Bok Financial Corporation · NASDAQ:BOKF
Bok Financial — BOK Financial Corp ET AL — Investor Day (September 2011)
81 slides from Bok Financial's investor day presentation, Sep 21, 2011
Slide 1: Investor Day
Investor Day September 21, 2011
Slide 2: Legal Notice
Legal Notice Forward-Looking Statements: This presentation contains forward-looking 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. Words such
Slide 3: Agenda
Agenda 4 7:30 - 8:00 a.m. Continental breakfast - Hilton Park Cities, Beverly Ballroom A 4 8:00 - 8:20 a.m. Welcome and Corporate Strategy - Stan Lybarger, President & CEO 4 8:20 - 8:40 a.m. Financial Overview and Current Trends - Steven Nell, CFO 4 8:40 - 8:55 a.m. Asset / Liability Management - Ma
Slide 4: Welcome & Strategic Overview
Welcome & Strategic Overview Stan Lybarger Chief Executive Officer
Slide 5: Solid Foundation
Solid Foundation Outperform Through Economic Cycles Total Return as of 9/13/11
Slide 6: Position the organization to generate sustained revenue growth
Position the organization to generate sustained revenue growth Select Components of BOKF’s 2012 Strategic Focus 1. Accelerate momentum in high quality, profitable loan growth 2. Continue to develop revenue initiatives to offset the financial impact of regulatory reform and work toward increasing the
Slide 7: Bank Brands Employees Mission
7 4,530 1 Bank Brands Employees Mission Organizational Philosophy ü Local decision making ü Nationally competitive products ü Superior personalized service
Slide 8: The Current Environment
Dave Horsey, Seattle Post - Intelligencer The Current Environment Risks to the fragile domestic economy 4 Potential Eurozone debt crisis 4 Political dysfunction 4 Natural disasters 4 Continuing regulatory reform
Slide 9: Building on an Outstanding Past, Positioned for an Excellent Future
Building on an Outstanding Past, Positioned for an Excellent Future 4 Dominant position in Oklahoma; strong revenue growth in markets outside Oklahoma 4 OOR in markets outside OK -16% 3 year CAGR 4 OOR in OK market - 6% 3 year CAGR 4 Proven core strategy 4 Diversified fee-based revenue contributed 4
Slide 10: Financial Overview and Current Trends
Financial Overview and Current Trends Steven Nell Chief Financial Officer
Slide 11: Current Trends: Revenue
Current Trends: Revenue • NIR and NIM have been pressured by the decline in loans and the declining yield on the securities portfolio and are expected to remain under pressure • C&I loan growth returned in 2011, increasing $400 million year to date; loan trends are expected to continue through 3Q
Slide 12: Current Trends: Credit Quality & Expenses
Current Trends: Credit Quality & Expenses • Net charge-offs have normalized to historic levels leading to a lower provision and allowance • BOKF continually monitors expenses in relation to revenue; working to migrate the efficiency ratio below 60% * Excludes changes in the fair value of MSRs
Slide 13: Capital Deployment
Capital Deployment 4 Organic growth 4 Capacity to fund acquisitions without additional debt or equity 4 Dividends (increased quarterly dividend 10% to $0.275 in April 2011 - current yield 2.3%) 4 Stock repurchases: ~320,000 shares purchased YTD through 9/19/11 Capital Strong without TARP or Dilutive
Slide 14: BOKF Markets Relationship Banking
BOKF Markets 4 Relationship Banking 4 Empowered local market leadership 4 Efficient centralized back office 4 Personalized delivery of sophisticated products 4 M&A Opportunity 4 Seeking fill in opportunity for branch network 4 $1B - $2B in assets 4 Begin at 15% IRR 4 Non-bank prospects include trust
Slide 15: Asset / Liability Management
Asset / Liability Management Marty Grunst Treasurer
Slide 16: High Quality Investment Portfolio
© BOK FINANCIAL CORPORATION High Quality Investment Portfolio AFS Composition at June 30, 2011 Agency MBS 2% Jumbo 45% 4% Other 1% Muni 1% Agency CMO 47% The securities portfolio is a key component of our interest rate risk management strategy Active approach to portfolio management » No sub-prime,
Slide 17: Investment Portfolio
Investment Portfolio 4 Core portfolio size has remained relatively steady over the last several quarters 4 Portfolio yield is affected by mortgage prepayment speeds as a function of both actual and anticipated prepayment levels 4 2011 industry experience indicates a secular decline in prepayment spe
Slide 18: Net Interest Revenue & NIM
Net Interest Revenue & NIM 4 Growth of the securities portfolio has supported NIR 4 BOKF’s NIR has grown at a 10% CAGR over the past 10 years compared to the peer median of 6% 4 AFS portfolio yield was 3.04% in Q2 2010, whereas reinvestment yields have recently fallen to the 2% area 4 Loan spreads h
Slide 19: Deposits and Wholesale Funding
Deposits and Wholesale Funding 4 Recent deposit growth has predominantly displaced short-term wholesale funding sources 4 Demand Deposit growth has been the primary driver of overall deposit growth 4 The resulting improved funding mix has lowered overall funding costs
Slide 20: Funding Costs
Funding Costs 4 Funding costs have declined slowly and remained below peer levels 4 Interest bearing transaction account costs have declined slowly but steadily over the last several quarters 4 The rate increase in Other Borrowings in 2Q was driven by GNMA loans in the servicing portfolio. As the lo
Slide 21: Commercial Banking
Commercial Banking Dan Ellinor Senior Executive Vice President
Slide 22: Commercial Banking Revenue
71% 68% 32% 29% COMMERCIAL BANKING REVENUE 4 Net interest revenue has been pressured by declining loan balances, but loan fees remain strong 4 TransFund is one of the top 10 EFT networks in the nation 4 More than 1,900 ATMs 4 TF clients in a 16 state area 4 Growing merchant services business 4 Other
Slide 23: Loan Portfolio
LOAN PORTFOLIO 4 Exit of Indirect portfolio and reduction in energy line usage have contributed $1 billion in shrinkage since 2008 4 Diversified portfolio by sector and geography 4 Key concentrations remain energy & the general services sector 4 Significant spread improvement since 2008; currently p
Slide 24: Commercial Loan Portfolio
COMMERCIAL LOAN PORTFOLIO Since December 2010 4 Second consecutive quarter of C&I growth 4 Growth in Corporate Banking, including services, wholesale/retail and healthcare 4 Energy very choppy 4 Flat results in CRE: 4 Growth in retail and other CRE 4 Continued decline in C&D 4 Growth occurring in mo
Slide 25: Corporate Banking Loan Growth
4 BOKF benefiting from economic strength of our region 4 Growth remains diversified and with solid credit metrics 4 Additions to corporate banking team in lead markets is paying off (in millions) June 2011 2011 Change Markets: Oklahoma $1,514.6 $127.1 Texas $1,394.8 $128.0 Colorado $ 263.3 $ 27.7 Ne
Slide 26: CRE Portfolio
CRE PORTFOLIO 4 CRE represented 20% of total loans as of June 30 4 Quarterly CRE concentration reporting 4 Current focus on income-producing properties 4 Talent acquisitions through the cycle Commercial Banking
Slide 27: Energy Portfolio
ENERGY PORTFOLIO 4 50-60% loan to value 4 49% of committed production loans secured by oil 4 Line usage at June 30 was 44% - well below historical rates of 55-60% 4 Energy production portfolio has been one of the best performing portfolios for the last 20+ years 4 Sensitivity analysis performed for
Slide 28: Other Niche Business Lines
OTHER NICHE BUSINESS LINES 4 Niche lines have a defined growth strategy covering BOKF footprint and neighboring states 4 HealthCare includes three main types of lending - senior housing, hospitals and medical services 4 BOKF operates three specialty lines—leasing, heavy equipment, and agribusiness 4
Slide 29: New Mexico Market
Growth Strategies: 4 Gain momentum in high quality loan growth 4 Capitalize on fee based capabilities and grow base 4 Leverage strengths of BOKF amongst market disruption Key Competitive Strengths: 4 Well established brand and market position 4 Diversified revenue base 4 Top tier talent and leadersh
Slide 30: Arizona Market
Key Competitive Strengths: 4 Financial strength of BOKF 4 Top tier talent and leadership 4 Corporate banking capabilities Growth Strategies: 4 Maintain momentum in high quality loan growth 4 Penetrate relationships with fee based product offering 4 Increase brand strength & awareness Arizona Market
Slide 31: Arkansas Market
Key Competitive Strengths: 4 Longevity and stability within market 4 Top Tier talent and leadership 4 Financial strength of BOKF Growth Strategies: 4 Build C&I portfolio alongside CRE book 4 Increase cross sales activities 4 Pursue Little Rock expansion Arkansas Market
Slide 32: © BOK FINANCIAL CORPORATION
© BOK FINANCIAL CORPORATION
Slide 33: Credit Administration & Asset Quality
Credit Administration & Asset Quality Stacy Kymes Executive Vice President, Credit
Slide 34: Credit Administration Approval Process
Authority Approval Amount Independent Credit Concurrence Officer Beginning at $7.5MM Senior Loan Committee > $25MM Credit Committee > $35MM Board of Directors > $50MM Credit Administration Approval Process 4 Individual authority assigned to RMs and DMs commensurate with ability, experience and the n
Slide 35: $10.7 Billion Loan Portfolio
$10.7 Billion Loan Portfolio Diversified by Sector and Geography Consistent Portfolio Mix C&I 58% CRE 20% Resi 17% Consumer 5% Regional Diversity OK 45% TX 29% NM 7% CO 7% AZ 5% KS/MO 4% AR 3% Note: Based on outstanding loans at 6/30/11
Slide 36: Concentration Management
Concentration Management ü Applied to significant lending businesses - Energy, Healthcare & Commercial Real Estate ü Centrally monitored and managed ü Limits established annually and reviewed quarterly Commercial Real Estate: Regulatory Guideline: 300% of T1 capital + ACL BOKF Guideline: 125% of T1
Slide 37: Concentration Management Continued
Concentration Management Continued Healthcare: BOKF Guidelines: Senior Housing: 25% of T1 capital + ACL Commitments at June 30 = 21% Hospitals: 20% of T1 capital + ACL Commitments at June 30 = 13% Energy: BOKF Guidelines: E&P: 130% of T1 capital + ACL Commitments at June 30 = 118% Non E&P: 50% of T1
Slide 38: Net Losses By Loan Type
Net Losses By Loan Type* In Basis Points 10 Yr Ave YTD Annl’d Com’l 37 6 CRE 55 86 Resi 30 54 Consumer 150 84 NCOs/Ave Loans 47 35 * Calculated by taking NCOs by type/ average loans outstanding by type
Slide 39: Allowance Analysis
Allowance Analysis ü If positive credit trends continue without an acceleration in loan growth, we anticipate reserve release to continue through lower provisioning
Slide 40: Operations & Technology
Operations & Technology Don Parker Chief Information Officer
Slide 41: The Back Office Strategy
The Back Office Strategy 4 Enable the execution of the core BOKF strategy, having sophisticated products delivered with a community bank customer experience. 4 Consider every back office function to be competing with the like function at other banks. 4 Every manager is expected to benchmark their un
Slide 42: The Back Office as an Engine for Reducing Cost
The Back Office as an Engine for Reducing Cost 4 Image Technology 4 Process Engineering 4 Expert Sourcing 4 Functional Consolidation
Slide 43: BOKF Technology Positioning
BOKF Technology Positioning 4 A Differentiated Governance Process 4 Recent Investments 4 Delivery System Automation - Teller 4 Short Term Line of Credit 4 Mobile Banking 4 Charter Consolidation
Slide 44: BOKF Technology Positioning Product Enhancements
BOKF Technology Positioning 4 Product Enhancements 4 Mobile Banking 4 ATM Image Deposit 4 Corporate Front End System 4 Internal Capability 4 Delivery System Automation - Sales & Service 4 Credit Data Warehouse 4 Mortgage Origination
Slide 45: Consumer Banking & Wealth Management
Consumer Banking & Wealth Management Steve Bradshaw Senior Executive Vice President
Slide 46: Consumer Banking
Growth Strategies: • Self service and the underbanked • Product pricing • Branch delivery Current Trends: • Deposit mix shift • Loan growth • Volatile fee revenue Consumer Banking 1
Slide 47: Wealth Management
Current Trends: • Client advisor growth • Opportunistic expansion • Strong investment performance Strategic Priorities: • Leverage investment results • Expanding retail channel • Global banking focus Wealth Management
Slide 48: Mortgage Banking
Current Trends: • Growing origination capacity • Widening margins • Avoiding headline risks Strategic Priorities: • Expanding revenue channels • Building leadership strength • Managing repurchase risk Mortgage Banking
Slide 49: Business Banking
Current Trends: • Launched Business Experts • Significant deposit growth • Loan runoff continuing Strategic Priorities: • Talent additions / upgrades • Balanced sales focus • Service channel integration Business Banking
Slide 50: Colorado Market
Growth Strategies: • Targeting high net worth growth • Expand Business Banking • Fee business growth Current Trends: • C&I / Energy loan growth • Leadership transition / staffing additions • Expanding Wealth Management lines Colorado Market
Slide 51: Kansas City Market
Current Trends: • Highly integrated sales culture • Fee revenue dominant • Lack retail delivery Strategic Priorities: • Building commercial loan staff • Retail delivery acquisition • Opportunistic CRE growth Kansas City Market
Slide 52: Treasury / International
Current Trends: • Strong DDA Growth • Business line marketing focus • Diversifying international revenue sources Strategic Priorities: • Leveraging technology investments • Marketing to non-borrowers • Growing international revenues Treasury / International
Slide 53: Regulatory Reform
Regulatory Reform 4 Key Areas 4 Reg E 4 Interchange 4 Mortgage reform 4 Other: derivatives “push out”, commercial checking interest, CFPB compliance, state law pre-emption 4 Company Wide Revenue Initiatives to be implemented through 2013 4 Fee enhancements 4 New fees 4 Product enhancement/expansion
Slide 54: Mortgage Banking
Mortgage Banking Ben Cowen President, BOK Mortgage
Slide 55: Mortgage Banking Industry
Mortgage Banking Industry 4 Consolidating market and fewer competitors 4 Barrier to entry is increasing 4 Regulatory requirements and lender risk on the rise 4 Loan volumes are projected to be flat to decreasing over the long term 4 Purchasers of Servicing most likely to change 4 Credit has tightene
Slide 56: Mortgage Division-Production Growth
Mortgage Division-Production Growth 4 Have improved production leadership outside of Oklahoma since 2008 4 Strengthened loan officer value proposition 4 Strong growth in number of loan officers 4 Expanding with new loan production offices 4 New Correspondent Lending channel in 2011
Slide 57: Mortgage Banking - Servicing
Mortgage Banking - Servicing 4 Servicing continues to grow 4 Loan performance better than average
Slide 58: Mortgage Banking - Risk Management
Mortgage Banking - Risk Management 4 BOKF has low levels of loan repurchases 4 BOKF remains focused on loan quality and process controls MSR Hedging Strategy: 4 Objective is to reduce volatility in income 4 Protect the expected rate of return from Mortgage Operations 4 Maintain a coverage to protect
Slide 59: Mortgage Summary
Mortgage Summary 4 Continued opportunity to profitably grow the mortgage business 4 Continued focus on managing loan quality and risk is critical 4 BOKF Mortgage delinquencies are lower than average 4 MSR asset hedge strategy in place
Slide 60: Wealth Management
Wealth Management Scott Grauer Executive Vice President, Wealth Management President & CEO, BOSC, Inc.
Slide 61: Wealth Management History
Wealth Management History 4 Bank founded in 1910 4 Trust Division established in 1918 4 Investment Management services added in 1949 4 Brokerage firm launched in 1991 4 Wealth Management division of BOK Financial boasts roughly 750 employees
Slide 62: Wealth Management Business Lines
Wealth Management Business Lines • BOSC • Retail Brokerage • Institutional Brokerage • Financial Risk Management • Investment Banking • The Private Bank • Lending • Personal Trust • Investment Management • Mineral & Real Property Management • Tax Preparation • Institutional Wealth Management • Retir
Slide 63: Wealth Management Current Revenue Initiatives
Wealth Management Current Revenue Initiatives BOSC 4 Expansion of retail & institutional sales through key hires and strategic product distribution 4 Sales efforts around newly implemented FX portal 4 Enhance and focus on Corporate Finance/Commercial Integration 4 Further build-out and integration o
Slide 64: Revenue Initiatives Continued
Institutional Wealth Management 4 Talent additions in Denver market 4 Focused sales efforts around investment consulting 4 Expansion of Corporate Trust services 4 Acquisitions / partnerships with RIAs that manage institutional clients Cavanal Hill 4 Reopen high yield mortgage investment strategy 4 C
Slide 65: Wealth Management Competitive Advantages
Wealth Management Competitive Advantages / Differentiators 4 Integrated approach to client service delivery across all Wealth Management Lines of Business 4 Proprietary funds offering 4 Scalable sales & service delivery model 4 Client Advisor role
Slide 66: Recent Talent Acquisition
Wealth Management Recent Talent Acquisition 4 Expansion into Milwaukee market 4 Municipal research team 4 The Private Bank Team in KC 4 Corporate trust teams in Texas & Nebraska 4 Investment Banking
Slide 67: Texas Market Highlights
Texas Market Highlights Norm Bagwell CEO, Bank of Texas
Slide 68: Texas Market Development
Texas Market Development • Acquisition and Development (1997-2002) • Eight charters acquired (seven from 1997 - 2002) • Combination of disparate operations • Characterized by a decentralized operating model • Assimilation and Cultural Redefinition (2003 - 2008) • Management structure and teams were
Slide 69: Management Team
Management Team TEXAS Norm Bagwell CEO Bank of TX Dallas CEO - Bank of Texas & President- Bank of Texas Park Cities Senior Chairman & Chairman Fort Worth CEO & President Texas Market Advisory Board Houston CEO & President Houston Market Advisory Board
Slide 70: Bank of Texas 2011 Initiatives
Bank of Texas 2011 Initiatives 4 Deliver 4% growth in NDO for Texas Market 4 Continued Improvement in Credit Quality 4 Produce Net Asset Generation driven by Loan and Lease growth 4 Increase Other Operating Revenue targeting fee generating businesses 4 Charter Consolidation 4 Mortgage Expansion In T
Slide 71: Texas Market June Year-to-Date 2011
• Year-to-date “net direct operating” earnings of $54.1 million, up 8% over the same period of 2010 • Net interest revenue of $68.8 million, up 4% over the same period of 2010 • Fees and commissions revenue totaled $31 million, up 6% over the same period of 2010 • Operating expenses of $45.7 million
Slide 72: Texas Market Net Direct Operating Income
$000s 2010 June YTD 2011 June YTD Growth Commercial Banking 37,273 42,899 5,626 15.1% BOSC (Brokerage) 1,143 2,189 1,047 91.6% Trust 1,427 1,907 481 33.7% Private Bank Banking 2,160 2,270 110 5.1% Consumer Banking 6,724 3,880 (2,844) (42%) BOMC (Mortgage) 1,477 975 (502) (34%) TEXAS MARKET 50,203 54
Slide 73: Texas Market Loan Growth by Segment
4 2004 - 2010 CAGR 9% Largest Segments are 4 Corporate - 29% 4 Energy - 16% 4 Real Estate - 15% 4 Business Banking - 8% 4 Consumer & Wealth - 15%
Slide 74: Texas Market Loan Growth & Distribution
Texas Market Loan Growth & Distribution 4 June 30, 2011 Loan Volume 4 Dallas - 53% 4 Houston - 35% 4 Fort Worth - 12% Dallas - $1.8 Billion Houston - $1.2 Billion Fort Worth - $400 Million
Slide 75: Texas Market Deposit Growth
4 2004 - 2010 CAGR 10% 4 Deposit Mix improved with focus on lower cost deposits and DDA 4 Demand Deposits have grown at a CAGR of 13.4% from $623M in 2004 to ~$1.33 Billion in 2010 4 BOKF / Bank of Texas became a trusted repository for companies seeking a stable financial institution 4 BOKF / Bank o
Slide 76: Texas Market Fee Based Revenue
Texas Market Fee Based Revenue 4 2004 - 2010 CAGR of 11% 4 Brokerage & Investment Banking Revenues have a CAGR of 18% 4 Transaction Card Revenues have a CAGR of 24% 4 Trust Fees & Commissions have a CAGR of 7% 4 Service Charge Revenues have a CAGR of 5%
Slide 77: TX Diversification of Fee Based Revenue
2004 June 2011 Service Charges 45% 28% Brokerage/ Inv. Bkg. 15% 21% Trust Fees 18% 19% Transaction Card 8% 17% Letter of Credit Related 5% 6% Mortgage 4% 5% Other 5% 4% TX Diversification of Fee Based Revenue 4 2004 - 2010 CAGR of 11% 4 Diversification of Fee Revenues has been a priority 4 Acquired
Slide 78: Dallas/Fort Worth Key Metrics
Dallas/Fort Worth 4 Key Metrics 4 31 Locations (20 Dallas / 11 Ft. Worth area) 4 Deposit Market Share of 1.59% (up from 1.52% in 2009) 4 $2.4 Billion in BOKF deposits 4 Rank: 8th Population (2010 Census) 4 Economic activity is steady 4 Momentum in CRE, Energy, Commercial and Fee Services 4 Strong ta
Slide 79: Houston Key Metrics
Houston 4 Key Metrics 4 15 Locations (concentrated on West side) 4 Deposit Market Share of 1.14% (up from 1.09% in 2009) 4 $1.4 Billion in BOKF deposits 4 Rank: 12th Population (2010 Census) 4 Strongest economy in Texas 4 Solid activity in CRE, Energy and Commercial 4 Port and energy sectors active
Slide 80: Building on an Outstanding Past, Positioned for an Excellent Future
Building on an Outstanding Past, Positioned for an Excellent Future
Slide 81: Footnotes & Definitions
Footnotes & Definitions 4 Consumer Banking 1 for this presentation excludes mortgage, business banking and indirect auto lending. 4 Net direct operating income is a non-GAAP performance measure that includes only: NIR+OOR-direct exp (personnel +non-personnel). It does not include provision for credi
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