BOK Financial Corporation

Greetings. Welcome to BOK Financial Corporation's third quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one 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 third quarter of 2024 financial results. Our CEO, Stacey Kimes, will provide opening comments. Mark Mond, Executive Vice President of Regional Banking, will cover our loan portfolio and related credit metrics. And Scott Grower, Executive Vice President of Wealth Management, will cover our fee-based results. Our CFO, Marty Gruntz, will then discuss financial performance for the quarter and 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 two regarding any forward-looking statements made during this call. I will now turn the call over to Stacey Cones, who will begin on slide four.

Stacey Cones, Thank you, Heather. We're pleased to report earnings of $140 million, or EPS, of $2.18 per diluted share for the third quarter. As we've mentioned previously, we are a strong and growing company that has prioritized generating attractive, long-term results, and we have demonstrated that again this quarter. During the quarter, net interest income and net interest margin have stabilized and started an upward trend consistent with prior expectations. We're also on track to capturing the down-rate deposit data as we communicated. The credit performance of our loan portfolio remains excellent. We had net recoveries during the quarter. Criticized classified levels remain below normalized pre-pandemic levels. and a combined allowance that remains robust at 1.39% of outstanding loans given our strong credit profile and performance. Loan commitments remain stable, although as Mark will cover later, robust capital markets activity during the quarter impacted growth and outstanding loan balances. We are encouraged by current sales activity and the trajectory that sets up going forward. Our fee income segments performed particularly well and contributed significantly to our overall results. Scott will talk more about those details shortly, but I wanted to note that we're proud of surpassing the $110 billion mark for assets under management or administration for the first time in our history. These results were achieved while preserving strong levels of liquidity with continued growth in our deposit portfolio, showcasing the strength of our franchise. We remain well positioned for growth while maintaining regulatory and tangible capital levels that are attractive versus peers. Our performance is reflective of solid operational execution and the strength of the economic conditions in our markets. We remain focused on delivering value to our customers and shareholders. During the quarter, we also saw the first cut in rates from the Federal Reserve, and I'm happy with the proactive steps our team is working through to adapt quickly to this change. Marty will discuss this in more detail later. It's also important to consider that for the first time in more than two years, the yield curve is no longer inverted as of the end of the quarter. While we may be neutral to the level of rates, there is certainly upside to our operating model when the yield curve is normal and upward sloping. This bodes well for us moving forward. I'm pleased with the results the BOKF team produced this quarter, and I'm optimistic about the trajectory our team has established. The economic backtrack we're operating in should allow us to continue generating attractive returns moving forward. And with that, I'll turn the call over to Mark.

Thanks, Stacy. Turning to slide seven, overall period end loans decreased 2.3% linked quarter, with commercial loans down 4.8% and CRE up 2.1%. However, average loan balances contracted only 80 million, or 0.3%. Despite the slight pullback in outstanding this quarter, we continue to grow new commitments and relationships. If you look at core C&I, which is reflective of our general business and services, outstandings in those segments increased at a 6.4% year-over-year rate, and total commitments have grown at a 5.7% year-over-year rate. BOK Financial experienced 11 consecutive quarters of loan growth until the third quarter. While the unique nature of the markets in the specialty lending areas impacted this consistent loan growth this quarter, we remain optimistic about our loan growth for future periods. Portfolio yields increased six basis points during the quarter. The majority of that increase was due to growth in loan fees, which I will break down in more detail as we walk through our loan segments. Loan balances in the energy business decreased 9.4% in the quarter. Most of this was driven by broader trends in the public debt market appetite for this sector. In Q3, We saw a more accommodating bond market with issuance in domestic energy debt transactions increasing significantly on a linked quarter basis. This activity does reduce outstanding loan balances. However, we have the ability to capture some of the bond economics of these transactions, which are accretive to earnings and led to a quarterly record in our investment banking revenue. We realized additional early payoff fees, which contributed to the yield increase I noted previously. Further, energy balances this quarter were affected by M&A activity with the acquisition of several of our customers resulting in the payoff of their loans. In many cases, we also participate and or leave the credit facilities of the acquiring institutions, but are seeing lower levels of leverage after the business combination. This has contributed to utilization rates in energy falling from 45% to 42% during the quarter. We've grown energy commitments over the last several years, but temporary factors can moderate growth and outstandings in any given period. Our combined general business and service loans fell 4.3% in the quarter, which has given back some of the seasonal advances that were outlined last quarter. Looking more broadly, these segments are continuing to post strong growth, being up 6.4% on a year-over-year basis, with loan pipelines remaining stable. Our healthcare business loans decreased 1.9% link quarter. Payoffs increased as longer term rates and spreads made it attractive for some borrowers to refinance in a fixed rate HUD market. Our pipeline remains robust, driven by potential new acquisition activity. Our CRE business increased 2.1% quarter over quarter. As we've discussed previously, we were very close to our concentration limit several quarters ago. As paydowns have reduced CRE levels, We are gathering new commitments and rebuilding outstandings as new loans fund up during the construction phase of these projects. We are committed to our strict concentration limit, which is 185% of Tier 1 capital and reserves on a committed basis, but is currently at 157%, which gives us plenty of room for growth that should continue to build over time. I won't cover slide 8 in detail, but this remains a good testament to the attractive long-term performance of our credit. Transitioning to slide nine, credit quality remains exceptional across the loan portfolio, extending our trend of outperformance versus peers in this area. NPAs, not guaranteed by the U.S. government, fell again this quarter, decreasing $6 million. The resulting non-performing assets to period-end loans and repossessed assets decreased one basis point to 34 basis points. Committed criticized assets remain very low relative to historical standards Further, we had net recoveries of $54,000 during the quarter, and net charge-offs have averaged seven basis points over the last 12 months. Looking forward, we expect net charge-offs to remain below historical norms. We are well-reserved with a combined allowance for credit losses of $332 million, or 1.39% of outstanding loans. And now I'll turn the call over to Scott.

Thank you, Mark. Turning to our operating results for the quarter, total fee income grew $2.5 million, contributing $202.5 million of revenue and representing 40% of total revenue, which continues to differentiate us from our peers and represents another strong contribution from these lines of business. I'd like to begin by covering our markets and securities businesses on slide 11. Both our trading and mortgage banking businesses can be volatile and fluctuate significantly in any given quarter based on current market conditions and expectations from the markets, but have shown very positive risk-adjusted returns. Consistent with the industry trends, our trading fees decreased 14.6% to 23.6 million during the quarter, which was driven by lower MBS volumes as client demand ahead of anticipated rate cuts was relatively muted. This is partially offset by strong activity in the municipal sector. Our trading volumes and spreads are greatly influenced by the mortgage origination market. While showing improvement compared to 2023, industry mortgage origination volumes remain significantly below historical norms. Given the recent rate cut and anticipated cuts ahead, we expect those volumes to continue to return to more normal levels which aligns with the current industry viewpoint. On that topic, mortgage banking revenue has remained relatively unchanged for the past three quarters, coming in at $18.4 million for the third quarter. The mortgage origination market remains relatively soft. As origination volumes increase and the environment normalizes, both trading revenues and mortgage banking revenues should be positively impacted. While we've faced some headwinds in this space over the past two years, we believe the outlook has improved from current levels. Our other markets and securities businesses continue to produce solid results. We've recognized a record quarter for investment banking fees coming in at $10.8 million, led by our Texas municipal bond underwriting team and bond economics related to the energy payoffs that Mark noted in his comments. Turning to slide 12. Asset management revenue was consistent with the second quarter at $57.4 million. Growth in our trust fee income nearly offset last quarter's seasonal tax preparation fees. Asset Center Management Administration grew $3.2 billion with increased market valuations. As Stacy mentioned in his opening commentary, we eclipsed the $110 billion mark for the first time, and we're proud of the decades of work that have contributed to building this platform. Transaction card revenue grew by 4.6% to $28.5 million, driven by a higher volume of transactions processed. These businesses produce attractive, peer-leading returns and give us a resilience to market stresses, contributing greatly to the strength of our franchise. They are core to our business model and were built over decades of investment. We are thrilled with the strong financial results these teams are producing and the outlook for growth. And now, I'll hand the call over to Marty to cover financials. Thank you, Scott.

Turning to slide 14, net interest income was up $12.1 million, and net interest margin was up 12 basis points, with core net interest margin excluding trading up eight basis points. Within the eight basis points, three were due to unusually high loan fees in Q3, driven by the increased level of loan payoffs, which is not expected to recur. The remaining five basis points are on track with the drivers we have talked about over the last couple quarters, causing asset repricing to exceed liability repricing, including securities and fixed rate loan repricing, and less deposit mix shift out of DDA. The strong interest-bearing deposit growth in Q3 also supported both net interest margin and net interest income. Deposit repricing activity resulting from the 50 basis point Fed rate cut is also on track with our expectations. Both the index deposits and the high beta portions of our commercial and wealth deposit book were repriced lower in conjunction with the Fed rate cut. These actions were largely completed by quarter end and give us a high degree of confidence that we will realize our deposit beta expectations as market rates decline. Overall, deposit betas on the way down should be similar in magnitude to betas on the way up. If we see continued interest-bearing deposit growth in Q4, that may impact the calculated deposit beta a bit, but not the liability beta, as that growth would replace wholesale borrowings and be incrementally beneficial to margin and NII. Turning to slide 15, linked quarter total expenses increased 4.3 million, or 1.3%. Personnel expenses grew 15.7 million, largely driven by incentive compensation expense, which is primarily timing-related. looking at the average of the last two quarters personnel expense may be useful. That increase was offset by lower non-personnel expenses, which included a decrease related to the $13.6 million charitable contribution made to the BOKF Foundation in the second quarter. Slide 16 provides our view on full year 2024, and I will note a couple of changes. Loan growth expectations were revised to reflect this quarter's specialized lending payoff activity that Mark covered in his commentary. Deposit growth has remained strong, with new balances being added below the cost of wholesale borrows. We expect net interest income to be slightly higher than $1.2 billion. Fees and commissions were adjusted to reflect recent and current conditions in MBS trading and provision expense was also adjusted to reflect the very strong credit quality results we continue to experience. We're in the midst of our budgeting process for next year, so consistent with our normal practice, we will provide 2025 guidance when we announce Q4 results in January. 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. The floor is now open for questions, if you have a dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue, if you would like to withdraw your question simply press star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. And your first question comes from the line of Michael Rose with Raymond James. Please go ahead.

Hey, good afternoon, everyone. Thanks for taking my questions. Maybe I could just start on some of the loan payoff commentary. I certainly understand some of the specialized segments in energy, but when I look at the market breakdown, it looks like you experienced declines in even some of the smaller markets that you guys So I know you talked positively about future loan growth, pipelines being full. Can you just give us some color there as to maybe what pipelines look like now versus a quarter, a couple quarters ago? And do you think some of the headwinds around the election will actually cause people to actually borrow? Just some color there would be great. Thanks.

Well, taking that last part first, Mark, I'll just say that obviously uncertainty will cause people to delay decisions. So it's likely that some of the decisions will be resolved by the election or views on tax policy going forward, you know, in the short term. But we do expect that that will have an impact later this year. But we're looking at our pipelines overall. You know, we are We feel pretty strongly that in the CNI world that our pipelines are in good shape. Fundamentally, we're looking at the CNI portfolio that, as we said in the second quarter, we were at a seasonal high during that quarter. And then we have seen that come down in the third quarter in line with what our pattern has been in the past. This is not an unusual development, but if we look at the – that's why we concentrate on year-over-year growth. And so we had 6.4% in year-over-year growth in CNI and 5.7% growth in commitments, and utilization is only down from 57% to 56%. So the pattern has existed, but we actually have raised the overall level of our commercial and industrial loans throughout the year, not just looking at third quarter to second quarter. I would say when we then look at our experience in the smaller markets or all the different markets, we've been very actively acquiring talent in those markets. And we've been actively increasing our calling and pursuing business because we're in good position from a capital standpoint, from a credit standpoint to pursue business. And we feel comfortable that, you know, barring any significant change in the economy, that we're going to be able to generate future loan growth, and we're in a good position going forward with that over the next 12 months or plus.

Michael, this is Stacy. Just to pile on, I think we've had 11 consecutive quarters of loan growth, and so you had a really unique circumstances quarter around energy and healthcare that impacted the totals overall. You've got lots of tailwind, I think, as we look into the next 18 months around commercial real estate because we're well below our concentration limits, and so we've got room to fund up there. We go really good. We track through Salesforce. We track our pipelines monthly, quarterly. Everything we're looking at there still feels very good to us. Mark's right. There can be some uncertainty that happens around election season or next year as you think about tax policy, but if you just look on the surface, Those core C&I areas are growing 6% year over year. We're really happy with that. We've strung together up until this quarter 11 consecutive quarters of loan growth. We still feel confident. There's nothing here inherently that's changed our confidence and our ability to grow the portfolio. In fact, we're continuing to add significant talent, some of which we haven't even announced yet in some of our markets. So we're confident that we'll continue to grow loans as we move forward.

Very helpful. Thanks for that. Maybe just one. uh for for scott um certainly understand some of the the nearer term headwinds as it relates to maybe mortgage banking and you know some of the the broker brokerage trading uh you know softness uh you know at least sequentially this quarter but it sounds like the outlook and what you guys are trying to put forward is is relatively uh positive um you know what do you see as kind of the the greatest opportunities among you know, fees as we think about the next couple quarters and where could there still be some headwinds and, you know, maybe how would the, you know, the impact of lower rates, you know, meaning if we get more cuts in the forward curve or maybe less in the forward curve, how would that, in your view, impact, you know, some of the lines of business? Thanks.

Right. So, great question. I think that, you know, when you look in detail at the trading line item, it is, entirely limited to the mortgage-backed securities sector, where we saw, you know, we've seen significant headwinds. And so when you parse that out and eliminate the MBS, we actually saw increases in all of our other product sets. So municipals, corporates, treasuries, all of our fixed income activity was actually up absent the MBS. So we did and have seen Beginning in mid-September with the Fed move, we have seen an uptick in the activity on the MBS side. The question that remains is the degree to which we'll see continued momentum and activity, but we have seen an inflection point in terms of the activity and the volumes there on even the MBS side. But we continue to have constructive belief about our positioning inside of the municipal bond space, both from an underwriting and a trading perspective. On the asset management side, we've got consistent sources of inflows to offset our general churn in our assets with disbursements, et cetera. So we like our allocation of our assets in terms of our AUMA 13% in cash, 40% fixed income, 39 equities and 8% alternatives. So we're well balanced and I think poised to continue to benefit in asset growth from the market perspective, but probably more significantly and more importantly on our flows in on our asset management side. So we're constructive on all of those and continue to see positive turns develop really across the board on those spaces. And then I think Marty, You want to comment a little bit on mortgage production?

Yeah, Michael. So I'd say, you know, mortgage production, we feel like there's good opportunity in the future there. I mean, you know, current period production levels are still a little depressed. But, you know, I think as time moves forward and we see the rate declines continue, you know, we'll see both volume come back up and, you know, gain on sale production You know, that percentage was a little bit lower Q3. Like, you'll see it go back to more like what you saw in Q2. So, I think that there's opportunity in that line item as well.

But there's no doubt there's pressure there. I think you think about other areas we've got, you know, like, we don't talk about our ATM business, Transfund. Our transaction card business is up 4%, 4.6%, very steady. And these guys have really turned the growth corner. I'm excited about kind of where they're headed over the next 12 to 18 months. From their perspective, they went through a really difficult system conversion a couple of years ago and really kind of got through that mess and have turned the corner in a meaningful way there. Our businesses aren't all designed to go up and to the right. And so some of these businesses, like the trading that's impacted by MBS or the mortgage businesses, are going to be softer when others are performing very well. I mean, Scott mentioned the fiduciary business. I mean, $110 billion of assets under management, you know, lots of tailwind from the markets today. We're awfully excited about the opportunities there over the next year or so. So it's not all going to go in tandem together as it goes up and to the right, but the mix is very good, and we like how it all works together over different cycles.

That's great, Paul, everyone. Thank you so much. I'll step back.

Your next question comes from the line of John Arstrom with RBC Capital Markets. Please go ahead.

Hey, thanks. Good morning or good afternoon, I guess. Yeah. Marty, clarification question for you on expenses. You expect the incentive comp number to come back down in 4Q to kind of a more normalized level, I guess. And I think you said the average of the last two quarters is is a run rate for comp. Is that Q1 and Q2 or Q2 and Q3?

Yeah, John, if you look at Q2 at $191 million for personnel expense, you know, that's low, you know, versus kind of a run rate level in Q3 at $206.8. That's high. I mean, the easy way to do it is to just average those two, and that gives you much better sense for kind of what a run rate is for that line item. There's just You know, the way you have to recognize incentive comp, that's not always, you know, sometimes there's a little noise quarter to quarter.

Yep. Okay. Thank you on that. Then on deposits, slide five, you know, you guys had, you're talking about almost a billion dollars in growth for the quarter. Curious where you're finding the opportunities to grow deposits in general. Is this client movement or is it market share gains or what's driving that?

Yeah, it's more commercial and wealth, you know, broadly, but a little bit more skewed towards commercial. And, you know, it's a combination of new clients we're bringing to the bank, probably a little bit more of that is existing clients, but it's broad-based across the businesses.

Yeah, John, some of that is mixed change. We have customers that are moving from DDA and they're taking advantage of the opportunity and moving it. We're not losing them as deposits. We're just changing the mix from a DDA to more of an interest-bearing option. Okay, okay. We have, and I would say, we have added a number of new customers over this last 18-month period. Yep, okay.

And just back on the... specialty businesses and energy growth or energy pressures in terms of balances what what do you think changes that um is it just as simple as the bond market is open and there's m a happening or what what changes some of those heavy payoffs in those businesses thanks wait this is stacy i mean it you know it could there's a lot that could change you know that that that i don't think that what happened what happened in the third quarter i think is unique

for energy in that we just had a bunch that kind of coincidentally all happened at the same time. It tended to be a little bit more ratable over these types of periods. I think if you look just today, which doesn't mean that the wait will end at the end of the year, but energy is up relatively materially from where it was at the end of September, that could change. But I don't think there's some fundamental shift here that's happened with energy that there's going to continue to be pressure on balances. I think that there may still be some leftover capital markets activity or M&A activity that could impact the balances for a quarter or two here, but I think the bulk of that should be behind us, and I would expect those balances to grow as we move forward, particularly over the next, if you think about, when I think about things over kind of a 12 to 15-month or longer time horizon, I think you'll see those balances grow from the end of the third quarter over the next 12 months for sure.

Yeah, and I would only add that the Clearly, this is one of the more stable markets we've had in a long, long time. I mean, it's been consistently good pricing in the oil market, and customers are going to still have to invest in order to maintain their borrowing bases and continue the production and so forth. So we do expect, and we've been in this business a long time, and we'll get our share of those opportunities as they come about. Yep. Okay.

All right. Thank you for the help.

Your next question comes from Peter Winter with DA Davidson. Please go ahead.

Thank you. For expense growth, it's kind of been running high the last two years, even excluding FDIC and charitable contributions. Are there opportunities to lower that expense growth? And what do you think a more normalized growth rate is for the company?

Yeah, Peter, I'd say a couple things. So, you know, efficiency is super important to us. We're always looking to manage to appropriate efficiency ratios at each line of, you know, and it's more important at the line of business level than all rolled up, actually, as we think about it. And those numbers will move around just as margin moves around. But you're right, expense growth is something that we pay attention to and want to make sure that every line of business is doing so in a prudent way. However, we are also very focused on investing in our business and growing our business. And so that takes the form of, you know, adding producers and adding technological capability to serve customers. And so you'll see that, you know, a couple line items. So, you know, we feel good about what we've delivered this year, but I'll just note that data processing and communications you know, we've got investments that are really good investments for long-term growth in the company. And so what you saw, you know, just looking at this quarter, for example, you know, that's a couple of important projects, including the 12th line of business, that have gone in really well, and we're very excited about what that means for the company. But you'll see that step up, and that's, you know, that's not going to come back down, to be sure. And then as we add people, you'll see occupancy as a step function for growth in people, and so you'll see that come up over time if that's part of what your question was.

But Peter, if you look at the overall efficiency, I think to be where we are with the rate environment where it's been, looking at it by line of business, we feel really good about managing from an efficient perspective. I think you'll see us make some investments here, and I think you'll see us work real hard to maintain the efficiency ratio where we're at today. But I also think that you've got a couple of businesses that are not funding, not operating at a high revenue level where they've been in the past that dragged that efficiency a little bit. And so we like those businesses. They help us through a long cycle. But they do impact it. And so we're not too worried about that. Like Marty said, it's more important for us to look at it at a line of business level. And we're very comfortable with our efficiency when we look at it through that lens.

Okay. And then if I can ask, the positive growth, as I think John mentioned, was very strong. It's been very strong. It's been outpacing the loan growth. So with the loan-to-deposit ratio at just 64%, are there opportunities maybe to push down deposit costs more aggressively than you thought maybe a quarter ago? And is there kind of a certain level you don't want to see that loan-to-deposit ratio go above?

Yeah, we're not managing to a loan-to-deposit ratio per se, but you're right. Having a loan-to-deposit ratio as we do does give us the ability to manage deposits very well. And so what we did in the third quarter, we're very happy about the progress we made in being able to bring down deposit rates as a result of the Fed move and got a good bit of that done before the end of the quarter with still a little bit more left to go. And all that gives us the confidence that we're going to continue to expand margin as we go from Q3 into Q4. And that's a sustainable trend for us.

And that expansion on the margin, that's on a core five basis points, right? Not the reported.

I think you'll see that in both as we go from Q3 to Q4. So even above the 268?

That's right.

Okay. That's great. Great. Thanks, Marty.

Your next question comes from the line of Brett Rabattin with Hovde Group. Please go ahead.

Hey, good afternoon. Wanted just to follow up on that 268 and talk about the margin from here. And I know you had, I believe it was three basis points due to payoffs and core. expansion of eight basis points. Can you talk maybe a little bit more about the drivers that you expect in 4Q? And then it sounded like you were pretty comfortable with deposit betas and just wanted to dive in a little bit more on your lowering deposit rates post that first Fed cut.

Sure. Yeah. So keep in mind that, you know, SOFR actually, term SOFR actually had a rate cut in it by September 1st. I mean, it was 15 basis points down from where it was early on. So you actually saw some impact in the loan book in September. And then we were able to get both wholesale and deposits down through the end of the quarter. and still ended up with really good results at the end of the quarter. And so that only gets a little bit better when you get into the fourth quarter. So those repricing dynamics, we understand very well and are very comfortable with how that plays through. There's always some denominator effects that can happen if you know, overall trading moves around. But, you know, we feel very confident about how that will play out over the next quarter.

Brad, we talked a lot about the loan and deposit book, but don't forget, we've got a fixed rate security portfolio that's got a three and a half year plus or minus duration that's funded with floating rate liabilities that's going to move down commensurate with every Fed step. And so that's part of what's behind the confidence of what's going to happen with net interest margin and interest income.

So everything I just talked about is still on top of the, you know, fixed rate securities are still repricing up, a portion of the fixed rate loan book, that's still repricing up. You know, that stuff's still happening as it has for the last couple quarters, so that will continue to be supportive. Okay.

That's helpful. And then the other thing was just, I'm curious, you know, I think people kind of view you guys as very selective M&A players, and maybe there'd be some others that might be more aggressive than you. And I'm just curious to hear your thoughts on what you see playing out in the environment, conversations, what you're seeing activity-wise or maybe chatter-wise with some of your potential players.

partners yeah just i mean just broadly i think that that we're interested in the right opportunity it's just that it does have been difficult to find you know we're not interested in somebody's got a large concentration of commercial real estate because of our discipline there we value core deposits we value deposit franchises uh we think those are are really key to banking uh and there's just not a lot that kind of fits the size profile and exactly what we're looking for and so That remains, you know, a possibility to the extent that there's something available, but that's not how, you know, that really, we've always used that as kind of the cherry on top of the sundae. We're not, our strategy isn't to buy something to achieve the next level of growth. We're so focused on organic growth. We're, if nothing, we're never successful at buying another bank, we still think we're going to perform very well because of our emphasis on organic growth. But we're not out of the market as it relates to things that could happen from an acquisition perspective. They're just low probability events for which there's not a lot that really fits our criteria today.

Okay. Fair enough. Appreciate all the color. Thank you.

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

Hey, thanks for taking my question. wanted to uh start on the deposit side and more specifically the time deposit portfolio was just curious how much of that portfolio reprices in the fourth quarter and and if you could sort of walk through the repricing dynamics there yes that's largely a consumer book and so you know that's got a tail that goes out you know well over a year so so it's not a huge amount uh in any given month because it's so granular

So, you know, that in and of itself is not going to have a large impact on the pricing characteristics of the deposit book.

Got it. And then maybe just one follow-up on CRE. You know, it sounds like CRE activity is picking up a little bit, and you have a clear advantage relative to competitors just given the concentration levels. Could you give us some color on what you're seeing in terms of the loan competition in this space?

Yeah, I mean, I think there's a little less competition, but there's also a few deals. I mean, some of those customers that we've been with for a long time are moving more cautiously and slowly. So that's impacting that a little bit. But clearly, there is some advantage that we have by being able to be in the market when others are still trying to manage their concentration levels. But that's part of why we're confident that we've never had trouble filling that bucket. And so we'll continue to prospect and to grow existing customers principally with an occasional new customer mixed in there. But I'm confident that over the next 12 to 18 months, we'll refill that bucket. That's never been an issue that we worried about growing. All right. Sounds good.

Thanks for taking my question.

As a reminder, 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 join the queue. Your next question comes from the line of Matt Olney with Stevens. Please go ahead.

Yeah, thanks for taking the question, guys. Just wanted to Go back on the investment securities portfolio. Marty, I think you mentioned this is still pricing higher in the near term. Any more details there as far as the cash flows in that portfolio and then what you've been buying more recently and then just the overall size of that portfolio? Any plans to change the size of that? Thanks.

Sure, yeah. We saw about $760 million of cash flow come in this quarter and reprice, and so that repriced up about 115 basis points during the quarter. And, you know, kind of that level is about where you can expect that over the – Q3 is a little bit higher, probably more like $650 million a month – sorry, a quarter per quarter over the next, you know, year is probably a good run rate to think about how much of that happens going forward. And, you know, in terms of what we're buying, I mean, it's very similar to what we bought in the past, sort of, you know, three, four-year duration paper that is, you know, kind of at the shorter end of the mortgage security spectrum.

Okay. Got it. Thanks for that, Marty. And then I guess I know some of the movements on the balance sheet at quarter end can be a But I guess the borrowing position came down pretty hard at September 30th, below $5 billion. Is that a good assumption for the fourth quarter? Are there any color on that line for 4Q?

Yes, you've got two things going on there that brought that down at the end. So, number one, you know, that deposit growth that we had during the quarter, I mean, that was the big driver, and so that should be durable. And then... Second, you know, just our trading account is always up in the middle of the month and then lower at the end of the month just because that's how the mortgage-backed security settlements, you know, that cycle works. So that will usually be a little bit lower end of month than average. But, you know, a big driver there is the deposit. So that may stay. That should grow a little. You should see loan growth, and so that should bring the wholesale up a little bit. uh you know hope time is a trend but uh you know i'd say that that's materially a good starting place okay that's all for me guys thank you thank you matt there are no further questions at this time i will now turn the call back to stacy kimes for closing remarks

Thank you everyone for joining our discussion today. Again, this quarter we've maintained consistent earnings growth benefiting from the net interest margin expansion and exceptional asset quality. We've proven over a long history that we have both strong risk management practices as it relates to credit, interest rate, liquidity, and capital, while also demonstrating a higher long-term earnings profile. Our diverse business model has proven resilient through many business cycles. We believe the economic resiliency of our eight-state footprint, coupled with our high levels of tangible capital and liquidity, will be the raw material for our future 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 at bokf.com.

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