BOK Financial Corporation

Greetings. Welcome to Bok Financial Corporation's first quarter 2025 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 this time, simply press star followed by the number one on your telephone keypad. If you would like to retry 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 first quarter 2025 financial results. Our CEO, Stacey Kimes, will provide opening comments and cover our loan portfolio and related credit metrics. Scott Brower, Executive Vice President of Wealth Management, will cover our fee-based results. Our CFO, Marty Grunst, will then discuss financial performance for the quarter and our forward guidance. 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'll now turn the call over to Stacey Kimes, who will begin on slide four.

Thank you, Heather. We appreciate you joining the call this afternoon. We are pleased to report earnings of 119.8 million, or EPS, of $1.86 per diluted share for the first quarter. At BOK Financial, we've worked hard over the years to build a reputation as a strong, stable, and growing financial services provider. In today's volatile market environment, the stability of our franchise is apparent. We have a consistent risk management framework built to weather many different economic and market cycles. Our capital levels remain strong and, in fact, improved yet again this quarter, with TCE reaching 9.5% and CET1 reaching 13.3%. These strong capital levels not only help insulate us from market disruptions, but also allow us to confidently and strategically plan for future growth. Another insulator is our liquidity position. At 62%, our loan-to-deposit ratio is one of the lowest in our peer group. Additionally, part of our stability story is a disciplined approach to credit that doesn't change over cycles. That consistency has driven solid performance in our loan portfolio with low criticized classified levels and a combined allowance at a healthy 1.4% of outstanding loans. Our long-term credit performance of 26 basis points of charge-offs is peer-leading, and we believe in our ability to continue outperforming the market in this area. Commercial real estate is another area that can be sensitive to market conditions. Our CRE concentration is currently well below limits, which at 185% limit on Tier 1 capital plus reserves, in itself is low compared to peers. Our financial performance this quarter reflects our ability to navigate through times of extraordinary market volatility. Despite recent market disruptions and geopolitical events, our diverse business model has performed well. Our strategy at BOK Financial is to produce long-term, sustainable value for our shareholders, and we base our decisions on that strategy. While we may see fluctuating results in some of our business lines during unstable conditions, as we did this quarter, these businesses are built for long-term success. During the quarter, net interest income was strong, and we continue to see net interest margin expansion for the third quarter in a row as we recognize the downrate deposit status with continued lower repricing. We are already showing a total liability data of 74%, which is one of the highest in our peer group. The lack of clarity and volatility in the financial markets impacted our fee income, specifically in our trading business. Trading fees in January were in line with our expectations. The trading volumes and spread were compressed during February and March as uncertainty in the markets slowed fixed income trading. However, as we mentioned last quarter, we expected a mix shift in trading revenue to net interest income as the yield curve steepened, and we saw that come to fruition in Q1, with some of our fee income decline recaptured in net interest income growth. Scott will talk more about this in his commentary. Consistent with the rest of the industry, loan growth in the first quarter has been challenging. As you can see on slide 6, we experienced contraction in our loan portfolio, mainly driven by pullback in our energy book. Excluding energy, our total loan portfolio was relatively consistent with prior quarter. Loan balances in the energy business decreased 12.1% at link quarter. Our appetite for adding new energy transactions is unchanged, and we're proactive in supporting our customers in this space. Over the last few quarters, the energy industry has been consolidating, which has generated payoffs in the portfolio. We expect these balances will rebound over time as the market adjusts. Our core C&I loan portfolio, which represents our combined services and general business portfolios, was relatively stable late quarter, contracting only 0.7%. On a year-over-year basis, these portfolios are still showing positive results, growing 4.2%. Our healthcare business loans decreased four and a half percent in a quarter. We set a new record for healthcare commitment production in Q1. However, payoff levels have remained elevated relative to historical standards and more than offset the increased outstandings. Payoff activity is a normal component of this business and was driven by increases in asset sales by sponsors and refinancing into non-bank, long-term, non-recourse loan options. We expect half activity, especially related to refinances, to moderate and pipelines to remain robust. Our commercial real estate business increased 2.1% quarter over quarter, with the majority of the growth coming from multifamily housing and industrial projects. We are starting to see the loans that we originated in 2024 fund up as they move through the construction phase as we signal the past couple of quarters. We expect to see further growth in upstandings in the second half of the year. As I mentioned last quarter, we are expanding into the mortgage finance and warehouse lending business. This initiative is progressing nicely with the system implementation well underway and the talent already in place. This lays the foundation for a launch of this new line of business in the September to October timeframe. This won't be a monoline offering, and we believe that this will unlock value across our existing lines of business and allow us to better support and engage with the more than 500 independent mortgage originators that we do business with today. Transitioning to slide seven, credit quality remains exceptional across the loan portfolio. This isn't a new story for us. We've consistently shown peer-leading credit outcomes over the last 30 years across good and challenging market cycles. Non-performing assets not guaranteed by the U.S. government increased 36 million to 79 million. However, this is coming off the lowest levels in the last 20 years and remains exceptionally low. The resulting non-performing assets appeared in loans and repossessed assets increased 15 basis points to 33 basis points. Committed criticized assets also remained very low relative to historical standards. In addition, we had minimal net charge-offs of $1.1 million during the quarter, and net charge-offs have averaged four basis points over the last 12 months. We expect net charge-offs to remain below historical norms in the future. Our combined allowance of credit losses is $331 million, or 1.4% of outstanding loans, which is a healthy reserve level. Overall, I'm pleased with the results this quarter. We are focused on people and process. Our exceptional team demonstrates the grit and determination it takes to succeed in a very dynamic and fast-changing market. We continue to add revenue-generating team members, and our sales process continues to produce opportunities for us going forward. And now I'll turn the call over to Scott.