BOK Financial Corporation
) first-quarter 2013 earnings of $1.28 per share surpassed the
Zacks Consensus Estimate by 10 cents. Moreover, results came
above the prior-quarter earnings of $1.21.
Better-than-expected results were aided by reduced operating
expenses, reflecting disciplined expense management. Moreover,
reduced net charge-offs and strong capital ratios were the
tailwinds. On the other hand, lower net interest revenues and
condensed mortgage banking revenues were the negatives for the
Net income attributable to the shareholders of BOK Financial in
the reported quarter was $88 million, compared with $83 million
in the prior quarter.
Quarter in Detail
BOK Financial's net interest revenues totaled $170.4 million in
the reported quarter, down 1.7% sequentially. Net interest margin
fell 3 basis points from 2.95% in the prior quarter to 2.92% in
the reported period.
With cash flows being reinvested at lower rates, the yield on its
securities portfolio continued to decline. Yield on average
earning assets also dipped 6 basis points sequentially. Moreover,
loan yields decreased 13 basis points, partially mitigated by
lower funding costs.
BOK Financial's fees and commissions revenue amounted to $158.1
million, down 4.6% on a sequential basis. Reduced mortgage
banking revenues due to lower volume and lessened pricing of
loans sold along with low deposit service charges and fees led to
Though mortgage banking revenues were down from the high levels
in the second half of 2012, management expects revenues to remain
strong in 2013. Notably, first quarter 2013 mortgage originations
were up $209 million or 28% year over year.
Total operating expenses at BOK Financial were $201.3 million,
down 9.4% sequentially. Excluding changes in the fair value of
mortgage servicing rights, operating expenses totaled $204.0
million, down 10% sequentially. The company experienced a
reduction in both personnel costs and non-personnel expenses in
the reported quarter compared with the prior quarter.
The credit quality of BOK Financial's loan portfolio produced
mixed results. Nonperforming assets totaled $283 million or 2.32%
of outstanding loans and repossessed assets as of Mar 31, 2013,
up from $277 million or 2.23% of outstanding loans and
repossessed assets as of Dec 31, 2012.
Yet, net charge-offs amounted to $2.4 million (or 0.08% of
average loans on an annualized basis) in the reported quarter,
down from net charge-offs of $4.3 million (or 0.14%) in the prior
Further, the combined allowance for credit losses amounted to
$207 million or 1.71% of outstanding loans as of Mar 31, 2013,
declining from $217 million or 1.77% of outstanding loans as of
Dec 31, 2012.
As a result, BOK Financial recorded negative provision for credit
losses of $8 million in the reported quarter as against negative
provision for credit losses of $14 million in the prior quarter.
As of Mar 31, 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 13.35% and 15.68%, respectively, up
from 12.78% and 15.13%, respectively as of Dec 31, 2012.
BOK Financial's Tier 1 common equity ratio under existing Basel I
standards was 13.16% as of Mar 31, 2013. Further, estimated Tier
1 common equity ratio under a fully phased in Basel III framework
is about 12.70%, nearly 570 basis points above the 7% regulatory
Outstanding loans at BOK Financial as of Mar 31, 2013 were $12.1
billion, down $218 million from the prior quarter, mainly due to
a decline in commercial loans. Further, elevated commercial real
estate loans were offset by lower residential mortgage and
Period end deposits amounted to $19.9 billion as of Mar 31, 2013,
down from $21.2 billion as of Dec 31, 2012. Reduction in
interest-bearing transaction accounts and demand deposit accounts
along with lower time deposits led to the dip.
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 a quarterly
cash dividend of 38 cents per share. The dividend will be paid on
or around May 31, 2013 to shareholders of record as of May 17,
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 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 enjoys 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 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 #2 (Buy).
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