BOK Financial Corporation Reports Quarterly Earnings of $188 million or $2.74 Per Share in the Third Quarter

TULSA, Okla., Oct. 20, 2021 (GLOBE NEWSWIRE) — BOK Financial Corporation (NASD: BOKF) –

CEO Commentary

Steven G. Bradshaw, president and chief executive officer, stated, “The third quarter was BOKF’s second-consecutive record quarter with net income of $188 million or $2.74 per share. This quarter exhibits many of the benefits achieved from our strategy to generate revenue growth through long-term commitments and investments. Our diversified Wealth Management business, built over 30+ years, largely through organic growth, led the way with a record $153 million in total revenues, a 14% increase from their previous high set during the same quarter last year. Our alternative investment practice, which began in 2005 and provides equity and debt capital to growing businesses, experienced significant gains during the third quarter adding $31 million to pretax revenue. These types of long-term differentiators set us apart and demonstrate the force of a diversified business model.”

Bradshaw continued, “Equally impressive to our revenue generating opportunities this year has been our firm hold on expense management, which has grown at a rate just slightly above 2% over the last two trailing twelve month periods, despite significant technology and cyber-related investments.

“While loan growth continues to be a challenge, and our line utilization levels at five year lows, we believe that the inevitable return to normalized levels will result in significant earnings growth potential. Our strong results today leave us well-positioned to aggressively add customers throughout our loan portfolio.”

Third Quarter 2021 Financial Highlights

  • Net income was $188.3 million or $2.74 per diluted share for the third quarter of 2021 and $166.4 million or $2.40 per diluted share for the second quarter of 2021.
  • Net interest revenue totaled $280.2 million, consistent with the prior quarter. Net interest margin was 2.66 percent compared to 2.60 percent in the second quarter of 2021.
  • Operating revenue totaled $229.8 million, an increase of $38.4 million. Growth in much of our fee-based businesses, led by brokerage and trading and mortgage banking revenues, was partially offset by lower operating revenues from repossessed assets related to oil and gas properties sold during the quarter. In addition, we recognized a $31.1 million pre-tax gain on the sale of an alternative investment. This gain was partially offset by losses on the extinguishment of subordinated debt and sale of repossessed assets.
  • Operating expense totaled $291.3 million, consistent with the prior quarter, as a $3.8 million increase in personnel expense was offset by a $3.7 million decrease in non-personnel expense, primarily due to a reduction of operating expenses related to oil and gas properties sold during the quarter.
  • Period-end loans decreased $1.1 billion to $20.3 billion at September 30, 2021. Period-end Paycheck Protection Program (“PPP”) loans decreased $586 million to $536 million. The remaining decrease was primarily due to paydowns of commercial energy loans and commercial real estate loans. Average loans were $20.8 billion, a $1.3 billion decrease compared to the second quarter of 2021.
  • Continued improvement in credit quality metrics and lower loan balances coupled with strength in commodity prices and a continued optimistic outlook for growth in gross domestic product and the labor markets resulted in a $23.0 million negative provision for expected credit losses in the third quarter of 2021. A $35.0 million negative provision for expected credit losses was recorded in the prior quarter. The combined allowance for credit losses totaled $306 million or 1.54 percent of outstanding loans, excluding PPP loans, at September 30, 2021. The combined allowance for credit losses was $336 million or 1.66 percent of outstanding loans, excluding PPP loans, at June 30, 2021.
  • Average deposits increased $344 million to $37.8 billion and period-end deposits increased $1.1 billion to $38.5 billion, largely due to growth in commercial balances. Average demand deposits grew by $481 million and average interest bearing deposits decreased by $137 million.
  • The company’s common equity Tier 1 capital ratio was 12.26 percent at September 30, 2021. In addition, the company’s Tier 1 capital ratio was 12.29 percent, total capital ratio was 13.38 percent, and leverage ratio was 8.77 percent at September 30, 2021. At June 30, 2021, the company’s common equity Tier 1 capital ratio was 11.95 percent, Tier 1 capital ratio was 12.01 percent, total capital ratio was 13.61 percent, and leverage ratio was 8.58 percent.
  • The company repurchased 478,141 shares of common stock at an average price of $85.00 a share in the third quarter of 2021.
  • On August 23, 2021, the company redeemed the subordinated debt issued in June of 2016 at the interest rate of 5.375 percent using existing capital, saving approximately $8.0 million per year in interest payments. The repayment resulted in a realized loss on extinguishment of debt of $5.2 million.
  • Commercial Banking contributed $102.7 million to net income in the third quarter of 2021, an increase of $30.1 million compared to the second quarter of 2021. The sale of an alternative investment resulted in a $31.1 million pre-tax gain, net of non-controlling interest. Combined net interest revenue and fee revenue decreased $3.7 million, largely due to a decrease of $6.0 million in production revenue from repossessed oil and gas properties, which was partially offset by a decrease in expenses on the same properties. In addition, favorable yields on deposits sold to our Funds Management unit dampened the reduction of total revenue. Average Commercial Banking loans decreased $393 million due to purposeful deleveraging by our customers. Average Commercial Banking deposits grew 5 percent to $17.9 billion in the third quarter of 2021.
  • Consumer Banking contributed $12.4 million to net income in the third quarter of 2021, an increase of $10.7 million compared to the prior quarter. Combined net interest revenue and fee revenue increased $9.0 million. Net interest revenue increased $2.3 million, mainly due to favorable yields on deposits sold to our Funds Management unit. Fees and commissions revenue increased $6.7 million, largely due to mortgage production revenue. Lower mortgage banking costs largely drove a $3.0 million decrease in operating expense. Average Consumer Banking deposits were consistent with the prior quarter.
  • Wealth Management contributed a record $41.4 million to net income in the third quarter of 2021, an increase of $10.3 million compared to the prior quarter. Our diverse set of investment-focused businesses including fixed income trading, private wealth, institutional wealth, financial risk management, and multiple fiduciary businesses combined to provide total net interest and fee revenues of $153.2 million, an increase of $22.0 million over the second quarter of 2021. Revenue primarily from agency residential mortgage trading activity increased $15.4 million to $77.3 million due to higher margin market opportunities. Operating expense increased $8.0 million, primarily due to incentive compensation costs related to increased trading activity. Average Wealth Management deposits decreased 6 percent to $9.1 billion in the third quarter of 2021. Assets under management were $98.8 billion, an increase of $2.2 billion compared to the prior quarter.

Net Interest Revenue

Net interest revenue was $280.2 million for the third quarter of 2021, largely unchanged compared to the second quarter of 2021. Net interest margin was 2.66 percent compared to 2.60 percent in the prior quarter.

Average earning assets decreased $892 million compared to the second quarter of 2021. Average loan balances decreased $1.3 billion, largely due to paydowns of PPP loans. Available for sale securities increased $203 million. Average trading securities grew by $187 million. Other borrowings decreased $1.1 billion while funds purchased and repurchase agreements decreased $342 million.

The yield on average earning assets was 2.78 percent, a 3 basis point increase from the prior quarter. The loan portfolio yield increased 14 basis points to 3.68 percent, primarily due to non-use fees related to lower credit line utilization. The yield on the available for sale securities portfolio decreased 5 basis points to 1.80 percent.

Funding costs were 0.19 percent, down 2 basis points. The cost of interest-bearing deposits decreased 1 basis point to 0.13 percent. The cost of other borrowed funds increased 2 basis points to 0.30 percent. The cost of subordinated debentures decreased 24 basis points due to the redemption of $150 million in the third quarter. The benefit to net interest margin from assets funded by non-interest liabilities was 7 basis points for the third quarter of 2021, compared to 6 basis points for the prior quarter.

Operating Revenue

Growing $21.0 million over the prior quarter, fees and commissions revenue totaled $190.4 million for the third quarter of 2021. Brokerage and trading revenue increased $18.5 million to $47.9 million. Higher margin market opportunities led to an $11.1 million increase in trading revenue. Customer hedging revenue increased $5.1 million, primarily attributed to energy customers. Investment banking revenue increased $1.9 million, largely due to the timing of financial advisory fees.

Mortgage banking revenue increased $5.1 million compared to the prior quarter. While mortgage production volume decreased $28 million to $615 million, production revenue as a percentage of production volume, which includes unrealized gains and losses on our mortgage commitment pipeline and related hedges, increased to 2.50 percent. An increase in consumer activity following the pandemic shut downs resulted in a $1.6 million increase in deposit service charges.

Other gains and losses, net increased $14.6 million over the prior quarter. The sale of an alternative investment resulted in a $31.1 million gain, net of non-controlling interest, which was partially offset by a $5.2 million loss on the extinguishment of subordinated debentures and a $3.9 million loss on the sale of a repossessed oil and gas asset. The prior quarter included a $7.4 million gain on the sale of a repossessed asset.

Other revenue decreased $4.3 million as a result of lower operating revenue from repossessed oil and gas assets due to the sale of a property, which was largely offset by a reduction of expenses on the same properties.

Operating Expense

Total operating expense remained consistent with the prior quarter at $291.3 million with a $3.8 million increase in personnel expense offset by a $3.7 million decrease in non-personnel expense.

Cash based incentive compensation increased $8.8 million, primarily in relation to increased trading revenue. Deferred compensation expense, which is largely offset by a decrease in the value of related investments included in Other gains (losses), net, decreased $2.4 million. Employee benefits expense decreased $3.3 million due to reduced payroll taxes and employee healthcare costs.

Other expense decreased $6.8 million as a result of lower operating expenses on repossessed assets. Mortgage banking costs decreased $2.2 million due to a decrease in prepayments. These decreases were partially offset by a $2.2 million increase in business promotion costs, a $2.0 million increase in data processing and communications expense and a $1.8 million increase in occupancy and equipment expense.

Loans, Deposits and Capital

Loans

Outstanding loans were $20.3 billion at September 30, 2021, a $1.1 billion decrease compared to June 30, 2021, led by lower PPP loan balances and to a lesser extent, energy and commercial real estate loans.

Outstanding commercial loan balances decreased $298 million compared to June 30, 2021, primarily due to lower energy loan balances. Although the primary source of repayment of our commercial loan portfolio is the on-going cash flow from operations of the customer’s business, loans are generally governed by a borrowing base and secured by the customer’s assets.

Energy loan balances decreased $197 million to $2.8 billion or 14 percent of total loans. While commodity prices have continued to improve and stabilize, sourcing new loans sufficient to offset paydowns remains a challenge. 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 67 percent of committed production loans are secured by properties primarily producing oil. The remaining 33 percent is secured by properties primarily producing natural gas. Unfunded energy loan commitments were $2.8 billion at September 30, 2021, an increase of $109 million over June 30, 2021.

Services loan balances decreased $66 million to $3.3 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.

Healthcare sector loan balances decreased $34 million compared to the prior quarter, totaling $3.3 billion or 16 percent of total loans. Our healthcare sector loans primarily consist of $2.6 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 that serves to help diversify risks specific to a single facility.

Commercial real estate loan balances decreased $130 million compared to June 30, 2021 and represent 20 percent of total loans at September 30, 2021, largely due to refinancing in the long term, non-recourse markets. Multifamily residential loans, decreased $89 million to $876 million at September 30, 2021. Loans secured by office facilities decreased $43 million to $1.0 billion. Loans secured by other commercial real estate properties decreased $35 million to $435 million. Loans secured by industrial facilities increased $66 million to $890 million.

PPP loan balances decreased $586 million to $536 million or 3 percent of total loans.

Loans to individuals decreased $55 million and represent 17 percent of total loans at September 30, 2021. Residential mortgage loans decreased $62 million, largely due to the re-sale of loans previously sold into GNMA mortgage pools that the Company repurchased when certain defined delinquency criteria were met. Many loans repurchased during the pandemic have since been cured and meet the re-sale qualifications. Personal loans were up $7.1 million.

Deposits

Period-end deposits totaled $38.5 billion at September 30, 2021, a $1.1 billion increase compared to June 30, 2021. Demand deposit account balances grew by $710 million and interest-bearing transaction account balances increased by $474 million. Average deposits were $37.8 billion at September 30, 2021, a $344 million increase compared to June 30, 2021. Demand deposit account balances increased $481 million primarily from deposits attributed to the Commercial Banking segment while interest-bearing deposits decreased $137 million.

Capital

The company’s common equity Tier 1 capital ratio was 12.26 percent at September 30, 2021. In addition, the company’s Tier 1 capital ratio was 12.29 percent, total capital ratio was 13.38 percent, and leverage ratio was 8.77 percent at September 30, 2021. We have 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, which added 20 basis points to the company’s common equity tier 1 capital ratio at September 30. At June 30, 2021, the company’s common equity Tier 1 capital ratio was 11.95 percent, Tier 1 capital ratio was 12.01 percent, total capital ratio was 13.61 percent, and leverage ratio was 8.58 percent.

The company’s tangible common equity ratio, a non-GAAP measure, was 9.28 percent at September 30, 2021 and 9.09 percent at June 30, 2021. 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 478,141 shares of common stock at an average price of $85.00 a share in the third quarter of 2021. 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 expected 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 rate and West Texas Intermediate (“WTI”) oil prices on a probability weighted basis.

We recorded a $23.0 million negative provision for credit losses in the third quarter of 2021. Changes in our reasonable and supportable forecasts of macroeconomic variables, primarily due to continued strength in commodity prices and a continued optimistic outlook for economic growth in GDP and labor markets resulted in a $12.3 million decrease in the allowance for credit losses related to lending activities. Changes in loan portfolio characteristics, primarily related to improving credit quality metrics and lower loan balances resulted in a $10.1 million decrease in the allowance for credit losses related to lending activities.

Our base case reasonable and supportable forecast assumes that the COVID-19 pandemic continues to improve from the Delta variant as global virus immunity continues to be more widespread and vaccines prove to be effective against severe virus outcomes as well as new virus strains. Elevated consumer consumption and the need for inventory restocking is expected to result in GDP growth above historical averages throughout mid-year 2022, but begins to moderate thereafter. We expect a 4.1 percent increase in GDP over the next twelve months. We expect labor force participants will continue to re-enter the job market to help meet record job openings. This increase in employment helps maintain household income above its pre-pandemic trend and prevents a sharp drop-off in spending. Our forecasted civilian unemployment rate is 4.9 percent for the fourth quarter of 2021, improving to 4.5 percent by the third quarter of 2022. WTI oil prices are projected to generally follow the NYMEX forward curve that existed at the end of September 2021, averaging $68.38 per barrel over the next twelve months.

The probability weighting of our base case reasonable and supportable forecast decreased to 65 percent in the third quarter of 2021 compared to 70 percent in the second quarter of 2021 as the level of uncertainty in the current economic outlook worsened slightly. Our downside case, probability weighted at 25 percent, assumes additional waves and hotspots emerge in areas of the country with lower vaccination rates stemming from the impact of new virus strains, such as the current Delta variant, as the U.S. enters the fall and winter months. This results in a relatively mild recession with conditions beginning to improve in the summer of 2022.

The allowance for loan losses totaled $277 million or 1.36 percent of outstanding loans and 208 percent of nonaccruing loans at September 30, 2021, excluding residential mortgage loans guaranteed by U.S. government agencies. The combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $306 million or 1.50 percent of outstanding loans and 230 percent of nonaccruing loans at September 30, 2021. Excluding PPP loans, the allowance for loan losses was 1.40 percent of outstanding loans and the combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was 1.54 percent.

At June 30, 2021, the allowance for loan losses was $312 million or 1.46 percent of outstanding loans and 183 percent of nonaccruing loans, excluding loans guaranteed by U.S. government agencies. The combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $336 million or 1.57 percent of outstanding loans and 197 percent of nonaccruing loans.

Nonperforming assets totaled $349 million or 1.71 percent of outstanding loans and repossessed assets at September 30, 2021, down from $408 million or 1.90 percent at June 30, 2021. Nonperforming assets that are not guaranteed by U.S. government agencies totaled $162 million or 0.83 percent of outstanding loans and repossessed assets at September 30, 2021, compared to $228 million or 1.14 percent at June 30, 2021. The decrease in nonperforming assets was primarily related to a decrease in nonaccruing energy loans and sales of energy-related repossessed assets during the third quarter of 2021.

Nonaccruing loans were $142 million or 0.72 percent of outstanding loans, excluding PPP loans, at September 30, 2021. Nonaccruing commercial loans totaled $81 million or 0.66 percent of outstanding commercial loans. Nonaccruing commercial real estate loans totaled $21 million or 0.52 percent of outstanding commercial real estate loans. Nonaccruing loans to individuals totaled $40 million or 1.14 percent of outstanding loans to individuals.

Nonaccruing loans decreased $38 million compared to June 30, 2021, primarily due to a decrease in nonaccruing energy loans. New nonaccruing loans identified in the third quarter totaled $22 million, offset by $42 million in payments received and $10 million in 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 $333 million at September 30, 2021, down significantly from $384 million at June 30. Potential problem energy and services loans decreased compared to the prior quarter, partially offset by an increase in potential problem commercial real estate loans.

Net charge-offs were $7.8 million or 0.16 percent of average loans on an annualized basis for the third quarter of 2021, excluding PPP loans. Net charge-offs were 0.26 percent of average loans over the last four quarters. Net charge-offs were $15.4 million or 0.30 percent of average loans on an annualized basis for the second quarter of 2021, excluding PPP loans. Gross charge-offs were $9.6 million for the third quarter compared to $18.3 million for the previous quarter. Recoveries totaled $1.8 million for the third quarter of 2021 and $2.9 million for the second quarter of 2021.

Securities and Derivatives

The fair value of the available for sale securities portfolio totaled $13.3 billion at September 30, 2021, a $24 million increase compared to June 30, 2021. At September 30, 2021, the available for sale securities portfolio consisted primarily of $8.2 billion of residential mortgage-backed securities fully backed by U.S. government agencies and $4.7 billion of commercial mortgage-backed securities fully backed by U.S. government agencies. At September 30, 2021, the available for sale securities portfolio had a net unrealized gain of $221 million compared to $297 million at June 30, 2021.

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 $9.4 million to $51 million at September 30, 2021.

The net economic benefit of the changes in the fair value of mortgage servicing rights and related economic hedges was $7.3 million during the third quarter of 2021, including a $12.9 million increase in the fair value of mortgage servicing rights, a $5.9 million decrease in the fair value of securities and derivative contracts held as an economic hedge, and $286 thousand of related net interest revenue.

Conference Call and Webcast

The company will hold a conference call at 9 a.m. Central time on Wednesday, October 20, 2021 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 1-412-317-6671 and referencing conference ID # 13723814.

About BOK Financial Corporation

BOK Financial Corporation is a $47 billion regional financial services company headquartered in Tulsa, Oklahoma with $99 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 September 30, 2021 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 — UNAUDITED
BOK FINANCIAL CORPORATION
(In thousands)

Sept. 30, 2021 June 30, 2021
ASSETS
Cash and due from banks $ 729,285 $ 678,998
Interest-bearing cash and cash equivalents 1,162,477 580,457
Trading securities 5,554,040 5,699,070
Investment securities, net of allowance 215,592 220,832
Available for sale securities 13,342,113 13,317,922
Fair value option securities 51,019 60,432
Restricted equity securities 77,542 134,885
Residential mortgage loans held for sale 176,813 200,842
Loans:
Commercial 12,175,140 12,472,907
Commercial real estate 4,116,892 4,246,992
Paycheck protection program 536,052 1,121,583
Loans to individuals 3,519,852 3,574,967
Total loans 20,347,936 21,416,449
Allowance for loan losses (276,680 ) (311,890 )
Loans, net of allowance 20,071,256 21,104,559
Premises and equipment, net 558,126 556,400
Receivables 171,505 195,763
Goodwill 1,044,749 1,048,091
Intangible assets, net 96,186 105,694
Mortgage servicing rights 133,308 117,629
Real estate and other repossessed assets, net 28,770 57,337
Derivative contracts, net 1,901,136 1,701,443
Cash surrender value of bank-owned life insurance 403,369 401,163
Receivable on unsettled securities sales 215,755 70,954
Other assets 990,368 901,904
TOTAL ASSETS $ 46,923,409 $ 47,154,375
LIABILITIES AND EQUITY
Deposits:
Demand $ 14,090,229 $ 13,380,409
Interest-bearing transaction 21,753,110 21,278,719
Savings 900,497 875,456
Time 1,780,715 1,905,349
Total deposits 38,524,551 37,439,933
Funds purchased and repurchase agreements 843,273 730,183
Other borrowings 37,426 1,546,231
Subordinated debentures 131,220 276,043
Accrued interest, taxes and expense 220,266 199,014
Due on unsettled securities purchases 614,598 576,536
Derivative contracts, net 739,641 612,261
Other liabilities 415,986 419,623
TOTAL LIABILITIES 41,526,961 41,799,824
Shareholders’ equity:
Capital, surplus and retained earnings 5,219,801 5,106,209
Accumulated other comprehensive gain 169,172 226,768
TOTAL SHAREHOLDERS’ EQUITY 5,388,973 5,332,977
Non-controlling interests 7,475 21,574
TOTAL EQUITY 5,396,448 5,354,551
TOTAL LIABILITIES AND EQUITY $ 46,923,409 $ 47,154,375

AVERAGE BALANCE SHEETS — UNAUDITED
BOK FINANCIAL CORPORATION
(in thousands)

Three Months Ended
Sept. 30, 2021 June 30, 2021 Mar. 31, 2021 Dec. 31, 2020 Sept. 30, 2020
ASSETS
Interest-bearing cash and cash equivalents $ 682,788 $ 659,312 $ 711,047 $ 643,926 $ 553,070
Trading securities 7,617,236 7,430,217 6,963,617 6,888,189 1,834,160
Investment securities, net of allowance 218,117 221,401 237,313 251,863 258,965
Available for sale securities 13,446,095 13,243,542 13,433,767 12,949,702 12,580,850
Fair value option securities 56,307 64,864 104,662 122,329 387,784
Restricted equity securities 245,485 208,692 189,921 280,428 144,415
Residential mortgage loans held for sale 167,620 218,200 207,013 229,631 213,125
Loans:
Commercial 12,231,230 12,402,925 12,908,461 13,113,449 13,772,217
Commercial real estate 4,218,190 4,395,848 4,547,945 4,788,393 4,754,269
Paycheck protection program 792,728 1,668,047 1,741,534 1,928,665 2,092,933
Loans to individuals 3,606,460 3,700,269 3,559,067 3,617,011 3,491,044
Total loans 20,848,608 22,167,089 22,757,007 23,447,518 24,110,463
Allowance for loan losses (306,125 ) (345,269 ) (382,734 ) (414,225 ) (441,831 )
Loans, net of allowance 20,542,483 21,821,820 22,374,273 23,033,293 23,668,632
Total earning assets 42,976,131 43,868,048 44,221,613 44,399,361 39,641,001
Cash and due from banks 766,688 763,393 760,691 742,432 723,826
Derivative contracts, net 1,501,736 1,022,137 873,712 553,779 581,839
Cash surrender value of bank-owned life insurance 401,926 401,760 399,830 397,354 394,680
Receivable on unsettled securities sales 632,539 716,700 735,482 1,094,198 4,563,301
Other assets 3,220,129 3,424,884 3,319,305 3,200,040 3,027,108
TOTAL ASSETS $ 49,499,149 $ 50,196,922 $ 50,310,633 $ 50,387,164 $ 48,931,755
LIABILITIES AND EQUITY
Deposits:
Demand $ 13,670,656 $ 13,189,954 $ 12,312,629 $ 12,136,071 $ 11,929,694
Interest-bearing transaction 21,435,736 21,491,145 21,433,406 20,718,390 19,752,106
Savings 888,011 872,618 789,656 737,360 707,121
Time 1,839,983 1,936,510 1,986,425 1,930,808 2,251,012
Total deposits 37,834,386 37,490,227 36,522,116 35,522,629 34,639,933
Funds purchased and repurchase agreements 1,448,800 1,790,490 2,830,378 2,153,254 2,782,150
Other borrowings 2,546,083 3,608,369 3,392,346 5,193,656 3,382,688
Subordinated debentures 214,654 276,034 276,015 275,998 275,980
Derivative contracts, net 434,334 366,202 428,488 399,476 458,390
Due on unsettled securities purchases 957,538 701,495 915,410 957,642 1,516,880
Other liabilities 619,913 634,460 671,715 656,147 712,674
TOTAL LIABILITIES 44,055,708 44,867,277 45,036,468 45,158,802 43,768,695
Total equity 5,443,441 5,329,645 5,274,165 5,228,362 5,163,060
TOTAL LIABILITIES AND EQUITY $ 49,499,149 $ 50,196,922 $ 50,310,633 $ 50,387,164 $ 48,931,755

STATEMENTS OF EARNINGS — UNAUDITED
BOK FINANCIAL CORPORATION
(in thousands, except per share data)

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Interest revenue $ 293,463 $ 294,659 $ 887,595 $ 949,980
Interest expense 13,236 22,909 46,639 138,766
Net interest revenue 280,227 271,750 840,956 811,214
Provision for credit losses (23,000 ) (83,000 ) 229,092
Net interest revenue after provision for credit losses 303,227 271,750 923,956 582,122
Other operating revenue:
Brokerage and trading revenue 47,930 69,526 98,120 182,327
Transaction card revenue 24,632 23,465 71,985 68,286
Fiduciary and asset management revenue 45,248 39,931 131,402 125,646
Deposit service charges and fees 27,429 24,286 77,499 72,462
Mortgage banking revenue 26,286 51,959 84,618 143,062
Other revenue 18,896 13,698 58,364 37,486
Total fees and commissions 190,421 222,865 521,988 629,269
Other gains (losses), net 31,091 2,044 57,661 (1,347 )
Gain (loss) on derivatives, net (5,760 ) 2,354 (14,590 ) 42,659
Gain (loss) on fair value option securities, net (120 ) (754 ) (3,657 ) 53,180
Change in fair value of mortgage servicing rights 12,945 3,441 33,778 (85,800 )
Gain (loss) on available for sale securities, net 1,255 (12 ) 3,152 5,571
Total other operating revenue 229,832 229,938 598,332 643,532
Other operating expense:
Personnel 175,863 179,860 520,908 512,276
Business promotion 4,939 2,633 9,837 10,783
Charitable contributions to BOKF Foundation 4,000 3,000
Professional fees and services 12,436 14,074 36,777 39,183
Net occupancy and equipment 28,395 28,111 81,690 84,847
Insurance 3,712 5,848 11,992 15,984
Data processing and communications 38,371 34,751 112,256 100,436
Printing, postage and supplies 3,558 3,482 11,283 11,256
Amortization of intangible assets 4,488 5,071 13,873 15,355
Mortgage banking costs 8,962 15,803 34,031 41,946
Other expense 10,553 7,411 41,566 26,571
Total other operating expense 291,277 297,044 878,213 861,637
Net income before taxes 241,782 204,644 644,075 364,017
Federal and state income taxes 54,061 50,552 144,939 83,655
Net income 187,721 154,092 499,136 280,362
Net income (loss) attributable to non-controlling interests (601 ) 58 (1,667 ) (444 )
Net income attributable to BOK Financial Corporation shareholders $ 188,322 $ 154,034 $ 500,803 $ 280,806
Average shares outstanding:
Basic 68,359,125 69,877,866 68,768,044 69,958,944
Diluted 68,360,871 69,879,290 68,770,663 69,962,053
Net income per share:
Basic $ 2.74 $ 2.19 $ 7.23 $ 3.99
Diluted $ 2.74 $ 2.19 $ 7.23 $ 3.99

FINANCIAL HIGHLIGHTS — UNAUDITED
BOK FINANCIAL CORPORATION
(in thousands, except ratio and share data)

Three Months Ended
Sept. 30, 2021 June 30, 2021 Mar. 31, 2021 Dec. 31, 2020 Sept. 30, 2020
Capital:
Period-end shareholders’ equity $ 5,388,973 $ 5,332,977 $ 5,239,462 $ 5,266,266 $ 5,218,787
Risk weighted assets $ 33,916,456 $ 33,824,860 $ 32,623,108 $ 32,492,277 $ 31,529,826
Risk-based capital ratios:
Common equity tier 1 12.26 % 11.95 % 12.14 % 11.95 % 12.07 %
Tier 1 12.29 % 12.01 % 12.21 % 11.95 % 12.07 %
Total capital 13.38 % 13.61 % 13.98 % 13.82 % 14.05 %
Leverage ratio 8.77 % 8.58 % 8.42 % 8.28 % 8.39 %
Tangible common equity ratio1 9.28 % 9.09 % 8.82 % 9.02 % 9.02 %
Common stock:
Book value per share $ 78.56 $ 77.20 $ 75.33 $ 75.62 $ 74.23
Tangible book value per share $ 61.93 $ 60.50 $ 58.67 $ 58.94 $ 57.64
Market value per share:
High $ 92.97 $ 93.00 $ 98.95 $ 73.07 $ 62.86
Low $ 77.20 $ 83.59 $ 67.57 $ 50.09 $ 48.41
Cash dividends paid $ 35,725 $ 35,925 $ 36,038 $ 36,219 $ 35,799
Dividend payout ratio 18.97 % 21.59 % 24.67 % 23.48 % 23.24 %
Shares outstanding, net 68,596,764 69,078,458 69,557,873 69,637,600 70,305,833
Stock buy-back program:
Shares repurchased 478,141 492,994 260,000 665,100
Amount $ 40,644 $ 43,797 $ 20,071 $ 42,450 $
Average price per share $ 85.00 $ 88.84 $ 77.20 $ 63.82 $
Performance ratios (quarter annualized):
Return on average assets 1.51 % 1.33 % 1.18 % 1.22 % 1.25 %
Return on average equity 13.78 % 12.58 % 11.28 % 11.75 % 11.89 %
Net interest margin 2.66 % 2.60 % 2.62 % 2.72 % 2.81 %
Efficiency ratio 61.23 % 64.20 % 66.26 % 62.77 % 59.57 %
Reconciliation of non-GAAP measures:
1 Tangible common equity ratio:
Total shareholders’ equity $ 5,388,973 $ 5,332,977 $ 5,239,462 $ 5,266,266 $ 5,218,787
Less: Goodwill and intangible assets, net 1,140,935 1,153,785 1,158,676 1,161,527 1,166,615
Tangible common equity $ 4,248,038 $ 4,179,192 $ 4,080,786 $ 4,104,739 $ 4,052,172
Total assets $ 46,923,409 $ 47,154,375 $ 47,442,513 $ 46,671,088 $ 46,067,224
Less: Goodwill and intangible assets, net 1,140,935 1,153,785 1,158,676 1,161,527 1,166,615
Tangible assets $ 45,782,474 $ 46,000,590 $ 46,283,837 $ 45,509,561 $ 44,900,609
Tangible common equity ratio 9.28 % 9.09 % 8.82 % 9.02 % 9.02 %
Three Months Ended
Sept. 30, 2021 June 30, 2021 Mar. 31, 2021 Dec. 31, 2020 Sept. 30, 2020
Pre-provision net revenue:
Net income before taxes $ 241,782 $ 215,603 $ 186,690 $ 199,847 $ 204,644
Provision for expected credit losses (23,000 ) (35,000 ) (25,000 ) (6,500 )
Net income (loss) attributable to non-controlling interests (601 ) 686 (1,752 ) 485 58
Pre-provision net revenue $ 219,383 $ 179,917 $ 163,442 $ 192,862 $ 204,586
Other data:
Tax equivalent interest $ 2,217 $ 2,320 $ 2,301 $ 2,414 $ 2,457
Net unrealized gain on available for sale securities $ 221,487 $ 297,267 $ 290,217 $ 440,814 $ 480,563
Mortgage banking:
Mortgage production revenue $ 15,403 $ 10,004 $ 25,287 $ 26,662 $ 38,431
Mortgage loans funded for sale $ 652,336 $ 754,893 $ 843,053 $ 998,435 $ 1,032,472
Add: current period-end outstanding commitments 239,066 276,154 387,465 380,637 560,493
Less: prior period end outstanding commitments 276,154 387,465 380,637 560,493 546,304
Total mortgage production volume $ 615,248 $ 643,582 $ 849,881 $ 818,579 $ 1,046,661
Mortgage loan refinances to mortgage loans funded for sale 48 % 48 % 65 % 58 % 54 %
Realized margin on funded mortgage loans 2.48 % 2.75 % 3.10 % 3.78 % 3.52 %
Production revenue as a percentage of production volume 2.50 % 1.55 % 2.98 % 3.26 % 3.67 %
Mortgage servicing revenue $ 10,883 $ 11,215 $ 11,826 $ 12,636 $ 13,528
Average outstanding principal balance of mortgage loans serviced for others 14,899,306 15,065,173 15,723,231 16,518,208 17,434,215
Average mortgage servicing revenue rates 0.29 % 0.30 % 0.31 % 0.30 % 0.31 %
Gain (loss) on mortgage servicing rights, net of economic hedge:
Gain (loss) on mortgage hedge derivative contracts, net $ (5,829 ) $ 18,764 $ (27,705 ) $ (385 ) $ 2,295
Gain (loss) on fair value option securities, net (120 ) (1,627 ) (1,910 ) 68 (754 )
Gain (loss) on economic hedge of mortgage servicing rights (5,949 ) 17,137 (29,615 ) (317 ) 1,541
Gain (loss) on changes in fair value of mortgage servicing rights 12,945 (13,041 ) 33,874 6,276 3,441
Gain on changes in fair value of mortgage servicing rights, net of economic hedges, included in other operating revenue 6,996 4,096 4,259 5,959 4,982
Net interest revenue on fair value option securities2 286 341 393 550 1,565
Total economic benefit of changes in the fair value of mortgage servicing rights, net of economic hedges $ 7,282 $ 4,437 $ 4,652 $ 6,509 $ 6,547

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

QUARTERLY EARNINGS TREND — UNAUDITED
BOK FINANCIAL CORPORATION
(in thousands, except ratio and per share data)

Three Months Ended
Sept. 30, 2021 June 30, 2021 Mar. 31, 2021 Dec. 31, 2020 Sept. 30, 2020
Interest revenue $ 293,463 $ 295,893 $ 298,239 $ 319,020 $ 294,659
Interest expense 13,236 15,584 17,819 21,790 22,909
Net interest revenue 280,227 280,309 280,420 297,230 271,750
Provision for credit losses (23,000 ) (35,000 ) (25,000 ) (6,500 )
Net interest revenue after provision for credit losses 303,227 315,309 305,420 303,730 271,750
Other operating revenue:
Brokerage and trading revenue 47,930 29,408 20,782 39,506 69,526
Transaction card revenue 24,632 24,923 22,430 21,896 23,465
Fiduciary and asset management revenue 45,248 44,832 41,322 41,799 39,931
Deposit service charges and fees 27,429 25,861 24,209 24,343 24,286
Mortgage banking revenue 26,286 21,219 37,113 39,298 51,959
Other revenue 18,896 23,172 16,296 14,209 13,698
Total fees and commissions 190,421 169,415 162,152 181,051 222,865
Other gains, net 31,091 16,449 10,121 7,394 2,044
Gain (loss) on derivatives, net (5,760 ) 18,820 (27,650 ) (339 ) 2,354
Gain (loss) on fair value option securities, net (120 ) (1,627 ) (1,910 ) 68 (754 )
Change in fair value of mortgage servicing rights 12,945 (13,041 ) 33,874 6,276 3,441
Gain (loss) on available for sale securities, net 1,255 1,430 467 4,339 (12 )
Total other operating revenue 229,832 191,446 177,054 198,789 229,938
Other operating expense:
Personnel 175,863 172,035 173,010 176,198 179,860
Business promotion 4,939 2,744 2,154 3,728 2,633
Charitable contributions to BOKF Foundation 4,000 6,000
Professional fees and services 12,436 12,361 11,980 14,254 14,074
Net occupancy and equipment 28,395 26,633 26,662 27,875 28,111
Insurance 3,712 3,660 4,620 4,006 5,848
Data processing and communications 38,371 36,418 37,467 35,061 34,751
Printing, postage and supplies 3,558 4,285 3,440 3,805 3,482
Amortization of intangible assets 4,488 4,578 4,807 5,088 5,071
Mortgage banking costs 8,962 11,126 13,943 14,765 15,803
Other expense 10,553 17,312 13,701 11,892 7,411
Total other operating expense 291,277 291,152 295,784 302,672 297,044
Net income before taxes 241,782 215,603 186,690 199,847 204,644
Federal and state income taxes 54,061 48,496 42,382 45,138 50,552
Net income 187,721 167,107 144,308 154,709 154,092
Net income (loss) attributable to non-controlling interests (601 ) 686 (1,752 ) 485 58
Net income attributable to BOK Financial Corporation shareholders $ 188,322 $ 166,421 $ 146,060 $ 154,224 $ 154,034
Average shares outstanding:
Basic 68,359,125 68,815,666 69,137,375 69,489,597

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