Cullen/Frost Bankers Inc

Hilltop Holdings reported a 5.6% year-over-year increase in net interest income to $227.9 million for the first half of 2026, driven by strength in its banking segment and lower funding costs. In the second quarter alone, NII rose 4.7% year over year and 3.4% sequentially to $115.9 million, with the consolidated net interest margin expanding to 3.21% from 3.13% in the prior quarter. Net loans held for investment grew to $8.6 billion as of June 30, up 8% year over year and 3% sequentially, prompting management to raise its 2026 average loan growth expectation to 5-7% from 4-6%. However, management expects NIM to remain around current levels or decline modestly in the second half, with NII likely staying relatively stable, suggesting the pace of growth may moderate. Among peers, Cullen/Frost Bankers saw NII rise 4.8% to $886.3 million in the first half, while Prosperity Bancshares recorded a 22.2% increase to $651.7 million, aided by acquisitions and margin expansion.

Cullen/Frost Bankers currently pays a quarterly dividend of $1.03 per share, yielding 2.65%, which exceeds the Banks - Southwest industry average of 1.65% and the S&P 500's 1.41%. The company's annualized dividend of $4.12 represents a 4.3% increase from last year, and it has raised its dividend five times over the past five years for an average annual increase of 7.98%. With a payout ratio of 39% and expected earnings growth of 6.14% to $10.54 per share in fiscal 2026, the stock holds a Zacks Rank of 3, or Hold.

John Dorfman of Dorfman Value Investments recommends a quintet of mid-cap stocks, arguing they can help portfolios perform differently from large-cap-dominated indices. The five picks are Dillard's, Matson, Cullen/Frost Bankers, National Fuel Gas, and Oshkosh. Dillard's trades at 13 times earnings and has appreciated 833% over the past decade. Matson, a Hawaii-based ocean shipper, sells for 14 times earnings and has returned 478% over ten years. Cullen/Frost Bankers has been profitable every year since 1868. National Fuel Gas, active across natural-gas production, pipelines, and utilities, trades at about 10 times earnings. Oshkosh, a maker of fire engines and military trucks, sells at 13 times forward earnings estimates. Mid-caps are up 15.4% this year through June 19, outpacing the 10.2% gain for large-caps.