Cullen/Frost Bankers, Inc.

Greetings. Welcome to Colin Frost Banker's fourth quarter and full year 2024 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, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce 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 Dan Geddes, Group Executive Vice President and CFO. Before I turn the call over to Phil and Dan, 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.

Good afternoon, everyone, and thanks for joining us. Today we'll review our fourth quarter and full year 2024 results for Cullen Frost, and our Chief Financial Officer, Dan Geddes, will provide additional commentary and guidance before we take your questions. In the fourth quarter, Cullen Frost earned $153.2 million, or $2.36 a share, compared with earnings of $100.9 million, or $1.55 per share, reported in the same quarter last year. And for the full year 2024, the company's net income available to common shareholders was $575.9 million, and that compared with 2023 earnings available to common shareholders of $591.3 million. On a per share basis, 2024 full year earnings were $8.87 per share, compared with $9.10 per share reported for the full year 2023. Our return on average assets and average common equity in the fourth quarter were 1.19% and 15.58% respectively. That compares with 0.82% and 13.51% for the same period last year. Average deposits in the fourth quarter were $41.9 billion, up from $41.2 billion in the fourth quarter last year. Average loans grew by 9% to $20.3 billion in the fourth quarter, compared with $18.6 billion in the fourth quarter last year. We continue to see solid results driven by the hard work of our Frost bankers and the expansion effort that we have going today. As was the case in previous quarters, Cullen Frost didn't utilize any FHLB advances or broker deposits or reciprocal deposit arrangements to build insured deposit percentages or to fund liquidity. So the way I continue to like to say it is, when you look at our balance sheet, what you see is what you get. We continue to see excellent results with our organic growth strategy. We launched it at the end of 2018. When we did, Frost had 131 financial centers across Texas. Around the midpoint of this year, we'll open up our 200th location, and we'll keep going from there by identifying strong markets where our value proposition will make an impact. At the end of the fourth quarter, our overall expansion efforts continue to grow and have generated $2.4 billion in deposits, $1.8 billion in loans, and added more than 59,000 new households. For deposits, loans, and households, these represent 101%, 151%, and 130% of goal, respectively. Our Houston and Dallas efforts continue to perform consistent with what we've reported in the past. We opened our sixth location in the Austin region in the fourth quarter. and we're now approximately one-third through that effort. Early results continue to be very encouraging and in line with the other expansion markets. As we've mentioned before, the successes of the earlier expansion locations are now funding the current expansion effort, and we expect the overall effort will be accretive to earnings beginning in 2026. As the proverb says, there's a time to sow and a time to reap, We're getting near reaping time. And as I've said many times, this strategy is both durable and scalable. The investments we've made in organic expansion, new products, marketing, technology, and our employees are driving outstanding growth throughout our consumer business. We've had record consumer growth for the year with a $610 million increase in average outstanding balances for consumer loans. This represents a 21% annual growth rate in our third consecutive year of high-quality consumer loan growth over 20%. Two-thirds of the growth comes from our second lien home equity products, and the other third comes from our new mortgage program that has been nationally recognized for its excellence in customer experience. We funded $75 million in mortgage loans in the fourth quarter, and at the end of 2024, our total one to four mortgage portfolios stood at $259 million. Consumer checking household growth, our measure of customer growth, continued its four-year industry-leading run of 6% or greater growth. Consumer deposits which make up 47% of our company's total deposit base, grew 3.2% for the year. We consider this to be excellent deposit growth in an environment of intense competition for deposits. And consumer deposits are now 51% higher than our 2019 pre-COVID balances, a total increase of $6.5 billion over that period. Altogether, this represents an 8.6% compound annual growth rate over the past five years, with all of it organic growth. I'm very excited to see the consistency and sustainability of our results over multiple years, and we're working hard to continue on this trajectory. Overall, our investments in organic expansion, as well as new products, marketing, technology, and our employees, are helping drive this outstanding growth across the consumer business. Now looking at our commercial business, period end loan balances grew by 1.3 billion, or 8.3% year over year. CRE balances grew by 11%, energy balances grew by 20%, and CNI balances increased by 2.4%. New commercial relationships in 2024 were the highest annual level ever. Even beating the Silicon Valley impacted 2023 level by 1%. For the year, the expansion accounted for 20% of new commercial relationships in 2024. And half of our total new commercial relationships are coming from what we call the too big to fail banks. New loan commitments totaled $2 billion in the fourth quarter and were up 24% from the third quarter. Finally, new loan opportunities were up 35% from the same quarter a year ago and represented our highest fourth quarter level ever. Our overall credit quality remains good by historical standards with net charge-offs and non-accruals both at healthy levels. Non-performing assets totaled $93 million at the end of the fourth quarter compared with $106 million last quarter and $62 million in the fourth quarter of 2023. The quarter-end figure represents 45 basis points of period-end loans and 18 basis points of total assets. Net charge-offs for the quarter were $14 million compared with $9.6 million last quarter and $10.9 million a year ago. And annualized net charge-offs for the fourth quarter represented 27 basis points of average loans. Total problem loans, which we define as risk-grade 10 OAEM or higher, totaled $943 million at the end of the fourth quarter compared with $839 million at the end of the third quarter. Our overall commercial real estate lending portfolio remains stable with steady operating performance across all types and acceptable debt service coverage ratios. Our loan-to-value levels are similar to what we reported in prior quarters. When you put all that together, These results demonstrate what happens when you combine Frost values with the right strategies in the best banking markets in the United States and provide the best customer experiences with the best team anywhere. We are very well positioned to move ahead into 2025 and to extend the Frost value proposition to more customers around the state. And with that, I'll turn it over to Dan.