Bank of Oklahoma Tower • P.O. Box 2300 Tulsa, Oklahoma 74192918.588.6000 • www.bokf.comBF-BW-000052020 Annual Report Credit Ratings
S&P
Moody’s
Fitch Ratings
BOK Financial Corporation
Long-term Issuer
BBB+ (ON)
A3 (ON)
A (ON)
BOKF, NA
Long-term Issuer
A- (ON)
A3 (ON)
A (ON)
2020 Highlights
30th consecutive year
of profitability
Wealth Management revenue
tops $500 million for the first
time in company history
Record $786 million in
pre-tax, pre-provision
revenue
Robust deposit growth with
year-end deposits up more
than 30% year-over-year
A Family Of Brands
BOK Financial Corporation has a long-time commitment to serving customers and communities throughout
the United States. It provides a wide array of banking, fiduciary and investment services through regional bank
operations, a broker dealer, four registered investment advisor firms and an electronic funds network.
Full Service Banking Markets
Arizona
Arkansas
Colorado
Kansas
Missouri
New Mexico
Oklahoma
Texas
Consumer and Commercial Banking:
Wealth Management:
Mortgage adds record
$182 million in revenue
15th consecutive year of
dividend increases
Transaction and Payment Processing:
Mortgage Banking:
Key Statistics
At December 31, 2020
Assets
$47
Billion
Loans
$23
Billion
Deposits
$36
Billion
Assets Under
Management
$92
Billion
Fiduciary
Assets
$60
Billion
Diversified Revenue
58%
Net Interest
Revenue
3% Other Revenue
5% Transaction Card Revenue
5% Service Charges
9% Mortgage Banking
11% Brokerage & Trading Revenue
9% Trust Fees
Dear Shareholders,
2020 was dominated by national news
headlines—a 100-year pandemic, an energy
industry downturn, near-zero interest rates and
political uncertainty. This quartet of headwinds
acted as the ultimate test of our business
model, core values and the resiliency of our
employees. I’m proud to say that we delivered
a differentiated outcome on all fronts:
for our customers, our employees,
our shareholders and our communities.
In a year many have characterized as
“worth forgetting,” BOK Financial Corporation,
in my opinion, had a year that will be worth
remembering.
Our Customers
Despite the challenges of conducting business almost wholly
through virtual mediums, we stayed closely connected to
customers. As a relationship-oriented institution, we saw the
need for advice and counsel elevate substantially in all areas of
our organization due to the extreme economic pressure brought
by COVID-19.
We were there for our business customers the day the Paycheck
Protection Program went live on Friday, April 3. We redeployed
more than 500 employees from many different areas of our
company to help clients secure much-needed funding to keep
their businesses and employee payrolls intact. In the end, we
came together to help more than 5,000 customers receive over
$2 billion in PPP funds. And we are poised to continue that
assistance as new stimulus programs unfold in the new year.
We helped evaluate investment portfolios and objectives with our
many wealth management customers in light of extreme market
volatility. As these clients sought ways to reduce risk and gain an
advantage as market stability returned, we provided the crucial
counsel sought in times of economic crisis.
We also took swift action for our consumer banking customers,
eliminating certain fees and loosening policies surrounding
overdrafts. Additionally, quick access to forbearance relief for our
mortgage customers provided financial flexibility and resiliency
for families most impacted.
Our Employees
In mid-March, we swiftly undertook a massive initiative to
move more than 75% of our employees to a work from home
status. This involved a severe test of the many technology
infrastructure and business resiliency investments we have
made in the last several years. Candidly, it went better than we
even anticipated. We quickly deployed a substantial inventory of
laptops to employees who needed them, enabling us to maintain
connectivity with customers and one another. For those critical
employees who needed to stay on-site, we created proper
cleaning and spacing protocol while using multiple sites where
possible to reduce employee density. As part of the work from
home process, we differentiated pay for the critical workforce
and provided incremental funds for the technology needed at
home for employees with school-age children. We also provided
tutoring services and additional funds for employees to retain
child care services for those who needed it. Our employee
engagement’s defining characteristic was flexibility, as many were
navigating unique challenges for themselves and their family.
Pandemic response aside, 2020 was also a year of advancing
our commitment to building an even stronger and more
diverse workforce in the second full year for our Diversity and
Inclusion Council. We made great strides implementing an
educational program focused on leveraging inclusion and
mitigating unconscious bias for our employees, as well as a
formal mentoring program as part of our talent development
focus. We see a tremendous opportunity to gain greater diversity
of thought and experience across our company as we see
leadership transitions over the next 3-5 years in many vital areas.
To address this, we continue to build a prepared slate of diverse
candidates for those roles. In fact, we have made strides in
increasing both the gender and racial diversity of our succession
slates. Of note, this year we have doubled our percentage of
internal female successor candidates for senior leadership team
roles. We believe that a diverse workforce isn’t merely a desire;
it’s necessary to drive business growth in the years ahead.
Our commitment to cultivate a diverse and inclusive workplace
did not stop within our walls. In 2020, we signed the CEO
Action for Diversity & Inclusion™ Pledge, the largest CEO-
driven business commitment to advance diversity and inclusion
in the workplace. We are proud to join the more than 1,000
CEOs of the world’s leading companies who have agreed to
take action to cultivate a workplace where different points
of view are welcomed, and employees feel encouraged to
discuss challenging issues at work. I fully expect BOK Financial
Corporation to be a leader in our industry and our communities
when advancing diversity and inclusion efforts. There is still
much work to do, but I am incredibly proud of the progress
made in 2020.
Our Shareholders
We often discuss with our investors that we have intentionally
built the bank to mitigate downside risk and earnings volatility.
Remaining disciplined in our credit underwriting throughout the
cycle and investing in growth for our fee-based businesses has
been our company’s hallmark for decades.
That dual strategy was on full display in 2020 as we saw a
precipitous drop in energy pricing, a key segment of our loan
portfolio. Even though the economic outlook component of
CECL drove a quick and significant increase to loan loss reserves
in the first half of 2020, our asset quality has remained incredibly
resilient. In fact, we expect to continue our outperformance
related to charge-offs in our energy portfolio compared to peers
in the space, while maintaining sub-historic charge-offs across all
other lending functions.
The 150 basis points of emergency Federal Reserve rate cuts
in March made the outlook for incremental quarterly earnings
growth difficult for most banks. But having the ability to serve
client needs across the spectrum of financial services is a
competitive advantage for BOK Financial Corporation—and
the income diversity rewards shareholders. Our fee income
streams produced more than $800 million in revenue in
2020, a testament to our resiliency during economic distress.
Unprecedented demand due to the low rate environment and
lack of industry capacity was a historic force that vaulted margins
in our mortgage business to all-time highs. Our mortgage team
produced record revenues in 2020, earning more than $180
million for the company.
Additionally, our wealth management division put together a
record revenue year with its host of complementary business
units. We have considerable expertise related to mortgage
backed securities trading and commodity hedging, and
together, these two units increased revenue by a combined
$67.9 million from 2019. Combined with significant deposit
growth and growing investment management and investment
banking revenue, our wealth management division is a diversified
business within itself that provides stable shareholder value in
both good times and bad.
Despite the headwinds for the banking sector, our ability to
generate revenue has never been more impressive with record
annual pre-tax, pre-provision earnings of $786.4 million.
Throughout 2020 we continued to accumulate capital and,
once the immediate storm had passed, opportunistically bought
back shares of our common equity to support EPS growth into
the future.
Our Communities
As the pandemic accelerated, so too did the deployment
of our financial and employee volunteer resources to help
those suffering most in the communities we serve. With a
focus on organizations helping displaced workers from the
hard-hit hospitality and restaurant industries, we embraced
our leadership role in our communities by providing a record
$6.8 million in funding to nonprofits serving critical needs. Our
employees volunteered nearly 16,000 hours of their time and
expertise, including 271 employees engaged in 465 meaningful
leadership roles with organizations within our communities. As
witnessed by our top ranking in the 2020 American Banker
reputation survey, community engagement isn’t casual at BOKF;
it’s a significant core value for all of our employees.
Like many across the country, we were outraged by the multiple
incidents that resulted from income inequality and racial injustice
that were only made worse by the disparate impact of the
pandemic. We feel that it’s critical to back up our words with
actions, so we have identified opportunities to address the root
causes of income inequality and racial injustice by partnering
with Tulsa and Dallas agencies focused on improving outcomes,
especially in low to moderate income communities. Our focus
has been to provide incremental funding and employee direct
engagement to assist these agencies. As we monitor progress
and outcome, we expect to broaden our focus to include all of
the BOKF footprint markets.
Our Future
2020 was a year that tested our core strengths and revealed
our core values in a meaningful way. While the pandemic will
ultimately be resolved through medical advancement, the impact
on our company culture, our customer relationships, and our role
in our communities will be forever changed—for the better.
Looking ahead, we remain optimistic about the resiliency of
our customers and employees, and we expect upside growth
across many of our business segments. We see a future that
includes more robust digital capabilities, but also one where the
value of a personal relationship with BOK Financial Corporation
is significantly enhanced. The complexity of decision-making
arising from the pandemic and its consequences has been a
tremendous challenge for our customers. Like never before,
we embrace our role as a foundation of experience, advice and
counsel to create the best possible outcomes. This is a sweet
spot for BOKF. Our operating model provides a credible and
sustainable alternative to the national banks and investment firms
that almost exclusively rely on technology to deliver impersonal,
“in the box” solutions. While digital solutions are important
for day to day transactional needs, we believe that having
experienced, well-prepared and fully supported professionals to
assist clients with their most meaningful decisions is critical to
their success—as well as ours.
As shareholders, we appreciate the confidence and trust you
have placed in our company and our leadership team. We are
grateful that you allow us to execute disciplined strategies that
pay off in times of uncertainty, and you can see the fruits of that
labor today. We pledge to keep the company firmly focused on
long-term shareholder value and growth—while achieving that in
tandem with a highly energized and committed workforce—and
being a leader in the communities we serve. 2020 was a year like
no other, but the growth story of BOK Financial Corporation has
been enhanced from the challenges we have faced successfully.
Sincerely,
Steven G. Bradshaw
President and Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
FORM 10-K
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
Commission File No. 0-19341
BOK FINANCIAL CORP
(Exact name of registrant as specified in its charter)
OK
(State or other jurisdiction
of Incorporation or Organization)
Bank of Oklahoma Tower
Boston Avenue at Second Street
Tulsa,
OK
(Address of Principal Executive Offices)
73-1373454
(IRS Employer
Identification No.)
74172
(Zip Code)
(918) 588-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Common stock, $0.00006 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act. Yes ¨ No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files)Yes ý No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See definitions of “larger accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act. (Check one):
Large Accelerated Filer ý Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ý
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒
The aggregate market value of the registrant's common stock ("Common Stock") held by non-affiliates is approximately $1.8 billion (based
on the June 30, 2020 closing price of Common Stock of $56.44 per share). As of January 31, 2021, there were 69,577,615 shares of Common
Stock outstanding.
Part III incorporates certain information by reference from the Registrant’s Proxy Statement for the 2021 Annual Meeting of Shareholders.
DOCUMENTS INCORPORATED BY REFERENCE
BOK Financial Corporation
Form 10-K
Year Ended December 31, 2020
Index
Part I
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Part II
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
1
10
17
17
17
17
18
21
21
74
82
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 163
Controls and Procedures
Other Information
Part III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
Item 10
Item 11
Item 12
Item 13
Item 14
Part IV
Item 15
Exhibits, Financial Statement Schedules
Signatures
Exhibit 21
Exhibit 23
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm
Exhibit 31.1
Chief Executive Officer Section 302 Certification
Exhibit 31.2
Chief Financial Officer Section 302 Certification
Exhibit 32
Section 906 Certifications
163
163
163
163
164
164
164
164
167
ITEM 1. BUSINESS
PART I
General
Developments relating to individual aspects of the business of BOK Financial Corporation ("BOK Financial" or "the
Company") are described below. Additional discussion of the Company’s activities during the current year appears within Item
7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations."
Description of Business
BOK Financial is a financial holding company incorporated in the state of Oklahoma in 1990 whose activities are governed by
the Bank Holding Company Act of 1956 ("BHCA"), as amended by the Financial Services Modernization Act or Gramm-
Leach-Bliley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"). BOK
Financial offers full service banking in Oklahoma, Texas, New Mexico, Northwest Arkansas, Colorado, Arizona, and Kansas/
Missouri. At December 31, 2020, the Company reported total consolidated assets of $47 billion.
BOKF, NA is a wholly owned subsidiary bank of BOK Financial. BOKF, NA operates TransFund, Cavanal Hill Investment
Management and BOK Financial Asset Management, Inc. BOKF, NA operates banking divisions across eight states: 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. Other wholly owned subsidiaries of BOK
Financial include BOK Financial Securities, Inc., a broker/dealer that primarily engages in retail and institutional securities
sales and municipal bond underwriting; BOK Financial Private Wealth, Inc., an investment adviser to high net worth clients;
and BOK Financial Insurance, Inc., a broker providing insurance services. Other non-bank subsidiary operations do not have a
significant effect on the Company’s financial statements.
Our overall strategic objective is to emphasize growth in long-term value by building on our leadership position in Oklahoma
through expansion into other high-growth markets in contiguous states. We operate primarily in the metropolitan areas of Tulsa
and Oklahoma City, Oklahoma; Dallas, Fort Worth and Houston, Texas; Albuquerque, New Mexico; Denver, Colorado;
Phoenix, Arizona, and Kansas City, Kansas/Missouri. Our acquisition strategy targets fairly priced quality organizations with
demonstrated solid growth that would supplement our principal lines of business. We provide additional growth opportunities
by hiring talent to enhance competitiveness, adding locations and broadening product offerings. Our operating philosophy
embraces local decision-making in each of our geographic markets while adhering to common Company standards.
Our primary focus is to provide a comprehensive range of nationally competitive financial products and services in a
personalized and responsive manner. Products and services include loans and deposits, cash management services, fiduciary
and insurance services, mortgage banking and brokerage and trading services to middle-market businesses, financial institutions
and consumers. Commercial banking represents a significant part of our business. Our credit culture emphasizes building
relationships by making high quality loans and providing a full range of financial products and services to our customers. We
offer derivative products that enable mortgage banking customers to manage their production risks and our energy financing
expertise enables us to offer commodity derivatives for customers to use in their risk management. Our diversified base of
revenue sources is designed to generate returns in a range of economic situations. Historically, fees and commissions provide
39% to 48% of our total revenue. Approximately 42% of our revenue came from fees and commissions in 2020.
BOK Financial’s corporate headquarters is located at Bank of Oklahoma Tower, Boston Avenue at Second Street, Tulsa,
Oklahoma 74172.
The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
amendments to those reports are available on the Company’s website at www.bokf.com as soon as reasonably practicable after
the Company electronically files such material with or furnishes it to the Securities and Exchange Commission.
1
Operating Segments
BOK Financial operates three principal lines of business: Commercial Banking, Consumer Banking and Wealth
Management. Commercial Banking includes lending, treasury and cash management services and customer commodity risk
management products for small businesses, middle market and larger commercial customers. Commercial Banking also
includes the TransFund electronic funds network. Consumer Banking includes retail lending and deposit services, lending and
deposit services to small business customers served through the retail branch network and all mortgage loan origination and
servicing activities. Wealth Management engages in brokerage and trading activities, mainly related to providing liquidity to the
mortgage markets through trading of U.S. government agency mortgage-backed securities and related derivative contracts.
Wealth Management also provides fiduciary services, private bank services, investment advisory services and insurance
services in all markets. Additionally, Wealth Management underwrites state and municipal securities. Discussion of these
principal lines of business appears within the Lines of Business section of "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
Competition
BOK Financial and its operating segments face competition from other banks, thrifts, credit unions and other non-bank
financial institutions, such as investment banking firms, investment advisory firms, brokerage firms, investment companies,
financial technology firms, government agencies, mortgage brokers and insurance companies. The Company competes largely
on the basis of customer services, interest rates on loans and deposits, lending limits and customer convenience. Some operating
segments face competition from institutions that are not as closely regulated as banks, and therefore are not limited by the same
capital requirements and other restrictions. All market share information presented below is based upon share of deposits in
specified areas according to the Federal Deposit Insurance Corporation ("FDIC") as of June 30, 2020.
We are the largest financial institution in the state of Oklahoma with 16% of the state’s total deposits. We have 38% and 10%
of the market share in the Tulsa and Oklahoma City areas, respectively. We compete with two banks that have operations
nationwide and have greater access to funds at lower costs, higher lending limits, and greater access to technology resources.
We also compete with regional and locally-owned banks in both the Tulsa and Oklahoma City areas, as well as in every other
community in which we do business throughout the state.
We compete against numerous financial institutions in the state of Texas, including some of the largest in the United States, and
have a market share of approximately 1% in the Dallas, Fort Worth area and less than 1% in the Houston area. We have an 11%
market share in the Albuquerque area and compete with four large national banks, some regional banks and several locally-
owned smaller community banks. Our market share is approximately 4% in the Denver area. We serve Benton and Washington
counties in Arkansas with a market share of approximately 2%. Our market share is approximately 1% in the Kansas City,
Missouri/Kansas area. We operate as a community bank with locations in Phoenix, Mesa and Scottsdale with approximately 1%
market share. The Company’s ability to expand into additional states remains subject to various federal and state laws.
Human Capital Management and Practices
In order to continue leading the financial industry as a provider of sophisticated solutions to businesses, institutions and
individuals across the country, it is crucial that we attract, develop and retain top talent. To facilitate talent attraction and
retention, we strive to make BOK Financial an inclusive workplace with opportunities for our employees to grow and develop
in their careers. We support our employees with strong compensation, benefits, and wellness programs. We also work to build
connections between our employees and our communities. “Actively advancing the communities we serve” is one of our core
values. Those familiar with BOK Financial will recognize the generosity of our employees in our communities as one of the
hallmarks of our culture, and a source of pride as we live out our purpose statement of “Achieving More Together”.
As of December 31, 2020, BOK Financial and its subsidiaries employed approximately 4,915 full-time and part-time
employees, the majority of which are full-time employees. None of the Company’s employees are represented by collective
bargaining agreements. Management considers its employee relations to be good. Our employees are distributed over our eight
state footprint, to include: Oklahoma, Texas, Arkansas, Kansas, Missouri, Colorado, New Mexico and Arizona. As of year-end
2020, our voluntary turnover rate was 10.5%, well below the financial services industry benchmark of 14%+ for voluntary
turnover.
2
Response to COVID-19
Related to the COVID-19 pandemic, we implemented protocols that we determined were in the best interest of our employees
to ensure operational continuity and employee safety. We moved a majority of our employees to a work-from-home status and
implemented additional safety measures for employees continuing critical on-site operations. In addition, we implemented
enhanced compensation and benefits offerings for employees and their families throughout the year.
Diversity and Inclusion Efforts
We believe that our organization should reflect the diversity of the communities we serve. We also recognize that in order for a
diverse workforce to thrive, we must prioritize inclusion efforts. The following categories represent areas of focus for Diversity
& Inclusion: community engagement, senior leader engagement, Communities of Practice, diverse recruiting practices and
education.
Community Engagement
In 2020, the company and our BOKF Foundation gave a combined $6.2 million to organizations making a difference
in our communities. Our employees donated more than 12,000 volunteer hours and more than 250 employees served
on 320 nonprofit boards. Over the past ten years, we have committed nearly $565 million in loan funding to support
affordable housing projects and nearly $305 million in affordable housing investments.
Senior Leader Engagement
Our Diversity & Inclusion Council is led by our CEO and President, Steve Bradshaw, and includes other members of
the executive leadership team, as well as senior leaders throughout our footprint. As an organization, we joined the
‘CEO Action for Diversity and Inclusion’ Pledge. The pledge outlines our commitment to cultivating a trusting
environment where all ideas are welcomed, and employees feel comfortable and empowered to have discussions about
diversity and inclusion.
Mentorship Program
Our mentorship program launched in the fourth quarter of 2020. We believe that mentorship programs are a valuable
tool for helping employees successfully shape their long-term career trajectory. Mentor matches are prioritized for
availability for females and people of color.
Communities of Practice
Earlier this year, we introduced a concept called ‘Communities of Practice’ ("CoP") as a way for our organization to
build inclusive groups to harness the collective power of diverse skills, styles, strengths and experiences – and leverage
those strengths into advancing our business. Six groups connecting employees from different disciplines, markets and
lines of business were launched in 2020. More CoPs are set to launch in 2021, to include: Advancing Minority Owned
Businesses, Practicing Inclusion, and Diverse Recruiting Practices. Any person from across the organization can join
any Community of Practice; these groups highlight our enterprise focus on inclusivity.
Diverse Recruiting Practices
All members of the recruiting team have completed the Alliance of Information & Referral Systems ("AIRS")
Certified Diversity Recruiter certification as well as a custom-developed training program for BOKF talent and
attraction specialists. University recruiting has been a focal point for our diversity efforts. Our 2020 class of interns
and early career associates saw significant increases both in number of females and people of color.
Diversity Education
Unconscious bias education was introduced for all managers in order to provide tools to adjust automatic patterns of
thinking related to hiring practices. At the beginning of 2020, we also introduced a partnership with a well-known
learning vendor to ensure all employees across the company had equal access to development opportunities in a virtual
setting. The concept of ‘inclusion’ is woven into many of the learning opportunities offered by our Talent and
Organizational Development team; examples would include: ‘Communicating Across Generations’ and ‘Crucial
Conversations’.
3
Benefits and Compensation Offerings
BOKF is committed to the health and wellness of our employees. We provide our employees and their families with access to a
variety of flexible and convenient health and wellness programs. We encourage engagement in healthy behaviors and offer
options, where possible, to customize benefits to meet the needs of employees and their families. We provide robust
compensation and benefits programs to help meet the needs of our employees. In addition to base salaries, these programs may
include incentive compensation, discretionary bonuses, equity, 401(k), health and wellness benefits, health savings and flexible
spending accounts, paid time off, family leave, flexible work schedules, employee assistance programs, and tuition
reimbursement.
Talent Development
Our talent development programs provide employees with the resources they need to achieve their career goals, build
management skills and lead within BOKF. We provide ‘boot camps’ that support professional development. We have programs
that prepare high-potential talent for the leadership roles of tomorrow.
Connecting with Our Communities
Since our employees are passionate about many causes, our corporate giving and volunteering programs support and encourage
employees by engaging with those causes. Our employee-led giving program allows employees to nominate and vote for
nonprofit organizations across our footprint to receive financial benefit from our Foundation. This year, over 2,100 employees
nominated and voted on 212 nonprofit organizations to receive funding.
Supervision and Regulation
BOK Financial and its subsidiaries are subject to extensive regulations under federal and state laws. Both the scope of the laws
and regulations and the intensity of the supervision to which our business is subject have increased in recent years. Regulatory
enforcement and fines have also increased across the banking and financial services sector. Many of these changes have
occurred as a result of the Dodd-Frank Act and its implementing regulations, most of which are now in place. These regulations
and others are designed to promote safety and soundness, protect consumers and ensure the stability of the banking system as a
whole. The purpose of these regulations is not necessarily to protect shareholders and creditors. As detailed below, these
regulations require the Company and its subsidiaries to maintain certain capital balances and require the Company to provide
financial support to its subsidiaries. These regulations may restrict the Company’s ability to diversify, to acquire other
institutions and to pay dividends on its capital stock. These regulations also include requirements on certain programs and
services offered to our customers, including restrictions on fees charged for certain services. The Company expects that its
business will remain subject to extensive regulation and supervision.
The following information summarizes certain existing laws and regulations that affect the Company’s operations. It does not
summarize all provisions of these laws and regulations and does not include all laws and regulations that affect the Company
presently or in the future.
General
As a financial holding company, BOK Financial is regulated under the BHCA and is subject to regular inspection, examination
and supervision by the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"). Under the BHCA,
BOK Financial files quarterly reports and other information with the Federal Reserve Board.
BOKF, NA is organized as a national banking association under the National Banking Act, and is subject to regulation,
supervision and examination by the Office of the Comptroller of the Currency (the "OCC"), the FDIC, the Federal Reserve
Board, the Consumer Financial Protection Bureau ("CFPB") and other federal and state regulatory agencies. The OCC has
primary supervisory responsibility for national banks and must approve certain corporate or structural changes, including
changes in capitalization, payment of dividends, change of place of business, and establishment of a branch or operating
subsidiary. The OCC performs examinations concerning safety and soundness, the quality of management and directors,
information technology and compliance with applicable regulations. The National Banking Act authorizes the OCC to examine
every national bank as often as necessary.
4
A financial holding company, and the companies under its control, are permitted to engage in activities considered "financial in
nature" as defined by the BHCA, Gramm-Leach-Bliley Act and Federal Reserve Board interpretations. Activities that are
"financial in nature" include securities underwriting and dealing, insurance underwriting, merchant banking, operating a
mortgage company, performing certain data processing operations, servicing loans and other extensions of credit, providing
investment and financial advice, owning and operating savings and loan associations, and leasing personal property on a full
pay-out, non-operating basis. A financial holding company is required to notify the Federal Reserve Board within thirty days of
engaging in new activities determined to be "financial in nature." BOK Financial is engaged in some of these activities and has
notified the Federal Reserve Board.
In order for a financial holding company to commence any new activity permitted by the BHCA, each insured depository
institution subsidiary of the financial holding company must be "well capitalized" and "well managed" and have received a
rating of at least "satisfactory" in its most recent examination under the Community Reinvestment Act. A financial holding
company and its depository institution subsidiaries are considered to be "well capitalized" if they meet the requirements
discussed in the section captioned "Capital Adequacy and Prompt Corrective Action" which follows. A financial holding
company and its depository institution subsidiaries are considered to be "well managed" if they receive a composite rating and
management rating of at least "satisfactory" in their most recent examinations. If a financial holding company fails to meet
these requirements, the Federal Reserve Board may impose limitations or conditions on the conduct of its activities and the
company may not commence any new financial activities without prior approval.
The BHCA requires the Federal Reserve Board’s prior approval for the direct or indirect acquisition of more than five percent
of any class of voting stock of any non-affiliated bank. Under the Federal Bank Merger Act, the prior approval of the OCC is
required for a national bank to merge with another bank or purchase the assets or assume the deposits of another bank. In
reviewing applications seeking approval of merger and acquisition transactions, the bank regulatory authorities consider, among
other things, the competitive effect and public benefits of the transactions, the capital position of the combined organization, the
applicant’s performance record under the Community Reinvestment Act and fair housing laws and the effectiveness of the
subject organizations in combating money laundering activities.
A financial holding company and its subsidiaries are prohibited under the BHCA from engaging in certain tie-in arrangements
in connection with the provision of any credit, property or services. Thus, a subsidiary of a financial holding company may not
extend credit, lease or sell property, furnish any services or fix or vary the consideration for these activities on the condition that
(1) the customer obtain or provide additional credit, property or services from or to the financial holding company or any
subsidiary thereof, or (2) the customer may not obtain some other credit, property or services from a competitor, except to the
extent reasonable conditions are imposed to insure the soundness of credit extended.
The Company and other non-bank subsidiaries are also subject to other federal and state laws and regulations. For example,
BOK Financial Securities, Inc. is regulated by the Securities and Exchange Commission ("SEC"), the Financial Industry
Regulatory Authority ("FINRA"), the Federal Reserve Board, and state securities regulators. Such regulations generally include
licensing of certain personnel, customer interactions, and trading operations.
Volcker and Swap Rules
Title VI of the Dodd-Frank Act, commonly known as the Volcker Rule, prohibits the Company from (1) engaging in short-term
proprietary trading for our own account, and (2) having certain ownership interests in or relationships with private equity or
hedge funds. The fundamental prohibitions of the Volcker Rule apply to banking entities of any size, including the Company
and its bank subsidiary. Trading activity remains largely unaffected by the Volcker Rule as most of our trading activity is
exempted or excluded from the proprietary trading prohibitions.
Title VII of the Dodd-Frank Act, commonly known as the Swap Rule, subjects nearly all derivative transactions to the
regulations of the Commodity Futures Trading Commission ("CFTC") or SEC. This includes registration, recordkeeping,
reporting, capital, margin and business conduct requirements on swap dealers and major swap participants. Under CFTC and
SEC rules, entities transacting in less than $8 billion in notional value of swaps over any 12 month period are exempt from the
definition of and registration as a "swap dealer." The Company currently estimates that the nature and volume of its swaps
activity will not require it to register as a swap dealer.
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Enhanced Prudential Standards
The Dodd-Frank Act directed the Federal Reserve Board to monitor emerging risks to financial institutions and enacted
enhanced supervision and prudential standards applicable to bank holding companies with consolidated assets of $50 billion
or more and non-bank covered companies designated as systematically important to the Financial Stability Oversight Council
(often referred to as systemically important financial institutions). The Dodd-Frank Act mandated that certain regulatory
requirements applicable to systemically important financial institutions be more stringent than those applicable to other
financial institutions.
In February 2014, the Federal Reserve Board adopted rules to implement certain of these enhanced prudential standards.
Beginning in 2015, the rules required publicly traded bank holding companies with $10 billion or more in total consolidated
assets to establish risk committees and required bank holding companies with $50 billion or more in total consolidated assets
to comply with enhanced capital, liquidity and overall risk management standards. In May 2018, the Economic Growth,
Regulatory Relief and Consumer Protection Act ("Regulatory Relief Act") raised the threshold for systemically important
financial institutions from $50 billion to $250 billion while providing the Federal Reserve with authority to establish
incremental prudential standards for banks between $100 billion and $250 billion.
Consumer Financial Protection
We are subject to a number of federal and state consumer protection laws that extensively govern our relationship with our
customers. These laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the
Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure
Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Service
Members Civil Relief Act and these laws’ respective state-law counterparts, as well as state usury laws and laws regarding
unfair and deceptive acts and practices. These and other federal laws, among other things, require disclosures of the cost of
credit and terms of deposit accounts, provide substantive consumer rights, prohibit discrimination in credit transactions,
regulate the use of credit report information, provide financial privacy protections, prohibit unfair, deceptive and abusive
practices, restrict our ability to raise interest rates and subject us to substantial regulatory oversight. Violations of applicable
consumer protection laws can result in significant potential liability from litigation brought by customers, including actual
damages, restitution and attorneys’ fees. Federal bank regulators, state attorneys general and state and local consumer protection
agencies may also seek to enforce consumer protection requirements and obtain these and other remedies, including regulatory
sanctions, customer rescission rights, action by the state and local attorneys general in each jurisdiction in which we operate and
civil money penalties. Failure to comply with consumer protection requirements may also damage our reputation and result in
our failure to obtain any required bank regulatory approval for merger or acquisition transactions we may wish to pursue or our
prohibition from engaging in such transactions even if approval is not required.
The CFPB has broad rulemaking authority for a wide range of consumer financial laws that apply to all banks, including,
among other things, the authority to prohibit “unfair, deceptive or abusive” acts and practices. Abusive acts or practices are
defined as those that materially interfere with a consumer’s ability to understand a term or condition of a consumer financial
product or service or take unreasonable advantage of a consumer’s (i) lack of financial savvy, (ii) inability to protect himself in
the selection or use of consumer financial products or services, or (iii) reasonable reliance on a covered entity to act in the
consumer’s interests. The CFPB can issue cease-and-desist orders against banks and other entities that violate consumer
financial laws. The CFPB may also institute a civil action against an entity in violation of federal consumer financial law in
order to impose a civil penalty or injunction.
Community Reinvestment Act
The Community Reinvestment Act of 1977 ("CRA") requires depository institutions to assist in meeting the credit needs of
their market areas consistent with safe and sound banking practice. Under the CRA, each depository institution is required to
help meet the credit needs of its market areas by, among other things, providing credit to low- and moderate-income individuals
and communities. Depository institutions are periodically examined for compliance with the CRA and are assigned ratings. In
order for a financial holding company to commence any new activity permitted by the BHCA, or to acquire any company
engaged in any new activity permitted by the BHCA, each insured depository institution subsidiary of the financial holding
company must have received a rating of at least “satisfactory” in its most recent examination under the CRA. Furthermore,
banking regulators take into account CRA ratings when considering a request for an approval of a proposed transaction. BOKF,
NA received a rating of "outstanding" in its most recent CRA examination, which is above "satisfactory."
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Financial Privacy
The federal banking regulators adopted rules that limit the ability of banks and other financial institutions to disclose non-public
information about consumers to non-affiliated third parties. These limitations require disclosure of privacy policies to
consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a non-
affiliated third party. These regulations affect how consumer information is transmitted through diversified financial companies
and is conveyed to outside parties.
Capital Adequacy and Prompt Corrective Action
The Federal Reserve Board, the OCC and the FDIC have issued substantially similar risk-based and leverage capital guidelines
applicable to United States banking organizations to ensure capital adequacy based upon the risk levels of assets and off-
balance sheet financial instruments. In addition, these regulatory agencies may from time to time require that a banking
organization maintain capital above the minimum levels, whether because of its financial condition or actual or anticipated
growth. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets,
liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgments by regulators regarding components, risk weighting and other factors.
Federal Reserve Board risk-based guidelines define four capital metrics based on three categories of regulatory capital.
Common equity Tier 1 capital ("CET1") includes common shareholders' equity, less goodwill, most intangible assets and other
adjustments. Tier 1 capital consists of CET1 capital plus certain additional capital instruments and related surplus.
Supplementary capital ("Tier 2") consists of preferred stock not qualifying as Tier 1 capital, qualifying mandatory convertible
debt securities, limited amounts of subordinated debt, other qualifying term debt and allowances for credit losses, subject to
limitations. Assets and off-balance sheet exposures are assigned to categories of risk-weights, based primarily upon relative
credit risk. Risk-based capital ratios are calculated by dividing CET1, Tier 1 and total capital by risk-weighted assets. In
addition to the risk-based capital ratios, the Company is also subject to the leverage ratio. The leverage ratio is determined by
dividing Tier 1 capital by adjusted average total assets.
Additional capital rules were effective for banks and bank holding companies, including BOK Financial, on January 1, 2015 as
part of a package of regulatory reforms developed by the Basel Committee on Banking Supervision ("BCBS") to strengthen the
regulation, supervision and risk management of the banking sector, commonly referred to as the Basel III framework. Several
components, which had previously been deferred, were finalized in 2019. These have been implemented with no material
capital impact.
Failure to meet minimum capital requirements would be subject to regulatory restrictions on capital distributions (including but
not limited to dividends and share repurchases) and executive bonus payments.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the "FDICIA"), among other things, identifies five
capital categories for insured depository institutions from well capitalized to critically under-capitalized and requires the
respective federal regulatory agencies to implement systems for prompt corrective action for institutions failing to meet
minimum capital requirements within such categories. FDICIA imposes progressively more restrictive covenants on operations,
management and capital distributions, depending upon the category in which an institution is classified. The various regulatory
agencies have adopted substantially similar regulations that define the five capital categories identified by FDICIA, using the
total risk-based capital, Tier 1 risk-based capital and leverage capital ratios as the relevant capital measures. Such regulations
establish various degrees of corrective action to be taken when an institution is considered under-capitalized.
Stress Testing
The Regulatory Relief Act eliminated the requirement for periodic company run capital stress tests known as the Dodd-Frank
Act Stress Test for banks with assets less than $250 billion. Although the mandate has been lifted, the Company still continues
to perform capital stress testing on a regular basis.
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Executive and Incentive Compensation
Guidelines adopted by federal banking agencies prohibit excessive compensation as an unsafe and unsound practice and
describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by
an executive officer, employee, director or principal shareholder. The Federal Reserve Board has issued comprehensive
guidance on incentive compensation intended to ensure that the incentive compensation policies do not undermine safety and
soundness by encouraging excessive risk taking. This guidance covers all employees that have the ability to materially affect
the risk profile of an organization, either individually or as part of a group, based on key principles that (i) incentives do not
encourage risk-taking beyond the organization's ability to identify and manage risk, (ii) compensation arrangements are
compatible with effective internal controls and risk management, and (iii) compensation arrangements are supported by strong
corporate governance, including active and effective board oversight. Deficiencies in compensation practices may affect
supervisory ratings and enforcement actions may be taken if incentive compensation arrangements pose a risk to safety and
soundness.
Deposit Insurance
Substantially all of the deposits held by the subsidiary banks are insured up to applicable limits by the Deposit Insurance Fund
("DIF") of the FDIC and are subject to deposit insurance assessments to maintain the DIF. In 2011, the FDIC released a final
rule to implement provisions of the Dodd-Frank Act that affect deposit insurance assessments. Among other things, the Dodd-
Frank Act raised the minimum Designated Reserve Ratio (DRR) from 1.15% to 1.35% of estimated insured deposits, removed
the upper limit of the designated reserve ratio, required that the designated reserve ratio reach 1.35% by September 30, 2020,
and required that the FDIC offset the effect of increasing the minimum designated reserve ratio on depository institutions with
total assets of less than $10 billion. The Dodd-Frank Act provided the FDIC flexibility in implementation of the increase in the
designated reserve ratio, but it ultimately resulted in increased deposit insurance costs to the Company. The Dodd-Frank Act
also required that the FDIC redefine the assessment base to average consolidated assets minus average tangible equity.
On September 30, 2018 the DRR rose above 1.35%. Accordingly, the surcharge for depository institutions with assets of greater
than $10 billion ceased. On September 15, 2020, the FDIC Board of Directors waived the provision of the FDIC's assessment
regulations requiring that the reserve ratio must be at least 1.35% for the FDIC to remit the full nominal value of an insured
depository institution's remaining assessment credits. All remaining small bank credits were refunded on the September 30,
2020 assessment invoice, ending the application of small bank credits.
Dividends
A key source of liquidity for BOK Financial is dividends from BOKF, NA, which is limited by various banking regulations to
net profits, as defined, for the year plus retained profits for the preceding two years. Dividends are further restricted by
minimum capital requirements and the Company's internal capital policy. BOKF, NA's dividend limitations are discussed under
the heading "Liquidity and Capital" within "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Source of Strength Doctrine
According to Federal Reserve Board policy, a bank holding company is expected to act as a source of financial strength to each
subsidiary bank and to commit resources to support each such subsidiary. This support may be required at times when a bank
holding company may not be able to provide such support.
Transactions with Affiliates
The Federal Reserve Board regulates transactions between the Company and its subsidiaries. Generally, the Federal Reserve
Act and Regulation W, as amended by the Dodd-Frank Act, limit the Company’s banking subsidiary and its subsidiaries, to
lending and other "covered transactions" with affiliates. The aggregate amount of covered transactions a banking subsidiary or
its subsidiaries may enter into with an affiliate may not exceed 10% of the capital stock and surplus of the banking subsidiary.
The aggregate amount of covered transactions with all affiliates may not exceed 20% of the capital stock and surplus of the
banking subsidiary.
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Covered transactions with affiliates are also subject to collateral requirements and must be conducted on arm’s length
terms. Covered transactions include (a) a loan or extension of credit by the banking subsidiary, including derivative contracts,
(b) a purchase of securities issued to a banking subsidiary, (c) a purchase of assets by the banking subsidiary unless otherwise
exempted by the Federal Reserve, (d) acceptance of securities issued by an affiliate to the banking subsidiary as collateral for a
loan, and (e) the issuance of a guarantee, acceptance or letter of credit by the banking subsidiary on behalf of an affiliate.
Bank Secrecy Act and USA PATRIOT Act
The Bank Secrecy Act ("BSA") and The USA PATRIOT Act of 2001 ("PATRIOT Act") impose many requirements on
financial institutions in the interest of national security and law enforcement. BSA requires banks to maintain records and file
suspicious activity reports that are of use to law enforcement and regulators in combating money laundering and other financial
crimes. The PATRIOT Act is intended to deny terrorists and criminals the ability to access the U.S. financial services system
and places significantly greater requirements on financial institutions. Financial institutions, such as the Company and its
subsidiaries, must have a designated BSA Officer, internal controls, independent testing and training programs commensurate
with their size and risk profile. As part of its internal control program, a financial institution is expected to have effective
customer due diligence and enhanced due diligence requirements for high-risk customers, as well as processes to prohibit
transactions with entities subject to Office of Foreign Asset Control sanctions. Documentation and recordkeeping requirements,
as well as system requirements, aimed at identifying and reporting suspicious activity reporting, must increase with the
institution's size and complexity. Failure to implement or maintain adequate programs and controls to combat terrorist financing
and money laundering may have serious legal, financial, and reputational consequences.
Governmental Policies and Economic Factors
The operations of BOK Financial and its subsidiaries are affected by legislative changes and by the policies of various
regulatory authorities and, in particular, the policies of the Federal Reserve Board. The Federal Reserve Board has statutory
objectives to maximize employment and maintain price stability. Among the instruments of monetary policy used by the
Federal Reserve Board to implement these objectives are: open-market operations in U.S. Government securities, changes in the
discount rate and federal funds rate on bank borrowings, and changes in reserve requirements on bank deposits. The effect of
future changes in such policies on the business and earnings of BOK Financial and its subsidiaries is uncertain.
The spread of COVID-19 and related economic shutdowns that occurred during 2020 resulted in significant economic
instability. In response, Congress and the Federal Reserve took aggressive actions. Congress passed an emergency $2.2 trillion
relief package, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), designed to alleviate some of the
worst effects of the swift economic downturn. The Federal Reserve lowered the federal funds rate by 150 basis points to near
zero and has initiated additional programs to infuse liquidity and stimulate economic activity. The Federal Reserve increased its
purchasing position, purchasing about $120 billion in securities a month in the final half of 2020. The Federal Open Market
Committee is committed to keeping the federal funds rate at the current level until the labor market has recovered consistent
with their assessment of maximum employment and inflation has risen to 2 percent, and is on track to exceed that for some
time. In December, 2020, Congress passed an additional $900 billion in stimulus to the U.S. economy. The newest package
included the extension of federal pandemic unemployment compensation, funds for healthcare and vaccination distributions, an
extended stay on evictions, stimulus check for qualifying Americans, employee tax credits, additional Paycheck Protection
Program relief, among other provisions.
The drastic decline in economic conditions in March and April was partially offset by a steep incline in May and June and
moderated in the subsequent months. Real GDP grew 33% in the third quarter and demand for durable goods increased to pre-
pandemic levels. The housing market completely bounced back due to continued low mortgage interest rates. See "Summary of
Credit Loss Experience" section on Management's Discussion and Analysis for further discussion around our economic
forecast.
BOK Financial does not engage in operations in foreign countries, nor does it lend to foreign governments.
Foreign Operations
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ITEM 1A. RISK FACTORS
BOK Financial Corporation and its subsidiaries could be adversely affected by risks and uncertainties that could have a material
impact on its financial condition and results of operations, as well as on its common stock and other financial instruments. Risk
factors which are significant to the Company include, but are not limited to:
General and Regulatory Risk Factors
Adverse factors could impact BOK Financial's ability to implement its operating strategy.
Although BOK Financial has developed an operating strategy, which it expects to result in continuing improved financial
performance, BOK Financial cannot ensure that it will be successful in fulfilling this strategy or that this operating strategy will
be successful. Achieving success is dependent upon a number of factors, many of which are beyond BOK Financial's direct
control. Factors that may adversely affect BOK Financial's ability to implement its operating strategy include:
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deterioration of BOK Financial's asset quality;
deterioration in general economic conditions, especially in BOK Financial's core markets;
inability to control BOK Financial's non-interest expenses;
inability to increase non-interest income;
inability to access capital;
decreases in net interest margins;
increases in competition;
a breach in the security of BOK Financial's systems and
adverse regulatory developments.
Substantial competition could adversely affect BOK Financial.
Banking is a competitive business. BOK Financial competes actively for loan, deposit and other financial services business in
the southwest region of the United States. BOK Financial's competitors include a large number of small and large local and
national banks, savings and loan associations, credit unions, trust companies, broker-dealers and underwriters, as well as many
financial and non-financial firms that offer services similar to those of BOK Financial. Large national financial institutions have
substantial capital, technology and marketing resources. Such large financial institutions may have greater access to capital at a
lower cost than BOK Financial does, which may adversely affect BOK Financial's ability to compete effectively.
BOK Financial has expanded into markets outside of Oklahoma, where it competes with a large number of financial institutions
that have an established customer base and greater market share than BOK Financial. With respect to some of its services, BOK
Financial competes with non-bank companies that are not subject to regulation. The absence of regulatory requirements may
give non-banks a competitive advantage.
The increasingly competitive environment is in part a result of changes in regulation, changes in technology and product
delivery systems and the accelerating pace of consolidation among financial service providers. Our success depends on our
ability to respond to the threats and opportunities of financial technology innovations. Developments in "fintech" and crypto-
currencies have the potential to disrupt the financial industry and change the way banks do business. Investment in new
technology to stay competitive could result in significant costs and increased cybersecurity risk. Our success depends on our
ability to adapt to the pace of the rapidly changing technological environment which is important to retention and acquisition of
customers.
Government regulations and political environment could adversely affect BOK Financial.
BOK Financial and BOKF, NA are subject to banking laws and regulations that limit the type of acquisitions and investments
that we may make. In addition, certain permitted acquisitions and investments are subject to prior review and approval by
banking regulators, including the Federal Reserve, OCC and FDIC. Banking regulators have broad discretion on whether to
approve proposed acquisitions and investments. In deciding whether to approve a proposed acquisition, federal banking
regulators will consider, among other things, the effect of the acquisition on competition; the convenience and needs of the
communities to be served, including our record of compliance under the Community Reinvestment Act; and our effectiveness
in combating money laundering. They will also consider our financial condition and our future prospects, including projected
capital ratios and levels; the competence, experience, and integrity of our management; and our record of compliance with laws
and regulations.
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Regulatory authorities may change their interpretation of these statutes and regulations, including the OCC, our primary
regulator, and the CFPB, our regulator for certain designated consumer laws and regulations. Violations of laws and regulations
could limit the growth potential of BOK Financial's businesses. We have made extensive investments in human and
technological resources to address enhanced regulatory expectations, including investments in the areas of risk management,
compliance, and capital planning. Political developments, including recent Federal executive and legislative changes, add
additional uncertainty to the implementation, scope and timing of changes in the regulatory environment for the banking
industry and for the broader economy.
BOK Financial has a long-standing relationship with the energy industry and the local economies within BOKF's geographical
footprint have a concentration in energy-related industries. The energy industry is facing increased pressure from investors and
the government to mitigate greenhouse emissions, which could significantly increase costs, hinder financial results and shrink
the industry.
Our business, financial condition, liquidity and results of operations have been, and will likely continue to be, adversely
affected by the COVID-19 pandemic.
The Coronavirus Disease 2019 (“COVID-19”) pandemic has created economic and financial disruptions that have adversely
affected, and are likely to continue to adversely affect, BOKF’s business, financial condition, liquidity and results of operations.
The extent to which the COVID-19 pandemic will continue to affect our business, financial condition, liquidity and results of
operations will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and
duration of the pandemic, the continued effectiveness of our business continuity plan, the direct and indirect impact of the
pandemic on our employees, customers, clients, counterparties and service providers, as well as other market participants, and
the effectiveness of actions taken by governmental authorities and other third parties in response to the pandemic.
The spread of the COVID-19 virus and the resulting "Stay at Home" orders, travel restrictions, and closed schools and work
places caused severe disruptions in the U.S. economy, which has in turn disrupted the business activities and operations of our
customers, as well as our business and operations. The COVID-19 outbreak was first reported in Wuhan, Hubei Province,
China in December 2019, and has resulted in millions of confirmed cases identified around the world, many in the U.S. As a
result of the pandemic, many businesses were shut down or continue to be shut down, supply chains were interrupted, slowed,
or rendered inoperable, and many individuals have become ill, quarantined, or otherwise unable to work and/or travel due to
health reasons or governmental restrictions. While multiple vaccines have been developed, the timing of administration of the
vaccines to the full population, number of people who will take the vaccines, and the efficacy on new variants of the virus
remains unknown.
Specific to our operations, we face the following risks:
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The pandemic, combined with pre-existing factors, including, but not limited to, international trade disputes, inflation
risks, and oil price volatility, could further destabilize the financial markets and markets in which the Company
operates. The resulting impacts on consumers, including the sudden increase in the unemployment rate, could cause
changes in consumer and business spending, borrowing needs, and saving habits, which will likely affect the demand
for loans and other products or services the Company offers, as well as the creditworthiness of potential and current
borrowers.
Governmental mandates forced shutdowns of many of our customers' and vendors' facilities. While some have
reopened, others may extend for indefinite periods. This may cause customers, third-party service providers, and
counterparties to be unable to meet existing payment or other obligations to the Company.
The COVID-19 virus may have an adverse effect on customer deposits, the ability of our borrowers to satisfy their
obligations, the demand for our loans or other products and services, or on financial markets, real estate markets, or
economic growth, which could adversely affect our liquidity, financial condition and results of operations.
The Federal Reserve reduced the target federal funds rate to 0.00% to 0.25% on March 15, 2020 and announced a
significant quantitative easing program in response to the economic downturn caused by COVID-19. These reductions,
especially if prolonged, could adversely affect our net interest income and margins, the value of mortgage servicing
rights, and our profitability.
• Widespread outbreaks of the COVID-19 virus in our primary geographies could adversely affect our workforce
resulting in serious health issues and absenteeism. Social distancing measures enacted for working employees such as
working from home, working in different locations, and working different shifts could further disrupt the workforce
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and normal internal control environment. This could lead to the inability to adequately meet customer needs, maintain
adequate financial controls and cybersecurity controls, and meet regulatory deadlines.
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The determination of the appropriate level of allowance for credit losses involves a high degree of subjectivity and
requires management to make significant estimates of current expected credit losses. The COVID-19 pandemic and the
unprecedented governmental response could make these subjective judgments even more difficult. The economic
impact of the pandemic and government responses may have an adverse effect on current and forward prices for oil
and natural gas, which could result in significant credit losses. The value of real estate and other collateral securing
loans may also be adversely affected.
As a result of the preceding and other risks, if the COVID-19 virus continues to spread and the response to contain the
pandemic is unsuccessful, the Company could experience a material adverse effect on its business, financial condition, and
results of operations. These adverse impacts could lead to a material impairment of goodwill and other intangible assets
assigned to our reporting units.
Credit Risk Factors
Adverse regional economic developments could negatively affect BOK Financial's business.
At December 31, 2020, loans to businesses and individuals with collateral primarily located in Texas represented approximately
31% of the total loan portfolio, loans to businesses and individuals with collateral primarily located in Oklahoma represented
approximately 17% of our total loan portfolio and loans to businesses and individuals with collateral primarily located in
Colorado represented approximately 12% of our total loan portfolio. These geographic concentrations subject the loan portfolio
to the general economic conditions within these areas. Poor economic conditions in Texas, Oklahoma, Colorado or other
markets in the southwest region may cause BOK Financial to incur losses associated with higher default rates and decreased
collateral values in BOK Financial's loan portfolio. A regional economic downturn could also adversely affect revenue from
brokerage and trading activities, mortgage loan originations and other sources of fee-based revenue.
Extended oil and gas commodity price downturns could negatively affect BOK Financial customers.
At December 31, 2020, 15% of BOK Financial's total loan portfolio is comprised of loans to borrowers in the energy industry.
The energy industry is historically cyclical and prolonged periods of low oil and gas commodity prices could negatively impact
borrowers' ability to pay. In addition, the Company does business in several major oil and natural gas producing states including
Oklahoma, Texas and Colorado. The economies of these states could be negatively impacted by prolonged periods of low oil
and gas commodity prices resulting in increased credit migration to classified and nonaccruing categories, higher loan loss
provisions and risk of credit losses from both energy borrowers and businesses and individuals in those regional economies.
Other adverse economic factors affecting particular industries could have a negative effect on BOK Financial customers
and their ability to make payments to BOK Financial.
Certain industry-specific economic factors also affect BOK Financial. For example, BOK Financial's loan portfolio includes
commercial real estate loans. A downturn in the real estate industry in general or in certain segments of the commercial real
estate industry in the southwest region could also have an adverse effect on BOK Financial's operations. Regulatory changes in
healthcare may negatively affect our customers. Legislation affecting reimbursement rates along with the continued transition to
managed care in place of fee for service payments could affect their ability to pay.
Adverse global economic factors could have a negative effect on BOK Financial customers and counterparties.
Economic conditions globally could impact BOK Financial’s customers and counterparties with which we do business. The
ongoing COVID-19 pandemic has affected economies around the world, the United Kingdom continues to work through issues
regarding BREXIT, trade related issues remain between the United States and China, and tension exists amongst the United
States and OPEC Plus countries, including Russia and countries in the Middle East, over oil production levels. We have no
direct exposure to European sovereign debt and limited exposure to European and Chinese financial institutions. We have not
identified any significant customer exposures to European sovereign debt, European financial institutions or Chinese financial
institutions.
BOK Financial, its customers and counterparties may also be negatively affected by global events, such as natural disasters, and
other external events beyond our control, including public health issues, terrorist attacks and acts of war. These global events
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may significantly affect long-term and short-term interest rates, energy prices, the value of financial assets and ultimately
economic activity in our primary markets. The adverse effect of these events on the Company may include narrowing of the
spread between interest income and interest expense, a reduction in fee income, an increase in credit losses and a decrease in
demand for loans and other products and services.
Liquidity and Interest Rate Risk Factors
Fluctuations in interest rates could adversely affect BOK Financial's business.
BOK Financial's business is highly sensitive to:
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the monetary policies implemented by the Federal Reserve Board, including the discount rate on bank borrowings
and changes in reserve requirements, which affect BOK Financial's ability to make loans and the interest rates we
may charge;
changes in prevailing interest rates, due to the dependency of the subsidiary banks on interest income;
changes in depositor behavior;
open market operations in U.S. Government securities.
A significant increase in market interest rates, or the perception that an increase may occur, could adversely affect both BOK
Financial's ability to originate new loans and BOK Financial's ability to grow. Conversely, a decrease in interest rates could
result in acceleration in the payment of loans, including loans underlying BOK Financial's holdings of residential mortgage-
backed securities and termination of BOK Financial's mortgage servicing rights. In addition, changes in market interest rates,
changes in the relationships between short-term and long-term market interest rates or changes in the relationships between
different interest rate indices, could affect the interest rates charged on interest-earning assets differently than the interest rates
paid on interest-bearing liabilities. This difference could result in an increase in interest expense relative to interest income,
which would reduce the Company’s net interest revenue. In a rising interest rate environment, the composition of the deposit
portfolio could shift resulting in a mix that is more sensitive to changes in interest rates than is the current mix. An increase in
market interest rates also could adversely affect the ability of BOK Financial's floating-rate borrowers to meet their higher
payment obligations. If this occurred, it could cause an increase in nonperforming assets and net charge-offs, which could
adversely affect BOK Financial's business.
In 2017, the U.K. Financial Conduct Authority announced its lack of confidence in LIBOR as a market benchmark rate, and
that it would no longer persuade or compel banks to submit to LIBOR after 2021. U.S. regulatory authorities voiced similar
support for phasing out LIBOR. The Federal Reserve Bank of New York's Alternative Reference Rate Committee has
recommended the Secured Overnight Financing Rate ("SOFR") as an alternative to LIBOR.
In November of 2020, the ICE Benchmark Administration (IBA), the FCA-regulated and authorized administrator of LIBOR,
announced its intention to cease USD LIBOR for one-week and two-month tenors at the end of 2021, but extend the anticipated
cessation date for the remaining USD LIBOR tenors to the end of June 2023. U.S. regulators released a joint inter-agency
statement about their expectations that banks cease entering into new contracts that use USD LIBOR as a reference rate as soon
as practicable and in any event by December 31, 2021.
We have a significant number of loans, securities, derivative contracts, borrowings and other financial instruments with
attributes that are either directly or indirectly dependent on LIBOR. Given these uncertainties, it is not possible at this time to
determine the impact of the transition away from LIBOR on the valuations, pricing and operation of our financial instruments.
However, the proposed extension of our primary LIBOR tenors to June of 2023 reduces our exposure to the LIBOR transition
significantly, as a large portion of our legacy financial instruments that matured after 2021 will mature before June of 2023.
In order to be well prepared for the transition, the Company has established formal governance for the LIBOR transition,
including a LIBOR Transition Working Group ("the Group") whose purpose is to guide the overall transition process for the
Company. The Group is an internal, cross-functional team with representatives from all business lines, support and control
functions, and legal counsel. Its responsibilities include, but are not limited to, monitoring industry developments; tracking
direct and indirect exposures; developing and implementing remediation plans; and communication with internal and external
stakeholders.
Key loan provisions have been modified so that new and renewed loans include LIBOR fallback language designed to ensure
the smoothest possible transition from LIBOR to the new benchmark when such transition occurs. All existing financial
contracts with direct exposure to LIBOR have been inventoried and are being tracked. Indirect exposures in the form of
LIBOR-related systems, models, and processes have been inventoried, evaluated, and prioritized and remediation is underway.
13
Changes in mortgage interest rates could adversely affect mortgage banking operations along with mortgage servicing rights
as well as BOK Financial's substantial holdings of residential mortgage-backed securities, and brokerage and trading
revenue.
BOK Financial derives a substantial amount of revenue from mortgage banking activities, the production and sale of mortgage
loans and the servicing of mortgage loans. In addition, as part of BOK Financial's mortgage banking business, BOK Financial
has substantial holdings of mortgage servicing rights. Revenue generated from the production and sale of mortgage loans is
affected by mortgage interest rates and government policies related to economic stimulus and home ownership. Falling interest
rates tend to increase mortgage lending activities and related revenue while rising interest rates have an opposite effect.
Mortgage servicing revenue is a fee earned over the life of the related loan. However, mortgage servicing rights are assets that
are carried at fair value which are very sensitive to numerous factors with the primary factor being changes in market interest
rates. Falling interest rates tend to increase loan prepayments, which may lead to a decrease in the value of related servicing
rights. We attempt to manage this risk by maintaining an active hedging program. The primary objective of the Company's
hedging program is to provide an offset to changes in the fair value of these rights due to hedgeable risks, primarily changes in
market interest rates. Due to numerous unhedgeable factors, hedging strategies may not offset all changes in the fair value of
the asset. Such unhedgeable factors include, but are not limited to, changes in customer prepayment or delinquency behavior
that is inconsistent with historical actual performance in a similar market environment; changes in the long-term or short-term
primary/secondary mortgage spreads; and changes in survey-driven assumptions such as the cost of servicing and discount
rates.
We also hold a substantial portfolio of residential mortgage-backed securities issued by U.S. government agencies. The fair
value of residential mortgage-backed securities is highly sensitive to changes in interest rates. A significant decrease in interest
rates may lead mortgage holders to refinance the mortgages constituting the pool backing the securities, subjecting BOK
Financial to a risk of prepayment and decreased return on investment due to subsequent reinvestment at lower interest rates. A
significant decrease in interest rates may also accelerate premium amortization. Conversely, a significant increase in interest
rates may cause mortgage holders to extend the term over which they repay their loans, which delays the Company’s
opportunity to reinvest funds at higher rates. We mitigate this risk somewhat by investing principally in shorter duration
mortgage products, which are less sensitive to changes in interest rates.
In addition, the Company actively engages in trading activities that provide U.S. government agency residential mortgage-
backed securities and related derivative instruments to our customers. Trading activities generate net interest revenue, trading
revenue and customer hedging revenue. Trading revenue and customer hedging revenue varies in response to customer demand.
The value of trading securities will increase in response to decreases in interest rates or decrease in response to increases in
interest rates. We mitigate the market risk of holding trading securities through appropriate economic hedging techniques.
Market disruptions could impact BOK Financial’s funding sources.
BOK Financial’s subsidiary bank may rely on other financial institutions and the Federal Home Loan Bank of Topeka as a
significant source of funds. Our ability to fund loans, manage our interest rate risk and meet other obligations depends on funds
borrowed from these sources. The inability to borrow funds at market interest rates could have a material adverse effect on our
operations.
Operating Risk Factors
Dependence on technology increases cybersecurity, data privacy and technology failure risk.
The Company is dependent on its technological ability to process, record and monitor a large number of customer transactions
and store and protect a significant amount of sensitive customer information. Our customers’ use of our internet-based services,
and our customer and regulatory expectations regarding operational and information security and reliability, have increased
over time. We face compliance risks and costs relating to the data privacy laws existing in multiple jurisdictions. Congress and
the legislatures of states in which we operate regularly consider legislation that would impose more stringent data privacy
requirements, resulting in increased compliance costs.
Cybersecurity risks for financial institutions have increased significantly in recent years in part because of the proliferation of
new technologies, the increased use of the internet and mobile technologies to conduct financial transactions, and the increased
sophistication and ever changing cyberattack techniques used by organized crime, hackers, terrorists, hostile foreign
governments and other external parties to obtain confidential customer information and misappropriate customer funds. Such
parties may seek to gain access to our systems directly or use equipment or security passwords belonging to employees,
14
customers, third party services providers or other users of our systems. Accordingly, our operational systems and infrastructure
must continue to be safeguarded and monitored for potential failures, disruptions, breakdowns and cyber attacks.
Our business, financial, accounting, data processing systems and other operating systems and facilities may stop operating
properly or become disabled as a result of a number of factors that may be wholly or partially beyond our control. In addition to
cyber attacks, there could be sudden increases in customer transaction volume, electrical or telecommunications outages,
natural disasters, pandemics, events arising from political or social matters, including terrorist attacks. Third parties with whom
we do business or that facilitate our business activities including exchanges, clearing houses, financial intermediaries or vendors
that provide services or security solutions for our operations, could also be sources of operational or information security risk to
the Company, including breakdowns or failures of their own systems, capacity constraints or cyber attacks.
Cybersecurity risk management programs are expensive to maintain and will not protect the Company from all risks associated
with maintaining the security of customer data from external and internal intrusions, disaster recovery and failures in controls
used by our vendors. A material breach of customer data security or operational or system failure may negatively impact our
business reputation and cause a loss of customers, result in increased expense to contain the event and/or require that we
provide credit monitoring services for or reimburse affected customers, result in regulatory fines, penalties or intervention, or
result in litigation, all of which could have a materially adverse effect on our results of operations and financial condition.
Although to date we have not experienced any material losses relating to cyber attacks or other information security breaches or
operational failures, there can be no assurance that we will not suffer such losses in the future. Our risk and exposure to these
matters remains heightened and as a result the continued development and enhancement of our controls, processes and practices
designed to protect and facilitate the recovery of our systems, computers, software, data and networks from attack, damage or
unauthorized access remains a high priority for us. As an additional layer of protection, we have purchased network and privacy
liability risk insurance coverage. Our cybersecurity insurance may not provide sufficient coverage in the event of a breach, or
may not be available in the future on acceptable terms.
We depend on third parties for critical components of our infrastructure.
We outsource a significant portion of our information systems, communications, data management and transaction processing
to third parties. These third parties are sources of risk associated with operational errors, system interruptions or breaches,
unauthorized disclosure of confidential information and misuse of intellectual property. If the service providers encounter any
of these issues, we could be exposed to disruption of service, reputation damages, and litigation risk that could be material to
our business.
Risks Related to an Investment in Our Stock
Although publicly traded, BOK Financial's common stock has substantially less liquidity than the average trading market
for a stock quoted on the NASDAQ National Market System.
A relatively small fraction of BOK Financial's outstanding common stock is actively traded. The risks of low liquidity include
increased volatility of the price of BOK Financial's common stock. Low liquidity may also limit holders of BOK Financial's
common stock in their ability to sell or transfer BOK Financial's shares at the price, time and quantity desired.
BOK Financial's principal shareholder controls a majority of BOK Financial's common stock.
Mr. George B. Kaiser owns approximately 55% of the outstanding shares of BOK Financial's common stock at December 31,
2020. Mr. Kaiser is able to elect all of BOK Financial's directors and effectively control the vote on all matters submitted to a
vote of BOK Financial's common shareholders. Mr. Kaiser's ability to prevent an unsolicited bid for BOK Financial or any
other change in control could have an adverse effect on the market price for BOK Financial's common stock. A substantial
majority of BOK Financial's directors are not officers or employees of BOK Financial or any of its affiliates. However, because
of Mr. Kaiser's control over the election of BOK Financial's directors, he could change the composition of BOK Financial's
Board of Directors so that it would not have a majority of outside directors.
15
Possible future sales of shares by BOK Financial's principal shareholder could adversely affect the market price of BOK
Financial's common stock.
Mr. Kaiser has the right to sell shares of BOK Financial's common stock in compliance with the federal securities laws at any
time, or from time to time. The federal securities laws will be the only restrictions on Mr. Kaiser's ability to sell. Because of his
current control of BOK Financial, Mr. Kaiser could sell large amounts of his shares of BOK Financial's common stock by
causing BOK Financial to file a registration statement that would allow him to sell shares more easily. In addition, Mr. Kaiser
could sell his shares of BOK Financial's common stock without registration under Rule 144 of the Securities Act. Although
BOK Financial can make no predictions as to the effect, if any, that such sales would have on the market price of BOK
Financial's common stock, sales of substantial amounts of BOK Financial's common stock, or the perception that such sales
could occur, could adversely affect market prices. If Mr. Kaiser sells or transfers his shares of BOK Financial's common stock
as a block, another person or entity could become BOK Financial's controlling shareholder.
Statutory restrictions on subsidiary dividends and other distributions and debts of BOK Financial's subsidiaries could limit
amounts BOK Financial's subsidiaries may pay to BOK Financial.
A substantial portion of BOK Financial's cash flow typically comes from dividends paid by BOKF, NA. Statutory provisions
and regulations restrict the amount of dividends BOKF, NA may pay to BOK Financial without regulatory approval.
Management also developed, and the BOK Financial board of directors approved, an internal capital policy that is more
restrictive than the regulatory capital standards. In the event of liquidation, creditors of the subsidiary banks and other non-bank
subsidiaries of BOK Financial are entitled to receive distributions from the assets of that subsidiary before BOK Financial, as
holder of an equity interest in the subsidiaries, is entitled to receive any distributions.
16
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
BOK Financial and its subsidiaries own and lease improved real estate that is carried at $377 million, net of depreciation and
amortization. The Company’s principal offices are located in leased premises in the Bank of Oklahoma Tower in Tulsa,
Oklahoma. Banking offices are primarily located in Tulsa and Oklahoma City, Oklahoma; Dallas, Fort Worth and Houston,
Texas; Albuquerque, New Mexico; Denver, Colorado; Phoenix, Arizona; and Kansas City, Kansas/Missouri. Primary
operations facilities are located in Tulsa and Oklahoma City, Oklahoma; Dallas, Texas and Albuquerque, New Mexico. The
Company’s facilities are suitable for their respective uses and present needs.
The information set forth in Notes 5 of the Company’s Notes to Consolidated Financial Statements, which appear elsewhere
herein, provides further discussion related to properties.
ITEM 3. LEGAL PROCEEDINGS
The information set forth in Note 14 of the Company’s Notes to Consolidated Financial Statements, which appear elsewhere
herein, provides discussion related to legal proceedings.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
17
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
BOK Financial’s $0.00006 par value common stock is traded on the NASDAQ Stock Market under the symbol BOKF. As of
January 31, 2021, common shareholders of record numbered 724 with 69,577,615 shares outstanding.
The highest and lowest quarterly closing bid price for shares and cash dividends declared per share of BOK Financial common
stock follows:
2020:
Low
High
Cash dividends declared
2019:
Low
High
Cash dividends declared
First
Second
Third
Fourth
$
35.27 $
40.50 $
48.94 $
86.82
0.51
67.46
0.51
61.55
0.51
$
73.43 $
73.81 $
73.45 $
92.31
0.50
87.68
0.50
83.41
0.50
51.17
72.61
0.52
72.23
88.01
0.51
18
Shareholder Return Performance Graph
Set forth below is a line graph comparing the change in cumulative shareholder return of the NASDAQ Composite Index, the
KBW NASDAQ Bank Index and the SNL U.S. Bank NASDAQ Index for the period commencing December 31, 2015 and
ending December 31, 2020.*
Total Return Performance
BOK Financial Corporation
KBW NASDAQ Bank Index
NASDAQ Composite Index
SNL U.S.Bank NASDAQ Index
275
250
225
200
175
150
125
100
e
u
l
a
V
x
e
d
n
I
75
12/31/15
12/31/16
12/31/17
12/31/18
12/31/19
12/31/20
Period Ending
Index
BOK Financial Corporation
NASDAQ Composite
SNL U.S. Bank NASDAQ
KBW NASDAQ Bank Index
Period Ending December 31,
2015
2016
2017
2018
2019
2020
100.00
100.00
100.00
100.00
142.91
108.87
138.65
128.51
162.37
141.13
145.97
152.40
131.52
137.12
123.04
125.41
160.59
187.44
154.47
170.71
130.03
271.64
132.56
153.11
* Graph assumes value of an investment in the Company's Common Stock for each index was $100 on December 31, 2015. Cash dividends
on Common Stock are assumed to have been reinvested in BOK Financial Common Stock.
19
The following table provides information with respect to purchases made by or on behalf of the Company or any “affiliated
purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of the Company’s common stock
during the three months ended December 31, 2020.
Period
October 1, 2020 to October 31, 2020
November 1, 2020 to November 30, 2020
December 1, 2020 to December 31, 2020
Total
Number of
Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs 1
160,000
Maximum
Number of
Shares that
May Yet Be
Purchased
Under the
Plans
3,531,287
465,000
3,066,287
40,100
3,026,187
Total
Number of
Shares
Purchased 2
Average
Price Paid
per Share
160,000 $
465,000 $
40,100 $
58.27
65.24
69.59
Total
1 On April 30, 2019, the Company's board of directors authorized the Company to repurchase up to five million shares of the Company's
common stock. As of December 31, 2020, the Company had repurchased 1,973,813 shares under this plan. Future repurchases of the
Company's common stock will vary based on market conditions, regulatory limitations and other factors.
665,100
665,100
2 The Company may repurchase shares from employees to cover the exercise price and taxes in connection with employee shared-based
compensation.
20
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data is set forth within Table 1 of Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Table 1 – Consolidated Selected Financial Data
(Dollars in thousands, except per share data)
2020
2019
2018
2017
2016
December 31,
Selected Financial Data
For the year:
Interest revenue
Interest expense
Net interest revenue
Provision for credit losses
Fees and commissions revenue1
Net income attributable to BOK Financial
Corporation shareholders
Period-end:
Loans
Assets
Deposits
Shareholders’ equity
Nonperforming assets2
Profitability Statistics
Earnings per share (based on average equivalent
shares):
Basic
Diluted
Percentages (based on daily averages):
Return on average assets
Return on average shareholders' equity
Average total equity to average assets
$ 1,269,000
$ 1,531,958
$ 1,228,426
$
972,751
$
829,117
160,556
419,079
1,108,444
1,112,879
222,592
810,320
44,000
702,201
243,559
984,867
8,000
643,176
131,050
841,701
(7,000)
642,169
81,889
747,228
65,000
647,986
435,030
500,758
445,646
334,644
232,668
23,007,520
21,750,987
21,656,730
17,153,424
16,989,660
46,671,088
42,172,021
38,020,504
32,272,160
32,772,281
36,143,880
27,621,168
25,263,763
22,061,305
22,748,095
5,266,266
4,855,795
4,432,109
3,495,367
3,274,854
476,994
293,762
267,162
290,305
356,641
$
$
6.19
6.19
$
7.03
7.03
$
6.63
6.63
$
5.11
5.11
3.53
3.53
0.89 %
8.55 %
10.46 %
1.19 %
10.73 %
11.11 %
1.28 %
11.98 %
10.70 %
1.02 %
9.82 %
10.43 %
0.72 %
7.02 %
10.38 %
Common Stock Performance
Per Share:
Book value per common share
$
Market price: December 31 close
Market range – High close bid price
Market range – Low close bid price
Cash dividends declared
Dividend payout ratio
$
75.62
68.48
86.82
35.27
2.05
$
$
68.80
87.40
92.31
72.23
2.01
$
61.45
73.33
105.24
70.61
1.90
53.45
92.32
93.50
74.34
1.77
50.12
83.04
84.13
44.72
1.73
33.04 %
28.56 %
28.55 %
34.45 %
48.81 %
21
Table 1 – Consolidated Selected Financial Data
(Dollars in thousands, except per share data)
2020
2019
2018
2017
2016
December 31,
Selected Financial Data
Selected Balance Sheet Statistics
Period-end:
Common equity Tier 1 ratio
Tier 1 capital ratio
Total capital ratio
Leverage ratio
Allowance for loan losses to nonaccruing loans3
Allowance for loan losses to loans
Allowance for loan losses to loans, excluding
PPP loans5
Combined allowances for credit losses to loans 4
Combined allowances for credit losses to loans,
excluding PPP loans 4,5
Miscellaneous (at December 31)
Number of employees (full-time equivalent)
Number of TransFund locations
Fiduciary assets
11.95 %
11.95 %
13.82 %
8.28 %
11.39 %
11.39 %
12.94 %
8.40 %
10.92 %
10.92 %
12.50 %
8.96 %
12.05 %
12.05 %
13.54 %
9.31 %
11.21 %
11.21 %
12.81 %
8.72 %
171.24 %
120.54 %
132.89 %
129.09 %
112.33 %
1.69 %
1.82 %
1.85 %
2.00 %
0.97 %
0.97 %
0.98 %
0.98 %
0.96 %
0.96 %
0.97 %
0.97 %
1.34 %
1.34 %
1.37 %
1.37%
1.45 %
1.45 %
1.52 %
1.52%
4,915
2,599
5,107
2,463
5,313
2,426
4,930
2,223
4,884
2,021
$ 60,495,213
$ 52,352,135
$ 44,841,339
$ 48,761,477
$ 42,378,053
Mortgage loans serviced for others
16,228,449
20,727,106
21,658,335
22,046,632
21,997,568
1 Non-GAAP measure to net interchange charges for 2016-2017 between transaction card revenue and data processing and communications expense as a
result of the revenue recognition standard implemented January 1, 2018. This measure has no effect on net income or earnings per share.
Includes nonaccruing loans, renegotiated loans and assets acquired in satisfaction of loans. Excludes loans past due 90 days or more and still accruing.
2
3 Excludes residential mortgage loans guaranteed by agencies of the U.S. government.
4 Includes allowance for loan losses and accrual for off-balance sheet credit risk.
5 Metric meaningful due to the U.S. government agency guarantee and short-term nature of the PPP loans.
Management’s Assessment of Operations and Financial Condition
Overview
The following discussion is management’s analysis to assist in the understanding and evaluation of the financial condition and
results of operations of BOK Financial Corporation ("BOK Financial" or "the Company"). This discussion should be read in
conjunction with the Consolidated Financial Statements and footnotes and selected financial data presented elsewhere in this
report.
After completing its 11th consecutive year of expansion in 2019, the U.S. economy experienced extreme volatility throughout
2020. The worldwide spread of COVID-19 affected every part of the economic environment. Economic conditions in the U.S.
declined drastically in March and April of 2020 following the initial U.S. COVID-19 outbreak. Congress quickly passed the
CARES Act economic relief package, which alleviated some of the downturn. With the government stimulus package and some
time to settle into the current new normal, the economy rebounded significantly in the second half of the year.
The Federal Reserve lowered the federal funds rate to near zero by April, 2020 and has initiated additional programs to infuse
liquidity and stimulate economic activity. The Federal Reserve is expected to keep the federal funds rate at or near zero until the
labor market has fully recovered and inflation has stabilized at 2%. See "Summary of Credit Loss Experience" section of
Management's Discussion and Analysis for additional discussion around our economic forecast.
22
Performance Summary
Net income for the year ended December 31, 2020 totaled $435.0 million or $6.19 per diluted share compared with net income
of $500.8 million or $7.03 per diluted share for the year ended December 31, 2019. A pre-tax provision for expected credit
losses of $222.6 million was included in 2020 while a pre-tax provision for incurred losses of $44.0 million was included in
2019. The Company adopted the current expected credit loss ("CECL") model on January 1, 2020.
Pre-provision net revenue, a non-GAAP measure, was $786.4 million for 2020 compared to $674.9 million in the prior year.
This is a measure of revenue less expenses, and is calculated before provision for credit losses and income tax expense. Pre-
provision net revenue is a financial measure frequently used by investors and analysts that 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.
We incurred $17.2 million of integration costs in 2019 related to the acquisition of CoBiz Financial, Inc. ("CoBiz") on October
1, 2018, which resulted in an $0.18 per share reduction in 2019. The fluctuation discussion in the highlights below excludes this
impact.
Highlights of 2020 included:
•
•
•
•
•
•
•
Net interest revenue totaled $1.1 billion for 2020, consistent with the prior year. Net interest margin was 2.83% for
2020 compared to 3.11% for 2019. The Federal Reserve reduced the federal funds rate to near zero early in the year
putting pressure on the margin in 2020. Average earning assets were $40.7 billion for 2020, up $4.3 billion over 2019.
The increase was largely due to increased trading securities, loans primarily related to the Small Business
Administration's Paycheck Protection Program ("PPP"), and the expansion of the available for sale securities portfolio
as we repositioned the balance sheet for a lower rate environment.
Fees and commissions revenue was $810.3 million for 2020, up $108.1 million compared to 2019. Mortgage banking
revenue increased $74.8 million and brokerage and trading revenue increased $62.0 million. Lower mortgage interest
rates increased both mortgage loan production and related trading activities. These increases were partially offset by a
decrease in deposit service charges of $15.7 million and fiduciary and asset management revenue of $9.6 million.
Other operating expense totaled $1.2 billion, a $50.8 million increase compared to 2019. Personnel expense increased
$30.8 million, primarily due to higher incentive compensation expense due to expanded trading activities. This was
partially offset by lower employee benefits costs. Increased data processing and communications expense, occupancy
and equipment expense, mortgage banking costs and charitable contributions were partially offset by lower business
promotions expense.
The net economic benefit of the changes in the fair value of mortgage servicing rights and related economic hedges
was $24.9 million during 2020 compared to an economic cost of $17.9 million during 2019.
The allowance for loan losses totaled $389 million or 1.69% of outstanding loans at December 31, 2020. The
combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was
$426 million or 1.85% of outstanding loans at December 31, 2020. Excluding PPP loans, which are fully guaranteed
by a U.S. government agency, the allowance for loan losses was 1.82% of outstanding loans and the combined
allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was 2.00%.
The allowance for loan losses was $211 million or 0.97% of outstanding loans and the combined allowance for loan
losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $212 million or 0.98% of
outstanding loans at December 31, 2019.
Period-end outstanding loan balances were $23.0 billion at December 31, 2020, a $1.3 billion increase over the prior
year, primarily due to the inflow of PPP loans. Average loans were $23.4 billion, a $1.3 billion increase compared to
2019.
Period-end deposits totaled $36.1 billion at December 31, 2020, an $8.5 billion increase compared to December 31,
2019. Interest-bearing transaction deposits increased $5.8 billion, while demand deposit balances increased $2.8
billion. Average deposits increased $7.1 billion to $32.8 billion. Deposit growth was largely due to customers retaining
higher balances in the current economic environment combined with increases due to various COVID-19 related
government program stimulus payments.
23
•
•
•
Common equity Tier 1 capital ratio was 11.95% at December 31, 2020. In addition, the Tier 1 capital ratio was
11.95%, total capital ratio was 13.82% and leverage ratio was 8.28% at December 31, 2020. At December 31, 2019,
the Tier 1 capital ratio was 11.39%, the total capital ratio was 12.94% and the leverage ratio was 8.40%.
The Company repurchased 1,107,100 shares at an average price of $68.49 per share during 2020 and 1,572,322 shares
at an average price of $82.35 during 2019.
The Company paid cash dividends of $2.05 per common share during 2020 and $2.01 per common share in 2019.
Net income for the fourth quarter of 2020 totaled $154.2 million or $2.21 per diluted share, compared to $110.4 million or
$1.56 per diluted share for the fourth quarter of 2019.
Highlights of the fourth quarter of 2020 included:
•
•
•
•
Net interest revenue totaled $297.2 million for the fourth quarter of 2020, an increase of $27.0 million compared to the
fourth quarter of 2019, largely due to a $5.2 billion increase in average trading securities. We saw a shift from trading
revenue to interest income on trading securities in the fourth quarter of 2020. Net interest margin was 2.72% for the
fourth quarter of 2020 and 2.88% for the fourth quarter of 2019. The increase in the trading securities portfolio
combined with the repricing of our available for sale securities portfolio decreased the net interest margin.
Fees and commissions revenue totaled $181.1 million, up $1.6 million over the fourth quarter of 2019. Increased
mortgage banking revenue stemming from the low interest rate environment was largely offset by decreased brokerage
and trading revenue, fiduciary and asset management revenue, and deposit service charges.
Operating expenses in the fourth quarter totaled $300.7 million, an $11.9 million increase compared to the prior year.
Personnel expense increased $7.8 million primarily due to higher incentive compensation expense, partially offset by
regular compensation expense. Non-personnel expenses increased $4.1 million, largely due to increased data
processing and communications expense and higher charitable contributions, partially offset by lower business
promotion expense.
Based on an evaluation of economic forecasts and loan portfolio characteristics, the Company recorded a $6.5 million
negative provision for expected credit losses in the fourth quarter of 2020 and a $19.0 million provision for incurred
credit losses in the fourth quarter of 2019.
24
Critical Accounting Policies & Estimates
The Consolidated Financial Statements and accompanying notes are prepared in accordance with generally accepted accounting
principles in the United States of America (“GAAP”). The Company's accounting policies are more fully described in Note 1 of
the Consolidated Financial Statements. Management makes significant assumptions and estimates in the preparation of the
Consolidated Financial Statements and accompanying notes in conformity with GAAP that may be highly subjective, complex
and subject to variability. Actual results could differ significantly from these assumptions and estimates. The following
discussion addresses the most critical areas where these assumptions and estimates could affect the financial condition, results
of operations and cash flows of the Company. These critical accounting policies and estimates have been discussed with the
appropriate committees of the Board of Directors.
Allowance for Loan Losses and Accrual for Off-Balance Sheet Credit Risk from Loan Commitments
The allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments represent the
portion of amortized cost basis of loans and related unfunded commitments we do not expect to collect over the asset’s
contractual life, considering past events, current conditions, as well as reasonable and supportable forecasts of future economic
conditions. Appropriateness of the allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan
commitments is determined by a senior management Allowance Committee which requires judgment about effects of uncertain
matters, resulting in a subjective calculation which is inherently imprecise. Because of the subjective forward-looking nature of
the calculation, changes in these measures may not directly correlate with actual economic events. In future periods,
management judgment may consider new or changed information which may cause significant changes in these allowances in
those future periods.
As of January 1, 2020 BOK Financial’s accounting policies have changed significantly with the adoption of Financial
Accounting Standards Board ("FASB") Accounting Standards Update No. 2016-13 Financial Instruments - Credit Losses
(Topic 326): Assets Measured at Amortized Cost ("ASU 2016-13" or "CECL"). Prior years are not restated. Prior to January 1,
2020, general allowances and nonspecific allowances were based on incurred credit losses. See Note 4 to the Consolidated
Financial Statements for the description of the expected credit losses calculation of the allowance for loan losses and accrual for
off-balance sheet credit risk from unfunded loan commitments.
For the majority of risk-graded loans, the accruing loan’s expected credit loss estimate is sensitive to management judgment,
particularly probability of default and loss given default assumptions, changes in specific macroeconomic factor forecasts and
the probability weight assigned to each economic scenario.
Probability of default and loss given default measurements are based on historical data that may not be a good predictor of
future performance or actual losses. Probability of default is based on risk grades, a subjective measurement of the risk of a
loan. This subjective assessment of risk may not reflect actual risk of loss.
Other subjective measures include the forecast for each relevant economic loss driver and the probability weighting of
economic scenarios, both of which are overseen by a senior management Economic Forecast Committee which includes
members independent of the allowance process. The Allowance Committee may increase or decrease the allowance based on
factors that include, for example, new lines of business, market conditions that have not been previously encountered, observed
changes in credit risk that are not yet reflected in macroeconomic factors, or economic conditions that impact loss given default
assumptions.
Although the resulting expected credit loss estimate represents management’s best estimates at the time, actual credit losses will
differ from management’s estimate. Portfolio composition will change over time, actual economic conditions will differ from
probability-weighted assumptions, borrower-specific circumstances will change, as well as other factors. Differences between
actual losses and management's estimates may materially affect the Company's results of operations.
Fair Value Measurement
Certain assets and liabilities are recorded at fair value in the Consolidated Financial Statements. Fair value is defined by
applicable accounting guidance as the price to sell an asset or transfer a liability in an orderly transaction between market
participants in the principal markets for the given asset or liability at the measurement date based on market conditions at that
date. An orderly transaction assumes exposure to the market for a customary period for marketing activities prior to the
measurement date and not a forced liquidation or distressed sale.
25
A hierarchy for fair value has been established that prioritizes the inputs of valuation techniques used to measure fair value into
three broad categories: unadjusted quoted prices in active markets for identical assets or liabilities (Level 1), other observable
inputs that can be observed either directly or indirectly (Level 2) and unobservable inputs for assets or liabilities (Level 3). Fair
value may be recorded for certain assets and liabilities every reporting period on a recurring basis or under certain
circumstances on a non-recurring basis. Fair value measurements of significant assets or liabilities that are based on
unobservable inputs (Level 3) are considered Critical Accounting Policies and Estimates. Additional discussion of fair value
measurement and disclosure is included in Notes 7 and 19 of the Consolidated Financial Statements.
Mortgage Servicing Rights
We have a significant investment in mortgage servicing rights. Our mortgage servicing rights are primarily retained
from sales in the secondary market of residential mortgage loans we have originated or purchased from correspondent
lenders. Occasionally, mortgage servicing rights may be purchased from other lenders. Both originated and purchased
mortgage servicing rights are initially recognized at fair value. We carry all mortgage servicing rights at fair value.
Changes in fair value are recognized in earnings as they occur.
Mortgage servicing rights are not traded in active markets. The fair value of mortgage servicing rights is determined by
discounting the projected cash flows. Certain significant assumptions and estimates used in valuing mortgage servicing
rights are based on current market sources including projected prepayment speeds, assumed servicing costs, earnings
on escrow deposits, ancillary income and discount rates. Assumptions used to value our mortgage servicing rights are
considered significant unobservable inputs and represent our best estimate of assumptions that market participants
would use to value this asset. A separate third party model is used to estimate prepayment speeds based on interest
rates, housing turnover rates, estimated loan curtailment, anticipated defaults and other relevant factors. The
prepayment model is updated periodically for changes in market conditions and adjusted to better correlate with actual
performance of our servicing portfolio. The discount rate is based on benchmark rates for mortgage loans plus a
market spread expected by investors in servicing rights. Significant assumptions used to determine the fair value of our
mortgage servicing rights are presented in Note 7 to the Consolidated Financial Statements. At least annually, we
request estimates of fair value from outside sources to corroborate the results of the valuation model.
The assumptions used in this model are primarily based on mortgage interest rates. Evaluation of the effect of a change
in one assumption without considering the effect of that change on other assumptions is not meaningful. Considering
all related assumptions, we expect a 50 basis point increase in primary mortgage interest rates to increase the fair value
of our servicing rights by $29 million. We expect a $15 million decrease in the fair value of our mortgage servicing
rights from a 50 basis point decrease in primary mortgage interest rates.
Valuation of Impaired Loans and Real Estate and Other Repossessed Assets
The fair value of collateral for certain impaired loans and real estate and other repossessed assets is measured on a
non-recurring basis. The fair value of real estate is generally based on unadjusted third-party appraisals derived
principally from or corroborated by observable market data. Fair value measurements based on these appraisals are
considered to be based on Level 2 inputs. Fair value measurements based on appraisals that are not based on
observable inputs or that require significant adjustments by us or fair value measurements that are not based on third-
party appraisals are considered to be based on Level 3 inputs. Significant unobservable inputs include listing prices for
comparable assets, uncorroborated expert opinions or management's knowledge of the collateral or industry.
The fair value of mineral rights is generally determined by our internal staff of engineers based on projected cash flows
from proven oil and gas reserves under existing economic and operating conditions. Proven oil and gas reserves are
estimated quantities that geological and engineering data demonstrate, with reasonable certainty, to be recoverable in
future years from known reservoirs using existing prices and costs. Projected cash flows incorporate assumptions
related to a number of factors including production, sales prices, operating expenses, severance, ad valorem taxes,
capital costs and appropriate discount rate. Fair values determined through this process are considered to be based on
Level 3 inputs.
Income Taxes
Determination of income tax expense and related assets and liabilities is complex and requires estimates and judgments when
applying tax laws, rules, regulations and interpretations. It also requires judgments as to future earnings and the timing of future
events. Accrued income taxes represent an estimate of net amounts due to or from taxing jurisdictions based upon these
estimates, interpretations and judgments.
26
Management evaluates the Company's current tax expense or benefit based upon estimates of taxable income, tax credits and
statutory tax rates. Annually, we file tax returns with each jurisdiction where we conduct business and adjust recognized income
tax expense or benefit to filed tax returns.
We recognize deferred tax assets and liabilities based upon the differences between the values of assets and liabilities as
recognized in the financial statements and their related tax basis using enacted tax rates in effect for the year in which the
differences are expected to be recovered or settled. A valuation allowance is provided when it is more likely than not that some
portion of the entire deferred tax asset may not be realized.
We also recognize the benefit of uncertain tax positions when based upon all relevant evidence, it is more-likely-than-not that
our position would prevail upon examination, including resolution of related appeals or litigation, based upon the technical
merits of the position. Unrecognized tax benefits, including estimated interest and penalties, are part of our current accrued
income tax liability. Estimated penalties and interest are recognized in income tax expense. Income tax expense in future
periods may decrease if an uncertain tax position is favorably resolved, generally upon completion of an examination by the
taxing authorities, expiration of a statute of limitations, or changes in facts and circumstances.
Goodwill Impairment
Goodwill for each reporting unit is evaluated for impairment annually as of October 1st or more frequently if conditions
indicate that impairment may have occurred. The evaluation of possible goodwill impairment involves significant judgment
based upon short-term and long-term projections of future performance.
During the evaluation for impairment, management qualitatively assesses whether it is more likely than not that the fair value of
the reporting units is less than their carrying value, including goodwill. Reporting unit carrying value includes sufficient capital
to exceed regulatory requirements. This assessment includes consideration of relevant events and circumstances including, but
not limited to, macroeconomic conditions, industry and market conditions, the financial and stock performance of the Company
and other relevant factors. Specifically, the analysis may include:
•
•
•
•
•
•
General economic conditions including overall economic activity, consumer spending and mobility, unemployment
rates, consumer confidence, and duration and severity of any current market moving instability.
Global health concerns including ongoing pandemics or potential for widespread health issues, the future course of a
pandemic and the potential for medical advances.
Regional economic conditions including demand for oil and price stability of oil, other overarching conditions that
may be affecting any of the Company's primary states such as weather or other catastrophes, pandemics and health
related lockdowns, or other state mandates.
Industry conditions including federal funds rate movement by the Federal Reserve, the interest rate environment and
the resulting effect on net interest revenue and operating revenue, and regulatory mandates that hinder or provide relief
to the financial services industry.
Company specific conditions including current and forecasted income, changes in stock price, the Company's stock
price compared to peers and other indexes, book value per share compared to fair value per share, goodwill compared
to total shareholders' equity, current capital and liquidity position, demand for products and services, health of the loan
portfolio and other credit related factors, and current credit ratings with the ratings agencies, and regulatory ratings.
Reporting unit performance and forecasts including any event that may significantly impact a reporting unit.
If management concludes based on the qualitative assessment that goodwill may be impaired, a quantitative impairment test
will be applied to goodwill at all reporting units. The quantitative analysis compares the fair value of the reporting unit with its
carrying value, including goodwill. The fair value of each reporting unit is estimated by the discounted future earnings method.
Goodwill is considered impaired if the fair value of the reporting unit is less than the carrying value of the reporting unit,
including goodwill.
Both the qualitative assessment and quantitative analysis require significant management judgment, including estimates of
changes in future economic conditions and their underlying causes and duration, the reasonableness and effectiveness of
management's responses to those changes, changes in governmental fiscal and monetary policies, and fair value measurements
based largely on significant unobservable inputs. The results of these judgments may have a significant impact on the
Company's reported results of operations.
See Note 6, "Goodwill and Intangible Assets" for breakout of goodwill by reporting unit.
27
Results of Operations
Net Interest Revenue and Net Interest Margin
Net interest revenue is the interest earned on debt securities, loans and other interest-earning assets less interest paid for
interest-bearing deposits and other borrowings. The net interest margin is calculated by dividing tax-equivalent net interest
revenue by average interest-earning assets. Net interest spread is the difference between the average rate earned on interest-
earning assets and the average rate paid on interest-bearing liabilities. Net interest margin is typically greater than net interest
spread due to interest income earned on assets funded by non-interest bearing liabilities such as demand deposits and equity.
Tax-equivalent net interest revenue totaled $1.1 billion for 2020, consistent with the prior year. This includes $26.0 million of
net purchase discount accretion for 2020 and $37.8 million for 2019. Approximately $48 million of purchase accounting
discount remains to be accreted. Net interest revenue decreased $108.7 million due to changes in interest rates and increased
$102.8 million from growth in earning assets. Table 2 shows the effects on net interest revenue due to changes in average
balances and interest rates for the various types of earning assets and interest-bearing liabilities. In addition, see the Annual and
Quarterly Financial Summary of consolidated daily average balances, yields and rates following the Consolidated Financial
Statements.
Net interest margin was 2.83% for 2020 and 3.11% for 2019. The tax-equivalent yield on earning assets was 3.24% for 2020
compared to 4.27% in 2019. In response to the anticipated impact to the economy from the COVID-19 pandemic, the Federal
Reserve reduced the federal funds rate to near zero in March, 2020. The resulting impact on market interest rates has
compressed the net interest margin. The company has been proactive in reducing deposit costs and implementing LIBOR floors
in loan agreements; however, funds received from available for sale securities have been reinvested at lower rates. Loan yields
decreased 129 basis points to 3.84%. The available for sale securities portfolio yield decreased 37 basis points to 2.21%. The
yield on trading securities fell 80 basis points to 2.75%. The yield on interest-bearing cash and cash equivalents decreased 183
basis points to 0.45%.
Funding costs decreased 108 basis points compared to 2019. The cost of interest-bearing deposits decreased 69 basis points.
The cost of other short-term borrowings decreased 161 basis points. The benefit to net interest margin from earning assets
funded by non-interest bearing liabilities was 12 basis points for 2020, down from 45 basis points for 2019.
Average earning assets for 2020 increased $4.3 billion or 12% over 2019, largely due to the expansion of the available for sale
securities portfolio, loans originated as part of the Small Business Administration's Paycheck Protection Program ("PPP"), and
an increase in our trading of U.S. government issued mortgage-backed securities. The average balance of available for sale
securities, which consists largely of residential and commercial mortgage-backed securities guaranteed by U.S. government
agencies, increased $2.3 billion. We purchase securities to supplement earnings and to manage interest rate risk. We increased
the size of our bond portfolio during the latter half of 2019 and first quarter 2020 in order to reduce our exposure to falling
short-term interest rates. Average loans, net of allowance for loan losses, increased $1.1 billion, primarily related to $1.4 billion
in average PPP loans. Trading securities balances increased $1.3 billion.
Total average deposits grew by $7.1 billion over the prior year. This increase is largely due to the combination of focused
deposit gathering initiatives, stimulus-related deposits, and customers retaining elevated balances in the current economic
environment. Average interest-bearing transaction account balances increased $5.6 billion. Average demand deposit balances
increased $1.4 billion. Average short-term borrowings decreased $1.7 billion.
Our overall objective is to manage the Company’s balance sheet to be relatively neutral to changes in interest rates as is further
described in the Market Risk section of this report. As shown in Table 21, approximately 70% of our commercial and
commercial real estate loan portfolios are either variable rate loans or fixed rate loans that will re-price within one year. These
loans are funded primarily by deposit accounts that are either non-interest bearing, or that re-price more slowly than the
loans. The result is a balance sheet that would be asset sensitive, which means that assets generally re-price more quickly than
liabilities. Among the strategies that we use to manage toward a relatively rate-neutral position, we purchase fixed rate
residential mortgage-backed securities issued primarily by U.S. government agencies and fund them with market rate sensitive
liabilities. The liability-sensitive nature of this strategy provides an offset to the asset-sensitive characteristics of our loan
portfolio. We also may use derivative instruments to manage our interest rate risk.
The effectiveness of these strategies is reflected in the overall change in net interest revenue due to changes in interest rates as
shown in Table 2 and in the interest rate sensitivity projections as shown in the Market Risk section of this report.
28
Fourth Quarter 2020 Net Interest Revenue
Tax-equivalent net interest revenue totaled $299.6 million for the fourth quarter of 2020, an increase of $26.7 million compared
to the fourth quarter of 2019. Net interest revenue increased $44.5 million, primarily due to the increase in trading securities,
available for sale securities and loan balances. This was partially offset by a decrease of $17.8 million primarily due to lower
market interest rates in 2020.
Net interest margin was 2.72% for the fourth quarter of 2020 compared to 2.88% for the fourth quarter of 2019. The tax-
equivalent yield on earning assets was 2.92% for the fourth quarter of 2020, a decrease of 101 basis points compared to the
fourth quarter of 2019, primarily due to the impact on interest rates related to the federal funds rate cuts in 2020. Loan yields
decreased 107 basis points to 3.68%. Yield on available for sale securities decreased 54 basis points to 1.98%. Yield on trading
securities decreased 117 basis points to 2.02%.
Funding costs decreased 112 basis points compared to the fourth quarter of 2019. The cost of other short-term borrowings
decreased 145 basis points. The cost of interest-bearing deposits decreased 90 basis points. The benefit to net interest margin
from earning assets funded by non-interest bearing liabilities was 8 basis points in the fourth quarter of 2020, down from 35
basis points in the fourth quarter of 2019.
Average earning assets for the fourth quarter of 2020 increased $6.3 billion over the fourth quarter of 2019. Trading securities
balances increased $5.2 billion as we increased our trading of U.S. government issued mortgage-backed securities. Available
for sale securities increased $1.6 billion as the balance sheet was repositioned for the current rate environment. Average loans,
net of allowance for loan losses, increased $1.0 billion, largely due to the loans related to the PPP. Fair value option securities
held as an economic hedge of our mortgage servicing rights decreased $1.4 billion.
Average deposits increased $8.4 billion over the fourth quarter of 2019, largely due to the combination of government stimulus
payments and customers choosing to retain elevated balances in the current environment. Average interest-bearing transaction
accounts increased $6.0 billion and average demand deposit balances increased $2.5 billion. Average short-term borrowings
decreased $3.0 billion.
2019 Net Interest Revenue
Tax-equivalent net interest revenue for 2019 was $1.1 billion, up from $993.8 million for 2018. The acquisition of CoBiz in the
fourth quarter of 2018 added $158.5 million to net interest revenue in 2019 and $43.1 million to net interest revenue in 2018.
This includes $37.8 million of net purchase discount accretion for 2019 and $6.4 million for 2018. Net interest revenue
decreased $13.7 million due to rates and increased $144.4 million from growth in earning assets.
Net interest margin was 3.11% for 2019 compared to 3.20% for 2018. The tax-equivalent yield on average earning assets
increased 29 basis points over 2018. Short-term rate increases during the first half of 2019 resulting from four 25 basis point
increases in the federal funds rate by the Federal Reserve during 2018 were partially offset by three 25 basis point decreases in
the federal funds rate in the second half of 2019. Loan yields increased 33 basis points. The available for sale securities
portfolio yield increased 23 basis points.The yield on interest-bearing cash and cash equivalents increased 48 basis points. The
yield on trading securities fell 29 basis points. The cost of interest-bearing liabilities increased 42 basis points. The cost of
interest-bearing deposits increased 39 basis points and the cost of other short-term borrowings increased 35 basis points. The
benefit to net interest margin from earning assets funded by non-interest bearing liabilities was 45 basis points for 2019,
compared to 41 basis points for 2018.
Average earning assets increased $5.4 billion or 18% over 2018, largely due to acquired loans from the CoBiz acquisition
combined with the expansion of the available for sale securities portfolio. Average loans, net of allowance for loan losses,
increased $3.4 billion. The average balance of available for sale securities increased $1.8 billion. Total average deposits grew
by $2.8 billion over 2018, largely related to acquired deposits. Average interest-bearing transaction deposits increased $2.5
billion. Average short-term borrowings increased $2.9 billion, primarily from increased borrowings from federal funds
purchased and the Federal Home Loan Banks.
29
(4,654)
1,166
20,909
(1,861)
(391)
(483)
66,900
85,838
46,938
172
11,486
15,404
25,630
(112)
99,518
(13,680)
Table 2 – Volume/Rate Analysis
(In thousands)
Year Ended
Year Ended
December 31, 2020 / 2019
December 31, 2019 / 2018
Change Due To1
Change Due To1
Change
Volume
Yield /
Rate
Change
Volume
Yield /
Rate
Tax-equivalent interest revenue:
Interest-bearing cash and cash equivalents
$
(9,384) $
1,332 $
(10,716) $
(10,119) $
(14,371) $
4,252
Trading securities
Investment securities
Available for sale securities
Fair value option securities
Restricted equity securities
Residential mortgage loans held for sale
5,982
(1,657)
7,303
(14,461)
(15,897)
(708)
22,824
(2,270)
47,992
(9,178)
(10,782)
822
(16,842)
613
(40,689)
(5,283)
(5,115)
(1,530)
4,012
(1,431)
56,629
17,731
5,305
(1,018)
8,666
(2,597)
35,720
19,592
5,696
(535)
Loans
(235,592)
58,016
(293,608)
Total tax-equivalent interest revenue
(264,414)
108,756
(373,170)
235,141
306,250
168,241
220,412
Interest expense:
Transaction deposits
Savings deposits
Time deposits
Funds purchased and repurchase agreements
Other borrowings
Subordinated debentures
Total interest expense
(72,430)
38,117
(110,547)
66,995
20,057
(292)
(12,820)
(37,398)
88
176
9,191
(134,414)
(41,577)
(1,169)
(8)
(380)
(12,996)
(46,589)
(92,837)
(1,161)
(258,523)
5,987
(264,510)
238
12,788
43,796
46,417
5,286
175,520
130,730
2,718
66
1,302
28,392
20,787
5,398
76,002
144,410
Tax-equivalent net interest revenue
Change in tax-equivalent adjustment
(5,891)
(1,456)
102,769
(108,660)
Net interest revenue
1 Changes attributable to both volume and yield/rate are allocated to both volume and yield/rate on an equal basis.
128,012
(4,435)
$
$
30
Table 2 – Volume/Rate Analysis (continued)
(In thousands)
Tax-equivalent interest revenue:
Interest-bearing cash and cash equivalents
Trading securities
Investment securities
Available for sale securities
Fair value option securities
Restricted equity securities
Residential mortgage loans held for sale
Loans
Total tax-equivalent interest revenue
Interest expense:
Transaction deposits
Savings deposits
Time deposits
Funds purchased and repurchase agreements
Other borrowings
Subordinated debentures
Total interest expense
Tax-equivalent net interest revenue
Change in tax-equivalent adjustment
Three Months Ended
December 31, 2020 / 2019
Change Due To1
Change
Volume
Yield /
Rate
$
(2,177) $
151 $
(2,328)
22,833
(429)
(8,807)
(8,817)
(4,165)
(248)
(49,339)
(51,149)
(29,850)
(67)
(6,670)
(14,686)
(26,168)
(377)
(77,818)
26,669
(312)
35,696
(522)
7,122
(8,146)
(2,888)
180
12,466
44,059
8,531
34
(1,141)
(4,571)
(3,261)
(4)
(412)
44,471
(12,863)
93
(15,929)
(671)
(1,277)
(428)
(61,805)
(95,208)
(38,381)
(101)
(5,529)
(10,115)
(22,907)
(373)
(77,406)
(17,802)
Net interest revenue
1 Changes attributable to both volume and yield/rate are allocated to both volume and yield/rate on an equal basis.
26,981
$
31
Other Operating Revenue
Other operating revenue was $843.9 million for 2020, an increase of $149.6 million or 22% over 2019 driven by growth in
mortgage banking revenue and brokerage and trading revenue.
Table 3 – Other Operating Revenue
(In thousands)
Brokerage and trading revenue
Transaction card revenue1
Fiduciary and asset management revenue
Deposit service charges and fees
Mortgage banking revenue
Other revenue
Total fees and commissions revenue
Other gains (losses), net
Gain (loss) on derivatives, net
Gain (loss) on fair value option securities, net
Change in fair value of mortgage servicing rights
Gain (loss) on available for sale securities, net
Year Ended December 31,
2020
2019
2018
2017
2016
$ 221,833 $ 159,826 $ 108,323 $ 131,601 $ 138,377
90,182
167,445
96,805
182,360
51,695
810,320
7,675
42,320
53,248
87,216
177,025
112,485
107,541
58,108
84,025
184,703
112,153
97,787
56,185
81,143
162,889
112,079
104,719
49,738
702,201
643,176
642,169
9,351
14,951
15,787
(2,265)
11,434
(422)
779
(25,572)
(2,733)
(79,524)
(53,517)
9,910
5,597
4,668
(2,801)
172
4,428
78,347
135,387
111,589
133,914
50,372
647,986
4,687
(15,685)
(10,555)
(2,193)
11,675
Total other operating revenue
$ 843,949 $ 694,370 $ 616,784 $ 656,249 $ 635,915
Non-GAAP Reconciliation:1
Transaction card revenue on income statement
Netting adjustment
90,182
87,216
84,025
119,988
116,452
—
—
—
(38,845)
(38,105)
Transaction card revenue after netting adjustment
1 Non-GAAP measure to net interchange charges for 2016-2017 between transaction card revenue and data processing and communications expense as a
81,143
84,025
87,216
90,182
78,347
result of the revenue recognition standard implemented January 1, 2018. This measure has no effect on net income or earnings per share.
Fees and commissions revenue
Diversified sources of fees and commissions revenue are a significant part of our business strategy and represented 42% of total
revenue for 2020, excluding provision for credit losses and gains and losses on asset sales, securities and derivatives and the
change in the fair value of mortgage servicing rights. We believe that a variety of fee revenue sources provides an offset to
changes in interest rates, values in the equity markets, commodity prices and consumer spending, all of which can be
volatile. As an example of this strength, many of the economic factors such as rising interest rates resulting in growth in net
interest revenue or fiduciary and asset management revenue may also decrease mortgage banking production volumes and
related trading. We expect growth in other operating revenue to come through offering new products and services and by
further development of our presence in other markets. However, current and future economic conditions, including the impact
of the COVID-19 pandemic, regulatory constraints, increased competition and saturation in our existing markets could affect
the rate of future increases.
Brokerage and trading revenue, which includes revenues from trading, customer hedging, retail broker and investment banking,
increased $62.0 million or 39% over the prior year.
Trading revenue includes net realized and unrealized gains and losses primarily related to sales of residential mortgage-backed
securities guaranteed by U.S. government agencies and related derivative instruments that enable our mortgage-banking
customers to manage their production risk. Trading revenue also includes net realized and unrealized gains and losses on
municipal securities, asset-backed securities and other financial instruments that we sell to institutional customers, along with
changes in the fair value of financial instruments we hold as economic hedges against market risk of our trading securities.
Trading revenue was $144.3 million for 2020, an increase of $55.7 million over 2019. Industry-wide mortgage loan production
increased in 2020 driven by lower interest rates as the Federal Reserve stepped in to provide market stability. We increased our
bond trading pipeline to provide greater liquidity to the housing market during a time of record loan production volumes.
32
Customer hedging revenue is based primarily on realized and unrealized changes in the fair value of derivative contracts held
for customer risk management programs. As more fully discussed under Customer Derivative Programs in Note 3 of the
Consolidated Financial Statements, we offer commodity, interest rate, foreign exchange and equity derivatives to our
customers. Derivative contracts executed with customers are offset with contracts between selected counterparties and
exchanges to minimize market risk from changes in commodity prices, interest rates or foreign exchange rates. Customer
hedging revenue totaled $22.7 million for 2020, an increase of $3.8 million or 20% compared to 2019. Customer hedging
revenue on energy derivatives is up $12.2 million as energy customers have increased hedging activity in the volatile
commodity price environment. This is offset by a $9.6 million decrease on to-be-announced derivatives reflecting a shift in the
mix of our to-be-announced residential mortgage-backed securities contracts from our customer hedging program to our trading
program.
Revenue earned from retail brokerage transactions totaled $15.7 million for 2020, relatively consistent with the prior
year. Retail brokerage revenue is primarily based on fees and commissions earned on sales of fixed income securities, annuities,
mutual funds and other financial instruments to retail customers. Revenue is primarily based on the volume of customer
transactions and applicable commission rate for each type of product.
Insurance brokerage fees were $12.7 million for 2020, a decrease of $1.2 million compared to the prior year.
Investment banking, which includes fees earned upon completion of underwriting, financial advisory services and loan
syndication fees, totaled $26.4 million for 2020, an increase of $4.1 million or 18% compared to 2019, related to the timing and
volume of completed transactions.
Transaction card revenue depends largely on the volume and amount of transactions processed, the number of TransFund
automated teller machine (“ATM”) locations and the number of merchants served. Transaction card revenue totaled $90.2
million for 2020, a $3.0 million or 3% increase over 2019. Revenues from the processing of transactions on behalf of the
members of our TransFund electronic funds transfer ("EFT") network totaled $78.4 million, up $1.0 million or 1% over
2019. The number of TransFund ATM locations totaled 2,599 at December 31, 2020 compared to 2,463 at December 31, 2019.
Merchant services fees paid by customers for account management and electronic processing of card transactions totaled $9.2
million, relatively consistent with the prior year.
Fiduciary and asset management revenue is earned through managing or holding of assets for customers and executing
transactions or providing related services. Approximately 90% of fiduciary and asset management revenue is primarily based
on the fair value of assets. Rates applied to those asset values vary based on the nature of the relationship. Fiduciary and
managed asset relationships generally have a higher fee rate than non-fiduciary and/or managed relationships.
Fiduciary and asset management revenue decreased $9.6 million or 5% compared to 2019. The low rate environment has put
pressure on our mutual fund revenue streams, partially offset by increased trust and managed account fees from higher client
asset balances.We also had approximately $5.6 million in fee waivers during 2020 as a result of the significant decline in
interest rates. We have voluntarily waived certain administration fees on the Cavanal Hill money market funds in order to
maintain positive yields on these funds in the current low short-term interest rate environment.
33
A distribution of assets under management or administration and related fiduciary and asset management revenue follows:
Table 4 -- Assets Under Management or Administration
Year Ended December 31,
Balance
2020
Revenue1 Margin2
Balance
2019
Revenue1 Margin2
Managed fiduciary assets:
Personal
Institutional
$ 11,172,457 $ 95,753
0.86 % $ 10,441,048 $ 97,527
15,364,387
29,443
0.19 % 13,512,904
25,603
Total managed fiduciary assets
26,536,844
125,196
0.47 % 23,953,952
123,130
Non-managed assets:
Fiduciary
Non-fiduciary
33,958,369
40,603
0.12 % 28,398,183
52,480
13,590,435
1,646
0.01 % 14,250,586
1,415
0.93 %
0.19 %
0.51 %
0.18 %
0.01 %
Safekeeping and brokerage assets under
administration
17,506,599
—
— % 16,138,240
—
— %
Total non-managed assets
65,055,403
42,249
0.06 % 58,787,009
53,895
0.09 %
Total assets under management or administration
1 Fiduciary and asset management revenue includes asset-based and other fees associated with the assets.
2 Revenue divided by period-end balance.
$ 91,592,247 $ 167,445
0.18 % $ 82,740,961 $ 177,025
0.21 %
A summary of changes in assets under management or administration for the year ended December 31, 2020 and 2019 follows:
Table 5 -- Changes in Assets Under Management or Administration
Beginning balance
Net inflows (outflows)
Net change in fair value
Ending balance
Year Ended
December 31,
2020
2019
$
82,740,961 $ 76,279,777
1,859,868
6,991,418
(257,531)
6,718,715
$
91,592,247 $ 82,740,961
Mortgage banking revenue totaled $182.4 million for 2020, a $74.8 million or 70% increase compared to 2019. Mortgage
production revenue increased $83.1 million. Production volume is up $1.0 billion as average primary interest rates decreased 84
basis points compared to 2019. Gain on sale margin also increased 172 basis points to 3.16%. A rapid decrease in interest rates
has led to increased application demand and industry-wide capacity constraints. Mortgage servicing revenue was $56.5 million,
an $8.3 million decrease compared to the prior year. The outstanding principal balance of mortgage loans serviced for others
totaled $16.2 billion at December 31, 2020, a $4.5 billion decrease compared to December 31, 2019, largely due to our strategic
decision to focus on higher-margin products and distribution channels along with a sale of mortgage servicing rights. During
the second quarter of 2020, we completed a sale of mortgage servicing rights on $1.6 billion of unpaid principal balance,
primarily related to loans guaranteed by the Veteran's Administration. Completion of this sale meaningfully reduced the future
expected credit losses in the servicing portfolio.
34
Table 6 – Mortgage Banking Revenue
(In thousands)
Mortgage production revenue
$ 125,848
$
42,720
$
31,690
$
38,498
$
69,628
Year Ended December 31,
2020
2019
2018
2017
2016
Mortgage loans funded for sale
$ 3,764,112
$ 2,973,291
$ 2,587,297
$ 3,286,873
$ 6,117,417
Add: Current year end outstanding commitments
Less: Prior year end outstanding commitments
380,637
158,460
158,460
160,848
160,848
222,919
222,919
318,359
318,359
601,147
Total mortgage production volume
3,986,289
2,970,903
2,525,226
3,191,433
5,834,629
Gain on sale margin
3.16 %
1.44 %
1.25 %
1.21 %
1.19 %
Mortgage loan refinances to mortgage loans funded
for sale
Primary mortgage interest rates:
58 %
44 %
28 %
40 %
51 %
Average
Period end
3.10 %
2.67 %
3.94 %
3.74 %
4.54 %
4.55 %
3.99 %
3.99 %
3.65 %
4.32 %
Mortgage servicing revenue
$
56,512
$
64,821
$
66,097
$
66,221
$
64,286
Average outstanding principal balance of mortgage
loans serviced for others
18,422,210
21,257,462
21,891,749
22,055,002
20,837,897
Average mortgage servicing fee rates
0.31 %
0.30 %
0.30 %
0.30 %
0.31 %
Primary rates disclosed in Table 6 above represent rates generally available to borrowers on 30 year conforming mortgage
loans.
Net gains on securities, derivatives and other assets
As discussed in the Market Risk section following, the fair value of our mortgage servicing rights ("MSRs") changes in
response to changes in primary mortgage loan rates and other assumptions. We attempt to mitigate the earnings volatility
caused by changes in the fair value of MSRs by designating certain financial instruments as an economic hedge. Changes in the
fair value of these instruments are generally expected to partially offset changes in the fair value of MSRs.
The net economic benefit of the changes in fair value of mortgage servicing rights and related economic hedges was $24.9
million in 2020, including a $95.3 million increase in the fair value of securities and derivative contracts held as an economic
hedge, offset by a $79.5 million decrease in the fair value of mortgage servicing rights and $9.1 million of related net interest
revenue.
The net economic cost of changes in the fair value of mortgage servicing rights and related economic hedges was $17.9 million
in 2019. The fair value of mortgage servicing rights decreased $53.5 million. The fair value of securities and interest rate
derivative contracts held as an economic hedge increased $30.4 million. Net interest earned on securities held as an economic
hedge was $5.2 million.
The significant improvement in results versus 2019 was due to the combination of a more favorable mortgage servicing rights
risk profile; increased volume and carry on the hedge portfolio; positive hedge strategy performance; and positive economics on
the sale of GNMA servicing rights.
35
Table 7 – Gain (Loss) on Mortgage Servicing Rights, Net of Economic Hedge
(In thousands)
Year Ended December 31,
2020
2019
2018
2017
2016
Gain (loss) on mortgage hedge derivative contracts, net
$ 42,096 $ 14,589 $
551 $
681 $ (15,696)
Gain (loss) on fair value option securities, net
Gain (loss) on economic hedge of mortgage servicing rights
53,248
95,344
15,787
30,376
(25,572)
(25,021)
(2,733)
(10,555)
(2,052)
(26,251)
Gain (loss) on change in fair value of mortgage servicing rights
(79,524)
(53,517)
4,668
172
(2,193)
Gain (loss) on changes in fair value of mortgage servicing rights, net of
economic hedges included in other operating revenue
Net interest revenue on fair value option securities1
Total economic benefit (cost) of changes in the fair value of mortgage
servicing rights, net of economic hedges
15,820
(23,141)
(20,353)
(1,880)
(28,444)
9,085
5,214
4,798
8,435
4,356
$ 24,905 $ (17,927) $ (15,555) $
6,555 $ (24,088)
1 Actual interest earned on fair value option securities less internal transfer-priced cost of funds.
Fourth Quarter 2020 Other Operating Revenue
Other operating revenue was $196.8 million for the fourth quarter of 2020, an $18.2 million or 10% increase over the fourth
quarter of 2019.
Mortgage banking revenue was $39.3 million for the fourth quarter of 2020, an increase of $13.9 million. A decrease in
mortgage interest rates in 2020 increased mortgage loan production. Mortgage loan production volumes were $819 million for
the fourth quarter of 2020, compared to $635 million in the fourth quarter of 2019. The fourth quarter of 2020 included a $6.0
million increase in the fair value of mortgage servicing rights, net of economic hedges, while the fourth quarter of 2019
included a $3.7 million decrease.
Other gains and losses, net, increased $7.0 million largely due to changes in the fair value of assets related to the deferred
compensation plan and equity securities not held for trading purposes.
Brokerage and trading revenue was $39.5 million for the fourth quarter of 2020, a decrease of $4.3 million, largely due to the
shift of brokerage and trading fee revenue to net interest revenue partially offset by increased customer hedging fees and
investment banking revenue. Fiduciary and asset management revenue decreased $3.2 million while deposit service charges
decreased $3.0 million.
2019 Other Operating Revenue
Other operating revenue totaled $694.4 million for 2019, an increase of $77.6 million or 13% compared to 2018 driven by
growth in brokerage and trading revenue and mortgage banking revenue. A $15.4 million fee earned through the sale of client
assets was recognized as fiduciary and asset management revenue in 2018. This fee is excluded from the fluctuation discussion
below.
Brokerage and trading revenue for 2019 increased $51.5 million compared to 2018. Lower mortgage interest rates during 2019
increased customer mortgage-backed trading activities. Trading revenue increased $60.5 million in 2019. Customer hedging
revenue decreased $19.9 million compared to 2018. This is reflective of a shift in the mix of our to-be-announced residential
mortgage-backed securities contracts from our customer hedging program to our trading program. Insurance brokerage fees
increased $9.7 million compared to 2018 due to a full of year of operations with the addition of CoBiz in October, 2018.
Transaction card revenue grew by $3.2 million over 2018, primarily due to growth in transaction volumes. Fiduciary and asset
management revenue grew $7.7 million over 2018, primarily due to growth in managed fiduciary assets.
Mortgage banking revenue increased by $9.8 million over 2018. Lower mortgage interest rates led to an increase in the supply
of mortgage applications.
36
Other Operating Expense
Other operating expense for 2020 totaled $1.2 billion, a $33.6 million or 3% increase over the prior year. CoBiz added $17.2
million in integration costs during 2019. Excluding those costs, operating expense increased $50.8 million, largely related to
incentive compensation. The fluctuation discussion below excludes the impact of closing and integration costs.
Table 8 – Other Operating Expense
(In thousands)
Regular compensation
Incentive compensation:
Cash-based compensation
Share-based compensation
Deferred compensation
Total incentive compensation
Employee benefits
Total personnel expense
Business promotion
Charitable contributions to BOKF Foundation
Professional fees and services
Net occupancy and equipment
Insurance
Data processing & communications1
Printing, postage and supplies
Net losses & operating expenses of repossessed assets
Amortization of intangible assets
Mortgage banking costs
Other expense
Total other operating expense
Year Ended December 31,
2020
2019
2018
2017
2016
$
390,282 $
395,902 $ 358,280 $
333,226 $ 332,740
186,059
144,526
132,593
127,964
128,077
16,037
8,401
210,497
87,695
688,474
14,511
9,000
53,437
112,722
19,990
135,497
15,061
10,709
20,443
56,711
29,382
15,544
8,711
4,229
(1,076)
23,602
4,091
10,464
1,687
168,781
135,746
155,657
140,228
95,882
89,105
84,525
80,151
660,565
583,131
573,408
553,119
35,662
3,000
54,861
110,275
20,906
30,523
2,846
59,099
97,981
23,318
124,983
114,796
16,517
6,707
20,618
50,685
27,602
17,169
17,052
9,620
46,298
26,333
28,877
2,000
51,067
86,477
19,653
108,125
15,689
9,687
6,779
52,856
32,054
26,582
2,000
56,783
80,024
32,489
93,736
15,584
3,359
6,862
61,387
47,560
$ 1,165,937 $ 1,132,381 $ 1,028,166 $
986,672 $ 979,485
Average number of employees (full-time equivalent)
5,011
5,155
4,993
4,900
4,872
Non-GAAP Reconciliation:1
Data processing and communications expense on income
statement
Netting adjustment
Data processing and communications expense after netting
135,497
124,983
114,796
146,970
131,841
—
—
—
(38,845)
(38,105)
adjustment
93,736
1 Non-GAAP measure to net interchange charges for 2016-2017 between transaction card revenue and data processing and communications
expense as a result of the revenue recognition standard implemented January 1, 2018. This measure has no effect on net income or earnings
per share.
114,796
135,497
124,983
108,125
Personnel expense
Personnel expense increased $30.8 million in 2020. Incentive compensation increased $41.8 million or 25% over 2019. Cash-
based incentive compensation plans, which are either intended to provide current rewards to employees who generate long-term
business opportunities for the Company based on growth in loans, deposits, customer relationships and other measurable
metrics or intended to compensate employees with commissions on completed transactions, grew $41.6 million or 29% over
2019, largely related to the growth in mortgage-backed securities trading activities. This increase was partially offset by lower
employee benefits costs of $7.2 million or 8%, largely related to decreased employee healthcare costs.
37
Non-personnel expense
Non-personnel expense increased $20.0 million or 4% over the prior year.
Data processing and communications expense increased $12.5 million or 10% primarily due to technology project costs.
Occupancy and equipment expense increased $6.4 million or 6%, largely due to increased cleaning costs during the pandemic
as well as increased depreciation costs. Mortgage banking expense increased $6.0 million or 12%, primarily due to an increase
in prepayments and accruals related to default servicing and loss mitigation costs on loans serviced for others. Charitable
contributions to the BOKF Foundation increased $6.0 million as we focus on the communities we serve and the extreme needs
created by the pandemic. Professional fees increased $5.0 million or 10%. Net losses and operating expenses of repossessed
assets increased $4.0 million or 60% over the prior year mainly due to write-downs on a set of oil and gas properties and a retail
commercial real estate property during the year.
Business promotion costs, consisting largely of travel and entertainment and advertising costs, were down $19.5 million or
57%, primarily due to the effects of the current pandemic.
Fourth Quarter 2020 Operating Expenses
Other operating expense for the fourth quarter of 2020 totaled $300.7 million, an increase of $11.9 million over the fourth
quarter of 2019.
Personnel expense increased $7.8 million over the fourth quarter of 2019 An increase in incentive compensation costs of $12.2
million was partially offset by a decrease of $3.4 million in regular compensation. Cash-based incentive compensation
increased $11.4 million due to increased activity, particularly in the mortgage banking and trading areas. Deferred
compensation expense increased $3.1 million, which is largely offset by changes in the fair value of assets held in rabbi trusts
for the benefit of participants. Share-based compensation expense, which represents expense for equity awards based on the
grant date fair value, decreased $2.3 million due to changes in vesting assumptions related to performance-based share awards.
Non-personnel expense increased $4.1 million compared to the fourth quarter of 2019. Data processing and communications
costs increased $3.2 million related to technology projects. Charitable contributions to the BOKF Foundation increased $4.0
million. These increases were partially offset by a decrease in business promotion expense of $5.1 million, largely related to
lower travel and entertainment costs during the pandemic.
2019 Operating Expenses
Other operating expense totaled $1.1 billion for 2019, a $104.2 million or 10% increase over 2018. CoBiz added $17.2 million
in closing and integration costs in 2019 and $16.6 million in 2018. The fluctuation discussion below excludes these costs.
Personnel expense increased $80.3 million in 2019. Regular compensation expense increased $36.0 million, largely related to
the addition of CoBiz employees. Incentive compensation grew $37.6 million, primarily related to increased sales activities and
the addition of CoBiz employees. Cash based incentive compensation grew $16.5 million over 2018. Share-based incentive
compensation increased $11.3 million due to an increase in the vesting probability of certain performance-based share awards.
Deferred compensation expense increased $9.8 million. This expense is largely offset by changes in the fair value of assets held
in rabbi trusts for the benefit of participants, which is included in other gains (losses).
Non-personnel expense increased $23.3 million or 5% over 2018. Intangible asset amortization increased $11.0 million due to
the addition of CoBiz. Occupancy and equipment expense increased $8.4 million, primarily related to the addition of CoBiz
operations. Data processing and communications expense increased $8.5 million due to technology project costs. Mortgage
banking costs increased $4.4 million, largely due to an increase in prepayments.
Net losses and operating expenses of repossessed assets decreased $10.3 million compared to 2018 mainly due to write-downs
on a set of oil and gas properties and a healthcare property in 2018. Insurance expense decreased $2.6 million, largely due to the
elimination of a large bank deposit insurance surcharge assessed by the FDIC in the fourth quarter of 2018.
38
Income Taxes
Income tax expense was $128.8 million or 22.8% of net income before taxes for 2020, $130.2 million or 20.6% of net income
before taxes for 2019 and $119.1 million or 21.1% of net income before taxes for 2018.
Net deferred tax liabilities totaled $9.5 million at December 31, 2020 compared to net deferred tax liabilities of $26 million at
December 31, 2019. We have evaluated the recoverability of our deferred tax assets based on the generation of future taxable
income during the periods in which those temporary differences become deductible and determined that no valuation allowance
was required in 2020 and 2019.
Income tax expense was $45.1 million or 22.6% of net income before taxes for the fourth quarter of 2020 compared to $30.3
million or 21.5% of net income before taxes for the fourth quarter of 2019.
39
Table 9 – Selected Quarterly Financial Data (Unaudited)
(In thousands, except per share data)
Interest revenue
Interest expense
Net interest revenue
Provision for credit losses
Net interest revenue after provision for credit losses
Fees and commissions revenue
Gain on financial instruments and other assets, net
Change in fair value of mortgage servicing rights
Other operating revenue
Personnel expense
Other non-personnel expense
Total other operating expense
Net income before taxes
Federal and state income taxes
Net income
2020
First
Second
Third
Fourth
$
348,937 $
306,384 $
294,659 $
319,020
87,577
261,360
93,771
167,589
192,724
76,075
(88,480)
180,319
156,181
112,443
268,624
79,284
17,300
61,984
28,280
278,104
135,321
142,783
213,680
19,774
(761)
22,909
271,750
21,790
297,230
—
(6,500)
271,750
303,730
222,865
181,051
7,853
3,441
9,451
6,276
232,693
234,159
196,778
176,235
119,152
295,387
80,089
15,803
64,286
179,860
121,405
301,265
204,644
50,552
154,092
58
176,198
124,463
300,661
199,847
45,138
154,709
485
Net income (loss) attributable to non-controlling interests
(95)
(407)
Net income attributable to BOK Financial Corporation shareholders
$
62,079 $
64,693 $
154,034 $
154,224
Earnings per share:
Basic
Diluted
Average shares:
Basic
Diluted
$
$
0.88 $
0.88 $
0.92 $
0.92 $
2.19 $
2.19 $
2.21
2.21
70,123,685
69,876,043
69,877,866
69,489,597
70,130,166
69,877,467
69,879,290
69,493,050
40
Table 9 – Selected Quarterly Financial Data (Unaudited) (continued)
(In thousands, except per share data)
Interest revenue
Interest expense
Net interest revenue
Provision for credit losses
Net interest revenue after provision for credit losses
Fees and commissions revenue
Gain (loss) on financial instruments and other assets, net
Change in fair value of mortgage servicing rights
Other operating revenue
Personnel expense
Other non-personnel expense
Total other operating expense
Net income before taxes
Federal and state income taxes
Net income
2019
First
Second
Third
Fourth
$
376,074 $
390,820 $
395,207 $
369,857
97,972
278,102
8,000
105,388
285,432
5,000
270,102
280,432
116,111
279,096
12,000
267,096
99,608
270,249
19,000
251,249
160,552
17,384
176,108
25,512
186,119
12,924
179,422
(10,134)
(20,666)
(29,555)
(12,593)
9,297
157,270
172,065
186,450
178,585
169,228
117,929
287,157
160,342
116,795
277,137
162,573
116,719
279,292
168,422
120,373
288,795
140,215
29,950
175,360
37,580
174,254
32,396
141,039
30,257
$
110,265 $
137,780 $
141,858 $
110,782
Net income (loss) attributable to non-controlling interests
(347)
217
(373)
430
Net income attributable to BOK Financial Corporation shareholders
$
110,612 $
137,563
142,231
110,352
Earnings per share:
Basic
Diluted
Average shares:
Basic
Diluted
$
$
1.54 $
1.54 $
1.93 $
1.93 $
2.00 $
2.00 $
1.56
1.56
71,387,070
70,887,063
70,596,307
70,295,899
71,404,388
70,902,033
70,609,924
70,309,644
41
Lines of Business
We operate three principal lines of business: Commercial Banking, Consumer Banking and Wealth Management. Commercial
Banking includes lending, treasury and cash management services and customer risk management products for small
businesses, middle market and larger commercial customers. Commercial Banking also includes the TransFund EFT
network. Consumer Banking includes retail lending and deposit services, lending and deposit services to small business
customers served through our consumer branch network and all mortgage loan origination and servicing activities. Wealth
Management provides fiduciary services, private bank services, insurance and investment advisory services in all
markets. Wealth Management also underwrites state and municipal securities and engages in brokerage and trading activities.
In addition to our lines of business, we have a Funds Management unit. The primary purpose of this unit is to manage our
overall liquidity needs and interest rate risk. Each line of business borrows funds from and provides funds to the Funds
Management unit as needed to support their operations. Operating results for Funds Management and other include the effect of
interest rate risk positions and risk management activities, securities gains and losses including impairment charges, the
provision for credit losses in excess of net loans charged off, tax planning strategies and certain executive compensation costs
that are not attributed to the lines of business. The Funds Management unit also initially recognizes accruals for loss
contingencies when losses become probable. Actual losses are recognized by the lines of business if the accruals are settled.
We allocate resources and evaluate the performance of our lines of business using the net direct contribution, which includes
the allocation of funds, actual net credit losses and capital costs. In addition, we measure the performance of our business lines
after allocations of certain indirect expenses and taxes based on statutory rates.
The cost of funds borrowed from the Funds Management unit by the operating lines of business is transfer priced at rates that
approximate market rates for funds with similar repricing and cash flow characteristics. Market rates are generally based on the
applicable LIBOR or interest rate swap rates, adjusted for prepayment risk and liquidity risk. This method of transfer-pricing
funds that support assets of the operating lines of business tends to insulate them from interest rate risk.
The value of funds provided by the operating lines of business to the Funds Management unit is also based on rates that
approximate wholesale market rates for funds with similar repricing and cash flow characteristics. Market rates are generally
based on LIBOR or interest rate swap rates. The funds credit formula applied to deposit products with indeterminate maturities
is established based on their repricing characteristics reflected in a combination of the short-term LIBOR rate and a moving
average of an intermediate term swap rate, with an appropriate spread applied to both. Shorter duration products are weighted
towards the short term LIBOR rate and longer duration products are weighted towards the intermediate swap rates. The
expected duration ranges from 30 days for certain rate-sensitive deposits to five years. During 2018, the funds transfer pricing
rates for non-maturity deposits became inverted due to the flattening of the yield curve. Short term rates continued to increase
while long term rates remained relatively flat. In order to appropriately reflect the organizational value of these deposits to the
lines of business, we increased the funding credit to reflect the upward rate moves. Those adjustments are set annually each
January. During 2019, short-term rates moved down materially, which was reflected in the funding credit to the business lines
beginning in January, 2020.
Economic capital is assigned to the business units by a capital allocation model that reflects management’s assessment of
risk. This model assigns capital based upon credit, operating, interest rate and other market risk inherent in our business lines
and recognizes the diversification benefits among the units. The level of assigned economic capital is a combination of the risk
taken by each business line, based on its actual exposures and calibrated to its own loss history where possible. Average
invested capital includes economic capital and amounts we have invested in the lines of business.
As shown in Table 10 following, net income attributable to our lines of business decreased $9.8 million or 2% compared to the
prior year. Net interest revenue decreased by $119.0 million compared to the prior year, primarily due to decreases in the short-
term interest rate related to a 225 basis point reduction in the federal funds rate by the Federal Reserve since the middle of
2019. Net charge-offs were up $27.1 million over the prior year. Other operating revenue increased $130.6 million led by our
brokerage and trading and mortgage banking businesses. Other operating expense increased $57.3 million compared to prior
year, largely due to increased incentive compensation related to trading activities. The increase in net loss attributed to Funds
Management and other is largely due to the excess provision for expected credit losses over net charge-offs.
42
Table 10 – Net Income by Line of Business
(In thousands)
Commercial Banking
Consumer Banking
Wealth Management
Subtotal
Funds Management and other
Total
Commercial Banking
Year Ended December 31,
2020
2019
2018
$
306,005 $
374,806 $
333,515
95,360
115,628
516,993
(81,963)
56,606
95,331
526,743
(25,985)
25,399
86,027
444,941
705
$
435,030 $
500,758 $
445,646
Commercial Banking contributed $306.0 million to consolidated net income in 2020, a decrease of $68.8 million or 18%
compared to prior year.
Table 11 – Commercial Banking
(Dollars in thousands)
Net interest revenue from external sources
Net interest expense from internal sources
Total net interest revenue
Net loans charged off
Net interest revenue after net loans charged off
Fees and commissions revenue
Other gains, net
Other operating revenue
Personnel expense
Non-personnel expense
Other operating expense
Net direct contribution
Gain on financial instruments, net
Gain (loss) on repossessed assets, net
Corporate expense allocations
Income before taxes
Federal and state income taxes
Net income
Average assets
Average loans
Average deposits
Average invested capital
Year Ended December 31,
2020
2019
2018
$
714,932 $
919,148 $
726,855
(126,444)
(242,907)
(159,954)
588,488
69,475
519,013
187,119
242
187,361
159,165
99,738
258,903
676,241
39,011
637,230
168,667
1,745
170,412
163,106
89,353
252,459
566,901
30,358
536,543
161,949
752
162,701
122,863
79,232
202,095
447,471
555,183
497,149
193
(2,677)
24,862
420,125
114,120
106
331
43,055
512,565
137,759
$
306,005 $
374,806 $
26
(6,532)
36,670
453,973
120,458
333,515
$
26,994,075 $ 22,807,589 $ 18,432,035
18,711,372
18,090,224
15,073,484
14,319,729
10,319,677
2,220,177
2,218,013
8,517,137
1,561,623
43
Net interest revenue decreased $87.8 million or 13% compared to the prior year. Yields on deposits sold to the Funds
Management unit decreased as the value of deposits was impacted by falling interest rates. Net loans charged-off increased
$30.5 million.
Fees and commissions revenue increased $18.5 million or 11% due to growth in customer energy hedging revenue and an
increase in revenues from the processing of transactions on behalf of the members of our TransFund EFT network.
Operating expense increased $6.4 million or 3% over 2019. Non-personnel expense increased $10.4 million or 12%. Increases
in data processing and communications expense, occupancy and equipment expense, intangible amortization and deposit
insurance costs were partially offset by a decrease in business promotion expense. Personnel expense decreased $3.9 million or
2%. An decrease in incentive compensation costs was partially offset by an increase in regular compensation. Corporate
expense allocations decreased $18.2 million or 42% compared to the prior year.
The average outstanding balance of loans attributed to Commercial Banking was up $621 million or 3% over 2019 to $18.7
billion, primarily due to the full year benefit of acquired loans from CoBiz. Prior to April 1, 2019, CoBiz loans were attributed
to Funds Management and other. See the Loans section of Management's Discussion and Analysis of Financial condition
following for additional discussion of changes in commercial and commercial real estate loans, which are primarily attributed to
the Commercial Banking segment.
Average deposits attributed to Commercial Banking were $14.3 billion for 2020, a 39% increase over the prior year. See
Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital for further
discussion of change.
Consumer Banking
Consumer Banking services are provided through four primary distribution channels: traditional branches, the 24-hour
ExpressBank call center, Internet banking and mobile banking. Consumer Banking also conducts mortgage banking activities
through offices located outside of our Consumer Banking markets. In the first quarter of 2019, the strategic decision was made
to exit our online lead buying business, HomeDirect, to focus more on our core competency of developing complete, long-term
relationships with our clients through our traditional mortgage origination channel.
Net income attributed to Consumer Banking totaled $95.4 million for 2020, compared to $56.6 million in the prior
year. Improved performance by Consumer Banking was largely due to the effect of lower mortgage interest rates, which has
increased mortgage banking activity and related revenue.
44
Table 12 – Consumer Banking
(Dollars in thousands)
Net interest revenue from external sources
Net interest revenue from internal sources
Total net interest revenue
Net loans charged off
Net interest revenue after net loans charged off
Fees and commissions revenue
Other losses, net
Other operating revenue
Personnel expense
Other non-personnel expense
Total other operating expense
Net direct contribution
Gain (loss) on financial instruments, net
Change in fair value of mortgage servicing rights
Gain on repossessed assets, net
Corporate expense allocations
Net income before taxes
Federal and state income taxes
Net income
Average assets
Average loans
Average deposits
Average invested capital
Year Ended December 31,
2020
2019
2018
$
78,004 $
99,679 $
69,000
147,004
2,805
144,199
245,554
(1,835)
243,719
93,966
139,459
233,425
154,493
95,344
(79,524)
276
42,638
127,951
32,591
95,775
195,454
6,271
189,183
83,231
73,448
156,679
5,143
151,536
187,996
178,174
(496)
(51)
187,500
178,123
96,518
134,398
230,916
145,767
30,375
(53,517)
496
47,169
75,952
19,346
96,234
134,841
231,075
98,584
(25,021)
4,668
247
44,398
34,080
8,681
$
95,360 $
56,606 $
25,399
$
9,842,125 $
9,301,341 $
8,303,263
1,764,682
7,599,937
259,333
1,762,915
6,876,676
294,923
1,731,894
6,560,145
292,791
Net interest revenue from Consumer Banking activities decreased by $48.5 million or 25% compared to 2019, primarily due to
a decrease in the yield on deposits sold to our Funds Management unit. Average consumer deposits grew $723 million with
demand deposit balances up by $470 million or 22%.
Fees and commissions revenue increased $57.6 million or 31% over the prior year. Lower mortgage interest rates increased
mortgage loan origination volumes. Mortgage production volume increased $1.0 billion or 34% and gain on sale margin
increased 172 basis points due to industry-wide capacity constraints. Deposit service charges decreased $15.4 million. During
these uncertain times, we proactively waived certain fees. In addition, the pandemic has resulted in customers retaining cash
and not maintaining the usual level of spending, which has decreased overdraft fees compared to the prior year. Operating
expense increased $2.5 million or 1% over 2019. An increase in mortgage banking costs was largely offset by lower business
promotion expenses. Corporate expense allocations were $4.5 million or 10% lower than the prior year.
Changes in the fair value of our mortgage servicing rights, net of economic hedges, as more fully presented in Table 7, resulted
in a $15.8 million increase to pre-tax net income for 2020 compared to a $23.1 million decrease to pre-tax net income in 2019.
45
Wealth Management
Wealth Management contributed $115.6 million to consolidated net income in 2020, up $20.3 million or 21% over the prior
year. Increased fees and commissions revenue, primarily from U.S. agency residential mortgage-backed securities and related
derivatives trading, was partially offset by related incentive compensation costs.
Table 13 – Wealth Management
(Dollars in thousands)
Net interest revenue from external sources
Net interest revenue from internal sources
Total net interest revenue
Net loans recovered
Year Ended December 31,
2020
2019
2018
$
130,818 $
61,277 $
(13,528)
117,290
(209)
38,815
100,092
(308)
(288)
81,528
31,480
113,008
Net interest revenue after net loans recovered
117,499
100,400
113,296
Fees and commissions revenue
Other gains (losses), net
Other operating revenue
Personnel expense
Other non-personnel expense
Other operating expense
Net direct contribution
Gain on financial instruments, net
Corporate expense allocations
Net income before taxes
Federal and state income tax
Net income
Average assets
Average loans
Average deposits
Average invested capital
399,229
341,333
296,465
(395)
56
(96)
398,834
341,389
296,369
243,461
82,147
325,608
201,368
75,899
277,267
184,144
73,506
257,650
190,725
164,522
152,015
4
35,331
155,398
39,770
2
36,239
128,285
32,954
7
35,920
116,102
30,075
$
115,628 $
95,331 $
86,027
$ 15,695,646 $ 10,204,426 $ 8,447,784
1,758,226
1,609,464
1,423,126
8,676,047
6,447,987
5,617,325
300,860
274,599
251,401
Revenue attributed to the Wealth Management segment totaled $516.1 million for 2020, a $74.6 million or 17% increase over
the previous year. Net interest revenue increased $17.2 million and fees and commissions revenue increased $57.9 million.
Demand for mortgage loans and related derivative contracts increased significantly due to a decrease in mortgage interest rates
that began in early 2020 and continued throughout the year. We expanded trading activities that provide liquidity to our
mortgage banking customers and enable them to manage their market risk. Our expanded trading activities are subject to limits
established by the Board of Directors as discussed in the Market Risk section following. Growth in transaction volumes resulted
in an $89.7 million increase in combined net interest revenue and trading revenue. Our level of trading volume is largely
dependent on industry-wide mortgage loan production.
Growth in total revenue from expanded trading activities was partially offset by decreased net interest revenue generated by
deposits sold to our Funds Management unit and loans attributed to the Wealth Management segment, and fiduciary and asset
management fees. Both were negatively affected by the current low short-term interest rate environment.
46
Operating expense increased $48.3 million or 17% over the prior year. Personnel expense increased $42.1 million or 21%
primarily related to incentive compensation as a result of higher trading activity. Non-personnel expense increased $6.2 million
or 8% over 2019. Corporate expense allocations were relatively consistent compared to the prior year.
47
Financial Condition
Securities
We maintain a securities portfolio to enhance profitability, manage interest rate risk, provide liquidity and comply with
regulatory requirements. Securities are classified as trading, held for investment, or available for sale.
Table 14 – Securities
(In thousands)
Trading:
U.S. government securities
Residential agency mortgage-backed
securities
Municipal securities
Asset-backed securities
Other debt securities
Total trading securities
Investment:
Municipal securities
Residential agency mortgage-backed
securities
Other debt securities
Total investment securities
Allowance for credit losses1
Investment securities, net of allowance
$
2020
December 31,
2019
2018
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
$
9,183 $
9,183 $
44,258 $
44,264 $
63,511 $
63,765
4,672,772
19,130
—
10,450
1,791,584
34,507
42,656
24,411
$ 4,711,535 $ 4,707,975 $ 1,621,562 $ 1,623,921 $ 1,945,954 $ 1,956,923
4,669,148
19,172
—
10,472
1,502,358
26,136
14,105
34,705
1,504,651
26,196
14,084
34,726
1,781,618
34,508
41,971
24,346
$
229,245 $
255,270 $
274,535
295,032 $
334,665 $
346,623
$
8,913
7,373
245,531 $
(688)
244,843 $
9,790
7,371
272,431 $
—
272,431 $
10,676
8,207
293,418 $
—
293,418 $
11,164
8,206
314,402 $
—
314,402 $
12,612
7,910
355,187 $
—
355,187 $
12,770
7,905
367,298
—
367,298
Available for sale:
U.S. Treasury
Municipal securities
Mortgage-backed securities:
Residential agency
Residential non-agency
Commercial agency
Other debt securities
Total available for sale securities
Fair value option securities:
U.S. Treasury
Residential agency mortgage-backed
$
500 $
508 $
165,318
167,979
1,598 $
1,789
1,600 $
1,861
496 $
2,782
493
2,864
9,019,013
17,563
3,406,956
500
5,804,708
59,736
2,953,889
35,430
$ 12,609,850 $ 13,050,665 $ 11,131,494 $ 11,269,643 $ 8,952,391 $ 8,857,120
9,340,471
32,770
3,508,465
472
8,046,096
41,609
3,178,005
472
5,886,323
40,948
2,986,297
35,545
7,956,297
25,968
3,145,342
500
$
— $
— $
9,965 $
9,917 $
— $
—
securities
Total fair value option securities
280,469
280,469 $
1 Effective with the adoption of FASB ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) on January 1, 2020.
114,982
114,982 $ 1,084,516 $ 1,098,577 $
110,519
110,519 $
1,088,660
1,074,551
$
283,235
283,235
We maintain an inventory of trading securities in support of sales to a variety of customers, including banks, corporations,
insurance companies, money managers and others. As discussed in the Market Risk section of this report, trading activities
involve risk of loss from adverse price movement. We mitigate this risk within board-approved limits through the use of
derivative contracts, short-sales and other techniques. These limits remain unchanged from levels set before our expanded
trading activities. For further discussion of growth in trading securities, see "Lines of Business" section of Management's
Discussion and Analysis.
Investment securities consist primarily of intermediate and long-term, fixed rate Oklahoma and Texas municipal bonds and
taxable Texas school construction bonds. The investment security portfolio is diversified among issuers.
48
Available for sale securities, which may be sold prior to maturity, are carried at fair value. Unrealized gains or losses, net of
deferred taxes, are recorded as accumulated other comprehensive income in shareholders’ equity. The amortized cost of
available for sale securities totaled $12.6 billion at December 31, 2020, an increase of $1.5 billion compared to December 31,
2019. Available for sale securities consist primarily of U.S. government agency residential mortgage-backed securities and U.S.
government agency commercial mortgage-backed securities. Both residential and commercial mortgage-backed securities have
credit risk from delinquency or default of the underlying loans. We mitigate this risk by primarily investing in securities issued
by U.S. government agencies. Principal and interest payments on the underlying loans are fully guaranteed. Commercial
mortgage-backed securities have prepayment penalties similar to commercial loans. At December 31, 2020, residential
mortgage-backed securities represented 72% of total available for sale securities.
A primary risk of holding residential mortgage-backed securities comes from extension during periods of rising interest rates or
prepayment during periods of falling interest rates. We evaluate this risk through extensive modeling of risk both before making
an investment and throughout the life of the security. Our best estimate of the effective duration of the combined residential
mortgage-backed securities portfolio held in investment and available for sale securities portfolios at December 31, 2020 is 2.3
years. Management estimates the combined portfolios' duration extends to 4.0 years assuming an immediate 200 basis point
upward shock. The estimated duration contracts to 1.9 years assuming a 100 basis point decline in the current low rate
environment.
The aggregate gross amount of unrealized losses on available for sale securities totaled $8.8 million at December 31, 2020, an
$11.4 million decrease compared to December 31, 2019. On a quarterly basis, we perform an evaluation on debt securities to
determine if the unrealized losses are temporary as more fully described in Note 2 of the Consolidated Financial Statements. No
other-than-temporary impairment charges were recognized in earnings in 2020.
Certain residential mortgage-backed securities issued by U.S. government agencies and included in Fair value option securities
on the Consolidated Balance Sheets have been segregated and designated as economic hedges of changes in the fair value of
our mortgage servicing rights. We have elected to carry these securities at fair value with changes in fair value recognized in
current period income. These securities are held with the intent that gains or losses will offset changes in the fair value of
mortgage servicing rights and related derivative contracts. Fair value option securities totaled $115 million, a decrease of $984
million. See Market Risk section for further details.
Bank-Owned Life Insurance
We have approximately $399 million of bank-owned life insurance at December 31, 2020. This investment is expected to
provide a long-term source of earnings to support existing employee benefit programs. Approximately $308 million is held in
separate accounts. Our separate account holdings are invested in diversified portfolios of investment-grade fixed income
securities and cash equivalents, including U.S. Treasury and Agency securities, residential mortgage-backed securities,
corporate debt, asset-backed and commercial mortgage-backed securities. The portfolios are managed by unaffiliated
professional managers within parameters established in the portfolio’s investment guidelines. The cash surrender value of
certain life insurance policies is further supported by a stable value wrap, which protects against changes in the fair value of the
investments. As of December 31, 2020, the fair value of investments held in separate accounts was approximately $331
million. As the underlying fair value of the investments held in a separate account at December 31, 2020 exceeded the net book
value of the investments, no cash surrender value was supported by the stable value wrap. The stable value wrap is provided by
a domestic financial institution. The remaining cash surrender value of $91 million primarily represents the cash surrender
value of policies held in general accounts and other amounts due from various insurance companies.
49
Loans
The aggregate loan portfolio before allowance for loan losses totaled $23.0 billion at December 31, 2020, an increase of $1.3
billion over December 31, 2019, primarily due to PPP loans, partially offset by commercial loan paydowns.
Table 15 – Loans
(In thousands)
Commercial:
Energy
Services
Healthcare
General business
Total commercial
Commercial real estate:
2020
2019
December 31,
2018
2017
2016
$
3,469,194 $ 3,973,377 $
3,508,583
3,305,990
2,793,768
13,077,535
3,832,031
3,033,916
3,192,326
14,031,650
3,590,333 $
4,062,742
2,799,277
3,183,726
13,636,078
2,930,156 $
2,992,534
2,314,753
2,496,532
10,733,975
2,497,868
3,119,056
2,201,916
2,571,984
10,390,824
Multifamily
Office
Industrial
Retail
Residential construction and land development
Other commercial real estate
Total commercial real estate
1,328,045
1,085,257
810,510
796,223
119,394
559,109
4,698,538
1,265,562
928,379
856,117
775,521
150,879
457,325
4,433,783
1,288,065
1,072,920
778,106
919,082
148,584
558,056
4,764,813
980,017
831,770
573,014
691,532
117,245
286,409
3,479,987
903,272
798,888
871,749
761,888
135,533
337,716
3,809,046
Paycheck protection program
1,682,310
—
—
—
—
Loans to individuals:
Residential mortgage
Residential mortgage guaranteed by U.S.
government agencies
Personal
Total loans to individuals
Total
Commercial
1,863,003
1,886,378
2,039,167
1,776,180
1,750,445
408,687
1,277,447
3,549,137
197,794
1,201,382
3,285,554
190,866
1,025,806
3,255,839
197,506
965,776
2,939,462
199,387
839,958
2,789,790
$ 23,007,520 $ 21,750,987 $ 21,656,730 $ 17,153,424 $ 16,989,660
Commercial loans represent loans for working capital, facilities acquisition or expansion, purchases of equipment and other
needs of commercial customers primarily located within our geographical footprint. Commercial loans are underwritten
individually and represent ongoing relationships based on a thorough knowledge of the customer, the customer’s industry and
market. While commercial loans are generally secured by the customer’s assets including real property, inventory, accounts
receivable, operating equipment, interests in mineral rights and other property and may also include personal guarantees of the
owners and related parties, the primary source of repayment of the loans is the on-going cash flow from operations of the
customer’s business. Inherent lending risks are centrally monitored on a continuous basis from underwriting throughout the life
of the loan for compliance with commercial lending policies.
Commercial loans totaled $13.1 billion or 57% of the loan portfolio at December 31, 2020, decreasing $954 million or 7%
compared to December 31, 2019. Borrowers continue to reduce leverage during this time of economic uncertainty.
50
Approximately 78% of loans in this segment are located within our geographic footprint, based on collateral location. Loans for
which the collateral location is less relevant, such as unsecured loans and reserve-based energy loans are categorized by the
borrower's primary operating location. The largest concentration of loans in this segment outside of our footprint is California,
totaling 5% of the segment.
Supporting the energy industry with loans to producers and other energy-related entities has been a hallmark of the Company
since its founding and represents a large portion of our commercial loan portfolio. In addition, energy production and related
industries have a significant impact on the economy in our primary markets. Loans collateralized by oil and gas properties are
subject to a semi-annual engineering review by our internal staff of petroleum engineers. This review is used as the basis for
developing the expected cash flows supporting the loan amount. The projected cash flows are discounted according to risk
characteristics of the underlying oil and gas properties. Loans are evaluated to demonstrate with reasonable certainty that crude
oil, natural gas and natural gas liquids can be recovered from known oil and gas reservoirs under existing economic and
operating conditions at current pricing levels and with existing conventional equipment and operating methods and costs. As
part of our evaluation of credit quality, we analyze rigorous stress tests over a range of commodity prices and take proactive
steps to mitigate risk when appropriate.
Outstanding energy loans totaled $3.5 billion or 15% of total loans at December 31, 2020. Approximately $2.6 billion or 76%
of energy loans were to oil and gas producers, a $497 million decrease compared to December 31, 2019. The majority of this
portfolio is first lien, senior secured, reserve-based lending, which we believe is the lowest risk form of energy lending.
Approximately 67% of the committed production loans are secured by properties primarily producing oil and 33% of the
committed production loans are secured by properties primarily producing natural gas.
Loans to midstream oil and gas companies totaled $700 million or 20% of energy loans, an increase of $91 million over the
prior year. Loans to borrowers that provide services to the energy industry totaled $110 million or 3% of energy loans, a
decrease of $68 million during 2020. Loans to other energy borrowers, including those engaged in wholesale or retail energy
sales totaled $36 million or 1% of energy loans, a decrease of $31 million compared to the prior year.
Unfunded energy loan commitments were $2.4 billion at December 31, 2020, down $524 million compared to December 31,
2019 as a result of the semi-annual borrowing base redetermination process in the second and fourth quarters of 2020.
The healthcare sector of the loan portfolio totaled $3.3 billion or 14% of total loans. Healthcare loans increased $272 million
over December 31, 2019, primarily due to growth in loans to senior housing and care facilities. Healthcare sector loans consist
primarily of loans for the development and operation of senior housing and care facilities, including independent living, assisted
living and skilled nursing. Generally we loan to borrowers with a portfolio of multiple facilities that serves to help diversify
risks specific to a single facility. Healthcare also includes loans to hospitals and other medical service providers impacted by a
deferral of elective procedures. The CARES Act includes multiple revenue enhancement measures for both hospitals and skilled
nursing facilities as they manage through the risks of the virus.
The services sector of the loan portfolio decreased $323 million to $3.5 billion or 15% of total loans. Service sector loans
consist of a large number of loans to a variety of businesses, including Native American tribal and state and local governments,
Native American tribal casino operations, educational services, foundations and not-for-profit organizations and specialty trade
contractors. Approximately $1.9 billion of the services category is made up of loans with individual balances of less than $10
million. Service sector loans are generally secured by the assets of the borrower with repayment coming from the cash flows of
ongoing operations of the customer’s business.
General business loans decreased $399 million to $2.8 billion or 12% of total loans. General business loans primarily consist of
$1.6 billion of wholesale/retail loans and $701 million of loans from other commercial industries.
Our services and general business loans include areas we consider to be more exposed to the economic slowdown as a result of
the social distancing measures in place to combat the COVID-19 pandemic such as entertainment and recreation, retail, hotels,
churches, airline travel, and higher education that are dependent on large social gatherings to remain profitable. This represents
less than 7 percent of our total portfolio. Some of these borrowers have participated in the PPP, which has provided some
measure of relief. We will continue to monitor these areas closely in the coming months.
We participate in shared national credits when appropriate to obtain or maintain business relationships with local customers.
Shared national credits are defined by banking regulators as credits of more than $100 million and with three or more non-
affiliated banks as participants. At December 31, 2020, the outstanding principal balance of these loans totaled $4.1 billion,
including $1.8 billion in the energy sector. Approximately 85% of shared national credits are to borrowers with local market
relationships. We serve as the agent lender in approximately 21% of our shared national credits, based on dollars committed.
51
We hold shared national credits to the same standard of analysis and perform the same level of review as internally originated
credits. Our lending policies generally avoid loans in which we do not have the opportunity to maintain or achieve other
business relationships with the customer. In addition to management’s quarterly assessment of credit risk, banking regulators
annually review a sample of shared national credits for proper risk grading.
Commercial Real Estate
Commercial real estate represents loans for the construction of buildings or other improvements to real estate and property held
by borrowers for investment purposes generally within our geographical footprint. We require collateral values in excess of the
loan amounts, demonstrated cash flows in excess of expected debt service requirements, equity investment in the project and a
portion of the project already sold, leased or permanent financing already secured. The expected cash flows from all significant
new or renewed income producing property commitments are stress tested to reflect the risks in varying interest rates, vacancy
rates and rental rates. As with commercial loans, inherent lending risks are centrally monitored on a continuous basis from
underwriting throughout the life of the loan for compliance with applicable lending policies.
The commercial real estate loan balance as a percentage of our total loan portfolio has ranged from 20% to 22% over the past
five years. The outstanding balance of commercial real estate loans increased $265 million over 2019. Continued friction in the
permanent financing market continued to constrain paydown activity. Loans secured by office buildings increased $157 million
or 17%. Other real estate loans increased $102 million or 22%. Loans secured by multifamily real estate increased $62 million
or 5%. These increases were partially offset by a decrease of $46 million or 5% in loans secured by industrial facilities and a
decrease of $31 million or 21% in construction and land development loans.
Approximately 67% of loans in this segment are in our geographic footprint based on collateral location. The largest
concentration of loans in this segment outside our footprint is Utah, totaling 8% of the segment, followed by California at 7%.
All other states represent less than 5% individually.
Loans secured by retail facilities and office buildings may be adversely impacted by measures being taken to hinder the spread
of the virus as well as changes in consumer behavior.
Paycheck Protection Program
We are actively participating in programs initiated by the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"),
including the Small Business Administration's ("SBA") Paycheck Protection Program ("PPP") that began on April 3, 2020. PPP
provided fully forgivable loans when utilized for qualified expenditures, including to help small business maintain payrolls
during the COVID-19 pandemic. These loans generally have a contractual term of two years, though most are expected to be
forgiven prior to maturity after completion of a compliance period. Loans are guaranteed and amounts forgiven will be
reimbursed to the Company by the SBA. The loans carry a rate of 1 percent. Interest plus loan fees, which vary depending on
loan size, are accrued over the contractual life of the loan. Any unaccreted origination fees will be recognized when the loan is
paid. Unaccreted origination fees totaled $24 million at December 31, 2020.
PPP loan balances decreased $415 million to $1.7 billion or 7% of total loans. The complexity of the forgiveness process and
borrowers' reluctance to apply for forgiveness in hopes of further legislative action that would relax the requirements has made
the forgiveness process slower than initially anticipated. The recent Economic Aid Act will provide substantial forgiveness
process relief, particularly for those clients with existing loans of less than $150 thousand, which represents more the 70% of
our total PPP loan volume. The Company expects to participate in the newest round of PPP, with largely the same strategy of
focusing on our existing client base in order to timely meet our existing clients' needs.
Loans to Individuals
Loans to individuals include residential mortgage and personal loans. Residential mortgage loans provide funds for our
customers to purchase or refinance their primary residence or to borrow against the equity in their home. These loans are
secured by a first or second mortgage on the customer's primary residence. These loans are made in accordance with
underwriting policies we believe to be conservative and are fully documented. Loans may be individually underwritten or credit
scored based on size and other criteria. Credit scoring is assessed based on significant credit characteristics including credit
history, residential and employment stability.
52
In general, we sell the majority of our conforming fixed rate loan originations in the secondary market and retain the majority of
our non-conforming and adjustable-rate mortgage loans. Our mortgage loan portfolio does not include payment option
adjustable rate mortgage loans or adjustable rate mortgage loans with initial rates that are below market. Home equity loans are
primarily first-lien and fully amortizing.
Residential mortgage, which includes home equity loans, and personal loans are made in accordance with underwriting policies
we believe to be conservative and are fully documented. Loans may be individually underwritten or credit scored based on size
and other criteria. Credit scoring is assessed based on significant credit characteristics including credit history, residential and
employment stability.
Personal loans consist primarily of loans to Wealth Management clients secured by the cash surrender value of insurance
policies and marketable securities. It also includes direct loans secured by and for the purchase of automobiles, recreational and
marine equipment as well as unsecured loans.
Approximately 91% of the loans in this segment are secured by collateral located within our geographical footprint. Loans for
which the collateral location is less relevant, such as unsecured loans are categorized by the borrower’s primary operating
location.
Residential mortgage loans guaranteed by U.S. government agencies have limited credit exposure because of the agency
guarantee. This amount includes residential mortgage loans previously sold into GNMA mortgage pools that the Company may
repurchase when certain defined delinquency criteria are met. Because of this repurchase right, the Company is deemed to have
regained effective control over these loans and must include them on the Consolidated Balance Sheet. Residential mortgage
loans guaranteed by U.S. government agencies increased $211 million compared to December 31, 2019, primarily due to
increased delinquencies and CARES Act forbearance. The balances of residential mortgage loans guaranteed by U.S.
government agencies are expected to decline during the next few quarters as new forbearance plan requests have remained
muted, which will reduce the Company's repurchase activity relative to 2020. Loans that have exited forbearance and have met
GNMA requirements will be re-pooled into GNMA mortgage pools.
The Company secondarily evaluates loan portfolio performance based on the primary geographical market managing the loan.
Loans attributed to a geographical market may not represent the location of the borrower or the collateral. All permanent
mortgage loans serviced by our mortgage banking unit and held for investment by the Company are centrally managed by the
Oklahoma market.
53
Table 20 – Loans Managed by Primary Geographical Market
(In thousands)
Texas:
Commercial
Commercial real estate
Paycheck protection program
Loans to individuals
Total Texas
Oklahoma:
Commercial
Commercial real estate
Paycheck protection program
Loans to individuals
Total Oklahoma
Colorado:
Commercial
Commercial real estate
Paycheck protection program
Loans to individuals
Total Colorado
Arizona:
Commercial
Commercial real estate
Paycheck protection program
Loans to individuals
Total Arizona
Kansas/Missouri:
Commercial
Commercial real estate
Paycheck protection program
Loans to individuals
Total Kansas/Missouri
New Mexico:
Commercial
Commercial real estate
Paycheck protection program
Loans to individuals
Total New Mexico
Arkansas:
Commercial
Commercial real estate
Paycheck protection program
Loans to individuals
Total Arkansas
2020
2019
December 31,
2018
2017
2016
$
5,445,132 $ 6,174,894 $
1,500,250
501,079
854,700
8,301,161
1,259,117
—
727,175
8,161,186
5,438,133 $
1,341,783
—
661,548
7,441,464
4,520,401 $
1,261,864
—
608,759
6,391,024
4,022,455
1,415,011
—
540,729
5,978,195
4,381,569
628,727
413,108
2,054,205
7,477,609
1,554,670
877,610
377,111
263,872
3,073,263
1,014,958
718,548
211,725
177,900
2,123,131
400,555
366,409
56,011
105,755
928,730
195,846
471,310
109,881
75,665
852,702
84,805
135,684
13,395
17,040
250,924
3,454,825
631,026
—
1,854,864
5,940,715
2,169,598
927,826
—
276,939
3,374,363
1,307,073
728,832
—
186,539
2,222,444
527,872
322,541
—
131,069
981,482
305,320
402,148
—
90,257
797,725
92,068
162,293
—
18,711
273,072
3,491,117
700,756
—
1,816,109
6,007,982
2,275,069
963,575
—
324,765
3,563,409
1,320,139
889,903
—
166,505
2,376,547
659,793
343,228
—
169,412
1,172,433
340,489
383,670
—
98,008
822,167
111,338
141,898
—
19,492
272,728
3,238,720
682,037
—
1,777,644
5,698,401
1,130,714
174,201
—
126,465
1,431,380
687,792
660,094
—
98,911
1,446,797
717,408
273,116
—
201,356
1,191,880
343,296
341,282
—
109,739
794,317
95,644
87,393
—
16,588
199,625
3,370,259
684,381
—
1,711,020
5,765,660
1,018,208
265,264
—
110,003
1,393,475
686,253
747,409
—
88,818
1,522,480
807,816
338,762
—
206,140
1,352,718
399,256
284,603
—
119,541
803,400
86,577
73,616
—
13,539
173,732
Total BOK Financial loans
$ 23,007,520 $ 21,750,987 $ 21,656,730 $ 17,153,424 $ 16,989,660
54
Table 21 – Loan Maturity and Interest Rate Sensitivity at December 31, 2020
(In thousands)
Loan maturity:
Commercial
Commercial real estate
Paycheck protection program
Total
Interest rate sensitivity for selected loans with:
Predetermined interest rates
Floating or adjustable interest rates
Total
Off-Balance Sheet Commitments
Remaining Maturities of Selected Loans
Total
Within 1
Year
1-5 Years
After 5
Years
$ 13,077,535 $
729,049 $ 7,506,549 $ 4,841,937
4,698,538
529,473
2,945,467
1,223,598
$ 1,682,310 $
— $ 1,682,310 $
—
$ 19,458,383 $ 1,258,522 $ 12,134,326 $ 6,065,535
$ 5,931,766 $
59,628 $ 2,634,813 $ 3,237,325
13,526,617
1,198,894
9,499,513
2,828,210
$ 19,458,383 $ 1,258,522 $ 12,134,326 $ 6,065,535
We enter into certain off-balance sheet arrangements in the normal course of business as shown in Table 22. Loan commitments
may be unconditional obligations to provide financing or conditional obligations that depend on the borrower’s financial
condition, collateral value or other factors. Standby letters of credit are unconditional commitments to guarantee the
performance of our customer to a third party. Since some of these commitments are expected to expire before being drawn
upon, the total commitment amounts do not necessarily represent future cash requirements.
We have off-balance sheet commitments related to certain residential mortgage loans sold into mortgage-backed securities as
part of our mortgage banking activities. We retain off-balance sheet credit risk related to losses in excess of amounts guaranteed
by the U.S. Department of Veteran's Affairs ("VA"). During the second quarter of 2020, we sold mortgage servicing rights
related to residential mortgage loans primarily guaranteed by the VA with an unpaid principal balance of $1.6 billion.
We also have off-balance sheet credit risk related to certain residential mortgage loans primarily originated under community
development loan programs that were sold to a U.S. government agency with full recourse prior to 2007. We are obligated to
repurchase these loans for the life of these loans in the event of foreclosure for the unpaid principal and interest at the time of
foreclosure. The majority of our conforming fixed rate loan originations are sold in the secondary market and we only retain
repurchase obligations under standard underwriting representations and warranties.
The CARES Act provided protections for borrowers with agency-backed residential mortgages that are serviced by the
Company. Forbearance must be granted upon receiving a request from a borrower and the borrower's attestation to a financial
hardship associated with the COVID-19 emergency. The Bank is required to offer up to a 6 month forbearance, with the
possibility of an additional 6 month extension. This program was available to all current and delinquent borrowers, including
those in bankruptcy and/or foreclosure. As of December 31, 2020, agency-serviced loans in forbearance included 3,258
borrowers with an unpaid principal balance of $511 million. For certain contracts, we must advance principal and interest
payments during the forbearance period. Advances as of December 31, 2020 totaled $5.4 million. Advances are generally
reimbursed to us by the appropriate agencies. Loans in forbearance are considered delinquent when payments are not made for
purposes of valuing mortgage servicing rights and for purposes of determining GNMA loans that are eligible to be repurchased.
As of December 31, 2020, 23% of borrowers in forbearance remained current.
55
Table 22 – Off-Balance Sheet Credit Commitments
(In thousands)
2020
2019
2018
2017
2016
December 31,
Loan commitments
$ 10,967,546 $ 11,065,649 $ 11,944,525 $ 9,958,080 $ 9,404,665
Standby letters of credit
Unpaid principal balance of residential mortgage loans
sold with recourse
Unpaid principal balance of residential mortgage loans
transferred into mortgage-backed securities
guaranteed by U.S. Dept. of Veteran's Affairs
681,467
645,505
582,196
647,653
585,472
73,055
88,808
98,623
125,127
139,486
1,442,504
3,375,451
3,585,321
3,337,377
2,822,368
Customer Derivative Programs
We offer programs that permit our customers to hedge various risks, including fluctuations in energy, cattle and other
agricultural product prices, interest rates and foreign exchange rates. Each of these programs work essentially the same
way. Derivative contracts are executed between the customers and the Company. Offsetting contracts are executed between the
Company and selected counterparties or exchanges to minimize market risk to us from changes in commodity prices, interest
rates or foreign exchange rates. The counterparty contracts are identical to the customer contracts, except for a fixed pricing
spread or a fee paid to us as compensation for administrative costs, credit risk and profit.
The customer derivative programs create credit risk for potential amounts due to the Company from our customers and from the
counterparties. Customer credit risk is monitored through existing credit policies and procedures. The effects of changes in
commodity prices, interest rates or foreign exchange rates are evaluated across a range of possible options to determine the
maximum exposure we are willing to have individually to any customer. Customers may also be required to provide cash
margin or other collateral in conjunction with our credit agreements to further limit our credit risk.
Counterparty credit risk is evaluated through existing policies and procedures. This evaluation considers the total relationship
between BOK Financial and each of the counterparties. Individual limits are established by management, approved by Credit
Administration and reviewed by the Asset/Liability Committee. Margin collateral is required if the exposure between the
Company and any counterparty exceeds established limits. Based on declines in the counterparties’ credit ratings, these limits
may be reduced and additional margin collateral may be required.
A deterioration of the credit standing of one or more of the customers or counterparties to these contracts may result in BOK
Financial recognizing a loss as the fair value of the affected contracts may no longer move in tandem with the offsetting
contracts. This occurs if the credit standing of the customer or counterparty deteriorated such that either the fair value of
underlying collateral no longer supports the contract or the customer or counterparty’s ability to provide margin collateral was
impaired. Credit losses on customer derivatives reduce brokerage and trading revenue in the Consolidated Statements of
Earnings.
Derivative contracts are carried at fair value. At December 31, 2020, the net fair values of derivative contracts, before
consideration of cash margin, reported as assets under these programs totaled $625 million compared to $302 million at
December 31, 2019. Derivative contracts carried as assets include foreign exchange contracts with fair values of $332 million,
energy contracts with fair values of $175 million and interest rate swaps primarily sold to loan customers with fair values of
$113 million. Before consideration of cash margin paid to counterparties, the aggregate net fair values of derivative contracts
held under these programs reported as liabilities totaled $600 million.
At December 31, 2020, total derivative assets were reduced by $705 thousand of cash collateral received from counterparties
and total derivative liabilities were reduced by $223 million of cash collateral paid to counterparties related to instruments
executed with the same counterparty under a master netting agreement.
A table showing the notional and fair value of derivative assets and liabilities on both a gross and net basis is presented in Note
3 to the Consolidated Financial Statements.
The fair value of derivative contracts reported as assets under these programs, net of cash margin held by the Company, by
category of debtor at December 31, 2020 follows in Table 23.
56
Table 23 – Fair Value of Derivative Contracts
(In thousands)
Customers
Banks and other financial institutions
Fair value of customer hedge asset derivative contracts, net
$ 415,021
209,532
$ 624,553
The largest exposure to a single counterparty was to a customer for an energy swap which totaled $28 million at December 31,
2020.
Our customer derivative program also introduces liquidity and capital risk. We are required to provide cash margin to certain
counterparties when the net negative fair value of the contracts exceeds established limits. Also, changes in commodity prices
affect the amount of regulatory capital we are required to hold as support for the fair value of our derivative assets. These risks
are modeled as part of the management of these programs. Based on current prices, a decrease in market prices equal to the
equivalent of $35.09 per barrel of oil would decrease the fair value of derivative assets by $85 million, with dealer
counterparties comprising the bulk of the assets. An increase in prices equal to the equivalent of $61.71 per barrel of oil would
increase the fair value of derivative assets by $506 million. Liquidity requirements of this program are also affected by our
credit rating. A decrease in credit rating to below investment grade would increase our obligation to post cash margin on
existing contracts by approximately $10 million. The fair value of our to-be-announced residential mortgage-backed securities
and interest rate swap derivative contracts is affected by changes in interest rates. Based on our assessment as of December 31,
2020, changes in interest rates would not materially impact regulatory capital or liquidity needed to support this portion of our
customer derivative program.
57
Summary of Credit Loss Experience
Table 24 – Summary of Loan Loss Experience
(In thousands)
Allowance for loan losses:
Beginning balance
CECL transition adjustment1
Beginning balance, adjusted
Loans charged off
Recoveries of loans previously charged off
Net loans charged off
Provision for credit losses
Ending balance
Accrual for off-balance sheet credit risk from unfunded loan commitments:
Beginning balance
CECL transition adjustment
Beginning balance, adjusted
Provision for credit losses
Ending balance
Accrual for off-balance sheet credit risk associated with mortgage banking activities:
Beginning balance
CECL transition adjustment
Beginning balance, adjusted
Loans charged off
Provision for credit losses
Ending balance
Allowance for credit losses related to held-to-maturity (investment) securities:
Beginning balance
CECL transition adjustment
Beginning balance, adjusted
Provision for credit losses
Ending balance
Total provision for credit losses
Net charge-offs (recoveries) to average loans
Net charge-offs (recoveries) to average loans excluding PPP loans2
Recoveries to gross charge-offs
Provision for loan losses to average loans
Provision for loan losses to average loans excluding PPP loans2
Allowance for loan losses to loans outstanding at period-end
Allowance for loan losses to loans outstanding at period-end excluding PPP loans2
Accrual for unfunded loan commitments to loan commitments
Combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded
loan commitments to loans outstanding at period-end
Combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded
loan commitments to loans outstanding at period-end excluding PPP loans2
$
$
$
$
$
$
$
$
Year Ended December 31,
2020
210,759
25,809
236,568
(79,399)
9,011
(70,388)
222,460
388,640
1,585
23,552
25,137
11,784
36,921
4,820
10,915
15,735
(165)
(11,288)
4,282
—
1,052
1,052
(364)
688
222,592
0.30 %
0.32 %
11.35 %
0.95 %
1.01 %
1.69 %
1.82 %
0.34 %
1.85 %
2.00 %
1 Included $1.3 million related to measurement changes to the allowance attributed to outstanding loan balances and $24.5 million related to
recognition of expected credit losses on acquired loans.
2 Metric meaningful due to the U.S. government agency guarantee and short-term nature of the PPP loans.
58
Allowance for loan losses:
Beginning balance
Loans charged off:
Commercial
Commercial real estate
Residential mortgage
Personal
Total
Recoveries of loans previously charged off:
Commercial
Commercial real estate
Residential mortgage
Personal
Total
Net loans charged off
Provision for loan losses
Ending balance
Accrual for off-balance sheet credit risk:
Beginning balance
Provision for off-balance sheet credit risk
Ending balance
Total combined provision for credit losses
Allowance for loan losses to loans outstanding at period end
Net charge-offs (recoveries) to average loans
Total provision for credit losses to average loans
Recoveries to gross charge-offs
Allowance for loan losses as a multiple of net charge-offs
Accrual for off-balance sheet credit risk to off-balance sheet credit
commitments
Combined allowance for credit losses to loans outstanding at period-
end
Year Ended December 31,
2019
2018
2017
2016
$
207,457
$
230,682
$ 246,159
$ 225,524
(43,185)
(37,880)
(19,810)
(35,828)
(1,161)
(288)
(6,343)
(50,977)
2,021
4,986
562
2,505
10,074
(40,903)
44,205
—
(378)
(5,325)
(43,583)
3,316
3,552
1,047
2,499
10,414
(33,169)
9,944
(76)
(649)
(5,064)
(25,599)
—
(1,312)
(5,448)
(42,588)
4,461
1,940
760
2,451
9,612
1,727
1,283
1,999
2,747
7,756
(15,987)
(34,832)
510
55,467
$
$
$
$
210,759
$
207,457
$ 230,682
$ 246,159
1,790
(205)
1,585
44,000
$
$
$
3,734
$
11,244
$
1,711
(1,944)
(7,510)
9,533
1,790
8,000
$
$
3,734
$ 11,244
(7,000)
$ 65,000
0.97 %
0.19 %
0.20 %
0.96 %
0.18 %
0.04 %
19.76 %
23.89 %
1.34 %
0.09 %
(0.04) %
37.55 %
1.45 %
0.21 %
0.40 %
18.21 %
5.15 x
6.25 x
14.43 x
7.07 x
0.01 %
0.98 %
0.01 %
0.04 %
0.11 %
0.97 %
1.37 %
1.52 %
59
Allowance for Loan Losses and Accrual for Off-Balance Sheet Credit Risk from Unfunded Loan Commitments
The Company adopted FASB Accounting Standard Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326):
Assets Measured at Amortized Cost ("CECL") on January 1, 2020 through a pre-tax cumulative-effect adjustment to equity of
$61.4 million. CECL requires recognition of expected credit losses on assets carried at amortized cost over their expected lives.
The previous incurred loss model incorporated only known information as of the balance sheet date. Prior years reported under
the incurred loss model have not been restated. CECL uses models to measure the probability of default and loss given default
over a 12-month reasonable and supportable forecast period. 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. See Note 4 to the Consolidated Financial Statements for
additional discussion of methodology of allowance for loan losses.
The provision for expected credit losses was $222.6 million for the year ended December 31, 2020. A $234.2 million provision
related to lending activities was partially offset by a decrease in the accrual for expected credit losses from mortgage banking
activities and allowance for credit losses from investment securities. During the second quarter of 2020, the Company sold
certain mortgage servicing rights related to residential mortgage loans transferred to mortgage-backed securities. These
servicing rights expose the Company to credit risk for amounts that exceed the U.S. government agency guarantees.
Changes in our reasonable and supportable forecasts of macroeconomic variables, primarily due to the anticipated impact of the
COVID-19 pandemic, resulted in a $99.1 million provision for credit losses from lending activities. Economic conditions were
volatile during the year, including changes in unemployment rates, GDP and energy commodity prices, causing the 2020
provision to occur in the first half of the year as our allowance grew for expected losses. While this volatility moderated in the
latter half of the year, the embedded impact of these risks continue to remain in our portfolio at December 31, 2020. Changes in
the loan portfolio characteristics, including specific impairment and losses, loan balances and risk grading resulted in a $135.1
million increase in the provision for credit losses from lending activities during 2020.
We recorded a $6.5 million negative provision for credit losses in the fourth quarter of 2020. Changes in our reasonable and
supportable forecasts of macroeconomic variables, primarily due to an improved economic outlook related to the anticipated
impact of the on-going COVID-19 pandemic offset by changes in the probability weighting of the economic scenarios and other
assumptions, resulted in a $3.0 million increase in the provision for credit losses from lending activities. Changes in the loan
portfolio characteristics, including specific impairment and losses, risk grading and loan balances resulted in an $8.6 million
decrease in the provision for credit losses from lending activities.
60
Our reasonable and supportable forecast of macroeconomic variables is significantly influenced by the COVID-19 pandemic
developments and related government stimulus policies, which remain highly uncertain. A summary of macroeconomic
variables considered in developing our estimate of expected credit losses at December 31, 2020 follows:
Scenario
probability
weighting
COVID-19
trajectory
Economic
recovery (driven
by COVID-19
trajectory)
Fiscal stimulus
(driven by
economic
recovery)
Macro-economic
factors
Base
60%
Downside
30%
Upside
10%
Trajectory of COVID-19
maintains current level with
localized and state-level hotspots
resulting in isolated shutdowns;
FDA approval of several more
vaccines in the first half of 2021,
with a large share of U.S.
population vaccinated by the end
of the third quarter of 2021.
Regional shutdowns and
consumer confidence weigh
negatively on economic and
employment recoveries in the first
quarter of 2021. As vaccine
distribution boosts consumer
confidence, GDP grows at rates
above historical averages and
recovers to pre-COVID-19 levels
by the third quarter of 2021.
No additional fiscal stimulus
packages are enacted in 2021.
Trajectory of COVID-19
continues to improve from peak
experienced in December of 2020.
This leads to isolated shutdowns,
even at a more localized level.
FDA approval of several more
vaccines in the first half of 2021,
with a large share of U.S.
population vaccinated by the end
of the third quarter 2021.
Consumer confidence grows as
optimism around vaccination
helps maintain moderate growth in
the first quarter of 2021. GDP
subsequently continues to grow at
levels above historical averages,
recovering to pre-COVID-19
levels by the second quarter of
2021.
No additional fiscal stimulus
packages are enacted in 2021.
Trajectory of COVID-19
pandemic worsens during winter
months; additional waves and
hotspots emerge through the first
half of 2021. Highly impacted
states/regions enact shutdowns to
manage hospital capacity, though
a nation-wide shutdown is not re-
implemented. FDA does not
approve additional vaccines until
the second half of 2021, resulting
in more protracted distribution and
delaying widespread vaccination
in the U.S. until early 2022.
Deteriorated COVID-19 situation,
slow vaccine distribution and lack
of fiscal stimulus in 2020 cause
the economy to fall back into
recession. GDP does not recover
to pre-COVID-19 levels until
early 2023.
Large-scale fiscal stimulus
package of $1.2 trillion enacted in
the third quarter of 2021 due to
on-going political gridlock and
includes expanded unemployment
benefits, additional small business
support, state fiscal aid and
payments to individuals.
– GDP is forecasted to
– GDP is forecasted to
– GDP is forecasted to
grow by 4.1% over the
next 12 months.
– Civilian unemployment
rate of 6.8% in the first
quarter of 2021 improves
to 6.3% by the fourth
quarter of 2021.
– WTI oil prices are
projected to generally
follow the NYMEX
forward curve that
existed at the end of
December 2020,
averaging $46.80 per
barrel over the next 12
months.
contract 6.0% in the first
quarter of 2021,
improving to 3.0%
growth in the fourth
quarter of 2021.
– Civilian unemployment
rate of 7.9% the first
quarter of 2021 increases
in the next two quarters
and ends at 8.9% by the
fourth quarter of 2021.
– WTI oil prices are
projected to average
$35.74 over the next 12
months.
grow by 6.0% over the
next 12 months.
– Civilian unemployment
rate of 6.6% in the first
quarter of 2021 quickly
improves to 5.7% by the
fourth quarter of 2021.
– WTI oil prices are
projected to average
$49.89 per barrel over
the next 12 months.
61
Net charge-offs and changes in specific impairments attributed to certain credits required a $75.4 million provision during 2020
while changes in risk grading during the year resulted in a $92.9 million provision. This provision was partially offset by a
change in outstanding loan balances used to measure the provision for credit losses related to changes in loan portfolio
characteristics. A summary of outstanding loan balances by risk grade is included in Note 4 to the Consolidated Financial
Statements. Non-pass grade loans include other loans especially mentioned, defined by regulatory guidelines as loans that are
currently performing in compliance with original terms but may have a potential weakness that deserves management’s close
attention, accruing substandard loans, and nonaccruing loans. Non-pass grade loans totaled $1.0 billion at December 31, 2020,
composed primarily of $650 million or 19% of energy loans, $133 million or 4% of commercial services loans, $84 million or
3% of commercial general business loans, $58 million or 1% of commercial real estate loans and $53 million or 2% of
commercial healthcare loans. Non-pass grade loans totaled $551 million at December 31, 2019.
Although fiscal stimulus through PPP, SBA support and other CARES Act programs have had a positive impact on credit
quality, we received a number of deferral or forbearance requests beginning in the second quarter of 2020. All requests were
evaluated on a case-by-case basis and all loans greater than $1 million that requested forbearance were reviewed for proper
grading. At the peak, deferral requests totaled $1.6 billion or 8% of total loans. At December 31, 2020, loans in deferral status
have dropped to just below 1% of total loans. More than 90% of the loans that were deferred have now moved back to payment
status and are making payments pursuant to an updated payment schedule.
The allowance for loan losses totaled $389 million or 1.69% of outstanding loans and 171% of nonaccruing loans at December
31, 2020, 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 $426 million or 1.85% of outstanding
loans and 188% of nonaccruing loans at December 31, 2020. Excluding PPP loans, the allowance for loan losses was 1.82% of
outstanding loans and the combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan
commitments was 2.00%.
The allowance for credit losses attributed to energy was 3.61% of outstanding energy loans at December 31, 2020. Our most
recent semi-annual borrowing base redetermination was completed during the fourth quarter of 2020 based on forward pricing
curves that existed at that time. While forward prices subsequently improved, the pricing environment remains fragile and tied
to the continued economic recovery from the impact of the COVID-19 pandemic. We believe the duration of the downturn is a
more significant factor affecting performance than the level of prices.
We also conduct quarterly stress tests of our energy borrowers with more than 50% funding on their lines of credit and all non-
pass graded loans using a current price deck discounted at 20%. This stress test helps us identify potential issues, although the
most recent test corroborated the risk grading of energy borrowers evaluated once hedging was taken into consideration. Of all
the energy customers that we stress test, which makes up 96% of production loans outstanding, 96% of our customers have
some level of hedging in the 12-month range and many of them carry into the 24-month range.
The company recorded a $44 million provision for credit losses under the previous incurred loss model in 2019. The allowance
for loan losses under the incurred loss model was $211 million or 0.97% of outstanding loans and 121% of nonaccruing loans,
excluding loans guaranteed by U.S. government agencies at December 31, 2019. The combined allowance for loan losses and
accrual for off-balance sheet credit risk from unfunded loan commitments was $212 million or 0.98% of outstanding loans and
121% of core nonaccruing loans.
62
Table 25 – Allowance for Loan Losses Allocation
(Dollars in thousands)
2020
2019
December 31,
2018
2017
2016
Allowance
% of
Loans1
Allowance2
% of
Loans1
Allowance2
% of
Loans1
Allowance2
% of
Loans1
Allowance2
% of
Loans1
Loan category:
Commercial
$ 254,934
56.84 % $ 118,187
64.51 % $ 102,226
62.97 % $
124,269
62.58 % $
140,213
61.16 %
Commercial real
estate
Paycheck
protection
program
Loans to
individuals
Nonspecific
allowance
86,558
20.42 %
51,805
20.38 %
60,026
22.00 %
56,621
20.29 %
50,749
22.42 %
—
7.31 %
—
— %
—
— %
—
— %
—
— %
47,148
15.43 %
23,572
15.11 %
27,437
15.03 %
27,575
17.13 %
26,997
16.42 %
—
17,195
17,768
22,217
28,200
Total
Represents ratio of loan category balance to total loans.
100.00 % $ 210,759
$ 388,640
100.00 % $ 207,457
1
100.00 % $
230,682
100.00 % $
246,159
100.00 %
2 Calculated under previous incurred loss method. The Company adopted FASB Accounting Standard Update No. 2016-13,
Financial Instruments – Credit Losses (Topic 326): Assets Measured at Amortized Cost ("CECL") on January 1, 2020
Net Loans Charged Off
Net loans charged off totaled $70 million or 0.32% of average loans, excluding PPP loans, in 2020. Net loans charged off were
$41 million or 0.19% of average loans in 2019.
In 2020, net charge-offs of commercial loans were $69 million, primarily related to energy borrowers. Net commercial real
estate loan charge-offs were $1.0 million and net loan charge-offs of loans to individuals were $620 thousand. Net charge-offs
of loans to individuals include deposit account overdraft losses.
Accrual for Off-Balance Sheet Credit Risk Associated with Mortgage Banking Activities
The accrual for off-balance sheet credit risk associated with mortgage banking activities includes consideration of credit risk
related to certain residential mortgage loans sold into mortgage-backed securities in excess of amounts guaranteed by the U.S.
Department of Veteran's Affairs ("VA") and mortgage loans originated under community development loan programs that were
sold to a U.S. government agency with full recourse.
We use publicly available long-term national data to estimate total loss given default for our off-balance sheet credit risk related
to losses in excess of amounts guaranteed by the VA. This result is combined with probability of default output from our
mortgage servicing rights model to estimate total expected loss. Then, we estimate the VA's guarantee percentage to determine
our portion of the credit risk. Qualitative adjustment may be used, if necessary.
Allowance for Credit Losses Related to Held-to-Maturity (Investment) Securities
The expected credit losses principles apply to all financial assets measured at cost, including our held-to-maturity (investment)
debt securities portfolio. Our investment portfolio includes municipal and other tax-exempt securities and other debt securities.
Expected credit losses for these assets is based on probability of default and loss given default assumptions that align with
similarly graded loans. Qualitative adjustment may be used, if necessary.
Nonperforming Assets
As more fully described in Note 4 to the Consolidated Financial Statements, loans are generally classified as nonaccruing when
it becomes probable that we will not collect the full contractual principal and interest. Accruing renegotiated loans guaranteed
by U.S. government agencies represent residential mortgage loans that have been modified in troubled debt restructurings.
Interest continues to accrue based on the modified terms of the loan and loans may be sold once they become eligible according
to U.S. government agency guidelines. Real estate and other repossessed assets are assets acquired in partial or total forgiveness
of loans. The assets are carried at the lower of cost as determined by fair value at the date of foreclosure or current fair value,
less estimated selling costs. A summary of nonperforming assets follows in Table 26:
63
Commercial real estate
27,246
27,626
Paycheck protection program
—
—
Table 26 - Nonperforming Assets
(Dollars in Thousands)
Nonaccruing loans:
Commercial
Energy
Healthcare
Services
General business
Total commercial
Loans to individuals
Residential mortgage
Residential mortgage guaranteed by U.S.
government agencies
Personal
Total loans to individuals
Total nonaccruing loans
Accruing renegotiated loans guaranteed by U.S.
government agencies
Real estate and other repossessed assets
Total nonperforming assets
Total nonperforming assets excluding those
guaranteed by U.S. government agencies
Allowance for loan losses to nonaccruing loans1,3
Nonperforming assets to outstanding loans and
repossessed assets
Nonperforming assets to outstanding loans and
repossessed assets excluding residential mortgage
and PPP loans guaranteed by U.S. government
agencies2,3
Nonaccruing commercial loans to outstanding
commercial loans
Nonaccruing commercial real estate loans to
outstanding commercial real estate loans
Nonaccruing loans to individuals to outstanding
loans to individuals3
2020
2019
2018
2017
2016
December 31,
$
125,059
$
91,722
$
47,494
$
92,284
$
132,499
3,645
25,598
12,857
167,159
4,480
7,483
11,731
115,416
16,538
8,567
27,242
99,841
21,621
—
14,765
2,620
27,634
137,303
2,855
—
825
8,173
37,456
178,953
5,521
—
32,228
31,522
34,423
38,268
34,374
7,741
319
40,288
6,100
287
37,909
7,132
230
41,785
9,179
269
47,716
11,846
290
46,510
$
234,693
$ 180,951
$
163,247
$
187,874
$
230,984
151,775
90,526
92,452
20,359
476,994
$ 293,762
317,478
$ 195,210
$
$
86,428
17,487
267,162
173,602
$
$
73,994
28,437
290,305
207,132
$
$
81,370
44,287
356,641
263,425
$
$
171.24 %
120.54 %
132.89 %
129.09 %
112.33 %
2.07 %
1.35 %
1.23 %
1.69 %
2.09 %
1.51 %
0.90 %
1.28 %
0.82 %
0.58 %
0.62 %
1.04 %
1.03 %
0.81 %
0.73 %
0.45 %
1.22 %
1.28 %
0.08 %
1.56 %
1.72 %
0.14 %
Accruing loans 90 days of more past due3
1 Effective January 1, 2020, the Company adopted the required expected credit loss approach for the allowance as required by ASU 2016-13,
10,369
7,680
$
$
$
$
$
1.13 %
1,338
1.41 %
633
1.34 %
5
Financial Instruments - Credit Losses. All periods prior to January 1, 2020 reflect the incurred loss approach in effect at that time.
2 Excludes residential mortgage and PPP loans guaranteed by U.S. government agencies.
3 Excludes residential mortgages guaranteed by U.S. government agencies.
Excluding assets guaranteed by U.S. government agencies, nonperforming assets increased $122 million over December 31,
2019, primarily due to a $70 million increase in real estate and other repossessed assets, a $33 million increase in nonaccruing
energy loans and an $18 million increase in nonaccruing services loans. Newly identified nonaccruing loans totaled $305
million, partially offset by $85 million of foreclosures, $79 million of charge-offs and $74 million in payments. The Company
generally retains nonperforming assets to maximize potential recovery, which may cause future nonperforming assets to
decrease more slowly.
64
A rollforward of nonperforming assets for the year ended December 31, 2020 follows in Table 27.
Table 27 – Rollforward of Nonperforming Assets
(In thousands)
Year Ended December 31, 2020
Nonaccruing Loans
Commercial
Commercial
Real Estate
Loan to
Individuals
Total
Renegotiated
Loans
Real Estate
and Other
Repossessed
Assets
Total
Nonperforming
Assets
Balance, December 31,
2019
Additions
Payments
Charge-offs
Net gains (losses) and
write-downs
Foreclosure of nonaccruing
loans
Foreclosure of loans
guaranteed by U.S.
government agencies
Proceeds from sales
Net transfers to
nonaccruing loans
Return to accrual status
Other, net
Balance, December 31,
2020
$
115,416 $
27,626 $
37,909 $ 180,951 $
92,452 $
20,359 $
263,981
19,919
20,658
304,558
(61,617)
(459)
(11,567)
(73,643)
(73,370)
(1,300)
(4,729)
(79,399)
—
—
—
—
(65,690)
(18,540)
(1,093)
(85,323)
96,935
(2,752)
—
—
—
—
—
—
293,762
401,493
(76,395)
(79,399)
(1,628)
(1,628)
85,323
—
—
—
—
(11,561)
—
—
—
—
—
—
(1,506)
—
(1,506)
—
(3,422)
(30,860)
—
(13,528)
1,326
(710)
1,326
(12,271)
—
—
—
(1,916)
1,338
—
—
—
(4,928)
(44,388)
1,326
(14,187)
1,338
$
167,159 $
27,246 $
40,288 $ 234,693 $
151,775 $
90,526 $
476,994
We foreclose on loans guaranteed by U.S. government agencies in accordance with agency guidelines. Generally these loans
are not eligible for modification programs or have failed to comply with modified loan terms. Principal is guaranteed by
agencies of the U.S. government, subject to limitations and credit risk is limited. These properties will be conveyed to the
agencies and receivables collected once applicable criteria have been met.
Real Estate and Other Repossessed Assets
Real estate and other repossessed assets totaled $91 million at December 31, 2020, composed primarily of $64 million of oil
and gas properties, including $41 million of repossessed oil & gas properties included in a consolidated limited liability
corporation that is 60% owned by the Company and 40% owned by an unrelated financial institution. The remaining balance of
real estate and other repossessed assets included $21 million of developed commercial real estate, $3.4 million of undeveloped
land primarily zoned for commercial development and $625 thousand of 1-4 family residential properties. The residential
properties and undeveloped land are widely disbursed across our geographical footprint. Real estate and other repossessed
assets increased $73 million compared to December 31, 2019.
Liquidity and Capital
Based on the average balances for 2020, approximately 67% of our funding was provided by deposit accounts, 17% from
borrowed funds, less than 1% from long-term subordinated debt and 10% from equity. Our funding sources, which primarily
include deposits and borrowings from the Federal Home Loan Banks, provide adequate liquidity to meet our operating needs.
65
Subsidiary Bank
Deposits and borrowed funds are the primary sources of liquidity for the subsidiary bank. Deposit accounts represent our largest
funding source. We compete for retail and commercial deposits by offering a broad range of products and services and focusing
on customer convenience. Retail deposit growth is supported through personal and small business checking, online bill paying
services, mobile banking services, an extensive network of branch locations and ATMs and our ExpressBank call
center. Commercial deposit growth is supported by offering treasury management and lockbox services. We also acquire
brokered deposits when the cost of funds is advantageous to other funding sources.
Table 29 - Average Deposits by Line of Business
(In thousands)
Commercial Banking
Consumer Banking
Wealth Management
Subtotal
Funds Management and other
Total
Year Ended December 31,
2020
2019
$ 14,319,729 $ 10,319,677
7,599,937
6,876,676
8,676,047
6,447,987
30,595,713
23,644,340
2,169,285
2,006,941
$ 32,764,998 $ 25,651,281
Average deposits for 2020 totaled $32.8 billion and represented approximately 67% of total liabilities and capital compared to
$25.7 billion and 61% of total liabilities and capital for 2019. Average deposits increased $7.1 billion over the prior year.
Inflows resulting from PPP loans and government stimulus payments during the pandemic, along with additional core deposit
growth as customers maintain higher balances during the current economic environment, have all contributed to the significant
increase in deposits. Interest-bearing transaction deposit account balances increased by $5.6 billion and demand deposits grew
by $1.4 billion.
Average deposits attributed to Commercial Banking were $14.3 billion for 2020, a $4.0 billion or 39% increase over 2019.
Interest-bearing transaction account balances increased $2.5 billion or 60% and demand deposit balances increased $1.3 billion
or 22%. Commercial customers continue to retain large cash reserves primarily due to a combination of factors including
uncertainty about the economic environment and potential for growth, lack of preferable liquid alternatives and a desire to
minimize deposit charges through the earnings credit. The earnings credit is a non-cash method that enables commercial
customers to offset deposit service charges based on account balances. Commercial deposit balances may decrease as the
economic outlook improves and if short-term rates move higher, enhancing their investment alternatives.
Average Consumer Banking deposit balances increased $723 million or 11% over the prior year. Average demand deposit
balances grew by $470 million or 22% while average interest-bearing transaction accounts increased $253 million or 5%. Time
deposit balances decreased $15 million or 2%.
Average Wealth Management deposit balances grew by $2.2 billion or 35% over the prior year. Interest-bearing transaction
balances increased $2.3 billion or 52%. Non-interest-bearing demand deposits decreased $42 million or 4%, and time deposit
balances decreased $63 million or 8%.
Table 30 - Maturity of Domestic CDs and Public Funds in Amounts of $100,000 or More
(In thousands)
Months to maturity:
3 or less
Over 3 through 6
Over 6 through 12
Over 12
Total
December 31,
2020
2019
$
653,092 $
247,546
281,865
314,623
364,642
275,227
466,751
572,539
$
1,497,126 $
1,679,159
66
Brokered deposits included in time deposits averaged $131 million for 2020, compared to $247 million for 2019. Brokered
deposits included in time deposits totaled $81 million at December 31, 2020 and $237 million at December 31, 2019.
Average interest-bearing transaction accounts for 2020 included $1.9 billion of brokered deposits compared to $1.1 billion for
2019. Brokered deposits included in interest-bearing transaction accounts totaled $2.2 billion at December 31, 2020 and $1.2
billion at December 31, 2019.
67
The distribution of our period end deposit account balances among principal markets follows in Table 31.
Table 31 - Period End Deposits by Principal Market Area
(In thousands)
Oklahoma:
Demand
Interest-bearing:
Transaction
Savings
Time
Total interest-bearing
Total Oklahoma
Texas:
Demand
Interest-bearing:
Transaction
Savings
Time
Total interest-bearing
Total Texas
Colorado:
Demand
Interest-bearing:
Transaction
Savings
Time
Total interest-bearing
Total Colorado
New Mexico:
Demand
Interest-bearing:
Transaction
Savings
Time
Total interest-bearing
Total New Mexico
2020
2019
2018
2017
2016
December 31,
$
4,328,619 $
3,257,337 $
3,610,593 $ 3,885,008 $
3,993,170
12,603,603
8,574,912
6,445,831
5,901,293
6,345,536
420,996
306,194
288,210
265,870
1,134,453
1,125,446
1,118,643
1,092,133
14,159,052
10,006,552
7,852,684
7,259,296
241,696
1,118,355
7,705,587
18,487,671
13,263,889
11,463,277
11,144,304
11,698,757
3,450,468
2,757,376
3,289,659
3,239,098
3,137,009
3,800,482
2,911,731
2,294,740
2,397,071
2,388,812
139,173
383,062
4,322,717
7,773,185
102,456
495,343
3,509,530
6,266,906
99,624
423,880
93,620
502,879
2,818,244
2,993,570
6,107,903
6,232,668
83,101
535,642
3,007,555
6,144,564
2,168,404
1,729,674
1,658,473
633,714
576,000
2,170,485
1,769,037
1,899,203
69,384
208,778
2,448,647
4,617,051
53,307
283,517
2,105,861
3,835,535
57,289
274,877
2,231,369
657,629
35,223
224,962
917,814
616,679
32,866
242,782
892,327
3,889,842
1,551,528
1,468,327
941,074
623,722
691,692
663,353
627,979
733,007
91,646
186,307
1,010,960
1,952,034
558,493
63,999
238,140
860,632
571,347
58,194
224,515
854,056
552,393
55,647
216,743
824,783
590,571
49,963
238,408
878,942
1,484,354
1,545,748
1,488,136
1,506,921
68
Arizona:
Demand
Interest-bearing:
Transaction
Savings
Time
Total interest-bearing
Total Arizona
Kansas/Missouri:
Demand
Interest-bearing:
Transaction
Savings
Time
Total interest-bearing
Total Kansas/Missouri
Arkansas:
Demand
Interest-bearing:
Transaction
Savings
Time
Total interest-bearing
Total Arkansas
2020
2019
2018
2017
2016
December 31,
905,201
681,268
709,176
334,701
366,755
768,220
12,174
32,721
813,115
684,929
10,314
49,676
744,919
575,996
274,846
10,545
43,051
629,592
3,343
20,394
298,583
633,284
305,099
2,973
27,765
335,837
702,592
1,718,316
1,426,187
1,338,768
426,738
384,533
418,199
457,080
508,418
960,237
16,286
14,610
991,133
784,574
12,169
17,877
814,620
1,417,871
1,199,153
327,866
382,066
13,721
19,688
361,275
779,474
13,574
27,260
422,900
879,980
513,176
12,679
42,152
568,007
1,076,425
45,834
27,381
36,800
30,384
26,389
122,388
108,076
2,333
7,197
131,918
177,752
1,837
7,850
117,763
145,144
91,593
1,632
8,726
101,951
138,751
85,095
1,881
14,045
101,021
131,405
105,232
2,192
16,696
124,120
150,509
Total BOK Financial deposits
$ 36,143,880 $ 27,621,168 $ 25,263,763 $ 22,061,305 $ 22,748,095
See Note 9 to the Consolidated Financial Statements for a summary of other borrowings.
In addition to deposits, liquidity for the subsidiary bank is provided primarily by federal funds purchased, securities repurchase
agreements and Federal Home Loan Bank borrowings. Federal funds purchased consist primarily of unsecured, overnight funds
acquired from other financial institutions. Funds are primarily purchased from bankers’ banks and Federal Home Loan Banks
from across the country. The largest source of wholesale federal funds purchased totaled $200 million at December 31, 2020
and $600 million at December 31, 2019. Securities repurchase agreements generally mature within 90 days and are secured by
certain available for sale securities. Federal Home Loan Bank borrowings are generally short term and are secured by a blanket
pledge of eligible collateral (generally unencumbered U.S. Treasury and mortgage-backed securities, 1-4 family residential
mortgage loans, multifamily and other qualifying commercial real estate loans). Amounts borrowed from the Federal Home
Loan Bank of Topeka averaged $3.4 billion during 2020 and $7.1 billion during 2019.
On April 13, 2020, the banking agencies published an interim final rule which permits banking organizations to exclude from
regulatory capital requirements PPP covered loans pledged to the Federal Reserve's Paycheck Protection Program Liquidity
Facility ("PPLF"). The Company initially funded PPP loans from deposits and Federal Home Loan Bank borrowings, but
transitioned to the PPLF in June of 2020 in order to realize this regulatory capital relief.
At December 31, 2020, the estimated unused credit available to BOKF, NA from collateralized sources was approximately
$16.5 billion.
69
BOKF, NA also has a liability related to the repurchase of certain delinquent residential mortgage loans previously sold in
GNMA mortgage pools. Interest is payable monthly at rates contractually due to investors. The average balance of this liability
increased over the prior year primarily due to GNMA loans serviced by the Company that are participating in the forbearance
program included in the CARES Act, which began in the second quarter. As delinquencies increase, the GNMA repurchase
liability will also increase.
Parent Company and Other Non-Bank Subsidiaries
The primary sources of liquidity for BOK Financial are cash on hand and dividends from the subsidiary bank. Cash and cash
equivalents totaled $184 million at December 31, 2020. Dividends from the subsidiary bank are limited by various banking
regulations to net profits, as defined, for the year plus retained profits for the two preceding years. Dividends are further
restricted by minimum capital requirements. At December 31, 2020, based on the most restrictive limitations as well as
management’s internal capital policy, BOKF, NA could declare up to $370 million of dividends without regulatory
approval. Dividend constraints may be alleviated through increases in retained earnings, capital issuances or changes in risk
weighted assets. Future losses or increases in required regulatory capital could also affect its ability to pay dividends to the
parent company.
On June 27, 2016, the parent company issued $150 million of subordinated debt that will mature on June 30, 2056. This debt
bears interest at the rate of 5.375%, payable quarterly. On June 30, 2021, we will have the option to redeem the debt at the
principal amount plus accrued interest, subject to regulatory approval.
As a result of the acquisition of CoBiz Financial, we obtained $60 million of subordinated debt issued in June 2015 that will
mature on June 25, 2030. This debt bears interest at the rate of 5.625% through June 25, 2025 and thereafter, the notes will bear
an annual floating rate equal to 3-month LIBOR plus 317 basis points. We also acquired $72 million of junior subordinated
debentures. Interest is based on spreads over 3 month LIBOR ranging from 145 basis points to 295 basis points and mature
September 17, 2033 through September 30, 2035. The junior subordinated debentures are subject to early redemption prior to
maturity.
Shareholders' equity at December 31, 2020 was $5.3 billion, an increase of $410 million over December 31, 2019. Net income
less cash dividends paid increased equity $357 million during 2020. Changes in interest rates resulted in accumulated other
comprehensive income of $336 million at December 31, 2020, compared to $105 million at December 31, 2019. Capital is
managed to maximize long-term value to the shareholders. Factors considered in managing capital include projections of future
earnings, asset growth and acquisition strategies, and regulatory and debt covenant requirements. Capital management may
include subordinated debt issuance, share repurchase and stock and cash dividends.
On April 30, 2019, the Board of Directors authorized the Company to purchase up to five million common shares, subject to
market conditions, securities laws and other regulatory compliance limitations. As of December 31, 2020, a cumulative total of
1,973,813 shares have been repurchased under this authorization. The Company repurchased 1,107,100 shares during 2020 at
an average price of $68.49 per share.
BOK Financial and the subsidiary bank are subject to various capital requirements administered by federal agencies. Failure to
meet minimum capital requirements, including capital conservation buffer, can result in certain mandatory and additional
discretionary actions by regulators that could have a material impact on operations including restrictions on capital distributions
from dividends and share repurchases and executive bonus payments. These capital requirements include quantitative measures
of assets, liabilities and off-balance sheet items. The capital standards are also subject to qualitative judgments by the
regulators.
A summary of minimum capital requirements follows for BOK Financial on a consolidated basis in Table 32.
70
Table 32 – Capital Ratios
Risk-based capital:
Common equity Tier 1
Tier 1 capital
Total capital
Tier 1 Leverage
Average total equity to average assets
Tangible common equity ratio
Minimum
Capital
Requirement
Capital
Conservation
Buffer
Minimum
Capital
Requirement
Including
Capital
Conservation
Buffer
4.50 %
6.00 %
8.00 %
4.00 %
2.50 %
2.50 %
2.50 %
N/A
7.00 %
8.50 %
10.50 %
4.00 %
December 31,
2020
2019
11.95 %
11.95 %
13.82 %
8.28 %
10.46 %
9.02 %
11.39 %
11.39 %
12.94 %
8.40 %
11.11 %
8.98 %
In March 2020, in response to the impact on the financial markets by the COVID-19 pandemic, the banking agencies issued an
interim final rule permitting banking organizations that implement CECL the option to delay for two years an estimate of the
CECL methodology's effect on regulatory capital, followed by a three-year transition period. The estimate includes the
implementation date adjustment as of January 1, 2020 plus an estimate of the impact of the change for a two year period
following implementation of CECL. We have elected to delay the regulatory capital impact of the transition in accordance with
the interim final rule. Deferral of the impact of CECL added 26 basis points to the Company's Common equity Tier 1 capital at
December 31, 2020.
Capital resources of financial institutions are also regularly measured by the tangible common shareholders’ equity
ratio. Tangible common shareholders’ equity is shareholders’ equity as defined by generally accepted accounting principles in
the United States of America (“GAAP”), including unrealized gains and losses on available for sale securities, less intangible
assets and equity which does not benefit common shareholders. Equity that does not benefit common shareholders includes
preferred equity. This non-GAAP measure is a valuable indicator of a financial institution’s capital strength since it eliminates
intangible assets from shareholders’ equity and retains the effect of unrealized losses on securities and other components of
accumulated other comprehensive income in shareholders’ equity.
Table 33 following provides a reconciliation of the non-GAAP measures with financial measures defined by GAAP.
Table 33 – Non-GAAP Measures
(Dollars in thousands)
Tangible common equity ratio:
Total shareholders' equity
Less: Goodwill and intangible assets, net
Tangible common equity
Total assets
Less: Goodwill and intangible assets, net
Tangible assets
Tangible common equity ratio
Pre-provision net revenue:
Net income before taxes
Add: Provision for expected credit losses
Less: Net income (loss) attributable to non-controlling interests
Pre-provision net revenue
71
December 31,
2020
2019
$ 5,266,266
1,161,527
4,104,739
46,671,088
1,161,527
$ 45,509,561
$ 4,855,795
1,173,362
3,682,433
42,172,021
1,173,362
$ 40,998,659
9.02 %
8.98 %
$
$
563,864
222,592
41
786,415
$
$
630,868
44,000
(73)
674,941
Off-Balance Sheet Arrangements
See Note 14 to the Consolidated Financial Statements for a discussion of the Company’s significant off-balance sheet
commitments.
Aggregate Contractual Obligations
BOK Financial has numerous contractual obligations in the normal course of business. These obligations include time deposits
and other borrowed funds, premises used under various operating leases, commitments to extend credit to borrowers and to
purchase securities, derivative contracts and contracts for services such as data processing that are integral to our operations.
Table 34 following summarizes payments due on contractual obligations with initial terms in excess of one year.
Table 34 – Contractual Obligations as of December 31, 2020
(In thousands)
Time deposits
Other borrowings
Subordinated debentures
Lease obligations
Derivative contracts
Data processing services
Total
Loan commitments
Standby letters of credit
Mortgage loans sold with recourse
Alternative investment commitments
Less Than
1 Year
1 to 3
Years
4 to 5
Years
More Than
5 Years
Total
$
560,187 $
267,384 $
101,021 $
106,509 $
1,035,101
4,601
13,310
26,289
145,978
13,852
1,652,753
26,620
41,366
91,489
23,409
11,434
24,933
38,493
22,078
18,788
1,100
535,642
115,784
9,143
5,306
1,669,888
600,505
221,932
268,688
61,355
$
764,217 $
2,103,021 $
216,747 $
773,484 $
3,857,469
$
10,967,546
681,467
73,055
94,380
Payments on time deposits, other borrowed funds and subordinated debentures include interest which has been calculated from
rates at December 31, 2020. These obligations may have variable interest rates and actual payments will differ from the
amounts shown on this table.
Payments on time deposits are based on contractual maturity dates. These funds may be withdrawn prior to maturity. We may
charge the customer a penalty for early withdrawal.
Lease commitments generally represent real property we rent for branch offices, corporate offices and operations
facilities. Payments presented represent the minimum lease payments and exclude related costs such as utilities and property
taxes.
Obligations under derivative contracts are used in customer hedging programs. As previously discussed, we have entered into
derivative contracts which are expected to substantially offset the cash payments due on these obligations.
Data processing and communications contracts represent the minimum obligations under the contracts. Additional payments
that are based on the volume of transactions processed are excluded.
Loan commitments represent legally binding obligations to provide financing to our customers. Some of these commitments are
expected to expire before being drawn upon and the total commitment amounts do not necessarily represent future cash
requirements. Approximately $2.1 billion of the loan commitments expire within one year.
The Company has commitments to fund an additional $94 million for various alternative investments. Alternative investments
primarily consist of limited partnership interests in entities that invest in low income housing projects. Legally binding
commitments to fund alternative investments are recognized as liabilities in the Consolidated Financial Statements.
72
Recently Issued Accounting Standards
See Note 1 of the Consolidated Financial Statements for disclosure of newly adopted and pending accounting standards.
Forward-Looking Statements
This 10-K contains forward-looking statements that are based on management's beliefs, assumptions, current expectations,
estimates and projections about BOK Financial, 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, 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 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.
Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not
reflect actual results.
Legal Notice
As used in this report, the term “BOK Financial” and such terms as “the Company,” “the Corporation,” “our,” “we” and “us”
may refer to one or more of the consolidated subsidiaries or all of them taken as a whole. All these terms are used for
convenience only and are not intended as a precise description of any of the separate companies, each of which manages its
own affairs.
73
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument.
These changes may be the result of various factors, including interest rates, foreign exchange rates, commodity prices or equity
prices. Financial instruments that are subject to market risk can be classified either as held for trading or held for purposes other
than trading. Market risk excludes changes in fair value due to credit of the individual issuers of financial instruments.
BOK Financial is subject to market risk primarily through the effect of changes in interest rates on both its assets held for
purposes other than trading and trading assets. The effects of other changes, such as foreign exchange rates, commodity prices
or equity prices do not pose significant market risk to BOK Financial. BOK Financial has no material investments in assets that
are affected by changes in foreign exchange rates or equity prices. Energy and agricultural product derivative contracts, which
are affected by changes in commodity prices, are matched against offsetting contracts as previously discussed.
The Asset/Liability Committee is responsible for managing market risk in accordance with policy limits established by the
Board of Directors. The Committee monitors projected variation in net interest revenue, net income and economic value of
equity due to specified changes in interest rates. These limits also set maximum levels for short-term borrowings, short-term
assets, public funds and brokered deposits and establish minimum levels for un-pledged assets, among other things. Further, the
Board approved market risk limits for fixed income trading, mortgage pipeline and mortgage servicing assets inclusive of
economic hedge benefits. Exposure is measured daily and compliance is reviewed monthly. Deviations from the Board
approved limits, which periodically occur throughout the reporting period, may require management to develop and execute
plans to reduce exposure. These plans are subject to escalation to and approval by the Board.
The simulations used to manage market risk are based on numerous assumptions regarding the effects of changes in interest
rates on the timing and extent of repricing characteristics, future cash flows and customer behavior. These assumptions are
inherently uncertain and, as a result, models cannot precisely estimate or precisely predict the impact of higher or lower interest
rates. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes, market
conditions and management strategies, among other factors.
Interest Rate Risk – Other than Trading
As previously noted in the Net Interest Revenue section of this report, management has implemented strategies to manage the
Company’s balance sheet to have relatively limited exposure to changes in interest rates over a twelve-month period. The
effectiveness of these strategies in managing the overall interest rate risk is evaluated through the use of an asset/liability
model. BOK Financial performs a sensitivity analysis to identify more dynamic interest rate risk exposures, including
embedded option positions, on net interest revenue. A simulation model is used to estimate the effect of changes in interest rates
on our performance across multiple interest rate scenarios. Our current internal policy limit for net interest revenue variation
due to a 200 basis point parallel change in market interest rates over twelve months is a maximum decline of 5%. The results of
a decrease in interest rates in the current low-rate environment are not meaningful.
The Company’s primary interest rate exposures include the Federal Funds rate, which affects short-term borrowings, and the
prime lending rate and LIBOR, which are the basis for much of the variable rate loan pricing. Additionally, residential
mortgage rates directly affect the prepayment speeds for residential mortgage-backed securities and mortgage servicing
rights. Derivative financial instruments and other financial instruments used for purposes other than trading are included in this
simulation. In addition, the impact on the level and composition of demand deposit accounts and other core deposit balances
resulting from a significant increase in short-term market interest rates and the overall interest rate environment is likely to be
material. The simulation incorporates assumptions regarding the effects of such changes based on a combination of historical
analysis and expected behavior. The impact of planned growth and new business activities is factored into the simulation
model.
Table 35 – Interest Rate Sensitivity
(Dollars in thousands)
Anticipated impact over the next twelve months on net interest revenue
$
24,489
$
(16,328)
2.33 %
(1.50) %
200 bp Increase1
2020
2019
100 bp Decrease2
2020
N/A
N/A
2019
$
(31,629)
(2.91) %
74
1 Repricing assumptions for non-maturity deposits were updated in the second quarter of 2020 to better represent observed historical performance.
2 The results of a decrease in the current low-rate environment in 2020 are not meaningful. The results of a 200 basis point decrease in interest rates in the low-
rate environment in 2019 were not meaningful, therefore we reported the effect of a 100 basis point decrease in interest rates.
BOK Financial is also subjected to market risk through changes in the fair value of mortgage servicing rights. Changes in the
fair value of mortgage servicing rights are highly dependent on changes in primary mortgage rates offered to borrowers,
intermediate-term interest rates that affect the value of custodial funds, and assumptions about servicing revenues, servicing
costs and discount rates. As primary mortgage rates increase, prepayment speeds slow and the value of our mortgage servicing
rights increases. As primary mortgage rates fall, prepayment speeds increase and the value of our mortgage servicing rights
decreases.
We maintain a portfolio of financial instruments, which may include debt securities issued by the U.S. government or its
agencies and interest rate derivative contracts held as an economic hedge of the changes in the fair value of our mortgage
servicing rights. Composition of this portfolio will change based on our assessment of market risk. Changes in the fair value of
residential mortgage-backed securities are highly dependent on changes in secondary mortgage rates required by investors, and
interest rate derivative contracts are highly dependent on changes in other market interest rates. While primary and secondary
mortgage rates generally move in the same direction, the spread between them may widen and narrow due to market conditions
and government intervention. Changes in the forward-looking spread between the primary and secondary rates can cause
significant earnings volatility.
Management performs a stress test to measure market risk due to changes in interest rates inherent in its MSR portfolio and
hedges. The stress test shocks applicable interest rates up and down 50 basis points and calculates an estimated change in fair
value, net of economic hedging activity, that may result. The Board has approved a $20 million market risk limit for mortgage
servicing rights, net of economic hedges.
Table 36 - MSR Asset and Hedge Sensitivity Analysis
(In thousands)
MSR Asset
MSR Hedge
Net Exposure
Trading Activities
December 31,
2020
2019
Up 50 bp
Down 50 bp
Up 50 bp
Down 50 bp
$ 29,065 $
(14,585) $ 30,369 $
(41,779)
(19,873)
9,192
18,354
(40,727)
3,769
(10,358)
33,454
(8,325)
The Company bears market risk by originating residential mortgages held for sale ("RMHFS"). RMHFS are generally
outstanding for 60 to 90 days, which represents the typical period from commitment to originate a loan to sale of the closed
loan to an investor. Primary mortgage interest rate changes during this period affect the value of RMHFS commitments and
loans. We use forward sale contracts to mitigate market risk on all closed mortgage loans held for sale and on an estimate of
mortgage loan commitments that are expected to result in closed loans.
A variety of methods are used to monitor market risk of mortgage origination activities. These methods include daily marking
of all positions to market value, independent verification of inventory pricing, and revenue sensitivity limits.
Management performs a stress test to measure market risk due to changes in interest rates inherent in the mortgage production
pipeline. The stress test shocks applicable interest rates up and down 50 basis points and calculates an estimated change in fair
value, net of economic hedging activity that may result. The Board has approved a $7 million market risk limit for the mortgage
production pipeline, net of forward sale contracts.
75
Table 37 - Mortgage Pipeline Sensitivity Analysis
(In thousands)
Year Ended
December 31,
2020
2019
Up 50 bp Down 50 bp Up 50 bp Down 50 bp
Average1
Low2
High3
Period End
1 Average represents the simple average of each daily value observed during the reporting period.
2 Low represents least risk of loss in fair value measured as the smallest negative value or the largest positive value observed daily during the reporting period.
3 High represents the greatest risk of loss in fair value measured as the largest negative value or the smallest positive value observed daily during the reporting
(414) $
(386) $
(143) $
(1,483)
(510)
(112)
(799)
(507)
(498)
293
582
998
528
(191)
(538)
(98)
$
period.
BOK Financial enters into trading activities both as an intermediary for customers and for its own account. As an intermediary,
we take positions in securities, generally residential mortgage-backed securities, government agency securities and municipal
bonds. These securities are purchased for resale to customers, which include individuals, corporations, foundations and
financial institutions. On a limited basis, we may also take trading positions in U.S. Treasury securities, residential mortgage-
backed securities, and municipal bonds to enhance returns on securities portfolios. Both of these activities involve interest rate,
liquidity and price risk. BOK Financial has an insignificant exposure to foreign exchange risk and does not take positions in
commodity derivatives.
A variety of methods are used to monitor the interest rate risk of trading activities. These methods include daily marking of all
positions to market value, independent verification of inventory pricing, and position limits for each trading activity. Economic
hedges in either the futures or cash markets may be used to reduce the risk associated with some trading programs.
Management performs a stress test to measure market risk from changes in interest rates on its trading portfolio. The stress test
shocks applicable interest rates up and down 50 basis points and calculates an estimated change in fair value, net of economic
hedging activity that may result. The Board has approved an $8 million market risk limit for the trading portfolio, net of
economic hedges.
Table 38 –Trading Securities Sensitivity Analysis
(In thousands)
Year Ended
December 31,
2020
2019
Up 50 bp Down 50 bp Up 50 bp Down 50 bp
Average1
Low2
High3
Period End
1 Average represents the simple average of each daily value observed during the reporting period.
2 Low represents least risk of loss in fair value measured as the smallest negative value or the largest positive value observed daily during the reporting period.
3 High represents the greatest risk of loss in fair value measured as the largest negative value or the smallest positive value observed daily during the reporting
3,910 $ (1,803) $
$ (2,473) $
(12,490)
(4,855)
(4,380)
(5,345)
(1,702)
(1,376)
15,309
7,893
7,106
2,049
2,710
4,241
2,602
period.
76
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Management on Internal Control over Financial Reporting
Management of BOK Financial Corporation is responsible for establishing and maintaining adequate internal control over
financial reporting and for assessing the effectiveness of internal control over financial reporting, as such term is defined in
Exchange Act Rules 13a-15(f) and 15d-15(f), as amended. Management has assessed the effectiveness of the Company’s
internal control over financial reporting based on the criteria established in “Internal Control – Integrated Framework,” issued
by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission in 2013. Based on that assessment and
criteria, management has determined that the Company maintained effective internal control over financial reporting as of
December 31, 2020.
Ernst & Young LLP, the independent registered public accounting firm that audited the Consolidated Financial Statements of
the Company included in this annual report has issued an audit report on the effectiveness of the Company’s internal control
over financial reporting as of December 31, 2020. Their report, which expresses an unqualified opinion on the effectiveness of
the Company’s internal control over financial reporting as of December 31, 2020, is included in this annual report.
77
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of BOK Financial Corporation
Opinion on Internal Control over Financial Reporting
We have audited BOK Financial Corporation’s internal control over financial reporting as of December 31, 2020, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria). In our opinion, BOK Financial Corporation (the Company)
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the
COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of BOK Financial Corporation as of December 31, 2020 and 2019, and the related
consolidated statements of earnings, comprehensive income, changes in equity, and cash flows for each of the three years in the
period ended December 31, 2020, and the related notes and our report dated February 24, 2021 expressed an unqualified
opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of
Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Tulsa, Oklahoma
February 24, 2021
78
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of BOK Financial Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of BOK Financial Corporation (the Company) as of December
31, 2020 and 2019, and the related consolidated statements of earnings, comprehensive income, changes in equity, and cash
flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects,
the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on the criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework), and our report dated February 24, 2021 expressed an unqualified opinion thereon.
Adoption of New Accounting Standard
As discussed in Notes 1 and 4 to the consolidated financial statements, the Company changed its method for accounting for
credit losses in 2020. As explained below, auditing the Company’s allowance for credit losses, including adoption of the new
accounting guidance related to the estimate of allowance for credit losses, was a critical audit matter.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the accounts or disclosures to which it relates.
79
Description of
the Matter
Allowance for credit losses
The Company’s loan portfolio totaled $23.0 billion as of December 31, 2020, and the
associated allowance for credit losses (ACL) was $425.6 million. The provision for credit
losses was $234.2 million for the year ended December 31, 2020. As discussed above and in
Notes 1 and 4, the Company adopted new accounting guidance related to the estimate of the
allowance for credit losses (ACL or allowance), resulting in a pre-tax cumulative-effect
decrease to equity of $61.4 million. As discussed in Note 1 and 4 to the consolidated financial
statements, management’s estimate for the expected credit losses within the loan portfolio
represents the portion of amortized cost basis of loans and related unfunded commitments
they do not expect to collect over the asset’s contractual life, considering past events, current
conditions, as well as reasonable and supportable forecasts of future economic conditions. The
allowance for credit losses consists of specific allowances attributed to certain individual
loans, generally nonaccruing loans, with dissimilar risk characteristics that have not yet been
charged down to amounts they expect to recover, general allowances for estimated credit
losses on pools of loans that share similar risk characteristics, and qualitative reserves with the
estimated impact of factors that are not captured in the modeled results or historical
experience.
Auditing management’s estimate of the ACL and related provision for credit losses was
complex due to the allowance models used, high degree of subjectivity in evaluating
management’s development of forecasts of future economic conditions (“economic
scenarios”), probability weighting of economic scenarios, and qualitative reserves used in the
general allowance.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
internal controls over the ACL process, including, among others, controls over the
development, operation, and monitoring of economic scenarios, probability weighting of
economic scenarios and qualitative reserves used in the allowance results.
We involved EY specialists in testing management’s models including evaluating model
methodology, model performance and testing key modeling assumptions as well as controls
covering the economic scenarios used by the ACL models. Additionally, with the support of
EY specialists, we assessed the economic scenarios and related probability weights by
evaluating management’s methodology and agreeing a sample of key economic variables used
to external sources. We also performed various sensitivity analyses and analytical procedures,
including comparison of a sample of the key economic variables to alternative external
sources and historical statistics.
With respect to general ACL models, with the support of EY specialists, we evaluated model
design and re-performed the calculation for a sample of models. We also tested the
appropriateness of key inputs and assumptions used in these models by agreeing a sample of
inputs to internal sources.
80
We evaluated the overall ACL amount, including model estimates, qualitative reserves, and
whether the recorded ACL appropriately reflects expected credit losses. We performed
analytical procedures on the ACL, charge-off and delinquency rates, and coverage ratios of
the allowance. Our audit response also included specific substantive tests of management’s
process to measure qualitative reserves, including those related to the significant judgments
made by management. We compared calculations to industry peer data and compared
qualitative reserves to prior periods and prior economic cycles. We also evaluated if the
qualitative reserves were applied based on a comprehensive framework and that all available
information was considered, well-documented, and consistently applied. We searched for and
evaluated information that corroborates or contradicts management’s economic scenarios and
related probability weights as well as identification and measurement of qualitative reserves.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1990.
Tulsa, Oklahoma
February 24, 2021
81
Consolidated Statements of Earnings
(In thousands, except share and per share data)
Interest and dividend revenue
Loans
Residential mortgage loans held for sale
Trading securities
Investment securities
Available for sale securities
Fair value option securities
Restricted equity securities
Interest-bearing cash and cash equivalents
Total interest and dividend revenue
Interest expense
Deposits
Borrowed funds
Subordinated debentures
Total interest expense
Net interest and dividend revenue
Provision for credit losses
Net interest and dividend revenue after provision for credit losses
Other operating revenue
Brokerage and trading revenue
Transaction card revenue
Fiduciary and asset management revenue
Deposit service charges and fees
Mortgage banking revenue
Other revenue
Total fees and commissions
Other gains (losses), net
Gain (loss) on derivatives, net
Gain (loss) on fair value option securities, net
Change in fair value of mortgage servicing rights
Gain (loss) on available for sale securities, net
Total other operating revenue
Other operating expense
Personnel
Business promotion
Charitable contributions to BOKF Foundation
Professional fees and services
Net occupancy and equipment
Insurance
Data processing and communications
Printing, postage and supplies
Net losses and operating expenses of repossessed assets
Amortization of intangible assets
Mortgage banking costs
Other expense
Total other operating expense
Net income before taxes
Federal and state income taxes
Net income
Net income (loss) attributable to non-controlling interests
Net income attributable to BOK Financial Corporation shareholders
Earnings per share:
Basic
Diluted
Average shares used in computation:
Basic
Diluted
Dividends declared per share
See accompanying notes to Consolidated Financial Statements.
82
$
2020
Year Ended December 31,
2019
1,123,791 $
7,105
61,595
13,426
254,031
32,936
26,860
12,214
1,531,958
889,507 $
6,397
67,689
11,943
261,196
18,475
10,963
2,830
1,269,000
89,996
56,616
13,944
160,556
1,108,444
222,592
885,852
175,538
228,428
15,113
419,079
1,112,879
44,000
1,068,879
221,833
90,182
167,445
96,805
182,360
51,695
810,320
7,675
42,320
53,248
(79,524)
9,910
843,949
688,474
14,511
9,000
53,437
112,722
19,990
135,497
15,061
10,709
20,443
159,826
87,216
177,025
112,485
107,541
58,108
702,201
9,351
14,951
15,787
(53,517)
5,597
694,370
660,565
35,662
3,000
54,861
110,275
20,906
124,983
16,517
6,707
20,618
2018
891,587
8,123
57,531
14,775
197,317
15,205
21,555
22,333
1,228,426
95,517
138,215
9,827
243,559
984,867
8,000
976,867
108,323
84,025
184,703
112,153
97,787
56,185
643,176
(2,265)
(422)
(25,572)
4,668
(2,801)
616,784
583,131
30,523
2,846
59,099
97,981
23,318
114,796
17,169
17,052
9,620
56,711
29,382
1,165,937
563,864
128,793
435,071
41
435,030 $
50,685
27,602
1,132,381
630,868
130,183
500,685
(73)
500,758 $
46,298
26,333
1,028,166
565,485
119,061
446,424
778
445,646
6.19 $
6.19 $
7.03 $
7.03 $
6.63
6.63
69,840,977
69,844,172
70,787,700
70,802,612
2.05 $
2.01 $
66,628,640
66,662,273
1.90
$
$
$
$
Consolidated Statements of Comprehensive Income
(In thousands)
Net income
Other comprehensive income (loss) before income taxes:
Net change in unrealized gain (loss)
Reclassification adjustments included in earnings:
Loss (gain) on available for sale securities, net
Other comprehensive gain (loss), before income taxes
Federal and state income taxes
Other comprehensive gain (loss), net of income taxes
Comprehensive income
Comprehensive income (loss) attributable to non-controlling interests
Year Ended December 31, 2020
2020
2019
2018
$ 435,071 $ 500,685 $ 446,424
313,796
241,047
(48,010)
(9,910)
(5,597)
2,801
303,886
235,450
72,941
230,945
666,016
41
57,942
177,508
678,193
(73)
778
(45,209)
(11,507)
(33,702)
412,722
Comprehensive income attributable to BOK Financial Corp. shareholders
$ 665,975 $ 678,266 $ 411,944
See accompanying notes to Consolidated Financial Statements.
83
Consolidated Balance Sheets
(In thousands, except share data)
Assets
Cash and due from banks
Interest-bearing cash and cash equivalents
Trading securities
Investment securities, net of allowance (fair value: 2020 – $272,431; 2019 – $314,402)
Available for sale securities
Fair value option securities
Restricted equity securities
Residential mortgage loans held for sale
Loans
Allowance for loan losses
Loans, net of allowance
Premises and equipment, net
Receivables
Goodwill
Intangible assets, net
Mortgage servicing rights
Real estate and other repossessed assets, net of allowance (2020 – $15,060; 2019 – $11,013)
Derivative contracts, net
Cash surrender value of bank-owned life insurance
Receivable on unsettled securities sales
Other assets
Total assets
Liabilities and Equity
Liabilities:
Noninterest-bearing demand deposits
Interest-bearing deposits:
Transaction
Savings
Time
Total deposits
Funds purchased and repurchase agreements
Other borrowings
Subordinated debentures
Accrued interest, taxes and expense
Derivative contracts, net
Due on unsettled securities purchases
Other liabilities
Total liabilities
Shareholders' equity:
Common stock ($0.00006 par value; 2,500,000,000 shares authorized; shares issued and outstanding: 2020 –
75,995,205; 2019 – 75,758,597)
Capital surplus
Retained earnings
Treasury stock (shares at cost: 2020 – 6,357,605; 2019 – 5,178,999)
Accumulated other comprehensive income (loss)
Total shareholders’ equity
Non-controlling interests
Total equity
Total liabilities and equity
See accompanying notes to Consolidated Financial Statements.
84
$
December 31,
2020
2019
798,757 $
381,816
4,707,975
244,843
13,050,665
114,982
171,391
252,316
23,007,520
(388,640)
22,618,880
551,308
245,880
1,048,091
113,436
101,172
90,526
810,688
398,758
62,386
907,218
735,836
522,985
1,623,921
293,418
11,269,643
1,098,577
460,552
182,271
21,750,987
(210,759)
21,540,228
535,519
231,811
1,048,091
125,271
201,886
20,359
323,375
389,879
1,020,404
547,995
$
46,671,088 $
42,172,021
$
12,266,338 $
9,461,291
21,158,422
751,992
1,967,128
36,143,880
1,662,386
1,882,970
276,005
323,667
405,779
257,627
427,213
41,379,527
5
1,368,062
3,973,675
(411,344)
335,868
5,266,266
25,295
5,291,561
15,391,752
550,276
2,217,849
27,621,168
3,818,350
4,527,055
275,923
259,701
251,128
182,547
372,230
37,308,102
5
1,350,995
3,729,778
(329,906)
104,923
4,855,795
8,124
4,863,919
$
46,671,088 $
42,172,021
Consolidated Statements of Changes in Equity
(In thousands)
Balance, December 31,
2017
Transition adjustment of
net unrealized gains
on equity securities
Balance, December 31,
2017, Adjusted
Net income
Other comprehensive
loss
Repurchase of common
stock
Share-based
compensation plans:
Stock options
exercised
Non-vested shares
awarded, net
Vesting of non-vested
shares
Share-based
compensation
Cash dividends on
common stock
Capital calls and
distributions, net
Issuance of shares for
CoBiz acquisition
Balance, December 31,
2018
Transition adjustment -
Leasing Standard
Balance, January 1,
2019, Adjusted
Net income (loss)
Other comprehensive
income
Repurchase of common
stock
Share-based
compensation plans:
Stock options
exercised
Non-vested shares
awarded, net
Vesting of non-vested
shares
Share-based
compensation
Cash dividends on
common stock
Capital calls and
distributions, net
Balance, December 31,
2019
Common Stock
Treasury Stock
Shares
Amount
Capital
Surplus
Retained
Earnings
Shares
Amount
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shareholders’
Equity
Non-
Controlling
Interests
Total
Equity
75,148 $
4 $ 1,035,895 $ 3,048,487
9,753 $ (552,845) $
(36,174) $ 3,495,367 $
22,967 $ 3,518,334
—
—
—
2,709
—
—
(2,709)
—
—
—
75,148 $
4 $ 1,035,895 $ 3,051,196
9,753 $ (552,845) $
(38,883) $ 3,495,367 $
22,967 $ 3,518,334
445,646
—
—
—
—
—
(33,702)
(33,702)
—
445,646
778
446,424
—
616
(53,465)
—
(53,465)
—
—
—
—
—
—
—
—
54
109
—
—
—
—
400
—
—
—
—
—
—
—
—
—
1
2,781
—
—
—
—
—
—
—
31
(2,870)
4,229
—
—
—
—
(127,188)
—
—
—
—
—
—
291,125
—
(6,811)
410,185
—
—
—
—
—
—
(33,702)
(53,465)
2,781
—
(2,870)
4,229
2,781
—
(2,870)
4,229
—
—
—
—
—
—
—
(127,188)
—
(127,188)
—
(12,809)
(12,809)
701,311
—
701,311
75,711
5
1,334,030
3,369,654
3,589
(198,995)
(72,585)
4,432,109
10,936
4,443,045
—
—
—
2,862
—
—
—
2,862
—
2,862
75,711
—
—
—
27
21
—
—
—
—
5
1,334,030
3,372,516
3,589
(198,995)
(72,585)
4,434,971
10,936
4,445,907
—
—
—
—
—
—
—
—
—
—
—
—
500,758
—
—
—
—
—
—
500,758
(73)
500,685
177,508
177,508
—
177,508
—
1,572
(129,483)
—
(129,483)
—
(129,483)
—
—
1,421
—
—
—
—
—
—
—
18
(1,428)
15,544
—
—
—
—
(143,496)
—
—
—
—
—
—
—
—
—
—
—
—
1,421
—
(1,428)
15,544
—
—
—
—
1,421
—
(1,428)
15,544
(143,496)
—
(143,496)
—
(2,739)
(2,739)
75,759 $
5 $ 1,350,995 $ 3,729,778
5,179 $ (329,906) $
104,923 $ 4,855,795 $
8,124 $ 4,863,919
85
(In thousands)
Balance, December 31,
2019
Transition adjustment -
CECL
Balance, January 1,
2020, Adjusted
Net income
Other comprehensive
income
Repurchase of common
stock
Share-based
compensation plans:
Stock options
exercised
Non-vested shares
awarded, net
Vesting of non-vested
shares
Share-based
compensation
Cash dividends on
common stock
Capital calls and
distributions, net
Balance, December 31,
2020
75,759
—
—
—
12
224
—
—
—
—
Common Stock
Treasury Stock
Shares
Amount
Capital
Surplus
Retained
Earnings
Shares
Amount
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shareholders’
Equity
Non-
Controlling
Interests
Total
Equity
75,759 $
5 $ 1,350,995 $ 3,729,778
5,179 $ (329,906) $
104,923 $ 4,855,795 $
8,124 $ 4,863,919
—
—
—
(46,696)
—
—
—
(46,696)
—
(46,696)
5
1,350,995
3,683,082
5,179
(329,906)
104,923
4,809,099
8,124
4,817,223
435,030
—
—
—
—
—
—
435,030
230,945
230,945
—
1,107
(75,830)
—
(75,830)
—
—
—
—
—
—
—
72
(5,608)
16,392
—
—
—
—
(144,437)
—
—
—
—
—
—
675
—
(5,608)
16,392
—
—
—
—
—
—
(144,437)
—
(144,437)
—
17,130
17,130
75,995 $
5 $ 1,368,062 $ 3,973,675
6,358 $ (411,344) $
335,868 $ 5,266,266 $
25,295 $ 5,291,561
—
—
—
675
—
—
—
—
—
—
—
—
—
—
—
41
—
—
—
—
—
—
435,071
230,945
(75,830)
675
—
(5,608)
16,392
See accompanying notes to Consolidated Financial Statements.
86
Consolidated Statements of Cash Flows
(In thousands)
Cash Flows From Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for credit losses
Change in fair value of mortgage servicing rights due to market changes
Change in fair value of mortgage servicing rights due to principal payments
Net unrealized losses (gains) from derivative contracts
Share-based compensation
Depreciation and amortization
Net amortization of discounts and premiums
Net losses (gains) on financial instruments and other losses (gains), net
Net gain on mortgage loans held for sale
Mortgage loans originated for sale
Proceeds from sale of mortgage loans held for sale
Capitalized mortgage servicing rights
Change in trading and fair value option securities
Change in receivables
Change in other assets
Change in other liabilities
Net cash provided by (used in) operating activities
Cash Flows From Investing Activities:
Proceeds from maturities or redemptions of investment securities
Proceeds from maturities or redemptions of available for sale securities
Purchases of investment securities
Purchases of available for sale securities
Proceeds from sales of available for sale securities
Change in amount receivable on unsettled available for sale securities transactions
Loans originated, net of principal collected
Net payments on derivative asset contracts
Acquisitions, net of cash acquired
Net change in restricted equity securities
Proceeds from disposition of assets
Purchases of assets
Net cash provided by (used in) investing activities
Cash Flows From Financing Activities:
Net change in demand deposits, transaction deposits and savings accounts
Net change in time deposits
Net change in other borrowed funds
Change in amount due on unsettled security purchases
Issuance of common and treasury stock, net
Net change in derivative margin accounts
Net payments or proceeds on derivative liability contracts
Repurchase of common stock
Dividends paid
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental Cash Flow Information:
Cash paid for interest
Cash paid for taxes
Net loans and bank premises transferred to repossessed real estate and other assets
Increase in U.S. government guaranteed loans eligible for repurchase
Increase in receivables from conveyance of GNMA OREO
Right-of-use assets obtained in exchange for operating lease liabilities
See accompanying notes to Consolidated Financial Statements.
87
Year Ended
2020
2019
2018
$
435,071 $
500,685 $
446,424
222,592
79,524
41,598
(59,253)
16,392
99,013
5,357
(15,949)
(114,545)
(3,764,112)
3,817,475
(31,209)
(2,103,931)
945,087
1,739
8,895
(416,256)
46,992
2,695,067
—
(4,575,324)
384,507
(6,357)
(1,103,752)
(121,130)
—
289,161
73,135
(141,134)
(2,458,835)
44,000
53,517
38,979
(25,936)
15,544
95,416
(16,984)
(583)
(40,402)
(3,025,930)
3,035,600
(35,128)
(483,007)
(740,868)
18,955
92,463
(473,679)
60,128
1,841,069
—
(5,245,256)
1,211,718
25,410
(44,414)
33,566
—
116,105
62,576
(384,639)
(2,323,737)
8,773,433
(250,721)
(5,091,026)
63,521
(4,933)
(600,218)
127,054
(75,830)
(144,437)
2,796,843
(78,248)
1,258,821
1,180,573 $
2,252,936
104,288
1,110,970
(41,651)
(7)
(207,122)
(33,622)
(129,483)
(143,496)
2,912,813
115,397
1,143,424
1,258,821 $
8,000
(4,668)
33,528
4,686
4,229
60,843
30,945
9,585
(35,705)
(2,587,297)
2,691,144
(35,247)
(1,023,097)
(38,346)
27,507
(144,537)
(552,006)
124,864
1,122,680
(4,468)
(1,955,172)
745,643
38,347
(1,553,033)
(114,417)
(175,755)
18,997
289,765
(345,082)
(1,807,631)
(13,870)
(73,089)
1,295,484
(41,319)
(88)
85,466
114,076
(53,465)
(127,188)
1,186,007
(1,173,630)
2,317,054
1,143,424
160,288 $
136,181 $
85,323 $
290,977 $
11,322 $
16,177 $
417,070 $
87,361 $
10,665 $
91,634 $
28,669 $
62,755 $
243,121
92,291
9,880
100,238
38,216
—
$
$
$
$
$
$
$
Notes to Consolidated Financial Statements
(1) Significant Accounting Policies
Basis of Presentation
The Consolidated Financial Statements of BOK Financial Corporation (“BOK Financial” or “the Company”) have been
prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP"), including
interpretations of U.S. GAAP issued by federal banking regulators and general practices of the banking industry. The
Consolidated Financial Statements include the accounts of BOK Financial and its subsidiaries, principally BOKF, NA, BOK
Financial Securities, Inc., BOK Financial Private Wealth, Inc., BOK Financial Insurance, Inc. and Cavanal Hill Distributors,
Inc. All significant intercompany transactions are eliminated in consolidation.
The Consolidated Financial Statements include the assets, liabilities, non-controlling interests and results of operations of
variable interest entities (“VIEs”) when BOK Financial is determined to be the primary beneficiary. Variable interest entities
are generally defined as entities that either do not have sufficient equity to finance their activities without support from other
parties or whose equity investors lack a controlling financial interest. Determination that the Company is the primary
beneficiary considers the power to direct the activities that most significantly impact the variable interest's economic
performance and the obligation to absorb losses of the variable interest or the right to receive benefits of the variable interest
that could be significant to the variable interest.
Certain prior year amounts have been reclassified to conform to current year presentation.
Nature of Operations
BOK Financial, through its subsidiaries, provides a wide range of financial services to commercial and industrial customers,
other financial institutions, municipalities, and consumers. These services include depository and cash management; lending
and lease financing; mortgage banking; securities brokerage, trading and underwriting; and personal and corporate trust.
BOKF, NA operates as Bank of Oklahoma primarily in the Tulsa and Oklahoma City metropolitan areas of the state of
Oklahoma and Bank of Texas primarily in the Dallas, Fort Worth and Houston metropolitan areas of the state of Texas. In
addition, BOKF, NA does business as BOK Financial in the metropolitan areas of Phoenix, Arizona; Northwest Arkansas;
Denver, Colorado; Kansas City, Missouri/Kansas; and as Bank of Albuquerque in Albuquerque, New Mexico. BOKF, NA also
operates the TransFund electronic funds network, Cavanal Hill Investment Management, and BOK Financial Asset
Management, Inc.
Use of Estimates
Preparation of BOK Financial's Consolidated Financial Statements requires management to make estimates of future economic
activities, including loan collectability, loss contingencies, prepayments and cash flows from customer accounts. These
estimates are based upon current conditions and information available to management. Actual results may differ significantly
from these estimates.
Acquisitions
Assets and liabilities acquired, including identifiable intangible assets, are recorded at fair value on the acquisition date. The
purchase price includes consideration paid at closing and the estimated fair value of contingent consideration that will be paid in
the future, subject to achieving defined performance criteria. Premiums and discounts assigned to interest-earning assets and
interest-bearing liabilities are amortized over the lives of the acquired assets and liabilities on either an individual instrument or
pool basis. Provision for credit losses is recognized for changes in credit quality after the acquisition date. Goodwill is
recognized as the excess of the purchase price over the net fair value of assets acquired and liabilities assumed. The
Consolidated Statements of Earnings include the results of operations from the acquisition date.
88
Goodwill and Intangible Assets
Goodwill and intangible assets generally result from business combinations and are evaluated for each of BOK Financial's
reporting units for impairment annually or more frequently if conditions indicate impairment. The evaluation of possible
impairment of goodwill and intangible assets involves significant judgment based upon short-term and long-term projections of
future performance.
Reporting units are defined by the Company as significant lines of business within each operating segment. This definition is
consistent with the manner in which the chief operating decision maker assesses the performance of the Company and makes
decisions concerning the allocation of resources. The Company qualitatively assesses whether it is more likely than not that the
fair value of the reporting units are less than their carrying value, including goodwill. Reporting unit carrying value includes
sufficient capital to exceed regulatory requirements. This assessment includes consideration of relevant events and
circumstances including but not limited to macroeconomic conditions, industry and market conditions, the financial and stock
performance of the Company and other relevant factors.
If the Company concludes based on the qualitative assessment that goodwill may be impaired, a quantitative one-step
impairment test will be applied to goodwill at all reporting units. The quantitative analysis compares the fair value of the
reporting unit with its carrying value, including goodwill. The fair value of each reporting unit is estimated by the discounted
future earnings method. Goodwill is considered impaired if the fair value of the reporting unit is less than the carrying value of
the reporting unit, including goodwill.
Intangible assets are generally composed of customer relationships, naming rights, non-compete agreements and core deposit
premiums. They are amortized using accelerated or straight-line methods, as appropriate, over the estimated benefit periods.
These periods range from 3 years to 20 years. The net book values of identifiable intangible assets are evaluated for impairment
when economic conditions indicate impairment may exist.
Cash Equivalents
Due from banks, funds sold (generally federal funds sold for one day), resell agreements (which generally mature within one
day to 30 days) and investments in money market funds are considered cash equivalents.
Securities
Securities are identified as trading, investment (held to maturity) or available for sale at the time of purchase based upon the
intent of management, liquidity and capital requirements, regulatory limitations and other relevant factors. Trading securities,
which are acquired for profit through resale, are carried at fair value with unrealized gains and losses included in current period
earnings. Investment securities are carried at amortized cost. Amortization is computed by methods that approximate level yield
and is adjusted for changes in prepayment estimates. Securities identified as available for sale are carried at fair value.
Unrealized gains and losses are recorded, net of deferred income taxes, as accumulated other comprehensive income in
shareholders' equity. Available for sale securities are separately identified as pledged to creditors if the creditor has the right to
sell or re-pledge the collateral.
The purchase or sale of securities is recognized on a trade date basis. Realized gains and losses on sales of securities are based
upon specific identification of the security sold. A receivable or payable is recognized for subsequent transaction settlement.
On a quarterly basis, the Company performs separate evaluations of debt investment and available for sale securities for the
presence of impairment. We assess whether impairment is present on an individual security basis when the fair value of a debt
security is less than the amortized cost.
Management determines whether it intends to sell or if it is more likely than not that it will be required to sell impaired
securities. This determination considers current and forecasted liquidity requirements and securities portfolio management. If
the Company intends to sell or it is more likely than not that it will be required to sell the impaired debt security, a charge is
recognized against earnings for the entire unrealized loss. For all impaired debt securities for which there is no intent or
expected requirement to sell, the evaluation considers all available evidence to assess whether it is more likely than not that all
amounts due would not be collected according to the security's contractual terms and whether there is any impairment
attributable to credit-related factors. If an impairment exists, the amount attributed to credit-related factors is measured and an
allowance for credit loss is recognized. Declines in fair value that are not recorded in the allowance are recorded in other
comprehensive income, net of taxes.
89
BOK Financial may elect to carry certain securities that are not held for trading purposes at fair value with changes in fair value
recognized in current period income. These securities are held with the intent that gains or losses will offset changes in the fair
value of mortgage servicing rights or other financial instruments.
Restricted equity securities represent equity interests the Company is required to hold in the Federal Reserve Banks and Federal
Home Loan Banks. Restricted equity securities are carried at cost as these securities do not have a readily determined fair value
because ownership of these shares is restricted and they lack a market.
The fair value of our securities portfolio is generally based on a single price for each financial instrument provided to us by a
third-party pricing service determined by one or more of the following:
•
•
•
•
Quoted prices for similar, but not identical, assets or liabilities in active markets;
Quoted prices for identical or similar assets or liabilities in inactive markets;
Inputs other than quoted prices that are observable, such as interest rate and yield curves, volatilities, prepayment
speeds, loss severities, credit risks and default rates; and
Other inputs derived from or corroborated by observable market inputs.
The underlying methods used by the third-party pricing services are considered in determining the primary inputs used to
determine fair values. We evaluate the methodologies employed by the third-party pricing services by comparing the price
provided by the pricing service with other sources, including brokers' quotes, sales or purchases of similar instruments and
discounted cash flows to establish a basis for reliance on the pricing service values. Significant differences between the pricing
service provided value and other sources are discussed with the pricing service to understand the basis for their values. Based
on all observable inputs, management may adjust prices obtained from third-party pricing services to more appropriately reflect
the prices that would be received to sell assets or paid to transfer liabilities in orderly transactions in the current market.
Derivative Instruments
Derivative instruments may be used by the Company as part of its internal risk management programs or may be offered to
customers. All derivative instruments are carried at fair value and changes in fair value are generally reported in income as they
occur. The determination of fair value of derivative instruments considers changes in interest rates, commodity prices and
foreign exchange rates. Fair values for exchange-traded contracts are based on quoted prices in an active market for identical
instruments. Fair values for over-the-counter contracts are generated internally using third-party valuation models. Inputs used
in third-party valuation models to determine fair values are considered significant other observable inputs. Credit risk is also
considered in determining fair value. Deterioration in the credit rating of customers or other counterparties reduces the fair
value of asset contracts. Deterioration of our credit rating could decrease the fair value of our derivative liabilities.
When bilateral netting agreements or similar agreements exist between the Company and its counterparties that create a single
legal claim or obligation to pay or receive the net amount in settlement of the individual derivative contracts, the Company
reports derivative assets and liabilities on a net by derivative contract by counterparty basis.
Derivative contracts may also require the Company to provide or receive cash margin as collateral for derivative assets and
liabilities. Derivative assets and liabilities are reported net of cash margin when certain conditions are met. In addition,
derivative contracts executed with customers under Customer Risk Management Programs may be secured by non-cash
collateral in conjunction with a credit agreement with that customer. Access to collateral in the event of default is reasonably
assured.
BOK Financial offers programs that permit its customers to manage various risks, including fluctuations in energy, cattle and
other agricultural products, interest rates and foreign exchange rates with derivative contracts. Customers may also manage
interest rate risk through interest rate swaps used by the borrower to modify interest rate terms of their loans. Derivative
contracts are executed between the customers and BOK Financial. Offsetting contracts are executed between BOK Financial
and other selected counterparties to minimize market risk from changes in commodity prices, interest rates or foreign exchange
rates. The counterparty contracts are identical to customer contracts, except for a fixed pricing spread or fee paid to BOK
Financial as profit and compensation for administrative costs and credit risk which is recognized over the life of the contracts
and included in Other Operating Revenue - Brokerage and trading revenue in the Consolidated Statements of Earnings.
BOK Financial may offer derivative instruments such as to-be-announced U.S. agency residential mortgage-backed securities to
mortgage banking customers to enable them to manage their market risk or to mitigate the Company's market risk of holding
trading securities. Changes in the fair value of derivative instruments for trading purposes or used to mitigate the market risk of
holding trading securities are included in Other Operating Revenue - Brokerage and trading revenue.
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BOK Financial may use derivative instruments in managing its interest rate sensitivity, as part of its economic hedge of the
changes in the fair value of mortgage servicing rights. Changes in the fair value of derivative instruments used in managing
interest rate sensitivity and as part of its economic hedge of changes in the fair value of mortgage servicing rights are included
in Other Operating Revenue - Gain (loss) on derivatives, net in the Consolidated Statements of Earnings.
BOK Financial also enters into mortgage loan commitments that are considered derivative contracts. Forward sales contracts
that have not been designated as hedging instruments are used to economically hedge these mortgage loan commitments as well
as mortgage loans held for sale. Mortgage loan commitments, forward sales contracts, and residential mortgage loans held for
sale are carried at fair value. Changes in the fair value are reported in Other Operating Revenue - Mortgage banking revenue.
Loans
Loans are either secured or unsecured based on the type of loan and the financial condition of the borrower. Repayment is
generally expected from cash flow or proceeds from the sale of selected assets of the borrower. BOK Financial is exposed to
risk of loss on loans due to the borrower's financial difficulties, which may arise from any number of factors, including
problems within the respective industry or local economic conditions. Access to collateral, in the event of borrower default, is
reasonably assured through adherence to applicable lending laws and through sound lending standards and credit review
procedures. Accounting policies for all loans, excluding residential mortgage loans guaranteed by U.S. government agencies,
are as follows.
Interest is accrued at the applicable interest rate on the outstanding principal amount. Loans are placed on nonaccruing status
when, in the opinion of management, full collection of principal or interest is uncertain. Internally risk graded loans are
individually evaluated for nonaccruing status quarterly. Non-risk graded loans are generally placed on nonaccruing status when
90 days or more past due or within 60 days of being notified of the borrower's bankruptcy filing. Interest previously accrued but
not collected is charged against interest income when the loan is placed on nonaccruing status. Payments received on
nonaccruing loans are applied to principal or recognized as interest income, according to management's judgment as to the
collectability of principal. Loans may be returned to accruing status when, in the opinion of management, full collection of
principal and interest, including principal previously charged off, is probable based on improvements in the borrower's financial
condition or a sustained period of performance.
For loans acquired with no evidence of credit deterioration, discounts are accreted on either an individual basis for loans with
unique characteristics or on a pool basis for groups of homogeneous loans. Accretion is discontinued when a loan with an
individually attributed discount is placed on nonaccruing status.
Loans to borrowers experiencing financial difficulties may be modified in troubled debt restructurings ("TDRs"). TDRs are
generally classified as nonaccruing, excluding loans guaranteed by U.S. government agencies. Modifications generally consist
of extension of payment terms or interest rate concessions and may result either voluntarily through negotiations with the
borrower or involuntarily through court order. Payment deferrals of up to six months are generally considered to be short-term
modifications. Generally, principal and accrued but unpaid interest is not voluntarily forgiven.
Performing loans may be renewed under the then current collateral, debt service ratio and other underwriting standards.
Nonaccruing loans may also be renewed and will remain classified as nonaccruing.
Occasionally, loans, other than residential mortgage loans, may be held for sale in order to manage credit concentration. These
loans are carried at the lower of cost or fair value with gains or losses recognized in gain (loss) on assets.
All loans are charged-off when the loan balance or a portion of the loan balance is no longer supported by the paying capacity
of the borrower or when the required cash flow is reduced in a TDR. The charge-off amount is determined through an
evaluation of available cash resources and collateral value. Internally risk graded loans are evaluated quarterly and charge-offs
are taken in the quarter in which the loss is identified. Non-risk graded loans that are past due between 60 days and 180 days,
based on the loan product type, are charged off. Loans to borrowers whose personal obligation has been discharged through
Chapter 7 bankruptcy proceedings are charged off within 60 days of notice of the bankruptcy filing, regardless of payment
status.
Loan origination and commitment fees and direct loan acquisition and origination costs are deferred and amortized as an
adjustment to yield over the life of the loan or over the commitment period, as applicable. Amortization does not anticipate loan
prepayments. Net unamortized fees are recognized in full at time of payoff.
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Qualifying residential mortgage loans guaranteed by U.S. government agencies have been sold into GNMA pools. Under
certain performance conditions specified in government programs, the Company has the right, but not the obligation to
repurchase loans from GNMA pools. These loans no longer qualify for sale accounting and are recognized in the Consolidated
Balance Sheets. Guaranteed loans are considered to be impaired because we do not expect to receive all principal and interest
based on the loan's contractual terms. A portion of the principal balance continues to be guaranteed; however, interest accrues at
a curtailed rate as specified in the programs. The carrying value of these loans is reduced based on an estimate of expected cash
flows discounted at the original note rate plus a liquidity spread. Guaranteed loans may be modified in TDRs in accordance
with U.S. government agency guidelines. Interest continues to accrue at the modified rate. Guaranteed loans may either be
resold into GNMA pools after a performance period specified by the programs or foreclosed and conveyed to the guarantors.
Loans are disaggregated into portfolio segments and further disaggregated into classes. The portfolio segment is the level at
which the Company develops and documents a systematic method for determining its Allowance for Credit Losses. Classes are
based on the risk characteristics of the loans and the Company's method for monitoring and assessing credit risk.
Allowances for Credit Losses and Accrual for Off-balance Sheet Credit Risk from Unfunded Loans Commitments
BOK Financial’s accounting policies have changed significantly with the adoption of CECL as of January 1, 2020. Prior
periods are not restated. Prior to January 1, 2020, general allowances and nonspecific allowances were based on incurred credit
losses in accordance with accounting policies disclosed in Note 1 of the Consolidated Financial Statements included in the 2019
Form 10-K.
The allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments represent the
portion of the amortized cost basis of loans that we do not expect to collect over the asset’s contractual life, considering past
events, current conditions, and reasonable and supportable forecasts of future economic conditions. The appropriateness of the
allowance for credit losses, including industry and product adjustments, is assessed quarterly by a senior management
Allowance Committee. This review is based on an on-going evaluation of the estimated expected credit losses in the portfolio
and on unused commitments to provide financing. A well-documented methodology has been developed and is applied by an
independent Credit Administration department to assure consistency across the Company.
The allowance for loan losses consists of specific allowances attributed to certain individual loans, generally nonaccruing loans,
with dissimilar risk characteristics that have not yet been charged down to amounts we expect to recover and general
allowances for estimated credit losses on pools of loans that share similar risk characteristics.
When full collection of principal or interest is uncertain, the loan’s risk characteristics have changed, and we exclude the loan
from the general allowance pool, typically designating it as nonaccruing. For these loans, a specific allowance reflects the
expected credit loss.
We measure specific allowances for loans excluded from the general allowance pool by an evaluation of estimated future cash
flows discounted at the loans initial effective interest rate or the fair value of collateral for certain collateral dependent loans.
For a non-collateral dependent loan, the specific allowance is the amount by which the loan’s amortized cost basis exceeds its
net realizable value. We measure the specific allowance for collateral dependent loans as the amount by which the loan’s
amortized cost basis exceeds its fair value. When repayment is expected to be provided substantially through the sale of
collateral, we deduct estimated selling costs from the collateral’s fair value. Generally, third party appraisals that conform to
Uniform Standards of Professional Appraisal Practice serve as the basis for the fair value of real property held as collateral.
These appraised values are on an “as-is” basis and generally are not adjusted by the Company. We obtain updated appraisals at
least annually or more frequently if market conditions indicate collateral values may have declined. For energy loans, our
internal staff of engineers generally determines collateral value of mineral rights based on projected cash flows from proven oil
and gas reserves under existing economic and operating conditions. For real property held as collateral for other loans, third
party appraisals that conform to Uniform Standards of Professional Appraisal Practice generally serve as the basis for the fair
value. These appraised values are on an “as-is” basis and generally are not adjusted by the Company. We obtain updated
appraisals at least annually or more frequently if market conditions indicate collateral values may have declined. Our special
assets staff generally determines the value of other collateral based on projected liquidation cash flows under current market
conditions. We evaluate collateral values and available cash resources quarterly. Historical statistics may be used to estimate
specific allowances in limited situations, such as when a collateral dependent loan is removed from the general allowance pool
near the end of a reporting period until an appraisal of collateral value is received or a full assessment of future cash flows is
completed.
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General allowances estimate expected credit losses on pools of loans sharing similar risk characteristics that are expected to
occur over the loan’s estimated remaining life. The loan’s estimated remaining life represents the contractual term adjusted for
amortization, estimates of prepayments, and borrower-owned extension options. Approximately 90 percent of the committed
dollars in the loan portfolio is risk graded loans with general allowance model inputs that include probability of default, loss
given default, and exposure at default. Probability of default is based on the migration of loans from performing to
nonperforming using historical life of loan analysis periods. Loss given default is based on the aggregate losses incurred, net of
estimated recoveries. Exposure at default represents an estimate of the outstanding amount of credit exposure at the time a
default may occur.
Charge-off migration is used to calculate the general allowance for the majority of non-risk graded loans to individuals. The
expected credit loss on less than 10 percent of the committed dollars in the portfolio is calculated using charge-off migration.
The expected credit loss on approximately 1 percent of the committed dollars in the portfolio is calculated using a non-modeled
approach. Specifically, the calculation applies a long-term net charge-off rate to the loan balances, adjusted for the weighted
average remaining maturity of each portfolio.
In estimating the expected credit losses for general allowances on performing risk-graded loans, each portfolio class is assigned
relevant economic loss drivers which best explain variations in portfolio net loss rates. The probability of default estimates for
each portfolio class are adjusted for current and forecasted economic conditions. The result is applied to the exposure at default
and loss given default to calculate the lifetime expected credit loss estimate. Selection of relevant economic loss drivers is re-
evaluated periodically and involves statistical analysis as well as management judgment. The unemployment rate factors
significantly in the allowance for loan losses calculation, affecting commercial and loans to individuals segments. Other
primary factors impacting the commercial portfolio include BBB corporate spreads, real gross domestic product growth rate,
and energy commodity prices. The primary commercial real estate variables are vacancy rate and BBB corporate spreads. In
addition to the unemployment rate, the forecast for loans to individuals is tied to home price index. The forecasts may include
regional economic factors when localized conditions diverge from national conditions.
An Economic Forecast Committee, consisting of senior management with members largely independent of the allowance
process develops a twelve-month forward-looking forecast for the relevant economic loss drivers. Management develops these
forecasts based on external data as well as a view of future economic conditions, which may include adjustments for regional
conditions. The forecast includes three economic scenarios and probability weights for each scenario. The base forecast
represents management's view of the most likely outcome, while the downside forecast reflects reasonably possible worsening
economic conditions, and the upside forecast projects reasonably possible improving conditions.
At the end of the one-year reasonable and supportable forecast period, we transition from shorter-term expected losses to long-
term loss averages for the loan’s estimated remaining life. The difference between short-term loss forecasts and long-term loss
averages is run-off over the reversion horizon, up to three years, depending on the forecasted economic scenarios.
General allowances also consider the estimated impact of factors that are not captured in the modeled results or historical
experience. These factors may increase or decrease modeled results by amounts determined by the Allowance Committee.
Factors not captured in modeled results or historical experience may include for example, new lines of business, market
conditions that have not been previously encountered, observed changes in credit risk that are not yet reflected in macro-
economic factors, or economic conditions that impact loss given default assumptions.
The accrual for off-balance sheet credit risk is maintained at a level that is appropriate to cover estimated losses associated with
credit instruments that are not currently recognized as assets such as loan commitments, standby letters of credit or guarantees
that are not unconditionally cancellable by the bank. This accrual is included in other liabilities in the Consolidated Balance
Sheets. The appropriateness of the accrual is determined in the same manner as the allowance for loan losses, with the added
consideration of commitment usage over the remaining life for those loans that the bank can not unconditionally cancel.
A provision for credit losses is charged against or credited to earnings in amounts necessary to maintain an appropriate
Allowance for Credit Losses. Recoveries of loans previously charged off are added to the allowance when received.
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Real Estate and Other Repossessed Assets
Real estate and other repossessed assets are acquired in partial or total forgiveness of loans. These assets are initially recognized
at cost, which is determined by fair value at date of foreclosure less estimated disposal costs. They are subsequently carried at
the lower of cost or current fair value less estimated disposal costs. Decreases in fair value below cost are recognized as asset-
specific valuation allowances which may be reversed when supported by future increases in fair value. Subsequent increases in
fair value may be used to reduce the allowance but not below zero.
Fair values of real estate are based on “as is” appraisals which are updated at least annually or more frequently for certain asset
types or assets located in certain distressed markets. Fair values based on appraisals are generally considered to be based on
significant other observable inputs. The Company also considers decreases in listing price and other relevant information in
quarterly evaluations and reduces the carrying value of real estate and other repossessed assets when necessary. Fair values
based on list prices and other relevant information are generally considered to be based on significant unobservable inputs.
Additional costs incurred to complete real estate and other repossessed assets may increase the carrying value, up to current fair
value based on “as completed” appraisals. The fair value of mineral rights included in repossessed assets is generally
determined by our internal staff of engineers based on projected cash flows from proven oil and gas reserves under existing
economic and operating conditions. The value of other repossessed assets is generally determined by our special assets staff
based on projected liquidation cash flows under current market conditions.
Income generated by these assets is recognized as received. Operating expenses are recognized as incurred. Gains or losses on
sales of real estate and other repossessed assets are based on the cash proceeds received less the cost basis of the asset, net of
any valuation allowances. The estimated disposal costs of real estate and other repossessed assets are evaluated by the Company
on an annual basis based on actual results.
Transfers of Financial Assets
BOK Financial regularly transfers financial assets as part of its mortgage banking activities and periodically may transfer other
financial assets. Transfers are recorded as sales when the criteria for surrender of control are met.
The Company has elected to carry certain residential mortgage loans held for sale at fair value under the fair value option.
Changes in fair value are recognized in net income as they occur. These loans are reported separately in the Consolidated
Balance Sheets and changes in fair value are recorded in Other Operating Revenue - Mortgage banking revenue in the
Consolidated Statements of Earnings.
Fair value of conforming residential mortgage loans that will be sold to U.S. government agencies is based on sales
commitments or market quotes considered Level 2 inputs. Fair value of mortgage loans that are unable to be sold to U.S.
government agencies is based on Level 3 inputs using quoted prices of loans that are sold in securitization transactions with a
liquidity discount applied. The fair value is corroborated with an independent third party on at least an annual basis.
BOK Financial retains a repurchase obligation under underwriting representations and warranties related to residential
mortgage loans transferred and generally retains the right to service the loans. These are not credit obligations. The Company
may incur a recourse obligation in limited circumstances. Separate accruals are recognized in Other liabilities in the
Consolidated Balance Sheets for repurchase and recourse obligations. These reserves reflect the estimated amount of probable
loss the Company will incur as a result of repurchasing a loan, indemnifications, and other settlement resolutions.
Repurchases of loans with an origination defect that are also credit impaired are considered collateral dependent and are
initially recognized at net realizable value (appraised value less the cost to sell). The difference between unpaid principal
balance and net realizable value is not accreted. Repurchases of loans with an origination defect that are not credit impaired are
carried at fair value as of the repurchase date. Interest income continues to accrue on these loans and the discount is accreted
over the estimated life of the loan.
The Company may also choose to purchase GNMA loans once certain mandated delinquency criteria are met. The loans that
are eligible and are chosen to be repurchased are initially recognized at fair value based on expected cash flows discounted
using the average agency guaranteed debenture rates, average actual principal loss rates and liquidity premium.
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Mortgage Servicing Rights
Mortgage servicing rights may be purchased or may be recognized when mortgage loans are originated and sold with servicing
rights retained. All mortgage servicing rights are carried at fair value. Changes in the fair value are recognized in earnings as
they occur.
Mortgage servicing rights are not traded in active markets. A cash flow model is used to determine fair value. Key assumptions
and estimates, including projected prepayment speeds and assumed servicing costs, earnings on escrow deposits, ancillary
income and discount rates, used by this model are based on current market sources. Assumptions used to value mortgage
servicing rights are considered significant unobservable inputs. A separate third-party model is used to estimate prepayment
speeds based on interest rates, housing turnover rates, estimated loan curtailment, anticipated defaults and other relevant
factors. The prepayment model is updated daily for changes in market conditions and adjusted to better correlate with actual
performance of BOK Financial's servicing portfolio. Fair value estimates from outside sources are received at least annually to
corroborate the results of the valuation model.
Premises and Equipment
Premises and equipment are carried at cost, including capitalized interest when appropriate, less accumulated depreciation and
amortization. Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the assets
or, for leasehold improvements, over the shorter of the estimated useful lives or remaining lease terms. Useful lives range from
5 years to 40 years for buildings and improvements, 3 years to 10 years for software and related implementation costs, and 3
years to 10 years for furniture and equipment. Construction in progress represents facilities construction and data processing
systems projects underway that have not yet been placed into service. Depreciation and amortization begin once the assets are
placed into service.
Repair and maintenance costs, including software maintenance and enhancement costs, are charged to expense as incurred.
Software licensing costs are generally charged to expense as incurred. Software licensing costs are capitalized if the contractual
right to take possession of the software exists and it is feasible to take possession without significant penalty. Capitalized costs
are amortized over the shorter of the estimated useful life of the software or remaining contractual life of the license.
Premises no longer used by the Company are transferred to real estate and other repossessed assets. The transferred amount is
the lower of cost less accumulated depreciation or fair value less estimated disposal costs as of the transfer date.
Premises and equipment includes rights to use leased facilities and equipment. Right of use assets are initially measured by the
present value of future rent payments over lease terms, adjusted for rent concessions. Rent payments exclude both payments
made for non-lease components such as services and variable lease payments other than payments dependent on an index at
lease commencement. Lease term includes options reasonably certain to be exercised. The right of use assets and lease
liabilities are amortized to achieve straight-line expense over the lease term. Upon lease modification, the right of use asset and
liability are reassessed and remeasured. Right of use assets are evaluated for impairment when facts and circumstances change
that indicate an impairment may be necessary. Leases less than twelve months are excluded from capitalization.
Ongoing technology projects of significant size or length are reviewed at least annually for impairment. Accumulated costs are
reviewed for projects or components of projects that do not support the value of the asset being developed. Findings of
obsolescence, duplicate effort or other conditions that do not support the recorded value are impaired, with the cost of the
impaired components being charged to current-year earnings.
Federal and State Income Taxes
BOK Financial and its subsidiaries file consolidated tax returns. The subsidiaries provide for income taxes on a separate return
basis and remit to BOK Financial amounts determined to be currently payable. BOK Financial is an agent for its subsidiaries
under the Company's tax sharing agreements and has no ownership rights to any refunds received for the benefit of its
subsidiaries.
Current income tax expense or benefit is based on an evaluation that considers estimated taxable income, tax credits, and
statutory federal and state income tax rates. The amount of current income tax expense or benefit recognized in any period may
differ from amounts reported to taxing authorities. Annually, tax returns are filed with each jurisdiction where the Company
conducts business and recognized current income tax expense or benefit is adjusted to the filed tax returns.
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Deferred tax assets and liabilities are based upon the temporary differences between the values of assets and liabilities as
recognized in the financial statements and their related tax basis using enacted tax rates in effect for the year in which the
differences are expected to be recovered or settled. The effect of changes in statutory tax rates on the measurement of deferred
tax assets and liabilities is recognized through income tax expense in the period the change is enacted. A valuation allowance is
provided when it is more likely than not that some portion of the entire deferred tax asset may not be realized.
BOK Financial has unrecognized tax benefits, which are included in accrued current income taxes payable, for the uncertain
portion of recorded tax benefits and related interest. These uncertainties result from the application of complex tax laws, rules,
regulations and interpretations, primarily in state taxing jurisdictions. Unrecognized tax benefits are assessed quarterly and may
be adjusted through current income tax expense in future periods based on changing facts and circumstances, completion of
examinations by taxing authorities or expiration of a statute of limitations. Estimated penalties and interest on uncertain tax
positions are recognized in income tax expense.
Employee Benefit Plans
BOK Financial sponsors a defined contribution plan (“Thrift Plan”) and a defined benefit cash balance pension plan (“Pension
Plan”). Employer contributions to the Thrift Plan, which matches employee contributions subject to percentage and years of
service limits, are expensed when incurred. Pension Plan costs, which are based upon actuarial computations of current costs,
are expensed annually. Pension Plan benefits were curtailed as of April 1, 2006. No participants may be added to the Pension
Plan and no additional service benefits will be accrued. BOK Financial recognizes the funded status of its employee benefit
plans. Adjustments required to recognize the Pension Plan's net funded status are made through accumulated other
comprehensive income, net of deferred income taxes.
Share-Based Compensation Plans
BOK Financial awards non-vested common shares and stock options as compensation to certain officers. The grant date fair
value of non-vested shares is based on the then-current market value of BOK Financial common stock. Non-vested shares
generally cliff vest in 3 years and are subject to a holding period after vesting of 2 years. The grant date fair value of stock
options is based on the Black-Scholes option pricing model. Stock options generally have graded vesting over 7 years. Each
tranche is considered a separate award for valuation and compensation cost recognition.
Compensation cost is initially based on the grant date fair value of the award and recognized as expense over the service period,
which is generally the vesting period. Expense is reduced for estimated forfeitures over the vesting period and adjusted for
actual forfeitures as they occur. Share-based compensation awarded to certain officers has performance conditions that affect
the number of awards granted. Compensation cost is adjusted based on the probable outcome of the performance conditions.
Restricted stock units ("RSUs") may also be awarded for certain executives who have elected to defer income recognition upon
vesting of their awards. RSUs are subject to the same vesting criteria as non-vested shares. The value of the awards will vary in
amounts equal to changes in the fair value of an equal number of BOK Financial common shares.
Tax effects of share-based payments are recognized through tax expense. Dividends on non-vested shares are charged to
retained earnings. Dividend equivalents on RSUs are charged to expense.
Other Operating Revenue
Fees and commissions revenue is generated through the sales of products, consisting primarily of financial instruments, and the
performance of services for customers under contractual obligations. Revenue from providing services for customers is
recognized at the time services are provided in an amount that reflects the consideration we expect to be entitled to for those
services. Revenue is recognized based on the application of five steps:
•
•
•
•
•
Identify the contract with a customer
Identify the performance obligations in the contract
Determine the transaction price
Allocate the transaction price to the performance obligations in the contract
Recognize revenue when (or as) the Company satisfies a performance obligation
For contracts with multiple performance obligations, individual performance obligations are accounted for separately if the
customer can benefit from the good or service on its own or with other resources readily available to the customer and the
promise to transfer goods and services to the customer is separately identifiable in the contract. The transaction price is
allocated to the performance obligations based on relative standalone selling prices.
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Revenue is recognized on a gross basis whenever we have primary responsibility and risk in providing the services or products
to our customers and have discretion in establishing the price for the services or products. Revenue is recognized on a net basis
whenever we act as an agent for products or services of others.
Brokerage and trading revenue includes revenues from trading, customer hedging, retail brokerage, investment banking and
insurance brokerage. Trading revenue includes net realized and unrealized gains primarily related to sales of securities to
institutional customers and related derivative contracts. Customer hedging revenue includes realized and unrealized changes in
the fair value of derivative contracts held for customer risk management programs including credit valuation adjustments, as
necessary. We offer commodity, interest rate, foreign exchange and equity derivatives to our customers. These customer
contracts are offset with contracts with selected counterparties and exchanges to minimize changes in market risk from changes
in commodity prices, interest rates or foreign exchange rates. Retail brokerage revenue represents fees and commissions earned
on sales of fixed income securities, annuities, mutual funds and other financial instruments to retail customers. Investment
banking revenue includes fees earned upon completion of underwriting and financial advisory services. Investment banking
revenue also includes fees earned in conjunction with loan syndications. Insurance brokerage revenues represent fees and
commissions earned on placement of insurance products with carriers for property and casualty and health coverage.
Transaction card revenue includes merchant discount fees and electronic funds transfer network fees, net of interchange fees
paid to card issuers and assessments paid to card networks. Merchant discount fees represent fees paid by customers for account
management and electronic processing of card transactions. Merchant discount fees are recognized at the time the customer’s
transactions are processed or other services are performed. The Company also maintains the TransFund electronic funds
transfer network for the benefit of its members, which includes BOKF, NA. Electronic funds transfer fees are recognized as
electronic transactions are processed on behalf of its members.
Fiduciary and asset management revenue includes fees from asset management, custody, recordkeeping, investment advisory
and administration services. Revenue is recognized on an accrual basis at the time the services are performed and may be based
on either the fair value of the account or the service provided.
Deposit service charges and fees include commercial account service charges, overdraft fees, check card fee revenue and
automated service charge and other deposit service fees. Fees are recognized at least quarterly in accordance with published
deposit account agreements and disclosure statements for retail accounts or contractual agreements for commercial
accounts. Item charges for overdraft or non-sufficient funds items are recognized as items are presented for payment. Account
balance charges and activity fees are accrued monthly and collected in arrears. Commercial account activity fees may be offset
by an earnings credit based on account balances. Check card fees represent interchange fees paid by a merchant bank for
transactions processed from cards issued by the Company. Check card fees are recognized when transactions are processed.
Mortgage banking revenue includes revenues recognized in conjunction with the origination, marketing and servicing of
conventional and government-sponsored residential mortgage loans. Mortgage production revenue includes net realized gains
(losses) on sales of residential mortgage loans in the secondary market and the net change in unrealized gains (losses) on
residential mortgage loans held for sale. Mortgage production revenue also includes changes in the fair value of derivative
contracts not designated as hedging instruments related to residential mortgage loan commitments and forward sales contracts.
Mortgage servicing revenue includes servicing fee income and late charges on loans serviced for others.
Newly Adopted and Pending Accounting Pronouncements
The following is a summary of newly adopted and pending accounting pronouncements that may have a more than insignificant
effect on the Company's financial statements.
Financial Accounting Standards Board ("FASB")
FASB Accounting Standards Update No. 2016-02, Leases (Topic 842) ("ASU 2016-02")
On February 25, 2016, the FASB issued ASU 2016-02 to increase transparency and comparability by recognizing lease assets
and liabilities on the balance sheet and disclosing key information about leasing arrangements. The Company adopted the new
standard January 1, 2019 through a cumulative effect adjustment to retained earnings. The implementation of ASU 2016-02
increased the reported right-of-use asset and lease liability by $137 million. The effect on retained earnings was immaterial.
97
FASB Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Assets Measured at
Amortized Cost ("ASU 2016-13")
On June 16, 2016, the FASB issued ASU 2016-13 to provide more timely recording of credit losses on loans and other financial
assets measured at amortized cost. The Company adopted the new standard January 1, 2020, through a cumulative effect
adjustment to retained earnings. Prior periods were not restated.
Under ASU 2016-13, acquired loans must be reserved in a manner consistent with originated loans while the incurred loss
model excluded purchased loans because the loans had been marked to fair value at acquisition. Under ASU 2016-13, the fair
value discount will remain in place and be accreted into interest income over the life of any acquired loans in the portfolio.
Another transition adjustment component is related to expected credit losses for residential mortgage loans sold that exceed
amounts guaranteed by the U.S. Department of Veterans Affairs as we retain the credit risk for any amounts exceeding the
guarantee as well as for recourse loans.
Prior to ASU 2016-13, held-to-maturity non-agency securities carried no reserve for credit losses.
Note 4 disaggregates the transition adjustment for loans and unfunded loan commitments among portfolio segments as well as
on-and off-balance sheet reserves.
FASB Accounting Standards Update No. 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit
Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments ("ASU 2019-04")
On April 25, 2019, the FASB issued ASU 2019-04 which clarifies certain aspects of the accounting for credit losses, hedging
activities, and financial instruments addressed by ASUs 2016-13, 2017-12, and 2016-01, respectively. Significant amendments
made to the provisions of ASU 2016-13 by ASU 2019-04 include providing certain alternatives for the measurement of the
allowance for credit losses on accrued interest receivable and clarifying steps entities should take when recording the transfer of
loans or debt securities between measurement classification or categories. ASU 2019-04 further clarifies the expectation that
entities include recoveries of financial assets in the calculation of the current expected credit losses allowance for both pools of
financial assets and individual financial assets. Significant amendments made to the provisions of ASU 2017-12 by ASU
2019-04 include clarification on partial-term fair value hedges of interest rate risk, amortization of fair value hedge basis
adjustments and disclosure of fair value hedge basis adjustments. Significant amendments made to provisions of ASU 2016-01
include clarification of the measurement alternative practice for equity securities and remeasurement of equity securities at
historical exchange rates. ASU 2019-04 includes other amendments which clarify various provisions within the codification.
The Company adopted ASU 2019-04 in the first quarter of 2020. Adoption of ASU 2019-04 did not have a material impact on
the Company's financial statements.
FASB Accounting Standards Update No. 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition
Relief ("ASU 2019-05")
On May 15, 2019, the FASB issued ASU 2019-05 which provides transition relief for entities adopting the Board's credit losses
standard, ASU 2016-13. ASU 2019-05 amends ASU 2016-13 to allow companies to irrevocably elect, upon adoption of ASU
2016-13, the fair value option for financial instruments that meet specific requirements and is effective for the Company for
annual reporting periods beginning after December 15, 2019. The Company did not elect the fair value option for additional
financial instruments.
FASB Accounting Standards Update No. 2019-11, Codification Improvements to Topic 326: Financial Instruments-Credit
Losses ("ASU 2019-11")
On November 27, 2019, the FASB issued ASU 2019-11 which revises certain aspects of new guidance on credit losses. Topics
addressed include purchased credit-deteriorated assets, transition relief for troubled debt restructurings, disclosure relief for
accrued interest receivable, and financial assets secured by collateral maintenance provisions. ASU 2019-11 is effective for the
Company for annual reporting periods beginning after December 15, 2019. The Company adopted ASU 2019-11 in the first
quarter of 2020. Adoption of ASU 2019-11 did not have a material impact on the Company's financial statements.
98
FASB Accounting Standards Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
("ASU 2019-12")
On December 18, 2019, the FASB issued ASU 2019-12 which simplifies the accounting for income taxes by eliminating certain
exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim
period and the recognition of deferred tax liabilities for outside basis differences. The ASU also simplifies aspects of accounting
for franchise taxes and enacted changes in tax laws or rates and clarifies accounting for transactions that result in a step-up in
the tax basis of goodwill. ASU 2019-12 is effective for the Company for annual reporting periods beginning after December 15,
2020, and interim periods within; however, early adoption is permitted. The Company adopted ASU 2019-12 in the first quarter
of 2020. Adoption of ASU 2019-12 did not have a material impact on the Company's financial statements.
FASB Accounting Standards Update No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference
Rate Reform on Financial Reporting ("ASU 2020-04")
On March 12, 2020, the FASB issued ASU 2020-04 which provides optional expedients and exceptions for applying U.S.
GAAP to contract modifications and hedging relationships that reference LIBOR or another reference rate expected to be
discontinued, subject to meeting certain criteria. Under the new guidance, an entity can elect by accounting topic or industry
subtopic to account for the modification of a contract affected by reference rate reform as a continuation of the existing
contract, if certain conditions are met. In addition, the new guidance allows an entity to elect on a hedge-by-hedge basis to
continue to apply hedge accounting for hedging relationships in which the critical terms change due to reference rate reform, if
certain conditions are met. A one-time election to sell and/or transfer held-to-maturity debt securities that reference a rate
affected by reference rate reform is also allowed. ASU 2020-04 became effective for all entities as of March 12, 2020 and will
apply to all LIBOR reference rate modifications through December 31, 2022. Management is currently evaluating the impact of
ASU 2020-04 on the Company's financial statements.
FASB Accounting Standards Update No. 2021-01, Reference Rate Reform (Topic 848): Scope ("ASU 2021-01")
On January 7, 2021, the FASB issued ASU 2021-01 which clarifies that certain optional expedients and exceptions in Topic
848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The
amendments in this update are elective and apply to all entities that have derivative instruments that use an interest rate for
margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The amendments also
optionally apply to all entities that designate receive-variable rate, pay-variable-rate cross-currency interest rate swaps as
hedging instruments in net investment hedges that are modified as a result of reference rate reform. ASU 2021-01 is effective
immediately for all entities and amendments may be applied on a full retrospective basis as of any date from the beginning of
an interim period that includes or is subsequent to March 12, 2020. Management is currently evaluating the impact of ASU
2021-01 on the Company's financial statements.
99
(2) Securities
Trading Securities
The fair value and net unrealized gain (loss) included in trading securities is as follows (in thousands):
U.S. government securities
Residential agency mortgage-backed securities
Municipal securities
Asset-backed securities
Other debt securities
Total trading securities
Investment Securities
December 31, 2020
December 31, 2019
Fair Value
Net
Unrealized
Gain (Loss)
Fair Value
Net
Unrealized
Gain (Loss)
$
9,183 $
— $
44,264 $
4,669,148
(3,624)
1,504,651
19,172
—
10,472
42
—
22
26,196
14,084
34,726
6
2,293
60
(21)
21
$ 4,707,975 $
(3,560) $ 1,623,921 $
2,359
The amortized cost and fair values of investment securities are as follows (in thousands):
Municipal securities
Residential agency mortgage-backed securities
Other debt securities
Total investment securities
Allowance for credit losses1
Investment securities, net of allowance
1 Effective with the adoption of FASB ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) on January 1, 2020.
272,431 $
245,531 $
244,843 $
272,431 $
(688)
$
$
27,046 $
27,046 $
December 31, 2020
Amortized
Cost
Fair
Value
Gross Unrealized
Gain
Loss
$
229,245 $
255,270 $
26,169 $
(144)
8,913
7,373
9,790
7,371
877
—
—
(2)
(146)
(146)
Municipal securities
Residential agency mortgage-backed securities
Other debt securities
Total investment securities
December 31, 2019
Amortized
Cost
Fair
Value
Gross Unrealized
Gain
Loss
$
274,535 $
295,032 $
20,797 $
(300)
10,676
8,207
11,164
8,206
488
—
—
(1)
$
293,418 $
314,402 $
21,285 $
(301)
100
The amortized cost and fair values of investment securities at December 31, 2020, by contractual maturity, are as shown in the
following table (dollars in thousands):
Fixed maturity debt securities:
Amortized cost
Fair value
Residential mortgage-backed securities:
Amortized cost
Fair value
Total investment securities:
Amortized cost
Fair value
Less than
One Year
One to
Five Years
Six to
Ten Years
Over
Ten Years
Total
$
31,029
$
76,646
$ 119,966
$
31,459
83,944
138,101
8,977
9,137
$ 236,618
262,641
Weighted
Average
Maturity1
4.90
2
$
8,913
9,790
$ 245,531
272,431
1 Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without
penalty.
2 The average expected lives of residential mortgage-backed securities were 4.0 years based upon current prepayment assumptions.
Temporarily Impaired Investment Securities
(in thousands):
Investment:
Municipal securities
Other debt securities
Total investment securities
Investment:
Municipal securities
Other debt securities
December 31, 2020
Number
of
Securities
Less Than 12 Months
12 Months or Longer
Total
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
6 $
2 $
8 $
2,451 $
250 $
2,701 $
40 $
2,043 $
104 $
4,494 $
1 $
25 $
1 $
275 $
41 $
2,068 $
105 $
4,769 $
144
2
146
December 31, 2019
Number
of
Securities
Less Than 12 Months
12 Months or Longer
Total
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
15 $
1,001 $
1 $
9,747 $
299 $
10,748 $
2
275
1
—
—
275
300
1
301
Total investment securities
17 $
1,276 $
2 $
9,747 $
299 $
11,023 $
101
Available for Sale Securities
The amortized cost and fair value of available for sale securities are as follows (in thousands):
U.S. Treasury
Municipal securities
Mortgage-backed securities:
Residential agency
Residential non-agency
Commercial agency
Other debt securities
Total available for sale securities
U.S. Treasury
Municipal securities
Mortgage-backed securities:
Residential agency
Residential non-agency
Commercial agency
Other debt securities
Total available for sale securities
December 31, 2020
Amortized
Cost
Fair
Value
Gross Unrealized
Gain
Loss
$
500 $
508 $
8 $
165,318
167,979
2,666
9,019,013
9,340,471
17,563
32,770
3,406,956
3,508,465
500
472
328,183
15,207
103,590
—
—
(5)
(6,725)
—
(2,081)
(28)
$ 12,609,850 $ 13,050,665 $
449,654 $
(8,839)
December 31, 2019
Amortized
Cost
Fair
Value
Gross Unrealized
Gain
Loss
$
1,598 $
1,600 $
1,789
1,861
2 $
72
—
—
7,956,297
8,046,096
104,912
(15,113)
25,968
41,609
3,145,342
3,178,005
500
472
15,641
37,808
—
—
(5,145)
(28)
$ 11,131,494 $ 11,269,643 $
158,435 $
(20,286)
The amortized cost and fair values of available for sale securities at December 31, 2020, by contractual maturity, are as shown in the
following table (dollars in thousands):
Fixed maturity debt securities:
Amortized cost
Fair value
Residential mortgage-backed securities:
Amortized cost
Fair value
Total available-for-sale securities:
Amortized cost
Fair value
Less than
One Year
One to
Five Years
Six to
Ten Years
Over
Ten Years
Total
Weighted
Average
Maturity1
$
78,673 $ 1,413,405 $ 1,472,918 $
608,278
$
3,573,274
7.79
78,918
1,469,630
1,498,376
630,500
3,677,424
$
9,036,576
2
9,373,241
$
12,609,850
13,050,665
1 Expected maturities may differ from contractual maturities, because borrowers may have the right to call or prepay obligations with or without
penalty.
2 The average expected lives of residential mortgage-backed securities were 3.0 years based upon current prepayment assumptions.
102
Sales of available for sale securities resulted in gains and losses as follows (in thousands):
Proceeds
Gross realized gains
Gross realized losses
Related federal and state income tax expense (benefit)
Year Ended December 31,
2020
2019
2018
$
384,507 $ 1,211,718 $
745,643
9,976
(66)
2,524
14,996
(9,399)
1,425
7,117
(9,918)
(713)
The fair value of debt securities pledged as collateral for repurchase agreements, public trust funds on deposit and for other purposes,
as required by law was $11.6 billion at December 31, 2020 and $10.1 billion at December 31, 2019.
The secured parties do not have the right to sell or re-pledge these securities.
Temporarily Impaired Available for Sale Securities
(In thousands)
Available for sale:
Municipal securities
Mortgage-backed securities:
Residential agency
Commercial agency
Other debt securities
December 31, 2020
Number
of
Securities
Less Than 12 Months
12 Months or Longer
Total
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
1
6,166
5
—
—
6,166
5
38 $
786,890 $
6,605 $
160,747 $
120 $
947,637 $
37
1
350,506
1,587
277,627
—
—
472
494
28
628,133
472
6,725
2,081
28
Total available for sale securities
77 $ 1,143,562 $
8,197 $
438,846 $
642 $ 1,582,408 $
8,839
Available for sale:
Municipal securities
Mortgage-backed securities:
Residential agency
Commercial agency
Other debt securities
December 31, 2019
Number
of
Securities
Less Than 12 Months
12 Months or Longer
Total
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
—
—
—
—
—
—
—
133 $ 1,352,597 $
6,690 $
686,002 $
8,423 $ 2,038,599 $
15,113
69
1
830,047
4,238
210,877
907
1,040,924
—
—
472
28
472
5,145
28
Total available for sale securities
203 $ 2,182,644 $
10,928 $
897,351 $
9,358 $ 3,079,995 $
20,286
No credit impairment of available for sale securities was recognized in 2020. Unrealized losses related to changes in interest rates
subsequent to purchase and are not attributable to credit. Based on evaluations of impaired securities as of December 31, 2020, the
Company does not intend to sell any impaired available for sale securities before fair value recovers to the current amortized cost and
it is more-likely-than-not that the Company will not be required to sell impaired securities before fair value recovers, which may be
maturity.
Fair Value Option Securities
Fair value option securities represent securities which the Company has elected to carry at fair value and are separately identified on
the Consolidated Balance Sheets with changes in the fair value recognized in earnings as they occur. Certain residential mortgage-
backed securities issued by U.S. government agencies and derivative contracts are held as an economic hedge of the mortgage
servicing rights.
103
The fair value and net unrealized gain (loss) included in fair value option securities is as follows (in thousands):
U.S. Treasury
Residential agency mortgage-backed securities
Total
December 31, 2020
December 31, 2019
Fair Value
Net
Unrealized
Gain (Loss)
Fair Value
Net
Unrealized
Gain (Loss)
$
— $
— $
9,917 $
(48)
114,982
4,463
1,088,660
$
114,982 $
4,463 $ 1,098,577 $
14,109
14,061
104
(3) Derivatives
The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in
the balance sheet at December 31, 2020 (in thousands):
Assets
Notional1
Gross Fair
Value
Netting
Adjustments
Net Fair
Value
Before
Cash
Collateral
Cash
Collateral
Fair Value
Net of Cash
Collateral
$ 3,212,469 $ 113,524 $
(144) $ 113,380 $
— $
113,380
3,791,565
386,008
(211,468)
174,540
14,765
3,859
337,001
332,257
70,199
7,425,999
84,997,593
995,123
1,222
836,870
440,627
17,352
—
—
—
3,859
332,257
1,222
(211,612)
625,258
(240,655)
199,972
(26,958)
(4,231)
13,121
—
—
—
(420)
(285)
(705)
174,540
3,859
331,837
937
624,553
173,014
13,121
Customer risk management programs:
Interest rate contracts
Energy contracts
Agricultural contracts
Foreign exchange contracts
Equity option contracts
Total customer risk management programs
Trading
Interest rate risk management programs
Total derivative contracts
$ 93,418,715 $ 1,294,849 $
(456,498) $ 838,351 $ (27,663) $
810,688
Liabilities
Notional¹
Gross Fair
Value
Netting
Adjustments
Net Fair
Value
Before
Cash
Collateral
Cash
Collateral
Fair Value
Net of Cash
Collateral
$ 3,212,469 $ 113,900 $
(144) $ 113,756 $ (104,202) $
3,617,678
361,334
(211,468)
149,866
(114,070)
14,781
3,844
336,223
331,035
70,199
7,251,350
88,929,916
145,256
1,222
811,335
414,801
5,529
—
—
—
3,844
331,035
1,222
(3,844)
(1,165)
—
(211,612)
599,723
(223,281)
(240,655)
174,146
(145,692)
(4,231)
1,298
(415)
9,554
35,796
—
329,870
1,222
376,442
28,454
883
Customer risk management programs:
Interest rate contracts
Energy contracts
Agricultural contracts
Foreign exchange contracts
Equity option contracts
Total customer risk management programs
Trading
Interest rate risk management programs
Total derivative contracts
$ 96,326,522 $ 1,231,665 $
1 Notional amounts for commodity contracts are converted into dollar-equivalent amounts based on dollar prices at the inception of the
(456,498) $ 775,167 $ (369,388) $
405,779
contract.
105
The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in
the balance sheet at December 31, 2019 (in thousands):
Assets
Notional1
Gross
Fair
Value
Netting
Adjustments
Net Fair
Value
Before
Cash
Collateral
Cash
Collateral
Fair Value
Net of Cash
Collateral
(38)
—
—
(660)
(698)
—
—
47,261
37,277
1,500
213,007
2,573
301,618
15,612
6,145
Customer risk management programs:
Interest rate contracts
Energy contracts
Agricultural contracts
Foreign exchange contracts
Equity option contracts
$ 2,464,478 $ 49,100 $
(1,839) $
47,261 $
— $
2,151,096
144,906
(107,591)
16,118
1,522
214,119
213,007
81,455
3,233
(22)
—
—
37,315
1,500
213,007
3,233
Total customer risk management programs
4,927,266
411,768
(109,452)
302,316
Trading
69,721,932
131,561
(115,949)
Internal risk management programs
1,268,180
6,226
(81)
15,612
6,145
Total derivative contracts
$ 75,917,378 $ 549,555 $
(225,482) $ 324,073 $
(698) $
323,375
Liabilities
Notional¹
Gross
Fair
Value
Netting
Adjustments
Net Fair
Value
Before
Cash
Collateral
Cash
Collateral
Fair Value
Net of Cash
Collateral
$ 2,464,478 $ 49,194 $
(1,839) $
47,355 $ (43,932) $
2,105,391
139,311
(107,591)
16,139
1,507
207,919
207,020
81,455
3,233
(22)
—
—
31,720
1,485
207,020
3,233
(6,031)
(1,485)
—
—
3,423
25,689
—
207,020
3,233
Customer risk management programs:
Interest rate contracts
Energy contracts
Agricultural contracts
Foreign exchange contracts
Equity option contracts
Total customer risk management programs
4,875,382
400,265
(109,452)
290,813
(51,448)
239,365
Trading
65,144,388
125,535
(115,949)
Internal risk management programs
380,401
3,121
(81)
9,586
3,040
—
(863)
9,586
2,177
Total derivative contracts
$ 70,400,171 $ 528,921 $
1 Notional amounts for commodity contracts are converted into dollar-equivalent amounts based on dollar prices at the inception of the
(225,482) $ 303,439 $ (52,311) $
251,128
contract.
106
The following summarizes the pre-tax net gains (losses) on derivative instruments and where they are recorded in the
Consolidated Statements of Earnings (in thousands):
Year Ended December 31,
2020
2019
2018
Brokerage
and
Trading
Revenue
Gain (Loss)
on
Derivatives,
Net
Brokerage
and
Trading
Revenue
Gain (Loss)
on
Derivatives,
Net
Brokerage
and
Trading
Revenue
Gain (Loss)
on
Derivatives,
Net
$
— $
— $
9,579 $
— $
27,190 $
4,507
17,287
34
921
—
22,749
8,255
—
—
—
—
—
—
—
—
42,320
3,647
5,064
28
623
—
18,941
13,999
—
—
—
—
—
—
—
—
14,951
2,614
8,443
53
535
—
38,835
(13,643)
—
—
—
—
—
—
—
—
—
(442)
Customer risk management programs:
Interest rate contracts
To-be-announced U.S. agency
residential mortgage-backed
securities1
Interest rate swaps
Energy contracts
Agricultural contracts
Foreign exchange contracts
Equity option contracts
Total customer risk management programs
Trading2
Internal risk management programs
Total derivative contracts
1 To-be-announced U.S. agency residential mortgage-backed securities customer hedging program transitioned to trading program during
42,320 $
14,951 $
32,940 $
31,004 $
25,192 $
$
(442)
2
2019.
Includes changes in fair value of to-be-announced U.S. agency residential mortgage-backed securities and other derivative instruments
offered to mortgage banking customers to manage their market risk or held to mitigate market risk of trading securities portfolio, which is
offset by changes in fair value of trading securities also included in Brokerage and trading revenue in the Consolidated Statement of
Earnings.
As discussed in Note 7, certain derivative contracts not designated as hedging instruments related to mortgage loan
commitments and forward sales contracts are included in Residential mortgage loans held for sale on the Consolidated Balance
Sheets. See Note 7 for additional discussion of notional, fair value and impact on earnings of these contracts.
No derivative contracts have been designated as hedging instruments for financial reporting purposes.
(4) Loans and Allowances for Credit Losses
The portfolio segments of the loan portfolio are as follows (in thousands):
Commercial
Commercial real estate
Paycheck protection program
Loans to individuals
Total
Foregone interest on nonaccrual loans
December 31, 2020
Fixed
Rate
Variable
Rate
Non-accrual
Total
$
1,805,286 $
1,021,443
1,682,310
11,105,090 $
3,649,849
—
2,173,437
1,335,412
167,159 $
27,246
—
40,288
13,077,535
4,698,538
1,682,310
3,549,137
$
6,682,476 $
16,090,351 $
234,693 $
23,007,520
$
22,870
107
At December 31, 2020, loans to businesses and individuals with collateral primarily located in Texas totaled $7.2 billion or
31% of the total loan portfolio. Loans to businesses and individuals with collateral primarily located in Oklahoma totaled $3.8
billion or 17% of our total loan portfolio. Loans to businesses and individuals with collateral primarily located in Colorado
totaled $2.8 billion or 12% of our total loan portfolio. Loans for which the collateral location is not relevant, such as unsecured
loans and reserve-based energy loans, are distributed by the borrower’s primary operating location. These geographic
concentrations subject the loan portfolio to the general economic conditions within these areas.
At December 31, 2019, loans to businesses and individuals with collateral primarily located in Texas totaled $6.8 billion or
31% of the loan portfolio, loans to businesses and individuals with collateral primarily located in Oklahoma totaled $3.5 billion
or 16% of the loan portfolio and loans to businesses and individuals with collateral primarily located in Colorado totaled $2.8
billion or 13% of the loan portfolio.
Commercial
Commercial loans represent loans for working capital, facilities acquisition or expansion, purchases of equipment and other
needs of commercial customers primarily located within our geographical footprint. Commercial loans are underwritten
individually and represent on-going relationships based on a thorough knowledge of the customer, the customer’s industry and
market. While commercial loans are generally secured by the customer’s assets including real property, inventory, accounts
receivable, operating equipment, interest in mineral rights and other property and may also include personal guarantees of the
owners and related parties, the primary source of repayment of the loans is the on-going cash flow from operations of the
customer’s business. Inherent lending risk is centrally monitored on a continuous basis from underwriting throughout the life of
the loan for compliance with commercial lending policies.
At December 31, 2020, commercial loans with collateral primarily located in Texas totaled $4.3 billion or 33% of the
commercial loan portfolio segment. Commercial loans with collateral primarily located in Oklahoma totaled $1.8 billion or
14% of the commercial loan portfolio segment. Commercial loans with collateral primarily located in Colorado totaled $1.7
billion or 13% of the commercial loan portfolio segment. The commercial loan portfolio segment is further divided into loan
classes. The services loan class totaled $3.5 billion or 15% of total loans. Approximately $1.8 billion of loans in the services
class consisted of loans with individual balances of less than $10 million. Businesses included in the services class include
Native American tribal and state and local municipal government entities, Native American tribal casino operations, educational
services, foundations and not-for-profit organizations and specialty trade contractors. The energy loan class totaled $3.5 billion
or 15% of total loans, including $2.6 billion of outstanding loans to energy producers. Approximately 67% of the committed
production loans are secured by properties primarily producing oil and 33% of the committed production loans are secured by
properties primarily producing natural gas. The healthcare loan class totaled $3.3 billion or 14% of total loans. The healthcare
loan class consists primarily of loans for the development and operation of senior housing and care facilities, including
independent living, assisted living and skilled nursing. Healthcare also includes loans to hospitals and other medical service
providers.
At December 31, 2019, commercial loans with collateral primarily located in Texas totaled $4.7 billion or 33% of the
commercial loan portfolio segment, commercial loans with collateral primarily located in Oklahoma totaled $2.0 billion or 14%
of the commercial loan portfolio segment and commercial loans with collateral primarily located in Colorado totaled $2.0
billion or 14% of the commercial loan portfolio segment. The energy loan class totaled $4.0 billion or 18% of total loans,
including $3.1 billion of outstanding loans to energy producers. At December 31, 2019, approximately 58% of committed
production loans were secured by properties primarily producing oil and 42% were secured by properties producing natural gas.
The services loan class totaled $3.8 billion or 18% of total loans. Approximately $1.5 billion of loans in the services category
consisted of loans with individual balances of less than $10 million. The healthcare loan class totaled $3.0 billion or 14% of
total loans.
Commercial Real Estate
Commercial real estate loans are for the construction of buildings or other improvements to real estate and property held by
borrowers for investment purposes primarily within our geographical footprint. We require collateral values in excess of the
loan amounts, demonstrated cash flows in excess of expected debt service requirements, equity investment in the project and a
portion of the project already sold, leased or permanent financing already secured. The expected cash flows from all significant
new or renewed income producing property commitments are stress tested to reflect the risks in varying interest rates, vacancy
rates and rental rates. As with commercial loans, inherent lending risks are centrally monitored on a continuous basis from
underwriting throughout the life of the loan for compliance with applicable lending policies.
108
At December 31, 2020, 27% of commercial real estate loans were secured by properties primarily located in the Dallas and
Houston metropolitan areas of Texas and 10% of commercial real estate loans were secured by properties located primarily in
the Tulsa and Oklahoma City metropolitan areas of Oklahoma. At December 31, 2019, 24% of commercial real estate loans are
secured by properties primarily located in the Dallas and Houston metropolitan areas of Texas, 12% of commercial real estate
loans were secured by properties located primarily in the Tulsa and Oklahoma City metropolitan areas of Oklahoma and 11% of
commercial real estate loans are secured by properties located primarily in the Denver, Colorado metropolitan area.
Paycheck Protection Program
BOK Financial is actively participating in programs initiated by the Coronavirus Aid, Relief and Economic Security Act
("CARES Act"), including the Small Business Administration's ("SBA") Paycheck Protection Program ("PPP") that began on
April 3, 2020. PPP provided fully forgivable loans when utilized for qualified expenditures, including to help small business
maintain payrolls during the COVID-19 pandemic. These loans generally have a contractual term of two years, though most are
expected to be forgiven prior to maturity after completion of a compliance period. Loans are guaranteed and amounts forgiven
will be reimbursed to the Company by the SBA. The loans carry a rate of 1 percent. Interest plus loan fees, which vary
depending on loan size, are accrued over the contractual life of the loan. Any unaccreted origination fees will be recognized
when the loan is paid.
Loans to Individuals
Loans to individuals include residential mortgage and personal loans. Residential mortgage loans provide funds for our
customers to purchase or refinance their primary residence or to borrow against the equity in their home. These loans are
secured by a first or second mortgage on the customer's primary residence. These loans are made in accordance with
underwriting policies we believe to be conservative and are fully documented. Loans may be individually underwritten or credit
scored based on size and other criteria. Credit scoring is assessed based on significant credit characteristics including credit
history, residential and employment stability.
In general, we sell the majority of our conforming fixed rate loan originations in the secondary market and retain the majority of
our non-conforming and adjustable-rate mortgage loans. Our mortgage loan portfolio does not include payment option
adjustable rate mortgage loans or adjustable rate mortgage loans with initial rates that are below market. Home equity loans are
primarily first-lien and fully amortizing.
Residential mortgage, which includes home equity loans, and personal loans are made in accordance with underwriting policies
we believe to be conservative and are fully documented. Loans may be individually underwritten or credit scored based on size
and other criteria. Credit scoring is assessed based on significant credit characteristics including credit history, residential and
employment stability.
Personal loans consist primarily of loans to Wealth Management clients secured by the cash surrender value of insurance
policies and marketable securities. It also includes direct loans secured by and for the purchase of automobiles, recreational and
marine equipment as well as unsecured loans.
Approximately 91% of the loans in this segment are secured by collateral located within our geographical footprint. Loans for
which the collateral location is less relevant, such as unsecured loans are categorized by the borrower’s primary operating
location.
Residential mortgage loans guaranteed by U.S. government agencies have limited credit exposure because of the agency
guarantee. This amount includes residential mortgage loans previously sold into GNMA mortgage pools that the Company may
repurchase when certain defined delinquency criteria are met. Because of this repurchase right, the Company is deemed to have
regained effective control over these loans and must include them on the Consolidated Balance Sheet.
Credit Commitments
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of conditions established in
the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.
At December 31, 2020, outstanding commitments totaled $11.0 billion. Because some commitments are expected to expire
before being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. BOK Financial
uses the same credit policies in making commitments as it does loans.
The amount of collateral obtained, if deemed necessary, is based upon management’s credit evaluation of the borrower.
109
Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party.
Because the credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan
commitments, BOK Financial uses the same credit policies in evaluating the creditworthiness of the customer. Additionally,
BOK Financial uses the same evaluation process in obtaining collateral on standby letters of credit as it does for loan
commitments. The term of these standby letters of credit is defined in each commitment and typically corresponds with the
underlying loan commitment. At December 31, 2020, outstanding standby letters of credit totaled $681 million.
Allowances for Credit Losses and Accrual for Off-balance Sheet Credit Risk from Unfunded Loans Commitments
BOK Financial maintains an allowance for loan losses and accrual for off-balance sheet credit risk from unfunded
commitments. The allowance consists of specific allowances attributed to certain individual loans, generally nonaccruing loans,
with dissimilar risk characteristics that have not yet been charged down to amounts we expect to recover and general
allowances for estimated credit losses on pools of loans that share similar risk characteristics based on probability of default,
loss given default and exposure at default for each loan class developed based on current and forecasted relevant economic loss
drivers.
The accrual for off-balance sheet credit risk is maintained at a level that is appropriate to cover estimated losses associated with
credit instruments that are not currently recognized as assets such as loan commitments, standby letters of credit or guarantees
that are not unconditionally cancellable by the bank.
The activity in the allowance for loan losses and the allowance for off-balance sheet credit losses related to loan commitments
and standby letters of credit is for the year ended December 31, 2020 summarized as follows (in thousands):
Allowance for loan losses:
Beginning balance
Transition adjustment
Beginning balance, adjusted
Provision for loan losses
Loans charged off
Recoveries of loans previously
charged off
Ending balance
Allowance for off-balance sheet
credit risk from unfunded loan
commitments:
Beginning balance
Transition adjustment
Beginning balance, adjusted
Provision for off-balance sheet credit
risk
Ending balance
Commercial
Commercial
Real Estate
Paycheck
Protection
Program
Loans to
Individuals
Nonspecific
Allowance
Total
$
118,187 $
51,805 $
— $
23,572 $
17,195 $
210,759
33,681
151,868
171,800
(73,370)
(4,620)
47,185
40,407
(1,300)
4,636
266
—
—
—
—
—
13,943
37,515
10,253
(4,729)
4,109
(17,195)
—
—
—
—
25,809
236,568
222,460
(79,399)
9,011
$
254,934 $
86,558 $
— $
47,148 $
— $
388,640
$
1,434 $
10,144
11,578
107 $
11,660
11,767
— $
—
—
2,844
8,804
—
44 $
1,748
1,792
136
$
14,422 $
20,571 $
— $
1,928 $
— $
—
—
—
— $
1,585
23,552
25,137
11,784
36,921
Changes in our reasonable and supportable forecasts of macroeconomic variables, primarily due to the anticipated impact of the
on-going COVID-19 pandemic, and other assumptions, resulted in a $99.1 million increase in the allowance for lending
activities during the year ended December 31, 2020. Changes in the loan portfolio characteristics, including specific impairment
and losses, loan balances and risk grading resulted in a $135.2 million increase in the allowance for lending activities.
110
The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment
measurement method at December 31, 2020 is as follows (in thousands):
Collectively Measured
for General Allowances
Individually Measured
for Specific Allowances
Total
Recorded
Investment
Related
Allowance
Recorded
Investment
Related
Allowance
Recorded
Investment
Related
Allowance
Commercial
$ 12,910,376 $
235,882 $
167,159 $
19,052 $ 13,077,535 $
254,934
Commercial real estate
Paycheck protection program
Loans to individuals
Total
Credit Quality Indicators
4,671,292
1,682,310
83,169
—
27,246
—
3,508,849
$ 22,772,827 $
47,148
366,199 $
40,288
234,693 $
3,389
4,698,538
—
—
1,682,310
3,549,137
22,441 $ 23,007,520 $
86,558
—
47,148
388,640
The Company utilizes risk grading as primary credit quality indicators as it influences the probability of default which is a key
attribute in the expected credit losses calculation. Substantially all commercial as well as commercial real estate loans and
certain loans to individuals are risk graded based on a quarterly evaluation of the borrowers’ ability to repay the loans. Certain
commercial loans and most loans to individuals are small, homogeneous pools that are not risk-graded. The credit quality of
these loans is based on past due days in accordance with regulatory guidelines.
We have included in the credit quality indicator “pass” loans that are in compliance with the original terms of the agreement
and currently exhibit no factors that cause management to have doubts about the borrowers’ ability to remain in compliance
with the original terms of the agreement, which is consistent with the regulatory guideline of “pass.” This also includes past due
residential mortgages that are guaranteed by agencies of the U.S. government that continue to accrue interest based on criteria
of the guarantors’ programs.
Other loans especially mentioned ("Special Mention") are currently performing in compliance with the original terms of the
agreement but may have a potential weakness that deserves management’s close attention, consistent with regulatory
guidelines. Non-graded loans 30 to 59 days past due are categorized as Special Mention.
The risk grading process identified certain loans that have a well-defined weakness (for example, inadequate debt service
coverage or liquidity or marginal capitalization; repayment may depend on collateral or other risk mitigation) that may
jeopardize liquidation of the debt and represent a greater risk due to deterioration in the financial condition of the borrower.
This is consistent with the regulatory guideline for “substandard.” Because the borrowers are still performing in accordance
with the original terms of the loan agreements, these loans remain on accruing status. Non-graded loans 60 to 89 days past due
are categorized as Accruing Substandard.
Nonaccruing loans represent loans for which full collection of principal and interest is uncertain. This includes certain loans
considered “substandard” and all loans considered “doubtful” by regulatory guidelines. Non-graded loans 90 or more days past
due are categorized as Nonaccrual.
Probability of default is lowest for pass graded loans and increases for each credit quality indicator, Special Mention, and
Accruing Substandard.
Vintage represents the year of origination, except for revolving loans which are considered in aggregate. Loans that were once
revolving but have converted to term loans without additional underwriting appear in a separate vintage column.
111
The following table summarizes the Company's loan portfolio at December 31, 2020 by the risk grade categories and vintage
(in thousands):
Origination Year
2020
2019
2018
2017
2016
Prior
Revolving
Loans
Converted
to Term
Loans
Revolving
Loans
Total
Commercial:
Energy
Pass
Special Mention
Accruing
$ 112,614 $
51,863 $
89,346 $
—
—
—
7,178 $
—
1,148 $
—
7,956 $ 2,548,663 $
—
202,590
— $ 2,818,768
202,590
—
Substandard
Nonaccrual
Total energy
Healthcare
Pass
Special Mention
Accruing
Substandard
Nonaccrual
Total healthcare
Services
Pass
Special Mention
Accruing
Substandard
Nonaccrual
Total services
General
business
Pass
Special Mention
Accruing
Substandard
Nonaccrual
Total general
business
Total commercial
24,000
21,076
157,690
1,363
2,607
55,833
1,453
—
90,799
—
—
7,178
12,667
—
13,815
283,294
—
21,064
80,312
29,020 3,114,859
322,777
—
—
125,059
— 3,469,194
536,745
—
615,221
27,500
638,302
—
422,834
—
234,399
—
658,286
8,282
147,132
5
— 3,252,919
35,787
—
—
—
536,745
—
18
642,739
1,191
183
639,676
929
—
423,763
132
—
234,531
11,387
2,935
680,890
—
509
147,646
13,639
—
—
3,645
— 3,305,990
534,853
150
436,384
9,057
372,867
389
307,374
291
373,785
2,038
683,936
2,000
665,491
3,063
682 3,375,372
16,988
—
429
4,833
540,265
6,380
448
452,269
26,008
—
399,264
6,027
12,590
326,282
5,030
1,049
381,902
7,954
6,138
700,028
38,797
540
707,891
—
—
90,625
25,598
682 3,508,583
419,756
197
394,985
4,519
310,273
9,713
236,222
7,803
103,987
2,511
186,600 1,055,878
2,483
3,159
2,316 2,710,017
30,404
19
1,432
1,675
3,069
3,728
6,694
4,863
10,935
1,436
10,042
530
3,729
107
4,449
477
140
41
40,490
12,857
423,060
256,396
1,657,760 1,557,142 1,461,282 1,013,619
406,301
331,543
117,070
193,595 1,063,287
747,318 1,603,533 5,033,683
2,516 2,793,768
3,198 13,077,535
Commercial real
estate:
Pass
Special Mention
Accruing
Substandard
Nonaccrual
Total commercial
real estate
725,577 1,211,338
—
—
954,226
259
489,193
12,311
314,899
2,725
722,475
5,831
223,131
—
38 4,640,877
21,126
—
—
—
—
8,300
—
—
4,410
—
4,852
232
7,468
11,246
27
—
—
—
9,289
27,246
725,577 1,219,638
954,485
506,146
325,092
744,404
223,158
38 4,698,538
112
Origination Year
2020
2019
2018
2017
2016
Prior
Revolving
Loans
Converted
to Term
Loans
Revolving
Loans
Total
1,682,310
—
—
—
—
—
—
— 1,682,310
1,682,310
—
—
—
—
—
—
— 1,682,310
Paycheck
protection
program:
Pass
Total paycheck
protection
program
Loans to
individuals:
Residential
mortgage
Pass
Special Mention
Accruing
Substandard
Nonaccrual
Total residential
mortgage
Residential
mortgage
guaranteed
by U.S.
government
agencies
Pass
Special Mention
Accruing
Substandard
Nonaccrual
Total residential
mortgage
guaranteed
by U.S.
government
agencies
Personal:
Pass
Special Mention
Accruing
Substandard
Nonaccrual
Total personal
564,325
33
149,832
11
120,875
2,094
124,930
—
158,801
59
348,292
318
335,259
950
24,553 1,826,867
3,475
10
—
648
—
104
51
1,658
—
784
—
2,010
34
22,415
272
3,835
76
774
433
32,228
565,006
149,947
124,678
125,714
160,870
371,059
340,316
25,413 1,863,003
4,859
—
33,880
—
34,464
—
43,099
—
58,264
—
226,380
—
—
—
—
—
—
545
—
—
—
309
—
6,887
—
—
—
—
—
—
—
—
400,946
—
—
7,741
4,859
33,880
35,009
43,099
58,573
233,267
—
—
408,687
219,873
39
200,580
55
76,246
66
100,229
—
64,104
469
102,126
31
510,571
965
1,510 1,275,239
1,625
—
11
28
219,951
214
17
200,866
10
57
76,379
—
73
100,302
—
50
64,623
—
49
102,206
29
45
511,610
—
—
264
319
1,510 1,277,447
Total loans to
individuals
Total loans
789,816
851,926
269,115
$ 4,855,463 $ 3,161,473 $ 2,651,833 $ 1,788,880 $ 1,356,476 $ 3,054,469 $ 6,108,767 $
236,066
384,693
706,532
284,066
26,923 3,549,137
30,159 $ 23,007,520
113
Nonaccruing Loans
A summary of nonaccruing loans as of December 31, 2020 follows (in thousands):
Commercial:
Energy
Healthcare
Services
General business
Total commercial
Commercial real estate
Loans to individuals:
Residential mortgage
Residential mortgage guaranteed by U.S. government agencies
Personal
Total loans to individuals
Total
With No
Allowance
With
Allowance
Related
Allowance
$ 125,059 $
76,633 $
48,426 $
16,478
3,645
25,598
12,857
3,645
20,810
12,857
—
4,788
—
—
2,574
—
167,159
113,945
53,214
19,052
27,246
13,645
13,601
3,389
32,228
32,228
7,741
319
7,741
319
40,288
40,288
—
—
—
—
—
—
—
—
Total
$ 234,693 $ 167,878 $
66,815 $
22,441
114
Troubled Debt Restructurings
At December 31, 2020 the Company has $187 million in troubled debt restructurings (TDRs), of which $152 million are
accruing residential mortgage loans guaranteed by U.S. government agencies. Approximately $95 million of TDRs are
performing in accordance with the modified terms. The loans designated as TDRs had $20.9 million in charge offs during the
year ended December 31, 2020.
At December 31, 2019, TDRs totaled $132 million, of which $92 million were accruing residential mortgage loans guaranteed
by U.S. government agencies. Approximately $57 million of TDRs were performing. The loans designated as TDRs had $18.6
million in charge offs during the year ended December 31, 2019.
TDRs generally consist of interest rate concessions, payment stream concessions or a combination of concessions to distressed
borrowers. During the year ended December 31, 2020, $83 million of loans were restructured. During the year ended December
31, 2019, $37 million of loans were restructured.
Past Due Loans
Past due status for all loan classes is based on the actual number of days since the last payment was due according to the
contractual terms of the loans, as modified for short-term payment deferral forbearance.
A summary of loans currently performing and past due as of December 31, 2020 is as follows (in thousands):
Past Due
Current
30 to 59
Days
60 to 89
Days
90 Days
or More
Total
Past Due 90
Days or
More and
Accruing
$ 3,410,995 $
12,735
4,050 $
41,414 $ 3,469,194 $
3,302,345
3,489,423
2,776,038
—
3,278
1,206
12,978,801
17,219
—
177
6,277
10,504
3,645
3,305,990
15,705
10,247
3,508,583
2,793,768
71,011
13,077,535
—
—
326
4,495
4,821
Commercial:
Energy
Healthcare
Services
General business
Total commercial
Commercial real estate
4,672,279
276
5,310
20,673
4,698,538
5,126
Paycheck protection program
1,682,310
—
—
—
1,682,310
—
Loans to individuals
Permanent mortgage
Permanent mortgages guaranteed by
U.S. government agencies
Personal
Total loans to individuals
1,849,304
5,812
837
7,050
1,863,003
181
262,102
1,273,702
3,385,108
41,389
3,317
50,518
22,041
83,155
408,687
90
338
1,277,447
22,968
90,543
3,549,137
78,349
241
78,771
Total
$ 22,718,498 $
68,013 $
38,782 $
182,227 $ 23,007,520 $
88,718
115
Following is disclosure of loans and the combined allowance for loan losses and accrual for off-balance sheet credit losses
under the previous incurred loss model.
Portfolio segments of the loan portfolio are as follows (in thousands):
Commercial
Commercial real estate
Residential mortgage
Personal
December 31, 2019
Fixed
Rate
Variable
Rate
Non-accrual
Total
$
3,231,485 $ 10,684,749 $
115,416 $ 14,031,650
1,056,321
1,652,653
3,349,836
393,897
193,903
1,007,192
27,626
37,622
287
4,433,783
2,084,172
1,201,382
180,951 $ 21,750,987
$
$
7,680
17,409
Total
Accruing loans past due (90 days)1
Foregone interest on nonaccrual loans
1. Excludes residential mortgage loans guaranteed by agencies of the U.S. government
$
6,134,362 $ 15,435,674 $
The activity in the allowance for loan losses and the allowance for off-balance sheet credit losses related to loan commitments
and standby letters of credit is for the year ended December 31, 2019 summarized as follows (in thousands):
Allowance for loan losses:
Beginning balance
Provision for loan losses
Loans charged off
Recoveries
Ending balance
Commercial
Commercial
Real Estate
Residential
Mortgage
Personal
Nonspecific
Allowance
Total
$
102,226 $
60,026 $
17,964 $
9,473 $
17,768 $
207,457
57,125
(43,185)
2,021
(12,046)
(3,838)
(1,161)
4,986
(288)
562
3,537
(6,343)
2,505
(573)
—
—
44,205
(50,977)
10,074
$
118,187 $
51,805 $
14,400 $
9,172 $
17,195 $
210,759
Allowance for off-balance sheet
credit losses:
Beginning balance
Provision for off-balance sheet credit
losses
Ending balance
Total provision for credit losses
$
$
1,655
(221)
52
55
52
(8)
1,434 $
107 $
44 $
31
(31)
— $
—
—
1,790
(205)
— $
1,585
56,904 $
(11,991) $
(3,846) $
3,506 $
(573) $
44,000
116
The activity in the allowance for loan losses and the allowance for off-balance sheet credit losses related to loan commitments
and standby letters of credit is for the year ended December 31, 2018 summarized as follows (in thousands):
Allowance for loan losses:
Beginning balance
Provision for loan losses
Loans charged off
Recoveries
Ending balance
Commercial
Commercial
Real Estate
Residential
Mortgage
Personal
Nonspecific
Allowance
Total
$
124,269 $
56,621 $
18,451 $
9,124 $
22,217 $
230,682
12,521
(37,880)
3,316
(147)
—
3,552
(1,156)
(378)
1,047
3,175
(5,325)
2,499
(4,449)
—
—
9,944
(43,583)
10,414
$
102,226 $
60,026 $
17,964 $
9,473 $
17,768 $
207,457
Allowance for off-balance sheet
credit losses:
Beginning balance
Provision for off-balance sheet credit
losses
Ending balance
Total provision for credit losses
$
$
3,644
(1,989)
45
7
43
9
2
29
—
—
3,734
(1,944)
1,655 $
52 $
52 $
31 $
— $
1,790
10,532 $
(140) $
(1,147) $
3,204 $
(4,449) $
8,000
The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment
measurement method at December 31, 2019 is as follows (in thousands):
Commercial
Commercial real estate
Residential mortgage
Personal
Total
Collectively Measured
for Impairment
Individually Measured
for Impairment
Total
Recorded
Investment
Related
Allowance
Recorded
Investment
Related
Allowance
Recorded
Investment
Related
Allowance
$ 13,916,234 $
100,773 $
115,416 $
17,414 $ 14,031,650 $
118,187
4,406,157
2,046,550
1,201,095
51,805
14,400
9,172
27,626
37,622
287
—
—
—
4,433,783
2,084,172
1,201,382
51,805
14,400
9,172
21,570,036
176,150
180,951
17,414
21,750,987
193,564
Nonspecific allowance
—
—
—
—
—
17,195
Total
$ 21,570,036 $
176,150 $
180,951 $
17,414 $ 21,750,987 $
210,759
The allowance for loan losses and recorded investment of the related loans by portfolio segment for risk graded and non-risk
graded loans at December 31, 2019 is as follows (in thousands):
Commercial
Commercial real estate
Residential mortgage
Personal
Total
Internally Risk Graded
Non-Graded
Total
Recorded
Investment
Related
Allowance
Recorded
Investment
Related
Allowance
Recorded
Investment
Related
Allowance
$ 13,997,538 $
117,236 $
34,112 $
951 $ 14,031,650 $
118,187
4,433,783
279,113
1,116,297
51,805
3,085
7,003
—
—
4,433,783
1,805,059
85,085
11,315
2,169
2,084,172
1,201,382
51,805
14,400
9,172
19,826,731
179,129
1,924,256
14,435
21,750,987
193,564
Nonspecific allowance
—
—
—
—
—
17,195
Total
$ 19,826,731 $
179,129 $ 1,924,256 $
14,435 $ 21,750,987 $
210,759
117
The following table summarizes the Company's loan portfolio at December 31, 2019 by the risk grade categories (in
thousands):
Internally Risk Graded
Non-Graded
Performing
Other
Loans
Especially
Mentioned
Pass
Accruing
Substandard Nonaccrual
Performing Nonaccrual
Total
$ 3,700,406 $
117,298 $
63,951 $
91,722 $
— $
— $ 3,973,377
Commercial:
Energy
Services
Wholesale/retail
Manufacturing
Healthcare
Public finance
3,050,946
1,749,023
623,219
2,995,514
709,868
29,943
5,281
18,214
13,117
—
Other commercial and
industrial
709,729
4,028
Total commercial
13,538,705
187,881
Commercial real estate:
Residential construction
and land development
Retail
Office
Multifamily
Industrial
Other commercial real
estate
Total commercial real
estate
150,529
743,343
923,202
1,257,005
852,539
—
12,067
5,177
1,604
1,658
Residential mortgage:
Permanent mortgage
276,138
Permanent mortgage
guaranteed by U.S.
government agencies
Home equity
Total residential
mortgage
Personal
Total
—
—
276,138
1,116,196
33,791
5,399
13,883
20,805
—
17,744
155,573
—
1,243
—
95
1,011
7,483
1,163
10,133
4,480
—
398
115,379
350
18,868
—
6,858
909
—
—
—
—
—
34,075
34,075
—
—
—
—
—
—
—
—
—
—
—
—
37
37
—
—
—
—
—
—
3,122,163
1,760,866
665,449
3,033,916
709,868
766,011
14,031,650
150,879
775,521
928,379
1,265,562
856,117
457,325
—
4,433,783
455,045
1,639
—
641
4,381,663
22,145
2,349
27,626
78
—
—
78
45
2,404
493
758,260
19,948
1,057,321
—
—
—
—
191,694
817,976
6,100
11,081
197,794
829,057
2,404
493
1,767,930
37,129
2,084,172
—
56
84,853
232
1,201,382
$ 19,312,702 $
210,149 $
160,326 $
143,554 $ 1,886,858 $
37,398 $ 21,750,987
118
Impaired Loans
Loans are considered to be impaired when it is probable that the Company will not be able to collect all amounts due according
to the contractual terms of the loan agreement. This generally includes all nonaccruing loans, all loans modified in a TDR and
all loans repurchased from GNMA pools.
Generally, no interest income is recognized on impaired loans until all principal balances, including amounts charged-off, are
recovered.
A summary of impaired loans at December 31, 2019 follows (in thousand):
As of December 31, 2019
Recorded Investment
Unpaid
Principal
Balance
Total
With No
Allowance
With
Allowance
Related
Allowance
Year Ended
December 31, 2019
Average
Recorded
Investment
Interest
Income
Recognized
$
149,441 $
91,722 $
44,244 $
47,478 $
16,854 $
69,119 $
Commercial:
Energy
Services
Wholesale/retail
Manufacturing
Healthcare
Public finance
Other commercial and
industrial
Total commercial
Commercial real estate:
Residential construction and
land development
Retail
Office
Multifamily
Industrial
Other commercial real estate
Total commercial real
estate
Residential mortgage:
Permanent mortgage
Permanent mortgage
guaranteed by U.S.
government agencies1
Home equity
Total residential mortgage
10,923
1,980
10,848
13,774
—
7,483
1,163
10,133
4,480
—
8,227
195,193
435
115,416
1,306
20,265
—
6,858
909
801
350
18,868
—
6,858
909
641
6,301
902
9,914
4,480
—
435
66,276
350
18,868
—
6,858
909
641
30,139
27,626
27,626
24,868
20,441
20,441
204,187
12,967
242,022
197,794
11,081
229,316
197,794
11,081
229,316
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,182
261
219
—
—
—
49,140
240
101
219
—
—
5,854
916
9,144
7,798
—
—
17,414
8,568
101,399
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
350
19,573
—
3,580
454
666
24,623
22,196
1,198
195,009
10,776
227,981
7,733
—
8,931
259
—
Personal
360
287
287
Total
1 All permanent mortgage loans guaranteed by U.S. government agencies are considered impaired as we do not expect full collection of
contractual principal and interest. At December 31, 2019, the majority were accruing based on the guarantee by U.S. government
agencies.
323,505 $
372,645 $
467,714 $
354,262 $
49,140 $
17,414 $
$
8,931
119
A summary of loans currently performing, loans past due and accruing and nonaccrual loans as of December 31, 2019 is as
follows (in thousands):
Current
30 to 59
Days
Past Due
60 to 89
Days
90 Days
or More
Nonaccrual
Total
Commercial:
Energy
Services
Wholesale/retail
Manufacturing
Healthcare
Public finance
Other commercial and industrial
$ 3,881,244 $
3,105,621
1,758,878
654,329
3,027,329
707,638
764,390
Total commercial
13,899,429
Commercial real estate:
Residential construction and land
development
Retail
Office
Multifamily
Industrial
Other commercial real estate
Total commercial real estate
Residential mortgage:
Permanent mortgage
Permanent mortgages guaranteed by
U.S. government agencies
Home equity
Total residential mortgage
Personal
Total
401
1,737
712
410
2,039
2,230
414
7,943
3,093
—
—
—
—
1,827
4,920
10 $
— $
91,722 $ 3,973,377
523
113
190
—
—
772
1,608
—
—
—
—
—
250
250
6,799
—
387
68
—
—
7,483
1,163
3,122,163
1,760,866
10,133
665,449
4,480
3,033,916
—
435
709,868
766,011
7,254
115,416
14,031,650
57
—
—
—
—
354
411
350
18,868
—
150,879
775,521
928,379
6,858
1,265,562
909
641
856,117
457,325
27,626
4,433,783
147,379
756,653
928,379
1,258,704
855,208
454,253
4,400,576
1,034,716
2,011
153
—
20,441
1,057,321
46,898
814,325
1,895,939
24,203
3,343
29,557
18,187
102,406
308
—
18,648
102,406
6,100
11,081
37,622
197,794
829,057
2,084,172
1,196,362
4,664
54
15
287
1,201,382
$ 21,392,306 $
47,084
20,560 $
110,086 $
180,951 $ 21,750,987
120
(5) Premises and Equipment and Leases
Premises and equipment at December 31 are summarized as follows (in thousands):
Land
Buildings and improvements
Software and related integration
Furniture and equipment
Construction in progress
Premises and equipment
Less accumulated depreciation
Premises and equipment, net of accumulated depreciation
December 31,
2020
2019
$
69,776 $
69,960
440,528
120,444
165,344
46,949
843,041
291,733
551,308 $
$
421,952
98,487
135,153
53,498
779,050
243,531
535,519
Depreciation expense of premises and equipment was $54.3 million, $51.6 million and $51.2 million for the years ended
December 31, 2020, 2019 and 2018, respectively.
Effective January 1, 2019, premises and equipment included right-of-use assets for leased office space and facilities. Leases are
at market rates at inception and may contain escalations based on consumer price index or similar benchmarks and options to
renew at then market rates.
Right-of-use assets of $166 million at December 31, 2020 and $180 million at December 31, 2019 are included in buildings and
improvements and related right-of-use liabilities are included in other liabilities. At December 31, 2020, the weighted-average
remaining lease term was 11 years and the weighted average discount rate on operating leases was 3.0 percent. Operating lease
costs recognized as occupancy and equipment expense were $25.0 million and $24.2 million for the years ended December 31,
2020 and December 31, 2019, respectively. Operating cash flows from operating leases were $25.6 million and $23.3 million
for the years ended December 31, 2020 and December 31, 2019, respectively.
Total rent expense for BOK Financial was $42.0 million in 2020, $43.0 million in 2019 and $28.5 million in 2018. At
December 31, 2020, un-discounted operating lease liabilities are scheduled to mature as follows: $26.3 million in 2021, $21.2
million in 2022, $20.1 million in 2023, $19.6 million in 2024, $18.9 million in 2025 and $116 million thereafter. Operating
expense and short term lease costs total $13.4 million and $12.6 million for the year ended December 31, 2020 and
December 31, 2019, respectively. BOKF, NA is obligated under a long-term lease for its bank premises in downtown Tulsa.
The original lease dated November 1, 1976 was renegotiated on July 1, 2019. The new lease will terminate on December 31,
2034. The Company has the option to renew for an additional 10 years. Premises leases may include options to renew at then
current market rates and may include escalation provisions based upon changes in consumer price index or similar benchmarks.
The Company may lease owned properties or sublease unoccupied leased facilities. Income on these leases is immaterial.
121
(6) Goodwill and Intangible Assets
The following table presents the original cost and accumulated amortization of intangible assets (in thousands):
Core deposit premiums
Less accumulated amortization
Net core deposit premiums
Other identifiable intangible assets
Less accumulated amortization
Net other identifiable intangible assets
Total intangible assets, net
Dec. 31,
2020
2019
$
103,200 $
103,200
32,256
70,944
82,731
40,239
42,492
19,364
83,836
74,372
32,937
41,435
$
113,436 $
125,271
Expected amortization expense for intangible assets that will continue to be amortized (in thousands):
2021
2022
2023
2024
2025
Thereafter
Core
Deposit
Premiums
Other
Identifiable
Intangible
Assets
$
11,893 $
6,599 $
10,981
10,145
9,379
8,675
19,871
5,232
4,191
3,178
2,767
20,525
Total
18,492
16,213
14,336
12,557
11,442
40,396
$
70,944 $
42,492 $
113,436
The changes in the carrying value of goodwill by operating segment are as follows (in thousands):
Balance, December 31, 2018
Adjustment1
Balance, December 31, 2019
Commercial
Banking
Consumer
Banking
Wealth
Management
Funds
Management
and Other
Total
$
313,270 $
43,458 $
90,702 $
601,833 $ 1,049,263
600,661
913,931
—
43,458
—
90,702
(601,833)
(1,172)
—
1,048,091
Balance, December 31, 2020
1 Goodwill related to the CoBiz acquisition was not yet allocated to the operating segments as of December 31, 2018 and was included in
913,931 $
— $ 1,048,091
43,458 $
90,702 $
$
Funds Management and Other in 2018 then allocated during 2019.
At October 1, 2020, the Company performed a qualitative impairment assessment of goodwill based on factors including, but
not limited to, general economic conditions, financial services industry considerations, regional economic conditions, global
health concerns and related medical developments, general BOKF Financial performance and reporting unit performance.
During 2020, the U.S. and global economies were negatively impacted by the spread of COVID-19. This resulted in the need
for quarterly qualitative impairment analyses and quantitative corroboration of the annual qualitative impairment assessment.
No impairment was indicated for any reporting unit.
122
(7) Mortgage Banking Activities
Residential Mortgage Loan Production
The Company originates, markets and services conventional and government-sponsored residential mortgage loans. Generally,
conforming fixed rate residential mortgage loans are held for sale in the secondary market and non-conforming and adjustable-
rate residential mortgage loans are held for investment. The volume of mortgage loans originated for sale and secondary market
prices are the primary drivers of originating and marketing revenue.
Residential mortgage loan commitments are generally outstanding for 60 to 90 days, which represents the typical period from
commitment to originate a residential mortgage loan to when the closed loan is sold to an investor. Residential mortgage loan
commitments are subject to both credit and interest rate risk. Credit risk is managed through underwriting policies and
procedures, including collateral requirements, which are generally accepted by the secondary loan markets. Exposure to interest
rate fluctuations is partially managed through forward sales of residential mortgage-backed securities and forward sales
contracts. These latter contracts set the price for loans that will be delivered in the next 60 to 90 days.
The unpaid principal balance of residential mortgage loans held for sale, notional amounts of derivative contracts related to
residential mortgage loan commitments and forward contract sales and their related fair values included in Mortgage loans held
for sale on the Consolidated Balance Sheets were (in thousands):
Residential mortgage loans held for sale
Residential mortgage loan commitments
Forward sales contracts
December 31, 2020
December 31, 2019
Unpaid
Principal
Balance/
Notional
Fair Value
Unpaid
Principal
Balance/
Notional
Fair Value
$
227,161 $ 236,444 $
175,117 $
177,703
380,637
549,414
20,435
(4,563)
158,460
315,203
5,233
(665)
$ 252,316
$
182,271
No residential mortgage loans held for sale were 90 days or more past due or considered impaired as of December 31, 2020 or
December 31, 2019. No credit losses were recognized on residential mortgage loans held for sale for the years ended December
31, 2020, 2019 and 2018.
Mortgage banking revenue was as follows (in thousands):
Year Ended
2020
2019
2018
Production revenue:
Net realized gains on sales of mortgage loans
$
107,847 $
39,730 $
36,379
Net change in unrealized gain on mortgage loans held for sale
Net change in the fair value of mortgage loan commitments
Net change in the fair value of forward sales contracts
Total mortgage production revenue
Servicing revenue
Total mortgage banking revenue
6,697
15,202
(3,898)
125,848
56,512
672
(145)
2,463
42,720
64,821
$
182,360 $
107,541 $
(674)
(1,145)
(2,870)
31,690
66,097
97,787
Mortgage production revenue includes gain (loss) on residential mortgage loans held for sale and changes in the fair value of
derivative contracts not designated as hedging instruments related to residential mortgage loan commitments and forward sales
contracts. Servicing revenue includes servicing fee income and late charges on loans serviced for others.
123
Residential Mortgage Servicing
The Company generally retains the right to service residential mortgage loans sold and may purchase mortgage servicing
rights. The unpaid principal balance of loans serviced for others is the primary driver of servicing revenue.
The following represents a summary of mortgage servicing rights (Dollars in thousands):
Number of residential mortgage loans serviced for others
2020
106,201
December 31,
2019
126,828
2018
132,463
Outstanding principal balance of residential mortgage loans serviced for others
$ 16,228,449
$ 20,727,106
$ 21,658,335
Weighted average interest rate
Remaining contractual term (in months)
3.84 %
280
3.98 %
289
3.99 %
293
Activity in capitalized mortgage servicing rights during the three years ended December 31, 2020 is as follows (in thousands):
Balance, December 31, 2017
Additions, net
Change in fair value due to loan runoff
Change in fair value due to market changes
Balance, December 31, 2018
Additions, net
Change in fair value due to loan runoff
Change in fair value due to market changes
Balance, December 31, 2019
Additions
Disposals
Change in fair value due to loan runoff
Change in fair value due to market changes
Balance, December 31, 2020
$
252,867
35,247
(33,528)
4,668
259,254
35,128
(38,979)
(53,517)
201,886
31,209
(10,801)
(41,598)
(79,524)
$
101,172
Changes in the fair value of mortgage servicing rights due to market changes are included in Other operating revenue in the
Consolidated Statements of Earnings. Changes in fair value due to loan runoff are included in Mortgage banking costs.
Mortgage servicing rights are not traded in active markets. Fair value is determined by discounting the projected net cash flows.
Significant assumptions used to determine fair value considered to be significant unobservable inputs were as follows:
Discount rate – risk-free rate plus a market premium
December 31,
2020
9.14%
2019
9.81%
Prepayment rate - based upon loan interest rate, original term and loan type
9.41% - 21.87%
8.28% - 16.05%
Loan servicing costs – annually per loan based upon loan type:
Performing loans
Delinquent loans
Loans in foreclosure
Primary/secondary mortgage rate spread
Escrow earnings rate – indexed to rates paid on deposit accounts with comparable average
life
Delinquency rate
$69 - $94
$150 - $500
$68 - $94
$150 - $500
$1,000 - $4,000
$1,000 - $4,000
105 bps
104 bps
0.43%
3.54%
1.73%
2.73%
124
Changes in primary residential mortgage interest rates directly affect the prepayment speeds used in valuing our mortgage
servicing rights. A separate third party model is used to estimate prepayment speeds based on interest rates, housing turnover
rates, estimated loan curtailment, anticipated defaults and other relevant factors. The prepayment model is updated periodically
for changes in market conditions and adjusted to better correlate with actual performance of BOK Financial’s servicing
portfolio.
(8) Deposits
Interest expense on deposits is summarized as follows (in thousands):
Transaction deposits
Savings
Time:
Certificates of deposits under $100,000
Certificates of deposits $100,000 and over
Other time deposits
Total time
Total
Year Ended December 31,
2020
2019
2018
$
60,424 $ 132,854 $
65,859
385
677
439
6,741
18,270
4,176
29,187
8,299
29,288
4,420
42,007
5,751
19,739
3,729
29,219
$
89,996 $ 175,538 $
95,517
The aggregate amounts of time deposits in denominations of $250,000 or more at December 31, 2020 and 2019 were $815
million and $845 million, respectively.
Time deposit maturities are as follows: 2021 – $1.5 billion, 2022 – $172 million, 2023 – $90 million, 2024 – $54 million, 2025
– $41 million and $100 million thereafter.
The aggregate amount of overdrawn customer transaction deposits that have been reclassified as loan balances was $3.1 million
at December 31, 2020 and $8.7 million at December 31, 2019.
125
(9) Other Borrowed Funds
Information relating to other borrowings is summarized as follows (dollars in thousands):
Funds purchased
Repurchase agreements
Other borrowings:
Federal Home Loan Bank advances
GNMA repurchase liability
Federal Reserve Bank advances
As of
December 31, 2020
Year Ended
December 31, 2020
Balance
Rate
Average
Balance
Rate
769,365
0.05 %
2,045,795
0.58 %
893,021
0.09 %
1,589,746
0.24 %
200,000
0.29 %
3,393,989
1.00 %
19,500
4.35 %
42,771
4.18 %
—
— %
42,464
0.26 %
Maximum
Outstanding
At Any
Month End
3,311,938
3,230,097
7,500,000
126,569
—
Paycheck protection program liquidity facility
1,635,963
0.35 %
1,152,073
0.35 %
2,013,414
Other
Total other borrowings
Subordinated debentures1
Total other borrowed funds
Funds purchased
Repurchase agreements
Other borrowings:
Federal Home Loan Bank advances
GNMA repurchase liability
Other
Total other borrowings
Subordinated debentures1
Total other borrowed funds
Funds purchased
Repurchase agreements
Other borrowings:
Federal Home Loan Bank advances
GNMA repurchase liability
Other
Total other borrowings
Subordinated debentures1
Total other borrowed funds
1 Parent Company only.
27,507
5.24 %
28,156
5.12 %
49,376
1,882,970
4,659,453
0.88 %
276,005
4.72 %
275,965
5.05 %
276,005
$
3,821,361
$ 8,570,959
0.82 %
As of
December 31, 2019
Year Ended
December 31, 2019
Balance
Rate
Average
Balance
Rate
Maximum
Outstanding
At Any
Month End
3,390,528
1.53 %
2,438,376
2.08 %
427,822
0.50 %
399,785
0.57 %
3,390,528
427,822
4,500,000
1.79 %
7,122,466
2.44 %
8,000,000
15,417
4.32 %
13,746
4.47 %
11,638
5.09 %
11,144
5.30 %
19,581
34,676
4,527,055
7,147,356
2.45 %
275,923
5.15 %
276,075
5.47 %
275,923
$
8,621,328
$ 10,261,592
2.37 %
As of
December 31, 2018
Year Ended
December 31, 2018
Balance
Rate
Average
Balance
Rate
Maximum
Outstanding
At Any
Month End
402,450
2.34 %
419,322
1.89 %
615,961
0.36 %
464,582
0.28 %
949,531
615,961
6,100,000
2.65 %
6,207,142
2.06 %
6,500,000
15,552
4.43 %
14,783
4.47 %
8,838
2.90 %
14,516
2.67 %
16,529
20,422
6,124,390
6,236,441
2.07 %
275,913
5.34 %
177,884
5.52 %
275,913
$
7,418,714
$ 7,298,229
2.03 %
126
Aggregate annual principal repayments at December 31, 2020 are as follows (in thousands):
2021
2022
2023
2024
2025
Thereafter
Total
$ 1,884,974
1,639,735
9,625
625
10,555
275,847
$ 3,821,361
Funds purchased are unsecured and generally mature within one day to ninety days from the transaction date. Securities
repurchase agreements are recorded as secured borrowings that generally mature within ninety days and are secured by certain
available for sale securities.
Additional information relating to securities sold under agreements to repurchase and related liabilities at December 31, 2020
and 2019 is as follows (dollars in thousands):
Security Sold/Maturity
U.S. government agency mortgage-backed securities:
Overnight1
Long-term
Total Agency Securities
Security Sold/Maturity
U.S. government agency mortgage-backed securities:
Overnight1
Long-term
Total Agency Securities
December 31, 2020
Amortized
Cost
Fair
Value
Repurchase
Liability1
Rate
$
893,069 $
910,885 $
893,021
—
—
—
$
893,069 $
910,885 $
893,021
0.09 %
— %
0.09 %
December 31, 2019
Amortized
Cost
Fair
Value
Repurchase
Liability1
Rate
$
431,939 $
435,898 $
427,822
—
—
—
$
431,939 $
435,898 $
427,822
0.50 %
— %
0.50 %
1 BOK Financial maintains control over the securities underlying overnight repurchase agreements and generally transfers control over securities underlying
longer-term dealer repurchase agreements to the respective counterparty.
Borrowings from the Federal Home Loan Banks are used for funding purposes. In accordance with policies of the Federal
Home Loan Banks, BOK Financial has granted a blanket pledge of eligible assets (generally unencumbered U.S. Treasury and
residential mortgage-backed securities, 1-4 family loans and multifamily loans) as collateral for these advances. The Federal
Home Loan Banks have issued letters of credit totaling $381 million to secure BOK Financial’s obligations to depositors of
public funds. The unused credit available to BOK Financial at December 31, 2020 pursuant to the Federal Home Loan Bank’s
collateral policies is $8.6 billion.
In 2016, BOK Financial issued $150 million of subordinated debt that will mature on June 30, 2056. Interest on this debt bears
an interest rate of 5.375%, payable quarterly. On June 30, 2021, BOK Financial will have the option to redeem the debt at the
principal amount plus accrued interest, subject to regulatory approval.
As a result of the acquisition of CoBiz Financial, we obtained $60 million of subordinated debt issued in June 2015 that will
mature on June 25, 2030. This debt bears interest at the rate of 5.625% through June 2025 and thereafter, the notes will bear
interest at an annual floating rate equal to three-month LIBOR plus 3.17%. The debt contains a call option that allows for
repayment prior to contractual maturity. The call option is available on June 25, 2025 and quarterly thereafter at 100% of the
principal amount.
127
Also through CoBiz Financial, we acquired junior subordinated debentures split across three issuance tranches. Junior
subordinated debentures of $21 million will mature September 17, 2033 and bear an interest rate of three-month LIBOR plus
2.95% that resets quarterly. Junior subordinated debentures of $31 million will mature on July 23, 2034 and bear an interest rate
of three-month LIBOR plus 2.60% that resets quarterly. Junior subordinated debentures of $20 million will mature on
September 30, 2035 and bear an interest rate of three-month LIBOR plus 1.45% that resets quarterly. The junior subordinated
debentures are subject to early redemption prior to maturity.
BOK Financial Securities, Inc. may borrow funds from Pershing, LLC ("Pershing"), a clearing broker/dealer and a wholly
owned subsidiary of Bank of New York Mellon, for the purposes of financing securities purchases or to facilitate funding of
investment banking activities, on terms to be negotiated at the time of the borrowing. BOK Financial Securities, Inc. had no
borrowings outstanding at December 31, 2020 and December 31, 2019.
The Company has a liability related to the repurchase of certain delinquent residential mortgage loans previously sold into
GNMA mortgage pools. Interest is payable at rates contractually due to investors.
128
(10) Federal and State Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred tax assets
and liabilities are as follows (in thousands):
Deferred tax assets:
Credit loss reserves
Lease liability
Deferred compensation
Unearned fees
Purchased loan discount
Share-based compensation
Valuation adjustments
Other
Total deferred tax assets
Deferred tax liabilities:
Available for sale securities mark to market
Right-of-use asset
Mortgage servicing rights
Acquired identifiable intangible
Depreciation
Lease financing
Other
Total deferred tax liabilities
Net deferred tax liabilities
December 31,
2020
2019
$
101,265 $
44,794
29,504
14,584
11,537
6,525
3,834
29,963
242,006
105,769
38,635
24,182
18,138
13,754
11,828
39,210
50,611
46,084
25,976
9,080
18,042
7,392
1,545
26,384
185,114
33,140
42,180
48,435
23,181
18,909
10,720
34,826
251,516
211,391
$
(9,510) $
(26,277)
No valuation allowance was necessary on deferred tax assets as of December 31, 2020 and 2019.
The significant components of the provision for income taxes attributable to continuing operations for BOK Financial are
shown below (in thousands):
Current income tax expense:
Federal
State
Total current income tax expense
Deferred income tax expense (benefit):
Federal
State
Total deferred income tax expense (benefit)
Total income tax expense
Year Ended December 31,
2020
2019
2018
$
173,888 $
110,887 $
103,748
29,889
203,777
15,088
125,975
15,253
119,001
(65,989)
(8,995)
(74,984)
3,416
792
4,208
(190)
250
60
$
128,793 $
130,183 $
119,061
129
The reconciliations of income attributable to continuing operations at the U.S. federal statutory tax rate to income tax expense
are as follows (in thousands):
Amount:
Federal statutory tax
Tax exempt revenue
Effect of state income taxes, net of federal benefit
Utilization of tax credits, net of proportional amortization of low-income housing limited
partnership investments
Other, net
Total income tax expense
Percent of pretax income:
Federal statutory tax
Tax exempt revenue
Effect of state income taxes, net of federal benefit
Utilization of tax credits, net of proportional amortization of low-income housing limited
partnership investments
Other, net
Total
Year Ended December 31,
2020
2019
2018
$
118,412 $
132,482 $
118,752
(7,035)
14,251
(6,994)
10,159
(12,227)
12,715
(5,127)
2,340
(8,311)
12,430
(4,559)
749
$
128,793 $
130,183 $
119,061
Year Ended December 31,
2020
2019
2018
21.0 %
21.0 %
21.0 %
(1.2)
2.5
(1.2)
1.7
(1.9)
2.0
(0.8)
0.3
(1.5)
2.2
(0.8)
0.2
22.8 %
20.6 %
21.1 %
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Balance as of January 1
Additions for tax for current year positions
Settlements during the period
Lapses of applicable statute of limitations
Balance as of December 31
2020
2019
2018
$
20,465 $
18,869 $
18,110
6,384
—
(3,947)
5,649
—
(4,053)
2,649
—
(1,890)
$
22,902 $
20,465 $
18,869
Of the above unrecognized tax benefits, $17.2 million, if recognized, would have affected the effective tax rate.
BOK Financial recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. The
Company recognized $2.4 million for 2020, $2.2 million for 2019 and $1.7 million for 2018 in interest and penalties. The
Company had approximately $5.9 million and $5.6 million accrued for the payment of interest and penalties at December 31,
2020 and 2019, respectively. Federal statutes remain open for federal tax returns filed in the previous three reporting periods.
Various state income tax statutes remain open for the previous three to six reporting periods.
130
(11) Employee Benefits
BOK Financial sponsors a defined benefit cash balance Pension Plan for all employees who satisfy certain age and service
requirements. Pension Plan benefits were curtailed as of April 1, 2006. No participants may be added to the plan and no
additional service benefits will be accrued. Interest continues to accrue on employees' account balances at a variable rate tied to
the five-year trailing average of five-year U.S. Treasury securities plus 1.5%. The rate has a floor of 3.0% and a ceiling of
5.0%. The 2020 quarterly variable rates ranged from 3.28% to 3.40%.
The projected benefit obligation and fair value of plan assets, respectively, were $24 million and $38 million at December 31,
2020 and $25 million and $36 million at December 31, 2019. The net periodic benefit credit was $1.3 million for December 31,
2020, $815 thousand for December 31, 2019 and $583 thousand for December 31, 2018. Total expected future benefit
payments related to the Pension Plan were $26.6 million at December 31, 2020.
The following table presents the weighted-average assumptions used in the measurement of the Company's net periodic benefit
cost as of December 31:
Discount rate
Expected return on plan assets
2020
2019
2.69 %
5.50 %
4.10 %
5.50 %
Assets of the Pension Plan consist primarily of shares in the Cavanal Hill Active Core Fund. The stated objective of this fund is
to provide an attractive total return with a well-balanced mix of equities and bonds. The typical portfolio mix is approximately
60% equities and 40% bonds. The net asset value of shares in the Cavanal Hill Funds is reported daily based on market
quotations for the Fund’s securities. Management considers the Fund's recent and long-term performance as indicators when
setting the expected return on plan assets. No minimum contribution was required for 2020, 2019 or 2018.
Employee contributions to the Thrift Plan are eligible for Company matching equal to 6% of base compensation, as defined in
the plan. The Company-provided matching contribution rates range from 50% for employees with less than 4 years of service to
200% for employees with 15 or more years of service. Additionally, a maximum Company-provided, non-elective annual
contribution of up to $750 per participant is provided for employees whose annual base compensation is less than $40,000.
Participants may direct investments in their accounts to a variety of options, including a BOK Financial common stock fund and
Cavanal Hill funds. Employer contributions, which are invested in accordance with the participant’s investment options, vest
over five years. Thrift Plan expenses were $29.9 million for 2020, $27.6 million for 2019 and $25.1 million for 2018.
131
(12) Share-Based Compensation Plans
The shareholders and Board of Directors of BOK Financial have approved various share-based compensation plans. An
independent compensation committee of the Board of Directors determines the number of awards granted to the Chief
Executive Officer and other senior executives. Share-based compensation is granted to other officers and employees as
determined by the Chief Executive Officer.
The following table presents stock options outstanding under these plans (in thousands, except for per share data):
Options outstanding at:
December 31, 2018
December 31, 2019
December 31, 2020
Options vested at:
December 31, 2018
December 31, 2019
December 31, 2020
Weighted-
Average
Exercise
Price
Aggregate
Intrinsic
Value
Number
63,058 $
54.89 $
36,100
17,671
56.75
57.35
33,573 $
53.09 $
27,193
17,671
57.08
57.35
1,163
1,106
197
679
824
197
No options have been awarded since 2013. At December 31, 2020, the weighted average remaining contractual life of options
outstanding was 1.03 years and the weighted average remaining contractual life of vested options was 1.03 years. The aggregate
intrinsic value of options exercised was $318 thousand for 2020, $761 thousand for 2019 and $2.3 million for 2018.
The Company also awards restricted stock to certain officers and employees and restricted stock units ("RSUs) to certain
executives, (collectively "non-vested shares"). Vesting of all non-vested shares is subject to service requirements. Additionally,
vesting of certain non-vested shares is subject to performance criteria based on changes in the Company's earnings per share
relative to defined peers. The following represents a summary of the non-vested shares for the three years ended December 31,
2020 (in thousands):
Non-vested at January 1, 2018
Granted
Vested
Forfeited
Non-vested at December 31, 2018
Granted
Vested
Forfeited
Non-vested at December 31, 2019
Granted
Vested
Forfeited
Non-vested at December 31, 2020
Restricted Stock
Restricted Stock Units
Weighted
Average
Grant Date
Fair Value
Units
Weighted
Average
Grant Date
Fair Value
Shares
667,103
150,419 $
(242,215)
(47,700)
527,607
145,724 $
(114,201)
(131,952)
427,178
236,750 $
(225,527)
(18,167)
420,234
85.58
74.85
75.68
76.74
61.28
83.69
83.49
83.50
83.10
—
—
—
—
—
—
—
—
46,689 $
87.40
—
—
46,689
—
—
22,980 $
77.36
—
—
69,669
—
—
Compensation expense recognized on non-vested shares totaled $16.0 million for 2020, $15.1 million for 2019 and $3.6 million
for 2018. Unrecognized compensation cost of non-vested shares totaled $16.3 million at December 31, 2020. We expect to
recognize compensation expense of $10.8 million in 2021, $5.4 million in 2022, and $134 thousand in 2023.
132
Compensation cost for restricted stock units is variable based on the current fair value of BOK Financial common shares.
Vesting of 244,392 non-vested shares may be increased or decreased based on performance criteria defined in the plan
documents.
(13) Related Parties
In compliance with applicable banking regulations, the Company may extend credit to certain executive officers, directors,
principal shareholders and their affiliates (collectively referred to as “related parties”) in the ordinary course of business. The
Company’s loans to related parties do not involve more than the normal credit risk.
Activity in loans to related parties is summarized as follows (in thousands):
Beginning balance
Advances
Payments
Adjustments1
Ending balance
1 Adjustments generally consist of changes in status as a related party.
Year Ended December 31,
2020
2019
$
75,189 $
75,265
498,425
886,610
(484,958)
(896,643)
4,284
9,957
$
92,940 $
75,189
As defined by banking regulations, loan commitments and equity investments from the subsidiary banks to a single affiliate
may not exceed 10% of unimpaired capital and surplus while loan commitments and equity investments to all affiliates may not
exceed 20% of unimpaired capital and surplus. All loans to affiliates must be fully secured by eligible collateral. At December
31, 2020, loan commitments and equity investments were limited to $416 million to a single affiliate and $832 million to all
affiliates. The largest loan commitment and equity investment to a single affiliate was $264 million and the aggregate loan
commitments and equity investments to all affiliates were $324 million. The largest outstanding amount to a single affiliate at
December 31, 2020 was $4.1 million and the total outstanding amounts to all affiliates were $5.3 million. At December 31,
2019, total loan commitments and equity investments to all affiliates were $392 million and the total outstanding amounts to all
affiliates were $5.0 million.
Certain related parties are customers of the Company for services other than loans, including consumer banking, corporate
banking, risk management, wealth management, brokerage and trading, or fiduciary/trust services. The Company engages in
transactions with related parties in the ordinary course of business in compliance with applicable regulations.
QuikTrip Corporation has entered into a fee sharing agreement with TransFund, BOKF’s electronic funds transfer network
(“TransFund”), respecting transactions completed at TransFund automated teller machines placed in QuikTrip locations. In
2020, BOKF paid QuikTrip approximately $10.0 million pursuant to this agreement. A BOK Financial director is Chief
Executive Officer, Chairman, and a significant shareholder of QuikTrip Corporation.
Cavanal Hill Investment Management, Inc., a wholly-owned subsidiary of BOKF, NA, is the administrator to and investment
advisor for the Cavanal Hill Funds (the "Funds"), a diversified, open-ended investment company established as a business trust
under the Investment Company Act of 1940 (the "1940 Act"). BOKF, NA is custodian and Cavanal Hill Distributors, Inc. is
distributor for the Funds. The Funds’ products are offered to customers, employee benefit plans, trusts and the general public in
the ordinary course of business. Approximately 80% of the Funds’ assets of $3.7 billion are held for the Company's clients. A
Company executive officer serves on the Funds' board of trustees and officers of BOKF, NA serve as president and secretary of
the Funds. A majority of the members of the Funds’ board of trustees are, however, independent of the Company and the Funds
are managed by its board of trustees.
133
(14) Commitments and Contingent Liabilities
Litigation Contingencies
As a member of Visa, BOK Financial is obligated for a proportionate share of certain covered litigation losses incurred by Visa
under a retrospective responsibility plan. A contingent liability was recognized for the Company’s share of Visa’s covered
litigation liabilities. Visa funded an escrow account to cover litigation claims, including covered litigation losses under the
retrospective responsibility plan, with proceeds from its initial public offering in 2008 and from available cash.
BOK Financial currently owns 252,233 Visa Class B shares which are convertible into 409,324 shares of Visa Class A shares
after the final settlement of all covered litigation. Class B shares may be diluted in the future if the escrow fund is not adequate
to cover future covered litigation costs. No value has been currently assigned to the Class B shares.
On June 24, 2015, BOKF, NA received a complaint alleging that an employee had colluded with a bond issuer and an
individual in misusing revenues pledged to municipal bonds for which BOKF, NA served as trustee under the bond indenture.
The Company conducted an investigation and concluded that employees in one of its Corporate Trust offices had, with respect
to a single group of affiliated bond issuances, violated Company policies and procedures by waiving financial covenants,
granting forbearances and accepting without disclosure to the bondholders, debt service payments from sources other than
pledged revenues. The relationship manager was terminated. The Company reported the circumstances to, and cooperated with
an investigation by, the Securities and Exchange Commission ("SEC"). On September 7, 2016, BOKF, NA agreed, and the SEC
entered, a consent order finding that BOKF, NA had violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of
the Securities Exchange Act and requiring BOKF, NA to disgorge $1,067,721 of fees and pay a civil penalty of $600,000.
BOKF, NA disgorged the fees and paid the penalty.
On December 28, 2015, in an action brought by the SEC, the United States District Court for the District of New Jersey entered
a judgment against the principals involved in issuing the bonds, precluding the principals from denying the alleged violations of
the federal securities laws and requiring the principals to pay all outstanding principal, accrued interest, and other amounts
required under the bond documents, less the value of the facilities securing repayment of the bonds, subject to oversight by a
court appointed monitor (“Payment Plan”).
On August 26, 2016, BOKF, NA was sued in the United States District Court for New Jersey by two bondholders in a putative
class action on behalf of all holders of the bonds alleging BOKF, NA participated in the fraudulent sale of securities by the
principals. The New Jersey Federal District Action remains stayed with no current deadlines pending. On September 14, 2016,
BOKF, NA was sued in the District Court of Tulsa County, Oklahoma by 19 bondholders alleging BOKF, NA participated in
the fraudulent sale of securities by the principals. The Tulsa County District Court Action is pending on BOKF, NA’s motion to
dismiss the plaintiff's Third Amended Petition.
On January 8, 2020, the New Jersey District Court entered judgment against the principal individual and his wife for
$36,805,051 in principal amount and $10,937,831 in pre-judgment interest. On January 17, 2020, the New Jersey Federal
District Court formally terminated the Payment Plan. Management is no longer able to conclude that the individual principal
and his wife will be successful in paying the obligations they have to pay the bonds in full but such obligations remain and are
not dischargeable in bankruptcy. Beginning September 2020, the SEC filed multiple garnishments on entities either related to or
holding assets for the debtor. If the individual principal and his wife do not have the financial ability to pay the bonds in full, a
bondholder loss could become probable. Management has been advised by counsel that BOKF, NA has valid defenses to claims
of bondholders and that no loss to the company is probable. No provision for losses has been made at this time. BOKF, NA
estimates that, upon sale of all remaining collateral securing payment of the bonds, approximately $20 million will remain
outstanding. A reasonable estimate cannot be made of the amount of any bondholder loss, though the amount of bondholder
loss could be material to the company in the event a loss to the company becomes probable.
On March 5, 2018, BOKF, NA was sued in the Fulton, Georgia County District Court by a Wrongful Death Judgment Creditor
of one of the operators of a nursing home financed by one of the bonds which are the subject of the litigation discussed above.
The judgment is alleged to total approximately $8 million in principal and interest at this time. Plaintiff alleges that BOKF, as
Trustee, colluded with the borrower and others to defraud creditors of the nursing home by misleading the public about the
solvency of the nursing home. Plaintiff alleges that this conduct has prevented her from collecting on her judgment. On April
19, 2019, the Court granted BOKF, NA's Motion to Dismiss. On May 3, 2019, the plaintiff filed a Motion for Reconsideration
which remains pending. BOKF, NA is advised by counsel that BOKF, NA has valid defenses to the plaintiffs’ claims and no
loss is probable.
134
On March 14, 2017, BOKF, NA was sued in the United States District Court for the Northern District of Oklahoma by
bondholders in a second putative class action representing a different set of municipal securities. The bondholders in this
second action alleged two individuals purchased facilities from the principals who are the subject of the SEC New Jersey
proceedings by means of the fraudulent sale of $60 million of municipal securities for which BOKF, NA also served as
indenture trustee. On December 18, 2020, the action was dismissed with prejudice in exchange for a nominal payment.
On March 7, 2017, a plaintiff filed a putative class action in the United States District Court for the Northern District of Texas
alleging an extended overdraft fee charged by BOKF, NA is interest and exceeds permitted rates. On September 18, 2018, the
District Court dismissed the Texas action and the plaintiff appealed the dismissal to the United States Court of Appeals for the
Fifth Circuit which heard argument on October 8, 2019. On August 22, 2018, a plaintiff filed a second putative class action in
the United States District Court for New Mexico making the same allegations as the Texas action. The District Court dismissed
the plaintiff's action. The plaintiff has appealed to the United States Court of Appeals for the Tenth Circuit. Management is
advised by counsel that a loss is not probable in either the now dismissed Texas action or the New Mexico action and that the
loss, if any, cannot be reasonably estimated.
On March 7, 2020, three former employees sued BOKF, NA, the Plan Committee of the BOKF, NA 401k Plan, and Cavanal
Hill Investment Management, Inc., a subsidiary of BOKF, NA, alleging that the Defendants included proprietary investment
products as investment options in the BOKF, NA 401k Plan, whose fees were too high and performance too low, for the
purpose of earning fees. The action is brought as a putative class action on behalf of all Plan Participants. The action is pending
on the defendants' motion to dismiss. Management is advised by counsel that a loss is not probable and that the loss, if any,
cannot be reasonably estimated.
On May 12, 2020, an accounting firm filed a putative class action in the District Court of Colorado alleging that BOKF, NA
and other national banks failed to pay the agents of borrowers making application through the Bank to the Small Business
Administration for Paycheck Protection Program (CARES Act) loans. The action has now been dismissed with prejudice by the
plaintiff.
In the ordinary course of business, BOK Financial and its subsidiaries are subject to legal actions and complaints. Management
believes, based upon the opinion of counsel, that the actions and liability or loss, if any, resulting from the final outcomes of the
proceedings, will not have a material effect on the Company’s financial condition, results of operations or cash flows.
Alternative Investment Commitments
The Company sponsors a private equity fund and invests in several tax credit entities and other funds as permitted by banking
regulations. Consolidation of these investments is based on the variable interest model.
At December 31, 2020, the Company has $290 million in interests in various alternative investments generally consisting of
unconsolidated limited partnership interests in entities for which investment return is in the form of low income housing tax
credits or other investments in merchant banking activities. The investment balance also includes $94 million in unfunded
commitments included in Other liabilities on the Consolidated Balance Sheets. At December 31, 2019, the Company had $259
million in interests in various alternative investments and included $82 million in unfunded commitments in Other liabilities.
Other Commitments and Contingencies
Cavanal Hill Funds’ assets include U.S. Treasury and government securities money market funds. Assets of these funds consist
of highly-rated, short-term obligations of the U.S. Treasury and Agencies. The net asset value of units in these funds was $1.00
at December 31, 2020. An investment in these funds is not insured by the Federal Deposit Insurance Corporation or guaranteed
by BOK Financial or any of its subsidiaries. BOK Financial may, but is not obligated to purchase assets from these funds to
maintain the net asset value at $1.00. No assets were purchased from the funds in 2020 or 2019.
The Federal Reserve Bank requires member banks to maintain certain minimum average cash balances. Member banks may
satisfy reserve balance requirements through holdings of vault cash and balances maintained directly with a Federal Reserve
Bank. The combined average balance of vault cash and balances held at the Federal Reserve Bank was $727 million for the year
ended December 31, 2020 and $618 million for the year ended December 31, 2019.
135
(15) Shareholders Equity
Preferred Stock
One billion shares of preferred stock with a par value of $0.00005 per share are authorized. The Series A Preferred Stock has no
voting rights except as otherwise provided by Oklahoma corporate law and may be converted into one share of Common Stock
for each 36 shares of Series A Preferred Stock at the option of the holder. Dividends are cumulative at an annual rate of ten
percent of the $0.06 per share liquidation preference value when declared and are payable in cash. Aggregate liquidation
preference is $15 million. No Series A Preferred Stock was outstanding in 2020, 2019 or 2018.
Common Stock
Common stock consists of 2.5 billion authorized shares with a $0.00006 par value. Holders of common shares are entitled to
one vote per share at the election of the Board of Directors and on any question arising at any shareholders’ meeting and to
receive dividends when and as declared. Additionally, regulations restrict the ability of national banks and bank holding
companies to pay dividends.
Subsidiary Bank
The amounts of dividends that BOK Financial’s subsidiary bank can declare and the amounts of loans the subsidiary bank can
extend to affiliates are limited by various federal banking regulations and state corporate law. Generally, dividends declared
during a calendar year are limited to net profits, as defined, for the year plus retained profits for the preceding two years.
Dividends are further restricted by minimum capital requirements.
Regulatory Capital
BOK Financial and the subsidiary bank is subject to various capital requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate certain mandatory and additional discretionary actions by regulators
that could have a material effect on BOK Financial's operations. These capital requirements include quantitative measures of
assets, liabilities and certain off-balance sheet items. The capital standards are also subject to qualitative judgments by the
regulators.
A bank falling below the minimum capital requirements, including the capital conservation buffer, would be subject to
regulatory restrictions on capital distributions (including but not limited to dividends and share repurchases) and executive
bonus payments. For a banking institution to qualify as well capitalized, Common Equity Tier 1, Tier I, Total and Leverage
capital ratios must be at least 6.5%, 8%, 10% and 5%, respectively. Tier I capital consists primarily of common stockholders'
equity, excluding unrealized gains or losses on available for sale securities, less goodwill, core deposit premiums and certain
other intangible assets. Total capital consists primarily of Tier I capital plus preferred stock, subordinated debt and allowances
for credit losses, subject to certain limitations. The subsidiary bank exceeded the regulatory definition of well capitalized as of
December 31, 2020 and December 31, 2019.
136
A summary of regulatory capital minimum requirements and levels follows (dollars in thousands):
Minimum
Capital
Requirement
Capital
Conservation
Buffer
Minimum
Capital
Requirement
Including
Capital
Conservation
Buffer
Well
Capitalized
Bank
Requirement
December 31, 2020
December 31, 2019
Common Equity
Tier 1 Capital
(to Risk
Weighted
Assets):
Consolidated
BOKF, NA
Tier I Capital (to
Risk Weighted
Assets):
Consolidated
BOKF, NA
Total Capital (to
Risk Weighted
Assets):
Consolidated
BOKF, NA
Leverage (Tier I
Capital to
Average
Assets):
Consolidated
BOKF, NA
4.50%
4.50%
2.50%
N/A
7.00%
4.50%
N/A
$ 3,881,912
11.95 % $ 3,608,821
11.39 %
6.50%
3,756,950
11.66 % 3,414,446
10.90 %
6.00%
6.00%
2.50%
N/A
8.50%
6.00%
N/A
$ 3,881,912
11.95 % $ 3,608,821
11.39 %
8.00%
3,756,950
11.66 % 3,414,446
10.90 %
8.00%
8.00%
2.50%
N/A
10.50%
8.00%
N/A
$ 4,489,110
13.82 % $ 4,097,087
12.94 %
10.00%
4,153,347
12.89 % 3,692,010
11.79 %
4.00%
4.00%
N/A
N/A
4.00%
4.00%
N/A
$ 3,881,912
8.28 % $ 3,608,820
5.00%
3,756,950
8.04 % 3,414,446
8.40 %
7.98 %
137
Accumulated Other Comprehensive Income (Loss)
AOCI includes unrealized gains and losses on available for sale ("AFS") securities and non-credit related unrealized losses on
AFS securities for which an other-than-temporary impairment has been recorded in earnings. Unrealized losses on employee
benefit plans will be reclassified into income as pension plan costs are recognized over the remaining service period of plan
participants. Gains and losses in AOCI are net of deferred income taxes.
A rollforward of the components of accumulated other comprehensive income (loss) is included as follows (in thousands):
Balance, December 31, 2017
Transition adjustment for net unrealized gains on equity securities
Net change in unrealized gain (loss)
Reclassification adjustments included in earnings:
Loss on available for sale securities, net
Other comprehensive income (loss), before income taxes
Federal and state income tax
Other comprehensive income (loss), net of income taxes
Balance, December 31, 2018
Net change in unrealized gain (loss)
Reclassification adjustments included in earnings:
Gain on available for sale securities, net
Other comprehensive income (loss), before income taxes
Federal and state income tax
Other comprehensive income (loss), net of income taxes
Balance, December 31, 2019
Net change in unrealized gain (loss)
Reclassification adjustments included in earnings:
Gain on available for sale securities, net
Other comprehensive income (loss), before income taxes
Federal and state income tax
Other comprehensive income (loss), net of income taxes
Balance, December 31, 2020
Unrealized Gain (Loss) on
Available
for Sale
Securities
Employee
Benefit
Plans
Total
$
(35,385) $
(789) $
(36,174)
(2,709)
(46,941)
—
(2,709)
(1,069)
(48,010)
2,801
(44,140)
(11,235)
(32,905)
(70,999)
—
(1,069)
(272)
(797)
(1,586)
2,801
(45,209)
(11,507)
(33,702)
(72,585)
239,017
2,030
241,047
(5,597)
233,420
57,425
175,995
104,996
312,576
(9,910)
302,666
72,630
230,036
—
2,030
517
1,513
(73)
1,220
(5,597)
235,450
57,942
177,508
104,923
313,796
—
(9,910)
1,220
303,886
311
909
72,941
230,945
$
335,032 $
836 $ 335,868
138
(16) Earnings Per Share
The following table presents the computation of basic and diluted earnings per share (dollars in thousands, except per share
data):
Numerator:
Net income attributable to BOK Financial Corp. shareholders
Less: Earnings allocated to participating securities
Year Ended
2020
2019
2018
$ 435,030 $ 500,758 $ 445,646
2,612
3,227
3,737
Numerator for basic earnings per share – income available to common shareholders
432,418
497,531
441,909
Effect of reallocating undistributed earnings of participating securities
—
—
1
Numerator for diluted earnings per share – income available to common shareholders
$ 432,418 $ 497,531 $ 441,910
Denominator:
Weighted average shares outstanding
70,259,553
71,250,081
67,190,257
Less: Participating securities included in weighted average shares outstanding
418,576
462,381
561,617
Denominator for basic earnings per common share
Dilutive effect of employee stock compensation plans
Denominator for diluted earnings per common share
Basic earnings per share
Diluted earnings per share
(17) Reportable Segments
69,840,977
70,787,700
66,628,640
3,195
14,912
33,633
69,844,172
70,802,612
66,662,273
$
$
6.19 $
6.19 $
7.03 $
7.03 $
6.63
6.63
BOK Financial operates three principal lines of business: Commercial Banking, Consumer Banking and Wealth Management.
Commercial Banking includes lending, treasury and cash management services and customer risk management products to
small businesses, middle market and larger commercial customers. Commercial Banking also includes the TransFund EFT
network. Consumer Banking includes retail lending and deposit services, lending and deposit services to small business
customers served through the consumer branch network and all mortgage banking activities. Wealth Management provides
fiduciary services, private bank services, insurance and investment advisory services in all markets. Wealth Management also
underwrites state and municipal securities and engages in brokerage and trading activities.
In addition to its lines of business, BOK Financial has a Funds Management unit. The primary purpose of this unit is to manage
overall liquidity needs and interest rate risk. Each line of business borrows funds from and provides funds to the Funds
Management unit as needed to support their operations. Operating results for Funds Management and Other include the effect
of interest rate risk positions and risk management activities, securities gains and losses including impairment charges, the
provision for credit losses in excess of net loans charged off, tax planning strategies and certain executive compensation costs
that are not attributed to the lines of business.
BOK Financial allocates resources and evaluates performance of its lines of business after allocation of funds, actual net credit
losses and capital costs. In addition, we measure the performance of our business lines after allocation of certain indirect
expenses and taxes on statutory rates. The allocation for the prior comparable periods have been revised on a comparable basis.
The cost of funds borrowed from the Funds Management unit by the operating lines of business is transfer priced at rates that
approximate market rates for funds with similar duration. Market rates are generally based on the applicable LIBOR or interest
rate swap rates, adjusted for prepayment risk. This method of transfer-pricing funds that support assets of the operating lines of
business tends to insulate them from interest rate risk.
139
The value of funds provided by the operating lines of business to the Funds Management unit is based on rates which
approximate the wholesale market rates for funds with similar duration and re-pricing characteristics. Market rates are generally
based on LIBOR or interest rate swap rates. The funds credit formula applied to deposit products with indeterminate maturities
is established based on their re-pricing characteristics reflected in a combination of the short-term LIBOR rates and a moving
average of an intermediate term swap rate, with an appropriate spread applied to both. Shorter duration products are weighted
towards the short-term LIBOR rate and longer duration products are weighted towards intermediate swap rates. The expected
duration ranges from 30 days for certain rate-sensitive deposits to five years.
Substantially all revenue is from domestic customers. No single external customer accounts for more than 10% of total revenue.
Net loans charged off and provision for credit losses represents net loans charged off as attributed to the lines of business and
the provision for credit losses in excess of net charge-offs attributed to Funds Management and Other.
The operations of CoBiz, acquired on October 1, 2018 were allocated to the operating segments in the second quarter of 2019.
Prior to April 1, 2019, CoBiz operations were included in Funds Management and other.
Reportable segments reconciliation to the Consolidated Financial Statements for the year ended December 31, 2020 is as
follows (in thousands):
Net interest and dividend revenue from external
sources
Net interest revenue (expense) from internal
sources
Net interest and dividend revenue
Provision for credit losses
Net interest and dividend revenue after
provision for credit losses
Other operating revenue
Other operating expense
Net direct contribution
Gain (loss) on financial instruments, net
Change in fair value of mortgage servicing
rights
Gain (loss) on repossessed assets, net
Corporate expense allocations
Net income before taxes
Federal and state income taxes
Net income
Net income attributable to non-controlling
interests
Net income attributable to BOK Financial Corp.
Commercial
Consumer
Wealth
Management
Funds
Management
and Other
BOK
Financial
Consolidated
$
714,932 $
78,004 $
130,818 $
184,690 $
1,108,444
(126,444)
588,488
69,475
519,013
187,361
258,903
447,471
193
—
(2,677)
24,862
420,125
114,120
306,005
69,000
147,004
2,805
144,199
243,719
233,425
154,493
95,344
(79,524)
276
42,638
127,951
32,591
95,360
(13,528)
117,290
(209)
117,499
398,834
325,608
190,725
4
—
—
35,331
155,398
39,770
115,628
70,972
255,662
150,521
105,141
14,035
348,001
(228,825)
(95,541)
79,524
2,401
(102,831)
(139,610)
(57,688)
(81,922)
—
1,108,444
222,592
885,852
843,949
1,165,937
563,864
—
—
—
—
563,864
128,793
435,071
—
—
—
41
41
shareholders
$
306,005 $
95,360 $
115,628 $
(81,963) $
435,030
Average assets
$ 26,994,075 $ 9,842,125 $
15,695,646 $
(3,827,456) $
48,704,390
140
Reportable segments reconciliation to the Consolidated Financial Statements for the year ended December 31, 2019 is as
follows (in thousands):
Net interest and dividend revenue from external
sources
Net interest revenue (expense) from internal
sources
Net interest and dividend revenue
Provision for credit losses
Net interest and dividend revenue after
provision for credit losses
Other operating revenue
Other operating expense
Net direct contribution
Gain (loss) on financial instruments, net
Change in fair value of mortgage servicing
rights
Gain (loss) on repossessed assets, net
Corporate expense allocations
Net income before taxes
Federal and state income taxes
Net income
Commercial
Consumer
Wealth
Management
Funds
Management
and Other
BOK
Financial
Consolidated
$
919,148 $
99,679 $
61,277 $
32,775 $
1,112,879
(242,907)
676,241
39,011
637,230
170,412
252,459
555,183
106
—
331
43,055
512,565
137,759
374,806
95,775
195,454
6,271
189,183
187,500
230,916
145,767
30,375
(53,517)
496
47,169
75,952
19,346
56,606
38,815
100,092
(308)
100,400
341,389
277,267
164,522
2
—
—
36,239
128,285
32,954
95,331
108,317
141,092
(974)
142,066
(4,931)
371,739
(234,604)
(30,483)
53,517
(827)
(126,463)
(85,934)
(59,876)
(26,058)
—
1,112,879
44,000
1,068,879
694,370
1,132,381
630,868
—
—
—
—
630,868
130,183
500,685
Net loss attributable to non-controlling interests
—
—
—
(73)
(73)
Net income attributable to BOK Financial Corp.
shareholders
$
374,806 $
56,606 $
95,331 $
(25,985) $
500,758
Average assets
$ 22,807,589 $ 9,301,341 $
10,204,426 $
(219,009) $
42,094,347
141
Reportable segments reconciliation to the Consolidated Financial Statements for the year ended December 31, 2018 is as
follows (in thousands):
Net interest and dividend revenue from external
sources
Net interest revenue (expense) from internal
sources
Net interest and dividend revenue
Provision for credit losses
Net interest and dividend revenue after
provision for credit losses
Other operating revenue
Other operating expense
Net direct contribution
Gain (loss) on financial instruments, net
Change in fair value of mortgage servicing
rights
Gain (loss) on repossessed assets, net
Corporate expense allocations
Net income before taxes
Federal and state income taxes
Net income
Net income attributable to non-controlling
interests
Net income attributable to BOK Financial Corp.
Commercial
Consumer
Wealth
Management
Funds
Management
and Other
BOK
Financial
Consolidated
$
726,855 $
83,231 $
81,528 $
93,253 $
984,867
(159,954)
566,901
30,358
536,543
162,701
202,095
497,149
26
—
(6,532)
36,670
453,973
120,458
333,515
73,448
156,679
5,143
151,536
178,123
231,075
98,584
(25,021)
4,668
247
44,398
34,080
8,681
25,399
31,480
113,008
(288)
113,296
296,369
257,650
152,015
7
—
—
35,920
116,102
30,075
86,027
55,026
148,279
(27,213)
175,492
(20,409)
337,346
(182,263)
24,988
(4,668)
6,285
(116,988)
(38,670)
(40,153)
1,483
—
984,867
8,000
976,867
616,784
1,028,166
565,485
—
—
—
—
565,485
119,061
446,424
—
—
—
778
778
shareholders
$
333,515 $
25,399 $
86,027 $
705 $
445,646
Average assets
$ 18,432,035 $ 8,303,263 $
8,447,784 $
(245,552) $
34,937,530
142
(18) Fees and Commissions Revenue
Fees and commissions revenue by reportable segment and primary service line is as follows for the year ended December 31,
2020.
Commercial
Consumer
Wealth
Management
Funds
Management
and Other
Consolidated
Out of
Scope1
In Scope2
Trading revenue
$
— $
— $
144,299 $
— $
144,299 $
144,299 $
Customer hedging revenue
Retail brokerage revenue
Insurance brokerage revenue
Investment banking revenue
Brokerage and trading
revenue
TransFund EFT network revenue
Merchant services revenue
Corporate card revenue
Transaction card revenue
Personal trust revenue
Corporate trust revenue
Institutional trust & retirement
plan services revenue
Investment management services
and other
Fiduciary and asset
management revenue
Commercial account service
charge revenue
Overdraft fee revenue
Check card revenue
Automated service charge and
other deposit fee revenue
Deposit service charges and
fees
Mortgage production revenue
Mortgage servicing revenue
Mortgage banking revenue
Other revenue
Total fees and commissions
revenue
22,767
—
—
9,183
31,950
75,363
9,172
2,362
86,897
—
—
—
—
—
44,489
132
—
311
44,932
—
—
—
23,340
—
—
—
—
—
3,058
60
—
3,118
—
—
—
—
—
1,654
21,679
21,355
4,749
49,437
125,848
58,249
184,097
8,902
395
15,690
12,702
17,391
190,477
(56)
—
75
19
84,759
19,308
46,253
17,290
(413)
—
—
(181)
(594)
5
—
143
148
—
—
—
22,749
15,690
12,702
26,393
221,833
78,370
9,232
2,580
90,182
84,759
19,308
46,253
(165)
17,125
167,610
(165)
167,445
2,282
74
—
74
2,430
—
—
—
38,693
(4)
7
—
3
6
—
(1,737)
(1,737)
(19,240)
48,421
21,892
21,355
5,137
96,805
125,848
56,512
182,360
51,695
22,749
—
—
8,530
175,578
—
—
—
—
—
—
—
—
—
—
—
—
—
—
125,848
56,512
182,360
39,092
—
—
15,690
12,702
17,863
46,255
78,370
9,232
2,580
90,182
84,759
19,308
46,253
17,125
167,445
48,421
21,892
21,355
5,137
96,805
—
—
—
12,603
$
187,119 $
245,554 $
399,229 $
(21,582) $
810,320 $
397,030 $
413,290
1 Out of scope revenue generally relates to financial instruments or contractual rights and obligations within the scope of other applicable accounting
guidance.
In scope revenue represents revenue subject to FASB ASC Topic 606, Revenue from Contracts with Customers.
2
143
Fees and commissions revenue by reportable segment and primary service line is as follows for the year ended December 31,
2019.
Commercial
Consumer
Wealth
Management
Funds
Management
and Other
Consolidated
Out of
Scope1
In Scope2
Trading revenue
$
— $
— $
88,558 $
— $
88,558 $
88,558 $
Customer hedging revenue
Retail brokerage revenue
Insurance brokerage revenue
Investment banking revenue
Brokerage and trading
revenue
TransFund EFT network revenue
Merchant services revenue
Corporate card revenue
Transaction card revenue
Personal trust revenue
Corporate trust revenue
Institutional trust & retirement
plan services revenue
Investment management services
and other
Fiduciary and asset
management revenue
Commercial account service
charge revenue
Overdraft fee revenue
Check card revenue
Automated service charge and
other deposit fee revenue
Deposit service charges and
fees
Mortgage production revenue
Mortgage servicing revenue
Mortgage banking revenue
Other revenue
Total fees and commissions
revenue
8,422
—
—
10,136
18,558
73,479
8,607
1,072
83,158
—
—
—
—
—
42,251
313
—
823
43,387
—
—
—
23,564
—
—
—
—
—
3,924
56
—
3,980
—
—
—
—
—
1,713
35,134
21,865
6,155
64,867
42,724
66,692
109,416
9,733
9,667
16,251
10,131
12,194
852
(115)
3,730
—
136,801
4,467
(82)
—
32
(50)
81,763
24,635
45,084
3
123
2
128
—
—
—
18,941
16,136
13,861
22,330
159,826
77,324
8,786
1,106
87,216
81,763
24,635
45,084
23,993
1,550
25,543
175,475
1,550
177,025
2,137
138
—
168
2,443
—
—
—
26,664
1,804
(229)
165
47,905
35,356
22,030
48
7,194
1,788
(4)
(1,871)
(1,875)
(1,853)
112,485
42,720
64,821
107,541
58,108
18,941
—
—
8,678
116,177
—
—
—
—
—
—
—
—
—
—
—
—
—
—
42,720
64,821
107,541
39,428
—
—
16,136
13,861
13,652
43,649
77,324
8,786
1,106
87,216
81,763
24,635
45,084
25,543
177,025
47,905
35,356
22,030
7,194
112,485
—
—
—
18,680
$
168,667 $
187,996 $
341,333 $
4,205 $
702,201 $
263,146 $
439,055
1 Out of scope revenue generally relates to financial instruments or contractual rights and obligations within the scope of other applicable accounting
guidance.
In scope revenue represents revenue subject to FASB ASC Topic 606, Revenue from Contracts with Customers.
2
144
Fees and commissions revenue by reportable segment and primary service line is as follows for the year ended December 31,
2018.
Commercial
Consumer
Wealth
Management
Funds
Management
and Other
Consolidated
Out of
Scope1
In Scope2
Trading revenue
$
— $
— $
28,077 $
— $
28,077 $
28,077 $
Customer hedging revenue
Retail brokerage revenue
Insurance brokerage revenue
Investment banking revenue
Brokerage and trading
revenue
TransFund EFT network revenue
Merchant services revenue
Corporate card revenue
Transaction card revenue
Personal trust revenue
Corporate trust revenue
Institutional trust & retirement
plan services revenue
Investment management services
and other
Fiduciary and asset
management revenue
Commercial account service
charge revenue
Overdraft fee revenue
Check card revenue
Automated service charge and
other deposit fee revenue
Deposit service charges and
fees
Mortgage production revenue
Mortgage servicing revenue
Mortgage banking revenue
Other revenue
Total fees and commissions
revenue
7,748
—
—
7,628
15,376
72,280
7,666
—
79,946
—
—
—
—
—
41,931
370
—
282
42,583
—
—
—
24,044
—
—
—
—
—
4,017
59
—
4,076
—
—
—
—
—
1,445
36,177
20,967
6,621
65,210
31,690
67,980
99,670
9,218
27,512
19,030
—
11,634
3,574
(1,078)
4,198
—
86,253
6,694
(82)
—
—
(82)
96,839
22,292
44,400
6
79
—
85
—
—
76
38,834
17,952
4,198
19,262
108,323
76,221
7,804
—
84,025
96,839
22,292
44,476
19,729
1,367
21,096
183,260
1,443
184,703
2,331
134
—
62
2,527
—
—
—
24,507
1,565
(145)
339
47,272
36,536
21,306
74
7,039
1,833
—
(1,883)
(1,883)
(1,584)
112,153
31,690
66,097
97,787
56,185
38,834
—
—
6,380
73,291
—
—
—
—
—
—
—
—
—
—
—
—
—
—
31,690
66,097
97,787
38,306
—
—
17,952
4,198
12,882
35,032
76,221
7,804
—
84,025
96,839
22,292
44,476
21,096
184,703
47,272
36,536
21,306
7,039
112,153
—
—
—
17,879
$
161,949 $
178,174 $
296,465 $
6,588 $
643,176 $
209,384 $
433,792
1 Out of scope revenue generally relates to financial instruments or contractual rights and obligations within the scope of other applicable accounting
guidance.
In scope revenue represents revenue subject to FASB ASC Topic 606, Revenue from Contracts with Customers.
2
145
(19) Fair Value Measurements
Fair value is defined by applicable accounting guidance as the price to sell an asset or transfer a liability in an orderly
transaction between market participants in the principal market for the given asset or liability at the measurement date based on
market conditions at that date. An orderly transaction assumes exposure to the market for a customary period for marketing
activities prior to the measurement date and not a forced liquidation or distressed sale. Certain assets and liabilities are recorded
in the Company’s financial statements at fair value. Some are recorded on a recurring basis and some on a non-recurring basis.
For some assets and liabilities, observable market transactions and market information might be available. For other assets and
liabilities, observable market transactions and market information might not be available. A hierarchy for fair value has been
established which categorizes into three levels the inputs to valuation techniques used to measure fair value. The three levels are
as follows:
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) - fair value is based on unadjusted quoted
prices in active markets for identical assets or liabilities.
Significant Other Observable Inputs (Level 2) - fair value is based on significant other observable inputs which are
generally determined based on a single price for each financial instrument provided to us by an applicable third-party
pricing service and is based on one or more of the following:
•
•
•
•
Quoted prices for similar, but not identical, assets or liabilities in active markets;
Quoted prices for identical or similar assets or liabilities in inactive markets;
Inputs other than quoted prices that are observable, such as interest rate and yield curves, volatilities, prepayment
speeds, loss severities, credit risks and default rates;
Other inputs derived from or corroborated by observable market inputs.
Significant Unobservable Inputs (Level 3) - fair value is based upon model-based valuation techniques for which at least
one significant assumption is not observable in the market.
Transfers between levels are recognized as of the end of the reporting period. There were no transfers in or out of quoted prices
in active markets for identical instruments to significant other observable inputs or significant unobservable inputs during the
year ended December 31, 2020 and 2019, respectively. Transfers between significant other observable inputs and significant
unobservable inputs during the year ended December 31, 2020 and 2019 are included in the summary of changes in recurring
fair values measured using unobservable inputs.
The underlying methods used by the third-party pricing services are considered in determining the primary inputs used to
determine fair values. Management has evaluated the methodologies employed by the third-party pricing services by comparing
the price provided by the pricing service with other sources, including brokers' quotes, sales or purchases of similar instruments
and discounted cash flows to establish a basis for reliance on the pricing service values. Significant differences between the
pricing service provided value and other sources are discussed with the pricing service to understand the basis for their values.
Based on all observable inputs, management may adjust prices obtained from third-party pricing services to more appropriately
reflect the prices that would be received to sell assets or paid to transfer liabilities in orderly transactions in the current market.
No significant adjustments were made to prices provided by third-party pricing services at December 31, 2020 and 2019.
146
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The fair value of financial assets and liabilities that are measured on a recurring basis is as follows as of December 31, 2020 (in
thousands):
Quoted
Prices in
Active
Markets for
Identical
Instruments
Total
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
—
—
—
—
—
—
—
—
—
—
472
472
—
7,017
Assets:
Trading securities:
U.S. government securities
$
9,183 $
4,999 $
4,184 $
Residential agency mortgage-backed securities
Municipal securities
Other trading securities
Total trading securities
Available for sale securities:
U.S. Treasury
Municipal securities
Residential agency mortgage-backed securities
Residential non-agency mortgage-backed securities
Commercial agency mortgage-backed securities
Other debt securities
4,669,148
19,172
10,472
—
—
—
4,669,148
19,172
10,472
4,707,975
4,999
4,702,976
508
167,979
9,340,471
32,770
3,508,465
472
508
—
—
—
—
—
—
167,979
9,340,471
32,770
3,508,465
—
Total available for sale securities
Fair value option securities — Residential agency mortgage-backed
13,050,665
508
13,049,685
securities
Residential mortgage loans held for sale1
Mortgage servicing rights, net2
Derivative contracts, net of cash margin3
Liabilities:
114,982
252,316
101,172
810,688
114,982
245,299
—
—
—
—
101,172
10,780
799,908
—
Derivative contracts, net of cash margin3
—
1 Residential mortgage loans held for sale measured at fair value on a recurring basis using significant unobservable inputs (Level 3) consist
405,779
405,779
—
of residential mortgage loans intended for sale to U.S. government agencies that fail to meet conforming standards and are valued at
94.57% of the unpaid principal balance.
2 A reconciliation of the beginning and ending fair value of mortgage servicing rights and disclosures of significant assumptions used to
determine fair value are presented in Note 7, Mortgage Banking Activities.
3 See Note 3 for detail of fair value of derivative contracts by contract type. Derivative contracts in asset positions that were valued based on
quoted prices in active markets for identical instruments (Level 1) are primarily exchange-traded interest rate derivative contracts.
Derivative contracts in liability positions that were valued using quoted prices in active markets for identical instruments are exchange-
traded interest rate, energy and agricultural derivative contracts, fully offset by cash margin.
147
The fair value of financial assets and liabilities that are measured on a recurring basis is as follows as of December 31, 2019 (in
thousands):
Quoted
Prices in
Active
Markets for
Identical
Instruments
Total
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
Assets:
Trading securities:
U.S. government securities
$
44,264 $
— $
44,264 $
Residential agency mortgage-backed securities
1,504,651
Municipal securities
Asset-backed securities
Other trading securities
Total trading securities
Available for sale securities:
U.S. Treasury
Municipal securities
Residential agency mortgage-backed securities
Residential non-agency mortgage-backed securities
Commercial agency mortgage-backed securities
Other debt securities
Total available for sale securities
Fair value option securities:
U.S. Treasury
Residential agency mortgage-backed securities
Total fair value option securities
Residential mortgage loans held for sale1
Mortgage servicing rights, net2
Derivative contracts, net of cash margin3
Liabilities:
26,196
14,084
34,726
1,623,921
1,600
1,861
8,046,096
41,609
3,178,005
472
—
—
—
—
—
1,504,651
26,196
14,084
34,726
1,623,921
1,600
—
—
—
—
—
—
1,861
8,046,096
41,609
3,178,005
—
11,269,643
1,600
11,267,571
9,917
1,088,660
1,098,577
182,271
201,886
323,375
9,917
—
9,917
—
1,088,660
1,088,660
—
—
173,958
—
8,944
314,431
—
—
—
—
—
—
—
—
—
—
—
472
472
—
—
—
8,313
201,886
—
Derivative contracts, net of cash margin3
—
1 Residential mortgage loans held for sale measured at fair value on a recurring basis using significant unobservable inputs (Level 3) consist
251,128
251,128
—
of residential mortgage loans intended for sale to U.S. government agencies that fail to meet conforming standards and are valued at
95.23% of the unpaid principal balance.
2 A reconciliation of the beginning and ending fair value of mortgage servicing rights and disclosures of significant assumptions used to
determine fair value are presented in Note 7, Mortgage Banking Activities.
3 See Note 3 for detail of fair value of derivative contracts by contract type. Derivative contracts based on quoted prices in active markets for
identical instruments (Level 1) are exchange-traded interest rate and energy derivative contracts, net of cash margin. Derivative contracts in
liability positions that were valued using quoted prices in active markets for identical instruments (Level 1) are exchange-traded interest
rate and agricultural contracts, fully offset by cash margin.
148
Following is a description of the Company's valuation methodologies used for assets and liabilities measured on a recurring
basis:
Securities
The fair values of trading, available for sale and fair value option securities are based on quoted prices for identical instruments
in active markets, when available. If quoted prices for identical instruments are not available, fair values are based on
significant other observable inputs such as quoted prices of comparable instruments or interest rates and credit spreads, yield
curves, volatilities, prepayment speeds and loss severities.
The fair value of certain available for sale and held-to-maturity municipal and other debt securities may be based on significant
unobservable inputs. These significant unobservable inputs include limited observed trades, projected cash flows, current credit
rating of the issuers and, when applicable, the insurers of the debt and observed trades of similar debt. Discount rates are
primarily based on reference to interest rate spreads on comparable securities of similar duration and credit rating as determined
by the nationally-recognized rating agencies adjusted for a lack of trading volume. Significant unobservable inputs are
developed by investment securities professionals involved in the active trading of similar securities. A summary of significant
inputs used to value these securities follows. A management committee composed of senior members from the Company's
Capital Markets, Risk Management and Finance departments assess the appropriateness of these inputs quarterly.
Derivatives
All derivative instruments are carried on the balance sheet at fair value. Fair values for exchange-traded contracts are based on
quoted prices. Fair values for over-the-counter interest rate, commodity and foreign exchange contracts are based on valuations
provided either by third-party dealers in the contracts, quotes provided by independent pricing services, or a third-party
provided pricing model that uses significant other observable market inputs.
Credit risk is considered in determining the fair value of derivative instruments. Management determines fair value adjustments
based on various risk factors including but not limited to counterparty credit rating or equivalent loan grading, derivative
contract notional size, price volatility of the underlying commodity, duration of the derivative contracts and expected loss
severity. Expected loss severity is based on historical losses for similarly risk graded commercial loan customers. Decreases in
counterparty credit rating or grading and increases in price volatility and expected loss severity all tend to increase the credit
quality adjustment which reduces the fair value of asset contracts.
We also consider our own credit risk in determining the fair value of derivative contracts. Changes in our credit rating would
affect the fair value of our derivative liabilities. In the event of a credit downgrade, the fair value of our derivative liabilities
would increase.
Residential Mortgage Loans Held for Sale
Residential mortgage loans held for sale are carried on the balance sheet at fair value. The fair values of conforming residential
mortgage loans held for sale are based upon quoted market prices of such loans sold in securitization transactions, including
related unfunded loan commitments. The fair value of mortgage loans that are unable to be sold to U.S. government agencies is
determined using quoted prices of loans that are sold in securitization transactions with a liquidity discount applied.
149
Fair Value of Assets and Liabilities Measured on a Non-Recurring Basis
Assets measured at fair value on a non-recurring basis include pension plan assets, which are based on quoted prices in active
markets for identical instruments, collateral for certain impaired loans and real property and other assets acquired to satisfy
loans, which are based primarily on comparisons to completed sales of similar assets.
The following represents the carrying value of assets measured at fair value on a non-recurring basis and related losses recorded
during the year. The carrying value represents only those assets with the balance sheet date for which the fair value was
adjusted during the year:
Carrying Value at December 31, 2020
Fair Value Adjustments for the
Year Ended December 31, 2020
Recognized In:
Quoted Prices
in Active
Markets for
Identical
Instruments
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
Gross charge-
offs against
allowance for
loan losses
Net losses
(gains) and
expenses of
repossessed
assets, net
Nonaccrual loans
Real estate and other repossessed assets
$
— $
—
801 $
20,423 $
18,188
2,842
39,299 $
—
—
(4,602)
Carrying Value at December 31, 2019
Fair Value Adjustments for the
Year Ended December 31, 2019
Recognized In:
Quoted Prices
in Active
Markets for
Identical
Instruments
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
Gross charge-
offs against
allowance for
loan losses
Net losses
(gains) and
expenses of
repossessed
assets, net
Nonaccrual loans
Real estate and other repossessed assets
$
— $
—
41 $
55,665 $
5,986
1,551
31,305 $
—
—
(461)
The fair value of collateral-dependent nonaccruing loans and real estate and other repossessed assets and the related fair value
adjustments are generally based on unadjusted third-party appraisals. Our appraisal review policies require appraised values to
be supported by observed inputs derived principally from or corroborated by observable market data. Appraisals that are not
based on observable inputs or that require significant adjustments or fair value measurements that are not based on third-party
appraisals are considered to be based on significant unobservable inputs. Non-recurring fair value measurements of collateral-
dependent nonaccruing loans and real estate and other repossessed assets based on significant unobservable inputs are generally
due to estimates of current fair values between appraisal dates. Significant unobservable inputs include listing prices for
comparable assets, uncorroborated expert opinions or management's knowledge of the collateral or industry. Non-recurring fair
value measurements of collateral dependent loans secured by mineral rights are generally determined by our internal staff of
engineers on projected cash flows under current market conditions and are based on significant unobservable inputs. Projected
cash flows are discounted according to risk characteristics of the underlying oil and gas properties. Assets are evaluated to
demonstrate with reasonable certainty that crude oil, natural gas and natural gas liquids can be recovered from known oil and
gas reservoirs under existing economic and operating conditions at current prices with existing conventional equipment,
operating methods and costs. Significant unobservable inputs are developed by asset management and workout professionals
and approved by senior Credit Administration executives.
150
A summary of quantitative information about Non-recurring Fair Value Measurements based on Significant Unobservable
Inputs (Level 3) as of December 31, 2020 follows (in thousands):
Quantitative Information about Level 3 Non-recurring Fair Value Measurements
Nonaccrual loans
Fair
Value
Valuation
Technique(s)
$ 20,423 Discounted cash
flows
Real estate and other repossessed assets
2,842 Discounted cash
flows
1 Represents fair value as a percentage of the unpaid principal balance.
Significant Unobservable Input
Management knowledge of industry and
non-real estate collateral including but
not limited to recoverable oil & gas
reserves, forward looking commodity
prices, and estimated operating costs
Management knowledge of industry and
non-real estate collateral including but
not limited to recoverable oil & gas
reserves, forward looking commodity
prices, and estimated operating costs
Range
(Weighted Average)
1% - 91% (23%)1
N/A
A summary of quantitative information about Non-recurring Fair Value Measurements based on Significant Unobservable
Inputs (Level 3) as of December 31, 2019 follows (in thousands):
Quantitative Information about Level 3 Non-recurring Fair Value Measurements
Nonaccrual loans
Fair
Value
Valuation
Technique(s)
$ 55,665 Discounted cash
flows
Real estate and other repossessed assets
1,551 Discounted cash
flows
Significant Unobservable Input
Management knowledge of industry and
non-real estate collateral including but
not limited to recoverable oil & gas
reserves, forward looking commodity
prices, and estimated operating costs
Marketability adjustments off appraised
value2
Range
(Weighted Average)
4% - 94% (55%)1
74% - 86% (84%)
1 Represents fair value as a percentage of the unpaid principal balance.
2 Marketability adjustments include consideration of estimated costs to sell which is approximately 10% of the fair value.
The fair value of pension plan assets was approximately $38 million at December 31, 2020 and $36 million at December 31,
2019, determined by significant other observable inputs. Fair value adjustments of pension plan assets along with changes in the
projected benefit obligation are recognized in other comprehensive income.
151
Fair Value of Financial Instruments
The following table presents the carrying values and estimated fair values of all financial instruments, including those financial
assets and liabilities that are not measured and reported at fair value on a recurring basis or non-recurring (dollars in thousands):
December 31, 2020
Quoted
Prices in
Active
Markets for
Identical
Instruments
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Carrying
Value
Estimated
Fair Value
Cash and due from banks
$
798,757 $
798,757 $
798,757 $
— $
Interest-bearing cash and cash equivalents
381,816
381,816
381,816
—
Trading securities:
U.S. government securities
9,183
9,183
4,999
4,184
Residential agency mortgage-backed securities
4,669,148
4,669,148
4,707,975
4,707,975
4,999
4,702,976
—
—
—
—
—
—
—
185,866
—
—
185,866
—
185,866
—
—
—
—
—
472
472
—
7,017
—
—
—
4,669,148
19,172
10,472
—
—
—
—
—
—
508
—
—
—
—
—
69,404
9,790
7,371
86,565
—
86,565
—
167,979
9,340,471
32,770
3,508,465
—
114,982
245,299
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
13,003,383
4,649,763
1,669,461
3,563,199
22,885,806
—
22,885,806
101,172
10,780
799,908
—
—
—
—
—
—
—
—
—
34,176,752
1,976,936
3,542,489
269,544
405,779
—
—
Commercial agency mortgage-backed securities
3,508,465
3,508,465
13,050,665
13,050,665
508
13,049,685
Municipal securities
Other trading securities
Total trading securities
Investment securities:
Municipal securities
Residential agency mortgage-backed securities
Other debt securities
Total investment securities
Allowance for credit losses
Investment securities, net of allowance
Available for sale securities:
U.S. Treasury
Municipal securities
Residential agency mortgage-backed securities
Residential non-agency mortgage-backed securities
Other debt securities
Total available for sale securities
19,172
10,472
19,172
10,472
229,245
255,270
8,913
7,373
9,790
7,371
245,531
272,431
(688)
—
244,843
272,431
508
508
167,979
167,979
9,340,471
9,340,471
32,770
32,770
472
472
Fair value option securities — Residential agency mortgage-backed
securities
Residential mortgage loans held for sale
114,982
252,316
114,982
252,316
Loans:
Commercial
Commercial real estate
Paycheck protection program
Loans to individuals
Total loans
Allowance for loan losses
Loans, net of allowance
Mortgage servicing rights
Derivative instruments with positive fair value, net of cash margin
Deposits with no stated maturity
Time deposits
Other borrowed funds
Subordinated debentures
Derivative instruments with negative fair value, net of cash margin
13,077,535
13,003,383
4,698,538
1,682,310
3,549,137
4,649,763
1,669,461
3,563,199
23,007,520
22,885,806
(388,640)
—
22,618,880
22,885,806
101,172
810,688
101,172
810,688
34,176,752
34,176,752
1,967,128
3,545,356
276,005
405,779
1,976,936
3,542,489
269,544
405,779
152
December 31, 2019
Quoted
Prices in
Active
Markets for
Identical
Instruments
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Carrying
Value
Estimated
Fair Value
Cash and due from banks
$
735,836 $
735,836 $
735,836 $
Interest-bearing cash and cash equivalents
522,985
522,985
522,985
— $
—
Trading securities:
U.S. government securities
Residential agency mortgage-backed securities
Municipal securities
Asset-backed securities
Other trading securities
Total trading securities
Investment securities:
Municipal securities
Residential agency mortgage-backed securities
Other debt securities
Total investment securities
Available for sale securities:
U.S. Treasury securities
Municipal securities
44,264
44,264
1,504,651
1,504,651
26,196
14,084
34,726
26,196
14,084
34,726
1,623,921
1,623,921
274,535
10,676
8,207
293,418
1,600
1,861
295,032
11,164
8,206
314,402
1,600
1,861
Residential agency mortgage-backed securities
Residential non-agency mortgage-backed securities
8,046,096
8,046,096
41,609
41,609
Commercial agency mortgage-backed securities
3,178,005
3,178,005
Other debt securities
Total available for sale securities
Fair value option securities:
U.S. Treasury
Residential agency mortgage-backed securities
Total fair value option securities
Residential mortgage loans held for sale
Loans:
Commercial
Commercial real estate
Residential mortgage
Personal
Total loans
Allowance for loan losses
Loans, net of allowance
Mortgage servicing rights
Derivative instruments with positive fair value, net of cash margin
Deposits with no stated maturity
Time deposits
Other borrowed funds
Subordinated debentures
Derivative instruments with negative fair value, net of cash margin
9,917
1,088,660
1,098,577
182,271
9,917
1,088,660
1,098,577
182,271
14,031,650
13,966,221
4,433,783
2,084,172
1,201,382
4,422,717
2,098,093
1,202,298
21,750,987
21,689,329
(210,759)
—
21,540,228
21,689,329
201,886
323,375
201,886
323,375
25,403,319
25,403,319
2,217,849
8,345,405
275,923
251,128
2,212,467
8,315,860
284,627
251,128
96,897
11,164
8,206
198,135
—
—
116,267
198,135
44,264
1,504,651
26,196
14,084
34,726
1,623,921
—
—
—
—
—
—
—
—
—
—
1,600
—
—
—
—
—
—
1,861
8,046,096
41,609
3,178,005
—
9,917
—
—
1,088,660
9,917
1,088,660
—
—
—
—
—
—
—
—
—
—
—
—
—
472
472
—
—
—
—
—
—
—
—
—
—
—
—
173,958
8,313
—
—
—
—
—
—
—
—
13,966,221
4,422,717
2,098,093
1,202,298
21,689,329
—
21,689,329
201,886
8,944
314,431
—
—
—
—
—
—
—
—
—
284,627
251,128
25,403,319
2,212,467
8,315,860
—
—
472
472
11,269,643
11,269,643
1,600
11,267,571
Because no market exists for certain of these financial instruments and management does not intend to sell these financial
instruments, the fair values shown in the tables above may not represent values at which the respective financial instruments
could be sold individually or in the aggregate at the given reporting date.
153
Fair Value Election
As more fully disclosed in Note 2 and Note 7 to the Consolidated Financial Statements, the Company has elected to carry all
securities held as economic hedges against changes in the fair value of mortgage servicing rights and all residential mortgage
loans originated for sale at fair value. Changes in the fair value of these financial instruments are recognized in earnings.
154
(20) Parent Company Only Financial Statements
Summarized financial information for BOK Financial – Parent Company Only follows:
Balance Sheets
(In thousands)
Assets
Cash and cash equivalents
Loan to bank subsidiary
Investment in bank subsidiaries
Investment in non-bank subsidiaries
Other assets
Total assets
Liabilities and Shareholders’ Equity
Liabilities:
Other liabilities
Subordinated debentures
Total liabilities
Shareholders’ equity:
Common stock
Capital surplus
Retained earnings
Treasury stock
Accumulated other comprehensive income
Total shareholders’ equity
Total liabilities and shareholders’ equity
December 31,
2020
2019
$
183,805 $
214,779
65,204
65,220
5,079,336
4,602,977
195,768
24,338
216,542
38,082
$ 5,548,451 $ 5,137,600
$
6,180 $
5,882
276,005
282,185
275,923
281,805
5
5
1,368,062
1,350,995
3,973,675
3,729,778
(411,344)
(329,906)
335,868
104,923
5,266,266
4,855,795
$ 5,548,451 $ 5,137,600
155
Statements of Earnings
(In thousands)
Dividends, interest and fees received from bank subsidiaries
$
179,140 $
344,007 $
426,071
Year Ended December 31,
2020
2019
2018
Dividends, interest and fees received from non-bank subsidiaries
Other revenue
Total revenue
Interest expense
Other operating expense
Total expense
Net income before taxes, other losses, net, and equity in undistributed income of
subsidiaries
Other gains (losses), net
Net income before taxes and equity in undistributed income of subsidiaries
Federal and state income taxes
Net income before equity in undistributed income of subsidiaries
Equity in undistributed income of bank subsidiaries
Equity in undistributed income of non-bank subsidiaries
25,050
907
9,325
1,036
12,800
954
205,097
354,368
439,825
13,944
2,697
16,641
188,456
1,465
189,921
15,113
2,352
17,465
336,903
3,310
340,213
(4,502)
(4,516)
194,423
276,217
344,729
166,797
9,827
12,110
21,937
417,888
(3,921)
413,967
(7,078)
421,045
37,515
(35,610)
(10,768)
(12,914)
Net income attributable to BOK Financial Corp. shareholders
$
435,030 $
500,758 $
445,646
156
Statements of Cash Flows
(In thousands)
Cash Flows From Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed income of bank subsidiaries
Equity in undistributed income of non-bank subsidiaries
Change in other assets
Change in other liabilities
Net cash provided by operating activities
Cash Flows From Investing Activities:
Investment in subsidiaries
Acquisitions, net of cash acquired
Net cash used in investing activities
Cash Flows From Financing Activities:
Issuance of common and treasury stock, net
Dividends paid
Repurchase of common stock
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Cash paid for interest
(21) Subsequent Events
Year Ended December 31,
2020
2019
2018
$
435,030 $
500,758 $
445,646
(276,217)
(166,797)
35,610
13,760
850
10,768
(5,075)
855
209,033
340,509
(14,807)
(19,837)
—
—
(14,807)
(19,837)
(4,933)
(144,437)
(75,830)
(225,200)
(30,974)
214,779
(7)
(143,496)
(129,483)
(272,986)
47,686
167,093
(37,515)
12,914
(1,072)
(13,434)
406,539
(31,901)
(232,680)
(264,581)
(88)
(127,188)
(53,465)
(180,741)
(38,783)
205,876
$
$
183,805 $
214,779 $
167,093
14,064 $
15,099 $
11,457
The Company evaluated events from the date of the Consolidated Financial Statements on December 31, 2020 through the
issuance of those consolidated financial statements included in this Annual Report on Form 10-K. No events were identified
requiring recognition in and/or disclosure in the Consolidated Financial Statements.
157
Annual Financial Summary – Unaudited
Consolidated Daily Average Balances, Average Yields and Rates
(Dollars in Thousands, Except Per Share Data)
Assets
Interest-bearing cash and cash equivalents
Trading securities
Investment securities
Available for sale securities
Fair value option securities
Restricted equity securities
Residential mortgage loans held for sale
Loans
Allowance for loan losses
Loans, net of allowance
Total earning assets
Receivable on unsettled securities sales
Cash and other assets
Total assets
Liabilities and equity
Interest-bearing deposits:
Transaction
Savings
Time
Total interest-bearing deposits
Funds purchased and repurchase agreements
Other borrowings
Subordinated debentures
Total interest-bearing liabilities
Non-interest bearing demand deposits
Due on unsettled securities purchases
Other liabilities
Total equity
Total liabilities and equity
Tax-equivalent Net Interest Revenue
Tax-equivalent Net Interest Revenue to Earning Assets
Less tax-equivalent adjustment
Net Interest Revenue
Provision for credit losses
Other operating revenue
Other operating expense
Net income before taxes
Federal and state income taxes
Net income
Net income attributable to non-controlling interests
Net income attributable to BOK Financial Corporation shareholders
Earnings Per Average Common Share Equivalent:
Net income:
Basic
Diluted
Year Ended
December 31, 2020
Average
Balance
Revenue/
Expense
Yield/
Rate
0.45 %
2.75 %
4.81 %
2.21 %
2.39 %
3.89 %
3.05 %
3.84 %
3.90 %
3.24 %
0.32 %
0.06 %
1.31 %
0.42 %
0.43 %
0.88 %
5.05 %
0.53 %
2,830
67,942
12,760
261,404
18,475
10,963
6,397
898,445
898,445
1,279,216
60,424
385
29,187
89,996
15,605
41,011
13,944
160,556
$
634,401 $
3,078,075
265,455
12,420,678
769,760
281,594
215,296
23,402,195
(368,820)
23,033,375
40,698,634
3,329,727
4,676,029
48,704,390
18,676,146 $
666,549
2,220,749
21,563,444
3,635,541
4,659,453
275,965
30,134,403
11,201,554
1,081,674
1,193,445
5,093,314
48,704,390
$
$
$
$
1,118,660
2.71 %
2.83 %
10,216
1,108,444
222,592
843,949
1,165,937
563,864
128,793
435,071
41
435,030
6.19
6.19
$
$
$
Yield calculations are shown on a tax equivalent 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 include 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.
159
Annual Financial Summary – Unaudited (continued)
Consolidated Daily Average Balances, Average Yields and Rates
(Dollars in Thousands, Except Per Share Data)
Year Ended
December 31, 2019
December 31, 2018
Average
Balance
Revenue/
Expense
Yield/
Rate
Average
Balance
Revenue/
Expense
Yield/
Rate
Assets
Interest-bearing cash and cash equivalents
Trading securities
Investment securities
Available for sale securities
Fair value option securities
Restricted equity securities
Residential mortgage loans held for sale
Loans
Allowance for loan losses
Loans, net of allowance
Total earning assets
Receivable on unsettled securities sales
Cash and other assets
Total assets
Liabilities and equity
Interest-bearing deposits:
Transaction
Savings
Time
Total interest-bearing deposits
Funds purchased and repurchase agreements
Other borrowings
Subordinated debentures
Total interest-bearing liabilities
Non-interest bearing demand deposits
Due on unsettled securities purchases
Other liabilities
Total equity
Total liabilities and equity
$
Tax-equivalent Net Interest Revenue
Tax-equivalent Net Interest Revenue to
Earning Assets
Less tax-equivalent adjustment
Net Interest Revenue
Provision for credit losses
Other operating revenue
Other operating expense
Net income before taxes
Federal and state income taxes
Net income
Net income attributable to non-controlling
interests
Net income attributable to BOK Financial
Corporation shareholders
Earnings Per Average Common Share
Equivalent:
Net income:
Basic
Diluted
$
536,853 $
$
$
1,772,660
319,451
10,108,409
1,145,800
441,756
186,207
22,106,979
(204,679)
21,902,300
36,413,436
1,597,098
4,083,813
42,094,347
13,072,914 $
553,057
2,215,405
15,841,376
2,838,161
7,147,356
276,075
26,102,968
9,809,905
702,450
801,474
4,677,550
42,094,347
12,214
61,960
14,417
254,101
32,936
26,860
7,105
1,134,037
1,134,037
1,543,630
132,854
677
42,007
175,538
53,003
175,425
15,113
419,079
22,333
57,948
15,848
197,472
15,205
21,555
8,123
898,896
898,896
1,237,380
65,859
439
29,219
95,517
9,207
129,008
9,827
243,559
2.28 % $
3.55 %
4.51 %
2.58 %
2.95 %
6.08 %
3.82 %
5.13 %
5.18 %
4.27 %
$
1.02 % $
0.12 %
1.90 %
1.11 %
1.87 %
2.45 %
5.47 %
1.61 %
$
1,240,600 $
1,530,400
395,895
8,309,355
464,160
347,447
201,218
18,709,433
(218,840)
18,490,593
30,979,668
795,723
3,162,139
34,937,530
10,581,732 $
503,597
2,133,427
13,218,756
883,904
6,236,441
177,884
20,516,985
9,590,455
531,071
559,802
3,739,217
34,937,530
1.80 %
3.84 %
4.00 %
2.35 %
3.18 %
6.20 %
4.07 %
4.80 %
4.86 %
3.98 %
0.62 %
0.09 %
1.37 %
0.72 %
1.04 %
2.07 %
5.52 %
1.19 %
$
1,124,551
2.66 %
$
993,821
2.79 %
3.11 %
3.20 %
11,672
1,112,879
44,000
694,370
1,132,381
630,868
130,183
500,685
(73)
8,954
984,867
8,000
616,784
1,028,166
565,485
119,061
446,424
778
$
500,758
$
445,646
$
$
7.03
7.03
$
$
6.63
6.63
160
Quarterly Financial Summary – Unaudited
Consolidated Daily Average Balances, Average Yields and Rates
(In Thousands, Except Per Share Data)
Three Months Ended
Assets
Interest-bearing cash and cash equivalents
Trading securities
Investment securities
Available for sale securities
Fair value option securities
Restricted equity securities
Residential mortgage loans held for sale
Loans
Allowance for loan losses
Loans, net of allowance
Total earning assets
Receivable on unsettled securities sales
Cash and other assets
Total assets
Liabilities and equity
Interest-bearing deposits:
Transaction
Savings
Time
Total interest-bearing deposits
Funds purchased and repurchase agreements
Other borrowings
Subordinated debentures
Total interest-bearing liabilities
Non-interest bearing demand deposits
Due on unsettled securities purchases
Other liabilities
Total equity
Total liabilities and equity
Tax-equivalent Net Interest Revenue
Tax-equivalent Net Interest Revenue to Earning
Assets
Less tax-equivalent adjustment
Net Interest Revenue
Provision for credit losses
Other operating revenue
Other operating expense
Net income before taxes
Federal and state income taxes
Net income
Net income attributable to non-controlling interests
Net income attributable to BOK Financial Corp.
shareholders
Earnings Per Average Common Share
Equivalent:
Basic
Diluted
December 31, 2020
September 30, 2020
Average
Balance
Revenue/
Expense
Yield/
Rate
Average
Balance
Revenue/
Expense
Yield/
Rate
158
35,848
3,071
60,885
671
2,276
1,549
216,976
216,976
321,434
7,047
87
4,300
11,434
1,526
5,453
3,377
21,790
$
643,926 $
6,888,189
251,863
12,949,702
122,329
280,428
229,631
23,447,518
(414,225)
23,033,293
44,399,361
1,094,198
4,893,605
$ 50,387,164
$ 20,718,390 $
737,360
1,930,808
23,386,558
2,153,254
5,193,656
275,998
31,009,466
12,136,071
957,642
1,055,623
5,228,362
$ 50,387,164
553,070 $
0.10 % $
1,834,160
2.02 %
4.88 %
258,965
1.98 % 12,580,850
387,784
2.27 %
144,415
3.25 %
2.75 %
213,125
3.68 % 24,110,463
(441,831)
3.75 % 23,668,632
2.92 % 39,641,001
4,563,301
4,727,453
$ 48,931,755
0.14 % $ 19,752,106 $
0.05 %
707,121
2,251,012
0.89 %
0.19 % 22,710,239
2,782,150
0.28 %
3,382,688
0.42 %
275,980
4.87 %
0.28 % 29,151,057
11,929,694
1,516,880
1,171,064
5,163,060
$ 48,931,755
167
8,766
3,141
62,433
1,986
913
1,585
218,125
218,125
297,116
8,199
88
6,371
14,658
1,199
3,657
3,395
22,909
0.12 %
1.92 %
4.85 %
2.11 %
1.92 %
2.53 %
3.01 %
3.60 %
3.67 %
3.04 %
0.17 %
0.05 %
1.13 %
0.26 %
0.17 %
0.43 %
4.89 %
0.31 %
$
299,644
2.64 %
$
274,207
2.73 %
2.72 %
2.81 %
2,414
297,230
(6,500)
196,778
300,661
199,847
45,138
154,709
485
154,224
2.21
2.21
$
$
$
2,457
271,750
—
234,159
301,265
204,644
50,552
154,092
58
154,034
2.19
2.19
$
$
$
Yield calculations are shown on a tax equivalent 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 include 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
161
Quarterly Financial Summary – Unaudited (continued)
Consolidated Daily Average Balances, Average Yields and Rates
June 30, 2020
Three Months Ended
March 31, 2020
December 31, 2019
Average Balance
Revenue /
Expense
Yield /
Rate
Average Balance
Revenue /
Expense
Yield /
Rate
Average Balance
Revenue /
Expense
Yield /
Rate
112
11,473
3,210
68,358
4,110
1,880
2,140
217,731
217,731
309,014
9,321
84
8,340
17,745
2,042
4,954
3,539
28,280
$
619,737 $
1,871,647
268,947
12,480,065
786,757
273,922
288,588
24,099,492
(367,583)
23,731,909
40,321,572
4,626,307
4,809,152
49,757,031
18,040,170 $
656,669
2,464,793
21,161,632
5,816,484
3,527,303
275,949
30,781,368
11,489,322
887,973
1,526,754
5,071,614
49,757,031
$
$
$
2,393
11,855
3,338
69,728
11,708
5,894
1,123
245,613
245,613
351,652
35,857
126
10,176
46,159
10,838
26,947
3,633
87,577
0.07 % $
2.46 %
4.77 %
2.29 %
2.00 %
2.75 %
3.10 %
3.63 %
3.69 %
3.12 %
$
0.21 % $
0.05 %
1.36 %
0.34 %
0.14 %
0.56 %
5.16 %
0.37 %
$
721,659 $
1,690,104
282,265
11,664,521
1,793,480
429,133
129,708
21,943,023
(250,338)
21,692,685
38,403,555
3,046,111
4,270,952
45,720,618
16,159,654 $
563,821
2,239,234
18,962,709
3,815,941
6,542,325
275,932
29,596,907
9,232,859
960,780
1,022,106
4,907,966
45,720,618
2,335
13,015
3,500
69,692
9,488
6,441
1,797
266,315
266,315
372,583
36,897
154
10,970
48,021
16,212
31,621
3,754
99,608
1.33 % $
2.89 %
4.73 %
2.48 %
2.67 %
5.49 %
3.50 %
4.50 %
4.55 %
3.73 %
$
0.89 % $
0.09 %
1.83 %
0.98 %
1.14 %
1.66 %
5.30 %
1.19 %
$
573,203 $
1,672,426
298,567
11,333,524
1,521,528
479,687
203,535
22,236,000
(205,417)
22,030,583
38,113,053
1,973,604
4,126,697
44,213,354
14,685,385 $
554,605
2,247,717
17,487,707
4,120,610
6,247,194
275,916
28,131,427
9,612,533
784,174
837,732
4,847,488
44,213,354
1.62 %
3.19 %
4.69 %
2.52 %
2.62 %
5.37 %
3.55 %
4.75 %
4.80 %
3.93 %
1.00 %
0.11 %
1.94 %
1.09 %
1.56 %
2.01 %
5.40 %
1.40 %
$
280,734
2.75 %
$
264,075
2.54 %
$
272,975
2.53 %
2.83 %
2.80 %
2.88 %
2,630
278,104
135,321
232,693
295,387
80,089
15,803
64,286
(407)
64,693
0.92
0.92
$
$
$
2,726
270,249
19,000
178,585
288,795
141,039
30,257
110,782
430
110,352
1.56
1.56
$
$
$
2,715
261,360
93,771
180,319
268,624
79,284
17,300
61,984
(95)
62,079
0.88
0.88
$
$
$
162
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
As of the end of the period covered by this report and pursuant to Rule 13a-15 of the Securities Exchange Act of 1934 (the
“Exchange Act”), the Company's management, including the Chief Executive Officer and Chief Financial Officer, conducted an
evaluation of the effectiveness and design of the Company's disclosure controls and procedures (as that term is defined in Rules
13a-15(e) and 15d-15(e) of the Exchange Act). Based upon that evaluation, the Company's Chief Executive Officer and Chief
Financial Officer concluded, as of the end of the period covered by this report, that the Company's disclosure controls and
procedures were effective in recording, processing, summarizing and reporting information required to be disclosed by the
Company, within the time periods specified in the Securities and Exchange Commission's rules and forms.
In addition and as of the end of the period covered by this report, there have been no changes in internal control over financial
reporting (as defined in Rule 13a-15(f) and 15d-15(f), as amended, of the Exchange Act) during the Company's fourth fiscal
quarter that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.
Management's Report on Internal Control over Financial Reporting appears within Item 8, “Financial Statements and
Supplementary Data.” The independent registered public accounting firm, Ernst & Young LLP, has audited the financial
statements included in Item 8 and has issued an audit report on the Company's internal control over financial reporting, which
appears therein.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information set forth under the headings “Election of Directors,” “Executive Officers, “Insider Reporting,” “Director
Nominations,” and “Report of the Audit Committee” in BOK Financial's 2021 Annual Proxy Statement is incorporated herein
by reference.
The Company has a Code of Ethics which is applicable to all Directors, officers and employees of the Company, including the
Chief Executive Officer and the Chief Financial Officer, the principal executive officer and principal financial and accounting
officer, respectively. A copy of the Code of Ethics will be provided without charge to any person who requests it by writing to
the Company's headquarters at Bank of Oklahoma Tower, P.O. Box 2300, Tulsa, Oklahoma 74192 or telephoning the Chief
Risk Officer at (918) 588-6000. The Company will also make available amendments to or waivers from its Code of Ethics
applicable to Directors or executive officers, including the Chief Executive Officer and the Chief Financial Officer, in
accordance with all applicable laws and regulations.
There are no material changes to the procedures by which security holders may recommend nominees to the Company's board
of directors since the Company's 2020 Annual Proxy Statement to Shareholders.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the heading “Compensation Discussion and Analysis,” “Compensation Committee Interlocks
and Insider Participation", “Compensation Committee Report,” “Executive Compensation Tables,” and “Director
Compensation” in BOK Financial's 2021 Annual Proxy Statement is incorporated herein by reference.
163
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information set forth under the headings “Security Ownership of Certain Beneficial Owners and Management” and
“Election of Directors” in BOK Financial's 2021 Annual Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information regarding related parties is set forth in Note 13 of the Company's Notes to Consolidated Financial Statements,
which appears elsewhere herein. Additionally, the information set forth under the headings “Certain Transactions,” “Director
Independence” and “Related Party Transaction Review and Approval Process” in BOK Financial's 2021 Annual Proxy
Statement is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information set forth under the heading “Principal Accountant Fees and Services” in BOK Financial's 2021 Annual Proxy
Statement is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) (1) Financial Statements
The following financial statements of BOK Financial Corporation are filed as part of this Form 10-K in Item 8:
Consolidated Statements of Earnings for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019 and 2018
Consolidated Balance Sheets as of December 31, 2020 and 2019
Consolidated Statements of Changes in Equity for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018
Notes to Consolidated Financial Statements
Annual Financial Summary - Unaudited
Quarterly Financial Summary - Unaudited
Reports of Independent Registered Public Accounting Firm
(a) (2) Financial Statement Schedules
The schedules to the Consolidated Financial Statements required by Regulation S-X are not required under the related
instructions or are inapplicable and are therefore omitted.
164
(a) (3) Exhibits
Exhibit
Number
Description of Exhibit
2.0
3.0
3.1
4.0
4.1
4.2
4.3
4.5
10.4
10.4.2
10.4.2 (a)
10.4.2 (b)
10.4.7
10.4.9
10.4.10
10.4.11
10.7.7
Agreement and Plan of Merger by and among BOK Financial Corporation, CoBiz Financial Inc., and BOKF
Merger Corporation Number Sixteen dated June 17, 2018, incorporated by reference to EX 99.1 of Form 8-K
filed on June 18, 2018.
The Articles of Incorporation of BOK Financial, incorporated by reference to (i) Amended and Restated
Certificate of Incorporation of BOK Financial filed with the Oklahoma Secretary of State on May 28, 1991,
filed as Exhibit 3.0 to S-1 Registration Statement No. 33-90450, and (ii) Amendment attached as Exhibit A to
Information Statement and Prospectus Supplement filed November 20, 1991.
Bylaws of BOK Financial, as amended and restated as of October 30, 2007, incorporated by reference to
Exhibit 3.1 of Form 8-K filed on November 5, 2007.
The rights of the holders of the Common Stock of BOK Financial are set forth in its Certificate of
Incorporation.
Subordinated Notes Indenture, dated as of June 27, 2016, between the Company and U.S. Bank National
Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company's filing on Form 8-K filed
June 27, 2016).
Form of 5.375% Subordinated Notes due 2056 Global Security (incorporated by reference to Exhibit 4.2 to the
Company's Registration Statement on Form 8-A filed on June 24, 2016).
Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, BOK Financial is not filing certain documents. BOK
Financial agrees to furnish a copy of each such documents to the Commission upon the request of the
Commission.
Form of Subordinated Notes Indenture, to be dated as of June 25, 2015 between CoBiz Financial Inc. and U.S.
Bank National Association, as trustee, incorporated by reference to Exhibit 4.1 to CoBiz Financial Inc. Form 8-
K filed June 25, 2015.
Form of 5.625% Subordinated Notes due June 25, 2030, incorporated by reference to Exhibit 4.2 to CoBiz
Financial Inc. Form 8-K filed June 25, 2015.
Employment and Compensation Agreements.
Amended and Restated Deferred Compensation Agreement (Amended as of December 1, 2003) between
Steven G. Bradshaw and BOK Financial Corporation, incorporated by reference to Exhibit 10.4.2 of Form 10-
K for the fiscal year ended December 31, 2003.
409A Deferred Compensation Agreement between Steven G. Bradshaw and BOK Financial Corporation dated
December 31, 2004, incorporated by reference to Exhibit 10.4.2 (a) of Form 8-K filed on January 5, 2005.
Amended and Restated Employment Agreement (amended as of June 30, 2013) between BOK Financial and
Steven G. Bradshaw, incorporated by reference to Exhibit 99.A of Form 8-K filed August 20, 2013.
Amended and Restated Employment Agreement (amended June 15, 2013) between BOK Financial and Steven
Nell incorporated by reference to Exhibit 99.B of Form 8-K filed September 4, 2013.
Amended and Restated Employment Agreement (amended as of June 15, 2013) between BOK Financial and
Norman Bagwell, incorporated by reference to Exhibit 99.A of Form 8-K filed September 4, 2013.
Amended and Restated Employment Agreement (amended as of June 15, 2013) between BOK Financial and
Stacy C. Kymes incorporated by reference to Exhibit 10.4.10 of Form 10-K for the fiscal year ended December
31, 2015.
Employment Agreement between BOK Financial and Scott B. Grauer dated December 18, 2013.
BOK Financial Corporation 2001 Stock Option Plan, incorporated by reference to Exhibit 4.0 of S-8
Registration Statement No. 333-62578.
165
Exhibit
Number
Description of Exhibit
10.7.8
10.7.9
10.7.10
10.7.11
10.7.12
10.7.13
10.7.14
10.7.16
10.8
10.8.1
21
23
31.1
31.2
32
99
101
BOK Financial Corporation Directors' Stock Compensation Plan, incorporated by reference to Exhibit 4.0 of
S-8 Registration Statement No. 33-79836.
Bank of Oklahoma Thrift Plan (Amended and Restated Effective as of January 1, 1995), incorporated by
reference to Exhibit 10.7.6 of Form 10-K for the year ended December 31, 1994.
Trust Agreement for the Bank of Oklahoma Thrift Plan (December 30, 1994), incorporated by reference to
Exhibit 10.7.7 of Form 10-K for the year ended December 31, 1994.
BOK Financial Corporation 2003 Stock Option Plan, incorporated by reference to Exhibit 4.0 of S-8
Registration Statement No. 333-106531.
BOK Financial Corporation 2003 Executive Incentive Plan, incorporated by reference to Exhibit 4.0 of S-8
Registration Statement No. 333-106530.
10b5-1 Repurchase Plan between BOK Financial Corporation and BOSC, Inc. dated May 27, 2008,
incorporated by reference to Exhibit 10.1 of Form 8-K filed May 30, 2008.
BOK Financial Corporation 2003 Executive Incentive Plan, as amended and restated, for the Chief Executive
Officer and for Direct Reports to the Chief Executive Officer, incorporated by reference to the Schedule 14 A
Definitive Proxy Statement filed on March 15, 2011.
BOK Financial Corporation 2009 Omnibus Incentive Plan, Amended and Restated effective April 30, 2013,
incorporated by reference to the Schedule 14A Definitive Proxy Statement filed on March 20, 2013.
Lease Agreement between Williams Headquarters Building LLC and BOKF, NA dated July 1, 2019.
First Amendment to Lease Agreement between Williams Headquarters Building LLC and BOKF, NA dated
November 8th, 2019.
Subsidiaries of BOK Financial, filed herewith.
Consent of independent registered public accounting firm - Ernst & Young LLP, filed herewith.
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed
herewith.
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed
herewith.
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
Additional Exhibits.
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets, (ii) the
Consolidated Statements of Earnings, (iii) the Consolidated Statements of Changes in Equity, (iv) the
Consolidated Statement of Cash Flows and (v) the Notes to the Consolidated Financial Statements, filed
herewith. The XBRL instance document does not appear in the Interactive Data File because its XBRL tags are
embedded within the Inline XBRL document.
(b)
Exhibits
See Item 15 (a) (3) above.
(c)
Financial Statement Schedules
See Item 15 (a) (2) above.
166
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
BOK FINANCIAL CORPORATION
DATE: February 24, 2021 BY: /s/ George B. Kaiser
George B. Kaiser
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on February 24, 2021,
by the following persons on behalf of the registrant and in the capacities indicated.
OFFICERS
/s/ George B. Kaiser
George B. Kaiser
Chairman of the Board of Directors
/s/ Steven G. Bradshaw
Steven G. Bradshaw
Director, President and Chief Executive Officer
/s/ Steven E. Nell
Steven E. Nell
Director, Executive Vice President and
Chief Financial Officer
/s/ John C. Morrow
John C. Morrow
Senior Vice President and
Chief Accounting Officer
167
/s/ Alan S. Armstrong
Alan S. Armstrong
/s/ C. Frederick Ball, Jr.
C. Frederick Ball, Jr.
/s/ Steve Bangert
Steve Bangert
/s/ Peter C. Boylan III
Peter C. Boylan III
/s/ Chester E. Cadieux, III
Chester E. Cadieux, III
/s/ John W. Coffey
John W. Coffey
/s/ Joseph W. Craft, III
Joseph W. Craft, III
/s/ Jack E. Finley
Jack E. Finley
David F. Griffin
/s/ V. Burns Hargis
V. Burns Hargis
DIRECTORS
/s/ Douglas D. Hawthorne
Douglas D. Hawthorne
/s/ Kimberley D. Henry
Kimberley D. Henry
/s/ E. Carey Joullian, IV
E. Carey Joullian, IV
Stanley A. Lybarger
/s/ Steven J. Malcolm
Steven J. Malcolm
/s/ Emmet C. Richards
Emmet C. Richards
/s/ Claudia San Pedro
Claudia San Pedro
/s/ Michael C. Turpen
Michael C. Turpen
/s/ Rose M. Washington
Rose M. Washington
168
Exhibit 21
BOK FINANCIAL CORPORATION
SUBSIDIARIES OF THE REGISTRANT
Banking Subsidiaries
BOKF, National Association (1)
Other subsidiaries of BOK Financial Corporation
BOK Capital Services Corporation
BOKF Capital Corporation
BOKF-CC (Collision Works), LLC
BOKFCC (FIXED INCOME I), LLC
BOKF-CC (FSE), LLC
BOKF-CC (IPS), LLC
BOKF-CC (O2 Concepts), LLC
BOKF-CC (QRC), LLC
BOKF-CC (SSP), LLC
BOKF-CC (Switchgrass), LLC
BOKFCC Merchant Banking Fund I, LLC
BOKFCC MB II, LLC
BOKF Energy Fund Investment I, LLC
BOKF Equity, LLC
BOKF Private Equity Limited Partnership II
BOK Financial Insurance, Inc. (7)
BOK Financial Private Wealth, Inc. (5)
BOK Financial Securities, Inc.
Cavanal Hill Distributors, Inc.
BOKF Risk Management, Inc. (8)
Industrial Pipe & Supply , LLC
RMA Holdings, Inc. (7)
Switchgrass I, LLC
Switchgrass II, LLC
Switchgrass III, LLC
Switchgrass IV, LLC
Switchgrass V, LLC
Switchgrass VI, LLC
Switchgrass Holdings, LLC
Switchgrass Management, LLC
Switchgrass Properties, LLC
Switchgrass Properties II, LLC
Subsidiaries of BOKF, National Association (1)
Affiliated BancServices, Inc.
Affiliated Financial Holding Co.
Affiliated Financial Insurance Agency, Inc.
AWREI, Inc. (7)
BancOklahoma Agri-Service Corporation
BOK Delaware, Inc. (3)
BOK Financial Asset Management, Inc. (2)
BOK Financial Equipment Finance, Inc.
BOK Financial Public Finance, Inc. (7)
BOK Funding Trust (3)
BOKFCDF Fund I, LLC
BOKF Community Development Fund, LLC
BOKF Community Development Fund II
BOKF Community Development Corporation
BOKF Petro Holding, LLC
BOKF Petro Holdings II, LLC
BOKF Petro Holdings III, LLC
BOKF Petro Holdings IV, LLC
BOKF Real Estate Holdings, LLC
BOKF Special Assets I, LLC
BOSC Agency, Inc. (Oklahoma)
BOSC Agency, Inc. (New Mexico) (4)
BOSC Agency, Inc. (Texas) (2)
Cavanal Hill Investment Management, Inc.
Cottonwood Valley Ventures, Inc.
CVV Management, Inc.
CVV Partnership, an Oklahoma General Partnership
Oklahoma New Markets Fund I, LLC
Remora Holdings, LLC
Remora Operating, LLC
Western Real Estate Investors, Inc. (7)
All Subsidiaries listed above were incorporated in Oklahoma, except as noted.
(1) Chartered by the United States Government
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Incorporated in Texas
Incorporated in Delaware
Incorporated in New Mexico
Incorporated in Colorado
Incorporated in Kansas
Incorporated in Colorado
Incorporated in Nevada
Exhibit 23
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
•
•
•
•
•
•
•
•
•
•
•
•
Registration Statement (Form S-8, No. 33-44121) pertaining to the Reoffer Prospectus of the Bank of Oklahoma
Master Thrift Plan and Trust Agreement as amended October 6, 2008.
Registration Statement (Form S-8, No. 333-40280) pertaining to the Reoffer Prospectus of the BOK Financial
Corporation Master Thrift Plan for Hourly Employees as amended October 6, 2008.
Registration Statement (Form S-8, No. 33-79836) pertaining to the Reoffer Prospectus of the BOK Financial
Corporation Directors' Stock Compensation Plan.
Registration Statement (Form S-8, No. 333-32649) pertaining to the Reoffer Prospectus of the BOK Financial
Corporation 1997 Stock Option Plan.
Registration Statement (Form S-8, No. 333-93957) pertaining to the Reoffer Prospectus of the BOK Financial
Corporation 2000 Stock Option Plan.
Registration Statement (Form S-8, No. 333-62578) pertaining to the Reoffer Prospectus of the BOK Financial
Corporation 2001 Stock Option Plan.
Registration Statement (Form S-8, No. 333-106530) pertaining to the Reoffer Prospectus of the BOK Financial
Corporation 2003 Executive Incentive Plan.
Registration Statement (Form S-8, No. 333-106531) pertaining to the Reoffer Prospectus of the BOK Financial
Corporation 2003 Stock Option Plan.
Registration Statement (Form S-8, No. 333-135224) pertaining to the Reoffer Prospectus of the BOK Financial
Corporation 2003 Stock Option Plan.
Registration Statement (Form S-8, No. 333-158846) pertaining to the Reoffer Prospectus of the BOK Financial
Corporation 2009 Omnibus Incentive Plan.
Registration Statement (Form S-3, No. 333-212120) pertaining to the Reoffer Prospectus of the BOK Financial
Corporation 2016 Subordinated Note Issuance.
Registration Statement (Form S-4, No. 333-226211) pertaining to the Registration Statement for the registration of
BOK Financial Corporation's common stock.
of our reports dated February 24, 2021, with respect to the consolidated financial statements of BOK Financial Corporation and
the effectiveness of internal control over financial reporting of BOK Financial Corporation included in this Annual Report
(Form 10-K) of BOK Financial Corporation for the year ended December 31, 2020.
/s/ Ernst & Young LLP
Tulsa, Oklahoma
February 24, 2021
CERTIFICATION PURSUANT TO
SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
FOR THE CHIEF EXECUTIVE OFFICER
Exhibit 31.1
I, Steven G. Bradshaw, President and Chief Executive Officer of BOK Financial Corporation (“BOK Financial”), certify that:
1.
I have reviewed this Annual Report on Form 10-K of BOK Financial;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: February 24, 2021
/s/ Steven G. Bradshaw
Steven G. Bradshaw
President
Chief Executive Officer
BOK Financial Corporation
CERTIFICATION PURSUANT TO
SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
FOR THE CHIEF FINANCIAL OFFICER
Exhibit 31.2
I, Steven E. Nell, Chief Financial Officer of BOK Financial Corporation (“BOK Financial”), certify that:
1.
I have reviewed this Annual Report on Form 10-K of BOK Financial;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c.
d.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing
the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: February 24, 2021
/s/ Steven E. Nell
Steven E. Nell
Executive Vice President
Chief Financial Officer
BOK Financial Corporation
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32
In connection with the Annual Report of BOK Financial Corporation (“BOK Financial”) on Form 10-K for the fiscal period
ending December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Steven
G. Bradshaw and Steven E. Nell, Chief Executive Officer and Chief Financial Officer, respectively, of BOK Financial, certify,
pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of BOK Financial as of, and for, the periods presented.
February 24, 2021
/s/ Steven G. Bradshaw
Steven G. Bradshaw
President
Chief Executive Officer
BOK Financial Corporation
/s/ Steven E. Nell
Steven E. Nell
Executive Vice President
Chief Financial Officer
BOK Financial Corporation
Credit Ratings
S&P
Moody’s
Fitch Ratings
BOK Financial Corporation
Long-term Issuer
BBB+ (ON)
A3 (ON)
A (ON)
BOKF, NA
Long-term Issuer
A- (ON)
A3 (ON)
A (ON)
2020 Highlights
30th consecutive year
of profitability
Wealth Management revenue
tops $500 million for the first
time in company history
Record $786 million in
pre-tax, pre-provision
revenue
Robust deposit growth with
year-end deposits up more
than 30% year-over-year
A Family Of Brands
BOK Financial Corporation has a long-time commitment to serving customers and communities throughout
the United States. It provides a wide array of banking, fiduciary and investment services through regional bank
operations, a broker dealer, four registered investment advisor firms and an electronic funds network.
Full Service Banking Markets
Arizona
Arkansas
Colorado
Kansas
Missouri
New Mexico
Oklahoma
Texas
Consumer and Commercial Banking:
Wealth Management:
Mortgage adds record
$182 million in revenue
15th consecutive year of
dividend increases
Transaction and Payment Processing:
Mortgage Banking:
Bank of Oklahoma Tower • P.O. Box 2300 Tulsa, Oklahoma 74192918.588.6000 • www.bokf.comBF-BW-000052020 Annual Report