BOK Financial (BOKF) Q2 2025 Earnings Transcript

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Date

Tuesday, July 22, 2025 at 5:00 p.m. ET

Call participants

President and Chief Executive Officer — Stacy Kymes

Chief Financial Officer — Martin Grunst

Chief Executive Officer, Wealth Management — Scott Grauer

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Takeaways

Net Income and EPS-- Net income for Q2 2025 was $140 million, with earnings per diluted share of $2.19.

Loan Growth-- Total outstanding loans rose 2.5% sequentially, annualizing above 10%, with particular strength in commercial real estate, core commercial and industrial lending, and loans to individuals.

CRE Portfolio-- Commercial real estate balances grew 6.9% quarter over quarter, mainly in multifamily housing, retail, and industrial project lending.

Specialty Lending-- The specialty lending portfolio decreased 1.6% quarter over quarter, driven by a 4.4% contraction in energy lending, partially offset by a 0.5% expansion in health care.

Fee Income-- Total fees and commissions were up 7.2% sequentially, with several fee lines achieving record quarterly revenue.

Trading Revenue-- Trading revenue, including related net interest income, reached $30.5 million, up 31% quarter on quarter as market conditions normalized.

Syndication Fees-- Syndication fees grew $1.9 million quarter on quarter to $5.1 million, the highest since 2022.

Wealth Management (AUMA)-- Assets under management and administration increased $3.9 billion sequentially to a record $117.9 billion, attributed to market appreciation and new business.

Net Interest Income and Margin-- Net interest income (GAAP) increased by $11.9 million, and reported net interest margin expanded by two basis points; core net interest income excluding trading rose by $11 million with a seven basis point core margin improvement (excluding trading).

Capital-- Tangible common equity rose to 9.6% and common equity tier 1 capital reached 13.6% after repurchasing over 660,000 shares below $94 per share and redeeming $131 million of Tier 2 capital instruments.

Credit Metrics-- Allowance for credit losses was $330 million or 1.36% of loans; Nonperforming assets not guaranteed by the U.S. government fell by $4 million to $70 million, lowering the NPAs-to-loans and repossessed assets ratio by two basis points to 31 basis points.

Net Charge-Offs-- Net charge-offs were minimal at $561,000, maintaining recent averages of one basis point over the last twelve months.

Expenses-- Total expenses rose $7 million quarter over quarter, with nonpersonnel costs up $6.4 million due to higher technology project costs and operational losses; personnel costs remained stable, as a compensation rise was offset by seasonally lower payroll taxes.

Deposit Metrics-- The loan-to-deposit ratio was 64%, and cumulative interest-bearing liability beta was 76% for the cutting cycle, slightly higher than the 75% cumulative beta during the hiking cycle.

Mortgage Finance Business-- The company will launch its mortgage finance and warehouse lending business imminently, with four credit relationships approved and expectations to reach $500 million in commitments by year-end 2025, and 11 FTEs already included in the expense base.

Expense Outlook-- All staffing for mortgage finance is included in Q2 run rate; amortization for the loan system will be phased in by March.

Summary

Management stated that growth in core commercial and industrial lending, the CRE segment, and individual loans accelerated as payoff activity in specialty lending subsided. Several fee-based businesses—including fiduciary and asset management, transaction card, and deposit services—notched all-time high revenues, with management highlighting the stability and diversity of earnings streams. Net interest margin continued to benefit from fixed asset repricing and optimizations in deposit pricing even as cumulative liability betas surpassed the recent rate hiking cycle, suggesting potential for further flexibility. The impending launch of mortgage finance and warehouse lending, with operational investments fully incorporated, is expected to fortify future loan growth. Allowance for credit losses remained robust, and charge-off levels were minimal, with management expressing confidence in outperformance relative to industry peers.

Chief Financial Officer Martin Grunst said, "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."

Chief Executive Officer Stacy Kymes affirmed that, "core strategy is to acquire talent, to grow in these great markets that we are in," signaling continued focus on organic expansion rather than M&A as the principal growth engine.

Management expects full-year loan growth, net interest income, and fee income guidance to remain unchanged for fiscal 2025, underlying their constructive outlook despite lingering economic policy uncertainties.

Quarterly cash flows from the securities portfolio are $650 million and from the fixed-rate loan book, $200 million-$250 million in cash flows.

Industry glossary

Loan-to-Deposit Ratio: The percentage of a bank's loans funded by its deposits, an indicator of liquidity and funding structure.

Tangible Common Equity (TCE): A measure of a bank’s core capital, calculated as common equity minus intangible assets and goodwill, expressed as a percentage of tangible assets.

CET1 (Common Equity Tier 1): The highest quality regulatory capital that banks must maintain, consisting primarily of common stock and retained earnings.

Allowance for Credit Losses: Reserves set aside to cover potential loan losses, shown as a percentage of outstanding loans.

AUMA (Assets Under Management and Administration): Total market value of assets managed or administered on behalf of clients.

Interest-Bearing Liability Beta: The sensitivity of deposit costs to changes in market interest rates during hiking or cutting cycles.

Full Conference Call Transcript

Stacy Kymes: Thank you, Heather. We appreciate you joining the call this afternoon. We are pleased to report earnings of $140 million or EPS of $2.19 per diluted share for the second quarter. The word that comes to mind for this quarter is momentum. During the quarter, we saw a reacceleration of loan growth. With the anticipated fund up of our CRE book, continued strength in the core C&I portfolio, and a tapering of the abnormal payoff activity that has recently impacted outstandings in our specialized businesses. Looking ahead, we will launch our new mortgage finance line of business, which should further support future loan growth.

This was made possible by consistently investing in the right talent and systems to enable the future growth of our business. We realize this does increase expenses in the current period, but it enhances our long-term sustainable growth and positive operating leverage for years to come. Fee income was another bright spot for the quarter. With total fees and commissions up 7.2% sequentially, trading activity normalized this quarter as the macro environment uncertainty abated, and we saw more typical levels of customer engagement. Not only was our trading business up this quarter, but we also saw broad-based growth across our fee income businesses with several lines producing record quarterly results.

Net interest income grew for the fifth consecutive quarter, and we continue to experience margin expansion as well. With a loan-to-deposit ratio of 64%, we are well-positioned to continue optimizing pricing of the deposit book. Even in our current levels of liability betas, we have exceeded our most recent hiking cycle beta and see further opportunities to the upside. Our capital levels remain robust and strengthened once again this quarter, with TCE reaching 9.6% and CET1 reaching 13.6%. This growth occurred even though we took several capital actions to create value for our shareholders, including repurchasing over 660,000 shares below $94 per share and redeeming all $131 million of our Tier two capital instruments.

Credit has long been a strength for us, and we continue to be well reserved with a combined allowance at a healthy 1.36% of outstanding loans. Criticized and classified levels remain well below their pre-pandemic levels. Turning to slide six, I wanted to spend a little time highlighting the segments of our loan book. Total outstanding loans grew 2.5% this quarter, which is over 10% on an annualized basis, led by growth in commercial real estate, our core C&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.

The specialty lending portfolio decreased 1.6%, with contraction in our energy portfolio of 4.4%. This was partially offset by expansion in our health care portfolio of 0.5%, which had a strong quarter of new originations. These portfolios have experienced elevated levels of payoff activity over the past couple of quarters. And while that activity is still present, it has abated from abnormally high levels. In fact, when we look specifically at the energy book, most of the payoff activity for the quarter was in April, while the months of May and June were very stable. We are confident in our ability to grow these businesses over time, and pipelines remain healthy.

Our CRE business increased 6.9% quarter over quarter, with the majority of the growth coming from multifamily housing, retail, and industrial projects. As we mentioned previously, we anticipated a fund up of our CRE portfolio. This portfolio recently came under its internal concentration limits. We have focused on building commitments over the past few quarters, but it takes time for this portfolio, which is largely construction, to begin funding up and showing increases in outstanding balances. We expect growth in outstanding balances to continue. Our expansion into the mortgage finance and warehouse lending business is on track. We have 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, and our system implementation is nearly complete. We hired a talented and experienced team to build this business, and the related expense is embedded in the run rate you see today. All of this combined gives us confidence in our ability to achieve the outlook that we set at the beginning of the year. Transitioning to Slide seven, credit quality remained excellent across the loan portfolio. I will keep my commentary brief. NPAs not guaranteed by the US government decreased $4 million to $70 million. Resulting nonperforming assets to period loans and repossessed assets decreased two basis points to 31 basis points.

Committed criticized assets ticked up slightly this quarter but remained very low relative to historical standards. We had minimal net charge-offs of $561,000 during the quarter, with net charge-offs averaging one basis point over the last twelve months. We expect net charge-offs to remain below historical norms in the future. Our combined allowance for credit losses is $330 million or 1.36% of outstanding loans. This is a healthy reserve level. Our track record speaks for itself as we have demonstrated consistency in the credit space time and time again. And now I will turn the call over to Scott.

Scott Grauer: Thank you, Stacy. Turning to our operating results for the quarter on Slides nine and ten. 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 linked quarter driven by higher mortgage origination volumes from seasonal production and steady demand as customer engagement has rebounded following the significant market uncertainty in the first quarter. Syndication fees were another standout, growing $1.9 million linked quarter to $5.1 million, the highest quarter we have seen since 2022. Now turning to slide 10.

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

This is another record quarter for AUMA. Transaction card revenue increased $2.5 million from the first quarter. Excellent performance this quarter was supported by disciplined pricing strategies, targeted customer acquisition efforts, and a seasonal uplift in transaction activity. Deposit service charges grew $1 million linked quarter. This line has shown sustained growth over the past two years driven by our commercial treasury services. And now I will hand the call over to Marty to cover the financials.

Martin Grunst: Thank you, Scott. Turning to slide 12. Net interest income was up $11.9 million and reported net interest margin expanded two basis points. Core net interest income, excluding trading, increased $11 million and core margin, excluding trading, grew by seven basis points driven by several factors. The securities and fixed-rate loan portfolios continued to reinvest cash flows at higher current market yields. Our ongoing efforts to optimize deposit pricing resulted in lower rates for nonmaturity deposits. That was without the support of any Fed rate cuts in the quarter. Time deposit repricing was also driven by the natural repricing of higher rate vintages in that relatively short day book.

This was partially offset by slightly lower average balances in the non-interest-bearing DDA driven by seasonally higher balances in January affecting the Q1 overall average balance. Both the average DDA balance and trends within the second quarter were aligned with our expectations. We expect net interest income and margin growth will be supported by continued fixed asset repricing and continued loan growth. We will pursue further deposit pricing optimization efforts where available, and the DDA stability we have seen in the past couple of quarters indicates that typical seasonality and new business activity should be expected to drive balanced behavior going forward. Turning to slide 13. Total expenses increased $7 million. 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. Nonpersonnel expense increased $6.4 million, driven primarily by increased technology project costs and operational losses. Slide 14 provides an update on our outlook for full year 2025. We remain confident in our full-year loan growth projections, due to the robust growth seen in Q2, continued momentum in early Q3, and strong pipelines across both C&I and CRE. This will be further supported by the launch of our mortgage finance business this quarter.

We acknowledge that economic policy uncertainty is still somewhat of a risk factor for our loan growth guidance, however, it seems much less important than it did ninety days ago. Our net interest income expectations remain unchanged. This assumes two twenty-five basis point rate cuts in September and December, consistent with the market's forward rate expectations. However, given our relatively neutral interest rate risk position, changes there would not alter our guidance. Our fees and commissions guidance is also unchanged, reflecting the momentum we have in that set of businesses.

As a reminder, I will note that interest rate levels and curve steepness can affect the geography of total trading revenue between NII and fees, but that would be neutral to total revenue. Lastly, on credit, nonperforming assets are very low, and portfolio credit quality continues to be very strong, which supports our expectation that charge-offs will remain low in the near term. And provision expense will be below 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.

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

Jared Shaw: Hey, good afternoon, everybody.

Stacy Kymes: Hi, Jared. Hey, Jared.

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

Martin Grunst: Yeah. No. Good question. So, you know, margin, we are 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, across 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, seven basis points of expansion. And those had been the drivers we have been talking about for the last few quarters. And so we see that again replaying in, you know, the next quarters where fixed asset repricing will still be supportive of margin.

You have got both securities book and the fixed-rate loan book that continue to reprice up to current market rates. There is still a little bit of room for deposit pricing to be supportive. And then, obviously, loan growth, that will be supportive going forward. And really nice to see this quarter's level. And, you know, our outlook, as you know, is constructive there.

Jared Shaw: Okay. Thanks. 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? And then if you look at FHLB borrowings, average was higher than in the period. Is that going to sort of continue to trend down as well in the backdrop?

Martin Grunst: So on the securities portfolio, the difference quarter to quarter on a portfolio that big is really sort of noise. So just think about that as kind of steady from here for the rest of the year. And then on the FHLB 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. And so that's what drove the FHLB borrowings up a little bit. You could see that trading, you know, potentially stay the same or come down a little bit, and you would see that offset in FHLB most likely.

Jared Shaw: Great. Thanks very much.

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

Jon Arfstrom: Thank you. Good afternoon.

Stacy Kymes: Hey, Jon. Hello, Jon.

Jon Arfstrom: Hey. Could you talk a little bit more about the pace of loan growth? Through the quarter? I know there are some nuances to average period end, but it looks like period end is up a little bit higher. And, Stacy, you used the term accelerating. So talk a little bit about what you saw throughout the quarter and how you feel exiting the quarter.

Stacy Kymes: Yeah. It really built throughout the quarter, and I think part of that was we have talked about we have had good underlying loan growth for the last really three years now. Our C&I loan growth CAGR is, you know, 5%, 6% over the last three years. Excluding the specialty businesses. Is really the headwind that we have had from health care, energy, and real estate. And so that slowed down. Obviously, real estate is a tailwind now, not a headwind. Health care seems very stable to growing modestly. Energy now stable. So if you look at, for us, April, we had energy payoffs, less payoffs in May and June.

And so that feels like, you know, you hate to call the bottom there, but feels like we are pretty close to stable and close to the bottom. And so that's really going to allow the underlying loan growth that's always been there to kind of come to the surface without being masked by the payoffs in those areas. And so feel really good about that. We have always pointed to the second half of the year as 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 are going to have mortgage warehouse come online. We think you could have $500 million in there by the end of the year, assume half of that's outstanding. You are going to have growth in your traditional C&I business where we have 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 are excited about where we are, where we are positioned from a loan growth perspective. Both this year and frankly, how we are positioned thinking about '26 as well.

Jon Arfstrom: Okay. Good. Very helpful on that. And then maybe, Stacy or Marty, just competition, it looks like loan yields were stable. I know there are a lot of things that go into that, but how are you feeling about the competitive environment? Is it any tougher than maybe it has been historically?

Stacy Kymes: You know, in the markets that we are in, it is always hypercompetitive. I mean, that's what you hear consistently from all of our teams there is that competition is very strong. We are in great markets. And so part of the other side of the coin of being in great markets like Dallas and Fort Worth and Houston and Phoenix and Denver, San Antonio is you are going to have a lot of competition. I would say there is some spread compression on the C&I side that we are seeing a little bit there.

As we move forward, as people think about diversification and either get pressure around real estate or decide they have 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. And so you see a little bit of spread compression there on the C&I side, but core C&I, what we call core C&I, but otherwise, spreads are holding in pretty well.

Martin Grunst: And sometimes that's more visible on the very high credit quality borrowers. They are close to the level where they can access capital markets. Especially.

Jon Arfstrom: Yep. Okay. Alright. I'll step back. Thank you.

Stacy Kymes: Thank you, Jon.

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

Brett Rabatin: Hey, guys. Good afternoon.

Stacy Kymes: Hey, Brett. How are you?

Brett Rabatin: 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 was just hoping for some additional color around that.

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

When you look at some of the transactional businesses, you know, on trading, so we do expect trading to be, you know, positive as we go through the next couple quarters. But we are realistic to have a growth rate that is certainly attainable in the way we think about that. You know, when you look at syndications, that will benefit from the, you know, 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 have got a really strong track record in that business. And year over year, really good momentum.

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, I mean, our confidence in the fee businesses goes across multiple lines. Anything you want to add to that, Scott?

Scott Grauer: Yes. I think Marty summed it up well. I think that the diversity of both asset classes that we have bodes well from the market growth standpoint. So we got that component. But as Marty mentioned, we have 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 have normalized and feel like we have 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 very strong. So we do not feel like we are 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. And then maybe, Stacy, you know, we have seen a pickup in M&A, and there are 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 or franchises that you view as, you know, as ones that you have got a small list that you are interested in and wouldn't just do any deal, obviously. What are you seeing, if anything, you know, in terms of the ones that are on your list?

You know, is there an increase in receptivity and what do you think the potential of you guys doing a deal might be, you know, in the back half of this year in '26?

Stacy Kymes: 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. 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 are 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 are in, and if we are 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.

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

Stacy Kymes: You know, if you look at where we are relative to last year, on the production side, we are probably up in excess of 30 people across our footprint. You know, we have added talent in all of our markets. We are proud of, you know, the markets that we are in. We think it gives us a differentiated opportunity to grow, allows us to maintain our strong asset quality because we do not have to reach for growth, we can do it in the constraints of our credit appetite. And we have added some extraordinarily talented people. In Dallas and Fort Worth and Houston. Obviously, we 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 are headed there. Denver's got good momentum. And our core markets have been strong for us. People kind of think, underplay the strength of Tulsa and Oklahoma City, Kansas City, but we are doing very well in these markets. And so talent acquisition is key to us. It continues to be almost a line of business for us in terms of how we think about it. And that's going to be key to our growth and our outsized growth as we move forward.

Brett Rabatin: Okay. Appreciate all the color, guys.

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

Michael Rose: Hey. Good afternoon, everyone.

Stacy Kymes: Hi, Michael.

Michael Rose: Hey. Maybe just following up on Jon's question. You know, I think what I heard, you know, C&I, CRE pipeline, you know, the energy decline that we have seen in balances year over year, it maybe sounds like it's coming to an end maybe with health care too. I know you talked about momentum into next year. I'm not trying to ask for the outlook for next year today. But is there any reason to think that 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 you think as we begin to contemplate next year?

Stacy Kymes: 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 and kind of a three- and five-year forecast, we use those kinds of numbers because that's the rate of growth that we expect to achieve over time, understanding it will be more in some periods and less in some periods, but kind of on a sustainable average over time, that's a good number for us.

Michael Rose: Okay. Great. And then maybe just pivoting to credit. You know, obviously, no provision again this quarter. Credit trends are excellent. I know I have talked with Marty about this separately, but, yeah, obviously, we are adding a fair amount to the debt deficit. But credit trends generally look pretty good for you guys in the industry. Is there anything that we should consider kind of in the near to intermediate term as puts and takes to kind of the current credit quality outlook and how it could change as we move forward? Thanks.

Stacy Kymes: You know, you are asking a question that we have all been asking ourselves. You know, what's what could be around the corner, how do we anticipate that, I think that the good thing about our company is we do not widen or contract the fairway based on the economic circumstances. We keep the fairway the same. We do not like leverage lending. We do not like collateral light, like having a strong secondary source of repayment. And so all those factors are why even when we do have criticized classified nonperforming assets, 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. Our loss given default historically has been much lower than our peers, and I would expect that to continue. But we do not see kind of the boogeyman around the corner right now. It appears there is a lot of tailwind economically, not just in our footprint, but just kind of the proverbial animal spirits are very strong right now. And borrowers are more confident. It's amazing what ninety days have been.

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

Michael Rose: Very helpful. And then maybe just one last one for me, Stacy. Just a lot of talk around stablecoins this quarter. PNC just signed a deal with Coinbase. You know, earlier today, you know, on the crypto front. Can you just talk about, you know, kind of, you know, third-party lending, whether, you know, leverage lending, all the above. Just from a technology standpoint. I would love your outlook and what you guys plan to do.

Stacy Kymes: Yeah. You know, address stablecoin. I think that domestically, there's a lot of smoke there. I think that where stablecoin makes a lot of sense is in uncertain economies or where you have a central bank that's not grounded like it is in most stable economies, where inflation is a bigger deal. Cross-border payments is another strong application for stablecoin. We do not have a huge population of clients that has applicability for some. But not a lot. But on the domestic payment side, I see very little use case today. Around Stablecoin. Although we are watching it, we have a large, as you know, commercial treasury services platform. Payments is really critical to our success.

And so we are watching these types of developments. And we will stay close to it. I think we have made enormous investments in our technology base, whether it was the wealth system, our treasury system, our lending platform, our, what we call, our exchange where we have single sign-on and all of our users can kind of access the commercial users and institutional users can access their information in a single place. We have made a lot of investments there, and we will continue to do that. From a lending perspective, that has been a bit of an Achilles heel for us as lending into the tech technology space.

It is such a binary outcome where it either works or it does not work. That's been a difficult place for us to find our footing and we have not done much there. So we do not have a lot of vulnerability if some of these things do not play out as perhaps expected. We are not lending into private credit. We are not lending to those who lend money to people we would not lend money to. And so that tends to help us in good times or when it's important to make good decisions. It's all decisions look good right now.

When the tide goes out, when we will figure out who made good decisions and who focused on growth at all costs. And so we feel good about how we maintained our discipline here and how we think about long-term lending.

Michael Rose: Appreciate it. Thank you so much.

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

Woody Lay: Hey. Good afternoon. I 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?

Martin Grunst: Yeah, Woody. This is Marty. We are pretty excited being able to get to launch that here just in the next couple weeks. And, you know, we will be able to get, like Stacy mentioned, probably half a billion dollars of commitments by the end of the year. We will be booking clients, you know, in August and September and make 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 have got both the lending capability, the deposit capability, and the treasury management, treasury services capability. And probably the best part about this is how well that business ties in with the institutional fixed income trading because the overlap there between those two client bases is super high. So that's a client base that we have got decades of history with. And so the tie-in there is fantastic.

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

Woody Lay: Alright. That's really helpful color. And then maybe last for me, shifting over to deposit costs. And as you sort of mentioned in your opening comments, the beta has 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?

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

Woody Lay: Alright. Thanks for taking my questions.

Operator: Star then the number one on your telephone keypad. Your next question comes from the line of Matt Olney with Stephens Inc. You may go ahead.

Matt Olney: Yes. Hey, guys. Good afternoon. Thanks for taking the question. Just want to follow-up on the loan yield commentary. Marty, I think you mentioned that the new loan growth would be accretive to the overall net interest margin. There I think I heard Stacy mention maybe some pressure on the C&I spreads. Just help me reconcile these comments and is the commentary about improving loan yield, is that more a matter of the loan mix you expect the back half of the year?

Martin Grunst: Yes. Yes, right. So certainly, loan growth is going to help you with just NII dollars. To the extent 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, you know, based on what that mix would look like.

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

Martin Grunst: Yes. So that's simply the traders, the desks, as they see opportunities, you know, they can move that overall balance up or down just based on market opportunity. 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.

Scott Grauer: 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.

Stacy Kymes: But we remain in all of our risk limits. We are not compromising any of our risk structures or anything like that to try to achieve any revenue growth or revenue targets there. We are 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 in a very difficult time, it could have gone in a different direction. And so we continue to be very disciplined about that as you would expect us to be.

Martin Grunst: 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 or the quarter before those average balances are a reasonable range to think about.

Matt Olney: Okay. Thanks for clarifying.

Operator: Your final question comes from the line of Timur Braziler with Wells Fargo. You may go ahead.

Timur Braziler: Good afternoon, everyone.

Stacy Kymes: Hey, Timur.

Timur Braziler: You had made a comment that the mortgage warehouse build-out has now been fully incorporated in the expense base. I'm just wondering what portion of the 2Q expense growth came from mortgage warehouse build-out?

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

Martin Grunst: Yeah. So all the staffing was fully in Q2, and the loan system, that will go, you know, kick on here in March and the amortization for that is the one last piece that will come into run rate in March.

Timur Braziler: Okay. Great. And then, you know, as you are 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 are 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?

Martin Grunst: Yes. 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 how it plays out. Our base case scenario, though, is that we do expect to continue to grow deposits over the coming quarters. But, you know, any mix within there would be a perfectly fine outcome.

Timur Braziler: Okay. And can you just remind us what the next twelve-month cash flows are out of the bond book and out of the loan book?

Martin Grunst: 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, more like $200 to $250 million per quarter of cash flows come out of that fixed-rate loan book and reprice. Per quarter.

Timur Braziler: Perfect. Great. Thank you so much.

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

Stacy Kymes: Before we wrap up the call today, I wanted to take a moment to share our company support for those affected by the flooding in the Texas Hill Country. Someone who grew up in Texas, I know the strength and resilience of community and what a special place it is. We stand with our team members and customers in Texas and across our footprint and offering our support now and throughout what will be a long recovery. I'm proud of the results this quarter. These results reflect the strength of our team, the effectiveness of our long-term strategy, and the resilience of our diverse business model. The momentum we gained across the board reinforces our optimism about the future.

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

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

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