Since 2018 San Antonio-based Frost Bank has been aggressively branching in key Texas cities and environs in the search for organic growth, to the tune of nearly 50 new offices, a 39% increase as of early 2024. New branches for the bank (currently $50.8 billion in assets) have opened in Houston, Austin and Dallas.
Management has seen no need to look beyond the borders of the huge state, especially as it continues to enjoy an influx of people and businesses from other parts of the country. In a December U.S. Census Bureau report, Texas led in population growth, adding close to half a million people — 473,453 — in 2023 alone.
Much of the bank’s current growth has come from expansion. During Frost’s yearend 2023 earnings analyst briefing, Chairman and CEO Phil Green shared some representative figures. At the end of the year, he said, overall expansion moves produced $1.9 billion in deposit growth and $1.4 billion in new loans. Over the past three years, Frost has added 81,000 net new consumer checking households. Green said that this was 2.6 times the level seen in the previous three years. Among the benefits of that growth, outpacing deposit growth of “legacy Frost,” is that the bank has not tapped brokered deposits for funding.
Even though Frost has strong digital usage and an award-winning banking app, Green believes the physical presence makes a difference.
“We’re not trying to process transactions at these locations, but we are projecting our brand into these communities,” he explained. In Houston, as an example, he said 85% of expansion-related accounts are opened with five miles of a Frost branch, and 44% are opened within two miles. He noted that in consumer surveys, the bank still hears that convenient locations remain the top reason for picking a new bank.
Frost's Expansionary Box Score:
Going by cities, as of early February, Frost has opened 30 of 33 planned new locations for Houston, 18 of 28 planned for Dallas, and one of 17 planned for Austin. That's at least 29 more branches to come.
In today’s market, Frost needs growth. It’s the second-largest Texas-based banking institution, behind USAA, according to the Texas Banking Department, but it faces much larger competition from out-of-state players, including JPMorgan Chase, which continues to aggressively branch around the country. (Chase recently said it would add yet another 500 branches nationwide over the next three years.)
‘We’re Spending Money to Make Money’
For Frost, the strategy has been paying off even as it has added costs in the near-term. An analyst nudged Green about rising expense levels during the briefing. The CEO acknowledged the increase, but said it was the price of organic growth, and that the rest of the bank was keeping expenses down. He also believes that as the Houston expansion tops out and produces more, it will help pay for growing the network in Dallas and Austin.
In fact, Green said, “We’re going to keep leaning into” what he calls “expansion Frost.” That push has necessitated increased spending on marketing and development of fresh marketing strategies.
In mid-2022 Frost brought Blair McGrain aboard as chief marketing officer. McGrain spent years in marketing work in health insurance and in marketing and operations posts at Southwest Airlines.
“We’ve been talking for some time about the need to invest in marketing capabilities to complement the organic success we’ve been achieving,” said Green. “We’re optimistic about the impact this will make in customer acquisition.” The bank brought in some new outside help and asked longtime marketing advisors for fresh ideas.
The bank is going through a marketing shakeup that is open to questioning everything.
Read more: 2024 Marketing Roadmap: More Customer Focus, More Streamlining & Fresh Takes on Life’s Milestones
Time for Frost to Bust Out of the Texas Crowd
In late January, McGrain and his team launched a new marketing campaign and a brand refresh to give the bank a boost, both in its legacy footprint and to support its expansion markets. More will be coming as themes launched in consumer banking spread to other parts of Frost.
The tagline for the new campaign is “Exactly What You Unexpected” — with an emphasis on service that goes far beyond smiles and remembering your name.
“We’re opening branches like crazy, the opposite of what everybody else is doing, because that’s what people want,” says McGrain. “They want human interaction and our bankers are good at that.”
Trimming locations to cut costs pleases bean counters and analysts, but McGrain thinks the customer gets lost in such calculations.
“The key point is to deliver what the customers want, not what we want,” says McGrain. Customers like digital banking but they also crave the human factor. The bank has long striven to build broader relationships, rather than transactional ones.
With the branch network expanding potential relationships further, “it was time to show ourselves off,” says McGrain.
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Sailing Out of a Marketing ‘Sea of Sameness’
The marketing push that accompanies this strategy has multiple prongs.
One is the bank’s logo, a shape some see as a sunburst, others as an abstract flower with 15 “petals.” Frost has used this logo for decades. Marketing research scoping out the rebrand, focused on the logo.
Any thoughts about scrapping the logo soon disappeared. “There was incredible recognition for our logo, so we have doubled down on it in our new campaign and in the brand refresh,” says McGrain. “We’ve going big with it because everybody recognizes the logo.”
While the logo had value, not so much the rest of the bank’s public face, from advertising to its website.
“The not so good news in the research was that we looked like everybody else.”
— Blair McGrain, Frost Bank
Speaking to the analysts, Green referred to being stuck in a “sea of sameness,” and wanting to “reduce the lack of awareness about our brand and reduce indifference to the brand.”
As part of that effort, the valuable logo isn’t being treated as a holy banking relic. Quite the contrary.
Those “petals,” plucked and reoriented, pick up on the logo but get repurposed in multiple ways. Stood on end, they function like exclamation points, for example.
And, speaking of “going big,” the bank decided to add a heavy slug of outdoor advertising to its marketing mix, which had been moving more and more to digital channels. In the selection of outdoor ads seen below, the petals become part of each ad theme — speech bubbles, a relaxing recliner, hillocks on a surreal landscape.
Read more: Comerica Stands Out in Small Business Banking with Innovative Co-Op Initiative
A Pause, and Then a Push, on Frost’s Revamped Look and Feel
In the midst of the efforts of marketing staff and agencies to revamp things came the banking crisis of 2023, with all of its ripples.
McGrain decided to assess the market before going further with the bank’s plans.
“We took the temperature of the market and felt we needed to proceed with the work we were already doing,” says McGrain.
“If anything, our campaign should provide assurances to people, showing the difference and the sustainability of Frost, which has been here in Texas for 150 years,” says McGrain. “I think we have chance right now, and I think we’re doing it, to drive home how we are different.
Surreal Episodes Where ‘Above and Beyond’ Pays No Mind to Profits
In a commodity business like banking, everyone says their service sets them apart. How do you get beyond this old, old message?
Frost Bank and its advisors decided to go quirky.
Five spots showing “unexpectedly true stories” — three have been released and are embedded below — have been produced to show how Frost Bank staff delivers.
• In one, three nuns in an ancient station wagon get a flat right outside a Frost branch. A branch manager comes out and fixes the flat. It comes out that the nuns actually bank with a competitor.
• In another, an older customer has trouble with his banking app. Frost tech staffers swing by his house, take the phone back to their shop, make a custom software patch, and bring the fixed phone back to the customer.
• In the third spot, a noddy accountant, working too late during tax time, makes a night depository drop at Frost. Unfortunately, when a branch employee retrieves the bag, it was meant for another bank the accountant also worked with. The banker personally delivers it to the right bank.
These stories are all true, McGrain says, and represent the kind of stories that staff tend to tell each other in group meetings, as success stories.
What sets the spots apart is the presentation. The filmed situations and resolutions don’t include dialog. A woman’s voice provides a narrative to the spots, including “speaking” for both male and female characters. (View the commercials to get the full effect of that technique.)
Each spot gets interrupted by the incredulous narrator stepping out of character and expressing her disbelief that the episode really happened. Her sound engineer, on the other side of the studio glass, insists in each case, “Yes, it really happened.”
McGrain says he has two more spots produced in the same style. He’s giving the original trio some time before he throws those two into the mix. The videos were developed by McGarrah Jessee, an all-female production company that Frost has worked with for years. (The Financial Brand featured a gallery of the some of the firm’s work for Frost in 2014.)