of the ninth quarter following the date on which the bank holding company’s average total consolidated assets equal or exceed $50 billion.
We also seek to design careers that are fulfilling ones, with competitive compensation and benefits alongside a positive work-life balance. We also dedicate resources to fostering professional and personal growth with continuing education, on-the-job training and development programs.
We also dedicate resources to fostering professional and personal growth with continuing education, on-the-job training and development programs. This commitment to our people has earned us a spot on Forbes magazine's Best Employers list in 2024. Our employees are key to our success as an organization.
Removed
In July 2019, the federal bank regulators adopted final rules (the “Capital Simplifications Rules”) that, among other things, eliminated the standalone prior approval requirement in the Basel III Capital Rules for any repurchase of common stock.
Added
The proposal introduced revised credit risk, equity risk, operational risk, credit valuation adjustment risk and market risk requirements, among other changes, which would substantially increase the levels of required capital.
Removed
Prior to the adoption of the Capital Simplification Rules in July 2019, amounts were deducted from CET1 to the extent that any one such category exceeded 10% of CET1 or all such items, in the aggregate, exceeded 15% of CET1. The Capital Simplification Rules took effect for Cullen/Frost and Frost Bank as of January 1, 2020.
Added
In June 2024, due to the increased estimate of losses, the FDIC announced that it projects that the special assessment will be collected for an additional two quarters beyond the initial eight-quarter collection period, at a lower rate.
Removed
In December 2017, the Basel Committee published standards that it described as the finalization of the Basel III post-crisis regulatory reforms.
Added
The extent to which any such proposed changes in permissible interchange fees will impact our future revenues is currently uncertain. Consumer Financial Protection We are subject to a number of federal and state consumer protection laws that extensively govern our relationship with our customers.
Removed
As a result of this final rule, we accrued $51.5 million ($40.7 million after tax) related to this assessment in the fourth quarter of 2023. This amount represents our current expectation of the full amount of the assessment based on our total uninsured deposits as of December 31, 2022.
Added
Banks with over $10 billion and less than $250 billion in total assets, including Frost Bank, must comply with the new requirements by April 1, 2027.
Removed
The final rules assign all domestic bank holding companies with $100 billion or more in total consolidated assets to one of four categories of tailored regulatory requirements. Cullen/Frost and Frost Bank are generally not impacted by these rules.
Added
In December 2024, the CFPB issued a final rule that, among other things, amends Regulation Z (otherwise known as the “Truth In Lending Act”) and impacts extensions of overdraft credit offered by financial institutions with more than $10 billion in assets.

… 32 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

64 edited+18 added−8 removed139 unchanged
Biggest changeIn addition, the scope and content of U.S. banking regulators' policies on incentive compensation, as well as changes to these policies, could adversely affect our ability to hire, retain and motivate our key employees. 33 Table of Contents Severe Weather, Natural Disasters, Acts Of War Or Terrorism and Other Adverse External Events Could Significantly Impact Our Business and Our Customers Severe weather, natural disasters, acts of war or terrorism and other adverse external events could have a significant impact on our ability to conduct business.
Biggest changeIn addition, the scope and content of U.S. banking regulators' policies on incentive compensation, as well as changes to these policies, could adversely affect our ability to hire, retain and motivate our key employees.
Additionally, negative news about us or the banking industry in general could negatively impact market and/or customer perceptions of our company, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured deposits.
Additionally, negative news about us or the banking industry in general could negatively impact market or customer perceptions of our company, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured deposits.
Though we endeavor to mitigate these threats through product improvements, use of encryption and authentication technology and customer and employee education, such cyber-attacks against us, our merchants, our third-party service providers and our customers remain a serious issue and have been successful in the past.
Though we endeavor to mitigate these threats through product improvements, use of encryption and authentication technology and customer and employee education, such cyber-attacks against us, merchants, our third-party service providers and our customers remain a serious issue and have been successful in the past.
In addition, our reputation or prospects may be significantly damaged by adverse publicity or negative information regarding us, whether or not true, that may be posted on social media, non-mainstream news services or other parts of the internet, and this risk is magnified by the speed and pervasiveness with which information is disseminated through those channels.
In addition, our reputation or future prospects may be significantly damaged by adverse publicity or negative information regarding us, whether or not true, that may be posted on social media, non-mainstream news services or other parts of the internet, and this risk is magnified by the speed and pervasiveness with which information is disseminated through those channels.
Furthermore, evolving responses from federal and state governments and other regulators, and our customers or our third-party partners or vendors, to new challenges such as climate change have impacted and could continue to impact the economic and political conditions under which we operate which could have a material adverse effect on our business, financial condition and results of operations.
Furthermore, evolving responses from federal and state governments and other regulators, and our customers or our third-party partners or vendors, to challenges such as climate change have impacted and could continue to impact the economic and political conditions under which we operate which could have a material adverse effect on our business, financial condition and results of operations.
Negative public opinion could result from our actual or alleged conduct in any number of activities, including (i) lending practices, (ii) branching strategy, (iii) product and service offerings, (iv) corporate governance, (v) regulatory compliance, (vi) mergers and acquisitions, (vii) disclosure, (viii) sharing or inadequate protection of customer information, (ix) successful or attempted cyber-attacks against us, our customers or our third-party partners or vendors and (x) failure to discharge any publicly announced commitments to employees or environmental, social and governance initiatives or to respond adequately to social and sustainability concerns from the viewpoint of our stakeholders from actions taken by government regulators and community organizations in response to our conduct.
Negative public opinion could result from our actual or alleged conduct in any number of activities, including (i) lending practices, (ii) branching strategy, (iii) product and service offerings, (iv) corporate governance, (v) regulatory compliance, (vi) mergers and acquisitions, (vii) disclosure, (viii) sharing or inadequate protection of customer information, (ix) successful or attempted cyber-attacks against us, our customers or our third-party partners or vendors and (x) failure to discharge any publicly announced commitments to employees or ESG initiatives or to respond adequately to social and sustainability concerns from the viewpoint of our stakeholders from actions taken by government regulators and community organizations in response to our conduct.
Furthermore, in the event of a cyber-attack, we may be delayed in identifying or responding to the attack, which could increase the negative impact of the cyber-attack on our business, financial condition and results of operations.
In the event of a cyber-attack, we may be delayed in identifying or responding to the attack, which could increase the negative impact of the cyber-attack on our business, financial condition and results of operations.
In recent years, commercial real estate markets have been particularly impacted by the economic disruption resulting from the COVID-19 pandemic. The COVID-19 pandemic has also been a catalyst for the evolution of various remote work options which could impact the long-term performance of some types of office properties within our commercial real estate portfolio.
In recent years, commercial real estate markets have been particularly impacted by the economic disruption resulting from the COVID-19 pandemic. The COVID-19 pandemic has also been a catalyst for the evolution of various remote work options which have impacted the long-term performance of some types of office properties within our commercial real estate portfolio.
If these vendors encounter any of these issues, or if we have difficulty communicating with them, we could be exposed to disruption of operations, loss of service or connectivity to customers, reputational damage, and litigation risk that could have a material adverse effect on our business and, in turn, our financial condition and results of operations.
If these vendors encounter any of these issues, or if we have difficulty communicating with them regarding such issues, we could be exposed to disruption of operations, loss of service or connectivity to customers, reputational damage, and litigation risk that could have a material adverse effect on our business and, in turn, our financial condition and results of operations.
Climate change exposes us to physical risk as its effects may lead to more frequent and more extreme weather events, such as prolonged droughts or flooding, tornados, hurricanes, wildfires and extreme seasonal weather; and longer-term shifts, such as increasing average temperatures, ozone depletion and rising sea levels.
Climate change exposes us and our customers to physical risk as its effects may lead to more frequent and more extreme weather events, such as prolonged droughts or flooding, tornados, hurricanes, wildfires and extreme seasonal weather; and longer-term shifts, such as increasing average temperatures, ozone depletion and rising sea levels.
Such changes could subject us to additional costs, limit the types of financial services and products we may offer, limit our ability to return capital to shareholders or conduct certain activities, and/or increase the ability of non-banks to offer competing financial services and products, among other things.
Such changes have and could continue to subject us to additional costs, limit the types of financial services and products we may offer, limit our ability to return capital to shareholders or conduct certain activities, and/or increase the ability of non-banks to offer competing financial services and products, among other things.
Economic conditions and the loss of confidence in financial institutions may increase our cost of funding and limit access to certain customary 32 Table of Contents sources of capital, including inter-bank borrowings, repurchase agreements and borrowings from the discount window of the Federal Reserve. We cannot assure that such capital will be available on acceptable terms or at all.
Economic conditions and the loss of confidence in financial institutions may increase our cost of funding and limit access to certain customary sources of capital, including inter-bank borrowings, repurchase agreements and borrowings from the discount window of the Federal Reserve. We cannot assure that such capital will be available on acceptable terms or at all.
These third-party vendors are sources of operational and informational security risk to us, including risks associated with operational errors, information system failures, interruptions or breaches and unauthorized disclosures of sensitive or confidential client or customer information.
These third-party vendors are sources of operational, cybersecurity, and informational security risk to us, including risks associated with operational errors, coding errors, information system failures, interruptions or breaches and unauthorized disclosures of sensitive or confidential client or customer information.
Climate change also exposes us to transition risks associated with the transition to a less carbon-dependent economy. Transition risks may result from changes in policies; laws and regulations; technologies; and/or market preferences to address climate change.
Climate change also exposes us and our customers to transition risks associated with the transition to a less carbon-dependent economy. Transition risks may result from changes in policies; laws and regulations; technologies; and/or market preferences to address climate change.
Any failure or circumvention of our controls and procedures; failure to comply with regulations related to controls and procedures; or failure to comply with our corporate governance procedures could have a material adverse effect on our reputation, business, financial 24 Table of Contents condition and results of operations, including subjecting us to litigation, regulatory fines, penalties or other sanctions.
Any failure or circumvention of our controls and procedures; failure to comply with regulations related to controls and procedures; or failure to comply with our corporate governance procedures could have a material adverse effect on our reputation, business, financial condition and results of operations, including subjecting us to litigation, regulatory fines, penalties or other sanctions.
Replacing these external vendors could also entail significant delay and expense. We Are Subject To Litigation Risk Pertaining To Fiduciary Responsibility From time to time, customers make claims and take legal action pertaining to our performance of our fiduciary responsibilities.
Replacing these external vendors could also entail significant delay and expense. 27 Table of Contents We Are Subject To Litigation Risk Pertaining To Fiduciary Responsibility From time to time, customers make claims and take legal action pertaining to our performance of our fiduciary responsibilities.
In the normal course of business, we are routinely subject to examinations and challenges from federal and applicable state tax authorities regarding the amount of taxes due in connection with investments we have made and the businesses in which we have engaged. Recently, federal and state taxing authorities have become increasingly aggressive in challenging tax positions taken by financial institutions.
In the normal course of business, we are routinely subject to examinations and challenges from federal and applicable state tax authorities regarding the amount of taxes due in connection with investments we have made and the businesses in which we have engaged. Federal and state taxing authorities have been aggressive in challenging tax positions taken by financial institutions.
As market interest rates have increased, we have experienced significant unrealized losses on our available for sale securities portfolio. Unrealized losses related to available for sale securities are reflected in accumulated other comprehensive income in our consolidated balance sheets and reduce the level of our book capital and tangible common equity.
We have experienced significant unrealized losses on our available-for sale-securities portfolio as a result of increases in market interest rates. Unrealized losses related to available-for-sale securities are reflected in accumulated other comprehensive income in our consolidated balance sheets and reduce the level of our book capital and tangible common equity.
Such events and long-term shifts may damage, destroy or otherwise impact the value or productivity of our properties and other assets; reduce the availability of insurance; and/or disrupt our operations and other activities through prolonged outages.
Such events and long-term shifts may damage, destroy or otherwise impact the value or productivity of our properties and other assets; increase the premiums for and reduce the availability of insurance; and/or disrupt our operations and other activities through prolonged outages.
Management’s Discussion and Analysis of Financial Condition and Results of Operations elsewhere in this report for further discussion related to our process for determining the appropriate level of the allowance for credit losses. 22 Table of Contents We Are Subject to Risk Arising From Conditions In The Commercial Real Estate Market As of December 31, 2023, commercial real estate mortgage loans comprised approximately 35.8% of our loan portfolio.
Management’s Discussion and Analysis of Financial Condition and Results of Operations elsewhere in this report for further discussion related to our process for determining the appropriate level of the allowance for credit losses. 22 Table of Contents We Are Subject to Risk Arising From Conditions In The Commercial Real Estate Market As of December 31, 2024, commercial real estate mortgage loans comprised approximately 34.5% of our loan portfolio.
Moreover, if we need to raise capital in the future, we may have to do so when many other financial institutions are also seeking to raise capital and would have to compete with those institutions for investors.
Moreover, if we need to raise capital in the future, we may have to do so when many other financial institutions are also seeking to raise 33 Table of Contents capital and would have to compete with those institutions for investors.
Increases in interest rates and/or weakening economic conditions could adversely impact the ability of borrowers to repay outstanding loans or the value of the collateral securing these loans. As of December 31, 2023, approximately 84.4% of our loan portfolio consisted of commercial and industrial, energy, construction and commercial real estate mortgage loans.
Increases in interest rates and/or weakening economic conditions could adversely impact the ability of borrowers to repay outstanding loans or the value of the collateral securing these loans. As of December 31, 2024, approximately 82.9% of our loan portfolio consisted of commercial and industrial, energy, construction and commercial real estate mortgage loans.
New Lines Of Business, Products Or Services and Technological Advancements May Subject Us To Additional Risks From time to time, we implement new lines of business or offer new products and services within existing lines of business. For instance, we are currently implementing a new residential mortgage product offering.
New Lines Of Business, Products Or Services and Technological Advancements May Subject Us To Additional Risks From time to time, we implement new lines of business or offer new products and services within existing lines of business. For instance, we recently implemented a new residential mortgage product offering.
Any failures related to upgrades and maintenance of our technology and information systems could further increase our information and system security risk. Our increased use of cloud and other technologies, such as remote work technologies, also increases our risk of being subject to a cyber-attack.
Any failures related to upgrades and maintenance of our technology and information systems could further increase our information and system security risk. Our increased use of cloud and other technologies, such as remote work technologies, and the increased connectivity of third parties and electronic devices to our systems also increases our risk of being subject to a cyber-attack.
Regulatory approvals could be delayed, impeded, restrictively conditioned or denied due to existing or new regulatory issues we have, or may have, with regulatory agencies, including, without limitation, issues related to Bank Secrecy Act compliance, Community Reinvestment Act issues, fair lending laws, fair housing laws, consumer protection laws, unfair, deceptive, or abusive acts or practices regulations and other laws and regulations.
Regulatory approvals could be delayed, impeded, restrictively conditioned or denied due to existing or new regulatory issues we have, or may have, with regulatory agencies, including, without limitation, issues related to BSA compliance, CRA issues, fair lending laws, fair housing laws, consumer protection laws, unfair, deceptive, or abusive acts or practices regulations and other laws and regulations.
Unlike larger national or other regional banks that are more geographically diversified, we provide banking and financial services primarily to customers across Texas through financial centers in the Austin, Corpus Christi, Dallas, Fort Worth, Houston, Permian Basin, Rio Grande Valley and San Antonio regions.
Unlike larger national or other regional banks that are more geographically diversified, we provide banking and financial services primarily to customers across Texas through financial centers in the Austin, Dallas, Fort Worth, Gulf Coast, Houston, Permian Basin, and San Antonio regions.
Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations. 29 Table of Contents In addition, we anticipate increased regulatory scrutiny, in the course of routine examinations and otherwise, and new regulations in response to recent negative developments in the banking industry, which may increase our cost of doing business and reduce our profitability.
Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations. In addition, we face significant regulatory scrutiny, in the course of routine examinations and otherwise, and new regulations in response to negative developments in the banking industry, which may increase our cost of doing business and reduce our profitability.
Even well protected information, networks, systems and facilities remain potentially vulnerable to attempted security breaches or disruptions because the techniques used in such attempts are constantly 26 Table of Contents evolving and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected.
Furthermore, even well protected information, networks, systems and facilities remain potentially vulnerable to attempted security breaches or disruptions because the techniques used in such attempts are constantly evolving, including as a result of artificial intelligence, and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected.
We Are Subject To Volatility Risk In Crude Oil Prices As of December 31, 2023, we had $935.3 million of energy loans which comprised approximately 5.0% of our loan portfolio at that date. Furthermore, energy production and related industries represent a large part of the economies in some of our primary markets.
We Are Subject To Volatility Risk In Crude Oil Prices As of December 31, 2024, we had $1.1 billion of energy loans which comprised approximately 5.4% of our loan portfolio at that date. Furthermore, energy production and related industries represent a large part of the economies in some of our primary markets.
Continuing deterioration in economic conditions, including the possibility of a recession, affecting borrowers and securities issuers; inflation; rising interest rates; new information regarding existing loans, credit commitments and securities holdings; the lingering effects of the COVID-19 pandemic or other global pandemics; natural disasters and risks related to climate change; and identification of additional problem loans, ratings down-grades and other factors, both within and outside of our control, may require an increase in the allowances for credit losses on loans, securities and off-balance sheet credit exposures.
Changes in economic conditions; inflation; interest rate volatility; new information regarding existing loans, credit commitments and securities holdings; the lingering effects of the COVID-19 pandemic or other global pandemics; natural disasters and risks related to climate change; and identification of additional problem loans, ratings down-grades and other factors, both within and outside of our control, may require an increase in the allowances for credit losses on loans, securities and off-balance sheet credit exposures.
Commercial real estate mortgage loans generally involve a greater degree of credit risk than residential real estate mortgage loans because they typically have larger balances and are more affected by adverse conditions in the economy.
Commercial real estate mortgage loans generally involve a greater degree of credit risk than residential real estate mortgage loans because the collateral securing these loans may not be sold as easily as residential real estate and because they typically have larger balances and are more affected by adverse conditions in the economy.
Ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit and reputational risks and costs. ITEM 1B. UNRESOLVED STAFF COMMENTS None 34 Table of Contents
Ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit and reputational risks and costs, and may subject us to different and potentially conflicting requirements. ITEM 1B. UNRESOLVED STAFF COMMENTS None 35 Table of Contents
As of December 31, 2023, approximately 53% of our deposits were uninsured and we rely on these deposits for liquidity. A failure to maintain adequate liquidity could have a material adverse effect on our business, financial condition and results of operations. Unrealized Losses in Our Securities Portfolio Could Affect Liquidity.
As of December 31, 2024, approximately 54% of our deposits were uninsured and we rely on these deposits for liquidity. A failure to maintain adequate liquidity could have a material adverse effect on our business, financial condition and results of operations.
The price per barrel of crude oil was approximately $72 on December 31, 2023, down from $80 on December 31, 2022. While losses in our energy portfolio have not been significant in recent years, we have experienced increased losses within our energy portfolio in years that were impacted by significant oil price volatility, particularly in 2020.
The price per barrel of crude oil was approximately $72 at both December 31, 2024, and December 31, 2023. While losses in our energy portfolio have not been significant in recent years, we have experienced increased losses within our energy portfolio in years that were impacted by significant oil price volatility.
Because we conduct most of our business under the “Frost” brand, negative public opinion about one business could affect our other businesses. 25 Table of Contents Our Business, Financial Condition and Results Of Operations Are Subject To Risk From Changes in Customer Behavior Individual, economic, political, industry-specific conditions and other factors outside of our control, such as fuel prices, energy costs, real estate values, inflation, taxes or other factors that affect customer income levels, could alter anticipated customer behavior, including borrowing, repayment, investment and deposit practices.
Our Business, Financial Condition and Results Of Operations Are Subject To Risk From Changes in Customer Behavior Individual, economic, political, industry-specific conditions and other factors outside of our control, such as fuel prices, energy costs, real estate values, inflation, taxes or other factors that affect customer income levels, could alter anticipated customer behavior, including borrowing, repayment, investment and deposit practices.
As a result, if you acquire our common stock or preferred stock, you could lose some or all of your investment. 31 Table of Contents Certain Banking Laws May Have An Anti-Takeover Effect Provisions of federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire us, even if doing so would be perceived to be beneficial to our shareholders.
Certain Banking Laws May Have An Anti-Takeover Effect Provisions of federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire us, even if doing so would be perceived to be beneficial to our shareholders.
A significant decline in general economic conditions in Texas, whether caused by recession, inflation, unemployment, changes or prolonged stagnation in oil prices, changes in securities markets, acts of terrorism, pandemics, natural disasters, climate change, outbreak of hostilities or other international or domestic occurrences or other factors could impact these local economic conditions and, in turn, have a material adverse effect on our business, financial condition and results of operations.
A significant decline in general economic conditions in Texas, whether caused by recession, inflation, unemployment, changes or prolonged stagnation in oil prices, changes in securities markets, acts of terrorism, pandemics, natural disasters, climate change, outbreak of hostilities or other international or domestic occurrences or other factors could impact these local economic conditions and, in turn, have a material adverse effect on our business, financial condition and results of operations. 28 Table of Contents We Are Subject to Risk Arising From The Soundness Of Other Financial Institutions and Counterparties Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships.
Climate changes presents multi-faceted risks, including (i) operational risk from the physical effects of climate events on our facilities and other assets as well as those of our customers; (ii) credit risk from borrowers with significant exposure to climate risk; and (iii) reputational risk from stakeholder concerns about our practices related to climate change, our carbon footprint and our business relationships with customers who operate in carbon-intensive industries.
Climate change presents multi-faceted risks, including (i) operational risk from the physical effects of climate events on our facilities and other assets as well as those of our customers; (ii) credit risk from borrowers with significant exposure to climate risk; (iii) legal, regulatory and compliance risks arising from the policy, legal and regulatory changes associated with the transition to a less carbon-dependent economy; and (iv) reputational risk from stakeholder concerns about our practices related to climate change, our carbon footprint and our business relationships with customers who operate in carbon-intensive industries, and from negative public opinion related to any of our actions or inaction in response to climate change and our climate change strategy.
Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, not shareholders. These regulations and supervisory guidance affect our lending practices, capital structure, investment practices, dividend policy and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes.
Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, not shareholders. These regulations and supervisory guidance affect our lending practices, capital structure, investment practices, dividend policy, the fees we can charge for certain products or transactions, and growth, among other things.
Our customers, employees and third parties that we do business with have been, and will continue to be, targeted by parties using fraudulent e-mails and other communications in attempts to misappropriate passwords, bank account information or other personal information or to introduce viruses or other malware programs to our information systems, the information systems of our merchants or third-party service providers and/or our customers' personal devices, which are beyond our security control systems.
The risk of a security breach or disruption, particularly through cyber-attack or cyber-intrusion, has increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. 26 Table of Contents Our customers, employees and third parties that we do business with have been, and will continue to be, targeted by parties using fraudulent e-mails and other communications in attempts to misappropriate passwords, bank account information or other personal information or to introduce viruses or other malware programs to our information systems, the information systems of merchants or third-party service providers and/or our customers' personal devices, which are beyond our security control systems.
Our access to funding sources in amounts adequate to finance our activities or on terms that are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy generally.
Liquidity Risk We Are Subject To Liquidity Risk We require liquidity to meet our deposit and debt obligations as they come due. Our access to funding sources in amounts adequate to finance our activities or on terms that are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy generally.
We Are Subject To Risk Arising From Failure Or Circumvention Of Our Controls and Procedures Our internal controls, including fraud detection and controls, disclosure controls and procedures, and corporate governance procedures are based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the controls and procedures are met.
Any such failure in our analytical or forecasting models could have a material adverse effect on our business, financial condition and results of operations. 24 Table of Contents We Are Subject To Risk Arising From Failure Or Circumvention Of Our Controls and Procedures Our internal controls, including fraud detection and controls, disclosure controls and procedures, and corporate governance procedures are based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the controls and procedures are met.
Such litigation is often expensive, time-consuming, disruptive to our operations and distracting to management. If we are found to infringe upon one or more patents or other intellectual property rights, we may be required to pay substantial damages or royalties to a third-party.
If we are found to infringe upon one or more patents or other intellectual property rights, we may be required to pay substantial damages or royalties to a third-party.
Recent regulation has reduced the regulatory burden of large bank holding companies, and raised the asset thresholds at which more onerous requirements apply, which could cause certain large bank holding companies with less than $250 billion in total consolidated assets, which were previously subject to more stringent enhanced prudential standards, to become more competitive or to pursue expansion more aggressively. 28 Table of Contents We also face competition from many other types of financial institutions, including, without limitation, savings and loans, credit unions, finance companies, brokerage firms, insurance companies and other financial intermediaries.
Recent regulation has reduced the regulatory burden of large bank holding companies, and raised the asset thresholds at which more onerous requirements apply, which could cause certain large bank holding companies with less than $250 billion in total consolidated assets, which were previously subject to more stringent enhanced prudential standards, to become more competitive or to pursue expansion more aggressively.
Changes to statutes, regulations or regulatory policies or supervisory guidance, including changes in interpretation or implementation of statutes, regulations, policies or supervisory guidance, could affect us in substantial and unpredictable ways.
Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. Changes to statutes, regulations or regulatory policies or supervisory guidance, including changes in interpretation or implementation of statutes, regulations, policies or supervisory guidance, have and could continue to affect us in substantial and unpredictable ways.
A prolonged period of inflation may impact our profitability by negatively impacting our fixed costs and expenses. Economic and inflationary pressure on consumers and uncertainty regarding economic improvement could result in changes in consumer and business spending, borrowing and savings habits.
Current economic conditions are being heavily impacted by recent inflationary conditions and higher interest rates, the effects of which may impact our profitability by negatively impacting our fixed costs and expenses. Economic and inflationary pressure on consumers and uncertainty regarding economic improvement could result in changes in consumer and business spending, borrowing and savings habits.
Furthermore, the occurrence of any such event in the future could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.
Furthermore, the occurrence of any such event in the future could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations. 34 Table of Contents Climate Change Could Have a Material Negative Impact on Us and Our Customers Our business, as well as the operations and activities of our customers, could be negatively impacted by climate change.
Actions by members of the Organization of Petroleum Exporting Countries (“OPEC”) can impact global crude oil production levels and lead to significant volatility in global oil supplies and market oil prices.
Global wars, military conflicts, terrorism, governmental and social responses to environmental issues and climate change, or other geopolitical events as well as actions by members of the Organization of Petroleum Exporting Countries (“OPEC”) can impact global crude oil and gas production levels and lead to significant volatility in global oil and gas supplies and market prices.
Furthermore, failure to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits from an acquisition could have a material adverse effect on our business, financial condition and results of operations. 30 Table of Contents Acquisitions May Be Delayed, Impeded, Or Prohibited Due To Regulatory Issues Acquisitions by financial institutions, including us, are subject to approval by a variety of federal and state regulatory agencies (collectively, “regulatory approvals”).
Furthermore, failure to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits from an acquisition could have a material adverse effect on our business, financial condition and results of operations.
Risks Associated With Our Common Stock and Preferred Stock The Trading Volumes In Our Common Stock and Preferred Stock Are Less Than That Of Other Larger Financial Services Companies Although our common stock and preferred stock are listed for trading on the NYSE, the trading volume in our common stock is less than that of other, larger financial services companies.
Difficulties associated with potential acquisitions that may result from these factors could have a material adverse effect on our business, financial condition and results of operations. 31 Table of Contents Risks Associated With Our Common Stock and Preferred Stock The Trading Volumes In Our Common Stock and Preferred Stock Are Less Than That Of Other Larger Financial Services Companies Although our common stock and preferred stock are listed for trading on the NYSE, the trading volume in our common stock is less than that of other, larger financial services companies.
Compliance and Regulatory Risks We Are Subject To Extensive Government Regulation and Supervision and Related Enforcement Powers and Other Legal Remedies We, primarily through Cullen/Frost, Frost Bank and certain non-bank subsidiaries, are subject to extensive federal and state regulation and supervision, which vests a significant amount of discretion in the various regulatory authorities.
Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our business, financial condition and results of operations. 29 Table of Contents Compliance and Regulatory Risks We Are Subject To Extensive Government Regulation and Supervision and Related Enforcement Powers and Other Legal Remedies We, primarily through Cullen/Frost, Frost Bank and certain non-bank subsidiaries, are subject to extensive federal and state regulation and supervision, which vests a significant amount of discretion in the various regulatory authorities.
We Are Subject To Government Regulation and Oversight Relating to Data and Privacy Protection Our business requires the collection and retention of large volumes of customer data, including personally identifiable information in various information systems that we maintain and in those maintained by third parties with whom we contract to provide data services.
Our interest expense will increase, and our net interest margin will decrease, if we begin offering interest on demand deposits to attract additional customers or maintain current customers, which could have a material adverse effect on our business, financial condition and results of operations. 30 Table of Contents We Are Subject To Government Regulation and Oversight Relating to Data and Privacy Protection Our business requires the collection and retention of large volumes of customer data, including personally identifiable information in various information systems that we maintain and in those maintained by third parties with whom we contract to provide data services.
In particular, the activity of fintechs/wealthtechs has grown significantly over recent years and is expected to continue to grow. Some fintechs/wealthtechs are not subject to the same regulation as we are, which may allow them to be more competitive.
Some fintechs/wealthtechs are not subject to the same regulation as we are, which may allow them to be more competitive.
In addition, financial markets and global supply chains may be adversely affected by the current or anticipated impact of military conflict, including the current wars in Ukraine and Israel, terrorism or other geopolitical events. Current economic conditions are being heavily impacted by elevated levels of inflation and rising interest rates.
In addition, financial 32 Table of Contents markets and global supply chains may be adversely affected by the current or anticipated impact of global wars/military conflicts, terrorism or other geopolitical events.
During the ordinary course of business, we foreclose on and take title to properties securing certain loans. There is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage.
We Are Subject To Environmental Liability Risk Associated With Lending Activities A significant portion of our loan portfolio is secured by real property. During the ordinary course of business, we foreclose on and take title to properties securing certain loans. There is a risk that hazardous or toxic substances could be found on these properties.
Our business, reputation and ability to attract and retain employees may also be harmed if our response to climate change is perceived to be ineffective or insufficient.
The risks associated with climate change are rapidly changing and evolving in an escalating fashion, making them difficult to assess due to limited data. Our business, reputation and ability to attract and retain employees may also be harmed if our response to climate change is perceived to be ineffective or insufficient.
Climate Change Could Have a Material Negative Impact on Us and Our Customers Our business, as well as the operations and activities of our customers, could be negatively impacted by climate change. Climate change presents both immediate and long-term risks to us and our customers and these risks are expected to increase over time.
Climate change presents both immediate and long-term risks to us and our customers and these risks are expected to increase over time.
In recent years, decreased market oil prices compressed margins for many U.S. and Texas-based oil producers, particularly those that utilize higher-cost production technologies such as hydraulic fracking and horizontal drilling, as well as oilfield service providers, energy equipment manufacturers and transportation suppliers, among others.
Prolonged periods of low oil and gas commodity prices could negatively impact our borrowers' ability to pay, particularly those that utilize higher-cost production technologies such as hydraulic fracking and horizontal drilling, as well as oilfield service providers, energy equipment manufacturers and transportation suppliers, among others.
The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our business, financial condition and results of operations. Liquidity Risk We Are Subject To Liquidity Risk We require liquidity to meet our deposit and debt obligations as they come due.
Environmental reviews of real property before initiating foreclosure actions may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our business, financial condition and results of operations.
The plaintiffs in these actions frequently seek injunctions and substantial damages and may also seek to enter into licensing agreements with us to obtain ongoing fees. 27 Table of Contents Regardless of the scope or validity of such patents or other intellectual property rights, or the merits of any claims by potential or actual litigants, we may have to engage in protracted litigation.
Regardless of the scope or validity of such patents or other intellectual property rights, or the merits of any claims by potential or actual litigants, we may have to engage in protracted litigation. Such litigation is often expensive, time-consuming, disruptive to our operations and distracting to management.
Such claims may increase in the future as the financial services sector becomes more reliant on information technology vendors.
Such claims may increase in the future as the financial services sector becomes more reliant on information technology vendors. The plaintiffs in these actions frequently seek injunctions and substantial damages and may also seek to enter into licensing agreements with us to obtain ongoing fees.
Environmental laws may require us to incur substantial expenses and may materially reduce the affected property’s value or limit our ability to use or ability to sell the affected property. Environmental reviews of real property before initiating foreclosure actions may not be sufficient to detect all potential environmental hazards.
If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require us to incur substantial expenses and may materially reduce the affected property’s value or limit our ability to use or ability to sell the affected property.
Future oil price volatility could have negative impacts on the U.S. economy, in particular, the economies of energy-dominant states such as Texas, and our borrowers and customers. We Are Subject To Environmental Liability Risk Associated With Lending Activities A significant portion of our loan portfolio is secured by real property.
Future oil price volatility could have negative impacts on the U.S. economy, in particular, the economies of energy-dominant states such as Texas, and our borrowers and customers. Such negative impacts could result in an increased rate of loan delinquencies and credit losses which, accordingly, could have a material adverse effect on our business, financial condition and results of operations.
The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Also, technology and other changes have lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks.
Also, technology and other changes have lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks. In particular, the activity of fintechs/wealthtechs has grown significantly over recent years and is expected to continue to grow.
Removed
In March of 2020, disagreements between members of OPEC signaled that production levels would rise and, when coupled with the uncertainties of the COVID-19 pandemic, led to a significant decline in market oil prices.
Added
The energy industry and market prices for oil and gas have historically been cyclical.
Removed
As the global economy emerged from pandemic lockdowns in 2021, the demand for oil naturally increased and supply could not keep up with the sudden surge in demand. Consequently, oil prices began to rise. The current wars in Ukraine and Israel have also impacted global oil supplies and caused further volatility in oil prices.
Added
We may also need to raise additional capital and liquidity through the issuance of stock to comply with regulatory mandates, which could dilute the ownership of existing stockholders, or reduce or even eliminate common stock dividends or share repurchases to preserve capital and liquidity. Unrealized Losses in Our Securities Portfolio Could Affect Liquidity.
Removed
Any such failure in our analytical or forecasting models could have a material adverse effect on our business, financial condition and results of operations.
Added
There has been an increased focus by investors and other stakeholders on topics related to corporate policies and approaches regarding ESG and diversity, equity and inclusion matters.
Removed
The risk of a security breach or disruption, particularly through cyber-attack or cyber-intrusion, has increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.
Added
Due to divergent stakeholder 25 Table of Contents views on these matters, we are at increased risk that any action, or lack thereof, concerning these matters will be perceived negatively by some stakeholders, which could negatively affect our business and reputation.
Removed
We Are Subject to Risk Arising From The Soundness Of Other Financial Institutions and Counterparties Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships.
Added
Because we conduct most of our business under the “Frost” brand, negative public opinion about one business could affect our other businesses.
Removed
Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our business, financial condition and results of operations.
Added
Events that result in damage to our reputation may also increase our litigation risk, increase regulatory scrutiny, affect our ability to attract and retain customers and employees and have other consequences that we may not be able to predict.
Removed
Our interest expense will increase and our net interest margin will decrease if we begin offering interest on demand deposits to attract additional customers or maintain current customers, which could have a material adverse effect on our business, financial condition and results of operations.
Added
It is possible that employees, merchants or our third-party vendors may not follow our cybersecurity policies and procedures, which may expose us to a cyber-attack.
Removed
Difficulties associated with potential acquisitions that may result from these factors could have a material adverse effect on our business, financial condition and results of operations.
Added
We also face competition from many other types of financial institutions, including, without limitation, savings and loans, credit unions, finance companies, brokerage firms, insurance companies and other financial intermediaries. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation.

… 10 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

8 edited+1 added−0 removed18 unchanged
Biggest changeThese committees generally meet monthly to provide oversight of the risk management strategy, standards, policies, practices, controls, and mitigation and prevention efforts employed to manage security risks. More frequent meetings occur from time to time in accordance with the Incident Response Plan in order to facilitate timely informing and monitoring efforts.
Biggest changeThese committees generally meet monthly (in the case of the Information Technology Risk Committee) and quarterly (in the case of the Information Security Oversight Committee) to provide oversight of the risk management strategy, standards, policies, practices, controls, and mitigation and prevention efforts employed to manage security risks.
Our internal systems, processes, and controls are designed to mitigate loss from cyber-attacks and, while we have experienced cybersecurity incidents in the past, to date, risks from cybersecurity threats have not materially affected our company.
Our internal systems, processes, and controls are designed to mitigate loss from cyber-attacks and, while we have experienced cybersecurity incidents in the past, to date, cybersecurity incidents and risks from cybersecurity threats have not materially affected our company.
The information security program is periodically reviewed by such personnel with the goal of addressing changing threats and conditions. We employ an in-depth, layered, defensive strategy that embraces a “trust by design” philosophy when designing new products, services, and technology. We leverage people, processes, and technology as part of our efforts to manage and maintain cybersecurity controls.
The information security program is periodically reviewed by such personnel with the goal of addressing changing threats and conditions. We employ an in-depth, layered, defensive strategy that embraces a “security by design” philosophy when designing new products, services, and technology. We leverage people, processes, and technology as part of our efforts to manage and maintain cybersecurity controls.
We maintain an Incident Response Plan that provides a documented framework for responding to actual or potential cybersecurity incidents, including timely notification of and escalation to the appropriate Board-approved management committees, as discussed further below, and to the Technology Committee of our board of directors.
We maintain an Incident Response Plan that provides a documented framework for responding to actual or potential cybersecurity incidents, including timely notification of and escalation to the appropriate Board-approved management committees, as discussed further below, to the Technology Committee of our board of directors, and external agencies.
For further discussion of risks from cybersecurity threats, see the section captioned “Our Information Systems May Experience Failure, Interruption Or Breach In Security” in Item 1A. Risk Factors. Governance Our Chief Information Security Officer is accountable for managing our enterprise information security department and delivering our information security program.
For further discussion of risks from cybersecurity threats, see the section captioned “Our Information Systems May Experience Failure, Interruption Or Breach In Security” in Item 1A. Risk Factors. Governance Our Chief Information Security Officer is responsible for managing our enterprise information security department and delivering our information security program.
The second line of defense function is separated from the first line of defense function through 35 Table of Contents organizational structure and ultimately reports directly to the Chief Risk Officer. The department, as a whole, consists of information security professionals with varying degrees of education and experience.
The second line of defense function is separated from the first 36 Table of Contents line of defense function through organizational structure and ultimately reports directly to the Chief Risk Officer. The department, as a whole, consists of information security professionals with varying degrees of education and experience.
The Technology Committee of our board of directors is responsible for overseeing our information security and technology programs, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks.
The Technology Committee of our board of directors meets quarterly and is responsible for overseeing our information security and technology programs, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks.
The responsibilities of this department include cybersecurity risk assessment, defense operations, incident response, vulnerability assessment, threat intelligence, identity access governance, third-party risk management, and business resilience.
The responsibilities of this department include cybersecurity risk assessment, defense operations, incident response, vulnerability assessment, threat intelligence, identity access governance, third-party risk management, information governance risk and compliance, and business resilience.
Added
More frequent meetings occur from time to time in accordance with the Incident Response Plan in order to facilitate timely informing and monitoring efforts.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed1 unchanged
Biggest changeWe also own or lease other facilities within our primary market areas in the regions of Austin, Corpus Christi, Dallas, Fort Worth, Houston, Permian Basin, Rio Grande Valley and San Antonio. We consider our properties to be suitable and adequate for our present needs.
Biggest changeWe also own or lease other facilities within our primary market areas in the regions of Austin, Dallas, Fort Worth, Gulf Coast, Houston, Permian Basin, and San Antonio. We consider our properties to be suitable and adequate for our present needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 3. LEGAL PROCEEDINGS We are subject to various claims and legal actions that have arisen in the course of conducting business. Management does not expect the ultimate disposition of these matters to have a material adverse effect on our business, financial condition and results of operations. ITEM 4. MINE SAFETY DISCLOSURES None 36 Table of Contents PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS We are subject to various claims and legal actions that have arisen in the course of conducting business. Management does not expect the ultimate disposition of these matters to have a material adverse effect on our business, financial condition and results of operations. ITEM 4. MINE SAFETY DISCLOSURES None 37 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

15 edited+1 added−1 removed5 unchanged
Biggest changePeriod Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans at the End of the Period October 1, 2023 to October 31, 2023 26,318 (1) $ 89.67 — $ 60,992 November 1, 2023 to November 30, 2023 159 (1) 96.60 — 60,992 December 1, 2023 to December 31, 2023 — — — 60,992 Total 26,477 — (1) Repurchases made in connection with the vesting of certain share awards.
Biggest changePeriod Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans at the End of the Period (1) October 1, 2024 to October 31, 2024 68,718 (2) $ 127.42 — $ 100,045 November 1, 2024 to November 30, 2024 696 (2) 136.93 — 100,045 December 1, 2024 to December 31, 2024 47 (2) 137.99 — 100,045 Total 69,461 — (1) On January 25, 2024, Cullen/Frost announced that our board of directors authorized a $150.0 million stock repurchase plan, allowing us to repurchase shares of our common stock over a one -year period expiring on January 24, 2025.
The following table provides information with respect to purchases made by or on behalf of us or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of our common stock during the fourth quarter of 2023.
The following table provides information with respect to purchases made by or on behalf of us or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of our common stock during the fourth quarter of 2024.
Stock-Based Compensation Plans Information regarding stock-based compensation awards outstanding and available for future grants as of December 31, 2023, segregated between stock-based compensation plans approved by shareholders and stock-based compensation plans not approved by shareholders, is presented in the table below.
Stock-Based Compensation Plans Information regarding stock-based compensation awards outstanding and available for future grants as of December 31, 2024, segregated between stock-based compensation plans approved by shareholders and stock-based compensation plans not approved by shareholders, is presented in the table below.
The graph assumes an investment of $100 on December 31, 2018 and reinvestment of dividends on the date of payment without commissions.
The graph assumes an investment of $100 on December 31, 2019 and reinvestment of dividends on the date of payment without commissions.
These policies have been reasonably designed to promote compliance with insider trading laws, rules and regulations, and applicable NYSE listing standards. 38 Table of Contents Performance Graph The performance graph below compares the cumulative total shareholder return on Cullen/Frost Common Stock with the cumulative total return on the equity securities of companies included in the Standard & Poor’s 500 Stock Index and the Standard and Poor’s 500 Bank Index, measured at the last trading day of each year shown.
This policy has been reasonably designed to promote compliance with insider trading laws, rules and regulations, and applicable NYSE listing standards. 39 Table of Contents Performance Graph The performance graph below compares the cumulative total shareholder return on Cullen/Frost Common Stock with the cumulative total return on the equity securities of companies included in the Standard & Poor’s 500 Stock Index and the Standard and Poor’s 500 Bank Index, measured at the last trading day of each year shown.
Such plans also provide us with the ability to repurchase shares of common stock that can be used to satisfy obligations related to stock compensation awards in order to mitigate the dilutive effect of such awards. Under the 2023 Repurchase Plan, we repurchased 400,868 shares at a total cost of $39.0 million during 2023.
Such plans also provide us with the ability to repurchase shares of common stock that can be used to satisfy obligations related to stock compensation awards in order to mitigate the dilutive effect of such awards. Under the 2024 Repurchase Plan, we repurchased 489,862 shares at a total cost of $50.0 million during 2024.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market for Our Common Stock Our common stock is traded on the NYSE under the symbol “CFR”. As of December 31, 2023, there were 64,185,287 shares of our common stock outstanding held by 1,050 holders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market for Our Common Stock Our common stock is traded on the NYSE under the symbol “CFR”. As of December 31, 2024, there were 64,197,432 shares of our common stock outstanding held by 1,036 holders of record.
This repurchase plan was publicly announced in a current report on Form 8-K filed with the SEC on January 25, 2024.
This repurchase plan was publicly announced in a current report on Form 8-K filed with the SEC on January 30, 2025.
On January 25, 2023, our board of directors authorized a $100.0 million stock repurchase plan (the “2023 Repurchase Plan”), allowing us to repurchase shares of our common stock over a one-year period expiring on January 25, 2024. The 2023 Repurchase Plan was publicly announced in our 2022 Form 10-K filed with the SEC on February 3, 2023.
On January 24, 2024, our board of directors authorized a $150.0 million stock repurchase plan (the “2024 Repurchase Plan”), allowing us to repurchase shares of our common stock over a one -year period expiring on January 24, 2025. The 2024 Repurchase Plan was publicly announced in a current report on Form 8-K filed with the SEC on January 25, 2024.
The closing price per share of common stock on December 29, 2023, the last trading day of our fiscal year, was $108.49.
The closing price per share of common stock on December 31, 2024, the last trading day of our fiscal year, was $134.25.
During 2023, we also repurchased 35,897 shares at a total cost of $3.5 million in connection with the vesting of certain share awards. Repurchases made in connection with the vesting of share awards are not associated with any publicly announced stock repurchase plan. No shares were repurchased under a publicly announced stock repurchase plan during 2022 or 2021.
During 2024, we also repurchased 87,775 shares at a total cost of $10.9 million in connection with the vesting of certain share awards. Repurchases made in connection with the vesting of share awards are not associated with any publicly announced stock repurchase plan.
Plan Category Number of Shares to be Issued Upon Exercise of Outstanding Awards Weighted-Average Exercise Price of Outstanding Awards Number of Shares Available for Future Grants Plans approved by shareholders 1,373,965 (1) $ 71.25 (2) 205,090 Plans not approved by shareholders — — — Total 1,373,965 71.25 205,090 (1) Includes 485,941 shares related to stock options, 566,806 shares related to non-vested stock units, 54,164 shares related to director deferred stock units and 267,054 shares related to performance stock units (assuming attainment of the maximum payout rate as set forth by the performance criteria).
Plan Category Number of Shares to be Issued Upon Exercise of Outstanding Awards Weighted-Average Exercise Price of Outstanding Awards Number of Shares Available for Future Grants Plans approved by shareholders 975,274 (1) $ 65.11 (2) 2,361,570 Plans not approved by shareholders — — — Total 975,274 65.11 2,361,570 (1) Includes 183,976 shares related to stock options, 507,862 shares related to non-vested stock units, 52,779 shares related to director deferred stock units and 230,657 shares related to performance stock units (assuming attainment of the maximum payout rate as set forth by the performance criteria).
Insider Trading Policies and Procedures. Our board of directors has adopted insider trading policies and procedures governing the purchase, sale, and/or other dispositions of our securities by directors, officers and employees, or by Cullen/Frost itself.
(2) Repurchases made in connection with the vesting of certain stock compensation awards. Insider Trading Policies and Procedures. Our board of directors has adopted the Cullen/Frost Bankers, Inc. Insider Trading Policy which governs the purchase, sale, and/or other dispositions of our securities by directors, officers and employees, or by Cullen/Frost itself.
On January 24, 2024, our board of directors authorized a $150.0 million stock repurchase plan (the “2024 Repurchase Plan”), allowing us to repurchase shares of our common stock over a one-year period expiring on 37 Table of Contents January 24, 2025.
Shares repurchased in connection with the vesting of certain share awards totaled 35,897 at a total cost of $3.5 million in 2023 and 31,351 at a total cost of $4.4 million in 2022. 38 Table of Contents On January 29, 2025, our board of directors authorized a $150.0 million stock repurchase plan (the “2025 Repurchase Plan”), allowing us to repurchase shares of our common stock over a one -year period expiring on January 28, 2026.
The performance graph represents past performance and should not be considered to be an indication of future performance. 2018 2019 2020 2021 2022 2023 Cullen/Frost $ 100.00 $ 114.60 $ 105.98 $ 157.05 $ 170.58 $ 143.19 S&P 500 100.00 131.49 155.68 200.37 164.08 207.21 S&P 500 Banks 100.00 140.63 121.29 164.28 132.72 147.28 ITEM 6. [RESERVED] 39 Table of Contents
The performance graph represents past performance and should not be considered to be an indication of future performance. 2019 2020 2021 2022 2023 2024 Cullen/Frost $ 100.00 $ 92.48 $ 137.05 $ 148.86 $ 124.95 $ 159.77 S&P 500 100.00 118.40 152.39 124.79 157.59 197.02 S&P 500 Banks 100.00 86.25 116.82 94.38 104.72 144.74 ITEM 6. [RESERVED] 40 Table of Contents
Removed
Shares repurchased in connection with the vesting of certain share awards totaled 31,351 at a total cost of $4.4 million in 2022 and 31,317 at a total cost of $3.9 million in 2021.
Added
Under a prior publicly announced stock repurchase plan, we repurchased 400,868 shares at a total cost of $39.0 million during 2023. No shares were repurchased under a publicly announced stock repurchase plan during 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

220 edited+37 added−35 removed125 unchanged
Biggest changeProperty type concentrations are stated as a percentage of year-end total commercial real estate loans as of December 31, 2023 and 2022: 2023 2022 Property type: Office/Warehouse 20.9 % 19.1 % Office Building 20.0 22.4 Retail 12.1 11.2 Multi Family 9.0 6.5 Auto/Truck Dealer 6.0 6.3 Medical Office & Services 4.2 4.2 Hotel 3.5 3.3 1-4 Family Construction 3.4 4.1 Non Farm - Non Residential 3.2 3.9 Religious 2.8 3.0 Raw Land 2.5 2.4 Land Developed 1.9 2.0 Land in Development 1.8 2.1 All Other 8.7 9.5 Total commercial real estate loans 100.0 % 1 100.0 % 57 Table of Contents 2023 2022 Geographic region: San Antonio 27.6 % 25.7 % Houston 24.6 24.9 Dallas 15.7 16.0 Fort Worth 14.1 14.4 Austin 11.9 12.4 Gulf Coast 4.5 4.7 Permian Basin 1.6 1.9 Total commercial real estate loans 100.0 % 100.0 % Consumer Loans .
Biggest changeProperty type concentrations are stated as a percentage of year-end total commercial real estate loans as of December 31, 2024 and 2023: 2024 2023 Owner Occupied Non-Owner Occupied Total Owner Occupied Non-Owner Occupied Total Property type: Office/Warehouse 15.5 % 6.2 % 21.7 % 15.8 % 5.1 % 20.9 % Office Building 8.8 10.3 19.1 10.1 9.9 20.0 Retail 1.8 10.6 12.4 0.8 11.3 12.1 Multi Family — 10.4 10.4 — 9.0 9.0 Auto/Truck Dealer 5.9 — 5.9 6.0 — 6.0 Medical Office & Services 2.5 1.5 4.0 2.8 1.4 4.2 Non-Farm/Non-Residential — 3.4 3.4 — 3.2 3.2 1-4 Family Construction — 3.1 3.1 — 3.4 3.4 Hotel — 2.9 2.9 — 3.5 3.5 Religious 2.8 — 2.8 2.8 — 2.8 Raw Land — 2.0 2.0 — 2.5 2.5 All Other 2.3 10.0 12.3 2.3 10.1 12.4 Total 39.6 % 60.4 % 100.0 % 40.6 % 59.4 % 100.0 % 2024 2023 Owner Occupied Non-Owner Occupied Total Owner Occupied Non-Owner Occupied Total Geographic region: Houston 10.1 % 13.3 % 23.4 % 10.4 % 13.3 % 23.7 % San Antonio 8.4 9.3 17.7 8.6 8.9 17.5 Austin 4.0 11.1 15.1 4.3 10.3 14.6 Dallas 5.3 5.8 11.1 5.7 5.6 11.3 Fort Worth 4.5 5.4 9.9 4.5 6.3 10.8 Gulf Coast 2.2 2.5 4.7 2.2 2.6 4.8 Permian Basin 0.4 1.3 1.7 0.5 1.5 2.0 Out of market - Texas 2.2 2.2 4.4 1.6 1.7 3.3 Out of market - outside of Texas 2.5 9.5 12.0 2.8 9.2 12.0 Total 39.6 % 60.4 % 100.0 % 40.6 % 59.4 % 100.0 % Consumer Loans .
In the case of off-balance-sheet credit exposures, the allowance for credit losses is a liability account, calculated in accordance with ASC 326, reported as a component of accrued interest payable and other liabilities in our consolidated balance sheets.
In the case of off-balance-sheet credit exposures, the allowance for credit losses is a liability account, calculated in accordance with ASC 326, reported as a component of accrued interest payable and other liabilities in our consolidated balance sheets.
Also see Note 3 - Loans in the accompanying notes to consolidated financial statements included elsewhere in this report.
Also see Note 3 - Loans in the accompanying notes to consolidated financial statements included elsewhere in this report.
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. 40 Table of Contents • 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.
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. 41 Table of Contents • 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.
Quantitative and Qualitative Disclosures About Market Risk elsewhere in this report. 46 Table of Contents Credit Loss Expense Credit loss expense is determined by management as the amount to be added to the allowance for credit loss accounts for various types of financial instruments including loans, securities and off-balance-sheet credit exposure after net charge-offs have been deducted to bring the allowance to a level which, in management’s best estimate, is necessary to absorb expected credit losses over the lives of the respective financial instruments.
Quantitative and Qualitative Disclosures About Market Risk elsewhere in this report. 47 Table of Contents Credit Loss Expense Credit loss expense is determined by management as the amount to be added to the allowance for credit loss accounts for various types of financial instruments including loans, securities and off-balance-sheet credit exposure after net charge-offs have been deducted to bring the allowance to a level which, in management’s best estimate, is necessary to absorb expected credit losses over the lives of the respective financial instruments.
Due to the large borrowing requirements of this customer base, the energy loan portfolio includes participations and purchased shared national credits. Industry Concentrations. As of December 31, 2023 and 2022, there were no concentrations of loans related to any single industry, as segregated by Standard Industrial Classification code (“SIC code”), in excess of 10% of total loans.
Due to the large borrowing requirements of this customer base, the energy loan portfolio includes participations and purchased shared national credits. Industry Concentrations. As of December 31, 2024 and 2023, there were no concentrations of loans related to any single industry, as segregated by Standard Industrial Classification code (“SIC code”), in excess of 10% of total loans.
On January 24, 2024, our board of directors authorized a $150.0 million stock repurchase plan (the “2024 Repurchase Plan”), allowing us to repurchase shares of our common stock over a one-year period expiring on January 24, 2025. This repurchase plan was publicly announced in a current report on Form 8-K filed with the SEC on January 25, 2024. Liquidity .
On January 24, 2024, our board of directors authorized a $150.0 million stock repurchase plan (the “2024 Repurchase Plan”), allowing us to repurchase shares of our common stock over a one-year period expiring on January 24, 2025. The 2024 Repurchase Plan was publicly announced in a current report on Form 8-K filed with the SEC on January 25, 2024.
Further analysis of the components of our net interest margin is presented below. 43 Table of Contents The following table presents an analysis of net interest income and net interest spread for the periods indicated, including average outstanding balances for each major category of interest-earning assets and interest-bearing liabilities, the interest earned or paid on such amounts, and the average rate earned or paid on such assets or liabilities, respectively.
Further analysis of the components of our net interest margin is presented below. 44 Table of Contents The following table presents an analysis of net interest income and net interest spread for the periods indicated, including average outstanding balances for each major category of interest-earning assets and interest-bearing liabilities, the interest earned or paid on such amounts, and the average rate earned or paid on such assets or liabilities, respectively.
The effective income tax rates differed from the U.S. statutory federal income tax rate of 21% during 2023 and 2022 primarily due to the effect of tax-exempt income from securities, loans and life insurance policies and the income tax effects associated with stock-based compensation, among other things, and their relative proportion to total pre-tax net income.
The effective income tax rates differed from the U.S. statutory federal income tax rate of 21% during 2024 and 2023 primarily due to the effect of tax-exempt income from securities, loans and life insurance policies and the income tax effects associated with stock-based compensation, among other things, and their relative proportion to total pre-tax net income.
Mexico has historically been considered a part of the natural trade territory of our banking offices. Accordingly, U.S. dollar-denominated foreign deposits from sources within Mexico have traditionally been a significant source of funding. Average deposits from foreign sources, primarily Mexico, totaled $1.1 billion in both 2023 and 2022 respectively. Brokered Deposits.
Mexico has historically been considered a part of the natural trade territory of our banking offices. Accordingly, U.S. dollar-denominated foreign deposits from sources within Mexico have traditionally been a significant source of funding. Average deposits from foreign sources, primarily Mexico, totaled $1.1 billion in both 2024 and 2023, respectively. Brokered Deposits.
The decrease in the net, after-tax, unrealized loss was primarily due to a $219.5 million net, after-tax, increase in the fair value of securities available for sale. Under the Basel III Capital Rules, we elected to opt-out of the requirement to include most components of accumulated other comprehensive income in regulatory capital.
The increase in the net, after-tax, unrealized loss was primarily due to a $135.5 million net, after-tax, decrease in the fair value of securities available for sale. Under the Basel III Capital Rules, we elected to opt-out of the requirement to include most components of accumulated other comprehensive income in regulatory capital.
As of December 31, 2023, we used the Moody’s Analytics December 2023 S3 Alternative Scenario Downside - 90th Percentile. In modeling expected credit losses using this scenario, we also assume each non-classified loan within our modeled loan pools is downgraded by one risk grade level.
As of December 31, 2024, we used the Moody’s Analytics S3 Alternative Scenario Downside - 90th Percentile. In modeling expected credit losses using this scenario, we also assume each non-classified loan within our modeled loan pools is downgraded by one risk grade level.
Our methodology used to estimate the allowance for credit losses on off-balance-sheet credit exposures was also impacted by the model updates during the first quarter of 2023 described in Note 3 - Loans in the accompanying notes to consolidated financial statements elsewhere in this report.
Our methodology used to estimate the allowance for credit losses on off-balance-sheet credit exposures was also impacted by the model updates during the first quarter of 2024 described in Note 3 - Loans in the accompanying notes to consolidated financial statements elsewhere in this report.
In the ordinary course of business we have entered into contractual obligations and have made other commitments to make future payments. Refer to the accompanying notes to consolidated financial statements included elsewhere in this report for the expected timing of such payments as of December 31, 2023.
In the ordinary course of business, we have entered into contractual obligations and have made other commitments to make future payments. Refer to the accompanying notes to consolidated financial statements included elsewhere in this report for the expected timing of such payments as of December 31, 2024.
Details of the changes in the various components of net income are further discussed below. 42 Table of Contents Net Interest Income Net interest income is the difference between interest income on earning assets, such as loans and securities, and interest expense on liabilities, such as deposits and borrowings, which are used to fund those assets.
Details of the changes in the various components of net income are further discussed below. 43 Table of Contents Net Interest Income Net interest income is the difference between interest income on earning assets, such as loans and securities, and interest expense on liabilities, such as deposits and borrowings, which are used to fund those assets.
The special assessment was based on estimated uninsured deposits as of December 31, 2022 (excluding the first $5.0 billion) and will be assessed at a quarterly rate of 3.36 basis points, over eight quarterly assessment periods, beginning in the first quarter of 2024.
The special assessment was based on estimated uninsured deposits as of December 31, 2022 (excluding the first $5.0 billion) and was assessed at a quarterly rate of 3.36 basis points, over eight quarterly assessment periods, beginning in the first quarter of 2024.
Underwriting standards for home equity loans are heavily influenced by statutory requirements, which include, but are not limited to, loan-to-value limitations, collection remedies, the number of such loans a borrower can have at one time and documentation requirements. We maintain an independent loan review department that reviews and validates the credit risk program on a periodic basis.
Underwriting standards for home equity loans are heavily influenced by statutory requirements, which include, but are not limited to, loan-to-value limitations, collection remedies, the number of such loans a borrower can have at one time and documentation requirements. 56 Table of Contents We maintain an independent loan review department that reviews and validates the credit risk program on a periodic basis.
The down-side scenario overlay is a qualitative adjustment for our commercial and industrial loan portfolio to address the significant risk of economic recession as a result of inflation; interest rate volatility; labor shortages; disruption in financial markets and global supply chains; further oil price volatility; and the current or anticipated impact of global wars/military conflicts, terrorism, or other geopolitical events.
The down-side scenario overlay is a qualitative adjustment for our commercial and industrial loan portfolio to address the significant risk of economic recession as a result of inflation; elevated interest rates; labor shortages; disruption in financial markets and global supply chains; further oil price volatility; and the current or anticipated impact of global wars/military conflicts, terrorism, or other geopolitical events.
As of December 31, 2023, management is not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on us.
As of December 31, 2024, management is not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on us.
Nominal Gross Domestic Product average annualized quarterly growth rate of 2.86% during 2024 and 4.24% during 2025; (ii) average annualized U.S. unemployment rate of 4.33% during 2024 and 4.18% in 2025; (iii) average annualized Texas unemployment rate of 4.30% during 2024 and 4.00% during 2025; (iv) projected average 10 year Treasury rate of 4.24% during 2024 and 4.04% during 2025; and (v) average oil price of $83.02 per barrel during 2024 and $78.13 per barrel during 2025.
Nominal Gross Domestic Product average annualized quarterly growth rate of 2.86% during 2024 and 4.24% during 2025; (ii) average annualized U.S. unemployment rate of 4.33% during 2024 and 4.18% in 2025; (iii) average annualized Texas unemployment rate of 4.30% during 2024 and 4.00% during 2025; (iv) projected 64 Table of Contents average 10 year Treasury rate of 4.24% during 2024 and 4.04% during 2025; and (v) average oil price of $83.02 per barrel during 2024 and $78.13 per barrel during 2025.
We generally require production borrowers to maintain an active hedging program to manage risk and to have at least 50% of their production hedged for two years. Oil and gas service, transportation, and equipment providers are economically aligned due to their reliance on drilling and active oil and gas development.
We generally require production borrowers to maintain an active hedging program to manage risk and to have at least 50% of their production hedged for two years. 55 Table of Contents Oil and gas service, transportation, and equipment providers are economically aligned due to their reliance on drilling and active oil and gas development.
While management utilizes its best judgment and information available, the ultimate adequacy of 61 Table of Contents our allowance accounts is dependent upon a variety of factors beyond our control, including the performance of our portfolios, the economy, changes in interest rates and the view of the regulatory authorities toward classification of assets.
While management utilizes its best judgment and information available, the ultimate adequacy of our allowance accounts is dependent upon a variety of factors beyond our control, including the performance of our portfolios, the economy, changes in interest rates and the view of the regulatory authorities toward classification of assets.
Financial Statements and Supplementary Data elsewhere in this report for further details of the risk factors considered by management in estimating the necessary level of the allowance for credit losses. 41 Table of Contents Overview The following discussion and analysis presents the more significant factors that affected our financial condition as of December 31, 2023 and 2022 and results of operations for each of the years then ended.
Financial Statements and Supplementary Data elsewhere in this report for further details of the risk factors considered by management in estimating the necessary level of the allowance for credit losses. 42 Table of Contents Overview The following discussion and analysis presents the more significant factors that affected our financial condition as of December 31, 2024 and 2023 and results of operations for each of the years then ended.
Loans exceeding $1.0 million undergo a complete underwriting process at each renewal. 59 Table of Contents Accruing Past Due Loans. Accruing past due loans are presented in the following table. Also see Note 3 - Loans in the accompanying notes to consolidated financial statements included elsewhere in this report.
Loans exceeding $1.0 million undergo a complete underwriting process at each renewal. Accruing Past Due Loans. Accruing past due loans are presented in the following table. Also see Note 3 - Loans in the accompanying notes to consolidated financial statements included elsewhere in this report.
Should any of the factors considered by management in making this estimate change, our estimate of current expected credit losses could also change, which could affect the level of future credit loss expense related to loans. 66 Table of Contents Allowance for Credit Losses - Off-Balance-Sheet Credit Exposures.
Should any of the factors considered by management in making this estimate change, our estimate of current expected credit losses could also change, which could affect the level of future credit loss expense related to loans. Allowance for Credit Losses - Off-Balance-Sheet Credit Exposures.
Certain other loans are tied to other indices, however, such loans do not make up a significant portion of our loan portfolio as of December 31, 2023.
Certain other loans are tied to other indices; however, such loans do not make up a significant portion of our loan portfolio as of December 31, 2024.
As a general policy, we do not lend to energy traders; however, we have made an exception to this policy for certain 54 Table of Contents customers based upon their underlying business models which minimize risk as commodities are bought only to fill existing orders (back-to-back trading). As such, the commodity price risk and sale risk are eliminated.
As a general policy, we do not lend to energy traders; however, we have made an exception to this policy for certain customers based upon their underlying business models which minimize risk as commodities are bought only to fill existing orders (back-to-back trading). As such, the commodity price risk and sale risk are eliminated.
In such cases, we do not generally grant concessions, and, except for those reported in Note 3 - Loans in the accompanying notes to consolidated financial statements included elsewhere in this report, any such renewals, extensions or refinancings that occurred during the reported periods were not deemed to be troubled debt restructurings pursuant to applicable accounting guidance.
In such cases, we do not generally grant concessions, and, except for those reported in Note 3 - Loans in the accompanying notes to consolidated financial statements included elsewhere in this report, any such renewals, extensions or refinancings that occurred during the reported periods were not deemed to be troubled loan modifications pursuant to applicable accounting guidance.
While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical loss information may be made for differences in current portfolio-specific risk characteristics, environmental conditions or other relevant factors.
While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical loss information 62 Table of Contents may be made for differences in current portfolio-specific risk characteristics, environmental conditions or other relevant factors.
The market areas served by us include three of the top ten most populated cities in the United States. These market areas are also home to a significant number of Fortune 500 companies. As a result, we originate and maintain large credit relationships with numerous commercial customers in the ordinary course of business.
The market areas served by us include five of the top fifteen most populated cities in the United States. These market areas are also home to a significant number of Fortune 500 companies. As a result, we originate and maintain large credit relationships with numerous commercial customers in the ordinary course of business.
These adjustments are determined based upon minimum reserve ratios for 64 Table of Contents loans within our commercial real estate - non-owner occupied and commercial real estate - construction loan portfolios that have risk grades of 8 or worse.
These adjustments are determined based upon minimum reserve ratios for loans within our commercial real estate - non-owner occupied and commercial real estate - construction loan portfolios that have risk grades of 8 or worse.
While some short-term loans may be made on an unsecured basis, most are secured by the assets being financed with collateral margins that are consistent with our loan policy guidelines. The commercial and industrial loan portfolio also includes the commercial lease and purchased shared national credits. 55 Table of Contents Energy .
While some short-term loans may be made on an unsecured basis, most are secured by the assets being financed with collateral margins that are consistent with our loan policy guidelines. The commercial and industrial loan portfolio also includes the commercial lease and purchased shared national credits. Energy .
The following table summarizes the industry concentrations of our loan portfolio, as segregated by SIC code, stated as a percentage of year-end total loans as of December 31, 2023 and 2022. 2023 2022 Industry Concentrations Automobile dealers 5.9 % 5.4 % Energy 5.0 5.4 Investor 5.0 2.8 Public finance 4.3 4.6 Medical services 4.0 3.9 Building materials and contractors 3.5 3.8 Manufacturing, other 3.4 3.4 General and specific trade contractors 3.3 3.6 Services 2.9 2.3 Wholesale - heavy equipment 2.1 1.6 All other 60.6 63.2 Total loans 100.0 % 100.0 % Large Credit Relationships.
The following table summarizes the industry concentrations of our loan portfolio, as segregated by SIC code, stated as a percentage of year-end total loans as of December 31, 2024 and 2023. 2024 2023 Industry Concentrations Automobile dealers 6.0 % 5.9 % Energy 5.4 5.0 Investor 4.2 5.0 Public finance 3.9 4.3 Medical services 3.5 4.0 Building materials and contractors 3.5 3.5 General and specific trade contractors 3.4 3.3 Manufacturing, other 3.1 3.4 Services 3.0 2.9 Wholesale - heavy equipment 2.2 2.1 All other 61.8 60.6 Total loans 100.0 % 100.0 % 57 Table of Contents Large Credit Relationships.
Accounting Standards Updates See Note 19 - Accounting Standards Updates in the accompanying notes to consolidated financial statements included elsewhere in this report for details of recently issued accounting pronouncements and their expected impact on our financial statements.
Accounting Standards Updates See Note 19 - Accounting Standards Updates in the accompanying notes to consolidated financial statements included elsewhere in this report for details of recently issued accounting pronouncements and their expected impact on our financial statements. 73 Table of Contents
The decrease in non-interest-bearing deposits; savings and interest checking; and money market accounts and the increase in time deposits was primarily driven by increases in market interest rates as customers sought higher yields through time deposits and other alternatives. The ratio of average interest-bearing deposits to total average deposits was 63.0% in 2023 compared to 59.2% in 2022.
The decrease in non-interest-bearing deposits; savings and interest checking; and money market accounts and the increase in time deposits was primarily driven by increases in market interest rates as customers sought higher yields through time deposits and other alternatives. The ratio of average interest-bearing deposits to total average deposits was 66.2% in 2024 compared to 63.0% in 2023.
Management deemed it appropriate to consider an additional overlay to the modeled forecasted losses for the unsecured consumer portfolio. As of December 31, 2022, we provided qualitative adjustments, as detailed in the table below. Further information regarding these qualitative adjustments is provided in our 2022 Form 10-K.
Management deemed it appropriate to consider an additional overlay to the modeled forecasted losses for the unsecured consumer portfolio. 66 Table of Contents As of December 31, 2023, we provided qualitative adjustments, as detailed in the table below. Further information regarding these qualitative adjustments is provided in our 2023 Form 10-K.
The outstanding balance of these loans and the unfunded amounts available under these commitments were not significant at December 31, 2023 or 2022. 58 Table of Contents Maturities and Sensitivities of Loans to Changes in Interest Rates. The following table presents the maturity distribution of our loan portfolio at December 31, 2023.
The outstanding balance of these loans and the unfunded amounts available under these commitments were not significant at December 31, 2024 or 2023. Maturities and Sensitivities of Loans to Changes in Interest Rates. The following table presents the maturity distribution of our loan portfolio at December 31, 2024.
We have also provided additional qualitative adjustments, or management overlays, as of December 31, 2023 as management believes there are still significant risks impacting certain categories of our loan portfolio. Q-Factor and other qualitative adjustments as of December 31, 2023 are detailed in the table below.
We have also provided additional qualitative adjustments, or management overlays, as of December 31, 2024 as management believes there are still significant risks impacting certain categories of our loan portfolio. Q-Factor and other qualitative adjustments as of December 31, 2024 are detailed in the following table.
The ratio of the allowance for credit losses on loans to total loans was 1.31% at December 31, 2023 compared to 1.33% at December 31, 2022. Management believes the recorded amount of the allowance for credit losses on loans is appropriate based upon management’s best estimate of current expected credit losses within the existing portfolio of loans.
The ratio of the allowance for credit losses on loans to total loans was 1.30% at December 31, 2024 compared to 1.31% at December 31, 2023. Management believes the recorded amount of the allowance for credit losses on loans is appropriate based upon management’s best estimate of current expected credit losses within the existing portfolio of loans.
The allowance for credit losses on off-balance-sheet credit exposures totaled $51.8 million at December 31, 2023 and $58.6 million at December 31, 2022. The level of the allowance for credit losses on off-balance-sheet credit exposures depends upon the volume of outstanding commitments, underlying risk grades, the expected utilization of available funds and forecasted economic conditions impacting our loan portfolio.
The allowance for credit losses on off-balance-sheet credit exposures totaled $51.9 million at December 31, 2024 and $51.8 million at December 31, 2023. The level of the allowance for credit losses on off-balance-sheet credit exposures depends upon the volume of outstanding commitments, underlying risk grades, the expected utilization of available funds and forecasted economic conditions impacting our loan portfolio.
At December 31, 2023, Cullen/Frost had liquid assets, including cash and resell agreements, totaling $350.5 million. 70 Table of Contents Regulatory and Economic Policies Our business and earnings are affected by general and local economic conditions and by the monetary and fiscal policies of the United States government, its agencies and various other governmental regulatory authorities, among other things.
At December 31, 2024, Cullen/Frost had liquid assets, including cash and resell agreements, totaling $334.5 million. 72 Table of Contents Regulatory and Economic Policies Our business and earnings are affected by general and local economic conditions and by the monetary and fiscal policies of the United States government, its agencies and various other governmental regulatory authorities, among other things.
Net Gain/Loss on Securities Transactions . During 2023, we sold certain available-for-sale securities with amortized costs totaling $1.9 billion and realized a net gain of $66 thousand. Market conditions provided us an opportunity to sell certain lower-yielding securities.
Net Gain/Loss on Securities Transactions . During 2024, we sold certain available-for-sale securities with amortized costs totaling $123.3 million and realized a net loss of $96 thousand. During 2023, we sold certain available-for-sale securities with amortized costs totaling $1.9 billion and realized a net gain of $66 thousand. Market conditions provided us an opportunity to sell certain lower-yielding securities.
From time to time, we have obtained interest-bearing deposits through brokered transactions including participation in the Certificate of Deposit Account Registry Service (“CDARS”). Brokered deposits were not significant during the reported periods. 68 Table of Contents Capital and Liquidity Capital . Shareholders’ equity totaled $3.7 billion at December 31, 2023 and $3.1 billion at December 31, 2022.
From time to time, we have obtained interest-bearing deposits through brokered transactions including participation in the Certificate of Deposit Account Registry Service (“CDARS”). Brokered deposits were not significant during the reported periods. 70 Table of Contents Capital and Liquidity Capital . Shareholders’ equity totaled $3.9 billion at December 31, 2024 and $3.7 billion at December 31, 2023.
Net revenues from interchange and card transaction fees for 2023 increased $1.2 million, or 6.5%, compared to 2022 primarily due to an increase in transaction volumes partly offset by an increase in network costs.
Net revenues from interchange and card transaction fees for 2024 increased $1.6 million, or 8.2%, compared to 2023 primarily due to an increase in transaction volumes partly offset by an increase in network costs.
The average rate paid on interest-bearing deposits during 2023 was impacted by an increase in the interest rates we pay on most of our interest-bearing deposit products as a result of increases in market interest rates. Geographic Concentrations .
The average rate paid on interest-bearing deposits during 2024 was impacted by an increase in the interest rates we pay on most of our interest-bearing deposit products as a result of higher average market interest rates. Geographic Concentrations .
Our taxable-equivalent net interest spread, which represents the difference between the average rate earned on earning assets and the average rate paid on interest-bearing liabilities, was 2.63% in 2023 compared to 2.56% in 2022.
Our taxable-equivalent net interest spread, which represents the difference between the average rate earned on earning assets and the average rate paid on interest-bearing liabilities, was 2.66% in 2024 compared to 2.63% in 2023.
See the analysis of net interest income included in the section captioned “Net Interest Income” included elsewhere in this discussion. Credit loss expense for 2023 totaled $46.2 million compared to $3.0 million in 2022.
See the analysis of net interest income included in the section captioned “Net Interest Income” included elsewhere in this discussion. Credit loss expense for 2024 totaled $65.0 million compared to $46.2 million in 2023.
At December 31, 2023, all of the securities in our municipal bond portfolio were issued by the State of Texas or political subdivisions or agencies within the State of Texas, of which approximately 70.9% are either guaranteed by the Texas Permanent School Fund, which has a “triple-A” insurer financial strength rating, or secured by U.S.
At December 31, 2024, all of the securities in our municipal bond portfolio were issued by the State of Texas or political subdivisions or agencies within the State of Texas, of which approximately 68.8% are either guaranteed by the Texas Permanent School Fund, which has a “triple-A” insurer financial strength rating, or secured by U.S.
This equates to a dividend payout ratio of 39.3% in 2023 and 36.6% in 2022. The amount of dividend, if any, we may pay may be limited as more fully discussed in Note 8 - Capital and Regulatory Matters in the accompanying notes to consolidated financial statements included elsewhere in this report. Preferred Stock .
This equates to a dividend payout ratio of 42.1% in 2024 and 39.3% in 2023. The amount of dividend, if any, we may pay may be limited as more fully discussed in Note 8 - Capital and Regulatory Matters in the accompanying notes to consolidated financial statements included elsewhere in this report. Preferred Stock .
Average assets totaled $49.6 billion in 2023 compared to $51.5 billion in 2022. 2023 2022 2021 Sources of Funds: Deposits: Non-interest-bearing 30.9 % 35.3 % 36.2 % Interest-bearing 52.6 51.2 47.4 Federal funds purchased 0.1 0.1 0.1 Repurchase agreements 7.7 4.5 4.6 Long-term debt and other borrowings 0.4 0.4 0.5 Other non-interest-bearing liabilities 1.6 1.6 1.7 Equity capital 6.7 6.9 9.5 Total 100.0 % 100.0 % 100.0 % Uses of Funds: Loans 36.1 % 32.5 % 36.5 % Securities 42.0 36.3 28.0 Interest-bearing deposits 14.8 24.8 29.4 Federal funds sold — 0.1 — Resell agreements 0.2 — — Other non-interest-earning assets 6.9 6.3 6.1 Total 100.0 % 100.0 % 100.0 % Deposits continue to be our primary source of funding.
Average assets totaled $49.7 billion in 2024 compared to $49.6 billion in 2023. 2024 2023 2022 Sources of Funds: Deposits: Non-interest-bearing 27.9 % 30.9 % 35.3 % Interest-bearing 54.6 52.6 51.2 Federal funds purchased 0.1 0.1 0.1 Repurchase agreements 7.7 7.7 4.5 Long-term debt and other borrowings 0.4 0.4 0.4 Other non-interest-bearing liabilities 1.7 1.6 1.6 Equity capital 7.6 6.7 6.9 Total 100.0 % 100.0 % 100.0 % Uses of Funds: Loans 39.8 % 36.1 % 32.5 % Securities 38.0 42.0 36.3 Interest-bearing deposits 15.2 14.8 24.8 Federal funds sold — — 0.1 Resell agreements 0.1 0.2 — Other non-interest-earning assets 6.9 6.9 6.3 Total 100.0 % 100.0 % 100.0 % Deposits continue to be our primary source of funding.
Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed with the SEC on February 3, 2023 (the “ 202 2 Form 10-K ”) for a discussion and analysis of the more significant factors that affected periods prior to 2022.
Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed with the SEC on February 6, 2024 (the “ 2023 Form 10-K ”) for a discussion and analysis of the more significant factors that affected periods prior to 2023.
While there can be no such assurance that any such decreases in the federal funds rate will occur, these projections imply up to a 75 basis point decrease in the federal funds rate during 2024, followed by a 100 basis point decrease in 2025.
While there can be no such assurance that any such decreases in the federal funds rate will occur, these projections imply up to a 50 basis point decrease in the federal funds rate during 2025, followed by a 50 basis point decrease in 2026.
Combined, home equity loans and lines of credit made up 60.5% and 61.9% of the consumer real estate loan total at December 31, 2023 and 2022, respectively. We offer home equity loans up to 80% of the estimated value of the personal residence of the borrower, less the value of existing mortgages and home improvement loans.
Combined, home equity loans and lines of credit made up 58.8% and 60.5% of the consumer real estate loan total at December 31, 2024 and 2023, respectively. We offer home equity loans up to 80% of the estimated value of the personal residence of the borrower, less the value of existing mortgages and home improvement loans.
In November 2023, the FDIC issued a final rule to implement a special assessment to recover losses to the Deposit Insurance Fund ("DIF") incurred as a result of recent bank failures and the FDIC's use of the systemic risk exception to cover certain deposits that were otherwise uninsured.
In November 2023, the FDIC issued a final rule to implement a special assessment to recover losses to the DIF incurred as a result of bank failures earlier that year and the FDIC's use of the systemic risk exception to cover certain deposits that were otherwise uninsured.
The increase was primarily related to an increase in the average yield on loans and, to a lesser extent, the average volume of loans; an increase in the average yields on interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve); an increase in the average volume of and average yield on taxable securities; and an increase in the average taxable-equivalent yield on tax-exempt securities, among other things.
The increase was primarily related to increases in the average volume of and yield on loans and increases in the average yields on taxable securities, interest-bearing deposits (primarily amounts held by us in an interest-bearing account at the Federal Reserve), and to a lesser extent, tax-exempt securities, combined with an increase in the average volume of interest-bearing deposits (primarily amounts held by us in an interest-bearing account at the Federal Reserve), among other things.
Furthermore, at December 31, 2023, we had approximately $13.1 billion in securities that were unencumbered by a pledge and could be used to support additional borrowings through repurchase agreements or the Federal Reserve discount window, as needed.
Furthermore, at December 31, 2024, we had approximately $7.4 billion in securities that were unencumbered by a pledge and could be used to support additional borrowings through repurchase agreements or the Federal Reserve discount window, as needed.
Select average market rates for the periods indicated are presented in the table below. 2023 2022 2021 Federal funds target rate upper bound 5.20 % 1.87 % 0.25 % Effective federal funds rate 5.03 1.69 0.08 Interest on reserve balances 5.10 1.76 0.13 Prime 8.20 4.86 3.25 AMERIBOR Term-30 (1) 5.08 1.79 0.11 AMERIBOR Term-90 (1) 5.34 2.33 0.17 1-Month Term SOFR (2) 5.07 1.86 0.04 3-Month Term SOFR (2) 5.17 2.18 0.05 1-Month LIBOR (3) 4.85 1.91 0.10 3-Month LIBOR (3) 5.15 2.39 0.16 ____________________ (1) AMERIBOR Term-30 and AMERIBOR Term-90 are published by the American Financial Exchange.
Select average market rates for the periods indicated are presented in the table below. 2024 2023 2022 Federal funds target rate upper bound 5.31 % 5.20 % 1.87 % Effective federal funds rate 5.14 5.03 1.69 Interest on reserve balances 5.21 5.10 1.76 Prime 8.31 8.20 4.86 AMERIBOR Term-30 (1) 5.18 5.08 1.79 AMERIBOR Term-90 (1) 5.20 5.34 2.33 1-Month Term SOFR (2) 5.11 5.07 1.86 3-Month Term SOFR (2) 5.05 5.17 2.18 1-Month LIBOR (3) N/A 4.85 1.91 3-Month LIBOR (3) N/A 5.15 2.39 ____________________ (1) AMERIBOR Term-30 and AMERIBOR Term-90 are published by the American Financial Exchange.
As of December 31, 2023, the target range for the federal funds rate was 5.25% to 5.50%. In December 2023, the Federal Reserve released projections whereby the midpoint of the projected appropriate target range for the federal funds rate would decrease to 4.6% by the end of 2024 and subsequently decrease to 3.6% by the end of 2025.
As of December 31, 2024, the target range for the federal funds rate was 4.25% to 4.50%. In December 2024, the Federal Reserve released projections whereby the midpoint of the projected appropriate target range for the federal funds rate would fall to 3.9% by the end of 2025 and subsequently decrease to 3.4% by the end of 2026.
Treasury securities via defeasance of the debt by the issuers. The average taxable-equivalent yield on the securities portfolio based on a 21% tax rate was 3.24% in 2023 compared to 2.95% in 2022. Tax-exempt municipal securities totaled 35.5% of average securities in 2023 compared to 42.7% in 2022.
Treasury securities via defeasance of the debt by the issuers. The average taxable-equivalent yield on the securities portfolio based on a 21% tax rate was 3.38% in 2024 compared to 3.24% in 2023. Tax-exempt municipal securities totaled 35.2% of average securities in 2024 compared to 35.5% in 2023.
We paid quarterly dividends of $0.87, $0.87, $0.92 and $0.92 per common share during the first, second, third and fourth quarters of 2023, respectively, and quarterly dividends of $0.75, $0.75, $0.87 and $0.87 per common share during the first, second, third and fourth quarters of 2022, respectively.
We paid quarterly dividends of $0.92, $0.92, $0.95 and $0.95 per common share during the first, second, third and fourth quarters of 2024, respectively, and quarterly dividends of $0.87, $0.87, $0.92 and $0.92 per common share during the first, second, third and fourth quarters of 2023, respectively.
Net interest income is our largest source of revenue, representing 78.4% of total revenue during 2023. Net interest margin is the ratio of taxable-equivalent net interest income to average earning assets for the period. The level of interest rates and the volume and mix of earning assets and interest-bearing liabilities impact net interest income and net interest margin.
Net interest income is our largest source of revenue, representing 77.8% of total revenue during 2024. Net interest margin is the ratio of taxable-equivalent net interest income to average earning assets for the period. The level of interest rates and the volume and mix of earning assets and interest-bearing liabilities impact net interest income and net interest margin.
Dollar amounts in tables are stated in thousands, except for per share amounts. Results of Operations Net income available to common shareholders totaled $591.3 million, or $9.10 diluted per common share, in 2023 compared to $572.5 million, or $8.81 diluted per common share, in 2022 and $435.9 million, or $6.76 diluted per common share, in 2021.
Dollar amounts in tables are stated in thousands, except for per share amounts. Results of Operations Net income available to common shareholders totaled $575.9 million, or $8.87 diluted per common share, in 2024 compared to $591.3 million, or $9.10 diluted per common share, in 2023 and $572.5 million, or $8.81 diluted per common share, in 2022.
See the sections captioned “Credit Loss Expense” and “Allowance for Credit Losses” elsewhere in this discussion for further analysis of credit loss expense related to loans and off-balance-sheet commitments. Non-interest income for 2023 increased $20.4 million, or 8.9%, compared to 2022.
See the sections captioned “Credit Loss Expense” and “Allowance for Credit Losses” elsewhere in this discussion for further analysis of credit loss expense related to loans and off-balance-sheet commitments. Non-interest income for 2024 increased $13.5 million, or 5.4%, compared to 2023.
A comparison of gross and net interchange and card transaction fees for the reported periods is presented in the table below. 2023 2022 2021 Income from debit card transactions $ 36,622 $ 32,457 $ 29,122 ATM service fees 3,516 3,313 3,298 Gross interchange and debit card transaction fees 40,138 35,770 32,420 Network costs 20,719 17,539 14,959 Net interchange and debit card transaction fees $ 19,419 $ 18,231 $ 17,461 Federal Reserve rules applicable to financial institutions that have assets of $10 billion or more provide that the maximum permissible interchange fee for an electronic debit transaction is the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction.
A comparison of gross and net interchange and card transaction fees for the reported periods is presented in the table below. 2024 2023 2022 Income from debit card transactions $ 40,303 $ 36,622 $ 32,457 ATM service fees 3,492 3,516 3,313 Gross interchange and debit card transaction fees 43,795 40,138 35,770 Network costs 22,777 20,719 17,539 Net interchange and debit card transaction fees $ 21,018 $ 19,419 $ 18,231 Federal Reserve rules applicable to financial institutions that have assets of $10 billion or more provide that the maximum permissible interchange fee for an electronic debit transaction is the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction.
Such plans also provide us with the ability to repurchase shares of common stock that can be used to satisfy obligations related to stock compensation awards in order to mitigate the dilutive effect of such awards. Under the 2023 Repurchase Plan, we repurchased 400,868 shares at a total cost of $39.0 million during 2023.
Such plans also provide us with the ability to repurchase shares of common stock that can be used to satisfy obligations related to stock compensation awards in order to mitigate the dilutive effect of such awards. Under the 2024 Repurchase Plan, we repurchased 489,862 shares at a total cost of $50.0 million during 2024.
The components of credit loss expense were as follows. 2023 2022 2021 Credit loss expense (benefit) related to: Loans $ 52,861 $ (5,279) $ (6,097) Off-balance-sheet credit exposures (6,842) 8,279 6,162 Securities held to maturity 152 — (2) Total $ 46,171 $ 3,000 $ 63 See the section captioned “Allowance for Credit Losses” elsewhere in this discussion for further analysis of credit loss expense related to loans and off-balance-sheet credit exposures.
The components of credit loss expense were as follows. 2024 2023 2022 Credit loss expense (benefit) related to: Loans $ 64,832 $ 52,861 $ (5,279) Off-balance-sheet credit exposures 153 (6,842) 8,279 Securities held to maturity — 152 — Total $ 64,985 $ 46,171 $ 3,000 See the section captioned “Allowance for Credit Losses” elsewhere in this discussion for further analysis of credit loss expense related to loans and off-balance-sheet credit exposures.
The increase was primarily related to increases in other non-interest income; other charges, commissions, and fees; insurance commissions and fees; service charges on deposit accounts; and interchange and card transaction fees.
The increase was primarily related to increases in service charges on deposit accounts; insurance commissions and fees; and interchange and card transaction fees partly offset by a decrease in other non-interest income.
The increase in taxable-equivalent net interest income during 2023 was primarily related to an increase in the average yield on loans and, to a lesser extent, the average volume of loans; an increase in the average yield on interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve); an increase in the average volume of and average yield on taxable securities; and an increase in the average taxable-equivalent yield on tax-exempt securities, among other things.
The increase in taxable-equivalent net interest income during 2024 was primarily related to increases in the average volume of and yield on loans and increases in the average yields on taxable securities, interest-bearing deposits (primarily amounts held by us in an interest-bearing account at the Federal Reserve), and to a lesser extent, tax-exempt securities, combined with an increase in the average volume of interest-bearing deposits (primarily amounts held by us in an interest-bearing account at the Federal Reserve), among other things.
Sundry income during 2023 included $5.6 million related to recoveries of prior write-offs, $4.4 million in card related incentives, and $1.5 million related to distributions received from a Small Business Investment Company (“SBIC”) fund investment, among other things, while sundry income during 2022 included $5.1 million in card related incentives, $5.1 million related to a distribution received from an SBIC fund investment, and $1.4 million related to the recovery of prior write-offs, among other things.
Sundry and other miscellaneous income during 2024 included $4.6 million in card related incentives and $1.9 million related to the recovery of prior write-offs, among other things, while sundry and other miscellaneous income during 2023 included $5.6 million related to the recovery of prior write-offs, $4.4 million in card related incentives, and $1.5 million related to distributions received from a Small Business Investment Company (“SBIC”) fund investment, among other things.
Investment management fees are the most significant component of trust and investment management fees, making up approximately 79.3% and 77.1% of total trust and investment management fees in 2023 and 2022, respectively.
Investment management fees are the most significant component of trust and investment management fees, making up approximately 81.3% and 79.3% of total trust and investment management fees in 2024 and 2023, respectively.
A description of each business and the methodologies used to measure financial performance is described in Note 17 - Operating Segments in the accompanying notes to consolidated financial statements elsewhere in this report. Details of net income (loss) by operating segment are discussed in more detail below. Banking Net income for 2023 increased $26.8 million, or 4.9%, compared to 2022.
A description of each business and the methodologies used to measure financial performance is described in Note 17 - Operating Segments in the accompanying notes to consolidated financial statements elsewhere in this report. Details of net income (loss) by operating segment are discussed in more detail below. Banking Net income for 2024 decreased $17.5 million, or 3.0%, compared to 2023.
The aforementioned increases were partly offset by a decrease in incentive compensation. The increase in employee benefits expense was primarily related to increases in medical benefits expense, 401(k) plan expense, and payroll taxes, and a decrease in the net periodic benefit related to our defined benefit retirement plan, among other things.
The increase in employee benefits expense was primarily related to increases in medical/dental benefits expense and payroll taxes, among other things, partly offset by a decrease in 401(k)/profit sharing plan expense and an increase in the net periodic benefit related to our defined benefit retirement plan, among other things.
Investment management fees are the most significant component of trust and investment management fees, making up approximately 79.3% and 77.1% of total trust and investment management fees for 2023 and 2022, respectively.
Investment management fees are the most significant component of trust and investment management fees, making up approximately 81.3% and 79.3% of total trust and investment management fees for 2024 and 2023, respectively.
Energy loans increased $9.5 million, or 1.0%, during 2023 compared to 2022. The average loan size, the significance of the portfolio and the specialized nature of the energy industry requires a highly prescriptive underwriting policy. Exceptions to this policy are rarely granted.
Energy loans increased $192.2 million, or 20.5%, during 2024 compared to 2023. The average loan size, the significance of the portfolio and the specialized nature of the energy industry requires a highly prescriptive underwriting policy. Exceptions to this policy are rarely granted.
In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans. At December 31, 2023, approximately 49.9% of the outstanding principal balance of our commercial real estate loans were secured by owner-occupied properties.
In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans. At December 31, 2024, approximately half of the outstanding principal balance of our commercial real estate loans (excluding construction) were secured by owner-occupied properties.
Average deposits decreased $3.1 billion, or 7.0%, in 2023 compared to 2022. Non-interest-bearing deposits remain a significant source of funding, which has been a key factor in maintaining our relatively low cost of funds. Average non-interest-bearing deposits totaled 37.0% of total average deposits in 2023 compared to 40.8% in 2022.
Average deposits decreased $472.8 million, or 1.1%, in 2024 compared to 2023. Non-interest-bearing deposits remain a significant source of funding, which has been a key factor in maintaining our relatively low cost of funds. Average non-interest-bearing deposits totaled 33.8% of total average deposits in 2024 compared to 37.0% in 2023.
Commercial and industrial loans increased $284.3 million, or 5.0%, during 2023 compared to 2022. Our commercial and industrial loans are a diverse group of loans to small, medium and large businesses. The purpose of these loans varies from supporting seasonal working capital needs to term financing of equipment.
Commercial and industrial loans increased $142.4 million, or 2.4%, during 2024 compared to 2023. Our commercial and industrial loans are a diverse group of loans to small, medium and large businesses. The purpose of these loans varies from supporting seasonal working capital needs to term financing of equipment.
The estimated fair value of trust assets was $47.2 billion (including managed assets of $23.8 billion and custody assets of $23.5 billion) at December 31, 2023 compared to $42.9 billion (including managed assets of $21.4 billion and custody assets of $21.5 billion) at December 31, 2022. Service Charges on Deposit Accounts.
The estimated fair value of trust assets was $51.4 billion (including managed assets of $26.2 billion and custody assets of $25.2 billion) at December 31, 2024 compared to $47.2 billion (including managed assets of $23.8 billion and custody assets of $23.5 billion) at December 31, 2023. Service Charges on Deposit Accounts.
Real estate loans increased $1.4 billion, or 14.1%, during 2023 compared to 2022. Real estate loans include both commercial and consumer balances. Commercial real estate loans totaled $9.0 billion, or 78.5% of total real estate loans, at December 31, 2023 and $8.2 billion, or 81.6% of total real estate loans, at December 31, 2022.
Real estate loans increased $1.6 billion, or 14.2%, during 2024 compared to 2023. Real estate loans include both commercial and consumer balances. Commercial real estate loans totaled $10.0 billion, or 76.3% of total real estate loans, at December 31, 2024 and $9.0 billion, or 78.5% of total real estate loans, at December 31, 2023.
Contingent income primarily consists of amounts received from various property and casualty insurance carriers related to the loss performance of insurance policies previously placed. These performance related contingent payments are seasonal in nature and are mostly received during the first quarter of each year. This performance related contingent income totaled $3.3 million in 2023 and $1.9 million in 2022.
Contingent income totaled $5.0 million in 2024 and $4.6 million in 2023. Contingent income primarily consists of amounts received from various property and casualty insurance carriers related to the loss performance of insurance policies previously placed. These performance related contingent payments are seasonal in nature and are mostly received during the first quarter of each year.

… 212 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+0 added−3 removed12 unchanged
Biggest changeWe do not currently pay interest on a significant portion of our commercial demand deposits. Any interest rate that would ultimately be paid on these commercial demand deposits would likely depend upon a variety of factors, some of which are beyond our control.
Biggest changeAny interest rate that would ultimately be paid on these commercial demand deposits would likely depend upon a variety of factors, some of which are beyond our control. Our December 31, 2024 and December 31, 2023 model simulations did not assume any payment of interest on commercial demand deposits (those not already receiving an earnings credit).
The effects of hypothetical fluctuations in interest rates on our securities classified as “trading” under ASC Topic 320, “Investments - Debt and Equity Securities” are not significant, and, as such, separate quantitative disclosure is not presented. 72 Table of Contents
The effects of hypothetical fluctuations in interest rates on our securities classified as “trading” under ASC Topic 320, “Investments - Debt and Equity Securities” are not significant, and, as such, separate quantitative disclosure is not presented. 75 Table of Contents
As of December 31, 2023, the effects of a 200 basis point increase and a 200 basis point decrease in interest rates on our derivative holdings would not result in a significant variance in our net interest income.
As of December 31, 2024, the effects of a 200 basis point increase and a 200 basis point decrease in interest rates on our derivative holdings would not result in a significant variance in our net interest income.
The model measures the impact on net interest income relative to a flat-rate case scenario of hypothetical fluctuations in interest rates over the next 12 months. These simulations incorporate assumptions regarding balance sheet growth and mix, pricing and the 71 Table of Contents repricing and maturity characteristics of the existing and projected balance sheet.
The model measures the impact on net interest income relative to a flat-rate case scenario of hypothetical fluctuations in interest rates over the next 12 months. These simulations incorporate assumptions regarding balance sheet growth and mix, pricing and the repricing and maturity characteristics of the existing and projected balance sheet.
For modeling purposes, as of December 31, 2022, the model simulations projected that 100 and 200 basis point ratable increases in interest rates would result in positive variances in net interest income of 0.2% and 1.4%, respectively, relative to the flat-rate case over the next 12 months, while 100 and 200 basis point ratable decreases in interest rates would result in a negative variances in net interest income of 0.2% and 1.4%, respectively, relative to the flat-rate case over the next 12 months.
For modeling purposes, as of December 31, 2024, the model simulations projected that 100 and 200 basis point ratable increases in interest rates would result in positive variances in net interest income of 1.5% and 2.8%, respectively, relative to the flat-rate case over the next 12 months, while 100 and 200 basis point ratable decreases in interest rates would result in a negative variances in net interest income of 1.1% and 2.2%, respectively, relative to the flat-rate case over the next 12 months.
For modeling purposes, as of December 31, 2023, the model simulations projected that 100 and 200 basis point ratable increases in interest rates would result in positive variances in net interest income of 1.7% and 3.5%, respectively, relative to the flat-rate case over the next 12 months, while 100 and 200 basis point ratable decreases in interest rates would result in a negative variances in net interest income of 1.3% and 3.0%, respectively, relative to the flat-rate case over the next 12 months.
For modeling purposes, as of December 31, 2023, the model simulations projected that 100 and 200 basis point ratable increases in interest rates would result in positive variances in net interest income of 1.7% and 3.5%, respectively, relative to the flat-rate case over the next 12 months, while 100 and 200 basis point ratable decreases in interest rates would result in a negative variances in net interest income of 1.3% and 3.0%, respectively, relative to the flat-rate case over the next 12 months. 74 Table of Contents We do not currently pay interest on a significant portion of our commercial demand deposits.
Our December 31, 2023 and December 31, 2022 model simulations did not assume any payment of interest on commercial demand deposits (those not already receiving an earnings credit). Management believes, based on our experience during the last interest rate cycle, that it is less likely we will pay interest on these deposits as rates increase.
Management believes, based on our experience during the last interest rate cycle, that it is less likely we will pay interest on these deposits as rates increase.
The model simulations as of December 31, 2023 indicate that our projected balance sheet is more asset sensitive in comparison to our balance sheet as of December 31, 2022. The increased asset sensitivity was partly due to a decrease in the expected deposit pricing beta for rate increases on certain types of deposit accounts.
These model simulations indicate that our balance sheet as of December 31, 2024 is slightly less asset sensitive in comparison to our balance sheet as of December 31, 2023.
Removed
The deposit pricing beta is a measure of how much deposit rates will reprice, up or down, given a defined change in market rates. Management believes that the deposit pricing betas used as of December 31, 2023 are more reflective of current expectations.
Removed
The increased asset sensitivity was also partly due to an increase in the relative proportion of interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) and federal funds sold to projected average interest-earning assets combined with a decrease in the relative proportion of fixed-rate securities to projected average interest-earning assets.
Removed
Interest-bearing deposits and federal funds sold are more immediately impacted by changes in interest rates in comparison to our other categories of earning assets.

Other CFR 10-K year-over-year comparisons