Cullen/Frost's Q1 2025 Earnings: Navigating Contradictions in Loan Growth and Deposit Strategies

Commercial loan growth and CRE payoffs, deposit beta expectations, deposit strategy and rate adjustments are the key contradictions discussed in Cullen/Frost Bankers' latest 2025Q1 earnings call.



Financial Performance and Loan Growth:
- Cullent/Frost Bankers Inc. earned $149.3 million or $2.30 a share for Q1 2025, compared to $134 million or $2.06 a share in the same quarter last year.
- Average loans grew 8.8% compared to Q1 2024, reaching $20.8 billion.
- The growth in earnings and loans was driven by successful organic expansion strategies and customer experience excellence.

Deposit Expansion and Margin Improvement:
- Average deposits increased by 2.3% to $41.7 billion compared to $40.7 billion in Q1 2024.
- The net interest margin percentage increased by 7 basis points to 3.60% from 3.53% last quarter.
- This improvement was attributed to higher volumes of higher-yielding taxable securities and lower cost of interest-bearing deposits.

Insurance and Noninterest Income:
- Insurance commissions and fees rose by $6.8 million, with a year-over-year increase of 15%.
- This growth is due to better alignment between commercial banking and insurance groups, leading to increased market share.

Capital Management and Dividend Strategy:
- The company increased its dividend in Q1, indicating a focus on shareholder returns.
- The dividend increase is part of an ongoing strategy to prioritize capital management and dividend increases rather than share buybacks.