Okla.-based BOKF earnings leapfrog estimates

Journal Record, The (Oklahoma City), Apr 30, 2009 by Kirby Lee Davis

Shares of BOK Financial jumped 4 percent Wednesday after the Tulsa bank holding company reported first-quarter earnings far surpassing analyst estimates.

"Our solid capital and liquidity positions and diverse revenue sources have allowed us to perform much better than the industry as a whole," President and Chief Executive Stan Lybarger said Wednesday.

The parent of Bank of Oklahoma, Bank of Texas and several other regional financial companies also increased its quarterly cash dividend 7 percent to 24 cents, payable around May 29 to shareholders of record May 15.

"By not taking government funds, BOKF management will have more freedom to pilot the economic storm and come out ahead once the economy recovers," said analyst Greg Womack. "It also has allowed them to increase their dividends.

"Banks who did take TARP funds have many restrictions on their operations, including increasing their dividends," said Womack, president and senior portfolio manager for Womack Investment Advisers of Edmond. "Many of those banks are now wishing they never took those funds from Big Brother."

For the three months ended March 31, BOKF posted an 11.7-percent drop in net income to $55 million, or 81 cents per diluted share, from $62.3 million, or 92 cents, the prior year.

But those year-ago results included a 9-cent after-tax gain from the sales of Visa Class B stock and the reversal of Visa liabilities. Temporary impairment charges took $15 million out of the latest quarterly earnings, almost three times the $5.3 million drained from year-ago results.

Analysts polled by Thompson Financial/First Call had projected 57- cent earnings for BOKF in the latest quarter. Analysts surveyed by Zacks Investment Research had estimated 59 cents.

Pre-tax net operating income rose 13.8 percent to $123.6 million from $109.3 million for the same period of 2008.

In trading on the Nasdaq Exchange, BOKF shares rose $1.49 to $38.69. At 538,306 shares, trading volume almost doubled BOKF's daily average.

Trading 37 percent off its 52-week highs, Womack said, BOKF shares have recovered from a March low price of $22.53.

"The positives I see is that their deposits have increased, and the values of their securities portfolio have increased," he said. "There may be more challenges ahead in the banking sector; however, management has planned for this by increasing their provisions for credit losses by almost 400 percent from the previous quarter."

BOKF's total deposits jumped 14.5 percent from a year ago to $15.27 billion. The cost of interest-bearing deposits was 1.76 percent.

"A special focus has been placed on growing deposits to enhance our strong liquidity position," said Lybarger. "We have succeeded in growing deposits while, at the same time, reducing deposit costs."

Total net loans climbed 4.7 percent to $12.5 billion.

On the positive side, net interest revenue jumped 15 percent to $169.8 million, with the net interest margin rising to 3.47 percent.

Fees and commissions revenue increased 6.6 percent to $121.5 million.

On the negative side, non-performing assets totaled $414 million at March 31, or 3.26 percent of outstanding loans and repossessed assets.

BOKF had $339 million in non-accruing loans, 2.68 percent of outstanding loans. About $112 million came from the Arizona market, where 20 percent of loans were non-accruing. Oklahoma accounted for another $106 million, but that was just 1.82 percent of outstanding loans in BOKF's biggest market. Texas chipped in $55 million, just 1.52 percent of its loan base.

Non-accruing commercial real estate loans totaled $175 million, or 6.42 percent of outstanding commercial real estate loans. Arizona claimed $102 million, almost four times the Sooner State's $26 million.

Non-accruing residential mortgage loans came in at $33 million, or 1.8 percent of outstanding residential mortgage loans.

Combined reserve for credit losses totaled $262 million, or 2.07 percent of outstanding loans. The allowance for loan losses was $251 million.

"We are continuing to work closely with borrowers adversely affected by the recession and expect those efforts to remain a major focus throughout the balance of the year," Lybarger said. "We have no plans to liquidate non-performing assets at depressed prices and will selectively retain assets to maximize value."

Inside the BOKF earnings report

Total assets rose 10.4 percent from a year ago to $23.3 billion.

Shareholder equity slipped 3 percent to $1.9 billion.

Tier 1 ratio at March 31: 9.76 percent.

Tangible common equity ratio: 6.84 percent.

Operating expenses totaled $165.8 million. Personnel expenses rose $4.9 million from the fourth quarter.

Securities portfolio rose 9 percent from fourth quarter to $7.7 billion.