Aided by growth in mortgage banking revenue as well as expansion
in all other categories of non-interest revenues,
BOK Financial Corporation
) posted second-quarter 2012 earnings of $1.43 per share, well
above the Zacks Consensus Estimate of $1.13.
The company also reported improvements in credit quality, which
in turn, had a positive impact of 21 cents per share on net income
in the reported quarter.
BOK Financial's results also comfortably outshined prior-quarter
earnings of $1.22 per share and year-ago earnings of $1.00 per
Net income attributable to BOK Financial shareholders in the
reported quarter was $97.6 million compared with $83.6 million in
the prior quarter and $69.0 million in the prior-year quarter. This
represents a sequential growth of 17% and a year-over-year growth
of 41% in net income.
Quarter in Detail
BOK Financial's net interest revenue totaled $181.4 million in
the reported quarter, up 4% sequentially. Net interest margin
advanced 11 basis points (bps) from the prior quarter to 3.30%.
In the reported quarter, net interest revenue included $2.9
million from the complete recovery of a non-accruing commercial
loan. Excluding this recovery, net interest margin advanced 6 bps
to 3.25% in the quarter. Average earning assets also advanced $163
million during the quarter.
BOK Financial's fees and commissions revenue amounted to $154.5
million, up 7% sequentially. Results were aided by a 20% increase
in mortgage banking revenue. Moreover, all other fee-based revenue
sources expanded from the prior quarter.
Total operating expenses at BOK Financial were $223.8 million,
up 21% sequentially. Excluding changes in the fair value of
mortgage servicing rights, operating expenses totaled $212.3
million, up $20.0 million from the prior quarter. The company
experienced an increase in both personnel costs as well as
non-personnel expenses in the reported quarter from the prior
Personnel expenses moved up, primarily due to incentive
compensation, while non-personnel expenses increased mainly due to
higher mortgage banking, repossessed assets and data processing
The credit quality of BOK Financial's loan portfolio produced
improved results. Net charge-offs continued to decline, while other
credit quality indicators continue to recover.
Nonperforming assets totaled $279 million or 2.38% of
outstanding loans and repossessed assets as of June 30, 2012, down
from $336 million or 2.87% of outstanding loans and repossessed
assets as of March 31, 2012.
Net charge-offs amounted to $4.8 million (or 0.17% of average
loans on an annualized basis) in the reported quarter, down from
$8.5 million (or 0.30%) in the prior quarter. Results reflect a
reduction of $2.1 million in net charge-offs from the full recovery
of a non-accruing commercial loan.
Further, the combined allowance for credit losses totaled $241
million or 2.09% of outstanding loans as of June 30, 2012,
declining from $254 million or 2.20% of outstanding loans as of
March 31, 2012.
As a result, BOK Financial recorded a negative provision for
credit losses of $8.0 million in the reported quarter while no
provisions were made in the prior quarter.
As of June 30, 2012, 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 13.62% and 16.19%, respectively, compared
with 13.03% and 16.16%, respectively as of March 31, 2012. Tangible
common equity ratio improved to 10.07% from 9.75% as of March 31,
Outstanding loans at BOK Financial as of June 30, 2012 were
$11.6 billion, unchanged compared with the prior quarter. Growth in
commercial loans and residential mortgage loans were partially
offset by decreases in commercial real estate and consumer
Period end deposits amounted to $18.4 billion as of June 30,
2012, slightly down from $18.5 billion as of March 31, 2012.
Increase in demand deposits was offset by a decrease in
interest-bearing transaction accounts and a fall in time
Share Repurchase and Dividend Update
BOK Financial remains committed to boosting shareholders' wealth
and has bought back 39,496 common shares at an average price of
$53.81 per share during the reported quarter through a previously
announced share repurchase program.
During the reported quarter, the company paid a cash dividend of
38 cents per share. Notably, in May 2012, the company increased its
quarterly cash dividend by a nickel to 38 cents, which marked the
seventh consecutive annual increase since the company paid its
first cash dividend in 2005.
On July 31, 2012, BOK Financial's Board of Directors approved a
quarterly cash dividend of 38 cents per share payable on or about
August 31, 2012 to shareholders of record as of August 17,
The strategic expansions and local-leadership based business
model of BOK Financial, with peers such as
Texas Capital Bancshares Inc.
First Financial Bankshares Inc.
), have aided its expansion into a leading financial service
provider from a small bank in Oklahoma.
BOK Financial's diverse revenue stream, sturdy capital position
and expense control initiatives augur well for investors. Capital
deployment efforts also bode well and boost investors' confidence.
Nevertheless, a protracted economic recovery, along with regulatory
issues and the low interest rate environment remain our
The shares of BOK Financial currently retain a Zacks #3 Rank,
which translates into a short-term Hold rating. Considering the
company's business model and fundamentals, we have a long-term
Neutral recommendation on the stock.
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