BOK Financial Q4 2024 Earnings Report

BOK Financial EPS Results

• Actual EPS: $2.12
• Consensus EPS: $1.97
• Beat/Miss: Beat by +$0.15
• One Year Ago EPS: N/A

BOK Financial Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $517.09 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

BOK Financial Announcement Details

• Quarter: Q4 2024
• Date: 1/17/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, January 21, 2025
• Conference Call Time: 1:00PM ET

BOK Financial (NASDAQ:BOKF) operates as the financial holding company for BOKF, NA that provides various financial products and services in Oklahoma, Texas, New Mexico, Northwest Arkansas, Colorado, Arizona, and Kansas/Missouri. It operates through three segments: Commercial Banking, Consumer Banking, and Wealth Management. The Commercial Banking segment offers lending, treasury, cash management, and customer commodity risk management products for small businesses, middle market, and larger commercial customers, as well as operates TransFund electronic funds transfer network. The Consumer Banking segment engages in the provision of retail lending and deposit services to small business customers through retail branch network; and mortgage loan origination and servicing activities. The Wealth Management segment offers fiduciary, private bank, insurance, and investment advisory services; and brokerage and trading services primarily related to providing liquidity to the mortgage markets through trading of U.S. government agency mortgage-backed securities and related derivative contracts, as well as underwrites state and municipal securities. The company also provides commercial loans, such as loans for working capital, facilities acquisition or expansion, purchases of equipment, and other needs of commercial customers; and service, healthcare, manufacturing, wholesale/retail, energy, and other sector loans. In addition, it offers commercial real estate loans for the construction of buildings or other improvements to real estate and property held by borrowers for investment purposes; residential mortgage and personal loans; and automated teller machine, call center, and Internet and mobile banking services. The company was founded in 1910 and is headquartered in Tulsa, Oklahoma.

BOK Financial Q4 2024 Earnings Call Transcript

Presentation

[Operator]

and welcome to BOK Financial Corporation's 4th Quarter and Full Year 2024 Earnings Conference Call.

[Operator]

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you. 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.

[Operator]

Please proceed.

[Heather King, Director - Investor Relations at BOK Financial]

Good afternoon and thank you for joining our discussion of BOK Financial's Q4 and full year 2024 financial results. Our CEO, Stacy Kymes will provide opening comments. Mark Maun, Executive Vice President of Regional Banking will cover our loan portfolio and related credit metrics. And Scott Grauer, 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.

[Heather King, Director - Investor Relations at BOK Financial]

The slide presentation and press release are available on our website atbokf.com. We refer you to the disclaimers on Slide 2 regarding any forward looking statements made during this call. I will now turn the call over to Stacy Kymes, who will begin on Slide 4.

[Stacy Kymes, President & CEO at BOK Financial]

Thank you, Heather. We are pleased to report earnings of $136,200,000 or EPS of $2.12 per diluted share for the Q4. This results in earnings of $523,600,000 or EPS of $8.14 for the full year, the 2nd highest full year EPS in our history. As I reflect on the year, it's impossible to do that without mentioning the outstanding team we have at the bank. We have a unique and entrepreneurial culture that is focused on driving long term success.

[Stacy Kymes, President & CEO at BOK Financial]

Our results this year are representative of hard work by an exceptional team with the underpinning of a strong fundamental base and robust risk management practices. I would like to take a moment to share with you the highlights from the year just ended. During the year, net interest income was solid and we delivered on our prior expectations of high deposit betas into the Federal Reserve's most recent cutting cycle. During the Q4, deposit pricing leverage was also evident, giving us continued confidence in being able to capture the down rate deposit betas we've signaled and a strong outlook for margin. The credit performance of our loan portfolio remains exceptional.

[Stacy Kymes, President & CEO at BOK Financial]

Criticized levels remain below normalized pre pandemic levels and we've maintained a combined allowance of 1.38 percent of outstanding loans. During the year, we had an annualized net charge off rate of just 5 basis points. The most recent peer data is as of the end of the third quarter, but these results would have placed us near the 90th percentile of KRX regional banks. It takes determination and persistence to generate C and I loan growth. This has been a long term focus for us and in 2024, our core C and I portfolio, which is reflective of services and general business increased at an 8.1% year over year growth rate.

[Stacy Kymes, President & CEO at BOK Financial]

We've also focused on growth in the Texas market broadly and expanded specifically into San Antonio. These efforts are bearing fruit with C and ILM growth in Texas reaching 9.8% year over year. While we experienced payoff activity in the second half of the year related to our specialized lines of business and CRE, we are confident in our ability to grow those balances back over time. We've also invested in future growth by welcoming new revenue generating teammates during the year, which will bolster our loan growth prospects going forward. Our fee income segments have again delivered a 40% contribution to revenue.

[Stacy Kymes, President & CEO at BOK Financial]

This ranks at the top of regional banks. Scott will highlight details of this performance in his commentary. Taken together, these results have contributed to a total shareholder return in our stock of 27%, which far outpaced the KRX index return of 13%. Our results were achieved while preserving strong levels of liquidity, regulatory and tangible capital levels. Despite rates moving higher, which would typically result in many banks' TCE ratios declining, our TCE ratio at quarter end was 9.2% flat versus last quarter.

[Stacy Kymes, President & CEO at BOK Financial]

This place us in the top third of the KRX index as of the end of the third quarter. Once 4th quarter results are released, it's not hard to imagine that our relative position could improve. I'm proud of the results for this quarter and for the full year 2024 and have high expectations about the trajectory of our organization. Our business has strong fundamentals. The economic backdrop is robust, The yield curve is beginning to take a more historically normal shape and the markets we operate in remain strong and growing.

[Stacy Kymes, President & CEO at BOK Financial]

And with that, I'll turn the call over to Mark.

[Marc Maun, Executive VP - Regional Banks at BOK Financial]

Thanks, Stacy. Turning to Slide 7, period end loan balances increased 0.5% linked quarter. Commercial loan balances grew 1% and loans to individuals were up 2.7%, while commercial real estate balances fell 2.5%. We continue to grow new commitments and relationships and believe that economic conditions in our markets are supportive of continued growth. With our balance sheet, capital and credit quality metrics, we are well positioned to take advantage of these conditions and are actively pursuing new loan opportunities.

[Marc Maun, Executive VP - Regional Banks at BOK Financial]

Portfolio yields decreased 46 basis points during the quarter as our predominantly floating rate loan portfolio repriced lower following the recent federal funds rate cuts. Loan balances in the energy business increased 4.1% linked quarter, reflecting fund ups of existing lines and an increase in new relationships. Our core C and I loans grew 2.7% linked quarter, primarily in Texas resulting from our increased investment in this market. These segments continue to produce strong growth being up 8.1% on a year over year basis with loan pipelines remaining stable. I know Stacy referenced this in his opening remarks, but this story is exciting enough that it bears repeating.

[Marc Maun, Executive VP - Regional Banks at BOK Financial]

Our healthcare business loans decreased 4.4% linked quarter. While new loan production and pipelines remain robust, we have continued to see payoff activity into the fixed rate HUD market. Our CRE business decreased 2.5% quarter over quarter. CRE loans were down in Q4 as part of the normal cycle of refinancing completed projects on a long term basis. We continue to add new loans in the early construction phase and will be funding up over time creating new loan growth.

[Marc Maun, Executive VP - Regional Banks at BOK Financial]

Loans to individuals increased 2.7% reflecting growth in both personal loans and residential mortgage loans. Transitioning to Slide 8, credit quality remains exceptional across the loan portfolio extending our trend of outperformance versus peers in this area. NPAs not guaranteed by the U. S. Government fell again this quarter, decreasing $38,000,000 to $42,000,000 the lowest levels we've seen in the last 20 years.

[Marc Maun, Executive VP - Regional Banks at BOK Financial]

The resulting non performing assets to period end loans and repossessed assets decreased 16 basis points to 18 basis points. Committed criticized assets remained very low relative to historical standards. In addition, we had minimal net charge offs of $528,000 during the quarter and net charge offs have averaged 5 basis points over the last 12 months. We expect net charge offs to remain below historical norms going forward. We are well reserved with combined allowance for credit losses of $332,000,000 or 1.38 percent of outstanding loans.

[Marc Maun, Executive VP - Regional Banks at BOK Financial]

And now, I'll turn the call over to Scott.

[Scott Grauer, Executive VP - Wealth Management at BOK Financial]

Thank you, Mark. Turning to our operating results for the quarter. On a linked quarter basis, total fee income grew $4,400,000 contributing $206,900,000 to revenue and accounting for 40% of total revenue. This isn't a short term trend. Our free income has averaged 39% of total revenue over the past 5 years, a key differentiator for us from our peers and has been a hallmark to our success in varying economic conditions.

[Scott Grauer, Executive VP - Wealth Management at BOK Financial]

I'd like to begin by covering our Markets and Securities businesses on Slide 10. Our trading fees rebounded nicely, increasing 39.8% to $33,100,000 during the quarter, driven by higher MBS volumes and widened spreads as client demand following anticipated rate cuts returned to more normal levels than we saw in the prior quarter. Due to the steepening yield curve environment, I'd like to note that total trading revenue includes 2 distinct pieces, trading fees and trading related net interest income. This quarter, trading fees were $33,100,000 while trading related net interest income was $4,600,000 dollars If the yield curve steepens further and trading portfolio yields move further above their funding costs, we will see additional revenue mix shift with more of our total trading revenue coming from net interest income as opposed to fee income as we've seen in recent quarters. We've provided a table on this slide to allow you to see this dynamic historically.

[Scott Grauer, Executive VP - Wealth Management at BOK Financial]

Mortgage banking revenue has remained relatively steady for the past 4 quarters coming in at $18,100,000 for the 4th quarter. Our other markets and securities businesses continue to produce solid results with syndication fees up $1,400,000 over the prior quarter. Investment banking fees were down $5,500,000 However, this is coming off a record quarter and the business is still performing exceptionally well. Turning to Slide 11. Asset Management revenue grew $3,200,000 or 5.6 percent linked quarter, reflecting growth in our trust fee income.

[Scott Grauer, Executive VP - Wealth Management at BOK Financial]

AUMA grew $3,900,000,000 quarter over quarter eclipsing $114,000,000,000 with increased market valuations and continued growth in client relationships. I know my commentary on this slide is less than usual, but the consistent results these businesses have exhibited over time speak for themselves. And now, I'll hand the call over to Marty to cover the financials.

[Martin Grunst, Executive VP & CFO at BOK Financial]

Thank you, Scott. Turning to Slide 13, net interest income was up $4,900,000 supported by growth in both the trading and non trading components. Headline net interest margin expanded 7 basis points with core net interest margin excluding trading also up 7 basis points. The 7 basis point increase in core margin was driven by several factors. The securities portfolio continued to reinvest cash flows at higher current market yields.

[Martin Grunst, Executive VP & CFO at BOK Financial]

The fixed rate portion of the loan portfolio also continued to reprice cash flows at higher current market fixed rates. Non interest bearing DDA grew in Q4 driven by normal seasonal balance increases. We saw strong interest bearing deposit growth and liabilities repriced more quickly than assets in response to rate cuts by the Federal Reserve. Both the magnitude and the pace of this quarter's deposit repricing activity aligns with our expectations and gives us great confidence in our ability to realize our previously communicated deposit beta expectations should short term market rates continue to decline. Last quarter, we noted that if deposit balances increase significantly, it could mute the deposit beta somewhat, but would result in a better liability beta and be accretive to margin and NII.

[Martin Grunst, Executive VP & CFO at BOK Financial]

This played out in the Q4 as we grew average interest bearing deposit balances by approximately 1,000,000,000 dollars offsetting a portion of our wholesale funding at below wholesale cost. Turning to Slide 14, linked quarter total expenses increased $6,600,000 or 1.9%. Personnel expenses grew $3,900,000 as normal levels of trading activity resumed and we continue to invest in our businesses. Non personnel expense grew $2,800,000 largely due to project related professional fees and seasonal business promotion costs. Slide 15 provides our view on full year 2025 and I will note a couple of items.

[Martin Grunst, Executive VP & CFO at BOK Financial]

Loan balance projections reflect our strong track record of growing C and I as well as our specialty lending businesses. We have ample headroom versus our concentration limits due to high levels of pay downs in 2024, which we do not expect to recur this year. For total revenue, we expect growth in the mid to upper single digit range. That growth rate would be unaffected by the mix shift between trading NII and trading fees that Scott noted earlier. Within total revenue based on our assumptions for rates, we expect growth in net interest income to be above single digit.

[Martin Grunst, Executive VP & CFO at BOK Financial]

However, that growth rate is driven incrementally higher by the mix shift from trading fees to trading NII. We expect growth in core NII ex trading to be mid to upper single digit. Fees and commissions growth is expected to be lower single digit. However, that growth rate is affected the opposite way by the trading revenue mix shift. Excluding trading, fees and commissions would also be in the mid to upper single digit range.

[Martin Grunst, Executive VP & CFO at BOK Financial]

Lastly, I will note that the remarkably low level of non performing assets we see today supports our view that charge offs will remain well controlled for the foreseeable future. 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.

[Operator]

Thank you. We will now begin our question and answer session. Thank you. Your first question comes from the line of Jon Arfstrom with RBC Capital Markets. Please go ahead.

[Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets]

Thanks. Good afternoon.

[Stacy Kymes, President & CEO at BOK Financial]

Hey, Jon.

[Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets]

Hi. Can you talk a little bit more about the payoff activity and some of the expected changes you're thinking about in 'twenty five? You used the phrase over time. And I'm just kind of curious when the paydowns could change or is that already starting to happen?

[Stacy Kymes, President & CEO at BOK Financial]

You're talking about with respect to loan growth and our kind of outlook?

[Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets]

Yes, exactly.

[Stacy Kymes, President & CEO at BOK Financial]

Yes, I think you look we've spent so much time and energy investing in the core C and I areas because that's the longest sales cycle, that's the hardest business to move. And we really saw that play out in our favor in 2024 with core C and I growing 8%, which I think is very, very good. The unexpected headwind really was the core specialty businesses, healthcare, commercial real estate and energy were a headwind to loan growth. And really because of some idiosyncratic things related to the timing of the capital markets, whether it's respect to energy or whether it's the shape of the yield curve, created some permanent financing opportunities outside the core portfolio for real estate and for healthcare. And so if you think those return back to kind of more normal growth patterns, and we do, we have plenty of concentration cap room in all of those areas, and you think you can sustain the C and I growth, which we think we can, I think the guidance that we have around loan growth for next year is very achievable?

[Marc Maun, Executive VP - Regional Banks at BOK Financial]

Yes. John, the one thing I would add on the energy side of this is that in the Q4, we did generate a lot of new relationships at a much faster pace than we did the previous 3 quarters, which will which created a lot of loan growth we experienced in Energy in the Q4 and we expect that we'll see the continue to see some of the benefits from that. So that seems to have turned around and is in a growth pattern right now.

[Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets]

Okay, good. I did want to ask about that as well just deeper on energy. What do you think about in terms of the energy lending outlook with the new administration? And feels like maybe prices come down, I don't know, but how do you think about risk to that as well? Just curious on the administration and your thoughts there.

[Stacy Kymes, President & CEO at BOK Financial]

Yes. I think it's too soon to know exactly. I think that certainly we expect that the incoming administration will open up more federal lands for drilling. I think the permitting process will be better. I think that they're going to commit to filling the strategic petroleum reserve, which I think is a positive.

[Stacy Kymes, President & CEO at BOK Financial]

But I think you cannot ignore borrower behavior and those guys are going to do what's in their best interest and that's being disciplined about how they spend their capital investment and getting a return on that capital investment. And so those energy companies will make discrete decisions at the point in time based on what they can hedge out on the curve and what kind of return they can get for drilling activity. And so I think it's too soon to know how it may spur or not spur actual drilling activity. But I think we have a lot of confidence in our borrowers that they're going to make the best economic decision at the point in time for them to make sense for them.

[Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets]

Okay. All right. Thank you.

[Operator]

Your next question comes from the line of Matt Olney with Stephens Inc. Please go ahead.

[Matt Olney, Managing Director at Stephens Inc]

Hey, thanks. Good afternoon. I want to ask more about the guidance for net interest income in 2025. I think that guidance you guys provided us assumes a low double digit growth number in 2025 versus 2024. And I'm just struggling to get there.

[Matt Olney, Managing Director at Stephens Inc]

Can you give us any kind of launch point or guidance for the Q1 that could help us appreciate what you guys see on your side with respect to net interest income?

[Martin Grunst, Executive VP & CFO at BOK Financial]

Yes. Matt, I think it's useful to think about our guidance in 2 pieces sort of the core margin ex trading and then the trading piece. And as you think through just the core margin ex trading, you're going to see kind of the same factors that you've seen in the last couple of quarters just play out in Q1 and throughout the year where you've got securities all the fixed rate asset repricing that's going to continue to reprice up, that's going to be supportive Both loan growth and deposit growth are going to be supportive of margin. And it's nice to see the DDA trends be supportive of margin recently. But then when you look at the second half of that, the trading component, here's the way to think about that.

[Martin Grunst, Executive VP & CFO at BOK Financial]

So in Q4, just the trading portfolio, so that's $5,500,000,000 that had a yield of 4.9%, which you can see and spread of 36 basis points over its funding costs, which you can see on Page 17. And so that's $4,600,000 of net interest income provided in Q4. As you play that over into 2025, the volume of trading is price still going to be in that $5,500,000,000 to $6,000,000,000 territory. But yields on the trading account should come up, 30 year mortgage yields are mortgage backed security yields around 5.85 percent. And you've seen short term rates come down in the 4th quarter, so you'll see a full quarter effect of that in Q1.

[Martin Grunst, Executive VP & CFO at BOK Financial]

And then later in the year, we're assuming 2 more cuts. And so over the course of 2025, that funding cost comes down and that spread that was 36 basis points in Q4, now that could be easily 100 basis points or a little bit more for 2025 overall. So you can see that's a pretty big pickup year over year in that trading related margin. And that will grow quarter by quarter as you get that widening playing out by the change more in the short term funding costs. Now importantly, that growth gets offset in trading fees with the hedge costs.

[Martin Grunst, Executive VP & CFO at BOK Financial]

But I think most importantly to think about our trading our total revenue, we've given guide of mid to upper single digits for total revenue. That's very attainable for us. And when you look at the 3 pieces within that NII ex trading, fees ex trading and then trading in total, both the NII ex trading and the fees ex trading are also mid to upper single digits, very attainable for us. And then the last piece trading in total regardless of how much of that is fees versus margin, we feel very good about how that trading revenue is going to go over the course of 2025 versus 2024 and Scott may want to add a little bit to that.

[Scott Grauer, Executive VP - Wealth Management at BOK Financial]

Sure. Hey, Matt. So I think that as Marty indicated those component pieces kind of get to the forecast going forward. But our what we've seen really in the last 6 weeks or so of 2024 and is carrying on into the beginning of this year, our clients on the institutional side, a fair amount of which are financial institutions prefer clarity that has emerged. So when you think about the election in the rearview mirror and a little bit better clarity, not certainty, but clarity around potential Fed moves.

[Scott Grauer, Executive VP - Wealth Management at BOK Financial]

We're seeing quite a bit of increased appetite and willingness to invest out the curve, which bodes well for demand for our business. So as Marty said, we're optimistic and feel confident about our ability to continue to move forward on the rate that we've established here in the Q4.

[Matt Olney, Managing Director at Stephens Inc]

Okay. Well, I appreciate the commentary on that. And just to follow-up on maybe a point that Marty made. I see in the deck, the guidance assumes 2 Fed cuts throughout the year. I think you guys give us the time frame of those cuts.

[Matt Olney, Managing Director at Stephens Inc]

What does that guidance assume or imply with respect to the shape of the yield curve?

[Martin Grunst, Executive VP & CFO at BOK Financial]

Yes. So we're assuming that long term rates are really about where they are today, give or take, throughout the year. So we're not putting any particular changes in steepness into that curve other than what's driven by the short term, does that make sense?

[Matt Olney, Managing Director at Stephens Inc]

Yes. Okay. So yield curve, what I guess would improve a little bit, but the long term rates stay flat, short term rates come in with those assumptions?

[Martin Grunst, Executive VP & CFO at BOK Financial]

Exactly. Yes.

[Matt Olney, Managing Director at Stephens Inc]

Got it. Okay. Thank you, guys.

[Operator]

Your next question comes from the line of Peter Winter with D. A. Davidson. Please go ahead.

[Peter Winter, Managing Director - Senior Research Analyst at D.A. Davidson]

Thanks. I was wondering if I could just dig into Matt's question a little bit more. Just the net interest income outlook, it's a pretty wide range for you guys. Just can you Marty maybe talk about some of the drivers to the upper end of the range versus the lower end of the range?

[Martin Grunst, Executive VP & CFO at BOK Financial]

Yes. I think one of the we feel very good about all the things that I laid out. We've got that securities repricing, fixed rate repricing, that's very visible and durable throughout the year. The one thing that's interesting that I'll point out Peter is our loan to deposit ratio is very low and that gives us an awful lot of flexibility when you think about how we manage deposit pricing. And that gives us room to be a little bit more aggressive on the yield side if we want to.

[Martin Grunst, Executive VP & CFO at BOK Financial]

That's not how we built our plan. But to the extent that we want to push on that, rate cuts certainly make that easier but are not necessary to be able to take some incremental pricing action if we want to on the deposit side.

[Peter Winter, Managing Director - Senior Research Analyst at D.A. Davidson]

Okay. And I hear you. I see the guidance on end of period loans, but just I'm just wondering what average loans would do, what you're expecting for that range?

[Stacy Kymes, President & CEO at BOK Financial]

Peter, this is Stacy. I mean, I think we're you should assume the growth is relatively ratable over the period. So we're not assuming any kind of elevated growth in that particular period, but we try to grow it kind of typically a similar amount in every quarter. We understand the actual results will differ from that. But as we plan for 2025, we kind of look at it ratably over the period.

[Peter Winter, Managing Director - Senior Research Analyst at D.A. Davidson]

Okay. Then Stacy, if I could just ask, you talked about it in the opening remarks that you've had nice success with the team lift outs and it's been additive to growth. Do you have a pipeline of additional team lift outs and looking to continue to do that? Because M and A, my sense is still kind of a low priority.

[Stacy Kymes, President & CEO at BOK Financial]

Yes. I think from our perspective, there's not a team lift out pipeline per se, but we are constantly pipelining for new talent. So every single market we're in, we have targets for revenue producers that we're trying to add to our company and it's been a really important strategy for us. In 2023 2024, we saw the dividends for that, particularly in the latter half of twenty twenty four and we'll continue to do that. We think that's very positive, very accretive to our earnings, very accretive to our franchise value to do that.

[Stacy Kymes, President & CEO at BOK Financial]

And so we continue to be very aggressive in all of our markets in adding talent and this year will be no different in that regard.

[Peter Winter, Managing Director - Senior Research Analyst at D.A. Davidson]

Got it. Thanks, Stacy.

[Stacy Kymes, President & CEO at BOK Financial]

Thank you, Peter.

[Operator]

Your next question comes from the line of Brett Rabatin with Hovde Group. Please go ahead.

[Brett Rabatin, Managing Director & Head of Equity Research at Hovde Group]

Hey, guys. Good afternoon. Hey, Brett. I wanted to beat the loan growth horse one more time. So if I understand, it looks to me like the payoffs and reductions in energy have swung the other way with some renewed momentum in energy.

[Brett Rabatin, Managing Director & Head of Equity Research at Hovde Group]

I didn't get a clear understanding of if you think the healthcare portfolio was getting to its bottom. And then also just within the commercial real estate bucket, you've obviously had growth in multifamily offsetting other declines. So just wanted to get a sense of what you think happens with the kind of the non core C and I book? And then also, it seems like Oklahoma has been driving the strength in the loan portfolio. And wanted us to hear if that's a function maybe of Texas being more competitive lending wise with rates or any other color around geography?

[Marc Maun, Executive VP - Regional Banks at BOK Financial]

Well, okay, there's several questions in there. So let me start with healthcare. And basically the interest rate environment generated opportunities from a for a number of our customers to refinance on a long term basis into the HUD market. And we see that a lot of that activity has taken place and it's going to start to taper off and we will see more opportunities for us to begin our growth on the healthcare side. So similarly, that event in the interest rate environment has had an impact on our CRE portfolio because again they're taking advantage of the opportunity to do some normal course of business, move things off there off the short term maturity to a longer term maturity with a fixed interest rate.

[Marc Maun, Executive VP - Regional Banks at BOK Financial]

And again, those interest rates aren't moving like they were. So we do expect those opportunities to occur and we're adding new construction opportunities that are going to give us the fund up opportunity, which is a cycle we have historically gone through in our company. And we have a capacity in CRE relative to our concentration limits that's given us a lot of opportunity to grow that particular portfolio. And we are going to consistently look for the best deals. We do have different concentration limits for different types of real estate, but we're always looking for deals that have capacity for the various types of opportunities that exist and we will look for the best deals that we can there and we feel like we can generate additional growth in the CRE.

[Marc Maun, Executive VP - Regional Banks at BOK Financial]

On the C and I side, it's more of just a consistent approach that we've taken. The Oklahoma market may have driven a little more. We've been here longer and we have a lot more relationships and some of those are renewing. But we saw a substantial amount of growth in Texas in the C and I in the 4th quarter, which is starting to show that the investment we've made in Texas is starting to pay dividends. It takes time to generate C and I loan growth.

[Marc Maun, Executive VP - Regional Banks at BOK Financial]

And so as we've made those investments, we're not going to get the transactions that we might get in the specialty industries, but we're generating a lot of business now that we've spent and committed the time and investment on the C and I side in Texas. And we're starting to see that all the other markets generally grew at a double digit rate on the C and I side as well. So, I feel really good about the fact that it's been a consistent performer for the last couple of years. And barring any change in economic factors, we would expect that to continue. And so the combination is why we come up with the kind of guidance we're providing.

[Brett Rabatin, Managing Director & Head of Equity Research at Hovde Group]

Okay.

[Brett Rabatin, Managing Director & Head of Equity Research at Hovde Group]

That's helpful. And then just back on the trading business again, is there and I know it's probably tough to come up with an exact number in terms of what you're giving guidance to, but is there a way to extrapolate or can you give an idea of how much dollar change you expect in the trading to move from fee income to NII?

[Martin Grunst, Executive VP & CFO at BOK Financial]

Yes. So Brett, we're probably not going to give guidance on trading per se. That'd be a tough one to wrap your head around. But certainly there's a shift that's going to go on between that growth based on our economic assumptions in NII down to fees. But the point is trading in total, total trading revenue, that's going to grow nicely year over year.

[Martin Grunst, Executive VP & CFO at BOK Financial]

And I think that's really the important point.

[Stacy Kymes, President & CEO at BOK Financial]

Brad, I think if you look on Slide 10 in the slide deck that we provided to accompany the call, you can see how we've broken out the impact of trading fees and trading NII over time. And I think Marty has given you all the component pieces that you need to kind of fill in the blanks from there. And we provided the total revenue line item so that you can kind of see at the end of the day, does it make sense or not. And so we're not going to break it down by quarter or discrete line item, but I think the pieces are there for you to put it together.

[Brett Rabatin, Managing Director & Head of Equity Research at Hovde Group]

Okay. Great. Fair enough. Appreciate all the color guys.

[Stacy Kymes, President & CEO at BOK Financial]

Thanks.

[Operator]

Your next question comes from the line of Woody Lay with KBW. Please go ahead.

[Woody Lay, Vice President at Keefe, Bruyette & Woods (KBW)]

Hey, good afternoon.

[Stacy Kymes, President & CEO at BOK Financial]

Hi, there.

[Woody Lay, Vice President at Keefe, Bruyette & Woods (KBW)]

Wanted to start on deposits. I mean, the Q4 was a really successful quarter and really that success has been consistent throughout the year. Any color on what drove the deposit growth in the Q4? And does the success impact your deposit strategy throughout 2025?

[Martin Grunst, Executive VP & CFO at BOK Financial]

Yes. I'd say that the growth was across all three lines of business. We were happy to see that a little bit more in commercial as you might expect for us, but it was all three lines of business contributing and it did not change our strategy. I mean, we're very happy with the growth that we've got, the track record we have and we expect to continue to grow deposits next year. It may not be at the very high rate that we were able to achieve this year, but we're very happy with the traction that we've got going on in that business and the level of price competitiveness has settled down from what it was a year ago and that's been a great factor as well.

[Woody Lay, Vice President at Keefe, Bruyette & Woods (KBW)]

Got it. That's helpful. And then maybe shifting over to capital. I was just curious, does a more favorable regulatory backdrop sort of impact the way you view your excess capital position and how you might deploy that capital?

[Martin Grunst, Executive VP & CFO at BOK Financial]

Yes. I'd say regulatory backdrop that's certainly helpful. But it doesn't really fundamentally change how we think about capital. We know we've got a strong capital position. We've got a level of excess capital and that just represents earnings and reserve and we're going to be very patient and thoughtful about how we deliver that, how we deploy that into whatever avenue is best for long term shareholder return.

[Stacy Kymes, President & CEO at BOK Financial]

But Woody, given kind of how we risk manage the bank and our outstanding CRA rating and those types of things, the regulatory overlay doesn't really impact how we can do that in any particular environment. We've done things the right way, and so that gives us the latitude regardless of who's in charge to be able to do the right things for shareholders here.

[Woody Lay, Vice President at Keefe, Bruyette & Woods (KBW)]

Yes. That makes sense. All right. Thanks for taking my questions.

[Operator]

Your next question comes from the line of Tim Mitchell with Raymond James. Please go ahead.

[Tim Mitchell, Equity Research Associate at Raymond James Financial]

Hey, good afternoon, everyone. Tim on for Michael. Just want to start out on expenses, kind of lay out mid single digit growth range, obviously, probably tied to the fee businesses and upper versus lower end, how they perform. But just want to appreciate, are there any underlying investments and potential team of doubt that we might which kind of contemplate as we think about that range for the year?

[Martin Grunst, Executive VP & CFO at BOK Financial]

Yes. There's nothing that would qualify as team lift out. But like Stacy said earlier, we are constantly looking to grow talent and that's a driver for year over year growth both improvement in talent base growth in the talent base and continued IT investments. All those things are propelling long term growth and that's really the core drivers there. And as you know, Q1, you'll see payroll taxes that hits in Q1 like it does every year, but pretty standard revenue growth is going to drive a component of the expense growth as well.

[Stacy Kymes, President & CEO at BOK Financial]

We're constantly looking to see where can we make an investment today to add value tomorrow. And one of the things that we've spent a lot of time on recently is how we think about holistically our mortgage businesses. And so you'll see us in the latter half, really probably the 4th quarter, late Q3, Q4 really began to be fully engaged in the mortgage warehouse lending space. In order to do that, we've had to hire talent. Some of that was onboarded in the 4th quarter and some of that will be onboarded in future periods.

[Stacy Kymes, President & CEO at BOK Financial]

But it's things like that where the call it the San Antonio team broadly or things like mortgage warehouse or individual contributors or individual revenue producers in each of these markets, we are constantly looking for opportunities where we can spend a dollar today to create a better opportunity for us to grow top line revenue in the future. And so, I think being able to maintain that efficiency ratio while we're making these types of investments is really positive for our franchise and we're excited about these investments that we're making.

[Tim Mitchell, Equity Research Associate at Raymond James Financial]

Awesome. Appreciate the color. And I appreciate the color on mortgage and what you said about trading so far. Can you just talk about Investment Banking and Brokerage and some of the other kind of fee businesses and what the trends are there? It seems like the outlook for Investment Banking and whatnot is kind of improving post election.

[Tim Mitchell, Equity Research Associate at Raymond James Financial]

Just curious what you're seeing on that front?

[Scott Grauer, Executive VP - Wealth Management at BOK Financial]

Yes. So this is Scott. So as you noticed in the slides, if you take the impact of on the results, if you take the impact from our sale of the insurance unit out, our retail brokerage business is growing at 13%. So we're confident in the trends there and we continue to gain momentum with that piece of our business. Our investment banking activity has been exceptionally strong.

[Scott Grauer, Executive VP - Wealth Management at BOK Financial]

We saw a decline in the Q4, but that is really more seasonal as the majority of our investment banking activity centers around municipal finance. And in particular, we have a high concentration of that activity in Texas. And so when the elections and predominantly the independent school district debt cycles gear back up here, We feel very good about our positioning there and the demand for that activity because we don't participate in the Equity Investment Banking activity.

[Tim Mitchell, Equity Research Associate at Raymond James Financial]

Yes. Awesome. Well,

[Tim Mitchell, Equity Research Associate at Raymond James Financial]

thanks for taking my questions.

[Stacy Kymes, President & CEO at BOK Financial]

Thank you.

[Operator]

Your next question comes from the line of Timur Braziler with Wells Fargo. Please go ahead.

[Timur Braziler, Director - Mid-Cap Bank Equity Research at Wells Fargo]

Hi, good afternoon. My first question is on the deposit side. It was a pretty impressive result, especially considering that CD rates really didn't move in the quarter. Just wondering if you can remind us what the maturation schedule looks like there. And it

[Timur Braziler, Director - Mid-Cap Bank Equity Research at Wells Fargo]

looks like balances even declined a little bit

[Timur Braziler, Director - Mid-Cap Bank Equity Research at Wells Fargo]

in the quarter. Just how much of a head start maybe from a margin standpoint you're getting from time deposits in the first half of twenty twenty five?

[Martin Grunst, Executive VP & CFO at BOK Financial]

Yes. So time deposits, our mix there isn't terribly huge. We actually let a couple of brokered CDs roll off that we put on a little over a year ago. And so that's part of the drop there. The core portfolio is pretty short.

[Martin Grunst, Executive VP & CFO at BOK Financial]

And by the way, our brokered CDs are less than 1% today. So it's not meaningful. But that drove the drop. RCD portfolio tends to be fairly short. It's a lot of that's original 4 month maturity or 8 to 10 month maturity.

[Martin Grunst, Executive VP & CFO at BOK Financial]

So it's only a couple of months of maturity. And so you'll see some of that repriced nicely in the Q1 as we see rates being a little bit lower than when those were put on.

[Timur Braziler, Director - Mid-Cap Bank Equity Research at Wells Fargo]

Okay. And then just looking at the trading securities, did I hear correct that it's 5.8% is the current kind of ongoing rate versus the 4.90% rate for 4Q?

[Martin Grunst, Executive VP & CFO at BOK Financial]

Well, so keep in mind, 4.90 is the weighted average portfolio for the whole trading book. Today's new current coupon MBS is 5.80 or so. But that portfolio will always have some blend of recently produced mortgages as well as some just secondary trading in older vintages. So, but just know that it won't be precisely moving towards exactly the current production level.

[Timur Braziler, Director - Mid-Cap Bank Equity Research at Wells Fargo]

Yes. Okay, great. And then just lastly for me, just the commercial real estate payoff activity, you had made a comment that that was some normal course of business just going into year end. I'm just wondering with rates backing up, if that drove any of that activity or just kind of the timing there? And I guess as you look at stuff that could still be refied away, what component of that has now largely found in your own?

[Martin Grunst, Executive VP & CFO at BOK Financial]

Hey, Timur, I would just point you to the fact that if you look at what happened at 10 year rates kind of in September, you had those rates drop a lot. And so that customer base that did payoffs right at the end of Q3 and a bunch of Q4, those guys are taking down takeouts at that low point in rates. And so as rates came back up, that's what's going to slow it going forward.

[Timur Braziler, Director - Mid-Cap Bank Equity Research at Wells Fargo]

Got it. Great. Thank you.

[Martin Grunst, Executive VP & CFO at BOK Financial]

Yes.

[Operator]

Your next question comes from the line of Ben Gurlinger with Citi. Please go ahead.

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

Hey, good afternoon.

[Martin Grunst, Executive VP & CFO at BOK Financial]

Hi, Ben. Hi, Peter.

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

Just kind of looking at the

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

expense guidance, it says mid single digits. I'm assuming that's, let's call it, 4% to 6%. And now the pivot from this fee to NII trading really doesn't drive any expenses. So it's kind of 10,000 foot view, what gets us to

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

the high end of the

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

range, what gives us to the low end? And would

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

you kind of manage it towards

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

total revenue if possible? Or is it more overall investment, it doesn't matter as much?

[Martin Grunst, Executive VP & CFO at BOK Financial]

Well, there's a portion of that that's just the investments we're making in the business. A lot of the stuff that Stacy talked about, those are long term decisions and we're making those decisions based on their long term effect to drive shareholder value. There is a piece within the expenses that is really tied to the trading businesses and mortgage production, all of the transactional businesses, even loan production to some extent. And so that component will behave as variable. And so as revenue comes up, you'll see that would be something that would move us to the higher end of the range, for example.

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

Okay. That is helpful. And I know over the past, let's call it a couple of years at a minimum, you've been a bit of a C and I hiring sales cycle, whatever you want to call it, but hiring individual bankers across your footprint, those really funded up and was supportive of this above peer growth. I know you're not stopping, but if rates stay elevated, does that change your idea of what kind of CNA or potentially what other lending styles that might be more attractive in this, call it, higher for longer environment?

[Marc Maun, Executive VP - Regional Banks at BOK Financial]

Interest rates really have not had any impact on who we're focused on. We are very much focused on the types of industries that we feel can provide the credit metrics and the credit structure that we are comfortable in lending into. And we've focused more on having the ability to have a secondary source for repayment, strong guarantors, ways that can prevent that we can generate business, but prevent us from creating future credit problems and management teams that can manage through cycles, not start up businesses, ones that fit the ability to manage long term. We don't focus on interest rates that's driving anything associated with our C and I calling efforts.

[Stacy Kymes, President & CEO at BOK Financial]

And Ben, this is Stacy. I think if you look at interest rates on any kind of historical spectrum, rates aren't high. I think that we all get blended into the last 10 years and rates were 0 and that created its own set of behaviors. But I think if you think about where rates are on a historical basis, rates are kind of in the middle of the fairway. And I think that this is much more likely to be the business environment than having really low rates.

[Stacy Kymes, President & CEO at BOK Financial]

I think that was an unusual period of time coming out of the great financial crisis and then the pandemic and those types of things where you had really low rate for an extended period of time. I just don't think that's normal nor sustainable. And I think borrower behavior will adapt to this more normal. Frankly, we see it as a positive just from the shape of the yield curve. I mean, we're awfully excited to have a yield curve that slopes as opposed to essentially a flat to inverted curve over the last decade.

[Stacy Kymes, President & CEO at BOK Financial]

So we see net net overall that as a positive for financials overall.

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

Got you. That's helpful. I appreciate the time.

[Operator]

As there are no further questions at this time, that concludes the Q and A session. I would now like to turn the call over to Stacy Kymes, President and CEO, for closing remarks.

[Stacy Kymes, President & CEO at BOK Financial]

Thank you, everyone, for joining us for our discussion today. I'm very pleased with the strong results we reported this quarter and for the full year. Credit quality is exceptional. Core loans are growing and the right business activity is happening to continue this trend into the future. Margin is robust and expanding and our strong fee income businesses continue to post solid results.

[Stacy Kymes, President & CEO at BOK Financial]

We spent a long time constructing this foundation and we're proud of the earnings engine we built. I do want to take a moment to recognize Mark Mahn. Mark has been an integral part of building this business over the last 40 years. We as an organization and I personally am thankful for Mark, his determination, grit and decisive leadership during his career at BOKF. This will be Mark's last conference call with us and on behalf of the organization, I'd like to say thank you.

[Stacy Kymes, President & CEO at BOK Financial]

We appreciate your interest in BOK Financial and your willingness to spend time with us this afternoon. Please reach out to Heather Keane if you have questions at h.kingbokf.com.

[Operator]

That concludes today's meeting. Thank you for your participation. You may now disconnect.

Participants

Executives

• Heather King, Director - Investor Relations
• Stacy Kymes, President & CEO
• Marc Maun, Executive VP - Regional Banks
• Scott Grauer, Executive VP - Wealth Management
• Martin Grunst, Executive VP & CFO

Analysts

• Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets
• Matt Olney, Managing Director at Stephens Inc
• Peter Winter, Managing Director - Senior Research Analyst at D.A. Davidson
• Brett Rabatin, Managing Director & Head of Equity Research at Hovde Group
• Woody Lay, Vice President at Keefe, Bruyette & Woods (KBW)
• Tim Mitchell, Equity Research Associate at Raymond James Financial
• Timur Braziler, Director - Mid-Cap Bank Equity Research at Wells Fargo
• Ben Gerlinger, Vice President of Equity Research at Citigroup