Q1 2021 BOK Financial Corp Earnings Call
Over the next year I'll be focusing on the sure and a smooth transition for my successor when that individual is formerly named by the board in the coming months those familiar with our company know that leadership decisions are very intentional. Okay, then we run the company with a long-term perspective which includes significant work on developing internal talent and I fully expect the boredom and internal successor for the appropriate time. We're well-positioned to choose a successor soon. And I can reassure you that the next leader will continue the same intentional long-term shareholder Focus. We are done for in the meantime. I'll be focused on the Slate of goals and objectives for 20 21, which will continue to improve our competitive position in our growth prospects in the 2022 and Beyond.
With that, let's look at the most.
Shown on slide for first-quarter net income was 146.1 million or $2.10 per diluted share while that's down modestly from the record his performance last quarter the difference between the first quarter of 2021 and that of twenty-twenty could not be more Stark the key items that drove the quarter were another outstanding earnings results for our mortgage business is activity remained elevated this quarter despite Rising rates the contribution from our wealth management team continues to be a differentiator for us the results were off from the consecutive record quarters in late June twenty as we had expected the improving economic Outlook combined with improving credit Trends allowed us to release twenty-five million dollars of our loan loss reserve and lastly expense management remains. Excellent. It has really throughout the past year turning to slide five loan growth continues to be a challenge that's quarter as our commercial and Commercial Real Estate customers continue to pay down debt while borrowers wage.
Continue to understandably reduce leverage in the challenging economic environment We believe We Are poised for growth opportunities in the latter half of twenty Twenty-One as the economy continues to rebound deposit growth remains, excellent up nearly 3% linked quarter and not nearly 30% from the same quarter a year ago as we began to see the most recent wave of stimulus late in the quarter assets under management or in custody in our wealth management business continue to grow as the protracted low-rate environment encourages Market investment for yield speaking clients Investments and equities is now 40% of our total assets or in custody and that's up approximately two billion dollars from your end which positions up to materially grow fees in our fiduciary and asset management business.
I'll provide additional perspective on the results before the start of the session but now Stacy kymes will review the loan portfolio our credit metrics that are businesses and more detail all turn the call. Thanks Steve turning to slide seven. In loans in our core loan portfolio were 20.7 billion down 3% for the quarter as we continue to see borrowers reduce as expected in early 2021 line utilization in the overall portfolio has dropped from 68% free COVID-19 to 62% at the end of the first quarter of this year off the largest declines occurring in the energy Healthcare and general cni portfolios were cumulative line utilization is down from 65% free COVID-19 to 58% today as the economy continues to reopen we feel confident that line utilization will normalize and our positive outlook for loan growth will materialize later this year over the long term we birth
Loans and two to three times the normal rate of GDP growth and we believe our competitive Position will continue to serve as well once macroeconomic factors stabilize.
Looking at the energy portfolio balance is contracted 7.7% for the quarter while commodity prices have continued to improve and stabilize sourcing New Deals sufficient to offset pay Downs in the current environment remains a challenge as existing borrowers continue to reduce leverage despite these factors. We remain optimistic for Lending and energy-related revenue opportunities as we continue to support our customers in the space.
this
Provides a great example of how we manage the bank to long-term economic outcomes as opposed to short-term Optics during the first quarter. We recognized a 14 million dollars a gain on energy property sales from an equity interest. We received as part of a workout in this most recent downturn. We have consistently indicated a willingness to own or closed off. One of the short-term impact of this was higher non-performing levels. We held the assets until such time the market had improved and thus were in a position to provide a full economic recovery on this life.
Healthcare balances were largely unchanged as quarter as a pocket of growth in senior housing loans was offset by a decrease in hospital system loans looking forward. We remain confident in our Healthcare Palm Coast long-term growth and credit Outlook and expect it to return to its status as a growth leader for us as health and economic conditions migrate into a more normal State later this year.
Triple P loan balances increased $166 billion or nearly 10% and represent 8% of total loans. We originated 544 million of new triple P loans discourse maintaining our strategy of focusing on our existing client base to ensure timely support of our existing client needs growth from new organizations. This quarter was partially offset by pay down of the first round of loans forgiveness activity from previous rounds of triple P were slower in the fourth quarter than our expectations the net interest Revenue impact was about $10,000 less than we anticipated. This should just move into future periods. When the Forgiveness occurs looking ahead. We remain optimistic in our outlook for loan growth in the latter half of this month once these unprecedented levels of liquidity normalize.
The speed of vaccine distributions and the resulting broader economic recovery today leads us to believe confidence and result in capital investment will return to the US economy later this year.
Turning to slide eight. You can see that credit quality continues to be a clear differentiator for bokf. We saw meaningful credit quality improvement across the broader loan portfolio with below expectation charges and criticize asset level this quarter this coupled with the near-term stability in in commodity prices and dramatically improving economic metrics. Let us to release twenty-five million and Reserve this quarter net charge-offs were down from 16.7 million or 31 basis points annualized net of triple P loans in the fourth quarter to 14.5 million or 58 basis points annualized net a triple P loans this quarter and charge-offs total 31 basis points instead of triple P loans over the last four quarters at the lower end of our home place range.
The combined allowance for loan losses totaled $385 million or 1.86% of outstanding loans at quarter in excluding triple P loans. The compact allowance for credit losses attributed to energy was 3.29% of outstanding energy loans on March 31st.
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Lungs decreased significantly down 19 million from last quarter primarily due to a reduction and not occurring energy loans potential problem loans total 422 million a quarter in downtown only from 478 man on December 31st, almost all potential problem classes were down compared to the prior quarter led by potential problem energy and general business ones looking ahead from a credit perspective. There is still a degree of uncertainty in the current environment. So it remains difficult to forget predict that said based on what we know today and assuming our economic forecast is in line as we advance We Believe 20-21 net charge-offs will remain consistent with our experience over the last twelve months.
We will continue to set are reserved at the appropriate level as we always have. We are generally positive about the credit outlook for the remainder of the Year. Oh, I only have to continue to release this quarter off. Once we have more clarity around the spread of COVID-19 case count reductions vaccine distribution and abroad resumption of regular economic activity in 20 21, we could potentially with the additional opportunity for Reserve released this year turning to slide 9, you can see that brokerage and trading fee revenues are down this quarter when looking at the income and non-interest income generated from our brokerage and trading business comprehensively the businesses down about 15 million link order. This is largely due to some reversion from record volumes in the third and fourth quarters and compressing margins in the mortgage industry that impacted trading margins by about 70 basis points compared to the last quarter.
In addition customer hedging Revenue decreased 2.1 million primarily due to a modest decrease in Energy customer hedging activities from the record fourth-quarter Investment Banking Revenue decreased 5.1 million mainly due to timing of loan syndication activity while the net interest Revenue in trading Revenue related to our enhanced mortgage trading desk experience a Slowdown from the record levels and 22 age as expected. It is still a major contributor to the overall success of the company and is still up over 15% from the same quarter a year ago.
Mortgage Banking Revenue decreased roughly 2.2 million link order to remain strong despite a national lack of housing inventory and Rising interest rates while margins have been relative to age levels in the summer of 2020. They remained roughly 45% above where they were in March of 2020 total production volume this quarter remain consistent with prior quarters and looking ahead inventory constraints could continue to build a case for these elevated production levels to be sustainable as it will take a while before inventory is materially improved other Revenue increase 1 million this quarter due to higher revenue from repossessed oil and gas properties.
Who not included?
Also note that economic changes in the fair value of mortgage servicing rights and related economic catches were positive four point seven million during the quarter. I'll turn the call over to Steven to highlight our Nim Dynamics and the important balance sheet items for the quarter Stephen. Thanks Stacy turn this slide eleven first quarter net interest. Revenue wage was $280 million down about $17 million from last quarter while the poor yields in our loan portfolio were relatively stable a reduction in average loan volumes and the timing of loan fee including a two-million-dollar decline in triple pee-pees linked quarter was a drag on that interest Revenue this quarter.
Net interest margin was 2.62% down ten basis points from the previous quarter. Laura average outstanding loan balance is coupled with the reinvestment of cash flows for available for sale Securities portfolio continue to impact managers margin with the portfolio yield declining 14 basis points to 1.84% Additionally why we should have success driving interest-bearing deposit costs down slightly to 17 basis points. This was at a decrease page from previous quarter's by there are many moving parts to consider the continued recognition of triple P interest and fees the combination of continued repricing of the AFS portfolio and The Limited room to move interest-bearing deposit cost down further month will continue to impact meditrans margins in the coming quarters.
Turn to slide twelve expense management remains prudent with total expenses down 6% link border Personnel expense was down 3.2 million or nearly 2% this quarter cash-based incentive compensation decreased eight point two million primarily due to decreased brokerage activity mentioned earlier deferred compensation, which is largely offset by decreasing the value of related Investments included in other gains and losses decreased three point four million employee benefits increased 6.4 million primarily due to seasonal increase in payroll taxes and retirement planned expenses all told were very happy with our ability to hold the personal cost efficiencies earned through the pandemic off even with medical expenses increasing one point seven million year-over-year as employees now seek wellness and other treatments deferred in 2020.
Non personal expense was down nearly $15 or 12% from the fourth quarter half of this decrease was due to a 14.1 million gain on the sale of equity interest received this part of the work out of a default energy loan partially offset by additional expense and write down of a set of all the gas properties in the first quarter the remaining decrease and not expense was due to a decrease in business promotion expense a 1.6 million a decrease of 2.3 million in professional fees and services a decrease of 1.6 million and recruiting expense and a decrease in occupancy and Equipment of 1.2 million.
partially offset by
Two point four million spent on ongoing technology projects. Additionally, we made it for million-dollar charitable contribution to the bokf foundation and the quarter as we continue to focus on the communities we serve and the extreme needs created by the pandemic.
On slide 13 our liquidity position remains very strong given the continued inflow of deposit balances. Our loaner deposit ratio is now below 60% compared with 64% a year in providing significant on balance sheet liquidity to meet future customer needs our Capital levels remain strong as well with the common Equity Tier 1 ratio of 12.1% Well ahead of our internal operating range minimum was such a strong Capital level. We once again, we're active with share repurchase optimistically repurchasing 260,000 shares at an average price of $77.20 per share in the open market.
On slide 14 I'll leave you with a general outlook for the near and mid-term.
We Believe Ned activity and Loan growth will slowly accelerate in tandem with the broader economic recovery this year excluding the impact of triple p
are available for sale Securities portfolio, which is largely agency mortgage-backed Securities yielded 1.84% during the first quarter given the sustained low-rate environment pre-packaged could reach approximately 700 million per quarter. We can currently reinvest those cash flows at rates around 95 to 105 basis points at 7 a.m. And we believe we're close to the bottom and deposit pricing the combination of the Securities reinvestment at lower rates and minimal room to further lower deposit costs will push minotaurs margin in the coming quarters.
Our diverse portfolio fee revenue streams should continue to provide submitted gating impact to overall Revenue pressure being felt in our spread businesses. We expect most fee Revenue categories to go off in 20 21 with the exception of brokerage and trading and mortgage businesses as the 2020 record year, and those areas will be difficult to replicate as we mentioned late last year.
We will continue our disciplined approach to controlling personnel and non Personnel costs with growth budget at low single-digits in 2021. Our Focus will be holding the line on manageable life sentences without sacrificing multi-year technology commitments to improve customer service in our competitive position.
If the economy continues to improve and we get further oil price stability this year additional loan loss Reserve release as possible.
As I mentioned a moment ago, we feel good about our Capital stream. We will continue looking for share buyback opportunities and will maintain our current quarterly cash dividend level.
Intend to bring all our employees back to the office by the end of the second quarter given improving Health metrics and the wide vaccine availability.
I'll now turn the call back over to Steve Bradshaw for closing, Terry. Thank you. Stephen all told it was a solid quarter for Bok Financial our mortgage and wealth management businesses off while down on a quarterly comparison continue to offer a significant offset to the depressed loan demand that plagued the industry and presented a differentiated shareholder value for our company credit came out comes this quarter or a testament to not only how well we've managed the ongoing crisis, but more importantly our ability to remain disciplined with credit decisions in more favorable parts of the cycle. We agree with forecasts that we are on the cusp of a period of Rapid economic growth heading into the latter half of this year. And we believe that will translate the loan growth and area bokf has never been better positioned to take advantage than it is today.
In the near-term, it's Stephen Mitchell and his Outlook. We intend to bring all employees back to the office and by the end of the second quarter given improving Health metrics in the white vaccine availability. We know that we're better together and believe this will act as yet another positive Catalyst to our efforts to grow relationships and add new ones in the second half of this year with that. We were pleased to take your questions operator.
Thank you at this time will be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad will indicate your line as in the question. You may press start to if you'd like to remove your question from the account for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star key. Our first question comes from the life Peter winter with wedbush Securities. Please proceed with your question.
Good morning. I wanted to ask about the loan pipeline. Just give a little bit more color on the Tailwind that you're expecting just based on the discussions you're having with clients. And then also just the extent of this excess liquidity on their balance sheets and how it's impacting their ability to to appetite suck.
Sure, I'll I'll talk about the loan Pipeline and then turn over to Steven to talk about the excess liquidity. Yeah, I think you'd be we are seeing you know, opportunities pipeline a growing really across the The Lending segment. But but level of liquidity that exist in our clients balance sheets is still very high. But if you look at our home, you know lack of loan growth. If you will this quarter, you really see two segments that traditionally lead for us, you know, both energy and Commercial Real Estate. We're down larger than normal and I think I you heard me talk about in the first in the fourth quarter call that we really thought energy would probably kind of bottomed out or reach an inflection point we were hopeful in the first quarter, but thought it was more likely in the second quarter off. I feel more confident today that will hit that inflection point in the second quarter for energy as we began to work through the the payoffs Energy prices were very good in the first quarter most of those borrowers. Yep.
That extra cash flow to pay down debt.
We had some anomalies in commercial real estate where we had a higher level of pay Downs in the in the first quarter that area is going to grow just fine. So I think once those stabilized and it can begin to show growth again. I think that's really masking some good activity that we hope to see and you know, we're still hopeful in the second half of the Year. We're very optimistic that you'll begin to see some poor loan growth that will come out of that portfolio, which is why we highlighted the utilization in our commentary, you know, we've got a lot of organic growth that will happen just by higher line utilization in our cni book in particular and so once there is core economic activity that returns I think there's going to be some really good what I need Elation increases that will be on new customer acquisition will help us grow our loans in the second half of the year. So we feel good about that clearly. It's hard to predict. You've got high liquidity on your customers balance sheets, but there's a lot of stimulus and there's ma'am.
FEMA has proposed and we think that that that's going to lead to higher economic activity that will organically increase loan activity, but we feel good about it. And and we feel good about the quality of ones that were adding to you know, we're focused on segments that are are are sustainable and meet our credit Fairway over a long period of time and so we're not going to chase loan growth to meet a market expectations, but we'll stick to the core loan growth that has served us very well for a very long period of time I'll turn over to Steven to talk about the excess liquidity. Yeah. So Peter I was looking at had our a direct deposits just from a year ago and they're up eight point three billion dollars 29% and 4.2 that is in our commercial portfolios or commercial clients down 35% increase so clearly as you pointed out. I mean, there's significant liquidity on on the balance sheets and how that plays into. You know, when will that get used Ed?
And if some of that will get used prior to the loan growth that Stacy's pretty confident about, you know could be and we don't know the answer to that. So yeah significant liquidity. I'm certainly may play into usage of some of that before we know get some of the line utilization. We just don't know how much but I think if you really go back to that liquidity off part of that is just the quality of our franchise, we continue to attract high-quality customers and deposits, even though you've seen our cost of interest bearing deposits continue to decline quarterly quarter-over-quarter the movement that we've made there for the last 12 months is really very strong in spite of the fact that we're we're really not paying at a high level for those deposits. We're continue to attract those really speaks to the Palm Court franchise value of bok Financial.
Can I can I ask a follow-up just on this line utilization? You mentioned Stacy that the core portfolios line utilization went from 65% to 58% today. You know how much for every one percentage Point increase in line utilization. Does that impact commercial loans? And and where did it could go to buy your rent?
In general 1% about $150 million. So, you know plus or minus from there. You can you can do the math from there and see you know, what you think, you know, we we use pre-code as kind of a standard, you know, we felt like that was a representative lot. For line utilization. If you'll get higher economic activity than than what we had pre COVID-19 which is which is probably likely then you'll get higher line utilization that will exceed what we were pre-code.
Okay. Thanks for taking my questions. Thank you Peter.
Thank you. Our next question comes from line of Brady Gailey with KBW. Please proceed with your question.
Hey, good morning. This is Bill Jones on Brady Gailey. How are you guys? Good good.
A good system just piggybacking off of lung growth for just 1 SEC, you know, just just thinking about loans as a whole, you know, I know energy is really kind of money and a lot of the burden here lately. Do you feel like balance is today or kind of at a low water mark on the total portfolio? What what do you do you feel like there could be more shrinkage to come.
Well, I think if you look at what we're calling the core loan portfolio. So if you look on slide seven where we break out the paycheck to paycheck Protection Program, I think that that those loans will run their course and so if you if you see that that can provide some headwind in the future is is those get forgiven and and and we'll roll off but in the core portfolio clearly energy has been the headwind wage order real estate was also a headwind which is which traditionally as an area. We've we've grown pretty radically over time, you know, the inflection point I believe is in the second quarter page, you know, whether that's you know, April May or June. I don't know but I do think that will reach the inflection point where we do kind of bottomed out in the second quarter at some point and then Thursday, that's the level that we begin to grow back from we're seeing opportunities in energy. I think that that even the the rise in commodity prices in my view and the first quarter dead.
Had a higher level resulted in a higher level of paid on activity than even what we were anticipating and forecasting because those borrowers weren't using that cash flow for they were using that to connect to pay down revolver. So I think that that, you know, we're within a 1/4 here of reaching that inflection point and then you'll begin to see loans began back as we pointed to now for, you know, two quarters second half of 21 is really when were expecting the the core loan growth to return.
Right now that's great color know it's really good to hear the optimism on energy. Hope that that plays out and just I'll see if I just wanted to move over to them, you know, just think of m&a, you know, I know I know bokf is historically been pretty selective and you know, it's real deal pricing and they'll choosing. You know, we've seen a great deal of activity already this year including you know, Cadence and BancorpSouth that was you know, really really kind of rang vo kaise backyard. I'm just just curious on your thoughts on a transaction of that magnitude be okay, whatever be interested in that and just more broadly speaking. How active do you think be? Okay could be an m&a this year.
Yeah, this is Steve Bradshaw. I'll take that one. You know, we certainly acknowledge what's kind of going on in the financial sector from a consolidation perspective. In fact, it seems even a little bit of a cute and and similar-sized Banks to bokf including those two that you just mentioned and I think you know to me there's two major driver that one is the opportunity or desire to spread the expense base and more broadly and and we will have an interest in that and in our most recent transactions that wage to a key element for us as well. The second driver really is investment in technology. And you see that kind of mentioned time after time. I'll tell you that we don't feel the same level of competitive urgency because we've not taken any time off we've continued to invest in technology as an increasing percentage of our revenues really for the wage.
Five or six years plus and like our competitive position and feel like we we are on track and and are able to compete upmarket with large investment firms as well as National Banks off. So that's not as big a motivation for us. So we kind of come back to our core belief on m&a. We really want to see Banks largely within footprint that are high-quality have great employees and management teams and have a broad business base and we don't expect them to have the same basis us because we're we're unique even among our peers but we may want to see something more than a large real estate portfolio frankly. And because we're going to have to after we realize those energy or at night energy, but the expense energies we have to grow it going forth. Our mindset is really we use Revenue as the guidepost for our Acquisitions, you know, can we can we add an acquisition that we think would be dead?
Added into Revenue going forward your the other second part of your question was really size. You have set the size of we're at today. It would have to be a more meaningful transaction for us than Iraq we've done in the past the most recent acquisition we did was about four billion in assets and it would need to be north of that in order to really move the needle in terms of expenses and revenue growth may also be worth the kind of inherent distraction that you introduced inside your culture when you were simulating one organization into another so long answer to a short question, but I know what everybody's mind as we've seen so much activity and some and some deals and now it's just really even as recently as this week. But that's how we're thinking about it. We would expect to have an opportunity to participate in Acquisitions going forward, but I think the bank that that I described for you is probably not a seller birth.
In today's economic environment. I think we're going to have to see some economic.
Kitchen in sustainability before the banks that are really in our sweet spot think it's a good opportunity to to merge.
Got it makes total sense. Thanks for taking my questions.
Thank you. Our next question comes from the line of Brett rabatin with healthy group. Please proceed with your question.
Hey guys. Good morning. Good morning.
Congratulations Steve on your plan retirement. Thank you. Appreciate that.
Wanted to ask I guess first about the reserve, you know, and just thinking about Reserve release from here. You know, you had a reserve that got below 1% off Visa land. I'm just curious. You know, how do you guys think about where the reserve might be able to get to you know in this news piece of world, you know, assuming the economy gets to kind of Iraq 20s scenario where things are pretty good. You know, how do you how do you use a potential for the reserve to go down from here?
Yeah, this is Mark Martin. First of all, just as a reminder when Cecil was implemented. There's a day one reserved adjustment that had to be made so long before the impact of the pandemic and and so forth on our Reserve we had added reserved. It took it more to 1.2% So it came above the below 1% level and then we add it on additional Reserve build related to the economic downturn and and the pandemic home. So it was we have evaluate the future of the reserve will be taking into account. The economic conditions will be taking into account our credit quality metrics. Both of them. We think will continue to improve throughout this year. And then the other Factor will be loan growth and has that impacts it and we want to make sure we're managing it at the appropriate level to to address that. Yep.
So the combination of that, you know, we hope that it'll come down to that 1.2% level, but it'll be a combination of supporting loan growth as well as as looking at potential Reserve or associated with credit quality and economic Outlook.
Okay fair enough and then on on feeding, you know the the guidance I guess if you want to call it that is for the categories to grow modestly with the exception of brokerage and trading in my office. Yeah, can you give us any thoughts around one mortgage from here? Do you think gain-on-sale margins or or going to continue after failing or do you think one could sort of encapsulated you know the pressure that you get from where we were previously with volumes and then just secondly on a brokerage and trading, you know obviously would be here in the past two quarters, you know, can you give us maybe some thoughts around how things play out there is volatility in that business slows as well. Sure the Stacy and we've got grauer here as well who can can chime in on on the west side as well. But I mean as it relates to mortgage, I think we feel good about going into the second quarter. You know, you've got some seasonality in the mortgage ma'am.
For your second and third quarters tend to be pretty good quarters from an activity perspective that's going to help us a little bit you have seen.
Some thinning of the gain on sale margins there, but they're still really good on a relative basis to kind of what normal is for that business. And so that's still a really good place to be even though they've Fallen they're still really strong there could be some pressure there, but it doesn't feel like a return to level if you will in terms of where that is. At least from what we're seeing today. So we I feel good about kind of the next couple of quarters as it relates to mortgage. I feel really good about our our growth and our wealth business office, you know, the brokerage and trading Revenue broadly, but but all that's happening there. We really feel like what you saw in the first quarter is is a number that we can can do really well with and maybe help you out perform into the second quarter particularly that that is a a sustainable number and when we think we can actually grow from a little bit as Steven alluded to in his prepared comments. Oh dead.
We still good about where we're positioned in both of those businesses. They are volatile, you know, if you look at that the the overall wealth business brokerage and trading both the nir and the birth and trading fee Revenue component. So total revenue for that business. It's up 15% first-quarter over first quarter. So you've got that Tough Cop with a fourth-quarter. It was just a record wage and and you know, I don't want to lose sight of the fact that that core business has grown substantially and we continue to commit Capital to that so our Capital commitment to the wealth business is up over 50% from this time of year ago and will continue to support that because we we really like that business. Okay. Appreciate the call and thanks guys.
Thank you. Our next question comes from line of Jared Shaw with Wells Fargo. Please proceed with your question.
Hi, this is John Rowan from Jared morning morning morning.
I guess just stick on the wealth side looking at the assets under management and administration kind of flattish quarter-over-quarter. And you also mentioned about two billion dollar increase in equity balances. Can you give any color on I guess what the differential differential between inflows or outflows and changes in market value? We're driving that balance sure. So this is Scott grauer and when you look at our total, you know, um a we're uh, we were actually really pleased with that inflows, uh, in the first quarter. We have during the course of the first quarter very high plan distributions of assets a lot of it in our corporate trust grew up. So we had total disbursements in the first quarter of over eleven billion. And so we saw a net sales new sales of over ten billion, so there was really wage.
a moderate Market increase of those totally Umma
Okay, great. That's helpful. You know I for that distributions from that so that that that's a big factor there.
Okay, great. That's helpful. And then I guess just talking about the building equity in that business. Is that kind of a longer-term focus or I guess would you like to have it be more wage? Exactly means to maybe protect the margin a little bit more. I guess just higher level. What are your plans on that? Yeah, and and so actually we're we like our our our allocation and our distribution amongst the asset classes, you know, we have continued to see as have the broader markets, you know with fixed-income suck at these nominal yields and real yields equities obviously have just a a better momentum in terms of asset flows when you look at into firstco. We were you know, just to give you an allocation. We were 12% cash 42% fixed income 38% equities in about 8% in Alternatives and dead.
A consistent mix we're getting a a mix reflected of the assets that is on track with our Target allocations. So often we feel good about that distribution to weather and grow regardless of rate and Equity market performance. So we feel good about it. We're we're always going to see, you know efforts to try to grow our Equity inflows because that's where Flows In general are netting out positive in the overall Market.
Okay, great. Thanks for your call.
Thank you. Our next question comes from only with Stephens. Please proceed with your question great. Thank you want to Circle back on the loan off discussion and and you covered the energy topic pretty well. I wanted to ask about commercial real estate. It's not particularly large at the bank, but we did see a pretty decent-sized decline any color on what drove that Decline and what's the outlook on Commercial Real Estate? Yeah, we we still get about the portfolio. I mean you want a you know, at least for us you want a commercial real estate portfolio that has some level of turn in it that that indicates that deals are performing well and can be refinanced long-term in the pump permanent financing more the market whether that's life, KO or CM yes or whatever we saw in 2020 because of the pandemic the lowest level of payoffs as a result of movement to the permanent financing Market that
We've seen in the last ten years for sure. And so what you saw in the first quarter was really more a a returned.
Normalcy of kind of normal pay Downs that there were things are moving you had a maybe a little higher level of it because you had some pin-up opportunity there, you know commercial real estate for both the growth and the pay towns tend to be lumpy and best to look at over a 12-month Horizon as opposed to kind of Link quarter annualized will be buying their will have good growth in commercial real estate. We think this year, you know, you're just going to have some lumpiness from quarter-to-quarter as those those advances and then the reef eyes into the permanent financing Market non-recourse, you know long-term wife. KO type stuff will move out of the portfolio and that that from our view is the sign of a healthy portfolio and that's that's our view about that.
Okay. Thanks Stacy. And then on the on the health-care side, I think overall balances were relatively stable in the first quarter of It kind of a mix shift growth in senior housing towns and in hospital any more details you can provide and is that any kind of inflection that we saw in the first quarter? Yeah. I think that is the inflection, you know, we had some Hospital Systems Advance up in preparation for life COVID-19 and and the expense associated with that. I think we're we've seen kind of the tale of that in the first quarter where where those have paid back down and then you saw that senior housing core growth begin to kick back. We're really seeing really good metrics coming out of our portfolios inside of senior housing. We can monitor on a weekly basis. We're watching occupancy. Come back up almost about 1% a month in our core senior housing portfolio. So once that portfolio really begins to stabilize we do think there's some pin up dead.
Acquisition activity that can happen there that will spur a loan growth in on the health-care side. We got a great team. We're well-positioned for that. And I think that that will continue to be a growth driver for Bok Financial. Okay. Thank you.
Thank you. Our next question comes from the line of Gary tenner with the a Davidson. Please proceed with your question. Good morning everybody. Good morning. Hey wanted to ask about how you're thinking about, you know, overall balance sheet management over the course of this year, you know, you you are pretty fully invested seems like in the Securities portfolio. You do have some kind of excess balances but not nearly to the boss. Maybe extreme that some other Banks do separate billion in cash and I'm just wondering how you're thinking about, you know, the potential for some, you know shift and deposit flows over the course of this year as your customer used their liquidity, you know, and put that to work and and and, you know, given particularly the low rates that you were talking about in terms of reinvestment.
Yeah, so, this is Steven. I mean if you look over the course of the year we actually increased are available for sale Securities portfolio. One point eight billion dollars. So it's like 15% off. We did kind of put the work if you will over the course of the Year some of the quiddity it was flowing our direction. We in fact added four hundred million this particular phone number first quarter, you know, we'll reinvest cash flows, I think going forward but given the Steep a little bit steeper yield curve. I doubt if you'll see us, you know leverage up if you will that that security for polio much more. I kind of like where the balance sheet is. We don't venture out. We haven't historically ventured out to asset-sensitive in in previous. I think if you look at a parallel shock of a hundred basis points, we're about two and half percent asset-sensitive going forward and that's a pretty good level for us off.
Topped with that. So that's that's
Really? I think what we're thinking about in terms of the Securities portfolio, which is our primary lever for managing interest rate risk here at the bank and leaving that relatively stable by reinvesting cash flows, which actually you're a little bit better than they were in the in the previous quarter. I think our cash flow has slowed down a bit and the reinvestment rates are a little bit stronger than they were last quarter. So that's that's helpful as well. If you have anything, this is Stacy I might speak to is you know, it's particularly is you people think about and talk to start to project more assets sensitivity. When you look at various disclosures around that there are just a host of assumptions that go into that sensitivity analysis and it's very hard to get apples-to-apples comparisons across the the the Regional Bank Spectrum in terms of exactly how folks you're looking at that but I would encourage the analyst Community to go look at actual results. The last time rates went up. I mean if you think about
You know, we we've had a recent cycle pre-code where rates were rising and you could really see the performance of folks balance sheet as a result of that. I think that's a Thursday indicator in many respects than what folks are going to project through their queue and K around asset sensitivity as we as we think about this going forward.
Thanks for that Steven going back to my initial question. I apologize. If I didn't ask her clearly. I guess I I what it was really asking is given that you don't have as much access to put in the balance sheet. Do you are you do you not have any major concerns about outflow of customer deposits as some of the stimulus Burns off whereas other banks are holding a lot more access to query so I'm not really asking do you think about that?
I don't think we do. I mean I kind of described earlier the the increase in those balances. It means Scott's world and in wealth has increased a couple of billion there could be some outflows of that in the future if they find other places to invest but I don't think we're too concerned about all that flowing away anytime soon.
Okay, that's great. And then kind of following up on stage. She's kind of minutes Stephen. If you could maybe give us just a quick overview of kind of weird bokf is positioned in a loan portfolio from home versus fixed rate loans and kind of impact of floors potentially as we do do that. All right. So about 70% of our loans are either dead or they're going to reprice within a year. So that gives you an idea there we have of the $22 billion dollar loan portfolio about three point eight billion. Maybe it's three point four billion has floors embedded in it. We're getting a benefit of about 18 to 20 million dollars annualized on those floors and they're supporting them about four bases once
Okay.
And then just last one if I could squeeze one more question in here in terms of with the addition of the second round here. You just tell us what the total remaining fees are yet to be recognized through that, Yes, I can do that. So the original twenty-twenty fundings of 2.3 billion o p p p we had fees associated with that of about 59 months and the first quarter 20-21 fundings this last round there's fees about $23 million associated with that's a total of about 82 million and we recognized 36 million and 20 twenty. We kind of expect to recognize around Thirty million in 2012. And then you know, we'll see how the rest flows out but you know likely most of it in 2022 for the remainder of that balance.
Okay, and over the 30 million expecting 21 how much it was recognized in the first quarter.
About 11 million just the fees. Now, you know, you've got the interest and of course the cost of funds against that against the 1% So the total ptpp in our benefit in the first quarter was about fourteen million, which is down a little bit from the fourth quarter. That's one of the reasons that our Nim declined a little bit more than than what we expect just because of that PPP activity, but you know, that's probably just a push in the future quarters.
Great. Thanks for taking my questions.
Thank you. Our next question comes from line of Jennifer Demba with trust Securities. Please proceed with your question. Good morning. How are you thinking about energy loan competition over the next few years. We've seen some of your competitors came back away from the space and say they maybe have a little bit less appetite there at least over the near-term. How do how do you think lay out?
Who are walking away from it now? What will be interesting to see is it's easy to walk away from that business when you know commodity prices are are a struggle and and Executives have to talk about asset quality on an earnings call, you know, as you build some some good good results in this business going forward. You may have some folks who step back into the business particularly in our office in our footprint, but we are really excited about where we're positioned here. I mean, if you think about, you know, our place in the league tables relative to production in this business, we are we are competitive with the the very large National Banks here and so has has this area begins to return seeing some information just over the last week that talks about storage levels Globe are at three levels today, but demand levels are not at all. So if if you you know, if you just kind of see that through I think there there could be some more Tailwind for some primer.
In the short term which which would be positive but I think we really like the business we like where we're positioned in the business. I don't think there's a better energy team in the country should be okay financials. So we're we're excited to grow the business.
Thanks so much. Thank you.
Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to mister know for any final comments.
Okay. Thanks. Again everyone for joining us today. We appreciate your interest in Bok Financial. If you have any further questions, please call me at 918-595-8030, or you can email us at I have a great day. Thank you.
Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.