BOK Financial Corporation Reports Quarterly Earnings of $65 million or $0.92 Per Share in the Second Quarter

Rhea-AI Summary

BOK Financial (NASDAQ: BOKF) reported net earnings of $65 million or $0.92 per diluted share for Q2 2020, reflecting a strong performance in a challenging economic environment. This quarter marked the highest pre-provision net revenue in the company's history at $215.8 million, driven by record results from Wealth Management and Mortgage segments, contributing over $150 million to fee revenue. Despite a provision for credit losses of $135.3 million, the bank experienced a significant increase in loans and deposits, attributed largely to the Paycheck Protection Program, showcasing its diversified revenue model.

Positive

• Net earnings of $65 million, or $0.92 per diluted share, for Q2 2020.
• Record pre-provision net revenue of $215.8 million, highest in company history.
• Fee revenue increased by more than $150 million, driven by Wealth Management and Mortgage businesses.
• Average loans increased by $2.2 billion to $24.1 billion, including $1.7 billion in PPP loans.
• Period-end deposits rose by $4.6 billion to $33.9 billion, largely due to CARES Act funding.

Negative

• Provision for expected credit losses increased to $135.3 million compared to $93.8 million in Q1 2020.
• Operating expenses rose by $26.8 million to $295.4 million, driven by higher personnel expenses.

TULSA, Okla., July 22, 2020 (GLOBE NEWSWIRE) -- BOK Financial (NASDAQ: BOKF) today reported net earnings applicable to common shareholders for the second quarter of 2020 of $65 million, or $0.92 per diluted common share.

"The second quarter, unlike any in recent memory, demonstrated the effectiveness of our diversified revenue model," said Steven G. Bradshaw, president and chief executive officer. "Record quarters from both our Wealth Management and Mortgage businesses added more than $150 million to fee revenue this quarter, eclipsing our pre-provision net revenue from the same quarter a year ago. In fact, this quarter generated the highest level of pre-provision net revenue in the history of our company, even after normalizing for the impact of the Paycheck Protection Program. Considering the economic environment we find ourselves in today, this is truly a remarkable outcome."

Bradshaw continued, "With more than 40 percent of our company's revenues derived from a host of fee-based businesses, we have the proven ability to generate positive outcomes through all parts of the economic cycle. In this time of margin compression and credit concerns, financial institutions like BOK Financial demonstrate the real power of a diversified business model and sound underwriting methods."

• Net income was $64.7 million or $0.92 per diluted share for the second quarter of 2020 and $62.1 million or $0.88 per diluted share for the first quarter of 2020. Pre-provision net revenue was $215.8 million for the second quarter of 2020 compared to $173.0 million for the prior quarter. The second quarter of 2020 included a pre-tax provision for expected credit losses of $135.3 million compared to $93.8 million in the prior quarter.
  
  
• Net interest revenue totaled $278.1 million, an increase of $16.7 million, largely due to the addition of loans related to the Small Business Administration's ("SBA") Paycheck Protection Program ("PPP") that began on April 3, 2020. Net interest margin was 2.83 percent compared to 2.80 percent in the first quarter of 2020. Our ability to move deposit costs down, along with LIBOR remaining elevated early in the second quarter relative to recent Federal Reserve rate cuts and the strategic positioning of our balance sheet, has allowed us to combat much of the market pressure on our margin.
  
  
• Fees and commissions revenue totaled $213.7 million, an increase of $21.0 million. Low mortgage interest rates continued to drive increases in mortgage banking revenue of $16.8 million and related bond trading activity of $9.5 million over the first quarter of 2020. These increases were partially offset by a reduction in service charges, largely due to "shelter in place" impacts coupled with proactive waivers of fees that were extended as a courtesy to our customers during the COVID-19 pandemic.
  
  
• Operating expense was $295.4 million, an increase of $26.8 million. Personnel expense increased $20.1 million, including an $11.0 million increase in incentive compensation expense reflecting the growth in our trading activity. Non-personnel expense increased $6.7 million compared to the first quarter of 2020. Increases in mortgage banking costs and occupancy and equipment expense were partially offset by a decrease in business promotion expense.
  
  
• Changes in the fair value of mortgage servicing rights and related economic hedges provided $9.3 million during the second quarter of 2020. A $7.4 million increase in the fair value of securities and derivative contracts held as an economic hedge and $2.7 million of related net interest revenue, were partially offset by a $761 thousand decrease in the fair value of mortgage servicing rights.  
  
  
• We have implemented programs to help our customers through this uncertain time. We are actively participating in programs initiated by the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), including the SBA's PPP. Average loans for the second quarter increased $2.2 billion to $24.1 billion with $1.7 billion of those being PPP loans. Period-end loans increased $1.7 billion to $24.2 billion. Period-end PPP loans were $2.1 billion. We have also granted $1.2 billion in forbearance requests from customers as of June 30, including $704 million of commercial loans, $398 million in commercial real estate loans and $143 million in loans to individuals.
  
  
• The allowance for loan losses totaled $436 million or 1.80 percent of outstanding loans at June 30, 2020. The combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $469 million or 1.94 percent of outstanding loans at June 30, 2020. Excluding PPP loans, the allowance for loan losses was 1.97 percent of outstanding loans and the combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was 2.12 percent. At March 31, 2020, the allowance for loan losses was $315 million or 1.40 percent of outstanding loans. The combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $344 million or 1.53 percent of outstanding loans.
  
  
• Average deposits increased $4.5 billion to $32.7 billion and period-end deposits increased $4.6 billion to $33.9 billion. An estimated $2.7 billion of this growth was related to CARES Act funding, with the remainder due to growth from our broader customer base.
  
  
• The company's common equity Tier 1 capital ratio was 11.41 percent at June 30, 2020. In addition, the company's Tier 1 capital ratio was 11.41 percent, total capital ratio was 13.40 percent, and leverage ratio was 7.74 percent at June 30, 2020. At March 31, 2020, the company's common equity Tier 1 capital ratio was 10.98 percent, Tier 1 capital ratio was 10.98 percent, total capital ratio was 12.65 percent, and leverage ratio was 8.15 percent.

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Second Quarter 2020 Business Segment Highlights

• Commercial Banking contributed $81.0 million to net income, an increase of $6.0 million over the first quarter. While net interest revenue decreased $6.3 million, fees and commissions revenue increased $5.1 million. Customer reaction to the volatile price environment drove an increase of $4.4 million in customer hedging revenue this quarter. Other gains (losses), net also increased $4.6 million, primarily related to an impairment of an alternative investment in the first quarter. Operating expense increased $2.2 million, largely due to incentive compensation.
  
  
• Consumer Banking contributed $31.9 million to net income, an increase of $9.0 million over the first quarter. Net interest revenue decreased $4.7 million; however, fees and commissions revenue increased $12.1 million. Mortgage banking revenue increased $16.8 million following another strong quarter for mortgage loan production. Low mortgage interest rates continue to increase volume, particularly around refinances, which is responsible for 71 percent of the volume in the second quarter. The large increase in refinance demand, which reduced industry-wide capacity, has led to the ability to increase margins. Gain on sale margin increased 159 basis points to 3.65 percent. This increase was partially offset by a decrease in service charges as we waived certain fees in the second quarter to help customers throughout this uncertain time. Changes in the fair value of mortgage servicing rights and related economic hedges provided $9.3 million during the second quarter of 2020. Operating expense increased $4.1 million, primarily due to an increase in mortgage banking costs.
  
  
• Wealth Management contributed $33.4 million to net income, an increase of $10.8 million over the first quarter. Net interest revenue increased $8.0 million and fees and commissions increased $8.9 million. Lower interest rates drove record increases in industry-wide mortgage loan production volume during the second quarter. We increased our trading pipeline to provide greater liquidity to the housing market. As a result, trading revenue increased $9.5 million. Trust fees and commissions decreased $3.2 million as we waived certain fees for our customers and market conditions led to reduction in trust revenue. Operating expense increased $2.4 million, primarily due to incentive compensation costs related to increased trading activity partially offset by lower business promotion expense.

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Net Interest Revenue

Net interest revenue was $278.1 million for the second quarter of 2020, a $16.7 million increase compared to the first quarter of 2020. PPP loans added $13.6 million to net interest revenue in the second quarter.

Average earning assets increased $1.9 billion compared to the first quarter of 2020. Average loan balances increased $2.2 billion, largely due to the influx of PPP loans. Available for sale securities increased $816 million as we have adjusted our balance sheet for the current rate environment. Fair value option securities, held as an economic hedge of the changes in fair value of our mortgage servicing rights, decreased $1.0 billion. In addition, receivables from unsettled securities sales, primarily related to our U.S. agency residential mortgage-backed trading operations, increased $1.6 billion. Growth in average earning assets and non-interest bearing receivables was largely funded by a $2.2 billion increase in interest-bearing deposits. Other borrowings decreased $3.0 billion, primarily due to a decrease in funds borrowed from the Federal Home Loan Bank, partially offset by an increase in PPP loans funded through the Federal Reserve's PPP Liquidity Facility. Funds purchased and repurchase agreements increased $2.0 billion.

Net interest margin was 2.83 percent compared to 2.80 percent in the previous quarter. The reduction in deposit costs, LIBOR remaining elevated early in the second quarter, and the strategic positioning of our balance sheet, have combined to reduce the pressure on margin. PPP loans added one basis point to net interest margin.

The yield on average earning assets was 3.12 percent, a 61 basis point decrease from the prior quarter as we start to see the effects of the recent Federal Reserve rate cuts. The loan portfolio yield was 3.63 percent, down 87 basis points. The yield on the available for sale securities portfolio decreased 19 basis points to 2.29 percent.

Funding costs were 0.37 percent, down 82 basis points. The cost of interest-bearing deposits decreased 64 basis points to 0.34 percent. The cost of other borrowed funds was down 117 basis points to 0.30 percent. The benefit to net interest margin from assets funded by non-interest liabilities was 8 basis points for the second quarter of 2020 compared to 26 basis points for the first quarter of 2020.

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Fees and Commissions Revenue

Fees and commissions revenue totaled $213.7 million for the second quarter of 2020, an increase of $21.0 million over the first quarter of 2020, led by significant growth in mortgage banking and brokerage and trading revenue.

Declining interest rates have propelled mortgage production, particularly refinance activities, and have allowed for margin expansion. Mortgage banking revenue increased $16.8 million to $53.9 million compared to the prior quarter. Mortgage loan production volume was $1.1 billion for the second quarter of 2020, an increase of 2 percent over an already very strong first quarter. Refinances grew to 71 percent of our production volume compared to 57 percent in the prior quarter. Gain on sale margin increased 159 basis points to 3.65 percent as industry-wide capacity constraints have eased pricing competition.

Brokerage and trading revenue increased $11.2 million to $62.0 million. We continue to grow our relationships with mortgage originators by providing liquidity and financial instruments to help them manage their pipeline risk. Trading revenue, primarily related to sales of residential mortgage-backed securities guaranteed by U.S. government agencies and related derivative instruments, increased $9.5 million. Industry-wide mortgage loan production increased in the second quarter driven by the lower rates as the Federal Reserve stepped in to provide market stability. We increased our bond trading pipeline to provide greater liquidity to the housing market during a time of record loan production volumes. Customer hedging revenue also increased $3.0 million as existing customers increased hedging activities in the volatile environment.

Deposit service charges decreased $4.1 million compared to the first quarter. In order to help our customers during uncertain times, we proactively waived certain fees during the second quarter.

Fiduciary and asset management revenue decreased $3.2 million compared to the first quarter of 2020. As a result of the significant decline in interest rates, we provided $1.1 million in fee waivers during the second quarter. In addition, asset volumes and market conditions have affected our trust revenues. These decreases were partially offset by an increase in seasonal tax preparation fees.

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Operating Expense

Total operating expense was $295.4 million for the second quarter of 2020, an increase of $26.8 million compared to the first quarter of 2020.

Personnel expense increased $20.1 million. Incentive compensation increased $22.3 million. Cash based incentive compensation increased $11.0 million, primarily due to increased residential mortgage-backed securities trading activity. Deferred compensation, which is largely offset by an increase in the value of related investments included in Other gains (losses), net, increased $11.6 million. Regular compensation increased $1.5 million. Employee benefits decreased $3.8 million, primarily due to a seasonal decrease in payroll taxes.

Non-personnel expense increased $6.7 million compared to the first quarter of 2020. Mortgage banking costs increased $5.1 million. Accruals related to default servicing and loss mitigation costs on loans serviced for others increased $2.8 million due to changes in our portfolio and loan counts, delinquency levels, and additional accruals related to losses on loans in forbearance. Increased amortization of mortgage servicing rights from actual prepayments also added $1.7 million to mortgage banking costs during the second quarter of 2020. Occupancy and equipment expense increased $4.6 million as impairment charges were incurred on two leases where assumptions regarding subleasing changed due to deteriorating economic conditions. We also made a charitable contribution of $3.0 million to the BOKF Foundation in the second quarter. These increases were partially offset by a decrease of $4.3 million in business promotion costs, largely related to reduced travel and entertainment expenses.

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Loans, Deposits and Capital

Loans

Outstanding loans were $24.2 billion at June 30, 2020, up $1.7 billion over March 31, 2020, primarily due to a $2.1 billion increase from PPP loans, partially offset by paydowns in the commercial portfolio.

Outstanding core commercial loan balances decreased $637 million or 4 percent compared to March 31, 2020, primarily due to paydowns during the second quarter. Although the primary source of repayment of our commercial loan portfolio is the on-going cash flow from operations of the customer's business, loans are generally governed by a borrowing base and secured by the customer’s assets.

General business loans decreased $448 million to $3.1 billion or 13 percent of total loans. General business loans include $1.7 billion of wholesale/retail loans and $780 million of loans from other commercial industries. Broad paydowns across our core commercial and industrial loan book contracted the portfolio.

Services loan balances decreased $176 million to $3.8 billion or 16 percent of total loans. Services loans consist of a large number of loans to a variety of businesses, including Native American tribal and state and local municipal government entities, Native American tribal casino operations, educational services, consumer services and commercial services.

Although not a significant portion of our commercial portfolio, our services and general business loans also include areas we consider to be more exposed to the economic slowdown as a result of the social distancing measures in place to combat the COVID-19 pandemic such as entertainment and recreation, retail, hotels, churches, airline travel, and higher education that are dependent on large social gatherings to remain profitable. This represents less than 7 percent of our total portfolio. Some of these borrowers have participated in the PPP, which has provided some measure of relief. We will continue to monitor these areas closely in the coming months.

Energy loan balances decreased $138 million to $4.0 billion or 16 percent of total loans as the current commodity price environment dampened demand for new loans and borrowers focused on paying down debt to reduce leverage. Supporting the energy industry has been a hallmark of the Company for over a century. 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 62 percent of committed production loans are secured by properties primarily producing oil. The remaining 38 percent is secured by properties primarily producing natural gas. Unfunded energy loan commitments were $2.5 billion at June 30, 2020, a $222 million decrease compared to March 31, 2020, primarily due to semi-annual borrowing base redeterminations completed during the second quarter.

Healthcare sector loan balances increased $124 million to $3.3 billion or 14 percent of total loans, primarily due to growth in balances from hospital systems. Our healthcare sector loans primarily consist of $2.4 billion of senior housing and care facilities, including independent living, assisted living and skilled nursing. Generally we loan to borrowers with a portfolio of multiple facilities that serves to help diversify risks specific to a single facility. The remaining balance is composed of hospitals and other medical service providers impacted by a deferral of elective procedures. The CARES Act does include multiple revenue enhancement measures for both hospitals and skilled nursing facilities as they manage through the risks of the virus.

Commercial real estate loan balances were up $104 million over March 31, 2020 and represent 19 percent of total loans at June 30, 2020. Multifamily residential loans, our largest exposure in commercial real estate, increased $125 million to $1.4 billion at June 30, 2020. Paydowns from refinances into the permanent market slowed during the second quarter. Loans secured by office buildings increased $12 million to $974 million. Loans secured by other commercial real estate properties decreased $32 million to $533 million. Loans secured by retail facilities were $780 million at June 30, 2020, largely unchanged from the prior quarter. Loans secured by retail facilities and office buildings may be impacted by measures being taken to hinder the spread of the virus as well as changes in consumer behavior.

Loans to individuals increased $144 million, primarily due to an increase in residential mortgage loans guaranteed by U.S. government agencies. The Company may repurchase loans previously sold into GNMA mortgage pools 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. Loans to individuals represent 14 percent of total loans at June 30, 2020.

Deposits

Period-end deposits totaled $33.9 billion at June 30, 2020, a $4.6 billion increase over March 31, 2020. Inflows resulting from PPP loans and government stimulus payments during the pandemic, along with additional core deposit growth as customers maintain higher balances, have all contributed to the significant increase in deposits. Interest-bearing transaction account balances grew by $2.3 billion and demand deposit balances increased $2.2 billion. Average deposits were $32.7 billion at June 30, 2020, a $4.5 billion increase compared to March 31, 2020. Average demand deposit balances grew by $2.3 billion and interest-bearing transaction deposits increased $1.9 billion.

Capital

The company's common equity Tier 1 capital ratio was 11.41 percent at June 30, 2020. In addition, the company's Tier 1 capital ratio was 11.41 percent, total capital ratio was 13.40 percent, and leverage ratio was 7.74 percent at June 30, 2020. We have elected to delay the regulatory capital impact of the transition of the allowance for credit losses from the incurred loss methodology to CECL for two years, followed by a three-year transition period, which added 30 basis points to the company's common equity tier 1 capital ratio at June 30. At March 31, 2020, the company's common equity Tier 1 capital ratio was 10.98 percent, Tier 1 capital ratio was 10.98 percent, total capital ratio was 12.65 percent, and leverage ratio was 8.15 percent.

The company's tangible common equity ratio, a non-GAAP measure, was 8.79 percent at June 30, 2020 and 8.39 percent at March 31, 2020. 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 paused share repurchases through the second quarter of 2020. The company repurchased 442,000 shares at an average price of $75.52 in the first quarter of 2020. We view share buybacks opportunistically, but within the context of maintaining our strong capital position.

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Credit Quality

The Company adopted FASB Accounting Standard Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Assets Measured at Amortized Cost ("CECL") on January 1, 2020. CECL requires recognition of expected credit losses on assets carried at amortized cost over their expected lives. The previous incurred loss model incorporated only known information as of the balance sheet date. CECL uses models to measure the probability of default and loss given default over a 12-month reasonable and supportable forecast period. Models incorporate base case, downside and upside macroeconomic variables such as real gross domestic product ("GDP") growth, civilian unemployment rate and West Texas Intermediate ("WTI") oil prices on a probability weighted basis.

The provision for credit losses was $135.3 million for the second quarter of 2020, with $138.8 million related to lending activities. Changes in our reasonable and supportable forecasts of macroeconomic variables, primarily due to the anticipated impact of the on-going COVID-19 pandemic, and other assumptions, required a provision of $54.6 million. All other changes totaled $84.2 million, which included $14.4 million primarily due to increased specific impairment of energy loans, portfolio changes of $55.7 million primarily due to changes in risk grades related to energy loans, partially offset by the impact of a decrease in loan balances, and net charge-offs of $14.1 million. The provision related to lending activities was partially offset by a $3.6 million decrease in the accrual for expected credit losses from mortgage banking activities. During the second quarter, the Company sold certain mortgage servicing rights related to residential mortgage loans transferred to mortgage-backed securities. These servicing rights expose the Company to credit risk for amounts that exceed the U.S. government agency guarantees.

Our base case reasonable and supportable forecast includes an 18 percent increase in GDP and an 8.4 percent civilian unemployment rate in the third quarter of 2020, as adjusted for the impact of government stimulus programs. Our forward twelve month forecast through the second quarter of 2021 assumes a 5.0 percent increase in GDP and an 8.5 percent civilian unemployment rate. WTI oil prices are projected to generally follow the NYMEX forward curve that existed at the end of June 2020, $38.99 per barrel for delivery in the third quarter of 2020 and increasing to $40.13 per barrel for delivery in the second quarter of 2021. Our downside reasonable and supportable forecast reflects a more severe and prolonged disruption in economic activity than the base case and includes a 6.0 percent increase in GDP and a 9.7 percent adjusted civilian unemployment rate in the third quarter of 2020. Our forward twelve month forecast through the second quarter of 2021 assumes a 6.0 percent increase in GDP and a 10.0 percent civilian unemployment rate. WTI oil prices are projected to range from $33.99 per barrel for delivery in the third quarter of 2020 to $34.63 per barrel for delivery in the second quarter of 2021.

The allowance for loan losses totaled $436 million or 1.80 percent of outstanding loans and 175 percent of nonaccruing loans at June 30, 2020, excluding residential mortgage loans guaranteed by U.S. government agencies. The combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $469 million or 1.94 percent of outstanding loans and 188 percent of nonaccruing loans at June 30, 2020. The combined allowance for credit losses attributed to energy was 4.44 percent of outstanding energy loans at June 30. Excluding PPP loans, the allowance for loan losses was 1.97 percent of outstanding loans and the combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was 2.12 percent.

At March 31, 2020, the allowance for loan losses was $315 million or 1.40 percent of outstanding loans and 199 percent of nonaccruing loans, excluding loans guaranteed by U.S. government agencies. The combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $344 million or 1.53 percent of outstanding loans and 217 percent of nonaccruing loans.

Nonperforming assets totaled $405 million or 1.68 percent of outstanding loans and repossessed assets at June 30, 2020, compared to $292 million or 1.30 percent at March 31, 2020. Nonperforming assets that are not guaranteed by U.S. government agencies totaled $285 million or 1.19 percent of outstanding loans and repossessed assets at June 30, 2020, compared to $195 million or 0.87 percent at March 31, 2020.

Nonaccruing loans were $255 million or 1.16 percent of outstanding loans at June 30, 2020. Nonaccruing commercial loans totaled $202 million or 1.43 percent of outstanding commercial loans. Nonaccruing commercial real estate loans totaled $14.0 million or 0.31 percent of outstanding commercial real estate loans. Nonaccruing loans to individuals totaled $39 million or 1.17 percent of outstanding loans to individuals. 

Nonaccruing loans increased $92 million from March 31, 2020, primarily due to a $67 million increase in nonaccruing energy loans and a $13 million increase in nonaccruing services loans. New nonaccruing loans identified in the second quarter totaled $124 million, offset by $16 million in payments received, $16 million in charge-offs and $1.1 million of foreclosures.

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 $626 million at June 30, compared to $293 million at March 31. The increase largely resulted from energy and service sector loans. Oil prices remained depressed during April and May during our semi-annual borrowing base redeterminations resulting in credit quality migration in the energy portfolio. While prices have subsequently improved, the pricing environment remains fragile and tied to the continued economic recovery.

Net charge-offs were $14.1 million or 0.25 percent of average loans on an annualized basis for the second quarter of 2020, excluding PPP loans. Net charge-offs were $17.2 million or 0.31 percent of average loans on an annualized basis for the first quarter of 2020. Gross charge-offs were $15.6 million for the second quarter compared to $18.9 million for the previous quarter. Recoveries totaled $1.5 million for the second quarter of 2020 and $1.7 million for the first quarter of 2020.

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Securities and Derivatives

The fair value of the available for sale securities portfolio totaled $12.5 billion at June 30, 2020, a $218 million decrease compared to March 31, 2020. At June 30, 2020, the available for sale securities portfolio consisted primarily of $9.1 billion of residential mortgage-backed securities fully backed by U.S. government agencies and $3.3 billion of commercial mortgage-backed securities fully backed by U.S. government agencies. At June 30, 2020, the available for sale securities portfolio had a net unrealized gain of $487 million compared to $436 million at March 31, 2020.

The company also maintains a portfolio of residential mortgage-backed securities issued by U.S. government agencies and interest rate derivative contracts as an economic hedge of the changes in the fair value of our mortgage servicing rights. This portfolio of fair value option securities decreased $981 million to $723 million at June 30, 2020.

The net economic benefit of the changes in the fair value of mortgage servicing rights and related economic hedges was $9.3 million during the second quarter of 2020, including a $7.4 million increase in the fair value of securities and derivative contracts held as an economic hedge, $761 thousand decrease in the fair value of mortgage servicing rights, and $2.7 million of related net interest revenue. The completion of a sale of mortgage servicing rights on $1.6 billion of unpaid principal balance, primarily related to loans guaranteed by the Veteran's Administration, was a large contributor to the increase in the fair value of contracts held as an economic hedge. Interest rate movements between the date we established the transaction price and the closing date of the sale produced positive results.

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Conference Call and Webcast

The company will hold a conference call at 9 a.m. Central time on July 22, 2020 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 1-412-317-6671 and referencing conference ID # 13706496.

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About BOK Financial Corporation

BOK Financial Corporation is a $46 billion regional financial services company headquartered in Tulsa, Oklahoma with $79 billion in assets under management and administration. The company's stock is publicly traded on NASDAQ under the Global Select market listings (BOKF). BOK Financial Corporation's holdings include BOKF, NA; BOK Financial Securities, Inc., BOK Financial Private Wealth, Inc. and BOK Financial Insurance, Inc. BOKF, NA operates TransFund, Cavanal Hill Investment Management 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, Milwaukee 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 June 30, 2020 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)

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	June 30, 2020		Mar. 31, 2020
ASSETS
Cash and due from banks	$	762,453				$	670,500
Interest-bearing cash and cash equivalents	485,319				302,577
Trading securities	1,196,105				2,110,585
Investment securities, net of allowance	267,988				272,576
Available for sale securities	12,475,919				12,694,277
Fair value option securities	722,657				1,703,238
Restricted equity securities	125,683				390,042
Residential mortgage loans held for sale	319,357				204,720
Loans:
Commercial	14,158,510				14,795,975
Commercial real estate	4,554,144				4,450,085
Paycheck protection program	2,081,428				—
Loans to individuals	3,361,808				3,217,910
Total loans	24,155,890				22,463,970
Allowance for loan losses	(435,597	)			(315,311	)
Loans, net of allowance	23,720,293				22,148,659
Premises and equipment, net	550,230				546,093
Receivables	226,934				207,341
Goodwill	1,048,091				1,048,091
Intangible assets, net	123,595				121,807
Mortgage servicing rights	97,971				110,828
Real estate and other repossessed assets, net	35,330				36,744
Derivative contracts, net	651,553				922,716
Cash surrender value of bank-owned life insurance	393,741				391,006
Receivable on unsettled securities sales	1,863,719				2,171,881
Other assets	752,936				1,065,481
TOTAL ASSETS	$	45,819,874				$	47,119,162
LIABILITIES AND EQUITY
Deposits:
Demand	$	11,992,165				$	9,821,582
Interest-bearing transaction	18,850,418				16,596,292
Savings	696,971				593,805
Time	2,352,760				2,232,473
Total deposits	33,892,314				29,244,152
Funds purchased and repurchase agreements	1,357,602				4,583,768
Other borrowings	3,173,563				5,529,554
Subordinated debentures	275,973				275,942
Accrued interest, taxes and expense	365,634				309,236
Due on unsettled securities purchases	599,510				537,709
Derivative contracts, net	610,020				1,213,445
Other liabilities	440,835				391,196
TOTAL LIABILITIES	40,715,451				42,085,002
Shareholders' equity:
Capital, surplus and retained earnings	4,726,679				4,694,956
Accumulated other comprehensive gain	370,316				331,292
TOTAL SHAREHOLDERS' EQUITY	5,096,995				5,026,248
Non-controlling interests	7,428				7,912
TOTAL EQUITY	5,104,423				5,034,160
TOTAL LIABILITIES AND EQUITY	$	45,819,874				$	47,119,162

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

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	Three Months Ended
	June 30, 2020		Mar. 31, 2020		Dec. 31, 2019		Sept. 30, 2019		June 30, 2019
ASSETS
Interest-bearing cash and cash equivalents	$	619,737				$	721,659				$	573,203				$	500,823				$	535,491
Trading securities	1,871,647				1,690,104				1,672,426				1,696,568				1,757,335
Investment securities, net of allowance	268,947				282,265				298,567				308,090				328,482
Available for sale securities	12,480,065				11,664,521				11,333,524				10,747,439				9,435,668
Fair value option securities	786,757				1,793,480				1,521,528				1,553,879				898,772
Restricted equity securities	273,922				429,133				479,687				476,781				413,812
Residential mortgage loans held for sale	288,588				129,708				203,535				203,319				192,102
Loans:
Commercial	14,502,652				14,452,851				14,344,534				14,507,185				14,175,057
Commercial real estate	4,543,511				4,346,886				4,532,649				4,652,534				4,656,861
Paycheck protection program	1,699,369				—				—				—				—
Loans to individuals	3,353,960				3,143,286				3,358,817				3,253,199				3,172,487
Total loans	24,099,492				21,943,023				22,236,000				22,412,918				22,004,405
Allowance for loan losses	(367,583	)			(250,338	)			(205,417	)			(201,714	)			(205,532	)
Loans, net of allowance	23,731,909				21,692,685				22,030,583				22,211,204				21,798,873
Total earning assets	40,321,572				38,403,555				38,113,053				37,698,103				35,360,535
Cash and due from banks	678,878				669,369				690,806				717,338				703,294
Derivative contracts, net	642,969				376,621				311,542				331,834				328,802
Cash surrender value of bank-owned life insurance	391,951				390,009				388,012				385,190				384,974
Receivable on unsettled securities sales	4,626,307				3,046,111				1,973,604				1,742,794				1,437,462
Other assets	3,095,354				2,834,953				2,736,337				2,705,089				2,629,710
TOTAL ASSETS	$	49,757,031				$	45,720,618				$	44,213,354				$	43,580,348				$	40,844,777
LIABILITIES AND EQUITY
Deposits:
Demand	$	11,489,322				$	9,232,859				$	9,612,533				$	9,759,710				$	9,883,965
Interest-bearing transaction	18,040,170				16,159,654				14,685,385				13,131,542				12,512,282
Savings	656,669				563,821				554,605				557,122				558,738
Time	2,464,793				2,239,234				2,247,717				2,251,800				2,207,391
Total deposits	32,650,954				28,195,568				27,100,240				25,700,174				25,162,376
Funds purchased and repurchase agreements	5,816,484				3,815,941				4,120,610				3,106,163				2,066,950
Other borrowings	3,527,303				6,542,325				6,247,194				8,125,023				7,175,617
Subordinated debentures	275,949				275,932				275,916				275,900				275,887
Derivative contracts, net	836,667				379,342				276,078				300,051				283,484
Due on unsettled securities purchases	887,973				960,780				784,174				745,893				821,688
Other liabilities	690,087				642,764				561,654				547,144				460,732
TOTAL LIABILITIES	44,685,417				40,812,652				39,365,866				38,800,348				36,246,734
Total equity	5,071,614				4,907,966				4,847,488				4,780,000				4,598,043
TOTAL LIABILITIES AND EQUITY	$	49,757,031				$	45,720,618				$	44,213,354				$	43,580,348				$	40,844,777

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

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	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2020		2019		2020		2019
Interest revenue	$	306,384				$	390,820				$	655,321				$	766,894
Interest expense	28,280				105,388				115,857				203,360
Net interest revenue	278,104				285,432				539,464				563,534
Provision for credit losses	135,321				5,000				229,092				13,000
Net interest revenue after provision for credit losses	142,783				280,432				310,372				550,534
Other operating revenue:
Brokerage and trading revenue	62,022				40,526				112,801				72,143
Transaction card revenue	22,940				21,915				44,821				42,653
Fiduciary and asset management revenue	41,257				45,025				85,715				88,383
Deposit service charges and fees	22,046				28,074				48,176				56,317
Mortgage banking revenue	53,936				28,131				91,103				51,965
Other revenue	11,479				12,437				23,788				25,199
Total fees and commissions	213,680				176,108				406,404				336,660
Other gains (losses), net	6,768				3,480				(3,973	)			6,456
Gain on derivatives, net	21,885				11,150				40,305				15,817
Gain (loss) on fair value option securities, net	(14,459	)			9,853				53,934				19,518
Change in fair value of mortgage servicing rights	(761	)			(29,555	)			(89,241	)			(50,221	)
Gain on available for sale securities, net	5,580				1,029				5,583				1,105
Total other operating revenue	232,693				172,065				413,012				329,335
Other operating expense:
Personnel	176,235				160,342				332,416				329,570
Business promotion	1,935				10,142				8,150				18,016
Professional fees and services	12,161				13,002				25,109				29,141
Net occupancy and equipment	30,675				26,880				56,736				56,401
Insurance	5,156				6,454				10,136				11,293
Data processing and communications	32,942				29,735				65,685				61,184
Printing, postage and supplies	3,502				4,107				7,774				8,992
Net losses and operating expenses of repossessed assets	1,766				580				3,297				2,576
Amortization of intangible assets	5,190				5,138				10,284				10,329
Mortgage banking costs	15,598				11,545				26,143				21,451
Other expense	7,227				8,212				15,281				14,341
Total other operating expense	295,387				277,137				564,011				564,294
Net income before taxes	80,089				175,360				159,373				315,575
Federal and state income taxes	15,803				37,580				33,103				67,530
Net income	64,286				137,780				126,270				248,045
Net income (loss) attributable to non-controlling interests	(407	)			217				(502	)			(130	)
Net income attributable to BOK Financial Corporation shareholders	$	64,693				$	137,563				$	126,772				$	248,175
Average shares outstanding:
Basic	69,876,043				70,887,063				69,999,865				71,135,414
Diluted	69,877,467				70,902,033				70,003,817				71,151,558
Net income per share:
Basic	$	0.92				$	1.93				$	1.80				$	3.47
Diluted	$	0.92				$	1.93				$	1.80				$	3.46

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

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	Three Months Ended
	June 30, 2020		Mar. 31, 2020		Dec. 31, 2019		Sept. 30, 2019		June 30, 2019
Capital:
Period-end shareholders' equity	$	5,096,995				$	5,026,248				$	4,855,795				$	4,829,016				$	4,709,438
Risk weighted assets	$	32,258,548				$	32,973,242				$	31,673,425				$	32,159,139				$	32,040,741
Risk-based capital ratios:
Common equity tier 1	11.41	%		10.98	%		11.39	%		11.06	%		10.84	%
Tier 1	11.41	%		10.98	%		11.39	%		11.06	%		10.84	%
Total capital	13.40	%		12.65	%		12.94	%		12.56	%		12.34	%
Leverage ratio	7.74	%		8.15	%		8.40	%		8.41	%		8.75	%
Tangible common equity ratio1	8.79	%		8.39	%		8.98	%		8.72	%		8.69	%
Common stock:
Book value per share	$	72.50				$	71.49				$	68.80				$	68.15				$	66.15
Tangible book value per share	55.83				54.85				52.17				51.60				49.68
Market value per share:
High	$	67.62				$	87.40				$	88.28				$	84.35				$	88.17
Low	$	37.80				$	34.57				$	71.85				$	72.96				$	72.60
Cash dividends paid	$	35,769				$	35,949				$	36,011				$	35,472				$	35,631
Dividend payout ratio	55.29	%		57.91	%		32.63	%		24.94	%		25.90	%
Shares outstanding, net	70,306,690				70,308,532				70,579,598				70,858,010				71,193,770
Stock buy-back program:
Shares repurchased	—				442,000				280,000				336,713				250,000
Amount	$	—				$	33,380				$	22,844				$	25,937				$	20,125
Average price per share	$	—				$	75.52				$	81.59				$	77.03				$	80.50
Performance ratios (quarter annualized):
Return on average assets	0.52	%		0.55	%		0.99	%		1.29	%		1.35	%
Return on average equity	5.14	%		5.10	%		9.05	%		11.83	%		12.02	%
Net interest margin	2.83	%		2.80	%		2.88	%		3.01	%		3.30	%
Efficiency ratio	59.57	%		58.62	%		63.65	%		59.31	%		59.51	%
Reconciliation of non-GAAP measures:
1   Tangible common equity ratio:
Total shareholders' equity	$	5,096,995				$	5,026,248				$	4,855,795				$	4,829,016				$	4,709,438
Less: Goodwill and intangible assets, net	1,171,686				1,169,898				1,173,362				1,172,411				1,172,564
Tangible common equity	$	3,925,309				$	3,856,350				$	3,682,433				$	3,656,605				$	3,536,874
Total assets	$	45,819,874				$	47,119,162				$	42,172,021				$	43,127,205				$	41,893,073
Less: Goodwill and intangible assets, net		1,171,686					1,169,898					1,173,362					1,172,411					1,172,564
Tangible assets	$	44,648,188				$	45,949,264				$	40,998,659				$	41,954,794				$	40,720,509
Tangible common equity ratio	8.79	%		8.39	%		8.98	%		8.72	%		8.69	%
Pre-provision net revenue:
Net income before taxes	$	80,089				$	79,284				$	141,039				$	174,254				$	175,360
Provision for expected credit losses	135,321				93,771				19,000				12,000				5,000
Net income (loss) attributable to non-controlling interests	(407	)			(95	)			430				(373	)			217
Pre-provision net revenue	$	215,817				$	173,150				$	159,609				$	186,627				$	180,143
Other data:
Tax equivalent interest	$	2,630				$	2,715				$	2,726				$	2,936				$	3,481
Net unrealized gain (loss) on available for sale securities	$	487,334				$	435,989				$	138,149				$	178,060				$	131,780
Mortgage banking:
Mortgage production revenue	$	39,185				$	21,570				$	9,169				$	13,814				$	11,869
Mortgage loans funded for sale	$	1,184,249				$	548,956				$	855,643				$	877,280				$	729,841
Add: current period-end outstanding commitments	546,304				657,570				158,460				379,377				344,087
Less: prior period end outstanding commitments	657,570				158,460				379,377				344,087				263,434
Total mortgage production volume	$	1,072,983				$	1,048,066				$	634,726				$	912,570				$	810,494
Mortgage loan refinances to mortgage loans funded for sale	71	%		57	%		57	%		56	%		31	%
Gain on sale margin	3.65	%		2.06	%		1.44	%		1.51	%		1.46	%
Mortgage servicing revenue	$	14,751				$	15,597				$	16,227				$	16,366				$	16,262
Average outstanding principal balance of mortgage loans serviced for others	19,319,872				20,416,546				20,856,446				21,172,874				21,418,690
Average mortgage servicing revenue rates	0.31	%		0.31	%		0.31	%		0.31	%		0.30	%
Gain (loss) on mortgage servicing rights, net of economic hedge:
Gain (loss) on mortgage hedge derivative contracts, net	$	21,815				$	18,371				$	(4,714	)			$	3,742				$	11,128
Gain (loss) on fair value option securities, net	(14,459	)			68,393				(8,328	)			4,597				9,853
Gain (loss) on economic hedge of mortgage servicing rights	7,356				86,764				(13,042	)			8,339				20,981
Gain (loss) on changes in fair value of mortgage servicing rights	(761	)			(88,480	)			9,297				(12,593	)			(29,555	)
Gain (loss) on changes in fair value of mortgage servicing rights, net of economic hedges, included in other operating revenue	6,595				(1,716	)			(3,745	)			(4,254	)			(8,574	)
Net interest revenue on fair value option securities2	2,702				4,268				1,544				1,245				1,296
Total economic benefit (cost) of changes in the fair value of mortgage servicing rights, net of economic hedges	$	9,297				$	2,552				$	(2,201	)			$	(3,009	)			$	(7,278	)

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)

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	Three Months Ended
	June 30, 2020		Mar. 31, 2020		Dec. 31, 2019		Sept. 30, 2019		June 30, 2019
Interest revenue	$	306,384				$	348,937				$	369,857				$	395,207				$	390,820
Interest expense	28,280				87,577				99,608				116,111				105,388
Net interest revenue	278,104				261,360				270,249				279,096				285,432
Provision for credit losses	135,321				93,771				19,000				12,000				5,000
Net interest revenue after provision for credit losses	142,783				167,589				251,249				267,096				280,432
Other operating revenue:
Brokerage and trading revenue	62,022				50,779				43,843				43,840				40,526
Transaction card revenue	22,940				21,881				22,548				22,015				21,915
Fiduciary and asset management revenue	41,257				44,458				45,021				43,621				45,025
Deposit service charges and fees	22,046				26,130				27,331				28,837				28,074
Mortgage banking revenue	53,936				37,167				25,396				30,180				28,131
Other revenue	11,479				12,309				15,283				17,626				12,437
Total fees and commissions	213,680				192,724				179,422				186,119				176,108
Other gains (losses), net	6,768				(10,741	)			(1,649	)			4,544				3,480
Gain (loss) on derivatives, net	21,885				18,420				(4,644	)			3,778				11,150
Gain (loss) on fair value option securities, net	(14,459	)			68,393				(8,328	)			4,597				9,853
Change in fair value of mortgage servicing rights	(761	)			(88,480	)			9,297				(12,593	)			(29,555	)
Gain on available for sale securities, net	5,580				3				4,487				5				1,029
Total other operating revenue	232,693				180,319				178,585				186,450				172,065
Other operating expense:
Personnel	176,235				156,181				168,422				162,573				160,342
Business promotion	1,935				6,215				8,787				8,859				10,142
Charitable contributions to BOKF Foundation	3,000				—				2,000				—				1,000
Professional fees and services	12,161				12,948				13,408				12,312				13,002
Net occupancy and equipment	30,675				26,061				26,316				27,558				26,880
Insurance	5,156				4,980				5,393				4,220				6,454
Data processing and communications	32,942				32,743				31,884				31,915				29,735
Printing, postage and supplies	3,502				4,272				3,700				3,825				4,107
Net losses and operating expenses of repossessed assets	1,766				1,531				2,403				1,728				580
Amortization of intangible assets	5,190				5,094				5,225				5,064				5,138
Mortgage banking costs	15,598				10,545				14,259				14,975				11,545
Other expense	7,227				8,054				6,998				6,263				8,212
Total other operating expense	295,387				268,624				288,795				279,292				277,137
Net income before taxes	80,089				79,284				141,039				174,254				175,360
Federal and state income taxes	15,803				17,300				30,257				32,396				37,580
Net income	64,286				61,984				110,782				141,858				137,780
Net income (loss) attributable to non-controlling interests	(407	)			(95	)			430				(373	)			217
Net income attributable to BOK Financial Corporation shareholders	$	64,693				$	62,079				$	110,352				$	142,231				$	137,563
Average shares outstanding:
Basic	69,876,043				70,123,685				70,295,899				70,596,307				70,887,063
Diluted	69,877,467				70,130,166				70,309,644				70,609,924				70,902,033
Net income per share:
Basic	$	0.92				$	0.88				$	1.56				$	2.00				$	1.93
Diluted	$	0.92				$	0.88				$	1.56				$	2.00				$	1.93

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

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		June 30, 2020		Mar. 31, 2020		Dec. 31, 2019		Sept. 30, 2019		June 30, 2019
Commercial:
Energy		$	3,974,174			$	4,111,676			$	3,973,377			$	4,114,269			$	3,921,353
Services		3,779,881			3,955,748			3,832,031			4,011,089			4,105,117
Healthcare		3,289,343			3,165,096			3,033,916			3,032,968			2,926,510
General business		3,115,112			3,563,455			3,192,326			3,266,299			3,383,928
Total commercial		14,158,510			14,795,975			14,031,650			14,424,625			14,336,908
Commercial real estate:
Multifamily		1,407,107			1,282,457			1,265,562			1,324,839			1,300,372
Office		973,995			962,004			928,379			1,014,275			1,056,306
Retail		780,467			774,198			775,521			799,169			825,399
Industrial		723,005			728,026			856,117			873,536			828,569
Residential construction and land development		136,911			138,958			150,879			135,361			141,509
Other commercial real estate		532,659			564,442			457,325			478,877			557,878
Total commercial real estate		4,554,144			4,450,085			4,433,783			4,626,057			4,710,033
Paycheck protection program		2,081,428			—			—			—			—
Loans to individuals:
Permanent mortgage		1,813,442			1,844,555			1,886,378			1,925,539			1,975,449
Permanent mortgages guaranteed by U.S. government agencies		322,269			197,889			197,794			191,764			195,373
Personal		1,226,097			1,175,466			1,201,382			1,117,382			1,037,889
Total loans to individuals		3,361,808			3,217,910			3,285,554			3,234,685			3,208,711
Total		$	24,155,890			$	22,463,970			$	21,750,987			$	22,285,367			$	22,255,652

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

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	June 30, 2020		Mar. 31, 2020		Dec. 31, 2019		Sept. 30, 2019		June 30, 2019
Texas:
Commercial	$	5,771,691			$	6,350,690			$	6,174,894			$	6,220,227			$	5,877,265
Commercial real estate	1,389,547			1,296,266			1,259,117			1,292,116			1,341,609
Paycheck protection program	612,133			—			—			—			—
Loans to individuals	748,474			756,634			727,175			749,361			673,463
Total Texas	8,521,845			8,403,590			8,161,186			8,261,704			7,892,337
Oklahoma:
Commercial	5,086,934			3,886,086			3,454,825			3,690,100			3,762,234
Commercial real estate	636,021			593,473			631,026			679,786			717,970
Paycheck protection program	442,518			—			—			—			—
Loans to individuals	1,967,665			1,788,518			1,854,864			1,753,698			1,786,162
Total Oklahoma	8,133,138			6,268,077			5,940,715			6,123,584			6,266,366
Colorado:
Commercial	1,600,382			2,181,309			2,169,598			2,247,798			2,325,742
Commercial real estate	937,742			955,608			927,826			975,066			1,023,410
Paycheck protection program	488,279			—			—			—			—
Loans to individuals	264,872			268,674			276,939			303,605			314,317
Total Colorado	3,291,275			3,405,591			3,374,363			3,526,469			3,663,469
Arizona:
Commercial	1,036,862			1,396,582			1,307,073			1,276,534			1,330,415
Commercial real estate	689,121			714,161			728,832			771,425			761,243
Paycheck protection program	318,961			—			—			—			—
Loans to individuals	177,066			181,821			186,539			170,815			168,019
Total Arizona	2,222,010			2,292,564			2,222,444			2,218,774			2,259,677
Kansas/Missouri:
Commercial	404,860			556,255			527,872			566,969			602,836
Commercial real estate	314,504			310,799			322,541			374,795			331,443
Paycheck protection program	76,724			—			—			—			—
Loans to individuals	102,577			116,734			131,069			146,522			155,453
Total Kansas/Missouri	898,665			983,788			981,482			1,088,286			1,089,732
New Mexico:
Commercial	182,688			327,164			305,320			335,409			350,520
Commercial real estate	455,574			434,150			402,148			374,331			385,058
Paycheck protection program	128,058			—			—			—			—
Loans to individuals	83,470			87,110			90,257			92,270			92,626
Total New Mexico	849,790			848,424			797,725			802,010			828,204
Arkansas:
Commercial	75,093			97,889			92,068			87,588			87,896
Commercial real estate	131,635			145,628			162,293			158,538			149,300
Paycheck protection program	14,755			—			—			—			—
Loans to individuals	17,684			18,419			18,711			18,414			18,671
Total Arkansas	239,167			261,936			273,072			264,540			255,867
TOTAL BOK FINANCIAL	$	24,155,890			$	22,463,970			$	21,750,987			$	22,285,367			$	22,255,652

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)

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	June 30, 2020		Mar. 31, 2020		Dec. 31, 2019		Sept. 30, 2019		June 30, 2019
Oklahoma:
Demand	$	4,378,559			$	3,669,558			$	3,257,337			$	3,515,312			$	3,279,360
Interest-bearing:
Transaction	11,438,489			9,955,697			8,574,912			7,447,799			7,020,484
Savings	387,557			329,631			306,194			308,103			307,785
Time	1,330,619			1,137,802			1,125,446			1,198,170			1,253,804
Total interest-bearing	13,156,665			11,423,130			10,006,552			8,954,072			8,582,073
Total Oklahoma	17,535,224			15,092,688			13,263,889			12,469,384			11,861,433
Texas:
Demand	3,070,955			2,767,399			2,757,376			2,867,915			2,970,340
Interest-bearing:
Transaction	3,358,090			2,874,362			2,911,731			2,589,063			2,453,187
Savings	128,892			115,039			102,456			100,597			103,125
Time	476,867			505,565			495,343			464,264			425,253
Total interest-bearing	3,963,849			3,494,966			3,509,530			3,153,924			2,981,565
Total Texas	7,034,804			6,262,365			6,266,906			6,021,839			5,951,905
Colorado:
Demand	2,096,075			1,579,764			1,729,674			1,694,044			1,621,820
Interest-bearing:
Transaction	1,816,604			1,759,384			1,769,037			1,910,874			1,800,271
Savings	67,477			58,000			53,307			60,107			57,263
Time	254,845			279,105			283,517			273,622			246,198
Total interest-bearing	2,138,926			2,096,489			2,105,861			2,244,603			2,103,732
Total Colorado	4,235,001			3,676,253			3,835,535			3,938,647			3,725,552
New Mexico:
Demand	965,877			750,052			623,722			645,698			630,861
Interest-bearing:
Transaction	752,565			563,891			558,493			539,260			557,881
Savings	80,242			67,553			63,999			62,863			62,636
Time	222,370			235,778			238,140			236,135			232,569
Total interest-bearing	1,055,177			867,222			860,632			838,258			853,086
Total New Mexico	2,021,054			1,617,274			1,484,354			1,483,956			1,483,947
Arizona:
Demand	985,757			665,396			681,268			705,895			704,144
Interest-bearing:
Transaction	780,500			729,603			684,929			600,103			560,861
Savings	15,669			8,832			10,314			12,487			11,966
Time	42,318			47,081			49,676			44,347			43,099
Total interest-bearing	838,487			785,516			744,919			656,937			615,926
Total Arizona	1,824,244			1,450,912			1,426,187			1,362,832			1,320,070

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	June 30, 2020		Mar. 31, 2020		Dec. 31, 2019		Sept. 30, 2019		June 30, 2019
Kansas/Missouri:
Demand	427,795			318,985			384,533			376,020			431,856
Interest-bearing:
Transaction	526,635			537,552			784,574			284,940			310,774
Savings	15,033			12,888			12,169			11,689			13,125
Time	17,746			19,137			17,877			19,126			19,205
Total interest-bearing	559,414			569,577			814,620			315,755			343,104
Total Kansas/Missouri	987,209			888,562			1,199,153			691,775			774,960
Arkansas:
Demand	67,147			70,428			27,381			39,513			29,176
Interest-bearing:
Transaction	177,535			175,803			108,076			149,506			148,485
Savings	2,101			1,862			1,837			1,747			1,783
Time	7,995			8,005			7,850			7,877			7,810
Total interest-bearing	187,631			185,670			117,763			159,130			158,078
Total Arkansas	254,778			256,098			145,144			198,643			187,254
TOTAL BOK FINANCIAL	$	33,892,314			$	29,244,152			$	27,621,168			$	26,167,076			$	25,305,121

NET INTEREST MARGIN TREND -- UNAUDITED
BOK FINANCIAL CORPORATION

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	Three Months Ended
	June 30, 2020		Mar. 31, 2020		Dec. 31, 2019		Sept. 30, 2019		June 30, 2019
TAX-EQUIVALENT ASSETS YIELDS
Interest-bearing cash and cash equivalents	0.07	%		1.33	%		1.62	%		2.42	%		2.57	%
Trading securities	2.46	%		2.89	%		3.19	%		3.49	%		3.59	%
Investment securities, net of allowance	4.77	%		4.73	%		4.69	%		4.46	%		4.41	%
Available for sale securities	2.29	%		2.48	%		2.52	%		2.60	%		2.63	%
Fair value option securities	2.00	%		2.67	%		2.62	%		2.79	%		3.34	%
Restricted equity securities	2.75	%		5.49	%		5.37	%		6.34	%		6.30	%
Residential mortgage loans held for sale	3.10	%		3.50	%		3.55	%		3.73	%		3.65	%
Loans	3.63	%		4.50	%		4.75	%		5.12	%		5.39	%
Allowance for loan losses
Loans, net of allowance	3.69	%		4.55	%		4.80	%		5.17	%		5.45	%
Total tax-equivalent yield on earning assets	3.12	%		3.73	%		3.93	%		4.25	%		4.51	%
COST OF INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest-bearing transaction	0.21	%		0.89	%		1.00	%		1.08	%		1.04	%
Savings	0.05	%		0.09	%		0.11	%		0.14	%		0.12	%
Time	1.36	%		1.83	%		1.94	%		1.94	%		1.90	%
Total interest-bearing deposits	0.34	%		0.98	%		1.09	%		1.17	%		1.13	%
Funds purchased and repurchase agreements	0.14	%		1.14	%		1.56	%		2.01	%		2.08	%
Other borrowings	0.56	%		1.66	%		2.01	%		2.42	%		2.67	%
Subordinated debt	5.16	%		5.30	%		5.40	%		5.48	%		5.53	%
Total cost of interest-bearing liabilities	0.37	%		1.19	%		1.40	%		1.68	%		1.70	%
Tax-equivalent net interest revenue spread	2.75	%		2.54	%		2.53	%		2.57	%		2.81	%
Effect of noninterest-bearing funding sources and other	0.08	%		0.26	%		0.35	%		0.44	%		0.49	%
Tax-equivalent net interest margin	2.83	%		2.80	%		2.88	%		3.01	%		3.30	%

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)

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	Three Months Ended
	June 30, 2020		Mar. 31, 2020		Dec. 31, 2019		Sept. 30, 2019		June 30, 2019
Nonperforming assets:
Nonaccruing loans:
Commercial:
48%; width:48%; min-width:48%;">Energy	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">162,989	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	6%; width:6%; min-width:6%;">96,448	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	6%; width:6%; min-width:6%;">91,722	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">88,894	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	7%; width:7%; min-width:7%;">71,632	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">
Healthcare	3,645				4,070				4,480				5,978				16,148
Services	21,032				8,425				7,483				6,119				10,087
General business	14,333				9,681				11,731				10,715				25,528
Total commercial	201,999				118,624				115,416				111,706				123,395
Commercial real estate	13,956				8,545				27,626				23,185				21,670
Loans to individuals:
Permanent mortgage	33,098				30,721				31,522				30,972				31,734
Permanent mortgage guaranteed by U.S. government agencies	6,110				5,005				6,100				6,332				6,743
Personal	233				277				287				271				237
Total loans to individuals	39,441				36,003				37,909				37,575				38,714
Total nonaccruing loans	$	255,396				$	163,172				$	180,951				$	172,466				$	183,779
Accruing renegotiated loans guaranteed by U.S. government agencies	114,571				91,757				92,452				92,718				95,989
Real estate and other repossessed assets	35,330				36,744				20,359				21,026				16,940
Total nonperforming assets	$	405,297				$	291,673				$	293,762				$	286,210				$	296,708
Total nonperforming assets excluding those guaranteed by U.S. government agencies	284,616				194,911				195,210				187,160				193,976
Accruing loans 90 days past due1	11,316				3,706				7,680				1,541				2,698
Gross charge-offs	$	15,570				$	18,917				$	14,268				$	11,707				$	13,227
Recoveries	(1,491	)			(1,696	)			(1,816	)			(1,066	)			(5,503	)
Net charge-offs	$	14,079				$	17,221				$	12,452				$	10,641				$	7,724
Provision for loan losses	$	134,365				$	95,964				$	18,779				$	12,539				$	4,918
Provision for credit losses from off-balance sheet unfunded loan commitments	4,405				3,377				221				(539	)			82
Provision for expected credit losses from mortgage banking activities2	(3,575	)			(6,020	)			—				—				—
Provision for credit losses related to held-to maturity (investment) securities portfolio2	126				450				—				—				—
Total provision for credit losses	$	135,321				$	93,771				$	19,000				$	12,000				$	5,000
Allowance for loan losses to period end loans	1.80	%		1.40	%		0.97	%		0.92	%		0.91	%
Allowance for loan losses to period end loans excluding PPP loans3	1.97	%		1.40	%		0.97	%		0.92	%		0.91	%
Combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments to period end loans	1.94	%		1.53	%		0.98	%		0.92	%		0.92	%
Combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments to period end loans excluding PPP loans3	2.12	%		1.53	%		0.98	%		0.92	%		0.92	%
Nonperforming assets to period end loans and repossessed assets	1.68	%		1.30	%		1.35	%		1.28	%		1.33	%
Net charge-offs (annualized) to average loans	0.23	%		0.31	%		0.22	%		0.19	%		0.14	%
Net charge-offs (annualized) to average loans excluding PPP loans3	0.25	%		0.31	%		0.22	%		0.19	%		0.14	%
Allowance for loan losses to nonaccruing loans1	174.74	%		199.35	%		120.54	%		123.05	%		114.40	%
Combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments to nonaccruing loans1	187.94	%		217.38	%		121.44	%		123.87	%		115.48	%

¹   Excludes residential mortgage loans guaranteed by agencies of the U.S. government.
²   Included in Provision for credit losses effective with implementation of CECL on January 1, 2020.
³   Represents a non-GAAP measure meaningful due to the unique characteristics and short-term nature of the PPP loans.

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

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		Three Months Ended		Change
Commercial Banking		June 30, 2020		Mar. 31, 2020		June 30, 2019		2Q20 vs 1Q20		2Q20 vs 2Q19
Net interest revenue		$	145,109			$	151,407			$	184,471			(4.2)%		(21.3)%
Fees and commissions revenue		46,515			41,459			41,105			12.2%		13.2 %
Other operating expense		62,933			60,752			63,415			3.6%		(0.8)%
Corporate expense allocations		5,437			8,905			10,652			(38.9)%		(49.0)%
Net income		80,992			74,975			106,280			8.0%		(23.8)%
Average assets		27,575,652			24,687,976			22,910,724			11.7%		20.4%
Average loans		19,262,827			18,812,015			18,812,800			2.4%		2.4%
Average deposits		14,599,225			11,907,386			10,724,206			22.6%		36.1%
Consumer Banking
Net interest revenue		$	39,270			$	43,932			$	52,715			(10.6)%		(25.5)%
Fees and commissions revenue		67,192			55,062			48,830			22.0%		37.6%
Other operating expense		58,936			54,793			57,694			7.6%		2.2%
Corporate expense allocations		10,812			10,487			11,695			3.1%		(7.6)%
Net income		31,900			22,921			16,342			39.2%		95.2%
Average assets		9,920,005			9,850,853			9,212,667			0.7%		7.7%
Average loans		1,679,164			1,711,703			1,796,823			(1.9)%		(6.5)%
Average deposits		7,587,246			6,869,481			6,998,677			10.4%		8.4%
Wealth Management
Net interest revenue		$	26,880			$	18,904			$	26,941			42.2%		(0.2)%
Fees and commissions revenue		106,757			97,881			85,925			9.1%		24.2%
Other operating expense		80,567			78,192			69,452			3.0%		16.0%
Corporate expense allocations		8,204			8,265			9,168			(0.7)%		(10.5)%
Net income		33,394			22,573			25,544			47.9%		30.7%
Average assets		15,721,452			12,723,412			9,849,396			23.6%		59.6%
Average loans		1,709,363			1,705,735			1,647,680			0.2%		3.7%
Average deposits		8,385,681			7,623,986			6,220,848			10.0%		34.8%
Fiduciary assets		50,560,584			47,053,101			49,296,896			7.5%		2.6%
Assets under management or administration		79,452,502			75,783,829			81,774,602			4.8%		(2.8)%

Contact:

Cody McAlester
Vice President, Investor Relations
918-595-3030

FAQ

What were BOK Financial's earnings for Q2 2020?

BOK Financial reported net earnings of $65 million or $0.92 per diluted share for Q2 2020.

How much did BOK Financial's net interest revenue increase in Q2 2020?

Net interest revenue for BOK Financial totaled $278.1 million, an increase of $16.7 million compared to Q1 2020.

What was the provision for credit losses in Q2 2020 for BOK Financial?

The provision for expected credit losses was $135.3 million in Q2 2020, up from $93.8 million in Q1 2020.

How much did BOK Financial's deposits increase in Q2 2020?

Period-end deposits rose by $4.6 billion to $33.9 billion, significantly influenced by CARES Act funding.

What is BOK Financial's common equity Tier 1 capital ratio as of June 30, 2020?

BOK Financial's common equity Tier 1 capital ratio was 11.41% as of June 30, 2020.