BOK Financial Corporation
) third-quarter 2013 earnings of $1.10 per share lagged the Zacks
Consensus Estimate by a nickel. Moreover, results compared
unfavorably with the prior-year quarter earnings of $1.27.
Lower-than-expected results came on the back of lower net
interest revenues and reduced fees and commissions. However,
reduced operating expenses reflect disciplined expense
management. Further, reduced net charge-offs, surge in deposits
and increased loans were the tailwinds.
Net income attributable to the shareholders of BOK Financial in
the reported quarter was $75.7 million, compared with $87.4
million in the prior-year quarter.
Quarter in Detail
BOK Financial's net interest revenues totaled $166.4 million in
the reported quarter, down 5.5% year over year. Net interest
margin fell 32 basis points from 3.12% in the prior-year quarter
to 2.80% in the reported period.
Yield on average earning assets also declined 38 basis points
year over year. Moreover, loan yields decreased 27 basis points,
partially mitigated by lower funding costs.
BOK Financial's fees and commissions revenue amounted to $146.8
million, down 11.6% on a year-over-year basis. Reduced mortgage
banking revenues and lower deposit service charges and fees were
partially offset by elevated transaction card revenues and higher
brokerage and trading revenue.
Total operating expenses at BOK Financial were $210.6 million,
down 5.3% year over year. Excluding changes in the fair value of
mortgage servicing rights, operating expenses totaled $210.3
million, down 1.1% year over year. The company experienced a rise
in personnel costs in the reported quarter compared with the
The credit metrics of BOK Financial's loan portfolio was a mixed
bag in the reported quarter. Net charge-offs amounted to $0.3
million (or 0.01% of average loans on an annualized basis) in the
reported quarter, down from net charge-offs of $5.7 million (or
0.19%) in the prior-year quarter.
Further, the combined allowance for credit losses was 1.59% of
outstanding loans as of Sep 30, 2013, declining from 1.99% of
outstanding loans as of Sep 30, 2012. As a result, BOK Financial
recorded negative provision for credit losses of $8.5 million as
against no provision for credit losses in the prior-year quarter.
However, nonperforming assets totaled $271.1 million or 2.18% of
outstanding loans and repossessed assets as of Sep 30, 2013, up
from $264.0 million or 2.21% of outstanding loans and repossessed
assets as of Sep 30, 2012.
As of Sep 30, 2013, 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 13.51% and 15.35%, respectively,
compared with 13.21% and 15.71%, respectively as of Sep 30, 2012.
BOK Financial's Tier 1 common equity ratio under existing Basel I
standards was 13.33% compared with 13.01% 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
stood at 12.35%, up 535 basis points from the 7% regulatory
Outstanding loans at BOK Financial as of Sep 30, 2013 were $12.4
billion, up 5.1% year over year, mainly due to a rise in
commercial loans. Further, commercial real estate loans, consumer
loans and residential mortgage loans increased.
Period end deposits amounted to $19.5 billion as of Sep 30, 2013,
up from $19.1 billion as of Sep 30, 2012. Increase in
interest-bearing transaction accounts along with higher demand
deposits mainly led to the rise.
During the reported quarter, the company paid cash dividend of
$26 million or 38 cents per share.
Concurrent with the press release, BOK Financial's board of
directors approved an increase in the quarterly cash dividend to
40 cents per share. This reflects a 5% increase in dividend over
the last dividend paid. The hiked dividend will be paid on or
around Nov 29, 2013 to shareholders of record as of Nov 16, 2013.
The strategic expansions and local-leadership based business
model of BOK Financial, with peers such as
Texas Capital Bancshares Inc.
Metrocorp 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 and favorable geographic
footprint would support its growth.
Though regulatory issues and risks emanating from its private
label mortgage backed securities portfolio 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).
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