BOK Financial Strategies Pay Off, Shareholders Told

BOK Financial Corp.’s strategies have transformed BOKF from the leading Oklahoma bank to a leading regional bank, laying the foundation for continued earnings growth, bank officials told shareholders Tuesday.
At BOKF’s annual meeting, Stan Lybarger, president and CEO, said, “The strategies we have adopted are designed to help BOKF out perform the industry in all economic cycles and produce a superior risk-adjusted return for shareholders.
By diversifying revenue sources and working to produce solid growth in all of BOKF’s markets and business lines, “we are optimistic about the prospects for future growth,” he said.
BOKF has reported record earnings for 17 consecutive years and a 15 percent compound annual growth rate in earnings per share since 1991.
“Since 2000, our 11percent EPS growth is nearly twice the peer median of 6 percent,” Lybarger said. “While 2007 EPS growth was below our targets and expectations, we achieved positive growth while our peers suffered nearly a 15 percent decline in earnings per share.
BOKF’s objective is to produce growth organically and to avoid reliance on high risk investments and business activities, he said.
“The ability to consistently deliver good organic growth has made it easy for BOKF to operate with a lower risk profile. We consciously underweight higher risk traditional businesses such as commercial real estate lending, and avoid altogether very high-risk business activities like sub-prime mortgage lending,” Lybarger said.
Net income for 2007 was $217.7 million, or $3.22 per diluted share, compared to $213 million, or $3.16 per share in 2006.
Loans topped $12.0 billion and deposits grew to nearly $13.5 billion, increases of 12 percent and 9 percent, respectively, in 2007. Non-interest revenue increased 9 percent over 2006. Assets exceeded $20.8 billion in 2007.
Lybarger said one of BOKF’s key performance differentiators is its high proportion of non-interest revenue to total revenue.
“Forty-two percent of our revenue stream is fee-based, making BOKF’s revenue more stable and lower risk than many banks that are more dependent upon net interest income,” he said. “We have virtually no exposure to subprime lending, collateralized debt obligations or collateralized loan obligations – the three activities that have caused the greatest problems in this credit cycle.”
BOKF reported a good start for the first quarter of 2008 with an 18 percent increase in earnings over the first quarter last year. Lybarger said a modest increase in the net interest margin and controlled expense growth contributed to BOKF’s success.
In addition, all major categories of fee revenue increased, most notably an 80 percent increase in brokerage and trading revenue, he said.
On an annualized basis, loans grew 12 percent since year end, spread across all major sectors of the portfolio, with the growth focused primarily in Texas, Kansas and Arizona.
“After experiencing unusually strong credit quality for over three years, we are seeing a migration back to what we consider more ‘normal’ for BOKF,” Lybarger said, noting non-performing assets are at 1.02 percent of outstanding loans and repossessed assets.
Excluding assets subject to guarantees by the U.S. government and the First United Bank Denver purchase agreement, the ratio is 88 basis points, he said.
“Our first quarter results were very good, but compared to most other mid- and large-cap banks they stand out as exceptional,” he said. “With 18 of our 20 peers having reported first quarter earnings, it appears that period over period peer group earnings will decline approximately 30 percent. We are clearly performing much better than our peers and the industry as a whole.
BOKF operates 172 full-service locations in eight states.
“Our markets are diverse and dynamic, including an attractive mix of Sunbelt, Midwest, and Rocky Mountain states. We operate in some of the nation’s strongest metropolitan areas, including Dallas, Houston, Denver and Phoenix,” Lybarger said.
About 74 percent of BOKF’s loan growth and 63 percent of its deposit growth in the past five years has been in markets outside of Oklahoma.
“We reached another significant milestone in 2007,” Lybarger said. “After ten years of regional expansion, over half of BOKF’s loans are now in markets outside our home state. In addition, 45 percent of our deposits are in the regional markets.”

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