BOK Financial Corp
NASDAQ:BOKF
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
70.91
118.86
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
BOK Financial Corp
You don't have any saved screeners yet
Greetings and welcome to the BOK Financial Corporation’s Fourth Quarter 2018 Earnings Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host Mr. Steven Nell, Chief Financial Officer for BOK Financial Corporation. Thank you. You may begin.
Good morning, and thanks for joining us. Today you’ll hear from Steve Bradshaw, our CEO; Stacy Kymes, Executive Vice President of Corporate Banking; Marc Maun, Executive Vice President, Chief Credit Officer and I’ll also be making some remarks about the quarter.
PDFs of the slide presentation and fourth quarter press release are available at our website at www.bokf.com. We refer you to the disclaimers on slide two as it pertains to any forward-looking statements that we make during this call.
I’ll now turn the call over to Steve Bradshaw.
Good morning. Thanks for joining us to discuss the fourth quarter and full year 2018 financial results. Our strong fourth quarter concluded a record year for BOK Financial. For the full year net income was $445.6 million or $6.63 per diluted share, representing the largest annual earnings in company history.
Per tax earnings of $565.5 million were at record as well, demonstrated not tax reform but excellent operating performance was the main driver for an outstanding year. All through the year we saw growth in net interest margin and net interest income, combined with broad based outstanding loan growth. Our disciplined diversified approach to shareholder value, coupled with our geographic footprint and quality banking teams paid off this year allowing us to post the single best year in the history of the bank.
In addition we successfully managed the expenses substantially below our revenue growth rate for the year. Total revenues defined by pre-provision net interest revenue plus fees and commissions was up 9.7%, but total operating expenses were up only 2.5%, including CoBiz operating costs driving meaningful and very significant earnings leverage. The credit environment was relatively benign in 2018 as well, though our record loan growth did have us take our first loan loss provision in over two years.
Turning to slide five, period-end loans were $21.7 billion. Once the addition of the $2.9 billion CoBiz loan portfolio is normalized, this represents growth of 2% quarterly and 9% year-over-year for the legacy BOK Financial loan portfolio. Fueled by growth across all of our loan segments, this is the strongest and most diverse year of loan growth in recent memory. Stacy will provide more details momentarily.
Fiduciary assets and assets under manager were down this quarter. Though we had a net inflow of number of accounts for the quarter, sharp declines in equity markets in the final quarter of 2018 overshadow those efforts.
I'll provide additional perspective on the 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.
Thanks Steve. As noted on slide seven, net interest income for the quarter was $285.7 million. Of the $44.8 million increase over the previous quarter, $43.1 million came from the addition of CoBiz and the remaining $1.7 million from legacy BOKF. The net interest income improvement was largely driven by the strong loan growth as Steve mentioned.
Net interest margin increased to 3.40% up 19 basis points from the third quarter. CoBiz is responsible for 16 basis points of margin improvement, split evenly between core CoBiz operations and purchase accounting accretion, while the remaining 3 basis points improvement is attributable to legacy BOKF.
The yield on average earning assets was 4.33%, a 29 basis point increase and the yield on the loan portfolio was 5.09% up 29 basis points due to a number of factors. The slightly higher yield on the CoBiz loan portfolio and $6.4 million in net purchase accounting accretion in the fourth quarter was a large contributor, coupled with an increase in short term market interest rates related to the Federal Reserve’s 25 basis point rate increase in September. The yield on the Available for Sale Securities portfolio increased 14 basis points to 2.51%. The yield on the Trading Securities portfolio was up 12 basis points.
Deposit betas have increased compared to the previous quarters, however overall interest bearing deposit costs remain controlled, increasing only 10 basis points relative to the additional Fed Rate hike to quarter. We benefited 4 basis points from CoBiz overall lower cost of deposits and favorable deposit mix. The combined entities overall cost of deposits including the benefit of non-rate demand deposits was 50 basis points for the quarter, up only 6 basis points from the third quarter.
On slide eight, fees and commissions were $160.1 million, a decrease of $6.1 million or 3.7% on a sequential basis. I remind you of the onetime $15 million fee earned in the third quarter which impacts quarterly comparisons.
Production over capacity, interest rate pressures and seasonality continue to slow the production of mortgage loan origination and related investment products, leading to compressed margins. This has impacted both our mortgage and brokerage and trading revenue.
Mortgage banking revenue decreased 7% compared to the third quarter of 2018. While mortgage continues to be important, it not only represents 15% of our diverse fee revenue sources versus 19% three years ago.
Our focus during the overall mortgage market slowdown is on increasing efficiency in this space. We have worked the past few quarters to right size expenses and to that end we are down $2.2 million in ongoing expense year-over-year and down nearly 20% in personnel staffing. We’ll continue to monitor and work to optimize this business based on production expectations.
Brokerage and trading revenue while impacted by the overall declines in mortgage volumes was able to post growth this quarter, of the $28.1 million, $3.4 million was contributed by CoBiz. Once normalized, legacy BOKF Brokerage and Trading revenues showed a 6.9% lift this quarter, primarily due to increases in customer risk management products.
Transaction card continues to be a steady performer among our key businesses with quarterly year-over-year growth of 3.2%. Normalizing for the $15 million fee from the third quarter, fiduciary and asset management revenue was up $1.6 million for 3.8% for the quarter.
Turning to slide nine, operating expenses were up $32 million including $14.5 million of CoBiz related acquisition and integration costs, which I'll talk a little bit more about later. The following comments addressing expense fluctuations on mid-CoBiz one time integration costs.
Personnel expense increased $11.5 million or 8% over the prior quarter. Personnel expense directly related to the addition of CoBiz its operations was $19.3 million. I'll remind you that we have not yet realized full run rate efficiencies, so personnel expense will be elevated until after systems integration at the end of the first quarter of 2019.
Excluding CoBiz, personnel expense decreased $7.8 million or 5%. This was largely driven by a decrease of $10.8 million in incentive compensation expense related to the company's earnings per share growth relative to a defined peer group.
Non-personnel expense increased $6.8 million over the third quarter of 2018, of which CoBiz operations added $10.4 million. Excluding CoBiz operations non-personnel expense decreased $3.6 million or 3%.
Data processing and communication expense decreased $4.2 million, primarily due to impairment of a software license in the third quarter. Insurance expense decreased $2 million due to the reduction of the FDIC large bank surcharges that is no longer required.
Net losses in operating expenses of repossessed assets decreased $1.6 million as a result for write down in the healthcare property in the third quarter and professional fees and services expense decreased $1.2 million.
A last note on expenses: The fourth quarter included our typical year end charitable contribution to the BOKF foundation in the amount of $2.8 million. When you review the press release financial statements, you'll notice our effective tax rate for the fourth quarter is less than 16%, nearly 7 percentage points lower than usual. We finalized our 2017 federal and state tax returns this quarter and resolved several uncertainties caused by last year's Tax Cuts and Jobs Act.
Resolution of these uncertainties and other routine adjustments reduced tax expense for the quarter by $8.6 million. This is a single quarter impact and our tax rate will revert back to the 22% to 23% level. Lastly, consistent with our opportunistic capital deployment strategy, this quarter we bought back 525,000 BOKF shares at $85.82 per share in the open market.
Slide 10 has our current outlook for 2019. We expect mid-single digit loan growth for the consolidated BOKF and CoBiz entity. Loan loss provision levels will be influenced by loan growth, but will likely run in similar dollar levels when compared to the past few quarters.
We have built into our forecast two additional rate hacks in 2019. We currently expect these additional increases in the federal funds rate to be accretive, slightly improving net interest margin.
We expect that revenue from fee generating businesses will be slightly up with CoBiz embedded on a linked quarter basis, even facing the mortgage headwinds we discussed. We expect 2019 to be the year that our efficiency ratio reaches the 60% target we identified earlier last year.
We expect the blended federal and state tax rate of 22% to 23% for 2019. We expect CoBiz integration cost to come in near $40 million, slightly lower than the $45 million estimate we guided to last quarter. However due to timing of the contract buyout and professional services being incurred closer to the data of integration, CoBiz acquisition costs only totaled $17 million [ph] in 2018 leaving the remaining $23 million to be incurred largely in the first quarter of 2019?
At the CoBiz announcement and also reiterated last quarter, we guided a 6% EPS accretion in 2019. After reviewing our 2019 budgets, I feel comfortable stating that we expect to meet or possibly exceed that estimate. Conversion is still on track for late March, so expect to realize full run rate efficiencies for the final three quarters of the year.
Stacy Kymes will now review the loan portfolio in more detail. I'll turn the call over to Stacy.
Thanks Steven. As you can see on slide 12, total loans were $21.7 billion, up $3.3 billion including $2.9 billion related to the CoBiz acquisition. Looking at the loan portfolio from a legacy BOKF basis, total loans were up 2% compared to the third quarter and over 9% year-over-year.
To state 2018 was a phenomenal year for long growth would be an understatement. Capping the second largest loan production year in company history, the fourth quarter continued the momentum established earlier in the year and has been the trend and growth continued to be broad based with our energy, healthcare and commercial real estate segments all showing gains.
Total C&I on a legacy BOKF portfolio basis was up 2% for the quarter and 10% year-over-year. We are seeing broad based strength across our region with nearly every market adding to their C&I book.
Energy on a legacy BOKF portfolio basis was up 8.4% for the quarter and up 21.8% year-over-year, which is a testament to the commitment to the industry that we maintained during the recent downturn, which clearly differentiated us against other energy banks.
We also benefited from lower than normal churn in the energy portfolio as companies are slower to divest assets or sell outright in the current market environment. Our legacy Healthcare channel was up 2% sequentially for the quarter and 7.8% year-over-year. This channel remains a growth engine for BOK Financial and is expected to continue to perform well. Many large national players in senior housing struggled in 2018, which should lead to more opportunities for regional players which constitute our primary customers and prospects.
Commercial real-estate has continued to deliver. BOKF legacy CRA outstandings were up 3.2% for the quarter or 12.8% year-over-year. While we remain cautious given the length of the economic recovery, we are still finding quality opportunities with our strong customer base. We do not currently see any declining credit trends in this portfolio.
We remain optimistic about core loan growth as we head into 2019, as long as the broader economy continues to show strength. We believe our geographic footprint and quality of our banking teams will allow us to continue to outperform the national economy.
Marc Maun will now review the loan portfolio in more detail. I’ll turn the call over to Marc.
Thanks Stacy. On slide 14 you can see that credit quality remains strong as it has all year. While our loan growth in 2018 was an outlier among peers, I want to reiterate that we continue to stick to the same playbook, growth without underwriting compromise.
Non-accruals were down 1.4% on a legacy BOKF basis during the quarter. Including CoBiz non-accruals are up $10 million in total. All CoBiz acquired loans were recognized at fair value and have been discounted for expected credit exposure.
Net charge offs remain low at 23 basis points for the quarter, though they have moved up slightly to be more in line with historical levels. Net charge offs were 18 basis points of average loans over the last four quarters. This is something that Steven has called out in the past and is not a cause for concern.
Net charge offs for the fourth quarter were primarily related to a single wholesale retail sector borrower and energy production borrower, both of which had previously been identified as impaired and appropriately reserved.
Potential problem loans which are defined as performing loans that based on known information caused management concern as to the borrower's ability to continue to perform totaled $215 million at December 31 compared to $176 million at September 30. The increase was primarily due to the addition of $65 million of potential problem loans from the CoBiz acquisition, potential problem loans from the legacy BOKF portfolio decreased $26 million.
Based on an evaluation of all credit factors including overall loan portfolio growth, changes in non-accruing of potential problem loans and net charge-off, the company determined that a $9 million provision for credit losses was appropriate for the fourth quarter of 2018. We remain appropriately reserved with a combined allowance of 0.97% with CoBiz portfolio included; the reserve of the legacy portfolio is 1.12%.
I'll now turn the call back over to Steven Bradshaw for closing commentary.
Thanks Marc. 2018 was a landmark year for BOK Financial in a number of ways. We are incredibly proud of our results in 2018 and as evidenced by the 2019 guidance that Steven just articulated, we are equally enthusiastic about what 2019 has in store.
Record earnings and the largest acquisition in company history were the defining characteristics of 2018, but under the surface our record 2018 results simply reflect our company's core strategy and strong credit discipline, and a diversified approach to overcome cyclical downturns. We have a differentiated business model unlike any other midsized regional bank and we feel that model will continue to serve us well as we look to 2019.
I’ll also say that none of this happens without a highly ethical and talented group of professionals that form our BOK Financial team. Their ability to attract and retain quality customers in every business segment is the reason we were able to post record earnings and why we are recognized as one of America's most respected banks.
With that we will take your questions. Operator?
Thank you. [Operator Instruction]. Our first question comes from a line of Ken Zerbe with Morgan Stanley. Please proceed with your question.
Okay, thanks. I wanted to just go back to the guidance part about the outlook for your two rate hikes targeting slightly higher NIM next year. Can you just help us understand if you don't get those two rate hikes, because I'm pretty sure the Fed Funds features the curves [ph] is implying zero hikes all of next year. What is due to your NIM outlook?
Yeah, I think we would moderate it a little bit, because certainly those two rate increases that we have in there advance our margin just a little bit higher. So if we don't get those, I suspect that our margin would be a bit more flat.
Okay and then just to be clear on the base, are we talking the whole 340 or are you looking at sort of the NIM ex the PAA is flat?
We would begin you know that – I’m comfortable with the 340. So that would be your kind of starting off point.
Gotcha, okay. And then maybe a different question. Just in terms of the efficiency ratio, so the 60%, I just wanted to understand, it had average or end of year, because you are starting from call it just over 63% this quarter and it implies presumably a pretty sizable decline over the course of the year and also like what’s the path for that. Like it sounds like it does drop down noticeably in the second quarter.
I'm not really pointing at the exact quarter that we’ll reach that. I just wanted to make you know clear that we were confident that we will pass through that at some point during the year. So it could be mid to latter half of the year, but we will achieve that goal we believe in ’19.
Yeah, and Ken this is Steven Bradshaw. The fourth quarter obviously has CoBiz integrations, then it has well the first quarter of ’19. So as we look out beyond that, that's where we see the efficiency ratio hitting our target and hopefully be in that target by the end of next year or by the end of this year, sorry.
Sounds good, all right. Thank you very much.
Thank you. Our next question comes from the line of Brady Gailey with KBW. Please proceed with your questions.
Hey, its Brady, good morning guys.
Good morning.
Maybe just start on the buyback. You repurchased a little bit of stock, but in 4Q the stock is now cheaper today. Do you think now is the right time to get a little more aggressive in repurchasing more of the company?
Perhaps and we are working on that as we speak. We're doing some analysis around what might be appropriate. You know we are not – I'm not going to provide any guidance today on what that level might be, but certainly it's not – it's something that we're looking at pretty closely as we move kind of later into the first quarter and into the second quarter.
I mean our focus today is to get CoBiz converted and make sure we get the run rate benefit of earnings which will add certainly to retained earnings that we could then perhaps deploy a longer term with some buyback, but not providing any guidance today of exactly what that might be.
All right, and then there is a lot of focus nowadays just on lever, when even given some noise that we’ve seen like from some of your peers. Can you tell us if you have any lever lending and if you do, what are the metrics there? Like how much do you have?
Yeah, this is Marc Maun. There are a lot of different definitions of leverage lending. We are not active in the equities sponsored collateral like enterprise value market which we consider the most risky. We don’t have a line of business with a dedicated team pursuing this type of business. So we really have minimal exposure and we haven’t really created a separate reserve for this category. We have very limited amount of loans in that space and don’t see it as an overall issue for our loan portfolio quality.
Okay, and then just lastly from me, maybe another one on the net interest margin. If you take the $6.4 million of yield accretion that happened in 4Q and if you analyze it, that's your around $25 million of accretive yield for ’19. Is that still like the right number or is that too high or too low?
It’s close to the right number. I think it might be slightly lower than what we have budgeted, but it's close to it.
Alright great. Thanks guys.
Thank you. Our next question comes from the line of Peter Winter with Wedbush Securities. Please proceed with your question.
Good morning.
Good morning.
Steven in the prepared remarks you talked about what the outlook that you plan to meet or even exceed the 6% EPS accretion. I’m just wondering now with the deal closed what some of the things that maybe you feel better about the deal and then would the same hold true for the 9% accretion in 2020?
Yeah, well you know business volumes are holding really well. We feel like we can grow up the base and we feel like we can get the kind of expense efficiencies that we built in the pro forma. And as you know, we didn't build any real synergies on the operating revenue or fee side. We don't have real aggressive growth there in that space as it relates to CoBiz, but certainly there's some there that we feel like we’ll achieve. So kind of all of those things wrapped together lead us to believe that we're in pretty good shape as it relates to that 6% or perhaps better.
Okay, and then just on the fee income side, brokerage and trading and mortgage in pretty tough years. I'm just wondering with the outlook where the fed is more dovish for next year, can you just talk about what the outlook is for those two businesses next year or 2019.
Yeah, I mean I think you know we continue to be very committed to those businesses. Certainly they have a slow point in the last couple of quarters with the mortgage market. If that settles down a bit, then I think that will flatten out and even out and perhaps take at least the downward pressure off of those two businesses. But we continue to you know add people particularly on the brokerage side. We've got some offices that we are expanding some of the products sets that they are selling, so we feel pretty comfortable that we can grow at least the brokerage and trading business through ’19. I think mortgage will be a little bit more flat.
Thanks very much.
Thank you. Our next question comes from a line of Michael Rose with Raymond James. Please proceed with your question.
Hey guys. Just wanted to get a little color on the expectations for the loan growth for this year, mid-single digit, you know maybe how much you expect out of the CoBiz franchise and then where do you think areas of strength will be and then potentially where will be some headwinds.
This is Stacy. I think as it relates to CoBiz, I think we’re very excited about what they bring to the table from a couple of areas. I think they are exceptionally strong in the business banking space, as well as in the healthcare space.
I’m actually heading to Denver this afternoon for customer prospect calls with their customers there, because we think what they are doing will be very additive to what we are doing in healthcare. So everything that we’ve seen as we’ve gone through this process with them, it’s a highly professional group. They are very additive to what we are doing across the board and so we are excited about what they bring to the table and how they can augment what we are doing in several areas.
I think that if you think about what could be a headwind of that growth, certainly commercial real-estate pay downs are something that we are anticipating. They are hard to predict, but we think in the next 90 days or so we will get some level of commercial real estate pay downs that will be a little bit of a headwind to total loan growth.
You know that category ebbs and flows a little bit as things work through the pipeline there, but we feel confident in the mid-single digit and certainly hope that as the year unfolds that we will be able to do better than that. But very strong loan growth in 2018; a lot of momentum into ’19; a little bit of a headwind that we wanted to be clear about there too.
Okay, and then maybe a follow-up on credit. It looks like on a core basis it was – your trends were very strong and it looks like some of the up-tick in non-accruing and pass though and criticize was from the CoBiz side. Anything surprising there that maybe wasn’t covered you know by the loan market. It looks like there was a big jump in retail, so any commentary would be helpful. Thanks.
Yeah, this is Marc again. No, I don't think there's anything that we're seeing. Certainly not systemic or any trend in the quality of the credit portfolio, anything that we've seen, you know the increases in those different categories is related to just adding CoBiz volume into it. We didn't see anything in our own portfolio or the legacy portfolio that would indicate any change in credit quality and we’re pretty comfortable with where we stand.
Okay. Thanks for taking my questions.
Thank you. Our next question comes from a line of Jennifer Demba with SunTrust Robinson Humphrey. Please proceed with your question.
Thank you. Good morning.
Good morning.
A question about healthcare lending. You guys haven't seen any issues, but there have been some companies who had some healthcare losses over the last couple years, nothing dramatic, but question, what are you not doing in that sector? What are you getting away from?
Jennifer it’s probably easier for me to talk about kind of how we look at healthcare, because I think we don't have a real broad brush when we talk about healthcare and what we are doing. Our focus in healthcare is really senior housing, hospitals and what we’ve acquired with CoBiz we’re really excited about both the corporate and kind of large doctor group healthcare portfolio that they bring to the table there as well, and that's really our prospecting focus. Those are areas that we have been in for a very long time. We understand well and we're focused on. We’re really not actively prospecting for deals outside of that traditional fair weight for us.
I know healthcare is a very broad category, but for us that's really the focus. We do hospitals. Hospitals really don't entail for us credit risk and really the opportunity mostly on the treasury side, because we don't do real hospitals and we’re focused on large urban metropolitan large systems. They tend to be high end investment grade rating, so there's not a lot of credit needs there traditionally, although we do have credit extended to hospitals and hospital systems. That's really where our focus is in healthcare and we haven't got out of the fairway.
I think some of the noise in senior housing particularly has been on the highest end of the spectrum where we are not playing. We do think that as we move into ’19, as those large players kind of right size sale properties out of collateral pools and things like that. That creates an opportunity for the regional players, which is our sweet spot. So we’re at this point hopeful that we’ll see more activity around that and opportunity to help borrowers that typically kind of fit our profile as they get an opportunity to acquire properties from some of the largest players in the senior housing space.
Thanks Stacy. I appreciate it.
Thank you. [Operator Instructions] Our next question comes from the line of Gary Tanner with D. A. Davidson. Please proceed with your question.
Thanks, good morning. I had a follow up on the longer outlook for ’19. As you talk about commercial real estate pay downs and headwinds, are you talking about a reduction in growth from the pay downs or are you actually talking about the decline in balances over the early part of the year.
Yeah, I think at the early part of the year we expect to see commitment levels decline over the next 90 days as a result of that. I think you know we are hopeful to keep balances relatively flat or consistent over this next 90 days. The commitment levels will come down as that portfolio has normal churn associated with a commercial real estate portfolio.
Okay, thank you. And then just I guess attached to that, you know C&I growth was 10% year-over-year ex-CoBiz, led by energy and manufacturing and healthcare. Are you seeing anything in those three particular segments that would argue for a significant decline in the pace of growth there, for instance in the energy portfolio?
Yeah, I mean I have a hard time committing to you know a continuation of 22% growth rate in energy. I don't think that I'm willing to sign up for that today. Do you think we’ll continue to see strong growth there? Obviously we are a national player, we are known for that. Our discipline through the down cycle has paid enormous dividends for us.
We have a phenomenally good team, great leadership, but one of the benefits that we received here on the energy lending side is that with the capital markets being effectively closed, all but the strongest energy companies and the A&D market is very, very slow today, the typical churn that we might see in our portfolio has slowed significantly. So as we've added new names and borrowers to the list, we haven't had lending or borrowers even kind of through the pay down side. So you’ve seen enhanced growth there as a result of that.
I don’t know when that changes or what that dynamic – how that dynamic evolves exactly over the next 12 months, but that's been a benefit that we received and why that area has grown a little bit faster than maybe in previous periods where there was more robust capital markets activity.
Great color Stacy. Thank you
Thank you. Our next question comes from the line of Jared Shaw with Wells Fargo Securities. Please proceed with your question.
Hi, good morning. This is actually [Inaudible] filling in for Jared. I guess my first question is just looking at the MSR hedge this quarter, it doesn't look like it was quite as effective as it had been in the past. Any color around that or any broader strategy changes taking place there?
No broader strategy changes, but you are exactly right. It was less effective than what you've seen in previous quarters, largely because early in the quarter you saw a 30 basis point increase in market rates and then this massive drop of 60 basis points towards the end of the quarter and our head strategy generally ranges around kind of 25 basis point movements one way or the other and so when you get outside of that band, that hedge effectiveness just wasn't as robust as it is generally as inside the band. So that's really what happened this particular quarter.
Okay, that’s helpful. And then may be just circling back to the retail related questions, it looks like retail balances declined during the quarter as well. What's the thinking around that group? Is it pretty much in just kind of runoff mode or is there new loans being originated in that segment?
No, I think there was seasonality really associated with the retail segment. We have a couple of larger retail borrowers that we have a long history with who have you know simply fund up on the line that they acquire inventory and then those lines fall as the sales pay down the line. So I would really look at that from a seasonality perspective.
Obviously you know the whole retail sector both on the C&I side and on the commercial real estate side, we look at it awfully closely and we talked about that on previous calls and our Investor Day a couple of years ago, our view there, but there is still a place for retail although it clearly is not going to grow and is an area that we're not actively focused on from a business development perspective.
Okay, great, and then just one last one for me. In the release there was a call out to some mix shift in the commercial deposit base. Just wondering what's driving that and how that's going to impact the concentration of the deposit base going forward here.
I think what we were referring to is just the mix that CoBiz brought to the table, which they have a little bit higher DDA mix than even what we do and we're close to 40% you know in the 45% or a little bit higher range of DDA. I think we were trying to make the point that they kind of averaged us up just a bit in terms of deposit mix and then of course averaged this down a little bit and hopefully rolled deposit cost. That was what I think we were referring to.
Okay, great. Thank you.
Thank you. Mr. Nell, there are no further questions at this time. I’ll turn the floor back to you for any final comments.
Okay, thanks again everyone for joining us. If you have any further questions feel free to call me at 918-595-3030 or you can email me at ir@bokf.com. Have a great day! Thank you.
Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.