Cullen/Frost Bankers plans to give more customers a break on overdraft fees, but it doesn’t expect to abandon the controversial revenue stream entirely, CEO Phillip Green said in an interview.
The San Antonio-based parent company of Frost Bank is taking additional steps after
In order to qualify for that offer, customers have so far been required to make a monthly direct deposit of at least $500. But starting later this year, all Frost customers will get the benefit.
“We’re expanding that to customers who don’t have access to direct deposit,” Green said.
In the next few months, Frost also plans to eliminate nonsufficient-funds fees on checks and other transactions that the bank doesn’t allow to go through when a customer’s balance is too low. But Green said he isn’t prepared to step away from overdraft fees entirely.
“To me, just eliminating that service to customers, the industry should think long and hard about that as long as we have the systems in place to help keep it from being oppressive or inappropriate in any way,” he said in the interview.
“But it is clear that overdraft fees will be a smaller percentage than they used to be.”
Large and regional U.S. banks
At Frost, the expansion of overdraft-fee relief will cost about $2 million a year in lost revenue, and the elimination of nonsufficient fund fees will eliminate up to $400,000 the bank collects each quarter, Chief Financial Officer Jerry Salinas said Thursday during a call with analysts.
Despite the overdraft changes that Frost made in April 2021, the $51.3 billion-asset company reported that it collected $8.7 million from the fees during the first quarter, up 16% from the same period last year. About $6.7 million came from consumer accounts, and $2 million was charged to business customers.
The Cleveland bank, which currently charges around $33 when customers spend more than they have in their accounts, is planning a series of overdraft-related reforms. Key follows numerous other large and midsize banks that have taken similar steps.
The disclosures about overdraft fee revenue came as part of the bank’s quarterly earnings report. Cullen/Frost recorded $97.4 million in net income during the first quarter, down 14.4% from one year prior.
While Frost is participating in the industry’s shift toward a reduced reliance on overdraft fees, it is bucking the trend in favor of culling branches.
Frost has been aggressively
The new branches are already seeing a surge in new business, according to Frost executives, who vowed to push forward with the company’s expansion plan.
The first two of 28 new branches planned for the Dallas area opened this year and are already trending above their goals for loans, deposits and customer counts, Green told analysts. A third branch in the Dallas area is scheduled to open in the second quarter. Meanwhile, the bank continues to grow in Houston and could be eyeing opportunities in Austin next year and beyond.
“I really believe that we're going to be doing this for a long time,” Green said of the branch expansion.
