Richard Mann, Houston Region President, Frost Bank

Invest: sat down with Richard Mann, Houston region president of Frost Bank, to discuss Houston’s growth, Frost Bank’s organic expansion strategy, and the role relationship banking plays in serving a fast-growing market. “Our model is relationship banking. We want to know the people we’re doing business with,” Mann said.

How would you describe the current business environment in Houston, and what changes have had the biggest impact on your operations?

Frost is the only bank I’ve ever worked for. I was born and raised in the Houston area, went to school at the University of Houston-Clear Lake, and the day I graduated, I came to work for Frost. It’s the only job I’ve had post-college.

I started off as a credit analyst and worked my way up into management. About a year ago, the prior president retired, and the bank asked me to take his role. The last year has been eye-opening for me. Before that, my vision was focused on a certain segment of Houston, but now I’m focused on the entire greater Houston area.

One thing that is important to understand is that Frost has grown through organic expansion. We’ve bought banks in the past, but the way we decided we wanted to grow going forward was to pick our own locations, pick our own people to run those locations, and then find the clients that we can make life better for and where it is a good fit.

Seven years ago, we started on this expansion. At that time, we had 32 financial centers in the greater Houston area. Today, we have 64, so we have doubled in size in the last seven years. We are not done yet. We have many more that we are going to be opening, and right now we plan to open at least four more next year.

Houston is growing fast. I read an article in the Houston Business Journal that said every 3.9 minutes, or about every four minutes, a new resident moves here. That equates to about 135,000 people a year. When you think about adding another suburb every year around Houston, it blows your mind.

Those people need homes, retail, schools, hospitals, and infrastructure. They also need a good bank. What makes Frost unique is that we are 158 years old. We are one of the oldest banks in Texas, and we are No. 1 in Texas for customer satisfaction for 17 years in a row based on JD Power. That reflects our culture, our people, and our customers.

How is Houston’s growth influencing your strategy and the needs of your clients?

Businesses are moving here, and with all the people moving here, they are starting businesses as well. Houston is open for business. When you combine that with all the mergers happening in our industry right now, it creates tremendous opportunity.

Frost is one of the unique banks that is actually increasing the number of our locations. We have put more branches in the Houston area than any other bank in the last four years.To have good growth, you need the right people, and we are finding the right people. We have hired a lot of people and brought them in, and they have blended well into our culture.

We do things differently here, and our culture is what defines us from other banks. Every bank is trying to come to Texas right now. We started here, and we have been here, so we understand the market and we understand the needs. The new locations we are looking at are in markets that need a good bank, and the people there deserve a good bank.

With so much competition and consolidation in banking, how are you attracting and retaining talent?

We have a great reputation, and when we open opportunities to hire, we have a lot of people who want to be part of a great organization, one that is strong and that has taken care of its customers over the years.

If you look at the history of Frost, during the 1980s in Texas, there were over 500 bank and savings and loan failures. If you looked at the 10 largest banks in Texas at that time, only one of the 10 survived, and it was Frost. Then, during the Great Recession, when TARP funds were offered to help banks survive, Frost was the first bank in the country to turn down those funds. We did not need them; we had plenty of liquidity, and we did not want to be a burden to the taxpayer.

Then, during COVID, while we were certainly not the biggest bank in the country, we were in the top five in the country for the number of PPP loans during Round 1. Our average loan was about $150,000; we were trying to help those small businesses because they needed the help the most.

We are a great partner in the community. We work with a lot of nonprofits, and we give back. That culture and reputation draw people in. We are actively hiring because we need to fill these new locations and continue supporting our existing ones.

What are you seeing today in terms of lending activity and investment appetite among the middle-market companies and businesses you serve?

At Frost, we are definitely optimistic about the future of Houston and the future of Texas. Every business owner has their eye on inflation, and that has been a big part of the last year. Even with economic pressures and all the things that can change financial markets, Houston is growing, and our customers are growing.

They are looking for a stable partner that can help them meet their needs and take care of their employees. A good example is the residential mortgage business. Frost had been in that business when I first started nearly 27 years ago, but we had gotten out of it around that time. About two years ago, we made the decision to get back into that market.

What is unique about Frost is that we built the right team and the right internal platforms, and we underwrite those loans in-house. We work with the client all the way through the process, because getting a mortgage can be difficult. When we close the loan, we do not sell it. We keep it and hold it on our balance sheet.

Our model is relationship banking. We want to know the people we’re doing business with. We want to find ways that we can make their life better, whether it is through banking, investments, or insurance. We are more than just a bank. We have one of the largest insurance agencies in Texas, and we also have a large wealth management and investment group.

How are your clients adjusting to higher interest rates and ongoing cost pressures?

Rates started to come down in the fourth quarter of last year. Up to that point, in residential mortgages, we had mainly seen demand from people buying new homes. But when rates began to fall, it opened the door for people to start refinancing their homes because it made financial sense.

Frost lowered our rates well before a lot of our peers did to try to help our clients and capture some market share. Going into this year, many people thought we were probably going to see two or maybe three more rate cuts. However, with all the geopolitical turmoil in the world, a lot of that has changed. We are probably going to see rates stay pretty steady, and some believe rates could even increase depending on what happens with inflation.

Nobody has a crystal ball. But when our customers have a real need, whether that is a new piece of equipment, a larger building, or an increased working capital line, they are still going to move forward because it is what is best for their business.

How is Frost supporting clients across both traditional and emerging sectors?

Some people in the past have said that Frost is a conservative bank. I would say we are consistent. Unlike other banks that may come into a market and then leave a market, or enter an industry and then pull back from it, Frost stays consistent.

We are looking for the right type of customer, one that fits with our character and culture. There are going to be times when we may not be able to help somebody immediately, but what we will do is show them a path forward. If they are unable to qualify for a loan today, we can give them the guidance they need and a plan so that when they reach that point, they are bankable, instead of simply telling them no.

How are you thinking about technology and AI, both for internal efficiency and client service?

Right now, we are using AI in a lot of our back-office operations to create better efficiencies. What is especially exciting is the use of AI to help prevent fraud.

Businesses are constantly bombarded by fraudsters who are trying to impersonate someone and trick them into giving up their credentials or otherwise create havoc in their financial lives. We are using AI to help identify when someone may be pretending to be one of our customers, so fraud prevention is going to be a huge component of AI.

As bankers, we are still trying to figure out how to best use AI in our sales efforts and in portfolio management. There is a cool aspect to AI, but we have to move beyond it just being a cool feature and figure out how it can help us be more productive and better serve our clients.

How do you balance technology with the relationship-driven nature of banking?

We love our clients, and we want to be with our clients. The way we design our branches is intentional. When someone walks through our door, a human being is there, makes eye contact, and is ready to help. You do not have to have an appointment. We want to talk to you anytime you need us.

We also have 24-hour customer service that is based in Texas. If it is after hours and a client needs help resolving an issue, they can always call their banker directly, whether they are an individual or a business. But if they need customer service late at night, there are no call trees. Someone will answer the phone right away, and it will be someone in Texas.

We are active and engaged with our clients. We want to find ways to make their lives better, whether that is through banking, investments, insurance, or connecting them with others in the community. There is great opportunity to move customers to Frost, where they can know their banker, have a bank that adds value, and say that they love their bank.