Sunday, 01 November 2009 19:00

Reggie Middleton on BOKF's 3Q09 Results Featured

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Here is my review of the BOKF 3rd quarter results. BOKF has performed relatively well in comparison to other regionals, but the caveats and basis of the orignal thesis that we warned about in the forensic preview are still valid. See:

BOK 1Q09 BOK 1Q09 2009-05-07 06:34:52 460.74 Kb

BOK 2Q09 review BOK 2Q09 review 2009-08-01 05:04:06 1.05 Mb

March Actionable Note - Banking Sector BK March Actionable Note - Banking Sector BK 2009-03-03 11:58:22 184.25 Kb

March 2nd Actionable Note Preview - banking March 2nd Actionable Note Preview - banking 2009-03-02 09:44:20 61.88 Kb

and an off topic piece that BOKF just happened to be involved in... Deposit Insurance Arbitrage

The 3rd quarter of 2009

BOK Financial Corporation (BOKF) reported a decline in earnings for 3Q09 (y-o-y) off lower fee and commission income and increased provisioning for loan losses, even as net interest income grew.

3Q2009 earnings declined versus 3Q2008, but beats consensus estimates: 

The Company's net income per diluted share declined to $0.75 for 3Q-09 compared with $0.84 per share in the same quarter last year. The analysts, however, estimated a lower per share earnings of $0.69. Included in the 3Q09 earnings is the impact of gains (net) on securities realized from the sale of $377 million of MBS securities, which contributed $0.08 to EPS in 3Q09.

BOKF's net interest income increased 9.8% y-o-y to $180.5 million in 3Q09 primarily due to margin improvement which grew 15bps (y-o-y) to 3.63%, reflecting improved loan pricing and decline in funding costs. Further, an increase in average earning assets (up 6.4% y-o-y) to $20.2 billion further stimulated the net interest income in 3Q09. However, on q-o-q basis average earning assets declined 1.2%, the impact of which was more than offset by net interest margin expansion to result into a 2.8% increase in net interest income over the previous quarter.

Non-interest income contracted 5.3% y-o-y to $120 million in 3Q09 compared with $126.7 million in 3Q08 due to decline in brokerage and commission fees while on sequential basis the non-interest income reduced 2.6% off significant decline in mortgage banking revenues due to lower loan volumes.

Operating expenses grew 8.8% y-o-y to $178.7 million in 3Q09 due to higher personnel costs which increased 12.0% to $98.0 million compared with $87.6 million in 3Q2008. The bank's efficiency ratio, as a result, deteriorated to 58.1% in 3Q09 compared with 54.2% in corresponding quarter last year.

 

3Q 09

q-o-q change (%)

2Q 09

y-o-y change (%)

3Q 08

figures in $millions

Interest revenue

             226

-1.9%

            231

-14.1%

                263

Interest expense

               46

-16.9%

              55

-53.8%

                  99

Net interest income

             180

2.8%

            176

9.8%

                164

 

 

   

 

 

Provision for credit losses

               55

17.0%

              47

4.6%

                  53

 

 

   

 

 

Net interest revenue after provision for credit losses (A)

             125

-2.4%

            128

12.3%

                112

 

 

   

 

 

Brokerage and trading revenue

               25

14.5%

              22

-19.1%

                  31

Transaction card revenue

               26

-4.6%

              28

2.5%

                  26

Trust fees and commissions

               16

-3.2%

              17

-18.8%

                  20

Deposit service charges and fees

               30

7.2%

              28

0.2%

                  30

Mortgage banking revenue

               13

-33.6%

              20

84.7%

                    7

Bank-owned life insurance

                 3

8.9%

                2

-6.9%

                    3

Margin asset fees

                 0

-25.0%

                0

-97.4%

                    2

Other revenue

                 6

-0.6%

                6

-21.6%

                    8

Total fees and commissions

             120

-2.6%

            123

-5.3%

                127

Gain (loss) on other assets

                 3

231.2%

                1

-483.2%

                   (1)

Gain (loss) on derivatives, net

               (0)

-71.6%

              (1)

-106.7%

                    4

Gain (loss) on securities, net

               12

89.6%

                6

483.3%

                    2

Net impairment losses recognized in earnings

               (3)

119.3%

              (2)

 

 

Others

               12

142.8%

                5

109.9%

                    6

Total operating revenue including impairament losses (B)

             132

3.0%

            128

 

                132

 

 

   

 

 

Total operating expenses, including others (C)

             179

1.7%

            176

8.8%

                164

 

 

   

 

 

Income before taxes (A+B-C)

               78

-2.8%

              81

-1.6%

                  80

Federal and state income tax

               25

 

              28

 

                  23

Net income, before non-controlling interest

               54

 

              52

 

                  57

Net income (loss) attributable to non-controlling interest

                 3

 

                0

 

                   (0)

Net income available to common shareholders

               51

-2.8%

              52

-10.6%

                  57

Net income available to common shareholders declined to $50.7 million in 3Q09 over $56.7 million in 3Q08.

 

Asset Quality deteriorated as NPAs continue to spike, as we anticipated:

BOKF's net charge-offs increased 3.0% q-o-q and 78.0% y-o-y to $36.0 million or 1.21% of average loans at the end of September 30, 2009. Further, non-performing assets increased to $489.7 million or 4.19% of total loans in 3Q09 led by increase in nonaccrual commercial real estate loans.

bok_financial_3q09_results_update_13823_image001.png

The credit losses in 3Q09 adversely impacted BOKF's performance with gross charge offs increasing to $38.6 million (annualized charge off rate - 1.30%) in 3Q09 from $37.4 million (annualized charge off rate -1.21%) in 2Q09 and $33.9 million (annualized charge off rate - 1.10%) in 3Q08. In addition to this, provisions for loan losses increased in 3Q09 to $55.1 million (annualized rate -1.86%) against $47.1 million (annualized rate - 1.53%) in 2Q09 and $52.7 million (annualized rate - 1.71%) in 3Q08 driven by growth in non-performing assets. Total non-performing assets increased stood at $489.7 million (4.22% of total loans) compared with $445.7 million (3.67% of total loans) at the end of 2Q09 and $252.2 million (2.01% of total loans) at the end of 3Q08.

Non-accruing loans increased 8.4% q-o-q to $382.8 million (3.30% of total loans) at the end of 3Q09 from $353.0 million (2.91% of total loans) at the end of 2Q09 and relatively lower when compared with $211.8 million (1.69% of total loans) at the end of 3Q08.

bok_financial_3q09_results_update_13823_image003.png

However, the 90 days past due loans declined to $24.2 million in 3Q09 from $32.5 million in 2Q09. A drop in 90 days past due loans and growth in tangible equity was more than offset by higher NPAs, which led to an increase in the Texas ratio to 24.4% against 24.3% in 2Q09 and 15.5% in 3Q08.

Loan portfolio - credit quality metrics

3Q08

4Q08

1Q09

2Q09

3Q09

90 days past due loans to total loans

0.16%

0.15%

0.37%

0.27%

0.21%

Non performing assets to total loans

2.03%

2.71%

3.31%

3.67%

4.22%

Non performing assets to allowance for loan losses

138.0%

163.5%

163.9%

163.1%

174.1%

Texas ratio

15.5%

21.3%

25.2%

24.3%

24.4%

 

Lower commercial and consumer lending contracted loans portfolio in 3Q09:

The total loan portfolio declined to $11.6 billion in 3Q09 compared with $12.1 billion in 2Q09 due to lower demand for loans across sectors, with significant contribution in decline coming from commercial and consumer loans. However, the total deposits increased to $15.1 billion in 3Q09 from $14.7billion in 2Q09, resulting in loan-to-deposit ratio of 76.9% compared with 82.8% in 2Q09.

 

3Q08

4Q08

1Q09

2Q09

3Q09

Total loans (in $millions)

        12,414

        12,617

       12,532

        12,130

           11,606

Total deposits (in $millions)

        14,586

        14,983

       15,270

        14,655

           15,095

Loan to deposit ratio

85.1%

84.2%

82.1%

82.8%

76.9%

Read 3993 times Last modified on Sunday, 01 November 2009 20:42
Reggie Middleton

Resident Contrarian Badass at BoomBustBlog (you can call me Editor-in-Chief)...

Disruptor-in-Chief at Veritaseum.com, where we're ushering the P2P Economy.

 

www.boombustblog.com
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