EXHIBIT 99 (a)
NASD: BOKF
For Further Information Contact: Steven Nell
Chief Financial Officer
(918) 588-6000
Kayte Spillman
Assistant Vice President
Corporate Communications Specialist
BOK Financial Corp.
(918) 588-6378
BOK FINANCIAL REPORTS THIRD QUARTER EARNINGS
Strong Balance Sheet Growth and Stable Margin Continue
TULSA, Okla. (Tuesday, October 17, 2006) - BOK Financial Corporation reported
earnings of $52.7 million or $0.78 per diluted share for the third quarter of
2006, up 4% over the third quarter of 2005. Net income for the third quarter of
2005 totaled $50.8 million or $0.76 per diluted share.
Highlights of the quarter included:
o Average outstanding loans and average deposits increased 14% and 13%,
respectively over the third quarter of 2005
o Net interest revenue grew $11.2 million or 10% over last year's third
quarter, 9% annualized over the second quarter of 2006
o Net interest margin was 3.38%, up from 3.32% over the third quarter of last
year and stable throughout 2006
o Fee income increased $2.7 million or 3% over the third quarter of 2005
o Fair value of mortgage servicing rights declined $4.2 million, net of
hedging gains during the third quarter
o Other operating expenses increased $9.2 million or 8%, including a $1.8
million non-cash charge related to taxes on a $202 million investment in
bank-owned life insurance; personnel costs were up $8.1 million
o Income tax expense was reduced $2.2 million for the resolution of uncertain
tax issues
o Non-performing loans, annualized net charge-offs continued to be near
historic lows
"We were pleased to see the continuation of double digit loan and deposit growth
while maintaining a stable net interest margin in a very competitive
environment," said President and CEO Stan Lybarger. "Our fee revenue business
lines have long been a key strength of the Company, but we clearly experienced
slower growth during the third quarter."
Net Interest Revenue
Net interest revenue totaled $124.0 million for the third quarter of 2006, up
$11.2 million or 10% over the same period of 2005. Average earning assets grew
$1.2 billion or 9%, due to a $1.2 billion increase in average outstanding loans.
Average deposits increased $1.3 billion or 13% compared with the third quarter
of 2005. Net interest revenue was also improved by a $226 million reduction in
short-term borrowed funds, which generally have a higher interest cost.
Net interest margin was 3.38% for the third quarter of 2006 compared with 3.32%
for the third quarter of 2005 and 3.40% for the second quarter of 2006. Net
interest margin has remained stable throughout the first nine months of 2006.
While the spread between the yield on earning assets and the cost of interest
bearing liabilities continued to narrow, the Company benefited from a strong
capital position.
Loans and Deposits
Outstanding loans totaled $10.0 billion at September 30, 2006, up $211 million
over previous quarter's end. Commercial loans totaled $5.7 billion at September
30, 2006, a $140 million increase. Commercial lFoans grew in all sectors of the
portfolio. The outstanding balance of commercial real estate loans remained
unchanged at $2.3 billion. Commercial real estate loan growth in the Arizona and
Colorado markets was largely offset by reductions in Texas and New Mexico.
Regional markets continue to increase in importance to the Company as we
continue to add experienced bankers in each market. At September 30, 2006, $4.3
billion or 43% of outstanding loans were attributed to markets outside of
Oklahoma. Texas remained the largest regional market with $2.5 billion of loans
outstanding at the end of the third quarter. Pay downs of commercial real estate
loans reduced outstanding loans in the Texas market at a 4% annualized rate.
Outstanding loans in the New Mexico, Colorado and Arizona markets totaled $698
million, $574 million and $313 million, respectively. Annualized loan growth
during the third quarter was 24% in New Mexico, 52% in Colorado and 86% in
Arizona.
Deposits increased $349 million during the third quarter to $11.7 billion at
September 30, 2006. Interest-bearing transaction accounts grew $471 million, an
annualized rate of 38%. Rising interest rates led to a shift to interest-bearing
transaction accounts from demand deposits, which decreased $117 million.
Total deposits increased $184 million or 12% annualized in the Oklahoma market
and $104 million or 14% annualized in the Texas market. In addition, deposits in
the Colorado market increased $65 million or 38% annualized during the third
quarter.
Fees and Commissions Revenue
Fees and commissions revenue totaled $93.0 million for the third quarter of
2006, up 3% from the same period last year. Total fee revenue, which recently
had been growing at a low double digit rate, slowed in most major categories of
fees and commissions. Mortgage banking revenue decreased $2.6 million or 27% due
largely to lower volumes.
"Volatile mortgage interest rates over the past six months affected this
quarter's performance," said Lybarger. "Rising rates in the second quarter
reduced our loan production pipeline coming into this quarter and falling rates
in the third quarter reduced the value of our servicing portfolio."
Brokerage and trading revenue declined $408 thousand or 4% from last year. A
flat yield curve reduced revenue from trading activities $1.3 million or 20%.
Derivatives revenue, primarily from customer energy hedging, increased $513
thousand or 21% over last year. Transaction card revenue grew $1.4 million or 8%
from both check card and ATM processing fees. The Company recently signed
agreements to place ATMs with two large regional convenience store chains. Trust
revenue and deposit services charges increased $725 thousand or 4% and $703
thousand or 3%, respectively. Overdraft fees, which provided much of the recent
growth in deposit services charges, were up $915 thousand or 5%. Investment
banking revenue, which is included in other revenue, increased $1.3 million. A
newly-developed tax-exempt leasing unit provided much of this revenue growth.
Mortgage Servicing Rights
Depreciation in the fair value of mortgage servicing rights, net of recognized
gains on economic hedges decreased pre-tax income by $4.2 million and net income
$2.7
million or $0.04 per diluted share during the third quarter. At the end of the
second quarter, a 50 basis point decrease in mortgage interest rates was
expected to reduce the fair value of the Company's servicing rights, net of
economic hedge gains, by $659 thousand. Although average mortgage interest rates
fell 52 basis points, increased prepayment speeds and mortgage rate volatility
caused the third quarter's results to differ from expectations. Loans serviced
by BOK Financial historically have prepaid at rates well-below national trends.
Although still below national trends, actual prepayments in our servicing
portfolio migrated upward during the third quarter. In addition, mortgage
interest rate volatility over the past two quarters increased the risk-premium
required by investors further lowering the fair value of the servicing rights.
Year-to-date, the fair value of mortgage servicing rights, net of recognized
losses on economic hedges, increased pre-tax income by $2.1 million.
Operating Expenses and Taxes
Operating expenses, excluding changes in the fair value of mortgage servicing
rights, totaled $130.9 million, up $9.2 million over the third quarter of 2005.
The third quarter of 2006 included a $1.8 million non-cash charge related to
taxes on bank-owned life insurance.
Personnel expense totaled $74.6 million for the third quarter of 2006, up $8.1
million over the third quarter of 2005. Salaries and wages increased $5.0
million or 12%. Average compensation per employee increased 8% and the average
number of employees increased 4%.
"We continued adding experienced bankers in the regional markets and in Kansas
City where we expect to open a bank in the fourth quarter," Lybarger said. "We
also increased expenditures related to product development, technology and
support services. These investments are expected to provide long-term benefits
to the Company."
The Company reduced its provision for income taxes by $2.2 million which
contributed $0.03 to diluted earnings per share. The statute of limitations on
an uncertain income tax position expired during the third quarter of 2006.
Credit Quality
Net loans charged-off during the third quarter of 2006 totaled $4.3 million,
compared with $3.8 million in the previous quarter and $3.3 million in the third
quarter of 2005.
Non-performing loans totaled $41 million at September 30, 2006 and continue to
be at near-historic lows.
The combined allowance for loan losses and reserve for off-balance sheet credit
losses totaled $127 million or 1.28% of outstanding loans and 417% of
non-accruing loans at September 30, 2006. The allowance for loan losses was $105
million and the reserve for off-balance sheet credit losses was $22 million. At
June 30, 2006, the combined allowance for loan losses and reserve for
off-balance sheet credit losses totaled $126 million or 1.30% of outstanding
loans and 408% of non-accruing loans. The allowance for loan losses was $105
million and the reserve for off-balance sheet credit losses was $21 million.
The provision for credit losses for the third quarter of 2006 was $5.3 million,
compared with $4.0 million for the third quarter of 2005 and $3.8 million for
the second quarter of 2006.
About BOK Financial Corporation
BOK Financial is a regional financial services company that provides commercial
and consumer banking, investment and trust services, mortgage origination and
servicing, and an electronic funds transfer network. Holdings include Bank of
Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of
Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank & Trust, N.A.,
BOSC,Inc., the TransFund electronic funds network, Southwest Trust Company, N.A.
and AXIA Investment Management, Inc. Shares of BOK Financial are traded on the
NASDAQ under the symbol BOKF. For more information, visit www.bokf.com.
Forward-looking Information
This news release contains forward-looking statements that are based on
management's beliefs, assumptions, current expectations, estimates and
projections about BOK Financial, the financial services industry and the economy
generally. Words such as "anticipates," "believes," "estimates," "expects,"
"forecasts," "plans," "projects," variations of such words and similar
expressions are intended to identify such forward-looking statements. Management
judgments relating to and discussion of the provision and allowance for credit
losses involve judgments as to future events and are inherently forward-looking
statements. Assessments that BOK Financial's acquisitions and other growth
endeavors will be profitable are necessary statements of belief as to the
outcome of future events based in part on information provided by others which
BOK Financial has not independently verified. These statements are not
guarantees of future performance and involve certain risks, uncertainties, and
assumptions which are difficult to predict with regard to timing, extent,
likelihood and degree of occurrence. Therefore, actual results and outcomes may
materially differ from what is expected, implied or forecasted in such
forward-looking statements. Internal and external factors that might cause such
a difference include, but are not limited to (1) the ability to fully realize
expected cost savings from mergers within the expected time frames, (2) the
ability of other companies on which BOK Financial relies to provide goods and
services in a timely and accurate manner, (3) changes in interest rates and
interest rate relationships, (4) demand for products and services, (5) the
degree of competition by traditional and nontraditional competitors, (6) changes
in banking regulations, tax laws, prices, levies and assessments, (7) the impact
of technological advances and (8) trends in consumer behavior as well as their
ability to repay loans. BOK Financial and its affiliates undertake no obligation
to update, amend or clarify forward-looking statements, whether as a result of
new information, future events, or otherwise.