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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, 2023

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: 66,600,833 shares of common stock ($.00006 par value) as of March 31, 2023.

BOK Financial Corporation

Form 10-Q

Quarter Ended March 31, 2023

Index

Part I.  Financial Information
Management's Discussion and Analysis (Item 2)			1
Market Risk (Item 3)			34
Controls and Procedures (Item 4)			39
Consolidated Financial Statements – Unaudited (Item 1)			40
Quarterly Financial Summary – Unaudited (Item 2)			84
Quarterly Earnings Trend – Unaudited			87
Part II.  Other Information
Item 1.  Legal Proceedings			88
Item 1A. Risk Factors			88
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds			88
Item 6.  Exhibits			89
Signatures			90

---

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

Performance Summary

BOK Financial Corporation ("the Company") reported net income of $162.4 million or $2.43 per diluted share for the first quarter of 2023 compared to $168.4 million or $2.51 per diluted share for the fourth quarter of 2022. Pre-provision net revenue ("PPNR"), a non-GAAP measure, decreased $7.0 million to $224.3 million compared to the fourth quarter of 2022.

Highlights of the first quarter of 2023 compared to the fourth quarter of 2022 included:

•Net interest revenue totaled $352.3 million, consistent with the prior quarter, despite two fewer days in the first quarter. Net interest margin was 3.45 percent for the first quarter of 2023 compared to 3.54 percent for the prior quarter, driven by higher funding costs.

•Fees and commissions revenue totaled $186.0 million, a decrease of $7.6 million. Brokerage and trading revenue decreased $10.6 million related to lower trading volumes due to escalated market volatility. This was partially offset by a $4.3 million increase in mortgage banking revenue due to higher production volume and expanded mortgage servicing.

•The net cost of the changes in fair value of mortgage servicing rights and related economic hedges was $10.5 million for the first quarter of 2023 compared to $1.2 million for the fourth quarter of 2022 due to interest rate volatility in the first quarter.

•Other operating expense totaled $305.8 million, a decrease of $12.6 million. Personnel expense decreased $4.3 million, largely driven by a one-time incentive given to employees in the fourth quarter of 2022, partially offset by increased employee benefits costs related to seasonal payroll taxes. Non-personnel expense decreased $8.4 million, led by a reduction in professional fees and services and mortgage banking costs.

•Period-end outstanding loan balances totaled $22.8 billion at March 31, 2023, growing $193 million compared to December 31, 2022, largely due to growth in commercial real estate loans driven primarily by loans secured by multifamily residential properties and industrial facilities. Average loan balances increased $500 million to $22.5 billion, primarily due to higher commercial and commercial real estate balances.

•We recorded a $16.0 million provision for expected credit losses in the first quarter of 2023, as key economic factors in the base case, including projected West Texas Intermediate ("WTI") oil prices and commercial real estate vacancy rates, were less favorable to economic growth. We recorded a $15.0 million provision for expected credit losses in the fourth quarter of 2022, primarily as a result of growth in loans and loan commitments during the quarter. The combined allowance for credit losses totaled $312 million or 1.37 percent of outstanding loans at March 31, 2023. The combined allowance for credit losses was $297 million or 1.31 percent of outstanding loans at December 31, 2022.

•Nonperforming assets not guaranteed by U.S. government agencies decreased $2.5 million compared to December 31, 2022. Potential problem loans grew $44 million while other loans especially mentioned increased $65 million. Net charge-offs were $769 thousand or 0.01 percent of average loans on an annualized basis for the first quarter of 2023. Net charge-offs were 0.07 percent of average loans over the last four quarters. Net charge-offs were $15.5 million or 0.28 percent of average loans on an annualized basis for the fourth quarter of 2022.

•Period-end deposits were $32.6 billion at March 31, 2023, a $1.9 billion decrease compared to December 31, 2022, as customers redeployed resources and pursued investment alternatives following the savings trend during the height of the pandemic. Average deposits decreased $2.0 billion, including a $1.8 billion reduction in demand deposits.

•Assets under management or administration totaled $102.3 billion at March 31, 2023 compared to $99.7 billion at December 31, 2022, with growth across all categories.

•The company's tangible common equity ratio, a non-GAAP measure, was 8.46 percent at March 31, 2023 and 7.63 percent at December 31, 2022. The tangible common equity ratio is primarily based on total shareholders' equity, which includes unrealized gains and losses on available for sale securities. Adjusted for all securities portfolio losses, including the tax adjusted losses in the investment portfolio, the tangible common equity ratio would be 8.22 percent at March 31, 2023 and 7.36 percent at December 31, 2022.

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•The common equity Tier 1 capital ratio at March 31, 2023 was 12.19 percent. Other regulatory capital ratios included the Tier 1 capital ratio at 12.20 percent, total capital ratio at 13.21 percent, and leverage ratio at 9.94 percent. At December 31, 2022, the common equity Tier 1 capital ratio was 11.69 percent, the Tier 1 capital ratio was 11.71 percent, total capital ratio was 12.67 percent, and leverage ratio was 9.91 percent.

•The Company repurchased 447,071 shares of common stock at an average price of $98.64 per share in the first quarter of 2023 and 314,406 shares at an average price of $103.14 in the fourth quarter of 2022. We view share buybacks opportunistically, but within the context of maintaining our strong capital position.

•The Company paid a regular cash dividend of $36.0 million or $0.54 per common share during the first quarter of 2023. On May 2, 2023, the board of directors approved a quarterly cash dividend of $0.54 per common share payable on or about May 30, 2023 to shareholders of record as of May 15, 2023.

Highlights of the three months ended March 31, 2023 compared to the three months ended March 31, 2022 included:

•Tax-equivalent net interest revenue totaled $354.6 million for the three months ended March 31, 2023 and $270.4 million for the three months ended March 31, 2022. Net interest revenue decreased $19.0 million from changes in earning assets and increased $103.3 million from changes in interest rates. Net interest margin was 3.45 percent compared to 2.44 percent. In response to rising inflation, the Federal Reserve increased the federal funds rate 475 basis points since the beginning of 2022. The resulting impact on market interest rates increased net interest margin as our earning assets, led by our significant percentage of variable-rate commercial loans, repriced at a higher rate and faster pace than our interest-bearing liabilities. Average earning assets decreased $2.7 billion to $40.8 billion, primarily due to a reduction in trading securities, partially offset by an increase in loan balances. Total interest-bearing deposits decreased $4.2 billion while total other borrowed funds increased $3.1 billion. Loan yields increased 310 basis points while funding costs increased 222 basis points.

•Fees and commissions revenue totaled $186.0 million for the three months ended March 31, 2023, an $88.3 million increase compared to the three months ended March 31, 2022. Brokerage and trading revenue increased $79.5 million, primarily due to disruption in the fixed income markets related to economic uncertainty in the first quarter of 2022. Fiduciary and asset management revenue increased $4.3 million, led by growth in mutual fund fees and Cavanal Hill fund fees. Mortgage banking revenue decreased $2.3 million as rapidly rising mortgage interest rates and continued inventory shortages have adversely affected both loan production volume and margins. Other revenue increased $6.5 million, primarily related to higher margin interest fees.

•Total operating expense was $305.8 million for the three months ended March 31, 2023, an increase of $28.2 million compared to the three months ended March 31, 2022. Personnel expense increased $22.9 million. Regular compensation increased $8.6 million, largely related to annual merit increases and salary adjustments while cash-based incentive compensation grew $7.3 million due to higher sales activity. Non-personnel expense increased $5.3 million to $123.7 million, largely related to higher FDIC insurance costs following increased assessment rates in 2023 and data processing costs related to ongoing technology projects.

•We recorded a $16.0 million provision for expected credit losses in the first quarter of 2023, as key economic factors in the base case, including projected West Texas Intermediate ("WTI") oil prices and projected commercial real estate vacancy rates, were less favorable to economic growth. No provision for expected credit losses was recorded in the first quarter of 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 $354.6 million for the first quarter of 2023, consistent with the prior quarter despite two less days in the first quarter. Compared to the fourth quarter of 2022, net interest revenue increased $10.6 million from changes in interest rates and decreased $10.9 million from changes in earning assets. 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 increased $1.5 billion compared to the fourth quarter of 2022. The average balance of available for sale securities, which consists largely of residential and commercial mortgage-backed securities guaranteed by U.S. government agencies, increased $785 million as we reposition our balance sheet for the current rate environment. Average loan balances increased $500 million, largely due to growth in commercial and commercial real estate loans. Average fair value option securities, held as an economic hedge of the changes in fair value of our mortgage servicing rights, increased $208 million while average restricted equity securities grew $100 million.

Total average deposits were reduced by $2.0 billion compared to the fourth quarter of 2022 as customers redeployed cash resources and seek higher yielding alternatives following the savings trend during the height of the pandemic. Other borrowings increased $2.0 billion while funds purchased and repurchase agreements grew $713 million.

Net interest margin was 3.45 percent compared to 3.54 percent in the fourth quarter of 2022. In recent prior quarters, the rapid pace of market interest rate increases grew net interest margin as our earning assets, led by our significant percentage of variable-rate loans, repriced at a higher rate and faster pace than our interest-bearing liabilities. In the current quarter, we saw margin compression as our interest-bearing liabilities began to catch up and reprice more quickly. The tax-equivalent yield on earning assets was 5.06 percent, an increase of 53 basis points. Loan yields increased 68 basis points to 6.67 percent. The yield on trading securities was up 82 basis points to 4.52 percent. The available for sale securities portfolio yield increased 33 basis points to 2.87 percent while the yield on the fair value option securities portfolio grew 77 basis points to 5.17 percent. The yield on interest-bearing cash and cash equivalents increased 22 basis points to 4.28 percent.

Funding costs were 2.43 percent, a 86 basis point increase. The cost of interest-bearing deposits increased 61 basis points to 1.83 percent. The cost of funds purchased and repurchase agreements increased 128 basis points to 3.33 percent while the cost of other borrowings increased 65 basis points to 4.73 percent. The benefit to net interest margin from assets funded by non-interest liabilities was 82 basis points, an increase of 24 basis points.

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 79 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.

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Table 1 – Volume/Rate Analysis

(In thousands)

						Three Months Ended Mar. 31, 2023 / Dec. 31, 2022																		Three Months Ended Mar. 31, 2023 / 2022
												Change Due To1																		Change Due To1
						Change						Volume						Yield/Rate						Change						Volume						Yield/Rate
Tax-equivalent interest revenue:
Interest-bearing cash and cash equivalents						$	684					$	430					$	254					$	6,033					$	(2,389)					$	8,422
Trading securities						5,600						(614)						6,214						(6,968)						(50,714)						43,746
Investment securities						(206)						(245)						39						6,542						19,095						(12,553)
Available for sale securities						15,795						5,818						9,977						31,094						(3,836)						34,930
Fair value option securities						2,962						2,575						387						3,402						2,299						1,103
Restricted equity securities						2,720						1,861						859						4,701						1,829						2,872
Residential mortgage loans held for sale						(411)						(456)						45						(415)						(1,227)						812
Loans						37,977						4,259						33,718						189,553						25,424						164,129
Total tax-equivalent interest revenue						65,121						13,628						51,493						233,942						(9,519)						243,461
Interest expense:
Transaction deposits						27,043						(1,565)						28,608						82,593						(10,009)						92,602
Savings deposits						43						(3)						46						175						6						169
Time deposits						2,614						176						2,438						4,908						(346)						5,254
Funds purchased and repurchase agreements						9,043						4,672						4,371						9,752						(1,293)						11,045
Other borrowings						26,627						21,297						5,330						51,498						21,166						30,332
Subordinated debentures						31						(23)						54						767						(2)						769
Total interest expense						65,401						24,554						40,847						149,693						9,522						140,171
Tax-equivalent net interest revenue						(280)						(10,926)						10,646						84,249						(19,041)						103,290
Change in tax-equivalent adjustment						(2)																		312
Net interest revenue						$	(278)																	$	83,937

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 $177.9 million for the first quarter of 2023, a decrease of $19.2 million compared to the fourth quarter of 2022.

Table 2 – Other Operating Revenue 

(Dollars in thousands)

						Three Months Ended												Increase (Decrease)						% Increase (Decrease)						Three Months Ended Mar. 31, 2022						Increase (Decrease)						% Increase (Decrease)
						Mar. 31, 2023						Dec. 31, 2022
Brokerage and trading revenue						$	52,396					$	63,008					$	(10,612)					(17)		%				$	(27,079)					$	79,475					(293)		%
Transaction card revenue						25,621						27,136						(1,515)						(6)		%				24,216						1,405						6		%
Fiduciary and asset management revenue						50,657						49,899						758						2		%				46,399						4,258						9		%
Deposit service charges and fees						25,968						26,429						(461)						(2)		%				27,004						(1,036)						(4)		%
Mortgage banking revenue						14,367						10,065						4,302						43		%				16,650						(2,283)						(14)		%
Other revenue						16,970						17,034						(64)						—		%				10,445						6,525						62		%
Total fees and commissions revenue						185,979						193,571						(7,592)						(4)		%				97,635						88,344						90		%
Other gains (losses), net						2,251						8,427						(6,176)						N/A						(1,644)						3,895						N/A
Gain (loss) on derivatives, net						(1,344)						4,548						(5,892)						N/A						(46,981)						45,637						N/A
Loss on fair value option securities, net						(2,962)						(2,568)						(394)						N/A						(11,201)						8,239						N/A
Change in fair value of mortgage servicing rights						(6,059)						(2,904)						(3,155)						N/A						49,110						(55,169)						N/A
Gain (loss) on available for sale securities, net						—						(3,988)						3,988						N/A						937						(937)						N/A
Total other operating revenue						$	177,865					$	197,086					$	(19,221)					(10)		%				$	87,856					$	90,009					102		%

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 35 percent of total revenue for the first quarter of 2023, 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. We believe that a variety of fee revenue sources provides diversification to changes resulting from market or economic conditions such as 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 affect mortgage banking production volumes and related trading. The velocity of changes in market conditions and interest rates may result in timing differences between when offsetting impacts and benefits are realized. 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, 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 $10.6 million or 17 percent compared to the fourth quarter of 2022.

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 was $27.6 million, an $8.3 million decrease compared to the prior quarter, largely due to a lower volume of U.S. agency residential mortgage-backed securities trading activity caused by high market volatility.

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Investment banking, which includes fees earned upon completion of underwriting, financial advisory services and loan syndication fees, totaled $9.3 million for the first quarter of 2023, a decrease of $2.6 million compared to the fourth quarter of 2022, primarily related to timing and volume of transactions. A reduction in syndication activity was partially offset by higher underwriting fees.

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 $8.4 million for the first quarter of 2023, consistent with the prior quarter. Customer hedging revenue includes credit valuation adjustments of the fair value of derivatives to reflect the risk of counterparty default.

Transaction Card Revenue

Transaction card revenue totaled $25.6 million for the first quarter of 2023, a $1.5 million decrease compared to the prior quarter led by lower transaction volumes following seasonal highs in the fourth quarter. , largely due to stimulus measures and

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. Fiduciary and asset management revenue is largely 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 2022. Increased trust business line fees were offset by lower Cavanal Hill money market fund fees and mutual fund fees.

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

Table 3 – Assets Under Management or Administration

(Dollars in thousands)

			Three Months Ended
			March 31, 2023																		December 31, 2022																		March 31, 2022
			Balance1						Revenue2						Margin3						Balance1						Revenue2						Margin3						Balance1						Revenue2						Margin3
Managed fiduciary assets:
Personal			$	10,609,920					$	24,839					0.94		%				$	10,317,729					$	25,565					0.99		%				$	11,292,472					$	28,331					1.00		%
Institutional			18,683,598						9,223						0.20		%				17,229,041						7,884						0.18		%				18,592,153						9,995						0.22		%
Total managed fiduciary assets			29,293,518						34,062						0.47		%				27,546,770						33,449						0.49		%				29,884,625						38,326						0.51		%
Non-managed assets:
Fiduciary			28,164,407						13,785						0.20		%				28,513,725						13,086						0.18		%				31,210,695						5,107						0.07		%
Non-fiduciary			19,830,593						2,810						0.06		%				19,467,202						3,364						0.07		%				19,361,212						2,966						0.06		%
Safekeeping and brokerage assets under administration			25,021,601						—						—		%				24,207,343						—						—		%				20,624,823						—						—		%
Total non-managed assets			73,016,601						16,595						0.09		%				72,188,270						16,450						0.09		%				71,196,730						8,073						0.05		%
Total assets under management or administration			$	102,310,119					$	50,657					0.20		%				$	99,735,040					$	49,899					0.20		%				$	101,081,355					$	46,399					0.18		%

1 Assets under management or administration balance excludes certain assets under custody held by a sub-custodian where minimal revenue is recognized. $18 billion, $17 billion, and $22 billion of such assets are excluded from assets under management or administration for the three months ended March 31, 2023, December 31, 2022, and March 31, 2022, respectively.

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

3    Annualized revenue divided by period-end balance.

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A summary of changes in assets under management or administration for the three months ended March 31, 2023 and 2022 follows:

Table 4 – Changes in Assets Under Management or Administration

(In thousands)

						Three Months Ended March 31,
						2023						2022
Beginning balance						$	99,735,040					$	104,917,721
Net inflows (outflows)						(516,918)						(1,774,056)
Net change in fair value						3,091,997						(2,062,310)
Ending balance						$	102,310,119					$	101,081,355

Assets under management as of March 31, 2023 consist of 45 percent fixed income, 32 percent equities, 14 percent cash, and 9 percent alternative investments.

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Mortgage Banking Revenue

Mortgage banking revenue increased $4.3 million over the fourth quarter of 2022. Mortgage production revenue increased $3.4 million along with higher mortgage originations following seasonal declines in the fourth quarter. Mortgage production volume increased $54 million to $165 million. Production revenue as a percentage of production volume, which includes unrealized gains and losses on our mortgage commitment pipeline and related hedges, increased 321 basis points to (0.38) percent. Mortgage servicing revenue increased $952 thousand following recent acquisitions of mortgage servicing rights.

Table 5 – Mortgage Banking Revenue 

(Dollars in thousands)

						Three Months Ended												Increase (Decrease)						% Increase (Decrease)						Three Months Ended Mar. 31, 2022						Increase (Decrease)						% Increase (Decrease)
						Mar. 31, 2023						Dec. 31, 2022
Mortgage production revenue						$	(633)					$	(3,983)					$	3,350					84		%				$	5,055					$	(5,688)					(113)		%
Mortgage loans funded for sale						$	138,624					$	141,090																	$	418,866
Add: Current period end outstanding commitments						71,693						45,492																		160,260
Less: Prior period end outstanding commitments						45,492						75,779																		171,412
Total mortgage production volume						$	164,825					$	110,803					$	54,022					49		%				$	407,714					$	(242,889)					(60)		%
Mortgage loan refinances to mortgage loans funded for sale						9		%				10		%				(100)		bps										45		%				(3,600)		bps
Realized margin on funded mortgage loans						(1.25)		%				(1.10)		%				(15)		bps										1.64		%				(289)		bps
Production revenue as a percentage of production volume						(0.38)		%				(3.59)		%				321		bps										1.24		%				(162)		bps
Primary mortgage interest rates:
Average						6.33		%				6.63		%				(30)		bps										3.82		%				251		bps
Period end						6.24		%				6.41		%				(17)		bps										4.67		%				157		bps
Mortgage servicing revenue						$	15,000					$	14,048					$	952					7		%				$	11,595					$	3,405					29		%
Average outstanding principal balance of mortgage loans serviced for others						21,121,319						18,923,078						2,198,241						12		%				16,155,329						4,965,990						31		%
Average mortgage servicing revenue rates						0.29		%				0.29		%				—		bp										0.29		%				—		bp

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

Net gains on other assets, securities and derivatives

Net gains on other assets were $2.3 million for the first quarter of 2023 compared to net gains of $8.4 million in the fourth quarter of 2022. The current quarter included write-downs on certain alternative investments and changes in the value of deferred compensation investments, which are held to offset the cost of various employee benefit programs.

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.

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Table 6 – Gain (Loss) on Mortgage Servicing Rights

(In thousands)

						Three Months Ended
						Mar. 31, 2023						Dec. 31, 2022																		Mar. 31, 2022
Gain (loss) on mortgage hedge derivative contracts, net						$	(1,711)					$	4,373																	$	(46,694)
Loss on fair value option securities, net						(2,962)						(2,568)																		(11,201)
Gain (loss) on economic hedge of mortgage servicing rights, net						(4,673)						1,805																		(57,895)
Gain (loss) on change in fair value of mortgage servicing rights						(6,059)						(2,904)																		49,110
Loss on changes in fair value of mortgage servicing rights, net of economic hedges included in other operating revenue						(10,732)						(1,099)																		(8,785)
Net interest revenue on fair value option securities1						187						(118)																		383
Total economic cost of changes in the fair value of mortgage servicing rights, net of economic hedges						$	(10,545)					$	(1,217)																	$	(8,402)

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

Other Operating Expense

Other operating expense for the first quarter of 2023 totaled $305.8 million, a decrease of $12.6 million compared to the fourth quarter of 2022.

Table 7 – Other Operating Expense

(Dollars in thousands)

						Three Months Ended												Increase (Decrease)						% Increase (Decrease)						Three Months Ended Mar. 31, 2022						Increase (Decrease)						% Increase (Decrease)
						Mar. 31, 2023						Dec. 31, 2022
Regular compensation						$	105,118					$	102,943					$	2,175					2		%				$	96,474					$	8,644					9		%
Incentive compensation:
Cash-based						41,735						54,295						(12,560)						(23)		%				34,444						7,291						21		%
Share-based						5,257						3,107						2,150						69		%				3,304						1,953						(59)		%
Deferred compensation						1,710						3,864						(2,154)						N/A						(2,124)						3,834						N/A
Total incentive compensation						48,702						61,266						(12,564)						(21)		%				35,624						13,078						37		%
Employee benefits						28,325						22,210						6,115						28		%				27,130						1,195						4		%
Total personnel expense						182,145						186,419						(4,274)						(2)		%				159,228						22,917						14		%
Business promotion						8,569						7,470						1,099						15		%				6,513						2,056						32		%
Charitable contributions to BOKF Foundation						—						2,500						(2,500)						N/A						—						—						N/A
Professional fees and services						13,048						18,365						(5,317)						(29)		%				11,413						1,635						14		%
Net occupancy and equipment						28,459						29,227						(768)						(3)		%				30,855						(2,396)						(8)		%
Insurance						7,315						4,677						2,638						56		%				4,283						3,032						71		%
Data processing and communications						44,802						43,048						1,754						4		%				39,836						4,966						12		%
Printing, postage and supplies						3,893						3,890						3						—		%				3,689						204						6		%
Amortization of intangible assets						3,391						3,736						(345)						(9)		%				3,964						(573)						(14)		%
Mortgage banking costs						5,782						9,016						(3,234)						(36)		%				7,877						(2,095)						(27)		%
Other expense						8,408						10,108						(1,700)						(17)		%				9,960						(1,552)						(16)		%
Total other operating expense						$	305,812					$	318,456					$	(12,644)					(4)		%				$	277,618					$	28,194					10		%
Average number of employees (full-time equivalent)						4,796						4,791						5						—		%				4,712						84						2		%

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

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Personnel expense

Personnel expense decreased $4.3 million compared to the fourth quarter of 2022. Cash-based incentive compensation decreased $12.6 million, largely due to a one-time incentive given to employees in the fourth quarter of 2022. Deferred compensation expense, which is largely offset by changes in the value of related deferred compensation investments, decreased $2.2 million. Share-based compensation expense increased $2.2 million due to changes in vesting assumptions of certain performance-based equity awards. Regular compensation increased $2.2 million along with our annual merit increases in March. Employee benefits expense was up $6.1 million primarily due to a seasonal increase in payroll taxes.

Non-personnel operating expense

Non-personnel expense totaled $123.7 million for the first quarter of 2023, a decrease of $8.4 million compared to the fourth quarter of 2022. Professional fees and services decreased $5.3 million, primarily due to reduced legal fees and lower technology project costs. Mortgage banking costs decreased $3.2 million from lower prepayments and reduced accruals related to default servicing and loss mitigation costs. The fourth quarter of 2022 also included a $2.5 million charitable donation to the BOKF Foundation. These decreases were partially offset by $2.6 million more in FDIC insurance expenses from higher assessment rates.

Income Taxes

The effective tax rate was 22.0 percent for the first quarter of 2023, 22.1 percent for the fourth quarter of 2022 and 20.6 percent for the first quarter of 2022. The effective tax rate was relatively consistent with the prior quarter and increased compared to the first quarter of 2022, primarily due to an increase in forecasted and actual pre-tax income.

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. In order to appropriately reflect the organizational value of these deposits to the lines of business, annual adjustments are made to the funds credit formula each January that attribute more or less deposit credit value to the business lines dependent upon historical and forward-looking interest rate expectations, which are then held constant throughout the remainder of the year. After several years of decreased funding credits provided to business lines from a sustained low interest rate environment, increases in short-term and long-term rates in response to the Federal Reserve's actions to control inflation caused a commensurate increase in funding credits to business lines in the first quarter of 2023, with the offset to Funds Management and other.

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 increased $89.8 million compared to the fourth quarter of 2022. Net interest revenue increased $109.4 million, primarily due to the increased value of deposits and loan growth. Net charge-offs decreased $14.7 million to $1.2 million in the first quarter of 2023. Other operating revenue decreased $7.9 million, largely due to a lower volume of U.S. agency residential mortgage-backed securities trading activity caused by high market volatility, partially offset by an increase in mortgage banking revenue. Operating expense decreased $10.7 million due to a combination of lower incentive compensation costs and a reduction in professional fees and mortgage banking costs. The decrease in net income attributed to Funds Management and other is largely due to adjustments made that attribute more deposit credit value to the business lines, with the offset to Funds Management and other.

Table 8 – Net Income by Line of Business

(Dollars in thousands)

						Three Months Ended												Increase (Decrease)						% Increase (Decrease)						Three Months Ended Mar. 31, 2022						Increase (Decrease)						% Increase (Decrease)
						Mar. 31, 2023						Dec. 31, 2022
Commercial Banking						$	176,547					$	139,374					$	37,173					27		%				$	82,344					$	94,203					114		%
Consumer Banking						50,687						8,996						41,691						463		%				(7,317)						58,004						(793)		%
Wealth Management						52,427						41,447						10,980						26		%				(4,521)						56,948						(1,260)		%
Subtotal						279,661						189,817						89,844						47		%				70,506						209,155						297		%
Funds Management and other						(117,293)						(21,388)						(95,905)						N/A						(8,018)						(109,275)						N/A
Total						$	162,368					$	168,429					$	(6,061)					(4)		%				$	62,488					$	99,880					160		%

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 $176.5 million to consolidated net income in the first quarter of 2023, an increase of $37.2 million or 27 percent compared to the fourth quarter of 2022.

Table 9 – Commercial Banking

(Dollars in thousands)

						Three Months Ended												Increase (Decrease)						% Increase (Decrease)						Three Months Ended Mar. 31, 2022						Increase (Decrease)						% Increase (Decrease)
						Mar. 31, 2023						Dec. 31, 2022
Net interest revenue from external sources						$	287,646					$	271,615					$	16,031					6		%				$	147,590					$	140,056					95		%
Net interest expense from internal sources						(21,101)						(38,781)						17,680						46		%				(10,579)						(10,522)						(99)		%
Total net interest revenue						266,545						232,834						33,711						14		%				137,011						129,534						95		%
Net loans charged off						76						14,411						(14,335)						(99)		%				5,343						(5,267)						(99)		%
Net interest revenue after net loans charged off						266,469						218,423						48,046						22		%				131,668						134,801						102		%
Fees and commissions revenue						55,835						58,881						(3,046)						(5)		%				56,964						(1,129)						(2)		%
Other gains, net						1,010						3,213						(2,203)						N/A						463						547						N/A
Other operating revenue						56,845						62,094						(5,249)						(8)		%				57,427						(582)						(1)		%
Personnel expense						43,074						48,366						(5,292)						(11)		%				38,927						4,147						11		%
Non-personnel expense						30,430						31,356						(926)						(3)		%				26,187						4,243						16		%
Other operating expense						73,504						79,722						(6,218)						(8)		%				65,114						8,390						13		%
Net direct contribution						249,810						200,795						49,015						24		%				123,981						125,829						101		%
Gain (loss) on financial instruments, net						(58)						140						(198)						N/A						(204)						146						N/A
Gain on repossessed assets, net						859						978						(119)						N/A						1,793						(934)						N/A
Corporate expense allocations						17,729						18,007						(278)						(2)		%				16,246						1,483						9		%
Income before taxes						232,882						183,906						48,976						27		%				109,324						123,558						113		%
Federal and state income tax						56,335						44,532						11,803						27		%				26,980						29,355						109		%
Net income						$	176,547					$	139,374					$	37,173					27		%				$	82,344					$	94,203					114		%
Average assets						$	28,162,934					$	28,373,856					$	(210,922)					(1)		%				$	29,823,905					$	(1,660,971)					(6)		%
Average loans						18,750,426						18,254,559						495,867						3		%				16,696,428						2,053,998						12		%
Average deposits						15,861,285						16,832,244						(970,959)						(6)		%				19,595,260						(3,733,975)						(19)		%
Average invested capital						2,133,459						2,107,241						26,218						1		%				2,020,925						112,534						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 increased $33.7 million or 14 percent over the fourth quarter of 2022, primarily due to increased value of deposits and loan growth. Net loans charged-off decreased $14.3 million to $76 thousand in the first quarter of 2023.

Fees and commissions revenue decreased $3.0 million or 5 percent, largely due to reduced investment banking revenue related to timing and volume of transactions, combined with a decline in transaction card revenue. Operating expense decreased $6.2 million or 8 percent compared to the fourth quarter of 2022, largely due to reduced incentive compensation expense. Corporate expense allocations were consistent with the prior quarter.

Average outstanding balance of loans attributed to Commercial Banking increased $496 million or 3 percent over the fourth quarter of 2022 to $18.8 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 $15.9 billion for first quarter of 2023, a $971 million decrease compared to the fourth quarter of 2022. See Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital for further discussion of changes.

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 contributed $50.7 million to consolidated net income for the first quarter of 2023, an increase of $41.7 million or 463 percent over the prior quarter. Growth in net interest revenue due to an increase in the spread on deposits sold to our Funds Management unit was partially offset by changes in the fair value of mortgage servicing rights, net of economic hedges.

Table 10 – Consumer Banking

(Dollars in thousands)

						Three Months Ended												Increase (Decrease)						% Increase (Decrease)						Three Months Ended Mar. 31, 2022						Increase (Decrease)						% Increase (Decrease)
						Mar. 31, 2023						Dec. 31, 2022
Net interest revenue from external sources						$	21,146					$	18,464					$	2,682					15		%				$	16,915					$	4,231					25		%
Net interest revenue from internal sources						88,235						34,838						53,397						153		%				10,292						77,943						757		%
Total net interest revenue						109,381						53,302						56,079						105		%				27,207						82,174						302		%
Net loans charged off						1,184						1,544						(360)						(23)		%				1,112						72						6		%
Net interest revenue after net loans charged off						108,197						51,758						56,439						109		%				26,095						82,102						315		%
Fees and commissions revenue						30,581						27,618						2,963						11		%				33,977						(3,396)						(10)		%
Other gains (losses), net						29						(35)						64						N/A						(16)						45						N/A
Other operating revenue						30,610						27,583						3,027						11		%				33,961						(3,351)						(10)		%
Personnel expense						21,362						22,446						(1,084)						(5)		%				20,984						378						2		%
Non-personnel expense						28,836						32,080						(3,244)						(10)		%				27,805						1,031						4		%
Total other operating expense						50,198						54,526						(4,328)						(8)		%				48,789						1,409						3		%
Net direct contribution						88,609						24,815						63,794						257		%				11,267						77,342						686		%
Gain (loss) on financial instruments, net						(4,673)						1,805						(6,478)						N/A						(57,895)						53,222						N/A
Change in fair value of mortgage servicing rights						(6,059)						(2,904)						(3,155)						N/A						49,110						(55,169)						N/A
Gain on repossessed assets, net						14						—						14						N/A						45						(31)						N/A
Corporate expense allocations						11,618						11,972						(354)						(3)		%				12,080						(462)						(4)		%
Income (loss) before taxes						66,273						11,744						54,529						464		%				(9,553)						75,826						(794)		%
Federal and state income tax						15,586						2,748						12,838						467		%				(2,236)						17,822						(797)		%
Net income (loss)						$	50,687					$	8,996					$	41,691					463		%				$	(7,317)					$	58,004					(793)		%
Average assets						$	9,934,511					$	10,078,381					$	(143,870)					(1)		%				$	10,273,890					$	(339,379)					(3)		%
Average loans						1,747,237						1,725,555						21,682						1		%				1,672,346						74,891						4		%
Average deposits						8,248,541						8,617,085						(368,544)						(4)		%				8,746,622						(498,081)						(6)		%
Average invested capital						261,485						256,905						4,580						2		%				255,758						5,727						2		%

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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Net interest revenue from Consumer Banking activities increased $56.1 million or 105 percent compared to the fourth quarter of 2022, mainly due to an increase in the spread on deposits sold to our Funds Management unit.

Operating revenue increased $3.0 million or 11 percent due to an increase in mortgage banking revenue as mortgage originations were up following seasonal declines in the prior quarter. Mortgage production volume increased $54.0 million to $164.8 million. Operating expense declined $4.3 million or 8 percent. Lower prepayments and decreased accruals related to default servicing and loss mitigations costs led to a $3.2 million reduction in mortgage banking costs. Personnel expense also decreased $1.1 million. The net cost of the changes in fair value of mortgage servicing rights and related economic hedges was $10.5 million for the first quarter of 2023 compared to a net cost of $1.2 million for the fourth quarter of 2022. Corporate expense allocations were consistent with the fourth quarter of 2022.

Average loans increased $21.7 million or 1 percent to $1.7 billion over the previous quarter. Average deposits attributed to the Consumer Banking segment decreased $369 million or 4 percent to $8.2 billion compared to the fourth quarter of 2022.

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Wealth Management

Wealth Management contributed $52.4 million to consolidated net income in the first quarter of 2023, an increase of $11.0 million or 26 percent over the fourth quarter of 2022, largely due to an increase in the spread on deposits sold to our Funds Management unit, which was partially offset by a decrease in revenue from institutional trading activities.

Table 11 – Wealth Management

(Dollars in thousands)

						Three Months Ended												Increase (Decrease)						% Increase (Decrease)						Three Months Ended Mar. 31, 2022						Increase (Decrease)						% Increase (Decrease)
						Mar. 31, 2023						Dec. 31, 2022
Net interest revenue from external sources						$	20,940					$	25,585					$	(4,645)					(18)		%				$	56,231					$	(35,291)					(63)		%
Net interest revenue (expense) from internal sources						33,166						8,913						24,253						272		%				(465)						33,631						7,232		%
Total net interest revenue						54,106						34,498						19,608						57		%				55,766						(1,660)						(3)		%
Net loans recovered						(24)						(22)						(2)						(9)		%				(71)						47						66		%
Net interest revenue after net loans recovered						54,130						34,520						19,610						57		%				55,837						(1,707)						(3)		%
Fees and commissions revenue						108,911						114,630						(5,719)						(5)		%				25,023						83,888						335		%
Other losses, net						—						(20)						20						N/A						(5)						5						N/A
Other operating revenue						108,911						114,610						(5,699)						(5)		%				25,018						83,893						335		%
Personnel expense						59,524						59,041						483						1		%				52,951						6,573						12		%
Non-personnel expense						22,515						23,170						(655)						(3)		%				21,669						846						4		%
Other operating expense						82,039						82,211						(172)						—		%				74,620						7,419						10		%
Net direct contribution						81,002						66,919						14,083						21		%				6,235						74,767						1,199		%
Gain on financial instruments, net						—						4						(4)						N/A						—						—						N/A
Corporate expense allocations						12,386						12,733						(347)						(3)		%				12,071						315						3		%
Income (loss) before taxes						68,616						54,190						14,426						27		%				(5,836)						74,452						1,276		%
Federal and state income tax						16,189						12,743						3,446						27		%				(1,315)						17,504						1,331		%
Net income (loss)						$	52,427					$	41,447					$	10,980					26		%				$	(4,521)					$	56,948					1,260		%
Average assets						$	11,663,096					$	12,912,630					$	(1,249,534)					(10)		%				$	21,323,795					$	(9,660,699)					(45)		%
Average loans						2,201,622						2,223,275						(21,653)						(1)		%				2,118,780						82,842						4		%
Average deposits						7,432,413						7,888,753						(456,340)						(6)		%				9,619,323						(2,186,910)						(23)		%
Average invested capital						290,369						292,689						(2,320)						(1)		%				305,597						(15,228)						(5)		%

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 increased $13.9 million or 9 percent over the fourth quarter of 2022, primarily due to an increase in the spread on deposits sold to our Funds Management unit, partially offset by a decrease of $9.0 million in total revenue from institutional trading activities due to reduced U.S. agency residential mortgage-backed securities trading volumes. Investment banking revenue grew $2.0 million due to growth in the size and number of municipal bonds underwritten while other revenue decreased $1.1 million. Operating expense and corporate expense allocations were relatively consistent with the previous quarter.

Average outstanding loans attributed to the Wealth Management segment decreased $21.7 million or 1.0 percent compared to the prior quarter. Average Wealth Management deposits decreased $456 million or 6 percent to $7.4 billion. See Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital for further discussion of changes.

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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, 2023 and December 31, 2022.

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 $2.2 billion to $2.3 billion during the first quarter of 2023 in response to lower origination volumes in the residential mortgage industry driven by increases in interest rates. 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, 2023, the carrying value of investment (held-to-maturity) securities was $2.4 billion, including a $497 thousand allowance for expected credit losses, compared to $2.5 billion at December 31, 2022 with a $558 thousand allowance for expected credit losses. The fair value of investment securities was $2.3 billion at March 31, 2023, consistent with prior quarter. 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 $12.7 billion at March 31, 2023, a $320 million increase compared to December 31, 2022. At March 31, 2023, 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 contraction in the form of more rapid prepayments 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, 2023 is 3.5 years, which is 0.3 years longer than the same measure as of December 31, 2022. Management estimates the duration extends to 3.9 years assuming an immediate 200 basis point upward shock. The estimated duration contracts to 2.9 years assuming a 200 basis point decline in the current rate environment. The duration of the total investment portfolio is 3.4 years, extends to 3.6 years in an upward shock of 200 basis points, and contracts to 3.1 years in a down 200 basis point shock scenario. 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.

Bank-Owned Life Insurance

We have approximately $409 million of bank-owned life insurance at March 31, 2023. This investment is expected to provide a long-term source of earnings to support existing employee benefit programs. Approximately $314 million is held in separate accounts and $95 million represents the cash surrender value of policies held in general accounts and other amounts due from various insurance companies. Our separate account holdings are invested in diversified portfolios of investment-grade fixed income securities and cash equivalents, including U.S. Treasury and Agency securities, residential mortgage-backed securities, corporate debt, asset-backed and commercial mortgage-backed securities. The portfolios are managed by unaffiliated professional managers within parameters established in the portfolio's investment guidelines. The cash surrender value of certain life insurance policies is further supported by a stable value wrap, which protects against changes in the fair value of the investments. As of March 31, 2023, the fair value of investments held in separate accounts covered by the stable value wrap was approximately $290 million. Since the underlying fair value of the investments held in separate accounts at March 31, 2023 was below the net book value of the investments, $22 million of cash surrender value was supported by the stable value wrap. The remaining $2 million of fair value held in separate accounts is not supported by the stable value wrap. Future rate increases may cause write-downs in the short-term. The stable value wrap is provided by a domestic financial institution. 

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Loans

The aggregate loan portfolio before allowance for loan losses totaled $22.8 billion at March 31, 2023, growing $193 million over December 31, 2022, largely due to growth in commercial real estate loans in the multifamily and industrial loan portfolios.

Table 12 – Loans

(In thousands)

						Mar. 31, 2023						Dec. 31, 2022						Sep. 30, 2022						June 30, 2022						Mar. 31, 2022
Commercial:
Healthcare						$	3,899,341					$	3,845,017					$	3,826,623					$	3,696,963					$	3,441,732
Services						3,563,702						3,431,521						3,280,925						3,421,493						3,351,495
Energy						3,398,057						3,424,790						3,371,588						3,393,072						3,197,667
General business						3,356,249						3,511,171						3,148,783						3,110,309						3,029,660
Total commercial						14,217,349						14,212,499						13,627,919						13,621,837						13,020,554
Commercial real estate:
Multifamily						1,363,881						1,212,883						1,126,700						878,565						867,288
Industrial						1,309,435						1,221,501						1,103,905						953,626						911,928
Office						1,045,700						1,053,331						1,086,615						1,100,115						1,097,516
Retail						618,264						620,518						635,021						637,304						667,561
Residential construction and land development						102,828						95,684						91,690						111,575						120,506
Other commercial real estate						375,208						402,860						429,980						424,963						436,157
Total commercial real estate						4,815,316						4,606,777						4,473,911						4,106,148						4,100,956
Loans to individuals:
Residential mortgage						1,926,027						1,890,784						1,851,836						1,784,729						1,723,506
Residential mortgage guaranteed by U.S. government agencies						224,753						245,940						262,466						293,838						322,581
Personal						1,566,608						1,601,150						1,574,325						1,484,596						1,506,832
Total loans to individuals						3,717,388						3,737,874						3,688,627						3,563,163						3,552,919
Total						$	22,750,053					$	22,557,150					$	21,790,457					$	21,291,148					$	20,674,429

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 $14.2 billion or 62 percent of the loan portfolio at March 31, 2023, largely unchanged compared to December 31, 2022. Growth in services and healthcare loans were offset by decreases in general business and energy loan balances.

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Approximately 72 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 5 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 $3.4 billion or 15 percent of total loans at March 31, 2023, a $27 million decrease compared to December 31, 2022. Approximately $2.7 billion of energy loans were to oil and gas producers, a $20 million increase over December 31, 2022. 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 67 percent of the committed production loans are secured by properties primarily producing oil, and 33 percent of the committed production loans are secured by properties primarily producing natural gas.

Loans to midstream oil and gas companies totaled $519 million at March 31, 2023, a $56 million decrease compared to December 31, 2022. Loans to borrowers that provide services to the energy industry totaled $126 million at March 31, 2023, a decrease of $31 million. Loans to other energy borrowers, including those engaged in wholesale or retail energy sales, totaled $66 million, a $40 million increase over the prior quarter.

Unfunded energy loan commitments were $4.1 billion at March 31, 2023, growing $246 million over December 31, 2022.

The healthcare sector of the loan portfolio totaled $3.9 billion or 17 percent of total loans. Healthcare loans increased $54 million over December 31, 2022, primarily due to growth in loans to senior housing facilities. This was partially offset by a decrease in balances to hospital systems and 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 $3.6 billion or 16 percent of total loans, a $132 million increase 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 $3.4 billion or 15 percent of total loans, a decrease of $155 million compared to the prior quarter. General business loans consist of $2.0 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, 2023, the outstanding principal balance of these loans totaled $5.5 billion, including $2.5 billion of energy loans. Substantially all of these loans are to borrowers with local market relationships. We serve as the agent lender in approximately 21 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 grew by $209 million over December 31, 2022 to $4.8 billion or 21 percent of total loans at March 31, 2023. Multifamily residential loans increased $151 million to $1.4 billion at March 31, 2023. Loans secured by industrial facilities grew by $88 million to $1.3 billion. This growth was partially offset by a $28 million decrease in other real estate loans.

Approximately 68 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.

Unfunded commercial real estate loan commitments were $2.7 billion at March 31, 2023, a decrease of $397 million compared to December 31, 2022. We take a disciplined approach to managing our concentration of commercial real estate loan commitments as a percentage of Tier 1 Capital. While loan commitments are presently at the upper concentration limit, we expect continued growth in our commercial real estate balances as loans fund, primarily in the multifamily and industrial loan portfolios.

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

Loans to individuals totaled $3.7 billion or 16% of the loan portfolio, a decrease of $20.5 million compared to December 31, 2022. Approximately 91 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 location.

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, 2023						Dec. 31, 2022						Sep. 30, 2022						June 30, 2022						Mar. 31, 2022
Texas:
Commercial						$	7,103,166					$	6,878,618					$	6,644,890					$	6,645,698					$	6,286,125
Commercial real estate						1,675,831						1,555,508						1,448,590						1,339,452						1,345,105
Loans to individuals						992,343						982,700						970,459						934,856						957,320
Total Texas						9,771,340						9,416,826						9,063,939						8,920,006						8,588,550
Oklahoma:
Commercial						3,178,934						3,382,577						3,108,608						3,139,093						2,936,530
Commercial real estate						574,708						582,109						608,856						576,458						552,310
Loans to individuals						2,049,472						2,077,124						2,054,362						1,982,247						1,977,886
Total Oklahoma						5,803,114						6,041,810						5,771,826						5,697,798						5,466,726
Colorado:
Commercial						2,148,066						2,149,199						2,117,181						2,082,688						2,006,357
Commercial real estate						646,537						613,912						565,057						473,231						480,740
Loans to individuals						231,368						241,902						237,981						234,105						236,125
Total Colorado						3,025,971						3,005,013						2,920,219						2,790,024						2,723,222
Arizona:
Commercial						1,115,973						1,124,289						1,103,000						1,085,401						1,086,195
Commercial real estate						881,465						860,947						850,319						766,767						719,970
Loans to individuals						240,556						229,872						225,981						212,870						190,746
Total Arizona						2,237,994						2,215,108						2,179,300						2,065,038						1,996,911
Kansas/Missouri:
Commercial						318,782						310,715						307,456						338,910						336,966
Commercial real estate						489,951						479,968						466,955						458,157						436,740
Loans to individuals						129,580						131,307						125,039						125,584						121,247
Total Kansas/Missouri						938,313						921,990						899,450						922,651						894,953
New Mexico:
Commercial						280,945						263,349						258,754						253,825						272,246
Commercial real estate						449,715						417,008						426,367						431,606						504,632
Loans to individuals						65,770						67,163						68,095						67,026						63,299
Total New Mexico						796,430						747,520						753,216						752,457						840,177
Arkansas:
Commercial						71,483						103,752						88,030						76,222						96,135
Commercial real estate						97,109						97,325						107,767						60,477						61,459
Loans to individuals						8,299						7,806						6,710						6,475						6,296
Total Arkansas						176,891						208,883						202,507						143,174						163,890
Total BOK Financial loans						$	22,750,053					$	22,557,150					$	21,790,457					$	21,291,148					$	20,674,429

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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, 2023						Dec. 31, 2022						Sep. 30, 2022						June 30, 2022						Mar. 31, 2022
Loan commitments						$	15,119,984					$	15,424,431					$	14,585,566					$	13,470,286					$	12,490,832
Standby letters of credit						790,316						740,039						725,302						700,929						654,185
Unpaid principal balance of residential mortgage loans sold with recourse						43,510						44,742						46,199						48,775						51,459
Unpaid principal balance of residential mortgage loans transferred into mortgage-backed securities guaranteed by U.S. Dept. of Veterans Affairs						996,139						1,005,368						1,021,504						1,038,317						1,062,197

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 deteriorates such that either the fair value of underlying collateral no longer supports the contract or the customer or the counterparty's ability to provide margin collateral becomes 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, 2023, the net fair values of derivative contracts, before consideration of cash margin, reported as assets under these programs totaled $572 million compared to $1.0 billion at December 31, 2022. At March 31, 2023, the net fair value of our derivative contracts included $396 million for energy contracts, $118 million for interest rate swaps and $57 million for foreign exchange contracts. The aggregate net fair value of derivative contracts, before consideration of cash margin, held under these programs reported as liabilities totaled $578 million at March 31, 2023 and $1.0 billion at December 31, 2022.

At March 31, 2023, total derivative assets were reduced by $221 million of cash collateral received from counterparties and total derivative liabilities were reduced by $80 million 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, 2023 follows in Table 15.

Table 15 – Fair Value of Derivative Contracts

(In thousands)

Customers						$	147,529
Banks and other financial institutions						48,006
Exchanges and clearing organizations						154,653
Fair value of customer risk management program asset derivative contracts, net						$	350,188

 

At March 31, 2023, our largest derivative exposure was to an exchange for $152 million of net derivative positions and $53 million of cash margin placed.

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 down to an equivalent of $58.98 per barrel of oil would decrease the fair value of derivative assets by $62 million, with lending customers comprising the bulk of the assets. An increase in prices up to an equivalent of $92.36 per barrel of oil would increase the fair value of derivative assets by $389 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, 2023, 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, 2023, 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

(Dollars in thousands)

			Three Months Ended
			Mar. 31, 2023						Dec. 31, 2022						Sep. 30, 2022						June 30, 2022						Mar. 31, 2022
Allowance for loan losses:
Beginning balance			$	235,704					$	241,768					241,114						246,473						256,421
Loans charged off			(3,667)						(17,807)						(1,766)						(1,368)						(7,805)
Recoveries of loans previously charged off			2,898						2,301						1,309						2,167						1,824
Net loans recovered (charged off)			(769)						(15,506)						(457)						799						(5,981)
Provision for credit losses			14,525						9,442						1,111						(6,158)						(3,967)
Ending balance			$	249,460					$	235,704					$	241,768					$	241,114					$	246,473
Accrual for off-balance sheet credit risk from unfunded loan commitments:
Beginning balance			$	60,919					$	56,310					42,250						36,245						32,977
Provision for credit losses			2,024						4,609						14,060						6,005						3,268
Ending balance			$	62,943					$	60,919					$	56,310					$	42,250					$	36,245
Accrual for off-balance sheet credit risk associated with mortgage banking activities:
Beginning balance			$	4,904					$	3,885					4,003						3,997						3,382
Loans charged off			(35)						16						(52)						(63)						(6)
Provision for credit losses			(488)						1,003						(66)						69						621
Ending balance			$	4,381					$	4,904					$	3,885					$	4,003					$	3,997
Allowance for credit losses related to held-to-maturity (investment) securities:
Beginning balance			$	558					$	612					$	717					$	633					$	555
Provision for credit losses			(61)						(54)						(105)						84						78
Ending balance			$	497					$	558					$	612					$	717					$	633
Total provision for credit losses			$	16,000					$	15,000					$	15,000					$	—					$	—
Average loans by portfolio segment :
Commercial			$	14,046,237					$	13,846,339					$	13,508,325					$	13,472,488					$	12,887,816
Commercial real estate			4,757,362						4,488,091						4,434,650						4,061,129						4,059,148
Loans to individuals			3,672,648						3,641,574						3,656,257						3,524,097						3,516,698
Net charge-offs (annualized) to average loans			0.01		%				0.28		%				0.01		%				(0.02)		%				0.12		%
Net charge-offs (annualized) to average loans by portfolio segment:
Commercial			(0.06)		%				0.42		%				(0.02)		%				(0.05)		%				0.17		%
Commercial real estate			0.17		%				—		%				—		%				0.01		%				—		%
Loans to individuals			0.07		%				0.12		%				0.12		%				0.08		%				0.05		%
Recoveries to gross charge-offs			79.03		%				12.92		%				74.12		%				158.41		%				23.37		%
Provision for loan losses (annualized) to average loans			0.26		%				0.17		%				0.02		%				(0.12)		%				(0.08)		%
Allowance for loan losses to loans outstanding at period-end			1.10		%				1.04		%				1.11		%				1.13		%				1.19		%
Accrual for unfunded loan commitments to loan commitments			0.42		%				0.39		%				0.39		%				0.31		%				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		%				1.31		%				1.37		%				1.33		%				1.37		%

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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.

A $16.0 million provision for credit losses was necessary for the first quarter of 2023, as key economic assumptions in the base case, including projected WTI oil prices and commercial real estate vacancy rates, were less favorable to economic growth. Non-pass grade loans, including loans especially mentioned, accruing substandard and nonaccruing loans increased $107 million compared to December 31, 2022. Increases to non-pass grade general business, healthcare, commercial real estate and services loans were partially offset by decreased non-pass grade energy loans. A summary of outstanding loan balances by risk grade is included in Note 4 to the Consolidated Financial Statements.

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A summary of macroeconomic variables considered in developing our estimate of expected credit losses at March 31, 2023 follows:

			Base			Downside			Upside
Scenario probability weighting			50%			40%			10%
Economic outlook			The Russia-Ukraine conflict remains isolated and stress in the banking sector does not become widespread. There is one federal funds rate increase at the Federal Reserve Open Market ("FOMC") meeting in the second quarter of 2023, which results in a target range of 5.00 percent to 5.25 percent. There are no additional rate increases in 2023. Inflation continues to improve from the peaks experienced in 2022, reaching 3.0 percent by the end of 2023. Inflation pressures cause modest declines in real household income compared to pre-pandemic levels, resulting in below-trend GDP growth. Job openings revert to more normalized levels and overall hiring levels decline, causing the national unemployment rate to modestly increase over the next four quarters.			The Russia-Ukraine conflict remains isolated and stress in the banking sector does not become widespread. Higher levels of inflation force the Federal Reserve to adopt a more aggressive monetary policy compared to the base case scenario. This results in a target range of 5.75 percent to 6.00 percent by first quarter of 2024. This pushes the United States into a recession, with a contraction in economic activity and a sharp increase in the unemployment rate. Inflation moderates slightly from peaks in 2022 and remains elevated through the forecast horizon, ending 2023 at 5.0 percent.			The Russia-Ukraine conflict remains isolated and stress in the banking sector does not become widespread. There are no additional rate increases in 2023 and the terminal range of 4.75 percent to 5.00 percent is held flat for the remainder of the forecast horizon. Inflation continues to improve from the peaks experienced in 2022 and reaches 2.5 percent by the end of 2023. Labor force participants continue to re-enter the job market to help fill the elevated level 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.
Macro-economic factors			–GDP is forecasted to grow by 0.70 percent over the next 12 months. –Civilian unemployment rate of 3.8 percent in the second quarter of 2023 increases to 4.1 percent by the first quarter of 2024. –WTI oil prices are projected to generally follow the NYMEX forward curve that existed at the end of March 2023 and are expected to average $69.18 per barrel over the next 12 months.			–GDP is forecasted to contract 2.0 percent over the next twelve months. –Civilian unemployment rate of 4.7 percent in the second quarter of 2023 increases to 6.0 percent in the first quarter of 2024. –WTI oil prices are projected to average $58.02 over the next 12 months, with a peak of $62.53 in the second quarter of 2023 and falling 17 percent over the following three quarters.			–GDP is forecasted to grow by 1.5 percent over the next 12 months. –Civilian unemployment rate of 3.6 percent in the second quarter of 2023 increases to 3.8 percent by the first quarter of 2024. –WTI oil prices are projected to average $73.65 per barrel over the next 12 months.

The sensitivity to management's economic scenario weighting may be quantified by comparing the results of weighting each

economic scenario at 100%. For example, compared to a 100% Base Case scenario, a 100% Downside Case would result in an

additional $129 million in quantitative reserve, while a 100% Upside Case would results in $14 million less quantitative reserve at March 31, 2023. Such sensitivity calculations do not necessarily reflect the nature and extent of future changes in the related allowance.

At March 31, 2023, the allowance for loan losses totaled $249 million or 1.10 percent of outstanding loans. Excluding residential mortgage loans guaranteed by U.S. government agencies, the allowance for loan losses was 235 percent of nonaccruing loans. The combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $312 million or 1.37 percent of outstanding loans and 295 percent of nonaccruing loans at March 31, 2023.

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The Company recorded a $15.0 million provision for credit losses in the fourth quarter of 2022. At December 31, 2022, the allowance for loan losses was $236 million or 1.04 percent of outstanding loans. Excluding residential mortgage loans guaranteed by U.S. government agencies, the allowance for loan losses was 221 percent of nonaccruing loans. The combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $297 million or 1.31 percent of outstanding loans and 278 percent of nonaccruing loans.

Net Loans Charged Off

Net recoveries of commercial loans were $2.0 million in the first quarter of 2023. Net charge-offs of commercial real estate loans were $2.1 million and net charge-offs of loans to individuals were $680 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. The Company adopted FASB Accounting Standards Update No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminates designation of these loans as troubled debt restructurings effective January 1, 2023. 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

(Dollars in thousands)

						Mar. 31, 2023						Dec. 31, 2022						Sep. 30, 2022						June 30, 2022						Mar. 31, 2022
Nonaccruing loans:
Commercial:
Healthcare						$	37,247					$	41,034					$	41,438					$	14,886					$	15,076
Services						8,097						16,228						27,315						15,259						16,535
Energy						127						1,399						4,164						20,924						24,976
General business						8,961						1,636						2,753						3,539						3,750
Total commercial						54,432						60,297						75,670						54,608						60,337
Commercial real estate						21,668						16,570						7,971						10,939						15,989
Loans to individuals:
Residential mortgage						29,693						29,791						30,066						30,460						30,757
Residential mortgage guaranteed by U.S. government agencies						14,302						15,005						16,957						18,000						16,992
Personal						200						134						136						132						171
Total loans to individuals						44,195						44,930						47,159						48,592						47,920
Total nonaccruing loans						120,295						121,797						130,800						114,139						124,246
Accruing renegotiated loans guaranteed by U.S. government agencies1						—						163,535						176,022						196,420						204,121
Real estate and other repossessed assets						12,651						14,304						29,676						22,221						24,492
Total nonperforming assets						$	132,946					$	299,636					$	336,498					$	332,780					$	352,859
Total nonperforming assets excluding those guaranteed by U.S. government agencies						$	118,644					$	121,096					$	143,519					$	118,360					$	131,746
Allowance for loan losses to nonaccruing loans2						235.36		%				220.71		%				212.37		%				250.80		%				229.80		%
Combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments to nonaccruing loans2						294.74		%				277.76		%				261.83		%				294.74		%				263.60		%
Nonperforming assets to outstanding loans and repossessed assets						0.58		%				1.33		%				1.54		%				1.56		%				1.70		%
Nonperforming assets to outstanding loans and repossessed assets2						0.53		%				0.54		%				0.67		%				0.56		%				0.65		%
Nonaccruing loans to outstanding loans						0.53		%				0.54		%				0.60		%				0.54		%				0.60		%
Nonaccruing commercial loans to outstanding commercial loans						0.38		%				0.42		%				0.56		%				0.40		%				0.46		%
Nonaccruing commercial real estate loans to outstanding commercial real estate loans						0.45		%				0.36		%				0.18		%				0.27		%				0.39		%
Nonaccruing loans to individuals to outstanding loans to individuals2						0.86		%				0.86		%				0.88		%				0.94		%				0.96		%

1     The Company adopted FASB Accounting Standards Update No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminates designation of these loans as troubled debt restructurings effective January 1, 2023.

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

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Nonaccruing loans decreased $1.5 million compared to December 31, 2022. Nonaccruing services loans decreased $8.1 million, nonaccruing healthcare loans decreased $3.8 million and nonaccruing energy loans decreased $1.3 million. These decreases were partially offset by a $7.3 million increase in nonaccruing general business loans and a $5.1 million increase in nonaccruing commercial real estate loans. Newly identified nonaccruing loans totaled $25 million, offset by $22 million of payments and $3.7 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, 2023 follows in Table 18.

Table 18 – Rollforward of Nonperforming Assets

(In thousands)

						Three Months Ended
						March 31, 2023
						Nonaccruing Loans																								Renegotiated Loans						Real Estate and Other Repossessed Assets						Total Nonperforming Assets
						Commercial						Commercial Real Estate						Loan to Individuals						Total
Balance, December 31, 2022						$	60,297					$	16,570					$	44,930					$	121,797					$	163,535					$	14,304					$	299,636
Change in accounting standard						—						—						—						—						(163,535)						—						(163,535)
Additions						12,973						7,459						4,557						24,989						—						—						24,989
Payments						(18,826)						(153)						(2,607)						(21,586)						—						—						(21,586)
Charge-offs						(12)						(2,208)						(1,447)						(3,667)						—						—						(3,667)
Net gains (losses) and write-downs						—						—						—						—						—						1,051						1,051
Foreclosure of nonperforming loans						—						—						(225)						(225)						—						225						—
Foreclosure of loans guaranteed by U.S. government agencies						—						—						(1,013)						(1,013)						—						—						(1,013)
Proceeds from sales						—						—						—						—						—						(2,929)						(2,929)
Balance, March 31, 2023						$	54,432					$	21,668					$	44,195					$	120,295					$	—					$	12,651					$	132,946

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 $13 million at March 31, 2023, composed primarily of $9.0 million of developed commercial real estate. Real estate and other repossessed assets decreased $1.7 million compared to December 31, 2022.

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Liquidity and Capital

Based on the average balances for the first quarter of 2023, approximately 73 percent of our funding was provided by deposit accounts, 14 percent from borrowed funds, less than 2 percent from long-term subordinated debt and 11 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 2023 totaled $33.5 billion, a $2.0 billion decrease compared to the fourth quarter of 2022. Deposit balances continue to decline as customers redeploy resources and pursue other investment alternatives following the savings trend during the height of the pandemic. Demand deposits decreased $1.8 billion while interest-bearing transaction account balances decreased $258 million. Certificate of deposit balances increased $60 million.

Table 19 – Average Deposits by Line of Business

(In thousands)

			Three Months Ended
			Mar. 31, 2023						Dec. 31, 2022						Sep. 30, 2022						June 30, 2022						Mar. 31, 2022
Commercial Banking			$	15,861,285					$	16,832,244					$	17,966,661					$	18,933,766					$	19,595,260
Consumer Banking			8,248,541						8,617,085						8,812,884						8,876,469						8,746,622
Wealth Management			7,432,413						7,888,753						7,999,074						8,482,785						9,619,323
Subtotal			31,542,239						33,338,082						34,778,619						36,293,020						37,961,205
Funds Management and other			1,940,232						2,123,303						2,271,157						2,301,400						2,401,002
Total			$	33,482,471					$	35,461,385					$	37,049,776					$	38,594,420					$	40,362,207

Average Commercial Banking deposit balances decreased $971 million compared to the fourth quarter of 2022. Demand deposit balances decreased $1.4 billion while interest-bearing transaction account balances increased $413 million. Commercial deposit balances have decreased as short-term rates move higher, enhancing Commercial customers' investment alternatives. Our commercial deposit portfolio is highly diversified across industries and customers. The highest concentration by industry within our commercial deposit portfolio is with our energy customers at 7 percent.

Average Consumer Banking deposit balances decreased $369 million compared to the prior quarter. Interest-bearing transaction deposit balances decreased $231 million and demand deposit balances decreased $111 million.

Average Wealth Management deposits decreased $456 million compared to the fourth quarter of 2022. Demand deposit balances decreased $273 million and interest-bearing transaction account balances decreased $214 million.

Average interest-bearing transaction accounts for the first quarter included $1.4 billion of brokered deposits, a $223 million decrease compared to the fourth quarter of 2022. Average time deposits for the first quarter of 2023 included $95 million of brokered deposits, a $49 million increase over the fourth quarter of 2022.

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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, 2023						Dec. 31, 2022						Sep. 30, 2022						June 30, 2022						Mar. 31, 2022
Oklahoma:
Demand						$	4,369,944					$	4,585,963					$	5,143,405					$	5,422,593					$	5,205,806
Interest-bearing:
Transaction						9,468,100						9,475,528						9,619,419						10,240,378						11,410,709
Savings						564,829						555,407						558,256						561,413						558,634
Time						942,787						794,002						776,306						678,127						817,744
Total interest-bearing						10,975,716						10,824,937						10,953,981						11,479,918						12,787,087
Total Oklahoma						15,345,660						15,410,900						16,097,386						16,902,511						17,992,893
Texas:
Demand						3,154,789						3,873,759						4,609,255						4,670,535						4,552,001
Interest-bearing:
Transaction						4,366,932						4,878,482						4,781,920						5,344,326						4,963,118
Savings						175,012						178,356						179,049						183,708						182,536
Time						321,774						356,538						343,015						333,038						329,931
Total interest-bearing						4,863,718						5,413,376						5,303,984						5,861,072						5,475,585
Total Texas						8,018,507						9,287,135						9,913,239						10,531,607						10,027,586
Colorado:
Demand						1,869,194						2,462,891						2,510,179						2,799,798						2,673,352
Interest-bearing:
Transaction						2,126,435						2,123,218						2,221,796						2,277,563						2,387,304
Savings						72,548						77,961						80,542						82,976						81,762
Time						128,583						135,043						151,064						160,795						165,401
Total interest-bearing						2,327,566						2,336,222						2,453,402						2,521,334						2,634,467
Total Colorado						4,196,760						4,799,113						4,963,581						5,321,132						5,307,819
New Mexico:
Demand						997,364						1,141,958						1,296,410						1,347,600						1,271,264
Interest-bearing:
Transaction						674,328						691,915						717,492						845,442						888,257
Savings						111,771						112,430						113,056						115,660						115,457
Time						137,875						133,625						142,856						148,532						156,140
Total interest-bearing						923,974						937,970						973,404						1,109,634						1,159,854
Total New Mexico						1,921,338						2,079,928						2,269,814						2,457,234						2,431,118

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						Mar. 31, 2023						Dec. 31, 2022						Sep. 30, 2022						June 30, 2022						Mar. 31, 2022
Arizona:
Demand						780,051						844,327						903,296						901,543						947,775
Interest-bearing:
Transaction						687,527						739,628						788,142						792,269						810,896
Savings						16,993						16,496						18,258						17,999						18,122
Time						27,755						24,846						26,704						28,774						27,259
Total interest-bearing						732,275						780,970						833,104						839,042						856,277
Total Arizona						1,512,326						1,625,297						1,736,400						1,740,585						1,804,052
Kansas/Missouri:
Demand						393,321						436,259						479,459						537,143						553,345
Interest-bearing:
Transaction						1,040,009						694,163						747,981						913,921						1,107,525
Savings						18,292						20,678						19,375						19,943						19,589
Time						13,061						12,963						13,258						13,962						11,527
Total interest-bearing						1,071,362						727,804						780,614						947,826						1,138,641
Total Kansas/Missouri						1,464,683						1,164,063						1,260,073						1,484,969						1,691,986
Arkansas:
Demand						42,312						50,180						43,111						41,084						38,798
Interest-bearing:
Transaction						71,158						56,181						123,273						130,300						122,020
Savings						3,228						3,083						3,098						3,125						3,265
Time						4,775						4,825						5,940						6,371						6,414
Total interest-bearing						79,161						64,089						132,311						139,796						131,699
Total Arkansas						121,473						114,269						175,422						180,880						170,497
Total BOK Financial deposits						$	32,580,747					$	34,480,705					$	36,415,915					$	38,618,918					$	39,425,951

Estimated uninsured deposits totaled $18.7 billion or 57 percent of our total deposits at March 31, 2023. In addition to insured deposits, we also hold $4.5 billion of collateralized deposits. With that adjustment, our uninsured and uncollateralized deposit level is $14.2 billion or 44 percent of total deposits at March 31, 2023.

In addition to deposits, liquidity is provided primarily by federal funds purchased, securities repurchase agreements and Federal Home Loan Banks 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 largest source of wholesale federal funds purchased totaled $750 million at March 31, 2023. Securities repurchase agreements generally mature within 90 days and are secured by certain available for sale and trading securities. Federal Home Loan Banks 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 $4.5 billion during the quarter, compared to $2.5 billion in the fourth quarter of 2022.

At March 31, 2023, management estimates a total potential secured borrowing capacity of approximately $12.7 billion. This includes the use of programs available to U.S. banks from the Federal Home Loan Banks and Federal Reserve Banks.

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

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Table 21 – Borrowed Funds

(Dollars in thousands)

												Three Months Ended March 31, 2023																								Three Months Ended Dec. 31, 2022
						Mar. 31, 2023						Average Balance During the Quarter						Rate						Maximum Outstanding At Any Month End During the Quarter						Dec. 31, 2022						Average Balance During the Quarter						Rate						Maximum Outstanding At Any Month End During the Quarter
Funds purchased						1,087,553						847,336						4.23		%				1,711,580						99,843						151,514						2.02		%				103,141
Repurchase agreements						512,171						911,901						2.50		%				512,171						2,170,534						894,933						2.06		%				2,170,534
Other borrowings:
Federal Home Loan Banks advances						4,700,000						4,475,555						4.74		%				4,700,000						4,700,000						2,486,958						4.06		%				4,700,000
GNMA repurchase liability						11,868						11,371						4.24		%				12,414						10,608						9,217						4.52		%				11,011
Other						24,017						25,354						2.54		%				26,311						26,300						27,020						3.47		%				27,424
Total other borrowings						4,735,885						4,512,280						4.73		%										4,736,908						2,523,195						4.08		%
Subordinated debentures1						131,148						131,166						6.40		%				131,164						131,205						131,180						6.16		%				131,205
Total other borrowed funds and subordinated debentures						$	6,466,757					$	6,402,683					4.38		%										$	7,138,490					$	3,700,822					3.58		%

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, 2023, cash and interest-bearing cash and cash equivalents held by the parent company totaled $165 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, 2023, based upon the most restrictive limitations as well as management's internal capital policy, BOKF, NA could declare up to $433 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, 2023 was $4.9 billion, a $191 million increase compared to December 31, 2022. Net income less cash dividends paid increased equity $126 million during the first quarter of 2023. Changes in interest rates resulted in a $108 million increase in accumulated other comprehensive income compared to December 31, 2022. We also repurchased $44 million of common stock during the first quarter of 2023. 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 November 1, 2022, 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, 2023, the Company had repurchased 761,477 shares under this authorization. The Company repurchased 447,071 shares of common stock at an average price of $98.64 a share in the first quarter of 2023. 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 a 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 the current expected credit loss ("CECL") model 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 elected to delay the regulatory capital impact of the transition in accordance with the interim final rule. Deferral of the impact of CECL added 6 basis points to the Company's Common equity Tier 1 capital at March 31, 2023.

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, 2023						Dec. 31, 2022						Mar. 31, 2022
Risk-based capital:
Common equity Tier 1						4.50		%				2.50		%				7.00		%				12.19		%				11.69		%				11.30		%
Tier 1 capital						6.00		%				2.50		%				8.50		%				12.20		%				11.71		%				11.31		%
Total capital						8.00		%				2.50		%				10.50		%				13.21		%				12.67		%				12.25		%
Tier 1 Leverage						4.00		%				N/A						4.00		%				9.94		%				9.91		%				8.47		%
Average total equity to average assets																								10.53		%				10.22		%				10.18		%
Tangible common equity ratio																								8.46		%				7.63		%				8.13		%

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, 2023						Dec. 31, 2022						Sep. 30, 2022						June 30, 2022						Mar. 31, 2022
Tangible common equity ratio:
Total shareholders' equity						$	4,874,786					$	4,682,649					$	4,509,934					$	4,737,339					$	4,849,582
Less: Goodwill and intangible assets, net						1,117,438						1,120,880						1,124,582						1,128,493						1,132,510
Tangible common equity						3,757,348						3,561,769						3,385,352						3,608,846						3,717,072
Add: Unrealized gain (loss) on investment securities, net						(140,947)						(167,477)						(165,206)						(30,305)						6,778
Add: Tax effect on unrealized gain (loss) on investment securities, net						33,149						39,196						38,665						7,093						(1,586)
Adjusted tangible common equity						$	3,649,550					$	3,433,488					$	3,258,811					$	3,585,634					$	3,722,264
Total assets						45,524,122						47,790,642						43,645,446						45,377,072						46,826,507
Less: Goodwill and intangible assets, net						1,117,438						1,120,880						1,124,582						1,128,493						1,132,510
Tangible assets						$	44,406,684					$	46,669,762					$	42,520,864					$	44,248,579					$	45,693,997
Tangible common equity ratio						8.46		%				7.63		%				7.96		%				8.16		%				8.13		%
Adjusted tangible common equity ratio						8.22		%				7.36		%				7.66		%				8.10		%				8.15		%
Pre-provision net revenue:
Net income before taxes						$	208,401					$	216,256					$	196,272					$	168,980					$	78,649
Provision for expected credit losses						16,000						15,000						15,000						—						—
Net income (loss) attributable to non-controlling interests						128						(37)						81						12						(36)
Pre-provision net revenue						$	224,273					$	231,293					$	211,191					$	168,968					$	78,685

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 has 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

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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.

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 exposure to changes in interest rates over a twelve-month period within established policy limits. 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 6.5 percent. Management also reviews alternative rate changes and time periods.

On March 5, 2021, the U.K. Financial Conduct Authority ("FCA") confirmed that the publication of the principal tenors of the U.S. dollar London Interbank Offered Rate ("LIBOR") will cease immediately following a final publication on June 30, 2023. Further, U.S. regulators released a joint inter-agency statement about their expectations that banks cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021.

The Company has ceased production of new LIBOR-based exposure as of December 31, 2021 and now offers floating rate products in various alternative reference rates with the majority of volume being observed thus far in simple or term rate versions of the Secured Overnight Financing Rate ("SOFR"). Key loan provisions have been modified so that new and renewed loans include LIBOR fallback language designed to ensure the smoothest possible transition from LIBOR to the new benchmark when such transition occurs. All existing financial contracts with direct exposure to LIBOR have been inventoried, and the Company has taken action to transition these exposures to an alternative reference rate in advance of the June 30, 2023 deadline.

The Company's primary interest rate exposures include the Federal Funds rate, which affects short-term borrowings, and the prime lending rate, LIBOR and SOFR, 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 (3.01) percent, or ($42.0 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 (0.84) percent, or ($11.8 million) for the 200 basis point increase scenario.

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Table 24 – Interest Rate Sensitivity

(Dollars in thousands)

						Mar. 31, 2023																								Dec. 31, 2022
						200 bp Increase						100 bp Increase						100 bp Decrease						200 bp Decrease						200 bp Increase						100 bp Increase						100 bp Decrease						200 bp Decrease
Anticipated impact over the next twelve months on net interest revenue						$	(26,900)					$	(2,800)					$	(26,600)					$	(40,970)					$	(10,980)					$	8,440					$	(42,660)					$	(73,800)
						(1.93)		%				(0.20)		%				(1.90)		%				(2.93)		%				(0.71)		%				0.54		%				(2.75)		%				(4.76)		%
Anticipated impact over months twelve through twenty-four						$	(10,100)					$	21,970					$	(96,300)					$	(177,100)					$	4,090					$	40,190					$	(129,900)					$	(239,300)
						(0.68)		%				1.47		%				(6.46)		%				(11.88)		%				0.24		%				2.39		%				(7.71)		%				(14.21)		%

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.

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

(In thousands)

						Mar. 31, 2023												Dec. 31, 2022
						Up 50 bp						Down 50 bp						Up 50 bp						Down 50 bp
MSR Asset						$	8,778					$	(11,308)					$	6,100					$	(8,195)
MSR Hedge						(10,299)						9,860						(7,400)						6,810
Net Exposure						(1,521)						(1,448)						(1,300)						(1,385)

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.

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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

(In thousands)

						Three Months Ended
						Mar. 31, 2023												Dec. 31, 2022												Mar. 31, 2022
						Up 50 bp						Down 50 bp						Up 50 bp						Down 50 bp						Up 50 bp						Down 50 bp
Average1						$	(79)					$	(16)					$	(71)					$	(50)					$	(96)					$	(420)
Low2						(1)						61						28						18						161						2
High3						(186)						(84)						(214)						(131)						(402)						(779)
Period End						(74)						(19)						(71)						(30)						(27)						(95)

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.

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.

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, 2023, December 31, 2022, March 31, 2022 and Dec. 31, 2022. In the first quarter of 2023, 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.

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Table 27 – VaR and SVaR Measures

(In thousands)

						Three Months Ended
						Mar. 31, 2023												Dec. 31, 2022												Mar. 31, 2022
						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						$	4,059					$	7,461					$	3,927					$	7,091					$	8,759					$	39,402
Low						1,944						3,156						933						3,210						5,969						23,910
High						8,487						15,571						9,077						15,396						14,556						73,790
Period End						4,036						8,907						8,000						13,819						8,178						23,988

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.

Limit Structure

Beyond VaR and SVaR described above, 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.

Table 28 – Trading Sensitivity Analysis

(In thousands)

						Three Months Ended
						Mar. 31, 2023												Dec. 31, 2022												Mar. 31, 2022
						Up 50 bp						Down 50 bp						Up 50 bp						Down 50 bp						Up 50 bp						Down 50 bp
Average1						$	701					$	(497)					$	1,456					$	(1,151)					$	499					$	2,927
Low2						4,513						1,983						4,508						1,766						8,643						12,277
High3						(1,837)						(4,538)						(1,523)						(4,472)						(11,253)						(3,813)
Period End						2,247						(2,053)						3,507						(3,458)						49						1,076

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.

Model Risk Governance and Review

BOK Financial has an internal but independent Model Risk Governance and Review ("MRGR") team that validates models to verify they are conceptually sound, computationally accurate, are performing as expected, and are in line with their intended use. MRGR also enforces the Company's model risk governance program that defines roles and responsibilities, including the authority to levy findings requiring remediation and to restrict model usage.

Model Validation

MRGR is independent of both the developers and users of the models. The team validates models through an evaluation process that assesses the data, theory, implementation, outcomes, and governance of each scenario. MRGR assigns each model a model risk score, which determines the frequency and scope of each validation. Validations comprise an assessment of model performance as well as a model's potential limitations given its particular assumptions or weaknesses. Based on the results of the review, the team determines the use case for the model. The ultimate validation results may require remediation actions from the business line. MRGR communicates their result as one of the following three outcomes: "Approved for use", "Approved with findings", or "Unapproved".

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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 reports, 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						2023						2022
Loans						$	367,870					$	178,373
Residential mortgage loans held for sale						979						1,394
Trading securities						34,009						40,975
Investment securities						8,928						2,354
Available for sale securities						88,736						57,932
Fair value option securities						3,893						491
Restricted equity securities						5,808						1,107
Interest-bearing cash and cash equivalents						6,506						473
Total interest revenue						516,729						283,099
Interest expense
Deposits						95,274						7,598
Borrowed funds						67,038						5,788
Subordinated debentures						2,069						1,302
Total interest expense						164,381						14,688
Net interest revenue						352,348						268,411
Provision for credit losses						16,000						—
Net interest revenue after provision for credit losses						336,348						268,411
Other operating revenue
Brokerage and trading revenue						52,396						(27,079)
Transaction card revenue						25,621						24,216
Fiduciary and asset management revenue						50,657						46,399
Deposit service charges and fees						25,968						27,004
Mortgage banking revenue						14,367						16,650
Other revenue						16,970						10,445
Total fees and commissions						185,979						97,635
Other gains (losses), net						2,251						(1,644)
Loss on derivatives, net						(1,344)						(46,981)
Loss on fair value option securities, net						(2,962)						(11,201)
Change in fair value of mortgage servicing rights						(6,059)						49,110
Gain on available for sale securities, net						—						937
Total other operating revenue						177,865						87,856
Other operating expense
Personnel						182,145						159,228
Business promotion						8,569						6,513
Professional fees and services						13,048						11,413
Net occupancy and equipment						28,459						30,855
Insurance						7,315						4,283
Data processing and communications						44,802						39,836
Printing, postage and supplies						3,893						3,689
Amortization of intangible assets						3,391						3,964
Mortgage banking costs						5,782						7,877
Other expense						8,408						9,960
Total other operating expense						305,812						277,618
Net income before taxes						208,401						78,649
Federal and state income taxes						45,905						16,197
Net income						162,496						62,452
Net income (loss) attributable to non-controlling interests						128						(36)
Net income attributable to BOK Financial Corporation shareholders						$	162,368					$	62,488
Earnings per share:
Basic						$	2.43					$	0.91
Diluted						$	2.43					$	0.91
Average shares used in computation:
Basic						66,331,775						67,812,400
Diluted						66,331,775						67,813,851
Dividends declared per share						$	0.54					$	0.53

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,
						2023						2022
Net income						$	162,496					$	62,452
Other comprehensive income (loss) before income taxes:
Net change in unrealized gain (loss)						124,045						(639,041)
Reclassification adjustments included in earnings:
Interest revenue, Investment securities						16,051						—
Gain on available for sale securities, net						—						(937)
Other comprehensive income (loss) before income taxes						140,096						(639,978)
Federal and state income taxes						31,695						(149,781)
Other comprehensive income (loss), net of income taxes						108,401						(490,197)
Comprehensive income (loss)						270,897						(427,745)
Comprehensive income (loss) attributable to non-controlling interests						128						(36)
Comprehensive income (loss) attributable to BOK Financial Corp. shareholders						$	270,769					$	(427,709)

See accompanying notes to consolidated financial statements.

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Consolidated Balance Sheets

(In thousands, except share data)

						Mar. 31, 2023						Dec. 31, 2022
						(Unaudited)						(Footnote 1)
Assets
Cash and due from banks						$	792,371					$	943,810
Interest-bearing cash and cash equivalents						571,613						457,906
Trading securities						2,294,358						4,464,161
Investment securities, net of allowance (fair value: March 31, 2023 – $2,307,686; December 31, 2022 – $2,346,768)						2,448,136						2,513,687
Available for sale securities						11,937,841						11,493,860
Fair value option securities						326,390						296,590
Restricted equity securities						288,181						299,651
Residential mortgage loans held for sale						74,175						75,272
Loans						22,750,053						22,557,150
Allowance for loan losses						(249,460)						(235,704)
Loans, net of allowance						22,500,593						22,321,446
Premises and equipment, net						623,112						565,175
Receivables						265,680						273,815
Goodwill						1,044,749						1,044,749
Intangible assets, net						72,689						76,131
Mortgage servicing rights						299,803						277,608
Real estate and other repossessed assets, net of allowance (March 31, 2023 – $4,406; December 31, 2022 – $10,115)						12,651						14,304
Derivative contracts, net						394,291						880,343
Cash surrender value of bank-owned life insurance						408,614						406,751
Receivable on unsettled securities sales						18,186						31,004
Other assets						1,150,689						1,354,379
Total assets						$	45,524,122					$	47,790,642
Liabilities and Equity
Liabilities:
Noninterest-bearing demand deposits						$	11,606,975					$	13,395,337
Interest-bearing deposits:
Transaction						18,434,489						18,659,115
Savings						962,673						964,411
Time						1,576,610						1,461,842
Total deposits						32,580,747						34,480,705
Funds purchased and repurchase agreements						1,599,724						2,270,377
Other borrowings						4,735,885						4,736,908
Subordinated debentures						131,148						131,205
Accrued interest, taxes and expense						268,449						296,870
Derivative contracts, net						510,483						554,900
Due on unsettled securities purchases						262,492						147,470
Other liabilities						557,167						484,849
Total liabilities						40,646,095						43,103,284
Shareholders' equity:
Common stock ($0.00006 par value; 2,500,000,000 shares authorized; shares issued and outstanding: March 31, 2023 – 76,555,507; December 31, 2022 – 76,423,345)						5						5
Capital surplus						1,397,096						1,390,395
Retained earnings						4,950,176						4,824,164
Treasury stock (shares at cost: March 31, 2023 – 9,954,674; December 31, 2022 – 9,464,711)						(743,937)						(694,960)
Accumulated other comprehensive income (loss)						(728,554)						(836,955)
Total shareholders' equity						4,874,786						4,682,649
Non-controlling interests						3,241						4,709
Total equity						4,878,027						4,687,358
Total liabilities and equity						$	45,524,122					$	47,790,642

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, 2022						76,423						$	5					$	1,390,395					$	4,824,164					9,465						$	(694,960)					$	(836,955)					$	4,682,649					$	4,709					$	4,687,358
Net income (loss)						—						—						—						162,368						—						—						—						162,368						128						162,496
Other comprehensive income						—						—						—						—						—						—						108,401						108,401						—						108,401
Repurchase of common stock						—						—						—						—						447						(44,476)						—						(44,476)						—						(44,476)
Share-based compensation plans:
Stock options exercised						—						—						—						—						—						—						—						—						—						—
Non-vested shares awarded,      net						133						—						—						—						—						—						—						—						—						—
Vesting of non-vested      shares						—						—						—						—						43						(4,501)						—						(4,501)						—						(4,501)
Share-based compensation						—						—						6,701						—						—						—						—						6,701						—						6,701
Cash dividends on common      stock						—						—						—						(36,356)						—						—						—						(36,356)						—						(36,356)
Capital calls and distributions,      net						—						—						—						—						—						—						—						—						(1,596)						(1,596)
Balance, March 31, 2023						76,556						$	5					$	1,397,096					$	4,950,176					9,955						$	(743,937)					$	(728,554)					$	4,874,786					$	3,241					$	4,878,027
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

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

						Three Months Ended
						March 31,
						2023						2022
Cash Flows From Operating Activities:
Net income						$	162,496					$	62,452
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for credit losses						16,000						—
Change in fair value of mortgage servicing rights due to market assumption changes						6,059						(49,110)
Change in the fair value of mortgage servicing rights due to principal payments						5,382						7,960
Net unrealized (gains) losses from derivative contracts						61,704						(31,298)
Share-based compensation						6,701						2,835
Depreciation and amortization						26,885						26,091
Net amortization of discounts and premiums						(4,163)						3,216
Net losses (gains) on financial instruments and other losses (gains), net						(2,009)						706
Net loss (gain) on mortgage loans held for sale						1,361						(1,056)
Mortgage loans originated for sale						(138,624)						(418,866)
Proceeds from sale of mortgage loans held for sale						139,088						446,742
Capitalized mortgage servicing rights						(2,498)						(5,215)
Change in trading and fair value option securities						2,140,101						4,104,453
Change in receivables						11,032						(88,559)
Change in other assets						6,721						(19,589)
Change in other liabilities						28,544						(107,508)
Net cash provided by (used in) operating activities						2,464,780						3,933,254
Cash Flows From Investing Activities:
Proceeds from maturities or redemptions of investment securities						64,514						26,363
Proceeds from maturities or redemptions of available for sale securities						313,935						723,730
Purchases of available for sale securities						(631,168)						(1,161,606)
Proceeds from sales of available for sale securities						—						55,185
Change in amount receivable on unsettled available for sale securities transactions						9,864						(99,944)
Loans originated, net of principal collected						(187,088)						(460,128)
Net payments on derivative asset contracts						156,522						34,855
Net change in restricted equity securities						11,470						5,724
Proceeds from disposition of assets						7,401						9,708
Purchases of assets						(58,710)						(37,569)
Net cash provided by (used in) investing activities						(313,260)						(903,682)
Cash Flows From Financing Activities:
Net change in demand deposits, transaction deposits and savings accounts						(2,014,726)						(1,626,196)
Net change in time deposits						114,768						(189,912)
Net change in other borrowed funds						(677,232)						(1,271,195)
Net proceeds on derivative liability contracts						(158,021)						(30,779)
Net change in derivative margin accounts						579,188						(1,274,645)
Change in amount due on unsettled available for sale securities transactions						52,104						(17,198)
Issuance of common and treasury stock, net						(4,501)						(4,907)
Repurchase of common stock						(44,476)						(48,074)
Dividends paid						(36,356)						(36,295)
Net cash provided by (used in) financing activities						(2,189,252)						(4,499,201)
Net increase (decrease) in cash and cash equivalents						(37,732)						(1,469,629)
Cash and cash equivalents at beginning of period						1,401,716						2,837,410
Cash and cash equivalents at end of period						$	1,363,984					$	1,367,781
Supplemental Cash Flow Information:
Cash paid for interest						$	163,960					$	13,982
Cash paid for taxes						$	733					$	858
Net loans and bank premises transferred to repossessed real estate and other assets						$	225					$	64
Residential mortgage loans guaranteed by U.S. government agencies that became eligible for repurchase during the period						$	5,556					$	12,568
Conveyance of other real estate owned guaranteed by U.S. government agencies						$	1,150					$	1,812
Right-of-use assets obtained in exchange for operating lease liabilities						$	63,521					$	9,241

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 2022 Form 10-K filed with the Securities and Exchange Commission, which contains audited financial statements. Amounts presented as of December 31, 2022 have been derived from the audited financial statements included in BOK Financial's 2022 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, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Newly Adopted and Pending Accounting Policies

Financial Accounting Standards Board ("FASB")

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 was effective for the Company January 1, 2023. Amendments related to TDR recognition and measurement and vintage disclosures were applied prospectively and are included in Note 4 to the consolidated financial statements. Adoption of this standard did not have a material effect on the Company's financial condition or results of operations.

FASB Accounting Standards Update No. 2023-01, Leases (Topic 842): Common Control Arrangements ("ASU 2023-01")

On March 27, 2023, the FASB issued ASU 2023-01 which, in part, amends the accounting for leasehold improvement in common-control arrangements. Under previous guidance, a lessee is generally required to amortize leasehold improvements that it owns over the shorter of the useful life of those improvements or the lease term. However, due to the nature of leasehold improvements made under leases between entities under common control, ASU 2023-01 requires a lessee in a common-control arrangement to amortize such leasehold improvements that it owns over the improvements' useful life to the common control group, regardless of the lease term. ASU 2023-01 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Adoption of ASU 2023-01 is not expected to have a material impact on the Company's financial statements.

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FASB Accounting Standards Update No. 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method ("ASU 2023-02")

On March 29, 2023, the FASB issued ASU 2023-02 which amends previous guidance to allow entities to account for qualifying tax equity investments using the proportional amortization method regardless of the program giving rise to the related income tax credits, as opposed to only being allowed to apply this method to qualifying tax equity investments in low-income housing tax credit structures as was the case under previous guidance. ASU 2023-02 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Adoption of ASU 2023-02 is not expected to have a material impact on the Company's financial statements.

(2) Securities

Trading Securities

 

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

 

						March 31, 2023												December 31, 2022
						Fair Value						Net Unrealized Gain (Loss)						Fair Value						Net Unrealized Gain (Loss)
U.S. government securities						$	5,618					$	(6)					$	9,823					$	(16)
Residential agency mortgage-backed securities						2,210,721						12,289						4,406,848						4
Municipal securities						37,455						45						21,484						(136)
Asset-backed securities						10,194						10						—						—
Other trading securities						30,370						228						26,006						(175)
Total trading securities						$	2,294,358					$	12,566					$	4,464,161					$	(323)

Investment Securities

 

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

						March 31, 2023
						Amortized						Carrying						Fair						Gross Unrealized
						Cost						Value1						Value						Gain						Loss
Municipal securities						$	153,739					$	153,739					$	160,866					$	7,321					$	(194)
Mortgage-backed securities:
Residential agency						2,472,291						2,264,922						2,118,538						163						(146,547)
Commercial agency						17,259						15,684						14,861						—						(823)
Other debt securities						14,288						14,288						13,421						—						(867)
Total investment securities						2,657,577						2,448,633						2,307,686						7,484						(148,431)
Allowance for credit losses						(497)						(497)						—						—						—
Investment securities, net of allowance						$	2,657,080					$	2,448,136					$	2,307,686					$	7,484					$	(148,431)

1    Carrying value includes $209 million of net unrealized loss which remains in Accumulated other comprehensive income ("AOCI") in the Consolidated Balance Sheets related to certain securities transferred during the second quarter of 2022 from the Available for Sale securities portfolio to the Investment securities portfolio as discussed in greater detail following.

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						December 31, 2022
						Amortized						Carrying						Fair						Gross Unrealized
						Cost						Value1						Value						Gain						Loss
Municipal securities						$	170,629					$	170,629					$	176,621					$	6,456					$	(464)
Mortgage-backed securities:
Residential agency						2,538,565						2,315,219						2,143,360						155						(172,014)
Commercial agency						17,259						15,609						14,588						—						(1,021)
Other debt securities						12,788						12,788						12,199						—						(589)
Total investment securities						2,739,241						2,514,245						2,346,768						6,611						(174,088)
Allowance for credit losses						(558)						(558)						—						—						—
Investment securities, net of allowance						$	2,738,683					$	2,513,687					$	2,346,768					$	6,611					$	(174,088)

1    Carrying value includes $225 million of net unrealized loss which remains in Accumulated other comprehensive income ("AOCI") in the Consolidated Balance Sheets related to certain securities transferred during the second quarter of 2022 from the Available for Sale securities portfolio to the Investment securities portfolio as discussed in greater detail following.

The amortized cost and fair values of investment securities at March 31, 2023, 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:
Carrying value						$	24,634					$	92,723					$	66,341					$	13					$	183,711					3.94
Fair value						24,917						99,241						64,977						13						189,148
Residential mortgage-backed securities:
Carrying value																														$	2,264,922					2
Fair value																														2,118,538
Total investment securities:
Carrying value																														$	2,448,633
Fair value																														2,307,686

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 5.3 years years based upon current prepayment assumptions.

Temporarily Impaired Investment Securities

(dollars in thousands):

						March 31, 2023
						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						9						$	—					$	—					$	6,594					$	194					$	6,594					$	194
Mortgage-backed securities:
Residential agency						116						2,115,733						146,464						1,599						83						2,117,332						146,547
Commercial agency						2						14,861						823						—						—						14,861						823
Other debt securities						3						9,153						847						255						20						9,408						867
Total investment securities						130						$	2,139,747					$	148,134					$	8,448					$	297					$	2,148,195					$	148,431

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						December 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						22						$	18,037					$	406					$	544					$	58					$	18,581					$	464
Mortgage-backed securities:
Residential agency						116						2,142,114						172,014						—						—						2,142,114						172,014
Commercial agency						2						14,588						1,021						—						—						14,588						1,021
Other debt securities						3						9,428						571						257						18						9,685						589
Total investment securities						143						$	2,184,167					$	174,012					$	801					$	76					$	2,184,968					$	174,088

Available for Sale Securities 

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

						March 31, 2023
						Amortized						Fair						Gross Unrealized
						Cost						Value						Gain						Loss
U.S. Treasury						$	1,000					$	914					$	—					$	(86)
Municipal securities						685,963						634,207						1,338						(53,094)
Mortgage-backed securities:
Residential agency						6,311,728						6,022,708						15,379						(304,399)
Residential non-agency						690,345						651,351						11,271						(50,265)
Commercial agency						4,989,813						4,628,188						5,738						(367,363)
Other debt securities						500						473						—						(27)
Total available for sale securities						$	12,679,349					$	11,937,841					$	33,726					$	(775,234)

						December 31, 2022
						Amortized						Fair						Gross Unrealized
						Cost						Value						Gain						Loss
U.S. Treasury						$	1,000					$	898					$	—					$	(102)
Municipal securities						687,875						624,500						321						(63,696)
Mortgage-backed securities:
Residential agency						6,161,358						5,814,496						13,085						(359,947)
Residential non-agency						616,423						577,576						11,776						(50,623)
Commercial agency						4,892,257						4,475,917						3,479						(419,819)
Other debt securities						500						473						—						(27)
Total available for sale securities						$	12,359,413					$	11,493,860					$	28,661					$	(894,214)

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The amortized cost and fair values of available for sale securities at March 31, 2023, 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			$	148,742					$	2,665,838					$	2,360,090					$	502,606					$	5,677,276					5.82
Fair value			146,996						2,510,112						2,131,783						474,891						5,263,782
Residential mortgage-backed securities:
Amortized cost																											$	7,002,073					2
Fair value																											6,674,059
Total available for sale securities:
Amortized cost																											$	12,679,349
Fair value																											11,937,841

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 years based upon current prepayment assumptions.

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

			Three Months Ended March 31,
			2023						2022
Proceeds			$	—					$	55,185
Gross realized gains			—						1,933
Gross realized losses			—						(996)
Related federal and state income tax expense			—						219

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 $9.9 billion at March 31, 2023 and $11.2 billion at December 31, 2022. The secured parties do not have the right to sell or repledge these securities.

Temporarily Impaired Available for Sale Securities

(Dollars in thousands)

						March 31, 2023
						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						$	—					$	—					$	914					$	86					$	914					$	86
Municipal securities						215						61,983						767						487,032						52,327						549,015						53,094
Mortgage-backed securities:
Residential agency						618						1,531,016						37,020						3,240,193						267,379						4,771,209						304,399
Residential non-agency						30						230,541						8,648						343,580						41,617						574,121						50,265
Commercial agency						288						824,751						14,313						3,413,042						353,050						4,237,793						367,363
Other debt securities						1						—						—						473						27						473						27
Total available for sale securities						1,153						$	2,648,291					$	60,748					$	7,485,234					$	714,486					$	10,133,525					$	775,234

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						December 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						$	—					$	—					$	899					$	102					$	899					$	102
Municipal securities						227						146,634						5,301						428,248						58,395						574,882						63,696
Mortgage-backed securities:
Residential agency						613						3,879,582						256,973						863,732						102,974						4,743,314						359,947
Residential non-agency						26						499,716						50,623						—						—						499,716						50,623
Commercial agency						285						1,647,778						63,701						2,535,816						356,118						4,183,594						419,819
Other debt securities						1						—						—						473						27						473						27
Total available for sale securities						1,153						$	6,173,710					$	376,598					$	3,829,168					$	517,616					$	10,002,878					$	894,214

Based on evaluations of impaired securities as of March 31, 2023, 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.

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, 2023												December 31, 2022
						Fair Value						Net Unrealized Gain (Loss)						Fair Value						Net Unrealized Gain (Loss)
U.S. Treasury						$	106,307					$	359					$	—					$	—
Residential agency mortgage-backed securities						220,083						250						296,590						338
Total						$	326,390					$	609					$	296,590					$	338

(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 reduce 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.

 

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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, 2023 (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						$	2,691,550					$	121,481					$	(3,303)					$	118,178					$	(98,143)					$	20,035
Energy contracts						7,456,604						988,149						(592,276)						395,873						(121,612)						274,261
Foreign exchange contracts						59,321						57,431						—						57,431						(1,560)						55,871
Equity option contracts						12,286						116						—						116						(95)						21
Total customer risk management programs						10,219,761						1,167,177						(595,579)						571,598						(221,410)						350,188
Trading						14,507,221						87,395						(45,420)						41,975						(1,439)						40,536
Internal risk management programs						165,207						5,253						(1,686)						3,567						—						3,567
Total derivative contracts						$	24,892,189					$	1,259,825					$	(642,685)					$	617,140					$	(222,849)					$	394,291
						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						$	2,691,550					$	121,040					$	(3,303)					$	117,737					$	—					$	117,737
Energy contracts						7,564,737						997,077						(592,276)						404,801						(80,146)						324,655
Foreign exchange contracts						57,909						55,828						—						55,828						—						55,828
Equity option contracts						12,286						116						—						116						—						116
Total customer risk management programs						10,326,482						1,174,061						(595,579)						578,482						(80,146)						498,336
Trading						16,042,176						116,109						(45,420)						70,689						(59,941)						10,748
Internal risk management programs						135,415						3,085						(1,686)						1,399						—						1,399
Total derivative contracts						$	26,504,073					$	1,293,255					$	(642,685)					$	650,570					$	(140,087)					$	510,483

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, 2022 (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						$	2,629,318					$	158,825					$	—					$	158,825					$	(114,955)					$	43,870
Energy contracts						7,918,020						1,232,283						(594,543)						637,740						(67,024)						570,716
Foreign exchange contracts						219,791						216,569						—						216,569						—						216,569
Equity option contracts						21,102						193						—						193						(109)						84
Total customer risk management programs						10,788,231						1,607,870						(594,543)						1,013,327						(182,088)						831,239
Trading						17,400,037						126,910						(74,647)						52,263						(4,646)						47,617
Internal risk management programs						85,000						1,500						(13)						1,487						—						1,487
Total derivative contracts						$	28,273,268					$	1,736,280					$	(669,203)					$	1,067,077					$	(186,734)					$	880,343
						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						$	2,629,122					$	158,816					$	—					$	158,816					$	—					$	158,816
Energy contracts						8,696,060						1,242,058						(594,543)						647,515						(484,319)						163,196
Foreign exchange contracts						214,855						211,233						—						211,233						(7)						211,226
Equity option contracts						21,102						193						—						193						—						193
Total customer risk management programs						11,561,139						1,612,300						(594,543)						1,017,757						(484,326)						533,431
Trading						14,038,906						94,958						(74,647)						20,311						(423)						19,888
Internal risk management programs						178,806						1,594						(13)						1,581						—						1,581
Total derivative contracts						$	25,778,851					$	1,708,852					$	(669,203)					$	1,039,649					$	(484,749)					$	554,900

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, 2023												March 31, 2022
						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						$	1,770					$	—					$	6,342					$	—
Energy contracts						6,553						—						4,449						—
Foreign exchange contracts						31						—						148						—
Equity option contracts						—						—						—						—
Total customer risk management programs						8,354						—						10,939						—
Trading1						(63,093)						—						31,074						—
Internal risk management programs						—						(1,344)						—						(46,981)
Total derivative contracts						$	(54,739)					$	(1,344)					$	42,013					$	(46,981)

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.

(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.

Modifications of loans to existing borrowers generally consist of interest rate reductions, extension of payment terms, or a combination of these. Modifications may arise 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. A change to the allowance for credit losses is generally not recorded upon modification because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance methodology.

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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 modification. The charge-off amount is determined through a quarterly evaluation of available cash resources and collateral values. 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.

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 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, 2023																								December 31, 2022
						Fixed Rate						Variable Rate						Non-accrual						Total						Fixed Rate						Variable Rate						Non-accrual						Total
Commercial						$	3,427,345					$	10,735,572					$	54,432					$	14,217,349					$	3,392,422					$	10,759,780					$	60,297					$	14,212,499
Commercial real estate						879,806						3,913,842						21,668						4,815,316						874,716						3,715,491						16,570						4,606,777
Loans to individuals						2,125,020						1,548,173						44,195						3,717,388						2,099,165						1,593,779						44,930						3,737,874
Total						$	6,432,171					$	16,197,587					$	120,295					$	22,750,053					$	6,366,303					$	16,069,050					$	121,797					$	22,557,150

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, 2023, outstanding commitments totaled $15.1 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.

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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, 2023, outstanding standby letters of credit totaled $790 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.

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, for real property held as collateral for loans, 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.

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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 a 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.

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.

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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, 2023
						Commercial						Commercial Real Estate												Loans to Individuals												Total
Allowance for loan losses:
Beginning balance						$	131,586					$	57,648											$	46,470											$	235,704
Provision for loan losses						6,330						10,426												(2,231)												14,525
Loans charged off						(12)						(2,208)												(1,447)												(3,667)
Recoveries of loans previously charged off						1,994						137												767												2,898
Ending balance						$	139,898					$	66,003											$	43,559											$	249,460
Allowance for off-balance sheet credit risk from unfunded loan commitments:
Beginning balance						$	18,246					$	40,490											$	2,183											$	60,919
Provision for off-balance sheet credit risk						2,362						(279)												(59)												2,024
Ending balance						$	20,608					$	40,211											$	2,124											$	62,943

						Three Months Ended
						March 31, 2022
						Commercial						Commercial Real Estate												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

A $16.0 million provision for credit losses was necessary for the first quarter of 2023, as key economic assumptions in the base case, including projected WTI oil prices and commercial real estate vacancy rates, were less favorable to economic growth.

The allowance for loan losses and recorded investment of the related loans by portfolio segment for each measurement method at March 31, 2023 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						$	14,162,917					$	137,415					$	54,432					$	2,483					$	14,217,349					$	139,898
Commercial real estate						4,793,648						64,453						21,668						1,550						4,815,316						66,003
Loans to individuals						3,673,193						43,559						44,195						—						3,717,388						43,559
Total						$	22,629,758					$	245,427					$	120,295					$	4,033					$	22,750,053					$	249,460

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The allowance for loan losses and recorded investment of the related loans by portfolio segment for each measurement method at December 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						$	14,152,202					$	127,566					$	60,297					$	4,020					$	14,212,499					$	131,586
Commercial real estate						4,590,207						56,098						16,570						1,550						4,606,777						57,648
Loans to individuals						3,692,944						46,470						44,930						—						3,737,874						46,470
Total						$	22,435,353					$	230,134					$	121,797					$	5,570					$	22,557,150					$	235,704

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 identifies 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, 2023 by the risk grade categories and vintage (in thousands): 

			Origination Year
			2023			2022			2021			2020			2019			Prior			Revolving Loans			Revolving Loans Converted to Term Loans			Total
Commercial:
Energy
Pass			$	12,973		$	146,448		$	66,052		$	8,865		$	11,301		$	11,408		$	3,119,103		$	—		$	3,376,150
Accruing Substandard			—			—			—			—			658			1,060			20,062			—			21,780
Nonaccrual			—			—			—			—			—			127			—			—			127
Total energy			12,973			146,448			66,052			8,865			11,959			12,595			3,139,165			—			3,398,057
Loans charged-off, year-to-date			—			—			—			—			—			—			—			—			—
Healthcare
Pass			175,703			876,440			615,643			479,575			386,837			1,027,229			220,992			19			3,782,438
Special Mention			—			—			204			429			21,767			45,663			60			—			68,123
Accruing Substandard			—			—			—			2,178			1,456			7,899			—			—			11,533
Nonaccrual			—			—			—			—			26,137			11,110			—			—			37,247
Total healthcare			175,703			876,440			615,847			482,182			436,197			1,091,901			221,052			19			3,899,341
Loans charged-off, year-to-date			—			—			—			—			—			—			—			—			—
Services
Pass			216,237			759,320			470,813			275,065			171,904			805,240			799,522			506			3,498,607
Special Mention			—			19,077			1,365			219			672			2,521			6,246			—			30,100
Accruing Substandard			—			397			86			—			2,232			2,599			21,499			84			26,897
Nonaccrual			—			—			5,281			376			—			—			2,441			—			8,098
Total services			216,237			778,794			477,545			275,660			174,808			810,360			829,708			590			3,563,702
Loans charged-off, year-to-date			—			—			—			—			—			—			5			—			5
General business
Pass			288,367			607,548			320,451			162,810			147,988			355,227			1,336,404			2,193			3,220,988
Special Mention			—			7,515			8,200			87			70			1,762			31,903			25			49,562
Accruing Substandard			5,516			38,443			6,841			56			4,013			7,940			13,929			—			76,738
Nonaccrual			—			—			—			1,030			14			68			7,842			7			8,961
Total general business			293,883			653,506			335,492			163,983			152,085			364,997			1,390,078			2,225			3,356,249
Loans charged-off, year-to-date			—			—			—			—			—			3			—			4			7
Total commercial			698,796			2,455,188			1,494,936			930,690			775,049			2,279,853			5,580,003			2,834			14,217,349

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			Origination Year
			2023			2022			2021			2020			2019			Prior			Revolving Loans			Revolving Loans Converted to Term Loans			Total
Commercial real estate:
Pass			46,900			1,383,300			1,187,644			540,129			644,511			832,101			148,063			—			4,782,648
Special Mention			—			—			—			—			—			11,000			—			—			11,000
Nonaccrual			—			—			—			—			7,459			14,209			—			—			21,668
Total commercial real estate			46,900			1,383,300			1,187,644			540,129			651,970			857,310			148,063			—			4,815,316
Loans charged-off, year-to-date			—			—			—			—			—			2,208			—			—			2,208
Loans to individuals:
Residential mortgage
Pass			71,000			348,697			371,044			380,908			61,409			285,877			351,428			21,242			1,891,605
Special Mention			—			68			—			1,355			—			309			2,843			—			4,575
Accruing Substandard			—			—			—			—			—			7			147			—			154
Nonaccrual			—			1,184			1,738			2,851			649			20,547			1,994			730			29,693
Total residential mortgage			71,000			349,949			372,782			385,114			62,058			306,740			356,412			21,972			1,926,027
Loans charged-off, year-to-date			—			—			—			—			—			4			—			1			5
Residential mortgage guaranteed by U.S. government agencies
Pass			—			1,021			2,321			7,321			8,963			190,825			—			—			210,451
Nonaccrual			—			—			—			299			1,005			12,998			—			—			14,302
Total residential mortgage guaranteed by U.S. government agencies			—			1,021			2,321			7,620			9,968			203,823			—			—			224,753
Personal:
Pass			24,231			236,041			190,370			156,515			181,332			220,604			550,478			253			1,559,824
Special Mention			—			115			109			47			2			—			6,055			39			6,367
Accruing Substandard			—			17			40			—			160			—			—			—			217
Nonaccrual			—			69			5			10			19			19			78			—			200
Total personal			24,231			236,242			190,524			156,572			181,513			220,623			556,611			292			1,566,608
Loans charged-off, year-to-date			—			—			—			—			—			1,437			1			4			1,442
Total loans to individuals			95,231			587,212			565,627			549,306			253,539			731,186			913,023			22,264			3,717,388
Total loans			$	840,927		$	4,425,700		$	3,248,207		$	2,020,125		$	1,680,558		$	3,868,349		$	6,641,089		$	25,098		$	22,750,053

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The following table summarizes the Company's loan portfolio at December 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			$	157,745		$	76,951		$	30,284		$	12,783		$	5,992		$	4,980		$	3,104,906		$	—		$	3,393,641
Special Mention			—			—			—			—			—			—			—			—			—
Accruing Substandard			—			—			—			664			385			683			28,018			—			29,750
Nonaccrual			—			—			—			—			—			159			1,240			—			1,399
Total energy			157,745			76,951			30,284			13,447			6,377			5,822			3,134,164			—			3,424,790
Healthcare
Pass			932,097			604,886			476,854			404,204			464,989			618,163			245,898			20			3,747,111
Special Mention			—			—			—			20,071			—			18,859			4			—			38,934
Accruing Substandard			—			—			—			—			—			14,304			3,634			—			17,938
Nonaccrual			—			—			—			26,480			6,373			8,181			—			—			41,034
Total healthcare			932,097			604,886			476,854			450,755			471,362			659,507			249,536			20			3,845,017
Services
Pass			821,785			496,510			286,085			193,481			156,736			696,300			722,371			639			3,373,907
Special Mention			502			5,139			989			771			894			1,345			8,668			—			18,308
Accruing Substandard			—			—			—			2,459			43			2,789			17,665			122			23,078
Nonaccrual			—			5,570			449			—			—			2,389			7,820			—			16,228
Total services			822,287			507,219			287,523			196,711			157,673			702,823			756,524			761			3,431,521
General business
Pass			725,894			361,839			198,274			172,878			139,140			283,694			1,570,536			2,329			3,454,584
Special Mention			17,759			13,065			208			71			7			2,291			7,094			26			40,521
Accruing Substandard			—			2,169			66			4,130			4,680			3,287			94			4			14,430
Nonaccrual			—			—			1,052			14			72			5			485			8			1,636
Total general business			743,653			377,073			199,600			177,093			143,899			289,277			1,578,209			2,367			3,511,171
Total commercial			2,655,782			1,566,129			994,261			838,006			779,311			1,657,429			5,718,433			3,148			14,212,499
Commercial real estate:
Pass			1,188,483			1,158,002			552,616			641,102			247,625			633,304			161,616			—			4,582,748
Special Mention			—			—			—			—			—			—			—			—			—
Accruing Substandard			—			—			—			7,459			—			—			—			—			7,459
Nonaccrual			—			—			—			—			—			16,570			—			—			16,570
Total commercial real estate			1,188,483			1,158,002			552,616			648,561			247,625			649,874			161,616			—			4,606,777

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			Origination Year
			2022			2021			2020			2019			2018			Prior			Revolving Loans			Revolving Loans Converted to Term Loans			Total
Loans to individuals:
Residential mortgage
Pass			354,497			373,190			393,002			63,142			40,525			260,625			352,126			22,176			1,859,283
Special Mention			—			81			42			—			142			388			527			87			1,267
Accruing Substandard			—			—			187			—			—			138			117			1			443
Nonaccrual			32			1,656			2,717			362			1,904			20,139			2,216			765			29,791
Total residential mortgage			354,529			374,927			395,948			63,504			42,571			281,290			354,986			23,029			1,890,784
Residential mortgage guaranteed by U.S. government agencies
Pass			289			2,254			9,000			10,722			17,244			191,426			—			—			230,935
Nonaccrual			—			—			299			1,460			2,319			10,927			—			—			15,005
Total residential mortgage guaranteed by U.S. government agencies			289			2,254			9,299			12,182			19,563			202,353			—			—			245,940
Personal:
Pass			254,497			193,095			154,887			172,114			68,871			201,278			549,187			332			1,594,261
Special Mention			47			28			40			12			17			—			6,003			4			6,151
Accruing Substandard			—			444			—			160			—			—			—			—			604
Nonaccrual			38			7			12			22			14			18			23			—			134
Total personal			254,582			193,574			154,939			172,308			68,902			201,296			555,213			336			1,601,150
Total loans to individuals			609,400			570,755			560,186			247,994			131,036			684,939			910,199			23,365			3,737,874
Total loans			$	4,453,665		$	3,294,886		$	2,107,063		$	1,734,561		$	1,157,972		$	2,992,242		$	6,790,248		$	26,513		$	22,557,150

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Nonaccruing Loans

A summary of nonaccruing loans at March 31, 2023 follows (in thousands): 

			As of March 31, 2023
			Total						With No Allowance						With Allowance						Related Allowance
Commercial:
Energy			$	127					$	127					$	—					$	—
Healthcare			37,247						37,247						—						—
Services			8,097						387						7,710						2,483
General business			8,961						8,961						—						—
Total commercial			54,432						46,722						7,710						2,483
Commercial real estate			21,668						7,628						14,040						1,550
Loans to individuals:
Residential mortgage			29,693						29,693						—						—
Residential mortgage guaranteed by U.S. government agencies			14,302						14,302						—						—
Personal			200						200						—						—
Total loans to individuals			44,195						44,195						—						—
Total			$	120,295					$	98,545					$	21,750					$	4,033

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

			As of December 31, 2022
			Total						With No Allowance						With Allowance						Related Allowance
Commercial:
Energy			$	1,399					$	1,399					$	—					$	—
Healthcare			41,034						34,661						6,373						946
Services			16,228						7,835						8,393						3,074
General business			1,636						1,636						—						—
Total commercial			60,297						45,531						14,766						4,020
Commercial real estate			16,570						393						16,177						1,550
Loans to individuals:
Residential mortgage			29,791						29,791						—						—
Residential mortgage guaranteed by U.S. government agencies			15,005						15,005						—						—
Personal			134						134						—						—
Total loans to individuals			44,930						44,930						—						—
Total			$	121,797					$	90,854					$	30,943					$	5,570

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Loan Modifications to Borrowers Experiencing Financial Difficulty

At March 31, 2023 the Company had $35 million of loan modifications to borrowers experiencing financial difficulty, including $26 million of healthcare loans and $8.4 million of residential mortgage loans guaranteed by U.S. government agencies. Modifications generally consist of interest rate reductions, an other than insignificant payment delay, term extension or a combination. During the three months ended March 31, 2023, $511 thousand of residential mortgage loans guaranteed by U.S. government agencies were modified and subsequently defaulted. A payment default is defined as being 30 or more days past due after modification.

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, 2023 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						$	3,398,057					$	—					$	—					$	—					$	3,398,057					$	—
Healthcare						3,866,921						—						—						32,420						3,899,341						45
Services						3,556,753						6,844						45						60						3,563,702						—
General business						3,355,731						492						17						9						3,356,249						9
Total commercial						14,177,462						7,336						62						32,489						14,217,349						54
Commercial real estate						4,806,306						8,965						45						—						4,815,316						—
Loans to individuals:
Residential mortgage						1,910,799						8,315						363						6,550						1,926,027						22
Residential mortgage guaranteed by U.S. government agencies						103,992						48,833						—						71,928						224,753						64,980
Personal						1,565,875						567						143						23						1,566,608						—
Total loans to individuals						3,580,666						57,715						506						78,501						3,717,388						65,002
Total						$	22,564,434					$	74,016					$	613					$	110,990					$	22,750,053					$	65,056

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A summary of loans currently performing and past due as of December 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						$	3,424,766					$	24					$	—					$	—					$	3,424,790					$	—
Healthcare						3,812,164						5,914						26,480						459						3,845,017						—
Services						3,423,042						1,060						2,461						4,958						3,431,521						—
General business						3,509,094						257						1,424						396						3,511,171						396
Total commercial						14,169,066						7,255						30,365						5,813						14,212,499						396
Commercial real estate						4,606,029						531						—						217						4,606,777						—
Loans to individuals:
Residential mortgage						1,872,155						10,632						1,828						6,169						1,890,784						114
Residential mortgage guaranteed by U.S. government agencies						108,019						36,119						19,400						82,402						245,940						75,604
Personal						1,600,595						502						21						32						1,601,150						—
Total loans to individuals						3,580,769						47,253						21,249						88,603						3,737,874						75,718
Total						$	22,355,864					$	55,039					$	51,614					$	94,633					$	22,557,150					$	76,114

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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, 2023												December 31, 2022
						Unpaid Principal Balance/ Notional						Fair Value						Unpaid Principal Balance/ Notional						Fair Value
Residential mortgage loans held for sale						$	72,746					$	72,113					$	74,941					$	73,938
Residential mortgage loan commitments						71,693						2,694						45,492						1,054
Forward sales contracts						127,427						(632)						109,469						280
												$	74,175											$	75,272

No residential mortgage loans held for sale were 90 days or more past due or considered impaired as of March 31, 2023 or December 31, 2022. No credit losses were recognized on residential mortgage loans held for sale for the three month period ended March 31, 2023 and 2022.

Mortgage banking revenue was as follows (in thousands):

						Three Months Ended March 31,
						2023						2022
Production revenue:
Net realized gains (losses) on sale of mortgage loans						$	(1,731)					$	6,883
Net change in unrealized gain (loss) on mortgage loans held for sale						370						(5,827)
Net change in the fair value of mortgage loan commitments						1,640						(3,298)
Net change in the fair value of forward sales contracts						(912)						7,297
Total production revenue						(633)						5,055
Servicing revenue						15,000						11,595
Total mortgage banking revenue						$	14,367					$	16,650

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, 2023						December 31, 2022
Number of residential mortgage loans serviced for others						118,303						110,541
Outstanding principal balance of residential mortgage loans serviced for others						$	21,009,762					$	18,863,201
Weighted average interest rate						3.55		%				3.59		%
Remaining term (in months)						285						283

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

						Three Months Ended March 31,
						2023						2022
Beginning Balance						$	277,608					$	163,198
Additions						2,500						5,215
Acquisitions						31,138						—
Change in fair value due to principal payments						(5,384)						(7,960)
Change in fair value due to market assumption changes						(6,059)						49,110
Ending Balance						$	299,803					$	209,563

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, 2023						December 31, 2022
Discount rate – risk-free rate plus a market premium						8.95%						9.51%
Prepayment rate - based upon loan interest rate, original term and loan type						7.43%						7.54%
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						$875 - $8,000						$875 - $8,000
Escrow earnings rate – indexed to rates paid on deposit accounts with comparable average life						3.66%						4.06%
Primary/secondary mortgage rate spread						105 bps						105 bps
Delinquency rate						1.40%						2.33%

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 Financia'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 to, 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 required 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 plaintiffs' recently filed a Fourth Amended Petition to which BOKF is preparing to respond. Management is advised by counsel that, in the Tulsa County District Court action, a loss is not probable and that the loss, if any, cannot be reasonably estimated.

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 $25 million in principal 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.

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 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.

At March 31, 2023, the Company has $401 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 $94 million of unfunded commitments included in Other liabilities on the Consolidated Balance Sheets.

(7) Shareholders' Equity

On May 2, 2023, the Company declared a quarterly cash dividend of $0.54 per common share payable on or about May 30, 2023 to shareholders of record as of May 15, 2023.

Dividends declared were $0.54 per share during the three months ended March 31, 2023 and $0.53 per share during the three months ended March 31, 2022.

Accumulated Other Comprehensive Income (Loss)

AOCI includes unrealized gains and losses on available for sale ("AFS") securities. AOCI also includes unrealized losses on AFS securities that were transferred from AFS to investment securities in the second quarter of 2022. Such amounts are being amortized over the estimated remaining life of the security as an adjustment to yield, offsetting the related amortization of premium on the transferred securities. Gains and losses in AOCI are net of deferred income taxes.

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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						Investment Securities Transferred from AFS						Employee Benefit Plans												Total
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 loss, before income taxes						(639,978)						—						—												(639,978)
Federal and state income taxes						(149,781)						—						—												(149,781)
Other comprehensive loss, net of income taxes						(490,197)						—						—												(490,197)
Balance, March 31, 2022						$	(420,422)					$	—					$	2,596											$	(417,826)
Balance, Dec. 31, 2022						$	(664,618)					$	(172,337)					$	—											$	(836,955)
Net change in unrealized gain (loss)						124,045						—						—												124,045
Interest revenue, Investment securities						—						16,051						—												16,051
Other comprehensive loss, before income taxes						124,045						16,051						—												140,096
Federal and state income taxes						28,179						3,516						—												31,695
Other comprehensive income, net of income taxes						95,866						12,535						—												108,401
Balance, March 31, 2023						$	(568,752)					$	(159,802)					$	—											$	(728,554)

(8) Earnings Per Share

 

(In thousands, except share and per share amounts)						Three Months Ended March 31,
						2023						2022
Numerator:
Net income attributable to BOK Financial Corp. shareholders						$	162,368					$	62,488
Less: Earnings allocated to participating securities						1,255						451
Numerator for basic earnings per share – income available to common shareholders						161,113						62,037
Effect of reallocating undistributed earnings of participating securities						—						—
Numerator for diluted earnings per share – income available to common shareholders						$	161,113					$	62,037
Denominator:
Weighted average shares outstanding						66,849,288						68,306,107
Less:  Participating securities included in weighted average shares outstanding						517,513						493,707
Denominator for basic earnings per common share						66,331,775						67,812,400
Dilutive effect of employee stock compensation plans						—						1,451
Denominator for diluted earnings per common share						66,331,775						67,813,851
Basic earnings per share						$	2.43					$	0.91
Diluted earnings per share						$	2.43					$	0.91

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(9) Reportable Segments

Reportable segments reconciliation to the Consolidated Financial Statements for the three months ended March 31, 2023 is as follows (in thousands):

						Commercial						Consumer						Wealth Management						Funds Management and Other						BOK Financial Consolidated
Net interest revenue from external sources						$	287,646					$	21,146					$	20,940					$	22,616					$	352,348
Net interest revenue (expense) from internal sources						(21,101)						88,235						33,166						(100,300)						—
Net interest revenue (expense)						266,545						109,381						54,106						(77,684)						352,348
Net loans charged off and provision for credit losses						76						1,184						(24)						14,764						16,000
Net interest revenue after provision for credit losses						266,469						108,197						54,130						(92,448)						336,348
Other operating revenue						56,845						30,610						108,911						(18,501)						177,865
Other operating expense						73,504						50,198						82,039						100,071						305,812
Net direct contribution						249,810						88,609						81,002						(211,020)						208,401
Gain (loss) on financial instruments, net						(58)						(4,673)						—						4,731						—
Change in fair value of mortgage servicing rights						—						(6,059)						—						6,059						—
Gain (loss) on repossessed assets, net						859						14						—						(873)						—
Corporate expense allocations						17,729						11,618						12,386						(41,733)						—
Net income (loss) before taxes						232,882						66,273						68,616						(159,370)						208,401
Federal and state income taxes						56,335						15,586						16,189						(42,205)						45,905
Net income (loss)						176,547						50,687						52,427						(117,165)						162,496
Net income attributable to non-controlling interests						—						—						—						128						128
Net income (loss) attributable to BOK Financial Corp. shareholders						$	176,547					$	50,687					$	52,427					$	(117,293)					$	162,368
Average assets						$	28,162,934					$	9,934,511					$	11,663,096					$	(3,778,073)					$	45,982,468

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						74,620						89,095						277,618
Net direct contribution						123,981						11,267						6,235						(62,834)						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						12,071						(40,397)						—
Net income before taxes						109,324						(9,553)						(5,836)						(15,286)						78,649
Federal and state income taxes						26,980						(2,236)						(1,315)						(7,232)						16,197
Net income						82,344						(7,317)						(4,521)						(8,054)						62,452
Net loss attributable to non-controlling interests						—						—						—						(36)						(36)
Net income attributable to BOK Financial Corp. shareholders						$	82,344					$	(7,317)					$	(4,521)					$	(8,018)					$	62,488
Average assets						$	29,823,905					$	10,273,890					$	21,323,795					$	(10,860,516)					$	50,561,074

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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, 2023.

			Commercial						Consumer						Wealth Management						Funds Management & Other						Consolidated						Out of Scope1						In Scope2
Trading revenue			$	—					$	—					$	27,598					$	—					$	27,598					$	27,598					$	—
Customer hedging revenue			6,487						—						100						1,767						8,354						8,354						—
Retail brokerage revenue			—						—						3,844						—						3,844						—						3,844
Insurance brokerage revenue			—						—						3,306						—						3,306						—						3,306
Investment banking revenue			3,698						—						5,596						—						9,294						3,598						5,696
Brokerage and trading revenue			10,185						—						40,444						1,767						52,396						39,550						12,846
TransFund EFT network revenue			20,499						908						(17)						2						21,392						—						21,392
Merchant services revenue			2,150						8						—						—						2,158						—						2,158
Corporate card revenue			1,785						—						177						109						2,071						—						2,071
Transaction card revenue			24,434						916						160						111						25,621						—						25,621
Personal trust revenue			—						—						23,945						—						23,945						—						23,945
Corporate trust revenue			—						—						7,660						—						7,660						—						7,660
Institutional trust & retirement plan services revenue			—						—						12,835						—						12,835						—						12,835
Investment management services and other revenue			—						—						6,238						(21)						6,217						—						6,217
Fiduciary and asset management revenue			—						—						50,678						(21)						50,657						—						50,657
Commercial account service charge revenue			12,871						499						477						—						13,847						—						13,847
Overdraft fee revenue			25						4,828						20						—						4,873						—						4,873
Check card revenue			—						5,638						—						1						5,639						—						5,639
Automated service charge and other deposit fee revenue			237						1,313						59						—						1,609						—						1,609
Deposit service charges and fees			13,133						12,278						556						1						25,968						—						25,968
Mortgage production revenue			—						(633)						—						—						(633)						(633)						—
Mortgage servicing revenue			—						15,558						—						(558)						15,000						15,000						—
Mortgage banking revenue			—						14,925						—						(558)						14,367						14,367						—
Other revenue			8,083						2,462						17,073						(10,648)						16,970						8,560						8,410
Total fees and commissions revenue			$	55,835					$	30,581					$	108,911					$	(9,348)					$	185,979					$	62,477					$	123,502

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, 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.

(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 Compan'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.

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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, 2023 and 2022, respectively. Transfers between significant other observable inputs and significant unobservable inputs during the three months ended March 31, 2023 and 2022 were immaterial.

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, 2023 or December 31, 2022.

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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, 2023 (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						$	5,618					$	4,878					$	740					$	—
Residential agency mortgage-backed securities						2,210,721						—						2,210,721						—
Municipal securities						37,455						—						37,455						—
Asset-backed securities						10,194						—						10,194						—
Other trading securities						30,370						—						30,370						—
Total trading securities						2,294,358						4,878						2,289,480						—
Available for sale securities:
U.S. Treasury						914						914						—						—
Municipal securities						634,207						—						634,207						—
Residential agency mortgage-backed securities						6,022,708						—						6,022,708						—
Residential non-agency mortgage-backed securities						651,351						—						651,351						—
Commercial agency mortgage-backed securities						4,628,188						—						4,628,188						—
Other debt securities						473						—						—						473
Total available for sale securities						11,937,841						914						11,936,454						473
Fair value option securities:
U.S. Treasury						106,307						106,307						—						—
Residential agency mortgage-backed securities						220,083						—						220,083						—
Total fair value option securities						326,390						106,307						220,083						—
Residential mortgage loans held for sale1						74,175						—						67,024						7,151
Mortgage servicing rights2						299,803						—						—						299,803
Derivative contracts, net of cash collateral3						394,291						303						393,988						—
Liabilities:
Derivative contracts, net of cash collateral3						510,483						3,822						506,661						—

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 77.43% 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.

3See Note 3 for detail of fair value of derivative contracts by contract type. Derivative contracts in asset and liability positions that were valued based on quoted prices in active markets for identical instruments (Level 1) are primarily exchange-traded interest rate derivative contracts held for trading purposes.

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The fair value of financial assets and liabilities measured on a recurring basis was as follows as of December 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						$	9,823					$	4,970					$	4,853					$	—
Residential agency mortgage-backed securities						4,406,848						—						4,406,848						—
Municipal securities						21,484						—						21,484						—
Other trading securities						26,006						—						26,006						—
Total trading securities						4,464,161						4,970						4,459,191						—
Available for sale securities:
U.S. Treasury						898						898						—						—
Municipal securities						624,500						—						624,500						—
Residential agency mortgage-backed securities						5,814,496						—						5,814,496						—
Residential non-agency mortgage-backed securities						577,576						—						577,576						—
Commercial agency mortgage-backed securities						4,475,917						—						4,475,917						—
Other debt securities						473						—						—						473
Total available for sale securities						11,493,860						898						11,492,489						473
Fair value option securities — Residential agency mortgage-backed securities						296,590						—						296,590						—
Residential mortgage loans held for sale1						75,272						—						68,054						7,218
Mortgage servicing rights2						277,608						—						—						277,608
Derivative contracts, net of cash collateral3						880,343						2,110						878,233						—
Liabilities:
Derivative contracts, net of cash collateral3						554,900						16						554,884						—

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 77.55% 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.

3See Note 3 for detail of fair value of derivative contracts by contract type. Derivative contracts in asset and liability positions that were valued based on quoted prices in active markets for identical instruments (Level 1) are primarily exchange-traded interest rate derivative contracts held for trading purposes.

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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, 2023 for which the fair value was adjusted during the three months ended March 31, 2023:

																					Fair Value Adjustments for the
			Carrying Value at March 31, 2023																		Three Months Ended Mar. 31, 2023 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			$	—					$	—					$	14,040					$	1,991					$	—
Real estate and other repossessed assets			—						547						—						—						(101)

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 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, 2023 follows (in thousands):

Fair Value

Valuation Technique(s)

Unobservable Input

Range (Weighted Average)

Nonaccruing loans

$

14,040

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

88% - 88% (88%)1

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

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.

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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 are measured at fair value on a non-recurring basis as of March 31, 2023 (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						$	792,371					$	792,371					$	792,371					$	—					$	—
Interest-bearing cash and cash equivalents						571,613						571,613						571,613						—						—
Trading securities:
U.S. government securities						5,618						5,618						4,878						740						—
Residential agency mortgage-backed securities						2,210,721						2,210,721						—						2,210,721						—
Municipal securities						37,455						37,455						—						37,455						—
Asset-backed securities						10,194						10,194						—						10,194						—
Other trading securities						30,370						30,370						—						30,370						—
Total trading securities						2,294,358						2,294,358						4,878						2,289,480						—
Investment securities:
Municipal securities						153,739						160,866						—						33,158						127,708
Residential agency mortgage-backed securities						2,264,922						2,118,538						—						2,118,538						—
Commercial agency mortgage-backed securities						15,684						14,861						—						14,861						—
Other debt securities						14,288						13,421						—						13,421						—
Total investment securities						2,448,633						2,307,686						—						2,179,978						127,708
Allowance for credit losses						(497)						—						—						—						—
Investment securities, net of allowance						2,448,136						2,307,686						—						2,179,978						127,708
Available for sale securities:
U.S. Treasury						914						914						914						—						—
Municipal securities						634,207						634,207						—						634,207						—
Residential agency mortgage-backed securities						6,022,708						6,022,708						—						6,022,708						—
Residential non-agency mortgage-backed securities						651,351						651,351						—						651,351						—
Commercial agency mortgage-backed securities						4,628,188						4,628,188						—						4,628,188						—
Other debt securities						473						473						—						—						473
Total available for sale securities						11,937,841						11,937,841						914						11,936,454						473
Fair value option securities:
U.S. Treasury						106,307						106,307						106,307						—						—
Residential agency mortgage-backed securities						220,083						220,083						—						220,083						—
Total fair value option securities						326,390						326,390						106,307						220,083						—
Residential mortgage loans held for sale						74,175						74,175						—						67,024						7,151
Loans:
Commercial						14,217,349						14,129,311						—						—						14,129,311
Commercial real estate						4,815,316						4,703,787						—						—						4,703,787
Loans to individuals						3,717,388						3,547,326						—						—						3,547,326
Total loans						22,750,053						22,380,424						—						—						22,380,424
Allowance for loan losses						(249,460)						—						—						—						—
Loans, net of allowance						22,500,593						22,380,424						—						—						22,380,424
Mortgage servicing rights						299,803						299,803						—						—						299,803
Derivative instruments with positive fair value, net of cash collateral						394,291						394,291						303						393,988						—
Deposits with no stated maturity						31,004,137						31,004,137						—						—						31,004,137
Time deposits						1,576,610						1,547,154						—						—						1,547,154
Other borrowed funds						6,335,609						6,333,599						—						—						6,333,599
Subordinated debentures						131,148						125,077						—						125,077						—
Derivative instruments with negative fair value, net of cash collateral						510,483						510,483						3,822						506,661						—

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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 are measured at fair value on a non-recurring basis as of December 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						$	943,810					$	943,810					$	943,810					$	—					$	—
Interest-bearing cash and cash equivalents						457,906						457,906						457,906						—						—
Trading securities:
U.S. government securities						9,823						9,823						4,970						4,853						—
Residential agency mortgage-backed securities						4,406,848						4,406,848						—						4,406,848						—
Municipal securities						21,484						21,484						—						21,484						—
Other trading securities						26,006						26,006						—						26,006						—
Total trading securities						4,464,161						4,464,161						4,970						4,459,191						—
Investment securities:
Municipal securities						170,629						176,621						—						38,106						138,515
Residential agency mortgage-backed securities						2,315,219						2,143,360						—						2,143,360						—
Commercial agency mortgage-backed securities						15,609						14,588						—						14,588						—
Other debt securities						12,788						12,199						—						12,199						—
Total investment securities						2,514,245						2,346,768						—						2,208,253						138,515
Allowance for credit losses						(558)						—						—						—						—
Investment securities, net of allowance						2,513,687						2,346,768						—						2,208,253						138,515
Available for sale securities:
U.S. Treasury						898						898						898						—						—
Municipal securities						624,500						624,500						—						624,500						—
Residential agency mortgage-backed securities						5,814,496						5,814,496						—						5,814,496						—
Residential non-agency mortgage-backed securities						577,576						577,576						—						577,576						—
Commercial agency mortgage-backed securities						4,475,917						4,475,917						—						4,475,917						—
Other debt securities						473						473						—						—						473
Total available for sale securities						11,493,860						11,493,860						898						11,492,489						473
Fair value option securities — Residential agency mortgage-backed securities						296,590						296,590						—						296,590						—
Residential mortgage loans held for sale						75,272						75,272						—						68,054						7,218
Loans:
Commercial						14,212,499						13,905,765						—						—						13,905,765
Commercial real estate						4,606,777						4,454,048						—						—						4,454,048
Loans to individuals						3,737,874						3,531,410						—						—						3,531,410
Total loans						22,557,150						21,891,223						—						—						21,891,223
Allowance for loan losses						(235,704)						—						—						—						—
Loans, net of allowance						22,321,446						21,891,223						—						—						21,891,223
Mortgage servicing rights						277,608						277,608						—						—						277,608
Derivative instruments with positive fair value, net of cash collateral						880,343						880,343						2,110						878,233						—
Deposits with no stated maturity						33,018,863						33,018,863						—						—						33,018,863
Time deposits						1,461,842						1,431,245						—						—						1,431,245
Other borrowed funds						7,007,285						7,005,305						—						—						7,005,305
Subordinated debentures						131,205						121,497						—						121,497						—
Derivative instruments with negative fair value, net of cash collateral						554,900						554,900						16						554,884						—

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, 2023 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, 2023																		December 31, 2022
						Average Balance						Revenue/ Expense						Yield/ Rate						Average Balance						Revenue/ Expense						Yield/ Rate
Assets
Interest-bearing cash and cash equivalents						$	616,596					$	6,506					4.28		%				$	568,307					$	5,822					4.06		%
Trading securities						3,031,969						34,073						4.52		%				3,086,985						28,473						3.70		%
Investment securities, net of allowance						2,473,796						9,017						1.46		%				2,535,305						9,223						1.46		%
Available for sale securities						11,738,693						89,112						2.87		%				10,953,851						73,317						2.54		%
Fair value option securities						300,372						3,893						5.17		%				92,012						931						4.40		%
Restricted equity securities						316,724						5,808						7.34		%				216,673						3,088						5.70		%
Residential mortgage loans held for sale						65,769						979						5.79		%				98,613						1,390						5.56		%
Loans						22,476,247						369,626						6.67		%				21,976,004						331,649						5.99		%
Allowance for loan losses						(238,909)																		(242,450)
Loans, net of allowance						22,237,338						369,626						6.74		%				21,733,554						331,649						6.06		%
Total earning assets						40,781,257						519,014						5.06		%				39,285,300						453,893						4.53		%
Receivable on unsettled securities sales						177,312																		194,996
Cash and other assets						5,023,899																		5,729,322
Total assets						$	45,982,468																	$	45,209,618
Liabilities and equity
Interest-bearing deposits:
Transaction						$	18,639,900					$	87,936					1.91		%				$	18,898,315					$	60,893					1.28		%
Savings						958,443						248						0.10		%				969,275						205						0.08		%
Time						1,477,720						7,090						1.95		%				1,417,606						4,476						1.25		%
Total interest-bearing deposits						21,076,063						95,274						1.83		%				21,285,196						65,574						1.22		%
Funds purchased and repurchase agreements						1,759,237						14,450						3.33		%				1,046,447						5,407						2.05		%
Other borrowings						4,512,280						52,588						4.73		%				2,523,195						25,961						4.08		%
Subordinated debentures						131,166						2,069						6.40		%				131,180						2,038						6.16		%
Total interest-bearing liabilities						27,478,746						164,381						2.43		%				24,986,018						98,980						1.57		%
Non-interest bearing demand deposits						12,406,408																		14,176,189
Due on unsettled securities purchases						316,738																		575,957
Other liabilities						939,553																		853,134
Total equity						4,841,023																		4,618,320
Total liabilities and equity						$	45,982,468																	$	45,209,618
Tax-equivalent Net Interest Revenue												$	354,633					2.63		%										$	354,913					2.96		%
Tax-equivalent Net Interest Revenue to Earning Assets																		3.45		%																3.54		%
Less tax-equivalent adjustment												2,285																		2,287
Net Interest Revenue												352,348																		352,626
Provision for credit losses												16,000																		15,000
Other operating revenue												177,865																		197,086
Other operating expense												305,812																		318,456
Income before taxes												208,401																		216,256
Federal and state income taxes												45,905																		47,864
Net income												162,496																		168,392
Net income (loss) attributable to non-controlling interests												128																		(37)
Net income attributable to BOK Financial Corp. shareholders												$	162,368																	$	168,429
Earnings Per Average Common Share Equivalent:
Basic												$	2.43																	$	2.51
Diluted												$	2.43																	$	2.51

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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(In thousands, except per share data)						Three Months Ended
						September 30, 2022																		June 30, 2022
						Average Balance						Revenue /Expense						Yield / Rate						Average Balance						Revenue / Expense						Yield / Rate
Assets
Interest-bearing cash and cash equivalents						$	748,263					$	3,520					1.87		%				$	843,619					$	1,737					0.83		%
Trading securities						3,178,068						22,772						2.72		%				4,166,954						23,009						2.00		%
Investment securities, net of allowance						2,593,989						9,207						1.42		%				610,983						3,585						2.35		%
Available for sale securities						10,306,257						59,144						2.21		%				12,258,072						58,882						1.84		%
Fair value option securities						36,846						286						2.98		%				54,832						437						2.92		%
Restricted equity securities						173,656						2,703						6.23		%				167,732						1,384						3.30		%
Residential mortgage loans held for sale						132,685						1,684						5.05		%				148,183						1,559						4.22		%
Loans						21,599,232						265,997						4.89		%				21,057,714						205,694						3.92		%
Allowance for loan losses						(241,136)																		(246,064)
Loans, net of allowance						21,358,096						265,997						4.94		%				20,811,650						205,694						3.96		%
Total earning assets						38,527,860						365,313						3.71		%				39,062,025						296,287						2.96		%
Receivable on unsettled securities sales						219,113																		457,165
Cash and other assets						6,372,229																		7,769,208
Total assets						$	45,119,202																	$	47,288,398
Liabilities and equity
Interest-bearing deposits:
Transaction						$	19,556,806					$	31,266					0.63		%				$	21,037,294					$	11,454					0.22		%
Savings						978,596						135						0.05		%				981,493						76						0.03		%
Time						1,409,069						3,314						0.93		%				1,373,036						2,332						0.68		%
Total interest-bearing deposits						21,944,471						34,715						0.63		%				23,391,823						13,862						0.24		%
Funds purchased and repurchase agreements						800,759						1,445						0.72		%				1,224,134						1,608						0.53		%
Other borrowings						1,528,887						8,988						2.33		%				1,301,358						3,286						1.01		%
Subordinated debentures						131,199						1,677						5.07		%				131,219						1,473						4.50		%
Total interest-bearing liabilities						24,405,316						46,825						0.76		%				26,048,534						20,229						0.31		%
Non-interest bearing demand deposits						15,105,305																		15,202,597
Due on unsettled securities purchases						331,428																		380,332
Other liabilities						501,731																		924,605
Total equity						4,775,422																		4,732,330
Total liabilities and equity						$	45,119,202																	$	47,288,398
Tax-equivalent Net Interest Revenue												$	318,488					2.95		%										$	276,058					2.65		%
Tax-equivalent Net Interest Revenue to Earning Assets																		3.24		%																2.76		%
Less tax-equivalent adjustment												2,163																		2,040
Net Interest Revenue												316,325																		274,018
Provision for credit losses												15,000																		—
Other operating revenue												189,698																		168,617
Other operating expense												294,751																		273,655
Income before taxes												196,272																		168,980
Federal and state income taxes												39,681																		36,122
Net income												156,591																		132,858
Net income attributable to non-controlling interests												81																		12
Net income attributable to BOK Financial Corp. shareholders												$	156,510																	$	132,846
Earnings Per Average Common Share Equivalent:
Basic												$	2.32																	$	1.96
Diluted												$	2.32																	$	1.96

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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(In thousands, except per share data)						Three Months Ended
						March 31, 2022
						Average Balance						Revenue / Expense						Yield / Rate
Assets
Interest-bearing cash and cash equivalents						$	1,050,409					$	473					0.18		%
Trading securities						8,537,390						41,041						1.71		%
Investment securities, net of allowance						195,198						2,475						5.07		%
Available for sale securities						13,092,422						58,018						1.77		%
Fair value option securities						75,539						491						2.81		%
Restricted equity securities						164,484						1,107						2.69		%
Residential mortgage loans held for sale						179,697						1,394						3.11		%
Loans						20,463,662						180,073						3.57		%
Allowance for loan losses						(254,191)
Loans, net of allowance						20,209,471						180,073						3.61		%
Total earning assets						43,504,610						285,072						2.58		%
Receivable on unsettled securities sales						375,616
Cash and other assets						6,680,848
Total assets						$	50,561,074
Liabilities and equity
Interest-bearing deposits:
Transaction						$	22,763,479					$	5,343					0.10		%
Savings						947,407						73						0.03		%
Time						1,589,039						2,182						0.56		%
Total interest-bearing deposits						25,299,925						7,598						0.12		%
Funds purchased and repurchase agreements						2,004,466						4,698						0.95		%
Other borrowings						1,148,440						1,090						0.38		%
Subordinated debentures						131,228						1,302						4.02		%
Total interest-bearing liabilities						28,584,059						14,688						0.21		%
Non-interest bearing demand deposits						15,062,282
Due on unsettled securities purchases						519,097
Other liabilities						1,247,785
Total equity						5,147,851
Total liabilities and equity						$	50,561,074
Tax-equivalent Net Interest Revenue												$	270,384					2.37		%
Tax-equivalent Net Interest Revenue to Earning Assets																		2.44		%
Less tax-equivalent adjustment												1,973
Net Interest Revenue												268,411
Provision for credit losses												—
Other operating revenue												87,856
Other operating expense												277,618
Income before taxes												78,649
Federal and state income taxes												16,197
Net income												62,452
Net income (loss) attributable to non-controlling interests												(36)
Net income attributable to BOK Financial Corp. shareholders												$	62,488
Earnings Per Average Common Share Equivalent:
Basic												$	0.91
Diluted												$	0.91

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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Quarterly Earnings Trends – Unaudited

(In thousands, except share and per share data)

						Three Months Ended
						Mar. 31, 2023						Dec. 31, 2022						Sep. 30, 2022						June 30, 2022						Mar. 31, 2022
Interest revenue						$	516,729					$	451,606					$	363,150					$	294,247					$	283,099
Interest expense						164,381						98,980						46,825						20,229						14,688
Net interest revenue						352,348						352,626						316,325						274,018						268,411
Provision for credit losses						16,000						15,000						15,000						—						—
Net interest revenue after provision for credit losses						336,348						337,626						301,325						274,018						268,411
Other operating revenue
Brokerage and trading revenue						52,396						63,008						61,006						44,043						(27,079)
Transaction card revenue						25,621						27,136						25,974						26,940						24,216
Fiduciary and asset management revenue						50,657						49,899						50,190						49,838						46,399
Deposit service charges and fees						25,968						26,429						28,703						28,500						27,004
Mortgage banking revenue						14,367						10,065						11,282						11,368						16,650
Other revenue						16,970						17,034						15,479						12,684						10,445
Total fees and commissions						185,979						193,571						192,634						173,373						97,635
Other gains (losses), net						2,251						8,427						979						(7,639)						(1,644)
Gain (loss) on derivatives, net						(1,344)						4,548						(17,009)						(13,569)						(46,981)
Loss on fair value option securities, net						(2,962)						(2,568)						(4,368)						(2,221)						(11,201)
Change in fair value of mortgage servicing rights						(6,059)						(2,904)						16,570						17,485						49,110
Gain (loss) on available for sale securities, net						—						(3,988)						892						1,188						937
Total other operating revenue						177,865						197,086						189,698						168,617						87,856
Other operating expense
Personnel						182,145						186,419						170,348						154,923						159,228
Business promotion						8,569						7,470						6,127						6,325						6,513
Charitable contributions to BOKF Foundation						—						2,500						—						—						—
Professional fees and services						13,048						18,365						14,089						12,475						11,413
Net occupancy and equipment						28,459						29,227						29,296						27,489						30,855
Insurance						7,315						4,677						4,306						4,728						4,283
Data processing and communications						44,802						43,048						41,743						41,280						39,836
Printing, postage and supplies						3,893						3,890						4,349						3,929						3,689
Amortization of intangible assets						3,391						3,736						3,943						4,049						3,964
Mortgage banking costs						5,782						9,016						9,504						9,437						7,877
Other expense						8,408						10,108						11,046						9,020						9,960
Total other operating expense						305,812						318,456						294,751						273,655						277,618
Net income before taxes						208,401						216,256						196,272						168,980						78,649
Federal and state income taxes						45,905						47,864						39,681						36,122						16,197
Net income						162,496						168,392						156,591						132,858						62,452
Net income (loss) attributable to non-controlling interests						128						(37)						81						12						(36)
Net income attributable to BOK Financial Corporation shareholders						$	162,368					$	168,429					$	156,510					$	132,846					$	62,488
Earnings per share:
Basic						$2.43						$2.51						$2.32						$1.96						$0.91
Diluted						$2.43						$2.51						$2.32						$1.96						$0.91
Average shares used in computation:
Basic						66,331,775						66,627,955						67,003,199						67,453,748						67,812,400
Diluted						66,331,775						66,627,955						67,004,623						67,455,172						67,813,851

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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 1A. Risk Factors

There are no material changes from the risk factors set forth under Part I, Item 1A. "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, except as described below.

Recent events impacting the financial services industry could adversely affect BOK Financial's business.

Recent events affecting the financial services industry have generated significant market volatility among publicly traded bank holding companies with particular focus on regional banks. These events occurred following a period of rapidly rising interest rates, which resulted in unrealized losses in longer duration securities and loans held by banks as well as more competition for bank deposits. These recent events have, and may continue to, adversely impact the market price and volatility of the Company’s stock. Potentially adverse changes to laws or regulations governing banks and bank holding companies may occur, including but not limited to, increased regulatory scrutiny in the course of routine examinations or otherwise and new regulations directed towards banks of similar size, which could increase the costs of doing business. In addition, the cost of resolving the recent bank failures may prompt the FDIC to increase its premiums above the recently increased levels or to issue additional special assessments, which could result in higher costs.

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, 2023.

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, 2023						109,194						$	101.08					80,550						4,605,044
February 1 to February 28, 2023						140,769						$	102.72					126,521						4,478,523
March 1 to March 31, 2023						240,000						$	96.27					240,000						4,238,523
Total						489,963												447,071

1On November 1, 2022, 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, 2023, the Company had repurchased 761,477 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.

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Item 6. Exhibits

31.1			Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2			Certification 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
32			Certification 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
101			Interactive 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 3, 2023                                                                  

/s/ Martin E. Grunst
Martin E. Grunst
Executive Vice President and
Chief Financial Officer

    

/s/ Michael J. Rogers
Michael J. Rogers
Senior Vice President and
Chief Accounting Officer

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