“A lot of banks were getting out of the mortgage business and independent firms were closing up because risk was elevated—but the returns were being elevated in that space as well,” he says. “We saw that as an opportunity to jump in and, as a result, we tripled that business. It went from being almost nonexistent in terms of earnings for us to accounting for 15 percent of our earnings by 2012 and about 13 percent last year.” However, things were not quite as rosy when Bradshaw first joined BOK back in 1991.
“George is an amazing entrepreneur. He had a bold vision for the bank—and you know what? It was right.”
Just a year prior, the Tulsa, Oklahoma-based business had faltered and been placed into Federal Deposit Insurance Corporation receivership. Concerned that the bank would get gobbled up, depriving Oklahoma energy businesses of their go-to financial institution, wealthy local oilman George Kaiser bought it himself for about $60 million.
“George is an amazing entrepreneur,” recalls Bradshaw, who sold his own small retail securities firm to Kaiser and joined BOK to help it establish a new consumer investment business.
“He had a bold vision for the bank—and you know what? It was right.” Under Kaiser’s ownership, BOK set its sights on expanding into neighboring markets. The bank now operates in Oklahoma, New Mexico, Arizona, Arkansas, Texas, Colorado, Kansas, Missouri and Utah. Today, it is a $27.4 billion corporation providing commercial and consumer banking, investment and trust services, mortgage origination and servicing, and the TransFund electronic funds transfer network. That general description, however, doesn’t quite capture the bank’s specialty—an expertise in energy lending and a commitment to seeing investments through.
“Typically. when banks have a nonperforming asset, they can’t get rid of it fast enough,” explains Bradshaw. “Our approach is to work it internally. We won’t give someone else the opportunity to buy [an asset] at a fire sale price and earn 20 percent or more when we can work it ourselves.”
“We won’t give someone else the opportunity to buy [an asset] at a fire sale price and earn 20 percent or more when we can work it ourselves.”
The result is a balance sheet with more nonperforming assets but fewer charge-offs—and ultimately a better total shareholder return than like-sized peers. BOK also continues to leverage a formidable legacy of serving the energy sector. Kaiser, who made the bulk of his wealth in oil and gas businesses, still owns about two-thirds of BOK.
“Energy producers know that they’re dealing with a bank that understands the business and isn’t going to run for the hills when commodity prices come down,” says Bradshaw. “You’ve got a lot of [energy] operators out there who have been in this business for 30 years and know what it’s like to have a bank suddenly call them up and say, ‘My board is not comfortable; we need to be out.’
We are usually in for the duration. We grew up in the industry and it’s important to us.” In fact, the bank actually has its own dedicated petroleum engineering staff, which evaluates the reserves of clients to provide guidance on loan amounts and terms. That deep understanding of the capabilities of its clients and the energy space has helped the bank remain the lender of choice in Oklahoma and expand into new markets populated by energy producers.
Together those strengths have enabled BOK to deliver 14.42 percent annual return from January 1992 through March 2014. However, like all financial institutions, the bank is now grappling with the cost of complying with intensifying regulatory requirements—which will translate to an estimated incremental expense of between $10 million and $15 million in 2014 alone. Heightened regulatory requirements are also hitting the bank on another front, adds Bradshaw.
“In two years, it will feel like success if we manage to meet all of those heightened requirements, but if we’ve done that and we haven’t grown the bank, that’s not a win. Internally, I’ve been driving home the message that our growth initiatives are just as important as meeting the regulatory expectations.”
To that point, Bradshaw is determined to continue to grow BOK’s share of markets like Texas, where the bank has small footholds in the Dallas/Ft. Worth and Houston markets, and to work toward getting a piece of the expanding healthcare industry market.
“In two years, it will feel like success if we manage to meet all of those heightened requirements, but if we’ve done that and we haven’t grown the bank, that’s not a win.”
“Our part of the country seems to be seeing a disproportionate amount of growth in areas like assisted living, acute surgery, memory care, skilled nursing,” says Bradshaw, who says BOK has been ramping up its governance capabilities around the regulatory elements and underwriting risks specific to the healthcare industry.
“We plan to attack the healthcare industry the same way we do energy. Early returns are positive and it offers a good opportunity for above-market growth.” BOK has also consolidated its investment business and is expanding its sales force and product portfolio. “Most recently, we introduced a new world energy fund,” explains Bradshaw. “If I can lift loan growth and if I can lift asset accumulation in the investment management business where the margins are good, those are my two best levers to continue to grow EPS in an otherwise challenging rate and regulatory environment. So that’s the focus right now.”
WHO: Steve Bradshaw
TITLE: President & CEO
COMPANY: BOK Financial
LOCATION: Tulsa, Oklahoma
SIZE: $27.4 billion
FIRST JOB: Local Federal Savings & Loan
LEISURE INTEREST: Cooking
SPECIALTIES: Risotto, Thai and Indian cuisines
FAVORITE TEAM: Green Bay Packers