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Cullen/Frost CEO sees little, 'if any,' contagion from energy

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Cullen/Frost CEO sees little, 'if any,' contagion from energy

executives said they are seeing very little spillover effect from energyweakness into other sectors in its Texas markets.

Speakingduring the company's April 27 first-quarter earnings call, management said they feel comfortablewith current loan loss reserves. Executives said they have set aside $85million for the company's energy exposure, and the total allowance for loanlosses in the quarter came in at $161.9 million. Specifically, executives saidthe company saw three loans totaling $94.3 million move into the nonperformingcategory in the first quarter. All three loans were to exploration andproduction companies, and the bank has set aside $28 million in reserves forthe loans.

Duringthe question-and-answer portion of the call, an analyst suggested the bank'sreserves related to the non-energy portion of the portfolio decreased andinquired as to whether that would need start moving higher as Texas economiesdeal with energy softness.

"Notnecessarily," said CEO and Chairman Phillip Green. "We're not seeingmuch, if any, contagion in the portfolio right now. And so I would not expectthat to happen from a contagion basis."

Managementfielded a couple more questions about the performance of commercial real estatein markets with heavy exposure to oil and gas, such as Houston.

"TheHouston market really is, I think, overall, still strong in real estate,"Green said. "You've got issues in the office towers. You've got subleasesthere increasing. There is some slowing in multifamily. Retail is extremelystrong, still trying to catch up; single-family is doing well."

Similarly,management said they expect to report loan growth this year despite some adecrease in energy loans as weakness in the sector persists.

Separately,management said there has been no pressure on deposit pricing in the wake ofthe Federal Reserve's interest rate hike in December 2015.