BOK Financial Corporation — FY2022 Form 10-K
Reporting period: Year ended December 31, 2022; the filing also reports fourth-quarter results. BOK Financial is a regional financial holding company operating across eight states, with commercial banking, consumer banking and wealth management businesses. It reported $47.8 billion in consolidated assets at year-end.
Key financial results
| Metric | FY2022 | FY2021 | Change / context |
|---|---|---|---|
| Net income attributable to BOK Financial shareholders | $520.3 million | $618.1 million | Down 15.8% |
| Diluted EPS | $7.68 | $8.95 | Down 14.2% |
| Net interest revenue | $1.211 billion | $1.118 billion | Up $93.3 million |
| Net interest margin | 2.98% | 2.60% | Higher rates and faster repricing of variable-rate loans supported expansion |
| Fees and commissions | $657.2 million | $668.3 million | Down 1.7%; mortgage banking weakness offset by growth in trading and fiduciary revenue |
| Total other operating revenue | $643.3 million | $755.8 million | Down 14.9%, including lower prior-year asset-sale gains and weaker mortgage revenue |
| Operating expenses | $1.164 billion | $1.178 billion | Down 1.1% |
| Provision for credit losses | $30.0 million | $(100.0) million | Shifted from reserve release to provision |
Balance sheet, liquidity and capital
- Total assets were $47.8 billion, down from $50.2 billion. Loans grew $2.4 billion to $22.6 billion; deposits fell $6.8 billion to $34.5 billion. Average deposits were nearly flat at $37.9 billion.
- The loan-to-deposit ratio rose to 65% from 49%. Management attributed deposit outflows primarily to clients moving funds to higher-yielding, off-balance-sheet alternatives. Year-end borrowings included $4.7 billion of other borrowings, primarily Federal Home Loan Bank advances, and $2.3 billion of repurchase agreements and funds purchased.
- Management reported approximately $12.5 billion of estimated unused credit available from collateralized sources. The parent company held $165 million of cash; subsidiary-bank dividends available without regulatory approval were estimated at $227 million, subject to capital and regulatory limits.
- Consolidated CET1, Tier 1, total capital and leverage ratios were 11.69%, 11.71%, 12.67% and 9.91%, respectively. Shareholders’ equity declined to $4.68 billion from $5.36 billion, largely reflecting a $909 million after-tax other comprehensive loss.
- Cash and cash equivalents decreased $1.44 billion to $1.40 billion. Operating cash flow was $5.12 billion, investing cash flow was negative $4.60 billion and financing cash flow was negative $1.95 billion. Operating cash flow was substantially affected by changes in trading securities and should be read alongside the cash flow statement’s detailed components.
- The company declared $2.13 per share in dividends and repurchased 1.63 million shares for $154.9 million during 2022.
Material changes and business drivers
- Seven Federal Reserve rate increases totaled 425 basis points during 2022. Higher rates boosted net interest revenue, while increasing funding costs and prompting deposit movement. Fourth-quarter net income was $168.4 million, or $2.51 per diluted share; net interest margin reached 3.54%.
- Mortgage banking revenue fell 53% to $49.4 million as higher mortgage rates and limited housing inventory reduced originations. Mortgage production volume declined $1.6 billion, and production revenue as a share of volume was negative 0.17%.
- Brokerage and trading revenue rose 25% to $141.0 million; fiduciary and asset management revenue increased 10% to $196.3 million. Assets under management or administration declined to $99.7 billion, primarily from market-value declines.
- Commercial banking net income increased 40% to $460.4 million. Consumer banking net income fell to $5.9 million, mainly reflecting weaker mortgage production. Wealth management net income declined 6% to $106.2 million.
- Gross unrealized losses on available-for-sale securities were $894 million, versus $114 million a year earlier. Management attributed the losses to interest-rate changes, reported no identified credit impairment, and stated it did not expect to be required to sell impaired securities before recovery or maturity. The company transferred $2.4 billion of agency mortgage-backed securities from available for sale to held to maturity; a pretax unrealized loss of $268 million remained in accumulated other comprehensive income and is amortized over time.
Outlook, risks and unusual items
- The filing provides economic assumptions for credit-loss estimation, not earnings guidance. Its base case assumed below-trend growth, GDP growth of 0.9% over 12 months, unemployment rising to 4.1% by late 2023, and WTI averaging $75.05 per barrel. The downside case assigned a 40% probability and assumed recession, GDP contraction of 1.3%, unemployment reaching 6.0%, and WTI averaging $65.87.
- The combined allowance for loan losses and off-balance-sheet credit risk was $296.6 million, or 1.31% of loans. Management cited loan and commitment growth and greater forecast uncertainty; a 100%-downside scenario would add $117 million to the modeled reserve relative to a 100%-base scenario, according to its sensitivity analysis.
- Key exposures include energy lending (15% of loans), regional concentrations (32% Texas, 16% Oklahoma and 11% Colorado), commercial real estate commitments, interest-rate sensitivity, deposit repricing and mortgage-related fair-value risk. The company is asset-sensitive, but results depend on actual deposit behavior and rates.
- Other identified risks include cybersecurity and third-party technology disruptions, competition, inflation, regulatory changes, climate-related risks, and the transition of LIBOR-linked contracts. Management said the expected economic effect of LIBOR transition was minimal and described steps toward SOFR and other replacement rates.
- Consumer overdraft and non-sufficient-funds fee changes implemented in Q4 were expected to reduce deposit service charges by approximately $10 million in 2023. The FDIC’s 2-basis-point increase in initial assessment rates took effect January 1, 2023.
- Legal matters include stayed and pending bondholder litigation; management said a loss was not probable and could not be reasonably estimated in the Oklahoma action. A Colorado fiduciary-duty case was settled in January 2023 at no cost beyond defense costs. The filing reports unqualified audit opinions and effective internal control over financial reporting.
Important facts for investors to verify
- How deposit balances and funding costs evolved after year-end, including reliance on FHLB advances and the availability and terms of contingent liquidity.
- Whether higher rates continue to support net interest margin as deposit costs reprice, and how the disclosed rate-sensitivity scenarios compare with actual outcomes.
- Credit quality and reserve adequacy, especially in energy, healthcare, commercial real estate and unfunded commitments; review the downside-scenario assumptions and nonperforming-loan trends.
- The size, duration and capital implications of securities unrealized losses, including the held-to-maturity portfolio and accumulated other comprehensive loss.
- Mortgage banking recovery prospects, mortgage servicing rights valuation assumptions and the expected impact of lower consumer deposit fees.
- Progress on LIBOR contract conversion, pending litigation developments, and execution of the share-repurchase authorization.