BOK Financial(US:BOKF)2025-04-30 16:56Part I. Financial Information Management's Discussion and Analysis of Financial Condition and Results of Operations BOK Financial's Q1 2025 net income decreased to $119.8 million due to lower brokerage revenue, despite increased net interest income and an expanded net interest margin of 2.78%, with strong capital ratios Q1 2025 Key Financial Performance (vs Q4 2024) | Metric | Q1 2025 | Q4 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $119.8 million | $136.2 million | ($16.4 million) | | Diluted EPS | $1.86 | $2.12 | ($0.26) | | Net Interest Income | $316.3 million | $313.1 million | +$3.2 million | | Net Interest Margin | 2.78% | 2.75% | +3 bps | | Fees and Commissions | $184.1 million | $206.9 million | ($22.8 million) | | Period End Loans | $23.7 billion | $24.1 billion | ($0.4 billion) | | Period End Deposits | $38.3 billion | $38.2 billion | +$0.1 billion | Performance Summary Q1 2025 net income fell to $119.8 million ($1.86/share) due to reduced brokerage revenue, despite net interest income growth and a 2.78% net interest margin, with strong capital ratios and no credit loss provision - Net interest margin expanded to 2.78% from 2.75% QoQ, as liabilities re-priced lower more quickly than assets12 - Brokerage and trading revenue fell by $24.4 million QoQ due to lower trading volumes and margin compression from market volatility12 - No provision for expected credit losses was necessary, as a worse economic outlook was offset by decreased loan balances and improved portfolio credit quality12 - Period-end loan balances decreased by $424 million to $23.7 billion, primarily from a drop in commercial loans12 - The Common Equity Tier 1 capital ratio improved to 13.31% at March 31, 2025, from 13.03% at December 31, 202413 Results of Operations Q1 2025 results showed net interest income rising to $316.3 million, offset by a $24.0 million decrease in other operating revenue, primarily from brokerage activities, with stable operating expenses and a 22.61% effective tax rate Reportable Segments In Q1 2025, all three segments—Commercial Banking, Consumer Banking, and Wealth Management—experienced a decline in net income before taxes, primarily driven by reduced loan spreads, lower deposit spreads, and decreased trading volumes, respectively Net Income Before Taxes by Segment (Q1 2025 vs Q4 2024) | Segment | Q1 2025 (in thousands) | Q4 2024 (in thousands) | Change (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Commercial Banking | $139,983 | $160,393 | $(20,410) | (13)% | | Consumer Banking | $22,122 | $23,580 | $(1,458) | (6)% | | Wealth Management | $32,726 | $48,915 | $(16,189) | (33)% | | Subtotal | $194,831 | $232,888 | $(38,057) | (16)% | Financial Condition As of March 31, 2025, total loans decreased to $23.7 billion, while deposits grew modestly, improving the loan-to-deposit ratio to 62%, with robust capital levels including a 13.31% CET1 ratio and a 1.40% allowance for credit losses Explanation and Reconciliation of Non-GAAP Measures This section reconciles non-GAAP measures like tangible common equity ratio, pre-provision net revenue (PPNR), and efficiency ratio to GAAP equivalents, providing additional insight into capital strength and operational performance - The tangible common equity ratio, a non-GAAP measure, is used to indicate capital strength by excluding intangible assets. It was 9.48% at March 31, 2025, up from 9.17% at December 31, 2024153155 - Pre-provision net revenue (PPNR) is used to assess the ability to generate earnings to cover credit losses. PPNR was $154.8 million for Q1 2025153156 - The efficiency ratio, which measures operational effectiveness, was 68.31% for Q1 2025 compared to 65.61% for Q4 2024153157 Market Risk The company manages primary market risks, including interest rate risk on non-trading and trading assets, through Asset/Liability Committee oversight, economic hedges for MSRs, and VaR/SVaR for trading, with a 200 bp rate increase projected to decrease NII by $38.0 million Interest Rate Sensitivity on Net Interest Income (Next 12 Months) | Rate Change | Impact on NII (in thousands) | Impact (%) | | :--- | :--- | :--- | | +200 bp | $(38,000) | (2.76)% | | +100 bp | $(8,200) | (0.60)% | | -100 bp | $3,900 | 0.28% | | -200 bp | $12,600 | 0.92% | - The company uses VaR (Value at Risk) and SVaR (Stressed VaR) to measure and manage market risk for its trading portfolio. For Q1 2025, the average 10-day 99% VaR was $3.4 million and the average SVaR was $13.2 million175177179 - The company has an independent Model Risk Management staff to validate models, ensuring they are conceptually sound and performing as expected182 Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls over financial reporting identified during Q1 2025 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period184 - No material changes to internal controls over financial reporting were identified during the first quarter of 2025184 Consolidated Financial Statements – Unaudited This section presents BOK Financial's unaudited consolidated financial statements for Q1 2025, including Statements of Earnings, Balance Sheets, and Cash Flows, with detailed notes on accounting policies, securities, loans, derivatives, and fair value measurements Consolidated Statements of Earnings (Unaudited) For Q1 2025, net income attributable to shareholders was $119.8 million ($1.86/diluted share), up from $83.7 million ($1.29/diluted share) in Q1 2024, driven by higher net interest income and no significant AFS securities loss Consolidated Earnings Summary (Three Months Ended March 31) | Metric (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net Interest Income | $316,251 | $293,572 | | Provision for credit losses | $0 | $8,000 | | Total other operating revenue | $186,041 | $161,701 | | Total other operating expense | $347,529 | $340,384 | | Net income attributable to BOKF shareholders | $119,777 | $83,703 | Consolidated Balance Sheets (Unaudited) As of March 31, 2025, total assets increased to $50.5 billion, driven by trading securities, while total loans decreased to $23.4 billion, and total deposits rose to $38.3 billion, contributing to a growth in shareholders' equity to $5.8 billion Balance Sheet Summary (in thousands) | Metric | March 31, 2025 | Dec. 31, 2024 | | :--- | :--- | :--- | | Total Assets | $50,472,189 | $49,685,892 | | Loans, net of allowance | $23,411,894 | $23,834,689 | | Total Deposits | $38,281,673 | $38,191,230 | | Total Liabilities | $44,697,811 | $44,134,935 | | Total Shareholders' Equity | $5,771,813 | $5,548,353 | Notes to Consolidated Financial Statements (Unaudited) These notes detail accounting policies, securities, loan portfolio analysis under CECL, derivative instruments, mortgage banking, commitments, contingencies, segment reporting, and fair value measurements, providing comprehensive financial disclosures - The company adopted ASU 2024-01 regarding stock compensation, which did not have a material effect. It is currently assessing the impact of new ASUs on income tax and expense disclosures199200201 - Note 4 provides a detailed breakdown of the loan portfolio by type, risk grade, and vintage, and explains the methodology for the allowance for credit losses, which is based on a CECL model incorporating macroeconomic forecasts222235242 - Note 11 details the fair value hierarchy (Levels 1, 2, and 3) and provides valuations for assets and liabilities measured at fair value on both a recurring (e.g., securities, derivatives) and non-recurring (e.g., collateral for nonaccruing loans) basis304305318 Quarterly Financial Summary – Unaudited This section summarizes consolidated daily average balances for assets, liabilities, and equity, along with average yields and rates for interest-earning assets and interest-bearing liabilities, providing insight into net interest income and margin drivers Q1 2025 Average Balances and Yields/Rates | Category | Average Balance (in thousands) | Tax-Equivalent Yield/Rate | | :--- | :--- | :--- | | Total Earning Assets | $45,606,324 | 5.45% | | Loans | $24,068,227 | 6.71% | | Available-for-sale securities | $12,962,830 | 3.82% | | Total Interest-Bearing Liabilities | $35,896,315 | 3.42% | | Interest-bearing deposits | $30,203,009 | 3.24% | | Other borrowings | $4,626,402 | 4.57% | Quarterly Earnings Trends – Unaudited This section presents a summary table of key earnings statement line items for the last five consecutive quarters (Q1 2024 through Q1 2025), facilitating trend analysis of revenues, expenses, provisions, and net income Net Income Trend (Last 5 Quarters) | Quarter | Net Income Attributable to BOKF (in thousands) | | :--- | :--- | | Q1 2025 | $119,777 | | Q4 2024 | $136,154 | | Q3 2024 | $139,999 | | Q2 2024 | $163,713 | | Q1 2024 | $83,703 | Part II. Other Information Legal Proceedings The company is a defendant in a class action lawsuit concerning its trustee role for municipal bonds, with a potential $31 million bondholder loss, though management believes no loss is probable - The company is a defendant in a class action lawsuit from 2016 concerning its role as a trustee for municipal bonds where an employee violated policies. The action remains stayed277 - Management believes no loss is probable, but if it were, the estimated outstanding bond amount is approximately $31 million, which could be material279 Risk Factors No material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K were reported - No material changes from the risk factors disclosed in the 2024 Form 10-K were reported330 Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2025, the company repurchased 10,000 shares at an average price of $98.45 under its public repurchase plan, with 1,532,980 shares remaining available under the current authorization - In Q1 2025, the company repurchased 10,000 shares of its common stock at an average price of $98.45 per share under its public repurchase program332 - As of March 31, 2025, 1,532,980 shares may yet be purchased under the existing five-million-share repurchase authorization from November 2022332 Other Information No director or officer adopted, modified, or terminated Rule 10b5-1 trading plans during Q1 2025, though some participate in dividend reinvestment and 401(k) plans - No director or officer adopted, modified, or terminated any Rule 10b5-1 trading plans during Q1 2025333 Exhibits This section lists exhibits filed with the quarterly report, including CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906, and interactive data files (Inline XBRL) - Exhibits filed include CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906335 - Interactive data files (XBRL) are included as Exhibit 101335 Signatures The report is signed on April 30, 2025, by Martin E. Grunst, EVP and CFO, and Michael J. Rogers, SVP and Chief Accounting Officer, for BOK Financial Corporation