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BOK Financial (BOKF) Beats on Q3 Earnings, Revenues Up
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BOK Financial Corporation (BOKF - Free Report) reported positive earnings surprise of 1.8% in third-quarter 2016. Earnings per share of $1.13 surpassed the Zacks Consensus Estimate of $1.11. Moreover, the bottom line improved around 3.7% from the prior-year quarter.
Better-than-expected results were driven by higher revenues, stemming from increased net interest revenue, and fees and commissions revenues. However, higher operating expenses and weak credit metrics acted as headwinds.
Net income attributable to common shareholders was $74.3 million, slightly down from $74.9 million in the year-ago quarter.
Revenues came in at $379.2 million, up 10.9% year over year. Also, the figure outpaced the Zacks Consensus Estimate of $373 million.
Net interest revenue came in at $187.8 million, up 5.2% year over year. Net interest margin (NIM) also expanded 3 basis points (bps) year over year to 2.64%.
On a sequential basis, yield on average earning assets increased 2 bps to 2.93%, while loan yields were up 5 bps to 3.63%.
BOK Financial’s fees and commissions revenues amounted to $185.3 million, up 12.5% on a year-over-year basis. The quarter witnessed growth in several income categories, including brokerage and trading revenues, transaction card revenues, fiduciary & asset management and mortgage banking revenues.
Total other operating expenses were $262.1 million, up nearly 17% year over year. The rise was driven by increase in almost all components, like personnel expense, professional fees ad services, amortization of intangible assets, to name a few.
Notably, management intends to reduce annual expenses by nearly $20 million in 2017, by reducing contract labor, right-sizing workforce, and not backfilling open positions.
Total loans at BOK Financial as of Sep 30, 2016 were $16.5 billion, up 7.1% year over year. As of the same date, total deposits amounted to $21.1 billion, up 2.3% from the year-ago period.
Credit Quality Deteriorated
BOK Financial’s asset quality deteriorated during the quarter. The company recorded provisions of $10 million, up 33.3% from the prior-year quarter.
Also, net charge-offs were $6.1 million, up significantly from $1.8 million in the prior-year period.
Further, the combined allowance for credit losses was 1.56% of outstanding loans as of Sep 30, 2016, up from 1.35% as of Sep 30, 2015.
Additionally, non-performing assets totaled $349.2 million or 2.12% of outstanding loans and repossessed assets as of Sep 30, 2016, up from $204.1 million or 1.33% as of Sep 30, 2015.
Steady 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 Sep 30, 2016, the common equity Tier 1 capital ratio was 11.99%, compared to 12.78% as of Sep 30, 2015.
Tier 1 and total capital ratios were 11.99% and 13.65%, compared with 12.78% and 13.89%, respectively, as of Sep 30, 2015. Leverage ratio was 9.06% as against 9.55% as of Sep 30, 2015.
Our Viewpoint
BOK Financial’s consistent revenue growth keeps us optimistic about the stock. Also, continued growth in loan balances support the company’s organic growth strategy. In addition, its diverse revenue mix and favorable geographic footprint should support growth in the upcoming quarters.
However, several issues including the stringent regulatory landscape and rising expenses remain key concerns.
Texas Capital Bancshares Inc. (TCBI - Free Report) reported a positive earnings surprise of 1.2% in third-quarter 2016. Earnings per share of 87 cents outpaced the Zacks Consensus Estimate by a penny. Moreover, the bottom line improved 16% from the prior-year quarter figure of 75 cents.
Organic growth was supported by higher revenues, along with strong growth in loans and deposit balances. However, elevated expenses and deteriorating credit metrics were the undermining factors.
Cullen/Frost Bankers, Inc. (CFR - Free Report) reported third-quarter 2016 earnings per share of $1.24, beating the Zacks Consensus Estimate of $1.16. Moreover, the reported figure was up from the year-ago quarter earnings of $1.17 per share.
Higher revenues primarily supported the beat. The company also registered growth in deposit balances. Moreover, improvement in capital ratios added to the positives. However, elevated expenses and deteriorating credit metrics were the dampening factors. This led to a drop in Cullen/Frost’s share price by 1.4%.
Prosperity Bancshares Inc.’s (PB - Free Report) reported its third-quarter 2016 earnings per share of $0.99, in line with the Zacks Consensus Estimate. However, the reported figure compared unfavorably with the prior-year quarter earnings per share of $1.01. Earnings included purchase accounting adjustments for both periods.
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BOK Financial (BOKF) Beats on Q3 Earnings, Revenues Up
BOK Financial Corporation (BOKF - Free Report) reported positive earnings surprise of 1.8% in third-quarter 2016. Earnings per share of $1.13 surpassed the Zacks Consensus Estimate of $1.11. Moreover, the bottom line improved around 3.7% from the prior-year quarter.
Better-than-expected results were driven by higher revenues, stemming from increased net interest revenue, and fees and commissions revenues. However, higher operating expenses and weak credit metrics acted as headwinds.
Net income attributable to common shareholders was $74.3 million, slightly down from $74.9 million in the year-ago quarter.
Revenues & Expenses Rise
Revenues came in at $379.2 million, up 10.9% year over year. Also, the figure outpaced the Zacks Consensus Estimate of $373 million.
Net interest revenue came in at $187.8 million, up 5.2% year over year. Net interest margin (NIM) also expanded 3 basis points (bps) year over year to 2.64%.
On a sequential basis, yield on average earning assets increased 2 bps to 2.93%, while loan yields were up 5 bps to 3.63%.
BOK Financial’s fees and commissions revenues amounted to $185.3 million, up 12.5% on a year-over-year basis. The quarter witnessed growth in several income categories, including brokerage and trading revenues, transaction card revenues, fiduciary & asset management and mortgage banking revenues.
Total other operating expenses were $262.1 million, up nearly 17% year over year. The rise was driven by increase in almost all components, like personnel expense, professional fees ad services, amortization of intangible assets, to name a few.
Notably, management intends to reduce annual expenses by nearly $20 million in 2017, by reducing contract labor, right-sizing workforce, and not backfilling open positions.
Total loans at BOK Financial as of Sep 30, 2016 were $16.5 billion, up 7.1% year over year. As of the same date, total deposits amounted to $21.1 billion, up 2.3% from the year-ago period.
Credit Quality Deteriorated
BOK Financial’s asset quality deteriorated during the quarter. The company recorded provisions of $10 million, up 33.3% from the prior-year quarter.
Also, net charge-offs were $6.1 million, up significantly from $1.8 million in the prior-year period.
Further, the combined allowance for credit losses was 1.56% of outstanding loans as of Sep 30, 2016, up from 1.35% as of Sep 30, 2015.
Additionally, non-performing assets totaled $349.2 million or 2.12% of outstanding loans and repossessed assets as of Sep 30, 2016, up from $204.1 million or 1.33% as of Sep 30, 2015.
Steady 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 Sep 30, 2016, the common equity Tier 1 capital ratio was 11.99%, compared to 12.78% as of Sep 30, 2015.
Tier 1 and total capital ratios were 11.99% and 13.65%, compared with 12.78% and 13.89%, respectively, as of Sep 30, 2015. Leverage ratio was 9.06% as against 9.55% as of Sep 30, 2015.
Our Viewpoint
BOK Financial’s consistent revenue growth keeps us optimistic about the stock. Also, continued growth in loan balances support the company’s organic growth strategy. In addition, its diverse revenue mix and favorable geographic footprint should support growth in the upcoming quarters.
However, several issues including the stringent regulatory landscape and rising expenses remain key concerns.
BOK FINL CORP Price, Consensus and EPS Surprise
BOK FINL CORP Price, Consensus and EPS Surprise | BOK FINL CORP Quote
BOK Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Performance of Other Southwest Banks
Texas Capital Bancshares Inc. (TCBI - Free Report) reported a positive earnings surprise of 1.2% in third-quarter 2016. Earnings per share of 87 cents outpaced the Zacks Consensus Estimate by a penny. Moreover, the bottom line improved 16% from the prior-year quarter figure of 75 cents.
Organic growth was supported by higher revenues, along with strong growth in loans and deposit balances. However, elevated expenses and deteriorating credit metrics were the undermining factors.
Cullen/Frost Bankers, Inc. (CFR - Free Report) reported third-quarter 2016 earnings per share of $1.24, beating the Zacks Consensus Estimate of $1.16. Moreover, the reported figure was up from the year-ago quarter earnings of $1.17 per share.
Higher revenues primarily supported the beat. The company also registered growth in deposit balances. Moreover, improvement in capital ratios added to the positives. However, elevated expenses and deteriorating credit metrics were the dampening factors. This led to a drop in Cullen/Frost’s share price by 1.4%.
Prosperity Bancshares Inc.’s (PB - Free Report) reported its third-quarter 2016 earnings per share of $0.99, in line with the Zacks Consensus Estimate. However, the reported figure compared unfavorably with the prior-year quarter earnings per share of $1.01. Earnings included purchase accounting adjustments for both periods.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>