BOK Financial Corporation · NASDAQ:BOKF
BOK Financial — Investor Day (October 2014)
66 slides from BOK Financial's investor day presentation, Oct 1, 2014
Slide 1: Investor Day October 1, 2014
Investor Day I October 1, 2014 NASDAQ: BOKF BOK Financial Corporation. Member FDIC. Equal Housing Lender. Services provided by BOKF, NA doing business as Bank of Albuquerque, Bank of Arizona, Bank of Arkansas, Bank of Kansas City, Bank of Oklahoma, Bank of Texas, Colorado State Bank and Trust. 1
Slide 2: Forward-Looking Statements
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-lookin
Slide 3: Today's Agenda
Today’s Agenda Time and Topic Executives 8:00 - 8:15 Greetings and strategic overview Bradshaw 8:15 - 9:30 Commercial lending overview and Ellinor and team Roundtable Discussion 9:30 – 9:45 Break 9:45 - 11:00 Fee Generating Businesses Overview Grauer, Cowen, and Roundtable Discussion Bourgeois 11:00
Slide 4: Strategic Overview
Strategic Overview Steven G. Bradshaw President and Chief Executive Officer BOK Financial Corporation. Member FDIC. Equal Housing Lender. Services provided by BOKF, NA doing business as Bank of Albuquerque, Bank of Arizona, Bank of Arkansas, Bank of Kansas City, Bank of Oklahoma, Bank of Texas, Colo
Slide 5: Our Goals for Today
Our Goals for Today • Provide the investment community with a thorough understanding of: • Our competitive differentiators – As of 6/30/14 10 Yr. TSR 15 Yr. TSR both as a bank and an investment BOKF 106% 272% • The sustainable growth Peer average 28% 165% strategies we employ which have made BOK Fin
Slide 6: 2014 Accomplishments
2014 Accomplishments 2014 Objectives Results Accelerate loan growth and Double-digit annualized loan growth AUM growth to drive revenue Double-digit annualized AUM growth Create mortgage “soft landing” Strong 2014 production after end of refinancing boom Stable gain on sale margins Outperf
Slide 7: 2015 Objectives
2015 Objectives 2015 Objectives Drivers Accelerate growth in low-share Step up efforts on M&A front markets M&A Targets: $0.5 - $2.5B assets Proven organic growth capability Limited fee-generating capability Within footprint Goal: announce at least one transaction in 2015 Build teams t
Slide 8: Commercial Lending Panel Discussion
Commercial Lending Panel Discussion Dan Ellinor, Chief Operating Officer Norm Bagwell, CEO, Bank of Texas and Director, Regional Banks Stacy Kymes, Chief Credit Officer Mickey Coats, EVP and Director, Energy Banking Brad Vincent, EVP and Director, Healthcare Banking Dan Easley, EVP and Director, Rea
Slide 9: Competitive Strengths
Competitive Strengths • Financial Strength and Performance of BOKF • Broad product set is a differentiation from local competitors • Sophistication and platform allow us to compete with larger banks • Our talent stacks up favorably vs. competition • Customer service has been a key differentiator as
Slide 10: Commercial Banking: Diversified by Sector and Geography
Commercial Banking Diversified by Sector and Geography Loan Portfolio Breakdown - by Sector: Loans by Principal Market: Commercial (In Millions) 6/30/2014 (In Millions) 6/30/2014 Energy $ 2,419.8 18.0% Oklahoma 5,378.4 40.1% Services $ 2,377.1 17.7% Texas 4,501.6 33.5% Wholesale/Retail $ 1,318.2 9.8
Slide 11: Regional Banks
Regional Banks Kansas City Colorado Arkansas Arizona Tulsa Oklahoma City New Mexico Dallas Fort Worth Houston BOK Financial Corporation. Member FDIC. Equal Housing Lender. Services provided by BOKF, NA doing business as Bank of Albuquerque, Bank of Arizona, Bank of Arkansas, Bank of Kansas City, Ban
Slide 12: Market CEO Model
Market CEO Model • In 2010, this role was codified and formally implemented • Market Leader is the owner of the market, and is accountable for the activities and corresponding outcomes in the geography • Should exemplify what is in the best interest of the larger organization and position the geogra
Slide 13: Core Philosophy
Core Philosophy • We are in the Solutions business • Mobilize all market resources to sell and build the brand regardless of role or line of business • Engage our employees to drive superior outcomes • Market that acts as one internally will project itself as one externally • The sophistication of o
Slide 14: Operational Themes
Operational Themes • Asset Generation • Diversification of Revenue • Market Coverage to Drive Expansion of the Client Base • Delivery of the Entirety of BOKF to the Markets We Serve • Team Based Delivery • Commonality in our Approach • Employee Engagement • Superior Portfolio Management BOK Financia
Slide 15: Solid Credit Quality at June 30, 2014
Solid Credit Quality at June 30, 2014 Continued Positive Trends ALL to period end loans: Net annualized charge-offs to average loans: 1.42% (0.6)% Three consecutive quarters of net recoveries Allowance for loan losses to Non-performing assets to period nonaccruing loans: end loans and repossessed as
Slide 16: Concentration Management
Concentration Management Energy Healthcare Commercial Real Estate Sub-limits in: Sub-limits in: Sub-limits in: • E&P • Senior Housing • Multi-family • Midstream • Hospital • Industrial • Energy-Other • Retail • Energy Service • Office • Non E&P • Land/Development • Residential Construction • Hotel •
Slide 17: Commercial Banking: Energy Lending
Commercial • Banking $2.4 billion energy portfolio at 6/30/14 Energy Lending • Core competency of BOK for over 100 years • 50-60% loan to value on proved producing reserves Energy Wholesale/ Services • Approximately 59% of production loans are Retail 3% 6% secured by oil Midstream 3% • Regionally di
Slide 18: Energy Loan Illustration
Energy Loan Illustration • A borrower requests a credit facility for working capital, exploration and development of oil & gas reserves. For illustrative purposes, assume the collateral is one seasoned oil well generating ~$1 million a year in net cash flow. Net Cash PV of Net Cash Advance Loan Valu
Slide 19: Energy Price Volatility & Loss Rates
Energy Price Volatility & Loss Rates • BOKF’s 20 year average gross loss rate on energy production loans (gross charge-offs as a percent of period end loans) is 5 basis points • Over the last 20 years, NG prices ranged from $1.05 to $15.38 and oil prices ranged from $10.72 to $145.29 BOK Financial C
Slide 20: Energy Portfolio – Growth Strategies
Energy Portfolio – Growth Strategies • Agency mandates • Larger hold on agented transactions • Additional fees associated with agented transactions • Expansion of energy services portfolio • Energy services grew from $79 million at 3/31/14 to $147 million at 6/30/14 • Expansion of midstream portfoli
Slide 21: Commercial Banking: Healthcare Lending
Commercial • Growing line of business within commercial Banking • $1.4 billion portfolio at 6/30/14 Healthcare Lending • Portfolio increased at a compound annual rate of 13.3% since 2002 Healthcare Commitments • National expertise in skilled nursing facilities and acute care hospitals Medical Skille
Slide 22: Historical and Projected U.S. Healthcare Expenditures
Historical and Projected U.S. Healthcare Expenditures • Total healthcare spending is projected to be roughly $3.8 trillion in 2014, with the majority of this spend (31%) going toward hospitals and physicians (20%). • According to CMS projections, healthcare spending will grow at an average rate of 6
Slide 23: Healthcare Banking Overview
Healthcare Banking Overview • BOKF’S initial focus on Healthcare began during 1997 with lending commitments totaling less than $100 million. • BOKF’S Healthcare Banking initiative was managed as a “Center of Excellence” rather than as a Line of Business until January 1, 2014. • The new line of busin
Slide 24: Healthcare Lending and Fee Businesses
Healthcare Lending and Fee Businesses • Noteworthy features of BOKF’s Healthcare lending initiative include: • Higher fundings (~80% of total commitment) than a general C&I portfolio (~50% of total commitment). • Typically superior yields for senior housing compared to a general C&I loan • Treasury
Slide 25: Commercial Banking: Commercial Real Estate Lending
Commercial • Provides construction, bridge and permanent Banking financing primarily for Multifamily, Industrial, Office and Retail developer/owners as well as Commercial Real Estate Lending developer/owners of private pay Independent Living, Assisted Living and Memory Care CRE By Market facilities.
Slide 26: Commercial Real Estate Lending: Disciplined Strategy
Commercial Banking Commercial Real Estate Lending • Disciplined lending strategy: • CRE adheres to concentration Disciplined concentration management: Since 2002, the highest CRE as percent of total loans was 23% in 2006. limits by collateral type. • Underwriting Guidelines that are 3,000 23% 25% gr
Slide 27: CRE Competitive Differentiators/Growth Strategies
CRE Competitive Differentiators/Growth Strategies • Hands-on, streamlined transaction vetting and approval process. • Decisions to move forward (or not) are communicated to customers quickly. • Seasoned commercial real estate team • Selective lift-outs • 2011 expansion into Independent Living, Assis
Slide 28: Incubating Additional Specialty Lending Businesses
Incubating Additional Specialty Lending Businesses Heavy equipment banking Native American banking Maritime banking • Serves construction • Centered in Oklahoma, • Based in Houston market equipment distributors Arizona, and New Mexico • Launched 2013 with • Presence in 26 states • $300 million portf
Slide 29: Fee-Generating Business Panel Discussion
Fee-Generating Business Panel Discussion Steve Bradshaw, Chief Executive Officer Scott Grauer, Executive Vice President, Wealth Management Greg Wheeler, CEO, The Private Bank Joann Schaub, SVP, Mgr, Institutional Wealth Management Ben Cowen, President, BOK Mortgage Brian Bourgeois, SVP, Director, Tr
Slide 30: Balanced Revenue
Balanced Revenue Fee Businesses Provide Stability and Growth Opportunity Brokerage & Trading 11.9% CAGR 2010- LT Growth Rates 2013 Transaction Brokerage and 7.34% Card Trading 9.6% Transaction Card (1) 1.32% Net Interest Trust Fees 11.68% 50.5% Trust Fees Service Charges (1) (2.8%) 9.0% Mortgage Ban
Slide 31: Q2 2014: Inflection Point for Fee Businesses
Q2 2014: Inflection Point for Fee Businesses Brokerage and Trading Fiduciary & Asset Mgt. 45 30 40 28 35 26 30 24 25 22 20 20 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Transaction Card Mortgage Banking 32 40 31 30 30 20 29 28 10 27 0 Q2 2013 Q3 2013 Q4 2013 Q1 2
Slide 32: Wealth Management Division Highlights
Wealth Management Division Highlights • More than $61 billion in assets under management or in custody • $32.7 billion in fiduciary assets • More than $1 trillion in traded securities annually • More than 800 dedicated Wealth Management employees Note: percentages based on Q1 revenue BOK Financial C
Slide 33: Wealth Management Capabilities
Wealth Management Capabilities Serving individuals and their families, foundations, endowments, pension plans, philanthropic organizations, governmental entities, tribal governments, educational institutions, hospitals, insurance companies and other businesses Wealth Management Brokerage and Institu
Slide 34: Wealth Management Growth Drivers
Wealth Management Growth Drivers • Launch of Cavanal Hill World Energy Fund as flagship equity fund • Integration of recent GTrust and MBM Advisors acquisitions • Leverage Mineral Management expertise to open new doors, add value with existing client relationships • Retirement plan growth and relati
Slide 35: The Private Bank
The Private Bank Loan Balances Deposit Balances Assets Under Administration $935 million $3 billion $13.2 billion • BOK Financial team focused on serving approximately 5,000 High Net Worth Individual client relationships • 90,000 mineral properties under management • 1,300 real estate assets under m
Slide 36: Institutional Wealth: Retirement Plans
Institutional Wealth $28 Billion in Assets 146 Officers & Serving Clients in Employees 12 Cities A broad range of solutions for Institutional clients, delivered locally with industry experts Retirement Plans • Single source solution for trustee, investment advisory, recordkeeping and compliance • $6
Slide 37: Institutional Wealth: Asset Services
Institutional Wealth Asset Services • Asset custody, trustee, aggregate reporting and investment management • $14 billion in assets • Key differentiators and growth drivers • Not-for-profits, healthcare sector and tribal governments • Mineral management sales • New investment advisory clients • High
Slide 38: Institutional Wealth: Corporate Trust
Institutional Wealth Corporate Trust • 7th largest trustee bank ranked by number of issues • 46 officers and employees in 12 cities • Significant expertise and high-touch service • Key differentiators and growth drivers • Expansion into new markets, talent acquisition and local servicing • Expertise
Slide 39: TransFund
500 CAGR: 10.04% TransFund 400 EFT Transaction Volumes (M) EFT Network 300 200 • Among the top 10 networks in the US 100 • Operates in 21 states; 50% of clients outside Oklahoma 0 2008 2013 • Clients: 207 Banks, 138 Credit Unions, 6 SIG POS PIN POS ATM C-Store partners • In 2013, processed 455 milli
Slide 40: TransFund Growth Drivers
TransFund Growth Drivers • Moving up market: New clients include $900 million regional bank in Q2 2014 and $1.5 billion regional bank in Q1 2015 • Leverage continued market volatility and technological changes to engage prospective customers in dialog • Aggressively build and pursue referral partner
Slide 41: Mortgage Banking: Building a Recurring Revenue Model
Mortgage Banking Building a Recurring Revenue Model • Several key strategic initiatives: 180,000 Mortgage Banking Revenue 160,000 ($000s) • Build servicing portfolio 140,000 120,000 • Expand correspondent 100,000 network 80,000 60,000 • Build platform that reaches 40,000 homebuyers and 20,000 homeow
Slide 42: Mortgage Banking: Building a Recurring Revenue Model
Mortgage Banking Building a Recurring Revenue Model Servicing Portfolio ($B) Servicing Revenue ($MM) 15.0 15.0 14.0 14.0 13.0 • Consistent growth in 12.0 13.0 11.0 servicing portfolio 10.0 drives recurring 12.0 9.0 8.0 servicing revenue 11.0 7.0 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 2013 2013 2013 201
Slide 43: Mortgage Banking Growth Drivers
Mortgage Banking Growth Drivers • Continued build-out of HomeDirect Mortgage channel • 7% of production volume today, goal to grow to 10% • National expansion of correspondent channel • Capitalize on strong in-footprint housing market • More first time homebuyers • Less overall malaise about homeown
Slide 44: Consumer Banking Panel Discussion
Consumer Banking Panel Discussion Pat Piper Executive Vice President, Consumer Banking Services Derek Martin Senior Vice President, Director, Strategic Services Jill Hall Senior Vice President, Manager, Consumer Sales BOK Financial Corporation. Member FDIC. Equal Housing Lender. Services provided by
Slide 45: Universal Banker: The Transition
Universal Banker The Transition • Client’s desire for even Digital Banking greater convenience = Solutions digital banking solutions • Required branch team assistance to effectively Greater Client Convenience promote digital channels & Lower Cost of Delivery • Universal Banker Process • Solved for r
Slide 46: Universal Banker: Execution and Emerging Benefits
Universal Banker The Execution and Emerging Benefits Greeted by Relationship Banker • Relationship Bankers assisting clients with all How may What IW assist? needs vs. defined teller/banker roles Client enters branch Providing Basic Assistance • Client greeted by a Solving Complex Service Issues rel
Slide 47: Delivering Small Business Solutions
Delivering Small Business Solutions Scalable Coverage • Annual Revenues < $5MM Small Business • Focus on high value & complex products – Treasury, Credit and Merchant BOKF Branch • Sustain scale with base knowledge across branch network Business Expert In Person Virtual Active Responsive Coverage Mi
Slide 48: Multi-Channel Marketing
Multi-Channel Marketing Delivering Relevant & Timely Solutions customer data • Identify client’s key r c e h "moments of truth" s p C R a n o n and decision n s M e l making e s • Deliver timely and Marketing Conductor relevant solutions synchronization that meet client delivery needs contact • Act
Slide 49: Admin Functions Panel Discussion
Admin Functions Panel Discussion Steve Grossi Chief Human Resources Officer Don Parker Chief Risk Officer Becky Keesling Chief Auditor BOK Financial Corporation. Member FDIC. Equal Housing Lender. Services provided by BOKF, NA doing business as Bank of Albuquerque, Bank of Arizona, Bank of Arkansas,
Slide 50: Financial Overview
Financial Overview Steven Nell Chief Financial Officer Marty Grunst EVP and Treasurer BOK Financial Corporation. Member FDIC. Equal Housing Lender. Services provided by BOKF, NA doing business as Bank of Albuquerque, Bank of Arizona, Bank of Arkansas, Bank of Kansas City, Bank of Oklahoma, Bank of T
Slide 51: $9.7B AFS Portfolio at June 30, 2014
$9.7B AFS Portfolio at June 30, 2014 High Quality, Actively Managed Private • Total AFS portfolio estimated Issue MBS, $0.2 duration of 3.1 years Agency • Duration expected to extend to 3.4 CMBS, years with 200bp interest rate $2.1 Other, shock $0.1 Available for Sale Securities ($B) $12.0 $11.0 Age
Slide 52: Liability Sensitivity
Liability Sensitivity Solid Progress in 2014 Percentage decline in NII due to parallel 200bp rate increase over 12 months 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 • Assumptions: • Interest bearing core deposit re-pr
Slide 53: Earning Asset Mix
Earning Asset Mix Solid Progress in 2014 12/31/2013 6/30/2014 12/31/14 Forecast AFS AFS 39% AFS Loans 44% 48% 52% Loans 56% Loans 61% BOK Financial Corporation. Member FDIC. Equal Housing Lender. Services provided by BOKF, NA doing business as Bank of Albuquerque, Bank of Arizona, Bank of Arkansas,
Slide 54: Net Interest Margin
Net Interest Margin Yields (%) 5 Net Interest Revenue & Margin 4 3.50 $180 3 2 $170 3.25 NIR ($ in millions) 1 $160 3.00 2Q13 3Q13 3Q13 4Q13 1Q14 2Q14 Margin (%) $150 AFS Loans $140 2.75 $130 2.50 Cost of Interest Bearing Liability $120 (%) 2.25 0.75 $110 0.50 $100 2.00 2Q13 3Q13 4Q13 1Q14 2Q14 0.25
Slide 55: Expansion of FHLB Borrowings
Expansion of FHLB Borrowings • Beginning in Q3, BOKF increased FHLB borrowings and deposited the net cash proceeds with the Federal Reserve • Deposit with the Federal Reserve earns 0.25% and additional income is earned via dividends on the incremental FHLB stock • Cash balances held at Federal Reser
Slide 56: Liquidity
Liquidity Deposit Growth Source: SNL Financial $25 As of 6/30/14 At period end: $20 $15 $10 $5 $0 DDA Deposits Non DDA Top quartile liquidity position as measured by loan to deposit ratio Supports future loan growth while maintaining deposit pricing leverage when rates rise Significant liquidi
Slide 57: Holding Company Cash Balances
Holding Company Cash Balances $600.0 At Year End: $500.0 $400.0 $300.0 $200.0 $100.0 $- 2009 2010 2011 2012 2013 BOK Financial Corporation. Member FDIC. Equal Housing Lender. Services provided by BOKF, NA doing business as Bank of Albuquerque, Bank of Arizona, Bank of Arkansas, Bank of Kansas City,
Slide 58: Capital
Capital • Tier 1 common equity ratio 13.46% as of June 30, 2014. • Based on our interpretation of the new capital rule, our estimated Tier 1 common equity ratio is approximately 12.35%, nearly 535 basis points above the 7% regulatory threshold. Capital Deployment • Acquired MBM Advisors in April 201
Slide 59: Excess Capital
Excess Capital Estimated fully Tier I Tier I Risk Total Risk phased in Basel III Common Based Based Capital Ratios Equity Ratio 12.35% 12.50% 14.00% Versus 100 bp cushion $950 million $650 million $550 million over Basel III threshold Versus 200 bp cushion $750 million $450 million $350 million over
Slide 60: M&A Targets and Strategy
M&A Targets and Strategy • Primarily in-market (TX, KS/MO, CO) • Bank and non-bank entities • Ability to leverage existing business or add elements • Revenue-generating capabilities • Solid customer base • Talented employee continuance • Expense synergies are important, but secondary to revenue gene
Slide 61: Revised 2014 Assumptions
Revised 2014 Assumptions • Low double-digit annual loan growth • Continued nominal pressure on NIM • Continued reduction of securities portfolio offset by growth in loan portfolio • Reduce the securities portfolio by $1.2 billion over the full year • Net interest income to be flat to slightly down f
Slide 62: Preliminary 2015 Assumptions
Preliminary 2015 Assumptions • Continued low-double-digit loan growth • Continued mid-single-digit revenue growth from fee-generating businesses • Expansion of NIM (excluding impact of FHLB program) and increasing NII throughout the year due to ongoing remix of earning assets • Additional $5-$10 mil
Slide 63: Summary – What You Heard Today
Summary – What You Heard Today Diverse sources of revenue Capital and willingness to make accretive acquisitions Deep and experienced Sound financial condition management team Exceptional bench strength Differentiated business model Multiple growth drivers BOK Financial is a high-quali
Slide 64: A Compelling Value Proposition
A Compelling Value Proposition Trading Multiple CY EPS BOKF ~ 15x 40-bank peer group ~16x Texas HQ’d banks ~19x Transaction processing ~20x ++ companies Trust banks ~18x Percentage of earnings driven by Texas operations Money management ~17x companies BOK Financial Corporation. Member FDIC. Equal Ho
Slide 65: Open Q&A with Executive Leadership Team
Open Q&A with Executive Leadership Team BOK Financial Corporation. Member FDIC. Equal Housing Lender. Services provided by BOKF, NA doing business as Bank of Albuquerque, Bank of Arizona, Bank of Arkansas, Bank of Kansas City, Bank of Oklahoma, Bank of Texas, Colorado State Bank and Trust. 65
Slide 66: Intermission in Progress Please Stand By
Investor Day I October 1, 2014 NASDAQ: BOKF Intermission in Progress Please Stand By BOK Financial Corporation. Member FDIC. Equal Housing Lender. Services provided by BOKF, NA doing business as Bank of Albuquerque, Bank of Arizona, Bank of Arkansas, Bank of Kansas City, Bank of Oklahoma, Bank of Te