Cullen/Frost Bankers, Inc.

What they do

Cullen/Frost provides banking, trust, investment management, and insurance products and services primarily through its subsidiary Frost Bank. The company serves commercial, corporate, and consumer customers across Texas, with a loan portfolio heavily weighted toward commercial real estate (47.1% at year-end 2025) and energy (5.0%). It generates revenue through net interest income on loans and securities and non-interest income from fees and trust services.

Revenue drivers

• Commercial real estate mortgages — Approximately 47.1% of the loan portfolio as of December 31, 2025, making it the largest loan category; performance depends on property operations and economic conditions.
• Energy loans — Approximately $1.1 billion, or 5.0% of loans at December 31, 2025; sensitive to oil price volatility, with exposure to higher-cost producers and oilfield service providers.
• Net interest income (taxable-equivalent basis) — For Q2 2026, up 4.3% to $470.1 million, driven by loan and deposit growth; net interest margin was 3.75%.
• Service charges on deposit accounts — Q2 2026: up $5.0 million (17.2%) year-over-year, driven by customer growth and higher transaction volumes.
• Trust and investment management fees — Q2 2026: up $4.0 million (9.1%) year-over-year, with investment management fees rising $4.2 million on market value-linked assets.

Recent performance

In Q2 2026, net income available to common shareholders was $170.4 million ($2.70 diluted EPS), up from $155.3 million ($2.39) a year earlier. For H1 2026, net income available to common shareholders rose 11.5% to $339.7 million ($5.35 diluted EPS) from $304.6 million ($4.69) in H1 2025. Average loans grew 7.4% year-over-year to $22.6 billion, and average deposits grew 2.1% to $42.6 billion. Returns on average assets and average common equity were 1.30% and 15.41% for the quarter. Customer households grew 5.9% from June 2025 to June 2026.

Strategy

Management emphasizes balanced growth across deposits, loans, and customer expansion. The company opened four new financial centers in Q2 2026 and a seventh location in Richardson in late July 2026, part of a broader Texas expansion across Dallas, Fort Worth, Austin, and San Antonio. Management highlights continued investment in growth despite competitive pressure, with a focus on building customer relationships and market share. The company also maintains strong capital ratios, exceeding Basel III minimums.

Risks

• Commercial real estate concentration — CRE mortgages are 47.1% of loans, which carry higher credit risk and may be affected by weakness in office properties due to remote work trends.
• Energy price volatility — Energy loans (5.0% of portfolio) are sensitive to crude oil prices, which fell from $71.72 at end-2024 to $57.95 at end-2025; prolonged low prices could increase delinquencies and losses.
• Cybersecurity and information system failures — The company faces increased risk from cyber-attacks, including attempts to misappropriate customer data, and may be delayed in detecting or responding; cyber insurance may be inadequate.
• Interest rate risk — Net interest income is sensitive to rate changes; if deposit rates rise faster than loan yields, earnings could be adversely affected.

Outlook

Management expects sustained growth in loans, deposits, and customer households, citing strong market trends in Texas. They note geopolitical events, such as the U.S.-Iran conflict, could increase volatility in energy prices and financial markets. Forward-looking statements include risks from interest rate policy, inflation, and technological changes, including AI and quantum computing. No specific numerical guidance was provided.