BOK Financial Corporation
) second-quarter 2013 earnings of $1.16 per share lagged the
Zacks Consensus Estimate by 6 cents. Moreover, results compared
unfavorably with the prior-quarter earnings of $1.28.
Lower-than-expected results were aided by lower net interest
revenues. However, reduced operating expenses reflect disciplined
expense management. Further, reduced net charge-offs, fee revenue
growth and increased loans were the tailwinds.
Net income attributable to the shareholders of BOK Financial in
the reported quarter was $79.9 million, compared with $88 million
in the prior quarter.
Quarter in Detail
BOK Financial's net interest revenues totaled $167.2 million in
the reported quarter, down 1.9% sequentially. Net interest margin
fell 11 basis points from 2.92% in the prior quarter to 2.81% 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 13 basis points sequentially.
Moreover, loan yields decreased 8 basis points, partially
mitigated by lower funding costs.
BOK Financial's fees and commissions revenue amounted to $160.9
million, up 1.8% on a sequential basis. Reduced mortgage banking
revenues were offset by elevated transaction card revenues and
higher deposit service charges and fees.
Total operating expenses at BOK Financial were $196.6 million,
down 2.3% sequentially. Excluding changes in the fair value of
mortgage servicing rights, operating expenses totaled $210.9
million, up 3.4% sequentially. The company experienced a rise 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 improved in
the quarter. Nonperforming assets totaled $281 million or 2.24%
of outstanding loans and repossessed assets as of Jun 30, 2013,
down from $283 million or 2.32% of outstanding loans and
repossessed assets as of Mar 31, 2013.
Net charge-offs amounted to $2.3 million (or 0.08% of average
loans on an annualized basis) in the reported quarter, down from
net charge-offs of $2.4 million (or 0.08%) in the prior quarter.
Further, the combined allowance for credit losses amounted to
$205 million or 1.65% of outstanding loans as of Jun 30, 2013,
declining from $207 million or 1.71% of outstanding loans as of
Mar 31, 2013.
As a result, BOK Financial recorded no provision for credit
losses as against a negative provision for credit losses of $8
million in the prior quarter.
As of Jun 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 13.37% and 15.28%, respectively,
compared with 13.35% and 15.68%, respectively as of Mar 31, 2013.
BOK Financial's Tier 1 common equity ratio under existing Basel I
standards was 13.19% compared with 13.16% in the prior quarter.
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 12.20%, up 520 basis points from the 7% regulatory
Outstanding loans at BOK Financial as of Jun 30, 2013 were $12.4
billion, up $347 million from the prior quarter, mainly due to a
rise in commercial loans. Further, elevated commercial real
estate loans and residential mortgage loans increased while
consumer loans remained stable.
Period end deposits amounted to $19.5 billion as of Jun 30, 2013,
down from $19.9 billion as of Mar 31, 2013. Reduction in
interest-bearing transaction accounts along with lower time
deposits led to the decline.
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 Aug 30, 2013 to shareholders of record as of Aug 16,
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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