Summary of Cullen/Frost Bankers, Inc. Q4 2025 Earnings Call

1Key Financial Results and Metrics

Q4 2025 Net Income: $164.6 million, up 7.4% year-over-year.

Earnings Per Share (EPS): $2.56, an increase of 8.5% from Q4 2024.

Full Year 2025 Net Income: $641.9 million, an 11.5% increase over 2024.

Full Year EPS: $9.92, compared to $8.87 in 2024.

Return on Average Assets: 1.22% (up from 1.19% in Q4 2024).

Return on Average Common Equity: 14.8% (down from 15.58% in Q4 2024).

Average Deposits: $43.3 billion, a 3.5% year-over-year increase.

Average Loans: $21.7 billion, up 6.5% year-over-year.

Net Interest Margin: 3.66%, down 3 basis points from the previous year.

2Strategic Updates and Business Highlights

Expansion Strategy: Expansion deposits exceeded $3 billion, with expansion loans at $2.37 billion, contributing significantly to overall growth.

Consumer Banking: Notable growth in checking household accounts (5.8% for 2025) and mortgage lending, surpassing the $500 million target to reach $595 million.

Commercial Banking: Record number of new relationships (4,091, up 8% from 2024) and significant new loan commitments (up 22% from Q3 2025).

Wealth Management: Organizational restructuring to enhance sales culture and align with commercial banking.

3Forward Guidance and Outlook

2026 Guidance:

Net Interest Income Growth: Expected to be between 3% to 5%.

Loan Growth: Anticipated at 5% to 7%.

Deposit Growth: Expected to be 2% to 3%.

Noninterest Income Growth: Projected at 4% to 5%.

Noninterest Expense Growth: Forecasted at 5% to 6%.

Net Charge-offs: Expected to be 20 to 25 basis points of average loans.

Branch Expansion: Plans to open 12 to 15 new branches in 2026.

4Bad News, Challenges, or Points of Concern

Credit Quality: Nonperforming assets increased to $72 million, primarily due to one borrower in the beverage distribution sector. However, overall credit quality remains stable.

Net Charge-offs: Slightly increased from $5.8 million in Q4 2025 compared to $6.6 million in Q3 2025, but down from $14 million a year ago.

Competitive Pressures: New entrants in the market may drive pricing pressures, particularly on loans and deposits.

Net Interest Margin: Continued pressure from higher interest-bearing deposits affecting margins.

5Notable Q&A Insights

Credit Concerns: Management clarified that the specific reserve of $10 million was set aside for the troubled borrower, but they remain optimistic about resolution.

Loan Pipeline: New commitments were strong, particularly in commercial real estate, but management anticipates elevated payoffs in the first half of 2026.

Expense Growth: The guidance for expense growth (5% to 6%) is expected to remain steady, with no significant spikes anticipated.

M&A Stance: Management reiterated a preference for organic growth over acquisitions, citing better control and lower costs associated with organic expansion.

Fee Income Outlook: Management noted that while deposit service charges are growing due to account growth, there are headwinds from reduced overdraft fees and competitive pricing pressures. Overall, Cullen/Frost Bankers demonstrated solid financial performance in Q4 2025, with a positive outlook for 2026, although they face challenges from competitive pressures and credit quality concerns.