BOK Financial Corporation

Greetings and welcome to the BOK Financial first quarter 2020 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Stephen Nell, Chief Financial Officer of BOK Financial. Thank you, sir. You may begin.

Good morning and thanks for joining us. Today, given the unprecedented environment in which we operate, we wanted you to hear from several leaders across the company. First, our CEO, Steve Bradshaw, will provide opening comments. Next, Marty Grunst, our Chief Risk Officer, will provide an update on our business resiliency operations related to the coronavirus pandemic. You'll also hear from Norm Bagwell, Executive Vice President of our Regional Banking Division. who will discuss our response to customer needs across our region, including the significant efforts to provide loans under the Paycheck Protection Program. Stacy Kymes, Executive Vice President of Corporate Banking, will cover our energy, healthcare, and commercial real estate portfolios. And Mark Maughan, our Chief Credit Officer, will also join us to discuss other loan portfolios, our credit metrics, and the impact of our CECL implementations. Lastly, I'll provide first quarter details regarding net interest income, net interest margin, fee revenues, expenses, and our overall balance sheet position from a liquidity and capital standpoint. PDFs of the slide presentation and first quarter press release are available on our website at BOKF.com. We refer you to the disclaimers on slide two as it pertains to any forward-looking statements we make during the call. I'll now turn the call over to Steve Bradshaw.

Good morning. Thanks for joining us to discuss the first quarter of 2020 financial results. I want to begin our call this morning by saying that our thoughts go out to all those impacted by the coronavirus pandemic. This is an event without parallel for our company, our region, and our nation. We recognize that our clients and communities depend on us now more than ever. As a company that serves a vital role in the economies of our footprint, we see firsthand the impact this crisis has on individuals and companies, and we remain committed to helping our clients through this troubled time. And while our call will detail our first quarter results, we'll spend a significant amount of time today discussing the impact of this new economic environment on our company. As Steven mentioned, we have a big lineup today that should provide insight into our response and our outlook relative to COVID-19. With respect to the first quarter, BOK Financial recorded net income of 62.1 million and diluted earnings per share of 88 cents. Earnings this quarter were impacted dramatically from a shifting economic outlook and falling oil prices that drove a significant increase in our loan loss provision under the newly adopted CECL accounting standard, which Mark Maugham will talk about in detail a bit later. Not to minimize expected credit losses, but if we focus on pre-provision net revenue in comparison to previous quarters, the results were really solid. Pre-provision net revenue was 173.1 million this quarter, versus 160 million last quarter and 148.2 million for the first quarter last year, showcasing the contribution of our diversified mix of business revenues. Net interest revenue declined 8.9 million to 261.4 million this quarter. Despite multiple rate cuts in the latter half of 2019 and 150 basis points of emergency rate cuts in March of 2020, LIBOR has remained relatively elevated. This, combined with our ability to decrease deposit costs, has preserved a large portion of our margin. Stephen will talk later about actions we've taken to position the balance sheet and drive deposit costs further down. Our brokerage and trading and mortgage banking revenues continue to outperform on strong mortgage-backed securities trading and mortgage loan production volumes. Fees and commissions revenue was up over 7% from last quarter, building on the previous year's momentum Thank you for joining us today. We also took several steps related to delaying the filling of open positions and reducing discretionary spending detailed later in the call, which should help expense levels for the remainder of this year. Turning to slide five, period end loans were $22.5 billion, up over 30% from last quarter. While this was positive for the company overall, a significant portion of this was due to increased draws, particularly in our commercial and industrial portfolio. Period-end deposits were up nearly 6% length quarter and up over 15% year-over-year, a continuation of the strength we demonstrated in 2019. Even with the significant growth in deposits, we were able to bring overall interest-bearing deposit costs down from 1.09% in the fourth quarter to 0.98% this quarter, as we were able to adjust rates paid on exception price deposits in our commercial portfolio much more quickly than expected. Half of us under management or in custody were understandably down for the quarter as equity markets weighed on asset prices. That said, prudent diversification of our clients' assets helped us to relatively outperform the broad market sell-off. In addition, we saw an opportunity to invest further in our company this quarter as we bought back 442,000 BOKS shares at $75.52 per share in the open market. I'll provide additional perspective on the results after the prepared remarks, but now I'll turn it over to Marty Grunst, our Chief Risk Officer, to cover our business resiliency and employee safety response to the coronavirus pandemic. Marty and his team were instrumental in making sure we were able to respond quickly while also maintaining business continuity throughout our footprint.