Business Overview
BOK Financial Corporation (NASDAQ:BOKF) is a leading regional financial services company that has steadily built a reputation for its strong financial performance, prudent risk management, and diversified business model. Headquartered in Tulsa, Oklahoma, the company has established a prominent presence across the southwest region of the United States, providing a comprehensive range of banking, wealth management, and other financial solutions to its customers.
BOK Financial Corporation was incorporated in the state of Oklahoma in 1990, but its roots trace back to 1910 when the Bank of Oklahoma was founded in Tulsa. The company's activities are governed by the Bank Holding Company Act, as amended by the Financial Services Modernization Act and the Dodd-Frank Act. BOK Financial operates full-service banking in Oklahoma, Texas, New Mexico, Northwest Arkansas, Colorado, Arizona, and Kansas/Missouri.
BOKF, NA, a wholly-owned subsidiary bank, is the core of BOK Financial's operations. It operates the TransFund electronic funds network and Cavanal Hill Investment Management. BOKF, NA has banking divisions across eight states - Bank of Albuquerque, Bank of Oklahoma, Bank of Texas and BOK Financial in Arizona, Arkansas, Colorado, Kansas, and Missouri, as well as limited purpose offices in other states.
Throughout its history, BOK Financial has faced and overcome several challenges. In the early 2000s, the company successfully navigated the economic volatility caused by the dot-com bubble burst and the 9/11 attacks. During the 2008 financial crisis, BOK Financial demonstrated its resilience by effectively managing credit risk and maintaining capital levels amidst a difficult operating environment.
A key milestone in BOK Financial's history was its expansion beyond Oklahoma. In the 1990s and 2000s, the company strategically expanded into neighboring states, including Texas, Colorado, and Arizona, to diversify its geographic footprint and capitalize on growing markets. This expansion transformed BOK Financial into a regional banking powerhouse, broadening its range of financial services across the Southwest.
Another significant development in the company's history was its investment in technology and digital banking capabilities. Recognizing the shift in customer preferences towards online and mobile banking, BOK Financial made substantial investments to enhance its digital offerings and improve the customer experience. This strategic move has enabled the company to remain competitive and meet the evolving needs of its client base.
The company's core business segments include Commercial Banking, Consumer Banking, and Wealth Management. The Commercial Banking division offers lending, treasury and cash management services, and customer risk management products to small businesses, middle-market, and larger commercial customers. The Consumer Banking segment provides retail lending and deposit services, as well as mortgage banking activities. The Wealth Management division offers fiduciary services, private banking, and investment advisory services across all of BOK Financial's markets.
Financial Performance and Ratios
BOK Financial has consistently demonstrated strong financial performance, showcasing its ability to navigate various economic environments. In the fiscal year ended December 31, 2024, the company reported net income of $523.6 million, or $8.14 per diluted share, compared to $530.7 million, or $8.02 per diluted share, in the prior year. The company's return on average assets was 1.03% in 2024, while its return on average equity stood at 9.82%.
The company's balance sheet remains well-capitalized, with a common equity Tier 1 capital ratio of 13.03% and a total capital ratio of 14.21% as of December 31, 2024. BOK Financial's tangible common equity ratio, a key metric for assessing a bank's financial strength, was 9.17% at the end of 2024, placing it among the top-performing regional banks in the industry.
For the fiscal year 2024, BOK Financial reported annual revenue of $1.94 billion, annual net income of $523.6 million, annual operating cash flow of $1.43 billion, and annual free cash flow of $1.43 billion. In the most recent quarter (Q4 2024), the company reported revenue of $432.7 million and net income of $136.2 million. Year-over-year growth in revenue was 4.3%, while net income grew by 64.9%. This growth was driven by higher loans and deposit balances, an increase in net interest revenues and total fees and commissions, and a decline in provisions and expenses.
Loan Portfolio and Credit Quality
BOK Financial's loan portfolio is well-diversified, with commercial loans accounting for 62% of the total, followed by loans to individuals at 17% and commercial real estate loans at 21% as of December 31, 2024. The company has maintained a strong credit profile, with nonperforming assets (excluding those guaranteed by the U.S. government) at just 0.18% of total assets at the end of 2024, a significant improvement from the prior year's 0.58%.
The company's net charge-off ratio for the full year 2024 was just 0.05%, reflecting its prudent underwriting practices and effective risk management strategies. This level of credit quality places BOK Financial among the top performers in the regional banking industry, a testament to the company's disciplined approach to lending and its deep understanding of its local markets.
Diversified Revenue Streams
BOK Financial's business model is characterized by a well-balanced revenue mix, with a significant contribution from fee-based businesses. In 2024, the company's fees and commissions revenue accounted for 40% of its total revenue, a testament to the strength of its wealth management, brokerage, and other fee-generating activities.
The company's fee income sources include brokerage and trading revenue, transaction card revenue, fiduciary and asset management revenue, deposit service charges and fees, and mortgage banking revenue, among others. This diversification helps BOK Financial mitigate the impact of fluctuations in net interest income, providing a more stable and resilient revenue stream.
Geographic Footprint and Growth Initiatives
BOK Financial's geographic footprint is primarily concentrated in the southwest region of the United States, with a strong presence in Oklahoma, Texas, and Colorado. The company has strategically expanded its reach in recent years, with a particular focus on growing its commercial banking and wealth management businesses in markets like Texas and Arizona.
In 2024, the company reported year-over-year growth of 8.1% in its core commercial and industrial (C&I) loan portfolio, driven by its targeted investments in talent and infrastructure in key markets. The Texas market, in particular, saw a 9.8% increase in C&I loans during the year, underscoring the company's successful efforts to capitalize on the region's economic strength and growing demand for financial services.
Liquidity
BOK Financial maintains a strong liquidity position, which is crucial for ensuring the bank's ability to meet its financial obligations and navigate potential market disruptions. The company's liquidity management strategy focuses on maintaining diverse funding sources, including core deposits, wholesale funding, and access to various credit facilities. This approach provides BOK Financial with the flexibility to adapt to changing market conditions and capitalize on growth opportunities while maintaining a robust financial foundation.
As of December 31, 2024, BOK Financial reported a debt-to-equity ratio of 0.57 and cash and cash equivalents of $1.43 billion. The company has a total potential secured borrowing capacity of approximately $27.5 billion, including $22.9 billion in current available secured capacity from the Federal Home Loan Banks and Federal Reserve Banks, and an estimated $4.6 billion from other sources.
Business Segments Performance
BOK Financial operates three principal business segments: Commercial Banking, Consumer Banking, and Wealth Management.
The Commercial Banking segment contributed $653.4 million to consolidated net income before taxes in 2024, a decrease of 9% compared to the prior year. Net interest income and fee revenue for this segment decreased 7% primarily due to a shift in deposit balances from demand to interest-bearing accounts along with decreased spreads. Average loans attributed to this segment grew 4% to $20.2 billion, while average deposits increased 9% to $16.8 billion.
The Consumer Banking segment contributed $112.2 million to consolidated net income before taxes in 2024, a 5% increase over the prior year. Net interest income decreased 3%, largely due to increased customer demand for time deposits and a decrease in deposit spreads. Other operating revenue increased 32%, primarily due to higher mortgage banking revenue. Average loans in this segment grew 12% to $2.0 billion, while average deposits increased 1% to $8.1 billion.
The Wealth Management segment contributed $156.8 million to consolidated net income before taxes in 2024, a 29% decrease compared to the prior year, which included a $31.0 million pre-tax gain on the sale of the BOKF Insurance business. Average loans in this segment were relatively flat at $2.2 billion, while average deposits grew 25% to $9.7 billion.
Outlook and Risks
BOK Financial's management has provided a positive outlook for the company's performance in 2025, with expectations of mid-to-upper single-digit growth in both net interest income and fee-based revenue. The company anticipates loan balance growth, reflecting its strong track record of growing C&I and specialty lending businesses. Total revenue growth is expected to be in the mid to upper-single digit range, with net interest income growth projected to be above single digits. Fees and commissions growth is anticipated to be in the lower single digit range, affected by a trading revenue mix shift.
The company assumes two Federal Reserve interest rate cuts during 2025, with long-term rates staying relatively flat and the yield curve improving modestly. BOK Financial expects continued well-controlled charge-offs given the low level of non-performing assets.
However, the company is not without its risks. Factors such as interest rate fluctuations, changes in the competitive landscape, regulatory scrutiny, and potential regional economic downturns could all pose challenges to BOK Financial's financial performance. The company's significant exposure to the energy and commercial real estate sectors also warrants close monitoring, as these industries can be susceptible to cyclical downturns.
Conclusion
BOK Financial Corporation has established itself as a stalwart regional bank, delivering consistent financial performance and maintaining a strong reputation for prudent risk management. The company's diversified business model, geographic footprint, and focus on fee-based revenue streams have enabled it to navigate various economic conditions and position itself for continued growth. With a strong track record of loan and deposit growth, and a robust liquidity position, BOK Financial is well-positioned to capitalize on opportunities in its core markets. While challenges and risks remain, BOK Financial's track record of excellence and its commitment to serving the financial needs of its customers make it a compelling investment opportunity for those seeking exposure to the regional banking sector.