BOK Financial to Take 4Q Hit on MSR Valuation Change

BOK Financial in Oklahoma City will take a roughly $17 million earnings hit due to a change in the fair value of its mortgage servicing rights and a corresponding hedge.

The $32.8 million-asset company disclosed in a regulatory filing Wednesday that an increase in long-term interest rates, spurred by the results of the presidential election, increased the value of its MSR by nearly $37 million in the fourth quarter. At the same time, the company reported a $54 million loss on its MSR hedge.

BOK said it had maintained a hedge position since mid-2016 in order to reduce the impact of a 50-basis-point decrease in long-term interest rates. The hedge, however, created increased exposure to a rise in long-term rates.

BOK said that it recently decided to adjust the MSR hedge position, effectively locking in the negative earnings impact while “preventing further material losses from an increase or decrease in interest rates for the balance of the quarter.”