BOK Financial(BOKF) - 2019 Q3 - Quarterly Report

Part I. Financial Information This part presents a comprehensive overview of the company's financial condition, operational results, market risks, and control environment Management's Discussion and Analysis of Financial Condition and Results of Operations Q3 2019 net income rose to $142.2 million, driven by the CoBiz acquisition, despite net interest margin compression Performance Summary Q3 2019 performance was marked by strong net income and EPS growth, significantly influenced by the CoBiz acquisition Q3 2019 Key Performance Indicators | Metric | Q3 2019 | Q2 2019 | Q3 2018 | | :--- | :--- | :--- | :--- | | Net Income | $142.2M | $137.6M | $117.3M | | Diluted EPS | $2.00 | $1.93 | $1.79 | | Net Interest Revenue | $279.1M | $285.4M | $240.9M | | Net Interest Margin | 3.01% | 3.30% | 3.21% | | Fees and Commissions Revenue | $186.1M | $176.1M | $166.2M | | Provision for Credit Losses | $12.0M | $5.0M | $4.0M | | Period-end Loans | $22.3B | $22.3B | - | | Period-end Deposits | $26.2B | $25.3B | - | | Common Equity Tier 1 Ratio | 11.06% | 10.84% | - | - The acquisition of CoBiz Financial in Q4 2018 significantly impacted results, contributing $40.6 million to net interest revenue and $20.8 million to operating expenses in Q3 2019[9][11] - The Board of Directors approved a quarterly cash dividend increase to $0.51 per common share, payable in November 2019[18] Results of Operations Operational results show strong revenue growth from the CoBiz acquisition, offset by a declining net interest margin Lines of Business Commercial Banking led net income growth, Consumer Banking doubled its income, while Wealth Management saw a decline Net Income by Line of Business (in thousands) | Line of Business | Q3 2019 | Q3 2018 | % Change | | :--- | :--- | :--- | :--- | | Commercial Banking | $101,573 | $84,964 | 20% | | Consumer Banking | $16,640 | $8,015 | 108% | | Wealth Management | $23,206 | $28,866 | (20)% | | Subtotal | $141,419 | $121,845 | 16% | - The operations of CoBiz were allocated to the operating segments starting in Q2 2019; prior to April 1, 2019, CoBiz operations were included in Funds Management and other[67] Financial Condition The company maintained a stable financial position with $43.1 billion in assets and strong capital ratios Market Risk The company manages interest rate risk through a rate-neutral strategy and economic hedges for Mortgage Servicing Rights Interest Rate Sensitivity on Net Interest Revenue (Next 12 Months) | Rate Shock | Estimated Impact (in thousands) | % Change | | :--- | :--- | :--- | | +200 bps | $(20,916) | (1.89)% | | -100 bps | $(28,509) | (2.57)% | MSR Asset and Hedge Sensitivity Analysis (in thousands) | Rate Shock | MSR Asset | MSR Hedge | Net Exposure | | :--- | :--- | :--- | :--- | | +50 bps | $33,176 | $(41,744) | $(8,568) | | -50 bps | $(42,387) | $39,600 | $(2,787) | - Management has established a LIBOR Transition Working Group to guide the company's transition process away from LIBOR, which is expected to be phased out after 2021[241] Controls and Procedures Management concluded that disclosure controls and internal controls over financial reporting were effective as of the period end - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[243] Consolidated Financial Statements – Unaudited (Item 1) This section presents the unaudited consolidated financial statements and accompanying notes for the period Consolidated Statements of Earnings The statements detail revenue, expenses, and net income for the three and nine months ended September 30, 2019 Consolidated Earnings Summary (in thousands) | Metric | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Net Interest Revenue | $279,096 | $240,883 | | Provision for Credit Losses | $12,000 | $4,000 | | Total Other Operating Revenue | $186,450 | $167,941 | | Total Other Operating Expense | $279,292 | $252,617 | | Net Income | $141,858 | $117,545 | Consolidated Balance Sheets The balance sheets present the company's assets, liabilities, and equity as of September 30, 2019 Consolidated Balance Sheet Summary (in thousands) | Account | Sep 30, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Total Assets | $43,127,205 | $38,020,504 | | Loans, net of allowance | $22,080,935 | $21,449,273 | | Total Deposits | $26,167,076 | $25,263,763 | | Total Liabilities | $38,289,540 | $33,577,459 | | Total Equity | $4,837,665 | $4,443,045 | Notes to Consolidated Financial Statements The notes provide critical disclosures on accounting policies, financial instruments, and upcoming standard adoptions - The company adopted the new lease accounting standard (ASU 2016-02) on January 1, 2019, which increased right-of-use assets and lease liabilities by $137 million with an immaterial effect on retained earnings[265] - The company is preparing to adopt the new credit loss standard, CECL (ASU 2016-13), on January 1, 2020, with an implementation team finalizing model validation and governance processes[267] Part II. Other Information This part covers legal proceedings, share repurchase activities, and a list of filed exhibits Item 1. Legal Proceedings The company faces several legal proceedings, including class action lawsuits, but believes a material loss is not probable - BOKF, NA is a defendant in a putative class action lawsuit from bondholders related to its role as trustee for municipal bonds where an employee previously violated company policies[378][381] - The company faces two putative class actions alleging excessive or improper overdraft fees, for which management believes a loss is not probable[386][387] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 336,713 shares of its common stock during the third quarter of 2019 Share Repurchases in Q3 2019 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2019 | 0 | N/A | | August 2019 | 311,713 | $77.23 | | September 2019 | 25,000 | $74.46 | | Total Q3 | 336,713 | ~$77.03 | Item 6. Exhibits This section lists all exhibits filed with the report, including required CEO and CFO certifications - Exhibits filed include CEO/CFO certifications (31.1, 31.2, 32) and Interactive Data Files (101)[477]