Is This The Start: Regional Bank Tumbles After Admitting To Previously Underreserved Energy Loss

Submitted by Tyler Durden on 01/13/2016 16:17 -0500

While the energy carnage over the past year has impaired commodities, mostly oil, and increasingly the equity and bond prices of US energy companies, so far one industry has been left relatively unscathed: banks. The reason for this was that over the past year banks have, in filings, earnings calls and investor meetings, taken every possible opportunity to assure investors they all overly provisioned for any potential losses stemming from their exposure to impaired energy loans (despite not one but two consecutive quarters of Jefferies earnings fiascos).

All of this changed today when BOK financial, a $31 billion regional financial services company based in Tulsa, Oklahoma with a $3.4 billion market cap lender covering the West South Central States region of the United States, announced that not only was it overly optimistic with its "previously forecasted a provision for credit losses of $3.5 million to $8.5 million", and as a result of a major loan impairment on just one energy producer it would have to take a dramatic $22.5 million in credit losses, but that things are slowly going from great to not so great when it also admitted that "we continued to see credit grade migration and increased impairment in our energy portfolio. The combination of factors necessitated a higher level of provision expense."

BOK Financial is the first bank to admit its rose-colored glasses no longer fit: we expect many more banks with billions in energy exposure to admit they too have been overly optimistic and to send their credit loss reserves soaring even as they have no choice but to admit major charge offs on existing loan portfolios.

But it's just a $22.5 million loss, what's the big deal? That may be a good question for the shareholder, who have taken the axe to BOKF stock, which just today has wiped out $300 million in market cap.

Full 8-K below:

BOK Financial Corporation (NASDAQ:BOKF) today announced that its provision for credit losses for the fourth quarter of 2015 is expected to be $22.5 million. The company had previously forecasted a provision for credit losses of $3.5 million to $8.5 million for the quarter.

Stacy Kymes, executive vice president, Corporate Banking, commented, “A single borrower reported steeper than expected production declines and higher lease operating expenses, leading to an impairment on the loan. In addition, as we noted at the start of the commodities downturn in late 2014, we expected credit migration in the energy portfolio throughout the cycle and an increased risk of loss if commodity prices did not recover to a normalized level within one year. As we are now into the second year of the downturn, during the fourth quarter we continued to see credit grade migration and increased impairment in our energy portfolio. The combination of factors necessitated a higher level of provision expense."

Steven Nell, chief financial officer, added, “Aside from the increased loan loss provision, fourth quarter results were softer than expected, largely due to lower fee income and expenses that were slightly above our forecasted range. As a result, net income for the fourth quarter, including the impact of the increased provision, is expected to be $58 million to $61 million, or $0.87 to $0.91 per diluted share. We will provide additional details on fourth quarter results, and update our guidance for the 2016 loan loss provision, when we announce earnings at the end of the month.”

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Wed, 01/13/2016 - 15:53 | 7042123 Yes We Can. But...

WVU hoops, with their pressing style, is fun to watch. Wouldn't be too surprised if they win the conference this year.

Wed, 01/13/2016 - 17:14 | 7042608 Squid Viscous

ok so you were wrong, time to get a map or fuck your cousin whichever is more convenient

Wed, 01/13/2016 - 15:23 | 7041936 franzpick

If the withdrawal lines outside are moving counter-clockwise, BOK is going down the drain. Oh wait...

Wed, 01/13/2016 - 15:24 | 7041938 wmbz

Sorry you little shit banks are not to big to fail.

So fuck off...Signed Goldman,JP & The Boyz of Banksters Inc.

Wed, 01/13/2016 - 15:56 | 7042140 HardlyZero

This happened last year in China, but they have ways to fix em'.

Not sure anything will work in the West...that has not already been printed.

Wed, 01/13/2016 - 15:27 | 7041961 lunaticfringe

Mercy for banks? Fuck them- I'm fresh out.

Wed, 01/13/2016 - 15:27 | 7041963 NEOSERF

You know this is just the beginning when the market is down 350 pts and GM is in the green...Easy 15-20% and more depending on who BKs during that first downleg.

Wed, 01/13/2016 - 15:59 | 7042165 HardlyZero

I have a SoylentGreen/MadMax theory about cars, the new poor-man RV's.

Just hop on and get out of town when things get rough.

4-seats...4-rooms. Might be the new accommodations.

Sad but true business opportunity...drive-up shower/baths for caravaner's.

Wed, 01/13/2016 - 16:18 | 7042288 Hitlery_4_Dictator

I'm seeing a ton more RV's pop up all over the place.

Wed, 01/13/2016 - 15:28 | 7041966 Thisisbullishright

And as we all knew, here comes the 3:15 ish - er market ramp!!!

Wed, 01/13/2016 - 15:28 | 7041968 firstdivision

Spotted: Blankfein and Dimon pooling their money together to get Powerball tickets. Buckle up bitches.

Wed, 01/13/2016 - 15:32 | 7041994 Yen Cross

Here comes the short covering, right on time.

VIX hammer engaged for vertical rampfest in equities.

Wed, 01/13/2016 - 15:35 | 7042016 Dr. Engali

Contagion, it's what's for dinner.

Wed, 01/13/2016 - 15:44 | 7042071 NoDebt

We're doing that "mind meld" thing again. See above.

Wed, 01/13/2016 - 16:06 | 7042203 Uchtdorf

Failed banks:

https://www.fdic.gov/bank/individual/failed/banklist.html

Wed, 01/13/2016 - 16:59 | 7042534 azusgm

Thanks for posting that list. Used to check it every week. Looks like Illinois has been having bank closures at a higher rate than other states. The page is worth revisiting on a regular basis again.

Wed, 01/13/2016 - 16:28 | 7042347 oklaboy

I do belive this is George Kaiser's bank, of Solyndra fame..

Wed, 01/13/2016 - 16:59 | 7042532 still kicking

I bet George personally is nice and insulated though

Wed, 01/13/2016 - 15:57 | 7042157 NoVa

how long have I been saying long SPXU and TLT?

nice day today - more tomorrow, next week and month -

NoVa

Wed, 01/13/2016 - 15:36 | 7042020 HardHatBanker

Comerica is next. Tons of shit energy deals made recently.

Wed, 01/13/2016 - 15:37 | 7042035 HardlyZero

PowerBall is looking better and better.

Wed, 01/13/2016 - 15:38 | 7042039 Goldbugger

The SHIT Is hitting.

https://uk.finance.yahoo.com/news/one-bank-telling-investors-sell-everyt...

Wed, 01/13/2016 - 15:52 | 7042120 CheapBastard

“This is about return of capital, not return on capital. In a crowded hall, exit doors are small,” it said.

ouch!

Wed, 01/13/2016 - 15:38 | 7042040 Bill of Rights

Eat dead crow you fuckers...

Wed, 01/13/2016 - 15:38 | 7042041 Yes We Can. But...

The bank EVP uses the term 'credit grade migration'. Is that so fucking 2016 or what. NOT CREDIT DOWNGRADES (too microaggressive), but credit grade migration.

Wed, 01/13/2016 - 15:50 | 7042109 yrad

Haha, nice catch.

Wed, 01/13/2016 - 15:42 | 7042065 surf0766

Wiil they get it back over 1900?

Wed, 01/13/2016 - 15:44 | 7042072 db51

yep

Wed, 01/13/2016 - 15:46 | 7042088 Harnar

PPT hasn't clocked in yet. Might be stuck in traffic.

Wed, 01/13/2016 - 15:50 | 7042112 playdoh

gonna be load of stops above 1900

guess where the overnight ramp will go..

Wed, 01/13/2016 - 16:01 | 7042177 Uchtdorf

I know. I know. It will go "off the lows." What do I win?

Wed, 01/13/2016 - 15:50 | 7042096 Yen Cross

Here we go, the blowhorn is blaming it on the weather again. Whacky markets eight years over bought have nothing to do with it.?

Where's Joe LaVorgna?

Wed, 01/13/2016 - 15:55 | 7042135 Mark Mywords

We bankrupted some folks.

Wed, 01/13/2016 - 15:58 | 7042163 Jack of All Trades

Low energy prices are unambiguously good for the economy!!!

Wed, 01/13/2016 - 16:06 | 7042209 NEOSERF

Maybe it is time for the major mortgage holders to take a look at the energy states and give us an update on how those loans are going and how well the bank is provisioned against a sharp default rate there...

Wed, 01/13/2016 - 16:08 | 7042221 Kassandra