Cullen/Frost Bankers Beats Expectations in Q4 2025, Eyes Growth Amid Rate Uncertainty

This analysis is based on the Q4 2025 earnings call and financial reports. The original article first appeared on GuruFocus.

DALLAS, TX – Cullen/Frost Bankers, Inc. (NYSE: CFR), the financial holding company for Frost Bank, closed its 2025 fiscal year on a high note, reporting robust growth in net income and earnings per share. The results, released January 29, 2026, highlight the Texas-based bank's resilience in a competitive market marked by potential Federal Reserve rate cuts and new entrants vying for market share.

During the earnings call, executives provided detailed guidance for the coming year. A key focus was credit quality, where the bank reported adding a $10 million specific reserve for a shared national credit but emphasized no charge-offs, with the borrower in the process of liquidation. On the deposit front, management expects growth to remain competitive with a deposit beta—a measure of how funding costs respond to rate changes—holding steady around 43%. Loan growth is forecasted to accelerate in the latter half of 2026, following an expected $255 million in multi-family loan payoffs in the first two quarters.

Strategic investments are also poised to bear fruit. The company's branch expansion initiative is projected to contribute between $0.35 and $0.45 to full-year 2026 EPS, though quarterly impacts may vary. Leadership expressed confidence in navigating price competition from new market players, citing Frost Bank's low-cost structure and service-oriented model as key differentiators.

Analyst and Investor Perspectives:

• Michael Thorne, Portfolio Manager at Lone Star Capital: "Frost's discipline is showing. The controlled approach to credit reserves and clear payoff expectations for multi-family loans suggest they're proactively managing risk, not just reacting to it. The EPS guidance from branch expansion is a tangible, near-term catalyst."
• Sarah Chen, Banking Analyst at Clearwater Research: "The outlook is pragmatic but reveals underlying pressure. A 43% deposit beta in a potential cutting cycle is ambitious. They're betting heavily on service to retain deposits when yields elsewhere may look more attractive. Execution in the second half will be critical."
• David R. Miller, Independent Investor: "Another quarter of optimistic jargon. 'Working through liquidation' and 'confident in our service' doesn't address the core issue: margins are getting squeezed from all sides. That $10 million reserve is a quiet admission of stress they don't want to highlight. I'm not convinced."
• Rebecca Hayes, Small Business Owner & Frost Client: "As a customer, the branch expansion news is great. More locations mean better access. Their focus on service over just price is why I've stayed with them, even if my savings rate isn't always the absolute highest."

For the complete details, please refer to the official earnings call transcript and SEC filings from Cullen/Frost Bankers, Inc.