Aided by growth in mortgage banking revenue and commercial loan,
BOK Financial Corporation ( BOKF )
posted third-quarter 2012 earnings of $1.27 per share, well above
the Zacks Consensus Estimate of $1.21.
Though BOK Financial's results in the quarter under review were
below the prior-quarter earnings of $1.43 per share, it surpassed
the year-ago earnings of $1.24 per share.
Net income attributable to BOK Financial shareholders in the
reported quarter was $87.4 million, compared with $97.6 million in
the prior quarter and $85.1 million in the prior-year
Notably, in the prior quarter BOK Financial experienced a gain on
the sale of common stock, obtained in settlement of a defaulted
loan and a negative provision for credit losses. This led to an
elevation in net income by $14 million or 21 cents per share in the
Quarter in Detail
BOK Financial's net interest revenue totaled $176.0 million in the
reported quarter, down 3% sequentially. Net interest margin fell 18
basis points (bps) from 3.30% in the prior quarter to 3.12% in the
reported period. Notably, excluding the full recovery of a
nonaccruing commercial loan, net interest margin for the second
quarter was 3.25%.
With the cash flows being reinvested at lower rates, the yield
on its securities portfolio continued to fall. Average earning
assets also advanced $1.2 billion during the reported
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BOK Financial's fees and commissions revenue amounted to $166.3
million, escalating 8% sequentially. Results were aided by a 27%
increase in mortgage banking revenue. The company experienced
record mortgage loan production volumes and improved pricing of
Total operating expenses at BOK Financial were $222.3 million,
nearly flat sequentially. Excluding changes in the fair value of
mortgage servicing rights, operating expenses totaled $212.8
million, up $1.2 million or less than 1% sequentially. The company
experienced an elevation in both personnel costs as well as
non-personnel expenses in the reported quarter from the prior
The credit quality of BOK Financial's loan portfolio produced
improved results. Nonperforming assets totaled $264 million or
2.21% of outstanding loans and repossessed assets as of September
30, 2012, down from $279 million or 2.38% of outstanding loans and
repossessed assets as of June 30, 2012.
Net charge-offs amounted to $5.7 million (or 0.19% of average
loans on an annualized basis) in the reported quarter, slightly up
from net charge-offs of $4.8 million (or 0.17%) in the prior
quarter. Notably, third quarter recoveries were reduced by $7.1
million as a result of the refund of a settlement between BOK
Financial and the City of Tulsa.
Further, the combined allowance for credit losses amounted to $236
million or 1.99% of outstanding loans as of September 30, 2012,
declining from $241 million or 2.09% of outstanding loans as of
June 30, 2012.
As a result, BOK Financial recorded no provision for credit losses
in the reported quarter as against an $8.0 million negative
provision for credit losses in the prior quarter.
As of September 30, 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 13.21% and 15.71%, respectively,
down from 13.62% and 16.19%, respectively as of June 30,
Moreover, tangible common equity ratio slightly deteriorated to
9.67% as of September 30, 2012 from 10.07% as of June 30, 2012.
Notably, the decline in Tier 1, total and tangible common equity
ratios was mainly a result of asset growth.
Outstanding loans at BOK Financial as of June 30, 2012 were $11.6
billion, up $256 million from the prior quarter. Augmentation in
commercial loans, commercial real estate and residential mortgage
loans were partially offset by decrease in consumer loans.
Period end deposits amounted to $19.1 billion at September 30,
2012, up from $18.4 billion as of June 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 a cash dividend of
$26 million or 38 cents per share. On October 30, 2012, BOK
Financial's Board of Directors approved a quarterly cash dividend
of 38 cents per share. The dividend will be paid on or about
November 30, 2012 to shareholders of record as of November 16,
Moreover, on October 30, 2012, the Board of Directors approved a
special cash dividend of $1.00 per common share. The dividend
would be paid on or about November 30, 2012 to shareholders of
record as of November 16, 2012.
The strategic expansions and local-leadership based business model
of BOK Financial, with peers such as Texas Capital
Bancshares Inc. ( TCBI )
and First Financial Bankshares Inc. ( FFIN ),
have aided its transformation 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.
Moreover, in August, 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 fee-based
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 to navigate through the
The shares of BOK Financial currently retain a Zacks #2 Rank,
which translates into a short-term Buy rating.