Diversification keeps BOK out of industry slump

tulsaworld.com
By Laurie Winslow World Staff Writer
April 30, 2008

With its disciplined and conservative approach, BOK Financial Corp. remains optimistic about the future even as it anticipates a continued economic slowdown.

Because the Tulsa-based company has diverse revenue sources and has avoided high-risk business activities such as subprime mortgage lending, it has produced positive results even as many other banks have lost significant shareholder value, bank executives said.

On Tuesday at BOK's annual meeting of shareholders, bank executives recapped highlights from 2007, which marked the 17th consecutive year of record earnings for the financial services company.

"While we are not immune to economic cycles or market swings, our strategies are intended to produce more consistent results and outperform the industry," said Stan Lybarger, president and CEO.

The economic slowdown is likely to continue for a long time, and bank credit will get worse before it gets better, Lybarger said. But he also noted that BOK is sober about the future and will continue to take a disciplined and conservative approach.

Although BOK's stock price declined 6 percent last year, it still outperformed all but nine of the 103 largest banks in the country, Lybarger said.

BOK's stock price has risen significantly this year and recently reached an all-time high, Lybarger said. On April 18, BOK's stock price posted a 52-week high of $60.48 a share compared with a 52-week low of $45.90 a share, according to Bloomberg data.

"BOKF is one of only two mid- and large-cap banks in the United States that have had an increase in stock price since the beginning of 2007," Lybarger said.

When BOK was formed in 1991, it had $2 billion in assets and operated several locations in Oklahoma. Last year, the bank company's total assets surpassed $20 billion, and today it has 172 full-service locations in eight states.

Last year marked the largest branch network increase in BOK history, Lybarger said. The company opened 14 branches and added 16 additional branches through acquisitions of Worth National Bank in Fort Worth, Texas, and First United Bank in Denver.

"We expect to open eight new branches in 2008 and are actively pursuing potential acquisitions," Lybarger said. "The late stages of the economic downturn may well produce attractive acquisition opportunities as more and more banks struggle with profitability and funding needs."

BOK deliberately maintains a balanced mix of business lines, which provide stable revenue sources through varying economic cycles, said Steven Nell, chief financial officer.

He noted, for instance, that the company's broker-dealer, BOSC, has enjoyed compound annual revenue growth of 12 percent over the past five years.

"We believe brokerage and trading revenue will continue to be strong because this group tends to see positive results and does very well in volatile markets," Nell said.

BOK has limited its exposure to commercial real estate to less than 25 percent of total loans for many years. Phoenix has a soft market, but Bank of Arizona's commercial real estate portfolio represents less than 3 percent of BOK's total loans, Nell said.

"We made a conscious decision to limit our exposure to certain lending types, especially commercial real estate," he said. "We put a premium on loan quality - even to the extent that we may sacrifice some growth. Our net charge-offs have increased only modestly, 6 basis points from 2006, compared to the peer group median increase of 13 basis points."

Also Tuesday, BOK declared a first-quarter dividend of 22.5 cents per share on the company's common stock. It is payable on or about May 29 to shareholders of record May 15.

In addition to its Bank of Oklahoma subsidiary, BOK has bank holdings in Texas, New Mexico, Arizona, Arkansas, Colorado and the Kansas City area.