Cullen/Frost Bankers (NYSE:CFR) reported higher earnings in the first quarter of 2026, driven by loan growth, improved net interest margin and continued momentum in its organic branch expansion strategy, executives said during the company’s quarterly earnings call.
First-quarter results and balance sheet growth
Chairman and CEO Phil Green said Cullen/Frost earned $169.3 million in the first quarter of 2026, up 13.4% from $149.3 million in the first quarter of 2025. Earnings per share were $2.65, an increase of 15.2% from $2.30 a year earlier.
Average deposits totaled $42.2 billion, up from $41.7 billion in the same quarter last year, while average loans rose to $22.0 billion from $20.8 billion, Green said.
Consumer banking trends and customer satisfaction
Green highlighted consumer banking growth and the company’s continued customer satisfaction recognition. He said Frost’s consumer bank earned the J.D. Power Award for customer satisfaction in consumer banking in Texas for the 17th consecutive year, adding that the consistency reflects cultural strength even as the company has expanded its footprint in major Texas metro areas.
On growth metrics, Green said consumer checking households increased 5.3% year over year and consumer loan balances increased 19%. Consumer loan growth totaled $154 million in the first quarter, which he said was “nearly double” first-quarter 2025 growth.
Mortgage lending was a key driver, with mortgage products growing $124 million during the quarter to $719 million in total outstanding balances, Green said.
Discussing deposits, Green said that after adjusting for the loss of balances from “one extremely large account” in the fourth quarter tied to estate administration activity, consumer checking and savings balances increased 3% and 2%, respectively, on a linked-quarter basis.
Commercial activity and loan pipeline
Green said the commercial segment “continued to perform well,” pointing to new relationship wins and pipeline activity. He said the first quarter marked the fourth consecutive quarter of generating more than 1,000 new relationships, with 1,016 new relationships representing the company’s highest first-quarter performance on record.
Green attributed 46% of new relationships to wins from “too big to fail” banks and said 8% came from “disruption,” such as organizations going through an acquisition.
On lending opportunities, Green said the gross loan pipeline of new opportunities reached $6.8 billion, a 55% increase from the prior quarter and an all-time high. The company’s 90-day weighted pipeline increased 38% from the prior quarter to nearly $2 billion, which he said was also a record.
Credit quality and problem loans
Green said overall credit quality remained “good by historical standards.” Non-performing assets ended the quarter at $73 million, compared with $72 million in the fourth quarter and $85 million a year earlier. He said that figure represented 33 basis points of period-end loans and 14 basis points of total assets, both unchanged from the prior quarter.
Net charge-offs were $5.8 million in the first quarter, matching the fourth quarter and down from $9.7 million a year ago, Green said. Annualized net charge-offs were 11 basis points of average loans, flat sequentially and lower than 19 basis points a year earlier.
Total problem loans—defined as risk grade 10 or higher (OAEM)—totaled $989 million at quarter-end, up from $857 million last quarter and $889 million a year ago. Green said the entire net increase was attributable to loans in the risk grade 10 category and added that the company expects “some large resolutions” in the second and third quarters.
Branch expansion, margin improvement and portfolio activity
CFO Dan Geddes provided additional detail on the company’s branch expansion strategy, noting that performance reporting will now include eight branches opened outside the previously highlighted expansion regions of Houston, Dallas and Austin.
Geddes said branch expansion contributed $0.14, or 5.6%, of earnings-per-share accretion in the quarter. Year over year, expansion-branch average loans grew 33% and represented 12.7% of total loans, up from 10.1% a year ago, while average deposits grew 21% and represented 8.3% of total deposits, up from 7% in the prior-year period.
He said the expansion branches have grown to $2.9 billion in loans and $3.6 billion in deposits and have added about 95,000 new households. The company opened two new locations in the first quarter—one in Austin and one in Dallas—and plans to open an additional 10 to 12 branches over the remainder of 2026, according to Geddes.
On profitability drivers, Geddes said net interest margin was 3.74% in the first quarter, up 8 basis points from 3.66% in the fourth quarter. He attributed part of the margin improvement to lower interest-bearing deposits and repos, which reduced net interest income but improved margin due to a lower relative spread to overnight rates.
In the investment portfolio, Geddes said the portfolio averaged $19.9 billion, flat with the prior quarter. Purchases totaled $2.3 billion, including:
- $1.23 billion of Treasuries yielding 3.66%
- $618 million of agency MBS yielding 5.09%
- $423 million of municipals yielding 5.71% on a tax-equivalent basis
Maturities included $400 million of Treasuries yielding 3.44%, $540 million of municipals yielding 3.53% on a tax-equivalent basis, and $430 million of agency MBS paydowns, Geddes said.
The net unrealized loss on the available-for-sale portfolio increased to $1.15 billion at quarter-end from $1.04 billion the prior quarter. The tax-equivalent yield on the total investment portfolio was 3.85%, up 3 basis points sequentially, he said. Geddes also said the tax-exempt municipal portfolio averaged $7.1 billion, with a tax-equivalent yield of 4.73%, up 9 basis points, and that about 69% of the municipal portfolio was pre-refunded or PSF insured at quarter-end.
On funding, Geddes said average total deposits fell $1.1 billion from the fourth quarter to $42.2 billion due to seasonal factors, with the decline about 30% non-interest-bearing and 70% interest-bearing. The cost of interest-bearing deposits was 1.55%, down from 1.75% in the first quarter. Customer repos averaged $4.2 billion, down $426 million from the fourth quarter, and carried a cost of 2.70%, down 17 basis points, he said.
Geddes also pointed to seasonal and one-time items affecting non-interest income and expenses versus the prior quarter. Insurance commissions and fees increased $6.9 million, which he said reflects typical first-quarter seasonality. Other income declined $4 million after the company received an annual Visa volume bonus of $5.4 million in the fourth quarter.
On expenses, salaries and wages decreased $16.3 million from the linked quarter. Geddes said the fourth quarter included about $4.2 million in one-time expenses tied to a payroll transition from bi-monthly to bi-weekly, as well as $7.2 million in higher stock compensation related to stock awards granted in October, some of which required immediate expense recognition. FDIC deposit expense rose $8.6 million from the prior quarter after the company reversed $8.4 million of a special FDIC insurance accrual in the fourth quarter, he said.
Turning to guidance assumptions, Geddes said the company’s full-year 2026 outlook includes a 125 basis point cut to the Fed funds rate in the fourth quarter. His prepared remarks on net interest guidance were cut off in the provided transcript.
About Cullen/Frost Bankers (NYSE:CFR)
Cullen/Frost Bankers, Inc is the holding company for Frost Bank, a Texas-chartered financial institution whose origins date back to 1868 in San Antonio. As one of the oldest banking organizations in the state, it offers a broad range of services to individuals, small and large businesses, and institutional clients. Core banking activities include commercial lending, deposit services, cash management and trade finance, while consumer products cover residential mortgages, personal lines of credit and home equity loans.
Beyond traditional banking, the company provides comprehensive treasury and equipment leasing solutions tailored to support working capital and capital expenditure requirements.
