Cullen/Frost Bankers (CFR) Q3 2024 earnings summary

Executive summary

• Net income available to common shareholders for Q3 2024 was $144.8 million ($2.24 per share), down from $154.0 million ($2.38 per share) in Q3 2023, a 5.9% decrease year-over-year; nine-month net income was $422.7 million ($6.51 per share), down 13.8% year-over-year.

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

• Return on average assets for Q3 2024 was 1.16%; return on average common equity was 15.48%, both lower than the prior year.

• Average assets for the nine months ended September 30, 2024, were $49.2 billion, a 1.2% decrease from the prior year period.

• Organic growth strategy and market expansions in Houston, Dallas, and Austin are driving strong deposit and loan growth.

Financial highlights

• Net interest income for Q3 2024 was $425.2 million (taxable-equivalent), up 4.4% year-over-year; non-interest income was $113.7 million, up 7.3% year-over-year.

• Non-interest expense for Q3 2024 was $323.4 million, up 10.3% year-over-year, mainly due to higher salaries, benefits, and technology costs.

• Credit loss expense for Q3 2024 was $19.4 million, with net charge-offs of $9.6 million (19 bps of loans); allowance for credit losses on loans was $263.1 million (1.31% of total loans) at September 30, 2024.

• Average deposits were $40.7 billion, nearly flat year-over-year, while average loans grew 11.8% to $20.1 billion.

• Consumer checking household growth was 6% year-over-year, with over 7,300 net new checking households added in the quarter.

Outlook and guidance

• Full-year 2024 guidance assumes two 25 bps Fed rate cuts in November and December; net interest income expected to grow 2%-3% for the year.

• Full-year average loan growth projected in low double digits, above previous guidance; average deposits expected to decline 1%-2%.

• Non-interest income growth projected at 4%-5%; non-interest expense growth at 6%-6.5%.

• Net charge-offs expected at 18-22 bps of average loans for the year.

• Management expects continued pressure on net interest margin from deposit competition and market rates, but core deposit base is expected to support net interest income.