CULLEN/FROST BANKERS, INC.

Cullen/Frost Bankers, Inc. operates as a financial holding company and bank holding company headquartered in San Antonio, Texas, providing a broad array of products and services throughout numerous Texas markets. The company offers commercial and consumer banking services, as well as trust and investment management, insurance, brokerage, mutual funds, leasing, treasury management, capital markets advisory and item processing services. At December 31, 2025, Cullen/Frost had consolidated total assets of $53.0 billion ¹ and was one of the largest independent bank holding companies headquartered in the State of Texas. The company serves a wide variety of industries including energy, manufacturing, services, construction, retail, telecommunications, healthcare, military and transportation, and is not dependent upon any single industry or customer.

The industry is highly competitive, with competition among commercial banks in the company's market areas as well 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 firms. Some competitors have greater resources and may have higher lending limits and offer other services not provided by Cullen/Frost. The company generally competes on the basis of customer service and responsiveness to customer needs, available loan and deposit products, the rates of interest charged on loans, the rates of interest paid for funds, and the availability and pricing of trust, brokerage and insurance services.

Cullen/Frost generates revenue primarily through net interest income, which is the difference between interest income earned on interest-earning assets such as loans and securities and interest expense paid on interest-bearing liabilities such as deposits and borrowed funds. The company also generates fee-based income through trust and investment management, insurance, brokerage, treasury management, capital markets advisory, and other services. Primary customer segments include commercial and industrial businesses, energy companies, real estate developers, and individual consumers across Texas markets. The company operates as a locally-oriented, community-based financial services organization with regional management and regional advisory boards comprised of local business persons, professionals and other community representatives.

The Banking segment provides commercial banking services including traditional business checking and savings accounts, loans for general corporate purposes including financing for industrial and commercial properties, interim construction financing, equipment, inventories and accounts receivable financing, acquisition financing, and commercial leases. Treasury management services include Frost Connect, a secure digital banking platform for account management, fund transfers, bill payments, mobile check deposits, and payroll services, cash management, and detailed financial reporting. Merchant services are provided through integrated point-of-sale systems, and the company also offers business bank debit and credit cards. Correspondent banking services are provided to approximately 178 ² financial institutions, primarily banks in Texas, including check clearing, transfer of funds, fixed income security services, and securities custody and clearance services. The Capital Markets Division supports fixed-income institutional investors with sales and trading, new issue underwriting, money market trading, advisory services and securities safekeeping and clearance, and also provides services to government entities, non-profit organizations, and other public sector customers. Global trade services include foreign exchange, online global trade services, standby letters of credit, import/export letters of credit, demand guarantees, and documentary collections. Consumer services include a full suite of deposit products, safe deposit facilities, online and mobile banking, drive-in and night deposit services, ATMs, and consumer lending products including home equity lines of credit, home equity loans, home improvement loans, 1-4 family residential mortgages, overdraft facilities, and other consumer loans. International banking services are provided to customers residing in or dealing with businesses located in Mexico, consisting of accepting deposits, making loans, issuing letters of credit, handling foreign collections, transmitting funds, and dealing in foreign exchange. Trust services include administration of estates and personal trusts, management of investment accounts for individuals, employee benefit plans and charitable foundations. At December 31, 2025, the estimated fair value of trust assets was $51.0 billion ³, including managed assets of $26.7 billion ⁴ and custody assets of $24.3 billion ⁵.

The Frost Wealth Advisors segment provides investment management services through Frost Investment Advisors, LLC, a registered investment advisor that provides investment management services to Frost-managed mutual funds, institutions and individuals, and Frost Investment Services, LLC, a registered investment advisor that provides investment management services to individuals. Frost Insurance Agency, Inc. provides a broad range of insurance products and services including property and casualty insurance and employee benefits plans for businesses, as well as life, disability, long-term care, property and real estate, automobile, and valuables insurance for individuals. Frost Brokerage Services, Inc. provides brokerage services and performs other transactions related to the sale and purchase of securities of all types, operating as a fully disclosed introducing broker-dealer that does not hold any customer accounts or maintain custody of customer assets. Tri-Frost Corporation primarily holds securities and receives cash flows related to principal and interest on securities until maturity. Cullen/Frost Capital Trust II was formed in 2004 for the purpose of issuing $120.0 million ⁶ in trust preferred securities and lending the proceeds to Cullen/Frost.

During the period, the company repurchased shares under its stock repurchase plans. On January 29, 2025, the board of directors authorized a stock repurchase plan for 2025. Subsequent to year-end, on January 28, 2026, the board of directors authorized a stock repurchase plan for 2026. The company also paid dividends on its common stock and preferred stock. The FDIC issued an interim final rule in December 2025 that reduced the eighth quarterly special assessment rate from 3.36 basis points to 2.97 basis points ⁷, and as a result, the company reversed a total of $9.7 million ⁸ ($7.7 million ⁹ after tax) of its special deposit insurance assessment accrual. The company accrued $51.5 million ¹⁰ ($40.7 million ¹¹ after tax) related to the FDIC special assessment in 2023, and an additional $9.0 million ¹² ($7.1 million ¹³ after tax) in 2024.

For the fiscal year ended December 31, 2025, total revenue (net interest income plus noninterest income) was not explicitly stated as a single line item in the filing, but net interest income and noninterest income are detailed in the financial statements. Net income available to common shareholders was reported. Diluted earnings per common share was reported. The company's return on average assets and return on average common equity were reported. The company maintained a strong capital position with regulatory capital ratios exceeding well-capitalized minimums.

The company's operating objectives include expansion, diversification within its markets, growth of fee-based income, and growth internally and, to a lesser extent, through acquisitions of financial institutions, branches and financial services businesses. While currently focused on organic growth, the company may seek merger or acquisition partners that are culturally similar and have experienced management and possess either significant market presence or have potential for improved profitability through financial management, economies of scale and expanded services. From time to time, the company evaluates merger and acquisition opportunities and conducts due diligence activities related to possible transactions with other financial institutions and financial services companies.

The company's growth strategy includes the continued development of its residential mortgage product offering, which was recently implemented. The company also continues to invest in technology, including its Frost Connect digital banking platform, which includes additional features for businesses such as payroll services, cash management, and detailed financial reporting. The company operates approximately 204 ¹⁴ financial centers across Texas in the Austin, Dallas, Fort Worth, Gulf Coast, Houston, Permian Basin, and San Antonio regions, and approximately 1,760 ¹⁵ automated-teller machines throughout the State of Texas, the majority of which are operated in connection with branding and licensing agreements with various retailers.

The company's margin trajectory is influenced by interest rate risk, as net interest income is largely dependent upon the difference between interest income earned on interest-earning assets and interest expense paid on interest-bearing liabilities. Changes in monetary policy, including changes in interest rates, could influence the interest received on loans and securities and the amount of interest paid on deposits and borrowings. The company's cost structure includes noninterest expenses such as salaries and employee benefits, occupancy, technology, and other operating costs. The company does not provide specific margin or cost efficiency targets in the filing.

The company employed 6,008 ¹⁶ full-time equivalent employees at December 31, 2025. The average tenure of all full-time employees was approximately 9.4 years ¹⁷ while the average tenure of executive officers was approximately 30.3 years ¹⁸. None of the employees are represented by collective bargaining agreements. The company dedicates 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. The company also provides employees the opportunity to use paid time off to perform community service activities, which amounted to over 27,000 hours ¹⁹ of community service performed by employees in 2025.

The company's capital allocation strategy includes the payment of dividends on common stock and preferred stock. The company repurchased shares under its stock repurchase plans. On January 29, 2025, the board of directors authorized a stock repurchase plan for 2025. Subsequent to year-end, on January 28, 2026, the board of directors authorized a stock repurchase plan for 2026. The company's ability to pay dividends and repurchase shares is subject to regulatory restrictions and policies. The company's principal source of liquidity is dividends from Frost Bank, and at December 31, 2025, Frost Bank could pay aggregate dividends of approximately $977.4 million ²⁰ to Cullen/Frost without obtaining affirmative governmental approvals.

The company faces structural headwinds from interest rate risk, as earnings and cash flows are largely dependent upon net interest income, which is sensitive to changes in market interest rates. If interest rates paid on deposits and other borrowings increase at a faster rate than interest rates received on loans and other investments, net interest income could be adversely affected. Additionally, the company's loan portfolio contains a significant number of commercial and industrial, energy, construction and commercial real estate loans with relatively large balances, and the deterioration of one or a few of these loans could cause a significant increase in non-performing loans. The company also faces risks from volatility in crude oil prices, as energy loans comprised approximately 5.0% ²¹ of the loan portfolio at December 31, 2025, and the energy industry and market prices for oil and gas have historically been cyclical.

The company faces regulatory and macro constraints including extensive regulation under federal and state laws, which is intended primarily for the protection of depositors, federal deposit insurance funds and the banking system as a whole. Changes in statutes, regulations or regulatory policies applicable to Cullen/Frost or its subsidiaries could have a material effect on business, financial condition or results of operations. The company is also subject to liquidity risk, as approximately 52% ²² of deposits were uninsured at December 31, 2025, and a failure to maintain adequate liquidity could have a material adverse effect. The company has experienced significant unrealized losses on its available-for-sale securities portfolio as a result of elevated market interest rates, which are reflected in accumulated other comprehensive income and reduce the level of book capital and tangible common equity.

The company is subject to significant interest rate risk, as earnings and cash flows are largely dependent upon net interest income, which is sensitive to changes in market interest rates. If interest rates paid on deposits and other borrowings increase at a faster rate than interest rates received on loans and other investments, net interest income could be adversely affected. The company faces credit risk from its loan portfolio, which at December 31, 2025 had approximately 80.9% ²³ consisting of commercial and industrial, energy, construction and commercial real estate mortgage loans, which are generally viewed as having more risk of default. Commercial real estate mortgage loans comprised approximately 47.1% ²⁴ of the loan portfolio at that date. The company also faces volatility risk in crude oil prices, as energy loans totaled $1.1 billion ²⁵ and comprised approximately 5.0% ²⁶ of the loan portfolio at December 31, 2025, and the price per barrel of crude oil was $57.95 ²⁷ at that date compared to $71.72 ²⁸ at December 31, 2024. Liquidity risk is material, as approximately 52% ²⁹ of deposits were uninsured at December 31, 2025, and the company relies on these deposits for liquidity. The company has experienced significant unrealized losses on its available-for-sale securities portfolio due to elevated market interest rates, which reduce book capital and tangible common equity.

Management's message emphasizes the company's philosophy to grow and prosper by building long-term relationships based on top quality service, high ethical standards, and safe, sound assets. The company operates as a locally-oriented, community-based financial services organization, augmented by experienced, centralized support in select critical areas. Management highlights the company's commitment to its culture, which is designed to promote making people's lives better and to uphold that principle in everything we do, adhering to the timeless values of integrity, caring and excellence. The strategic priorities for the period ahead include expansion, diversification within markets, growth of fee-based income, and growth internally and, to a lesser extent, through acquisitions of financial institutions, branches and financial services businesses. Management also emphasizes the importance of human capital, noting that at December 31, 2025, the company employed 6,008 ³⁰ full-time equivalent employees with an average tenure of approximately 9.4 years ³¹ for all full-time employees and approximately 30.3 years ³² for executive officers.