BOK Financial(BOKF) - 2025 Q2 - Quarterly Report

Part I. Financial Information This section presents the company's financial performance, condition, market risks, and internal controls, including unaudited financial statements Management's Discussion and Analysis of Financial Condition and Results of Operations BOK Financial reported strong Q2 2025 results with net income of $140.0 million, driven by increased net interest income and fees, robust loan growth, stable credit quality, and strong capital position Performance Summary This section provides a comparative overview of key financial performance metrics for the current quarter and year-to-date periods Q2 2025 vs Q1 2025 Performance | Metric | Q2 2025 ($) | Q1 2025 ($) | | :--- | :--- | :--- | | Net Income | $140.0 million | $119.8 million | | Diluted EPS ($) | $2.19 | $1.86 | | Pre-Provision Net Revenue (PPNR) ($) | $180.7 million | $154.8 million | | Net Interest Income ($) | $328.2 million | $316.3 million (implied) | | Net Interest Margin (%) | 2.80% | 2.78% | | Fees and Commissions Revenue ($) | $197.3 million | $184.1 million | | Period End Loans ($) | $24.3 billion | $23.7 billion (implied) | - No provision for expected credit losses was recorded in Q2 2025, attributed to improved portfolio credit quality offsetting the impact of loan growth. Net charge-offs were minimal at $561 thousand[14] - The company repurchased 663,298 shares at an average price of $93.99 in Q2 2025 and approved a new 5 million share repurchase authorization on July 29, 2025[15] YTD 2025 vs YTD 2024 Performance | Metric | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | | :--- | :--- | :--- | | Net Interest Income | $644.4 million | $589.6 million | | Fees and Commissions Revenue | $381.4 million | $400.6 million | | Total Operating Expense | $702.0 million | $677.0 million | | Provision for Credit Losses | $0 | $16.0 million | Results of Operations This section analyzes the drivers behind changes in net interest income, other operating revenue, and operating expenses - Net interest income increased QoQ due to a $1.4 billion rise in average earning assets, primarily in trading and AFS securities, and a 2 basis point expansion in net interest margin to 2.80%[17][18][20] - Other operating revenue grew by $21.1 million QoQ to $207.1 million, driven by broad-based growth in fees and commissions, particularly a $7.1 million increase in brokerage and trading revenue[26][27] - Other operating expense increased by $7.0 million QoQ to $354.5 million, mainly due to higher operational losses and costs related to technology projects[44][47] Reportable Segments This section details the financial performance and key drivers for each of the company's reportable business segments Net Income Before Taxes by Segment (Q2 2025 vs Q1 2025) | Segment | Q2 2025 ($) | Q1 2025 ($) | % Change | | :--- | :--- | :--- | :--- | | Commercial Banking | $141.6 million | $140.0 million | 1% | | Consumer Banking | $24.7 million | $22.1 million | 12% | | Wealth Management | $40.7 million | $32.7 million | 25% | | Segment Total | $207.1 million | $194.8 million | 6% | - Commercial Banking's pre-tax income rose 1% QoQ, as an $8.9 million increase in other operating revenue (from merchant banking and syndication fees) offset a $2.4 million decline in net interest income[57][58] - Consumer Banking's pre-tax income grew 12% QoQ, primarily due to a $1.8 million decrease in operating expenses and lower net loan charge-offs[62][63] - Wealth Management's pre-tax income surged 25% QoQ, driven by a $7.7 million increase in combined net interest and fee revenue from higher trading activities[65][66] Financial Condition This section reviews the company's financial position, including loan portfolio composition, credit quality, and liquidity metrics - The loan portfolio grew by $602 million QoQ to $24.3 billion, led by increases in commercial real estate and loans to individuals[73] - The energy loan portfolio decreased by $126 million to $2.7 billion, or 11% of total loans, due to elevated payoff activity[79] - The combined allowance for credit losses stood at $330 million, or 1.36% of outstanding loans, at June 30, 2025[14][114] - The loan-to-deposit ratio was 64% at quarter-end, indicating significant on-balance sheet liquidity[129] Liquidity and Capital This section assesses the company's liquidity position and capital adequacy, including key regulatory ratios and shareholder return initiatives Key Capital Ratios | Ratio | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Common Equity Tier 1 | 13.59% | 13.31% | | Tier 1 Capital | 13.60% | 13.31% | | Total Capital | 14.48% | 14.54% | | Leverage Ratio | 9.88% | 10.02% | | Tangible Common Equity Ratio | 9.63% | 9.48% | - Average deposits for Q2 2025 were $38.1 billion, a slight decrease of $222 million from Q1 2025, primarily from a reduction in demand deposits[131] - The company redeemed all outstanding subordinated debt and junior subordinated debentures during the second quarter of 2025[145] - A new share repurchase authorization for up to five million shares was approved on July 29, 2025, replacing the previous plan[148] Market Risk The company manages interest rate risk, MSR, and trading portfolio exposures within board-approved limits, with the balance sheet being asset-sensitive to rate changes Interest Rate Sensitivity on Net Interest Income (as of June 30, 2025) | Rate Change | Impact over next 12 months ($) | Impact over next 12 months (%) | | :--- | :--- | :--- | | +200 bp | $(38,600) thousand | (2.79)% | | +100 bp | $(15,100) thousand | (1.09)% | | -100 bp | $11,100 thousand | 0.80% | | -200 bp | $26,200 thousand | 1.89% | - The company actively manages market risk for its Mortgage Servicing Rights (MSR) portfolio. A 50 basis point increase in rates would result in a net exposure loss of $460 thousand, while a 50 basis point decrease would result in a net loss of $2.73 million, both well within the $20 million board-approved limit[170][171] - For trading activities, the company uses Value at Risk (VaR) and Stressed VaR (SVaR) to measure potential losses. For Q2 2025, the average 10-day 99% VaR was $1.9 million and the average SVaR was $7.0 million[177][179][181] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the second quarter of 2025[186] - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls over financial reporting[186] Consolidated Financial Statements – Unaudited This section presents the unaudited consolidated financial statements, including balance sheet, earnings, and cash flow highlights for the periods ended June 30, 2025 Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2025 ($) | Dec. 31, 2024 ($) | | :--- | :--- | :--- | | Total Assets | $50,998,077 thousand | $49,685,892 thousand | | Loans, net | $24,015,162 thousand | $23,834,689 thousand | | Total Deposits | $38,246,109 thousand | $38,191,230 thousand | | Total Liabilities | $45,104,721 thousand | $44,134,935 thousand | | Total Shareholders' Equity | $5,890,888 thousand | $5,548,353 thousand | Consolidated Statement of Earnings Highlights (Unaudited) | Account | Three Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2025 ($) | | :--- | :--- | :--- | | Net Interest Income | $328,166 thousand | $644,417 thousand | | Provision for Credit Losses | $0 | $0 | | Total Other Operating Revenue | $207,098 thousand | $393,139 thousand | | Total Other Operating Expense | $354,503 thousand | $702,032 thousand | | Net Income | $140,070 thousand | $259,841 thousand | Part II. Other Information This section covers legal proceedings, risk factors, equity sales, and other miscellaneous information, including required exhibits Item 1. Legal Proceedings The company is involved in a stayed putative class action lawsuit, with management believing a loss is not probable due to valid defenses - BOKF, NA is a defendant in a putative class action lawsuit from 2016 alleging participation in the fraudulent sale of securities related to its role as a trustee for municipal bonds. The case remains stayed[279] - Management, based on counsel's opinion, believes it has valid defenses and that a loss is not probable. No provision for losses has been made[281] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the 2024 Annual Report on Form 10-K were reported - No material changes from the risk factors disclosed in the 2024 Form 10-K were reported[337] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 671,074 shares in Q2 2025 and approved a new 5 million share repurchase authorization on July 29, 2025 Share Repurchases in Q2 2025 | Period | Total Shares Purchased | Average Price Paid | | :--- | :--- | :--- | | April 2025 | 246,557 | $92.30 | | May 2025 | 297,487 | $95.15 | | June 2025 | 127,030 | $94.70 | | Total | 671,074 | N/A | - On July 29, 2025, the board approved a new share repurchase authorization for up to five million shares, replacing the previous plan from November 2022[339] Item 5. Other Information No company director or officer adopted, modified, or terminated any trading arrangements during Q2 2025 - No director or officer adopted, modified, or terminated any trading arrangements in Q2 2025[340] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and Interactive Data Files (XBRL) - Exhibits filed include CEO/CFO certifications (31.1, 31.2, 32) and Interactive Data Files (101, 104)[342]