Greetings, and welcome to the BOK Financial Corporation's Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the presentation over to Marty Grunst, Chief Financial Officer for BOK Financial Corporation. Thank you, sir. You may begin.

Good morning and thank you for joining us. Today our CEO, Stacy Kymes will provide opening comments; Marc Maun, Executive Vice President for Regional Banking will cover our loan portfolio and related credit metrics; and Scott Grauer, Executive Vice President of Wealth Management will cover our fee-based results. I will then discuss financial performance for the quarter and our forward guidance. PDFs of the slide presentation and second quarter press release are available on our website. We refer you to the disclaimers on Slide 2 regarding any forward-looking statements we make during this call. I'll now turn the call over to Stacy Kymes.

Good morning. Thanks for joining us to discuss BOK Financial's second quarter financial results. Starting on Slide 4, second quarter net income was $151 million or $2.27 per diluted share. I am proud of the exceptional second quarter financial results delivered across the board by our team. Wealth segment revenues set another record this quarter and core loans reached an all-time high led by the commercial and multifamily segments. Our growth efforts are supported by the vitality of our geographic footprint, as well as our diverse business model. Noninterest revenues were almost 40% of total revenues for the quarter. Using our capital and liquidity strength, we are taking advantage of market and economic uncertainty to prudently grow. Our full-service banking market expansion into San Antonio and the addition of a fixed income sales and trading office in Memphis are just two more examples of how we are investing to build long-term shareholder value. That disciplined long-view approach has consistently been a distinct advantage for BOK Financial. Turning to slide 5. Period-end core loan balances increased $488 million or 2.1% linked quarter with gross spread across C&I and commercial real estate. The deposit trajectory flattened and turned positive during the quarter. Our loan-to-deposit ratio remained below 70% at the end of the quarter. Across the industry, deposit costs have accelerated for all banks including us as reported in our results. As Marty will detail later, our reported net interest margin is diluted by the increased trading activity this quarter and our margin excluding the trading activities remained healthy at 3.36%. We're seeing early signs of loan spreads increasing as banks seek to contract and also work through the impact of higher deposit costs and anticipated higher capital requirements for some. This impact will take many quarters to become meaningfully apparent. Our efficiency ratio came in just below 59% even with the shift in mix of noninterest revenue. Credit quality remains very strong as we continue to grow our allowance and have a combined reserve of 1.39%, which is notably above the median of our peer group. Assets under management or administration grew $1.3 billion or 1.3% linked quarter and were up $7.6 million or 8% compared to last year. The market impact on cash, equities and fixed income combined with the growth in new relationships is providing a tailwind we did not have for this area in 2022. Finally, we repurchased 266,000 shares this quarter as we balance opportunities for growth with attractive repurchase valuations. I'll provide additional perspective on the results before starting the Q&A session. But now Marc Maun will review the loan portfolio and our credit metrics in more detail. I'll turn the call over to Marc.

Thanks Stacy. Turning to Slide 7. Period-end loans were $23.2 billion or up 2.1% linked quarter. Total C&I loans increased $317 million or 2.2% linked quarter with year-over-year growth of $913 million or 6.7%. Commercial real estate loans increased $155 million or 3.2% linked quarter and have increased $865 million or 21% year-over-year. This effectively returns those balances to their 2020 level after experiencing significant paydown activity in 2021. Compared to December 31, 2020, CRE balances have grown at a modest 2% annualized growth rate. Growth this quarter was primarily driven by multifamily residential properties with an increase of $139 million or 10.2% linked quarter. Industrial facility loans grew $40 million or 3.1% linked quarter which was offset with a $40 million or 3.1% linked quarter decline in loans secured by office facilities. The year-over-year CRE growth of $865 million was primarily driven from loans secured by multifamily residential properties and industrial facilities. We have an internal limit of 185% of Tier 1 capital and reserves to total CRE commitments and we're presently at the upper limit of that range. We do expect continued growth in outstanding CRE balances as construction loans fund up. As of June 30, CRE balances represented 21% of total outstanding loan balances, a ratio well below our peers. Healthcare balances increased $92 million or 2.4% linked quarter and have grown $294 million or 8% year-over-year primarily driven by our senior housing sector. Healthcare sector loans represented 17% of total loans at quarter end. Energy balances increased $111 million or 3.3% linked quarter and have increased $116 million or 3.4% year-over-year with period-end balances representing 15% of total period-end loans. Combined services and general business loans our core C&I loans increased $114 million or 1.7% linked quarter with year-over-year growth of $503 million or 7.7%. These combined categories represent 30% of our total loan portfolio. Year-over-year, loans have grown $1.9 billion or 9%. Excluding PPP loans, Q2 2023 extends the linked quarter loan growth to seven consecutive quarters. Our pipeline suggests we have the current momentum to drive continued growth in the loan portfolio throughout 2023, near our current pace. Turning to slide 8, you can see that credit quality continues to be exceptionally good across the loan portfolio well below historical norms and pre-pandemic levels. Nonperforming assets excluding those guaranteed by U.S. government agencies increased $6 million this quarter. Non-accruing loans increased $12 million driven by an increase in energy-related nonaccruals, while repossessed assets fell $8 million. The level of uncertainty in the economic outlook of our reasonable and supportable forecast remained high. And the assumptions for commercial real estate vacancy rates increased during the forecast period. Those economic factors, combined with second quarter loan growth supported a $17 million credit loss provision for the quarter. We remain in a solid credit position today. With the ratio of capital allocated to commercial real estate that's substantially less than our peers and a history of outperformance during the past credit cycles, we believe we are well positioned should an economic slowdown materialize in the quarters ahead. The markets are more focused on the office segment of real estate, given the recent trends in workforce preferences, though it remains an open question as to whether this will be sustained as employers continue to require more time in the physical office. Our maturities are generally ratable over the next three to four years, and we have a mini firm option if the markets are not conducive to long-term permanent financing. The average loan-to-value ratio in the office space is below 65% and average cash flow coverage exceeds 1.3 times based on the most recent semi-annual review at the end of 2022. Net charge-offs were $6.7 million or 12 basis points for the second quarter and have averaged 10 basis points over the last 12 months far below our historic loss range of 30 to 40 basis points. Looking forward, we expect net charge-offs to continue to be low. The combined allowance for credit losses was $323 million or 1.39% of outstanding loans at quarter end. The total combined allowance is available for losses and any apples-to-apples industry comparison should include the combined reserves. We expect to maintain this ratio or to migrate slightly upward as we expect loan growth to continue and economic uncertainty to persist. I'll turn the call over to Scott.

Thanks, Marc. Turning to slide 10. Total fees and commissions were $200 million for the second quarter, up $14.5 million or 7.8% linked quarter. Our Wealth segment set a new quarterly high for fees and commissions at $123 million this quarter with the last four consecutive quarters representing four of the five highest quarters on record. Trading fees and customer hedging revenues were the primary drivers of the linked quarter increase, up $9.3 million and $5.3 million respectively. Fiduciary and asset management fees increased $2.3 million, largely due to seasonal tax service fees. The trading fee increase was primarily driven by a $7.9 million improvement in our MBS trading activities. Trading activity and margins improved coming off exceptionally low volume and high volatility in the first quarter. The desk has been able to increase volume by expanding coverage to downstream accounts as mortgage originations slowly increase and market volatility returns to more normal levels. The $5.3 million customer hedging revenue increase was driven by a record quarter for energy customer hedging fees with linked quarter fees up $4.7 million. Fees from other institutional trading activities increased $1.4 million linked quarter. Fiduciary and asset management fees were $53 million for the second quarter, a 4.6% linked quarter increase. Our assets under management or administration were $103.6 billion, an increase of $1.3 billion or 1.3% linked quarter. Growth was spread across most categories and primarily driven by improved asset values. Our asset mix for assets under management or administration moved slightly this quarter, with 43% fixed income, 33% equities, 15% cash and 9% alternatives. We believe our diversified mix of fee income is a strategic differentiator for us when compared to our peers, especially during times of economic uncertainty. We consistently rank in the top decile for fee income as a percentage of total net interest revenue and non-interest fee income. Our revenue mix has averaged just over 36% during the last 12 months. That consistently supports a revenue stream that is sustainable through a wide array of economic cycles. I'll now turn the call over to Marty.

Thank you, Scott. Turning to Slide 12. Second quarter net interest revenue was $322 million, a $30 million decrease linked quarter. Net interest margin was 3%, a 45 basis point decrease versus Q1. It is important to note that 9 basis points of the 45 basis point margin decline was due to growth in trading assets. Our trading business grew revenue and grew profitability as you can see in the fee income trends but was dilutive to net interest margin as trading assets grew at narrower spreads relative to the rest of the balance sheet. When trading assets are higher or the yield curve is flatter or inverted, both of which we experienced this quarter, the dilutive impact to net interest margin is more significant. Net of the 9 basis point impact from trading, the remaining 36 basis point decline was driven by the competitive deposit environment. As average interest-bearing deposit costs increased 73 basis points, the cumulative net interest-bearing deposit beta increased to 54% and DDA continued to shift into interest-bearing although at a reduced pace. DDA was 32% of total deposits at June 30. This slide shows net interest margin and net interest revenue with and without the impact of the trading business to better highlight trends and comparability. For the second quarter of 2023, the net interest margin excluding the impact of trading assets was 3.36% versus 3.72% in the first quarter. Growth in earning assets during the quarter was driven by loans and trading assets as the securities portfolio remains stable to maintain our balanced interest rate risk position. Turning to Slide 13. Liquidity and capital continue to be very strong on an absolute basis and versus peers. Total deposits grew $714 million on a period-end basis and the loan-to-deposit ratio was 70% unchanged from the prior quarter. Early in the second quarter, we saw a continued downward trend driven by April tax payments and some price-sensitive movements, though at a slower pace in the prior two quarters. Balance trends rebounded in early May, and we grew $2 billion in deposits in the back half of the quarter. This was consistent with our expectations and we are happy with the result in such a competitive environment. Our tangible common equity ratio was 7.79%, down 67 basis points linked quarter due to balance sheet growth and increases in interest rates but up 16 basis points from year-end. Adjusted TCE, including the impact of unrealized losses on held to maturity securities is 7.49%. CET1 is 12.1% and if adjusted for AOCI would be 9.9%. As regulatory capital changes are being proposed for the industry, we believe that across the array of plausible outcomes for banks in our size range, we have ample capital to support additional organic growth, while at the same time allowing for continued share buyback. During the second quarter, we repurchased 266,000 shares at an average price of $84.08 per share. Turning to slide 14. Linked quarter total expenses increased by $12.9 million or 4.2%. Personnel expense grew $8.5 million with $4.1 million due to the full quarter effect of annual merit increases implemented on March 1, while cash-based incentive compensation grew $6.6 million due to new business production. These were partially offset by a $2.5 million seasonal decrease in payroll taxes. Other operating expense grew $4.4 million primarily due to a $2.5 million increase in mortgage banking costs driven by a seasonal increase in prepayments and a $1.1 million increase due to the donation of an appreciated asset to the foundation. Year-over-year total operating expense increased 16.5%. However, this includes the impact of market value-driven swings in deferred compensation and changes in the vesting assumptions for stock-related compensation. Excluding those two factors total operating expense increased 11% compared to Q2 2022 with a 13% increase in total personnel expense due to regular compensation and increased cash-based compensation related to new business production. Other operating expense increased 8% primarily due to continued investments in technology, facilities and increased FDIC expense. Turning to slide 15, I'll cover our expectations for 2023. We expect upper single-digit annualized loan growth. Economic conditions in our geographic footprint remain favorable and continue to be supported by business in migration from other markets. Changes in the competitive environment for loans should be a tailwind. We expect to continue holding our available-for-sale securities portfolio flat in 2023 to maintain a neutral interest rate risk position. We expect total deposits to be stable or grow modestly, and the loan-to-deposit ratio to remain in the low 70s. Currently, we are assuming one additional 25 basis point increase here in July before the Federal Reserve pauses. We believe that the margin will migrate lower throughout 2023 and as interest-bearing deposit betas increase and demand deposit balance attrition runs its course. Net interest income is expected to be near $1.3 billion for 2023. In aggregate we expect total fees and commissions revenue to approach $800 million for 2023. We expect expenses to be near or slightly above Q2 2023 levels and the efficiency ratio to migrate slightly above 60% throughout the remainder of 2023 as our revenue mix shifts in our strategic market expansions ramp up. This does not include the impact of the FDIC special assessment, which could be finalized in the second half of 2023. Our combined allowance level is above the median of our peers and we expect to maintain a strong credit reserve. Given our expectations for loan growth and the strength of our credit quality, we expect quarterly provision expense similar to that in recent quarters. Changes in the economic outlook will impact our provision expense. We expect to continue opportunistic share repurchases in the second half of the year. I'll now turn the call back over to Stacy Kymes for closing commentary.

Thanks, Marty. As we have again demonstrated this quarter, strong risk management and strong financial results are not mutually exclusive. We expect to do both well. Our talented teams collaborate well to ensure we grow our company the right way, a way that is sustainable through all economic cycles. While the market is more focused on capital and liquidity, I see this as a unique opportunity to use our strength in these areas to both organically grow and invest in new markets, while others may be more internally focused. I continue to assert that we are in a stage where investing in strong banks versus trading the sector matters. Banks with thoughtful growth, a diverse business mix, meaningful core deposits and proven credit discipline should outperform. That certainly continues to play out for us in 2023. We are focused on using the fantastic geographic footprint to grow both in the current environment and in the years to come. With that, we are pleased to take your questions. Operator?

Thank you. Our first question comes from Jared Shaw with Wells Fargo Securities. Please proceed with your question.

Hey good morning. Maybe starting with credit, with the expectation that provisions could go higher based on growth and the economic outlook. You call out the expectation for vacancy changes. Maybe can you spend a little time on where you think I guess specifically office vacancy is and could go and how your markets are holding up with that return to work and your outlook on office. And I guess should we assume that office continues to decline and that provides some opportunity to fund new CRE loans that are right now on office.

Yes, Jared, this is Marc. The office portfolio that we have we've been reducing our office exposure over the last several years. So this is not new. And we would expect to continue to decline. If we look at our footprint, our overall markets, we think are in great shape. I mean, you're looking at markets that have performed very well in multiple economic downturns. When we're looking at the economic outlook, we're looking at its effect on the overall economy as opposed specifically to our portfolio. And we would expect that we can maintain this level of performance on the CRE portfolio going forward is where our focus has been on multifamily and industrial which has held up very well.

Yes. If you are looking at the forward guidance and suggesting that there might be higher provision expenses, that's not our perspective. We believe we have accurately reflected the future potential outlook in commercial real estate and how we developed our allowance methodology. The forward-looking aspect of potential increases in office vacancies is what informed our allowance this quarter. We are not indicating that provision levels could rise in the future. In fact, our guidance is aligned with current levels, depending on the economic outlook. If the economic outlook improves, then provision levels could actually decrease from here. It's really dependent on how we anticipate the economy will perform in the future.

Thanks for the update. I wanted to discuss deposits and funding. You mentioned that there were strong trends in deposits during the second half of the quarter. Considering the broader perspective of slower deposit growth for the year, should we view that growth as a way to adjust the deposit mix, or how should we think about the deposit mix for the remainder of the year given that growth outlook?

Yes. I think that deposit growth should remain on an upward trend here with some noise within there. I think on the mix side, DDA is probably the more interesting question and we really saw the DDA mix shift slowed down appreciably in May and June. And in fact, June average and June ending DDA balances were about the same. So, that trend actually turned reasonably favorable in the back half of the quarter.

Do you believe we have reached the bottom for DDA at this point?

Yes, I'm not sure I would say we're exactly at the bottom. The trends are certainly looking very favorable. It's possible that with another Fed rate hike, we could see a little more improvement. Overall, the trends in the last two months have been very positive.

Okay. And then I guess finally for me, when we look at the buyback and your comments about opportunistic buyback. Is that really more opportunistic based on price, or is that opportunistic based on alternative uses of capital at any given sort of point in the quarter?

Yes, those are the two factors. I mean, we're just trying to maximize shareholder value with how we do that and price is a factor and to the extent that our outlook is for strong organic growth opportunities to be present over the couple of quarters. We want to make sure that we've got sufficient wherewithal to support that. And that's obviously first in the pecking order, but that's kind of how we do the calculus.

Jared, before the kind of first quarter in the industry, the most common question was what are you going to do with all your excess capital? So we obviously think that long-term we probably do have a little bit of excess capital to deploy share buybacks are part of that, but we're being a little bit careful maybe in this environment at least for the near term.

Okay. And I guess, maybe just circling back on the deposits. In terms of your expectation for beta, how should we be thinking about cumulative beta going through with the potential or the expectation for one more hike?

Yes. We do think that cumulative beta does keep moving up here. We were at 54% this quarter. And our assumption that's within our guide is that that crosses the 60% and gets up into the 63%, 64% territory by the end of the year.

Yes, I would agree with Marty, but I think the cumulative beta over the life of the cycle is going to be kind of where we said it was going to be all along somewhere in that 40% to 50% range.

Thanks very much.

Our next question comes from Jon Arfstrom with RBC Capital Markets. Please proceed with your question.

Thanks. Good morning.

Good morning, Jon.

Maybe a question for you, Marty. When I do the math on the margin, it seems like there's a little bit of pressure coming to maybe not that material. Can you confirm that? Just how much pressure do you think is ahead in the net interest margin? And what do you think the cadence might look like for the next couple of quarters assuming the Fed is done today?

Yes, that's right. And that is our base assumption. And maybe the best way to walk through that is to talk through net interest revenue kind of what the pluses and minuses are from here, because like June net interest revenue for the month of June was $106 million. And so if you kind of start from that run rate loan growth is going to be a plus obviously. Bond portfolio repricing is going to be a plus. In Q2, we saw $420 million of principal cash flows run off at about a 278 runoff yield and we're reinvesting that around 485 for the second quarter. And you'll see that trend continue through future quarters. And even within the fixed rate part of the loan portfolio that small you've got the same dynamic going on there that provides lift and we'll continue to provide lift. The deposit betas we're at 54 cumulative right now. That will continue to bleed up here as you get out of the rate hike and then you just get a little bit of residual carry forward. The July rate hike probably doesn't really independently move the needle that much. And then as you were talking about before the DDA mix shift that's really slowed down a fair amount. So that impact gets a lot smaller. So if you look at those pieces the DDA and the deposit reprice are declining effects that are getting close to pending running their course here. And then the loan growth is a growing effect over time and the bond portfolio reprice. It's a declining effect over time but it lasts a while. So that kind of gives you a little bit of color around how that plays out over the next couple of quarters.

And Jon we're focusing on net interest revenue versus net interest margin, because the trading size of the trading portfolio will greatly influence that margin. And so it's easier for us to think about it in terms of net interest revenue, because if the activity is strong and the trade portfolio expands, obviously, the net interest margin impact that is very dilutive. And so it could be influenced by that, but that's going to benefit us on the fee side should that trading portfolio continue to perform as it has been.

Yes. Okay. That makes sense. I do want to ask a question on that. But just one comment you made was you grew $2 billion in deposits later in the quarter. What was the driver of that? And was it higher rate deposits, or was it more client-driven or help us understand what that was?

Yes. The growth is primarily in commercial, with some contributions from consumer. We focused on ensuring that our pricing is competitive across the board, aligning with the options available to our customers in those markets. We are committed to maintaining market-level pricing at all tiers, which is what drove this growth. Additionally, there has been an impact from fees and the consumer sector, which contributed to this as well.

Okay. Then Scott, last one for you. You talked about volumes and volatility helping your brokerage and trading. You talked about extending the reach of the sales force. Can you talk about that a little bit more, and about the better environment what makes for a more favorable environment so we can kind of understand how the balance sheet might flex when there's a better environment or a worse environment?

In the first quarter, external shocks to the fixed income market and the Fed's active rate hikes led to wider bid-ask spreads and historically low mortgage origination. However, as we entered the second quarter, we observed a rebound as homebuyers adjusted to mortgage rates of 5% to over 6%, despite ongoing inventory shortages. This change has raised expectations and increased mortgage origination. With the possibility of one or two more rate hikes, we are clearly further into the Fed's rate hike cycle, which has improved the appetite among institutional buyers for mortgage-backed securities and other fixed income products. Consequently, we are witnessing a more optimistic outlook and increased certainty in the fixed income markets, along with improved flows in mortgage-backed securities, allowing us to regain our previous securities inventory levels.

From the perspective of an investment portfolio manager, as you approach the end of the rate-hiking cycle, whether it is now or slightly in the future, you tend to feel more assured in adjusting your portfolio because the expectation is that this trend won't persist indefinitely. This optimism could positively influence our performance in the latter half of the year if investors believe that the Federal Reserve has finished or is close to finishing its rate hikes.

Okay. Clearly, first quarter was abnormal. But is this maybe an impossible question. Does this feel more normal?

It does. I think that, as Marty indicated, our levels of trading securities appear to be more business as usual. We expect these levels to be sustainable, given the current rate environment and the appetite for repositioning on the curve.

Okay.

Jon, sometimes we tell you don't use the end of quarter trading level as the way to think about the future. This quarter, it's probably better than the average.

Okay. Very helpful, guys. Thank you.

Our next question comes from Brady Gailey with KBW. Please proceed with your question.

Hi. Thank you. Good morning, guys.

Good morning.

Good morning.

I understand the dynamics of having a net interest margin that moves a little lower in the back half of this year. But I'm wondering, as we look to next year, the Fed will be done deposit costs will probably have peaked could you see an expanding net interest margin into next year, just because your asset reprice is higher and the NIM could be actually headed higher next year?

Yes. So, that's possible. And I would again, focus on net interest revenue is the way to think about next year. And if you play out the comments that I made earlier, you can see that be on a growth trend. And the percentage, sure it's possible to see that higher especially, if you get less of an inverted curve that's going to help as well.

You get a couple of factors there. I think Marty's reinvestment rate, we're getting what roughly $400 million, a quarter in cash flow from the securities portfolio that's reinvesting at 250 to 300 basis points higher, than what we're receiving today. That's going to help you a little bit. The trepidation in answering the question is really just understanding, how deposit behavior is going to be as we grind higher for longer. If we're through the worst of that from an industry perspective then I think you're right, there's upward opportunity on the margin, if deposit pricing continues to grind higher in a more meaningful way than that could be the offset to some of the favorable benefits that we see.

All right. And then intra-quarter you guys had a couple of announcements expanding into San Antonio, also expanding into Memphis maybe just the rationale behind those new markets? And is this something we should expect to see going forward putting new markets on the map organically?

Yeah. I think they're probably a little bit two different stories. San Antonio is a market that we buy for a long time. We have a strong presence in Dallas-Fort Worth and Houston. Central Texas has been a gap for us, and we've just been looking for kind of the right way to enter that market. We're excited about the team we've acquired there, and we'll have corporate commercial treasury wealth both in San Antonio and Austin, we'll have a complement of between 15 and 20 folks. They're in Central Texas that will be an opportunity for us to meaningfully expand our presence there. And so that's going to be full-service banking and the beginning of another key market for us in Texas. I mean, Memphis really was an opportunistic chance for us to grow our fixed income sales and trading platform that wasn't necessarily on the radar screen as we began the year. But as things unfolded and opportunities presented themselves, we really saw it as additive to the current operations we have in Little Rock, Milwaukee and Stamford Connecticut. It fits very cleanly. They have very little sales overlap with our existing portfolio and we're excited for the team that is going to come on board there to help us in that area.

All right. Lastly, the price of oil remains quite robust, while the price of natural gas is underperforming, and we have noticed some fluctuations in that sector. Could you share your thoughts on this? I understand that natural gas makes up about a third of your energy portfolio. Do you anticipate any challenges in the natural gas market moving forward?

Not at this point we have like right now 93% of our gas-heavy borrowers are hedged and have over 50% of their PDP in 2023 and 76% of their PDP hedged at prices in 2024 exceeding $3.50. So they're well positioned to receive a price well above what we're seeing in the spot market plus today's market you can hedge out all the way into 2025 at almost $4 an Mcf. So we continue to push hedging as a way to protect their portfolio as well as to improve our credit risk. And our customers have been responding. So we actually are in a really strong position that we expect our natural gas producers to perform well.

Okay. Great. Thanks for the color, guys.

Our next question comes from Brandon King with Truist Securities. Please proceed with your question.

Hey, good morning, Thanks for taking my questions.

Good morning.

Good morning, Brad.

Yes. So I wanted to touch on the outlook as far as loan growth. In the prior quarter, you detail that economic conditions were very strong and in this quarter now has kind of been downgraded to favorable. So I just want to know, if you could provide more context and details around that and what you're seeing in your markets and with your customers?

We may not have communicated clearly, but we do not see any unfavorable economic conditions impacting loan growth. Our markets in the Southwest and Midwest are performing exceptionally well, with no indications of an economic slowdown or early signs of issues. In fact, both the long-term and short-term outlook for Texas, Colorado, and Arizona shows them as high-growth markets benefiting from in-migration, which we believe will provide long-term advantages. We are quite optimistic and have indicated in our guidance that we expect upper single-digit loan growth for the year, and we are confident in achieving that goal. Currently, our year-over-year growth is about 9%, and we plan to maintain this pace. We continue to see robust pipelines and opportunities. Moreover, our situation is somewhat unique as other institutions may be focused on managing capital ratios and might be less aggressive in the market. We are actively engaging with customers and prospects to expand our customer base, loan portfolio, and assets under management. We intend to grow in all these areas while we have substantial capital, excellent liquidity, and the ability to fully engage in this environment.

Yeah. The only thing I will add is the key here is that this has been a very broad-based growth. I mean we have had all our lines of business experiencing growth, not just concentrated in one particular sector or another. Our CRE, we are kind of at our upper end of our range of our concentration, but the construction loans have continued to fund up. So we're seeing it in C&I. We're seeing healthcare energy and CRE all experienced growth. So we expect that reflects a lot of the things that Stacy was talking about.

And Brandon, if you look through to the state level GDP and state level employment for our footprint that still remains very strong. There's no downturn there at all.

Okay. And within that and the tailwind from the competitive environment with these opportunities that you're getting are you able to get kind of higher loan spreads or better economics on some of these deals you're getting today?

There's no doubt. I alluded to that in my prepared comments that we are seeing particularly on the higher end of the corporate space, deals are pricing upward whether it's from fewer participants in the market or those beginning to price for higher capital requirements on the higher end of the banking segment, we are seeing that a 25 to 50 basis point increase in loan spreads, I think that that will take some time to work through the portfolio effect. But clearly, that's an opportunity as we move forward.

Okay. And then just lastly for me. Is there any way you can provide kind of a spot cost of deposits at the end of the quarter?

There's not really a way to do that specifically. If you look at our CD rates that we're offering, we have rates in the upper 4s and 5s for new production, which varies by market, but that's probably the best information I can provide you.

Okay. Thanks for taking my questions.

Thank you.

There are no further questions at this time. I would now like to turn the floor back over to Marty Grunst for closing comments.

Thanks again everyone for joining us. And if you have further questions, please email us. Have a great day everyone.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.