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BOKF BOK Financial

Participants
Joe Crivelli IR
Steven Bradshaw President and Chief Executive Officer
Scott Grauer Executive Vice President, Wealth Management, CEO, BOK Financial Securities, Inc.
Steven Nell Executive Vice President, Chief Financial Officer
Stacy Kymes Executive Vice President, Corporate Banking
Brady Gailey Keefe, Bruyette & Woods
Peter Winter Wedbush Securities
Jared Shaw Wells Fargo
Ken Zerbe Morgan Stanley
Brett Rabatin Piper Jaffray
Michael Rose Raymond James.
Jennifer Demba SunTrust Robinson Humphrey
Gary Tenner D.A. Davidson & Co.
Jon Arfstrom RBC Capital Markets
Call transcript
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Operator

Greetings and welcome to the BOK Financial Corporation Fourth Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joe Crivelli, Senior Vice President, Investor Relations. may you sir, you begin. Thank

Joe Crivelli

Steven thanks Good PDFs hear Scott of us. Stacy Management, this we’ll the available slide fourth joining about morning, Grauer, EVP, the Banking. turn our forward-looking Wealth CEO; at on and remarks our quarter Today it call Bradshaw, and and to for from any Corporate CFO; Nell, www.bokf.com. X presentation press Steve EVP Slide Kymes, refer you quarter Bradshaw. as now on release We we call. make over to during statements are the disclaimers website Steve I'll to the pertains

Steven Bradshaw

Good morning. for results. quarter financial The fourth Thanks fourth quarter BOK the Financial. a for year us discuss wrapped full strong XXXX to and year up joining very

was outstanding assets net attracting year year, back million which to growth. growth strong saw share, success performance interest full market, per diluted highest which income, combined demographic managers economy income the under in trends achieved in that from interest we results and the through from to and long-term $X.XX benefit we net just All or continues point Wealth our EPS external the margin strong net XXXX. $XXX.X in money division, from continued Management our with For

successfully our In revenue growth managed below we expenses substantially addition, rate.

loan more for we in loss finally, quarter, our the our the meaningful strategy our assets of much than change driving commissions as well fees XXXX manageable For XXXX X.X% the X% to year, reserves million environment total significant led MSR earnings. but up portfolio revenue improve. was impacted continued pre-provision, The on results. net was energy credit in $X up And and fourth less in impact Thus expenses is revenue, which plus earnings hedging to defined and interest benign by total leverage. positively was and released

modest BOK fourth the was as our will tax change the $X.XX per share for write-down benefits of significant have a shareholders, quarter. $XX.X rates While million tax there deferred long-term in in or asset corporate

our made engagement to we Foundation contribution addition, $X community our to customary annual efforts. million BOKF In the fund

X, loans down slightly end for loan factors. just quarter. below were on This our from the of the Period-End $XX.X as expectations X%. was noted third three the year less growth XXXX As in Slide attribute of We to loan robust was the growth billion

First, growth muted the in year. healthcare healthcare first prospects reform in half of portfolio our the the of

second accelerate a of in rate with loan Accordingly, And as exceeding years fact set of deals record have quarter almost us. the we coupled second in quarter commercial experienced clients XXXX. curve a of estate yield commercial C&I our we are the a concentration limits the in flattening which paydowns Second, will XXXX with capacity was new our of we wave real production half the now expect reform lower previous volume Steven first due booked to of XXXX, to not year as the and exceeding we estate, new commitments internal mindful were uncertainty mid-single-digit ago. booked tax behind fourth growth reform, headwinds earlier In more the book to healthcare growth year. of negatively are in C&I around all now half million impacted discuss in business making tax normalized record real in our $XXX segments. And the third, new commitments in general a these We to which three feel we in of that law, group guiding the plans. moment. and The two

driver During during continues was XXXX, growth the record This track impressive financial big performance of year. wealth and its management record results. generated our a

Management President Vice Scott? remarks. few Executive our Group Grauer, Scott to a ask I’d of So Wealth make

Scott Grauer

preliminary division’s see On X, Slide highlights XXXX of the Management Steve. Wealth financial you’ll Thanks, results.

This revenue, Net more management, XXXX. were into XX% as as in the increase mortgage-backed the during result the year leverage a million established by management, are driven which these highest trust total in for is growth XX.X% and allocations by business and the million the is investors This even for growth. is wealth deposits up financial margin year. net expansion Revenue management XXXX. allocations for century division management, this security was investors company we in to our fee as and meaningful brokerage, are growth the which new investors. corporate XX.X% year. X.X% typically including also trading the combined offerings respectively investment Connecticut an personal XX% revenue income desk inclusive operating division. individuals, among actually expanded were loans services, and of of for income with loan services and cross-section well This income last group. been trading from This significant as to a net alone was that despite in growth products and nearly that fees, fiduciary others. of higher the direct rates wealth on the year before our management deposits the income committed and $X XXXX and mortgage services includes private in the risk and private banking that up and XXXX, banking Stanford statement. interest robust to a was before lines and corporate institutional $XXX.X translated under among Loans see operating we’ve industry and institutional driven As an a from corporations, achieved $XX.X Brokerage broad careful assets contributed estimated The expenses to down for management corporate it know, interest with trust contribution, institutions, our expense million earnings was retail asset our banking and up but initiative

growth year up and management the with assets search fixed fiduciary the stage billion, for the ended and income of X.X% division. Longer importantly, assets nearly increases in set to industry. surpassing the for in and retirement our for the markets billion equity under of Management of in quarter, with first continued history. Perhaps the the new $XX the of money baby fourth their $X total $XX.X is of the is heirs transfer most year powerful Wealth most one trillion custody the or we in up management time the wealth Finally, term, the trends during in wealth the and boomers company’s demographic and facing XX.X%

fiduciary will one can We benefit This in to I’ll we fees deliver diverse is under reasons in higher assets commissions services trust XXXX confident the in are fees more translate positioned XXXX. in the turn XXXX now are should call of as moment. of to Steven the near-term, products that needs in generation. the and meet to growth over in Steven In Steven? the with set a discuss we the next now. to of increase the and well assets management and

Steven Nell

Thanks, Scott.

As points the X, that $X.X million net the slightly to and added interest $XXX.X and margin net are from noted net was income non-accrual on Slide million net These keep the interest X.XX%. down quarter interest third tax-equivalent basis income in margin in mind for X interest quarter. third recoveries to interest but was quarter,

basis quarter. full loan continue as the both reserve from limited Excluding declines in weakness loan we the and year continued non-accrual We both see no this $X problem for only although fourth to net quarter growth seeing we we points fourth points as loss were were deposit and loan signs quarter, standpoint of on in reversed a healthy the metrics charge-offs credit the pressure cost modest XXXX. and meaningful basis impact, are saw million charge-offs net in of fourth of Also, very X XX potential to balances. in compared elevated in

our discuss basis, last reversals On in $XXX.X X.X% a fees is the section, guidance but up down XXXX. and compared at commissions year’s bias quarter. the moment X.X% towards on in sequential million, As Slide fourth were XX, to I’ll additional

For the our margins result This purely the down business. own card deposit million issued reclassified The quarter associated processing reflective was funds in big $X XXXXwas of in that which fees business. were revenues driver fees. and debit full item. the The driven is which from on service mortgage N.A. now better rate gain charge was cards lower in charges to year, approximately revenue turn quarterly transaction with which on Obviously, and this processing decrease also higher line we reflected is by is Note transaction productions revenue line service BOKF, revenue, industry-wide banking of the our we felt volume. trans to associated environments with the the sale X.X%. refinance item that translated commissions transaction lower mortgage in limited volume

year. earlier companies and income fiduciary fees a revenue. the decrease expense commissions consolidated chart flat at in we revenue, year you’ll The There of corresponding XX% the this revenue full to annual the portfolio XX.X% due We in compensate other are particularly grew decrease other pleased us XX% decrease able this and the note the which management the banking is that sequential businesses bottom full of for the our and our keep in mortgage sale we for on statement. merchant that to in enabled for other to which is year, are for relatively despite asset

last Slide $XXX the million quarter, down Turning million quarter. from were in operating in to the expenses $XXX.X XX,

to mode expenses X.X%, in customer-facing professional quarter Slide services line caused a up addition, our million For on production standpoint. GAAP customary was compared goal the quiet put on fees the full current our contributed for to guidance fourth our million which project keep from expense XXXX. has XXXX. to BOKF basis. large sequential a a in were year, flat an The modest with $X.X was increase a largely XX $X expenses into to We quarter and original foundation, IT and basis

expect mid-single-digit growth. We loan

front are they the main optimistic loan more team our noted, and behind Steve feels hampered that XX in days on us ago. this XXXX As three did than growth entire headwinds

to securities be We down. slightly flat expect available-for-sale to

and forecast We within and assuming continued pricing. net expect in of September in management margin our continued hikes interest rate embedded March deposit control with and active growth modest

reflecting net growth hikes our did revenue additional days the in we We ago. rate XX interest not expect have forecast that mid-single-digit

fee-generating low-single-digits expense expect year. we low-single-digit growth. from revenues up businesses We to expect for And be the

And least XXXX. we the the through more quality at Kymes releases As in loan rate the will loss we and environment reserve blended review loan current for credit half XX% federal our are home Stacy? forecasting towards Stacy effective biased are the in noted, to state additional of portfolio, XX% the detail. XXXX. range now a first of of tax given portfolio and

Stacy Kymes

Thanks, Steven.

the Slide As you to can third XX, see down were total slightly loans on quarter. compared

the despite was full that commitment to we Steven for and banks. Steve modest year, that headwinds Energy other recent year, full the which to for the a However, which energy the noted. is downturns, during posted XX.X% the industry clearly loan maintained the X% against differentiated testament we growth up us

new over that During time, energy of borrowers able translated XXXX were and well-priced book in $X we the loan healthy which in commitments to into growth to well-structured industry. billion

fee particular, annualized wait In move higher the its credit the loans returns business discussed. indicative addition, up we for healthcare facilities which or year, healthcare our to income annualized. reform to for the is after full banking, of the in opportunities X% growth relationship. X% good to of more quarter quarter management and XX% healthcare for for translates strength wealth Likewise, XX.X% any the was better up year. the seeing and industry or of see historical paused X.X% the trajectory back which were aging earlier to Scott are fourth impact potential It’s which in total to private on Personal and

quarter we driven continued that curve fourth yield flatter in to pay quarter downs by CRE see our As in third we expected, noted call. the the

is the is However, quarter. Slide new real mode growth strong. those quality new down mentioned for deals feel capacity XX were XX, internal estate in remains back book loan real to XXXX. much concentration better Net our although our commercial and full On and activity take points. This limits estate commercial will XX% charge-offs about translating to basis team under were to it in time to Non-accruals as some has credit start Steve production fund, during we transactions.

the specific allocated during all investors recognized Although increase, on charge-offs we reserve. for quarter, which substantially read should the have we not too into a much loans fourth

net a year, were basis down XXXX. very X points, XX from full the in points basis modest For charge-offs

loss X.XX%. loan remains Our appropriate at reserve

has energy production during and provided portfolio we business, the as Our in quarters seven energy Slide have after and exploration have net banking the energy of so for which losses first is before, our portfolio for charge-offs as excellent XX, consecutive quarter the lower a five-year you picture that at look portfolio, of shape XXXX, downturn. trough of the business, right cycle. the the now of energy improved makes In the a of clear up corner since overall XX% and the well

can discipline As downturn we’ve message since XXXXs, investors. the business and even the demonstrates see, cyclicality delivering in you worst underwrite to which structure the We understand losses able kind the the and been manageable, were portfolio This we of of we and the consistently energy to why time from in XXXX. minimize business saw were downturns. banks benefit to losses tested to running when other the with from be is growth loan in were committed we it this

the I’ll relationship this using – attractive. fee-generating over Bradshaw commentary. some customers the energy and other now back call very we makes tend in turn to returns Steve offer, services addition, In to be for which – products most the business our of closing complete

Steven Bradshaw

good was margin. XXXX company. and income, posted strong exceptionally year Stacy. in We growth for net the net an Thanks, interest very interest

GAAP Our Accordingly, from history. our downward the for our order a year drive of $XXX on in flat our net to production goal income mortgage leverage. year $X.XX or a XXXX expenses best basis delivering share of combined all expense in in company’s was per levels fee businesses second represents million long earnings strong shift to overcome management and

As evidenced XXXX continued articulated, guidance just are by than earnings growth the the quarter. that third the we at of Steven more were we about end optimistic XXXX in

of earlier, the the business. the tax and of our pipelines a renewed healthcare noted the we production reform, in group new passage loan activity First, as in seeing as result stronger much I CRE momentum are

prioritize XXXX. the Second, should this in of income. and interest quarter continued in XXXX now fourth of to we modest work throughout expense We now XXXX very one, the hikes growth expect expense two expansion hike, rate reduce and instead in drive steadily December heels and margin expect net on to the growth growth

discipline is stable release sources downturns results potential loan overcome XXXX environment credit credit loss core reflects there an of of of array and sustains, the strategy demand. to revenue if slower reserves. Finally, and for our diverse company’s loan cyclical strong additional

recognized differentiated this highly BOK bank. happens talented attract We ability a mid-sized of other course business any model have to professionals regional form and to earnings, is Financial banks. our None record of quality group we unlike ethical Their customers respected were of every now. your the as America’s in segment one being return and We’ll take most reason new business questions able that a of post while being Operator? without team.

Operator

[Operator Instructions] Thank you.

line Please of question first the your KBW. with Our from Brady Gailey proceed comes question. with

Brady Gailey

morning good Hey, guys.

Steven Bradshaw

Good morning.

Scott Grauer

Good morning.

Brady Gailey

I for with that think but flat XXXX? income are downside Or mortgage, runrate more more XXXX? low-single-digits, be growth mortgage how about there for to baked in into think that your of a thinking with you in know do little fee it’s could lower XXXX you should guidance the volumes? Do be you specifically that

Steven Bradshaw

Bradshaw. Yes, Steve this is

our the forecast. years given had what mortgage. obviously which we pressure was segment within previous margin, direct less in XXXX consumer think down our activity and Even rate refinance of I really from on about than more especially it’s less

there. So, to we see expect pressure some continued

Our actually, or origination believe today. will bit year. that’s we kind how a origination we that the be - little up see But for mortgage retail

Brady Gailey

at energy Okay. guys I kind or And energy, two ago, look XX%. loans that think you I of under of years about had if you a to at three fell back then, look if XX%

I your bit a grow that safety. are is guys which as are exposure Do backdrop from you think know we swing committed energy to here should over oil Now back has kind to the given year just the up where think a Do that little the you just you finished improved? on of little XX%. in at?

Steven Bradshaw

XX% to opportunity do I XXXX would as see historical move to back its the outsize relative the to in over We’ve and the been back there between certainly as growth expect that more expect on I growth and great portfolio. level. We up time that percent of would move portfolio. to average a it level of us to for rest a XX%

up. a clearly that expect we percentage, go So, to would as

Brady Gailey

just of heard, for Do we XXXX? negative to reversals you the talked continue provision, additional loss can provision you then XXXX. about into All a translates few on a zero provision see right. lastly, reserve think I in quarters do think or loan that And just actually a you

Steven Nell

really non-accrual for expectations are loans, We biased continue loans, in the we and provision the towards for of our XXXX problem look potential negative you expectations for first honestly. quarters moving When couple our down a improving. to at see that our take

feel very, are we already early reserve, we year. in our biased at strong releases point, given towards So, this like least at very the

Brady Gailey

the for Thanks great. Okay, guys. color

Operator

Our of proceed Winter Peter your question. with line comes the Wedbush. question from with next Please

Peter Winter

Good morning.

Steven Bradshaw

Good morning.

Scott Grauer

Hi, Peter.

Peter Winter

I look terms record the though, am a their to levels on about, is reform liquidity the having ongoing in commentary I cash tax that now little there of at bit more heard all have you continue positive of increased of wondering growth. the portfolio? concern in with flows just loan see outlook paydowns could and you borrowers loan when

Stacy Kymes

even latter half headwind think, year-over-year think I portfolio roughly came of depth by XX% difference from going that’s make outstandings, being risk borrowers if with in portfolio where that year loan growth. in XXXX, biggest far is so was that move total liquidity the look particularly and the begin to really and and of that clearly, represent we estate terms down up huge a and of and stabilize real can I a the to of that commercial the the in in headwinds if our Well you at conversations the

since talked with been liquidity. I borrowers about is financial you liquidity so, think the that that’s in the that where flushed really industry downturn And mentioned the one were challenge

growth in that you deposits manifested would So, decline loan manner. that necessarily see hasn’t itself watching begin before to

if you think And through that I established specifically, just at achieve internal look XXXX, commercial of think limits for our Peter. have real to and capacity stabilizing estate target well have kind mid-single-digit of and itself are our now so, to allows inside grow I us that we really in we that us concentration that XXXX,

Peter Winter

And are? Stacy, just internal you limits can the what remind concentration us

Stacy Kymes

So, a measured outstanding capital not of an committed it’s reserves basis, Tier-X XXX% on in a basis. and on essence,

Steven Bradshaw

More commercial real estate.

Stacy Kymes

estate. real commercial More

Peter Winter

And where today? guys you are

Stacy Kymes

big and that below through our well are would to as of We our on forward. through portfolio, loan the forecast et likely indicate a for effectively growth, and capital the XXXX cetera XXXX grow of have that based capacity projections we all certainly we chunk move

So, in constraint we as don’t months. see a that XX next the to XX

still occupancy through credit market hard us those tenant moved to particularly the can extent the the hit in have really has our perspective, of from to third it move take and move You we yield pretty quickly from curve impacts with that as fourth an bit the was in a commercial permanent a paydowns flattened, suffered financing lesser which portfolio perspective. to to deal replace quarter committed the a to high but the we estate a industrial real outstanding that will and in it

Peter Winter

ask And follow-up to I on could one then, Steve if just M&A.

extrapolate Just curious one really bit. kind curious the you I of M&A what what time little as activity and on for to means, it’s you so are said a at am that just from seeing? is look are We being halted the and reform sellers tax heard the M&A? try seeing what halted bank

Steven Bradshaw

think I Peter, Yes, bigger. that’s

be a think to are category, able you two how early forward. it’s to an put going I you I impact you for interested us understand you’ve things a seller, and that’s would potential valuation of got think if going to that are in I acquirer little

for - certainly move And accumulation happened, bank value that up increase in XX Today, or the believe that is deal. if it at some capital if next momentum threshold for mutes if second, substantial many deals. will that we momentum, higher. the bump larger of expanded And months not in would there ongoing. $XX while course billion, were you of like a be over us, obviously, size against to the regulatory then legislative a has and got, operating You’ve negates be there what a is you SIFI will the you Financial very larger meaningful expenses look to ways BOK

is. and So for growth we got the expecting of M&A than we’ve thinking said that’s in bit that that, best us to what deployment most where Having aggressively from threshold organic of in perspective. would still we expect been capital a thinking and move an the us – return that’s perhaps more is so are focus past terms our

Peter Winter

great. Thanks It’s much. very

Steven Bradshaw

Thanks, Peter.

Operator

Shaw with comes next the question Fargo. Wells Jared of from Our your proceed Please questions. line with

Jared Shaw

Does just the really I mean to guess, see that thank that, deals? we you capital that time more just up Hi, one focus last on following smaller on the that shouldn’t deals question. and worth expect you. this do larger to

Steven Bradshaw

deals it. I acquisition costs in that think I benefit adding today way now scale. of embedded there larger we’ve Again, than to are and our so size that’s that mean by that are a done you associated organization shareholders. an still what doing for are past we many fair think a really put the fixed do we deal, that. But perhaps market cost the to would make with for work to in – we we I in need think an

Jared Shaw

Okay, Good. all right.

not paydowns you a able are optimistic, CRE optimistic like like on ��� quarter, out the through are it side, to had net was growth little the level that’s is a paydowns it for loaded than I and net or on more last the with maybe with more you guess, and quarter a better you Just, spread little expected and this thought the more see seems it confidence I being or sounded the of front-end growth? the you it’s quarter higher giving

Stacy Kymes

won’t to have course, in non-recourse into paydowns were certainly seen loans market. more think, its growth which and great that would great eligible the that really of permanent But coming a of that origination group the organic refinanced it earlier later. we materially year were headwind. the I the kind than without Certainly, allows year I run quarter, large it as that be a out completely but was But we’ve that its had the I say course, there abnormally the to behind quarter that relates financing for created origination. terms – were that fourth of you last tell headwind. that in that’s been team It has run paydowns

creates great have help And folks optimism team ventures who clients is their can a the the of we paydown have of continue that, have great business of so, a and what impact their grow less aspect really a we group from that’s to and who it.

Jared Shaw

It seems that like the see that – CRE or that is this on pricing very still is back not spreads. assume all market requirement? that in tight at necessarily very assumption you a pricing growth an tied year Is for the with side we holding improving

Stacy Kymes

Well, on I of real you portion guess, it play in. estate sector the depends what

I spreads think we’ve our size and somewhat have there. in, stable been in we – seen constrained larger space. in in play the sector Others have growth particularly their this

rates would cycle this that spreads. recovery typically tighter you they typically spreads than more kind a stay enabled of into so long much And stable where to to have has

think spreads that our sweet from I the category stable very here of real in spot. perspective estate is lending our commercial has stayed

Jared Shaw

before loans on or coming then, provision? of down. been high. we allowance the we at in zero And to stop been It’s we provision about what sort point serve would loans negative back, looking portfolio. the quality level, terms have the looking the hear allowance – last years, of just potential At to do get where few has the Okay. But of to the finally just to of over allowance strength for me, you I

Steven Bradshaw

it that��s guide, certain judgment what and around Well, and way won’t the floor. expectations stayed calculate have depends pass non-performings the we tells I it and all problem don’t the say and past and that’s a us go our our we loans this don’t model mean, we we through just and just we at we that around way analysis level. potential We on the of really won’t spot full

Jared Shaw

lower could so where the growth we say it credit And and significantly to be mean, be than it the are? given dynamics, fair dynamics would I

Steven Bradshaw

significantly – wouldn’t from we lower to I ranged down since XXX. are. I’ve here years, I say XX than been I’ve mean, where it’s XXX

where tremendous that. I see amount. to So, who But, knows wouldn’t I goes fall mean, in down we that

Jared Shaw

And reserve what’s year? the remaining Okay. the of end energy on the at

Stacy Kymes

Given I have. are loans that’s for all where in is the that our we not that mean, allowance cycle number the have disclosing, of in the a we are we that we reserve available

given where are segment, are I never and are particularly we insightful into that at kind back the look we get a to not disclosing to so, that. downturn, way that because of past I in that we cycle, thought want don’t to the And was now by particularly

Jared Shaw

questions. Thanks Okay. for taking my

Operator

the question Zerbe with Stanley. next your question. Our from comes Ken line of with Morgan Please proceed

Ken Zerbe

Great, thanks.

you where categories Just CRE or most you it’s in a as that Thanks. to terms, want – can comment you CRE, spreads? value? don’t mentioned where in play of Are broadly the the going of to there back playing the sweet just on little segments, of because see more spot you you the attractiveness whether conditions the CRE different

Steven Bradshaw

and stayed that push have last goes have there had ability I into obviously that there. little but we We business that very do a an financial historically navigate that really analysis is and that CRE retail think retail the marketing today, what low or were area in see space downturn. we downturn. ten of estate Clearly, more lot a real commercial development the the given to where work and are would is subsequent away segment active the years more little we is one to homebuilder such so in aspect margins from much

that we’d a do to work retail lot are goods We is we of headed clearly for retail segment. not that of particularly based is opinion evaluate an segment retail the the and impact a there cliff, but there so as

that warehouse type lot coined has a the retailers of to you see coined, if coin ship of develop deliver of those that’s opportunities Amazon been more effect of do types order – and turn side other among because that the industrial will, and that you as been The consumer. products house, and in to

segment. increasing think slowing is while retail segment, we a so, And that maybe an industrial warehouse

at the to speaking, So, areas I on we been there we and on have to that. others. across that all stable focus had and look you, we more that that. those tell But segments wanted Clearly, do than areas are focus the would have aspects generally of opportunities we have spreads

Ken Zerbe

Got question. just last it, okay. And then,

management, In much to under I how much am or a Slide you assets of of X, not just your tied year management back the up terms are I revenues more wealth remind are tied type at that clearly markets? equity and us looking the in up tied that last lot about of total actually see things? just than Because, your XX%, I is wondering is how just market am can

Steven Bradshaw

Sure.

the AUMA X% equity alternatives. allocation income, of XX% XX% asset fixed is XX% So, about mix cash, our and

Ken Zerbe

Got Perfect, you. it, thank okay.

Operator

question line with with of the question. proceed your Rabatin Our next Please Jaffray. Brett from Piper comes

Brett Rabatin

morning. Hey guys. Good

Steven Bradshaw

Good morning.

Brett Rabatin

reduced curious of industry loan competition? and we this outlook that wanted changes was in curious, folks been impacted, I hasn’t and to seeing how just know I go am impact to and healthcare sort that I back with maybe growth that just the any am talking XXXX. quality are some curious in some provide for if that just growth year I about some portfolio the hear view but I the portfolio to in portfolio’s you credit

Steven Bradshaw

a nursing, Obviously, The it’s but business continues management memory and from of think there. well we broad of Well, that is is of that urban term couple high our aren’t is a what as do housing, an credit I in focus creates boomer That’s There And assisted from in hospitals large of landscape that ancillary large segment living, investment not in really a et opportunity it’s of cash the including development opportunity, skilled One and is generally opportunity there. It care, senior a areas. baby population. segment to healthcare that a is cetera. be regulatory drives legal and and healthcare perspective a aging part us. kind in services the management – mean, spreads there area part business large. evolving other perspective, metro for there is, demographics retiring means an segments. as

excess in we’ve there. of something XX years. opportunity see been still for we so, It’s doing And

very that. are We like to We space. committed the

us. We business of a dedicated have – for it’s line

But breathing So something day. living doing somebody that part-time. it’s not they every and that are is

on nothing underwriting impact our federal look state reimbursement other that and budget we still very optimistic. have states. activity in in changes does who analyst full-time But those customers a issues than We our are our and staff could for and

saw strongest we optimistic obviously, if fourth healthcare. that think line, very You you well very, our very quarter they’ve look a healthcare has over a of a they’ve about trend at we and are since line business grown still been

for that we the and For us, spreads where there. senior that’s largely take the risk appropriate are housing

Brett Rabatin

you plan? managing duration That’s And do what the year wanted portfolio, hear you the few and cash the book What’s color. the a are is that? this hikes thoughts rate for everybody Okay. to great from What securities some maybe how flow and guys year. think on apply expecting securities then, I looking on this much

Steven Bradshaw

Well, is the years. about the securities portfolio duration, X.X

As rates rise, very it little. really very, extends

pretty of do, in rates out regardless can scheduled at some we’ve we that have of the really it’s, rise appropriate plough as you And we what rate significant got flows back the cash cash that reinvest. So know going will are to flows time.

think to out balances we neutrality flat maintain that is see of part mean, as risk. relatively I to relates interest rate just I the it future. securities in

gone expect We rates have certainly in kind that somewhat to be We XXXX. continue to asset-sensitive proven of in as have up XXXX.

neutral. asset that of expect to more couple the in the just securities course But rate to modeled I part say are benefit would asset-sensitive I we perhaps all portfolio So we’ll margin active we higher us the portfolio and of and our from environment, get management. that the on longer-term of kind of some of are manage short-term, although we’ve that XXXX rate some modeling. interest in improvement see modest in is And net we liability and hikes accommodate

Brett Rabatin

great. the Okay, Appreciate color.

Operator

from next your Michael comes Instructions] Please question line proceed [Operator with James. question. Raymond Rose with Our of the

Michael Rose

Hey, good guys. morning

Steven Bradshaw

Good morning.

Michael Rose

morning. Good

think going the wealth about or attractive have Just those bank today. comments M&A? forward? a to I Is going little near-term talk more asset mean, to – obviously back that maybe should to you still you done Scott’s management M&A bit it’s guys we historically discussion, something, and deals. around still all the smaller given relative that some wealth navigated How is

Scott Grauer

that in grow. improving of relative years number range M&A, couple story more and in acquired. but part the kind that’s we XXXX efficiency today. we businesses think of are did how to opportunities we that we to businesses the was to it’s multiple that XXXX Well, acquire benefit of bank that look reaping would the that I the Five think actually at strong and continue to last the performance the I don’t of attractive about

we think, But in still we because I the probably wouldn’t more I M&A interested earnings drive not us going opportunity are. say So, that that for will have to bank forward. accretion are

Michael Rose

a Arizona, you the Okay, a that And kind bit. But growth in of seem markets maybe this helpful. et a some state-by-state basis? little What’s it like of as then, good is Colorado, out if of to think some we guys outlook stall your pretty cetera? that’s before follow-up, have had Thanks. smaller want to those some about markets on growth for year,

Steven Bradshaw

think our think we’ve look acquisition. be Colorado, us. Well, Mobank very growth to you for the continues reinvested City mentioned focused in Arizona certainly I a I through market you out as Kansas footprint,

We small those have market good markets. in share

those for in growth We as XXXX, drive us continue beyond. forward move XXXX and should we believe

those one in forward, underlies two get can move and markets us just going You have for is activity be – is the small a quarter relatively share relatively in up driver or strong we but expect markets. that market a we growth would as that quarters, to on continue very those because we to caught

Michael Rose

for Okay, taking thanks my questions.

Steven Bradshaw

Sure.

Operator

proceed question next SunTrust. with comes your question. of with Demba Our from line Jennifer Please the

Jennifer Demba

you. Thank

see or investments, deploying you break earnings tax just in be can where forward, of M&A it down reform? growth, you the from kind return? look capital yourselves you Whether As additional

Steven Nell

Steven. Jennifer, this Yes, is

I think of the we’ll it. earnings throw have, capital we’ve in mix just thought about we’ll that always retained extra like that allocation

one of and I We be earnings As very good is stating to that areas. and it of Steve in X than percent the we stock the in seen growth. pay of in We M&A. for going the would pay a kind Certainly deployment where organic opportunistic that say opportunistic on our past dividend that. then best plough terms capital return percent a think opportunity that could used mentioned some get earlier, from number range we’ll continue to But rather take we be are we can. certain you’ve buybacks tax of back and we benefit into will of

We going to are not that. say

we it to capital organic and going growth goes into allocate look, going are it the say, primarily towards to are going forward. We pool

and some gives a estate bit us real up do of grow I and those likely for room us with more little to it what areas opportunity opens that’s think and we’ll it.

Jennifer Demba

XXXX high do you see for when Do in industry? the they paydowns? you were be in And will through the think as that XXXX as

Steven Bradshaw

of an There or that we eligible life For still of folks lot flattening We’ve think permanent between commercial will curve that a relative that’s that I and fourth move real difference direction. to probably in do without where X.X will I average queue yield so. or rate estate and the happened long-term paydowns commercial if and recourse real third kind had more the in are floating, paydowns a not, really quarter great fixed a year, be estate? that every of the had has that that. of you whether you years that through to we moved push

so of yield are permanent to the to was use some XXXX. you commercial of the extent but taking in that than a amount yield began the curve So flatten, I to than lesser push had and still we market. be think There we that opportunity XXXX always an estate, real always was will I have a out that into and financing as It it because more that to steeper curve think just typical was that. going advantage much have when and you had in in

Jennifer Demba

Thank you.

Operator

from Gary your with with proceed question. Please Davidson. D.A. of comes question the next line Tenner Our

Gary Tenner

Thanks answered. just were guys. questions Thanks. My

Steven Bradshaw

Thank you.

Steven Nell

Thank you.

Operator

next Arfstrom comes with proceed with Our the Please your from line question. RBC. Jon question of

Jon Arfstrom

Good Thanks. morning guys.

Steven Bradshaw

morning. Good

Steven Nell

Good Jon. morning,

Jon Arfstrom

come you earlier fees on that. you lead the I Two about, to that a said think here. expand Stacy, Can questions more and made that energy you a deals bit? with potential comment opportunity along

Stacy Kymes

Sure.

credit. as tends That a lending, effectively shared national I because larger the lending typically definition be relatively January, of meets to of nature energy changed of it know, the definition size think, you but and true. in group still a

of than of of total. particularly deal in that less more the demonstrate this opportunity deals with lead a for $XXX in – sizes, been compete country significant size. effectively bank space, million exceeding, to we because few how double we years. our us are And space. have taking numerous has base we we downturn so, number We a We in of kind Obviously, leadership commitment a It’s the over and the advantage in we today to energy this absolutely last or have are appreciated we anybody any energy the receiving are of. are that handle history a in that’s an borrower deep is, and opportunities to we deals dividend opportunity our lead receiving

Jon Arfstrom

Good. okay. for a question you. maybe Okay, Steven,

bit on fourth reduce expense to a what to can touch – forecast. little to you changes alluded extent quarter guys you in happened some the making the You Can the there?

Steven Nell

belt, our we mentioned areas spend the like a working our could guided Well, client bit infrastructure. want reduction we and are office and our through to service as and all of a do as projects that IT Steve have and we in side. of budgeting or future. scrubbing to of work I the yes, projects out other felt things team tighten kind had then you from hours we the mid-single-digit the back leadership that the of then, in non-personnel executive and of XXXX, looking amount looking our quarter, third kind scheduled we budgets and In to right. the But, had in lot back a any just building we I tremendous really accomplish for projects, particularly And without at pull that process

how really for spend in dollars just was that expects it plan we’ve wise built think I I we about and a So year. trying to next our growth being expense XXXX low-single-digit be think,

Jon Arfstrom

expense Okay. The And like million? base there. just $XX $X the to number the then baseline follow-up is use a you’d billion reported – us

Steven Nell

you’ll to one we million Yes, little a going see fourth quarter, we that first And foundation at let one-time relative in DP other are you’ll release, press recognition me in revenue the about number for it’s quarter, up had what in to few probably just our high new million a revenue guidance. the look $XXX against mention, of quarter, items the of reclass because to and $XX the if to the fourth expenses under a items line contribution then, our items. notice being several one you the

first at the the the up that’s So, of year. of look quarter kind I the and way would remainder build

Jon Arfstrom

Okay. All right.

you. thank Okay,

Steven Bradshaw

Thank you.

Operator

at back further over this to comments. no Crivelli, for I turn like questions time. closing you floor we have Mr. to the would now

Joe Crivelli

this Well, joining us morning. thanks all you for

a Thank questions, you any for I’ll rest me around follow-up please the you. of day. the give be If call. have

Operator

Ladies this does and teleconference. conclude today's gentlemen,

your participation for at disconnect lines may a this You your time. have you Thank wonderful and day.