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| 8-K - 8-K - BOK FINANCIAL CORP | a20171231bokfconferencecal.htm |
1
Fourth Quarter 2017
Earnings Conference Call
January 24, 2018
2
Forward-Looking Statements: This presentation contains statements that are based on management’s
beliefs, assumptions, current expectations, estimates, and projections about BOK Financial Corporation, the
financial services industry, and the economy generally. These remarks constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “anticipates”,
“believes”, “estimates”, “expects”, “forecasts”, “plans”, “projects”, variations of such words, and similar
expressions are intended to identify such forward-looking statements. Management judgments relating to,
and discussion of the provision and allowance for credit losses involve judgments as to future events and are
inherently forward-looking statements. Assessments that BOK Financial’s acquisitions and other growth
endeavors will be profitable are necessary statements of belief as to the outcome of future events, based in
part on information provided by others which BOKF has not independently verified. These statements are not
guarantees of future performance and involve certain risks, uncertainties, and assumptions which are difficult
to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and
outcomes may materially differ from what is expressed, implied or forecasted in such forward-looking
statements. Internal and external factors that might cause such a difference include, but are not limited to,
changes in interest rates and interest rate relationships, demand for products and services, the degree of
competition by traditional and non-traditional competitors, changes in banking regulations, tax laws, prices,
levies, and assessments, the impact of technological advances, and trends in customer behavior as well as
their ability to repay loans. For a discussion of risk factors that may cause actual results to differ from
expectations, please refer to BOK Financial Corporation’s most recent annual and quarterly reports. BOK
Financial Corporation and its affiliates undertake no obligation to update, amend, or clarify forward-looking
statements, whether as a result of new information, future events, or otherwise.
Non-GAAP Financial Measures: This presentation may refer to non-GAAP financial measures. Additional
information on these financial measures is available in BOK Financial’s 10-Q and 10-K filings with the
Securities and Exchange Commission which can be accessed at www.BOKF.com.
All data is presented as of December 31, 2017 unless otherwise noted.
3
Steven G. Bradshaw
Chief Executive Officer
4
Fourth Quarter and FY2017 Summary:
• Noteworthy items impacting Q4 profitability:
• Deferred tax asset writedown of $12 million
• $7 million release of loan loss provision
• $2 million charitable contribution
$50.0
$85.6
$72.5
$0.76
$1.31
$1.11
4Q16 3Q17 4Q17
Net Income - Quarterly
Net income attributable to shareholders
Net income per share - diluted
$288.6
$232.7
$334.6
$4.21
$3.53
$5.11
2015 2016 2017
Net Income - Annual
Net income attributable to shareholders
Net income per share - diluted
• Noteworthy items impacting FY2017 profitability:
• Strong growth in net interest margin and net
interest income
• Outstanding results from Wealth Management
division
• Careful expense management
• Benign credit environment
• Better results from MSR hedging
5
Loan Growth
($B)
Q4 2017
Quarterly
Growth
Annualized
Quarterly
Growth
Year over Year
Growth
Period-End Loans $17.2 (0.3%) (1.2%) 1.0%
Average Loans $17.2 (0.4%) (1.8%) 2.7%
• Low single digit year-over-year loan growth despite multiple headwinds – CRE paydowns due to
flattening of yield curve and uncertainty over healthcare and tax reform.
6
Scott Grauer
EVP-Wealth Management
7
• Revenue growth driven by Connecticut Trading Desk lift-out, loan growth, net interest margin growth,
increase in trust fees (AUMA and market performance).
• Wealth management surpasses $80 billion in Assets Under Management for the first time in company
history. Very strong Q4 growth in AUM and fiduciary assets – 60% new money inflows, 40% market
movement.
• Careful expense controls and earnings leverage – total expenses down 1.7% for the full year
Wealth Management
Preliminary 2017 Results
FY 2017
Year over Year
Growth
Total Revenue ($M) $384.8 11.4%
Net Direct Contribution ($M) (1) $138.9 46.1%
Total Loans ($B) $1.3 16.0%
Total Deposits ($B) $5.5 13.3%
Fiduciary Assets ($B) $48.8 15.1%
Assets Under Management
or in Custody ($B)
$81.8 8.5%
(1) Excludes corporate allocations of $40.6 million
8
Steven Nell
Chief Financial Officer
Financial Overview
9
Net Interest Revenue
Net Interest Margin
($mil)
Q4
2017
Q3
2017
Q2
2017
Q1
2017
Q4
2016
Net Interest Revenue $216.9 $218.5 $205.2 $201.2 $194.2
Provision For Credit Losses ($7.0) $ -- $ -- $ -- $ --
Net Interest Revenue After Provision $223.9 $218.5 $205.2 $201.2 $194.2
Net Interest Margin 2.97% 3.01% 2.89% 2.81% 2.69%
• Interest recoveries impacted Q3 2017 NIR by $4.7 million and NIM by 6 basis points and did not recur in Q4
• Yield on investment securities up 12 basis points
• Loan yields down 2 basis points sequentially; normalized for non-accrual interest recoveries Q4 loan yields
would be up 2 basis points.
• Modest 3 basis point increase in deposit costs
• Continued benign credit environment and declines in non-accrual and potential problem loans led to provision
release in Q4
10
Fees and Commissions
Revenue, $mil Change:
Q4 17
Quarterly,
Sequential
Quarterly,
Year over Year
12 Months
Brokerage and Trading $33.0 (0.4%) 15.9% (4.9%)
Transaction Card 29.5 (10.1%) (0.5%) 3.0%
Fiduciary and Asset Management 41.8 2.7% 20.9% 20.2%
Deposit Service Charges and Fees 27.7 (1.8%) (1.8%) 0.5%
Mortgage Banking 24.4 (2.1%) (14.3%) (21.8%)
Other Revenue 11.8 (14.0%) (7.3%) 2.2%
Total Fees and Commissions $168.2 (3.1%) 3.8% (0.5%)
Fee and commission revenue drivers:
• Strong 12 month year over year growth in transaction card, fiduciary and asset management largely offset
significant decline in mortgage banking due to high rates/lower refi volume.
• Other Revenue down sequentially due to sale of merchant banking portfolio company in Q3 (partially offset by
corresponding decrease in other expense).
• Note reclassification of approximately $5 million of quarterly revenue from Transaction Card to Deposit Service
Charges and Fees.
11
Expenses
($mil)
Q4 2017
Q3 2017
Q4 2016
%Incr.
Seq.
%Incr.
YOY
Personnel Expense $145.3 $147.9 $141.1 (1.7%) 3.0%
Other Operating Expense $118.7 $118.0 $124.4 0.5% (4.6%)
Total Operating Expense $264.0 $265.9 $265.5 (0.7%) (0.7%)
($mil)
12 mos.
2017
12 Mos
2016
%Incr.
YOY
Personnel Expense $573.4 $553.1 3.7%
Other Operating Expense $452.1 $464.5 (2.7%)
Total Operating Expense $1,025.5 $1,017.6 0.8%
• Full year total expenses up 0.8%, essentially flat from 2016
• Q4 expenses in 2016 and 2017 included a $2 million charitable contribution to BOKF Foundation
• Higher professional fees and services in Q4 due to completion and launch of new products
12
Forecast and Assumptions
2018 Expectations
Mid-single-digit loan growth
Available-for-sale securities flat to slightly down
Modest growth in net interest margin
Assuming two Fed rate hikes (March and September) with assumed active management
and control of deposit pricing
Mid-single-digit growth in net interest income
Low-single-digit revenue growth from fee-generating businesses
Low-single-digit expense growth
Bias toward additional loan loss reserve releases in 2018
Blended federal and state effective tax rate 22-23% going forward
13
Stacy Kymes
EVP-Corporate Banking
14
Strong year over year loan growth in energy and personal (private banking) offset decreases
in wholesale/retail, manufacturing, and CRE.
Healthcare, energy, and personal delivered strong sequential growth in Q4 but were offset by
decreases in wholesale/retail, manufacturing, and CRE.
($mil)
Dec 31
2017
Sept. 30
2017
Dec 31
2016
Seq.
Loan
Growth
YOY
Loan
Growth
Energy $2,930.2 $2,868.0 $2,497.9 2.2% 17.3%
Services 2,986.9 2,967.5 3,109.0 0.7% 3.9%
Healthcare 2,314.8 2,239.5 2,201.9 3.4% 5.1%
Wholesale/retail 1,471.3 1,658.1 1,576.8 (11.3%) (6.7%)
Manufacturing 496.8 519.4 515.0 (4.4%) (3.5%)
Other 534.1 543.4 490.3 (1.7%) 8.9%
Total C&I $10,734.0 $10,795.9 $10,390.8 (0.6%) 3.3%
Commercial Real
Estate
3,480.0 3,518.1 3,809.0 (1.1%) (8.6%)
Residential Mortgage 1,973.7 1,945.8 1,949.8 1.4% 1.2%
Personal 965.8 947.0 840.0 2.0% 15.0%
Total Loans $17,153.4 $17,206.8 $16,989.7 (0.3%) 1.0%
Loan Portfolio
15
Key Credit Quality Metrics
$132.5
$110.4
$124.0
$110.7
$92.3
$98.5
$97.2
$121.4
$114.9
$95.6
$231.0
$207.6
$245.4
$225.6
$187.9
$-
$50.0
$100.0
$150.0
$200.0
$250.0
4Q16 1Q17 2Q17 3Q17 4Q17
Energy Non-Accruals Other Non-Accruals
1.52% 1.52%
1.49%
1.47%
1.37%
0.00%
0.50%
1.00%
1.50%
2.00%
4Q16 1Q17 2Q17 3Q17 3Q17
Combined Allowance for Credit Losses
to Period End Loans
-0.03% -0.02%
0.04%
0.08%
0.27%
-0.50%
0.00%
0.50%
1.00%
1.50%
4Q16 1Q17 2Q17 3Q17 4Q17
Net charge offs (annualized)
to average loans
No material signs of stress in any loan portfolio
Nonaccrual loans down 17% sequentially
Net charge-offs of 27 basis points for the
fourth quarter, 9 basis points for the full year.
Appropriately reserved for any potential issues
with a combined allowance of 1.37%
16
Energy Lending Update
At 12/31/17:
$2.9 billion unfunded commitments
$2.9 billion outstanding
E&P line utilization 53%
Q4 energy net chargeoffs $0.5 million
Seventh consecutive quarterly reduction
in criticized/classified energy loan
outstandings
20 year average gross loss rate on E&P loans (gross
chargeoffs as a percent of period average loans) is 16 bps
85%
11% 4%
Oil & Gas
Producers
Midstream &
Other
Energy
Services
Net
Charge-
Offs
2013
2014
2015
2016
2017
E&P 0.00% 0.00% 0.07% 1.42% 0.23%
Total
Energy
-0.01% -0.15% 0.17% 1.16% 0.18%
17
Steven G. Bradshaw
Chief Executive Officer
Closing Remarks
18
Question and Answer Session