Cullen/Frost Bankers (CFR) Q2 2024 earnings summary

Executive summary

• Net income for Q2 2024 was $143.8 million ($2.21 per share), down from $160.4 million ($2.47 per share) year-over-year, with six-month net income at $277.9 million ($4.27 per share), down 17.4% year-over-year.

• Decline in net income was driven by higher non-interest and credit loss expenses, partially offset by higher net interest and non-interest income.

• Board increased the quarterly common dividend by 3.3% to $0.95 per share, payable September 13, 2024.

• Expansion efforts in Houston, Dallas, and Austin exceeded goals, with 58 new branches added in five years.

• Leadership transition announced: Jerry Salinas retiring as CFO, to be succeeded by Dan Geddes.

Financial highlights

• Net interest income for Q2 2024 was $417.6 million (taxable-equivalent), up 2.2% year-over-year; net interest margin rose to 3.54% from 3.45%.

• Non-interest income for Q2 2024 was $111.2 million, up 7.4% year-over-year, led by trust/investment management fees and service charges.

• Non-interest expense increased 11.2% year-over-year to $317.0 million, mainly due to higher salaries, deposit insurance, and technology costs.

• Credit loss expense for Q2 2024 was $15.8 million, with net loan charge-offs of $9.7 million.

• Average loans for Q2 2024 grew 11.3% year-over-year to $19.7 billion; average deposits declined 1.2% to $40.5 billion.

Outlook and guidance

• Full-year average loan growth expected in high single to low double digits, higher than previous guidance.

• Full-year average deposits now expected to be flat to down 2%, revised from prior flat to 2% growth.

• Net interest income growth projected at 2%-3%, down from 2%-4% prior guidance.

• Net interest margin expected to trend slightly upward each quarter.

• Management expects continued pressure on net interest income from deposit mix shifts and higher funding costs.