BOK Financial Corp (BOKF) 2025 Q4 法說會逐字稿

Greetings. Welcome to BOK Financial Corporation's fourth quarter in full year 2025 earnings conference call. (Operator Instructions) And as a reminder, this conference is being recorded. I would now like to turn the presentation over to Heather King, Director of Investor Relations for BOK Financial Corporation. Please proceed.

Good afternoon and thank you for joining our discussion of BOK Financial's Fourth Quarter and Full Year 2025 financial results. Our CEO, Stacy Kymes, will provide opening comments and cover the loan portfolio and related credit metrics. Scott Grauer, Executive Vice President of Wealth Management, will cover our fee-based results; and our CFO, Martin Grunst, will then discuss financial performance for the quarter as well as our forward guidance.

The slide presentation and press release are available on our website at bokf.com. We refer you to the disclaimers on Slide 2 regarding any forward-looking statements made during this call.

I will now turn the call over to Stacy Kymes, who will begin on Slide 4.

Thank you, Heather. We appreciate you joining the call this afternoon. We are pleased to report earnings of $177.3 million or EPS of $2.89 per diluted share for the fourth quarter. Full year 2025 earnings reached $578 million or $9.17 per diluted share. This marks a record high earnings per share for both the quarter and the year.

Throughout the year, we delivered solid growth and continue to invest in our strategy to create long-term sustainable shareholder value while maintaining a strong and disciplined approach to risk management. During the year, we achieved solid loan growth, expanding loan balances by more than $1.5 billion or 6.4%. This growth was broad-based, both in terms of geography and lending segment.

After the economic pause in the first quarter of the year, loans grew at an annualized rate of 11% over the last nine months of the year. We delivered growth in net interest income and expanded our net interest margin in every quarter of 2025.

We maintained a loan-to-deposit ratio in the mid-60% range all year, positioning us for future growth and continued pricing optimization. Our fee income engine, which continues to be a differentiator for us, produced consistent strong results once again this year, contributing $801 million to revenue. This represents a peer-leading 38% of total revenue.

Our credit quality remains excellent. We've maintained a combined allowance of 1.28% of outstanding loans and our annualized net charge-off rate for the year was only 3 basis points. Our strong performance across business lines has been recognized by the market as we have outperformed the KBW Regional Bank Index in total shareholder return over a one, three, five and ten year period by 7%, 3%, 42% and 51%, respectively.

I'm proud of our performance this year and have strong confidence in the path ahead for our organization. With that, I will turn attention to our fourth quarter results. As I discuss the quarter, you'll hear me emphasize broad-based growth. This is a testament to the work we've done over many years to position ourselves to deliver exceptional value to our shareholders.

During the quarter, outstanding loan balances grew $786 million or 3.2% sequentially. The growth was broad-based as our core C&I portfolio, and our healthcare and energy portfolios all posted strong results this quarter, expanding 5.3% in total. Growth in Texas specifically was exceptional, representing $561 million of total fourth quarter growth.

Net interest margin expanded again this quarter, increasing 7 basis points. Fee income was very strong, exhibiting again broad-based growth across our various lines of business. Total fee income increased 5.1% sequentially. I'd like to call out our fiduciary and asset management, and transaction card lines of business, both posted not only record quarter for revenue but also record full year results.

AUMA continued its impressive trajectory this quarter, surpassing $126 billion and setting a new record high. Our capital levels remain robust with tangible common equity of 9.5% and CET1 at 12.9%. Given these strong capital levels, we also had the opportunity to return value to shareholders by repurchasing over 2.6 million shares at an average price of $107.99 per share during the quarter.

Slide 6 provides a closer look at our loan portfolio. Total outstanding loans grew 3.2% this quarter. Our core C&I loan portfolio, which represents our combined services and general business portfolios, grew 5.5% sequentially.

Core C&I loan growth is inherently relationship-driven, requiring time, focus and disciplined execution. We've seen three consecutive quarters of growth in this business, reflecting the progress from those sustained efforts. Healthcare loans increased 3.3%, driven by strong origination activity and funding of prior commitments.

Healthcare production remains robust and the cyclical payoffs we experienced in the first and second quarters of this year have moderated to more typical levels. Energy loans posted strong results, growing more than $200 million.

This growth was driven primarily by higher utilization rates across the existing portfolio as well as solid new loan origination. This segment experienced higher-than-normal payoff activity during the early parts of the year, largely driven by industry consolidation.

This activity has moderated, resulting in more normal payoff rates during the quarter. Our commercial real estate business decreased 1.4% compared to the prior quarter but has increased 12.1% on a year-over-year basis.

This small quarter-over-quarter decline was driven by a moderate level of normal refinancing into the permanent market. We saw a strong quarter of originations in commercial real estate and have a robust pipeline in this space.

Let's move to Slide 7. Consistent with the last couple of quarters, credit quality is excellent, so my comments will be brief. Nonperforming assets not guaranteed by the U.S. government decreased $847,000 to $66 million. The resulting nonperforming assets to period end loans and repossessed assets decreased 1 basis point to 26 basis points.

Committed criticized assets increased this quarter but remained very low relative to historical standards. We had net charge-offs of $1.4 million during the quarter, averaging 3 basis points over the last 12 months. Importantly, the limited charge-offs we've seen recently show no patterns or concentrations that raise concerns about specific business lines or geographies.

Over the long term, we do expect that credit normalization will occur. In the short term, we expect net charge-offs to remain below historical norms. No provision was required this quarter as the impact of loan growth was balanced by an improvement in the economic forecast.

Our combined allowance for credit losses is a healthy $327 million or 1.28% of outstanding loans. Our results in credit continue to reflect a highly disciplined approach, supported by consistent execution and a strong track record over time. And now I'll turn the call over to Scott.

Thank you, Stacy. Turning to our operating results for the quarter on Slides 9 and 10. Total fee income increased $10.4 million on a linked-quarter basis, contributing $214.9 million to revenue, reflecting an excellent quarter. The 5.3% growth in these businesses is an exceptional outcome.

Total trading revenue, which includes trading-related net interest income was $34.1 million, growing $4.3 million over the prior quarter. Trading fees were up $5.4 million, driven by increased trading volumes for agency mortgage-backed securities. Investment banking revenue, which includes investment banking and syndication fees decreased $1.9 million.

However, this is following a record high for these businesses. Investment banking revenue of $14.3 million is still a remarkable quarter. Turning to Slide 10. As you know, recurring fee income-based businesses are among the most resilient, valuable and sought after in the industry, achieving a $7.1 million linked quarter increase in asset management and transactions revenue reflects not only the strength of our business model but also the dedication and expertise of our team.

It was a banner year for both our fiduciary and asset management and transaction card businesses. Fiduciary and asset management revenue grew $4.5 million, led by asset growth from customer expansion and increased market valuations, along with transaction management fees. AUMA grew an impressive $3.9 billion to $126.6 billion, eclipsing last quarter for the highest on record.

Transaction card revenue increased $2.1 million, reflecting growth in volume and increased customer relationships. Overall, these results underscore the strength and diversity of our fee-based businesses, which continue to deliver consistent growth and resilience across market cycles.

With that, I'll hand the call over to Marty to cover the financials.

Thank you, Scott. Turning to Slide 12. Net interest income increased $7.6 million and reported net interest margin expanded 7 basis points. Excluding trading, core net interest income increased $8.7 million and core margin grew 6 basis points. Drivers of core margin expansion are largely consistent with those for recent quarters, including fixed rate asset repricing, beneficial repricing of deposits and loan and deposit growth.

In addition, Q4 net interest margin experienced a small net benefit from SOFR spreads and shifting some existing wholesale borrowings into wholesale deposits. That benefit was partially offset by the impact of our subordinated debt issuance. When those funding market spreads return to normal, we would expect to see those wholesale deposits run off and return to normal wholesale borrowing sources.

Within the other gains category, I'd like to point out that we exited a merchant banking investment in the fourth quarter, recognizing a $23.5 million pretax gain. We've included Slide 22 in the appendix to provide more color on notable items during the quarter.

Turning to Slide 13. Total expenses decreased $8.7 million. Personnel expenses were down $3.6 million. Cash-based incentive payments were higher driven by increased loan production and new business volumes. However, that was more than offset by seasonal declines in employee benefit costs and by lower deferred compensation costs.

As you know, deferred compensation costs vary quarter-to-quarter, but the amount is consistently offset in the other gains line item within the other operating revenue section. Non-personnel expense decreased $5.1 million.

During the quarter, the FDIC updated their estimate of the special assessment and other adjustments were made, resulting in a $9.5 million benefit. This was partially offset by higher professional fees and data processing costs. Slide 14 provides our outlook for full year 2026.

We expect end-of-period loan growth to be in the upper single digits. This reflects a continuation of the growth we've seen in our existing portfolio, which has grown above a 10% annualized rate over the last 3 quarters and meaningful contributions from our new mortgage finance segment.

We expect net interest income to be $1.44 billion to $1.48 billion, which assumes two cuts in the latter half of 2026 and a slightly steeper curve. Our rate curve assumptions are broadly consistent with implied forwards. Fee income is expected to be in the $800 million to $825 million range.

There are two drivers here. First, we expect our portfolio of fee-based businesses to grow revenue at a mid-single-digit growth rate in 2026. And second, we expect a steeper curve in 2026 to shift some of the trading revenue out of fee income into net interest income as we have discussed on previous calls.

For total revenue, we expect growth in the mid-single-digit range. Please note that our baseline 2025 total revenue number of $2.18 billion includes NII, fees and commissions as well as the other gains and losses in other operating revenue category. We anticipate the growth rate for expenses to be in the low single digits.

We've been very thoughtful about aligning our expense base with the future needs of the business, investing in growth areas and focusing on efficiency in more mature areas. This should result in a 2026 full year average efficiency ratio in the 63% to 64% range.

This ratio should migrate lower during the course of the year as revenue continues to grow. We expect 2026 provision expense to be in the $25 million to $45 million area. This reflects our upper single-digit loan growth expectation and the very strong starting point in credit quality that we can see today.

While we see no tangible evidence of credit normalization beginning in our portfolio, the guidance does allow for at least some amount of that eventual normalization to begin later in the year. With that, I would like to hand the call back to the operator for Q&A, which will be followed by closing remarks from Stacy.

(Operator Instructions)

Peter Winter, D. A Davidson.

Thank you. I was wondering, the loan growth has been really strong, and you've got a positive outlook for loan growth. But could you give a little bit more detail to the drivers to this upper single-digit loan growth? I noticed that consumer loan growth did moderate in the fourth quarter and commercial real estate was down, but you talked about the refinancings to permanent finance but strong pipelines.

Just some of the drivers, including mortgage banking, mortgage warehouse as well for the loan growth.

Sure, Peter. This is Stacy. I think the good news about the loan growth really over the last 9 months is how diverse it's been. It's been diverse by geography. It's been diverse by lending type.

significant growth, obviously, in loans in the fourth quarter. About $100 million of that was driven by mortgage finance business, the change from third quarter to fourth quarter. So it contributed in a meaningful way, but it wasn't the main driver. It was diverse across all the areas. I mean if you think about loan growth for the year, early in the year, energy was a headwind.

Here in the fourth quarter, it became a little bit of a tailwind. In the fourth quarter, commercial real estate was a bit of a headwind. But for the year, it still was up solidly double digits. I mean I think that's the kind of the beauty of what we've created here is we've got lots of diversity, both by lending style and type as well as by geography. And it ebbs and flows each one over a period of time.

It's not necessarily all linear but has worked very well together. I mean, I'd love to give you the main driver but there's not a main driver. It's very diverse across particularly the C&I world, where, as you know, we've made very significant investments over the last three years, both in terms of staff and expansion. And so we're really seeing the benefits of that.

Got it. Thank you and positive surprise on the level of share buybacks in the fourth quarter despite, strong loan growth and where the stock is trading, but how are you thinking about future share buybacks and do you have a targeted CET1 ratio?

Yeah. Peter, we -- this is Marty. Yes, we don't really have a targeted ratio. I mean, as you know, we've got a long history of our share buyback activity being opportunistic and the Q4 number that kind of connects to the sub debt issuance we made.

So as you think about us share buyback going forward, just reflect on our long-run history of doing that in an opportunistic and shareholder value-oriented manner.

Got it. Okay. Thanks Martin.

Michael Rose, Raymond James.

Hey, good afternoon, guys. Thanks for taking my questions. Maybe just a follow-up on Peter's question of the buyback. It looks like on November 7, there was 2.2 million shares traded. I was just curious if you guys did an ASR or if there's anything like that. I know you just talked about the sub debt issuance.

But if you can talk about that and then maybe also address the change in short interest during that period. It was a pretty big jump from kind of the 4% range to around 12% or 13%.

Yeah. Michael, if you look at the Q4 number, we did a portion of that share buyback in Q4 kind of regular way. But as you noted, the -- a portion of that is related to ASR, and that was done right in that early November time frame, which explains what you see.

Okay. So I assume that was with one of the institutional shareholders that owns your stock. Is that fair?

Oh. That's generally not how you do ASRs.

Got it. Okay. Maybe just moving on, you guys had really good deposit growth this quarter, especially in the IB category. Obviously, I understand the guidance, but can you talk about the competition for deposits and how we should think about not only growth but the mix and deposit betas as we move through the, hopefully, two cuts this year. Thanks.

Yeah. So a couple of things about deposits. So just on a couple of questions there. So on competition, I'd say that the environment is -- it's always competitive. It is today. It has been for a long time. But there's nothing in particular that's irrational in our markets that we'd point to. It's just sort of competitive at that high normal level. Growth this quarter, we felt very good about deposit growth all year long.

I would just point out that a portion of the growth you saw in fourth quarter was just the wholesale deposits that for odd reasons relating to the rate cuts, it just turned out there were some wholesale deposits available that were cheaper than the wholesale -- normal secured wholesale borrowing that we would use.

And so we just replaced that. So at some point, that washes out and don't be surprised if you see that happen in the first or second quarter when those spreads kind of go back to normal. But as you look forward into 2026, we expect to grow loans well. We expect to grow deposits well. The loan growth will probably exceed the deposit growth.

That would be normal for us. And given the loan-to-deposit ratio we have to start with, we're very comfortable with that drifting up a little bit over the year. And then lastly, on deposit betas, we've had very good performance on deposit betas in the mid-60s here for deposit beta and upper 70s on interest-bearing liability beta and those numbers are cumulative down beta cycle.

And we expect that as we get into the rate cuts later in 2026 that we have performance right on top of that. We feel very comfortable with being able to continue with those levels for those cuts.

All right. Great. Thanks for taking my questions.

Yes. Thanks.

David Chiaverini, Jefferies LLC .

Hi, thanks for taking the question. So I wanted to ask about fee income. Clearly, very strong fees here and the growth mid-single digit, excluding trading. Can you give some comments on what your expectations are on the trading front and drivers for overall fees?

Yeah. So let me start here. And so I'd say that our intention here is to talk about both trading -- the trading portfolio of businesses, we expect mid-single digit, and that's really very long run rate. At times we're above that but that's kind of how we see those businesses in any given business can be a little higher or lower in a given year but that's how we see that portfolio.

And that -- when I say that, I'm including trading -- total trading revenue, which includes the NII and fees part with the same expectation there that, that will grow mid-single digit and certainly market opportunities where that could be notably higher.

Let's see, anything you'd add to that, Scott?

This is Scott. So I would say that in addition to -- I think Marty frames it well at the top of the house, I think that what we're seeing is a continuation of really the momentum that we built throughout '25. We had a good first month of '25 and then the last two months of the first quarter were challenging for all the fixed income markets.

And we stabilized after that, and I really think returned to more of our expected trend lines in terms of our trading volumes activity. And we've continued to see the demand really coming from our financial institution client base as well as asset managers have kind of returned to more normalized demand, particularly in the mortgage-backed securities.

And then we've seen continued strength in the municipal sector as well. So I don't think that there's anything extraordinary that occurred but really more of a return to normalized levels of demand. And then the total revenue, as Marty articulated, both the fees and the NII out of that activity, we feel pretty good about and feel constructive in terms of the trends that we're seeing build back to our more normalized rates there.

Yeah. It was a good fourth quarter and good fundamental trends in the business.

Great. Thanks for that. And then shifting over to the expense side of things. Can you talk about the outlook looks really good on the efficiency side with the guide of 63% to 64% versus the 65%. Can you talk about the drivers there?

I know mortgage finance; you're going to see some revenue catch-up versus the expenses that came through in 2025. But can you talk about that and other drivers of this strong efficiency outlook?

Yeah. So you're right. Part of that is just continued good momentum on the revenue side. And then part of that relates to some work that we completed in Q3 and Q4 of 2025 to make sure we've got our workforce and other expenses invested in the areas that we want to have them invested in.

And so as you go from Q4 to Q1, you'll actually see some reduction in expense levels in the personnel line item as a result and the fee -- professional fees line item, Q4 to Q1, we would expect to see some benefit there as well.

And I might just -- this is Stacy. I might just add on there a couple of points. I think, number one, we think about things for the long term. We're not focused on next quarter. And we've made several long-term investments over the last several years about how we think about growing the business.

Certainly, the expansion in San Antonio was a big investment for us. The investment in mortgage finance was a big investment for us. And obviously, you lead with expenses there, and it takes time for the revenue to catch up and those investments to earn a return.

They're now beginning to do that, and so that's going to show up in the results. We have taken actions to try to manage that and demonstrate to the market that, look, we can manage these expenses but we're going to invest.

And as those investments mature, you'll be able to see that efficiency ratio come back to a level you're more accustomed to for us. For us, given the mix of fee revenue, we're never going to be a 55% efficiency ratio type company because of our high mix of fee businesses.

But we do think that the guidance we provided is very reasonable for us, and I think you should expect us to achieve that unless given the disruption in the markets that we see, there may be some opportunities for us to continue to be aggressive in talent acquisition.

And should that opportunity come to fruition, we may obviously choose to do that, which may delay the kind of efficiency ratio falling. But based on what we see today, we're very confident in our ability to let that efficiency ratio fall but there could be some things that very opportunistically come about that would allow us to build a better -- even better revenue future.

And so we're not going to walk away from that to manage the efficiency ratio.

Makes sense. Very helpful. Thank you.

Jon Arfstrom, RBC Capital Markets Wealth Management

Hey. Thanks. Good afternoon, again. A couple of follow-ups here. Stacy, you talked about $100 million in balances from mortgage finance in the fourth quarter. What kind of a contribution do you expect from that business in 2026 in terms of the balance sheet?

We're -- we think the number could be -- we could get to -- easily get to $1 billion in commitments by the end of '26, assume half of that's funded, probably do better than that, honestly. But I think that's easy to assume. A lot of these things, they happen. It's kind of -- they just take longer than you think that they will by 3 to 6 months. And so I'm trying to be a little bit cautious there to don't overpromise.

But clearly, the trajectory there is very positive. The momentum that the sales team has is very, very strong, and we're just exceptionally pleased with how that business is progressing for us.

Okay. Good. That helps in terms of framing it. And then, Marty, for you, I asked a similar question to this last quarter, but it seems like a decent setup for the margin for you. Do you expect the core margin to float higher?

And can you share with us some of the repricing of the fixed rate loans and securities and how that might flow through '26?

You bet. Yes, yes. And you're right. We do continue to expect both margin and core margin will continue to expand into 2026. Fixed rate repricing is certainly a big driver there. And so it's about $700 million, a quarter of securities portfolio that reprices up old rate to new rate.

And as we go forward, that step-up is not what it was a year ago, but I think that's maybe in the 60, 70, 75 basis point territory of that rate step up at least currently. And then fixed rate loan book, kind of similar story there, call it, $200 million a quarter on average, and that's probably more over 100 basis points of rate step up as those occur.

And so that gives you a nice tailwind going into the year. The 6 basis points in core margin we saw this quarter, there might be a little bit of reversion to the mean because that average has been more like 4.5 basis points. But we feel like that's still that -- there's legs to that driver there through 2026, you bet.

Okay. This is Stacy. Just to kind of confirm, too, I mean, the actual rate movements don't make a big difference to us, maybe rounding around the fringes. And our forecast or the guidance that we provided assumes are a couple of rate cuts that are in the back half of the year that don't really make much of a difference.

What does make a difference to us is the steepening yield curve as to all financial institutions. We're not unique there. And so you are beginning to see really some steepness to the curve or actually some shape to the curve, maybe not steepness but shape. And that's certainly helpful to us and other financial institutions as we think about 2026 and future periods as well.

Because that builds over time. So that steepness would continue on benefiting through 2027 plus.

Yeah. It seems like a good environment.

Jared Shaw, Barclays Capital Inc.

Hey everybody, good afternoon. Hey, Maybe just going back to the growth rate on fees and on the loan book. It feels like looking at what we've seen for the last three quarters that the guide for '26 seems very conservative. Is there some area where maybe you're expecting a little more pressure than we're expecting?

I mean talking about 50% funded on $1 billion of commitments with mortgage warehouse, that's one third of the growth that you saw on the whole balance sheet this year. Where should we think that maybe there's some pressure on growth?

Well, I think upper single digits is -- could be 7% to 9%. So I'm pretty confident in our ability to deliver that. I think that we want to convey to the Street what we believe we can deliver. And certainly, we'll do our very best to outperform that. But we think in this environment, particularly upper single-digit loan growth is a very positive outlier, and we'll continue to -- I think we're very well positioned.

We've done a lot of work across lots of linWell, I think upper single digits is -- could be 7% to 9%. So I'm pretty confident in our ability to deliver that. I think that we want to convey to the Street what we believe we can deliver.

And certainly, we'll do our very best to outperform that. But we think in this environment, particularly upper single-digit loan growth is a very positive outlier, and we'll continue to -- I think we're very well positioned. We've done a lot of work across lots of lines of businesses to be in a position to grow loans. You've seen that. I think we've grown at an 11% clip over -- annualized over the last nine months.

And that's with some headwinds and some tailwinds from various areas. But I think that's going to continue. And that's what we don't know is will there be an unexpected headwind in an area that we can't put our finger on today. And so we think we can deliver -- comfortably deliver the guidance that we provided and hopefully, we can do better.

es of businesses to be in a position to grow loans. You've seen that. I think we've grown at an 11% clip over -- annualized over the last nine months. And that's with some headwinds and some tailwinds from various areas. But I think that's going to continue.

And that's what we don't know is will there be an unexpected headwind in an area that we can't put our finger on today. And so we think we can deliver -- comfortably deliver the guidance that we provided and hopefully, we can do better.

Okay. All right. Appreciate that. And then maybe shifting to the credit outlook. Obviously, credit has been great, and you sound like things are -- the outlook remains strong. Just as you look at your model, what would drive any incremental concern on credit, or which would have more of an impact on potential credit concerns? Would it be oil prices, tariffs, inflation? I guess, where are you keeping an eye out more closely?

Yeah. You're right. I mean I get teased a lot here internally about saying that credit is unsustainably good, and it seems like it's been that way for several years now. And certainly, in the short term, we think it's going to stay that way. The biggest driver for provision levels going forward will be loan growth and expected economic outlook.

I mean those will be the two things that will drive higher or lower provision levels. And as long as the economic outlook remains strong, we're well positioned from an allowance perspective. And there will be a day that criticized and classified and nonperforming levels come up to a more normal level. You can see in the investor presentation kind of where we were essentially pre-COVID.

And we think that when it goes back to that level, it won't be that credit is going bad, it's just going back to normal. But we don't have some of the early indications that others may have, like we don't have low-end consumer and things like that, that you're beginning to see some weakness around.

That's not kind of core to our portfolio. And so our portfolio is held in there very well. I think in the short term, it's going to continue to do that. And there's not just this easily identifiable thing that we think is the next thing to focus on there.

But we have a great credit team, a very seasoned experienced team and a great group of folks on the line who take risk management very responsibility. So we feel good about where we're at there.

If we see sort of an unchanged economic backdrop from where we are today and the loan growth that you're expecting, should we expect provisions in each quarter in '26 but maybe potentially still some downward pressure on the allowance as a ratio? Or what's the -- or you're going to have to provide for all loan growth from this point and we should think about that ratio as stable from here?

Yeah. What I would go back to the guidance we provided. I'm not going to get into quarterly what would happen or what could happen. We've given you an outlook, a positive economic outlook, a range of loan growth and a range for provision levels next year, and that's our best estimate today. You've seen how we've handled it over time.

And so you can certainly provide your own color to that but I'm not going to get more specific than that.

Okay. Thanks.

Wood Lay, Keefe, Bruyette & Woods, Inc.

Hey. Good afternoon, guys. I wanted to start on the finance business. And longer term, as that business continues to grow, how do you plan to fund that business? Will it be core deposit funded based on a low loan-to-deposit ratio? Or as the volatility picks up and will use broker deposits to help fund some of that?

Yeah. That loan portfolio, like any other loan portfolio will be funded just by the broader funding mix, and you should expect that to largely look like it does today, where there's a portion of that, that's wholesale and a portion of that, that's deposits.

This business will bring with it a decent amount of deposits but we've got a very strong funding profile and this particular asset class is very liquid. So it gives us a lot of different alternatives to use, and we'll just use the lowest cost, most sensible mix.

Got it. That's helpful. And then last for me, I wanted to ask a follow-up on the trading business. You mentioned the outlook there is mid-single-digit growth, but there are market conditions that would support much stronger growth. Could you just remind me of the market dynamics out there that would support faster growth in your trading business?

Yes. So this is Scott. So obviously, mortgage origination activity and volumes in the mortgage sector tend to add momentum and volumes in a declining rate environment. So this is one of those businesses that we enjoy higher growth rates in challenging economic times that are spawning lower interest rates.

So in a declining rate environment where mortgage origination were to increase, that activity, given our -- we're fairly equal in terms of volumes and revenues from municipals and mortgage-backed securities, that mortgage-backed security, in particular, would benefit from lower rates as would refinancing activity in the municipal space.

So as rates decline, those two segments of our trading book are beneficiaries.

The other thing I might add too, there is a lot of our clients are other financial institutions, and they've been reluctant to if you will, take losses in their securities portfolio. So as those portfolios get closer to par and there's fewer unrealized losses there, that's going to create a little bit more opportunity as well, we think, as we move forward.

Got it. That's really helpful. All right. thanks for taking my questions.

Benjamin Gerlinger, Citi.

Hey, good afternoon. I was curious if we could talk through a little bit on the expense, Marty. It's a little bit myopic here, so I apologize but you said 3Q and 4Q had some expenses that were, let's call it, noncore reinvestment that kind of elevated the starting off point for '26.

Is it fair to think like you were to level set all these core items is a little bit more of a mid-single digit going forward? I'm just trying to think about just underwriting the future given you guys have a faster pace of growth than the national average at this point?

Yeah. Just in Q3 and Q4, it was small but there's a little bit of period costs related to some of the realignment we did. But that's not a material number in thinking about next year. But that is a little bit of a tailwind for us from Q4 to Q1.

Got you. Okay. That's helpful. And then in terms of just the mortgage kind of silo, I get that it's relatively new, so maybe you don't have the perfect line of sight at this point. But there's like a ballooning effect as the mortgage business improves generally on a seasonality basis.

Do you expect something similar where -- or is it you're starting at such a low base, it's just kind of growth throughout and you have new customers adding and funding up the relative commitments. Like should we expect it to kind of peak in the roughly July time frame and then kind of wane thereafter? Or would you expect a little bit more linear growth throughout the year?

Given we're starting from essentially zero, I don't think you're going to be able to see the effect of that. And I think you're right; we see that somewhat intra-month as that business has natural ebbs and flows inside of it. But given our starting point here, I don't think it's going to be discernible. It's going to look like just pretty strong expected largely linear growth throughout '26.

Got you. If I could sneak one more in. I know the San Antonio expansion was -- it's a pretty big lift for everyone involved and it seems to be pretty successful at this point given the seasoning effect with the disruption throughout kind of Texas, I should say, or even just the Texas area at every contiguous state, would you expect to do incremental hires given opportunity in front of you? Or is it kind of a playbook that you're -- you already wrote it and we're going to ride it here?

No, I think you're exactly right. I think that if you look back in our history, some of the highest periods of growth for us has been when there's been the most market dislocation. And M&A is highly disruptive. It's disruptive to talent. It's disruptive to clients who were forced to go through a conversion that wasn't they're choosing.

And so our intention is to be aggressive and take advantage of that dislocation as much as we can. But I suspect we're not the only ones with that strategy. And so that will be in and of itself a very competitive process. But we certainly expect in the markets where there have been significant M&A activity to be active from a talent acquisition and a customer prospect acquisition.

Yeah. I appreciate your time.

Brett Rabatin, Hovde Group, LLC

Hey, good afternoon. Hey guys. I wanted to go back to the NII guide for the full year. And just given the comments on the margin, it seems like the guidance that you're giving would imply a similar like low single-digit growth of average earning assets in '26 relative to the high single-digit growth of loans. Is that fair?

And then you talked some about the various borrowing pieces that you can use on the funding side. Do you end up reducing that throughout the year as a result?

Yeah. So you're right. The blend of fairly stable securities portfolio and good growth in the loan book will blend out to a lower earning asset growth but combined with a little bit of margin expansion, that's how you get to the number. And we expect deposits to grow to support overall margin, but we also expect to see the loan growth be a little faster than the deposit growth.

Okay. And you guys have talked quite a bit on this call about the fee income guidance. And obviously, brokerage and trading is hard to predict it is depending on rates to a large degree. I'm a little bit surprised the mid-single guide seems reasonable for some of the businesses.

But I'm just curious if you just feel like maybe the growth in what you've accomplished, which is huge on the asset management side, if maybe that's tough to continue to replicate or if there's anything else that's driving maybe a more to date growth level than what you've experienced the past two quarters in particular.

Well, two things. Keep in mind -- well, number one, you're right. That business, we feel great about, and that should have a good long -- very long-term growth rate. But note that within that fee guide that there is a shift from fee income into net interest income just within trading just based on the curve sloppiness. So don't let that confuse our enthusiasm for the fee-based businesses.

The other piece that you may be missing is you remember in Marty's prepared remarks, he talked about the $23.5 million kind of onetime gain. That's included in the 2025 fee number essentially. So if you think about that ex that number, I think that probably gets you to a little bit higher number than what you see on the surface. But Marty alluded to that in his prepared remarks.

Okay. And Marty, would you be willing to throw out a number for the movement from the income to NII guide on the brokerage trading?

That's maybe a little bit more into the weeds than is constructive but it's not small. And when you look at the other large banks that have trading, they're doing the same exact sort of guide for the same exact reasons.

Okay. Great. And I don't know if I'm last. The other question I really wanted to ask was just around -- you guys have been growing Texas, in particular, Oklahoma really well. Arizona had a good '25, but it seems like Colorado and Kansas, Missouri have been lagging.

Any thoughts on those two states or three states and those markets and if there are competitive dynamics that are slowing stronger growth or anything else you might comment on that?

No. Obviously, we're excited about the growth areas that you mentioned. I mean, Oklahoma, Texas and Arizona, you highlighted, those were all great stories for 2026. We're still very excited about Colorado and Kansas City. That's the great thing about our business lines and about our geography is that they're not all linear at the same point but the diversity is what creates the growth over time.

And so we're as excited about those markets as we are any of the other ones that we're in. There's nothing necessarily unique about those that creates a different growth dynamic there from my perspective.

Okay. Fair enough. Appreciate all the color.

Matt Olney, Stephens Inc.

Yeah. Hey guys. Just a few follow-ups here. Going back to Stacy's comments about the importance of the steepness of the curve. Can we assume that the guidance implies about a 50 basis point improvement throughout the year? So shorten comes down 50 bps and the intermediate part of the curve maintains kind of where it's at today?

Yeah. That's more or less what forwards have, and that's basically how we think about the year.

Okay. Thank you for that, Marty. And then on the capital discussion, it sounds like there aren't any specific targets -- target ratios out there you want to disclose. I think we're all just trying to understand if there could be additional deployment activity or opportunities for 2026, whether it's buyback, M&A or something else. So can you just address if you see any interesting capital deployment opportunities for the year?

This is Stacy. I think, look, our kind of order generally has been our first choice is loan growth. Loan growth has been very good. Second choice is looking at M&A opportunities as they come along. We're opportunistic there. We're not interested in doing something just for the sport of doing it. It needs to add intrinsic strategic value as well as being financially beneficial to shareholders.

We don't see anything today on the near-term horizon that would indicate that, that's a near-term deployment of capital. And obviously, you saw us be more aggressive in the fourth quarter with share repurchases but likely to slow that down here as we get into 2026.

I think that's the use of the capital for us. And so we're kind of not locked into any one favorite and we can pivot and be more aggressive as we have a view over time. And we're still active. We're looking for ways to deploy capital from an M&A perspective.

But as you know, we kind of don't act like capital is burning a hole in our pocket. We're not afraid to sit on it and wait to find an opportunistic time to redeploy it, and that's proven to be a good strategy for us overtime.

Okay. That's helpful, Stacy. And then just lastly, the loan yields in the fourth quarter, I thought were better than I was expecting. Anything unusual in those loan yields in the fourth quarter? And then any commentary about just loan beta expectations within that guidance in 2026?

Yeah, really nothing that's a change fundamentally in that portfolio. As you know, it's very much a floating rate portfolio and very much a one-month floater portfolio. And so that -- there's nothing that would have changed the characteristics to make it behave any differently. And that's all captured in how we constructed the margin guidance.

The one thing I would say there, Matt, as you know, and we talked about earlier on the call, SOFR -- most of those loans are SOFR based. So there's been a little bit of quirkiness with SOFR and that remains. And so they benefited just a little bit from that but that's really it.

Yes. That kind of flows through to a basis point or maybe two for the quarter.

Yeah. Okay. That's helpful, guys. Thanks again.

Thank you. And with no further questions in queue, I'd like to turn the conference back over to Stacy Kymes for any closing remarks.

As I've highlighted today, broad-based growth has been a defining thing for the quarter and for the year. It reflects the disciplined work we've undertaken over many years to strengthen our foundation, diversify our earnings stream and consistently deliver results across the business. BOK Financial is a strong, stable, growing company.

Our progress has positioned us well to navigate the current environment, capitalize on market disruption and continue generating long-term value for our shareholders. We appreciate your interest in BOK Financial and your willingness to spend time with us this afternoon.

Please reach out to Heather King if you have any additional questions at h.king@bokf.com.

This concludes today's conference call. You may now disconnect.