BOKF - Earnings call transcript Q3 2017 | BOK Financial Corporation

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Operator

Greetings, and welcome to the BOK Financial Corporation Third Quarter 2017 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Joe Crivelli, Senior Vice President, Investor Relations, for BOK Financial Corporation. you. Thank

begin. may You

Joseph Crivelli

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

Steven Bradshaw

another Good morning. It Financial. quarter was strong BOK for

As noted third Slide net year's quarter. up share, million income was on $X.XX per or last X, compared to XX% $XX.X

up loan XXXX. For was mixed volume X interest on the due third gain good X XXXX, the quarter combined earnings the the other in positive strong to Fee including due with in Recent over net Wealth continues year, operating total very first of underwriting in income margins. lower results the our compared million, division. revenue Mortgage lower hedging sale months XX% No with for careful fourth deliver first months And XX% MSR due of X XXXX, of $XXX revenue continued, income. losses refinancing and in Through strategy net operating net almost net credit net revenue growth the to environment. income quarter much stable quarter. lower including to interest up Management XX% revenue, is combined provision up and trends and the declined discipline margin is expense our management. Record volatility. continued to results first consecutive was Wealth income interest from sound Management for with our months to a

this slide, processing. there as and However, a Wealth the these had to due handful of unusual planned. third noted our Expenses were we With driven had assumptions, But relative our quarter we upwards partially transaction We vesting. offset this increased million took strength in is than were Management financial year. which have on this expense equity charge headwinds performance for items. to year, higher performance were assumptions incentive by in a bit is equity our vesting by our adjust a compensation. of in to million $X.X $X the related equity strong strong turn

stock million of our is price. due increase $X.X Another to this the in

by In addition, an down OREO written was $X.X million. property

our negative events, $X.X weather the recent Hurricane of impact a had facilities, and one operating including Finally, results, on a which quarter. Tulsa Harvey totaling struck tornado in million

have assets X, in by offset As but Industrial total commercial flat will under estate were for call, assets shown higher the I'll quarter, and and had Steven? flat. custody detail. now on Commercial strong additional management Fiduciary business. the in Steven but Nell remarks were later Slide some a financial to add in real paydown quarter. or more essentially this the levels results cover in period-end loans our was

Steven Nell

Steve. Thanks,

resulted in rate full cost with margin net Net combined sequentially $XXX.X quarter's basis As due and liabilities. quarter. in noted million a record the X.XX%, points the interest-bearing XX a in June was interest impact on yields growth modest margin in revenue strong on of interest X, up net securities of Fed loan to Slide of interest hike increase

impact compared retail summer point basis X.X% flat. interest up and a a to We're trading customer revenues $X.X a were quarter, basis, Investment were quarter, institutional banking down very little trailing quarter. X.X% and also Brokerage while the on strength point of had and trading the strong Transaction business. had and third down XX still sequentially which essentially seeing sequentially. on a the net down X.X% pressure. X.X% seasonality were on X XX-month nonaccrual based a brokerage higher deposit and basis X.X% asset year's basis. XX-month commissions $XXX.X and up down in due pricing last fees and On fees revenues hedging impact management X, On during positive sequential typical up on were was activity. year-over-year levels on million was Slide million, recoveries yields. loan Fiduciary card interest customer trailing sequentially of margin XX.X% basis XX.X% sequentially We to but positive also had and

Excluding return revenue in to volumes Mortgage increased million This was in XX.X% business as on flat. would competition the due the the impact loan been pricing. quarter, down third $X quarter. production tax the well of that banking was of have as seasonal second generated revenue lower

Turning X, quarter, line from $XXX.X largely million expenses increase be quarter. $XXX.X X up in last million to Slide to were items. operating This can the attributed

there there the gains million losses damage of within storm quarter. FDIC, the facilities not XXXX. P&L for the stock disaster-related in in million assets was million total XX of price. of a his impact guidance tornado facilities item $X.X mentioned These that million also As and Tulsa bank our combined Hurricane one assumptions and OREO you preliminary equity XXXX. repossessed damage as that expenses for Houston and in did Within items energy $X.X the related operating by a in expenses associated income the performance of million Harvey guidance $X.X to that a Steve charge represent other to the noted, remind repossessed our in with $X.X strong also has with Slide the balance as in quarter, charges were well August. contained Note to Natural of on comments. the statement. was of $X.X XXXX I'll received group including $X.X which expenses for that struck there third year this second quarter, which Steve was was million write-down in recur compensation associated X our from set we higher a rebate line an a property due the

be fourth loan in First, to to the we flat balances up expect quarter. slightly period-end

We revenue recoveries. Net GAAP as to expect net full fourth available-for-sale flat year. up for we businesses Revenue down the from don't excluding same margin expected be reflecting expect slightly of securities the the of recoveries. expected In the mortgage year, down to level the expect to interest quarter, fee-generating interest is our we portfolio flat impact be is balance interest of be the the to slightly, the results. interest slightly for weaker-than-expected to be

the be a to expenses year to quarter. to and full compared no in expect we take on GAAP basis provision XXXX, flat loan fourth loss expect We

are paydowns subside and low growth, paydowns. measure CRE CRE be muted law, take on initial loan growth. of constructive single-digit would Should to XXXX more Our includes on due reform some much loan become our tax although expectations we

deposit nonmaterial available-for-sale to down. expect be Assuming balances, no we slightly securities major flat in to changes

expect continue hike growth in limited forecast. our interest We margin, modest pricing one and pressure within embedded net Fed with XXXX deposit rate March

We income growth. single-digit expect low net interest

We provide fee-generating of loan flat on call we loan fourth environment expect commodity and to XXXX growth. loss economic when expect the and sense expense be provision the revenue businesses from guidance and for trends. a We'll have to mid-single-digit growth slightly up better year, our we quarter

detail. will any material changes environment. now foresee Stacy? more not in portfolio Kymes do in we review Stacy credit the loan However, the

Stacy Kymes

Thanks, Steven.

XX, on very a see were healthy can up to Slide compared you was quarter. second X.X%. the flat Commercial industrial loans As and

have to we they end. commercial rates was paydown However, higher-than-expected permanent environment. activity as at estate, narrow the been real estate The quite some seeing tap the borrowers are down due quarter Within as market XX-year commercial current sharply spreads short-term between are in time. the rate real increasingly and in

during the permanent the X.X%. industrial division, stabilized. with a to are basis oil to loss portfolio, were or And go the no in energy execute inside The was you growth On the peer before XX, points. there third the quarter. the as represents Net line down top Slide Within mix at reserve we've the private of XX% were represent seen was loans continues XX%. well energy modest to Slide change our sequential utilization loans which market and total know, bank our X In category, gas continue Nonaccruals remains producers strong. group. near deals our of charge-offs quality E&P personal our XX, of remained even quarter, largely outstanding. credit very loan of On as wealth they substantially

get improve. Net we to portfolio and oil that were the charge-offs criticized from loans further downturn As gas million. it continues XXXX, the of was energy and And decreased. to consecutive $X.X XXXX quarter classified sixth the

up Bradshaw for In sector, end-of-period nearly closing XX% to over outstanding in addition, with call Steve commentary. turn I'll loans back from year-end. the now has loan growth been this

Steven Bradshaw

Thanks, Stacy.

with interest the results has in and the to The are expansion are in been track a good entire strong credit as their post very of We to environment and substantial. earnings The executing Financial, BOK has kept results well, income and increase financial testimony a disciplined margin has the year. combined credit work. XXXX. minimum hard economic culture a to helped credit backdrop XXXX cost resulting Financial this environment Obviously, team is interest on net BOK

helped of Our the been expenses offset management and fee-generating that quarter. the of unusual with strong, this weakness impacted diverse in items portfolio businesses expense market, all handful has has mortgage even year

earnings manage that We continue XXXX. are in another and leverage but we and earnings this we did year expense meaningful in see expect drive Obviously, to earnings forward significant another growth confident like leap income growth. continued net build year, growth can on our won't to of we we

about The with of Before challenged we to say close, a Hurricane this Houston I market market. the our aftermath was would like quarter Harvey. word

We BOKF an $XX,XXX, from help Employee footprint several the employees contributed the homes. storm. and XXX the Houston, was Foundation matched of then which BOK from displaced have and XXX formed in over Assistance quickly to across colleagues by from their them We their Fund, were recover employees over

sleeves and It damaged company we shoulder missing several shoulder of debris, moments a and as days weekend employees. remove storm, addition, damaged without their proudest back and employees that few of demonstrated lend the really few resiliency can-do was just of the organization and work And one homes beat. a the up reported a though storm of our full hand. our to at running the arrived their strength drywall facilities pull my up at down following within spirit this by CEO and to helping were even a were teammates In roll the to

questions We now. your will Operator? take

Operator

Instructions]. [Operator

the from Jared line Wells comes question first Fargo. Shaw of with Our

Jared Shaw

balance the into should rate through go change in we the we see go some see rest to XXXX any this whether expect year we of and As like structure, come in declines more going sheet see hikes, interest-earning be deposit higher than we changes the with the seeing if higher that's cash you beta borrowing would comfortable in structure? expected? And any in loan-to-deposit or ratio and

Steven Nell

we yes, don't higher would certainly I we're of given shift that expect Steven. scenario really painted. is doing much a what currently This And a the ratio. entertain Yes. loan-to-deposit you on

I the reached around or This think range historically now. XX% been has company into We've the so even we're XXs. before. in upper XX%

going see comfortable we're higher. this balance way don't change definitely point. wholesale the we're real any in sheet I So managing at But the

Jared Shaw

at was we see that Okay. quarter that looking basis go in improvement And point the some energy significant benefit really the we you be market, Or a with from recovery, the then there should of as there? do recoveries the the think this interest year, forward opportunity? margin as the in additional X one-off -

Steven Nell

in in, it just to this we always quarters. do interest but looks quarter is. from in energy, be expected, higher in was it will we mean, certainly, have It than we was think I because gather a pipeline. it larger quarters, that we'll than had time it's recoveries higher subsequent I Well, much little not future and normally don't time, like have probably a than

a normal. we little So bit to bigger that's out. than why It's call wanted it

Jared Shaw

for finally then me. And Okay.

Just Or as on in quarter, forward incentive more the the go is expenses that a with that we new here? comp catch-up? this reflecting the increase was level

Steven Nell

is it of Most components. two Well, catch-up. a

in mentioned comments, so catch-up probabilities Steve or and think higher $X on better about was adjustment million really his I performance. a based

that and drove was well. piece $X other increase that a portion for our stock of price The the quarter, as almost went up

was that be catch-up. forward, a that but could I majority So piece the variable think of going

Operator

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

Brady Gailey

quarter? kind fee notably big the So all Could you line expectations, quarter. color the income, weak quarter of the of believe, been in kind And was million seasonally look little item mortgage one fees you provide mortgage to line. first third have in a that's in a XQ? at of the more bit did you I in down $XX expect why when that you below might in rebound on maybe with the line fees, $XX of deltas just million do last mortgage

Steven Nell

been it's very competitive. Well,

in competitive up quarter, to the pricing price were a the in We think we bit. little market. really second performance been the I has had able good and

activity hedging quarter. well the in second behaved Our pretty

little would of gave say a quarter. back in we the I So that third

off don't Of competitive as biggest I'm pricing that. I volumes us I pricing's in look say fourth tailed pretty of bit here, course, competitive. volumes seeing but momentum little would see And terms as see that into the don't much. the well, what quarter gaining a lot we the is driver changing third still a saw in that of of from we And now, quarter. the right the I

So that the color of fourth mortgage. give bit for how you treat to ought a little quarter to on

Steven Bradshaw

effort pricing decline response to Brady, I'll nonbank mortgage kind using pricing this a There's Steven's is to yet fill and Yes, take the seeing to able to I that. that. we're not seeing much out originations of Bradshaw. be somewhat banking capacity, to point, think the as sector, We're sector. XX-plus-percent from competitors, the And Steve country. been so in clearly they're sharper there add in much but across in

You year might exited as amount out we significant recall last time correspondent we of business. the capacity took this a

sustainable. believe a shakes from we'd still before we next pricing and that competitive very But see So few standpoint perspective, that's tight our really quarters from the that out. being not

So we the the and in saw kind that, business really why on mortgage what's in third today mind, of softness in quarter. some my going explains

Brady Gailey

question And my All then right. on That's guidance. helpful. second is

in low saying down. 'XX the If you single-digit you're mid-single-digit the and versus loan Fee was from kind growth growth 'XX. of digits, income XXXX now categories at flat. low you loan single look are in a to XXXX, couple go guidance growth of Like it's

what being the dynamics loan year? of year. Is the and could are income growth more saw feels maybe lower at kind like good we it So just revenue a come growth XXXX slower a that a last function than of pace assumptions? behind What fee of

Steven Nell

piece, want talk You about in bit the we'll maybe later we'll growth the of to a budgeting and little Stacy our move we of loan kind 'XX. as about let year - talk effort towards just then and kind

Stacy Kymes

folks look for good a you felt and provided growth, of Really mid-single-digit kind original move extent, the - to some 'XX in tighten the had that that. the had kind push if So a of anomaly, we market we between about where quarter loan real market. short-term third at commercial very rates was of you guidance to kind spreads we created out here for and long-term to estate permanent

that. growth If at kind annualized line you look that's third our C&I X% with loan from quarter at X.X%, in so of

is And paydowns think probably be happen will the given this to guidance Whether our that, at Street, is look to it's that that the think so of kind in conservative duration the resolution as probably to on we there. we begin do some in little Probably going we effort can get some what begin reform. a will given trying do initial or there to impetus provided color really there. we real waiting to bit we for began some to influenced I process, And that it's level a by resolution to estate early handle going of borrow The of tax pent-up the to not of kind subside. provide when happen, of that demand and

But guidance. time. long a expect over that, loan X can forward, between look grow we as growing. looked so to continue revise environment, growth you I is and at We've GDP that that period look operating normal Xx in that of loans we'll to at a what And think us

tend grow, heavily the to And going what correlate there. pretty your is market on so depending we estimate to of

normalizing different than that, next And estate activity. real the for paydown think year so be will no I

Steven Nell

I to together trying mean, a in our Stacy's were of income lined a of. out yesterday I we of spend meetings net is point, to talking But this to proud would got We that guidance. initial in month be we put expect the do. I doing of to that time our - grow. We got November XXXX mean, can interest think, Yes. terms plan most lot effort. We've budgeting work this of about

fee operating expect that side that leverage set has on. Steve the grow. We hard we work to ensure the path we'll guidance our on pretty of that equation to And business expense meet

initial So our this is take.

Operator

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

Brett Rabatin

looking XQ? stick for the wanted - to, on guess, color the especially there to would that year, the growth which to the - other given quarter? going you Can maybe guidance I that essentially of quarter. a And noise I then expense some rate full fourth at fourth the are in just the personnel, in expenses just be around the Can for thinking in of and lower you kind us us your XQ going a impact little down more about imply guidance are buckets flattish kind give XQ. give are

Steven Nell

of that Well, to I recurrence the in award quarter. much that the I catch-up again. to that nonpersonnel property and don't categories the in million we fourth got of write-down see $X.X that I in don't the Other expect categories, the that oil related third $X.X that quarter. other we change that recur. out recur don't the expense scattered there. different personnel don't feel will we around particularly a had think than the I performance-based quarter. don't We've will I expect don't play had our equity down third was million. weather like had expect in events item, I compensation really the in line that, gas

lower compared in quarter. expense third do to for just fourth to to bit a going off what is - much I you're be yes, the saw the think, you quarter So - level compared good

Brett Rabatin

your and of then thinking betas just up. keeps funds, moving the deposit cost margin Okay. And about

higher But on funding to deposit of from response and maybe is move pressure curious be I going just what maybe people perspective sensitive, a deposits? see thoughts asset realize. from your happening as than moving what mitigating more from the core here XQ and your little look DDA think, kind to of to I'm betas in sources interest-bearing a You're you margin people on

Steven Nell

Well, had We for deposit little. quarter, and move first same just very third higher, we quarter not have the the second the - pricing again, in seen quarter. the experience compared

XX interest-bearing total saw points from You XX basis to this costs quarter. points deposit go basis

have pressures our continue performance terms move seen have to - begin - if on modeled that runoff nonmaterial we've you but our move or Certainly, 'XX. have changes, in to to So asset-sensitive pretty securities it's forecast, 'XX ensure in we our benign we'll of feeling be it's what quickly happen towards able reprice categories. position. that think. the than as for we'll take to the that in could action. Certainly, to if of stay stay then is We'll market's 'XX rates that off perhaps 'XX But we're back - of than portfolio we've then and some in to more higher, now not to similar it as we completely, our maintain in kind going deposit to deposits projection more

just we'll yes, But time. So today, over much we're the seeing pricing. change it deposit in to watch have not

Operator

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

Jon Arfstrom

$XX provision over the of obviously, us credit not Is something about it's decision just million? is A provision the in a else here. there you're to do about think to or couple this of $XX whether that? or terms want holding million unbelievably has Or been things guidance? X But off strong. in thinking how guidance, you Stacy,

Stacy Kymes

that think very I fluid. Look, it's

classified XX year, peak quality, downturn, growth levels. Credit probably lot determining criticized of a there's year, things Charge-offs points. than levels. that last provision that is into be for we points to a that the go off improvement of in energy charged This think basis I is sure. number the in less going continued basis and factor. big XX Loan

to in perspective it's growth a that until firmer behind there. too with prices commodity we're begin get possibilities around another all stability I quarter ranges premature begin of loan next about think for to 'XX from us, So our kind or hands and we to little around our of exist year. provide guidance our - some get bit estimates But so for

Jon Arfstrom

Okay.

a understand you you saying Brady's but the there, to Feels like optimistic. some on you We've little where XXXX? growth, more tailwinds that most me you're with are there's the question, CRE, I that. loan talked you but heard what Back bit are optimistic but on on for Okay. about where

Stacy Kymes

optimistic energy. Very in

there We have great right momentum now.

opportunities strong We continue to see lots there. of very

Our downturn. today. during proactive team dividend stayed That and being is very diligent the paid

energy see as one that of and we're have good We strong That we most forward. very to and there. expect in continues constructive move to risk opportunities look see forward. prevalent growth continued as area adjustment the we That's double-digit spreads, favorable we

in that job loan the them Those private I think ignore you've we've new and category. continue strong either. banking very done that you personal can't business, to results great guys developing a seen grow seen have

You look out in as a to particular, momentum at there build their growth strong over that of they the last delivery. lot and enhance XX months there, continue

Jon Arfstrom

If helps. stack capital we seems understand your guys start have for question you. you I do help capital Okay. it want what in love question. you to with XXXX. us Good. Steve, of the know to out, That laid and just roll you will the But forward up capital plan expectations kind again, like a

Steven Bradshaw

the impact of from Not think on. we're the probably still not bit of a our interested expansion think moment. appear markets. mentioned, given natural uncertainty our M&A that's to Stacy - I be consolidation standpoint, in reform, going in Yes, is as - pretty the I high. muted of in selected terms think of to our view And around the some be Valuations I given an that tax expect kind at having

in standpoint, but in still opportunities our select footprint. our mode capital open we'd 'XX around from to increasing So be

Jon Arfstrom

Okay.

was at lower. - back buyback? bought all appetite was XX% Any you buyback for Your time the stock last

Steven Nell

going into 'XX, allocate of to might have around Steve's opportunities is our and And not we utilize But get certainly organic stock in point, be, 'XX obviously moment. we what dividend the one some Well, buyback to of M&A at to and capital we'll options that growth at come as and consider build. level. the our is look what course, our of

Operator

[Operator Instructions].

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

Peter Winter

When be think up look, maybe that and And flat slightly fee what if I fee going of of are can little differentiating do to the flat, income on the better challenges one just year. side? BOK, the it's down slightly next And overcome I'm I year you just about just the is income factors businesses. to this bit wondering to a some

Steven Bradshaw

this impact margin is Peter, Yes, Steve. compression mortgage. It's colored, and I the think, by on having the that's

earlier, opposed see that playing at up As would I of while competitors out capacity, couple margins declining. next we could over shed least mentioned current expect quarters, we as which to some to firm the then

We continued haven't a through yet growth We some phenomenal has other areas. there. of that year. strategies our had and this businesses. all We'd also the year other-related our for Wealth our Management see expect fee TransFund would of worked business from

category. it set to today. work to between and for absolutely ourselves on good what business seeing colored But in have we're certainly that in going the mortgage now up we is So growth year-end do by

Peter Winter

then follow-up. a Okay. And just

weaker XXXX? drivers just the the to higher but weak growth given growth - you are on some side, expect What On expense the mid-single-digit. of side, versus fee outlook expense some income the outlook expense the of

Steven Nell

I across bases that the expense of carryover Peter, couple space, the cybersecurity, or recovery the investments is years, made information company. investments of capabilities, over so. Well, technology There's our year think past some will disaster the some our that we've we've database over next modernizing some in through flow out made of of

some of we made processing growth investments just data as that And in two. the or and over so of higher categories growth you'll that would than be some of activity, the single-digit those absorb equipment year we see of past kind

Peter Winter

the you of Okay. pull expense revenues some back bit if for there's opportunities little to And expected, think maybe come growth lighter next the do a in than year?

Steven Nell

every category, our as nature. we Steve November. at all do got look look as very a expense those develop all work got of again, for hard to business certainly go take budget. We'll lined promotion, controllable take in at we are professional and in out those hard mentioned, categories kind that a We've that budgeting. Well, more We'll fees, into

Steven Bradshaw

is And this Yes. Peter, Steve.

I balancer multiyear think the is there balance had we've - the technology spend. in really increase the

related is to resiliency. that business and of Some infrastructure

is it position terms within critical of Some in business lines. maintaining of competitive our

you your perhaps And spend years so if for that there. the do revenue still to be things are is not to last can as few expansion strong critical But are is that like. made elevated some you'd investments moderate There as for company. the those

And would better in other the to Steven's try to we alignment. so tend to and ourselves categories expense get look point, at

Operator

there Thank questions the are remarks. you. further you final Mr. time. Crivelli, no this any at for back I'll to turn floor

Joseph Crivelli

around joining for everybody, if us questions. follow-up today be Thanks, this morning. day I'll all you

Have XXX-XXX-XXXX. at me great reach can day. a You

Operator

you. teleconference. Thank This today's concludes

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

BOK Financial (BOKF) 25 Oct 172017 Q3 Earnings call transcript