2022
Annual report
2022 financial highlights
• First- and fourth-highest pre-provision net revenue quarters in company’s history.1
• Record organic core loan growth of $2.4 billion from 2021.
• Record derivative fees of $45.7 million and investment banking fees of $45.6 million.
• Treasury Services surpassed $100 million in operating revenue for the first time.
• Record Trust fee revenue of more than $200 million, a 10% increase from the prior year.
AT DECEMBER 31, 2022
ASSETS
$47.8 bn
LOANS
$22.6 bn
DEPOSITS
$34.5 bn
ASSETS UNDER MANAGEMENT & ADMINISTRATION
$99.7 bn
1 Pre-provision net revenue is a non-GAAP measure. Refer to Table 32 in our 2022 Form 10-K for a reconciliation with financial measures defined by GAAP.
Revenue Diversity*
Net interest 64.8%
Brokerage/Trd 7.5%
Transaction card 5.6%
Fiduciary & asset management 10.5%
Service charges 5.9%
Mortgage 2.6%
Other 3.1%
Loan Portfolio*
Commercial 30.7%
Commercial real estate 20.4%
Energy 15.2%
Healthcare 17.0%
Residential mortgage 9.5%
Consumer 7.1%
Paycheck protection program 0.1%
S&P
MOODY’S
FITCH
BBB+ (ON)
A3 (ON)
A (ON)
A- (ON)
A3 (ON)
A (ON)
Credit ratings
BOK FINANCIAL
CORPORATION
Long-term Issuer
BOKF, NA
Long-term Issuer
*As of December 31, 2022.
Dear Shareholders,
As I began my new role as BOK Financial president and CEO
at the beginning of 2022, I shared with our employees key
foundational values and leadership principles that have
shaped my career. These eight attributes gave insight into
how I would lead the company and set expectations on what
success looks like at BOK Financial.
Although the philosophy evolved from a number of outside
sources, most of them were already alive and well inside our
company. Values like playing to win the right way and holding
ourselves and each other accountable are lived every day by
our employees. Not only are these values illustrative of what
makes our company different, they’re also a key driver of our
success in this past year and in years to come.
Hold our teams and each other
accountable for results.
Play to win and be dissatisfied
when we lose.
The company posted net income of $520.3 million or $7.68
per diluted share, down from $618.1 million, or $8.95 per
diluted share in 2021. The results for the year were impacted
by large year-over-year swings in loan loss provision levels
and a precipitous drop in mortgage activity driven by the
Federal Reserve’s tightening cycle.
Despite these challenges, we saw considerable momentum
in the second half of the year. In fact, at $231.3 million, the
fourth quarter was our best pre-provision net revenue1 in our
company’s history.
Our focus on accelerating top line growth was reflected in
loan growth of $2.4 billion which resulted in year-end loan
balances of $22.6 billion. This was the best organic loan
growth year in our history and best percentage organic loan
growth year since 2006. Much of this growth was driven by
commercial and commercial real estate loans, underscoring
our ongoing commitment to serving the needs of small
businesses, international corporations and everything in
between. Those commercial relationships also helped to
grow our Treasury Services revenue by 10%, topping $100
million in operating revenue for the first time.
Growth in our loan portfolio helped to magnify the benefit
of the Federal Reserve’s 425 basis point increase to the Fed
Funds rate. For the year, our net interest revenue totaled $1.2
billion, an increase of $93.3 million; our net interest margin
expanded to 2.98% from 2.60%. Although the Fed has
signaled the possibility of continued rate hikes in 2023, we
took actions in the fourth quarter of 2022 to move toward
a more neutral interest rate position as the risks are more
balanced now, and we’ve captured most of the benefit from
the rising rates.
The impact of the worst combined equity and fixed-income
markets since the late 1960s was reflected in our Wealth
Management results, which saw net income drop by $7.1
million to $106.2 million. Decreased trading activities,
disruption in the fixed-income markets and narrowing
margins all impacted our results, however we continue to
add new client relationships and grow existing ones.
This relationship building allowed us to keep assets under
management or administration relatively flat from the prior
year despite the equity markets being down by 20% and fixed
income markets by 15%.
In addition, wealth management grew loans by 9%, and our
Trust area surpassed $200 million in operating revenue for
the first time, a 10% increase over 2021.
The sharp decline in the mortgage production markets drove
a $56.5 million decrease in mortgage banking revenue,
although the reduction was largely offset by increased
customer hedging, investment banking, and fiduciary and
asset management revenues. It’s fair to say that the strength
of our diversified revenue model was on full display in 2022.
Principled leadership
at BOK Financial
• Do the right thing all the time.
• Hold our teams and each other accountable
for results.
• Trust each other more; trust drives
better collaboration.
• Fear of making a mistake cannot paralyze us.
• We are full of grit.
• Play to win and be dissatisfied when we lose.
• Value people and talent, but teams above all.
• We are one team.
Trust each other more;
trust drives better collaboration.
Fear of making a mistake
cannot paralyze us.
Our ability to collaborate across business lines, between
operational and front line areas, and across markets is
essential to our success. It’s a discipline that allows us to
serve the complete financial needs of our clients and ensures
we continue to evolve those relationships as needs change.
The interest rate environment in which we find ourselves—
the first materially rising-rate environment for nearly 15
years—is an area where that collaborative discipline will
differentiate us. This environment is aligned with our brand
of active wealth management which will be in greater
demand in an era of economic uncertainty. We’re also
working across lines of business to help commercial clients
seeking creative ways to generate better returns for short-
term funds while meeting their risk and liquidity needs.
Over the past couple of years, many parts of our company
have been involved in transformative technology projects that
will enhance our client experience across our commercial,
wealth and payment platforms. These projects have been
a significant lift for both our front-line teams and our
operational and information technology teams. Our teams
have worked closely on these multi-year projects, and we look
forward to seeing these significant investments positively
impact our client interactions.
We are one team.
Value people and talent,
but teams above all.
Our ability to recruit, retain and advance talent has always
been a strength at all levels of our company. In 2022, that
discipline was brought to bear on our executive leadership
team as we shifted roles in a number of areas, including
information technology, consumer banking and commercial
banking. New perspectives paired with a deep understanding
of our culture are creating new energy in the company.
Two significant retirements also brought about change
within the company. Norm Bagwell retired after leading our
Texas bank for more than 15 years. We are fortunate that he
continues to play a role in client development and employee
recruiting in Texas.
The Lone Star state continues to be an important growth
focus for us, which is why we were so pleased to name Mark
Wade as CEO for Bank of Texas. Mark has been with us for
more than 20 years, most recently leading our commercial
banking division. He has brought a passion for growth
to his new role and will lead our expansion plans for this
dynamic market.
Steven Nell also announced plans for his retirement in 2022.
Steven has been an exceptional CFO for more than 20 years,
and all those who had the pleasure of working with him
know him to be an outstanding leader and human being.
I, personally, am grateful for all of Steven’s innumerable
contributions to our company.
With Steven’s departure at the end of February, Marty Grunst
has stepped into the role of CFO. Marty previously served as
our chief risk officer and treasurer before that. He has more
than three decades of experience in the financial industry,
and his strategic and operational expertise has helped to
make this a seamless transition.
We are full of grit.
Do the right thing all the time.
Our focus on doing the right thing goes beyond regulations
and codes of conduct. We believe that doing right by
our employees creates an environment where they are
energized and committed to doing right by our clients. We
know that our company does well when our clients and our
communities are doing well.
That commitment to our communities was evident in late
2022 as we celebrated an important giving milestone for
our company and our foundation: surpassing $100 million in
contributions to nonprofits serving our communities. Since
its creation in 2000, the BOKF Foundation has been funded
through a portion of the company’s profits allowing us to
give back to our communities in a significant way. We’re
proud of the impact that we’ve had and are committed to
continuing to advance the communities we are so proud
to serve.
I want to close by thanking our employees who continually
go beyond for our clients and communities. We are grateful
for their commitment and the ongoing support of our board
of directors, clients and you, our shareholders.
Sincerely,
Stacy C. Kymes
President and Chief Executive Officer
1 Pre-provision net revenue is a non-GAAP measure. Refer to Table 32 in our 2022 Form 10-K for a reconciliation with financial measures defined by GAAP.
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, 2022
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. 001-37811
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
(I.R.S. 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 every Interactive Data File required to be submitted 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 such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See definitions of "larger accelerated filer," "accelerated filer," and "smaller reporting company,"
and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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 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. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ý
The aggregate market value of the registrant's common stock ("Common Stock") held by non-affiliates is approximately $2.4 billion (based
on the June 30, 2022 closing price of Common Stock of $75.58 per share). As of January 31, 2023, there were 66,971,817 shares of Common
Stock outstanding.
Part III incorporates certain information by reference from the Registrant’s Proxy Statement for the 2023 Annual Meeting of Shareholders.
DOCUMENTS INCORPORATED BY REFERENCE
BOK Financial Corporation
Form 10-K
Year Ended December 31, 2022
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
73
78
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 153
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 Accountant 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 10.4.12 Employment Agreement between BOK Financial and Martin E. Grunst dated March 1,
Exhibit 21
Exhibit 23
2023.
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
153
153
153
153
154
154
154
154
157
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, 2022, the Company reported total consolidated assets of $48 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
also offer products that leverage our energy financing expertise and enable us to offer commodity derivatives for customers to
use in their risk management. Our diversified base of revenue sources is designed to generate returns across a range of
economic situations. Wealth management also continues to be a strategic focus. We provide liquidity to the mortgage markets
through trading of U.S. government agency issued mortgage-backed securities and related derivative contracts and currently
service approximately $100 billion of assets under management or administration.
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, 2022.
We are the largest financial institution in the state of Oklahoma with 13% of the state’s total deposits. We have 31% and 11%
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 2% 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 1%. Our market share is approximately 2% in the Kansas City,
Missouri/Kansas area and approximately 1% in the Phoenix area. 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 industry as a provider of financial 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, wellness programs and development resources. 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."
Our talented workforce is the key to our success. At December 31, 2022, we had 4,791 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 primarily distributed over our eight
state footprint, to include: Oklahoma, Texas, Arkansas, Kansas, Missouri, Colorado, New Mexico and Arizona.
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,
Equity and Inclusion ("DEI"): community engagement, senior leader engagement, Communities of Practice and diverse
recruiting practices and education.
2
As of December 31, 2022, 56% of our overall workforce was female, and 32% of our overall workforce was comprised of
people of color. In 2022, BOK Financial was again recognized by ‘Diversity, Inc.’ as one of the ‘Top Regional Companies’
with respect to scoring criteria related to DEI organizational practices.
Community Engagement
In 2022, the Company and the BOKF Foundation gave a combined $6.1 million to organizations making a difference in our
communities. Our employees donated more than 33,000 volunteer hours, and more than 358 employees served in 665
leadership roles with 430 nonprofit boards. Over the past ten years, we have committed $768 million in loan funding to support
affordable housing projects and $362 million in affordable housing investments.
Senior Leader Engagement
Our DEI Council is led by our CEO and President, Stacy Kymes, and includes other members of our executive leadership team
as well as senior leaders throughout our footprint. We are members of 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 late 2020. We believe mentorship programs are a valuable tool for helping employees
successfully shape their long-term career trajectory. Mentor matches are prioritized for females and people of color. In 2022, we
launched Cohort 4 and 5 with 127 mentors/mentees participating in the program. In 2022, 26% of our participants were people
of color and 53% were female.
Communities of Practice (CoP)
In 2020, we introduced a concept from Harvard Business Review 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. CoP also provide exposure opportunities for employees to interact with
others across the organization at all levels. As of December 31, 2022, we had 20 active CoP, including: Advancing Minority
Owned Businesses, Mentoring, Practicing Inclusion, Diverse Recruiting Practices, Engagement Practices and Culture
Ambassadors. Any person from across the organization can join any CoP; these groups highlight our enterprise focus on
inclusivity.
Diverse Recruiting Practices
Our recruiting organization is fully AIRS® (Advanced Internet Recruitment Strategies) Certified and held accountable to
monthly recruitment outreach efforts to diverse organizations, including HBCUs (Historically Black Colleges and Universities).
University recruiting has been a focal point for our diversity efforts. In 2022, 35% of our class of interns and early career
associates identified as people of color.
Diversity Education
Unconscious bias education was introduced to all managers in order to provide tools that support awareness of the automatic
patterns of thinking related to hiring practices. We also partner with LinkedIn Learning to ensure all employees across the
company have equal access to development opportunities. The concept of ‘inclusion’ is woven into many of the learning
opportunities offered by our Talent and Organizational Development team; examples include: ‘Leveraging Inclusion and
Mitigating Unconscious Bias,’ ‘Emergenetics Applications,’ ‘Emotional Intelligence Skills’ and ‘Crucial Conversations.’
Benefits and Compensation Offerings
BOK Financial 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
3
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 resources they need to achieve their career goals. Development
offerings are focused on supporting career development goals, increasing skill sets, and preparing employees to expand in their
current role or develop for future roles. We offer a variety of learning modalities, from on demand resources to interactive
sessions facilitated by Talent Development Consultants. Our employees are provided many opportunities to advance their
careers within our organization. During 2022, 32% of all of positions filled were with internal employees.
Connecting with Our Employees
Engagement is an important component of our culture. We encourage our employees to provide feedback in a survey format
with the last one completed in 2021. In 2021, 91% of our workforce participated in the survey, and results were shared and
discussed across the Company. We will seek feedback in the same format in 2023. We have consistently had employee
participation in excess of 80% since the inception of our engagement survey.
Connecting with Our Communities
Our employees are passionate about many causes, and the Company’s 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 the BOKF Foundation. In 2022, over 1,700
employees nominated and voted on 165 nonprofit organizations to receive funding. This was the second year of the Company’s
pilot program where we accelerated resources to underserved minority communities by supporting nonprofit organizations
providing programs to help close gaps in four key areas: income inequality, workforce development, education and mentoring,
and social justice inequities.
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,
4
information technology and compliance with applicable regulations. The National Banking Act authorizes the OCC to examine
every national bank as often as necessary.
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.
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.
Subsequent legislation raised the threshold for systemically important financial institutions from $50 billion to $250 billion
while providing the Federal Reserve Board with authority to establish incremental prudential standards for banks between
$100 billion and $250 billion. Current rules adopted by the OCC require heightened standards for financial institutions that
report at least $50 billion of average consolidated assets over a four quarter period after an 18-month grace period. These
heightened standards require establishing and implementing a risk governance framework to cover the bank's risk-taking
activities.
5
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 rule-making 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 laws 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."
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.
6
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.
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.
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. On October 18, 2022, the FDIC
finalized a rule that would increase initial base deposit insurance assessment rates by 2 basis points beginning with the first
quarterly assessment period of 2023. The FDIC, as required under the Federal Deposit Insurance Act, established a plan in
September 2020 to restore the DIF reserve ratio to meet or exceed the statutory minimum of 1.35 percent within eight years.
This plan did not include an increase in the deposit insurance assessment rate. Based on the FDIC's recent projections, however,
the FDIC determined that the DIF reserve ratio is at risk of not reaching the statutory minimum by the statutory deadline of
September 30, 2028 without increasing the deposit insurance assessment rates. The increased assessment would improve the
likelihood that the DIF reserve ratio would reach the required minimum by the statutory deadline, consistent with the FDIC's
Amended Restoration Plan. The rule will become effective as of January 1, 2023.
7
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.
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.
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.
8
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.
Economic variables have changed vastly throughout 2022. At the beginning of the year, the Federal Funds rate was near zero,
and the housing market was in a boom with elevated levels of originations and an acceleration in the rise of home prices.
Consumer spending was also high. Starting in March 2022, the Federal Reserve raised the Federal Funds rate seven times
through the end of the year for a total of 425 basis points due to a four-decade inflation high. While oil prices soared in the first
half of the year fueled by the Russia-Ukraine conflict, they began to subside in the second half of the year. Unemployment
remains low, coming in at 3.5% for December 2022.
Our base case economic forecast for the fourth quarter of 2022 assumes the Russia-Ukraine conflict remains isolated. Inflation
continues to improve from the peak experienced in the third quarter of 2022 and reaches 3.0% by end of 2023. There are two
additional federal funds rate increases in the first quarter of 2023 and is held flat for the remainder of 2023. Job openings revert
to more normalized levels and overall hiring levels decline, causing the national unemployment rate to modestly increase over
the next four quarters. Inflation pressures cause modest declines in real household income compared to pre-pandemic levels,
resulting in below-trend GDP growth. See "Summary of Credit Loss Experience" section in 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:
Strategic, Compliance 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. Concern regarding the ability of Congress and the President to reach agreement on federal budgetary matters,
including the debt ceiling, or prolonged stalemates leading to total or partial governmental shutdowns may also have adverse
economic consequences and create the risk of economic instability or market volatility, with potential negative consequences to
our business and financial performance. Additionally, changes in fiscal, monetary or regulatory policy, including as a result of
labor shortages, wage pressures, supply chain disruptions and higher inflation, could increase our compliance costs and
adversely affect our business operations and results of operations.
Federal budget deficit concerns and the potential for political conflict over legislation to raise the U.S. government's debt limit
may increase the possibility of a default by the U.S. government on its debt obligations, related credit-rating downgrades, or an
economic recession in the United States. Many of our investment securities are issued by the U.S. government and government
agencies and sponsored entities. As a result of uncertain domestic political conditions, including potential future federal
government shutdowns, the possibility of the federal government defaulting on its obligations for a period of time due to debt
ceiling limitations or other unresolved political issues, investments in financial instruments issued or guaranteed by the federal
government pose liquidity risks. In connection with prior political disputes over U.S. fiscal and budgetary issues leading to the
U.S. government shutdown in 2011, S&P lowered its long term sovereign credit rating on the U.S. from AAA to AA+. A
further downgrade, or a downgrade by other rating agencies, as well as sovereign debt issues facing the governments of other
countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide.
Our business, financial condition, liquidity and results of operations could be adversely affected by a health pandemic such
as the COVID-19 pandemic or other health crisis.
A pandemic or other health crisis could destabilize the financial markets and the general economy. Forced shutdowns or
regulations limiting business could have an adverse effect on our customers, limiting their ability to satisfy obligations and
limiting growth or demand for our loans and other services, which could affect our liquidity, financial condition and results of
operations.
The effects of climate change and resulting government regulations could adversely affect BOK Financial and BOK
Financial customers.
The current and anticipated effects of climate change have resulted in increased political and social attention. Climate changes
present physical and transition risks to BOK Financial, both of which are expected to increase over time. Physical risks relate to
the harm of people or property arising from acute, climate-related disaster events such as hurricanes or tornadoes, as well as
longer-term chronic phenomena such as higher average temperatures. Physical risks specific to BOK Financial include:
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Increases in extreme weather events could damage or destroy the property of BOK Financial or its customers,
disrupting operations and causing significant expenditures.
Significant damages to real properties securing our loans could cause the value of the loan portfolio to contract.
Borrowers may be unable to make payments on loans increasing delinquency rates and average loan loss severity.
• Wide-ranging weather disasters, including but not limited to, long periods of drought and rising sea levels, could result
in an economic downturn and a decline in market conditions. Liquidity risks could arise as operational needs change
for both BOK Financial and its customers.
• We may not have adequate insurance coverage for some potential natural, catastrophic climate change-related events.
Transition risks relate to stresses arising from the shifts in regulatory policies, consumer or business sentiment, or technologies
required to limit climate change. The U.S. Congress, state legislatures and federal and state regulatory agencies have continued
to propose and advance numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change.
Transition risks specific to BOK Financial include:
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Compliance, operating, maintenance and remediation costs may require a significant amount of capital affecting BOK
Financial's liquidity position.
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BOK Financial's credit portfolios include carbon-intensive industries, which could be adversely impacted by the
transition to a low-carbon economy. BOK Financial has a long-standing relationship with the energy industry, and the
local economies within BOK Financial's geographical footprint have a concentration in energy-related industries. The
regulatory impacts on the energy industry could lead to sharp changes in the values of certain assets or liabilities,
increase costs, hinder financial results and shrink the industry. These changes could have a significant effect on the
general economic conditions within our footprint.
Reputational risk may increase as stakeholders become more focused on climate risk.
Credit Risk Factors
Adverse regional economic developments could negatively affect BOK Financial's business.
At December 31, 2022, loans to businesses and individuals with collateral primarily located in Texas represented approximately
32% of the total loan portfolio, loans to businesses and individuals with collateral primarily located in Oklahoma represented
approximately 16% of our total loan portfolio and loans to businesses and individuals with collateral primarily located in
Colorado represented approximately 11% 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, 2022, 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.
Pandemics, such as the COVID-19 pandemic, may affect economies around the world. The Russia-Ukraine conflict has resulted
in volatile oil prices as well as affected other global economic factors.
BOK Financial, its customers and counterparties may be negatively affected by the volatility and uncertainty related to inflation
and the effects of inflation. Prolonged periods of inflation may impact our profitability by negatively affecting our fixed costs
and expenses, including increasing funding costs and expenses related to talent acquisition and retention. Additionally, inflation
may lead to a decrease in consumer purchasing power and negatively impact the need or demand for our products or services. If
significant inflation continues, the creditworthiness of our borrowers and their ability to repay loans timely may be affected.
The Company, its customers and counterparties may also be adversely 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
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.
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Liquidity, Price, 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; and
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. Deposit
repricing behavior may also differ from our models or from previous rate increases. 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.
On March 5, 2021, the U.K. Financial Conduct Authority ("FCA") confirmed that the publication of the principal tenors of the
U.S. dollar London Interbank Offered Rate ("LIBOR") will cease immediately following a final publication on June 30, 2023.
Further, 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. On March 15,
2022, the President of the United States of America signed into law the Adjustable Interest Rate (LIBOR) Act ("LIBOR Act").
Under the LIBOR Act, on the first London banking day after June 30, 2023 ("LIBOR Replacement Date"), a benchmark
replacement recommended by the Board of Governors of the Federal Reserve System ("Board") will replace LIBOR in specific
contracts. In the fourth quarter of 2022, the Board issued its final regulations ("Final Regulations") implementing the LIBOR
Act. The Final Regulations: (i) address the applicability of the LIBOR Act to various LIBOR contracts, (ii) identify the Board-
selected benchmark replacements for various types of LIBOR contracts, (iii) include specific benchmark replacement
conforming changes, (iv) address the issue of preemption and (v) provide other clarifications, definitions, and information. The
regulations will become effective thirty (30) days after the publication of the Final Regulation in the Federal Register.
The Company ceased production of new LIBOR-based exposure as of December 31, 2021 and now offers floating rate products
in various alternative reference rates with the majority of volume being observed thus far in simple or term rate versions of the
Secured Overnight Financing Rate ("SOFR"). 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. The Company has
taken action to transition these exposures to an alternative reference rate in advance of the June 30, 2023 deadline. However, if
exposures are not transitioned as of the LIBOR Replacement Date, the organization expects to implement the fallback language
of each contract or follow the LIBOR Act as appropriate. Additionally, the Company has some debt instruments subject to the
LIBOR Act. The overall economic impact of the LIBOR transition to the organization is expected to be minimal as the
Company is implementing appropriate credit spread adjustments to exposures that are being transitioned from LIBOR to SOFR.
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; however this strategy may not be successful.
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 and
trading 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 and other
bond market factors. We mitigate the market risk of holding trading securities through appropriate economic hedging
techniques, which may not be effective.
Models may fail to reasonably predict changes in values caused by changes in interest rates, prepayment speeds, and other
relevant stimuli, which could adversely affect our business or results of operations.
We use quantitative models to assist in measuring risk and predicting changes in the value of financial instruments. The outputs
of these models are used to determine hedging strategy related to mortgage servicing rights, mortgage production pipeline and
trading securities. We also use models to estimate the effects of changing interest rates and other market measures in order to
adequately structure assets and liabilities to manage interest rate sensitivity. Inaccurate information obtained from these models
could result in poor management decisions that lead to an elevated exposure to interest rates which could adversely affect our
results of operations.
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.
14
Operating and Transaction 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, and
may disrupt operations through Ransomware. Such parties may seek to gain access to our systems directly or use equipment or
security passwords belonging to employees, 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,
extended disruptions in operations or technology, natural disasters, pandemics, and 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. Attempts to compromise our
cybersecurity are regular and frequent. 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.
Our business may be adversely affected if we are unable to hire and retain qualified employees.
An increasing competitive factor in the financial services industry is the ability to attract and retain talented and diverse
employees across several lines of business. The transition by many employers to remote work and work-from-home that
occurred during the COVID-19 pandemic seems likely to continue. Employers, now less constrained by physical geography,
particularly those in markets with elevated employee compensation, may increasingly compete for our employees.
15
We may be adversely affected and experience losses related to fraud or theft.
Attempts to commit fraud, including but not limited to, card fraud, check fraud, electronic fraud, wire fraud, social engineering
and phishing attacks, are becoming increasingly more sophisticated and may go undetected by the systems and procedures we
have in place to monitor our operations. We have experienced, and may experience again in the future, losses incurred due to
customer, employee, or third party fraud and theft. These losses may be material, negatively affect our results of operations,
financial condition or prospects, and may lead to significant reputational risks and other effects. We continue to invest in fraud
prevention in the form of people and systems designed to prevent, detect and mitigate the customer and financial impacts.
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 57% of the outstanding shares of BOK Financial's common stock at December 31,
2022. 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.
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 $386 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 Note 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, 2023, common shareholders of record numbered 647 with 66,971,817 shares outstanding.
The highest and lowest quarterly closing bid price for shares and cash dividends declared per share of BOK Financial common
stock follows:
2022:
Low
High
Cash dividends declared
2021:
Low
High
Cash dividends declared
First
Second
Third
Fourth
$
93.95 $
74.40 $
71.14 $
90.41
115.68
0.53
92.60
0.53
95.05
0.53
109.57
0.54
$
68.97 $
83.71 $
77.86 $
90.31
97.60
0.52
92.25
0.52
91.80
0.52
108.91
0.53
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
Keefe, Bruyette & Woods (KBW) NASDAQ Bank Index and the KBW NASDAQ Regional Banking Index for the period
commencing December 31, 2017 and ending December 31, 2022.* We are adding in the KBW Regional Bank Index this year,
to eventually replace KBW NASDAQ Bank Index in our performance graph as the composition of the KBW Regional Bank
index is more relevant to our size and market cap. Furthermore, BOKF is included in the KBW Regional Banking Index.
Period Ending December 31,
Index
BOK Financial Corporation
NASDAQ Composite
KBW NASDAQ Bank Index
KBW NASDAQ Regional Banking Index
2017
2018
2019
2020
2021
2022
100.00
100.00
100.00
100.00
81.02
97.16
82.29
82.50
98.92
132.81
112.01
102.15
80.15
192.47
100.46
93.25
126.31
235.15
138.97
127.42
127.05
158.65
109.23
118.59
* Graph assumes value of an investment in the Company's Common Stock for each index was $100 on December 31, 2017. Cash dividends
on Common Stock are assumed to have been reinvested in BOK Financial Common Stock.
19
Period EndingIndex ValueTotal Return PerformanceBOK Financial CorporationNASDAQ Composite IndexKBW NASDAQ Bank IndexKBW NASDAQ Regional Banking Index12/31/1712/31/1812/31/1912/31/2012/31/2112/31/225075100125150175200225250
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, 2022.
Period
October 1, 2022 to October 31, 2022
November 1, 2022 to November 30, 2022
December 1, 2022 to December 31, 2022
Total
Number of
Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs 1
—
Maximum
Number of
Shares that
May Yet Be
Purchased
Under the
Plans
348,535
Total
Number of
Shares
Purchased 2
Average
Price Paid
per Share
— $
—
244,406 $
104.26
244,406
4,755,594
70,000 $
99.25
70,000
4,685,594
Total
1 On November 1, 2022, 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, 2022, the Company had repurchased 314,406 shares under this plan. This authorization replaces a
previous authorization for the repurchase of five million common shares, under which 4,651,465 shares were repurchased. Future
repurchases of the Company's common stock will vary based on market conditions, regulatory limitations and other factors.
314,406
314,406
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
Selected Financial Data
Earnings per share (based on average equivalent shares):
Basic
Diluted
Percentages (based on daily averages):
Return on average assets
Return on average shareholders' equity
Dividend payout ratio
Allowance for loan losses to loans, excluding PPP loans1
Combined allowance for credit losses to loans, excluding PPP loans1,2
December 31,
2022
2021
2020
$
$
7.68
7.68
$
8.95
8.95
6.19
6.19
1.11 %
10.81 %
27.65 %
1.05 %
1.32 %
1.23 %
11.59 %
23.29 %
1.29 %
1.45 %
0.89 %
8.55 %
33.04 %
1.82 %
2.00 %
1
2
Metric meaningful due to the U.S. government agency guarantee and short-term nature of the Paycheck Protection Program ("PPP") loans.
Includes allowance for loan losses and accrual for off-balance sheet credit risk.
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. This section and other sections provide information about our recent financial performance. For information about
results of operations for 2021 compared with 2020, see the respective sections in Management's Discussion and Analysis
included in our 2021 Form 10-K filed February 23, 2022.
Economic conditions have been volatile in 2022 with soaring inflation, fluctuating oil prices caused by the Russia-Ukraine
conflict and the lingering effects of the COVID-19 pandemic. In order to combat rising inflation, the Federal Reserve began
increasing the Federal Funds rate in March and continued to do so through the end of the year for a total 425 basis point
increase. Consumer spending has remained high through 2022, and unemployment remains low at 3.5% for December 2022.
See "Summary of Credit Loss Experience" section of Management's Discussion and Analysis for additional discussion around
our economic forecast.
21
Performance Summary
Net income for the year ended December 31, 2022 totaled $520.3 million or $7.68 per diluted share compared with net income
of $618.1 million or $8.95 per diluted share for the year ended December 31, 2021. Pre-provision net revenue ("PPNR"), a non-
GAAP measure, was $690.1 million for 2022 compared to $697.9 million in the prior year.
Highlights of 2022 included:
•
•
•
•
•
Net interest revenue totaled $1.2 billion for 2022, an increase of $93.3 million over the prior year. Net interest margin
was 2.98% for 2022 compared to 2.60% for 2021. In response to rising inflation, the Federal Reserve increased the
federal funds rate 425 basis points since the beginning of the year. The resulting impact on market interest rates has
increased net interest margin as our earning assets, led by our significant percentage of variable-rate commercial loans,
reprice at a higher rate and faster pace than our interest-bearing liabilities. Average earning assets were $40.1 billion
for 2022, down $3.7 billion compared to 2021, largely due to decreased trading securities.
Fees and commissions revenue was $657.2 million for 2022, a decrease of $11.1 million compared to 2021. Mortgage
banking revenue decreased $56.5 million due to a decrease in mortgage production volume caused by rising mortgage
interest rates and continued housing inventory shortages. Other revenue decreased $14.3 million, primarily due to
lower production revenue on repossessed oil and gas properties sold in 2021. Brokerage and trading revenues grew
$28.0 million, largely due to increased customer hedging and investment banking revenues. Fiduciary and asset
management revenue increased $18.1 million with growth in mutual fund fees and decreased fee waivers.
Other gains and losses, net decreased $63.6 million due to sales of an alternative investment and repossessed assets in
the prior year.
Other operating expense totaled $1.2 billion, a $13.2 million decrease compared to 2021. Personnel expense decreased
$24.5 million, primarily driven by lower incentive compensation costs, partially offset by higher regular compensation.
Non-personnel expense increased $11.2 million, largely due to additional business promotion fees, project-related data
processing and communications and professional fees. These were partially offset by lower mortgage banking costs
and expenses on repossessed assets.
The net economic cost of the changes in the fair value of mortgage servicing rights and related economic hedges was
$12.5 million during 2022 compared to an economic benefit of $21.0 million during 2021 due to increased market
volatility throughout 2022.
• We recorded a $30.0 million provision for expected credit losses in 2022, primarily due to strong growth in loans and
loan commitments, partially offset by improvement in credit quality metrics. The uncertainty in our economic forecast
increased and some key economic factors were less favorable to growth across all scenarios. A negative $100.0 million
provision for expected credit losses was recorded in 2021. The combined allowance for credit losses totaled $296.6
million or 1.31% of outstanding loans at December 31, 2022. The combined allowance for credit losses was $289.4
million or 1.43% of outstanding loans at December 31, 2021.
•
•
•
•
•
Nonperforming assets not guaranteed by U.S. government agencies decreased $23.7 million compared to December
31, 2021. Potential problem loans decreased $128 million and other loans especially mentioned increased $5.5 million.
Net charge-offs were $21.1 million or 0.10% of average loans in 2022. Net loans charged-off were $37.0 million or
0.17% of average loans in 2021.
Period-end outstanding loan balances increased $2.4 billion to $22.6 billion at December 31, 2022. Of this increase,
commercial loans increased $1.7 billion, commercial real estate loans increased $775 million, and loans to individuals
grew by $146 million. Paycheck Protection Program loans decreased $262 million. Average outstanding loan balances
were $21.3 billion, a $216 million decrease.
Average deposits decreased $70 million to $37.9 billion and period-end deposits decreased $6.8 billion to $34.5
billion, primarily driven by institutional clients moving to off-balance sheet alternatives seeking higher yields.
The Company's common equity Tier 1 capital ratio was 11.69% at December 31, 2022. In addition, the Tier 1 capital
ratio was 11.71%, total capital ratio was 12.67% and leverage ratio was 9.91% at December 31, 2022. At December
31, 2021, the Tier 1 capital ratio was 12.25%, the total capital ratio was 13.29% and the leverage ratio was 8.55%.
The Company repurchased 1,632,401 common shares at an average price of $94.88 per share during 2022 and
1,359,657 common shares at an average price of $86.74 during 2021.
22
•
The Company paid cash dividends of $2.13 per common share during 2022 and $2.09 per common share in 2021.
Net income for the fourth quarter of 2022 totaled $168.4 million or $2.51 per diluted share, compared to $156.5 million or
$2.32 per diluted share for the third quarter of 2022.
Highlights of the fourth quarter of 2022 included:
•
•
•
Net interest revenue totaled $352.6 million for the fourth quarter of 2022, an increase of $36.3 million compared to the
prior quarter. Net interest margin was 3.54% compared to 3.24%. In response to rising inflation, the Federal Reserve
increased the federal funds rate another 125 basis points in the fourth quarter. The resulting impact on market interest
rates increased our net interest margin.
Fees and commissions revenue was relatively consistent with the prior quarter at $193.6 million. Increased brokerage
and trading revenue, transaction card revenue, and other revenue was offset by lower revenue from mortgage banking
and deposit service charges.
Operating expense increased $23.7 million to $318.5 million. Personnel expense increased $16.1 million, largely
driven by higher incentive compensation expense. Non-personnel expense increased $7.6 million, primarily related to
project-related professional fees and data processing and communications costs.
• We recorded a $15.0 million provision for expected credit losses in the fourth quarter of 2022, primarily due to strong
growth in loans and loan commitments. The level of uncertainty in the economic outlook remained high and key
economic factors in the base case were slightly less favorable to economic growth. We also recorded a $15.0 million
provision for expected credit losses in the third quarter of 2022, primarily as a result of growth in loans and loan
commitments during the quarter.
23
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.
On January 1, 2020, BOK Financial’s accounting policies 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 were 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, and appropriate adjustments.
Significant assumptions and estimates affecting the allowance for loan losses and accrual for off-balance sheet credit risk
include:
•
•
•
•
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.
The forecast for each relevant economic loss driver and the probability weighting of economic scenarios 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 to reflect risks not captured in the quantitative
component. Examples of circumstances that may result in adjustments include, but are not limited to, 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.
24
We describe critical elements affecting our estimate of expected credit loss in the "Summary of Credit Loss Experience" section
of Management's Discussion and Analysis. While it is challenging to evaluate the allowance impact for a change in a particular
input, results of such an analysis demonstrate how the quantitative element of the allowance behaves under different conditions.
The sensitivity to management's economic scenario weighting may be quantified by comparing the results of weighting each
economic scenario at 100%. For example, compared to a 100% Base Case scenario, a 100% Downside case would result in an
additional $117 million in quantitative reserve, while a 100% Upside Case would result in $18 million less in quantitative
reserve at December 31, 2022. Such sensitivity calculations do not necessarily reflect the nature and extent of future changes in
the related allowance for a number of reasons including (1) management's weighting of multiple forecasted economic scenarios
in estimating expected credit losses; (2) management's predictions of future economic trends and relationships among the
scenarios may differ from actual events; and (3) management's application of subjective measures to modeled results when
appropriate.
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.
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 ("MSRs"). Our MSRs are primarily retained from sales
in the secondary market of residential mortgage loans we have originated or purchased from correspondent lenders.
MSRs may be purchased from other lenders. Both originated and purchased MSRs are initially recognized at fair
value. We carry all MSRs at fair value. Changes in fair value are recognized in earnings as they occur.
MSRs are not traded in active markets. The fair value of MSRs is determined by discounting the projected cash flows.
Certain significant assumptions and estimates used in valuing MSRs 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 MSRs 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 MSRs are presented in Note 7 to the Consolidated Financial
Statements. At least quarterly, 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 $6.1 million. We expect an $8.2 million decrease in the fair value of our MSRs from a 50
basis point decrease in primary mortgage interest rates.
25
Results of Operations
Net Interest Revenue and Net Interest Margin
2022 Net Interest Revenue
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 $1.2 billion for 2022, an increase of $92.9 million over the prior year. This includes
$7.3 million of PPP loan fees for 2022 and $42.7 million for 2021. Net interest revenue increased $100.8 million due to changes
in interest rates and decreased $7.9 million from a decrease in earning assets, partially offset by a decrease in interest-bearing
liabilities. Table 3 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 Financial Summary of consolidated daily
average balances, yields and rates as shown in Table 2.
Net interest margin was 2.98% for 2022 and 2.60% for 2021. The tax-equivalent yield on earning assets was 3.42% for 2022
compared to 2.74% in 2021. During 2022, the Federal Reserve increased the federal funds rate 425 basis points in response to
rising inflation. The resulting impact on market interest rates has increased net interest margin as our earning assets, led by our
significant percentage of variable-rate commercial loans, reprice at a higher rate and faster pace than our interest-bearing
liabilities. Loan yields increased 100 basis points to 4.62%. The available for sale securities portfolio yield increased 27 basis
points to 2.07%. The yield on trading securities grew 26 basis points to 2.24% and the yield on interest-bearing cash and cash
equivalents increased 131 basis points to 1.44%.
Funding costs increased 49 basis points compared to 2021. The cost of interest-bearing deposits increased 39 basis points. The
cost of other short-term borrowings increased 144 basis points. The benefit to net interest margin from earning assets funded by
non-interest bearing liabilities was 26 basis points for 2022, up from 7 basis points for 2021.
Average earning assets for 2022 decreased $3.7 billion or 9% compared 2021. Average trading securities balances decreased
$3.1 billion in response to lower origination volumes in the residential mortgage industry driven by increases in mortgage
interest rates. The average balance of available for sale securities, which consists largely of residential and commercial
mortgage-backed securities guaranteed by U.S. government agencies, decreased $1.7 billion, while investment securities
increased $1.3 billion. In the second quarter 2022, we transferred $2.4 billion of U.S. government agency mortgage-backed
securities from available for sale to the investment securities portfolio to limit the effect of future rate increases on the tangible
common equity ratio. Average loans, net of allowance for loan losses, decreased $136 million.
Total average deposits decreased $70 million compared to the prior year. Average interest-bearing transaction account balances
decreased $1.1 billion while average demand deposit balances increased $1.4 billion. Average time deposits also decreased
$430 million. Average short-term borrowings decreased $1.9 billion.
Our overall objective is to manage the Company's balance sheet in such a way as to limit exposure to changes in interest rates.
These strategies are further described in the Market Risk section of this report. Approximately 79% of our commercial and
commercial real estate loan portfolios are either variable rate loans or fixed rate loans that will reprice within one year. These
loans are funded primarily by deposit accounts that are either non-interest bearing or that reprice more slowly than the
loans. The result is a balance sheet that would be asset-sensitive which means that assets generally reprice more quickly than
liabilities. One of the strategies that we use to manage toward a relative rate-neutral position is to 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 3 and in the interest rate sensitivity projections as shown in the Market Risk section of this report.
26
Table 2 - Annual Financial Summary
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, 2022
Average
Balance
Revenue/
Expense
Yield/
Rate
1.44 %
2.24 %
1.64 %
2.07 %
3.40 %
4.58 %
4.31 %
4.62 %
4.68 %
3.42 %
0.53 %
0.05 %
0.85 %
0.53 %
1.04 %
2.41 %
4.95 %
0.70 %
11,552
115,295
24,490
249,361
2,145
8,282
6,027
983,413
983,413
1,400,565
108,956
489
12,304
121,749
13,158
39,325
6,490
180,722
$
801,180 $
4,723,130
1,493,322
11,643,103
64,776
180,760
139,553
21,279,187
(245,915)
21,033,272
40,079,096
310,974
6,634,566
47,024,636
20,550,624 $
969,279
1,446,613
22,966,516
1,265,045
1,628,972
131,206
25,991,739
14,884,765
451,530
879,691
4,816,911
47,024,636
$
$
$
$
1,219,843
2.72 %
2.98 %
8,463
1,211,380
30,000
643,257
1,164,480
660,157
139,864
520,293
20
520,273
7.68
7.68
$
$
$
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 includes average
loan balances for which the accrual of interest has been discontinued and are net of unearned income. Yield/rate calculations are generally based on the
conventions that determine how interest income and expense is accrued.
27
Table 2 - Annual Financial Summary (continued)
Consolidated Daily Average Balances, Average Yields and Rates
(Dollars in thousands, Except Per Share Data)
Year Ended
December 31, 2021
December 31, 2020
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
$
$
816,425 $
$
$
7,823,705
222,426
13,342,526
67,881
195,488
188,888
21,495,156
(326,121)
21,169,035
43,826,374
667,149
5,658,180
50,151,703
21,673,472 $
865,245
1,876,901
24,415,618
2,238,702
2,599,861
224,058
29,478,239
13,505,359
800,667
1,013,050
5,354,388
50,151,703
1,060
156,214
11,065
230,698
1,542
5,703
5,465
777,124
0.13 % $
1.98 %
4.97 %
1.80 %
2.38 %
2.92 %
2.93 %
3.62 %
777,124
1,188,871
3.67 %
2.74 %
21,961
374
11,149
33,484
8,084
9,793
10,535
61,896
$
0.10 % $
0.04 %
0.59 %
0.14 %
0.36 %
0.38 %
4.70 %
0.21 %
$
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
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 %
Tax-equivalent net interest revenue
$
1,126,975
2.53 %
$
1,118,660
2.71 %
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 (loss) attributable to non-controlling
interests
Net income attributable to BOK Financial
Corporation shareholders
Earnings Per Average Common Share
Equivalent:
Net income:
Basic
Diluted
2.60 %
2.83 %
8,942
1,118,033
(100,000)
755,775
1,177,708
796,100
179,775
616,325
(1,796)
10,216
1,108,444
222,592
842,320
1,164,308
563,864
128,793
435,071
41
$
618,121
$
435,030
$
$
8.95
8.95
$
$
6.19
6.19
28
Table 3 – Annual Volume/Rate Analysis
(In thousands)
Year Ended
Year Ended
December 31, 2022 / 2021
December 31, 2021 / 2020
Change Due To1
Change Due To1
Change
Volume
Yield /
Rate
Change
Volume
Yield /
Rate
Tax-equivalent interest revenue:
Interest-bearing cash and cash equivalents
$
10,492 $
(111) $
10,603 $
(1,770) $
540 $
(2,310)
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
(40,919)
(58,095)
13,425
18,663
603
2,579
562
206,289
211,694
43,575
(14,377)
(50)
(476)
(1,696)
(8,240)
(39,470)
17,176
(30,150)
33,040
653
3,055
2,258
214,529
251,164
88,272
(1,695)
(30,706)
(16,933)
(5,260)
(932)
128,039
(39,767)
(2,018)
20,115
(16,899)
(3,286)
(694)
323
(50,821)
(34)
(1,974)
(238)
(121,321)
(71,533)
(49,788)
(90,345)
54,264
(144,609)
86,995
(3,662)
90,657
(38,463)
115
1,155
5,074
29,532
(4,045)
118,826
92,868
(479)
35
(3,132)
(6,827)
(13,467)
(4,485)
(31,538)
(7,932)
80
4,287
11,901
42,999
440
150,364
100,800
(11)
(18,038)
(7,521)
6,108
121
(3,277)
(5,491)
(44,571)
(132)
(14,761)
(2,030)
(31,218)
(13,023)
(18,195)
(3,409)
(2,532)
(98,660)
(18,094)
8,315
(1,274)
72,358
(877)
(80,566)
(64,043)
Net interest revenue
1 Changes attributable to both volume and yield/rate are allocated to both volume and yield/rate on an equal basis.
93,347
9,589
$
$
29
Fourth Quarter 2022 Net Interest Revenue
Tax-equivalent net interest revenue totaled $354.9 million for the fourth quarter of 2022, an increase of $36.4 million compared
to the third quarter of 2022. The rapid increase in interest rates combined with our strong loan growth and our asset-sensitive
position drove a linked quarter increase in net interest revenue and a 30 basis point increase in net interest margin.
Net interest margin was 3.54% for the fourth quarter of 2022 compared to 3.24% for the third quarter of 2022. The Federal
Reserve increased the federal funds rate 125 basis points in the fourth quarter in response to rising inflation. The resulting
impact on market interest rates increased the net interest margin. The tax-equivalent yield on earning assets was 4.53% for the
fourth quarter of 2022, an increase of 82 basis points compared to the third quarter of 2022. Loan yields increased 110 basis
points to 5.99%. The yield on trading securities was up 98 basis points to 3.70% while the yield on available for sale securities
increased 33 basis points to 2.54%. The yield on interest-bearing cash and cash equivalents increased 219 basis points to 4.06%.
Funding costs increased 81 basis points compared to the third quarter of 2022. The cost of other short-term borrowings
increased 171 basis points while the cost of interest-bearing deposits increased 59 basis points. The cost of other borrowings
was up 175 basis points to 4.08%. The cost of funds purchased and repurchase agreements increased 133 basis points to 2.05%.
The benefit to net interest margin from earning assets funded by non-interest bearing liabilities was 58 basis points in the fourth
quarter of 2022 and 29 basis points in the third quarter of 2022.
Average earning assets for the fourth quarter of 2022 increased $757 million over the third quarter of 2022. Average loans, net
of allowance for loan losses, increased $375 million, largely due to growth in commercial and commercial real estate loans.
Available for sale securities increased $648 million as we repositioned our balance sheet to a more rate-risk neutral position.
Average interest bearing cash and cash equivalents decreased $180 million while average trading securities balances decreased
$91 million.
Average deposits decreased $1.6 billion compared to the third quarter of 2022 as customers redeploy resources following the
savings trend during the height of the COVID-19 pandemic. Average demand deposit balances decreased $929 million.
Average interest-bearing transaction accounts decreased $658 million. Other borrowings increased $994 million while funds
purchased and repurchase agreements increased $246 million.
30
Table 4 - Quarterly Financial Summary
Consolidated Daily Average Balances, Average Yields and Rates
(In thousands, except per share data)
Three Months Ended
December 31, 2022
September 30, 2022
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 (loss) attributable to non-controlling
interests
Net income attributable to BOK Financial Corp.
shareholders
Earnings Per Average Common Share
Equivalent:
Basic
Diluted
5,822
28,473
9,223
73,317
931
3,088
1,390
331,649
331,649
453,893
60,893
205
4,476
65,574
5,407
25,961
2,038
98,980
$
568,307 $
3,086,985
2,535,305
10,953,851
92,012
216,673
98,613
21,976,004
(242,450)
21,733,554
39,285,300
194,996
5,729,322
$ 45,209,618
$ 18,898,315 $
969,275
1,417,606
21,285,196
1,046,447
2,523,195
131,180
24,986,018
14,176,189
575,957
853,134
4,618,320
$ 45,209,618
748,263 $
4.06 % $
3,178,068
3.70 %
1.46 %
2,593,989
2.54 % 10,306,257
36,846
4.40 %
173,656
5.70 %
5.56 %
132,685
5.99 % 21,599,232
(241,136)
6.06 % 21,358,096
4.53 % 38,527,860
219,113
6,372,229
$ 45,119,202
1.28 % $ 19,556,806 $
978,596
0.08 %
1.25 %
1,409,069
1.22 % 21,944,471
800,759
2.05 %
4.08 %
1,528,887
131,199
6.16 %
1.57 % 24,405,316
15,105,305
331,428
501,731
4,775,422
$ 45,119,202
3,520
22,772
9,207
59,144
286
2,703
1,684
265,997
265,997
365,313
31,266
135
3,314
34,715
1,445
8,988
1,677
46,825
1.87 %
2.72 %
1.42 %
2.21 %
2.98 %
6.23 %
5.05 %
4.89 %
4.94 %
3.71 %
0.63 %
0.05 %
0.93 %
0.63 %
0.72 %
2.33 %
5.07 %
0.76 %
$
354,913
2.96 %
$
318,488
2.95 %
3.54 %
3.24 %
2,287
352,626
15,000
197,086
318,456
216,256
47,864
168,392
(37)
168,429
2.51
2.51
$
$
$
2,163
316,325
15,000
189,698
294,751
196,272
39,681
156,591
81
156,510
2.32
2.32
$
$
$
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 includes average
loan balances for which the accrual of interest has been discontinued and are net of unearned income. Yield/rate calculations are generally based on the
conventions that determine how interest income and expense is accrued
31
Table 4 - Quarterly Financial Summary (continued)
Consolidated Daily Average Balances, Average Yields and Rates
June 30, 2022
Three Months Ended
March 31, 2022
December 31, 2021
Average Balance
Revenue /
Expense
Yield /
Rate
Average Balance
Revenue /
Expense
Yield /
Rate
Average Balance
Revenue /
Expense
Yield /
Rate
1,737
23,009
3,585
58,882
437
1,384
1,559
205,694
205,694
296,287
11,454
76
2,332
13,862
1,608
3,286
1,473
20,229
$
843,619 $
4,166,954
610,983
12,258,072
54,832
167,732
148,183
21,057,714
(246,064)
20,811,650
39,062,025
457,165
7,769,208
47,288,398
21,037,294 $
981,493
1,373,036
23,391,823
1,224,134
1,301,358
131,219
26,048,534
15,202,597
380,332
924,605
4,732,330
47,288,398
$
$
$
473
41,041
2,475
58,018
491
1,107
1,394
180,073
180,073
285,072
5,343
73
2,182
7,598
4,698
1,090
1,302
14,688
0.83 % $
2.00 %
2.35 %
1.84 %
2.92 %
3.30 %
4.22 %
3.92 %
3.96 %
2.96 %
$
0.22 % $
0.03 %
0.68 %
0.24 %
0.53 %
1.01 %
4.50 %
0.31 %
$
1,050,409 $
8,537,390
195,198
13,092,422
75,539
164,484
179,697
20,463,662
(254,191)
20,209,471
43,504,610
375,616
6,680,848
50,561,074
22,763,479 $
947,407
1,589,039
25,299,925
2,004,466
1,148,440
131,228
28,584,059
15,062,282
519,097
1,247,785
5,147,851
50,561,074
483
44,537
2,661
55,638
302
1,028
1,242
188,547
188,547
294,438
5,097
96
2,351
7,544
5,292
1,091
1,330
15,257
0.18 % $
1.71 %
5.07 %
1.77 %
2.81 %
2.69 %
3.11 %
3.57 %
3.61 %
2.58 %
$
0.10 % $
0.03 %
0.56 %
0.12 %
0.95 %
0.38 %
4.02 %
0.21 %
$
1,208,552 $
9,260,778
213,188
13,247,607
46,458
137,874
163,433
20,242,653
(271,794)
19,970,859
44,248,749
585,901
5,769,406
50,604,056
22,326,401 $
909,131
1,747,715
24,983,247
2,893,128
880,837
131,224
28,888,436
14,818,841
629,642
898,848
5,368,289
50,604,056
0.16 %
1.89 %
4.99 %
1.72 %
2.71 %
2.98 %
3.06 %
3.70 %
3.75 %
2.66 %
0.09 %
0.04 %
0.53 %
0.12 %
0.73 %
0.49 %
4.02 %
0.21 %
$
276,058
2.65 %
$
270,384
2.37 %
$
279,181
2.45 %
2.76 %
2.44 %
2.52 %
2,040
274,018
—
168,617
273,655
168,980
36,122
132,858
12
132,846
1.96
1.96
$
$
$
2,104
277,077
(17,000)
157,443
299,495
152,025
34,836
117,189
(129)
117,318
1.71
1.71
$
$
$
1,973
268,411
—
87,856
277,618
78,649
16,197
62,452
(36)
62,488
0.91
0.91
$
$
$
32
Table 5 – Quarterly Volume/Rate Analysis
(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
Dec. 31, 2022 / Sep. 30, 2022
Change Due To1
Change
Volume
Yield /
Rate
$
2,302 $
(1,338) $
5,701
16
14,173
645
385
(294)
65,652
88,580
(2,207)
(230)
5,012
427
619
(445)
5,205
7,043
3,640
7,908
246
9,161
218
(234)
151
60,447
81,537
29,627
(1,730)
31,357
70
1,162
3,962
16,973
361
52,155
36,425
124
(3)
23
862
8,034
—
7,186
(143)
73
1,139
3,100
8,939
361
44,969
36,568
Net interest revenue
1 Changes attributable to both volume and yield/rate are allocated to both volume and yield/rate on an equal basis.
36,301
$
33
Other Operating Revenue
2022 Other Operating Revenue
Other operating revenue was $643.3 million for 2022, a decrease of $112.5 million or 15% compared to 2021. A decline in
mortgage banking revenue and other gains, net was partially offset by increased brokerage and trading revenue and fiduciary
and asset management revenue.
Table 6 – Other Operating Revenue
(Dollars in thousands)
Year Ended
December 31,
2022
vs.
2021
2022
2021
Increase
(Decrease)
2022
vs.
2021
%
Increase
(Decrease)
Year Ended
December 31,
2021
vs.
2020
2020
Increase
(Decrease)
2021
vs.
2020
%
Increase
(Decrease)
Brokerage and trading revenue
$ 140,978 $ 112,989 $
27,989
25 % $
221,833 $ (108,844)
104,266
96,983
7,283
8 %
90,182
6,801
Transaction card revenue
Fiduciary and asset management
revenue
Deposit service charges and fees
Mortgage banking revenue
Other revenue
Total fees and commissions
revenue
Other gains, 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
196,326
110,636
49,365
55,642
178,274
104,217
105,896
69,950
657,213
668,309
123
63,742
(73,011)
(19,378)
18,052
6,419
(56,531)
(14,308)
(11,096)
(63,619)
(53,633)
10 %
167,445
6 %
96,805
10,829
7,412
(53) %
(20) %
182,360
(76,464)
51,695
18,255
(2) %
810,320
(142,011)
(18) %
N/A
N/A
6,046
42,320
57,696
(61,698)
(20,358)
(2,239)
(18,119)
N/A
53,248
(55,487)
80,261
41,637
38,624
N/A
(79,524)
121,161
(971)
3,704
(4,675)
N/A
9,910
(6,206)
(49) %
8 %
6 %
8 %
(42) %
35 %
N/A
N/A
N/A
N/A
N/A
(10) %
Total other operating revenue
$ 643,257 $ 755,775
(112,518)
(15) % $
842,320 $
(86,545)
Fees and commissions revenue
Diversified sources of fees and commissions revenue are a significant part of our business strategy and represented 35% of
combined net interest revenue before provision for credit losses and fees and commission revenue. 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. Many of these economic factors, such as rising interest rates, that we expect
will result in growth in net interest revenue or fiduciary and asset management revenue may also decrease mortgage banking
production volumes and related trading. The velocity of changes in market conditions and interest rates may result in timing
differences between when offsetting impacts and benefits are realized. As interest rates are expected to move higher, we expect
to experience increased benefits to our net interest margin, which provides an offset to reduced mortgage-related fee income.
Generally, for operating revenues not as directly related to movement in interest rates, we expect growth 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 recent 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 brokerage and investment
banking, increased $28.0 million or 25% over the prior year.
34
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 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 $20.3
million for 2022, a decrease of $7.3 million compared to 2021. Trading revenue was negatively affected by the disruption of the
fixed income markets early in 2022. This was largely offset by favorable market conditions and increased market volatility,
which led to higher margins and increased trading activity in the second half of the year. See additional discussion in "Lines of
Business" section of Management's Discussion and Analysis.
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 6 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, which is largely volume driven, totaled $45.7 million for 2022, an increase of $25.3 million or 124%
compared to 2021 and was primarily attributed to our energy and interest rate derivative customers. Customer hedging revenue
includes credit valuation adjustments of the fair value of derivatives to reflect the risk of counterparty default.
Investment banking, which includes fees earned upon completion of underwriting, financial advisory services and loan
syndication fees, totaled $45.6 million for 2022, an increase of $11.2 million or 33% compared to 2021, largely related to the
timing and volume of commercial loan syndication fees and municipal bond transactions.
Revenue earned from retail brokerage transactions totaled $16.4 million for 2022, a decrease of $2.4 million or 13% compared
to 2021. 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 $12.9 million for 2022, an increase of $1.1 million or 9% over the prior year.
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 $104.3
million for 2022, a $7.3 million or 8% increase over 2021. Revenues from the processing of transactions on behalf of the
members of our TransFund electronic funds transfer ("EFT") network totaled $84.6 million, up $4.5 million or 6% over
2021. The number of TransFund ATM locations totaled 2,774 at December 31, 2022 compared to 2,593 at December 31, 2021.
Corporate card revenue totaled $7.2 million, up $2.3 million or 45% over 2021 due to increased transactions from the broader
reopening of the economy. Merchant services fees paid by customers for account management and electronic processing of card
transactions totaled $12.4 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 80% 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 increased $18.1 million or 10% compared to 2021. Higher mutual fund fees and a
reduction in fee waivers was partially offset by lower trust fees. During the height of the COVID-19 pandemic, we voluntarily
waived certain administration fees on the Cavanal Hill money market funds in order to maintain positive yields on these funds
in the low short-term interest rate environment. This practice subsided in 2022. We had approximately $3.1 million in fee
waivers during 2022 compared to approximately $11.7 million in fee waivers during 2021.
35
A distribution of assets under management or administration and related fiduciary and asset management revenue follows:
Table 7 – Assets Under Management or Administration
(Dollars in thousands)
Balance1
2022
Revenue2 Margin3
Balance1
2021
Revenue2 Margin3
Balance1
2020
Revenue2 Margin3
Year Ended December 31,
Managed fiduciary assets:
Personal
$ 10,317,729 $ 107,325
1.04 % $ 12,739,289 $ 110,052
0.86 % $ 11,172,457 $ 96,094
Institutional
Total managed
17,229,041
33,482
0.19 % 17,477,280
29,286
0.17 % 15,364,387
26,555
0.86 %
0.17 %
fiduciary assets
27,546,770
140,807
0.51 % 30,216,569
139,338
0.46 % 26,536,844
122,649
0.46 %
Non-managed assets:
Fiduciary
28,513,725
19,467,202
Non-fiduciary
Safekeeping and
brokerage
assets under
administration 24,207,343
Total non-
43,220
12,299
0.15 % 34,320,264
28,645
0.08 % 28,949,648
38,899
0.06 % 20,253,072
10,291
0.05 % 18,599,156
5,897
0.13 %
0.03 %
—
— % 20,127,816
—
— % 17,506,599
—
— %
managed assets
72,188,270
55,519
0.08 % 74,701,152
38,936
0.05 % 65,055,403
44,796
0.07 %
Total assets under
management or
administration
$ 99,735,040 $ 196,326
0.18 %
0.20 % $ 104,917,721 $ 178,274
1 Assets under management or administration balance excludes certain assets under custody held by a sub-custodian where minimal revenue
is recognized. $17 billion, $22 billion and $21 billion of such assets are excluded from the 2022, 2021 and 2020 assets under management
or administration balances, respectively.
0.17 % $ 91,592,247 $ 167,445
2 Fiduciary and asset management revenue includes asset-based and other fees associated with the assets.
3 Revenue divided by period-end balance.
A summary of changes in assets under management or administration for the year ended December 31, 2022, 2021, and 2020
follows:
Table 8 – Changes in Assets Under Management or Administration
(In thousands)
Beginning balance
Net inflows (outflows)
Net change in fair value
Ending balance
Year Ended December 31,
2022
2021
2020
$ 104,917,721 $ 91,592,247 $ 82,740,961
572,812
4,786,237
(5,755,493)
8,539,237
1,859,868
6,991,418
$
99,735,040 $ 104,917,721 $ 91,592,247
Assets under management as of December 31, 2022 consist of 45% fixed income, 32% equities, 14% cash and 9% alternative
investments. Net inflows to assets under management increased during 2022 as new financial institution client relationships
were gained and existing clients added to their asset balances. The decrease in fair value of $5.8 billion mainly resulted from
declines in both the fixed income and equity markets in 2022.
Deposit service charges and fees totaled $110.6 million for 2022, a $6.4 million or 6% increase over 2021, largely affected by
transaction volumes as customer activity resumed following the height of the COVID-19 pandemic. Service charges earned
primarily on commercial deposit accounts totaled $56.6 million, a $2.3 million or 4% increase over the previous year. Overdraft
fees and non-sufficient fund fees earned primarily on consumer deposit accounts totaled $25.4 million for 2022, an increase of
$3.8 million or 18% over 2021. Changes were implemented in the fourth quarter of 2022 to eliminate non-sufficient funds fees
36
and reduce consumer overdraft fees, which is expected to reduce total deposit service charges by approximately $10 million in
2023. Check card revenue totaled $23.3 million, relatively unchanged from 2021.
Mortgage banking revenue totaled $49.4 million for 2022, a $56.5 million or 53% decrease compared to 2021. Rising mortgage
interest rates, low inventory, and home price affordability have placed pressure on mortgage loan originations and margins in
2022. Mortgage production revenue decreased $62.6 million. Production volume was down $1.6 billion and production revenue
as a percentage of production volume also decreased 250 basis points to (0.17)%. Mortgage refinancing activity was 24% of
total production in 2022 compared to 54% in 2021. Mortgage servicing revenue was $51.2 million, a $6.0 million increase
compared to the prior year. The average outstanding principal balance of mortgage loans serviced for others totaled $17.9
billion at December 31, 2022, a $2.5 billion increase compared to December 31, 2021. During 2022, we acquired $3.8 billion in
unpaid principal balance of mortgage servicing rights. This, combined with a purchase in the fourth quarter of 2021 with an
unpaid principal balance of $2.0 billion, led to the higher mortgage servicing revenue in 2022.
Table 9 – Mortgage Banking Revenue
(Dollars in thousands)
Mortgage production revenue
Mortgage loans funded for sale
Add: Current year end outstanding commitments
Less: Prior year end outstanding commitments
Total mortgage production volume
Production revenue as a percentage of production volume
Realized margin on funded mortgage loans
Mortgage loan refinances to mortgage loans funded for sale
Primary mortgage interest rates:
Average
Period end
Year Ended December 31,
2022
2021
2020
$
(1,838)
$
60,712
$
125,848
$ 1,180,403
$ 2,818,789
$ 3,764,112
45,492
171,412
171,412
380,637
380,637
158,460
1,054,483
2,609,564
3,986,289
(0.17) %
0.63 %
24 %
5.34 %
6.41 %
2.33 %
2.71 %
54 %
2.96 %
3.11 %
3.16 %
2.87 %
58 %
3.10 %
2.67 %
Mortgage servicing revenue
$
51,203
$
45,184
$
56,512
Average outstanding principal balance of mortgage loans serviced for others
17,871,306
15,404,548
18,422,210
Average mortgage servicing fee rates
0.29 %
0.29 %
0.31 %
Primary rates disclosed in Table 9 above represent rates generally available to borrowers on 30 year conforming mortgage
loans.
Other revenue totaled $55.6 million for 2022, a decrease of $14.3 million or 20% compared to 2021, primarily due to lower
production revenue from repossessed oil and gas properties sold in 2021; however, this impact was also partially offset by
lower operating expenses related to these properties.
Other gains, net and net gains on securities and derivatives
Other gains, net decreased $63.6 million compared to 2021. In 2021, the sale of an alternative investment and sale of an equity
interest received as part of the workout of a defaulted energy loan resulted in a $45.2 million gain. In addition, we experienced a
$15.7 million decrease in the value of deferred compensation investments, which are held to offset the cost of various employee
benefit programs in 2022.
As discussed in the Market Risk section following, the fair value of our 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, generally U.S. government agency residential mortgage-backed securities
for which we have elected the fair value option, 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.
37
Table 10 – Gain (Loss) on Mortgage Servicing Rights, Net of Economic Hedge
(In thousands)
Gain (loss) on mortgage hedge derivative contracts, net
Gain (loss) on fair value option securities, net
Gain (loss) on economic hedge of mortgage servicing rights
Gain (loss) on change in fair value of mortgage servicing rights
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
1 Actual interest earned on fair value option securities less internal transfer-priced cost of funds.
Fourth Quarter 2022 Other Operating Revenue
Table 11 – Fourth Quarter 2022 Other Operating Revenue
(Dollars in thousands)
Year Ended December 31,
2022
2021
2020
$
(72,987) $
(19,632) $
42,096
(20,358)
(93,345)
80,261
(13,084)
569
(2,239)
(21,871)
53,248
95,344
41,637
(79,524)
19,766
1,279
15,820
9,085
$
(12,515) $
21,045 $
24,905
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 revenue
Other gains, net
Gain (loss) on derivatives, net
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
$
63,008 $
27,136
49,899
26,429
10,065
17,034
193,571
8,427
4,548
(2,568)
(2,904)
(3,988)
197,086
Three Months Ended
Dec. 31,
2022
Sep. 30,
2022
Increase
(Decrease)
2,002
1,162
(291)
(2,274)
(1,217)
1,555
937
7,448
21,557
61,006 $
25,974
50,190
28,703
11,282
15,479
192,634
979
(17,009)
(4,368)
16,570
892
189,698
1,800
(19,474)
(4,880)
7,388
%
Increase
(Decrease)
3 %
4 %
(1) %
(8) %
(11) %
10 %
— %
N/A
N/A
N/A
N/A
N/A
4 %
Other operating revenue was $197.1 million for the fourth quarter of 2022, a $7.4 million or 4% increase compared to the third
quarter of 2022.
Brokerage and trading revenue increased $2.0 million to $63.0 million. Trading revenue grew $9.5 million, largely due to an
increase in volume and higher margins on U.S. agency residential mortgage-backed securities trading activity driven by
favorable market conditions and increased market volatility. A decline from heightened energy derivative activity in the third
quarter led to a $4.7 million decrease in customer hedging revenue. Investment banking revenue decreased $2.4 million,
following record levels in the third quarter driven primarily by municipal bond transaction growth. Other revenue increased
$1.6 million, largely due to higher revenue on repossessed assets while transaction card revenue grew $1.2 million along with a
rise in seasonal transaction volumes.
Deposit service charges decreased $2.3 million. In the fourth quarter, we implemented changes to eliminate non-sufficient funds
fees and reduce consumer overdraft fees.
38
Mortgage banking revenue was $10.1 million for the fourth quarter of 2022, a decrease of $1.2 million compared to the third
quarter of 2022, as rising mortgage interest rates and continued inventory constraints place pressure on mortgage loan
originations. Mortgage loan production volumes were $111 million for the fourth quarter of 2022 compared to $230 million in
the third quarter of 2022. Production revenue as a percentage of production volume, which includes unrealized gains and losses
on our mortgage commitment pipeline and related hedges, decreased 254 basis points to (3.59)%.
Other gains, net, increased $7.4 million compared to the prior quarter primarily driven by the sale of a repossessed entity
combined with a change in the value of deferred compensation investments which are held to offset the cost of various
employee benefit programs. We also recognized a $4.0 million loss on the sale of available for sale securities in the fourth
quarter as we repositioned our balance sheet for the current rate environment.
Other Operating Expense
2022 Other Operating Expense
Other operating expense for 2022 totaled $1.2 billion, a $13.2 million or 1% decrease compared to the prior year. Personnel
expense decreased $24.5 million or 4%. Non-personnel expense increased $11.2 million or 2%.
Table 12 – Other Operating Expense
(Dollars in thousands)
Year Ended
December 31,
2022
vs.
2021
2022
2021
Increase
(Decrease)
2022
vs.
2021
%
Increase
(Decrease)
Year
Ended
December
31,
2021
vs.
2020
2020
Increase
(Decrease)
2021
vs.
2020
%
Increase
(Decrease)
$ 399,107 $ 384,808 $
14,299
4 % $ 390,282 $
(5,474)
(1) %
Regular compensation
Incentive compensation:
Cash-based compensation
172,595
187,974
(15,379)
(8) %
183,868
Share-based compensation
Deferred compensation
9,565
(6,235)
13,246
9,789
Total incentive compensation
175,925
211,009
Employee benefits
95,886
99,565
(3,681)
(16,024)
(35,084)
(3,679)
(28) %
18,228
(164) %
8,401
(17) %
210,497
(4) %
87,695
11,870
Total personnel expense
670,918
695,382
(24,464)
(4) %
688,474
26,435
16,289
10,146
62 %
14,511
Business promotion
Charitable contributions to BOKF
Foundation
Professional fees and services
2,500
56,342
9,000
50,906
Net occupancy and equipment
116,867
108,587
Insurance
17,994
15,881
Data processing & communications
165,907
151,614
Printing, postage and supplies
Amortization of intangible assets
Mortgage banking costs
Other expense
15,857
15,692
35,834
40,134
14,218
18,311
42,698
54,822
(6,500)
(72) %
9,000
5,436
8,280
2,113
14,293
1,639
(2,619)
(6,864)
(14,688)
11 %
53,437
8 %
112,722
13 %
19,990
9 %
135,497
12 %
(14) %
(16) %
(27) %
15,061
20,443
56,711
38,462
4,106
(4,982)
1,388
512
6,908
1,778
—
(2,531)
(4,135)
(4,109)
16,117
(843)
(2,132)
(14,013)
16,360
Total other operating expense
$ 1,164,480 $ 1,177,708 $
(13,228)
(1) % $ 1,164,308 $
13,400
2 %
(27) %
17 %
— %
14 %
1 %
12 %
— %
(5) %
(4) %
(21) %
12 %
(6) %
(10) %
(25) %
43 %
1 %
Average number of employees (full-
time equivalent)
4,759
4,816
(57)
(1) %
5,011
(195)
(4) %
39
Personnel expense
Personnel expense decreased $24.5 million in 2022. 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, decreased $15.4 million or 8% compared 2021, primarily related to a decline in institutional trading
activity, partially offset by increased incentives from growth in loans and loan commitments in the current year. Deferred
compensation expense, which is offset by deferred compensation investments in other revenue, decreased $16.0 million or
164%, directly related to market movements. Regular compensation increased $14.3 million or 4%, largely due to employee
merit increases received in the first quarter. Changes in assumptions of certain performance-based equity awards led to a $3.7
million or 28% decrease in share-based compensation expense. Employee benefits expense decreased $3.7 million or 4%
primarily due to reduced employee healthcare costs.
Non-personnel expense
Non-personnel expense increased $11.2 million or 2% over the prior year.
Data processing and communications expense increased $14.3 million or 9% and professional fees and services increased $5.4
million or 11%, both largely affected by on-going technology project costs. Higher travel costs following a lull in travel during
the COVID-19 pandemic and increased advertising costs led to a $10.1 million or 62% increase in business promotion expense.
Occupancy and equipment expense was also up $8.3 million or 8% driven largely by higher operating costs on leases.
Other expense decreased $14.7 million or 27%, primarily due to lower operating expenses on repossessed assets sold in 2021;
however, this was offset by lower operating revenue on these properties. Mortgage banking costs decreased $6.9 million or
16%, primarily due to a decrease in prepayments. Charitable contributions to the BOKF Foundation were $2.5 million in the
current year compared to $9.0 million in the prior year. During the height of the COVID-19 pandemic and the extreme needs it
created in the communities we serve, we increased our charitable contributions to the BOKF Foundation during 2021.
40
Fourth Quarter 2022 Operating Expenses
Table 13 – Fourth Quarter 2022 Other Operating Expense
(Dollars 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 & communications
Printing, postage and supplies
Amortization of intangible assets
Mortgage banking costs
Other expense
Total other operating expense
Three Months Ended
Dec. 31,
2022
Sep. 30,
2022
Increase
(Decrease)
%
Increase
(Decrease)
$ 102,943 $ 101,368 $
1,575
2 %
54,295
3,107
3,864
61,266
22,210
44,376
3,744
(1,005)
47,115
21,865
9,919
(637)
4,869
14,151
345
186,419
170,348
16,071
7,470
2,500
18,365
29,227
4,677
43,048
3,890
3,736
9,016
6,127
—
14,089
29,296
4,306
41,743
4,349
3,943
9,504
10,108
11,046
1,343
2,500
4,276
(69)
371
1,305
(459)
(207)
(488)
(938)
318,456
294,751
23,705
22 %
(17) %
(484) %
30 %
2 %
9 %
22 %
N/A
30 %
— %
9 %
3 %
(11) %
(5) %
(5) %
(8) %
8 %
Other operating expense for the fourth quarter of 2022 totaled $318.5 million, an increase of $23.7 million or 8% over the third
quarter of 2022.
Personnel expense increased $16.1 million or 9% compared to the third quarter of 2022. Cash-based incentive compensation
increased $9.9 million or 22% due to increased sales activity combined with a one-time incentive given to all employees in the
fourth quarter. Deferred compensation expense, which is offset by deferred compensation investments in other revenue,
increased $4.9 million or 484%.
Non-personnel expense increased $7.6 million or 6% compared to the third quarter of 2022. A $4.3 million or 30% increase in
professional fees and services and $1.3 million or 3% increase in data processing and communications expense was largely
attributed to ongoing technology projects. The fourth quarter of 2022 included a $2.5 million charitable donation to the BOKF
Foundation as we continue to focus on the communities we serve.
Income Taxes
Income tax expense was $139.9 million or 21.2% of net income before taxes for 2022 and $179.8 million or 22.6% of net
income before taxes for 2021.
Net deferred tax assets totaled $321.3 million at December 31, 2022 compared to net deferred tax assets of $34.5 million at
December 31, 2021. 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 2022 or 2021.
Income tax expense was $47.9 million or 22.1% of net income before taxes for the fourth quarter of 2022 compared to $39.7
million or 20.2% of net income before taxes for the third quarter of 2022.
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, 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 and capital costs. Credit costs are attributed to the lines of business based on net loans charged off or
recovered. The difference between credit costs attributed to the lines of business and the consolidated provision for credit losses
is attributed to Funds Management. 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 wholesale borrowing rates 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 a proxy of wholesale borrowing rates 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
wholesale funding 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 wholesale funding rates 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. In order to appropriately reflect the organizational value of these deposits to the lines of business, methodology
adjustments are made each January that attribute more or less deposit credit value to the business lines dependent upon
historical and forward-looking interest rate expectations with the offset to Funds Management and other. After several years of
decreased funding credits provided to business lines from a sustained low interest rate environment, increases in short-term and
long-term rates in response to the Federal Reserve's actions to control inflation caused a commensurate increase in funding
credits to business lines in 2022.
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 14 following, net income attributable to our lines of business increased $103.0 million or 22% compared to
the prior year. Net interest revenue grew by $211.0 million over the prior year, primarily due to increases in the short-term
interest rate related to a 425 basis point increase in the federal funds rate by the Federal Reserve during 2022. Net charge-offs
decreased $12.1 million compared to the prior year. Other operating revenue decreased $31.8 million. The prior year included
the sale of an alternative investment that resulted in a $31.1 million pre-tax gain, net of non-controlling interest. Other operating
expense was consistent with prior year. The decrease in net income attributed to Funds Management and other is largely due to
the excess provision for expected credit losses over net charge-offs recorded in 2022 compared to a release of provision
recorded in the prior year.
42
Table 14 – Net Income by Line of Business
(In thousands)
Commercial Banking
Consumer Banking
Wealth Management
Subtotal
Funds Management and other
Total
2022 Commercial Banking
Year Ended December 31,
2022
2021
2020
$
460,361 $
328,516 $
306,005
5,889
106,173
572,423
(52,150)
27,643
113,246
469,405
148,716
97,974
115,302
519,281
(84,251)
$
520,273 $
618,121 $
435,030
Commercial Banking contributed $460.4 million to consolidated net income in 2022, an increase of $131.8 million or 40%
compared to the prior year.
Table 15 – Commercial Banking
(In thousands)
Net interest revenue from external
sources
Net interest expense from internal
sources
Net loans charged off
Net interest revenue after net loans
charged off
Year Ended
December 31,
2022
vs.
2021
2022
2021
Increase
(Decrease)
2022
vs.
2021
%
Increase
(Decrease)
Year
Ended
December
31,
2021
vs.
2020
2020
Increase
(Decrease)
2021
vs.
2020
%
Increase
(Decrease)
$ 818,213 $ 606,902 $ 211,311
35 % $ 714,932 $ (108,030)
(15) %
Total net interest revenue
744,449
535,735
208,714
39 %
588,488
17,726
31,128
(13,402)
(43) %
69,475
(73,764)
(71,167)
(2,597)
4 %
(126,444)
55,277
(52,753)
(38,347)
(44) %
(9) %
(55) %
726,723
504,607
222,116
44 %
519,013
(14,406)
(3) %
Fees and commissions revenue
233,873
227,081
Other gains, net
Other operating revenue
Personnel expense
Non-personnel expense
Other operating expense
7,721
35,321
241,594
262,402
174,505
116,212
290,717
168,285
112,804
281,089
6,792
(27,600)
(20,808)
6,220
3,408
9,628
3 %
187,119
(78) %
242
(8) %
187,361
4 %
159,165
3 %
99,738
3 %
258,903
39,962
35,079
75,041
9,120
13,066
22,186
Net direct contribution
677,600
485,920
191,680
39 %
447,471
38,449
Gain on financial instruments, net
Gain (loss) on repossessed assets, net
Corporate expense allocations
Income before taxes
Federal and state income taxes
1
(1,903)
67,337
608,361
148,000
154
13,001
49,941
449,134
120,618
(153)
(14,904)
17,396
159,227
27,382
N/A
N/A
193
(2,677)
35 %
24,862
35 %
420,125
23 %
114,120
(39)
15,678
25,079
29,009
6,498
Net income
$ 460,361 $ 328,516 $ 131,845
40 % $ 306,005 $
22,511
Average assets
Average loans
Average deposits
$ 29,084,957 $ 28,536,881 $ 548,076
2 % $ 26,994,075 $ 1,542,806
17,553,398
16,853,006
18,323,412
17,659,695
700,392
663,717
4 % 18,711,372
(1,858,366)
4 % 14,319,729
3,339,966
Average invested capital
2,057,560
2,082,488
(24,928)
(1) % 2,220,177
(137,689)
19 %
14495 %
40 %
6 %
13 %
9 %
9 %
N/A
N/A
101 %
7 %
6 %
7 %
6 %
(10) %
23 %
(6) %
43
Net interest revenue increased $208.7 million or 39% compared to the prior year primarily due to an increase in the spread on
deposits sold to our Funds Management unit. Net loans charged-off decreased $13.4 million.
Fees and commissions revenue increased $6.8 million or 3%. Customer hedging revenue grew $11.3 million, primarily
attributed to our energy and interest rate derivative customers. Syndication fees increased $7.5 million due to the timing and
volume of completed transactions during the year. Transaction card revenue was also up $7.0 million due to growth in revenues
from the processing of transactions on behalf of the members of our TransFund EFT network combined with increased
transactions from the broader reopening of the economy. These were partially offset by a decline in production revenue from
repossessed oil and gas properties sold in 2021.
Operating expense increased $9.6 million or 3% over 2021. Personnel expense increased $6.2 million or 4%, primarily due to
incentive compensation costs associated with growth in loans and deposit balances. Non-personnel expense increased $3.4
million or 3%, primarily due to project related data processing and communications fees, occupancy expenses and business
promotion fees. These were partially offset by decreased operating expenses on repossessed oil and gas properties sold in 2021.
The prior year also included the sale of an alternative investment that resulted in a $31.1 million pre-tax gain, net of non-
controlling interest. Corporate expense allocations increased $17.4 million or 35% compared to the prior year due to growth in
lending activity.
The average outstanding balance of loans attributed to Commercial Banking increased $700 million or 4% compared to 2021 to
$17.6 billion. 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 $18.3 billion for 2022, a $664 million or 4% 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 this change.
44
Fourth Quarter 2022 Commercial Banking
Table 16 - Commercial Banking - Fourth Quarter 2022
(Dollars in thousands)
Three Months Ended
Net interest revenue from external sources
Net interest expense from internal sources
Total net interest revenue
Net loans charged off (recovered)
Net interest revenue after net loans charged off (recovered)
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
Sep. 30,
2022
226,016 $
(17,951)
208,065
Increase
(Decrease)
45,599
(20,830)
24,769
14,937
9,832
$
Dec. 31,
2022
271,615 $
(38,781)
232,834
14,411
218,423
58,881
3,213
62,094
48,366
31,356
79,722
(526)
208,591
58,147
2,239
60,386
44,998
30,874
75,872
200,795
140
978
18,007
183,906
44,532
139,374 $
193,105
4
(158)
16,451
176,500
42,670
133,830 $
$
$ 28,373,856 $ 28,890,429 $
18,254,559
16,832,244
2,107,241
17,904,779
17,966,661
2,059,149
(516,573)
349,780
(1,134,417)
48,092
734
974
1,708
3,368
482
3,850
7,690
136
1,136
1,556
7,406
1,862
5,544
%
Increase
(Decrease)
20 %
(116) %
12 %
2840 %
5 %
1 %
N/A
3 %
7 %
2 %
5 %
4 %
N/A
N/A
9 %
4 %
4 %
4 %
(2) %
2 %
(6) %
2 %
Commercial Banking contributed $139.4 million to consolidated net income in the fourth quarter of 2022, an increase of $5.5
million compared to the third quarter of 2022. Net interest revenue increased $24.8 million over the prior quarter, largely due to
an increase in the spread on deposits sold to our Funds Management unit. Net loans charged off increased $14.9 million.
Personnel expense increased $3.4 million driven by incentive compensation costs associated with growth in revenue.
45
2022 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 our Consumer Banking markets.
Net income attributed to Consumer Banking totaled $5.9 million for 2022 compared to $27.6 million in the prior year. This
decrease is largely due to lower mortgage loan production volumes as rising mortgage interest rates and continued inventory
constraints place pressure on mortgage loan originations.
(33,329)
(43,477)
1,204
(44,681)
0
(72,190)
(48) %
(30) %
43 %
(31) %
(29) %
(99) %
(29) %
(6) %
(11) %
(9) %
Table 17 – Consumer Banking
(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
Year Ended
December 31,
2022
vs.
2021
2022
2021
Increase
(Decrease)
2022
vs.
2021
%
Increase
(Decrease)
Year
Ended
December
31,
2021
vs.
2020
2020
Increase
(Decrease)
2021
vs.
2020
%
Increase
(Decrease)
$
69,646 $
67,856 $
1,790
3 % $
78,004 $
(10,148)
(13) %
88,603
35,671
158,249
103,527
5,260
4,009
52,932
54,722
1,251
148 %
69,000
53 %
147,004
31 %
2,805
152,989
99,518
53,471
54 %
144,199
Fees and commissions revenue
121,926
173,364
(51,438)
(30) %
245,554
Other losses, net
(107)
(23)
(84)
365 %
(1,835)
1,812
Other operating revenue
121,819
173,341
(51,522)
(30) %
243,719
(70,378)
Personnel expense
Other non-personnel expense
Total other operating expense
87,183
122,027
209,210
85,989
123,607
209,596
1,194
(1,580)
(386)
1 %
91,903
(1) %
138,499
— %
230,402
(5,914)
(14,892)
(20,806)
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
65,598
63,263
2,335
4 %
157,516
(94,253)
(60) %
(93,346)
(21,871)
(71,475)
N/A
95,344
(117,215)
80,261
41,637
38,624
N/A
(79,524)
121,161
139
44,965
7,687
1,798
85
46,010
37,104
9,461
54
N/A
276
(1,045)
(29,417)
(7,663)
(2) %
42,155
(79) %
131,457
(81) %
33,483
(191)
3,855
(94,353)
(24,022)
N/A
N/A
N/A
9 %
(72) %
(72) %
Net income
$
5,889 $
27,643 $
(21,754)
(79) % $
97,974 $
(70,331)
(72) %
Average assets
Average loans
Average deposits
$ 10,230,437 $ 10,029,687 $ 200,750
2 % $ 9,842,114 $ 187,573
1,688,697
1,769,384
(80,687)
(5) % 1,764,682
4,702
8,763,046
8,439,577
323,469
4 % 7,599,937
839,640
Average invested capital
250,546
250,554
(8)
— %
259,333
(8,779)
2 %
— %
11 %
(3) %
Net interest revenue from Consumer Banking activities increased by $54.7 million or 53% compared to 2021, primarily due to
an increase in the spread on deposits sold to our Funds Management unit. Average consumer deposits grew $323 million or 4%.
46
Fees and commissions revenue decreased $51.4 million or 30% compared to the prior year, largely attributed to reduced
mortgage loan production volume combined with narrowing margins. Mortgage production volume decreased $1.6 billion or
60% and production revenue as a percentage of production volume, which includes unrealized gains and losses on our mortgage
commitment pipeline and related hedges, decreased 250 basis points to (0.17)%. Operating expense was consistent with the
prior year. Corporate expense allocations decreased $1.0 million or 2% compared to the prior year.
The net cost of change in fair value of mortgage servicing rights and related economic hedges, as more fully presented in Table
10, was $12.5 million for 2022 compared to a net benefit of $21.0 million in 2021.
Fourth Quarter 2022 Consumer Banking
Table 18 - Consumer Banking - Fourth Quarter 2022
(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
Non-personnel expense
Other operating expense
Net direct contribution
Gain (loss) on financial instruments, net
Change in fair value of mortgage servicing rights
Corporate expense allocations
Income before taxes
Federal and state income taxes
Net income
Average assets
Average loans
Average deposits
Average invested capital
Three Months Ended
Dec. 31,
2022
Sep. 30,
2022
$
18,464 $
34,838
53,302
1,544
51,758
Increase
(Decrease)
982
8,369
9,351
136
9,215
17,482 $
26,469
43,951
1,408
42,543
27,618
(35)
27,583
22,446
32,080
54,526
30,230
(44)
30,186
22,243
30,993
53,236
24,815
1,805
(2,904)
11,972
11,744
2,748
8,996 $
19,493
(21,395)
16,570
10,792
3,876
906
2,970 $
$
(2,612)
9
(2,603)
203
1,087
1,290
5,322
23,200
(19,474)
1,180
7,868
1,842
6,026
$ 10,078,381 $ 10,233,401 $
1,725,555
8,617,085
256,905
1,686,498
8,812,884
250,256
(155,020)
39,057
(195,799)
6,649
%
Increase
(Decrease)
6 %
32 %
21 %
10 %
22 %
(9) %
N/A
(9) %
1 %
4 %
2 %
27 %
N/A
N/A
11 %
203 %
203 %
203 %
(2) %
2 %
(2) %
3 %
Consumer Banking contributed $9.0 million to net income in the fourth quarter of 2022, an increase of $6.0 million compared
to the third quarter of 2022. Net interest revenue increased $9.4 million, mainly due to improved spreads on deposits sold to our
Funds Management unit. Fees and commissions revenue decreased $2.6 million. Deposit service charges decreased $1.5 million
from reduced consumer overdraft charges as expected from changes implemented in the fourth quarter of 2022. Mortgage
banking revenue decreased $1.2 million due to reduced mortgage production volume combined with narrowing margins. Other
operating expense increased $1.3 million over the third quarter of 2022 due to increases in professional fees and other expenses.
47
2022 Wealth Management
Wealth Management contributed $106.2 million to consolidated net income in 2022, a decrease of $7.1 million or 6% compared
to the prior year.
Table 19 – Wealth Management
(In thousands)
Net interest revenue from external
sources
Net interest revenue (expense) from
internal sources
Net loans recovered
Net interest revenue after net loans
recovered
Year Ended
December 31,
2022
vs.
2021
2022
2021
Increase
(Decrease)
2022
vs.
2021
%
Increase
(Decrease)
Year
Ended
December
31,
2021
vs.
2020
2020
Increase
(Decrease)
2021
vs.
2020
%
Increase
(Decrease)
$ 155,974 $ 214,458 $
(58,484)
(27) % $ 130,818 $
83,640
64 %
Total net interest revenue
161,597
214,072
(52,475)
(25) %
117,290
5,623
(386)
6,009
(1557) %
(13,528)
13,142
96,782
(175)
(223)
48
(22) %
(209)
(14)
161,772
214,295
(52,523)
(25) %
117,499
96,796
82 %
Fees and commissions revenue
339,538
298,765
40,773
14 %
399,229
(100,464)
Other gains (losses), net
Other operating revenue
(37)
197
(234)
(119) %
(395)
592
339,501
298,962
40,539
14 %
398,834
(99,872)
Personnel expense
223,718
234,031
(10,313)
(4) %
243,681
Other non-personnel expense
Other operating expense
88,459
86,695
312,177
320,726
1,764
(8,549)
2 %
82,335
(3) %
326,016
Net direct contribution
189,096
192,531
(3,435)
(2) %
190,317
Gain on financial instruments, net
4
—
Corporate expense allocations
50,241
40,341
Net income before taxes
Federal and state income tax
138,859
152,190
32,686
38,944
4
9,900
(13,331)
(6,258)
N/A
4
25 %
35,359
(9) %
154,962
(16) %
39,660
(9,650)
4,360
(5,290)
2,214
(4)
4,982
(2,772)
(716)
Net income
$ 106,173 $ 113,246 $
(7,073)
(6) % $ 115,302 $
(2,056)
Average assets
Average loans
Average deposits
$ 16,209,684 $ 19,425,475 $ (3,215,791)
(17) % $ 15,695,646 $ 3,729,829
2,166,231
1,981,159
185,072
9 % 1,758,226
8,491,377
9,426,771
(935,394)
(10) % 8,676,047
Average invested capital
279,939
310,627
(30,688)
(10) %
300,860
222,933
750,724
9,767
(97) %
83 %
7 %
(25) %
(150) %
(25) %
(4) %
5 %
(2) %
1 %
N/A
14 %
(2) %
(2) %
(2) %
24 %
13 %
9 %
3 %
Combined net interest revenue and fees and commission revenue attributed to the Wealth Management segment totaled $501.1
million for 2022, a decrease of $11.7 million compared to the prior year. Total revenue from trading activities decreased $89.5
million compared to 2021, largely due to disruption in the fixed income markets due to economic uncertainty, primarily in the
first quarter of 2022, combined with narrowing margins and lower trading volumes. This decrease was partially offset by an
increase in the spread on deposits sold to our Funds Management unit. Fiduciary and asset management revenue increased
$18.0 million. Growth in mutual fund fees and decreased waivers were partially offset by lower trust fees. Other revenue
increased $26.7 million, largely due to higher derivative margin use fees.
Average Wealth Management loans grew by $185 million or 9% to $2.2 billion. Average deposits attributed to Wealth
Management decreased $935 million or 10% to $8.5 billion in 2022.
Operating expense decreased $8.5 million or 3% compared to the prior year due to incentive compensation costs related to
reduced trading activity. Corporate expense allocations increased $9.9 million or 25% over the prior year.
48
Fourth Quarter 2022 Wealth Management
Table 20 - Wealth Management - Fourth Quarter 2022
(Dollars in thousands)
Net interest revenue from external sources
Net interest revenue (expense) from internal sources
Total net interest revenue
Net loans recovered
Net interest revenue after net loans recovered
Fees and commissions revenue
Other losses, net
Other operating revenue
Personnel expense
Non-personnel expense
Other operating expense
Net direct contribution
Corporate expense allocations
Income before taxes
Federal and state income taxes
Net income
Average assets
Average loans
Average deposits
Average invested capital
Three Months Ended
Dec. 31,
2022
Sep. 30,
2022
Increase
(Decrease)
$
25,585 $
8,913
34,498
(22)
34,746 $
(1,162)
33,584
(22)
34,520
33,606
(9,161)
10,075
914
—
914
114,630
(20)
114,610
59,041
22,970
82,011
113,113
—
113,113
56,939
22,212
79,151
67,119
12,733
54,390
12,790
41,600 $
67,568
12,934
54,634
12,826
41,808 $
$
1,517
(20)
1,497
2,102
758
2,860
(449)
(201)
(244)
(36)
(208)
$ 12,912,630 $ 13,818,299 $
2,223,275
7,888,753
292,689
2,163,975
7,999,074
284,681
(905,669)
59,300
(110,321)
8,008
%
Increase
(Decrease)
(26) %
867 %
3 %
— %
3 %
1 %
N/A
1 %
4 %
3 %
4 %
(1) %
(2) %
— %
— %
— %
(7) %
3 %
(1) %
3 %
Wealth Management contributed $41.6 million to net income in the fourth quarter of 2022, consistent with the third quarter of
2022. Combined net interest and fee revenue totaled $149.1 million, an increase of $2.4 million compared to prior quarter,
primarily due to higher volume of U.S. government agency residential mortgage-backed securities trading activity. Other
revenue decreased $2.3 million due to lower energy hedging in the fourth quarter. Operating expense increased $2.9 million,
primarily due to increased volume-driven incentive compensation costs.
49
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. See Note 2 to the
Consolidated Financial Statements for the composition of the securities portfolio as of December 31, 2022 and December 31,
2021.
We hold an inventory of trading securities in support of sales to a variety of customers including banks, corporations, insurance
companies, money managers and others. Trading securities totaled $4.5 billion at December 31, 2022, a decrease of $4.7 billion
compared to December 31, 2021. Our trading portfolio expanded during 2021 in order to provide greater liquidity in the
housing market during a time of record mortgage loan production volumes and to meet demand of our growing institutional
customer base. As inflation pressure increased throughout 2022 and the conflict in Ukraine intensified, fixed income markets
were disrupted reducing the demand for these securities. Consequently, we reduced our inventory of trading securities. As
discussed in the Market Risk section of this report, trading activities involve risk of loss from adverse price movements. We
mitigate this risk within board-approved value-at-risk limits through the use of derivative contracts, short-sales and other
techniques. These limits remain relatively unchanged from levels set before our expanded trading activities.
At December 31, 2022, the carrying value of investment (held-to-maturity) securities was $2.5 billion, including a $558
thousand allowance for expected credit losses, compared to $211 million at December 31, 2021 with a $555 thousand
allowance for expected credit losses. The fair value of investment securities was $2.3 billion at December 31, 2022 and $231
million at December 31, 2021. Investment securities consist primarily of residential mortgage-backed securities issued by U.S.
government agencies, 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. During the second quarter of 2022, the
Company transferred certain U.S. government agency mortgage-backed securities from the available for sale portfolio to the
investment securities portfolio to limit the effect of future rate increases on the tangible common equity ratio. No gains or losses
were recognized in the Consolidated Statements of Earnings at the time of the transfer. At the time of transfer, the fair value
totaled $2.4 billion, amortized cost totaled $2.7 billion and the pretax unrealized loss totaled $268 million. Transfers of debt
securities into the investment securities portfolio are made at fair value at the date of transfer. The unrealized holding gain or
loss at the date of transfer is retained in Accumulated Other Comprehensive Income and in the carrying value of the investment
securities portfolio. Such amounts are amortized over the estimated remaining lives of the securities as an adjustment to yield,
offsetting the related amortization of the premium or accretion of the discount on the transferred securities.
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. At December 31, 2022, the
fair value of available for sale securities was $11.5 billion, a decrease of $1.7 billion compared to December 31, 2021. The
amortized cost of available for sale securities totaled $12.4 billion at December 31, 2022, a decrease of $705 million compared
to December 31, 2021. 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 for which the 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, 2022, residential mortgage-backed securities represented 56% of total fair value of 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, 2022 is 3.2
years. Management estimates the combined portfolios' duration extends to 3.7 years assuming an immediate 200 basis point
upward shock. The estimated duration contracts to 2.9 years assuming a 100 basis point decline in the current rate environment.
The aggregate gross amount of unrealized losses on available for sale securities totaled $894 million at December 31, 2022, a
$780 million increase compared to December 31, 2021. 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
credit impairment of available for sale securities was identified in 2022.
50
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 $297 million, an increase of $253
million over 2021. See Market Risk section for further details.
Bank-Owned Life Insurance
We have approximately $407 million of bank-owned life insurance at December 31, 2022. This investment is expected to
provide a long-term source of earnings to support existing employee benefit programs. Approximately $312 million is held in
separate accounts and $95 million represents the cash surrender value of policies held in general accounts and other amounts
due from various insurance companies. 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, 2022, the fair value of investments held in separate accounts covered by the stable value wrap
was approximately $282 million. Since the underlying fair value of the investments held in separate accounts at December 31,
2022 was below the net book value of the investments, $29 million of cash surrender value was supported by the stable value
wrap. Future rate increases may cause write-downs in the short-term. The stable value wrap is provided by a domestic financial
institution.
51
Loans
The aggregate loan portfolio before allowance for loan losses totaled $22.6 billion at December 31, 2022, an increase of $2.4
billion compared to December 31, 2021, driven by growth in commercial loans, commercial real estate loans and loans to
individuals.
Table 21 – Loans
(In thousands)
Commercial:
Healthcare
Services
Energy
General business
Total commercial
Commercial real estate:
Industrial
Multifamily
Office
Retail
Residential construction and land development
Other commercial real estate
Total commercial real estate
Paycheck protection program
Loans to individuals:
Residential mortgage
Residential mortgage guaranteed by U.S. government agencies
Personal
Total loans to individuals
Total
Commercial
December 31,
2022
2021
$
3,845,017 $ 3,414,940
3,367,193
3,431,521
3,006,884
3,424,790
2,717,448
3,496,859
12,506,465
14,198,187
1,221,501
1,212,883
1,053,331
620,518
95,684
402,860
4,606,777
766,125
786,404
1,040,963
679,917
120,016
437,900
3,831,325
14,312
276,341
1,890,784
245,940
1,601,150
3,737,874
1,722,170
354,173
1,515,206
3,591,549
$ 22,557,150 $ 20,205,680
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 $14.2 billion or 63% of the loan portfolio at December 31, 2022, increasing $1.7 billion or 14%
compared to December 31, 2021, primarily related to growth in general business loan balances, with healthcare, energy and
services loans also increasing.
52
Approximately 73% of commercial loans 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 semi-annual engineering reviews by our internal staff of petroleum engineers. These reviews are 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 $3.4 billion or 15% of total loans at December 31, 2022. Approximately $2.7 billion or 78%
of energy loans were to oil and gas producers, a $478 million increase compared to December 31, 2021. 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 72% of the committed production loans are secured by properties primarily producing oil and 28% of the
committed production loans are secured by properties primarily producing natural gas.
Loans to midstream oil and gas companies totaled $575 million or 17% of energy loans, a decrease of $71 million compared to
the prior year. Loans to borrowers that provide services to the energy industry totaled $157 million or 5% of energy loans, a $15
million increase during 2022. Loans to other energy borrowers, including those engaged in wholesale or retail energy sales,
totaled $26 million or less than 1% of energy loans, a $3.9 million decrease from the prior year.
Unfunded energy loan commitments were $3.8 billion at December 31, 2022, up $806 million over December 31, 2021. While
utilization levels remain low, this provides ample capacity for growth from our current customer base.
The healthcare sector of the loan portfolio totaled $3.8 billion or 17% of total loans. Healthcare loans increased $430 million
over December 31, 2021, 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.
The services sector of the loan portfolio increased $64 million to $3.4 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 municipal government
entities, Native American tribal casino operations, educational services, foundations and not-for-profit organizations and
specialty trade contractors. Approximately $1.6 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 increased $779 million to $3.5 billion or 16% of total loans. General business loans primarily consist of
$2.1 billion of wholesale/retail loans and $1.4 billion of loans from other commercial industries.
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, 2022, the outstanding principal balance of these loans totaled $5.3 billion,
including $2.5 billion in the energy sector. Based on dollars committed, approximately 80% of shared national credits are to
borrowers with local market relationships and we serve as the agent lender in approximately 22% of our shared national credits.
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.
53
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 outstanding balance of commercial real estate loans totaled $4.6 billion or 20% of the loan portfolio, an increase of $775
million over December 31, 2021. Loans secured by industrial facilities increased $455 million or 59%. Loans secured by
multifamily real estate increased $426 million or 54%. Loans secured by retail facilities decreased $59 million or 9%. Other real
estate loans decreased $35 million or 8%.
Approximately 67% of commercial real estate loans are in our geographic footprint based on collateral location. The largest
concentration of loans in this segment outside our footprint is Utah, totaling 10% of the segment. All other states represent less
than 5% individually.
Unfunded commercial real estate loan commitments were $3.1 billion at December 31, 2022, a $1.2 billion increase over the
prior year. We take a disciplined approach to managing our concentration of commercial real estate loan commitments as a
percentage of Tier 1 Capital. While loan commitments are presently at the upper concentration limit, we expect continued
growth in our outstanding commercial real estate balances as loans fund.
Paycheck Protection Program
We participated 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. The remaining loans in this portfolio generally have a contractual term of five 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 fixed interest rate of 1%. Interest plus loan fees, which vary
depending on loan size, are accrued over the contractual life of the loan. The remaining outstanding balance of PPP loans was
$14 million or less than 1% of the loan portfolio. Remaining unaccreted origination fees were not significant at December 31,
2022.
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. 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. 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 mortgage 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 loans guaranteed by U.S. government agencies have limited credit exposure because of the underlying
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.
54
Loans to individuals totaled $3.7 billion or 17% of the loan portfolio, growing $146 million over December 31, 2021.
Approximately 91% of loans to individuals 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.
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.
55
Table 22 – 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
Total BOK Financial loans
56
December 31,
2022
2021
$
6,869,979 $ 6,068,700
1,253,439
1,555,508
81,654
8,639
942,982
982,700
8,346,775
9,416,826
3,379,468
582,109
3,109
2,077,124
6,041,810
2,147,969
613,912
1,230
241,902
3,005,013
1,123,569
860,947
720
229,872
2,215,108
310,715
479,968
—
131,307
921,990
262,735
417,008
614
67,163
747,520
103,752
97,325
—
7,806
208,883
2,633,014
546,021
69,817
2,024,404
5,273,256
1,936,149
470,937
82,781
256,533
2,746,400
1,130,798
674,309
21,594
186,528
2,013,229
338,697
382,761
4,718
110,889
837,065
306,964
442,128
13,510
63,930
826,532
92,143
61,730
2,267
6,283
162,423
$ 22,557,150 $ 20,205,680
Table 23 – Loan Maturity and Interest Rate Sensitivity at December 31, 2022
(In thousands)
Loan maturity:
Commercial
Commercial real estate
Paycheck protection program
Loans to individuals
Total
Remaining Maturities of Selected Loans
Total
Within 1
Year
1-5 Years
5 - 15 Years
After 15
Years
$ 14,198,187 $ 2,218,916 $ 9,907,795 $ 1,826,250 $
245,226
4,606,777
1,532,618
2,767,611
281,275
14,312
8,643
5,669
—
25,273
—
3,737,874
581,351
1,084,957
670,433
1,401,133
$ 22,557,150 $ 4,341,528 $ 13,766,032 $ 2,777,958 $ 1,671,632
Interest rate sensitivity for selected loans with:
Predetermined interest rates
$ 6,363,116 $
375,344 $ 2,531,446 $ 2,144,232 $ 1,312,094
Floating or adjustable interest rates
16,194,034
3,966,184
11,234,586
633,726
359,538
Total
$ 22,557,150 $ 4,341,528 $ 13,766,032 $ 2,777,958 $ 1,671,632
Off-Balance Sheet Commitments
We enter into certain off-balance sheet arrangements in the normal course of business as shown in Table 24. 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").
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.
Table 24 – Off-Balance Sheet Credit Commitments
(In thousands)
Loan commitments
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
December 31,
2022
2021
$ 15,424,431 $ 12,471,482
699,743
54,619
740,039
44,742
1,005,368
1,095,877
57
Customer Derivative Programs
We offer programs that permit our customers to hedge various risks including fluctuations in energy, interest rates, foreign
exchange rates, and other commodities. 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 deteriorates 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
becomes 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, 2022, the net fair values of derivative contracts, before
consideration of cash margin, reported as assets under these programs totaled $1.0 billion compared to $1.1 billion at
December 31, 2021. Derivative contracts carried as assets include energy contracts with fair values of $638 million, foreign
exchange contracts with fair values of $217 million and interest rate swaps primarily sold to loan customers with fair values of
$159 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 $1.0 billion.
At December 31, 2022, total derivative assets were reduced by $182 million of cash collateral received from counterparties, and
total derivative liabilities were reduced by $484 million of cash collateral paid to counterparties related to instruments executed
with the same counterparty under a master netting agreement. Derivative contracts executed with customers may be secured by
non-cash collateral in conjunction with a credit agreement with that customer such as proven producing oil and gas properties.
Access to this collateral in the event of default is reasonably assured.
A table showing the notional and fair value of derivative assets and liabilities on both a gross and net basis is presented in Note
6 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, 2022 follows in Table 25.
Table 25 – Fair Value of Derivative Contracts
(In thousands)
Customers
Banks and other financial institutions
Exchanges and clearing organizations
Fair value of customer hedge asset derivative contracts, net
$ 595,711
136,134
99,394
$ 831,239
The largest exposure to a single counterparty was to an exchange for $88 million of net derivative positions and $104 million of
cash collateral placed at December 31, 2022.
58
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 down to an
equivalent of $60.93 per barrel of oil would decrease the fair value of derivative assets by $328 million with lending customers
comprising the bulk of the assets. An increase in prices up to the equivalent of $91.25 per barrel of oil would increase the fair
value of derivative assets by $601 million. Liquidity requirements of this program are also affected by our credit rating. A
decrease in our 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, 2022, changes in
interest rates would not materially impact regulatory capital or liquidity needed to support this portion of our customer
derivative program.
59
Summary of Credit Loss Experience
Table 26 – Summary of Credit Loss Experience
(In thousands)
Allowance for loan losses:
Beginning balance
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
Provision for credit losses
Ending balance
Accrual for off-balance sheet credit risk associated with mortgage banking activities:
Beginning balance
Loans charged off
Provision for credit losses
Ending balance
Allowance for credit losses related to held-to-maturity (investment) securities:
Beginning balance
Provision for credit losses
Ending balance
Total provision for credit losses
Average loans by portfolio segment :
Commercial
Commercial real estate
Paycheck protection program
Loans to individuals
Net charge-offs (annualized) to average loans
Net charge-offs (annualized) to average loans by portfolio segment:
Commercial
Commercial real estate
Paycheck protection program
Loans to individuals
Recoveries to gross charge-offs
Provision for loan losses (annualized) to average loans
Allowance for loan losses to loans outstanding at period-end
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
Year Ended
Dec. 31, 2022
Dec. 31, 2021
$
$
$
$
$
$
$
$
$
256,421
(28,746)
7,601
(21,145)
428
235,704
32,977
27,942
60,919
3,382
(105)
1,627
4,904
555
3
558
30,000
$
$
$
$
$
$
$
$
388,640
(51,351)
14,334
(37,017)
(95,202)
256,421
36,921
(3,944)
32,977
4,282
(179)
(721)
3,382
688
(133)
555
(100,000)
$ 13,393,796
4,345,783
13,501
3,526,107
$ 13,304,596
4,075,831
293,976
3,820,753
0.10 %
0.17 %
0.13 %
— %
— %
0.10 %
26.44 %
— %
1.04 %
0.39 %
0.25 %
0.04 %
— %
0.05 %
27.91 %
(0.44) %
1.27 %
0.26 %
1.31 %
1.43 %
60
Allowance for Loan Losses and Accrual for Off-Balance Sheet Credit Risk from Unfunded Loan Commitments
Expected credit losses on assets carried at amortized cost are recognized over their expected lives based on models that measure
the probability of default and loss given default over a 12-month reasonable and supportable forecast period. 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.
A $30.0 million provision for credit losses was recorded for the year ended December 31, 2022, primarily due to strong growth
in loans and loan commitments, partially offset by improvement in credit quality metrics. The uncertainty in our economic
forecast increased resulting in an increase in the probability weighting of the downside scenario. In addition, some key
economic factors were less favorable to growth across all scenarios.
Non-pass grade loans, which include loans especially mentioned, accruing substandard and nonaccruing loans, decreased $135
million to $321 million at December 31, 2022. Non-pass grade loans were composed primarily of $98 million or 3% of
commercial healthcare loans, $58 million or 2% of commercial services loans, $57 million or 2% of commercial general
business loans, $31 million or 1% of energy loans and $24 million or 1% of commercial real estate loans. A summary of
outstanding loan balances by risk grade is included in Note 4 to the Consolidated Financial Statements.
We recorded a $15.0 million provision for credit losses in the fourth quarter of 2022, primarily due to strong growth in loans
and loan commitments. The level of uncertainty in the economic outlook remained high, and key economic factors in the base
case were slightly less favorable to economic growth.
At December 31, 2022, the allowance for loan losses totaled $236 million or 1.04% of outstanding loans. Excluding residential
mortgage loans guaranteed by U.S. government agencies, the allowance for loan losses was 221% of nonaccruing loans. The
combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $297
million or 1.31% of outstanding loans and 278% of nonaccruing loans at December 31, 2022.
A $100.0 million negative provision for credit losses was recorded for the year ended December 31, 2021 primarily related to
improvements in our reasonable and supportable forecasts of macroeconomic variables influenced by the anticipated impact of
the COVID-19 pandemic developments. Throughout 2021, energy commodity prices strengthened and stabilized and the
outlook of growth in GDP and the labor markets improved. Changes from credit quality metrics, primarily from changes in
specific impairment, improving credit quality metrics and lower loan balances resulted in a decrease in the allowance for loan
losses.
At December 31, 2021, the allowance for loan losses was $256 million or 1.27% of outstanding loans. Excluding loans
guaranteed by U.S. government agencies, the allowance for loan losses was 213% of nonaccruing loans. The combined
allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $289 million or
1.43% of outstanding loans and 241% of nonaccruing loans.
61
A summary of macroeconomic variables considered in developing our estimate of expected credit losses at December 31, 2022
follows:
Scenario
probability
weighting
Economic
outlook
Macro-economic
factors
Base
50%
Downside
40%
Upside
10%
The Russia-Ukraine conflict
remains isolated.
The Russia-Ukraine conflict
remains isolated.
The Russia-Ukraine conflict
remains isolated.
The Federal Reserve increases the
federal funds rate twice in the first
quarter of 2023, resulting in a
target range of 4.75% to 5.00%.
No additional rate increases in
2023 are anticipated. Inflation
pressures cause modest declines in
real household income compared
to pre-pandemic levels, resulting
in below-trend GDP growth.
Job openings revert to more
normalized levels, and overall
hiring levels decline causing the
national unemployment rate to
modestly increase over the next
four quarters.
Higher levels of inflation force the
Federal Reserve to adopt a more
aggressive monetary policy as
compared to the base case
scenario. This results in a federal
funds rate target range of 5.75% to
6.00% by December 2023.
Inflation moderates slightly from
the peak experienced in the third
quarter of 2022, but remains
elevated through the forecast
horizon. The United States
economy is pushed into a
recession with a contraction in
economic activity and a sharp
increase in the unemployment
rate.
– GDP is forecasted to grow by
– GDP is forecasted to contract
0.9% over the next 12
months.
– Civilian unemployment rate
of 3.9% in the first quarter of
2023 increasing to 4.1% by
the fourth quarter of 2023.
– WTI oil prices are projected
to generally follow the
NYMEX forward curve that
existed at the end of
December 2022 and are
expected to average $75.05
per barrel over the next 12
months.
1.3% over the next 12
months.
– Civilian unemployment rate
of 4.8% in the first quarter of
2023 worsens to 6.0% by the
fourth quarter of 2023.
– WTI oil prices are projected
to average $65.87 per barrel
over the next twelve months,
peaking at $70.78 in the first
quarter of 2023 and falling
15% over the following three
quarters.
The Federal Reserve increases the
federal funds rate once in the first
quarter of 2023, resulting in a
target range of 4.50% to 4.75%.
No additional rate increases in
2023 are anticipated. Inflation
continues to improve from the
peak experienced in the third
quarter of 2022.
Labor force participants continue
to re-enter the job market to help
fill the elevated level of job
openings. This increase in
employment helps maintain real
household income above its pre-
pandemic trend. This, coupled
with a drawdown in savings,
supports consumer spending and
produces GDP growth consistent
with pre-pandemic levels.
– GDP is forecasted to grow by
1.6% over the next 12
months.
– Civilian unemployment rate
of 3.7% in the first quarter of
2023 increases slightly to
3.8% by the fourth quarter of
2023.
– WTI oil prices are projected
to average $83.58 per barrel
over the next 12 months.
Net Loans Charged Off
In 2022, net loans charged off totaled $21 million or 0.10%, down from $37 million or 0.17% of average loans in 2021.
In 2022, net charge-offs of commercial loans were $17.7 million, primarily related to a single services borrower in the fourth
quarter. Net commercial real estate loan charge-offs were $92 thousand and net loan charge-offs of loans to individuals were
$3.4 million. Net charge-offs of loans to individuals include deposit account overdraft losses.
62
Nonperforming Assets
As more fully described in Note 1 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 27:
Table 27 - Nonperforming Assets
(Dollars in thousands)
Nonaccruing loans:
Commercial
Energy
Healthcare
Services
General business
Total commercial
Commercial real estate
Paycheck protection program
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
Combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan
commitments to nonaccruing loans1
Nonperforming assets to outstanding loans and repossessed assets
Nonperforming assets to outstanding loans and repossessed assets1
Nonaccruing loans to outstanding loans
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 individuals1
Accruing loans 90 days or more past due1
1 Excludes residential mortgages guaranteed by U.S. government agencies.
December 31,
2022
2021
1,399
41,034
16,228
1,636
60,297
16,570
—
29,791
15,005
134
44,930
121,797
163,535
14,304
299,636
121,096
$
31,091
15,762
17,170
10,081
74,104
14,262
—
31,574
13,861
258
45,693
134,059
210,618
24,589
$ 369,266
$ 144,787
220.71 %
213.33 %
277.76 %
1.33 %
0.54 %
0.54 %
0.42 %
0.36 %
0.86 %
510
$
240.77 %
1.83 %
0.73 %
0.66 %
0.59 %
0.37 %
0.98 %
313
$
$
$
$
Excluding loans guaranteed by U.S. government agencies, nonperforming assets decreased $24 million compared to
December 31, 2021, primarily due to a $30 million decrease in nonaccruing energy loans, a $10 million decrease in real estate
and other repossessed assets and an $8.4 million decrease in nonaccruing general business loans. These decreases were partially
offset by a $25 million increase in nonaccruing healthcare sector loans. Newly identified nonaccruing loans totaled $97 million,
offset by $55 million in payments, $29 million of charge-offs, $13 million of loans returning to accrual status and $12 million
in foreclosures. The Company generally retains nonperforming assets to maximize potential recovery, which may cause future
nonperforming assets to decrease more slowly.
63
A rollforward of nonperforming assets for the years ended December 31, 2022 and December 31, 2021 follows in Table 28.
Table 28 – Rollforward of Nonperforming Assets
(In thousands)
Year Ended December 31, 2022
Nonaccruing Loans
Commercial
Commercial
Real Estate
Loan to
Individuals
Total
Renegotiated
Loans
Real Estate
and Other
Repossessed
Assets
Total
Nonperforming
Assets
Balance, December 31,
2021
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,
2022
Balance, December 31,
2020
Additions
Net transfer from premises
and equipment
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,
2021
$
74,104 $
58,822
(42,484)
(22,382)
14,262 $
20,683
(944)
(269)
45,693 $ 134,059 $
17,372
(12,049)
96,877
(55,477)
210,618 $
38,644
(6,382)
(6,095)
(28,746)
—
—
—
—
(7,960)
(3,956)
(410)
(12,326)
24,589 $
—
—
—
369,266
135,521
(61,859)
(28,746)
(1,194)
(1,194)
12,326
—
—
—
—
—
—
—
(13,206)
—
—
—
197
—
(4,929)
—
(4,929)
—
(3,431)
(71,520)
—
(21,417)
5,774
(426)
5,774
(13,435)
—
—
—
(5,774)
—
1,380
—
—
—
(8,360)
(92,937)
—
(13,435)
1,380
$
60,297 $
16,570 $
44,930 $ 121,797 $
163,535 $
14,304 $
299,636
Year Ended December 31, 2021
Nonaccruing Loans
Commercial
Commercial
Real Estate
Loan to
Individuals
Total
Renegotiated
Loans
Real Estate
and Other
Repossessed
Assets
Total
Nonperforming
Assets
$
167,159 $
61,129
27,246 $
327
40,288 $ 234,693 $
25,241
86,697
151,775 $
105,535
90,526 $
8,688
476,994
200,920
—
—
—
(102,717)
(43,956)
(10,537)
(2,485)
(17,443)
(4,910)
—
(130,697)
(51,351)
—
(3,948)
—
—
—
217
—
—
217
(134,645)
(51,351)
13,842
13,842
8,320
—
—
—
(809)
(8,320)
(2,435)
—
(2,435)
—
(866)
(37,322)
—
(97,004)
(3,301)
(134,326)
—
(289)
—
6,081
(320)
—
6,081
(609)
—
(6,081)
—
1,525
—
—
—
—
(609)
1,525
$
74,104 $
14,262 $
45,693 $ 134,059 $
210,618 $
24,589 $
369,266
64
—
—
—
—
—
(7,511)
—
—
—
—
—
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 $14 million at December 31, 2022, composed primarily of $9.5 million of
developed commercial real estate. Real estate and other repossessed assets decreased $10 million compared to December 31,
2021, primarily related to the sale of developed commercial real estate and oil and gas properties.
Liquidity and Capital
BOK Financial has numerous material cash requirements in the normal course of business. These obligations include deposits
and other borrowed funds, leased premises, 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. Additional information on loan
commitments can be found in the "Loan Commitments" section of Management's Discussion and Analysis while the
distribution of time deposit balances can be located in Note 8, "Deposits," and information related to Other Borrowings can be
located in Note 9, "Other Borrowings."
Our funding sources, which primarily include deposits and borrowings from the Federal Home Loan Banks, provide adequate
liquidity to meet our operating needs. Based on the average balances for 2022, approximately 80% of our funding was provided
by deposit accounts, 6% from borrowed funds, less than 1% from long-term subordinated debt and 10% from equity. The loan
to deposit ratio increased to 65% at December 31, 2022 from 49% at December 31, 2021, and continues to provide significant
on-balance sheet liquidity to meet future loan demand and contractual obligations. BOK Financial, similar to the banking
industry as a whole, saw deposits decline in 2022 as customers begin redeploying capital and moving to other off-balance sheet
alternatives seeking higher yields in the rising interest rate environment. We are maintaining higher balances at the Federal
Reserve to cover vital business obligations, to meet future asset growth opportunities and to stay nimble in a rising rate
environment.
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,
2022
2021
$ 18,323,412 $ 17,659,695
8,763,046
8,439,577
8,491,377
9,426,771
35,577,835
35,526,043
2,273,446
2,394,934
$ 37,851,281 $ 37,920,977
Average deposits for 2022 totaled $37.9 billion, a decrease of $70 million compared to the prior year, primarily driven by
institutional clients moving to off-balance sheet alternatives seeking higher yields. Interest-bearing transaction deposit account
balances decreased $1.1 billion while demand deposits increased $1.4 billion. Average time deposits also decreased $430
million.
65
Average deposits attributed to Commercial Banking were $18.3 billion for 2022, a $664 million or 4% increase over 2021.
Demand deposit balances increased $984 million or 11%. Time deposit balances decreased $227 million or 43% while interest-
bearing transaction account balances decreased $94 million or 1%. Commercial customers continued to retain large cash
reserves, especially in the first half of the year, 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. We anticipate that commercial deposit balances may contract as short-term rates
continue to move higher enhancing other investment alternatives for commercial customers.
Average Consumer Banking deposit balances increased $323 million or 4% over the prior year. Average interest-bearing
transaction account balances increased $234 million or 6%. Average demand deposit account balances grew by $101 million or
3% while savings deposits increased $99 million or 12%. Time deposit balances decreased $110 million or 14%.
Average Wealth Management deposit balances decreased by $935 million or 10% compared to the prior year. Interest-bearing
transaction balances decreased $1.1 billion or 14%. Non-interest-bearing demand deposits increased $234 million or 17% and
time deposit balances decreased $110 million or 19%.
Brokered deposits included in time deposits averaged $51 million for 2022 compared to $62 million for 2021. Brokered
deposits included in time deposits totaled $42 million at December 31, 2022 and $49 million at December 31, 2021.
Average interest-bearing transaction accounts for 2022 included $1.9 billion of brokered deposits compared to $2.1 billion for
2021. Brokered deposits included in interest-bearing transaction accounts totaled $1.5 billion at December 31, 2022 and $2.1
billion at December 31, 2021.
66
The distribution of our period end deposit account balances among principal markets follows in Table 30.
Table 30 - 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
December 31,
2022
2021
$
4,585,963 $
5,433,405
9,475,528
12,689,367
555,407
794,002
521,439
978,822
10,824,937
14,189,628
15,410,900
19,623,033
3,873,759
4,552,983
4,878,482
5,345,461
178,356
356,538
178,458
337,559
5,413,376
5,861,478
9,287,135
10,414,461
2,462,891
2,526,855
2,123,218
2,334,371
77,961
135,043
2,336,222
4,799,113
78,636
174,351
2,587,358
5,114,213
1,141,958
1,196,057
691,915
112,430
133,625
937,970
2,079,928
858,394
107,963
163,871
1,130,228
2,326,285
67
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
Total BOK Financial deposits
December 31,
2022
2021
844,327
934,282
739,628
16,496
24,846
780,970
834,491
16,182
31,274
881,947
1,625,297
1,816,229
436,259
658,342
694,163
1,086,946
20,678
12,963
727,804
1,164,063
18,844
12,255
1,118,045
1,776,387
50,180
42,499
56,181
3,083
4,825
64,089
114,269
119,543
3,213
6,196
128,952
171,451
$ 34,480,705 $ 41,242,059
Estimated uninsured deposits totaled $21.3 billion at December 31, 2022 and $27.1 billion at December 31, 2021. The portion
of time deposits in excess of the FDIC limit, as applied without regard to other deposit balances held by the depositor, were
$373 million at December 31, 2022.
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 Company had no wholesale federal funds purchased at December 31, 2022 or December 31, 2021.
Securities repurchase agreements generally mature within 90 days and are secured by certain trading or 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 $1.6 billion during 2022 and $1.7 billion during 2021.
At December 31, 2022, the estimated unused credit available to BOKF, NA from collateralized sources was approximately
$12.5 billion.
68
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.
See Note 9 to the Consolidated Financial Statements for a summary of other borrowings.
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 $165 million at December 31, 2022. 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, 2022, based on the most restrictive limitations as well as
management’s internal capital policy, BOKF, NA could declare up to $227 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.
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. These LIBOR-based subordinated debentures will be subject to transition on July 1, 2023 in conjunction with the
Adjustable Interest Rate (LIBOR) Act as implemented by the Board of Governors of the Federal Reserve System.
Shareholders' equity at December 31, 2022 was $4.7 billion, a decrease of $681 million compared to December 31, 2021. Net
income less cash dividends paid increased equity $376 million during 2022. Changes in interest rates resulted in an
accumulated other comprehensive loss of $837 million at December 31, 2022, compared to accumulated comprehensive income
of $72 million at December 31, 2021. We also repurchased $155 million of common shares during 2022. 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 November 1, 2022, the Company's board of directors authorized the Company to repurchase up to five million shares of the
Company's common stock, subject to market conditions, securities laws and other regulatory compliance limitations. This
authorization replaces the existing board authorization for the purchase of five million commons shares, under which 4,651,465
shares were repurchased. As of December 31, 2022, the Company had repurchased 314,406 shares under this new
authorization. The Company repurchased 1,632,401 shares during 2022 at an average price of $94.88 per share. We view share
buybacks opportunistically, but within the context of maintaining our strong capital position.
BOK Financial and the subsidiary bank are subject to various capital requirements administered by federal agencies. Failure to
meet minimum capital requirements, including a 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 31.
69
Table 31 – 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,
2022
2021
11.69 %
11.71 %
12.67 %
9.91 %
10.24 %
7.63 %
12.24 %
12.25 %
13.29 %
8.55 %
10.68 %
8.61 %
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 elected to delay the regulatory capital impact of the transition in accordance with the
interim final rule. Deferral of the impact of CECL added 8 basis points to the Company's Common equity Tier 1 capital at
December 31, 2022.
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.
70
Non-GAAP Measures
In this report we may sometimes use non-GAAP financial measures. Please note that although non-GAAP financial measures
provide useful insight to analysts, investors and regulators, they should not be considered in isolation or relied upon as a
substitute for analysis using GAAP measures.
Table 32 following provides a reconciliation of the non-GAAP measures with financial measures defined by GAAP.
Table 32 – 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
December 31,
2022
2021
$ 4,682,649
1,120,880
3,561,769
47,790,642
1,120,880
$ 46,669,762
$ 5,363,732
1,136,527
4,227,205
50,249,431
1,136,527
$ 49,112,904
7.63 %
8.61 %
$
$
660,157
30,000
20
690,137
$
$
796,100
(100,000)
(1,796)
697,896
Pre-provision net revenue is a measure of revenue less expenses, and is calculated before provision for credit losses and income
tax expense. This financial measure is frequently used by investors and analysts 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.
Off-Balance Sheet Arrangements
See Note 14 to the Consolidated Financial Statements for a discussion of the Company’s significant off-balance sheet
commitments.
Recently Issued Accounting Standards
See Note 1 of the Consolidated Financial Statements for disclosure of newly adopted and pending accounting standards.
71
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 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.
72
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 other commodity 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 200 basis point decrease in interest rates in the current low deposit rate environment are not meaningful. Until such time as it
becomes meaningful, we will instead report the effect of a 100 basis point decrease in interest rates. Management also reviews
alternative rate changes and time periods.
On March 5, 2021, the U.K. Financial Conduct Authority ("FCA") confirmed that the publication of the principal tenors of the
U.S. dollar London Interbank Offered Rate ("LIBOR") will cease immediately following a final publication on June 30, 2023.
Further, 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.
The Bank has ceased production of new LIBOR-based exposure as of December 31, 2021 and now offers floating rate products
in various alternative reference rates with the majority of volume being observed thus far in simple or term rate versions of the
Secured Overnight Financing Rate ("SOFR"). 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 the Company has
taken action to transition these exposures to an alternative reference rate in advance of the June 30, 2023 deadline.
73
The Company’s primary interest rate exposures include the Federal Funds rate, which affects short-term borrowings, and the
prime lending rate, LIBOR and SOFR, 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.
The interest rate sensitivity in Table 33 indicates management’s estimation of the impact of rate changes on net interest
revenue. Should deposit costs be 10%more sensitive to changes in rates, the variation in net interest revenue over the next
twelve months would be (1.75)%, or ($27.2 million) for the 200 basis point increase scenario. Alternatively, should deposit
funding costs be 10% less sensitive to changes in rates, the variation in net interest revenue over the next twelve months would
be an increase of 0.34%, or $5.2 million for the 200 basis point increase scenario. Additionally, in a flattening yield curve
scenario where long-term rates increase by 100 basis points and short-term rates increase by 200 basis points, net interest
revenue would decrease approximately 2.52%, or $39.1 million.
Table 33 – Interest Rate Sensitivity
(Dollars in thousands)
Anticipated impact over the next twelve
months on net interest revenue
Anticipated impact over months twelve
through twenty-four
200 bp
Increase
December 31, 2022
100 bp
Increase
100 bp
Decrease
200 bp
Increase
December 31, 2021
100 bp
Increase
$
(10,980)
$
8,440
$ (42,660)
$87,241
(0.71) %
0.54 %
(2.75) %
7.60%
$54,213
4.72%
100 bp
Decrease
$(24,759)
(2.16)%
$
4,090
$ 40,190
$ (129,900)
$185,054
$129,850
$(74,983)
0.24 %
2.39 %
(7.71) %
16.03%
11.25%
(6.50)%
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.
74
Table 34 - MSR Asset and Hedge Sensitivity Analysis
(In thousands)
MSR Asset
MSR Hedge
Net Exposure
Trading Activities
December 31,
2022
2021
Up 50 bp
Down 50 bp
Up 50 bp
Down 50 bp
$
6,100 $
(8,195) $ 31,856 $
(41,815)
(7,400)
(1,300)
6,810
(38,213)
(1,385)
(6,357)
36,692
(5,123)
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.
Table 35 - Mortgage Pipeline Sensitivity Analysis
(In thousands)
Average1
Low2
High3
Period End
Year Ended
December 31,
2022
2021
Up 50 bp
Down 50 bp
Up 50 bp
Down 50 bp
$
(75) $
(183) $
(430) $
381
(402)
(71)
91
(779)
(30)
103
(1,244)
(85)
(439)
13
(1,097)
(181)
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
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
risk, liquidity risk 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 and manage the market 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. Risk management tools include Value at Risk ("VaR"), stress testing and sensitivity analysis. Economic hedges in
either the futures or cash markets may be used to reduce the risk associated with some trading programs. Basis Risk can result
when trading asset values and the instruments used to hedge them move at different rates.
75
VaR measures the potential loss of a given position or portfolio of positions at a specified confidence level and time horizon.
BOK Financial utilizes a historical VaR methodology to measure and aggregate risks across its covered trading positions. For
Market Risk Rule purposes, the Company calculates VaR using a historical simulation approach and measures the potential
trading losses using a 10-day holding period and a 99% confidence level.
Due to inherent limitations of the VaR methodology, including its reliance on past market behavior which might not be
indicative of future market performance, VaR is only one of several tools used to measure and manage market risk. Other tools
used to actively manage market risk include stress testing ("Stressed VaR"), and sensitivity analysis.
Stressed VaR is calculated using the same internal models as used for the VaR-based measure. Stressed VaR is calculated over
a ten-day holding period at a one-tail, 99% confidence level and employs a historical simulation approach based on a
continuous twelve-month historical window selected to reflect a period of significant financial stress for the Company’s trading
portfolio.
The trading portfolio’s VaR and Stressed VaR profiles are influenced by a variety of factors, including the size and composition
of the portfolio, market volatility, and the correlation between different positions. A portfolio of trading positions is typically
less risky than the sum of the risk from each of the individual sub-portfolios because, under normal market conditions, risk
within each category partially offsets the exposure to other risk categories. Table 36 below summarizes certain VaR and
Stressed VaR based measures for the three months ended December 31, 2022, September 30, 2022, December 31, 2021 and
September 30, 2021. In the fourth quarter of 2022, the period-end VaR and SVaR measures increased relative to the previous
quarter mainly due to an increase in total trading assets. Both VaR and SVaR measures decreased relative to 2021 due to a
decrease in basis risk between trading assets and their economic hedges.
Table 36 –VaR and SVaR Measures
(In thousands)
Three Months Ended
Three Months Ended
Dec. 31, 2022
Sep. 30, 2022
Dec. 31, 2021
Sep. 30, 2021
10 day 99%
VaR
10 day 99%
SVaR
10 day 99%
VaR
10 day 99%
SVaR
10 day 99%
VaR
10 day 99%
SVaR
10 day 99%
VaR
10 day 99%
SVaR
$
3,927 $
7,091 $
2,644 $
7,555 $
8,930 $
40,010 $
9,600 $
19,230
933
9,077
8,000
3,210
15,396
13,819
1,044
5,930
1,584
4,051
14,030
5,478
6,100
15,060
9,770
21,390
67,440
45,050
5,220
16,350
5,690
9,050
37,810
22,200
Average1
Low
High
Period End
The Company monitors the accuracy of internal VaR models and modeling processes by back-testing model performance. The
Company updates historical data used by the VaR model on a regular basis and model validators independent of business lines
perform regular modeled validations to access model input, processing, and reporting components. These models are required
to be independently validated and approved prior to implementation.
Limit Structure
Beyond VaR and SVaR described above, Management also performs a sensitivity analysis to measure market risk from changes
in interest rates on its trading portfolio. Applicable interest rates are shocked up and down 50 basis points calculating 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.
76
Table 37 –Trading Securities Sensitivity Analysis
(In thousands)
Year Ended
December 31,
2022
2021
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
(11,253)
(852) $
790 $
280 $
(3,458)
(9,345)
(6,325)
(5,392)
12,277
13,323
8,631
3,507
3,364
8,643
1,587
355
$
period.
Model Risk Governance and Review
BOK Financial has an internal but independent Model Risk Governance and Review ("MRGR") team that validates models to
verify they are conceptually sound, computationally accurate, performing as expected and in line with their intended use.
MRGR also enforces the Company’s model risk governance program that defines roles and responsibilities, including the
authority to levy findings requiring remediation and to restrict model usage.
Model Validation
MRGR is independent of both the developers and users of the models. The team validates models through an evaluation process
that assesses the data, theory, implementation, outcomes and governance of each scenario. MRGR assigns each model a model
risk score, which determines the frequency and scope of each validation. Validations comprise an assessment of model
performance as well as a model’s potential limitations given its particular assumptions or weaknesses. Based on the results of
the review, the team determines the use case for the model. The ultimate validation results may require remediation actions
from the business line. MRGR communicates their result as one of the following three outcomes: "Approved for use,"
"Approved with findings," or "Unapproved."
77
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, 2022.
Ernst & Young LLP (PCAOB ID: 42), 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, 2022. Their report, which expresses an unqualified
opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, is included in
this annual report.
78
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, 2022, 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, 2022, 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, 2022 and 2021, 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, 2022, and the related notes, and our report dated March 1, 2023 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
March 1, 2023
79
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, 2022 and 2021, 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, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2022, 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, 2022, 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 March 1, 2023 expressed an unqualified opinion thereon.
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.
80
Description of
the Matter
Allowance for credit losses
The Company’s loan portfolio totaled $22.6 billion as of December 31, 2022, and the
associated allowance for credit losses (ACL) was $296.6 million. A $30 million provision for
credit losses was recorded for the year ended December 31, 2022. 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 non-accruing 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 source documentation.
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
March 1, 2023
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, 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
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.
Year Ended December 31,
2021
2020
2022
$
976,653 $
6,027
115,048
24,072
248,323
2,145
8,282
11,552
1,392,102
769,357 $
5,465
155,989
10,430
230,383
1,542
5,703
1,060
1,179,929
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
221,833
90,182
167,445
96,805
182,360
51,695
810,320
6,046
42,320
53,248
(79,524)
9,910
842,320
688,474
14,511
9,000
53,437
112,722
19,990
135,497
15,061
20,443
56,711
38,462
1,164,308
563,864
128,793
435,071
41
435,030
121,749
52,483
6,490
180,722
1,211,380
30,000
1,181,380
140,978
104,266
196,326
110,636
49,365
55,642
657,213
123
(73,011)
(20,358)
80,261
(971)
643,257
33,484
17,877
10,535
61,896
1,118,033
(100,000)
1,218,033
112,989
96,983
178,274
104,217
105,896
69,950
668,309
63,742
(19,378)
(2,239)
41,637
3,704
755,775
670,918
26,435
2,500
56,342
116,867
17,994
165,907
15,857
15,692
35,834
40,134
1,164,480
660,157
139,864
520,293
20
520,273 $
695,382
16,289
9,000
50,906
108,587
15,881
151,614
14,218
18,311
42,698
54,822
1,177,708
796,100
179,775
616,325
(1,796)
618,121 $
$
$
$
$
82
7.68 $
7.68 $
8.95 $
8.95 $
6.19
6.19
67,212,728
67,212,735
68,591,920
68,594,322
2.13 $
2.09 $
69,840,977
69,844,172
2.05
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:
Interest revenue, Investment securities
Operating expense, Personnel
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 (loss)
Comprehensive income (loss) attributable to non-controlling interests
Year Ended December 31,
2022
2021
2020
$ 520,293 $ 616,325 $ 435,071
(1,227,414)
(341,369)
313,796
42,514
(3,483)
—
—
—
—
971
(3,704)
(9,910)
(1,187,412)
(345,073)
303,886
(278,086)
(81,576)
(909,326)
(263,497)
(389,033)
352,828
20
(1,796)
72,941
230,945
666,016
41
Comprehensive income (loss) attributable to BOK Financial Corp. shareholders
$ (389,053) $ 354,624 $ 665,975
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: 2022 – $2,346,768; 2021 – $231,395)
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 (2022 – $10,115; 2021 – $6,083)
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: 2022 –
76,423,345; 2021 – 76,254,029)
Capital surplus
Retained earnings
Treasury stock (shares at cost: 2022 – 9,464,711; 2021 – 7,786,257)
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,
2022
2021
943,810 $
457,906
4,464,161
2,513,687
11,493,860
296,590
299,651
75,272
22,557,150
(235,704)
22,321,446
565,175
273,815
1,044,749
76,131
277,608
14,304
880,343
406,751
31,004
1,354,379
712,067
2,125,343
9,136,813
210,444
13,157,817
43,770
83,113
192,295
20,205,680
(256,421)
19,949,259
574,148
223,021
1,044,749
91,778
163,198
24,589
1,097,297
405,607
56,172
957,951
$
47,790,642 $
50,249,431
$
13,395,337 $
15,344,423
18,659,115
964,411
1,461,842
34,480,705
2,270,377
4,736,908
131,205
296,870
554,900
147,470
484,849
43,103,284
5
1,390,395
4,824,164
(694,960)
(836,955)
4,682,649
4,709
4,687,358
23,268,573
924,735
1,704,328
41,242,059
2,326,449
36,753
131,226
273,041
275,625
160,686
435,221
44,881,060
5
1,378,794
4,447,691
(535,129)
72,371
5,363,732
4,639
5,368,371
$
47,790,642 $
50,249,431
Consolidated Statements of Changes in Equity
(In thousands)
Balance, December 31,
2019
Transition adjustment -
CECL
Balance, January 1,
2020, Adjusted
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)
75,759 $
5 $ 1,350,995 $ 3,683,082
5,179 $ (329,906) $
104,923 $ 4,809,099 $
8,124 $ 4,817,223
41
—
—
—
—
—
—
435,071
230,945
(75,830)
675
—
(5,608)
16,392
435,030
—
—
—
—
—
—
435,030
230,945
230,945
—
1,107
(75,830)
—
(75,830)
—
—
—
675
—
—
—
—
—
973
—
—
Net income (loss)
—
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,
2020
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
Balance, December 31,
2021
—
—
12
224
—
—
—
—
—
—
17
242
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
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
618,121
—
—
—
—
—
—
618,121
(1,796)
616,325
(263,497)
(263,497)
—
(263,497)
—
1,360
(117,938)
—
(117,938)
—
(117,938)
—
—
—
—
—
—
—
68
(5,847)
9,759
—
—
—
—
(144,105)
—
—
—
—
—
—
—
—
—
—
—
—
973
—
(5,847)
9,759
—
—
—
—
973
—
(5,847)
9,759
(144,105)
—
(144,105)
—
(18,860)
(18,860)
76,254 $
5 $ 1,378,794 $ 4,447,691
7,786 $ (535,129) $
72,371 $ 5,363,732 $
4,639 $ 5,368,371
85
(In thousands)
Balance, December 31,
2021
Net income (loss)
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
Balance, December 31,
2022
76,254
—
—
—
1
168
—
—
—
—
—
—
—
37
—
—
—
—
—
—
—
—
—
—
—
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
5
1,378,794
4,447,691
7,786
(535,129)
72,371
5,363,732
4,639
5,368,371
520,273
—
—
—
—
—
—
520,273
20
520,293
(909,326)
(909,326)
—
(909,326)
—
1,633
(154,887)
—
(154,887)
—
(154,887)
—
—
—
—
—
—
—
46
(4,944)
11,564
—
—
—
—
(143,800)
—
—
—
—
—
—
—
—
—
—
—
—
37
—
(4,944)
11,564
—
—
—
—
37
—
(4,944)
11,564
(143,800)
—
(143,800)
—
50
50
76,423 $
5 $ 1,390,395 $ 4,824,164
9,465 $ (694,960) $
(836,955) $ 4,682,649 $
4,709 $ 4,687,358
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 or proceeds on derivative asset contracts
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
Repayment of subordinated debentures
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
Transfer of available for sale securities to investment securities
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
2022
2021
2020
$
520,293 $
616,325 $
435,071
30,000
(80,261)
31,741
(52,214)
11,564
107,563
9,215
846
(2,948)
(1,180,403)
1,295,588
(18,215)
4,419,761
(34,301)
13,205
50,836
5,122,270
157,796
2,192,200
(10,000)
(4,533,892)
307,481
9,629
(2,348,586)
(7,099)
(216,538)
60,769
(215,046)
(4,603,286)
(6,518,868)
(242,486)
4,609,824
—
(17,782)
(4,907)
519,797
(1,569)
(154,887)
(143,800)
(1,954,678)
(1,435,694)
2,837,410
1,401,716 $
176,081 $
79,532 $
12,326 $
2,454,273 $
34,259 $
8,451 $
22,059 $
$
$
$
$
$
$
$
$
(100,000)
(41,637)
38,761
30,201
9,759
102,468
18,293
(67,446)
(70,464)
(2,818,789)
2,939,522
(31,132)
(4,357,950)
39,183
(12,568)
12,897
(3,692,577)
33,865
3,500,081
—
(4,607,199)
622,881
(10,406)
2,853,326
161,093
88,278
165,040
(204,287)
2,602,672
5,360,979
(262,800)
(1,269,241)
(150,000)
(117,452)
(4,874)
(467,865)
(79,962)
(117,938)
(144,105)
2,746,742
1,656,837
1,180,573
2,837,410 $
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)
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
68,775 $
135,331 $
8,320 $
— $
87,087 $
6,376 $
40,798 $
160,288
136,181
85,323
—
290,977
11,322
16,177
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. Goodwill is recognized as the excess of the purchase price over the net fair value of assets acquired and liabilities
assumed.
Acquired loans with more than an insignificant credit deterioration since inception are recorded at fair value plus a gross-up
amount which is offset by an allowance for credit losses. Acquired loans without a more than insignificant credit deterioration
since inception are recorded at fair value. An allowance for credit losses is recognized through a provision for credit losses,
similar to origination loans.
The Consolidated Statements of Earnings include the results of operations from the acquisition date.
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Goodwill and Intangible Assets
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. 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.
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. Reporting unit carrying value includes sufficient capital to exceed regulatory
requirements plus goodwill. 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:
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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. 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.
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.
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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.
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:
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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.
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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, interest
rates, foreign exchange rates, and other commodities 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.
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.
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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.
We sell qualifying residential mortgage loans guaranteed by U.S. government agencies into GNMA pools. GNMA optional
repurchase programs allow financial institutions to buy back individual delinquent mortgage loans that meet certain criteria
from the securitized loan pool for which the institution provides servicing. At the servicer's option and without GNMA's prior
authorization, the servicer may repurchase a delinquent loan for an amount equal to 100% of the remaining principal balance of
the loan. These loans no longer qualify for sale accounting and are recognized in the Consolidated Balance Sheets. The 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. These loans may be modified in TDRs in accordance with U.S. government agency
guidelines. Interest continues to accrue at the modified rate. Loans repurchased from GNMA under the program may either be
resold into GNMA pools after a performance period specified by the program 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.
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Allowances for Credit Losses and Accrual for Off-balance Sheet Credit Risk from Unfunded Loans Commitments
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 and related unfunded commitments 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 and accrual for off-balance sheet credit risk from unfunded
loan commitments, 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. 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.
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 loan's 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. 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.
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% 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% of the committed dollars in the portfolio is calculated using charge-off migration.
The expected credit loss on approximately 1% 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.
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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.
Real Estate and Other Repossessed Assets
Real estate and other repossessed assets are acquired in partial or total forgiveness of loans. These assets are carried at the lower
of cost, which is the fair value at date of foreclosure less estimated disposal costs, 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 valuation 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. 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. The value of other repossessed assets is generally determined by our special assets
staff based on projected liquidation cash flows under current market conditions.
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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.
The Company may also retain a residual interest in excess cash flows generated by the assets. All assets obtained, including
cash, servicing rights and residual interests, and all liabilities incurred, including recourse obligations, are initially recognized at
fair value. All assets transferred are derecognized and any gain or loss on the sale is recognized in earnings. Subsequently,
servicing rights and residual interest are carried at fair value with changes in fair value recognized in earnings as they occur.
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 quarterly to
corroborate the results of the valuation model.
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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
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.
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.
Management evaluates the Company's current tax expense or benefit based upon estimates of 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, we file tax returns with each jurisdiction where we conduct
business and adjust recognized income tax expense or benefit to filed tax returns.
Deferred tax assets and liabilities are recognized 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. 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.
96
BOK Financial also recognizes 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 assessed quarterly and
are part of our current accrued income tax liability. These 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 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.
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. At December 31, 2022, the Pension Plan has
been terminated, all benefits have been paid and all obligations settled. Prior to termination, BOK Financial recognized the
funded status of its employee benefit plans. Adjustments required to recognize the Pension Plan's net funded status were made
through accumulated other comprehensive income, net of deferred income taxes. See Note 11, "Employee Benefit Plans" for
further discussion.
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. No options have been granted since
2013.
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. Upon vesting and meeting other
relevant conditions, RSUs are settled through cash distributions. 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.
97
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 charges 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.
98
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. 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. Adoption of ASU 2020-04 did not have a material
impact 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. Adoption of ASU 2021-01 did not have a material impact
on the Company's financial statements.
FASB Accounting Standards Update No. 2022-01, Derivatives and Hedging (Topic 815), Fair Value Hedging - Portfolio Layer
Method ("ASU 2022-01")
On March 28, 2022, the FASB issued ASU 2022-01 which clarifies existing guidance around fair value hedge accounting of
interest rate risk for portfolios of financial assets. Under existing guidance, the "last-of-layer" method (now known as the
"portfolio layer" method) enables an entity to apply fair value hedging to a stated amount of a closed portfolio of prepayable
financial assets without having to consider prepayment risk or credit risk when measuring those assets. ASU 2022-01 expands
the scope of this guidance to allow entities to apply the portfolio layer method to portfolios of all financial assets, including
both prepayable and non-prepayable financial assets. ASU 2022-01 is effective for fiscal years beginning after December 15,
2022, including interim periods within those fiscal years. Adoption of ASU 2022-01 is not expected to have a material impact
on the Company's financial statements as we do not currently apply hedge accounting to our financial assets.
FASB Accounting Standards Update No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt
Restructurings and Vintage Disclosures ("ASU 2022-02")
On March 31, 2022, the FASB issued ASU 2022-02 which eliminates the accounting guidance on troubled debt restructurings
("TDRs") for creditors in ASC 310-40, while also no longer requiring an entity to consider renewals, modifications, and
extensions that result from reasonably expected TDRs in their calculation of the allowance for credit losses. ASU 2022-02
requires enhanced disclosures for certain loan refinancings and restructurings by creditors when a borrower is experiencing
financial difficulties. Further, it requires entities to disclose gross write-offs recorded in the current period by year of origination
in the vintage disclosures on a year-to-date basis. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022
and amendments related to TDR recognition and measurement may be applied using either a prospective or modified
retrospective transition method, while amendments on TDR and vintage disclosures are to be adopted prospectively. The
Company will adopt ASU 2022-02 on January 1, 2023, using the prospective transition method. Adoption of this standard will
not have a material effect on the Company's financial condition or results of operations.
99
FASB Accounting Standards Update No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic
848 ("ASU 2020-06")
On December 21, 2022, the FASB issued ASU 2022-06, which defers the sunset date of ASU 2020-04 from December 31,2022
to December 31, 2024; the details of ASU 2020-04 are described further above. Adoption of ASU 2022-06 did not have a
material impact on the Company's financial statements.
(2) Securities
Trading Securities
The fair value and net unrealized gain (loss) included in trading securities is as follows (in thousands):
December 31, 2022
December 31, 2021
Fair Value
Net
Unrealized
Gain (Loss)
Fair Value
Net
Unrealized
Gain (Loss)
U.S. government securities
$
9,823 $
(16) $
23,610 $
Residential agency mortgage-backed securities
4,406,848
4
9,068,900
21,484
26,006
(136)
(175)
25,783
18,520
$ 4,464,161 $
(323) $ 9,136,813 $
(9,290)
40
(9,338)
34
(26)
Municipal securities
Other trading securities
Total trading securities
Investment Securities
The amortized cost and fair values of investment securities are as follows (in thousands):
Municipal securities
Mortgage-backed securities:
Residential agency
Commercial agency
Other debt securities
Total investment securities
Allowance for credit losses
December 31, 2022
Amortized
Cost
Carrying
Value1
Fair
Value
Gross Unrealized
Gain
Loss
$
170,629 $
170,629 $
176,621 $
6,456 $
(464)
2,538,565
2,315,219
2,143,360
17,259
12,788
15,609
12,788
14,588
12,199
155
—
—
(172,014)
(1,021)
(589)
$ 2,739,241 $ 2,514,245 $ 2,346,768 $
6,611 $
(174,088)
(558)
(558)
—
—
—
Investment securities, net of allowance
1 Carrying value includes $225 million of net unrealized loss which remains in Accumulated Other Comprehensive Income ("AOCI") in the Consolidated
$ 2,738,683 $ 2,513,687 $ 2,346,768 $
6,611 $
(174,088)
Balance Sheets related to certain securities transferred during the second quarter of 2022 from the Available for Sale securities portfolio to the Investment
securities portfolio.
December 31, 2021
Amortized
Carrying
Cost
Value
Fair
Value
Gross Unrealized
Gain
Loss
Municipal securities
$
203,772 $
203,772 $
223,609 $
19,851 $
Residential agency mortgage-backed securities
Other debt securities
Total investment securities
Allowance for credit losses
6,939
288
6,939
288
7,500
286
561
—
$
210,999 $
210,999 $
231,395 $
20,412 $
(555)
(555)
—
—
Investment securities, net of allowance
$
210,444 $
210,444 $
231,395 $
20,412 $
(14)
—
(2)
(16)
—
(16)
100
The amortized cost and fair values of investment securities at December 31, 2022, by contractual maturity, are as shown in the
following table (dollars in thousands):
Fixed maturity debt securities:
Carrying value
Fair value
Residential mortgage-backed securities:
Carrying value
Fair value
Total investment securities:
Carrying value
Fair value
Less than
One Year
One to
Five Years
Six to
Ten Years
Over
Ten Years
Total
$
23,329
$ 103,089
$
67,660
$
23,440
109,073
65,947
4,948
4,948
$ 199,026
203,408
Weighted
Average
Maturity1
4.33
2
$ 2,315,219
2,143,360
$ 2,514,245
2,346,768
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 5.4 years based upon current prepayment assumptions.
Temporarily Impaired Investment Securities
(In thousands):
December 31, 2022
Number
of
Securities
Less Than 12 Months
12 Months or Longer
Total
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Investment:
Municipal securities
22 $
18,037 $
406 $
544 $
58 $
18,581 $
464
Mortgage-backed securities:
Residential agency
Commercial agency
Other debt securities
116 $ 2,142,114 $
172,014 $
2 $
3 $
14,588 $
1,021 $
9,428 $
571 $
Total investment securities
143 $ 2,184,167 $
174,012 $
— $
— $
257 $
801 $
— $ 2,142,114 $
172,014
— $
14,588 $
1,021
18 $
9,685 $
589
76 $ 2,184,968 $
174,088
December 31, 2021
Number
of
Securities
Less Than 12 Months
12 Months or Longer
Total
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Investment:
Municipal securities
Other debt securities
1 $
2
— $
— $
587 $
14 $
587 $
273
2
—
—
273
Total investment securities
3 $
273 $
2 $
587 $
14 $
860 $
14
2
16
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, 2022
Amortized
Cost
Fair
Value
Gross Unrealized
Gain
Loss
$
1,000 $
898 $
— $
(102)
687,875
624,500
321
(63,696)
6,161,358
5,814,496
616,423
577,576
4,892,257
4,475,917
500
473
13,085
11,776
3,479
—
(359,947)
(50,623)
(419,819)
(27)
$ 12,359,413 $ 11,493,860 $
28,661 $
(894,214)
December 31, 2021
Amortized
Cost
Fair
Value
Gross Unrealized
Gain
Loss
$
1,001 $
1,000 $
— $
515,551
508,365
1,302
(1)
(8,488)
7,908,587
8,006,616
155,477
(57,448)
10,625
24,339
4,628,172
4,617,025
500
472
13,714
36,868
—
—
(48,015)
(28)
$ 13,064,436 $ 13,157,817 $
207,361 $
(113,980)
The amortized cost and fair values of available for sale securities at December 31, 2022, 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
$
121,279 $ 2,529,961 $ 2,396,317 $
534,075 $ 5,581,632
6.11
118,907
2,358,353
2,126,561
497,967
5,101,788
$ 6,777,781
2
6,392,072
$ 12,359,413
11,493,860
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 4.4 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
Year Ended December 31,
2022
2021
2020
$
307,481 $
622,881 $
384,507
5,054
(6,025)
(227)
5,702
(1,998)
889
9,976
(66)
2,524
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 $11.2 billion at December 31, 2022 and $10.2 billion at December 31, 2021. The secured
parties do not have the right to sell or re-pledge these securities.
Temporarily Impaired Available for Sale Securities
(In thousands)
December 31, 2022
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 $
— $
— $
899 $
102 $
899 $
227
146,634
5,301
428,248
58,395
574,882
102
63,696
Available for sale:
U.S. Treasury
Municipal securities
Mortgage-backed securities:
Residential agency
613 $ 3,879,582 $
256,973 $
863,732 $
102,974 $ 4,743,314 $
359,947
Residential non-agency
26
499,716
50,623
—
—
499,716
Commercial agency
Other debt securities
285
1,647,778
63,701
2,535,816
356,118
4,183,594
1
—
—
473
27
473
50,623
419,819
27
Total available for sale securities
1,153 $ 6,173,710 $
376,598 $ 3,829,168 $
517,616 $ 10,002,878 $
894,214
December 31, 2021
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 $
1,000 $
1 $
— $
175
423,575
7,762
22,476
— $
726
1,000 $
446,051
1
8,488
120 $ 2,382,094 $
37,121 $
750,044 $
20,327 $ 3,132,138 $
57,448
165
2,104,689
35,488
703,216
12,527
2,807,905
48,015
1
—
—
472
28
472
28
Available for sale:
U.S. Treasury
Municipal securities
Mortgage-backed securities:
Residential agency
Commercial agency
Other debt securities
Total available for sale securities
462 $ 4,911,358 $
80,372 $ 1,476,208 $
33,608 $ 6,387,566 $
113,980
No credit impairment of available for sale securities was identified in 2022. Unrealized losses are 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,
2022, 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.
103
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.
The fair value and net unrealized gain (loss) included in fair value option securities is as follows (in thousands):
Residential agency mortgage-backed securities
$
296,590 $
338 $
43,770 $
1,591
December 31, 2022
December 31, 2021
Fair Value
Net
Unrealized
Gain (Loss)
Fair Value
Net
Unrealized
Gain (Loss)
(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, 2022 (in thousands):
Assets
Notional1
Gross Fair
Value
Netting
Adjustments
Net Fair
Value
Before
Cash
Collateral
Cash
Collateral
Fair Value
Net of Cash
Collateral
$ 2,629,318 $ 158,825 $
— $ 158,825 $ (114,955) $
43,870
7,918,020
1,232,283
(594,543)
637,740
(67,024)
219,791
216,569
21,102
193
—
—
216,569
193
—
(109)
570,716
216,569
84
Customer risk management programs:
Interest rate contracts
Energy contracts
Foreign exchange contracts
Equity option contracts
Total customer risk management programs
10,788,231
1,607,870
(594,543)
1,013,327
(182,088)
831,239
Trading
17,400,037
126,910
(74,647)
Interest rate risk management programs
85,000
1,500
(13)
52,263
1,487
(4,646)
—
47,617
1,487
Total derivative contracts
$ 28,273,268 $ 1,736,280 $
(669,203) $ 1,067,077 $ (186,734) $
880,343
Liabilities
Notional¹
Gross Fair
Value
Netting
Adjustments
Net Fair
Value
Before
Cash
Collateral
Cash
Collateral
Fair Value
Net of Cash
Collateral
$ 2,629,122 $ 158,816 $
— $ 158,816 $
— $
158,816
8,696,060
1,242,058
(594,543)
647,515
(484,319)
214,855
211,233
21,102
193
—
—
211,233
193
(7)
—
163,196
211,226
193
Customer risk management programs:
Interest rate contracts
Energy contracts
Foreign exchange contracts
Equity option contracts
Total customer risk management programs
11,561,139
1,612,300
(594,543)
1,017,757
(484,326)
533,431
Trading
Interest rate risk management programs
14,038,906
178,806
94,958
1,594
(74,647)
(13)
20,311
1,581
(423)
—
19,888
1,581
$ 25,778,851 $ 1,708,852 $
Total derivative contracts
1 Notional amounts for commodity contracts are converted into dollar-equivalent amounts based on dollar prices at the inception of the
(669,203) $ 1,039,649 $ (484,749) $
554,900
contract.
104
The following table summarizes the fair values of derivative contracts recorded as "derivative contracts" assets and liabilities in
the balance sheet at December 31, 2021 (in thousands):
Customer risk management programs:
Interest rate contracts
Energy contracts
Foreign exchange contracts
Equity option contracts
Assets
Notional1
Gross Fair
Value
Netting
Adjustments
Net Fair
Value
Before
Cash
Collateral
Cash
Collateral
Fair Value
Net of Cash
Collateral
$ 2,614,162 $
53,881 $
(10,101) $
43,780 $
— $
43,780
6,360,095
1,168,363
(375,624)
792,739
216,272
215,148
42,136
755
—
—
215,148
755
—
—
(242)
(242)
(721)
—
792,739
215,148
513
1,052,180
34,647
10,470
Total customer risk management programs
9,232,665
1,438,147
(385,725)
1,052,422
Trading
35,592,751
139,694
(104,326)
Internal risk management programs
869,506
10,687
(217)
35,368
10,470
Total derivative contracts
$ 45,694,922 $ 1,588,528 $
(490,268) $ 1,098,260 $
(963) $ 1,097,297
Liabilities
Notional¹
Gross Fair
Value
Netting
Adjustments
Net Fair
Value
Before
Cash
Collateral
Cash
Collateral
Fair Value
Net of Cash
Collateral
$ 2,614,162 $
54,062 $
(10,101) $
43,961 $ (33,870) $
6,480,840
1,210,946
(375,624)
835,322
(803,102)
208,381
207,119
42,136
755
—
—
207,119
755
(447)
—
10,091
32,220
206,672
755
Customer risk management programs:
Interest rate contracts
Energy contracts
Foreign exchange contracts
Equity option contracts
Total customer risk management programs
9,345,519
1,472,882
(385,725)
1,087,157
(837,419)
249,738
Trading
41,285,649
152,947
(104,326)
48,621
(24,074)
Internal risk management programs
298,832
1,557
(217)
1,340
—
24,547
1,340
$ 50,930,000 $ 1,627,386 $
Total derivative contracts
1 Notional amounts for commodity contracts are converted into dollar-equivalent amounts based on dollar prices at the inception of the
(490,268) $ 1,137,118 $ (861,493) $
275,625
contract.
105
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,
2022
2021
2020
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
$
10,690 $
— $
5,503 $
— $
4,507 $
34,435
—
591
—
45,716
48,616
—
—
—
—
—
—
14,190
27
712
—
20,432
(11,453)
—
—
—
—
—
—
—
(73,011)
—
(19,378)
17,287
34
921
—
22,749
8,255
—
$
94,332 $
(73,011) $
8,979 $
(19,378) $
31,004 $
—
—
—
—
—
—
—
42,320
42,320
Customer risk management programs:
Interest rate contracts
Energy contracts
Agricultural contracts
Foreign exchange contracts
Equity option contracts
Total customer risk management programs
Trading1
Internal risk management programs
Total derivative contracts
1
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):
Fixed
Rate
December 31, 2022
Non-
accrual
Variable
Rate
Total
Fixed
Rate
Variable
Rate
Non-accrual
Total
December 31, 2021
Commercial
Commercial real estate
Paycheck protection
program
Loans to individuals
Total
Foregone interest on
nonaccrual loans
$ 3,378,110 $ 10,759,780 $
874,716
3,715,491
60,297 $ 14,198,187 $ 3,360,117 $ 9,072,244 $
16,570
4,606,777
2,888,048
929,015
74,104 $ 12,506,465
3,831,325
14,262
276,341
14,312
2,099,165
3,591,549
$ 6,366,303 $ 16,069,050 $ 121,797 $ 22,557,150 $ 6,603,265 $ 13,468,356 $ 134,059 $ 20,205,680
14,312
3,737,874
—
1,593,779
—
1,508,064
276,341
2,037,792
—
45,693
—
44,930
$
6,796
$
14,102
At December 31, 2022, loans to businesses and individuals with collateral primarily located in Texas totaled $7.3 billion or
32% of the total loan portfolio. Loans to businesses and individuals with collateral primarily located in Oklahoma totaled $3.5
billion or 16% of our total loan portfolio. Loans to businesses and individuals with collateral primarily located in Colorado
totaled $2.5 billion or 11% 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, 2021, loans to businesses and individuals with collateral primarily located in Texas totaled $6.8 billion or
34% of the loan portfolio, loans to businesses and individuals with collateral primarily located in Oklahoma totaled $3.2 billion
or 16% of the loan portfolio and loans to businesses and individuals with collateral primarily located in Colorado totaled $2.5
billion or 12% of the loan portfolio.
106
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, 2022, 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 $2.1 billion or
15% of the commercial loan portfolio segment. Commercial loans with collateral primarily located in Colorado totaled $1.8
billion or 12% of the commercial loan portfolio segment. The commercial loan portfolio segment is further divided into loan
classes. The services loan class totaled $3.4 billion or 15% of total loans. Approximately $1.6 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 $3.4 billion
or 15% of total loans, including $2.7 billion of outstanding loans to energy producers. Approximately 72% of the committed
production loans are secured by properties primarily producing oil and 28% of the committed production loans are secured by
properties primarily producing natural gas. The healthcare loan class totaled $3.8 billion or 17% 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, 2021, commercial loans with collateral primarily located in Texas totaled $4.4 billion or 35% of the
commercial loan portfolio segment, commercial loans with collateral primarily located in Oklahoma totaled $1.7 billion or 13%
of the commercial loan portfolio segment and commercial loans with collateral primarily located in Colorado totaled $1.6
billion or 13% of the commercial loan portfolio segment. The services loan class totaled $3.4 billion or 17% of total loans.
Approximately $1.7 billion of loans in the services category consisted of loans with individual balances of less than $10
million. The energy loan class totaled $3.0 billion or 15% of total loans, including $2.2 billion of outstanding loans to energy
producers. At December 31, 2021, approximately 67% of committed production loans were secured by properties primarily
producing oil and 33% were secured by properties producing natural gas. The healthcare loan class totaled $3.4 billion or 17%
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.
At December 31, 2022, 30% of commercial real estate loans were secured by properties primarily located in the Dallas and
Houston metropolitan areas of Texas and 9% of commercial real estate loans were secured by properties located primarily in the
Tulsa and Oklahoma City metropolitan areas of Oklahoma. At December 31, 2021, 30% of commercial real estate loans are
secured by properties primarily located in the Dallas and Houston metropolitan areas of Texas and 12% of commercial real
estate loans were secured by properties located primarily in the Tulsa and Oklahoma City metropolitan areas of Oklahoma.
107
Paycheck Protection Program
BOK Financial actively participated 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 businesses maintain
payrolls during the COVID-19 pandemic. The remaining loans in the portfolio generally have a contractual term of five 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 fixed interest rate of 1%. Interest plus loan
fees, which vary depending on loan size, are accrued over the contractual life of the loan. Remaining unaccreted origination
fees were not significant at December 31, 2022.
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. Personal loans consist primarily of loans to Wealth
Management clients secured by the cash surrender value of insurance policies and marketable securities. Personal loans also
include direct loans secured by and for the purchase of automobiles, recreational and marine equipment as well as unsecured
loans. 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 residential mortgage 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 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.
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 location.
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, 2022, outstanding commitments totaled $15.4 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.
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, 2022, outstanding standby letters of credit totaled $740 million.
108
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 for the year ended December 31, 2022 is summarized as follows (in thousands):
Commercial
Commercial
Real Estate
Paycheck
Protection
Program
Loans to
Individuals
Nonspecific
Allowance
Total
Allowance for loan losses:
Beginning balance
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
Provision for off-balance sheet credit
risk
Ending balance
$
$
$
$
162,056 $
(12,782)
(22,382)
58,553 $
(813)
(269)
4,694
131,586 $
177
57,648 $
— $
—
—
—
— $
35,812 $
14,023
(6,095)
2,730
46,470 $
— $
—
—
256,421
428
(28,746)
—
— $
7,601
235,704
13,812 $
17,442 $
— $
1,723 $
— $
32,977
4,434
18,246 $
23,048
40,490 $
—
— $
460
2,183 $
—
— $
27,942
60,919
A $30.0 million provision for credit losses was recorded for the year ended December 31, 2022, primarily due to strong growth
in loans and loan commitments, partially offset by improvement in credit quality metrics. The uncertainty in our economic
forecast increased resulting in an increase in the probability weighting of the downside scenario. In addition, some key
economic factors were less favorable to growth across all scenarios.
109
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 for the year ended December 31, 2021 is summarized as follows (in thousands):
Commercial
Commercial
Real Estate
Paycheck
Protection
Program
Loans to
Individuals
Nonspecific
Allowance
Total
Allowance for loan losses:
Beginning balance
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
Provision for off-balance sheet credit
risk
Ending balance
$
$
$
$
254,934 $
(59,326)
(43,956)
86,558 $
(26,522)
(2,485)
10,404
162,056 $
1,002
58,553 $
— $
—
—
—
— $
47,148 $
(9,354)
(4,910)
2,928
35,812 $
— $
—
—
388,640
(95,202)
(51,351)
—
— $
14,334
256,421
14,422 $
20,571 $
— $
1,928 $
— $
36,921
(610)
13,812 $
(3,129)
17,442 $
—
— $
(205)
1,723 $
—
— $
(3,944)
32,977
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
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
losses
Ending balance
Commercial
Commercial
Real Estate
Paycheck
Protection
Program
Loans to
Individuals
Nonspecific
Allowance
Total
$
$
118,187 $
33,681
151,868
171,800
(73,370)
4,636
254,934 $
51,805 $
(4,620)
47,185
40,407
(1,300)
266
86,558 $
— $
—
—
—
—
—
— $
23,572 $
13,943
37,515
10,253
(4,729)
4,109
47,148 $
17,195 $
(17,195)
—
—
—
—
— $
210,759
25,809
236,568
222,460
(79,399)
9,011
388,640
1,434
10,144
11,578
107
11,660
11,767
—
—
—
44
1,748
1,792
—
—
—
2,844
14,422 $
8,804
20,571 $
$
—
— $
136
1,928 $
—
— $
1,585
23,552
25,137
11,784
36,921
110
The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment
measurement method at December 31, 2022 is as follows (in thousands):
Collectively Measured
for General Allowances
Individually Measured
for Specific Allowances
Total
Commercial
Commercial real estate
Paycheck protection program
Loans to individuals
Total
Recorded
Investment
$ 14,137,890 $
4,590,207
14,312
3,692,944
$ 22,435,353 $
Related
Allowance
Recorded
Investment
Related
Allowance
Recorded
Investment
Related
Allowance
127,566 $
56,098
—
46,470
230,134 $
60,297 $
16,570
—
44,930
121,797 $
4,020 $ 14,198,187 $
1,550
—
—
4,606,777
14,312
3,737,874
5,570 $ 22,557,150 $
131,586
57,648
—
46,470
235,704
The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment
measurement method at December 31, 2021 is as follows (in thousands):
Collectively Measured
for General Allowances
Individually Measured
for Specific Allowances
Total
Commercial
Commercial real estate
Paycheck protection program
Loans to individuals
Total
Credit Quality Indicators
Recorded
Investment
$ 12,432,361 $
3,817,063
276,341
3,545,856
$ 20,071,621 $
Related
Allowance
Recorded
Investment
Related
Allowance
Recorded
Investment
Related
Allowance
158,063 $
56,204
—
35,812
250,079 $
74,104 $
14,262
—
45,693
134,059 $
3,993 $ 12,506,465 $
2,349
—
—
3,831,325
276,341
3,591,549
6,342 $ 20,205,680 $
162,056
58,553
—
35,812
256,421
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 identifies 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.
111
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.
The following table summarizes the Company's loan portfolio at December 31, 2022 by the risk grade categories and vintage
(in thousands):
Origination Year
2022
2021
2020
2019
2018
Prior
Revolving
Loans
Converted
to Term
Loans
Revolving
Loans
Total
Commercial:
Healthcare
Pass
Special Mention
Accruing
Substandard
Nonaccrual
Total healthcare
Energy
Pass
Accruing
Substandard
Nonaccrual
Total energy
Services
Pass
Special Mention
Accruing
Substandard
Nonaccrual
Total services
General business
Pass
Special Mention
Accruing
$ 932,097 $ 604,886 $ 476,854 $ 404,204 $ 464,989 $ 618,163 $ 245,898 $
4
20,071
18,859
—
—
—
—
—
—
3,634
—
932,097 604,886 476,854 450,755 471,362 659,507 249,536
14,304
8,181
—
26,480
—
6,373
—
—
—
—
20 $ 3,747,111
38,934
—
17,938
—
—
41,034
20 3,845,017
157,745
76,951
30,284
12,783
5,992
4,980 3,104,906
— 3,393,641
—
—
157,745
—
—
76,951
—
—
30,284
664
—
13,447
385
—
6,377
683
159
28,018
1,240
5,822 3,134,164
29,750
—
1,399
—
— 3,424,790
821,785 496,510 286,085 193,481 156,736 696,300 722,371
8,668
1,345
5,139
894
502
989
771
—
—
17,665
7,820
822,287 507,219 287,523 196,711 157,673 702,823 756,524
2,789
2,389
2,459
—
—
5,570
—
449
43
—
725,894 358,383 187,418 172,878 139,140 283,694 1,570,536
7,094
17,759
13,065
2,291
208
71
7
639 3,373,907
18,308
—
23,078
122
—
16,228
761 3,431,521
2,329 3,440,272
40,521
26
4
8
14,430
1,636
2,367 3,496,859
3,148 14,198,187
Nonaccrual
Substandard
94
485
Total general business 743,653 373,617 188,744 177,093 143,899 289,277 1,578,209
2,655,782 1,562,673 983,405 838,006 779,311 1,657,429 5,718,433
4,130
14
2,169
—
66
1,052
4,680
72
3,287
5
—
—
Total commercial
Commercial real estate:
Pass
Accruing
Substandard
Nonaccrual
Total commercial real
estate
1,188,483 1,158,002 552,616 641,102 247,625 633,304 161,616
— 4,582,748
—
—
—
—
—
—
7,459
—
—
—
—
16,570
—
—
—
—
7,459
16,570
1,188,483 1,158,002 552,616 648,561 247,625 649,874 161,616
— 4,606,777
112
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
Nonaccrual
Total residential
mortgage
guaranteed by U.S.
government
agencies
Personal
Pass
Special Mention
Accruing
Substandard
Nonaccrual
Total personal
Total loans to
individuals
Total loans
Origination Year
2022
2021
2020
2019
2018
Prior
Revolving
Loans
Converted
to Term
Loans
Revolving
Loans
Total
—
3,456
10,856
—
3,456
10,856
—
—
—
—
—
—
—
—
—
14,312
—
14,312
354,497 373,190 393,002
42
—
81
63,142
—
40,525 260,625 352,126
527
388
142
22,176 1,859,283
1,267
87
—
32
—
1,656
187
2,717
—
362
—
1,904
138
20,139
117
2,216
1
765
443
29,791
354,529 374,927 395,948
63,504
42,571 281,290 354,986
23,029 1,890,784
289
—
2,254
—
9,000
299
10,722
1,460
17,244 191,426
10,927
2,319
—
—
—
—
230,935
15,005
289
2,254
9,299
12,182
19,563 202,353
—
—
245,940
254,497 193,095 154,887 172,114
12
40
47
28
68,871 201,278 549,187
6,003
17
—
—
38
160
22
254,582 193,574 154,939 172,308
444
7
—
12
—
14
—
23
68,902 201,296 555,213
—
18
332 1,594,261
6,151
4
604
—
—
134
336 1,601,150
609,400 570,755 560,186 247,994 131,036 684,939 910,199
23,365 3,737,874
$ 4,453,665 $ 3,294,886 $ 2,107,063 $ 1,734,561 $ 1,157,972 $ 2,992,242 $ 6,790,248 $ 26,513 $ 22,557,150
113
The following table summarizes the Company's loan portfolio at December 31, 2021 by the risk grade categories and vintage
(in thousands):
Origination Year
2021
2020
2019
2018
2017
Prior
Revolving
Loans
Converted
to Term
Loans
Revolving
Loans
Total
Commercial:
Healthcare
Pass
Special Mention
Accruing
Substandard
Nonaccrual
Total healthcare
Energy
Pass
Special Mention
Accruing
Substandard
Nonaccrual
Total energy
Services
Pass
Special Mention
Accruing
Substandard
Nonaccrual
Total services
General business
Pass
Special Mention
Accruing
$ 563,800 $ 589,193 $ 516,558 $ 498,998 $ 319,096 $ 688,136 $ 160,154 $
5
15,583
11,135
6,835
—
—
—
—
—
—
509
570,635 589,193 559,276 506,083 330,231 698,828 160,668
27,135
—
1,981
8,711
543
6,542
—
—
—
—
26 $ 3,335,961
33,558
—
29,659
—
—
15,762
26 3,414,940
252,133
558
29,556
771
15,914
—
13,548
—
4,741
—
6,765 2,540,525
750
—
— 2,863,182
2,079
—
10,650
—
263,341
22,611
20,487
73,425
1,185
—
17,099
814
—
14,362
—
—
4,741
716
714
74,556
9,890
8,195 2,625,721
110,532
—
—
31,091
— 3,006,884
696,149 405,057 289,375 275,010 225,404 795,029 607,958
17,210
1,830
3,290
1,047
434
405
47
43
—
11,607
503
696,626 405,992 295,371 287,001 244,397 799,961 637,278
1,785
13,918
10,714
230
4,166
—
2,366
2,519
530
—
584,438 211,892 264,462 177,384 168,977 215,014 1,047,420
5,875
3,842
1,435
218
223
—
60
Nonaccrual
Substandard
1,821
730
Total general business 584,921 215,625 270,718 187,562 181,917 218,556 1,055,846
2,115,523 1,284,235 1,142,464 995,008 761,286 1,725,540 4,479,513
Total commercial
8,336
762
7,697
1,046
1,066
2,444
1,634
4,562
3,024
518
265
—
Commercial real estate:
Pass
Special Mention
Accruing Substandard
Nonaccrual
717,400 711,231 871,283 403,115 279,058 664,684 117,847
—
—
—
10,898
4,480
—
6,660
13,352
—
9,244
7,780
6,186
—
—
8,076
—
—
—
—
—
—
Total commercial real
estate
717,400 711,231 879,359 423,127 294,436 687,894 117,847
31 3,831,325
114
375 3,294,357
24,455
192
31,211
—
17,170
—
567 3,367,193
2,284 2,671,871
11,653
—
—
19
23,843
10,081
2,303 2,717,448
2,896 12,506,465
31 3,764,649
26,802
—
25,612
—
14,262
—
Origination Year
2021
2020
2019
2018
2017
Prior
Revolving
Loans
Converted
to Term
Loans
Revolving
Loans
Total
Paycheck protection
program:
Pass
Total paycheck
237,357
38,984
protection program
237,357
38,984
—
—
—
—
—
—
—
—
—
—
—
276,341
—
276,341
Loans to individuals:
Residential mortgage
Pass
Special Mention
Accruing
Substandard
Nonaccrual
Total residential
mortgage
Residential mortgage
guaranteed by U.S.
government
agencies
Pass
Nonaccrual
Total residential
mortgage
guaranteed by U.S.
government
agencies
Personal
Pass
Special Mention
Accruing
Substandard
Nonaccrual
Total personal
Total loans to
individuals
Total loans
386,092 452,537
—
—
84,001
156
60,390
—
68,150 295,632 320,638
282
411
19
21,463 1,688,903
1,027
159
98
1,516
—
1,809
—
383
—
1,968
127
629
41
22,289
400
2,177
—
803
666
31,574
387,706 454,346
84,540
62,358
68,925 318,373 323,497
22,425 1,722,170
699
—
11,380
—
20,650
1,259
27,970
821
32,742 246,871
11,146
635
—
—
—
—
340,312
13,861
699
11,380
21,909
28,791
33,377 258,017
—
—
354,173
218,960 180,577 177,389
34
—
9
435
110
165
10
219,505 180,605 177,598
5
14
70,249
3
—
24
70,276
92,592 135,041 638,713
—
—
47
—
35
—
25
92,627 135,129 638,738
1
40
728 1,514,249
93
—
606
—
—
258
728 1,515,206
607,910 646,331 284,047 161,425 194,929 711,519 962,235
23,153 3,591,549
$ 3,678,190 $ 2,680,781 $ 2,305,870 $ 1,579,560 $ 1,250,651 $ 3,124,953 $ 5,559,595 $ 26,080 $ 20,205,680
115
Nonaccruing Loans
A summary of nonaccruing loans as of December 31, 2022 follows (in thousands):
Commercial:
Healthcare
Services
Energy
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
$
41,034 $
34,661 $
6,373 $
16,228
1,399
1,636
7,835
1,399
1,636
8,393
—
—
946
3,074
—
—
60,297
45,531
14,766
4,020
16,570
393
16,177
1,550
29,791
15,005
134
44,930
29,791
15,005
134
44,930
—
—
—
—
—
—
—
—
Total
$ 121,797 $
90,854 $
30,943 $
5,570
A summary of nonaccruing loans as of December 31, 2021 follows (in thousands):
Commercial:
Energy
Services
Healthcare
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
$
31,091 $
31,091 $
— $
17,170
15,762
10,081
74,104
13,686
9,679
7,690
3,484
6,083
2,391
62,146
11,958
—
2,584
53
1,357
3,994
14,262
6,186
8,076
2,349
31,574
13,861
258
45,693
31,574
13,861
258
45,693
—
—
—
—
—
—
—
—
Total
$ 134,059 $ 114,025 $
20,034 $
6,343
116
Troubled Debt Restructurings
At December 31, 2022 the Company has $232 million in troubled debt restructurings (TDRs), of which $164 million are
accruing residential mortgage loans guaranteed by U.S. government agencies. Of the approximately $117 million TDRs that are
performing in accordance with the modified terms, $74 million are government guaranteed loans. The loans designated as
TDRs had $16 million in charge-offs during the year ended December 31, 2022.
At December 31, 2021, TDRs totaled $273 million, of which $211 million were accruing residential mortgage loans guaranteed
by U.S. government agencies. Approximately $141 million of TDRs were performing, including $97 million of government
guaranteed loans. The loans designated as TDRs had $994 thousand in charge-offs during the year ended December 31, 2021.
TDRs generally consist of interest rate concessions, payment stream concessions or a combination of concessions to distressed
borrowers. During the year ended December 31, 2022, $52 million of loans were restructured. During the year ended
December 31, 2021, $121 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, 2022 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
Commercial:
Healthcare
Energy
Services
General business
Total commercial
3,424,766
3,423,042
3,496,815
14,156,787
Commercial real estate
4,606,029
Paycheck protection program
12,279
$ 3,812,164 $
5,914 $
26,480 $
459 $ 3,845,017 $
24
1,060
26
7,024
531
231
—
2,461
18
28,959
—
3,424,790
4,958
3,431,521
—
3,496,859
5,417
14,198,187
—
217
4,606,777
—
—
—
—
—
—
1,406
396
14,312
396
Loans to individuals:
Permanent mortgage
Permanent mortgages guaranteed by
U.S. government agencies
Personal
Total loans to individuals
1,872,155
10,632
1,828
6,169
1,890,784
114
108,019
1,600,595
3,580,769
36,119
502
47,253
19,400
82,402
245,940
75,604
21
32
1,601,150
—
21,249
88,603
3,737,874
75,718
Total
$ 22,355,864 $
55,039 $
51,614 $
94,633 $ 22,557,150 $
76,114
117
—
—
—
199
199
—
74
—
A summary of loans currently performing and past due as of December 31, 2021 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
Commercial:
Healthcare
Services
Energy
General business
Total commercial
$ 3,412,072 $
2,359 $
— $
509 $ 3,414,940 $
3,352,639
3,002,623
2,705,596
12,472,930
920
545
6,080
9,904
—
—
4,620
3,716
997
9,333
9,014
3,367,193
—
3,006,884
4,775
2,717,448
14,298
12,506,465
206
3,157
3,831,325
—
—
276,341
Commercial real estate
3,827,962
Paycheck protection program
276,341
Loans to individuals:
Permanent mortgage
Permanent mortgages guaranteed by
U.S. government agencies
Personal
Total loans to individuals
1,707,654
6,263
1,556
6,697
1,722,170
181,022
1,514,938
3,403,614
26,869
16,751
129,531
354,173
118,819
66
24
178
1,515,206
40
33,198
18,331
136,406
3,591,549
118,859
Total
$ 19,980,847 $
43,102 $
27,870 $
153,861 $ 20,205,680 $
119,132
(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,
2022
2021
$
69,944 $
69,776
469,001
198,057
201,830
35,736
974,568
409,393
565,175 $
$
472,450
159,063
186,092
36,917
924,298
350,150
574,148
Depreciation expense of premises and equipment was $68.4 million, $63.4 million and $54.3 million for the years ended
December 31, 2022, 2021 and 2020, respectively.
Premises and equipment include 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 $177 million at December 31, 2022 and $181 million at December 31, 2021 are included in buildings and
improvements, and related right-of-use liabilities are included in other liabilities. At December 31, 2022, the weighted-average
remaining lease term was 10.2 years and the weighted average discount rate on operating leases was 2.9%.
118
At December 31, 2022, undiscounted operating lease liabilities are scheduled to mature as follows (in thousands):
2023
2024
2025
2026
2027
Thereafter
Total undiscounted lease payments
Less: Interest
Lease liabilities
$
27,130
26,894
26,092
25,306
22,925
115,983
244,330
32,278
$
212,052
Total lease expense for BOK Financial was $41.7 million in 2022, $35.8 million in 2021 and $42.0 million in 2020. Rent
expense and right-of-use asset amortization recognized as occupancy and equipment expense was $24.5 million in 2022, $23.4
million in 2021 and $25.0 million in 2020. Operating cash flows from operating leases were $23.3 million, $25.3 million and
$25.6 million for the years ended December 31, 2022, 2021 and 2020, respectively. Operating expenses related to leased assets
and short term lease costs totaled $13.0 million, $11.5 million and $13.4 million for the years ended December 31, 2022, 2021
and 2020, 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.
(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,
2022
2021
$
103,200 $
103,200
55,130
48,070
78,154
50,093
28,061
44,149
59,051
78,154
45,427
32,727
$
76,131 $
91,778
119
Expected amortization expense for intangible assets that will continue to be amortized (in thousands):
2023
2024
2025
2026
2027
Thereafter
Core
Deposit
Premiums
Other
Identifiable
Intangible
Assets
$
10,145 $
3,625 $
9,379
8,675
7,986
6,956
4,929
2,611
2,201
1,828
1,597
16,199
$
48,070 $
28,061 $
Total
13,770
11,990
10,876
9,814
8,553
21,128
76,131
The changes in the carrying value of goodwill by operating segment are as follows (in thousands):
Commercial
Banking
Consumer
Banking
Wealth
Management
Funds
Management
and Other
Total
Balance, December 31, 2020
913,931
43,458
90,702
—
1,048,091
Sale of consolidated merchant banking investment
during 2021
Balance, December 31, 2021
Balance, December 31, 2022
(3,342)
—
910,589
43,458
—
90,702
—
—
(3,342)
1,044,749
$
910,589 $
43,458 $
90,702 $
— $ 1,044,749
At October 1, 2022, 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. No
impairment was indicated for any reporting unit.
(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.
120
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, 2022
December 31, 2021
Unpaid
Principal
Balance/
Notional
Fair Value
Unpaid
Principal
Balance/
Notional
Fair Value
$
74,941 $
73,938 $
182,710 $
186,175
45,492
109,469
1,054
280
171,412
328,433
6,167
(47)
$
75,272
$
192,295
No residential mortgage loans held for sale were 90 days or more past due or considered impaired as of December 31, 2022 or
December 31, 2021. No credit losses were recognized on residential mortgage loans held for sale for the years ended
December 31, 2022, 2021 and 2020.
Mortgage banking revenue was as follows (in thousands):
Year Ended
2022
2021
2020
Production revenue:
Net realized gains on sales of mortgage loans
$
7,416 $
76,282 $
107,847
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
(4,468)
(5,113)
327
(1,838)
51,203
(5,818)
(14,268)
4,516
60,712
45,184
6,697
15,202
(3,898)
125,848
56,512
$
49,365 $
105,896 $
182,360
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.
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
2022
110,541
December 31,
2021
102,008
2020
106,201
Outstanding principal balance of residential mortgage loans serviced for others
$ 18,863,201
$ 16,442,446
$ 16,228,449
Weighted average interest rate
Remaining contractual term (in months)
3.59 %
283
3.58 %
281
3.84 %
280
121
Activity in capitalized mortgage servicing rights during the three years ended December 31, 2022 is as follows (in thousands):
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
Additions
Acquisitions
Change in fair value due to loan runoff
Change in fair value due to market changes
Balance, December 31, 2021
Additions
Acquisitions
Change in fair value due to loan runoff
Change in fair value due to market changes
Balance, December 31, 2022
$
201,886
31,209
(10,801)
(41,598)
(79,524)
101,172
31,132
28,018
(38,761)
41,637
163,198
18,215
47,675
(31,741)
80,261
$
277,608
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
Prepayment rate - based upon loan interest rate, original term and loan type
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 a comparable average
life
Delinquency rate
December 31,
2022
9.51%
7.54%
2021
8.39%
12.11%
$69 - $94
$150 - $500
$69 - $94
$150 - $500
$875 - $8,000
$1,000 - $4,000
105 bps
105 bps
4.06%
2.33%
1.32%
2.05%
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.
122
(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,
2022
2021
2020
$ 108,956 $
21,961 $
60,424
489
374
385
2,545
6,729
3,030
2,961
4,719
3,469
12,304
11,149
6,741
18,270
4,176
29,187
$ 121,749 $
33,484 $
89,996
The aggregate amounts of time deposits in denominations of $250,000 or more at December 31, 2022 and 2021 were $470
million and $828 million, respectively.
Time deposit maturities are as follows: 2023 – $1.2 billion, 2024 – $133 million, 2025 – $40 million, 2026 – $81 million, 2027
– $20 million and $19 million thereafter.
The aggregate amount of overdrawn customer transaction deposits that have been reclassified as loan balances was $10 million
at December 31, 2022 and $3.4 million at December 31, 2021.
123
(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
Other
Total other borrowings
Subordinated debentures1
Total other borrowed funds
Funds purchased
Repurchase agreements
Other borrowings:
Federal Home Loan Bank advances
GNMA repurchase liability
As of
December 31, 2022
Year Ended
December 31, 2022
Balance
Rate
Average
Balance
Rate
$
99,843
0.05 % $
266,344
1.12 % $
2,170,534
4.42 %
998,701
1.02 %
Maximum
Outstanding
At Any
Month End
444,069
3,034,312
4,700,000
4.48 %
1,593,699
2.37 %
4,700,000
10,608
4.06 %
6,692
4.38 %
26,300
3.20 %
28,581
3.12 %
11,011
30,382
4,736,908
1,628,972
2.41 %
131,205
6.34 %
131,206
4.95 %
131,230
$
7,138,490
$ 3,025,223
1.95 %
As of
December 31, 2021
Year Ended
December 31, 2021
Balance
Rate
Average
Balance
Rate
$
199,513
0.05 % $
543,183
0.46 % $
2,126,936
0.08 %
1,695,519
0.33 %
Maximum
Outstanding
At Any
Month End
542,465
2,920,728
—
— %
1,679,315
0.27 %
2,600,000
7,420
4.36 %
11,956
4.06 %
23,856
Paycheck protection program liquidity facility
—
— %
879,145
0.35 %
1,662,598
Other
Total other borrowings
Subordinated debentures1
Total other borrowed funds
Funds purchased
Repurchase agreements
Other borrowings:
Federal Home Loan Bank advances
GNMA repurchase liability
Federal Reserve Bank advances
29,333
3.23 %
29,445
4.18 %
31,875
36,753
2,599,861
0.38 %
131,226
3.95 %
224,058
4.70 %
276,049
$
2,494,428
$ 5,062,621
0.56 %
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
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 %
124
Aggregate annual principal repayments at December 31, 2022 are as follows (in thousands):
2023
2024
2025
2026
2027
Thereafter
Total
$ 6,989,462
3,839
3,964
4,094
2,610
134,521
$ 7,138,490
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.
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 $419 million to secure BOK Financial’s obligations to depositors of
public funds. The unused credit available to BOK Financial at December 31, 2022 pursuant to the Federal Home Loan Bank’s
collateral policies is $2.1 billion.
As a result of the acquisition of CoBiz Financial in 2018, 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.
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.
These LIBOR-based subordinated debentures will be subject to transition on July 1, 2023 in conjunction with the Adjustable
Interest Rate (LIBOR) Act as implemented by the Board of Governors of the Federal Reserve System.
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, 2022 and December 31, 2021.
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.
125
(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):
December 31,
2022
2021
Deferred tax assets:
Available for sale securities mark to market
$
255,244 $
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:
Right-of-use asset
Mortgage servicing rights
Available for sale securities mark to market
Acquired identifiable intangible
Depreciation
Lease financing
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)
69,385
49,839
34,645
12,915
4,955
4,625
5,792
42,808
480,208
40,741
49,001
—
11,280
7,163
12,333
38,357
—
67,339
48,457
33,945
11,368
7,498
5,989
1,883
28,958
205,437
41,291
31,703
21,841
14,307
10,939
11,120
39,698
158,875
170,899
$
321,333 $
34,538
No valuation allowance was necessary on deferred tax assets as of December 31, 2022 and 2021.
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,
2022
2021
2020
$
127,144 $
121,196 $
173,888
18,185
145,329
21,065
142,261
29,889
203,777
(4,700)
(765)
(5,465)
29,777
7,737
37,514
(65,989)
(8,995)
(74,984)
$
139,864 $
179,775 $
128,793
126
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,
2022
2021
2020
$
138,633 $
167,181 $
118,412
(5,714)
13,490
(8,883)
2,338
(6,084)
22,489
(8,801)
4,990
(7,035)
14,251
(6,994)
10,159
$
139,864 $
179,775 $
128,793
Year Ended December 31,
2022
2021
2020
21.0 %
21.0 %
21.0 %
(0.8)
2.0
(1.4)
0.4
(0.7)
2.8
(1.1)
0.6
(1.2)
2.5
(1.2)
1.7
21.2 %
22.6 %
22.8 %
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
2022
2021
2020
$
21,092 $
22,902 $
20,465
3,465
—
(4,974)
3,961
(1,754)
(4,017)
6,384
—
(3,947)
$
19,583 $
21,092 $
22,902
Of the above unrecognized tax benefits, $15.3 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 $1.8 million for 2022, $2.3 million for 2021 and $2.4 million for 2020 in interest and penalties. The
Company had approximately $6.0 million and $6.4 million accrued for the payment of interest and penalties at December 31,
2022 and 2021, 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.
127
(11) Employee Benefits
BOK Financial sponsored a defined benefit cash balance Pension Plan for all employees who satisfied certain age and service
requirements. As of February 28, 2022, the Pension Plan was terminated and was subsequently liquidated in accordance with
the standard plan termination requirements of Title IV of ERISA and Section 12.3 of the Plan. Each participant was permitted
to elect to receive payment of their accrued benefit in the form of a lump sum or an immediate annuity. Those participants who
did not elect a lump sum had their accrued benefit annuitized in the form of an irrevocable commitment from an insurance
company selected to fund the remaining plan benefits in connection with the plan termination. All benefits were paid and all
obligations settled prior to December 31, 2022. Prior to termination, BOK Financial recognized the funded status of its
employee benefit plans. Adjustments required to recognize the Pension Plan's net funded status were made through
accumulated other comprehensive income, net of deferred income taxes. In 2022, as a result of the termination, BOK Financial
paid out $15.5 million in benefits to plan participants to settle all obligations. At the beginning of 2023, the remaining balance
in the Plan of $19.1 million was transferred to the Thrift Plan to cover a portion of the employer contributions for 2022.
The projected benefit obligation and fair value of plan assets, respectively, were $20 million and $39 million at December 31,
2021. The net periodic benefit credit was $2.2 million for December 31, 2021 and $1.3 million for December 31, 2020, and is
included in Personnel expense in the Consolidated Statements of Earnings.
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. An additional 5% of the annual employer matching contribution was
added to each contributing participant's account for 2022 who were employed on the last day of the plan year. 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 $31.7 million for 2022,
$30.5 million for 2021 and $29.9 million for 2020.
128
(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 Company 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,
2022 (in thousands):
Non-vested at January 1, 2020
Granted
Vested
Forfeited
Non-vested at December 31, 2020
Granted
Vested
Forfeited
Non-vested at December 31, 2021
Granted
Vested
Forfeited
Non-vested at December 31, 2022
Restricted Stock
Restricted Stock Units
Weighted
Average
Grant Date
Fair Value
Shares
427,178
236,750 $
(225,527)
(18,167)
420,234
247,917 $
(166,965)
(11,632)
489,554
83.49
83.50
83.10
73.01
94.96
75.83
Weighted
Average
Grant Date
Fair Value
Units
46,689
22,980 $
77.36
—
—
69,669
—
—
17,570 $
88.25
—
—
87,239
—
—
183,809 $
108.23
25,416 $
103.79
(139,859)
(40,620)
492,884
76.80
79.60
(61,645)
91.38
—
51,010
Compensation expense recognized on non-vested restricted stock totaled $9.0 million for 2022, $9.3 million for 2021 and $16.0
million for 2020. Unrecognized compensation cost of non-vested restricted stock totaled $15.5 million at December 31, 2022.
We expect to recognize compensation expense of $8.8 million in 2023, $6.3 million in 2024, and $386 thousand in 2025 on the
non-vested shares of restricted stock. Vesting of 58,098 shares of non-vested restricted stock may be increased or decreased
based on performance criteria defined in the plan documents. The fair value of restricted shares vested totaled $15.0 million,
$13.0 million and $19.5 million during the years ended December 31, 2022, 2021 and 2020, respectively.
Compensation expense recognized on non-vested restricted stock units totaled $597 thousand for 2022, $4.0 million for 2021
and $2.2 million for 2020. Compensation cost for restricted stock units is variable based on the current fair value of BOK
Financial common shares. Unrecognized compensation cost of non-vested restricted stock units totaled $932 thousand at
December 31, 2022. We expect to recognize compensation expense of $578 thousand in 2023, $342 thousand in 2024 and $13
thousand in 2025 on the non-vested restricted stock units. Vesting of 8,258 non-vested restricted stock units may be increased
or decreased based on performance criteria defined in the plan documents. The intrinsic value of share-based liabilities paid in
2022 was $6.3 million. No share-based liabilities were paid in 2021 and 2020.
129
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,
2022
2021
$
95,219 $
92,940
731,664
588,252
(770,808)
(583,040)
(1,596)
(2,933)
$
54,479 $
95,219
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. Loans to affiliates must be fully secured by eligible collateral. At December 31,
2022, loan commitments and equity investments were limited to $448 million to a single affiliate and $896 million to all
affiliates. The largest loan commitment and equity investment to a single affiliate was $284 million, and the aggregate loan
commitments and equity investments to all affiliates were $344 million. The largest outstanding amount to a single affiliate at
December 31, 2022 was $3.9 million, and the total outstanding amounts to all affiliates were $3.9 million. At December 31,
2021, total loan commitments and equity investments to all affiliates were $324 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.
Pursuant to this agreement, BOKF paid QuikTrip approximately $10.7 million in 2022, $10.4 million in 2021 and $10.0 million
in 2020. 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. 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 79% of the Funds’ assets of $3.9 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.
(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.
130
BOK Financial currently owns 252,533 Visa Class B shares which are convertible into 403,826 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 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. 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 to, 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 required 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
August 26, 2016, BOKF, NA was sued in the United States District Court for New Jersey by two bondholders in a putative
class action alleging BOKF, NA participated in the fraudulent sale of securities by the principals. The 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 also alleging BOKF, NA participated in the fraudulent sale of securities by the principals. The
Tulsa County District Court recently granted in part and denied in part BOKF, NA’s motion to dismiss the plaintiffs’ Third
Amended Petition and BOKF is preparing to respond. Management is advised by counsel that, in the Tulsa County District
Court action, a loss is not probable and that the loss, if any, cannot be reasonably estimated.
On December 28, 2015, in an action brought by the SEC, the New Jersey District Court entered a judgment against the
principals involved in issuing the bonds. On January 8, 2020, the 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. The SEC continues to aggressively
pursue collection of the judgment. If the individual principal and his wife cannot pay the bonds, 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 $25 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.
As previously reported, a limited liability partnership sued BOKF, NA in Colorado District Court in 2019 alleging that the
Bank breached various fiduciary duties as trustee of a trust that was a co-general partner of the partnership and claiming in
excess of $60 million in damages. In January 2023 the action was settled at no cost to BOKF, NA in excess of the cost of
defense.
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 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, 2022, the Company has $390 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 $81 million in unfunded
commitments included in Other liabilities on the Consolidated Balance Sheets. At December 31, 2021, the Company had $352
million in interests in various alternative investments and included $106 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, 2022. 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 2022 or 2021.
131
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 $890 million for the year
ended December 31, 2022 and $905 million for the year ended December 31, 2021.
(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 2022, 2021 or 2020.
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 are 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, 2022 and December 31, 2021.
132
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, 2022
December 31, 2021
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
$ 4,460,054
11.69 % $ 4,230,626
12.24 %
6.50%
4,176,978
11.05 % 3,869,454
11.27 %
6.00%
6.00%
2.50%
N/A
8.50%
6.00%
N/A
$ 4,464,763
11.71 % $ 4,235,265
12.25 %
8.00%
4,178,531
11.06 % 3,871,457
11.28 %
8.00%
8.00%
2.50%
N/A
10.50%
8.00%
N/A
$ 4,830,826
12.67 % $ 4,594,787
13.29 %
10.00%
4,478,559
11.85 % 4,164,940
12.13 %
4.00%
4.00%
N/A
N/A
4.00%
4.00%
N/A
$ 4,464,763
9.91 % $ 4,235,265
5.00%
4,178,531
9.31 % 3,871,457
8.55 %
7.84 %
133
Accumulated Other Comprehensive Income (Loss)
AOCI includes unrealized gains and losses on available for sale ("AFS") securities. AOCI also includes unrealized losses on
AFS securities that were transferred from AFS to investment securities in the second quarter of 2022. Such amounts are being
amortized over the estimated remaining life of the security as an adjustment to yield, offsetting the related amortization of
premium on the transferred securities. 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, 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
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, 2021
Net change in unrealized gain (loss)
Unrealized Gain (Loss) on
Available
for Sale
Securities
Investment
Securities
Transferred
from AFS
Employee
Benefit
Plans
Total
$
104,996 $
— $
(73) $ 104,923
312,576
(9,910)
302,666
72,630
230,036
335,032
(343,730)
(3,704)
(347,434)
(82,177)
(265,257)
69,775
(1,227,414)
—
—
—
—
—
—
—
—
—
—
—
—
—
1,220
313,796
—
(9,910)
1,220
303,886
311
909
836
72,941
230,945
335,868
2,361
(341,369)
—
(3,704)
2,361
(345,073)
601
1,760
2,596
—
—
—
(3,483)
—
(81,576)
(263,497)
72,371
(1,227,414)
—
42,514
(3,483)
971
Transfer of net unrealized loss from AFS to investment securities
267,509
(267,509)
Reclassification adjustments included in earnings:
Interest revenue, Investment securities
Operating expense, Personnel
Loss on available for sale securities, net
—
—
971
42,514
—
—
Other comprehensive income (loss), before income taxes
(958,934)
(224,995)
(3,483)
(1,187,412)
Federal and state income tax
(224,541)
(52,658)
(887)
(278,086)
Other comprehensive income (loss), net of income taxes
(734,393)
(172,337)
(2,596)
(909,326)
Balance, December 31, 2022
$
(664,618) $
(172,337) $
— $ (836,955)
134
(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
2022
2021
2020
$ 520,273 $ 618,121 $ 435,030
3,803
4,299
2,612
Numerator for basic earnings per share – income available to common shareholders
516,470
613,822
432,418
Effect of reallocating undistributed earnings of participating securities
—
—
—
Numerator for diluted earnings per share – income available to common shareholders
$ 516,470 $ 613,822 $ 432,418
Denominator:
Weighted average shares outstanding
67,706,014
69,071,511
70,259,553
Less: Participating securities included in weighted average shares outstanding
493,286
479,591
418,576
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
67,212,728
68,591,920
69,840,977
7
2,402
3,195
67,212,735
68,594,322
69,844,172
$
$
7.68 $
7.68 $
8.95 $
8.95 $
6.19
6.19
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 and capital costs.
Credit costs are attributed to the lines of business based on net loans charged off or recovered. 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 wholesale
borrowing rates 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.
135
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 a proxy of wholesale borrowing rates 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
wholesale funding 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 wholesale funding rates 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 or recovered as attributed to the lines of
business. The provision for credit losses in excess of net charge-offs or recoveries is attributed to Funds Management and
Other.
Reportable segments reconciliation to the Consolidated Financial Statements for the year ended December 31, 2022 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
Net loans charged off and 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
$
818,213 $
69,646 $
155,974 $
167,547 $
1,211,380
(73,764)
744,449
88,603
158,249
5,623
161,597
(20,462)
147,085
—
1,211,380
17,726
5,260
(175)
7,189
30,000
726,723
241,594
290,717
677,600
1
—
(1,903)
67,337
608,361
148,000
460,361
152,989
121,819
209,210
65,598
(93,346)
80,261
139
44,965
7,687
1,798
5,889
161,772
339,501
312,177
189,096
4
—
—
50,241
138,859
32,686
106,173
139,896
(59,657)
352,376
(272,137)
93,341
(80,261)
1,764
(162,543)
(94,750)
(42,620)
(52,130)
1,181,380
643,257
1,164,480
660,157
—
—
—
—
660,157
139,864
520,293
—
—
—
20
20
shareholders
$
460,361 $
5,889 $
106,173 $
(52,150) $
520,273
Average assets
$ 29,084,957 $ 10,230,437 $
16,209,684 $
(8,500,442) $
47,024,636
136
Reportable segments reconciliation to the Consolidated Financial Statements for the year ended December 31, 2021 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
Net loans charged off and 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
$
606,902 $
67,856 $
214,458 $
228,817 $
1,118,033
(71,167)
535,735
35,671
103,527
(386)
214,072
35,882
264,699
—
1,118,033
31,128
4,009
(223)
(134,914)
(100,000)
504,607
262,402
281,089
485,920
154
—
13,001
49,941
449,134
120,618
328,516
99,518
173,341
209,596
63,263
(21,871)
41,637
85
46,010
37,104
9,461
27,643
214,295
298,962
320,726
192,531
—
—
—
40,341
152,190
38,944
113,246
399,613
21,070
366,297
54,386
21,717
(41,637)
(13,086)
(136,292)
157,672
10,752
146,920
1,218,033
755,775
1,177,708
796,100
—
—
—
—
796,100
179,775
616,325
Net loss attributable to non-controlling interests
—
—
—
(1,796)
(1,796)
Net income attributable to BOK Financial Corp.
shareholders
$
328,516 $
27,643 $
113,246 $
148,716 $
618,121
Average assets
$ 28,536,881 $ 10,029,687 $
19,425,475 $
(7,840,340) $
50,151,703
137
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
Net loans charged off and 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
69,000
147,004
(13,528)
117,290
70,972
255,662
—
1,108,444
69,475
2,805
(209)
150,521
222,592
519,013
187,361
258,903
447,471
193
—
(2,677)
24,862
420,125
114,120
306,005
144,199
243,719
230,402
157,516
95,344
(79,524)
276
42,155
131,457
33,483
97,974
117,499
398,834
326,016
190,317
4
—
—
35,359
154,962
39,660
115,302
105,141
12,406
348,987
(231,440)
(95,541)
79,524
2,401
(102,376)
(142,680)
(58,470)
(84,210)
885,852
842,320
1,164,308
563,864
—
—
—
—
563,864
128,793
435,071
—
—
—
41
41
shareholders
$
306,005 $
97,974 $
115,302 $
(84,251) $
435,030
Average assets
$ 26,994,075 $ 9,842,114 $
15,695,646 $
(3,827,445) $
48,704,390
138
(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,
2022 (in thousands):
Commercial
Consumer
Wealth
Management
Funds
Management
and Other
Consolidated
Out of
Scope1
In Scope2
Trading revenue
$
— $
— $
20,332 $
— $
20,332 $
20,332 $
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
34,676
—
—
25,048
59,724
81,097
12,397
6,440
99,934
—
—
—
—
—
52,779
115
—
556
53,450
—
—
—
20,765
—
—
—
—
—
3,560
37
—
3,597
—
—
—
—
—
1,884
25,229
23,312
4,612
55,037
(1,838)
53,236
51,398
11,894
1,053
16,403
12,879
20,600
9,987
—
—
—
45,716
16,403
12,879
45,648
45,716
—
—
23,730
71,267
9,987
140,978
89,778
(73)
—
410
337
99,075
23,775
50,404
23,242
6
—
392
398
—
—
—
84,590
12,434
7,242
104,266
99,075
23,775
50,404
(170)
23,072
196,496
(170)
196,326
1,965
77
—
102
2,144
—
—
—
69,294
—
5
—
—
5
—
(2,033)
(2,033)
(46,311)
56,628
25,426
23,312
5,270
110,636
(1,838)
51,203
49,365
55,642
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,838)
51,203
49,365
25,844
—
—
16,403
12,879
21,918
51,200
84,590
12,434
7,242
104,266
99,075
23,775
50,404
23,072
196,326
56,628
25,426
23,312
5,270
110,636
—
—
—
29,798
$
233,873 $
121,926 $
339,538 $
(38,124) $
657,213 $
164,987 $
492,226
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
139
Fees and commissions revenue by reportable segment and primary service line is as follows for the year ended December 31,
2021 (in thousands):
Commercial
Consumer
Wealth
Management
Funds
Management
and Other
Consolidated
Out of
Scope1
In Scope2
Trading revenue
$
— $
— $
27,595 $
— $
27,595 $
27,595 $
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
23,424
—
—
19,129
42,553
76,603
11,806
4,502
92,911
—
—
—
—
—
50,213
104
—
94
50,411
—
—
—
41,206
—
—
—
—
—
3,591
55
—
3,646
—
—
—
—
—
1,821
21,439
23,714
4,340
51,314
60,712
47,055
107,767
10,637
300
18,762
11,765
16,742
(3,292)
—
—
(1,436)
20,432
18,762
11,765
34,435
20,432
—
—
16,272
75,164
(4,728)
112,989
64,299
(67)
—
169
102
97,582
14,805
50,765
15,300
6
—
318
324
—
—
—
80,133
11,861
4,989
96,983
97,582
14,805
50,765
(178)
15,122
178,452
(178)
178,274
2,326
70
—
87
2,483
—
—
—
42,564
—
9
—
—
9
—
(1,871)
(1,871)
(24,457)
54,360
21,622
23,714
4,521
104,217
60,712
45,184
105,896
69,950
—
—
—
—
—
—
—
—
—
—
—
—
—
—
60,712
45,184
105,896
54,349
—
—
18,762
11,765
18,163
48,690
80,133
11,861
4,989
96,983
97,582
14,805
50,765
15,122
178,274
54,360
21,622
23,714
4,521
104,217
—
—
—
15,601
$
227,081 $
173,364 $
298,765 $
(30,901) $
668,309 $
224,544 $
443,765
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
140
Fees and commissions revenue by reportable segment and primary service line is as follows for the year ended December 31,
2020 (in thousands):
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
(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.
141
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
years ended December 31, 2022 and 2021, respectively. Transfers between significant other observable inputs and significant
unobservable inputs during the years ended December 31, 2022 and 2021 were immaterial.
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, 2022 and 2021.
142
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, 2022 (in
thousands):
Quoted
Prices in
Active
Markets for
Identical
Instruments
Total
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
—
—
—
—
—
—
—
—
—
—
473
473
—
7,218
Assets:
Trading securities:
U.S. government securities
$
9,823 $
4,970 $
4,853 $
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
4,406,848
21,484
26,006
—
—
—
4,406,848
21,484
26,006
4,464,161
4,970
4,459,191
898
624,500
5,814,496
577,576
4,475,917
473
898
—
—
—
—
—
—
624,500
5,814,496
577,576
4,475,917
—
Total available for sale securities
Fair value option securities — Residential agency mortgage-backed
11,493,860
898
11,492,489
securities
Residential mortgage loans held for sale1
Mortgage servicing rights, net2
Derivative contracts, net of cash margin3
Liabilities:
296,590
75,272
277,608
880,343
296,590
68,054
—
—
—
—
277,608
2,110
878,233
—
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
554,900
554,884
16
of residential mortgage loans intended for sale to U.S. government agencies that fail to meet conforming standards and are valued at
77.55% 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 and liability positions that were
valued based on quoted prices in active markets for identical instruments (Level 1) are primarily exchange-traded interest rate derivative
contracts held for trading purposes.
143
The fair value of financial assets and liabilities that are measured on a recurring basis is as follows as of December 31, 2021 (in
thousands):
Quoted
Prices in
Active
Markets for
Identical
Instruments
Total
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
—
—
—
—
—
—
—
—
—
—
472
472
—
6,326
Assets:
Trading securities:
U.S. government securities
$
23,610 $
4,999 $
18,611 $
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
9,068,900
25,783
18,520
—
—
—
9,068,900
25,783
18,520
9,136,813
4,999
9,131,814
1,000
508,365
8,006,616
24,339
4,617,025
472
1,000
—
—
—
—
—
—
508,365
8,006,616
24,339
4,617,025
—
Total available for sale securities
Fair value option securities — Residential agency mortgage-backed
13,157,817
1,000
13,156,345
securities
Residential mortgage loans held for sale1
Mortgage servicing rights, net2
Derivative contracts, net of cash margin3
Liabilities:
43,770
192,295
163,198
—
—
—
43,770
185,969
—
163,198
1,097,297
8,331
1,088,966
—
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
275,625
275,625
—
of residential mortgage loans intended for sale to U.S. government agencies that fail to meet conforming standards and are valued at
95.07% 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 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 energy derivative
contracts, fully offset by cash margin.
144
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
Corporate Treasury, 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.
145
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 nonaccruing 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, 2022
Fair Value Adjustments for the
Year Ended December 31, 2022
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
Other gains
(losses), net
Nonaccruing loans
Real estate and other repossessed assets
$
— $
—
57 $
3,873
4,998 $
1,699
16,399 $
—
—
(6,437)
Carrying Value at December 31, 2021
Fair Value Adjustments for the
Year Ended December 31, 2021
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
Other gains
(losses), net
Nonaccruing loans
Real estate and other repossessed assets
$
— $
—
808 $
1,706
1,990 $
—
2,087 $
—
—
(150)
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.
146
A summary of quantitative information about Non-recurring Fair Value Measurements based on Significant Unobservable
Inputs (Level 3) as of December 31, 2022 follows (in thousands):
Quantitative Information about Level 3 Non-recurring Fair Value Measurements
Nonaccruing loans
Fair
Value
Valuation
Technique(s)
$
4,998 Discounted cash
flows
Real estate and other repossessed assets
1,699 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
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)
9% - 24% (23%)1
N/A
1 Represents fair value as a percentage of the unpaid principal balance.
A summary of quantitative information about Non-recurring Fair Value Measurements based on Significant Unobservable
Inputs (Level 3) as of December 31, 2021 follows (in thousands):
Nonaccruing loans
Quantitative Information about Level 3 Non-recurring Fair Value Measurements
Fair
Value
Valuation
Technique(s)
$
1,990 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
Range
(Weighted Average)
16% - 97% (37%)1
1 Represents fair value as a percentage of the unpaid principal balance.
The fair value of pension plan assets was approximately $39 million at December 31, 2021, determined by significant other
observable inputs. Fair value adjustments of pension plan assets along with changes in the projected benefit obligation were
recognized in other comprehensive income. The Pension Plan was terminated during 2022, and all benefits have been paid and
obligations settled.
147
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 are measured at fair value on a non-
recurring basis (dollars in thousands):
December 31, 2022
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
$
943,810 $
943,810 $
943,810 $
— $
Interest-bearing cash and cash equivalents
457,906
457,906
457,906
—
Trading securities:
U.S. government securities
9,823
9,823
4,970
4,853
Residential agency mortgage-backed securities
4,406,848
4,406,848
21,484
26,006
21,484
26,006
—
—
—
4,406,848
21,484
26,006
4,464,161
4,464,161
4,970
4,459,191
Municipal securities
Other trading securities
Total trading securities
Investment securities:
Municipal securities
Residential agency mortgage-backed securities
Commercial 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
Commercial agency mortgage-backed securities
Other debt securities
Total available for sale securities
170,629
176,621
2,315,219
2,143,360
15,609
12,788
14,588
12,199
2,514,245
2,346,768
(558)
—
2,513,687
2,346,768
898
898
624,500
624,500
5,814,496
5,814,496
577,576
577,576
4,475,917
4,475,917
473
473
11,493,860
11,493,860
898
11,492,489
—
—
—
—
—
—
—
—
—
—
—
—
473
473
—
7,218
—
—
—
—
—
—
—
38,106
138,515
2,143,360
14,588
12,199
—
—
—
2,208,253
138,515
—
—
2,208,253
138,515
898
—
—
—
—
—
—
624,500
5,814,496
577,576
4,475,917
—
296,590
68,054
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
13,891,453
4,454,048
14,312
3,531,410
21,891,223
—
21,891,223
277,608
2,110
878,233
—
—
—
—
—
16
—
—
—
33,018,863
1,431,245
7,005,305
121,497
554,884
—
—
Fair value option securities — Residential agency mortgage-backed
securities
Residential mortgage loans held for sale
296,590
75,272
296,590
75,272
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
14,198,187
13,891,453
4,606,777
4,454,048
14,312
14,312
3,737,874
3,531,410
22,557,150
21,891,223
(235,704)
—
22,321,446
21,891,223
277,608
880,343
277,608
880,343
33,018,863
33,018,863
1,461,842
7,007,285
131,205
554,900
1,431,245
7,005,305
121,497
554,900
148
December 31, 2021
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
$
712,067 $
712,067 $
712,067 $
Interest-bearing cash and cash equivalents
2,125,343
2,125,343
2,125,343
— $
—
Trading securities:
U.S. government securities
23,610
23,610
4,999
18,611
Residential agency mortgage-backed securities
9,068,900
9,068,900
9,136,813
9,136,813
4,999
9,131,814
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 securities
Municipal securities
Residential agency mortgage-backed securities
Residential non-agency mortgage-backed securities
Other debt securities
Total available for sale securities
25,783
18,520
25,783
18,520
203,772
223,609
6,939
288
7,500
286
210,999
231,395
(555)
—
210,444
231,395
1,000
508,365
1,000
508,365
8,006,616
8,006,616
24,339
24,339
472
472
—
—
—
—
—
—
—
165,911
—
—
165,911
—
165,911
—
—
—
—
—
472
472
—
6,326
—
—
—
9,068,900
25,783
18,520
—
—
—
—
—
—
57,698
7,500
286
65,484
—
65,484
1,000
—
—
—
—
—
—
508,365
8,006,616
24,339
4,617,025
—
43,770
185,969
Commercial agency mortgage-backed securities
4,617,025
4,617,025
13,157,817
13,157,817
1,000
13,156,345
Fair value option securities — Residential agency mortgage-backed
securities
Residential mortgage loans held for sale
43,770
192,295
43,770
192,295
Loans:
Commercial
Commercial real estate
Paycheck protection program
Loans to individuals
Total loans
Allowance for loan losses
Loans, net of allowance
Mortgage servicing rights
12,506,465
12,395,664
3,831,325
3,786,767
276,341
269,912
3,591,549
3,586,878
20,205,680
20,039,221
(256,421)
—
19,949,259
20,039,221
163,198
163,198
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
12,395,664
3,786,767
269,912
3,586,878
20,039,221
—
20,039,221
163,198
Derivative instruments with positive fair value, net of cash margin
1,097,297
1,097,297
8,331
1,088,966
—
Deposits with no stated maturity
Time deposits
Other borrowed funds
Subordinated debentures
Derivative instruments with negative fair value, net of cash margin
39,537,731
39,537,731
1,704,328
2,363,202
131,226
275,625
1,703,886
2,360,746
141,761
275,625
—
—
—
—
—
—
—
—
141,761
275,625
39,537,731
1,703,886
2,360,746
—
—
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.
149
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.
(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 subsidiary
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 (loss)
Total shareholders’ equity
Total liabilities and shareholders’ equity
December 31,
2022
2021
$
165,395 $
230,647
65,169
65,187
4,351,280
4,951,405
217,011
18,302
228,447
22,011
$ 4,817,157 $ 5,497,697
$
3,303 $
2,739
131,205
134,508
131,226
133,965
5
5
1,390,395
1,378,794
4,824,164
4,447,691
(694,960)
(836,955)
(535,129)
72,371
4,682,649
5,363,732
$ 4,817,157 $ 5,497,697
150
Statements of Earnings
(In thousands)
Dividends, interest and fees received from bank subsidiary
$
228,689 $
483,868 $
179,140
Year Ended December 31,
2022
2021
2020
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
43,281
1,172
8,030
767
25,050
907
273,142
492,665
205,097
6,490
3,005
9,495
10,535
2,914
13,449
263,647
479,216
(4,279)
(3,415)
259,368
475,801
(1,776)
261,144
300,330
(41,201)
(4,202)
480,003
126,380
11,738
13,944
2,697
16,641
188,456
1,465
189,921
(4,502)
194,423
276,217
(35,610)
Net income attributable to BOK Financial Corp. shareholders
$
520,273 $
618,121 $
435,030
151
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
Other losses (gains), net
Change in other assets
Change in other liabilities
Net cash provided by operating activities
Cash Flows From Investing Activities:
Investment in subsidiaries
Dissolution of subsidiaries
Net cash used in investing activities
Cash Flows From Financing Activities:
Repayment of subordinated debentures
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,
2022
2021
2020
$
520,273 $
618,121 $
435,030
(300,330)
(126,380)
(276,217)
41,201
(11,738)
4,279
1,317
543
3,415
1,160
389
35,610
(1,465)
15,225
850
267,283
484,967
209,033
(31,552)
(25,665)
(14,807)
2,611
4,457
—
(28,941)
(21,208)
(14,807)
—
(150,000)
—
(4,907)
(143,800)
(154,887)
(303,594)
(65,252)
230,647
(4,874)
(144,105)
(117,938)
(416,917)
46,842
183,805
(4,933)
(144,437)
(75,830)
(225,200)
(30,974)
214,779
$
$
165,395 $
230,647 $
183,805
6,203 $
10,559 $
14,064
The Company evaluated events from the date of the Consolidated Financial Statements on December 31, 2022 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.
152
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 2023 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 2022 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 2023 Annual Proxy Statement is incorporated herein by reference.
153
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 2023 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 2023 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 2023 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, 2022, 2021 and 2020
Consolidated Statements of Comprehensive Income for the years ended December 31, 2022, 2021 and 2020
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Changes in Equity for the years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020
Notes to Consolidated Financial Statements
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.
154
(a) (3) Exhibits
Exhibit
Number
Description of Exhibit
3.0
3.1
4.0
4.3
4.4
10.4
10.4.7
10.4.10
10.4.11
10.4.12
10.7.7
10.7.8
10.7.9
10.7.10
10.7.11
10.7.12
10.7.14
10.7.16
10.8
10.8.1
21
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.
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 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 January 1, 2022) between BOK Financial and
Stacy C. Kymes.
Employment Agreement between BOK Financial and Scott B. Grauer dated December 18, 2013.
Employment Agreement between BOK Financial and Martin E. Grunst dated March 1, 2023.
BOK Financial Corporation 2001 Stock Option Plan, incorporated by reference to Exhibit 4.0 of S-8
Registration Statement No. 333-62578.
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.
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.
155
Exhibit
Number
Description of Exhibit
23
31.1
31.2
32
99
101
104
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 Cover Page, (ii) the Consolidated Balance
Sheets, (iii) the Consolidated Statements of Earnings, (iv) the Consolidated Statements of Changes in Equity,
(v) the Consolidated Statement of Cash Flows and (vi) 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.
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
(b)
Exhibits
See Item 15 (a) (3) above.
(c)
Financial Statement Schedules
See Item 15 (a) (2) above.
156
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: March 1, 2023 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 March 1, 2023, 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/ Stacy C. Kymes
Stacy C. Kymes
Director, President and Chief Executive Officer
/s/ Steven E. Nell
Steven E. Nell
Director, Executive Vice President and
Chief Financial Officer
/s/ Michael J. Rogers
Michael J. Rogers
Senior Vice President and
Chief Accounting Officer
157
Alan S. Armstrong
/s/ Steven Bangert
Steven Bangert
/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
DIRECTORS
/s/ E. Carey Joullian, IV
E. Carey Joullian, IV
/s/ Stanley A. Lybarger
Stanley A. Lybarger
/s/ Steven J. Malcolm
Steven J. Malcolm
/s/ Emmet C. Richards
Emmet C. Richards
/s/ Claudia San Pedro
Claudia San Pedro
David F. Griffin
Peggy I. Simmons
/s/ V. Burns Hargis
V. Burns Hargis
Douglas D. Hawthorne
Kimberley D. Henry
Michael C. Turpen
/s/ Rose M. Washington
Rose M. Washington
158
Exhibit 10.4.12
EMPLOYMENT AGREEMENT
This Employment Agreement (“Agreement”) is made this 2nd day of , November 2022 to
be effective on March 1, 2023 (the “Effective Date”) between the following parties (“Parties”):
(i)
BOK Financial Corporation, an Oklahoma corporation
Financial”); and,
(“BOK
(ii) Martin E. Grunst, an individual currently residing in Tulsa, Oklahoma (the
“Executive”).
BOK Financial and Executive, in consideration of the promises and covenants set forth
herein (the receipt and adequacy of which are hereby acknowledged) and intending to be legally
bound hereby, agree as follows:
(1)
Purpose of This Agreement. The purpose of this Agreement is as follows:
(a)
(b)
(c)
BOK Financial is a financial holding company, subject to regulation by the Board
of Governors of the Federal Reserve System. The subsidiaries of BOK Financial
include BOKF, NA, a national association engaged in banking and BOSC, Inc., a
registered broker-dealer.
The Executive has extensive prior experience in financial services and banking
and is currently employed as the Executive Vice President, Chief Risk Officer, of
BOKF, NA.
The purpose of this Agreement is to set forth the terms and conditions on which
BOK Financial shall employ the Executive and the Executive shall serve as an
officer of BOK Financial, BOKF, NA, and other of their affiliates.
Prior Agreement Superseded. This agreement supersedes, from and after the Effective
Date, any employment agreement between Executive and BOK Financial and/or BOKF,
NA (excluding, for avoidance of doubt, any rights of Executive arising under the BOK
Financial 2003 Stock Option Plan or, the BOK Financial 2009 Omnibus Incentive Plan).
Employment. Effective as of the Effective Date, BOK Financial hereby employs the
Executive, and the Executive hereby accepts employment with BOK Financial, on the
following terms and conditions:
(a)
(b)
Executive shall serve as Executive Vice President, Chief Financial Officer, BOK
Financial and BOKF, NA. Executive shall be responsible for those divisions and
business lines of BOK Financial and BOKF, NA as the Chief Executive Officer
has heretofore established and as may hereafter be established by the Chief
Executive Officer from time to time.
Executive shall devote all time and attention reasonably necessary to the affairs of
BOK Financial and BOKF, NA and shall serve BOK Financial and BOKF, NA
diligently, loyally, and to the best of his ability.
(2)
(3)
(c)
(d)
Executive shall serve in such other or additional positions as an officer and/or
director of BOK Financial and BOKF, NA or any of their affiliates as the Chief
Executive Officer of BOK Financial may reasonably request; provided, however,
Executive’s residence and place of work shall be in the Tulsa, Oklahoma area.
Notwithstanding anything herein to the contrary, Executive shall not be precluded
from engaging in any charitable, civic, political or community activity or
membership in any professional organization.
(4)
Compensation. As the sole, full and complete compensation to the Executive for the
performance of all duties of Executive under this Agreement and for all services rendered
by Executive to BOK Financial and/or to any affiliate of BOK Financial:
(a)
(b)
(c)
(d)
BOK Financial shall pay the Executive an annual salary (the “Annual Salary”)
equal to Executive’s Annual Salary in effect as of the Effective Date during the
Term (as hereafter defined). The Annual Salary shall be payable in installments
in arrears, less usual and customary payroll deductions for FICA, federal and state
withholding, and the like, at the times and in the manner in effect in accordance
with the usual and customary payroll policies generally in effect from time to time
at BOK Financial.
The Annual Salary shall not be decreased at any time during the Term of this
Agreement. The Annual Salary may be increased annually in accordance with
BOK Financial’s compensation review practices in effect from time to time for
senior executives.
BOK Financial shall pay and provide to Executive pension, thrift, medical
insurance, disability insurance plan benefits, and other fringe benefits, on the
same terms and conditions generally in effect for senior executive employees of
the BOK Financial and its affiliates (the “Additional Benefits”).
BOK Financial may, from time to time in BOK Financial’s sole discretion
consistent with the practices generally in effect for senior executive employees of
the BOK Financial and its affiliates, pay or provide, or agree to pay or provide
Executive a bonus, stock option, restricted stock, other incentive or performance
based compensation.
(i)
(ii)
BOKF Financial shall provide annual incentive and long term incentive
awards to Executive in accordance with BOK Financial’s Executive
Incentive Compensation Plan as adopted by the BOK Financial’s Board of
Directors from time to time.
All such bonus, stock option, restricted stock, or other incentive or
performance based compensation, regardless of its nature (hereinafter
called “Performance Compensation”) shall not constitute Annual Salary.
(e)
BOK Financial shall reimburse Executive for reasonable and necessary
entertainment, travel and other expenses in accordance with BOK Financial’s
standard policies in general effect for senior executives of BOK Financial.
2
(f)
(g)
(h)
Executive shall be allowed vacation, holidays, and other employee benefits not
described above in accordance with BOK Financial’s standard policy in general
effect for BOK Financial’s senior executives. Executive shall be entitled to four
weeks paid vacation each year.
BOK Financial shall permit Executive to participate in a deferred compensation
plan on the terms and conditions established by BOK Financial for senior
executives.
Executive hereby agrees to accept the foregoing compensation as the sole, full and
complete compensation to Executive for the performance of all duties of
Executive under this Agreement and for all services rendered by Executive to
BOK Financial or any affiliate of BOK Financial.
(5)
Term of Employment.
term (the “Term”) of Executive’s employment
(“Employment”) pursuant to this Agreement shall commence on the Effective Date (the
“Commencement”) and shall continue thereafter provided that upon ninety days prior
written notice, either Party may terminate this Agreement.
The
(6)
Termination of Employment. Notwithstanding the provisions of paragraph 5 of this
Agreement, the Employment may be terminated on the following terms and conditions:
(a)
Termination by BOK Financial Without Cause. In the event BOK Financial
terminates Employment of Executive without cause during the Term or upon
termination of this Agreement as provided in Paragraph 5:
(i)
BOK Financial shall forthwith upon such termination (A) pay to Executive
BOK Financial’s standard severance pay for senior executives in effect at
the time of termination and, in addition, an amount equal to Executive’s
then Annual Salary payable in one lump sum payment, (B) the Executive
shall be entitled to receive any Additional Benefits accrued through, but
not beyond the effective date of such termination which are payable under
the terms and provisions of benefit plans then in effect in accordance with
paragraph 4(c) above, (C) Executive shall be entitled to receive pay for
vacation in accordance with BOK Financial’s then existing policy for
terminating senior executives, (D) options held by Executive under the
BOKF 2003 Stock Option Plan and the BOKF 2009 Omnibus Incentive
Plan shall vest shall be exercisable for a period of ninety days following
such termination as provided in such plans, (E) Restricted stock held by
Executive shall continue to be owned by the Executive, but shall remain
subject to all restrictions applicable to the restricted stock as provided
under the Executive Incentive Plan and the 2009 Omnibus Incentive Plan,
and (F) Executive shall be entitled to receive those amounts due Executive
pursuant to paragraph 8(b) and shall be bound by the Non-Solicitation
Agreement (as hereafter defined).
3
(ii)
If Executive is terminated for any reason other than for cause following a
Change of Control (as hereafter defined), BOK Financial shall pay
Executive upon such termination in one lump sum payment an amount
equal to two times Executive’s then Annual Salary at the time of
termination in addition to an amount equal to Executive’s then Annual
Salary through, but not beyond the effective date of the termination. This
payment shall be in lieu of any payment that would otherwise be paid
pursuant to paragraph 6(a)(i)(A), but Executive shall be entitled to the
benefit of the other provisions of paragraph 6(a)(i). As used herein, a
Change of Control shall be deemed to have occurred if, and only if:
(A)
George B. Kaiser, affiliates of George B. Kaiser, George B. Kaiser
Foundation, George Kaiser Family Foundation, and/or members of
the family of George B. Kaiser collectively cease to own more
shares of the voting capital stock of BOK Financial than any other
shareholder (or group of shareholders acting in concert to control
BOK Financial to the exclusion of George B. Kaiser, affiliates of
George B. Kaiser, George B. Kaiser Foundation, George Kaiser
Family Foundation, and/or members of the family of George B.
Kaiser); or,
(B)
BOK Financial shall cease to own directly and indirectly more than
fifty percent (50%) of the voting capital stock of BOKF, NA.
(b)
Termination by BOK Financial for Cause. BOK Financial may terminate the
Employment for cause on the following terms and conditions:
(i)
BOK Financial shall be deemed to have cause to terminate Executive’s
Employment only in one or more of the following events:
(A)
(B)
(C)
(D)
The Executive shall fail to substantially perform his obligations
under this Agreement (except as a result of Executive’s incapacity
due to physical or mental illness) after having first received notice
of such failure and thirty days within which to correct the failure;
The Executive commits any act which is reasonably deemed to
have been intended by Executive to injure BOK Financial or any
of its affiliates;
The Executive is charged, indicted or convicted of any criminal act
or act involving moral turpitude which BOK Financial reasonably
deems adversely affects the suitability of Executive to serve BOK
Financial or any of its affiliates;
The Executive commits any dishonest or fraudulent act which
BOK Financial reasonably deems material to BOK Financial or
any of its affiliates, including the reputation of BOK Financial or
any of its affiliates; or,
4
(ii)
(iii)
(E)
Any refusal by Executive to obey orders or instructions of the
Chief Executive Officer of BOK Financial or BOKF, NA, unless
such instructions would require Executive to commit an illegal act,
could subject Executive to personal liability, would require
Executive to violate the terms of this Agreement, are inconsistent
with recognized ethical standards, or would otherwise be
inconsistent with the duties of an officer of a bank.
BOK Financial shall be deemed to have cause to terminate Executive’s
Employment only when a majority of the members of the Board of
Directors of BOK Financial finds that, in the good faith opinion of such
majority, the Executive committed one or more of the acts set forth in
clauses (A) through (E) of the preceding subparagraph, such finding to
have been made after at least twenty (20) business days’ notice to the
Executive and an opportunity for the Executive, together with his counsel,
to be heard before such majority. The determination of such majority,
made as set forth above, shall be binding upon BOK Financial and the
Executive.
The effective date of a termination for cause shall be the date of the action
of such majority finding the termination was with cause. In the event
BOK Financial terminates Executive’s Employment for cause, (A) BOK
Financial shall pay Executive the Executive’s then Annual Salary through,
but not beyond, the effective date of the termination and (B) the Executive
shall receive those Additional Benefits accrued through but not beyond the
effective date of such termination which are payable under the terms and
provisions of benefit plans then in effect in accordance with paragraph
3(c) above, (C) BOK Financial shall pay the Executive for vacation in
accordance with BOK Financial’s then existing policy for senior
executives, and (D)Executive shall be entitled to receive those amounts
due Executive pursuant to paragraph 8(b) and Executive shall be bound by
the provisions of the Non-Solicitation Agreement.
(7)
Provisions Respecting Illness and Death. In the event Executive becomes disabled as
defined in Section 409A(a)(2)(C) of the Internal Revenue Code, BOK Financial may
terminate Executive’s Employment without further or additional compensation being due
the Executive from BOK Financial except Annual Salary accrued through the date of
termination, Additional Benefits accrued through the date of such termination under
benefit plans then in effect in accordance with paragraph 4(c) above, and vacation in
accordance with BOK Financial’s then existing policy for senior executives, and the
provisions of paragraph 8 shall apply. Without limiting the generality of paragraph 4(c),
Executive shall upon such termination receive those benefits provided in BOK
Financial’s long term disability policy then in effect. In the event of the death of the
Executive, the Employment of the Executive shall automatically terminate as of the date
of death without further or additional compensation being due the Executive, except BOK
Financial shall pay to the estate of the Executive the Annual Salary in effect on the date
of death and accrued through the date of termination and the Additional Benefits accrued
through the date of such termination under benefit plans then in effect in accordance with
paragraph 4(c) above. BOK Financial shall make the payments due Executive in one
lump sum within forty-five days following the date of termination.
5
(8)
Agreement Not to Solicit. The provisions of this paragraph are hereafter called the
“Non-Solicitation Agreement”.
(a)
(b)
(c)
(d)
Executive agrees that, for a period of two (2) years following any termination of
the Employment for cause, and for a period of one (1) year following any
termination of the Employment for any reason other than cause (including
expiration of the Term), Executive shall not directly or indirectly (whether as an
officer, director, employee, partner, stockholder, creditor or agent, or
representative of other persons or entities) contact or solicit, in any manner
indirectly or directly, individuals or entities who were at any time during the
original or any extended Term clients of BOK Financial or any of its affiliates for
the purpose of providing banking, trust, investment, or other services provided by
BOK Financial or any of its affiliates during the Term or contact or solicit
employees of BOK Financial or any affiliates of BOK Financial to seek
employment with any person or entity except BOK Financial and its affiliates.
This Non-Solicitation Agreement shall not apply to ownership by Executive of up
to ten percent (10%) of the common stock of a corporation traded on the facilities
of a national securities exchange engaged in the banking business of which
Executive is not a director, officer, employee, agent or representative.
BOK Financial shall pay Executive, in addition to any other amounts which may
be due Executive, during each year in which the Non-Solicitation Agreement is in
effect, $3,000 payable in installments in arrears, less usual and customary payroll
deductions for FICA, federal and state withholding, and the like, at the times and
in the manner in effect in accordance with the usual and customary payroll
policies generally in effect from time to time at BOK Financial. Notwithstanding
the foregoing, the amounts due for the first six months of the Non-Competition
Agreement shall be paid in a lump sum as soon administratively possible
following such six month period if Executive is determined to be a "specified
employee as defined in Section 409A(a)(2)(B)(i).
Executive agrees that the Non-Solicitation Agreement and all the restrictions set
forth in this Non-Solicitation Agreement are fair and reasonable.
Executive agrees that (i) any remedy at law for any breach of this Non-
Solicitation Agreement would be inadequate, (ii) in the event of any breach of this
Non-Solicitation Agreement, the terms of this Non-Solicitation Agreement shall
constitute incontrovertible evidence of irreparable injury to BOK Financial, and
(iii) BOK Financial shall be entitled to both immediate and permanent injunctive
relief without the necessity of establishing or posting any bond therefor to
preclude any such breach (in addition to any remedies of law to which BOK
Financial may be entitled).
6
(9)
Confidential Information. All references in this Section 9 to BOK Financial shall
include BOK Financial’s affiliates.
(a)
(b)
(c)
(d)
Executive acknowledges that, during the Term and prior to the Term, Executive
has had and will have access to Confidential Information (as hereinafter defined),
all of which shall be made accessible to Executive only in strict confidence; that
unauthorized disclosure of Confidential Information will damage BOK
Financial’s business; that Confidential Information would be susceptible to
immediate competitive application by a competitor of BOK Financial; that BOK
Financial’s business is substantially dependent on access to and the continuing
secrecy of Confidential Information; that Confidential Information is unique to
BOK Financial and known only to Executive and certain key employees and
contractors of BOK Financial; that BOK Financial shall at all times retain
ownership and control of all Confidential Information; and that the restrictions
contained in this Section 9 are reasonable and necessary for the protection of
BOK Financial’s business.
All documents or other records containing or reflecting Confidential Information
(“Confidential Documents”) prepared by or to which Executive has access are and
shall remain the property of BOK Financial. Executive shall not copy or use any
Confidential Document for any purpose not relating directly to Executive’s
Employment on BOK Financial’s behalf, or use or disclose any Confidential
Document to any party other than BOK Financial or its employees and shall not
sell Confidential Documents to any party. Upon the termination of this
Agreement or upon BOK Financial’s request before or after such termination,
Executive shall immediately deliver to BOK Financial or its designee (and shall
not keep in Executive’s possession or deliver to anyone else) all Confidential
Documents and all other property belonging to BOK Financial. This paragraph
shall not bar Employee from complying with any subpoena or court order,
provided that Executive shall at the earliest practicable date provide a copy of the
subpoena or court order to BOK Financial’s Chief Executive Officer.
During the Term and for a period of four (4) years thereafter, regardless of the
reason for termination of Executive’s employment, (i) Executive shall not disclose
any Confidential Information to any third party and (ii) Executive shall use
Confidential Information only in connection with and in furtherance of
Executive’s Employment by BOK Financial and on behalf of its affiliates.
As used herein, Confidential Information means all nonpublic information
concerning or arising from BOK Financial’s business, including particularly but
not by way of limitation trade secrets used, developed or acquired by BOK
Financial in connection with its business; information concerning the manner and
details of BOK Financial’s operations, organization and management; financial
information and/or documents and nonpublic policies, procedures and other
printed or written material generated or used in connection with BOK Financial’s
business; BOK Financial’s business plans and strategies; electronic files or
documents prepared by BOK Financial or Executive containing the identities of
BOK Financial’s customers (including their addresses and telephone numbers),
the nature and amounts of their assets and liabilities, and the specific individual
customer needs being addressed by BOK Financial; the nature of fees and charges
assessed by BOK Financial; nonpublic forms, contracts and other documents used
in BOK Financial’s business; the nature and content of any proprietary computer
software used in BOK Financial’s business, whether owned by BOK Financial or
used by BOK Financial under license from a third party; and all other nonpublic
7
information concerning BOK Financial’s concepts, prospects, customers,
employees, contractors, earnings, products, services, equipment, systems, and/or
prospective and executed contracts and other business arrangements. Confidential
Information shall not include (i) general skills and general knowledge of the
industry obtained by reason of Executive’s association with BOK Financial; (ii)
information that is or becomes public knowledge through no fault or action of
Executive; (iii) any information received from an independent third party who is
under no duty of confidentiality with respect to the information; or (iv) any
information that, on advice of counsel, Executive is required to disclose by law or
regulation.
(10)
Surrender of Records and Property. Upon termination of Executive’s employment
with BOK Financial for whatever reason, in addition to Executive’s obligations pursuant
to Paragraph 9(b), Executive shall deliver promptly to BOK Financial all records,
manuals, books, blank forms, documents, letters, memoranda, notes, notebooks, reports,
data, tables, calculations or copies thereof that relate in any way to the business, products,
practices or techniques of BOK Financial or any of its affiliates, and all other information
of BOK Financial or any of its affiliates, including, but not limited to, all documents that
in whole or in part contain any information which is defined in this Agreement as
Confidential Information and which is in the possession or under the control of
Executive.
(11) Compliance with Section 409A. This Agreement is subject to the following provisions
in order to ensure compliance with Section 409A of the Internal Revenue Code of 1986,
as amended (Section 409A”).
(a)
(b)
If any payment, compensation or other benefit provided to the Executive
in connection with his employment termination is determined, in whole or
in part, to constitute “nonqualified deferred compensation” within the
meaning of Section 409A and the Executive is a specified employee as
defined in Section 409A(2)(B)(i), no part of such payments shall be paid
before the day that is six (6) months plus one (1) day after the date of
termination.
to
the Executive
The Parties acknowledge and agree that Section 409A and its application,
if any, to the terms of this Agreement may be subject to change as
additional guidance and regulations become available. Anything to the
contrary herein notwithstanding, all benefits or payments provided by the
Company
to constitute
“nonqualified deferred compensation” within the meaning of Section
409A are intended to comply with Section 409A. If, however, any such
benefit or payment is deemed to not comply with Section 409A, the
Company and the Executive agree to renegotiate in good faith any such
benefit or payment (including, without limitation, as to the timing of any
severance payments payable hereof) so that either (i) Section 409A will
not apply or (ii) compliance with Section 409A will be achieved.
that would be deemed
(c)
All payments required to be made by Bank hereunder to the Executive
may be adjusted to the withholding of such amounts, if any, relating to tax
and other payroll deductions as the Bank may reasonably determine
should be withheld pursuant to any applicable law or regulation.
8
(12) Miscellaneous Provisions. The following miscellaneous provisions shall apply to this
Agreement:
(a)
All notices or advices required or permitted to be given by or pursuant to this
Agreement, shall be given in writing. All such notices and advices shall be (i)
delivered personally or (ii) delivered for overnight delivery by a nationally
recognized overnight courier service. Such notices and advices shall be deemed
to have been given (i) the first business day following the date of delivery if
delivered personally or (ii) on the date of receipt if delivered for overnight
delivery by a nationally recognized overnight courier service. All such notices
and advices and all other communications related to this Agreement shall be given
as follows:
If to BOK Financial:
BOK Financial Corporation
Attn: Stacy C. Kymes, Chief Executive Officer
Bank of Oklahoma Tower
P.O. Box 2300
Tulsa, Oklahoma 74192
Telephone No.: (918) 588-6000
skymes@bokf.com
Tamara Wagman, General Counsel
Old City Hall
124 East Fourth Street
Tulsa, OK 74103-5010
Telephone No.: (918) 583-9958
twagman@FDLaw.com
With a Copy to:
If to Executive:
Martin E. Grunst
11414 S. Harvard Ave.
Tulsa, Oklahoma 74137
Telephone No: (918) 260-4565
[Personal Email]
or to such other address as the Party may have furnished to the other Parties in
accordance herewith, except that notice of change of addresses shall be effective
only upon receipt.
(b)
(c)
(d)
This Agreement is made and executed in Tulsa, Oklahoma and all actions or
proceedings with respect to, arising directly or indirectly in connection with, out
of, related to or from this Agreement, shall be litigated in courts having situs in
Tulsa, Oklahoma.
This Agreement shall be subject to, and interpreted by and in accordance with, the
laws of the State of Oklahoma without regard to its conflict of law provisions.
This Agreement is the entire Agreement of the Parties respecting the subject
matter hereof. There are no other agreements, representations or warranties,
whether oral or written, respecting the subject matter hereof, except as stated in
this Agreement.
9
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
This Agreement, and all the provisions of this Agreement, shall be deemed
drafted by all of the Parties hereto.
This Agreement shall not be interpreted strictly for or against any Party, but solely
in accordance with the fair meaning of the provisions hereof to effectuate the
purposes and interest of this Agreement.
Each Party hereto has entered into this Agreement based solely upon the
agreements, representations and warranties expressly set forth herein and upon her
or his own knowledge and investigation. Neither Party has relied upon any
representation or warranty of any other Party hereto except any such
representations or warranties as are expressly set forth herein.
Each of the persons signing below on behalf of a Party hereto represents and
warrants that he or she has full requisite power and authority to execute and
deliver this Agreement on behalf of the Parties for whom he or she is signing and
to bind such Party to the terms and conditions of this Agreement.
This Agreement may be executed in counterparts, each of which shall be deemed
an original. This Agreement shall become effective only when all of the Parties
hereto shall have executed the original or counterpart hereof. This Agreement
may be executed and delivered by a facsimile transmission of a counterpart
signature page hereof.
In any action brought by a Party hereto to enforce the obligations of any other
Party hereto, the prevailing Party shall be entitled to collect from the opposing
Party to such action such Party’s reasonable litigation costs and attorney’s fees
and expenses (including court costs, reasonable fees of accountants and experts,
and other expenses incidental to the litigation).
This Agreement shall be binding upon and shall inure to the benefit of the Parties
and their respective heirs, personal representatives, successors and assigns.
This is not a third party beneficiary contract, except BOK Financial (including
each affiliate thereof) shall be a third party beneficiary of this Agreement.
This Agreement may be amended or modified only in writing, as agreed to by the
Parties hereto, which specifically references this Agreement.
A Party to this Agreement may decide or fail to require full or timely performance
of any obligation arising under this Agreement. The decision or failure of a Party
hereto to require full or timely performance of any obligation arising under this
Agreement (whether on a single occasion or on multiple occasions) shall not be
deemed a waiver of any such obligation. No such decisions or failures shall give
rise to any claim of estoppel, laches, course of dealing, amendment of this
Agreement by course of dealing, or other defense of any nature to any obligation
arising hereunder.
10
(o)
(p)
In the event any provision of this Agreement, or the application of such provision
to any person or set of circumstances, shall be determined to be invalid, unlawful,
or unenforceable to any extent for any reason, the remainder of this Agreement,
and the application of such provision to persons or circumstances other than those
as to which it is determined to be invalid, unlawful, or unenforceable, shall not be
affected and shall continue to be enforceable to the fullest extent permitted by
law.
None of the compensation or other payments to Executive provided for in, or that
may be made pursuant to, this Agreement are intended by the Parties to be
deferred compensation within the meaning of Section 409A. If, however, the
Executive is a " specified employee" as defined in Section 409A(a)(2)(B)(i), then
the other provisions of this Agreement notwithstanding, no compensation that is
"deferred compensation" within the meaning of Section 409A shall be paid to
Executive sooner than six months and one day following the date of Executive s
separation from service from the Company, as such date is determined in
accordance with Section 409A.
11
Dated as of the Effective Date.
BOK Financial Corporation
/s/ Stacy C. Kymes
Name: Stacy C. Kymes,
Chief Executive Officer
Executive
/s/ Martin E. Grunst
Martin E. Grunst, Individually
12
Exhibit 21
BOK FINANCIAL CORPORATION
SUBSIDIARIES OF THE REGISTRANT
Banking Subsidiaries
BOKF, National Association (1)
Other subsidiaries of BOK Financial Corporation
BOKF Capital Corporation
BOKF-CC (Collision Works), LLC
BOKFCC (Cyber), LLC
BOKFCC (FIXED INCOME I), LLC
BOKFCC (Fixed Income II), LLC
BOKF-CC (FSE), LLC
BOKF-CC (HD Repair), LLC
BOKF-CC (IPS), LLC
BOKF-CC (O2 Concepts), LLC
BOKF-CC (QRC), LLC
BOKF-CC (SSP), LLC
BOKF-CC (Switchgrass), LLC
BOKF-CC (VFP), LLC
BOKFCC Merchant Banking Fund I, LLC
BOKFCC MB II, LLC
BOKFCC MB III, LLC
BOKF Energy Fund Investment I, LLC
BOK Financial Insurance, Inc. (5)
BOK Financial Private Wealth, Inc. (5)
BOK Financial Securities, Inc.
Cavanal Hill Distributors, Inc.
Industrial Pipe & Supply , LLC
RMA Holdings, Inc. (5)
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. (5)
BancOklahoma Agri-Service Corporation
BOK Delaware, Inc. (3)
BOK Financial Asset Management, Inc. (2)
BOK Financial Equipment Finance, Inc.
BOK Financial Public Finance, Inc. (5)
BOK Funding Trust (3)
BOKF Community Development Fund, LLC
BOKF Community Development Fund II
BOKF Community Development Corporation
BOKF Investment Fund II, LLC
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
Remora Holdings, LLC (3)
Western Real Estate Investors, Inc. (5)
All Subsidiaries listed above were incorporated in Oklahoma, except as noted.
(1) Chartered by the United States Government
(2)
(3)
(4)
(5)
Incorporated in Texas
Incorporated in Delaware
Incorporated in New Mexico
Incorporated in Colorado
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. 333-62578) 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-4, No. 333-226211) pertaining to the Registration Statement for the registration of
BOK Financial Corporation's common stock.
Registration Statement (Form S-8, No. 333-266398) pertaining to the Registration Statement for the registration of the
BOK Financial Corporation 401(k) plan.
of our reports dated March 1, 2023, 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, 2022.
/s/ Ernst & Young LLP
Tulsa, Oklahoma
March 1, 2023
CERTIFICATION PURSUANT TO
SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
FOR THE CHIEF EXECUTIVE OFFICER
Exhibit 31.1
I, Stacy C. Kymes, 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: March 1, 2023
/s/ Stacy C. Kymes
Stacy C. Kymes
President
Chief Executive Officer
BOK Financial Corporation
CERTIFICATION PURSUANT TO
SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
FOR THE CHIEF FINANCIAL OFFICER
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;
Exhibit 31.2
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: March 1, 2023
/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, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Stacy
C. Kymes 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.
March 1, 2023
/s/ Stacy C. Kymes
Stacy C. Kymes
President
Chief Executive Officer
BOK Financial Corporation
/s/ Steven E. Nell
Steven E. Nell
Executive Vice President
Chief Financial Officer
BOK Financial Corporation
A family of brands
BOK Financial Corporation has a long-time
commitment to serving customers and
communities throughout the United States.
We provide 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 & Commercial Banking
Wealth Management
BOK Financial®
Bank of Albuquerque
Bank of Oklahoma
Bank of Texas
BOK Financial Advisors
BOK Financial Capital Markets
BOK Financial Insurance
BOK Financial Private Wealth
BOK Financial Securities
Canaval Hill
Transaction & Payment Processing
Mortgage Banking
Transfund
BOK Financial Mortgage
BANK OF OKLAHOMA TOWER
P.O. Box 2300 | Tulsa, Oklahoma 74190
918.588.6000 | BOKF.COM