Terms

Series

5.375% Non-Cumulative Perpetual Preferred Stock, Series A

Liquidation Preference

$25.00

Coupon Rate

5.375%

Rate Type

Fixed

Annual Dividend

$1.34

Payment Frequency

Quarterly

Cumulative

No

Perpetual

Yes

Convertible

No

Callable

Yes

First Call Date

March 15, 2018

First Call Price

$25.00

Capital Stack Ranking

Junior To: All Existing And Future Debt Obligations Of Cullen/Frost, Any Future Senior-Ranking Preferred Stock, All Liabilities And Obligations Of Subsidiaries (Including Frost Bank Deposits And Borrowings); Pari Passu With: Any Future Preferred Stock Ranking On Parity; Senior To: Common Stock, Any Future Junior-Ranking Preferred Stock

Regulatory (Basel III) Call

Yes

Tax Classification

Qualified Dividend

Qualifies for QDI

Yes

Qualifies for DRD

Yes

Shares Offered

6,000,000

Prospectus Summary

Cullen/Frost Bankers, Inc. is offering 6,000,000 shares of its Series A 5.375% Non-Cumulative Perpetual Preferred Stock at a liquidation preference of $25 per share (par value $0.01), listed on the NYSE under 'CFR PrA'. The fixed annual dividend of $1.34375 per share ($0.3359 per quarter at a full quarter) is payable on March 15, June 15, September 15, and December 15, beginning June 15, 2013, with the first partial-period payment expected to be $0.45. Critically, dividends are non-cumulative: if the board does not declare a dividend for any period, that dividend is permanently forfeited and holders have no claim to it in future periods. As a bank holding company issue, the Preferred Stock ranks senior to Cullen/Frost's common stock but junior to all existing and future debt obligations of Cullen/Frost, which totaled approximately $223.7 million as of December 31, 2012. Because Cullen/Frost is a holding company that depends entirely on dividends from its banking subsidiary Frost Bank, the preferred stock is also structurally subordinated to all of Frost Bank's depositors and creditors (~$19.5 billion in deposits and ~$561 million in borrowings). The issuer may redeem the Preferred Stock in whole (but not in part) within 90 days of a 'regulatory capital treatment event'—triggered when a change in law or regulation creates more than an insubstantial risk that the shares no longer qualify as Tier 1 capital under Federal Reserve rules, such as implementation of Basel III. This provision could force early redemption prior to the March 15, 2018 optional call date. At the $25 offering price, the Preferred Stock offers an effective yield of 5.375% per annum. Dividends on a C-corporation preferred stock like this are expected to qualify as qualified dividend income (QDI) taxable at the preferential 15%/20% rate for individual holders, and should be eligible for the dividends-received deduction (DRD) for qualifying corporate holders, though investors should consult their own tax advisors. Dividends are paid quarterly with a record date 15 calendar days before each payment date. The dividend stopper mechanism blocks any dividends or repurchases on common or other junior/parity stock unless full preferred dividends for the most recently completed quarter have been paid; additionally, if Cullen/Frost defers interest or defaults on its junior subordinated debentures, all preferred dividends are contractually blocked.

Summarized from the SEC prospectus filing.

Distribution History

Ranking vs. Other Preferreds

Dividend Stopper Provisions

Dividend Stopper Description

If the issuer has not paid full dividends on the Preferred Stock for the most recently completed quarter, it may not pay dividends on or repurchase common stock or other junior/parity stock. Additionally, if Cullen/Frost is deferring interest or in default on its junior subordinated notes, it is contractually prohibited from paying dividends on the Preferred Stock.

Other Preferreds from Cullen/Frost Bankers Inc

Div Score Breakdown

Reinvesty's multi-factor safety analysis for this preferred, composite score: 47 (Average)