Financial Analysis

Borrowed Funds Federal Funds Purchased and Securities Sold Under Agreements to Repurchase. Federal funds purchased are short-term borrowings that typically mature within one to ninety days. Federal funds purchased totaled $18.8 million and $22.0 million at December 31, 2025 and 2024. Securities sold under agreements to repurchase are secured short-term borrowings that typically mature overnight or within thirty to ninety days. Securities sold under agreements to repurchase are stated at the amount of cash received in connection with the transaction. We may be required to provide additional collateral based on the fair value of the underlying securities. Securities sold under agreements to repurchase totaled $4.5 billion and $4.3 billion at December 31, 2025 and 2024. Subordinated Notes. In March 2017, we issued $100.0 million of 4.50% subordinated notes that mature on March 17, 2027. The notes, which qualify as Tier 2 capital for Cullen/Frost, bear interest at the rate of 4.50% per annum, payable semi-annually on each March 17 and September 17. The notes are unsecured and subordinated in right of payment to the payment of our existing and future senior indebtedness and structurally subordinated to all existing and future indebtedness of our subsidiaries. Unamortized debt issuance costs related to these notes, totaled approximately $196 thousand and $352 thousand December 31, 2025 and 2024. Proceeds from sale of the notes were used for general corporate purposes. Junior Subord …

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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) for such asset or liability. 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 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. The fair value hierarchy is as follows: Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

Income Taxes Income tax expense was as follows: 2025 2024 2023 Current income tax expense $ 117,773 $ 125,025 $ 129,229 Deferred income tax expense (benefit) 5,372 (11,600) (14,829) Income tax expense, as reported $ 123,145 $ 113,425 $ 114,400 Effective tax rate 16.0 % 16.3 % 16.1 % A reconciliation between reported income tax expense and the amounts computed by applying the U.S. federal statutory income tax rate of 21% to income before income taxes is presented in the following table. There were no activities or transactions that had foreign income taxes or cross-border tax effects during the reported periods. State income/franchise taxes are primarily related to the State of Texas, while amounts related to other jurisdictions were not significant, in the aggregate, during the reported periods. 2025 2024 2023 Amount Percent Amount Percent Amount Percent U.S. federal income tax expense computed at the statutory rate $ 162,057 21.0 % $ 146,153 21.0 % $ 149,598 21.0 % State income/franchise taxes, net of U.S. federal income tax effects 1,628 0.2 1,343 0.2 1,527 0.2 Effect of changes in tax laws or rates enacted during the year Tax credits (131) (141) (162) Non-taxable or non-deductible items: Tax-exempt interest (45,497) (5.9) (38,498) (5.5) (43,114) (6.1) FDIC premiums 5,979 0.8 5,943 0.9 5,263 0.8 Executive compensation 2,572 0.3 1,629 0.2 2,591 0.4 Meals and entertainment 2,001 0.3 1,861 0.2 1,692 0.2 Other (925) (0.1) 1,211 0.2 34 Tax benefit of 401(k) dividends (2,274) (0. …

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Accounting Changes, Reclassifications and Restatements. Certain items in prior financial statements have been reclassified to conform to the current presentation.

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Employee Benefit Plans Retirement Plans Retirement Plan and Restoration Plan. We maintain a non-contributory defined benefit plan (the Retirement Plan) that was frozen as of December 31, 2001. The plan provides pension and death benefits to substantially all employees who were at least 21 years of age and had completed at least one year of service prior to December 31, 2001. Defined benefits are provided based on an employees final average compensation and years of service at the time the plan was frozen and age at retirement. The freezing of the plan provides that future salary increases will not be considered. Our funding policy is to contribute yearly, at least the amount necessary to satisfy the funding standards of the Employee Retirement Income Security Act (ERISA). Our Restoration of Retirement Income Plan (the Restoration Plan) provides benefits for eligible employees that are in excess of the limits under Section 415 of the Internal Revenue Code of 1986, as amended, that apply to the Retirement Plan. The Restoration Plan is designed to comply with the requirements of ERISA. The entire cost of the plan, which was also frozen as of December 31, 2001, is supported by our contributions. We use a December 31 measurement date for our defined benefit plans. Combined activity in our defined benefit pension plans was as follows: 2025 2024 2023 Change in plan assets: Fair value of plan assets at beginning of year $ 169,727 $ 174,611 $ 161,823 Actual return on plan assets 14,67 …

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Operating Segments We are managed under a matrix organizational structure whereby our two primary operating segments, Banking and Frost Wealth Advisors, overlap a regional reporting structure. The regions are primarily based upon geographic location and include Austin, Dallas, Fort Worth, Gulf Coast (which includes Corpus Christi and the Rio Grande Valley), Houston, Permian Basin, San Antonio and Statewide. We are primarily managed based on the line of business structure. In that regard, all regions have the same lines of business, which have the same product and service offerings, have similar types and classes of customers and utilize similar service delivery methods. Pricing guidelines for products and services are the same across all regions. The regional reporting structure is primarily a means to scale the lines of business to provide a local, community focus for customer relations and business development. Banking and Frost Wealth Advisors are delineated by the products and services that each segment offers. The Banking operating segment includes both commercial and consumer banking services and Frost Insurance Agency. Commercial banking services are provided to corporations and other business customers and include a wide array of lending and cash management products. Consumer banking services include direct lending and depository services. Frost Insurance Agency provides insurance brokerage services to individuals and businesses covering corporate and personal propert …

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Summary of 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 include the accounts of Cullen/Frost and all other entities in which Cullen/Frost has a controlling financial interest. All significant 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 and to general practices within the financial services industry. We determine whether we have a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity (VIE) under accounting principles generally accepted in the United States. Voting interest entities are entities in which the total equity i …

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Stock-Based Compensation A combined summary of activity in our active stock plans is presented in the table below. Performance stock units outstanding are presented assuming attainment of the maximum payout rate as set forth by the performance criteria. As of June 30, 2026, there were 2,113,772 shares remaining available for grant for future stock-based compensation awards. Deferred Stock Units Outstanding Non-Vested 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 61,539 $ 98.38 586,298 $ 111.39 219,512 $ 101.23 Granted 8,190 142.80 2,595 139.91 Vested (6,553) 102.22 (2,114) 127.77 (26,844) 130.26 Forfeited (7,354) 112.89 (25,683) 130.26 Balance, June 30, 2026 63,176 103.74 579,425 111.62 166,985 91.11 Shares issued in connection with stock compensation awards are issued from available treasury shares. If no treasury shares are available, new shares are issued from available authorized shares. Shares issued in connection with stock compensation awards along with other related information were as follows: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 New shares issued from available authorized shares Shares issued from available treasury stock 6,553 36,942 35,511 140,878 Proceeds from stock option exercises $ $ 2,248 $ $ 5,956 Stock-based comp …

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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 June 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 June 30, 2026 Securities available for sale: U.S. Treasury $ 2,925,951 $ $ $ 2,925,951 Residential mortgage-backed securities 9,819,31 …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

Income Taxes Income tax expense was as follows: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Current income tax expense $ 35,327 $ 32,345 $ 68,972 $ 61,807 Deferred income tax expense (benefit) (2,844) (2,728) (5,070) (4,017) Income tax expense, as reported $ 32,483 $ 29,617 $ 63,902 $ 57,790 Effective tax rate 15.9 % 15.9 % 15.7 % 15.8 % We had a net deferred tax asset totaling $268.5 million at June 30, 2026 and $261.1 million at December 31, 2025. No valuation allowance for deferred tax assets was recorded as of either date, as management believes it is more likely than not that deferred tax assets will be realized through the reversal of existing deferred tax liabilities and the generation of projected future taxable income. The effective income tax rates differed from the U.S. statutory federal income tax rate of 21% for the comparable periods primarily due to the effect of tax-exempt income from securities, loans, and life insurance policies, as well as the income tax effects of stock-based compensation, among other items. There were no unrecognized tax benefits recorded during any of the periods reported. Interest and/or penalties related to income taxes are reported as a component of income tax expense. Such amounts were not material during any of the periods reported. 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 20 …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

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 June 30, Six Months Ended June 30, 2026 2025 2026 2025 Expected return on plan assets, net of expenses $ (2,487) $ (2,341) $ (4,975) $ (4,683) Interest cost on projected benefit obligation 1,470 1,655 2,940 3,310 Net amortization and deferral 208 309 417 619 Net periodic expense (benefit) $ (809) $ (377) $ (1,618) $ (754) Our non-qualified defined benefit pension plan is not funded. No contributions to the qualified defined benefit pension plan were made during the six months ended June 30, 2026. We do not expect to make any contributions to the qualified defined benefit plan during the remainder of 2026.

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Operating Segments We are managed under a matrix organizational structure whereby our two primary operating segments, Banking and Frost Wealth Advisors, overlap a regional reporting structure. The regions are primarily based upon geographic location and include Austin, Dallas, Fort Worth, Gulf Coast (which includes Corpus Christi and the Rio Grande Valley), Houston, Permian Basin, San Antonio, and Statewide. We are primarily managed based on the line of business structure. In that regard, all regions have the same lines of business, which have the same product and service offerings, have similar types and classes of customers, and utilize similar service delivery methods. Pricing guidelines for products and services are the same across all regions. The regional reporting structure is primarily a means to scale the lines of business to provide a local, community focus for customer relations and business development. See our 2025 Form 10-K for additional information about our operating segments and related accounting policies. 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 wit …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

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 o …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing