BOK Financial Corp. remains committed to energy lending, despite "the longest downturn in the energy industry since the 1980s" and a "volatile interest-rate environment."
An increase in rates following the November election presented a significant drag on the company's earnings, President and CEO Steven Bradshaw said. BOK Financial reported fourth-quarter net income attributable to shareholders of approximately $50.0 million, or 76 cents per share, down approximately 16.1%, compared to $59.6 million, or 89 cents per share, in the year-ago quarter.
Energy sector loans decreased by $23 million from the third quarter of 2016. Still, Bradshaw said the sector is picking up, and that the company has completed a "large number of deals" over the last six months. Potential problem energy loans decreased by $53 million to $308 million from the third quarter. Bradshaw said that the economies in Oklahoma and Texas "have been very resilient, and are strengthening currently."
"We remain committed energy lenders," Bradshaw said. "We're looking for new deals, we're looking to expand relationships with existing customers, and we have a very active energy team that is continuing to look to add to our energy exposure...We're obviously challenged with headwinds, where borrowers who had higher leverage profile are de-leveraging appropriately and using cash flow to pay down outstanding debt."
BOK Financial completed its acquisition of Kansas City, Mo.-based MBT Bancshares Inc. in the fourth quarter. Bradshaw said the company remains open to acquiring banks within its footprint. He said the size of potential targets could grow larger over time as the $32.8 billion company approaches the $50 billion in assets threshold.
"We do see some banks out there that we think would enhance and work with us from a cultural perspective and that appetite hasn't changed," Bradshaw said.
Meanwhile, the company plans to decrease its commercial real estate exposure as it reaches an internal threshold. CRE loans increased by $15 million from the third quarter.
The company reported a $17 million loss in fair value of mortgage servicing rights, net of economic hedges, which it chalked up to market reaction following the presidential election, which reduced earnings per share by 18 cents.
Mortgage banking revenue decreased by $10.1 million, down 26.1% sequentially, which the management said was mainly due to seasonality, as well as a decrease in outstanding loan commitments.