# FROST BROKERAGE SERVICES, INC. X-17A-5 (2026-03-23) — Broker-dealer annual report - Company: FROST BROKERAGE SERVICES, INC. - Form: X-17A-5 - Filed: 2026-03-23 - Period: 2025-12-31 - Accession: 0000785701-26-000001 - CIK: 785701 - File #: 8-35285 - Type: Broker-dealer - Material weakness: No - Auditor: ERNST & YOUNG LLP - Auditor location: SAN ANTONIO, TX - Contact: Michael T Marrone - Phone: 6469301906 - Email: michael.marrone@frostbank.com - Website: frostbank.com - Signed by: CHRISTOPHER WALSH (PRESIDENT) Original filing: https://www.sec.gov/Archives/edgar/data/785701/000078570126000001/frost2025fsb.pdf --- {0}------------------------------------------------ **UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** > **ANNUAL REPORTS FORM X-17A-5** 0MB APPROVAL 0MB Number: 3235-0123 Expires: Nov. 30, 2026 Estimated average burden hours per response: 12 SEC FILE NUMBER **PART** Ill | SEC FILE NUMBER | |-----------------| | 8-35285 | | | **FACING PAGE** **Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934** FILING FOR THE PERIOD BEGINNING **01 /01 /25** MM/DD/VY AND ENDING **12/31 /25** MM/DD/VY **A. REGISTRANT IDENTIFICATION** NAMEOFFIRM:\_FROST BROKERAGE SERVICES, INC TYPE OF REGISTRANT (check all applicable boxes}: [!] Broker-dealer □ Security-based swap dealer = Check here if respondent is also an OTC derivatives dealer D Major security-based swap participant ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.} # 111 WEST HOUSTON STREET | | | (No. and Street) | | | | |------------------------------------------------------------------------------------------------|---------------------------|------------------------------------------------------------|-----------------|-------------------------------|--| | SAN ANTONIO | | TEXAS | | 78205 | | | (City) | | (State) | | (Zip Code) | | | PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | | | | MICHAEL T MARRONE 646-930-1906 | | | | MICHAEL.MARRONE@FROSTBANK.COM | | | (Name) | | (Area Code - Telephone Number) | (Email Address) | | | | | | B. ACCOUNTANT IDENTIFICATION | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing*
ERNST & YOUNG LLP | | | | | | | | | (Name - if individual, state last, first, and middle name) | | | | | 111 WEST HOUSTON STREET STE 1901 | | SAN ANTONIO | TEXAS | 78205 | | | (Address) | | (City) | (State) | (Zip Code) | | | (C
10/20/2003 | | | 42 | | | | | with PCAOB)(tt apphcable) | | | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | | \* Claims for exemption from the requirement that the annual reports be covered by the reports of an independent public accountant must te supported by a statement of facts and circumstances relied on as the basis of the exemption. See 17 CFR 240.17a-S(e)(l)(ii), if applicable. **Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid 0MB control number.** {1}------------------------------------------------ #### **OATH OR AFFIRMATION** I, CHRISTOPHER WALSH swear (or affirm) that, to the best of my knowledge and belief, the financial report pertaini ,g to the firm of FROST BROKERAGE SERVICES, INC as of **12/31** ---~ 2~ is true and correct. I further swear ( or affirm) that neither the company nor any partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely as that of a customer. ![](_page_1_Picture_3.jpeg) | Signature,/?wc:JZ:!
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- | | |------------------------------------|--| | Title:
- | | | PRESIDENT | | #### \* co **ains (check all applicable boxes):** - (a) Statement offinancial condition. - D (b) Notes to consolidated statement of financial condition. - **iil** (c) Statement of incor,e (loss) or, if there is other comprehensive income in the period(s) presented, a statement of comprehensive income (as defined in§ 210.1-02 of Regulation S-X). - **iil** (d) Statement of cash flows. - **iii** (e) Statement of chan5es in stockholders' or partners' or sole proprietor's equity. - D (f) Statement of changes in liabilities subordinated to claims of creditors. - **iil** (g) Notes to consolidated financial statements. - **iil** (h) Computation of net capital under 17 CFR 240.15c3-l or 17 CFR 240.18a-l, as applicable. - D (i) Computation of tar gible net worth under 17 CFR 240.18a-2. - **iii** (j) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3. - D (k) Computation for determination of security-based swap reserve requirements pursuant to Exhibit B to 17 CFR 240.1Sc3-3 or Exhibit A to 17 CFR 240.18a-4, as applicable. - D (I) Computation for Determination of PAB Requirements under Exhibit A to§ 240.1Sc3-3. - **iil** (m) Information relating to possession or control requirements for customers under 17 CFR 240.15c3-3. - D (n) Information relatirig to possession or control requirements for security-based swap customers under 17 CFR 240.15c3-3(p)(2) or *V* CFR 240.18a-4, as applicable. - **iii** (o) Reconciliations, in :luding appropriate explanations, of the FOCUS Report with computation of net capital or tangible net worth under 17 CFR 240.15c3-1, 17 CFR 240.18a-1, or 17 CFR 240.18a-2, as applicable, and the reserve requirements under 17 CFR 240.15c3-3 or 17 CFR 240.18a-4, as applicable, if material differences exist, or a statement that no material differences exist. - D (p) Summary of financial data for subsidiaries not consolidated in the statement of financial condition. - **iii** (q) Oath or affirmatiori in accordance with 17 CFR 240.17a-5, 17 CFR 240.17a-12, or 17 CFR 240.18a-7, as applicable. - =:J (r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - **iil** (s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - D (t) Independent publi: accountant's report based on an examination of the statement of financial condition. - Iii (u) Independent publ c accountant's report based on an examination of the financial report or financial statements under 17 CFR 240.17a-5, 17 crn 240.18a-7, or 17 CFR 240.17a-12, as applicable. - D (v) Independent public accountant's report based on an examination of certain statements in the compliance report under 17 CFR 240.l 7a-5 or 17 C:FR 240.18a-7, as applicable. - **iii** (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - **iil** (x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.15c3-le or 17 CFR 240.17a-12, as applicable. - D (y) Report describing any material inadequacies found to exist or found to have existed since the date of the previous audit, or a statement that no r1aterial inadequacies exist, under 17 CFR 240.l 7a-12(k). D (z) Other:--------------------------------------- - \*\*To request confidential treatment of certain portions of this fifing, see 17 CFR 240.17a-5{e){3) or 17 CFR 240.18a-7{d){2), as applicable. {2}------------------------------------------------ ## **Frost Brokerage Services, Inc.** Financial Statements and Supplemental Information With Report oflndependent Registered Public Accounting Firm December 31, 2025 {3}------------------------------------------------ ## **Frost Brokerage Services, Inc. Financial Statements and Supplemental Information** ## **December 31, 2025** ## **Table of Contents** | Facing Page and Oath or Affirmation | | |--------------------------------------------------------------|---| | Report oflndependent Registered Public Accounting Firm | l | | Financial Statements | | | Statement of Financial Condition | | | Statement oflncome | | | Statement of Changes in Shareholder's Equity | | | Statement of Cash Flows | | | Notes to the Financial Statements | | | Supplemental Information | | | Computation of Net Capital Under Rule 15c3-1
Schedule I - | | | Schedule II -
Statement Regarding SEC Rule 15c3-3 | | | | | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) Ernst & Young LLP The Frost Tower 111 West Houston Street Suite 1901 San Antonio, TX 78205 Tel: +1 210 228 9696 ey.com ## **Report of Independent Registered Public Accounting Firm** To the Board of Directors of Frost Brokerage Services, Inc. #### **Opinion on the Financial Statements** We have audited the accompanying statement of financial condition of Frost Brokerage Services, Inc., (the Company) as of December 31 , 2025, the related statement of income, changes in shareholder's equity and cash flows for the year then ended, and the related notes ( collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31 , 2025, and the results of its operations and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles. #### **Basis for Opinion** These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. #### **Supplemental Information** The accompanying information contained in Schedules I and II has been subjected to audit procedures performed in conjunction with the audit of the Company's financial statements. Such information is the responsibility of the Company's management. Our audit procedures included determining whether the information reconciles to the financial statements or the underlying accounting and other records, as applicable and performing procedures to test the completeness and accuracy of the information. In forming our opinion on the information, we evaluated whether such information, including its form and content, is presented in conformity with Rule l 7a-5 under the Securities Exchange Act of 1934. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. We have served as the Company's auditor since 1987. March 20, 2026 {5}------------------------------------------------ ## **Frost Brokerage Services, Inc. Statement of Financial Condition** (Dollars in thousands) ## **December 31, 2025** | Assets: | | | |---------------------------------------------------------------------------------------------|----|--------| | Cash | \$ | 1,491 | | Securities owned | | 36,650 | | Brokerage, annuity and insurance commissions receivable, net | | 1,744 | | Trading income receivable | | 350 | | Prepaid expenses and other assets | | 471 | | Deferred tax assets, net | | 90 | | Total assets | \$ | 40,796 | | | | | | Liabilities: | | | | Accrued liabilities and employee benefits | \$ | 1,825 | | Income taxes payable to Cullen/Frost | | 312 | | Total liabilities | | 2,137 | | | | | | Shareholder's Equity: | | | | Common stock, par value \$0.01 per share; 100,000 shares authorized, issued and outstanding | | | | Additional paid-in capital | | 327 | | Retained earnings | | 38,332 | | Total shareholder's equity | | 38,659 | | Total liabilities and shareholder's equity | \$ | 40,796 | {6}------------------------------------------------ ## **Frost Brokerage Services, Inc. Statement of Income** (Dollars in thousands) ## **Year Ended December 31, 2025** | Revenue: | | | |----------------------------------------|--|--------| | Brokerage commissions, net | | 18,244 | | Annuity and life insurance commissions | | 5,924 | | Trading income | | 4,160 | | Interest income | | 1,480 | | Clearing broker volume bonus | | 279 | | Other income | | 365 | | Total revenue | | 30,452 | | | | | | Expenses: | | | | Employee compensation and benefits | | 21,308 | | Technology, occupancy and equipment | | 2,114 | | General and administrative | | 1,929 | | Professional services | | 796 | | Total expenses | | 26,147 | | | | | | Income before income taxes | | 4,305 | | Income tax expense | | 916 | | Net income | | 3,389 | {7}------------------------------------------------ ## **Frost Brokerage Services, Inc. Statement of Changes in Shareholder's Equity** (Dollars in thousands) ## **Year Ended December 31, 2025** | | Common Stock | | Additional Paid
In Capital | | Retained
Earnings | | Total
Shareholder's
Equity | | |------------------------------|--------------|--|-------------------------------|-----|----------------------|--------|----------------------------------|--------| | Balance at beginning of year | \$ | | \$ | 327 | \$ | 34,943 | \$ | 35,270 | | Net income | | | | | | 3,389 | | 3,389 | | Balance at end of year | \$ | | \$ | 327 | \$ | 38,332 | \$ | 38,659 | {8}------------------------------------------------ ## **Frost Brokerage Services, Inc. Statement of Cash Flows** (Dollars in thousands) ## **Year Ended December 31, 2025** | 3,389
5 | |------------| | | | | | 137 | | | | (2,740) | | (194) | | (84) | | 57 | | 574 | | (782) | | 98 | | 460 | | 460 | | 1,031 | | 1,491 | | | | | | 666 | | 10 | | | {9}------------------------------------------------ **Frost Brokerage Services, Inc. Notes to Financial Statements** (Table amounts in thousands) #### **December 31, 2025** ## **Note 1- Organization and Nature of Operations** Frost Brokerage Services, Inc. is registered as a fully disclosed, introducing broker-dealer under the Securities Exchange Act of 1934. The terms "the Company," "we," "us" and "our" mean Frost Brokerage Services, Inc., when appropriate. We principally engage in executing general securities transactions on behalf of our clients. We operate under a clearing agreement with National Financial Services Company ("NFS"), whereby NFS assumes and maintains our customer accounts on a fully disclosed basis. We are a member of the Financial Industry Regulatory Authority, Inc. ("FINRA") and are subject to regulation by the United States Securities and Exchange Commission ("SEC") and FINRA. We are also a member of the Securities Investors Protection Company ("SIPC"), a nonprofit membership company designed to protect, up to specified amounts, customers' cash and securities in the event of the liquidation of a broker-dealer. We are a wholly owned subsidiary of Frost Bank, a wholly owned banking subsidiary of Cullen/Frost Bankers, Inc. ("Cullen/Frost"). #### **Note 2 - Summary of Significant Accounting Policies** We follow accounting and financial reporting policies that conform to accounting principles generally accepted in the United States and to general practices within the securities industry. *Subsequent Events.* We have evaluated subsequent events for potential recognition and/or disclosure through the date these financial statements were issued. No subsequent events occurred during this period that require recognition or disclosure in these financial statements. *Litigation.* We are subject to various claims and legal actions that have arisen in the course of conducting business. Management does not expect the ultimate disposition of these matters to have a material adverse impact on our financial statements. *Estimates.* The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. *Revenue Recognition.* We operate as an introducing broker and earn commission and trading revenues from the execution of customer transactions in securities, annuities and life insurance. Commission revenue consists of commission revenue and trails. Non-trail commission and trading revenues and related expenses from transactions are recognized on the trade date, which is the point in time when the performance obligation is satisfied because we have arranged for execution and the customer obtains the benefits of the transaction. Nearly all of our revenue is generated from customers located in Texas. We also receive revenue on a trailing basis from mutual funds and, to a lesser extent, on annuities and life insurance. Trail revenue is recognized in accordance with the terms of the underlying agreements. Trail revenue is received in arrears on a quarterly or monthly basis and is generally based the average value of assets held in the account by our customers. Trail revenues recognized in the current period are primarily related to performance obligations that have been satisfied in prior periods. We may also receive volume-based incentives from our clearing broker based on aggregate customer trading activity. Such amounts are subject to a twelve-month clawback window if our contract with the clearing broker is terminated or not renewed. Accordingly, we consider our performance obligation for such amounts to complete to the extent that it is probable that a significant revenue reversal will not occur. {10}------------------------------------------------ *Securities Owned.* Securities owned are valued at estimated fair value as determined by quoted market values. The resulting differences between cost and fair value are included as a component of trading income in the accompanying Statement of Income. *Brokerage and Insurance Commissions Receivable, Net.* Brokerage commissions receivable is comprised of revenue related to brokerage commissions, 12b-1 fees and mutual funds concessions, and other income receivable related to transactions cleared through various third parties. Brokerage commission receivable are presented net of fees payable due to the third parties. We consider the brokerage commissions and insurance receivable fully collectible as the majority of the receivables have been collected subsequent to period end but before the date these financial statements were issued; therefore, management has concluded that no allowance is required. *Trading Income Receivable.* Trading income receivable represents the markup earned from fixed income security trade transactions executed but not yet received. We consider the trading income receivable fully collectible as the majority of the receivables have been collected subsequent to period end but before the date these financial statements were issued; therefore, management has concluded that no allowance is required. *Share-Based Payments.* Cullen/Frost maintains a stock compensation plan under which we may grant various types of awards to participating employees. Compensation expense related to awards currently outstanding is related to non-vested restricted stock units. This expense is based on the fair value of the underlying awards on the measurement date, which is generally the date of the grant, and is recognized ratably over the service periods of each award. For most non-vested restricted stock unit awards, the service period generally matches the vesting period, which is generally a three-year-cliff vesting period. However, the service period will not extend past the date the participant reaches 65 years of age. The fair value of non-vested stock units is generally the market price of our stock on the date of grant. The impact of forfeitures of share-based payment awards on compensation expense is recognized as forfeitures occur. *Income taxes.* Our operations are included in the consolidated federal income tax return filed by Cullen/Frost using a calendar year-end. Our federal income tax provision is determined as if we filed a separate return using the consolidated statutory federal income tax rate for Cullen/Frost (21 % during the period presented), as this is the rate charged to us by Cullen/Frost. The income tax effects related to settlements of share-based payment awards are reported in earnings as an increase (or decrease) to income tax expense (see Note 6 - Income Taxes). *Segment Reporting.* We are managed by our lines of business under a regional organizational structure as a single operating segment. The regions generally operate the same lines of business. We principally engage in executing general securities transactions on behalf of our clients utilizing a clearing agreement with National Financial Services Company ("NFS"), whereby NFS assumes and maintains our customer accounts on a fully disclosed basis. Our President, as our chief operating decision maker, reviews actual net income versus budgeted net income to assess performance on a monthly basis and to make decisions about allocating capital and personnel. *Accounting Changes.* We adopted ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" for our annual financial statements in 2025. See Note 6 - Income Taxes. #### **Note 3 -Transactions with Customers** NFS clears transactions for our customers and carries the accounts of such customers on a fully disclosed basis as customers of NFS. We do not hold customer cash or securities in connection with such transactions. We do not generally extend credit to customers. However, in the limited instances where we do extend credit to customers through the clearing broker, we seek to control the risks associated with these activities by requiring customers to maintain margin collateral in compliance with various regulatory and internal guidelines. We, in addition to the clearing broker, monitor required margin levels daily and, pursuant to such guidelines, request customers to deposit additional collateral or reduce securities positions when necessary. As an introducing broker, we clear all transactions with and for customers on a fully disclosed basis with a clearing broker and promptly transmit all customer funds and securities to the clearing broker who carries all of the accounts of such customers. These activities expose us to off-balance-sheet risk in the event that the customer and/ or clearing broker is unable to fulfill its obligations. We have agreed to indemnify the clearing broker for any losses {11}------------------------------------------------ sustained from customer accounts we introduced. At December 31, 2025, there were no material amounts to be indemnified to the clearing broker for such customer accounts. #### **Note 4** - **Securities Owned** At December 31, 2025, trading securities totaled \$36.7 million and consisted entirely of short-term U.S. Treasury securities reported at estimated fair value with changes in unrealized holding gains and losses included in income. These securities are not purchased to be resold to customers and are for our investment and liquidity purposes only. All securities owned at December 31, 2025 will contractually mature within one year. Securities with carrying amounts totaling \$59 thousand at December 31, 2025, were pledged to NFS for surety purposes. #### **Note 5** - **Employee Benefit Plans** As a subsidiary, we participate in various employee benefit plans offered by Cullen/Frost, including a 401(k) stock purchase plan, a defined benefit pension plan and a stock compensation plan. Expenses related to these plans are included in employee compensation and benefits in the accompanying Statement of Income. The 401(k) stock purchase plan is a defined contribution plan whereby participants are permitted to make beforeor after-tax contributions in an amount no less than 2% and not exceeding 50% of eligible compensation and subject to dollar limits from Internal Revenue Service regulations. We match 100% of employee contributions to the plan based on the amount of each participant's contributions up to a maximum of 7% of eligible compensation. Eligible employees must complete 30 days of service in order to enroll and vest in matching contributions immediately. Employees elect where their company match is invested, or it is defaulted into the applicable target date fund. We may make additional profit sharing contributions to the plan. All such contributions are made at our discretion and may be made without regard to current or accumulated profits. Contributions are generally allocated to eligible participants uniformly, based upon compensation, age and/or other factors. Plan participants self-direct the investment of allocated contributions by choosing from a menu of investment options. Profit sharing contributions are subject to withdrawal restrictions and participants vest in their allocated contributions after three years of service. Expense related to this plan totaled \$900 thousand during 2025. The defined benefit pension plan (the "Retirement Plan") is a non-contributory plan that was frozen as of December 31, 2001. The plan provides pension and death benefits to substantially all employees who had attained the age of 21 years and had completed at least one year of service prior to December 31, 2001. Expense is recognized based upon actual contributions to the plans. There were no contributions, and thus no expense, related to this plan during 2025. Certain employees are granted non-vested stock awards in shares of Cullen/Frost common stock. Compensation expense related to these awards totaled \$142 thousand during 2025. ## **Note 6- Income Taxes** We are included in the consolidated federal income tax return filed by Cullen/Frost. Our income tax provision is computed in accordance with a tax sharing agreement whereby we are paid for the tax benefit of any loss provided to Cullen/Frost, or alternatively, we pay Cullen/Frost for the incremental tax liability resulting from any profit we realize. We file separate or combined state and local income/margin tax returns where applicable. State and local taxes have been provided for in these financial statements. Interest and/or penalties related to income taxes are reported as a component of income tax expense. Such amounts were not significant during the reported period. The One Big Beautiful Bill Act ("OBBBA") was enacted on July 4, 2025. Among other things, the new law makes permanent certain expiring business tax provisions of the Tax Cuts and Jobs Act ("TCJA"). These include provisions which allow businesses to immediately expense, for tax purposes, the cost of new investments in certain qualified depreciable assets. The OBBBA also imposes a floor on tax deductions taken on charitable contributions. The OBBBA also significantly changes U.S. tax law related to foreign operations and certain tax credits; however, such changes do not currently impact us. {12}------------------------------------------------ The components of income tax expense for 2025 are presented in the table below: | Current income tax expense: | | |---------------------------------|-----------| | Federal | \$
773 | | State | 6 | | Deferred income tax expense | 137 | | Income tax expense, as reported | \$
916 | | | | | Effective tax rate | 21.3 % | Reported income tax expense for 2025 differs from the amount computed by applying the U.S. federal statutory income tax rate of 21 % to income before income taxes and is presented in the following table. There were no activities or transactions that had foreign income taxes or cross-border tax effects during the reported period. State income/franchise taxes are primarily related to the State of Texas, while amounts related to other jurisdictions were not significant, in the aggregate, during the reported periods. | | | 2025 | | | |----------------------------------------------------------------------|--------|------|---------|--| | | Amount | | Percent | | | U.S. federal income tax expense computed at the statutory rate | \$ | 904 | 21 % | | | State income/franchise taxes, net of U.S. federal income tax effects | | 6 | 0.1 | | | Effect of changes in tax laws or rates enacted during the year | | | | | | Non-Taxable or non-deductible items: | | | | | | Meals and entertainment | | 20 | 0.5 | | | Other | | (9) | (0.2) | | | Net tax benefit from stock-based compensation | | (5) | (0.1) | | | Income tax expense and effective tax rate, as reported | \$ | 916 | 21.3 % | | Accounting Standards Codification "ASC" 740, Income Taxes, prescribes criteria for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. There were no significant tax positions taken by management that required accrual as of December 31, 2025. Deferred tax assets and liabilities are the expected future tax amounts resulting from the temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities, computed using enacted tax rates. Deferred taxes at December 31, 2025 were as follows. | Deferred tax assets: | | |---------------------------|-----------| | Bonus accrual | \$
140 | | Stock-based compensation | 52 | | Deferred tax liabilities: | | | Prepaid expenses | (102) | | Net deferred tax asset | \$
90 | No valuation allowance for deferred tax assets was recorded at December 31, 2025, as management believes it is more likely than not that all of the deferred tax assets will be realized against deferred tax liabilities and projected future taxable income. We file income tax returns in the U.S. federal jurisdiction. We are no longer subject to U.S. federal income tax examinations by tax authorities for years before 2022. {13}------------------------------------------------ #### **Note** 7 - **Related-Party Transactions** *Intercompany Management and Administrative Expenses.* Frost Bank provides us certain management and administrative services in accordance with a management services agreement that is reviewed and updated annually. The services provided include, but are not limited to, payroll processing, audit, marketing support, technical support, and financial operations. We reimbursed Frost Bank for the cost of these services, which totaled \$651 thousand for 2025 and is included in general and administrative expense in the accompanying Statement of Income. *Rental Expense.* We lease corporate office space under a one-year rental agreement with Frost Bank. This lease was renewed for a one-year term effective from January, 2026. Furthermore, we maintain a desk rental licensing agreement with Frost Bank wherein Frost Bank provides us with office space at various Frost Bank branch locations. Under the terms of the agreement, the license period commenced on January 1, 2015 and continues for successive 12-month periods until terminated by sixty days' prior written notice by either party. Rental expense for the corporate office lease and the desk rental license agreement totaled \$180 thousand and \$141 thousand, respectively, for 2025 and is included in technology, occupancy and equipment expense in the accompanying Statement of Income. Future minimum payments due under the corporate office lease and desk rental license agreement totaled \$331 thousand at December 31, 2025. *Managed Accounts at Frost Investment Services.* Frost Investment Services, LLC ("Frost Investment Services") is a wholly owned subsidiary of Frost Bank. Certain of our employees who perform brokerage duties for us also manage fiduciary investment accounts for Frost Investment Services. As a result, for the year ended December 31, 2025, our employee compensation and benefits expense in the accompanying Statement of Income was reduced by \$398 thousand related to the management of these fiduciary investment accounts by our employees. #### **Note 8 -Net Capital Requirements** The Company is subject to the SEC Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1 (and the rule of the applicable exchange also provides that equity capital may not be withdrawn or cash dividends be paid if the resulting net capital ratio exceeds 10 to 1). At December 31, 2025, we had net capital of \$36.9 million, which was \$36.6 million in excess of our required net capital of \$250 thousand. At such date, the ratio of aggregate indebtedness to net capital was 5.80%. #### **Note 9** - **Fair Value Measurements** The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market ( or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, we utilize valuation techniques that are consistent with the market approach. ASC Topic 820 "Fair Value Measurements and Disclosures" establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy includes (i) Level 1 inputs that are unadjusted quoted prices in active markets for identical assets or liabilities, (ii) Level 2 inputs that are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly and (iii) Level 3 inputs that are unobservable inputs for determining the fair values of assets or liabilities that reflect assumptions that market participants would use in pricing the assets or liabilities. All of our securities owned are reported at fair value utilizing Level 1 inputs. For these securities, we obtain fair value measurements from an independent pricing service. We review the fair value measurements for reasonableness to ensure such prices are aligned with traditional pricing matrices. {14}------------------------------------------------ #### **Note 10 -Accounting Standards Updates** *ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures."* ASU 2023-09 requires public business entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold. ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things. ASU 2023-09 became effective for us in 2025 (see Note 6 - Income Taxes). *ASU No. 2024-03, "Income Statement* - *Reporting Comprehensive Income* - *Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses."* ASU 2024-03 requires disaggregated disclosure of income statement expenses for public business entities. ASU 2024-03 requires new financial statement disclosures in tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense caption. The prescribed categories include, among other things, employee compensation, depreciation, and intangible asset amortization. Additionally, entities must disclose the total amount of selling expenses as well as the entity's definition of selling expenses. ASU 2024-03 will be effective for us in 2027 though early adoption is permitted. ASU 2024-03 is not expected to have a material impact on our financial statements. *ASU No. 2025-05, "Financial Instruments* - *Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets.* " ASU 2025-05 provides all entities, when developing reasonable and supportable forecasts as part of estimating expected credit losses on current accounts receivable and/or current contract assets arising from transactions under ASC Topic 606 - Revenue from Contracts with Customers, a practical expedient whereby entities can assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. ASU 2025-05 will be effective in 2026 and is not expected to have a material impact on our financial statements. {15}------------------------------------------------ Supplemental Information {16}------------------------------------------------ ## **Frost Brokerage Services, Inc. Schedule** I **-Computation of Net Capital Under Rule 15c3-1** (Dollars in thousands) **December 31, 2025** | Computation of net capital: | | | |-------------------------------------------------------------------------------|-------|--------------| | Total ownership equity from Statement of Financial Condition | | \$
38,659 | | Deduct ownership equity not allowable for Net Capital | | | | Total ownership equity qualified for Net Capital | | \$
38,659 | | Total capital and allowable subordinated liabilities | | \$
38,659 | | Deductions and/or charges: | | | | Non-allowable assets: | | | | Receivables from parent or affiliates | \$ | | | Other unsecured receivables | 1,232 | | | Prepaid expenses | 471 | | | Net deferred tax asset | 90 | | | Total deductions and/or charges | | 1,793 | | Net Capital before haircuts on securities positions | | \$
36,866 | | Net Capital | | \$
36,866 | | Computation of basic net capital requirements: | | | | Minimum dollar net capital required (6-2/3 % of total aggregate indebtedness) | | \$
142 | | Minimum dollar net capital requirement of reporting broker or dealer | | \$
250 | | Net capital requirement (whichever is greater) | | \$
250 | | Excess net capital | | \$
36,616 | | Net capital less 120% of minimum net capital requirement | | \$
36,566 | | Computation of aggregate indebtedness: | | | | Total aggregate indebtedness from Statement of Financial Condition | | \$
2,137 | | Percentage of aggregate indebtedness to net capital | | 5.80 % | No material differences exist between the above computation and the computation included in the Company's corresponding amended unaudited Part II of Form X-17A-5 filing as of December 31, 2025, submitted on March 20, 2026. {17}------------------------------------------------ ![](_page_17_Picture_0.jpeg) ## **Report of Independent Registered Public Accounting Firm** The Board of Directors and Management of Frost Brokerage Services, Inc. We have reviewed management's statements, included in the accompanying Frost Brokerage Services, Inc. Exemption Report, in which Frost Brokerage Services, Inc. (the Company) stated that: - (1) The Company claimed an exemption from 17 C.F.R. § 240.15c3-3 (k): (2)(ii) (the "exemption provisions") - (2) The Company met the identified exemption provisions of §240.15c3-3 (k) throughout the most recent fiscal year ended December 31, 2025 except as described in its exemption report. - (3) The Company is also filing this Exemption Report because the Company's other business activities contemplated by Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. §240.17a-5 are limited to effecting securities transactions via subscriptions on a subscription way basis where the funds are payable to the issuer or its agent and not to the Company, and the Company (1) did not directly or indirectly receive, hold, or otherwise owe funds or securities for or to customers, (other than money or other consideration received and promptly transmitted for effecting transactions via subscriptions on a subscription way basis where the funds are payable to the issuer or its agent and not to the Company); (2) did not carry accounts of or for customers; and (3) did not carry PAB accounts (as defined in Rule 15c3-3) throughout the most recent fiscal year ended December 31 , 2025 except as described in its exemption report. Management is responsible for compliance with 17 C.F .R. § 240.15c3-3 and its statements. Our review was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and, accordingly, included inquiries and other required procedures to obtain evidence about the Company's compliance with 17 C.F .R. § 240.15c3-3. A review is substantially less in scope than an examination, the objective of which is the expression of an opinion on management's statements. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to management's statements referred to above for them to be fairly stated, in all material respects , based on the provisions set forth in Rule 15c3-3 under the Securities Exchange Act of 1934 and pursuant to footnote 7 4 of SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240.17a-5. This report is intended solely for the information and use of the Board of Directors, management, the SEC, FINRA, other regulatory agencies that rely on Rule 17a-5 under the Securities Exchange Act of 1934 in their regulation of registered brokers and dealers, and other recipients specified by Rule 17a-5(d)(6) and is not intended to be and should not be used by anyone other than these specified parties. March 20, 2026 {18}------------------------------------------------ ## **Schedule II -Exemption from filing Compliance Report Required by SEC Rule 15c3-3** ## **Frost Brokerage Services, Inc. Exemption Report** Frost Brokerage Services, Inc. (the Company) is a registered broker-dealer subject to Rule 17a-5 promulgated by the Securities and Exchange Commission (17 CFR 240.17a-5 "Reports to be made by certain brokers and dealers"). This Exemption Report was prepared as required by the 17 CFR 240. 17a-5(d)( 1) and (4 ). To the best of its knowledge and belief, the Company states the following: - 1) The Company claimed an exemption from 17 CFR 240.15c3-3 under the provisions of 17 CFR 240.15c3-3 (k)(2)(ii). - 2) The Company met the identified exemption provisions in 17 CFR 240.15c3-3 (k) throughout the most recent fiscal year, except as described in Appendix A. - 3) The Company is also filing this Exemption Report because the Company's other business activities contemplated by Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. §240.17a-5 are limited to effecting securities transactions via subscriptions on a subscription way basis where the funds are payable to the issuer or its agent and not to the Company, and the Company (1) did not directly or indirectly receive, hold, or otherwise owe funds or securities for or to customers; (2) did not carry accounts of or for customers; and (3) did not carry PAB accounts (as defined in Rule 15c3-3) throughout the most recent fiscal year without exception. Frost Brokerage Services, Inc. I affir c--~ge and belief, this Exemption Report is true and correct. <- =' Chris Walsh President March 20, 2026 {19}------------------------------------------------ # **FROST BROKERAGE SERVICES, INC CONFIDENTIAL** ## **Exception Report -Appendix A** | Date Check
Received | Amount of
Check | Payee | Nature of
Exception | Approximate
duration of
exception in
days (a) | |------------------------|--------------------|-------|------------------------|--------------------------------------------------------| | | | | | | | 2/5/25 | \$7,000.00 | NFS | Late deposit | 2 | | 2/7/25 | \$100,000.00 | NFS | Late deposit | 1 | | 2/7/25 | \$300,000.00 | NFS | Late deposit | 1 | | 2/25/25 | \$250,000.00 | NFS | Late deposit | 1 | | 2/27/25 | \$150,000.00 | NFS | Late deposit | 2 | | 3/7/25 | \$2,000.00 | NFS | Late deposit | 1 | | 3/7/25 | \$2,000.00 | NFS | Late deposit | 1 | | 3/10/25 | \$1,000.00 | NFS | Late deposit | 2 | | 3/10/25 | \$300.00 | NFS | Late deposit | 1 | | 4/2/25 | \$5,000.00 | NFS | Late deposit | 3 | | 4/8/25 | \$64,447.94 | NFS | Late deposit | 2 | | 4/15/25 | \$100,000.00 | NFS | Late deposit | 1 | | 5/15/25 | \$.20 | NFS | Late deposit | 6 | | 5/16/25 | \$394.55 | NFS | Late deposit | 9 | | 6/17 /25 | \$175,000.00 | NFS | Late deposit | 3 | | 7/8/25 | \$10,000.00 | NFS | Late deposit | 8 | | 7/28/25 | \$20,000.00 | NFS | Late deposit | 1 | | 8/22/25 | \$100,000.00 | NFS | Late deposit | 1 | | 8/22/25 | \$200,000.00 | NFS | Late deposit | 1 | | 8/29/25 | \$8,557.00 | NFS | Late deposit | 1 | | 9/30/25 | \$98,213.65 | NFS | Late deposit | 1 | | 10/31 /25 | \$200,000.00 | NFS | Late deposit | 1 | | 11/10/25 | \$500.00 | NFS | Late deposit | 3 | | 11/25/25 | \$128.89 | NFS | Late deposit | 3 | | 11/25/25 | \$138,829.85 | NFS | Late deposit | 3 | | 11/25/25 | \$157,702.97 | NFS | Late deposit | 3 | | 11/25/25 | \$107,615.84 | NFS | Late deposit | 3 | (a)Duration includes weekends and holidays where applicable. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.