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BOK Financial Corporation Reports Quarterly Earnings of $62 million or $0.91 Per Share in the First Quarter

·32 min read
BOK Financial Corporation
BOK Financial Corporation

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

CEO Commentary

Stacy Kymes, president and chief executive officer, stated, “BOK Financial has an enviable mix of business segments that are core to our strategy focused on long-term, sustainable success. Over a long period of time the company has benefited from the diversity of these segments. The overall results this quarter did not meet our expectations as the markets experienced extraordinary interest rate volatility. The markets had to digest high levels of inflation, changing sentiment around the magnitude of interest rate hikes, and the first meaningful geopolitical conflict in Europe since WWII. Several of our market segments experienced impacts as the markets appeared to reset. As we move forward, we believe we are well positioned for this new environment. We have strong momentum growing our loan portfolio with both solid actual results and strong loan pipelines. We have been intentional about positioning our balance sheet to benefit from rising interest rates and should the Federal Reserve move to hike more aggressively, we will see expanding margins and revenue. Credit quality has long been a differentiator for BOK Financial and we are well-positioned should the credit markets begin to show weakness, though there is no sign of that today.”

First Quarter 2022 Financial Highlights

  • Net income was $62.5 million or $0.91 per diluted share for the first quarter of 2022 and $117.3 million or $1.71 per diluted share for the fourth quarter of 2021. Interest rate volatility driven by expectations of future Federal Reserve actions to address rising inflation as well as the deepening conflict in Ukraine combined to significantly decrease our trading revenue, mortgage loan production volumes, and the net fair value of our mortgage servicing rights valuation.

  • Net interest revenue totaled $268.4 million, a decrease of $8.7 million. Net interest margin was 2.44 percent compared to 2.52 percent in the fourth quarter of 2021.

  • Fees and commissions revenue decreased $48.7 million to $97.6 million. Brokerage and trading revenue decreased $41.9 million while mortgage banking revenue decreased $4.6 million.

  • The net cost of the changes in fair value of mortgage servicing rights and related economic hedges was $8.4 million for the first quarter of 2022 compared to a net benefit of $4.7 million for the fourth quarter of 2021.

  • Operating expense decreased $21.9 million to $277.6 million. Personnel expense decreased $15.2 million, primarily due to lower incentive compensation expense, partially offset by a seasonal increase in employee benefits expense. Non-personnel expense decreased $6.6 million. The fourth quarter of 2021 included a $5.0 million charitable donation to the BOKF Foundation that did not recur in the first quarter of 2022.

  • Period-end loans increased $469 million to $20.7 billion at March 31, 2022. Commercial loans increased $377 million and commercial real estate loans increased $270 million while period-end Paycheck Protection Program (“PPP”) loans decreased $139 million to $137 million. Average loans were $20.5 billion, a $221 million increase compared to the fourth quarter of 2021.

  • No provision for expected credit losses was necessary for the first quarter of 2022. A $17.0 million negative provision for expected credit losses was recorded in the prior quarter. The impact of continued strength in commodity prices and improved credit quality metrics was offset by higher required provision due to loan growth and changes in our economic outlook. The combined allowance for credit losses totaled $283 million or 1.37 percent of outstanding loans at March 31, 2022. The combined allowance for credit losses was $289 million or 1.43 percent of outstanding loans at December 31, 2021.

  • Average deposits increased $560 million to $40.4 billion while period-end deposits decreased $1.8 billion to $39.4 billion due to expected seasonal activity from 2021 year-end balances. Average interest-bearing deposits increased $317 million and average demand deposits grew $243 million.

  • The company’s common equity Tier 1 capital ratio was 11.30 percent at March 31, 2022. In addition, the company’s Tier 1 capital ratio was 11.31 percent, total capital ratio was 12.25 percent, and leverage ratio was 8.47 percent at March 31, 2022. At December 31, 2021, the company’s common equity Tier 1 capital ratio was 12.24 percent, Tier 1 capital ratio was 12.25 percent, total capital ratio was 13.29 percent, and leverage ratio was 8.55 percent.

  • The company repurchased 475,877 shares of common stock at an average price of $101.02 a share in the first quarter of 2022.

First Quarter 2022 Segment Highlights

  • Commercial Banking contributed $82.3 million to net income in the first quarter of 2022, a decrease of $1.2 million compared to the fourth quarter of 2021. Combined net interest revenue and fee revenue decreased $4.2 million, primarily due to two fewer days in the quarter and a reduction in loan fees. Net loans charged-off increased $7.3 million. Personnel expense decreased $8.3 million, primarily due to reduced incentive compensation costs. Corporate expense allocations increased $3.3 million, largely related to project resources. Average Commercial Banking loans increased $362 million or 2 percent to $16.7 billion. Average Commercial Banking deposits were consistent with prior quarter.

  • Consumer Banking had a net loss of $7.3 million in the first quarter of 2022 compared to prior quarter net income of $6.8 million. Combined net interest revenue and fee revenue decreased $8.1 million. Net interest revenue decreased $3.2 million, mainly due to a 14 basis point reduction in the spread on deposits sold to our Funds Management unit. Fees and commissions revenue decreased $5.0 million due to lower mortgage production volumes combined with narrowing margins. The net cost of the changes in fair value of mortgage servicing rights and related economic hedges was $8.4 million for the first quarter of 2022 compared to a net benefit of $4.7 million for the fourth quarter of 2021. Interest rate volatility affected the effectiveness of our mortgage servicing rights hedging strategy. Operating expense decreased $3.2 million, primarily due to decreased professional fees and services expense. Average Consumer Banking loans decreased $32.9 million or 2 percent to $1.7 billion. Average Consumer Banking deposits increased $64.2 million or 1 percent to $8.7 billion in the first quarter of 2022.

  • Wealth Management had a net loss of $4.4 million in the first quarter of 2022 compared to net income of $21.7 million in the fourth quarter of 2021. Our diverse set of investment-focused businesses including fixed income trading, private wealth, institutional wealth, financial risk management, and multiple fiduciary businesses combined to provide total net interest and fee revenues of $80.8 million, a decrease of $33.7 million compared to the fourth quarter of 2021. Total revenue from trading activities decreased $43.3 million primarily due to reduced demand for U.S. government agency residential mortgage-backed securities. Investment banking and insurance brokerage revenue increased over the previous quarter. Fiduciary and asset management revenue and retail brokerage revenue were relatively consistent with the prior quarter. Decreases in revenue related to assets under management or administration were offset by improved money market fund fees. Operating expense was consistent with the prior quarter. Average Wealth Management loans increased $53.5 million or 3 percent to $2.1 billion. Average Wealth Management deposits increased $425 million or 5 percent to $9.6 billion. Deposit balances began to decline in the second half of March 2022. Assets under management were $101.1 billion, a decrease of $3.8 billion compared to the prior quarter.

Net Interest Revenue

Average earning assets decreased $744 million compared to the fourth quarter of 2021. Average trading securities decreased $723 million. Average loan balances increased $221 million, largely due to growth in commercial and commercial real estate loans, partially offset by a decrease in PPP loans. Average interest bearing cash and cash equivalents were reduced by $158 million. Available for sale securities decreased $155 million. Funds purchased and repurchase agreements decreased $889 million, while other borrowings increased $268 million. Net interest revenue was $268.4 million for the first quarter of 2022 compared to $277.1 million for the fourth quarter of 2021. Net interest margin was 2.44 percent compared to 2.52 percent in the prior quarter. PPP loan fees of $3.9 million were recognized in the first quarter of 2022 compared to $7.7 million in the previous quarter. PPP loan fees remaining to be recognized were $3.5 million as of March 31, 2022.

The yield on average earning assets was 2.58 percent, an 8 basis point decrease from the prior quarter. The loan portfolio yield decreased 13 basis points to 3.57 percent. Yields related to loan fees decreased 17 points from the prior quarter while core loan yields increased 4 basis points. The yield on trading securities was down 18 basis points to 1.71 percent, largely due to a decrease in the weighted average coupon rate. The yield on the available for sale securities portfolio increased 5 basis points to 1.77 percent.

Funding costs were 0.21 percent, consistent with the prior quarter. The cost of interest-bearing deposits was unchanged at 0.12 percent. The cost of funds purchased and repurchase agreements increased 22 basis points to 0.95 percent while the cost of other borrowings decreased 11 basis points to 0.38 percent. The benefit to net interest margin from assets funded by non-interest liabilities was 7 basis points for the first quarter of 2022, consistent with the prior quarter.

Operating Revenue

Brokerage and trading revenue decreased $41.9 million to a net loss of $27.1 million. Beginning in the second quarter of 2021, to meet customer demand in response to expected tightening by the Federal Reserve and increasing rates, we increased the trading volume of short duration, low coupon U.S. government agency residential mortgage-backed securities. These actions led to record trading revenues in the third quarter of 2021. As inflation pressure increased in the first quarter of 2022 and the conflict in Ukraine intensified, fixed income markets were disrupted reducing the demand for these securities. As of March 31, 2022, we have reduced our exposure to these securities by approximately 70 percent compared to December 31, 2021. Customer hedging revenue increased $1.8 million, primarily related to interest rate contracts, partially offset by a decline in energy contracts. Investment banking revenue decreased $3.9 million, largely due to the timing of syndication activity. Fees and commissions revenue totaled $97.6 million for the first quarter of 2022, a $48.7 million decrease compared to the fourth quarter of 2021.

Mortgage banking revenue decreased $4.6 million compared to the prior quarter due to lower loan production volume combined with narrowing margins. Interest rate volatility and continued inventory shortages have resulted in fewer refinance opportunities and heightened competitive pricing pressure. Mortgage loan production volume decreased $93 million to $408 million. Production revenue as a percentage of production volume, which includes unrealized gains and losses on our mortgage commitment pipeline and related hedges, decreased 76 basis points to 1.24 percent.

Other gains and losses, net decreased $7.7 million compared to the prior quarter, primarily related to the change in fair value of the rabbi trust investments, which is offset by a decrease in related deferred compensation expense.

Operating Expense

Personnel expense decreased $15.2 million. Cash-based incentive compensation expense decreased $11.2 million from elevated levels in the fourth quarter of 2021. Deferred compensation expense, which is largely offset by a decrease in the value of related rabbi trust investments, decreased $4.2 million. Share-based incentive compensation expense decreased $3.8 million resulting from changes in vesting assumptions. Employee benefits expense increased $3.2 million due to a seasonal increase in payroll taxes and retirement plan costs, partially offset by a decrease in employee healthcare costs. Total operating expense was $277.6 million for the first quarter of 2022, a decrease of $21.9 million compared to the fourth quarter of 2021.

Non-personnel expense decreased $6.6 million compared to the fourth quarter of 2021. The fourth quarter of 2021 included a $5.0 million charitable donation to the BOKF Foundation that did not recur in the first quarter of 2022. Decreases in professional fees and services expense and other expense were partially offset by an increase in net occupancy and equipment expense.

Loans, Deposits and Capital

Loans

Outstanding loans were $20.7 billion at March 31, 2022, a $469 million increase compared to December 31, 2021 due to growth in both commercial and commercial real estate loans.

Outstanding commercial loan balances increased $377 million compared to December 31, 2021, led by growth in energy and general business loans. Although the primary source of repayment of our commercial loan portfolio is the ongoing cash flow from operations of the customer’s business, loans are generally governed by a borrowing base and secured by the customer’s assets.

Energy loan balances increased $191 million to $3.2 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 72 percent of committed production loans are secured by properties primarily producing oil. The remaining 28 percent is secured by properties primarily producing natural gas. Unfunded energy loan commitments were $3.0 billion at March 31, 2022, an increase of $23 million over December 31, 2021.

General business loans increased $175 million to $2.9 billion or 14 percent of total loans. General business loans include $1.5 billion of wholesale/retail loans and $1.4 billion of loans from other commercial industries.

Healthcare sector loan balances increased $27 million compared to the prior quarter, totaling $3.4 billion or 17 percent of total loans. Our healthcare sector loans primarily consist of $2.7 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.

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

Commercial real estate loan balances increased $270 million compared to December 31, 2021 and represent 20 percent of total loans at March 31, 2022. Loans secured by industrial facilities increased $146 million to $912 million. Multifamily residential loans increased $81 million to $867 million at March 31, 2022. Loans secured by office facilities increased $57 million to $1.1 billion.

PPP loan balances decreased $139 million to $137 million or less than 1 percent of total loans. PPP loan balances have decreased $2.0 billion since their peak in the third quarter of 2020.

Loans to individuals decreased $39 million and represent 17 percent of total loans at March 31, 2022. Personal loans decreased $8.4 million while residential mortgage loans guaranteed by U.S. government agencies decreased $32 million, largely due to the re-sale of loans previously sold into GNMA mortgage pools that the company repurchased when certain defined delinquency criteria were met. Many loans repurchased during the pandemic have since been cured and meet the re-sale qualifications. The balance of these loans peaked in the second quarter of 2021 at $421 million and since have been reduced by a total of $98 million.

Deposits

Period-end deposits totaled $39.4 billion at March 31, 2022, a $1.8 billion decrease compared to December 31, 2021 due to expected seasonal activity. Interest-bearing transaction account balances decreased by $1.6 billion. Period-end Commercial Banking deposits decreased $909 million and Wealth Management deposits reduced $1.2 billion while Consumer Banking deposits grew $208 million. Average deposits were $40.4 billion at March 31, 2022, a $560 million increase compared to December 31, 2021. Interest-bearing transaction account balances increased $437 million and demand deposit account balances increased $243 million.

Capital

The company’s common equity Tier 1 capital ratio was 11.30 percent at March 31, 2022. In addition, the company’s Tier 1 capital ratio was 11.31 percent, total capital ratio was 12.25 percent, and leverage ratio was 8.47 percent at March 31, 2022. We have elected to delay the regulatory capital impact of the transition of the allowance for credit losses from the incurred loss methodology to CECL for two years, followed by a three-year transition period. This election added 11 basis points to the company’s common equity tier 1 capital ratio at March 31. At December 31, 2021, the company’s common equity Tier 1 capital ratio was 12.24 percent, Tier 1 capital ratio was 12.25 percent, total capital ratio was 13.29 percent, and leverage ratio was 8.55 percent.

The company’s tangible common equity ratio, a non-GAAP measure, was 8.13 percent at March 31, 2022 and 8.61 percent at December 31, 2021. This decrease is primarily due to unrealized losses related to available for sale securities. The tangible common equity ratio is primarily based on total shareholders’ equity, which includes unrealized gains and losses on available for sale securities. The company has elected to exclude unrealized gains and losses from available for sale securities from its calculation of Tier 1 capital for regulatory capital purposes, consistent with the treatment under the previous capital rules.

The company repurchased 475,877 shares of common stock at an average price of $101.02 a share in the first quarter of 2022. We view share buybacks opportunistically, but within the context of maintaining our strong capital position.

Credit Quality

No provision for credit losses was necessary for the first quarter of 2022. Changes in our reasonable and supportable forecasts of macroeconomic variables resulted in a $7.3 million decrease in the allowance for credit losses related to lending activities. Continued strength in commodity prices was partially offset by changes in our economic outlook. Changes in loan portfolio characteristics, primarily related to growth in loan balances resulted in a $6.6 million increase in the allowance for credit losses related to lending activities. Continued improvements in credit quality metrics were offset by net charge-offs and changes in specific impairment and payment profile characteristics. Expected credit losses on assets carried at amortized cost are recognized over their projected lives based on models that measure the probability of default and loss given default over a 12-month reasonable and supportable forecast period. Our models incorporate base case, downside and upside macroeconomic variables such as real gross domestic product (“GDP”) growth, civilian unemployment rate and West Texas Intermediate (“WTI”) oil prices on a probability weighted basis.

Our base case reasonable and supportable forecast assumes inflation peaks in the second quarter of 2022 and begins to normalize thereafter. We expect the Russian-Ukraine conflict remains isolated and conditions improve by mid-year 2022. We expect a 2.2 percent increase in GDP over the next twelve months as labor force participants will continue to re-enter the job market to help meet record job openings. This increase in employment helps maintain household income above its pre-pandemic trend and supports consumer spending and GDP growth consistent with pre-pandemic levels. Our forecasted civilian unemployment rate is 3.9 percent for the second quarter of 2022, improving to 3.8 percent by the first quarter of 2023. Our base case also assumes the Federal Reserve begins balance sheet reduction in mid-year 2022 and increases federal funds rates at each meeting through March 2023, which results in a target range of 2.75 percent to 3.00 percent. WTI oil prices are projected to generally follow the NYMEX forward curve that existed at the end of March 2022, averaging $94.98 per barrel over the next twelve months.

The probability weighting of our base case reasonable and supportable forecast decreased to 60 percent in the first quarter of 2022 compared to 65 percent in the fourth quarter of 2021 as the level of uncertainty in economic forecasts increased. Our downside case, probability weighted at 30 percent, assumes the Russia-Ukraine conflict persists through 2022, but does remain isolated. Additional surges in commodity prices and exacerbated supply chain dislocations create higher levels of inflation forcing the Federal Reserve to adopt a more aggressive monetary policy to combat the inflationary environment. This results in a federal funds target range of 4.00 percent to 4.25 percent. This pushes the United States into a recession with a contraction in economic activity and a sharp increase in the unemployment rate. Real GDP is expected to contract 1.3 percent over the next four quarters in this scenario. WTI oil prices are projected to average $109.67 per barrel over the next twelve months in this scenario.

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

At December 31, 2021, the allowance for loan losses was $256 million or 1.27 percent of outstanding loans and 213 percent of nonaccruing loans excluding loans guaranteed by U.S. government agencies. The combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $289 million or 1.43 percent of outstanding loans and 241 percent of nonaccruing loans.

Nonperforming assets totaled $353 million or 1.70 percent of outstanding loans and repossessed assets at March 31, 2022, compared to $369 million or 1.83 percent at December 31, 2021. Nonperforming assets that are not guaranteed by U.S. government agencies totaled $132 million or 0.65 percent of outstanding loans and repossessed assets at March 31, 2022, compared to $145 million or 0.74 percent at December 31, 2021.

Nonaccruing loans were $124 million or 0.60 percent of outstanding loans at March 31, 2022. Nonaccruing commercial loans totaled $60 million or 0.47 percent of outstanding commercial loans. Nonaccruing commercial real estate loans totaled $16 million or 0.39 percent of outstanding commercial real estate loans. Nonaccruing loans to individuals totaled $48 million or 1.35 percent of outstanding loans to individuals.

Nonaccruing loans decreased $9.8 million compared to December 31, 2021 primarily related to nonaccruing general business and energy loans. New nonaccruing loans identified in the first quarter totaled $12 million, offset by $14 million in payments received and $7.8 million in gross charge-offs.

Potential problem loans, which are defined as performing loans that, based on known information, cause management concern as to the borrowers’ ability to continue to perform, totaled $169 million at March 31, 2022, down from $222 million at December 31. Potential problem energy loans decreased $37 million. Potential problem commercial real estate loans decreased $8.8 million and potential problem services loans decreased $6.1 million.

Net charge-offs were $6.0 million or 0.12 percent of average loans on an annualized basis for the first quarter of 2022. Net charge-offs were 0.14 percent of average loans over the last four quarters. Net recoveries were $714 thousand or (0.01) percent of average loans on an annualized basis for the fourth quarter of 2021. Gross charge-offs were $7.8 million for the first quarter compared to $6.6 million for the previous quarter. Recoveries totaled $1.8 million for the first quarter of 2022 and $7.3 million for the fourth quarter of 2021.

Securities and Derivatives

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 increased $141 million to $185 million at March 31, 2022 as hedges that were previously held as derivatives were settled into the fair value option securities portfolio. The fair value of the available for sale securities portfolio totaled $12.9 billion at March 31, 2022, a $263 million decrease compared to December 31, 2021. At March 31, 2022, the available for sale securities portfolio consisted primarily of $7.6 billion of residential mortgage-backed securities fully backed by U.S. government agencies and $4.4 billion of commercial mortgage-backed securities fully backed by U.S. government agencies. At March 31, 2022, the available for sale securities portfolio had a net unrealized loss of $547 million compared to a net unrealized gain of $93 million at December 31, 2021.

The net fair values of derivative contracts, before consideration of cash margin, totaled $2.7 billion at March 31, 2022, a $1.6 billion increase compared to December 31, 2021. Energy contracts increased $1.3 billion driven by recent increases in oil and gas prices.

The net cost of the changes in the fair value of mortgage servicing rights and related economic hedges was $8.4 million during the first quarter of 2022, including a $57.9 million decrease in the fair value of securities and derivative contracts held as an economic hedge, $49.1 million increase in the fair value of mortgage servicing rights, and $383 thousand of related net interest revenue.

Conference Call and Webcast

The company will hold a conference call at 9 a.m. Central time on Wednesday, April 27, 2022 to discuss the financial results with investors. The live audio webcast and presentation slides will be available on the company’s website at www.bokf.com. The conference call can also be accessed by dialing 1-201-689-8471. A conference call and webcast replay will also be available shortly after conclusion of the live call at www.bokf.com or by dialing 1-844-512-2921 and referencing conference ID # 13728424.

About BOK Financial Corporation

BOK Financial Corporation is a $47 billion regional financial services company headquartered in Tulsa, Oklahoma with $101 billion in assets under management and administration. The company’s stock is publicly traded on NASDAQ under the Global Select market listings (BOKF). BOK Financial Corporation’s holdings include BOKF, NA; BOK Financial Securities, Inc., BOK Financial Private Wealth, Inc. and BOK Financial Insurance, Inc. BOKF, NA’s holdings include TransFund, Cavanal Hill Investment Management, Inc. and BOK Financial Asset Management, Inc. BOKF, NA operates banking divisions across eight states as: Bank of Albuquerque; Bank of Oklahoma; Bank of Texas; and BOK Financial in Arizona, Arkansas, Colorado, Kansas and Missouri; as well as having limited purpose offices in Nebraska, Wisconsin and Connecticut. Through its subsidiaries, BOK Financial Corporation provides commercial and consumer banking, brokerage trading, investment, trust and insurance services, mortgage origination and servicing, and an electronic funds transfer network. For more information, visit www.bokf.com.

The company will continue to evaluate critical assumptions and estimates, such as the appropriateness of the allowance for credit losses and asset impairment as of March 31, 2022 through the date its financial statements are filed with the Securities and Exchange Commission and will adjust amounts reported if necessary.

This news release contains forward-looking statements that are based on management’s beliefs, assumptions, current expectations, estimates and projections about BOK Financial Corporation, the financial services industry, the economy generally and the expected or potential impact of the novel coronavirus (COVID-19) pandemic, and the related responses of the government, consumers, and others, on our business, financial condition and results of operations. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “plans,” “projects,” “will,” “intends,” variations of such words and similar expressions are intended to identify such forward-looking statements. Management judgments relating to and discussion of the provision and allowance for credit losses, allowance for uncertain tax positions, accruals for loss contingencies and valuation of mortgage servicing rights involve judgments as to expected events and are inherently forward-looking statements. Assessments that acquisitions and growth endeavors will be profitable are necessary statements of belief as to the outcome of future events based in part on information provided by others which BOK Financial has not independently verified. These various forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions which are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what is expected, implied or forecasted in such forward-looking statements. Internal and external factors that might cause such a difference include, but are not limited to changes in government, consumer or business responses to, and ability to treat or prevent further outbreak of the COVID-19 pandemic, changes in commodity prices, interest rates and interest rate relationships, inflation, demand for products and services, the degree of competition by traditional and nontraditional competitors, changes in banking regulations, tax laws, prices, levies and assessments, the impact of technological advances, and trends in customer behavior as well as their ability to repay loans. BOK Financial Corporation and its affiliates undertake no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.


BALANCE SHEETS — UNAUDITED
BOK FINANCIAL CORPORATION
(In thousands)

Mar. 31, 2022

Dec. 31, 2021

ASSETS

Cash and due from banks

$

767,805

$

712,067

Interest-bearing cash and cash equivalents

599,976

2,125,343

Trading securities

4,891,096

9,136,813

Investment securities, net of allowance

183,824

210,444

Available for sale securities

12,894,534

13,157,817

Fair value option securities

185,003

43,770

Restricted equity securities

77,389

83,113

Residential mortgage loans held for sale

169,474

192,295

Loans:

Commercial

12,883,189

12,506,465

Commercial real estate

4,100,956

3,831,325

Paycheck protection program

137,365

276,341

Loans to individuals

3,552,919

3,591,549

Total loans

20,674,429

20,205,680

Allowance for loan losses

(246,473

)

(256,421

)

Loans, net of allowance

20,427,956

19,949,259

Premises and equipment, net

574,786

574,148

Receivables

238,694

223,021

Goodwill

1,044,749

1,044,749

Intangible assets, net

87,761

91,778

Mortgage servicing rights

209,563

163,198

Real estate and other repossessed assets, net

24,492

24,589

Derivative contracts, net

2,680,207

1,097,297

Cash surrender value of bank-owned life insurance

407,763

405,607

Receivable on unsettled securities sales

229,404

56,172

Other assets

1,132,031

957,951

TOTAL ASSETS

$

46,826,507

$

50,249,431

LIABILITIES AND EQUITY

Deposits:

Demand

$

15,242,341

$

15,344,423

Interest-bearing transaction

21,689,829

23,268,573

Savings

979,365

924,735

Time

1,514,416

1,704,328

Total deposits

39,425,951

41,242,059

Funds purchased and repurchase agreements

1,068,329

2,326,449

Other borrowings

36,246

36,753

Subordinated debentures

131,209

131,226

Accrued interest, taxes and expense

238,048

273,041

Due on unsettled securities purchases

81,016

160,686

Derivative contracts, net

557,834

275,625

Other liabilities

434,350

435,221

TOTAL LIABILITIES

41,972,983

44,881,060

Shareholders’ equity:

Capital, surplus and retained earnings

5,267,408

5,291,361

Accumulated other comprehensive gain (loss)

(417,826

)

72,371

TOTAL SHAREHOLDERS’ EQUITY

4,849,582

5,363,732

Non-controlling interests

3,942

4,639

TOTAL EQUITY

4,853,524

5,368,371

TOTAL LIABILITIES AND EQUITY

$

46,826,507

$

50,249,431


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

Three Months Ended

Mar. 31, 2022

Dec. 31, 2021

Sept. 30, 2021

June 30, 2021

Mar. 31, 2021

ASSETS

Interest-bearing cash and cash equivalents

$

1,050,409

$

1,208,552

$

682,788

$

659,312

$

711,047

Trading securities

8,537,390

9,260,778

7,617,236

7,430,217

6,963,617

Investment securities, net of allowance

195,198

213,188

218,117

221,401

237,313

Available for sale securities

13,092,422

13,247,607

13,446,095

13,243,542

13,433,767

Fair value option securities

75,539

46,458

56,307

64,864

104,662

Restricted equity securities

164,484

137,874

245,485

208,692

189,921

Residential mortgage loans held for sale

179,697

163,433

167,620

218,200

207,013

Loans:

Commercial

12,677,706

12,401,935

12,231,230

12,402,925

12,908,461

Commercial real estate

4,059,148

3,838,336

4,218,190

4,395,848

4,547,945

Paycheck protection program

210,110

404,261

792,728

1,668,047

1,741,534

Loans to individuals

3,516,698

3,598,121

3,606,460

3,700,269

3,559,067

Total loans

20,463,662

20,242,653

20,848,608

22,167,089

22,757,007

Allowance for loan losses

(254,191

)

(271,794

)

(306,125

)

(345,269

)

(382,734

)

Loans, net of allowance

20,209,471

19,970,859

20,542,483

21,821,820

22,374,273

Total earning assets

43,504,610

44,248,749

42,976,131

43,868,048

44,221,613

Cash and due from banks

790,440

783,670

766,688

763,393

760,691

Derivative contracts, net

2,126,282

1,441,869

1,501,736

1,022,137

873,712

Cash surrender value of bank-owned life insurance

406,379

404,149

401,926

401,760

399,830

Receivable on unsettled securities sales

375,616

585,901

632,539

716,700

735,482

Other assets

3,357,747

3,139,718

3,220,129

3,424,884

3,319,305

TOTAL ASSETS

$

50,561,074

$

50,604,056

$

49,499,149

$

50,196,922

$

50,310,633

LIABILITIES AND EQUITY

Deposits:

Demand

$

15,062,282

$

14,818,841

$

13,670,656

$

13,189,954

$

12,312,629

Interest-bearing transaction

22,763,479

22,326,401

21,435,736

21,491,145

21,433,406

Savings

947,407

909,131

888,011

872,618

789,656

Time

1,589,039

1,747,715

1,839,983

1,936,510

1,986,425

Total deposits

40,362,207

39,802,088

37,834,386

37,490,227

36,522,116

Funds purchased and repurchase agreements

2,004,466

2,893,128

1,448,800

1,790,490

2,830,378

Other borrowings

1,148,440

880,837

2,546,083

3,608,369

3,392,346

Subordinated debentures

131,228

131,224

214,654

276,034

276,015

Derivative contracts, net

682,435

320,757

434,334

366,202

428,488

Due on unsettled securities purchases

519,097

629,642

957,538

701,495

915,410

Other liabilities

565,350

578,091

619,913

634,460

671,715

TOTAL LIABILITIES

45,413,223

45,235,767

44,055,708

44,867,277

45,036,468

Total equity

5,147,851

5,368,289

5,443,441

5,329,645

5,274,165

TOTAL LIABILITIES AND EQUITY

$

50,561,074

$

50,604,056

$

49,499,149

$

50,196,922

$

50,310,633


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

Three Months Ended

March 31,

2022

2021

Interest revenue

$

283,099

$

298,239

Interest expense

14,688

17,819

Net interest revenue

268,411

280,420

Provision for credit losses

(25,000

)

Net interest revenue after provision for credit losses

268,411

305,420

Other operating revenue:

Brokerage and trading revenue

(27,079

)

20,782

Transaction card revenue

24,216

22,430

Fiduciary and asset management revenue

46,399

41,322

Deposit service charges and fees

27,004

24,209

Mortgage banking revenue

16,650

37,113

Other revenue

10,445

16,296

Total fees and commissions

97,635

162,152

Other gains (losses), net

(1,644

)

10,121

Loss on derivatives, net

(46,981

)

(27,650

)

Loss on fair value option securities, net

(11,201

)

(1,910

)

Change in fair value of mortgage servicing rights

49,110

33,874

Gain on available for sale securities, net

937

467

Total other operating revenue

87,856

177,054

Other operating expense:

Personnel

159,228

173,010

Business promotion

6,513

2,154

Charitable contributions to BOKF Foundation

4,000

Professional fees and services

11,413

11,980

Net occupancy and equipment

30,855

26,662

Insurance

4,283

4,620

Data processing and communications

39,836

37,467

Printing, postage and supplies

3,689

3,440

Amortization of intangible assets

3,964

4,807

Mortgage banking costs

7,877

13,943

Other expense

9,960

13,701

Total other operating expense

277,618

295,784

Net income before taxes

78,649

186,690

Federal and state income taxes

16,197

42,382

Net income

62,452

144,308

Net loss attributable to non-controlling interests

(36

)

(1,752

)

Net income attributable to BOK Financial Corporation shareholders

$

62,488

$

146,060

Average shares outstanding:

Basic

67,812,400

69,137,375

Diluted

67,813,851

69,141,710

Net income per share:

Basic

$

0.91

$

2.10

Diluted

$

0.91

$

2.10


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

Three Months Ended

Mar. 31, 2022

Dec. 31, 2021

Sept. 30, 2021

June 30, 2021

Mar. 31, 2021

Capital:

Period-end shareholders’ equity

$

4,849,582

$

5,363,732

$

5,388,973

$