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BOK Financial Reports Quarterly Earnings of $86 Million

TULSA, Okla., Oct. 25, 2017 (GLOBE NEWSWIRE) -- BOK Financial Corporation (NASDAQ:BOKF) reported net income of $85.6 million or $1.31 per diluted share for the third quarter of 2017. Net income was $88.1 million or $1.35 per diluted share for the second quarter of 2017 and $74.3 million or $1.13 per diluted share for the third quarter of 2016.

Steven G. Bradshaw, president and chief executive officer of BOK Financial, stated, “It was another very strong quarter for BOK Financial, and the earnings momentum we’ve demonstrated in 2017 continued through the third quarter. Net interest margin continued to expand as a result of the June 2017 Federal Reserve rate hike, combined with deposit pricing discipline across the banking industry. This, in turn, translated to record net interest income for the quarter. Our sound credit underwriting and discipline, combined with a benign credit environment, resulted in no loan loss provision for the fourth consecutive quarter. Looking forward to 2018, we see many of the trends we’ve experienced in 2017 continuing, including a favorable rate environment, strong organic revenue growth, and careful expense management to drive earnings leverage.”

Bradshaw continued, “During the third quarter, the company was impacted by two weather events: Hurricane Harvey in Houston, as well as a tornado, which struck one of our facilities in Tulsa. In both cases, employees rallied and worked around the clock to minimize the impact to customers. In addition, employees contributed almost $90,000 to an assistance fund to help their colleagues in Houston recover from the storm, and several employees reported that teammates arrived at their homes the weekend following to help remove debris, pull down damaged drywall, and lend a helping hand. I’m extremely proud of our employees for their heartfelt response and can-do attitude during these events. From a company standpoint, the storms negatively impacted earnings by $2.4 million this quarter.”

Third Quarter 2017 Highlights

  • Net interest revenue totaled $218.5 million for the third quarter of 2017, up $13.2 million over the second quarter of 2017. Net interest margin increased to 3.01 percent for the third quarter of 2017 from 2.89 percent for the second quarter of 2017. Recoveries of foregone interest on non-accruing loans added 6 basis points to net interest margin in the third quarter of 2017. Average earning assets grew by $395 million.

  • Fees and commissions revenue totaled $173.5 million for the third quarter of 2017, compared to $177.5 million for the second quarter of 2017. Mortgage banking revenue decreased $5.4 million due to lower gain on sale margin and mortgage production volumes.

  • Operating expense was $265.9 million for the third quarter of 2017, an increase of $15.0 million over the prior quarter. Personnel expense was up $4.2 million, primarily due to increased incentive compensation expense. Non-personnel expense increased $10.9 million. Deposit insurance expense for the second quarter of 2017 included $5.1 million in credits related to the revision of certain inputs to the assessment calculation filed in previous periods. Net losses and operating expenses of repossessed assets increased $3.8 million primarily due to the write-down of one set of repossessed oil and gas properties.

  • No provision for credit losses was recorded in the third quarter of 2017 or the second quarter of 2017. The company had net charge-offs of $3.4 million in the third quarter of 2017, compared to net charge-offs of $1.7 million in the previous quarter.

  • The combined allowance for credit losses totaled $253 million or 1.47 percent of outstanding loans at September 30, 2017, compared to $256 million or 1.49 percent of outstanding loans at June 30, 2017.

  • Nonperforming assets that are not guaranteed by U.S. government agencies totaled $249 million or 1.46 percent of outstanding loans and repossessed assets at September 30, 2017 and $276 million or 1.62 percent of outstanding loans and repossessed assets at June 30, 2017. The decrease in nonperforming assets was primarily due to nonaccruing energy loans.

  • Average loans increased $127 million over the previous quarter. Period-end outstanding loan balances totaled $17.2 billion at September 30, 2017, a $23 million increase over June 30, 2017.

  • Average deposits were largely unchanged compared to the previous quarter. Average demand deposit balances grew by $51 million, partially offset by a $28 million decrease in time deposit balances. Period-end deposits were $21.8 billion at September 30, 2017, a $468 million decrease compared to June 30, 2017.

  • The common equity Tier 1 capital ratio at September 30, 2017 was 11.90 percent. Other regulatory capital ratios were Tier 1 capital ratio, 11.90 percent, total capital ratio, 13.47 percent and leverage ratio, 9.30 percent. At June 30, 2017, the common equity Tier 1 capital ratio was 11.76 percent, the Tier 1 capital ratio was 11.76 percent, total capital ratio was 13.36 percent, and leverage ratio was 9.27 percent.

Net Interest Revenue

Net interest revenue was $218.5 million for the third quarter of 2017, up $13.2 million over the second quarter of 2017.

Net interest margin was 3.01 percent for the third quarter of 2017, an increase of 12 basis points over the second quarter of 2017. Recoveries of foregone interest primarily related to nonaccruing energy loans added 6 basis points to the net interest margin for the third quarter. Net interest margin also increased due to a full quarter's impact on short-term market interest rates from the 25 basis point rate hike by the Federal Reserve in June. Yields on floating-rate earning assets improved, while deposit costs rose modestly. Excluding interest recoveries, the yield on average earning assets was 3.44 percent, an increase of 14 basis points and the loan portfolio yield was 4.20 percent, a 17 basis point increase. The yield on the available for sale securities portfolio increased 6 basis points to 2.17 percent. The yield on interest-bearing cash and cash equivalents increased 25 basis points. Funding costs were 0.75 percent, up 12 basis points. The cost of interest-bearing deposits increased 5 basis points to 0.45 percent as market pricing pressure remained relatively subdued. The cost of other borrowed funds was up 21 basis points to 1.23 percent. The benefit to net interest margin from assets funded by non-interest liabilities increased to 26 basis points from 22 basis points in the second quarter of 2017.

Average earning assets increased $395 million over the third quarter of 2017. Fair value option securities held as an economic hedge of our mortgage servicing rights increased $208 million. Average loan balances grew by $127 million. Available for sale securities increased $44 million, trading securities increased $36 million and restricted equity security balances were up $33 million over the prior quarter. These increases were partially offset by a $42 million decrease in average interest-bearing cash and cash equivalents balances.

Average interest-bearing deposit balances decreased $24 million compared to the second quarter of 2017. The average balance of borrowed funds increased $511 million.

Fees and Commissions Revenue

Fees and commissions revenue totaled $173.5 million for the third quarter of 2017, a decrease of $4.0 million compared to the second quarter of 2017.

Mortgage banking revenue totaled $24.9 million for the third quarter of 2017, a $5.4 million decrease compared to the second quarter of 2017. Revenue from mortgage loan production decreased $5.5 million due to a 54 basis point decrease in gain on sale margin and a $78 million decrease in mortgage loan production, due to market pricing pressure.

Increased transaction card revenue and brokerage and trading revenue was partially offset by lower fiduciary and asset management revenue.

Operating Expense

Total operating expense was $265.9 million for the third quarter of 2017, a $15.0 million increase over the second quarter of 2017, including $1.3 million of expense related to tornado damage sustained on our Tulsa operations center and the impact of the hurricane in the Houston market.

Personnel expense increased $4.2 million primarily due to a $4.7 million increase in incentive compensation expense. Equity compensation expense included charges of $4.0 million from changes in the probability that performance-based awards granted in 2015, 2016 and 2017 will vest and $1.9 million from a $4.93 per share increase in the fair value of BOKF stock. Cash-based incentive compensation expense increased $3.7 million due to continued improvement in performance metrics.

Non-personnel expense increased $10.9 million over the second quarter of 2017. Deposit insurance expense increased $5.3 million. The second quarter included $5.1 million of rebates for years 2013 through 2016. Net losses and operating expenses of repossessed assets increased $3.8 million, primarily due to a $4.7 million write-down of a set of repossessed oil and gas properties.

Loans, Deposits and Capital

Loans

Outstanding loans were $17.2 billion at September 30, 2017, an increase of $23 million over June 30, 2017. Growth in commercial loan balances was partially offset by a decrease in commercial real estate loan balances.

Outstanding commercial loan balances grew by $158 million. Wholesale/retail sector loan balances grew by $114 million. Other commercial and industrial loans increased by $23 million and energy loan balances were up $21 million. Unfunded energy loan commitments were largely unchanged at $2.7 billion. Healthcare sector loan balances increased $18 million. This growth was partially offset by a $27 million decrease in manufacturing service sector loan balances.

Commercial real estate loan balances decreased $170 million compared to June 30, 2017 as a higher than expected number of borrowers refinanced in the long-term permanent markets during the quarter. Loans secured by industrial properties decreased $103 million, primarily in the Texas market partially offset by growth in loans in the Oklahoma market. Loans secured by office buildings decreased $66 million, primarily in the Texas and Colorado markets. Residential land and construction loans decreased $29 million and other commercial real estate loans decreased $22 million. Multifamily residential loans increased $47 million. Growth in the Texas and Oklahoma markets was partially offset by a decrease in the Colorado market.

Deposits

Period-end deposits totaled $21.8 billion at September 30, 2017, a $468 million decrease compared to June 30, 2017. Demand deposit balances decreased $383 million. Wealth management demand deposit balances were elevated at June 30 in anticipation of upcoming debt service payments for corporate trust customers. Interest-bearing transaction account balances decreased $62 million and time deposits decreased $24 million. Wealth Management deposits decreased $363 million and Commercial Banking deposits decreased $218 million. Consumer Banking deposits were largely unchanged compared to the previous quarter.

Capital

The company's common equity Tier 1 capital ratio was 11.90 percent at September 30, 2017. In addition, the company's Tier 1 capital ratio was 11.90 percent, total capital ratio was 13.47 percent and leverage ratio was 9.30 percent at September 30, 2017. At June 30, 2017, the company's common equity Tier 1 capital ratio was 11.76 percent, Tier 1 capital ratio was 11.76 percent, total capital ratio was 13.36 percent, and leverage ratio was 9.27 percent.

The company's tangible common equity ratio, a non-GAAP measure, was 9.23 percent at September 30, 2017 and 9.24 percent at June 30, 2017. 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.

Credit Quality

Nonperforming assets totaled $328 million or 1.90 percent of outstanding loans and repossessed assets at September 30, 2017, compared to $365 million or 2.12 percent at June 30, 2017. Nonperforming assets that are not guaranteed by U.S. government agencies totaled $249 million or 1.46 percent of outstanding loans and repossessed assets (excluding those guaranteed by U.S. government agencies) at September 30, 2017, compared to $276 million or 1.62 percent at June 30, 2017.

Nonaccruing loans totaled $226 million or 1.31 percent of outstanding loans at September 30, 2017, down from $245 million or 1.43 percent of outstanding loans at June 30, 2017. The decrease in nonaccruing loans was primarily due to a $13 million decrease in energy loans. Nonaccruing wholesale/retail sector loans decreased $8.7 million and nonaccruing service sector loans decreased $6.6 million, partially offset by a $9.0 million increase in nonaccruing other commercial and industrial loans. New nonaccruing loans identified in the third quarter totaled $24 million, offset by $35 million in payments received, $5.8 million in charge-offs and $3.8 million in foreclosures and repossessions. At September 30, 2017, nonaccruing commercial loans totaled $177 million or 1.64 percent of outstanding commercial loans, nonaccruing commercial real estate loans totaled $3.0 million or 0.08 percent of outstanding commercial real estate loans and nonaccruing residential mortgage loans totaled $46 million or 2.34 percent of outstanding residential mortgage loans.

Approximately $90 million of nonaccruing loans required a specific allowance of $13 million. No specific allowance was necessary for the remaining $136 million of nonaccruing loans based on estimated cash flows or collateral value. At June 30, 2017, $73 million of nonaccruing loans required specific allowances of $9.7 million. No specific allowance was necessary for the remaining $172 million of nonaccruing loans.

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 $285 million at September 30 compared to $327 million at June 30. The decrease largely resulted from energy and service sector potential problem loans, partially offset by an increase in healthcare and other commercial and industrial potential problem loans.

The company had net charge-offs of $3.4 million for the third quarter of 2017, compared to net charge-offs of $1.7 million in the second quarter of 2017. Gross charge-offs totaled $5.8 million for the third quarter, compared to $2.9 million for the previous quarter. Recoveries totaled $2.4 million for the third quarter of 2017 and $1.2 million for the second quarter of 2017.

Based on an evaluation of all credit factors, including changes in nonaccruing and potential problem loans, overall loan portfolio growth and net charge-offs, the company determined that no provision for credit losses was necessary during the third quarter of 2017.

The combined allowance for credit losses totaled $253 million or 1.47 percent of outstanding loans and 117 percent of nonaccruing loans at September 30, 2017, excluding residential mortgage loans guaranteed by U.S. government agencies. The allowance for loan losses was $248 million and the accrual for off-balance sheet credit losses was $5.4 million. At June 30, 2017, the combined allowance for credit losses was $256 million or 1.49 percent of outstanding loans and 109 percent of nonaccruing loans, excluding loans guaranteed by U.S. government agencies. The allowance for loan losses was $250 million and the accrual for off-balance sheet credit losses was $6.4 million.

Securities and Derivatives

The fair value of the available for sale securities portfolio totaled $8.4 billion at September 30, 2017, a $42 million increase compared to June 30, 2017. At September 30, 2017, the available for sale portfolio consisted primarily of $5.3 billion of residential mortgage-backed securities fully backed by U.S. government agencies and $2.9 billion of commercial mortgage-backed securities fully backed by U.S. government agencies. At September 30, 2017, the available for sale securities portfolio had a net unrealized gain of $14 million compared to a $16 million net unrealized gain at June 30, 2017.

The company also maintains a portfolio of financial instruments consisting primarily 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.

The net economic benefit of the changes in fair value of mortgage servicing rights and related economic hedges was $3.6 million during the third quarter of 2017, including a $639 thousand decrease in the fair value of mortgage servicing rights, a $1.7 million increase in the fair value of securities and derivative contracts held as an economic hedge and $2.5 million of related net interest revenue.

The fair value of mortgage servicing rights decreased by $6.9 million during the second quarter of 2017. The fair value of securities and interest rate derivative contracts held as an economic hedge of mortgage servicing rights increased by $5.2 million. Related net interest revenue was $2.0 million during the second quarter of 2017.

Conference Call and Webcast

The company will hold a conference call at 9 a.m. Central time on Wednesday, October 25, 2017 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 # 13671914.

About BOK Financial Corporation

BOK Financial Corporation is a $33 billion regional financial services company based in Tulsa, Oklahoma. The company's stock is publicly traded on NASDAQ under the Global Select market listings (symbol: BOKF). BOK Financial's holdings include BOKF, NA, BOK Financial Securities, Inc. and The Milestone Group, Inc. BOKF, NA operates TransFund, Cavanal Hill Investment Management, BOK Financial Asset Management, Inc. and seven banking divisions: Bank of Albuquerque, Bank of Arizona, Bank of Arkansas, Mobank, Bank of Oklahoma, Bank of Texas and Colorado State Bank and Trust. Through its subsidiaries, the company provides commercial and consumer banking, investment and trust 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, 2017 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, the financial services industry and the economy generally. 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 BOK Financial's acquisitions and other 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 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 commodity prices, interest rates and interest rate relationships, demand for products and services, the degree of competition by traditional and nontraditional competitors, changes in banking regulations, tax laws, prices, levies and assessments, the impact of technological advances, and trends in customer behavior as well as their ability to repay loans. BOK Financial and its affiliates undertake no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.


BALANCE SHEETS -- UNAUDITED
BOK FINANCIAL CORPORATION
(In thousands)
Sept. 30, 2017 June 30, 2017 Sept. 30, 2016
ASSETS
Cash and due from banks$547,203 $561,587 $535,916
Interest-bearing cash and cash equivalents1,926,779 2,078,831 2,080,978
Trading securities614,117 441,414 546,615
Investment securities466,562 490,426 546,457
Available for sale securities8,383,199 8,341,041 8,862,283
Fair value option securities819,531 445,169 222,409
Restricted equity securities347,542 311,033 333,391
Residential mortgage loans held for sale275,643 287,259 447,592
Loans:
Commercial10,795,934 10,637,955 10,120,163
Commercial real estate3,518,142 3,688,592 3,793,598
Residential mortgage1,945,750 1,939,198 1,872,793
Personal947,008 917,900 678,232
Total loans17,206,834 17,183,645 16,464,786
Allowance for loan losses(247,703) (250,061) (245,103)
Loans, net of allowance16,959,131 16,933,584 16,219,683
Premises and equipment, net320,060 321,038 318,196
Receivables314,251 295,042 650,368
Goodwill446,697 446,697 382,739
Intangible assets, net39,013 40,755 41,977
Mortgage servicing rights245,858 245,239 203,621
Real estate and other repossessed assets, net32,535 39,436 31,941
Derivative contracts, net352,559 280,289 655,078
Cash surrender value of bank-owned life insurance 314,201 312,774 310,211
Receivable on unsettled securities sales230,225 33,177 19,642
Other assets370,409 358,741 370,134
TOTAL ASSETS$ 33,005,515 $ 32,263,532 $ 32,779,231
LIABILITIES AND EQUITY
Deposits:
Demand$9,185,481 $9,568,895 $8,681,364
Interest-bearing transaction10,025,084 10,087,139 9,824,160
Savings465,225 464,318 420,349
Time2,172,289 2,196,122 2,169,631
Total deposits21,848,079 22,316,474 21,095,504
Funds purchased62,356 67,990 109,031
Repurchase agreements328,189 396,333 504,573
Other borrowings6,241,275 5,232,343 6,533,443
Subordinated debentures144,668 144,658 144,631
Accrued interest, taxes and expense152,029 133,198 191,276
Due on unsettled securities purchases160,781 32,636 677
Derivative contracts, net336,327 285,819 573,987
Other liabilities217,372 204,536 193,698
TOTAL LIABILITIES29,491,076 28,813,987 29,346,820
Shareholders' equity:
Capital, surplus and retained earnings3,482,057 3,414,505 3,302,584
Accumulated other comprehensive income6,757 7,964 95,727
TOTAL SHAREHOLDERS' EQUITY3,488,814 3,422,469 3,398,311
Non-controlling interests25,625 27,076 34,100
TOTAL EQUITY3,514,439 3,449,545 3,432,411
TOTAL LIABILITIES AND EQUITY$33,005,515 $32,263,532 $32,779,231


AVERAGE BALANCE SHEETS -- UNAUDITED
BOK FINANCIAL CORPORATION
(in thousands)
Three Months Ended
Sept. 30, 2017 June 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016
ASSETS
Interest-bearing cash and cash equivalents$1,965,645 $2,007,746 $2,087,964 $2,032,785 $2,047,991
Trading securities491,613 456,028 579,549 476,498 366,545
Investment securities475,705 499,372 530,936 542,869 552,592
Available for sale securities8,428,353 8,384,057 8,567,049 8,766,555 8,862,590
Fair value option securities684,571 476,102 416,524 210,733 266,998
Restricted equity securities328,677 295,743 312,498 334,114 335,812
Residential mortgage loans held for sale256,343 245,401 220,325 345,066 445,930
Loans:
Commercial10,827,198 10,604,456 10,414,579 10,228,095 10,109,692
Commercial real estate3,528,330 3,676,976 3,903,850 3,749,393 3,789,673
Residential mortgage1,951,385 1,933,091 1,962,759 1,919,296 1,870,855
Personal949,750 915,010 854,637 826,804 677,530
Total loans17,256,663 17,129,533 17,135,825 16,723,588 16,447,750
Allowance for loan losses(250,590) (251,632) (249,379) (246,977) (247,901)
Total loans, net17,006,073 16,877,901 16,886,446 16,476,611 16,199,849
Total earning assets29,636,980 29,242,350 29,601,291 29,185,231 29,078,307
Cash and due from banks546,653 530,352 547,104 578,694 511,534
Derivative contracts, net238,583 248,168 401,886 681,455 766,671
Cash surrender value of bank-owned life insurance 313,079 311,310 309,223 309,532 308,670
Receivable on unsettled securities sales76,622 79,248 62,641 33,813 259,906
Other assets2,196,253 1,957,143 2,032,844 2,172,351 1,721,385
TOTAL ASSETS$ 33,008,170 $ 32,368,571 $ 32,954,989 $ 32,961,076 $ 32,646,473
LIABILITIES AND EQUITY
Deposits:
Demand$9,389,849 $9,338,683 $9,101,763 $9,124,595 $8,497,037
Interest-bearing transaction10,088,522 10,087,640 10,567,475 9,980,132 9,650,618
Savings464,130 461,586 441,254 421,654 420,009
Time2,176,820 2,204,422 2,258,930 2,177,035 2,197,350
Total deposits22,119,321 22,092,331 22,369,422 21,703,416 20,765,014
Funds purchased49,774 63,263 55,508 62,004 68,280
Repurchase agreements361,512 427,353 523,561 560,891 522,822
Other borrowings6,162,641 5,572,031 5,737,955 6,072,150 6,342,369
Subordinated debentures144,663 144,654 144,644 144,635 255,890
Derivative contracts, net221,371 178,695 405,444 682,808 747,187
Due on unsettled securities purchases145,155 157,438 91,529 77,575 200,574
Other liabilities319,092 323,373 299,534 321,404 352,671
TOTAL LIABILITIES29,523,529 28,959,138 29,627,597 29,624,883 29,254,807
Total equity3,484,641 3,409,433 3,327,392 3,336,193 3,391,666
TOTAL LIABILITIES AND EQUITY$33,008,170 $32,368,571 $32,954,989 $32,961,076 $32,646,473


STATEMENTS OF EARNINGS -- UNAUDITED
BOK FINANCIAL CORPORATION
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Interest revenue$255,413 $209,317 $716,984 $613,380
Interest expense36,961 21,471 92,146 60,350
Net interest revenue218,452 187,846 624,838 553,030
Provision for credit losses 10,000 65,000
Net interest revenue after provision for credit losses218,452 177,846 624,838 488,030
Other operating revenue:
Brokerage and trading revenue33,169 38,006 98,556 109,877
Transaction card revenue37,826 33,933 105,249 101,237
Fiduciary and asset management revenue40,687 34,073 121,126 100,942
Deposit service charges and fees23,209 23,668 69,593 68,828
Mortgage banking revenue24,890 38,516 80,357 105,500
Other revenue13,670 13,080 40,406 38,336
Total fees and commissions173,451 181,276 515,287 524,720
Other gains (losses), net(1,283) 2,442 8,452 5,309
Gain on derivatives, net1,033 2,226 3,824 20,130
Gain (loss) on fair value option securities, net661 (3,355) 1,505 10,367
Change in fair value of mortgage servicing rights(639) 2,327 (5,726) (41,944)
Gain on available for sale securities, net2,487 2,394 4,916 11,684
Total other operating revenue175,710 187,310 528,258 530,266
Other operating expense:
Personnel147,910 139,212 428,079 411,987
Business promotion7,105 6,839 21,560 19,238
Professional fees and services11,887 14,038 35,723 39,955
Net occupancy and equipment21,325 20,111 64,074 58,554
Insurance6,005 9,390 13,098 23,784
Data processing and communications37,327 33,331 108,559 98,150
Printing, postage and supplies3,917 3,790 11,908 11,586
Net losses (gains) and operating expenses of repossessed assets6,071 (926) 9,347 1,732
Amortization of intangible assets1,744 1,521 5,349 5,304
Mortgage banking costs13,450 15,963 38,525 44,039
Other expense9,193 14,819 25,308 37,714
Total other operating expense265,934 258,088 761,530 752,043
Net income before taxes128,228 107,068 391,566 266,253
Federal and state income taxes42,438 31,956 128,246 83,881
Net income85,790 75,112 263,320 182,372
Net income (loss) attributable to non-controlling interests141 835 1,168 (270)
Net income attributable to BOK Financial Corporation shareholders $85,649 $74,277 $262,152 $182,642
Average shares outstanding:
Basic 64,742,822 65,085,392 64,729,391 65,208,774
Diluted64,805,172 65,157,841 64,793,893 65,263,566
Net income per share:
Basic$1.31 $1.13 $4.01 $2.77
Diluted$1.31 $1.13 $4.00 $2.76


FINANCIAL HIGHLIGHTS -- UNAUDITED
BOK FINANCIAL CORPORATION
(in thousands, except ratio and share data)
Three Months Ended
Sept. 30, 2017 June 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016
Capital:
Period-end shareholders' equity$3,488,814 $3,422,469 $3,341,744 $3,274,854 $3,398,311
Risk weighted assets$25,409,728 $25,130,802 $24,901,019 $25,274,848 $24,358,385
Risk-based capital ratios:
Common equity tier 111.90% 11.76% 11.59% 11.21% 11.99%
Tier 111.90% 11.76% 11.59% 11.21% 11.99%
Total capital13.47% 13.36% 13.25% 12.81% 13.65%
Leverage ratio9.30% 9.27% 8.89% 8.72% 9.06%
Tangible common equity ratio19.23% 9.24% 8.88% 8.61% 9.19%
Common stock:
Book value per share$53.30 $52.32 $51.09 $50.12 $51.56
Tangible book value per share45.88 44.87 43.63 42.53 45.12
Market value per share:
High$90.69 $88.31 $85.25 $85.00 $70.05
Low$77.10 $74.09 $73.44 $67.11 $56.36
Cash dividends paid$28,655 $28,652 $28,646 $28,860 $28,181
Dividend payout ratio33.46% 32.50% 32.42% 57.69% 37.94%
Shares outstanding, net65,456,786 65,416,403 65,408,019 65,337,432 65,910,454
Stock buy-back program:
Shares repurchased 700,000
Amount$ $ $ $49,021 $
Average price per share$ $ $ $70.03 $
Performance ratios (quarter annualized):
Return on average assets1.03% 1.09% 1.09% 0.60% 0.91%
Return on average equity9.83% 10.46% 10.86% 6.03% 8.80%
Net interest margin3.01% 2.89% 2.81% 2.69% 2.64%
Efficiency ratio66.77% 64.61% 65.77% 72.93% 68.88%
Reconciliation of non-GAAP measures:
1 Tangible common equity ratio:
Total shareholders' equity$3,488,814 $3,422,469 $3,341,744 $3,274,854 $3,398,311
Less: Goodwill and intangible assets, net485,710 487,452 488,294 495,830 424,716
Tangible common equity$3,003,104 $2,935,017 $2,853,450 $2,779,024 $2,973,595
Total assets$33,005,515 $32,263,532 $32,628,932 $32,772,281 $32,779,231
Less: Goodwill and intangible assets, net485,710 487,452 488,294 495,830 424,716
Tangible assets$32,519,805 $31,776,080 $32,140,638 $32,276,451 $32,354,515
Tangible common equity ratio9.23% 9.24% 8.88% 8.61% 9.19%
Other data:
Fiduciary assets$45,177,185 $45,089,153 $44,992,920 $42,378,053 $41,810,943
Tax equivalent interest$4,314 $4,330 $4,428 $4,389 $4,455
Net unrealized gain (loss) on available for sale securities$14,061 $16,041 $(5,537) $(14,899) $159,533
Mortgage banking:
Mortgage production revenue$8,329 $13,840 $8,543 $11,937 $21,958
Mortgage loans funded for sale$832,796 $902,978 $711,019 $1,189,975 $1,864,583
Add: current period-end outstanding commitments334,337 362,088 381,732 318,359 630,804
Less: prior period end outstanding commitments362,088 381,732 318,359 630,804 965,631
Total mortgage production volume$805,045 $883,334 $774,392 $877,530 $1,529,756
Mortgage loan refinances to mortgage loans funded for sale38% 33% 44% 63% 51%
Gain on sale margin1.03% 1.57% 1.10% 1.36% 1.44%
Mortgage servicing revenue$16,561 $16,436 $16,648 $16,477 $16,558
Average outstanding principal balance of mortgage loans service for others22,079,177 22,055,127 22,006,295 21,924,552 21,514,962
Average mortgage servicing revenue rates0.30% 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$1,025 $3,241 $(450) $(35,868) $2,268
Gain (loss) on fair value option securities, net661 1,984 (1,140) (20,922) (3,355)
Gain (loss) on economic hedge of mortgage servicing rights1,686 5,225 (1,590) (56,790) (1,087)
Gain (loss) on changes in fair value of mortgage servicing rights(639) (6,943) 1,856 39,751 2,327
Gain (loss) on changes in fair value of mortgage servicing rights, net of economic hedges, included in other operating revenue1,047 (1,718) 266 (17,039) 1,240
Net interest revenue on fair value option securities22,543 1,965 1,271 114 861
Total economic benefit (cost) of changes in the fair value of mortgage servicing rights, net of economic hedges$3,590 $247 $1,537 $(16,925) $2,101

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, 2017 June 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016
Interest revenue$255,413 $235,181 $226,390 $215,737 $209,317
Interest expense36,961 29,977 25,208 21,539 21,471
Net interest revenue218,452 205,204 201,182 194,198 187,846
Provision for credit losses 10,000
Net interest revenue after provision for credit losses218,452 205,204 201,182 194,198 177,846
Other operating revenue:
Brokerage and trading revenue33,169 31,764 33,623 28,500 38,006
Transaction card revenue37,826 35,296 32,127 34,521 33,933
Fiduciary and asset management revenue40,687 41,808 38,631 34,535 34,073
Deposit service charges and fees23,209 23,354 23,030 23,365 23,668
Mortgage banking revenue24,890 30,276 25,191 28,414 38,516
Other revenue13,670 14,984 11,752 12,693 13,080
Total fees and commissions173,451 177,482 164,354 162,028 181,276
Other gains (losses), net(1,283) 6,108 3,627 (1,279) 2,442
Gain (loss) on derivatives, net1,033 3,241 (450) (35,815) 2,226
Gain (loss) on fair value option securities, net661 1,984 (1,140) (20,922) (3,355)
Change in fair value of mortgage servicing rights(639) (6,943) 1,856 39,751 2,327
Gain (loss) on available for sale securities, net2,487 380 2,049 (9) 2,394
Total other operating revenue175,710 182,252 170,296 143,754 187,310
Other operating expense:
Personnel147,910 143,744 136,425 141,132 139,212
Business promotion7,105 7,738 6,717 7,344 6,839
Charitable contributions to BOKF Foundation 2,000
Professional fees and services11,887 12,419 11,417 16,828 14,038
Net occupancy and equipment21,325 21,125 21,624 21,470 20,111
Insurance6,005 689 6,404 8,705 9,390
Data processing and communications37,327 36,330 34,902 33,691 33,331
Printing, postage and supplies3,917 4,140 3,851 3,998 3,790
Net losses (gains) and operating expenses of repossessed assets6,071 2,267 1,009 1,627 (926)
Amortization of intangible assets1,744 1,803 1,802 1,558 1,521
Mortgage banking costs13,450 12,072 13,003 17,348 15,963
Other expense9,193 8,558 7,557 9,846 14,819
Total other operating expense265,934 250,885 244,711 265,547 258,088
Net income before taxes128,228 136,571 126,767 72,405 107,068
Federal and state income taxes42,438 47,705 38,103 22,496 31,956
Net income85,790 88,866 88,664 49,909 75,112
Net income (loss) attributable to non-controlling interests141 719 308 (117) 835
Net income attributable to BOK Financial Corporation shareholders $85,649 $88,147 $88,356 $50,026 $74,277
Average shares outstanding:
Basic64,742,822 64,729,752 64,715,964 64,719,018 65,085,392
Diluted64,805,172 64,793,134 64,783,737 64,787,728 65,157,841
Net income per share:
Basic$1.31 $1.35 $1.35 $0.76 $1.13
Diluted$1.31 $1.35 $1.35 $0.76 $1.13


LOANS TREND -- UNAUDITED
BOK FINANCIAL CORPORATION
(In thousands)
Sept. 30, 2017 June 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016
Commercial:
Energy $2,867,981 $2,847,240 $2,537,112 $2,497,868 $2,520,804
Services 2,967,513 2,958,827 3,013,375 3,108,990 2,936,599
Healthcare 2,239,451 2,221,518 2,265,604 2,201,916 2,085,046
Wholesale/retail 1,658,098 1,543,695 1,506,243 1,576,818 1,602,030
Manufacturing 519,446 546,137 543,430 514,975 499,486
Other commercial and industrial 543,445 520,538 461,346 490,257 476,198
Total commercial 10,795,934 10,637,955 10,327,110 10,390,824 10,120,163
Commercial real estate:
Retail 725,865 722,805 745,046 761,888 801,377
Multifamily 999,009 952,380 922,991 903,272 873,773
Office 797,089 862,973 860,889 798,888 752,705
Industrial 591,080 693,635 871,463 871,749 838,021
Residential construction and land development 112,102 141,592 135,994 135,533 159,946
Other commercial real estate 292,997 315,207 334,680 337,716 367,776
Total commercial real estate 3,518,142 3,688,592 3,871,063 3,809,046 3,793,598
Residential mortgage:
Permanent mortgage 1,013,965 989,040 977,743 1,006,820 969,558
Permanent mortgages guaranteed by U.S. government agencies 187,370 191,729 204,181 199,387 190,309
Home equity 744,415 758,429 764,350 743,625 712,926
Total residential mortgage 1,945,750 1,939,198 1,946,274 1,949,832 1,872,793
Personal 947,008 917,900 847,459 839,958 678,232
Total $ 17,206,834 $ 17,183,645 $ 16,991,906 $ 16,989,660 $ 16,464,786


LOANS BY PRINCIPAL MARKET AREA -- UNAUDITED
BOK FINANCIAL CORPORATION
(in thousands)
Sept. 30, 2017 June 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016
Bank of Oklahoma:
Commercial$3,408,973 $3,369,967 $3,189,183 $3,370,259 $3,545,924
Commercial real estate712,915 667,932 691,332 684,381 795,806
Residential mortgage1,405,900 1,398,021 1,404,054 1,407,197 1,401,166
Personal322,320 318,016 310,708 303,823 271,420
Total Bank of Oklahoma5,850,108 5,753,936 5,595,277 5,765,660 6,014,316
Bank of Texas:
Commercial4,434,595 4,339,634 4,148,316 4,022,455 3,903,218
Commercial real estate1,236,702 1,360,164 1,452,988 1,415,011 1,400,709
Residential mortgage229,993 232,074 231,647 233,981 229,345
Personal375,173 354,222 312,092 306,748 278,167
Total Bank of Texas6,276,463 6,286,094 6,145,043 5,978,195 5,811,439
Bank of Albuquerque:
Commercial367,747 369,370 407,403 399,256 398,147
Commercial real estate319,208 324,405 307,927 284,603 299,785
Residential mortgage101,983 103,849 106,432 108,058 110,478
Personal12,953 12,439 11,305 11,483 11,333
Total Bank of Albuquerque801,891 810,063 833,067 803,400 819,743
Bank of Arkansas:
Commercial91,051 85,020 88,010 86,577 83,544
Commercial real estate80,917 73,943 74,469 73,616 72,649
Residential mortgage6,318 6,395 6,829 7,015 6,936
Personal10,388 11,993 6,279 6,524 6,757
Total Bank of Arkansas188,674 177,351 175,587 173,732 169,886
Colorado State Bank & Trust:
Commercial1,124,200 1,065,780 998,216 1,018,208 1,013,314
Commercial real estate186,427 255,379 266,218 265,264 254,078
Residential mortgage63,734 63,346 62,313 59,631 59,838
Personal60,513 56,187 49,523 50,372 42,901
Total Colorado State Bank & Trust 1,434,874 1,440,692 1,376,270 1,393,475 1,370,131
Bank of Arizona:
Commercial634,809 617,759 643,222 686,253 680,447
Commercial real estate706,188 705,858 737,088 747,409 726,542
Residential mortgage40,730 37,034 36,737 36,265 39,206
Personal55,050 55,528 51,386 52,553 31,205
Total Bank of Arizona1,436,777 1,416,179 1,468,433 1,522,480 1,477,400
Mobank (Kansas City):
Commercial734,559 790,425 852,760 807,816 495,569
Commercial real estate275,785 300,911 341,041 338,762 244,029
Residential mortgage97,092 98,479 98,262 97,685 25,824
Personal110,611 109,515 106,166 108,455 36,449
Total Mobank (Kansas City)1,218,047 1,299,330 1,398,229 1,352,718 801,871
TOTAL BOK FINANCIAL$ 17,206,834 $ 17,183,645 $ 16,991,906 $ 16,989,660 $ 16,464,786

Loans attributed to a geographical region may not always represent the location of the borrower or the collateral.


DEPOSITS BY PRINCIPAL MARKET AREA -- UNAUDITED
BOK FINANCIAL CORPORATION
(in thousands)
Sept. 30, 2017 June 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016
Bank of Oklahoma:
Demand$4,061,612 $4,353,421 $4,320,666 $3,993,170 $4,158,273
Interest-bearing:
Transaction5,909,259 5,998,787 6,114,288 6,345,536 5,701,983
Savings265,023 263,664 265,014 241,696 242,959
Time1,131,547 1,170,014 1,189,144 1,118,355 1,091,464
Total interest-bearing7,305,829 7,432,465 7,568,446 7,705,587 7,036,406
Total Bank of Oklahoma11,367,441 11,785,886 11,889,112 11,698,757 11,194,679
Bank of Texas:
Demand3,094,184 3,121,890 3,091,258 3,137,009 2,734,981
Interest-bearing:
Transaction2,272,987 2,272,185 2,317,576 2,388,812 2,240,040
Savings93,400 91,491 89,640 83,101 84,642
Time521,072 502,128 511,037 535,642 528,380
Total interest-bearing2,887,459 2,865,804 2,918,253 3,007,555 2,853,062
Total Bank of Texas5,981,643 5,987,694 6,009,511 6,144,564 5,588,043
Bank of Albuquerque:
Demand659,793 612,117 593,117 627,979 584,681
Interest-bearing:
Transaction551,884 558,523 623,677 590,571 555,326
Savings53,532 54,136 53,683 49,963 54,480
Time224,773 229,616 233,506 238,408 244,706
Total interest-bearing830,189 842,275 910,866 878,942 854,512
Total Bank of Albuquerque1,489,982 1,454,392 1,503,983 1,506,921 1,439,193
Bank of Arkansas:
Demand31,442 40,511 42,622 26,389 32,203
Interest-bearing:
Transaction126,746 129,848 106,804 105,232 313,480
Savings1,876 2,135 2,304 2,192 2,051
Time14,434 14,876 15,067 16,696 17,534
Total interest-bearing143,056 146,859 124,175 124,120 333,065
Total Bank of Arkansas174,498 187,370 166,797 150,509 365,268
Colorado State Bank & Trust:
Demand540,300 577,617 601,778 576,000 517,063
Interest-bearing:
Transaction628,807 626,343 610,510 616,679 623,055
Savings34,776 35,651 37,801 32,866 31,613
Time231,927 228,458 234,740 242,782 247,667
Total interest-bearing895,510 890,452 883,051 892,327 902,335
Total Colorado State Bank & Trust 1,435,810 1,468,069 1,484,829 1,468,327 1,419,398
Bank of Arizona:
Demand335,740 366,866 342,854 366,755 418,718
Interest-bearing:
Transaction174,010 154,457 180,254 305,099 303,750
Savings4,105 3,638 3,858 2,973 2,959
Time20,831 19,911 26,112 27,765 27,935
Total interest-bearing198,946 178,006 210,224 335,837 334,644
Total Bank of Arizona534,686 544,872 553,078 702,592 753,362
Mobank (Kansas City):
Demand462,410 496,473 514,278 508,418 235,445
Interest-bearing:
Transaction361,391 346,996 406,105 513,176 86,526
Savings12,513 13,603 13,424 12,679 1,645
Time27,705 31,119 34,242 42,152 11,945
Total interest-bearing401,609 391,718 453,771 568,007 100,116
Total Mobank (Kansas City)864,019 888,191 968,049 1,076,425 335,561
TOTAL BOK FINANCIAL$ 21,848,079 $ 22,316,474 $ 22,575,359 $ 22,748,095 $ 21,095,504


NET INTEREST MARGIN TREND -- UNAUDITED
BOK FINANCIAL CORPORATION
Three Months Ended
Sept. 30, 2017 June 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016
TAX-EQUIVALENT ASSETS YIELDS
Interest-bearing cash and cash equivalents 1.29% 1.04% 0.82% 0.55% 0.51%
Trading securities3.47% 3.23% 3.87% 3.91% 2.71%
Investment securities:
Taxable5.31% 5.34% 5.44% 5.39% 5.34%
Tax-exempt2.60% 2.51% 2.45% 2.33% 2.26%
Total investment securities3.86% 3.76% 3.70% 3.60% 3.51%
Available for sale securities:
Taxable2.16% 2.09% 2.02% 1.98% 1.99%
Tax-exempt5.27% 6.09% 5.37% 5.27% 5.47%
Total available for sale securities2.17% 2.11% 2.05% 2.00% 2.01%
Fair value option securities2.97% 2.92% 2.27% 0.99% 1.70%
Restricted equity securities5.87% 5.95% 5.52% 5.45% 5.37%
Residential mortgage loans held for sale3.36% 3.92% 3.35% 3.31% 3.28%
Loans4.31% 4.03% 3.88% 3.67% 3.63%
Allowance for loan losses
Loans, net of allowance4.38% 4.09% 3.94% 3.72% 3.69%
Total tax-equivalent yield on earning assets3.50% 3.30% 3.15% 2.98% 2.93%
COST OF INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest-bearing transaction0.32% 0.26% 0.20% 0.16% 0.14%
Savings0.08% 0.08% 0.08% 0.09% 0.09%
Time1.16% 1.11% 1.09% 1.12% 1.14%
Total interest-bearing deposits0.45% 0.40% 0.35% 0.32% 0.32%
Funds purchased0.92% 0.61% 0.47% 0.28% 0.19%
Repurchase agreements0.15% 0.06% 0.02% 0.02% 0.04%
Other borrowings1.29% 1.09% 0.83% 0.61% 0.57%
Subordinated debt5.68% 5.55% 5.68% 5.51% 3.84%
Total cost of interest-bearing liabilities0.75% 0.63% 0.52% 0.44% 0.44%
Tax-equivalent net interest revenue spread2.75% 2.67% 2.63% 2.54% 2.49%
Effect of noninterest-bearing funding sources and other 0.26% 0.22% 0.18% 0.15% 0.15%
Tax-equivalent net interest margin3.01% 2.89% 2.81% 2.69% 2.64%

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 -- UNAUDITED
BOK FINANCIAL CORPORATION
(in thousands, except ratios)
Three Months Ended
Sept. 30, 2017 June 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016
Nonperforming assets:
Nonaccruing loans:
Commercial$176,900 $197,157 $156,825 $178,953 $176,464
Commercial real estate2,975 3,775 4,475 5,521 7,350
Residential mortgage45,506 44,235 46,081 46,220 52,452
Personal255 272 235 290 686
Total nonaccruing loans225,636 245,439 207,616 230,984 236,952
Accruing renegotiated loans guaranteed by U.S. government agencies69,440 80,624 83,577 81,370 80,306
Real estate and other repossessed assets32,535 39,436 42,726 44,287 31,941
Total nonperforming assets$327,611 $365,499 $333,919 $356,641 $349,199
Total nonperforming assets excluding those guaranteed by U.S. government agencies $249,280 $275,823 $240,234 $263,425 $253,461
Nonaccruing loans by loan class:
Commercial:
Energy$110,683 $123,992 $110,425 $132,499 $142,966
Services1,174 7,754 7,713 8,173 8,477
Wholesale / retail1,893 10,620 11,090 11,407 2,453
Manufacturing9,059 9,656 5,907 4,931 274
Healthcare24,446 24,505 909 825 855
Other commercial and industrial29,645 20,630 20,781 21,118 21,439
Total commercial176,900 197,157 156,825 178,953 176,464
Commercial real estate:
Residential construction and land development1,924 2,051 2,616 3,433 3,739
Retail289 301 314 326 1,249
Office275 396 413 426 882
Multifamily 10 24 38 51
Industrial 76 76 76
Other commercial real estate487 1,017 1,032 1,222 1,353
Total commercial real estate2,975 3,775 4,475 5,521 7,350
Residential mortgage:
Permanent mortgage24,623 23,415 24,188 22,855 25,956
Permanent mortgage guaranteed by U.S. government agencies8,891 9,052 10,108 11,846 15,432
Home equity11,992 11,768 11,785 11,519 11,064
Total residential mortgage45,506 44,235 46,081 46,220 52,452
Personal255 272 235 290 686
Total nonaccruing loans$225,636 $245,439 $207,616 $230,984 $236,952
Performing loans 90 days past due1$253 $1,414 $95 $5 $3,839
Gross charge-offs$(5,825) $(2,872) $(2,153) $(1,651) $(8,101)
Recoveries2,437 1,214 2,900 2,813 2,038
Net recoveries (charge-offs)$(3,388) $(1,658) $747 $1,162 $(6,063)
Provision for credit losses$ $ $ $ $10,000
Allowance for loan losses to period end loans1.44% 1.46% 1.46% 1.45% 1.49%
Combined allowance for credit losses to period end loans1.47% 1.49% 1.52% 1.52% 1.56%
Nonperforming assets to period end loans and repossessed assets1.90% 2.12% 1.96% 2.09% 2.12%
Net charge-offs (annualized) to average loans0.08% 0.04% (0.02)% (0.03)% 0.15%
Allowance for loan losses to nonaccruing loans1114.28% 105.78% 125.92% 112.33% 110.65%
Combined allowance for credit losses to nonaccruing loans1116.78% 108.51% 130.70% 117.46% 115.67%

1 Excludes residential mortgage loans guaranteed by agencies of the U.S. government.


For Further Information Contact:
Joseph Crivelli
Investor Relations
(918) 595-3027

Source:BOK Financial Corporation