• Fourth Quarter Earnings: $153.2 million or $2.36 per share, compared to $100.9 million or $1.55 per share in the same quarter last year.
• Full Year 2024 Net Income: $575.9 million, compared to $591.3 million in 2023.
• Full Year 2024 Earnings Per Share: $8.87, compared to $9.10 in 2023.
• Return on Average Assets (Q4): 1.19%, compared to 0.82% last year.
• Return on Average Common Equity (Q4): 15.58%, compared to 13.51% last year.
• Average Deposits (Q4): $41.9 billion, up from $41.2 billion last year.
• Average Loans (Q4): $20.3 billion, a 9% increase from $18.6 billion last year.
• Consumer Loan Growth: $610 million increase in average outstanding balances, a 21% annual growth rate.
• Consumer Deposits Growth: 3.2% for the year, 51% higher than 2019 pre-COVID balances.
• Commercial Loan Growth: $1.3 billion or 8.3% year-over-year.
• Net Interest Margin (Q4): 3.53%, down 3 basis points from the previous quarter.
• Nonperforming Assets (Q4): $93 million, compared to $106 million last quarter and $62 million last year.
• Net Charge-offs (Q4): $14 million, compared to $9.6 million last quarter and $10.9 million a year ago.
• Investment Portfolio Average (Q4): $18.6 billion, down $257 million from the prior quarter.
• Average Total Deposits (Q4): $41.9 billion, up $1.2 billion from the previous quarter.
• Cost of Interest-bearing Deposits (Q4): 2.14%, down 27 basis points from the third quarter.

• Warning! GuruFocus has detected 6 Warning Sign with BOOT.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Cullen/Frost Bankers Inc (NYSE:CFR) reported a significant increase in fourth-quarter earnings, with $153.2 million or $2.36 per share, compared to $100.9 million or $1.55 per share in the same quarter last year.
• The company achieved a 9% growth in average loans, reaching $20.3 billion in the fourth quarter compared to $18.6 billion in the previous year.
• Cullen/Frost Bankers Inc (NYSE:CFR) continues to expand its footprint, with plans to open its 200th location by mid-2025, contributing to $2.4 billion in deposits and $1.8 billion in loans.
• The bank's consumer business saw record growth, with a $610 million increase in average outstanding balances for consumer loans, representing a 21% annual growth rate.
• The company's return on average assets and average common equity improved to 1.19% and 15.58%, respectively, compared to 0.82% and 13.51% in the same period last year.

Negative Points

• Full-year 2024 earnings per share decreased to $8.87 from $9.10 in 2023, indicating a slight decline in profitability.
• The net interest margin percentage decreased by 3 basis points to 3.53% from the previous quarter, impacted by lower rates on balances held at the Fed.
• Nonperforming assets increased to $93 million at the end of the fourth quarter, up from $62 million in the fourth quarter of 2023.
• Total problem loans rose to $943 million at the end of the fourth quarter, compared to $839 million at the end of the third quarter.
• The company anticipates high single-digit growth in noninterest expenses for 2025, driven by continued investments in technology and expansion, which may pressure profitability.

Q & A Highlights

Q: The guidance for mid- to high single-digit loan growth implies a slowdown from last year. Is there any conservatism in this guidance, or is it due to growing off a higher base? A: Phillip Green, CEO: We expect good consumer loan growth to continue, particularly in C&I. The slowdown might occur in CRE due to fewer new deals, especially in multifamily and office spaces. The growth we've seen recently is from deals initiated years ago, and we expect some headwinds in CRE, potentially leading to low single-digit growth in that area.

Q: With loan growth potentially outpacing deposit growth, do you expect the investment portfolio to remain flat, or will you be a net purchaser of securities in 2025? A: Phillip Green, CEO: We plan to invest some of our liquidity in the first quarter, with about $4 billion in securities purchases planned for 2025, utilizing around half of that in the first quarter. This strategy leverages our liquidity to support loan growth and take advantage of the current yield curve.

Q: Regarding deposit betas, do you see the current beta stabilizing, or could you outperform on deposit costs as growth picks up? A: Phillip Green, CEO: We expect the deposit beta to remain around 45% on a cumulative basis. We will continue to listen to customers and competition to adjust pricing as needed, but we feel good about our current position.

Q: Can you provide more color on the expense growth guidance for 2025, particularly with the branch build-out and technology investments? A: Dan Geddes, CFO: We're investing in technology, compliance, cybersecurity, and expansion. While we've done much of the heavy lifting in terms of people and infrastructure, we expect expense growth to moderate over time. We're mindful of expenses and aim to balance growth with financial prudence.

Q: What are your thoughts on the capital strategies going forward, particularly regarding share buybacks and preferred securities? A: Phillip Green, CEO: Our focus is on maintaining a strong dividend and supporting growth. The share buyback is opportunistic, and while we haven't discussed retiring preferred securities, we'll consider it. Our priority remains organic growth and maintaining financial stability.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.