Cullen/Frost Bankers (CFR) Q3 2026 Earnings Call: Loan Growth and Guidance Raised

Key Takeaways

• Cullen/Frost Bankers earned $178.5 million in Q3 2026, up 3.4% year over year. EPS increased 6.4% to $2.84.
• Average loans rose 9% to $23.4 billion, while average deposits increased 3.6% to $43.6 billion. The net interest margin expanded 3 basis points sequentially to 3.78%.
• Consumer loans grew 18.7% to $4.66 billion, supported by consumer real estate lending. The mortgage portfolio surpassed $1 billion.
• The 90-day weighted commercial loan pipeline reached a record $2.5 billion, up 16% from the previous record in Q2. Year-to-date new loan commitments increased 19%.
• Expansion branches generated $0.22 of EPS accretion in Q3 and $0.51 year to date. These locations held $3.25 billion of loans and $4 billion of deposits.
• Management raised its 2026 outlook for net interest income, average loan growth and noninterest income, while maintaining its net interest margin and deposit growth guidance.

Core Financial Data

Business and Operating Performance

Consumer banking remained a major growth driver. Consumer deposits increased $297 million during the quarter, primarily through higher money market balances. Consumer noninterest income rose $2.6 million, or 9.4%, year over year. Since the expansion program began in late 2018, consumer checking accounts have grown 52%.

The mortgage product continued to support customer acquisition. Management said 46% of mortgage customers were new to Frost, and 37% of those new customers opened additional products. The company services these mortgages and positions the product as part of a broader banking relationship.

Commercial activity was broad-based. Core loan commitments below $10 million reached a record $1.2 billion, and Cullen/Frost added more than 1,000 new commercial relationships for the sixth consecutive quarter. Expansion locations accounted for 21% of new commercial relationships.

Relationships generated by bank mergers and other market disruption increased 73% year over year. Management said Cullen/Frost was winning approximately 78% of these opportunities on a dollar basis, compared with its historical win rate of roughly one-third for general prospects.

On a sequential basis, management attributed about 40% of loan growth to C&I and owner-occupied real estate, another 40% to investor commercial real estate, and most of the remaining 20% to consumer real estate. Approximately 42% of loan growth came from customers added during the past year.

Expansion branches continued to scale. Their average loans grew 40% year over year and represented 13.9% of total loans, while deposits increased 23% and represented 9.1% of total deposits. The company expects to open 12 locations in 2026 and has 14 planned for 2027.

Credit quality remained sound by the company’s historical standards. The decline in nonperforming assets primarily reflected the full repayment of a large multifamily commercial real estate loan following a property sale.

The investment portfolio averaged $21.2 billion, up $592 million sequentially. Its tax-equivalent yield increased 13 basis points to 4.09%. Higher rates lifted the unrealized loss on the available-for-sale portfolio to $2 billion from $1.1 billion at the end of Q2.

Management Guidance

Management’s 2026 outlook assumes one 25-basis-point Federal Reserve rate increase in December.

Management expects 50-75 basis points of positive operating leverage in 2026 and is targeting positive operating leverage in 2027, subject to completion of the budget and planned investment in wealth management.

For future rate increases, management estimated an approximately 80% loan beta, a similar beta for interest-bearing deposits and a 50%-55% beta for total deposits. Each 25-basis-point increase could add roughly $1.5 million to $1.7 million of monthly net interest income.

Risks and Watch Items

• Higher rates are increasing deposit costs. The cost of interest-bearing deposits rose 12 basis points sequentially to 1.73%, and management expects another 12-15 basis points of pressure in Q4.
• Q3 net interest margin included an approximately $3 million accrued-interest benefit from the repayment of a nonaccrual loan, limiting the comparability of the reported margin.
• Management continues to monitor several older-vintage multifamily projects affected by weaker rents, lease-up concessions, higher expenses and refinancing needs.
• Cullen/Frost is also watching its approximately $290 million homebuilder loan portfolio as builders face margin pressure from mortgage-rate incentives.
• Competition for high-quality commercial borrowers remains intense, with some smaller banks offering more aggressive loan structures.
• Wealth management hiring is expected to increase expenses, while new advisers may require 12-18 months to reach payback.

Analyst Q&A Highlights

Loan pipeline and demand: Management said the record $2.5 billion weighted pipeline was supported by all four core markets, led by Dallas, followed by Houston, San Antonio and Austin. About two-thirds of the pipeline was tied to existing customers and one-third to prospects, providing management with confidence in potential closings during Q4 2026 and early 2027.

Branch expansion: Cullen/Frost expects to maintain a pace of roughly 12-15 new branches annually in the near term, with potential to accelerate over time. Management identified talent, execution quality, site selection and coordination across business lines as the main constraints rather than capital spending alone.

Deposit franchise: Management expects loan growth to exceed deposit growth in the near term because customers remain incentivized to seek higher yields. However, the company emphasized that its low loan-to-deposit ratio provides balance-sheet flexibility and said long-term growth in both loans and deposits in the mid- to high-single digits would be optimal.

Margin outlook: Management expects continued benefits from replacing lower-yielding fixed-rate loans and securities. Approximately $275 million of fixed-rate loans were scheduled to mature in Q4, followed by more than $1 billion in 2027, with reinvestment expected at higher yields based on the company’s modeling.

Capital returns: Cullen/Frost repurchased approximately 93,000 shares for $15 million in Q3, bringing year-to-date repurchases to $175 million and 1.26 million shares. Management indicated that full-year repurchases of $190 million to $200 million would be a satisfactory outcome, depending partly on the stock’s relative trading level and macroeconomic conditions.

Full Earnings Call Transcript

Complete Earnings Call Transcript

Management Remarks

Operator

Greetings. Welcome to Cullen/Frost Bankers, Inc. Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to A.B. Mendez, Senior Vice President and Director of Investor Relations. Thank you. You may begin.

A. Mendez

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.

All 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.

Phillip Green

Thanks, A.B. Good afternoon, everyone. Thanks for joining us. Today, we'll review the third quarter 2026 results for Cullen/Frost and then our Chief Financial Officer, Dan Geddes, will also provide additional comments and guidance updates before we take your questions.

The third quarter of 2026, Cullen/Frost earned $178.5 million, an increase of 3.4% compared to the third quarter of last year. Per share earnings for the third quarter were $2.84, an increase of 6.4% from $2.67 in the third quarter of last year. Our return on average assets and average common equity in the third quarter were 1.31% and 16.16% respectively, and that compares with 1.32% and 16.72% in the third quarter of last year. Average deposits in the third quarter were $43.6 billion. That was an increase of 3.6% from the previous year and average loans grew to $23.4 billion, up 9% from last year.

Our consumer bank continues to deliver strong results that are grounded in consistent focus on customer experience and our investments in organic expansion, products and technology. Consumer loans ended the quarter at $4.66 billion, an increase of $736 million or 18.7% year-over-year. Consumer real estate lending continues to drive this outstanding growth, and I'm happy to say that as I speak to you today, our mortgage portfolio exceeds $1 billion.

Mortgage lending also remains an important opportunity to build broader relationships since the program began 46%, mortgage customers have been due to Frost and 37% of those new customers have opened additional products. Consumer deposits also saw strong growth in what continues to be a very competitive market. Consumer deposits increased $297 million in the third quarter, driven primarily by increases in money market deposit balances. This growth is only possible through the focused effort of our sales, product, marketing and technology teams and of course, through the world-class customer experiences provided every day by our frontline bankers in every Frost branch throughout the state.

Noninterest income continued to grow strongly, driven by our consistently best-in-class customer growth. Consumer noninterest income increased $2.6 million or 9.4% compared to the same period last year. Since launching our expansion program in late 2018, consumer checking accounts have grown 52%.

Our commercial line of business is also showing impressive growth. Our 90-day weighted loan pipeline reached an all-time high of $2.5 billion in the third quarter, up 16% compared to what had been the previous record in the second quarter. Opportunities generated by our legacy financial centers grew by 14% in the third quarter, while opportunities generated by our expansion locations grew by 37%.

Looking at new loan commitments booked, the third quarter was up 4% from a very strong second quarter, putting year-to-date commitments up by 19%. Commitments of what we call core loans that is those loans under $10 million hit a record of $1.2 billion in the third quarter. We once again added more than 1,000 new relationships in the third quarter. The expansion continues to be a significant driver of commercial relationships, and accounted for 21% of new commercial relationships for the quarter. Opportunities created by other banks, mergers and acquisitions, what we call market disruption continues to be a strong source of new relationships for us. Year-to-date, new relationships or market disruption are up 73% compared to the same period last year.

Our overall credit quality remains good by historical standards. Total problem loans, which we define as those risk grade 10 or worse totaled $902 million at the end of the third quarter compared to $917 million last quarter and $828 million a year ago. Nonperforming assets totaled $67 million at the end of the third quarter, compared to $114 million in the second quarter and $47 million a year ago. The quarter end nonperforming asset figure represents only 28 basis points of period-end loans and 12 basis points of total assets.

The decrease in nonperformers mainly relates to one large multifamily commercial real estate loan that was discussed in last quarter's call that paid off in full through an expected property sale in the third quarter.

Net charge-offs for the third quarter were $8.4 million, compared to $9.5 million last quarter and $6 million a year ago. Annualized net charge-offs for the third quarter represent only 14 basis points of average loans.

In our last conference call, I mentioned my optimism about our efforts around expanding our wealth management insurance brokerage business. In our wealth management business, we saw managed accounts grow by more than 5% year-over-year. And in our cross insurance agency, commercial customers increased by more than 10% year-over-year. I'm proud of the way these teams have responded to the changes that we've made in those areas, particularly increasing competitive environment that they operate in. And our continued efforts and investment in these areas will contribute to future results.

All across our company, our people continue to serve customers and shareholders with their commitment to integrity, caring and excellence. We've got the best bankers in the best markets and that's what will continue to set Cullen/Frost apart.

With that, I'll turn it over to Dan for some additional insights.

Dan Geddes

Thank you, Phil. Let me start by providing some perspective on our branch expansion strategy and the growth we're seeing from those investments.

During the third quarter, our branch expansion delivered $0.22 or 8.4% EPS accretion and $0.51 year-to-date or 6.6% of EPS accretion. We continue to be pleased with the volumes we've been able to achieve. On a year-over-year basis, average loans grew 40% and now represents 13.9% of total loans, up from 10.8% a year ago and contributed 48% of the growth. Deposits grew 23% and now represents 9.1% of deposits versus 7.6% in the same period last year and contributed 49% of the growth. The expansion branches have now grown to $3.25 billion in loans and $4 billion in deposits. Since our last call, we opened 1 new location in the Dallas region and have 4 planned openings by year-end bringing the total for the year to 12 locations.

Now moving to third quarter financial performance for the company. Regarding our net interest margin, our net interest margin percentage was 3.78% for the quarter, up 3 basis points from 3.75% reported last quarter. Net interest margin was positively impacted by a volume mix shift of earning assets from lower-yielding balances held at the Fed into both loans and investment securities. These are somewhat offset by both increased volumes of interest-bearing deposits and repos.

Looking at our investment portfolio. The total investment portfolio averaged $21.2 billion during the third quarter, up $592 million from the previous quarter. Investment purchases during the quarter totaled $1.6 billion, consisting of $625 million of Agency MBS securities yielding 5.69%, $494 million of treasuries yielding 4.21% and $481 million of municipals yielding 5.89% on a tax equivalent basis.

Maturities during the quarter included $1 billion of treasuries with an average yield of 2.88%, $257 million of municipals at an average tax equivalent yield of 4.45% and $368 million of Agency MBS paydowns. Given the recent run-up in rates, the net unrealized loss on the available-for-sale portfolio at the end of the quarter increased to $2 billion compared to the $1.1 billion reported at the end of the previous quarter.

The tax equivalent yield on the total investment portfolio during the quarter was 4.09%, up 13 basis points from the previous quarter. The taxable portfolio averaged $14.1 billion, up $496 million from the prior quarter and had a yield of 3.68%, up 17 basis points from 3.51% in the prior quarter. Our tax-exempt municipal portfolio averaged $7.2 billion flat with the prior quarter and had a taxable equivalent yield of 4.93%, up 6 basis points from the prior quarter.

At the end of the third quarter, approximately 70% of the municipal portfolio was pre-refunded or PSF insured. The duration of the investment portfolio at the end of the quarter was 5 years, up from 4.9 years at the end of the prior quarter.

Looking at our funding sources. On a linked-quarter basis, average total deposits of $43.6 billion were up $950 million from the previous quarter. The increase was approximately 65% in interest-bearing and 35% in noninterest-bearing deposits. Thus far in October, deposit growth continues to show momentum with the average deposits for the month sitting at $44.4 billion.

The cost of interest-bearing deposits in the third quarter was 1.73%, up 12 basis points from the 1.61% in the second quarter. Customer repos for the third quarter averaged $4.9 billion, up $471 million from the second quarter. The cost of customer repos for the quarter was 2.67%, up 2 basis points from the second quarter.

Looking at noninterest income and expenses, I'll point out a couple of items impacting the linked quarter results. Regarding noninterest income, other income was up $9.1 million, which included $7.6 million in gains from the sales of 2 legacy Motor bank locations and a $541,000 gain on the sale of certain loans held for sale. Offsetting these gains was $7.5 million in losses on the sales of securities where we sold $17 million in treasuries yielding 2.15% and $18.6 million in municipals yielding 1.92%. Given year-to-date actual performance, we recognized an additional $4.7 million in incentive compensation expense accruals during the quarter. Additionally, marketing and advertising was up $3.3 million due primarily to additional targeted media spend during the quarter.

Regarding our guidance for full year 2026. Our current outlook includes 125 basis point hike for the Fed funds rate in December. We expect net interest income growth for the full year to fall in the range of 5% to 5.5%. This reflects an increase from our prior guidance range of 4.75% to 5.25%. For net interest margin, we continue to expect an improvement of about 10 to 13 basis points compared to our full year 2025 net interest margin of 3.66%, no change from our guidance a quarter ago. We expect full year average loan growth to be in the range of 8% to 8.5%. This increases the prior guidance of 7% to 8%.

Regarding deposits, we expect full year average growth to be in the range of 2% to 3%, unchanged from prior guidance. Based on current projections, we expect noninterest income growth of 8.5% to 9%, up from the prior guidance range of 7.5% to 8.5%. Regarding noninterest expense, we expect growth to be in the 5% range year-over-year. It's at the upper end of the prior guidance of 4.5% to 5%, and it's impacted by the additional incentive accruals and advertising expense mentioned earlier. Regarding net charge-offs, we expect full year 2026 to be in the range of 15 to 20 basis points of average loans, consistent with prior quarter guidance.

Our effective tax rate expectation for full year 2026 is in the range of 15.5% to 16%, consistent with the prior quarter. Regarding stock repurchases, I want to mention that during the third quarter, we utilized $15 million of our $300 million approved share repurchase plan to buy back approximately 93,000 shares, bringing total share repurchases for the year to $175 million and 1.26 million shares.

With that, I'll turn the call back over to Phil for questions.

Phillip Green

Thank you, Dan. Okay. We'll open the call up for questions now.

Operator

[Operator Instructions] Our first question is from Will Jones with KBW.

Question-and-Answer Session

William Jones

I wanted to start on loan growth. Obviously, a really good result this quarter. So could you just dissect for us just the breakdown between commercial and consumer growth and it doesn't really feel like Frost is having to contend with the same payoff headwinds that, that maybe others are. I guess maybe could -- is that a fair comment? Just commentary you could give us around growth you saw in the quarter, that would be great.

Phillip Green

Okay. Well, I think I'll talk about it in an overall way, just -- we just heard from all our relationship managers with the feedback they give us as we prepare for our Board meetings and to an extent this call. I've made numerous visits to branches by this time, I've visited most all of our markets. And what I'll tell you is I've been surprised by the durability of activity and loan growth throughout this year, even as rates have moved up.

Now as we talk to our people, they will tell you we're fighting headwinds -- that we're finding competitive headwinds, the really good customers. There's big-time competition against those and against those prospects. I think that we're seeing smaller banks be more aggressive on structure in many cases, things that you typically wouldn't do or see. But as they've told me, there's enough business out there that we're able to be successful enough to have these kinds of growth numbers.

We talked about the number of disruption relationships that we had when we say they're up 73%. That means they've gone from in round numbers. We had 150 new relationships last year. We're over 250 this year. So that helps some. And then on the consumer side, the mortgage product has been so successful and continues to become a recognized high-value product in the marketplace.

So, Will, honestly, it's very granular and it's just very normal. What we're seeing where our people are working hard. We've got a great brand. There's disruption in the marketplace. And 1 other thing I might say is that I have heard a few times that as rates began to move up, there was a bit of a fear of missing out and not wanting to see rates go higher and take advantage of the rate that you see in the market today. So I think there's been a bit of that also.

But I guess the final thing I'll say is we have instructed our people to be competitive, and we don't want to do anything stupid and there are structural things you don't want to do. But as we've said a number of times through these calls this year, we are a low-cost producer as it relates to funding and don't want to lose a great relationship, high character relationship, a great prospect that we've been after just for a few basis points. So we're willing to compete on price, and we've been doing that. So it's just a whole lot of things. It's not 1 thing, and it's been very successful probably right now.

Dan Geddes

Will, I'll kind of add just kind of what I'm seeing is it's broad-based. I think you'll look at our growth kind of on a linked quarter basis. And about 40% of it is what I'll call C&I related, both a C&I loan, but also with what we secure with real estate, we call the owner-occupied real estate loan. So that's about 40%. Another 40% is kind of the investor commercial real estate. And then really, the majority of the other 20% is what Phil mentioned is our consumer real estate, our 1- to 4-family mortgage product. And with -- I think Phil mentioned the 1,000 new commercial relationships, 40% -- around -- I think it's around 42% of our loan growth is attributed to new customers that we've brought on in the last year.

Phillip Green

Yes, Dan, I think that we had over 1,000 relationships for what, 6 quarters in...

Dan Geddes

Consecutive quarters. So -- and it's -- we -- as Phil mentioned, we've seen an uptick. Typically, we would get half of our new relationships from the 2 big to fail banks and then the other half from the other regional community banks that we compete with. Now that number is more like 40% from the too big to fail and then the making of that difference is around this 10% from what we call the market disruption banks. And so as he mentioned, what is up nearly 75% year-over-year. And so you've seen an uptick in new relationships, and it's really, I think, encouraging because that cohort it's heavily C&I related. When we look at what we're winning is what we would call kind of core C&I relationships in the communities that we're serving.

Phillip Green

And you might also mention, Dan, the percentage win rate business...

Dan Geddes

It's typically, when I go back, and this was reports I've looked at for 20-something years of my career, we would, for a prospect on a dollar basis, we would typically win around 1/3 of those opportunities on a dollar basis. On our -- we're currently hovering around 78% of, one, opportunities from the banks that are going through mergers and acquisitions. So it's been a really a highly effective campaign that in my previous experience being a banker out in the Houston market for 20 years, it has a long tail to it.

So it usually lasts at least 2-year period where I think if you are a business owner or if you're a consumer and your bank gets acquired, some people will leave immediately. Others will maybe hang around and see how the new organization runs and may grow frustrated within 6 months, a year or 2 years, it may coincide with the renewal of a credit if the credit culture has changed. So there's -- it's early on, but we're pleased with the results.

William Jones

Yes. Well, that's great. I wanted a great color from both of you guys. I appreciate that. And Dan, maybe 1 for you, just outlook for deposit costs. I recall last cycle, move up that Frost was an early mover on deposit costs, not a defense mechanism, but just because you thought it was the right thing to do for the customers that going to be the same playbook here to the extent we do get a few rate hikes. And if you could just help us out with the outlook for deposit cost and maybe what you expect betas to look like in this cycle?

Dan Geddes

Yes. We're -- right now, we're anticipating kind of, I would say on the -- I'll give you kind of what our expectation on loan and deposit beta is it would be around 80% for the loans. And then from an interest-bearing perspective, it -- we would expect that maybe a similar basis, but from an overall deposit perspective, it will be around 50%, 55% beta. So we should -- you should see us pick up margin if rates were to go up into 2027.

Operator

Our next question is from Jared Shaw with Barclays.

Jared David Shaw

I guess starting on the expense side. You highlighted the expectation for 4 more branches to bring to 12 this year. Is that still a good sort of annual expectation for you as you look at future branch expansion? And with that, can we still expect to see positive operating leverage?

Dan Geddes

So on the expansion, we -- I mentioned we expect to open 12 this year. Looking into '27, we have I think, 14 plants, so inflecting a little higher. And so I think that's -- I would say that 12 to 15 in the near term with I think the opportunity to continue to -- our branch expansion has just been very successful and I don't see us slowing down. In fact, I would I would tend to see over time us open up more than the 12 to 15.

And then on your second question, yes, we still have some -- our budget to complete for '27, but I would say in looking at just the guidance that I gave for '26, you're looking at for '26 is 50 to 75 basis point operating leverage. And for next year, we'll -- we would hope for positive operating leverage, maybe in that same area or range. But we still have some, as we've mentioned before, the wealth management is an area that we made some leadership changes in this year and late last year, and we've added some really strong leaders, but we'll need some strong producers or wealth advisers to add into '27 and '28. So I think that you'll see us invest in our wealth management business in '27.

Jared David Shaw

Okay. All right. And I guess on the fee income side, the guide for 4Q implies sort of a continued healthy growth. Should we think that, that could start to accelerate once you get traction with the planned wealth management hires?

Dan Geddes

Yes. And I'll point out that the fourth quarter is impacted by a put that we put in place for some treasury bill bonds that we're going to purchase in January. There are [ 250 million ] each for 3 year, 4-year and 5-year that we just -- we decided to exercise a foot and have about $5.5 million benefit to noninterest income in the fourth quarter. So that's going to help that fourth quarter growth number.

But going into -- I guess, going into your question on wealth management. I mean, I think for -- there's a lot of factors going into next year. I would say that it's just too early to tell. A lot of those -- there's some -- there's a ramp-up in the -- from the hiring to the adviser producing. So I would say that a typical ramp rate might be 12 to 18 months before that producer is really paying yourself back. So I think it will be a long-term investment.

Operator

Our next question is from Ebrahim Poonawala with Bank of America.

Ebrahim Poonawala

I guess just a question around I guess maybe I'm thinking about it the wrong way. When we think about -- or at least when I think about the branch expansion, I do believe as you get sort of customer primacy that should drive deposit growth and your noninterest-bearing deposit growth has been quite strong, including this quarter. Just talk to us as we look forward the next year or 2, is it your expectation that loan growth will exceed deposit growth? And is that a result of it's too competitive? And given the makeup of your balance sheet, you don't need to be super aggressive to chase rate-sensitive deposits?

Dan Geddes

So I think that right now, it's with the interest rate environment, there still is an opportunity for both individuals and corporate controllers to go seek yield. And so deposit growth has been just for the industry, below loan growth. And so we're certainly, I think, hitting above our weight in both categories. But I would say for the near term, you're probably right in that loan growth, we have the ability to go acquire relationships with that loan growth. And so it's a very -- we're not doing -- we're not going out there growing our loan book just to grow it. I mean they're -- I mentioned kind of that owner occupied category. Those loans are specifically designed as relationship loans. They're not a transactional real estate loans.

So I think over time, I think we've shown the ability to grow deposits in different -- in a lower interest rate environment at a higher rate. So I think that's the backdrop, Ebrahim, is just the interest rate environment that would hinder deposit growth.

Ebrahim Poonawala

Got it. And just wanted to follow up. I think if I heard it correctly, Phil, in your prepared remarks about half the mortgage customers new to the Frost. And I believe I think you said 1/3 of those added second product -- almost half. So that was -- I guess my question was, historically, we viewed the mortgage product as commoditized, rate sensitive, gets -- moved to the securitized market. Are you seeing this base last year as the mortgage product reliably becoming something that becomes a relatively sticky client acquisition tool? It sounds like it's happening at least with half the customers.

Phillip Green

It is. And I said almost half. It's really almost 40%, but still a really good number as far as the secondary products they're bringing on. Ebrahim, you're right, that is how we're seeing it. Because they have talked about this before, but we had a rule around here when we started offering this product that nobody could say that we were going in the mortgage business. In fact, if you did, you had to pay $5 to whoever. It costs me $60 in 1 meeting, I screwed up and said it.

But the -- but what we wanted is to offer a mortgage product, okay, because we have 4 of the 5 consumer real estate products. And -- but we didn't have mortgage, we were getting a call to have it. And we just wanted a high-service product that we service that we would integrate with our overall customer service processes including on your mobile app, it's all there, very integrated and elegant way, a great customer experience as you go through it. And in fact, someone told me last week, I won't name the bank, but it was too big to fail and that they had gone through the mortgage process in our Austin market that it pains me to say this, but I had a fantastic experience.

So it's all about providing a product that really expands our relationship. And we're servicing them. And so we have a lot of flexibility in terms of how we price them and other things.

I would say another thing that drove us this way is we're creating this amazing distribution network around this state of Texas, which is a tremendously powerful economic environment. And it's a natural to have that product to push through that distribution system. So all those things work together. And one other thing I'll say Ebrahim. And it's a different way of doing it, but we don't have any sales people or any commission sales tool on the Street. We just have advisers that help people get into houses right and get to the loan process.

And all those things like that, the commission part of the business and the selling of the assets and all that was a part of the business that we were in before. And we're not doing that today. We're really offering a high-quality service product that people are really enjoying and we're being really successful in doing it. So that's the way we're thinking about it. I hope I captured your question within that.

Ebrahim Poonawala

No, that's helpful. And if I may sneak in just a follow-up to Dan's response earlier about maybe you could do more than 12 to 15 branches per year. What's the constraint there? Like there's a Midwest bank expanding into Texas 150 branches over the next 3 years? I'm assuming you mastered the art of opening a branch and the science behind it. Like is the constrained capital expenses or finding the right bankers where, like for why that 12% to 15% could not be 2x?

Phillip Green

It's all those things. I think that we have -- if we wanted to, we could expand that 15%. We have in a sense of warehouse, some of our future locations because we knew others were going to be coming into these markets, and I didn't want to be behind the curve like we were, 20 years ago [indiscernible] tried to build an organic network in Texas before they failed. And they bought up all the great sites, and it was impossible to get a site if you wanted a bank side.

So we, couple of years ago, began putting together sites and communities that weren't quite ready for it, but we thought would be ready for in a couple of years. So I feel confident about our warehouse, if you will. But it's really important to have the right people. And because it's not just a great location and a great facility we could put up 100 branches, and it wouldn't do anything. You've got to have the right person leading and you've got to have the right processes that integrate with your other lines of business and a coordinated approach to developing a trade area, which is what these branches are built to do. And that takes time. Could we scale it? Yes. But I don't -- I'm not confident we would do it quite as well as we're doing right now.

And will we be doing more than 15% at some point of course, we will, because the math of it is that to get consistent percentage on your base that's growing, you have to grow. But right now, I think giving you guys an indication of 15 or so, 12 to 15 or so a year, I think that's a good indication. And -- and we'll let you know if we decide, and you'll see it if we decide to ramp it up.

Dan Geddes

And the only other thing I'll add is that when we started -- I was updating the management team in Houston. And then we moved into Dallas and so the Dallas and then Houston and then we moved into Austin. And now we really have this going statewide where we are updating the management team from each of our major regions. And so that -- I think our reach now is not just 1 region or 2 regions, it's really looking for the best people statewide.

Operator

Our next question is from Peter Winter with D.A. Davidson.

Peter Winter

I wanted to talk on expenses first. Just based on the updated guidance, the expense growth is 5% this year versus around 10% the prior 2 years. So, do you think mid-single digit is the good level of expense growth for next year? And then secondly, do you see opportunities maybe to leverage AI to increase productivity and efficiency and maybe self-fund some of these investments to help with the expense growth rate?

Dan Geddes

Peter, the mid-single digits. I think next year, -- as I mentioned, we're going to have some investments in wealth management. So I would anticipate it being a little higher than just right in the middle, but not get back up to the high single digits. It's just my expectations without having gone through the entire budgeting process. But I do know that we'll be investing there.

And to your question on AI, I think at some point, we will get to realize self-funding AI projects. I wouldn't say that we're there yet, but I would hope in the near future that that's the case to where you can get efficiencies and see us through your expense growth.

Peter Winter

Got it. And then just on credit, Nice to see the decline in nonperforming assets from the resolution of that multifamily loan. Are there any portfolios that you're watching more closely, especially as rates are moving higher?

Phillip Green

Peter, I think they relate sales to commercial real estate. And as we've said before, there are still a few of these older vintage multifamily projects. I think we probably have 4 of them, but they have different maturity dates. I think 1 of them is this year. I think 1 of them this year, then 2 in '27 and 1 in '28. And they're the same song that we've been seeing for the last 2 years. I think rents are less are the lease-up or concessions, expenses higher, and what you really have to rely on is the performance of the sponsor as they either raise the equity needed to rightsize it or they go about the process to sell the property, maybe they find bridge financing.

And all those, I think, are -- or the other thing is that the market improves to the extent that they're able to meet their necessary debt coverage ratios and those things. So that's the thing that's happening with all those projects to various degrees. And I don't have any concern about any of them. I think that the sponsors are good. And I really think the underwriting that we've done sort of speaks for itself, because if you take a look at that property that was sold in basically the -- they sold it for [indiscernible]. And we underwrote it at, I don't know, somewhere between 55% to 60%. And so to me, that shows that our underwriting standards that we utilized at the time were adequate to need a really unfavorable situation.

And that's one of the things that gives me confidence as we look at the remaining deals. But interest rates impact things, and so we'll continue to look at those as we move forward. But that would be the one that I think we look most closely at.

Dan Geddes

And Peter, I think anything interest [indiscernible] homebuilders are feeling the margin pressure if they're offering interest rate incentives for people to buy their homes. We -- and so I think home building, I think we have about $290 million in that category to loans to homebuilders. So it's not a huge part of our portfolio, but we're watching that. They're -- the consumer has held up really well. I think our charge-offs were like 25 basis points on the consumer side and I think our past dues were under 1%, which -- that's a good signal for the health of the consumer and what we see.

Operator

Our next question is from Ryan Kenny with Morgan Stanley.

Ryan Kenny

So I have 1 on the noninterest-bearing deposit growth. I'm guessing part of that comes from the treasury management investments you've been making consistently over the years and ability to win commercial operating accounts. Is that part of what's driving the growth? Or is it more on the consumer side?

Dan Geddes

So it's -- right now, we're seeing it in what we call DDA, which is what you just mentioned kind of the commercial side, where, yes, I think our investment in our treasury platform and the customer service that the -- that our clients receive from our bankers and their teams I think, is really what sets us apart, our ability. That's -- a lot of times, it's the ease of doing business. And that's an area that we get rated really high in terms of when we're evaluated by Greenwich and Associates.

And so we have -- we have the sales force in terms of the people and it's paired with really great technology and, I would say, kind of our the back of the house customer service, when somebody needs help 24/7, they can pick up the phone and get the hold of a person. So I think that all those things play into our ability to grow those core DDA accounts. I think it goes back to our branch expansion that we're going into communities and targeting both consumers and the commercial businesses in the markets that we're entering.

And so it's we don't -- they're not just -- we don't put a branch up just anticipating retail balances and offering either really out of market CDs or any sort of teaser to come over. It's -- we offer a square deal. We offer incredible customer service paired with world-class technology.

Ryan Kenny

And is your sense that the competition in treasury management is getting 1 time as new entrants enter Texas and as the technology landscape evolves? And are there any numbers you could share on the percentage of commercial clients that have treasury management relationship with you? .

Dan Geddes

I don't have that at my hand, but we can certainly -- we can get that to you. But what I would tell you on just the competition is, I don't think it's -- I don't think it's any different than what we faced before. I think it's -- it's certainly competitive out there, but a lot of times for the commercial, it's part of a whole package. So it's not just, hey, I have the best either technology or here's something that you might find useful in your business. It's part of a whole relationship. So it could be paired with a line of credit, it could be paired with an equipment loan. It could be -- so it's not just in and of itself. It's part of who are you going to be dealing with. And I think that's where we really shine is our people out of the marketplace.

Operator

Our next question is from Janet Lee with TD Cowen.

Sun Young Lee

I just want to make sure that I'm understanding your NII guide for 2026 correctly, if we assume kind of like the midpoint of your average loans, deposit at NIM. When we layer in like the loan, you're talking loan beta at the 80% and deposit beta in the 50% to 55%. It's -- it's hard to not be above your 5% to 5.5% NII growth for 2026. So I'm just wondering if there was any front-loaded benefit from loan yields in the third quarter? Or if there is anything that is missing?

Dan Geddes

I don't have anything that I would say that we're necessarily holding back. Our 1 cut -- 1 hike, I'm sorry, was -- is projected in December. And so it doesn't have much of a benefit in 2026. It would really be more of a 2027 benefit. So I think it's -- it will be determined by volumes. And so if we're able to achieve either higher loan volumes, what we're -- so I just -- I think that if we're able to achieve higher volumes and higher yielding assets, then maybe there's some upside there.

Phillip Green

A little inside baseball here, I'm stepping on a little edge. But with that credit that paid off, sometimes there's crude interest...

Dan Geddes

That was in the third quarter, which benefited. So we had a nonaccrual loan that was paid off and we did get -- and I want to say that was something like it was about a $3 million benefit to the third quarter, which helped the NIM in the third quarter.

Sun Young Lee

Okay. Got it. And kind of circling back on your interest-bearing deposit beta open, I believe the increase in interest-bearing deposit cost in the third quarter reflected the pricing actions you took on a good portion of your money market balances in June. So you're effectively getting ahead of the September hike. Is -- are there similar actions that are on the plate? Or are they -- how should we think about like the magnitude of the pricing increase on your deposits?

Dan Geddes

So I guess I'll kind of mention that we mentioned last quarter that we were increasing our money market rates in these consumer fees under $1 million and over $250 million. And for the -- and I'll just kind of tell you kind of how that's been playing out so far is we have seen that -- those tiers decline in balances in the second quarter around 3% in those tiers on the consumer side. And we were able to actually see a slight increase I want to say, around 1%. But more importantly, we kind of stem the tide of seeing balances go out of those. And so the idea around that strategy was to capture more of the wallet share of this consumer that we're picking up that was much younger. It was the Gen Y and Gen Z customer that we mentioned.

And so we have -- I think we've been pleased with that -- with that program. So I mean, I think when I look kind of out into the fourth quarter, and I just kind of try to kind of see, okay, what is the -- what is -- what are we looking at in terms of just our cost on interest-bearing deposits going out into the fourth quarter with those changes, I think we're looking at -- with that interest rate hike in December, we see -- right now, we're looking at -- gosh, I would say deposit cost, total interest-bearing growing around 10 basis points [indiscernible]. So it will be -- there will be an impact to -- in the interest-bearing side. I'm sorry [indiscernible] to like around $187, so around 12 to 15 basis points.

Sun Young Lee

Right. Do you have a spot NIM?

Dan Geddes

Let me get back to you with that. And I did want to answer that one question. I think right now that you -- someone had asked on commercial customers on treasury and approximately 7% of our commercial customers are on our treasury platform.

Operator

Our next question is from John Pancari with Evercore ISI.

Unknown Analyst

This is [indiscernible] on for John. Just one on the buyback. So on the buybacks, slowed down this quarter from recent quarters. How much of this was determined by the securities repositioning you had in the quarter versus the higher rate backdrop more broadly or even where the stock was trading in the quarter? And then looking ahead, how is your outlook compared to that $70 million to $90 million quarterly cadence that you had over the past year or so?

Dan Geddes

Gerard, so it was more to do with -- we discussed kind of having a consistent buyback approach. And so there's a component of us just being in the market. And then I would say the delta between what we had done in the previous quarters to the $15 million that we did in the third quarter was really just the market. We are just looking at how our stock was trading and relative to the index. And then also just wanting to hold back some powder in case of some macro event that we could utilize the balance.

Unknown Analyst

Got it. So in terms of forward implications, really anything to think about outside of where the stock is trading like you mentioned?

Dan Geddes

I'm sorry, repeat that?

Unknown Analyst

Just on the forward implications and just getting back to maybe that more typical cadence that you talked about, the more consistent cadence.

Dan Geddes

Yes. Again, I think that we'll -- we'll kind of have that kind of 3-pronged approach is be consistent with a component, have another that we kind of feel like we can use strategically during the quarter. And then, again, if you want to think about 1/3, 1/3 and 1/3, but a third that we would just kind of pull back for some level. So -- but we feel good if we end up the year in the $190 million to $200 million, I think we'd be happy with that.

Unknown Analyst

Okay. Then just 1 quick 1 on expenses. Given the continued branch openings, investment in wealth, if the revenue growth slows down a bit, do you think you have the levers to still achieve the positive operating leverage in '27?

Dan Geddes

Yes. Just -- I mean, I think there's an opportunity. We'll have to make sure that we're -- we've really looked at the investments we want to make from a technology standpoint from -- we've talked about the branch expansion and then the wealth management. So we're -- but I do think that given -- depending on how many rate hikes we see in the forward curve, I think there's an opportunity to have a similar positive operating leverage that we're anticipating for '26.

Operator

Our next question is from Casey Haire with Autonomous Research.

Casey Haire

So I wanted to circle back on the beta guidance of 50 to 55. Is that -- that's a little bit higher than what we saw from you last cycle. Does that still hold the each 25 bp hike is good for $2 million of NII a month? Or is that higher beta knock that down a little bit?

Dan Geddes

It's a little bit below that. We're looking at around $1.5 million to $1.7 million.

Casey Haire

Okay. All right. And then just going back to the loan to deposit ratio question, I have 55 today. Is there like a ceiling where you would not -- I mean, you guys have a lot of runway to move that higher. I'm just wondering, is there a level where you would not want to see that go to or exceed?

Phillip Green

I think we're way off of where we were at a previous high, and that was -- that was, I think, right around the great financial crisis or so. I think we may have gotten to 80% for 1 month. And that's still way below peer. But that's an area that begins to impact your thinking in terms of funding acquisition what you're willing to do to support continued growth there. And so I think that the answer is I don't think we have a specific number, but directionally, what we want to have over time is a consistency in the level of loan growth we're generating compared to the level of deposit growth that we're generating. I mean, on a long-term basis, we think that somewhere in mid- to high single digits for both of those would be optimal over the really long period of time.

And so that would be what I would -- I would hope to achieve. I love operating with a lower loan-to-deposit ratio because it gives you optionality in terms of what you do with your balance sheet. And the real benefit and value of any banking organization is in the deposit franchise. It's really not in the asset franchise. And just something that comes to mind is that I looked back historically, I think the latest I could get to was 90 years ago or so. And if you look at the compound annual growth rate of our company over that 90-year period in terms of absolute size, which would imply the deposit growth, it was like 8.85% over that 90-year period.

So I think over the long term, we've demonstrated the ability to have a balance between deposits and loans, and I hope over the long term going forward, we'd see that same thing.

Casey Haire

Got you. Okay. Just 1 last one. The bond book restructure, was that late in the quarter? And just any help you could give us with where the bond book yield will be in the fourth quarter, just given all the -- it sounds like there were very low yielding securities that you sold?

Dan Geddes

Yes. I mean I think that it was at the end of the third quarter where we made those sales with the loss. And your second question was just kind of looking at where we think our bond portfolio will be in the fourth quarter. I would say, overall, you're going to look at around $415 million, $420 million in that ballpark [indiscernible].

Operator

Our next question is from Michael Rose with Raymond James.

Michael Rose

Maybe just going back to Ebrahim's questions on the branch expansion. Phil, I think you said nearly half of the incremental loan and deposit growth is coming from those branches. From when you started this 10 or so years ago, these expansions, has the opportunity and the size of these branches, the profitability of these branches, has it evolved over time? I think you probably learned a bunch from what you did in the early days in Dallas and Houston 1.0. But it seems like it's -- it continues to be a really good opportunity for you guys to drive growth and ultimately profitability. If you can just talk about kind of the evolution of the branch expansion over the year, breakeven deposit size? Any sort of details because it seems like it's pretty compelling at this point, particularly given some of the dislocation that we're seeing across the Texas markets with M&A.

Dan Geddes

This is Dan. I'll jump in and then let Phil fill any gaps that I leave. But when we started the Houston expansion, it was -- it was really a commercial centric in terms of the loan side and then kind of a 50-50 deposit opportunity and -- and so we executed that and it was really successful. And as we entered into the Dallas expansion and we saw that we were really growing consumer loans in Dallas faster than we're growing commercial loans. And so it really gave us this opportunity to kind of take a step back and say that this could be not our kind of Frost typical, let's find a high commercial small business market, but we could go into some consumer markets. We actually have 1 in the San Antonio area that just knocked it out of the park, and it was all a rooftop play. I mean there was there is -- it's a -- it does really get on the commercial side, but the consumer side has just done really, really well.

And so it gave us this kind of realization that it doesn't have to be 1 or the other, it can be all of it. And so we went back in and we did a 2.0 in Houston. And then it really kind of what set us up for the Austin market because you think about the Austin dynamics, and it's going to be a little more consumer centric. And so with our, I think, 17 years now of J.D. Power awards on the consumer banking side that we can grow this into a great consumer experience and grow our consumer deposits with our new -- make sure I don't have my $5 bill, and I say the right, our mortgage product, not getting into the mortgage business, that with our mortgage product, it really -- you've seen -- you've seen that be a factor now with the loan growth we've had in the mortgage business.

So I think they're all complementary and I was looking at some economic data that from an economist that looked at growth in Texas and the growth in Texas and population is going to be around 2.5x the growth rate of the United States. And we'll -- about 1 in every 4 kind of population growth will be in Texas over the next 5 years. And so we have customers coming to us from other states. And so this is a great opportunity for us to go into, I would greener markets than maybe we would have gone into at Houston 1.0 because of the confidence that we have on the consumer side.

So we've -- I think you've seen our ability. We think we do it better than anyone in the country. We think the results show it in terms of our ability to grow deposits, especially in these markets that we're entering.

Phillip Green

Yes. Dan, I think you've done a great job of explaining that evolution and -- just to give you some insight into our overall thinking as we look forward, I mean, today, we're about, I don't know, a $55 billion or so company. Our deposit base is roughly half consumer and half commercial. And as we make our way towards a $100 billion organization, and that will take some time, but we'll get there. I'm very confident that we're going to continue with that same relative mix. So what that means is -- as you look at Cullen/Frost as a $100 billion Texas organization, with that same mix, we're going to be a $50 billion consumer bank in the state of Texas. But I don't know a $50 billion consumer bank in the state of Texas right now. I mean, maybe part of the too big [indiscernible] has got that. But that's a really big consumer bank.

And so it made sense to me that we're evolving into a company that has this developing expertise in tapping these consumer markets because that's who we're going to have to be as we continue to grow and as our size gets to be at that level. And so I'm really encouraged by the fact that we have the jobs to compete in the consumer markets. And it's not just being able to compete on physical distribution, although that is very important. You've got to have the technological jobs to meet the consumer -- customers' needs today. And if you look at the J.D. Power reports that Dan referred to, at least the last 1 that I looked at and for the several that I've looked at, we have the #1 ranking in digital satisfaction. So we spend a lot of money to keep it there. That's 1 of the reasons why our expense growth is high, along with the other things that we invest in to make sure our service levels are high.

But this ability to compete on the consumer side, in addition to what we've always done in the middle market commercial, I think, is very -- it's a big positive. And it's just another reason why this mortgage product is an example of leveraging that franchise and being successful. I mean we raised $1 billion in great assets since we put this product in place, and they're great relationships in addition to that. So I'm just so confident of our ability to develop this Texas market.

I really hope that you all are sensing that is we -- these are not just numbers of these growth rates that are really good. I mean, I've been in this business a long time. I know a good growth rate when I see one. And it's more than just numbers on a page. We're just being successful day-to-day, relationship to relationship and the value proposition is working, and we're in the best markets you could ever conceive being. So I'm very encouraged with what we've got going on here.

Dan Geddes

Just one other thing to add is that when we look at our branch share to market share, when you look at some of the markets that we've been in for really a long time, San Antonio, Austin, even Fort Worth, our deposit share exceeds our branch share. So for instance, San Antonio, our headquarters, we have about a 10% branch share, but a 27% market share. And Austin, it's around 6% branch share and around 7.5% deposit share. Fort Worth, 6% branch share and almost 11% market share. Well, where we started in Houston back in 2018, we are at 2.6% branch share and only a 1.8% market share. Now we've increased our branch share in Houston to almost 5% and our deposit share to 2.3%. So we've grown at 50 basis points.

But it has a lot of room to run. I mean in order to even get at par with our branch share. In a similar trait in Dallas, where back in 2019, it was a little under 1.5% branch share and a little under 1% market share. Well, now we're up to almost 4% branch share and the deposit share has grown 20 basis points, 1.1%, but you see the opportunities in both of those markets for us to continue to invest and to continue to gain market share.

Michael Rose

Very detailed response. I appreciate all the thoughts there. It's very helpful. Maybe just 1 quick follow-up for you, Dan. I think last quarter, you maybe discussed adding some forward starting swaps. Any changes or any updated thoughts there?

Dan Geddes

We haven't added any more than what we already have put on. I think that we generally -- I think we got about a 200 basis point spread over what we are paying fixed on that one. And we're -- it's not quite as -- I think it's a little bit under maybe 30, 40 basis points below that right now. So I think we'll likely put 1 another on our plan is to kind of put 1 on about every year and have them be the 1 we put on is a 2-year forward starting swap. And if we put another 1 on next year and then another one. And over about 4, 5 years, we should have between $2.5 billion to $3 billion built up, but we'll certainly evaluate opportunities as they come, but that's -- but that's kind of the thought process.

As we start getting closer to $100 billion or whatever the -- if they raise that limit. We'll look to lower that duration of our bond portfolio over time, and that can be an effective tool to do that.

Operator

Our next question is from David Chiaverini with Jefferies.

David Chiaverini

On the net interest margin, very nice expansion over the last several quarters to 3.78. With mix shift driving the expansion does the tailwind of mix shift have legs looking out over multiple quarters?

Dan Geddes

I would say, yes, with depending on the shape of the yield curve, right, if it's positively sloping. We have, I think, a -- I think we still have several years where we'll be repricing either fixed rate loans or our investment portfolio into higher-yielding assets. Just to give a sense, and I've given these numbers before, so I can kind of just help a little bit with kind of where -- where we see that opportunity on our fixed side. We have in the fourth quarter just around $275 million in fixed rate loans that are rolling off at [indiscernible] 5 and that we could likely get around [ 7.25% ]. So there's a pretty good pickup there.

Next year, we have a little over $1 billion in fixed rate loans anticipated to run off, and those come around like they have a runoff yield around $570, and we likely are modeling a similar 7.25% rate. So there's an opportunity there. And then just on our securities portfolio, for the fourth quarter, we're looking at around $800 million at around 4% to 4.1% that will either mature or prepay. And then in '27, it's around 2 -- around $1.9 billion and around about a 4.5% interest rate.

David Chiaverini

Very helpful. And then you mentioned earlier about how market disruption has been a source of new relationships up like 73% year-over-year. Are you able to size how much of your loan pipeline of $2.5 billion is from disruption in the market versus grassroots loan demand?

Dan Geddes

Let me see if I can find that. Well, let me see if I can get that for you. What I can tell you is what we've -- what we've created is I would say in the -- this is for the year-to-date, we've created about $250 million in opportunities. So it's not a, I would say, a huge component of our overall opportunities that we create. It's probably in that same, I would say, if it's representing 10% of our new relationships, it's probably 10% of our prospect opportunities. And so it's relatively -- it's a lot more than it was. And so I think that, that's -- that's probably the best way I would describe it is that we're seeing it increase probably twice as much as what we were doing last year just because of the raw numbers, and we're winning 80% of them.

Operator

Our final question is from Jon Arfstrom with RBC Capital Markets.

Jon Arfstrom

Phil, 1 comment on the pipeline. You made a comment earlier that the weighted 90-day pipeline was up, I think, 15% or 16% sequentially from the prior quarter. What -- that's a big number. And I think I asked this a couple of quarters ago, but that's another big number. What would you attribute that to?

Phillip Green

A lot of things and it's fairly broad based. I will say I'm aware of some large commercial real estate opportunities that are included in there, but I wouldn't say it was all commercial real estate. Dan, you've got some numbers there that give some insight into it.

Dan Geddes

Yes. And so just our...

Phillip Green

Growth in our weighted pipeline.

Dan Geddes

Yes. I mean it's substantially above kind of where it's been this time last year, it was $1.8 billion, $1.85 billion. And what's -- what's encouraging is it's about 2/3 weighted towards customer and 1/3 weighted towards prospects. And Jon, what I kind of mentioned is typically, if it's a customer we -- on a weighted -- on a kind of a dollar basis, we usually close about 2/3 of those just over a long period of history and then prospects about 1/3. And so it tells me a couple of things.

It tells me that our customers are, despite all the uncertainty out there that they're active and they're still looking to grow and they still see opportunity in this environment. So you've seen that. It's a pretty good split. You have about -- you had a little bit of an increase in C&I. Again, there was a bigger growth in the CRE growth. And I would say that, that's more of our customers of CRE. And so that, to me, means that these are relationships that we have over years, and it's not us going in stretching on structure. It's our customer base that's active and they're looking for us to be their financial resource.

Phillip Green

I think one thing also that is great about that weighted pipeline is we've looked at the correlation between fundings and that pipeline, it's actually pretty strong. So we've had the process for a number of years, and it's really a part of our sales effort on the commercial side. So when I see that number being up at that level, it really gives me some confidence.

Dan Geddes

And just looking at which regions it's basically led by the -- what you'd expect that Dallas was actually up the most and then Houston, San Antonio and then Austin. So kind of our 4 of our core markets are driving a lot of the expectation for closings in the fourth quarter and the start '27.

Phillip Green

Yes. What that really means, and Dan did a good job of outlining. It's nothing unusual. There's nothing weird driving this activity or the success. It's pretty much basic boots on the ground really.

Jon Arfstrom

Okay. That's good. Just a small question. Phil, my earnings model goes back 25 years, not 90 years. But in all those earnings calls, I don't think I've ever heard the term motor bank. Dan, can you just touch on the branch sale, what that was all about. So we can understand it. It was just some kind of random.

Dan Geddes

Well, we -- this was price stems from some property that we -- when we acquired a bank and you still have the...

Phillip Green

Jon, it's -- it's -- maybe it's you call it a drive-through lanes or stand-alone drive-through. It's not a bank on wheels [indiscernible] kiosk, can they take care of your business...

Dan Geddes

Bank drive-through if you're...

Jon Arfstrom

So that's just a couple of branches that don't fit, that's simple as that.

Phillip Green

And I can't believe you haven't heard motor bank and that's maybe not just a Texan thing. Motor bank, that's what it is.

Operator

There are no further questions at this time. I would like to turn the floor back over to Phil for closing remarks.

Phillip Green

All right. Thanks, everyone. Great questions. Great interest that you show and we appreciate it. We'll be adjourned. Thank you.

Operator

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.