Cullen/Frost Bankers (CFR 1.22%), a major Texas-based community banking and financial services firm, released its second quarter 2025 results on July 31, 2025. The quarter saw GAAP earnings and revenue both beat analyst expectations, with reported EPS (GAAP) at $2.39 compared to the $2.31 consensus estimate, and revenue (GAAP) reaching $567.9 million versus a $550.9 million forecast. These results also improved from Q2 2024. Growth came from stronger net interest income, broader loan and deposit balances, and improving fee income. Management continued to bolster reserves for potential credit losses. Overall, the period featured steady business momentum with some caution signals that investors will be watching going forward.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (GAAP) | $2.39 | $2.31 | $2.21 | 8.1 % |
| Revenue (GAAP) | N/A | $550.9 million | N/A | N/A |
| Net Interest Income (taxable-equivalent basis) | $450.6 million | N/A | $417.6 million | 7.9 % |
| Average Loans | $21.1 billion | N/A | $19.7 billion | 7.2 % |
| Average Deposits | $41.8 billion | N/A | $40.5 billion | 3.1 % |
Source: Analyst estimates for the quarter provided by FactSet.
About Cullen/Frost Bankers and Its Business Focus
Cullen/Frost Bankers is a longstanding regional bank and financial services company known for its deep local roots in Texas. It offers commercial and consumer banking, as well as trust and investment management, insurance, and brokerage services through a network of branches geared toward community-focused relationships.
In recent years, the company has emphasized organic growth in its heartland markets, expanding its lending, deposit, and wealth management activities. Its priorities have included maintaining strong regulatory capital, broadening financial offerings, and keeping up with technology demands. Key factors for its success are local customer relationships, diversification across industries, disciplined lending practices, and a strong capital buffer against market swings.
Quarter Highlights: Growth, Margins, and Costs
The company outperformed expectations for both profit and revenue (GAAP). Net income available to common shareholders (GAAP) reached $155.3 million, This represented an increase of 8.0% compared to Q2 2024. Average loans rose 7.2% to $21.1 billion while average deposits climbed 3.1% to $41.8 billion, even as new deposits slowed seasonally. Net interest income, which is bank revenue from lending minus costs for deposit funding, increased 7.9% year over year, benefiting from a higher net interest margin. The net interest margin, a key measure of profitability on loans and securities, improved to 3.67% from 3.54% in Q2 2024. Management attributed this to higher yields on loans and bonds, as well as disciplined pricing of deposit rates.
Non-interest income, which includes fees from trust and investment management, insurance, and other services, grew 5.5% to $117.3 million. Service charges on deposit accounts, such as overdraft and maintenance fees, rose 11.6% compared to Q2 2024. Trust and investment management fees increased, supported by higher asset values and client activity, and other fee income benefited from annuity placements and additional product offerings. Mortgage originations included 30% to new customers of the bank.
On the expense side, costs continued to rise faster than revenue. Non-interest expense was up 9.5%, led by increases in salaries, benefits, and especially technology spending. Technology, furniture, and equipment expense jumped 12.9% compared to Q2 2024, reflecting investments in cloud services, software maintenance, and furniture and equipment depreciation. Other costs, such as advertising, also contributed to higher overall expenses. This dynamic means that despite top-line growth, operating leverage may be under pressure if expense trends continue at their current pace.
The quarter saw ongoing management of loan quality and potential credit risks. The provision for credit loss expense was stable at $13.1 million compared to Q1 2025, though down from $15.8 million in Q2 2024. Net charge-offs, which are loans written off as irrecoverable, rose to $11.2 million. The allowance for credit losses, a reserve against potential bad loans, increased to 1.31% of total loans. Non-accrual loans, or loans that are not collecting interest, fell to $62.4 million, signaling some improvement in problem assets.
The company maintained strong capital levels, with its Common Equity Tier 1 ratio at 13.98% and total risk-based capital at 15.88%. These ratios significantly exceed regulatory minimums. In line with its focus on shareholder value, the company declared a $1.00 per share common stock dividend, marking an increase from prior payouts and continuing its long record of reliable dividend growth.
Looking Forward: Management Guidance and Trends
It expects interest income growth for the full year 2025 to be in the range of 5% to 7%, compared to prior guidance of 4% to 6%. Loan balances are projected to grow in the mid- to high-single digits for FY2025. Deposits are expected to increase by 2–3% for the full year 2025, and Non-interest income is projected to grow by 2–3% for the full year 2025. Net charge-offs are estimated to remain at 20–25 basis points of average loans for FY2025, which signals a stable but watchful approach on credit. Operating expenses are expected to post high single-digit growth for FY2025, with technology costs likely to remain elevated into next year.
In a shift from previous expectations, management guidance now factors in four possible interest rate cuts from the Federal Reserve in 2025, rather than two. This assumption is based on the broader forward curve and the desire to remain conservative in planning, rather than any specific economic forecast. The focus remains on organic growth in the core Texas market, ongoing investment in technology, and the search for select acquisition opportunities. The quarterly dividend was raised 5.3% to $1.00 per share.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
