Earnings call transcript: BOK Financial Q2 2025 beats forecasts, stock dips

BOK Financial Corporation reported strong second-quarter earnings for 2025, surpassing analyst expectations with earnings per share (EPS) of $2.19 against a forecast of $2.00, marking a 9.5% surprise. Revenue also exceeded predictions, reaching $525.5 million compared to the expected $520.8 million. Trading at an attractive P/E ratio of 12.04 and a PEG ratio of 0.46, the stock appears undervalued relative to its growth potential. Despite these positive results, the company’s stock closed down 1.54% at $106.7, reflecting a complex market reaction. InvestingPro analysis reveals 10+ additional insights about BOKF’s valuation and growth prospects.

Key Takeaways

• EPS and revenue both exceeded forecasts, with a 9.5% and 0.9% surprise, respectively.
• Stock price fell by 1.54% post-earnings, despite strong financial performance.
• Net interest income and fee income showed significant growth.
• New mortgage finance line expected to drive future growth.

Company Performance

In the second quarter of 2025, BOK Financial Corporation demonstrated robust growth, with net interest income increasing for the fifth consecutive quarter. Total fee income rose by $13.2 million quarter-over-quarter, while trading revenue surged by 31% to $30.5 million. According to InvestingPro’s Financial Health Score of 2.85 (rated as "GOOD"), the company maintains strong operational efficiency. The company also strengthened its capital levels, with tangible common equity at 9.6% and common equity tier 1 at 13.6%.

Financial Highlights

• Revenue: $525.5 million, up from the forecast of $520.8 million
• Earnings per share: $2.19, exceeding the forecast of $2.00
• Total trading revenue: $30.5 million, a 31% increase

Earnings vs. Forecast

BOK Financial’s EPS of $2.19 surpassed the forecasted $2.00, delivering a 9.5% positive surprise. This performance marks a continuation of the company’s trend of exceeding expectations, highlighting its operational efficiency and strategic growth initiatives.

Market Reaction

Despite the earnings beat, BOK Financial’s stock fell by 1.54% to $106.7. This decline occurred in the context of a broader market environment characterized by cautious investor sentiment and potential concerns over future interest rate cuts. Based on InvestingPro’s Fair Value analysis, the stock appears undervalued, presenting a potential opportunity for investors. The company has maintained dividend payments for 21 consecutive years and has raised its dividend for 11 straight years, demonstrating strong financial stability.

Outlook & Guidance

Looking ahead, BOK Financial anticipates mid to upper single-digit loan growth and expects two 25 basis point rate cuts in the upcoming quarters. With analyst consensus showing a moderate "Hold" rating and revenue growth forecast of 4% for FY2025, the company maintains a stable outlook. The new mortgage finance line, projected to secure $500 million in commitments by year-end, is expected to contribute significantly to growth in 2026.

Executive Commentary

"Our core strategy has always been we have to be an organic grower," stated Stacy Kymes, CEO, emphasizing the company’s focus on sustainable growth. Kymes also noted, "We don’t widen or contract the fairway based on the economic circumstances," highlighting BOK Financial’s disciplined approach to lending.

Risks and Challenges

• Potential interest rate cuts could impact net interest margins.
• Competitive pressures in core markets may affect loan growth.
• Economic uncertainties could influence credit risk and lending practices.

Q&A

During the earnings call, analysts inquired about the sustainability of loan growth momentum and the performance of trading and fee income businesses. Management expressed cautious optimism about the economic environment while reiterating a commitment to prudent lending practices.

Full transcript - BOK Financial Corporation (BOKF) Q2 2025:

Conference Operator: Greetings. Welcome to BOK Financial Corporation’s Second Quarter twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer As a reminder, this conference is being recorded. I would now like to turn the presentation over to Heather King, Director of Investor Relations for BOK Financial Corporation.

Please proceed.

Heather King, Director of Investor Relations, BOK Financial Corporation: Good afternoon, and thank you for joining our discussion of BOK Financial’s second quarter twenty twenty five financial results. Our CEO, Stacy Kymes, will provide opening comments and cover our loan portfolio and related credit metrics. Scott Brower, Executive Vice President of Wealth Management, will cover our fee based results. Our CFO, Marty Grunst, will then discuss financial performance for the quarter and our forward guidance. The slide presentation and press release are available on our website at boks.com.

We refer you to the disclaimers on Slide two regarding any forward looking statements made during this call. I will now turn the call over to Stacy Kymes, who will begin on Slide four.

Stacy Kymes, CEO, BOK Financial Corporation: Thank you, Heather. We appreciate you joining the call this afternoon. We’re pleased to report earnings of 140,000,000 or EPS of $2.19 per diluted share for the second quarter. The word that comes to mind for this quarter is momentum. During the quarter, we saw a reacceleration of loan growth with the anticipated fund up of our CRE book, continued strength in the core C and I portfolio and a tapering of the abnormal payoff activity that has recently impacted outstandings in our specialized businesses.

Looking ahead, we will launch our new mortgage finance line of business, which should further support future loan growth. This was made possible by consistently investing in the right talent and systems to enable the future growth of our business. We realize this does increase expenses in the current period, but it enhances our long term sustainable growth and positive operating leverage for years to come. Fee income was another bright spot for the quarter with total fees and commissions up 7.2% sequentially. Trading activity normalized this quarter as the macro environment uncertainty abated and we saw more typical levels of customer engagement.

Not only was our trading business up this quarter, we saw broad based growth across our fee income businesses with several lines producing record quarterly results. Net interest income grew for the fifth consecutive quarter and we continue to experience margin expansion as well. With a loan to deposit ratio of 64%, we are well positioned to continue optimizing pricing of the deposit book. Even in our current levels of liability betas, we’ve exceeded our most recent hiking cycle beta and see further opportunities to the upside. Our capital levels remain robust and strengthened once again this quarter with TCE reaching 9.6% and CET1 reaching 13.6%.

This growth occurred even though we took several capital actions to create value for our shareholders, including repurchasing over 660,000 shares below $94 per share and redeeming all $131,000,000 of our Tier two capital instruments. Credit has long been a strength for us and we continue to be well reserved with a combined allowance at a healthy 1.36% of outstanding loans. Criticized and classified levels remain well below their pre pandemic levels. Turning to Slide six. I wanted to spend a little time highlighting the segments of our loan book.

Total outstanding loans grew 2.5% this quarter, which is over 10% on an annualized basis, led by growth in commercial real estate, our core C and I portfolio and loans to individuals. Our core C and I loan portfolio, which represents our combined services and general business portfolios, grew 1.1% led by Native American lending and general business loans. Our specialty lending portfolio decreased 1.6% with contraction in our energy portfolio of 4.4%. This was partially offset by expansion in our health care portfolio of 0.5%, which had a strong quarter of new originations. These portfolios have experienced elevated levels of payoff activity over the past couple of quarters.

And while that activity is still present, it has abated from abnormally high levels. In fact, when we look specifically at the Energy book, most of the payoff activity for the quarter was in April, while the months of May and June were very stable. We are confident in our ability to grow these businesses over time and pipelines remain healthy. Our CRE business increased 6.9% quarter over quarter with the majority of the growth coming from multifamily housing, retail and industrial projects. As we mentioned previously, we anticipated a fund up of our CRE portfolio.

This portfolio recently came under its internal concentration limits. We have focused on building commitments over the past few quarters, but it takes time for this portfolio, which is largely construction, to begin funding up and showing increases in outstanding balances. We expect growth in outstanding balances to continue. Our expansion into the mortgage finance and warehouse lending business is on track. We’ve approved four credit relationships as of this call and the pipeline is strong.

In fact, we expect to fund our first loan in the next couple of weeks as our system implementation is nearly complete. We’ve hired a talented and experienced team to build this business and the related expenses embedded in the run rate you see today. All of this combined gives us confidence in our ability to achieve the outlook that we set at the beginning of the year. Transitioning to Slide seven, credit quality remains excellent across the loan portfolio, so I will keep my commentary brief. NPAs not guaranteed by the U.

S. Government decreased $4,000,000 to $74,000,000 The resulting nonperforming assets to period loans and repossessed assets decreased two basis points to 31 basis points. Committed criticized assets ticked up slightly this quarter, but remained very low relative to historical standards. We had minimal net charge offs of 561,000 during the quarter with net charge offs averaging one basis point over the last twelve months. We expect net charge offs to remain below historical norms in the future.

Our combined allowance for credit losses is $330,000,000 or 1.36 percent of outstanding loans, which is a healthy reserve level. Our track record speaks for itself as we’ve demonstrated consistency in the credit space time and time again. And now I’ll turn the call over to Scott.

Scott Brower, Executive Vice President of Wealth Management, BOK Financial Corporation: Thank you, Stacy. Turning to our operating results for the quarter on Slides nine and ten. Total fee income increased $13,200,000 on a linked quarter basis contributing $197,300,000 to revenue. Total trading revenue, which includes trading related net interest income was $30,500,000 representing growth of 31 from the prior quarter and a return to a more normal operating environment. Trading fees grew $6,300,000 linked quarter driven by higher mortgage origination volumes from seasonal production and steady demand as customer engagement has rebounded following the significant market uncertainty in the first quarter.

Syndication fees were another standout, growing 1,900,000.0 linked quarter to 5,100,000.0, the highest quarter we’ve seen since 2022. Now turning to slide 10. Before talking about the numbers, I wanted to highlight that three of the business activities shown on this page posted record revenue during the quarter, including our fiduciary and asset management, transaction card, and deposit service charges. Fiduciary and asset management revenue grew $3,000,000 reflecting higher trust and mutual fund fees along with seasonal increases in tax preparation fees. I think it’s also worth emphasizing the stable stream of earnings you get from this business.

Over the last ten years, the wealth management business has achieved a compounded annual growth rate for revenue of approximately 8%. AUMA increased 3,900,000,000.0 linked quarter to 117,900,000,000.0 reflecting increased market valuations and continued new business growth. This is another record quarter for AUMA. Transaction card revenue increased $2,500,000 from first quarter. Excellent performance this quarter was supported by disciplined pricing strategies, targeted customer acquisition efforts, and a seasonal uplift in transaction activity.

Deposit service charges grew 1,000,000 linked quarter. This line has shown sustained growth over the past two years driven by our commercial treasury services. And now I’ll hand the call over to Marty to cover the financials.

Marty Grunst, CFO, BOK Financial Corporation: Thank you, Scott. Turning to slide 12, net interest income was up $11,900,000 and reported net interest margin expanded two basis points. Core net interest income excluding trading increased $11,000,000 and core margin excluding trading grew by seven basis points driven by several factors. The securities and fixed rate loan portfolios continued to reinvest cash flows at higher current market yields. Our ongoing efforts to optimize deposit pricing resulted in lower rates for non maturity deposits and that was without the support of any Fed rate cuts in the quarter.

Time deposit repricing was also a benefit driven by the natural repricing of higher rate vintages in that relatively short dated book. This was partially offset by slightly lower average balances in the non interest bearing DDA driven by seasonally higher balances in January affecting the Q1 overall average balance. Both the average DDA balance and trends within the second quarter were aligned with our expectations. We expect net interest income and margin growth will be supported by continued fixed asset repricing and continued loan growth. We will pursue further deposit pricing optimization efforts where available and the DDA stability we’ve seen in the past couple of quarters indicates that typical seasonality and new business activity should be expected to drive balanced behavior going forward.

Turning to Slide 13, total expenses increased $7,000,000 Personnel expenses were relatively consistent with the prior quarter. Within personnel expenses, we saw a slight increase in compensation, which was largely offset by a seasonal decrease in payroll taxes. Non personnel expense increased $6,400,000 driven primarily by increased technology project costs and operational losses. Slide 14 provides an update on our outlook for full year 2025. We remain confident in our full year loan growth projections due to the robust growth seen in Q2, continued momentum in early Q3 and strong pipelines across both C and I and CRE.

This will be further supported by the launch of our mortgage finance business this quarter. We acknowledge that economic policy uncertainty is still somewhat of a risk factor for our loan growth guidance. However, it seems much less important than it did ninety days ago. Our net interest income expectations remain unchanged. This assumes two twenty five basis point rate cuts in September and December, consistent with the market’s forward rate expectations.

However, given our relatively neutral interest rate risk position, changes there would not alter our guidance. Our fees and commissions guidance is also unchanged, reflecting the momentum we have in that set of businesses. As a reminder, will note that interest rate levels and curve steepness can affect the geography of total trading revenue between NII and fees, but that would be neutral to total revenue. Lastly, on credit, nonperforming assets are very low and portfolio credit quality continues to be very strong, which supports our expectation that charge offs will remain low in the near term and provision expense will be below twenty twenty four levels. With that, I would like to hand the call back to the operator for Q and A, which will be followed by closing remarks from Stacy.

Conference Operator: So our first question comes from the line of Jared Shaw with Barclays. You may go ahead.

Jared Shaw, Analyst, Barclays: Hey, good afternoon, everybody.

Stacy Kymes, CEO, BOK Financial Corporation: Hi, Jared. Hi, Jared.

Jared Shaw, Analyst, Barclays: Maybe just when we look at NII, what’s some of the expectations for margin trajectory behind that? Is there anything in particular we should be paying attention to for that?

Marty Grunst, CFO, BOK Financial Corporation: Yes. Good question. So margin, we’re really happy with how margin behaved in the second quarter. We got really good lift out of the fixed asset repricing you know, across bonds and loans and then some additional lift across deposit pricing broadly, including even the the changes in DDA. So that gave us basically between those two items, almost seven basis points of expansion.

And those have been the drivers we’ve been talking about for the last few quarters. And so we see that, again, replaying in, you know, the next quarters where fixed asset repricing will still be supportive of margin. You’ve got both the securities book and the fixed rate loan book that continue to reprice up to to current market rates. There’s still a little bit of room for for deposit pricing to be supportive. And then obviously, loan growth that will be supportive going forward.

And it’s really nice to see this quarter’s level. And our outlook as you know is constructive there.

Jared Shaw, Analyst, Barclays: Okay. Thanks. And then when we look at things like the guide for securities, does that imply a slight decline? Should we think of the securities portfolio going down for the rest of the year? And then if you look at FHLB borrowings, average was higher than in the period, is that going to sort of continue to trend down as well in the backdrop?

Marty Grunst, CFO, BOK Financial Corporation: So on the securities portfolio, the difference quarter to quarter on a portfolio that big is really sort of noise. So just think about that as kind of steady from here for the rest of the year. And then on the FHLB borrowings, so that ticked up, but that was solely because in the trading account, we just held a higher level on average for the quarter. And so that’s what drove the FHLB borrowings up a little bit. You could see that trading, you know, potentially stay the same or come down a little bit.

You’d see that offset in FHLB most likely.

Jared Shaw, Analyst, Barclays: Great. Thanks very much.

Conference Operator: Your next question comes from the line of Jon Arfstrom with RBC Capital Markets. You may go ahead. Thank

Stacy Kymes, CEO, BOK Financial Corporation: you. Good afternoon. Hey, John. Hello, John. Hey.

Jon Arfstrom, Analyst, RBC Capital Markets: Could you talk a little bit more about the pace of loan growth through the quarter? I I know there’s some nuances to average versus period end, but it looks like period ends up a little bit higher. And Stacy, you used the term accelerating. So talk a little bit about what you saw throughout the quarter and how you feel exiting the quarter.

Stacy Kymes, CEO, BOK Financial Corporation: Yes. It really built throughout the quarter. And I think part of that was we talked about we’ve had good underlying loan growth for the last really three years now. Our C and I loan growth CAGRs 5%, 6% over the last three years, excluding the specialty businesses. It’s really the headwind that we’ve had from health care, energy and real estate.

And so that slowed down. Obviously, real estate is a tailwind now, not a headwind. Health care seems very stable to growing modestly. Energy now stable. So if you look at, for us, April, we had energy payoffs, less payoffs in May and June.

And so that feels like you hate to call the bottom there, but feels like we’re pretty close to stable and close to the bottom. And so that’s really going to allow the underlying loan growth that’s always been there to kind of come to the surface without being masked by the payoffs in those areas. And so we feel really good about that. We’ve always pointed to the second half of the year is when that point to point loan growth that we have in our guidance would really show up. And so having the level of loan growth that we had in the second quarter has only encouraged our outlook as we think about now going into the second half of the year.

We’re going to have mortgage warehouse come online. We think you could have $500,000,000 in commitments there by the end of the year, assume half of that is outstanding. You’re going to have growth in your traditional C and I businesses where we’ve been investing. I think real estate will continue to be a tailwind. Healthcare will get some momentum here in the second half of the year.

So we’re excited about where we are and where we’re positioned from a loan growth perspective both this year and frankly how we’re positioned thinking about 2026 as well.

Jon Arfstrom, Analyst, RBC Capital Markets: Okay. Good. Very helpful on that. And then maybe, Stacy or Marty, just competition, it looks like loan yields were stable. I know there’s a lot of things that go into that, but how are you feeling about the competitive environment?

Is it any tougher than maybe it has been historically?

Stacy Kymes, CEO, BOK Financial Corporation: In the markets that we’re in, it is always hypercompetitive. Mean, that’s what you hear consistently from all of our teams there is that competition is very strong. We’re in great markets. And so part of the other side of the coin of being in great markets like Dallas and Fort Worth and Houston and Phoenix and Denver, San Antonio is you’re going to have a lot of competition. I would say there’s some spread compression on the C and I side that we’re seeing a little bit there as we move forward.

As people think about diversification and either get pressure around real estate or decide they’ve got too much internally and try to focus on other lines of business, you see more competition on the C and I side mostly around the rate. And so you see a little bit of spread compression there on the C and I side, the core C and I, what we call core C and I. But otherwise, spreads are holding in pretty well.

Marty Grunst, CFO, BOK Financial Corporation: And sometimes that’s more visible on the very high credit quality borrowers that are close to the level where they can access capital markets, especially.

Jon Arfstrom, Analyst, RBC Capital Markets: Yep. Yep. Okay. All right. I’ll step back.

Thank you.

Stacy Kymes, CEO, BOK Financial Corporation: Thank you, John.

Conference Operator: Your next question comes from the line of Brett Rabatin with Hovde Group. You may go ahead.

Brett Rabatin, Analyst, Hovde Group: Hey, guys. Good afternoon.

Jared Shaw, Analyst, Barclays: Hey, Brett. How are you?

Brett Rabatin, Analyst, Hovde Group: Wanted to ask about fee income and just thinking about the guidance for the full year and and what might take you to the lower versus the higher end of that range. And then just with within the guidance, I I assume that the, you know, pickup from here or or additional improvement in fee income trends would be mostly related to brokerage trading and card. So just was just hoping for some additional color around that.

Marty Grunst, CFO, BOK Financial Corporation: Yeah. Brett, why don’t you let me talk a little bit about that and you know, Scott can add some color if if that’s useful. So, you know, if you look at the fiduciary and asset management transaction card, deposit service charge line items and look at the growth rates that we’ve seen year over year, you know, those are 11%, you know, 68%. I mean, those are very strong growth rates, and those are long run strong growth rates driven both by, you know, in cases of new share and asset management, a combination of both the markets being up and our ability to win and deliver new business. So we expect continued growth in those businesses and those are just doing really well.

When you look at some of the transactional businesses, know, on trading, so we do expect trading to be, positive as we go through the next couple of quarters, but we’re realistic to have a growth rate that is certainly attainable in our the way we think about that. When you look at syndications, that will benefit from the better loan origination environment that we find ourselves in for Q2 and Q3 and Q4 going forward. And then when you look at the investment banking business, you know, we’ve got a really strong track record in that business and year over year really good momentum. There was some activity in q two in the municipal space that was kinda slowed down just by conditions of q two that is teed up in our pipeline that that we feel really good about coming through in the back half of the year. So So I mean, our confidence in the fee businesses goes across multiple lines.

Anything you want to add to that, Scott?

Scott Brower, Executive Vice President of Wealth Management, BOK Financial Corporation: Yes. I think Marty summed it up well. I think that the diversity of both asset classes that we have bodes well from the market growth standpoint. So we got that component. But as Marty mentioned, we’ve also had net positive inflows in our AUM, which gives us good tailwind.

And then on the trading side, absent the February, March environment of dislocation to chaos in the fixed income markets. Post that, we’ve normalized and feel like we’ve got good positioning in the MBS space as we move forward. And then on the investment banking side that he mentioned, we feel like we our pipelines and our docket on the investment banking business, specifically in the municipal space, is very strong. So we don’t feel like we’re going to miss that. We think it’s been delayed a bit and is pushed out toward the second half of the year.

Brett Rabatin, Analyst, Hovde Group: Okay. That’s all really helpful. And then maybe, Stacy, we’ve seen a pickup in m and a, and there there’s quite a few regionals that, you know, are spousing their their intent or their willingness to do acquisitions. And you guys have always been a a more selective, so to speak, buyer or franchises that you view as, you know, as ones that you’ve got a small list that you’re interested in and and wouldn’t just do any deal, obviously. What are you seeing, if anything, you know, in terms of the ones that are on your list?

You know, is there an increase in receptivity? And what do you think the potential of you guys doing a deal might be in the back half of this year in ’twenty six?

Stacy Kymes, CEO, BOK Financial Corporation: I think you kind of described how we approach M and A very well. I think our core strategy has always been we have to be an organic grower. That M and A is not our strategy. It’s got to be the icing on the cake, but it’s not the key to driving our growth. It’s so difficult to be successful no matter what the environment is.

Strong franchises typically have a lot of folks who are interested and it’s very difficult to win those. And so we do have folks that we’re interested in over time and we stay in touch with them. I think the regulatory environment frankly is more favorable to M and A. But that’s not our core strategy. Our core strategy is to acquire talent, to grow in these great markets that we’re in.

And if we’re fortunate to find something along the way that fits our profile and has a willing seller at the time it fits for us, that’s extra for us, but it’s not our core strategy.

Brett Rabatin, Analyst, Hovde Group: Okay. And then also on the organic side, just last quick follow-up. What are you seeing in terms of net adds of people or producers maybe relative to last year?

Stacy Kymes, CEO, BOK Financial Corporation: If you look at where we are relative to last year, on the production side, we’re probably up in excess of 30 people across our footprint. We’ve added talent in all of our markets. We’re proud of the markets that we’re in. We think it gives us a differentiated opportunity to grow, allows us to maintain our strong asset quality because we don’t have to reach for growth. We can do it in the constraints of our credit appetite.

And we’ve added some extraordinarily talented people in Dallas and Fort Worth and Houston. Obviously, talked a lot about San Antonio. So proud of the work those guys are doing there. Phoenix, we are really, really hitting our stride in Phoenix, excited about where we’re headed there. Denver has got good momentum.

And our core markets have been strong for us. People kind of, I think, underplay the strength of Tulsa and Oklahoma City, Kansas City. But we’re doing very well in these markets. And so talent acquisition is key to us. It continues to be almost a line of business for us in terms of how we think about it.

And that’s going to be key to our growth and our outsized growth as we move forward.

Brett Rabatin, Analyst, Hovde Group: Okay. Great. Appreciate all the color, guys.

Conference Operator: Your next question comes from the line of Michael Rose with Raymond James. You may go ahead.

Michael Rose, Analyst, Raymond James: Hey. Good afternoon, everyone.

Stacy Kymes, CEO, BOK Financial Corporation: Hey, Michael.

Jared Shaw, Analyst, Barclays: Maybe just following up on John’s question. You know, I think what I heard, you know, C and I, CRE pipeline strong. You know, the energy, decline that we’ve seen imbalances kind of year over year maybe sounds like it’s coming to an end maybe with health care too. I know you talked about momentum into next year. I’m not trying to ask for the outlook for next year today, but is there any reason to think that just given the momentum that you guys have and kind of the declining headwinds from some of those specialty businesses that we shouldn’t at least expect similar pace of loan growth as you think as we begin to contemplate next year?

Stacy Kymes, CEO, BOK Financial Corporation: Then Yeah. Think that’s a Yes. I think that’s a reasonable expectation. I think what our guide was mid to upper single digits. And I think as we think about our strategic planning process and kind of a three and five year forecast, we use those kinds of numbers because that’s the rate of growth that we expect to achieve over time, understanding it will be more in some periods and less in some periods, but kind of on a sustainable average over time, that’s a good number for us.

Jared Shaw, Analyst, Barclays: Okay. Great. And then maybe just pivoting to credit. Obviously, no provision again this quarter. Credit trends are excellent.

I know I’ve talked with Marty about this separately, but, yeah. Yeah. Obviously, we’re adding a you know, with the big bill, you know,

Marty Grunst, CFO, BOK Financial Corporation: fair amount to the debt deficit.

Jared Shaw, Analyst, Barclays: But but credit trends generally look pretty good for for you guys in the industry. Is there anything that we should consider kind of in the near to intermediate term as puts and takes to kind of the current credit quality outlook and how it could change

Brett Rabatin, Analyst, Hovde Group: as we move forward? Thanks.

Stacy Kymes, CEO, BOK Financial Corporation: You’re asking a question that we’ve all been asking ourselves, what could be around the corner, how do we anticipate that. I think that the good thing about our company is we don’t widen or contract the fairway based on the economic circumstances. We keep the fairway the same. We don’t like leverage lending. We don’t like collateral light.

We like having a strong secondary source of repayment. And so all those factors are why even when we do have criticized classified non performing assets, and they will increase, they will kind of revert to the median over time, but our losses should still be well below the peers because of kind of our lending style and focus on a secondary source of repayment. So our loss given default historically has been much lower than our peers, and I would expect that to continue. But we see kind of the boogeyman around the corner right now. It appears there’s a lot of tailwind economically, not just in our footprint but just kind of the proverbial animal spirits are very strong right now and borrowers are more confident.

It’s amazing what ninety days have been. I mean, we sat here ninety days ago very not confident in how the noise around tax policy or the tariffs would impact borrower behavior. But I think folks have kind of absorbed that, understood that the tariffs will be there, it will be at a level that they can manage and have moved on about their business. And so that’s really healthy for us, and I think we’re going to benefit from that.

Jared Shaw, Analyst, Barclays: Very helpful. And then maybe just one last one for me, Stacy. Just a lot of talk around stablecoins this quarter. PNC just signed a deal with Coinbase, you know, earlier today, you know, on on the crypto front. Can you just talk about kind of third party lending, leverage lending, all the above, just from a technology standpoint?

And just would love your outlook and what you guys plan to do, on multiple fronts technology wise. Thanks.

Stacy Kymes, CEO, BOK Financial Corporation: Yes. I’ll address stablecoin. I think that domestically, there’s a lot of smoke there. I think that where stablecoin makes a lot of sense is in uncertain economies or where you have a central bank that’s not grounded like it is in most stable economies where inflation is a bigger deal. Cross border payments is another strong application for Stablecoin.

We don’t have a huge population of clients that has applicability for some, but not a lot. But on the domestic payment side, I see very little use case today around stablecoin. Although we’re watching it, we have a large, as you know, commercial treasury services platform. Payments is really critical to our success. And so we’re watching these types of developments and we’ll stay close to it.

I think we’ve made enormous investments in our technology base, whether it was the wealth system, our treasury system, our lending platform, our what we call our exchange where we have single sign on and all of our users can kind of access the commercial users and institutional users can access their information in a single place. We’ve made a lot of investments there and we’ll continue to do that. From a lending perspective, that has been a bit of an Achilles’ heel for us is kind of lending into the technology space. It is such a binary outcome where it either works or it doesn’t work. That’s been a difficult place for us to find our footing.

And we haven’t done much there. So we haven’t we don’t have a lot of vulnerability if some of these things don’t play out as perhaps expected. We’re not lending into private credit. We’re not lending to those who lend money to people we wouldn’t lend money to. And so that tends to help us in good times or when it’s important to make good decisions.

All decisions look good right now. When the tide goes out is when we’ll figure out who made good decisions and who focused on growth at all costs. And so we feel good about how we’ve maintained our discipline here and how we think about long term lending.

Jared Shaw, Analyst, Barclays: Appreciate it. Thank you so much.

Conference Operator: Your next question comes from the line of Woody Lay with KBW. You may go ahead.

Michael Rose, Analyst, Raymond James: Hey, good afternoon. I wanted to

Stacy Kymes, CEO, BOK Financial Corporation: start

Michael Rose, Analyst, Raymond James: mortgage finance and the launch there. I was just wondering if you could sort of frame the opportunity and sort of how fast you expect balances to come on over the

Jared Shaw, Analyst, Barclays: back half of the year.

Marty Grunst, CFO, BOK Financial Corporation: Yeah. Woody, this is Marty. We’ve we’re pretty excited about being able to to get to launch that here just in the next couple weeks. And, you know, we’ll we’ll be able to to get, like Stacy mentioned, probably half half a billion dollars of commitments by the end of the year. We’ll be booking clients, you know, in August and September and and making good headway there.

You probably have a, you know, 25% utilization there. 50 utilization kind of by the end of the year is kind of a good way to think about that. So so we feel really good about the the all the groundwork that’s been laid, the fact that we’ve got both the the lending capability, the deposit capability, and the treasury management, treasury services capability. And probably the best part about this is how well that business ties in with the the institutional fixed income trading because the overlap there between those two client bases is super high. So that’s that’s a client base that we’ve got decades of history with.

And so the the tie in there is fantastic.

Stacy Kymes, CEO, BOK Financial Corporation: And we’re not ready to talk about ’26 yet, but I think as you think about that business, you know, going out through ’26, we’re really spending 25,000,000 focusing on making sure all the operational potential speed bumps are resolved well and that we feel good about the operational risks associated with this business. Because if done correctly, there’s little credit risk but more operational risk. So we’re going to spend 25,000,000 making sure that new people, new systems are operating as intended. And then I think you’ll see us ramp up or accelerate the growth there as we move into ’twenty six and ’twenty seven.

Michael Rose, Analyst, Raymond James: All right. That’s really helpful color. And then maybe last for me, shifting over to deposit costs. And as you sort of mentioned in your opening comments, the beta outperformed so far through the season cycle. How do you think about the incremental beta if we get additional rate cut over the back half of the year?

Marty Grunst, CFO, BOK Financial Corporation: Yeah. So you’ve seen us get to, you know, interest bearing liability beta of 76 cumulative for the the cutting cycle here, and that’s actually just a little bit above the cumulative similar beta on the upside that was 75. Same thing on deposits, we’ve gotten to 66. And we think that those betas pretty well hold as we as as rates continue to fall that you’d be able to see, you kind of that level perhaps even a little better as rates decline further.

Michael Rose, Analyst, Raymond James: All right. Thanks for taking my questions.

Conference Operator: Your next question comes from the line of Matt Olney with Stephens Inc. You may go ahead.

Matt Olney, Analyst, Stephens Inc.: Yes. Hey, guys. Good afternoon. Thanks for taking the question. Just want to follow-up on the loan yield commentary.

Marty, I think you mentioned that the new loan growth would be accretive to the overall net interest margin. I think I heard Stacy mention maybe some pressure on the C and I spreads. Just help me reconcile these comments and is the commentary about improving loan yields, is that more a matter of the loan mix you expect the back half of the year? Yes.

Marty Grunst, CFO, BOK Financial Corporation: Right. So certainly, loan growth is going to help you with just NII dollars. To the extent that that changes your overall mix between loans and securities, that’s gonna help margin a little bit. And we would expect to see those loans that loan growth come on at, you know, more or less similar spreads to the existing book just, based on what that mix would look like.

Matt Olney, Analyst, Stephens Inc.: Okay. Thanks for that, Marty. And then just lastly, I think on the there was a comment in the prepared remarks about the trading securities portfolio. I think that ballooned up during the course of the quarter, but then moved lower towards the end of the quarter. Any color on the volatility behind that and then the outlook for the size of this?

Thanks.

Marty Grunst, CFO, BOK Financial Corporation: Yes. So that’s simply the traders, the desks, as they see opportunities, they can move that overall balance up or down just based on market opportunities. So that’s really just them being tactical throughout the quarter and doing what’s smart. That was a little higher during the quarter. That could be down a little bit, but, you know, there isn’t a particular strategic bent one way or the other.

Scott Brower, Executive Vice President of Wealth Management, BOK Financial Corporation: And I this is Scott. And I think that, you know, when you think back to not the beginning of the year, but February and March, there’s no question that during that period of uncertainty and volatility, we were not as long with balances at that time period as the first quarter came to an end. And as more predictable normalcy returned to the fixed income markets, we are obviously more comfortable with larger balance there.

Stacy Kymes, CEO, BOK Financial Corporation: But we remain in all of our risk limits. We’re not compromising any of our risk structures or anything like that to try to achieve any revenue growth or revenue targets there. We’re well within all of our internal risk limits there and have continued to be really throughout this period of time. I think our performance there, particularly in the first quarter, despite the revenue lag, really was attributed to our risk management at a very difficult time that could have gone in a different direction. So we continue to be very disciplined about that as you would expect us to be.

Marty Grunst, CFO, BOK Financial Corporation: Yes. So it’s all fully hedged. So it’s really just kind of a denominator of the margin question and kind of where it’s been the last quarter or the quarter before those average balances are a reasonable range to think about.

Heather King, Director of Investor Relations, BOK Financial Corporation: Okay. Thanks for clarifying. Your

Conference Operator: final question comes from the line of Chinua Bazalier with Wells Fargo. You may go ahead.

Heather King, Director of Investor Relations, BOK Financial Corporation0: Hi. Good afternoon, everyone.

Marty Grunst, CFO, BOK Financial Corporation: Hey, Timur.

Heather King, Director of Investor Relations, BOK Financial Corporation0: You had made a comment that the mortgage warehouse build out has now been fully incorporated in the expense base. I’m just wondering what portion of the 2Q expense growth came from the mortgage warehouse build out?

Stacy Kymes, CEO, BOK Financial Corporation: Well, we’ve been building it out over the last twelve months really slowly until we’re kind of approaching fully staffed. We’ve got 11 FTE in that business today, not $1 revenue and 11 FTE are in our third quarter our second quarter run rate. So that gives you an idea a little bit about kind of where we are from an opportunity perspective and we talk about continuing to create positive operating leverage from here forward. That’s one example of that. And so I think you’ll see those expenses related to that business certainly stabilize in future periods as we bring on the revenue.

Marty Grunst, CFO, BOK Financial Corporation: Yes. So all the staffing was fully in Q2 and the loan system that will go kick on here in 3Q and the amortization for that is the one last piece that’ll come into the run rate in March.

Heather King, Director of Investor Relations, BOK Financial Corporation0: Okay. Great. And then, you know, as you’re more optimistic about the loan pipeline, loan growth into the back end of the year, can you just give us some color on how you’re expecting to fund that? Is that going to

Matt Olney, Analyst, Stephens Inc.: be primarily out of the

Heather King, Director of Investor Relations, BOK Financial Corporation0: bond book as some of those cash flow? And then just maybe some color as to what your expectation is for deposit growth in the back end of the year?

Marty Grunst, CFO, BOK Financial Corporation: Yeah. So, Timur, just as a starting place, we have a very strong loan to deposit ratio, you know, below 65% and and that could certainly creep up and that would be perfectly fine if that’s how it plays out. Our base case scenario though is that we do expect to continue to grow deposits over the the coming quarters. But but, you know, any mix within there would be a perfectly fine outcome.

Heather King, Director of Investor Relations, BOK Financial Corporation0: Okay. And can you just remind

Heather King, Director of Investor Relations, BOK Financial Corporation: us what the

Heather King, Director of Investor Relations, BOK Financial Corporation0: next twelve month cash flows are out of

Heather King, Director of Investor Relations, BOK Financial Corporation: the the bond book and out of the loan book?

Marty Grunst, CFO, BOK Financial Corporation: Yeah. So it’s basically 650,000,000 per quarter of cash flows, you know, come out of the the securities portfolio and reprice. And then, just on the the fixed rate portion of the loan book, that’s more like 200 to 250,000,000 per quarter of, cash flows come out of that fixed rate loan book and reprice per quarter.

Heather King, Director of Investor Relations, BOK Financial Corporation0: Perfect. Great. Thank you so much for your attention.

Conference Operator: This concludes today’s question and answer session. I would now like to turn the call back over to Stacy Kymes for closing remarks.

Stacy Kymes, CEO, BOK Financial Corporation: Before we wrap up the call today, I wanted to take a moment to share our company’s support for those affected by the flooding in the Texas Hill Country. As someone who grew up in Texas, I know the strength and resilience of that community and what a special place it is. We stand with our team members and customers in Texas and across our footprint and offering our support now and throughout what will be a long recovery. I’m proud of the results this quarter. These results reflect the strength of our team, the effectiveness of our long term strategy and the resilience of our diverse business model.

The momentum we gained across the board reinforces our optimism about the future. We appreciate your interest in BOK Financial and your willingness to spend time with us this afternoon. Please reach out to Heather King if you have any questions at h. Kingbokf dot com.

Conference Operator: This concludes today’s conference call. You may now disconnect.

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