Exhibit 99 (a)
BOK Financial Reports $51 Million Third Quarter Income
Net Interest Revenue Growth Drives Earnings
TULSA, Okla. (Wednesday October 28, 2009) - BOK Financial Corporation reported
net income for the third quarter of 2009 of $50.7 million or $0.75 per diluted
share. Net income for the previous quarter totaled $52.1 million or $0.77 per
diluted share.
Net income for the nine months ended September 30, 2009 totaled $157.8 million
or $2.33 per diluted share compared with $117.8 million or $1.74 per diluted
share for the nine months ended September 30, 2008. Net income for the nine
months ended September 30, 2008 was impacted by $67.6 million of pre-tax charges
for loan and energy derivative credit exposure related to a customer bankruptcy
filing which reduced net income by approximately $43.9 million or $0.65 per
diluted share.
"BOK Financial is pleased with solid performance this quarter, especially
considering the continued challenges we see in the economy," said President and
CEO Stan Lybarger. "Earnings for the third quarter were based on continued net
interest revenue growth, solid fee revenue and controlled operating expenses.
The fair value of our securities portfolio improved by $159 million which
further strengthened our balance sheet and capital position. However, we
recognize the banking industry is far from the end of this depressed credit
cycle and we added $19 million to our reserves for credit losses in response to
an increase in our non-performing assets."
Highlights of the third quarter of 2009 included:
o Net interest revenue totaled $180.5 million, up $4.9 million compared to
the second quarter of 2009. Net interest margin was 3.63% for the third
quarter of 2009, up 8 basis points over the second quarter of 2009 largely
due to higher loan yields and lower funding costs.
o Fees and commission revenue totaled $120.0 million, down $3.1 million from
the previous quarter. Mortgage banking revenue decreased $6.7 million due
to lower volume of loans originated during the quarter. Brokerage and
trading revenue and deposit service charges increased over the previous
quarter.
o Operating expenses totaled $178.7 million, up $3.0 million over the second
quarter of 2009. Net losses and operating expenses of repossessed assets
and personnel expenses increased over the previous quarter.
o Combined reserve for credit losses totaled $293 million or 2.52% of
outstanding loans at September 30, 2009, up from $274 million or 2.27% of
outstanding loans at June 30, 2009. Net loans charged off and provision for
credit losses were $36.0 million and $55.1 million, respectively, for the
third quarter of 2009.
o Non-performing assets totaled $490 million or 4.19% of outstanding loans
and repossessed assets at September 30, 2009 compared to $446 million or
3.67% of outstanding loans and repossessed assets at June 30, 2009.
o Available for sale securities totaled $8.4 billion, at September 30, 2009,
up $1.1 billion since June 30, 2009. The increase consisted of $1.0 billion
of net securities purchased during the quarter and a $159 million net
increase in the fair value of securities held in the portfolio. Purchased
securities consisted primarily of mortgage-backed securities issued by U.S.
government agencies.
o Outstanding loan balances were $11.6 billion at September 30, 2009, down
$458 million since June 30, 2009. All major loan categories decreased
during the third quarter largely due to reduced customer demand, normal
repayment trends and management decisions to exit certain loan types.
o Average deposit balances totaled $15.1 billion for the third quarter of
2009, down $202 million compared with average deposits for the second
quarter of 2009. Total period-end deposits grew $440 million in the third
quarter of 2009 to $15.1 billion. Growth in demand and interest-bearing
transaction deposits was partially offset by decreases in higher-costing
time deposits.
o Tangible common equity ratio and tier 1 common equity ratio increased to
7.78% and 10.45%, respectively, at September 30, 2009 from 7.55% and 9.77%,
respectively, at June 30, 2009 largely due 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 in the United States of America ("GAAP") minus intangible assets
and equity that does not benefit common shareholders such as preferred
equity and equity provided by the U.S. Treasury's Troubled Asset Relief
Program ("TARP") Capital Purchase Program. We chose not to participate in
the TARP Capital Purchase Program. Tier 1 capital ratios were 10.56% at
September 30, 2009 and 9.86% at June 30, 2009.
o The Company paid a cash dividend of $16.3 million or $0.24 per common share
during the third quarter of 2009. On October 27, 2009, the board of
directors declared a cash dividend of $0.24 per common share payable on or
about December 2, 2009 to shareholders of record as of November 16, 2009.
Net Interest Revenue
Net interest revenue totaled $180.5 million, up $4.9 million over the second
quarter of 2009. Net interest margin was 3.63% for the third quarter of 2009 and
3.55% for the second quarter of 2009. The increase in net interest margin over
the previous quarter resulted from improved loan pricing and lower funding
costs. Loan yield increased 3 basis points over the previous quarter as wider
spreads continue to be priced into the loan portfolio. The increased loan yield
partially offset a 33 basis point decrease in securities portfolio yield. The
cost of interest-bearing liabilities decreased 22 basis points, including a 26
basis point decrease in the cost of interest-bearing deposits and a 9 basis
point decrease in the cost of other borrowed funds.
Average earning assets decreased $237 million during the third quarter of 2009,
primarily due to a decrease of $516 million in average outstanding loans and a
$110 million decrease in average residential mortgage loans held for sale,
partially offset by a $406 million increase in average securities, primarily
mortgage-backed securities issued by U.S. government agencies.
Average deposits decreased $202 million compared with the second quarter of
2009, due primarily to a $719 million decrease in average time deposits. The
Company chose not to renew certain higher-costing time deposits as they matured.
The decrease in time deposits was partially offset by a $308 million increase in
average interest-bearing transaction accounts and a $209 million increase in
average demand deposits. Average funds purchased, repurchase agreements and
other borrowed funds increased $189 million from the second quarter of 2009.
Fees and Commissions Revenue
Fees and commissions revenue totaled $120.0 million for the third quarter of
2009, down from $123.1 million for the second quarter of 2009. Mortgage banking
revenue totaled $13.2 million for the third quarter of 2009 and $19.9 million
for the second quarter of 2009, still well above historic levels. Mortgage loan
originations totaled $536 million for the third quarter of 2009, down from the
historic high of $1.0 billion in the second quarter of 2009 as the impact of
government initiatives to lower national mortgage interest rates began to
lessen. The decrease in mortgage-banking revenue was partially offset by growth
in brokerage and trading revenue and deposit service charges. Brokerage and
trading revenue increased $3.2 million primarily due to investment banking
activity. Deposit service charges increased $2.0 million due to higher overdraft
fees.
Operating Expenses
Operating expenses totaled $178.7 million for the third quarter of 2009, up $3.0
million from the preceding quarter. Operating expenses increased $10.8 million
due to changes in the fair value of mortgage servicing rights and decreased
$11.8 million due to an FDIC special assessment in the second quarter of 2009.
Excluding the impact of the change in the fair value of the mortgage servicing
rights and the FDIC special assessment, operating expense increased $3.9
million. Personnel expenses were up $1.8 million and net losses and operating
expenses of repossessed assets were up $2.5 million. All other operating
expenses were down $433 thousand due to Company-wide initiatives to control
operating expenses.
Credit Quality
Non-performing assets continued to increase across most sectors of the loan
portfolio and geographic markets during the third quarter of 2009.
Non-performing assets totaled $490 million or 4.19% of outstanding loans and
repossessed assets at September 30, 2009 which consisted of non-accruing loans
of $383 million, renegotiated loans of $17 million (including $11 million of
residential mortgage loans guaranteed by U.S. government agencies) and $90
million of real estate and other repossessed assets. Total non-performing assets
increased $44 million during the third quarter.
Non-accruing loans totaled $383 million or 3.30% of outstanding loans at
September 30, 2009, compared with $353 million or 2.92% of outstanding loans at
June 30, 2009. Approximately $111 million of non-accruing loans have been
charged-down from original values of $234 million to amounts management expects
to recover. During the third quarter of 2009, $105 million of new non-accruing
loans were identified, offset by $28 million in charge offs, $21 million in
foreclosures and $13 million in payments received. In addition, the Company sold
$25 million of the face amount of its SemGroup bankruptcy claims which reduced
non-accruing energy loans by $13 million.
Non-accruing commercial loans totaled $128 million or 2.01% of total commercial
loans at September 30, 2009. Non-accruing commercial loans increased $1.8
million since June 30, 2009. Newly identified non-accruing commercial loans
totaled $36 million, primarily in the energy and services sector of the
portfolio.
Non-accruing commercial real estate loans totaled $212 million or 8.30% of
outstanding commercial real estate loans at September 30, 2009. Total
non-accruing commercial real estate loans increased $23 million since June 30,
2009, including a $16 million increase in loans secured by land, residential
lots and residential construction properties, $4.7 million increase in loans
secured by retail facilities and a $3.7 million increase in loans secured by
commercial office buildings. Non-accruing commercial real estate loans
attributed to various markets included $99 million or 38% of commercial real
estate loans in Arizona, $39 million or 16% of commercial real estate loans in
Colorado, $31 million or 4% of commercial real estate loans in Oklahoma, $22
million or 6% of commercial real estate loans in New Mexico and $16 million or
3% of commercial real estate loans in Texas.
Non-accruing residential mortgage loans totaled $38 million or 2.09% of
outstanding residential mortgage loans at September 30, 2009, a $2.4 million
increase over June 30, 2009. The distribution of non-accruing residential
mortgage loans among various markets included $14 million or 4% of mortgage
loans in Texas, $12 million or 1% of mortgage loans in Oklahoma and $6 million
or 11% of mortgage loans in Arizona. Mortgage loans past due 30 to 89 days were
$32 million compared to $27 million at June 30, 2009.
The combined reserve for credit losses totaled $293 million or 2.52% of
outstanding loans and 77% of non-accruing loans at September 30, 2009. The
allowance for loan losses was $281 million and the reserve for off-balance sheet
credit losses was $12 million. During the third quarter of 2009, the Company
recognized a $55.1 million provision for credit losses. Net losses charged
against the allowance for loan losses totaled $36.0 million or 1.21% annualized
of average outstanding loans.
Real estate and other repossessed assets totaled $90 million at September 30,
2009, up $14 million from June 30, 2009. Real estate and other repossessed
assets increased by $21 million in additions offset by $4 million in sales and
$3 million in write-downs based on updated appraisals. Real estate and other
repossessed assets included $50 million of 1-4 family residential properties and
residential land development properties, $22 million of developed commercial
real estate properties, $8 million of undeveloped land, $7 million of equipment,
and $3 million of automobiles. The distribution of real estate owned and other
repossessed assets among various markets included $35 million in Arizona, $18
million in Texas, $8 million in New Mexico, $8 million in Colorado, $7 million
in Kansas City, $7 million in Oklahoma and $6 million in Arkansas.
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 $345 million at September 30, 2009. These loans are primarily to
borrowers in the Company's primary market areas, including $242 million in
Oklahoma, $38 million in Arkansas, $20 million in New Mexico, $17 million Kansas
City and $16 million in Texas. At September 30, 2009, approximately 4.81% of
these loans are non-performing and 6.27% were past due 30 to 89 days. A separate
reserve for credit risk of $11 million is available for losses on these loans.
Securities and Derivatives
Available for sale securities totaled $8.4 billion at September 30, 2009, up
$1.1 billion since June 30, 2009. The increase in the securities portfolio
included $1.0 billion of net securities purchased and a $159 million increase in
the net fair value. The available for sale portfolio consisted primarily of
mortgage-backed securities, including $6.9 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.
The Company continued a strategy to increase holdings of mortgage-backed
securities during the third quarter. This strategy recognizes attractive spreads
over funding costs on these securities. Credit risk is controlled by investing
in securities fully backed by U.S. government agencies. Interest rate risk is
mitigated by investing in short-duration securities that would have limited
extension exposure from rising interest rates.
The portfolio of available for sale securities had a net unrealized gain of $31
million at September 30, 2009, a $159 million improvement from June 30, 2009.
Net unrealized gains on mortgage-backed securities issued by U.S. government
agencies increased by $59 million and net unrealized losses on privately-issued
mortgage backed securities decreased by $82 million.
Approximately $635 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 $137 million at September 30, 2009. Aggregate losses on these same
securities were $182 million at June 30, 2009. The Company recognized a $3.4
million other-than-temporary impairment charge against earnings in the third
quarter related to certain mortgage-backed securities due to further declines in
the projected cash flows.
Net gains on securities totaled $12.3 million for the third quarter of 2009,
compared with $6.5 million for the second quarter of 2009 and $2.1 million for
the third quarter of 2008.
Three Months Ended
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Sept. 30, June 30, Sept. 30,
2009 2009 2008
Net gain on available for sale securities $ 8,706 $ 16,670 $ 917
Gain (loss) on mortgage hedge securities 3,560 (10,199) 1,186
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Net gain on securities $ 12,266 $ 6,471 $ 2,103
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Gain (loss) on change in fair value of
mortgage servicing rights $(2,981) $ 7,865 $ (5,554)
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The Company recognized $8.7 million of net gains on the sale of $377 million of
available for sale securities in the third quarter of 2009 and $16.7 million of
gains on the sale of $1.2 billion of available for sale securities in the second
quarter of 2009. This continues a program to sell low-coupon mortgage-backed
securities that were purchased at deep discounts near the beginning of the
current market disruption. Securities sold are replaced with securities that are
expected to have superior future total returns.
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
decreased $3.0 million and the fair value of mortgage hedge securities increased
$3.6 million during the third 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
September 30, 2009, the fair value of all asset contracts totaled $397 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 September 30,
2009 was $116 million. This amount was entirely offset by letters of credit
issued by independent financial institutions.
Loans, Deposits and Capital
Outstanding loans at September 30, 2009 were $11.6 billion, down $458 million
from June 30, 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 types. Commercial loans decreased
$346 million from June 30, 2009, primarily due to a decrease of $116 million in
service sector loans, $110 million in energy sector loans and $87 million in
wholesale/retail sector loans. Commercial real estate loans decreased $51
million compared to the prior quarter, primarily due to an $84 million decrease
in construction and land development offset by a $34 million increase in
multifamily sector loans. Residential mortgage loans decreased $4 million from
the prior quarter primarily due to a $14 million decrease in permanent mortgage
loans offset by a $10 million increase in home equity loans. Consumer loans
decreased $57 million compared to the prior quarter primarily due to a $66
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 increased $440 million during the third quarter and totaled $15.1
billion at September 30, 2009. Demand and interest-bearing transaction deposits
increased $637 million and $289 million, respectively, offset by a $487 million
decrease in time deposit balances as the Company decreased higher-cost
certificates of deposit. Among the lines of business, commercial banking
deposits increased $519 million during the third quarter of 2009, offset by
decreased consumer banking deposits of $91 million and decreased wealth
management deposits of $48 million.
The Company and each of its subsidiary banks exceeded the regulatory definition
of well capitalized at September 30, 2009. The Company's Tier 1 and total
capital ratios were 10.56% and 14.10%, respectively, at September 30, 2009. The
Company's Tier 1 and total capital ratios were 9.86% and 13.34%, respectively,
at June 30, 2009. In addition, the Company's tangible common equity ratio, a
non-GAAP measure, was 7.78% at September 30, 2009 and 7.55% at June 30, 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
September 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.