Cullen/Frost Bankers (CFR) 25 Apr 242024 Q1 Earnings call transcript

Greetings. Welcome to Cullen/Frost Bankers Inc.

First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to A.B. and Investor President Vice Senior Director Relations. of Mendez, you. Thank

You may begin.

Vice afternoon's Thanks, and be Executive conference led This Jerry and by Group CEO; will and call Jerry. CFO. Chairman Phil Salinas, President Green,

turn to a provisions. need I Jerry, safe address take the Phil moment to Before and over I the to harbor call

the of the will amended. Securities Reform Litigation today Private XXXX statements as forward-looking Some constitute made Act remarks in as of defined

forward-looking available about associated statements intend I'll as by If these or safe Phil. for for We a last statements department on harbor calling the the Litigation in Securities release covered to statements. amended. text information Investor is call XXX the morning's this forward-looking time, the XXXX our with this factors in the XXX-XXXX. by contained Reform such be At Relations website see copy page of Private risk of additional to earnings needed, the provisions over Act at turn release of the Please

share earned or up $XXX of earnings last In reported quarter for it Cullen/Frost provide good quarter, review results year. a quarter the Thanks, $X.XX in per to A.B., Financial share first your million first compared $X.XX million the questions. we everyone. Cullen/Frost for I'll with Today, joining our or before open comments $XXX Jerry afternoon, Salinas, us. additional Officer, Chief the will and and Thanks same

with million in bank by happened were $X.XX quarter failures first FDIC surcharge associated XXXX. of affected results additional the early or The insurance accrual a share an $X.X that

and for same of first common average X.XX% period last average X.XX% XX.XX% Our equity the assets and with return and respectively, XX.XX%, compared the quarter that year. in on

bankers. organic demonstrate the the work from our growth of first our earnings Solid the and hard strategy of success quarter

with long-term providing results to core our and values allow service strength combined stability, world-class growth. which in corporate strong continue sustained culture Our and to our us customers

strong. participate percentages. Bank Also, any government in deposit as deposit cross levels build liquidity on Loan or remain special quarters broker sheet any going take our and consistently not or advances, previous case in to uninsured was access deposits arrangements Home utilizing reciprocal balance Our liquidity borrowing facility the Federal any

representing the our year-end And quarter the and XX% $XX.X first available-for-sale last a million year in portfolio quarter Average ago. than were the down first the in of grew loans billion more quarter at quarter deposits year. of end. -- compared X.X% $XX.X in securities, additionally, quarter with at $XX.X first billion, the our Average from in billion XX.X% $XX.X

results We program. our continue see growth to excellent in organic

For XXX% deposit example, we our combined our stand loan XXX% they Houston expansion, of goal of XXX% and goal. locations household and new the goal, at

of For household our market XXX% the goal, XXX% XXX% expansion, at goal. Dallas deposit and new gold of we loan of stand

on first opened quarter the after location Just new the XX-site close, Austin second our expansion project. we

open remember I households. when XX,XXX with our this company Our next billion was the acquisition history the first over after in that of had a At generated efforts billion And $X.X new Austin region it Day. quarter, billion to me location in our in Memorial just expansion new end will deposits, put added helps loans $X and deposits. overall in largest perspective, in the the $X.X

top to from Our growing growth an new net the growth, in net had accounts we annual among X,XXX quarter, the consumer continues of country. build checking there we which continues X.X%, to to business momentum the put and household added banks the rate banking households we XXXXs new us and believe record for

with basis which average and coming of hit prospects new about our quarter. excited consumer annualized product, we XXX about in $X saw a steady And Average growth an in outstanding. milestone the the loans billion in the mortgage XX% on first remain loans for quarter, half balances increasing a first is linked-quarter approaching

Looking loan XX.X% XX.X% and CRE. balances average for linked-quarter an annualized commercial at basis, C&I a increase increased our On business.

the new of Our quarter XX% in level booked booked the XXXX. in commitments were the first less first quarter than

commercial represented XX% relationships the XXX our highest year-over-year relationships of calling at with activity first ever achieving quarter up level were new highest coincided us level for and ever. Our quarter. first our in This

New only failure. SBD's loan in last our pipeline XX% second the spike year-over-year were opportunities after were and up to year's

first from big quarter Our fourth weighted billion, by XX.X% from banks. from of come up at those the by And continue relationships about $X.XX I stood those quarter first and XXX in regarding X the failed the half new to last XX% average pipeline year. that mentioned, quarter the

new at use good to point deals as levels. continue first at an were lost healthy and debt out nonaccrual We that XX% lost XX% And deals those and and our opportunities. to the is by our discretion in I'd by look loans loan as of quality quarter, charge-offs new due up net standards year-over-year structure. we with Credit were example, historical

totaled figure period a first last XX loans $XX basis quarter normalization come risk ago. end some million And of quarter as compared points quarter off XX in represented seeing $X.X of points pandemic. Annualized quarter were loans. million quarter million $X.X looking for $XX immediately the the of total credit to of And ago. at some quarter Nonperforming represents experienced in points at details. first and net the following year XX the million a the $XX.X we problems compared and lows $XX million to assets. the and a charge-offs the We're last year charge-offs basis The end first historic years the ratings. period assets and for of end basis in Net million

loans with the the totaled quarter. loans C&I risk quarter year. the remainder we company's which $XXX at the loans, was first same at XX CRE time $XXX define million few last larger relatively was between or credits the $XXX or credits, being grade million are quarter increase overall our split X/X Problem mainly XX% real estate. growth Less of grade end and problem from and to grade OAEM risk for. end some a OAEM, fourth that's various to of the of XX And was in commercial and investor a up loans as and And we types. quick than which expect of XX the categories attributable of classified million the specific risk this tied due fairly at of resolution evenly to first

in the related About most C&I C&I closely XX% balance with are are related which real estate, credits to to loans. of owner-occupied

estate Regarding we the consider our of totaled major to industrial, outstanding. categories loan CRE example, for be coverage stable portfolio, overall with remains across and ratios debt Within retail this XX% total investor operating to of office, what multifamily, acceptable $X and billion performance or portfolio service commercial steady types loans all asset CRE, real about lending, and values.

XX% CRE and held loan has about underwriting average investor of debt overall ratio to with average Our service well the up average portfolio an $X.XX. coverage of value exhibiting weighted metrics performance quarter-over-quarter and stable about

had consecutive $XXX investor coverage has a that quarter. of balance and of average of The end, the at which slightly second portfolio X.XX, improved service occupancy the loan-to-value ratio an specifically quarter office for average XX% exhibited million levels healthy debt portfolio, and and

be based had last just Bank conference the In that and Frost sponsors emphasize to experiences. level comfort continues office and on Class the we I the and of marketing building refresh nature our predominantly call, mentioned portfolio our office our great A introduced our Our borrowers with to charter designed new experience campaign of the projects. customer brand

you satisfaction the for can other We our Award nationwide saw expect realized the level examples extraordinary eighth things. for satisfaction But the those service about proof and No say ever deliver Excellence now and highest Texas we you the when unexpected. campaign when bank in bank Frost. hope first what Power's year points study in and highest about talk the of unprecedented we J.D. mean to consecutive the what it, quarter exactly think on the year. customers are it's the what I a ranking the That's retail new why Greenwich description, the banking customer basis, have of in XXth when scores of is with in from customer daily These that Frost will. we service for achieved achievements. banking consecutive that come And

And experience, none our our I'm of employees of of everything proud culture the that all optimistic accomplishing possible teams possible is commitment across make to and their Frost their our our dedication Texas, without communities. are of our all and this success as across

the turn call for to I'll now Jerry And some Officer, Chief comments. Financial additional Salinas, over our

Thank you, Phil.

results. additional on color start overall expansion giving our Let off some me by

As Phil to able achieve. the be we mentioned, very volumes with we've pleased been continue to

the first X% first costs was Looking when efforts expansion growth profitability at in deposits of both the quarter, with and and the quarter. compared average Austin. And additional loans the Houston the in offset Dallas approximately to expansion the the associated previous quarter, for

net our margin. interest to moving Now

from Our last for net points quarter the first percentage the basis interest margin X.XX% X X.XX%, reported quarter. was up

Some positives quarter volumes higher by fourth of on include of balances both deposits yields at investment Fed compared higher to for securities. partially the and offset and and positives the the cost loans loans were These higher interest-bearing quarter.

million investment during the total quarter. portfolio. our portfolio The at quarter, billion down fourth first Looking from the $XXX investment $XX.X averaged

$XXX was totaled loss the purchases the for from the million Agency million portfolio an at MBS in at $X.XX $XXX on reported quarter. investment being The increase $XXX available net fourth quarter, and billion, first the $X.XX of the of of the of securities unrealized with that the During municipals. quarter $XX million billion sale million end end

the investment averaged yield the million but yield which quarter. up on points prior from quarter up X.XX%, a portfolio had taxable in the was of fourth X basis billion down The from quarter first points X total quarter. The approximately basis taxable $XXX X.XX%, portfolio, prior the from $XX.X equivalent the

basis about had averaged the of $XX end PSF XX% quarter, portfolio from of municipal X.XX%, first taxable Our the $X.X quarter the the of quarter. municipal a the up during about from million up fourth approximately insured. point and or pre-refunded tax-exempt billion X At first the equivalent prior was portfolio quarter, yield

of at The duration years the fourth investment from end quarter X.X X end portfolio up first years of the the was the of quarter. the at

to basis, On quarter deposits. deposits shift of the quarter or decreased a on were quarter. We shift average total quarter. XX.X% as the to XX.X% linked-quarter see quarter. $XXX a deposits X% to compared million previous the -- balances, the Based as when or first billion noninterest-bearing first $XXX compared total million fourth average previous mix deposits noninterest-bearing from during deposits X.X%, at did of a interest-bearing demand percentage while in a deposits were or average down $XXX X.X% $XX.X million Looking continue increased

in cost The first X from X.X% deposits was X.XX% up the points fourth quarter basis of the and interest-bearing in quarter.

investment million management quarter $XXX the fees down they number first averages balance yesterday, $XXX expense noninterest estate fees average repos for estates up quarter about I'll The Looking total are approximately $XX.X and point through $X.X up lower average million. quarter. on be million they quarter value by down million based million repos were down are the average. $XXX for customer and deposits out fees April a impacted the billion, the noninterest-bearing can basically settled. first $X.X was with $X.X at of [indiscernible] April month-to-date. billion A quarter from first state X.X% linked our up for lumpy from month-to-date Trust as of million basis. the X down flat Customer and and for $XX from of month-to-date of items. point a or fourth repos was the on couple basis income quarter. with customer averaged cost X.XX%, fourth interest-bearing The quarter

to Insurance the up Benefit in received and increase. first commissions Property XX%. were as is the were typically the first $X.X bonuses, quarter benefit casualty for commissions or are which those and million contributed million company strongest million quarter $X.X $X.X typically commissions. the quarter fees up and

quarter fees, the for cycle. typically and our yearly renewal given As quarter is a typical reminder, weakest the commissions second insurance

$X.X incentives, The quarter down $X.X income and of was million received quarter in other fourth those $X.X each in a fourth a million previous noninterest primarily category to accrual. year the related recovery loss as million card-related incentives are

higher $X.X was which by expense, million mostly up stock incentive compensation salaries were as Salaries offset by increased and million. wages accruals and were $X.X lower

nature, awards As up each require recognition. the their bonuses trend a the Benefits by the taxes expense by October was reminder, higher related year. normal in some the expenses reset to are first million, our of immediate impacted and year granted paid XXX(k) $X.X stock expense annual of payroll and impacted and quarter during limits by for XXX(k) at FICA and beginning taxes awards

and expense professional was noninterest X.X%. $X.X Other million. or million driven down donations was The services was primarily $X.X million decrease $X.X down expense down by which

year XXXX. full for of Regarding our guidance

current Our with and include January is This cuts cut XXXX in cuts remainder November. funds another one from down projections X the rate two one XX for the in September Fed point our of basis guidance. in over

we average of currently our high in up full digits. single the the For That's of to full digits. in year expect single XX, year growth loan previous high the from growth guidance mid-

impacted Full to to to net from year growth slight flat the X%, by industry slightly of a range of the X%. deposit level X%, has in quarter to of income on average X% basically for from growth X%, each that upward that's pressure fees the in in previous revenues could high percentage guidance of That OD flat our income of expected by year. trend with in flat. XXXX. remainder our income our improvement changed from range interchange of and previous be of the up guidance, sundry our the interest X% the range facing growth to represents Net the also not Noninterest margin impacted and previous the interest down guidance

previous Noninterest the expense growth basis, range of from not our on guidance. a to this reported X% X% has changed in

more expect we those to average of XX up XX basis to level charge-offs, still of net historical points go normalized Regarding loans. to a

in I'll tax effective Phil this year Regarding we now currently effective expect taxes, back over call comparable questions. of our was XXXX. turn XX% and guidance. the to rate for rate for that, a With to change the No full XX.X%,

for open questions. Thanks, up Jerry. We'll call now the

Haire [Operator Instructions] with is question from Casey Our Jefferies. first

the NII with guide. guess off starting I

leaving despite growth are in the high coming even you're than single-digit a like little your loan guys cuts, bit less it it's you So intact stronger getting guide. sounds revised

pressure funding it's a it intact? I keeping cost more higher on color just dynamics. So guess NII Just the -- the it's higher the that's little

for some Yes. longer. higher also, That's of talking And that. about certainly we're

pressure higher the that yields. field pressure here customers continue just see that about the We've think to As risk, stay now for higher we've about a the talked out for longer more competitive for rates we'll will while I deposits. higher, been obviously talking think continue. that And deposits, I think I looking on

people the that to deposits. We in continue side noninterest-bearing move continuing their see are to especially where

think of a reduction bit just there to uncertainty with trend make to little We original given see continue of just I the a even us is downward stay there. And couple tips. our going guidance,

maybe up Great. And following Okay. just that. on

guide believe And then DDA NII I XX%. it about your what fell assume is of what from to So in betas -- terms mix, here?

then this is have Yes. hikes we The don't betas really, because at any and the point, we're not rate significant in assuming not assuming we're movement any betas.

I from, that have were expect I we XX% we remember and to sort I'd cumulative beta XX%. moved correctly, pressure. up moved a think if our of we'd up that potential at

little movement non-time of some We're the not the lot interest-bearing, tweaked seeing a actually accounts. downward a in We bit.

of So increase but same at to sort drastically. see that change you this that of expect don't I quarter-over-quarter, point, may X%

I heard, what's going it, eye out an keep to call But much some as we've on still continue months there's don't X, pricing on crazy in nearly ago. X stuff going CD we'll there as on. course, hear Of X, the market.

standpoint, on that from the beta, change I some it expect but I wouldn't pressure to expect significantly. So

Okay. DDA XX%, mix sounds there's the it more And like at pressure.

how wondering much Just more...

bit, little Yes, it -- don't think to this to that be move at to expect would pressure down change expect going expect but there'll it continue drastic I a a I I there. point. would I

the times, year maybe half of the is we for for a always You but first are not historically couple down the historically, first reminder, in half that category us year-to-date. the of of on softer heard a year these of hundred historical DDA. the And million kind and have was that movement as us,

us. so really And to not that's unusual

think were call I in call fourth million the the the mentioned I it, quarter to we call seeing between average. $XXX January the already DDA of down, compared time

higher very not we to comfortable we there, is really be reported continue I that that, just we'll I being focused think out with keep feel just would customers might your as growing a a The we're expect But that down plug little a get pressure do well. are continue do. to can and do looking would there's what are can. and back could we because think what little doing, of that expect, along bit going we're lot continue I to we for I averages, the we to go what relationships to bit question, with successes on

Our from next is question JPMorgan. with Alexopoulos Steven

thought But if on it to up that last that up Maybe didn't you're NII. X Jerry, so now? question NII still cuts. quarter, X.X% rate to we If the Casey's X.X% said to cuts X% was that we above? no Is X%. we add I lessen thinking as get start, to follow potential like I you has assuming increase. any cuts, would Or same? on get improvement

little It when whole conversation the this of probably is deposits. part number. on now. a lessens A -- bit that's is that big a noninterest-bearing it again impact obviously, And about we're talking

pressure a given expected first than the little So we in there, bit the more what saw that quarter. we

standpoint, will while and this address really a now because a to And is as would first of that the look increase year and little a for really typically to it's bit guidance. unusually be there. said of the will half doesn't us, of it's really We'd a I that that said, of really kind all April, it. tough little this like to related bad the where previous of what I from a lot we've I more softer The And on month cyclical be ready question, drive think softer. be. we responded not our happens for

have of is I what those see kind But the big point, plays with yes, to volumes. at happens we're, think out. factor just DDA yes, So this swing it we'll where

Got it.

is loan at current a new really side, on really where more the growth in bank? and the growth speak to coming much of then just sign solid borrowing pure customers share growth market of of How you the not has had customers all. loan Okay. much long guys markets a versus the industry loan quarter to like the growth gains, from of the health And

that Steven, out the Jerry what you help I I that. done don't of loan new to tell have at number can me hand. with customers growth, some can have

to related. lot a was interesting. talk bit that in is the to it's was loan as an also think interesting we And a opposed I activity that under Just area we customer saw thought relationships. pipeline I the little that saw be And that about increased of growth prospects, $XX million core

I the One better activity the that and is able second, And think expansion than -- what we're loan was so reflects broadly based, I seeing. growth there be might so it's pretty large to... that's -- our I and think deals.

Yes. end related say numbers going I'm it, the from let's December I'm at, looking like what looks I period a growth about maybe I'd say, of guess to to that X/X customers. About March. and new talk the between is, about it is

Got it.

ahead. And while -- go Okay.

So added find loan new for. I relationships looking and balances deposits the million what million $XXX quarter, last was in in the over did months. $XXX In first I just we XX from new

a about quarter. That's

but seem would you same to said in puts digit, Quite be seeing conservative know Yes, even on the coming even pipelines you a of digit. high I seeing and banks pretty are low Jerry, want the year-over-year that are do Do double fairly to single About guys this growth quarter. it bullish terms industry in has you're than quarter. just single you good pretty I a pipeline to growth. position here? out part up of build, high if digit already modest build maybe the you asked better few reason loan the

move to if I could it think, digits. asking, double guess, up the I low you're

bit is could, hearing out the regional going we're hearing what obviously, some there think of in of a I there. it the little some I but mean just slowness of we presidents with conversations is

were last from growth Some year. originated that is of this coming commitments

there's the through what still bullish, is year. happens little concern of although of a So the bit pretty everybody rest still about

on both the year-over-year. trending So are really linked Yes, well, happen? it quarter could a I and mean numbers

were them I think we XX%. were north -- of both of

guys tweak a But a from of we again, bit of a or into kind instead are some So caution could be hearing up we could little we of -- of XX.X%, seat. of certainly. out in getting our XX% we X%, the are word

their market under a And some to and side, that negative. a there was few is couple it. say end are the people going got low from doing back are yesterday, some how done forces just some some high calls the I'd of to I forces Steven, a of well talked And opinion seeing And of looks, was it of bifurcation I are about someone of really that there's activity. is good there pressure. our kind they're of the end there just

XX% a bit, themselves careful but deals being those seeing we're structure. we're I structure. we from lost but so the good, Like in said, activity what of But little also lost is were

and So banks some game, before, more a guess, getting in think aggressive of they back bit we I like back be. I we'd where to little they're the than to the as getting were see

So mentioned little reasons of of it's limiter got overall, us gets that if the good relationships a few was the be the will number are -- a quarter that pipeline of that hand. market strong. ago, is because a linked new one a outlook of think the out I you, pipeline and I growth on just look, But minutes I bit strong. showed information A the in

in Texas still reasonably is competitively. well market doing think the And good. we're I So

think I is Jerry right.

been would get built people going quarter. bit has last but what more cautious be I've to a the But so probably be they little lay election, are some bit the land recently that what they're probably continue pretty interestingly, of Some impact people looking good. at. to are the willing circumspect little around heard to But a regulatorily might do

is Point. from with Compass Dave Rochester next question Our

into what And that? different plan purchases that here Is Back take just of I wondering table? you that some be trends off to It would reduce your and made on grow this those those guide, some the sounds that on securities from you you're the some sensitivity was assumptions are the quarter. asset NII have baking the some to for cash like purchase of segments, yields if book great. liquidity

Yes, first. that yields Sure. give me let right I'll on -- purchase you here. the let those

municipals agencies, a ] What been a the bought in now the very I we're obviously XXX So liquidity we doing [ XXX TE. right at the Loan [ during at and than don't ] growth we better year. much expected. see is moving has

of I We about have scaling we for this that of environment. about $X.X investment to the been opportunistic Part back targeting think to $X.X billion just it We're purchases $X.X billion, is talking be year. guidance that in I've billion given, is somewhat. the continue want

-- it see probably that us that you'll probably shy expected million that. side. that liquidity softer we has We'll the will this loan bit like the know I year. we growth on number that reach much. I'm a I number so I hundred been in thinking few -- of noninterest-bearing even like said, be won't a better affect But little probably than deposits, said, And don't

So think somewhat. I of in to liquidity. bias, there's lot all see being won't small a you whole of bias change increasing the a it's the a net-net it And probably things if is that equal,

NII curious higher just was cut. on of your then of is upside just now a longer sensitivity on a less delaying for And I Okay. where that type and NII scenario. comment

is What quarter, I each million mentioned think benefit that you roughly? roughly something now last like month. $X of

Yes.

it, lot part our that it in the look the models timing. I When year. depends got we've we at cuts a on second again, are the of of think in

a I'd to they what's so in number the on And say probably depending with million again, balances probably happen $X later at year, that again, it's the is happening benefit. assuming closer Fed, .X month at

maybe... And Okay.

rate. free On tax

And just on to loan at heard credit, I larger those. your right, Great. credits this are some this reserve just detail office this quarter. ratio on impacting then a I get on if where hoping trends maybe you point? then you And problem was the okay. Yes, mentioned few

increased regard problems the tenant with question take rate let Okay. along the with risk Well, the me higher. to

bids of talked looking it or a related, and As we -- refinance risk construction just now, was missed interim they're XX about need there I to these at was There recognized large some said, I've one for the period. a industry rate that segment, some -- looking for actively but was before. in company the company-specific in

operating rate saw not some base volume. in was There There They computation significant move that regard risk we're factoring was of on a as some on was They're with brand-new company page just we et had to issues one used the facility. that a into truck decided there getting a same that near them. that. because We that company moved over. have XX borrowing of fairly facility caller. we cetera, to and a increased perspective loss the an term they was

more, said, company specific. So recognize like that I need they're things to that until turn they around. Those the are I

to used except true the rate-related relate the primarily we've and They're seen. here. side. for impact not That's an car much things the to buyer the both interest consumer trucking that That's cars side that pay the the rate so deals. thing interest also on really on closest

not for us. new talking some of kind been that's but But quarters. that's seeing. thing that that about we're few for the of we've So next that, We've the had

And then at just the if ratio there? this on any office reserve point, there's update

Sure. in give don't detailed you'll is a there. we Yes, see view the very XX-Q what

XXX. overlays, that just is at a a of nonowner inside like do there is commercial estate at little some with the reserve and of occupied for you give -- of construction this the bit think baseball real for office what to building and the coverages But I we construction.

pass I rate So should a credits say, that the I worst, reserve. X% highest give the the we or for guess, best them

than worse then that. So and anything --

So which and if XX% worse, you no get reserve. start X%, and they is getting a into actually a a watch

-- these is on So and basis, office buildings combined combined at the this only that this construction, that any again, under production. office, look numbers would reserve as I brings investor a XXX at be -- a

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

I on follow could loan problem afternoon. discussion. wanted to, the Phil, if Good I up just Thanks.

I Because in heard in longer we're and if you C&I this like rate aren't continued we're related comments rate the environment, rate yet, this your Just interest problem on the pressure do for that longer in these that more higher increases longer sector? environment? but see loans for loans

I To much. really talked anything see C&I that with auto the the portfolios, for higher and of credit significant who the I are dealers trend again, I that I longer honest, issues running don't so for exception of there. that the think some don't having be see a on some piece. that's about, or

commercial I they when real before to be think things the real where to are they supporting in were those come going borrowers coming and impact what is maturity. and to sponsors and estate going solved by today. their financing have to estate, more be projects at and they are on And

so interest we've our But a performance a more good by had not seeing experience, really really now. could pressure, but forth, created scenarios we're borrowers. rates higher, create where we And good that right went and

separately, basis? Or first was anything the commissions, are on It unusual up Okay. at down had just And Is it there XX%. insurance it X.X%. growth But almost then that how nice this the looking was year a year-over-year, full just quarter? really quarter in 'XX. you

ago. the Yes. to one thing comparison year The say I'll a on

very So commission. a strong the insurance life had first year quarter last

to $X.X So in are and be in an like policies commissions of unfavorable benefit by a the tend fee. little that commissions those onetime annuity. It's not this property quarter about we a that more you're onetime casualty comparison were are probably bit And million. on just

compared a was the was that affected that year. to bit probably thing the biggest lumpy. little That last first quarter us negatively So

as that well. Although commissions benefits was I'll softer than expected say I

with KBW. Our next question is from Miller Catherine

Should unchanged FICA X% A to kind then this some quarter. I we go drove do that Or fall quarter? guidance you at run from from the rate quarter we this we year-over-year. mentioned assume left of Thanks. think next back growth your know Good afternoon. of taxes I on into expense XQ as you expenses. first and you still second the into higher quarter Curious know grow grow question level you expenses there? X% that from that this rate kind and seasonality

Yes.

impacted to January. in expenses. we expansion the additional the on ship we in been that say certainly about doing. here really surcharge a of gave million, of when this $X.X tight guidance things quarter is And couple I the the know that trying we've get think anything right, are did a from I'll FDIC we're Again, run didn't we we by that first

And And maybe we was additional your kept basically though our quarter I even haven't say $XX heard higher a you think the same, we guidance question almost expected. from were we so million in saw muffled, benefits that the that the but expenses little I an maybe. first was

unintentionally. during lot down it to intentionally or A have XXX(k) go I that matches. XXX(k) quickly, think tends benefits the certain payroll matches of on with things side In especially that has we pretty the make year. may cases, like employees, do contributions, tax to for limit to reach

no And for our to more we contribution they reach X%. so up after level, there. a thing same FIC of the then -- then match The If that there's the match course, level, they stops. certain reach

I we you'll feel trend-wise, little I of what that I just a have on certainly out, see expect bit we're than growth quarter-over-quarter down where seeing based you go would will I today. $X the good other said, -- benefits But about don't at. it that the so like take in trajectory million see expenses if But we're

to But will grow a I and they continue this to a done expect that good up to we've would think first little job quarter-over-quarter. just do I quarter continue bit try that.

And helpful. assessment. X% to clear, includes $X that's million to the that Yes, FDIC be X%

for you operating, if we is Exactly. Yes, purposes. just assume we those -- will,

the the million in 'XX it's and on numbers. number XXXX $XX number because as included in the $X our reported So is an million in

is other quarter, I Okay. first and also interchange about then seasonally but mean, first know Great. next you've I lower on usually quarter. talked the service fees, things some in in question softer And charges, being the

So couple into is would quarters? next charges? Or kind that increase good also run a for we you this of go of lower as expect rate to the service also

Yes.

the balances. hold charges. commercial you, service the it charges more pay cases, for customers keeping service In I decide some has been is think right? to that through the than charge in to the thing Because rather some to cases, hard works against services may upside it dollar with

of So of some some it. that's

really to But on pretty to relates we to And OD of Phil some things have will mentioned, the -- going grow. as we've say, the lot I customer there's it, of those -- continue obviously, -- of And pressure that's that so those a And there buying done there. as on accounts potentially on I a of impacting lot those we're say that the it And that lot significantly. I just try see been favor guidance good the on to kind of But don't fees. in out fees. are expect side, the growth. growth a especially consumer

ways, don't So we've I from growth we will in really a say, some of where see lot are but surprised, been that pleasantly having today. I

will pressure rest of that it continue category the in seeing numbers think for be the of that to I'm It's 'XX. now. kind I just right

from Gosalia Stanley. Our with next is Manan Morgan question

you accelerating And you do wanted markets, guys I pressure driving what the most your spoke deposit deposit about we're quarter. eased is you related on in about in think to deposit growth first mix that fact specific ask are new afternoon. pressure market? broader think relative Good incremental that or in how what the to for costs seeing you pressure. to Do the customer banks there's something

I From a of standpoint, cost deposit really feeling and competitive not from on pressure cost we're to are. market not that need lot feeling standpoint, be say the a We a will we side.

on is competing we've pressure think got primarily on the really a the the CD. decided we're of more coming noninterest-bearing. I -- XX-day It's we've

put increases customers it commercial on consumer and that especially seen April the the and balances. really that commercial continues think, February to on when at true, be customers just in to we well and I of increases think scenario side, in consumer side. that March small looking we where higher at as have on interest-bearing balances, will both it's then March, look and pressure is interest-bearing -- say to both continues I levels for I And the to rates these from

be pricing in We're are quarter. I softer said, on be I think things wise, to the balances we're not like pricing. this But our highest. think the going competitively tend compete just So first to I going going right, I to think historically,

compete. we're the to going bearing earlier, the But where what's We've on not keep on obviously, and But never lot non-CDs, to an what on there, intended decisions, highest. on eye a we the pressure seeing of do we will. said as if I we be take want interest you call I'll

So specifically, pressure the lot a not MMA competitively. there of yet seeing

those haven't we rates for now. while a really So moved

deals higher for you're on about part because structure lost you up Is it. lower of from? side, loan weakness credit? right the and it And the in reason the maybe being coming where -- now. are Is maybe NIM because private And loans skewing spoke other Got this quality of yielding the to seeing then you competition it is banks?

of guarantees. Well, first it's I'd structure. that it's question, And banks It's we're seeing part that. story. your say it's the all mainly loan its terms -- values, same

piece but there's average be case. risk got some don't that Yes, -- be little credit We're the a lot your -- higher yield to you're of by lower But getting but because we're probably albeit tend to So at vis-a-vis to that. know. achieve, higher of lower yields we they're we've the private on see group. could I credit, from a on it not quality certainly, going that able bit

it. Got

side. if on a your could of And one comments on have I Okay. clarification just the security

to in about of taking duration Or on rates? are book from move years. lock the half X.X little was I that duration think bit year tally a more the in you up you in benefits up to of Is said higher that rates? a

of we first purchases like really said, quarter. No, do I the a in didn't lot

say, of of of call were we end first million it the $XXX some January. of few treasuries about was had that think it maturing it $X the we're that days and I billion that year, let's

affecting I And first duration mortgage duration done the that more extended it. of So we anything the little a think banks. of haven't in a there we've But on added might be was lot bit quarter. whole that

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

questions. A true? potential Phil, not to expect migrate of loans should couple higher? problem to the is necessarily Or continue we that

I And say, is anymore, say would The don't of that were with everything problem levels quality, the of normal. Yes, maybe. low Really, the I'll risk right? use all, pandemic low levels. not I out grade say increase probably where old first that unsustainably we we right? loans John, the say the is higher, I is category still XX expect -- but coming we're are, such at a the reason at so because credit we loans, could would industry for we And and potential

me. call, seeing are And some, so would we I to reversion -- what but some

correct. I some risk, tell some probably would risk time, the to same these some. But realistic up trying that we we these at go just them, quick turnarounds we're work it. It's for added, recognizing -- work it's that to and do perceive ought not then correct a reasonably we of expect with we've or So they get company's anything. we're work the me, on yes, it but to to that that some we rates to to adding elevated on best mean tenets looking just be

hopeful but because, we can in some see some we're more this we'll brought move low on unsustainably I'm coming really off time, that of we out, that that so levels. with also And see these pretty move with again,

So I say that's why maybe.

I'm as with concerned quality. worry credit not mean, banker. cross I I'm I know a to

market, solid in think reduction say, interest looked would People "Oh, building our deals. office the at the the at the on, et come lot housing got But part in so I at feel for hills. But that's supply looked of tell I think real multifamily I've I and And with Austin cetera. building, It's portfolio up commercial office Austin. about. granular great somebody just a quality that going me level. it. at you to spent is tell said would run estate they looked lot a and very I've rates, guess and of coming be the our I time But would is And always we Austin the portfolio I'll you, good, probably prices cetera, I've I concerned I got -- a our man, at, et there's credit looking of to that multifamily And Austin XX%. look

And the sponsors, on depends how so It depends on operating. it they're deal. your

quarter. And prices being I there's then if mean I reason time commercial before the -- heck have right? far of it, below great And XX%, that over we As as a for down it done of you this stuff. X of the you on up underwriting house really the job years about great I real feel I estate feel XX% Austin deals same mean, to part it. lost people structure XX% and headline is the they're the our and look that, this So portfolio a spend

but that won't to problems book mean gets doesn't to we you I've at have Our It talk about me something it's up how all, know popped things. not that that worry. these folks to something

to the I side, see think things the it's interesting there. continue C&I up we have we're on what's stuff happening see where going to pop to company-specific with

really I banking. And the a may a guys be But some It's say of have these But that. them most to anyway. handle to on of their not we it risk problems. just need will. able I business, that's solve and felt just think

Okay. Yes.

here? feel your doesn't like the I and to that, but doesn't guys sound more like mean, of least charge-off your from guidance pressure need credit. have hear I coming, you in feel it build you respect at it mind So I in reserves terms

good to better -- And mean I can. worse? reserve can I is know. Jerry formula, than feel another can. say can we see think I I that the But the feel reserves. we really I get don't Sure I speak think about it about thing the we today. Yes, the where might

period, it and took You might never COVID recall, out. up we during it that built we

And so think... I

there, number reserve bit I envision wouldn't We in point this credit at if a here I and around pretty to you at percentage, than quality moved of -- really move haven't really that but will basis that's it's environment. very don't couple coverage different increasing. it see sort pretty Yes, significant hasn't little we reason going reserve a expect Yes, is our -- much. I stayed any assuming look that there. normal of we Again, a points And it think much others. that

Yes.

share, the the the expansion as long have for as of what X.X -- quarter? Okay. did kind Houston presentation Jerry, contribution mic, if quarter. What you have you you contribution can of this changed the

Yes.

rounded we let They we exactly quarter, I just to this to make think this $X.XX last to it right. quarter. were $X.XX, but Last me I I say, sure time that's think quarter, going let it check. round was. Yes, $X.XX was me $X.XX

you say the Houston is together? Austin, funding that's -- X.X, And and when Dallas Okay. X.X right that and is

things we they mature, simple. that just we financial Correct, it would really, certainly keep going worked That that these hope began way planning Maybe was funding to work is that to it I to had other would the as out for would and was it expansions future net it was out, certainly it if out I centers begin way. pay expansion. the trying I yes. to Yes, together talked confused the about Houston this and

great a That's great. that's Well, number. Yes.

wanted I'll comment comment that One to had in my the clarify, a about one I And in I salaries. make made thing about and comments expenses. linked Catherine quarter asked

they and affect lot So in the a so quarter. fourth for us, stock of are given October, do the awards

their a these of as by immediately and awards And because are us that a in lot they're quarter. stock nature, higher salaries so best, And typically, for fourth result, expensed. immediately

might wise, expectation to fourth third of So the this you and the the what year. quarter if quarter at -- between in I growth some the get and salaries between fourth of think expect quarter between you'll looked fourth year, quarter third expense last see you sort

Just better a bit color little to there. give of

of [Operator from Ebrahim is Instructions] Our Poonawala next Bank America. with question

on confirm, for if portfolio the second, should average in we XQ you you. sorry missed to expect, off? think levels have what I the reinvestment another rolling buy, And I Jay, that securities securities to you you securities the expect of one, from what's flat? mentioned grow billion is Around quick pickup stay you could $X this, yield one book, versus one, the Just or

be and billion cash bit, Yes, We're be being I flat. expect until a little equal, about weighted XX of securities the points. treasury think, somewhat. $XXX it's some relatively yield but all things million impacted doesn't we fourth a mature $X.X that's I flow, basis going to down at may those of and are would those expecting And got are We've that quarter, X.XX. the about

about And there. I the what X.X% expect that you're to were buying. think right I got in that some potential talking heard something now, some -- would it you've you kind of pickup versus if XXX, of round nice we

fourth securities year? from So probably as move the through that from the a we quarter, imply, lift higher? we'll keep see going quarter growing And again NII does first levels that Jerry, yield the should

income of a expect. trajectory. positive a that's I would Yes, little bit Yes, the what is on interest of net kind

for low the, moving we was think the the year expecting I or the second rest last first, are pickups small in We -- of for the third quarters sometime of probably should say, I quarter. kind second us, forward. would

reached have turn remarks. our question-and-answer conference back session. to of the I like We the over end to would for closing Phil

you, and thank for Well, everyone, interest really Okay. their adjourn. Thank you.

you. will Thank This conference. conclude today's

this disconnect and may for You participation. at thank time, your your lines you