BOK Financial(BOKF) - 2025 Q2 - Quarterly Results

Q2 2025 Financial Highlights & CEO Commentary BOK Financial Corporation reported strong Q2 2025 results with increased net income, expanded net interest margin, broad-based fee revenue growth, and significant loan growth Financial Highlights BOK Financial Corporation achieved strong Q2 2025 results, marked by increased net income, expanded net interest margin, broad-based fee revenue growth, and significant loan growth Q2 2025 Key Financial Metrics (vs. Q1 2025) | Metric | Q2 2025 | Change from Q1 2025 | | :--- | :--- | :--- | | Net Income | $140.0 million | +$20.2 million | | Diluted EPS | $2.19 | +$0.33 | | Net Interest Income | $328.2 million | +$11.9 million | | Net Interest Margin | 2.80% | +2 bps | | Fees & Commissions Revenue | $197.3 million | +$13.2 million | | Period End Loans | $24.3 billion | +$602 million | | Period End Deposits | $38.2 billion | Relatively Unchanged | | Net Charge-offs (annualized) | < 0.01% | - | | Nonperforming Assets % | 0.33% | -0.03% | CEO Commentary President and CEO Stacy Kymes highlighted the company's diverse business model, driven by accelerated loan growth, strong fee income, and continued net interest margin expansion - Key drivers for the quarter's success included: accelerated loan growth of over $600 million, fifth consecutive quarter of net interest income growth, core net interest margin expansion of 7 basis points, and broad-based fee income growth with record highs in fiduciary/asset management, transaction card revenue, and deposit service charges[2] Financial Performance Analysis The company's financial performance improved due to increased net interest income, higher other operating revenue, and managed operating expenses Net Interest Income Net interest income increased by $11.9 million to $328.2 million in Q2 2025, driven by a 2 basis point expansion in net interest margin to 2.80% Net Interest Income and Margin (Q2 2025 vs Q1 2025) | Metric | Q2 2025 | Q1 2025 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $328.2 million | $316.3 million | +$11.9 million | | Net Interest Margin (NIM) | 2.80% | 2.78% | +2 bps | | Core NIM (Non-GAAP) | 3.12% | 3.05% | +7 bps | | Average Earning Assets | $47.0 billion | $45.6 billion | +$1.4 billion | - The yield on average earning assets increased by 2 basis points to 5.47%, while total funding costs decreased by 2 basis points to 3.40%[5][6] - Growth in average earning assets was primarily driven by a $995 million increase in average trading securities and a $256 million increase in average available-for-sale securities[4] Other Operating Revenue Total other operating revenue rose by $21.1 million to $207.1 million, primarily fueled by a $13.2 million increase in fees and commissions Fees and Commissions Revenue Breakdown (Q2 2025 vs Q1 2025) | Revenue Source | Q2 2025 | Q1 2025 | Change | | :--- | :--- | :--- | :--- | | Brokerage and trading | $38.1 million | $31.1 million | +$7.1 million | | Fiduciary and asset management | $64.0 million | $61.0 million | +$3.0 million | | Transaction card | $29.6 million | $27.1 million | +$2.5 million | | Total Fees and Commissions | $197.3 million | $184.1 million | +$13.2 million | - Brokerage and trading revenue growth was driven by steady customer demand and higher mortgage origination volumes[8] - Other gains (losses), net, was a net gain of $8.1 million, a significant turnaround from a net loss of $725 thousand in the prior quarter, mainly due to gains on merchant banking and deferred compensation investments[10] Operating Expenses Total operating expenses increased by $7.0 million to $354.5 million, primarily due to higher operational losses and increased technology-related professional fees - Personnel expense was consistent at $214.7 million, as a seasonal decrease in payroll taxes was offset by increased deferred compensation expense and the full quarter impact of annual merit increases[12] - Non-personnel expenses rose by $6.4 million, mainly due to a $4.1 million increase in 'Other expense' from higher operational losses and a combined $4.1 million increase in professional fees and data processing for technology projects[13] Balance Sheet and Credit Analysis The company's balance sheet strengthened with significant loan growth, stable deposits, improved capital ratios, and exceptional credit quality Loans Total loans increased by $602 million (2.5% QoQ) to $24.3 billion, driven by strong growth in Commercial Real Estate and Loans to Individuals Loan Portfolio Composition (June 30, 2025) | Loan Category | Balance | Change from Q1 2025 | % of Total Loans | | :--- | :--- | :--- | :--- | | Total Commercial | $14.4 billion | -$19 million | 59% | | Energy | $2.7 billion | -$126 million | 11% | | Commercial Real Estate | $5.5 billion | +$358 million | 23% | | Loans to Individuals | $4.4 billion | +$263 million | 18% | | Total Loans | $24.3 billion | +$602 million | 100% | - Growth in Commercial Real Estate was led by a $141 million increase in industrial loans and a $137 million increase in multifamily loans[20] - The decrease in the energy portfolio, which is primarily low-risk, first-lien, reserve-based lending, brought its share of total loans down to 11%[16] Deposits Period-end deposits remained stable at $38.2 billion, with a slight decrease of $36 million, reflecting a shift from non-interest-bearing to interest-bearing accounts Period End Deposit Composition (June 30, 2025) | Deposit Type | Balance | Change from Q1 2025 | | :--- | :--- | :--- | | Demand | $8.0 billion | -$290 million | | Interest-bearing transaction | $25.8 billion | +$182 million | | Time | $3.5 billion | +$83 million | | Total Deposits | $38.2 billion | -$36 million | - The loan to deposit ratio was 64% at June 30, 2025, up from 62% at March 31, 2025[22] - By segment, average deposits decreased in Commercial Banking (-$344 million) but increased in Consumer Banking (+$112 million) and Wealth Management (+$81 million)[24] Capital The company's capital position strengthened, with all regulatory capital ratios remaining well above minimum requirements, and active share repurchases undertaken Key Capital Ratios (June 30, 2025 vs. March 31, 2025) | Ratio | June 30, 2025 | March 31, 2025 | Minimum Requirement (incl. buffer) | | :--- | :--- | :--- | :--- | | Common Equity Tier 1 | 13.59% | 13.31% | 7.00% | | Tier 1 Capital | 13.60% | 13.31% | 8.50% | | Total Capital | 14.48% | 14.54% | 10.50% | | Tangible Common Equity | 9.63% | 9.48% | N/A | - The company repurchased 663,298 shares of common stock for approximately $62.3 million during the second quarter[27][25] Credit Quality Credit quality continued to improve in Q2 2025, with declining nonperforming assets and historically low net charge-offs, resulting in no provision for expected credit losses - Nonperforming assets decreased to $81 million (0.33% of loans) from $85 million (0.36% of loans) in the prior quarter[28] - Net charge-offs were minimal at $561 thousand, or 0.01% of average loans on an annualized basis[30] - The combined allowance for loan losses and off-balance sheet credit risk was $330 million, representing 1.36% of outstanding loans and 456% of nonaccruing loans (excluding government-guaranteed loans)[31] Securities & Derivatives The available-for-sale securities portfolio increased to $13.3 billion with narrowing unrealized losses, while the trading securities portfolio stood at $5.6 billion - The AFS portfolio, primarily consisting of U.S. government agency-backed mortgage securities, grew to $13.3 billion[32] - The trading securities portfolio, held to support customer sales, totaled $5.6 billion at quarter-end[33] - The net economic benefit from changes in the fair value of mortgage servicing rights and their related hedges was $1.6 million during the quarter[36] Segment Performance Each segment demonstrated positive contributions, with Wealth Management showing significant growth, Consumer Banking improving profitability, and Commercial Banking maintaining stable performance Commercial Banking The Commercial Banking segment's net income before taxes increased by $1.6 million to $141.6 million, with stable revenue and a modest expense increase Commercial Banking Q2 2025 Highlights | Metric | Q2 2025 | Change from Q1 2025 | | :--- | :--- | :--- | | Net Income Before Taxes | $141.6 million | +$1.6 million | | Average Loans | $19.9 billion | -$71 million | | Average Deposits | $17.4 billion | -$344 million | Consumer Banking Consumer Banking contributed $24.7 million to net income before taxes, a $2.6 million increase, driven by decreased operating expenses and growth in loans and deposits Consumer Banking Q2 2025 Highlights | Metric | Q2 2025 | Change from Q1 2025 | | :--- | :--- | :--- | | Net Income Before Taxes | $24.7 million | +$2.6 million | | Average Loans | $2.3 billion | +$98 million | | Average Deposits | $8.3 billion | +$112 million | Wealth Management The Wealth Management segment reported a strong quarter, with net income before taxes increasing by $8.0 million to $40.7 million, driven by higher revenue and asset growth Wealth Management Q2 2025 Highlights | Metric | Q2 2025 | Change from Q1 2025 | | :--- | :--- | :--- | | Net Income Before Taxes | $40.7 million | +$8.0 million | | Average Loans | $2.3 billion | +$88 million | | Average Deposits | $10.8 billion | +$81 million | | Assets Under Management | $117.9 billion | +$3.9 billion | Financial Statements and Supplementary Data This section provides comprehensive financial statements, quarterly trends, and reconciliations of non-GAAP measures for detailed performance analysis Balance Sheets The unaudited balance sheet as of June 30, 2025, shows total assets of $51.0 billion, driven by an increase in net loans, with total equity growing to $5.9 billion Key Balance Sheet Items (June 30, 2025) | Item | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Total Assets | $50,998 million | $50,472 million | | Loans, net of allowance | $24,015 million | $23,412 million | | Total Liabilities | $45,105 million | $44,698 million | | Total Deposits | $38,246 million | $38,282 million | | Total Equity | $5,893 million | $5,774 million | Income Statements The unaudited income statement for Q2 2025 details a net income of $140.0 million, reflecting $328.2 million in net interest income and $207.1 million in other operating revenue Income Statement Summary (Three Months Ended June 30, 2025, in millions) | Item | Amount | | :--- | :--- | | Net Interest Income | $328.166 | | Provision for Credit Losses | $0 | | Total Other Operating Revenue | $207.098 | | Total Other Operating Expense | $354.503 | | Net Income Before Taxes | $180.761 | | Net Income | $140.070 | Quarterly Financial Trends This section provides detailed trend data for the past five quarters, covering earnings, key ratios, capital levels, and credit quality indicators for comprehensive performance review - Quarterly trend data reveals a consistent increase in net interest income over the last five quarters, from $296.0 million in Q2 2024 to $328.2 million in Q2 2025[47] - Credit quality has shown significant improvement, with nonperforming assets decreasing from $93.0 million in Q2 2024 to $81.1 million in Q2 2025[62] - Capital ratios have steadily strengthened, with the Common Equity Tier 1 ratio rising from 12.10% in Q2 2024 to 13.59% in Q2 2025[48] Reconciliation of Non-GAAP Measures This section reconciles non-GAAP financial measures to GAAP, providing clearer insights into capital strength and core operational performance - The Tangible Common Equity Ratio is presented to show capital strength by eliminating intangible assets from shareholders' equity[53] - Pre-provision net revenue is calculated to assess the company's ability to generate earnings to cover credit losses through a credit cycle[55] - Net interest income and margin excluding trading activities are provided to help assess the performance of core lending and deposit activities without the volatility of trading[56]