Cullen/Frost Q3 earnings rise to $2.84 a share
The $300.0 million repurchase program had $175.0 million of purchases during the nine months and expires January 27, 2027.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Form Type
10-Q
Cullen/Frost Bankers, Inc. reported third-quarter net income of $180.2 million, compared with $174.4 million a year earlier, and diluted earnings per share of $2.84 versus $2.67. Net interest income for the quarter was $467.9 million, compared with $441.6 million.
For the nine months ended September 30, 2026, net income was $523.3 million, compared with $482.3 million for 2025. The quarter included $752.5 million of after-tax other comprehensive loss and a $960.3 million pretax change in net unrealized losses on available-for-sale securities. Cullen/Frost attributed the unrealized losses to increased market interest rates and said it did not intend to sell securities in the loss-position table.
At September 30, 2026, total assets were $54.5 billion and deposits were $44.2 billion, versus $53.0 billion and $42.9 billion, respectively, at December 31, 2025. Under its $300.0 million 2026 repurchase program, Cullen/Frost repurchased 1,255,408 shares for $175.0 million during the nine months, excluding applicable excise taxes. The program expires January 27, 2027. Cullen/Frost's Common Equity Tier 1 ratio was 13.76%.
1 point · 0 major1 major · 1 point
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointNine-month net income was $523.3 million, versus $482.3 million in 2025.
Negative
- Major pointAvailable-for-sale securities drove a $752.5 million quarterly after-tax OCI loss. 7.7% of market cap
Filing Explained
Reported shareholders’ equity fell during the quarter, while Cullen/Frost’s CET1 ratio was above its stated minimum-plus-buffer requirement.
For the three months ended
The filing says capital levels exceeded all capital adequacy requirements; Cullen/Frost’s CET1 ratio was
Key Figures
Net income: $523.3 million
Net income: $180.2 million
Diluted earnings per common share: $2.84
+5 more
8 metrics
Net income
$523.3 million
Nine months ended September 30, 2026; $482.3 million in 2025
Net income
$180.2 million
Three months ended September 30, 2026; $174.4 million in 2025
Diluted earnings per common share
$2.84
Three months ended September 30, 2026; $2.67 in 2025
Net interest income
$467.9 million
Three months ended September 30, 2026; $441.6 million in 2025
Total assets
$54.5 billion
September 30, 2026; $53.0 billion at December 31, 2025
Total deposits
$44.2 billion
September 30, 2026; $42.9 billion at December 31, 2025
Repurchases under the 2026 Repurchase Plan
1,255,408 shares; $175.0 million total cost
Nine months ended September 30, 2026; cost excludes applicable excise taxes
Common Equity Tier 1 ratio
13.76%
Cullen/Frost, September 30, 2026
Key Terms
Common Equity Tier 1, Allowance for credit losses, Accumulated other comprehensive income (loss), forward-starting, pay-fixed, receive-variable interest rate swap, +1 more
5 terms
Common Equity Tier 1 financial
"Cullen/Frost’s Common Equity Tier 1 capital (“CET1”)"
Common Equity Tier 1 is the highest-quality capital a bank holds—mainly common shares and retained profits—that acts as the primary cushion against losses. Investors use the CET1 level and ratio to judge a bank’s financial strength and regulatory standing: a bigger cushion means the bank is better able to absorb shocks, sustain payouts and borrow cheaply, much like an emergency fund for a household.
Allowance for credit losses financial
"Allowance for credit losses on loans"
Allowance for credit losses is a reserve set aside by a financial institution to cover potential losses from borrowers who may not repay their loans. It acts like a safety net, helping the institution prepare for loans that might turn sour. For investors, it signals how cautious the institution is about the quality of its loans and potential risks to its financial health.
Accumulated other comprehensive income (loss) financial
"Accumulated other comprehensive income (loss), net of tax"
A balance-sheet line that tracks certain gains and losses that haven’t flowed through the company’s profit-and-loss statement, such as unrealized changes in the value of investments, foreign-currency adjustments, and some pension-related items. Think of it like a storage closet for value swings the company hasn’t ‘realized’ by selling or settling them yet; it changes shareholders’ equity and helps investors see hidden volatility or potential future impacts on book value.
forward-starting, pay-fixed, receive-variable interest rate swap financial
"a forward-starting, pay-fixed, receive-variable interest rate swap"
portfolio layer method financial
"as a fair value hedge under the portfolio layer method of ASC 815"
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much did CFR earn in the first nine months of 2026?
Cullen/Frost reported net income of $523.3 million for the nine months ended September 30, 2026, compared with $482.3 million for the same period in 2025. Third-quarter net income was $180.2 million, versus $174.4 million.
How many shares did CFR repurchase in 2026?
During the nine months ended September 30, 2026, Cullen/Frost repurchased 1,255,408 shares for $175.0 million under its 2026 Repurchase Plan, excluding applicable excise taxes. It also repurchased 11,390 shares for $1.6 million in connection with share-award vesting; those purchases were not associated with a publicly announced plan.
What was CFR's Common Equity Tier 1 ratio?
As of September 30, 2026, Cullen/Frost's Common Equity Tier 1 ratio was 13.76%, and Frost Bank's ratio was 14.12%. The minimum capital ratio plus the capital conservation buffer shown for both was 7.00%.
What common-stock dividend did CFR report for the third quarter?
Cullen/Frost reported cash dividends on common stock of $1.03 per share for the three months ended September 30, 2026. For the nine months ended September 30, 2026, the reported common-stock dividend was $3.06 per share.
AI-generated analysis. How Rhea-AI works. Not financial advice.
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United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
For the quarterly period ended: September 30, 2026
Or
For the transition period from ________________ to ________________
Commission file number: 001-13221
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
| (Address of principal executive offices) | (Zip code) | |||||||||||||
| (Registrant's telephone number, including area code) | |||||||||||
| N/A | |||||||||||||||||
| (Former name, former address and former fiscal year, if changed since last report | |||||||||||||||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ | Accelerated filer | ☐ | ||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 27, 2026, there were 62,180,525 shares of the registrant’s Common Stock, $.01 par value, outstanding.
Cullen/Frost Bankers, Inc.
Quarterly Report on Form 10-Q
September 30, 2026
Table of Contents
| Page | ||||||||
Part I - Financial Information | ||||||||
| Item 1. | Financial Statements (Unaudited) | |||||||
Consolidated Balance Sheets | 3 | |||||||
Consolidated Statements of Income | 4 | |||||||
Consolidated Statements of Comprehensive Income (Loss) | 5 | |||||||
Consolidated Statements of Changes in Shareholders’ Equity | 6 | |||||||
Consolidated Statements of Cash Flows | 8 | |||||||
Notes to Consolidated Financial Statements | 9 | |||||||
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 41 | ||||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 66 | ||||||
| Item 4. | Controls and Procedures | 66 | ||||||
Part II - Other Information | ||||||||
| Item 1. | Legal Proceedings | 67 | ||||||
| Item 1A. | Risk Factors | 67 | ||||||
| Item 2. | Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities | 67 | ||||||
| Item 3. | Defaults Upon Senior Securities | 67 | ||||||
| Item 4. | Mine Safety Disclosures | 67 | ||||||
| Item 5. | Other Information | 67 | ||||||
| Item 6. | Exhibits | 68 | ||||||
Signatures | 69 | |||||||
2
Table of Contents
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Cullen/Frost Bankers, Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
| September 30, 2026 | December 31, 2025 | ||||||||||
| Assets: | |||||||||||
| Cash and due from banks | $ | $ | |||||||||
| Interest-bearing deposits | |||||||||||
| Federal funds sold | |||||||||||
| Resell agreements | |||||||||||
| Total cash and cash equivalents | |||||||||||
Securities held to maturity, net of allowance for credit losses of $ | |||||||||||
| Securities available for sale, at estimated fair value | |||||||||||
| Trading account securities | |||||||||||
| Loans, net of unearned discounts | |||||||||||
| Less: Allowance for credit losses on loans | ( | ( | |||||||||
| Net loans | |||||||||||
| Premises and equipment, net | |||||||||||
| Accrued interest receivable and other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities: | |||||||||||
| Deposits: | |||||||||||
| Non-interest-bearing demand deposits | $ | $ | |||||||||
| Interest-bearing deposits | |||||||||||
| Total deposits | |||||||||||
| Federal funds purchased | |||||||||||
| Repurchase agreements | |||||||||||
| Junior subordinated deferrable interest debentures, net of unamortized issuance costs | |||||||||||
| Subordinated notes, net of unamortized issuance costs | |||||||||||
| Accrued interest payable and other liabilities | |||||||||||
| Total liabilities | |||||||||||
| Shareholders’ Equity: | |||||||||||
Preferred stock, par value $ | |||||||||||
Common stock, par value $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive income (loss), net of tax | ( | ( | |||||||||
Treasury stock, at cost; | ( | ( | |||||||||
| Total shareholders’ equity | |||||||||||
| Total liabilities and shareholders’ equity | $ | $ | |||||||||
See accompanying Notes to Consolidated Financial Statements.
3
Table of Contents
Cullen/Frost Bankers, Inc.
Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Interest income: | |||||||||||||||||||||||
| Loans, including fees | $ | $ | $ | $ | |||||||||||||||||||
| Securities: | |||||||||||||||||||||||
| Taxable | |||||||||||||||||||||||
| Tax-exempt | |||||||||||||||||||||||
| Interest-bearing deposits | |||||||||||||||||||||||
| Federal funds sold | |||||||||||||||||||||||
| Resell agreements | |||||||||||||||||||||||
| Total interest income | |||||||||||||||||||||||
| Interest expense: | |||||||||||||||||||||||
| Deposits | |||||||||||||||||||||||
| Federal funds purchased | |||||||||||||||||||||||
| Repurchase agreements | |||||||||||||||||||||||
| Junior subordinated deferrable interest debentures | |||||||||||||||||||||||
| Subordinated notes | |||||||||||||||||||||||
| Total interest expense | |||||||||||||||||||||||
| Net interest income | |||||||||||||||||||||||
| Credit loss expense | |||||||||||||||||||||||
| Net interest income after credit loss expense | |||||||||||||||||||||||
| Non-interest income: | |||||||||||||||||||||||
| Trust and investment management fees | |||||||||||||||||||||||
| Service charges on deposit accounts | |||||||||||||||||||||||
| Insurance commissions and fees | |||||||||||||||||||||||
| Interchange and card transaction fees | |||||||||||||||||||||||
| Other charges, commissions, and fees | |||||||||||||||||||||||
| Net gain (loss) on securities transactions | ( | ( | ( | ||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total non-interest income | |||||||||||||||||||||||
| Non-interest expense: | |||||||||||||||||||||||
| Salaries and wages | |||||||||||||||||||||||
| Employee benefits | |||||||||||||||||||||||
| Net occupancy | |||||||||||||||||||||||
| Technology, furniture, and equipment | |||||||||||||||||||||||
| Deposit insurance | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total non-interest expense | |||||||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||
| Income taxes | |||||||||||||||||||||||
| Net income | |||||||||||||||||||||||
| Preferred stock dividends | |||||||||||||||||||||||
| Net income available to common shareholders | $ | $ | $ | $ | |||||||||||||||||||
| Earnings per common share: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See accompanying Notes to Consolidated Financial Statements.
4
Table of Contents
Cullen/Frost Bankers, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(Dollars in thousands)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive income (loss), before tax: | |||||||||||||||||||||||
| Securities available for sale and transferred securities: | |||||||||||||||||||||||
| Change in net unrealized gain/loss during the period | ( | ( | |||||||||||||||||||||
| Change in net unrealized gain on securities transferred to held to maturity | ( | ||||||||||||||||||||||
| Reclassification adjustment for net (gains) losses included in net income | |||||||||||||||||||||||
| Total securities available for sale and transferred securities | ( | ( | |||||||||||||||||||||
| Defined-benefit post-retirement benefit plans: | |||||||||||||||||||||||
| Reclassification adjustment for net amortization of actuarial gain/loss included in net income as a component of net periodic cost (benefit) | |||||||||||||||||||||||
| Total defined-benefit post-retirement benefit plans | |||||||||||||||||||||||
| Other comprehensive income (loss), before tax | ( | ( | |||||||||||||||||||||
| Deferred tax expense (benefit) | ( | ( | |||||||||||||||||||||
| Other comprehensive income (loss), net of tax | ( | ( | |||||||||||||||||||||
| Comprehensive income (loss) | $ | ( | $ | $ | ( | $ | |||||||||||||||||
See accompanying Notes to Consolidated Financial Statements.
5
Table of Contents
Cullen/Frost Bankers, Inc.
Consolidated Statements of Changes in Shareholders’ Equity
(Dollars in thousands, except per share amounts)
| Preferred Stock | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss), Net of Tax | Treasury Stock | Total | |||||||||||||||||||||||||||||||||||
| Three months ended: | |||||||||||||||||||||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||||||||||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Stock unit conversions ( | — | — | — | ( | — | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense recognized in earnings | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Purchase of treasury stock ( | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Cash dividends – Series B preferred stock (approximately $ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Cash dividends – common stock ($ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Balance at end of period | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| September 30, 2025 | |||||||||||||||||||||||||||||||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Stock option exercises/stock unit conversions ( | — | — | — | ( | — | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense recognized in earnings | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Purchase of treasury stock ( | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Cash dividends – Series B preferred stock (approximately $ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Cash dividends – common stock ($ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Balance at end of period | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
See accompanying Notes to Consolidated Financial Statements.
6
Table of Contents
Cullen/Frost Bankers, Inc.
Consolidated Statements of Changes in Shareholders’ Equity
(Dollars in thousands, except per share amounts)
| Preferred Stock | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss), Net of Tax | Treasury Stock | Total | |||||||||||||||||||||||||||||||||||
| Nine months ended: | |||||||||||||||||||||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||||||||||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Stock unit conversions ( | — | — | — | ( | — | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense recognized in earnings | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Purchase of treasury stock ( | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Cash dividends – Series B preferred stock (approximately $ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Cash dividends – common stock ($ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Balance at end of period | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| September 30, 2025 | |||||||||||||||||||||||||||||||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Stock option exercises/stock unit conversions ( | — | — | — | ( | — | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense recognized in earnings | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Purchase of treasury stock ( | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Cash dividends – Series B preferred stock (approximately $ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Cash dividends – common stock ($ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Balance at end of period | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
See accompanying Notes to Consolidated Financial Statements.
7
Table of Contents
Cullen/Frost Bankers, Inc.
Consolidated Statements of Cash Flows
(Dollars in thousands)
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Operating Activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash from operating activities: | |||||||||||
| Credit loss expense | |||||||||||
| Deferred tax expense (benefit) | ( | ||||||||||
| Accretion of loan discounts | ( | ( | |||||||||
| Securities premium amortization (discount accretion), net | |||||||||||
| Net (gain) loss on securities transactions | |||||||||||
| Depreciation and amortization | |||||||||||
| Net (gain) loss on sale/write-down of assets/foreclosed assets | ( | ( | |||||||||
| Stock-based compensation | |||||||||||
| Net tax benefit from stock-based compensation | |||||||||||
| Earnings on life insurance policies | ( | ( | |||||||||
| Net change in: | |||||||||||
| Trading account securities | ( | ( | |||||||||
| Lease right-of-use assets | |||||||||||
| Accrued interest receivable and other assets | ( | ||||||||||
| Accrued interest payable and other liabilities | ( | ||||||||||
| Net cash from operating activities | |||||||||||
| Investing Activities: | |||||||||||
| Securities held to maturity: | |||||||||||
| Purchases | ( | ||||||||||
| Maturities, calls and principal repayments | |||||||||||
| Securities available for sale: | |||||||||||
| Purchases | ( | ( | |||||||||
| Sales | |||||||||||
| Maturities, calls and principal repayments | |||||||||||
| Proceeds from sale of loans | |||||||||||
| Net change in loans | ( | ( | |||||||||
| Benefits received on life insurance policies | |||||||||||
| Proceeds from sales of premises and equipment | |||||||||||
| Purchases of premises and equipment | ( | ( | |||||||||
| Proceeds from sales of foreclosed assets | |||||||||||
| Net cash from investing activities | ( | ( | |||||||||
| Financing Activities: | |||||||||||
| Net change in deposits | ( | ||||||||||
| Net change in short-term borrowings | |||||||||||
| Proceeds from stock option exercises | |||||||||||
| Purchase of treasury stock | ( | ( | |||||||||
| Cash dividends paid on preferred stock | ( | ( | |||||||||
| Cash dividends paid on common stock | ( | ( | |||||||||
| Net cash from financing activities | ( | ||||||||||
| Net change in cash and cash equivalents | ( | ( | |||||||||
| Cash and cash equivalents at beginning of period | |||||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||
See accompanying Notes to Consolidated Financial Statements.
8
Table of Contents
Notes to Consolidated Financial Statements
(Table amounts in thousands, except for share and per share amounts)
Note 1 - Significant Accounting Policies
Nature of Operations. Cullen/Frost Bankers, Inc. (“Cullen/Frost”) is a financial holding company and a bank holding company headquartered in San Antonio, Texas that provides, through its subsidiaries, a broad array of products and services throughout numerous Texas markets. The terms “Cullen/Frost,” “the Corporation,” “we,” “us,” and “our” mean Cullen/Frost Bankers, Inc., and its subsidiaries, when appropriate. In addition to general commercial and consumer banking, other products and services offered include trust and investment management, insurance, brokerage, mutual funds, leasing, treasury management, capital markets advisory, and item processing.
Basis of Presentation. The consolidated financial statements in this Quarterly Report on Form 10-Q include the accounts of Cullen/Frost and all other entities for which Cullen/Frost is determined to have a controlling financial interest. All material intercompany balances and transactions have been eliminated in consolidation. The accounting and financial reporting policies we follow conform, in all material respects, to accounting principles generally accepted in the United States (“U.S. GAAP”) and to general practices within the financial services industry.
The consolidated financial statements in this Quarterly Report on Form 10-Q have not been audited by an independent registered public accounting firm, but, in the opinion of management, reflect all adjustments considered necessary for a fair presentation of our financial position and results of operations. All such adjustments were of a normal and recurring nature. The consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q adopted by the Securities and Exchange Commission (“SEC”). Accordingly, the financial statements do not include all information and footnotes required by U.S. GAAP for complete financial statements and should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2025, included in our Annual Report on Form 10-K filed with the SEC on February 5, 2026 (the “2025 Form 10-K”). Operating results for the interim periods disclosed herein are not necessarily indicative of results that may be expected for a full year or any future period.
Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. The allowance for credit losses, the fair values of financial instruments, and the evaluation of contingencies are particularly subject to change.
Cash Flow Reporting. Additional cash flow information was as follows:
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Cash paid for: | |||||||||||
| Interest | $ | $ | |||||||||
| U.S. federal income taxes, net of refunds received | |||||||||||
| State income/franchise taxes, net of refunds received | |||||||||||
| Significant non-cash transactions: | |||||||||||
| Unsettled securities transactions | |||||||||||
| Loans foreclosed and transferred to other real estate owned and foreclosed assets | |||||||||||
| Loans transferred to loans held for sale | |||||||||||
| Right-of-use lease assets obtained in exchange for lessee operating lease liabilities | |||||||||||
Accounting Changes, Reclassifications and Restatements. Certain items in prior financial statements have been reclassified, where necessary, to conform to the current presentation.
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Note 2 - Securities
Securities - Held to Maturity. A summary of the amortized cost, fair value and allowance for credit losses related to securities held to maturity as of September 30, 2026 and December 31, 2025, is presented below.
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Allowance for Credit Losses | Net Carrying Amount | ||||||||||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
States and political subdivisions | ( | ||||||||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
States and political subdivisions | ( | ||||||||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
All mortgage-backed securities included in the above table were issued by U.S. government agencies and corporations. The carrying value of held-to-maturity securities pledged to secure public funds, trust deposits, repurchase agreements and for other purposes, as required or permitted by law totaled $1.4 billion at September 30, 2026 and $1.4 billion at December 31, 2025. Accrued interest receivable on held-to-maturity securities totaled $19.3 million at September 30, 2026 and $37.2 million at December 31, 2025, and is included in accrued interest receivable and other assets in the accompanying consolidated balance sheets.
The following table summarizes Moody's and/or Standard & Poor's bond ratings for our portfolio of held-to-maturity securities issued by States and political subdivisions and other securities as of September 30, 2026 and December 31, 2025:
| States and Political Subdivisions | |||||||||||||||||||||||||||||||||||
| Not Guaranteed or Pre-Refunded | Guaranteed by the Texas PSF | Guaranteed by Third Party | Pre-Refunded | Total | Other Securities | ||||||||||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||||||||||||||
| Aaa/AAA | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Aa/AA | |||||||||||||||||||||||||||||||||||
| A | |||||||||||||||||||||||||||||||||||
| Not rated | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Aaa/AAA | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Aa/AA | |||||||||||||||||||||||||||||||||||
| A | |||||||||||||||||||||||||||||||||||
| Not rated | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
The following table details activity in the allowance for credit losses on held-to-maturity securities during the three and nine months ended September 30, 2026 and 2025.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | |||||||||||||||||||
| Credit loss expense (benefit) | |||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | |||||||||||||||||||
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Securities - Available for Sale. A summary of the amortized cost, fair value and allowance for credit losses related to securities available for sale as of September 30, 2026 and December 31, 2025, is presented below.
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Allowance for Credit Losses | Estimated Fair Value | |||||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||||||||
| U.S. Treasury | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||||||
States and political subdivisions | |||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||
| U.S. Treasury | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||||||
States and political subdivisions | |||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
All mortgage-backed securities included in the above table were issued by U.S. government agencies and corporations. At September 30, 2026, all of the securities in our available for sale municipal bond portfolio were issued by the State of Texas or political subdivisions or agencies within the State of Texas, of which approximately 68.9 % are either guaranteed by the Texas Permanent School Fund (“PSF”) or have been pre-refunded. Securities with limited marketability, such as stock in the Federal Reserve Bank and the Federal Home Loan Bank, are carried at cost and are reported as other available for sale securities in the table above. The carrying value of available-for-sale securities pledged to secure public funds, trust deposits, repurchase agreements and for other purposes, as required or permitted by law totaled $7.5 billion at September 30, 2026 and $6.6 billion at December 31, 2025. Accrued interest receivable on available-for-sale securities totaled $88.6 million at September 30, 2026 and $122.5 million at December 31, 2025, respectively, and is included in accrued interest receivable and other assets in the accompanying consolidated balance sheets.
The table below summarizes, as of September 30, 2026, securities available for sale in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by type of security and length of time in a continuous unrealized loss position.
| Less than 12 Months | More than 12 Months | Total | |||||||||||||||||||||||||||||||||
| Estimated Fair Value | Unrealized Losses | Estimated Fair Value | Unrealized Losses | Estimated Fair Value | Unrealized Losses | ||||||||||||||||||||||||||||||
| U.S. Treasury | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Residential mortgage-backed securities | |||||||||||||||||||||||||||||||||||
| States and political subdivisions | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
As of September 30, 2026, no allowance for credit losses has been recognized on available for sale securities in an unrealized loss position as management does not believe any of the securities are impaired due to reasons of credit quality. This is based upon our analysis of the underlying risk characteristics, including credit ratings, and other qualitative factors related to our available for sale securities and in consideration of our historical credit loss experience and internal forecasts. The issuers of these securities continue to make timely principal and interest payments under the contractual terms of the securities. Furthermore, management does not have the intent to sell any of the securities classified as available for sale in the table above and believes that it is more likely than not that we will not have to sell any such securities before a recovery of cost. The unrealized losses are due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline.
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Contractual Maturities. The following table summarizes the maturity distribution schedule of securities held to maturity and securities available for sale as of September 30, 2026. Mortgage-backed securities are included in maturity categories based on their stated maturity date. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Other securities classified as available for sale include stock in the Federal Reserve Bank and the Federal Home Loan Bank, which have no maturity date. These securities have been included in the total column only.
| Within 1 Year | 1 - 5 Years | 5 - 10 Years | After 10 Years | Total | |||||||||||||||||||||||||
| Held To Maturity | |||||||||||||||||||||||||||||
| Amortized Cost | |||||||||||||||||||||||||||||
| Residential mortgage-backed securities | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| States and political subdivisions | |||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Estimated Fair Value | |||||||||||||||||||||||||||||
| Residential mortgage-backed securities | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| States and political subdivisions | |||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Available For Sale | |||||||||||||||||||||||||||||
| Amortized Cost | |||||||||||||||||||||||||||||
| U.S. Treasury | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Residential mortgage-backed securities | |||||||||||||||||||||||||||||
| States and political subdivisions | |||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Estimated Fair Value | |||||||||||||||||||||||||||||
| U.S. Treasury | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Residential mortgage-backed securities | |||||||||||||||||||||||||||||
| States and political subdivisions | |||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Sales of Securities. Sales of available for sale securities were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Proceeds from sales | $ | $ | $ | $ | |||||||||||||||||||
| Gross realized gains | |||||||||||||||||||||||
| Gross realized losses | ( | ( | ( | ||||||||||||||||||||
| Tax (expense) benefit of securities gains/losses | |||||||||||||||||||||||
Premiums and Discounts. Premium amortization and discount accretion included in interest income on securities were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Premium amortization | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Discount accretion | |||||||||||||||||||||||
| Net (premium amortization) discount accretion | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
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Trading Account Securities. Trading account securities, at estimated fair value, were as follows:
| September 30, 2026 | December 31, 2025 | ||||||||||
| U.S. Treasury | $ | $ | |||||||||
| States and political subdivisions | |||||||||||
| Total | $ | $ | |||||||||
Net gains and losses on trading account securities included in other non-interest income were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net gain on sales transactions | $ | $ | $ | $ | |||||||||||||||||||
| Net mark-to-market gains (losses) | ( | ( | |||||||||||||||||||||
| Net gain (loss) on trading account securities | $ | $ | $ | $ | |||||||||||||||||||
Note 3 - Loans
Loans were as follows:
| September 30, 2026 | December 31, 2025 | ||||||||||
| Commercial and industrial | $ | $ | |||||||||
| Energy: | |||||||||||
| Production | |||||||||||
| Service | |||||||||||
| Other | |||||||||||
| Total energy | |||||||||||
| Commercial real estate: | |||||||||||
| Owner occupied | |||||||||||
| Non-owner occupied | |||||||||||
| Construction and land | |||||||||||
| Total commercial real estate | |||||||||||
| Consumer real estate: | |||||||||||
| Home equity lines of credit | |||||||||||
| Home equity | |||||||||||
| 1-4 family mortgage | |||||||||||
| Home improvement | |||||||||||
| Other | |||||||||||
| Total consumer real estate | |||||||||||
| Total real estate | |||||||||||
| Consumer and other | |||||||||||
| Total loans | $ | $ | |||||||||
Concentrations of Credit. Most of our lending activity occurs within the State of Texas, including the four largest metropolitan areas of Austin, Dallas/Ft. Worth, Houston, and San Antonio, as well as other markets. The majority of our loan portfolio consists of commercial and industrial and commercial real estate loans. As of September 30, 2026, there were no concentrations of loans related to any single industry in excess of 10 % of total loans. At that date, the largest industry concentration was related to the energy industry, which totaled 4.9 % of total loans. As of September 30, 2026, unfunded commitments to extend credit and standby letters of credit issued to customers in the energy industry totaled $1.3 billion and $81.4 million, respectively.
Foreign Loans. We have U.S. dollar denominated loans and commitments to borrowers in Mexico. The outstanding balance of these loans and the unfunded amounts available under these commitments were not
Overdrafts. Deposit account overdrafts reported as loans totaled $31.4 million at September 30, 2026, including a $15.4 million overnight overdraft related to a correspondent bank that cleared the following day, and $13.8 million at December 31, 2025.
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Related Party Loans. In the ordinary course of business, we have granted loans to certain directors, executive officers, and their affiliates (collectively referred to as “related parties”). Such loans totaled $303.4 million at September 30, 2026 and $316.1 million at December 31, 2025.
Accrued Interest Receivable. Accrued interest receivable on loans totaled $90.0 million at September 30, 2026 and $90.6 million at December 31, 2025, and is included in accrued interest receivable and other assets in the accompanying consolidated balance sheets.
Federal Home Loan Bank Blanket Pledge. We have executed a blanket pledge and security agreement with the Federal Home Loan Bank (“FHLB”) under which certain qualifying loans are pledged as collateral for any outstanding borrowings under the agreement. Loans pledged under the blanket agreement totaled $21.4 billion at September 30, 2026 and $19.6 billion at December 31, 2025, though no
Non-Accrual and Past Due Loans. Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions.
Non-accrual loans, segregated by class of loans, were as follows:
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Total Non-Accrual | Non-Accrual with No Credit Loss Allowance | Total Non-Accrual | Non-Accrual with No Credit Loss Allowance | ||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | |||||||||||||||||||
| Energy | |||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||
| Owner occupied | |||||||||||||||||||||||
| Non-owner occupied | |||||||||||||||||||||||
| Construction and land | |||||||||||||||||||||||
| Consumer real estate | |||||||||||||||||||||||
| Consumer and other | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
The following table presents non-accrual loans as of September 30, 2026, by class and year of origination.
| 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Revolving Loans | Revolving Loans Converted to Term | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Energy | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-owner occupied | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction and land | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer real estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer and other | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
In the table above, loans reported as 2026 originations as of September 30, 2026 were primarily originated in years prior to 2026 and renewed during 2026. Had non-accrual loans performed in accordance with their original contractual terms, we would have recognized additional interest income, net of tax, of approximately $1.6 million and $3.8 million for the three and nine months ended September 30, 2026, and approximately $929 thousand and $3.6 million for the three and nine months ended September 30, 2025.
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An age analysis of past due loans (including both accruing and non-accruing loans), segregated by class of loans, as of September 30, 2026, was as follows:
| Loans 30-89 Days Past Due | Loans 90 or More Days Past Due | Total Past Due Loans | Current Loans | Total Loans | Accruing Loans 90 or More Days Past Due | ||||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Energy | |||||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||
| Owner occupied | |||||||||||||||||||||||||||||||||||
| Non-owner occupied | |||||||||||||||||||||||||||||||||||
| Construction and land | |||||||||||||||||||||||||||||||||||
| Consumer real estate | |||||||||||||||||||||||||||||||||||
| Consumer and other | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Modifications to Borrowers Experiencing Financial Difficulty. From time to time, we may modify loans to borrowers experiencing financial difficulty. In some cases, these modifications may result in new loans. Such modifications may include principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, a term extension, or a combination thereof, among other things. The following table presents the period-end balance of loans to borrowers experiencing financial difficulty that were modified during the nine months ended September 30, 2026 and September 30, 2025, segregated by type of modification, regardless of whether the modifications resulted in new loans. There were no commitments to lend additional funds to these borrowers at September 30, 2026.
| Payment Delay | Percent of Total Class of Loans | ||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||||||||
| Non-owner occupied | $ | % | |||||||||||||||||||||||||||||||||||||||||||||
| $ | |||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | % | |||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||||||||
| Construction and land | |||||||||||||||||||||||||||||||||||||||||||||||
| $ | |||||||||||||||||||||||||||||||||||||||||||||||
The financial effects of the loan modifications made to borrowers experiencing financial difficulty were not material during the nine months ended September 30, 2026 and 2025. The loan modifications reported in the table above did not materially impact our determination of the allowance for credit losses on loans during their respective reporting periods.
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Information as of September 30, 2026 and September 30, 2025, related to loans modified (by type of modification) in the preceding twelve months, respectively, whereby the borrower was experiencing financial difficulty at the time of modification is set forth in the following table.
| September 30, 2026 | September 30, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||
| Payment Delay | Payment Delay | ||||||||||||||||||||||||||||||||||||||||||||||
| Past due in excess of 90 days or on non-accrual status at period-end: | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied | |||||||||||||||||||||||||||||||||||||||||||||||
| Non-owner occupied | |||||||||||||||||||||||||||||||||||||||||||||||
| Construction and land | |||||||||||||||||||||||||||||||||||||||||||||||
| $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Charge-offs during the period: | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
Credit Quality Indicators. As part of the on-going monitoring of the credit quality of our loan portfolio, management tracks certain credit quality indicators including trends related to (i) the weighted-average risk grade of commercial loans, (ii) the level of classified commercial loans, (iii) the delinquency status of consumer loans, (iv) non-performing loans (see details above) and (v) the general economic conditions in the State of Texas.
We utilize a risk grading matrix to assign a risk grade to each of our commercial loans. Loans are graded on a scale of 1 to 14. A description of the general characteristics of the 14 risk grades is set forth in our 2025 Form 10-K. We monitor portfolio credit quality by the weighted-average risk grade of each class of commercial loan. Individual relationship managers, under the oversight of credit administration, review updated financial information for all pass grade loans to reassess the risk grade on at least an annual basis. When a loan has a risk grade of 9, it is still considered a pass grade loan; however, it is considered to be on management’s “watch list,” and where a significant risk-modifying action is anticipated in the near term. When a loan has a risk grade of 10 or higher, a special assets officer monitors the loan on an on-going basis. The following table presents weighted-average risk grades for all commercial loans, by class and year of origination/renewal, as of September 30, 2026.
| 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Revolving Loans | Revolving Loans Converted to Term | Total | W/A Risk Grade | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grades 1-8 | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 11 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 13 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
| W/A risk grade | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Energy | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grades 1-8 | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 11 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 13 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
| W/A risk grade | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Revolving Loans | Revolving Loans Converted to Term | Total | W/A Risk Grade | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grades 1-8 | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 11 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 13 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
| W/A risk grade | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-owner occupied | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grades 1-8 | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 11 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 13 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
| W/A risk grade | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction and land | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grades 1-8 | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 11 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 13 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
| W/A risk grade | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial real estate | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| W/A risk grade | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
In the table above, certain loans are reported as 2026 originations and have risk grades of 11 or higher. These loans were primarily originated years prior to 2026 and renewed during 2026.
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The following tables present weighted average risk grades for all commercial loans by class as of December 31, 2025. Refer to our 2025 Form 10-K for details of these loans by year of origination/renewal.
| Commercial Real Estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and Industrial | Energy | Owner Occupied | Non-owner Occupied | Construction and Land | Total Commercial Real Estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| W/A Risk Grade | Loans | W/A Risk Grade | Loans | W/A Risk Grade | Loans | W/A Risk Grade | Loans | W/A Risk Grade | Loans | W/A Risk Grade | Loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grades 1-8 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 11 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk grade 13 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Information about the payment status of consumer loans, segregated by portfolio segment and year of origination, as of September 30, 2026, was as follows:
| 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Revolving Loans | Revolving Loans Converted to Term | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Consumer real estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Past due 30-89 days | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Past due 90 or more days | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total past due | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Current loans | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Consumer and other: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Past due 30-89 days | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Past due 90 or more days | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total past due | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Current loans | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Period-end balances for revolving loans that converted to term during the three and nine months ended September 30, 2026 and 2025 were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | |||||||||||||||||||
| Energy | |||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||
| Owner occupied | |||||||||||||||||||||||
| Non-owner occupied | |||||||||||||||||||||||
| Construction and land | |||||||||||||||||||||||
| Consumer real estate | |||||||||||||||||||||||
| Consumer and other | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
In assessing the general economic conditions in the State of Texas, management monitors and tracks the Texas Leading Index (“TLI”), which is produced by the Federal Reserve Bank of Dallas. The TLI, the components of which are more fully described in our 2025 Form 10-K, totaled 129.0 at September 30, 2026 and 125.8 at December 31, 2025. A higher TLI value implies more favorable economic conditions.
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Allowance For Credit Losses - Loans. The allowance for credit losses on loans is a contra‑asset valuation account, calculated in accordance with ASC 326, that is deducted from the amortized cost basis of loans to present the net amount expected to be collected. The amount of the allowance represents lifetime expected credit losses on loans, based on available information from internal and external sources that is relevant to assessing exposure to credit loss over the expected lives of the loans. Relevant information includes historical credit loss experience, current conditions, and reasonable and supportable forecasts over the loans’ contractual terms, adjusted for expected prepayments when appropriate. Loans are evaluated collectively when they share similar risk characteristics and individually when they do not. Credit loss expense related to loans reflects the totality of actions taken on all loans for a particular period, including any necessary increases or decreases in the allowance related to changes in credit loss expectations associated with specific loans or pools of loans. Portions of the allowance may be allocated for specific credits; however, the entire allowance is available for any credit that, in management’s judgment, should be charged off. Although management utilizes its best judgment and the information available, the ultimate appropriateness of the allowance is dependent upon a variety of factors beyond our control, including the performance of our loan portfolio, macroeconomic conditions, changes in interest rates, the accuracy of forecasted assumptions, and regulatory interpretations and supervisory assessments related to credit quality and asset classification. Our allowance methodology is more fully described in our 2025 Form 10-K.
The following table presents details of the allowance for credit losses on loans segregated by loan portfolio segment as of September 30, 2026 and December 31, 2025.
| September 30, 2026 | Commercial and Industrial | Energy | Commercial Real Estate | Consumer Real Estate | Consumer and Other | Total | |||||||||||||||||||||||||||||
| Modeled expected credit losses | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Q-Factor and other qualitative adjustments | |||||||||||||||||||||||||||||||||||
| Specific allocations | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Modeled expected credit losses | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Q-Factor and other qualitative adjustments | |||||||||||||||||||||||||||||||||||
Specific allocations | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
The following table details activity in the allowance for credit losses on loans by portfolio segment for the three and nine months ended September 30, 2026 and 2025. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
| Commercial and Industrial | Energy | Commercial Real Estate | Consumer Real Estate | Consumer and Other | Total | ||||||||||||||||||||||||||||||
| Three months ended: | |||||||||||||||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Credit loss expense (benefit) | ( | ( | |||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||||||||
| Net (charge-offs) recoveries | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| September 30, 2025 | |||||||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Credit loss expense (benefit) | ( | ||||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||||||||
| Net (charge-offs) recoveries | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
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| Commercial and Industrial | Energy | Commercial Real Estate | Consumer Real Estate | Consumer and Other | Total | ||||||||||||||||||||||||||||||
| Nine months ended: | |||||||||||||||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Credit loss expense (benefit) | ( | ( | |||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||||||||
| Net (charge-offs) recoveries | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| September 30, 2025 | |||||||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Credit loss expense (benefit) | ( | ||||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||||||||
| Net (charge-offs) recoveries | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
The following table presents year-to-date gross charge-offs by year of origination as of September 30, 2026.
| 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Revolving Loans | Revolving Loans Converted to Term | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Energy | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-owner occupied | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction and land | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer real estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer and other | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
In the table above, $15.3 million of the consumer and other loan charge-offs reported as 2026 originations and $3.7 million of the total reported as 2025 originations were related to deposit overdrafts.
The following table presents loans that were evaluated for expected credit losses on an individual basis and the related specific allocations, by loan portfolio segment, as of September 30, 2026 and December 31, 2025.
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Loan Balance | Specific Allocations | Loan Balance | Specific Allocations | ||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | |||||||||||||||||||
| Energy | |||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||
| Owner occupied | |||||||||||||||||||||||
| Non-owner occupied | |||||||||||||||||||||||
| Construction and land | |||||||||||||||||||||||
| Consumer real estate | |||||||||||||||||||||||
| Consumer and other | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
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Note 4 - Deposits
Deposits were as follows:
| September 30, 2026 | December 31, 2025 | ||||||||||
| Non-interest-bearing demand deposits | $ | $ | |||||||||
| Interest-bearing deposits: | |||||||||||
| Savings and interest checking | |||||||||||
| Money market accounts | |||||||||||
| Time accounts | |||||||||||
| Total interest-bearing deposits | |||||||||||
| Total deposits | $ | $ | |||||||||
The table below presents additional information about our deposits. Public funds in excess of deposit insurance limits are included in the totals for deposits not covered by insurance; however, such deposits are generally fully collateralized by securities.
| September 30, 2026 | December 31, 2025 | ||||||||||
| Deposits from foreign sources (primarily Mexico) | $ | $ | |||||||||
| Non-interest-bearing public funds deposits | |||||||||||
| Interest-bearing public funds deposits | |||||||||||
| Total deposits that are not covered by deposit insurance | |||||||||||
| Time deposits that are not covered by deposit insurance | |||||||||||
Note 5 - Off-Balance-Sheet Arrangements, Commitments, Guarantees and Contingencies
Financial Instruments with Off-Balance-Sheet Risk. In the normal course of business, we enter into various transactions to meet the financing needs of our customers that, in accordance with generally accepted accounting principles in the United States, are not recognized in our consolidated balance sheets. As more fully discussed in our 2025 Form 10-K, these transactions include commitments to extend credit and standby letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of amounts recognized in the consolidated balance sheets. We manage the credit risk associated with these commitments through credit approval and monitoring procedures.
Financial instruments with off-balance-sheet risk were as follows:
| September 30, 2026 | December 31, 2025 | ||||||||||
| Commitments to extend credit | $ | $ | |||||||||
| Standby letters of credit | |||||||||||
| Deferred standby letter of credit fees | |||||||||||
Allowance For Credit Losses - Off-Balance-Sheet Credit Exposures. The allowance for credit losses on off-balance-sheet credit exposures is a liability account, calculated in accordance with ASC 326, representing lifetime expected credit losses over the contractual periods for which we are exposed to credit risk resulting from contractual obligations to extend credit. No allowance is recognized if we have the unconditional right to cancel the obligation. Off-balance-sheet credit exposures primarily consist of amounts available under outstanding lines of credit and letters of credit, as presented in the table above. The allowance is determined based on available information from internal and external sources, including historical credit loss experience, current conditions, reasonable and supportable forecasts, and the probability that commitments will be funded over their contractual terms. Our allowance methodology is more fully described in our 2025 Form 10-K.
The following table presents activity in the allowance for credit losses on off-balance-sheet credit exposures.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | |||||||||||||||||||
| Credit loss expense (benefit) | ( | ( | ( | ( | |||||||||||||||||||
| Ending balance | $ | $ | $ | $ | |||||||||||||||||||
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Lease Commitments. We lease certain office facilities and office equipment under operating leases. The components of total lease expense were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Amortization of lease right-of-use assets | $ | $ | $ | $ | |||||||||||||||||||
| Short-term lease expense | |||||||||||||||||||||||
| Non-lease components (including taxes, insurance, common maintenance, etc.) | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
Right-of-use lease assets totaled $249.5 million at September 30, 2026 and $259.2 million at December 31, 2025, and are reported as a component of premises and equipment on our accompanying consolidated balance sheets. The related lease liabilities totaled $286.1 million at September 30, 2026 and $296.4 million at December 31, 2025, and are reported as a component of accrued interest payable and other liabilities on our accompanying consolidated balance sheets. Lease payments under operating leases that were applied to our operating lease liability totaled $9.6 million and $28.4 million during the three and nine months ended September 30, 2026, respectively, and $9.4 million and $27.8 million during the three and nine months ended September 30, 2025, respectively. There has been no material change in our expected future minimum lease payments since December 31, 2025. See the 2025 Form 10-K for information regarding these commitments.
Note 6 - Capital and Regulatory Matters
Banks and bank holding companies are subject to various regulatory capital requirements administered by state and federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weighting, and other factors.
Cullen/Frost’s and Frost Bank’s Common Equity Tier 1 capital (“CET1”) includes common stock and related paid-in capital, net of treasury stock, and retained earnings. In connection with the adoption of the Basel III Capital Rules, we elected to opt-out of the requirement to include most components of accumulated other comprehensive income in CET1. CET1 is reduced by goodwill and other intangible assets, net of associated deferred tax liabilities. Frost Bank's CET1 is also reduced by its equity investment in its financial subsidiary, Frost Insurance Agency (“FIA”).
Tier 1 capital includes CET1 and additional Tier 1 capital. For Cullen/Frost, additional Tier 1 capital included $145.5 4.450 no 20.0 20.0 million at December 31, 2025, and trust preferred securities, which totaled $120.0 No portion of Cullen/Frost's subordinated notes were permitted as Tier 2 capital at September 30, 2026 as the notes were within one year of maturity.
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The following table presents actual and required capital ratios as of September 30, 2026 and December 31, 2025, for Cullen/Frost and Frost Bank under the Basel III Capital Rules. Capital levels required to be considered well-capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules. See the 2025 Form 10-K for a more detailed discussion of the Basel III Capital Rules.
| Actual | Minimum Capital Required Plus Capital Conservation Buffer | Required to be Considered Well- Capitalized (1) | |||||||||||||||||||||||||||||||||
| Capital Amount | Ratio | Capital Amount | Ratio | Capital Amount | Ratio | ||||||||||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||||||||||||||
| Common Equity Tier 1 to Risk-Weighted Assets | |||||||||||||||||||||||||||||||||||
| Cullen/Frost | $ | % | $ | % | N/A | N/A | |||||||||||||||||||||||||||||
| Frost Bank | $ | % | |||||||||||||||||||||||||||||||||
| Tier 1 Capital to Risk-Weighted Assets | |||||||||||||||||||||||||||||||||||
| Cullen/Frost | |||||||||||||||||||||||||||||||||||
| Frost Bank | |||||||||||||||||||||||||||||||||||
| Total Capital to Risk-Weighted Assets | |||||||||||||||||||||||||||||||||||
| Cullen/Frost | |||||||||||||||||||||||||||||||||||
| Frost Bank | |||||||||||||||||||||||||||||||||||
| Leverage Ratio | |||||||||||||||||||||||||||||||||||
| Cullen/Frost | N/A | N/A | |||||||||||||||||||||||||||||||||
| Frost Bank | |||||||||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Common Equity Tier 1 to Risk-Weighted Assets | |||||||||||||||||||||||||||||||||||
| Cullen/Frost | $ | % | $ | % | N/A | N/A | |||||||||||||||||||||||||||||
| Frost Bank | $ | % | |||||||||||||||||||||||||||||||||
| Tier 1 Capital to Risk-Weighted Assets | |||||||||||||||||||||||||||||||||||
| Cullen/Frost | |||||||||||||||||||||||||||||||||||
| Frost Bank | |||||||||||||||||||||||||||||||||||
| Total Capital to Risk-Weighted Assets | |||||||||||||||||||||||||||||||||||
| Cullen/Frost | |||||||||||||||||||||||||||||||||||
| Frost Bank | |||||||||||||||||||||||||||||||||||
| Leverage Ratio | |||||||||||||||||||||||||||||||||||
| Cullen/Frost | N/A | N/A | |||||||||||||||||||||||||||||||||
| Frost Bank | |||||||||||||||||||||||||||||||||||
____________________
(1)“Well-capitalized” minimum Common Equity Tier 1 to Risk-Weighted Assets and Leverage Ratio thresholds are defined under the prompt corrective action regulations for insured depository institutions and do not formally apply to bank holding companies.
As of September 30, 2026, capital levels at Cullen/Frost and Frost Bank exceed all capital adequacy requirements under the Basel III Capital Rules. Based on the ratios presented above, capital levels as of September 30, 2026, at Cullen/Frost and Frost Bank exceed the minimum levels necessary to be considered “well-capitalized.”
Cullen/Frost and Frost Bank are subject to the regulatory capital requirements administered by the Federal Reserve Board and, for Frost Bank, the Federal Deposit Insurance Corporation (“FDIC”). Regulatory authorities can initiate certain mandatory actions if Cullen/Frost or Frost Bank fail to meet the minimum capital requirements, which could have a direct material effect on our financial statements. Management believes, as of September 30, 2026, that Cullen/Frost and Frost Bank meet all capital adequacy requirements to which they are subject.
Series B Preferred Stock. Outstanding preferred stock includes 150,000 shares, or $150.0 million in aggregate liquidation preference, of our 4.450 0.01 and liquidation preference $1,000 per share (“Series B Preferred Stock”). Each share of Series B Preferred Stock issued and outstanding is represented by 40 depositary shares, each representing a 1/40th ownership interest in a share of the Series B Preferred Stock (equivalent to a liquidation preference of $25 per share). The Series B Preferred Stock qualifies as Tier 1 capital for the purposes of the regulatory capital calculations. The net proceeds from the issuance and sale of the Series B Preferred Stock, after deducting $4.5 million of issuance costs including the underwriting discount and professional service fees, among other things, were approximately $145.5 million. Refer to our 2025 Form 10-K for additional details related to our Series B Preferred Stock.
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Purchases of Equity Securities. From time to time, our board of directors has authorized stock repurchase plans. The purpose of such plans and the manner in which shares are repurchased are discussed in more detail in our 2025 Form 10-K. Most recently, on January 28, 2026, our board of directors authorized a $300.0 million stock repurchase program (the “2026 Repurchase Plan”), allowing us to repurchase shares of our common stock over a one-year period expiring on January 27, 2027. The 2026 Repurchase Plan was publicly announced in a current report on Form 8-K filed with the SEC on January 29, 2026.
Under the 2026 Repurchase Plan, we repurchased 1,255,408 shares at a total cost of $175.0 million (excluding applicable excise taxes) during the nine months ended September 30, 2026. We also repurchased 11,390 shares at a total cost of $1.6 million in connection with the vesting of certain share awards during the nine months ended September 30, 2026. Repurchases made in connection with the vesting of share awards are not associated with any publicly announced stock repurchase plan. Under a prior repurchase plan, we repurchased 549,228 shares at a total cost of $69.3 million (excluding applicable excise taxes) during the nine months ended September 30, 2025. We also repurchased 19,331 shares at a total cost of $2.7 million in connection with the vesting of certain share awards during the nine months ended September 30, 2025. Under the Basel III Capital Rules, Cullen/Frost may not repurchase or redeem any of its preferred stock or subordinated notes and, in some cases, its common stock without the prior approval of the Federal Reserve Board.
Dividend Restrictions. In the ordinary course of business, Cullen/Frost is dependent upon dividends from Frost Bank to provide funds for the payment of dividends to shareholders and to provide for other cash requirements, including to repurchase its common stock. Banking regulations may limit the amount of dividends that may be paid. Approval by regulatory authorities is required if the effect of dividends declared would cause the regulatory capital of Frost Bank to fall below specified minimum levels. Approval is also required if dividends declared exceed the net profits for that year combined with the retained net profits for the preceding two years. Under the foregoing dividend restrictions and while maintaining its “well-capitalized” status, at September 30, 2026, Frost Bank could pay aggregate dividends of up to $841.2 million to Cullen/Frost without prior regulatory approval.
Under the terms of the junior subordinated deferrable interest debentures that Cullen/Frost has issued to Cullen/Frost Capital Trust II, Cullen/Frost has the right at any time during the term of the debentures to defer the payment of interest for one or more extension periods not exceeding 20 consecutive quarterly periods with respect to each extension period. In the event that we have elected to defer interest on the debentures, we may not, with certain exceptions, declare or pay any dividends or distributions on our capital stock or purchase or acquire any of our capital stock.
Under the terms of the Series B Preferred Stock, in the event that we do not declare and pay dividends on the Series B Preferred Stock for the most recent dividend period, we may not, with certain exceptions, declare or pay dividends on, or purchase, redeem or otherwise acquire, shares of our common stock or any of our securities that rank junior to the Series B Preferred Stock.
Note 7 - Derivative Financial Instruments
The fair value of derivative positions outstanding is included in accrued interest receivable and other assets and accrued interest payable and other liabilities in the accompanying consolidated balance sheets and in the net change in each of these financial statement line items in the accompanying consolidated statements of cash flows.
Interest Rate Derivatives. We utilize interest rate swaps, caps, and floors to mitigate exposure to interest rate risk and to facilitate the needs of our customers. Our objectives for utilizing our currently outstanding derivative positions are described below:
During the first quarter of 2026, we entered into and designated a forward‑starting, pay-fixed, receive-variable interest rate swap as a fair value hedge under the portfolio layer method of ASC 815 to mitigate changes in the fair value of a designated hedged layer of a closed portfolio of $500.0 million of fixed-rate, available-for-sale municipal securities attributable solely to changes in the Secured Overnight Financing Rate (“SOFR”), the benchmark interest rate being hedged. Under this designation, changes in the fair value of the swap and the corresponding SOFR-related changes in the fair value of the hedged layer are recognized in interest income on tax-exempt securities, with basis adjustments recorded to the carrying amount of the hedged layer. The cumulative basis adjustments included in the hedged layer totaled $22.4 million at September 30, 2026. The hedge is intended to assist in managing the duration of our securities portfolio as its mix and maturity profile evolve over time. The swap has a notional amount of $500.0 million and a forward start date of January 1, 2028, at which time we will pay a fixed rate of approximately 3.53 % and receive a floating rate indexed to SOFR. Changes in the fair value of the hedged layer not attributable to SOFR will continue to be recognized in other comprehensive income, net of tax, or in accordance with other applicable accounting guidance in the case of credit impairment.
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We also have entered into certain interest rate derivative contracts that are not designated as hedging instruments to accommodate the business needs of our customers. These derivative contracts relate to transactions in which we enter into an interest rate swap, cap and/or floor with a customer while at the same time entering into an offsetting interest rate swap, cap and/or floor with a third-party financial institution. In connection with each swap transaction, we agree to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate. At the same time, we agree to pay a third-party financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows our customer to effectively convert a variable rate loan to a fixed rate. Because we act as an intermediary for our customers, changes in the fair value of the underlying derivative contracts largely offset each other and do not materially impact our results of operations.
The notional amounts and estimated fair values of interest rate derivative contracts outstanding are presented in the following table. The fair values of these contracts are estimated utilizing internal valuation methods with observable market data inputs, or as determined by the Chicago Mercantile Exchange (“CME”) for centrally cleared derivative contracts. CME rules legally characterize variation margin payments for centrally cleared derivatives as settlements of the derivatives' exposure rather than collateral. As a result, the variation margin payment and the related derivative instruments are considered a single unit of account for accounting and financial reporting purposes. Variation margin, as determined by the CME, is settled daily. As a result, derivative contracts that clear through the CME have a negligible fair value.
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Notional Amount | Estimated Fair Value | Notional Amount | Estimated Fair Value | ||||||||||||||||||||
| Derivatives designated as hedges of fair value: | |||||||||||||||||||||||
| Financial institution counterparties: | |||||||||||||||||||||||
| Securities interest rate swap - liabilities | $ | ( | $ | ||||||||||||||||||||
| Non-hedging interest rate derivatives: | |||||||||||||||||||||||
| Financial institution counterparties: | |||||||||||||||||||||||
| Loan/lease interest rate swaps – assets | |||||||||||||||||||||||
| Loan/lease interest rate swaps – liabilities | ( | ( | |||||||||||||||||||||
| Loan/lease interest rate caps – assets | |||||||||||||||||||||||
| Customer counterparties: | |||||||||||||||||||||||
| Loan/lease interest rate swaps – assets | |||||||||||||||||||||||
| Loan/lease interest rate swaps – liabilities | ( | ( | |||||||||||||||||||||
| Loan/lease interest rate caps – liabilities | ( | ( | |||||||||||||||||||||
The weighted-average rates paid and received for active interest rate swaps outstanding at September 30, 2026, were as follows:
| Weighted-Average | |||||||||||
| Interest Rate Paid | Interest Rate Received | ||||||||||
| Interest rate swaps: | |||||||||||
| Non-hedging interest rate swaps – financial institution counterparties | % | % | |||||||||
| Non-hedging interest rate swaps – customer counterparties | |||||||||||
The weighted-average strike rate for outstanding interest rate caps was 4.10 % at September 30, 2026.
Commodity Derivatives. We enter into certain commodity derivative contracts that are not designated as hedging instruments to accommodate the business needs of our customers. Upon the origination of a commodity derivative contract with a customer, we simultaneously enter into an offsetting contract with a third-party financial institution to mitigate our exposure to fluctuations in commodity prices. Because we act as an intermediary for our customers, changes in the fair value of the underlying derivative contracts largely offset each other and do not materially impact our results of operations.
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The notional amounts and estimated fair values of non-hedging commodity derivative contracts outstanding are presented in the following table. The fair values of these contracts are estimated utilizing internal valuation methods with observable market data inputs.
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||
| Notional Units | Notional Amount | Estimated Fair Value | Notional Amount | Estimated Fair Value | |||||||||||||||||||||||||
| Financial institution counterparties: | |||||||||||||||||||||||||||||
| Oil – assets | Barrels | $ | $ | $ | |||||||||||||||||||||||||
| Oil – liabilities | Barrels | ( | ( | ||||||||||||||||||||||||||
| Natural gas – assets | MMBTUs | ||||||||||||||||||||||||||||
| Natural gas – liabilities | MMBTUs | ( | ( | ||||||||||||||||||||||||||
| Customer counterparties: | |||||||||||||||||||||||||||||
| Oil – assets | Barrels | ||||||||||||||||||||||||||||
| Oil – liabilities | Barrels | ( | ( | ||||||||||||||||||||||||||
| Natural gas – assets | MMBTUs | ||||||||||||||||||||||||||||
| Natural gas – liabilities | MMBTUs | ( | ( | ||||||||||||||||||||||||||
Foreign Currency Derivatives. We enter into foreign currency derivative contracts that are not designated as hedging instruments to accommodate the business needs of our customers and to mitigate our exposure to foreign currency risk. Upon the origination of a foreign currency derivative contract with a customer, we simultaneously enter into an offsetting contract with a third-party financial institution to mitigate our exposure to fluctuations in foreign currency exchange rates. Because we act as an intermediary for our customers, changes in the fair value of the underlying derivative contracts largely offset each other and do not materially impact our results of operations. We also utilize foreign currency derivative contracts that are not designated as hedging instruments to mitigate the economic effect of fluctuations in foreign currency exchange rates on foreign currency holdings and certain short-term, non-U.S. dollar-denominated loans. The fair values of these contracts are estimated utilizing internal valuation methods with observable market data inputs. The notional amounts and fair values of non-hedging foreign currency derivative contracts are presented in the following table.
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||
| Notional Currency | Notional Amount | Estimated Fair Value | Notional Amount | Estimated Fair Value | |||||||||||||||||||||||||
| Financial institution counterparties: | |||||||||||||||||||||||||||||
| Forward and option contracts – assets | CNY | ||||||||||||||||||||||||||||
| Forward and option contracts – liabilities | CNY | ||||||||||||||||||||||||||||
| Customer counterparties: | |||||||||||||||||||||||||||||
| Forward and option contracts – assets | CNY | ||||||||||||||||||||||||||||
Gains, Losses and Derivative Cash Flows. For the fair value hedge of securities, all cash flows and changes in the fair value of the derivative hedging instrument, as well as SOFR-related changes in the fair value of the hedged layer of municipal securities, are recorded in interest income on tax-exempt securities. For non-hedging derivative instruments, gains and losses due to changes in fair value and all cash flows are included in other non-interest income and other non-interest expense, as presented in the table below.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Fair value hedge of municipal securities: | |||||||||||||||||||||||
| Interest income on tax-exempt securities (net ineffective portion of hedge) | $ | ( | $ | $ | ( | $ | |||||||||||||||||
| Non-hedging interest rate derivatives: | |||||||||||||||||||||||
| Other non-interest income | |||||||||||||||||||||||
| Other non-interest expense | ( | ( | |||||||||||||||||||||
| Non-hedging commodity derivatives: | |||||||||||||||||||||||
| Other non-interest income | |||||||||||||||||||||||
| Non-hedging foreign currency derivatives: | |||||||||||||||||||||||
| Other non-interest income | |||||||||||||||||||||||
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Note 8 - Balance Sheet Offsetting and Repurchase Agreements
Balance Sheet Offsetting. Certain financial instruments, including resell and repurchase agreements and derivatives, may be eligible for offset in the consolidated balance sheet and/or subject to master netting arrangements or similar agreements. Our derivative transactions with upstream financial institution counterparties are generally executed under International Swaps and Derivative Association (“ISDA”) master agreements, which include “right of set-off” provisions. In such cases, there is generally a legally enforceable right to offset recognized amounts, and there may be an intention to settle such amounts on a net basis. Nonetheless, we do not generally offset such financial instruments for financial reporting purposes.
Information about financial instruments that are eligible for offset in the consolidated balance sheet as of September 30, 2026, is presented in the following tables.
| Gross Amount Recognized | Gross Amount Offset | Net Amount Recognized | |||||||||||||||
| September 30, 2026 | |||||||||||||||||
| Financial assets: | |||||||||||||||||
| Derivatives: | |||||||||||||||||
| Interest rate contracts | $ | $ | $ | ||||||||||||||
| Commodity contracts | |||||||||||||||||
| Foreign currency contracts | |||||||||||||||||
| Total derivatives | |||||||||||||||||
| Resell agreements | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
| Financial liabilities: | |||||||||||||||||
| Derivatives: | |||||||||||||||||
| Interest rate contracts | $ | $ | $ | ||||||||||||||
| Commodity contracts | |||||||||||||||||
| Total derivatives | |||||||||||||||||
| Repurchase agreements | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
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| Gross Amounts Not Offset | |||||||||||||||||||||||
| Net Amount Recognized | Financial Instruments | Collateral | Net Amount | ||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||
| Counterparty H | $ | $ | ( | $ | $ | ||||||||||||||||||
| Counterparty F | ( | ||||||||||||||||||||||
| Counterparty B | ( | ||||||||||||||||||||||
| Counterparty E | ( | ( | |||||||||||||||||||||
| Other counterparties | ( | ( | |||||||||||||||||||||
| Total derivatives | ( | ( | |||||||||||||||||||||
| Resell agreements | |||||||||||||||||||||||
| Total | $ | $ | ( | $ | ( | $ | |||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||
| Counterparty H | $ | $ | ( | $ | ( | $ | |||||||||||||||||
| Counterparty F | ( | ( | |||||||||||||||||||||
| Counterparty B | ( | ( | |||||||||||||||||||||
| Counterparty E | ( | ||||||||||||||||||||||
| Other counterparties | ( | ( | |||||||||||||||||||||
| Total derivatives | ( | ( | |||||||||||||||||||||
| Repurchase agreements | ( | ||||||||||||||||||||||
| Total | $ | $ | ( | $ | ( | $ | |||||||||||||||||
Information about financial instruments that are eligible for offset in the consolidated balance sheet as of December 31, 2025, is presented in the following tables.
| Gross Amount Recognized | Gross Amount Offset | Net Amount Recognized | |||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||
| Interest rate contracts | $ | $ | $ | ||||||||||||||||||||
| Commodity contracts | |||||||||||||||||||||||
| Total derivatives | |||||||||||||||||||||||
| Resell agreements | |||||||||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||
| Interest rate contracts | $ | $ | $ | ||||||||||||||||||||
| Commodity contracts | |||||||||||||||||||||||
| Total derivatives | |||||||||||||||||||||||
| Repurchase agreements | |||||||||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||||||||
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| Gross Amounts Not Offset | |||||||||||||||||||||||
| Net Amount Recognized | Financial Instruments | Collateral | Net Amount | ||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||
| Counterparty H | $ | $ | ( | $ | ( | $ | |||||||||||||||||
| Counterparty F | ( | ( | |||||||||||||||||||||
| Counterparty B | ( | ( | |||||||||||||||||||||
| Counterparty E | ( | ( | |||||||||||||||||||||
| Other counterparties | ( | ( | |||||||||||||||||||||
| Total derivatives | ( | ( | |||||||||||||||||||||
| Resell agreements | ( | ||||||||||||||||||||||
| Total | $ | $ | ( | $ | ( | $ | |||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||
| Counterparty H | $ | $ | ( | $ | $ | ||||||||||||||||||
| Counterparty F | ( | ||||||||||||||||||||||
| Counterparty B | ( | ||||||||||||||||||||||
| Counterparty E | ( | ||||||||||||||||||||||
| Other counterparties | ( | ( | |||||||||||||||||||||
| Total derivatives | ( | ( | |||||||||||||||||||||
| Repurchase agreements | ( | ||||||||||||||||||||||
| Total | $ | $ | ( | $ | ( | $ | |||||||||||||||||
Repurchase Agreements. We utilize securities sold under agreements to repurchase to facilitate the needs of our customers and to facilitate our short-term funding needs. Securities sold under agreements to repurchase are stated at the amount of cash received in connection with these transactions. We monitor collateral levels continuously, and we may be required to provide additional collateral based on the fair value of the underlying securities. Securities pledged as collateral under repurchase agreements are maintained with our safekeeping agents.
The remaining contractual maturity of repurchase agreements in the consolidated balance sheets as of September 30, 2026 and December 31, 2025, is presented in the following tables.
| Remaining Contractual Maturity of the Agreements | |||||||||||||||||||||||||||||
| Overnight and Continuous | Up to 30 Days | 30-90 Days | Greater than 90 Days | Total | |||||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||||||||
| Repurchase agreements: | |||||||||||||||||||||||||||||
| U.S. Treasury | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Residential mortgage-backed securities | |||||||||||||||||||||||||||||
| Total borrowings | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Gross amount of recognized liabilities for repurchase agreements | $ | ||||||||||||||||||||||||||||
| Amounts related to agreements not included in offsetting disclosures above | $ | ||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||
| Repurchase agreements: | |||||||||||||||||||||||||||||
| U.S. Treasury | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Residential mortgage-backed securities | |||||||||||||||||||||||||||||
| Total borrowings | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Gross amount of recognized liabilities for repurchase agreements | $ | ||||||||||||||||||||||||||||
| Amounts related to agreements not included in offsetting disclosures above | $ | ||||||||||||||||||||||||||||
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Note 9 - Stock-Based Compensation
A combined summary of activity in our active stock plans is presented in the following table. Performance stock units outstanding are presented based on the maximum payout rate specified by the applicable performance criteria. As of September 30, 2026, 2,114,785 shares remained available for future awards.
| Deferred Stock Units Outstanding | Restricted Stock Units Outstanding | Performance Stock Units Outstanding | |||||||||||||||||||||||||||||||||
| Number of Units | Weighted- Average Fair Value at Grant | Number of Units | Weighted- Average Fair Value at Grant | Number of Units | Weighted- Average Fair Value at Grant | ||||||||||||||||||||||||||||||
| Balance, January 1, 2026 | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Granted | — | — | |||||||||||||||||||||||||||||||||
| Vested | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Forfeited | — | — | ( | ( | |||||||||||||||||||||||||||||||
| Balance, September 30, 2026 | |||||||||||||||||||||||||||||||||||
Shares issued in connection with stock compensation awards are issued from available treasury shares or, if treasury shares are unavailable, from authorized but unissued shares. Shares issued in connection with stock compensation awards and related information were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| New shares issued from available authorized shares | |||||||||||||||||||||||
| Shares issued from available treasury stock | |||||||||||||||||||||||
| Proceeds from stock option exercises | $ | $ | $ | $ | |||||||||||||||||||
Stock-based compensation expense is recognized ratably over the requisite service period for all awards. The service period for restricted stock units does not extend beyond the date a participant reaches age 65. Deferred stock units granted to non-employee directors generally vest immediately, and the related expense is fully recognized on the date of grant. For performance stock units, the service period generally corresponds to the three-year performance period specified in the award but does not extend beyond the date a participant reaches age 65. Expense recognized each period is based on our estimate of the number of shares that will ultimately be issued based on the achievement of the applicable performance criteria.
Stock-based compensation expense or benefit and the related income tax benefit are presented in the following table. The service period for performance stock units granted each year begins on January 1 of the following year.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Restricted stock units | $ | $ | $ | $ | |||||||||||||||||||
| Deferred stock units | |||||||||||||||||||||||
| Performance stock units | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
| Income tax benefit | $ | $ | $ | $ | |||||||||||||||||||
Unrecognized stock-based compensation expense at September 30, 2026 is presented in the following table. Unrecognized stock-based compensation expense related to performance stock units is presented based on the maximum payout rate specified by the applicable performance criteria.
| Restricted stock units | $ | ||||
| Performance stock units | |||||
| Total | $ | ||||
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Note 10 - Earnings Per Common Share
Earnings per common share is computed using the two-class method as more fully described in our 2025 Form 10-K. The following table presents a reconciliation of net income available to common shareholders, net earnings allocated to common stock and the number of shares used in the calculation of basic and diluted earnings per common share.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Less: Preferred stock dividends | |||||||||||||||||||||||
| Net income available to common shareholders | |||||||||||||||||||||||
| Less: Earnings allocated to participating securities | |||||||||||||||||||||||
| Net earnings allocated to common stock | $ | $ | $ | $ | |||||||||||||||||||
| Distributed earnings allocated to common stock | $ | $ | $ | $ | |||||||||||||||||||
| Undistributed earnings allocated to common stock | |||||||||||||||||||||||
| Net earnings allocated to common stock | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average shares outstanding for basic earnings per common share | |||||||||||||||||||||||
| Dilutive effect of stock compensation | |||||||||||||||||||||||
| Weighted-average shares outstanding for diluted earnings per common share | |||||||||||||||||||||||
Note 11 - Defined Benefit Plans
The components of the combined net periodic expense (benefit) for our defined benefit pension plans are presented in the table below.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Expected return on plan assets, net of expenses | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Interest cost on projected benefit obligation | |||||||||||||||||||||||
| Net amortization and deferral | |||||||||||||||||||||||
| Net periodic expense (benefit) | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Our non-qualified defined benefit pension plan is not funded. No contributions to the qualified defined benefit pension plan were made during the nine months ended September 30, 2026. We do no t expect to make any contributions to the qualified defined benefit plan during the remainder of 2026.
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Note 12 - Income Taxes
Income tax expense was as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Current income tax expense | $ | $ | $ | $ | |||||||||||||||||||
| Deferred income tax expense (benefit) | ( | ( | |||||||||||||||||||||
| Income tax expense, as reported | $ | $ | $ | $ | |||||||||||||||||||
| Effective tax rate | % | % | % | % | |||||||||||||||||||
We had a net deferred tax asset totaling $470.6 million at September 30, 2026 and $261.1 million at December 31, 2025. No
The effective income tax rates differed from the U.S. statutory federal income tax rate of 21 no
We file income tax returns in the U.S. federal jurisdiction. We are no longer subject to U.S. federal income tax examinations by tax authorities for years before tax year 2022.
Note 13 - Other Comprehensive Income (Loss)
The before and after-tax amounts allocated to each component of other comprehensive income (loss) are presented in the following table. Reclassification adjustments related to securities available for sale are included in net gain (loss) on securities transactions in the accompanying consolidated statements of income. Reclassification adjustments related to defined-benefit post-retirement benefit plans are included in the computation of net periodic pension expense (see Note 11 – Defined Benefit Plans).
| Three Months Ended September 30, 2026 | Three Months Ended September 30, 2025 | ||||||||||||||||||||||||||||||||||
| Before Tax Amount | Tax Expense, (Benefit) | Net of Tax Amount | Before Tax Amount | Tax Expense, (Benefit) | Net of Tax Amount | ||||||||||||||||||||||||||||||
| Securities available for sale and transferred securities: | |||||||||||||||||||||||||||||||||||
| Change in net unrealized gain/loss during the period | $ | ( | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||
| Change in net unrealized gain on securities transferred to held to maturity | |||||||||||||||||||||||||||||||||||
| Reclassification adjustment for net (gains) losses included in net income | |||||||||||||||||||||||||||||||||||
| Total securities available for sale and transferred securities | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Defined-benefit post-retirement benefit plans: | |||||||||||||||||||||||||||||||||||
| Reclassification adjustment for net amortization of actuarial gain/loss included in net income as a component of net periodic cost (benefit) | |||||||||||||||||||||||||||||||||||
| Total defined-benefit post-retirement benefit plans | |||||||||||||||||||||||||||||||||||
| Total other comprehensive income (loss) | $ | ( | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||
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| Nine Months Ended September 30, 2026 | Nine Months Ended September 30, 2025 | ||||||||||||||||||||||||||||||||||
| Before Tax Amount | Tax Expense, (Benefit) | Net of Tax Amount | Before Tax Amount | Tax Expense, (Benefit) | Net of Tax Amount | ||||||||||||||||||||||||||||||
| Securities available for sale and transferred securities: | |||||||||||||||||||||||||||||||||||
| Change in net unrealized gain/loss during the period | $ | ( | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||
| Change in net unrealized gain on securities transferred to held to maturity | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Reclassification adjustment for net (gains) losses included in net income | |||||||||||||||||||||||||||||||||||
| Total securities available for sale and transferred securities | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Defined-benefit post-retirement benefit plans: | |||||||||||||||||||||||||||||||||||
| Reclassification adjustment for net amortization of actuarial gain/loss included in net income as a component of net periodic cost (benefit) | |||||||||||||||||||||||||||||||||||
| Total defined-benefit post-retirement benefit plans | |||||||||||||||||||||||||||||||||||
| Total other comprehensive income (loss) | $ | ( | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||
Activity in accumulated other comprehensive income (loss), net of tax, was as follows:
| Securities Available For Sale | Defined Benefit Plans | Accumulated Other Comprehensive Income | |||||||||||||||
| Balance at January 1, 2026 | $ | ( | $ | ( | $ | ( | |||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | |||||||||||||||
| Reclassification of amounts included in net income | |||||||||||||||||
| Net other comprehensive income (loss) during period | ( | ( | |||||||||||||||
| Balance at September 30, 2026 | $ | ( | $ | ( | $ | ( | |||||||||||
| Balance at January 1, 2025 | $ | ( | $ | ( | $ | ( | |||||||||||
| Other comprehensive income (loss) before reclassifications | |||||||||||||||||
| Reclassification of amounts included in net income | |||||||||||||||||
| Net other comprehensive income (loss) during period | |||||||||||||||||
| Balance at September 30, 2025 | $ | ( | $ | ( | $ | ( | |||||||||||
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Note 14 – Operating Segments
We are managed under a matrix organizational structure whereby our two
Our chief executive officer is our chief operating decision maker. We use a match-funded transfer pricing process to allocate costs, capital, and resources to each operating segment. The process helps us to (i) identify the cost or opportunity value of funds within each business segment, (ii) measure the profitability of a particular business segment by relating appropriate costs to revenues, (iii) evaluate each business segment in a manner consistent with its economic impact on consolidated earnings, and (iv) enhance asset and liability pricing decisions. Our chief executive officer reviews actual net income versus budgeted net income to assess segment performance on a monthly basis and to make decisions about allocating capital and personnel to the segments. Financial results by operating segment, including significant expense categories provided to the chief operating decision maker, are detailed below.
| Banking | Wealth Management | Non-Banks | Consolidated | ||||||||||||||||||||
| Three months ended: | |||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||
| Interest income | $ | $ | $ | $ | |||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Net interest income (expense) | ( | ||||||||||||||||||||||
| Credit loss expense | |||||||||||||||||||||||
| Net interest income after credit loss expense | ( | ||||||||||||||||||||||
| Non-interest income: | |||||||||||||||||||||||
| Trust and investment management fees | ( | ||||||||||||||||||||||
| Service charges on deposit accounts | |||||||||||||||||||||||
| Insurance commissions and fees | |||||||||||||||||||||||
| Interchange and card transaction fees | |||||||||||||||||||||||
| Other charges, commissions and fees | |||||||||||||||||||||||
| Net gain (loss) on securities transactions | ( | ( | |||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total non-interest income | |||||||||||||||||||||||
| Non-interest expense: | |||||||||||||||||||||||
| Salaries and wages | |||||||||||||||||||||||
| Employee benefits | |||||||||||||||||||||||
| Net occupancy | ( | ||||||||||||||||||||||
| Technology, furniture and equipment | |||||||||||||||||||||||
| Deposit insurance | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total non-interest expense | |||||||||||||||||||||||
| Income (loss) before income taxes | ( | ||||||||||||||||||||||
| Income tax expense (benefit) | ( | ||||||||||||||||||||||
| Net income (loss) | ( | ||||||||||||||||||||||
| Preferred stock dividends | |||||||||||||||||||||||
| Net income (loss) available to common shareholders | $ | $ | $ | ( | $ | ||||||||||||||||||
| Revenues from (expenses to) external customers | $ | $ | $ | ( | $ | ||||||||||||||||||
| Average assets (in millions) | $ | $ | $ | $ | |||||||||||||||||||
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| Banking | Wealth Management | Non-Banks | Consolidated | ||||||||||||||||||||
| Three months ended: | |||||||||||||||||||||||
| September 30, 2025 | |||||||||||||||||||||||
| Interest income | $ | $ | $ | $ | |||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Net interest income (expense) | ( | ||||||||||||||||||||||
| Credit loss expense | |||||||||||||||||||||||
| Net interest income after credit loss expense | ( | ||||||||||||||||||||||
| Non-interest income: | |||||||||||||||||||||||
| Trust and investment management fees | ( | ||||||||||||||||||||||
| Service charges on deposit accounts | |||||||||||||||||||||||
| Insurance commissions and fees | |||||||||||||||||||||||
| Interchange and card transaction fees | |||||||||||||||||||||||
| Other charges, commissions and fees | |||||||||||||||||||||||
| Net gain (loss) on securities transactions | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total non-interest income | ( | ||||||||||||||||||||||
| Non-interest expense: | |||||||||||||||||||||||
| Salaries and wages | |||||||||||||||||||||||
| Employee benefits | |||||||||||||||||||||||
| Net occupancy | |||||||||||||||||||||||
| Technology, furniture and equipment | |||||||||||||||||||||||
| Deposit insurance | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total non-interest expense | |||||||||||||||||||||||
| Income (loss) before income taxes | ( | ||||||||||||||||||||||
| Income tax expense (benefit) | ( | ||||||||||||||||||||||
| Net income (loss) | ( | ||||||||||||||||||||||
| Preferred stock dividends | |||||||||||||||||||||||
| Net income (loss) available to common shareholders | $ | $ | $ | ( | $ | ||||||||||||||||||
| Revenues from (expenses to) external customers | $ | $ | $ | ( | $ | ||||||||||||||||||
| Average assets (in millions) | $ | $ | $ | $ | |||||||||||||||||||
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| Banking | Wealth Management | Non-Banks | Consolidated | ||||||||||||||||||||
| Nine months ended: | |||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||
| Interest income | $ | $ | $ | $ | |||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Net interest income (expense) | ( | ||||||||||||||||||||||
| Credit loss expense | |||||||||||||||||||||||
| Net interest income after credit loss expense | ( | ||||||||||||||||||||||
| Non-interest income: | |||||||||||||||||||||||
| Trust and investment management fees | ( | ||||||||||||||||||||||
| Service charges on deposit accounts | |||||||||||||||||||||||
| Insurance commissions and fees | |||||||||||||||||||||||
| Interchange and card transaction fees | |||||||||||||||||||||||
| Other charges, commissions and fees | |||||||||||||||||||||||
| Net gain (loss) on securities transactions | ( | ( | |||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total non-interest income | ( | ||||||||||||||||||||||
| Non-interest expense: | |||||||||||||||||||||||
| Salaries and wages | |||||||||||||||||||||||
| Employee benefits | |||||||||||||||||||||||
| Net occupancy | ( | ||||||||||||||||||||||
| Technology, furniture and equipment | |||||||||||||||||||||||
| Deposit insurance | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total non-interest expense | |||||||||||||||||||||||
| Income (loss) before income taxes | ( | ||||||||||||||||||||||
| Income tax expense (benefit) | ( | ||||||||||||||||||||||
| Net income (loss) | ( | ||||||||||||||||||||||
| Preferred stock dividends | |||||||||||||||||||||||
| Net income (loss) available to common shareholders | $ | $ | $ | ( | $ | ||||||||||||||||||
| Revenues from (expenses to) external customers | $ | $ | $ | ( | $ | ||||||||||||||||||
| Average assets (in millions) | $ | $ | $ | $ | |||||||||||||||||||
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| Banking | Wealth Management | Non-Banks | Consolidated | ||||||||||||||||||||
| Nine months ended: | |||||||||||||||||||||||
| September 30, 2025 | |||||||||||||||||||||||
| Interest income | $ | $ | $ | $ | |||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Net interest income (expense) | ( | ||||||||||||||||||||||
| Credit loss expense | |||||||||||||||||||||||
| Net interest income after credit loss expense | ( | ||||||||||||||||||||||
| Non-interest income: | |||||||||||||||||||||||
| Trust and investment management fees | ( | ||||||||||||||||||||||
| Service charges on deposit accounts | |||||||||||||||||||||||
| Insurance commissions and fees | |||||||||||||||||||||||
| Interchange and card transaction fees | |||||||||||||||||||||||
| Other charges, commissions and fees | |||||||||||||||||||||||
| Net gain (loss) on securities transactions | ( | ( | |||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total non-interest income | ( | ||||||||||||||||||||||
| Non-interest expense: | |||||||||||||||||||||||
| Salaries and wages | |||||||||||||||||||||||
| Employee benefits | |||||||||||||||||||||||
| Net occupancy | |||||||||||||||||||||||
| Technology, furniture and equipment | |||||||||||||||||||||||
| Deposit insurance | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total non-interest expense | |||||||||||||||||||||||
| Income (loss) before income taxes | ( | ||||||||||||||||||||||
| Income tax expense (benefit) | ( | ||||||||||||||||||||||
| Net income (loss) | ( | ||||||||||||||||||||||
| Preferred stock dividends | |||||||||||||||||||||||
| Net income (loss) available to common shareholders | $ | $ | $ | ( | $ | ||||||||||||||||||
| Revenues from (expenses to) external customers | $ | $ | $ | ( | $ | ||||||||||||||||||
| Average assets (in millions) | $ | $ | $ | $ | |||||||||||||||||||
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Note 15 – Fair Value Measurements
The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market). In estimating fair value, we utilize valuation techniques that are consistent with the market approach, the income approach, and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. ASC Topic 820 establishes a three-level fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. See our 2025 Form 10-K for additional information regarding the fair value hierarchy and a description of our valuation techniques.
Financial Assets and Financial Liabilities. The tables below summarize financial assets and financial liabilities measured at fair value on a recurring basis as of September 30, 2026 and December 31, 2025, segregated by the level of the valuation inputs within the fair value hierarchy of ASC Topic 820 utilized to measure fair value.
| Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | Total Fair Value | ||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||
| Securities available for sale: | |||||||||||||||||||||||
| U.S. Treasury | $ | $ | — | $ | — | $ | |||||||||||||||||
| Residential mortgage-backed securities | — | — | |||||||||||||||||||||
| States and political subdivisions | — | — | |||||||||||||||||||||
| Other | — | — | |||||||||||||||||||||
| Trading account securities: | |||||||||||||||||||||||
| U.S. Treasury | — | — | |||||||||||||||||||||
| States and political subdivisions | — | — | |||||||||||||||||||||
| Derivative assets: | |||||||||||||||||||||||
| Interest rate swaps, caps, and floors | — | — | |||||||||||||||||||||
| Commodity swaps and options | — | — | |||||||||||||||||||||
| Foreign currency forward contracts | — | — | |||||||||||||||||||||
| Derivative liabilities: | |||||||||||||||||||||||
| Interest rate swaps, caps, and floors | — | — | |||||||||||||||||||||
| Commodity swaps and options | — | — | |||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Securities available for sale: | |||||||||||||||||||||||
| U.S. Treasury | $ | $ | — | $ | — | $ | |||||||||||||||||
| Residential mortgage-backed securities | — | — | |||||||||||||||||||||
| States and political subdivisions | — | — | |||||||||||||||||||||
| Other | — | — | |||||||||||||||||||||
| Trading account securities: | |||||||||||||||||||||||
| U.S. Treasury | — | — | |||||||||||||||||||||
| States and political subdivisions | — | — | |||||||||||||||||||||
| Derivative assets: | |||||||||||||||||||||||
| Interest rate swaps, caps, and floors | — | — | |||||||||||||||||||||
| Commodity swaps and options | — | — | |||||||||||||||||||||
| Derivative liabilities: | |||||||||||||||||||||||
| Interest rate swaps, caps, and floors | — | — | |||||||||||||||||||||
| Commodity swaps and options | — | — | |||||||||||||||||||||
Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, these instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. Financial assets measured at fair value on a non-recurring basis during the reported periods include certain collateral-dependent loans, reported at the fair value of the underlying collateral if repayment is expected solely from the collateral.
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The following table presents collateral dependent loans that were remeasured and reported at fair value through a specific allocation of the allowance for credit losses on loans based upon the fair value of the underlying collateral during the reported periods.
| Nine Months Ended September 30, 2026 | Nine Months Ended September 30, 2025 | ||||||||||||||||||||||
| Level 2 | Level 3 | Level 2 | Level 3 | ||||||||||||||||||||
| Carrying value before allocations | $ | $ | $ | $ | |||||||||||||||||||
| Specific (allocations) reversals of prior allocations | ( | ( | ( | ( | |||||||||||||||||||
| Fair value | $ | $ | $ | $ | |||||||||||||||||||
In June 2026, we transferred certain loans with an aggregate amortized cost of approximately $11.5 2.1 541 thousand.
Non-Financial Assets and Non-Financial Liabilities. We do not
The following table presents foreclosed assets that were remeasured and reported at fair value during the reported periods:
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Foreclosed assets remeasured at initial recognition: | |||||||||||
| Carrying value of foreclosed assets prior to remeasurement | $ | $ | |||||||||
| Charge-offs recognized in the allowance for credit losses on loans | ( | ||||||||||
| Fair value | $ | $ | |||||||||
| Foreclosed assets remeasured subsequent to initial recognition: | |||||||||||
| Carrying value of foreclosed assets prior to remeasurement | $ | $ | |||||||||
| Write-downs included in other non-interest expense | ( | ||||||||||
| Fair value | $ | $ | |||||||||
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Financial Instruments Reported at Amortized Cost. The estimated fair values of financial instruments that are reported at amortized cost in our consolidated balance sheets, segregated by the level of the valuation inputs within the fair value hierarchy of ASC 820 utilized to measure fair value, were as follows:
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||
| Level 2 inputs: | |||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | |||||||||||||||||||
| Securities held to maturity | |||||||||||||||||||||||
| Accrued interest receivable | |||||||||||||||||||||||
| Level 3 inputs: | |||||||||||||||||||||||
| Loans, net | |||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||
| Level 2 inputs: | |||||||||||||||||||||||
| Deposits | |||||||||||||||||||||||
| Federal funds purchased | |||||||||||||||||||||||
| Repurchase agreements | |||||||||||||||||||||||
| Junior subordinated deferrable interest debentures | |||||||||||||||||||||||
| Subordinated notes | |||||||||||||||||||||||
| Accrued interest payable | |||||||||||||||||||||||
Under ASC Topic 825, entities may choose to measure eligible financial instruments at fair value at specified election dates. The fair value measurement option (i) may be applied instrument by instrument, with certain exceptions, (ii) is generally irrevocable, and (iii) is applied only to entire instruments and not to portions of instruments. Unrealized gains and losses on items for which the fair value measurement option has been elected must be reported in earnings at each subsequent reporting date. During the reported periods, we had no
Note 16 - Accounting Standards Updates
Information about certain recently issued accounting standards updates is presented below. Also refer to Note 19 - Accounting Standards Updates in our 2025 Form 10-K for additional information related to previously issued accounting standards updates.
ASU No. 2025-05, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets.” ASU 2025‑05 provides all entities with a practical expedient when estimating expected credit losses on accounts receivable and contract assets arising from transactions under ASC 606, Revenue from Contracts with Customers. The practical expedient allows entities to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset when developing reasonable and supportable forecasts. ASU 2025-05 became effective for us in 2026 and did not have a material impact on our financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Financial Review
Cullen/Frost Bankers, Inc.
The following discussion should be read in conjunction with our consolidated financial statements, and notes thereto, for the year ended December 31, 2025, and the other information included in the 2025 Form 10-K. Operating results for the three and nine months ended September 30, 2026 are not necessarily indicative of the results for the year ending December 31, 2026 or any future period.
Dollar amounts in tables are stated in thousands, except for per share amounts.
Forward-Looking Statements and Factors that Could Affect Future Results
Certain statements contained in this Quarterly Report on Form 10-Q that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”), notwithstanding that such statements are not specifically identified as such. In addition, certain statements may be contained in our future filings with the SEC, in press releases, and in oral and written statements made by us or with our approval that are not statements of historical fact and constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations of Cullen/Frost or its management or Board of Directors, including those relating to products, services or operations; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” “continue,” “remain,” “will,” “should,” “may,” and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:
•The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board and the implementation of tariffs and other protectionist trade policies.
•Inflation, interest rate, securities market, and monetary fluctuations.
•Local, regional, national, and international economic conditions and the impact they may have on us and our customers and our assessment of that impact.
•Changes in the financial performance and/or condition of our borrowers.
•Changes in the mix of loan geographies, sectors and types or the level of non-performing assets and charge-offs.
•Changes in estimates of future credit loss reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements.
•Changes in our liquidity position.
•Impairment of our goodwill or other intangible assets.
•The timely development and acceptance of new products and services and perceived overall value of these products and services by users.
•Changes in consumer spending, borrowing, and saving habits.
•Greater than expected costs or difficulties related to the integration of new products and lines of business.
•Technological changes, including advances in artificial intelligence and quantum computing.
•The cost and effects of cyber incidents or other failures, interruptions, or security breaches of our systems or those of our customers or third-party providers.
•Acquisitions and integration of acquired businesses.
•Changes in the reliability of our vendors, internal control systems or information systems.
•Our ability to increase market share and control expenses.
•Our ability to attract and retain qualified employees.
•Changes in our organization, compensation, and benefit plans.
•The soundness of other financial institutions.
•Volatility and disruption in national and international financial and commodity markets.
•Changes in the competitive environment in our markets and among banking organizations and other financial service providers.
•Government intervention in the U.S. financial system.
•Political or economic instability.
•Acts of God or of war or terrorism.
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•The potential impact of climate change.
•The impact of pandemics, epidemics, or any other health-related crisis.
•The costs and effects of legal and regulatory developments, the resolution of legal proceedings or regulatory or other governmental inquiries, the results of regulatory examinations or reviews and the ability to obtain required regulatory approvals.
•The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, and insurance) and their application with which we and our subsidiaries must comply.
•The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters.
•Our success at managing the risks involved in the foregoing items.
In addition, ongoing geopolitical tensions, armed conflicts, regional instability, sanctions, cyber-related threats, and attacks affecting commercial shipping and critical infrastructure have increased geopolitical uncertainty and contributed to volatility in financial, energy, and commodity markets. Military conflict in the Middle East has disrupted energy markets and shipping routes, including through the Strait of Hormuz, while the ongoing Russia-Ukraine war and other geopolitical tensions continue to present risks to global economic and market conditions. Further escalation, including disruptions to shipping routes, energy supplies, critical infrastructure, or global supply chains, or expanded sanctions, trade restrictions, or cyber-related incidents, could adversely affect economic activity, inflation, market conditions, and borrower credit quality. These developments could also adversely affect our funding profile, liquidity, customer and counterparty credit quality, and the value of certain financial instruments and could have a material adverse effect on our business, financial condition, results of operations, and prospects. The timing, magnitude, duration, and geographic scope of these developments remain highly uncertain.
Furthermore, financial markets, international relations, and global supply chains continue to be affected by evolving trade policies and related legal, regulatory, and administrative developments. In February 2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act does not authorize the President to impose tariffs, invalidating tariffs previously imposed under that authority. The U.S. government subsequently implemented additional tariff measures under other statutory authorities, certain of which remain subject to legal challenges. Uncertainty regarding U.S. trade policy and the economic effects of tariffs and other trade restrictions could affect business confidence, capital investment, customer cash flows, supply chains, commodity prices, inflation, and market volatility. These developments could adversely affect the financial condition and operating performance of customers, particularly those in trade-sensitive industries, and increase our exposure to credit, market, liquidity, operational, compliance, and reputational risks. If these developments adversely affect borrower credit quality, market stability, or broader economic conditions, they could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Forward-looking statements speak only as of the date on which such statements are made. We do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.
Application of Critical Accounting Policies and Accounting Estimates
We follow accounting and reporting policies that conform, in all material respects, to accounting principles generally accepted in the United States (“U.S. GAAP”) and general practices within the financial services industry. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. While we base our estimates on historical experience, current information and other factors deemed relevant, actual results could differ from those estimates.
We consider an accounting estimate to be critical to our reported financial results if (i) the estimate requires management to make assumptions about matters that are highly uncertain and (ii) different estimates that management reasonably could have used in the current period, or changes in the estimate that are reasonably likely to occur from period to period, could have a material impact on our financial statements.
Our accounting policies related to the allowance for credit losses on loans and off-balance-sheet credit exposures are considered critical because they involve considerable judgment and estimation by management. The allowances are calculated in accordance with Accounting Standards Codification (“ASC”) Topic 326, “Financial Instruments - Credit Losses” (“ASC 326”). The allowance for credit losses on loans is a contra-asset valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected. The allowance for credit losses on off-balance-sheet credit exposures is a liability account reported as a component of accrued interest payable and other liabilities in our consolidated balance sheets.
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The amount of each allowance represents management’s best estimate of expected credit losses over the expected lives of the applicable financial instruments based on available information from internal and external sources that is relevant to assessing exposure to credit loss. Relevant information includes historical credit loss experience, current conditions and reasonable and supportable forecasts. While historical credit loss experience provides a starting point for estimating expected credit losses, adjustments may be made to reflect differences in current portfolio-specific risk characteristics, economic and environmental conditions or other relevant factors. Although management utilizes its best judgment and the information available, the ultimate adequacy of our allowances depends on a variety of factors, including portfolio performance, macroeconomic conditions, changes in interest rates, the accuracy of forecast assumptions and regulatory interpretations and supervisory assessments related to credit quality and asset classification.
Refer to our 2025 Form 10-K for additional information regarding critical accounting policies.
Overview
A discussion of our results of operations is presented below. Certain reclassifications have been made to conform prior‑period presentations and provide comparability. Taxable‑equivalent adjustments represent income from tax‑free loans and investments grossed up by the amount of federal income taxes that would have been incurred had such income been fully taxable, calculated using a 21% federal tax rate, thus making tax‑exempt yields comparable to taxable asset yields.
Results of Operations
Net income available to common shareholders totaled $178.5 million, or $2.84 per diluted common share, and $518.2 million, or $8.19 per diluted common share, for the three and nine months ended September 30, 2026, respectively, compared to $172.7 million, or $2.67 per diluted common share, and $477.3 million, or $7.36 per diluted common share for the three and nine months ended September 30, 2025, respectively.
Selected data for the comparable periods was as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Taxable-equivalent net interest income | $ | 490,767 | $ | 463,667 | $ | 1,421,626 | $ | 1,350,630 | |||||||||||||||
| Taxable-equivalent adjustment | 22,900 | 22,049 | 67,509 | 63,188 | |||||||||||||||||||
| Net interest income | 467,867 | 441,618 | 1,354,117 | 1,287,442 | |||||||||||||||||||
| Credit loss expense | 12,090 | 6,779 | 28,602 | 32,978 | |||||||||||||||||||
| Net interest income after credit loss expense | 455,777 | 434,839 | 1,325,515 | 1,254,464 | |||||||||||||||||||
| Non-interest income | 135,962 | 125,647 | 400,558 | 366,931 | |||||||||||||||||||
| Non-interest expense | 377,200 | 352,478 | 1,104,586 | 1,047,672 | |||||||||||||||||||
| Income before income taxes | 214,539 | 208,008 | 621,487 | 573,723 | |||||||||||||||||||
| Income taxes | 34,330 | 33,628 | 98,232 | 91,418 | |||||||||||||||||||
| Net income | 180,209 | 174,380 | 523,255 | 482,305 | |||||||||||||||||||
| Preferred stock dividends | 1,668 | 1,668 | 5,006 | 5,006 | |||||||||||||||||||
| Net income available to common shareholders | $ | 178,541 | $ | 172,712 | $ | 518,249 | $ | 477,299 | |||||||||||||||
| Earnings per common share – basic | $ | 2.84 | $ | 2.67 | $ | 8.19 | $ | 7.36 | |||||||||||||||
| Earnings per common share – diluted | 2.84 | 2.67 | 8.19 | 7.36 | |||||||||||||||||||
| Dividends per common share | 1.03 | 1.00 | 3.06 | 2.95 | |||||||||||||||||||
| Return on average assets | 1.31 | % | 1.32 | % | 1.31 | % | 1.24 | % | |||||||||||||||
| Return on average common equity | 16.16 | 16.72 | 15.57 | 15.98 | |||||||||||||||||||
| Average shareholders’ equity to average assets | 8.37 | 8.17 | 8.67 | 8.06 | |||||||||||||||||||
Net income available to common shareholders increased $5.8 million, or 3.4%, and $41.0 million, or 8.6%, for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025. The increase for the three months ended September 30, 2026 was primarily attributable to a $26.2 million increase in net interest income and a $10.3 million increase in non-interest income, partially offset by increases of $24.7 million in non-interest expense, $5.3 million in credit loss expense, and $702 thousand in income tax expense. The increase for the nine months ended September 30, 2026 was primarily attributable to a $66.7 million increase in net interest income, a $33.6 million increase in non-interest income, and a $4.4 million decrease in credit loss expense, partially offset by increases of $56.9 million in non-interest expense and $6.8 million in income tax expense.
Additional information regarding the components of net income follows.
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Net Interest Income
Net interest income is the difference between interest income on earning assets, such as loans and securities, and interest expense on liabilities, such as deposits and borrowings, which are used to fund those assets. Net interest income is our largest source of revenue, representing 77.2% of total revenue during the first nine months of 2026. Net interest margin is the ratio of taxable-equivalent net interest income to average earning assets for the period. The level of interest rates and the volume and mix of earning assets and interest-bearing liabilities affect net interest income and net interest margin.
The Federal Reserve influences general market interest rates, including deposit and loan rates offered by many financial institutions. As of September 30, 2026, approximately 40.4% of our loans had a fixed interest rate, while the remaining loans had floating interest rates that were primarily tied to the Secured Overnight Financing Rate (“SOFR”) (approximately 40.5%); the prime interest rate (approximately 18.0%); or the American Interbank Offered Rate (“AMERIBOR”) (approximately 1.1%). Certain other loans were tied to other indices; however, such loans did not represent a material portion of our loan portfolio as of September 30, 2026.
Select average market rates for the periods indicated are presented in the table below.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Federal funds target rate upper bound | 3.79 | % | 4.46 | % | 3.76 | % | 4.49 | % | |||||||||||||||
| Effective federal funds rate | 3.67 | 4.30 | 3.65 | 4.32 | |||||||||||||||||||
| Interest on reserve balances at the Federal Reserve | 3.69 | 4.36 | 3.66 | 4.39 | |||||||||||||||||||
| Prime | 6.79 | 7.47 | 6.76 | 7.49 | |||||||||||||||||||
AMERIBOR Term-30(1) | 3.83 | 4.36 | 3.79 | 4.38 | |||||||||||||||||||
AMERIBOR Term-90(1) | 3.99 | 4.35 | 3.91 | 4.41 | |||||||||||||||||||
1-Month Term SOFR(2) | 3.73 | 4.29 | 3.68 | 4.31 | |||||||||||||||||||
3-Month Term SOFR(2) | 3.82 | 4.20 | 3.72 | 4.26 | |||||||||||||||||||
____________________
(1)AMERIBOR Term-30 and AMERIBOR Term-90 are published by the American Financial Exchange.
(2)1-Month Term SOFR and 3-Month Term SOFR market data are the property of Chicago Mercantile Exchange, Inc., or its licensors as applicable. All rights reserved, or otherwise licensed by Chicago Mercantile Exchange, Inc.
As of September 30, 2026, the target range for the federal funds rate was 3.75% to 4.00%. In September 2026, the Federal Reserve released projections whereby the midpoint of the projected appropriate target range for the federal funds rate would rise to 4.1% by the end of 2026 and remain at that level through the end of 2027. While there can be no assurance that any increases or decreases in the federal funds rate will occur, these projections imply up to a 25 basis point increase in the federal funds rate during the remainder of 2026, with no net change in the federal funds rate in 2027.
We are primarily funded by core deposits, with non-interest-bearing demand deposits historically representing a significant source of funds. This lower-cost funding base generally benefits net interest income and net interest margin, particularly in rising or high interest rate environments. However, periods of higher interest rates may increase competition for deposits, including from new financial technology competitors, and provide customers with alternative investment options, which could adversely affect our access to and pricing of deposits. See Item 3. Quantitative and Qualitative Disclosures About Market Risk elsewhere in this report for information about our sensitivity to changes in interest rates. Additional analysis of the components of our net interest margin is presented below.
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The following tables present an analysis of net interest income and net interest spread for the periods indicated, including average outstanding balances for each major category of interest‑earning assets and interest‑bearing liabilities, the interest earned or paid on those balances, and the related average rates. The tables also present net interest margin calculated on average total interest‑earning assets for the same periods. For these calculations: (i) average balances are based on daily averages; (ii) amounts are stated on a taxable‑equivalent basis assuming a 21% tax rate; (iii) average loans include loans on non‑accrual status; and (iv) average securities include unrealized gains and losses on available‑for‑sale securities, while yields are calculated based on average amortized cost.
| Quarter To Date | Quarter To Date | ||||||||||||||||||||||||||||||||||
| September 30, 2026 | September 30, 2025 | ||||||||||||||||||||||||||||||||||
| Average Balance | Interest Income/ Expense | Yield/ Cost | Average Balance | Interest Income/ Expense | Yield/ Cost | ||||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits | $ | 5,830,409 | $ | 54,866 | 3.68 | % | $ | 6,815,763 | $ | 75,914 | 4.36 | % | |||||||||||||||||||||||
| Federal funds sold | 1,202 | 13 | 4.24 | 2,723 | 33 | 4.74 | |||||||||||||||||||||||||||||
| Resell agreements | 2 | — | — | 9,650 | 113 | 4.58 | |||||||||||||||||||||||||||||
| Securities: | |||||||||||||||||||||||||||||||||||
| Taxable | 14,083,142 | 139,961 | 3.68 | 13,305,618 | 125,977 | 3.48 | |||||||||||||||||||||||||||||
| Tax-exempt | 7,157,551 | 90,202 | 4.93 | 6,906,894 | 82,476 | 4.60 | |||||||||||||||||||||||||||||
| Total securities | 21,240,693 | 230,163 | 4.09 | 20,212,512 | 208,453 | 3.85 | |||||||||||||||||||||||||||||
| Loans, net of unearned discounts | 23,377,943 | 369,636 | 6.27 | 21,451,733 | 357,641 | 6.61 | |||||||||||||||||||||||||||||
| Total Earning Assets and Average Rate Earned | 50,450,249 | 654,678 | 5.03 | 48,492,381 | 642,154 | 5.11 | |||||||||||||||||||||||||||||
| Cash and due from banks | 554,415 | 553,819 | |||||||||||||||||||||||||||||||||
| Allowance for credit losses on loans and securities | (285,618) | (281,009) | |||||||||||||||||||||||||||||||||
| Premises and equipment, net | 1,386,165 | 1,289,816 | |||||||||||||||||||||||||||||||||
| Accrued interest and other assets | 2,009,399 | 1,855,641 | |||||||||||||||||||||||||||||||||
| Total Assets | $ | 54,114,610 | $ | 51,910,648 | |||||||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||
| Non-interest-bearing demand deposits | 14,360,456 | 13,839,072 | |||||||||||||||||||||||||||||||||
| Interest-bearing deposits: | |||||||||||||||||||||||||||||||||||
| Savings and interest checking | 9,826,962 | 3,797 | 0.15 | 9,689,097 | 5,781 | 0.24 | |||||||||||||||||||||||||||||
| Money market deposit accounts | 12,746,347 | 68,238 | 2.12 | 11,817,140 | 67,833 | 2.28 | |||||||||||||||||||||||||||||
| Time accounts | 6,645,374 | 55,299 | 3.30 | 6,725,842 | 64,254 | 3.79 | |||||||||||||||||||||||||||||
| Total interest-bearing deposits | 29,218,683 | 127,334 | 1.73 | 28,232,079 | 137,868 | 1.94 | |||||||||||||||||||||||||||||
| Total deposits | 43,579,139 | 1.16 | 42,071,151 | 1.30 | |||||||||||||||||||||||||||||||
| Federal funds purchased | 58,486 | 550 | 3.68 | 29,233 | 324 | 4.34 | |||||||||||||||||||||||||||||
| Repurchase agreements | 4,850,095 | 33,104 | 2.67 | 4,592,950 | 37,191 | 3.17 | |||||||||||||||||||||||||||||
| Junior subordinated deferrable interest debentures | 123,280 | 1,759 | 5.71 | 123,222 | 1,940 | 6.30 | |||||||||||||||||||||||||||||
| Subordinated notes | 99,907 | 1,164 | 4.69 | 99,751 | 1,164 | 4.69 | |||||||||||||||||||||||||||||
| Total Interest-Bearing Funds and Average Rate Paid | 34,350,451 | 163,911 | 1.89 | 33,077,235 | 178,487 | 2.13 | |||||||||||||||||||||||||||||
| Accrued interest and other liabilities | 874,547 | 751,158 | |||||||||||||||||||||||||||||||||
| Total Liabilities | 49,585,454 | 47,667,465 | |||||||||||||||||||||||||||||||||
| Shareholders’ Equity | 4,529,156 | 4,243,183 | |||||||||||||||||||||||||||||||||
| Total Liabilities and Shareholders’ Equity | $ | 54,114,610 | $ | 51,910,648 | |||||||||||||||||||||||||||||||
| Net interest income | $ | 490,767 | $ | 463,667 | |||||||||||||||||||||||||||||||
| Net interest spread | 3.14 | % | 2.98 | % | |||||||||||||||||||||||||||||||
| Net interest income to total average earning assets | 3.78 | % | 3.69 | % | |||||||||||||||||||||||||||||||
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| Year To Date | Year To Date | ||||||||||||||||||||||||||||||||||
| September 30, 2026 | September 30, 2025 | ||||||||||||||||||||||||||||||||||
| Average Balance | Interest Income/ Expense | Yield/ Cost | Average Balance | Interest Income/ Expense | Yield/ Cost | ||||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits | $ | 6,126,939 | $ | 169,962 | 3.66 | % | $ | 6,739,488 | $ | 224,149 | 4.39 | % | |||||||||||||||||||||||
| Federal funds sold | 3,057 | 93 | 4.02 | 4,736 | 170 | 4.73 | |||||||||||||||||||||||||||||
| Resell agreements | 2,760 | 85 | 4.06 | 14,012 | 488 | 4.60 | |||||||||||||||||||||||||||||
| Securities: | |||||||||||||||||||||||||||||||||||
| Taxable | 13,477,268 | 383,005 | 3.53 | 13,320,003 | 372,360 | 3.42 | |||||||||||||||||||||||||||||
| Tax-exempt | 7,108,439 | 262,797 | 4.84 | 6,682,301 | 232,253 | 4.48 | |||||||||||||||||||||||||||||
| Total securities | 20,585,707 | 645,802 | 3.97 | 20,002,304 | 604,613 | 3.76 | |||||||||||||||||||||||||||||
| Loans, net of unearned discounts | 22,675,095 | 1,056,075 | 6.23 | 21,103,347 | 1,040,948 | 6.59 | |||||||||||||||||||||||||||||
| Total Earning Assets and Average Rate Earned | 49,393,558 | 1,872,017 | 4.94 | 47,863,887 | 1,870,368 | 5.06 | |||||||||||||||||||||||||||||
| Cash and due from banks | 566,197 | 578,135 | |||||||||||||||||||||||||||||||||
| Allowance for credit losses on loans and securities | (285,474) | (276,488) | |||||||||||||||||||||||||||||||||
| Premises and equipment, net | 1,354,374 | 1,275,317 | |||||||||||||||||||||||||||||||||
| Accrued interest and other assets | 1,945,685 | 1,903,294 | |||||||||||||||||||||||||||||||||
| Total Assets | $ | 52,974,340 | $ | 51,344,145 | |||||||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||
| Non-interest-bearing demand deposits | 14,112,197 | 13,808,687 | |||||||||||||||||||||||||||||||||
| Interest-bearing deposits: | |||||||||||||||||||||||||||||||||||
| Savings and interest checking | 9,932,960 | 11,428 | 0.15 | 9,858,510 | 17,743 | 0.24 | |||||||||||||||||||||||||||||
| Money market deposit accounts | 12,266,997 | 181,666 | 1.98 | 11,590,603 | 197,133 | 2.27 | |||||||||||||||||||||||||||||
| Time accounts | 6,501,068 | 157,041 | 3.23 | 6,573,477 | 190,453 | 3.87 | |||||||||||||||||||||||||||||
| Total interest-bearing deposits | 28,701,025 | 350,135 | 1.63 | 28,022,590 | 405,329 | 1.93 | |||||||||||||||||||||||||||||
| Total deposits | 42,813,222 | 1.09 | 41,831,277 | 1.30 | |||||||||||||||||||||||||||||||
| Federal funds purchased | 35,800 | 994 | 3.66 | 24,346 | 806 | 4.37 | |||||||||||||||||||||||||||||
| Repurchase agreements | 4,465,448 | 90,549 | 2.67 | 4,331,773 | 104,287 | 3.17 | |||||||||||||||||||||||||||||
| Junior subordinated deferrable interest debentures | 123,265 | 5,221 | 5.59 | 123,208 | 5,824 | 6.23 | |||||||||||||||||||||||||||||
| Subordinated notes | 99,868 | 3,492 | 4.69 | 99,712 | 3,492 | 4.69 | |||||||||||||||||||||||||||||
| Total Interest-Bearing Funds and Average Rate Paid | 33,425,406 | 450,391 | 1.80 | 32,601,629 | 519,738 | 2.13 | |||||||||||||||||||||||||||||
| Accrued interest and other liabilities | 841,497 | 795,315 | |||||||||||||||||||||||||||||||||
| Total Liabilities | 48,379,100 | 47,205,631 | |||||||||||||||||||||||||||||||||
| Shareholders’ Equity | 4,595,240 | 4,138,514 | |||||||||||||||||||||||||||||||||
| Total Liabilities and Shareholders’ Equity | $ | 52,974,340 | $ | 51,344,145 | |||||||||||||||||||||||||||||||
| Net interest income | $ | 1,421,626 | $ | 1,350,630 | |||||||||||||||||||||||||||||||
| Net interest spread | 3.14 | % | 2.93 | % | |||||||||||||||||||||||||||||||
| Net interest income to total average earning assets | 3.76 | % | 3.65 | % | |||||||||||||||||||||||||||||||
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The following table presents changes in taxable-equivalent net interest income attributable to changes in the average volumes and rates of earning assets and interest-bearing liabilities. Changes attributable to the combined effects of volume and rate have been allocated between the volume and rate components in proportion to the absolute amounts of the changes attributable to each component.
| Three Months Ended | |||||||||||||||||||||||
| September 30, 2026 vs. September 30, 2025 | |||||||||||||||||||||||
| Increase (Decrease) Due to Change in | |||||||||||||||||||||||
| Rate | Volume | Total | |||||||||||||||||||||
| Interest-bearing deposits | $ | (10,923) | $ | (10,125) | $ | (21,048) | |||||||||||||||||
| Federal funds sold | (3) | (17) | (20) | ||||||||||||||||||||
| Resell agreements | (56) | (57) | (113) | ||||||||||||||||||||
| Securities: | |||||||||||||||||||||||
| Taxable | 7,325 | 6,659 | 13,984 | ||||||||||||||||||||
| Tax-exempt | 6,073 | 1,653 | 7,726 | ||||||||||||||||||||
| Loans, net of unearned discounts | (18,817) | 30,812 | 11,995 | ||||||||||||||||||||
| Total earning assets | (16,401) | 28,925 | 12,524 | ||||||||||||||||||||
| Savings and interest checking | (2,071) | 87 | (1,984) | ||||||||||||||||||||
| Money market deposit accounts | (4,804) | 5,209 | 405 | ||||||||||||||||||||
| Time accounts | (8,197) | (758) | (8,955) | ||||||||||||||||||||
| Federal funds purchased | (54) | 280 | 226 | ||||||||||||||||||||
| Repurchase agreements | (6,024) | 1,937 | (4,087) | ||||||||||||||||||||
| Junior subordinated deferrable interest debentures | (182) | 1 | (181) | ||||||||||||||||||||
| Subordinated notes | — | — | — | ||||||||||||||||||||
| Total interest-bearing liabilities | (21,332) | 6,756 | (14,576) | ||||||||||||||||||||
| Net change | $ | 4,931 | $ | 22,169 | $ | 27,100 | |||||||||||||||||
| Nine Months Ended | |||||||||||||||||||||||
| September 30, 2026 vs. September 30, 2025 | |||||||||||||||||||||||
| Increase (Decrease) Due to Change in | |||||||||||||||||||||||
| Rate | Volume | Total | |||||||||||||||||||||
| Interest-bearing deposits | $ | (35,037) | $ | (19,150) | $ | (54,187) | |||||||||||||||||
| Federal funds sold | (23) | (54) | (77) | ||||||||||||||||||||
| Resell agreements | (52) | (351) | (403) | ||||||||||||||||||||
| Securities: | |||||||||||||||||||||||
| Taxable | 12,280 | (1,635) | 10,645 | ||||||||||||||||||||
| Tax-exempt | 19,164 | 11,380 | 30,544 | ||||||||||||||||||||
| Loans, net of unearned discounts | (59,339) | 74,466 | 15,127 | ||||||||||||||||||||
| Total earning assets | (63,007) | 64,656 | 1,649 | ||||||||||||||||||||
| Savings and interest checking | (6,453) | 138 | (6,315) | ||||||||||||||||||||
| Money market deposit accounts | (26,427) | 10,960 | (15,467) | ||||||||||||||||||||
| Time accounts | (31,325) | (2,087) | (33,412) | ||||||||||||||||||||
| Federal funds purchased | (145) | 333 | 188 | ||||||||||||||||||||
| Repurchase agreements | (16,806) | 3,068 | (13,738) | ||||||||||||||||||||
| Junior subordinated deferrable interest debentures | (606) | 3 | (603) | ||||||||||||||||||||
| Subordinated notes | — | — | — | ||||||||||||||||||||
| Total interest-bearing liabilities | (81,762) | 12,415 | (69,347) | ||||||||||||||||||||
| Net change | $ | 18,755 | $ | 52,241 | $ | 70,996 | |||||||||||||||||
Taxable-equivalent net interest income increased $27.1 million, or 5.8%, and $71.0 million, or 5.3%, for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025.
The increase in taxable-equivalent net interest income for the three months ended September 30, 2026 was primarily attributable to higher average loan volumes, lower average costs of interest-bearing deposit accounts and repurchase agreements, and higher average taxable-equivalent yields on and higher average volumes of taxable and tax-exempt securities. These favorable variances were partially offset by lower average yields on and lower average volumes of interest-bearing
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deposits (primarily amounts held in an interest-bearing account at the Federal Reserve), lower average yields on loans, and higher average volumes of interest-bearing deposit accounts and repurchase agreements, among other things.
The increase in taxable-equivalent net interest income for the nine months ended September 30, 2026 was primarily attributable to lower average costs of interest-bearing deposit accounts and repurchase agreements, higher average volumes of loans and tax-exempt securities, and higher average taxable-equivalent yields on taxable and tax-exempt securities. These favorable variances were partially offset by lower average yields on loans, lower average yields on and lower average volumes of interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve), and higher average volumes of interest-bearing deposit accounts and repurchase agreements, among other things.
As a result of these factors, taxable-equivalent net interest margin increased 9 basis points to 3.78% and 11 basis points to 3.76% for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025.
Average interest-earning assets increased $2.0 billion and $1.5 billion for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025. For the three months ended September 30, 2026, the increase was primarily attributable to increases of $1.9 billion in average loans, $777.5 million in average taxable securities, and $250.7 million in average tax-exempt securities, partially offset by a $985.4 million decrease in average interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve), among other things. The average taxable-equivalent yield on interest-earning assets decreased 8 basis points to 5.03% for the three months ended September 30, 2026, compared to 5.11% for the same period in 2025.
For the nine months ended September 30, 2026, the increase in average interest-earning assets was primarily attributable to increases of $1.6 billion in average loans, $426.1 million in average tax-exempt securities, and $157.3 million in average taxable securities, partially offset by a $612.5 million decrease in average interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve), among other things. The average taxable-equivalent yield on interest-earning assets decreased 12 basis points to 4.94%, compared to 5.06% for the same period in 2025. Average taxable-equivalent yields on interest-earning assets were impacted by changes in market interest rates (as noted in the table above) and the volumes and relative mix of interest-earning assets.
The average taxable-equivalent yield on loans decreased 34 basis points to 6.27% and 36 basis points to 6.23% for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025. The decreases in average loan yields were impacted by lower market interest rates. Average loans increased $1.9 billion, or 9.0%, and $1.6 billion, or 7.4%, for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025. Loans represented approximately 46.3% and 45.9% of average interest-earning assets for the three and nine months ended September 30, 2026, respectively, compared to 44.2% and 44.1% for the same respective periods in 2025. The increases in average loans were primarily related to the use of available funds to originate loans.
The average taxable-equivalent yield on securities increased 24 basis points to 4.09% and 21 basis points to 3.97% for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025. The average yield on taxable securities increased 20 basis points to 3.68% and 11 basis points to 3.53% for the three and nine months ended September 30, 2026, respectively. The average taxable-equivalent yield on tax-exempt securities increased 33 basis points to 4.93% and 36 basis points to 4.84% for the three and nine months ended September 30, 2026, respectively.
Tax-exempt securities represented approximately 33.7% and 34.5% of average securities for the three and nine months ended September 30, 2026, respectively, compared to 34.2% and 33.4% for the same respective periods in 2025. Average securities increased $1.0 billion, or 5.1%, and $583.4 million, or 2.9%, for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025. Securities represented approximately 42.1% and 41.7% of average interest-earning assets for the three and nine months ended September 30, 2026, respectively, compared to 41.7% and 41.8% for the same respective periods in 2025.
Average interest-bearing deposits, primarily amounts held in an interest-bearing account at the Federal Reserve, decreased $985.4 million, or 14.5%, and $612.5 million, or 9.1%, for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025. Interest-bearing deposits represented approximately 11.6% and 12.4% of average interest-earning assets for the three and nine months ended September 30, 2026, respectively, compared to 14.1% for both periods in 2025. The decreases in average interest-bearing deposits were primarily related to the reinvestment of amounts held in an interest-bearing account at the Federal Reserve into loans and securities. Average yields on interest-bearing deposits were 3.68% and 3.66% for the three and nine months ended September 30, 2026, respectively, compared to 4.36% and 4.39% for the same respective periods in 2025. The lower average yields were impacted by lower average interest rates paid on reserves held at the Federal Reserve.
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The average rate paid on interest-bearing liabilities decreased 24 basis points to 1.89% and 33 basis points to 1.80% for the three and nine months ended September 30, 2026, respectively, compared to 2.13% for the same periods in 2025. Average deposits increased $1.5 billion, or 3.6%, and $981.9 million, or 2.3%, for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025. The increases included increases in average interest-bearing deposits of $986.6 million and $678.4 million and increases in average non-interest-bearing deposits of $521.4 million and $303.5 million for the three and nine months ended September 30, 2026, respectively.
The ratio of average interest-bearing deposits to total average deposits was 67.0% for both the three and nine months ended September 30, 2026, compared to 67.1% and 67.0%, respectively, for the same periods in 2025. The average cost of deposits is primarily impacted by changes in market interest rates and the volume and relative mix of interest-bearing deposits. The average costs of interest-bearing deposits and total deposits were 1.73% and 1.16%, respectively, for the three months ended September 30, 2026, compared to 1.94% and 1.30%, respectively, for the same period in 2025, and were 1.63% and 1.09%, respectively, for the nine months ended September 30, 2026, compared to 1.93% and 1.30%, respectively, for the same period in 2025. The lower average costs of deposits in 2026 were impacted by lower interest rates paid on our interest-bearing deposit products as a result of lower market interest rates.
Net interest spread, which represents the difference between the average yield on earning assets and the average rate paid on interest-bearing liabilities, was 3.14% for both the three and nine months ended September 30, 2026, compared to 2.98% and 2.93%, respectively, for the same periods in 2025. Net interest spread and net interest margin will be impacted by future changes in short- and long-term interest rates; the competitive environment, including competition from new financial technology competitors; and the availability of alternative investment options. A discussion of the effects of changing interest rates on net interest income is set forth in Item 3. Quantitative and Qualitative Disclosures About Market Risk elsewhere in this report.
Our hedging policies permit the use of various derivative financial instruments, including interest rate swaps, swaptions, caps, and floors, to manage exposure to changes in interest rates. Details of our derivatives and hedging activities are set forth in Note 7 - Derivative Financial Instruments in the accompanying notes to consolidated financial statements. Information regarding the impact of fluctuations in interest rates on our derivative financial instruments is set forth in Item 3. Quantitative and Qualitative Disclosures About Market Risk elsewhere in this report.
Credit Loss Expense
Credit loss expense represents the amounts recognized to adjust the allowances for credit losses on various types of financial instruments, including loans, securities, and off-balance-sheet credit exposures, to levels that, in management’s best estimate, are appropriate to reflect lifetime expected credit losses on the respective financial instruments in accordance with ASC 326.
The components of credit loss expense were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Credit loss expense (benefit) related to: | |||||||||||||||||||||||
| Loans | $ | 14,910 | $ | 9,007 | $ | 32,395 | $ | 37,501 | |||||||||||||||
| Off-balance-sheet credit exposures | (2,820) | (2,418) | (3,793) | (4,713) | |||||||||||||||||||
| Securities held to maturity | — | 190 | — | 190 | |||||||||||||||||||
| Total | $ | 12,090 | $ | 6,779 | $ | 28,602 | $ | 32,978 | |||||||||||||||
See the section captioned “Allowance for Credit Losses” elsewhere in this discussion for further analysis of credit loss expense for loans and off-balance-sheet credit exposures.
Non-Interest Income
Total non-interest income for the three and nine months ended September 30, 2026 increased $10.3 million, or 8.2%, and $33.6 million, or 9.2%, respectively, compared to the same periods in 2025. Changes in the components of non-interest income are discussed below.
Trust and Investment Management Fees. Trust and investment management fees increased $4.6 million, or 10.3%, for the three months ended September 30, 2026 and $13.6 million, or 10.4%, for the nine months ended September 30, 2026, compared to the same periods in 2025. Investment management fees, the most significant component of trust and investment management fees, represented approximately 82.1% and 81.4% of total trust and investment management fees during the first nine months of 2026 and 2025, respectively. The increases for the three and nine months ended September 30, 2026 were primarily attributable
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to increases in investment management fees (up $3.6 million and $12.1 million, respectively), reflecting higher average equity valuations on managed accounts and growth in the number of accounts, and oil and gas fees (up $1.6 million for each period). Investment management fees are generally based on the market value of assets within an account and are therefore sensitive to volatility in the equity and bond markets. The increase for the nine months ended September 30, 2026 also reflected the timing of certain court-approved fees associated with a large guardianship trust and a one-time $1.3 million administrative fee associated with a large trust account. The increases in oil and gas fees for the three and nine months ended September 30, 2026 were primarily attributable to higher oil prices and increases in one-time fees related to new lease bonuses.
At September 30, 2026, trust assets were primarily composed of equity securities (50.8% of assets), fixed income securities (28.2% of assets), alternative investments (8.6% of assets) and cash equivalents (6.8% of assets). The estimated fair value of these assets was $52.7 billion at September 30, 2026, including $27.9 billion and $24.8 billion of managed and custody assets, respectively, compared to $51.0 billion at December 31, 2025, including $26.7 billion and $24.3 billion of managed and custody assets, respectively, and $51.4 billion at September 30, 2025, including $26.5 billion and $24.8 billion of managed and custody assets, respectively.
Service Charges on Deposit Accounts. Service charges on deposit accounts increased $4.9 million, or 15.5%, and $13.4 million, or 15.0%, for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025. The increases were primarily attributable to higher commercial service charges (up $2.3 million and $7.3 million, respectively) and overdraft charges on consumer accounts (up $1.8 million and $4.8 million, respectively) and commercial accounts (up $647 thousand and $1.1 million, respectively). Commercial service charges increased partly due to increased billable services on analyzed treasury management accounts and a lower average earnings credit rate on related deposits, which resulted in customers paying a greater portion of their services through fees rather than earnings credits. Higher service fees on non-analyzed accounts also contributed to the increases.
Overdraft charges totaled $18.2 million ($14.1 million consumer and $4.1 million commercial) and $50.5 million ($39.2 million consumer and $11.3 million commercial) for the three and nine months ended September 30, 2026, respectively, compared to $15.7 million ($12.3 million consumer and $3.4 million commercial) and $44.6 million ($34.4 million consumer and $10.2 million commercial) for the same periods in 2025, respectively. The increases were primarily attributable to higher volumes of fee-assessed overdrafts, partly due to growth in the number of accounts.
Insurance Commissions and Fees. Insurance commissions and fees increased $414 thousand, or 2.7%, and $1.8 million, or 3.5%, for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025. The increase for the three months ended September 30, 2026 was primarily attributable to higher property and casualty commissions (up $674 thousand) and contingent income (up $80 thousand), partly offset by lower life insurance commissions (down $208 thousand) and benefit plan commissions (down $132 thousand). The increase for the nine months ended September 30, 2026 was primarily attributable to higher benefit plan commissions (up $1.1 million), property and casualty commissions (up $764 thousand), and contingent income (up $633 thousand), partly offset by lower life insurance commissions (down $746 thousand). Higher property and casualty commissions primarily reflected increased commercial lines business volumes, partly offset by lower premiums and exposure rates within the existing customer base. Higher benefit plan commissions for the nine months ended September 30, 2026 primarily reflected increased business volumes and higher premiums and exposure rates within the existing customer base. Lower life insurance commissions primarily reflected decreased business volumes.
Contingent income totaled $241 thousand and $5.4 million for the three and nine months ended September 30, 2026, respectively, compared to $161 thousand and $4.8 million for the same respective periods in 2025. Contingent income primarily consists of amounts received from property and casualty insurance carriers related to portfolio growth and the loss performance of previously placed insurance policies. These performance-related payments are seasonal and are primarily received during the first quarter of each year. Performance-related contingent income totaled $4.1 million and $3.6 million for the nine months ended September 30, 2026 and 2025, respectively. Contingent income also includes amounts received from benefit plan insurance companies related to business volumes and the subsequent retention of such business. Benefit plan-related contingent income totaled $151 thousand and $1.3 million for the three and nine months ended September 30, 2026, respectively, compared to $103 thousand and $1.1 million for the same respective periods in 2025.
Interchange and Card Transaction Fees. Interchange fees, or “swipe” fees, are charges paid by merchants to card-issuing banks for processing electronic payment transactions. Interchange and card transaction fees consist of income from debit and credit card usage, point of sale income from PIN-based card transactions, and ATM service fees and are reported net of related network costs.
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Net interchange and card transaction fees increased $1.3 million, or 23.4%, and $3.4 million, or 20.2%, for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025. The increases were primarily attributable to higher card transaction volumes. A comparison of gross and net interchange and card transaction fees is presented in the table below.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Income from card transactions | $ | 12,356 | $ | 10,876 | $ | 35,637 | $ | 32,037 | |||||||||||||||
| ATM service fees | 889 | 887 | 2,571 | 2,620 | |||||||||||||||||||
| Gross interchange and card transaction fees | 13,245 | 11,763 | 38,208 | 34,657 | |||||||||||||||||||
| Network costs | 6,402 | 6,216 | 18,287 | 18,089 | |||||||||||||||||||
| Net interchange and card transaction fees | $ | 6,843 | $ | 5,547 | $ | 19,921 | $ | 16,568 | |||||||||||||||
Federal Reserve rules applicable to financial institutions with assets of $10 billion or more generally limit debit card interchange fees to 21 cents per transaction plus 5 basis points of the transaction value, with an additional adjustment of up to 1 cent per transaction for issuers meeting certain fraud-prevention standards. The rules also require issuers to enable at least two unaffiliated networks for routing transactions on each debit or prepaid card product. In August 2025, the U.S. District Court for the District of North Dakota vacated the Federal Reserve's interchange fee rule but stayed its ruling pending appeal. The Federal Reserve appealed the decision, and the U.S. Court of Appeals for the Eighth Circuit heard oral arguments in May 2026. The existing interchange fee framework remains in effect while the appeal is pending. The ultimate resolution of this litigation could result in changes to the regulation of debit card interchange fees and could have a significant adverse effect on the fees banks may charge on debit card transactions.
In October 2023, the Federal Reserve issued a proposal that would reduce the maximum permissible interchange fee for an electronic debit transaction to 14.4 cents per transaction plus 4 basis points of the transaction value and increase the maximum fraud-prevention adjustment from 1.0 cent to 1.3 cents. The proposal would also provide for updates to the interchange fee cap every two years based on issuer cost data collected by the Federal Reserve. Had the proposed interchange fee cap been in effect during the reported periods, interchange and debit card transaction fees would have been approximately 30% lower. The comment period for this proposal ended in May 2024. As of September 30, 2026, the Federal Reserve had not adopted a final rule implementing the proposal. Accordingly, the extent to which any future changes to the interchange fee cap may affect our revenues cannot be determined at this time.
Other Charges, Commissions, and Fees. Other charges, commissions, and fees decreased $819 thousand, or 5.6%, and $1.3 million, or 3.1%, for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025. The decrease for the three months ended September 30, 2026 was primarily attributable to lower income from the placement of annuities and money market accounts (down $538 thousand and $154 thousand, respectively) and lower capital markets advisory fees (down $455 thousand), partly offset by higher income from the placement of mutual funds (up $412 thousand). The decrease for the nine months ended September 30, 2026 was primarily attributable to lower income from the placement of annuities and money market accounts (down $1.4 million and $377 thousand, respectively), capital markets advisory fees (down $599 thousand), and commitment fees on unused lines of credit (down $458 thousand), partly offset by higher income from the placement of mutual funds (up $1.1 million) and merchant service fees (up $599 thousand).
Net Gain/Loss on Securities Transactions. During the nine months ended September 30, 2026, we sold certain available-for-sale securities with amortized costs totaling $35.4 million and recognized a net loss of $7.5 million. These sales were primarily made to reinvest the proceeds at higher yields and shorten the duration of the securities portfolio. Approximately $18.6 million of the securities sold were related to a municipal tender offer. During the nine months ended September 30, 2025, we sold certain available-for-sale securities with amortized costs totaling $41.2 million and recognized a net loss of $14 thousand. These sales were primarily made in connection with a municipal tender offer.
Other Non-Interest Income. Other non-interest income for the three and nine months ended September 30, 2026 increased $7.4 million, or 54.5%, and $10.3 million, or 27.7%, respectively, compared to the same periods in 2025. The increase for the three months ended September 30, 2026 was primarily attributable to an $8.1 million increase in gains on the sale of foreclosed and other assets, including gains of $7.6 million on the sale of certain excess bank properties and $541 thousand on the sale of certain loans held for sale. Income from customer derivatives trading activities also increased $766 thousand. These increases were partly offset by decreases in income from customer securities trading activities (down $852 thousand), income from customer foreign exchange trading activities (down $290 thousand), and public finance underwriting fees (down $218 thousand).
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The increase for the nine months ended September 30, 2026 was primarily attributable to a $6.0 million increase in gains on the sale of foreclosed and other assets and a $3.8 million increase in sundry and other miscellaneous income. The increase in gains on the sale of foreclosed and other assets primarily reflected the aforementioned gains on the sale of excess bank properties and loans held for sale, partially offset by a $2.5 million gain on the sale of a foreclosed real estate property during the same period in 2025. The increase in sundry and other miscellaneous income included a $2.7 million one-time fee associated with the termination of a customer lease recognized during the first quarter and a $2.2 million refund of certain tax credits associated with payroll taxes paid during the COVID-19 pandemic recognized during the second quarter, among other things. Income from customer derivatives trading activities also increased $1.3 million. These increases were partly offset by decreases in income from customer securities trading activities (down $1.0 million), income from customer foreign exchange trading activities (down $317 thousand), and public finance underwriting fees (down $302 thousand). Changes in customer trading-related income and public finance underwriting fees were primarily attributable to fluctuations in transaction volumes.
Non-Interest Expense
Total non-interest expense for the three and nine months ended September 30, 2026 increased $24.7 million, or 7.0%, and $56.9 million, or 5.4%, respectively, compared to the same periods in 2025. Changes in the components of non-interest expense are discussed below.
Salaries and Wages. Salaries and wages for the three and nine months ended September 30, 2026 increased $13.0 million, or 7.7%, and $29.2 million, or 5.9%, respectively, compared to the same periods in 2025. The increases were primarily attributable to annual merit and market-based salary increases and growth in the number of employees, driven in part by investments in organic expansion across various markets. Salaries and wages also increased, to a lesser extent, due to higher incentive compensation and stock-based compensation.
Employee Benefits. Employee benefits expense for the three and nine months ended September 30, 2026 decreased $816 thousand, or 2.4%, and increased $4.0 million, or 3.7%, respectively, compared to the same periods in 2025. The decrease for the three months ended September 30, 2026 was primarily attributable to a decrease in medical and dental benefits expense (down $737 thousand) and an increase in the net periodic pension benefit related to our defined benefit retirement and restoration plans (up $432 thousand). These items were partly offset by increases in payroll taxes (up $389 thousand) and 401(k) plan expense (up $324 thousand). The increase for the nine months ended September 30, 2026 was primarily attributable increases in medical and dental benefits expense (up $2.6 million), primarily due to higher claims and related costs; payroll taxes (up $1.7 million); and 401(k) plan expense (up $930 thousand). These increases were partly offset by an increase in the net periodic pension benefit related to our defined benefit retirement and restoration plans (up $1.3 million).
Our defined benefit retirement and restoration plans have been frozen since 2001 which has reduced the volatility of retirement plan expense. However, we continue to have funding obligations associated with these plans, and future pension benefit or expense could fluctuate based on factors such as the performance of plan assets, changes in interest rates, and employee turnover. See Note 11 - Defined Benefit Plans for additional information related to our net periodic pension benefit/expense.
Net Occupancy. Net occupancy expense for the three and nine months ended September 30, 2026 increased $1.2 million, or 3.4%, and increased $3.2 million, or 3.1%, respectively, compared to the same periods in 2025. The increase for the three months ended September 30, 2026 was primarily attributable to increases in depreciation on buildings and leasehold improvements (up $878 thousand); repairs, maintenance and service contracts expense (up $590 thousand); and lease expense (up $275 thousand). These increases were partly offset by decreases in building insurance expense (down $395 thousand) and property tax expense (down $327 thousand). The increase for the nine months ended September 30, 2026 was primarily attributable to increases in depreciation on buildings and leasehold improvements (up $2.6 million); repairs, maintenance, and service contracts expense (up $653 thousand); and lease expense (up $638 thousand), as well as a decrease in rental income from tenants (down $627 thousand). These items were partly offset by decreases in building insurance expense (down $1.1 million) and property tax expense (down $440 thousand).
Technology, Furniture, and Equipment. Technology, furniture, and equipment expense for the three and nine months ended September 30, 2026 increased $2.7 million, or 6.1%, and $6.2 million, or 5.0%, respectively, compared to the same periods in 2025. The increases were primarily attributable to increases in cloud services expense (up $1.4 million and $4.2 million, respectively); equipment rental expense (up $450 thousand and $981 thousand, respectively); software maintenance expense (up $828 thousand and $925 thousand, respectively); service contracts expense (up $148 thousand and $771 thousand, respectively); and depreciation of furniture and fixtures (up $118 thousand and $421 thousand, respectively). These increases were partly offset by decreases in software amortization expense (down $399 thousand and $1.5 million, respectively).
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Deposit Insurance. Deposit insurance expense totaled $6.9 million and $20.4 million for the three and nine months ended September 30, 2026, respectively, compared to $6.3 million and $20.1 million for the same periods in 2025. The increases were primarily attributable to a higher assessment base, partly offset by lower assessment rates.
Other Non-Interest Expense. Other non-interest expense or the three and nine months ended September 30, 2026 increased $8.1 million, or 12.5%, and $13.9 million, or 7.0%, respectively, compared to the same periods in 2025. The increase for the three months ended September 30, 2026 was primarily attributable to increases in advertising and promotions expense (up $6.4 million); professional services expense (up $889 thousand); fraud losses, primarily related to deposits (up $857 thousand); and research and platform fees (up $696 thousand), among other things. These increases were partly offset by decreases in sundry and other miscellaneous expense (down $2.2 million) and donations expense (down $583 thousand), among other things. The increase for the nine months ended September 30, 2026 was primarily attributable to increases in advertising and promotions expense (up $7.4 million); fraud losses, primarily related to deposits (up $5.3 million); research and platform fees (up $1.1 million); travel, meals, and entertainment expense (up $990 thousand); professional services expense (up $935 thousand); and amortization of deferred costs on loan commitments (up $933 thousand), among other things. These increases were partly offset by decreases in sundry and other miscellaneous expense (down $3.9 million) and donations expense (down $1.5 million), among other things.
Results of Segment Operations
We are managed under a matrix organizational structure whereby our two primary operating segments, Banking and Wealth Management, overlap a regional reporting structure. A third operating segment, Non-Banks, consists primarily of the parent holding company and certain other immaterial non-bank subsidiaries of the parent that have little or no activity. See Note 14 - Operating Segments in the accompanying notes to consolidated financial statements for a description of each segment, the methodologies used to measure segment financial performance, and summarized operating results by segment. Segment operating results are discussed in more detail below.
Banking
Net income for the three and nine months ended September 30, 2026 increased $4.1 million, or 2.4%, and $37.0 million, or 7.9%, respectively, compared to the same periods in 2025. The increase during the three months ended September 30, 2026 was primarily the result of a $26.1 million increase in net interest income and a $6.6 million increase in non-interest income, partly offset by a $23.2 million increase in non-interest expense, a $5.3 million increase in credit loss expense, and a $128 thousand increase in income tax expense. The increase during the nine months ended September 30, 2026 was primarily the result of a $66.6 million increase in net interest income, a $21.5 million increase in non-interest income, and a $4.4 million decrease in credit loss expense, partly offset by a $49.8 million increase in non-interest expense and a $5.7 million increase in income tax expense.
Net interest income for the three and nine months ended September 30, 2026 increased $26.1 million, or 5.9%, and $66.6 million, or 5.2%, respectively, compared to the same periods in 2025.
The increase during the three months ended September 30, 2026 was primarily attributable to higher average loan volumes, lower average costs of interest-bearing deposit accounts and repurchase agreements, and higher average taxable-equivalent yields on and higher average volumes of taxable and tax-exempt securities. These favorable variances were partially offset by lower average yields on and lower average volumes of interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve), lower average yields on loans, and higher average volumes of interest-bearing deposit accounts and repurchase agreements, among other things.
The increase during the nine months ended September 30, 2026 was primarily attributable to lower average costs of interest-bearing deposit accounts and repurchase agreements, higher average volumes of loans and tax-exempt securities, and higher average taxable-equivalent yields on taxable and tax-exempt securities. These favorable variances were partially offset by lower average yields on loans, lower average yields on and lower average volumes of interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve), and higher average volumes of interest-bearing deposit accounts and repurchase agreements, among other things. See the analysis of net interest income included in the section captioned “Net Interest Income” elsewhere in this discussion.
Credit loss expense for the three and nine months ended September 30, 2026 totaled $12.1 million and $28.6 million, respectively, compared to $6.8 million and $33.0 million, respectively, for the same periods in 2025. See the sections captioned “Credit Loss Expense” and “Allowance for Credit Losses” elsewhere in this discussion for further analysis of credit loss expense related to loans and off-balance-sheet commitments.
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Non-interest income for the three and nine months ended September 30, 2026 increased $6.6 million, or 9.1%, and $21.5 million, or 10.1%, respectively, compared to the same periods in 2025. The increases were primarily attributable to higher service charges on deposit accounts; other non-interest income; interchange and card transaction fees; and insurance commissions and fees, partly offset by higher net losses on securities transactions. The increases in service charges on deposit accounts were primarily attributable to higher commercial service charges and overdraft charges on consumer and commercial accounts. The increases in other non-interest income were primarily attributable to higher gains on the sale of foreclosed and other assets, sundry and other miscellaneous income, and income from customer derivative trading activities, partially offset by lower income from customer securities trading activities, income from customer foreign exchange trading activities, and public finance underwriting fees. The increases in interchange and card transaction fees were primarily attributable to higher card transaction volumes. The increase in insurance commissions and fees for the three months ended September 30, 2026 was primarily attributable to higher property and casualty commissions, primarily reflecting increased commercial lines business volumes, and contingent income, partially offset by lower life insurance and benefit plan commissions. The increase for the nine months ended September 30, 2026 was primarily attributable to higher benefit plan commissions, property and casualty commissions, and contingent income, partially offset by lower life insurance commissions. See the analysis of these categories of non-interest income in the section captioned “Non-Interest Income” elsewhere in this discussion.
Non-interest expense for the three and nine months ended September 30, 2026 increased $23.2 million, or 7.5%, and $49.8 million, or 5.4%, respectively, compared to the same periods in 2025. The increases during the three and nine months ended September 30, 2026 were primarily attributable to higher salaries and wages; other non-interest expense; technology, furniture, and equipment expense; and net occupancy expense. Employee benefits expense decreased during the three-month period, partially offsetting the increase, but increased during the nine-month period. The increases in salaries and wages were primarily attributable to annual merit and market-based salary increases and growth in the number of employees. Salaries and wages also increased, to a lesser extent, due to higher incentive compensation and stock-based compensation. The increases in other non-interest expense were primarily attributable to higher advertising and promotions expense; fraud losses, primarily related to deposits; travel, meals, and entertainment expense; amortization of deferred costs on loan commitments; bank card expense; and professional services expense, among other things, partially offset by lower sundry and other miscellaneous expense and donations expense, among other things. The increases in technology, furniture, and equipment expense were primarily attributable to higher cloud services expense; equipment rental expense; software maintenance expense; service contracts expense; and depreciation of furniture and fixtures, among other things, partially offset by lower software amortization expense. The increases in net occupancy expense were primarily attributable to higher depreciation on buildings and leasehold improvements; repairs, maintenance, and service contracts expense; and lease expense, partially offset by lower building insurance expense and property tax expense. The nine-month period was also negatively impacted by lower rental income from tenants. The decrease in employee benefits expense during the three months ended September 30, 2026 was primarily attributable to lower medical and dental benefits expense and a higher net periodic pension benefit related to our defined benefit retirement and restoration plans, partially offset by higher payroll taxes. The increase in employee benefits expense during the nine months ended September 30, 2026 was primarily attributable to higher medical and dental benefits expense, payroll taxes, and 401(k) plan expense, among other things, partly offset by a higher net periodic pension benefit related to our defined benefit retirement and restoration plans. See the analysis of these categories of non-interest expense in the section captioned “Non-Interest Expense” elsewhere in this discussion.
Wealth Management
Net income for the three and nine months ended September 30, 2026 increased $1.9 million, or 20.2%, and $3.0 million, or 11.0%, respectively, compared to the same periods in 2025. The increase during the three months ended September 30, 2026 was primarily the result of a $3.6 million increase in non-interest income, partly offset by a $1.1 million increase in non-interest expense, among other things. The increase during the nine months ended September 30, 2026 was primarily the result of an $11.4 million increase in non-interest income, partly offset by a $7.1 million increase in non-interest expense, among other things.
Non-interest income for the three and nine months ended September 30, 2026 increased $3.6 million, or 6.7%, and $11.4 million, or 7.3%, respectively, compared to the same periods in 2025. The increases during the three and nine months ended September 30, 2026 were primarily attributable to higher trust and investment management fees, partly offset by lower other non-interest income and lower other charges, commissions, and fees. The increases in trust and investment management fees during the three and nine months ended September 30, 2026 were primarily attributable to higher investment management fees, reflecting higher average equity valuations on managed accounts and growth in the number of accounts, and higher oil and gas fees. The increase for the nine months ended September 30, 2026 also reflected the timing of certain court-approved fees associated with a large guardianship trust and a one-time $1.3 million administrative fee associated with a large trust account. The decreases in other non-interest income were primarily attributable to lower sundry and other miscellaneous income. The decreases in other charges, commissions, and fees were primarily attributable to lower income from the placement of annuities
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and money market accounts, partly offset by higher income from the placement of mutual funds. See the analysis of these categories of non-interest income in the section captioned “Non-Interest Income” elsewhere in this discussion.
Non-interest expense for the three and nine months ended September 30, 2026 increased $1.1 million, or 2.5%, and $7.1 million, or 5.6%, respectively, compared to the same periods in 2025. The increase during the three months ended September 30, 2026 was primarily related to an increase in other non-interest expense, partly offset by decreases in salaries and wages and technology, furniture, and equipment expense, among other things. The increase during the nine months ended September 30, 2026 was primarily related to increases in other non-interest expense; salaries and wages; and employee benefits expense, among other things. The increases in other non-interest expense during the three and nine months ended September 30, 2026 were primarily attributable to increases in research and platform fees; sundry and other miscellaneous expense; and professional services expense, among other things. The decrease in salaries and wages during the three months ended September 30, 2026 was due in part to a restructuring of compensation and incentive plans, among other things. The increase in salaries and wages during the nine months ended September 30, 2026 was primarily related to annual merit and market-based salary increases and higher incentive compensation and commissions expense. The increase in employee benefits expense during the nine months ended September 30, 2026 was primarily attributable to higher medical and dental benefits expense, payroll taxes, and 401(k) plan expense. The decrease in technology, furniture, and equipment expense during the three months ended September 30, 2026 was primarily attributable to lower cloud services expense, software maintenance expense, and software amortization expense. See the analysis of these categories of non-interest expense in the section captioned “Non-Interest Expense” elsewhere in this discussion.
Non-Banks
The Non-Banks operating segment had a net loss of $2.9 million and $9.8 million during the three and nine months ended September 30, 2026, respectively, compared to a net loss of $2.7 million and $10.7 million during the same periods in 2025. The increase in the net loss during the three months ended September 30, 2026 was primarily attributable to higher professional services expense, partly offset by lower net interest expense resulting from lower average rates paid on long-term borrowings, among other things. The decrease in the net loss during the nine months ended September 30, 2026 was primarily attributable to lower net interest expense resulting from lower average rates paid on long-term borrowings, among other things.
Income Taxes
Income tax expense was $34.3 million and $98.2 million for the three and nine months ended September 30, 2026, respectively, compared to $33.6 million and $91.4 million for the same periods in 2025. The effective income tax rates were 16.0% and 15.8% for the three and nine months ended September 30, 2026, respectively, compared to 16.2% and 15.9% for the same periods in 2025. The effective income tax rates differed from the U.S. statutory federal income tax rate of 21% primarily due to tax-exempt income from securities, loans, and life insurance policies and, for 2025, the income tax effects associated with stock-based compensation, among other things, and the relative proportion of these items to pre-tax net income. The increases in income tax expense for the three and nine months ended September 30, 2026 were primarily attributable to increases in projected pre-tax net income. The decreases in the effective income tax rates for the three and nine months ended September 30, 2026 were primarily attributable to increases in projected tax-exempt interest from securities combined with decreases in projected non-deductible deposit interest expense.
Average Balance Sheet
Average assets totaled $53.0 billion for the nine months ended September 30, 2026, an increase of $1.6 billion, or 3.2%, compared to the same period in 2025. Average earning assets increased $1.5 billion, or 3.2%, compared to the same period in 2025. The increase in average earning assets was primarily attributable to increases of $1.6 billion in average loans, $426.1 million in average tax-exempt securities, and $157.3 million in average taxable securities, partially offset by a $612.5 million decrease in average interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve), among other things. Average deposits increased $981.9 million, or 2.3%, compared to the same period in 2025, including increases of $678.4 million in average interest-bearing deposits and $303.5 million in average non-interest-bearing deposits. Average non-interest-bearing deposits represented 33.0% of average total deposits for both the nine months ended September 30, 2026 and 2025.
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Loans
Details of our loan portfolio are presented in Note 3 - Loans in the accompanying notes to consolidated financial statements included elsewhere in this report. Loans increased $1.8 billion, or 8.1%, from $21.9 billion at December 31, 2025 to $23.7 billion at September 30, 2026. The majority of our loan portfolio is comprised of commercial and industrial loans, energy loans, and real estate loans. Real estate loans include both commercial and consumer balances. Selected details related to our loan portfolio segments are presented below. Refer to our 2025 Form 10-K for a more detailed discussion of our loan origination and risk management processes.
Commercial and Industrial. Commercial and industrial loans increased $160.1 million, or 2.5%, to $6.5 billion at September 30, 2026, from $6.3 billion at December 31, 2025. Our commercial and industrial loans are a diverse group of loans to small, medium, and large businesses. The purpose of these loans varies from supporting seasonal working capital needs to providing term financing for equipment. While some short-term loans may be made on an unsecured basis, most are secured by the assets being financed, with collateral margins consistent with our loan policy guidelines. The commercial and industrial loan portfolio also includes commercial leases and purchased shared national credits ("SNC"s).
Energy. Energy loans include loans to entities and individuals engaged in various energy-related activities, including (i) the development and production of oil or natural gas, (ii) providing oil and gas field services, (iii) providing energy-related transportation services, (iv) providing equipment to support oil and gas drilling, (v) refining petrochemicals, or (vi) trading oil, gas, and related commodities. Energy loans increased $55.4 million, or 5.1%, to $1.2 billion at September 30, 2026, from $1.1 billion at December 31, 2025. Energy loans are our largest industry concentration, totaling approximately 4.9% and 5.0% of total loans at September 30, 2026 and December 31, 2025, respectively. The average loan size, the significance of the portfolio, and the specialized nature of the energy industry require a highly prescriptive underwriting policy. Exceptions to this policy are rarely granted. Due to the large borrowing requirements of this customer base, the energy loan portfolio includes participations and SNCs.
Purchased Shared National Credits. SNCs are loan participations purchased from upstream financial institutions and are generally larger than loans in our originated portfolio. Our purchased SNC portfolio totaled $829.3 million at September 30, 2026, a decrease of $46.4 million, or 5.3%, from $875.7 million at December 31, 2025. At September 30, 2026, approximately 30.9% of outstanding purchased SNCs were related to the construction industry, 21.1% to the real estate management industry, 11.2% to the financial services industry, and 11.0% to the energy industry. The remaining purchased SNCs were diversified among various other industries, with no other single industry representing more than 10% of the total purchased SNC portfolio. Almost all of the outstanding purchased SNC balance was included in the energy and commercial and industrial loan portfolios, with the remainder included in the real estate loan categories.
SNC participations are purchased in the ordinary course of business to meet the needs of our customers. As a matter of policy, we generally participate in SNCs only for companies headquartered in or with significant operations in our market areas. In addition, we generally require direct access to the company’s management and either an existing banking relationship or the expectation of expanding the relationship through other banking products and services within the following 12 to 24 months. SNCs are reviewed at least quarterly for credit quality and the development of the broader banking relationship.
Commercial Real Estate. Commercial real estate loans increased $1.1 billion, or 10.3%, to $11.4 billion at September 30, 2026, from $10.3 billion at December 31, 2025. Commercial real estate loans represented 73.1% and 73.5% of total real estate loans at September 30, 2026 and December 31, 2025, respectively. The majority of our commercial real estate loan portfolio consists of commercial real estate mortgages, which include both permanent and intermediate-term loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Consequently, these loans must undergo the analysis and underwriting processes applicable to both commercial and industrial loans and real estate loans. At September 30, 2026, approximately half of the outstanding principal balance of our commercial real estate loans (excluding construction and land) was secured by owner-occupied properties.
Consumer Real Estate and Other Consumer Loans. The consumer real estate loan portfolio increased $474.7 million, or 12.8%, to $4.2 billion at September 30, 2026, from $3.7 billion at December 31, 2025. Combined, home equity loans and lines of credit made up 53.5% and 56.6% of the consumer real estate loan total at September 30, 2026 and December 31, 2025, respectively. We offer home equity loans up to 80% of the estimated value of the borrower’s personal residence, less the outstanding balance of existing mortgages and home improvement loans. We also originate 1-4 family mortgage loans for portfolio investment purposes. Such loans increased $370.9 million, or 62.3%, to $965.7 million at September 30, 2026, from $594.8 million at December 31, 2025. Consumer and other loans increased $8.0 million, or 1.7%, to $468.7 million at September 30, 2026, from $460.7 million at December 31, 2025. The consumer and other loan portfolio primarily consists of unsecured revolving credit products, secured personal loans, motor vehicle loans, overdrafts, and other similar types of credit facilities.
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Accruing Past Due Loans. Accruing past due loans are presented in the following table. Additional information is provided in Note 3 - Loans in the accompanying notes to consolidated financial statements included elsewhere in this report.
| Accruing Loans 30-89 Days Past Due | Accruing Loans 90 or More Days Past Due | Total Accruing Past Due Loans | |||||||||||||||||||||||||||||||||||||||
| Total Loans | Amount | Percent of Loans in Category | Amount | Percent of Loans in Category | Amount | Percent of Loans in Category | |||||||||||||||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 6,467,069 | $ | 39,480 | 0.61 | % | $ | 11,051 | 0.17 | % | $ | 50,531 | 0.78 | % | |||||||||||||||||||||||||||
| Energy | 1,150,093 | 5,076 | 0.44 | — | — | 5,076 | 0.44 | ||||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||
| Owner occupied | 4,402,147 | 9,860 | 0.22 | 7,771 | 0.18 | 17,631 | 0.40 | ||||||||||||||||||||||||||||||||||
| Non-owner occupied | 4,218,556 | 9,527 | 0.23 | 55,347 | 1.31 | 64,874 | 1.54 | ||||||||||||||||||||||||||||||||||
| Construction and land | 2,757,013 | 1,749 | 0.06 | 1,834 | 0.07 | 3,583 | 0.13 | ||||||||||||||||||||||||||||||||||
| Consumer real estate | 4,193,379 | 26,679 | 0.64 | 7,271 | 0.17 | 33,950 | 0.81 | ||||||||||||||||||||||||||||||||||
| Consumer and other | 468,710 | 8,397 | 1.79 | 518 | 0.11 | 8,915 | 1.90 | ||||||||||||||||||||||||||||||||||
| Total | $ | 23,656,967 | $ | 100,768 | 0.43 | $ | 83,792 | 0.35 | $ | 184,560 | 0.78 | ||||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 6,306,980 | $ | 31,212 | 0.49 | % | $ | 4,273 | 0.07 | % | $ | 35,485 | 0.56 | % | |||||||||||||||||||||||||||
| Energy | 1,094,669 | 19,480 | 1.78 | — | — | 19,480 | 1.78 | ||||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||
| Owner occupied | 3,987,913 | 17,074 | 0.43 | 3,465 | 0.09 | 20,539 | 0.52 | ||||||||||||||||||||||||||||||||||
| Non-owner occupied | 3,773,028 | 49,305 | 1.31 | 6,290 | 0.17 | 55,595 | 1.48 | ||||||||||||||||||||||||||||||||||
| Construction and land | 2,549,869 | 7,955 | 0.31 | 1,451 | 0.06 | 9,406 | 0.37 | ||||||||||||||||||||||||||||||||||
| Consumer real estate | 3,718,668 | 26,281 | 0.71 | 5,680 | 0.15 | 31,961 | 0.86 | ||||||||||||||||||||||||||||||||||
| Consumer and other | 460,685 | 5,024 | 1.09 | 512 | 0.11 | 5,536 | 1.20 | ||||||||||||||||||||||||||||||||||
| Total | $ | 21,891,812 | $ | 156,331 | 0.71 | $ | 21,671 | 0.10 | $ | 178,002 | 0.81 | ||||||||||||||||||||||||||||||
Accruing past-due loans at September 30, 2026 increased $6.6 million compared to December 31, 2025. The increase was primarily attributable to increases in past-due commercial and industrial loans (up $15.0 million), non-owner occupied commercial real estate loans (up $9.3 million), consumer and other loans (up $3.4 million), and consumer real estate loans (up $2.0 million), partially offset by decreases in past-due energy loans (down $14.4 million), construction and land loans (down $5.8 million), and owner occupied commercial real estate loans (down $2.9 million).
Non-Accrual Loans. Non-accrual loans are presented in the table below. Additional information is provided in Note 3 - Loans in the accompanying notes to consolidated financial statements included elsewhere in this report.
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||
| Non-Accrual Loans | Non-Accrual Loans | ||||||||||||||||||||||||||||||||||
| Total Loans | Amount | Percent of Loans in Category | Total Loans | Amount | Percent of Loans in Category | ||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 6,467,069 | $ | 20,688 | 0.32 | % | $ | 6,306,980 | $ | 50,659 | 0.80 | % | |||||||||||||||||||||||
| Energy | 1,150,093 | 2,218 | 0.19 | 1,094,669 | 3,023 | 0.28 | |||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||
| Owner occupied | 4,402,147 | 11,838 | 0.27 | 3,987,913 | 7,581 | 0.19 | |||||||||||||||||||||||||||||
| Non-owner occupied | 4,218,556 | 4,453 | 0.11 | 3,773,028 | 465 | 0.01 | |||||||||||||||||||||||||||||
| Construction and land | 2,757,013 | 19,356 | 0.70 | 2,549,869 | 1,874 | 0.07 | |||||||||||||||||||||||||||||
| Consumer real estate | 4,193,379 | 4,959 | 0.12 | 3,718,668 | 6,615 | 0.18 | |||||||||||||||||||||||||||||
| Consumer and other | 468,710 | 192 | 0.04 | 460,685 | 265 | 0.06 | |||||||||||||||||||||||||||||
| Total | $ | 23,656,967 | $ | 63,704 | 0.27 | $ | 21,891,812 | $ | 70,482 | 0.32 | |||||||||||||||||||||||||
| Allowance for credit losses on loans | $ | 290,258 | $ | 281,495 | |||||||||||||||||||||||||||||||
| Ratio of allowance for credit losses on loans to non-accrual loans | 455.64 | % | 399.39 | % | |||||||||||||||||||||||||||||||
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Generally, loans are placed on non-accrual status when principal or interest becomes 90 days past due, when management determines that the collectibility of principal or interest is in doubt, or when otherwise required by regulatory guidelines. Upon placement on non-accrual status, accrued but uncollected interest is reversed and charged to current-period earnings. Subsequent cash receipts on non-accrual loans are generally applied to principal, and interest income is recognized only when the collection of principal is reasonably assured. Placement of a loan on non-accrual status does not necessarily preclude the ultimate collection of principal or interest.
Non-accrual loans decreased $6.8 million, from $70.5 million at December 31, 2025 to $63.7 million at September 30, 2026, primarily due to a decrease in non-accrual commercial and industrial loans, partially offset by increases in non-accrual commercial real estate loans across all classes. There were no non-accrual commercial and industrial loans in excess of $5.0 million at September 30, 2026. At December 31, 2025, non-accrual commercial and industrial loans included one credit relationship in excess of $5.0 million with an outstanding balance of $28.5 million. Principal payments during 2026 reduced the outstanding balance of this credit relationship to $2.8 million at September 30, 2026. There were no non-accrual energy loans in excess of $5.0 million at September 30, 2026 or December 31, 2025. At September 30, 2026, non-accrual commercial real estate - construction and land loans included one credit relationship in excess of $5.0 million with an outstanding balance of $12.4 million. There were no other non-accrual credit relationships in excess of $5.0 million within any commercial real estate loan class at September 30, 2026 or December 31, 2025.
Allowance for Credit Losses
In the case of loans and securities, allowances for credit losses are contra-asset valuation accounts, calculated in accordance with ASC 326, that are deducted from the amortized cost basis of these assets to present the net amount expected to be collected. In the case of off-balance-sheet credit exposures, the allowance for credit losses is a liability account, calculated in accordance with ASC 326, and is reported as a component of accrued interest payable and other liabilities in our consolidated balance sheets. The amount of each allowance represents management's best estimate of lifetime expected credit losses on the applicable financial instruments based on available information from internal and external sources that is relevant to assessing exposure to credit loss over the expected lives of the instruments. Relevant information includes historical credit loss experience, current conditions, and reasonable and supportable forecasts. While historical credit loss experience provides a starting point for estimating expected credit losses, adjustments may be made to reflect differences in current portfolio‑specific risk characteristics, economic and environmental conditions, or other relevant factors. Although management utilizes its best judgment and the information available, the ultimate adequacy of our allowances depends on a variety of factors beyond our control, including portfolio performance, macroeconomic conditions, changes in interest rates, the accuracy of forecast assumptions and regulatory interpretations and supervisory assessments related to credit quality and asset classification. Refer to our 2025 Form 10-K for additional information regarding our accounting policies related to credit losses.
Allowance for Credit Losses - Loans. The table below provides, as of the dates indicated, an allocation of the allowance for credit losses on loans by loan portfolio segment; however, the allocation of a portion of the allowance to one segment does not preclude its availability to absorb credit losses in other segments.
| Amount of Allowance Allocated | Percent of Loans in Each Category to Total Loans | Total Loans | Ratio of Allowance Allocated to Loans in Each Category | |||||||||||||||||||||||
| September 30, 2026 | ||||||||||||||||||||||||||
| Commercial and industrial | $ | 89,319 | 27.3 | % | $ | 6,467,069 | 1.38 | % | ||||||||||||||||||
| Energy | 8,046 | 4.9 | 1,150,093 | 0.70 | ||||||||||||||||||||||
| Commercial real estate: | ||||||||||||||||||||||||||
| Owner occupied | 45,507 | 18.6 | 4,402,147 | 1.03 | ||||||||||||||||||||||
| Non-owner occupied | 57,580 | 17.8 | 4,218,556 | 1.36 | ||||||||||||||||||||||
| Construction and land | 44,545 | 11.7 | 2,757,013 | 1.62 | ||||||||||||||||||||||
| Consumer real estate | 34,739 | 17.7 | 4,193,379 | 0.83 | ||||||||||||||||||||||
| Consumer and other | 10,522 | 2.0 | 468,710 | 2.24 | ||||||||||||||||||||||
| Total | $ | 290,258 | 100.0 | % | $ | 23,656,967 | 1.23 | |||||||||||||||||||
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| Amount of Allowance Allocated | Percent of Loans in Each Category to Total Loans | Total Loans | Ratio of Allowance Allocated to Loans in Each Category | |||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||
| Commercial and industrial | $ | 98,439 | 28.8 | % | $ | 6,306,980 | 1.56 | % | ||||||||||||||||||
| Energy | 11,563 | 5.0 | 1,094,669 | 1.06 | ||||||||||||||||||||||
| Commercial real estate: | ||||||||||||||||||||||||||
| Owner occupied | 41,526 | 18.2 | 3,987,913 | 1.04 | ||||||||||||||||||||||
| Non-owner occupied | 52,054 | 17.2 | 3,773,028 | 1.38 | ||||||||||||||||||||||
| Construction and land | 41,530 | 11.7 | 2,549,869 | 1.63 | ||||||||||||||||||||||
| Consumer real estate | 25,637 | 17.0 | 3,718,668 | 0.69 | ||||||||||||||||||||||
| Consumer and other | 10,746 | 2.1 | 460,685 | 2.33 | ||||||||||||||||||||||
| Total | $ | 281,495 | 100.0 | % | $ | 21,891,812 | 1.29 | |||||||||||||||||||
The allowance allocated to commercial and industrial loans totaled $89.3 million, or 1.38% of total commercial and industrial loans, at September 30, 2026, a decrease of $9.1 million, or 9.3%, from $98.4 million, or 1.56% of total commercial and industrial loans, at December 31, 2025. Q-Factor and other qualitative adjustments related to commercial and industrial loans increased $10.0 million, primarily due to an increase in the model overlay for the downside scenario, as further discussed below. Modeled expected credit losses decreased $8.2 million, partially due to improvements in certain macroeconomic variables that influence projected loss expectations. Specific allocations for commercial and industrial loans evaluated for expected credit losses on an individual basis decreased $10.9 million, from $16.6 million at December 31, 2025 to $5.7 million at September 30, 2026, primarily due to loan repayments and $2.3 million of charge-offs, partially offset by new specific allocations on newly assessed loans.
The allowance allocated to energy loans totaled $8.0 million, or 0.70% of total energy loans, at September 30, 2026, a decrease of $3.5 million, or 30.4%, from $11.6 million, or 1.06% of total energy loans, at December 31, 2025. The decrease was primarily due to lower modeled expected credit losses and a reduction in the credit concentrations overlay.
The allowance allocated to commercial real estate loans totaled $147.6 million, or 1.30% of total commercial real estate loans, at September 30, 2026, an increase of $12.5 million, or 9.3%, compared to $135.1 million, or 1.31% of total commercial real estate loans, at December 31, 2025. The increase was primarily related to a $10.1 million increase in Q-Factor and other qualitative adjustments, principally related to model overlays driven by growth in the portfolio, as well as increases of $1.6 million in modeled expected credit losses, and $800 thousand in specific allocations.
The following table presents additional information about the allowance allocated to commercial real estate loans at September 30, 2026 and December 31, 2025:
| Owner Occupied | Non-owner Occupied | Construction and Land | Total | ||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||
| Modeled expected credit losses | $ | 12,039 | $ | 4,393 | $ | 2,225 | $ | 18,657 | |||||||||||||||
| Q-Factor and other qualitative adjustments | 32,846 | 53,187 | 40,907 | 126,940 | |||||||||||||||||||
| Specific allocations | 622 | — | 1,413 | 2,035 | |||||||||||||||||||
| Total | $ | 45,507 | $ | 57,580 | $ | 44,545 | $ | 147,632 | |||||||||||||||
| Total loans | $ | 4,402,147 | $ | 4,218,556 | $ | 2,757,013 | $ | 11,377,716 | |||||||||||||||
| Ratio of allowance to loans in each category | 1.03 | % | 1.36 | % | 1.62 | % | 1.30 | % | |||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Modeled expected credit losses | $ | 11,635 | $ | 4,130 | $ | 1,253 | $ | 17,018 | |||||||||||||||
| Q-Factor and other qualitative adjustments | 29,169 | 47,924 | 39,764 | 116,857 | |||||||||||||||||||
| Specific allocations | 722 | — | 513 | 1,235 | |||||||||||||||||||
| Total | $ | 41,526 | $ | 52,054 | $ | 41,530 | $ | 135,110 | |||||||||||||||
| Total loans | $ | 3,987,913 | $ | 3,773,028 | $ | 2,549,869 | $ | 10,310,810 | |||||||||||||||
| Ratio of allowance to loans in each category | 1.04 | % | 1.38 | % | 1.63 | % | 1.31 | % | |||||||||||||||
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The allowance allocated to consumer real estate loans totaled $34.7 million, or 0.83% of total consumer real estate loans, at September 30, 2026, an increase of $9.1 million, or 35.5%, from $25.6 million, or 0.69% of total consumer real estate loans, at December 31, 2025. The increase was primarily related to a $9.0 million increase in modeled expected credit losses, primarily attributable to portfolio growth and a change in an input assumption related to the probability of attrition, which reflects the likelihood that a loan will be paid off prior to maturity.
The allowance allocated to consumer loans totaled $10.5 million, or 2.24% of total consumer loans, at September 30, 2026, a decrease of $224 thousand, or 2.1%, from $10.7 million, or 2.33% of total consumer loans, at December 31, 2025. The decrease was primarily related to a $792 thousand decrease in Q-Factor and other qualitative adjustments, principally related to the consumer overlay, partially offset by a $628 thousand increase in modeled expected credit losses.
As more fully described in our 2025 Form 10-K, we measure expected credit losses over the expected life of each loan using a combination of models that estimate probability of default and loss given default, among other factors. Expected credit losses are influenced by loan- and borrower-specific attributes and certain macroeconomic variables. The models are adjusted to reflect current macroeconomic conditions and expected changes over a reasonable and supportable forecast period.
In estimating expected credit losses as of September 30, 2026, we utilized the Moody’s Analytics September 2026 Baseline Scenario (the “September 2026 Baseline Scenario”) to forecast the macroeconomic variables used in our models. The September 2026 Baseline Scenario represented Moody’s most likely forecast of the U.S. economy based on prevailing economic conditions. The September 2026 Baseline Scenario projections included, among other things, (i) U.S. Real Gross Domestic Product average annualized quarterly growth rates of 1.56% during the remainder of 2026 and 2.05% through the end of the forecast period in the third quarter of 2028; (ii) average annualized U.S. unemployment rates of 4.32% during the remainder of 2026 and 4.64% through the end of the forecast period in the third quarter of 2028; (iii) average annualized Texas unemployment rate of 4.23% during the remainder of 2026 and 4.30% through the end of the forecast period in the third quarter of 2028; (iv) projected average 10 year Treasury rate of 4.51% during the remainder of 2026 and 4.40% through the end of the forecast period in the third quarter of 2028; and (v) average oil price of $78.71 per barrel during the remainder of 2026 and $72.02 per barrel through the end of the forecast period in the third quarter of 2028.
In estimating expected credit losses as of December 31, 2025, we utilized the Moody’s Analytics December 2025 Baseline Scenario (the “December 2025 Baseline Scenario”) to forecast the macroeconomic variables used in our models. The December 2025 Baseline Scenario was based on the most likely outcome based on prevailing economic conditions and Moody's forecast of the U.S. economy. The December 2025 Baseline Scenario projections included, among other things, (i) U.S. Real Gross Domestic Product average annualized quarterly growth rates of 2.16% in 2026 and 1.83% in 2027; (ii) average annualized U.S. unemployment rates of 4.67% during both 2026 and 2027; (iii) average annualized Texas unemployment rate of 4.36% during 2026 and 4.37% during 2027; (iv) projected average 10 year Treasury rate of 4.23% during 2026 and 4.31% during 2027; and (v) average oil price of $61.09 per barrel during 2026 and $62.90 per barrel during 2027.
The overall loan portfolio at September 30, 2026 increased $1.8 billion, or 8.1%, compared to December 31, 2025. The increase reflected growth across all portfolios, including increases of $1.1 billion, or 10.3%, in commercial real estate loans; $474.7 million, or 12.8%, in consumer real estate loans; $160.1 million, or 2.5%, in commercial and industrial loans; $55.4 million, or 5.1%, in energy loans; and $8.0 million, or 1.7%, in consumer and other loans.
The weighted average risk grade for commercial and industrial loans increased slightly to 6.45 at September 30, 2026, from 6.44 at December 31, 2025. The increase was primarily attributable to a higher weighted-average risk grade of pass-grade commercial and industrial loans, which increased to 6.18 at September 30, 2026 from 6.06 at December 31, 2025. This deterioration was partially offset by the effect of a $57.9 million decrease in classified commercial and industrial loans (risk grades of 11, 12 or 13). The weighted-average risk grade for energy loans decreased to 6.08 at September 30, 2026, compared to 6.16 at December 31, 2025. The improvement primarily reflected a decline in the weighted-average risk grade of pass-grade energy loans to 5.85 at September 30, 2026 from 5.86 at December 31, 2025, a $2.4 million reduction in classified energy loans, and a $13.7 million decrease in energy loans graded as “watch” (risk grade 9) and “special mention” (risk grade 10). The weighted average risk grade for commercial real estate loans remained unchanged at 7.29 at both September 30, 2026 and December 31, 2025. While the weighted-average risk grade of pass-grade commercial real estate loans increased slightly to 7.06 at September 30, 2026 from 7.05 at December 31, 2025, this was offset by the effect of a higher proportion of commercial real estate loans graded as “pass” relative to the proportion of commercial real estate loans in higher risk grades.
As discussed above, our credit loss models utilized the Moody's Analytics September 2026 Baseline Scenario to estimate expected credit losses as of September 30, 2026 and utilized the Moody’s Analytics December 2025 Baseline Scenario to estimate expected credit losses as of December 31, 2025. Model results were then qualitatively adjusted to reflect certain risk factors that are not captured within the modeling processes but are nonetheless relevant in assessing expected credit losses across our loan portfolios. These qualitative factor, or Q‑Factor, adjustments are discussed below.
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Q‑Factor adjustments are based on management’s judgment and current assessment of risks related to, among other factors, changes in lending policies and procedures; economic and business conditions; loan portfolio composition and credit concentrations; and other external factors not already reflected in the modeling inputs, assumptions, or methodologies. Management evaluates the potential impact of these factors across a range of outcomes and applies an aggregate adjustment percentage to the modeled expected credit losses based on this assessment. As of September 30, 2026, modeled expected credit losses were increased by a weighted-average Q-Factor adjustment of approximately 3.7%, resulting in a $3.9 million total adjustment, compared to approximately 3.0% at December 31, 2025, which resulted in a $3.2 million total adjustment. In addition, as of September 30, 2026, management applied other qualitative adjustments, or management overlays, to address risks impacting certain categories of the loan portfolio that management believes are not fully reflected in the modeled results. Q‑Factor and other qualitative adjustments as of September 30, 2026 are presented in the table below.
| Q-Factor Adjustments | Commercial Real Estate Model Overlays | Office Building Overlays | Downside Scenario Overlay | Credit Concentration Overlays | Consumer Overlay | Total | |||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 1,677 | $ | — | $ | — | $ | 25,969 | $ | 8,093 | $ | — | $ | 35,739 | |||||||||||||||||||||||||||||||||
| Energy | 155 | — | — | — | 2,736 | — | 2,891 | ||||||||||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied | 547 | 31,435 | — | — | 864 | — | 32,846 | ||||||||||||||||||||||||||||||||||||||||
| Non-owner occupied | 220 | 37,573 | 13,899 | — | 1,495 | — | 53,187 | ||||||||||||||||||||||||||||||||||||||||
| Construction and land | 111 | 39,019 | 938 | — | 839 | — | 40,907 | ||||||||||||||||||||||||||||||||||||||||
| Consumer real estate | 1,167 | — | — | — | — | — | 1,167 | ||||||||||||||||||||||||||||||||||||||||
| Consumer and other | 58 | — | — | — | — | 4,500 | 4,558 | ||||||||||||||||||||||||||||||||||||||||
| Total | $ | 3,935 | $ | 108,027 | $ | 14,837 | $ | 25,969 | $ | 14,027 | $ | 4,500 | $ | 171,295 | |||||||||||||||||||||||||||||||||
Commercial real estate model overlays are qualitative adjustments designed to address risks not captured within our commercial real estate credit loss models. These adjustments are established based on minimum reserve ratios for our commercial real estate loan portfolios. For our commercial real estate - owner occupied loan portfolio, management determined that a minimum reserve ratio was appropriate to address the model’s oversensitivity to favorable changes in certain economic variables. Based on internal analysis and benchmarking against peer bank data, the modeled results are considered overly optimistic and do not appropriately capture downside risk. Accordingly, management determined that the forecasted loss rate for the owner occupied commercial real estate loan portfolio should more closely align with that of the commercial and industrial loan portfolio. For the commercial real estate - non‑owner occupied and construction and land loan portfolios, management determined that minimum reserve ratios were appropriate because the modeled results do not appropriately capture downside risk related to borrowers’ ability to access capital markets for the sale or refinancing of investor real estate and assets under construction. Management believes access to capital may remain impaired for an extended period, which could require borrowers to rely on secondary sources of liquidity and capital to support completed projects that could take longer to stabilize than originally underwritten. In addition, most non-owner occupied commercial real estate and construction loans are originated with floating interest rates. These borrowers continue to be adversely affected by elevated short-term interest rates. Longer-term interest rates have also increased, reflecting, in part, higher term and risk premiums at the long end of the yield curve.
Office building overlays are additional qualitative adjustments to our commercial real estate models designed to address longer-term concerns regarding the utilization of commercial office space and the potential adverse impact on the long-term performance of certain office properties within our commercial real estate loan portfolio. These adjustments are established based on minimum reserve ratios applied to loans within our commercial real estate - non-owner occupied and construction and land loan portfolios that have risk grades of 8 or worse. Loans with these risk grades were targeted for the overlays because they represent elevated credit risk and are more susceptible to adverse changes in property performance, collateral values, and capital market conditions, and therefore warrant additional qualitative consideration beyond the modeled results.
The downside scenario overlay is a qualitative adjustment applied to the commercial and industrial loan portfolio to address the risk of an economic downturn resulting from factors such as inflation; elevated interest rates; unemployment; changes or volatility in energy prices or energy markets; changes in financial markets; disruptions in global supply chains; geopolitical conflicts; acts of terrorism; and changes in trade policies, including tariffs and other trade measures. These factors are outside of management’s control but may adversely affect our customers, including their income levels and borrowing, repayment, and investment practices. To determine this qualitative adjustment, management utilizes an alternative, more pessimistic economic scenario to forecast the macroeconomic variables used in the credit loss models. As of September 30, 2026, management used the Moody’s Analytics S3 Alternative Scenario Downside - 90th Percentile. In modeling expected credit losses under this scenario, management also assumes that each non-classified loan within the modeled loan pools is downgraded by one risk
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grade. The resulting qualitative adjustment is based on the amount by which expected credit losses under the alternative scenario exceed those estimated using the primary scenario, adjusted based on management’s assessment of the probability that the downside economic scenario will occur.
Credit concentration overlays are qualitative adjustments based on statistical analysis designed to address concentrations in large credit relationships within the loan portfolio. Changes in loan portfolio concentrations over time can cause expected credit losses within the current portfolio to differ from historical loss experience. Because the allowance for credit losses reflects expected credit losses within the loan portfolio and such losses are uncertain as to their nature, timing, and amount, management believes that portfolio segments with higher concentration risk are more susceptible to significant credit losses. Accordingly, given the concentration of a significant portion of the loan portfolio in large credit relationships and our past experience with losses associated with large credit relationships, management applied the qualitative adjustments presented in the table above to address the increased risk that the deterioration of a large credit relationship could result in a significant credit loss.
The consumer overlay is a qualitative adjustment applied to the consumer and other loan portfolio to address risks associated with the concentration of unsecured loans and other risk factors within the portfolio. Unsecured consumer loans present an elevated risk of loss during periods of economic stress, as these loans lack a secondary source of repayment in the form of hard collateral. Management determines the overlay based on an analysis of historical charge-off trends within the consumer loan portfolio and the broader banking industry. Based on this analysis, management determined that it was appropriate to apply an additional qualitative adjustment to the modeled expected credit losses for the unsecured consumer loan portfolio.
As of December 31, 2025, we provided qualitative adjustments, as detailed in the table below. Further information regarding these qualitative adjustments is provided in our 2025 Form 10-K.
| Q-Factor Adjustment | Model Overlays | Office Building Overlays | Downside Scenario Overlay | Credit Concentration Overlays | Consumer Overlay | Total | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 1,684 | $ | — | $ | — | $ | 15,986 | $ | 8,036 | $ | — | $ | 25,706 | ||||||||||||||||||||||||||||||||||||
| Energy | 216 | — | — | — | 3,432 | — | 3,648 | |||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied | 410 | 27,834 | — | — | 925 | — | 29,169 | |||||||||||||||||||||||||||||||||||||||||||
| Non-owner occupied | 165 | 33,435 | 13,451 | — | 873 | — | 47,924 | |||||||||||||||||||||||||||||||||||||||||||
| Construction | 50 | 36,945 | 2,273 | — | 496 | — | 39,764 | |||||||||||||||||||||||||||||||||||||||||||
| Consumer real estate | 610 | — | — | — | — | — | 610 | |||||||||||||||||||||||||||||||||||||||||||
| Consumer and other | 57 | — | — | — | — | 5,293 | 5,350 | |||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 3,192 | $ | 98,214 | $ | 15,724 | $ | 15,986 | $ | 13,762 | $ | 5,293 | $ | 152,171 | ||||||||||||||||||||||||||||||||||||
Additional information related to credit loss expense and net (charge-offs) recoveries is presented in the tables below. Also see Note 3 - Loans in the accompanying notes to consolidated financial statements included elsewhere in this report.
| Credit Loss Expense (Benefit) | Net (Charge-Offs) Recoveries | Average Loans | Ratio of Annualized Net (Charge-Offs) Recoveries to Average Loans | ||||||||||||||||||||
| Three months ended: | |||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||
| Commercial and industrial | $ | (763) | $ | (1,338) | $ | 6,410,816 | (0.08) | % | |||||||||||||||
| Energy | (1,603) | 242 | 1,149,072 | 0.08 | |||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||
| Owner occupied | 857 | — | 4,356,553 | — | |||||||||||||||||||
| Non-owner occupied | 3,802 | 1 | 4,141,100 | — | |||||||||||||||||||
| Construction and land | 467 | — | 2,726,727 | — | |||||||||||||||||||
| Consumer real estate | 7,460 | (1,867) | 4,140,667 | (0.18) | |||||||||||||||||||
| Consumer and other | 4,690 | (5,402) | 453,008 | (4.73) | |||||||||||||||||||
| Total | $ | 14,910 | $ | (8,364) | $ | 23,377,943 | (0.14) | ||||||||||||||||
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| Credit Loss Expense (Benefit) | Net (Charge-Offs) Recoveries | Average Loans | Ratio of Annualized Net (Charge-Offs) Recoveries to Average Loans | ||||||||||||||||||||
| September 30, 2025 | |||||||||||||||||||||||
| Commercial and industrial | $ | 2,669 | $ | (1,486) | $ | 6,204,484 | (0.10) | % | |||||||||||||||
| Energy | (2,343) | 353 | 1,287,431 | 0.11 | |||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||
| Owner occupied | 86 | 6 | 3,818,036 | — | |||||||||||||||||||
| Non-owner occupied | — | — | 3,640,002 | — | |||||||||||||||||||
| Construction and land | — | — | 2,659,145 | — | |||||||||||||||||||
| Consumer real estate | 3,115 | (1,463) | 3,399,070 | (0.17) | |||||||||||||||||||
| Consumer and other | 5,480 | (3,999) | 443,565 | (3.58) | |||||||||||||||||||
| Total | $ | 9,007 | $ | (6,589) | $ | 21,451,733 | (0.12) | ||||||||||||||||
| Nine months ended: | |||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||
| Commercial and industrial | $ | (3,952) | $ | (5,168) | $ | 6,331,409 | (0.11) | % | |||||||||||||||
| Energy | (4,100) | 583 | 1,133,819 | 0.07 | |||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||
| Owner occupied | 6,030 | (2,049) | 4,251,562 | (0.06) | |||||||||||||||||||
| Non-owner occupied | 5,517 | 9 | 3,993,850 | — | |||||||||||||||||||
| Construction and land | 3,069 | (54) | 2,536,636 | — | |||||||||||||||||||
| Consumer real estate | 13,800 | (4,698) | 3,970,876 | (0.16) | |||||||||||||||||||
| Consumer and other | 12,031 | (12,255) | 456,943 | (3.59) | |||||||||||||||||||
| Total | $ | 32,395 | $ | (23,632) | $ | 22,675,095 | (0.14) | ||||||||||||||||
| September 30, 2025 | |||||||||||||||||||||||
| Commercial and industrial | $ | 17,165 | $ | (8,067) | $ | 6,118,906 | (0.18) | % | |||||||||||||||
| Energy | (2,428) | 835 | 1,220,374 | 0.09 | |||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||
| Owner occupied | 2,713 | (3) | 3,806,204 | — | |||||||||||||||||||
| Non-owner occupied | 5,361 | (4,629) | 3,720,035 | (0.17) | |||||||||||||||||||
| Construction and land | (5,635) | 3 | 2,525,722 | — | |||||||||||||||||||
| Consumer real estate | 7,365 | (3,112) | 3,273,373 | (0.13) | |||||||||||||||||||
| Consumer and other | 12,960 | (12,458) | 438,733 | (3.80) | |||||||||||||||||||
| Total | $ | 37,501 | $ | (27,431) | $ | 21,103,347 | (0.17) | ||||||||||||||||
We recorded a net credit loss expense related to loans of $32.4 million for the nine months ended September 30, 2026, compared to $37.5 million during the same period in 2025. Net credit loss expense or benefit for each portfolio segment represents the amount required to adjust the allowance for credit losses allocated to that segment to the level of expected credit losses determined under our allowance methodology, after giving effect to net charge-offs. Net credit loss expense for the first nine months of 2026 primarily reflected (i) growth in commercial real estate loans and related increases in model overlays; (ii) higher expected credit losses associated with consumer real estate loans; (iii) an increase in the downside scenario overlay reflecting increased risk of an economic downturn; and (iv) net charge-offs related to consumer and other loans (primarily overdrafts), commercial and industrial loans, consumer real estate loans, and commercial real estate owner-occupied loans.
The ratio of the allowance for credit losses on loans to total loans was 1.23% at September 30, 2026 compared to 1.29% at December 31, 2025. Management believes the allowance for credit losses on loans is appropriate based on its best estimate of expected credit losses in the existing loan portfolio. Changes in the factors considered in estimating expected credit losses could result in changes to the allowance for credit losses and future credit loss expense.
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Allowance for Credit Losses - Off-Balance-Sheet Credit Exposures. The allowance for credit losses on off-balance-sheet credit exposures totaled $47.5 million at September 30, 2026, compared to $51.3 million at December 31, 2025. The level of the allowance for credit losses on off-balance-sheet credit exposures is influenced by the volume of outstanding commitments, underlying risk grades, expected utilization of available commitments, and forecasted economic conditions impacting the loan portfolio. We recognized a net credit loss benefit related to off-balance-sheet credit exposures of $3.8 million during the nine months ended September 30, 2026, compared to a net credit loss benefit of $4.7 million during the same period in 2025. Our policies and methodology used for estimating the allowance for credit losses on off-balance-sheet credit exposures are further described in our 2025 Form 10-K.
Capital and Liquidity
Capital. Shareholders’ equity totaled $4.0 billion at September 30, 2026 and $4.6 billion at December 31, 2025. Sources of capital during the nine months ended September 30, 2026 included net income of $523.3 million and $16.2 million related to stock-based compensation. Uses of capital during the nine months ended September 30, 2026 included other comprehensive loss, net of tax, of $761.2 million, $198.7 million of dividends paid on preferred and common stock, and $178.3 million of treasury stock purchases.
The accumulated other comprehensive income (loss) component of shareholders’ equity totaled a net, after-tax, unrealized loss of $1.6 billion at September 30, 2026, compared to a net, after-tax, unrealized loss of $843.0 million at December 31, 2025. The increase in the net, after-tax, unrealized loss was primarily due to a $761.7 million net, after-tax, decrease in the fair value of securities available for sale.
Under the Basel III Capital Rules, we have elected to opt out of the requirement to include most components of accumulated other comprehensive income (loss) in regulatory capital. Accordingly, amounts reported in accumulated other comprehensive income (loss) generally do not increase or reduce regulatory capital and are excluded from the calculation of our regulatory capital ratios. Banking regulators utilize capital guidelines designed to measure capital and take into consideration the risks associated with both on-balance-sheet and off-balance-sheet exposures. See Note 6 - Capital and Regulatory Matters in the accompanying notes to consolidated financial statements included elsewhere in this report for additional information regarding our regulatory capital requirements and ratios.
Details of dividends declared and paid are presented in the table below. Our ability to declare or pay dividends on, or purchase, redeem or otherwise acquire, shares of our capital stock is subject to certain legal and regulatory limitations. See Note 6 - Capital and Regulatory Matters in the accompanying notes to consolidated financial statements included elsewhere in this report for additional information.
| 2026 | 2025 | ||||||||||||||||||||||
| Dividends Per Share | Dividend Payout Ratio | Dividends Per Share | Dividend Payout Ratio | ||||||||||||||||||||
| 1st quarter | $ | 1.00 | 37.8 | % | $ | 0.95 | 41.3 | % | |||||||||||||||
| 2nd quarter | 1.03 | 38.0 | 1.00 | 41.8 | |||||||||||||||||||
| 3rd quarter | 1.03 | 36.4 | 1.00 | 37.5 | |||||||||||||||||||
| Year-to-date | $ | 3.06 | 37.4 | $ | 2.95 | 40.1 | |||||||||||||||||
In March 2026, the federal bank regulatory agencies proposed revisions to the standardized approach for calculating risk-weighted assets that would apply to Cullen/Frost and Frost Bank. The proposal would, among other things, revise the risk-based capital treatment of certain corporate, retail and residential mortgage exposures and mortgage servicing assets and make other changes to the calculation of risk-weighted assets. The comment period for the proposal ended in June 2026. Based on our preliminary assessment, the proposed changes would be expected to modestly reduce our total risk-weighted assets. Because the proposal has not been finalized and remains subject to change, its ultimate impact on our regulatory capital requirements cannot yet be determined.
Stock Repurchase Plans. From time to time, our board of directors has authorized stock repurchase plans that provide us with flexibility to manage our capital levels, repurchase shares of our common stock when management determines such repurchases are appropriate and acquire shares to satisfy obligations related to stock compensation awards. See Note 6 - Capital and Regulatory Matters in the accompanying notes to consolidated financial statements included elsewhere in this report and Part II, Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds for additional information.
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Liquidity. As more fully discussed in our 2025 Form 10-K, we continuously monitor our liquidity position and adjust the balance between sources and uses of funds as appropriate. Liquidity risk management is an important component of our asset/liability management process. We regularly model liquidity stress scenarios to assess potential liquidity outflows and funding needs that could result from economic disruptions, financial market volatility, unexpected credit events or other significant occurrences. These scenarios are incorporated into our contingency funding plan and assist us in identifying and planning for potential liquidity needs. Our principal source of funding has been customer deposits, supplemented by short-term and long-term borrowings, maturities of securities and cash flows from our loan and securities portfolios.
As of September 30, 2026, we had approximately $6.3 billion held in an interest-bearing account at the Federal Reserve. We also have the ability to borrow funds as a member of the FHLB. As of September 30, 2026, based upon available, pledgeable collateral, our total borrowing capacity with the FHLB was approximately $7.6 billion. In addition, as of September 30, 2026, we had approximately $11.5 billion of unencumbered securities that could be pledged to support additional borrowings through repurchase agreements or the Federal Reserve discount window, as needed. As of September 30, 2026, we are not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources or operations. Management also is not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on us.
Since Cullen/Frost is a bank holding company and does not conduct banking operations, its primary sources of liquidity are dividends received from Frost Bank and borrowings from external sources. Banking laws and regulations may limit the amount of dividends that Frost Bank may pay to Cullen/Frost. See Note 6 - Capital and Regulatory Matters in the accompanying notes to consolidated financial statements included elsewhere in this report for additional information regarding such dividends. As of September 30, 2026, Cullen/Frost had liquid assets totaling $260.4 million, primarily consisting of cash on deposit at Frost Bank.
Accounting Standards Updates
See Note 16 - Accounting Standards Updates in the accompanying notes to consolidated financial statements included elsewhere in this report for information regarding recently issued accounting pronouncements and their expected impact on our financial statements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
The disclosures set forth in this Item are qualified by, and should be read in conjunction with, the section captioned “Forward-Looking Statements and Factors That Could Affect Future Results” included in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, as well as other cautionary statements included elsewhere in this report.
Refer to the discussion of market risks included in Item 7A. Quantitative and Qualitative Disclosures About Market Risk in the 2025 Form 10-K. There has been no material change in the types of market risks to which we are exposed since December 31, 2025.
We use an earnings simulation model as our primary quantitative tool for measuring interest rate risk associated with changes in market interest rates. The model quantifies the effects of various interest rate scenarios on projected net interest income and net income over the next 12 months. The model measures the effect on net interest income relative to a flat-rate base-case scenario under hypothetical changes in interest rates over the same period. These simulations incorporate assumptions regarding balance sheet growth and mix, pricing and the repricing and maturity characteristics of our existing and projected balance sheet. The effects of interest rate derivatives, including interest rate swaps, caps and floors, also are incorporated into the model. Other interest rate-related risks, including prepayment, basis and option risk, also are considered.
Our model simulations as of September 30, 2026 indicate that our projected balance sheet is less asset-sensitive than our projected balance sheet as of December 31, 2025. For modeling purposes, as of September 30, 2026, the model simulations projected that ratable increases in interest rates of 100 and 200 basis points would result in positive variances in net interest income of 0.8% and 1.5%, respectively, relative to the flat-rate base case over the next 12 months. Ratable decreases in interest rates of 100 and 200 basis points were projected to result in negative variances in net interest income of 0.9% and 2.7%, respectively, relative to the flat-rate base case over the same period. For modeling purposes, as of December 31, 2025, the model simulations projected that ratable increases in interest rates of 100 and 200 basis points would result in positive variances in net interest income of 1.5% and 3.0%, respectively, relative to the flat-rate base case over the next 12 months. Ratable decreases in interest rates of 100 and 200 basis points were projected to result in negative variances in net interest income of 1.3% and 3.4%, respectively, relative to the flat-rate base case over the same period.
We do not currently pay interest on a significant portion of our commercial demand deposits. Whether we pay interest on these deposits in the future would depend on a variety of factors, some of which are beyond our control. Our September 30, 2026 and December 31, 2025 model simulations did not assume the payment of interest on commercial demand deposits that were not already receiving an earnings credit. Based on our experience during prior interest rate cycles, management believes it is unlikely that we would pay interest on these deposits as interest rates increase.
As of September 30, 2026, the effects of a 200 basis point increase and a 200 basis point decrease in interest rates on our derivative holdings would not result in a material variance in our net interest income.
The effects of hypothetical fluctuations in interest rates on our securities classified as “trading” under ASC Topic 320, “Investments—Debt and Equity Securities,” are not material. Accordingly, separate quantitative disclosure is not presented.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this Quarterly Report on Form 10-Q, management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the quarter ended September 30, 2026 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II. Other Information
Item 1. Legal Proceedings
We are subject to various claims and legal proceedings arising in the ordinary course of business. Management does not expect the ultimate resolution of these matters to have a material adverse effect on our business, financial condition or results of operations.
Item 1A. Risk Factors
There has been no material change in the risk factors disclosed under Item 1A. of our 2025 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information with respect to purchases we made or were made on our behalf or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of our common stock during the three months ended September 30, 2026. Dollar amounts in thousands.
| Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan | Maximum Number of Shares (or Approximate Dollar Value) That May Yet Be Purchased Under the Plan at the End of the Period(1) | |||||||||||||||||||
| July 1, 2026 to July 31, 2026 | 45 | (2) | $ | 156.86 | — | $ | 140,000 | ||||||||||||||||
| August 1, 2026 to August 31, 2026 | 47,580 | 161.92 | 47,580 | 132,296 | |||||||||||||||||||
| September 1, 2026 to September 30, 2026 | 45,120 | 161.70 | 45,120 | 125,000 | |||||||||||||||||||
| Total | 92,745 | 92,700 | |||||||||||||||||||||
(1)On January 28, 2026, Cullen/Frost announced that our board of directors authorized a $300.0 million stock repurchase program, allowing us to repurchase shares of our common stock over a one-year period expiring on January 27, 2027.
(2)Repurchases made in connection with the vesting of certain stock compensation awards.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
Insider Trading Policies and Procedures. Our board of directors has adopted the Cullen/Frost Bankers, Inc. Insider Trading Policy, which governs the purchase, sale and other disposition of our securities by our directors, officers and employees and by Cullen/Frost. The policy is reasonably designed to promote compliance with applicable insider trading laws, rules and regulations and applicable NYSE listing standards.
Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements. None
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Item 6. Exhibits
(a) Exhibits
| Exhibit Number | Description | ||||
| 31.1 | Rule 13a-14(a) Certification of the Corporation's Chief Executive Officer | ||||
| 31.2 | Rule 13a-14(a) Certification of the Corporation's Chief Financial Officer | ||||
32.1(1) | Section 1350 Certification of the Corporation's Chief Executive Officer | ||||
32.2(1) | Section 1350 Certification of the Corporation's Chief Financial Officer | ||||
101.INS(2) | Inline XBRL Instance Document | ||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | ||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||||
| 101.LAB | InlineXBRL Taxonomy Extension Label Linkbase Document | ||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||||
104(3) | Cover Page Interactive Data File | ||||
(1)This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
(2)The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
(3)Formatted as Inline XBRL and contained within the Inline XBRL Instance Document in Exhibit 101.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Cullen/Frost Bankers, Inc. | |||||||||||||||||
| (Registrant) | |||||||||||||||||
| Date: | October 29, 2026 | By: | /s/ Daniel J. Geddes | ||||||||||||||
| Daniel J. Geddes | |||||||||||||||||
| Group Executive Vice President | |||||||||||||||||
| and Chief Financial Officer | |||||||||||||||||
| (Principal Financial Officer) | |||||||||||||||||
| Date: | October 29, 2026 | By: | /s/ Matthew B. Henson | ||||||||||||||
| Matthew B. Henson | |||||||||||||||||
| Executive Vice President | |||||||||||||||||
| and Chief Accounting Officer | |||||||||||||||||
| (Principal Accounting Officer) | |||||||||||||||||
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