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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One) 

☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____________ to ______________                 

Commission File No. 001-37811

BOK FINANCIAL CORP

(Exact name of registrant as specified in its charter) 

Oklahoma									73-1373454
(State or other jurisdiction of Incorporation or Organization)									(IRS Employer Identification No.)
Bank of Oklahoma Tower
Boston Avenue at Second Street
Tulsa,			Oklahoma						74192
(Address of Principal Executive Offices)									(Zip Code)

 

(918) 588-6000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.       Yes  ý  No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ý  No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ý       Accelerated filer       ¨            

Non-accelerated filer   ¨    Smaller reporting company ☐

    Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes  ☐  No  ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 68,104,043 shares of common stock ($.00006 par value) as of March 31, 2022.

BOK Financial Corporation

Form 10-Q

Quarter Ended March 31, 2022

Index

Part I.  Financial Information
Management’s Discussion and Analysis (Item 2)			1
Market Risk (Item 3)			38
Controls and Procedures (Item 4)			42
Consolidated Financial Statements – Unaudited (Item 1)			43
Quarterly Financial Summary – Unaudited (Item 2)			91
Quarterly Earnings Trend – Unaudited			93
Part II.  Other Information
Item 1.  Legal Proceedings			94
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds			94
Item 6.  Exhibits			94
Signatures			95

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

Performance Summary

BOK Financial Corporation (“the Company”) reported net income of $62.5 million or $0.91 per diluted share for the first quarter of 2022. Net income was $117.3 million or $1.71 per diluted share for the fourth quarter of 2021 and $146.1 million or $2.10 per diluted share for the first quarter of 2021. Interest rate volatility driven by expectations of future Federal Reserve actions to address rising inflation as well as the the deepening conflict in Ukraine combined to significantly decrease our trading revenue, mortgage loan production volumes, and our net mortgage servicing rights valuation.

Pre-provision net revenue ("PPNR"), a non-GAAP measure, was $78.7 million for the first quarter of 2022, $135.2 million for the fourth quarter of 2021, and $163.4 million for the first quarter of 2021.

Highlights of the first quarter of 2022 included:

•Net interest revenue totaled $268.4 million, a decrease of $8.7 million compared to the fourth quarter of 2021 and $12.0 million compared to the first quarter of 2021. Average earning assets were $43.5 billion for the first quarter of 2022, $44.2 billion for the fourth quarter of 2021, and $44.2 billion for the first quarter of 2021. Net interest margin was 2.44 percent for the first quarter of 2022, 2.52 percent for the fourth quarter of 2021, and 2.62 percent for the first quarter of 2021.

•Fees and commissions revenue totaled $97.6 million, a decrease of $48.7 million compared to the fourth quarter of 2021 and $64.5 million compared to the first quarter of 2021. Brokerage and trading revenue decreased $41.9 million from the prior quarter and $47.9 million from the first quarter of 2021. Mortgage banking revenue also decreased $4.6 million from the previous quarter and $20.5 million compared to first quarter of 2021.

•The net cost of the changes in fair value of mortgage servicing rights and related economic hedges was $8.4 million for the first quarter of 2022 compared to a net benefit of $4.7 million for the fourth quarter of 2021 and a net benefit of $4.7 million for the first quarter of 2021.

•Other operating expense totaled $277.6 million, a decrease of $21.9 million compared to the previous quarter and a decrease of $18.2 million compared to the first quarter of 2021. Compared to the fourth quarter of 2021, personnel expense decreased $15.2 million, largely due to a decrease in incentive compensation expense. Non-personnel expense decreased $6.6 million as the fourth quarter of 2021 included a $5.0 million charitable donation to the BOKF Foundation that did not recur in the first quarter of 2022. Compared to the first quarter of 2021, personnel expense decreased $13.8 million due to lower incentive compensation costs. Non-personnel expenses decreased $4.4 million as lower mortgage banking costs, other expense and donations to the BOKF Foundation were partially offset by increased business promotion expenses, occupancy and equipment expenses, and data processing and communications expenses.

•Period-end outstanding loan balances totaled $20.7 billion at March 31, 2022, growing $469 million compared to December 31, 2021. Excluding a decrease in loans originated through the Small Business Administration's Paycheck Protection Program ("PPP"), outstanding loan balances increased $608 million. Commercial loans increased $377 million and commercial real estate loans increased $270 million. Average loan balances increased $221 million compared to the prior quarter to $20.5 billion.

•No provision for expected credit losses was necessary for the first quarter of 2022. A $17.0 million negative provision for expected credit losses was recorded in the prior quarter. The impact of continued strength in commodity prices and improved credit quality metrics was offset by higher required provision due to loan growth and changes in our economic outlook. The combined allowance for credit losses totaled $283 million or 1.38 percent of outstanding loans, excluding PPP loans, at March 31, 2022. The combined allowance for credit losses was $289 million or 1.45 percent of outstanding loans, excluding PPP loans, at December 31, 2021.

•Nonperforming assets not guaranteed by U.S. government agencies decreased $13 million compared to December 31, 2021. Potential problem loans decreased $53 million while other loans especially mentioned decreased $4.1 million. Net charge-offs were $6.0 million or 0.12 percent of average loans on an annualized basis for the first quarter of 2022, excluding PPP loans. Net charge-offs were 0.14 percent of average loans, excluding PPP loans, over the last four quarters. Net recoveries were $714 thousand or 0.01 percent of average loans on an annualized basis for the fourth quarter of 2021, excluding PPP loans.

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•Period-end deposits were $39.4 billion at March 31, 2022, a $1.8 billion decrease compared to December 31, 2021 due to expected seasonal activity from 2021 year-end balances. Average deposits increased $560 million, including a $243 million increase in demand deposits and a $317 million increase in interest bearing deposits.

•The common equity Tier 1 capital ratio at March 31, 2022 was 11.30 percent. Other regulatory capital ratios included the Tier 1 capital ratio at 11.31 percent, total capital ratio at 12.25 percent, and leverage ratio at 8.47 percent. At December 31, 2021, the common equity Tier 1 capital ratio was 12.24 percent, the Tier 1 capital ratio was 12.25 percent, total capital ratio was 13.29 percent, and leverage ratio was 8.55 percent.

•The Company repurchased 475,877 shares of common stock at an average price of $101.02 per share in the first quarter of 2022 and 128,522 shares at an average price of $104.46 in the fourth quarter of 2021. We view share buybacks opportunistically, but within the context of maintaining our strong capital position.

•The Company paid a regular cash dividend of $36.1 million or $0.53 per common share during the first quarter of 2022. On May 3, 2022, the board of directors approved a quarterly cash dividend of $0.53 per common share payable on or about May 25, 2022 to shareholders of record as of May 10, 2022.

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Results of Operations

Net Interest Revenue and Net Interest Margin

Net interest revenue is the interest earned on debt securities, loans and other interest-earning assets less interest paid for interest-bearing deposits and other borrowings. The net interest margin is calculated by dividing tax-equivalent net interest revenue by average interest-earning assets. Net interest spread is the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities. Net interest margin is typically greater than net interest spread due to interest income earned on assets funded by non-interest bearing liabilities such as demand deposits and equity.

Tax-equivalent net interest revenue totaled $270.4 million for the first quarter of 2022, $279.2 million for the fourth quarter of 2021, and $282.7 million for the first quarter of 2021. Compared to the fourth quarter of 2021, net interest revenue increased $3.8 million from changes in earning assets and decreased $12.6 million from changes in interest rates. Table 1 shows the effect on net interest revenue from changes in average balances and interest rates for various types of earning assets and interest-bearing liabilities.

Average earning assets decreased $744 million compared to the fourth quarter of 2021. Average trading securities were reduced by $723 million. Average loan balances increased $221 million, largely due to growth in commercial loans. The average balance of available for sale securities, which consists largely of residential and commercial mortgage-backed securities guaranteed by U.S. government agencies decreased $155 million. We purchase securities to supplement earnings and to manage interest rate risk. Interest-bearing cash and cash equivalents decreased $158 million.

Total average deposits grew by $560 million over the fourth quarter of 2021. Funds purchased and repurchase agreements decreased $889 million while other borrowings increased $268 million.

Net interest margin was 2.44 percent compared to 2.52 percent in the fourth quarter of 2021. The tax-equivalent yield on earning assets was 2.58 percent, a decrease of 8 basis points. The yield on trading securities was down 18 basis points to 1.71 percent, largely due to a decrease in the weighted average coupon rate. Loan yields decreased 13 basis points to 3.57 percent. Yields related to loan fees decreased 17 basis points from the prior quarter while core loan yields increased 4 basis points. PPP loan fees of $3.9 million were recognized in the first quarter of 2022 compared to $7.7 million in the previous quarter. PPP loan fees remaining to be recognized were $3.5 million as of March 31, 2022. The available for sale securities portfolio yield increased 5 basis points to 1.77 percent. The yield on fair value option securities increased 10 basis points to 2.81 percent.

Funding costs were 0.21 percent, consistent with the prior quarter. The cost of interest bearing deposits was unchanged at 0.12 percent. The cost of other borrowed funds increased 7 basis points to 0.74 percent. The benefit to net interest margin from assets funded by non-interest liabilities was 7 basis points for the first quarter of 2022, unchanged from the prior quarter.

Compared to the first quarter of 2021, tax-equivalent net interest revenue decreased $2.1 million from a reduction in average earning assets and $10.2 million from changes in interest rates. Net interest margin was 2.44 percent for the first quarter of 2022, compared to 2.62 percent for the first quarter of 2021.

Average earning assets decreased $717 million compared to the first quarter of 2021. Average loans decreased $2.3 billion, largely due to a reduction in PPP loans combined with purposeful deleveraging by our customers as borrowers continued to pay down during this time of economic uncertainty. Available for sale securities decreased $341 million. Average trading securities increased $1.6 billion due to increased customer demand for U.S. government agency mortgage-backed securities in 2021.

Total average deposits increased $3.8 billion compared to the first quarter of 2021 as customers retained higher balances due to economic uncertainty during the height of the pandemic. Other borrowings decreased $2.2 billion while funds purchased and repurchase agreements decreased $826 million.

The tax-equivalent yield on earning assets decreased 20 basis points compared to the first quarter of 2021. The yield on trading securities decreased 35 basis points due to a lower weighted average coupon rate. The available for sale securities portfolio yield decreased 7 basis points as principal cash flows received from maturities of the available for sale securities portfolio were reinvested at lower current market rates. Loan yields increased 2 basis points to 3.57 percent. The yield on fair value option securities was up 86 basis points.

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Funding costs decreased 3 basis points compared to the first quarter of 2021. The cost of other borrowed funds increased 44 basis points and the cost of interest-bearing deposits decreased 5 basis points. The benefit to net interest margin from earning assets funded by non-interest bearing liabilities was 7 basis points for the first quarter of 2022, a decrease of 1 basis point compared to the first quarter of 2021.

Our overall objective is to manage the Company’s balance sheet for changes in interest rates as is further described in the Market Risk section of this report. Approximately 77 percent of our commercial and commercial real estate loan portfolios are either variable rate or fixed rate that will reprice within one year. These loans are funded primarily by deposit accounts that are either non-interest bearing, or that reprice more slowly than the loans. The result is a balance sheet that would be asset sensitive, which means that assets generally reprice more quickly than liabilities. One of the strategies that we use to manage toward a relative rate-neutral position is to purchase fixed rate residential mortgage-backed securities issued primarily by U.S. government agencies and fund them with market-rate-sensitive liabilities. The liability-sensitive nature of this strategy provides an offset to the asset-sensitive characteristics of our loan portfolio. We also may use derivative instruments to manage our interest rate risk. 

The effectiveness of these strategies is reflected in the overall change in net interest revenue due to changes in interest rates as shown in Table 1 and in the interest rate sensitivity projections as shown in the Market Risk section of this report.

Table 1 -- Volume/Rate Analysis

(In thousands)

						Three Months Ended Mar. 31, 2022 / Dec. 31, 2021
												Change Due To1
						Change						Volume						Yield/Rate
Tax-equivalent interest revenue:
Interest-bearing cash and cash equivalents						$	(10)					$	(66)					$	56
Trading securities						(3,496)						758						(4,254)
Investment securities						(186)						(205)						19
Available for sale securities						2,380						827						1,553
Fair value option securities						189						173						16
Restricted equity securities						79						195						(116)
Residential mortgage loans held for sale						152						130						22
Loans						(8,474)						16						(8,490)
Total tax-equivalent interest revenue						(9,366)						1,828						(11,194)
Interest expense:
Transaction deposits						246						(104)						350
Savings deposits						(23)						2						(25)
Time deposits						(169)						(253)						84
Funds purchased and repurchase agreements						(594)						(1,882)						1,288
Other borrowings						(1)						281						(282)
Subordinated debentures						(28)						(14)						(14)
Total interest expense						(569)						(1,970)						1,401
Tax-equivalent net interest revenue						(8,797)						3,798						(12,595)
Change in tax-equivalent adjustment						(131)
Net interest revenue						$	(8,666)

1    Changes attributable to both volume and yield/rate are allocated to both volume and yield/rate on an equal basis.

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Table 1 -- Volume/Rate Analysis (continued)

(In thousands)

						Three Months Ended Mar. 31, 2022 / 2021
												Change Due To1
						Change						Volume						Yield/Rate
Tax-equivalent interest revenue:
Interest-bearing cash and cash equivalents						$	299					$	121					$	178
Trading securities						5,072						12,244						(7,172)
Investment securities						(418)						(498)						80
Available for sale securities						(662)						1,625						(2,287)
Fair value option securities						(5)						(187)						182
Restricted equity securities						(252)						(173)						(79)
Residential mortgage loans held for sale						14						(175)						189
Loans						(19,516)						(20,356)						840
Total tax-equivalent interest revenue						(15,468)						(7,399)						(8,069)
Interest expense:
Transaction deposits						(980)						235						(1,215)
Savings deposits						(13)						11						(24)
Time deposits						(1,259)						(630)						(629)
Funds purchased and repurchase agreements						3,350						(1,170)						4,520
Other borrowings						(2,184)						(2,129)						(55)
Subordinated debentures						(2,045)						(1,594)						(451)
Total interest expense						(3,131)						(5,277)						2,146
Tax-equivalent net interest revenue						(12,337)						(2,122)						(10,215)
Change in tax-equivalent adjustment						(328)
Net interest revenue						$	(12,009)

1    Changes attributable to both volume and yield/rate are allocated to both volume and yield/rate on an equal basis.

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Other Operating Revenue

Other operating revenue was $87.9 million for the first quarter of 2022, $157.4 million for the fourth quarter of 2021, and $177.1 million for the first quarter of 2021. Recent national and international events, including rising inflation, recent actions by the Federal Reserve to increase interest rates and expectations of future increases, and the deepening conflict in Ukraine combined to significantly decrease trading revenue and mortgage loan production volumes.

Table 2 – Other Operating Revenue 

(In thousands)

						Three Months Ended												Increase (Decrease)						% Increase (Decrease)						Three Months Ended Mar. 31, 2021						Increase (Decrease)						% Increase (Decrease)
						Mar. 31, 2022						Dec. 31, 2021
Brokerage and trading revenue						$	(27,079)					$	14,869					$	(41,948)					(282)		%				$	20,782					$	(47,861)					(230)		%
Transaction card revenue						24,216						24,998						(782)						(3)		%				22,430						1,786						8		%
Fiduciary and asset management revenue						46,399						46,872						(473)						(1)		%				41,322						5,077						12		%
Deposit service charges and fees						27,004						26,718						286						1		%				24,209						2,795						12		%
Mortgage banking revenue						16,650						21,278						(4,628)						(22)		%				37,113						(20,463)						(55)		%
Other revenue						10,445						11,586						(1,141)						(10)		%				16,296						(5,851)						(36)		%
Total fees and commissions revenue						97,635						146,321						(48,686)						(33)		%				162,152						(64,517)						(40)		%
Other gains (losses), net						(1,644)						6,081						(7,725)						N/A						10,121						(11,765)						N/A
Loss on derivatives, net						(46,981)						(4,788)						(42,193)						N/A						(27,650)						(19,331)						N/A
Gain (loss) on fair value option securities, net						(11,201)						1,418						(12,619)						N/A						(1,910)						(9,291)						N/A
Change in fair value of mortgage servicing rights						49,110						7,859						41,251						N/A						33,874						15,236						N/A
Gain on available for sale securities, net						937						552						385						N/A						467						470						N/A
Total other operating revenue						$	87,856					$	157,443					$	(69,587)					(44)		%				$	177,054					$	(89,198)					(50)		%

Certain percentage increases (decreases) in non-fees and commissions revenue are not meaningful for comparison purposes based on the nature of the item.

Fees and commissions revenue

Diversified sources of fees and commissions revenue are a significant part of our business strategy and represented 27 percent of total revenue for the first quarter of 2022, excluding provision for credit losses and gains and losses on other assets, securities and derivatives and the change in the fair value of mortgage servicing rights. Interest rate volatility during the first quarter had a significant negative impact to our mortgage-related fee businesses, reducing the ratio of fees and commissions from our historical range of 35 percent to 45 percent. We believe that a variety of fee revenue sources provides an offset to changes in interest rates, values in the equity markets, commodity prices and consumer spending, all of which can be volatile. Many of the economic factors such as rising interest rates that we expect will result in growth in net interest revenue or fiduciary and asset management revenue may also decrease mortgage banking production volumes and related trading, as we experienced in the first quarter of 2022. The velocity of changes in market conditions and interest rates may result in timing differences between when offsetting impacts and benefits are realized. As interest rates are expected to move higher, we expect to experience increased benefits to our net interest margin, which provides an offset to reduced mortgage-related fee income. Generally, for operating revenues not as directly related to movement in interest rates, we expect growth to come through offering new products and services and by further development of our presence in other markets. However, current and future economic conditions, including the recent impact of the COVID-19 pandemic, regulatory constraints, increased competition and saturation in our existing markets could affect the rate of future increases.

Brokerage and Trading Revenue

Brokerage and trading revenue, which includes revenues from trading, customer hedging, retail brokerage and investment banking, decreased $41.9 million or 282 percent compared to the fourth quarter of 2021 and $47.9 million or 230 percent compared to the first quarter of 2021.

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Trading revenue includes net realized and unrealized gains and losses primarily related to residential mortgage-backed securities guaranteed by U.S. government agencies and related derivative instruments that enable our mortgage banking customers to manage their production risk. Trading revenue also includes net realized and unrealized gains and losses on municipal securities and other financial instruments that we sell to institutional customers, along with changes in the fair value of financial instruments we hold as economic hedges against market risk of our trading securities. Trading revenue decreased $40.9 million to a net loss of $54.0 million compared to the prior quarter and decreased $57.8 million compared to first quarter of 2021. During 2021, to meet customer demand in response to expected tightening by the Federal Reserve and increasing rates, we increased the trading volume of short duration, low coupon U.S. government agency residential mortgage-backed securities, which led to record trading revenues in the third quarter of 2021. As inflation pressure increased in the first quarter of 2022 and the conflict in Ukraine intensified, fixed income markets were disrupted, reducing the demand for these securities. As of March 31, 2022, we have reduced our exposure to these securities by approximately 70 percent compared to December 31, 2021.

Customer hedging revenue is based primarily on realized and unrealized changes in the fair value of derivative contracts held for customer risk management programs. As more fully discussed under Customer Derivative Programs in Note 3 of the Consolidated Financial Statements, we offer commodity, interest rate, foreign exchange and equity derivatives to our customers. Customer hedging revenue totaled $10.9 million for the first quarter of 2022, an increase of $1.8 million over the prior quarter. Customer hedging revenue increased $8.3 million over the first quarter of 2021 due to growth in interest rate and energy contracts. Customer hedging revenue includes credit valuation adjustments of the fair value of derivatives to reflect the risk of counterparty default.

Revenue earned from retail brokerage transactions totaled $4.6 million for the first quarter of 2022, relatively unchanged compared to both the fourth quarter of 2021 and first quarter of 2021.

Investment banking, which includes fees earned upon completion of underwriting, financial advisory services and loan syndication fees, totaled $7.7 million for the first quarter of 2022, a decrease of $3.9 million compared to the fourth quarter of 2021, related to the timing and volume of completed transactions. Investment banking revenue increased $866 thousand over the first quarter of 2021.

Transaction Card Revenue

Transaction card revenue totaled $24.2 million for the first quarter of 2022, down slightly compared to the fourth quarter of 2021 due to seasonal factors. Transaction card revenue increased $1.8 million or 8 percent over the first quarter of 2021, largely due to stimulus measures and the broader reopening of the U.S. economy.

Fiduciary and Asset Management Revenue

Fiduciary and asset management revenue is earned through managing or holding of assets for customers and executing transactions or providing related services. Approximately 90 percent of fiduciary and asset management revenue is primarily based on the fair value of assets. Rates applied to asset values vary based on the nature of the relationship. Fiduciary relationships and managed asset relationships generally have higher fee rates than non-fiduciary and/or managed relationships. Fiduciary and asset management revenue was relatively unchanged compared to the fourth quarter of 2021 and increased $5.1 million or 12 percent compared to the first quarter of 2021, largely driven by an increase in trust and managed account fees from higher client asset balances. We had approximately $2.6 million in fee waivers during the first quarter of 2022, compared to approximately $3.0 million in fee waivers in the prior quarter and $2.8 million in the first quarter of 2021. We have voluntarily waived certain administration fees on the Cavanal Hill money market funds in order to maintain positive yields on these funds in the current short-term interest rate environment.

A distribution of assets under management or administration and related fiduciary and asset management revenue follows:

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Table 3 -- Assets Under Management or Administration

(In thousands)

			Three Months Ended
			March 31, 2022																		December 31, 2021																		March 31, 2021
			Balance1						Revenue2						Margin3						Balance1						Revenue2						Margin3						Balance1						Revenue2						Margin3
Managed fiduciary assets:
Personal			$	11,292,472					$	28,331					1.00		%				$	12,739,289					$	29,633					0.93		%				$	11,369,467					$	23,608					0.83		%
Institutional			18,592,153						9,995						0.22		%				17,477,280						7,536						0.17		%				15,144,797						6,818						0.18		%
Total managed fiduciary assets			29,884,625						38,326						0.51		%				30,216,569						37,169						0.49		%				26,514,264						30,426						0.46		%
Non-managed assets:
Fiduciary			31,210,695						5,107						0.07		%				34,320,264						6,647						0.08		%				29,713,004						9,286						0.13		%
Non-fiduciary			19,361,212						2,966						0.06		%				20,253,072						3,056						0.06		%				18,421,279						1,610						0.03		%
Safekeeping and brokerage assets under administration			20,624,823						—						—		%				20,127,816						—						—		%				17,307,641						—						—		%
Total non-managed assets			71,196,730						8,073						0.05		%				74,701,152						9,703						0.05		%				65,441,924						10,896						0.07		%
Total assets under management or administration			$	101,081,355					$	46,399					0.18		%				$	104,917,721					$	46,872					0.18		%				$	91,956,188					$	41,322					0.18		%

1 Assets under management or administration balance excludes $22 billion in assets under custody held by a sub-custodian where minimal revenue is recognized.

2    Fiduciary and asset management revenue includes asset-based and other fees associated with the assets.

3    Annualized revenue divided by period-end balance.

A summary of changes in assets under management or administration for the three months ended March 31, 2022 and 2021 follows:

Table 4 -- Changes in Assets Under Management or Administration

(In thousands)

						Three Months Ended March 31,
						2022						2021
Beginning balance						$	104,917,721					$	91,592,247
Net inflows (outflows)						(1,774,056)						(1,328,296)
Net change in fair value						(2,062,310)						1,692,237
Ending balance						$	101,081,355					$	91,956,188

Assets under management as of March 31, 2022 consist of 41 percent fixed income, 38 percent equities, 13 percent cash, and 8 percent alternative investments.

Deposit Service Charges and Fees

Deposit service charges and fees were relatively flat compared to the fourth quarter of 2021 and increased $2.8 million or 12 percent over the first quarter of 2021. Commercial accounts where lower earnings credit rates caused by the low interest rate environment have resulted in higher service charges and consumer activity has increased following the pandemic shut downs. Overdraft and non-sufficient funds fees earned primarily on consumer deposit accounts totaled $6.2 million for the first quarter of 2022, largely unchanged from the prior quarter and an increase of $1.6 million over the first quarter of 2021.

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Mortgage Banking Revenue

Mortgage banking revenue decreased $4.6 million or 22 percent compared to the fourth quarter of 2021 due to lower production volume combined with narrowing margins. Interest rate volatility and continued inventory shortages have resulted in fewer refinance opportunities and heightened competitive pricing pressure. Mortgage production volume decreased $93 million to $408 million. Production revenue as a percentage of production volume, which includes unrealized gains and losses on our mortgage commitment pipeline and related hedges, decreased 76 basis points to 1.24 percent.

Mortgage banking revenue decreased $20.5 million or 55 percent compared to the first quarter of 2021. Mortgage loan production volume decreased $442 million or 52 percent largely due to industry-wide housing inventory constraints and overall market conditions. Production revenue as a percentage of production volume decreased 174 basis points compared to the first quarter of 2021.

Table 5 – Mortgage Banking Revenue 

(In thousands)

						Three Months Ended												Increase (Decrease)						% Increase (Decrease)						Three Months Ended Mar. 31, 2021						Increase (Decrease)						% Increase (Decrease)
						Mar. 31, 2022						Dec. 31, 2021
Mortgage production revenue						$	5,055					$	10,018					$	(4,963)					(50)		%				$	25,287					$	(20,232)					(80)		%
Mortgage loans funded for sale						$	418,866					$	568,507																	$	843,053
Add: Current period end outstanding commitments						160,260						171,412																		387,465
Less: Prior period end outstanding commitments						171,412						239,066																		380,637
Total mortgage production volume						$	407,714					$	500,853					$	(93,139)					(19)		%				$	849,881					$	(442,167)					(52)		%
Mortgage loan refinances to mortgage loans funded for sale						45		%				51		%				(600)		bps										65		%				(2,000)		bps
Realized margin on funded mortgage loans						1.64		%				2.34		%				(70)		bps										3.10		%				(146)		bps
Production revenue as a percentage of production volume						1.24		%				2.00		%				(76)		bps										2.98		%				(174)		bps
Primary mortgage interest rates:
Average						3.82		%				3.08		%				74		bps										2.88		%				94		bps
Period end						4.67		%				3.11		%				156		bps										3.17		%				150		bps
Mortgage servicing revenue						$	11,595					$	11,260					$	335					3		%				$	11,826					$	(231)					(2)		%
Average outstanding principal balance of mortgage loans serviced for others						16,155,329						15,930,480						224,849						1		%				15,723,231						432,098						3		%
Average mortgage servicing revenue rates						0.29		%				0.28		%				1		bp										0.31		%				(2)		bp

Primary rates disclosed in Table 5 above represent rates generally available to borrowers on 30 year conforming mortgage loans.

Other Revenue

Other revenue decreased $1.1 million or 10 percent compared to the fourth quarter of 2021. Other revenue decreased $5.9 million or 36 percent compared to the first quarter of 2021 as a result of lower operating revenue from repossessed oil and gas assets due to the sale of properties during the prior year, which was largely offset by a reduction of expenses on the same properties.

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Net gains on other assets, securities and derivatives

Other gains and losses, net decreased $7.7 million compared to the fourth quarter of 2021 primarily related to changes in the fair value of rabbi trust investments that are largely offset by lower deferred compensation expense. Other gains and losses, net decreased $11.8 million compared to the first quarter of 2021. The first quarter of 2021 included a $14.1 million gain on the sale of an equity interest received as part of the workout of a defaulted energy loan, partially offset by additional operating expenses and a write-down of a repossessed oil and gas property, and a $3.6 million impairment of a merchant banking investment.

As discussed in the Market Risk section following, the fair value of our mortgage servicing rights ("MSRs") changes in response to changes in primary mortgage loan rates and other assumptions. We attempt to mitigate the earnings volatility caused by changes in the fair value of MSRs by designating certain financial instruments as an economic hedge. Changes in the fair value of these instruments are generally expected to partially offset changes in the fair value of MSRs.

Table 6 - Gain (Loss) on Mortgage Servicing Rights

(In thousands)

						Three Months Ended
						Mar. 31, 2022						Dec. 31, 2021						Mar. 31, 2021
Loss on mortgage hedge derivative contracts, net						$	(46,694)					$	(4,862)					$	(27,705)
Gain (loss) on fair value option securities, net						(11,201)						1,418						(1,910)
Loss on economic hedge of mortgage servicing rights, net						(57,895)						(3,444)						(29,615)
Gain on change in fair value of mortgage servicing rights						49,110						7,859						33,874
Gain (loss) on changes in fair value of mortgage servicing rights, net of economic hedges included in other operating revenue						(8,785)						4,415						4,259
Net interest revenue on fair value option securities1						383						259						393
Total economic benefit (cost) of changes in the fair value of mortgage servicing rights, net of economic hedges						$	(8,402)					$	4,674					$	4,652

1    Actual interest earned on fair value option securities less internal transfer-priced cost of funds.

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Other Operating Expense

Other operating expense for the first quarter of 2022 totaled $277.6 million, a decrease of $21.9 million compared to the fourth quarter of 2021, and a decrease of $18.2 million compared to the first quarter of 2021.

Table 7 – Other Operating Expense

(In thousands)

						Three Months Ended												Increase (Decrease)						% Increase (Decrease)						Three Months Ended Mar. 31, 2021						Increase (Decrease)						% Increase (Decrease)
						Mar. 31, 2022						Dec. 31, 2021
Regular compensation						$	96,474					$	95,708					$	766					1		%				$	97,211					$	(737)					(1)		%
Incentive compensation:
Cash-based						34,444						45,610						(11,166)						(24)		%				42,259						(7,815)						(18)		%
Share-based						3,304						7,153						(3,849)						(54)		%				4,570						(1,266)						28		%
Deferred compensation						(2,124)						2,071						(4,195)						N/A						2,263						(4,387)						N/A
Total incentive compensation						35,624						54,834						(19,210)						(35)		%				49,092						(13,468)						(27)		%
Employee benefits						27,130						23,932						3,198						13		%				26,707						423						2		%
Total personnel expense						159,228						174,474						(15,246)						(9)		%				173,010						(13,782)						(8)		%
Business promotion						6,513						6,452						61						1		%				2,154						4,359						202		%
Charitable contributions to BOKF Foundation						—						5,000						(5,000)						N/A						4,000						(4,000)						N/A
Professional fees and services						11,413						14,129						(2,716)						(19)		%				11,980						(567)						(5)		%
Net occupancy and equipment						30,855						26,897						3,958						15		%				26,662						4,193						16		%
Insurance						4,283						3,889						394						10		%				4,620						(337)						(7)		%
Data processing and communications						39,836						39,358						478						1		%				37,467						2,369						6		%
Printing, postage and supplies						3,689						2,935						754						26		%				3,440						249						7		%
Amortization of intangible assets						3,964						4,438						(474)						(11)		%				4,807						(843)						(18)		%
Mortgage banking costs						7,877						8,667						(790)						(9)		%				13,943						(6,066)						(44)		%
Other expense						9,960						13,256						(3,296)						(25)		%				13,701						(3,741)						(27)		%
Total other operating expense						$	277,618					$	299,495					$	(21,877)					(7)		%				$	295,784					$	(18,166)					(6)		%
Average number of employees (full-time equivalent)						4,712						4,711						1						—		%				4,902						(190)						(4)		%

Certain percentage increases (decreases) are not meaningful for comparison purposes.

Personnel expense

Personnel expense decreased $15.2 million compared to the fourth quarter of 2021. Cash-based incentive compensation expense decreased $11.2 million from elevated levels in the fourth quarter of 2021. Deferred compensation expense, which is largely offset by a decrease in the value of related investments included in Other gains (losses), net, decreased $4.2 million. Share-based compensation expense decreased $3.8 million resulting from changes in vesting assumptions. Employee benefits expense increased $3.2 million due to a seasonal increase in payroll taxes and retirement plan costs, partially offset by a decrease in employee healthcare costs.

Personnel expense decreased $13.8 million compared to the first quarter of 2021. Cash-based incentive compensation decreased $7.8 million primarily due to reduced trading revenues. Deferred compensation expense decreased $4.4 million; however, this is largely offset by a decrease in the value of related investments included in Other gains (losses), net. Share-based compensation expense decreased $1.3 million based on changes in vesting assumptions of certain performance-based equity awards. Regular compensation expense was relatively consistent with the first quarter of 2021 as the impact of annual standard merit increases was dampened by a decrease in the number of employees.

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Non-personnel operating expense

Non-personnel expense decreased $6.6 million compared to the fourth quarter of 2021. The prior quarter included a $5.0 million charitable contribution to the BOKF Foundation. Decreases in professional fees and services expense and other expense were partially offset by an increase in occupancy and equipment expense.

Non-personnel operating expense decreased $4.4 million compared to the first quarter of 2021. Mortgage banking costs decreased $6.1 million, largely due to a decrease in prepayments combined with lower accruals related to default servicing and loss mitigation costs on loans serviced for others. The first quarter of 2021 also included a $4.0 million charitable contribution to the BOKF Foundation that did not recur in the first quarter of 2022. Other expense decreased $3.7 million as a result of lower operating expense from repossessed oil and gas assets due to the sale of certain repossessed oil and gas properties during the second and third quarters of 2021; however, this was offset by decreased revenue from these same properties. These expense decreases were offset by a $4.4 million increase in business promotion expense as advertising and travel expenses have returned to pre-pandemic levels, an increase of $4.2 million in net occupancy and equipment expense, and a $2.4 million increase in data processing and communications expense due to continued investment in technology upgrades.

Income Taxes

The effective tax rate was 20.6 percent for the first quarter of 2022, 22.7 percent for the first quarter of 2021 and 22.9 percent for the fourth quarter of 2021. The effective rate for the first quarter of 2022 decreased compared to fourth quarter of 2021 primarily due to the decrease in net income before tax relative to increased excess tax benefits from vested share-based compensation. Income tax expense for the first quarter of 2022 decreased $18.6 million compared to the fourth quarter of 2021, primarily due to the decrease in net income before tax for the first quarter of 2022.

Lines of Business

We operate three principal lines of business: Commercial Banking, Consumer Banking and Wealth Management. Commercial Banking includes lending, treasury and cash management services and customer risk management products for small businesses, middle market and larger commercial customers. Commercial Banking also includes the TransFund EFT network. Consumer Banking includes retail lending and deposit services, lending and deposit services to small business customers served through our consumer branch network and all mortgage banking activities. Wealth Management provides fiduciary services, private banking services, insurance and investment advisory services in all markets. Wealth Management also underwrites state and municipal securities and engages in brokerage and trading activities.

In addition to our lines of business, we have a Funds Management unit. The primary purpose of this unit is to manage our overall liquidity needs and interest rate risk. Each line of business borrows funds from and provides funds to the Funds Management unit as needed to support their operations. Operating results for Funds Management and other include the effect of interest rate risk positions and risk management activities, securities gains and losses including impairment charges, the provision for credit losses in excess of net loans charged off, tax planning strategies and certain executive compensation costs that are not attributed to the lines of business.

We allocate resources and evaluate the performance of our lines of business using the net direct contribution, which includes the allocation of funds and capital costs. Credit costs are attributed to the lines of business based on net loans charged off or recovered. The difference between credit costs attributed to the lines of business and the consolidated provision for credit losses is attributed to Funds Management. In addition, we measure the performance of our business lines after allocations of certain indirect expenses and taxes based on statutory rates.

The cost of funds borrowed from the Funds Management unit by the operating lines of business is transfer priced at rates that approximate market rates for funds with similar repricing and cash flow characteristics. Market rates are generally based on the applicable wholesale borrowing rates or interest rate swap rates, adjusted for prepayment risk and liquidity risk. This method of transfer-pricing funds that support assets of the operating lines of business tends to insulate them from interest rate risk.

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The value of funds provided by the operating lines of business to the Funds Management unit is also based on rates that approximate wholesale market rates for funds with similar repricing and cash flow characteristics. Market rates are generally based on a proxy of wholesale borrowing rates or interest rate swap rates. The funds credit formula applied to deposit products with indeterminate maturities is established based on their repricing characteristics reflected in a combination of the short-term wholesale funding rate and a moving average of an intermediate term swap rate, with an appropriate spread applied to both. Shorter duration products are weighted towards the short term wholesale funding rates and longer duration products are weighted towards the intermediate swap rates. The expected duration ranges from 30 days for certain rate-sensitive deposits to five years.

Economic capital is assigned to the business units by a capital allocation model that reflects management’s assessment of risk. This model assigns capital based upon credit, operating, interest rate and other market risk inherent in our business lines and recognizes the diversification benefits among the units. The level of assigned economic capital is a combination of the risk taken by each business line, based on its actual exposures and calibrated to its own loss history where possible. Average invested capital includes economic capital and amounts we have invested in the lines of business.

As shown in Table 8, net income attributable to our lines of business decreased $41.4 million compared to the fourth quarter of 2021. Net interest revenue decreased $9.4 million, primarily due to a reduction in loan fees and two fewer days in the quarter. Net charge-offs increased $7.2 million. Other operating revenue decreased $36.4 million primarily due to the impact of interest rate volatility on our trading activities, mortgage banking revenue and mortgage servicing rights valuation. Operating expense decreased $13.0 million, primarily attributable to reduced incentive compensation expense.

Net interest revenue increased by $20.7 million compared to the prior year, primarily driven by an increase in the spread on deposits sold to our Funds Management unit. Net charge-offs decreased $8.7 million compared to the first quarter of 2021. Other operating revenue decreased by $48.6 million primarily due to incurred trading losses and reduced mortgage banking revenue. These decreases were partially offset by increases in other revenue, fiduciary and asset management revenue, deposit service charges and fees, and transaction card revenue. Operating expense decreased $12.8 million compared to the first quarter of 2021, mainly from reduced mortgage banking costs in Consumer Banking and reduced incentive compensation expense.

Table 8 -- Net Income by Line of Business

(In thousands)

						Three Months Ended												Increase (Decrease)						% Increase (Decrease)						Three Months Ended Mar. 31, 2021						Increase (Decrease)						% Increase (Decrease)
						Mar. 31, 2022						Dec. 31, 2021
Commercial Banking						$	82,344					$	83,514					$	(1,170)					(1)		%				$	69,673					$	12,671					18		%
Consumer Banking						(7,317)						6,810						(14,127)						(207)		%				6,948						(14,265)						(205)		%
Wealth Management						(4,419)						21,700						(26,119)						(120)		%				19,382						(23,801)						(123)		%
Subtotal						70,608						112,024						(41,416)						(37)		%				96,003						(25,395)						(26)		%
Funds Management and other						(8,120)						5,294						(13,414)						N/A						50,057						(58,177)						N/A
Total						$	62,488					$	117,318					$	(54,830)					(47)		%				$	146,060					$	(83,572)					(57)		%

Certain percentage increases (decreases) in non-fees and commissions revenue are not meaningful for comparison purposes based on the nature of the item.

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Commercial Banking

Commercial Banking contributed $82.3 million to consolidated net income in the first quarter of 2022, a decrease of $1.2 million or 1 percent compared to the fourth quarter of 2021 and an increase of $12.7 million over the first quarter of 2021.

Table 9 -- Commercial Banking

(Dollars in thousands)

						Three Months Ended												Increase (Decrease)						% Increase (Decrease)						Three Months Ended Mar. 31, 2021						Increase (Decrease)						% Increase (Decrease)
						Mar. 31, 2022						Dec. 31, 2021
Net interest revenue from external sources						$	147,590					$	148,948					$	(1,358)					(1)		%				$	155,799					$	(8,209)					(5)		%
Net interest expense from internal sources						(10,579)						(8,225)						(2,354)						29		%				(25,794)						15,215						(59)		%
Total net interest revenue						137,011						140,723						(3,712)						(3)		%				130,005						7,006						5		%
Net loans charged off (recovered)						5,343						(1,933)						7,276						(376)		%				13,985						(8,642)						(62)		%
Net interest revenue after net loans charged off (recovered)						131,668						142,656						(10,988)						(8)		%				116,020						15,648						13		%
Fees and commissions revenue						56,964						57,414						(450)						(1)		%				49,847						7,117						14		%
Other gains (losses), net						463						629						(166)						N/A						(3,268)						3,731						N/A
Other operating revenue						57,427						58,043						(616)						(1)		%				46,579						10,848						23		%
Personnel expense						38,927						47,242						(8,315)						(18)		%				39,252						(325)						(1)		%
Non-personnel expense						26,187						27,217						(1,030)						(4)		%				27,727						(1,540)						(6)		%
Other operating expense						65,114						74,459						(9,345)						(13)		%				66,979						(1,865)						(3)		%
Net direct contribution						123,981						126,240						(2,259)						(2)		%				95,620						28,361						30		%
Gain (loss) on financial instruments, net						(204)						43						(247)						N/A						33						(237)						N/A
Gain on repossessed assets, net						1,793						646						1,147						N/A						12,737						(10,944)						N/A
Corporate expense allocations						16,246						12,926						3,320						26		%				12,734						3,512						28		%
Income before taxes						109,324						114,003						(4,679)						(4)		%				95,656						13,668						14		%
Federal and state income tax						26,980						30,489						(3,509)						(12)		%				25,983						997						4		%
Net income						$	82,344					$	83,514					$	(1,170)					(1)		%				$	69,673					$	12,671					18		%
Average assets						$	29,823,905					$	29,451,007					$	372,898					1		%				$	28,047,052					$	1,776,853					6		%
Average loans						16,696,428						16,334,695						361,733						2		%				17,522,520						(826,092)						(5)		%
Average deposits						19,595,260						19,537,285						57,975						—		%				16,130,168						3,465,092						21		%
Average invested capital						2,020,925						2,021,214						(289)						—		%				2,157,062						(136,137)						(6)		%

Certain percentage increases (decreases) in non-fees and commissions revenue are not meaningful for comparison purposes based on the nature of the item.

Net interest revenue decreased $3.7 million compared to the fourth quarter of 2021, primarily due to reduced loan fees and two fewer days in the quarter.

Fees and commissions revenue was consistent with the prior quarter. Operating expense decreased $9.3 million or 13 percent compared to the fourth quarter of 2021, primarily due to a decline in incentive compensation from elevated levels in the prior quarter. Corporate expense allocations increased $3.3 million or 26 percent primarily related to project resources.

Average outstanding balance of loans attributed to Commercial Banking increased $362 million or 2 percent over the fourth quarter of 2021 to $16.7 billion. See the Loans section of Management’s Discussion and Analysis of Financial Condition following for additional discussion of changes in commercial and commercial real estate loans, which are primarily attributed to the Commercial Banking segment. 

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Average deposits attributed to Commercial Banking were $19.6 billion for first quarter of 2022, a $58 million increase over the fourth quarter of 2021. See Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital for further discussion of change.

Net interest revenue increased $7.0 million over the first quarter of 2021, largely driven by increased deposit balances and improved spreads. Net loans charged-off decreased $8.6 million. Fees and commissions revenue increased $7.1 million or 14 percent compared to the first quarter of 2021 due to growth in customer hedging revenue and an increase in revenues from processing transactions on behalf of the members of our TransFund EFT network. These increases were partially offset by reduced operating revenue from repossessed oil and gas assets due to the sale of properties during the prior year, which was largely offset by a reduction of expenses on the same properties. Corporate expense allocations increased $3.5 million or 28 percent compared to the prior year related to increased project resources.

Average loan balances decreased $826 million or 5 percent and average deposits increased $3.5 billion or 21 percent over the first quarter of 2021.

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Consumer Banking

Consumer Banking provides retail banking services through four primary distribution channels: traditional branches, the 24-hour ExpressBank call center, Internet banking and mobile banking. Consumer Banking also conducts mortgage banking activities through offices located outside of our Consumer Banking markets.

Consumer Banking had a net loss of $7.3 million for the first quarter of 2022, compared to prior quarter net income of $6.8 million, largely due to lower mortgage production volumes and narrowing margins combined with lower spreads on deposits sold to our Funds Management unit.

Table 10 -- Consumer Banking

(Dollars in thousands)

						Three Months Ended												Increase (Decrease)						% Increase (Decrease)						Three Months Ended Mar. 31, 2021						Increase (Decrease)						% Increase (Decrease)
						Mar. 31, 2022						Dec. 31, 2021
Net interest revenue from external sources						$	16,915					$	16,650					$	265					2		%				$	16,686					$	229					1		%
Net interest revenue from internal sources						10,292						13,735						(3,443)						(25)		%				4,288						6,004						140		%
Total net interest revenue						27,207						30,385						(3,178)						(10)		%				20,974						6,233						30		%
Net loans charged off						1,112						1,198						(86)						(7)		%				1,136						(24)						(2)		%
Net interest revenue after net loans charged off						26,095						29,187						(3,092)						(11)		%				19,838						6,257						32		%
Fees and commissions revenue						33,977						38,944						(4,967)						(13)		%				52,300						(18,323)						(35)		%
Other losses, net						(16)						—						(16)						N/A						(18)						2						N/A
Other operating revenue						33,961						38,944						(4,983)						(13)		%				52,282						(18,321)						(35)		%
Personnel expense						20,984						21,689						(705)						(3)		%				21,908						(924)						(4)		%
Non-personnel expense						27,805						30,347						(2,542)						(8)		%				33,714						(5,909)						(18)		%
Total other operating expense						48,789						52,036						(3,247)						(6)		%				55,622						(6,833)						(12)		%
Net direct contribution						11,267						16,095						(4,828)						(30)		%				16,498						(5,231)						(32)		%
Loss on financial instruments, net						(57,895)						(3,444)						(54,451)						N/A						(29,616)						(28,279)						N/A
Change in fair value of mortgage servicing rights						49,110						7,859						41,251						N/A						33,874						15,236						N/A
Gain on repossessed assets, net						45						44						1						N/A						41						4						N/A
Corporate expense allocations						12,080						11,420						660						6		%				11,475						605						5		%
Income (loss) before taxes						(9,553)						9,134						(18,687)						(205)		%				9,322						(18,875)						(202)		%
Federal and state income tax						(2,236)						2,324						(4,560)						(196)		%				2,374						(4,610)						(194)		%
Net income (loss)						$	(7,317)					$	6,810					$	(14,127)					(207)		%				$	6,948					$	(14,265)					(205)		%
Average assets						$	10,273,890					$	10,186,797					$	87,093					1		%				$	9,755,539					$	518,351					5		%
Average loans						1,672,346						1,705,222						(32,876)						(2)		%				1,823,732						(151,386)						(8)		%
Average deposits						8,746,622						8,682,437						64,185						1		%				8,082,443						664,179						8		%
Average invested capital						255,758						249,446						6,312						3		%				256,188						(430)						—		%

Certain percentage increases (decreases) in non-fees and commissions revenue are not meaningful for comparison purposes based on the nature of the item.

Net interest revenue from Consumer Banking activities decreased $3.2 million or 10 percent compared to the fourth quarter of 2021, mainly due to lower spreads on deposits sold to our Funds Management unit. Average consumer deposits grew $64.2 million or 1 percent over the fourth quarter of 2021.

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Operating revenue decreased $5.0 million compared to the prior quarter. Mortgage production volume decreased $93 million to $408 million and production revenue as a percentage of production volumes decreased 76 basis points resulting in a $4.7 million decrease in mortgage banking revenues. Operating expense decreased $3.2 million, primarily due to decreased professional fees and services expense and mortgage banking costs. Corporate expense allocations were consistent with the fourth quarter of 2021.

The net cost of the changes in fair value of mortgage servicing rights and related economic hedges was $8.4 million for the first quarter of 2022 compared to a net benefit of $4.7 million for the fourth quarter of 2021 and a net benefit of $4.3 million in the first quarter of 2021. Interest rate volatility affected the effectiveness of our mortgage servicing rights hedging strategy.

Net interest revenue from Consumer Banking activities increased $6.2 million or 30 percent over the first quarter of 2021, primarily due to increased deposit balances combined with an increase in the spread on deposits sold to our Funds Management unit, as well as improved loan spreads. Fees and commissions revenue decreased $18.3 million or 35 percent compared to the first quarter of 2021. Mortgage banking revenue decreased $20.4 million due to lower mortgage production volume and compression in production revenue as a percentage of production volume. Deposit service charges increased $1.7 million. Customer spending levels increased with the broader reopening of the U.S. economy, which resulted in increased overdraft fees and check card revenue compared to the prior year. Operating expense decreased $6.8 million due to a decrease in mortgage banking costs.

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Wealth Management

Wealth Management had a net loss of $4.4 million in the first quarter of 2022 compared to net income of $21.7 million in the fourth quarter of 2021, and net income of $19.4 million in the first quarter of 2021. The first quarter of 2022 was impacted by a net loss on trading activities.

Table 11 -- Wealth Management

(Dollars in thousands)

						Three Months Ended												Increase (Decrease)						% Increase (Decrease)						Three Months Ended Mar. 31, 2021						Increase (Decrease)						% Increase (Decrease)
						Mar. 31, 2022						Dec. 31, 2021
Net interest revenue from external sources						$	56,231					$	57,239					$	(1,008)					(2)		%				$	48,554					$	7,677					16		%
Net interest revenue (expense) from internal sources						(465)						990						(1,455)						(147)		%				(200)						(265)						133		%
Total net interest revenue						55,766						58,229						(2,463)						(4)		%				48,354						7,412						15		%
Net loans recovered						(71)						(71)						—						—		%				(29)						(42)						145		%
Net interest revenue after net loans recovered						55,837						58,300						(2,463)						(4)		%				48,383						7,454						15		%
Fees and commissions revenue						25,023						56,275						(31,252)						(56)		%				65,684						(40,661)						(62)		%
Other gains (losses), net						(5)						(472)						467						N/A						439						(444)						N/A
Other operating revenue						25,018						55,803						(30,785)						(55)		%				66,123						(41,105)						(62)		%
Personnel expense						52,894						51,871						1,023						2		%				57,414						(4,520)						(8)		%
Non-personnel expense						21,601						23,076						(1,475)						(6)		%				21,151						450						2		%
Other operating expense						74,495						74,947						(452)						(1)		%				78,565						(4,070)						(5)		%
Net direct contribution						6,360						39,156						(32,796)						(84)		%				35,941						(29,581)						(82)		%
Corporate expense allocations						12,062						9,971						2,091						21		%				9,887						2,175						22		%
Income (loss) before taxes						(5,702)						29,185						(34,887)						(120)		%				26,054						(31,756)						(122)		%
Federal and state income tax						(1,283)						7,485						(8,768)						(117)		%				6,672						(7,955)						(119)		%
Net income (loss)						$	(4,419)					$	21,700					$	(26,119)					(120)		%				$	19,382					$	(23,801)					(123)		%
Average assets						$	21,323,795					$	20,725,903					$	597,892					3		%				$	18,645,865					$	2,677,930					14		%
Average loans						2,118,780						2,065,261						53,519						3		%				1,917,973						200,807						10		%
Average deposits						9,619,323						9,194,019						425,304						5		%				9,706,295						(86,972)						(1)		%
Average invested capital						305,597						309,038						(3,441)						(1)		%				313,355						(7,758)						(2)		%

Certain percentage increases (decreases) in non-fees and commissions revenue are not meaningful for comparison purposes based on the nature of the item.

Combined net interest revenue and fee revenue decreased $33.7 million. Combined revenue from trading activities decreased $43.3 million compared to the fourth quarter of 2021, primarily due to reduced customer demand for U.S. government agency residential mortgage-backed securities. Fiduciary and asset management revenue and retail brokerage revenue were relatively consistent with the prior quarter as decreases in revenue related to assets under management or administration were offset by improved money market fund fees. Operating expense was consistent with prior quarter.

Average outstanding loans attributed to the Wealth Management segment increased $54 million or 3 percent and average Wealth Management deposits increased $425 million or 5 percent. Deposit balances began to decline in the second half of March 2022 from elevated levels in the fourth quarter of 2021.

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Combined net interest revenue and fee revenue from trading activities decreased by $51.2 million or 97 percent compared to the prior year due to reduced demand for agency residential mortgage-backed securities. Fiduciary and asset management revenue increased $5.2 million due to growth in trust fees and managed account fees as a result of higher client asset balances. Operating expense decreased $4.1 million largely due to reduced trading related incentive compensation expense.

Average loans attributed to the Wealth Management segment grew $201 million or 10 percent to $2.1 billion. Average Wealth Management deposits decreased $87.0 million or 1 percent.

Financial Condition

Securities

We maintain a securities portfolio to enhance profitability, manage interest rate risk, provide liquidity and comply with regulatory requirements. Securities are classified as trading, held for investment, or available for sale. See Note 2 to the Consolidated Financial Statements for the composition of the securities portfolio as of March 31, 2022 and December 31, 2021.

We hold an inventory of trading securities in support of sales to a variety of customers, including banks, corporations, insurance companies, money managers and others. Trading securities decreased $4.2 billion to $4.9 billion during the first quarter of 2022. As discussed in the Market Risk section of this report, trading activities involve risk of loss from adverse price movement. We mitigate this risk within board-approved limits through the use of derivative contracts, short-sales and other techniques.

At March 31, 2022, the carrying value of investment (held-to-maturity) securities was $184 million, including a $633 thousand allowance for expected credit losses compared to $210 million at December 31, 2021 with a $555 thousand allowance for expected credit losses. The fair value of investment securities was $191 million at March 31, 2022 and $231 million at December 31, 2021. Investment securities consist primarily of residential mortgage-backed securities issued by U.S. government agencies, intermediate and long-term, fixed rate Oklahoma and Texas municipal bonds, and taxable Texas school construction bonds.

Available for sale securities, which may be sold prior to maturity, are carried at fair value. Unrealized gains or losses, net of deferred taxes, are recorded as accumulated other comprehensive income in shareholders’ equity. The amortized cost of available for sale securities totaled $13.4 billion at March 31, 2022, a $377 million increase compared to December 31, 2021. The increase in the cost basis of available for sale securities was partially offset by a $263 million decrease in fair value due to rising interest rates. At March 31, 2022, the available for sale securities portfolio consisted primarily of U.S. government agency residential mortgage-backed securities and U.S. government agency commercial mortgage-backed securities. Both residential and commercial mortgage-backed securities have credit risk from delinquency or default of the underlying loans. We mitigate this risk by primarily investing in securities issued by U.S. government agencies. Principal and interest payments on the underlying loans are fully guaranteed. Commercial mortgage-backed securities have prepayment penalties similar to commercial loans.

A primary risk of holding residential mortgage-backed securities comes from extension during periods of rising interest rates or prepayment during periods of falling interest rates. We evaluate this risk through extensive modeling of risk both before making an investment and throughout the life of the security. Our best estimate of the duration of the combined residential mortgage-backed securities portfolio held in investment and available for sale securities at March 31, 2022 is 3.6 years. Management estimates the duration extends to 4.2 years assuming an immediate 200 basis point upward shock. The estimated duration contracts to 3.1 years assuming a 100 basis point decline in the current low rate environment. Management also regularly monitors the impact of interest rate risk on the available for sale securities portfolio on our tangible equity ratio under various shock scenarios. Throughout the first quarter of 2022, this exposure was reported and monitored by management, and the portfolio's actual performance remained within expectations.

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Loans

The aggregate loan portfolio before allowance for loan losses totaled $20.7 billion at March 31, 2022, a $469 million increase over December 31, 2021. Core loans, which exclude paycheck protection program loans increased $608 million, primarily due to growth in both commercial and commercial real estate loans.

Table 12 -- Loans

(In thousands

						Mar. 31, 2022						Dec. 31, 2021						Sept. 30, 2021						June 30, 2021						Mar. 31, 2021
Commercial:
Healthcare						$	3,441,732					$	3,414,940					$	3,347,641					$	3,381,261					$	3,290,758
Services						3,351,495						3,367,193						3,323,422						3,389,756						3,421,948
Energy						3,197,667						3,006,884						2,814,059						3,011,331						3,202,488
General business						2,892,295						2,717,448						2,690,018						2,690,559						2,742,590
Total commercial						12,883,189						12,506,465						12,175,140						12,472,907						12,657,784
Commercial real estate:
Office						1,097,516						1,040,963						1,030,755						1,073,346						1,094,060
Industrial						911,928						766,125						890,316						824,577						789,437
Multifamily						867,288						786,404						875,586						964,824						1,227,915
Retail						667,561						679,917						766,402						784,445						787,648
Residential construction and land development						120,506						120,016						118,416						128,939						119,079
Other commercial real estate						436,157						437,900						435,417						470,861						485,208
Total commercial real estate						4,100,956						3,831,325						4,116,892						4,246,992						4,503,347
Paycheck protection program						137,365						276,341						536,052						1,121,583						1,848,550
Loans to individuals:
Residential mortgage						1,723,506						1,722,170						1,747,243						1,772,627						1,797,478
Residential mortgage guaranteed by U.S. government agencies						322,581						354,173						376,986						413,806						420,051
Personal						1,506,832						1,515,206						1,395,623						1,388,534						1,306,637
Total loans to individuals						3,552,919						3,591,549						3,519,852						3,574,967						3,524,166
Total						$	20,674,429					$	20,205,680					$	20,347,936					$	21,416,449					$	22,533,847

Commercial

Commercial loans represent loans for working capital, facilities acquisition or expansion, purchases of equipment and other needs of commercial customers primarily located within our geographical footprint. These loans are underwritten individually and represent ongoing relationships based on a thorough knowledge of the customer, the customer’s industry and market. While commercial loans are generally secured by the customer’s assets including real property, inventory, accounts receivable, operating equipment, interests in mineral rights and other property and may also include personal guarantees of the owners and related parties, the primary source of repayment of the loans is the ongoing cash flow from operations of the customer’s business. In addition, revolving lines of credit are generally governed by a borrowing base. Inherent lending risks are centrally monitored on a continuous basis from underwriting throughout the life of the loan for compliance with commercial lending policies.

Commercial loans totaled $12.9 billion or 62 percent of the loan portfolio at March 31, 2022, a $377 million increase compared to December 31, 2021, primarily due to growth in the energy loan portfolio. Healthcare and general business loan balances also increased, partially offset by a decrease in services loans.

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Approximately 77 percent of loans in this segment are located within our geographic footprint, based on collateral location. Loans for which the collateral location is less relevant, such as unsecured loans and reserve-based energy loans are categorized by the borrower's primary operating location. The largest concentration of loans in this segment outside of our footprint is California, totaling 4 percent of the segment.

Supporting the energy industry with loans to producers and other energy-related entities has been a hallmark of the Company since its founding and represents a large portion of our commercial loan portfolio. In addition, energy production and related industries have a significant impact on the economy in our primary markets. Loans collateralized by oil and gas properties are subject to a semi-annual engineering review by our internal staff of petroleum engineers. This review is used as the basis for developing the expected cash flows supporting the loan amount. The projected cash flows are discounted according to risk characteristics of the underlying oil and gas properties. Loans are evaluated to demonstrate with reasonable certainty that crude oil, natural gas and natural gas liquids can be recovered from known oil and gas reservoirs under existing economic and operating conditions at current pricing levels and with existing conventional equipment and operating methods and costs. As part of our evaluation of credit quality, we analyze rigorous stress tests over a range of commodity prices and take proactive steps to mitigate risk when appropriate.

Outstanding energy loans totaled $3.2 billion or 15 percent of total loans at March 31, 2022, a $191 million increase over December 31, 2021. Approximately $2.4 billion of energy loans were to oil and gas producers, a $235 million increase over December 31, 2021. The majority of this portfolio is first lien, senior secured, reserve-based lending, which we believe is the lowest risk form of energy lending. Approximately 72 percent of the committed production loans are secured by properties primarily producing oil and 28 percent of the committed production loans are secured by properties primarily producing natural gas.

Loans to midstream oil and gas companies totaled $630 million at March 31, 2022, a $16 million decrease compared to December 31, 2021. Loans to borrowers that provide services to the energy industry totaled $121 million at March 31, 2022, a decrease of $22 million. Loans to other energy borrowers, including those engaged in wholesale or retail energy sales, totaled $24 million, a decrease of $6.7 million compared to the prior quarter.

Unfunded energy loan commitments were $3.0 billion at March 31, 2022, a $23 million increase over December 31, 2021.

The healthcare sector of the loan portfolio totaled $3.4 billion or 17 percent of total loans. Healthcare loans increased $27 million over December 31, 2021, primarily due to growth in loans to acute care and specialty hospital sectors. This was partially offset by a decline in balances to other medical practices compared to the prior quarter. Healthcare sector loans consist primarily of loans for the development and operation of senior housing and care facilities, including independent living, assisted living and skilled nursing. Generally we loan to borrowers with a portfolio of multiple facilities that serves to help diversify risks specific to a single facility.

The services sector of the loan portfolio totaled $3.4 billion or 16 percent of total loans, a $16 million decrease compared to the prior quarter. Service sector loans consist of a large number of loans to a variety of businesses, including Native American tribal and state and local governments, Native American tribal casino operations, foundations and not-for-profit organizations, educational services and specialty trade contractors. Approximately $1.6 billion of the services category is made up of loans with individual balances of less than $10 million. Services sector loans are generally secured by the assets of the borrower with repayment coming from the cash flows of ongoing operations of the customer’s business. 

General business loans totaled $2.9 billion or 14 percent of total loans, an increase of $175 million over the prior quarter. General business loans consist of $1.5 billion of wholesale/retail loans and $1.4 billion of loans from other commercial industries.

We participate in shared national credits when appropriate to obtain or maintain business relationships with local customers. Shared national credits are defined by banking regulators as credits of $100 million or more and with three or more non-affiliated banks as participants. At March 31, 2022, the outstanding principal balance of these loans totaled $4.0 billion, including $1.8 billion of energy loans. Substantially all of these loans are to borrowers with local market relationships. We serve as the agent lender in approximately 23 percent of our shared national credits, based on dollars committed. We hold shared national credits to the same standard of analysis and perform the same level of review as internally originated credits. Our lending policies generally avoid loans in which we do not have the opportunity to maintain or achieve other business relationships with the customer. In addition to management’s quarterly assessment of credit risk, banking regulators annually review a sample of shared national credits for proper risk grading.

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Commercial Real Estate

Commercial real estate represents loans for the construction of buildings or other improvements to real estate and property held by borrowers for investment purposes generally within our geographical footprint. We require collateral values in excess of the loan amounts, demonstrated cash flows in excess of expected debt service requirements, equity investment in the project and a portion of the project already sold, leased or permanent financing already secured. The expected cash flows from all significant new or renewed income producing property commitments are stress tested to reflect the risks in varying interest rates, vacancy rates and rental rates. As with commercial loans, inherent lending risks are centrally monitored on a continuous basis from underwriting throughout the life of the loan for compliance with applicable lending policies.

The outstanding balance of commercial real estate loans increased $270 million over December 31, 2021 to $4.1 billion or 20 percent of total loans at March 31, 2022, as the recent payoff trend in this portfolio has abated. Loans secured by industrial facilities increased $146 million to $912 million. Multifamily residential loans increased $81 million to $867 million at March 31, 2022. Loans secured by office facilities increased $57 million to $1.1 billion.

Approximately 70 percent of loans in this segment are in our geographic footprint based on collateral location. The largest concentration of loans in this segment outside our footprint is Utah, totaling 9 percent of the segment. All other states represent less than 5 percent individually.

Paycheck Protection Program

We actively participated in programs initiated by the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), including the Small Business Administration's ("SBA") Paycheck Protection Program ("PPP") that began on April 3, 2020. PPP provided fully forgivable loans when utilized for qualified expenditures, including to help small businesses maintain payrolls during the COVID-19 pandemic. These loans generally have a contractual term of two years, though most are expected to be forgiven prior to maturity after completion of a compliance period. Loans are guaranteed and amounts forgiven will be reimbursed to the Company by the SBA. The loans carry a fixed interest rate of 1 percent. Interest plus loan fees, which vary depending on loan size, are accrued over the contractual life of the loan. Any unaccreted origination fees will be recognized when the loan is paid. At March 31, 2022, approximately $24 million of PPP loans from the initial rounds remain outstanding, with an insignificant unaccreted origination fee balance remaining.

The Company also participated in the most recent round of PPP, which began on January 19, 2021. Approximately $114 million of PPP loans from this round remain outstanding. The newest round of loans have a fixed interest rate of 1 percent and a contractual term of five years, but are expected to be forgiven prior to maturity. Unaccreted origination fees related to the 2021 vintage of PPP loans totaled $3.5 million at March 31, 2022.

Loans to Individuals

Loans to individuals include residential mortgage and personal loans. Residential mortgage loans provide funds for our customers to purchase or refinance their primary residence or to borrow against the equity in their home. These loans are secured by a first or second mortgage on the customer's primary residence. These loans are made in accordance with underwriting policies we believe to be conservative and are fully documented. Loans may be individually underwritten or credit scored based on size and other criteria. Credit scoring is assessed based on significant credit characteristics including credit history, residential and employment stability.

In general, we sell the majority of our conforming fixed-rate loan originations in the secondary market and retain the majority of our non-conforming and adjustable-rate mortgage loans. Our mortgage loan portfolio does not include payment option adjustable-rate mortgage loans or adjustable-rate mortgage loans with initial rates that are below market. Home equity loans are primarily first-lien and fully amortizing.

Residential mortgage, which includes home equity loans, and personal loans are made in accordance with underwriting policies we believe to be conservative and are fully documented. Loans may be individually underwritten or credit scored based on size and other criteria. Credit scoring is assessed based on significant credit characteristics including credit history, residential and employment stability.

Personal loans consist primarily of loans to Wealth Management clients secured by the cash surrender value of insurance policies and marketable securities. It also includes direct loans secured by and for the purchase of automobiles, recreational and marine equipment as well as unsecured loans.

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Approximately 92 percent of the loans in this segment are secured by collateral located within our geographical footprint. Loans for which the collateral location is less relevant, such as unsecured loans are categorized by the borrower’s primary operating location.

Residential mortgage loans guaranteed by U.S. government agencies have limited credit exposure because of the agency guarantee. This amount includes residential mortgage loans previously sold into GNMA mortgage pools that the Company may repurchase when certain defined delinquency criteria are met. Because of this repurchase right, the Company is deemed to have regained effective control over these loans and must include them on the Consolidated Balance Sheet. After peaking in the second quarter of 2021, these loans are migrating toward pre-COVID levels through payoffs or sales.

The Company secondarily evaluates loan portfolio performance based on the primary geographical market managing the loan. Loans attributed to a geographical market may not represent the location of the borrower or the collateral. All permanent mortgage loans serviced by our mortgage banking unit and held for investment by the Company are centrally managed by the Oklahoma market.

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Table 13-- Loans Managed by Primary Geographical Market

(In thousands)

						Mar. 31, 2022						Dec. 31, 2021						Sept. 30, 2021						June 30, 2021						Mar. 31, 2021
Texas:
Commercial						$	6,254,883					$	6,068,700					$	5,815,562					$	5,690,901					$	5,748,345
Commercial real estate						1,345,105						1,253,439						1,383,871						1,403,751						1,511,714
Paycheck protection program						31,242						81,654						115,623						342,933						537,899
Loans to individuals						957,320						942,982						901,121						885,619						848,194
Total Texas						8,588,550						8,346,775						8,216,177						8,323,204						8,646,152
Oklahoma:
Commercial						2,883,663						2,633,014						2,590,887						2,840,560						2,975,477
Commercial real estate						552,310						546,021						552,184						552,673						597,840
Paycheck protection program						52,867						69,817						192,474						242,880						468,002
Loans to individuals						1,977,886						2,024,404						2,014,099						2,063,419						2,043,705
Total Oklahoma						5,466,726						5,273,256						5,349,644						5,699,532						6,085,024
Colorado:
Commercial						1,977,773						1,936,149						1,874,613						1,904,182						1,910,826
Commercial real estate						480,740						470,937						526,653						656,521						777,786
Paycheck protection program						28,584						82,781						140,470						299,712						436,540
Loans to individuals						236,125						256,533						249,298						262,796						264,759
Total Colorado						2,723,222						2,746,400						2,791,034						3,123,211						3,389,911
Arizona:
Commercial						1,074,551						1,130,798						1,194,801						1,239,270						1,207,089
Commercial real estate						719,970						674,309						734,174						705,497						667,766
Paycheck protection program						11,644						21,594						42,815						104,946						208,481
Loans to individuals						190,746						186,528						182,506						178,481						179,031
Total Arizona						1,996,911						2,013,229						2,154,296						2,228,194						2,262,367
Kansas/Missouri:
Commercial						334,371						338,697						336,414						388,291						421,974
Commercial real estate						436,740						382,761						408,001						406,055						395,590
Paycheck protection program						2,595						4,718						6,920						41,954						60,741
Loans to individuals						121,247						110,889						100,920						103,092						104,954
Total Kansas/Missouri						894,953						837,065						852,255						939,392						983,259
New Mexico:
Commercial						262,533						306,964						287,695						304,804						307,395
Commercial real estate						504,632						442,128						437,302						437,996						448,298
Paycheck protection program						9,713						13,510						31,444						86,716						124,059
Loans to individuals						63,299						63,930						66,651						68,177						70,491
Total New Mexico						840,177						826,532						823,092						897,693						950,243
Arkansas:
Commercial						95,415						92,143						75,168						104,899						86,678
Commercial real estate						61,459						61,730						74,707						84,499						104,353
Paycheck protection program						720						2,267						6,306						2,442						12,828
Loans to individuals						6,296						6,283						5,257						13,383						13,032
Total Arkansas						163,890						162,423						161,438						205,223						216,891
Total BOK Financial loans						$	20,674,429					$	20,205,680					$	20,347,936					$	21,416,449					$	22,533,847

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Off-Balance Sheet Commitments

We enter into certain off-balance sheet arrangements in the normal course of business as shown in Table 14. Loan commitments may be unconditional obligations to provide financing or conditional obligations that depend on the borrower’s financial condition, collateral value or other factors. Standby letters of credit are unconditional commitments to guarantee the performance of our customer to a third party. Since some of these commitments are expected to expire before being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

We have off-balance sheet commitments related to certain residential mortgage loans sold into mortgage-backed securities as part of our mortgage banking activities. We retain off-balance sheet credit risk related to losses in excess of amounts guaranteed by the U.S. Department of Veterans Affairs ("VA").

We also have off-balance sheet credit risk related to certain residential mortgage loans primarily originated under community development loan programs that were sold to a U.S. government agency with full recourse prior to 2007. We are obligated to repurchase these loans for the life of these loans in the event of foreclosure for the unpaid principal and interest at the time of foreclosure. The majority of our conforming fixed rate loan originations are sold in the secondary market and we only retain repurchase obligations under standard underwriting representations and warranties.

Table 14 – Off-Balance Sheet Credit Commitments

(In thousands)

						Mar. 31, 2022						Dec. 31, 2021						Sept. 30, 2021						June 30, 2021						Mar. 31, 2021
Loan commitments						$	12,490,832					$	12,471,482					$	12,044,695					$	11,518,158					$	11,151,650
Standby letters of credit						654,185						699,743						638,067						671,878						713,834
Unpaid principal balance of residential mortgage loans sold with recourse						51,459						54,619						57,988						63,545						68,393
Unpaid principal balance of residential mortgage loans transferred into mortgage-backed securities guaranteed by U.S. Dept. of Veterans Affairs						1,062,197						1,095,877						1,150,124						1,225,100						1,326,300

Customer Derivative Programs

 

We offer programs that permit our customers to hedge various risks, including fluctuations in energy, cattle and other agricultural product prices, interest rates and foreign exchange rates. Each of these programs work essentially the same way. Derivative contracts are executed between the customers and the Company. Offsetting contracts are executed between the Company and selected counterparties to minimize market risk due to changes in commodity prices, interest rates or foreign exchange rates. The counterparty contracts are identical to the customer contracts, except for a fixed pricing spread or a fee paid to us as compensation for administrative costs, credit risk and profit.

The customer derivative programs create credit risk for potential amounts due to the Company from our customers and from the counterparties. Customer credit risk is monitored through existing credit policies and procedures. The effects of changes in commodity prices, interest rates or foreign exchange rates are evaluated across a range of possible scenarios to determine the maximum exposure we are willing to have individually to any customer. Customers may also be required to provide cash margin or other collateral in conjunction with our credit agreements to further limit our credit risk.

Counterparty credit risk is evaluated through existing policies and procedures. This evaluation considers the total relationship between BOK Financial and each of the counterparties. Individual limits are established by management, approved by Credit Administration and reviewed by the Asset/Liability Committee. Margin collateral is required if the exposure between the Company and any counterparty exceeds established limits. Based on declines in the counterparties’ credit ratings, these limits may be reduced and additional margin collateral may be required.

A deterioration of the credit standing of one or more of the customers or counterparties to these contracts may result in BOK Financial recognizing a loss as the fair value of the affected contracts may no longer move in tandem with the offsetting contracts. This occurs if the credit standing of the customer or counterparty deteriorated such that either the fair value of underlying collateral no longer supported the contract or the customer or the counterparty’s ability to provide margin collateral was impaired. Credit losses on customer derivatives reduce brokerage and trading revenue in the Consolidated Statements of Earnings.

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Derivative contracts are carried at fair value. At March 31, 2022, the net fair values of derivative contracts, before consideration of cash margin, reported as assets under these programs totaled $2.4 billion compared to $1.1 billion at December 31, 2021. At March 31, 2022, the net fair value of our derivative contracts included $2.1 billion for energy contracts, $179 million for foreign exchange contracts and $63 million for interest rate swaps. The aggregate net fair value of derivative contracts, before consideration of cash margin, held under these programs reported as liabilities totaled $2.4 billion at March 31, 2022 and $1.1 billion at December 31, 2021.

At March 31, 2022, total derivative assets were reduced by $38 million of cash collateral received from counterparties and total derivative liabilities were reduced by $2.2 billion of cash collateral paid to counterparties related to instruments executed with the same counterparty under a master netting agreement. Derivative contracts executed with customers may be secured by non-cash collateral in conjunction with a credit agreement with that customer, such as proven producing oil and gas properties. Access to this collateral in event of default is reasonably assured.

A table showing the notional and fair value of derivative assets and liabilities on both a gross and net basis is presented in Note 3 to the Consolidated Financial Statements.

The fair value of derivative contracts reported as assets under these programs, net of cash margin held by the Company, by category of debtor at March 31, 2022 follows in Table 15.

Table 15 -- Fair Value of Derivative Contracts

(In thousands)

Customers						$	2,206,003
Banks and other financial institutions						112,897
Exchanges and clearing organizations						27,824
Fair value of customer risk management program asset derivative contracts, net						$	2,346,724

 

At March 31, 2022, our largest derivative exposure was to an energy customer for $107 million.

Our customer derivative program also introduces liquidity and capital risk. We are required to provide cash margin to certain counterparties when the net negative fair value of the contracts exceeds established limits. Also, changes in commodity prices affect the amount of regulatory capital we are required to hold as support for the fair value of our derivative assets. These risks are modeled as part of the management of these programs. Based on current prices, a decrease in market prices equivalent to $86.03 per barrel of oil would decrease the fair value of derivative assets by $529 million, with lending customers comprising the bulk of the assets. An increase in prices equivalent to $114.53 per barrel of oil would increase the fair value of derivative assets by $657 million as asset values rise faster than margin paid. Liquidity requirements of this program may also be affected by our credit rating. At March 31, 2022, a decrease in our credit rating to below investment grade would increase our obligation to post cash margin on existing contracts by approximately $10 million. The fair value of our to-be-announced residential mortgage-backed securities and interest rate swap derivative contracts is affected by changes in interest rates. Based on our assessment as of March 31, 2022, changes in interest rates would not materially impact regulatory capital or liquidity needed to support this portion of our customer derivative program.

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Summary of Credit Loss Experience

Table 16 -- Summary of Credit Loss Experience

(In thousands)

			Three Months Ended
			Mar. 31, 2022						Dec. 31, 2021						Sept. 30, 2021						June 30, 2021						Mar. 31, 2021
Allowance for loan losses:
Beginning balance			$	256,421					$	276,680					311,890						352,402						388,640
Loans charged off			(7,805)						(6,558)						(9,584)						(18,304)						(16,905)
Recoveries of loans previously charged off			1,824						7,272						1,769						2,856						2,437
Net loans recovered (charged off)			(5,981)						714						(7,815)						(15,448)						(14,468)
Provision for credit losses			(3,967)						(20,973)						(27,395)						(25,064)						(21,770)
Ending balance			$	246,473					$	256,421					$	276,680					$	311,890					$	352,402
Accrual for off-balance sheet credit risk from unfunded loan commitments:
Beginning balance			$	32,977					$	29,239					24,287						32,877						36,921
Provision for credit losses			3,268						3,738						4,952						(8,590)						(4,044)
Ending balance			$	36,245					$	32,977					$	29,239					$	24,287					$	32,877
Accrual for off-balance sheet credit risk associated with mortgage banking activities:
Beginning balance			$	3,382					$	3,264					3,828						5,135						4,282
Loans charged off			(6)						(32)						(30)						(85)						(32)
Provision for credit losses			621						150						(534)						(1,222)						885
Ending balance			$	3,997					$	3,382					$	3,264					$	3,828					$	5,135
Allowance for credit losses related to held-to-maturity (investment) securities:
Beginning balance			$	555					$	470					$	493					$	617					$	688
Provision for credit losses			78						85						(23)						(124)						(71)
Ending balance			$	633					$	555					$	470					$	493					$	617
Total provision for credit losses			$	—					$	(17,000)					$	(23,000)					$	(35,000)					$	(25,000)

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			Three Months Ended
			Mar. 31, 2022						Dec. 31, 2021						Sept. 30, 2021						June 30, 2021						Mar. 31, 2021
Average loans by portfolio segment :
Commercial			$	12,677,706					$	12,401,935					$	12,231,230					$	12,402,925					$	12,908,461
Commercial real estate			4,059,148						3,838,336						4,218,190						4,395,848						4,547,945
Paycheck protection program			210,110						404,261						792,728						1,668,047						1,741,534
Loans to individuals			3,516,698						3,598,121						3,606,460						3,700,269						3,559,067
Net charge-offs (annualized) to average loans			0.12		%				(0.01)		%				0.15		%				0.28		%				0.25		%
Net charge-offs (annualized) to average loans excluding PPP loans1			0.12		%				(0.01)		%				0.16		%				0.30		%				0.28		%
Net charge-offs (annualized) to average loans by portfolio segment:
Commercial			0.17		%				(0.03)		%				0.20		%				0.47		%				0.42		%
Commercial real estate			—		%				(0.06)		%				0.11		%				0.06		%				0.02		%
Paycheck protection program			—		%				—		%				—		%				—		%				—		%
Loans to individuals			0.05		%				0.08		%				0.05		%				0.02		%				0.06		%
Recoveries to gross charge-offs			23.37		%				110.89		%				18.46		%				15.60		%				14.42		%
Provision for loan losses (annualized) to average loans			(0.08)		%				(0.41)		%				(0.53)		%				(0.45)		%				(0.38)		%
Allowance for loan losses to loans outstanding at period-end			1.19		%				1.27		%				1.36		%				1.46		%				1.56		%
Allowance for loan losses to loans outstanding at period-end excluding PPP loans1			1.20		%				1.29		%				1.40		%				1.54		%				1.70		%
Accrual for unfunded loan commitments to loan commitments			0.29		%				0.26		%				0.24		%				0.21		%				0.29		%
Combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments to loans outstanding at period-end			1.37		%				1.43		%				1.50		%				1.57		%				1.71		%
Combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments to loans outstanding at period-end excluding PPP loans1			1.38		%				1.45		%				1.54		%				1.66		%				1.86		%

1    Metric meaningful due to the unique characteristics of the PPP loans.

Allowance for Loan Losses and Accrual for Off-Balance Sheet Credit Risk from Unfunded Loan Commitments

Expected credit losses on assets carried at amortized cost are recognized over their expected lives based on models that measure the probability of default and loss given default over a 12-month reasonable and supportable forecast period. Models incorporate base case, downside and upside macroeconomic variables such as real gross domestic product ("GDP") growth, civilian unemployment rate and West Texas Intermediate ("WTI") oil prices on a probability weighted basis. See Note 4 to the consolidated financial statements for additional discussion of methodology of allowance for loan losses.

No provision for credit losses was necessary for the first quarter of 2022. Changes in our reasonable and supportable forecasts of macroeconomic variables resulted in a $7.3 million decrease in the allowance for credit losses related to lending activities. Continued strength in commodity prices was partially offset by changes in our economic outlook. Changes in loan portfolio characteristics, primarily related to growth in loan balances resulted in a $6.6 million increase in the allowance for credit losses related to lending activities. Continued improvements in credit quality metrics were offset by net charge-offs and changes in specific impairment and payment profile characteristics.

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The probability weighting of our base case reasonable and supportable forecast decreased to 60 percent in the first quarter of 2022 compared to 65 percent in the fourth quarter of 2021 as the level of uncertainty in the current economic outlook increased. A summary of macroeconomic variables considered in developing our estimate of expected credit losses at March 31, 2022 follows:

			Base			Downside			Upside
Scenario probability weighting			60%			30%			10%
Economic outlook			The Russia-Ukraine conflict remains isolated and conditions improve by mid-year 2022. The federal funds rate is increased at each Federal Reserve Open Market ("FOMC") meeting through March 2023, which results in a target range of 2.75 percent to 3.00 percent. Additionally, the Federal Reserve begins balance sheet reduction by mid-year 2022. Labor force participants continue to re-enter the job market to meet the record number of job openings. The increase in employment helps maintain household income above its pre-pandemic trend. This, coupled with the drawdown in savings, supports consumer spending and produces GDP growth consistent with pre-pandemic levels.			The Russia-Ukraine conflict persists through 2022 but remains isolated. The Federal Reserve is forced to adopt a more aggressive monetary policy to combat the inflationary environment. This results in a target range of 4.00 percent to 4.25 percent by March 2023. Additionally, the Federal Reserve begins balance sheet reduction by mid-year 2022. Additional surges in commodity prices exacerbated by supply chain dislocations create higher levels of inflation that do not peak until the fourth quarter of 2022. These factors push the United States into a recession, with contraction in economic activity and a sharp increase in the unemployment rate.			The Russia-Ukraine conflict remains isolated and conditions improve early second quarter 2022. The federal funds rate is increased at each FOMC meeting through March 2023, which results in a target range of 2.25 percent to 2.50 percent. Additionally, the Federal Reserve begins balance sheet reduction by mid-year 2022. Labor force participants continue to re-enter the job market to meet the record number of job openings. The increase in employment helps maintain household income above its pre-pandemic trend. This coupled with the drawdown in savings, supports consumer spending and produces above trend GDP growth.
Macro-economic factors			–GDP is forecasted to grow by 2.2 percent over the next 12 months. –Civilian unemployment rate of 3.9 percent in the first quarter of 2022 improves to 3.8 percent by the first quarter of 2023. –WTI oil prices are projected to generally follow the NYMEX forward curve that existed at the end of March 2022 and are expected to average $94.98 per barrel over the next 12 months.			–GDP is forecasted to contract 1.3 percent over the next twelve months. –Civilian unemployment rate of 4.4 percent in the second quarter of 2022 increases to 6.9 percent in the first quarter of 2023. –WTI oil prices are projected to average $109.67 over the next 12 months, with a peak of $131.46 in the third quarter of 2022 and falling 33% over the following two quarters.			–GDP is forecasted to grow by 3.3 percent over the next 12 months. –Civilian unemployment rate of 3.7 percent in the second quarter of 2022 improves to 3.3 percent by the first quarter of 2023. –WTI oil prices are projected to average $85.89 per barrel over the next 12 months.

Growth in loan balances results in a $7.0 million increase in allowance. Net charge-offs and changes in specific impairments attributed to certain credits required a $2.9 million provision during the first quarter of 2022. Improved risk grading during the quarter resulted in a $6.1 million decrease in the allowance for lending activities, primarily related to energy, commercial real estate and commercial wholesale/retail sector loans. A summary of outstanding loan balances by risk grade is included in Note 4 to the Consolidated Financial Statements. Non-pass grade loans include other loans especially mentioned, defined by regulatory guidelines as loans that are currently performing in compliance with original terms but may have a potential weakness that deserves management’s close attention, accruing substandard loans, and nonaccruing loans. Non-pass grade loans totaled $389 million at March 31, 2022, a $67 million decrease compared to December 31, 2021. Non-pass graded loans were primarily composed of $101 million or 3 percent of energy loans, $77 million or 2 percent of healthcare loans, $74 million or 2 percent of services loans, $52 million or 1 percent of commercial real estate loans and $36 million or 1 percent of general business loans.

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The allowance for loan losses totaled $246 million or 1.19 percent of outstanding loans and 230 percent of nonaccruing loans at March 31, 2022, excluding residential mortgage loans guaranteed by U.S. government agencies. The combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $283 million or 1.37 percent of outstanding loans and 264 percent of nonaccruing loans at March 31, 2022.

The Company recorded a $17.0 million negative provision for credit losses in the fourth quarter of 2021. The allowance for loan losses was $256 million or 1.27 percent of outstanding loans and 213 percent of nonaccruing loans, excluding loans guaranteed by U.S. government agencies at December 31, 2021. The combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $289 million or 1.43 percent of outstanding loans and 241 percent of nonaccruing loans.

Net Loans Charged Off

Net charge-offs of commercial loans were $5.5 million in the first quarter of 2022, primarily related to two general business borrowers and a single energy services borrower. Net commercial real estate loan charge-offs were $47 thousand and net charge-offs of loans to individuals were $444 thousand. Net charge-offs of loans to individuals include deposit account overdraft losses.

Accrual for Off-Balance Sheet Credit Risk Associated with Mortgage Banking Activities

The accrual for off-balance sheet credit risk associated with mortgage banking activities includes consideration of credit risk related to certain residential mortgage loans sold into mortgage-backed securities in excess of amounts guaranteed by the U.S. Department of Veteran's Affairs ("VA") and mortgage loans originated under community development loan programs that were sold to a U.S. government agency with full recourse.

We use publicly available long-term national data to estimate total loss given default for our off-balance sheet credit risk related to losses in excess of amounts guaranteed by the VA. This result is combined with probability of default output from our mortgage servicing rights model to estimate total expected loss. Then, we estimate the VA's guarantee percentage to determine our portion of the credit risk. Qualitative adjustment may be used, if necessary.

Allowance for Credit Losses Related to Held-to-Maturity (Investment) Securities

The expected credit losses principles apply to all financial assets measured at cost, including our held-to-maturity (investment) debt securities portfolio. Our investment portfolio includes municipal and other tax-exempt securities and other debt securities. Expected credit losses for these assets is based on probability of default and loss given default assumptions that align with similarly graded loans. Qualitative adjustment may be used, if necessary.

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Nonperforming Assets

As more fully described in Note 4 to the Consolidated Financial Statements, loans are generally classified as nonaccruing when it becomes probable that we will not collect the full contractual principal and interest. Accruing renegotiated loans guaranteed by U.S. government agencies represent residential mortgage loans that have been modified in troubled debt restructurings. Interest continues to accrue based on the modified terms of the loan and loans may be sold once they become eligible according to U.S. government agency guidelines. Real estate and other repossessed assets are assets acquired in partial or total forgiveness of loans. The assets are carried at the lower of cost as determined by fair value at the date of foreclosure or current fair value, less estimated selling costs. A summary of nonperforming assets follows in Table 17:

Table 17 -- Nonperforming Assets

(In thousands)

						Mar. 31, 2022						Dec. 31, 2021						Sept. 30, 2021						June 30, 2021						Mar. 31, 2021
Nonaccruing loans:
Commercial:
Energy						$	24,976					$	31,091					$	45,500					$	70,341					$	101,800
Services						16,535						17,170						25,714						29,913						28,033
Healthcare						15,076						15,762						509						527						3,187
General business						3,750						10,081						8,951						11,823						14,053
Total commercial						60,337						74,104						80,674						112,604						147,073
Commercial real estate						15,989						14,262						21,223						26,123						27,243
Loans to individuals:
Residential mortgage						30,757						31,574						30,674						31,473						32,884
Residential mortgage guaranteed by U.S. government agencies						16,992						13,861						9,188						9,207						8,564
Personal						171						258						188						229						255
Total loans to individuals						47,920						45,693						40,050						40,909						41,703
Total nonaccruing loans						124,246						134,059						141,947						179,636						216,019
Accruing renegotiated loans guaranteed by U.S. government agencies						204,121						210,618						178,554						171,324						154,591
Real estate and other repossessed assets						24,492						24,589						28,770						57,337						70,911
Total nonperforming assets						$	352,859					$	369,266					$	349,271					$	408,297					$	441,521
Total nonperforming assets excluding those guaranteed by U.S. government agencies						$	131,746					$	144,787					$	161,529					$	227,766					$	278,366
Allowance for loan losses to nonaccruing loans1						229.80		%				213.33		%				208.41		%				183.00		%				169.87		%
Combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments to nonaccruing loans1						263.60		%				240.77		%				230.43		%				197.25		%				185.72		%
Nonperforming assets to outstanding loans and repossessed assets						1.70		%				1.83		%				1.71		%				1.90		%				1.95		%
Nonperforming assets to outstanding loans and repossessed assets1,2						0.65		%				0.74		%				0.83		%				1.14		%				1.37		%
Nonaccruing loans to outstanding loans						0.60		%				0.66		%				0.70		%				0.84		%				0.96		%
Nonaccruing commercial loans to outstanding commercial loans						0.47		%				0.59		%				0.66		%				0.90		%				1.16		%
Nonaccruing commercial real estate loans to outstanding commercial real estate loans						0.39		%				0.37		%				0.52		%				0.62		%				0.60		%
Nonaccruing loans to individuals to outstanding loans to individuals1						0.96		%				0.98		%				0.98		%				1.00		%				1.07		%

1     Excludes residential mortgages guaranteed by U.S. government agencies.

2     Excludes residential mortgage and PPP loans guaranteed by U.S. government agencies.

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Excluding assets guaranteed by U.S. government agencies, nonperforming assets decreased $13 million from December 31, 2021, primarily due to a $6.3 million decrease in nonaccruing general business loans and a $6.1 million decrease in nonaccruing energy loans. Newly identified nonaccruing loans totaled $12 million, offset by $14 million of payments and $7.8 million of charge-offs. The Company generally retains nonperforming assets to maximize potential recovery, which may cause future nonperforming assets to decrease more slowly.

A rollforward of nonperforming assets for the three months ended March 31, 2022 follows in Table 18.

Table 18 -- Rollforward of Nonperforming Assets

(In thousands)

						Three Months Ended
						March 31, 2022
						Nonaccruing Loans
						Commercial						Commercial Real Estate						Loan to Individuals						Total						Renegotiated Loans						Real Estate and Other Repossessed Assets						Total Nonperforming Assets
Balance, December 31, 2021						$	74,104					$	14,262					$	45,693					$	134,059					$	210,618					$	24,589					$	369,266
Additions						1,393						4,261						6,270						11,924						16,990						—						28,914
Payments						(9,079)						(290)						(4,407)						(13,776)						(2,233)						—						(16,009)
Charge-offs						(6,081)						(191)						(1,533)						(7,805)						—						—						(7,805)
Net gains (losses) and write-downs						—						—						—						—						—						1,873						1,873
Foreclosure of nonperforming loans						—						—						(64)						(64)						—						64						—
Foreclosure of loans guaranteed by U.S. government agencies						—						—						(891)						(891)						(601)						—						(1,492)
Proceeds from sales						—						—						—						—						(17,806)						(2,034)						(19,840)
Net transfers to nonaccruing loans						—						—						3,238						3,238						(3,238)						—						—
Return to accrual status						—						(2,053)						(386)						(2,439)						—						—						(2,439)
Other, net						—						—						—						—						391						—						391
Balance, March 31, 2022						$	60,337					$	15,989					$	47,920					$	124,246					$	204,121					$	24,492					$	352,859

We foreclose on loans guaranteed by U.S. government agencies in accordance with agency guidelines. Generally these loans are not eligible for modification programs or have failed to comply with modified loan terms. Principal is guaranteed by agencies of the U.S. government, subject to limitations and credit risk is limited. At foreclosure, these amounts are transferred to claims receivable accounts. These properties will be conveyed to the agencies once applicable criteria have been met. 

Real Estate and Other Repossessed Assets

Real estate and other repossessed assets totaled $24 million at March 31, 2022, composed primarily of $15 million of developed commercial real estate and $7.1 million of oil and gas properties. Real estate and other repossessed assets was largely unchanged compared to December 31, 2021.

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Liquidity and Capital

Based on the average balances for the first quarter of 2022, approximately 80 percent of our funding was provided by deposit accounts, 6 percent from borrowed funds, less than 1 percent from long-term subordinated debt and 10 percent from equity. Our funding sources, which primarily include deposits and borrowings from the Federal Home Loan Banks and other banks, provide adequate liquidity to meet our operating needs.

Subsidiary Bank

Deposits and borrowed funds are the primary sources of liquidity for BOKF, NA, the wholly owned subsidiary bank of BOK Financial. We compete for retail and commercial deposits by offering a broad range of products and services and focusing on customer convenience. Retail deposit growth is supported through personal and small business checking, online bill paying services, mobile banking services, an extensive network of branch locations and ATMs and our ExpressBank call center. Commercial deposit growth is supported by offering treasury management and lockbox services. We also acquire brokered deposits when the cost of funds is advantageous to other funding sources.

Average deposits for the first quarter of 2022 totaled $40.4 billion, a $560 million increase over the fourth quarter of 2021. Continued deposit growth was primarily due to customers maintaining higher balances in the current economic environment, supplemented by inflows from government stimulus payments. Interest-bearing transaction account balances increased $437 million. Demand deposits grew by $243 million and savings account balances were up $38 million. Certificate of deposit balances decreased $159 million.

Table 19 - Average Deposits by Line of Business

(In thousands)

			Three Months Ended
			Mar. 31, 2022						Dec. 31, 2021						Sept. 30, 2021						June 30, 2021						Mar. 31, 2021
Commercial Banking			$	19,595,260					$	19,537,285					$	17,881,673					$	17,049,772					$	16,130,168
Consumer Banking			8,746,622						8,682,437						8,516,942						8,469,043						8,082,443
Wealth Management			9,619,323						9,194,019						9,120,446						9,695,319						9,706,295
Subtotal			37,961,205						37,413,741						35,519,061						35,214,134						33,918,906
Funds Management and other			2,401,002						2,388,347						2,315,325						2,276,093						2,603,210
Total			$	40,362,207					$	39,802,088					$	37,834,386					$	37,490,227					$	36,522,116

Average Commercial Banking deposit balances increased $58 million over the fourth quarter of 2021. Interest-bearing transaction account balances increased $40 million. Demand deposit balances were up $32 million. Commercial customers continue to retain large cash reserves due to a combination of factors including uncertainty about the economic environment and potential for growth, lack of preferable liquid alternatives and a desire to minimize deposit service charges through the earnings credit. The earnings credit is a non-cash method that enables commercial customers to offset deposit service charges based on account balances. Commercial deposit balances may decrease as the economic outlook improves and if short-term rates move higher, enhancing their investment alternatives.

Average Consumer Banking deposit balances increased $64 million over the prior quarter. A $72 million increase in interest-bearing transaction deposit balances and a $33 million increase in savings account balances were partially offset by a $35 million decrease in time deposit balances. Demand deposit balances were largely unchanged compared to prior quarter.

Average Wealth Management deposits increased $425 million compared to the fourth quarter of 2021. A $295 million increase in interest bearing transaction accounts and a $246 million increase in demand deposit balances was partially offset by a $121 million decrease in time deposit balances.

Average time deposits for the first quarter of 2022 included $48 million of brokered deposits, an $845 thousand decrease compared to the fourth quarter of 2021. Average interest-bearing transaction accounts for the first quarter included $2.1 billion of brokered deposits, an $8.0 million increase over the fourth quarter of 2021.

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The distribution of our period end deposit account balances among principal markets follows in Table 20.

Table 20 -- Period End Deposits by Principal Market Area

(In thousands)

						Mar. 31, 2022						Dec. 31, 2021						Sept. 30, 2021						June 30, 2021						Mar. 31, 2021
Oklahoma:
Demand						$	5,205,806					$	5,433,405					$	5,080,162					$	4,985,542					$	4,823,436
Interest-bearing:
Transaction						11,410,709						12,689,367						11,692,679						12,065,844						12,828,070
Savings						558,634						521,439						510,906						500,344						487,862
Time						817,744						978,822						1,039,866						1,139,980						1,197,517
Total interest-bearing						12,787,087						14,189,628						13,243,451						13,706,168						14,513,449
Total Oklahoma						17,992,893						19,623,033						18,323,613						18,691,710						19,336,885
Texas:
Demand						4,552,001						4,552,983						3,987,503						3,752,790						3,592,969
Interest-bearing:
Transaction						4,963,118						5,345,461						4,985,465						4,335,113						4,257,234
Savings						182,536						178,458						165,043						160,805						154,406
Time						329,931						337,559						337,389						346,577						368,086
Total interest-bearing						5,475,585						5,861,478						5,487,897						4,842,495						4,779,726
Total Texas						10,027,586						10,414,461						9,475,400						8,595,285						8,372,695
Colorado:
Demand						2,673,352						2,526,855						2,158,596						1,991,343						2,115,354
Interest-bearing:
Transaction						2,387,304						2,334,371						2,337,354						2,159,819						2,100,135
Savings						81,762						78,636						79,873						73,990						73,446
Time						165,401						174,351						184,002						193,787						204,973
Total interest-bearing						2,634,467						2,587,358						2,601,229						2,427,596						2,378,554
Total Colorado						5,307,819						5,114,213						4,759,825						4,418,939						4,493,908
New Mexico:
Demand						1,271,264						1,196,057						1,222,895						1,197,412						1,131,713
Interest-bearing:
Transaction						888,257						858,394						837,630						723,757						736,923
Savings						115,457						107,963						107,615						105,837						103,591
Time						156,140						163,871						168,879						174,665						181,863
Total interest-bearing						1,159,854						1,130,228						1,114,124						1,004,259						1,022,377
Total New Mexico						2,431,118						2,326,285						2,337,019						2,201,671						2,154,090

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						Mar. 31, 2022						Dec. 31, 2021						Sept. 30, 2021						June 30, 2021						Mar. 31, 2021
Arizona:
Demand						947,775						934,282						1,110,884						943,511						915,439
Interest-bearing:
Transaction						810,896						834,491						784,614						820,901						835,795
Savings						18,122						16,182						16,468						13,496						13,235
Time						27,259						31,274						30,862						30,012						30,997
Total interest-bearing						856,277						881,947						831,944						864,409						880,027
Total Arizona						1,804,052						1,816,229						1,942,828						1,807,920						1,795,466
Kansas/Missouri:
Demand						553,345						658,342						488,595						463,339						478,370
Interest-bearing:
Transaction						1,107,525						1,086,946						965,757						978,160						991,510
Savings						19,589						18,844						17,303						17,539						18,686
Time						11,527						12,255						13,040						13,509						13,898
Total interest-bearing						1,138,641						1,118,045						996,100						1,009,208						1,024,094
Total Kansas/Missouri						1,691,986						1,776,387						1,484,695						1,472,547						1,502,464
Arkansas:
Demand						38,798						42,499						41,594						46,472						45,889
Interest-bearing:
Transaction						122,020						119,543						149,611						195,125						141,207
Savings						3,265						3,213						3,289						3,445						3,000
Time						6,414						6,196						6,677						6,819						7,022
Total interest-bearing						131,699						128,952						159,577						205,389						151,229
Total Arkansas						170,497						171,451						201,171						251,861						197,118
Total BOK Financial deposits						$	39,425,951					$	41,242,059					$	38,524,551					$	37,439,933					$	37,852,626

In addition to deposits, liquidity is provided primarily by federal funds purchased, securities repurchase agreements and Federal Home Loan Bank borrowings. Federal funds purchased consist primarily of unsecured, overnight funds acquired from other financial institutions. Funds are primarily purchased from bankers’ banks and Federal Home Loan banks from across the country. The Company has no wholesale federal funds purchased at March 31, 2022. Securities repurchase agreements generally mature within 90 days and are secured by certain available for sale and trading securities. Federal Home Loan Bank borrowings are generally short-term and are secured by a blanket pledge of eligible collateral (generally unencumbered U.S. Treasury and agency mortgage-backed securities, 1-4 family residential mortgage loans, multifamily and other qualifying commercial real estate loans). Amounts borrowed from the Federal Home Loan Bank of Topeka averaged $1.1 billion during the quarter, compared to $842 million in the fourth quarter of 2021.

At March 31, 2022, the estimated unused credit available to BOKF, NA from collateralized sources was approximately $16.4 billion.

A summary of other borrowings for BOK Financial on a consolidated basis follows in Table 21.

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Table 21 -- Borrowed Funds

(In thousands)

												Three Months Ended March 31, 2022																								Three Months Ended Dec. 31, 2021
						Mar. 31, 2022						Average Balance During the Quarter						Rate						Maximum Outstanding At Any Month End During the Quarter						Dec. 31, 2021						Average Balance During the Quarter						Rate						Maximum Outstanding At Any Month End During the Quarter
Funds purchased						444,068						371,435						0.57		%				444,068						199,513						337,328						0.63		%				226,605
Repurchase agreements						624,261						1,633,031						1.04		%				3,034,312						2,126,936						2,555,800						0.74		%				2,920,728
Other borrowings:
Federal Home Loan Bank advances						—						1,112,222						0.28		%				700,000						—						842,393						0.27		%				—
GNMA repurchase liability						6,294						6,530						4.29		%				6,804						7,420						8,440						4.42		%				9,358
Other						29,952						29,688						2.39		%				29,952						29,333						30,004						3.29		%				30,724
Total other borrowings						36,246						1,148,440						0.38		%										36,753						880,837						0.49		%
Subordinated debentures1						131,209						131,228						4.02		%				131,230						131,226						131,224						4.02		%				131,226
Total other borrowed funds and subordinated debentures						$	1,235,784					$	3,284,134					0.88		%										$	2,494,428					$	3,905,189					0.78		%

1 Parent Company only.

BOKF, NA also has a liability related to the repurchase of certain delinquent residential mortgage loans previously sold in GNMA mortgage pools. Interest is payable monthly at rates contractually due to investors if delinquent loans are not repurchased from the GNMA mortgage pools.

Parent Company

At March 31, 2022, cash and interest-bearing cash and cash equivalents held by the parent company totaled $233 million. The primary sources of liquidity for BOK Financial are cash on hand and dividends from BOKF, NA. Dividends from the bank are limited by various banking regulations to net profits, as defined, for the year plus retained profits for the two preceding years. Dividends are further restricted by minimum capital requirements. At March 31, 2022, based upon the most restrictive limitations as well as management's internal capital policy, BOKF, NA could declare up to $18 million of dividends. Dividend constraints may be alleviated through increases in retained earnings, capital issuances or changes in risk weighted assets. Future losses or increases in required regulatory capital at the bank could affect its ability to pay dividends to the parent company.

Our equity capital at March 31, 2022 was $4.9 billion, a $515 million decrease compared to December 31, 2021. Net income less cash dividends paid increased equity $26 million during the first quarter of 2022. Changes in interest rates resulted in a $490 million decrease in accumulated other comprehensive income compared to December 31, 2021. We also repurchased $48 million of common stock during the first quarter of 2022. Capital is managed to maximize long-term value to the shareholders. Factors considered in managing capital include projections of future earnings including expected benefits from lower federal income tax rates, asset growth and acquisition strategies, and regulatory and debt covenant requirements. Capital management may include subordinated debt or perpetual preferred stock issuance, share repurchase and stock and cash dividends.

On April 30, 2019, the board of directors authorized the Company to purchase up to five million common shares, subject to market conditions, securities law and other regulatory compliance limitations. As of March 31, 2022, 3,809,347 shares have been repurchased under this authorization. The Company repurchased 475,877 shares of common stock at an average price of $101.02 a share in the first quarter of 2022. We view share buybacks opportunistically, but within the context of maintaining our strong capital position.

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BOK Financial and BOKF, NA are subject to various capital requirements administered by federal agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that could have a material impact on operations. These capital requirements include quantitative measures of assets, liabilities and off-balance sheet items. The capital standards are also subject to qualitative judgments by the regulators.

A summary of minimum capital requirements, including capital conservation buffer follows in Table 22. A bank which falls below these levels, including the capital conservation buffer, would be subject to regulatory restrictions on capital distributions (including but not limited to dividends and share repurchases) and executive bonus payments.

In March 2020, in response to the impact on the financial markets by the COVID-19 pandemic, the banking agencies issued an interim final rule permitting banking organizations that implement CECL the option to delay for two years an estimate of the CECL methodology's effect on regulatory capital, followed by a three-year transition period. The estimate includes the implementation date adjustment as of January 1, 2020 plus an estimate of the impact of the change for a two year period following implementation of CECL. We have elected to delay the regulatory capital impact of the transition in accordance with the interim final rule. Deferral of the impact of CECL added 11 basis points to the Company's Common equity Tier 1 capital at March 31, 2022.

The capital ratios for BOK Financial on a consolidated basis are presented in Table 22.

Table 22 -- Capital Ratios

						Minimum Capital Requirement						Capital Conservation Buffer						Minimum Capital Requirement Including Capital Conservation Buffer						Mar. 31, 2022						Dec. 31, 2021						Mar. 31, 2021
Risk-based capital:
Common equity Tier 1						4.50		%				2.50		%				7.00		%				11.30		%				12.24		%				12.14		%
Tier 1 capital						6.00		%				2.50		%				8.50		%				11.31		%				12.25		%				12.21		%
Total capital						8.00		%				2.50		%				10.50		%				12.25		%				13.29		%				13.98		%
Tier 1 Leverage						4.00		%				N/A						4.00		%				8.47		%				8.55		%				8.42		%
Average total equity to average assets																								10.18		%				10.61		%				10.48		%
Tangible common equity ratio																								8.13		%				8.61		%				8.82		%

Capital resources of financial institutions are also regularly measured by the tangible common shareholders’ equity ratio. Tangible common shareholders’ equity is shareholders’ equity as defined by generally accepted accounting principles in the United States of America (“GAAP”) less intangible assets and equity which does not benefit common shareholders. Equity that does not benefit common shareholders includes preferred equity. This non-GAAP measure is a valuable indicator of a financial institution’s capital strength since it eliminates intangible assets from shareholders’ equity and retains the effect of unrealized losses on securities and other components of accumulated other comprehensive income in shareholders’ equity.

Table 23 provides a reconciliation of the non-GAAP measures with financial measures defined by GAAP.

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Table 23 -- Non-GAAP Measure

(Dollars in thousands)

						Mar. 31, 2022						Dec. 31, 2021						Sept. 30, 2021						June 30, 2021						Mar. 31, 2021
Tangible common equity ratio:
Total shareholders' equity						$	4,849,582					$	5,363,732					$	5,388,973					$	5,332,977					$	5,239,462
Less: Goodwill and intangible assets, net						1,132,510						1,136,527						1,140,935						1,153,785						1,158,676
Tangible common equity						3,717,072						4,227,205						4,248,038						4,179,192						4,080,786
Total assets						46,826,507						50,249,431						46,923,409						47,154,375						47,442,513
Less: Goodwill and intangible assets, net						1,132,510						1,136,527						1,140,935						1,153,785						1,158,676
Tangible assets						$	45,693,997					$	49,112,904					$	45,782,474					$	46,000,590					$	46,283,837
Tangible common equity ratio						8.13		%				8.61		%				9.28		%				9.09		%				8.82		%
Pre-provision net revenue:
Net income before taxes						$	78,649					$	152,025					$	241,782					$	215,603					$	186,690
Provision for expected credit losses						—						(17,000)						(23,000)						(35,000)						(25,000)
Net income (loss) attributable to non-controlling interests						(36)						(129)						(601)						686						(1,752)
Pre-provision net revenue						$	78,685					$	135,154					$	219,383					$	179,917					$	163,442

Pre-provision net revenue is a measure of revenue less expenses, and is calculated before provision for credit losses and income tax expense. This financial measure is frequently used by investors and analysts to enable them to assess a company's ability to generate earnings to cover credit losses through a credit cycle. It also provides an additional basis for comparing the results of operations between periods by isolating the impact of the provision for credit losses, which can vary significantly between periods.

Off-Balance Sheet Arrangements

See Note 4 to the Consolidated Financial Statements for a discussion of the Company’s significant off-balance sheet commitments.

Market Risk

Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange rates, commodity prices or equity prices. Financial instruments that are subject to market risk can be classified either as held for trading or held for purposes other than trading. Market risk excludes changes in fair value due to the credit of the individual issuers of financial instruments.

BOK Financial is subject to market risk primarily through the effect of changes in interest rates on both its assets held for purposes other than trading and trading assets. The effects of other changes, such as foreign exchange rates, commodity prices or equity prices do not pose significant market risk to BOK Financial. BOK Financial has no material investments in assets that are affected by changes in foreign exchange rates or equity prices. Energy and agricultural product derivative contracts, which are affected by changes in commodity prices, are matched against offsetting contracts as previously discussed.

The Asset/Liability Committee is responsible for managing market risk in accordance with policy limits established by the Board of Directors. The Committee monitors projected variation in net interest revenue, net income and economic value of equity due to specified changes in interest rates. These limits also set maximum levels for short-term borrowings, short-term assets, public funds and brokered deposits and establish minimum levels for un-pledged assets, among other things. Further, the Board approved market risk limits for fixed income trading, mortgage pipeline and mortgage servicing assets inclusive of economic hedge benefits. Exposure is measured daily and compliance is reviewed monthly. Deviations from the Board approved limits, which periodically occur throughout the reporting period, may require management to develop and execute plans to reduce exposure. These plans are subject to escalation to and approval by the Board.

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The simulations used to manage market risk are based on numerous assumptions regarding the effects of changes in interest rates on the timing and extent of repricing characteristics, future cash flows and customer behavior. These assumptions are inherently uncertain and, as a result, models cannot precisely estimate or precisely predict the impact of higher or lower interest rates. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes, market conditions and management strategies, among other factors.

Interest Rate Risk – Other than Trading

 

As previously noted in the Net Interest Revenue section of this report, management has implemented strategies to manage the Company’s balance sheet to have relatively limited exposure to changes in interest rates over a twelve-month period. The effectiveness of these strategies in managing the overall interest rate risk is evaluated through the use of an asset/liability model. BOK Financial performs a sensitivity analysis to identify more dynamic interest rate risk exposures, including embedded option positions, on net interest revenue. A simulation model is used to estimate the effect of changes in interest rates on our performance across multiple interest rate scenarios. Our current internal policy limit for net interest revenue variation due to a 200 basis point parallel change in market interest rates over twelve months is a maximum decline of 5 percent. The results of a decrease in interest rates in the current low-rate environment are not meaningful. Management also reviews alternative rate changes and time periods.

The Company’s primary interest rate exposures include the Federal Funds rate, which affects short-term borrowings, and the prime lending rate and LIBOR, which are the basis for much of the variable rate loan pricing. Additionally, residential mortgage rates directly affect the prepayment speeds for residential mortgage-backed securities and mortgage servicing rights. Derivative financial instruments and other financial instruments used for purposes other than trading are included in this simulation. In addition, the impact on the level and composition of demand deposit accounts and other core deposit balances resulting from a significant increase in short-term market interest rates and the overall interest rate environment is likely to be material. The simulation incorporates assumptions regarding the effects of such changes based on a combination of historical analysis and expected behavior. The impact of planned growth and new business activities is factored into the simulation model.

The interest rate sensitivity in Table 24 indicates management’s estimation of the impact of rate changes on net interest revenue. Should deposit costs be 10 percent more sensitive to changes in rates, the variation in net interest revenue over the next twelve months would be 6.60 percent, or $75.1 million for the 200 basis point increase scenario. Alternatively, should deposit funding costs be 10 percent less sensitive to changes in rates, the variation in net interest revenue over the next twelve months would be 8.45 percent, or $96.1 million for the 200 basis point increase scenario. Additionally, in a flattening yield curve scenario where long-term rates increase by 100 basis points and short-term rates increase by 200 basis points, net interest revenue would increase by approximately 3.26 percent, or $37.0 million.

Table 24 -- Interest Rate Sensitivity

(Dollars in thousands)

						Mar. 31, 2022												Dec. 31, 2021
						200 bp Increase						100 bp Increase						200 bp Increase						100 bp Increase
Anticipated impact over the next twelve months on net interest revenue						$	85,608					$	55,495					$	87,241					$	54,213
						7.53		%				4.88		%				7.60		%				4.72		%
Anticipated impact over months twelve through twenty-four						$	195,813					$	132,326					$	185,054					$	129,850
						16.36		%				11.39		%				16.03		%				11.25		%

BOK Financial is also subjected to market risk through changes in the fair value of mortgage servicing rights. Changes in the fair value of mortgage servicing rights are highly dependent on changes in primary mortgage rates offered to borrowers, intermediate-term interest rates that affect the value of custodial funds, and assumptions about servicing revenues, servicing costs and discount rates. As primary mortgage rates increase, prepayment speeds slow and the value of our mortgage servicing rights increases. As primary mortgage rates fall, prepayment speeds increase and the value of our mortgage servicing rights decreases.

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We maintain a portfolio of financial instruments, which may include debt securities issued by the U.S. government or its agencies and interest rate derivative contracts, held as an economic hedge of the changes in the fair value of our mortgage servicing rights. Composition of this portfolio will change based on our assessment of market risk. Changes in the fair value of residential mortgage-backed securities are highly dependent on changes in secondary mortgage rates required by investors, and interest rate derivative contracts are highly dependent on changes in other market interest rates. While primary and secondary mortgage rates generally move in the same direction, the spread between them may widen and narrow due to market conditions and government intervention. Changes in the forward-looking spread between the primary and secondary rates can cause significant earnings volatility.

Management performs a stress test to measure market risk due to changes in interest rates inherent in its MSR portfolio and hedges. The stress test shocks applicable interest rates up and down 50 basis points and calculates an estimated change in fair value, net of economic hedging activity, that may result. The Board has approved a $20 million market risk limit for mortgage servicing rights, net of economic hedges.

Table 25 -- MSR Asset and Hedge Sensitivity Analysis

(Dollars in thousands)

						Mar. 31, 2022												Dec. 31, 2021
						Up 50 bp						Down 50 bp						Up 50 bp						Down 50 bp
MSR Asset						$	12,025					$	(17,973)					$	31,856					$	(41,815)
MSR Hedge						(13,708)						13,723						(38,213)						36,692
Net Exposure						(1,683)						(4,250)						(6,357)						(5,123)

Trading Activities

The Company bears market risk by originating residential mortgages held for sale ("RMHFS"). RMHFS are generally outstanding for 60 to 90 days, which represents the typical period from commitment to originate a loan to sale of the closed loan to an investor. Primary mortgage interest rate changes during this period affect the value of RMHFS commitments and loans. We use forward sale contracts to mitigate market risk on all closed mortgage loans held for sale and on an estimate of mortgage loan commitments that are expected to result in closed loans.

A variety of methods are used to monitor market risk of mortgage origination activities. These methods include daily marking of all positions to market value, independent verification of inventory pricing, and revenue sensitivity limits.

Management performs a stress test to measure market risk due to changes in interest rates inherent in the mortgage production pipeline. The stress test shocks applicable interest rates up and down 50 basis points and calculates an estimated change in fair value, net of economic hedging activity that may result. The Board has approved a $7 million market risk limit for the mortgage production pipeline, net of forward sale contracts.

Table 26 -- Mortgage Pipeline Sensitivity Analysis

(Dollars in thousands)

						Three Months Ended
						Mar. 31, 2022												Dec. 31, 2021												Mar. 31, 2021
						Up 50 bp						Down 50 bp						Up 50 bp						Down 50 bp						Up 50 bp						Down 50 bp
Average1						$	(96)					$	(420)					$	(252)					$	(254)					$	(647)					$	(612)
Low2						161						2						103						(62)						(17)						(58)
High3						(402)						(779)						(621)						(523)						(1,244)						(1,097)
Period End						(27)						(95)						(85)						(181)						(564)						(422)

1    Average represents the simple average of each daily value observed during the reporting period.

2    Low represents least risk of loss in fair value measured as the smallest negative value or the largest positive value observed daily during the reporting period.

3    High represents the greatest risk of loss in fair value measured as the largest negative value or the smallest positive value observed daily during the reporting period.

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BOK Financial enters into trading activities both as an intermediary for customers and for its own account. As an intermediary, we take positions in securities, generally residential mortgage-backed securities, government agency securities and municipal bonds. These securities are purchased for resale to customers, which include individuals, corporations, foundations and financial institutions. On a limited basis, we may also take trading positions in U.S. Treasury securities, residential mortgage-backed securities, and municipal bonds to enhance returns on securities portfolios. Both of these activities involve interest rate risk, liquidity risk and price risk. BOK Financial has an insignificant exposure to foreign exchange risk and does not take positions in commodity derivatives.

A variety of methods are used to monitor and manage the market risk of trading activities. These methods include daily marking of all positions to market value, independent verification of inventory pricing, and position limits for each trading activity. Risk management tools include Value at Risk ("VaR"), stress testing and sensitivity analysis. Economic hedges in either the futures or cash markets may be used to reduce the risk associated with some trading programs. Basis Risk can result when trading asset values and the instruments used to hedge them move at different rates.

VaR measures the potential loss of a given position or portfolio of positions at a specified confidence level and time horizon. BOK Financial utilizes a historical VaR methodology to measure and aggregate risks across its covered trading positions. For Market Risk Rule purposes, the Company calculates VaR using a historical simulation approach and measures the potential trading losses using a 10-day holding period and a 99% confidence level.

Due to inherent limitations of the VaR methodology, including its reliance on past market behavior which might not be indicative of future market performance, VaR is only one of several tools used to measure and manage market risk. Other tools used to actively manage market risk include stress testing (“Stressed VaR”), and sensitivity analysis.

Stressed VaR, is calculated using the same internal models as used for the VaR-based measure. Stressed VaR is calculated over a ten-day holding period at a one-tail, 99% confidence level and employs a historical simulation approach based on a continuous twelve-month historical window selected to reflect a period of significant financial stress for the Company’s trading portfolio.

The trading portfolio’s VaR and Stressed VaR profiles are influenced by a variety of factors, including the size and composition of the portfolio, market volatility, and the correlation between different positions. A portfolio of trading positions is typically less risky than the sum of the risk from each of the individual sub-portfolios, because, under normal market conditions, risk within each category partially offsets the exposure to other risk categories. Table 27 below summarizes certain VaR and Stressed VaR based measures for the three months ended March 31, 2022, December 31, 2021, and March 31, 2021. In the first quarter of 2022, both VaR measures decreased from the previous quarter. This decrease resulted from a decline in total trading assets and a decrease in basis risk between trading assets and their economic hedges.

Table 27 -- VaR and SVaR Measures

						Three Months Ended
						Mar. 31, 2022												Dec. 31, 2021																		Mar. 31, 2021
						10 day 99% VaR						10 day 99% SVaR						10 day 99% VaR						10 day 99% SVaR																		10 day 99% VaR						10 day 99% SVaR
Average1						$	8,759					$	39,402					$	8,930					$	40,010																	$	6,836					$	10,266
Low						5,969						23,910						6,100						21,390																		3,500						4,582
High						14,556						73,790						15,060						67,440																		9,951						27,792
Period End						8,178						23,988						9,770						45,050																		8,038						11,221

1    Average represents the simple average of each daily value observed during the reporting period.

The Company monitors the accuracy of internal VaR models and modeling processes by back-testing model performance. The Company updates historical data used by the VaR model on a regular basis and model validators independent of business lines perform regular modeled validations to access model input, processing, and reporting components. These models are required to be independently validated and approved prior to implementation.

Management also performs a sensitivity analysis to measure market risk from changes in interest rates on its trading portfolio. Applicable interest rates are shocked up and down 50 basis points calculating an estimated change in fair value, net of economic hedging activity that may result. The Board has approved an $8 million market risk limit for the trading portfolio, net of economic hedges.

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Table 28 -- Trading Sensitivity Analysis

(Dollars in thousands)

						Three Months Ended
						Mar. 31, 2022												Dec. 31, 2021												Mar. 31, 2021
						Up 50 bp						Down 50 bp						Up 50 bp						Down 50 bp						Up 50 bp						Down 50 bp
Average1						$	499					$	2,927					$	1,134					$	1,479					$	(2,572)					$	3,553
Low2						8,643						12,277						8,631						9,319						5,818						8,801
High3						(11,253)						(3,813)						(6,589)						(5,020)						(7,054)						(4,618)
Period End						49						1,076						1,587						355						(6,548)						7,756

1    Average represents the simple average of each daily value observed during the reporting period.

2    Low represents least risk of loss in fair value measured as the smallest negative value or the largest positive value observed daily during the reporting period.

3    High represents the greatest risk of loss in fair value measured as the largest negative value or the smallest positive value observed daily during the reporting period.

Controls and Procedures

 

As required by Rule 13a-15(b), BOK Financial’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation as of the end of the period covered by their report, of the effectiveness of the Company’s disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report. As required by Rule 13a-15(d), BOK Financial’s management, including the Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of the Company’s internal controls over financial reporting to determine whether any changes occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting. Based on that evaluation, there has been no such change during the quarter covered by this report.

Forward-Looking Statements

This report contains forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about BOK Financial Corporation, the financial services industry, the economy generally and the expected or potential impact of the novel coronavirus (COVID-19) pandemic, and the related responses of the government, consumers, and others, on our business, financial condition and results of operations. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “plans,” “projects,” “will,” “intends,” 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, allowance for uncertain tax positions, accruals for loss contingencies and valuation of mortgage servicing rights involve judgments as to expected events and are inherently forward-looking statements. Assessments that acquisitions and 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 various forward-looking 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 changes in government, consumer or business responses to, and ability to treat or prevent further outbreak of, the COVID-19 pandemic, changes in commodity prices, interest rates and interest rate relationships, inflation, demand for products and services, the degree of competition by traditional and nontraditional competitors, changes in banking regulations, tax laws, prices, levies and assessments, the impact of technological advances, and trends in customer 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.

Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results.

In this report we may sometimes use non-GAAP financial measures. Please note that although non-GAAP financial measures provide useful insight to analysts, investors and regulators, they should not be considered in isolation or relied upon as a substitute for analysis using GAAP measures. If applicable, we provide GAAP reconciliations for non-GAAP financial measures.

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Consolidated Statements of Earnings (Unaudited)
(In thousands, except share and per share data)						Three Months Ended
						March 31,
Interest revenue						2022						2021
Loans						$	178,373					$	197,574
Residential mortgage loans held for sale						1,394						1,380
Trading securities						40,975						35,922
Investment securities						2,354						2,726
Available for sale securities						57,932						58,608
Fair value option securities						491						496
Restricted equity securities						1,107						1,359
Interest-bearing cash and cash equivalents						473						174
Total interest revenue						283,099						298,239
Interest expense
Deposits						7,598						9,850
Borrowed funds						5,788						4,622
Subordinated debentures						1,302						3,347
Total interest expense						14,688						17,819
Net interest revenue						268,411						280,420
Provision for credit losses						—						(25,000)
Net interest revenue after provision for credit losses						268,411						305,420
Other operating revenue
Brokerage and trading revenue						(27,079)						20,782
Transaction card revenue						24,216						22,430
Fiduciary and asset management revenue						46,399						41,322
Deposit service charges and fees						27,004						24,209
Mortgage banking revenue						16,650						37,113
Other revenue						10,445						16,296
Total fees and commissions						97,635						162,152
Other gains (losses), net						(1,644)						10,121
Loss on derivatives, net						(46,981)						(27,650)
Loss on fair value option securities, net						(11,201)						(1,910)
Change in fair value of mortgage servicing rights						49,110						33,874
Gain on available for sale securities, net						937						467
Total other operating revenue						87,856						177,054
Other operating expense
Personnel						159,228						173,010
Business promotion						6,513						2,154
Charitable contributions to BOKF Foundation						—						4,000
Professional fees and services						11,413						11,980
Net occupancy and equipment						30,855						26,662
Insurance						4,283						4,620
Data processing and communications						39,836						37,467
Printing, postage and supplies						3,689						3,440
Amortization of intangible assets						3,964						4,807
Mortgage banking costs						7,877						13,943
Other expense						9,960						13,701
Total other operating expense						277,618						295,784
Net income before taxes						78,649						186,690
Federal and state income taxes						16,197						42,382
Net income						62,452						144,308
Net loss attributable to non-controlling interests						(36)						(1,752)
Net income attributable to BOK Financial Corporation shareholders						$	62,488					$	146,060
Earnings per share:
Basic						$	0.91					$	2.10
Diluted						$	0.91					$	2.10
Average shares used in computation:
Basic						67,812,400						69,137,375
Diluted						67,813,851						69,141,710
Dividends declared per share						$	0.53					$	0.52

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Comprehensive Income (Unaudited)
(In thousands, except share and per share data)
						Three Months Ended
						March 31,
						2022						2021
Net income						$	62,452					$	144,308
Other comprehensive income (loss) before income taxes:
Net change in unrealized gain (loss)						(639,041)						(150,131)
Reclassification adjustments included in earnings:
Gain on available for sale securities, net						(937)						(467)
Other comprehensive loss before income taxes						(639,978)						(150,598)
Federal and state income taxes						(149,781)						(36,139)
Other comprehensive loss, net of income taxes						(490,197)						(114,459)
Comprehensive income (loss)						(427,745)						29,849
Comprehensive loss attributable to non-controlling interests						(36)						(1,752)
Comprehensive income (loss) attributable to BOK Financial Corp. shareholders						$	(427,709)					$	31,601

See accompanying notes to consolidated financial statements.

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Consolidated Balance Sheets

(In thousands, except share data)

						Mar. 31, 2022						Dec. 31, 2021
						(Unaudited)						(Footnote 1)
Assets
Cash and due from banks						$	767,805					$	712,067
Interest-bearing cash and cash equivalents						599,976						2,125,343
Trading securities						4,891,096						9,136,813
Investment securities, net of allowance (fair value: March 31, 2022 – $191,235; December 31, 2021 – $231,395)						183,824						210,444
Available for sale securities						12,894,534						13,157,817
Fair value option securities						185,003						43,770
Restricted equity securities						77,389						83,113
Residential mortgage loans held for sale						169,474						192,295
Loans						20,674,429						20,205,680
Allowance for loan losses						(246,473)						(256,421)
Loans, net of allowance						20,427,956						19,949,259
Premises and equipment, net						574,786						574,148
Receivables						238,694						223,021
Goodwill						1,044,749						1,044,749
Intangible assets, net						87,761						91,778
Mortgage servicing rights						209,563						163,198
Real estate and other repossessed assets, net of allowance (March 31, 2022 – $5,977; December 31, 2021 –          $6,083)						24,492						24,589
Derivative contracts, net						2,680,207						1,097,297
Cash surrender value of bank-owned life insurance						407,763						405,607
Receivable on unsettled securities sales						229,404						56,172
Other assets						1,132,031						957,951
Total assets						$	46,826,507					$	50,249,431
Liabilities and Equity
Liabilities:
Noninterest-bearing demand deposits						$	15,242,341					$	15,344,423
Interest-bearing deposits:
Transaction						21,689,829						23,268,573
Savings						979,365						924,735
Time						1,514,416						1,704,328
Total deposits						39,425,951						41,242,059
Funds purchased and repurchase agreements						1,068,329						2,326,449
Other borrowings						36,246						36,753
Subordinated debentures						131,209						131,226
Accrued interest, taxes and expense						238,048						273,041
Derivative contracts, net						557,834						275,625
Due on unsettled securities purchases						81,016						160,686
Other liabilities						434,350						435,221
Total liabilities						41,972,983						44,881,060
Shareholders' equity:
Common stock ($0.00006 par value; 2,500,000,000 shares authorized; shares issued and outstanding: March 31, 2022 – 76,412,230; December 31, 2021 – 76,254,029)						5						5
Capital surplus						1,381,666						1,378,794
Retained earnings						4,473,884						4,447,691
Treasury stock (shares at cost: March 31, 2022 – 8,308,187; December 31, 2021 – 7,786,257)						(588,147)						(535,129)
Accumulated other comprehensive gain (loss)						(417,826)						72,371
Total shareholders’ equity						4,849,582						5,363,732
Non-controlling interests						3,942						4,639
Total equity						4,853,524						5,368,371
Total liabilities and equity						$	46,826,507					$	50,249,431

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Changes in Equity (Unaudited)

(In thousands)

						Common Stock												Capital Surplus						Retained Earnings						Treasury Stock												Accumulated Other Comprehensive Income (Loss)						Total Shareholders’ Equity						Non- Controlling Interests						Total Equity
						Shares						Amount																		Shares						Amount
Balance, December 31, 2021						76,254						$	5					$	1,378,794					$	4,447,691					7,786						$	(535,129)					$	72,371					$	5,363,732					$	4,639					$	5,368,371
Net income (loss)						—						—						—						62,488						—						—						—						62,488						(36)						62,452
Other comprehensive loss						—						—						—						—						—						—						(490,197)						(490,197)						—						(490,197)
Repurchase of common stock						—						—						—						—						476						(48,074)						—						(48,074)						—						(48,074)
Share-based compensation plans:
Stock options exercised						1						—						37						—						—						—						—						37						—						37
Non-vested shares awarded,      net						157						—						—						—						—						—						—						—						—						—
Vesting of non-vested      shares						—						—						—						—						46						(4,944)						—						(4,944)						—						(4,944)
Share-based compensation						—						—						2,835						—						—						—						—						2,835						—						2,835
Cash dividends on common      stock						—						—						—						(36,295)						—						—						—						(36,295)						—						(36,295)
Capital calls and distributions,      net						—						—						—						—						—						—						—						—						(661)						(661)
Balance, March 31, 2022						76,412						$	5					$	1,381,666					$	4,473,884					8,308						$	(588,147)					$	(417,826)					$	4,849,582					$	3,942					$	4,853,524
Balance, December 31, 2020						75,995						$	5					$	1,368,062					$	3,973,675					6,358						$	(411,344)					$	335,868					$	5,266,266					$	25,295					$	5,291,561
Net income (loss)						—						—						—						146,060						—						—						—						146,060						(1,752)						144,308
Other comprehensive loss						—						—						—						—						—						—						(114,459)						(114,459)						—						(114,459)
Repurchase of common stock						—						—						—						—						260						(20,071)						—						(20,071)						—						(20,071)
Share-based compensation      plans:
Stock options exercised						17						—						949						—						—						—						—						949						—						949
Non-vested shares awarded,      net						232						—						—						—						—						—						—						—						—						—
Vesting of non-vested      shares						—						—						—						—						68						(5,815)						—						(5,815)						—						(5,815)
Share-based compensation						—						—						2,724						—						—						—						—						2,724						—						2,724
Cash dividends on common      stock						—						—						—						(36,192)						—						—						—						(36,192)						—						(36,192)
Capital calls and distributions,      net						—						—						—						—						—						—						—						—						(661)						(661)
Balance, March 31, 2021						76,244						$	5					$	1,371,735					$	4,083,543					6,686						$	(437,230)					$	221,409					$	5,239,462					$	22,882					$	5,262,344

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

						Three Months Ended
						March 31,
						2022						2021
Cash Flows From Operating Activities:
Net income						$	62,452					$	144,308
Adjustments to reconcile net income to net cash provided (used in) operating activities:
Provision for credit losses						—						(25,000)
Change in fair value of mortgage servicing rights due to market assumption changes						(49,110)						(33,874)
Change in the fair value of mortgage servicing rights due to principal payments						7,960						11,961
Net unrealized (gains) losses from derivative contracts						(31,298)						92,502
Share-based compensation						2,835						2,724
Depreciation and amortization						26,091						24,918
Net amortization of discounts and premiums						3,216						4,853
Net losses (gains) on financial instruments and other losses (gains), net						706						(10,587)
Net gain on mortgage loans held for sale						(1,056)						(19,045)
Mortgage loans originated for sale						(418,866)						(843,053)
Proceeds from sale of mortgage loans held for sale						446,742						836,209
Capitalized mortgage servicing rights						(5,215)						(9,830)
Change in trading and fair value option securities						4,104,453						(335,624)
Change in receivables						(88,559)						15,650
Change in other assets						(19,589)						(24,991)
Change in other liabilities						(107,508)						(49,998)
Net cash provided by (used in) operating activities						3,933,254						(218,877)
Cash Flows From Investing Activities:
Proceeds from maturities or redemptions of investment securities						26,363						18,624
Proceeds from maturities or redemptions of available for sale securities						723,730						877,257
Purchases of available for sale securities						(1,161,606)						(1,451,909)
Proceeds from sales of available for sale securities						55,185						56,037
Change in amount receivable on unsettled available for sale securities transactions						(99,944)						(26,130)
Loans originated, net of principal collected						(460,128)						498,667
Net payments on derivative asset contracts						34,855						(7,016)
Net change in restricted equity securities						5,724						31,777
Proceeds from disposition of assets						9,708						43,739
Purchases of assets						(37,569)						(63,110)
Net cash provided by (used in) investing activities						(903,682)						(22,064)
Cash Flows From Financing Activities:
Net change in demand deposits, transaction deposits and savings accounts						(1,626,196)						1,671,518
Net change in time deposits						(189,912)						37,228
Net change in other borrowed funds						(1,271,195)						(1,078,174)
Net proceeds on derivative liability contracts						(30,779)						8,437
Net change in derivative margin accounts						(1,274,645)						2,995
Change in amount due on unsettled available for sale securities transactions						(17,198)						(101,311)
Issuance of common and treasury stock, net						(4,907)						(4,866)
Repurchase of common stock						(48,074)						(20,071)
Dividends paid						(36,295)						(36,192)
Net cash provided by (used in) financing activities						(4,499,201)						479,564
Net increase (decrease) in cash and cash equivalents						(1,469,629)						238,623
Cash and cash equivalents at beginning of period						2,837,410						1,180,573
Cash and cash equivalents at end of period						$	1,367,781					$	1,419,196
Supplemental Cash Flow Information:
Cash paid for interest						$	13,982					$	16,743
Cash paid for taxes						$	858					$	852
Net loans and bank premises transferred to repossessed real estate and other assets						$	64					$	147
Residential mortgage loans guaranteed by U.S. government agencies that became eligible for repurchase during the period						$	12,568					$	36,496
Conveyance of other real estate owned guaranteed by U.S. government agencies						$	1,812					$	1,448
Right-of-use assets obtained in exchange for operating lease liabilities						$	9,241					$	1,191

See accompanying notes to consolidated financial statements.

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Notes to Consolidated Financial Statements (Unaudited)

(1) Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements of BOK Financial Corporation (“BOK Financial” or “the Company”) have been prepared in accordance with accounting principles for interim financial information generally accepted in the United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

The unaudited consolidated financial statements include accounts of BOK Financial and its subsidiaries, principally BOKF, NA (“the Bank”), BOK Financial Securities, Inc., and BOK Financial Private Wealth, Inc. Operating divisions of the Bank include Bank of Albuquerque, Bank of Oklahoma, Bank of Texas, BOK Financial in Arizona, Arkansas, Colorado and Kansas/Missouri, BOK Financial Mortgage and the TransFund electronic funds network.

Certain reclassifications have been made to conform to the current period presentation.

The financial information should be read in conjunction with BOK Financial’s 2021 Form 10-K filed with the Securities and Exchange Commission, which contains audited financial statements. Amounts presented as of December 31, 2021 have been derived from the audited financial statements included in BOK Financial’s 2021 Form 10-K but do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Operating results for the three-month period ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Newly Adopted and Pending Accounting Policies

Financial Accounting Standards Board (“FASB”)

FASB Accounting Standards Update No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04")

On March 12, 2020, the FASB issued ASU 2020-04 which provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships that reference LIBOR or another reference rate expected to be discontinued, subject to meeting certain criteria. Under the new guidance, an entity can elect by accounting topic or industry subtopic to account for the modification of a contract affected by reference rate reform as a continuation of the existing contract, if certain conditions are met. In addition, the new guidance allows an entity to elect on a hedge-by-hedge basis to continue to apply hedge accounting for hedging relationships in which the critical terms change due to reference rate reform, if certain conditions are met. A one-time election to sell and/or transfer held-to-maturity debt securities that reference a rate affected by reference rate reform is also allowed. ASU 2020-04 became effective for all entities as of March 12, 2020 and will apply to all LIBOR reference rate modifications through December 31, 2022. Adoption of ASU 2020-04 did not have a material impact on the Company's financial statements.

FASB Accounting Standards Update No. 2021-01, Reference Rate Reform (Topic 848): Scope ("ASU 2021-01")

On January 7, 2021, the FASB issued ASU 2021-01 which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The amendments in this update are elective and apply to all entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The amendments also optionally apply to all entities that designate receive-variable rate, pay-variable-rate cross-currency interest rate swaps as hedging instruments in net investment hedges that are modified as a result of reference rate reform. ASU 2021-01 is effective immediately for all entities and amendments may be applied on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020. Adoption of ASU 2021-01 did not have a material impact on the Company's financial statements.

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FASB Accounting Standards Update No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02")

On March 31, 2022, the FASB issued ASU 2022-02 which eliminates the accounting guidance on troubled debt restructurings ("TDRs") for creditors in ASC 310-40, while also no longer requiring an entity to consider renewals, modifications, and extensions that result from reasonably expected TDRs in their calculation of the allowance for credit losses. For receivables for which there has been a modification in their contractual cash flows, ASU 2022-02 requires disclosure, by class of financing receivable, of the types of modifications, the financial effects of those modifications, and the performance of these modified receivables, along with receivables that had a payment default during the current period and had modifications to the contractual cash flows within 12 months prior to the default. Further, ASU 2022-02 requires entities to disclose gross write-offs recorded in the current period by year of origination in the vintage disclosures on a year-to-date basis. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022 and amendments related to TDR recognition and measurement may be applied using either a prospective or modified retrospective transition method, while amendments on TDR and vintage disclosures are to be adopted prospectively. Management is currently evaluating the impact of ASU 2022-02 on the Company's financial statements.

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(2) Securities

Trading Securities

 

The fair value and net unrealized gain (loss) included in trading securities are as follows (in thousands):

 

						March 31, 2022												December 31, 2021
						Fair Value						Net Unrealized Gain (Loss)						Fair Value						Net Unrealized Gain (Loss)
U.S. government securities						$	13,513					$	(10)					$	23,610					$	40
Residential agency mortgage-backed securities						4,827,504						(135,438)						9,068,900						(9,338)
Municipal securities						24,539						(478)						25,783						34
Other trading securities						25,540						(148)						18,520						(26)
Total trading securities						$	4,891,096					$	(136,074)					$	9,136,813					$	(9,290)

Investment Securities

 

The amortized cost and fair values of investment securities are as follows (in thousands):

						March 31, 2022
						Amortized						Fair						Gross Unrealized
						Cost						Value						Gain						Loss
Municipal securities						$	177,683					$	184,214					$	7,155					$	(624)
Residential agency mortgage-backed securities						6,486						6,741						283						(28)
Other debt securities						288						280						—						(8)
Total investment securities						184,457						191,235						7,438						(660)
Allowance for credit losses						(633)
Investment securities, net of allowance						$	183,824					$	191,235					$	7,438					$	(660)

						December 31, 2021
						Amortized						Fair						Gross Unrealized
						Cost						Value						Gain						Loss
Municipal securities						$	203,772					$	223,609					$	19,851					$	(14)
Residential agency mortgage-backed securities						6,939						7,500						561						—
Other debt securities						288						286						—						(2)
Total investment securities						210,999						231,395						20,412						(16)
Allowance for credit losses						(555)
Investment securities, net of allowance						$	210,444					$	231,395					$	20,412					$	(16)

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The amortized cost and fair values of investment securities at March 31, 2022, by contractual maturity, are as shown in the following table (dollars in thousands):

						Less than One Year						One to Five Years						Six to Ten Years						Over Ten Years						Total						Weighted Average Maturity1
Fixed maturity debt securities:
Amortized cost						$	14,901					$	104,681					$	52,359					$	6,030					$	177,971					4.55
Fair value						15,080						110,636						52,834						5,944						184,494
Residential mortgage-backed securities:
Amortized cost																														$	6,486					2
Fair value																														6,741
Total investment securities:
Amortized cost																														$	184,457
Fair value																														191,235

1Expected maturities may differ from contractual maturities, because borrowers may have the right to call or prepay obligations with or without penalty.

2The average expected lives of residential mortgage-backed securities were 4.4 years based upon current prepayment assumptions.

Temporarily Impaired Investment Securities

(in thousands):

						March 31, 2022
						Number of Securities						Less Than 12 Months												12 Months or Longer												Total
												Fair Value						Unrealized Loss						Fair Value						Unrealized Loss						Fair Value						Unrealized Loss
Investment:
Municipal securities						35						$	22,394					$	566					$	544					$	58					$	22,938					$	624
Residential agency mortgage-backed securities						1						1,534						28						—						—						1,534						28
Other debt securities						2						243						7						24						1						267						8
Total investment securities						38						$	24,171					$	601					$	568					$	59					$	24,739					$	660

						December 31, 2021
						Number of Securities						Less Than 12 Months												12 Months or Longer												Total
												Fair Value						Unrealized Loss						Fair Value						Unrealized Loss						Fair Value						Unrealized Loss
Investment:
Municipal securities						1						$	—					$	—					$	587					$	14					$	587					$	14
Other debt securities						2						273						2						—						—						273						2
Total investment securities						3						$	273					$	2					$	587					$	14					$	860					$	16

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Available for Sale Securities 

The amortized cost and fair value of available for sale securities are as follows (in thousands):

						March 31, 2022
						Amortized						Fair						Gross Unrealized
						Cost						Value						Gain						Loss
U.S. Treasury						$	1,000					$	947					$	—					$	(53)
Municipal securities						562,065						526,322						144						(35,887)
Mortgage-backed securities:
Residential agency						7,913,760						7,612,021						14,727						(316,466)
Residential non-agency						339,904						347,187						13,279						(5,996)
Commercial agency						4,623,902						4,407,585						2,809						(219,126)
Other debt securities						500						472						—						(28)
Total available for sale securities						$	13,441,131					$	12,894,534					$	30,959					$	(577,556)

						December 31, 2021
						Amortized						Fair						Gross Unrealized
						Cost						Value						Gain						Loss
U.S. Treasury						$	1,001					$	1,000					$	—					$	(1)
Municipal securities						515,551						508,365						1,302						(8,488)
Mortgage-backed securities:
Residential agency						7,908,587						8,006,616						155,477						(57,448)
Residential non-agency						10,625						24,339						13,714						—
Commercial agency						4,628,172						4,617,025						36,868						(48,015)
Other debt securities						500						472						—						(28)
Total available for sale securities						$	13,064,436					$	13,157,817					$	207,361					$	(113,980)

The amortized cost and fair values of available for sale securities at March 31, 2022, by contractual maturity, are as shown in the following table (dollars in thousands):

			Less than One Year						One to Five Years						Six to Ten Years						Over Ten Years						Total						Weighted Average Maturity1
Fixed maturity debt securities:
Amortized cost			$	48,510					$	1,968,389					$	2,683,456					$	487,112					$	5,187,467					6.59
Fair value			48,612						1,911,239						2,507,611						467,864						4,935,326
Residential mortgage-backed securities:
Amortized cost																											$	8,253,664					2
Fair value																											7,959,208
Total available for sale securities:
Amortized cost																											$	13,441,131
Fair value																											12,894,534

1Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty.

2The average expected lives of residential mortgage-backed securities were 4.3 years based upon current prepayment assumptions.

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Sales of available for sale securities resulted in gains and losses as follows (in thousands):

			Three Months Ended March 31,
			2022						2021
Proceeds			$	55,185					$	56,037
Gross realized gains			1,933						473
Gross realized losses			(996)						(6)
Related federal and state income tax expense			219						119

The fair value of debt securities pledged as collateral for repurchase agreements, public trust funds on deposit and for other purposes, as required by law was $10.0 billion at March 31, 2022 and $10.2 billion at December 31, 2021. The secured parties do not have the right to sell or repledge these securities.

Temporarily Impaired Available for Sale Securities

(in thousands)

						March 31, 2022
						Number of Securities						Less Than 12 Months												12 Months or Longer												Total
												Fair Value						Unrealized Loss						Fair Value						Unrealized Loss						Fair Value						Unrealized Loss
Available for sale:
U.S. Treasury						1						$	947					$	53					$	—					$	—					$	947					$	53
Municipal securities						202						$	400,690					$	26,297					$	111,502					$	9,590					$	512,192					$	35,887
Mortgage-backed securities:
Residential agency						508						5,127,508						191,126						1,412,323						125,340						6,539,831						316,466
Residential non-agency						15						304,149						5,996						—						—						304,149						5,996
Commercial agency						238						2,988,497						177,409						773,363						41,717						3,761,860						219,126
Other debt securities						1						—						—						472						28						472						28
Total available for sale securities						965						$	8,821,791					$	400,881					$	2,297,660					$	176,675					$	11,119,451					$	577,556

						December 31, 2021
						Number of Securities						Less Than 12 Months												12 Months or Longer												Total
												Fair Value						Unrealized Loss						Fair Value						Unrealized Loss						Fair Value						Unrealized Loss
Available for sale:
U.S. Treasury						1						$	1,000					$	1					$	—					$	—					$	1,000					$	1
Municipal securities						175						$	423,575					$	7,762					$	22,476					$	726					$	446,051					$	8,488
Mortgage-backed securities:
Residential agency						120						2,382,094						37,121						750,044						20,327						3,132,138						57,448
Commercial agency						165						2,104,689						35,488						703,216						12,527						2,807,905						48,015
Other debt securities						1						—						—						472						28						472						28
Total available for sale securities						462						$	4,911,358					$	80,372					$	1,476,208					$	33,608					$	6,387,566					$	113,980

Based on evaluations of impaired securities as of March 31, 2022, the Company does not intend to sell any impaired available for sale debt securities before fair value recovers to the current amortized cost and it is more-likely-than-not that the Company will not be required to sell impaired securities before fair value recovers, which may be maturity.

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Fair Value Option Securities

 

Fair value option securities represent securities which the Company has elected to carry at fair value and are separately identified on the Consolidated Balance Sheets. Changes in the fair value are recognized in earnings as they occur. Certain securities are held as an economic hedge of the mortgage servicing rights. 

The fair value and net unrealized gain (loss) included in fair value option securities is as follows (in thousands):

						March 31, 2022												December 31, 2021
						Fair Value						Net Unrealized Gain (Loss)						Fair Value						Net Unrealized Gain (Loss)
Residential agency mortgage-backed securities						$	185,003					$	(4,017)					$	43,770					$	1,591

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(3) Derivatives

 

Derivative instruments may be used by the Company as part of its internal risk management programs or may be offered to customers. All derivative instruments are carried at fair value and changes in fair value are reported in earnings as they occur. Credit risk is also considered in determining fair value. Deterioration in the credit rating of customer or other counterparties reduced the fair value of asset contracts. Deterioration of our credit rating could decrease the fair value of our derivative liabilities.

When bilateral netting agreements or similar arrangements exist between the Company and its counterparties that create a single legal claim or obligation to pay or receive the net amount in settlement of the individual derivative contracts, the Company reports derivative assets and liabilities on a net by derivative contract type by counterparty basis.

Derivative contracts may require the Company to provide or receive cash margin as collateral for derivative assets and liabilities. Derivative assets and liabilities are reported net of cash margin when certain conditions are met. In addition, derivative contracts executed with customers under Customer Risk Management Programs may be secured by non-cash collateral in conjunction with a credit agreement with that customer. Access to collateral in the event of default is reasonably assured.

 

None of these derivative contracts have been designated as hedging instruments for accounting purposes.

Customer Risk Management Programs

 

BOK Financial offers programs to permit its customers to manage various risks, including fluctuations in energy, cattle and other agricultural products, interest rates and foreign exchange rates with derivative contracts. Customers may also manage interest rate risk through interest rate swaps used by borrowers to modify interest rate terms of their loans. Derivative contracts are executed between the customers and BOK Financial. Offsetting contracts are executed between BOK Financial and other selected counterparties to minimize the risk of changes in commodity prices, interest rates or foreign exchange rates. The counterparty contracts are identical to customer contracts, except for a fixed pricing spread or fee paid to BOK Financial as profit and compensation for administrative costs and credit risk which is recognized over the life of the contracts and included in Other operating revenue – Brokerage and trading revenue in the Consolidated Statements of Earnings.

 

Trading

BOK Financial may offer derivative instruments such as to-be-announced securities to mortgage banking customers to enable them to manage their market risk or to mitigate the Company's market risk of holding trading securities. Changes in the fair value of derivative instruments for trading purposes or used to mitigate the market risk of holding trading securities are included in Other operating revenue – Brokerage and trading revenue.

Internal Risk Management Programs

 

BOK Financial may use derivative contracts in managing its interest rate sensitivity, as part of its economic hedge of the change in the fair value of mortgage servicing rights. Changes in the fair value of derivative instruments used in managing interest rate sensitivity and as part of the economic hedge of changes in the fair value of mortgage servicing rights are included in Other operating revenue – Gain (loss) on derivatives, net in the Consolidated Statements of Earnings.

As discussed in Note 5, certain derivative contracts not designated as hedging instruments related to mortgage loan commitments and forward sales contracts are included in Residential mortgage loans held for sale on the Consolidated Balance Sheets. See Note 5 for additional discussion of notional, fair value and impact on earnings of these contracts.

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The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in the balance sheet at March 31, 2022 (in thousands):

						Assets
						Notional1						Gross Fair Value						Netting Adjustments						Net Fair Value Before Cash Collateral						Cash Collateral						Fair Value Net of Cash Collateral
Customer risk management programs:
Interest rate contracts						$	2,901,463					$	69,287					$	(6,285)					$	63,002					$	(24,595)					$	38,407
Energy contracts						8,010,126						2,683,519						(541,826)						2,141,693						(12,281)						2,129,412
Agricultural contracts						—						—						—						—						—						—
Foreign exchange contracts						180,648						179,024						—						179,024						(715)						178,309
Equity option contracts						39,984						896						—						896						(300)						596
Total customer risk management programs						11,132,221						2,932,726						(548,111)						2,384,615						(37,891)						2,346,724
Trading						29,002,117						550,075						(218,429)						331,646						(96)						331,550
Internal risk management programs						200,000						1,933						—						1,933						—						1,933
Total derivative contracts						$	40,334,338					$	3,484,734					$	(766,540)					$	2,718,194					$	(37,987)					$	2,680,207
						Liabilities
						Notional1						Gross Fair Value						Netting Adjustments						Net Fair Value Before Cash Collateral						Cash Collateral						Fair Value Net of Cash Collateral
Customer risk management programs:
Interest rate contracts						$	2,901,463					$	69,334					$	(6,285)					$	63,049					$	(61)					$	62,988
Energy contracts						8,069,893						2,712,617						(541,826)						2,170,791						(2,159,402)						11,389
Agricultural contracts						—						—						—						—						—						—
Foreign exchange contracts						179,447						177,609						—						177,609						—						177,609
Equity option contracts						39,984						896						—						896						—						896
Total customer risk management programs						11,190,787						2,960,456						(548,111)						2,412,345						(2,159,463)						252,882
Trading						26,298,226						525,699						(218,429)						307,270						(15,474)						291,796
Internal risk management programs						394,216						13,156						—						13,156						—						13,156
Total derivative contracts						$	37,883,229					$	3,499,311					$	(766,540)					$	2,732,771					$	(2,174,937)					$	557,834

1    Notional amounts for commodity contracts are converted into dollar-equivalent amounts based on dollar prices at the inception of the contract.

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The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in the balance sheet at December 31, 2021 (in thousands):

						Assets
						Notional 1						Gross Fair Value						Netting Adjustments						Net Fair Value Before Cash Collateral						Cash Collateral						Fair Value Net of Cash Collateral
Customer risk management programs:
Interest rate contracts						$	2,614,162					$	53,881					$	(10,101)					$	43,780					$	—					$	43,780
Energy contracts						6,360,095						1,168,363						(375,624)						792,739						—						792,739
Agricultural contracts						—						—						—						—						—						—
Foreign exchange contracts						216,272						215,148						—						215,148						—						215,148
Equity option contracts						42,136						755						—						755						(242)						513
Total customer risk management programs						9,232,665						1,438,147						(385,725)						1,052,422						(242)						1,052,180
Trading						35,592,751						139,694						(104,326)						35,368						(721)						34,647
Internal risk management programs						869,506						10,687						(217)						10,470						—						10,470
Total derivative contracts						$	45,694,922					$	1,588,528					$	(490,268)					$	1,098,260					$	(963)					$	1,097,297
						Liabilities
						Notional 1						Gross Fair Value						Netting Adjustments						Net Fair Value Before Cash Collateral						Cash Collateral						Fair Value Net of Cash Collateral
Customer risk management programs:
Interest rate contracts						$	2,614,162					$	54,062					$	(10,101)					$	43,961					$	(33,870)					$	10,091
Energy contracts						6,480,840						1,210,946						(375,624)						835,322						(803,102)						32,220
Agricultural contracts						—						—						—						—						—						—
Foreign exchange contracts						208,381						207,119						—						207,119						(447)						206,672
Equity option contracts						42,136						755						—						755						—						755
Total customer risk management programs						9,345,519						1,472,882						(385,725)						1,087,157						(837,419)						249,738
Trading						41,285,649						152,947						(104,326)						48,621						(24,074)						24,547
Internal risk management programs						298,832						1,557						(217)						1,340						—						1,340
Total derivative contracts						$	50,930,000					$	1,627,386					$	(490,268)					$	1,137,118					$	(861,493)					$	275,625

1    Notional amounts for commodity contracts are converted into dollar-equivalent amounts based on dollar prices at the inception of the contract.

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The following summarizes the pre-tax net gains (losses) on derivative instruments and where they are recorded in the income statement (in thousands):

						Three Months Ended
						March 31, 2022												March 31, 2021
						Brokerage and Trading Revenue						Gain (Loss) on Derivatives, Net						Brokerage and Trading Revenue						Gain (Loss) on Derivatives, Net
Customer risk management programs:
Interest rate contracts						$	6,342					$	—					$	1,388					$	—
Energy contracts						4,449						—						1,020						—
Agricultural contracts						—						—						18						—
Foreign exchange contracts						148						—						166						—
Equity option contracts						—						—						—						—
Total customer risk management programs						10,939						—						2,592						—
Trading1						31,074						—						(71,259)						—
Internal risk management programs						—						(46,981)						—						(27,650)
Total derivative contracts						$	42,013					$	(46,981)					$	(68,667)					$	(27,650)

1    Represents changes in fair value of to-be-announced securities and other derivative instruments held to mitigate market risk of trading securities portfolio, which is offset by changes in fair value of trading securities also included in Brokerage and Trading Revenue in the Consolidated Statements of Earnings.

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(4) Loans and Allowances for Credit Losses

Loans

Loans are either secured or unsecured based on the type of loan and the financial condition of the borrower. Repayment is generally expected from cash flow or proceeds from the sale of selected assets of the borrower. BOK Financial is exposed to risk of loss on loans due to the borrower’s difficulties, which may arise from any number of factors, including problems within the respective industry or local economic conditions. Access to collateral, in the event of borrower default, is reasonably assured through adherence to applicable lending laws and through sound lending standards and credit review procedures. Accounting policies for all loans, excluding residential mortgage loans guaranteed by U.S. government agencies, are as follows.

Interest is accrued at the applicable interest rate on the principal amount outstanding. Loans are placed on nonaccruing status when, in the opinion of management, full collection of principal or interest is uncertain. Internally risk graded loans are individually evaluated for nonaccruing status quarterly. Non-risk graded loans are generally placed on nonaccruing status when more than 90 days past due or within 60 days of being notified of the borrower's bankruptcy filing. Interest previously accrued but not collected is charged against interest income when the loan is placed on nonaccruing status. Accrued but not paid interest receivable is included in Receivables in the Consolidated Balance Sheets. Payments on nonaccruing loans are applied to principal or recognized as interest income, according to management’s judgment as to the collectability of principal. Loans may be returned to accruing status when, in the opinion of management, full collection of principal and interest, including principal previously charged off, is probable based on improvements in the borrower’s financial condition or a sustained period of performance.

For loans acquired with no evidence of credit deterioration, discounts are accreted on either an individual basis for loans with unique characteristics or on a pool basis for groups of homogeneous loans. Accretion is discontinued when a loan with an individually attributed discount is placed on nonaccruing status.

Loans to borrowers experiencing financial difficulties may be modified in troubled debt restructurings ("TDRs"). Primarily all TDRs are classified as nonaccruing, excluding loans guaranteed by U.S. government agencies. Modifications generally consist of extension of payment terms or interest rate concessions and may result either voluntarily through negotiations with the borrower or involuntarily through court order. Payment deferrals up to six months are generally considered to be short-term modifications. Generally, principal and accrued but unpaid interest is not voluntarily forgiven.

Performing loans may be renewed under the current collateral value, debt service ratio and other underwriting standards. Nonaccruing loans may be renewed and will remain classified as nonaccruing. 

Occasionally, loans, other than residential mortgage loans, may be held for sale in order to manage credit concentration. These loans are carried at the lower of cost or fair value with gains or losses recognized in Other gains (losses), net in the Consolidated Statements of Earnings.

All loans are charged off when the loan balance or a portion of the loan balance is no longer supported by the paying capacity of the borrower or when the required cash flow is reduced in a TDR. The charge-off amount is determined through a quarterly evaluation of available cash resources and collateral value. Internally risk graded loans are evaluated quarterly and charge-offs are taken in the quarter in which the loss is identified. Non-risk graded loans that are past due between 60 days and 180 days, based on the loan product type, are charged off. Loans to borrowers whose personal obligation has been discharged through Chapter 7 bankruptcy proceedings are charged off within 60 days of notice of the bankruptcy filing, regardless of payment status.

Loan origination and commitment fees and direct loan acquisition and origination costs are deferred and amortized as an adjustment to yield over the life of the loan or over the commitment period, as applicable. Amortization does not anticipate loan prepayments. Net unamortized fees are recognized in full at time of payoff.

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Qualifying residential mortgage loans guaranteed by U.S. government agencies have been sold into GNMA pools. Under certain performance conditions specified in government programs, the Company may have the right, but not the obligation to repurchase loans from GNMA pools. These loans no longer qualify for sale accounting and are recognized in the Consolidated Balance Sheets. We do not expect to receive all principal and interest based on the loan's contractual terms. A portion of the principal balance continues to be guaranteed; however, interest accrues at a curtailed rate as specified in the programs. The carrying value of these loans is reduced based on an estimate of the expected cash flows discounted at the original note rate plus a liquidity spread. Guaranteed loans may be modified in TDRs in accordance with U.S. government agency guidelines. Interest continues to accrue based on the modified rate. Guaranteed loans may either be resold into GNMA pools after a performance period specified by the programs or foreclosed and conveyed to the guarantors.

Loans are disaggregated into portfolio segments and further disaggregated into classes. The portfolio segment is the level at which the Company develops and documents a systematic method for determining its allowance for credit losses. Classes are a further disaggregation of portfolio segments based on the risk characteristics of the loans and the Company’s method for monitoring and assessing credit risk. 

Portfolio segments of the loan portfolio are as follows (in thousands):

						March 31, 2022																								December 31, 2021
						Fixed Rate						Variable Rate						Non-accrual						Total						Fixed Rate						Variable Rate						Non-accrual						Total
Commercial						$	3,343,185					$	9,479,667					$	60,337					$	12,883,189					$	3,360,117					$	9,072,244					$	74,104					$	12,506,465
Commercial real estate						924,332						3,160,635						15,989						4,100,956						929,015						2,888,048						14,262						3,831,325
Paycheck protection program						137,365						—						—						137,365						276,341						—						—						276,341
Loans to individuals						2,006,029						1,498,970						47,920						3,552,919						2,037,792						1,508,064						45,693						3,591,549
Total						$	6,410,911					$	14,139,272					$	124,246					$	20,674,429					$	6,603,265					$	13,468,356					$	134,059					$	20,205,680

Credit Commitments

 

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. At March 31, 2022, outstanding commitments totaled $12.5 billion. Because some commitments are expected to expire before being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. BOK Financial uses the same credit policies in making commitments as it does loans.

The amount of collateral obtained, if deemed necessary, is based upon management’s credit evaluation of the borrower.

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Because the credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan commitments, BOK Financial uses the same credit policies in evaluating the creditworthiness of the customer. Additionally, BOK Financial uses the same evaluation process in obtaining collateral on standby letters of credit as it does for loan commitments. The term of these standby letters of credit is defined in each commitment and typically corresponds with the underlying loan commitment. At March 31, 2022, outstanding standby letters of credit totaled $654 million. 

Allowances for Credit Losses and Accrual for Off-balance Sheet Credit Risk from Unfunded Loans Commitments

The allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments represent the portion of the amortized cost basis of loans that we do not expect to collect over the asset’s contractual life, considering past events, current conditions, and reasonable and supportable forecasts of future economic conditions. The appropriateness of the allowance for credit losses, including industry and product adjustments, is assessed quarterly by a senior management Allowance Committee. This review is based on an on-going evaluation of the estimated expected credit losses in the portfolio and on unused commitments to provide financing. A well-documented methodology has been developed and is applied by an independent Credit Administration department to assure consistency across the Company.

The allowance for loan losses consists of specific allowances attributed to certain individual loans, generally nonaccruing loans, with dissimilar risk characteristics that have not yet been charged down to amounts we expect to recover and general allowances for estimated credit losses on pools of loans that share similar risk characteristics.

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When full collection of principal or interest is uncertain, the loan’s risk characteristics have changed, and we exclude the loan from the general allowance pool, typically designating it as nonaccruing. For these loans, a specific allowance reflects the expected credit loss.

We measure specific allowances for loans excluded from the general allowance pool by an evaluation of estimated future cash flows discounted at the loan's initial effective interest rate or the fair value of collateral for certain collateral dependent loans. For a non-collateral dependent loan, the specific allowance is the amount by which the loan’s amortized cost basis exceeds its net realizable value. We measure the specific allowance for collateral dependent loans as the amount by which the loan’s amortized cost basis exceeds its fair value. When repayment is expected to be provided substantially through the sale of collateral, we deduct estimated selling costs from the collateral’s fair value. Generally, third party appraisals that conform to Uniform Standards of Professional Appraisal Practice serve as the basis for the fair value of real property held as collateral. These appraised values are on an “as-is” basis and generally are not adjusted by the Company. We obtain updated appraisals at least annually or more frequently if market conditions indicate collateral values may have declined. For energy loans, our internal staff of engineers generally determines collateral value of mineral rights based on projected cash flows from proven oil and gas reserves under existing economic and operating conditions. For real property held as collateral for other loans, third party appraisals that conform to Uniform Standards of Professional Appraisal Practice generally serve as the basis for the fair value. These appraised values are on an “as-is” basis and generally are not adjusted by the Company. We obtain updated appraisals at least annually or more frequently if market conditions indicate collateral values may have declined. Our special assets staff generally determines the value of other collateral based on projected liquidation cash flows under current market conditions. We evaluate collateral values and available cash resources quarterly. Historical statistics may be used to estimate specific allowances in limited situations, such as when a collateral dependent loan is removed from the general allowance pool near the end of a reporting period until an appraisal of collateral value is received or a full assessment of future cash flows is completed.

General allowances estimate expected credit losses on pools of loans sharing similar risk characteristics that are expected to occur over the loan’s estimated remaining life. The loan’s estimated remaining life represents the contractual term adjusted for amortization, estimates of prepayments, and borrower-owned extension options. Approximately 90 percent of the committed dollars in the loan portfolio is risk graded loans with general allowance model inputs that include probability of default, loss given default, and exposure at default. Probability of default is based on the migration of loans from performing to nonperforming using historical life of loan analysis periods. Loss given default is based on the aggregate losses incurred, net of estimated recoveries. Exposure at default represents an estimate of the outstanding amount of credit exposure at the time a default may occur.

Charge-off migration is used to calculate the general allowance for the majority of non-risk graded loans to individuals. The expected credit loss on less than 10 percent of the committed dollars in the portfolio is calculated using charge-off migration.

The expected credit loss on approximately 1 percent of the committed dollars in the portfolio is calculated using a non-modeled approach. Specifically, the calculation applies a long-term net charge-off rate to the loan balances, adjusted for the weighted average remaining maturity of each portfolio.

    

In estimating the expected credit losses for general allowances on performing risk-graded loans, each portfolio class is assigned relevant economic loss drivers which best explain variations in portfolio net loss rates. The probability of default estimates for each portfolio class are adjusted for current and forecasted economic conditions. The result is applied to the exposure at default and loss given default to calculate the lifetime expected credit loss estimate. Selection of relevant economic loss drivers is re-evaluated periodically and involves statistical analysis as well as management judgment. The unemployment rate factors significantly in the allowance for loan losses calculation, affecting commercial and loans to individuals segments. Other primary factors impacting the commercial portfolio include BBB corporate spreads, real gross domestic product growth rate, and energy commodity prices. The primary commercial real estate variables are vacancy rate and BBB corporate spreads. In addition to the unemployment rate, the forecast for loans to individuals is tied to home price index. The forecasts may include regional economic factors when localized conditions diverge from national conditions.

An Economic Forecast Committee, consisting of senior management with members largely independent of the allowance process develops a twelve-month forward-looking forecast for the relevant economic loss drivers. Management develops these forecasts based on external data as well as a view of future economic conditions, which may include adjustments for regional conditions. The forecast includes three economic scenarios and probability weights for each scenario. The base forecast represents management's view of the most likely outcome, while the downside forecast reflects reasonably possible worsening economic conditions, and the upside forecast projects reasonably possible improving conditions.

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At the end of the one-year reasonable and supportable forecast period, we transition from shorter-term expected losses to long-term loss averages for the loan’s estimated remaining life. The difference between short-term loss forecasts and long-term loss averages is run-off over the reversion horizon, up to three years, depending on the forecasted economic scenarios.

General allowances also consider the estimated impact of factors that are not captured in the modeled results or historical experience. These factors may increase or decrease modeled results by amounts determined by the Allowance Committee. Factors not captured in modeled results or historical experience may include for example, new lines of business, market conditions that have not been previously encountered, observed changes in credit risk that are not yet reflected in macro-economic factors, or economic conditions that impact loss given default assumptions.

The accrual for off-balance sheet credit risk is maintained at a level that is appropriate to cover estimated losses associated with credit instruments that are not currently recognized as assets such as loan commitments, standby letters of credit or guarantees that are not unconditionally cancelable by the bank. This accrual is included in other liabilities in the Consolidated Balance Sheets. The appropriateness of the accrual is determined in the same manner as the allowance for loan losses, with the added consideration of commitment usage over the remaining life for those loans that the bank can not unconditionally cancel.

A provision for credit losses is charged against or credited to earnings in amounts necessary to maintain an appropriate Allowance for Credit Losses. Recoveries of loans previously charged off are added to the allowance when received.

The activity in the allowance for loan losses and the allowance for off-balance sheet credit losses related to loan commitments and standby letters of credit is summarized as follows (in thousands):

						Three Months Ended
						March 31, 2022
						Commercial						Commercial Real Estate						Paycheck Protection Program						Loans to Individuals												Total
Allowance for loan losses:
Beginning balance						$	162,056					$	58,553					$	—					$	35,812											$	256,421
Provision for loan losses						(5,118)						468						—						683												(3,967)
Loans charged off						(6,081)						(191)						—						(1,533)												(7,805)
Recoveries of loans previously charged off						591						144						—						1,089												1,824
Ending Balance						$	151,448					$	58,974					$	—					$	36,051											$	246,473
Allowance for off-balance sheet credit risk from unfunded loan commitments:
Beginning balance						$	13,812					$	17,442					$	—					$	1,723											$	32,977
Provision for off-balance sheet credit risk						154						3,023						—						91												3,268
Ending Balance						$	13,966					$	20,465					$	—					$	1,814											$	36,245

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						Three Months Ended
						March 31, 2021
						Commercial						Commercial Real Estate						Paycheck Protection Program						Loans to Individuals												Total
Allowance for loan losses:
Beginning balance						$	254,934					$	86,558					$	—					$	47,148											$	388,640
Provision for loan losses						(9,893)						(4,579)						—						(7,298)												(21,770)
Loans charged off						(15,345)						(263)						—						(1,297)												(16,905)
Recoveries of loans previously charged off						1,676						30						—						731												2,437
Ending Balance						$	231,372					$	81,746					$	—					$	39,284											$	352,402
Allowance for off-balance sheet credit risk from unfunded loan commitments:
Beginning balance						$	14,422					$	20,571					$	—					$	1,928											$	36,921
Provision for off-balance sheet credit risk						(1,686)						(2,273)						—						(85)												(4,044)
Ending Balance						$	12,736					$	18,298					$	—					$	1,843											$	32,877

Changes in our reasonable and supportable forecasts of macroeconomic variables resulted in a $7.3 million negative provision for credit losses related to lending activities during the first quarter of 2022. Continued strength in commodity prices was partially offset by changes in our economic outlook. Changes in the loan portfolio characteristics, including specific impairment and losses, loan balances, risk grading and changes in payment profile resulted in a $6.6 million provision for credit losses related to lending activities.

The allowance for loan losses and recorded investment of the related loans by portfolio segment for each measurement method at March 31, 2022 is as follows (in thousands):

						Collectively Measured for General Allowances												Individually Measured for Specific Allowances												Total
						Recorded Investment						Related Allowance						Recorded Investment						Related Allowance						Recorded Investment						Related Allowance
Commercial						$	12,822,852					$	149,095					$	60,337					$	2,353					$	12,883,189					$	151,448
Commercial real estate						4,084,967						58,039						15,989						935						4,100,956						58,974
Paycheck protection program						137,365						—						—						—						137,365						—
Loans to individuals						3,504,999						36,051						47,920						—						3,552,919						36,051
Total						$	20,550,183					$	243,185					$	124,246					$	3,288					$	20,674,429					$	246,473

The allowance for loan losses and recorded investment of the related loans by portfolio segment for each measurement method at December 31, 2021 is as follows (in thousands):

						Collectively Measured for General Allowances												Individually Measured for Specific Allowances												Total
						Recorded Investment						Related Allowance						Recorded Investment						Related Allowance						Recorded Investment						Related Allowance
Commercial						$	12,432,361					$	158,063					$	74,104					$	3,993					$	12,506,465					$	162,056
Commercial real estate						3,817,063						56,204						14,262						2,349						3,831,325						58,553
Paycheck protection program						276,341						—						—						—						276,341						—
Loans to individuals						3,545,856						35,812						45,693						—						3,591,549						35,812
Total						$	20,071,621					$	250,079					$	134,059					$	6,342					$	20,205,680					$	256,421

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Credit Quality Indicators

The Company utilizes risk grading as primary credit quality indicators as it influences the probability of default which is a key attribute in the expected credit losses calculation. Substantially all commercial as well as commercial real estate loans and certain loans to individuals are risk graded based on a quarterly evaluation of the borrowers’ ability to repay the loans. Certain commercial loans and most loans to individuals are small, homogeneous pools that are not risk-graded. The credit quality of these loans is based on past due days in accordance with regulatory guidelines.

We have included in the credit quality indicator “pass” loans that are in compliance with the original terms of the agreement and currently exhibit no factors that cause management to have doubts about the borrowers’ ability to remain in compliance with the original terms of the agreement, which is consistent with the regulatory guideline of “pass.” This also includes past due residential mortgages that are guaranteed by agencies of the U.S. government that continue to accrue interest based on criteria of the guarantors’ programs.

Other loans especially mentioned ("Special Mention") are currently performing in compliance with the original terms of the agreement but may have a potential weakness that deserves management’s close attention, consistent with regulatory guidelines. Non-graded loans 30 to 59 days past due are categorized as Special Mention.

The risk grading process identified certain loans that have a well-defined weakness (for example, inadequate debt service coverage or liquidity or marginal capitalization; repayment may depend on collateral or other risk mitigation) that may jeopardize liquidation of the debt and represent a greater risk due to deterioration in the financial condition of the borrower. This is consistent with the regulatory guideline for “substandard.” Because the borrowers are still performing in accordance with the original terms of the loan agreements, these loans remain on accruing status. Non-graded loans 60 to 89 days past due are categorized as Accruing Substandard.

Nonaccruing loans represent loans for which full collection of principal and interest is uncertain. This includes certain loans considered “substandard” and all loans considered “doubtful” by regulatory guidelines. Non-graded loans 90 or more days past due are categorized as Nonaccrual.

Probability of default is lowest for pass graded loans and increases for each credit quality indicator, Special Mention, and Accruing Substandard.

Vintage represents the year of origination, except for revolving loans which are considered in aggregate. Loans that were once revolving but have converted to term loans without additional underwriting appear in a separate vintage column.

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The following table summarizes the Company’s loan portfolio at March 31, 2022 by the risk grade categories and vintage (in thousands): 

			Origination Year
			2022			2021			2020			2019			2018			Prior			Revolving Loans			Revolving Loans Converted to Term Loans			Total
Commercial:
Energy
Pass			$	102,694		$	156,167		$	48,775		$	15,678		$	11,925		$	8,450		$	2,753,419		$	—		$	3,097,108
Special Mention			—			551			642			—			—			—			1,090			—			2,283
Accruing Substandard			—			—			—			1,139			693			705			60,863			9,900			73,300
Nonaccrual			—			—			19,404			—			—			602			4,970			—			24,976
Total energy			102,694			156,718			68,821			16,817			12,618			9,757			2,820,342			9,900			3,197,667
Healthcare
Pass			140,071			574,892			549,379			514,779			483,909			933,344			168,255			24			3,364,653
Special Mention			—			6,787			—			15,417			—			5,712			5			—			27,921
Accruing Substandard			—			—			—			26,973			—			7,109			—			—			34,082
Nonaccrual			—			—			—			—			6,542			8,534			—			—			15,076
Total healthcare			140,071			581,679			549,379			557,169			490,451			954,699			168,260			24			3,441,732
Services
Pass			54,992			634,506			361,724			266,054			246,336			933,399			779,824			567			3,277,402
Special Mention			—			415			6,326			1,989			1,006			95			22,419			182			32,432
Accruing Substandard			—			10			499			4,002			10,579			2,990			7,046			—			25,126
Nonaccrual			—			—			—			—			—			16,145			390			—			16,535
Total services			54,992			634,931			368,549			272,045			257,921			952,629			809,679			749			3,351,495
General business
Pass			209,407			547,777			220,861			250,546			167,570			356,548			1,102,054			1,981			2,856,744
Special Mention			—			—			137			—			1,374			2,975			8,100			—			12,586
Accruing Substandard			—			215			957			1,139			5,673			9,231			2,000			—			19,215
Nonaccrual			—			—			1,111			799			1,004			24			800			12			3,750
Total general business			209,407			547,992			223,066			252,484			175,621			368,778			1,112,954			1,993			2,892,295
Total commercial			507,164			1,921,320			1,209,815			1,098,515			936,611			2,285,863			4,911,235			12,666			12,883,189
Commercial real estate:
Pass			279,254			921,473			695,399			826,150			398,633			820,481			107,780			25			4,049,195
Special Mention			—			—			—			—			—			18,942			—			—			18,942
Accruing Substandard			—			—			—			—			13,501			3,329			—			—			16,830
Nonaccrual			—			—			—			7,908			—			8,081			—			—			15,989
Total commercial real estate			279,254			921,473			695,399			834,058			412,134			850,833			107,780			25			4,100,956

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			Origination Year
			2022			2021			2020			2019			2018			Prior			Revolving Loans			Revolving Loans Converted to Term Loans			Total
Paycheck protection program:
Pass			—			113,697			23,668			—			—			—			—			—			137,365
Total paycheck protection program			—			113,697			23,668			—			—			—			—			—			137,365
Loans to individuals:
Residential mortgage
Pass			77,813			393,077			427,965			70,900			48,809			330,626			320,350			21,887			1,691,427
Special Mention			—			35			—			17			145			284			552			210			1,243
Accruing Substandard			—			—			—			—			—			53			26			—			79
Nonaccrual			35			1,517			2,571			356			2,057			21,653			1,903			665			30,757
Total residential mortgage			77,848			394,629			430,536			71,273			51,011			352,616			322,831			22,762			1,723,506
Residential mortgage guaranteed by U.S. government agencies
Pass			—			1,080			11,379			15,778			23,480			253,872			—			—			305,589
Nonaccrual			—			—			—			2,081			1,746			13,165			—			—			16,992
Total residential mortgage guaranteed by U.S. government agencies			—			1,080			11,379			17,859			25,226			267,037			—			—			322,581
Personal:
Pass			40,789			219,748			171,964			174,523			70,349			214,736			613,114			598			1,505,821
Special Mention			—			49			23			—			15			42			15			—			144
Accruing Substandard			—			524			—			165			—			—			7			—			696
Nonaccrual			—			14			19			10			22			42			64			—			171
Total personal			40,789			220,335			172,006			174,698			70,386			214,820			613,200			598			1,506,832
Total loans to individuals			118,637			616,044			613,921			263,830			146,623			834,473			936,031			23,360			3,552,919
Total loans			$	905,055		$	3,572,534		$	2,542,803		$	2,196,403		$	1,495,368		$	3,971,169		$	5,955,046		$	36,051		$	20,674,429

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The following table summarizes the Company’s loan portfolio at December 31, 2021 by the risk grade categories and vintage (in thousands): 

			Origination Year
			2021			2020			2019			2018			2017			Prior			Revolving Loans			Revolving Loans Converted to Term Loans			Total
Commercial:
Energy
Pass			$	252,133		$	29,556		$	15,914		$	13,548		$	4,741		$	6,765		$	2,540,525		$	—		$	2,863,182
Special Mention			558			771			—			—			—			—			750			—			2,079
Accruing Substandard			10,650			22,611			1,185			814			—			716			74,556			—			110,532
Nonaccrual			—			20,487			—			—			—			714			9,890			—			31,091
Total energy			263,341			73,425			17,099			14,362			4,741			8,195			2,625,721			—			3,006,884
Healthcare
Pass			563,800			589,193			516,558			498,998			319,096			688,136			160,154			26			3,335,961
Special Mention			6,835			—			15,583			—			11,135			—			5			—			33,558
Accruing Substandard			—			—			27,135			543			—			1,981			—			—			29,659
Nonaccrual			—			—			—			6,542			—			8,711			509			—			15,762
Total healthcare			570,635			589,193			559,276			506,083			330,231			698,828			160,668			26			3,414,940
Services
Pass			696,149			405,057			289,375			275,010			225,404			795,029			607,958			375			3,294,357
Special Mention			434			405			1,830			1,047			3,290			47			17,210			192			24,455
Accruing Substandard			43			530			4,166			10,714			1,785			2,366			11,607			—			31,211
Nonaccrual			—			—			—			230			13,918			2,519			503			—			17,170
Total services			696,626			405,992			295,371			287,001			244,397			799,961			637,278			567			3,367,193
General business
Pass			584,438			211,892			264,462			177,384			168,977			215,014			1,047,420			2,284			2,671,871
Special Mention			218			223			60			1,435			3,842			—			5,875			—			11,653
Accruing Substandard			265			1,066			1,634			7,697			8,336			3,024			1,821			—			23,843
Nonaccrual			—			2,444			4,562			1,046			762			518			730			19			10,081
Total general business			584,921			215,625			270,718			187,562			181,917			218,556			1,055,846			2,303			2,717,448
Total commercial			2,115,523			1,284,235			1,142,464			995,008			761,286			1,725,540			4,479,513			2,896			12,506,465
Commercial real estate:
Pass			717,400			711,231			871,283			403,115			279,058			664,684			117,847			31			3,764,649
Special Mention			—			—			—			6,660			10,898			9,244			—			—			26,802
Accruing Substandard			—			—			—			13,352			4,480			7,780			—			—			25,612
Nonaccrual			—			—			8,076			—			—			6,186			—			—			14,262
Total commercial real estate			717,400			711,231			879,359			423,127			294,436			687,894			117,847			31			3,831,325

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			Origination Year
			2021			2020			2019			2018			2017			Prior			Revolving Loans			Revolving Loans Converted to Term Loans			Total
Paycheck protection program:
Pass			237,357			38,984			—			—			—			—			—			—			276,341
Total paycheck protection program			237,357			38,984			—			—			—			—			—			—			276,341
Loans to individuals:
Residential mortgage
Pass			386,092			452,537			84,001			60,390			68,150			295,632			320,638			21,463			1,688,903
Special Mention			—			—			156			—			19			411			282			159			1,027
Accruing Substandard			98			—			—			—			127			41			400			—			666
Nonaccrual			1,516			1,809			383			1,968			629			22,289			2,177			803			31,574
Total residential mortgage			387,706			454,346			84,540			62,358			68,925			318,373			323,497			22,425			1,722,170
Residential mortgage guaranteed by U.S. government agencies
Pass			699			11,380			20,650			27,970			32,742			246,871			—			—			340,312
Nonaccrual			—			—			1,259			821			635			11,146			—			—			13,861
Total residential mortgage guaranteed by U.S. government agencies			699			11,380			21,909			28,791			33,377			258,017			—			—			354,173
Personal:
Pass			218,960			180,577			177,389			70,249			92,592			135,041			638,713			728			1,514,249
Special Mention			—			9			34			3			—			47			—			—			93
Accruing Substandard			435			5			165			—			—			1			—			—			606
Nonaccrual			110			14			10			24			35			40			25			—			258
Total personal			219,505			180,605			177,598			70,276			92,627			135,129			638,738			728			1,515,206
Total loans to individuals			607,910			646,331			284,047			161,425			194,929			711,519			962,235			23,153			3,591,549
Total loans			$	3,678,190		$	2,680,781		$	2,305,870		$	1,579,560		$	1,250,651		$	3,124,953		$	5,559,595		$	26,080		$	20,205,680

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Nonaccruing Loans

A summary of nonaccruing loans at March 31, 2022 follows (in thousands): 

			As of March 31, 2022
			Total						With No Allowance						With Allowance						Related Allowance
Commercial:
Energy			$	24,976					$	24,976					$	—					$	—
Healthcare			15,076						8,534						6,542						946
Services			16,535						13,290						3,245						1,407
General business			3,750						3,750						—						—
Total commercial			60,337						50,550						9,787						2,353
Commercial real estate			15,989						8,081						7,908						935
Loans to individuals:
Residential mortgage			30,757						30,757						—						—
Residential mortgage guaranteed by U.S. government agencies			16,992						16,992						—						—
Personal			171						171						—						—
Total loans to individuals			47,920						47,920						—						—
Total			$	124,246					$	106,551					$	17,695					$	3,288

A summary of nonaccruing loans at December 31, 2021 follows (in thousands): 

			As of December 31, 2021
			Total						With No Allowance						With Allowance						Related Allowance
Commercial:
Energy			$	31,091					$	31,091					$	—					$	—
Healthcare			15,762						9,679						6,083						53
Services			17,170						13,686						3,484						2,584
General business			10,081						7,690						2,391						1,357
Total commercial			74,104						62,146						11,958						3,994
Commercial real estate			14,262						6,186						8,076						2,349
Loans to individuals:
Residential mortgage			31,574						31,574						—						—
Residential mortgage guaranteed by U.S. government agencies			13,861						13,861						—						—
Personal			258						258						—						—
Total loans to individuals			45,693						45,693						—						—
Total			$	134,059					$	114,025					$	20,034					$	6,343

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Troubled Debt Restructurings

At March 31, 2022 the Company had $260 million in troubled debt restructurings ("TDRs"), of which $204 million were accruing residential mortgage loans guaranteed by U.S. government agencies, $20 million were nonaccruing residential mortgage loans with no specific allowance necessary and $12 million were commercial real estate loans with a related specific allowance of $935 thousand. Of the approximately $124 million of TDRs that are performing in accordance with the modified terms, $92 million are government guaranteed loans.

At December 31, 2021, the Company had $273 million in TDRs, of which $211 million were accruing residential mortgage loans guaranteed by U.S. government agencies. Of the approximately $141 million of TDRs that were performing in accordance with the modified terms, $97 million are government guaranteed loans.

TDRs generally consist of interest rate concessions, payment stream concessions or a combination of concessions to distressed borrowers. During the three months ended March 31, 2022, $18 million of loans were restructured and $3 thousand of loans designated as TDRs were charged off. During the three months ended March 31, 2021, $13 million of loans were restructured and $306 thousand of loans designated as TDRs were charged off.

Past Due Loans

Past due status for all loan classes is based on the actual number of days since the last payment was due according to the contractual terms of the loans, as modified for short-term payment deferral forbearance.

A summary of loans currently performing and past due as of March 31, 2022 is as follows (in thousands):

												Past Due																								Past Due 90 Days or More and Accruing
						Current						30 to 59 Days						60 to 89 Days						90 Days or More						Total
Commercial:
Energy						$	3,197,667					$	—					$	—					$	—					$	3,197,667					$	—
Healthcare						3,433,749						1,300						141						6,542						3,441,732						—
Services						3,340,989						743						1,377						8,386						3,351,495						—
General business						2,891,472						691						—						132						2,892,295						—
Total commercial						12,863,877						2,734						1,518						15,060						12,883,189						—
Commercial real estate						4,089,135						4,473						4,270						3,078						4,100,956						—
Paycheck protection program						137,052						—						6						307						137,365						307
Loans to individuals:
Residential mortgage						1,707,772						9,334						364						6,036						1,723,506						—
Residential mortgage guaranteed by U.S. government agencies						147,883						51,165						—						123,533						322,581						109,283
Personal						1,506,538						114						107						73						1,506,832						—
Total loans to individuals						3,362,193						60,613						471						129,642						3,552,919						109,283
Total						$	20,452,257					$	67,820					$	6,265					$	148,087					$	20,674,429					$	109,590

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A summary of loans currently performing and past due as of December 31, 2021 is as follows (in thousands):

												Past Due																								Past Due 90 Days or More and Accruing
						Current						30 to 59 Days						60 to 89 Days						90 Days or More						Total
Commercial:
Energy						$	3,002,623					$	545					$	3,716					$	—					$	3,006,884					$	—
Healthcare						3,412,072						2,359						—						509						3,414,940						—
Services						3,352,639						920						4,620						9,014						3,367,193						—
General business						2,705,596						6,080						997						4,775						2,717,448						199
Total commercial						12,472,930						9,904						9,333						14,298						12,506,465						199
Commercial real estate						3,827,962						—						206						3,157						3,831,325						—
Paycheck protection program						276,341						—						—						—						276,341						74
Loans to individuals:
Residential mortgage						1,707,654						6,263						1,556						6,697						1,722,170						—
Residential mortgage guaranteed by U.S. government agencies						181,022						26,869						16,751						129,531						354,173						118,819
Personal						1,514,938						66						24						178						1,515,206						40
Total loans to individuals						3,403,614						33,198						18,331						136,406						3,591,549						118,859
Total						$	19,980,847					$	43,102					$	27,870					$	153,861					$	20,205,680					$	119,132

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(5) Mortgage Banking Activities

Residential Mortgage Loan Production

The Company originates, markets and services conventional and government-sponsored residential mortgage loans. Generally, conforming fixed rate residential mortgage loans are held for sale in the secondary market and non-conforming and adjustable-rate residential mortgage loans are retained for investment. Residential mortgage loans originated for sale by the Company are carried at fair value based on sales commitments and market quotes. Changes in the fair value of mortgage loans held for sale are included in Other operating revenue – Mortgage banking revenue. Residential mortgage loans held for sale also includes the fair value of residential mortgage loan commitments and forward sales commitments, which are considered derivative contracts that have not been designated as hedging instruments for accounting purposes. The volume of mortgage loans originated for sale and secondary market prices are the primary drivers of originating and marketing revenue.

Residential mortgage loan commitments are generally outstanding for 60 to 90 days, which represents the typical period from commitment to originate a residential mortgage loan to when the closed loan is sold to an investor. Residential mortgage loan commitments are subject to both credit and interest rate risk. Credit risk is managed through underwriting policies and procedures, including collateral requirements, which are generally accepted by the secondary loan markets. Exposure to interest rate fluctuations is partially managed through forward sales of residential mortgage-backed securities and forward sales contracts. These latter contracts set the price for loans that will be delivered in the next 60 to 90 days.

The unpaid principal balance of residential mortgage loans held for sale, notional amounts of derivative contracts related to residential mortgage loan commitments and forward contract sales and their related fair values included in Mortgage loans held for sale on the Consolidated Balance Sheets were (in thousands):

						March 31, 2022												December 31, 2021
						Unpaid Principal Balance/ Notional						Fair Value						Unpaid Principal Balance/ Notional						Fair Value
Residential mortgage loans held for sale						$	161,717					$	159,355					$	182,710					$	186,175
Residential mortgage loan commitments						160,260						2,869						171,412						6,167
Forward sales contracts						310,237						7,250						328,433						(47)
												$	169,474											$	192,295

No residential mortgage loans held for sale were 90 days or more past due or considered impaired as of March 31, 2022 or December 31, 2021. No credit losses were recognized on residential mortgage loans held for sale for the three month period ended March 31, 2022 and 2021.

Mortgage banking revenue was as follows (in thousands):

						Three Months Ended March 31,
						2022						2021
Production revenue:
Net realized gains on sale of mortgage loans						$	6,883					$	26,000
Net change in unrealized gain (loss) on mortgage loans held for sale						(5,827)						(6,955)
Net change in the fair value of mortgage loan commitments						(3,298)						(8,980)
Net change in the fair value of forward sales contracts						7,297						15,222
Total production revenue						5,055						25,287
Servicing revenue						11,595						11,826
Total mortgage banking revenue						$	16,650					$	37,113

Production revenue includes gain (loss) on residential mortgage loans held for sale and changes in the fair value of derivative contracts not designated as hedging instruments for accounting purposes related to residential mortgage loan commitments and forward sales contracts. Servicing revenue includes servicing fee income and late charges on loans serviced for others.

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Residential Mortgage Servicing

Mortgage servicing rights may be originated or purchased. Both originated and purchased mortgage servicing rights are initially recognized at fair value. The Company has elected to carry all mortgage servicing rights at fair value. Changes in the fair value are recognized in earnings as they occur. The unpaid principal balance of loans serviced for others is the primary driver of servicing revenue.

The following represents a summary of mortgage servicing rights (dollars in thousands):

						March 31, 2022						December 31, 2021
Number of residential mortgage loans serviced for others						99,409						102,008
Outstanding principal balance of residential mortgage loans serviced for others						$	16,024,663					$	16,442,446
Weighted average interest rate						3.57		%				3.58		%
Remaining term (in months)						281						281

The following represents activity in capitalized mortgage servicing rights (in thousands):

						Three Months Ended March 31,
						2022						2021
Beginning Balance						$	163,198					$	101,172
Additions						5,215						9,830
Change in fair value due to principal payments						(7,960)						(11,961)
Change in fair value due to market assumption changes						49,110						33,874
Ending Balance						$	209,563					$	132,915

Changes in the fair value of mortgage servicing rights due to market assumption changes are included in Other operating revenue in the Consolidated Statements of Earnings. Changes in fair value due to principal payments are included in Mortgage banking costs. 

Mortgage servicing rights are not traded in active markets. Fair value is determined by discounting the projected net cash flows. Significant market assumptions used to determine fair value based on significant unobservable inputs were as follows:

						March 31, 2022						December 31, 2021
Discount rate – risk-free rate plus a market premium						8.53%						8.39%
Prepayment rate - based upon loan interest rate, original term and loan type						8.48%						12.11%
Loan servicing costs – annually per loan based upon loan type:
Performing loans						$69 - $94						$69 - $94
Delinquent loans						$150 - $500						$150 - $500
Loans in foreclosure						$1,000 - $4,000						$1,000 - $4,000
Escrow earnings rate – indexed to rates paid on deposit accounts with comparable average life						2.47%						1.32%
Primary/secondary mortgage rate spread						105 bps						105 bps
Delinquency rate						2.28%						2.05%

Changes in primary residential mortgage interest rates directly affect the prepayment speeds used in valuing our mortgage servicing rights. A separate third party model is used to estimate prepayment speeds based on interest rates, housing turnover rates, estimated loan curtailment, anticipated defaults and other relevant factors. The prepayment model is updated periodically for changes in market conditions and adjusted to better correlate with actual performance of BOK Financial’s servicing portfolio.

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(6) Commitments and Contingent Liabilities

Litigation Contingencies

On June 24, 2015, BOKF, NA received a complaint that an employee had colluded with a bond issuer and an individual in misusing revenues pledged to municipal bonds for which BOKF, NA served as trustee under the bond indenture. The Company conducted an investigation and concluded that employees in one of its Corporate Trust offices had, with respect to a single group of affiliated bond issuances, violated Company policies and procedures. The relationship manager was terminated. The Company reported the circumstances to, and cooperated with an investigation by, the Securities and Exchange Commission ("SEC"). On September 7, 2016, BOKF, NA agreed, and the SEC entered, a consent order finding that BOKF, NA had violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act and requiring BOKF, NA to disgorge $1,067,721 of fees and pay a civil penalty of $600,000. BOKF, NA disgorged the fees and paid the penalty. On August 26, 2016, BOKF, NA was sued in the United States District Court for New Jersey by two bondholders in a putative class action alleging BOKF, NA participated in the fraudulent sale of securities by the principals. The action remains stayed with no current deadlines pending. On September 14, 2016, BOKF, NA was sued in the District Court of Tulsa County, Oklahoma by 19 bondholders also alleging BOKF, NA participated in the fraudulent sale of securities by the principals. The Tulsa County District Court action is pending on BOKF, NA’s motion to dismiss the plaintiff's Third Amended Petition.

On December 28, 2015, in an action brought by the SEC, the New Jersey District Court entered a judgment against the principals involved in issuing the bonds. On January 8, 2020, the Court entered judgment against the principal individual and his wife for $36,805,051 in principal amount and $10,937,831 in pre-judgment interest. The SEC continues to aggressively pursue collection of the judgment. If the individual principal and his wife cannot pay the bonds, a bondholder loss could become probable. Management has been advised by counsel that BOKF, NA has valid defenses to claims of bondholders and that no loss to the Company is probable. No provision for losses has been made at this time. BOKF, NA estimates that, upon sale of all remaining collateral securing payment of the bonds, approximately $20 million will remain outstanding. A reasonable estimate cannot be made of the amount of any bondholder loss, though the amount of bondholder loss could be material to the Company in the event a loss to the Company becomes probable.

The United States Courts of Appeals for the Fifth and the Tenth Circuits have each affirmed dismissals of putative class actions in which the plaintiffs alleged that an extended overdraft fee charged by BOKF, NA was impermissible interest. Before the Tenth Circuit affirmed the dismissal of the second putative class action, the plaintiff in the Fifth Circuit case filed an application in the Supreme Court of the United States for an extension of time to file a petition for certiorari, citing the possibility of a split in the Circuit Courts due to the pendency of the Tenth Circuit Appeal. The Supreme Court granted the extension, as it routinely does, and the extension will expire June 12, 2022. Management has been advised by its counsel that, if a petition is filed, the grant of certiorari by the Supreme Court is unlikely.

On March 7, 2020, three former employees sued BOKF, NA, the Plan Committee of the BOKF, NA 401k Plan, and Cavanal Hill Investment Management, Inc., a subsidiary of BOKF, NA, alleging that the defendants included proprietary investment products as investment options in the BOKF, NA 401k Plan, whose fees were too high and performance too low, for the purpose of earning fees. The action is brought as a putative class action on behalf of all Plan Participants. The action is pending on the defendants' motion to dismiss. Management is advised by counsel that a loss is not probable and that the loss, if any, cannot be reasonably estimated.

In 2019, a limited liability partnership sued BOKF, NA in Colorado District Court alleging that the Bank breached various fiduciary duties as trustee of a trust that was a co-general partner of the partnership and claiming in excess of $60 million in damages. From 2000 to 2009, BOKF was serving as personal representative of the estate of the creator of the trust. In 2009, BOKF moved to close the probate of the estate in the Colorado Probate Court. The members of the partnership who now sue BOKF objected to the closing of the estate and made the same allegations in the 2009 probate hearing as they now make in the 2019 Colorado District Court action. In 2009, the Colorado Probate Court entered summary judgment against the beneficiaries and the estate was closed. The 2019 action is pending on BOKF’s renewed motions for summary judgment. Management is advised by counsel that a loss is not probable and that the loss, if any, cannot be reasonably estimated.

In the ordinary course of business, BOK Financial and its subsidiaries are subject to legal actions and complaints. Management believes, based upon the opinion of counsel, that the actions and liability or loss, if any, resulting from the final outcomes of the proceedings, will not have a material effect on the Company’s financial condition, results of operations or cash flows.

Alternative Investment Commitments

The Company sponsors a private equity fund and invests in several tax credit entities and other funds as permitted by banking regulations. Consolidation of these investments is based on the variable interest model.

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At March 31, 2022, the Company has $360 million in interests in various alternative investments generally consisting of unconsolidated limited partnership interests in entities for which investment return is in the form of low income housing tax credits or other investments in merchant banking activities. This investment balance also includes $101 million of unfunded commitments included in Other liabilities on the Consolidated Balance Sheets.

(7) Shareholders' Equity

On May 3, 2022, the Company declared a quarterly cash dividend of $0.53 per common share payable on or about May 25, 2022 to shareholders of record as of May 10, 2022.

Dividends declared were $0.53 per share during the three months ended March 31, 2022 and $0.52 per share during the three months ended March 31, 2021.

Accumulated Other Comprehensive Income (Loss)

AOCI includes unrealized gains and losses on available for sale ("AFS") securities and non-credit related unrealized losses on AFS securities for which an other-than-temporary impairment has been recorded in earnings. Unrealized losses on employee benefit plans will be reclassified into income as pension plan costs are recognized over the remaining service period of plan participants. Gains and losses in AOCI are net of deferred income taxes.

A rollforward of the components of accumulated other comprehensive income (loss) is included as follows (in thousands):

						Unrealized Gain (Loss) on
						Available for Sale Securities						Employee Benefit Plans												Total
Balance, Dec. 31, 2020						$	335,032					$	836											$	335,868
Net change in unrealized gain (loss)						(150,131)						—												(150,131)
Reclassification adjustments included in earnings:
Gain on available for sale securities, net						(467)						—												(467)
Other comprehensive income, before income taxes						(150,598)						—												(150,598)
Federal and state income taxes						(36,139)						—												(36,139)
Other comprehensive income, net of income taxes						(114,459)						—												(114,459)
Balance, March 31, 2021						$	220,573					$	836											$	221,409
Balance, Dec. 31, 2021						$	69,775					$	2,596											$	72,371
Net change in unrealized gain (loss)						(639,041)						—												(639,041)
Reclassification adjustments included in earnings:
Gain on available for sale securities, net						(937)						—												(937)
Other comprehensive income, before income taxes						(639,978)						—												(639,978)
Federal and state income taxes						(149,781)						—												(149,781)
Other comprehensive income (loss), net of income taxes						(490,197)						—												(490,197)
Balance, March 31, 2022						$	(420,422)					$	2,596											$	(417,826)

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(8) Earnings Per Share

 

(In thousands, except share and per share amounts)						Three Months Ended March 31,
						2022						2021
Numerator:
Net income attributable to BOK Financial Corp. shareholders						$	62,488					$	146,060
Less: Earnings allocated to participating securities						451						937
Numerator for basic earnings per share – income available to common shareholders						62,037						145,123
Effect of reallocating undistributed earnings of participating securities						—						—
Numerator for diluted earnings per share – income available to common shareholders						$	62,037					$	145,123
Denominator:
Weighted average shares outstanding						68,306,107						69,583,788
Less:  Participating securities included in weighted average shares outstanding						493,707						446,413
Denominator for basic earnings per common share						67,812,400						69,137,375
Dilutive effect of employee stock compensation plans						1,451						4,335
Denominator for diluted earnings per common share						67,813,851						69,141,710
Basic earnings per share						$	0.91					$	2.10
Diluted earnings per share						$	0.91					$	2.10

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(9) Reportable Segments

Reportable segments reconciliation to the Consolidated Financial Statements for the three months ended March 31, 2022 is as follows (in thousands):

						Commercial						Consumer						Wealth Management						Funds Management and Other						BOK Financial Consolidated
Net interest revenue from external sources						$	147,590					$	16,915					$	56,231					$	47,675					$	268,411
Net interest revenue (expense) from internal sources						(10,579)						10,292						(465)						752						—
Net interest revenue						137,011						27,207						55,766						48,427						268,411
Net loans charged off and provision for credit losses						5,343						1,112						(71)						(6,384)						—
Net interest revenue after provision for credit losses						131,668						26,095						55,837						54,811						268,411
Other operating revenue						57,427						33,961						25,018						(28,550)						87,856
Other operating expense						65,114						48,789						74,495						89,220						277,618
Net direct contribution						123,981						11,267						6,360						(62,959)						78,649
Gain (loss) on financial instruments, net						(204)						(57,895)						—						58,099						—
Change in fair value of mortgage servicing rights						—						49,110						—						(49,110)						—
Gain (loss) on repossessed assets, net						1,793						45						—						(1,838)						—
Corporate expense allocations						16,246						12,080						12,062						(40,388)						—
Net income before taxes						109,324						(9,553)						(5,702)						(15,420)						78,649
Federal and state income taxes						26,980						(2,236)						(1,283)						(7,264)						16,197
Net income (loss)						82,344						(7,317)						(4,419)						(8,156)						62,452
Net income (loss) attributable to non-controlling interests						—						—						—						(36)						(36)
Net income (loss) attributable to BOK Financial Corp. shareholders						$	82,344					$	(7,317)					$	(4,419)					$	(8,120)					$	62,488
Average assets						$	29,823,905					$	10,273,890					$	21,323,795					$	(10,860,516)					$	50,561,074

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Reportable segments reconciliation to the Consolidated Financial Statements for the three months ended March 31, 2021 is as follows (in thousands):

						Commercial						Consumer						Wealth Management						Funds Management and Other						BOK Financial Consolidated
Net interest revenue from external sources						$	155,799					$	16,686					$	48,554					$	59,381					$	280,420
Net interest revenue (expense) from internal sources						(25,794)						4,288						(200)						21,706						—
Net interest revenue						130,005						20,974						48,354						81,087						280,420
Net loans charged off and provision for credit losses						13,985						1,136						(29)						(40,092)						(25,000)
Net interest revenue after provision for credit losses						116,020						19,838						48,383						121,179						305,420
Other operating revenue						46,579						52,282						66,123						12,070						177,054
Other operating expense						66,979						55,622						78,565						94,618						295,784
Net direct contribution						95,620						16,498						35,941						38,631						186,690
Gain (loss) on financial instruments, net						33						(29,616)						—						29,583						—
Change in fair value of mortgage servicing rights						—						33,874						—						(33,874)						—
Gain (loss) on repossessed assets, net						12,737						41						—						(12,778)						—
Corporate expense allocations						12,734						11,475						9,887						(34,096)						—
Net income before taxes						95,656						9,322						26,054						55,658						186,690
Federal and state income taxes						25,983						2,374						6,672						7,353						42,382
Net income						69,673						6,948						19,382						48,305						144,308
Net income (loss) attributable to non-controlling interests						—						—						—						(1,752)						(1,752)
Net income attributable to BOK Financial Corp. shareholders						$	69,673					$	6,948					$	19,382					$	50,057					$	146,060
Average assets						$	28,047,052					$	9,755,539					$	18,645,865					$	(6,137,823)					$	50,310,633

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(10) Fees and Commissions Revenue

Fees and commissions revenue is generated through the sales of products, consisting primarily of financial instruments, and the performance of services for customers under contractual obligations. Revenue from providing services for customers is recognized at the time services are provided in an amount that reflects the consideration we expect to be entitled to for those services. Revenue is recognized based on the application of five steps:

•Identify the contract with a customer

•Identify the performance obligations in the contract

•Determine the transaction price

•Allocate the transaction price to the performance obligations in the contract

•Recognize revenue when (or as) the Company satisfies a performance obligation

For contracts with multiple performance obligations, individual performance obligations are accounted for separately if the customer can benefit from the good or service on its own or with other resources readily available to the customer and the promise to transfer goods and services to the customer is separately identifiable in the contract. The transaction price is allocated to the performance obligations based on relative standalone selling prices.

Revenue is recognized on a gross basis whenever we have primary responsibility and risk in providing the services or products to our customers and have discretion in establishing the price for the services or products. Revenue is recognized on a net basis whenever we act as an agent for products or services of others.

 

Brokerage and trading revenue includes revenues from trading, customer hedging, retail brokerage and investment banking. Trading revenue includes net realized and unrealized gains primarily related to sales of securities to institutional customers and related derivative contracts. Customer hedging revenue includes realized and unrealized changes in the fair value of derivative contracts held for customer risk management programs including credit valuation adjustments, as necessary. We offer commodity, interest rate, foreign exchange and equity derivatives to our customers. These customer contracts are offset with contracts with selected counterparties and exchanges to minimize changes in market risk from changes in commodity prices, interest rates or foreign exchange rates. Retail brokerage revenue represents fees and commissions earned on sales of fixed income securities, annuities, mutual funds and other financial instruments to retail customers. Investment banking revenue includes fees earned upon completion of underwriting and financial advisory services. Investment banking revenue also includes fees earned in conjunction with loan syndications. Insurance brokerage revenues represents fees and commissions earned on placement of insurance products with carriers for property and casualty and health coverage.

 

Transaction card revenue includes merchant discount fees and electronic funds transfer network fees, net of interchange fees paid to card issuers and assessments paid to card networks. Merchant discount fees represent fees paid by customers for account management and electronic processing of card transactions. Merchant discount fees are recognized at the time the customer’s transactions are processed or other services are performed. The Company also maintains the TransFund electronic funds transfer network for the benefit of its members, which includes the Bank. Electronic funds transfer fees are recognized as electronic transactions processed on behalf of its members. 

 

Fiduciary and asset management revenue includes fees from asset management, custody, recordkeeping, investment advisory and administration services. Revenue is recognized on an accrual basis at the time the services are performed and may be based on either the fair value of the account or the service provided.

 

Deposit service charges and fees include commercial account service charges, overdraft fees, check card fee revenue and automated service charge and other deposit service fees. Fees are recognized at least quarterly in accordance with published deposit account agreements and disclosure statements for retail accounts or contractual agreements for commercial accounts. Item charges for overdraft or non-sufficient funds items are recognized as items are presented for payment. Account balance charges and activity fees are accrued monthly and collected in arrears. Commercial account activity fees may be offset by an earnings credit based on account balances. Check card fees represent interchange fees paid by a merchant bank for transactions processed from cards issued by the Company. Check card fees are recognized when transactions are processed.

Mortgage banking revenue includes revenues recognized in conjunction with the origination, marketing and servicing of conventional and government-sponsored residential mortgage loans. Mortgage production revenue includes net realized gains (losses) on sales of residential mortgage loans in the secondary market and the net change in unrealized gains (losses) on residential mortgage loans held for sale. Mortgage production revenue also includes changes in the fair value of derivative contracts not designated as hedging instruments related to residential mortgage loan commitments and forward sales contracts. Mortgage servicing revenue includes servicing fee income and late charges on loans serviced for others.

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Fees and commissions revenue by reportable segment and primary service line is as follows for the three months ended March 31, 2022.

			Commercial						Consumer						Wealth Management						Funds Management & Other						Consolidated						Out of Scope1						In Scope2
Trading revenue			$	—					$	—					$	(54,048)					$	—					$	(54,048)					$	(54,048)					$	—
Customer hedging revenue			12,979						—						817						(2,858)						10,938						10,938						—
Retail brokerage revenue			—						—						4,610						—						4,610						—						4,610
Insurance brokerage revenue			—						—						3,738						—						3,738						—						3,738
Investment banking revenue			3,358						—						4,325						—						7,683						3,099						4,584
Brokerage and trading revenue			16,337						—						(40,558)						(2,858)						(27,079)						(40,011)						12,932
TransFund EFT network revenue			18,153						886						(17)						1						19,023						—						19,023
Merchant services revenue			3,641						10						—						—						3,651						—						3,651
Corporate card revenue			1,376						—						76						90						1,542						—						1,542
Transaction card revenue			23,170						896						59						91						24,216						—						24,216
Personal trust revenue			—						—						24,797						—						24,797						—						24,797
Corporate trust revenue			—						—						3,958						—						3,958						—						3,958
Institutional trust & retirement plan services revenue			—						—						12,567						—						12,567						—						12,567
Investment management services and other revenue			—						—						5,121						(44)						5,077						—						5,077
Fiduciary and asset management revenue			—						—						46,443						(44)						46,399						—						46,399
Commercial account service charge revenue			13,131						450						513						—						14,094						—						14,094
Overdraft fee revenue			31						6,193						23						—						6,247						—						6,247
Check card revenue			—						5,545						—						—						5,545						—						5,545
Automated service charge and other deposit fee revenue			23						1,107						(14)						2						1,118						—						1,118
Deposit service charges and fees			13,185						13,295						522						2						27,004						—						27,004
Mortgage production revenue			—						5,055						—						—						5,055						5,055						—
Mortgage servicing revenue			—						12,076						—						(481)						11,595						11,595						—
Mortgage banking revenue			—						17,131						—						(481)						16,650						16,650						—
Other revenue			4,272						2,655						18,557						(15,039)						10,445						7,275						3,170
Total fees and commissions revenue			$	56,964					$	33,977					$	25,023					$	(18,329)					$	97,635					$	(16,086)					$	113,721

1     Out of scope revenue generally relates to financial instruments or contractual rights and obligations within the scope of other applicable accounting guidance.

2    In scope revenue represents revenue subject to FASB ASC Topic 606, Revenue from Contracts with Customers.

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Fees and commissions revenue by reportable segment and primary service line is as follows for the three months ended March 31, 2021.

			Commercial						Consumer						Wealth Management						Funds Management & Other						Consolidated						Out of Scope1						In Scope2
Trading revenue			$	—					$	—					$	3,716					$	—					$	3,716					$	3,716					$	—
Customer hedging revenue			4,207						—						91						(1,706)						2,592						2,592						—
Retail brokerage revenue			—						—						4,741						—						4,741						—						4,741
Insurance brokerage revenue			—						—						2,916						—						2,916						—						2,916
Investment banking revenue			2,258						—						4,768						(209)						6,817						2,049						4,768
Brokerage and trading revenue			6,465						—						16,232						(1,915)						20,782						8,357						12,425
TransFund EFT network revenue			18,443						834						(13)						2						19,266						—						19,266
Merchant services revenue			2,266						16						—						(1)						2,281						—						2,281
Corporate card revenue			804						—						28						51						883						—						883
Transaction card revenue			21,513						850						15						52						22,430						—						22,430
Personal trust revenue			—						—						21,977						—						21,977						—						21,977
Corporate trust revenue			—						—						3,789						—						3,789						—						3,789
Institutional trust & retirement plan services revenue			—						—						12,610						—						12,610						—						12,610
Investment management services and other revenue			—						—						2,903						43						2,946						—						2,946
Fiduciary and asset management revenue			—						—						41,279						43						41,322						—						41,322
Commercial account service charge revenue			11,988						434						581						1						13,004						—						13,004
Overdraft fee revenue			26						4,635						19						—						4,680						—						4,680
Check card revenue			—						5,327						—						—						5,327						—						5,327
Automated service charge and other deposit fee revenue			26						1,150						23						(1)						1,198						—						1,198
Deposit service charges and fees			12,040						11,546						623						—						24,209						—						24,209
Mortgage production revenue			—						25,287						—						—						25,287						25,287						—
Mortgage servicing revenue			—						12,277						—						(451)						11,826						11,826						—
Mortgage banking revenue			—						37,564						—						(451)						37,113						37,113						—
Other revenue			9,829						2,340						7,535						(3,408)						16,296						13,143						3,153
Total fees and commissions revenue			$	49,847					$	52,300					$	65,684					$	(5,679)					$	162,152					$	58,613					$	103,539

1     Out of scope revenue generally relates to financial instruments or contractual rights and obligations within the scope of other applicable accounting guidance.

2    In scope revenue represents revenue subject to FASB ASC Topic 606, Revenue from Contracts with Customers.

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(11) Fair Value Measurements

Fair value is defined by applicable accounting guidance as the price to sell an asset or transfer a liability in an orderly transaction between market participants in the principal market for the given asset or liability at the measurement date based on market conditions at that date. An orderly transaction assumes exposure to the market for a customary period for marketing activities prior to the measurement date and not a forced liquidation or distressed sale. Certain assets and liabilities are recorded in the Company’s financial statements at fair value. Some are recorded on a recurring basis and some on a non-recurring basis.

For some assets and liabilities, observable market transactions and market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. A hierarchy for fair value has been established which categorizes into three levels the inputs to valuation techniques used to measure fair value. The three levels are as follows:

Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) - Fair value is based on unadjusted quoted prices in active markets for identical assets or liabilities.

Significant Other Observable Inputs (Level 2) - Fair value is based on significant other observable inputs which are generally determined based on a single price for each financial instrument provided to us by an applicable third-party pricing service and is based on one or more of the following:

•Quoted prices for similar, but not identical, assets or liabilities in active markets;

•Quoted prices for identical or similar assets or liabilities in inactive markets;

•Inputs other than quoted prices that are observable, such as interest rate and yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates;

•Other inputs derived from or corroborated by observable market inputs.

Significant Unobservable Inputs (Level 3) - Fair value is based upon model-based valuation techniques for which at least one significant assumption is not observable in the market.

Transfers between levels are recognized as of the end of the reporting period. There were no transfers in or out of quoted prices in active markets for identical instruments to significant other observable inputs or significant unobservable inputs during the three months ended March 31, 2022 and 2021, respectively. Transfers between significant other observable inputs and significant unobservable inputs during the three months ended March 31, 2022 and 2021 are included in the summary of changes in recurring fair values measured using unobservable inputs.

The underlying methods used by the third-party pricing services are considered in determining the primary inputs used to determine fair values. Management has evaluated the methodologies employed by the third-party pricing services by comparing the price provided by the pricing service with other sources, including brokers' quotes, sales or purchases of similar instruments and discounted cash flows to establish a basis for reliance on the pricing service values. Significant differences between the pricing service provided value and other sources are discussed with the pricing service to understand the basis for their values. Based on all observable inputs, management may adjust prices obtained from third-party pricing services to more appropriately reflect the prices that would be received to sell assets or paid to transfer liabilities in orderly transactions in the current market. No significant adjustments were made to prices provided by third-party pricing services at March 31, 2022 or December 31, 2021.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair value of financial assets and liabilities measured on a recurring basis was as follows as of March 31, 2022 (in thousands):

						Total						Quoted Prices in Active Markets for Identical Instruments (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Assets:
Trading securities:
U.S. government securities						$	13,513					$	4,978					$	8,535					$	—
Residential agency mortgage-backed securities						4,827,504						—						4,827,504						—
Municipal securities						24,539						—						24,539						—
Other trading securities						25,540						—						25,540						—
Total trading securities						4,891,096						4,978						4,886,118						—
Available for sale securities:
U.S. Treasury						947						947						—						—
Municipal securities						526,322						—						526,322						—
Residential agency mortgage-backed securities						7,612,021						—						7,612,021						—
Residential non-agency mortgage-backed securities						347,187						—						347,187						—
Commercial agency mortgage-backed securities						4,407,585						—						4,407,585						—
Other debt securities						472						—						—						472
Total available for sale securities						12,894,534						947						12,893,115						472
Fair value option securities – Residential agency mortgage-backed securities						185,003						—						185,003						—
Residential mortgage loans held for sale1						169,474						—						160,507						8,967
Mortgage servicing rights2						209,563						—						—						209,563
Derivative contracts, net of cash collateral						2,680,207						—						2,680,207						—
Liabilities:
Derivative contracts, net of cash collateral						557,834						—						557,834						—

1Residential mortgage loans held for sale measured at fair value on a recurring basis using significant unobservable inputs (Level 3) consist of residential mortgage loans intended for sale to U.S. government agencies that fail to meet conforming standards and are valued at 95.07% of the unpaid principal balance.

2A reconciliation of the beginning and ending fair value of mortgage servicing rights and disclosures of significant assumptions used to determine fair value are presented in Note 5, Mortgage Banking Activities.

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The fair value of financial assets and liabilities measured on a recurring basis was as follows as of December 31, 2021 (in thousands):

						Total						Quoted Prices in Active Markets for Identical Instruments (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Assets:
Trading securities:
U.S. government securities						$	23,610					$	4,999					$	18,611					$	—
Residential agency mortgage-backed securities						9,068,900						—						9,068,900						—
Municipal securities						25,783						—						25,783						—
Other trading securities						18,520						—						18,520						—
Total trading securities						9,136,813						4,999						9,131,814						—
Available for sale securities:
U.S. Treasury						1,000						1,000						—						—
Municipal securities						508,365						—						508,365						—
Residential agency mortgage-backed securities						8,006,616						—						8,006,616						—
Residential non-agency mortgage-backed securities						24,339						—						24,339						—
Commercial agency mortgage-backed securities						4,617,025						—						4,617,025						—
Other debt securities						472						—						—						472
Total available for sale securities						13,157,817						1,000						13,156,345						472
Fair value option securities — Residential agency mortgage-backed securities						43,770						—						43,770						—
Residential mortgage loans held for sale1						192,295						—						185,969						6,326
Mortgage servicing rights2						163,198						—						—						163,198
Derivative contracts, net of cash collateral						1,097,297						8,331						1,088,966						—
Liabilities:
Derivative contracts, net of cash collateral						275,625						—						275,625						—

1Residential mortgage loans held for sale measured at fair value on a recurring basis using significant unobservable inputs (Level 3) consist of residential mortgage loans intended for sale to U.S. government agencies that fail to meet conforming standards and are valued at 95.07% of the unpaid principal balance.

2A reconciliation of the beginning and ending fair value of mortgage servicing rights and disclosures of significant assumptions used to determine fair value are presented in Note 5, Mortgage Banking Activities.

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Following is a description of the Company's valuation methodologies used for assets and liabilities measured on a recurring basis:

Securities

The fair values of trading, available for sale and fair value option securities are based on quoted prices for identical instruments in active markets, when available. If quoted prices for identical instruments are not available, fair values are based on significant other observable inputs such as quoted prices of comparable instruments or interest rates and credit spreads, yield curves, volatilities, prepayment speeds and loss severities. The Company has elected to carry all residential mortgage-backed securities guaranteed by U.S. government agencies held as economic hedges against changes in the fair value of mortgage servicing rights at fair value with changes in the fair value recognized in earnings.

The fair value of certain available for sale municipal and other debt securities may be based on significant unobservable inputs. These significant unobservable inputs include limited observed trades, projected cash flows, current credit rating of the issuers and, when applicable, the insurers of the debt and observed trades of similar debt. Discount rates are primarily based on references to interest rate spreads on comparable securities of similar duration and credit rating as determined by the nationally-recognized rating agencies adjusted for a lack of trading volume. Significant unobservable inputs are developed by investment securities professionals involved in the active trading of similar securities. A summary of significant inputs used to value these securities follows. A management committee composed of senior members from the Company's Capital Markets, Risk Management and Finance departments assesses the appropriateness of these inputs quarterly.

Derivatives

All derivative instruments are carried on the balance sheet at fair value. Fair values for exchange-traded contracts are based on quoted prices. Fair values for over-the-counter interest rate, commodity and foreign exchange contracts are based on valuations provided either by third-party dealers in the contracts, quotes provided by independent pricing services, or a third-party provided pricing model that uses significant other observable market inputs.

Credit risk is considered in determining the fair value of derivative instruments. Management determines fair value adjustments based on various risk factors including but not limited to current fair value, probability of default and loss given default.

We also consider our own credit risk in determining the fair value of derivative contracts. Changes in our credit rating would affect the fair value of our derivative liabilities. In the event of a credit downgrade, the fair value of our derivative liabilities would increase.

Residential Mortgage Loans Held for Sale

Residential mortgage loans held for sale are carried on the balance sheet at fair value. The Company has elected to carry all residential mortgage loans originated for sale at fair value. Changes in the fair value of these financial instruments are recognized in earnings. The fair values of residential mortgage loans held for sale are based upon quoted market prices of such loans sold in securitization transactions, including related unfunded loan commitments and forward sales contracts. The fair value of mortgage loans that were unable to be sold to U.S. government agencies were determined using quoted prices of loans that are sold in securitization transactions with a liquidity discount applied.

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Fair Value of Assets and Liabilities Measured on a Non-Recurring Basis

Assets measured at fair value on a non-recurring basis include collateral for certain nonaccruing loans and real property and other assets acquired to satisfy loans, which are based primarily on comparisons to completed sales of similar assets.

The following represents the carrying value of assets measured at fair value on a non-recurring basis (and related losses) during the period. The carrying value represents only those assets with a balance at March 31, 2022 for which the fair value was adjusted during the three months ended March 31, 2022:

																					Fair Value Adjustments for the
			Carrying Value at March 31, 2022																		Three Months Ended Mar. 31, 2022 Recognized in:
			Quoted Prices in Active Markets for Identical Instruments						Significant Other Observable Inputs						Significant Unobservable Inputs						Gross charge-offs against allowance for loan losses						Other gains (losses), net
Nonaccruing loans			$	—					$	4,168					$	244					$	818					$	—
Real estate and other repossessed assets			—						1,412						400						—						106

The following represents the carrying value of assets measured at fair value on a non-recurring basis (and related losses) during the period. The carrying value represents only those assets with a balance at March 31, 2021 for which the fair value was adjusted during the three months ended March 31, 2021:

																					Fair Value Adjustments for the
			Carrying Value at March 31, 2021																		Three Months Ended Mar. 31, 2021 Recognized in:
			Quoted Prices in Active Markets for Identical Instruments						Significant Other Observable Inputs						Significant Unobservable Inputs						Gross charge-offs against allowance for loan losses						Other gains (losses), net
Nonaccruing loans			$	—					$	259					$	34,046					$	15,049					$	—
Real estate and other repossessed assets			—						1,706						300						—						(2,200)

The fair value of collateral-dependent nonaccruing loans secured by real estate and real estate and other repossessed assets and the related fair value adjustments are generally based on unadjusted third-party appraisals. Our appraisal review policies require appraised values to be supported by observed inputs derived principally from or corroborated by observable market data. Appraisals that are not based on observable inputs or that require significant adjustments or fair value measurements that are not based on third-party appraisals are considered to be based on significant unobservable inputs. Non-recurring fair value measurements of collateral-dependent nonaccruing loans and real estate and other repossessed assets based on significant unobservable inputs are generally due to estimates of current fair values between appraisal dates. Significant unobservable inputs include listing prices for the same or comparable assets, uncorroborated expert opinions or management's knowledge of the collateral or industry. Non-recurring fair value measurements of collateral dependent loans secured by mineral rights are generally determined by our internal staff of engineers on projected cash flows under current market conditions and are based on significant unobservable inputs. Projected cash flows are discounted according to risk characteristics of the underlying oil and gas properties. Assets are evaluated to demonstrate with reasonable certainty that crude oil, natural gas and natural gas liquids can be recovered from known oil and gas reservoirs under existing economic and operating conditions at current prices with existing conventional equipment, operating methods and costs. Significant unobservable inputs are developed by asset management and workout professionals and approved by senior Credit Administration executives.

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A summary of quantitative information about Non-recurring Fair Value Measurements based on Significant Unobservable Inputs (Level 3) as of March 31, 2022 follows (in thousands):

Fair Value

Valuation Technique(s)

Unobservable Input

Range (Weighted Average)

Nonaccruing loans

$

244

Discounted cash flows

Management knowledge of industry and non-real estate collateral including but not limited to recoverable oil and gas reserves, forward-looking commodity prices, estimated operating costs

3% - 25% (5%)1

Real estate and other repossessed assets

400

Discounted cash flows

Marketability adjustments off appraised value.2

75% - 75% (75%)

1     Represents fair value as a percentage of the unpaid principal balance.

2    Marketability adjustments include consideration of estimated costs to sell which is approximately 10% of the fair value.

A summary of quantitative information about Non-recurring Fair Value Measurements based on Significant Unobservable Inputs (Level 3) as of March 31, 2021 follows (in thousands):

Fair Value

Valuation Technique(s)

Unobservable Input

Range (Weighted Average)

Nonaccruing loans

$

34,046

Discounted cash flows

Management knowledge of industry and non-real estate collateral including but not limited to recoverable oil and gas reserves, forward-looking commodity prices, estimated operating costs

10% - 91% (47%)1

Real estate and other repossessed assets

300

Discounted cash flows

Management knowledge of industry and non-real estate collateral including but not limited to recoverable oil and gas reserves, forward-looking commodity prices, estimated operating costs

N/A

1 Represents fair value as a percentage of the unpaid principal balance.

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Fair Value of Financial Instruments

The following table presents the carrying values and estimated fair values of all financial instruments, including those financial assets and liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis as of March 31, 2022 (dollars in thousands):

						Carrying Value						Estimated Fair Value						Quoted Prices in Active Markets for Identical Instruments (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Cash and due from banks						$	767,805					$	767,805					$	767,805					$	—					$	—
Interest-bearing cash and cash equivalents						599,976						599,976						599,976						—						—
Trading securities:
U.S. government securities						13,513						13,513						4,978						8,535						—
Residential agency mortgage-backed securities						4,827,504						4,827,504						—						4,827,504						—
Municipal securities						24,539						24,539						—						24,539						—
Other trading securities						25,540						25,540						—						25,540						—
Total trading securities						4,891,096						4,891,096						4,978						4,886,118						—
Investment securities:
Municipal securities						177,683						184,214						—						41,920						142,294
Residential agency mortgage-backed securities						6,486						6,741						—						6,741						—
Other debt securities						288						280						—						280						—
Total investment securities						184,457						191,235						—						48,941						142,294
Allowance for credit losses						(633)						—						—						—						—
Investment securities, net of allowance						183,824						191,235						—						48,941						142,294
Available for sale securities:
U.S. Treasury						947						947						947						—						—
Municipal securities						526,322						526,322						—						526,322						—
Residential agency mortgage-backed securities						7,612,021						7,612,021						—						7,612,021						—
Residential non-agency mortgage-backed securities						347,187						347,187						—						347,187						—
Commercial agency mortgage-backed securities						4,407,585						4,407,585						—						4,407,585						—
Other debt securities						472						472						—						—						472
Total available for sale securities						12,894,534						12,894,534						947						12,893,115						472
Fair value option securities – Residential agency mortgage-backed securities						185,003						185,003						—						185,003						—
Residential mortgage loans held for sale						169,474						169,474						—						160,507						8,967
Loans:
Commercial						12,883,189						12,639,182						—						—						12,639,182
Commercial real estate						4,100,956						3,985,876						—						—						3,985,876
Paycheck protection program						137,365						134,313						—						—						134,313
Loans to individuals						3,552,919						3,470,751						—						—						3,470,751
Total loans						20,674,429						20,230,122						—						—						20,230,122
Allowance for loan losses						(246,473)						—						—						—						—
Loans, net of allowance						20,427,956						20,230,122						—						—						20,230,122
Mortgage servicing rights						209,563						209,563						—						—						209,563
Derivative instruments with positive fair value, net of cash collateral						2,680,207						2,680,207						—						2,680,207						—
Deposits with no stated maturity						37,911,535						37,911,535						—						—						37,911,535
Time deposits						1,514,416						1,498,269						—						—						1,498,269
Other borrowed funds						1,104,575						1,102,079						—						—						1,102,079
Subordinated debentures						131,209						138,623						—						138,623						—
Derivative instruments with negative fair value, net of cash collateral						557,834						557,834						—						557,834						—

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The following table presents the carrying values and estimated fair values of all financial instruments, including those financial assets and liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis as of December 31, 2021 (dollars in thousands):

						Carrying Value						Estimated Fair Value						Quoted Prices in Active Markets for Identical Instruments (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Cash and due from banks						$	712,067					$	712,067					$	712,067					$	—					$	—
Interest-bearing cash and cash equivalents						2,125,343						2,125,343						2,125,343						—						—
Trading securities:
U.S. government securities						23,610						23,610						4,999						18,611						—
Residential agency mortgage-backed securities						9,068,900						9,068,900						—						9,068,900						—
Municipal securities						25,783						25,783						—						25,783						—
Other trading securities						18,520						18,520						—						18,520						—
Total trading securities						9,136,813						9,136,813						4,999						9,131,814						—
Investment securities:
Municipal securities						203,772						223,609						—						57,698						165,911
Residential agency mortgage-backed securities						6,939						7,500						—						7,500						—
Other debt securities						288						286						—						286						—
Total investment securities						210,999						231,395						—						65,484						165,911
Allowance for credit losses						(555)						—						—						—						—
Investment securities, net of allowance						210,444						231,395						—						65,484						165,911
Available for sale securities:
U.S. Treasury						1,000						1,000						1,000						—						—
Municipal securities						508,365						508,365						—						508,365						—
Residential agency mortgage-backed securities						8,006,616						8,006,616						—						8,006,616						—
Residential non-agency mortgage-backed securities						24,339						24,339						—						24,339						—
Commercial agency mortgage-backed securities						4,617,025						4,617,025						—						4,617,025						—
Other debt securities						472						472						—						—						472
Total available for sale securities						13,157,817						13,157,817						1,000						13,156,345						472
Fair value option securities — Residential agency mortgage-backed securities						43,770						43,770						—						43,770						—
Residential mortgage loans held for sale						192,295						192,295						—						185,969						6,326
Loans:
Commercial						12,506,465						12,395,664						—						—						12,395,664
Commercial real estate						3,831,325						3,786,767						—						—						3,786,767
Paycheck protection program						276,341						269,912						—						—						269,912
Loans to individuals						3,591,549						3,586,878						—						—						3,586,878
Total loans						20,205,680						20,039,221						—						—						20,039,221
Allowance for loan losses						(256,421)						—						—						—						—
Loans, net of allowance						19,949,259						20,039,221						—						—						20,039,221
Mortgage servicing rights						163,198						163,198						—						—						163,198
Derivative instruments with positive fair value, net of cash collateral						1,097,297						1,097,297						8,331						1,088,966						—
Deposits with no stated maturity						39,537,731						39,537,731						—						—						39,537,731
Time deposits						1,704,328						1,703,886						—						—						1,703,886
Other borrowed funds						2,363,202						2,360,746						—						—						2,360,746
Subordinated debentures						131,226						141,761						—						141,761						—
Derivative instruments with negative fair value, net of cash collateral						275,625						275,625						—						275,625						—

Because no market exists for certain of these financial instruments and management does not intend to sell these financial instruments, the fair values shown in the tables above may not represent values at which the respective financial instruments could be sold individually or in the aggregate at the given reporting date.

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(12) Subsequent Events

The Company evaluated events from the date of the consolidated financial statements on March 31, 2022 through the issuance of those consolidated financial statements included in this Quarterly Report on Form 10-Q. No events were identified requiring recognition in and/or disclosure in the consolidated financial statements.

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Quarterly Financial Summary – Unaudited

Consolidated Daily Average Balances, Average Yields and Rates

(In Thousands, Except Per Share Data)						Three Months Ended
						March 31, 2022																		December 31, 2021
						Average Balance						Revenue/ Expense						Yield/ Rate						Average Balance						Revenue/ Expense						Yield/ Rate
Assets
Interest-bearing cash and cash equivalents						$	1,050,409					$	473					0.18		%				$	1,208,552					$	483					0.16		%
Trading securities						8,537,390						41,041						1.71		%				9,260,778						44,537						1.89		%
Investment securities, net of allowance						195,198						2,475						5.07		%				213,188						2,661						4.99		%
Available for sale securities						13,092,422						58,018						1.77		%				13,247,607						55,638						1.72		%
Fair value option securities						75,539						491						2.81		%				46,458						302						2.71		%
Restricted equity securities						164,484						1,107						2.69		%				137,874						1,028						2.98		%
Residential mortgage loans held for sale						179,697						1,394						3.11		%				163,433						1,242						3.06		%
Loans						20,463,662						180,073						3.57		%				20,242,653						188,547						3.70		%
Allowance for loan losses						(254,191)																		(271,794)
Loans, net of allowance						20,209,471						180,073						3.61		%				19,970,859						188,547						3.75		%
Total earning assets						43,504,610						285,072						2.58		%				44,248,749						294,438						2.66		%
Receivable on unsettled securities sales						375,616																		585,901
Cash and other assets						6,680,848																		5,769,406
Total assets						$	50,561,074																	$	50,604,056
Liabilities and equity
Interest-bearing deposits:
Transaction						$	22,763,479					$	5,343					0.10		%				$	22,326,401					$	5,097					0.09		%
Savings						947,407						73						0.03		%				909,131						96						0.04		%
Time						1,589,039						2,182						0.56		%				1,747,715						2,351						0.53		%
Total interest-bearing deposits						25,299,925						7,598						0.12		%				24,983,247						7,544						0.12		%
Funds purchased and repurchase agreements						2,004,466						4,698						0.95		%				2,893,128						5,292						0.73		%
Other borrowings						1,148,440						1,090						0.38		%				880,837						1,091						0.49		%
Subordinated debentures						131,228						1,302						4.02		%				131,224						1,330						4.02		%
Total interest-bearing liabilities						28,584,059						14,688						0.21		%				28,888,436						15,257						0.21		%
Non-interest bearing demand deposits						15,062,282																		14,818,841
Due on unsettled securities purchases						519,097																		629,642
Other liabilities						1,247,785																		898,848
Total equity						5,147,851																		5,368,289
Total liabilities and equity						$	50,561,074																	$	50,604,056
Tax-equivalent Net Interest Revenue												$	270,384					2.37		%										$	279,181					2.45		%
Tax-equivalent Net Interest Revenue to Earning Assets																		2.44		%																2.52		%
Less tax-equivalent adjustment												1,973																		2,104
Net Interest Revenue												268,411																		277,077
Provision for credit losses												—																		(17,000)
Other operating revenue												87,856																		157,443
Other operating expense												277,618																		299,495
Income before taxes												78,649																		152,025
Federal and state income taxes												16,197																		34,836
Net income												62,452																		117,189
Net income (loss) attributable to non-controlling interests												(36)																		(129)
Net income attributable to BOK Financial Corp. shareholders												$	62,488																	$	117,318
Earnings Per Average Common Share Equivalent:
Basic												$	0.91																	$	1.71
Diluted												$	0.91																	$	1.71

Yield calculations are shown on a tax equivalent at the statutory federal and state rates for the periods presented. The yield calculations exclude security trades that have been recorded on trade date with no corresponding interest income and the unrealized gains and losses. The yield calculation also includes average loan balances for which the accrual of interest has been discontinued and are net of unearned income. Yield / rate calculations are generally based on the conventions that determine how interest income and expense is accrued.

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Three Months Ended
September 30, 2021																		June 30, 2021																		March 31, 2021
Average Balance						Revenue /Expense						Yield / Rate						Average Balance						Revenue / Expense						Yield / Rate						Average Balance						Revenue / Expense						Yield / Rate
$	682,788					$	245					0.14		%				$	659,312					$	158					0.10		%				$	711,047					$	174					0.10		%
7,617,236						39,006						2.04		%				7,430,217						36,702						1.95		%				6,963,617						35,969						2.06		%
218,117						2,740						5.02		%				221,401						2,771						5.01		%				237,313						2,893						4.88		%
13,446,095						57,391						1.80		%				13,243,542						58,989						1.85		%				13,433,767						58,680						1.84		%
56,307						342						2.62		%				64,864						402						2.60		%				104,662						496						1.95		%
245,485						1,565						2.55		%				208,692						1,751						3.36		%				189,921						1,359						2.86		%
167,620						1,274						3.06		%				218,200						1,569						2.91		%				207,013						1,380						2.71		%
20,848,608						193,117						3.68		%				22,167,089						195,871						3.54		%				22,757,007						199,589						3.55		%
(306,125)																		(345,269)																		(382,734)
20,542,483						193,117						3.73		%				21,821,820						195,871						3.60		%				22,374,273						199,589						3.62		%
42,976,131						295,680						2.78		%				43,868,048						298,213						2.75		%				44,221,613						300,540						2.78		%
632,539																		716,700																		735,482
5,890,479																		5,612,174																		5,353,538
$	49,499,149																	$	50,196,922																	$	50,310,633
$	21,435,736					$	5,002					0.09		%				$	21,491,145					$	5,539					0.10		%				$	21,433,406					$	6,323					0.12		%
888,011						96						0.04		%				872,618						96						0.04		%				789,656						86						0.04		%
1,839,983						2,567						0.55		%				1,936,510						2,790						0.58		%				1,986,425						3,441						0.70		%
24,163,730						7,665						0.13		%				24,300,273						8,425						0.14		%				24,209,487						9,850						0.17		%
1,448,800						722						0.20		%				1,790,490						722						0.16		%				2,830,378						1,348						0.19		%
2,546,083						2,344						0.37		%				3,608,369						3,084						0.34		%				3,392,346						3,274						0.39		%
214,654						2,505						4.63		%				276,034						3,353						4.87		%				276,015						3,347						4.92		%
28,373,267						13,236						0.19		%				29,975,166						15,584						0.21		%				30,708,226						17,819						0.24		%
13,670,656																		13,189,954																		12,312,629
957,538																		701,495																		915,410
1,054,247																		1,000,662																		1,100,203
5,443,441																		5,329,645																		5,274,165
$	49,499,149																	$	50,196,922																	$	50,310,633
						$	282,444					2.59		%										$	282,629					2.54		%										$	282,721					2.54		%
												2.66		%																2.60		%																2.62		%
						2,217																		2,320																		2,301
						280,227																		280,309																		280,420
						(23,000)																		(35,000)																		(25,000)
						229,832																		191,446																		177,054
						291,277																		291,152																		295,784
						241,782																		215,603																		186,690
						54,061																		48,496																		42,382
						187,721																		167,107																		144,308
						(601)																		686																		(1,752)
						$	188,322																	$	166,421																	$	146,060
						$	2.74																	$	2.40																	$	2.10
						$	2.74																	$	2.40																	$	2.10

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Quarterly Earnings Trends – Unaudited

(In thousands, except share and per share data)

						Three Months Ended
						Mar. 31, 2022						Dec. 31, 2021						Sept. 30, 2021						June 30, 2021						Mar. 31, 2021
Interest revenue						$	283,099					$	292,334					$	293,463					$	295,893					$	298,239
Interest expense						14,688						15,257						13,236						15,584						17,819
Net interest revenue						268,411						277,077						280,227						280,309						280,420
Provision for credit losses						—						(17,000)						(23,000)						(35,000)						(25,000)
Net interest revenue after provision for credit losses						268,411						294,077						303,227						315,309						305,420
Other operating revenue
Brokerage and trading revenue						(27,079)						14,869						47,930						29,408						20,782
Transaction card revenue						24,216						24,998						24,632						24,923						22,430
Fiduciary and asset management revenue						46,399						46,872						45,248						44,832						41,322
Deposit service charges and fees						27,004						26,718						27,429						25,861						24,209
Mortgage banking revenue						16,650						21,278						26,286						21,219						37,113
Other revenue						10,445						11,586						18,896						23,172						16,296
Total fees and commissions						97,635						146,321						190,421						169,415						162,152
Other gains, net						(1,644)						6,081						31,091						16,449						10,121
Gain (loss) on derivatives, net						(46,981)						(4,788)						(5,760)						18,820						(27,650)
Gain (loss) on fair value option securities, net						(11,201)						1,418						(120)						(1,627)						(1,910)
Change in fair value of mortgage servicing rights						49,110						7,859						12,945						(13,041)						33,874
Gain on available for sale securities, net						937						552						1,255						1,430						467
Total other operating revenue						87,856						157,443						229,832						191,446						177,054
Other operating expense
Personnel						159,228						174,474						175,863						172,035						173,010
Business promotion						6,513						6,452						4,939						2,744						2,154
Charitable contributions to BOKF Foundation						—						5,000						—						—						4,000
Professional fees and services						11,413						14,129						12,436						12,361						11,980
Net occupancy and equipment						30,855						26,897						28,395						26,633						26,662
Insurance						4,283						3,889						3,712						3,660						4,620
Data processing and communications						39,836						39,358						38,371						36,418						37,467
Printing, postage and supplies						3,689						2,935						3,558						4,285						3,440
Amortization of intangible assets						3,964						4,438						4,488						4,578						4,807
Mortgage banking costs						7,877						8,667						8,962						11,126						13,943
Other expense						9,960						13,256						10,553						17,312						13,701
Total other operating expense						277,618						299,495						291,277						291,152						295,784
Net income before taxes						78,649						152,025						241,782						215,603						186,690
Federal and state income taxes						16,197						34,836						54,061						48,496						42,382
Net income						62,452						117,189						187,721						167,107						144,308
Net income (loss) attributable to non-controlling interests						(36)						(129)						(601)						686						(1,752)
Net income attributable to BOK Financial Corporation shareholders						$	62,488					$	117,318					$	188,322					$	166,421					$	146,060
Earnings per share:
Basic						$0.91						$1.71						$2.74						$2.40						$2.10
Diluted						$0.91						$1.71						$2.74						$2.40						$2.10
Average shares used in computation:
Basic						67,812,400						68,069,160						68,359,125						68,815,666						69,137,375
Diluted						67,813,851						68,070,910						68,360,871						68,817,442						69,141,710

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PART II. Other Information

Item 1. Legal Proceedings

 

See discussion of legal proceedings at Note 6 to the Consolidated Financial Statements.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

The following table provides information with respect to purchases made by or on behalf of the Company or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of the Company’s common stock during the three months ended March 31, 2022.

Period						Total Number of Shares Purchased2						Average Price Paid per Share						Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs1						Maximum Number of Shares that May Yet Be Purchased Under the Plans
January 1 to January 31, 2022						258,359						$	102.50					230,877						1,435,653
February 1 to February 28, 2022						228,571						$	101.03					210,000						1,225,653
March 1 to March 31, 2022						35,000						$	98.33					35,000						1,190,653
Total						521,930												475,877

1On April 30, 2019, the Company's board of directors authorized the Company to repurchase up to five million shares of the Company's common stock. As of March 31, 2022, the Company had repurchased 3,809,347 shares under this plan. Future repurchases of the Company's common stock will vary based on market conditions, regulatory limitations and other factors.

2The Company may repurchase mature shares from employees to cover the exercise price and taxes in connection with employee equity compensation.

Item 6. Exhibits

31.1Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Earnings, (iii) the Consolidated Statements of Changes in Equity, (iv) the Consolidated Statement of Cash Flows and (v) the Notes to Consolidated Financial Statements. The XBRL instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

104    Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101)

Items 3, 4 and 5 are not applicable and have been omitted.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BOK FINANCIAL CORPORATION

(Registrant)

Date:        May 4, 2022                                                                  

/s/ Steven E. Nell
Steven E. Nell
Executive Vice President and
Chief Financial Officer

    

/s/ John C. Morrow
John C. Morrow
Senior Vice President and
Chief Accounting Officer

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