With no rebound in oil prices on the horizon, BOK Financial in Tulsa, Okla., appears, to be hunkering down for a prolonged slump.
The $31.5 billion-asset company disclosed Wednesday that it expects to add between $60 million to $80 million to loan loss reserves in 2016.
That forecast follows the $22.5 million fourth-quarter provision BOK recorded after downgrading a large shared national credit in its energy portfolio earlier this month. Large, energy-related additions to reserves are becoming de rigueur among energy lenders. BOK joins a list that includes the $28.3 billion-asset Cullen/Frost Bankers in San Antonio and the $20 billion-asset Hancock Holding in Gulfport, Miss., as well as JPMorgan Chase.
BOK's quarterly profit of $59.6 million was down 20.4% from the fourth quarter of 2014, but its earnings of $288.6 million for the full year were off just 1% from the previous year. Ongoing energy-sector tumult overshadowed what was "on balance a successful and profitable year," Chief Executive Steven G. Bradshaw said during a conference call with analysts.
"Profitability was solid; we grew loans, assets under management and revenue from fee-generating businesses; and expense growth was well-controlled all year long," he said.
Though virtually all of the questions BOK's management team fielded during the hourlong call focused on the present condition and future prospects of the company's $3.1 billion energy portfolio, Bradshaw sought to position the spotlight on the growing diversity in its balance sheet. BOK reported a 10% increase, to $71 billion, in assets under management and 29% growth, to $1.9 billion, in its health care lending portfolio. It also saw significant growth in Kansas City and Arizona, markets with virtually no exposure to energy, Bradshaw noted.
BOK reported loans totaling $1.19 billion in Arizona and $795 million in Kansas City as of Dec. 31.
The company expects to close its acquisition of the $645 million-asset MBT Bancshares in Kansas City around the end of the second quarter. Bradshaw predicted it would position BOK to take off there.
"While at first blush the [MBT] acquisition may seem modest from an earnings-per-share contribution standpoint, it is consistent with how we have built BOK Financial," Bradshaw said. "We are very optimistic that the sum of the parts in Kansas City is a game-changer for us."
Bradshaw's emphasis on diversification is similar to the argument Dallas-based Comerica made when it reported earnings last week. The $72 billion-asset company touted its expansion in California, offsetting at least in part the $27 million of energy loans charged off in the fourth quarter.
That is not to say BOK is backing away from its commitment to the energy business. The company expects payoffs to reduce the size of the energy portfolio in 2016, but Bradshaw said it is still willing to lend to qualified borrowers.
Indeed, during the fourth quarter, BOK made a $218 million energy loan to a "well-secured, well-rated borrower," according to Stacy C. Kymes, the company's executive vice president for corporate banking.
Earlier this month, BOK paid an undisclosed sum to acquire E-Spectrum Advisors, a boutique energy investment banking firm based in Dallas. According to BOK, E-Spectrum has closed more than 150 deals with an aggregate value in excess of $10 billion since opening its doors in 1997.
"We're still in this business," Bradshaw said.
BOK took much of the sting out of its disappointing fourth-quarter earnings earlier this month, when it reported the downgrade of the shared national energy credit and indicated a major provision would follow. The company's stock was up more than 2% to $47.96 in midday trading.
As of Dec. 31, BOK reported nonaccrual energy loans totaling $61 million. Total nonaccrual loans totaled $147.2 million, or 0.92% of total loans.