Cullen/Frost Bankers(US:CFR)2024-04-26 00:15Financial Data and Key Metrics Changes - The company reported earnings of $134 million or $2.06 per share for the first quarter, down from $176 million or $2.70 per share in the same quarter last year, impacted by a $7.7 million FDIC insurance surcharge [66] - Return on average assets and average common equity were 1.09% and 15.22%, respectively, compared to 1.39% and 22.59% for the same period last year [46] - Average deposits decreased by 4.8% to $40.7 billion from $42.8 billion year-over-year, while average loans grew by 10.4% to $19.1 billion [68] Business Line Data and Key Metrics Changes - Insurance commissions and fees increased by $5.6 million or 44%, with property and casualty and benefit company bonuses contributing significantly [61] - Average consumer loans grew by an annualized 13% on a linked-quarter basis, reaching $3 billion in average balances [70] - New loan commitments booked in the first quarter were 24% less than the level booked in the first quarter of 2023 [50] Market Data and Key Metrics Changes - The company experienced a shift in deposit mix, with average non-interest-bearing demand deposits decreasing by 4.9% while interest-bearing deposits increased by 1% [80] - Problem loans totaled $809 million at the end of the first quarter, up from $571 million at the end of the fourth quarter and $347 million a year ago, primarily due to company-specific C&I loans [53] Company Strategy and Development Direction - The company continues to focus on organic growth, achieving significant deposit and loan goals in new market expansions, with Houston locations at 104% of deposit goals and Dallas at 174% [48] - The company plans to maintain a conservative approach to loan growth, with expectations of high single-digit growth for the full year [108] Management's Comments on Operating Environment and Future Outlook - Management noted that while deposit pressure eased in the broader market, the company continues to face competitive pressures on deposit costs [12] - The outlook for net interest income remains stable, with expectations for slight upward trends in net interest margin for the remainder of the year [83] Other Important Information - The company expects non-interest expense growth in the range of 6% to 8% for the full year, unchanged from previous guidance [109] - The effective tax rate for the full year is expected to be comparable to the previous year at 16.1% [109] Q&A Session Summary Question: What is driving the incremental pressure on deposit costs? - Management indicated that competitive pressures and customer behavior are influencing deposit costs, particularly in the non-interest-bearing segment [12] Question: How are problem loans expected to trend in the current environment? - Management does not foresee significant trends related to interest rates impacting problem loans, with most issues being company-specific [15][32] Question: What is the outlook for net interest income given the current market conditions? - Management expects net interest income growth in the range of 2% to 4%, with pressures from higher funding costs being a factor [83][86]