Exhibit 99 (a)
BOK Financial Reports Annual Earnings of $153 Million or $2.27 per Share
Quarterly Earnings Totaled $35 Million, $0.53 per Share
TULSA, Okla. (Wednesday January 28, 2009) - BOK Financial Corporation reported
net income for the fourth quarter of 2008 of $35.4 million, down 31% from the
fourth quarter of 2007. Net income per diluted share was $0.53 for the fourth
quarter of 2008 and $0.76 for the fourth quarter of 2007. Net income for 2008
was $153.2 million, down 30% from the previous year. Net income per diluted
share was $2.27 for 2008 and $3.22 for 2007.
"BOK Financial ended 2008 with over $153 million in earnings, a larger reserve
for credit losses and a strong capital position," said President and CEO Stan
Lybarger. "BOK Financial was also the largest traditional commercial bank in the
country to decline participation in the U.S. Treasury's TARP Capital Purchase
Program. We increased our reserve for credit losses by $101 million during 2008,
in anticipation of continued deterioration in the nation's economy and increased
pressure on our customers. Despite the environment, revenues continued to
increase in 2008. Total revenue increased by $111 million as a result of
continued loan growth and improved margins."
Highlights of fourth quarter of 2008 included:
o Net interest revenue totaled $176.4 million, up $12.1 million over the
third quarter of 2008 and $35.2 million over the fourth quarter of
2007. Net interest margin was 3.57% for the fourth quarter of 2008,
3.48% for the third quarter of 2008 and 3.22% for the fourth quarter of
2007.
o Combined reserves for credit losses totaled $248 million or 1.93% of
outstanding loans at December 31, 2008, up from $209 million or 1.65%
of outstanding loans at September 30, 2008. Net loans charged off and
provision for credit losses were $33.7 million and $73.0 million,
respectively for the fourth quarter of 2008. Net loans charged off and
provision for credit losses were $20.2 million and $52.7 million,
respectively for the third quarter of 2008 and $7.3 million and $13.2
million, respectively, for the fourth quarter of 2007.
o Non-performing assets totaled $342 million or 2.65% of outstanding
loans and repossessed assets at December 31, 2008, up from $252 million
or 1.98% of outstanding loans and repossessed assets at September 30,
2008.
o The Company's Tier 1 and tangible common equity ratios were 9.42% and
6.64%, respectively at December 31, 2008. Tier 1 and tangible common
equity ratios were 9.25% and 7.16%, respectively at September 30, 2008.
o The Company elected to participate in the FDIC's Temporary Liquidity
Guarantee Program. This Program provides full deposit insurance
coverage of non-interest bearing, transaction deposit accounts and
guarantees certain newly issued senior unsecured debt. The Company has
not issued any guaranteed debt under this Program.
o The Company paid a cash dividend of $15.4 million or $0.225 per common
share during the fourth quarter of 2008. On January 27, 2009, the board
of directors declared a cash dividend of $0.225 per common share
payable on or about February 27, 2009 to shareholders of record as of
February 13, 2009.
Net Interest Revenue
Net interest revenue totaled $176.4 million for the fourth quarter of 2008, up
$12.1 million or 29% annualized over the third quarter of 2008 and $35.2 million
or 25% over the fourth quarter of 2007. Net interest margin was 3.57% for the
fourth quarter of 2008, 3.48% for the third quarter of 2008 and 3.22% for the
fourth quarter of 2007. The widening of the spread between LIBOR and the federal
funds rate, which began in the third quarter of 2008 continued into the fourth
quarter. LIBOR is the basis for interest earned on many of our loans. The
federal funds rate is the basis for interest paid on many of our
interest-bearing liabilities. The widening spread increased net interest margin
by approximately 15 basis points in the fourth quarter and 8 basis points in the
third quarter. This spread has largely narrowed to a historically normal level
by the end of the fourth quarter.
Average earning assets for the fourth quarter of 2008 increased $767 million
compared to the previous quarter, including a $230 million increase in average
loans before allowance for loan losses, and a $578 million increase in average
securities. Average commercial loans increased $224 million. The securities
portfolio added government issued mortgage-backed securities during the fourth
quarter to lock-in widening spreads.
Average other borrowed funds, which consists primarily of Federal Home Loan Bank
advances, increased $597 million. Average deposits decreased $163 million during
the fourth quarter of 2008. Average interest-bearing transaction accounts
decreased $449 million in the fourth quarter due to falling energy prices.
Interest-bearing transaction accounts had increased by $704 million over the
previous three quarters as high prices provided liquidity to many of our
energy-producing customers. Average time deposits increased $317 million.
Credit Quality
Non-performing assets totaled $343 million or 2.65% of outstanding loans and
repossessed assets at December 31, 2008, up $90 million since September 30,
2008. Non-performing assets included $10 million of restructured residential
mortgage loans guaranteed by agencies of the U.S. government and $15 million of
loans and repossessed assets acquired with First United Bank in the second
quarter of 2007. The Company will be reimbursed by the sellers up to $5.3
million for any losses incurred during a three-year period after the acquisition
date.
"Weakness in the national economy, first seen in residential real estate in
certain regions of the country is progressively spreading to other regions and
other sectors of the economy," said Lybarger. "As expected, we are seeing
increased signs of weakness in commercial real estate and other business
sectors. We have long maintained total commercial real estate loans below 25% of
our loan portfolio, which will be beneficial in the current environment."
Non-accruing commercial loans totaled $135 million or 1.82% of total commercial
loans at December 31, 2008. Non-accruing commercial loans increased $29 million
since September 30, 2008. Non-accruing loans in the wholesale/retail, services
and healthcare sectors of the commercial loan portfolio increased $11 million,
$10 million and $9 million, respectively during the fourth quarter. The
distribution of non-accruing commercial loans among our various markets included
$75 million in Oklahoma, $22 million in Colorado, $20 million in Texas and $11
million in Kansas City.
Non-accruing commercial real estate loans totaled $137 million or 5.08% of
outstanding commercial real estate loans at December 31, 2008. Total
non-accruing commercial real estate loans increased $59 million since September
30, 2008, including a $24 million increase in multifamily residential loans and
a $22 million increase in loans secured by land, residential lots and
residential construction properties. Non-accruing land and residential
construction loans totaled $76 million or 8.21% of the respective loan portfolio
sector at December 31, 2008. Other increases in non-accruing commercial real
estate loans spread across all sectors of the commercial real estate loan
portfolio. Non-accruing commercial real estate loans attributed to our various
markets included $76 million to Arizona, $23 million to Oklahoma, $14 million to
Texas, $10 million to Colorado and $8 million to New Mexico.
Our consumer credit exposure consists primarily of permanent residential
mortgage loans, home equity loans and indirect automobile loans. Non-accruing
permanent residential mortgage loans totaled $26 million or 2.06% of outstanding
residential mortgage loans at December 31, 2008. Non-accruing home equity loans
totaled $1.2 million or 0.24% of outstanding home equity loans. The distribution
of non-accruing residential mortgage loans among our various markets included
$10 million in Oklahoma, $8 million in Texas, $3 million in New Mexico and $3
million in Arizona.
At December 31, 2008, the distribution of our $693 million portfolio of indirect
automobile loans among various markets was $434 million in Oklahoma, $170
million in Arkansas and $88 million in Texas. Approximately 3.36% of the
indirect automobile loan portfolio is past due 30 days or more, including 3.25%
in Oklahoma, 3.74% in Arkansas and 3.17% in Texas. At September 30, 2008,
approximately 2.29% of the indirect automobile loan portfolio was past due 30
days or more. This compares to a national average of 3.06% for indirect
automobile loans past due 30 days or more at September 30, 2008.
The combined allowance for loan losses and reserve for off-balance sheet credit
losses totaled $248 million or 1.93% of outstanding loans and 83% of
non-accruing loans at December 31, 2008. The allowance for loan losses was $233
million and the reserve for off-balance sheet credit losses was $15 million. At
September 30, 2008, the combined allowance for loan losses and off-balance sheet
credit losses was $209 million or 1.65% of outstanding loans and 99% of
non-accruing loans.
Real estate and other repossessed assets totaled $29 million at December 31,
2008, up from $28 million at September 30, 2008. Real estate and other
repossessed assets included $18 million of 1-4 family residential properties and
residential land development properties, $5 million of developed commercial real
estate properties, $3 million of undeveloped land and $3 million of automobiles.
Real estate owned and other repossessed assets are primarily located in Texas,
Colorado, Arkansas, and Oklahoma.
The Company also has off-balance sheet obligations related to certain community
development residential mortgage loans sold to U.S. government agencies with
recourse. These mortgage loans were underwritten to standards approved by the
agencies, including full documentation and originated under programs available
only for owner-occupied properties. The outstanding principal balance of these
loans totaled $391 million at December 31, 2008. All of these loans are to
borrowers in our primary market areas, including $274 million in Oklahoma, $44
million in Arkansas, $22 million in New Mexico and $19 million in Kansas City.
At December 31, 2008, approximately 3.39% of these loans are non-performing. A
separate reserve for credit risk of $8.8 million is available for losses on
these loans.
Securities and Derivatives
The Company's securities portfolio totaled $7.1 billion at December 31, 2008, up
$364 million since September 30, 2008. The portfolio consisted primarily of
mortgage-backed securities, including $5.4 billion fully backed by U.S.
government agencies and $1.2 billion privately issued by publicly owned
financial institutions. The portfolio does not hold any securities backed by
sub-prime mortgage loans, collateralized debt obligations or collateralized loan
obligations. The Company holds no debt of corporate issuers. Net unrealized
losses on the Company's portfolio of available for sale debt securities totaled
$323 million at December 31, 2008. These unrealized losses were determined to be
temporary based on an assessment of the underlying cash flows, collateral values
and credit enhancements along with current and anticipated market conditions and
the Company's intent and ability to hold the securities until their fair values
recover.
Approximately $390 million of the privately issued mortgage-backed securities
consisted of Alt-A mortgage loans. Approximately 82% of these securities are
credit enhanced with additional collateral support and approximately 86% of our
Alt-A mortgage-backed securities represents pools of fixed-rate mortgage loans.
None of the adjustable rate mortgages are payment option ARMs. Approximately
$252 million of the privately issued mortgage-backed securities were rated below
investment grade by at least one nationally recognized rating agency. The
aggregate unrealized losses on securities rated below investment grade totaled
$92 million at December 31, 2008.
The securities portfolio also included $32 million of preferred stocks issued by
seven financial institutions. None of these institutions is in default and all
of the issuers are rated investment grade. The fair value of these preferred
stocks was $22 million at December 31, 2008. Based on an assessment of current
and anticipated market conditions, the Company determined that the $11 million
of unrealized losses on these securities were temporary.
The Company also has a portfolio of derivative contracts held for customer risk-
management programs and internal interest rate risk management programs. At
December 31, 2008, the fair value of all asset contracts totaled $453 million,
net of cash margin held by the Company. The largest net amount due from a single
counterparty, a subsidiary of an international energy company, to these
contracts at December 31 was $64 million. Letters of credit issued by
independent financial institutions further reduce our exposure to this customer
to $14 million.
Net losses on securities, derivatives and mortgage servicing rights totaled $8.5
million for the fourth quarter of 2008, compared with net gains of $915 thousand
for the third quarter of 2008 and net losses of $8.1 million for the fourth
quarter of 2007.
Quarter Ended
December 31 September 30 December 31
2008 2008 2007
---- ----- ----
Gain on available
for sale securities $ 5,067 $ 917 $1,102
Other than temporary impairment
of preferred stocks - - (8,641)
Gain (loss) on derivative contracts (2,219) 4,366 1,529
Gain on mortgage hedge
securities 15,089 1,186 1,288
Loss on change in fair value
of mortgage servicing rights (26,432) (5,554) (3,344)
-------- ------- -------
Loss on mortgage servicing rights
net of mortgage hedge securities (11,343) (4,368) (2,056)
------- ------- -------
Net gain (loss) on securities, derivatives
and mortgage servicing rights $(8,495) $ 915 $(8,066)
======= ======= =======
The fair value of our mortgage servicing rights was $43 million at December 31,
2008. During the fourth quarter of 2008, the fair value of mortgage servicing
rights declined by $26.4 million due largely to a significant increase in
anticipated prepayment speeds in response to government programs to lower
mortgage interest rates. We maintain a portfolio of mortgage-backed securities
as an economic hedge against changes in the fair value of our servicing rights.
However, disconnection between current yields on these securities and current
commitment rates for mortgage loans limited the effectiveness of the economic
hedge.
Liquidity and Capital
The Company maintains diverse sources of liquidity, including deposits, federal
funds purchased from other banks and borrowings from the Federal Home Loan
Banks. Liquidity improved during the fourth quarter by decreasing net amounts
funded into margin accounts to support customer derivative contracts by $311
million and increasing deposit account balances by $396 million. The decrease in
net amounts funded into margin accounts was due to effect of lower energy prices
on the fair value of derivative contracts. Time deposits increased by $366
million due primarily to a $209 million increase in deposits placed by other
financial institutions through the CDARS deposit program and a $150 million
increase in retail time deposits. Increased liquidity funded a $337 million net
increase in the available for sale securities portfolio, net loan growth of $196
million and a $197 million reduction in borrowed funds.
Net loan growth consisted of a $138 million increase in commercial loans and an
$83 million increase in residential mortgage loans, partially offset by a $13
million decrease in commercial real estate loans and a $12 million decrease in
consumer loans. The outstanding balance of energy loans increased $212 million,
partially offset by decreases in the manufacturing, agriculture and
wholesale/retail sectors. Residential construction and land development loans
decreased $42 million, largely offset by growth in the multifamily residential
sector of the commercial real estate loan portfolio.
The Company elected to participate in the FDIC's Temporary Liquidity Guaranty
Program. This program provides deposit insurance coverage for the full amount of
customer funds in non-interest bearing, transaction accounts through the end of
2009. It also fully guarantees certain debt issued on or before June 30, 2009
through the earlier of maturity of the debt or June 30, 2012.
The Company and each of its subsidiary banks exceeded the regulatory definition
of well capitalized at December 31, 2008. The Company's Tier 1 and tangible
common equity ratios were 9.42% and 6.64%, respectively, at December 31, 2008.
The decrease in tangible common equity ratio was due primarily to an increase in
temporary unrealized losses on available for sale securities. Tier 1 and
tangible common equity ratios were 9.25% and 7.16%, respectively, at September
30, 2008. In addition, the Company's total capital ratio was 12.84% at December
31, 2008 and 12.55% at September 30, 2008. The Company maintained its cash
dividend of $0.225 per common share during the fourth quarter.
The Company evaluated the U.S. Treasury's TARP Capital Purchase Program. The
TARP program allows participating banks to increase capital by issuing preferred
stock and common stock warrants to the U.S. government. The Company elected not
to participate in the TARP program.
Fees and Commission Revenue
Fees and commissions revenue totaled $109.9 million for the fourth quarter of
2008, $126.7 million for the third quarter of 2008, and $113.4 million for the
fourth quarter of 2007. The $16.8 million reduction in fees and commissions
revenue from the previous quarter was due primarily to a $7.3 million decrease
in brokerage and trading revenue, a $3.0 million decrease in trust fees and a
$1.6 million decrease in fees earned on margin assets. Brokerage and trading
revenue for the third quarter of 2008 included a $6.7 million net partial
recovery of losses on derivative contracts with two bankrupt counterparties that
did not recur in the fourth quarter. The fair value of trust assets at December
31, 2008 decreased $2.8 billion or 8% compared with September 30, 2008. The fair
value of trust assets is a primary driver of trust fees. Average margin assets,
which are held primarily as part of the Company's customer derivative programs,
totaled $121 million in the fourth quarter of 2008 and $532 million in the third
quarter of 2008. An increase in net interest revenue due to lower funding costs
offset the decrease in revenue from margin assets.
Operating Expenses
Operating expenses totaled $185.4 million for the fourth quarter of 2008, up
$21.2 million over the preceding quarter. Excluding changes in the fair value of
mortgage servicing rights, operating expenses increased $274 thousand over the
third quarter of 2008. Personnel expense increased $146 thousand. Lower
incentive compensation largely offset growth in salary expense. In addition, the
Company reversed a $1.7 million charge for its obligation to support a
settlement of litigation between Visa, Inc and Discover Financial Services
initially recognized in the third quarter of 2008.
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., Bank of
Kansas City, N.A., BOSC, Inc., Cavanal Hill Investment Management, Inc., the
TransFund electronic funds network, and Southwest Trust Company, N.A. Shares of
BOK Financial are traded on the NASDAQ under the symbol BOKF. For more
information, visit www.bokf.com.
The Company will continue to evaluate critical assumptions and estimates, such
as the adequacy of the allowance for credit losses and asset impairment as of
December 31, 2008 through the date its financial statements are filed with the
Securities and Exchange Commission and will adjust amounts reported if
necessary.
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.