Q2 2025 BOK Financial Corp Earnings Call

Transcription by Transcription Outsourcing, LLC.

Operator: If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again.

Greetings welcome to be okay. Financial Corporation second quarter 2025 earnings conference. Call Alliance have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.

Operator: As a reminder, this conference is being recorded.

Heather King: I would now like to turn the presentation over to Heather King, Director of Investor Relations for BOK Financial Corporation. Please proceed.

Speaker Change: If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again, 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 Bo Financial Corporation. Please proceed.

Stacy Kymes: Good afternoon, and thank you for joining our discussion of BOK Financial second quarter 2025. Our CEO Stacy Kymes will provide opening comments and cover our loan portfolio and related credit.

Scott Grauer: Scott Grauer, Executive Vice President of Wealth Management, will cover our fee-based results.

Marty Grunst: Our CFO, Marty Grunst, will then discuss financial performance for the quarter and our forward guidance. Slide presentation and press release are available on our website at BOKF.com.

Speaker Change: Blue and related credit metrics, Scott grower Executive, Vice President of wealth management will cover our fee based results.

Speaker Change: Our CFO. Marty grunts will then discuss financial performance for the quarter and our forward guidance.

Operator: We refer you to the disclaimers on Slide 2 regarding any forward-looking statements made during this call.

Stacy Kymes: I will now turn the call over to Stacy Kymes, who will begin on Slide 2. Thank you, Heather. We appreciate you joining the call this afternoon. We're pleased to report earnings of $140 million, or EBS, of $2.19 per diluted share for the second quarter. The word that comes to mind for this quarter is momentum. During the quarter, we saw a re-acceleration of loan growth with the anticipated fund up of our CRE book, continued strength in the core C&I portfolio, and a tapering of the abnormal payoff activity that has recently impacted outstandings in our specialized business.

Speaker Change: The slide presentation and press release are available on our website. At bokf.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 Stacey KS. Who will begin on slide 4?

Speaker Change: Thank you, heather. We appreciate you joining. The call this afternoon.

Stacey KS: We're pleased to report earnings of 140 million or EPS of $2.19 per diluted share for the second quarter.

For worth it, comes to mind for this quarter is momentum.

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

Stacey KS: During the quarter, we saw a re acceleration of loan growth with the anticipated fund up of our CRA book. Continued strength in the core cni, portfolio and a tapering of the abnormal payoff activity that has recently impacted outstandings in our specialized businesses.

Stacey KS: Looking ahead, we will launch our new mortgage Finance line of business, which should further support future loan growth.

Stacey KS: This was made possible by consistently investing in the right talent and systems to enable the future growth of our business.

Stacey KS: We realize this does increase expenses in the current period, but it enhances. Our long-term sustainable growth and positive operating leverage for years to come.

Stacey KS: The income was another bright spot for the quarter with total fees and commissions up to 7.2% sequentially.

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

Stacey KS: Trading activity normalized. This quarter as the macro, environment uncertainty abated, and we saw more typical levels of customer engagement.

Not only was our trading business up this quarter. We saw a broad-based growth across our fee. Income businesses, with several lines producing record, quarterly results.

Stacey KS: Net interest income group for the fifth consecutive quarter and we continue to experience margin expansion as well.

Stacey KS: With a loan of deposit ratio of 64%, we are well positioned to continue optimizing pricing of the deposit book.

Even in our current levels of liability bettas, we've exceeded our most recent hiking cycle beta and see further opportunities to the upside.

Stacy Kymes: This growth occurred even though we took several capital actions to create value for our shareholders, including repurchasing over 660,000 shares, below $94 per share, and redeeming all $131 million of our Tier 2 capital insurance. Credit has long been a strength for us, and we continue to be well-reserved, with a combined allowance at a healthy 1.36% of outstanding loans. Criticized and classified levels remain well below their pre-pandemic levels.

Our Capital levels remain robust and strengthen. Once again, this quarter with tce reaching 9.6% and cet1 reaching 13.6%

Stacey KS: This growth occurred even though we took several Capital actions to create value for our shareholders, including repurchasing over 660,000 shares below, 94 dollars per share and redeeming. All 131 million of our tier 2 Capital instruments.

Stacy Kymes: Turning to slide six, I wanted to spend a little time highlighting the segments of our loan book. Total outstanding loans grew 2.5% this quarter, which is over 10% on an annualized basis. by Growth in Commercial Real Estate, our core C&I portfolio, and loans to individuals. Our core C&I loan portfolio, which represents our combined services and general business portfolios, grew 1.1% led by Native American lending and general business loans. Our specialty lending portfolio decreased 1.6% with contraction in our energy portfolio of 4.4%. This was partially offset by expansion in our healthcare portfolio of 0.5%, which had a strong quarter of new origination.

Stacey KS: Credit has long been a strength for us and we continue to be well, reserved with a combined allowance at a healthy 1.36% of outstanding loans, criticizing classified levels remain well below their pre-pandemic levels.

Stacey KS: Turning to slide 6. I wanted to spend a little time highlighting the segments of our loan book.

Stacey KS: Total outstanding loans, grew 2 and a half percent this quarter which is over 10% on annualized basis.

Led by growth in commercial real estate. Our core cni portfolio and Loans to individuals.

our core cni loan for portfolio, which represents our combined services and general business portfolios, grew 1.1% by by Native American Lending, and general business loans,

Stacey KS: Our specialty lending portfolio decreased 1.6% with contraction in our energy portfolio of 4.4%.

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

Stacey KS: This was partially offset by expansion in our Healthcare portfolio of 0.5% which had a strong quarter of new originations

Stacey KS: These portfolios have experienced elevated levels of payoff activity, over the past couple of quarters.

Stacey KS: And while that activity is still present, it has abated for my abnormally, high levels.

Stacey KS: In fact, we will look specifically at the energy book, most of the payoff activity for the quarter was in April while the months of May and June were very stable.

Stacey KS: We are confident in our ability to grow these businesses over time and pipelines, remain healthy.

Stacey KS: Our CRA business increased 6.9% quarter over quarter with a majority of the growth coming from multifamily housing, retail, and Industrial projects.

Stacy Kymes: The portfolio recently came under its internal concentration. We have focused on building commitments over the past few quarters, but it takes time for this portfolio, which is largely construction, to begin funding up and showing increases in outstanding balance. We expect growth and outstanding balances to continue.

Stacey KS: As we mentioned previously, we anticipated a fund of our CRA portfolio.

This portfolio recently came under its internal concentration limits.

Stacey KS: We have focused on building commitments over the past few quarters but it takes time for this portfolio, which is largely construction to begin funding up and showing increases in outstanding balances.

Stacey KS: We expect growth in outstanding, balances to continue.

Stacy Kymes: Our expansion into the mortgage finance and warehouse lending business is on track. We've approved four credit relationships as of this call, and the pipeline is strong. In fact, we expect to fund our first loan in the next couple of weeks as our system implementation is nearly complete. We've hired a talented and experienced team to build this business and the related expenses embedded in the run rate you see today. All of this combined gives us confidence in our ability to achieve the outlook that we set at the beginning of the year.

Stacey KS: Our expansion into the mortgage finance and Warehouse lending, business is on track.

Stacey KS: We've approved 4 credit relationships as of this call and the pipeline is strong. In fact, we expect to fund our first Loan in the next couple of weeks as our system implementation is nearly complete.

Stacey KS: Right. You see today?

Stacey KS: All of this combined gives us confidence in our ability, to achieve the Outlook that we set at the beginning of the year.

Stacy Kymes: Transitioning to slide seven, credit quality remains excellent across the loan portfolio, so I will keep my commentary brief.

Stacy Kymes: MPAs not guaranteed by the U.S. government decreased $4 million to $74 million. The resulting non-performing assets to period loans and repossessed assets decreased two basis points to 31 basis points. Committed criticized assets ticked up slightly this quarter, but remain very low relative to historical standards. With minimal net charge of 561,000 during the quarter with net charge of averaging one basis point over the last 12 We expect net charge offs to remain below historical norms in the future. Our combined allowance for credit losses is $330 million, or 1.36% of outstanding loans, which is a healthy reserve level.

Stacey KS: Transitioning to slide 7, credit quality remains excellent across the loan portfolio, so I will keep my commentary brief.

Stacey KS: NBA is not guaranteed by the US government decreased 4 million to 74 million. The resulting non-performing assets to period, loans and repossessed assets, decreased, 2 basis points to 31 basis points.

Stacey KS: Committed criticized assets to pick up slightly this quarter but remain very low relative to historical standards.

with minimal net, charge offs of 561,000 during the quarter with net charge off averaging, 1 basis, point over the last 12 months,

Stacey KS: We expect that charge offs to remain below historical Norms in the future.

Stacy Kymes: Our track record speaks for itself as we've demonstrated consistency in the credit space time and time again.

Stacey KS: our combined allowance for credit, losses, is 330 million or 1.36% of outstanding loans, which is a healthy Reserve level

Scott Grauer: And now I'll turn the call over to Scott. Thank you, Stacy. Turning to our operating results for the quarter on slides 9 and 10, total fee income increased $13.2 million on a linked quarter basis, contributing $197.3 million to revenue. Total trading revenue, which includes trading-related net interest income, was $30.5 million, representing growth of 31% from the prior quarter and a return to a more normal operating environment. Trading fees grew $6.3 million late quarter, driven by higher mortgage origination volumes from seasonal production and steady demand as customer engagement has rebounded following the significant market uncertainty in the first quarter.

Stacey KS: Our track record speaks for itself, as we've demonstrated consistency in the credit space time and time again.

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

Scott Grower: Thank you, Stacy.

Scott Grower: Turning to our operating results. For the quarter on flights, 9 and 10, total fee income, increased 13.2 million on a linked quarter basis, contributing 197.3 million to revenue.

Scott Grower: Total trading Revenue which includes trading related net interest income was 30.5. Million representing growth of 31% from the prior quarter and a return to a more normal operating environment.

Scott Grauer: Syndication fees were another standout, growing $1.9 million linked quarter to $5.1 million, the highest quarter we've seen since 2022.

Scott Grower: Trading fees grew 6.3 million linked quarter driven by higher mortgage, origination volumes from seasonal production and steady demand. As customer engagement, has rebounded following the significant Market uncertainty in the first quarter.

Scott Grauer: Now turning to slide 10.

Scott Grower: Send the case where another standout growing 1.9 million linked quarter to 5.1 million the highest quarter we've seen since 2022.

Scott Grauer: Before talking about the numbers, I wanted to highlight that three of the business activities shown on this page posted record revenue during the quarter, including our fiduciary and asset management, transaction card, and deposit service charges. Fiduciary and asset management revenue grew $3 million, reflecting higher trust and mutual fund fees, along with seasonal increases in tax preparation. I think it's also worth emphasizing the stable stream of earnings you get from this business. Over the last 10 years, the wealth management business has achieved a compounded annual growth rate for revenue of approximately 8%. AUMA increased $3.9 billion linked quarter to $117.9 billion, reflecting increased market valuations and continued new business growth.

Scott Grower: Now, turning to slide 10.

Scott Grower: before talking about the numbers, I wanted to highlight that 3 of the business activities shown on this page posted record Revenue during the quarter including our fiduciary and asset management transaction card and deposit service charges

Scott Grower: Fiduciary and asset management Revenue, grew 3 million, reflecting higher, trust and mutual fund fees along with seasonal, increases in tax preparation fees.

Scott Grower: I think it's also worth emphasizing the stable stream of earnings, you get from this business.

Scott Grower: Over the last 10 years, the wealth management business has achieved a compounded annual growth rate for revenue of approximately 8%.

Scott Grower: Auma increased 3.9 billion linked quarter to 1 1 7. 9 0.

Scott Grauer: This is another record quarter for AUMA. Transaction card revenue increased $2.5 million from first quarter. Excellent performance this quarter was supported by disciplined pricing strategies, targeted customer acquisition efforts, and a seasonal uplift in transaction activity. The Deposit Service Charges grew $1 million linked quarter. This line has shown sustained growth over the past two years, driven by our Commercial Treasury Services.

Scott Grower: Reflecting increased market valuations and continued new business growth.

Scott Grower: This is another record quarter for AA.

Scott Grower: Transaction card Revenue, increased 2.5 million from first quarter.

Excellent performance. This quarter was supported by discipline pricing strategies targeted, customer acquisition efforts and a seasonal uplift in transaction activity.

Scott Grower: Deposit service, charges grew 1 million linked quarter. This line has shown sustained growth over the past 2 years driven by our commercial treasury services.

Marty Grunst: And now I'll hand the call over to Marty to cover the financial. Thank you, Scott. Turning to slide 12, net interest income was up $11.9 million and reported net interest margin expanded to base. Poor net interest income, excluding trading, increased 11%. Core Margin, excluding through by seven basis points driven by several factors. Securities and Fixed Rate Loan Portfolios Continued to Reinvest Cash Flows at Higher Current Market Yields. Our ongoing efforts to optimize deposit pricing resulted in lower rates for non-maturity And that was without the support of any Fed rate. Time deposit repricing was also a benefit driven by the natural repricing of higher rate vintages in that relatively short data.

Scott Grower: And now, I'll hand the call over to Marty to cover the financials.

Marty Grunts: Thank you. Scott turning to slide 12. Net. Interest income was up. 1. 1. 9 4.

Marty Grunts: Coordinate interest income excluding trading increased 11 million and core margin. Excluding training grew by 7 basis points, driven by several factors.

The Securities and fixed rate loan portfolios continued to reinvest cash flows, at higher current market yields.

Marty Grunts: Our ongoing efforts to optimize deposit pricing resulted in lower rates for non- maturity deposits. And that was, without the support of any Fed rate Cuts in the quarter.

Marty Grunst: was partially offset by slightly lower average balances in the non-interest-bearing DEA driven by seasonally higher balances in January of this year affecting the Q1 overall. Both the average DDA balance and trends within the second quarter were aligned with our expectations. We expect net interest income and margin growth will be supported by continued fixed asset repricing and continued loan growth. We will pursue further deposit pricing optimization efforts where available. And the DDA stability we've seen in the past couple quarters indicates that typical seasonality and new business activity should be expected to drive balanced behavior going forward.

Marty Grunts: time, deposit repricing was also a benefit driven by the natural repricing of higher rate vintages in that relatively short dated book

This is partially offset by slightly lower average balances in the non-interest-bearing. DDA driven by seasonally higher balances in January of this year affecting the q1 overall average balance.

Marty Grunts: Both the average DDA balance and Trends within the second quarter were aligned with our expectations.

Marty Grunts: We expect net interest income and margin growth will be supported by continued fixed asset repricing and continued loan growth.

Marty Grunts: And the DDA stability, we've seen in the past couple quarters, indicates that typical seasonality and new business activity, should be expected to drive balance Behavior going forward.

Marty Grunst: Turning to slide 13, total expenses increased seven. Personnel expenses were relatively consistent with the prior quarter. Within personnel expenses, we saw a slight increase in compensation, which is largely offset by a seasonal decrease in payroll. Non-personnel expense increased $6.4 million, driven primarily by increased technology project costs and operational losses.

Marty Grunts: Turning to slide 13 total expenses, increased 7 million.

Marty Grunts: Personnel expenses were relatively consistent with the prior quarter.

Within Personnel expenses. We saw a slight increase in compensation which was largely offset by a seasonal decrease, in payroll taxes.

Marty Grunts: Non-personal expenses increased, 6.4 million driven, primarily by increased technology, project costs and operational losses.

Marty Grunst: Slide 14 provides an update on our outlook for full year 2025. We remain confident in our full year loan growth projections due to the robust growth seen in Q2. Continued momentum in early Q3 and strong pipelines across both C&I and CRE.

Marty Grunst: This will be further supported by the launch of our mortgage finance business. We acknowledge that economic policy uncertainty is still somewhat of a risk factor for our loan growth guidance, however, it seems much less important than it did. Our net interest income expectations remain unchanged. This assumes two 25 basis point rate cuts in September and December consistent with the market's forward rate expectation. However, given our relatively neutral interest rate risk position, changes there would not alter our guidance. Our fees and commissions guidance is also unchanged, reflecting the momentum we have in that set of.

Slide 14 provides an update on our outlook for full year 2025. We remain confident in our full year, loan growth projections. Due to the robust growth seen in Q2 continued momentum in early, Q3 and strong pipelines across both cni and cra.

Marty Grunts: This will be further supported by the launch of our mortgage Finance business. This quarter

Marty Grunts: with knowledge, that Economic Policy uncertainty is still somewhat of a risk factor for our loan growth guidance. However, it seems much less important than it did 90 days ago.

Marty Grunts: Our net interest income expectations remain unchanged. This assumes 225 basis point rate Cuts in September and December consistent with the markets forward rate expectations.

Marty Grunts: However, given our relatively neutral interest rate, risk position changes there would not alter our guidance.

Marty Grunst: As a reminder, I will note that interest rate levels and curve steepness can affect the geography of total trading revenue between NII and fees, so that would be neutral to total revenue.

Marty Grunts: Our fees and commissions, guidance is also unchanged reflecting the momentum we have in that set of businesses.

Marty Grunts: As a reminder, I will note that interest rate levels, and curved steepness can affect the geography of total trading revenue, between knee and fees. So that would be neutral to total revenue.

Marty Grunst: Lastly, on credit, non-performing assets are very low and portfolio credit quality continues to be very strong, which supports our expectation that charge-offs will remain low in the near term and provision expense will be below 2024.

Operator: With that, I would like to hand the call back to the operator for Q&A, which will be followed by closing remarks. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster.

Marty Grunts: Lastly, on credit, non-performing assets are very low and portfolio. Credit quality continues to be very strong which supports our expectations that charge us will remain low in the near term and provision expense will be below 2024 levels.

With that, I would like to hand the call back to the operator for Q&A, which will be followed by closing remarks from Stacy.

At this time, I would like to remind everyone in order to ask a question. Press star, then the number 1 on your telephone keypad,

Marty Grunts: We will pause for just a moment to compile the Q&A roster.

Jared Shaw: So our first question comes from the line of Jared Shaw with Barclays, you may go ahead. Hey, good afternoon, everybody. Hi, Jared.

Speaker Change: Your first question comes from the line of Jared, Shaw with Barkley's, you may go ahead.

Marty Grunts: Hey, good afternoon, everybody.

Operator: Maybe just, you know, when we when we look at NII, what's what's some of the expectations for margin trajectory behind that? Is there? Anything in particular we should be paying attention to for that? Yeah, no, good question. So, you know, margin, we're really happy with how margin behaved in the second quarter, you know, we got really good lift out of the fixed asset repricing, you know, cross bonds and loans, and then some additional lift across deposit pricing, broadly, including even the changes in DDA. So that gave us basically between those two items, almost seven basis points.

Speaker Change: Hi Jared, hi Jared. Um, maybe just, you know, when we when we look at nii, what's what's some of the uh, expectations for margin trajectory, uh, behind that is there? Um,

Speaker Change: Anything, you know, in particular we should be paying attention to for that.

Marty Grunst: And those have been the drivers we've been talking about for the last few quarters. And so we see that again replaying in the next quarters where fixed asset repricing will still be supportive of margin. You've got both the securities book and the fixed rate loan book that continue to reprice up to current market rates. There's still a little bit of room for deposit pricing to be supportive. And then, obviously, loan growth, that will be supportive going forward. And it's really nice to see this quarter's level and, you know, our outlook, as you know, is constructive there.

Yeah, a good question. So, you know margin, we're really happy with how margin behaved in the second quarter, you know, we got really good lift out of the fixed asset repricing. Uh, you know, cross bonds and loans. And then some additional lift across deposit pricing, uh, broadly including uh, even the the changes in DDA. So that gave us basically between those 2 items, almost 7, basis points of expansion.

And those had been the drivers, we've been talking about for the last few quarters and so we see that again replaying in uh, you know, the next quarters. Where fixed asset repricing will still be supportive of margin. You've got both the Securities book and the fixed rate loan book that continue to reprice up to to current market rates.

Speaker Change: Um, there's still a little bit of room for, uh, for deposit pricing, uh, to be supportive. And then obviously, uh, loan growth, that will be supportive, uh, going forward. And, uh, it's really nice to see this quarter's level, uh, and you know, our Outlook as you know, is uh is constructive there.

Jared Shaw: Okay, thanks.

Jared Shaw: And then, you know, when we look at things like the Guide for Securities, does that imply a slight decline? Should we think of the securities portfolio going down for the rest of the year?

Speaker Change: Okay. Thanks and then, you know, when we look at things like uh the the guide for Securities uh does that imply

Marty Grunst: And then, you know, if you look at FHLB borrowings average was higher than in the period, is that going to sort of continue to trend down as well on the backdrop? So on the securities portfolio, you know, the difference quarter to quarter on a portfolio that big is really sort of noise. So just think about that as kind of steady from here for the rest of the year and then on the FHLB borrowing. So that ticked up. But that was solely because in the trading account, we just held a higher level on average for the quarter.

Speaker Change: A a slight decline. Should we think of of the Securities portfolio going down for the rest of the year? And then, you know, if you look at fhlb borrowing average was higher than the period, is that going to

Speaker Change: Sort of continue to Trend down as well in the backdrop.

Marty Grunst: And so that's what drove the FHLB borrowings up a little bit. You could see that that trading, you know, potentially stay the same or come down a little bit and you'd see that offset and FHLB most likely.

Jared Shaw: Great. Thanks very much.

Speaker Change: Great. Thanks very much.

Jon Arfstrom: Your next question comes from the line of Jon Arfstrom with RBC Capital Markets. You may go ahead. Thank you. Good afternoon. Hey, Jon.

Speaker Change: Market.

Speaker Change: You may go ahead. Thank you, good afternoon.

Jon Arfstrom: Hey, can you talk a little bit more about the pace of loan growth through the quarter? I know there's some nuances to average versus period end, but it looks like period ends up a little bit higher. And Stacy, you use the term accelerating. So talk a little bit about what you saw throughout the quarter and how you feel exiting the quarter. Yeah, it really built throughout the quarter. And I think part of that was we talked about we've had good underlying loan growth for the last really three years now. Our C&I loan growth cagers, you know, five, six percent over the last three years, excluding the specialty businesses is really the headwind that we've had from health care, energy and real estate.

Speaker Change: Hey, John. Hey, um, can you talk a little bit more about the pace of loan growth through the quarter? Um, I I know there's some nuances to average versus period end, but it looks like period ends up a little bit higher.

Stacy Kymes: And so that's slowed down. Obviously, real estate's a tailwind now, not a headwind. Health care seems very stable to growing modestly. Energy now stable. So if you look at for us, you know, April, we had energy payoffs, less payoffs in in May and June. And so that feels like, you know, you hate to call the bottom there, but it feels like we're pretty close to stable and close to the bottom. And so that's really going to allow the underlying loan growth. It's always been there to kind of come to the surface without being masked by the payoffs in those areas.

Stacy Kymes: And so we feel really good about that. We've always pointed to the second half of the year is when that point to point loan growth that we have in our guidance would really show up. And so having the level of loan growth that we had in the second quarter has only encouraged our outlook as we think about now going into the second half of the year, we're going to have, you know, mortgage warehouse come online. We think, you know, you could have five hundred million commitments there by the end of the year. Assume half of that's outstanding.

Speaker Change: And Stacy. You use the term accelerating. So, uh, talk a little bit about what you saw throughout the quarter and how you feel exiting the quarter. Yeah, I really built, uh, throughout the quarter and I think part of that was we talked about. We've had good underlying loan growth for, you know, the last really 3 years now, our seen how long growth kurz, you know, 5 6% over the last 3 years. Excluding the specialty businesses is, uh, really the headwind that we've had from Healthcare energy and real estate and so that slowed down obviously, real estate to Tailwind. Now, not a headwind. A healthcare seems very stable to Growing modestly energy now, stable. So if you look at for us, you know, April we had, uh, energy payoffs less payoffs and and, uh, in May and June, and so that's feels like, you know, you hate to call the bottom there. But uh, feels like we're pretty close to stable and close to the bottom. And so that's really going to allow the underlying loan growth. That's always been there to kind of come to the surface about being masked by the payoffs and

Stacy Kymes: You're going to have, you know, growth in your traditional C&I businesses. Well, we've been investing. I think real estate will continue to be a tailwind. Health care will get some momentum here in the second half of the year. So we're excited about where we are, where we're positioned from a loan growth perspective, both this year and frankly, how we're positioned, thinking about 26 as well.

Jon Arfstrom: Okay, good, very helpful on that.

Speaker Change: In those areas. And so we feel really good about that. We've always pointed to the second half of the year is when that point-to-point loan growth that we have in our guidance would really show up. And so having the the level of loan growth that we had in the second quarter has only encouraged our Outlook as we think about. Now going into the second half of the year, we're going to have uh you know mortgage Warehouse come online. We think you know you could have 500 million commitments there by the end of the year, assume half of that's outstanding. You're going to have, uh, you know, growth in your traditional cni businesses where we've been investing. I think, uh, real estate will continue to be a Tailwind Healthcare, will get some momentum here in the second half of the year. Uh, so we're excited about, you know, where we are. Where we're positioned from a loan growth perspective, both this year and frankly how we're positioned thinking about 26 as well.

Stacy Kymes: And then maybe Stacy or Marty, just competition, it looks like loan yields were stable. I know there's a lot of things that go into that, but how are you feeling about the competitive environment? Is it any tougher than maybe it has been historically? You know, when the markets that we're in, it is always hyper competitive. I mean, that's what you hear consistently from all of our teams. There is that, you know, competition is very strong. We're in great markets.

Speaker Change: Okay, uh, good very helpful on that. Um, and then um, maybe stay here, Marty just uh,

Stacy Kymes: And so part of the other side of the coin of being in great markets like Dallas and Fort Worth and Houston and Phoenix and Denver, San Antonio is is you're going to have a lot of competition. I would say there's some spread compression on the C&I side that we're seeing a little bit there as we move forward as people think about diversification and either get pressure around real estate or decide they've got too much internally and try to focus on other lines of business. You see more competition on the C&I side, mostly around the rate.

Speaker Change: Competition, it looks like loan yields were stable. I know there's a lot of things that go into that. But um, how are you feeling about the competitive environment? Is there any any tougher than maybe it has been? Historically? You know, when the markets that we're in? It is always hyper competitive. I mean, that's what you hear consistently from all of our teams. There is that, uh, you know, comp competition is very strong. We're in great markets. Uh, and so part of the other side of the coin to be in great markets, like Dallas and Fort Worth and Houston and Phoenix and Denver, uh, San Antonio is is

Speaker Change: That you're going to have a lot of competition.

Stacy Kymes: And so you see a little bit of spread compression there on the C&I side, the core C&I, what we call core C&I. But otherwise, spreads are holding in pretty well.

Speaker Change: I would say there's there's some, uh, spread compression on the cni side. That we're seeing a little bit there, as we move forward. As people think about diversification and and get either get pressure around real estate or decide they've got too much internally and, and try to focus on other lines of business, you see more uh, more competition on the cni side mostly around, uh, the rate. And so you see a little bit uh, of spread compression there on the cni side. The core cni, what we call Core cni. Uh, but otherwise spreads are holding in pretty well.

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Speaker Change: Sometimes that's more visible on the on the very high credit quality of borrowers that are close to the the level where they can access Capital markets.

Jon Arfstrom: All right, I'll step back. Thank you.

Brett Rabatin: Thank you, Jon. Your next question comes from the line of Brett Rabatin with Hope Day Group. You may go ahead. Hey, guys. Good afternoon. Hey, Brighton.

Speaker Change: Yep. Yep. Okay, all right. Uh, I'll step back. Thank you. Thank you, John.

Your next question comes from the line.

Speaker Change: robot with

Speaker Change: you may go ahead.

Speaker Change: Hey guys, good afternoon.

Marty Grunst: I wanted to ask about fee income and just thinking about the guidance for the full year and what might take you to the lower versus the higher end of that range. And then just within the guidance, I assume that the. You know, pick up from here or additional improvement in fee income trends would be mostly related to brokerage trading and card. So it was just hoping for some additional color around that.

Speaker Change: Hey Brett. Hey there.

Speaker Change: Uh wanted to ask about fee income and just thinking about the guidance for the full year and and what might take you to the lower versus the higher end of that range. And then just with, within the guidance, I I I assume that the, um,

Marty Grunst: Yeah, Brett, why don't you let me talk a little bit about that? And, you know, Scott can add some color if that's useful. So, you know, if you look at the fiduciary and asset management transaction card, deposit service charge line items and look at the growth rates that we've seen year over year, you know, those are 11 percent, you know. Unknown Executive, BOK Financial Corp. New Sheeran Asset Management, a combination of both the markets being up and our ability to win and deliver new business. So, you know, we expect continued growth in those businesses, and those are just doing really well.

You know, pick up from here, or, or additional Improvement in fee income, Trends would be mostly related to brokerage trading and card. So was just hoping for some additional call around that

Yeah, Brett L. Why don't you let me talk a little bit about that and and uh, you know, Scott can I add some color if if, uh, if that's useful. So if you look at the fiduciary and asset management and transaction card and deposit service charge, uh, line items, and look at the growth rates that we've seen year over year, you know, those are 11%, you know,

Scott Grauer: When you look at some of the transactional businesses, you know, on trading, so we do expect trading to be, you know, positive as we go through the next couple quarters, but, you know, we're realistic to have a growth rate that is certainly attainable in the way we think about it. You know, when you look at syndications that will benefit from the Better loan origination environment that we find ourselves in for Q2 and Q3 and Q4 going forward. And then when you look at The Investment Banking Business. You know, we've got a really strong track record in that business and year over year, really good momentum.

Speaker Change: And those are long run, strong growth rates driven both by, you know, in the cases of when you share an asset management, a combination of both the markets being up and our ability to win and deliver new business. Uh, so, you know, we expect continued growth in those businesses, and those are just doing really well. When you look at some of the, the transactional businesses, um, you know, on trading. So we do expect trading to be, uh, you know, positive as we go through the next couple quarters. But, you know, we're realistic to to have a a growth rate that is certainly attainable in our uh, the way we think about that.

Speaker Change: um,

You know, when you look at syndications that will benefit from the, uh, the, you know, better uh, loan, origination environment that we find ourselves in for Q2 and and, uh, Q3 and Q4 going forward. Uh, and then when you look at, um,

Speaker Change: Uh, the investment banking business.

Scott Grauer: There was some activity in Q2 in the municipal space that was kind of slowed down just by conditions of Q2 that is teed up in our pipeline that we feel really good about coming through in the back half of the year. So our confidence in the fee businesses goes across multiple lines.

Speaker Change: You know, we've got a really strong track record in that business and year-over-year really good. Uh momentum there was some activity in Q2 in the municipal space that was kind of slowed down just by conditions of Q2 uh that is teed up in our pipeline. That that we feel really good about coming through in the back half of the year. So uh, so I mean our confidence in the fee businesses goes across multiple lines and things

Scott Grauer: Yeah, I think I think Marty summed it up. Well, I think that, you know, the the diversity of both asset classes that we have bodes well from the the market growth standpoint. So we got that component. But as Marty mentioned, we've also had net positive inflows in our AUM, which gives us good tailwind. And then on the trading side, you know, absent the February, March environment of, you know, dislocation to chaos in the fixed income markets, post that we've normalized and feel like we've got good positioning in the MBS space as we move forward. And then on the investment banking side that he mentioned, we feel like we, you know, our pipelines and our docket on the investment banking business, specifically in the municipal space is is very strong.

Add to that Scott. Yeah, I think I think Marty summed it up. Well I think that um you know the the diversity of both asset classes that we have uh bod's well um from the the market growth standpoint so we got that component but as Marty mentioned we've also had uh net positive inflows in our AUM. Uh, which gives us good tailwind and then on the trading side, you know, absent the February March, um, environment of, you know, dislocation.

Scott Grauer: So we're we don't feel like we've we're going to miss that. We think it's been delayed a bit and is pushed out toward the second half of the year.

Speaker Change: To chaos, uh, and the fixed income markets, post that we've normalized and feel like we've got good positioning, um, in the MBS space, um, as we move forward and then on the investment banking side, that he mentioned, we feel like we, you know, our our pipelines and our docket on the investment banking, uh, business specifically in the municipal space is, is very strong. So we're we don't feel like we've, um, we're we're going to miss that. We think it's been delayed a bit and is pushed out toward the second half of the year.

Brett Rabatin: Okay, that's all really helpful.

Brett Rabatin: And then maybe Stacy, you know, we've seen a pickup in M&A and there's quite a few regionals that, you know, are espousing their intent or their willingness to do acquisitions. And you guys have always been a more selective, so to speak, buyer of franchises that you view as... you know, is ones that you've got a small list that you're interested in and wouldn't just do any deal, obviously.

Okay, uh, that's all really helpful. Uh, and then maybe Stacy, you know, we've seen a pickup in in m&a and there's quite a few regionals that, um, you know, are espousing their, their intent or their willingness to do Acquisitions. And you guys have always been a, a more selective. So to speak buyer or franchises that you view is.

Stacy Kymes: What are you seeing, if anything, you know, in terms of the ones that are on your list? You know, is there an increase in receptivity and what do you think the potential of you guys doing a deal might be, you know, in the back half of this year in 2016? You know, I think you kind of described how we approach M&A very well. I think our core strategy has always been we have to be an organic grower. That M&A is not our strategy. It's got to be the icing on the cake, but it's not the key to driving our growth.

Speaker Change: You know, is ones that you've got a small list that you're interested in and and wouldn't just do any deal. Obviously, what are you seeing? If anything, you know, in terms of

Speaker Change: The ones that are on your list, you know, is there an increase in in receptivity and what do you think the potential of you guys doing a deal? Might be, you know, in the back half of this year in 26.

Stacy Kymes: It's so difficult to be successful, no matter what the environment is. Strong franchises typically have a lot of folks who are interested. And it's very difficult to win those. And so we do have folks that we're interested in over time and we stay in touch with them. I think the regulatory environment, frankly, is more favorable to M&A. But that's not our core strategy. Our core strategy is to acquire talent, to grow in these great markets that we're in. And if we're fortunate to find something along the way that fits our profile and has a willing seller at the time it fits for us, then that's extra for us, but it's not our core strategy.

Speaker Change: You know I think uh you kind of describe how we approach him in a very well I think our core strategy has always been we have to be an organic grower. That m&a is not our strategy. It's got to be the icing on the cake but it it's not the key to driving our growth. It's so difficult to be successful. No, no matter what the environment is strong franchises. Uh, typically have a lot of folks who are interested and it's a very difficult to win those and so uh we do have uh folks that were interested in over time and we we stay in touch with them. I think they're regulatory environment. Frankly is more favorable uh to to uh m&a but but that's not our

4 strategy, our core strategy is to acquire talent to grow in these great markets that we're in. And then if they're fortunate to find something along the way that fits our profile uh, and and has a willing seller at the time. Uh, it fits for us, then then that's that's extra for us, but it's not our core strategy.

Stacy Kymes: OK, and then also on the organic side, just last quick follow up. What what are you seeing in terms of net ads of people or producers relative to last year? You know, I, you know, if you look at where we are, you know, relative to last year, I would, you know, on the production side, we're probably up in excess of 30 people across our footprint. You know, we've added talent in all of our markets. We're proud of, you know, the markets that we're in, we think it gives us a differentiated opportunity to grow, allows us to maintain our strong asset quality, because we don't have to reach for growth.

Okay. Um and then also on the organic side, just last Quick follow-up. Um, what what are you seeing in terms of net adds of of people or producers maybe relative to last year?

Stacy Kymes: We can do it in the constraints of our credit appetite. And we've added some extraordinarily talented people in Dallas and Fort Worth and Houston. Obviously, we've talked a lot about San Antonio, so proud of the work those guys are doing there. Phoenix, we are really, really hitting our stride in Phoenix, excited about where we're headed there. Denver's got good momentum. And our core markets have been strong for us. People kind of, I think, underplay the strength of Tulsa and Oklahoma City, Kansas City. But we're doing very well in these markets. And so talent acquisition is key to us.

Brett Rabatin: It continues to be almost a line of business for us in terms of how we think about it. And that's going to be key to our growth and our outsized growth as we move forward. Okay, great.

Speaker Change: You know, we've added talent in all of our markets, uh, we're proud of, you know, the, the the markets that we're in. We think it gives us a differentiated opportunity to grow allows us to maintain our strong asset quality, because we don't have to reach for growth. Uh, we can do it in the con, uh, constraints of our, our credit appetite. Uh, and we've added some extraordinarily, talented people, uh, in, in Dallas and Fort Worth and Houston. Obviously, we've talked a lot about San Antonio. I was so proud of the work. Those gadgets are doing their Phoenix. We are really, really hitting our stride in Phoenix. Excited about where, where we're headed there at Denver's got good momentum and our core markets have been strong for us. People kind of, uh, I think underplay the strength of Tulsa, and Oklahoma City, Kansas City. Uh, but we're, we're doing very well in these markets. And so, uh, Talent acquisition is key to us. It continues to be almost a line of business for us, in terms of how we think about it. Uh, and that's going to be key to our growth and our outsized growth as we move forward.

Brett Rabatin: Appreciate all the co-work, guys.

Okay. Great. Appreciate all the color, guys.

Michael Rose: Your next question comes from the line of Michael Rose with Raymond James. You may go ahead. and Michael. Hey, maybe just following up on Jon's question, you know, I think what I heard, you know, C&I, CRE pipeline, strong, you know, the energy decline that we've seen in balances kind of year over year, maybe sounds like it's coming to an end, maybe with healthcare too. I know you talked about momentum into next year. I'm not trying to ask for the outlook for next year today. But is there any reason to think that just given the momentum that you guys have and kind of the declining headwinds from some of those specialty businesses, that we shouldn't at least expect a similar pace of loan growth as we begin to contemplate next year?

Speaker Change: Your next question.

Speaker Change: Raymond James, you may go ahead.

Hey, good afternoon, everyone.

Speaker Change: Michael.

Speaker Change: Hey, um, maybe just following up on John's question. You know, I think what I heard. You know, cni, CRA pipelines strong, you know, the energy, uh, decline that we've seen in balances kind of year-over-year. Maybe sounds like it's coming to an end maybe with healthcare too. I know you talked about momentum into next year and I'm not trying to ask for the outlook for next year today. But is there any reason to think that just give them the momentum that you guys have and kind of the declining headwinds from from some of those specialty businesses that we shouldn't at least expect.

Michael Rose: Yeah, I think that's a reasonable expectation. I think, you know, when our guide was, you know, mid to upper single digits. And, you know, I think, as we think about our strategic planning process, and kind of a three and five year forecast, we use those kinds of numbers, because that's the rate of growth that we expect to achieve over time. Understanding, it'll be more in some periods and less in some periods, but kind of on a, you know, sustainable average over time, that's a good number for us. Okay, great.

Speaker Change: a similar pace of loan growth because you think as we begin to contemplate next year

Speaker Change: and then yeah I think that's a I think that's a reasonable expectation. I think, you know what our guide was, you know, you know, mid to Upper single digits and uh, you know, I think as we think about our strategic plan process and kind of a 3 and 5 year forecast, uh we use those kinds of numbers because that that's the rate of growth that we expect to achieve over. Over time. I understanding it'll be more in some periods and less in some periods but kind of on a you know uh sustainable uh average over time. That's a that's a good number for us.

Michael Rose: And then maybe just pivoting to credit. You know, obviously, no provision again, this quarter credit trends are excellent. I know I've talked with Marty about this separately. But yeah, obviously, we're adding The big beautiful bill you know for amount to the debt deficit, but credit trends generally look pretty good for you guys in the industry.

Stacy Kymes: Is there anything that we should consider, kind of, in the near to intermediate term as puts and takes to kind of the current credit quality outlook and how it could change? as we move forward. You know, you're asking the question that we've all been asking ourselves, you know, what could be around the corner? How do we anticipate that? You know, I think that the good thing about our company is we don't widen or contract the fairway based on the economic circumstances. We keep the fairway the same. We don't like leverage lending. We don't like collateral light.

Speaker Change: Okay, great. Um, and then maybe just pivoting to credit. Um, you know, obviously no provision again. This quarter credit Trends are excellent. Um, I I know I've talked with Marty about this separately but um, yeah, yeah. Obviously, we're adding a, the, you know, with the big beautiful bill, you know, a fair amount to the debt and deficit, um, but but credit Trends generally look pretty good for for you guys. In the industry. Is there anything that we should consider kind of in the near to intermediate term um as puts and takes to kind of the current credit quality Outlook and how it could change?

Speaker Change: Uh, as we move forward, thanks.

Speaker Change: You know, you're you're asking the question that we're we've all been asking ourselves, you know what's what could be around the corner, how do we anticipate that?

Stacy Kymes: We like having a strong secondary source of repayment. And so all those factors are why even when we do have, you know, criticized, classified, not performing assets, and they will increase, they will kind of revert to the median over time. But our losses should still be well below the peers because of kind of our lending style and focus on a secondary source of repayment. So our loss given default historically has been much lower than our peers. And I would expect that to continue. But we don't we don't see kind of the boogeyman around the right now.

Speaker Change: Uh, you know, I think that that the good thing about our company is, we don't widen or contract the Fairway, based on the economic circumstances we keep the Fairway the same. Uh, we don't like leveraged lending, we don't like uh collateral light. We like having a strong, secondary source of repayment. And so, all those factors are why even when we do have, you know, criticized classified non-performing assets and they will increase. They will kind of revert to the median over time but our losses should still be well below the peers because of kind of our lending style and focus on the secondary source of repayment. So our loss given the fall historically has been much lower than our peers and I would expect that to continue.

Stacy Kymes: It appears there's a lot of tailwind economically, not just in our footprint, but just, you know, kind of the proverbial animal spirits are very strong right now. And borrowers are more confident. It's amazing what 90 days have been. I mean, we sat here 90 days ago, very, you know, not confident in how the noise around tax policy or the tariffs would impact borrower behavior. But I think folks have kind of absorbed that, understood that the tariffs will be there. It will be at a level that they can manage and have moved on about their business.

Speaker Change: But we don't, we don't see kind of the boogeyman around the corner right now.

Michael Rose: And so that's really healthy for us. And I think we're going to benefit from that. Very helpful.

Um, it it appears there's a lot of Tailwind economically, not just in our footprint, but just, you know, kind of the proverbial Animal Spirits are very strong right now and a borrowers are more confident. It's amazing what 90 days have been. I mean, we sat here in 90 days ago. Very, you know, uh, not confident and how the noise around, uh, tax policy or the terrorists would impact, bar, or Behavior. Uh, but I think folks have kind of absorbed that understood that the tariffs will be there. It will be at a level that they can manage and have moved on about their business. And so that's really healthy for us. Uh, and I think we're going to benefit from that.

Michael Rose: And then maybe just one last one for me, Stacy, just a lot of talk around stablecoins this quarter. PNC just signed a deal with Coinbase earlier today on the crypto front. Can you just talk about, you know, kind of.

Stacy Kymes: You know, third party lending, you know, leverage lending, all the above, just from a technology standpoint, and would love your outlook and what you guys plan to do on multiple fronts, technology wise. Yeah, you know, I'll address stablecoin. I think that domestically, there's a lot of smoke there. I think that where stablecoin makes a lot of sense is in uncertain economies or where you have, you know, a central bank that's not grounded like it is in most stable economies, where inflation is a bigger deal. You know, cross-border payments is another strong application for stablecoin. We don't have a huge population of clients that that has applicability for some, but not a lot.

Speaker Change: PNC, just signed a deal with coinbase, you know, earlier today, you know, on on the crypto front, you just talked about you know, kind of

You know, third-party lending whether, you know, um, leveraged lending, all all the above, um, just from a technology standpoint and just would love your your outlook and what you guys plan to do, um, on multiple fronts, technology wise, thanks.

Stacy Kymes: But on the domestic payment side, I see very little use case today around stablecoin, although we're watching it. We have a large, as you know, commercial treasury services platform. Payments is really critical to our success. And so we're watching these types of developments and we'll stay close to it. I think we've made enormous investments in our technology base, whether it was the wealth system, our treasury system, our lending platform, our what we call our exchange, where we have single sign-on and all of our users can access the commercial users and institutional users can access their information in a single place.

Yeah. Uh, you know, address stablecoin, I think that uh, domestically there's a lot of smoke there. I think that we're stable coin makes, a lot of sense, is in uncertain economies, or where you have, you know, Central Bank, that's not grounded like it is. And and and most stable uh economies uh, where inflation is a bigger deal. Uh, you know, cross border payments is another strong application for stable coin. Uh we don't have a huge population of uh clients that that has applicability for some uh but not a lot. But on the domestic payment side I see very little use case today around stablecoin, although we're watching it. We have a large. As you know, commercial treasury Services. Platform payments is really critical to our success and so we're watching these types of developments and we'll stay close to it. Uh, I think we've made enormous investments in our technology base, whether it was The Wealth system. Our treasure

Stacy Kymes: We've made a lot of investments there and we'll continue to do that.

System, our lending platform, uh, our what we call our exchange where we have single sign on and and all of our users can kind of assess their commercial users and institutional users can access their information in a single place.

Stacy Kymes: From a lending perspective, you know, that has been a bit of an Achilles heel for us is kind of lending into the technology space. It is such a binary outcome where it either works or it doesn't work. That's been a difficult place for us to find our footing. And we haven't done much there. So we haven't, we don't have a lot of vulnerability if some of these things don't play out as perhaps expected. We're not lending into private credit. We're not, you know, lending to those who lend money to people we wouldn't lend money to.

Stacy Kymes: And so that tends to help us, you know, in good times or when it's important to make good decisions. You know, it's all decisions look good right now. When the tide goes out is when we'll figure out who made good decisions and who focused on growth at all costs. And so we feel good about how we've maintained our discipline here and how we think about long-term lending. Appreciate it.

Speaker Change: We've made a lot of Investments there and we'll continue to do that. Uh from a lending perspective. You know that has been a bit of an Achilles heel for us is kind of lending into the tech technology space. It is such a uh, binary outcome where it either works or it doesn't work. That's been a difficult place for us to find our footing. Uh, and and we haven't done much there, so we haven't, we don't have a lot of vulnerability. If some of these things don't play out as perhaps expected, uh, we're not lending into, uh, private credit. We're not, you know, lending to those who lend money to people, we wouldn't lend money to, uh, and so, uh, that tends to, to help us, um, you know, in good times, or when it's important to make good decisions, you know it, it's all decisions. Look good right now. Uh, when When the tide goes out is when we'll figure out who made good decisions and who focused on growth at all costs,

Speaker Change: and so, uh, we feel good about how we maintained our discipline here and how we think about long-term Lending,

Michael Rose: Thank you so much.

Speaker Change: appreciate it. Thank you so much.

Woody Lay: Your next question comes from the line of Woody Lay with KBW, you may go ahead. Hey, good afternoon. Wanted to start on mortgage finance and the launch there. I was just wondering if you could sort of frame the opportunity and sort of how fast you expect balances to come on over the back half of the year.

Speaker Change: You're next question comes from the line of Woody lay with KBW. You may go ahead.

Woody Lay: Hey, good afternoon, wanted to start on mortgage, 1 1/2 bath. You expect balances um, to come on, over the back half of the year.

Marty Grunst: Yeah, Woody, this is Marty. We've we're pretty excited about being able to a couple weeks, and, You know, we'll be able to get, like Stacy mentioned, probably half a billion dollars of commitments by the end of the year. We'll be booking clients, you know, in August and September and making good headway there. You probably have, you know, 25% utilization there, 50% utilization kind of by the end of the year is kind of a good way to think about that. So we feel really good about all the groundwork that's been laid, the fact that we've got both the lending capability, the deposit capability, and the treasury management, treasury services capability.

Marty Grunts: Yeah, Woody. This is Marty we we're uh, pretty excited about being able to to get to launch that here just in the next couple weeks. And uh

Marty Grunts: You know we'll we'll be able to uh to get like Stacy mentioned probably half of half a billion dollars of commitments. By the end of the year we'll be booking clients you know in August and September and and making good Headway there. You probably have a

Marty Grunst: And probably the best part about this is how well that business ties in with the institutional fixed income trading because the overlap there between those two client bases is super high. So that's a client base that we've got decades of history. and so the tie-in there is...

Uh, you know, 25% utilization there up to 50% utilization, kind of by the end of the year, is kind of a good way to think about that. So, uh, so we feel really good about the, the all the groundwork that's been laid, the fact that we've got both the, The Lending capability, the deposit capability, and the treasury management, treasury Services capability and probably the best.

Marty Grunst: And we're not ready to talk about 26 yet. But I think as you think about that business, you know, going out through 26, you know, we're we're really spending 25 focusing on making sure all the operational potential speed bumps are resolved well. And that, you know, we're we're we feel good about the operational risks associated this business because if done correctly, there's little credit risk, but but more operational risk. So we're going to spend 25 making sure that new people, new systems are operating as intended. And then I think you'll see us ramp up or accelerate the growth there as we move into 26 and 27.

Part about this is how well that business ties in with the the institutional fixed income trading because the overlap there between those 2 client bases is super high. So that's, that's a client base that we've got Decades of history with, uh, and so the, the tie in there is fantastic.

And I think you'll see us uh, ramp up our accelerate, the growth there. Uh, as we move into 26 and 27,

Woody Lay: All right, that's really helpful, Culler.

Marty Grunst: And then maybe last for me, shifting over to deposit costs. And as you sort of mentioned in your opening comments, the beta outperformed so far through the seizing cycle. How do you think about the incremental beta if we get additional rate cuts? over the back half of the year. Yeah, so you've seen us get to interest bearing liability beta of 76 cumulative for the cutting cycle here. And that's actually just a little bit above the cumulative. Similar beta on the upside, that was 75. Same thing on deposits, we've gotten to 66. And we think that those betas pretty well hold as rates continue to fall, that you'd be able to...

Speaker Change: All right. That that's really helpful caller. Um, and then maybe last for me shifting over to deposit calls. And as you sort of mentioned in your opening comments, the beta's outperformed so far, uh, through this evening cycle. How do you think about, um, the incremental beta, if, if we get additional rate cuts, um, over the back after the year,

Speaker Change: Yeah, so you've seen us get to, uh, you know, interest bearing liability beta of 76 cumulative, for the, The Cutting cycle here. And that's actually just a little bit of the cumulative.

Marty Grunst: You know, kind of that level, perhaps even a little better as as rates decline.

Speaker Change: Uh, similar beta on the upside that was 75. Same thing on deposits. We've got to 66 and we think that those betas uh, pretty well hold as we, uh, as as rates continue to fall that you'd be able to see, you know, kind of that level perhaps even a little better as, uh, as rates decline further.

Woody Lay: All right, thanks for taking my question.

Speaker Change: Right, thanks for taking my questions.

Operator: Again, if you would like to ask a question, please press star then the number one on your telephone keypad.

Matt Olney: Your next question comes from the line of Matt Olney with Stevens Inc. You may go ahead. Yeah, hey guys, good afternoon. Thanks for taking the question. I just want to follow up on the loan yield commentary. Marty, I think you mentioned that the new loan growth would be accretive to the overall net interest margin. I think I heard Stacy mentioned maybe some pressure on the C&I spreads. Just help me reconcile these comments. And is the commentary about improving loan yields, does that make any sense? Or is it more a matter of the loan mix you expect to back out the year?

Speaker Change: again, if you would like to ask a question, please press star then the number 1 on your telephone keypad,

Matt: Your next question comes from the line of Matt. Only with Stevens Inc, you may go ahead.

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

Matt: Yeah. Hey guys. Good afternoon. Thanks for taking the question. Just want to follow up on the loan yield commentary. Uh, Marty, I think you mentioned that the new loan growth would be accretive to the overall net interest margin that I heard. I think I heard Stacy mention, maybe some uh, uh, uh, some, some pressure on the CI spreads just help me reconcile. Um, these comments and and is the is the commentary about improving. Uh, loan yields is that more a matter of, uh, the loan, mix you expect the back half of the year? Thanks? Yeah. Yeah, right. So so to the so certainly loan growth is going to help you with just nii dollars, uh, to the extent that that changes your overall mix between loans and securities. That's going to help margin a little bit and we would expect to see those loans that loan growth. Come on at, you know, more or less similar spreads to the existing book, just uh, you know, based on what what that mix would look like.

Marty Grunst: Okay, thanks for that, Marty. And then just lastly, I think on the there was a comment and the better marks about the trading securities portfolio. I think that ballooned up during the course of the quarter, but then move lower towards the end of the quarter.

Scott Grauer: Any color on the volatility behind that and then the outlook for the size of this? Thanks. Yeah, so that's simply, you know, the traders, the desks, as they see opportunities, you know, they can move that overall balance up or down just based on market opportunities. So that's really just them being tactical throughout the quarter and doing what's smart. So that was a little higher during the quarter. That could be down a little bit. But, you know, there isn't a particular strategic bent one way or the other.

Okay, thanks for that. Marty and then just, lastly, I think on the, uh, there's a comment in the Predator marks about the, uh, trading security portfolio. I think that, uh, uh, ballooned up during the course of the quarter, but then move lower towards the end of the quarter, um, any color on the volatility behind that and then the outlook for the size of this, thanks.

Scott Grauer: And I, this is Scott, and I think that, you know, when you think back to not the beginning of the year, but February and March, there's no question that during that period of uncertainty and volatility, we were not as long with balances at that time period as we, as the first quarter came to an end, and as more predictable normalcy returned to the fixed income markets, we are obviously more comfortable with larger balance there. But we remain in all of our risk limits. We're not compromising any of our risk structures or anything like that to try to achieve any revenue growth or revenue targets there.

Yeah. So that's simply, you know, the the Traders, the desks as they see opportunities. Uh, you know, they can move that overall balance up or down, just based on Market opportunities. So that's really just them being tactical throughout the quarter and doing what smart so. So that that was a little higher during the quarter that could be, uh, down a little bit. But, uh, you know, there isn't a particular strategic bent 1 way or the other. And I, this is Scott and I think that, you know, when you think back to not the beginning of the year, but February and March, there's no question. Um, that during that period of uncertainty and volatility we were not as long, uh, with balances at that time period. As we, as the first quarter came to an end and as more, um, predictable normaly returned to the fixed income markets. Um, we are obviously more comfortable uh, with larger balance there.

Scott Grauer: We're well within all of our internal risk limits there and have continued to be really throughout this period of time. I think our performance there, particularly in the first quarter, despite the revenue lag, really was a tribute to our risk management at a very difficult time. That could have gone in a different direction and so we continue to be very disciplined about that as you would expect us to be. Yeah, so it's all fully hedged. So it's really just a kind of a denominator of the margin question and, you know, kind of where it's been the last quarter, the quarter before those average balances are reasonable.

Matt: But we remain in all of our our risk limits. We're not compromising any of our risk structures or anything like that. To try to achieve any, any Revenue growth or Revenue targets there. We're we're well within all of our internal risk limits there and and have continued to be really throughout this period of time. I think our performance there particularly in the first quarter despite the the revenue lag. Really was a tribute to our risk management and a very difficult time that could have gone a different direction. And and uh so we continue to be very disciplined about that as you would expect us to be.

Yes. So it's all fully hedged. So it's really just a kind of a denominator of the margin question. And, you know, kind of where it's been the last quarter, the quarter before those average balances are, are reasonable range to think about

Matt Olney: Okay, thanks for clarifying.

Matt: Okay, thanks for clarifying.

Timur Braziler: Your final question comes from the line of Timur Braziler with Wells Fargo, you may go ahead. All right, good afternoon. HMR. You had made a comment that the mortgage warehouse buildout has now been fully incorporated in the expense phase. I'm just wondering what portion of the 2Q expense growth came from the mortgage warehouse buildout. Well, we've been building it out over the last 12 months, really, you know, slowly until we're kind of approaching fully staffed. We've got 11 FTE in that business today, not a dollar revenue and 11 FTE are in our third quarter, our second quarter run rate.

Matt: Your final question.

From the line of Chen, newer Brasilia with Wells Fargo, you may go ahead.

Speaker Change: Hi. Good afternoon, everyone.

Matt: Hey, Tim Moore.

Speaker Change: Been fully Incorporated in the expense space. I'm just wondering what portion of the 2q expense growth came from the mortgage Warehouse build out.

Speaker Change: well, we've been building it out over the last 12 months, really uh you know slowly uh until we were kind of

Marty Grunst: So that gives you an idea a little bit about kind of where we are from an opportunity perspective. And we talk about continuing to create positive operating leverage from here forward. That's one example of that. And so I think you'll see those expenses related to that business certainly stabilize in future periods as we bring on the revenue.

Marty Grunst: Yeah, so all the all the staffing was fully in Q2 and the loan system that will go, you know, kick on here in 3Q and the amortization for that is the one last piece that Okay, great.

Speaker Change: Uh, approaching fully staff. We've got 11 FTE in that business today. Not a dollar revenue and 11 FTE are are in our third quarter, our second quarter run rate. So it gives you an idea a little bit about kind of where we are from a opportunity perspective and we talk about continuing to create positive operating leverage from here, forward, that's 1 example of that. Um, and so uh, I think, I think, you know, you'll see those, uh, expenses related to that business. Certainly stabilized in future periods as we bring on the revenue.

Speaker Change: Yeah, so all the all the Staffing was fully in Q2 and the loan system that will go, you know, kick on here in in 3Q and the, the uh, amortization for that is the 1 last piece that will come into the front right in 3Q.

Marty Grunst: And then You know, as you're more optimistic about the loan pipeline, loan growth into the back end of the year, can you just give us some color on how you're expecting to fund that? Is that going to be primarily out of the bond book as some of those cash flow? And then just maybe some color as to what your expectation is for deposit growth in the back end of the year? Yeah, so Timur, just as a starting place, we have a very strong loan to deposit ratio below 65%. And that could certainly creep up and that would be perfectly fine if that's how it plays out.

Speaker Change: Okay, great. And then

Speaker Change: You know, as you're more optimistic, about the loan pipeline loan growth into the back end of the year, can you just give us some color on how you're expecting to fund that? Is that going to be primarily out of the bond book as as some of those cash flow? Um, and then just maybe some color as to what your expectation is for deposit.

Speaker Change: Growth in the back, end of the year.

Marty Grunst: Our base case scenario, though, is that we But, you know, any mix within there would be a perfectly fine And can you just remind us what the next 12 month cash flows are out of the bond book and out of the loan? Yeah, so it's basically $650 million per quarter of cash flows come out of the securities portfolio and reprice. And then just on the fixed rate portion of the loan book, that's more like $200 to $250 million per quarter of cash flows come out of that fixed rate loan book and reprice per quarter. Great, thank you.

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

Speaker Change: Okay. And can you just remind us what the the next 12-month cash flows are out of the the bond book and out of the loan book,

Speaker Change: Yeah. So it's basically 650 million per quarter of cash flows. Uh, you know, come out of the the Securities portfolio and reprice and then

Speaker Change: Uh, just on the the fixed rate portion of the loan book, that's more like 200 to 250 million per quarter of uh cash flows. Come out of that fixed rate loan book and we're price per quarter.

Speaker Change: Perfect. Great. Thank you so much.

Operator: This concludes today's question and answer session.

Stacy Kymes: I would now like to turn the call back over to Stacy Kymes for closing remarks.

Stacey KS: Close today's question and answer session. I will now like to turn the call back over to Stacey times for closing remarks.

Stacy Kymes: Before we wrap up the call today, I wanted to take a moment to share our company's support for those affected by the flooding in the Texas Hill Country. As someone who grew up in Texas, I know the strength and resilience of that community and what a special place it is. We stand with our team members and customers in Texas and across our footprint in offering our support now and throughout what will be a long recovery.

Stacey KS: Before we wrap up the call today, I wanted to take a moment to share our company support for those affected by the flooding and the Texas Hill Country. If someone who grew up in Texas, I know the strength and resilience of that community and what a special place it is. We stand with our team members and customers in Texas and across our footprint and offering our support. Now

Stacy Kymes: I'm proud of the results this quarter. These results reflect the strength of our team, the effectiveness of our long-term strategy, and the resilience of our diverse business model. The momentum we gained across the board reinforces our optimism about the future.

Stacey KS: And throughout what will be a long recovery?

Stacey KS: I'm proud of the results. This quarter these results, reflect the team. The effectiveness of our long-term strategy, and the resilience of our diverse business model.

Stacy Kymes: We appreciate your interest in BOK Financial and your willingness to spend time with us this afternoon. Please reach out to Heather King if you have any questions at h.king at bokf.com.

Stacey KS: The momentum we gained across, uh, we gained across the board, reinforces, our optimism about the future, we appreciate your interest and be okay. Financial and your willingness to spend time with us this afternoon, please reach out to Heather King. If you have any questions at h. King at bokf.com

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

Stacey KS: this concludes today's conference call, you may now disconnect