Cullen/Frost Bankers (CFR) 8-K Cullen/frost Reports Second Quarter Results

Exhibit 99.1

A.B. Mendez

Investor Relations

210.220.5234

or

Bill Day

Media Relations

210.220.5427

FOR IMMEDIATE RELEASE

July 25, 2019

CULLEN/FROST REPORTS SECOND QUARTER RESULTS

Board declares third quarter dividend on common and preferred stock,

and authorizes $100 million stock repurchase program

SAN ANTONIO -- Cullen/Frost Bankers, Inc. (NYSE:CFR) today reported second quarter 2019 results. Net income available to common shareholders for the second quarter of 2019 was $109.6 million, compared to $109.3 million in the second quarter of 2018. On a per-share basis, net income available to common shareholders for the second quarter of 2019 was $1.72 per diluted common share, compared to $1.68 per diluted common share reported a year earlier. Returns on average assets and average common equity were 1.40 percent and 12.60 percent, respectively, for the second quarter of 2019 compared to 1.43 percent and 14.03 percent, respectively, for the same period a year earlier.

For the second quarter of 2019, net interest income on a taxable-equivalent basis was $277.8 million, up 6.6 percent compared to the same quarter in 2018. Average loans for the second quarter of 2019 increased $838.6 million, or 6.2 percent, to $14.4 billion, from the $13.5 billion reported for the second quarter a year earlier. Average deposits for the quarter were $26.0 billion, basically flat compared to the $26.1 billion reported for last year's second quarter.

“Frost bankers' commitment to sustainable, organic growth has resulted in another solid quarter,” said Cullen/Frost Chairman and CEO Phil Green. “During the second quarter, we continued our expansion in the Houston

market by opening two more new financial centers, and after six years of planning and implementation, we also moved to our new corporate headquarters in San Antonio.”

For the first six months of 2019, net income available to common shareholders was $224.1 million, up 4.8 percent compared to $213.8 million for the first six months of 2018. Diluted EPS available to common shareholders for the first six months of 2019 was $3.51 compared to $3.30 in the year-earlier period, representing an increase of 6.4 percent. Returns on average assets and average common equity for the first six months of 2019 were 1.44 percent and 13.32 percent, respectively, compared to 1.39 percent and 13.83 percent, respectively, for the same period in 2018.

Noted financial data for the second quarter of 2019 follows:

• The Common Equity Tier 1, Tier 1 and Total Risk-Based Capital Ratios at the end of the second quarter of 2019 were 12.29 percent, 12.94 percent and 14.60 percent, respectively, and continue to be in excess of well-capitalized levels and exceed Basel III minimum requirements.

• Net interest income on a taxable-equivalent basis was $277.8 million, an increase of 6.6 percent over the prior year period. Net interest margin was 3.85 percent for the second quarter of 2019, up 6 basis points over the first quarter of 2019 net interest margin of 3.79 percent.

• Non-interest income for the second quarter of 2019 totaled $82.6 million, a decrease of $2.4 million, or 2.9 percent, from the $85.1 million reported for the second quarter of 2018. Trust and investment management fees were $30.4 million, up $1.3 million, or 4.6 percent, from the second quarter of 2018. The increase in trust and investment management fees was primarily the result of an increase in trust investment fees due to higher average equity valuations and an increase in the number of accounts. Insurance commissions and fees of $10.1 million decreased $438,000, or 4.1 percent, from the previous year. The decrease in commission income during the second quarter was primarily related to a decrease in

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benefit plan commissions due to fluctuations in business volumes. Other non-interest income in the second quarter of 2019 was $7.3 million, down $4.3 million compared to the second quarter of 2018. The decrease was primarily related to other income recorded in the year-ago period from recoveries of prior write-offs ($1.7 million), distributions on private equity investments ($1.2 million), and gains on the sale of various branch and operational facilities ($502,000).

• Non-interest expense was $203.2 million for the quarter, up $14.3 million, or 7.6 percent, compared to the $188.9 million reported for the second quarter a year earlier. Total salaries and wages rose $5.6 million, or 6.6 percent, to $90.8 million, primarily due to an increase in the number of employees and normal annual merit and market increases. Employee benefits expense increased $2.1 million, or 12.0 percent, compared to the second quarter of 2018. The increase was primarily related to increases in medical benefits expense (up $562,000), expenses related to our defined benefit retirement plans (up $585,000) and expenses related to our 401(k) plan (up $505,000). Other non-interest expense increased $5.4 million, or 13.2 percent, compared to the second quarter of 2018. The increase was mainly driven by increases in advertising and sponsorships (up $3.3 million); platform fees related to investment services (up $1.0 million); and travel, meals and entertainment expense (up $1.0 million). Second quarter net occupancy expense increased by $1.7 million, or 8.6 percent, compared to the same period in 2018, primarily driven by a $1.8 million increase in lease expenses impacted by our move in June to our new corporate headquarters building in San Antonio and other leases related to existing facilities and our expansion within the Houston market area. Technology, furniture and equipment expense for the second quarter increased by $1.7 million, or 8.3 percent, from the second quarter of 2018. The increase was primarily driven by a $1.5 million increase in software maintenance expense.

• For the second quarter of 2019, the provision for loan losses was $6.4 million, compared to net charge-offs of $7.8 million. This compares with $11.0 million in provisions and $6.8 million in net charge-offs for the first quarter of 2019, and $8.3 million in provisions and $7.9 million in net charge-offs in the second quarter of 2018. The allowance for loan losses as a percentage of total loans was 0.93 percent at June 30, 2019 compared to 0.95 percent at the end of the first quarter of 2019 and 1.10 percent at the end of the second quarter of 2018. Non-performing assets were $76.4 million at the end of the second quarter

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of 2019, compared to $97.4 million at the end of the first quarter of 2019 and $122.8 million at the end of the second quarter of 2018.

The Cullen/Frost board declared a third-quarter cash dividend of $0.71 per common share, representing a 6.0 percent increase over the previous year's dividend, payable September 13, 2019 to shareholders of record on August 30 of this year. The board of directors declared a cash dividend of $.3359375 per share of the Noncumulative Perpetual Preferred Stock, Series A, which is traded on the NYSE under the symbol "CFR PrA." The Series A Preferred Stock dividend is payable on September 16, 2019, to shareholders of record on August 30 of this year.

In addition, the Corporation's board of directors authorized a new $100.0 million stock repurchase plan. Under the plan, shares may be repurchased over a one-year period.

Cullen/Frost Bankers, Inc. will host a conference call on Thursday, July 25, 2019, at 10 a.m. Central Time (CT) to discuss the results for the quarter. The media and other interested parties are invited to access the call in a “listen only” mode at 1-800-944-6430 or via webcast on our investor relations website linked below.

Playback of the conference call will be available after 2 p.m. CT on the day of the call until midnight Sunday, July 28, 2019 at 855-859-2056 with Conference ID # of 1479579. The call will also be available by webcast at the URL listed below after 2 p.m. CT on the day of the call.

Cullen/Frost investor relations website: www.frostbank.com/investor-relations/

Cullen/Frost Bankers, Inc. (NYSE: CFR) is a financial holding company, headquartered in San Antonio, with $31.8 billion in assets at June 30, 2019. One of the 60 largest U.S. banks, Frost provides a wide range of banking, investments and insurance services to businesses and individuals across Texas in the Austin, Corpus Christi, Dallas, Fort Worth, Houston, Permian Basin, Rio Grande Valley and San Antonio regions. Founded in 1868, Frost has helped clients with their financial needs during three centuries. Additional information is available at www.frostbank.com.

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Forward-Looking Statements and Factors that Could Affect Future Results

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

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

• Local, regional, national and international economic conditions and the impact they may have on us and our customers and our assessment of that impact.

• Volatility and disruption in national and international financial and commodity markets.

• Government intervention in the U.S. financial system.

• Changes in the mix of loan geographies, sectors and types or the level of non-performing assets and charge-offs.

• Changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements.

• The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board.

• Inflation, interest rate, securities market and monetary fluctuations.

• The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which we and our subsidiaries must comply.

• The soundness of other financial institutions.

• Political instability.

• Impairment of our goodwill or other intangible assets.

• Acts of God or of war or terrorism.

• The timely development and acceptance of new products and services and perceived overall value of these products and services by users.

• Changes in consumer spending, borrowings and savings habits.

• Changes in the financial performance and/or condition of our borrowers.

• Technological changes.

• The cost and effects of failure, interruption, or breach of security of our systems.

• Acquisitions and integration of acquired businesses.

• Our ability to increase market share and control expenses.

• Our ability to attract and retain qualified employees.

• Changes in the competitive environment in our markets and among banking organizations and other financial service providers.

• The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters.

• Changes in the reliability of our vendors, internal control systems or information systems.

• Changes in our liquidity position.

• Changes in our organization, compensation and benefit plans.

• The costs and effects of legal and regulatory developments, the resolution of legal proceedings or regulatory or other governmental inquiries, the results of regulatory examinations or reviews and the ability to obtain required regulatory approvals.

• Greater than expected costs or difficulties related to the integration of new products and lines of business.

• Our success at managing the risks involved in the foregoing items.

Forward-looking statements speak only as of the date on which such statements are made. We do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.

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Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share amounts)
	2019						2018
	2nd Qtr			1st Qtr			4th Qtr			3rd Qtr			2nd Qtr
CONDENSED INCOME STATEMENTS
Net interest income	$	253,431		$	246,469		$	249,209		$	241,665		$	237,270
Net interest income (1)	277,751			271,179			273,810			265,687			260,531
Provision for loan losses	6,400			11,003			3,767			2,650			8,251
Non-interest income:
Trust and investment management fees	30,448			31,697			29,882			30,801			29,121
Service charges on deposit accounts	21,798			20,790			21,632			21,569			21,142
Insurance commissions and fees	10,118			18,406			11,394			11,037			10,556
Interchange and debit card transaction fees	3,868			3,280			3,774			3,499			3,446
Other charges, commissions and fees	8,933			9,062			9,371			9,580			9,273
Net gain (loss) on securities transactions	169			—			(43		)	(34		)	(60		)
Other	7,304			13,550			11,108			11,205			11,588
Total non-interest income	82,638			96,785			87,118			87,657			85,066
Non-interest expense:
Salaries and wages	90,790			92,476			90,878			87,547			85,204
Employee benefits	20,051			23,526			19,066			18,355			17,907
Net occupancy	21,133			19,267			17,699			19,894			19,455
Technology, furniture and equipment	22,157			21,664			21,960			21,004			20,459
Deposit insurance	2,453			2,808			2,219			4,694			4,605
Intangible amortization	305			325			331			336			369
Other	46,320			41,734			47,544			41,838			40,909
Total non-interest expense	203,209			201,800			199,697			193,668			188,908
Income before income taxes	126,460			130,451			132,863			133,004			125,177
Income taxes	14,874			13,955			13,610			15,160			13,836
Net income	111,586			116,496			119,253			117,844			111,341
Preferred stock dividends	2,015			2,016			2,016			2,016			2,015
Net income available to common shareholders	$	109,571		$	114,480		$	117,237		$	115,828		$	109,326
PER COMMON SHARE DATA
Earnings per common share - basic	$	1.73		$	1.80		$	1.84		$	1.80		$	1.70
Earnings per common share - diluted	1.72			1.79			1.82			1.78			1.68
Cash dividends per common share	0.71			0.67			0.67			0.67			0.67
Book value per common share at end of quarter	57.42			54.68			51.19			49.49			49.53
OUTSTANDING COMMON SHARES
Period-end common shares	62,638			63,081			62,986			63,923			63,904
Weighted-average common shares - basic	62,789			63,009			63,441			63,892			63,837
Dilutive effect of stock compensation	765			819			811			1,022			1,062
Weighted-average common shares - diluted	63,554			63,828			64,252			64,914			64,899
SELECTED ANNUALIZED RATIOS
Return on average assets	1.40		%	1.48		%	1.48		%	1.49		%	1.43		%
Return on average common equity	12.60			14.08			14.85			14.40			14.03
Net interest income to average earning assets	3.85			3.79			3.72			3.66			3.64
(1) Taxable-equivalent basis assuming a 21% tax rate.

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Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
	2019						2018
	2nd Qtr			1st Qtr			4th Qtr			3rd Qtr			2nd Qtr
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
Loans	$	14,375		$	14,205		$	13,949		$	13,683		$	13,537
Earning assets	29,114			28,954			29,153			28,796			28,647
Total assets	31,491			31,356			31,330			30,918			30,758
Non-interest-bearing demand deposits	10,148			10,193			10,740			10,690			10,629
Interest-bearing deposits	15,845			15,919			15,767			15,462			15,440
Total deposits	25,993			26,112			26,507			26,152			26,069
Shareholders' equity	3,632			3,441			3,277			3,335			3,270
Period-End Balance:
Loans	$	14,459		$	14,406		$	14,100		$	13,815		$	13,712
Earning assets	29,218			29,283			29,894			29,042			28,494
Goodwill and intangible assets	658			658			659			659			659
Total assets	31,819			31,665			32,293			31,223			30,687
Total deposits	25,985			26,295			27,149			26,349			25,996
Shareholders' equity	3,741			3,594			3,369			3,308			3,310
Adjusted shareholders' equity (1)	3,522			3,500			3,433			3,449			3,373
ASSET QUALITY
($ in thousands)
Allowance for loan losses:	$	134,929		$	136,350		$	132,132		$	137,578		$	150,226
As a percentage of period-end loans	0.93		%	0.95		%	0.94		%	1.00		%	1.10		%
Net charge-offs:	$	7,821		$	6,785		$	9,213		$	15,298		$	7,910
Annualized as a percentage of average loans	0.22		%	0.19		%	0.26		%	0.44		%	0.23		%
Non-performing assets:
Non-accrual loans	$	71,521		$	92,162		$	73,739		$	82,601		$	119,181
Restructured loans	3,973			4,028			—			—			—
Foreclosed assets	907			1,175			1,175			3,765			3,643
Total	$	76,401		$	97,365		$	74,914		$	86,366		$	122,824
As a percentage of:
Total loans and foreclosed assets	0.53		%	0.68		%	0.53		%	0.62		%	0.90		%
Total assets	0.24			0.31			0.23			0.28			0.40
CONSOLIDATED CAPITAL RATIOS
Common Equity Tier 1 Risk-Based Capital Ratio (2)	12.29		%	12.34		%	12.27		%	12.56		%	12.33		%
Tier 1 Risk-Based Capital Ratio (2)	12.94			13.00			12.94			13.24			13.02
Total Risk-Based Capital Ratio (2)	14.60			14.68			14.64			14.99			14.85
Leverage Ratio	9.40			9.35			9.06			9.19			9.02
Equity to Assets Ratio (period-end)	11.76			11.35			10.43			10.60			10.78
Equity to Assets Ratio (average)	11.53			10.97			10.46			10.79			10.63
(1) Shareholders' equity excluding accumulated other comprehensive income (loss).
(2) After a review of risk-weight classifications during the first quarter of 2019, risk-weightings for certain loans were reclassified. Amounts reported prior to March 31, 2019 have been revised to reflect these reclassifications.

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Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share amounts)
	Six Months Ended
	June 30,
	2019			2018
CONDENSED INCOME STATEMENTS
Net interest income	$	499,900		$	467,018
Net interest income (1)	548,930			513,067
Provision for loan losses	17,403			15,196
Non-interest income:
Trust and investment management fees	62,145			58,708
Service charges on deposit accounts	42,588			41,985
Insurance commissions and fees	28,524			26,536
Interchange and debit card transaction fees	7,148			6,604
Other charges, commissions and fees	17,995			18,280
Net gain (loss) on securities transactions	169			(79		)
Other	20,854			24,477
Total non-interest income	179,423			176,511
Non-interest expense:
Salaries and wages	183,266			171,887
Employee benefits	43,577			39,902
Net occupancy	40,400			39,195
Furniture and equipment	43,821			40,138
Deposit insurance	5,261			9,484
Intangible amortization	630			757
Other (2)	88,054			84,156
Total non-interest expense (2)	405,009			385,519
Income before income taxes	256,911			242,814
Income taxes	28,829			24,993
Net income	228,082			217,821
Preferred stock dividends	4,031			4,031
Net income available to common shareholders	$	224,051		$	213,790
PER COMMON SHARE DATA
Earnings per common share - basic	$	3.53		$	3.33
Earnings per common share - diluted	3.51			3.30
Cash dividends per common share	1.38			1.24
Book value per common share at end of quarter	57.42			49.53
OUTSTANDING COMMON SHARES
Period-end common shares	62,638			63,904
Weighted-average common shares - basic	62,899			63,743
Dilutive effect of stock compensation	791			1,044
Weighted-average common shares - diluted	63,690			64,787
SELECTED ANNUALIZED RATIOS
Return on average assets	1.44		%	1.39		%
Return on average common equity	13.32			13.83
Net interest income to average earning assets (1)	3.82			3.58
(1) Taxable-equivalent basis assuming a 21% tax rate.

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Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
	As of or for the
	Six Months Ended
	June 30,
	2019			2018
BALANCE SHEET SUMMARY ($ in millions)
Average Balance:
Loans	$	14,291		$	13,416
Earning assets	29,035			28,824
Total assets	31,391			30,940
Non-interest-bearing demand deposits	10,170			10,799
Interest-bearing deposits	15,882			15,449
Total deposits	26,052			26,248
Shareholders' equity	3,537			3,263
Period-End Balance:
Loans	$	14,459		$	13,712
Earning assets	29,218			28,494
Goodwill and intangible assets	658			659
Total assets	31,819			30,687
Total deposits	25,985			25,996
Shareholders' equity	3,741			3,310
Adjusted shareholders' equity (1)	3,522			3,373
ASSET QUALITY ($ in thousands)
Allowance for loan losses:	$	134,929		$	150,226
As a percentage of period-end loans	0.93		%	1.10		%
Net charge-offs:	$	14,606		$	20,334
Annualized as a percentage of average loans	0.21		%	0.31		%
Non-performing assets:
Non-accrual loans	$	71,521		$	119,181
Restructured loans	3,973			—
Foreclosed assets	907			3,643
Total	$	76,401		$	122,824
As a percentage of:
Total loans and foreclosed assets	0.53		%	0.90		%
Total assets	0.24			0.40
CONSOLIDATED CAPITAL RATIOS
Common Equity Tier 1 Risk-Based Capital Ratio (2)	12.29		%	12.33		%
Tier 1 Risk-Based Capital Ratio (2)	12.94			13.02
Total Risk-Based Capital Ratio (2)	14.60			14.85
Leverage Ratio	9.40			9.02
Equity to Assets Ratio (period-end)	11.76			10.78
Equity to Assets Ratio (average)	11.27			10.55
(1) Shareholders' equity excluding accumulated other comprehensive income (loss).
(2) After a review of risk-weight classifications during the first quarter of 2019, risk-weightings for certain loans were reclassified. Amounts reported prior to March 31, 2019 have been revised to reflect these reclassifications.

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Cullen/Frost Bankers, Inc.
TAXABLE-EQUIVALENT YIELD/COST AND AVERAGE BALANCES (UNAUDITED)
	2019						2018
	2nd Qtr			1st Qtr			4th Qtr			3rd Qtr			2nd Qtr
TAXABLE-EQUIVALENT YIELD/COST(1)
Earning Assets:
Interest-bearing deposits	2.64		%	2.50		%	2.35		%	2.05		%	1.93		%
Federal funds sold and resell agreements	2.48			2.58			2.41			2.14			1.92
Securities	3.42			3.37			3.39			3.41			3.36
Loans, net of unearned discounts	5.34			5.33			5.20			5.04			4.90
Total earning assets	4.33			4.27			4.15			4.04			3.93
Interest-Bearing Liabilities:
Interest-bearing deposits:
Savings and interest checking	0.08			0.09			0.08			0.09			0.08
Money market deposit accounts	1.03			1.09			1.00			0.93			0.74
Time accounts	1.66			1.43			1.14			0.87			0.66
Public funds	1.51			1.39			1.31			1.11			0.99
Total interest-bearing deposits	0.68			0.69			0.63			0.57			0.46
Total deposits	0.41			0.42			0.37			0.34			0.27
Federal funds purchased and repurchase agreements	1.69			1.72			1.56			0.90			0.25
Junior subordinated deferrable interest debentures	4.34			4.40			4.24			4.09			3.85
Subordinated notes payable and other notes	4.71			4.72			4.72			4.72			4.72
Total interest-bearing liabilities	0.80			0.81			0.74			0.64			0.50
Net interest spread	3.53			3.46			3.41			3.40			3.43
Net interest income to total average earning assets	3.85			3.79			3.72			3.66			3.64
AVERAGE BALANCES
($ in millions)
Assets:
Interest-bearing deposits	$	1,171		$	1,729		$	2,452		$	2,799		$	2,885
Federal funds sold and resell agreements	246			250			317			260			296
Securities	13,322			12,770			12,435			12,053			11,928
Loans, net of unearned discount	14,375			14,205			13,949			13,683			13,537
Total earning assets	$	29,114		$	28,954		$	29,153		$	28,796		$	28,647
Liabilities:
Interest-bearing deposits:
Savings and interest checking	$	6,774		$	6,774		$	6,673		$	6,675		$	6,688
Money market deposit accounts	7,588			7,696			7,792			7,620			7,578
Time accounts	970			895			836			799			787
Public funds	513			554			467			369			387
Total interest-bearing deposits	15,845			15,919			15,767			15,462			15,440
Total deposits	25,993			26,112			26,507			26,152			26,069
Federal funds purchased and repurchase agreements	1,242			1,180			1,138			1,011			1,020
Junior subordinated deferrable interest debentures	136			136			136			136			136
Subordinated notes payable and other notes	99			99			99			99			99
Total interest-bearing funds	$	17,322		$	17,334		$	17,140		$	16,708		$	16,695
(1) Taxable-equivalent basis assuming a 21% tax rate.

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