BOK Financial Corporation
) first-quarter 2014 earnings of $1.11 per share surpassed the
Zacks Consensus Estimate by 11 cents. However, results compared
unfavorably with the prior-year quarter earnings of $1.28.
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Reduced operating expenses reflected disciplined expense
management. Further, improved credit quality and increased loans
and deposits were the tailwinds. However, lower net interest
revenues and reduced fees and commissions negatively impacted the
Net income attributable to the shareholders of BOK Financial in
the reported quarter was $76.6 million, compared with $88.0
million in the prior-year quarter.
Performance in Detail
BOK Financial's net interest revenues totaled $162.6 million in
the reported quarter, down 9.4% year over year. Net interest
margin fell 19 basis points from 2.90% in the prior-year quarter
to 2.71% in the reported period.
Yield on average earning assets also declined 22 basis points
year over year. Moreover, loan yields decreased 31 basis points,
partially mitigated by lower funding costs.
BOK Financial's fees and commissions revenue amounted to $140.9
million, down 10.3% on a year-over-year basis. Reduced mortgage
banking and brokerage and trading revenues along with lower
deposit service charges and fees were partially offset by
elevated transaction card revenues.
Total operating expenses at BOK Financial were $185.1 million,
down 9.3% year over year. The company experienced a fall in
personnel costs in the reported quarter compared with the
The credit metrics of BOK Financial's loan portfolio improved in
the reported quarter. Net recoveries amounted to $2.5 million in
the reported quarter compared with net charge-offs of $2.4
million in the prior-year quarter.
Further, the combined allowance for credit losses was 1.45% of
outstanding loans as of Mar 31, 2014, declining from 1.71% as of
Mar 31, 2013. As a result, BOK Financial recorded no provision
for credit losses as against negative $8.0 million in the
Moreover, nonperforming assets totaled $255.7 million or 1.94% of
outstanding loans and repossessed assets as of Mar 31, 2014, down
from $283.3 million or 2.32% of outstanding loans and repossessed
assets as of Mar 31, 2013.
As of Mar 31, 2014, armed with strong capital ratios, BOK
Financial and its subsidiary banks exceeded the regulatory
definition of well capitalized. As of the same date, Tier 1 and
total capital ratios were 13.77% and 15.55%, respectively,
compared with 13.35% and 15.68%, respectively as of Mar 31, 2013.
Leverage ratio was 10.17%, up from 9.28% as of Mar 31, 2013.
BOK Financial's Tier 1 common equity ratio under existing Basel I
standards was 13.59% compared with 13.16% in the prior-year
Notably in Jul 2013, the final revision of regulatory capital
rules for substantially all U.S. banking organizations were
released, effective from Jan 1, 2015. Therefore, based on the new
capital rule, the company's estimated Tier 1 common equity ratio
on a fully phased-in basis stood at 12.60%, up 560 basis points
from the 7% regulatory requirement.
Outstanding loans at BOK Financial as of Mar 31, 2014 were $13.1
billion, up 8.3% year over year, mainly due to a rise in
commercial loans. Further, commercial real estate loans and
residential mortgage loans increased. As of Mar 31, 2014, period
end deposits amounted to $20.4 billion, up from $19.9 billion as
of Mar 31, 2013.
The strategic expansions and local-leadership based business
model of BOK Financial, with peers such as
Texas Capital Bancshares Inc.
First Financial Bankshares Inc.
), helped it transform into a leading financial service provider
from a small bank in Oklahoma. Going forward, we believe BOK
Financial's diverse revenue mix, recent acquisitions and
favorable geographic footprint would support its growth.
Though regulatory issues and lower fee growth remain concerns, we
believe that its sturdy financial position and expense control
initiatives and efficiency will help it navigate through the
BOK Financial currently carries a Zacks Rank #3 (Hold).