BOK Financial Corporation
) fourth-quarter 2012 earnings of $1.21 per share missed the
Zacks Consensus Estimate by 5 cents. Moreover, results were below
the prior-quarter earnings of $1.27.
Reduced net interest revenue and lower mortgage banking revenue
were the negatives for the quarter. Moreover, elevated operating
expenses were a dampener. Yet, reduced net charge-offs and strong
capital ratios were the tailwinds.
Net income attributable to the shareholders of BOK Financial in
the reported quarter was $82.6 million, compared with $87.4
million in the prior quarter.
For full year 2012, net income was $351.2 million or $5.13 per
share, compared with $285.9 million or $4.71 per share in the
prior year. Yet, full year earnings missed the Zacks Consensus
Estimate by 7 cents per share.
Quarter in Detail
BOK Financial's net interest revenues totaled $173.4 million in
the reported quarter, down 1.5% sequentially. Net interest margin
fell 17 basis points (bps) from 3.12% in the prior quarter to
2.95% in the reported period.
With cash flows being reinvested at lower rates, the yield on its
securities portfolio continued to fall. Yield on average earning
assets also dipped 17 basis points sequentially.
BOK Financial's fees and commissions revenue amounted to $165.8
million, down slightly on a sequential basis. Elevated revenues
from the acquisition during the third quarter were offset by
reduced mortgage banking revenues. Moreover, record mortgage loan
production volume during the reported quarter was mitigated by a
seasonal decline in mortgage loan commitments and loans held for
Total operating expenses at BOK Financial were $222.1 million,
nearly flat sequentially. Excluding changes in the fair value of
mortgage servicing rights, operating expenses totaled $226.8
million, up 6.6% sequentially. The company experienced an
elevation in both personnel costs as well as non-personnel
expenses in the reported quarter from the prior quarter.
The credit quality of BOK Financial's loan portfolio produced
mixed results. Nonperforming assets totaled $277 million or 2.23%
of outstanding loans and repossessed assets as of Dec 31, 2012,
up from $264 million or 2.21% of outstanding loans and
repossessed assets as of Sep 30, 2012. Results include the impact
of regulatory guidance that primarily affected residential
Yet, net charge-offs amounted to $4.3 million (or 0.14% 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
Further, the combined allowance for credit losses amounted to
$217 million or 1.77% of outstanding loans as of Dec 31, 2012,
declining from $236 million or 1.99% of outstanding loans as of
Sep 30, 2012.
As a result, BOK Financial recorded negative provision for credit
losses of $14 million in the reported quarter as against no
provision for credit losses in the prior quarter.
As of Dec 31, 2012, armed with strong capital ratios, BOK
Financial and its subsidiary banks exceeded the regulatory
definition of well capitalized. However, as of the same date,
Tier 1 and total capital ratios were 12.78% and 15.13%,
respectively, down from 13.21% and 15.71%, respectively as of Sep
Moreover, tangible common equity ratio slightly deteriorated to
9.25% as of Dec 31, 2012 from 9.67% as of Sep 30, 2012. Notably,
the decline in Tier 1, total and tangible common equity ratios
was mainly a result of special dividend payment in the fourth
Outstanding loans at BOK Financial as of Dec 31, 2012 were $12.3
billion, up $479 million from the prior quarter. Augmentation in
commercial loans, commercial real estate, consumer loans and
residential mortgage loans drove the increase.
Period end deposits amounted to $21.2 billion as of Dec 31, 2012,
up from $19.1 billion as of Sep 30, 2012. Elevation in
interest-bearing transaction accounts and demand deposit accounts
were partly offset by a fall in time deposits.
During the reported quarter, the company paid cash dividend of
$26 million or 38 cents per share and a special cash dividend of
$68 million or $1.00 per share. On Jan 29, 2013, BOK Financial's
board of directors approved a quarterly cash dividend of 38 cents
per share. The dividend will be paid on or about Mar 1, 2013 to
shareholders of record as of Feb 15, 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.
), have helped it transform into a leading financial service
provider from a small bank in Okla. Going forward, we believe BOK
Financial's diverse revenue mix and favorable geographic
footprint would support its growth.
Moreover, in Aug 2012, BOK Financial announced the acquisition of
Denver-based The Milestone Group Inc., a wealth management firm.
The acquisition by BOK Financial demonstrates its aim of
diversifying its revenue opportunities by augmenting its
Having strengthened its foothold over the years through its local
bank brand, Colorado State Bank and Trust, BOK Financial has a
robust presence in Denver. Therefore, with the acquisition of
Milestone Group, the company will further consolidate its
foothold in Denver with the help of the acquired firm's wealth
management brand and proficiency.
Though regulatory issues and risks emanating from its private
label mortgage backed securities portfolio remain a concern, 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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