Cullen/Frost Bankers, Inc.

Cullen/Frost reported Q2 2026 earnings of $170 million, up 9.7% from $155 million a year ago, and EPS of $2.70, up 13% from $2.39. Return on average assets was 1.31% and return on average common equity was 15.41%. Average deposits were $42.6 billion versus $41.8 billion a year ago, and average loans were $22.6 billion versus $21.1 billion a year ago. Net interest margin was 3.75%, up from 3.74% in Q1. Net charge-offs were $9.5 million, or 17 basis points annualized of average loans, versus $5.7 million in Q1 and $11.1 million a year ago. For full-year 2026, management expects net interest income growth of 4.75% to 5.25%, net interest margin improvement of about 10 to 13 basis points versus 2025's 3.66%, average loan growth of 7% to 8%, average deposit growth of 2% to 3%, noninterest income growth of 7.5% to 8.5%, noninterest expense growth of 4.5% to 5%, net charge-offs of 15 to 20 basis points of average loans, and an effective tax rate of 15.5% to 16%.

Phillip Green emphasized that Cullen/Frost's organic expansion strategy is still working, pointing to accelerating consumer household growth, strong loan demand, and a record commercial pipeline. He framed the bank as competing hard but not loosening credit standards, saying the team is winning business on price where appropriate but walking away from structures it views as too aggressive. His tone was confident and upbeat, especially on consumer growth, market disruption creating opportunities, and the long runway for cross-selling into wealth and insurance.

Daniel Geddes focused on margin, funding, and guidance, noting a 3.75% NIM, a 46% beta on interest-bearing deposits that he expects to drift to the low-40% range, and a June total deposit cost of 1.11% with interest-bearing deposit cost at 1.66%. He said branch expansion contributed $0.16 of EPS accretion in Q2 and $0.30 year to date, and that the company used $90 million of its $300 million buyback authorization to repurchase about 655,000 shares. He also walked through portfolio actions, including $2.2 billion of investment purchases in the quarter, a $1.15 billion unrealized loss on AFS securities, and a plan to increase securities purchases by about $750 million with about $1 billion left to spend in the back half of the year.

Analysts focused heavily on the improved guidance, deposit beta, loan pricing competition, and whether the recent rise in nonperforming assets signaled a credit turn. Management said rate competition is heating up, especially in CRE and in large deposit accounts, but that Frost is staying disciplined on structure while still pricing competitively. On credit, management said the main new nonperformer was a $55 million multifamily loan in Austin with a small reserve of about $1.5 million, and they did not expect a bank-level issue; they also said reserves look steady, with only modest variation possible in the back half of the year.