Business Context and Reporting Period
Cullen/Frost Bankers, Inc. (CFR) is a Texas-based financial holding company and bank holding company headquartered in San Antonio. Its principal operating subsidiary is Frost Bank. The company operates through two primary segments: Banking and Frost Wealth Advisors. This Form 10-K covers the fiscal year ended December 31, 2025. As of year-end, the company held consolidated total assets of $53.0 billion and total deposits of $42.9 billion.
Key Financial Metrics
| Metric | 2025 | 2024 |
|---|---|---|
| Net Income (Total) | $648.6 million | $582.5 million |
| Net Income Available to Common Shareholders | $641.9 million | $575.9 million |
| Diluted Earnings Per Share | $9.92 | $8.87 |
| Net Interest Income | $1,736.1 million | $1,604.6 million |
| Non-Interest Income | $499.1 million | $459.1 million |
| Non-Interest Expense | $1,419.3 million | $1,302.8 million |
| Credit Loss Expense | $44.2 million | $65.0 million |
| Return on Average Assets | 1.24% | 1.16% |
| Return on Average Common Equity | 15.66% | 15.81% |
| Dividends Per Common Share | $3.95 | $3.74 |
Capital and Liquidity
- Capital Ratios: As of December 31, 2025, Cullen/Frost and Frost Bank exceeded all Basel III capital adequacy requirements and were classified as "well capitalized." The Common Equity Tier 1 (CET1) ratio for Cullen/Frost was 14.06%, and the Leverage Ratio was 8.80%.
- Liquidity: The company held approximately $8.2 billion in an interest-bearing account at the Federal Reserve. Total borrowing capacity with the Federal Home Loan Bank (FHLB) was approximately $6.9 billion, and $11.3 billion in unencumbered securities were available to support additional borrowings.
- Stock Repurchases: Under the 2025 Repurchase Plan, the company repurchased 1,203,141 shares for $150.0 million. On January 28, 2026, the Board authorized a new $300.0 million repurchase plan.
Material Changes Versus Prior Period
- Net Income Growth: Net income available to common shareholders increased by $66.0 million (11.5%) compared to 2024. This was driven by a $131.5 million increase in net interest income and a $40.0 million increase in non-interest income, partially offset by a $116.6 million increase in non-interest expense.
- Net Interest Income: Increased 8.2% to $1.736 billion. The taxable-equivalent net interest margin improved by 13 basis points to 3.66%. This improvement was primarily due to decreased costs on interest-bearing deposits and repurchase agreements, alongside increased loan volumes and higher yields on securities.
- Expense Management: Total non-interest expense rose 8.9%. Excluding the impact of a $9.7 million reversal of a special FDIC deposit insurance assessment accrual in 2025 (compared to a $9.0 million accrual in 2024), expenses would have increased by 10.5%. Increases were driven by salaries, employee benefits, and technology costs.
- Loan Portfolio: Total loans increased by $1.1 billion (5.5%) to $21.9 billion. Growth was led by consumer real estate loans (+19.8%) and commercial real estate loans (+3.4%), while energy loans decreased by 3.0%.
- Credit Quality: Non-accrual loans decreased to $70.5 million (0.32% of total loans) from $78.9 million in 2024. The allowance for credit losses on loans increased to $281.5 million, representing 1.29% of total loans.
Guidance, Outlook, and Risks
Management Commentary: Management highlighted a strong capital position and liquidity. The company continues to focus on organic growth and maintaining a low cost of funds through a high percentage of non-interest-bearing deposits (33.0% of total deposits). The company reversed a significant portion of its FDIC special assessment accrual due to a reduction in the expected assessment rate.
Outlook: The Federal Reserve projected a decrease in the federal funds rate target range in 2026 and 2027. Management noted that while the company is slightly more asset-sensitive, it maintains a strong position to manage interest rate risk.
Key Risks and Contingencies:
- Interest Rate Risk: Earnings are sensitive to changes in interest rates. A 200 basis point decrease in rates is projected to result in a 3.4% negative variance in net interest income over the next 12 months.
- Commercial Real Estate (CRE): CRE loans comprise 47.1% of the loan portfolio. Management maintains significant qualitative overlays for non-owner occupied and construction loans due to concerns over capital market access and refinancing risks.
- Energy Sector: Energy loans represent 5.0% of the portfolio. Volatility in crude oil prices (which were $57.95/barrel at year-end 2025) poses a risk to borrower repayment capacity.
- Regulatory Environment: The company faces ongoing regulatory scrutiny regarding interchange fees, consumer protection laws (CFPB), and potential changes to capital rules, though many proposed changes do not currently apply due to asset size thresholds.
- Cybersecurity: The company faces elevated risks from cyber-attacks and fraud, necessitating continued investment in security infrastructure.
Important Facts for Investor Verification
- FDIC Special Assessment Reversal: Verify the impact of the $9.7 million reversal of the FDIC special deposit insurance assessment accrual on 2025 non-interest expense and net income.
- Commercial Real Estate Exposure: Review the specific qualitative overlays applied to non-owner occupied and construction loans, which totaled $98.2 million in model overlays, to assess credit risk assumptions.
- Stock Repurchase Activity: Confirm the execution of the $150 million 2025 repurchase plan and the terms of the newly authorized $300 million 2026 plan.
- Uninsured Deposits: Note that approximately 52% of deposits were uninsured at year-end, which is a key liquidity risk factor.
- Energy Loan Concentration: Monitor the performance of the $1.1 billion energy loan portfolio given the decline in oil prices from $71.72 in 2024 to $57.95 in 2025.