Cullen/Frost Bankers(CFR) - 2025 Q2 - Quarterly Results

Cullen/Frost Second Quarter 2025 Earnings Release Second Quarter 2025 Performance Highlights Cullen/Frost reported strong Q2 2025 results with increased net income, diluted EPS, and significant growth in average loans and deposits Key Performance Metrics | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income (Common) | $155.3 million | $143.8 million | +8.0% | | Diluted EPS | $2.39 | $2.21 | +8.1% | | Return on Average Assets | 1.22% | 1.18% | +4 bps | | Return on Average Common Equity | 15.64% | 17.08% | -144 bps | Average Balances and Net Interest Income | Metric | Q2 2025 | Q2 2024 | YoY Change | Q1 2025 | QoQ Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Avg. Loans | $21.1 billion | $19.7 billion | +7.2% | $20.8 billion | +1.3% | | Avg. Deposits | $41.8 billion | $40.5 billion | +3.1% | $41.7 billion | +0.2% | | Net Interest Income (Taxable-Equiv.) | $450.6 million | $417.6 million | +7.9% | - | - | - Management attributes the strong performance to the durability of the company's organic growth model, highlighting solid loan growth and a slight increase in average total deposits despite seasonal weakness[4] Year-to-Date 2025 Performance Highlights Year-to-date 2025 results show a 9.6% increase in net income and a 9.8% rise in diluted EPS compared to 2024 Year-to-Date Key Performance Metrics | Metric | First Six Months 2025 | First Six Months 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income (Common) | $304.6 million | $277.9 million | +9.6% | | Diluted EPS | $4.69 | $4.27 | +9.8% | | Return on Average Assets | 1.20% | 1.14% | +6 bps | | Return on Average Common Equity | 15.59% | 16.13% | -54 bps | Detailed Financial Analysis (Q2 2025) Q2 2025 analysis reveals strong capital, expanded net interest margin, growth in non-interest income, and stable credit quality despite rising expenses Capital Ratios and Net Interest Margin - Capital ratios at the end of Q2 2025 remain well-capitalized and exceed Basel III minimums, with a Common Equity Tier 1 ratio of 13.98%[6] - Net interest margin was 3.67% for Q2 2025, an increase from 3.54% in Q2 2024 and 3.60% in Q1 2025[6] Non-Interest Income - Total non-interest income increased by 5.5% YoY to $117.3 million in Q2 2025[6] - Key drivers of non-interest income growth YoY include: - Trust and investment management fees: +$2.3 million (5.5%), mainly from higher investment management fees[6] - Service charges on deposit accounts: +$3.0 million (11.6%), driven by increased overdraft charges from more active accounts[6] - Other charges, commissions, and fees: +$0.9 million (7.3%), primarily from annuity placement income[6][7] Non-Interest Expense - Total non-interest expense rose by 9.5% YoY to $347.1 million in Q2 2025[7] - Key drivers of non-interest expense growth YoY include: - Salaries and wages: +$10.9 million (7.2%), due to merit/market increases and higher employee count for expansion[7] - Employee benefits: +$4.0 million (14.0%), from increased 401(k) and medical expenses[7] - Technology, furniture, and equipment: +$4.6 million (12.9%), mainly from higher cloud services and software maintenance costs[7] - Other non-interest expense: +$10.1 million (16.8%), driven by advertising, sundry expenses, and fraud losses[7] Credit Quality Credit Quality Metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Credit Loss Expense | $13.1 million | $13.1 million | $15.8 million | | Net Loan Charge-offs | $11.2 million | $9.7 million | $9.7 million | | Allowance for Credit Losses (% of loans) | 1.31% | 1.32% | 1.28% | | Non-accrual Loans | $62.4 million | $83.5 million | $75.0 million | Dividends and Conference Call The Board declared Q3 2025 cash dividends for common and preferred shares, with a conference call scheduled for July 31, 2025 - A Q3 2025 cash dividend of $1.00 per common share was declared, payable on September 15, 2025, to shareholders of record on August 29, 2025[9] - A cash dividend of $11.125 per share of Series B Preferred Stock (or $0.278125 per depositary share) was also declared, payable on the same dates[9] - The company will host a conference call to discuss the results on July 31, 2025, at 1 p.m. Central Time[10] Forward-Looking Statements This section outlines forward-looking statements, emphasizing that actual results may vary due to inherent risks and uncertainties, with no obligation to update Risk Factors Key risk factors include changes in economic conditions, monetary policies, credit quality, technology, competition, and regulatory developments - Forward-looking statements are not guarantees of future performance and involve risks and uncertainties[12][13] - Key risk factors include: - Effects of trade, monetary, and fiscal policies, including interest rates and tariffs[15] - Inflation and market fluctuations[15] - Changes in economic conditions and borrower financial health[15] - Shifts in loan portfolio mix and non-performing assets[15] - Technological changes and cybersecurity incidents[15] - Competition in banking markets[15] - Legal, regulatory, and accounting policy changes[15] Consolidated Financial Summary (Unaudited) Quarterly Financial Data This section presents unaudited consolidated financial data for the five most recent quarters, including income statements, balance sheets, and capital ratios Quarterly Consolidated Financial Data | | 2nd Qtr 2025 | 1st Qtr 2025 | 2nd Qtr 2024 | | :--- | :--- | :--- | :--- | | Income Statement | | | | | Net Interest Income | $429.6 million | $416.2 million | $396.7 million | | Credit Loss Expense | $13.1 million | $13.1 million | $15.8 million | | Total Non-interest Income | $117.3 million | $124.0 million | $111.2 million | | Total Non-interest Expense | $347.1 million | $348.1 million | $317.0 million | | Net Income (Common) | $155.3 million | $149.3 million | $143.8 million | | Diluted EPS | $2.39 | $2.30 | $2.21 | | Balance Sheet (Period-End) | | | | | Total Loans | $21,254 million | $20,904 million | $19,996 million | | Total Assets | $51,409 million | $52,005 million | $48,843 million | | Total Deposits | $41,684 million | $42,391 million | $40,318 million | | Asset Quality | | | | | Non-accrual Loans | $62.4 million | $83.5 million | $75.0 million | | Capital Ratios | | | | | Common Equity Tier 1 | 13.98% | 13.84% | 13.35% | Year-to-Date Financial Data This section provides a comparative summary of year-to-date financial performance, including income statements, balance sheets, and asset quality metrics Year-to-Date Consolidated Financial Data | | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Income Statement | | | | Net Interest Income | $845.8 million | $786.8 million | | Credit Loss Expense | $26.2 million | $29.4 million | | Total Non-interest Income | $241.3 million | $222.6 million | | Total Non-interest Expense | $695.2 million | $643.2 million | | Net Income (Common) | $304.6 million | $277.9 million | | Diluted EPS | $4.69 | $4.27 | | Balance Sheet (Period-End) | | | | Total Loans | $21,254 million | $19,996 million | | Total Assets | $51,409 million | $48,843 million | | Total Deposits | $41,684 million | $40,318 million | | Asset Quality | | | | Net Charge-offs | $20.8 million | $17.1 million | | Non-accrual Loans | $62.4 million | $75.0 million | Taxable-Equivalent Yield/Cost and Average Balances This section details taxable-equivalent yields and costs on earning assets and interest-bearing liabilities, along with average balances, to explain net interest margin Taxable-Equivalent Yield/Cost and Average Balances (Q2 2025) | Metric (Q2 2025) | Yield/Cost | Average Balance ($M) | | :--- | :--- | :--- | | Earning Assets | | | | Loans, net of unearned discounts | 6.60% | $21,063 million | | Securities | 3.79% | $20,401 million | | Total earning assets | 5.07% | $47,664 million | | Interest-Bearing Liabilities | | | | Total interest-bearing deposits | 1.93% | $27,972 million | | Total interest-bearing funds | 2.12% | $32,471 million | | Spreads | | | | Net interest spread | 2.95% | - | | Net interest income to total avg. earning assets | 3.67% | - |