BOK FINANCIAL CORP(BOKF)Q2 2026 法說會逐字稿

Greetings. Welcome to BOK Financial Corporation's Second Quarter 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a Q&A session. If you would like to ask a question during this time, simply press star followed by the 1 on your telephone keypad. If you would like to withdraw your question, press star followed by the 1 again. As a reminder, this conference is being recorded. I would now like to turn the presentation over to Heather King, Director of Investor Relations for 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 C. Kymes, will provide opening comments and cover the loan portfolio and related credit metrics. Scott Bradley Grauer, Executive Vice President of Wealth Management, will cover our fee-based results. And our CFO, Martin E. 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 C. 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 Class 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 in 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 benefit of the investments we have 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 have 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 have 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 have 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 have discussed, C&I is a longer sales cycle, and we expect to see the benefits build over time. We are 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 we are 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 does not 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 have often said, growth follows relationships. The momentum we are seeing today is a direct reflection of the trust we have earned from our customers. Healthcare 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 are 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 reporting 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 ratio 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 thousand during the quarter, averaging 3 basis points over the last 12 months. Once again, the limited charge-offs we have 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 was 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 will turn the call over to Scott Bradley Grauer.

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. 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 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 will hand the call over to Martin E. Grunst 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 Class 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 toward 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.

Thank you. We will now begin the Q&A session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and enter the queue. When you are called upon to ask your question and are listening via loud speaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of David Chiaverini with Jefferies. Your line is now open.

Hi. Thanks for taking the questions. 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 are happy with the basically stable margin in the quarter. We see drivers to see some margin expansion for the back half of the year. You know, kind of the typical drivers that have been long-standing positives: securities portfolio, fixed-rate asset repricing. And then that derivative margin piece—that was a negative 3 basis points going into Q2, and we are going to get that back over the next quarter or two. A lot of that margin has been returned to us already. So those are high-confidence items. And then typically, we have DDA grow in the back half of the year as well. So there is some pretty good support to see margin expansion in the back half of 2026.

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

Yes. So deposits are always competitive; there is really never a situation where deposits are not highly competitive. They are today. They have been previously. I would note that the bid pressure is probably rising rather than falling. But within our markets, we are really not seeing anything irrational. I mean, there are some areas that have a rush, but we are not seeing irrational behavior in our markets. And just as we think about deposit pricing and the guidance, we are not relying on any improvements in that rate. We will seek to get improvements in our cost of funds, but we are not relying on improvements there to drive our guidance. Just a reminder, we still have a, relative to others, low loan-to-deposit ratio, so that gives us a lot of flexibility managing rate-seeking deposits. Very helpful.

Thank you.

Next question comes from the line of Peter Winter with D.A. Davidson. Your line is now open.

Thanks. Good afternoon. Just on loan growth: if I think about loan growth for the industry, it has been coming in better than expected, but a lot of the banks that are giving updated guidance assume growth will moderate in the second half of the year. When I look at your updated guidance of period-end loans over 10%, and pipelines consistent with the first half of the year, it does not seem like you are expecting a slowdown in the second half of the year. Can you comment on that?

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, two big drivers for us historically. They are hard to forecast, so it is 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 is going to help us out. There is some seasonality there that could make some of that a little bit lumpy. But if you look straight through to the end of the fourth quarter, I think you've got really positive tailwind there. We feel comfortable with the guidance that we have provided, predicated on some things that are intrinsic to us. If I look at sales pipelines, frankly, at this point, they are not as strong as they were heading into the second quarter, but they are 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 have done, which should only add to that in some future period.

And then on credit, it has been excellent. You have got peer-leading low net charge-offs consistently, and rightly so you have taken a zero provision in six out of the last seven quarters. But the ACL ratio at 1.19% has reached the CECL day 1 level. If we assume a stable economy and stable credit trends, would you let the ACL ratio continue to fall?

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

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 the mid single-digit range—does that include the $31 million?

So Peter, for the total revenue guide, that does include that gain. And there was another gain last year. So both in the 2025 number and the 2026 number, we have both of those in there—that is correct.

Okay. Thanks, Martin.

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

Thanks. Good afternoon.

Scott, maybe a question for you: there has been some hand-wringing 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? Does the business in aggregate total trading revenue trend back to that mid-30s type level? Yeah, sure. Good question. As I commented earlier, we got off to a solid start in Q1. We saw in March and mostly in April and May a significant dislocation. And as I mentioned, we saw an improvement in June. The key contributors: our trading activity is 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. As the dislocation and uncertainty occurred in the markets, that caused the challenges for that segment. But we did see an improvement in June versus the previous two months. So potentially back to normal or at least an improvement from what you saw earlier in the quarter, certainly.

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

On the expense outlook, I see the guide and it looks good Martin. Can you talk a little bit about where you are finding opportunities to hold the line on expenses and then maybe touch a little bit on the hiring that you are doing—if there is more to come and the profile of who you are hiring?

Yeah. Let me give you a little bit of color on expenses and talk a little about deferred compensation and then get back to that question. As a reminder, there are two components in deferred comp and they are inextricably linked because they come from the same source. There are 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 in Q2. That gain plus some trivial administrative impact is how the $9.1 million of deferred comp expense number is determined. So by definition, those must net effectively to zero or something close to zero each quarter. To get an accurate understanding of the core run rate of the company, you've got to adjust for both those impacts. This quarter, personnel expense was down excluding deferred comp by $6 million.

Two drivers there: with trading revenue down, trading commissions were commensurately down, and then a seasonal decline in payroll taxes is the other piece that explains that $6 million decline quarter over quarter. So basically, the base regular compensation was really steady quarter over quarter. Now as you start from that starting place when you look over the next couple of quarters, you will see some expense increases within the personnel line items just due to the additions. But importantly, that is contemplated in the expense guidance that we provided.

And, Stacy, is this middle-market commercial lenders that you are hiring?

Yeah. We have hired across a range—from commercial to corporate to small business. Substantially all are revenue producers, not exclusively, but substantially all are revenue producers. The disruption in our key markets created an opportunity, and it is a playbook we've used many times in the past. We have a great brand and are excited to welcome new teammates to help us grow the company.

Thank you.

Next question comes from the line of Matt Olney with Stephens. Your line is now open.

Hey. Good afternoon. Thanks for taking the questions. Given the Visa share sale, just looking for updated thoughts around capital and capital deployment. Thanks.

Yes. Thanks for the question. We have a strong capital position, and that just makes it a little bit stronger. We are being thoughtful about how we deploy capital. We are always opportunistic about how we do that and always thinking about what is the best long-term action to take and when to take it. At the end of the day, we are willing to be patient to find the best use of capital.

And then on your puts and takes around the margin outlook, I think you mentioned getting back that 3 basis points from the cash margin related to hedging activity for energy customers. Any more color on that dynamic—what happened in Q2? And would I see this more specifically in the financials? Thanks.

Let me explain the dynamic and then Martin can explain how that runs through. We hedge on behalf of our customers; we do not take commodity risk. Because we have mortgages on their collateral, we hedge and offset the commodity risk with a third party, 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 saw those hedges move against them. We had to post cash margin to the exchange and did not get a return for that, which diluted 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 the process. At one point during the quarter, I think we had over $900 million posted to the exchange. Much of that has been returned to us. But understand that, obviously, the exposure remains, and as oil prices move, that number could change over time. With time decay and prices staying at this level, we expect that to return to a more normalized level. It largely has, with some degree of uncertainty around where commodity prices go from here.

Yeah. The majority of that has come back as we sit here today. To your question about how you see that in the financials: you will see that it is essentially a non-earning asset or a low-earning asset that grows temporarily and then comes back. You see that in the non-earning assets, and we can walk you through the specific line items later if that is useful.

Perfect. Thanks, guys.

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

Good afternoon, guys. Thanks for taking my questions. Just wanted to get an update on the mortgage business—where you guys stand at this point, and any updated thoughts around expectations versus where you are tracking?

No. I think I mentioned in the last six months our goal was to be at $1 billion in commitments by the end of the year. We are obviously tracking well ahead of that as we ended the second quarter. I am not going to give any updated goalposts other than to say we have lots of headroom and those teams are running fast, and we are seeing lots of opportunity. We remain very excited about that business. As I mentioned, we broke even—first month of breakeven was in June—so that is going to be a tailwind for us as we go into the latter half of the year. There is some seasonality in that business, but net, between now and the end of the year, we think that is going to continue to grow.

And then maybe one follow-up going back to deposits: the non-interest-bearing mix has remained pretty stable here, but it is competitive in a lot of your markets. With the updated loan growth guide, there is probably some incremental pressure. You guys do have a lower loan-to-deposit ratio. As we think about interest-bearing deposit costs moving forward, what do you see as the puts and takes under a base case with no rate hikes or if we do get one or two hikes? Thanks.

So non-interest-bearing and interest-bearing deposit costs are probably going to be closer to stable than they have been in the last couple quarters in a scenario where you have no rate changes. In a rate-hike scenario, which probably does not happen until later in the year if it does, our deposit beta has been in the upper 60s for the down cycle and was right about the same place in the up cycle. So we would think about that as a starting place for how to think about deposit costs. However, when you go from cutting to flat and then to increasing, you are probably going to be able to beat that just based on direction changes—there is usually some lag that benefits the industry. So we would probably beat that as how we think about it.

Thanks for taking my questions.

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

Hey. Thanks for taking my questions. Quick follow-up related to the Visa gain and how it relates to guidance: you said that is included in the revenue, but is that also included in the fee guidance? 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.

That is right. It is not in the fee number. I said that earlier: it is not in the fees and commissions guidance. Correct.

Okay. Alright. And then maybe just last for me: I wanted to touch on the fiduciary and asset revenue. You noted there was some impact of seasonal tax prep—how much of that bump up was from the seasonal impact versus strong organic trends?

Roughly a third of the quarter-over-quarter increase was due to the seasonal tax preparation—it's a once-a-year impact.

Alright. That's all for me. Thanks for taking my questions.

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

Thanks. Good afternoon. Where are you seeing the most loan competition—geographically or in certain subsectors? Are you seeing anything unusual on the competition side?

No, I would not say we are seeing anything unusual. The great part about our footprint is it is growing rapidly. If you think about Texas and Arizona and Colorado and even our home state of Oklahoma, those markets are growing at a great pace. That means everyone gets a part of the pie. It is easier to be part of a growing pie than a stable or shrinking one. We are seeing lots of opportunities for loan growth. I have never seen a more resilient American business enterprise in the face of so much economic volatility—businesses are moving forward, and that is creating opportunity for us. Structurally, I'm impressed with how competitive structures are hanging in there. Pricing continues to grind competitively as you would expect in this environment, but there are lots of lending opportunities as we look forward.

Thank you.

Your next question comes from the line of Brett Rabatin with Stonex Group. Your line is now open.

Hey. Good afternoon, everyone. I noticed a lot of the loan growth was reported in Oklahoma. Was there anything unique about that? Was it the domicile being at headquarters or anything that drove Oklahoma to be stronger? I thought we would see a bit more broad-based growth from other geographies this quarter given the overall strength in loan growth.

Sometimes those tables can be a little misleading because it is not necessarily where the borrower is but where the lending activity is headquartered. Internally, our growth was very broad based, and that was part of what we were most proud of—both by geography and by lending type, very diverse. Particularly in C&I—we've defined core C&I for a long time now, and that was up 11% year over year. That is outstanding and really reflects the team's success at the bank. That is the hardest lending to be successful at, but it is important to us because it feeds many of our fee-based businesses.

And you mentioned 25 new teammates, 20 in Texas. Do you view this as a unique opportunity given recent disruption, or do you have a pipeline that says you will continue to add folks? Any thoughts on whether this was more of a one-off relative to future hiring?

Talent acquisition is almost a line of business for us, like other verticals. The way we will grow is organic in virtually all of our markets, particularly outside of Oklahoma. We need more boots on the ground. We have market leaders in Texas and other regions and pipelines of talent in all of our markets that we are consistently recruiting. In periods of disruption, receptiveness is enhanced, and we take advantage of that. Many of the people coming across are folks we've been talking to for a long time—the recruiting process is a long sales cycle. We are open for business for talented folks with or without a specific budget for it. We like revenue producers and will need more talent on the ground in all key locations. We don't see that changing. The disruption has created a disproportionate opportunity in the near term, but talent acquisition remains a line of business for us.

Okay, great color—appreciate it.

That concludes our Q&A session. I will now turn the conference back over to Stacy for closing remarks.

To conclude, I am incredibly proud of the results the team delivered this quarter. The record pace of loan growth, continued strength in our fee-based businesses, and outstanding credit performance reflect the quality of our franchise and the dedication of our team. Our consistent performance is rooted in a strong risk management culture. That foundation, combined with our 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 h.king@bokf.com.

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