Cullen/Frost Bankers continues to invest in growth — amid what its CEO describes as a booming Texas economy — even as many other banks are tightening their purse strings.
The San Antonio bank reported a 14% year-over-year increase in noninterest expenses during the third quarter. Total average loans climbed by 7%.
Cullen/Frost remains "laser-focused on our efforts to achieve organic growth," CEO Phil Green told analysts on Thursday.
In an interview, Green said the bank's rising expenses represent investments in growth. "We're not trying to be successful by shrinking," he said. "We're not trying to save our way into prosperity."
Cullen/Frost's strategy is based on strong client demand in the Lone Star State, Green said.
"We're in Texas, which is a great market to be in right now," he said in the interview. "It's hard to envision a better business environment."
While Texas has a 4.1% unemployment rate, a bit higher than the 3.8% national average, the state's gross domestic product grew by 3% during the first quarter compared with 1.1% for the overall U.S. economy.
The Dallas and Houston markets have been one focus of Cullen/Frost's expansion efforts.
Deposits in Houston totaled $1.4 billion at the end of the third quarter, a 40% increase from the same period last year, according to company disclosures. Meanwhile, loans in Houston topped $1 billion last quarter, up 31% from the year-ago period.
In Dallas, Cullen/Frost had $325 million in deposits at the end of the third quarter, up from $261 million at the end of the second quarter, according to the company's disclosures. And the bank added more than $40 million in loans in Dallas during the third quarter.
The parent company of Frost Bank is also expanding in Austin. It
Numerous other banks have announced cost-cutting plans in recent weeks, including Truist Financial, which plans to
Many bankers
During the third quarter, total average loans at Cullen/Frost grew to $18 billion, up from $16.8 billion in the same period last year.
"Loan growth was much stronger than expected," Compass Point Research & Trading analyst David Rochester wrote in a note to clients.
Going into the third quarter, Rochester anticipated that Cullen/Frost's loan demand had weakened. He said that the strong growth was likely bolstered by the closing of loans that were in the pipeline during the second quarter, as well as by a slowdown in paydowns of real estate loans.
During the third quarter, noninterest expenses of $293 million were up from $258 million in the second quarter of 2022. Green said that Cullen/Frost "generally operates tightly on expenses," but he noted that higher costs could continue into next year amid the bank's continued expansion.
Cullen/Frost also expressed optimism about deposit trends. Its total average deposits declined by 11% year over year to $41 billion. But so far in the fourth quarter, there are signs of stabilization, according to Chief Financial Officer Jerry Salinas.
"I don't know if I can confidently say that we're at the bottom, but I certainly feel a whole lot better today than I did a quarter ago," Salinas told analysts during the company's earnings call.
The company reported net income of $156 million during the third quarter, which was down 8% from the same period last year. Net interest income of $407 million was up 7% from the year-ago period.
