Exhibit 99(a)
BOK Financial Reports $52 Million Second Quarter Income
Net Interest Revenue Growth Drives Earnings
TULSA, Okla. (Wednesday July 29, 2009) - BOK Financial Corporation reported net
income of $52.1 million or $0.77 per diluted share for the second quarter of
2009. Net income totaled $55.0 million or $0.81 per diluted share for the first
quarter of 2009 and a net loss of $1.2 million or $0.02 per diluted share was
recognized in second quarter of 2008. Net income for the six months ended June
30, 2009 totaled $107.1 million or $1.58 per diluted share compared with net
income of $61.1 million or $0.90 per diluted share for the six months ended June
30, 2008. The second quarter of 2008 was impacted by $87.0 million of pre-tax
charges for loan and energy derivative credit exposure related to the bankruptcy
filing by SemGroup LP and related entities which reduced net income for the
second quarter of 2008 by approximately $57.0 million or $0.84 per diluted
share.
In the second quarter of 2009, the Company incurred an $11.8 million pre-tax
charge for a special assessment by the FDIC and recognized net pre-tax gains on
available for sale securities of $15.2 million. In the first quarter of 2009,
the Company recognized net pre-tax gains on available for sale securities of
$7.2 million.
"BOK Financial is pleased to report net interest growth and solid fee revenue
for the second quarter of 2009," said President and CEO Stan Lybarger. "The
growth from our diversified revenue sources continues to enhance our strong
capital and liquidity position. However, declining loan demand may challenge
future net interest revenue and mortgage banking revenue until the economy
begins to recover."
Highlights of the second quarter of 2009 included:
o Net interest revenue totaled $175.6 million, up $5.7 million compared
to the first quarter of 2009. Net interest margin was 3.55% for the
second quarter of 2009, up 8 basis points over the first quarter of
2009 due largely to higher loan yields and lower funding costs.
o Fees and commissions revenue totaled $123.1 million for the second
quarter of 2009. Mortgage banking revenue remained at relative high
levels due to increased loan volume driven by government initiatives
to lower national mortgage interest rates.
o Operating expenses totaled $175.8 million, up $10.0 million over the
first quarter of 2009. Increased operating expenses included an $11.8
million FDIC special assessment.
o Combined reserve for credit losses totaled $274 million or 2.27% of
outstanding loans at June 30, 2009, up from $262 million or 2.07% of
outstanding loans at March 31, 2009. Net loans charged off and
provision for credit losses were $34.9 million and $47.1 million,
respectively, for the second quarter of 2009.
o Non-performing assets totaled $446 million or 3.67% of outstanding
loans and repossessed assets at June 30, 2009. Non-performing assets
totaled $414 million or 3.26% of outstanding loans and repossessed
assets at March 31, 2009.
o Outstanding loan balances were $12.1 billion at June 30, 2009, down
$570 million since March 31, 2009. Commercial, commercial real estate
and consumer loans all decreased during the second quarter due largely
to reduced customer demand.
o Average deposit balances totaled $15.3 billion for the second quarter
of 2009, up $479 million compared with average deposits for the first
quarter of 2009. Total period-end deposits were $14.7 billion at June
30, 2009, down $615 million since March 31, 2009 due largely to lower
brokered time deposit account balances.
o The Company's tangible common equity ratio and tier 1 common equity
ratio increased to 7.55% and 9.77%, respectively, at June 30, 2009
from 6.84% and 9.58%, respectively, at March 31, 2009 due largely to
lower unrealized losses on securities. The tangible common equity
ratio and tier 1 common equity ratio are non-GAAP measures of capital
strength used by the Company and investors based on shareholders'
equity as defined by generally accepted accounting principles minus
intangible assets and equity that does not benefit common shareholders
such as preferred equity and equity provided by the U.S. Treasury's
TARP Capital Purchase Program. The Company chose not to participate in
the U.S. Treasury's TARP Capital Purchase Program. Tier 1 capital
ratios were 9.86% at June 30, 2009 and 9.66% at March 31, 2009.
o The Company paid a cash dividend of $16.2 million or $0.24 per common
share during the second quarter of 2009. On July 28, 2009, the board
of directors declared a cash dividend of $0.24 per common share
payable on or about August 28, 2009 to shareholders of record as of
August 14, 2009.
Net Interest Revenue
Net interest revenue totaled $175.6 million, up $5.7 million compared to the
first quarter of 2009 and $16.6 million or 10% over the second quarter of 2008.
Net interest margin was 3.55% for the second quarter of 2009, 3.47% for the
first quarter of 2009 and 3.44% for the second quarter of 2008. The increase in
net interest margin over the previous quarter resulted from lower funding costs,
partially offset by a decrease in the yield on earning assets. The cost of
interest-bearing liabilities decreased 19 basis points, including a 27 basis
point decrease in the cost of interest-bearing deposits and a 5 basis point
decrease in the cost of other borrowed funds. The yield on average earning
assets for the second quarter of 2009 decreased 10 basis points compared with
the previous quarter. Securities yields decreased 42 basis points and loan
yields increased 8 basis points.
In addition to changes due to net interest margin, net interest revenue
increased due to earning asset growth. Average earning assets grew $205 million
during the second quarter of 2009, primarily due to a $542 million increase in
average securities, primarily mortgage-backed securities issued by U.S.
government agencies, partially offset by a decrease of $382 million in average
outstanding loans.
Average deposits increased $479 million compared with the first quarter of 2009,
including a $243 million increase in average interest-bearing transaction
accounts, a $319 million increase in average demand deposits, and a $91 million
decrease in average time deposits. Average funds purchased, repurchase
agreements and other borrowed funds decreased $452 million from the first
quarter of 2009.
Fees and Commissions Revenue
Fees and commissions revenue totaled $123.1 million for the second quarter of
2009, $121.5 million for the first quarter of 2009 and $63.7 million for the
second quarter of 2008. Fees and commissions revenue for the second quarter of
2008 included a $60.7 million charge to adjust SemGroup LP derivative contracts
to fair value. The $1.6 million increase in fees and commissions revenue from
the previous quarter was primarily due to increases in transaction card revenue,
mortgage banking revenue and deposit service charges partially offset by
decreased brokerage and trading revenue. Mortgage banking revenue totaled $19.9
million for the second quarter of 2009 and $18.5 million for the first quarter
of 2009, well above historic norms. Mortgage loan originations totaled $1.0
billion for the second quarter of 2009, up $315 million over the previous
quarter due to government initiatives to lower national mortgage interest rates.
Mortgage loan originations totaled $289 million in the second quarter of 2008.
Operating Expenses
Operating expenses totaled $175.8 million for the second quarter of 2009, up
$10.0 million from the preceding quarter. Changes in the fair value of mortgage
servicing rights reduced operating expenses by $7.9 million in the second
quarter of 2009 and $2.0 million in the first quarter of 2009. The increase in
the fair value of mortgage servicing rights resulted from the effect of changes
in interest rates on anticipated prepayment speeds, potential earnings on escrow
funds and discount rates. Excluding mortgage servicing rights, operating expense
increased $15.9 million primarily due to an $11.8 million FDIC insurance special
assessment in the second quarter of 2009 and increased personnel expenses of
$3.6 million. Operating expenses totaled $159.3 million for the second quarter
of 2008.
Credit Quality
Non-performing assets continued to increase during the second quarter of 2009.
"We are pleased to acknowledge that the non-performing asset growth rate has
decreased over the past three quarters", Lybarger said. "We continue to
aggressively address credit quality through evaluation and improvement of our
loan portfolio and proactively manage non-performing assets in a manner that
maximizes their value."
Non-performing assets totaled $446 million or 3.67% of outstanding loans and
repossessed assets at June 30, 2009 which consisted of non-accruing loans of
$353 million, renegotiated loans of $17 million (including $11 million of
residential mortgage loans guaranteed by U.S. government agencies) and $75
million of real estate and other repossessed assets. Non-accruing energy loans
included $47 million that represents approximately one-third of the
pre-bankruptcy amount due from SemGroup LP. Subsequent to June 30, the Company
sold $25 million of the face amount of its SemGroup bankruptcy claims which will
reduce non-accruing loans by $13.2 million.
Non-accruing loans totaled $353 million or 2.92% of outstanding loans at June
30, 2009, compared with $339 million or 2.68% of outstanding loans at March 31,
2009 and $149 million or 1.19% of outstanding loans at June 30, 2008.
Approximately $207 million of non-accruing loans have been charged-down to
reported values of $99 million, amounts management expects to recover. During
the second quarter of 2009, $72 million of new non-accruing loans were
identified, offset by $27 million in charge offs, $20 million in foreclosures
and $9 million in payments.
Approximately $106 million or 20% of loans in the Arizona market were
non-accruing at June 30, 2009, down from $112 million at March 31, 2009.
Non-accruing loans in Oklahoma and Texas, the Company's largest markets, totaled
$108 million or 1.96% of outstanding loans and $52 million or 1.49% of
outstanding loans in the respective markets, at June 30, 2009. Non-accruing
loans in New Mexico and Colorado markets totaled $30 million and $46 million,
respectively, up approximately $12 million and $7 million, respectively. Less
than 5% of outstanding loans in these respective markets at June 30, 2009 were
non-accruing.
Non-accruing commercial loans totaled $127 million or 1.88% of total commercial
loans at June 30, 2009. Non-accruing commercial loans have decreased $2.0
million since March 31, 2009.
Non-accruing commercial real estate loans totaled $190 million or 7.26% of
outstanding commercial real estate loans at June 30, 2009. Total non-accruing
commercial real estate loans increased $14 million since March 31, 2009,
primarily due to a $7 million increase in loans secured by retail facilities in
the Arizona market and a $4 million increase in loans secured by commercial
office buildings. Non-accruing commercial real estate loans attributed to
various markets included $100 million or 38% of total commercial real estate
loans in Arizona, $32 million or 12% of commercial real estate loans in
Colorado, $28 million or 3% of commercial real estate loans in Oklahoma and $18
million or 6% of commercial real estate loans in New Mexico.
Non-accruing residential mortgage loans totaled $36 million or 1.96% of
outstanding residential mortgage loans at June 30, 2009, a $1.7 million increase
over March 31, 2009. The distribution of non-accruing residential mortgage loans
among various markets included $12 million or 3.38% of mortgage loans in Texas,
$11 million or 0.90% of mortgage loans in Oklahoma and $5 million or 8.99% of
mortgage loans in Arizona. Mortgage loans past due 30 to 90 days were $27
million at June 30, 2009 compared to $28 million at March 31, 2009.
The combined reserve for credit losses totaled $274 million or 2.27% of
outstanding loans and 78% of non-accruing loans at June 30, 2009. The allowance
for loan losses was $263 million and the reserve for off-balance sheet credit
losses was $11 million. During the second quarter of 2009, the Company
recognized a $47.1 million provision for credit losses. Net losses charged
against the allowance for loan losses totaled $34.9 million or 1.13% annualized
of average outstanding loans.
Real estate and other repossessed assets totaled $75 million at June 30, 2009,
up $14 million from March 31, 2009. Real estate and other repossessed assets
increased by $20 million in additions offset by $6 million in sales. Real estate
and other repossessed assets included $43 million of 1-4 family residential
properties and residential land development properties, $17 million of developed
commercial real estate properties, $7 million of equipment, $5 million of
undeveloped land and $2 million of automobiles. The distribution of real estate
owned and other repossessed assets among various markets included $25 million in
Arizona, $17 million in Texas, $8 million in New Mexico, $7 million in Kansas
City, $6 million in Arkansas, $6 million in Oklahoma, and $5 million in
Colorado.
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 $346 million at June 30, 2009. These loans are primarily to
borrowers in the Company's primary market areas, including $243 million in
Oklahoma, $39 million in Arkansas, $19 million in New Mexico, $17 million in
Texas and $14 million in Kansas City. At June 30, 2009, approximately 4.30% of
these loans are non-performing and 6% were past due 30 to 90 days. A separate
reserve for credit risk of $10.8 million is available for losses on these loans.
Securities and Derivatives
The Company's portfolio of available for sale securities totaled $7.2 billion at
June 30, 2009, up $233 million since March 31, 2009. The increase in the
securities portfolio included $100 million of net securities purchased and a
$133 million increase in the net fair value. The available for sale portfolio
consisted primarily of mortgage-backed securities, including $5.8 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
securities totaled $128 million at June 30, 2009, a $133 million improvement
from March 31, 2009. Net unrealized gains on mortgage-backed securities issued
by U.S. government agencies increased by $20 million and net unrealized losses
on privately-issued mortgage backed securities decreased by $106 million.
Approximately $506 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 $148 million at June 30, 2009. Aggregate unrealized losses on
these same securities were $191 million at March 31, 2009. The Company
recognized a $279 thousand other-than-temporary impairment charge against
earnings in the second quarter related to certain mortgage-backed securities due
to further declines in the projected cash flows. Other-than-temporary impairment
of $7.0 million was recognized in earnings in the first quarter of 2009 from
these same securities.
Net unrealized losses on perpetual preferred stocks issued by other financial
institutions totaled $2.9 million at June 30, 2009 and $8.3 million at March 31,
2009. No other-than-temporary impairment charge was recognized on these
securities during the second quarter of 2009.
Net gains on securities totaled $6.5 million for the second quarter of 2009,
compared with a net gain of $20.1 million for the first quarter of 2009 and a
net loss of $5.2 million for the second quarter of 2008.
Three Months Ended
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June 30, March 31, June 30,
2009 2009 2008
Gain on available for sale securities $ 16,670 $ 22,226 $ 276
Loss on mortgage hedge securities (10,199) (2,118) (5,518)
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Net gain (loss) on securities $ 6,471 $ 20,108 $(5,242)
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Gain (loss) on change in fair value of
mortgage servicing rights $7,865 $1,955 $ (767)
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The Company recognized $16.7 million of gains on the sale of $1.2 billion of
available for sale securities in the second quarter of 2009. These securities
were purchased at deep discounts near the beginning of the recent market
disruption. Securities sold were low coupon U.S. government agency issued
mortgage-backed securities. These were replaced with higher coupon securities
that will have superior future yields. The Company intends to sell an additional
$91 million of similar securities after June 30. The current fair value of these
securities was below their amortized cost and the Company recognized $1.3
million in other-than-temporary impairment charges on these securities during
the second quarter.
BOK Financial also maintains a portfolio of mortgage-backed securities issued by
U.S. government agencies as an economic hedge against changes in the fair value
of mortgage servicing rights. The fair value of mortgage servicing rights
increased $7.9 million and the fair value of mortgage hedge securities decreased
$10.2 million during the second quarter of 2009.
The Company has a portfolio of derivative contracts held for customer risk
management programs and internal interest rate risk management programs. At June
30, 2009, the fair value of all asset contracts totaled $463 million, net of
cash margin held by the Company. The largest net amount due from a single
counterparty, a domestic subsidiary of a major energy company, at June 30, 2009
was $164 million. This amount was offset by $140 million in letters of credit
issued by independent financial institutions.
Balance Sheet Management
Outstanding loans at June 30, 2009 were $12.1 billion, down $570 million from
March 31, 2009. Loan balances were lower across most sectors of the loan
portfolio and markets due to reduced customer demand in response to current
economic conditions, normal repayment trends and management decisions to
mitigate credit risk by exiting certain loan type and relationships. Commercial
loans decreased $386 million from March 31, 2009, primarily due to a decrease of
$126 million in energy sector loans and $106 million in wholesale/retail sector
loans. Commercial real estate loans decreased $120 million compared to the prior
quarter, primarily due to a $61 million decrease in construction and land
development, a $38 million decrease in multifamily and a $21 million decrease in
industrial sectors of the real estate loan portfolio. Residential mortgage loans
increased $14 million from the prior quarter primarily due to increased
originations driven by lower interest rates. Consumer loans decreased $78
million compared to the prior quarter primarily due to a $68 million decrease in
indirect automobile loans related to the previously announced decision to
curtail that business during the first quarter of 2009 in favor of a
customer-focused direct approach to consumer lending.
Total deposits decreased $615 million during the second quarter and totaled
$14.7 billion at June 30, 2009. Time deposit balances were down $852 million due
largely to a $492 million decrease in brokered deposits and reductions in
certain higher-costing retail accounts. Among our lines of business, commercial
banking deposits increased $522 million during the second quarter of 2009,
offset by decreased wealth management deposits of $472 million and decreased
consumer banking deposits of $47 million.
The Company and each of its subsidiary banks exceeded the regulatory definition
of well capitalized at June 30, 2009. The Company's Tier 1 and total capital
ratios were 9.86% and 13.34%, respectively, at June 30, 2009. The Company's Tier
1 and total capital ratios were 9.66% and 13.08%, respectively, at March 31,
2009. In addition, the Company's tangible common equity ratio was 7.55% at June
30, 2009 and 6.84% at March 31, 2009. The increase in tangible common equity
ratio was primarily due to retained earnings growth and reduced net unrealized
losses on available for sale securities.
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
June 30, 2009 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.