Frost Says Customers Fleeing Merging Banks Lifted New Relationships 73%, And It Will Cut Prices To Win
CEO Phil Green says rivals are loosening loan structure, and Frost is "willing to compete on price" as its loan pipeline hits a record $2.5 billion.
New commercial relationships from what Cullen/Frost Bankers calls market disruption, meaning customers of banks caught up in mergers, are up 73% from a year ago, Chairman and CEO Phil Green said on the San Antonio bank's third-quarter earnings call on Thursday. Green put the count at roughly 150 last year against more than 250 this year.
Winning the merger refugees
Cullen/Frost, a Texas bank holding company whose business runs mostly through Frost Bank, is picking up customers as other banks are bought. CFO Dan Geddes said the bank typically wins about a third of the opportunities it offers on a dollar basis. It is "hovering around 78%" of won opportunities from banks going through mergers and acquisitions.
Geddes said disruption-sourced opportunities total about $250 million year to date, roughly 10% of prospect opportunities, and that Frost wins about 80% of them. He said such campaigns have a long tail, usually lasting at least two years, because some customers leave immediately while others wait to see how the new owner behaves.
The cohort leans heavily toward commercial and industrial lending, Geddes said. Frost used to draw half of its new relationships from the too-big-to-fail banks. That share is now more like 40%, with about 10% coming from disruption banks.
Pricing and loan structure
Green said competition for good customers is intense and that smaller banks are being "more aggressive on structure," in ways you typically wouldn't do or see. He said he has told staff to compete but "we don't want to do anything stupid."
On price, he was blunter. Frost is a low-cost funder, and Green said it does not want to lose a great relationship "just for a few basis points." "We're willing to compete on price," he said, "and we've been doing that."
The results are showing in the numbers. Frost earned $178.5 million in the third quarter, up 3.4% from a year earlier, or $2.84 a share, up 6.4%. Average loans rose 9% to $23.4 billion.
A record pipeline for the fourth quarter
Green said the 90-day weighted commercial loan pipeline reached a record $2.5 billion, up 16% from the prior record in the second quarter. Geddes said Dallas led the increase, followed by Houston, San Antonio and Austin, and those four markets are driving expected closings in the fourth quarter and early 2027.
Geddes said about two-thirds of the pipeline is weighted toward existing customers, who historically close about two-thirds of the time by dollar volume. Prospects close about a third. That, he said, means the growth is not coming from stretching on structure.
For 2026, Frost raised its outlook for net interest income growth to 5% to 5.5%, from 4.75% to 5.25%. It lifted average loan growth guidance to 8% to 8.5%, from 7% to 8%.
Frost plans four more branch openings by year end, bringing 2026 to 12 locations, and Geddes said about 14 are planned for 2027.
Sources
- Frost Bank's Texas expansion keeps paying off in third quarter as loan, deposit growth accelerates — Yahoo Finance
- Cullen/Frost Bankers (CFR) Q3 Earnings and Revenues Surpass Estimates — Yahoo Finance
- Cullen/Frost: Q3 Earnings Snapshot — Associated Press
- Cullen/Frost (CFR) Reports Q3 Earnings: What Key Metrics Have to Say — Yahoo Finance
- CULLEN/FROST REPORTS THIRD QUARTER RESULTS – Company Announcement - FT.com — Financial Times
