BOK Financial Corporation Aktie

Welcome to BOK Financial Corporation's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the presentation over to Heather King, Director of Investor Relations, for BOK Financial Corporation. Heather, please proceed.

Good afternoon, and thank you for joining us to discuss BOK Financial's Third Quarter 2026 results. Our CEO, Stacy Kymes, will provide opening remarks, cover the loan portfolio and related credit metrics. Scott Grauer, Executive Vice President of Wealth Management, will review our fee-based businesses. Our CFO, Marty Grunst, will then walk through our financial performance for the quarter as well as our forward guidance.

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 Stacy Kymes, who will begin on Slide 4.

Thank you, Heather. We appreciate you joining the call this afternoon. We are pleased to report earnings of $159.9 million or EPS of $2.64 per diluted share for the third quarter, reflecting another period of solid performance despite a challenging interest rate environment. Four key factors drove our results. First, quality loan growth, loan growth remained a standout contributor again this quarter. Total loans grew 2.4% in the quarter, representing annual growth of 9.5% and grew 11.5% year-over-year.

Second, meaningful margin expansion. Net interest margin increased 9 basis points to 3%. We continue to benefit from the repricing of fixed rate assets. Third, disciplined expense management. We continue to invest where we see attractive opportunities long-term growth and prudently manage our expense base. We are not managing the company for 1 quarter. We are focused on producing sustainable growth and profitability over time.

Fourth, exceptional credit quality. We continue to see very strong performance across the portfolio with no meaningful deterioration that would change our view about the underlying credit environment. Together, these strengths demonstrate the durability of our business model. They reflect the benefits of decisions we have made over many years to diversify our business, manage risk prudently and position the company to perform well across a wide range of economic environment.

I also want to spend a moment on the rate environment. It highlights an important deprator for BOK Financial. We have not seen a 10-year treasury yield these levels since 2007. This rate move also happened very quickly with similar velocity to what the market experienced in 2023. Our securities portfolio has a relatively short duration of about 3 years, which helps limit our exposure to changes in interest rates. We've managed the balance sheet this way for decades, maintaining risk limits around tangible common equity and tangible common equity and stress.

As part of that discipline, we regularly monitor how our capital would change if interest rates across the yield curve rose by 300 basis points. Our current TCE is 9.2%, well above the TCE for the broader KRX index. This is by design and reflects how we have managed the balance sheet over many years. That consistency gives us flexibility to continue serving clients and investing in growth across a range of market conditions. The higher rate environment is a headwind for our more rate-sensitive fee-based businesses, particularly fixed income trading and mortgage banking.

Industry activity levels declined meaningfully during the quarter and our results reflected that environment, consistent with what other market participants experience. We view those businesses through the cycle where they provide an important source of diversification to our overall earnings profile.

And now I'll cover our loan portfolio in more detail, starting on Slide 6. Loan growth remains a particular source of strength. We have invested heavily in our people, markets and capabilities, and those investments are now contributing across the organization. As I mentioned before, total outstanding loans grew $646 million or 2.4% this quarter and were up 11.5% year-over-year. Importantly, this growth continues to be well balanced across our businesses and markets.

Our core C&I loan portfolio, which represents our combined services and general business portfolios, grew slightly linked quarter, but is up 10.9% over the prior year. Energy Lending experienced an outstanding quarter, increasing $264 million or 8.6%, driven by both higher utilization across existing relationships and solid new production. This is a business where we have deep expertise and long-standing client relationships. The elevated payout activity we experienced last year was largely driven by industry consolidation and an accommodating debt capital markets environment.

As market activity normalized, volumes return, and we are benefiting from the strength of our relationships and reputation in this sector. Health care loans declined 1.4% this quarter, but were still up 3.8% year-over-year with healthy future pipelines. Mortgage plants also contributed meaningfully to loan growth during the quarter with current outstanding balances of $589 million, an increase of $137 million. Active warehouse commitments increased more than $500 million during the quarter to $1.4 billion, loans funded on our warehouse lines, grew 23%.

This is a remarkable result given the challenging U.S. mortgage origination environment. Our commercial real estate portfolio grew 4.2% over the prior quarter. Growth in this portfolio was broad-based, spanning industrial, retail and other real estate loans. We remain well below our internal concentration limits.

Moving to Slide 7. Once again, credit quality remains strong. Nonperforming assets not guaranteed by the U.S. government increased $3.3 million to $58 million. The resulting nonperforming assets to period end loans and repossessed assets increased 1 basis point to 21 basis points. Committed criticized assets increased this quarter but remain very low relative to historical standards. We had net charge-offs of $886,000 during the quarter, averaging 2 basis points over the last 12 months. We continue to have only de minimis exposure to private credit facilities and no direct lending to data centers.

Consistent with the prior quarter, no provision was required. Improvement in economic forecast assumptions was offset by the impact of loan growth. Our combined allowance for credit losses is a healthy $322 million, or 1.16% of outstanding loans. In all, credit quality remains exceptionally strong with no meaningful signs of broad-based stress emerging in the portfolio. Over time, we would expect credit performance to normalize. However, normalization should not be confused with deterioration. Our underwriting standards, portfolio diversification and risk management approach are designed to perform throughout the credit cycle. And we continue to feel very good about the quality of the book.

And with that, I'll turn it over to Scott.

Thank you, Stacy. Turning to our operating results for the quarter on Slides 9 and 10. I'm going to start with the interest rate environment because it had a meaningful impact on several of our market-sensitive businesses this quarter. During the quarter, interest rates moved up significantly with the 10-year treasury increasing nearly 80 basis points. The increase in longer-term rates creates a challenging backdrop for both mortgage activity in fixed income markets. And importantly, this is the theme we have seen across the industry. Higher mortgage rates slow origination activity, which in turn reduces the volumes that support both our mortgage production and fixed income trading businesses.

We take a long-term view of these businesses and recognize that activity levels will fluctuate with market conditions. History has shown that these businesses can provide significant earnings momentum when rates decline and mortgage activity rebounds. That long-term countercyclical benefit is a key component of our diversified business model. It's one of the reasons these businesses remain such an important part of our franchise. Against that backdrop, total fees and commissions were $188 million, declining $14 million sequentially. The majority of that decline was concentrated in our markets and securities businesses, where revenue declined $15.2 million to $36.2 million.

Within trading, the best way to evaluate the business is to look at total trading revenue, which includes both trading fees and trading-related net interest income. We've discussed this distinction over the last several quarters as the shape of the yield curve has shifted revenue between those 2 categories. Total trading revenue was $15 million this quarter compared to $25 million in the second quarter. Trading fees were negative $6.3 million, while trading-related net interest income was $21.3 million.

This quarter, you saw a decline in trading fees, reflecting the market dynamics just discussed, partially offset with a small increase in trading-related net interest income as the steeper curve shifted some revenue into that line item. It was a strong quarter for investment banking revenue, which grew $4.3 million, driven by municipal bond underwriting activity. This was partially offset by a reduction of $3.4 million in syndication fees, which returned to more normal levels following a very strong second quarter.

Turning to Slide 10 to discuss our asset management and transactions businesses. These businesses continue to perform well, generating recurring fee income, broadening our revenue mix and reinforcing the earnings diversity that distinguishes our franchise. Our fiduciary and asset management business delivered another very strong quarter, contributing $69.9 million to revenue. While that was down slightly linked quarter, the second quarter benefited from seasonal tax preparation fees. Excluding that seasonal comparison, the third quarter represents our highest revenue quarter on record.

AUMA was stable at $129.3 billion. Transaction card contributed $32.2 million to revenue this quarter, representing a new quarterly record. Collectively, these businesses represent an important part of what makes our franchise unique. They are built on long-term relationships, recurring sources of revenue and specialized expertise that have consistently produced value across market environments.

And with that, I'll hand the call over to Marty to cover the financials.

Thank you, Scott. Turning to Slide 12. Net interest income increased $18.1 million and net interest margin grew 9 basis points. Excluding trading, core net interest income increased $15.1 million and core margin increased 8 basis points. [indiscernible] margin and net interest income continued to benefit from loan growth and fixed rate asset repricing. Given the short duration of our securities portfolio, we typically have the opportunity to reinvest between $600 million to $700 million of quarterly securities cash flows. This provides a durable benefit as lower-yielding assets mature and are reinvested at current market rates.

In the third quarter, portfolio runoff was $770 million at an average yield of approximately 3.3%. Those cash flows were reinvested at an average yield slightly over 5.1%, representing a yield pickup of more than 180 basis points. Third quarter also benefited from loan fees the portfolio restructure we completed back in the second quarter and a small improvement in energy derivative margin.

Turning to Slide 13. Total expenses were largely unchanged compared to the prior quarter. Excluding changes in deferred compensation, personnel expense increased $6.5 million. This increase reflects strategic talent investments, including the addition of proven revenue producers as we capitalized on recruiting opportunities from market disruption. In addition, strong loan production during the quarter resulted in higher incentive compensation and health care costs increased. Total non-personnel expense was flat versus the prior quarter.

Slide 14 provides our outlook for full year 2026. Our guidance assumes 1 additional rate hike in the fourth quarter and longer-term rates aligned with the current forward curve. Loan growth and pipelines are tracking well with our expectations and our growth guidance remains [indiscernible]. Our outlook for total revenue growth is unchanged at mid-single digits. Net interest income is expected to be $1.43 billion to $1.44 billion, while fee income is expected to exceed $800 million.

We commonly note future variability and curve steepness can shift trading revenue between those 2 categories. On expenses, we have tightened our guidance and anticipate growth to be roughly 1% versus the prior year. We continue to expect the full year efficiency ratio to be approximately 62%, reflecting the Visa gain we recognized in the second quarter. If adjusted for the Visa gain, our guidance for that ratio would be near 63%.

Turning to credit. Portfolio credit quality remains very strong. We continue to see very low levels of nonperforming assets and no tangible evidence of broad-based normalization at this point. We believe provision expense will be below $10 million for the full year 2026.

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 Instructions] Your first question comes from the line of David Chiaverini with Jefferies.

Starting on the net interest margin, very strong bounce in the third quarter. How should we think about the trajectory from here along with the drivers as well as touch on the rate sensitivity as we look forward?

Yes. Thanks for the question, David. Yes, we were happy with how the margin turned out. That was consistent with how we were thinking about it a quarter ago. And the drivers from here as we think about finishing out the year, basically, the fixed rate asset repricing will be the big positive component there. So we'll continue to see both the securities portfolio of fixed rate loans add to that. Energy derivative margin. If you recall, that was -- gave us a drag of 3 basis points in the second quarter turned out to be a drag of 2 basis points in the third. We'll still get that back. It's hard to tell if that will be a neutral or a drag going into next quarter.

And then competitive loan and deposit pricing environments, those are still just as competitive as they were. And so far, that hasn't really shown up in the margin for us, but we certainly recognize that that's a driver. From a rate risk perspective, we're very rate risk neutral, so we don't think that, that will be anything that changes things from quarter-to-quarter. So all in, we think about the margin stable as our near-term outlook.

While we are rate neutral, this is Stacy, David. The shape of the yield curve does matter. So if there was any steepening along the way or flattening, obviously, that could impact us a little bit, too.

Great. And then shifting over to the loan side. Can you talk about the pipeline this quarter, growth driven by energy and mortgage finance should we expect similar areas to drive growth going forward? And a key theme this quarter is if higher rates are impacting loan demand.

Thus far, I haven't seen the impact of higher rates impacting loan demand. I think that in our footprint, you still have a lot of strong economic equity. Keep in mind, all the rate movement has been in the longer end of the curve, 25 basis point move in short-term rates isn't going to make a huge difference there. And I don't think the longer-term view has a huge rate move even at the short end. So we're not seeing changes in borrower appetite at this point, understanding that could change.

Nature of having a diverse portfolio is that some quarters 1 area shines more than another. And so this quarter, it was energy and certainly, mortgage finance has been a stalwart for us since inception. But we're very excited about what's happening in C&I. A little bit of a slowdown this quarter, but not -- we don't -- we think that's just kind of a blip. We think we'll continue to move forward and achieve the guidance that we provided to the Street as we move into the fourth quarter.

Your next question comes from the line of Michael Rose with Raymond James.

Maybe just following up on the NIM discussion. Obviously, very good NII growth this quarter. But it looks like based on the guide that that's going to slow fairly materially quarter-over-quarter. And I really wanted to get into the deposit side because deposits shrink. You guys obviously have a low loan-to-deposit ratio. But just how do we think about the progression of deposit growth from here as it relates to kind of the NIM discussion that you just laid out moving into next year along with earning asset growth? Just trying to put it all together as we set up for next year.

Yes, Michael, so let me just comment on the NII growth. I mean, we expect to continue to grow earning assets through growing loans and combine the earning asset growth and relatively stable net interest margin. We feel good about the NII trajectory as we finish out the year. And then I think it's an important point to look at on the deposit growth. So you're right. We certainly do have a very strong loan-to-deposit ratio, and that gives us the flexibility to be thoughtful about how we respond to market pricing pressures.

But if you spend a little extra time looking at the differences between Q2 and Q3 on an average and ending basis, it will help you see what's signal and what's noise. So if you look at average balance in Q3 and ending balance in Q3 for deposits, they're basically the same. If you look at ending balance in Q2 versus average balance ending was over $600 million higher, and so there's a little bit of a run off right at the end of June that affected that ending balance. So if you look at average balances, you see a growth trend, if you look at average balances in every single line of business that we disclose, you see growth quarter-over-quarter.

So I think it's probably more accurate to say that fundamentally, we've got a growth trend going on in the deposits. You've got a little signal versus noise issue when you look at the ending balances. But at the end of the day, we feel good about our ability to continue to grow the deposit portfolio. We've done a great job of that over the last several years, and we'll maintain a very strong loan-to-deposit ratio going forward.

I appreciate the color, Marty. And maybe a follow-up on loan growth. I know you like others have been fairly active in hiring new producers. Do you have a sense for how much of this quarter's growth was maybe driven by some of those new producers versus maybe just draws on existing lines and then what is the hiring outlook as we think about the next couple of quarters look like for you guys specifically? Obviously, we've had some bigger deals in Texas closed and I think last quarter, you mentioned that I think 20 of the 25 hires were in Texas. So just trying to frame the opportunity as we move forward.

Sure. I mean, this quarter, if you think about at the top of the house, utilization was essentially flat from the second quarter. So the growth really wasn't utilization driven and was really continued to add customers to the base. I think that from a talent acquisition perspective, we continue to be focused on that. The growth this quarter was not driven by the talent. We expect to see that begin to show up in the fourth quarter and then certainly in 2027. But we continue to be very active there across all of our markets, not just Texas.

We continue to look to add talent. We think that is the best way for us to grow in the current environment, and we have become an employer of choice for many who want to do business in a certain way, very relationship driven and that's been effective for us. So I think that's part of the future story. For sure, we're excited about the people who come on board, but the results that they will drive are going to be in the future not reflected in the third quarter.

Your next question comes from the line of Jon Arfstrom with RBC Capital Markets.

A couple of rate-related questions. On Slide 6, Stacy, that mortgage finance line, it's up nicely, and I think we all get that it's growing. But guess is the balances are probably somewhat depressed. I'm just kind of curious if you can talk about what you're seeing in terms of new business wins there and if the mortgage market normalizes a little bit, what kind of expectations do you have for potential balances there, if that makes sense?

Yes. When I talk about it kind of in general terms, I mean, we're still pretty nascent in that business. And so you still have a lot of customer acquisition that's happening. And so utilization is not where it will be when the business is more mature, I would say our utilization there is kind of in the low 30 percentile. And some of that's just a factor of the time it takes to get customers on boarded and for systems to integrate and for they become active from that perspective.

I think as you begin to mature out the business you're probably looking at utilization closer to 50%. And certainly, in this type of mortgage environment, I'm very impressed with the team and how they're continuing to grow and add commitments at a significant clip. I think if you think about a more normal mortgage environment, this business looks even better. So we're really happy with where it's at today in a difficult environment. But if you kind of whatever normal is for mortgage. If you find that, I think this business looks even better for us.

And I'll tell you, we talk about it's about a relationship, not a transaction for us. And this business is a really good example of that. We don't have a single customer who is a loan-only customer inside of our mortgage warehouse business. Every single customer that we have has at least 1 other product with us. whether that be they're an active trader in a TBA business or whether they're a treasury customer or both. We continue to be very good at selling the whole bank and having a relationship and not just a transaction.

And John, it's Marty. I would add 1 thing to that. Just note that, that business, as we matured out, there will be seasonality trends in there or summer versus winter is kind of the driver there. But given the momentum we have in originations, we think we'll be able to grow through the seasonality that we would see here in the near-term quarter.

Yes. Okay. Good. And then Scott, a question for you. I kind of feel like I'm picking on you periodically on trading fees, but obviously, you can't control what interest rates do, but a couple of tougher quarters in a row due to the rate environment. What needs to happen for that business to get back to some normalcy. Is it just rates staying steady in the same range or do rates have to come back down? Or how do you want us to think through this?

Yes, it's a great question. It's a fair question. And I'd characterize it really -- 2 things need to happen to create a more optimal environment. Obviously, we continue to do business, continue to have significant trading volumes there. They're just not what we would like them to be with the rapid change in rates. And so what we need to see are 2 things: stability and acclamation. It's not absolute rates and the rate levels because we have been in that business for over 25 years and have seen these rates in, in fact, higher in the past and generated quite effectively and efficiently.

So it's merely the uncertainty and the instability with the speed of change and the upward pressure on rates, I think that has caused the biggest challenge to both buyers in the mortgage series market as well as the origination piece. So as the mortgage buyers acclimate to this type of a rate range, we'll continue to take more than our share of that business. But during this environment, it creates challenges, both in the confidence levels of our asset buyers as well as the mortgage origination piece itself. So we need stability and acclamation to this type of a rate range, which we don't find necessarily out of longer-term historic norms.

Jon, this is Stacy. I mean, think about, for us, the last 6 weeks of the quarter, so 10-year rose about 80 basis points, pretty quick move in the long end of the curve. So if you're a buyer of fixed income instruments, the last thing you want to do is buy a bond today, and it will be worth less tomorrow. And I think what we've seen over the last few weeks is the tenure has kind of settled out the pace of the change has changed and stabilized tremendously. That business will be just fine in a stable environment.

And so if you think about where we are through the first 2 or 3 weeks of October, we like what we've seen there. So it's not about the rate, it's about the pace of change. And now that, that pace has stabilized quite a bit, we think that business will also stabilize. Now the mortgage business itself is a different story. It's going to take longer. But the fixed income trading business will come back to us once the pace of change has slowed and at least thus far this quarter, that has proven to be the case.

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

When I look at expenses, you guys have done really an excellent job managing expenses this year. Updated guidance is 1%. The question is, what would you consider a more normal growth rate. And is there room to further improve the efficiency ratio, I realize you operate a little higher than peers, just given the mix of your fee income businesses.

Yes. So Peter, I think that long run, there is room for that efficiency ratio to improve from where it is. But we're not the sort of company just given the strength and size of our fee businesses, we're not somebody that's going to be in the upper 50s. We're going to be in the lower 60s as kind of the long run, what would make sense for us. So -- but I think that ultimately, there is room there to make improvement. I think that -- we appreciate the commentary about the year and we've done a tremendous job of being thoughtful about making investments in the company that ultimately drive greater efficiency, and that's an important long run.

We're pretty proud of the fact that we brought the efficiency ratio down probably close to 300 basis points over the last 12 months while still making significant investments in new revenue producers and key infrastructure investments that we think will propel us for many years into the future. The mix of fee business that we have is unique for a regional bank. And so that results in a higher efficiency ratio than most, but we're -- we look at each of those lines of business in [indiscernible] as a target efficiency ratio, so it's easy for us to manage and kind of know where we are by each distinct line of business.

But I think, Peter, you know us well and you know that we don't manage to that ratio for the company because we're always thinking about long-term investments. And if there's investments that are important to make that are really going to pay off long term, we'll make those and the efficiency ratio is ultimately something that comes out of that set of decisions in the short run.

Got it. Got it. That's really helpful. And also just separately, nice to see another solid quarter of loan growth in the energy portfolio. Can you talk about the pipeline in energy. Are you starting to see willingness to drill as energy prices really might be staying at these elevated levels for longer?

I'm not going to be happy with [indiscernible] here, but it appears that way. We just met with our team yesterday and talked about for a long time, I would say that the severe backwardation of the curve didn't make it very interesting because you really need a longer-term price rise. But if you look out 12 months from now, you're still seeing pretty healthy prices. I think the market is beginning to believe that even post resumption of the resolution of the conflict that there will continue to be a political risk premium embedded in the price of oil. And as a result of that, we're starting to see customers begin to look at and begin to implement more broader drilling programs, which means the use of debt to be able to help them facilitate that.

So it will be lumpy. I wish it was always up into the right every quarter over the last 18 months, energy actually because of consolidation in the industry and much lower utilization had been a headwind for us. And so now it's great to have it as a tailwind, and we're very hopeful that it will continue to be that way for a while.

Your next question comes from the line of Ed Najarian with Hovde Group.

I hate to sort of beat a dead horse on the NIM, but just a question there. When I think about the investment securities portfolio runoff that you've outlined and the reinvestment there, the variability of the loan portfolio, the ability to lag deposit pricing, even if we're using sort of that high [indiscernible] deposit beta that you've talked about previously, it seems like there's still some opportunity for a little more margin expansion, at least in the near term, especially if the Fed is going to tighten, let's say, 1 or 2 more times in the near term. So are you -- I guess the question is, are you just being a little conservative in terms of your NIM outlook because the NIM is always a little difficult to fine-tune and forecast specifically? Or would you agree that there's a little more opportunity for NIM expansion over the next quarter or 2 before it sort of settles out and stabilizes?

Yes, Ed. I appreciate the question. And you're right. If you look at the long run history over the last 9 quarters, core NIM has expanded 3 basis points per quarter, and that's been a function of fixed rate asset repricing and then some of the other items that you articulated. And when we think through where the margin really gravitates to over time, we've said in the past, if you just took the securities portfolio replaced it with current market levels, you'd be north of 3. And so over long periods of time, you're always going to gravitate to something that is kind of your natural level. And then given year or quarter, you might be above or below that the various markets, mostly market-driven reasons.

I think that long run, we do see continued margin expansion as part of what's possible here. I'd just note that there certainly will be some level of overlay of competitive pressure, given that there's plenty of demand for loans within the industry. And we feel very comfortable talking about stable in the near term as we round out the year. But I think you're right on the long-term message of where that ultimately goes.

I think you're thinking about the short-term dynamic probably correctly. If you think about how deposit pricing tends to lag, we kind of would prefer to talk about the margin over a longer cycle so that you kind of even out those lags. But you're not wrong in how you think about it. I think that the other thing to think about is demand deposits are going to be a bit tougher in this environment given higher rates. And so as we think about it collectively, we feel pretty optimistic, but we don't want to overpromise here either.

Right. Okay. Great answer. Understood. And then just 2 really quick housekeeping questions. When you talk about the 1% expense growth for this year, that's like all in for both years. You're not taking out any kind of deferred comp or anything like that. That's GAAP versus GAAP, correct?

GAAP versus GAAP is right.

Okay. And then on the NII guide, that's a non-FTE number, correct?

That is an SEC, not FTE number, that's correct.

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

Wanted to touch on the CRE segment. You also saw nice growth in the quarter. Could you just talk about the growth opportunities you're seeing in the segment? And is that a trend that could continue from here?

Yes. I think that CRE is very difficult for us to forecast. I think that the nature of the portfolio is -- let's pick on multifamily, you identify a developer, they build a multifamily apartment, it seasons, it matures, it gets to occupancy and then it sells and that happens over a 3- to 4-year period of time. But rates have a pretty big impact there. So if you think about longer-term rates running up, that could have an impact and folks may choose to use a mini-perm structure or something like that, and not necessarily sell it on a nonrecourse fixed basis outside of the banking system.

And so that could make some of those loans a little stickier and then allow CRE to grow. We're still trying to figure out what that looks like as we think about next year. But we've got plenty of room to grow from a concentration limit. We really like the team that we've got in the field. we're smart about how we do it. We focus on recourse. We're successful in getting that. It's a big part of how we think about that business. So that's why our credit outcomes there have been so strong, but we're optimistic. And the only thing that ever makes a less optimistic is really understanding the impact of paydowns in the book, but with a higher level of the 10-year that probably makes the book a little bit stickier and allows it to grow.

I appreciate the color there. And just as a follow-up, maybe touching on credit. And as you mentioned, credit has been super clean. I guess as it relates to the reserve percentage you all had close to 0 provision over the past couple of years, and that's even in light of really strong growth. Given it sounds like growth should continue strong here in the near term. How are you thinking about the reserve on a percentage basis? Or are we close to a trough or given the expectations that mortgage finance should grow, would that naturally push the reserve down on a percentage basis?

Yes, kind of a nuanced answer, and it's kind of facts and circumstances at the point at the time that we make it depends on what the economic outlook is. It depends on the level of charge-offs and criticized and classified levels. I will tell you, as we think about next year, we'll start to think about the reserve ex mortgage warehouse. I think that as that portfolio grows, we kind of have to think about that as a percentage of loans differently than we do the rest of the portfolio. But credit has been incredibly strong. We clearly can't sustain $1 million in charge-offs a quarter but we'll take it while it's here.

And obviously, when you have this stronger credit, you don't need to provide even when we've had this kind of growth. And as time goes along, we'll continue to evaluate that and make the best decision in the quarter that we can based on the information that we have.

Your next question comes from the line of Terry McEvoy with Wells Fargo.

Just 1 follow-up on the last 2 questions. If you look at the other side of higher rates, if rates go higher into next year, could start to see some credit pressure within CRE? If so, how do you get ahead of that? What are your thoughts on loan modifications and term extension? And within those 4 larger segments of CRE that you call out on Page 6, are there any specific areas that you think are most at risk to higher interest rates?

Yes. I mean, obviously, higher interest rates is a big input into debt repayment for a commercial real estate borrower. And if rates go up, then that's an additional stress for them. I think it really depends on what happens with economic growth, and where are the projects. I mean, most all of our projects are in our footprint, where there's economic net infill activity that's positive. If you look at -- this isn't the first time rates have gone up, you've seen us perform through that. You may get some credit migration.

But because we have such a large percentage of our portfolio that has recourse, the project sponsors work through that and work on it over time, and we -- the outcomes are very strong. I mean, look at our real estate losses over the last 10 years. They're very, very, very low. And certainly, we had a rising rate environment that was more substantial, frankly, than this one, from a short-term perspective, I think we went up 500 basis points in the short term in a 15-month or less period of time. So we can work through that. We don't have any over concerns about that portfolio. But clearly, there could be some credit migration and things that would have to be worked through if rates continue to migrate higher.

Your next question comes from the line of Matt Olney with Stephens.

I'll ask about capital. I don't think we saw any buyback activity this quarter. We are seeing a little pullback in valuations in the industry. So curious about your appetite from here on the buyback. And then on the M&A front, it's been a while, so we've talked about this. So just curious about your -- the opportunities that you see out there, whether it's on the depository side or the non-depository side?

Yes, Matt, thanks for the question. Yes. And our commentary on capital and really share buyback more specifically is pretty consistent with the message that we talked about before. We're certainly aware of the fact that we have a very strong capital base and excess capital. However, we are very thoughtful about the capital deployment decisions we make and making sure that those are ones that make sense over a very long period of time. And so we're very opportunistic about that and continue to be willing to be patient, but there's a point where that opportunity gets attractive, and we'll just play that out through the quarter.

From an M&A perspective, this is Stacy. Obviously, we're interested in using our capital in M&A, but it needs to be the right opportunity. We don't need -- we're doing so well at acquiring talent and growing organically. We don't need M&A to continue to propel us forward. It really for us is kind of the cherry on top of the Sunday. If there's something that is attractive and that works, we're going to be interested in it. But obviously, what we're focused on is not just buying something for the sake of buying something. It has to have both strategic value and be financially inside the metrics that we -- are important to us, particularly our cash-on-cash IRR.

I would tell you there's not a large pipeline. We would look at bank deals, we would look at nonbank deals, but the discipline around how we think about that and how we ensure that they're shareholder-friendly and that the returns that are promised that the deal announcement are what is realized are very important to us. And so we'll be thoughtful about that. But it's certainly something that we're interested in, but not just for the sake of doing it.

Our last question comes from the line of Brett Rabatin with StoneX Group.

The only question that I haven't really heard an answer to was just wanted to talk about Slide 19 on the securities portfolio. The duration is fairly short, had 3.4 years, which only extends the 3.8 if rates increased 200 basis points. So I was a little surprised with the AOCI quarter-to-quarter change. Any thoughts on that and just why the increase was fairly outsized relative to the duration of the portfolio?

Yes. I think that the -- if you back to the math, I think that AOCI is consistent with the rates that apply to that part of the curve and the securities that we have. In fact, more broadly, our AOCI change relative to other peers, first of all, that's a more favorable outcome just because we do have a shorter securities portfolio. And the proof is in the footing of looking at the TCE ratios, if you look at our TCE at 9.2%, that's at the upper end of the -- whatever peer group you want to pick, that's at the upper end of the peer group, both in terms of the amount of change and the absolute -- more importantly, the absolute level of where that TCE landed, and that is a function of how we run that securities portfolio. So happy to talk with you more offline about some of the puts and takes of that, if you'd like.

Brett, the other piece of that is if you look at particularly larger regionals is the use of held to maturity which shields these banks from the AOCI Mark. I think that we have really stayed away from using held to maturity for the most part. We continue to allow that portfolio and held the maturity to just run off. We like the economic optionality we have, including things in AFS. And so I think we probably have a bigger percentage of our portfolio in AFS than most do because we think long term, that gives us the most optionality to do something if we want to do that. I think that's the other piece of that equation as you think about that.

Okay. That's helpful. And then I guess the other related kind of question is just around the trading portfolio, which the average size was just slightly higher linked quarter, but I kind of figured it might decrease a little bit. Any thoughts on the size of that portfolio from here? And if you think it might be about the same or any thoughts on sizable tip of the balance sheet.

Yes. I think if you look over the last couple of quarters, it's been pretty steady in that $5 billion to $6 billion, but closer to $6 billion average balance. And I think it's important, Brett, that you think about that portfolio in an average balance context, not ending balance because just any 1 given day for a trading book is really insightful. So kind of think of that 5% to 6% range on average and think about that probably at the higher end.

And I would think to tag on to Marty there, that's where we'll be given a sustained environment that we have today. Should the environment change, as Stacy and I talked about earlier, then certainly, that size could change.

There are no further questions at this time. I will now turn the call back to Stacy Kymes, CEO, for closing remarks.

I'm proud of the grid determination of our team to deliver another solid quarter, strong loan growth and expanding margins, disciplined expense management and excellent credit quality all reflect the underlying strength of our franchise. Market conditions will continue to evolve, but we'll stay focused on what we can control: serving our clients well, managing risk prudently, investing thoughtfully in growth and creating long-term value for our shareholders.

Before we close today's call, I'd like to take a moment to recognize our specialized industry banking executive, Brad Vincent, who will retire next month after nearly 30 years with the company. Throughout his career, Brad has been a trusted leader, an exceptional teammate, a mentor to many and 1 of the finest examples of servant leadership in our organization. On behalf of myself and the organization, Brad, thank you for your leadership, your friendship, your dedication to BOK Financial. Congratulations on an outstanding career and a well-deserved retirement.

Thank you for your interest in BOK Financial and for spending time with us this afternoon. If you have any questions, please reach out to Heather King at [email protected].

This concludes today's call. Thank you for attending. You may now disconnect.

Greetings. Welcome to BOK Financial Corporation's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

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

Good afternoon, and thank you for joining our discussion of BOK Financial's Second Quarter 2026 Financial Results. Our CEO, Stacy Kymes, will provide opening comments, cover the loan portfolio and related credit metrics. Scott Grauer, Executive Vice President of Wealth Management, will cover our fee-based results; and our CFO, Marty Grunst, will then discuss financial performance for the quarter as well as our forward guidance.

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 Stacy Kymes, who will begin on Slide 4.

Thank you, Heather. We appreciate you joining the call this afternoon. We are pleased to report earnings of $176.5 million or EPS of $2.92 per diluted share for the second quarter. Adjusted for the net gain related to the exchange of the Visa B shares and a small amount of repositioning in the securities portfolio, earnings were $156.5 million or $2.59 per share.

This was an excellent quarter and one that reflects how we are positioning the franchise for continued growth. We delivered strong results, including record quarterly loan growth, record quarterly fiduciary and asset management revenue, continued expense discipline with credit remaining outstanding. During the quarter, total loans grew 3.4% sequentially or 13.7% on an annualized basis. This resulted in a quarterly increase of $896 million, representing record new loan production in a single quarter of the company's history. Year-over-year, loans have grown an impressive 11.5%.

Importantly, nearly 70% of year-over-year growth has been in our C&I portfolio. This reflects both the strength of our customer activity and the benefits of the investments we've made over time. Our fee-based businesses contributed meaningfully with record quarterly revenue in our fiduciary and asset management business.

During the last call, we discussed aligning expenses with market opportunities and customer needs. Expenses this quarter remained well controlled with total operating expenses, excluding deferred compensation, being down slightly. Notably, this was achieved while making significant investments in talent during the quarter. Capital levels remain very strong with tangible common equity at 9.6% and CET1 at 12.9%.

Finally, we've talked over the past year about disruptions in the markets we serve. Periods like this tend to create opportunities for organizations like ours, those that are strong, stable and focused on long-term growth. Historically, these environments have represented some of our best opportunities. The current period represents another such opportunity. We've added more than 25 new teammates as a result of the disruption across our markets. More than 20 of those additions were in Texas, a market where we've been deeply involved for decades. We also saw success hiring in our Colorado and Arizona markets. This talent acquisition strengthens our ability to serve customers across the spectrum from large corporate relationships to small business.

Importantly, the loan activity this quarter was independent of these additions. As we've discussed, C&I is a longer sales cycle, and we expect to see the benefits build over time. We're excited to welcome this talent, and we are confident in the role they will play in driving future results.

And now I will cover our loan portfolio in more detail, starting on Slide 6. As I mentioned before, total outstanding loans grew nearly $900 million or 3.4% this quarter and were up 11.5% year-over-year. This growth was broad-based across our business lines and our footprint. Our core C&I loan portfolio, which represents our combined services and general business portfolios, grew 3.9% sequentially and is up 11.1% year-over-year. This level of growth in core C&I loans doesn't happen by accident. Our growth is a result of a disciplined long-term strategy centered on investing in top talent and deepening customer relationships.

As we've often said, growth follows relationships. The momentum we're seeing today is a direct reflection of the trust we've earned from our customers. Health care loans increased 3.2%. As we indicated last quarter, activity levels and pipeline strength in this segment were exceptionally strong entering the second quarter. The growth we're reporting today reflects the successful execution of opportunities that have been building for some time. Energy loans grew again this quarter, increasing 1.6%. Mortgage finance also contributed meaningfully to loan growth during the quarter with current outstanding balances of $452 million, an increase of $224 million.

As of quarter end, we had active warehouse facilities of $870 million in commitments. This business continues to build momentum and achieved an important milestone during the quarter by recording its first month above breakeven. Operating at a net profit less than a year after funding our first loan is a notable accomplishment by the team. Our CRE portfolio grew marginally compared to the prior quarter, but is up 6.6% year-over-year.

Moving to Slide 7. Once again, credit quality remains excellent. NPAs not guaranteed by the U.S. government increased $2.8 million to $55 million. The resulting nonperforming assets to period end loans and repossessed assets was consistent with the prior quarter at 20 basis points. Committed criticized assets decreased this quarter, remaining very low relative to historical standards. We had net charge-offs of just $500,000 during the quarter, averaging 3 basis points over the last 12 months. Once again, the limited charge-offs we've seen show no patterns or concentrations that raise concerns around specific business lines or geographies. And we continue to have no exposure to private credit facilities.

In the long term, we expect credit metrics to normalize. However, we expect net charge-offs to remain below historical averages in the near term. Consistent with the prior quarter, no provision was required. Improvement in economic forecast assumptions were offset by the impact of loan growth. Our combined allowance for credit losses is a healthy $323 million or 1.19% of outstanding loans. Overall, credit performance this quarter remains very strong.

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

Thank you, Stacy. Turning to our operating results for the quarter on Slides 9 and 10. Fee income was a solid contributor to total revenue again this quarter. While total fee income was lower than the prior quarter, results remained healthy and reflected the strength and diversity of our fee-based businesses. Total fee income was $202 million, declining $7.8 million sequentially. Total trading revenue, which includes trading-related net interest income decreased $9.7 million to $25 million.

As a reminder, we saw some mix shift from trading fee income into trading net interest income during the quarter as the yield curve steepened. From an activity standpoint, results in our fixed income business were impacted by lower customer activity, particularly as longer-term rates increased from March through May. As market conditions began to stabilize, activity improved, and we saw better trading performance in June. Overall, our activity levels were consistent with broader industry trends, which also saw a decline in MBS trading volumes during the quarter. Elevated long-term rates are also affecting our mortgage banking business with revenue down $2 million compared to the prior quarter. Syndication revenue grew $3 million sequentially, supported by robust activity and continued customer demand, resulting in a record second quarter for the business.

Turning to Slide 10 to discuss our asset management and transactions businesses. As you can see, these businesses continue to serve as consistent fee generators, delivering steady long-term growth and diversification to our revenue base. The biggest standout this quarter was fiduciary and asset management revenue, which delivered record-setting quarterly results, growing $4.5 million over the prior quarter. This reflects higher trust fees along with seasonal tax preparation fees. AUMA grew $5.7 billion during the quarter to $129.3 billion, led by increased market valuations and continued customer expansion. Looking at annual growth, which is not affected by seasonality, AUMA increased $11.4 billion compared to the same period last year, representing an annual growth rate of nearly 10% and highlighting the strength of customer activity.

Overall, our fee-based businesses continue to demonstrate the value of diversity. While individual categories may fluctuate from quarter-to-quarter, the underlying franchise remains strong and capable of generating consistent long-term growth.

With that, I'll hand the call over to Marty to cover the financials.

Thank you, Scott. Turning to Slide 12. Net interest income increased $9.3 million and reported net interest margin grew 1 basis point. Excluding trading, core net interest income increased $6.5 million and core margin decreased 2 basis points. Core margin and NII benefited from loan and deposit growth as well as fixed rate asset repricing. However, the offset was a 3 basis point negative impact related to cash margin we posted on behalf of our energy derivative customers as oil prices moved higher. This impact is temporary in nature. As energy prices have declined, the majority of that margin has already been returned. This item is, of course, market sensitive.

During the quarter, we recognized a pretax gain of $30.9 million on the exchange of our Visa B shares. We used a portion of this gain to reposition a small amount of the securities portfolio, realizing $4.6 million of pretax losses. This will improve yields on the $268 million of reinvested securities going forward.

Turning to Slide 13. Total expenses increased $7.5 million during the quarter. The increase was driven by an $8.9 million rise in deferred compensation expense, which was offset by gains recorded in other gains and losses. Excluding deferred compensation, total expenses declined $1.4 million, reflecting a $6 million decrease in personnel expense, partially offset by a $4.6 million increase in non-personnel expense. The decline in personnel expense was primarily driven by lower cash-based incentive compensation, reflecting reduced trading activity as well as seasonally lower employee benefits costs. The increase in non-personnel expense was largely attributable to higher business promotion costs.

Slide 14 provides our outlook for full year 2026. Similar to last quarter, our guidance assumes no rate changes from the Federal Reserve and longer-term rates aligned with the current forward curve. Loan growth in the first half of 2026 has been strong and well diversified across the portfolio. We are increasing our guidance as we now expect full year 2026 loan growth to be over 10%.

On total revenue, our guidance of mid-single-digit growth is unchanged. However, we now expect to be in the upper portion of that range. As a reminder, with this somewhat steeper rate curve versus a quarter ago, we will see the mix of trading-related revenue shift from fees to net interest income. Consequently, we expect net interest income to be in the upper half of our range of $1.42 billion to $1.45 billion. and we expect fee income to be in the lower half of our range of $820 million to $845 million.

On expenses, we continue to anticipate growth in the low single digits and likely towards the lower end of that range. The Visa gain we recognized in the second quarter will impact the full year efficiency ratio, and we now expect that metric to be approximately 62%. If adjusted for the Visa gain, our guidance for that ratio would be near 63%, unchanged from the prior quarter.

Turning to credit. Portfolio quality remains very strong. We continue to see very low levels of nonperforming assets and no tangible evidence of broad-based normalization at this point. We believe provision expense will be below $20 million for full year 2026.

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 Instructions] And your first question comes from the line of David Chiaverini with Jefferies.

So to start on the net interest margin, up 1 basis point here in the second quarter. How should we think about the go forward on the NIM?

Yes. Thanks for the question, David. So we feel good about seeing some -- we're happy with the basically stable margin in the quarter. We see drivers to see some margin expansion for the back half of the year. Kind of the typical drivers that have been long-standing positive securities portfolio, fixed rate asset repricing for both securities and fixed rate loans. And then that derivative margin piece, that was a negative 3 basis points going into Q2, and we're going to get that back over the next quarter or 2. A lot of that margin has been returned to customers already -- returned to us already.

So those are high confidence items. And then typically, we have DDA growth in the back half of the year as well. So there's some pretty good support to see margin expansion in the back half of '26.

Great. And related to that, deposit pricing is a hot topic this quarter. Can you talk about the competitive environment and where deposit costs could trend going forward?

Yes. So deposits are always competitive. There's really never a situation where deposits aren't highly competitive. They are today. They have been previously. I would note that the pressure is probably rising there rather than falling. But within our market, we're really not seeing anything irrational. I mean there are some areas that have rational, but we're not seeing irrational in our markets.

And just as we think about deposit pricing in the guidance, we're not relying on any improvements in that rate. We'll seek to get improvements in that cost of funds, but we're not relying on improvements there to drive our guide.

Just a reminder, we still have relative to others, low loan-to-deposit ratio. So that gives us a lot of flexibility in managing rate-seeking deposits.

Next question comes from the line of Peter Winter with D.A. Davidson.

Just on loan growth, if I think about loan growth for the industry, it's been coming in better than expected, but a lot of the banks that are giving updated guidance, it does assume growth to moderate in the second half of the year. But when I look at your updated guidance of period-end loans over 10% and pipelines consistent with the first half of the year, it doesn't seem like you're expecting a slowdown in the second half of the year.

This is Stacy. I think -- look, we grew loans 11.5% year-over-year, very diverse with not a big contribution from real estate and energy, 2 big drivers for us historically. They're hard to forecast. So it's hard to know exactly what those numbers are in the last half of the year. We still have a lot of tailwind to come from mortgage finance. I think that's going to help us out. There's some seasonality there that could make some of that a little bit lumpy. But if you look kind of straight through to the end of the fourth quarter, I think you've got really positive tailwind there. But we're not -- we feel comfortable with the guidance that we've provided based on some things that are intrinsic to us.

If I look at sales pipelines, frankly, at this point, they're not as strong as they were heading into the second quarter, but they're stronger than they were heading into the first quarter. And so obviously, we had a record second quarter loan production. The pipelines remain very strong, and we remain very confident in our ability to grow, even absent the talent acquisitions we've done, which should only add to that in some future period.

Got it. Very helpful. And then on credit, what can you say? It's been excellent. You've got peer-leading low net charge-offs consistently. And rightly so, you've taken a 0 provision 6 out of the 7 quarters. But -- the ACL ratio at 1.19%, it has reached the CECL day 1 level. If we assume a stable economy, stable credit trends, would you let the ACL ratio continue to fall?

Peter, this is Stacy. Look, we're -- our credit metrics are better than CECL day 1. If you look at criticized levels and classified levels, nonperforming levels and things like that. And so given what we know about credit today, then the percentage could continue to fall.

Okay. And then just one quick housekeeping. Does the fee income outlook include the $31 million Visa gain and thus the total revenue comment likely coming in at the upper end of mid-single-digit range, does that include the $31 million?

Yes. So Peter, for the total revenue guide, that does include both that gain, and there was another gain last year. So both in the '25 number and the '26 number, we both have those in there. That's correct.

Our next question comes from the line of Jon Arfstrom with RBC.

Scott, maybe a question for you. There's been maybe some handwringing over the trading fees this quarter. How unusual is that environment in your mind? And can you help us a little bit with what June and maybe July look like? Is it -- does the business in aggregate total trading revenue kind of trend back to that mid-30s type level?

Yes, sure. So good question. So as we -- as I commented, really where we got off to a solid start quarter 1. We saw in March and mostly in April and May, we saw a significant dislocation. And as I mentioned, we saw an improvement in June. So really, the kind of the key contributors there, when you think about our trading activity, it's nearly 100% fixed income. So it's mortgage-backed securities, munis, corporates and treasuries in that order with mortgage-backed securities being the dominant chunk of that. So as the dislocation and uncertainty has occurred in the markets, that's what causes the challenges there with that segment. But we did see an improvement in June versus the previous 2 months.

Okay. So potentially back to normal or an improvement from what you saw earlier in the quarter, certainly. Okay.

Jon, I want to add, we've been in the fixed income trading business for decades. And every once in a while, you get one of these dips and they're inevitably followed by a bounce back. It's a solid customer base that we've got a long history with.

Yes. Okay. Good. On the expense outlook, I see the guidance, it looks good. Marty, can you maybe talk a little bit about where you're finding opportunities to hold the line on expenses? And then maybe touch a little bit on the hiring that you're doing if there's more to come and kind of the profile of what you're looking for and who you're hiring.

Yes. I'd just say on expenses, if you -- let me give you a little bit of color on the expenses and talk a little bit about deferred comp and then kind of get back to that question. As a reminder, there's 2 components in deferred comp, and they're inextricably linked because they come from the same source. They are -- there's actually assets specifically invested for deferred compensation. Those investments are mark-to-market every quarter, and that gain or loss shows up in the other gains and losses item that we call out on Slide 13 in the footnote, $8.8 million in gain, too. That gain plus some trivial administrative impacts is how the $9.1 million of deferred comp expense number is determined.

So by definition, those must net effectively to 0 or something close to 0 each quarter. So to get an accurate understanding of the core run rate of the company, you've got to adjust for both those impacts or neither of them, which I appreciate the fact that, Jon, you did this quarter. But to understand the core trends in NIE, sorry for that long preamble, but you need to understand that context as well. So personnel expense was down, excluding deferred comp by $6 million. 2 drivers there, though, with trading revenue down, trading commissions were commensurately down. And then the seasonal decline in payroll taxes is the other piece that explains that $6 million decline quarter-over-quarter.

So basically, kind of the base regular compensation was really steady quarter-over-quarter. Now as you start from kind of that starting place when you look over the next couple of quarters, you will see some expense increase within the personal line items just due to the adds. And -- but importantly, that's contemplated in the expense guidance that we provided.

Okay. And Stacy, this is middle market commercial lenders that's who you're after?

We're -- we've hired kind of a range from commercial to corporate to small business. Substantially all revenue producers, not exclusively, but substantially all our revenue producers Obviously, the disruption in our key markets has created an opportunity, and it's a playbook we've used many times in the past. And we've got a great brand and excited to welcome new teammates to help us grow the company.

Next question comes from the line of Matt Olney with Stephens.

Given the Visa share sale, just looking for updated thoughts around capital and capital deployment.

Yes. Thanks for the question. Yes. So capital, we've got a strong capital position, and that just makes it a little bit stronger. We are well aware of that that's an opportunity for us to be very thoughtful about and how we deploy capital. But as you know, we're always very opportunistic about how we do that. We're always thinking about what's the best long-term action to take and when to take it. And at the end of the day, we're willing to be patient to find that.

Okay. I appreciate that, Marty. And then I guess, Marty, on your puts and takes around the margin outlook, I think you mentioned getting back that 3 bps back from that cash margin of the hedging activity from the energy customers. Any more color on that dynamic, what happened in 2Q? And then where would I see this more specifically in the financials?

Yes. Let me just explain the dynamic there, and then Marty can explain maybe how that runs through. But -- so we hedge on behalf of our customers. We don't take commodity risk. But because we have mortgages on their collateral, we hedge -- we offset the commodity risk with a third party or most predominantly with an exchange. The exchange requires cash margin when both initial margin and cash margin when the trades move. So when commodity prices moved up significantly, customers who had previously hedged, those hedges were underwater. So we had to post cash margin to the exchange. We don't get a return for that. So that dilutes our net interest margin.

As those positions season and mature and roll off or as commodity prices roll back down, we get a return to that margin, which improves our net interest margin in that process. At one point during the quarter, I think we had over $900 million that was posted to the exchange. Much of that has been returned back to us, but understand that, obviously, the conflict remains and as oil prices move, that number could change over time. But both with time decay and the prices staying at this level, we expect that to return to a more normalized level. It really has with some degree of uncertainty around where will commodity prices go from here.

Yes. So the majority of that has come back as we sit here today already. And to your question about how do you see that in the financial statements, you'll see that it's essentially a non-earning asset or a low-earning asset that grows temporarily and then comes back. And you see that in the non-earning asset section, and we can walk you through the specific line items later, if that's useful.

Your next question comes from the line of Michael Rose with Raymond James.

I just wanted to get an update on the mortgage business, where you guys stand at this point? And if there's any updated kind of thoughts around expectations versus where you're tracking?

No. I think I told -- I think in the last 6 months or so I indicated, I think our goal is to be at $1 billion in commitments by the end of the year. We're obviously tracking well ahead of that as we ended the second quarter. I'm not going to give any updated goalpost there other than to say we have lots of headroom and those guys are running awfully fast, and we're seeing lots of opportunity there. So we remain very excited about that business. As I mentioned, we broke even -- first month of breakeven was in June.

So that's going to be a tailwind for us as we go into the latter half of the year. But they're going to be a tailwind to us as we close the year for sure. There's some seasonality in that business, just like there is in the mortgage business. But net-net, between now and the end of the year, we think that's going to continue to grow.

Very helpful, Stacy. And then maybe just one follow-up going back to deposits. The NIB mix has remained pretty stable here, but I think we all know it's competitive in a lot of your markets. And with the updated loan growth guide, it's probably some incremental pressure you guys have a lower loan-to-deposit ratio. Just as we think about IB deposit costs as we move forward, just given that competitive dynamic, what do you see as kind of the puts and takes either under a base case with no rate hikes or if we do get 1 or 2?

Yes. So non interest-bearing -- or interest-bearing deposit costs is probably going to be closer to stable than it has been in the last couple of quarters in a scenario where you've got no rate hikes or rate cuts either way. And then in a rate cut -- rate hike scenario, probably doesn't happen until later in the year if it does. But our deposit beta has been in the upper 60s for the down cycle. It was right about the same place in the up cycle. And so we would think about that as kind of the starting place for how you think about deposit costs.

However, when you go from cutting to flat and then to increasing, you're probably going to be able to beat that just based on any time that direction changes that gives the industry the ability to do a little bit of lag here and there. So we probably beat that is how we think about it.

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

Just had one quick follow-up question related to the Visa gain and how it relates to the guidance. So you said that's included in the revenue, but is that also included in the fee guidance? Because when I look at last year's $801 million, that looks like an operating number. So I just want to make sure I'm looking at things apples-to-apples.

Sorry, it's not in the fee number. Yes. Thanks for that follow-up. I should have said that earlier. Yes, that's not in the fees and commissions guidance, correct.

Got it. But it's included in the total revenue?

That's correct.

Okay. All right. And then maybe just last for me, I wanted to touch on the fiduciary and asset management revenue. And as you noted, there was some impact of seasonal tax prep. But I was just curious how much of that bump up was from the seasonal impact just versus strong organic trends?

It was roughly 1/3 of the quarter-over-quarter increase was due to the tax prep, the onetime a year.

Your next question comes from the line of Jared Shaw with Barclays.

I guess just for me, maybe where are you seeing the most loan competition, whether it's geographically focused or certain subsectors? Are you seeing anything unusual on the competition side?

No, I wouldn't say we're seeing anything unusual. I think the great part about our footprint is it's growing rapidly. If you think about Texas and Arizona and Colorado and even our home state of Oklahoma is growing at a great pace. And so when that's happening, everybody gets a part of the pie. It's easier to be a part of a growing pie than it is to be part of a stable or shrinking pie. And so what I would say is, from my perspective, we're seeing lots of opportunities for loan growth. I've never seen a more resilient kind of American business enterprise in the face of so much economic volatility really moving forward with their businesses. And so that's obviously creating opportunity for us.

I think structurally, I think I'm really impressed with this stage of the cycle, how strong competitively structures are hanging in there. I think pricing continues to grind competitively and as you would expect it to in this kind of environment, but lots of lending opportunities as we look forward.

Your next question comes from the line of Brett Rabatin with StoneX Group.

I wanted to ask, I noticed a lot of the loan growth was in Oklahoma. Was there anything unique about that? Was it the domicile just being at the headquarters or anything that drove Oklahoma to be a lot stronger? Obviously, the company is based in Oklahoma, but I thought we'd see a little more broad-based growth from the other geographies this quarter given the overall strength in loan growth.

Yes. Sometimes those tables can be a little bit misleading because it's not necessarily where the borrower is, but where the lending activity is headquartered. And so that -- as we look at that internally, our growth was very broad-based, and that was part of what we were most proud about is both by geography and by lending type, very, very diverse, particularly if you look at C&I, what we've been defining for a long time now is core C&I. think that was up 11% year-over-year.

I mean that's really outstanding and really, really proud of the team here at the bank that's delivering that kind of outcome because, as you know, that's the hardest lending to be successful at. But yet it's important to us because it feeds so many of our fee-based businesses. And so it's really been fun to watch these guys have success.

Okay. I appreciate that, Stacy. And then just the other question I had was you mentioned 25 new teammates, 20 in Texas. Do you kind of view this as a kind of unique opportunity given some recent disruption? Or do you have a pipeline that says you think you'll be continuing to add folks to the team? Or any thoughts on just if this was kind of more of a one-off situation relative to what you might do from here?

Yes. So for us, I would say talent acquisition is almost a line of business for us, just like other vertical line of business. Our way we're going to grow is organic in virtually all of our markets, particularly outside of Oklahoma, we need more boots on the ground. And so we have Mark Wade, our market leader in Texas, particularly, but David, who leads our markets outside of Texas, we have pipelines of talent in all of our markets that we're consistently recruiting. In these periods of disruption, obviously, the receptiveness of our phone call and the opportunity we have to pull people across into our company is enhanced, and we're taking advantage of that. But in many cases, the people that are coming across are people that we've been talking to for a very long time.

And so just like with the sales process, the recruiting process also is a very long sales cycle. But we're open for business for talented folks with or without kind of a budget for it. We like revenue producers. We're going to have to grow with more talent on the ground in all of our key locations, and we don't see that any different. Obviously, the disruption has created a disproportional opportunity in the near term, but talent acquisition is a line of business for us.

That concludes our question-and-answer session. I will now turn the conference back over to Stacy for closing remarks.

To conclude, I'm incredibly proud of the results our team delivered this quarter. The record pace of loan growth, continued strength in our fee-based businesses and outstanding credit performance reflects the quality of our franchise and dedication of our team. Our consistent performance is rooted in a strong risk management culture. That foundation, combined with a unique geographic footprint continues to create opportunities to grow faster than peers while maintaining our disciplined approach. We are entering the second half of the year from a position of strength with strong business momentum and a solid foundation for continued growth.

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 [email protected].

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Greetings. Welcome to BOK Financial Corporation's First Quarter 2026 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference call is being recorded.

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

Good afternoon, and thank you for joining our discussion of BOK Financial's First Quarter 2026 Financial Results. Our CEO, Stacy Kymes, will provide opening comments, cover the loan portfolio and related credit metrics. Scott Grauer, Executive Vice President of Wealth Management, will cover our fee-based results; and our CFO, Marty Grunst, will then discuss financial performance for the quarter as well as our forward guidance.

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 Stacy Kymes, who will begin on Slide 4.

Thank you, Heather. We appreciate you joining the call this afternoon. We reported earnings of $155.8 million or EPS of $2.58 per diluted share for the first quarter. What stood out this quarter was the consistency of execution across the company and how our teams continue to build on the momentum we established in 2025.

During the quarter, total loans grew $536 million or 2.1% sequentially. That growth was well distributed across the portfolio. We saw strong momentum last year, and we're encouraged to see that continue. Pipelines remain solid and business activity across our footprint and customer base has been constructive, even with more macroeconomic uncertainty.

Growth was also well balanced geographically across our franchise with Texas growing $208 million or 8% on an annualized basis, Oklahoma posting growth of $163 million or approximately 9% annualized and Arizona increasing $236 million.

Our fee-based businesses also performed well even in an environment with elevated uncertainty and the rapidly changing macroeconomic backdrop. Fee revenue exceeded 3 of the past 4 quarters, reflecting the diversification and underlying strength of those platforms. Expenses declined meaningfully this quarter, reflecting our continued focus on managing our core cost structure.

Over the past several quarters, we worked to better align expenses with market opportunities and customer needs. This quarter illustrates that progress. Expenses were down $6.9 million, and we posted an efficiency ratio of 63.2%. Importantly, this quarter provides a clean view of a more typical expense profile with prior actions now embedded and temporary items less meaningful. Capital levels remain very strong with tangible common equity at 9.3% and CET1 at 12.6%.

Slide 6 provides a closer look at our loan portfolio. Total outstanding loans grew 2.1% this quarter, with strong growth across our core C&I portfolio, energy and commercial real estate. Our core C&I loan portfolio, which represents our combined services and general business portfolios grew 2.1% sequentially. This is the fourth consecutive quarter of growth in this portfolio, reflecting long-term sustained customer relationships.

Health care loans decreased 1.3%. Loan production in this segment remains at record highs with a very strong pipeline. This business has also supported our fee income lines with strong syndication fees generated during the quarter. The reduction in loan balances this quarter is primarily related to cyclical payoff activity. We believe we are well positioned to grow this portfolio throughout the remainder of the year.

Energy loans grew this quarter, increasing 4.3%. This marks another reversal of the payoff trends we discussed last year. We are not currently seeing clients seeking to add production capacity yet. Our CRE business increased 3.7% compared to the prior quarter. We remain well within our concentration limits for this segment, which allows us to be selective about opportunities and deploy capital where structure, terms and returns make sense.

Mortgage finance loans totaled $228 million, an increase of $50 million from the fourth quarter. We are happy with the progress this business is making, but it's important to note that the loan growth exhibited in the first quarter was driven by our existing businesses.

Moving to Slide 7. It has become a theme for me to keep my comments short on this topic, and I'm going to do that again this quarter. Credit quality remains strong. NPAs not guaranteed by the U.S. government, decreased $14 million to $52 million. The resulting nonperforming assets to period-end loans and repossessed assets decreased 6 basis points to 20 basis points. Committed criticized assets decreased this quarter, remaining very low relative to historical standards. We had net charge-offs of just $1.9 million during the quarter, averaging 3 basis points over the last 12 months.

I'll reiterate that the limited charge-offs we've seen, show no pattern or concentrations that raise concerns about specific business lines or geographies. And I would also note proactively that we have virtually no exposure to private credit facilities.

Over the long term, we do expect credit metrics to normalize. In the near term, we continue to expect net charge-offs to remain below historical averages. No provision was required this quarter. Our provision benefited from the favorable impact of higher projected oil prices in our energy portfolio and improved overall credit quality. This was offset by loan growth and a modest downward revision to economic forecast assumptions. Our combined allowance for credit losses is a healthy $323 million or 1.23% of outstanding loans. Overall credit performance this quarter was exceptionally strong.

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

Thank you, Stacy. Turning to our operating results for the quarter on Slides 9 and 10. Fee income remained solid this quarter despite the volatile market environment and macroeconomic backdrop of the quarter.

Fees declined $5.1 million sequentially following a very strong fourth quarter. Fee income totaled $209.8 million, exceeding 3 of the past 4 quarters and underscoring the underlying strength of our fee-based business in any market environment.

Total trading revenue, which includes trading-related net interest income, increased modestly to $34.7 million from $34.1 million in the prior quarter. Customer hedging revenue grew $1.1 million as our energy customers predictably increased their hedging activity when higher short-term crude oil prices presented themselves. Investment banking revenue, which includes investment banking and syndication fees, decreased $4.1 million after delivering 2 outstanding quarters. Results reflect the normal seasonality of this business. with a quieter first quarter before activity begins to build in the second quarter.

I would note that the first quarter of 2026 is the strongest first quarter syndication activity on record. This result represents a 40% increase from the same quarter a year ago. Mortgage banking revenue grew $2 million linked quarter with higher production and refinance activity.

Turning to Slide 10 to discuss our asset management and transactions businesses. Fiduciary and asset management revenue delivered strong results, contributing $66.5 million to revenue. This was the second strongest quarter on record, only surpassed by the prior quarter. As a reminder, the prior quarter included higher-than-usual transaction-related fees. AUMA declined $3 billion to $123.6 billion, driven by lower market valuations and normal seasonality.

Transaction card revenue continued its trend of record-setting results, contributing $32 million to revenue. These results demonstrate the strength of this franchise, which has been created through sustained momentum and reliable execution.

Taken together, our fee income performance this quarter reflects disciplined execution and the strength of these businesses even amid shifting market conditions. The overall foundation remains solid and continues to support consistent fee generation.

With that, I'll hand the call over to Marty to cover the financials.

Thank you, Scott. Turning to Slide 12. Net interest income decreased $2.7 million and reported net interest margin declined 8 basis points. Excluding trading, core net interest income decreased $4.8 million and core margin decreased 7 basis points.

We continue to expect margin expansion over the course of 2026. Fixed rate asset repricing and loan growth were positive drivers for this quarter and are expected to persist. However, we saw several small negatives impacting the quarter, all at the same time. Noninterest DDA declined with Q1 being the seasonal low point. Day count, of course, loan fees were down sequentially. SOFR spreads were abnormally wide in Q4, and we benefited from that in Q4, but spreads returned to normal in Q1 and drove some compression sequentially. Funding costs for counterparty margin posted to exchanges for energy derivatives had a small negative effect.

And lastly, we saw the full quarter impact of the sub debt issued last November. Each of those items had 1 or 2 basis point negative effects individually, which accumulated to overcome the positives of loan growth and fixed rate asset repricing in the first quarter.

Turning to Slide 13. Total expenses decreased $6.9 million, producing an efficiency ratio of 63.2% for the quarter. Personnel expenses were down $11.6 million. Normal increases from payroll taxes and merit increases were more than offset by lower incentive compensation as well as the benefits of the realignment actions we took in late 2025.

Non-personnel expense increased $4.7 million. However, during the fourth quarter, we experienced a $9.5 million benefit from the updated FDIC special assessment. Excluding that prior quarter benefit, non-personnel expense decreased $4.8 million, largely related to lower professional fees.

Slide 14 provides our outlook for full year 2026. On loan growth, we continue to produce strong results. Our pipelines are healthy and borrower sentiment in our footprint remains upbeat. We expect to see loan growth near 10% for full year 2026. Our guidance for total revenue has not changed. We expect growth to be in the mid-single-digit range. The mix of that revenue between NII and fees is somewhat rate curve dependent as trading income can shift between the 2.

Our current forecast reflects no rate cuts in 2026 versus the 2 cuts reflected in our prior guidance. Our NII expectations for 2026 are now slightly lower at $1.42 billion to $1.45 billion, and our fee income expectations are now similarly higher at $820 million to $845 million. We continue to anticipate the growth rate for expenses to be in the low single digits. This should result in a 2026 full year average efficiency ratio in the 63% area.

We expect 2026 provision expense to be in the $15 million to $35 million range. Portfolio credit quality continues to be exceptionally strong, and we see no tangible evidence of credit normalization. Our guide does allow for some amount of normalization later in the year.

Lastly, I'll note that Visa announced on April 13 that its second exchange program for Visa Class B shares has officially commenced. This allows us to monetize 50% of our remaining Visa B shares. We currently hold the equivalent of approximately 190,000 common shares and monetizing half that position would equate to roughly a $29 million pretax benefit based on Visa's April 13 closing price of $309 per share.

While this potential gain is not reflected in our guidance, we expect to participate in the exchange and recognize a gain based on the market value at the time of the exchange or disposition.

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 Instructions]. Your first question comes from Michael Rose with Raymond James.

Maybe, Marty, if we can go back to the margin, it seems like there was just a confluence of factors this quarter that drove the compression. But I think if I heard you right, you'd expect margin kind of expansion from here. Can you just give us some details behind that, what you'd expect in terms of deposit betas as we move forward, loan pricing and fixed asset repricing opportunities, just kind of the puts and takes as we kind of contemplate no rate cuts this year.

Sure. You bet. So as you think about each of those factors, the one that will be durable, has been durable and will continue to be durable is the fixed rate asset repricing. You'll see both bond portfolio and fixed rate loan portfolio continue to pick up spread there. Deposit betas, the competition in the market is kind of like it's been for the last few quarters. So without rate moves, I don't think you're going to see a lot in the betas. But to the extent that we have incremental rate moves, we'd still see our cumulative down beta has been 66% in deposits.

We'd continue to see that play out as it would relate to future rate moves to the extent you have them. A couple of the things that affected this quarter, the loan fees and the DDA, you'll see both those. What's typical is for you to see growth in those 2 components kind of in the back half of the year. And so you'll see some support there as we get into 3Q and 4Q.

Loan competition, we've seen some of that. I mean, it's always competitive. We've seen some incrementally competitive behavior at the kind of high end of the credit size and the very strong end of credit quality spectrum in the investment-grade territory, but not enough to really move the needle in terms of this quarter. So we'll kind of continue to watch that. But all those components are part of what give us confidence in the trajectory of margin.

One thing I might add on margin, if you think long term, one thing you can do just really simply to get -- give yourself some perspective on where ultimately that lands, if you just take our 2.90% margin that we printed this quarter and take both the available for sale and held-to-maturity securities portfolios and rerun that this quarter with those at their kind of mature rates where we're replacing at about 4.50%, that recasts our margin at just a little over 3.15%. And while it will take some time to get there, that gives you a little perspective on what the really long -- big picture and what the long run looks like for our margin expansion story.

Marty, that's great context. Very, very helpful. Maybe just as my follow-up, you mentioned the Visa Class B period has now commenced. I think you said about half of that position would equate to a roughly $29 million pretax benefit. Is the plan to monetize half of that? And then would you look to potentially repurchase shares with the proceeds? Or historically, you've used some of these gains to either pay down debt or repurchase shares, things like that. Just trying to better understand what the plan of action would be for those shares.

Yes. So our expectation is that, that program will officially start transacting shares later this quarter, and so we'd be able to recognize that gain in Q2. And we have not yet determined exactly the disposition of what we'll do with the proceeds. But all those avenues are on the table for us. But at this point, we just look forward to being able to capture that gain.

Michael, we'll let the year play out and kind of see what -- this is Stacy. We'll let the year play out and kind of see what opportunities may unfold to, if you will, reinvest those gains. If you recall, when we did the vis-a-vis before, there was some really kind of good opportunities in our investment portfolio to get really good IRRs by selling securities and losses and then essentially using those gains to do that and keep earnings relatively flat as a result of that, our run rate earnings relatively flat. That equation isn't as compelling this time. The IRRs aren't very good relative to where they were before.

Obviously, the unrealized losses in the portfolio are much smaller today than they were when we had this opportunity before. The other piece that we've looked at historically is contributing those to our foundation. There's been some changes to kind of corporate tax policy that makes that a little bit more challenging to do and get the tax benefit for it. And so for now, it's kind of all of the above in terms of options that are on the table, including do nothing. So we'll see as the year unfolds if we want to invest that gain or if we just don't see an opportunity that merits the return profile that we should consider there.

Your next question comes from the line of Jon Arfstrom with RBC Capital Markets.

I guess I wanted to ask you a little bit about the loan growth environment, Stacy. Can you talk a little bit about the general business drivers, just kind of the general business balance drivers? And then on energy, you used the term not yet, in describing energy clients seeking to add production. What do you think needs to happen there for that to show a little bit more of a growth profile?

Yes. So let me start with just -- obviously, the loan growth was broad-based by geography, by loan type. You know that we've been exerting significant effort around core C&I. Really, really excited to see that expansion continue. We continue to invest there. We're excited about what we see the future there as well. Obviously, it's been nice to see a little bit of a bounce back on the energy side. We kind of troughed, I think, around this time last year, and we've been stable to increasing since then.

I think if you look at where it would have to go for folks to continue to drill, I mean if you look -- I looked at rig counts, I mean, rig counts are down from last week. Rig counts are down by over 40 rigs from this time a year ago. And so my view generally is you're going to have to have out the strip. I think the folks are awfully focused on the prompt month or the near spot price But it's really the strip price out 2 to 3 years, really 3 years that's going to create the incentive for people to drill for oil.

And so if you look out 3 years, oil is below $70, and I think $70 is kind of a magic number. And so my view is you're not going to see folks drilling unless they can lock in a return with oil above $70 out that long. And so obviously, things are volatile, things could change and the curve has moved a lot. But I think it's more important to look at the curve 3 years out than it is to look at the prompt month in terms of what driller behavior will look like. So I don't see -- obviously, you see in the rig counts, there's no impetus right now for folks to drill given the backwardation of the curve, that could change, but we're not seeing that today.

Yes. Okay. Yes. Fair enough. And then, Marty, for you, just a follow-up on Michael's deposit beta question. You had a nice step down in the interest-bearing deposit costs this quarter. Just curious how much more room you think you have in an environment without any further cuts?

Yes. There's probably still a little bit of room. But as we've been chipping away at that over the quarters, it's a declining returns sort of situation. But I think that there's still a little bit more there, but not as much as there was clearly a year ago relative to where short rates are.

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

Stacy, I wanted to ask, there's been a lot of merger activity in your markets. Are you seeing opportunities for team lift out something that you've done successfully in the past?

As you know, that's a strategy for us. Some of the periods of most rapid growth in our history have been when there's been broad dislocation that's created from mergers and acquisitions. You have both employees and clients of those institutions who didn't choose to be a part of that institution. And so they may select to go somewhere else. So what I would tell you is, obviously, we see it. It's prevalent in our footprint, and you can assume that we're being very active in attempting to prospect for both employees and customers in this environment, but nothing specific to report today.

Okay. And then, Marty, you guys have always maintained really strong capital levels. I was wondering, could you quantify the estimated impact and benefits from the new regulatory proposals?

Yes. Peter, we don't, at this juncture, have a number yet, but it's definitely going to be a benefit to us both on the loan book and particularly in the real estate secured loan book, those LTV parameters, I mean, you know how we underwrite, we do a pretty good job of that. So because of where our LTVs and FICOs and so forth are, that's going to be a benefit to us on RWAs and the loan book. And then actually in the trading book, we'll get a little benefit there, too, based on our read at this point.

Your next question comes from the line of David Chiaverini with Jefferies.

So back on deposits, I think you mentioned that the noninterest-bearing DDA deposits should bottom in the first quarter. I was curious about the driver of the rebound in the second quarter and potentially the magnitude. And then should this rebound continue through the year?

Yes, David, a little bit of context on that. So DDA was pretty steady for us last year and kind of that rate-seeking behavior that you've seen in prior years that have kind of come to an end.

And what's difficult for us is to see a little bit of seasonal increase at the end of the fourth quarter, which we did see and then a seasonal decrease in the first quarter, which we did see -- we did also see a little bit of our commercial customers, kind of middle market customers just deploy some of their cash into their businesses, and that's certainly healthy for business growth. But if you look at -- you've had several years where you haven't really had a nice normal history of DDA to look at. But what is typical for us and to some extent, the industry is to see DDA climb more in the back half of the year than the front half as people build cash flow. So that's our expectation for the year.

Great. And then on to mortgage finance. So we did see balances grow nicely on a percentage basis here, and I know that you're still building that business. Previously, you mentioned about getting to $1 billion in commitments by the end of this year. But now that the forward curve, we know what's happened there, with a higher for longer environment, are you still comfortable with that $1 billion commitment level?

Yes, I think so. I think what we talked about was by the end of the year being at $1 billion in commitments with roughly 50% of that committed outstanding. So given where we are in kind of the newness of the business for us, I still feel good about that. Obviously, there's going to be some seasonality in this business.

Second and third quarter tend to be pretty good and then just like the mortgage business. So it will track that. And so we're not going to be perfect there on the estimate, but I still feel good about that.

Your next question comes from the line of Matt Olney with Stephens.

Just want to go back to the liability side of the balance sheet. I think in the deck, you mentioned you moved from wholesale deposits into more wholesale borrowings, I think, this past quarter. I was hoping you could just expand on that strategy.

Yes. So let me talk about that a little bit, Matt. Good question. So if you go back to Q4, when you had a couple of rate cuts and some of the market spreads got a little dislocated, we were able to find some deposits, they're technically deposits, but they're wholesale in the way we get them. And so we put on a little over $1 billion of deposits in Q4 at prices that were actually better than wholesale funding, which is rare, but we found that opportunity. And obviously, we took it.

And so we mentioned that would probably run off in Q1 when we talked on the call, and it did. So that ran off in Q1. And so that's the main driver of the deposit cost decline that you see Q4 to Q1 is just that opportunistic wholesale deposit trade we did in Q4 running off. So it's kind of that simple.

Okay. Yes. And then just, I guess, as a follow-up, going forward on that same topic, how should we think about funding the loan growth from here as far as core funding, wholesale deposits versus the borrowings?

Yes. Yes. So at the loan-to-deposit ratio we have, we certainly have some flexibility on how we do that. Our expectation for this year is to see loan growth be as we guided, very good and consistent with our history. Deposit growth, probably be a little bit less than that, but we will see deposit growth this year. So we can end with a little bit lower or a little higher loan-to-deposit ratio at the end of the year.

But going forward, generally speaking, loan growth and deposit growth are going to be somewhat aligned, just knowing that we've got flexibility that many others don't to let that float around a little bit.

Your next question comes from the line of Jared Shaw with Barclays.

A lot of them have been answered. But I guess, could you -- Marty, maybe just give the dollar impact of the loan fee reduction quarter-over-quarter that you had called out?

I don't have a -- it's basically 2 basis points, and that's something that quarter-over-quarter, just 2 basis points, and that's quarter-to-quarter, there's a little bit noise in there. But broadly speaking, that's year-over-year a good growth area for us.

Okay. And then are you seeing -- what are the trends that you're seeing in customer hedging activity as we're going through 2Q? Is that staying pretty strong?

Yes, this is Scott. We have, obviously, with the volatility in the global setting, it creates some spurts of activity on the energy side. We have seen less activity on our interest rate side because we've had relatively stable rate environment. But we're continuing to see good demand really across all the hedging opportunities with the biggest focus being on the energy side.

Okay. And then I guess finally for me, when we look at the guidance for provision for the year, should we think that, that's sort of through the next 3 quarters, equal contribution? Or is that a little more back-end weighted with growth?

Yes. You don't want to get too cute with quarterly, but certainly, the way the portfolio looks right now, it's very logical to think that there's a little back-end weighting there. Just the portfolio today just looks so clean. And you can always have a little bit of visibility in the next quarter or 2. And after that, it's a little harder. So I think that's the right way to think about the provision.

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

I wanted to start on expenses. They are very well managed. It was good to see the run rate come in following some of the actions you've taken in the fourth quarter. You touched the efficiency ratio down a little bit. Is there conviction that you could be on kind of the lower end of the stated range? Or is it too early to tell just given some of the hiring question marks?

Yes. Well, we feel really good about how Q1 turned out just in terms of that nice run rate that, that displays for what the first quarter had in expenses. And just in terms of how that plays into the second quarter, basically, pretty straightforward. I mean you'll have a little bit -- the rest of the merit increase will flow through in the second quarter, but then that's -- there's some offset there for the -- how payroll taxes play out.

And we're always looking to hire producers, as you know, but those are kind of the main things you point to in how that transpires. And so we feel pretty good about the guidance of 63 area.

Got it. And then maybe last for me. I know you mentioned oil prices factored into the ACL. Can you just walk through how that's included in the all CECL model? And is there any risk that if oil prices normalize lower, it could require a catch-up provision in the future?

Yes. So here's the way to think about that. So higher oil prices means the credit quality -- that's supportive for the energy loan book, both the valuation of the collateral and the cash flows in the business. So that's a nice positive, and that's easy to think through.

But there's also the impact that higher input prices to basically the bulk of the C&I book, there's a little bit of extra expense load borne by that part of the portfolio. And so we recognize that as well. And so those are kind of natural offsets if you think about how we manage the CECL book. And so there's probably not a whole lot of risk of on a net basis of that being a particular driver that would drive an adverse outcome in the future.

Your next question comes from the line of Brett Rabatin with StoneX.

I wanted to go back to guidance and just talking about the fee income guidance. And I get that the change is partly a function of interest rates and how you guys account for the income.

But wanted to see, it just seems like the $820 million to $845 million seasonal investment banking in the first quarter, it seems like that could have been a higher number. Is there -- are there any other businesses that maybe you're expecting to not grow this year? Or are there any other factors in that?

Brett, this is Marty. So I'd give you the following thoughts. We feel very good about the fee business. That group, the trajectory there is really good. We feel very confident in the history there and the outlook in really all those businesses across the board, and we can talk through each one if you want.

I think it's important to think through that for the trading business, part of that revenue stream is in the fee line and part of that revenue stream is in the NII line. And so you really kind of have to combine those 2 when you think about the veracity of all the fee businesses.

And so hopefully, that will kind of help you think through any changes in multiyear -- if you're looking at a multiyear trend, some of that business -- some of that revenue has moved into the NII line. You kind of have to recombine that when you think about that business.

Okay. And then, Stacy, you talked about producer adds and possibly adding people with disruption. Would you guys happen to have a net producer add number for the quarter?

That's not the way we think about it. We think about adding a talent. We don't have a goal around adding X number of net new producers each quarter. We have a perpetual goal of adding the best talent in every market that we're in. And those discussions have been ongoing for years in many cases. And so as we have an opportunity to add talent, we do it. And if it's not the A talent in the market, then we don't. And we don't track it that way or think about it that way. And so I don't have anything to report on that.

Okay. Fair enough. If I could sneak in one last one. The decrease on the provisioning for the year despite a little bit better loan growth expectations. I know, Stacy, late last year, we had the conversation about eventually credit will normalize, but it doesn't look like '26 was going to be that year. Is the reduction -- is that just better visibility that that's actually the case that '26 is going to continue to be fairly benign and you're just not seeing anything at all?

The reduction is pretty small, and it's really just a reflection that we've already got 1 quarter behind us now. And so -- when I was in credit, I used to tell people the crystal ball was pretty good for 3 to 6 months, and then it got really foggy after that. And I think that's just a reflection that we've got 1 quarter in the bag. And so we just have just a little bit more visibility going forward. And so we brought the guidance down there just a little bit, but it's not that different, really.

That concludes our question-and-answer session. I will now turn the conference back over to Stacy for closing comments.

To wrap up, the first quarter has set the stage with solid core operating results, diversified loan growth, resilient fee performance, excellent credit quality and disciplined expense management. We're off to a strong start in 2026, and we're well positioned for growth as the year progresses. 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 further questions at [email protected].

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Greetings. Welcome to BOK Financial Corporation's Fourth Quarter and Full Year 2025 Earnings Conference Call.

[Operator Instructions] And as a reminder, this conference is being recorded.

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

Good afternoon, and thank you for joining our discussion of BOK Financial's Fourth Quarter and Full Year 2025 financial results. Our CEO, Stacy Kymes, will provide opening comments and cover the loan portfolio and related credit metrics. Scott Grauer, Executive Vice President of Wealth Management, will cover our fee-based results; and our CFO, Martin Grunst, will then discuss financial performance for the quarter as well as our forward guidance .

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 Stacy Kymes, who will begin on Slide 4.

Thank you, Heather. We appreciate you joining the call this afternoon. We are pleased to report earnings of $177.3 million or EPS of $2.89 per diluted share for the fourth quarter. Full year 2025 earnings reached $578 million or $9.17 per diluted share. This marks a record high earnings per share for both the quarter and the year. Throughout the year, we delivered solid growth and continue to invest in our strategy to create long-term sustainable shareholder value while maintaining a strong and disciplined approach to risk management.

During the year, we achieved solid loan growth, expanding loan balances by more than $1.5 billion or 6.4%. This growth was broad-based, both in terms of geography and lending segment. After the economic pause in the first quarter of the year, loans grew at an annualized rate of 11% over the last 9 months of the year. We delivered growth in net interest income and expanded our net interest margin in every quarter of 2025. We maintained a loan-to-deposit ratio in the mid-60% range all year, positioning us for future growth and continued pricing optimization.

Our fee income engine, which continues to be a differentiator for us, produced consistent strong results once again this year, contributing $801 million to revenue. This represents a peer-leading 38% of total revenue. Our credit quality remains excellent. We've maintained a combined allowance of 1.28% of outstanding loans and our annualized net charge-off rate for the year was only 3 basis points. Our strong performance across business lines has been recognized by the market as we have outperformed the KBW Regional Bank Index in total shareholder return over a 1-, 3-, 5- and 10-year period by 7%, 3%, 42% and 51%, respectively. I'm proud of our performance this year and have strong confidence in the path ahead for our organization.

With that, I will turn attention to our fourth quarter results. As I discuss the quarter, you'll hear me emphasize broad-based growth. This is a testament to the work we've done over many years to position ourselves to deliver exceptional value to our shareholders. During the quarter, outstanding loan balances grew $786 million or 3.2% sequentially. The growth was broad-based as our core C&I portfolio and our healthcare and energy portfolios all posted strong results this quarter, expanding 5.3% in total. Growth in Texas specifically was exceptional, representing $561 million of total fourth quarter growth. Net interest margin expanded again this quarter, increasing 7 basis points. Fee income was very strong, exhibiting again broad-based growth across our various lines of business. Total fee income increased 5.1% sequentially.

I'd like to call out our fiduciary and asset management and transaction card lines of business, both posted not only record quarter for revenue but also record full year results. AUMA continued its impressive trajectory this quarter, surpassing $126 billion and setting a new record high. Our capital levels remain robust with tangible common equity of 9.5% and CET1 at 12.9%. Given these strong capital levels, we also had the opportunity to return value to shareholders by repurchasing over 2.6 million shares at an average price of $107.99 per share during the quarter.

Slide 6 provides a closer look at our loan portfolio. Total outstanding loans grew 3.2% this quarter. Our core C&I loan portfolio, which represents our combined services and general business portfolios, grew 5.5% sequentially. Core C&I loan growth is inherently relationship-driven, requiring time, focus and disciplined execution. We've seen 3 consecutive quarters of growth in this business, reflecting the progress from those sustained efforts.

Healthcare loans increased 3.3%, driven by strong origination activity and funding of prior commitments. Healthcare production remains robust and the cyclical payoffs we experienced in the first and second quarters of this year have moderated to more typical levels.

Energy loans posted strong results, growing more than $200 million. This growth was driven primarily by higher utilization rates across the existing portfolio as well as solid new loan origination. This segment experienced higher-than-normal payoff activity during the early parts of the year, largely driven by industry consolidation. This activity has moderated, resulting in more normal payoff rates during the quarter.

Our commercial real estate business decreased 1.4% compared to the prior quarter but has increased 12.1% on a year-over-year basis. This small quarter-over-quarter decline was driven by a moderate level of normal refinancing into the permanent market. We saw a strong quarter of originations in commercial real estate and have a robust pipeline in this space.

Let's move to Slide 7. Consistent with the last couple of quarters, credit quality is excellent, so my comments will be brief. Nonperforming assets not guaranteed by the U.S. government decreased $847,000 to $66 million. The resulting nonperforming assets to period end loans and repossessed assets decreased 1 basis point to 26 basis points. Committed criticized assets increased this quarter but remained very low relative to historical standards.

We had net charge-offs of $1.4 million during the quarter, averaging 3 basis points over the last 12 months. Importantly, the limited charge-offs we've seen recently show no patterns or concentrations that raise concerns about specific business lines or geographies. Over the long term, we do expect that credit normalization will occur. In the short term, we expect net charge-offs to remain below historical norms. No provision was required this quarter as the impact of loan growth was balanced by an improvement in the economic forecast. Our combined allowance for credit losses is a healthy $327 million or 1.28% of outstanding loans. Our results in credit continue to reflect a highly disciplined approach, supported by consistent execution and a strong track record over time.

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 $10.4 million on a linked-quarter basis, contributing $214.9 million to revenue, reflecting an excellent quarter. The 5.3% growth in these businesses is an exceptional outcome. Total trading revenue, which includes trading-related net interest income was $34.1 million, growing $4.3 million over the prior quarter. Trading fees were up $5.4 million, driven by increased trading volumes for agency mortgage-backed securities. Investment banking revenue, which includes investment banking and syndication fees decreased $1.9 million. However, this is following a record high for these businesses. Investment banking revenue of $14.3 million is still a remarkable quarter.

Turning to Slide 10. As you know, recurring fee income-based businesses are among the most resilient, valuable and sought after in the industry, achieving a $7.1 million linked quarter increase in asset management and transactions revenue reflects not only the strength of our business model but also the dedication and expertise of our team. It was a banner year for both our fiduciary and asset management and transaction card businesses. Fiduciary and asset management revenue grew $4.5 million, led by asset growth from customer expansion and increased market valuations, along with transaction management fees.

AUMA grew an impressive $3.9 billion to $126.6 billion, eclipsing last quarter for the highest on record. Transaction card revenue increased $2.1 million, reflecting growth in volume and increased customer relationships. Overall, these results underscore the strength and diversity of our fee-based businesses, which continue to deliver consistent growth and resilience across market cycles.

With that, I'll hand the call over to Marty to cover the financials.

Thank you, Scott. Turning to Slide 12. Net interest income increased $7.6 million and reported net interest margin expanded 7 basis points. Excluding trading, core net interest income increased $8.7 million and core margin grew 6 basis points. Drivers of core margin expansion are largely consistent with those for recent quarters, including fixed rate asset repricing, beneficial repricing of deposits and loan and deposit growth.

In addition, Q4 net interest margin experienced a small net benefit from SOFR spreads and shifting some existing wholesale borrowings into wholesale deposits. That benefit was partially offset by the impact of our subordinated debt issuance. When those funding market spreads return to normal, we would expect to see those wholesale deposits run off and return to normal wholesale borrowing sources.

Within the other gains category, I'd like to point out that we exited a merchant banking investment in the fourth quarter, recognizing a $23.5 million pretax gain. We've included Slide 22 in the appendix to provide more color on notable items during the quarter.

Turning to Slide 13. Total expenses decreased $8.7 million. Personnel expenses were down $3.6 million. Cash-based incentive payments were higher driven by increased loan production and new business volumes. However, that was more than offset by seasonal declines in employee benefit costs and by lower deferred compensation costs. As you know, deferred compensation costs vary quarter-to-quarter but the amount is consistently offset in the other gains line item within the other operating revenue section. Non-personnel expense decreased $5.1 million.

During the quarter, the FDIC updated their estimate of the special assessment and other adjustments were made, resulting in a $9.5 million benefit. This was partially offset by higher professional fees and data processing costs.

Slide 14 provides our outlook for full year 2026. We expect end-of-period loan growth to be in the upper single digits. This reflects a continuation of the growth we've seen in our existing portfolio, which has grown above a 10% annualized rate over the last 3 quarters and meaningful contributions from our new mortgage finance segment. We expect net interest income to be $1.44 billion to $1.48 billion, which assumes 2 cuts in the latter half of 2026 and a slightly steeper curve. Our rate curve assumptions are broadly consistent with implied forwards.

Fee income is expected to be in the $800 million to $825 million range. There are 2 drivers here. First, we expect our portfolio of fee-based businesses to grow revenue at a mid-single-digit growth rate in 2026. And second, we expect a steeper curve in 2026 to shift some of the trading revenue out of fee income into net interest income as we have discussed on previous calls.

For total revenue, we expect growth in the mid-single-digit range. Please note that our baseline 2025 total revenue number of $2.18 billion includes NII, fees and commissions as well as the other gains and losses in other operating revenue category. We anticipate the growth rate for expenses to be in the low single digits. We've been very thoughtful about aligning our expense base with the future needs of the business, investing in growth areas and focusing on efficiency in more mature areas. This should result in a 2026 full year average efficiency ratio in the 63% to 64% range. This ratio should migrate lower during the course of the year as revenue continues to grow.

We expect 2026 provision expense to be in the $25 million to $45 million area. This reflects our upper single-digit loan growth expectation and the very strong starting point in credit quality that we can see today. While we see no tangible evidence of credit normalization beginning in our portfolio, the guidance does allow for at least some amount of that eventual normalization to begin later in the year.

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 Instructions] Your first question comes from the line of Peter Winter with D.A. Davidson.

I was wondering, the loan growth has been really strong, and you've got a positive outlook for loan growth. But could you give a little bit more detail to the drivers to this upper single-digit loan growth? I noticed that consumer loan growth did moderate in the fourth quarter and commercial real estate was down but you talked about the refinancings to permanent finance but strong pipelines. Just some of the drivers, including mortgage banking, mortgage warehouse as well for the loan growth.

Sure, Peter. This is Stacy. I think the good news about the loan growth really over the last 9 months is how diverse it's been. It's been diverse by geography. It's been diverse by lending type. significant growth, obviously, in loans in the fourth quarter. About $100 million of that was driven by mortgage finance business, the change from third quarter to fourth quarter. So it contributed in a meaningful way but it wasn't the main driver. It was diverse across all the areas.

I mean if you think about loan growth for the year, early in the year, energy was a headwind. Here in the fourth quarter, it became a little bit of a tailwind. In the fourth quarter, commercial real estate was a bit of a headwind. But for the year, it still was up solidly double digits. I mean I think that's the kind of the beauty of what we've created here is we've got lots of diversity, both by lending style and type as well as by geography. And it ebbs and flows each one over a period of time. It's not necessarily all linear but has worked very well together.

I mean, I'd love to give you the main driver but there's not a main driver. It's very diverse across particularly the C&I world, where, as you know, we've made very significant investments over the last 3 years, both in terms of staff and expansion. And so we're really seeing the benefits of that.

Got it. And positive surprise on the level of share buybacks in the fourth quarter despite strong loan growth and where the stock is trading. But how are you thinking about future share buybacks? And do you have a targeted CET1 ratio?

Yes, Peter, we -- this is Marty. Yes, we don't really have a targeted ratio. I mean, as you know, we've got a long history of our share buyback activity being opportunistic and the Q4 number that kind of connects to the sub debt issuance we made. So as you think about us share buyback going forward, just reflect on our long-run history of doing that in an opportunistic and shareholder value-oriented manner.

Your next question comes from the line of Michael Rose with Raymond James.

Maybe just a follow-up on Peter's question of the buyback. It looks like on November 7, there was 2.2 million shares traded. I was just curious if you guys did an ASR or if there's anything like that. I know you just talked about the sub debt issuance. But if you can talk about that and then maybe also address the change in short interest during that period. It was a pretty big jump from kind of the 4% range to around 12% or 13%.

Yes, Michael, if you look at the Q4 number, we did a portion of that share buyback in Q4 kind of regular way. But as you noted, the -- a portion of that is related to ASR, and that was done right in that early November time frame, which explains what you see.

Okay. So I assume that was with one of the institutional shareholders that owns your stock. Is that fair?

That's generally not how you do ASRs.

Got it. Okay. Maybe just moving on, you guys had really good deposit growth this quarter, especially in the IB category. Obviously, I understand the guidance but can you talk about the competition for deposits and how we should think about not only growth but the mix and deposit betas as we move through the, hopefully, 2 cuts this year.

Yes. So a couple of things about deposits. So just on a couple of questions there. So on competition, I'd say that the environment is -- it's always competitive. It is today. It has been for a long time. But there's nothing in particular that's irrational in our markets that we'd point to. It's just sort of competitive at that high normal level. Growth this quarter, we felt very good about deposit growth all year long. I would just point out that a portion of the growth you saw in fourth quarter was just the wholesale deposits that for odd reasons relating to the rate cuts, it just turned out there were some wholesale deposits available that were cheaper than the wholesale -- normal secured wholesale borrowing that we would use. And so we just replaced that. So at some point, that washes out and don't be surprised if you see that happen in the first or second quarter when those spreads kind of go back to normal.

But as you look forward into 2026, we expect to grow loans well. We expect to grow deposits well. The loan growth will probably exceed the deposit growth. That would be normal for us. And given the loan-to-deposit ratio we have to start with, we're very comfortable with that drifting up a little bit over the year.

And then lastly, on deposit betas, we've had very good performance on deposit betas in the mid-60s here for deposit beta and upper 70s on interest-bearing liability beta and those numbers are cumulative down beta cycle. And we expect that as we get into the rate cuts later in 2026 that we have performance right on top of that. We feel very comfortable with being able to continue with those levels for those cuts.

Your next question comes from the line of David Chiaverini with Jefferies.

So I wanted to ask about fee income. Clearly, very strong fees here and the growth mid-single digit, excluding trading. Can you give some comments on what your expectations are on the trading front and drivers for overall fees?

Yes. So let me start here. And so I'd say that our intention here is to talk about both trading -- the trading portfolio of businesses, we expect mid-single digit, and that's really very long run run rate. At times we're above that but that's kind of how we see those businesses in any given business can be a little higher or lower in a given year but that's how we see that portfolio. And that -- when I say that, I'm including trading -- total trading revenue, which includes the NII and fees part with the same expectation there that, that will grow mid-single digit and certainly market opportunities where that could be notably higher.

Let's see, anything you'd add to that, Scott?

Yes, this is Scott. So I would say that in addition to -- I think Marty frames it well at the top of the house, I think that what we're seeing is a continuation of really the momentum that we built throughout '25. We had a good first month of '25 and then the last 2 months of the first quarter were challenging for all the fixed income markets. And we stabilized after that, and I really think returned to more of our expected trend lines in terms of our trading volumes activity. And we've continued to see the demand really coming from our financial institution client base as well as asset managers have kind of returned to more normalized demand, particularly in the mortgage-backed securities. And then we've seen continued strength in the municipal sector as well.

So I don't think that there's anything extraordinary that occurred but really more of a return to normalized levels of demand. And then the total revenue, as Marty articulated, both the fees and the NII out of that activity, we feel pretty good about and feel constructive in terms of the trends that we're seeing build back to our more normalized rates there.

Yes, it was a good fourth quarter and good fundamental trends in the business.

Great. And then shifting over to the expense side of things. Can you talk about the outlook looks really good on the efficiency side with the guide of 63% to 64% versus the 65%. Can you talk about the drivers there? I know mortgage finance, you're going to see some revenue catch-up versus the expenses that came through in 2025. But can you talk about that and other drivers of this strong efficiency outlook?

Yes. So you're right. Part of that is just continued good momentum on the revenue side. And then part of that relates to some work that we completed in Q3 and Q4 of 2025 to make sure we've got our workforce and other expenses invested in the areas that we want to have them invested in. And so as you go from Q4 to Q1, you'll actually see some reduction in expense levels in the personnel line item as a result and the fee -- professional fees line item, Q4 to Q1, we would expect to see some benefit there as well.

And I might just -- this is Stacy. I might just add on there a couple of points. I think, number one, we think about things for the long term. We're not focused on next quarter. And we've made several long-term investments over the last several years about how we think about growing the business. Certainly, the expansion in San Antonio was a big investment for us. The investment in mortgage finance was a big investment for us. And obviously, you lead with expenses there, and it takes time for the revenue to catch up and those investments to earn a return. They're now beginning to do that, and so that's going to show up in the results. We have taken actions to try to manage that and demonstrate to the market that, look, we can manage these expenses but we're going to invest. And as those investments mature, you'll be able to see that efficiency ratio come back to a level you're more accustomed to for us.

For us, given the mix of fee revenue, we're never going to be a 55% efficiency ratio type company because of our high mix of fee businesses. But we do think that the guidance we provided is very reasonable for us, and I think you should expect us to achieve that unless given the disruption in the markets that we see, there may be some opportunities for us to continue to be aggressive in talent acquisition. And should that opportunity come to fruition, we may obviously choose to do that, which may delay the kind of efficiency ratio falling.

But based on what we see today, we're very confident in our ability to let that efficiency ratio fall but there could be some things that very opportunistically come about that would allow us to build a better -- even better revenue future. And so we're not going to walk away from that to manage the efficiency ratio.

Your next question comes from the line of Jon Arfstrom with RBC.

A couple of follow-ups here. Stacy, you talked about $100 million in balances from mortgage finance in the fourth quarter. What kind of a contribution do you expect from that business in 2026 in terms of the balance sheet?

We're -- we think the number could be -- we could get to -- easily get to $1 billion in commitments by the end of '26, assume half of that's funded, probably do better than that, honestly. But I think that's easy to assume. A lot of these things, they happen. It's kind of -- they just take longer than you think that they will by 3 to 6 months. And so I'm trying to be a little bit cautious there to don't overpromise. But clearly, the trajectory there is very positive. The momentum that the sales team has is very, very strong, and we're just exceptionally pleased with how that business is progressing for us.

Okay. Good. That helps in terms of framing it. And then, Marty, for you, I asked a similar question to this last quarter but it seems like a decent setup for the margin for you. Do you expect the core margin to float higher? And can you share with us some of the repricing of the fixed rate loans and securities and how that might flow through '26?

You bet. Yes, yes. And you're right. We do continue to expect both margin and core margin will continue to expand into 2026. Fixed rate repricing is certainly a big driver there. And so it's about $700 million a quarter of securities portfolio that reprices up old rate to new rate. And as we go forward, that step-up is not what it was a year ago but I think that's maybe in the 60, 70, 75 basis point territory of that rate step up at least currently. And then fixed rate loan book, kind of similar story there, call it, $200 million a quarter on average, and that's probably more over 100 basis points of rate step up as those occur. And so that gives you a nice tailwind going into the year.

The 6 basis points in core margin we saw this quarter, there might be a little bit of reversion to the mean because that average has been more like 4.5 basis points. But we feel like that's still that -- there's legs to that driver there through 2026, you bet.

This is Stacy. Just to kind of confirm, too, I mean, the actual rate movements don't make a big difference to us, maybe rounding around the fringes. And our forecast or the guidance that we provided assumes are a couple of rate cuts that are in the back half of the year that don't really make much of a difference. What does make a difference to us is the steepening yield curve as to all financial institutions. We're not unique there.

And so you are beginning to see really some steepness to the curve or actually some shape to the curve, maybe not steepness but shape. And that's certainly helpful to us and other financial institutions as we think about 2026 and future periods as well.

Because that builds over time. So that steepness would continue on benefiting through 2027 plus.

Yes. It seems like a good environment.

Your next question comes from the line of Jared Shaw with Barclays.

Maybe just going back to the growth rate on fees and on the loan book. It feels like looking at what we've seen for the last 3 quarters that the guide for '26 seems very conservative. Is there some area where maybe you're expecting a little more pressure than we're expecting? I mean talking about 50% funded on $1 billion of commitments with mortgage warehouse, that's 1/3 of the growth that you saw on the whole balance sheet this year. Where should we think that maybe there's some pressure on growth?

Well, I think upper single digits is -- could be 7% to 9%. So I'm pretty confident in our ability to deliver that. I think that we want to convey to the Street what we believe we can deliver. And certainly, we'll do our very best to outperform that. But we think in this environment, particularly upper single-digit loan growth is a very positive outlier, and we'll continue to -- I think we're very well positioned. We've done a lot of work across lots of lines of businesses to be in a position to grow loans. You've seen that. I think we've grown at an 11% clip over -- annualized over the last 9 months. And that's with some headwinds and some tailwinds from various areas.

But I think that's going to continue. And that's what we don't know is will there be an unexpected headwind in an area that we can't put our finger on today. And so we think we can deliver -- comfortably deliver the guidance that we provided and hopefully, we can do better.

Okay. All right. Appreciate that. And then maybe shifting to the credit outlook. Obviously, credit has been great, and you sound like things are -- the outlook remains strong. Just as you look at your model, what would drive any incremental concern on credit or which would have more of an impact on potential credit concerns? Would it be oil prices, tariffs, inflation? I guess, where are you keeping an eye out more closely?

Yes, you're right. I mean I get teased a lot here internally about saying that credit is unsustainably good, and it seems like it's been that way for several years now. And certainly, in the short term, we think it's going to stay that way. The biggest driver for provision levels going forward will be loan growth and expected economic outlook. I mean those will be the 2 things that will drive higher or lower provision levels. And as long as the economic outlook remains strong, we're well positioned from an allowance perspective. And there will be a day that criticized and classified and nonperforming levels come up to a more normal level.

You can see in the investor presentation kind of where we were essentially pre-COVID. And we think that when it goes back to that level, it won't be that credit is going bad, it's just going back to normal. But we don't have some of the early indications that others may have, like we don't have low-end consumer and things like that, that you're beginning to see some weakness around. That's not kind of core to our portfolio. And so our portfolio is held in there very well. I think in the short term, it's going to continue to do that. And there's not just this easily identifiable thing that we think is the next thing to focus on there.

But we have a great credit team, a very seasoned experienced team and a great group of folks on the line who take risk management very responsibility. So we feel good about where we're at there.

If we see sort of an unchanged economic backdrop from where we are today and the loan growth that you're expecting, should we expect provisions in each quarter in '26 but maybe potentially still some downward pressure on the allowance as a ratio? Or what's the -- or you're going to have to provide for all loan growth from this point and we should think about that ratio as stable from here?

Yes. What I would go back to the guidance we provided. I'm not going to get into quarterly what would happen or what could happen. We've given you an outlook, a positive economic outlook, a range of loan growth and a range for provision levels next year, and that's our best estimate today. You've seen how we've handled it over time. And so you can certainly provide your own color to that but I'm not going to get more specific than that.

Your next question comes from the line of Wood Lay with KBW.

I wanted to start on the finance business. And longer term, as that business continues to grow, how do you plan to fund that business? Will it be core deposit funded based on a low loan-to-deposit ratio? Or as the volatility picks up, and will use broker deposits to help fund some of that?

Yes. That loan portfolio, like any other loan portfolio will be funded just by the broader funding mix, and you should expect that to largely look like it does today, where there's a portion of that, that's wholesale and a portion of that, that's deposits. This business will bring with it a decent amount of deposits but we've got a very strong funding profile and this particular asset class is very liquid. So it gives us a lot of different alternatives to use, and we'll just use the lowest cost, most sensible mix.

Got it. That's helpful. And then last for me, I wanted to ask a follow-up on the trading business. You mentioned the outlook there is mid-single-digit growth, but there are market conditions that would support much stronger growth. Could you just remind me of the market dynamics out there that would support faster growth in your trading business?

Yes. So this is Scott. So obviously, as mortgage origination activity and volumes in the mortgage sector, tend to add momentum and volumes in a declining rate environment. So this is one of those businesses that we enjoy higher growth rates in challenging economic times that are spawning lower interest rates. So in a declining rate environment where mortgage origination were to increase, that activity, given our -- we're fairly equal in terms of volumes and revenues from municipals and mortgage-backed securities, that mortgage-backed security, in particular, would benefit from lower rates as would refinancing activity in the municipal space. So as rates decline, those 2 segments of our trading book are beneficiaries.

The other thing I might add too, there is a lot of our clients are other financial institutions, and they've been reluctant to if you will, take losses in their securities portfolio. So as those portfolios get closer to par and there's fewer unrealized losses there, that's going to create a little bit more opportunity as well, we think, as we move forward.

Your next question comes from the line of Ben Gerlinger with Citi.

I was curious if we could talk through a little bit on the expense, Marty. It's a little bit myopic here, so I apologize but you said 3Q and 4Q had some expenses that were, let's call it, noncore reinvestment that kind of elevated the starting off point for '26. Is it fair to think like you were to level set all these core items is a little bit more of a mid-single digit going forward? I'm just trying to think about just underwriting the future given you guys have a faster pace of growth than the national average at this point?

Yes. Just in Q3 and Q4, it was small but there's a little bit of period costs related to some of the realignment we did. But that's not a material number in thinking about next year. But that is a little bit of a tailwind for us from Q4 to Q1.

Got you. Okay. That's helpful. And then in terms of just the mortgage kind of silo, I get that it's relatively new, so maybe you don't have the perfect line of sight at this point. But there's like a ballooning effect as the mortgage business improves generally on a seasonality basis. Do you expect something similar where -- or is it you're starting at such a low base, it's just kind of growth throughout and you have new customers adding and funding up the relative commitments. Like should we expect it to kind of peak in the roughly July time frame and then kind of wane thereafter? Or would you expect a little bit more linear growth throughout the year?

Given we're starting from essentially 0, I don't think you're going to be able to see the effect of that. And I think you're right, we see that somewhat intra-month as that business has natural ebbs and flows inside of it. But given our starting point here, I don't think it's going to be discernible. It's going to look like just pretty strong expected largely linear growth throughout '26.

Got you. If I could sneak one more in. I know the San Antonio expansion was -- it's a pretty big lift for everyone involved and it seems to be pretty successful at this point given the seasoning effect with the disruption throughout kind of Texas, I should say, or even just the Texas area at every contiguous state, would you expect to do incremental hires given opportunity in front of you? Or is it kind of a playbook that you're -- you already wrote it and we're going to ride it here?

No, I think you're exactly right. I think that if you look back in our history, some of the highest periods of growth for us has been when there's been the most market dislocation. And M&A is highly disruptive. It's disruptive to talent. It's disruptive to clients who were forced to go through a conversion that wasn't they're choosing. And so our intention is to be aggressive and take advantage of that dislocation as much as we can. But I suspect we're not the only ones with that strategy. And so that will be in and of itself a very competitive process. But we certainly expect in the markets where there have been significant M&A activity to be active from a talent acquisition and a customer prospect acquisition.

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

I wanted to go back to the NII guide for the full year. And just given the comments on the margin, it seems like the guidance that you're giving would imply a similar like low single-digit growth of average earning assets in '26 relative to the high single-digit growth of loans. Is that fair? And then you talked some about the various borrowing pieces that you can use on the funding side. Do you end up reducing that throughout the year as a result?

Yes. So you're right. The blend of fairly stable securities portfolio and good growth in the loan book will blend out to a lower earning asset growth but combined with a little bit of margin expansion, that's how you get to the number. And we expect deposits to grow to support overall margin but we also expect to see the loan growth be a little faster than the deposit growth.

Okay. And you guys have talked quite a bit on this call about the fee income guidance. And obviously, brokerage and trading is hard to predict it is depending on rates to a large degree. I'm a little bit surprised the mid-single guide seems reasonable for some of the businesses. But I'm just curious if you just feel like maybe the growth in what you've accomplished, which is huge on the asset management side, if maybe that's tough to continue to replicate or if there's anything else that's driving maybe a more to date growth level than what you've experienced the past 2 quarters in particular.

Well, 2 things. Keep in mind -- well, number one, you're right. That business, we feel great about, and that should have a good long -- very long-term growth rate. But note that within that fee guide that there is a shift from fee income into net interest income just within trading just based on the curve slopiness. So don't let that confuse our enthusiasm for the fee-based businesses.

The other piece that you may be missing is you remember in Marty's prepared remarks, he talked about the $23.5 million kind of onetime gain. That's included in the 2025 fee number essentially. So if you think about that ex that number, I think that probably gets you to a little bit higher number than what you see on the surface. But Marty alluded to that in his prepared remarks.

Okay. And Marty, would you be willing to throw out a number for the movement from the income to NII guide on the brokerage trading?

That's maybe a little bit more into the weeds than is constructive but it's not small. And when you look at the other large banks that have trading, they're doing the same exact sort of guide for the same exact reasons.

Okay. Great. And I don't know if I'm last. The other question I really wanted to ask was just around -- you guys have been growing Texas, in particular, Oklahoma really well. Arizona had a good '25, but it seems like Colorado and Kansas, Missouri have been lagging. Any thoughts on those 2 states or 3 states and those markets and if there are competitive dynamics that are slowing stronger growth or anything else you might comment on that?

No. Obviously, we're excited about the growth areas that you mentioned. I mean, Oklahoma, Texas and Arizona, you highlighted, those were all great stories for 2026. We're still very excited about Colorado and Kansas City. That's the great thing about our business lines and about our geography is that they're not all linear at the same point but the diversity is what creates the growth over time. And so we're as excited about those markets as we are any of the other ones that we're in. There's nothing necessarily unique about those that creates a different growth dynamic there from my perspective.

And your final question comes from Matt Olney with Stephens.

Just a few follow-ups here. Going back to Stacy's comments about the importance of the steepness of the curve. Can we assume that the guidance implies about a 50 basis point improvement throughout the year? So shorten comes down 50 bps and the intermediate part of the curve maintains kind of where it's at today?

Yes, that's more or less what forwards have, and that's basically how we think about the year.

Okay. And then on the capital discussion, it sounds like there aren't any specific targets -- target ratios out there you want to disclose. I think we're all just trying to understand if there could be additional deployment activity or opportunities for 2026, whether it's buyback, M&A or something else. So can you just address if you see any interesting capital deployment opportunities for the year?

This is Stacy. I think, look, our kind of order generally has been our first choice is loan growth. Loan growth has been very good. Second choice is looking at M&A opportunities as they come along. We're opportunistic there. We're not interested in doing something just for the sport of doing it. It needs to add intrinsic strategic value as well as being financially beneficial to shareholders. We don't see anything today on the near-term horizon that would indicate that, that's a near-term deployment of capital. And obviously, you saw us be more aggressive in the fourth quarter with share repurchases but likely to slow that down here as we get into 2026. I think that's the use of the capital for us.

And so we're kind of not locked into any one favorite and we can pivot and be more aggressive as we have a view over time. And we're still active. We're looking for ways to deploy capital from an M&A perspective. But as you know, we kind of don't act like capital is burning a hole in our pocket. We're not afraid to sit on it and wait to find an opportunistic time to redeploy it, and that's proven to be a good strategy for us over time.

Yes. Okay. That's helpful, Stacy. And then just lastly, the loan yields in the fourth quarter, I thought were better than I was expecting. Anything unusual in those loan yields in the fourth quarter? And then any commentary about just loan beta expectations within that guidance in 2026?

Yes, really nothing that's a change fundamentally in that portfolio. As you know, it's very much a floating rate portfolio and very much a 1-month floater portfolio. And so that -- there's nothing that would have changed the characteristics to make it behave any differently. And that's all captured in how we constructed the margin guidance.

The one thing I would say there, Matt, as you know, and we talked about earlier on the call, SOFR -- most of those loans are SOFR based. So there's been a little bit of quirkiness with SOFR and that remains. And so they benefited just a little bit from that but that's really it.

Yes, that kind of flows through to a basis point or maybe 2 for the quarter.

Thank you. And with no further questions in queue, I'd like to turn the conference back over to Stacy Kymes for any closing remarks.

As I've highlighted today, broad-based growth has been a defining thing for the quarter and for the year. It reflects the disciplined work we've undertaken over many years to strengthen our foundation, diversify our earnings stream and consistently deliver results across the business. BOK Financial is a strong, stable, growing company. Our progress has positioned us well to navigate the current environment, capitalize on market disruption and continue generating long-term value for our shareholders.

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 additional questions at [email protected].

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

Greetings. Welcome to BOK Financial Corporation's Third Quarter 2025 Earnings Conference Call. As a remainder, this conference is being supported. [Operator Instructions].

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

Good afternoon, and thank you for joining our discussion of BOK Financial's Third Quarter 2025 financial results. Our CEO, Stacy Kymes, will provide opening comments and cover the loan portfolio and related credit metrics. Scott Grauer, Executive Vice President of Wealth Management, will cover our fee-based results; and our CFO, Marty Grunst, will then discuss financial performance for the quarter as well as our forward guidance. 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 Stacy Kymes, who will begin on Slide 4.

Thank you, Heather. We appreciate you joining the call this afternoon. We are pleased to report earnings of $140.9 million or EPS of $2.22 per diluted share for the third quarter. On our last quarterly call, I spent a lot of time talking about momentum. This quarter, we built on that progress and remain confident in the trajectory we're on and the solid foundation we've established for future growth.

During the quarter, we delivered broad-based growth across our loan portfolio with total outstanding balances up 2.4% sequentially, adding almost $1.2 billion in outstanding loan balances over the past 2 quarters. Our core C&I portfolio posted strong results for the second consecutive quarter, while specialized businesses remained stable. CRE balances expanding meaningfully as commitments from late 2024 and early 2025 have continued to fund up during their construction life cycles. Importantly, this momentum is independent of our mortgage finance launch, which began generating fundings in the third quarter with more meaningful outstandings expected during the fourth quarter.

Net interest margin continued to expand this quarter, increasing 11 basis points. We believe the key elements are in place to sustain strength in this area regardless of whether the Fed cuts rates faster or slower than expected.

Our strong liquidity profile with a loan-to-deposit ratio in the mid-60s percent range, provides strategic flexibility. Going into this interest rate cutting cycle with a strong liquidity profile should enable us to achieve effective pricing outcomes. This positions us well to build upon our already attractive early cycle total liability beta.

Our balance sheet remains relatively neutral to interest rate risk, which is consistent with our long-held philosophy of managing rate risk. This neutral positioning helps protect margin whether cuts are more or less aggressive than anticipated. Importantly, while we are neutral to interest rates, we are not neutral to the shape of the yield curve. Current market implied forward suggest the yield curve will continue to steepen over the next 12 months. This should provide a further tailwind to margin.

Fee income was another solid contributor to overall performance this quarter, growing 3.6% sequentially. We recognized a record quarter for investment banking revenue, bolstered by municipal bond underwriting activity, a key strength in our fee income and advisory business.

We also saw significant growth in AUMA this quarter, reaching more than $122 billion. Our capital levels remain peer-leading and will further reinforce this quarter as TCE grew to 10.1% and CET1 reached 13.6%. We repurchased over 365,000 shares at an average price of $111 per share during the quarter. This reflects our continued commitment to providing value to our shareholders.

Credit quality continues to be a core strength for us. We remain well reserved with a combined allowance representing a healthy 1.32% of outstanding loans. Criticized and classified levels remain well below their prepandemic levels, reflecting our disciplined approach to risk management.

Slide 6 provides a closer look at our loan portfolio. Total outstanding loans grew 2.4% this quarter, led by growth in our core C&I portfolio, commercial real estate and loans to individuals. Our core C&I loan portfolio, which represents our combined services and general business portfolios grew 1.4% quarter-over-quarter.

Our specialty lending portfolio, consisting of our energy and health care books increased slightly this quarter, with growth in health care loans, partially offset by contraction in the energy portfolio. Healthcare loans increased 1.8%, driven by strong origination activity, particularly within the senior housing space. The growth was not limited outstanding balances, we saw a notable rise in commitments, reinforcing our confidence in long-term sustainable growth in this portfolio. This is despite normal refinancing churn. Both of our specialized lending books continue to demonstrate resilience, supported by healthy pipelines that indicate sustained performance ahead.

Our CRE business increased 4.2% quarter-over-quarter with growth covering multifamily, industrial, office, retail and construction. We expect growth in outstanding balances to continue for the remainder of the year as our commitments established in the previous few quarters fund up. We remain well below our internal concentration limits on this portfolio.

Let's move to Slide 7. I'll keep this brief. Credit quality continues to be very strong. NPA's not guaranteed by the U.S. government decreased $7 million to $67 million. The resulting nonperforming assets to period end loans and repossessed assets decreased 4 basis points to 27 basis points. Committed criticized assets increased this quarter, but remained very low relative to historical standards. We had net charge-offs of $3.6 million during the quarter, averaging 2 basis points over the last 12 months. Importantly, the limited charge-offs we've seen recently showed no patterns or concentrations that raise concerns about specific business lines or geographies. Looking ahead, we expect net charge-offs to remain well below historical norms.

We took a provision of $2 million this quarter, primarily reflecting loan growth. Our combined allowance for credit losses is $328 million or 1.32% in outstanding loans, which is a healthy reserve level. Our exposure to NDFIs is approximately 2% of total loans, with the vast majority in the 2 highest credit quality subcategories, subscription lines and residential mortgage warehouse lines. Exposure outside of these categories is very granular with an average loan size of $8 million. We have no credit exposure to companies recently publicized.

Our strong performance in the credit space speaks volumes about our disciplined approach. We've built a strong reputation through consistent execution and excellence in credit over time.

I'll now 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 $7.1 million on a linked quarter basis, contributing $204.4 million to revenue. Total trading revenue, which includes trading-related net interest income was $29.8 million, relatively consistent with the prior quarter. Trading fees were up $1.1 million, largely driven by increased municipal bond trading in a more stable market environment. Our trading business is focused on very high-quality fixed income products largely Agency MBS municipal bonds.

As Stacy mentioned, investment banking revenue, which includes investment banking fees and syndication fees, was a record quarter coming in at $16.1 million driven by impressive municipal bond underwriting activity.

Turning to Slide 10. Our asset management and transaction businesses increased $1.2 million linked quarter. I'll keep my commentary brief here because as you can see, each of these businesses has produced strong and consistent results quarter-over-quarter. I would like to call out fiduciary and asset management revenue. While third quarter revenue remained relatively flat compared to the prior quarter, it's important to note that second quarter results were elevated by seasonal tax preparation fees. In contrast, the third quarter performance was more reflective of typical run rate, excluding seasonal items, with growth driven by increased trust fees resulting from higher market valuations and continued customer expansion. AUMA grew 4.1% to $122.7 billion in the third quarter, the highest quarter on record.

We are very proud of the stable fee engines we have built here over many years. And now I'll hand the call over to Marty to cover the financials.

Thank you, Scott. Turning to Slide 12. Net interest income increased $9.5 million and reported net interest margin expanded 11 basis points. Excluding trading, core net interest income increased $11.3 million and core margin grew 4 basis points, driven by several factors. First, fixed rate asset repricing in both the securities portfolio and the fixed rate portion of the loan portfolio; second, incremental deposit repricing opportunities in both CDs and interest-bearing core deposit categories; and third, growth in loans and deposits.

Since Q2 of '24, core margin has grown 22 basis points in total, which is an average of 4 to 5 basis points per quarter. We expect those drivers to continue to support both margin and NII growth in future quarters.

Looking at headline net interest margin growth of 11 basis points and specifically, the 7 basis point incremental growth over the 4 basis points we saw in core margin, that was largely driven by the denominator effect of the decline in the average balance of the trading book quarter-over-quarter. Given the thinner spread on the trading book, the NII impact of the balance decline was very small.

We typically expect average trading assets to be near the levels we had in the third quarter. Although from time to time, our debt will hold more or less driven by market conditions and expectations of customer demand.

Turning to Slide 13. Total expenses increased $15.3 million. Personnel expenses were up $11.6 million. Regular compensation increased $3.1 million, largely reflecting transitional payments as we realign our workforce to meet the current and future needs of the business. Incentive compensation costs grew $7.9 million with $5.4 million related to cash-based incentives reflecting stronger underwriting and loan origination activity. The remaining $2.5 million increase reflects higher deferred compensation costs, which are offset in other gains and losses. Deferred compensation expense totaled $5.8 million for the quarter.

Non-personnel expense rose $3.6 million, mainly due to mortgage banking costs. Last quarter's expenses there were lower than normal seasonal trends due to lower levels of mortgage servicing related expenses.

Slide 14 provides an update on our outlook for full year 2025. We have tightened up our ranges for most categories since we are further through the year. Loan growth has been robust over the last 2 quarters, and our pipelines are strong across both C&I and CRE. We feel very good about our full year loan growth projections of 5% to 7%. For net interest income, we expect $1.325 billion to $1.35 billion. And for fees and commissions, we expect $775 million to $810 million, reflecting good momentum in that set of businesses.

Our guide for total revenue is mid-single-digit growth versus prior year. As a reminder, I will note interest rate levels and especially curve steepness can affect the geography of total trading revenue between NII and fees, but that shift would be neutral to total revenue. We expect our full year efficiency ratio to be in the 65% to 66% range, reflecting the higher quarter-specific actual expenses we saw in Q3.

Finally, regarding credit nonperforming assets declined sequentially and portfolio credit quality is exceptionally strong. This reinforces our expectation that charge-offs will remain low in the near term and 2025 provision expense will be well 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 Instructions] Your first question comes from the line of Michael Rose with Raymond James.

Maybe we could just start on loan growth. You guys have had pretty high expectations for the bulk of the year that's largely come through. You've talked about the pipelines being relatively strong. Can you just talk about some of the competitive forces maybe that you're seeing by market? And we have seen some mergers announced within some of those markets. Can you just discuss maybe some of the opportunities there. Maybe too early, but is there any reason to expect that you shouldn't be able to generate the same level of growth next year as you did this year? If you can just talk about the puts and takes.

Sure. Michael, thank you. I think loan growth has been really a big story for us. I mean in the first quarter, we were tracking pretty well and kind of the noise around the tariffs kind of slowed sentiment a little bit. But second quarter, third quarter, both quarters consistently around 2.5%, so 10% annualized growth without significant contribution from mortgage finance, which is obviously, we hope to see on the outstanding side more so in the fourth quarter. But we feel really good about where we're at.

We've got room on commercial real estate. Obviously, we limit more so than others, our appetite around how much commercial real estate will do, but we're under our concentration limits there. Energy has been a headwind this year. I don't expect it to be a tailwind next year, but I also don't expect it to be a headwind. And so that underlying growth that you see in just core C&I, personal loans on the wealth side has really done very well. We're very well positioned to be able to grow at a very strong level. We're obviously not providing guidance for 2026, but obviously, we feel good about where we're at and feel good about sustaining that into the fourth quarter.

Obviously, as you think about merger activity in our footprint, that disruption creates opportunity for us. And obviously, we feel very well positioned to take advantage of that. Some of the fastest-growing periods of my career have been when there was great disruption in the market for M&A. And so we're working very hard to position ourselves. And I think being a source of strength and stability and growth during a time of disruption should position us well, both with talent and with prospects in the market.

Appreciate the question. And maybe just as a flip side of that, just given where capital levels are, given where the stock is and buybacks, can you just frame kind of capital use? And given that we are seeing pretty quick approval times, and a more favorable regulatory backdrop. Does M&A enter the equation for you guys again? Or is there just too many buyers out there searching for too few deals?

From my perspective, the order of capital allocation remains, obviously, we want to grow organically. We are at our core, an organic growth company. And so that's our primary use of capital. Secondary, we'll look at share repurchases. We'll look at the dividend levels and things like that over time. You saw we printed over 10% TCE this quarter. I'm not sure that's a good thing or a bad thing, but obviously proud to have very strong capital. But we did that and repurchased a reasonably large amount of shares this quarter.

And then obviously, M&A is something that exists for us that we'll look at. We're focused on strong core deposit franchises. We've kind of identified in the past the types of things that would be interesting to us. And if those things become available, then we'll be interested. But we're not interested in doing a deal just for the sake of doing one or because somebody else did it or because the regulatory environment is more conducive to it. There are a lot of work, and they are very disruptive. And so they need to be worth the effort and really add strategic value long term. And so we're interested, but I think we're going to be very cautious about how we think about that.

Really appreciate it, Stacy. And just finally, I just want to wish Heather, happy birthday.

Your next question comes from the line of Jon Arfstrom with RBC Capital Markets.

Marty, maybe for you. You touched on it a little bit in your prepared comments, but on Slide 12 in the -- on the core margin, how do you feel about that trend in the core margin, excluding trading? Is it still that kind of grind higher? You just kind of give us some of the puts and takes in terms of what you expect there?

Yes. We do still think that, that is a grind higher trend. The repricing of the fixed rate portion of the loan book and the fixed rate securities book, those are trends that will continue. We had just over $600 million of securities basically priced up around 100 basis points this quarter and around $200 million of fixed rate loans priced up similarly and those trends don't last forever, but those are durable for a number of quarters over time.

And on the deposit pricing, we were able to do a little bit more on the -- just repricing around the edges on the core deposit book earlier in the quarter and saw no adverse impact on that from depositors. So we still think that those trends have legs.

Okay. And then you're also saying the trading book probably stays relatively flat in the fourth quarter. Is that right?

Yes. I mean that's our base expectation. We need to have -- our desk needs to have a specific reason to want to move higher or lower than that kind of point that they are typically at -- and -- but that's a reasonable assumption based on what we can see today.

Okay. Good. And then, Stacy, you mentioned it a couple of times, so I want to give the opportunity to talk about it. But you talked about the mortgage finance launch in that business funding up and maybe making contributions -- greater contributions in the coming quarters. Can you talk a little bit more about what's possible there and the time line so we can understand that?

Sure. So I think we've previously talked about having $500 million in commitments by the end of the year. I think that's very doable. I think the utilization there will be plus or minus 50%. As it matures, we'll kind of get a better feel for that, but that's kind of how we're modeling it today. I think we ended the third quarter with about $70 million, plus or minus in mortgage finance loans outstanding. And so that kind of gives you a little bit of a runway.

Obviously, we intend to grow that. And so we expect as we get out into '26 that the commitment level will increase pretty materially from there. We're very comfortable with that. The recourse there, the nature of the collateral and how we perfect on the collateral makes it a very safe lending aspect for us that we like, fits our profile well in addition to fitting our kind of mortgage ecosystem here with mortgage trading and mortgage TBA hedging that we do and then just the core mortgage finance that we're adding here is an important leg of that. So we see real growth opportunity here for the foreseeable future here for sure.

Okay. That's helpful context.

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

I wanted to ask about just the fee income range. It's still pretty wide with just 1 quarter left. And maybe if you could talk about the puts and takes within that range because you did tighten the range on net interest income?

Yes. Peter, we did tighten the range on fee income as well a bit. But as you know, those are just great businesses to be in. They've got really nice growth dynamics over time. It is a little bit more challenging to pinpoint any given quarter in those fee businesses, but we think that we've got good activity going across the board, whether that's -- fiduciary has good backdrop for both production of new volume. And so far, our market is behaving pretty well. Transaction card had a nice growth rate year in and year out. Brokerage and trading that's the most difficult to really be able to give any solid guidance on.

But I will say this, with the expectation for some lower rates in the fourth quarter, that at least gives you a constructive backdrop for that line of business.

Okay. And then just on the updated expense guidance, does it imply you're expecting expenses to be down in the fourth quarter? And if you could provide maybe some expense growth color for next year. Just would you expect expenses to moderate? And I guess, what's a normal expense growth rate for BOK?

Yes, we'll probably stop short of doing any 2026 guidance, but I think it might be helpful to just talk about Q3 expense levels and especially within the personnel because that was a little off trend for us. And so if you look at that $226 million expense for personnel in Q3, a couple of components in there that I think are just good to understand. So $5.8 Million was the level of deferred comp in that $226 million. And as you know, Peter, deferred comp, some quarters, that's positive. Some quarters, it's negative. The average is small, but it's truly inconsequential to EPS because it is always offset in the other gains and losses.

And so if you're going to -- some people adjust out the gains and losses in total. But if you do that, you really have to adjust it out of personnel anyway. In fact, when we do our guidance, we leave it out of both sides. But the $5.8 million that doesn't recur. That's some quarters up and some quarters down. So that's one, deferred comp. Two, there's a little bit of workforce realignment there, so that's nearly $3 million in the current period. So you want to be thoughtful about that.

And then third, the incentive comp, $5.1 million cash incentive comp higher quarter-over-quarter. And that's production driven, some i-banking, some loan production. And really, throughout the wealth business and other businesses to me that's kind of spread throughout the company. So that will give you a little bit of sense for how to think about that Q3 number going forward.

Okay. Just one last question. Stacy, I'll give it a shot. I just want to follow up with Jon's question with the mortgage finance. Just I'm wondering if you could put some guardrails around materially higher next year. It just seems with the Fed starting to cut rates, I mean, really could be a significant grower for you next year?

I agree with that assessment. I think that -- I think I indicated 500 commitments by the end of the year, roughly 50% utilization and then materially higher in 2026. Obviously, we're going to be very careful here about providing any 2026 guidance because we're not prepared to do that. We'll do that when we get together in January, we'll provide very detailed guidance around that. But we're obviously very optimistic. We have a strong appetite to grow it. We believe it's very low credit risk. And so I think you'll see us be very open about growing that very aggressively in 2026.

Your next question comes from the line of David Chiaverini with Jefferies.

I wanted to follow up on Peter's question there. To ask it a different way, how high as a percent of loans could mortgage finance eventually get, say, over 2 to 3 years?

We typically look at -- if you look at kind of the areas that we have our concentrations in, you think about things, we think about things in terms of percent of capital, and so obviously, we have lots of capital, and we have lots of capacity to grow that. When we start in any area, we don't start where we want to end up. We learn from it, we get better, we grow. We understand what the client selection opportunities are and what the market gives us. And so it's hard to look out and say with great certainty, but we have a very long runway here in mortgage finance. And we're -- we don't see where we're necessarily going to be constrained internally in the next couple of years around this.

At some point, we would be there. It would be a point in time where we would reach our kind of interim risk appetite, if you will. But we're nowhere close to that today. We're very excited about the possibilities here and see a pretty long runway to grow it.

And in terms of the competitive environment for mortgage finance, are you seeing competitors pull back from that business at all?

Not particularly. I mean not today. I mean, there have been some who pulled out over liquidity issues, call it, a couple of years ago, but if you think about the environment specifically to today, not necessarily, although it does fall under the nondepository financial institutional lending. And so I think that there will be folks who look at that and think about that maybe a little bit differently because of the scrutiny that's evolved from that. But this is one of the most secure areas of winning in our view, no matter how it's classified that we can do. And so we feel very comfortable with that.

We are bringing to market a very experienced team, a very strong leadership group who's well known by the participants in the market. We have synergies with our existing businesses that most do not have. So with our mortgage trading business, with our mortgage TBA hedging business, there's enormous synergy with the same clients that our mortgage finance prospects. And so we really think there's enormous opportunity here where 1 plus 1 is 3. Mortgage finance is going to grow on its own, but we also think it will enhance other businesses as well. And frankly, even on the treasury side and the cash management side, the corporate treasury side, we're seeing opportunities that perhaps we didn't foresee as we entered this business.

We have a very strong delivery platform on the treasury side that -- as those begin to explore full relationship are very impressed with relative to where they are. And so we're seeing much more traction there than perhaps we anticipated. So this is -- we talk about the loans, and I understand why they're a strong driver of earning assets. But this is about a complete and full relationship. And so that's part of why we've entered this business in the way we have with hiring a very experienced team, investing in the technology tools to be successful. And so I think you're going to see a lot of success here.

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

I wanted to just go back to loan growth. And I noticed that you guys grew quite a bit in office this quarter. And so I was just curious if you were seeing opportunities where others maybe were trying to reduce exposure relative to certain CRE buckets, kind of given you're a lot lower relative to some peers on concentration? And then maybe just any other segments that you're seeing people pull back from, whether it be multifamily or construction that might also be an opportunity?

Yes, I would say from -- office is really consistent with where it was the same quarter a year ago. I mean the balances are going to ebb and flow a little bit from period to period just based on activity. We're not afraid of office. Obviously, it depends upon who the tenants are, what the lease role looks like, the term of the leases, those types of things. I think much like there was -- everything was going to go away in retail because of Amazon, that didn't prove to be true. I think office is going to prove to be a better class than people originally were concerned about because of changing work preferences. But I think people are returning to the office. Workspace is important. And we're not leading with office per se. But for the right deal, for the right opportunity with the right tenant profile, we are in the business of making office loans. And so you see a little bit of that this quarter.

Obviously, our focus is multifamily and industrial primarily, and we're seeing good opportunities there. We see kind of a good runway to kind of fill out the bucket, if you will, in commercial real estate and continue to grow the outstanding there.

Okay. That's helpful, Stacy. And then the other question I wanted to ask was just around the strong growth this quarter and really the last year AUMA. And just how much of that might be to market versus new clients, new customers? Any fee changes that might drive the revenue relative to flattish going forward in 3Q to 2Q?

Sure. So this quarter specifically, as we have on Slide 10 that we're getting both. And we have a fair amount of planned distributions and natural churn in that business. So our actual new asset attraction is significant. But if you look at the net at the end of the quarter, it was half and half. We had -- of the $4.8 billion increase for the quarter, it was increased by both market valuation improvements accounted for about half of that and the other was new business growth -- net new business growth. So it's a combination of the two.

We feel good about -- and it's really across the broad spectrum. It's safekeeping assets, its fiduciary assets across all the business lines inside of wealth from retail brokerage to the institutional side.

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

Just wanted to start on trading income. How do you think about the mix shift of trading income between fees and NII based on the expectation of the deepening yield curves?

Yes. So this is Marty. So to the extent that you get a little more steepness in the curve, you're going to see a little bit more of that revenue be in the NII category and a little bit less in fees. And so that's a reasonable thing to assume. But the total -- we're really paying attention to how the business performs and adding those 2 together, that's really the right way to think about trends in the business.

Yes. Okay. And then maybe shifting over to credit. Obviously, really clean, but it did look like criticized assets picked up just a touch. Do you have the dollar amount that had increased, and any color you can give there?

It increased like $50 million, almost $25 billion in loans. If you look at criticized levels as a percent of Tier 1 capital, I mean, it crept up a little bit, but it's too small to move. I mean 1 loan can move the number here a little bit. So if you think about we're at 11.3% at the end of the third quarter, we were at 12% at the end of the fourth quarter last year, kind of at a similar level we were at the third quarter. Obviously, we saw an improvement in the first half of the year. But these numbers are so small that 1 or 2 loans can move these percentages here a little bit.

And I guess this is a good segue for me to remind everybody, this is not normal. These are abnormally strong credit numbers. And we include kind of that fourth quarter '18, fourth quarter '19, that is the mean, if you will. That is a normal -- those look good for us. We were happy with those levels. And so there will be a time where both charge-offs and criticized levels and nonperforming levels kind of revert to the mean. And that doesn't mean credit's deteriorated. It just means that there's been kind of a reversion back to kind of a more normal period of time. These are abnormally good credit periods. And we're kind of looking under every rock trying to find where we think the next risk element can come from. And we're not seeing it in a line of business. We're not seeing it in geography. And everybody is kind of jumping on the next credit thing.

But there will be a reversion to the mean, but we're not seeing any deterioration, really meaningful deterioration at all in asset quality today.

Yes. And that was going to go into my next question. I mean if I just look at the past -- on average over the past 3 years, you're averaging a net charge-off rate of about 6 basis points, which is just pretty remarkable considering you're a commercially focused business. Do you think, just based on where you see the macro economy today, do you think we get a more normalized environment in the year ahead? Or is it really just too unpredictable to tell?

It's really hard to say. I mean, we included in the appendix, I think it's Slide 18, and I always kind of refer people that we get caught up in the 1 year to 1 year, and you don't really pick up a credit cycle when you do that. We've included in our, essentially a 20-year loss history that picks up the worst of the great financial crisis embedded in that history. And we've got basically a 26 basis point average charge-off over that period of time, which includes some pretty significant losses in the -- if you think about coming out of it through the great financial crisis.

And so I think as we think about through the cycle, we kind of think 20 to 25 basis points as average losses for us. Maybe we do a little bit better. We think our asset quality has differentiated itself in a very positive way. But as you try to look out in the near term, it's hard to see that we revert back to that mean quickly. Just based on what we see today, there's as much positive going on as there is negative. And so I don't foresee that certainly. But there's so many factors that can predicate that. It's typically something that we didn't expect or that kind of an extragenous shock that creates the stress. And so it's very difficult with real certainty to predict.

And so as we model -- as we think about our business through a cycle, we really focus on that long-term loss rate, which we think is somewhere around 20 to 25 basis points. But we're nowhere near that today and don't certainly foresee that in the near term.

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

A couple more on the warehouse finance business. I guess what are the typical line sizes look like today? And how does that progression grow potentially as you build out that business?

I mean loan sizes are going to be -- loan commitments here are going to be larger than maybe a typical C&I loan commit would be. So let's call it, $75 million to $100 million, plus or minus. And some are going to be smaller, some are going to be bigger. But generally speaking, they're going to be a little bit larger there, mostly because of the quality of the credit is, in some cases, correlated to the size of the facility. And so we want to be sensitive about adverse selection. But it is less granular than a typical C&I portfolio for sure, but the asset quality is much, much better over a long period of time.

Okay. And then, Marty, I talked to you 3 months ago and your comments were a bit prophetic. You had mentioned essentially the risk of double pledging some of this collateral. You had also said that the mortgage registration system that are in places today, kind of eliminate some of these risks. I guess the events of these last couple of weeks, does that potentially make you reconsider how you think about that statement? Or as close as you've been with the ramp, does that give you even greater conviction around the process?

Yes. No, that's a great question because there's a distinction between the situations that are in the news, those are not residential mortgage warehouse lines where those loans are all registered at MERS. I mean that's the beauty of the component of mortgage warehouse that we're doing. So all of that collateral, not only do we have a very strong team, it's a very experienced, but we've got the leading platform to operate that business. And that gives us the ability to ensure that all the individual loans, we have clear title to all the loans that are securing our warehouse line through MERS. And so there are other flavors of warehouse finance that aren't like that. But what we're doing is 100% what I just described, where our ability to have clear line of sight on title so that we know we've got those loans with collateral. Not only that, we've got the ability to deal with them if we ever needed to, just given the talent we've got on board.

So we are, as convicted as ever, that the way we're going into this business and the portion of this business that we're doing is the right one that meets our risk appetite.

Great. That's good color. And then just last for me, just a clarifying question. The comment on trading assets being more or less in line with 3Q, is that on an average basis or a period end?

Yes, average. Always -- yes, we always talk about average there. You can almost ignore the period end on trading because just 1 day isn't representative. So as you're thinking about that business, it's always the most sensible thing to look at the averages.

Your next question comes from the line of Jared Shaw with Barclays.

So just, I guess, going back to the overall loan growth, if we look at the high end of that range, it feels like that's just driven by the optionality or the potential of mortgage warehouse. Is that right? And I guess what are your assumptions for energy payoff activity or pay down activity, is that going to slow going into the end of the year? Or could we still see pressure on those balances?

Yes. I think we're growing -- the last 2 quarters, we've grown loans at 10% without really any meaningful contribution from mortgage finance. And so I think that there's -- and that's with some headwind in the energy space. So I feel very confident about where we are from a loan growth perspective. We've got a good momentum. We look at the sales pipeline, obviously, going into -- we look at it more frequently, but particularly coming into the call to be able to feel good about talking about that here, sales pipelines are very strong right now.

And so we feel good about where we're positioned from that perspective. As we think about the future. I mean energy lending, the -- the commodity prices are low, there's consolidation happening in the space. I do think plus or minus a little bit, we've kind of hit the bottom in terms of the risk of material payoff activity, but I don't think it's going to grow at 10% either. And so I think from our perspective, having stable balances there is a positive. We do expect it to grow a little bit, but we're close to bouncing off the bottom here a little bit on the energy balances, which is helpful.

Obviously, we like that space. We feel very good about the asset quality there. But the growth has been more challenged in the last 12 to 18 months as there's been lower commodity prices and a more merger and acquisition activity in that space.

Okay. All right. And then if we do see the stronger growth in the mortgage side, is that going to be enough to impact sort of the expected growth in loan yields here? I mean, I'm guessing that's tighter spreads on that lending, right?

It is tighter spreads. It's really going to depend on what the mix is at that particular point in time. It's a hard question to answer until we get a little further along. Just overall, yes, the spreads on mortgage warehouse are tighter than they are on, let's say, a typical C&I deal. The flip side of that, we still got lots of room to grow in commercial real estate. Those spreads tend to be wider than a typical C&I deal. And so it really just depends on the mix at that particular point in time.

Yes. And Jared, one thing to think about is that business also brings deposits. And so when you think about the combination of the loan, deposits, the treasury management, revenue and incremental trading revenue, broadly speaking, that's bringing a pretty standard margin to the bottom line for us. So I think overall, it's not going to be dilutive to overall returns, if that's sort of the way you're thinking about it.

Okay. All right. And then how should we think about maybe your internal thoughts around loan-to-deposit ratios and funding this growth? I assume that -- should we assume that you're comfortable with that ratio, which is pretty low, starting to grow back to where we maybe saw in prior years?

Yes. We have, as you know, and as you just said, very strong loan-to-deposit ratio, that can drift up and that's fine. That's not our central -- our central case is that we'll continue to grow loans, we'll continue to grow deposits. Maybe loans are a little higher than the deposits and that could drift up and that would be fine. But we've got a lot of balance sheet flexibility and that will put us in a very good position for the next couple of years.

Your final question comes from the line of Matt Olney from Stephens.

I guess sticking with Jared's first question on the loan yields. Are there any material loan floors that would become effective as the Fed continues to cut rates?

Yes, not -- not really. I mean -- and certainly, in these -- we still have pretty high rates here in the grand scheme of things. So yes, floors are not going to be a factor in the foreseeable future.

Okay. Thanks for that, Marty. And then I guess going back to the credit discussion, you gave us some great details, and I'm looking at the allowance ratio, call it, 132%, which I think is the low end of what we've seen since the CECL adoption over the last few years ago. It feels like it's going to be really tough to keep that flat, and we could see that start to -- or continue to drift lower. Am I interpreting the commentary there right on the allowance ratio?

That's really predicated on asset quality at the point in time and loan growth and lots of other factors there. We obviously don't foresee lost content being material that's going to help, but if you look at the reserve relative to criticized levels or relative to nonperforming levels or relative to charge-offs, obviously, it's very healthy. And we've got something that we'll continue to look at there.

Your final question comes from the line of Timur Braziler with Wells Fargo.

Just one more for me. You had called out a couple of times that you're looking to align talent base with future growth initiatives. Can you just maybe put some context around that statement and maybe how far in the process we are there?

Yes. So we're constantly -- I mean, we are -- part of our corporate DNA is we're always looking to see where are the growth opportunities, where the highest returns on our capital and where are areas that are mature. And so we've been very focused as we have these expansion areas like San Antonio, like mortgage warehouse where we're making big investments. We have big technology investments in wealth and in the corporate bank. Obviously, as we think about that, we also think about where are some areas that are mature that we need to be more efficient in and focus on that.

And so as we've worked through that over the course of the year, we've taken actions in both the third quarter and in the fourth quarter that will result in transitional payments that are nonrecurring that will impact personnel expenses principally, but create benefit in future periods as we rightsize the workforce with the areas that we think provide the most opportunity for us to grow.

This concludes today's Q&A session. I would now like to turn the call back over to Stacy Kymes for closing remarks.

Thank you. This was another strong quarter marked by solid performance across our core businesses. The additional momentum we built this quarter reflects the strength and resilience of our team. We're entering the final quarter of 2025 with a clear focus on sustaining the positive trajectory. 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 [email protected].

This concludes today's conference call. You may disconnect.