Executive Summary

EPS of $2.67 materially beat consensus $2.38; total revenue of $560.5M was slightly below consensus $563.7M, yielding a mixed headline with a clear EPS beat driven by stronger NII, fee growth, and lower credit losses . EPS and revenue consensus from S&P Global: $2.3845 EPS, $563.748M revenue; actuals $2.67 and $560.486M*.
Net interest margin expanded to 3.69% (up 2 bps QoQ; +13 bps YoY) on mix shift into higher-yielding balances and municipals, while credit metrics improved (non-accrual loans fell to $44.8M and annualized NCOs to 12 bps) .
Management raised FY25 guidance for NII growth (7–8% from 6–7%) and non-interest income (6.5–7.5% from 3.5–4.5%); loans and deposits growth expectations maintained/slightly higher; NCO guidance improved to 15–20 bps (from 20–25 bps) .
Strategic expansion reached accretion (approx $0.09 EPS in Q3) with Houston 1.0 contributing $0.14; buybacks of ~$69.3M (549k shares) signal capital deployment flexibility amid robust CET1 of 14.14% .
Dividend maintained at $1.00 per share for Q4; potential stock catalysts include sustained EPS accretion from expansion, fee income durability, and clearer deposit momentum into 2026 offset by competitive pricing and rate-cut headwinds to NIM .

What Went Well and What Went Wrong

What Went Well

EPS beat and margin expansion: Diluted EPS $2.67 vs $2.24 YoY; NIM rose to 3.69% on favorable asset mix and municipal purchases at attractive TE yields (4.6%); tax-equivalent NII up 9.1% YoY .
Fee growth breadth: Non-interest income grew 10.5% YoY to $125.6M with strength in trust & investment (up 9.3%) and service charges (up 14.7%); public finance underwriting supported “other” line items .
Credit normalization: Non-accrual loans declined to $44.8M (0.21% of loans), and annualized NCOs fell to 12 bps; problem loans (RG10+) down by $169M QoQ, with resolutions in multifamily credits as telegraphed last quarter .

Management quotes:

“We remained as laser-focused as ever on pursuing our strategy of opening new locations… and continuing to deliver top-quality digital banking tools” — Phil Green, Chairman & CEO .
“Expansion locations delivered $0.09 of EPS accretion… Houston 1.0 generating $0.14 per share” — Dan Geddes, CFO .
“Credit has been very solid… lowest [non-performers] I may have ever seen” — Phil Green .

What Went Wrong

Revenue versus consensus: Total revenue $560.5M slightly missed consensus $563.7M*, despite strong NII and fees; mix shifts and timing (insurance seasonality; underwriting pull-forward) impacted fee trajectory into Q4 *.
Expense growth still elevated: Non-interest expense up 9.0% YoY to $352.5M, driven by wages, benefits (+18.6%), and technology/cloud services (+15.1%); management targets a glide path toward mid-single-digit growth over 2026–2027 .
Competitive pressure: Increased pricing and structural competition in lending; CRE paydowns remain a headwind even as pipeline improved 20% QoQ, requiring continued discipline on terms .

Financial Results

Metric	Q3 2024	Q2 2025	Q3 2025
Diluted EPS ($)	$2.24	$2.39	$2.67
Total Revenue ($MM)	$540.1*	$559.2*	$560.5*
Net Interest Income (GAAP, $MM)	$404.3	$429.6	$441.6
Net Interest Income (TE, $MM)	$425.2	$450.6	$463.7
Non-Interest Income ($MM)	$113.7	$117.3	$125.6
Net Interest Margin (%)	3.56%	3.67%	3.69%
Net Income ($MM)	$146.5	$157.0	$174.4
ROA (%)	1.16%	1.22%	1.32%
ROE (%)	15.48%	15.64%	16.72%

Notes: Total Revenue reflects S&P Global standardized revenue; values marked with * are from S&P Global; Values retrieved from S&P Global.

Segment/mix (key banking lines):

Revenue Mix	Q3 2024	Q2 2025	Q3 2025
Net Interest Income (GAAP, $MM)	$404.3	$429.6	$441.6
Non-Interest Income ($MM)	$113.7	$117.3	$125.6

KPIs and Balance/Credit:

KPI	Q3 2024	Q2 2025	Q3 2025
Average Loans ($B)	$20.08	$21.06	$21.45
Average Deposits ($B)	$40.73	$41.76	$42.07
Non-Accrual Loans ($MM)	$104.9	$62.4	$44.8
Net Charge-Offs ($MM)	$9.64	$11.15	$6.59
NCOs (Annualized, % of Avg Loans)	0.19%	0.21%	0.12%
ACL on Loans ($MM)	$263.1	$277.8	$280.2
ACL (% of Loans)	1.31%	1.31%	1.31%
CET1 Ratio (%)	13.55%	13.98%	14.14%

Vs Estimates (Q3 2025):

Metric	Consensus	Actual	Surprise
EPS ($)	2.38*	2.67	+12% — bold beat
Revenue ($MM)	563.7*	560.5*	-0.6% — slight miss

Notes: Values marked with * are from S&P Global; Values retrieved from S&P Global.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Interest Income Growth	FY 2025	6–7%	7–8%	Raised
Net Interest Margin (vs 2024 3.53%)	FY 2025	+12–15 bps	+12–15 bps	Maintained
Avg Loan Growth	FY 2025	Mid-to-high single digits	6.5–7.5%	Maintained (inline)
Avg Deposits Growth	FY 2025	2–3%	2.5–3.5%	Slightly Raised
Non-Interest Income Growth	FY 2025	3.5–4.5%	6.5–7.5%	Raised
Non-Interest Expense Growth	FY 2025	High single digits	8–9%	Maintained (clarified)
Net Charge-Offs	FY 2025	20–25 bps	15–20 bps	Improved
Effective Tax Rate	FY 2025	16–17%	16–17%	Maintained
Dividend	Q4 2025	—	$1.00 per share declared	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 2025, Q2 2025)	Current Period (Q3 2025)	Trend
NIM trajectory and rate cuts	Q1: Expect +12–15 bps NIM YoY; bond reinvestments and deposit cost relief; 4 cuts in initial outlook . Q2: NIM +7 bps QoQ to 3.67%; guidance steady; sensitivity to curve; fewer cuts modestly positive .	NIM 3.69%; two cuts (Oct, Dec) expected; back-book repricing and Treasuries maturing support resilience .	Improving but rate-cut headwind manageable
Deposit growth and mix	Q1: Seasonal DDA softness; outlook for back-half rebound . Q2: Deposit flows stronger in back half; mix-driven NIM sensitivity .	Seasonal strength beginning; average deposits +0.7% QoQ; potential acceleration in 2026 from off-balance money market flows .	Improving
Expansion strategy accretion	Q1/Q2: Near breakeven; accretive in 2026 .	Q3: Accretive with ~$0.09 EPS; Houston 1.0 $0.14; Dallas/Houston 2.0 near breakeven; Austin negative $0.04 .	Accelerating accretion
Credit quality (CRE, multifamily)	Q1: RG10 migration expected; payoffs; private credit bridge . Q2: RG10 at $989M; resolutions anticipated .	RG10 down $169M QoQ; non-accruals down; NCOs 12 bps; multifamily resolutions progressing .	Improving
Competition and M&A	Q2: Pricing/structure competition rising; no M&A focus; organic preferred .	Q3: Competition modestly higher; acquisitions create disruption opportunity; focus vs large money-center banks .	Stable competitive backdrop
Technology investment	Q1: Generational investments peaking; tech costs rising .	Q3: Tech/furniture/equipment expense +15.1% YoY, cloud services +$3.5M .	Elevated but manageable

Management Commentary

Strategic positioning: “We are well-positioned to continue to deliver above-market organic growth in any interest rate environment.” — Phil Green .
Expansion accretion: “Expansion locations delivered $0.09 of EPS accretion… Houston 1.0 generating $0.14 per share” — Dan Geddes .
NIM outlook: “You could see the NIM stay relatively where it’s at… driven by deposit volumes and back-book repricing; Treasuries coming due in November will help” — Dan Geddes .
Credit stance: “Credit has been very solid… the lowest [non-performers] I may have ever seen” — Phil Green .
Capital deployment: “We utilized $69.3M of our $150M approved share repurchase plan… no signal whatsoever… we’re generating significant capital” — Phil Green .

Q&A Highlights

NIM vs rate cuts: Management expects Q4 NIM to be relatively stable despite two cuts, supported by back-book repricing and maturities; in 2026, ~$2.5B of maturities at ~3.60% yield present reinvestment upside unless steep cuts occur .
Expense glide path: Focus on moderating growth toward mid-single digits into 2026–2027; expansion run-rate now embedded; scale dilutes growth rate over time .
Competition/M&A: Price competition up modestly; structural discipline maintained. Acquisitions by others create dislocation that CFR seeks to exploit; CFR remains committed to organic growth within Texas .
Fee income cadence: Q4 fees expected lighter on insurance seasonality and public finance underwriting pull-forward in Q3; broader trajectory positive with new customer growth .
Credit clarifications: Detailed NDFI exposure (~$860M; ~4% of loans) skewed to subscription lines/family offices; consumer credit intermediaries small ($74M) and performing; energy hedging robust; stress threshold in $40s/barrel manageable .

Estimates Context

EPS beat: $2.67 actual vs $2.3845 consensus; 14 EPS estimates. Revenue slight miss: $560.486M actual vs $563.748M consensus; 9 revenue estimates*.
Implications: Street likely revises FY25 EPS upward on NII and fee guidance upgrades; revenue mix and Q4 fee seasonality may temper near-term revenue revisions. NCO guidance improvement supports lower credit cost assumptions *.
Notes: Values marked with * are from S&P Global; Values retrieved from S&P Global.

Key Takeaways for Investors

EPS strength is durable as expansion turns accretive and NIM benefits from reinvestment; watch Q4 NIM stability vs deposit volume dynamics and December rate cut .
Fee momentum broad-based but expect Q4 seasonal dip; underlying customer growth should support 2026 fee trajectory .
Credit normalization continues; lower NCO guidance (15–20 bps) and shrinking non-accruals reduce tail risks; multifamily resolutions proceeding as planned .
Capital flexibility intact: CET1 14.14% and buybacks (~$69.3M) provide leverage to smooth EPS; dividend at $1.00 sustained .
Competitive pricing requires vigilance on loan terms; management prioritizes structure discipline, leveraging low funding costs to defend price without compromising risk .
Medium-term thesis: Expansion-driven EPS accretion accelerates in 2026–2027, with deposits likely to nudge higher as off-balance money market funds reintermediate in lower-rate scenarios .
Trading setup: Near-term continuation of EPS outperformance vs consensus amid guidance raises; monitor Q4 fee seasonality and NIM resilience through cuts; any further buyback activity could be supportive .

CULLEN/FROST BANKERS, INC. (CFR)·Q3 2025 Earnings Summary