GlobeNewswire

BOK Financial Corporation Reports Annual Earnings of $520 million or $7.68 Per Share and Quarterly Earnings of $168 million or $2.51 Per Share in the Fourth Quarter

TULSA, Okla., Jan. 25, 2023 (GLOBE NEWSWIRE) --

CEO Commentary
Stacy Kymes, president and chief executive officer, stated, “The strong results of the fourth quarter continue to build on the earnings momentum we have been developing throughout 2022. This quarter was the highest pre-provision net revenue in our history. We enjoyed loan growth, net interest margin expansion, strong capital levels and balance sheet liquidity while asset quality remains very strong. We also took actions in the fourth quarter to move toward a more neutral interest rate position. Our fee businesses remained strong for the quarter and for the year in spite of the worst combined equity and fixed income markets since the late 1960’s. I am proud of the results our team is delivering. Our thoughtful growth, diverse business mix, resilient geographic footprint, and proven credit discipline have BOK Financial well-positioned as we begin 2023."


Fourth Quarter 2022 Financial Highlights
(Unless indicated otherwise, all comparisons are to the prior quarter)
  • Net income was $168.4 million or $2.51 per diluted share for the fourth quarter of 2022 and $156.5 million or $2.32 per diluted share for the third quarter of 2022.

  • Net interest revenue totaled $352.6 million, an increase of $36.3 million. Net interest margin was 3.54 percent compared to 3.24 percent. 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.
  • The net cost of the changes in fair value of mortgage servicing rights and related economic hedges was $1.2 million for the fourth quarter of 2022 compared to $4.8 million for the third quarter of 2022.
  • 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.
  • Period-end loans increased $767 million to $22.6 billion at December 31, 2022. Of this increase, commercial loans increased $591 million, commercial real estate loans grew $133 million, and loans to individuals increased $49 million. In addition, unfunded loan commitments grew by $839 million. Average outstanding loan balances were $22.0 billion, a $377 million increase.
  • 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 were slightly less favorable to economic growth across all scenarios. 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. The combined allowance for credit losses totaled $297 million or 1.31 percent of outstanding loans at December 31, 2022. The combined allowance for credit losses was $298 million or 1.37 percent of outstanding loans at September 30, 2022.
  • Average deposits decreased $1.6 billion to $35.5 billion and period-end deposits decreased $1.9 billion to $34.5 billion, consistent with industry trends as customers redeploy resources following the savings trend during the height of the pandemic. Average demand deposits were reduced by $929 million and average interest-bearing deposits decreased $659 million. The loan to deposit ratio was 65 percent at December 31, 2022 and 60 percent at September 30, 2022.
  • The company's common equity Tier 1 capital ratio was 11.69 percent at December 31, 2022. In addition, the company's Tier 1 capital ratio was 11.71 percent, total capital ratio was 12.67 percent, and leverage ratio was 9.91 percent at December 31, 2022. At September 30, 2022, the company's common equity Tier 1 capital ratio was 11.80 percent, Tier 1 capital ratio was 11.82 percent, total capital ratio was 12.81 percent, and leverage ratio was 9.76 percent.
  • The company repurchased 314,406 shares of common stock at an average price of $103.14 a share in the fourth quarter of 2022.
Fourth Quarter 2022 Segment Highlights
  • Commercial Banking contributed $139.4 million to net income in the fourth quarter of 2022, an increase of $5.5 million. Combined net interest revenue and fee revenue increased $25.5 million, primarily due to the 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. Average loans increased $350 million or 2 percent to $18.3 billion. Average deposits decreased $1.1 billion or 6 percent to $16.8 billion.
  • Consumer Banking contributed $9.0 million to net income in the fourth quarter of 2022, an increase of $6.0 million over the prior quarter. Combined net interest revenue and fee revenue increased $6.7 million. Net interest revenue increased $9.4 million, largely due to an increase in the spread 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. Mortgage banking revenue decreased $1.2 million due to reduced mortgage production volume combined with narrowing margins. Operating expense increased $1.3 million. Average loans increased $39 million or 2 percent to $1.7 billion. Average deposits decreased $196 million or 2 percent to $8.6 billion.

  • Wealth Management contributed $41.6 million to net income in the fourth quarter of 2022, consistent with the third quarter of 2022. Our diverse set of investment-focused businesses, which include trading in fixed income securities and other financial instruments and providing wealth management services to institutional and private wealth clients, produced total net interest and fee revenues of $149.1 million, an increase of $2.4 million. Total revenue from institutional trading activities increased $2.7 million, primarily due to a higher volume of 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, mainly due to increased volume-driven incentive compensation costs. Average loans increased $59 million or 3 percent to $2.2 billion. Average deposits decreased $110 million or 1 percent to $7.9 billion. Assets under management were $99.7 billion, an increase of $4.3 billion.
Annual 2022 Financial Highlights
(Unless indicated otherwise, all comparisons are to the prior year)
  • Net income was $520.3 million or $7.68 per diluted share for the year ended December 31, 2022 and $618.1 million or $8.95 per diluted share for the year ended December 31, 2021.
  • Net interest revenue totaled $1.2 billion, an increase of $93.3 million. Net interest margin was 2.98 percent compared to 2.60 percent. In response to rising inflation, the Federal Reserve increased the federal funds rate 425 basis points since the beginning of 2022. The resulting impact on market interest rates has increased net interest margin.
  • Fees and commissions revenue decreased $11.1 million to $657.2 million. A $56.5 million decrease in mortgage banking revenue due to increasing mortgage interest rates and continued inventory shortages was largely offset by increased customer hedging, investment banking, and fiduciary and asset management revenues.
  • The net cost of the changes in the fair value of mortgage servicing rights and related economic hedges was $12.5 million for the year ended December 31, 2022 compared to a net benefit of $21.0 million for the year ended December 31, 2021, due to increased market volatility throughout 2022.
  • Other gains and losses, net, decreased $63.6 million due to sales of an alternative investment and repossessed assets in the prior year.
  • Operating expense decreased $13.2 million to $1.2 billion. Personnel expense decreased $24.5 million, largely driven by lower incentive compensation expense, partially offset by an increase in regular compensation. Non-personnel expense increased $11.2 million, primarily related to additional business promotion fees and project-related data processing and communications and professional fees. These were partially offset by lower mortgage banking costs and expenses on repossessed assets.
  • Period-end loans 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.
  • 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 $297 million or 1.31 percent of outstanding loans at December 31, 2022. The combined allowance for credit losses was $289 million or 1.43 percent of outstanding loans at December 31, 2021.
  • Average deposits decreased $70 million to $37.9 billion and period-end deposits decreased $6.8 billion to $34.5 billion. In the first half of the year, the majority of deposit outflows were driven by institutional clients moving to off-balance sheet alternatives seeking higher yields. Starting in the third quarter, deposit outflows were largely attributed to commercial clients redeploying capital. The fourth quarter also saw seasonal declines due to mortgage tax disbursements.
2022 Annual Segment Highlights
  • Commercial Banking contributed $460.4 million to net income in 2022, an increase of $131.8 million compared to 2021. Combined net-interest revenue and fee revenue increased $215.5 million. Net interest revenue increased $208.7 million, primarily due to growth in average deposit balances and an increase in the spread on deposits sold to our Funds Management unit. Fees and commissions revenue increased $6.8 million as increases in customer hedging revenue and transaction card revenue were largely offset by a decline in other revenue. Operating expense increased $9.6 million, primarily due to incentive compensation costs. 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. Net loans charged-off decreased $13.4 million. Average Commercial Banking loans increased $700 million or 4 percent to $17.6 billion. Average Commercial Banking deposits grew $664 million or 4 percent to $18.3 billion.
  • Consumer Banking contributed $5.9 million to net income in 2022, a decrease of $21.8 million compared to the prior year. Combined net interest revenue and fee revenue increased $3.3 million. Net interest revenue increased $54.7 million, primarily due to an increase in the spread on deposits sold to our Funds Management unit. Fees and commissions revenue decreased $51.4 million, largely attributable to reduced mortgage production volume and margin compression. The net cost of the changes in fair value of mortgage servicing rights and related economic hedges was $12.5 million for the year ended December 31, 2022 compared to a net benefit of $21.0 million for the year ended December 31, 2021. Interest rate volatility affected the effectiveness of our mortgage servicing rights hedging strategy. Operating expense was consistent with the prior year. Average Consumer Banking loans decreased $81 million or 5 percent to $1.7 billion. Average Consumer Banking deposits increased $323 million or 4 percent to $8.8 billion.
  • Wealth Management contributed $106.2 million to net income in 2022, a decrease of $7.1 million compared to 2021. Total Wealth Management revenue decreased $11.7 million. Total revenue from trading activities decreased $89.5 million compared to the year ended December 31, 2021, largely due to disruption in the fixed income markets due to economic uncertainty, primarily in the first quarter, 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 also increased $18.0 million. Growth in mutual fund fees and decreased waivers were partially offset by lower trust fees and managed account fees due to market driven declines in assets under management or administration. Other revenue increased $26.7 million, largely due to higher derivative margin use fees. Operating expense decreased $8.5 million due to incentive compensation costs related to reduced trading activity. Average Wealth Management loans grew $185 million or 9 percent to $2.2 billion. Average Wealth Management deposits decreased $935 million or 10 percent to $8.5 billion. Average assets under management decreased $5.2 billion or 5 percent compared to the prior year.
(Unless indicated otherwise, comparisons are to the prior quarter)
Net Interest Revenue

Net interest revenue was $352.6 million for the fourth quarter of 2022, an increase of $36.3 million. 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 to 3.54 percent. In response to rising inflation, the Federal Reserve increased the federal funds rate 125 basis points in the fourth quarter bringing the year-to-date total rate increases to 425 basis points. 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 increased $757 million. Average loan balances increased $377 million, largely due to growth in commercial and commercial real estate loans. Average available for sale securities increased $648 million as we reposition our balance for the current rate environment. Average interest bearing cash and cash equivalents decreased $180 million while average trading securities decreased $91 million. Average interest-bearing deposits decreased $659 million as customers redeploy resources following the savings trend during the height of the pandemic. Average other borrowings increased $994 million while funds purchased and repurchase agreements increased $246 million.

The yield on average earning assets was 4.53 percent, up 82 basis points. The loan portfolio yield increased 110 basis points to 5.99 percent while the yield on trading securities was up 98 basis points to 3.70 percent. The yield on the available for sale securities portfolio increased 33 basis points to 2.54 percent. The yield on interest-bearing cash and cash equivalents increased 219 basis points to 4.06 percent.

Funding costs were 1.57 percent, an 81 basis point increase. The cost of interest-bearing deposits increased 59 basis points to 1.22 percent. The cost of other borrowings was up 175 basis points to 4.08 percent while the cost of funds purchased and repurchase agreements increased 133 basis points to 2.05 percent. The benefit to net interest margin from assets funded by non-interest liabilities was 58 basis points, an increase of 29 basis points.

Operating Revenue

Fees and commissions revenue totaled $193.6 million for the fourth quarter of 2022, relatively unchanged from the prior quarter.

Brokerage and trading revenue increased $2.0 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. Total investment banking revenue decreased $2.4 million, following record levels in the third quarter. 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. Mortgage banking revenue decreased $1.2 million with a reduction in mortgage production revenue partially offset by an increase in mortgage servicing revenue. Mortgage production volume decreased $119 million to $111 million as rising mortgage interest rates and continued inventory constraints place pressure on mortgage loan originations.

Other gains and losses, net, increased $7.4 million, 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.

Operating Expense

Total operating expense was $318.5 million for the fourth quarter of 2022, an increase of $23.7 million compared to the third quarter of 2022.

Personnel expense increased $16.1 million. Cash-based incentive compensation increased $9.9 million 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.

Non-personnel expense was $132.0 million, up $7.6 million. A $4.3 million increase in professional fees and services and $1.3 million increase in data processing and communications expense was largely attributed to ongoing technology projects. The fourth quarter of 2022 also included a $2.5 million charitable donation to the BOKF Foundation as we continue to focus on the communities we serve.

Loans, Deposits and Capital

Loans

Outstanding loans were $22.6 billion at December 31, 2022, growing $767 million over September 30, 2022, largely due to growth in commercial and commercial real estate loans. Unfunded loan commitments were also up $839 million over the third quarter.

Outstanding commercial loan balances, which includes services, general business, energy, and healthcare loans, increased $591 million with strong growth in all categories.

Services sector loan balances increased $151 million to $3.4 billion or 15 percent of total loans. Services loans consist of a large number of loans to a variety of businesses, including Native American tribal and state and local municipal government entities, Native American tribal casino operations, foundations and not-for-profit organizations, educational services and specialty trade contractors.

General business loans increased $368 million to $3.5 billion or 16 percent of total loans. General business loans include $2.1 billion of wholesale/retail loans and $1.4 billion of loans from other commercial industries.

Energy loan balances increased $53 million to $3.4 billion or 15 percent of total loans. The majority of this portfolio is first lien, senior secured, reserve-based lending to oil and gas producers, which we believe is the lowest risk form of energy lending. Approximately 72 percent of committed production loans are secured by properties primarily producing oil. The remaining 28 percent is secured by properties primarily producing natural gas. Unfunded energy loan commitments were $3.8 billion at December 31, 2022, an increase of $334 million over September 30, 2022.

Healthcare sector loan balances increased $18 million, totaling $3.8 billion or 17 percent of total loans. Our healthcare sector loans primarily consist of $3.2 billion of senior housing and care facilities, including independent living, assisted living and skilled nursing. Generally, we loan to borrowers with a portfolio of multiple facilities, which serves to help diversify risks specific to a single facility.

Commercial real estate loan balances grew $133 million and represent 20 percent of total loans. Loans secured by industrial facilities increased $118 million to $1.2 billion. Loans secured by multifamily residential properties increased $86 million to 1.2 billion. This growth was partially offset by a $33 million decrease in loans secured by office buildings and $27 million decrease in other real estate loans. Unfunded commercial real estate loan commitments were $3.1 billion at December 31, 2022, an increase of $144 million over September 30, 2022.

Loans to individuals increased $49 million and represent 17 percent of total loans. Total residential mortgage loans increased $22 million while personal loans increased $27 million.

Liquidity and Capital

Our funding sources, which primarily include deposits and borrowings from the Federal Home Loan Banks, provide adequate liquidity to meet our needs. The loan to deposit ratio was 65 percent at December 31, 2022 providing significant on-balance sheet liquidity to meet future loan demand and contractual obligations.

Period-end deposits totaled $34.5 billion at December 31, 2022, a $1.9 billion decrease, largely due to commercial clients redeploying capital following the savings trend during the pandemic combined with seasonal mortgage tax disbursements. Demand deposits decreased $1.6 billion while interest-bearing transaction account balances decreased $341 million. Period-end Commercial Banking deposits decreased $1.4 billion, Consumer Banking deposits declined $354 million, and Wealth Management deposits were largely unchanged. Average deposits were $35.5 billion at December 31, 2022, a $1.6 billion decrease. Average demand deposit account balances decreased $929 million and average interest-bearing transaction account balances decreased $658 million.

The company's common equity Tier 1 capital ratio was 11.69 percent at December 31, 2022. In addition, the company's Tier 1 capital ratio was 11.71 percent, total capital ratio was 12.67 percent, and leverage ratio was 9.91 percent at December 31, 2022. At the beginning of 2020, we elected to delay the regulatory capital impact of the transition of the allowance for credit losses from the incurred loss methodology to CECL for two years, followed by a three-year transition period. This election added 8 basis points to the company's common equity tier 1 capital ratio at December 31, 2022. At September 30, 2022, the company's common equity Tier 1 capital ratio was 11.80 percent, Tier 1 capital ratio was 11.82 percent, total capital ratio was 12.81 percent, and leverage ratio was 9.76 percent.

The company's tangible common equity ratio, a non-GAAP measure, was 7.63 percent at December 31, 2022 and 7.96 percent at September 30, 2022. The tangible common equity ratio is primarily based on total shareholders' equity, which includes unrealized gains and losses on available for sale securities. The company has elected to exclude unrealized gains and losses from available for sale securities from its calculation of Tier 1 capital for regulatory capital purposes, consistent with the treatment under the previous capital rules.

The company repurchased 314,406 shares of common stock at an average price of $103.14 a share in the fourth quarter of 2022. The company repurchased a total of 1,632,401 shares of common stock at an average price of $94.88 a share in 2022. We view share buybacks opportunistically, but within the context of maintaining our strong capital position.

Credit Quality

Expected credit losses on assets carried at amortized cost are recognized over their projected lives based on models that measure the probability of default and loss given default over a 12-month reasonable and supportable forecast period. Our models incorporate base case, downside and upside macroeconomic variables such as real gross domestic product ("GDP") growth, civilian unemployment rates and West Texas Intermediate ("WTI") oil prices on a probability weighted basis.

A $15.0 million provision for credit losses was necessary for the fourth quarter of 2022, primarily related to strong growth in loans and unfunded commitments during the quarter. The level of uncertainty in the economic outlook of our reasonable and supportable forecast remained high, and key economic factors were slightly less favorable to economic growth across all scenarios.

The probability weighting of our base case reasonable and supportable forecast remained at 50 percent in the fourth quarter of 2022 as the level of uncertainty in economic forecasts remained high. Our base case reasonable and supportable forecast assumes inflation continues to improve from the peak experienced in the third quarter of 2022 and slowly normalizes. We expect the impact of the Russian-Ukraine conflict remains isolated. Inflation pressures cause modest declines in real household income compared to pre-pandemic levels, resulting in below-trend GDP growth. GDP is projected to grow by 0.9 percent over the next twelve months. 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. Our forecasted civilian unemployment rate is 3.9 percent for the first quarter of 2023, increasing to 4.1 percent by the fourth quarter of 2023. Our base case also assumes the Federal Reserve increases the federal funds rate twice in the first quarter of 2023, resulting in a target range of 4.75 percent to 5.00 percent. No additional rate increases in 2023 are anticipated. WTI oil prices are projected to generally follow the NYMEX forward curve that existed at the end of December 2022, averaging $75.05 per barrel over the next twelve months.

Our downside case, probability weighted at 40 percent, assumes that inflation moderates slightly from the peak experienced in the third quarter of 2022, but remains elevated through the forecast horizon ending 2023 at 5.0 percent. 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 target range of 5.75 percent to 6.00 percent by December 2023. The United States economy is pushed into a recession, with a contraction in economic activity and a sharp increase in the unemployment rate from 4.8 percent in the first quarter of 2023 to 6.0 percent in the fourth quarter of 2023. In this scenario, real GDP is expected to contract 1.3 percent over the next four quarters. 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 percent over the following three quarters.

Nonperforming assets totaled $300 million or 1.33 percent of outstanding loans and repossessed assets at December 31, 2022, compared to $336 million or 1.54 percent at September 30, 2022. Excluding loans guaranteed by U.S. government agencies, nonperforming assets totaled $121 million or 0.54 percent of outstanding loans and repossessed assets at December 31, 2022, compared to $144 million or 0.67 percent at September 30, 2022.

Nonaccruing loans were $122 million or 0.54 percent of outstanding loans at December 31, 2022. Nonaccruing commercial loans totaled $60 million or 0.42 percent of outstanding commercial loans. Nonaccruing commercial real estate loans totaled $17 million or 0.36 percent of outstanding commercial real estate loans. Nonaccruing loans to individuals totaled $45 million or 1.20 percent of outstanding loans to individuals.

Nonaccruing loans decreased $9.0 million compared to September 30, 2022, primarily related to nonaccruing services, energy and loans to individuals, partially offset by an increase in nonaccruing commercial real estate loans. New nonaccruing loans identified in the fourth quarter totaled $32 million, offset by $9.1 million in payments received.

Potential problem loans, which are defined as performing loans that, based on known information, cause management concern as to the borrowers' ability to continue to perform, totaled $94 million at December 31, 2022, compared to $95 million at September 30, 2022. A decrease in potential problem services, energy and general business loans was offset by an increase in healthcare and commercial real estate potential problem loans.

At December 31, 2022, the combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $297 million or 1.31 percent of outstanding loans and 278 percent of nonaccruing loans. The allowance for loan losses totaled $236 million or 1.04 percent of outstanding loans and 221 percent of nonaccruing loans. At September 30, 2022, the combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $298 million or 1.37 percent of outstanding loans and 262 percent of nonaccruing loans. The allowance for loan losses was $242 million or 1.11 percent of outstanding loans and 212 percent of nonaccruing loans. The allowance to nonaccruing loan percentages referenced above omit residential mortgage loans guaranteed by U.S. government agencies.

Gross charge-offs were $17.8 million for the fourth quarter compared to $1.8 million for the third quarter of 2022. Gross charge-offs for the fourth quarter were primarily related to a single services borrower. Recoveries totaled $2.3 million for the fourth quarter of 2022 and $1.3 million for the prior quarter. Net charge-offs were $15.5 million or 0.28 percent of average loans on an annualized basis in the fourth quarter compared to net charge-offs of $457 thousand or 0.01 percent of average loans on an annualized basis in the third quarter. Net charge-offs were 0.10 percent of average loans over the last four quarters.

Securities and Derivatives

The fair value of the available for sale securities portfolio totaled $11.5 billion at December 31, 2022, a $1.5 billion increase compared to September 30, 2022. At December 31, 2022, the available for sale securities portfolio consisted primarily of $5.8 billion of residential mortgage-backed securities fully backed by U.S. government agencies and $4.5 billion of commercial mortgage-backed securities fully backed by U.S. government agencies. At December 31, 2022, the available for sale securities portfolio had a net unrealized loss of $866 million compared to $936 million at September 30, 2022.

We hold an inventory of trading securities in support of sales to a variety of customers. At December 31, 2022, the trading securities portfolio totaled $4.5 billion compared to $2.2 billion at September 30, 2022.

The company also maintains a portfolio of residential mortgage-backed securities issued by U.S. government agencies and interest rate derivative contracts as an economic hedge of the changes in the fair value of our mortgage servicing rights. This portfolio of fair value option securities increased $263 million to $297 million at December 31, 2022.

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 our customer derivative programs totaled $1.0 billion compared to $1.5 billion at September 30, 2022. The aggregate net fair value of derivative contracts, before consideration of cash margin, held under these programs reported as liabilities totaled $1.0 billion at December 31, 2022 and $1.5 billion at September 30, 2022.

The net cost of the changes in the fair value of mortgage servicing rights and related economic hedges was $1.2 million during the fourth quarter of 2022, including a $2.9 million decrease in the fair value of mortgage servicing rights, $1.8 million increase in the fair value of securities and derivative contracts held as an economic hedge, and $118 thousand of related net interest expense.

Conference Call and Webcast

The company will hold a conference call at 9 a.m. Central time on Wednesday, January 25, 2023 to discuss the financial results with investors. The live audio webcast and presentation slides will be available on the company’s website at www.bokf.com. The conference call can also be accessed by dialing 1-201-689-8471. A conference call and webcast replay will also be available shortly after conclusion of the live call at www.bokf.com or by dialing 1-877-407-4018 and referencing conference ID # 13735343.

About BOK Financial Corporation

BOK Financial Corporation is a $48 billion regional financial services company headquartered in Tulsa, Oklahoma with $100 billion in assets under management or administration. The company's stock is publicly traded on NASDAQ under the Global Select market listings (BOKF). BOK Financial Corporation's holdings include BOKF, NA; BOK Financial Securities, Inc., BOK Financial Private Wealth, Inc. and BOK Financial Insurance, Inc. BOKF, NA's holdings include TransFund, Cavanal Hill Investment Management, Inc. and BOK Financial Asset Management, Inc. BOKF, NA operates banking divisions across eight states as: Bank of Albuquerque; Bank of Oklahoma; Bank of Texas; and BOK Financial in Arizona, Arkansas, Colorado, Kansas and Missouri; as well as having limited purpose offices in Nebraska, Wisconsin and Connecticut. Through its subsidiaries, BOK Financial Corporation provides commercial and consumer banking, brokerage trading, investment, trust and insurance services, mortgage origination and servicing, and an electronic funds transfer network. For more information, visit www.bokf.com

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

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

BALANCE SHEETS -- UNAUDITED
BOK FINANCIAL CORPORATION
(In thousands)

 Dec. 31, 2022 Sep. 30, 2022
ASSETS   
Cash and due from banks$943,810  $804,110 
Interest-bearing cash and cash equivalents 457,906   804,799 
Trading securities 4,464,161   2,194,618 
Investment securities, net of allowance 2,513,687   2,572,360 
Available for sale securities 11,493,860   10,040,894 
Fair value option securities 296,590   33,966 
Restricted equity securities 299,651   100,356 
Residential mortgage loans held for sale 75,272   148,121 
Loans:   
Commercial 14,198,187   13,607,686 
Commercial real estate 4,606,777   4,473,911 
Paycheck protection program 14,312   20,233 
Loans to individuals 3,737,874   3,688,627 
Total loans 22,557,150   21,790,457 
Allowance for loan losses (235,704)  (241,768)
Loans, net of allowance 22,321,446   21,548,689 
Premises and equipment, net 565,175   569,379 
Receivables 273,815   200,343 
Goodwill 1,044,749   1,044,749 
Intangible assets, net 76,131   79,833 
Mortgage servicing rights 277,608   283,806 
Real estate and other repossessed assets, net 14,304   29,676 
Derivative contracts, net 880,343   1,693,742 
Cash surrender value of bank-owned life insurance 406,751   407,722 
Receivable on unsettled securities sales 31,004   49,089 
Other assets 1,354,379   1,039,194 
TOTAL ASSETS$47,790,642  $43,645,446 
    
LIABILITIES AND EQUITY   
Deposits:   
Demand$13,395,337  $14,985,115 
Interest-bearing transaction 18,659,115   19,000,023 
Savings 964,411   971,634 
Time 1,461,842   1,459,143 
Total deposits 34,480,705   36,415,915 
Funds purchased and repurchase agreements 2,270,377   626,952 
Other borrowings 4,736,908   234,933 
Subordinated debentures 131,205   131,168 
Accrued interest, taxes and expense 296,870   212,342 
Due on unsettled securities purchases 147,470   205,388 
Derivative contracts, net 554,900   821,275 
Other liabilities 484,849   483,165 
TOTAL LIABILITIES 43,103,284   39,131,138 
Shareholders' equity:   
Capital, surplus and retained earnings 5,519,604   5,414,879 
Accumulated other comprehensive loss (836,955)  (904,945)
TOTAL SHAREHOLDERS' EQUITY 4,682,649   4,509,934 
Non-controlling interests 4,709   4,374 
TOTAL EQUITY 4,687,358   4,514,308 
TOTAL LIABILITIES AND EQUITY$47,790,642  $43,645,446 


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

 Three Months Ended
 Dec. 31, 2022 Sep. 30, 2022 June 30, 2022 Mar. 31, 2022 Dec. 31, 2021
ASSETS         
Interest-bearing cash and cash equivalents$568,307  $748,263  $843,619  $1,050,409  $1,208,552 
Trading securities 3,086,985   3,178,068   4,166,954   8,537,390   9,260,778 
Investment securities, net of allowance 2,535,305   2,593,989   610,983   195,198   213,188 
Available for sale securities 10,953,851   10,306,257   12,258,072   13,092,422   13,247,607 
Fair value option securities 92,012   36,846   54,832   75,539   46,458 
Restricted equity securities 216,673   173,656   167,732   164,484   137,874 
Residential mortgage loans held for sale 98,613   132,685   148,183   179,697   163,433 
Loans:         
Commercial 13,827,517   13,481,961   13,382,176   12,677,706   12,401,935 
Commercial real estate 4,488,091   4,434,650   4,061,129   4,059,148   3,838,336 
Paycheck protection program 18,822   26,364   90,312   210,110   404,261 
Loans to individuals 3,641,574   3,656,257   3,524,097   3,516,698   3,598,121 
Total loans 21,976,004   21,599,232   21,057,714   20,463,662   20,242,653 
Allowance for loan losses (242,450)  (241,136)  (246,064)  (254,191)  (271,794)
Loans, net of allowance 21,733,554   21,358,096   20,811,650   20,209,471   19,970,859 
Total earning assets 39,285,300   38,527,860   39,062,025   43,504,610   44,248,749 
Cash and due from banks 865,796   821,801   822,599   790,440   783,670 
Derivative contracts, net 1,239,717   2,019,905   3,051,429   2,126,282   1,441,869 
Cash surrender value of bank-owned life insurance 406,826   410,667   408,489   406,379   404,149 
Receivable on unsettled securities sales 194,996   219,113   457,165   375,616   585,901 
Other assets 3,216,983   3,119,856   3,486,691   3,357,747   3,139,718 
TOTAL ASSETS$45,209,618  $45,119,202  $47,288,398  $50,561,074  $50,604,056 
          
LIABILITIES AND EQUITY         
Deposits:         
Demand$14,176,189  $15,105,305  $15,202,597  $15,062,282  $14,818,841 
Interest-bearing transaction 18,898,315   19,556,806   21,037,294   22,763,479   22,326,401 
Savings 969,275   978,596   981,493   947,407   909,131 
Time 1,417,606   1,409,069   1,373,036   1,589,039   1,747,715 
Total deposits 35,461,385   37,049,776   38,594,420   40,362,207   39,802,088 
Funds purchased and repurchase agreements 1,046,447   800,759   1,224,134   2,004,466   2,893,128 
Other borrowings 2,523,195   1,528,887   1,301,358   1,148,440   880,837 
Subordinated debentures 131,180   131,199   131,219   131,228   131,224 
Derivative contracts, net 445,105   105,221   535,574   682,435   320,757 
Due on unsettled securities purchases 575,957   331,428   380,332   519,097   629,642 
Other liabilities 408,029   396,510   389,031   565,350   578,091 
TOTAL LIABILITIES 40,591,298   40,343,780   42,556,068   45,413,223   45,235,767 
Total equity 4,618,320   4,775,422   4,732,330   5,147,851   5,368,289 
TOTAL LIABILITIES AND EQUITY$45,209,618  $45,119,202  $47,288,398  $50,561,074  $50,604,056 


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

 Three Months Ended Year Ended
 December 31, December 31,
  2022   2021   2022   2021 
        
Interest revenue$451,606  $292,334  $1,392,102  $1,179,929 
Interest expense 98,980   15,257   180,722   61,896 
Net interest revenue 352,626   277,077   1,211,380   1,118,033 
Provision for credit losses 15,000   (17,000)  30,000   (100,000)
Net interest revenue after provision for credit losses 337,626   294,077   1,181,380   1,218,033 
Other operating revenue:       
Brokerage and trading revenue 63,008   14,869   140,978   112,989 
Transaction card revenue 27,136   24,998   104,266   96,983 
Fiduciary and asset management revenue 49,899   46,872   196,326   178,274 
Deposit service charges and fees 26,429   26,718   110,636   104,217 
Mortgage banking revenue 10,065   21,278   49,365   105,896 
Other revenue 17,034   11,586   55,642   69,950 
Total fees and commissions 193,571   146,321   657,213   668,309 
Other gains, net 8,427   6,081   123   63,742 
Gain (loss) on derivatives, net 4,548   (4,788)  (73,011)  (19,378)
Gain (loss) on fair value option securities, net (2,568)  1,418   (20,358)  (2,239)
Change in fair value of mortgage servicing rights (2,904)  7,859   80,261   41,637 
Gain (loss) on available for sale securities, net (3,988)  552   (971)  3,704 
Total other operating revenue 197,086   157,443   643,257   755,775 
Other operating expense:       
Personnel 186,419   174,474   670,918   695,382 
Business promotion 7,470   6,452   26,435   16,289 
Charitable contributions to BOKF Foundation 2,500   5,000   2,500   9,000 
Professional fees and services 18,365   14,129   56,342   50,906 
Net occupancy and equipment 29,227   26,897   116,867   108,587 
Insurance 4,677   3,889   17,994   15,881 
Data processing and communications 43,048   39,358   165,907   151,614 
Printing, postage and supplies 3,890   2,935   15,857   14,218 
Amortization of intangible assets 3,736   4,438   15,692   18,311 
Mortgage banking costs 9,016   8,667   35,834   42,698 
Other expense 10,108   13,256   40,134   54,822 
Total other operating expense 318,456   299,495   1,164,480   1,177,708 
        
Net income before taxes 216,256   152,025   660,157   796,100 
Federal and state income taxes 47,864   34,836   139,864   179,775 
        
Net income 168,392   117,189   520,293   616,325 
Net income (loss) attributable to non-controlling interests (37)  (129)  20   (1,796)
Net income attributable to BOK Financial Corporation shareholders$168,429  $117,318  $520,273  $618,121 
        
Average shares outstanding:       
Basic 66,627,955   68,069,160   67,212,728   68,591,920 
Diluted 66,627,955   68,070,910   67,212,735   68,594,322 
        
Net income per share:       
Basic$2.51  $1.71  $7.68  $8.95 
Diluted$2.51  $1.71  $7.68  $8.95 


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

 Three Months Ended
 Dec. 31, 2022 Sep. 30, 2022 June 30, 2022 Mar. 31, 2022 Dec. 31, 2021
Capital:         
Period-end shareholders' equity$4,682,649  $4,509,934  $4,737,339  $4,849,582  $5,363,732 
Risk weighted assets$38,142,231  $36,866,994  $36,787,092  $37,160,258  $34,575,277 
Risk-based capital ratios:         
Common equity tier 1 11.69%  11.80%  11.61%  11.30%  12.24%
Tier 1 11.71%  11.82%  11.63%  11.31%  12.25%
Total capital 12.67%  12.81%  12.59%  12.25%  13.29%
Leverage ratio 9.91%  9.76%  9.12%  8.47%  8.55%
Tangible common equity ratio1 7.63%  7.96%  8.16%  8.13%  8.61%
          
Common stock:         
Book value per share$69.93  $67.06  $69.87  $71.21  $78.34 
Tangible book value per share$53.19  $50.34  $53.22  $54.58  $61.74 
Market value per share:         
High$110.28  $95.51  $94.76  $119.59  $110.21 
Low$88.46  $69.82  $74.03  $93.76  $89.01 
Cash dividends paid$36,188  $35,661  $35,892  $36,093  $36,256 
Dividend payout ratio 21.49%  22.79%  27.02%  57.76%  30.90%
Shares outstanding, net 66,958,634   67,254,383   67,806,005   68,104,043   68,467,772 
Stock buy-back program:         
Shares repurchased 314,406   548,034   294,084   475,877   128,522 
Amount$32,429  $49,980  $24,404  $48,074  $13,426 
Average price per share$103.14  $91.20  $82.98  $101.02  $104.46 
          
Performance ratios (quarter annualized):
Return on average assets 1.48%  1.38%  1.13%  0.50%  0.92%
Return on average equity 14.48%  13.01%  11.27%  4.93%  8.68%
Net interest margin 3.54%  3.24%  2.76%  2.44%  2.52%
Efficiency ratio 57.87%  57.35%  60.65%  75.07%  70.14%
          
Reconciliation of non-GAAP measures:
1Tangible common equity ratio:         
Total shareholders' equity$4,682,649  $4,509,934  $4,737,339  $4,849,582  $5,363,732 
Less: Goodwill and intangible assets, net 1,120,880   1,124,582   1,128,493   1,132,510   1,136,527 
Tangible common equity$3,561,769  $3,385,352  $3,608,846  $3,717,072  $4,227,205 
          
Total assets$47,790,642  $43,645,446  $45,377,072  $46,826,507  $50,249,431 
Less: Goodwill and intangible assets, net 1,120,880   1,124,582   1,128,493   1,132,510   1,136,527 
Tangible assets$46,669,762  $42,520,864  $44,248,579  $45,693,997  $49,112,904 
          
Tangible common equity ratio 7.63%  7.96%  8.16%  8.13%  8.61%
          
Pre-provision net revenue:          
Net income before taxes$216,256  $196,272  $168,980  $78,649  $152,025 
Provision for expected credit losses 15,000   15,000         (17,000)
Net income (loss) attributable to non-controlling interests (37)  81   12   (36)  (129)
Pre-provision net revenue$231,293  $211,191  $168,968  $78,685  $135,154 
          
Other data:         
Tax equivalent interest$2,287  $2,163  $2,040  $1,973  $2,104 
Net unrealized gain (loss) on available for sale securities$(865,553) $(935,788) $(522,812) $(546,598) $93,381 
          
Mortgage banking:         
Mortgage production revenue$(3,983) $(2,406) $(504) $5,055  $10,018 
          
Mortgage loans funded for sale$141,090  $260,210  $360,237  $418,866  $568,507 
Add: current period-end outstanding commitments 45,492   75,779   106,004   160,260   171,412 
Less: prior period end outstanding commitments 75,779   106,004   160,260   171,412   239,066 
Total mortgage production volume$110,803  $229,985  $305,981  $407,714  $500,853 
          
Mortgage loan refinances to mortgage loans funded for sale 10%  10%  19%  45%  51%
Realized margin on funded mortgage loans(1.10)% (0.41)%  0.88%  1.64%  2.34%
Production revenue as a percentage of production volume(3.59)% (1.05)% (0.16)%  1.24%  2.00%
          
Mortgage servicing revenue$14,048  $13,688  $11,872  $11,595  $11,260 
Average outstanding principal balance of mortgage loans serviced for others 18,923,078   19,070,221   17,336,596   16,155,329   15,930,480 
Average mortgage servicing revenue rates 0.29%  0.28%  0.27%  0.29%  0.28%
          
Gain (loss) on mortgage servicing rights, net of economic hedge:
Gain (loss) on mortgage hedge derivative contracts, net$4,373  $(17,027) $(13,639) $(46,694) $(4,862)
Gain (loss) on fair value option securities, net (2,568)  (4,368)  (2,221)  (11,201)  1,418 
Gain (loss) on economic hedge of mortgage servicing rights 1,805   (21,395)  (15,860)  (57,895)  (3,444)
Gain (loss) on changes in fair value of mortgage servicing rights (2,904)  16,570   17,485   49,110   7,859 
Gain (loss) on changes in fair value of mortgage servicing rights, net of economic hedges, included in other operating revenue (1,099)  (4,825)  1,625   (8,785)  4,415 
Net interest revenue on fair value option securities2 (118)  29   275   383   259 
Total economic benefit (cost) of changes in the fair value of mortgage servicing rights, net of economic hedges$(1,217) $(4,796) $1,900  $(8,402) $4,674 

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


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

 Three Months Ended
 Dec. 31, 2022 Sep. 30, 2022 June 30, 2022 Mar. 31, 2022 Dec. 31, 2021
          
Interest revenue$451,606  $363,150  $294,247  $283,099  $292,334 
Interest expense 98,980   46,825   20,229   14,688   15,257 
Net interest revenue 352,626   316,325   274,018   268,411   277,077 
Provision for credit losses 15,000   15,000         (17,000)
Net interest revenue after provision for credit losses 337,626   301,325   274,018   268,411   294,077 
Other operating revenue:         
Brokerage and trading revenue 63,008   61,006   44,043   (27,079)  14,869 
Transaction card revenue 27,136   25,974   26,940   24,216   24,998 
Fiduciary and asset management revenue 49,899   50,190   49,838   46,399   46,872 
Deposit service charges and fees 26,429   28,703   28,500   27,004   26,718 
Mortgage banking revenue 10,065   11,282   11,368   16,650   21,278 
Other revenue 17,034   15,479   12,684   10,445   11,586 
Total fees and commissions 193,571   192,634   173,373   97,635   146,321 
Other gains (losses), net 8,427   979   (7,639)  (1,644)  6,081 
Gain (loss) on derivatives, net 4,548   (17,009)  (13,569)  (46,981)  (4,788)
Gain (loss) on fair value option securities, net (2,568)  (4,368)  (2,221)  (11,201)  1,418 
Change in fair value of mortgage servicing rights (2,904)  16,570   17,485   49,110   7,859 
Gain (loss) on available for sale securities, net (3,988)  892   1,188   937   552 
Total other operating revenue 197,086   189,698   168,617   87,856   157,443 
Other operating expense:         
Personnel 186,419   170,348   154,923   159,228   174,474 
Business promotion 7,470   6,127   6,325   6,513   6,452 
Charitable contributions to BOKF Foundation 2,500            5,000 
Professional fees and services 18,365   14,089   12,475   11,413   14,129 
Net occupancy and equipment 29,227   29,296   27,489   30,855   26,897 
Insurance 4,677   4,306   4,728   4,283   3,889 
Data processing and communications 43,048   41,743   41,280   39,836   39,358 
Printing, postage and supplies 3,890   4,349   3,929   3,689   2,935 
Amortization of intangible assets 3,736   3,943   4,049   3,964   4,438 
Mortgage banking costs 9,016   9,504   9,437   7,877   8,667 
Other expense 10,108   11,046   9,020   9,960   13,256 
Total other operating expense 318,456   294,751   273,655   277,618   299,495 
Net income before taxes 216,256   196,272   168,980   78,649   152,025 
Federal and state income taxes 47,864   39,681   36,122   16,197   34,836 
Net income 168,392   156,591   132,858   62,452   117,189 
Net income (loss) attributable to non-controlling interests (37)  81   12   (36)  (129)
Net income attributable to BOK Financial Corporation shareholders$168,429  $156,510  $132,846  $62,488  $117,318 
          
Average shares outstanding:         
Basic 66,627,955   67,003,199   67,453,748   67,812,400   68,069,160 
Diluted 66,627,955   67,004,623   67,455,172   67,813,851   68,070,910 
Net income per share:         
Basic$2.51  $2.32  $1.96  $0.91  $1.71 
Diluted$2.51  $2.32  $1.96  $0.91  $1.71 


LOANS TREND -- UNAUDITED
BOK FINANCIAL CORPORATION
(In thousands)

  Dec. 31, 2022 Sep. 30, 2022 June 30, 2022 Mar. 31, 2022 Dec. 31, 2021
Commercial:          
Healthcare $3,845,017 $3,826,623 $3,696,963 $3,441,732 $3,414,940
Energy  3,424,790  3,371,588  3,393,072  3,197,667  3,006,884
Services  3,431,521  3,280,925  3,421,493  3,351,495  3,367,193
General business  3,496,859  3,128,550  3,067,169  2,892,295  2,717,448
Total commercial  14,198,187  13,607,686  13,578,697  12,883,189  12,506,465
           
Commercial real estate:          
Industrial  1,221,501  1,103,905  953,626  911,928  766,125
Multifamily  1,212,883  1,126,700  878,565  867,288  786,404
Office  1,053,331  1,086,615  1,100,115  1,097,516  1,040,963
Retail  620,518  635,021  637,304  667,561  679,917
Residential construction and land development  95,684  91,690  111,575  120,506  120,016
Other commercial real estate  402,860  429,980  424,963  436,157  437,900
Total commercial real estate  4,606,777  4,473,911  4,106,148  4,100,956  3,831,325
           
Paycheck protection program  14,312  20,233  43,140  137,365  276,341
           
Loans to individuals:          
Residential mortgage  1,890,784  1,851,836  1,784,729  1,723,506  1,722,170
Residential mortgages guaranteed by U.S. government agencies  245,940  262,466  293,838  322,581  354,173
Personal  1,601,150  1,574,325  1,484,596  1,506,832  1,515,206
Total loans to individuals  3,737,874  3,688,627  3,563,163  3,552,919  3,591,549
           
Total $22,557,150 $21,790,457 $21,291,148 $20,674,429 $20,205,680


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

 Dec. 31, 2022 Sep. 30, 2022 June 30, 2022 Mar. 31, 2022 Dec. 31, 2021
          
Texas:         
Commercial$6,869,979 $6,632,610 $6,631,658 $6,254,883 $6,068,700
Commercial real estate 1,555,508  1,448,590  1,339,452  1,345,105  1,253,439
Paycheck protection program 8,639  12,280  14,040  31,242  81,654
Loans to individuals 982,700  970,459  934,856  957,320  942,982
Total Texas 9,416,826  9,063,939  8,920,006  8,588,550  8,346,775
          
Oklahoma:         
Commercial 3,379,468  3,104,037  3,125,764  2,883,663  2,633,014
Commercial real estate 582,109  608,856  576,458  552,310  546,021
Paycheck protection program 3,109  4,571  13,329  52,867  69,817
Loans to individuals 2,077,124  2,054,362  1,982,247  1,977,886  2,024,404
Total Oklahoma 6,041,810  5,771,826  5,697,798  5,466,726  5,273,256
          
Colorado:         
Commercial 2,147,969  2,115,883  2,074,455  1,977,773  1,936,149
Commercial real estate 613,912  565,057  473,231  480,740  470,937
Paycheck protection program 1,230  1,298  8,233  28,584  82,781
Loans to individuals 241,902  237,981  234,105  236,125  256,533
Total Colorado 3,005,013  2,920,219  2,790,024  2,723,222  2,746,400
          
Arizona:         
Commercial 1,123,569  1,101,917  1,080,228  1,074,551  1,130,798
Commercial real estate 860,947  850,319  766,767  719,970  674,309
Paycheck protection program 720  1,083  5,173  11,644  21,594
Loans to individuals 229,872  225,981  212,870  190,746  186,528
Total Arizona 2,215,108  2,179,300  2,065,038  1,996,911  2,013,229
          
Kansas/Missouri:         
Commercial 310,715  307,446  338,337  334,371  338,697
Commercial real estate 479,968  466,955  458,157  436,740  382,761
Paycheck protection program   10  573  2,595  4,718
Loans to individuals 131,307  125,039  125,584  121,247  110,889
Total Kansas/Missouri 921,990  899,450  922,651  894,953  837,065
          
New Mexico:         
Commercial 262,735  257,763  252,033  262,533  306,964
Commercial real estate 417,008  426,367  431,606  504,632  442,128
Paycheck protection program 614  991  1,792  9,713  13,510
Loans to individuals 67,163  68,095  67,026  63,299  63,930
Total New Mexico 747,520  753,216  752,457  840,177  826,532
          
Arkansas:         
Commercial 103,752  88,030  76,222  95,415  92,143
Commercial real estate 97,325  107,767  60,477  61,459  61,730
Paycheck protection program       720  2,267
Loans to individuals 7,806  6,710  6,475  6,296  6,283
Total Arkansas 208,883  202,507  143,174  163,890  162,423
          
TOTAL BOK FINANCIAL$22,557,150 $21,790,457 $21,291,148 $20,674,429 $20,205,680

Loans attributed to a principal market may not always represent the location of the borrower or the collateral.


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

 Dec. 31, 2022 Sep. 30, 2022 June 30, 2022 Mar. 31, 2022 Dec. 31, 2021
Oklahoma:         
Demand$4,585,963 $5,143,405 $5,422,593 $5,205,806 $5,433,405
Interest-bearing:         
Transaction 9,475,528  9,619,419  10,240,378  11,410,709  12,689,367
Savings 555,407  558,256  561,413  558,634  521,439
Time 794,002  776,306  678,127  817,744  978,822
Total interest-bearing 10,824,937  10,953,981  11,479,918  12,787,087  14,189,628
Total Oklahoma 15,410,900  16,097,386  16,902,511  17,992,893  19,623,033
          
Texas:         
Demand 3,873,759  4,609,255  4,670,535  4,552,001  4,552,983
Interest-bearing:         
Transaction 4,878,482  4,781,920  5,344,326  4,963,118  5,345,461
Savings 178,356  179,049  183,708  182,536  178,458
Time 356,538  343,015  333,038  329,931  337,559
Total interest-bearing 5,413,376  5,303,984  5,861,072  5,475,585  5,861,478
Total Texas 9,287,135  9,913,239  10,531,607  10,027,586  10,414,461
          
Colorado:         
Demand 2,462,891  2,510,179  2,799,798  2,673,352  2,526,855
Interest-bearing:         
Transaction 2,123,218  2,221,796  2,277,563  2,387,304  2,334,371
Savings 77,961  80,542  82,976  81,762  78,636
Time 135,043  151,064  160,795  165,401  174,351
Total interest-bearing 2,336,222  2,453,402  2,521,334  2,634,467  2,587,358
Total Colorado 4,799,113  4,963,581  5,321,132  5,307,819  5,114,213
          
New Mexico:         
Demand 1,141,958  1,296,410  1,347,600  1,271,264  1,196,057
Interest-bearing:         
Transaction 691,915  717,492  845,442  888,257  858,394
Savings 112,430  113,056  115,660  115,457  107,963
Time 133,625  142,856  148,532  156,140  163,871
Total interest-bearing 937,970  973,404  1,109,634  1,159,854  1,130,228
Total New Mexico 2,079,928  2,269,814  2,457,234  2,431,118  2,326,285
          
Arizona:         
Demand 844,327  903,296  901,543  947,775  934,282
Interest-bearing:         
Transaction 739,628  788,142  792,269  810,896  834,491
Savings 16,496  18,258  17,999  18,122  16,182
Time 24,846  26,704  28,774  27,259  31,274
Total interest-bearing 780,970  833,104  839,042  856,277  881,947
Total Arizona 1,625,297  1,736,400  1,740,585  1,804,052  1,816,229
          
          
Kansas/Missouri:         
Demand 436,259  479,459  537,143  553,345  658,342
Interest-bearing:         
Transaction 694,163  747,981  913,921  1,107,525  1,086,946
Savings 20,678  19,375  19,943  19,589  18,844
Time 12,963  13,258  13,962  11,527  12,255
Total interest-bearing 727,804  780,614  947,826  1,138,641  1,118,045
Total Kansas/Missouri 1,164,063  1,260,073  1,484,969  1,691,986  1,776,387
          
Arkansas:         
Demand 50,180  43,111  41,084  38,798  42,499
Interest-bearing:         
Transaction 56,181  123,273  130,300  122,020  119,543
Savings 3,083  3,098  3,125  3,265  3,213
Time 4,825  5,940  6,371  6,414  6,196
Total interest-bearing 64,089  132,311  139,796  131,699  128,952
Total Arkansas 114,269  175,422  180,880  170,497  171,451
          
TOTAL BOK FINANCIAL$34,480,705 $36,415,915 $38,618,918 $39,425,951 $41,242,059


NET INTEREST MARGIN TREND -- UNAUDITED
BOK FINANCIAL CORPORATION

 Three Months Ended
 Dec. 31, 2022 Sep. 30, 2022 June 30, 2022 Mar. 31, 2022 Dec. 31, 2021
          
TAX-EQUIVALENT ASSETS YIELDS         
Interest-bearing cash and cash equivalents4.06% 1.87% 0.83% 0.18% 0.16%
Trading securities3.70% 2.72% 2.00% 1.71% 1.89%
Investment securities, net of allowance1.46% 1.42% 2.35% 5.07% 4.99%
Available for sale securities2.54% 2.21% 1.84% 1.77% 1.72%
Fair value option securities4.40% 2.98% 2.92% 2.81% 2.71%
Restricted equity securities5.70% 6.23% 3.30% 2.69% 2.98%
Residential mortgage loans held for sale5.56% 5.05% 4.22% 3.11% 3.06%
Loans5.99% 4.89% 3.92% 3.57% 3.70%
Allowance for loan losses         
Loans, net of allowance6.06% 4.94% 3.96% 3.61% 3.75%
Total tax-equivalent yield on earning assets4.53% 3.71% 2.96% 2.58% 2.66%
          
COST OF INTEREST-BEARING LIABILITIES        
Interest-bearing deposits:         
Interest-bearing transaction1.28% 0.63% 0.22% 0.10% 0.09%
Savings0.08% 0.05% 0.03% 0.03% 0.04%
Time1.25% 0.93% 0.68% 0.56% 0.53%
Total interest-bearing deposits1.22% 0.63% 0.24% 0.12% 0.12%
Funds purchased and repurchase agreements2.05% 0.72% 0.53% 0.95% 0.73%
Other borrowings4.08% 2.33% 1.01% 0.38% 0.49%
Subordinated debt6.16% 5.07% 4.50% 4.02% 4.02%
Total cost of interest-bearing liabilities1.57% 0.76% 0.31% 0.21% 0.21%
Tax-equivalent net interest revenue spread2.96% 2.95% 2.65% 2.37% 2.45%
Effect of noninterest-bearing funding sources and other0.58% 0.29% 0.11% 0.07% 0.07%
Tax-equivalent net interest margin3.54% 3.24% 2.76% 2.44% 2.52%

Yield calculations are shown on a tax equivalent basis at the statutory federal and state rates for the periods presented. The yield calculations exclude security trades that have been recorded on trade date with no corresponding interest income and the unrealized gains and losses. The yield calculation also includes average loan balances for which the accrual of interest has been discontinued and are net of unearned income. Yield/rate calculations are generally based on the conventions that determine how interest income and expense is accrued.


CREDIT QUALITY INDICATORS -- UNAUDITED
BOK FINANCIAL CORPORATION
(in thousands, except ratios)

 Three Months Ended
 Dec. 31, 2022 Sep. 30, 2022 June 30, 2022 Mar. 31, 2022 Dec. 31, 2021
Nonperforming assets:         
Nonaccruing loans:         
Commercial:         
Healthcare$41,034  $41,438  $14,886  $15,076  $15,762 
Services 16,228   27,315   15,259   16,535   17,170 
Energy 1,399   4,164   20,924   24,976   31,091 
General business 1,636   2,753   3,539   3,750   10,081 
Total commercial 60,297   75,670   54,608   60,337   74,104 
          
Commercial real estate 16,570   7,971   10,939   15,989   14,262 
          
Loans to individuals:         
Permanent mortgage 29,791   30,066   30,460   30,757   31,574 
Permanent mortgage guaranteed by U.S. government agencies 15,005   16,957   18,000   16,992   13,861 
Personal 134   136   132   171   258 
Total loans to individuals 44,930   47,159   48,592   47,920   45,693 
          
Total nonaccruing loans$121,797  $130,800  $114,139  $124,246  $134,059 
Accruing renegotiated loans guaranteed by U.S. government agencies 163,535   176,022   196,420   204,121   210,618 
Real estate and other repossessed assets 14,304   29,676   22,221   24,492   24,589 
Total nonperforming assets$299,636  $336,498  $332,780  $352,859  $369,266 
Total nonperforming assets excluding those guaranteed by U.S. government agencies$121,096  $143,519  $118,360  $131,746  $144,787 
          
Accruing loans 90 days past due1$510  $120  $3  $307  $313 
          
Gross charge-offs$17,807  $1,766  $1,368  $7,805  $6,558 
Recoveries (2,301)  (1,309)  (2,167)  (1,824)  (7,272)
Net charge-offs (recoveries)$15,506  $457  $(799) $5,981  $(714)
          
Provision for loan losses$9,442  $1,111  $(6,158) $(3,967) $(20,973)
Provision for credit losses from off-balance sheet unfunded loan commitments 4,609   14,060   6,005   3,268   3,738 
Provision for expected credit losses from mortgage banking activities 1,003   (66)  69   621   150 
Provision for credit losses related to held-to maturity (investment) securities portfolio (54)  (105)  84   78   85 
Total provision for credit losses$15,000  $15,000  $  $  $(17,000)
          
Allowance for loan losses to period end loans 1.04%  1.11%  1.13%  1.19%  1.27%
Combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments to period end loans 1.31%  1.37%  1.33%  1.37%  1.43%
Nonperforming assets to period end loans and repossessed assets 1.33%  1.54%  1.56%  1.70%  1.83%
Net charge-offs (annualized) to average loans 0.28%  0.01% (0.02)%  0.12% (0.01)%
Allowance for loan losses to nonaccruing loans1 220.71%  212.37%  250.80%  229.80%  213.33%
Combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments to nonaccruing loans1 277.76%  261.83%  294.74%  263.60%  240.77%

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


SEGMENTS -- UNAUDITED
BOK FINANCIAL CORPORATION
(in thousands, except ratios)

  Three Months Ended 4Q22 vs 3Q22 Year Ended 2022 vs 2021
  Dec. 31, 2022 Sep. 30, 2022 $ change % change Dec. 31, 2022 Dec. 31, 2021 $ change % change
Commercial Banking                
Net interest revenue $232,834 $208,065 $24,769  11.9% $744,449 $535,735 $208,714  39.0%
Fees and commissions revenue  58,881  58,147  734  1.3%  233,873  227,081  6,792  3.0%
Combined net interest and fee revenue  291,715  266,212  25,503  9.6%  978,322  762,816  215,506  28.3%
Other operating expense  79,722  75,872  3,850  5.1%  290,717  281,089  9,628  3.4%
Corporate expense allocations  18,007  16,451  1,556  9.5%  67,337  49,941  17,396  34.8%
Net income  139,374  133,830  5,544  4.1%  460,361  328,516  131,845  40.1%
                 
Average assets  28,373,856  28,890,429  (516,573) (1.8)%  29,084,957  28,536,881  548,076  1.9%
Average loans  18,254,559  17,904,779  349,780  2.0%  17,553,398  16,853,006  700,392  4.2%
Average deposits