Greetings. Welcome to Cullen/Frost Bankers, Inc first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. 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. Thanks, Sherry. This afternoon's conference call will be led by Phil Green, Chairman and CEO, and Jerry Salinas, Group Executive Vice President and CFO. Before I turn the call over to Phil and Jerry, I need to take a moment to address the Safe Harbor provisions. Some of 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 two one zero two two zero five two three four. At this time, I'll turn the call over to Phil. Thanks, A.B. Good afternoon, everyone. Thanks for joining us. Today, I'll review the first quarter results for Cullen/Frost, and our Chief Financial Officer, Jerry Salinas, will provide additional comments before we open it up to your questions. In the first quarter, Cullen/Frost earned $134 million or $2.06 per share, compared with earnings of $176 million, or $2.70 a share, reported in the same quarter last year. The first quarter results were affected by an additional FDIC insurance surcharge accrual of $7.7 million, or $0.09 a share, associated with the bank failures that happened in early 2023. Our return on average assets and average common equity in the first quarter were 1.09% and 15.22%, respectively, and that compared with 1.39% and 22.59% for the same period last year. The solid earnings from the first quarter demonstrate the success of our organic growth strategy and the hard work of our bankers. Our strength and stability, combined with our core values and strong corporate culture, allow us to continue providing world-class service to our customers, which results in sustained long-term growth. Our balance sheet and our liquidity levels remain consistently strong. Also, as was the case in previous quarters, Cullen/Frost did not take on any Federal Home Loan Bank advances, participate in any special liquidity facility or government borrowing, access any brokered deposits, or utilize any reciprocal deposit arrangements to build uninsured deposit percentages. And additionally, our available-for-sale securities represented more than 80% of our portfolio at year-end, at quarter-end. Average deposits in the first quarter were $40.7 billion, down 4.8% from the $42.8 billion in the first quarter of last year. Average loans grew 10.4% to $19.1 billion in the first quarter, compared with $17.3 billion in the quarter a year ago. We continue to see excellent results in our organic growth program. For example, we combined our Houston locations in the expansion, they stand at 104% deposit goal, 164% of loan goal, and 122% of our new household goal. For the Dallas market expansion, we stand at 174% of deposit goal, 212% of loan goal, and 185% of our new household goal. Just after the first quarter close, we opened the second new location on our 17-site Austin expansion project. Our next new Austin region location will open just after Memorial Day. At the end of the first quarter, our overall expansion efforts had generated $2 billion in deposits, $1.5 billion in loans, and added over 46,000 new households. It helps me to put this in perspective when I remember that the largest acquisition in our history was a company with $1.4 billion in deposits. Our consumer banking business continues to build momentum from the 2023's record net new household growth, and we added 6,600 net new checking accounts for households in the quarter, and we had an annual growth rate there of 6.5%, which we believe continues to put us among the top growing banks in the country. Average consumer loans saw steady growth in the first quarter, increasing an annualized 13% on a linked quarter basis and hit a milestone of $3 billion in average balances outstanding. We remain excited about the prospects for our new mortgage product, which is approaching 200 loans, with about half coming in the first quarter. Looking at our commercial business, on a linked quarter basis, average loan balances increased an annualized 10.5% for C&I and 13.4% increase to CRE. While new commitments booked in the first quarter were 24% less than the level booked in the first quarter of 2023, our new commercial relationships were up 10% year-over-year, and at 825, represented our highest level of first quarter relationships ever. This coincided with us achieving our highest level ever for calling activity in the first quarter. New loan opportunities in our pipeline were up 15% year-over-year and were second only to the last year's spike after SVB's failure. Our weighted average pipeline stood at $1.46 billion, up by 24% from the fourth quarter and by 17.5% from the first quarter last year. Regarding those 825 new relationships in the first quarter that I mentioned, about half of those continue to come from the too big to fail banks. We continue to use discretion as we look at our new loan opportunities, and as an example, I'd point out that in the first quarter, our deals lost were up by 24% year-over-year, and 82% of those deals lost were due to structure. Credit quality is good by historical standards, with net charge-offs and debt and new non-accrual loans at healthy levels. We're seeing some normalizations in credit risk ratings and, as we come off the historic lows and problems experienced in the years immediately following the pandemic. And looking at some of the details, net charge-offs for the first quarter were $7.4 million, compared to $10.9 million last quarter and $8.8 million a year ago. Annualized net charge-offs for the first quarter represented 15 basis points of period-end loans. Non-performing assets totaled $72 million at the end of the first quarter, compared to $62 million last quarter and $39 million a year ago. The quarter-end figure represents just 37 basis points of period-end loans and 15 basis points of total assets. Problem loans, which we define as Risk Grade 10 or OAEM, total $809 million at the end of the first quarter, and that's up from $571 million at the end of the fourth quarter and $347 million the same time last year. Three-quarters of the increase was due to company-specific C&I loans, with the remainder being CRE credits of various types. And this growth in first quarter was fairly evenly split between loans in the OAEM or Risk Grade 10 and classified or Risk Grade 11 categories, and was mainly attributable to a few larger credits, some of which we expect relatively quick resolutions for. Less than 20% of our problem loans overall are tied to investor commercial real estate. About 50% are related to C&I credits, with most of the balance in owner-occupied real estate, which are closely related to C&I loans. Regarding commercial real estate lending, our overall portfolio remains stable, with steady operating performance across all asset types and acceptable debt service coverage ratios and loan-to-values. Within this portfolio, what we consider to be the major categories of investor CRE, office, multifamily, retail, and industrial, for example, total about $4 billion or 46% of total CRE loans outstanding. Our investor CRE portfolio has held up well, with the average performance metrics stable quarter-over-quarter, exhibiting an overall average loan-to-value at underwriting of about 53% and average weighted debt service coverage ratio of about 1.47x. The investor office portfolio specifically had a balance of $983 million at quarter end, and that portfolio exhibited an average loan to value of 53%, healthy occupancy levels, and an average debt service coverage ratio of 1.53x, which is slightly improved for the second consecutive quarter. Our comfort level with the office portfolio continues to be based on the character and experience of our borrowers and sponsors, and the predominantly Class A nature of our office building projects. In our last conference call, I mentioned that we had just introduced a new Frost Bank marketing campaign and brand refresh designed to emphasize our great customer experiences. We saw the proof points of that in the first quarter, when Frost achieved the highest scores nationwide in the Greenwich Excellence Award for the eighth consecutive year, and the highest ranking for banking customer satisfaction in Texas in J.D. Power's Retail Banking Satisfaction Study for the fifteenth consecutive year. These are unprecedented achievements. No other bank can say those things, and I hope no other bank ever will. But when you think about it, that level of service is what our customers have come to expect from Frost. That's what we deliver on a daily basis, and it's what we mean when we talk in the new campaign about real-life examples of extraordinary customer service with the description, exactly what you'd expect. None of this is possible without the dedication of our employees across Texas. Their commitment to our culture and their optimistic spirit make all of our successes possible, and I'm proud of everything that our Frost teams are accomplishing across all our communities. And now I'll turn the call over to our Chief Financial Officer, Jerry Salinas, for some additional comments. Thank you, Phil. Let me start off by giving some additional color on our overall expansion results. As Phil mentioned, we continue to be very pleased with the volumes we've been able to achieve. Looking at the first quarter, growth in both average loans and deposits was approximately 9% when compared to the previous quarter. And for the first quarter, the profitability of the Houston expansion offset the cost associated with the additional expansion efforts in Dallas and Austin. Now moving to our net interest margin. Our net interest margin percentage for the first quarter was 3.48%, up 7 basis points from the 3.41% reported last quarter. Some positives for the quarter include higher volumes of both loans and balances at the Fed and higher yields on loans and investment securities. These positives were partially offset by higher costs of interest-bearing deposits compared to the fourth quarter. Looking at our investment portfolio, the total investment portfolio averaged $19.3 billion during the first quarter, down $510 million from the fourth quarter. During the first quarter, investment purchases totaled $187 million, with $112 million of that being agency MBS securities and $75 million in municipals. The net unrealized loss on the available for sale portfolio at the end of the quarter was $1.59 billion, an increase of $199 million from the $1.39 billion reported at the end of the fourth quarter. The taxable equivalent yield on the total investment portfolio in the first quarter was 3.32%, up 8 basis points from the fourth quarter. The taxable portfolio, which averaged $12.5 billion, down approximately $582 million from the prior quarter, had a yield of 2.83%, up 8 basis points from the prior quarter. Our tax-exempt municipal portfolio averaged about $6.8 billion during the first quarter, up about $73 million from the fourth quarter, and had a taxable equivalent yield of 4.27%, up 1 basis point from the prior quarter. At the end of the first quarter, approximately 70% of the municipal portfolio was pre-refunded or PSF insured. The duration of the investment portfolio at the end of the first quarter was 5.5 years, up from five years at the end of the fourth quarter. Looking at deposits on a linked quarter basis, average total deposits of $40.7 billion were down $459 million, or 1.1% from the previous quarter. We did continue to see a shift, a mix shift during the first quarter, as average non-interest-bearing demand deposits decreased $720 million, or 4.9%, while interest-bearing deposits increased $261 million, or 1% when compared to the previous quarter. Based on first quarter average balances, non-interest-bearing deposits as a percentage of total deposits were 34.3%, compared to 35.7% in the fourth quarter. The cost of interest-bearing deposits in the first quarter was 2.34%, up 7 basis points from 2.27% in the fourth quarter. Looking at April month-to-date averages for total deposits through yesterday, they are up about $134 million from our first quarter average of $40.7 billion, with interest bearing up $332 million and non-interest bearing down $198 million month to date. Customer repos for the first quarter averaged $3.8 billion, basically flat with the fourth quarter. The cost of customer repos for the quarter was 3.76%, up 1 basis point from the fourth quarter. The month-to-date April average balance for customer repos was down approximately $42 million from the first quarter average. Looking at non-interest income expense on a linked quarter basis, I'll point out a couple of items. Trust and investment management fees were down $1.1 million, or 2.7%, impacted by lower estate fees, down $1.5 million. Estate fees can be lumpy, as they're based on the value and number of estates settled. Insurance commissions and fees were up $5.6 million, or 44%. Property and casualty and benefit company bonuses, which are typically received in the first quarter, contributed $3.4 million to the increase. Benefit commissions were up $2.1 million, as the first quarter is typically the strongest quarter for those commissions. As a reminder, the second quarter is typically the weakest quarter for insurance commissions and fees, given our typical yearly renewal cycle. The other non-interest income category was down $6.9 million, primarily related to $4.4 million in card-related incentives, as those incentives are received in the fourth quarter each year, and a $3.5 million fourth quarter recovery of a previous loss accrual. Salaries and wages were up $1.4 million, as increased salaries and higher incentive accruals were mostly offset by stock compensation expense, which was lowered by $8.2 million. As a reminder, our stock awards are granted in October of each year, and some awards, by their nature, require immediate expense recognition. Benefits expense was up $7.9 million, impacted by higher payroll taxes and 401(k) expenses related to annual bonuses paid during the first quarter and impacted by the normal trend for FICA taxes and 401(k) limits reset at the beginning of the year. Other non-interest expense was down $6.4 million, or 9.6%. The decrease was driven primarily by donations expense, which was down $3.5 million, and professional services down $2.9 million. Regarding our guidance for full year, 2024, our current projections include 225 basis point cuts for the Fed funds rate over the remainder of 2024, with one cut in September and another one in November. This is down from five cuts in our January guidance. For the full year of 2024, we currently expect full year average loan growth in the high single digits. That's up from our previous guidance of growth in the mid to high single digits. Full year average deposit growth in the range of flat to 2%. That's down from our previous guidance of growth in the range of 1%-3%. Net interest income growth in the range of 2%-4%. That has not changed from our previous guidance, with the net interest margin percentage expected to trend slightly upward each quarter for the remainder of the year. Non-interest income could be flat to up 1%, impacted by the pressure facing the industry on interchange revenues and OD fees, and also impacted by our high level of sundry income in 2023. That represents a slight improvement from our previous guidance of basically flat. Non-interest expense growth in the range of 6%-8% on a reported basis. This has not changed from our previous guidance. Regarding net charge-offs, we still expect those to go up to a more normalized historical level of 25-30 basis points of average loans. Regarding taxes, our effective tax rate for the full year of 2023 was 16.1%, and we currently expect a comparable effective rate in 2024. No change to this guidance. With that, I'll now turn the call back over to Phil for questions. Thanks, Jerry. We'll now open up the call for questions. Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Casey Haire with Jefferies. Please proceed. Yeah, thanks. Good afternoon, everyone. I guess starting off with the NII guide. So you guys are leaving it intact despite, you know, you getting less cuts. The loan growth sounds like it's coming in a little bit stronger than even your revised high single digit guide. So I guess it's just the higher funding pre-cost pressure that's keeping it intact? Just a little more color on the NII dynamics. Yeah, that's certainly some of that. And also, you know, we're talking about, you know, higher for longer. You know, as we've talked about the competitive field out here for deposits, I think the higher the, the longer that rates stay higher, I think we'll continue to see more pressure on deposits. We've been talking obviously for a while now about customers looking for higher yield, and I think that pressure will just continue. We continue to see that, especially in the non-interest-bearing side, where people are continuing to move their deposits. You know, we continue to see a little bit downward trend there, and I think just the uncertainty there is gonna make us just stay with our original guidance, even given the cuts, the reduction of a couple of cuts. Okay, great. And maybe just following up on that: so what is your NII guide assume in terms of DDA mix? I believe it's, it fell to 34%. And then what about betas from here? Yeah, the beta's really, at this point, you know, we're not assuming. Because we don't have any rate hikes in them, we're not assuming any significant movements in the betas. I think our cumulative beta moved up, you know, from, if I remember correctly, we were at a 42%, and we moved up to 43%. I'd expect that we'd have that sort of potential pressure. We're not seeing a lot of movement in the interest-bearing, the non-time accounts. We tweaked some downward actually a little bit. So at this point, you know, you may see that same sort of increase of 1% quarter-over-quarter, but I don't expect that to change drastically. Of course, we'll continue to keep an eye on what's going on in the market. I don't hear nearly as much crazy CD pricing as we've heard, call it four, five, six months ago. But there's still some stuff out there going on. So from that standpoint, you know, I expect some pressure on the beta, but I don't expect it to change significantly. Okay. And the DDA mix at 34%, it sounds like there's more pressure. Just wondering how much more and. Yeah, I would think that. Yeah, I would think there'll continue to be pressure there. I don't expect it to, I expect that it would move down a little bit, but I don't expect a drastic change at this point. You kind of heard the movement that we have in that category was down a couple hundred million year to date. And as a reminder, for us, the first half of the year historically, and maybe these are not historical times, but historically, the first half of the year is always softer for us on DDA. And so that's not really unusual to us. I think I mentioned in the January call, we were already seeing DDA down, you know, call it $400 million between the time of the call compared to the fourth quarter average. I think what we continue to do is we just continue to be focused on growing relationships. You know, I think we really feel very comfortable with what we're doing, the successes that are being reported out there, and, and we'll just continue to keep, you know, plugging along with that. There's not a lot we can do if customers are looking for higher averages, and, and we're going to do what we can. But I would expect, back to your question, I would expect there might be a little bit of pressure for that to go down a little bit as well. Thank you. Our next question is from Steven Alexopoulos with JP Morgan. Please proceed. Hi, everyone. Steven. Maybe to start, so to follow up on Casey's question on NII. Jerry, last quarter, I thought you said that NII up 2%-4%. I was assuming five rate cuts, but if we didn't get any cuts, we would add, like, 1.5% to that increase. Is it still the same? If we get no cuts this year, do you think 1.5% above, or has that potential improvement lessened now? You know, it probably lessens a little bit now. You know, part of it, again, is, you know, when we're talking, you know, this whole conversation is about the non-interest-bearing deposits, and obviously, that's a big impact on that number. So, you know, given what the pressure that we saw there, a little bit more than we expected in the first quarter, and, you know, as I responded on the previous question, not really ready to increase our guidance, it's more, really more related to what happens there, and, I think that'll really drive a lot of it. The month of April, like I said, doesn't look unusually bad. And, you know, it's a little tough to really address all of this, because for us, from a cyclical standpoint, this is where we would typically be. You know, we'd be a little bit softer, and we've kind of said that for a while now, that the first half of the year would be softer. So yeah, at this point, we'll just kind of have to see where it plays out. But yeah, I think the big swing factor is what happens with those DDA balances. Got it. Okay. And then, thank you. On the loan growth side, so you guys had solid loan growth and really in a quarter where the industry has not much loan growth to speak of at all. How much of the loan growth is coming from current customers borrowing more, really a sign of the health of the markets versus just pure market share gains, like new customers to the bank? You know, Steven, I don't have that number at hand. I can tell you what some of the new customers have done to loan growth. Jerry can help me out with that. But just to talk a little bit about it, it was interesting that a lot of the activity we saw in pipeline increase was customer related and as opposed to prospects. I thought that was interesting. And I think also an area that we saw is that core loan growth for the under 10 million relationships. You know, I think the activity there was better than the large loan deals, and I think that reflects our expansion growth. So you know, it's pretty broadly based and so that's what we're seeing. One second, I might be able to. Okay, some info on the relationship impact. Yeah, I guess what I'd say is, from the numbers that I'm looking at, it looks like maybe about a, you know, that, let's talk about the period end growth between December and March. About a quarter of it, I'm going to say, is related to new customers. Got it. Okay. Well. So I just. Go ahead. See, I just did find what I was looking for. In the first quarter, we added $145 million in new loan balances and $100 million in deposits from new relationships over the last 12 months. That's about a quarter. About a quarter. Yeah. Part of the reason I ask, you know, even though the industry has fairly modest growth this quarter, quite a few banks are coming out pretty bullish to seeing pipelines build, and you guys are already up low double digit in terms of year-over-year on loan growth. Jerry, I know you said high single digit, but if you're seeing the same pipeline build, it would seem that puts you in a pretty good position to maybe even do better than high single digit. Do you just want to be conservative here? You know, I think, you know, I guess if you're asking, could it move up to, you know, the low double digits? You know, I think what we're hearing in some of it is if you we could obviously, but, you know, just hearing some of the conversations with the regional presidents, I mean, there is a little bit of slowness going out there. Some of this growth is coming from commitments that were originated last year. So although everybody's still pretty bullish, there's a little bit still of, you know, concern about what happens through the rest of the year. So, you know, could it happen? Yeah, I mean, the numbers are trending really well both on a linked quarter and a year-over-year. I think we were both of them were north of 10%. So we could kind of tweak up into, you know, instead of a, you know, a 9%, could we be a 10% or 10.5%? Certainly. But again, you know, we are getting, we are hearing a little bit of a word of caution from some of our guys out in the field. You know, Steven, I'd say there are a couple of forces, you know, or there are a few forces that are on positive side, some on the negative. You know, I just talked to some of our people about how it looks just on some calls yesterday, got back from it, and their opinion was that they're seeing good activity, and there is kind of a bifurcation of the, you know, the, the high end of the market's doing really well, and some of the low end is under some pressure. But, you know, so those offset themselves a little bit. But, you know, activity is good, but we're also being careful on what we're seeing in structure. Like I said, we lost 82% of the deals lost were from structure. So I think as we see some of the banks getting back in the game, you know, they're getting back to where they were before, I guess, and a little bit more aggressive than we'd like to be. So that'll be a little bit of a limiter on us if the market gets out of hand. But overall, I think it's, I think it's got a good outlook. And one of the reasons is because, you know, look, that pipeline information that I showed you, you know, like I mentioned a few minutes ago, just the growth in the linked quarter pipeline was strong. The number of new relationships is strong. So we're doing well competitively, and I think the market in Texas is still reasonably good. I think Jerry's right. Some people are, you know, continue to be a little bit circumspect around the election, probably might impact what some people are willing to do till they get the lay of the land regulatorily, what they're gonna be looking at. But, you know, and I probably felt that a little bit more cautious last quarter. But interestingly, what I've heard recently has been pretty good. Okay. Sounds good. Thanks for all the color. Thanks. Our next question is from Dave Rochester with Compass Point. Please proceed. Hey, good afternoon, guys. Back on the NII guide, was just wondering what your assumptions are for liquidity trends you're baking into that? It sounds like you made some securities purchases this quarter. Is the plan to grow that book some from here to reduce some of that cash and take some of the asset sensitivity off the table? And if you have those purchase yields, on those different segments, that'd be great. Sure. Yeah, on the, l et me give you those purchase yields first. Let's got those right here. So in the, the agencies, we bought at a 5.49%, and the municipals at a 5.18% TE. You know, what we're doing right now is, you know, I don't see liquidity moving very much during the year. Loan growth has obviously been better than we expected. We have been targeting investment purchases of about $1.6 billion, is I think the guidance that I've given, $1.5 billion, $1.6 billion for the year. We're, we're talking about scaling that back somewhat. You know, part of it is we just wanna continue to be opportunistic in this environment, and so you'll probably see us. I don't know that it'll affect the liquidity number much, but, you know, I'm thinking that we probably won't reach that number this year. We'll probably be a few hundred million shy of that. You know, like I said, loan growth's been better. Deposits, you know, like I said, a little bit softer than we expected, even in that on the non-interest-bearing side. So all things being equal, I think the net-net of it is you won't see a whole lot of change in the liquidity, and if there's a bias, it's probably a small bias to increasing that somewhat. Yeah. Okay. And then just on your comment of less NII upside and a higher for longer type of scenario, was just curious where that NII sensitivity is now on delaying a cut. I think last quarter you mentioned something like roughly $1 million of benefit each month. What is that now, roughly? Yeah, I think a lot of it depends on timing. When we look at it, you know, again, the cuts that we've got in our models are, you know, in the second part of the year. And so again, depending on what's happening with balances at the Fed, I'd say that number's probably, and again, assuming they happen later in the year, it's probably closer to $1.4 million a month benefit. Okay. And maybe. On a pre-tax basis. Yep, pre-tax. Okay, great. And then on just credit, you mentioned, maybe if I heard this right, a few larger credits impacting the problem loan trends this quarter. Was just hoping to get some detail on those. And then where are you on your office reserve ratio at this point? Okay, well, let me take the question with regard to the increased problem loans with Risk Grade 10 and higher. You know, as I said, it was industry or company specific related. There was, and I've talked about some of these before, there's, you know, a large construction company that missed some bids in the one segment. They're actively looking for a refinance now, but we need to recognize that a Risk Grade 10 in the interim period. There was a factoring company that we increased the Risk Grade 10 just because of some perspective on borrowing base computation, etc. We decided we're not all on the same page, and that was one of them. There was a truck hauler we saw have some issues with regard to volume. There was a company that moved into a brand-new facility, a fairly significant facility. They're getting used to that. They had an operating loss in the near term as they moved that over, so we need to recognize that till they turn that around. Those are the things, they're more, like I said, company specific. They're not really so much interest rate related, except for the things that relate to, you know, used cars, primarily, you know, the buy here, pay here dealers. That's true of both the consumer on the car side and also on the trucking side. That's the closest thing to an interest rate impact that we've seen. So we've had some of that, but that's not new for us. We've been talking about that for the last few quarters, but that's the kind of thing that we're seeing. Appreciate the color. And then, just on the office reserve ratio at this point, if there's any update there? Sure. Yeah. What you'll see in the 10-Q is we don't give a very detailed view there. I think the commercial real estate reserve coverage is like at a 1.48x. But some of what we do with the overlays, just to give you a little bit of the inside baseball there, is that for non-owner occupied and construction office buildings under construction. So, you know, the highest or the best or the worst, I guess I should say, pass-rated credits that we give them a 5% reserve. So, and then anything worse than that, so if you start getting into you know, a nine, which is a watch, and a nine and worse, they actually get a 10% reserve. As I look at these numbers on a combined basis, that brings the, and this, again, this is only investor office and any office buildings under construction, that combined reserve would be at a 3.72x, is what I'm showing. Great. All right, thanks for all the color, guys. Appreciate it. Good. Our next question is from Peter Winter with D.A. Davidson. Please proceed. Thanks. Good afternoon. I just wanted to, Phil, if I could follow up on the problem loan discussion. Just if we're in this higher for longer rate environment, because I heard your comments that these aren't interest rate related yet. But the longer that we're in this higher for longer rate environment, do you see more pressure on, like, C&I loans and continued increases in the problem loans sector? Sure. I don't, I don't see anything that's significant or a trend for the higher for longer on the C&I piece, to be honest. I think that, again, with the exception of some of the auto dealers that I talked about, who are, you know, running portfolios, credit, and, having some issues there, I don't really see that so much. I think, you know, the impact's gonna be more on real estate, commercial real estate than what people, you know, were, what they were financing at before and, and where they are today. And, and those things are gonna have to be solved by, by borrowers and sponsors coming in and supporting their projects, you know, when they come to maturity. And so far, they've. We've had really good experience and really good performance by our borrowers. You know, we could create scenarios where interest rates went higher and created more pressure, but we're not seeing that right now. Okay. And then just separately, the insurance commissions, it had really nice growth in 2023. It was up almost 10%, but the first quarter, year-over-year, it was down 3.5%. Is there anything unusual this quarter, or just how are you looking at that on a full year basis? Yeah. The one thing I'll say on the comparison to a year ago, so the first quarter last year had a very strong life insurance commission. So we were probably unfavorable this quarter in that comparison by about $1.1 million. And so the commissions on those policies are just one time, you know, you earn a one-time fee. It's not like, you know, benefits commissions or property and casualty, that tend to be a little bit more of an annuity. So that was a little bit lumpy. That was probably the biggest thing that affected us negatively compared to the first quarter last year. Although, I'll say that the benefits commissions were softer than I expected as well. Okay. Thanks, Jerry. Sure. Our next question is from Catherine Mealor with KBW. Please proceed. Thanks. Good afternoon. Hey, Catherine. Hello. A question on expenses. I know that you left your expense guidance unchanged at the 6%-8% growth rate year-over-year. Curious, I know you mentioned that FICA taxes and some kind of one huge seasonality drove the higher expenses this quarter. Should we assume that we kind of fall back from this first quarter level as we go into second quarter and then grow from there? Or do you still think you grow from this from this run rate into next quarter? Yeah, I think a couple of things I'll say is that, you know, we did get the additional surcharge of $7.7 million right from the FDIC, that we didn't know anything about when we gave the guidance in January. And we've been really trying to run a tight ship here in this first quarter on expenses. You know, again, we are certainly impacted by the expansion that we're doing. And so we kept our guidance the same, even though, you know, we were basically saw an additional almost $8 million in expenses that we hadn't expected. And I, your question was a little muffled, but I think I heard you say, you know, that maybe the first quarter was higher from the benefits maybe? I think benefits, you know, tends to go down during the year. A lot of it has to do with things like 401(k) contributions, matches that we have to make, or payroll tax matches. In certain cases, employees, especially on the 401(k) side, may reach that limit pretty quickly, intentionally or unintentionally. And so then we match up to 6%. If they reach that level, then, you know, the match stops. The same thing for the FICA. After they reach a certain level, of course, there's no more contribution there. But so it'll, b enefits will go down, certainly just trend-wise. I don't see the, you know, the trajectory that we have, you know, other than, you know, take, if you take the $7 million out, I would expect that, you know, you'll see a little bit of growth quarter-over-quarter in expenses based on what we're seeing today. But like I said, I feel good about where we're at. I think we've done a good job this first quarter and continue to try to do that. But I would expect that they will continue to grow up just a little bit quarter-over-quarter. Yeah, that's helpful. And, and to be clear, that 6%-8% includes the $7 million FDIC assessment? Exactly. Yeah, we just, we assumed it's operating, if you will, for those purposes. So, yeah, the $51 million is in the number in 2023, and because it's on an as reported, and the $7 million number is included in the, in our 2024 numbers. Okay, great. And then next question on fees, service charges. It seasonally also is usually lower in the first quarter, but I know you've talked about interchange and some other things being softer in the first quarter. So would you expect that to also run or increase as we go into the next couple of quarters? Or is this also a good kind of lower run rate for service charges? Yeah, I think that the thing with service charges, the upside to it has been the commercial service charges. In some cases, you know, it works against you, right? Because in some cases, customers may decide to pay more for services through hard dollar charges rather than through keeping the balances. So that's some of it, and so that's been an impact in the growth. But you know, we've done a lot of things, I will say, in favor of the customer as it relates to, especially on the consumer side, on OD fees. And we continue to see good growth there, but a lot of it, as Phil mentioned, you know, we're just growing those accounts pretty significantly. You know, I really kind of try to say that I don't expect those are going to grow. And obviously, there's some guidance out there, potentially a lot of pressure that, you know, on that- on those fees. So, you know, we've really been, I will say, in some ways pleasantly surprised, but I don't see that having a lot of growth from where we are today. You know, I think it'll just be continued to be pressure in that category for the rest of 2024. It's kind of the numbers that I'm seeing right now. Very helpful. Thank you. Our next question is from Manan Gosalia with Morgan Stanley. Please proceed. Hi, good afternoon. I wanted to ask about deposit pressure. You know, most banks spoke about how deposit pressure eased in the first quarter. Do you think there's something related to your specific customer mix or the fact that you are accelerating growth in new markets? You know, what do you think is driving that incremental pressure on deposit costs for you guys relative to what we're seeing in the broader market? You know, from a cost standpoint, I will say that, you know, we're really not feeling, you know, from a market standpoint, not feeling a lot of pressure on the deposit cost side. We need to be competitive, and we are. I think we've got to. You know, we've decided we're competing primarily on the 90-day CD. It really more of the pressure is coming on the non-interest bearing. And I think it really just continues to be the scenario where, you know, rates at these higher levels continues to put pressure both on commercial customers and consumer customers looking for balances. I will say that, you know, when we look at the balances, especially on the interest-bearing side, and it's true, I think, both in consumer and commercial, is that, you know, we have seen increases in the, you know, from February to March, small increases, and then March to April as well, on that interest-bearing side. So I think competitively, pricing-wise, I think, you know, things are going right. I think, you know, historically, like I said, our balances just tend to be softer in this first quarter. But, you know, we're going to compete on the pricing. You know, we're not going to be the highest. We've never intended to be the highest, but we do keep an eye on what's going on there, and we make decisions, obviously, on where we want to compete. But as I said earlier, we're not seeing a lot of pressure on what I'll call the interest-bearing, the non-CDs, if you will. So the MMAs specifically, not seeing a lot of pressure there yet competitively. So we really haven't moved those rates, you know, for a while now. Got it. And then, you know, maybe on the loan side, you spoke about, the deals lost being up because of structure. Where are you seeing this competition coming from? Is it, is it private credit? Is it other banks? And, you know, is part of the reason for, maybe the weakness in NIM because you're skewing to higher quality and lower yielding loans right now? Well, first part of your question, I'd say it's mainly banks that we're seeing structure, and it's the same old story. You know, it's guarantees, it's, it's loan values, it's, you know, terms, all, all that. So, so there's some of that. I don't know, you know, we're - it could be, you know, certainly vis-à-vis private credit, you know, we're, we're getting lower yields than, than they're able to achieve, but albeit with higher risk on your case. But, yeah, you're probably gonna see that we've got a little bit lower yield on average, but not by a lot, because we tend to be on the, on the higher quality piece of the credit curve. Got it. Okay. And if I could just have a clarification on one of your comments on the security side. I think you said, duration on that book was up, about half a year to 5.5 years. Is that entirely from the move up in rates, or are you taking on a little bit more duration to lock in the benefits of higher rates? No, like I said, we really didn't do a lot of purchases in the first quarter. I think some of it was that we had about $1 billion in Treasuries that were, you know, at the end of the year, let's say, call it $750 million of it that were maturing first few days of January, so that was affecting it. And I think there might have been there might be a little bit more extended duration on the mortgage backs, but we haven't added a whole lot of duration with anything that we've done in the first quarter. Great. Thank you. Our next question is from Jon Arfstrom with RBC Capital Markets. Please proceed. Hey, thanks. Good afternoon, guys. Couple questions. Jon. Jon. Phil, should we expect the potential problem loans to continue to migrate higher, or is that not necessarily true? Yeah, Jon, First of all, I'll say problem loans, right? The old potential problem loans is a category that we don't use anymore, but the Risk Grade 10 and higher, should we expect an increase? I would say, maybe. And the reason I say that is because, we were at such low levels. Really, the industry was at unsustainably low levels with everything, you know, coming out of the pandemic for credit quality, right? And so we're still not where we are, I would say, normal. And so, but we are seeing some, what I would call some reversion to mean. So that would tell me, yeah, we probably ought to expect it to go up some. But at the same time, some of these that we've added, you know, we're looking for some, you know, reasonably quick turnarounds on them. I mean, we just try to be realistic with these risk rates that we're adding. And, you know, it's not a death sentence or anything, it's just recognizing that we proceed to elevate risk, but we do work on them and work to get to correct them, and the companies work to correct them. So I'm hopeful that with some of these that we brought on this time, we'll see them move out, but we could also see some more move in, because, again, we're really coming off of really unsustainably low levels. So that's why I say maybe. I'm not concerned with credit quality. I mean, I know I'm paid to worry as a CFO, and so I guess there's that part of me that's always going to be concerned with it. But, you know, I think credit quality is good. I mean, we spent a lot of time looking at our commercial real estate portfolio and, you know, very granular level. And, you know, I'll just tell you that, you know, probably if somebody said Austin office building, you know, they would run for the hills. But I would tell you, I think our Austin office building portfolio is solid, man. I've looked at the, you know, I've looked at the multifamily deals. People would say, "Oh, man, Austin, you know, it's got, it's got reduction in the interest rates. You know, the housing, you know, prices have come off 11%. You know, got a lot of supply coming on," et c., et c. But I look at our multifamily in the Austin market, I feel great about it. And so it depends on the deal, it depends on your sponsors, how they're operating. As far as the Austin house prices being down 11%, they're up 50% over the two years before that, right? So I mean, there's this headline stuff, and then if you really look below it and you spend time on it, I mean, I feel great about the commercial real estate portfolio for Frost. Our people have done a heck of a job underwriting it. And part of the reason I feel great is the same reason that we lost 82% of the deals to structure this quarter. You know, our folks know how to book these things. That doesn't mean we won't have problems, and I'll talk to you about, you know, some that have popped up and all, but not something that gives me any worry. I think it's interesting what's happening with the, you know, the company-specific stuff on the C&I side. We're gonna have to see whether or not we continue to see things pop up there. And some of these guys may not be able to solve their problems, you know? But, you know, we, most of them will. But that's just banking, you know, it's a risk business, and I really think we have a handle on it. And anyway, just felt the need to say that. Okay. Yep. Yep. So it does, it doesn't sound like you guys feel the need to build reserves from here. I mean, I hear your charge-off guidance, and I respect that, but it doesn't feel like you have more pressure coming, at least in your mind, in terms of credit? Yeah, I don't feel that way now. I mean. Yep. You know, can we, can we see it get worse? Sure. Sure, it can. Jerry can speak to the formula better than I can, but I think we feel really good about where the reserve is today. And I think another thing I might say about the reserve is, you might recall, you know, we built it up, you know, during that COVID period, and we never took it out. And so, you know, I, I think it. Yeah, I think that's a little bit different than others. Yeah, we pretty much stayed there, and we really haven't. I f you look at our reserve coverage, percentage, it really hasn't moved around very much. And, you know, I wouldn't expect that it'll, you know, you know, it's gonna move, you know, a couple of basis points here and there, but I don't envision at this point, any, significant reason that we, we'd see that reserve number increasing. Again, you know, if you assume a pretty normal sort of credit quality environment. Yep. Okay. Jerry, as long as you have the mic, you changed the presentation of the expansion contribution for the quarter. What if you can share it, what kind of contribution did Houston 1.0 have this quarter? Yeah, I think it was. It last time we rounded to $0.07. I think let me make sure. I was going to say, I think we rounded to $0.06 this quarter, but let me just check. Yeah, that's exactly right. They were $0.07 last quarter, $0.06 this quarter. Mm-hmm. Okay. And when you say Houston is funding Dallas and Austin, that's 1.0 and 2.0, is that right together? Correct. Yeah, I would just netted the two, and I was trying to keep it simple. Maybe I confused it. But yeah, Houston together is funding the other expansions. That was really, as we had talked about this and, and, planning it out, that was certainly the way we hoped things were going to work out, that if these, financial centers began to mature, they would begin to pay for the future expansions. And it certainly worked out that way. Yeah. Well, that, that's great. Those are great numbers. So, okay. Thank you. I appreciate it. Yeah. One comment I'll make that Catherine had asked about expenses, and one thing I wanted to clarify, and I made a comment in my comments about the latter quarter in salaries. So for us, a lot of the stock awards are given in October, and so they do affect the fourth quarter. And so typically, salaries for us are higher in that fourth quarter. And because by their nature, a lot of these stock awards immediately vest and as a result, are immediately expensed. So I think if you looked at the growth in salaries expense between the third quarter and fourth quarter last year, you'll get some sort of a sort of expectation-wise, what you might expect to see between the third, fourth quarter and fourth quarter this year. Just to give a little bit of a better color there, so. In the interest of time, we're going to ask that you please limit to one question and one follow-up question. Our next question is from Ebrahim Poonawala with Bank of America. Please proceed. Hey, good afternoon. Hey, Ebrahim. Just one very quick, quick one, Jerry, for you around the securities book. Sorry if I missed this. Should we expect, one, the securities portfolio to grow from 1Q average levels or stay flat? And second, could you confirm, I think you mentioned you have another $1 billion of securities that you expect to buy, what the pickup in the yield is on reinvestment versus what's rolling off? Thank you. Sure. Yeah, I would expect, all things being equal, we may be down a little bit, but it's going to be relatively flat. We're expecting cash flow, I think, of about $1.2 billion. And the weighted yield at, of those are about 2.26%. And that's impacted somewhat. We've got $500 million that doesn't mature until the fourth quarter, and those are some Treasury securities at 96 basis points. And, you know, right now, I think, you know, some of you heard kind of what we were buying. I would expect that, you know, if you're talking about something in the 5.5 versus that rounded to, you know, 2.25, you've got some nice pickup potential there. So does that imply, Jerry, that NII should keep growing from the first quarter levels as we move through the year, and fourth quarter will probably see a lift again from the securities yield going higher? Yeah, that's kind of what I would expect, yeah, that the net interest income is on a little bit of a positive trajectory. I think for us, the low was probably last year sometime in the, I would say, the second, first, second or third quarter. Perfect. Thank you. We are kind of expecting small pickups for the rest of the quarters moving forward. Got it. Thank you. Uh-huh. We have reached the end of our question-and-answer session. I would like to turn the conference back over to Phil for closing remarks. Okay. Well, we thank you, everyone, for their interest, and we will adjourn. Thank you. Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.