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BOKF BOK Financial

Participants
Steven Nell Chief Financial Officer
Steve Bradshaw Chief Executive Officer
Stacy Kymes Executive Vice President of Corporate Banking
Scott Grauer Executive Vice President of Wealth Management
Marc Maun Chief Credit Officer
Ken Zerbe Morgan Stanley
Peter Winter Wedbush Securities
Brady Gailey KBW
Brett Rabatin Piper Jaffray
Gary Tenner D.A. Davidson
Michael Rose Raymond James
Jon Arfstrom RBC Capital Markets
Matt Olney Stephens
Jennifer Demba SunTrust
Call transcript
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Operator

Greetings, and welcome to the BOK Financial Corporation Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the presentation over to Steven Nell, Chief Financial Officer for BOK Financial Corporation. proceed. Please

Steven Nell

provide thanks CEO; Today, President Vice Stacy Banking; joined I'll the and Steve hear of for President joining the us Credit and our about Officer and Bradshaw, Kymes, also our of for Wealth morning, Grauer, session. Marc we'll us. from Corporate quarter. Management; Good Scott remarks Maun, Executive Chief some question-and-answer Executive also Vice have

www.bokf.com. available slide it the quarter and refer on disclaimers our the presentation at forward-looking pertains statements as are of PDF we this press on website make second We any X to you during release slide call. to

I'll now Bradshaw. Steve over turn the to call

Steve Bradshaw

Thanks financial morning. second joining the discuss quarter results. Good XXXX us for to

We are pleased report strong to another quarter Financial. BOK for

achieved the highest earnings perspective. from the company both quarterly of history net the we income an in a level In and EPS of fact,

the incredibly efficiencies the The diversified this of our team. proud the efforts quarter. results I'm gain Financial as our of entire really BOK showed power the as company to model effort business in of well across greater

quarter a As from income and on XX% quarter the second same up $X.XX net share X slide or previous was $XXX.X XX% the from up year per diluted ago. shown quarter million that's

real by commercial growth estate. quarter continued its particularly key The strength driven a in factors. was this of lines in of number Loan business growth our specialty

market loan contributor. of quarter estate the first on and real paydowns a continued for energy deliver health growth our also large the focus above while segments was in Our wave in a care company, the following commercial reload to

support X.X%. We the factors interest rates net billion to income we income interest to Net short added quarter duration securities continue to in interest more as interest Steven revenue near-term. flat though this help momentarily. quarter at underlying this X% in $X.X mortgage-backed fixed net decline of expect detail the margin cover will expanded remained

XX%. this upward quarter expanding Fee revenue trajectory its continued commission and nearly

triggered mortgage mortgage the securities and contributors rates loan lower by main on banking revenues were all trading strong brokerage mortgage-backed during mortgage interest and volumes trading Our and the quarter. production

to in to greater the effort drive across multi-year gain company. has Our which check, held earnings continues efficiencies leverage expenses

Following CoBiz expenses level returned normal quarter. this a of to more the last quarter, integration

environment consistent the several quarters. stable with continues to credit The be results last our

Our continued driver loan of $X primary provision. growth loan our was loss the million

increase Turning X. million for an to were quarter. billion, the of slide $XX.X loans Period-end $XXX

due energy We commitment to year the about loan for of care. continue growth seen growth past optimistic and to health the strong in particularly feel quarters balance we've over the the several

And administration the and several gathering up $XX.X or were favorable asset quarter from business. our we along BOKF billion with markets organic market. success the that's further management back this billion open we $X.X XXX,XXX at benefiting shares strong the invest from of bought saw at our strength across price of lines under the in Assets opportunity last fiduciary a per company to $XX.XX in as quarter in equity investment share

Nell to prepared turn but Steven the results detail. call I'll the cover on additional Steven? the of at provide remarks, over results more now conclusion financial in I'll the the to perspective

Steven Nell

Thanks, Steve.

net X slide million interest first the on for the noted X% up As quarter from was $XXX quarter. income

significantly change able been margin. we've expand interest due loan impacted interest the to interest rates continued to net net While course revenue growth, has in of

quarter. interest flat margin X.X% Net previous was from the

this recovery accretion increase in to discount the interest $X.X million interest in from net $X.X an million supported was quarter. and CoBiz $XX.X first million up from quarter Second quarter margin by

offset margin help margin these basis to combined points pressure were total, items benefits. to by these XX combined that points interest on there fully While net

of factor from loans priced variable this LIBOR quarter. rate off yields were First, a lower loan

pace. some clients however, Second, at our from deposit pricing see decreasing to commercial exception a we continue

by portfolio mentioned, net interest Steve as realized a have net to securities securities a which measure additive will billion on down be $X.X interest interest dilutive the income, income our quarter. mortgage-backed the will additional fully environment. in protect be lastly, will third rate margin calculation, And These as we but to for expanded a fixed effect

working significant are to we to While net defend interest cuts rate margin pressure. apply interest continue will

the average of X available-for-sale the a down Omitting benefit was X decrease portfolio points points increased to basis The X.X% the yield accretion deposits the point interest-bearing and recovery securities interest to the a cost basis yield X.XX% assets point X.XX%. The basis and increase points. yield increased on basis X.XX%. to X X the X on was X.XX%, earning basis interest-bearing portfolio on loan overall including liabilities in

X slide trends growing XX% fueled in million, as were continue quarter The for the management fees declining increase and $XXX.X we and quarter. rates nearly activity an unfold commissions On last wealth to mortgage. mentioned of

were pay coupled led increase quarter. Lower XX% increased up gain margins sale over and million, applications a points. to operating in our dividends. this commitments mortgage a Increased interest efforts XX $XXX segment rates revenues rightsizing leverage the previous with seasonality XX% basis to on continues in and Mortgage mortgage from

seasonal revenue XX% strong the other results. quarter trading X.X% quarter revenues Brokerage or All factors. over the security increased fee previous for and $X.X over increased mortgage-backed trading by largely due primarily million driven to

the our million. that value changes primarily net This outside mention total mortgage $X.X fair of fell due of in volatility significant economic rights, hedge the hedges of was protection. of also our mortgage that combination rate to was continued I'll servicing cost economic

slide to Turning X.

of contained operating carefully to $XX Total cost. which $XX.X integration We to from quarter, expenses leverage. million $XXX expenses drive were million you'll the first down million operating CoBiz manage continue as remember

We which XX% the second ratio efficiency our target ratio front, quarter has we've efficiency are expense of on for through efforts us XX.X%. the made proud brought of the

advertisement quarter now first from CoBiz expenses increased acquisition. efficiencies the $X.X expenses integration cost first BOK Omitting spending from quarter. as benefits omitting personnel was Arizona marketing markets. brand to full of well and increased million the the expenses million Financial Colorado expense Non-personnel expenses in $X.X the integration our this $X.X advertising expenses seasonal quarter, realizing remaining due from decreased as as million, Business we're some related up the to promotion primarily

adjustments $X.X professional largely million, banking were a to insurance and due CoBiz $X.X net million. by to related to up of is assets Increases of costs partially expense mortgage offset fee and expense in of decrease Insurance million losses $X.X services, million in repossessed $X.X integration. expenses deposit and

addition, charitable In made was the Foundation to a the second $X million quarter. donation in BOKF

current XXXX. outlook XX Slide for has our

run energy, Interest decreases will We rate healthcare the continued downward to when Loan general influenced margin. few loss expect levels C&I mid-single compared loan likely strength continue to similar loan on by dollar by net interest quarters. will growth market in digit levels will forecasted provision past and growth, at the but put lending. be with pressure

to Revenue below long trading this the benefit lower from environment as at XX% fee-generating we've revenue. mortgage seen remains as could an from and and We'll businesses, continue interest rates favorable as ratio attempt for or to quarter. particularly brokerage efficiency maintain

strategy organic Our forward growth share support capital going opportunistic will and modest repurchases.

improve to ratios expect time. capital over We

lastly, And CECL. word on a

continues portfolio's a losses, existing Our the credit primarily standard to develop controls due our CECL expect team loan Currently, relatively in models, allowance X, do change necessary and processes by not for our implement we XXXX. material credit to average implementation life. January to short the new

$X.X credit for recognize an acquired need allowance approximately However, we to on losses expected of billion loans. will

in Although which requires CECL date, expected allowance. losses of those included credit duplicate an at losses, of estimate loans were marked acquisition expected to recognition fair the the value

amount. and us by we have losses residential approximately that recognize guaranteed some CECL we the are an that securities. on Administration the also requires of to $X.X in the Veterans mortgage expected guaranteed mortgage-backed credit billion to loans losses loans exposure credit transferred These exceed

reminder, recognition of directly a the retained and in income earnings through statement will initial As not run CECL XXXX.

will the as company of conditions of portfolio composition currently CECL expect not on as economic significantly While impact ultimately forecast depend affect and we adoption. the do well the at loan date to though

detail. portfolio I'll now Stacy. Stacy over the review turn to loan Kymes the call will more in

Stacy Kymes

Thanks, Steven.

can slide see million total XX, loans on were up for you $XXX $XX.X quarter. billion, the As

continues Looking the up the was you X.X% C&I can the Total be at broad-based. strength to for table, quarter. see

this energy of factor C&I growth in the the expertise to Our bulk responsible continues was and driving be quarter. for

discussed up market or sell $XXX environment. lower-than-normal current slower million to trend be or was energy the to the X.X% as continue quarter. portfolio in the The divest continues, Energy churn we've for in companies

channel this care a is cause for but up health concern. not quarter, Our was marginally

strong had impacted quarter this second in space, growth the overall of in market we permanent higher production While the levels refinancing rate. into

first credit continue experienced estate portfolio senior up with demographic commitment niche, business quarter. relationships our given excellent in great our given housing volume, is commercial X.X% operators. only paydowns was We the focus space, for is in The a strong the quarter strong perspective following high-quality which real with from an the trends, also but growth not current a

proven as a as around While limits half for we loan our broadly, the commitments More ability reload this outlook show discipline long space, larger have portfolio. in to concentration core XXXX of this to in remains strength. continues optimistic economy growth we back the continue

stages On quarter, in the to late in slide remains primarily you energy due can Non-accruals million during it first that the XX, did quality to lowest the strong as and do up points, credit were of in resolution. charge-offs see $XX three loans quarter. point XX quarters. not the These are basis last isolated five to situations level portfolio. the seen the moved over we've Net overall anything systemic

XX, and determined combined was ability growth, all to losses portfolio defined to problem We $X period-end net problem of potential as $XXX perform known of evaluation continue based which information at overall the credit on a reserved charge-offs, including June million and an management totaled a loan as for the XX. that down of March changes in remain factors, for leases. from performing appropriately at loans $XXX second X.XX% Based loans concern are of million Potential and million provision credit loans with loans borrower's cause appropriate the quarter company allowance to XXXX. non-accruing on

closing I'll to the now commentary. over back Bradshaw for turn Steve call

Steve Bradshaw

was quarter Again, Thank Financial. you, it Stacy. for another BOK record

We added strength, our quarter business also for our across what revenue would business well horizon. on rate expect and this think markets. environment linked-quarter performed market as as our and but mix in a just basis. focus capabilities, position lines really execute is $XX.X that the in we we businesses continued our geographic us economic business of only convinced to all of unique a showcase million diversified Many ability matter remain not fee falling I will on no

we XXXX, outlook of At point remainder optimistic the year. the remain way about the for of half the

discipline driving growth, strong We our credit through quality leverage and moved accelerating deliver has target and ratio efficiency our us are XX% revenues continue and strong. to fee loan expense is remains

closing, overall Colorado building quarter also and back the mention Arizona in is CoBiz I'll final of momentum, systems are on of we last integration the that In the growing.

the expense and of on realize We our companies across It's of highly several synergies markets the in and have two are services return organization. the made our that with bringing achieved, efficiencies areas the now traction focused we've the realizing very for seen and competitive Colorado together been in obvious of ultimately, but serving products, the our and our array advice investment share we'll growing a Arizona have market. by customers

take will questions. your we that, With Operator?

Operator

from Zerbe proceed first line the of question. comes your Instructions] [Operator question Ken Stanley. with Morgan Please Our with

Ken Zerbe

Thanks. Good morning.

Steve Bradshaw

morning. Good

Steven Nell

morning. Good

Ken Zerbe

was CECL could of commentary just had that you we the terms I hoping start XX. off in slide on

of you billion least banks of that in might what you're the guys guaranteed kind and $X.X reserve able even are address one any think I but combined form, that on to loans? of at to quantify CoBiz you need printed of first level

Steven Nell

to estimation, in bit an areas of do our but our We'll that above requires you we'll two the quarter. all give continue third where a think want little additional allowance of modeling, work to we indication allowance. CECL did I current our

for reserve. the fall magnitude that of the you an idea of the and amount the bit of is then to in be that's to or number entire loans give a prepared guidance of range around those after third buckets quarter two loans some So give a we'll the

Ken Zerbe

you. Got

far guaranteed only because have Okay. currently is you portion to you loans going least it in not assume XX reserve than fair that all less portfolio? are And the directionally were CoBiz to the that be points existing that is of at a loans sort basis your in -- down because something is not then, and your guaranteed the

Steven Nell

if particularly For as not you there's reserve, those only we're the full certainly tail two exposed bucket, carry the mentioned particular will, that going second you buckets, because it's to. to a

Ken Zerbe

you. Got

of maybe obviously a guidance this from where CoBiz, -- guess provide shifting little terms The XQ and beyond? might then discount in quarter. bit. think gears you that and I very trend high any Can accretion you in Okay.

Steven Nell

be Yes, that's a it on little a do. difficult to tried guidance provide to of little higher. I last to the out bit turned level quarter

we what XX% I think around has not around that of it third any providing you accretion so the I'm So although far. the think quarter, will guidance been recognized be I in tell

next big bucket years. got so of into we've sometime the flow income will a hours left And pretty of the couple over that

Ken Zerbe

break was And of sort up million, or accretion Okay. expected of much that then maybe if $XX-ish scheduled you versus that how unscheduled?

Steven Nell

I of expected you not and I'll a of as would was or paid real are the bit up of in payoffs that was some accelerated public generated as all But than forward. those going little arena. that and finance those and portfolio in from loans loans well million many so left re-underwritten tell bank, our about $X say we portfolio kind are off higher estate the end the

Ken Zerbe

Got you.

in last squeeze question. Okay. I And sorry then one if can

of $X.X terms the In adjustment, MSR thought I number valuation the million. heard of I

and within or right? line. that make to quarter security that sort want that Just your offset gain of this type a derivatives negative your Is was sure

Steven Nell

mortgage rights declined about and of million activity net the we themselves $XX through million covered negative. our servicing Actually, that Yes. $X.X hedging or XX% that

Ken Zerbe

it. Got

Okay. Perfect. Thank you very much.

Operator

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

Peter Winter

Good morning.

Steve Bradshaw

morning. Good

Steven Nell

Good morning, Peter.

Peter Winter

this I'm fed back this keep three wondering call XX% level still And do rate cuts, just is of two quarter. if year? The get the it in came down or ratio to that let's efficiency we sustainable at it half it nicely

Steven Nell

Well, think try, we're Peter, -- Steven. provided I but sure going provide the growth. this revenue on it depends denominator, is the really I that the guidance I to

well going that a to environment better. lower interest I some which and part do our at on it side the businesses environment, pressure are depends or environment. are attempt because fee pressure lower it income, the is changes we're of to revenue to certainly net NIM But going definitely, rate opportunities going put I to less, some where think of growth revenue quite if on on that in equation. a of drastically, rate XX% maintain But think

Peter Winter

forecast rate assume cuts? your does And

Steven Nell

Yes.

really what to I'm cuts. looking cuts anywhere think building I market's kind that's in what the rate rate of at from two is three

of you to going that's telling going part cuts some opportunity we get of overall to be I'm and our the rates we have for throughout the will And to on so we pressure net that but interest income year. lower offset if course, grow if all -- generate And loans we're will growth, interest net rate of margin that believe get that, by we if NIM. continue rest

Peter Winter

to what point is cut? quantify impact the margin there way each for Is any to XX rate basis

Steven Nell

what You can rate if loan given break think the in the on of ones usually because will loans you rate asset that repricing -- fourth the all I'm that of a not get LIBOR-based are quarter, and -- but the XX% I tell haven't the and cut, provided we third I'll it's our guidance I around be side, NIM variable. cuts,

with rate of On the wholesale much XXX% all side, rolled funding pretty cuts. that down were

deposit the not way side deposit to betas compared I on the be really margin on is happens think way whether us the the on and down higher everyone wildcard will in up. and probably the what for or

will And frankly, not case. sure be that I'm the

I wildcard. But you can think that -- balance think and our plays about how some are there out in net that that's for So our those the interest margin calculation. sheet components

assets bit, given other a loan category. securities in if much outcome, one the little at but portfolio I'll our than other we net $X.X a billion down. It bit spread little against interest did add edge go for guard off instance our rates economic lower out margin that say the securities the The to takes a is of dilutes those are that it that point also do earning

Peter Winter

squeeze Okay. just If in one more I question. could

decline a which third thought would've with could kind have cost events they quarter-to-quarter, I'm down in increase. just are on would but basis core got the it I expenses, and saves, that from the CoBiz, just items of those expenses any caused you the there other come of on wondering quarter? there the some to Just were onetime

Steven Nell

BOK and Well, promotion will to first in some call brand Colorado our that is Financial and quarter we additional say going promote this business to dollars we our that. and I in I did to were on pointed Arizona spend

that And $X.X went you'll up million. promotion, think notice I business

category in quarter. the So I that third don't to expect as high, be

a there revenue the side was mortgage had extra much to also few You again higher. But related mortgage. expenses

XX% I to going So a know quarter. better efficiency think way don't again, and Peter we're third maintain expenses or fourth try the are ratio. to I coming any extraordinary our of in

it that. I have revenue on we achieving So, of the think good certainly a side. But I think matters shot

Peter Winter

Okay. Thanks a lot.

Operator

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

Brady Gailey

guys. Hey, good morning,

Steven Nell

Good morning, Brady.

Brady Gailey

beat the your reasons fee estimates to of kind lot the in just a brokerage lines. look this that's you you in $XX of If why income of million was are a mean revenue And at at I record. and trading, guys if got you over XQ it look quarter it, be

I and know number think benefit see number Is that rates. you'll Or from to brokerage some that you about million going lower talk that downside sustainable? in your guidance do continue trading, see $XX you could forward? to

Scott Grauer

Hi. This is Grauer. Scott

we of We with mortgage the of first rates. our mix, product in have institutional the -- quarter because lower composition have from on trading environment, currently side benefited the the

in that and restructure, positioned began institutional securities movement That mortgage trading, desks so to through and regardless And we've being because our has of second we're that rate sector, that said, capitalize was first work of a quarter. our pushed in catalyst quarter segment. on the within because that well in of really range the trading mortgage here done

the So staff market. we that have, we product the in feel that have positioning we our and the set pretty about confident

today. how about So, we're mortgage dependent upon But feel in we good positioned we outpace. segment the pretty are to rates

Brady Gailey

bonds quarter? on at was And All it purchased you like a average the the $X.X it were that balances on right the the more looking right, that purchased. then, color at of your quarter. middle little at What of of just kind billion and looks timing

on look And impact, from you dilution just additional NIM the just at from the impact bond what's seeing purchases? balances, XQ the was And bond those what full if the those average that? yield in

Steven Nell

impact. I quarter, component. it from points Its a would the only dilutive XX component highlight lot. bigger basis but third particular a this or not kind a not to For a big point part that be of basis of be It'll quarter It's it's so. the a in tried

securities them throughout your to those of second we we second Because kind of the quarter. bought buy didn't quarter, point, the beginning at all the

we than average So third a bit lower averaged the we'll what in quarter.

Brady Gailey

that Right, was yield purchased the average what those were at?

Steven Nell

X.XX% sure not have but that rates that bonds, to move from re-prices help gain of range. we a that course spread borrowing funds. exactly we'll spread X.XX%, Brady, in some somewhere rates. little as go wholesale cost and to I'm protect certainly -- of the course And then if There's support a they down of our of then that down, bit those downside, lower down if

Brady Gailey

It was non-performance, I similar energy your portfolio? then, trends for to know a most maybe loan seen with and some health energy. the NPAs have related up energy peers of like right, me, just were the finally of update also All little increase your looks on, bit. of an

Stacy Kymes

Well, perspective, still the of think about very health portfolio. I good we feel the from our

to that late we have think this I moved quarter three we cycle. really credits non-accrual

you just and of that deals done could and as some got are may up probably frankly who modest with all non-economic banks, And But so some economic management Really fatigue, kind equity result of that. and sponsors be end teams. have different. the -- a outcomes outcome other you've

in depth come evaluation. these charge-off, through new recognize all problems But we of cycle that the of impairments really kind seeing allowance And from downturn. loss not content that we're and late the through; are recognize our certainly

where is. we feel So, good about energy very still

of capital perspective The side. really effect closing energy markets, having from in effect, the because broader we respects on loans energy a are issues and the a some positive stickier the that see that's macro the in

about of strategies going now of buyers, closed. work they the portfolio the for companies, as broader lot the a health capital of lot very good But aren't these the a But is we markets feel move we long-term because and through be is exit through, issue forward. there that of going to being

Marc Maun

is problem this Marc Stacy is our add thing key Brady, mentioned One Yeah. identified I Maun. would loan. we've -- we as that, do

XXX, ran we gas flat recently stress of our our XXX weren't results significant oil the also and We the aware portfolio, identify -- issues range and ran with that on low already in didn't in where environment XX any test we kind a of.

they've been already accounted So for.

Brady Gailey

it. guys. Got Thanks,

Steven Nell

Thank you.

Operator

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

Brett Rabatin

Good guys. Hi, morning.

Stacy Kymes

morning. Good

Steven Nell

Good morning.

Brett Rabatin

other have little you you there, and Wanted energy talk energy a from growth? of one continues just just energy to about the differentiated somewhat. to Can your pulled more, be back strategy if of capital mentioned lot and segments banks bigger markets about a for talk

more Or you're just banks have do energy lending? that on think want growing and do? you different you to have kind why how some energy And limits much then pulled still that's energy of how you from than back

Stacy Kymes

differently it's the It's today we're of when -- And story. But committed maybe the were a were record, stress. energy undergoing gas space a water was and at we feel same industry under I'm broken like any have. not this lot always energy underwriting maybe and the going oil I boring to we point.

confident about felt process. We our

of are -- providers more of than engineering capital engineering engineers who tech the most We on staff, banks and this largest space. have on in

competency. a the company broad-based energy core of across it's where space. into businesses, not lending, we a it's lot places the a to think have there's tentacles And our just energy but We important of lot

these to we of that XX%, that rate relative been XX% look sort fact the ago, the some but I stickier. So and years growing equity that loans there. for about to customers companies, we're and were because of our strategies underwriting. done -- has identifying lamenting a hasn't we've been couple who think as look low mid think were forward at in I been single-digits. of we terms are exceptionally exit the growth growth fit have commitments private don't of were good there committed growth growing most than And think rate, better we outstandings borrowers for I

of utilization up inverse. bit you have little inching a Now The outstandings are coming is period-to-period. the up

growth six first Our the through the annualized is about year commitment X.X%. months of

than different seeing the on side. energy year-to-year XX-plus that's on percent the So the you're

other a the almost ago. year as is you if it identical piece what portfolio, percent The of energy look a it's that of to at was

growth other seen So energy but too our was growth in good energy, of in continue areas we've balanced seen we've segment that helped be portfolio. to

Marc Maun

One other XXXXs, XXXX-XXXX I across worse really XX-year, during downturn, we since XX-year which averaging is basis note period period make would the in that net have energy charge-offs the a had the that in points is been our whole only the charge-offs and point. XX energy basis XX

the So they it's additional maybe performance. it's we out won't not with of been on fairly in consistent have line be like energy our charge-offs wouldn't and future, historical

Brett Rabatin

you the And to was as back has guys other any just year, talk obviously back you're what you to thing the the might been into the just from I appreciate a and color perspective? have -- margin think the what -- wanted there. challenge. I DDA Do can you Do expecting you Okay. out? go flatten balances a about insights you half DDA of about those whether

you can that any this you've maybe -- had particular in Mobank have City market specifically quarter know a changes on that in thoughts I just and some DDA about lower to little market? seem then And talk Kansas? Kansas

Steven Nell

Well, quarter of migration our DDA clients. we we this in and saw a the have continued commercial interest-bearing --

Perhaps, down that out? down go will. see are if flatten part they will any… they're I know the rates There there balances as some portfolio. we big move There would maybe if that we year in is got latter some the expected that or and go volatility I of your DDA in if to balances out. Now go expect stabilization forward. But -- in of don't yeah, you some question,

Stacy Kymes

there. agree I Steven with No,

I respond think as have rates that. you'll begin that to to earnings will go down, credits

have more that, of so which there. kind how that. hard responds experience to maybe will commercial to folks the to that of it's is trying I have market order know have ask answer DDA And but of to we services related magnitude, that And you'll in heart to see until cover be to you're think and question who tough it's the the going to

the around happens analysis is one. Steven's exactly we I unknown the as earlier the in deposit a modest through is betas right short-term real rates betas. mean, deposit what go that's to downtick question

Steve Bradshaw

Steven. Yeah. This is

of on to As portfolio about it customers we've handful your the Kansas Kansas -- their kind City to question DDA larger side. in of a City, relates got relative

always we that particular in market. so more And volatility see

So company. I the impact of moves you of think large a it's don't is the there particularly fact it moving indicative who than anything the or disproportionate to depositor and get funds needle other using funds that the

Brett Rabatin

the Okay. Great. Appreciate all color.

Operator

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

Gary Tenner

Thanks. Good morning.

Steve Bradshaw

morning. Good

Gary Tenner

follow-up to on Wanted the business. trading mortgage and

terms thinking environment, of volume that the of it be in terms more In in quarter the of absolute directional business? to important is rate about level rates or movement driving a within

Steve Bradshaw

somewhat there. that. in spread and I when the and earlier responded kind a talked of of even that securities -- pickup we've in also area The a municipal question stabilization I've It's the the directional. various the it's we influence in seen mortgage-backed that I We sector. categories -- because say is would talked activities reality specifically about I to our

given the an segments of a corporate and sectors little we quarter. and So municipal really have we've or from second the as whether in opportunity an backs our in of the treasuries set diversification our benefit bit side sector to there improvement seen product mortgage in move as or to the spreads

probably than So absolute. directional it's more

Gary Tenner

purchases know was this quarter last about balance the quarter. $XXX unsettled like relative the this what of kind securities expansion this quarter grow degree but quarter the some from it sheet you'd Thanks. Okay. to don't I $XXX million versus of there looks further from first curious quarter one it? million what on it growing And the to over drag about thoughts that? Any I'm was further, margin

Steven Nell

more. much wasn't It incrementally Yeah. that

receivable couple real impacts at hundred of a on And balance balance million. looking up average that's the If you're the went that that the margin.

it So on but have margin. that significant it additional impact million, $XXX wouldn't up the went

Gary Tenner

earlier. And There's from more comments on could really any demand of one the talk that you if on if a responded Okay. means some to there? basis. more a I'm haven't prices gas. macro I have and why issues. of geopolitical curious just perspective concerns Great. what question thoughts And lot of you on I'm a any your have if appreciate about oil kind just oil been ask and more curious I

Stacy Kymes

I oil us for be hard No prognostication to on it's the in think business awfully prices.

that's to according evaluate forward our we strip. it strip. why the so the underwrite, When we underwrite when forward And we book, to we do

that. hedge There can customers Our volatility. is

the I as were quarter. the mean, you we mid third XXs think to upper back a went year in ago into we

first quarter long-lived the of second rig quarter, because over part is asset. reason The corrects it were industry down, down, as takes come little prices This for that's equilibrium supply a we it up. like time well it counts come to while of part and the and come surface is why self self they've that does down; performs -- the portfolio that down And a but comes oil prices it. happen way

be total business that in. relative time-to-time, a That's the Obviously, a from the the and revenue, you fantastic us for time if portfolio look at to like creates losses to but core return is competency. really evaluate volatility heartburn a over it

there. history We have strong a

outperformance is Our stress created me a think maintain performance portfolio's I associated perspective performance discipline to think we from difficult the very to there, our through I that. and that that with continue the downturn and

Gary Tenner

you. Thank

Operator

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

Michael Rose

guys. Hi,

wanted Colorado go looks driver decline. back like to big of to Just the was it deposits,

then loan-to-deposit to balances So, -- those move to you as get here? going And ratios to to CoBiz where it higher? think the start you relates are uncomfortable continues do how do stabilize

Steven Nell

big there a Colorado. Yeah, business, that client, funds they're significant and decline pretty of we'll of in is so of they kind in around. balances DDA the chunk is administration A one out on point a that lot move

And a don't so read But they that I yeah, lot we there. have drop. stability into -- particular

at the view performance both going think Colorado deposit loan as acquisition. We're and going we're full the I view their to the as level. Arizona on well CoBiz to it level

So we've CoBiz into the completely incorporated all our businesses businesses. of

get we from going have the to watch results is the and market market -- we're the we view. so And impact what manage and the that closely full that

of Second question was part your what?

Michael Rose

to Loan-to-deposit ratio, it's obviously move higher. continued

So...

Steven Nell

than mean to wanted much XX%. before. into that think how higher our stated I it's majority above deposit it's matter this had of year. us to before to growth to this XXXX try I company up our a of XX%. so We've we goals well again, loan deposits. far probably one gather And at None fund go we the leading of was it creeping of can that done I've growth with that haven't that Yes.

but look we'll I And we somewhere certainly is range. it address, don't to So continue would think that what for that not uncomfortable that. would below want say, I us, I to at mid-XXs XX% keep

Michael Rose

And kind dry. the any and remain the seized Okay. or for of equity up energy companies concern debt capital if markets

business If to down you could they draw support in as see some growth? their outflows deposits

Stacy Kymes

aren't about banks the there. funding be of not may equity frankly, entirety the or drilling because I outcomes think bit drill that's absolutely one borrowing this them they're And excited to little level pretty a be if use see of if if -- going that at could flow really bases prices go cash to full. are they you programs help stay to going lower,

So they're cash to going to have out of flow. that do

seeing analytical by very that I see-through is there. a think good energy volumes deposit impacted

Michael Rose

on just was for what Thanks. what quarter? one premium margin quarter? then maybe And impact And this Okay. me, disclose it the last the you amortization was can maybe from more

Steven Nell

pushing us. for given bond small don't quarter. of a lot have We any regular amortization pretty in the premium through portfolio that on It's we're

say So, I would it's insignificant.

Michael Rose

my Okay. Thanks questions. taking for

Operator

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

Jon Arfstrom

morning, Good Thanks. everyone.

Steven Nell

Good morning.

Stacy Kymes

Good morning.

Jon Arfstrom

have may but have I'm loan do You just said percentage the that's the it, curious. LIBOR based? of portfolio Steven, you

Steven Nell

Well, put this me it let way.

day. majority but higher I is year, LIBOR pretty XX% based. it's a side. XX say our is variable. would migrated that Prime, to the LIBOR used split actually them variable. of XX% reprices XX% LIBOR of portfolio XX% a certainly towards And of high within loans between loan of more the but And It be So, and much is are LIBOR-based

on the short pretty curve. it's So

Jon Arfstrom

the portfolio commercial just the or entire that's And piece?

Steven Nell

the That's portfolio. entire

Jon Arfstrom

Okay.

Steven Nell

variable. XX% is

Jon Arfstrom

what Okay. that? XXX% And of you is that with the mentioned size then funding the offsetting beta, piece wholesale

Steven Nell

billion. -- It's that our $XX funding the from quickly. from wholesale reprice $XX we will of the is categories billion that

Jon Arfstrom

beta? piece And saying you're is Okay. that's the XXX%

Steven Nell

to closely very mean it's going down. Yeah, thereabout. track very, I

Stacy Kymes

a bank And peers, extent interest larger margin some rates. the net size than to -- revenue in real but portfolio forever. NIM the of more securities we've also this base and Keep that that been of than our interest falling lower stable net a of a but that that's because the most securities times portfolio, interest peers. buffer of in managed how much It's mind been has time result over

Jon Arfstrom

to point downs guess mean impact view. And trying step figure manageable would rates some I big of I reasonably Yeah. guess sounds what of of we're have. out an the your I Yeah. from lower like it's kind it here? all

Steven Nell

hammered don't up. on way we've try down ever think we a or way balance mean where I always to manage have positioned significantly get the neutral. we on stated I sheet the gain relatively we

definition when other, X% a but not one X% as or to other, it as you of other relatively compare that's wide way Now way X.X% the could to or neutral be the one banks. that's

Jon Arfstrom

made a for you loan about to you that. that's your continues anything showing Are Okay. economy seeing changing growth comment as core show view as Appreciate the That Stacy the a helps strength? strength. lot. long economy on you,

Stacy Kymes

this at point. Not

all growth the you over board couple segments, last think I see across strong. really exceptionally really C&I, the obviously Energy's estate, quarters in healthcare. real been --

could borrower's headwind worry think or to just that to the as more you respond uncertainty because as you will XXXX, things that. to about -- that borrowers and impact -- leverage, the XXXX desire how and these around little from bit create so election you a worry about think presidential process like a borrowers you I about you get into about things ability think how

pretty are would things good side, impressed day-to-day would But tell economy, borrower in still board sector. and perspective. good, but actually what's it's I you borrowers with the in terms late general a just you across on of in the even doing this happening the from discipline there's do the I'm in banking the cycle good the economy, both And discipline

Jon Arfstrom

one Okay. just to of on last else line mortgage sustainability out guess. And the coming not may did an call of then hopefully. quarter looks Good. you I top in terms hit The the mortgage it -- revenues? But anything have this quarter, sustainability like the way mortgage, MSR you of

Steve Bradshaw

that This lot Yeah. months or a we've last take out is so. of business -- unit I've done Steve. XX in to the expense

sweet as the gain So, quarter. kind spot of increase or nice we've points as They we've caught here, pretty a well. sale in seen grew basis on up application second seen drive XX volumes strong margins

on rates X.XX% that a see season to we're good think going below middle see continue of certainly kind long XX-year, to right as X%, now. I We're as the the threshold we in volume. of

course because segment a we haven't So, us wane going over seen profitable much but half suggest to it's the our of of it's the work. expense year, anything for would second that that of more

good So, is for think, the I side. timing this us, on mortgage

Jon Arfstrom

Yeah.

Thanks job. a guys. lot, Nice Okay.

Steve Bradshaw

Jon. you, Thank

Operator

question Stephens. Our Olney next from proceed comes line with Matt your the with question. of Please

Matt Olney

you. Thank morning, great. Hey, Good guys.

Steve Bradshaw

morning. Good

Steven Nell

Good morning.

Matt Olney

pipeline back sector was the details year. Thinking you and more point portfolios you're more loan strong seeing can as on growth, half of Any at you the of healthcare that that. as us about healthcare some the the some pipelines good you give good one far within pointed can good growth? to specific towards Any seeing as growth

Stacy Kymes

nursing, We've healthcare that living, development care, really opportunity. real great assisted memory is had that's skilled inside focus Our well. a outcomes think business around good independent historically. credit living, housing, senior We of as there

that but of have something on portfolio been and that have focused can through, inside we're for we around senior and risk, XX healthcare. something years and of segment the we've some portfolio that's reputation has around where risk really understand that You that work that inside you inside managed reimbursement some inside housing risk, risk

at losses standalone we out-of-network doctor credit over is have work -- we've look styled don't where healthcare look you through when you few and guarantees areas year risk worked that at embedded that facility, with really things we've seen seen you that of related the those that. The the have worked healthcare been areas a and a or frankly last underperformed the to on have through that

development So, the housing is side. on our really senior business focus

so or added we as we're healthcare. be well, and that in talent that in continue help optimistic strategies so, last augment We We've think to there XX excited our growth really space days about about. inside extremely will our the

Matt Olney

And Stacy, are impacted overbuilding standpoint a this your senior data macro by right housing some the now? borrowers that are point facilities. there from some that of something of towards the being Is that points

Stacy Kymes

certainly of the look that done sub things There inside a where for a particular at been think and when They of the careful capacity facilities is. case, I have those. larger area, of avoiding areas we we've job can be. new construction We're been and metro what has awfully -- like where that that areas pockets good even

-- from skilled good so been Our need teams really states analyzing where on at and there job are that. areas the some particularly we side. broadly We do look stay nursing that a really of barrier, where certificate creates of a try so has overbuilding, to there's away states

improve which or facilities and Because outcomes the the We're and in the operations is experiences is underperformed. good really play which we big think pretty healthcare divestiture players and to the and the of months So, our players for on outsized is operators the really players most for they've we're facilities spate about come attention space that. which -- has not from good pressure where of the up operations haven't Where REITs have regional the so spot is to much will gobbled where some they seeing create those. the the so the operations and we of of opportunities we and really housing sweet some over to feel ability next who some and XX housing from local good the the acquire as is have is is -- senior say the the that important facilities, paid senior big players about those residences. the part quality

Matt Olney

may Okay. from the And lots Thanks I'm average appreciate like moving of trying here. then, of the back the in Stacy. guess for half parts what earning color, year. balance look I sheet the Nell, assets Steven to

half the you $X.X loan of trading got higher increase towards mentioned. at NBS security securities, back XQ. the see growth strong the billion You've -- We the higher book

It right be XQ, Am assets almost growth on feels about XQ earning the versus in assets? XQ that average from earning to up speaking billion I like could average $X XQ. that

Steven Nell

Yeah.

should You're that kind to think continue close. we'll of we'll to securities loans. average, that so grow incrementally continue they or On I pretty add much single-digit in mean, level. don't probably portfolio. I grow more mid

you'll effect much that full -- the to we the but securities the assets, on available-for-sale be more earning portfolio. adding average portfolio So, average of incrementally the get in won't quarter average

follow. helpful? deposit mean, kind just gathering And borrowing categories. through the all in funding of that either some securities the wholesale case will self-fund we'll average activity, those the or Is they of of of that through it I then sort of fund

Matt Olney

Yeah. guys. is helpful. I appreciate you, Thank it. That

Steven Nell

you. Thank

Operator

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

Jennifer Demba

you. morning. Thank Good

have covered morning, at been all ask interest this know CoBiz the wanted been think about M&A long. but topics just has I books this your I point. too on to the

Steve Bradshaw

is this Steve. Jennifer, Yeah.

the clearly that real Arizona our those generate expense we in investment think work I of but now that targeted on hard there, Colorado and really the We grow is work growth got markets. in a squarely had markets. sure focus the return making lot still did and we and is saves

say appetite further pretty for our point. at M&A this is muted I'd So,

we're think on be successful us for absolutely I going that making focused forward.

Jennifer Demba

Thank Great. Okay. you.

Steve Bradshaw

Thank you.

Steven Nell

Thanks, Jennifer.

Operator

And session. we question-and-answer I turn like closing call the Nell Ladies and have for of the to back remarks. reached Steven gentlemen, the end to would

Steven Nell

joining Okay. Thanks this again morning. everyone us for

email have at great please call Have can day. or ir@bokf.com. XXX-XXX-XXXX at IR you questions, further any me you our If side a

Operator

today's conference. This concludes

You your for at you Thank lines may time. participation. disconnect this your