BOKF Takes Government Actions to Task

“Last year, we discussed the details of our 17th consecutive year of record earnings, and indicated that 2008 would be a difficult year,” said Stan Lybarger president and CEO of BOKF. “We certainly didn’t anticipate that last year would be the most tumultuous year in U.S. banking since the 1930s.”
Overall, BOK Financial, the largest commercial bank in the country to decline participation in the TARP or the Troubled Asset Relief Program – an initiative to provide banks with additional capital, views the combination of all government support initiatives “has been a net positive and served to stabilize the industry,” Lybarger said. “However, efforts to place capital into many banks beyond the large ‘systemically important’ institutions have been misguided,” he said. More of the weaker financial institutions should have been allowed to fail, with more assets liquidated or sold to healthy institutions in government assisted transactions, he said.
“Instead, we have preserved and institutionalized poor performance,” he said. “This will negatively impact the recovery, by leaving the walking dead in place without the capital, funding, or skill to help support sound economic recovery.”
Lybarger was also critical of the FDIC’s recent increase in deposit insurance premiums and a series of special assessments.
“Unfortunately, this has been politicized, with the rate of the special assessment now dependent on the size of the line of credit Congress will authorize for the FDIC,” he said. “Depending on the outcome, the special assessment will add between $3.5 and $7 million per quarter to BOK Financial’s deposit insurance costs. The current flat rate system punishes the strong banks for the irresponsible decisions of the weak.”
He said the FDIC needs to develop a risk based premium structure to incent banks to avoid imprudent risk.
“A large opportunity to replenish the insurance fund was missed, when the FDIC under-priced the insurance premiums on their term debt liquidity programs,” Lybarger said.
With this backdrop of economic decline, large bank failures, and widespread government assistance, BOKF reported 2008 earnings of $153 million.
“We did this after aggressively adding over $100 million, net of charge-offs, to our loan loss reserves. Clearly the performance was disappointing and below our expectations,” Lybarger said.
BOKF ended the year with net charge-offs of $102 million or 79 basis points of period-end loans. Non-performing assets totaled $342 million or 2.65% of period end loans.
Increased credit costs concealed BOK Financial’s solid growth in core earnings,” Lybarger said.
“For the first time in the company’s history, we surpassed $1 billion in total revenue,” he said. “There was solid growth in loans, deposits, and fee revenue, and operating expenses were well controlled.”

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