Cullen/Frost Bankers Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
January 25, 2024

There are 8 speakers on the call.

Operator

Greetings. Welcome to Colon Forest Bankers, Inc. 4th Quarter and Full Year 2023 Results Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation.

Operator

Please note this conference is being recorded. I will now turn the conference over to A. B. Mendez, Senior Vice President and Director of Investor Relations. Thank you.

Operator

You may begin.

Speaker 1

Thanks, Jerry. This afternoon's conference call will be led by Phil Green, Chairman and CEO and Jerry Salinas, Group Executive Vice President and CFO. Before I turn the call over to Phil and Jerry, I need to take a moment to address the Safe Harbor provisions. Some of the remarks made today will constitute forward looking statements as defined in the Private Securities Litigation Reform Act of 1995 as amended. We intend such statements to be covered by the Safe Harbor provisions are forward looking statements contained in the Private Securities Litigation Reform Act of 1995 as amended.

Speaker 1

Please see the last page of text in this morning's earnings release for additional information about the risk factors associated with these forward looking statements. If needed, a copy of the release is available on our website or by calling the Investor Relations department at 210-220-5234. At this time, I'll turn the call over

Speaker 2

to Phil.

Speaker 3

Thank you, A. B. Good afternoon, everybody, and thanks for joining us. Today, I'll review 4th quarter results for Colin Frost and our Chief Financial Officer, Jerry Salinas, will provide additional comments before we open it up for your questions. In the Q4, CullenFrost earned $100,900,000 or 1 point 5 $5 per share compared with earnings of $189,500,000 or $2.91 a share reported in the same quarter last year.

Speaker 3

Now these results were affected by $51,500,000 one time FDIC insurance surcharge associated with the bank failures that happened early in 2023. Our return on assets and Common equity for the 4th quarter were 82 basis points and 13.51%, respectively, and that compares with 1.44 percent 27.16 percent for the same quarter same period last year. For full year 2023, the company's annual net income available to common shareholders was $591,300,000 It's an increase of 3.3% compared to 2022 earnings available to common shareholders of 572,500,000 On a per share basis, 2023 full year earnings were $9.10 a share compared to $8.81 a share reported in 2020 2. As we mentioned in this morning's press release, just for the one time FDIC insurance surcharge, our yearly earnings would have been up by approximately 10% over 2022. The solid 4th quarter and full year performance is due to the continued strong execution of our organic growth strategy by Frost Bankers, to provide our customers with top quality service and experiences that make people's lives better.

Speaker 3

Our balance sheet and our liquidity levels is strong. Frost remains very well capitalized and it has a 45% loan to deposit ratio. Also, as was the case in previous quarters, CullenFrost did not take on any home loan advances, participate in any special liquidity facility or government borrowing, access any brokered deposits or utilize any reciprocal deposit arrangements to build insured deposit percentages. And additionally, our available for sale securities portfolio represented more than 80% of our portfolio total at quarter end. Our average deposits grew in the 4th quarter to $41,200,000,000 up an annualized 3.5 percent from the $40,800,000,000 in the previous quarter.

Speaker 3

Average loans also grew in the 4th quarter to $18,600,000,000 compared with $18,000,000,000 in the 3rd quarter. That was an annualized increase of 14.3%. We continue to see excellent results from our organic growth program. For example, our original Houston expansion location stand at 103% of original deposit goal, 155% loan goal and 122 percent of our new household goal. For what we call our Houston 2.0 locations, the last of which will open this year, we stand at 2 97% of deposit goal, 3 51 percent of loan goal and 185 percent of new household goal.

Speaker 3

As of quarter end, expansion loans and deposits represented approximately 24% and 19%, respectively, of our total Houston market presence. For the Dallas market expansion, we stand at 217% of deposit goal, 269 percent of loan goal and 198 percent of our new household goal. While still relatively early in this effort, expansion loans represent approximately 12% and deposits represented approximately 10% of Dallas market totals. We've opened up almost 2 thirds of our planned locations in the Dallas market and we look forward to their growth as these locations mature past the startup phase. And we're also excited about our new Austin expansion effort where we plan to open 17 locations to double our presence in that market as we've mentioned before.

Speaker 3

And the first of those opened in 2023 and the next is scheduled to open in April. Keep in mind that we've been successful generating core, stable, grassroots business in our expansions and that will generate significant value over the long term. At year end, our overall expansion efforts had generated $1,900,000,000 in deposits and $1,400,000,000 in loans, even though many of these locations are still early in their development. Looking at our Consumer Banking business, we continue to see standing organic growth and we ended 2023 with a record net new household growth of 28,632 households. Again, that's net growth and it's 12% higher than last year's net household growth.

Speaker 3

In the past 3 years, we've added 81,000 net new consumer checking households. That's 2.6 times more than the 3 years before that. And that shows that our organic growth strategy combined with our customer experience and reputation, is key to our success. We have the right products and services and relationships to help customers in our markets. Also, as we've noted, we're excited about the prospects for our new mortgage product.

Speaker 3

We completed the product rollout in December to the last of our regions, which was the Houston region. And in the 4th quarter, we approached the milestone of originating our first 100 mortgages and we expect faster growth in 2024. Looking at our commercial business, our weighted pipeline is at $1,175,000,000 and that was down from the record that we set was $1,910,000,000 in the 3rd quarter. In the 4th quarter, We brought in 960 new relationships. That's the 3rd highest quarterly amount ever, up an unannualized 8.7% over the 3rd quarter and up 21% over the 4th quarter last year.

Speaker 3

This shows me that our success in growing our business organically includes not only a consumer, but also commercial business as well. For the full year, new commercial relationships added $806,000,000 in new loan balances and $800,000,000 in new deposits. Credit quality continues to be good by historical standards with non accrual loans down from the previous quarter and net charge offs at healthy levels. Problem loans, which we define as risk rate 10 or higher totaled $571,000,000 at the end of the 4th quarter. That was up from the $513,000,000 at the end of the second quarter and $320,000,000 this time last year.

Speaker 3

This growth in the 4th quarter was evenly split between loans in the OAEM and classified categories, Another way of saying risk grade 10 and risk grade 11 categories. Nonperforming assets totaled $62,000,000 at the end of the 4th quarter compared to $68,000,000 last quarter $39,000,000 a year ago. The year end figure represents just 32 basis points of period end loans and 12 basis points of total assets. The charge offs for the 4th quarter were $10,900,000 compared to $5,200,000 last quarter and $3,800,000 a year ago. Annualized net charge offs for the 4th quarter represent 23 basis points of average loans and full year charge offs were 18 basis points of loans.

Speaker 3

Regarding commercial real estate lending, our overall portfolio portfolio remains stable with steady operating performance across all asset types and acceptable debt service coverage ratios and loan to values. Within this portfolio, what we would consider to be the major categories of investor CRE, that is office, multifamily, retail and industrial as examples, totaled $3,900,000,000 or 44 percent of total CRE loans outstanding. Our investor CRE portfolio has held up well with the average performance metrics slightly improved quarter over quarter, exhibiting an overall average loan to value of about 53% and weighted average debt service coverage ratio of about 1.44. The investor office portfolio, in particular, had a balance of $891,000,000 at quarter end, which was down from $959,000,000 the prior quarter. That portfolio exhibited an average loan to value of 49% and an average debt service coverage ratio of 1.54 and healthy occupancy levels, all of which improved from the prior quarter.

Speaker 3

Our comfort level with our office portfolio continues to be based on the character and expertise and experience of our borrowers and sponsors as well as with the predominantly Class A nature of our office building projects. And again, we're glad to be operating in Texas. More than 90% of our office portfolio projects are in Frost Markets, which are Texas' major metropolitan areas. We we continue to see good economic growth and strong levels of in migration of both people and businesses. I also wanted to note that from September 30 to December 31, total investor office outstandings decreased 7% from the linked quarter and total commitments decreased by 9%.

Speaker 3

Finally, I'll point out that we just rolled out a new Frost marketing campaign and brand refresh designed to emphasize the great customer experiences we provide in order to differentiate our voice in a crowded banking marketplace. We've been talking for some time about the need to invest in marketing capabilities to complement the organic success we've been achieving, and we're optimistic about the impact this will make in customer acquisition. So in closing, we remain optimistic for what lies ahead. We're capitalizing on opportunities. We're enhancing and expanding our brand, and I'm proud of everything that our Frost teams are accomplishing across our communities.

Speaker 3

And now I'll turn the call over to our Chief Financial Officer, Gary Salinas, for some additional comments.

Speaker 2

Thank you, Phil. Let me start off by giving some additional color on our Houston 1.0 expansion results. As Phil mentioned, we've been very pleased with the volumes we've been able to achieved. Looking at the 4th quarter, linked quarter growth in average loans and deposits were 52,000,000 $78,000,000 respectively, each representing approximately 24% annualized growth. And for the Q4, Houston 1.0 contributed $0.07 to our quarterly earnings per share.

Speaker 2

Now moving to our net interest margin. Our net interest margin percentage for the 4th quarter was 3.41%, down 3 basis points from the 3.44% reported last quarter. Some positives for the quarter included higher yields and volumes of both loans and balances at the Fed. These positives were primarily offset by higher costs and volumes of deposits and customer repos compared to the 3rd quarter. Looking at our investment portfolio, the total investment portfolio averaged $19,800,000,000 during the 4th quarter, down $723,000,000 from the 3rd quarter.

Speaker 2

During the quarter, we did not make any material investment purchases. The net unrealized loss on the available for sale portfolio at the end of the quarter was $1,390,000,000 a decrease of $825,000,000 from the $2,200,000,000 reported at the end of the 3rd quarter. The taxable equivalent yield on the total investment portfolio in the 4th quarter was 3.24%, flat with the 3rd quarter. The taxable portfolio, which averaged $13,100,000,000 down approximately $471,000,000 from the prior quarter, had a yield of 2.75 percent, down 1 basis point from the prior quarter. Our tax exempt municipal portfolio averaged about $6,700,000,000 during the 4th quarter, down about $252,000,000 from the 3rd quarter and had a taxable equivalent yield of 4.26%, flat with the prior quarter.

Speaker 2

At the end of the 4th quarter, approximately 71% of the municipal portfolio was pre refunded or PSF insured. The duration of the investment portfolio at the end of the 4th quarter was 5.0 years, down from 5.7 years at the end of the 3rd quarter. Looking at deposits. On a linked quarter basis, Average deposits of $41,200,000,000 were up $356,000,000 or 3.5 percent on an annualized basis from the previous quarter. We did continue to see a mix shift during the quarter as average non interest bearing demand deposits decreased 126,000,000 or 0.9%, while interest bearing deposits increased $482,000,000 or 1.9% when compared to the previous quarter.

Speaker 2

Based on the 4th quarter average balances, non interest bearing deposits as a percentage of total deposits were 35.7% compared to 36.3% in the 3rd quarter. Looking at January month to date averages for total deposits through yesterday, they are basically flat with our 4th quarter average of $41,200,000,000 For January month to date through yesterday, The average non interest bearing deposit balance was $14,390,000,000 down $309,000,000 from the 4th quarter average, affected by seasonality as those deposits tend to peak in the 4th quarter and soften in the first half of the year. For January month to date average, interest bearing deposits through yesterday were $26,800,000,000 of $309,000,000 from our 4th quarter average. In the January month to date average, we do continue to see a shift in the mix and interest bearing deposits to higher cost CDs from lower cost products. The cost of interest bearing deposits in the 4th quarter was 2.27%, up 15 basis points from 2.12 percent in the 3rd quarter.

Speaker 2

Customer repos for the 4th quarter averaged $3,800,000,000 up $225,000,000 from the $3,500,000,000 average in the 3rd quarter. The cost of customer repos for the quarter was 3.75%, up 8 basis points from the 3rd quarter. The month to date January average for customer repos was basically flat with the 4th quarter. Looking at noninterest income and expense on a linked quarter basis, I'll just point out a couple of items. The other non interest income category included a $3,500,000 recovery of a fraud related loss accrual that we recognized in the Q4 last year.

Speaker 2

Salaries and wages included approximately $8,800,000 in higher stock compensation compared to the Q3. As a reminder, our stock awards are granted in October of each year and some awards by their nature require immediate expense recognition. The other non interest expense category included a donation to our Frost Charitable Foundation of 3,500,000 Regarding estimates for full year 2024, our current projections include 5 25 basis point cuts for the Fed funds rate over the course of 2024. For the full year of 2024, we currently expect Full year average loan growth in the mid to high single digits, full year average deposit growth in the range of 1% to 3%, Net interest income growth in the range of 2% to 4%, with the net interest margin percentage expected to be slightly higher for full year 24 than the 3.45 percent we reported for 2023. Noninterest income could be relatively flat given the pressure facing the industry on interchange revenues and OD and SF fees.

Speaker 2

Non interest expense growth in the range of 6 to 8% on a reported basis. Regarding net charge offs, we do expect those to go up in 2024 to a more normalized historical level of 25 to 30 basis points of average loans given the unusually low level we've seen in the last few years. Regarding taxes, our effective tax rate for the full year of 2023 was 16.1% and we currently expect a comparable effective tax rate in 2024. Going forward, Given the wide range of analyst estimates and the results and impact on the mean of estimates, we do not plan to comment on consensus EPS as we have in the past and will instead provide our outlook for the major building blocks of our profitability. With that, I'll now turn the call back

Speaker 3

over to Philip for questions. Thank you, Jerry. Now we'll open up the call for questions.

Operator

Before pressing the star keys. Our first question is from Ebrahim Poonawala from Bank of America. Please proceed.

Speaker 4

Good afternoon.

Speaker 3

Hey, Ebrahim.

Speaker 4

I guess, maybe first question for Jerry. Your outlook for the 5 rate cuts for NII growth, You mentioned about 2% to 4%. Just give us a sense of the sensitivity. My understanding is the balance sheet is still asset sensitive. So first, whether that's right or wrong.

Speaker 4

And then as the year progresses, do you expect And are I to drift lower or do we build from 4th quarter levels? And are you just outrunning rate cut impact because of balance sheet growth and the fixed rate asset repricing?

Speaker 2

That's a lot. Let me first say that, Yes, we still are asset sensitive. I think we've talked about this in the past. I'll just kind of go through some of the pieces of it and fill in As I can remember your question. But one of the upsides that we talked about was that we've got projected about $3,000,000 in proceeds from our investment portfolio.

Speaker 2

And about $1,400,000,000 if I remember correctly is in the first quarter. So a big chunk of it comes in. And the yields that portfolio has, I think we've talked in the past about some specific treasury securities that we had purchased. I think $750,000,000 of that is going to mature here this month and the yield on that portfolio was a little 102, I think it was. So some of what we're seeing is a pickup that we're going to get just from the Even if we don't reinvest in investment securities, even in that rate environment that we've discussed, it would still be favorable to our net interest margin percent.

Speaker 2

We've also seen some improvements I was noting in our 4th quarter loan spreads that we booked. Not huge, but there are some improvements during the quarter. I think that's going to be a positive to us

Speaker 3

as well. So no, I mean,

Speaker 2

I think overall, we're feeling good about net interest income and net interest margin based on where we're at. I mentioned that we continue to see a mix change, but the changes that we're seeing at this point in my mind aren't really material. I think especially in a rate environment where we've been for a while now and even if you said it was flat, I think the bulk of the rate competition for the most part is gone. We still continue to see especially smaller banks, Smaller local and regional banks be what I think is really putting out some unrealistic deposit rates that we're not going to match. I think we've always said to the community that we don't intend to be the highest rate in the market, but we do want to be competitive.

Speaker 2

In a rate environment, as we portrayed it, I think we find ourselves being able to be more competitive on money market funds Because our betas typically have been of a range, we'll take money market, have been like 60%. In that The rate environment that we're talking about, some of those shorter duration investments that those funds would be making, they

Speaker 5

have 100% beta, if

Speaker 2

you will. So I think we'll find ourselves in a much more competitive situation. You heard me say we're not projecting a huge growth in deposits. I think that we feel really excited about the level of loans and deposits that are coming from our expansion branches. I think we're really excited about that.

Speaker 2

We've also talked about are continually about the nice growth that we've had in commercial relationships. As we've said in the past, those relationships take a little bit longer to get all the accounts moved over and signature cards done, etcetera. So I think overall, we're not too aggressive on deposits. I think there it's still to be seen. We saw a little bit of a downtick, as I said, in January on the commercial DDA.

Speaker 2

But as we look at our trends, that's really pretty normal for us. So no, I think we're still feeling good about all that and still feel like we've got some room to improve on the NIM percentage and net interest income. We're not talking on net List income, so I gave guidance on 2% to 4%, and that's given the rate environment that we're talking about. If you were if we were talking about a flat environment, just to give you some perspective, I'd probably be talking about increasing those percentages, say 1.5%. And we see a bit nicer improvement in our name in that situation.

Speaker 4

That was good color. So thanks for your patience there, Jerry. And Maybe a question is on loan growth. When I look at the period end balance, it will equate to about 5% growth starting out for the year. So it suggests that you don't expect as much momentum on loan growth looking forward.

Speaker 4

So maybe Phil, give us some perspective around customer sentiment and whether you are seeing that slowdown play out? And given that we're going entering sort of an election cycle, do you expect loan growth to be weighed down by that as well?

Speaker 2

Yes. It's

Speaker 3

a good question, Ebrahim. I think that with regard to sentiment, I believe that Things are slowing some with regard to that. And I think some of it is what you mentioned that typically happens with an election year. People are Wanting to know what the regulatory environment is going to look like. So I think there's some of that.

Speaker 3

I think there's just a general slowdown and some other things in interest sensitive Areas, say, like, obviously, real estate, commercial real estate deals, some interest sensitive areas, like, let's say, Used cars, for example, if you're looking at a specific segment. So there is some of that. And I looked at our pipelines also. Our new loan commitments were up about 9% Link quarter annualized. So recent activity has been good, but if you want to look at our opportunities, they're down a little bit from where they were last Sure.

Speaker 3

They're down about 7%. On a linked quarter basis, they're down about 17%, Depending on whether you're looking at customer or prospects, prospects were down about 26%. So That just shows what's kind of going into the hopper, if you will. It says to me that we're slowing in terms of what's available and what we're seeing. I should point out that if you did look at our core loans, which are those loan relationships under $10,000,000 that if If you look versus last year, those are actually up 28%.

Speaker 3

So we've seen most of the slowdown year over year to be in larger deals. And I think that represents That expansion strategy, it is a very core business centric strategy and we've had really good growth there. So I think that's propping that up. So yes, I would agree that things look a little bit slower, not bad. As I've said, Jerry has guided us to High single digits loan growth, and I think that's a realistic number for us.

Speaker 3

And we'll get through the election and see where that takes us. Thank you both.

Operator

Our next question is from Steven Alexopoulos with JPMorgan. Please proceed.

Speaker 6

Hi, Phil. Hi, Jerry.

Speaker 3

Hi, Phil. Hi, Phil.

Speaker 6

I want to start, so on expenses, So Jerry, the guidance was off reported expenses. So if I take the FDIC charge out, get or get the midpoint like 12% expense Growth something like that for 2024. Now I'm curious because you guys used to be a mid to high single digit expense grower, but you're having this really Great success with all the expansion. How do we think about expenses beyond 2024, right? Do you go to the next market or deeper and existing and the expansion Should we think about Frost as being a low double digit expense bank while you continue for the next several years on expansion or does it throttle down at some point?

Speaker 3

Well, Steve, I'll talk to Bobby a little bit and Jerry might throw in some color. I think there are 2 frosts, Right. I mean, there is what I'll call legacy for us, which is our business that we've built up over the 155 years. And then there is Expansion for us, which is a company that has really come into its own with its ability to grow organically in markets and build households and accounts. And we're going to keep leaning into that.

Speaker 3

And Our experience shows that it's great. It's worthwhile with a shareholder. I mean, for Houston to be 25% Represented by expansion, that's I think that's pretty remarkable. And I think it shows that we'll take share in this gain. So that will be higher.

Speaker 3

I would like to believe, though, if we go past 'twenty past this year That even though we're going to continue to be expanding, I'd like to see our expense growth rate be a little bit less Because we have made we talked about the generational investment in IP that we made Earlier this year, I think it was we talked about it. We talked about the marketing expenses that We've built up, which we really need to build that infrastructure. And so some of this is building things up that I hope we don't have to continue to do. And So I think our expense rate will be elevated from what it was historically, but mainly because of our growth strategy and our expansion strategy. But when you look at the legacy part of the bank and how we operate on a regular basis, I think we're still Pretty tight.

Speaker 3

And I'll be proud of our expense management on that basis. Jerry, do you want to?

Speaker 2

Yes. I agree with everything Phil said, Stephen. I would say that even in this environment, We won't go into a lot of details, but I'll tell you that we continue to make sure that we're looking at for any looking very closely at any request For additional capitalizable items or for new FTEs, we're really focused on that. So it's not like the door is open And everything is getting approved. And so I'm very much in the camp, as Phil says, that we would we need and we will try to continue control expenses.

Speaker 2

I think he talked about a couple of things, but just to give a little bit more put a little bit more meat on it. Some of the things that we We talked about some technology and from marketing to give the two examples that he mentioned weren't really in our full run rate For all of 2023. So some of the lift that we're seeing is just trying to get the full year impact of some of those expenses. Some of the people were tired until late in the year, for example, whether it's in the IT area or in the marketing area, and some of those programs hadn't started. So some of it is just trying to get that into our run rate.

Speaker 2

So I agree with Phil. I would expect that going forward, I don't see us going back to a 3% to 4% growth given our organic expansion strategy. But I would hope that these operating at these higher levels is certainly not our current expectation based on what we're seeing. And of course, in this environment, we did continue to do some things for our employees where We've done, I think, a great job of taking on some additional costs corporate wide that had previously been covered by the employees. As an example, we cover more of the medical that we did historically.

Speaker 2

And again, some of those things just trying to be more competitive and at the same time treating our employees with grace and knowing what a competitive market that we're operating in. So long winded Answer to say, I agree with Phil. I don't think we'll be operating at this level past this year that we're talking about, and we continue to be focused on trying to manage those expenses.

Speaker 3

Stephen, I'd also point out that with regard to the I mean, the numbers are the numbers and we're proud of what we're able to do. But I'll just throw a couple of things out there too that we're looking at and You might be interested in. If when someone comes here, we'll survey Broad group of people who are new customers. We'll ask them, what influenced you most in choosing Frost as your bank? And the number one response is convenient locations.

Speaker 3

And number 2, a close second is recommendation from a friend. And it drops off by about a third being 20 fourseven Live customer support and then it drops off by about that by about say 15% to convenient ATM network and then it goes to other and a lot of different things. But it shows and what we ask our customers, how and what are the things that brought you here? And remember the growth we've had, and growth in households. And those are the responses our customers are getting.

Speaker 3

And the other thing I'll point out, and we've said this before, and I'll update this and give a little bit more color. If you look at our Houston expansion, which is still we still got some developing new branches there, which aren't fully We only had 1, I think, in the 5 year anniversary, which that was recently. But if you look at those the relationships, new accounts that are open in Houston. 85% of the Houston expansion new accounts are opened within 5 miles of LaFrosse Financial Center. And 44% of the Houston expansion new accounts are located within 2 miles.

Speaker 3

So again, we're not trying to process transactions at these locations. We are projecting our brand into these communities and we're leveraging our value proposition. And you heard me say that the number 2 Reason was reference referrals from a friend. So it's I like to look at it as a virtuous cycle of What we're doing, how it's all working together. So we're going to continue to lean into that.

Speaker 3

And will it cost some expense money? Yes, it will. We're being careful with it. But we really believe it's generating success for the long term.

Speaker 6

That's great color. I wanted to ask about commercial real estate. It was funny this quarter particularly I feel there's ton of questions from investors that they want to buy your stock here, they like where it's trading, They love all these expansion metrics. Commercial real estate concentration is the thing that's keeping them nervous. And I'm sure you've seen the articles too, Phil, See rates almost 20% for office in Dallas, Houston, Austin.

Speaker 6

So my question to you is, what's your perspective on Commercial real estate market, like you see these markets from the ground level. Is this exaggerated? When you look at your portfolio, I don't think you have vacancy rates anyway to hear that. But can you give us some color on your pre exposure in those markets? You didn't feel overly concerned, but maybe we could flush that out for the investors on the call?

Speaker 3

Yes. What I would say, Stephen, is that, first of all, I read that Wall Street Journal late in the year about the vacancy rate in Texas. Let me tell you what, that vacancy rate in Texas is going to be high for a long, long time. You know why? It's from downtown real estate.

Speaker 1

Some of

Speaker 3

those buildings this is my thing. Some of those buildings, I don't know if they'll ever be filled. Some of them are probably from 1980s or 1990s. So you've got that You've got that. Now I recognize Austin's got new buildings here and they've got significant vacancy.

Speaker 3

So I'm not trying to We'll still pass the graveyard. I'm just trying to say there's some element of that vacancy that it's different than other Vacancies. Okay. Not all created equal. But what I would say about commercial real estate is We saw an increase you heard me, Sivir, we saw an increase in problem loans this quarter.

Speaker 3

That's risk rate 10 or higher. But it really wasn't from commercial real estate at all. In fact, if you look at What happened, let's take commercial office. We had 3 paydowns of investor office that totaled $95,000,000

Speaker 6

One of them, they paid off for cash.

Speaker 3

Long came due, paid it off for cash. It's a significant deal in a downtown major market. We had one that was in a medical center of a major market. They put lots of cash in it and refinanced the rest. We had another one that we sold.

Speaker 3

It was a completely performing loan, but the owner had some other problems other places And it was in Austin. And we said, look, we've got a really good bid for that loan. We sold it. We took I think it was a 7% discount on it to do it. But those are three examples of investor office In Texas, where we're operating, where it worked out okay because you've got the right structures, the right locations And the right sponsors for these things.

Speaker 3

None of these things were guaranteed. And The increase in problem credits this quarter was really more related to just banking business, where you've got someone there is one credit that Came up late. They've got an inventory write down they notified us about. I think we're still looking into exactly why it happened. They are 2, I think it probably relates to an accounting at least some of the accounting system, perpetual inventory system they put in, but we'll see.

Speaker 3

But if you got to basically, been operating with an understated cost Good. So I had to write down some inventory. So that's an unusual thing that happens in business at times. It doesn't have anything to do with interest rates Or office building vacancy rates, right? There was another that was Liquor distributor that lost a supplier, and they've got to cut some overhead.

Speaker 3

They'll be fine. But it's those kind of basic banking things That are the reason we saw the increase in risk rate and in higher, and it wasn't because of the real estate at all. In fact, that sort of improved.

Speaker 2

So and the other

Speaker 3

thing I'll say is we're not Stopping doing business in the Texas market. I mean, granted, we're in the Texas market, and thank goodness. I mean, It's I put it up the consignee market that in the U. S. And We're still seeing opportunities.

Speaker 3

There are fewer of them and competition for the really good deals Still there, but we're still seeing opportunities in commercial real estate that make total sense to us because of the properties and the structure and the sponsors for the deal. So My worry right now isn't really commercial Real Estate. I mean, we've been working on it for probably a long 18 months or whatever. But what I've been seeing, let's take these payoffs we talked about. And we also had one that was a Risk grade 11 last year was I didn't even mention it was $41,000,000 deal.

Speaker 3

It's not an office building, it's an industrial deal that There was a hole in it. It was great piece of property for a credit tenant, but rates go up, there's a hole in it. The owner sells it. He brings cash to the table. So that's not really It's been performing the way I think we hoped it would.

Speaker 3

Will there be some issues? I'm sure there will be Have been a few. I think we've got 1 nonperforming office building we talked about a few quarters ago. But It is not a train wreck in the markets we're in and the relationships that we're in in commercial real estate. And we're watching it and we'll keep talking to people.

Speaker 3

I mean, I'll keep going on with this answer, but I mean, these things that need to be said. You could say, well, what's the biggest exposure on paper? And it's probably your construction portfolio for Multifamily. And it's because the debt service coverage ratios of those things It improved a little bit, but there's still not where they'll need to be to get them refi or get a permanent financing. But when you look at that, I think only 6% of those come due in this year.

Speaker 3

I think 75% of them come due in 2026 or later. And then when you look at the people behind them and I'm not going to name names here, but if you look at the people we do business with, they understand this business. This is not like somebody who thought, gee, let's get into multifamily business The banker that will thank us. I mean, these are people who've been doing this a long time. And I feel really good about these relationships and how they take care of their business.

Speaker 3

Again, I'm not saying we can't have problems, but this is how life is on a day to day basis around here. And so anyway, That's what I know.

Speaker 6

That's great color. Thanks for taking the time to flush that out because it is a major concern and most of us just read These articles that we don't know what's in your portfolio like you do, Phil. So it's nice to hear you walk through it and that you're confident things can happen, but you feel pretty good on your exposure. So thanks for taking

Speaker 3

my questions.

Operator

Our next question is from Dave Rochester with Compass Point. Please proceed.

Speaker 2

Hey, good afternoon guys.

Speaker 3

Hi, David.

Speaker 2

I was hoping you guys could talk about What's your NII guide mean for the NIM trajectory? You've got the low rate securities rolling off this month and then you've got the rate cuts coming in later in the year. So is the thought that you get some expansion here in the first half of the year and then maybe that turns south in the back half of the year? And then what does that mean for the exit NIM by the end of the year? Is that Higher than where you were this quarter?

Speaker 2

Or are you thinking that might be lower? And then, you mentioned deposit betas earlier. I was just wondering what your guys thoughts were on how fast you can move those deposit costs down since you were very focused on being proactive. I know on the way up, Are you thinking you can bring those down just as fast, basically assume the same type of beta on the way down? Thanks.

Speaker 2

Yes. I guess I'll start with that last question first. I think the thought process is that we could be go down just as fast. But at the same time, I'll say that we don't ignore the market. I said earlier, we're not going to feel like we need to lead the market, But we're going to be competitive.

Speaker 2

So I would answer the question that by saying that, yes, we were up fast. I think we've kept up all along with all the hikes. And I feel like we can be pretty aggressive going down, but we're not going to keep our head in the sand. And if the market's not moving down as quickly As we thought it might. We'll certainly react accordingly.

Speaker 2

As far as the NIM, I guess what I'd say is that, yes, We are relatively flat flattish all year. And so yes, I think you said it. We really kind of take a step up In the Q1 is the current expectation. We do have in our projections a cut in March. But so we do take a hike up in the NIM in that Q1.

Speaker 2

And then really kind of given the conversations we had earlier, And a lot of it will be dependent on liquidity, right? I mean, what happens with deposits, how much we're keeping at the Fed, etcetera. But right now, our guidance I would give is Once we in the Q1, the rest of the quarters will be relatively flat. So we did a lot of the help in that Q1. Okay.

Speaker 2

What are you guys assuming for the NII or the NIM impact from a single rate cut at this point? The answer I'd give you is about $1,000,000 a month. And again, I think that's one where It will be dependent on what happens with how much liquidity we've got at the time it happens. Could be more if there was more liquidity on the balance sheet. How are you guys thinking about managing the securities book through the year?

Speaker 2

I know you've got you didn't purchase anything this past quarter, you've got the securities rolling off this quarter. Is it thought to Let that one off this year plowing any kind of cash flow into loans or paying down borrowings kind of thing or are you going to be replacing Sonae along the way? Our current expectation is that I think I said earlier that We're projecting about $3,000,000,000 in cash flow from that portfolio. Right now, we're projecting it I'm sorry? Yes.

Speaker 2

No, we're projecting that $1,500,000,000 to $2,000,000,000 is what we would be invest, More likely, yes, closer to that to the lower end. And we're really just kind of saying we've got our investment guys who really are paying attention to the market And we'll just look where there's value and we'll continue to try to be opportunistic. I think we've been successful in a lot of cases and We just have to see what's happening, but that's what our current expectation is. We spend about half of that liquidity. We feel good about deposits like I said, but Kind of would like you know us well enough to know that we tend to keep a pretty high level of liquidity.

Speaker 2

But that's our guidance. We'll spend about half of it.

Speaker 3

Half the run off.

Speaker 2

About after the run off, right, half of the $1,500,000,000 of the $3,000,000,000 that we expect. Got it. And maybe just one last one. Where are you seeing securities yield at this point? I know they'll change for the year, but curious to what you're buying.

Speaker 2

Yes, we're not buying anything. I think that the last time we talked and We were looking at mortgage backed, and I think they were a little bit yes, I almost hesitated to say yes. We really haven't been spending a lot of time with it. Our investment guys are we haven't made any purchases for 2 quarters now, but certainly north of 5 and nothing has really enticed That's what really we just kind of want to see how this Q1 plays out. But if we do see something where we think there's real value, The good thing about an organization like ours is that the group that makes those sorts of decisions is works very closely together.

Speaker 2

We're meeting all the time and Certainly could make a decision really at the snap of the finger. So our guys are keeping their pulse on the market, but at this point, really haven't felt a lot of pressure like that we need to do something today. Thanks, guys. Sure.

Operator

Our next question is from Manang Salia with Morgan Stanley. Please proceed.

Speaker 5

Hey, good afternoon. Follow-up To the question on liquidity, I mean, I guess if rates come down in line with the 5 rate cuts or so that you're estimating non interest bearing deposits stabilized. Can you deploy more of that those high levels of liquidity that you're keeping on your balance sheet? I know that the deposit rate you're forecasting is lower than the loan growth that you're forecasting. So presumably, you will use some of that.

Speaker 5

But can you bring that 14%, 15% of assets and cash down meaningfully as we exit 2024?

Speaker 2

Yes, I think it depends on what meaningfully means. You're never going to see us running with $1,000,000,000 at the Fed, for example, and that's It's not the way we operate. But could we make some decisions that had us potentially, especially if we felt good About the economy, we felt good about what was going on with deposit growth and such. Could we find ourselves in a position where we were deploying us more of that liquidity? I'd say yes.

Speaker 2

But it's going to be dependent on a lot of factors, what's going on in the economy, those sorts of things.

Speaker 5

Got it. And then given your comments on expenses earlier, and there's some one time or temporary nature of some of the expenses that you mentioned, At what point do you get back to positive operating leverage? So I know there is a bit of noise in the revenue line this year with the base effect of rising rates in 2023 and then the rate cuts in 2024. But if rates should stabilize from there, how quickly do you think you could return to positive operating leverage?

Speaker 3

It's a math question. Honestly, I don't know the answer to, but here's what I do know That the success that we're having developing these markets, as expensive as it is, will create significant positive shareholder value. Now does that manifest itself in a positive operating leverage trend? Probably. But honestly, I'm not close enough to math to tell you when it would happen.

Speaker 3

But it's at some level, it's just basic business And it's just a recognition of what we're developing and understanding the basic profitability Of a regional community middle market focused bank. That's really what we're creating in these markets. We're creating footprints that basically look like Frost Bank. And so whatever that profitability is For a bank like that, that's what we're generating. And I think that's going to be that will be positive for a long time.

Speaker 3

And I'm confident we'll get back Yes, to operating leverage positions that reflect that. Now again, As we talked about earlier, the as long as we're continuing to do this and finding markets where it makes sense to grow and develop this for shareholders. And upon how much we do in any one particular year, it could affect operating leverage on a particular year. But I think it would be wise for us to also look at What is the operating leverage of the, what I would call, the legacy company, the legacy bank, What is that doing as we're expanding in these markets? That's worth looking into also.

Speaker 5

Yes, we would love some disclosure on that if available, but thank you for those comments.

Speaker 3

Thank you.

Operator

Our next question is from Peter Winter with D. A. Davidson. Please proceed.

Speaker 5

Good afternoon.

Speaker 3

Jerry, you gave a

Speaker 2

little bit of a cautious outlook on fee income being relatively flat. You talked about the regulatory environment with overdrafts, fees and interchange. Are you guys taking action on this now ahead of any regulation or you just think it's going to be coming down the road this year? Well, I'll talk about 2 pieces of it. The thing for us on the overdraft fees It's something that it's not going to be a growth product for us, right?

Speaker 2

The reason those revenues are growing is because we've had consistent account growth. We continue to do changes to the product to ensure that we're doing what we need to be doing from a fairness standpoint and making sure we're serving the customers with grace. And so we're doing a lot of things beginning in 2023 That those impacts aren't haven't run completely through the annual financials for 2023. And then we've got some additional items that we're considering doing to tweak the product. They're going to tell they're telling me that All things being equal, we're not going to expect to see a lot of growth in those overdraft fees.

Speaker 2

On the interchange, that's really going to just be dependent. Our projections right now have those changes going into effect in the latter part of the year. So just based on the proposal that was out there. So we're not on the OD side, we're doing things that were affecting that revenue ourselves By making some changes to the product that we're delivering to the customer, it's going to reduce our revenue. In the case of interchange, It's really based on the anticipated 1 third reduction in those fees later this year.

Speaker 3

Okay. Thanks.

Speaker 2

So those are the headwinds that we're dealing.

Speaker 5

Got it. Thank you.

Speaker 2

And then separately, The earnings accretion from the Houston expansion has been really taking hold and becoming more accretive. Do you think that the Dallas expansion starts to become accretive to earnings this year? And then secondly, Are there opportunities maybe to close some underperforming legacy branches to defray some of the costs with the new branch build out? I'm going to step back a second on your question on non interest income. The other thing that's affecting us, and I mentioned just one item in the quarter On the sundry income, we did have some nice sundry income throughout the year that we don't really project those sorts of items into our financials.

Speaker 2

So this $3,500,000 recovery of a fraudulent wire that we had in the 4th quarter. Obviously, we've got items like that that go through our Non interest income that we don't forecast. And so that obviously has a downward effect too on our forecast going forward. As far as the Dallas is concerned, our expectation is we're still opening locations in Dallas. And so as you know, the most expensive part of this expansion effort is just starting up those locations.

Speaker 2

And As Phil said, the first one in Houston just reached its 5 years. And so as I talk about that profitability, we're really happy with where we're at. And when I look at the individual pieces of it and we're not ready to disclose overall kind of how we're doing, but the plan was and it's working this way is that as those Houston locations begin to mature more and more, they're going to start to offset the losses that we have associated with the expansions that have started more recently. So it's getting to a point where Houston is going to carry more of the Expansion cost of the Houston 2.0 and the Dallas. But Dallas, no, to answer your question, I don't see them being profitable this year just because we still have locations that we're opening and there's not a lot of maturity yet.

Speaker 2

Although it's filtered, Matt, they performed really, really well. So as far as our projections to or our performance to our goals, We've done really well. But no, we're not in a point where we'd say Dallas is going to be profitable next year. We are saying that Houston It's paying more and more of the expansion that we're doing. And so it's really working as we planned as those branches mature, really helping us pay for future expansions.

Operator

Okay. Thanks, Jerry.

Speaker 6

Sure.

Operator

Our next question is from Brady Gailey with KBW. Please proceed.

Speaker 1

Hi, thanks. Good afternoon, guys.

Speaker 2

Hey, Brady. Hey, Brady.

Speaker 1

I just wanted to circle back to the loan growth guidance to make sure we're understanding that right. The mid to high single digits, Are you saying that's on an average basis full year over full year? Correct. To Avery's point, Yes. So you're already I mean, if you didn't grow loans a single dollar, you'd already be up 5% on an average year over year.

Speaker 1

So on an end of period basis, if you're a period end to period end, that loan growth will take a decent step back from the 10% you did last year?

Speaker 2

I guess what I would say is That obviously, we tend to rely more on the averages than we do on the period end. But the guidance that we've got, we'll certainly We'll review that as we get through the quarter and as we get through the year. But right now, I feel like that sort of guidance is really Very realistic based on what we saw. I think this year, if I went back, if I'm remembering correctly, I think the full year average of 24 excuse me, 20 3 Over 22% was a little under 8%. And so really we're guiding towards something in that arena, maybe a little bit better than that Without knowing exactly what sort of environment we'll be in.

Speaker 2

So I think that we're sticking with it. And If we can do better than that, that'll be great. And we continue to we have plenty of liquidity. We're not holding back. But at the same time, all the deals that we're doing have to make sense to us.

Speaker 2

And I think we've been really good about growing relationships that we want to grow. We talked last quarter, I think it was about an unusual amount of opportunities that have come our way just given that from the stability that we have and the liquidity that we have available. But we're just not going to say yes to every deal that we get, right? We're going to be very selective and make sure that these are the quality sort of relationships that we want to continue to develop. We'll certainly continue to give upward we'll give guidance and if it's upward on loan growth, we'll certainly support that.

Speaker 2

But at this point, this is kind of what we're

Speaker 3

Yes. Just my tag on what Jerry was saying about looking at deals and making sure they work for us. If you look at the Q3 and then compared to the Q4, we saw a sharp uptick in the number or the percentage of deals that were lost to structure versus pricing. We lost 66% of the deals in the 3rd quarter to structure and that compared to 76% of deals lost to structure In the Q4. And a lot of that in the I'd say the majority of that would be in the CRE space.

Speaker 3

So it's still competitive out there. And I think this shows that we're not just going to do whatever deal comes our way. We're still going to be careful in making sure it's It's quality stuff and it's done our way.

Speaker 1

Yes. Understood. Then my last question is just on the share repurchase. I saw the New $150,000,000 of authorization. I think you bought back about $40,000,000 of stock last year in 2023.

Speaker 1

Should we expect Frost to be active on the buyback in 2024?

Speaker 2

I wouldn't yes, I think that certainly we'd like to have it available. We'd like to have that tool in our toolbox Should the opportunity arise. I wouldn't count on us being significant buyers of our stock unless we really felt Like there was an opportunity, something happened. We'd hate to be in a position where we thought we had a great value and we didn't have a program in place. So For us, it's just making sure that if there's some sort of market dislocation and we think there's a great value for us that we're able to take advantage of that without having to jump through a lot of hoops.

Speaker 1

Okay. Thanks guys.

Operator

Our next question is from Brandon King with Truist Securities. Please proceed.

Speaker 7

Hey, good afternoon.

Speaker 2

Good morning, Brian.

Speaker 7

So philosophically, with the expectation of No fed cutting this year. How are you thinking about managing deposit costs lower? Compared to your peers, you're a little more proactive with the rates on the way up. And I just wanted to know just your insight on how you plan on managing that on the way down, certain account types, exception price and things of that nature?

Speaker 2

Brandon, we don't we do very minimal Exception pricing. We do some, but it's not a big part of our business. So let me start with saying that. I think we said earlier, when we went up, We went up pretty fast. We reacted very quickly.

Speaker 2

I felt that, that was the right thing to do for our customers. We'll just really look at I said earlier, I'd expect that the betas that we utilized going up will be kind of the first reaction that we have on a down cycle. But at the same time, we're not going to have our head in the sand. And if there is a competition that we feel we're competing against, it is really pricing a lot more aggressive than we are than we may have to react. We don't think we have to be the highest.

Speaker 2

We're not the highest today. I think we're fortunate in that having won the J. D. Power award for 14 consecutive years, I'm looking to fill, I think 14 or 15 and the head of consumer is going to get mad at me if I missed it, but that's based on customer satisfaction. So It's not all in the rate.

Speaker 2

We realize that a lot of it is on customer service and how what we do to take care of the customer, Both on the commercial and the consumer side, but more on the consumer. And we've got a great app mobile app that I think we get a lot credit form that we really try to stay on top of and make sure that we're keeping that at the forefront. And so I don't feel like we have be the highest and we've proven that in our relatively stable deposit volumes, but we do have to be competitive. And that's what we really keep our eye on the most is making sure that we're offering our customers a square view.

Speaker 3

And Brandon, you probably know better than I do, but I mean, money market funds are probably going to have to be they're going to be buying a lot of market instruments and those

Speaker 2

things are

Speaker 3

going to be going down pretty consistent with declines in rates on traditional short end. I think it's partly our expectation that their movement in rates will be sort of inexorable and there were a lot of competition is right Anyway, so that'll give us some ability to compete better against those particular products. And I think as Jerry said, if we're competing straight up against the bank, we'll compete pretty well just being close on rate. We won't have to be the highest in the market.

Speaker 7

Got it. And that's helpful. And then I wanted to get more insight into Your marketing plan and brand refresh. So what are the things that you're planning to do in 2024 that you aren't doing in 2023? And then could you talk about kind of the potential and scale of what you could envision that looking like maybe beyond 2024?

Speaker 3

Well, as it relates to the marketing plan, we've really focused on just the look and feel of our brand, how it looks in the marketplace. I'm trying to differentiate it from sort of the sea of sameness that's out there And really trying to reduce the for sure the lack of awareness about our brand. And If you are aware, we really want to reduce indifference to the brand. And so we're trying to utilize things that Just visually help us there. We're also we put out some new ads that sort of reflect who we are and some of the amazing stories of customer service that we're going to have.

Speaker 3

And we do that with a little bit of humor and a wink that's typical of Cross Bank. And so I think the campaign that way is going to be really good. But if you look at it on the under the hood, I think we've done a lot better job. I know we have bringing in partners that are helping us do a better job with digital marketing and in effectiveness in our digital offerings. And really that even translates into Some of the direct mail pieces that we do and a lot of that in connection with some of these branches that we're opening in these new markets, Making sure that our response rates on that are improving.

Speaker 3

So we've seen some interesting results in that with our new partners, and I expect that To be something that helps drive customer acquisition going forward. So we'll see, right? It's I've learned everyone's a marketing expert.

Speaker 7

Got it. Yes, I was just trying to make Just trying to get a sense of this is not kind of a herculean effort and just kind of more incremental on the margins.

Speaker 3

No, I don't think so. I think it's we've built our infrastructure In terms of our internal marketing resources and capabilities so bad, it's something that was Really a part of what the expense base growth was last year. By and large, there will be some follow on as those things annualize to a full year in 20 24. But a lot of it is just utilizing the market spend that we have been spending, But doing it in a more effective way. So but it's not the same level of the I go back to the generational investment that we did in IT.

Speaker 3

It's generational for marketing, but it's not the same size Of that investment as I conclude.

Speaker 7

Great. Thanks for taking my questions.

Speaker 3

Thank you.

Operator

In the interest of time, we are going to ask that analysts please limit yourself to one question as we proceed. Our next question is from John Pancari with Evercore ISI. Please proceed. John, your line is live. Okay.

Operator

And our next question will be from Brody Preston with UBS. Please proceed.

Speaker 1

Hey, everyone. I'm just going to wrap a few into my one here, if you don't mind. Sure. They're all on NII, Gary, so to make it a

Speaker 3

little bit

Speaker 1

easier. I know you're relying a little bit more on the averages when you're on the period end. But If I am working on that off the period end, it looks like the loans and the deposits should kind of the deposit should fund the loans, And then you're going to reinvest half of the $3,000,000,000 So you got about $1,500,000,000 of cash flows left over from the securities look naturally. I'm wondering if that's going to go into just kind of pushing off the remaining repurchase agreements that you have on board? And then secondly, I was wondering if you all would provide us with what the period end savings and interest bearing checking and money market accounts look like just because it's a little over a week until we get the K and We got update models in the interim

Speaker 2

there. Yes. You're saying just the period end rates?

Speaker 1

No, the period end balances.

Speaker 2

The period end balances. Yes, we can get them here for you. But and if we don't get them to you, AB can certainly give those To you offline if you want to do that.

Speaker 3

Okay.

Speaker 2

I'm sorry. I forgot your first question that you

Operator

That's okay.

Speaker 2

What are you trying to get at? I'm sorry.

Speaker 1

I was saying if I look at the guidance and look at like the implied period I know you're relying more on the averages. I'm wondering, it looks like the deposit can fund the loan growth that you got. I'm wondering what you're going to do with the additional $1,500,000,000

Speaker 2

Yes. I'm sorry, I apologize. Yes. So you mentioned repo. So for us, Customer repos is really a these customers, for the most part are really long term customers.

Speaker 2

And there is a feature within that product that we make available to them that allows them to utilize the product. And so Even though it's fully collateralized, they do take a haircut versus the respective MMA rate. And we may do a little bit of exception pricing there. But for the most part, it's really a very successful product for us. There's some transactional pieces of it that work to their benefit and they want to be in that product.

Speaker 2

But this isn't hot money in any way. These are long term customers. A lot of them have Other deposit have deposit relationships as well, significant deposit relationships. So from our end, We've got a significant amount of collateral. It really it's a good operating business for us, and we don't have any intention of reducing that sort of

Speaker 6

of product

Speaker 2

from that

Speaker 1

sample. And what do you do with the additional $1,500,000,000 of cash So then because if you're targeting Yes.

Speaker 2

So at this point, what we would probably do and what we're modeling is that we would continue to keep those balances to the Fed. I think I've said earlier, we just kind of want to see what happens as far as deposits are concerned, deposit flows. And so from our assumptions today, we're really just increasing our balances at the 5th.

Speaker 1

Understood. Thank you very much.

Speaker 3

Sure.

Operator

And our final question is from Jon Ostrom with RBC Capital Markets. Please proceed.

Speaker 1

Hey, thanks for the opportunity. I'm going to tease Brody, but that's Just cruel to box them into one question. I'm kidding, Brody. Anyway, just on mortgage, how material do you expect Good to be in 2024. You said you're all built out and I'm just curious on your willingness for holding on the balance sheet, how big could it be and do you But to sell any of

Speaker 6

the production? Well,

Speaker 3

I can answer the last part of it as we don't I expect to sell any of the production. So it's really Jerry might have a better feel for Yes. But it's not going to be as it's ramping up, right? And so I think what we said early on when we started this, We expected in 5 years, it would be the same as the rest of the consumer portfolio. So that's at that point, I think it was around a $2,000,000,000 estimate of what it would be.

Speaker 3

And so we're beginning to ramp up. It's a worse market than when we started, right, in terms of what's available out there housing wise. But I would say it would be I would Let me venture a guess, dollars 200,000,000 ish.

Operator

And so under our mortgage department,

Speaker 3

not just falling down when I said that.

Speaker 1

Okay. All right. So not terribly material, but all on

Speaker 3

No, it's not huge. It's not wagging the dog, but it is going to be just solid growth to continue to Development product. Yes. Okay.

Speaker 1

Thanks guys. I appreciate it. Jerry, I think you should have said consensus is a little bit low. My calc is It's a little bit low, not by much, but that's my comment.

Speaker 2

I appreciate your input. Thank you, John. Yes. Thank you.

Operator

We have reached the end of our question and answer session. I would like to turn the conference back over to Mr. Green for closing remarks.

Speaker 3

Okay, everybody. Thanks again for your interest in our company and we'll be adjourned. Thank you.

Operator

Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.

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Earnings Conference Call
Cullen/Frost Bankers Q4 2023
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