Cullen/Frost Reports Third Quarter Results

                  Cullen/Frost Reports Third Quarter Results

- Average deposits rise 11.5 percent

- Average loans increase 7.1 percent

- Trust and investment fees up 8.9 percent

- Frost to enter Permian Basin market

PR Newswire

SAN ANTONIO, Oct. 30, 2013

SAN ANTONIO, Oct. 30, 2013 /PRNewswire/ --Cullen/Frost Bankers, Inc.
(NYSE:CFR) today reported third quarter 2013 results, as the Texas financial
services leader continues to post steady results in an uncertain economic
environment.

(Logo:http://photos.prnewswire.com/prnh/20030109/CFRLOGO)

Cullen/Frost's net income available to common shareholders for the third
quarter of 2013 was $58.4 million, compared to third quarter 2012 earnings of
$58.7 million. On a per-share basis, net income was $0.96 per diluted common
share, compared to $0.95 per diluted common share reported a year earlier.
Returns on average assets and common equity were 1.01 percent and 10.07
percent respectively, compared to 1.11 percent and 9.75percent for the same
period a year earlier.

For the third quarter of 2013, net interest income on a tax-equivalent basis
increased 7.0 percent to $179.1 million, compared to the $167.3 million
reported for the same quarter of 2012. Average deposits for the quarter were
$19.5 billion, an increase of $2.0 billion, or 11.5 percent, over the $17.5
billion reported for the third quarter of 2012. For the third quarter of 2013,
average loans were $9.3 billion, an increase of 7.1 percent compared to the
$8.6 billion reported for the third quarter a year earlier.

The provision for loan losses was $5.1 million, compared to $2.5 million
reported a year earlier, while the allowance for loan losses as a percentage
of loans decreased to 1.00 percent from 1.20 percent for the same quarter of
2012.

"Cullen/Frost continues to generate steady results in an extended low-interest
rate environment and an economy that seems to be waiting on clarity," said CEO
Dick Evans. "I was pleased to see double-digit deposit growth and strong
increases in net-interest income and trust and investment management
fees.During the third quarter, we announced a merger agreement with WNB
Bancshares, Inc. When this merger is complete, it will bring Frost into
Midland and Odessa for the first time. The Permian Basin is a significant
driver of the state's strong oil and gas business, and we are delighted to
expand our franchise into this dynamic region.

"Average loans increased more than 7 percent despite a highly competitive
lending environment and the ongoing uncertainty in Washington that is causing
concern and caution among business owners," Evans said. "Our focused calling
effort continues to expand our customer base, and our relationship managers
are working harder than ever to grow loans. Our credit quality is manageable,
capital levels remain strong, and we have plenty of liquidity to fund loans.

"Since 2007, before the financial crisis began, year-to-date average deposits
at Frost have risen $8.8 billion, a reflection of our efforts to build and
extend relationships based on our well-accepted value proposition. The greater
liquidity continues to pressure the net interest margin in this challenging
rate environment.

"We are fortunate to be located in Texas, where job growth consistently
outpaces the national average. The dynamic Texas markets we serve performed
well during the recession and are among the strongest in the U.S.," said
Evans.

"It has been five years since the 2008 financial crisis put the U.S. and
global economy on the brink of collapse. Decisions we made during that period
paved the way for our good performance today. We have consistently paid a
shareholder dividend, and have increased the dividend annually for the past 19
years.

"As always, our exceptional and dedicated employees bring the Frost culture to
life every day, taking care of customers, helping our company grow and making
our success possible," Evans said.

For the first nine months of 2013, net income available to common shareholders
was $170.6 million compared to $177.8 million reported for the same period of
2012. Year-to-date earnings were $2.81 per diluted common share, compared to
$2.88 per diluted common share for the same period in 2012. Returns on average
assets and average equity for the first nine months of 2013 were 1.02 percent
and 9.83 percent respectively, compared to 1.16 percent and 10.09 percent for
the same period a year earlier.

Noted financial data for the third quarter of 2013 follows:

  oTier 1 and Total Risk-Based Capital Ratios for the Corporation at the end
    of the third quarter of 2013 were 14.53 percent and 15.68 percent,
    respectively, and continue to be in excess of well capitalized levels. The
    tangible common equity ratio was 7.81 percent at the end of the third
    quarter of 2013, compared to 8.80 percent for the same quarter last year.
    The tangible common equity ratio, which is a non-GAAP financial measure,
    is equal to end of period shareholders' equity less preferred stock,
    goodwill and intangible assets divided by end of period total assets less
    goodwill and intangible assets.
  oNet-interest income on a taxable equivalent basis for the third quarter of
    2013 totaled $179.1 million, an increase of 7.0 percent, compared to
    $167.3 million for the same period a year ago. This increase resulted
    primarily from an increase in the average volume of earning assets and was
    partly offset by a decrease in the net interest margin. Strong growth in
    deposits has helped to fund the increase in earning assets. The net
    interest margin was 3.38 percent for the third quarter of 2013, compared
    to 3.54 percent for the third quarter of 2012, and 3.43 percent for the
    second quarter of 2013.
  oNon-interest income for the third quarter of 2013 totaled $74.0 million, a
    4.0 percent increase compared to $71.2 million reported for the third
    quarter of 2012. Trust and investment management fees were $22.7 million,
    up $1.8 million, or 8.9 percent, from the third quarter of 2012, with
    approximately $1.2 million of the increase related to investment fees.
    Insurance commissions and fees were $10.4 million, compared to the $10.0
    million reported the third quarter a year earlier. Other charges,
    commissions and fees were up $2.0 million to $9.3 million, with
    approximately half of the increase related to higher annuity income. Other
    income was down $1.5 million from last year's third quarter and was
    impacted by decreases in income from securities trading and customer
    derivative transactions.
  oNon-interest expense was $151.8 million for the quarter, up $7.4 million
    compared to the $144.5 million reported for the third quarter a year
    earlier. Total salaries rose $3.5 million, or 5.4 percent, to $68.5
    million, and were impacted by an increase in the number of employees,
    combined with normal annual merit and market increases. Employee benefits
    rose $970,000, primarily related to increases in medical insurance expense
    and payroll taxes. Other expense was $36.9 million, up 6.9 percent, or
    $2.4 million, from $34.5 million for the third quarter last year. This
    increase was impacted by higher professional services expense, including
    $853,000 of transaction-related expenses associated with the pending
    acquisition of WNB Bancshares. Inc.
  oFor the third quarter of 2013, the provision for loan losses was $5.1
    million, compared to net charge-offs of $5.4 million. For the third
    quarter of 2012, the provision for loan losses was $2.5 million, compared
    to net charge-offs of $2.7 million. The allowance for loan losses as a
    percentage of total loans was 1.00 percent at September 30, 2013, compared
    to 1.20 percent at the end of the third quarter last year and 1.01 percent
    at the end of the second quarter of 2013. Non-performing assets were $98.1
    million at the end of the third quarter, compared to $101.7 million last
    quarter-end and $124.9 million at last year's third quarter.

Cullen/Frost Bankers, Inc. will host a conference call on Wednesday, October
30, 2013, at 10:00 a.m. Central Time (CT) to discuss the results for the
quarter. The media and other interested parties are invited to access the call
in a "listen only" mode at 1-800-944-6430. Digital playback of the conference
call will be available after 2 p.m. CT until midnight Sunday, November 3, 2013
at 855-859-2056 with Conference ID # of 86218467. The call will also be
available by webcast at the URL listed below and available for playback after
2 p.m. CT. After entering the Web site, www.frostbank.com, go to "About Frost"
on the top navigation bar, then click on Investor Relations.

Cullen/Frost Bankers, Inc. (NYSE: CFR) is a financial holding company,
headquartered in San Antonio, with $23.5 billion in assets at September 30,
2013. Among the top 50 largest U.S. banks and one of 24 banks included in the
KBW Bank Index, Frost provides a wide range of banking, investments and
insurance services to businesses and individuals across Texas in the Austin,
Corpus Christi, Dallas, Fort Worth, Houston, Rio Grande Valley and San Antonio
regions. Founded in 1868, Frost has helped clients with their financial needs
during three centuries. Additional information is available at frostbank.com.

Forward-Looking Statements and Factors that Could Affect Future Results

Certain statements contained in this Earnings Release that are not statements
of historical fact constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Act"),
notwithstanding that such statements are not specifically identified as such.
In addition, certain statements may be contained in the Corporation's future
filings with the SEC, in press releases, and in oral and written statements
made by or with the approval of the Corporation that are not statements of
historical fact and constitute forward-looking statements within the meaning
of the Act. Examples of forward-looking statements include, but are not
limited to: (i) projections of revenues, expenses, income or loss, earnings or
loss per share, the payment or nonpayment of dividends, capital structure and
other financial items; (ii) statements of plans, objectives and expectations
of Cullen/Frost or its management or Board of Directors, including those
relating to products or services; (iii) statements of future economic
performance; and (iv) statements of assumptions underlying such statements.
Words such as "believes", "anticipates", "expects", "intends", "targeted",
"continue", "remain", "will", "should", "may" and other similar expressions
are intended to identify forward-looking statements but are not the exclusive
means of identifying such statements.

Forward-looking statements involve risks and uncertainties that may cause
actual results to differ materially from those in such statements. Factors
that could cause actual results to differ from those discussed in the
forward-looking statements include, but are not limited to:

  oLocal, regional, national and international economic conditions and the
    impact they may have on the Corporation and its customers and the
    Corporation's assessment of that impact.
  oVolatility and disruption in national and international financial markets.
  oGovernment intervention in the U.S. financial system.
  oChanges in the mix of loan geographies, sectors and types or the level of
    non-performing assets and charge-offs.
  oChanges in estimates of future reserve requirements based upon the
    periodic review thereof under relevant regulatory and accounting
    requirements.
  oThe effects of and changes in trade and monetary and fiscal policies and
    laws, including the interest rate policies of the Federal Reserve Board.
  oInflation, interest rate, securities market and monetary fluctuations.
  oThe effects of changes in laws and regulations (including laws and
    regulations concerning taxes, banking, securities and insurance) with
    which the Corporation and its subsidiaries must comply.
  oThe soundness of other financial institutions.
  oPolitical instability.
  oImpairment of the Corporation's goodwill or other intangible assets.
  oActs of God or of war or terrorism.
  oThe timely development and acceptance of new products and services and
    perceived overall value of these products and services by users.
  oChanges in consumer spending, borrowings and savings habits.
  oChanges in the financial performance and/or condition of the Corporation's
    borrowers.
  oTechnological changes.
  oAcquisitions and integration of acquired businesses.
  oThe ability to increase market share and control expenses.
  oThe Corporation's ability to attract and retain qualified employees.
  oChanges in the competitive environment in the Corporation's markets and
    among banking organizations and other financial service providers.
  oThe 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.
  oChanges in the reliability of the Corporation's vendors, internal control
    systems or information systems.
  oChanges in the Corporation's liquidity position.
  oChanges in the Corporation's organization, compensation and benefit plans.
  oThe costs and effects of legal and regulatory developments including the
    resolution of legal proceedings or regulatory or other governmental
    inquiries and the results of regulatory examinations or reviews.
  oGreater than expected costs or difficulties related to the integration of
    new products and lines of business.
  oThe Corporation's success at managing the risks involved in the foregoing
    items.
    

Forward-looking statements speak only as of the date on which such statements
are made. The Corporation undertakes noobligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made, or to reflect the occurrence of unanticipated
events.

Greg Parker
Investor Relations
210/220-5632
or
Renee Sabel
Media Relations
210/220-5416




Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share amounts)
                 2013                                      2012
                 3rd Qtr       2nd Qtr       1st Qtr       4th Qtr       3rd Qtr
CONDENSED INCOME
STATEMENTS
Net interest     $  155,353    $  153,181    $  152,813    $  154,405    $   151,532
income
Net interest        179,121       173,966       172,802       172,156        167,341
income(1)
Provision for       5,108         3,575         6,000         4,125          2,500
loan losses
Non-interest
income:
 Trust and
investment          22,692        22,561        21,885        20,543         20,843
management fees
 Service
charges on          20,742        20,044        20,044        21,162         20,797
deposit accounts
 Insurance
commissions and     10,371        9,266         13,070        8,436          9,964
fees
 Interchange
and debit card      4,376         4,268         4,011         4,330          4,194
transaction fees
 Other
charges,            9,266         8,578         7,755         7,740          7,265
commissions and
fees
 Net gain
(loss) on           (14)          6             5             4,435          --
securities
transactions
 Other           6,558         7,786         11,010        9,241          8,095
 Total
non-interest        73,991        72,509        77,780        75,887         71,158
income
Non-interest
expense:
 Salaries and    68,524        66,502        66,465        67,442         64,984
wages
 Employee        14,989        14,629        17,991        12,867         14,019
benefits
 Net             13,094        12,645        11,979        11,772         13,193
occupancy
 Furniture       14,629        14,986        14,185        13,932         14,193
and equipment
 Deposit         2,921         2,835         2,889         3,159          2,593
insurance
 Intangible      780           788           820           918            973
amortization
 Other           36,886        37,373        41,485        35,977         34,495
 Total
non-interest        151,823       149,758       155,814       146,067        144,450
expense
Income before       72,413        72,357        68,779        80,100         75,740
income taxes
Income taxes        11,969        12,694        13,591        19,912         17,071
Net income          60,444        59,663        55,188        60,188         58,669
Preferred stock     2,015         2,688         --            --             --
dividends
Net income
available to     $  58,429     $  56,975     $  55,188     $  60,188     $   58,669
common
shareholders
PER COMMON SHARE
DATA
Earning per
common share –   $  0.96       $  0.95       $  0.91       $  0.98       $   0.95
basic
Earning per
common share-       0.96          0.94          0.91          0.97           0.95
diluted
Cash dividends      0.50          0.50          0.48          0.48           0.48
per common share
Book value per
common share at     38.63         37.91         38.33         39.32          39.35
end of quarter
OUTSTANDING
COMMON SHARES
Period-end          60,492        60,236        59,970        61,479         61,462
common shares
Weighted-average
common shares -     60,340        60,011        60,593        61,382         61,317
basic
Dilutive effect
of stock            866           664           581           339            369
compensation
Weighted-average
common shares -     61,206        60,675        61,174        61,721         61,686
diluted
SELECTED
ANNUALIZED
RATIOS
Return on           1.01    %     1.03    %     1.01    %     1.09    %      1.11    %
average assets
Return on
average common      10.07         9.93          9.49          9.84           9.75
equity
Net interest
income to           3.38          3.43          3.45          3.48           3.54
average earning
assets(1)

 (1)Taxable-equivalent basis assuming a 35% tax rate.



Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
                     2013                                   2012
                     3rd Qtr      2nd Qtr      1st Qtr      4th Qtr       3rd Qtr
BALANCE SHEET
SUMMARY
 ($ in millions)
Average Balance:
 Loans            $   9,251    $  9,207     $  9,109     $   8,868     $  8,635
 Earning assets       21,199      20,468       20,415        20,138       19,218
 Total assets         22,926      22,232       22,213        21,964       21,010

Non-interest-bearing     7,738       7,452        7,431         7,690        7,161
demand deposits
 Interest-bearing     11,722      11,319       11,292        10,736       10,289
deposits
 Total deposits       19,460      18,771       18,723        18,426       17,450
 Shareholders'        2,447       2,445        2,431         2,433        2,393
equity
Period-End Balance:
 Loans            $   9,306    $  9,233     $  9,162     $   9,224     $  8,811
 Earning assets       21,688      20,755       20,787        21,148       20,024
 Goodwill and         541         542          543           544          545
intangible assets
 Total assets         23,530      22,572       22,498        23,124       21,848
 Total deposits       19,979      19,078       19,044        19,497       18,245
 Shareholders'        2,481       2,428        2,443         2,417        2,419
equity
 Adjusted
shareholders'            2,335       2,272        2,229         2,179        2,144
equity(1)
ASSET QUALITY
 ($ in thousands)
Allowance for loan   $   93,147   $  93,400    $  93,589    $   104,453   $  105,401
losses:
 As a percentage      1.00   %    1.01    %    1.02    %     1.13    %    1.20    %
of period-end loans
Net charge-offs:     $   5,361    $  3,764     $  16,864    $   5,073     $  2,747
 Annualized as a
percentage of            0.23   %    0.16    %    0.75    %     0.23    %    0.13    %
average loans
Non-performing
assets:
 Non-accrual      $   79,081   $  86,714    $  91,644    $   89,744    $  106,407
loans
 Restructured         8,243       1,900        1,613         --           --
loans
 Foreclosed           10,748      13,047       12,630        15,502       18,524
assets
 Total          $   98,072   $  101,661   $  105,887   $   105,246   $  124,931
 As a percentage
of:
 Total loans
and foreclosed           1.05   %    1.10    %    1.15    %     1.14    %    1.41    %
assets
 Total assets       0.42        0.45         0.47          0.46         0.57
CONSOLIDATED CAPITAL
RATIOS
Tier 1 Risk-Based        14.53  %    14.22   %    14.23   %     13.68   %    14.10   %
Capital Ratio
Total Risk-Based         15.68       15.39        15.44         15.11        15.62
Capital Ratio
Leverage Ratio           8.61        8.60         8.42          8.28         8.59
Equity to Assets         10.54       10.76        10.86         10.45        11.07
Ratio (period-end)
Equity to Assets         10.67       11.00        10.94         11.08        11.39
Ratio (average)

(1)Shareholders' equity excluding accumulated other comprehensive income
(loss).



Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share amounts)
                                                 Nine Months Ended
                                                 September 30,
                                                 2013         2012
CONDENSED INCOME STATEMENTS
Net interest income                              $ 461,347    $ 450,456
Net interest income(1)                             525,890      496,020
Provision for loan losses                          14,683       5,955
Non-interest income:
 Trust and investment management fees           67,138       62,774
 Service charges on deposit accounts            60,830       62,230
 Insurance commissions and fees                 32,707       31,512
 Interchange and debit card transaction fees    12,655       12,603
 Other charges, commissions and fees            25,599       22,440
 Net gain (loss) on securities transactions     (3)          (121)
 Other                                          25,354       21,462
 Total non-interest income                      224,280      212,900
Non-interest expense:
 Salaries and wages                             201,491      191,310
 Employee benefits                              47,609       44,768
 Net occupancy                                  37,718       37,203
 Furniture and equipment                        43,800       41,347
 Deposit insurance                              8,645        7,928
 Intangible amortization                        2,388        2,978
 Other                                          115,744      103,492
 Total non-interest expense                     457,395      429,026
Income before income taxes                         213,549      228,375
Income taxes                                       38,254       50,611
Net income                                         175,295      177,764
Preferred stock dividends                          4,703        --
Net income available to common shareholders      $ 170,592    $ 177,764
PER COMMON SHARE DATA
Earning per common share - basic                 $ 2.82       $ 2.89
Earning per common share – diluted                 2.81         2.88
Cash dividends per common share                    1.48         1.42
Book value per common share at end of period       38.63        39.35
OUTSTANDING COMMON SHARES
Period-end common shares                           60,492       61,462
Weighted-average common shares – basic             60,313       61,270
Dilutive effect of stock compensation              724          347
Weighted-average common shares – diluted           61,037       61,617
SELECTED ANNUALIZED RATIOS
Return on average assets                           1.02    %    1.16    %
Return on average common equity                    9.83         10.09
Net interest income to average earning assets(1)   3.42         3.63

 (1)Taxable-equivalent basis assuming a 35% tax rate.



Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
                                                 As of or for the
                                                 Nine Months Ended
                                                 September 30,
                                                 2013       2012
BALANCE SHEET SUMMARY
 ($ in millions)
Average Balance:
 Loans                                        $ 9,190    $ 8,319
 Earning assets                                 20,697     18,639
 Total assets                                   22,459     20,446
 Non-interest-bearing demand deposits           7,541      6,798
 Interest-bearing deposits                      11,446     10,114
 Total deposits                                 18,987     16,912
 Shareholders' equity                           2,441      2,352
Period-End Balance:
 Loans                                        $ 9,306    $ 8,811
 Earning assets                                 21,688     20,024
 Goodwill and intangible assets                 541        545
 Total assets                                   23,530     21,848
 Total deposits                                 19,979     18,245
 Shareholders' equity                           2,481      2,419
 Adjusted shareholders' equity(1)               2,335      2,144
ASSET QUALITY
 ($ in thousands)
Allowance for loan losses:                       $ 93,147   $ 105,401
As a percentage of period-end loans                1.00   %   1.20    %
Net charge-offs:                                 $ 25,989   $ 10,701
 Annualized as a percentage of average loans    0.38   %   0.17    %
Non-performing assets:
 Non-accrual loans                            $ 79,081   $ 106,407
 Restructured loans                             8,243      --
 Foreclosed assets                              10,748     18,524
 Total                                      $ 98,072   $ 124,931
As a percentage of:
 Total loans and foreclosed assets            1.05   %   1.41    %
 Total assets                                 0.42       0.57
CONSOLIDATED CAPITAL RATIOS
Tier 1 Risk-Based Capital Ratio                    14.53  %   14.10   %
Total Risk-Based Capital Ratio                     15.68      15.62
Leverage Ratio                                     8.61       8.59
Equity to Assets Ratio (period-end)                10.54      11.07
Equity to Assets Ratio (average)                   10.87      11.51

 (1)Shareholders' equity excluding accumulated other comprehensive
income (loss).

SOURCE Cullen/Frost Bankers, Inc.

Website: http://www.frostbank.com
 
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