Cullen/Frost Bankers, Inc.

Ladies and gentlemen, thank you for standing by. The conference will be beginning in just a few moments. Once again, thank you for standing by, and we will be beginning in a few moments. Thank you. Greetings. Welcome to Call in for Us Bankers Inc. fourth 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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. 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. You may begin.

Thanks, Sherry. 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 Angieri, 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 for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 as amended. 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 to Phil.

Thank you, A.B. Good afternoon, everybody, and thanks for joining us. Today, I'll review fourth quarter results for Colin Frost and our Chief Financial Officer, Jerry Salinas. We'll provide additional comments before we open it up for your questions. In the fourth quarter, Cullen-Frost earned $100.9 million, or $1.55 per share, compared with earnings of $189.5 million, or $2.91 a share reported in the same quarter last year. Now, these results were affected by a $51.5 million one-time FDIC insurance surcharge associated with the bank failures that happened early in 2023. Our return on assets and common equity for the fourth quarter were 82 basis points and 13.51% respectively, and that compares with 1.44% and 27.16% for the same quarter, same period last year. For full year 2023, the company's annual net income available to common shareholders was $591.3 million. That's an increase of 3.3% compared to 2022 earnings available to common shareholders of 572.5 million. On a per share basis, 2023 full year earnings were $9.10 a share compared to $8.81 a share reported in 2022. 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. This solid fourth quarter and full-year performance is due to the continued strong execution of our organic growth strategy by Frost Bankers. who provide our customers with top quality service and experiences that make people's lives better. Our balance sheet and our liquidity levels remain consistently strong. Frost remains very well capitalized, and it has a 45% loan-to-deposit ratio. Also, as was the case in previous quarters, Cullen Frost did not take on any home loan advances, participate in any special liquidity facility or government borrowing, access any broker 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 fourth quarter to $41.2 billion, up an annualized 3.5% from the $40.8 billion in the previous quarter. Average loans also grew in the fourth quarter to $18.6 billion, compared with $18 billion in the third 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 locations stand at 103% of original deposit goal, 155% loan goal, and 122% 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 297% of deposit goal 351% of loan goal and 185% of new household goal. 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% of loan goal, and 198% of our new household goal. While still relatively early in this effort, expansion loans represent approximately 12%, and deposits represent approximately 10%. of Dallas market totals. We've opened up almost two-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. 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 $1.9 billion in deposits and $1.4 billion in loans, even though many of these locations are still early in their development. Looking at our consumer banking business, we continue to see outstanding 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 percent higher than last year's net household growth. In the past three years, we've added 81,000 net new consumer checking households. That's 2.6 times more than the three 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. We completed the product rollout in December, to the last of our regions, which was the Houston region. And in the fourth 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 billion, and that was down from the record that we set of $1.918 billion in the third quarter. In the fourth quarter, we brought in 960 new relationships. That's the third highest quarterly amount ever, up an unannualized 8.7% over the third quarter, and up 21% over the fourth quarter last year. 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 million in new loan balances and $800 million 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 million at the end of the fourth quarter. That was up from the $513 million at the end of the second quarter and $320 million this time last year. This growth in the fourth quarter was evenly split between loans in the OAEM and classified categories. Another way of saying risk grade 10 and risk grade 11 categories. Non-performing assets, total $62 million at the end of the fourth quarter. compared with $68 million last quarter and $39 million a year ago. The year-end figure represents just 32 basis points of period-end loans and 12 basis points of total assets. Net charge-offs for the fourth quarter were $10.9 million compared to $5.2 million last quarter and $3.8 million a year ago. Annualized net charge-offs for the fourth quarter represent 23 basis points of average loans, and full-year charge-offs were 18 basis points of loans. Regarding commercial real estate lending, our overall portfolio remains stable with steady operating performance across all asset types and acceptable debt service coverage ratios and loan devalues. Within this portfolio, what we would consider to be the major categories of investor CRE, that is office, multifamily, retail, and industrial as examples, total $3.9 billion or 44% 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 million at quarter end, which was down from $959 million 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. 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's major metropolitan areas. 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 30th to December 31st, Total investor office outstandings decreased 7 percent from the linked quarter, and total commitments decreased by 9 percent. Finally, I'll point out that we've 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. And now I'll turn the call over to our Chief Financial Officer, Gary Salinas, for some additional comments.