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Note: Texas bank relies on traditional business values to get through the credit boom and bust.
In different times, no one would use the word radical to describe Frost National Bank. After all, this 140-year-old Texas lender with $13.6 billion in assets has built its fortunes on a plain-vanilla strategy: Avoid esoteric financial instruments, get to know clients well and hold on to business by providing personalized service. "We have always loaned money to people, not to projects," says Richard Evans Jr., chief executive of Frost and its holding company, Cullen/Frost Bankers. "We don't think of ourselves as product peddlers but as builders of relationships."
These days, with many big banks failing or needing government bailouts to overcome a legacy of financial excess, that back-to-basics approach seems positively contrarian. Frost is an old-fashioned regional bank, taking local deposits and making traditional personal and business loans. Its deposit base is split 50-50 between businesses and consumers. On the loan side the assets are 85 percent commercial and 15 percent retail. Subprime mortgages and bad credit card debts? Frost abandoned the mortgage business in 2000 and stopped issuing credit cards two decades ago. "They'd both become commodities," Evans explains. Globalization? Frost, headquartered in San Antonio, refuses to open branches in other states, let alone other countries. "Our brand is outstanding in Texas, but outside they'd think it's a misspelling, that it's First National something," he says. Credit freeze? Last year Frost lent out $8.3 billion, up 11.4 percent from $7.5 billion in 2007.
Frost's stick-to-the-basics style of banking has truly proved its worth in the financial crisis. The U.S. Treasury late last year offered the bank $330 million from its Troubled Asset Relief Program, but Evans says he turned the feds down because the tax implications and oversight involved in taking TARP money seemed too onerous. "Quite frankly, we didn't need the money," he says. "We've run this company conservatively, so our shareholders never got the upside of high risk and leverage. Why should they be...