BOK Financial Corporation Reports Quarterly Earnings of $133 million or $1.96 Per Share in the Second Quarter

Jul 27th, 2022 11:55 EST

TULSA, Okla., July 27, 2022 (GLOBE NEWSWIRE) -- BOK Financial Corporation (NASD: BOKF) -

CEO Commentary

Stacy Kymes, president and chief executive officer, stated, “The quarter represented strong earnings performance from across the company, demonstrating both our diversity and breadth. Loans are on a pace to exceed a 10 percent growth rate for the year, excluding the PPP program. While loan growth was exceptional, new loan commitments for the quarter grew at an even faster pace and broadly across our business region. Our net interest margin improved from the mix of earning assets and a balance sheet structure that is currently positioned to benefit from rising rates. Our trading businesses rebounded from the volatile first quarter. We had a strong quarter in commodity hedging and syndication activity as our market share in the energy space continues to expand. Despite market volatility and the resulting decrease in the value of assets under management and administration, our fiduciary fees increased. Transaction card revenues accelerated. We entered the year focused on growing top-line revenue and our team has responded, delivering those results across the board. While we understand these are unusual economic times, we are committed to prudent growth. The business profile of our geographic footprint remains exceptional and, when combined with BOKF's long-held credit discipline, will serve us well if the economy slows in future periods.”

Second Quarter 2022 Financial Highlights(Unless indicated otherwise, all comparisons are to the prior quarter)

  • Net income was $132.8 million or $1.96 per diluted share for the second quarter of 2022 and $62.5 million or $0.91 per diluted share for the first quarter of 2022.
  • Net interest revenue totaled $274.0 million, an increase of $5.6 million. Net interest margin was 2.76 percent compared to 2.44 percent. In response to rising inflation, the Federal Reserve has increased the federal funds rate 150 basis points since the beginning of 2022. The resulting impact on market interest rates has started to increase net interest margin.
  • Fees and commissions revenue increased $75.7 million to $173.4 million. Brokerage and trading revenue increased $71.1 million following trading losses in the prior quarter. Revenue growth in all other fee-generating business activities was partially offset by a $5.3 million decrease in mortgage banking revenue.
  • The net benefit of the changes in fair value of mortgage servicing rights and related economic hedges was $1.9 million for the second quarter of 2022 compared to a net cost of $8.4 million for the first quarter of 2022 due to reduced price sensitivity in the second quarter.
  • Operating expense decreased $4.0 million to $273.7 million. Personnel expense decreased $4.3 million, primarily due to lower share-based compensation expense. Non-personnel expense was consistent with the prior quarter.
  • Period-end loans increased $617 million to $21.3 billion at June 30, 2022. Commercial loans increased $696 million while period-end Paycheck Protection Program (“PPP”) loans decreased $94 million to $43 million. In addition, unfunded loan commitments grew by $979 million. Average outstanding loan balances were $21.1 billion, a $594 million increase.
  • No provision for expected credit losses was necessary for the second quarter of 2022, consistent with the prior quarter. An increase in required provision due to loan growth and changes in our economic outlook was offset by a sustained trend of improving credit quality metrics. The combined allowance for credit losses totaled $283 million or 1.33 percent of outstanding loans at June 30, 2022. The combined allowance for credit losses was $283 million or 1.37 percent of outstanding loans at March 31, 2022.
  • Average deposits decreased $1.8 billion to $38.6 billion while period-end deposits decreased $807 million to $38.6 billion. Average interest-bearing deposits decreased $1.9 billion and average demand deposits grew $140 million.
  • The company's common equity Tier 1 capital ratio was 11.61 percent at June 30, 2022. In addition, the company's Tier 1 capital ratio was 11.63 percent, total capital ratio was 12.59 percent, and leverage ratio was 9.12 percent at June 30, 2022. At March 31, 2022, the company's common equity Tier 1 capital ratio was 11.30 percent, Tier 1 capital ratio was 11.31 percent, total capital ratio was 12.25 percent, and leverage ratio was 8.47 percent.
  • The company repurchased 294,084 shares of common stock at an average price of $82.98 a share in the second quarter of 2022.

Second Quarter 2022 Segment Highlights

  • Commercial Banking contributed $104.8 million to net income in the second quarter of 2022, an increase of $22.5 million. Combined net interest revenue and fee revenue increased $32.4 million due to loan growth, increased spreads on deposits sold to the Funds Management unit, and loan syndication fees. Net loans charged-off decreased $6.8 million. Transaction card revenue increased $2.7 million due to elevated transaction volumes in the second quarter. Personnel expense increased $3.3 million, primarily due to increased incentive compensation costs with growth in loans and syndication activity. The second quarter also included a $5.8 million write-down of a repossessed equity interest in a midstream energy entity. Average loans increased $640 million or 4 percent to $17.3 billion. Average deposits decreased $661 million or 3 percent.
  • Consumer Banking contributed $1.2 million to net income in the second quarter of 2022 compared to a prior quarter net loss of $7.3 million. The net benefit of the changes in fair value of mortgage servicing rights and related economic hedges was $1.9 million for the second quarter of 2022 compared to a net cost of $8.4 million for the first quarter of 2022. Combined net interest revenue and fee revenue increased $2.7 million. Net interest revenue increased $6.6 million, primarily due to an increase in the spread on deposits sold to our Funds Management unit. Fees and commissions revenue decreased $3.9 million due to lower mortgage production volumes combined with narrowing margins. Operating expense increased $3.9 million due to a combination of increased business promotion expense and increased accruals for mortgage loan default servicing and loss mitigation costs. Average loans were relatively consistent with the previous quarter. Average deposits increased $130 million or 1 percent to $8.9 billion.
  • Wealth Management contributed $27.3 million to net income in the second quarter of 2022 compared to a net loss of $4.5 million in the first quarter of 2022. Our diverse set of investment-focused businesses, which include trading in fixed income securities and other financial instruments and providing wealth management services to institutional and private wealth clients, produced total net interest and fee revenues of $124.5 million, an increase of $43.7 million. Total revenue from trading activities increased $47.4 million. Market disruptions during the first quarter of 2022 reduced demand for low-coupon, fixed-rate U.S. government agency residential mortgage-backed securities. These securities were fully sold during the second quarter. Growth in money market fund revenue, seasonal tax preparation fees and a reduction in fee waivers combined to increase fiduciary and asset management revenue $6.6 million. This increase was partially offset by a $3.2 million reduction in asset under management billable fees, consistent with market driven declines in assets under management. Operating expense increased $1.8 million, primarily due to increased volume-driven incentive compensation costs and a full quarter's impact of annual merit increases. Average loans increased $39 million or 2 percent to $2.2 billion. Average deposits decreased $1.1 billion or 12 percent to $8.5 billion as customers redeployed deposits into higher yielding alternatives. Assets under management were $96.0 billion, a decrease of $5.1 billion.

Net Interest Revenue

Net interest revenue was $274.0 million for the second quarter of 2022 compared to $268.4 million for the first quarter of 2022. Net interest margin was 2.76 percent compared to 2.44 percent. In response to rising inflation, the Federal Reserve has increased the federal funds rate 150 basis points since the beginning of 2022. The resulting impact on market interest rates has started to increase net interest margin as our earning assets reprice at a higher rate and faster pace than our interest-bearing liabilities.

Average earning assets decreased $4.4 billion. Average trading securities decreased $4.4 billion as we reduced our inventory of low-coupon mortgage-backed securities and repositioned the trading portfolio in response to rising mortgage interest rates. Average loan balances increased $594 million, largely due to growth in commercial loans, partially offset by a decrease in PPP loans. Average available for sale securities decreased $834 million while investment securities increased $416 million. We transferred $2.4 billion in U.S. government agency mortgage-backed securities from available for sale to investment securities late in the second quarter to limit the effect of future rate increases on the tangible common equity ratio. The transfer of securities did not significantly affect net interest revenue or net interest margin. Average interest bearing cash and cash equivalents decreased $207 million. Funds purchased and repurchase agreements decreased $780 million while other borrowings increased $153 million.

The yield on average earning assets was 2.96 percent, a 38 basis point increase. The loan portfolio yield increased 35 basis points to 3.92 percent. The yield on trading securities was up 29 basis points to 2.00 percent. The yield on the available for sale securities portfolio increased 7 basis points to 1.84 percent. The yield on investment securities decreased 272 basis points due to the transfer of securities from the available for sale portfolio to the investment portfolio. The yield on interest-bearing cash and cash equivalents increased 65 basis points.

Funding costs were 0.31 percent, a 10 basis point increase. The cost of interest-bearing deposits increased 12 basis points to 0.24 percent. The cost of funds purchased and repurchase agreements decreased 42 basis points to 0.53 percent while the cost of other borrowings increased 63 basis points to 1.01 percent. The benefit to net interest margin from assets funded by non-interest liabilities was 11 basis points, an increase of 4 basis points.

Operating Revenue

Fees and commissions revenue totaled $173.4 million for the second quarter of 2022, a $75.7 million increase compared to the first quarter of 2022.

Brokerage and trading revenue increased $71.1 million to $44.0 million, rebounding from a net loss of $27.1 million. Trading revenue increased $66.0 million. Disruption in the fixed income markets related to uncertainty around rising inflation and interest rates adversely affected the value of trading securities during the first quarter of 2022. During the second quarter, we fully sold our inventory of low-coupon, U.S. government agency residential mortgage-backed securities. Trading activity in current-coupon instruments has returned to more normal levels. Investment banking revenue increased $4.2 million, largely due to the timing of commercial loan syndication activity.

Fiduciary and asset management revenue increased $3.4 million, primarily due to an increase in money market fund revenue, a reduction of fee waivers, and seasonal tax preparation fees. These increases were partially offset by a reduction in asset under management billable fees, consistent with market-driven declines in assets under management. We voluntarily waived certain administration fees on the Cavanal Hill money market funds in order to maintain positive yields during the low short-term interest rate environment.

Transaction card revenue increased $2.7 million and deposit service charges increased $1.5 million, both largely affected by changes in customer activity as transaction volumes recover from the pandemic.

Mortgage banking revenue decreased $5.3 million. Rapidly rising mortgage interest rates and continued inventory shortages have adversely affected both loan production volume and margins. Mortgage loan production volume, which includes funded loans and changes in unfunded commitments, decreased $102 million to $306 million. Competitive pricing pressure and a significant decrease in refinancing opportunities, down to 19 percent of total production, have reduced margins. Production revenue, which includes realized gains on loans sold and unrealized gains and losses on our mortgage commitment pipeline and related hedges, as a percentage of production volume, decreased 140 basis points to (0.16) percent.

Other gains and losses, net decreased $6.0 million, primarily related to a write-down of a repossessed equity interest in a midstream entity.

Operating Expense

Total operating expense was $273.7 million for the second quarter of 2022, a decrease of $4.0 million compared to the first quarter of 2022.

Personnel expense decreased $4.3 million. Deferred compensation expense, which is largely offset by a decrease in the value of related rabbi trust investments, decreased $4.8 million. Share-based incentive compensation expense decreased $3.9 million resulting from changes in vesting assumptions. Employee benefits expense decreased $2.4 million primarily due to a seasonal decrease in payroll taxes. These decreases were partially offset by an increase of $5.0 million in cash-based incentive compensation largely related to growing commercial activity and an increase of $1.8 million in regular compensation expense as we recognized a full quarter of expense related to annual merit increases.

Non-personnel expense was $118.7 million, consistent with the first quarter of 2022. Increases in mortgage banking expense, data processing and communications expense, and professional fees and services expense were offset by a decline in net occupancy and equipment expense and other expense.

Loans, Deposits and Capital

Loans

Outstanding loans were $21.3 billion at June 30, 2022, a $617 million increase compared to March 31, 2022 due to growth in commercial loans. Unfunded loan commitments also grew by $979 million during the second quarter.

Outstanding commercial loan balances increased $696 million, with growth in all categories.

Healthcare sector loan balances increased $255 million, totaling $3.7 billion or 17 percent of total loans. Our healthcare sector loans primarily consist of $3.0 billion 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, which serves to help diversify risks specific to a single facility.

Energy loan balances increased $195 million to $3.4 billion or 16 percent of total loans. The majority of this portfolio is first lien, senior secured, reserve-based lending to oil and gas producers, which we believe is the lowest risk form of energy lending. Approximately 72 percent of committed production loans are secured by properties primarily producing oil. The remaining 28 percent is secured by properties primarily producing natural gas. Unfunded energy loan commitments were $3.4 billion at June 30, 2022, an increase of $342 million over March 31, 2022.

General business loans increased $175 million to $3.1 billion or 14 percent of total loans. General business loans include $1.6 billion of wholesale/retail loans and $1.5 billion of loans from other commercial industries.

Services sector loan balances increased $70 million to $3.4 billion or 16 percent of total loans. Services loans consist of a large number of loans to a variety of businesses, including Native American tribal and state and local municipal government entities, Native American tribal casino operations, foundations and not-for-profit organizations, educational services and specialty trade contractors.

Commercial real estate loan balances increased $5.2 million and represent 19 percent of total loans. Loans secured by industrial facilities increased $42 million to $954 million while loans secured by retail facilities decreased $30 million to $637 million. Other changes include an increase of $11 million in multifamily residential loans, fully offset by a decrease in other real estate loans.

PPP loan balances decreased $94 million to $43 million, or less than 1 percent of the total loans balance.

Loans to individuals increased $10 million and represent 17 percent of total loans. Total residential mortgage loans increased $32 million while personal loans decreased $22 million.

Deposits

Period-end deposits totaled $38.6 billion at June 30, 2022, an $807 million decrease as customers begin to deploy cash resources following the savings trend during the pandemic. Interest-bearing transaction account balances decreased by $1.1 billion while demand deposits increased $478 million. Period-end Wealth Management deposits decreased $587 million, Commercial Banking deposits decreased $104 million, and Consumer Banking deposits declined by $138 million. Average deposits were $38.6 billion at June 30, 2022, a $1.8 billion decrease. Average interest-bearing transaction account balances decreased $1.7 billion, and average demand deposit account balances increased $140 million.

Capital

The company's common equity Tier 1 capital ratio was 11.61 percent at June 30, 2022. In addition, the company's Tier 1 capital ratio was 11.63 percent, total capital ratio was 12.59 percent, and leverage ratio was 9.12 percent at June 30, 2022. At the beginning of 2020, we elected to delay the regulatory capital impact of the transition of the allowance for credit losses from the incurred loss methodology to CECL for two years, followed by a three-year transition period. This election added 10 basis points to the company's common equity tier 1 capital ratio at June 30. At March 31, 2022, the company's common equity Tier 1 capital ratio was 11.30 percent, Tier 1 capital ratio was 11.31 percent, total capital ratio was 12.25 percent, and leverage ratio was 8.47 percent.

The company's tangible common equity ratio, a non-GAAP measure, was 8.16 percent at June 30, 2022 and 8.13 percent at March 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. The company has elected to exclude unrealized gains and losses from available for sale securities from its calculation of Tier 1 capital for regulatory capital purposes, consistent with the treatment under the previous capital rules.

The company repurchased 294,084 shares of common stock at an average price of $82.98 a share in the second quarter of 2022. We view share buybacks opportunistically, but within the context of maintaining our strong capital position.

Credit Quality

Expected credit losses on assets carried at amortized cost are recognized over their projected lives based on models that measure the probability of default and loss given default over a 12-month reasonable and supportable forecast period. Our models incorporate base case, downside and upside macroeconomic variables such as real gross domestic product (“GDP”) growth, civilian unemployment rates and West Texas Intermediate (“WTI”) oil prices on a probability weighted basis.

No provision for credit losses was necessary for the second quarter of 2022. An increase in allowance related to our lending activities from the strong loan growth during the quarter and changes in our reasonable and supportable forecast, primarily related to the economic outlook from the Federal Reserve's actions to control inflation, were offset by the impact of a sustained trend of improving credit quality metrics.

Our base case reasonable and supportable forecast assumes inflation peaks in the third quarter of 2022 and begins to normalize thereafter. We expect the Russian-Ukraine conflict remains isolated and conditions improve in the fourth quarter of 2022. GDP is projected to increase by 1.4 percent over the next twelve months as labor force participants will continue to re-enter the job market to help meet record job openings. Inflation pressures cause modest declines in real household income compared to pre-pandemic levels, but is offset by a drawdown in savings. This results in below-trend GDP growth. Our forecasted civilian unemployment rate is 3.7 percent for the third quarter of 2022, increasing to 4.0 percent by the second quarter of 2023. Our base case also assumes the Federal Reserve increases federal funds rates at each meeting through June 2023, which results in a target range of 3.50 percent to 3.75 percent. WTI oil prices are projected to generally follow the NYMEX forward curve that existed at the end of June 2022, averaging $98.15 per barrel over the next twelve months.

The probability weighting of our base case reasonable and supportable forecast decreased to 55 percent in the second quarter of 2022 compared to 60 percent in the first quarter of 2022 as the level of uncertainty in economic forecasts continued to increase. Our downside case, probability weighted at 35 percent, assumes the Russia-Ukraine conflict persists through the second quarter of 2023, but does remain isolated. Additional surges in commodity prices and exacerbated supply chain dislocations create higher levels of inflation forcing the Federal Reserve to adopt a more aggressive monetary policy to combat the inflationary environment. This results in a federal funds target range of 4.50 percent to 4.75 percent. The United States economy is pushed into a recession, with a contraction in economic activity and a sharp increase in the unemployment rate from 4.2 percent in the third quarter of 2022 to 6.9 percent in the second quarter of 2023. In this scenario, real GDP is expected to contract 1.8 percent over the next four quarters. WTI oil prices are projected to average $105.36 per barrel over the next twelve months, peaking at $130.37 in the fourth quarter of 2022 and falling 39 percent over the following two quarters.

Nonperforming assets totaled $333 million or 1.56 percent of outstanding loans and repossessed assets at June 30, 2022, compared to $353 million or 1.70 percent at March 31, 2022. Nonperforming assets that are not guaranteed by U.S. government agencies totaled $118 million or 0.56 percent of outstanding loans and repossessed assets at June 30, 2022, compared to $132 million or 0.65 percent at March 31, 2022.

Nonaccruing loans were $114 million or 0.54 percent of outstanding loans at June 30, 2022. Nonaccruing commercial loans totaled $55 million or 0.40 percent of outstanding commercial loans. Nonaccruing commercial real estate loans totaled $11 million or 0.27 percent of outstanding commercial real estate loans. Nonaccruing loans to individuals totaled $49 million or 1.36 percent of outstanding loans to individuals.

Nonaccruing loans decreased $10 million compared to March 31, 2022, primarily related to nonaccruing commercial real estate, energy and services loans. New nonaccruing loans identified in the second quarter totaled $4.4 million, offset by $8.4 million in payments received, $4.0 million in foreclosures and $1.4 million in gross charge-offs.

Potential problem loans, which are defined as performing loans that, based on known information, cause management concern as to the borrowers' ability to continue to perform, totaled $131 million at June 30, 2022, down from $169 million at March 31. Potential problem energy loans decreased $36 million. Potential problem services loans increased $16 million, offset by a $14 million decrease in potential problem commercial real estate loans.

At June 30, 2022, the combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $283 million or 1.33 percent of outstanding loans and 295 percent of nonaccruing loans. The allowance for loan losses totaled $241 million or 1.13 percent of outstanding loans and 251 percent of nonaccruing loans excluding residential mortgage loans guaranteed by U.S. government agencies.

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

Gross charge-offs were $1.4 million for the second quarter compared to $7.8 million for the first quarter of 2022. Recoveries totaled $2.2 million for the second quarter of 2022 and $1.8 million for the prior quarter leading to net recoveries of $799 thousand or 0.02 percent of average loans on an annualized basis and net charge-offs of $6.0 million or 0.12 percent of average loans on an annualized basis, respectively. Net charge-offs were 0.06 percent of average loans over the last four quarters.

Securities and Derivatives

The fair value of the available for sale securities portfolio totaled $10.2 billion at June 30, 2022, a $2.7 billion decrease compared to March 31, 2022. During the second quarter of 2022, certain U.S. government agency residential mortgage-backed securities were transferred from the available for sale portfolio to the investment securities portfolio. At the time of transfer, the fair value totaled $2.4 billion, amortized cost totaled $2.7 billion and the pretax unrealized loss totaled $268 million. At June 30, 2022, the available for sale securities portfolio consisted primarily of $4.9 billion of residential mortgage-backed securities fully backed by U.S. government agencies and $4.1 billion of commercial mortgage-backed securities fully backed by U.S. government agencies. At June 30, 2022, the available for sale securities portfolio had a net unrealized loss of $523 million compared to $547 million at March 31, 2022.

We hold an inventory of trading securities in support of sales to a variety of customers. At June 30, 2022, the trading securities portfolio totaled $2.9 billion compared to $4.9 billion at March 31, 2022. During the second quarter of 2022, we sold our low-coupon, fixed rate U.S. government agency residential mortgage-backed securities inventory.

The company also maintains a portfolio of residential mortgage-backed securities issued by U.S. government agencies and interest rate derivative contracts as an economic hedge of the changes in the fair value of our mortgage servicing rights. This portfolio of fair value option securities decreased $147 million to $38 million at June 30, 2022.

Derivative contracts are carried at fair value. At June 30, 2022, the net fair values of derivative contracts, before consideration of cash margin, reported as assets under our customer derivative programs totaled $2.0 billion compared to $2.4 billion at March 31, 2022. The aggregate net fair value of derivative contracts, before consideration of cash margin, held under these programs reported as liabilities totaled $2.0 billion at June 30, 2022 and $2.4 billion at March 31, 2022.

The net benefit of the changes in the fair value of mortgage servicing rights and related economic hedges was $1.9 million during the second quarter of 2022, including a $17.5 million increase in the fair value of mortgage servicing rights, $15.9 million decrease in the fair value of securities and derivative contracts held as an economic hedge, and $275 thousand of related net interest revenue. Three bulk mortgage servicing rights portfolios were acquired during the second quarter of 2022. These acquisitions added $3.5 billion in unpaid principal balance comprised of conventional, low note rate, strong performing loans.

Conference Call and Webcast

The company will hold a conference call at 9 a.m. Central time on Wednesday, July 27, 2022 to discuss the financial results with investors. The live audio webcast and presentation slides will be available on the company's website at www.bokf.com. The conference call can also be accessed by dialing 1-201-689-8471. A conference call and webcast replay will also be available shortly after conclusion of the live call at www.bokf.com or by dialing 1-877-407-4018 and referencing conference ID # 13731240.

About BOK Financial Corporation

BOK Financial Corporation is a $45 billion regional financial services company headquartered in Tulsa, Oklahoma with $96 billion in assets under management and administration. The company's stock is publicly traded on NASDAQ under the Global Select market listings (BOKF). BOK Financial Corporation's holdings include BOKF, NA; BOK Financial Securities, Inc., BOK Financial Private Wealth, Inc. and BOK Financial Insurance, Inc. BOKF, NA's holdings include TransFund, Cavanal Hill Investment Management, Inc. and BOK Financial Asset Management, Inc. BOKF, NA operates banking divisions across eight states as: Bank of Albuquerque; Bank of Oklahoma; Bank of Texas; and BOK Financial in Arizona, Arkansas, Colorado, Kansas and Missouri; as well as having limited purpose offices in Nebraska, Wisconsin and Connecticut. Through its subsidiaries, BOK Financial Corporation provides commercial and consumer banking, brokerage trading, investment, trust and insurance services, mortgage origination and servicing, and an electronic funds transfer network. For more information, visit www.bokf.com.

The company will continue to evaluate critical assumptions and estimates, such as the appropriateness of the allowance for credit losses and asset impairment as of June 30, 2022 through the date its financial statements are filed with the Securities and Exchange Commission and will adjust amounts reported if necessary.

This news release 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 Corporation 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.

BALANCE SHEETS -- UNAUDITEDBOK FINANCIAL CORPORATION(In thousands)

 June 30, 2022 Mar. 31, 2022
ASSETS   
Cash and due from banks$1,313,563  $767,805 
Interest-bearing cash and cash equivalents 723,787   599,976 
Trading securities 2,859,444   4,891,096 
Investment securities, net of allowance 2,637,345   183,824 
Available for sale securities 10,152,663   12,894,534 
Fair value option securities 37,927   185,003 
Restricted equity securities 95,130   77,389 
Residential mortgage loans held for sale 182,726   169,474 
Loans:   
Commercial 13,578,697   12,883,189 
Commercial real estate 4,106,148   4,100,956 
Paycheck protection program 43,140   137,365 
Loans to individuals 3,563,163   3,552,919 
Total loans 21,291,148   20,674,429 
Allowance for loan losses (241,114)  (246,473)
Loans, net of allowance 21,050,034   20,427,956 
Premises and equipment, net 573,605   574,786 
Receivables 176,672   238,694 
Goodwill 1,044,749   1,044,749 
Intangible assets, net 83,744   87,761 
Mortgage servicing rights 270,312   209,563 
Real estate and other repossessed assets, net 22,221   24,492 
Derivative contracts, net 1,992,977   2,680,207 
Cash surrender value of bank-owned life insurance 409,937   407,763 
Receivable on unsettled securities sales 60,168   229,404 
Other assets 1,690,068   1,132,031 
TOTAL ASSETS$45,377,072   $46,826,507  
    
LIABILITIES AND EQUITY   
Deposits:   
Demand$15,720,296  $15,242,341 
Interest-bearing transaction 20,544,199   21,689,829 
Savings 984,824   979,365 
Time 1,369,599   1,514,416 
Total deposits 38,618,918   39,425,951 
Funds purchased and repurchase agreements 677,030   1,068,329 
Other borrowings 35,505   36,246 
Subordinated debentures 131,223   131,209 
Accrued interest, taxes and expense 211,419   238,048 
Due on unsettled securities purchases 297,352   81,016 
Derivative contracts, net 214,576   557,834 
Other liabilities 449,507   434,350 
TOTAL LIABILITIES 40,635,530   41,972,983 
Shareholders' equity:   
Capital, surplus and retained earnings 5,339,967   5,267,408 
Accumulated other comprehensive income (loss) (602,628)  (417,826)
TOTAL SHAREHOLDERS' EQUITY 4,737,339   4,849,582 
Non-controlling interests 4,203   3,942 
TOTAL EQUITY 4,741,542   4,853,524 
TOTAL LIABILITIES AND EQUITY$45,377,072   $46,826,507  

AVERAGE BALANCE SHEETS -- UNAUDITEDBOK FINANCIAL CORPORATION(in thousands)

 Three Months Ended
 June 30, 2022 Mar. 31, 2022 Dec. 31, 2021 Sep. 30, 2021 June 30, 2021
ASSETS         
Interest-bearing cash and cash equivalents$843,619  $1,050,409  $1,208,552  $682,788  $659,312 
Trading securities 4,166,954   8,537,390   9,260,778   7,617,236   7,430,217 
Investment securities, net of allowance 610,983   195,198   213,188   218,117   221,401 
Available for sale securities 12,258,072   13,092,422   13,247,607   13,446,095   13,243,542 
Fair value option securities 54,832   75,539   46,458   56,307   64,864 
Restricted equity securities 167,732   164,484   137,874   245,485   208,692 
Residential mortgage loans held for sale 148,183   179,697   163,433   167,620   218,200 
Loans:         
Commercial 13,382,176   12,677,706   12,401,935   12,231,230   12,402,925 
Commercial real estate 4,061,129   4,059,148   3,838,336   4,218,190   4,395,848 
Paycheck protection program 90,312   210,110   404,261   792,728   1,668,047 
Loans to individuals 3,524,097   3,516,698   3,598,121   3,606,460   3,700,269 
Total loans 21,057,714   20,463,662   20,242,653   20,848,608   22,167,089 
Allowance for loan losses (246,064)  (254,191)  (271,794)  (306,125)  (345,269)
Loans, net of allowance 20,811,650   20,209,471   19,970,859   20,542,483   21,821,820 
Total earning assets 39,062,025   43,504,610   44,248,749   42,976,131   43,868,048 
Cash and due from banks 822,599   790,440   783,670   766,688   763,393 
Derivative contracts, net 3,051,429   2,126,282   1,441,869   1,501,736   1,022,137 
Cash surrender value of bank-owned life insurance 408,489   406,379   404,149   401,926   401,760 
Receivable on unsettled securities sales 457,165   375,616   585,901   632,539   716,700 
Other assets 3,486,691   3,357,747   3,139,718   3,220,129   3,424,884 
TOTAL ASSETS$47,288,398  $50,561,074  $50,604,056  $49,499,149  $50,196,922 
          
LIABILITIES AND EQUITY         
Deposits:         
Demand$15,202,597  $15,062,282  $14,818,841  $13,670,656  $13,189,954 
Interest-bearing transaction 21,037,294   22,763,479   22,326,401   21,435,736   21,491,145 
Savings 981,493   947,407   909,131   888,011   872,618 
Time 1,373,036   1,589,039   1,747,715   1,839,983   1,936,510 
Total deposits 38,594,420   40,362,207   39,802,088   37,834,386   37,490,227 
Funds purchased and repurchase agreements 1,224,134   2,004,466   2,893,128   1,448,800   1,790,490 
Other borrowings 1,301,358   1,148,440   880,837   2,546,083   3,608,369 
Subordinated debentures 131,219   131,228   131,224   214,654   276,034 
Derivative contracts, net 535,574   682,435   320,757   434,334   366,202 
Due on unsettled securities purchases 380,332   519,097   629,642   957,538   701,495 
Other liabilities 389,031   565,350   578,091   619,913   634,460 
TOTAL LIABILITIES 42,556,068   45,413,223   45,235,767   44,055,708   44,867,277 
Total equity 4,732,330   5,147,851   5,368,289   5,443,441   5,329,645 
TOTAL LIABILITIES AND EQUITY$47,288,398  $50,561,074  $50,604,056  $49,499,149  $50,196,922 

STATEMENTS OF EARNINGS -- UNAUDITEDBOK FINANCIAL CORPORATION(in thousands, except per share data)

 Three Months Ended Six Months Ended
 June 30, June 30,
  2022   2021   2022   2021 
        
Interest revenue$294,247  $295,893  $577,346  $594,132 
Interest expense 20,229   15,584   34,917   33,403 
Net interest revenue 274,018   280,309   542,429   560,729 
Provision for credit losses    (35,000)     (60,000)
Net interest revenue after provision for credit losses 274,018   315,309   542,429   620,729 
Other operating revenue:       
Brokerage and trading revenue 44,043   29,408   16,964   50,190 
Transaction card revenue 26,940   24,923   51,156   47,353 
Fiduciary and asset management revenue 49,838   44,832   96,237   86,154 
Deposit service charges and fees 28,500   25,861   55,504   50,070 
Mortgage banking revenue 11,368   21,219   28,018   58,332 
Other revenue 12,684   23,172   23,129   39,468 
Total fees and commissions 173,373   169,415   271,008   331,567 
Other gains (losses), net (7,639)  16,449   (9,283)  26,570 
Gain (loss) on derivatives, net (13,569)  18,820   (60,550)  (8,830)
Loss on fair value option securities, net (2,221)  (1,627)  (13,422)  (3,537)
Change in fair value of mortgage servicing rights 17,485   (13,041)  66,595   20,833 
Gain on available for sale securities, net 1,188   1,430   2,125   1,897 
Total other operating revenue 168,617   191,446   256,473   368,500 
Other operating expense:       
Personnel 154,923   172,035   314,151   345,045 
Business promotion 6,325   2,744   12,838   4,898 
Charitable contributions to BOKF Foundation          4,000 
Professional fees and services 12,475   12,361   23,888   24,341 
Net occupancy and equipment 27,489   26,633   58,344   53,295 
Insurance 4,728   3,660   9,011   8,280 
Data processing and communications 41,280   36,418   81,116   73,885 
Printing, postage and supplies 3,929   4,285   7,618   7,725 
Amortization of intangible assets 4,049   4,578   8,013   9,385 
Mortgage banking costs 9,437   11,126   17,314   25,069 
Other expense 9,020   17,312   18,980   31,013 
Total other operating expense 273,655   291,152   551,273   586,936 
        
Net income before taxes 168,980   215,603   247,629   402,293 
Federal and state income taxes 36,122   48,496   52,319   90,878 
        
Net income 132,858   167,107   195,310   311,415 
Net loss attributable to non-controlling interests 12   686   (24)  (1,066)
Net income attributable to BOK Financial Corporation shareholders$132,846  $166,421  $195,334  $312,481 
        
Average shares outstanding:       
Basic 67,453,748   68,815,666   67,616,396   68,975,743 
Diluted 67,455,172   68,817,442   67,617,834   68,978,798 
        
Net income per share:       
Basic$1.96  $2.40  $2.87  $4.50 
Diluted$1.96  $2.40  $2.87  $4.50 

FINANCIAL HIGHLIGHTS -- UNAUDITEDBOK FINANCIAL CORPORATION(in thousands, except ratio and share data)

 Three Months Ended
 June 30, 2022 Mar. 31, 2022 Dec. 31, 2021 Sep. 30, 2021 June 30, 2021
Capital:         
Period-end shareholders' equity$4,737,339  $4,849,582  $5,363,732  $5,388,973  $5,332,977 
Risk weighted assets$36,792,067  $37,160,258  $34,575,277  $33,916,456  $33,824,860 
Risk-based capital ratios:         
Common equity tier 1 11.61%  11.30%  12.24%  12.26%  11.95%
Tier 1 11.63%  11.31%  12.25%  12.29%  12.01%
Total capital 12.59%  12.25%  13.29%  13.38%  13.61%
Leverage ratio 9.12%  8.47%  8.55%  8.77%  8.58%
Tangible common equity ratio1 8.16%  8.13%  8.61%  9.28%  9.09%
          
Common stock:         
Book value per share$69.87  $71.21  $78.34  $78.56  $77.20 
Tangible book value per share$53.22  $54.58  $61.74  $61.93  $60.50 
Market value per share:         
High$94.76  $119.59  $110.21  $92.97  $93.00 
Low$74.03  $93.76  $89.01  $77.20  $83.59 
Cash dividends paid$35,892  $36,093  $36,256  $35,725  $35,925 
Dividend payout ratio 27.02%  57.76%  30.90%  18.97%  21.59%
Shares outstanding, net 67,806,005   68,104,043   68,467,772   68,596,764   69,078,458 
Stock buy-back program:         
Shares repurchased 294,084   475,877   128,522   478,141   492,994 
Amount$24,404  $48,074  $13,426  $40,644  $43,797 
Average price per share$82.98  $101.02  $104.46  $85.00  $88.84 
          
Performance ratios (quarter annualized):
Return on average assets 1.13%  0.50%  0.92%  1.51%  1.33%
Return on average equity 11.27%  4.93%  8.68%  13.78%  12.58%
Net interest margin 2.76%  2.44%  2.52%  2.66%  2.60%
Efficiency ratio 60.65%  75.07%  70.14%  61.23%  64.20%
          
Reconciliation of non-GAAP measures:
1       Tangible common equity ratio:         
Total shareholders' equity$4,737,339  $4,849,582  $5,363,732  $5,388,973  $5,332,977 
Less: Goodwill and intangible assets, net 1,128,493   1,132,510   1,136,527   1,140,935   1,153,785 
Tangible common equity$3,608,846  $3,717,072  $4,227,205  $4,248,038  $4,179,192 
          
Total assets$45,377,072  $46,826,507  $50,249,431  $46,923,409  $47,154,375 
Less: Goodwill and intangible assets, net 1,128,493   1,132,510   1,136,527   1,140,935   1,153,785 
Tangible assets$44,248,579  $45,693,997  $49,112,904  $45,782,474  $46,000,590 
          
Tangible common equity ratio 8.16%  8.13%  8.61%  9.28%  9.09%
          
          
Pre-provision net revenue:          
Net income before taxes$168,980  $78,649  $152,025  $241,782  $215,603 
Provision for expected credit losses       (17,000)  (23,000)  (35,000)
Net income (loss) attributable to non-controlling interests 12   (36)  (129)  (601)  686 
Pre-provision net revenue$168,968  $78,685  $135,154  $219,383  $179,917 
          
Other data:         
Tax equivalent interest$2,040  $1,973  $2,104  $2,217  $2,320 
Net unrealized gain (loss) on available for sale securities$(522,812) $(546,598) $93,381  $221,487  $297,267 
          
Mortgage banking:         
Mortgage production revenue$(504) $5,055  $10,018  $15,403  $10,004 
          
Mortgage loans funded for sale$360,237  $418,866  $568,507  $652,336  $754,893 
Add: current period-end outstanding commitments 106,004   160,260   171,412   239,066   276,154 
Less: prior period end outstanding commitments 160,260   171,412   239,066   276,154   387,465 
Total mortgage production volume$305,981  $407,714  $500,853  $615,248  $643,582 
          
Mortgage loan refinances to mortgage loans funded for sale 19%  45%  51%  48%  48%
Realized margin on funded mortgage loans 0.88%  1.64%  2.34%  2.48%  2.75%
Production revenue as a percentage of production volume(0.16)%  1.24%  2.00%  2.50%  1.55%
          
Mortgage servicing revenue$11,872  $11,595  $11,260  $10,883  $11,215 
Average outstanding principal balance of mortgage loans serviced for others 17,336,596   16,155,329   15,930,480   14,899,306   15,065,173 
Average mortgage servicing revenue rates 0.27%  0.29%  0.28%  0.29%  0.30%
          
Gain (loss) on mortgage servicing rights, net of economic hedge:
Gain (loss) on mortgage hedge derivative contracts, net$(13,639) $(46,694) $(4,862) $(5,829) $18,764 
Gain (loss) on fair value option securities, net (2,221)  (11,201)  1,418   (120)  (1,627)
Gain (loss) on economic hedge of mortgage servicing rights (15,860)  (57,895)  (3,444)  (5,949)  17,137 
Gain (loss) on changes in fair value of mortgage servicing rights 17,485   49,110   7,859   12,945   (13,041)
Gain (loss) on changes in fair value of mortgage servicing rights, net of economic hedges, included in other operating revenue 1,625   (8,785)  4,415   6,996   4,096 
Net interest revenue on fair value option securities2 275   383   259   286   341 
Total economic benefit (cost) of changes in the fair value of mortgage servicing rights, net of economic hedges$1,900  $(8,402) $4,674  $7,282  $4,437 

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

QUARTERLY EARNINGS TREND -- UNAUDITEDBOK FINANCIAL CORPORATION(in thousands, except ratio and per share data)

 Three Months Ended
 June 30, 2022 Mar. 31, 2022 Dec. 31, 2021 Sep. 30, 2021 June 30, 2021
          
Interest revenue$294,247  $283,099  $292,334  $293,463  $295,893 
Interest expense 20,229   14,688   15,257   13,236   15,584 
Net interest revenue 274,018   268,411   277,077   280,227   280,309 
Provision for credit losses       (17,000)  (23,000)  (35,000)
Net interest revenue after provision for credit losses 274,018   268,411   294,077   303,227   315,309 
Other operating revenue:         
Brokerage and trading revenue 44,043   (27,079)  14,869   47,930   29,408 
Transaction card revenue 26,940   24,216   24,998   24,632   24,923 
Fiduciary and asset management revenue 49,838   46,399   46,872   45,248   44,832 
Deposit service charges and fees 28,500   27,004   26,718   27,429   25,861 
Mortgage banking revenue 11,368   16,650   21,278   26,286   21,219 
Other revenue 12,684   10,445   11,586   18,896   23,172 
Total fees and commissions 173,373   97,635   146,321   190,421   169,415 
Other gains (losses), net (7,639)  (1,644)  6,081   31,091   16,449 
Gain (loss) on derivatives, net (13,569)  (46,981)  (4,788)  (5,760)  18,820 
Gain (loss) on fair value option securities, net (2,221)  (11,201)  1,418   (120)  (1,627)
Change in fair value of mortgage servicing rights 17,485   49,110   7,859   12,945   (13,041)
Gain on available for sale securities, net 1,188   937   552   1,255   1,430 
Total other operating revenue 168,617   87,856   157,443   229,832   191,446 
Other operating expense:         
Personnel 154,923   159,228   174,474   175,863   172,035 
Business promotion 6,325   6,513   6,452   4,939   2,744 
Charitable contributions to BOKF Foundation       5,000       
Professional fees and services 12,475   11,413   14,129   12,436   12,361 
Net occupancy and equipment 27,489   30,855   26,897   28,395   26,633 
Insurance 4,728   4,283   3,889   3,712   3,660 
Data processing and communications 41,280   39,836   39,358   38,371   36,418 
Printing, postage and supplies 3,929   3,689   2,935   3,558   4,285 
Amortization of intangible assets 4,049   3,964   4,438   4,488   4,578 
Mortgage banking costs 9,437   7,877   8,667   8,962   11,126 
Other expense 9,020   9,960   13,256   10,553   17,312 
Total other operating expense 273,655   277,618   299,495   291,277   291,152 
Net income before taxes 168,980   78,649   152,025   241,782   215,603 
Federal and state income taxes 36,122   16,197   34,836   54,061   48,496 
Net income 132,858   62,452   117,189   187,721   167,107 
Net income (loss) attributable to non-controlling interests 12   (36)  (129)  (601)  686 
Net income attributable to BOK Financial Corporation shareholders$132,846  $62,488  $117,318  $188,322  $166,421 
          
Average shares outstanding:         
Basic 67,453,748   67,812,400   68,069,160   68,359,125   68,815,666 
Diluted 67,455,172   67,813,851   68,070,910   68,360,871   68,817,442 
Net income per share:         
Basic$1.96  $0.91  $1.71  $2.74  $2.40 
Diluted$1.96  $0.91  $1.71  $2.74  $2.40 

LOANS TREND -- UNAUDITEDBOK FINANCIAL CORPORATION(In thousands)

  June 30, 2022 Mar. 31, 2022 Dec. 31, 2021 Sep. 30, 2021 June 30, 2021
Commercial:          
Healthcare $3,696,963 $3,441,732 $3,414,940 $3,347,641 $3,381,261
Services  3,421,493  3,351,495  3,367,193  3,323,422  3,389,756
Energy  3,393,072  3,197,667  3,006,884  2,814,059  3,011,331
General business  3,067,169  2,892,295  2,717,448  2,690,018  2,690,559
Total commercial  13,578,697  12,883,189  12,506,465  12,175,140  12,472,907
           
Commercial real estate:          
Office  1,100,115  1,097,516  1,040,963  1,030,755  1,073,346
Industrial  953,626  911,928  766,125  890,316  824,577
Multifamily  878,565  867,288  786,404  875,586  964,824
Retail  637,304  667,561  679,917  766,402  784,445
Residential construction and land development  111,575  120,506  120,016  118,416  128,939
Other commercial real estate  424,963  436,157  437,900  435,417  470,861
Total commercial real estate  4,106,148  4,100,956  3,831,325  4,116,892  4,246,992
           
Paycheck protection program  43,140  137,365  276,341  536,052  1,121,583
           
Loans to individuals:          
Residential mortgage  1,784,729  1,723,506  1,722,170  1,747,243  1,772,627
Residential mortgages guaranteed by U.S. government agencies  293,838  322,581  354,173  376,986  413,806
Personal  1,484,596  1,506,832  1,515,206  1,395,623  1,388,534
Total loans to individuals  3,563,163  3,552,919  3,591,549  3,519,852  3,574,967
           
Total $21,291,148 $20,674,429 $20,205,680 $20,347,936 $21,416,449

LOANS MANAGED BY PRINCIPAL MARKET AREA -- UNAUDITEDBOK FINANCIAL CORPORATION(in thousands)

 June 30, 2022 Mar. 31, 2022 Dec. 31, 2021 Sep. 30, 2021 June 30, 2021
          
Texas:         
Commercial$6,631,658 $6,254,883 $6,068,700 $5,815,562 $5,690,901
Commercial real estate 1,339,452  1,345,105  1,253,439  1,383,871  1,403,751
Paycheck protection program 14,040  31,242  81,654  115,623  342,933
Loans to individuals 934,856  957,320  942,982  901,121  885,619
Total Texas 8,920,006  8,588,550  8,346,775  8,216,177  8,323,204
          
Oklahoma:         
Commercial 3,125,764  2,883,663  2,633,014  2,590,887  2,840,560
Commercial real estate 576,458  552,310  546,021  552,184  552,673
Paycheck protection program 13,329  52,867  69,817  192,474  242,880
Loans to individuals 1,982,247  1,977,886  2,024,404  2,014,099  2,063,419
Total Oklahoma 5,697,798  5,466,726  5,273,256  5,349,644  5,699,532
          
Colorado:         
Commercial 2,074,455  1,977,773  1,936,149  1,874,613  1,904,182
Commercial real estate 473,231  480,740  470,937  526,653  656,521
Paycheck protection program 8,233  28,584  82,781  140,470  299,712
Loans to individuals 234,105  236,125  256,533  249,298  262,796
Total Colorado 2,790,024  2,723,222  2,746,400  2,791,034  3,123,211
          
Arizona:         
Commercial 1,080,228  1,074,551  1,130,798  1,194,801  1,239,270
Commercial real estate 766,767  719,970  674,309  734,174  705,497
Paycheck protection program 5,173  11,644  21,594  42,815  104,946
Loans to individuals 212,870  190,746  186,528  182,506  178,481
Total Arizona 2,065,038  1,996,911  2,013,229  2,154,296  2,228,194
          
Kansas/Missouri:         
Commercial 338,337  334,371  338,697  336,414  388,291
Commercial real estate 458,157  436,740  382,761  408,001  406,055
Paycheck protection program 573  2,595  4,718  6,920  41,954
Loans to individuals 125,584  121,247  110,889  100,920  103,092
Total Kansas/Missouri 922,651  894,953  837,065  852,255  939,392
          
New Mexico:         
Commercial 252,033  262,533  306,964  287,695  304,804
Commercial real estate 431,606  504,632  442,128  437,302  437,996
Paycheck protection program 1,792  9,713  13,510  31,444  86,716
Loans to individuals 67,026  63,299  63,930  66,651  68,177
Total New Mexico 752,457  840,177  826,532  823,092  897,693
          
Arkansas:         
Commercial 76,222  95,415  92,143  75,168  104,899
Commercial real estate 60,477  61,459  61,730  74,707  84,499
Paycheck protection program   720  2,267  6,306  2,442
Loans to individuals 6,475  6,296  6,283  5,257  13,383
Total Arkansas 143,174  163,890  162,423  161,438  205,223
          
TOTAL BOK FINANCIAL$21,291,148 $20,674,429 $20,205,680 $20,347,936 $21,416,449

Loans attributed to a principal market may not always represent the location of the borrower or the collateral.

DEPOSITS BY PRINCIPAL MARKET AREA -- UNAUDITEDBOK FINANCIAL CORPORATION(in thousands)

 June 30, 2022 Mar. 31, 2022 Dec. 31, 2021 Sep. 30, 2021 June 30, 2021
Oklahoma:         
Demand$5,422,593 $5,205,806 $5,433,405 $5,080,162 $4,985,542
Interest-bearing:         
Transaction 10,240,378  11,410,709  12,689,367  11,692,679  12,065,844
Savings 561,413  558,634  521,439  510,906  500,344
Time 678,127  817,744  978,822  1,039,866  1,139,980
Total interest-bearing 11,479,918  12,787,087  14,189,628  13,243,451  13,706,168
Total Oklahoma 16,902,511  17,992,893  19,623,033  18,323,613  18,691,710
          
Texas:         
Demand 4,670,535  4,552,001  4,552,983  3,987,503  3,752,790
Interest-bearing:         
Transaction 5,344,326  4,963,118  5,345,461  4,985,465  4,335,113
Savings 183,708  182,536  178,458  165,043  160,805
Time 333,038  329,931  337,559  337,389  346,577
Total interest-bearing 5,861,072  5,475,585  5,861,478  5,487,897  4,842,495
Total Texas 10,531,607  10,027,586  10,414,461  9,475,400  8,595,285
          
Colorado:         
Demand 2,799,798  2,673,352  2,526,855  2,158,596  1,991,343
Interest-bearing:         
Transaction 2,277,563  2,387,304  2,334,371  2,337,354  2,159,819
Savings 82,976  81,762  78,636  79,873  73,990
Time 160,795  165,401  174,351  184,002  193,787
Total interest-bearing 2,521,334  2,634,467  2,587,358  2,601,229  2,427,596
Total Colorado 5,321,132  5,307,819  5,114,213  4,759,825  4,418,939
          
New Mexico:         
Demand 1,347,600  1,271,264  1,196,057  1,222,895  1,197,412
Interest-bearing:         
Transaction 845,442  888,257  858,394  837,630  723,757
Savings 115,660  115,457  107,963  107,615  105,837
Time 148,532  156,140  163,871  168,879  174,665
Total interest-bearing 1,109,634  1,159,854  1,130,228  1,114,124  1,004,259
Total New Mexico 2,457,234  2,431,118  2,326,285  2,337,019  2,201,671
          
Arizona:         
Demand 901,543  947,775  934,282  1,110,884  943,511
Interest-bearing:         
Transaction 792,269  810,896  834,491  784,614  820,901
Savings 17,999  18,122  16,182  16,468  13,496
Time 28,774  27,259  31,274  30,862  30,012
Total interest-bearing 839,042  856,277  881,947  831,944  864,409
Total Arizona 1,740,585  1,804,052  1,816,229  1,942,828  1,807,920
          
Kansas/Missouri:         
Demand 537,143  553,345  658,342  488,595  463,339
Interest-bearing:         
Transaction 913,921  1,107,525  1,086,946  965,757  978,160
Savings 19,943  19,589  18,844  17,303  17,539
Time 13,962  11,527  12,255  13,040  13,509
Total interest-bearing 947,826  1,138,641  1,118,045  996,100  1,009,208
Total Kansas/Missouri 1,484,969  1,691,986  1,776,387  1,484,695  1,472,547
          
Arkansas:         
Demand 41,084  38,798  42,499  41,594  46,472
Interest-bearing:         
Transaction 130,300  122,020  119,543  149,611  195,125
Savings 3,125  3,265  3,213  3,289  3,445
Time 6,371  6,414  6,196  6,677  6,819
Total interest-bearing 139,796  131,699  128,952  159,577  205,389
Total Arkansas 180,880  170,497  171,451  201,171  251,861
          
TOTAL BOK FINANCIAL$38,618,918 $39,425,951 $41,242,059 $38,524,551 $37,439,933

NET INTEREST MARGIN TREND -- UNAUDITEDBOK FINANCIAL CORPORATION

 Three Months Ended
 June 30, 2022 Mar. 31, 2022 Dec. 31, 2021 Sep. 30, 2021 June 30, 2021
          
TAX-EQUIVALENT ASSETS YIELDS         
Interest-bearing cash and cash equivalents0.83% 0.18% 0.16% 0.14% 0.10%
Trading securities2.00% 1.71% 1.89% 2.04% 1.95%
Investment securities, net of allowance2.35% 5.07% 4.99% 5.02% 5.01%
Available for sale securities1.84% 1.77% 1.72% 1.80% 1.85%
Fair value option securities2.92% 2.81% 2.71% 2.62% 2.60%
Restricted equity securities3.30% 2.69% 2.98% 2.55% 3.36%
Residential mortgage loans held for sale4.22% 3.11% 3.06% 3.06% 2.91%
Loans3.92% 3.57% 3.70% 3.68% 3.54%
Allowance for loan losses         
Loans, net of allowance3.96% 3.61% 3.75% 3.73% 3.60%
Total tax-equivalent yield on earning assets2.96% 2.58% 2.66% 2.78% 2.75%
          
COST OF INTEREST-BEARING LIABILITIES        
Interest-bearing deposits:         
Interest-bearing transaction0.22% 0.10% 0.09% 0.09% 0.10%
Savings0.03% 0.03% 0.04% 0.04% 0.04%
Time0.68% 0.56% 0.53% 0.55% 0.58%
Total interest-bearing deposits0.24% 0.12% 0.12% 0.13% 0.14%
Funds purchased and repurchase agreements0.53% 0.95% 0.73% 0.20% 0.16%
Other borrowings1.01% 0.38% 0.49% 0.37% 0.34%
Subordinated debt4.50% 4.02% 4.02% 4.63% 4.87%
Total cost of interest-bearing liabilities0.31% 0.21% 0.21% 0.19% 0.21%
Tax-equivalent net interest revenue spread2.65% 2.37% 2.45% 2.59% 2.54%
Effect of noninterest-bearing funding sources and other0.11% 0.07% 0.07% 0.07% 0.06%
Tax-equivalent net interest margin2.76% 2.44% 2.52% 2.66% 2.60%

Yield calculations are shown on a tax equivalent basis 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.

CREDIT QUALITY INDICATORS -- UNAUDITEDBOK FINANCIAL CORPORATION(in thousands, except ratios)

 Three Months Ended
 June 30, 2022 Mar. 31, 2022 Dec. 31, 2021 Sep. 30, 2021 June 30, 2021
Nonperforming assets:         
Nonaccruing loans:         
Commercial:         
Energy$20,924  $24,976  $31,091  $45,500  $70,341 
Services 15,259   16,535   17,170   25,714   29,913 
Healthcare 14,886   15,076   15,762   509   527 
General business 3,539   3,750   10,081   8,951   11,823 
Total commercial 54,608   60,337   74,104   80,674   112,604 
          
Commercial real estate 10,939   15,989   14,262   21,223   26,123 
          
Loans to individuals:         
Permanent mortgage 30,460   30,757   31,574   30,674   31,473 
Permanent mortgage guaranteed by U.S. government agencies 18,000   16,992   13,861   9,188   9,207 
Personal 132   171   258   188   229 
Total loans to individuals 48,592   47,920   45,693   40,050   40,909 
          
Total nonaccruing loans$114,139  $124,246  $134,059  $141,947  $179,636 
Accruing renegotiated loans guaranteed by U.S. government agencies 196,420   204,121   210,618   178,554   171,324 
Real estate and other repossessed assets 22,221   24,492   24,589   28,770   57,337 
Total nonperforming assets$332,780  $352,859  $369,266  $349,271  $408,297 
Total nonperforming assets excluding those guaranteed by U.S. government agencies$118,360  $131,746  $144,787  $161,529  $227,766 
          
Accruing loans 90 days past due1$3  $307  $313  $223  $252 
          
Gross charge-offs$1,368  $7,805  $6,558  $9,584  $18,304 
Recoveries (2,167)  (1,824)  (7,272)  (1,769)  (2,856)
Net charge-offs (recoveries)$(799) $5,981  $(714) $7,815  $15,448 
          
Provision for loan losses$(6,158) $(3,967) $(20,973) $(27,395) $(25,064)
Provision for credit losses from off-balance sheet unfunded loan commitments 6,005   3,268   3,738   4,952   (8,590)
Provision for expected credit losses from mortgage banking activities 69   621   150   (534)  (1,222)
Provision for credit losses related to held-to maturity (investment) securities portfolio 84   78   85   (23)  (124)
Total provision for credit losses$  $  $(17,000) $(23,000) $(35,000)
          
Allowance for loan losses to period end loans 1.13%  1.19%  1.27%  1.36%  1.46%
Allowance for loan losses to period end loans excluding PPP loans2 1.13%  1.20%  1.29%  1.40%  1.54%
Combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments to period end loans 1.33%  1.37%  1.43%  1.50%  1.57%
Combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments to period end loans excluding PPP loans2 1.33%  1.38%  1.45%  1.54%  1.66%
Nonperforming assets to period end loans and repossessed assets 1.56%  1.70%  1.83%  1.71%  1.90%
Net charge-offs (annualized) to average loans (0.02)%  0.12%  (0.01)%  0.15%  0.28%
Net charge-offs (annualized) to average loans excluding PPP loans2 (0.02)%  0.12%  (0.01)%  0.16%  0.30%
Allowance for loan losses to nonaccruing loans1 250.80%  229.80%  213.33%  208.41%  183.00%
Combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments to nonaccruing loans1 294.74%  263.60%  240.77%  230.43%  197.25%

1   Excludes residential mortgage loans guaranteed by agencies of the U.S. government.2   Metric meaningful due to the unique characteristics and short-term nature of the PPP loans.

SEGMENTS -- UNAUDITEDBOK FINANCIAL CORPORATION(in thousands, except ratios)

  Three Months Ended 2Q22 vs 1Q22 2Q22 vs 2Q21
  June 30, 2022 Mar. 31, 2022 June 30, 2021 $ change % change $ change % change
Commercial Banking              
Net interest revenue $166,522 $137,011  $130,901 $29,511  21.5% $35,621  27.2%
Fees and commissions revenue  59,881  56,964   63,368  2,917  5.1%  (3,487) (5.5)%
Combined net interest and fee revenue  226,403  193,975   194,269  32,428  16.7%  32,134  16.5%
Other operating expense  70,009  65,114   71,351  4,895  7.5%  (1,342) (1.9)%
Corporate expense allocations  16,634  16,246   12,512  388  2.4%  4,122  32.9%
Net income  104,797  82,344   72,632  22,453  27.3%  32,165  44.3%
               
Average assets  29,269,712  29,823,905   28,160,594  (554,193) (1.9)%  1,109,118  3.9%
Average loans  17,336,841  16,696,428   16,981,888  640,413  3.8%  354,953  2.1%
Average deposits  18,933,766  19,595,260   17,049,772  (661,494) (3.4)%  1,883,994  11.0%
               
Consumer Banking              
Net interest revenue $33,786 $27,207  $24,945 $6,579  24.2% $8,841  35.4%
Fees and commissions revenue  30,101  33,977   37,714  (3,876) (11.4)%  (7,613) (20.2)%
Combined net interest and fee revenue  63,887  61,184   62,659  2,703  4.4%  1,228  2.0%
Other operating expense  52,660  48,789   52,453  3,871  7.9%  207  0.4%
Corporate expense allocations  10,120  12,080   11,599  (1,960) (16.2)%  (1,479) (12.8)%
Net income (loss)  1,239  (7,317)  1,698  8,556  116.9%  (459) (27.0)%
               
Average assets  10,338,191  10,273,890   10,087,488  64,301  0.6%  250,703  2.5%
Average loans  1,669,830  1,672,346   1,786,242  (2,516) (0.2)%  (116,412) (6.5)%
Average deposits  8,876,469  8,746,622   8,469,043  129,847  1.5%  407,426  4.8%
               
Wealth Management              
Net interest revenue $37,747 $55,766  $52,293 $(18,019) (32.3)% $(14,546) (27.8)%
Fees and commissions revenue  86,771  25,023   78,841  61,748  246.8%  7,930  10.1%
Combined net interest and fee revenue  124,518  80,789   131,134  43,729  54.1%  (6,616) (5.0)%
Other operating expense  76,393  74,619   79,518  1,774  2.4%  (3,125) (3.9)%
Corporate expense allocations  12,503  12,072   10,352  431  3.6%  2,151  20.8%
Net income (loss)  27,287  (4,521)  30,988  31,808  703.6%  (3,701) (11.9)%
               
Average assets  16,902,721  21,323,795   19,201,041  (4,421,074) (20.7)%  (2,298,320) (12.0)%
Average loans  2,157,771  2,118,780   1,968,513  38,991  1.8%  189,258  9.6%
Average deposits  8,482,785  9,619,323   9,695,319  (1,136,538) (11.8)%  (1,212,534) (12.5)%
Fiduciary assets  55,972,584  61,095,320   58,654,788  (5,122,736) (8.4)%  (2,682,204) (4.6)%
Assets under management or administration  95,981,289  101,081,355   96,632,748  (5,100,066) (5.0)%  (651,459) (0.7)%

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