BOK Financial Corporation — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; fourth-quarter comparisons are also summarized. BOK Financial is a regional financial holding company operating across eight states, with commercial banking, consumer banking and wealth management businesses. It reported approximately $49.8 billion in assets at year-end. The statements received an unqualified audit opinion.
Financial performance and condition
- Earnings: Net income attributable to BOK Financial shareholders was $530.7 million, or $8.02 per diluted share, versus $520.3 million, or $7.68, in 2022. Return on average assets was 1.10% and return on average equity was 10.82%.
- Revenue and margins: Net interest revenue was $1.272 billion, up $60.8 million. Other operating revenue was $789.9 million, up $146.7 million, led by brokerage and trading. Net interest margin declined to 2.93% from 2.98%; core margin excluding trading increased to 3.31% from 3.26%. The efficiency ratio rose to 62.76% from 61.63%, or was 61.42% excluding specified sale-related and FDIC assessment adjustments.
- Expenses and credit: Operating expense increased 14% to $1.333 billion, including a $43.8 million FDIC special assessment. Provision for credit losses was $46.0 million, versus $30.0 million; net charge-offs were $18.1 million, or 0.08% of average loans.
- Loans and asset quality: Loans rose $1.3 billion to $23.9 billion, with growth in commercial and commercial real estate lending. The combined allowance for loan and unfunded commitment losses was $326 million, or 1.36% of loans. Nonaccruing loans increased to $145.5 million from $121.8 million; nonperforming assets excluding government-guaranteed loans increased to $138.6 million from $121.1 million.
- Deposits, liquidity and borrowings: Period-end deposits decreased $461 million to $34.0 billion; average deposits fell $4.6 billion to $33.2 billion. The loan-to-deposit ratio increased to 70% from 65%. Year-end borrowings included $1.1 billion in funds purchased and repurchase agreements, $7.7 billion in other borrowings, and $131.2 million in subordinated debentures. Management estimated $18.3 billion in currently available secured borrowing capacity and $23.1 billion in total potential secured capacity.
- Cash flow: Net cash from operating activities was $66.2 million, compared with $5.12 billion in 2022; the year-over-year movement was substantially affected by trading and fair-value-option securities cash flows. Investing activities used $1.79 billion and financing activities provided $1.67 billion. Ending cash and cash equivalents were $1.35 billion.
- Capital and shareholder returns: CET1 was 12.06%, total capital 13.16%, and leverage 9.45%. Tangible common equity ratio was 8.29%. The company repurchased 2.11 million shares for approximately $176.8 million and declared $2.17 per share in dividends.
Material changes and unusual items
- Net income increased modestly year over year, while fourth-quarter net income fell to $82.6 million, or $1.26 per diluted share, from $134.5 million in the third quarter. The fourth quarter included the $43.8 million FDIC special assessment, described by management as reducing annual earnings by $0.52 per share.
- BOK Financial sold BOKF Insurance in the fourth quarter, recognizing a $31.0 million pretax gain before related professional fees. The sale proceeds were used in part to reposition securities.
- The company recorded $30.6 million in losses on available-for-sale securities during 2023, mostly in the fourth quarter. Gross unrealized losses on that portfolio were $669 million at year-end; the filing attributes them to interest-rate movements and reports no identified credit impairment.
- Average funding costs rose sharply as deposits repriced and deposit mix shifted. Interest expense increased to $1.070 billion from $180.7 million in 2022, while average earning assets grew 7%.
- Mortgage production remained pressured: mortgage production revenue was a $5.3 million loss, compared with a $1.8 million loss in 2022. Mortgage servicing revenue increased, supported by servicing-rights acquisitions.
Outlook, risks and contingencies
Management’s base-case economic forecast assumed isolated geopolitical conflicts, inflation reaching 2.6% by year-end 2024, a federal funds target range of 5.25%–5.50% held through 2024, GDP growth of 1.6%, and unemployment rising from 3.9% to 4.2%. This is an economic scenario used in credit-loss estimates, not earnings guidance. The filing provides no specific earnings or revenue guidance.
- Management identifies deposit outflows, higher funding costs and further margin compression as important risks. Interest-rate sensitivity modeling estimates a 3.03% decline in next-12-month net interest revenue under a 200-basis-point rate increase and a 0.66% decline under a 100-basis-point decrease.
- Credit exposures include Texas (32% of loans), Oklahoma (14%) and Colorado (11%); energy represents 14% of loans. Management also highlights commercial real estate risks, including office-market weakness and refinancing conditions. The downside credit scenario would produce a modeled $172 million increase in quantitative reserves versus the base case; this is a sensitivity, not a forecast of booked losses.
- Other disclosed risks include securities valuation and liquidity, mortgage servicing-rights sensitivity, geopolitical and economic uncertainty, cybersecurity and reliance on third-party technology providers, regulatory change, and the FDIC assessment.
- Legal matters include continuing bondholder litigation related to a municipal bond trustee matter. Management, citing counsel, says a loss is not probable and cannot be reasonably estimated; it notes a potentially material exposure if circumstances change. Visa litigation-related obligations and the uncertain value and convertibility of Visa Class B-1 shares are also disclosed.
- Uninsured deposits were estimated at $18.7 billion, or 55% of deposits; excluding collateralized and specified subsidiary-related deposits, uninsured and uncollateralized deposits were $12.9 billion, or 38%.
Investor verification priorities
- Assess deposit stability, deposit pricing and the company’s increased reliance on wholesale and Federal Home Loan Bank funding.
- Review the securities portfolio’s unrealized losses, liquidity needs, and potential impact if securities must be sold.
- Track nonaccrual and criticized loans, especially healthcare and energy exposures, and office and other commercial real estate performance.
- Separate recurring earnings from the insurance-sale gain, FDIC special assessment, securities repositioning losses and market-sensitive trading and deferred-compensation results.
- Verify capital and liquidity capacity alongside planned dividends and share repurchases, and monitor the cited legal contingencies.