BOK Financial Corporation

Greetings. Welcome to BOK Financial Corporation fourth quarter 2021 earnings conference 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. Please note this conference is being recorded. I will now turn the conference over to Stephen Nell, Chief Financial Officer for BOK Financial Corporation. Please proceed.

Good morning, and thanks for joining us. Today, our CEO, Stacey Kimes, will provide opening comments, and Mark Maughan, Executive Vice President for Regional Banking, will cover our loan portfolio and related credit metrics. Scott Grauer, Executive Vice President of Wealth Management, will cover our fee-based results, and then I'll provide details regarding net interest income, net interest margin, expenses, and our overall balance sheet position from a liquidity and capital standpoint. PDFs of the slide presentation and fourth quarter press release are available on our website at BOKF.com. We refer you to the disclaimers on slide two regarding any forward-looking statements we make during this call. I'll now turn the call over to Stacey Kimes.

Good morning, and thanks for joining us to discuss BOK Financial's fourth quarter and full year 2021 financial results. I'm proud of our record year of earnings in a period with tremendous volatility. As we continue to reiterate, our strong earnings are really due to our diversified business model, which has long been core to our strategic identity. It also reflects extraordinary dedication by our employees who are serving our customers in all aspects of our business in a very difficult environment. While there were aspects to our financial performance in 2021 that will not recur in 2022, The business that created these opportunistic gains is core to our franchise. Starting on slide four, full year net income was $618 million or $8.95 per diluted share, an increase of $183 million or $2.76 per diluted share. Shown on slide four, fourth quarter net income was $117.3 million or $1.71 per diluted share. That represents a $71 million decline in net income from last quarter's all-time quarterly high, which benefited from a non-recurring gain on sale of an alternative investment, as well as market conditions that were favorable to our mortgage-backed securities activities within our institutional trading business. The key items that drove our decline in linked quarter net income were our fee-based business units continue to perform well, recognizing the fourth quarter is historically lower than the third quarter. Link quarter fee income was down $44 million, with a $33 million decline in trading and brokerage fees, all driven by unfavorable market volatility in our MBS institutional trading activities. Mortgage fees decreased $5 million as production activity slowed and margins compressed. Other revenue decreased $7.3 million as a result of lower operating revenue from repossessed oil and gas assets due to the sale of a property. All other operating revenue was down $28.3 million linked quarter, primarily related to a $31 million gain realized in the third quarter from the sale of an alternative investment. Net interest revenue declined $3.2 million on a linked quarter basis, largely driven by a $5 million decline in Triple P fees. This was partially offset by an increase in non-use fees from low utilization levels and a one basis point decline in our interest-bearing cost of funds this quarter. We continue to experience some compression in yields on our available for sale portfolio. However, that impact was materially offset by increased balances in our trading portfolio. Market conditions and credit trends continue to improve, allowing us to release an additional $17 million of our loan loss reserve this quarter, which was $6 million less than the third quarter reserve release. We have released $100 million in loan loss reserves for the full year. Expense management remains quite strong, although link quarter direct expenses increased $8.2 million this quarter, $5 million of which was a contribution made to our foundation that serves our communities. The remaining increase in expenses is generally related to technology spend, a slight increase in business promotion, and some operational losses. I'm very proud of our expense management this past year, as total direct expenses increased only $13.4 million or 1.2%, with $10.8 million of that increase from increased employee medical spend coming off an unusually low 2020 as medical procedures were deferred from 2020 into 2021. These results reflect our disciplined approach to expenses despite significant technology and cyber-related investments. Turning to slide five, total loans were down $142 million for the quarter, but Triple P loan forgiveness accounts for $260 million of that contraction. We believe core loan growth turned a corner this quarter, with an increase of $117 million, or 2.4% annualized. The good news here is that the growth is being driven by our CNI book, both in our specialized lending and regional and corporate banking areas. Core CNI, excluding energy, grew 6% annualized, and 11% including energy. C&I commitments grew as well, with relatively no change in the core utilization rate, which positions us well with plenty of growth capacity as the economy continues to rebound. The net link quarter growth was muted by continued payoffs in our commercial real estate group, however. We expect growth to resume there after the first quarter. Loans attributed to our wealth segment grew $133 million this quarter, or 29% annualized. Average deposits increased another $2 billion this quarter and are at $4.3 billion or 12% higher than the same quarter a year ago. Assets under management or in custody in our wealth management business grew 6% linked quarter to $104.9 billion, surpassing the $100 billion milestone, largely due to sales activity and favorable markets. Compared to December 31, 2020, assets under management or in custody are up $13.3 billion, or 14.5%. I'll provide additional perspective on our results before starting the Q&A session, but now Mark Maughan will review the loan portfolio and our credit metrics in more detail. I'll turn the call over to Mark.