CULLENFROST BANKERS INC
For the period ended Dec 31, 2024. Filed Feb 6, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 6, 2025
CFR$155.23-0.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-06.
0000039263-24-000013
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-06.
0000039263-25-000017
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 206 previous paragraphs and 211 current paragraphs.
113 unchanged; 87 reworded; 10 added; 5 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 23 previous and 24 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
The decrease was primarily the result of a $74.1 million increase in non-interest expense and a $18.8 million increase in credit loss expense partly offset by a $45.9 million increase in net interest income, a $30.6 million increase in non-interest income, and a $975 thousand decrease in income tax expense.
Current report
Taxable-equivalent net interest income for 2024 increased $36.2 million, or 2.2%, compared to 2023. Taxable-equivalent net interest income in 2024 included 366 days compared to 365 days in 2023 as a result of the leap year. The additional day added approximately $3.0 million to taxable-equivalent net interest income during 2024. Excluding the impact of the additional day results in an effective increase in taxable-equivalent net interest income of $33.2 million during 2024.
Current report
In December 2024, the CFPB issued a final rule that modifies or eliminates several long-standing exclusions from requirements generally applicable to consumer credit that previously exempted certain overdraft practices from such requirements and requires banks to restructure many overdraft fees, overdraft lines of credit, and other overdraft practices as separate consumer credit accounts that have become subject to those requirements. This rule applies to banks with over $10 billion in total assets, including Frost Bank, starting in October 2025. Compliance with the new requirements could result in Frost Bank, among other things, facing higher compliance costs in charging overdraft fees, experiencing a decreased ability to recover amounts extended as overdraft protection, reducing the availability of overdraft protection, and/or charging lower overdraft fees. Refer to Part I, Item 1. Business in the section captioned “Supervision and Regulation” elsewhere in this annual report on Form 10-K for additional information.
Current report
Deposit Insurance. Deposit insurance expense totaled $37.3 million in 2024 compared to $76.6 million in 2023. Deposit insurance expense include accruals totaling $9.0 million ($7.1 million after tax) in 2024 and $51.5 million ($40.7 million after tax) in 2023 related to a special deposit insurance assessment discussed below. Excluding these amounts related to the special assessment, deposit insurance expense would have increased $3.2 million in 2024 compared to 2023 primarily due to an increase in the assessment rate.
Current report
Net income for 2024 decreased $17.5 million, or 3.0%, compared to 2023. The decrease was primarily the result of a $61.0 million increase in non-interest expense and an $18.8 million increase in credit loss expense partly offset by a $48.2 million increase in net interest income and a $13.5 million increase in non-interest income.
Current report
Non-interest income for 2024 increased $13.5 million, or 5.4%, compared to 2023. 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.
Current report
Non-accrual commercial and industrial loans included two credit relationships in excess of $5.0 million totaling $28.7 million at December 31, 2024. One of these credit relationships was reported as non-accrual at December 31, 2023 and totaled $13.8 million at that date. Principal payments received during 2024 reduced the outstanding balance of this credit relationship to $9.0 million at December 31, 2024. Non-accrual energy loans included one credit relationship in excess of $5.0 million totaling $5.9 million at December 31, 2023. This loan was subsequently paid-off during 2024. Non-accrual commercial real estate loans included one credit relationship in excess of $5.0 million totaling $7.5 million (owner occupied) at December 31, 2024. At December 31, 2023, non-accrual commercial real estate loans included one credit relationship in excess of $5.0 million totaling $17.4 million (non-owner occupied). We recognized a charge-off totaling $3.8 million related to this credit during 2024. Another credit relationship had an aggregate balance of $5.1 million at December 31, 2024 of which $4.6 million was included with non-accrual commercial real estate loans and $586 thousand was included with non-accrual commercial and industrial loans. We recognized charged-offs totaling $2.4 million on commercial and industrial loans associated with this credit relationship during 2024.
Current report
Additional information related to the allowance allocated to commercial real estate loans at December 31, 2024 is included in the following table:
Current report
The overall loan portfolio as of December 31, 2024 increased $1.9 billion, or 10.3%, compared to December 31, 2023. This increase included a $985.9 million, or 11.0%, increase in commercial real estate loans; a $642.7 million, or 26.1%, increase in consumer real estate loans; a $192.2 million, or 20.5%, increase in energy loans; and a $142.4 million, or 2.4%, increase in commercial and industrial loans; partly offset by a $32.5 million, or 6.8%, decrease in consumer and other loans.
Current report
(primarily overdrafts) and commercial and industrial loans and, to a lesser extent, both commercial and consumer real estate loans. The impact of these items was partly offset by a decrease in expected credit losses associated with energy loans; primarily related to decreases in modeled expected losses and the overlay for credit concentrations; a decrease in specific allocations related to commercial real estate loans; and a decrease in the consumer overlay, primarily associated with the model updates discussed in Note 3 - Loans in the accompanying notes to consolidated financial statements.
Removed paragraphs (5)
Previous report
Income tax expense for 2023 increased $26.0 million, or 30.6%, compared to 2022. See the section captioned “Income Taxes” elsewhere in this discussion.
Previous report
Frost Insurance Agency, which is included in the Banking operating segment, had gross commission revenues of $59.3 million during 2023 compared to $54.2 million during 2022. The increase in gross commission revenues was primarily due to increases in both commission and contingent income. The increase in commission income was related to increases in commercial and personal lines property and casualty commissions, benefit plan commissions and life insurance commissions. The increases in commercial and personal lines property and casualty commissions and benefit plan commissions were primarily related to increases in the underlying exposure bases and increases in rates. The increase in life insurance commissions was primarily due to an increase in business volume. The increase in contingent income was primarily related to an increase in performance related contingent payments due to growth within the portfolio and improvement in the loss performance of insurance policies previously placed. See the analysis of insurance commissions, and fees included in the section captioned “Non-Interest Income” included elsewhere in this discussion.
Previous report
Net income for 2023 decreased $5.1 million, or 13.3%, compared to 2022. The decrease was primarily due to a $12.5 million increase in non-interest expense partly offset by a $3.0 million increase in net interest income, a $3.0 million increase in non-interest income and a $1.4 million decrease in income tax expense.
Previous report
Net interest income for 2023 increased $3.0 million, or 64.0%, compared to 2022. This increase was primarily due to an increase in the average funds transfer prices allocated to funds provided by Frost Wealth Advisors. See the analysis of net interest income included in the section captioned “Net Interest Income” included elsewhere in this discussion.
Previous report
Paycheck Protection Program (“PPP”) loans, which were originated in 2020 and early 2021, are loans to qualified small businesses under the PPP administered by the Small Business Administration (“SBA”) under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (“the CARES Act”). Loans covered by the PPP were eligible for loan forgiveness for certain costs incurred related to payroll, group health care benefit costs and qualifying mortgage, rent and utility payments. The remaining loan balance after forgiveness of any amounts is still fully guaranteed by the SBA.
Reworded paragraphs (87)
Previous wording
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.
Current wording
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.
Previous wording
Net income available to common shareholders increased $18.8 million for 2023 compared to 2022. The increase was primarily the result of a $267.4 million increase in net interest income and a $23.7 million increase in non-interest income partly offset by a $204.4 million increase in non-interest expense; which included $51.5 million related to a special Federal Deposit Insurance Corporation (“FDIC”) deposit insurance assessment discussed below; a $43.2 million increase in credit loss expense; and a $24.7 million increase in income tax expense.
Current wording
Net income available to common shareholders decreased $15.4 million for 2024 compared to 2023.
Previous wording
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. 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.
Current wording
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. 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.
Previous wording
The Federal Reserve influences the general market rates of interest, including the deposit and loan rates offered by many financial institutions. As of December 31, 2023, approximately 42.9% of our loans had a fixed interest rate, while the remaining loans had floating interest rates that were primarily tied to a benchmark developed by the American Financial Exchange, the Secured Overnight Financing Rate (“SOFR”) (approximately 26.2%); the prime interest rate (approximately 22.0%); or the American Interbank Offered Rate (“AMERIBOR”) (approximately 8.6%). 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.
Current wording
The Federal Reserve influences the general market rates of interest, including the deposit and loan rates offered by many financial institutions. As of December 31, 2024, approximately 40.6% of our loans had a fixed interest rate, while the remaining loans had floating interest rates that were primarily tied to a benchmark developed by the American Financial Exchange, the Secured Overnight Financing Rate (“SOFR”) (approximately 33.5%); the prime interest rate (approximately 21.0%); or the American Interbank Offered Rate (“AMERIBOR”) (approximately 4.8%). 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.
Previous wording
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. 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. On January 31, 2024, the Federal Reserve announced they would maintain the target federal funds rate at 5.25% to 5.50% noting that, despite an easing in the rate of inflation over the past year, they do not expect it will be appropriate to reduce the target range until they have gained greater confidence that inflation is moving sustainably toward two percent.
Current wording
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. 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.
Previous wording
Taxable-equivalent net interest income for 2023 increased $264.7 million, or 19.1%, compared to 2022. 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 impact of these items was partly offset by increases in the average costs of interest-bearing deposit accounts and repurchase agreements, among other things, combined with a decrease in the average volume of interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) and increases in the average volumes of time deposit accounts and repurchase agreements, among other things. As a result of the aforementioned fluctuations, the taxable-equivalent net interest margin increased 63 basis points from 2.82% during 2022 to 3.45% during 2023.
Current wording
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. The impact of these items was partly offset by increases in the average volume of and cost on time deposit accounts, decreases in the average volumes of taxable and tax-exempt securities, and increases in the average costs of repurchase agreements and money market deposit accounts, among other things. As a result of the aforementioned fluctuations, the taxable-equivalent net interest margin increased 8 basis points from 3.45% during 2023 to 3.53% during 2024.
Previous wording
The average volume of interest-earning assets for 2023 decreased $2.1 billion, or 4.4%, compared to 2022. The decrease in the average volume of interest-earning assets during 2023 included a $5.4 billion decrease in average interest-bearing deposits (primarily amounts held by us in an interest-bearing account at the Federal Reserve) and a $596.2 million decrease in average tax-exempt securities partly offset by a $2.7 billion increase in average taxable securities and a $1.2 billion increase in average loans.
Current wording
The average volume of interest-earning assets for 2024 increased $89.1 million, or 0.2%, compared to 2023. The increase in the average volume of interest-earning assets during 2024 was primarily related to a $1.9 billion increase in average loans and a $208.0 million increase in average interest-bearing deposits (primarily amounts held by us in an interest-bearing account at the Federal Reserve) partly offset by a $1.2 billion decrease in average taxable securities, a $766.5 million decrease in average tax-exempt securities, a $31.0 million decrease in average resell agreements and a $20.7 million decrease in average federal funds sold.
Previous wording
The average yield on interest-earning assets increased 162 basis points from 3.20% during 2022 to 4.82% during 2023 while the average rate paid on interest-bearing liabilities increased 155 basis points from 0.64% in 2022 to 2.19% in 2023. The average taxable-equivalent yield on interest-earning assets and the average rate paid on interest-bearing liabilities were primarily impacted by increases in market interest rates (as noted in the table above) and changes in the volume and relative mix of interest-earning assets and interest-bearing liabilities.
Current wording
The average yield on interest-earning assets increased 36 basis points from 4.82% during 2023 to 5.18% during 2024 while the average rate paid on interest-bearing liabilities increased 33 basis points from 2.19% in 2023 to 2.52% in 2024. The average taxable-equivalent yields on interest-earning assets during the comparable periods was impacted by changes in market interest rates (as noted in the table above) and changes in the volume and relative mix of interest-earning assets.
Previous wording
The average taxable-equivalent yield on loans increased 205 basis points from 4.64% during 2022 to 6.69% during 2023. The average taxable-equivalent yield on loans during 2023 was positively impacted by significant increases in market interest rates in 2022 and, to a lesser extent 2023. The average volume of loans increased $1.2 billion, or 6.9%, in 2023 compared to 2022. Loans made up approximately 38.7% of average interest-earning assets during 2023 compared to 34.7% during 2022.
Current wording
The average taxable-equivalent yield on loans increased 30 basis points from 6.69% during 2023 to 6.99% during 2024. The average taxable-equivalent yield on loans during 2024 was partly impacted by changes in market interest rates (as noted in the table above). The average volume of loans increased $1.9 billion, or 10.7%, in 2024 compared to 2023. Loans made up approximately 42.8% of average interest-earning assets during 2024 compared to 38.7% during 2023.
Previous wording
The average taxable-equivalent yield on securities was 3.24% during 2023, increasing 29 basis points compared to 2.95% during 2022. The average yield on taxable securities was 2.72% during 2023 compared to 2.16% during 2022, increasing 56 basis points, while the average yield on tax exempt securities was 4.26% during 2023 compared to 4.08% during 2022, increasing 18 basis points. Tax exempt securities made up approximately 35.5% of total average securities during 2023, compared to 42.7% during 2022. The average volume of total securities increased $2.1 billion, or 11.4%, during 2023 compared to 2022. Securities made up approximately 45.1% of average interest-earning assets in 2023 compared to 38.7% in 2022. The increase during 2023 was primarily related to the investment of available funds (primarily the reinvestment of amounts held in an interest-bearing account at the Federal Reserve) into taxable securities.
Current wording
The average taxable-equivalent yield on securities was 3.38% during 2024, increasing 14 basis points compared to 3.24% during 2023. The average yield on taxable securities was 2.92% during 2024 compared to 2.72% during 2023, increasing 20 basis points, while the average yield on tax exempt securities was 4.31% during 2024 compared to 4.26% during 2023, increasing 5 basis points. Tax exempt securities made up approximately 35.2% of total average securities during 2024, compared to 35.5% during 2023. The average volume of total securities decreased $2.0 billion, or 9.5%, during 2024 compared to 2023. Securities made up approximately 40.8% of average interest-earning assets in 2024 compared to 45.1% in 2023. The decrease during 2024 was primarily related to the use of funds provided by maturities, calls and principal repayments of these securities to support the origination of loans.
Previous wording
Average interest-bearing deposits (primarily amounts held by us in an interest-bearing account at the Federal Reserve), during 2023 decreased $5.4 billion, or 42.6%, compared to 2022. Interest-bearing deposits made up approximately 15.9% of average interest-earning assets during 2023 compared to approximately 26.5% in 2022. The decrease during 2023 was primarily related to the reinvestment of amounts held in an interest-bearing account at the Federal Reserve into taxable securities, and to a lesser extent, loans combined with decreases in average funding provided by customer deposits (primarily non-interest-bearing). The average yield on interest-bearing deposits was 5.13% during 2023 and 1.69% during 2022. The average yields on interest-bearing deposits during 2023 was impacted by higher interest rates paid on reserves held at the Federal Reserve, compared to 2022.
Current wording
Average interest-bearing deposits (primarily amounts held by us in an interest-bearing account at the Federal Reserve), during 2024 increased $208.0 million, or 2.8%, compared to 2023. Interest-bearing deposits made up approximately 16.3% of average interest-earning assets during 2024 compared to approximately 15.9% in 2023. The increase during 2024 was partly related to funds provided by maturities, calls and principal repayments of securities. The average yield on interest-bearing deposits was 5.27% during 2024 and 5.13% during 2023. The average yield on interest-bearing deposits during 2024 was impacted by a higher average interest rate paid on reserves held at the Federal Reserve, compared to 2023.
Previous wording
Average resell agreements during 2023 increased $69.1 million, or 404.8%, compared to 2022, while federal funds sold during 2023 decreased $11.8 million, or 31.7%, compared to 2022. Federal funds sold and resell agreements were not a significant component of interest-earning assets during the comparable periods. The average yields on federal funds sold and resell agreements were 5.07% and 5.36%, respectively, during 2023 compared to 2.55% and 3.47%, respectively, during 2022. The average yields on federal funds sold and resell agreements were positively impacted by higher average market interest rates during 2023 compared to 2022.
Current wording
Average resell agreements during 2024 decreased $31.0 million, or 36.0%, compared to 2023, while federal funds sold during 2024 decreased $20.7 million, or 81.4%, compared to 2023. Federal funds sold and resell agreements were not a significant component of interest-earning assets during the comparable periods. The average yields on federal funds sold and resell agreements were 5.72% and 5.63%, respectively, during 2024 compared to 5.07% and 5.36%, respectively, during 2023. The average yields on federal funds sold and resell agreements were positively impacted by higher average market interest rates during 2024 compared to 2023.
Previous wording
The average rate paid on interest-bearing liabilities was 2.19% during 2023, increasing 155 basis points from 0.64% during 2022. Average deposits decreased $3.1 billion, or 7.0%, in 2023 compared to 2022. Average interest-bearing deposits decreased $270.0 million in 2023 compared to 2022, while average non-interest-bearing deposits decreased $2.9 billion in 2023 compared to 2022. The ratio of average interest-bearing deposits to total average deposits was 63.0% in 2023 compared to 59.2% in 2022. The average cost of deposits is primarily impacted by changes in market interest rates as well as changes in the volume and relative mix of interest-bearing deposits. The average rates paid on interest-bearing deposits and total deposits were 1.95% and 1.23%, respectively, in 2023 compared to 0.53% and 0.32%, respectively, in 2022. The average cost of deposits during 2023 was impacted by an increase in the interest rates we pay on our interest-bearing deposit products as a result of an increase in market interest rates.
Current wording
The average rate paid on interest-bearing liabilities was 2.52% during 2024, increasing 33 basis points from 2.19% during 2023. Average deposits decreased $472.8 million, or 1.1%, in 2024 compared to 2023. Average interest-bearing deposits increased $1.0 billion in 2024 compared to 2023, while average non-interest-bearing deposits decreased $1.5 billion in 2024 compared to 2023. The ratio of average interest-bearing deposits to total average deposits was 66.2% in 2024 compared to 63.0% in 2023. The average cost of deposits is primarily impacted by changes in market interest rates as well as changes in the volume and relative mix of interest-bearing deposits. The average rates paid on interest-bearing deposits and total deposits were 2.32% and 1.54%, respectively, in 2024 compared to 1.95% and 1.23%, respectively, in 2023. The average cost of deposits during 2024 was impacted by an increase in the interest rates we pay on our interest-bearing deposit products as a result of an increase in market interest rates.
Previous wording
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. The net interest spread, as well as the net interest margin, will be impacted by future changes in short-term and long-term interest rate levels, as well as the impact from the competitive environment. A discussion of the effects of changing interest rates on net interest income is set forth in Item 7A. Quantitative and Qualitative Disclosures About Market Risk elsewhere in this report.
Current wording
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. The net interest spread, as well as the net interest margin, will be impacted by future changes in short-term and long-term interest rate levels, as well as the impact from the competitive environment. A discussion of the effects of changing interest rates on net interest income is set forth in Item 7A. Quantitative and Qualitative Disclosures About Market Risk elsewhere in this report.
Previous wording
Total non-interest income for 2023 increased $23.7 million, or 5.9%, compared to 2022. Changes in the various components of non-interest income are discussed in more detail below.
Current wording
Total non-interest income for 2024 increased $30.6 million, or 7.1%, compared to 2023. Changes in the various components of non-interest income are discussed in more detail below.
Previous wording
Trust and Investment Management Fees. Trust and investment management fee income for 2023 decreased $1.4 million, or 0.9%, compared to 2022. 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. The decrease in trust and investment management fees during 2023 was primarily due to a decrease in oil and gas fees (down $4.2 million) partly offset by an increase in investment management fees (up $2.3 million), among other things. The decrease in oil and gas fees was primarily related to lower average market prices in 2023 relative to 2022.The increase in investment management fees during 2023 was primarily related to an increase in the average value of assets maintained in accounts. The increase in the average value of assets was partly related to higher average equity valuations during 2023 relative to 2022.
Current wording
Trust and Investment Management Fees. Trust and investment management fee income for 2024 increased $12.0 million, or 7.8%, compared to 2023. 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. The increase in trust and investment management fees during 2024 was primarily related to increases in investment management fees (up $12.8 million) and oil and gas fees (up $1.5 million), partly offset by decreases in estate fees (down $2.3 million) and real estate fees (down $637 thousand). Investment management fees are generally based on the market value of assets within an account and are thus impacted by price changes within the equity and bond markets. The increase in investment management fees during 2024 were primarily related to increases in the average value of assets maintained in accounts. The increases in the average value of assets were partly related to higher equity valuations during 2024 relative to 2023. The increase in oil and gas fees was primarily related to increased royalties received, in part due to new accounts added in 2023, and, to a lesser extent, an increase in new lease bonuses. The decreases in estate fees and real estate fees were primarily related to decreased transaction volumes relative to 2023.
Previous wording
At December 31, 2023, trust assets, including both managed assets and custody assets, were primarily composed of equity securities (41.2% of trust assets), fixed income securities (33.2% of trust assets), alternative investments (9.9% of assets) and cash equivalents (9.6% of trust assets). 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.
Current wording
At December 31, 2024, trust assets, including both managed assets and custody assets, were primarily composed of equity securities (42.2% of trust assets), fixed income securities (32.5% of trust assets), alternative investments (9.5% of assets) and cash equivalents (9.0% of trust assets). 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.
Previous wording
Service Charges on Deposit Accounts. Service charges on deposit accounts for 2023 increased $1.6 million, or 1.8%, compared to 2022. The increase was primarily related to increases in overdraft charges on consumer and commercial accounts (up $4.4 million and $1.7 million, respectively) and consumer service charges (up $1.2 million) partly offset by a decrease in commercial service charges (down $5.7 million). Overdraft charges totaled $44.4 million ($33.6 million consumer and $10.8 million commercial) during 2023 compared to $38.3 million ($29.2 million consumer and $9.1 million commercial) during 2022. The increase in overdraft charges during 2023 was impacted by an increase in the volume of fee assessed overdrafts relative to 2022, in part due to growth in the number of accounts. The increase in consumer service charges during 2023 was partly related to increases in overall deposit accounts and volumes. The decrease in commercial service charges primarily resulted from a higher average earnings credit rate applied to deposits maintained by treasury management customers. Because average market interest rates were higher during 2023 compared to 2022, deposit balances were more valuable and yielded a higher average earnings credit rate. As a result, customers paid for less of their services through fees rather than with earnings credits applied to their deposit balances.
Current wording
Service Charges on Deposit Accounts. Service charges on deposit accounts for 2024 increased $12.7 million, or 13.6%, compared to 2023. The increase was primarily related to increases in commercial service charges (up $5.5 million) and overdraft charges on consumer and commercial accounts (up $5.5 million and $2.0 million, respectively). The increase in commercial service charges during 2024 was partly related to an increase in billable services related to analyzed treasury management accounts partly offset by the effect of a higher average earnings credit rate applied to deposits maintained by treasury management customers which resulted in customers paying for less of their services through fees rather than with earnings credits applied to their deposit balances. The increase in commercial service charges was also partly related, to a lesser extent, to an increase in service fees on non-analyzed accounts. Overdraft charges totaled $51.9 million ($39.1 million consumer and $12.8 million commercial) during 2024 compared to $44.4 million ($33.6 million consumer and $10.8 million commercial) during 2023. The increase in overdraft charges during 2024 was impacted by an increase in the volume of fee assessed overdrafts relative to 2023, in part due to growth in the number of accounts.
Previous wording
Insurance Commissions and Fees. Insurance commissions and fees for 2023 increased $5.1 million, or 9.5%, compared to 2022. The increase was primarily the result of increases in commission income (up $3.9 million) and contingent income (up $1.1 million). The increase in commission income was related to increases in commercial and personal lines property and casualty commissions; benefit plan commissions; and life insurance commissions. The increases in benefit plan commissions and commercial and personal lines property and casualty commissions were primarily related to increases in the underlying exposure bases and increases in rates. The increase in life insurance commissions was primarily due to an increase in business volume.
Current wording
Insurance Commissions and Fees. Insurance commissions and fees for 2024 increased $3.0 million, or 5.1%, compared to 2023. The increase was primarily the result of increases in commercial lines property and casualty commissions (up $3.5 million) and contingent commissions (up $332 thousand), partly offset by a decrease in life insurance commissions (down $1.0 million). The increase in commercial lines property and casualty commissions was primarily related to an increase in the underlying exposure base, an increase in rates, and an increase in business volumes. The decrease in life insurance commissions was primarily due to a decrease in business volumes mostly due to a significant transaction in 2023.
Previous wording
Contingent income totaled $4.6 million in 2023 and $3.5 million in 2022. 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. The increase in performance related contingent income was primarily related to growth within the portfolio and improvement in the loss performance of insurance policies previously placed. Performance related contingent income in 2022 was impacted by a severe weather event in Texas during 2021 that resulted in significant property and casualty claims and losses. Contingent income also includes amounts received from various benefit plan insurance companies related to the volume of business generated and/or the subsequent retention of such business. This benefit plan related contingent income totaled $1.3 million in 2023 and $1.6 million in 2022.
Current wording
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. This performance related contingent income totaled $3.4 million in 2024 and $3.3 million in 2023. While total performance related contingent income remained relatively flat during the comparable years, performance related contingent income related to commercial lines insurance policies decreased during 2024 due to a deterioration of the loss performance of commercial lines insurance policies previously placed and lower growth within the commercial lines portfolio, partly due to a tightening of underwriting standards. This decrease was offset by an increase in performance related contingent income related to our personal lines portfolio due to improved loss performance. Contingent income also includes amounts received from various benefit plan insurance companies related to the volume of business generated and/or the subsequent retention of such business. This benefit plan related contingent income totaled $1.6 million in 2024 and $1.3 million in 2023.
Previous wording
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. A comparison of gross and net interchange and card transaction fees for the reported periods is presented in the table below.
Current wording
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. A comparison of gross and net interchange and card transaction fees for the reported periods is presented in the table below.
Previous wording
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. An upward adjustment of no more than 1 cent to an issuer's debit card interchange fee is allowed if the card issuer develops and implements policies and procedures reasonably designed to achieve certain fraud-prevention standards. The Federal Reserve also has rules governing routing and exclusivity that require issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid product. 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. 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. Had the proposed maximum interchange fees been in effect during 2023, interchange and debit card transaction fees for 2023 would have been approximately 30% lower. The extent to which any such proposed changes in permissible interchange fees will impact our future revenues is currently uncertain.
Current wording
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. An upward adjustment of no more than 1 cent to an issuer's debit card interchange fee is allowed if the card issuer develops and implements policies and procedures reasonably designed to achieve certain fraud-prevention standards. The Federal Reserve also has rules governing routing and exclusivity that require issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid product. 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. 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. Had the proposed maximum interchange fees been in effect during the reported periods, interchange and debit card transaction fees would have been approximately 30% lower. The comment period for this proposal ended in May 2024. The extent to which any such proposed changes in permissible interchange fees will impact our future revenues is currently uncertain.
Previous wording
Other Charges, Commissions and Fees. Other charges, commissions and fees for 2023 increased $7.4 million, or 17.9%, compared to 2022. The increase was primarily related to increases in income from the placement of money market accounts (up $2.9 million), other service charges (up $2.2 million), capital markets advisory fees (up $1.6 million), letter of credit fees (up $978 thousand), merchant services rebates/bonuses (up $897 thousand), and commitment fees on unused lines of credit (up $692 thousand), among other things, partly offset by a decrease in income from the sale of mutual funds (down $1.5 million), among other things.
Current wording
Other Charges, Commissions and Fees. Other charges, commissions and fees for 2024 increased $4.3 million, or 8.8%, compared to 2023. The increase was primarily related to increases in income from the placement of annuities (up $1.7 million) and money market accounts (up $1.4 million); letter of credit fees (up $933 thousand); and merchant services rebates/bonuses (up $888 thousand); among other things, partly offset by decreases in capital markets advisory fees (down $985 thousand) and other service charges (down $908 thousand), among other things.
Previous wording
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. The proceeds from these sales enhanced our current liquidity position and will provide us the flexibility to be more opportunistic with the reinvestment of these funds in the future. There were no sales of securities during 2022.
Current wording
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. The proceeds from these sales enhanced our liquidity position and provided us the flexibility to be more opportunistic with the reinvestment of these funds in the future.
Previous wording
Other Non-Interest Income. Other non-interest income for 2023 increased $9.7 million, or 21.5%, compared to 2022. The increase was partly related to increases in income from customer derivative and foreign exchange transactions (up $5.9 million), sundry and other miscellaneous income (up $1.1 million), income from customer securities trading transactions (up $911 thousand), and earnings on the cash surrender value of life insurance (up $847 thousand), among other things. The increases in income from customer derivative and securities trading transactions and income from customer foreign exchange transactions were primarily related to increases in transaction volumes. 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. The increase in earnings on the cash surrender value of life insurance was related to an increase in market interest rates.
Current wording
Other Non-Interest Income. Other non-interest income for 2024 decreased $2.9 million, or 5.2%, compared to 2023. The decrease was primarily related to decreases in sundry and other miscellaneous income (down $6.9 million) and income from customer derivative and foreign exchange transactions (down $2.0 million), among other things, partly offset by increases in public finance underwriting fees (up $4.9 million), income from customer securities trading activities (up $957 thousand), and earnings on the cash surrender value of life insurance (up $802 thousand), 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. The fluctuations in public finance underwriting fees and income from customer derivative, foreign exchange and securities trading transactions were primarily related to variations in transaction volumes. The increase in earnings on the cash surrender value of life insurance was related to an increase in market interest rates.
Previous wording
Total non-interest expense for 2023 increased $204.4 million, or 20.0%, compared to 2022. The increase included $51.5 million related to a special FDIC deposit insurance assessment discussed below. Excluding the impact of the special assessment, total non-interest expense would have increased $152.9 million, or 14.9%. Changes in the various components of non-interest expense are discussed below.
Current wording
Total non-interest expense for 2024 increased $74.1 million, or 6.0%, compared to 2023. This amount included $9.0 million and $51.5 million, during 2024 and 2023, respectively, related to a special FDIC deposit insurance assessment discussed below. Excluding the impact of the special assessment, total non-interest expense would have increased $116.7 million, or 9.9%. Changes in the various components of non-interest expense are discussed below.
Previous wording
Salaries and Wages. Salaries and wages increased $55.6 million, or 11.3%, in 2023 compared to 2022. The increase in salaries and wages was primarily related to an increase in salaries due to annual merit and market increases and an increase in the number of employees. The increase in the number of employees was partly related to our investments in organic expansion in the Houston, Dallas, and Austin markets as well as the rollout of our mortgage loan product offering. Salaries and wages was also impacted, to a lesser extent, by an increase in stock-based compensation. The aforementioned increases were partly offset by a decrease in incentive compensation. We are experiencing a competitive labor market which has resulted in and could continue to result in an increase in our staffing costs.
Current wording
Salaries and Wages. Salaries and wages increased $73.7 million, or 13.5%, in 2024 compared to 2023. The increase in salaries and wages was primarily related to an increase in salaries due to annual merit and market increases and an increase in the number of employees. The increase in the number of employees was partly related to our investment in organic expansion in various markets. Salaries and wages was also impacted, to a lesser extent, by increases in incentive compensation and commissions and a decrease in stock-based compensation. We are continuing to experience a competitive labor market which has resulted in and could continue to result in an increase in our staffing costs.
Previous wording
Employee Benefits. Employee benefits expense for 2023 increased $26.7 million, or 30.1%, compared to 2022. The increase was primarily related to increases in medical benefits expense (up $7.9 million), 401(k) plan expense (up $7.1 million), and payroll taxes (up $4.7 million), and a decrease in the net periodic benefit related to our defined benefit retirement plan (down $6.5 million), among other things.
Current wording
Employee Benefits. Employee benefits expense for 2024 increased $7.1 million, or 6.2%, compared to 2023. The increase was primarily related to increases in medical/dental benefits expense (up $5.5 million) and payroll taxes (up $5.1 million), among other things, partly offset by a decrease in 401(k)/profit sharing plan expense (down $3.2 million), primarily related to discretionary profit sharing contributions, and an increase in the net periodic benefit related to our defined benefit retirement plan (up $828 thousand), among other things.
Previous wording
Net Occupancy. Net occupancy expense for 2023 increased $11.9 million, or 10.6%, compared to 2022. The increase was primarily related to increases in depreciation on buildings and leasehold improvements (together up $4.4 million), lease expense (up $3.3 million), repairs/maintenance/service contracts expense (up $1.3 million), utilities expense (up $1.1 million), and property taxes (up $846 thousand), among other things. The increases in the aforementioned components of net occupancy expense were impacted, in part, by our expansion within the Houston and Dallas market areas.
Current wording
Net Occupancy. Net occupancy expense for 2024 increased $4.4 million, or 3.5%, compared to 2023. The increase was primarily related to increases in depreciation on buildings and leasehold improvements (together up $3.6 million) and repairs/maintenance/service contracts expense (up $2.7 million), among other things, partly offset by decreases in utilities expense (down $876 thousand) and property taxes (down $622 thousand), among other things. The increases in the aforementioned components of net occupancy expense were impacted, in part, by our expansion efforts.
Previous wording
Technology, Furniture and Equipment. Technology, furniture and equipment expense for 2023 increased $14.5 million, or 12.0%, compared to 2022. The increase was primarily related to increases in cloud services expense (up $10.2 million) and service contracts expense (up $3.9 million), among other things.
Current wording
Technology, Furniture and Equipment. Technology, furniture and equipment expense for 2024 increased $13.2 million, or 9.8%, compared to 2023. The increase was primarily related to increases in cloud services expense (up $9.2 million), service contracts expense (up $3.4 million), software amortization (up $1.2 million), and software maintenance expense (up $1.2 million), among other things. The increase from these items was partly offset by a decrease in depreciation on furniture and equipment (down $2.3 million), among other things.
Previous wording
Deposit Insurance. Deposit insurance expense totaled $76.6 million in 2023 compared to $15.6 million in 2022. The increase was primarily related to an accrual for a special assessment and, to a lesser extent, an increase in the assessment rate. 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. 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. 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. 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. The extent to which any such additional future assessments will impact our future deposit insurance expense is currently uncertain. In October 2022, the FDIC adopted a final rule to increase the initial base deposit insurance assessment rate schedules uniformly by 2 basis points beginning with the first quarterly assessment period of 2023.
Current wording
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 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. 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 was based on our estimate of the full amount of the assessment at that time. In February 2024, the FDIC notified insured depository institutions that their loss estimate related to the aforementioned bank failures had increased. As a result, we accrued an additional $7.7 million ($6.1 million after tax), related to an expected update of the special assessment during the first quarter of 2024. Upon receipt of the update during the second quarter of 2024, we accrued an additional $1.2 million ($984 thousand after tax) related to the special assessment. 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. 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 extent to which any such additional future assessments will impact our future deposit insurance expense is currently uncertain.
Previous wording
Other Non-Interest Expense. Other non-interest expense for 2023 increased $34.7 million, or 17.8%, compared to 2022. The increase included increases in professional services expense (up $13.0 million), which was primarily related to information technology services; advertising/promotions expense (up $8.6 million); travel, meals, and entertainment (up $3.9 million); donations expense (up $3.0 million), which was primarily related to a $3.5 million contribution to the Frost Charitable Foundation; check card expense (up $2.5 million); business development expense (up $2.5 million); and stationery, printing and supplies expense (up $1.4 million), among other things. The aforementioned items were partly offset by decreases in sundry and other miscellaneous expense (down $2.7 million) and fraud losses (down $2.4 million). Sundry and other miscellaneous expense in 2023 included $4.4 million related to operational losses, among other things, while sundry and other miscellaneous expense in 2022 included, among other things, accruals totaling $5.9 million, which included $4.0 million related to a license negotiation and $1.9 million related to other matters.
Current wording
Other Non-Interest Expense. Other non-interest expense for 2024 increased $15.0 million, or 6.6%, compared to 2023. The increase included increases in advertising/promotions expense (up $2.8 million); professional services expense (up $2.5 million), which was primarily related to information technology services; travel, meals and entertainment (up $2.0 million); research and platform fees (up $1.5 million); stationery/printing expense (up $1.3 million); postage expense (up $1.1 million); and business development expense (up $991 thousand), among other things. The increase from these items was partly offset by a decrease in donations expense (down $2.6 million) and a decrease in sundry and other miscellaneous expense (down $1.3 thousand), in part due to certain operational losses and write-offs recognized in 2023, among other things.
Previous wording
Net interest income for 2023 increased $267.0 million, or 20.6%, compared to 2022. 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 impact of these items was partly offset by increases in the average costs of interest-bearing deposit accounts and repurchase agreements, among other things, combined with a decrease in the average volume of interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) and increases in the average volumes of time deposit accounts and repurchase agreements, among other things. See the analysis of net interest income included in the section captioned “Net Interest Income” included elsewhere in this discussion.
Current wording
Net interest income for 2024 increased $48.2 million, or 3.1%, compared to 2023. 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. The impact of these items was partly offset by increases in the average volume of and cost on time deposit accounts, decreases in the average volumes of taxable and tax-exempt securities, and increases in the average costs of repurchase agreements and money market deposit accounts, among other things. See the analysis of net interest income included in the section captioned “Net Interest Income” included elsewhere in this discussion.
Previous wording
Credit loss expense for 2023 totaled $46.2 million compared to $3.0 million 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.
Current wording
Credit loss expense for 2024 totaled $65.0 million compared to $46.2 million in 2023. 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.
Previous wording
Non-interest income for 2023 increased $20.4 million, or 8.9%, compared to 2022. 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 in other non-interest income was partly related to increases in income from customer derivative and foreign exchange transactions, sundry and other miscellaneous income, and earnings on the cash surrender value of life insurance, among other things. The increase in income from customer derivative and foreign exchange transactions was primarily related to an increase in transaction volumes. The increase in earnings on the cash surrender value of life insurance was related to an increase in market interest rates. The increase in other charges, commissions, and fees included increases in capital markets advisory fees, letter of credit fees, merchant services rebates/bonuses, and commitment fees on unused lines of credit, among other things. The increase in insurance commissions and fees was primarily the result of increases in both commission income and contingent income. These changes are further discussed below in relation to Frost Insurance Agency. The increase in service charges on deposit accounts was primarily related to increases in overdraft charges on consumer and commercial accounts and consumer service charges partly offset by a decrease in commercial service charges. The increase in overdraft charges was impacted by an increase in the volume of fee assessed overdrafts in part due to growth in the number of accounts. The increase in consumer service charges was partly related to increases in overall deposit accounts and volumes. The decrease in commercial service charges primarily resulted from a higher average earnings credit rate applied to deposits maintained by treasury management customers. The increase in interchange and card transaction fees was primarily due to an increase in transaction volumes partly offset by an increase in network costs. See the analysis of these categories of non-interest income included in the section captioned “Non-Interest Income” included elsewhere in this discussion.
Current wording
The increase in service charges on deposit accounts was primarily related to increases in commercial service charges and overdraft charges on consumer and commercial accounts The increase in commercial service charges during 2024 was partly related to an increase in billable services partly offset by the effect of a higher average earnings credit rate applied to deposits maintained by treasury management customers. The increase in commercial service charges was also partly related, to a lesser extent, to an increase in service fees on non-analyzed accounts. The increase in overdraft charges was impacted by an increase in the volume of fee assessed overdrafts in part due to growth in the number of accounts. The increases in insurance commissions and fees were primarily related to increases in commercial lines property and casualty commissions and contingent commissions partly offset by decreases in life insurance commissions. The increase in interchange and card transaction fees was primarily due to an increase in transaction volumes partly offset by an increase in network costs. The decrease in other non-interest income was primarily related to decreases in sundry and other miscellaneous income and income from customer derivative and foreign exchange transactions, among other things, partly offset by increases in public finance underwriting fees and earnings on the cash surrender value of life insurance, among other things. See the analysis of these categories of non-interest income included in the section captioned “Non-Interest Income” included elsewhere in this discussion.
Previous wording
Non-interest expense for 2023 increased $191.4 million, or 21.6%, compared to 2022. While all categories of non-interest expense increased, the largest increases were in deposit insurance expense; salaries and wages; other non-interest expense; and employee benefit expense. The increase in deposit insurance expense was primarily related to a $51.5 million ($40.7 million after tax) accrual for a special assessment and, to a lesser extent, an increase in the assessment rate. The increase in salaries and wages was primarily related to an increase in salaries due to annual merit and market increases and an increase in the number of employees. The increase in the number of employees was partly related to our investments in organic expansion in the Houston, Dallas, and Austin markets as well as the rollout of our mortgage loan product offering. Salaries and wages was also impacted, to a lesser extent, by an increase in stock-based compensation. 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 other non-interest expense was primarily related to increases in professional services expense, which was primarily related to information technology services; advertising/promotions expense; travel, meals, and entertainment; donations expense, primarily related to a $3.5 million contribution to the Frost Charitable Foundation; check card expense; business development expense; and stationery, printing and supplies expense, among other things. The increase in technology, furniture, and equipment expense was primarily related to increases in cloud services expense and service contracts expense, among other things. See the analysis of these categories of non-interest expense included in the section captioned “Non-Interest Expense” included elsewhere in this discussion.
Current wording
Non-interest expense for 2024 increased $61.0 million, or 5.7%, compared to 2023. The increase was primarily related to increases in salaries and wages; technology, furniture, and equipment expense; other non-interest expense; employee benefit expense; and net occupancy expense, partly offset by a decrease in deposit insurance expense. The increase in salaries and wages was primarily related to an increase in salaries due to annual merit and market increases and an increase in the number of employees. Salaries and wages were also impacted, to a lesser extent, by increases in incentive compensation and commissions and a decrease in stock-based compensation. The increase in technology, furniture, and equipment expense was primarily related to increases in cloud services expense, service contracts expense, software amortization, and software maintenance expense, among other things. The increase in other non-interest expense included increases in advertising/promotions expense; professional services expense, which was primarily related to information technology services; travel, meals and entertainment; stationery/printing expense; postage expense; and business development expense, among other things. The increase from these items was partly offset by a decrease in donations expense and a decrease in sundry and other miscellaneous expense, in part due to certain operational losses and write-offs recognized in 2023, 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. Deposit insurance expense include accruals totaling $9.0 million ($7.1 million after tax) in 2024 and $51.5 million ($40.7 million after tax) in 2023 related to a special deposit insurance assessment. Excluding these amounts related to the special assessment, deposit insurance expense would have increased $3.2 million in 2024 compared to 2023 primarily due to an increase in the assessment rate. See the analysis of these categories of non-interest expense included in the section captioned “Non-Interest Expense” included elsewhere in this discussion.
Previous wording
Net income for 2023 increased $26.8 million, or 4.9%, compared to 2022. The increase was primarily the result of a $267.0 million increase in net interest income and a $20.4 million increase in non-interest income partly offset by a $191.4 million increase in non-interest expense, a $43.2 million increase in credit loss expense and a $26.0 million increase in income tax expense.
Current wording
Net income for 2024 increased $3.6 million, or 11.0%, compared to 2023. The increase was primarily due to a $17.3 million increase in non-interest income partly offset by a $12.6 million increase in non-interest expense, and a $968 thousand increase in income tax expense.
Previous wording
Non-interest income for 2023 increased $3.0 million, or 1.7%, compared to 2022. The increase was primarily due to increases in other non-interest income and other charges, commissions, and fees partly offset by a decrease in trust and investment management fees. The increase in other non-interest income was primarily related to an increase in income from customer securities trading transactions and an increase in sundry income, primarily related to a volume bonus received from Frost Brokerage Services' clearing broker. The increase in other charges, commissions, and fees was primarily related to an increase in income from the placement of money market accounts, among other things, partly offset by a decrease in income from the sale of mutual funds, among other things. Trust and investment management fee income is the most significant income component for Frost Wealth Advisors. 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. The decrease in trust and investment management fees was primarily due to a decrease in oil and gas fees partly offset by an increase in investment management fees, among other things. The decrease in oil and gas fees was primarily related to lower average market prices in 2023 relative to 2022. The increase in investment management fees was primarily related to an increase in the average value of assets maintained in accounts, despite a slight decrease in the number of accounts. The increase in the average value of assets was partly related to higher average equity valuations during 2023 relative to 2022. See the analysis of trust and investment management fees, other non-interest income and other charges, commissions, and fees included in the section captioned “Non-Interest Income” included elsewhere in this discussion.
Current wording
Non-interest income for 2024 increased $17.3 million, or 9.7%, compared to 2023. The increase was primarily due to increases in trust and investment management fees; other charges, commissions, and fees; and other non-interest income. Trust and investment management fee income is the most significant income component for Frost Wealth Advisors. 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. The increase in trust and investment management fees was primarily due increases in investment management fees and oil and gas fees, partly offset by decreases in estate fees and real estate fees. The increase in investment management fees was primarily related to an increase in the average value of assets maintained in accounts. The increase in the average value of assets was partly related to higher average equity valuations during 2024 relative to 2023. The increase in oil and gas fees was primarily related to increased royalties received, in part due to new accounts added in 2023, and, to a lesser extent, an increase in new lease bonuses. The decreases in estate fees and real estate fees were primarily related to decreased transaction volumes relative to 2023. The increase in other charges, commissions, and fees was primarily related to increases in income from the placement of annuities and money market accounts, among other things. The increase in other non-interest income was primarily related to an increase in income from customer securities trading transactions, among other things. See the analysis of trust and investment management fees, other non-interest income and other charges, commissions, and fees included in the section captioned “Non-Interest Income” included elsewhere in this discussion.
Previous wording
Non-interest expense for 2023 increased $12.5 million, or 9.4%, compared to 2022. While all categories of non-interest expense increased, the largest increases were in salaries and wages, other non-interest expense and employee benefits expense. The increase in salaries and wages was primarily due to an increase in salaries, due to annual merit and market increases, as well as increases in commission expense, among other things. The increase in other non-interest expense was primarily related to an increase in professional service expense and an increase in the corporate overhead expense allocation, among other things. The increase in employee benefits was primarily related to increases in medical benefits expense, payroll taxes and 401(k) plan expense, among other things.
Current wording
Non-interest expense for 2024 increased $12.6 million, or 8.7%, compared to 2023. The increase was primarily due to increases in salaries and wages; other non-interest expense; and employee benefits expense. The increase in salaries and wages was primarily due to an increase in salaries, due to annual merit and market increases, as well as increases in commissions and incentive compensation, among other things. The increase in other non-interest expense was primarily related to an increase in research and platform fees, among other things, partly offset by a decrease in the corporate overhead expense allocation, among other things. The increase in employee benefits was primarily related to increases in payroll taxes, medical/dental benefits expense, and 401(k) plan expense, among other things.
Previous wording
The Non-Banks operating segment had a net loss of $13.9 million for 2023 compared to a net loss of $11.0 million in 2022. The increase in net loss was primarily due to an increase in net interest expense due to an increase in the average rates paid on our long-term borrowings.
Current wording
The Non-Banks operating segment had a net loss of $15.4 million for 2024 compared to a net loss of $13.9 million in 2023. The increase in net loss was primarily due to an increase in net interest expense due to an increase in the average rates paid on our long-term borrowings.
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Current report — wording carried from elsewhere
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.
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Previous report — wording carried elsewhere
We recorded a net credit loss expense related to loans totaling $52.9 million in 2023 and net credit loss benefits totaling $5.3 million in 2022 and $6.1 million in 2021. Net credit loss expense/benefit for each portfolio segment reflects the amount needed to adjust the allowance for credit losses allocated to that segment to the level of expected credit losses determined under our allowance methodology after net charge-offs have been recognized.