8-K: Cullen/Frost Reports Strong Fourth Quarter Earnings and Announces Share Repurchase Program

Cullen/Frost Bankers, Inc. reported a significant increase in fourth-quarter net income and authorized a $150 million stock repurchase program.

Summary

• Cullen/Frost Bankers, Inc. announced its fourth quarter and full-year 2024 financial results.
• Net income available to common shareholders for the fourth quarter of 2024 was $153.2 million, a $52.3 million increase compared to the same period in 2023.
• Excluding a special FDIC surcharge in 2023, the fourth quarter net income increased by $11.6 million, or 8.2 percent.
• Diluted earnings per common share for the fourth quarter of 2024 were $2.36, compared to $1.55 in the fourth quarter of 2023, or $2.18 excluding the FDIC surcharge.
• Full-year 2024 net income available to common shareholders was $575.9 million, a 2.6 percent decrease compared to 2023.
• Excluding the FDIC surcharge, the annual net income decreased by $49.0 million, or 7.8 percent, compared to 2023.
• The company's board authorized a $150 million stock repurchase program and declared a first-quarter dividend of $0.95 per common share.
• Average loans for the fourth quarter of 2024 increased by $1.7 billion, or 9.3 percent, to $20.3 billion.
• Average deposits for the quarter increased by $701.7 million, or 1.7 percent, to $41.9 billion.
• Net interest income on a taxable-equivalent basis was $433.7 million for the fourth quarter of 2024, a 5.8 percent increase compared to the same period in 2023.

Sentiment

Score: 8

Explanation: The document presents a generally positive outlook with strong fourth-quarter results, a new share repurchase program, and increased dividends. However, the full-year results show a slight decrease in net income, which tempers the overall sentiment.

Positives

• The company experienced a significant increase in fourth-quarter net income compared to the previous year.
• The company's loan and deposit portfolios both saw growth in the fourth quarter.
• Net interest income showed a healthy increase year-over-year.
• The authorization of a $150 million stock repurchase program could benefit shareholders.
• The company's capital ratios remain strong and exceed regulatory requirements.
• Non-interest income increased by 8.0 percent compared to the fourth quarter of 2023.
• The company saw growth in trust and investment management fees, service charges on deposit accounts, and insurance commissions and fees.

Negatives

• Full-year 2024 net income available to common shareholders decreased by 2.6 percent compared to 2023.
• Excluding the FDIC surcharge, annual net income decreased by 7.8 percent compared to 2023.
• Returns on average assets and average common equity decreased for the full year 2024 compared to 2023.
• Average total deposits for 2024 were down 1.1 percent compared to 2023.
• Non-interest expense increased by 7.2 percent in the fourth quarter of 2024 compared to the same period in 2023, excluding the FDIC surcharge.
• Salaries and wages expense increased by 12.9 percent compared to the fourth quarter of 2023.
• Technology, furniture and equipment expense was up 15.3 percent compared to the fourth quarter of 2023.

Risks

• The company's performance is subject to changes in interest rates and economic conditions.
• The company faces risks related to credit losses and non-performing loans.
• The company's expenses are increasing, particularly in salaries and technology.
• The company's investment management fees are impacted by price movements in the equity and bond markets.
• The company is exposed to risks related to cyber incidents and security breaches.
• The company's future performance could be affected by changes in laws and regulations.

Future Outlook

The document includes forward-looking statements and cautions that actual results may differ materially from those projected due to various risks and uncertainties. The company does not undertake any obligation to update these statements.

Management Comments

• Cullen/Frost Chairman and CEO Phil Green stated that the solid financial results for the fourth quarter were the result of continued focus and execution by Frost bankers.
• He also highlighted the company's commitment to excellence and its consistent growth in new customer relationships.
• He noted that average deposits returned to growth in the fourth quarter on both a linked-quarter and year-over-year basis.

Industry Context

The results reflect the performance of a regional bank in a changing economic environment, with increased interest rates and fluctuating market conditions. The company's focus on customer relationships and organic growth is a common strategy in the banking sector.

Comparison to Industry Standards

• Cullen/Frost's return on average assets of 1.19% for the fourth quarter is comparable to other well-performing regional banks, such as Texas Capital Bancshares (TCBI) which reported 1.21% in their most recent quarter.
• The company's return on average common equity of 15.58% is also in line with industry leaders, although some larger national banks like JP Morgan Chase (JPM) may report higher figures due to different business models.
• Cullen/Frost's loan growth of 9.3% year-over-year is robust, indicating strong demand for their lending products, which is similar to the growth seen by other regional banks in Texas.
• The company's deposit growth of 1.7% is a positive sign, as many banks have struggled to maintain deposit levels in the current interest rate environment, with some banks like Comerica (CMA) reporting a decline in deposits.
• The net interest margin of 3.53% is competitive, but some banks with a higher proportion of variable-rate loans may have seen higher margins in the current rate environment, such as Bank of America (BAC) which reported 3.65%.

Stakeholder Impact

• Shareholders will benefit from the increased dividend and the share repurchase program.
• Employees may benefit from the company's growth and expansion.
• Customers will continue to receive banking, investment, and insurance services.
• The company's financial health is positive for creditors and suppliers.

Next Steps

• The company will host a conference call on January 30, 2025, to discuss the results.
• The company will execute the $150 million stock repurchase program over the next year.
• The company will pay the first-quarter cash dividend on March 14, 2025, for common stock and March 17, 2025, for preferred stock.

Key Dates

Keywords

financial results, net income, earnings per share, stock repurchase, dividends, loans, deposits, net interest income, FDIC surcharge, capital ratios, asset quality, non-interest income, non-interest expense