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| 8-K - 8-K - BOK FINANCIAL CORP | a20180331bokfconferencecal.htm |
1
First Quarter 2018
Earnings Conference Call
April 25, 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 March 31, 2018 unless otherwise noted.
3
Steven G. Bradshaw
Chief Executive Officer
4
First Quarter Summary:
Noteworthy items impacting Q1 profitability:
• Net interest margin expansion and growth in net interest income
• Strong performance from wealth management – over $100 million in wealth management total revenue for first time
in company history.
• Expenses well-controlled, total expenses down 4% compared to fourth quarter
• Strong credit quality and negative loan loss provision
• Stronger than expected quarter for mortgage banking production
• Lower tax rate due to implementation of The Tax Cuts and Jobs Act.
Q1 2018 Q4 2017 Q1 2017
Diluted EPS $1.61 $1.11 $1.35
Net income before
taxes ($M)
$136.3 $126.7 $126.8
Net income
attributable to BOKF
shareholders ($M)
$105.6 $72.5 $88.4
$88.4
$88.1
$85.6
$72.5
$105.6
$1.35 $1.35 $1.31
$1.11
$1.61
1Q17 2Q17 3Q17 4Q17 1Q18
Net Income
Net income attributable to shareholders
Net income per share - diluted
5
Additional Details
($B)
Q1 2018
Quarterly
Growth
Annualized
Quarterly
Growth
Year over Year
Growth
Period-End Loans $17.3 1.1% 4.3% 2.0%
Average Loans $17.3 0.5% 1.9% 0.7%
Fiduciary Assets ($B) $46.6 (4.3)% (17.3)% 3.7%
Assets Under Management
or in Custody ($B)
$78.9 (3.6)% (14.4)% 1.9%
• Strong loan growth in C&I combined with renewed momentum in commercial real estate
• AUM down largely due to timing of inflows and seasonality of disbursements.
6
Steven Nell
Chief Financial Officer
Financial Overview
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Net Interest Revenue
Net Interest Margin
($mil)
Q1
2018
Q4
2017
Q3
2017
Q2
2017
Q1
2017
Net Interest Revenue $219.7 $216.9 $218.5 $205.2 $201.2
Provision For Credit Losses ($5.0) ($7.0) $ -- $ -- $ --
Net Interest Revenue After Provision $224.7 $223.9 $218.5 $205.2 $201.2
Net Interest Margin 2.99% 2.97% 3.01% 2.89% 2.81%
• Tax law change negatively impacted first quarter NIM by 3 basis points.
• Yield on available for sale securities up 2 basis points.
• Loan yields up 16 basis points.
• 9 basis point increase in deposit costs.
• Continued benign credit environment and declines in non-accrual and potential problem loans led to $5 million
provision release in Q1.
8
Fees and Commissions
Revenue, $mil Change:
Q1 18
Quarterly,
Sequential
Quarterly,
Year over Year
Trailing
12 Months
Brokerage and Trading $30.6 (7.3%) (8.9%) (7.9%)
Transaction Card 21.0 4.8% 15.5% (4.4%)
Fiduciary and Asset Management 41.8 0.2% 8.3% 16.9%
Deposit Service Charges and Fees 27.2 (1.9%) (2.2%) 9.0%
Mortgage Banking 26.0 6.8% 3.3% (16.9%)
Other Revenue 12.3 4.8% 4.9% 3.7%
Total Fees and Commissions $159.0 0.2% 2.5% (0.2%)
Fee and commission revenue drivers:
• Brokerage and trading revenue down due to lower investment banking revenue, which was in turn related to
elimination of pre-funding for municipal customers.
• Strong year-over-year growth for TransFund due to double-digit growth in transaction volume and stable per-
transaction revenue.
• Continued strong growth from Fiduciary and Asset Management due to higher year-over-year AUM.
• Stronger than expected mortgage banking revenue driven by higher gain on sale margins.
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Expenses
($mil)
Q1 2018
Q4 2017
Q1 2017
%Incr.
Seq.
%Incr.
YOY
Personnel Expense $139.9 $145.3 $136.4 (3.7%) 2.6%
Other Operating Expense $104.5 $109.2 $99.1 (4.3%) 5.4%
Total Operating Expense $244.4 $254.5 $235.5 (3.9%) 3.8%
• Personnel expense down in Q1 due to lower-than-expected incentive compensation expense.
• Professional fees and services down as expected due to acceleration of spend into Q4.
• OREO expense includes property value write-down of $5 million.
• Mortgage banking costs lower due to declining delinquency rates and lower levels of on-balance-sheet government backed
loans.
10
Forecast and Assumptions
2018 Expectations
Mid-single-digit loan growth
Available-for-sale securities flat to slightly down
Modest growth in net interest margin
Assuming two additional Fed rate hikes in 2018 (June and September) with continued
active management and control of deposit pricing
Mid-single-digit growth in net interest income
Low-single-digit revenue growth from fee-generating businesses
Low-single-digit expense growth
Bias toward additional loan loss reserve releases in the first half of 2018
Blended federal and state effective tax rate 22-23% going forward
11
Stacy Kymes
EVP-Corporate Banking
Norm Bagwell
EVP-Regional Banking
12
Strong growth in energy, healthcare, and middle market C&I
CRE headwinds subsiding
Overall loan growth in line with BOKF forecast
Middle market banking aided by strength in heavy equipment lending and expansion
of Native American banking business.
($mil)
Mar 31
2018
Dec 31
2017
Mar 31
2017
Seq.
Loan
Growth
YOY
Loan
Growth
Energy $2,969.6 $2,930.2 $2,537.1 1.3% 17.0%
Services 2,928.3 2,986.9 3,013.4 (2.0%) (2.8%)
Healthcare 2,359.9 2,314.8 2,265.6 1.9% 4.2%
Wholesale/retail 1,531.6 1,471.3 1,506.2 4.1% 1.7%
Manufacturing 559.7 496.8 543.4 12.7% 3.0%
Other 570.6 534.1 461.3 6.8% 23.7%
Total C&I $10,919.7 $10,734.0 $10,327.1 1.7% 5.7%
Commercial Real
Estate
3,506.8 3,480.0 3,871.1 0.8% (9.4%)
Residential Mortgage 1,945.8 1,973.7 1,946.3 (1.4%) 0.0%
Personal 965.6 965.8 847.5 0.0% 13.9%
Total Loans $17,337.9 $17,153.4 $16,991.9 1.1% 2.0%
Loan Portfolio
13
Key Credit Quality Metrics
$207.6
$245.4
$225.6
$187.9 $180.1
$-
$50.0
$100.0
$150.0
$200.0
$250.0
1Q17 2Q17 3Q17 4Q17 1Q18
Energy Non-Accruals Other Non-Accruals
1.52%
1.49% 1.47% 1.37% 1.32%
0.00%
0.50%
1.00%
1.50%
2.00%
1Q17 2Q17 3Q17 4Q17 1Q18
Combined Allowance for Credit Losses
to Period End Loans
-0.02%
0.04%
0.08%
0.27%
0.03%
-0.50%
0.00%
0.50%
1.00%
1.50%
1Q17 2Q17 3Q17 4Q17 1Q18
Net charge offs (annualized)
to average loans
No material signs of stress in any loan
portfolio
Nonaccrual loans down 4.2% sequentially
Minimal net charge-offs of 3 basis points for
the first quarter.
Appropriately reserved for any potential
issues with a combined allowance of 1.32%
14
Steven G. Bradshaw
Chief Executive Officer
Closing Remarks
15
Question and Answer Session