BOK Financial Corporation BOKF gained 2% after the company delivered a positive earnings surprise in its first-quarter 2015 earnings, released on Apr 29, before the market opened. The company reported earnings per share of $1.08, beating the Zacks Consensus Estimate of $1.03. However, the reported figure was down from the prior-year quarter earnings of $1.11.
Better-than-expected results were aided by top-line growth, which came on the back of higher net interest revenues and fees and commissions. Further, the company continued to record no provision for credit losses in this quarter as well. However, increase in expenses was on the downside.
Net income attributable to common shareholders was $74.8 million compared with $76.6 million in the prior-year quarter. Notably, the prior-year net income included a benefit of $10.2 million from the reversal of accrued executive compensation costs.
Performance in Detail
The company reported revenues of $333.7 million in the quarter, up nearly 10% year over year. Further, the revenue figure surpassed the Zacks Consensus Estimate of $330 million.
Net interest revenues summed to $167.7 million in the quarter, up 3.1% year over year. Net interest margin fell 16 basis points year over year to 2.55%.
Yield on average earning assets declined 19 basis points year over year to 2.80%. Also, loan yields decreased 30 basis points year over year to 3.59%.
BOK Financial’s fees and commissions revenue amounted to $166.0 million, up 17.8% on a year-over-year basis. The increase was primarily attributable to higher mortgage banking revenue, brokerage and trading revenue and fiduciary and asset management revenue.
Total other operating expenses were $220.3 million, up 19% year over year. Elevated costs related to personnel, professional fees and services, net occupancy and equipment, data processing and communications along with mortgage banking costs mainly led to the rise in costs.
Total loans at BOK Financial as of Mar 31, 2015 were $14.7 billion, up 12.3% year over year, mainly due to a rise in commercial loans, commercial real estate loans and consumer loans. As of the same date, deposits amounted to $21.2 billion, up 3.7% year over year.
Credit Quality
BOK Financial’s credit metrics improved during the quarter. There was no provision for credit losses in the quarter, similar to the prior-year quarter. The combined allowance for credit losses was 1.35% of outstanding loans as of Mar 31, 2015, declining from 1.44% as of Mar 31, 2014.
Nonperforming assets totaled $206.6 million or 1.40% of outstanding loans and repossessed assets as of Mar 31, 2015, down from $255.7 million or 1.94% as of Mar 31, 2014. Net recoveries were $8.4 million as against net recoveries of $2.5 million in the prior-year quarter.
Capital Position
Armed with healthy capital ratios, BOK Financial and its subsidiary banks exceeded the regulatory well-capitalized level. The company became subject to new regulatory rules on Jan 1, 2015. As of Mar 31, 2015, the common equity Tier 1 ratio was 13.07%.
Tier 1 and total capital ratios were 13.07% and 14.39% compared with 13.77% and 15.55%, respectively, as of Mar 31, 2014. Leverage ratio was 9.74% compared with 10.17% as of Mar 31, 2014.
Share Repurchase
During the first quarter, the company repurchased 502,156 common shares at an average price of $58.71 per share.
Our Viewpoint
Results of BOK Financial reflect a decent performance in the quarter. The strategic expansions and local-leadership based business model of BOK Financial helped it transform into a leading financial service provider from merely a small bank in Oklahoma.Though the company’s diverse revenue mix, recent acquisitions and favorable geographic footprint would support its growth in the upcoming quarters, regulatory issues, rising expenses and compressed margin continue to pose concerns.
BOK Financial currently carries a Zacks Rank #4 (Sell).
Performance of other Southwest banks
Cullen/Frost Bankers, Inc. CFR reported first-quarter 2015 earnings of $1.10 per share, 14.6% above the prior-year quarter figure of 96 cents. The bottom line beat the Zacks Consensus Estimate of $1.09 per share.
Texas Capital BancShares Inc. TCBI reported first-quarter 2015 earnings per share of 70 cents, surpassing the prior-year quarter figure of 60 cents. However, results came in line with the Zacks Consensus Estimate.
Prosperity Bancshares Inc.’s PB first-quarter 2015 earnings per share of $1.05 came in line with the Zacks Consensus Estimate. However, earnings came 4% above the year-ago quarter figure.
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