BOK Financial Corporation Reports Quarterly Earnings of $134 million or $2.04 Per Share in the Third Quarter

BOK Financial Corp

TULSA, OK / ACCESSWIRE / October 25, 2023 /

CEO Commentary

Stacy Kymes, president and chief executive officer, stated, "We recognized another solid quarter of earnings driven by our diverse business model, which prudently balances interest revenue with non-interest revenues and allows us to perform well in a multitude of business climates. Non-interest revenues now represent 40% of our total revenues. In addition, we continue to focus on opportunities for growth given the economic vitality of our core geographic footprint as we take advantage of our capital and liquidity strengths. We have increased loans almost 9% over the previous year and our core commercial and industrial loans are up 8% from last year. We're focused on investing in growth initiatives like our San Antonio expansion, which will drive long-term shareholder value. We have consistently proven that our business diversification coupled with our outstanding team outperforms against strong headwinds."

Third Quarter 2023 Financial Highlights
(Unless indicated otherwise, all comparisons are to the prior quarter)

  • Net income was $134.5 million or $2.04 per diluted share for the third quarter of 2023 compared to $151.3 million or $2.27 per diluted share for the second quarter of 2023.

  • Net interest revenue totaled $300.9 million, a decrease of $21.4 million compared to the prior quarter. Net interest margin was 2.69 percent compared to 3.00 percent. Growth in low-spread U.S. government agency residential mortgage-backed trading assets drove an 8 basis point decline in net interest margin with deposit repricing activity primarily driving the remaining 23 basis point reduction. For the third quarter of 2023, our core net interest margin excluding trading activities, a non-GAAP measure, was 3.14 percent compared to 3.36 percent in the prior quarter.

  • Fees and commissions revenue decreased $2.6 million to $197.9 million. Decreased brokerage and trading revenue and mortgage banking revenue were partially offset by increased other revenue.

  • Operating expense increased $5.6 million to $324.3 million. Personnel expense was relatively unchanged, while non-personnel expense increased $5.5 million, primarily due to higher occupancy and equipment costs and other expenses.

  • Other gains and losses, net decreased $11.1 million to $1.5 million. The prior quarter included gains on alternative investments, primarily attributable to merchant banking activity.

  • Period-end loans grew by $486 million to $23.7 billion at September 30, 2023, mostly driven by growth in commercial loans and commercial real estate loans secured by multifamily properties. Average outstanding loan balances were $23.4 billion, a $525 million increase.

  • The provision for credit losses of $7.0 million in the third quarter of 2023 reflects our continued loan growth and changes in our economic forecast. Net charge-offs were $6.5 million or 0.11 percent of average loans on an annualized basis in the third quarter. The resulting combined allowance for credit losses totaled $325 million or 1.37 percent of outstanding loans at September 30, 2023 compared to $323 million or 1.39 percent of outstanding loans at June 30, 2023.

  • Period-end deposits increased $358 million to $33.7 billion while average deposits increased $918 million to $33.3 billion. Average interest-bearing deposits increased $1.8 billion while average demand deposits declined by $840 million. The loan to deposit ratio was 70 percent at September 30, 2023, consistent with June 30, 2023.

  • The company's tangible common equity ratio, a non-GAAP measure, was 7.74 percent at September 30, 2023 and 7.79 percent at June 30, 2023. The tangible common equity ratio is primarily based on total shareholders' equity, which includes unrealized gains and losses on available for sale securities. Adjusted for all unrealized securities portfolio gains and losses, including those in the investment portfolio, the tangible common equity ratio would be 7.35 percent.

  • The company's common equity Tier 1 capital ratio was 12.06 percent at September 30, 2023. In addition, the company's Tier 1 capital ratio was 12.07 percent, total capital ratio was 13.16 percent, and leverage ratio was 9.52 percent at September 30, 2023. At June 30, 2023, the company's common equity Tier 1 capital ratio was 12.13 percent, Tier 1 capital ratio was 12.13 percent, total capital ratio was 13.24 percent, and leverage ratio was 9.75 percent.

  • The company repurchased 700,500 shares of common stock at an average price paid of $84.17 a share in the third quarter of 2023.

Third Quarter 2023 Segment Highlights

  • Commercial Banking contributed $157.9 million to net income in the third quarter of 2023, a decrease of $12.2 million compared to the second quarter of 2023. Combined net interest revenue and fee revenue decreased $7.5 million due to a shift in deposit balances from demand to interest-bearing transaction accounts combined with a decline in customer hedging revenue, primarily related to our energy customers. Net loans charged-off decreased $1.1 million to $4.9 million in the third quarter of 2023. Personnel expense increased $2.8 million, driven primarily by incentive compensation costs and market expansion. Non-personnel expense increased $1.5 million, led by the retirement of certain ATMs as we upgrade our network. The prior quarter included a gain on alternative investments of $8.1 million resulting from merchant banking activities. Average loans increased $486 million or 3 percent to $19.6 billion. Average deposits increased $276 million or 2 percent to $15.1 billion.

  • Consumer Banking contributed $58.0 million to net income in the third quarter of 2023, a decrease of $2.3 million compared the prior quarter. Combined net interest revenue and fee revenue decreased $2.4 million, largely due to a decrease in mortgage banking revenue from lower production volumes combined with narrowing margins and spread compression on residential mortgage loans. Operating expense increased $2.2 million. Average loans increased $50 million or 3 percent to $1.8 billion. Average deposits were mostly unchanged from the previous quarter.

  • Wealth Management contributed $43.0 million to net income in the third quarter of 2023, a decrease of $14.3 million compared to the second quarter of 2023. Combined net interest and fee revenue decreased $12.4 million, primarily due to declining spreads on loans and deposits. Total revenue from institutional trading activities decreased $4.4 million, largely related to our municipal bond trading activity. Investment banking revenue increased $4.7 million resulting from increased underwriting fees and financial advisory fees. Personnel expense increased $1.4 million due to growth in regular compensation from business expansion. Non-personnel expense increased $3.1 million, primarily due to ongoing technology project costs. Average loans were consistent with the prior quarter at $2.2 billion. Average deposits increased $343 million or 5 percent to $7.9 billion. Assets under management or administration were $99.0 billion, a decrease of $4.6 billion.

Net Interest Revenue

Net interest revenue was $300.9 million for the third quarter of 2023 compared to $322.3 million for the prior quarter. Net interest margin was 2.69 percent compared to 3.00 percent. Growth in low-spread trading assets drove an 8 basis point decline in net interest margin while deposit price competition and liability mix shift are the primary drivers of the the remaining 23 basis point decline. For the third quarter of 2023, our core net interest margin excluding trading activities, a non-GAAP measure, was 3.14 percent compared to 3.36 percent in the prior quarter.

Average earning assets increased $1.3 billion. Average trading securities grew $1.2 billion, spurred by favorable market opportunities for U.S. government agency residential mortgage-backed securities observed primarily throughout the second quarter and extending into the early part of the third quarter. Average loan balances increased $525 million, largely due to growth in commercial and commercial real estate loans. Average fair value option securities, held as an economic hedge of the changes in fair value of our mortgage servicing rights, decreased $204 million. Average available for sale securities decreased $108 million and average interest-bearing cash and cash equivalents decreased $110 million. Average interest-bearing deposits increased $1.8 billion. Average other borrowings increased $1.7 billion while funds purchased and repurchase agreements declined $972 million.

The yield on average earning assets was 5.49 percent, up 20 basis points. The loan portfolio yield increased 22 basis points to 7.25 percent while the yield on the available for sale securities portfolio increased 11 basis points to 3.11 percent. The yield on trading securities grew 26 basis points to 4.76 percent.

Funding costs were 3.81 percent, up 54 basis points. The cost of interest-bearing deposits increased 61 basis points to 3.17 percent. The cost of other borrowings was up 36 basis points to 5.48 percent while the cost of funds purchased and repurchase agreements increased 23 basis points to 4.81 percent. The benefit to net interest margin from assets funded by non-interest liabilities was 101 basis points, an increase of 3 basis points.

Fees and Commissions Revenue

Fees and commissions revenue totaled $197.9 million for the third quarter of 2023, a decrease of $2.6 million compared to the prior quarter.

Brokerage and trading revenue decreased $2.7 million, with a $2.5 million reduction in trading revenue, primarily related to our municipal bond trading activity, which was influenced by the rising interest rate environment and evolving market expectations during the third quarter. Customer hedging revenue decreased $6.8 million following a record high in the second quarter. Investment banking revenue grew $5.7 million, primarily related to underwriting fees and financial advisory fees produced by our Public and Corporate Finance group, which underwrites municipal bonds such as independent school districts.

Mortgage banking revenue decreased $1.8 million, largely due lower mortgage production and qualifying residential mortgage loans guaranteed by U.S. government agencies previously in forbearance that have been resold into GNMA pools following the applicable performance period specified by the programs. Mortgage production volume was down $30.1 million reflecting the rise in mortgage interest rates and continued low inventory in the housing market.

Other revenue increased $1.6 million, largely due to increased margin interest fees and letter of credit fees.

Operating Expense

Total operating expense was $324.3 million for the third quarter of 2023, an increase of $5.6 million compared to the second quarter of 2023.

Personnel expense was $190.8 million, consistent with the prior quarter. A $2.0 million increase in regular compensation due to business expansion was mostly offset by a decrease in employee benefits expense driven by seasonal declines in payroll taxes.

Non-personnel expense was $133.5 million, an increase of $5.5 million. Occupancy and equipment costs grew $2.5 million driven by the retirement of certain ATMs as we upgrade our network. Other expense increased $2.9 million, primarily due to an accrual for certain disputed matters. FDIC insurance expense also increased $1.0 million.

Loans, Deposits and Capital

Loans

Outstanding loans were $23.7 billion at September 30, 2023, growing $486 million over June 30, 2023, largely due to growth in commercial and commercial real estate loans. Unfunded loan commitments decreased $575 million compared to the second quarter of 2023 due primarily to the funding of existing commercial real estate loan commitments.

Outstanding commercial loan balances, which includes healthcare, services, energy and general business loans, increased $185 million over the prior quarter.

Healthcare sector loan balances increased $92 million, totaling $4.1 billion or 17 percent of total loans. Our healthcare sector loans primarily consist of $3.4 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.

General business loans increased $131 million to $3.6 billion or 15 percent of total loans. General business loans include $2.2 billion of wholesale/retail loans and $1.4 billion of loans from other commercial industries.

Services sector loan balances decreased $19 million to $3.6 billion or 15 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.

Energy loan balances decreased $18 million to $3.5 billion or 15 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 69 percent of committed production loans are secured by properties primarily producing oil. The remaining 31 percent is secured by properties primarily producing natural gas. Unfunded energy loan commitments were $4.1 billion at September 30, 2023, a $219 million decrease compared June 30, 2023.

Commercial real estate loan balances grew $270 million and represent 22 percent of total loans. Loans secured by multifamily properties increased $232 million to $1.7 billion. Loans secured by industrial facilities increased $83 million to $1.4 billion. This growth was partially offset by a $24 million decrease in loans secured by office facilities. Unfunded commercial real estate loan commitments were $2.0 billion at September 30, 2023, a decrease of $411 million compared to June 30, 2023. We take a disciplined approach to managing our concentration of commercial real estate loan commitments as a percentage of Tier 1 Capital. While loan commitments are presently near the upper internal concentration limit, we expect continued modest growth in our commercial real estate balances as loans fund, primarily in the multifamily and industrial loan portfolios.

Loans to individuals increased $31 million and represent 16 percent of total loans. Residential mortgage loans increased $72 million while personal loans decreased $42 million.

Liquidity and Capital

Our funding sources, which primarily include deposits and borrowings from the Federal Home Loan Banks, provide adequate liquidity to meet our needs. The loan to deposit ratio was 70 percent at September 30, 2023, consistent with the prior quarter, providing significant on-balance sheet liquidity to meet future loan demand and contractual obligations.

Period-end deposits totaled $33.7 billion at September 30, 2023, a $358 million increase. Interest-bearing transaction account balances increased $989 million while time deposits increased $221 million. Demand deposits decreased $808 million. We do not rely on brokered certificates of deposit as a significant source of funding. Time deposits included $688 million of brokered certificates of deposit, a $72 million decrease compared to June 30, 2023.

Average deposits were $33.3 billion at September 30, 2023, a $918 million increase. Average interest-bearing transaction account balances increased $1.0 billion and average time deposits increased $764 million. Average demand deposit account balances decreased $840 million. Average Commercial Banking deposits increased $276 million to $15.1 billion or 45 percent of total deposits. Our commercial deposit portfolio is highly diversified across industries and customers. The highest concentration by industry within our commercial deposit portfolio is with our energy customers representing 6 percent of our total deposits. Wealth Management deposits increased $343 million to $7.9 billion or 24 percent of total deposits. Consumer Banking deposits decreased $50 million to $7.9 billion or 24 percent of total deposits.

The company's common equity Tier 1 capital ratio was 12.06 percent at September 30, 2023. In addition, the company's Tier 1 capital ratio was 12.07 percent, total capital ratio was 13.16 percent, and leverage ratio was 9.52 percent at September 30, 2023. 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 6 basis points to the company's common equity tier 1 capital ratio at September 30, 2023. At June 30, 2023, the company's common equity Tier 1 capital ratio was 12.13 percent, Tier 1 capital ratio was 12.13 percent, total capital ratio was 13.24 percent, and leverage ratio was 9.75 percent.

The company's tangible common equity ratio, a non-GAAP measure, was 7.74 percent at September 30, 2023 and 7.79 percent at June 30, 2023. The tangible common equity ratio is primarily based on total shareholders' equity, which includes unrealized gains and losses on available for sale securities. Adjusted for all unrealized securities portfolio gains and losses, including those in the investment portfolio, the tangible common equity ratio would be 7.35 percent. 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 700,500 shares of common stock at an average price paid of $84.17 a share in the third quarter of 2023. We view share buybacks opportunistically, but within the context of maintaining our strong capital position.

Credit Quality

Nonperforming assets totaled $123 million or 0.52 percent of outstanding loans and repossessed assets at September 30, 2023, compared to $136 million or 0.59 percent at June 30, 2023. Excluding loans guaranteed by U.S. government agencies, nonperforming assets totaled $113 million or 0.48 percent of outstanding loans and repossessed assets at September 30, 2023, compared to $125 million or 0.54 percent at June 30, 2023.

Nonaccruing loans decreased $13 million compared to June 30, 2023. New nonaccruing loans identified in the third quarter totaled $11 million, offset by $12 million in payments received and $11 million of charge-offs. Nonaccruing commercial real estate loans decreased $10 million and nonaccruing general business loans decreased $5.5 million, partially offset by a $5.1 million increase in nonaccruing healthcare loans.

Net charge-offs were $6.5 million or 0.11 percent of average loans on an annualized basis in the third quarter. Charge-offs for the third quarter were primarily composed of a $4.6 million general business loan, a $2.2 million commercial real estate loan and a $1.5 million services loan.

The provision for credit losses of $7.0 million in the third quarter of 2023 reflects continued loan growth and changes in our economic forecast. The provision for credit losses was $17.0 million in the second quarter of 2023.

At September 30, 2023, the combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $325 million or 1.37 percent of outstanding loans and 298 percent of nonaccruing loans.

Securities and Derivatives

The fair value of the available for sale securities portfolio totaled $11.9 billion at September 30, 2023, largely unchanged compared to June 30, 2023. At September 30, 2023, the available for sale securities portfolio consisted primarily of $6.2 billion of residential mortgage-backed securities fully backed by U.S. government agencies and $4.5 billion of commercial mortgage-backed securities fully backed by U.S. government agencies. At September 30, 2023, the available for sale securities portfolio had a net unrealized loss of $1.0 billion compared to $899 million at June 30, 2023.

We hold an inventory of trading securities in support of sales to a variety of customers. At September 30, 2023, the trading securities portfolio totaled $4.7 billion compared to $5.4 billion at June 30, 2023.

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 $192 million to $20 million at September 30, 2023.

Derivative contracts are carried at fair value. At September 30, 2023, the net fair values of derivative contracts, before consideration of cash margin, reported as assets under our customer derivative programs totaled $594 million compared to $538 million at June 30, 2023. The aggregate net fair value of derivative contracts, before consideration of cash margin, held under these programs reported as liabilities totaled $582 million at September 30, 2023 and $526 million at June 30, 2023.

The net cost of the changes in the fair value of mortgage servicing rights and related economic hedges was $1.3 million during the third quarter of 2023, including a $9.2 million decrease in the fair value of securities and derivative contracts held as an economic hedge, an $8.0 million increase in the fair value of mortgage servicing rights and $112 thousand of related net interest expense.

Conference Call and Webcast

The company will hold a conference call at 9 a.m. Central time on Wednesday, October 25, 2023 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 1-844-512-2921 and referencing conference ID # 13741617.

About BOK Financial Corporation

BOK Financial Corporation is a $49 billion regional financial services company headquartered in Tulsa, Oklahoma with $99 billion in assets under management or 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, Connecticut and Tennessee. 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, 2023 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 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 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, 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)


Sep. 30, 2023

June 30, 2023

ASSETS



Cash and due from banks

$

854,161

$

875,714

Interest-bearing cash and cash equivalents

520,774

571,616

Trading securities

4,748,101

5,442,364

Investment securities, net of allowance

2,298,418

2,374,071

Available for sale securities

11,906,647

11,938,523

Fair value option securities

20,215

212,321

Restricted equity securities

435,112

330,086

Residential mortgage loans held for sale

72,489

94,820

Loans:

Commercial

14,719,839

14,534,516

Commercial real estate

5,241,300

4,970,801

Loans to individuals

3,762,879

3,732,342

Total loans

23,724,018

23,237,659

Allowance for loan losses

(272,114

)

(262,714

)

Loans, net of allowance

23,451,904

22,974,945

Premises and equipment, net

616,439

617,918

Receivables

255,164

263,915

Goodwill

1,044,749

1,044,749

Intangible assets, net

65,804

69,246

Mortgage servicing rights

311,382

304,722

Real estate and other repossessed assets, net

3,753

4,227

Derivative contracts, net

546,109

353,037

Cash surrender value of bank-owned life insurance

406,623

411,084

Receivable on unsettled securities sales

28,707

133,909

Other assets

1,344,846

1,220,653

TOTAL ASSETS

$

48,931,397

$

49,237,920


LIABILITIES AND EQUITY

Deposits:

Demand

$

9,974,223

$

10,782,548

Interest-bearing transaction

19,897,179

18,907,981

Savings

853,933

897,937

Time

2,927,217

2,706,377

Total deposits

33,652,552

33,294,843

Funds purchased and repurchase agreements

2,722,998

5,446,864

Other borrowings

6,201,644

3,777,056

Subordinated debentures

131,152

131,154

Accrued interest, taxes and expense

244,105

228,797

Due on unsettled securities purchases

235,473

400,430

Derivative contracts, net

403,947

550,653

Other liabilities

522,318

540,726

TOTAL LIABILITIES

44,114,189

44,370,523

Shareholders' equity:

Capital, surplus and retained earnings

5,743,004

5,700,526

Accumulated other comprehensive loss

(928,985

)

(836,672

)

TOTAL SHAREHOLDERS' EQUITY

4,814,019

4,863,854

Non-controlling interests

3,189

3,543

TOTAL EQUITY

4,817,208

4,867,397

TOTAL LIABILITIES AND EQUITY

$

48,931,397

$

49,237,920

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


Three Months Ended


Sep. 30, 2023

June 30, 2023

Mar. 31, 2023

Dec. 31, 2022

Sep. 30, 2022

ASSETS






Interest-bearing cash and cash equivalents

$

598,734

$

708,475

$

616,596

$

568,307

$

748,263

Trading securities

5,444,587

4,274,803

3,031,969

3,086,985

3,178,068

Investment securities, net of allowance

2,331,595

2,408,122

2,473,796

2,535,305

2,593,989

Available for sale securities

11,925,800

12,033,597

11,738,693

10,953,851

10,306,257

Fair value option securities

41,741

245,469

300,372

92,012

36,846

Restricted equity securities

445,532

351,944

316,724

216,673

173,656

Residential mortgage loans held for sale

77,208

72,959

65,769

98,613

132,685

Loans:

Commercial

14,527,676

14,316,474

14,046,237

13,846,339

13,508,325

Commercial real estate

5,172,876

4,896,230

4,757,362

4,488,091

4,434,650

Loans to individuals

3,713,756

3,676,350

3,672,648

3,641,574

3,656,257

Total loans

23,414,308

22,889,054

22,476,247

21,976,004

21,599,232

Allowance for loan losses

(267,205

)

(252,890

)

(238,909

)

(242,450

)

(241,136

)

Loans, net of allowance

23,147,103

22,636,164

22,237,338

21,733,554

21,358,096

Total earning assets

44,012,300

42,731,533

40,781,257

39,285,300

38,527,860

Cash and due from banks

799,291

875,280

857,771

865,796

821,801

Derivative contracts, net

412,707

410,793

546,018

1,239,717

2,019,905

Cash surrender value of bank-owned life insurance

408,295

409,313

408,124

406,826

410,667

Receivable on unsettled securities sales

268,344

163,903

177,312

194,996

219,113

Other assets

3,418,615

3,317,285

3,211,986

3,216,983

3,119,856

TOTAL ASSETS

$

49,319,552

$

47,908,107

$

45,982,468

$

45,209,618

$

45,119,202


LIABILITIES AND EQUITY

Deposits:

Demand

$

10,157,821

$

10,998,201

$

12,406,408

$

14,176,189

$

15,105,305

Interest-bearing transaction

19,415,599

18,368,592

18,639,900

18,898,315

19,556,806

Savings

874,530

926,882

958,443

969,275

978,596

Time

2,839,947

2,076,037

1,477,720

1,417,606

1,409,069

Total deposits

33,287,897

32,369,712

33,482,471

35,461,385

37,049,776

Funds purchased and repurchase agreements

2,699,027

3,670,994

1,759,237

1,046,447

800,759

Other borrowings

6,968,309

5,275,291

4,512,280

2,523,195

1,528,887

Subordinated debentures

131,151

131,153

131,166

131,180

131,199

Derivative contracts, net

429,989

576,558

428,023

445,105

105,221

Due on unsettled securities purchases

435,927

436,353

316,738

575,957

331,428

Other liabilities

461,686

503,134

511,530

408,029

396,510

TOTAL LIABILITIES

44,413,986

42,963,195

41,141,445

40,591,298

40,343,780

Total equity

4,905,566

4,944,912

4,841,023

4,618,320

4,775,422

TOTAL LIABILITIES AND EQUITY

$

49,319,552

$

47,908,107

$

45,982,468

$

45,209,618

$

45,119,202

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


Three Months Ended

Nine Months Ended


September 30,

September 30,


2023

2022

2023

2022






Interest revenue

$

617,044

$

363,150

$

1,704,140

$

940,496

Interest expense

316,148

46,825

728,635

81,742

Net interest revenue

300,896

316,325

975,505

858,754

Provision for credit losses

7,000

15,000

40,000

15,000

Net interest revenue after provision for credit losses

293,896

301,325

935,505

843,754

Other operating revenue:

Brokerage and trading revenue

62,312

61,006

179,714

77,970

Transaction card revenue

26,387

25,974

78,011

77,130

Fiduciary and asset management revenue

52,256

50,190

155,910

146,427

Deposit service charges and fees

27,676

28,703

80,744

84,207

Mortgage banking revenue

13,356

11,282

42,864

39,300

Other revenue

15,865

15,479

47,085

38,608

Total fees and commissions

197,852

192,634

584,328

463,642

Other gains (losses), net

1,474

979

16,343

(8,304

)

Loss on derivatives, net

(9,010

)

(17,009

)

(18,513

)

(77,559

)

Loss on fair value option securities, net

(203

)

(4,368

)

(5,323

)

(17,790

)

Change in fair value of mortgage servicing rights

8,039

16,570

11,241

83,165

Gain (loss) on available for sale securities, net

-

892

(3,010

)

3,017

Total other operating revenue

198,152

189,698

585,066

446,171

Other operating expense:

Personnel

190,791

170,348

563,588

484,499

Business promotion

6,958

6,127

23,167

18,965

Charitable contributions to BOKF Foundation

23

-

1,165

-

Professional fees and services

13,224

14,089

39,049

37,977

Net occupancy and equipment

32,583

29,296

91,147

87,640

Insurance

7,996

4,306

22,285

13,317

Data processing and communications

45,672

41,743

135,781

122,859

Printing, postage and supplies

3,760

4,349

11,381

11,967

Amortization of intangible assets

3,474

3,943

10,339

11,956

Mortgage banking costs

8,357

9,504

22,439

26,818

Other expense

11,475

11,046

28,457

30,026

Total other operating expense

324,313

294,751

948,798

846,024


Net income before taxes

167,735

196,272

571,773

443,901

Federal and state income taxes

33,256

39,681

123,162

92,000


Net income

134,479

156,591

448,611

351,901

Net income (loss) attributable to non-controlling interests

(16

)

81

440

57

Net income attributable to BOK Financial Corporation shareholders

$

134,495

$

156,510

$

448,171

$

351,844


Average shares outstanding:

Basic

65,548,307

67,003,199

65,955,294

67,409,789

Diluted

65,548,307

67,004,623

65,955,294

67,411,222


Net income per share:

Basic

$

2.04

$

2.32

$

6.74

$

5.18

Diluted

$

2.04

$

2.32

$

6.74

$

5.18

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


Three Months Ended


Sep. 30, 2023

June 30, 2023

Mar. 31, 2023

Dec. 31, 2022

Sep. 30, 2022







Interest revenue

$

617,044

$

570,367

$

516,729

$

451,606

$

363,150

Interest expense

316,148

248,106

164,381

98,980

46,825

Net interest revenue

300,896

322,261

352,348

352,626

316,325

Provision for credit losses

7,000

17,000

16,000

15,000

15,000

Net interest revenue after provision for credit losses

293,896

305,261

336,348

337,626

301,325

Other operating revenue:

Brokerage and trading revenue

62,312

65,006

52,396

63,008

61,006

Transaction card revenue

26,387

26,003

25,621

27,136

25,974

Fiduciary and asset management revenue

52,256

52,997

50,657

49,899

50,190

Deposit service charges and fees

27,676

27,100

25,968

26,429

28,703

Mortgage banking revenue

13,356

15,141

14,367

10,065

11,282

Other revenue

15,865

14,250

16,970

17,034

15,479

Total fees and commissions

197,852

200,497

185,979

193,571

192,634

Other gains (losses), net

1,474

12,618

2,251

8,427

979

Gain (loss) on derivatives, net

(9,010

)

(8,159

)

(1,344

)

4,548

(17,009

)

Loss on fair value option securities, net

(203

)

(2,158

)

(2,962

)

(2,568

)

(4,368

)

Change in fair value of mortgage servicing rights

8,039

9,261

(6,059

)

(2,904

)

16,570

Gain (loss) on available for sale securities, net

-

(3,010

)

-

(3,988

)

892

Total other operating revenue

198,152

209,049

177,865

197,086

189,698

Other operating expense:

Personnel

190,791

190,652

182,145

186,419

170,348

Business promotion

6,958

7,640

8,569

7,470

6,127

Charitable contributions to BOKF Foundation

23

1,142

-

2,500

-

Professional fees and services

13,224

12,777

13,048

18,365

14,089

Net occupancy and equipment

32,583

30,105

28,459

29,227

29,296

Insurance

7,996

6,974

7,315

4,677

4,306

Data processing and communications

45,672

45,307

44,802

43,048

41,743

Printing, postage and supplies

3,760

3,728

3,893

3,890

4,349

Amortization of intangible assets

3,474

3,474

3,391

3,736

3,943

Mortgage banking costs

8,357

8,300

5,782

9,016

9,504

Other expense

11,475

8,574

8,408

10,108

11,046

Total other operating expense

324,313

318,673

305,812

318,456

294,751

Net income before taxes

167,735

195,637

208,401

216,256

196,272

Federal and state income taxes

33,256

44,001

45,905

47,864

39,681

Net income

134,479

151,636

162,496

168,392

156,591

Net income (loss) attributable to non-controlling interests

(16

)

328

128

(37

)

81

Net income attributable to BOK Financial Corporation shareholders

$

134,495

$

151,308

$

162,368

$

168,429

$

156,510


Average shares outstanding:

Basic

65,548,307

65,994,132

66,331,775

66,627,955

67,003,199

Diluted

65,548,307

65,994,132

66,331,775

66,627,955

67,004,623

Net income per share:

Basic

$

2.04

$

2.27

$

2.43

$

2.51

$

2.32

Diluted

$

2.04

$

2.27

$

2.43

$

2.51

$

2.32

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


Three Months Ended


Sep. 30, 2023

June 30, 2023

Mar. 31, 2023

Dec. 31, 2022

Sep. 30, 2022

Capital:






Period-end shareholders' equity

$

4,814,019

$

4,863,854

$

4,874,786

$

4,682,649

$

4,509,934

Risk weighted assets

$

38,791,023

$

38,218,164

$

37,192,197

$

38,142,231

$

36,866,994

Risk-based capital ratios:

Common equity tier 1

12.06

%

12.13

%

12.19

%

11.69

%

11.80

%

Tier 1

12.07

%

12.13

%

12.20

%

11.71

%

11.82

%

Total capital

13.16

%

13.24

%

13.21

%

12.67

%

12.81

%

Leverage ratio

9.52

%

9.75

%

9.94

%

9.91

%

9.76

%

Tangible common equity ratio 1

7.74

%

7.79

%

8.46

%

7.63

%

7.96

%

Adjusted tangible common equity ratio 1

7.35

%

7.49

%

8.22

%

7.36

%

7.66

%


Common stock:

Book value per share

$

73.31

$

73.28

$

73.19

$

69.93

$

67.06

Tangible book value per share

$

56.40

$

56.50

$

56.42

$

53.19

$

50.34

Market value per share:

High

$

92.41

$

90.91

$

106.47

$

110.28

$

95.51

Low

$

77.61

$

74.40

$

80.00

$

88.46

$

69.82

Cash dividends paid

$

35,655

$

35,879

$

36,006

$

36,188

$

35,661

Dividend payout ratio

26.51

%

23.71

%

22.18

%

21.49

%

22.79

%

Shares outstanding, net

65,664,840

66,369,208

66,600,833

66,958,634

67,254,383

Stock buy-back program:

Shares repurchased

700,500

266,000

447,071

314,406

548,034

Amount

$

58,961

$

22,366

$

44,100

$

32,429

$

49,980

Average price paid per share 2

$

84.17

$

84.08

$

98.64

$

103.14

$

91.20


Performance ratios (quarter annualized):

Return on average assets

1.08

%

1.27

%

1.43

%

1.48

%

1.38

%

Return on average equity

10.88

%

12.28

%

13.61

%

14.48

%

13.01

%

Return on average tangible common equity 1

14.08

%

15.86

%

17.71

%

19.14

%

17.04

%

Net interest margin

2.69

%

3.00

%

3.45

%

3.54

%

3.24

%

Efficiency ratio 1,3

64.01

%

58.75

%

56.79

%

56.61

%

57.33

%


Other data:

Tax equivalent interest

$

2,214

$

2,200

$

2,285

$

2,287

$

2,163

Net unrealized loss on available for sale securities

$

(1,034,520

)

$

(898,906

)

$

(741,508

)

$

(865,553

)

$

(935,788

)


Mortgage banking:

Mortgage production revenue

$

(1,887

)

$

(284

)

$

(633

)

$

(3,983

)

$

(2,406

)


Mortgage loans funded for sale

$

173,727

$

214,785

$

138,624

$

141,090

$

260,210

Add: current period-end outstanding commitments

49,284

55,031

71,693

45,492

75,779

Less: prior period end outstanding commitments

55,031

71,693

45,492

75,779

106,004

Total mortgage production volume

$

167,980

$

198,123

$

164,825

$

110,803

$

229,985


Mortgage loan refinances to mortgage loans funded for sale

9

%

8

%

9

%

10

%

10

%

Realized margin on funded mortgage loans

(0.94)

%

(0.14)

%

(1.25)

%

(1.10)

%

(0.41)

%

Production revenue as a percentage of production volume

(1.12)

%

(0.14)

%

(0.38)

%

(3.59)

%

(1.05)

%


Mortgage servicing revenue

$

15,243

$

15,425

$

15,000

$

14,048

$

13,688

Average outstanding principal balance of mortgage loans serviced for others

20,719,116

20,807,044

21,121,319

18,923,078

19,070,221

Average mortgage servicing revenue rates

0.29

%

0.30

%

0.29

%

0.29

%

0.28

%


Gain (loss) on mortgage servicing rights, net of economic hedge:

Gain (loss) on mortgage hedge derivative contracts, net

$

(8,980

)

$

(8,099

)

$

(1,711

)

$

4,373

$

(17,027

)

Loss on fair value option securities, net

(203

)

(2,158

)

(2,962

)

(2,568

)

(4,368

)

Gain (loss) on economic hedge of mortgage servicing rights

(9,183

)

(10,257

)

(4,673

)

1,805

(21,395

)

Gain (loss) on changes in fair value of mortgage servicing rights

8,039

9,261

(6,059

)

(2,904

)

16,570

Gain (loss) on changes in fair value of mortgage servicing rights, net of economic hedges, included in other operating revenue

(1,144

)

(996

)

(10,732

)

(1,099

)

(4,825

)

Net interest revenue (expense) on fair value option securities 4

(112

)

(232

)

187

(118

)

29

Total economic benefit (cost) of changes in the fair value of mortgage servicing rights, net of economic hedges

$

(1,256

)

$

(1,228

)

$

(10,545

)

$

(1,217

)

$

(4,796

)

1 See Reconciliation of Non-GAAP Measures following.

2 Excludes 1 percent excise tax on corporate stock repurchases.

3 Prior period ratios have been adjusted to be consistent with the current period presentation.

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

EXPLANATION AND RECONCILIATION OF NON-GAAP MEASURES - UNAUDITED
BOK FINANCIAL CORPORATION
(in thousands, except ratio and share data)


Three Months Ended


Sep. 30, 2023

June 30, 2023

Mar. 31, 2023

Dec. 31, 2022

Sep. 30, 2022

Reconciliation of tangible common equity ratio and adjusted tangible common equity ratio:






Total shareholders' equity

$

4,814,019

$

4,863,854

$

4,874,786

$

4,682,649

$

4,509,934

Less: Goodwill and intangible assets, net

1,110,553

1,113,995

1,117,438

1,120,880

1,124,582

Tangible common equity

3,703,466

3,749,859

3,757,348

3,561,769

3,385,352

Add: Unrealized gain (loss) on investment securities, net

(246,395

)

(189,152

)

(140,947

)

(167,477

)

(165,206

)

Add: Tax effect on unrealized gain (loss) on investment securities, net

57,949

44,486

33,149

39,196

38,665

Adjusted tangible common equity

$

3,515,020

$

3,605,193

$

3,649,550

$

3,433,488

$

3,258,811


Total assets

$

48,931,397

$

49,237,920

$

45,524,122

$

47,790,642

$

43,645,446

Less: Goodwill and intangible assets, net

1,110,553

1,113,995

1,117,438

1,120,880

1,124,582

Tangible assets

$

47,820,844

$

48,123,925

$

44,406,684

$

46,669,762

$

42,520,864


Tangible common equity ratio

7.74

%

7.79

%

8.46

%

7.63

%

7.96

%


Adjusted tangible common equity ratio

7.35

%

7.49

%

8.22

%

7.36

%

7.66

%


Reconciliation of return on average tangible common equity:

Total average shareholders' equity

$

4,902,119

$

4,941,352

$

4,837,567

$

4,613,929

$

4,771,123

Less: Average goodwill and intangible assets, net

1,112,217

1,115,652

1,119,123

1,122,680

1,126,440

Average tangible common equity

$

3,789,902

$

3,825,700

$

3,718,444

$

3,491,249

$

3,644,683


Net Income

134,495

151,308

162,368

168,429

156,510


Return on average tangible common equity

14.08

%

15.86

%

17.71

%

19.14

%

17.04

%


Reconciliation of pre-provision net revenue:

Net income before taxes

$

167,735

$

195,637

$

208,401

$

216,256

$

196,272

Provision for expected credit losses

7,000

17,000

16,000

15,000

15,000

Net income (loss) attributable to non-controlling interests

(16

)

328

128

(37

)

81

Pre-provision net revenue

$

174,751

$

212,309

$

224,273

$

231,293

$

211,191


Calculation of efficiency ratio:

Total other operating expense

$

324,313

$

318,673

$

305,812

$

318,456

$

294,751

Less: Amortization of intangible assets

3,474

3,474

3,391

3,736

3,943

Adjusted total other operating expense

$

320,839

$

315,199

$

302,421

$

314,720

$

290,808


Net interest revenue

$

300,896

$

322,261

$

352,348

$

352,626

$

316,325

Tax-equivalent adjustment

2,214

2,200

2,285

2,287

2,163

Tax-equivalent net interest revenue

303,110

324,461

354,633

354,913

318,488

Total other operating revenue

198,152

209,049

177,865

197,086

189,698

Less: Gain (loss) on available for sale securities, net

-

(3,010

)

-

(3,988

)

892

Adjusted revenue

$

501,262

$

536,520

$

532,498

$

555,987

$

507,294


Efficiency ratio

64.01

%

58.75

%

56.79

%

56.61

%

57.33

%

Information on net interest revenue and net interest margin excluding trading activities:

Net interest revenue

$

300,896

$

322,261

$

352,348

$

352,626

$

316,325

Less: Trading activities net interest revenue

(7,343

)

(3,461

)

70

(860

)

4,478

Net interest revenue excluding trading activities

308,239

325,722

352,278

353,486

311,847

Tax-equivalent adjustment

2,214

2,200

2,285

2,287

2,163

Tax-equivalent net interest revenue excluding trading activities

$

310,453

$

327,922

$

354,563

$

355,773

$

314,010


Average total earning assets

$

44,012,300

$

42,731,533

$

40,781,257

$

39,285,300

$

38,527,860

Less: Average trading activities interest-earning assets

5,444,587

4,274,803

3,031,969

3,086,985

3,178,068

Average interest-earning assets excluding trading activities

$

38,567,713

$

38,456,730

$

37,749,288

$

36,198,315

$

35,349,792


Net interest margin on average interest-earning assets

2.69

%

3.00

%

3.45

%

3.54

%

3.24

%

Net interest margin on average trading activities interest-earning assets

(0.49)

%

(0.34)

%

-

%

(0.12)

%

0.53

%

Net interest margin on average interest-earning assets excluding trading activities

3.14

%

3.36

%

3.72

%

3.84

%

3.49

%


Explanation of Non-GAAP Measures

The tangible common equity ratio and return on average tangible common equity are primarily based on total shareholders' equity, which includes unrealized gains and losses on available for sale securities, less intangible assets and equity that does not benefit common shareholders. The adjusted tangible common equity ratio also includes unrealized gains and losses on the investment portfolio. These measures are valuable indicators of a financial institution's capital strength since they eliminate intangible assets from shareholders' equity and retain the effect of unrealized losses on securities and other components of accumulated other comprehensive income in shareholders' equity.

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

The efficiency ratio measures the Company's ability to use its assets and manage its liabilities effectively in the current period. Prior to the second quarter of 2023, the efficiency ratio did not exclude amortization of intangible assets and only included tax-equivalent net interest revenue and fees and commissions as part of total revenue. All prior periods were adjusted to conform with the current methodology.

Net interest revenue and net interest margin excluding trading activities removes the effect of trading activities on these metrics allowing management and investors to assess the performance of the Company's core lending and deposit activities without the associated volatility from trading activities.

LOANS TREND - UNAUDITED
BOK FINANCIAL CORPORATION
(In thousands)


Sep. 30, 2023

June 30, 2023

Mar. 31, 2023

Dec. 31, 2022

Sep. 30, 2022

Commercial:






Healthcare

$

4,083,134

$

3,991,387

$

3,899,341

$

3,845,017

$

3,826,623

Services

3,566,361

3,585,169

3,563,702

3,431,521

3,280,925

Energy

3,490,602

3,508,752

3,398,057

3,424,790

3,371,588

General business

3,579,742

3,449,208

3,356,249

3,511,171

3,148,783

Total commercial

14,719,839

14,534,516

14,217,349

14,212,499

13,627,919


Commercial real estate:

Multifamily

1,734,688

1,502,971

1,363,881

1,212,883

1,126,700

Industrial

1,432,629

1,349,709

1,309,435

1,221,501

1,103,905

Office

981,876

1,005,660

1,045,700

1,053,331

1,086,615

Retail

608,073

617,886

618,264

620,518

635,021

Residential construction and land development

100,465

106,370

102,828

95,684

91,690

Other commercial real estate

383,569

388,205

375,208

402,860

429,980

Total commercial real estate

5,241,300

4,970,801

4,815,316

4,606,777

4,473,911


Loans to individuals:

Residential mortgage

2,090,992

1,993,690

1,926,027

1,890,784

1,851,836

Residential mortgages guaranteed by U.S. government agencies

161,092

186,170

224,753

245,940

262,466

Personal

1,510,795

1,552,482

1,566,608

1,601,150

1,574,325

Total loans to individuals

3,762,879

3,732,342

3,717,388

3,737,874

3,688,627


Total

$

23,724,018

$

23,237,659

$

22,750,053

$

22,557,150

$

21,790,457

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


Sep. 30, 2023

June 30, 2023

Mar. 31, 2023

Dec. 31, 2022

Sep. 30, 2022

Texas:

Commercial

$

7,249,963

$

7,223,820

$

7,103,166

$

6,878,618

$

6,644,890

Commercial real estate

1,873,477

1,748,796

1,675,831

1,555,508

1,448,590

Loans to individuals

961,299

974,911

992,343

982,700

970,459

Total Texas

10,084,739

9,947,527

9,771,340

9,416,826

9,063,939


Oklahoma:

Commercial

3,384,627

3,251,547

3,178,934

3,382,577

3,108,608

Commercial real estate

601,087

573,559

574,708

582,109

608,856

Loans to individuals

2,100,974

2,079,311

2,049,472

2,077,124

2,054,362

Total Oklahoma

6,086,688

5,904,417

5,803,114

6,041,810

5,771,826


Colorado:

Commercial

2,219,460

2,179,473

2,148,066

2,149,199

2,117,181

Commercial real estate

710,552

683,973

646,537

613,912

565,057

Loans to individuals

227,569

223,200

231,368

241,902

237,981

Total Colorado

3,157,581

3,086,646

3,025,971

3,005,013

2,920,219


Arizona:

Commercial

1,173,491

1,177,778

1,115,973

1,124,289

1,103,000

Commercial real estate

1,014,151

926,750

881,465

860,947

850,319

Loans to individuals

260,282

242,102

240,556

229,872

225,981

Total Arizona

2,447,924

2,346,630

2,237,994

2,215,108

2,179,300


Kansas/Missouri:

Commercial

307,725

309,148

318,782

310,715

307,456

Commercial real estate

547,708

516,299

489,951

479,968

466,955

Loans to individuals

132,137

138,960

129,580

131,307

125,039

Total Kansas/Missouri

987,570

964,407

938,313

921,990

899,450


New Mexico:

Commercial

297,714

287,443

280,945

263,349

258,754

Commercial real estate

405,989

425,472

449,715

417,008

426,367

Loans to individuals

69,418

64,803

65,770

67,163

68,095

Total New Mexico

773,121

777,718

796,430

747,520

753,216