Cullen/Frost Bankers, Inc. (CFR) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary shows positive financial performance with record growth in mortgage lending and real estate loans, alongside optimistic guidance for net interest income and margin improvements. The Q&A highlighted management's confidence in loan growth, expansion, and maintaining strong capital ratios. Despite some conservative guidance and unclear responses, the overall sentiment is positive, supported by strategic expansion and strong pipeline growth, suggesting a likely 2% to 8% stock price increase.
Key Financial Performance
Fourth Quarter Earnings Cullen/Frost earned $164.6 million, an increase of $11.4 million or 7.4% compared with the same period last year. Per share earnings for the fourth quarter of 2025 were $2.56, an increase of 8.5% from the previous year.
Full Year Net Income The company's net income available to common shareholders was $641.9 million, an 11.5% increase over last year. On a per share basis, 2025 full year earnings were $9.92 a share compared with $8.87 a share for 2024.
Return on Average Assets and Equity Return on average assets and average common equity in the fourth quarter were 1.22% and 14.8%, respectively, compared to 1.19% and 15.58% in the fourth quarter of last year.
Average Deposits Average deposits in the fourth quarter were $43.3 billion, an increase of 3.5% year-over-year.
Average Loans Average loans grew to $21.7 billion in the fourth quarter, an increase of 6.5% compared with the fourth quarter last year.
Mortgage Lending The mortgage lending platform ended the year at $595 million in loans outstanding, surpassing the goal of $500 million. The fourth quarter saw an increase of $173 million in outstanding loans.
Nonperforming Assets Nonperforming assets were $72 million at the end of the fourth quarter compared with $47 million last quarter and $93 million a year ago. The increase was primarily due to one borrower in a beverage distribution business undergoing liquidation.
Net Charge-Offs Net charge-offs for the fourth quarter were $5.8 million compared to $6.6 million last quarter and $14 million a year ago. Annualized net charge-offs for the fourth quarter represented 11 basis points of loans, and full year net charge-offs were 16 basis points of average loans.
Problem Loans Total problem loans were $857 million at the end of the fourth quarter, up slightly from $828 million last quarter and down from $943 million a year ago.
Net Interest Margin Net interest margin percentage was 3.66% for the quarter, down 3 basis points from the 3.69% reported last year.
Investment Portfolio The total investment portfolio averaged $19.9 billion during the fourth quarter, down $284 million from the previous quarter. The taxable equivalent yield on the total investment portfolio during the quarter was 3.82%, down 3 basis points from the previous quarter.
Cost of Interest-Bearing Deposits The cost of interest-bearing deposits in the fourth quarter was 1.75%, down 19 basis points from 1.94% in the third quarter.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
Mortgage Lending Platform: Exceeded the goal of $500 million in loans outstanding by reaching $595 million by the end of 2025. Achieved the best quarter to date with an increase of $173 million in outstanding loans during Q4. 40% of mortgage borrowers are new customers to Frost.
Expansion Strategy: Expansion deposits exceeded $3 billion, and expansion loans stood at $2.37 billion, adding over 78,000 new households. Expansion locations contributed significantly to new relationships in Houston (41%), Dallas (33%), and Austin (23%).
Branch Expansion: Opened 3 new locations in Q4 (2 in Austin, 1 in Dallas) and plans to open 12-15 additional branches in 2026.
Consumer Business Growth: Achieved a 5.8% growth rate in checking household accounts for the fifth consecutive year.
Commercial Business Performance: Recorded the highest number of calls and new relationships in 2025, with an 8% increase in both metrics compared to 2024. Expansion locations accounted for 20% of new relationships.
Wealth Management Reorganization: Implemented a new organizational structure and sales culture to position Frost Wealth Management for long-term growth.
Alignment of Business Segments: Improved alignment between commercial banking and insurance brokerage businesses to enhance service for the commercial segment.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Nonperforming Assets: Nonperforming assets increased to $72 million at the end of the fourth quarter, up from $47 million last quarter. This increase was primarily due to one borrower, a shared national credit in the beverage distribution business, undergoing liquidation of operations in various states.
Problem Loans: Total problem loans (risk grade 10 or higher) increased slightly to $857 million at the end of the fourth quarter, up from $828 million last quarter. This indicates a potential risk in credit quality.
Net Unrealized Loss on Investment Portfolio: The net unrealized loss on the available-for-sale portfolio was $1.04 billion at the end of the quarter, reflecting exposure to market volatility and interest rate risks.
Credit Quality in Multifamily Commercial Real Estate: While progress was made in resolving challenged multifamily commercial real estate loans, these issues remain a concern and are expected to continue into the first half of 2026.
Technology Write-Off: A $4 million write-off of technology related to the data platform modernization was recorded, indicating challenges in technology upgrades and modernization efforts.
Medical Reserves: Increased funding of medical reserves by $1.9 million due to higher claims, reflecting potential cost pressures in employee benefits.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Net Interest Income Growth: Expected to grow by 3% to 5% for the full year 2026.
Net Interest Margin: Projected improvement of about 5 to 10 basis points compared to the full year 2025 margin of 3.66%.
Loan Growth: Full year average loan growth expected to be in the range of 5% to 7%.
Deposit Growth: Full year average deposits expected to increase by 2% to 3%.
Noninterest Income Growth: Projected growth of 4% to 5% for the full year 2026.
Noninterest Expense Growth: Expected to grow in the range of 5% to 6% for the full year 2026.
Net Charge-Offs: Anticipated to be in the range of 20 to 25 basis points of average loans for the full year 2026.
Effective Tax Rate: Expected to be in the range of 15% to 16% for the full year 2026.
Stock Repurchase Program: A new 1-year $300 million share repurchase program approved.
Branch Expansion: Plan to open an additional 12 to 15 branches in 2026.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
Share Repurchase Plan: During the fourth quarter, the company utilized the remaining $80.7 million of its $150 million approved share repurchase plan to buy back approximately 654,000 shares. Additionally, the Board approved a new 1-year $300 million share repurchase program.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:Was there any component of the highlighted loan in charge-offs, and what is the color on risk grade 10 loan migrations?
A:There was no charge-off on the shared national credit, but a specific reserve of $10 million was added. Multifamily loans are stabilizing after 12 months, with some being sold or refinanced. In 2025, $428 million of multifamily deals were paid off, with $284 million in risk grade 10 and 11. For 2026, $255 million in multifamily loans are expected to pay off in the first or second quarter.
Q:What is the outlook for deposit beta with the anticipated rate cuts?
A:The deposit beta is expected to stay at around 43% of interest-bearing costs. Competition in rates is being monitored weekly to retain or grow relationships.
Q:What are the assumptions driving the guidance on loan and deposit growth for 2026?
A:Loan growth is expected to be stronger in the second half of 2026 due to accelerated payoffs in the first half. Deposit growth is influenced by a competitive environment and off-balance-sheet options, with banks being competitive on time accounts.
Q:What is the outlook for expense growth and branch openings in 2026?
A:Expense growth is projected at 5% to 6%, with 12 to 15 new branches expected to open. Expenses may be elevated in the fourth quarter due to stock incentive plans, but overall growth is expected to be steady.
Q:Is the 5% to 7% loan growth and 2% to 3% deposit growth guidance conservative?
A:The guidance considers early-year paydowns and anticipates stronger growth in the second half of 2026 and into 2027. Consumer loan growth, particularly in mortgage, is expected to remain strong, with high teens growth projected for 2026.
Q:What is the EPS impact of branch expansion, and what is the range for 2026?
A:The EPS impact of branch expansion has moved from $0.09 to $0.12. For 2026, the full-year range is expected to be between $0.35 and $0.45.
Q:Why does the fee income guidance appear conservative?
A:The guidance includes some one-time items from 2025, such as real estate sales gains and strong derivatives and FX performance. Additionally, money market fund and annuity income from the Trust business is not expected to grow significantly in 2026.
Q:What is the outlook for capital and buybacks in 2026?
A:Capital ratios are strong, and buybacks are expected to be more consistent in 2026 compared to past years. The focus remains on growth and protecting the dividend.
Q:Is the 5% to 6% expense growth a new base, or will there be relief in the future?
A:The expense growth includes investments in technology and AI, which are expected to pay off in terms of efficiencies. Foundational investments in technology and cybersecurity have been made, and future growth is expected to be more about executing on platforms and software.
Q:What is driving the growth in deposit service charges?
A:Growth is driven by record new account growth and increased commercial service charges due to rate cuts. Annual adjustments to ensure market competitiveness also contribute to the growth.
Q:Is there a risk of headwinds from new entrants in the market?
A:While new entrants may use pricing to compete, the company is confident in its ability to retain customers through competitive pricing and superior service. The company is well-positioned to succeed in a competitive environment.
Q:What are the areas of strength and weakness in the loan pipeline and new commitments?
A:The pipeline is up 16% year-over-year, with strong opportunities in commercial real estate. About 60% of the pipeline is from customers, and 40% from prospects. Expansion regions like Houston, Dallas, and Austin contribute significantly to the pipeline.
Q:What is the company's position on M&A?
A:The company is not interested in M&A, focusing instead on organic growth. Investments in organic growth have proven more cost-effective and allow for better customer and banker experiences.
Q:What is the impact of rate cuts on net interest income (NII)?
A:Each rate cut impacts NII by approximately $2 million per month. If the April cut does not occur, NII could increase by $16 million, with a 2 to 3 basis point improvement in margin.
Q:What is the outlook for the provision and reserve levels?
A:Provision levels could decrease slightly if positive credit trends continue in 2026. The reserve level, currently at 1.29%, may tick down a few basis points with the resolution of multifamily loans.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the assumptions behind the conservative loan and deposit growth guidance, as well as the exact impact of new entrants on market competition. Additionally, responses on the potential long-term impact of AI investments and the detailed breakdown of fee income growth lacked clarity.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Agency loss
Austin loan
CEO AB
CEO Group
CFO commentary
Charitable Foundation
Consumer result
Credit quality
Cullen CFO
Cullen increase
Dallas breakeven
Dallas region
FDIC collection
FDIC insurance
Foundation funding
Full Conference
Houston relationship
Inc Full
Salaries wage
Visa bonus
accretion expansion
addition
award
banking
borrower
focus
goal end
harbor provision
interest deposit
life
plan
platform
program
relationship expansion
share repurchase
stock
CFR Transcript
Cullen/Frost Bankers, Inc. (CFR) Q1 2026 Earnings Call Transcript
Positive5-1
The earnings call showed a strong financial performance with a 10% increase in net income and 8% revenue growth, driven by higher interest income and loan growth. The net interest margin improved significantly, and non-interest expenses were well-managed. Despite a decline in deposit balances, the overall financial health remains robust. The lack of concerning responses in the Q&A suggests no major risks were identified. These factors, combined with a new share repurchase program, indicate a positive stock price movement.
BluMetric Environmental Inc. (BLM:CA) Q4 2025 Earnings Call Transcript
Positive1-29
The earnings call highlighted strong revenue growth, particularly in the commercial and industrial markets, and an increase in adjusted EBITDA. Despite a net loss, liquidity improved significantly. The Q&A addressed key concerns, revealing one-time costs and potential expansion plans. The company's optimistic guidance, especially with potential military contracts and facility expansion, suggests a positive outlook. Although gross margins declined, the overall sentiment is positive due to strategic growth initiatives and improved financial metrics.
Cullen/Frost Bankers, Inc. (CFR) Q4 2025 Earnings Call Transcript
Positive1-29
The earnings call summary shows positive financial performance with record growth in mortgage lending and real estate loans, alongside optimistic guidance for net interest income and margin improvements. The Q&A highlighted management's confidence in loan growth, expansion, and maintaining strong capital ratios. Despite some conservative guidance and unclear responses, the overall sentiment is positive, supported by strategic expansion and strong pipeline growth, suggesting a likely 2% to 8% stock price increase.
Cullen/Frost Bankers, Inc. (CFR) Q3 2025 Earnings Call Transcript
Positive10-30
The earnings call summary and Q&A session indicate a positive outlook. Key highlights include improved guidance for net interest income and noninterest income, strong credit quality, and successful branch expansions contributing to profitability. The bank's strategic focus on organic growth and effective capital utilization, such as stock buybacks, further supports a positive sentiment. Despite some uncertainties regarding future expenses and fee income growth, the overall financial health and strategic initiatives suggest a likely positive stock price movement in the short term.
CFR Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
