BOK Financial Corporation's (BOKF) fourth quarter 2010 earnings of $58.8 million or 86 cents per share were below the Zacks Consensus Estimate of 93 cents.
The results also compare unfavorably with the prior quarter earnings of $64.3 million or 94 cents per share. The company had reported earnings of $42.8 million or 63 cents per share in the year-ago quarter.
Results primarily reflect a fall in interest revenue as a result of low interest rates and continued soft commercial loan demand. However, an improvement in credit metrics was on the upside.
For full year 2010, BOK Financial reported net income of $246.8 million or $3.61 per share, up 23% from $200.6 million or $2.96 per share reported in 2009 on diversified fee income growth and improved credit quality.
BOK Financial's net interest revenue totaled $163.6 million in the reported quarter, down 9% sequentially. Net interest revenue decreased as cash flows from the securities portfolio increased during the quarter. Prepayments spiked as interest rates declined, resulting in portfolio reinvestment at lower rates.
Net interest margin decreased 31 basis points (bps) from the prior quarter to 3.19% as a result of lower yield on average earning assets. However, average earning assets, increased $123 million in the reported quarter.
Outstanding loan balances at BOK Financial were $10.6 billion as of December 31, 2010, down $163 million since September 30, 2010, reflecting a decrease in all major loan categories during the reported quarter. Total period-end deposits increased $356 million to $17.2 billion, primarily due to a growth in interest-bearing transaction and demand deposits, partially offset by a decrease in higher costing time deposits.
Fees and commissions revenue totaled $136.0 million in the reported quarter, down 1% sequentially. The decrease primarily stemmed from a drop in mortgage banking revenue. It was partially offset by an increase in brokerage and trading revenue and trust fees and commissions.
BOK Financial'stotal operating expenses were $178.4 million in the reported quarter, down 13% from $205.2 million reported in the prior quarter. However, excluding changes in the fair value of mortgage servicing rights, operating expenses totaled $203.5 million, up $14.2 million from the prior quarter.
Results reflect an increase in personnel expenses, professional fees and services, data processing and communications expenses and other expenses, partially offset by decreased expenses incurred on repossessed assets.
The credit quality of BOK Financial's loan portfolio continued to improve. Nonperforming assets totaled $394 million or 3.66% of outstanding loans and repossessed assets as of December 31, 2010 compared with $421 million or 3.85% of outstanding loans and repossessed assets as of September 30, 2010.
Net loans charged off dropped 29% to $14.2 million from $20.1 million in the prior quarter. Provision for credit losses decreased 65% to $7.0 million from $20.0 million in the prior quarter.
BOK Financial'stangible common equity ratio increased to 9.21% as of December 31, 2010 from 8.96% as of September 30, 2010, reflecting retained earnings growth. Tier 1 capital ratios increased to 12.69% as of December 31, 2010 from 12.30% as of September 30, 2010.
Our Take
The strategic expansions and local-leadership based business model of BOK Financial, which has peers such as Cullen/Frost Bankers Inc. (CFR) and International Bancshares Corp. (IBOC), have aided it to expand into a leading financial service provider from a small bank in Oklahoma. The company's diverse revenue stream, sturdy capital position and expense control initiatives augur well for investors.
However, as the economic and employment conditions are expected to remain weak, we expect growth in revenue to be restricted. Additionally, given the regulatory issues, we expect both top and bottom lines to bear the brunt.
BOK Financial shares are maintaining a Zacks #3 Rank, which translates into a short-term Hold recommendation.
BOK FINL CORP (BOKF): Free Stock Analysis Report
CULLEN FROST BK (CFR): Free Stock Analysis Report
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