Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Cullen/Frost Bankers Inc  (NYSE:CFR)
Q1 2019 Earnings Call
April 25, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Cullen/Frost Bank First Quarter Earnings Call. My name is Sherry, and I will be facilitating the audio portion of today's interactive broadcast. All lines have been placed on mute to prevent any background noise. For those of you on the stream, please take note of the options available in your event counsel.

At this time, I would like to turn the show over to Mr. A.B. Mendez, Director of Investor Relations. Mr. Mendez, you may begin.

A.B. Mendez -- Director of Investor Relations

Thanks, Sherry. This morning'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 that 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 at our website or by calling the Investor Relations department at (210) 220-5234.

At this time, I'll turn the call over to Phil.

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Thanks, A.B. Good morning, everyone, and thanks for joining us. Today, I'll review first quarter results for Cullen/Frost and our Chief Financial Officer, Jerry Salinas will also provide additional comments before we open it up to your questions. In the first quarter, Cullen/Frost earned $114.5 million, or $1.79 per share, which represents 11% increase compared to the $1.61 per share reported in the same quarter last year. Our return on average assets reached 1.48% for the first quarter and that was compared to 1.36% in the first quarter last year. Average deposits in the first quarter were $26.1 billion, down slightly from the first quarter last year. The quarter saw pressure on demand deposit volumes, but we continued to see strong new customer flows.

Average loans in the first quarter were $14.2 billion. This represents an increase of almost $1 billion, or 6.8% versus the first quarter last year. Growth was broad-based across all categories. Our provision for loan losses was $11 million in the first quarter, compared to $3.8 million for the fourth quarter of 2018, and $6.9 million in the first quarter of 2018. Net charge-offs in the first quarter were $6.8 million, compared with $9.2 million in the fourth quarter and $12.4 million in the first quarter of last year. First quarter annualized net charge-offs were only 19 basis points of average loans.

Nonperforming assets totaled $97.4 million in the first quarter, compared with $74.9 million in the fourth quarter of 2018, and $136.6 million in the first quarter of last year. Overall delinquencies for accruing loans at the end of the first quarter were $73 million, or 51 basis points of period end loans. Those numbers have a slight improvements from the fourth quarter and are well within our standards and comparable to what we've experienced in the past three years.

Total problem loans, which we define as risk grade 10 and higher, totaled $495 million, or 27% lower than the same quarter a year ago. Energy-related problem loans totaled $119 million at the end of the first quarter, compared to $115 million in the fourth quarter, and $223 million in the first quarter last year. And energy loans represented 10.8% of our portfolio at the end of the first quarter, well below our peak of more than 16% in 2015.

Our focus for commercial loans is on consistent balanced growth, including the core loan component, while maintaining our quality standards. I was pleased that new relationships increased 22% versus the first quarter a year ago. New loan commitments in the first quarter increased by a healthy 12%, compared to the first quarter last year. And not only was it balanced between core and large deals, but it was also evenly split between C&I and commercial real state. With regard to our current active loan pipeline, the first quarter was up from the previous year by 21%. Interestingly, this quarter, it's driven more by commercial real estate opportunities than C&I.

I will say overall competition is increasing. A good indicator, as a percentage of deals we lose to pricing and structure. Like for example C&I loans. Last year, we lost roughly two-thirds to price and one-third to structure. While this year it's split to two-thirds, due to more aggressive structures. Looking at commercial real estate, last year deals lost to structure and price were evenly split at 50-50. However, this year structure is up to 78% and only 22% related to pricing.

In consumer banking, our value proposition and award-winning service coupled with our drive to increase deposit share in markets like Houston and Dallas, continue to attract customers. The second of the 25 new financial centers planned over the next two years in the Houston area opened just after the close of the first quarter. Overall, net new customer growth for the quarter is up by 35%, compared to a year ago, and same-store sales increased by 7.5%, compared to 12 months ago. About 28% of our account openings came from our online channel, which includes our Frost Bank mobile app, that's 33% higher than last year. The consumer loan portfolio averaged $1.68 billion in the first quarter, increasing by 7% compared to the first quarter last year. Another highlight for the quarter was our insurance revenue, which increased 15% compared with the first quarter last year to $18.4 million. It was good to see growth across all product lines.

2019 has already been busy for Frost. In addition to our ongoing expansion in Houston, we've opened a great new financial center in the Rio Grande Valley to serve more customers there. In this summer, we'll move our headquarters in San Antonio across the Street to the new Frost Tower, a project that has been in process for several years. We're also opening a new regional headquarters building this summer in Corpus Christi, while exiting older locations there and actually reducing operating cost. We're also redesigning and enhancing our digital customer experience. All this is going on at a time, when our ongoing Opt For Optimism initiative and our marketing partnerships have boosted non-financial metrics like brand awareness, consideration and our net promoter score.

We have an outstanding, welcoming locations and we have top-quality digital services, but those things are frankly useless, unless you have a plan to use them well, and especially, unless you have good people to execute that plan. Those things are Frost's competitive advantage. Our people executing our growth plans, guided by the Frost culture that is resulted in award-winning customer service and long-term relationships will sustain Frost just as it has for more than 150 years.

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

Jerry Salinas -- Group Executive Vice President and Chief Financial Officer

Thank you, Phil. I'll provide some additional information about our financial performance for the quarter, and I'll close with our guidance for full year 2019. Looking at our net interest margin, our net interest margin percentage for the first quarter was 3.79%, up 7 basis points from the 3.72% reported last quarter. The increase in the net interest margin percentage was driven by both positive and negative factors. The positive factors included higher loan volumes and higher rates on loans and balances at the Fed combined with the lower proportion of earning assets related to balances at the Fed. These positive factors were partially offset by higher deposit costs and lower yields on our investment portfolio. The taxable equivalent loan yield for the first quarter was 5.33%, up 13 basis points from the 5.20% reported in the fourth quarter. On a linked-quarter basis, average loans grew 7.3% on an annualized basis.

Looking at our investment portfolio. The total investment portfolio averaged $12.8 billion during the first quarter, up about $335 million from the fourth quarter average of $12.4 billion. The taxable equivalent yield on the investment portfolio was 3.37% in the first quarter, down 2 basis points from the fourth quarter. Our municipal portfolio averaged about $8.2 billion during the first quarter, up about $156 million from the fourth quarter. During the first quarter, we purchased about $164 million in municipal securities with a TE yield of about 3.97%. Also during the first quarter, we purchased about $422 million in agency mortgage-backed securities yielding about 3.42%. The municipal portfolio had a taxable equivalent yield for the fourth quarter of 4.03%, down 5 basis points from the previous quarter. At the end of the first quarter, about two-thirds of the municipal portfolio was pre-refunded or PSF-insured. The duration of the investment portfolio at the end of the quarter was 4.4 years, down slightly from 4.5 years the previous quarter.

Looking at our funding sources. The cost of total deposits for the first quarter was 42 basis points, up 5 basis points from the fourth quarter. The cost of combined Fed funds purchase and repurchase agreements, which consists primarily of customer repos increased to 1.72% for the first quarter, up from 1.56% in the previous quarter. Those balances averaged about $1.2 billion during the first quarter, up about $43 million from the previous quarter.

Regarding the outlook for 2019, our current expectations for the interest rate environment for 2019 have changed since the previous quarter's guidance. We were previously projecting two Fed rate hikes late in 2019, which we have now pulled from our projections. In addition, our revised projections now include the decline in LIBOR rates that we've seen in 2019, and also project a pretty flat yield curve. As a result of these changes in our assumptions related to the interest rate environment and the decline in demand deposits earlier this year, we are more comfortable with the lower end of the current range of analyst estimates.

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

Phillip D. Green -- Chairman and Chief Executive Officer/Director

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

Questions and Answers:

Operator

Thank you. (Operator Instructions) Our first question comes from Ken Zerbe with Morgan Stanley.

Ken Zerbe -- Morgan Stanley -- Analyst

Great. Thanks, good morning.

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Good morning.

Jerry Salinas -- Group Executive Vice President and Chief Financial Officer

Good morning.

Ken Zerbe -- Morgan Stanley -- Analyst

Just looking at the decline in non-interest bearing, obviously, I now see that you are baking that into your expectations. But can you just be a little bit more specific in terms of what you're seeing from the non-interest-bearing flows, say so far in second quarter? And what your expectation is on retaining those deposits over the course of the year? Thanks.

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Yeah. As Jerry mentioned, we had -- the decline really happened early in the year. I personally think that as the Fed had that last increase in December, we sort of reached the tipping point with corporate treasuries seeing a higher opportunity cost for those balances. And so we've seen -- we saw an outflow, an accelerated outflow into particularly suite products, didn't lose the relationships, but we have seen money flow into some of our off-balance sheet alternatives. Actually, if you look at the last two months be in March and then so far in April, we have pretty good growth in demand deposits. So I've talked before about how I think that, and this is an industry thing. Again, I've said it a lot, but the -- we've got -- sort of an equilibrium. Once the Fed sort of reaches what interest rates are going to be, there will be an equilibrium that has to be reached for -- there is a certain amount of demand deposits, free deposits that customers are going to keep and we'll really grow from there. And I think, yeah, at least I hope that we've sort of reached that. It looks like we have for the last couple of months as we've seen growth. We'll have to see keep an eye on it, because we feel there is kind of high opportunity cost today for demand deposits. But we have -- the thing I like about it, even though we were down. If you bifurcate the commercial business and the consumer business sort of like I alluded to in my comments, the commercial balances were down about 4. 7%. And as Jerry mentioned, it was really from diminishment in current accounts. We offset half of that diminishment though by new customer growth. So I'm happy with our ability to grow new customers. If you look at the consumer business, our consumer deposits are up by 3.2%, compared to the previous quarter, for example. And 3/4 (ph) of that growth is from new consumer customers. So, I mean it's a trend we're going to have to watch, but it was much accelerated in the early part of this quarter and Jerry has included that in his projections.

Ken Zerbe -- Morgan Stanley -- Analyst

Got you. Okay. And then, I guess in terms of the provision expense, obviously, a little higher, it looks like the rest of your metrics are totally fine. But do you have any more color in terms of what drove the higher provision expense?

Jerry Salinas -- Group Executive Vice President and Chief Financial Officer

In lot of cases, the provisions determined by our allowance calculation, right? And so, as we said last year, the last year's provision levels really got as low as they could get to be quite honest with the significant improvement that we had in the energy book and so our projections all along had provisions increasing this year. And so most of it is really formulate and partially due to increases in the C&I portfolio.

Ken Zerbe -- Morgan Stanley -- Analyst

Okay. (technical difficulty)

Phillip D. Green -- Chairman and Chief Executive Officer/Director

I'm sorry.

Ken Zerbe -- Morgan Stanley -- Analyst

I guess, so then just last question I have for you, just in terms of your guidance, the lower end, I just pulled it up. It looks like there's a few estimates in the $6 range like very high $6 range. I would expect that you're sort of implying a sub-$7 estimate for the year is kind of -- is how I read the lower end. I just want to make sure we're on the same page?

Jerry Salinas -- Group Executive Vice President and Chief Financial Officer

Again I think that the comments that I made are really kind of what I'm going to stick with it, so we're more comfortable with the lower end.

Ken Zerbe -- Morgan Stanley -- Analyst

Understood. Okay. All right. Perfect. Thank you very much.

Operator

Thank you. Our next question comes from Dave Rochester with Deutsche Bank.

David Rochester -- Deutsche Bank Securities Inc -- Analyst

Hey, good morning guys.

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Good morning.

Jerry Salinas -- Group Executive Vice President and Chief Financial Officer

Good morning.

David Rochester -- Deutsche Bank Securities Inc -- Analyst

On your comments earlier on competition increasing on loan structure. Are you seeing that more from the non-banks, or are you actually seeing that from banks as well? And if it's from banks, is there a skew to large banks, or smaller regional players on that front?

Phillip D. Green -- Chairman and Chief Executive Officer/Director

It's everywhere. I mean, I could -- I'd look at some of these specific deals and I see community banks in-state, I see community banks, out-of-state, I see large banks, I see there's private equity involved in some cases particularly on the real estate side. So it's really everywhere.

David Rochester -- Deutsche Bank Securities Inc -- Analyst

Okay. Any concern about that sort of limiting the pool loans that you guys are interested in? Because I know you are skewed to the very high end of the credit quality. Any thoughts there?

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Well, I mean, we don't need to practice. We want -- we actually want to make money. And so we'll say no to the deal that looks like it doesn't make sense, and I want us to. And I'm glad our people are taking that approach. We are a high quality bank. We perceive ourselves in that way. That is our culture. And we like to believe our standards are higher than others. And so -- but when you say something that just doesn't make sense, we'll say no to it. I will say we're just been talking to our people. We do feel good about the market. I mean, we are prospecting well. The number of -- I was looking at some numbers where our success rate on new customers has been up, which tells us that I think that we're doing a better job of targeting customers that makes sense for us. I was talking with our Chief Banking Officer, yesterday and all the markets that we're in are still growing. It's good. And we've got a good value proposition. So I'm -- even though we've got some tightening competition, I'm still optimistic about our ability to find customers that makes sense for us.

David Rochester -- Deutsche Bank Securities Inc -- Analyst

Yeah. Okay. Great. And then just maybe on the loan pipeline comments, were you seeing that, that was heading into the second quarter that was 21% higher versus a year ago. Did I hear that correctly?

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Yes.

David Rochester -- Deutsche Bank Securities Inc -- Analyst

I guess that would imply a decent step up in loan origination activity than in 2Q?

Jerry Salinas -- Group Executive Vice President and Chief Financial Officer

Well, it depends. That's the pipeline and you've got to win it and it's all got to make sense. But I think that the -- it's encouraging to me that we saw growth there. As I mentioned there was commercial real estate kind of help grow that. But you can't put too much. You can't make it too linear a relationship. But yeah, the fact that we've got pipelines increasing I think is a positive as opposed to where the (inaudible) we'd see it down. So yeah, it's a good thing.

David Rochester -- Deutsche Bank Securities Inc -- Analyst

Okay. And then just a last one, if I could on expenses. Now those were a little bit lower than what I think, we were looking for and others were looking for generally. Can you just talk about how you see those trending as we go through the year just given the Houston expansion ramp down?

Jerry Salinas -- Group Executive Vice President and Chief Financial Officer

Sure. Yeah, I can give you just a couple of comments there. What I'll say is that, yeah, you're right. The first quarter is not really a good run rate for the rest of the year. I guess I'll mentioned a couple of things. As you indicated the Houston expansion will continue to ramp up through the rest of the year, and it really didn't have a significant impact on first quarter expenses. In addition, Phil mentioned that we'll be moving into our new headquarters here in downtown San Antonio, late in the second quarter. And although we'll have less space in it, it will be at a higher price. So those two items alone will be driving higher expenses in future quarters. And then of course, we continue to grow the business. We'll continue to provide great customer service and we'll continue to keep up with technology and cybersecurity's cost. So we'll continue to have pressure on those expenses. But yeah, you're right the first quarter not a good indicator of our expectations for the rest of the year.

David Rochester -- Deutsche Bank Securities Inc -- Analyst

Okay, great. Thanks for the color guys.

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Thank you.

Operator

Thank you. Our next question comes from Jennifer Demba with SunTrust.

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Hi, Jennifer.

Jennifer H. Demba -- SunTrust Robinson Humphrey Capital Markets -- Analyst

Thank you. Good morning.

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Good morning.

Jennifer H. Demba -- SunTrust Robinson Humphrey Capital Markets -- Analyst

Question on for you Phil on the implications of the larger merger announcements that occurred in the first quarter. Just wondering what you think that means for the competitive environment going forward and the direct implication on CFR down the road? Thanks.

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Thanks, Jennifer. I don't see a direct implication for us in terms of what we're trying to do. Our focus is making sure our value proposition is great and our -- the markets that we're in are the right ones and that we're prospecting the right way and that we're able to achieve organic growth that's consistent, it's above average. And I think we've been showing that we can do that and have been doing that. I think, I can only read in the papers sort of what you read and that is there's some scale issues that people are trying to achieve. And that's great. But it's -- there are a lot of issues that they will have to deal with as well as they roll up the company. So, I think it's interesting, but it's not really having a direct impact on what we're trying to do. If anything, when you end up having mergers in your market it creates dislocations that allows you to pick up business. So hopefully we'll see some of that.

Jennifer H. Demba -- SunTrust Robinson Humphrey Capital Markets -- Analyst

Okay. And then just second question on expenses. There you had lower other expenses from no donation to the foundation this year versus last year. Should we expect something later in the year? Is that just a timing issue, or how do you look at that?

Jerry Salinas -- Group Executive Vice President and Chief Financial Officer

Sure. The contribution that we made last year, Jennifer just as a reminder we had about the same amount I think it was $3.7 million in gains that we had recognized on the sale of some bank facilities. And so rather than taking that to the bottom line we made a contribution to the charitable foundation. So we'll be opportunistic with those sorts of things. But at this point there was nothing in the quarter.

Jennifer H. Demba -- SunTrust Robinson Humphrey Capital Markets -- Analyst

Okay. Thank you.

Operator

Thank you. Our next question comes from Rahul Patil with Evercore.

Rahul Patil -- Evercore ISI -- Analyst

Hi, thanks. So last quarter, you talked about expectations for the NIM to expand even if there was no rate hikes. Given the current shape of the curve, considering that Fed hikes are probably not likely this year, and given that loan pricing remains competitive in your markets, where do you see the NIM trends in coming quarters? And what would drive that?

Jerry Salinas -- Group Executive Vice President and Chief Financial Officer

Well, I think as I said in my assumption, we are assuming a pretty flat yield curve for the rest of the year. And as I mentioned, we did not include in our previous projections at LIBOR rates would go down during early 2019. So, right now what I'd say is the NIM percentage is projection-wise, would probably be relatively flat unless we see some reversals of improvements in the yield curve or LIBOR going back up and those sorts of things. At this point, yeah, we're looking pretty flat.

Rahul Patil -- Evercore ISI -- Analyst

And then are you seeing any embedment in deposit pricing pressure as the Fed rate hikes have kind of taken out of the picture?

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Yeah, a little bit. Yeah, on the margins. Nothing dramatic.

Rahul Patil -- Evercore ISI -- Analyst

Okay. And I just want to go back to the expense question. So last quarter, I believe, you talked about some frontloading of the expenses tied to your Houston expansion. And you've -- accordingly expense growth in 2019 to be higher than what you saw in 2018, I think there was around 4%. Is that still the case? Or is there some incremental upside pressure. And now given the offices that you've talked about this quarter, the opening of these offices.

Phillip D. Green -- Chairman and Chief Executive Officer/Director

No, I don't think there is any change in that. The upfront expenses if you will, that comment is really that when you build a new location, right, and you hire the people. Those expenses are going to be -- are going to come early on before if you start generating revenue. So that hasn't changed. And so I think that we still feel like that's the case. They'll be -- as I mentioned, we expect that those Houston-related expenses will continue to increase. Again they were not a big impact in the first quarter. But as we continue to ramp up hiring and opening locations they'll begin to have an impact on our expense base.

Rahul Patil -- Evercore ISI -- Analyst

Perfect. Thank you.

Operator

Thank you. And our next question comes from Brady Gailey with KBW.

Brady Gailey -- Keefe Bruyette & Woods Inc -- Analyst

Hey, good morning guys.

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Good morning.

Jerry Salinas -- Group Executive Vice President and Chief Financial Officer

Good morning.

Brady Gailey -- Keefe Bruyette & Woods Inc -- Analyst

I wanted to ask one more question on the credit front. So I mean, the NPAs are still at a low level, but they did increase on a linked-quarter basis. Any color you can provide us on the NPA pick up?

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Really Brady, it was -- biggest one is, there was a low-income housing project that had some issues. I think the main issue has had a fire and has been trying to recover from that. That was probably $8 million to $9 million and the rest of them just what I call cats and dogs, it really wasn't anything specific. It really wasn't an energy-related thing. It was -- it's just doing business and some customers had some problems.

Brady Gailey -- Keefe Bruyette & Woods Inc -- Analyst

All right. And then, Phil last quarter you repurchased I think around 1.5% of the company, don't look like any buyback this quarter. I know the stock is up from where you repurchased it in the fourth quarter but can you talk a little bit about your appetite to do additional buybacks at this level?

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Well, I think we've got a little powder left. We have about $50 million left in the program and we want to continue to be opportunistic and that's been our position in the past. I don't see it changing. We do have shares that come into the base just through employee stock plans and those types of things. And I think it's good housekeeping for us to buy those back on a regular basis. So I think that's been our program. I don't see a change in it.

Brady Gailey -- Keefe Bruyette & Woods Inc -- Analyst

All right. And then lastly for me just on the earning asset mix. I mean, cash levels have continued to come down here. Cash is now about 7% of average earning assets. It was well north of 10%, now about a year ago. It looks like you've been putting a little bit of that into the bond book. How should we think about growth in the bond book versus some potential shrinkage in cash going forward?

Phillip D. Green -- Chairman and Chief Executive Officer/Director

I think it will end up. We want to be opportunistic and really just prudent in what we're doing. We're -- given what's happening in rates, you don't want to be just be totally leaning toward higher interest rates and we want to be asset-sensitive just fundamentally. But you can take some chips off the table and we plan on doing that. It's actually done a little bit of that in this quarter. I don't think we'll be doing it as heavily in municipals, because you just want to make sure your liquidity profile is -- continues to be strong. So, I think what you'll see us do more of probably would be in the mortgage-backed, the full faith in credit mortgage-backed that runs probably 4-ish duration, which is sort of in line with what our portfolio is today. But it's already source of liquidity, if needed. And just given some of the volatility that banks are seeing in demand deposits from that kind of thing. Although, as I said we have seen some good growth over the last couple of months. I mean, you want to make sure your liquidity is strong, so -- and I think it makes sense to given the Fed's position now to pull a few chips off the table. So, yeah, I think we'll use some of that cash in the bond portfolio.

Brady Gailey -- Keefe Bruyette & Woods Inc -- Analyst

Thanks, Phil.

Operator

Thank you. Our next question comes from Ebrahim Poonawala with Bank of America.

Ebrahim H. Poonawala -- Bank of America Merrill Lynch -- Analyst

Hey, guys. All my questions asked and answered. Thank you.

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Thank you.

Operator

Thank you. Our next question comes from Brett Rabatin with Piper Jaffray.

Brett Rabatin -- Piper Jaffray -- Analyst

Hey, guys. Good morning. I wanted to talk about the income for a second. Just I guess the two strong areas insurance and trust, both at nicely year-over-year. I know insurance is pretty seasonal. Does insurance build off of last year? It was -- was there anything unusual in the first quarter for insurance and then trust. I know oil and gas helps out a lot. Are you guys expecting a pretty good year on that business as well?

Jerry Salinas -- Group Executive Vice President and Chief Financial Officer

Yeah, you're right. On the trust side, yeah, we did have a good quarter. Really the trust revenues, the oil and gas revenues within trust really part of it was a new product that we started to distribute here recently and that's really kind of help the growth in that -- from that line item. But you're right, also prices help to. On the insurance side, they just had -- as Phil said in his comments, they just had a great first quarter across -- they had growth across all product lines and commercial lines, the benefit side and even life commission. So nothing unusual. I think even the first quarter is the quarter where we receive a lot of that contingent bonus payments. But I think on a competitive basis, first quarter to first quarter. The were relatively flat. So the growth really is coming off from commissions.

Brett Rabatin -- Piper Jaffray -- Analyst

Okay. And then the other thing I just wanted to maybe talk about is Houston and the build out there. Can you guys -- I saw you just got an award for retail. Can you guys just talk about kind of to date what Houston has done in terms of growth and just how much of that's contributed and what your plan is for the eventual size?

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Well, right now, that the branches that we've opened are new, right. So they're not contributing a lot. I said last time we're really planting trees not corn, right? So these things are going to growing to great foundational parts of our distribution system in Houston. So it's going well. I was talking to our people earlier about just how they're feeling about it and that we've gotten really good reception in markets that we're in. So it's really -- the Houston expansion isn't going to create a lot of growth immediately, but we feel confident that it's going to be there and help us expand in that market. So we're still optimistic. Again, it's early in the process, but feel great about it.

Brett Rabatin -- Piper Jaffray -- Analyst

Okay. All right. Great. Everything else was (ph) addressed. Thanks.

Operator

Thank you. Our next question comes from Steven Alexopoulos with JPMorgan.

Anthony Elian -- JP Morgan Securities Inc -- Analyst

Hi, good morning. This is Anthony on for Steve. I just have on my follow-up question on provisions. And Jerry, I know you start to expect this line to increase given loan growth and coming off a low 2018. But is the $11 million that we've saw in the first quarter a good run rate, or should we expect to set down back to the high single-digits range?

Jerry Salinas -- Group Executive Vice President and Chief Financial Officer

Yeah. I think that, my conversations with our Chief Credit Officer, I think that the first quarter, which probably a little bit high comparatively speaking, but I don't think it's going to be significantly different from that. But you're right it may trend down a little bit. But it's really all formulaic at the end of the day. So we'll be driven by what happens within the specific portfolio of course and with loan growth. But yeah, I don't -- I didn't see anything unusual about the first quarter other than it might be a little high, but it really is going to just depend on what happens in the portfolio.

Operator

Okay. Our next question comes from Peter Winter with Wedbush Securities.

Peter Winter -- Wedbush Securities -- Analyst

Good morning. Jerry, I just wanted to follow up on your comment on the margin. I just want to clarify when you say relatively stable that's relative to the first quarter?

Jerry Salinas -- Group Executive Vice President and Chief Financial Officer

Right, right.

Peter Winter -- Wedbush Securities -- Analyst

And so could you just talk about some of the puts and takes to hold it fairly steady going forward?

Jerry Salinas -- Group Executive Vice President and Chief Financial Officer

Well, like I said from a rate forecast everything we're assuming at this point is relatively flat, right? So any improvements there would certainly help us. Any increase in volumes on the loan side may be higher than we had expected. Part of the improvement and as I said in my comments on the percentage improvement is really the lower proportion of earning assets that are invested in those balances at the Fed. So to the extent that those would have increased or decreased for example you're going to see some volatility in that net interest margin percentage.

Peter Winter -- Wedbush Securities -- Analyst

Okay. And I was just thinking -- I would assume that interest-bearing deposit costs continue to move up and you continue to see a shift into interest-bearing as well and then just the reinvestment on securities, but that's still a little bit of pressure.

Jerry Salinas -- Group Executive Vice President and Chief Financial Officer

No, I think the -- you're talking about increases in interest-bearing deposit pricing. Right now we're assuming a relatively flat rate environment. We're not necessarily assuming any sort of increases in deposit pricing. We said that we did a lot of the heavy lifting previously. So when we look at our rates compared to the competitive environment, and we feel pretty good about our rates today to be quite honest with you. So I'm not feeling a lot of pressure on the deposit pricing side at this point.

Peter Winter -- Wedbush Securities -- Analyst

Okay. Thanks.

Operator

Thank you. And our final question comes from Jon Arfstrom with RBC Capital Markets.

Jon Arfstrom -- RBC Capital Markets Corporation -- Analyst

Hey, thanks. Good morning guys.

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Good morning.

Jerry Salinas -- Group Executive Vice President and Chief Financial Officer

Good morning.

Jon Arfstrom -- RBC Capital Markets Corporation -- Analyst

A few follow ups here. Phil, you talked about the competitive environment. You talked about structure being a big factor in deals that you lose over price. What you think that's changed structure over price?

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Just it changed because markets gotten more aggressive on structure and we're willing to do. It could be lack of guarantees, it could be extending amortizations, it could be funding levels, it could be structures like prepayment penalties, it could be absolute spreads. It's -- but it's just seems like it's getting people are willing to do more in terms of more aggressive structures. I mean, I would say -- good thing about it, we still are seeing good equity and deals, but...

Jon Arfstrom -- RBC Capital Markets Corporation -- Analyst

Nothing new from your approach?

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Yeah. There's nothing I can really point to. There's no Big Bang change. But just the deals that we saw this time and just looking at them with, 100% financing, long-term amortization, those kind of things. On a roll-up kind of deal, for example it's just -- why would you do that?

Jon Arfstrom -- RBC Capital Markets Corporation -- Analyst

Yes. Okay. Jerry, maybe a question for you. Back on the guidance and the margin, are you -- you're essentially just flagging rates and there's really no other message you're trying to portray to us. It's really more than the margin or anything?

Jerry Salinas -- Group Executive Vice President and Chief Financial Officer

Well, again I guess I would just lead to -- Phil mentioned in his comments and we've talked about, we did have some -- obviously some weakness in demand deposits in the first quarter, so we wanted to point that out. And yeah, you're right, the rate environment that we were looking at a quarter ago is significantly different than what we're looking at today and really that's the points that we're trying to get across.

Jon Arfstrom -- RBC Capital Markets Corporation -- Analyst

Okay. And then the last question is kind of random but -- and it goes to the prior cycle, but historically, you've done some hedging on a margin. And I'm just wondering it's just way too early to think about that from your point of view? You've talked about maybe changing the securities portfolio approach a bit, but then maybe give us an update on that, on hedging?

Phillip D. Green -- Chairman and Chief Executive Officer/Director

I think as we've looked at it, and if you look at the market place today, I think just the opportunity cost or the cost of the hedging is just too much from what I think you will see the benefit. And we've-- to this point we're using the cash markets more to sort of hedge our bets there. But -- and we're still asset sensitive a little bit less though after making some of the purchases that I referred to earlier. But probably right now it's a cash market. But we do keep an eye on it. We talk about it regularly. And if he saw something that opportunistically we thought made sense. We might have to bid on something like that.

Jon Arfstrom -- RBC Capital Markets Corporation -- Analyst

Yeah. Okay.

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Just to follow up on what Jerry is talking about and just maybe to just kind of bring it in for a landing. Interest rates are big factors for us. They're exogenous variables. Our view of what they are in the trend up has changed. In some cases our view for future rate changes is different because you don't think that's going to increase. In some cases, we've had actual rate decreases in the case of LIBOR and we got a lot of assets tied to LIBOR. So we're an asset-sensitive bank and the race is going down in that area. We do regular investing in the curves are allowed to flatter than it was a year ago, so -- or even last quarter. And the reaction of treasurers to the last increases makes total sense and it's been happening.

So, I mean those are factors that affect our business. I mean we're a financial company and that just -- that's really arithmetic as much as anything. But the thing that I feel really good about, and I think that I hope you've heard is that we still do -- are doing a great job prospecting. We're doing a great job continuing to grow our volumes with quality deals. We're willing to say no to deals that don't make sense to us from an overall risk perspective. We are seeing growth in our new customer amounts.

If you look at consumer checking accounts, the new -- net new checking accounts they're 40% from where they were a year ago. First quarter last year we had 1,998 new consumer checking accounts, whereas 2,803, this quarter, I mean, that's with no acquisitions. I mean, that's just the hard work of expanding our brand and marketing ourselves. We've seen increases in customer awareness and importantly in consideration for customers to do business with us and that's really important because we compete against the too-big-to-fail banks. And so when you see -- if you look from fourth quarter to first quarter, we saw an increase in our awareness from say, 60%, take the Houston market to 65%. We've seen increase in consideration from low 30% to low 40%. So those are all things, which are really encouraging to me. And so I think our basic business continues to be strong. Our Houston expansion sure it costs us money, but it's a thing we need to be doing. And so I'm excited about that. I'm excited about what were the people are doing in that market and the people that we're being able to hire. And so far the response of customers in that market for us expanding in these new places, so, yeah, it's a rough patch with rates right now. But I really feel good about how the fundamental business is performing.

Jon Arfstrom -- RBC Capital Markets Corporation -- Analyst

Okay. All right. Thank you.

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Okay.

Operator

Thank you. Ladies and gentlemen, thank you for participating in the question-and-answer portion of today's call. I would now like to turn the call back over to management for any closing remarks.

A.B. Mendez -- Director of Investor Relations

All right. Well, we thank everybody for their interest and participation, and we are adjourned. Thank you.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may all disconnect and have a wonderful day.

Duration: 45 minutes

Call participants:

A.B. Mendez -- Director of Investor Relations

Phillip D. Green -- Chairman and Chief Executive Officer/Director

Jerry Salinas -- Group Executive Vice President and Chief Financial Officer

Ken Zerbe -- Morgan Stanley -- Analyst

David Rochester -- Deutsche Bank Securities Inc -- Analyst

Jennifer H. Demba -- SunTrust Robinson Humphrey Capital Markets -- Analyst

Rahul Patil -- Evercore ISI -- Analyst

Brady Gailey -- Keefe Bruyette & Woods Inc -- Analyst

Ebrahim H. Poonawala -- Bank of America Merrill Lynch -- Analyst

Brett Rabatin -- Piper Jaffray -- Analyst

Anthony Elian -- JP Morgan Securities Inc -- Analyst

Peter Winter -- Wedbush Securities -- Analyst

Jon Arfstrom -- RBC Capital Markets Corporation -- Analyst

More CFR analysis

Transcript powered by AlphaStreet

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.