Cullen/Frost updates non-owner-occupied commercial real estate loan models

In a regulatory filing, Cullen/Frost Bankers said that, in Q1, it updated its non-owner-occupied commercial real estate loan models as well as its consumer and other loan models. “Our prior non-owner-occupied commercial real estate loan models were legacy models developed for stress-testing purposes by a third-party using external market data,” the company said in the filing. “The updated non-owner-occupied commercial real estate loan models are now based on internal historical loan data and risk grade information and the modeling processes are now consistent with those used with our other commercial loan models. Our prior consumer and other loan models relied upon certain components that did not use loan level attributes and were less sensitive to macroeconomic variables. The updated consumer and other loan models are now based on internal historical loan data and utilize more loan-level attributes and the modeling processes are now consistent with those used with our consumer real estate loan models. The overall approximate impact of the model updates during the first quarter was a $7.2 million increase ($6.2 million related to non-owner-occupied commercial real estate loans and $923 thousand related to consumer and other loans) in modeled expected credit losses on loans; however, the impact of this increase was largely offset by reductions in qualitative adjustments as some of the risks to which those qualitative adjustments related are now considered and incorporated in the updated models.”