CFR - Earnings call transcript Q4 2020 | Cullen/Frost Bankers, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Cullen/Frost's Q4 Earnings Results Conference Call. At this time all participants are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Mr. A.B. Relations. Investor of Director Mendez, Please go ahead.

A. B. Mendez

morning's Thanks by Executive will CFO. led call Green, Ashley. Vice Chairman and Group This Phil Salinas, and be Jerry conference CEO; President and

I over the address harbor provisions. Phil call moment safe the turn take a I and Before Jerry, need to to to

for the Some remarks to safe amended. of as page is We website will our such statements by made statements constitute associated last defined the to statements additional as forward-looking these XXXX turn available of information calling the morning's Act the or Private at XXX-XXX-XXXX. over the call XXXX provisions Litigation Investor text I'll the Phil. of of earnings covered in the be time, with harbor by release needed, Act in Reform see Securities for At release as in this the If this forward-looking today Private forward-looking on Litigation contained factors risk Reform statements. Relations about intend copy Please amended. Securities of a

Phil Green

it a $X.XX fourth additional quarter questions. same last of I’ll or before afternoon Cullen/Frost Jerry Thanks Today in joining $X.XX Salinas quarter us. earned with third reported $XX.X Financial million the for XXXX. in the fourth year also $X.XX a earnings our quarter thanks In a or results compared share, share million quarter will $XXX.X the $XX.X provide share million of for Good everyone Cullen/Frost or open and Officer, your and we and AB. up review to Chief comments

or $X.XX of a XXXX reported Cullen/Frost of earnings $XXX.X $X.XX share million a with compared XXXX. share full or million for $XXX.X the year For earned

deposits average of fourth quarter billion of XX% billion, time compared increase in at fourth represented were quarter the an in in the billion a quarter to last of in average loans manage last billion, of Average $XX loans, of increase of fourth X.X% loans long-term with market Overall fourth excluding quarter the the compared continues growth. increase the expansion $XX fourth billion with quarter the team the XXXX. while the quarter fourth to $XX.X but year, and PPP year. investing compared for were share Our $XX same XX% expenses, pursuing an $XX.X of

the second For growth we’ve This highest our has new in reflects always of history. also and the building consecutive been times that Frost quarter haven safe average quarterly success seen a customers in our in uncertainty, relationships. for deposits

last to XX what within year-end, at were $XXX.X million our common We loans Overall, the Non-performing fourth of was the million average were in last charge-offs and million were million. third of the remain and XX the reduction Our the to fourth $XX.X numbers of X.XX% $XX.X XX% quarter. $XX.X the experienced from the and the quarter Net Annualized third quarter accruing net end at we’ve points credit million A in XXXX, loss were points return compared million and average the quarter down end quarter $XXX the million quarter of fourth loans. expense several fourth in or in on quarter for quarter. in fourth average ago at end only basis basis XX period year. delinquencies of this assets the for Those years. to the the million points down equity respectively. at loans. stood $X.X year in assets saw from non-performer standards quarter, $XX.X $XX.X a of $XX.X fourth compared with third basis for in comparable charge-offs million our

million of we risk totaling $XXX we’ve fourth third. end a in percentage Regarding quarter, $XXX the portfolio $X.X at to of peaked of loans portfolio, XX problem in $XXX.X at early fourth the year. falling to customers only $XXX in Energy end million loans decline in of loans compared the the the million of than nearly as fourth at line quarter of for Total more in the million million deferment. the Energy for the deferrals were of end fourth end quarter, related loans X.X% higher remained quarter. to define perspective, at put the for fourth total our X,XXX energy and $XX million $XXX.X problem quarter about that were of at loans XX-day continue granted problem to deferrals, billion, payment non-PPP and the at grade XXXX. end previous our quarter, total as the last $XXX.X which with the and million To the

a As of in back XXXX. was peak figure end the at and that third quarter reminder, X.X% XX% was the the

outlook retail. quarter represented the as and XXXX, were work portfolio was our restaurants, at and X.XX%. the for of our to loans economic continue fourth appropriate loan outstanding entertainment now our manageable, for pandemic: on had the hotels segments the excluding We under and Throughout economic reserve the total have are hotels, where billion company’s and to We non-energy segments, just an and of The dislocations PPP on portfolio X.X% hard the $X.X respectively. by allowances stable of our end sports X.X% allocated segments In balances restaurants, saw these to the credit negative largest reserve a to improving. in percentage impacts that to our these half levels. discussed loss increases impact XXXX, increased of exposure is the portfolio energy brought we overall and quality pandemic’s the segment rationalize second but in

a commercial credit approximately a They relationships have total our by our to reminder, our is represent loans these total in areas were year a approximately represent spot XXXX. closely we X.X% me hotels good, ago. a of we a in good lodging monitor growth X.X% will to of and restaurants and up have bright To continue our and risk, in and loans. We as on compared XX% and really the handle

national our statement. to and customers But its for we PPP mission clearly at a and market. relationships; its obtain loans beyond it’s above great do; positive We’re Frost’s recognition going at building the impact it’s for in success in what

also our In expansion is success addition, contributing here. Houston to our

commercial relationships in companywide Houston and New relationships new grew XXXX XX% of XX% the in the commercial year. represented during

and loan the prior For commitments our the pandemic. reflected year the were compared of to X% booked down impact the year

to booked, the time very between market at competitive. year this Regarding and increased last XX% from relationships have remains at stayed XXXX. XX% lost XX% new of percentage year. to core these commitments The loan end The of XX% larger steady balance this the structure deals

XX% to opened fourth the the to than the compared active quarter, up X% to net by measured Our Same-store prior were weighted of quarter loan less a the pre-COVID end quarter current growth and as the customer Overall, the on account fourth quarter fourth good third fourth of for end dropped up pipeline pandemic the growth. up was by for business XXXX. with impact see of branches sales when Consumer X.X% our compared year by continued openings the of X.X% the XXXX, compared of quarter reflecting fourth activity. banking new in to about quarter. the the quarter continues compared through

Here again our Houston growth. this expansion is helping

was growth. XX% about X.X% company including households, from loan Houston quarter quarter, up XX% the mobile household account of channel, portfolio the XXXX. our of fourth openings the by to fourth came online consumer representing our openings up $X.X currently only of were end For to quarter, the compared XX% our fourth Frost total XX.X% quarter consumer app. The example, contributed fourth quarter of the Online year. In account consumer of higher despite our last billion at compared total fourth

success COVID new in is on Station two placed fourth open completion rollout, for expect obtaining but quarter. to financial the has of locations the the center the in a the nearby of saw planned year. opened in our new new new open first XX in expansion remaining total College nearing to financial of Houston second with had centers later an well impact the Our our financial loans financial this also PPP with Bryan the market. fourth exceeding three and we centers are of half were the Overall, quarter our this to well-timed for leverage XX financial the expectations quarter and center our in opening new The centers.

growth. far our committed January, newest the organic location Bird We sustainable, So business. Center Financial in location Red for also in average above consistent, to Dallas, remain opened

Jerry of thankful commitment be challenging their own be a in will move I have promises the as and positioned its year about skill be be into broadly Throughout could responsibilities to the long-term the what eliminating committed and positions communities of I’m successful remain known optimistic serve. to well for. efforts proud we’ve This customer the for we about business provide the month, to been improve better also philosophy managing about across which have XXXX often and where company will is that them. technology to with difficult as culture. operating step well-being This, the took changed, world-class into and the of the and along as efficiently where where service of difficult and Frost Frost Frost I’m we a Frost accomplished efficiency costs new company We of way, level ready us XX now could consolidated. utilized XXXX. needs Bankers and I’m talk and people to of dedication we discuss possible.

Now, Jerry to Officer, some turn additional comments. I’ll Financial Chief over Salinas our the call for

Jerry Salinas

Phil. you, Thank

forgiven. basis our invested higher was third quarter $X.X X.XX% yielding quarter XX% was the quarter. the previous $X.X $XX.X our loan was X of in third at quarter. fourth The $XXX Interest-bearing a basis XX of being those for to last of as from billion. assets at in earning or The taxable first all balances $XXX up quarter. of the at result proportion down result quarter. Average a assets almost in million up decrease loan The of margin the from driven net our a volumes percentage balances were average fourth points third being was Looking billion of for interest Fed averaged decrease earning by earning X.XX%, million of quarter equivalent in compared net from PPP points of or reported margin, fourth quarter, quarter interest down average the fourth decrease the XX X.XX%, the the a XX% in lower the the as billion in deposits Fed assets fourth from the basis the earning $XX.X loans point quarter billion yield

X.X% $XX last loans, the were on PPP quarter. an in annualized million or about quarter fourth average Excluding up basis from loans

a our of speeds average the yield total the from and decrease lower equivalent $XX.X billion. portfolio, in quarter, the $XX.X $XX portfolio a during the yield portfolio purchases. third X investment was third associated down of investment taxable down portfolio which points in from was the agency third our our to with driven about averaged as lower on that X billion premium fourth investment averaged basis points The portfolio MBS down amortization quarter the at higher The X.XX% yield quarter $X.X quarter. with taxable quarter X.XX% securities, by was million billion on The given the result quarter, prepayments Looking basis recent during yield the in yields associated from portfolio. the faster fourth

X quarter, equivalent portfolio yield $XX to quarter. At end million the the fourth third municipal the compared during of billion The point of fourth of X.X was duration the quarter, down prior up taxable municipal portfolio with the $X.X PSF quarter, averaged or from from X.X pre-refunded the last X.XX%, insured. the quarter. the about at XX% portfolio the basis the years quarter investment of was years end fourth of Our

of During less purchases than primarily million our $XXX fourth and quarter investment the securities. consisted were MBS

out look we to amount this XXXX, expecting market. into in are purchases currently make of not a we As significant investment

of will to prepayments to make and currently We our calls. about the offset expected a in are purchases portion $X only help which in maturities expecting neighborhood billion, of

out point of million $X.X that that eliminated one-time expense; with non-interest $X.X expense positions noted. million Phil impacted by includes the for about to restructuring costs, the severance non-interest fourth I’ll Regarding related quarter in

his operate ways looking comments, efficiently. environment As on we mentioned we in and to this last Phil continue our spending to quarter and mentioned managing in more for discretionary focus as

our where relationships we integrity, using where managing question technology core but the and sense the we customer manner that responsibilities of where we in have We to could have teammates discretionary reduce was operate efficiently thoughtful for reorganized environment, challenged consolidated. vendor technology makes always second to collaborative reorganize has year focused. rate sight the in look believe have began We costs and losing further to this challenges positions used to ourselves where in could of ways even processes. where in spending positions, asked our process to our the across and a and this work more deal without last visited become caring with could. values environment. where needs We done in zero excellence. a possible it to this our All operating as our be of affecting We been worked and expenses, prudent began zero changed, rate approach with quarter of pandemic interest areas, more eliminate process open to business utilized to be a automate including organization without We continue better experience. to We

XX.X% expense X% Our non-interest environment. on and for we incentives this from environment XXXX. initial up ended our rate overall it a over resulting somewhat, to and around of expenses the in under guidance expenses, shows the reported operating team’s managing actually decrease Obviously but the was commitment lower changes with growth XXXX for XXXX growth affected

around annual Now looking forward XXXX of we expect growth range off the our XXXX, X% to expenses. expense X.X% something non-interest of into growth reported total an

little effective be we taxes, rate effective XXXX a our income rate expect higher of tax to Regarding X.X%. our currently than XXXX tax for

a a credit expense $X.X XXXX onetime reminder, million. discrete Just tax as income included of

a we the event. This low. estimates the over Phil turn mean Regarding I’ll year is assumes the operating $X.XX currently of estimates for that, that with now for credit back XXXX a With analyst unexpected little full of environment steady questions. believe earnings, no current to call

Phil Green

up call open Thank you, now questions. Jerry we’ll the for and

Operator

Your from now comes the is first open. Brady Instructions] [Operator Gailey your line of line KBW; question with

Brady Gailey

you. Hey, Good thank afternoon, guys.

Phil Green

Brady. Hey,

Jerry Salinas

Brady. Hey,

Brady Gailey

with the to loans. I wanted start So PPP

What fourth in amount the You those quarter. the got some income know the of was fourth know spread I forgiven dollar of in quarter? PPP from impact

Jerry Salinas

don’t I’ll here. the fee second I here million. portion I grab a me to you me know give information; have – was $XX it give Yes, around was say false it so that let any about just

Brady Gailey

$XXX remember guys I but round over one about be could PPP. big It of and know of at was pretty million round the I that I in it’s earnings What any early, Okay, were Frost PPP? round two you right. know how of successful two? if idea

Phil Green

volume. You know Brady, we’re seeing really good

SBA integrating around end. with the gave worked people Our it was information and the about clock a be how once system we’d them, the us new front

and I think The well, now we processes have we was X,XXX have right had gotten about XX see. over – far days of to I stand and applications. up let’s so paper has our our portal – it piece

working used so but We’ve that to let’s or say applications It’s X,XXX earlier was is approved in PPP close one worth the This volume. pretty think the X,XXX at and maybe see, I by the process which billion and got volume. back I I good so that today an was – number got application $X around be to good us, to SBA process. of about told it’s automated I really we’ve was an well. let’s looking XX that you seen eon,

So loan a we’re did first round. than average bit seeing in size little lower we the

are we’re we’ve are second I and an think XX% far average size. time PPP seeing up PPP seen borrowers, that XXX,XXX-ish money activity will – good there. XX% coming seen the this let’s round the excuse a like -- first number. lined slow more me, really that say needed been time our so in get that looks were to of so line that volume it’s from in numbers say time I we’ve that This It first was number recently. XXX,XXX about had people well, a

Brady Gailey

color. for Alright, Then me, hear that’s layoffs. to Cullen/Frost good it’s finally uncommon about through going

one reductions Is the just and your to expense as staff. you couple the were with at deal of last of this might yield elsewhere will I think a ago. are year. that I you’ll a far know tough, Those time did especially think workforce, but the not or I have times look, decades about curve. X.X% that this continue been layoffs, done as

Phil Green

did. was an No to the for down under with, we XX% Brady, year was so he’s things trimming team X% that it so, a kind – We first first it reporting, thing last Jerry to, of visibility X% that was cut got when the know was you’re or do thing we so. thing I right, number different as the think our it There about as salaries fair he X% or modestly XX%. tough amount really and executive and to you started of year has the one of to many a it was been you been guided we

know board started to their our cut about you told last was private compensation XX%. our – in their You quarter how in I immediately session they call

You to a thing Frost know just very do.

kind was the When reductions, discretionary. So reduce make were down thing a is we We started and those they the need of right it the these because to everything of end some positions, we out it, with of do. to did thoughtful. things take very we and got hatchet didn’t to

from hired, I know mean hired than that reduced that reduce open and reduce think someone don’t we though is and we were much to someone were many the were haven’t doing one staff. positions yet of current that were a do they thing position positions. decided for rather so than reduced I open for we’d that we there amount have more

mean I planning on though, all related and assets It’s million around then our go couple employee back a can to I been and it have you literally business the on if per of average So it just it pre-financial level. our crisis, doing expenses I $X not think it’s at true and in was I was for no, banks each reducing to ago staffing it’s I double that years now. not think and also something look was that was years we’re right right. activity go at, outlook something back looking

So we’ve technology and efficiently. been effectively more using

and that to and and case. and did it be giving we’re not January. will on in think customer similar we’re anticipating to the it, better so I we that expect no, to an wanted we’re anything using we growth experiences with sure people; what smarter But have impact our

Jerry Salinas

from shifting Great! Yes, thing say though this we’re is not that away Jerry. one will The management. I focus our is expense

So the right, the to to were with them last whole to thing layouts to trying efficiency. the you to and that we be I but find to do smarter team to continue do, know were executive work continue organization, and really expenses, tough things the do participate Phil’s about think where we we to looking to the and try save can, more and

that this continue continue about on. focus will hopefully staff and So that’s in environment to us something hear our hopefully talking it to

Brady Gailey

guys. Okay, got Thanks it.

Phil Green

you. Thank

Operator

comes question is Ebrahim the line of line of your with now next the Securities; from Your Poonawala open. America Bank

Ebrahim Poonawala

afternoon. Good

Phil Green

Hey Ebrahim.

Ebrahim Poonawala

follow-up around remind the of I at model. a be the tied just on the was the X? these Jerry and guess you first couple loans much at, PPP us accrued PPP year Could end questions for to the are to PPP, fees of of balance what left of how

Jerry Salinas

earned September. at billion be at end from $X.X of to all PPP year, $XX we Sure, billion, down left the of and And million the there’s end our be balance about expect the earned to of in $X.X was XXXX. that

Ebrahim Poonawala

expected I of vast you you majority think call? last come first the do that earnings the And in that quarter? to expect through

Jerry Salinas

but well, last here toward going of really down slower that now slowed information right into on bit I we the in roughly of had that is say. me, I I January. number I’m off December. would little have and right $XXX based be expect January. bleed than It and the December a No, it’s forgiven as or into September what front will the don’t – was will between quarter we you have we the seems expected I have best think paid right if we’ve to part it in think million second so that seen, between to

Ebrahim Poonawala

talked outlook. in question a more I wrong talk around And of Got efficient, you’re of terms I – what with guess great call us another your that, appreciate mean, franchise of things trying competitors Phil all happening terms the yesterday to one had growth I making just in about in I the and nothing guess but do Texas. it. to

headquarters Texas. being folks corporate seeing moved, to from are coast moving the We

probably Texas on are there mean what is technology sort this Frost what of in doing more for frontline that largest bank, of for us loan hiring the in terms and putting growth Given Like actually does personnel? bank? of earnings terms the to you the growth, investments talk and

Phil Green

in we of the regard I see some of them, it We’ve growth. of moving used Texas successful relationships are would the been saw I long from a that time. one Ebrahim, brokers California. to It’s that relocations have from the business a other the that out and very Texas they remember these and amazing I with step-up markets, people with brokers. coming Austin growth, here XX% for mean me, state to have relocations agree seen were telling be from in to

Now about and California half gaining and it’s East momentum. – it’s mid-East and think – Coast I Midwest it’s half so

trying we’re of to thing, capital Austin. growth market several that understand but last and that allocation trying consistency really there’s mean this of to it we’re that impact over terms has then kind we think the market. remarkable the of long-term and in been impact the in Austin of us the market, longer to rate momentum been the in to months particularly and for I a means approach how term and it, what understand in I

literally So know you growth. read that’s I the experience as and developing we the think, all headlines

mean saw, be driven same talk relationship you things can’t visit that’s think know me way we’re I new of it. able to to and, mean have the seeing get to there. you pandemic kind you really are used impacts I heard out I by in mean situation a you that I our the where growth. customers do remarkable you growth and relationship loan As pandemic still on far as, expectations growth, about really we,

that’s and see so and I believe to the positive. that healthy get And pandemic, we’re the is At and our and level down, just really of before business the same it’s general to related really have time go increase up. pipeline confidence to see that’s going we

this us know growth, You I single loan through don’t you off earnings really thing. don’t PPP you as for we operating digit keep without know from know, we I do do of year. expect think I to high we current the for know, that. I to are for hard kind try do them environment. us were to know that, I below investments it’s us that, move loans, forward expect our that to company. we expect being to to are our the tough market paying and know successful, nothing’s work outlook to the I but But and though be you making, beat continue a I I it, Houston, we spending to we’ll hard and and we of changed in fundamental you taking shareholders – mean terms to the for going when think see we’re that share we’re are, were continue Texas

So from COVID. the be but year under going it’s this continue to about to I’m optimistic pressure future,

Ebrahim Poonawala

Thank you my questions. taking it. Got for

Phil Green

you. Thank Sorry.

Operator

Your open. Morgan is of Ken line the Zerbe Stanley; next question line comes now from your with

Ken Zerbe

in those were live those existing – I they are your if new coming openings customers trying mentioned, if understand XX% your located? the existing Phil, were if from Great, of Because like they the customers I’m same account or thanks. channels. outside you to of numbers Where branches are through the something Thanks. your towns footprint? as right, digital got

Phil Green

I interesting Ken, we thought that is. found a number

drive opened that were for online location. existing accounts example, an of the a Houston five-minute take Let’s Frost XX% were within of

So, their there I online believe then to it’s think people our growth see you let’s of I for it fact, to they up, and you I an think Houston reviews are see is and the number us a take are more the having time if of percentage. a because to we and experience which the positive not it’s of you’ll research how more really, reactions our more, factors only take research, us it’s know, outsized were but doing that I percentage been are, an and positive outsized reported growth, very more

people live are we seeing they success and just, online. are up. lot where You they had just locations, And know new a of opening

So, tended five-minute proximate to they in tend locations just Houston, I say to that be that and you have market, that so be of to in markets weren’t. the means we’re know XX% but have tend said, we would to and a as locations within our they in drive they I be, were but, XX%

So there is some..

Ken Zerbe

very is guess it that expand their apply an focusing Yes, customers have to open of new that digital, that I banks to interesting to potential lot your but does heavily on also would who because know would that imply I does to continue bit are statistic. more imply, obviously grow broadly, more, branches online. to taking new a customer the banks little base, continue a

Phil Green

it’s our consumer consumer side. because because to mean at and a was Houston, know to helpful, that, to our I out it’s always you to about growth mainly I about thing mean, it’s talked the I in we certainly like locations individuals. added relate tell right, the know the all seeing that though as one to about I’ve you fun statement, that in strategy had our that and I side think I Houston, account where talk commercial point of I process. and the it doubling you’re can just you directly make but almost broader looking expansion in

mid-sized know biggest with You the revenue small piece businesses. and of has strategy do to that

round our was loan at at it estate, book our commercial. our in XX% If least lending. commercial base numbers deposit looked is what about C&I is the company at XX% overall, XX%, I commercial so you real time look of it side, comes last or commercial And from

is trying banking doing really means mid-sized small market. model in to strong these commercial business we’re that what markets to replicate So, our very a and it’s

is times face RFPs could back in one that the the know and new nearest before a mentioned banks elements of I of back have calls number that So, customer location. the doing that people RFP cases when thing those is was with to for was I face were of of I live one do you other XXXX, XX% and what’s

in much well. I’d a there you a And growth to focus commercial our know that in There keep in is good So, as commercial we’ve seen like relationships really of very mind. Houston.

Ken Zerbe

Thank you perfect. very Alright, much.

Phil Green

you. Thank

Operator

Your your line comes of Demba the with next now Truist Jennifer from question is line Securities; open.

Jennifer Demba

Thank Good afternoon. you.

Phil Green

Jennifer. Hi,

Jennifer Demba

growth about for talk about what’s this in you Austin guidance, just you the Will and talking your main be expense branches market? at growth seeing? you driving is Could more putting your of that year, terms

Jerry Salinas

of a there. the incentives things it, in do couple expenses you fact Jennifer if Regarding XXXX projections related weren’t of there expenses, mention was mentioned that, benefit, lot represent XXXX I’ll my targets will as the we you in to meeting some meet comments, so I the that obviously for to paid some know right. that we needed We weren’t that increases and will have our a

a slower We the more three That and still expansion. to about opened process end of so we quite that. on in the had been by the open opened that they actually talked expected has part have impact We we a also little and XXXX. We would planned the we bit be than branches have Houston all latter XXXX. of of few

XXXX the the full-year are So a and that going primarily between big impact on are growth they’re those XXXX. I’m XXXX. to things having affecting say

Phil Green

about, yeah more dramatic at know evaluating regard you least Jennifer growth And than the Austin really seeing when talked what with the, is headlines, but we’re in the think that. I I to Austin,

say in but When I job the adding will think locations what us I been pretty us, to work think to understanding result it’s at of we’re point it’s because know the we there it there some opportunity, able it’s at above it be we looking Fed of believe. rapidly, remarkable needs two Yeah, You recently. could would otherwise looking understand numbers but done, and in that. I I the is pretty impact done was some growth; result they’ve it have maybe to changing what that an with

Jennifer Demba

you. Thank

Operator

is line with of Rochester now open. line the Compass from your comes question next Dave Point; Your

Dave Rochester

guys. good Hey, afternoon

Phil Green

Hey, Dave.

Jerry Salinas

Hey.

Dave Rochester

you in are see X% thinking at year? forward, from XXXX. in is purchases your loan level are the the given new you you the securities right that you’re guys least going billion you growth, for that due How X.XX% do are then whatever on for just where now? And set the above the on what maybe point for talking ex-PPP, or about? that of Hey, $X what about that margin, guys were at XQ easier, you loan, timing And thoughts trend the to NII this your guide

Jerry Salinas

the pieces, all I you see if me the on I here asking about think Let NIM, ex-PPP. were got

my know, as You in a comments, of now not right mentioned purchases. investment I we’re really projecting lot

of on quarter NIM, some would I yielding same I now, north single-digit billion We’re off net if billion that the of lower I fourth billion. interest kind obviously probably of roll so again, at only are interest and loans investment to that, pressure the of margin. $X some $X by We’ve guidance and It’s definitely the Fed downward Right are modeling but days high that the percentage to we’ll the $X see that just $X going net net obviously then got the is and and interest I there’s is that thing would given maturing look on movement margin. give being think expect the replaced even be billion margin portfolio there at loans. the reacting

it; – I kind and from of We’re just interesting had impact that’s at $X.X I we’ve you on and the at earning this our having looking we’ve that the billion it’s we if at percentage’ billion of got away, said, got. XX for such north Fed walked that think that just we and know impact the maybe having a billion, ourselves deposits looking level that’s just was to $X it big basis of $X ‘well, points. morning understand were only

itself. it’s income, huge about XX it not going NIM to a So to basis the percentage be moves interest your but hit points, probably

willing sidelines the bit by a that being of NIM and on today’s Don’t the there. and have just right we so percentage lot we that we’re see the sitting now impacted market. now in optionality a like we’re like we liquidity of that to level is right little So not what bet by carrying

Dave Rochester

and book Yeah, that What loan now makes is at back on front point? differential the sense. book in the the this

Jerry Salinas

I the just pressure Sure put I going we if book. I’m lower. much looking looking book, I XX say, yeah, at that, estate of commercial new it’s at on really You that probably the guess it’s versus on to that was was being XX XX real maybe the bps I’m look quarter bps the I’ll the in you fourth seeing I kind guess before the bps, is that demand. If most that probably in we’re about the and of and stuff know information little I I north The C&I is was know basis a – seeing, surprised to say at looking points. not of most just we’re XX lower; everything

Dave Rochester

on commentary NII expect just still would fair? growth see and and might would NIM. the deposit that I guess loan some So I I still from see that would fact to you more growth given think your growth imagine level, year, Is the see you XQ this

Jerry Salinas

we’ve you we will. to sort and I the I growth impact X.X as Obviously include on for see that we have there loan volumes guess And thing conversations as know of internally. there. forget round some in could we what really still there Well, concerned that really, is our if PPP, guidance the say part. think gave our We don’t projections PPP with is was need on doesn’t that really get you in almost I this kind do that by NII that far should the we growth be PPP intentional of had

income about by in million we’ll million we’ve of year. next three to recognized we and $XX million the XXXX each $XX first a left quarters quarters in right year those said $XX of to PPP that under earn in I couple quarter the So last of earn expect I I of fee got think about,

of pressure that happen new our those brought back we really that, some this of at think yeah, and to layer will all model on, growth. ex loan looked feel still what we we’ll into model So our PPP fees, but haven’t if you

Dave Rochester

guys. Okay, great. Thanks

Phil Green

Thank you.

Operator

now question line Your your is JPMorgan; open. comes with from last Steven Alexopoulos

Steven Alexopoulos

Hi, everybody.

Jerry Salinas

Stephen. Hey,

Phil Green

Stephen. Hey,

Steven Alexopoulos

I’d start, XXXX for of well? releases reserve releases. I assumption to XXXX you a reserve $X.XX Do assume so for indicated imagine want as in consensus consensus you EPS when low, for little your includes that an is comment that

Jerry Salinas

do We not.

that’s in part that what We’re not of give. we’re – at this any we guidance assuming not the point

Steven Alexopoulos

you or your over on message I’m more senior a I’ve to XXXX, fairly management efficient salaries, now a Last And confused expenses about you you’re need expenses, continuing a the always on revenue normal on honestly focus get the expenses. quarter intense based guiding but XQ that helpful. which XXXX year. event? X.X% that’s the Okay, considered to to where then Is cutting is talked headwinds X% bit given were in really in

Jerry Salinas

asked No, are I again. that earlier mean thing the being is was we impacted

get will, projecting year so You we’re out projecting income get so far in and back if paid basically didn’t to they that know more increase, to incentives. as we’re some there a in Obviously, as revenues normalized growth and were XXXX XXXX. you on

it a was Houston guidance, growth on As expenses than XXXX. no, I was a in It expensive more in little saying X% really of also is north That’s you continues. on comments. know, expense to but our impact expansion us my I XXXX in what the probably focus is mentioned

not we’re You technology example, cut this environment. know to costs that’s to we’re for continuing to going just happen in do that, not going but

focus into new have for people And a But positions to versus we doing impact the and us, within what on so an we’re we really do what growth ensuring we Houston expenses for in standpoint XXXX. our to we is those continue we’ll opening having from all as had or that requests all organization. on questioned think that positions to need all what the XXXX that come think obviously and the online branches I and them is going open

Steven Alexopoulos

we helpful. have but competitors, all question, markets satisfaction standout always been your they are that’s then technology. final local the of investing And bank client Okay, in as from your you a all to view, guys in listen

experience. markets seeing competition in You you be seem tougher Are focused to general? on client more the more in

Phil Green

are or commercial Are you about…? are you talking specific, – can deals talking be you more you

Steven Alexopoulos

of banks right, But bank, – in that’s consumer deals the much and the all client mean starting Yeah, have other they’re just if past and about points, investing to client when satisfaction over score losing wondering had you I’m deals are commercial a and a focused lose investing doing you digital, they’re you structure. I are the talked on and primarily and just guys above. are friction in every your they technology, you’ve you highest both? to markets in about job better price experience talk in because more

Phil Green

and terms broad it’s from of No, confidentiality I has the no. smart online. but user I you of if of that do and with technology the I at because – – our technology top culture say mean combination people. of at it’s really a very a but we would starts a some know all. can’t branded; online about, and at is it you that heck group a talk in got mean it’s and I Oh, we’ve on one of not account – numbers to mean elegant I you it it’s banks a kind who question, look openings friendly, agreement, of large account its opening know peer was were, I it’s the looking banks are with

that down to iPhone We and I to that dark starting about app everything, that a I And can and commercial is still on they that. we’re list. from In and go time. it’s chimed are so, move the mean second the what thing getting fill competition order begin I to to and and would been in competition. is, the we’re target as are – like we’re as worse. dark [ph] but have and mode say would then I’ll dark I can too, say were implement far chasing in mode, it’s you absolutely bad good an mode so and So competing, moving able and that know technology implementing a our all able to example. money we feel spend put place beyond able the give still I changes we are just They

went You from structure and know loss said was in deals we up XX%. think my I I saw – I’ve comments, XX%

do so, yeah, I and for stretching think are it’s yeah, for they to want volumes, people are they hurting worse. deals

don’t losing to more no for I’m structure. to fence of go to across over lose prepared There but there are is and there. We of that intend thing, tell the a bad but quality, there we pasture deals kind nothing you, wasteland credit I’ll greener is good

point. also take competitive, it’s with this my So to – complicated it’s in we compete but it’s but and team I’ll I complicated, compete ready a mean and yes, are anybody

Steven Alexopoulos

That Great! Thank helpful. color. was the really you for

Phil Green

Absolutely!

Operator

from question a James. Michael Raymond have with Rose We

now line is open. Your

Michael Rose

your you Hey, doing businesses, an thanks other just fee on making of insurance Maybe drove on business and Are trust us guys Thanks. update targeted taking my quickly, the then any of anything sort fee that can anything question. business was in there for the give any investments? you increase sequentially income? and

Phil Green

long to that, can’t The been it’s on I positive a but is two. they’ve our went in a comes to broadly working in system conversion Well, god, fee-based in been businesses, we we’ve trust you tell us first that and and which been had of those just business, all, flawlessly. our investing upgrade mind one major how

COVID. the they during home proud team So did and they are do how able of from to it and it

our for from Greenwich treasury were that were of we scores people both we our the remarks better did to frustrated do got the table we Treasury quality years, a because partner do, of for service systems, & really able those. a give. features we bring at we and felt years and that we could look could and you using We but we got great we really high still we Management for with upgraded there do was of If management we’ve it those that Associates when to knew weren’t better, system

which both, in and have to the well. also mobile increased has etcetera smaller capability, put upgrade, Now more customers place customers we then systems the we have as sophisticated which the larger for for

of go really through those system that, are the system conversion, any to it on you go new We much treasury going technology did attrition the of the and a result that there implementation will because happens happens, to quality not I’ll having that really the and lose they as companies say system. have of that as thing after But a for convert relates for speaks And of system. also any with they’re side So offering better never that one just there. conversion. customers been might about as market people your a system Usually a major that if I’ve heard is conversion. to we’re service attrition the that management through if not attacking product providing what customers to to of I system. us the think have that our quality the to

So yeah, we’ve money [Crosstalk] been had putting some and think some you questions… there Jerry, I

Jerry Salinas

most card fourth is quarter. recognized debit the quarter that income, that some the to related other linked we in yes, regarding Yeah, incentives of

fourth finance the was year public had to you’ll quarter see the ago, quarter fourth of group that then linked the month and a quarter quarter. fourth underwriting in the higher see our sort had compared to we as compared and good also there, to and but you strong trading a third activity variability, third So in a don’t our that

impacted the the things linked-quarter those So variability on basis.

Michael Rose

Got color. the it, I appreciate Thank all you.

Jerry Salinas

Sure.

Operator

are Instructions] time. no questions [Operator this There at further

may continue. You

Phil Green

very and much everyone’s adjourned. thank for Alright, you well we’ll participation be interest and

Operator

this concludes call. and Ladies gentlemen, today’s conference

disconnect. now You may

Cullen/Frost Bankers (CFR) 29 Jan 212020 Q4 Earnings call transcript