BOK Financial Corporation (BOKF) Earnings

Management highlights

- Overall Financial & Credit Performance * Reported strong quarterly results with record loan production and record fiduciary/asset management revenue, while maintaining expense discipline and strong credit quality. * Capital levels remain robust: tangible common equity of 9.6%, CET1 ratio of 12.9%. Credit quality is outstanding, with non-performing assets equal to 20 basis points of total loans, net charge-offs of just $500,000 (3 basis points 12-month average), and no exposure to private credit facilities. The allowance for credit losses totals $323 million (1.19% of outstanding loans), with no provision required this quarter. * The company has no plan to stop the ACL ratio from declining further given current strong credit metrics. - Strategic Talent Acquisition * Leveraged market disruption to hire 25+ new employees, 20 of which are based in Texas (a core growth market), with additional hires in Colorado and Arizona. Nearly all new hires are revenue producers, covering roles from large corporate banking to small business lending. Talent acquisition is an ongoing core priority to support organic growth across key markets, with market disruption accelerating near-term opportunities. - Fee-based Business Diversification * The diverse mix of fee-based businesses delivers consistent long-term growth despite quarterly fluctuations in individual segments. Fiduciary and asset management drove record results this quarter, supported by higher market valuations and continued customer growth. - Mortgage Finance Milestone * The mortgage finance business reached breakeven profitability in June, less than one year after funding its first loan, and is tracking well ahead of prior year-end growth targets.

Guidance

- Full-year 2026 loan growth guidance is increased to over 10%, up from prior outlook, supported by strong first-half growth and solid current pipelines. - Full-year total revenue guidance for mid-single-digit growth is unchanged, but management now expects to deliver results in the upper portion of this range. The B2B share gain is included in total revenue guidance but excluded from fee income guidance. - Net interest income is expected to land in the upper half of the prior guided $1.42 billion to $1.45 billion range; fee income is expected to land in the lower half of the prior guided $820 million to $845 million range, due to a mix shift from fee income to net interest income caused by a steeper yield curve. - Full-year operating expense growth is still expected to be in the low single digits, toward the lower end of the range. The full-year efficiency ratio is expected to be approximately 62% including the B2B gain, or ~63% adjusting for the gain (unchanged from prior guidance). - Full-year provision expense is expected to be below $20 million, given current strong credit quality. - Management expects net interest margin expansion in the second half of 2026, driven by fixed rate asset repricing, the reversal of temporary 3 basis point negative impact from energy derivative cash margin, and typical seasonal deposit growth.

Segment performance

Total reported net income was $176.5 million, with diluted EPS of $2.92; adjusted earnings were $156.5 million ($2.59 diluted EPS) after excluding a net securities gain. Core C&I loan portfolio: grew 3.9% sequentially and 11.1% year-over-year, representing ~70% of total year-over-year loan growth. Commercial real estate (CRE) loans: grew marginally sequentially, up 6.6% year-over-year. Energy loans: grew 1.6% in the quarter. Mortgage finance loans: ended the quarter at $452 million, an increase of $224 million from the prior quarter; active warehouse commitments reached $870 million. Total loans: grew 3.4% sequentially (13.7% annualized) for a $896 million quarterly increase (record single-quarter production), and 11.5% year-over-year. Total fee income was $202 million, down $7.8 million sequentially. Trading revenue (including trading-related net interest income) was $25 million, down $9.7 million sequentially. Fiduciary and asset management revenue hit a quarterly record, up $4.5 million sequentially; assets under management/administration (AUMA) grew $5.7 billion in the quarter to $129.3 billion, and 10% year-over-year. Syndication revenue grew $3 million sequentially to a second quarter record. Mortgage banking revenue was down $2 million sequentially. Net interest income increased $9.3 million quarter-over-quarter, with reported net interest margin up 1 basis point. Core net interest income (excluding trading) increased $6.5 million, with core margin down 2 basis points.

Risks & headwinds

- Deposit markets remain highly competitive, with moderate upward pressure on deposit costs. Management does not see irrational pricing in its core markets, but cannot count on deposit cost reductions to meet guidance. - Fixed income trading revenue (dominated by MBS trading) is negatively impacted by market dislocation and elevated long-term rates, which reduced customer activity in the first two months of Q2 2026. While activity recovered in June and dips historically are followed by rebounds, volatility in long-term rates can create quarterly revenue fluctuations. - Energy derivative cash margin requirements create temporary NIM dilution when commodity prices rise sharply, as the posted cash does not earn a market return. The magnitude of this impact moves with oil prices, creating near-term uncertainty. - While current credit metrics are extremely strong, management expects credit metrics to normalize over the long term, though net charge-offs are expected to remain below historical averages in the near term.

Analyst Q&A

• Q: What is the outlook for net interest margin, and how are deposit costs trending in the current competitive environment?

  A: Management expects stable NIM in the quarter with expansion in H2 2026. Drivers for expansion include fixed-rate asset repricing for loans and securities, and reversal of the temporary 3 bps NIM drag from energy derivative cash margin, most of which has already been returned. While deposit markets are competitive with upward pressure on costs, BOK Financial's low loan-to-deposit ratio gives it flexibility to manage pricing, and there is no irrational pricing in the firm's core markets. Guidance does not rely on deposit cost improvements to hit targets.

• Q: Does the 10%+ full-year loan growth guidance expect a second half slowdown, like what most other banks are projecting?

  A: While pipelines are not as strong as they were entering Q2, they are still stronger than they were entering Q1 and remain very strong. Mortgage finance provides solid positive tailwind for growth, even with expected quarterly lumpiness from seasonality. New talent hires are expected to add further growth over time, and management remains confident in meeting the updated guidance with no material slowdown expected.

• Q: What drove the Q2 trading revenue dip, and what is the activity outlook for coming months?

  A: The dip was driven by market dislocation and lower customer fixed income trading activity (particularly in MBS, the firm's largest trading segment) from March to May, as long-term rates rose. Activity improved meaningfully in June. Dips of this type are rare but temporary, and historically are followed by a bounce back. The firm has a long-term, stable customer base, so the underlying franchise remains strong.

• Q: What is the plan for capital deployment following the B2B share gain, and can you explain the energy derivative cash margin dynamic?

  A: The gain further strengthens BOK Financial's already strong capital position. Management will remain opportunistic and patient in deploying capital to maximize long-term value. For the energy margin dynamic: when hedging client commodity exposure, the exchange requires cash margin when prices move against client positions; this cash is non-earning, temporarily diluting NIM. As prices fell back, most of the ~$900 million peak margin posted in Q2 has already been returned, and the balance is expected to normalize as positions roll off.