BOK Financial’s Solid Financial Performance

BOK Financial, a leading regional bank, has reported its financial results for the first quarter of 2025. The company’s performance showcases its financial strength and resilience in the face of changing economic conditions.

Net Interest Income and Net Interest Margin

One of the key metrics for BOK Financial is its net interest income, which is the difference between the interest earned on loans, securities, and other interest-earning assets, and the interest paid on deposits and borrowings. The net interest margin, which is net interest income divided by average interest-earning assets, was 2.78% in the first quarter of 2025, up from 2.75% in the previous quarter.

The increase in net interest margin was primarily due to liabilities re-pricing lower more quickly than assets during the quarter. The company’s core net interest margin, excluding trading activities, was 3.05%, down slightly from 3.09% in the prior quarter. The decrease was due to a reduction in loan yields, as the majority of the company’s loan portfolio is floating rate and was impacted by the Federal Reserve’s interest rate cuts in the latter half of 2024.

BOK Financial’s balance sheet is asset-sensitive, meaning that its assets generally reprice more quickly than its liabilities. The company uses various strategies, such as purchasing fixed-rate residential mortgage-backed securities and using derivative instruments, to manage its interest rate risk and maintain a relatively rate-neutral position.

Other Operating Revenue

Other operating revenue, which includes fees and commissions from various business lines, decreased by $24.0 million compared to the previous quarter. This was primarily due to a decrease in brokerage and trading revenue, driven by lower trading volumes and margin compression resulting from market volatility during the first quarter.

Fees and commissions revenue, which represented 37% of combined net interest income and fees and commissions revenue, is a significant part of BOK Financial’s business strategy. The company believes that diversified sources of fee revenue provide stability and help offset changes in market or economic conditions.

Fees and Commissions Revenue

Brokerage and trading revenue, which includes revenue from trading, customer hedging, retail brokerage, and investment banking, decreased by $24.4 million compared to the previous quarter. This was mainly due to lower trading volumes and compressed spreads for U.S. agency residential mortgage-backed securities, as well as seasonally weaker municipal pipelines.

Transaction card revenue, which includes revenue from the company’s electronic fund transfer network and merchant services, decreased by $539 thousand, primarily due to seasonally lower transaction volumes.

Fiduciary and asset management revenue, which is earned through managing or holding assets for customers, remained consistent with the previous quarter at $61.0 million.

Expenses and Profitability

Other operating expense for the first quarter of 2025 totaled $347.5 million, consistent with the previous quarter. The company’s efficiency ratio, which measures the ratio of expenses to revenue, was 68.31% for the first quarter, compared to 65.61% in the prior quarter.

Net income before taxes attributable to BOK Financial’s segments decreased by $38.1 million compared to the previous quarter. This was primarily due to a decrease in net interest income and other operating revenue, partially offset by a decrease in other operating expense.

Loans and Asset Quality

BOK Financial’s loan portfolio totaled $23.7 billion at the end of the first quarter, a decrease of $424 million compared to the previous quarter. The decrease was primarily driven by a decline in commercial loans, particularly in the energy sector, partially offset by growth in commercial real estate loans and loans to individuals.

The company’s allowance for loan losses was $279 million, or 1.18% of outstanding loans, at the end of the first quarter. The combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $331 million, or 1.40% of outstanding loans. The company’s credit quality remained strong, with net charge-offs of $1.1 million, or 0.02% of average loans on an annualized basis.

Nonperforming assets, which include nonaccruing loans and real estate and other repossessed assets, increased to $85.3 million, or 0.36% of outstanding loans and repossessed assets, compared to $49.0 million, or 0.20%, at the end of the previous quarter. The increase was primarily due to new nonaccruing loans in the healthcare and services sectors.

Liquidity and Capital

BOK Financial maintains a strong liquidity position, with deposits and borrowed funds from the Federal Home Loan Banks and other banks providing adequate liquidity to meet its operating needs. The company’s loan-to-deposit ratio was 62% at the end of the first quarter, providing significant on-balance sheet liquidity.

The company’s subsidiary bank, BOKF, NA, is the primary source of liquidity. Average deposits for the first quarter of 2025 totaled $38.4 billion, a $540 million increase over the previous quarter. The increase was primarily due to growth in interest-bearing transaction account balances, partially offset by a decrease in demand deposit balances.

BOK Financial also has access to additional liquidity through federal funds purchased, securities repurchase agreements, and Federal Home Loan Banks borrowings. Management estimates a total potential secured borrowing capacity of approximately $26.9 billion, including current available secured capacity and other sources that could be converted into additional secured capacity.

Outlook

BOK Financial’s performance in the first quarter of 2025 demonstrates its ability to navigate changing market conditions and maintain a strong financial position. The company’s diversified revenue streams, prudent risk management, and solid liquidity and capital position position it well to continue delivering value to its shareholders.

While the company faces some headwinds, such as reduced loan spreads and market volatility impacting its brokerage and trading revenue, its proactive strategies to manage interest rate risk and its focus on fee-based businesses provide a solid foundation for future growth and profitability.

Overall, BOK Financial’s first-quarter results highlight its financial strength and resilience, and the company remains well-positioned to capitalize on opportunities and navigate the evolving economic landscape.