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Edited Transcript of BOKF earnings conference call or presentation 26-Apr-17 2:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 BOK Financial Corp Earnings Call

Tulsa May 4, 2017 (Thomson StreetEvents) -- Edited Transcript of BOK Financial Corp earnings conference call or presentation Wednesday, April 26, 2017 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Joseph J. Crivelli

BOK Financial Corporation - SVP and Director of IR

* Stacy C. Kymes

BOK Financial Corporation - EVP of Corporate Banking

* Steven E. Nell

BOK Financial Corporation - CFO, EVP, CFO of BOKF NA, EVP of BOKF NA and Director of Bank of Texas NA

* Steven Glen Bradshaw

BOK Financial Corporation - CEO, President, Director, CEO of BOKF NA and President of BOKF NA

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Conference Call Participants

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* Jared David Wesley Shaw

Wells Fargo Securities, LLC, Research Division - MD and Senior Analyst

* Jennifer Haskew Demba

SunTrust Robinson Humphrey, Inc., Research Division - MD

* Jon G. Arfstrom

RBC Capital Markets, LLC, Research Division - Analyst

* Matthew Covington Olney

Stephens Inc., Research Division - MD

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Presentation

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Operator [1]

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Greetings, and welcome to BOK Financial Corporation's First Quarter 2017 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would like to turn the conference over to Joe Crivelli. Thank you. Please go ahead.

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Joseph J. Crivelli, BOK Financial Corporation - SVP and Director of IR [2]

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Good morning, everyone, and thank you for joining us to discuss BOK Financial Corporation's first quarter 2017 financial results. Today, we'll hear remarks about the results and outlook from Steve Bradshaw, CEO; Steven Nell, CFO; and Stacy Kymes, EVP, corporate banking. PDFs of the slide presentation and press release that accompany the call are available on our website at www.bokf.com.

As a reminder, during this presentation, we will make remarks about our financial forecast for 2017 as well as other forward-looking statements as identified on Slide 2. We refer you to the company's filings with the Securities and Exchange Commission for more details about risks that could cause actual results to differ from our expectations. We assume no obligation to publicly update or revise any of the forward-looking information should our expectations change.

I'll now turn the call over to Steve Bradshaw.

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Steven Glen Bradshaw, BOK Financial Corporation - CEO, President, Director, CEO of BOKF NA and President of BOKF NA [3]

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Thanks, Joe. Good morning, everyone. Thanks for joining us. Earlier this morning, we announced earnings for the first quarter of 2017. The year is off to a very strong start with net income of $88.4 million or $1.35 per share for the first quarter. That's up over 70% sequentially from the fourth quarter and more than double the year-ago quarter. In fact, the first quarter of 2017 was our best quarter since Q2 of 2012 when the mortgage refinancing business in full swing.

This strong financial performance was driven by a number of factors. Our balance sheet has been more asset sensitive in the early going of the current interest rate cycle as net interest margin expansion combined with a higher level of average earning assets to drive a strong increase in net interest income. Our Wealth Management business, which includes the private bank, BOK Financial Securities, Institution of Wealth Management and our Cavanal Hill Funds, posted one of the best quarters in its history.

Within Wealth Management, we saw first quarter growth in loans, deposits and assets under management. We also saw the benefit of rising rates and higher commodity prices as we reduced cash management fee waivers and increased revenue from our middle-management business. Overall, net interest income for the business was up and growth in Wealth Management fees and commissions revenue more than offset softness in other fee-generating businesses such as transaction processing and mortgage.

Expenses were well-controlled in the first quarter. In total, expenses were down $21 million sequentially despite including our first full quarter of Mobank operating expenses. Personnel expense benefited from the actions we took in the fourth quarter. Deposit insurance expense and MSR amortization expense were both down and Mobank integration expenses came in under our plan in the first quarter.

One of our key goals for the company is to grow revenue at twice the rate of expenses, and we are optimistic that we've done the work necessary to deliver on this objective throughout 2017. As we mentioned in our fourth quarter call, we tightened the hedging parameters around our MSR asset and delivered a much more reliable outcome here.

Finally, the credit environment remains very benign at present. With flat loan growth, a substantial decrease in nonaccrual loans and net recoveries for the quarter, we did not book a provision for loan losses.

As shown on Slide 5, loans were flat for the quarter and average loan growth was 2.5%, largely due to a full quarter's impact of the Mobank acquisition. Heavy paydown activity at quarter end served to suppress overall loan growth. We continue to forecast mid-single-digit loan growth for the full year.

Fiduciary assets and assets under management both increased as our Wealth Management business continues to land new customer relationships and expand those relationships on a rate that exceeds just matching growth in market values. The strength of our Wealth Management business for the organization can't be underestimated. It is not a casual business for us and we believe it will continue to be a business that grows strongly from a demographic shift underway as baby boomers retire.

We've worked hard over the past several years to reposition BOK Financial for the consistent earnings growth that we and our shareholders expect. The energy industry is now stable. It's now been a year since we've had a new downgrade of an energy loan from pass to criticized and we are seeing consistent and meaningful positive credit migration in the energy book.

The interest rate environment has shifted positively, and while we would be unrealistic to forecast no changes in deposit rates. For the time being, we are seeing limited deposit pricing increases and the banking industry is benefiting from a more favorable rate environment. The regulatory compliance in IT infrastructure spend that has been such a focus for us over the past 3 years is largely complete. And while we are turning more of our attention to customer and employee-facing investments, those investments should be manageable going forward.

And we've done the work to reduce core operating expenses and ensure that we are disciplined so that we don't give back the expense reductions we've executed. Our employees continue to prove they are the best in the business and are skilled in attracting new business and providing a customer service experience that ensures high retention.

I'll provide additional perspective on the quarterly results at the conclusion of the prepared remarks, but now, I'll turn the call over to Steven Nell to cover the financial results in more detail. Steven?

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Steven E. Nell, BOK Financial Corporation - CFO, EVP, CFO of BOKF NA, EVP of BOKF NA and Director of Bank of Texas NA [4]

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Thanks, Steve. As noted on Slide 7, we saw healthy growth in net interest revenue and net interest margin in the first quarter. Net interest margin was 2.81% during the quarter, up 12 basis points sequentially as we saw a significant increase in loan yields with a modest increase in cost of interest-bearing liabilities. We're also seeing better yields from our portfolio of available-for-sale securities.

On Slide 8, fees and commissions were $164.4 million for the first quarter, up 1.4% on a sequential basis and relatively flat year-over-year. Brokerage and trading was up 18% sequentially, largely due to the nonrecurrence of the $5 million trading securities mark-to-market that impacted the fourth quarter results after the post-election interest rate spike. Excluding this, brokerage and trading revenue would've been flat sequentially as increases in retail brokerage and derivative fees and commissions were offset by lower investment banking revenue.

Transaction card, which, as you know, has seasonal elements to it, was down slightly year-over-year. However, sales activity has been robust recently in the ATM network business and we feel good about revenue growth prospects in the transaction card revenue line over the balance of 2017.

Fiduciary and asset management was up 11.9% sequentially and 20.5% year-over-year. All major lines of business contributed to growth in the first quarter as private banking, institutional Wealth Management, corporate trust and Cavanal Hill Funds all delivered healthy sequential and year-over-year growth. In addition, money market fee waivers were only $445,000 in the quarter, down from $2.1 million in the same quarter last year and $1.4 million in the fourth quarter 2016. To give you some perspective, money market fee waivers were $12.5 million in 2015, which was the peak and $6.8 million in 2016. For the month of March 2017, we were down $63,000, so we believe this revenue headwind is for all intents and purposes, behind us at this point.

As expected, mortgage banking revenue was down 11.3% sequentially due to lower production volume and lower gain on sale margins. Refinancing volume fell to 44% of production in the first quarter due to higher overall interest rates.

Deposit service charges and fees were down 1.4% sequentially, but were up 2.2% year-over-year. As you can see on the chart on Slide 8, all of our major fee-generating businesses met or exceeded our mid-single-digit revenue growth target for the trailing 12 months ended March 31, 2017. And the overall growth rate for our total fees and commissions on a trailing 12-month basis was a healthy 5.8%.

Turning to Slide 9. Total operating expenses were down $21 million sequentially to $245 million despite layering in a full quarter of expenses from the Mobank acquisition. Mobank operating expenses were $2.9 million in the quarter compared to $1.2 million in the fourth quarter of '16. In addition, onetime costs associated with the Mobank operational integration took place over Presidents' Day weekend were $2 million, which was substantially lower than we expected.

Personnel expense was down almost $5 million. However, this was largely due to the nonrecurrence of the onetime charges associated with our cost actions in the fourth quarter. Excluding this item, personnel expenses were flat compared to the fourth quarter as lower compensation expense was offset by a full quarter of Mobank personnel expense and merit increases as well as a higher seasonal payroll tax.

Within other operating expenses, professional fees were down $4.4 million due to lower Mobank and mortgage-related outsourcing expenses. Deposit insurance expenses were down $2.4 million due to the improvements in credit quality and other risk factors. Mortgage banking costs were down $4.3 million from the fourth quarter primarily due to lower level of mortgage servicing right amortization.

Turning to the balance sheet on Slide 10. The available-for-sale securities portfolio was down $240 million in the first quarter and is down $449 million from the same period last year. Period-end deposits were $22.6 billion at quarter end, down only slightly from the end of December. BOK Financial continues to be extremely well-capitalized as evidenced by the capital ratios on this slide. All capital ratios resumed growth in the first quarter after a $100 million capital deployment for the Mobank acquisition in the fourth quarter.

Turning to Slide 11. Our guidance assumptions for the balance of 2017 are as follows: Mid-single-digit loan growth for the full year; continued gradual decline in the securities portfolio with an overall reduction of about $700 million for the full year; stable to increasing net interest margin; low single-digit net interest revenue growth.

We're reducing our loan loss provision expectations for the full year and are now forecasting $15 million to $20 million in provisions for the full year. This reflects an improved credit environment and lack of any areas of material stress in the nonenergy portfolio at present.

On a rolling 12-month basis, we continue to expect low-single-digit revenue growth in fees and commissions. We expect expenses to be flat to slightly down for the full year compared to 2016. We expect continued capital deployment through organic growth, acquisitions, dividends and limited stock buybacks.

Stacy Kymes will now review the loan portfolio in more detail. Turn the call over to Stacy.

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Stacy C. Kymes, BOK Financial Corporation - EVP of Corporate Banking [5]

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Thanks, Steven. Slide 13 shows our loan portfolio by type and by market. As you can see, it was generally a flat quarter all around. This was not the case in February as we were optimistic about loan growth at that point, but in March, there was above average paydown activity. There has been improving borrower sentiment, but this is balanced by potential changes in the tax and regulatory climate that has borrowers being cautious until potential changes that impact the business climate are more clear. However, we remain optimistic about -- of our 2017 growth targets as the tide has now turned on the energy portfolio, and we expect this segment to contribute to growth for the balance of 2017.

From A geographic standpoint, Texas, New Mexico and Kansas City all posted healthy growth. We are especially happy about the growth in Kansas City as our team there is benefiting from the excitement about the Mobank acquisition.

As indicated on Slide 14 of the presentation, commercial and industrial loans were down slightly in the quarter, while CRE was up 1.6%. As you can see, energy loans were up 1.6% or 6.4% annualized. This is the first time energy loans have grown sequentially in over a year since the fourth quarter of 2015, and our forecast shows expected continued growth in the energy portfolio throughout 2017. As we've mentioned on previous calls, we do expect CRE growth through at least the first half of the year before this portfolio flattens out in the back half of 2017.

Slide 15 shows our energy portfolio as of March 31. At quarter end, our energy portfolio was $2.5 billion and E&P line utilization was 50%. Criticized and classified energy loans were down for the fourth consecutive quarter and there was a 17% sequential decrease in nonaccrual energy loans.

Despite the 2014 through 2016 downturn, energy lending remains one of the best-performing portfolios in our bank across the cycle. As you can see in the chart on the right-hand side of this slide, energy prices are volatile and we recognize losses during downturns as any energy lender would. But the long-term loss rate is a very modest 14.3 basis points for the 20 years ended December 31, 2016.

This low across-the-cycle loss rate is achievable because we stick to our playbook during boom times, focusing on senior secured first lien reserve-based lending, limiting exposure to highly leveraged E&P companies and second lien financing and maintaining a 13-person in-house engineering team to confirm and validate collateral values. This discipline is why we had the best-performing energy portfolio among major energy banks during the 2014 through 2016 downturn.

Turning to Slide 16. Retail commercial real estate has replaced energy as the primary focus of investors over the past several months due to high-profile retail bankruptcies and overall retail industry stress. So let me spend a moment talking about our retail CRE portfolio.

Total outstandings in retail CRE were $745 million at quarter end. And of this, only $6 million was criticized or classified, less than 1% of the portfolio. However, $4 million of this $6 million that was criticized, paid off in April, bringing total criticized and classified retail CRE loans down to a negligible $2 million. In short, this is a high-quality portfolio.

We have no exposure to traditional enclosed malls and very limited exposure to high profile troubled retailers. The portfolio is well-diversified by product type and geography. We focus on best-in-class retail developers with multiple sources of repayment and strength test each new loan at origination to ensure no significant dependencies on any single tenant.

Finally, it bears mentioning that retail CRE was down 8.1% over the last 12 months as we consciously slowed origination activity in this segment a year ago due to concerns about retailer health and changes in consumer behavior.

Overall credit quality remains strong. As shown on Slide 17, nonaccrual loans were down 10% in the first quarter, including a 17% decrease in energy nonaccruals. We realized net recoveries in the quarter instead of net charge-offs for the second consecutive quarter. Our combined allowance for credit losses was 1.52% of period-end loans, which places us at or very near the top of the peer group. Accordingly, we did not book a loan loss provision in the first quarter.

I'll now turn it back to Steve Bradshaw for closing remarks. Steve?

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Steven Glen Bradshaw, BOK Financial Corporation - CEO, President, Director, CEO of BOKF NA and President of BOKF NA [6]

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Thanks, Stacy. This quarter was a fine example of the value of our diversified business model and core operating strategy and demonstrates the earnings growth capabilities inherent in our organization. We definitely benefited in the first quarter from the work we've done over the past few years to better position our balance sheet for a rising rate environment and build our portfolio of fee-generating businesses, combined with the recent efforts to contain expense growth.

However, the main benefit in the first quarter was the lack of nonrecurring expense items and credit costs in the result. The credit environment was quiet and recent improvements in the energy book eliminated the need for a loan loss provision. We managed our MSR asset well and feel we are adequately reserved for mortgage credit exposure, 2 areas that impacted earnings in 2016.

The rest of 2017 shapes up well for earnings growth. We are seeing modest signs of pressure on deposit costs and see most banks behaving rationally thus far in this interest rate cycle. This is enabling BOK Financial and the rest of the industry to work to recapture margin that has been lost since this persistent low rate environment started almost a decade ago.

Our Wealth Management business, which represented 26% of our total revenue last year, is in execution mode and continues to grow and leverage its entrepreneurial mindset to serve customers. We are now approaching $80 billion in assets under management and we are extremely well-positioned to address one of the most powerful demographic trends and business opportunities facing our industry, the retirement of the baby boomers and the coming transfer of nearly $30 trillion of wealth to their heirs. We see this as a valuable capability and believe that we are differentiated from most regional peers in this regard.

We continue to watch our expenses carefully and we will stay focused on delivering on our goal of keeping expense growth to less than half the rate of revenue growth.

Before we open the call up for questions, we will be holding an Investor Day on June 1, 2017, in New York City where you will have the opportunity to get a closer look at the breadth and depth of our leadership team and our lines of business. If you would like to attend, please RSVP to Kathy Anderson at kathy.anderson@bokf.com. You can also reach out to Joe Crivelli, our Director of Investor Relations, if you have any questions.

We will now take your questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Jennifer Demba with SunTrust.

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Jennifer Haskew Demba, SunTrust Robinson Humphrey, Inc., Research Division - MD [2]

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A question -- thanks for all the details on the retail center loans. A question on health care credits. Can you give us some detail that you may have on hand there on health care? We've seen some one-off charge-offs from some of your peers this quarter.

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Stacy C. Kymes, BOK Financial Corporation - EVP of Corporate Banking [3]

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Jennifer, this is Stacy. We have about a $2.3 billion health care portfolio that is concentrated in senior housing and higher end hospital system credit. We have done a limited review of some of the -- nature of some of the losses that a couple of our peers have reported this quarter. And it appears that the nature of that was kind of cash flow style collateral-lite loans in that health care portfolio. We have less than $50 million of our $2.3 billion in health care that we would describe as cash flow collateral-lite loans in this space.

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Jennifer Haskew Demba, SunTrust Robinson Humphrey, Inc., Research Division - MD [4]

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That's really helpful, Stacy. When you say you're senior housing concentrated and higher end hospital system concentrated, would that mean 80% of the book? Or can you give us kind of a guesstimate what are talking about in terms of concentration?

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Stacy C. Kymes, BOK Financial Corporation - EVP of Corporate Banking [5]

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Between senior housing and hospitals, that would be in excess of 90% of our health care book.

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Jennifer Haskew Demba, SunTrust Robinson Humphrey, Inc., Research Division - MD [6]

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Okay. And quick question on your margin guidance. You said stable to higher. Are you going off last year's net interest margin for the year? Or off of the first quarter margin?

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Steven E. Nell, BOK Financial Corporation - CFO, EVP, CFO of BOKF NA, EVP of BOKF NA and Director of Bank of Texas NA [7]

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Jennifer, this is Steven. We are going off the first quarter's margin of 2.81%, which is a pretty pure number. And, of course, we're expecting 1 or 2 more Fed hikes, stable to rising mid- to long-term rates, so no real flattening of the curve. And then continued rational behavior in the deposit market, which we've seen everyone behaving rationally so far and there's really no reason to believe that they'll change. So that's where we're coming up with the stable to slightly increasing net interest margin off of the first quarter's number.

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Operator [8]

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

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Jared David Wesley Shaw, Wells Fargo Securities, LLC, Research Division - MD and Senior Analyst [9]

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Maybe just sticking with the margin question. Given the past inclination to be more neutral, are you seeing -- as you look forward, do you think most of that benefit will be coming from the deposit side? And do you think that, I guess, at what point do you think the depositors really start pushing for higher rates?

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Steven E. Nell, BOK Financial Corporation - CFO, EVP, CFO of BOKF NA, EVP of BOKF NA and Director of Bank of Texas NA [10]

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Well, that's a good question. And we saw very little pressure on deposits. As you noticed in the first quarter across the industry we were participating in that as well. Maybe around the edges, we saw a few pressures for price increase. I suspect everyone will stay again, pretty rational how they approach it. With the next couple of moves I think there'll be some lag there. We'll watch it closely. We did give guidance on our securities portfolio because that's the primary means at which we -- in a rising rate environment in which we bring our balance sheet back more into neutral. I think you will continue to see us bringing our securities portfolio down as rates rise and then, looking at the whole balance sheet, try to maintain a neutral stance to an up to 200 basis points scenario.

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Jared David Wesley Shaw, Wells Fargo Securities, LLC, Research Division - MD and Senior Analyst [11]

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Okay, thanks. And then shifting a little bit over to energy. It was great to see the decline in energy nonperformers. Were those from workouts? Or were those more just general curing of your improvement of customers' economic position?

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Stacy C. Kymes, BOK Financial Corporation - EVP of Corporate Banking [12]

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Sure. There were a couple of loans there. One was a refinance that took place that allowed us to be made whole. And the second one was via the process of a workout, but it was also effectively refinanced in the marketplace as well.

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Jared David Wesley Shaw, Wells Fargo Securities, LLC, Research Division - MD and Senior Analyst [13]

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And then how would you say the energy customers sort of adapting to the new reality? Is there optimism back in the space given sort of the stability of pricing? Or how should we be looking at energy lending going over the next year?

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Stacy C. Kymes, BOK Financial Corporation - EVP of Corporate Banking [14]

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Well, I think in a price stable environment, there are going to be certain particular plays that are going to be more advantageous for our borrowers. I mean, energy borrowers by their nature tend to be more optimistic. And so I think you're going to see opportunities for them where our utilization has been lower over the last several quarters. Hopefully, that utilization increase creates an opportunity for us to have higher levels of outstanding. Our commitment growth here has been phenomenal as we remained active in this market throughout the downturn. So I think you're going to see opportunity there. I think, obviously, there are some areas that there'll be less activity. Certainly in the Midland area there's going to be strong activity at these prices because the cost to drill and transport is going to be much more advantageous in this type of flat price environment.

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Operator [15]

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(Operator Instructions) Our next question comes from the line of Jon Arfstrom with RBC.

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Jon G. Arfstrom, RBC Capital Markets, LLC, Research Division - Analyst [16]

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Stacy, as long as you have the mic there, can you touch a little bit more on the March paydowns? Just kind of give us an idea of kind of what, where, why and how material was the size of some of these paydowns?

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Stacy C. Kymes, BOK Financial Corporation - EVP of Corporate Banking [17]

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Well, I think if you look through, it was diverse. I mean, it wasn't any particular one segment. We had a couple of large paydowns that weren't even in our forecast that we were certainly expecting to have as part of what we were doing. We had a little bit of seasonality that happened a little earlier than what we thought. Certainly, if you look at our breakdown, our SEC breakdown, it was primarily concentrated in what we consider the services segment, not energy services, but just commercial services. We had some retail -- significant retail paydowns in the C&I segment as well that happened toward the end of the month. So it really kind of skewed, at least what we kind of thought. If you look at averages versus period-end, I think, averages are a little stronger and that's why. We're still reasonably optimistic about our targets that we've got for loan growth for the year. And I think you had some unusual paydowns here in the first quarter that muted that. I think, historically, at least in the last couple years, energy paydowns have been a headwind. I think that we have turned the corner there. I think that they will provide a tailwind going forward to loan growth. Core C&I does seem a bit slower today. I attribute that to borrowers being cautious, trying to figure out the regulatory and tax environment a bit before they decide what to do. But I think it would be a mistake to kind of extrapolate from the first quarter and assume that this is what we'll do. I think that I still very -- feel confident about our ability to meet our objective in terms of mid-single-digit loan growth for the full year.

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Jon G. Arfstrom, RBC Capital Markets, LLC, Research Division - Analyst [18]

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Okay. Okay, good. That helps. And then Steven, maybe back to you on the margin. In terms of the loan yields jumping for the quarter, the 21 basis points, it looks like mostly that's LIBOR -- attributable to the LIBOR rise. Do you expect a similar type reaction from the March rate increase?

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Steven E. Nell, BOK Financial Corporation - CFO, EVP, CFO of BOKF NA, EVP of BOKF NA and Director of Bank of Texas NA [19]

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I think there'll be some, yes. 3/4 of our loan book is either variable or will reprice within a year. I think 2/3 of our whole book is variable. A lot of the commercial book, first real estate book is tied to LIBOR, so I expect a nice jump there.

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Jon G. Arfstrom, RBC Capital Markets, LLC, Research Division - Analyst [20]

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Okay, okay. And then just back to your margin guidance. I'm guessing you're assuming -- it feels like maybe there's more room in terms of potential margin upside. I'm guessing you're probably being fairly conservative on deposit costs. Is that a fair assessment?

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Steven E. Nell, BOK Financial Corporation - CFO, EVP, CFO of BOKF NA, EVP of BOKF NA and Director of Bank of Texas NA [21]

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Well, I mean, we are assuming that the market stays pretty rational what they're doing. I'm not building in any kind of catch up, if you will, in deposit pricing. There may not be as much lag in the next couple of increases that you saw in the first 2, but we are certainly building some lag in in coming up with our guidance there.

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Jon G. Arfstrom, RBC Capital Markets, LLC, Research Division - Analyst [22]

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Okay. So the similar net interest income guidance is really probably balancing what we just talked about with Stacy against potentially higher NIM?

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Steven E. Nell, BOK Financial Corporation - CFO, EVP, CFO of BOKF NA, EVP of BOKF NA and Director of Bank of Texas NA [23]

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Yes, I think that's right. I mean, we're looking at our performance for net interest income in the first quarter and we're trying to give guidance as to how that will grow out through the year, taking consideration Stacy's guidance and our guidance around loan growth, the declining securities portfolio as well as the stable to slightly increasing margin. That should all match up.

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Operator [24]

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Our next question comes from the line of Matt Olney with Stephens.

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Matthew Covington Olney, Stephens Inc., Research Division - MD [25]

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Just want to go back to the commentary on the loan yield that you guys gave from the first quarter, 21 basis point increase. Was there anything unusual in that number? Any kind of interest accrual reversals or anything like that?

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Stacy C. Kymes, BOK Financial Corporation - EVP of Corporate Banking [26]

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Matt, this is Stacy. We had a -- about a $600,000 interest recovery related to one of the nonaccrual loans that was included in first quarter results. As the portfolio improves, you may see some of that throughout the year. It's obviously very difficult to predict the timing and magnitude of it.

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Matthew Covington Olney, Stephens Inc., Research Division - MD [27]

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Okay. And then looking forward on the loan yields, you've talked in the past about kind of a hand off or a mix shift from CRE into energy loans at some point during 2017. Can you make some comments about the pricing of those 2 portfolios? Should there be any kind of mix shift change that would impact the overall loan yield?

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Stacy C. Kymes, BOK Financial Corporation - EVP of Corporate Banking [28]

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Not significant from my perspective. I think that pricing has held up nicely in energy. Actually in -- even in CRE, we've seen improvements in new originations in pricing as others have recognized kind of the length of the cycle, and so you're seeing higher pricing in CRE as well. So I think, you're going to see very, very similar type of yields even as the shift -- the mix has shifted.

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Matthew Covington Olney, Stephens Inc., Research Division - MD [29]

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Okay, that's helpful. And then lastly for me, going back to the expense discussion. It seems like last year, you guys were more focused on expenses and, I guess, probably a little bit frustrated you didn't see the expense improvement last year and we're definitely seeing it in the first quarter of this year. Any more commentary as far as kind of why now we're seeing in the results versus last year?

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Steven E. Nell, BOK Financial Corporation - CFO, EVP, CFO of BOKF NA, EVP of BOKF NA and Director of Bank of Texas NA [30]

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Well, it seems like last year, every quarter we turned around, we had some unusual kind of nonrecurring expense item that popped up. I mean, you can never predict those necessarily, but we don't expect that as much in '17. We are focused very heavily on expenses. We had a good result here in the first quarter. We expect to control expenses best we can, second, third and fourth quarter. And it's kind of set up some processes for more heightened review of that area throughout the year. So we're going to work hard at it.

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Operator [31]

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Since we have no further questions at this time I'd like to turn the floor back to Joe Crivelli for closing comments.

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Joseph J. Crivelli, BOK Financial Corporation - SVP and Director of IR [32]

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Well thanks, everybody, for joining us this morning. If you have any follow-up questions, you can give me a call at (918) 595-3027 or send me an e-mail. Thanks and have a great day.

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Operator [33]

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Thank you, ladies and gentlemen. This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.