BOK Financial Corporation

Greetings and welcome to the BOK Financial Corporation second quarter 2020 conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, please press star 1 on your telephone keypad. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Steven Nell, Chief Financial Officer for BOK Financial Corporation. Thank you, you may begin.

Good morning and thanks for joining us. Today our CEO, Steve Bradshaw, will provide opening comments and Stacy Kymes, Executive Vice President of Corporate Banking, will cover our loan portfolio, including detail around our energy, healthcare, and commercial real estate portfolios. Mark Maughan, our Chief Credit Officer, will cover credit metrics, and Scott Grauer, Executive Vice President of Wealth Management, will cover the outstanding results from his team this quarter. Lastly, I'll provide second quarter details regarding net interest income, net interest margin, additional fee revenues, expenses and our overall balance sheet position from a liquidity and capital standpoint. In addition, I'll provide a few thoughts regarding expectations for future quarters. PDFs of the slide presentation and second 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 second quarter 2020 financial results. We are pleased to report a record quarter for BOK Financial in terms of pre-provisioned net revenue despite the many economic challenges due to COVID-19. Shown on slide four, second quarter net income was $64.7 million or $0.92 per diluted share. That's up 4% from last quarter despite another quarter of elevated provision for credit losses. Earnings this quarter were bolstered dramatically by $214 million in revenues from our fee businesses as our wealth management and mortgage teams have continued their momentum to post simultaneous record quarters for the company. Focusing on pre-provision net revenue, it's clear to see the significant benefit we drive for our company with our long-term commitment to balanced revenue and breadth of business capabilities. Pre-provision net revenue was $216 million this quarter, the highest level in the history of our company. Considering the environment we find ourselves in today, this is truly a remarkable outcome that all of our high-performing and talented employees should be proud of. Fee and commission revenue was up nearly 11% from the previous quarter, and an incredible 21% quarterly year-over-year on continued strong wealth management and mortgage revenues. Fee revenue now represents 43% of total revenue, and that's up from 38% in the same quarter a year ago. This once again demonstrates an important differentiating characteristic of BOK Financial. We have long had a diverse revenue mix that provides an earnings buffer and economic downturns because of the counter-cyclical nature of some of these fee revenue streams. Expense management remains prudent with an efficiency ratio below 60% for the quarter, even with the shift in the mix of revenue towards fee income. It should also be noted that we added $3 million in unplanned contribution to our foundation, including an incremental $1 million in the second quarter to aid those in our communities with food insecurity while providing much needed jobs for displaced restaurant workers. Our loan loss provision was $135 million this quarter due to a combination of changes in our reasonable and supportable forecasts of macroeconomic variables, along with some credit migration that Mark will cover in more detail momentarily. While we continue to build a reserve again this quarter, we believe the material reserve build should be largely complete, assuming our economic forecast is in line going forward. Net interest revenue was up $16.7 million to $278 million this quarter, Despite the ongoing impact of the 150 basis points of emergency rate cuts in March, our ability to decrease deposit costs and the relatively elevated nature of LIBOR early in the quarter helped preserve a large portion of our margin. Stephen will cover the underlying components in more detail later in the call. Turning to slide five, average loans increased $2.2 billion to eclipse $24 billion this quarter. While this was positive for the company overall, $1.7 billion of this was due to the Small Business Administration's Triple P program. Average deposits were up nearly 16% linked quarter and up nearly 30% from the same quarter a year ago. We attribute this strong growth to continued momentum in deposit gathering activities along with Triple P loan deposits and government stimulus payments. Even with the significant growth in deposits, we were able to bring overall interest-bearing costs down from 98 basis points last quarter to 34 basis points this quarter as we were able to adjust rates paid on interest-bearing deposits due to our proactive management in the face of an unprecedented Fed movement in the first quarter. Assets under management or in custody were up nearly 5% this quarter on strong sales efforts and increases in the equity markets during the quarter. We believe asset growth is in part attributable to the volatility in the markets, which has really underscored the value that a professional advisor brings to individual and corporate investors during times of extreme uncertainty. I'll provide additional perspective on the results at the conclusion of the prepared remarks, but now Stacy Kymes will review the loan portfolio in more detail. I'll turn the call over to Stacy.