BOK Financial reported net income of $65.8 million or $1.00 per diluted share

OREANDA-NEWS.  BOK Financial Corporation (NASDAQ:BOKF) reported net income of $65.8 million or $1.00 per diluted share for the second quarter of 2016. Net income was $42.6 million or $0.64 per diluted share for the first quarter of 2016 and $79.2 million or $1.15 per diluted share for the second quarter of 2015.

Steven G. Bradshaw, president and chief executive officer, stated, “It was a solid quarter for the company, with very strong loan growth and record fee and commission revenue led by brokerage and trading, fiduciary and asset management, and transaction processing. In addition, stability in the commodity price environment translated into lower credit costs for the quarter and reduced concern about spillover impact on the economies in energy states such as Oklahoma, Texas, and Colorado. We continue to see strong growth opportunities across our footprint, and reflecting our confidence, we continued with our stock buyback program during the quarter."

Stacy Kymes, executive vice president, Corporate Banking, added, "We continue to be fully committed to the energy business and our energy customers. During the quarter we provided $172 million of new loan commitments to 20 new borrowers in the industry, and year to date we have provided $254 million of new loan commitments to 35 new borrowers. Energy lending is core to our DNA, and our experience in previous commodity cycles has shown that is a profitable business, and when approached in a consistent and disciplined manner, losses during down cycles are manageable. This long term view has served us well, and today we remain well-positioned in the industry with a complete service offering, world-class energy lending team, and enviable customer base."

Second Quarter 2016 Highlights

• Net interest revenue totaled $182.6 million for the second quarter of 2016, unchanged compared to the first quarter of 2016. Net interest margin was 2.63 percent for the second quarter of 2016, compared to 2.65 percent for the first quarter of 2016. Average earning assets increased $246 million during the second quarter of 2016, primarily related to a $271 million increase in average loan balances.
• Fees and commissions revenue totaled $183.5 million for the second quarter of 2016, an increase of $17.9 million over the prior quarter. Brokerage and trading revenue was up $7.2 million and mortgage banking revenue grew by $3.8 million. Fiduciary and asset management revenue increased $2.8 million and transaction card revenue increased $2.6 million.
• Changes in the fair value of mortgage servicing rights, net of economic hedges, decreased pre-tax net income by $1.2 million in the second quarter of 2016 and decreased pre-tax net income $11.4 million in the first quarter of 2016. Hedge coverage was increased during the second quarter.
• Operating expense was $254.7 million for the second quarter, an increase of $9.8 million over the previous quarter. Personnel expense increased $6.6 million, primarily due to revenue-driven incentive compensation. Non-personnel expense increased $3.2 million. Mortgage banking expense, professional fees and services expense, intangible asset amortization and business promotion expense increased over the prior quarter. Non-personnel expense in the first quarter of 2016 included $6.8 million of expense related to several litigation accruals and a post-acquisition valuation adjustment.
• A $20.0 million provision for credit losses was recorded in the second quarter of 2016 compared to a $35.0 million provision in the first quarter of 2016. The decrease in the provision for credit losses was due to improving credit metric trends, largely driven by energy price stability. Net loans charged off totaled $7.5 million in the second quarter of 2016, compared to $22.5 million in the previous quarter.
• The combined allowance for credit losses totaled $252 million or 1.54 percent of outstanding loans at June 30, 2016 compared to $240 million or 1.50 percent of outstanding loans at March 31, 2016. The portion of the combined allowance attributed to the energy portfolio totaled 3.58 percent of outstanding energy loans at June 30, 2016, an increase from 3.19 percent of outstanding energy loans at March 31, 2016.
• Nonperforming assets that are not guaranteed by U.S. government agencies totaled $251 million or 1.55 percent of outstanding loans and repossessed assets (excluding those guaranteed by U.S. government agencies) at June 30, 2016 and $252 million or 1.59 percent of outstanding loans and repossessed assets (excluding those guaranteed by U.S. government agencies) at March 31, 2016. Nonperforming energy loans increased $8.6 million during the second quarter.
• Average loans increased by $271 million over the previous quarter, primarily due to an increase in commercial real estate loans. Period-end outstanding loan balances increased $384 million to $16.4 billion at June 30, 2016. Commercial loans increased $68.0 million as growth across most loan classes was partially offset by a $210.8 million decrease in outstanding energy loans. 
• Average deposits decreased $159 million compared to the previous quarter primarily due to decreased interest-bearing transaction account balances. Growth in demand deposit balances was offset by a decrease in time deposits. Period-end deposits were $20.8 billion at June 30, 2016, an increase of $341 million from March 31, 2016. 
• The common equity Tier 1 capital ratio at June 30, 2016 was 11.86 percent. Other regulatory capital ratios were Tier 1 capital ratio, 11.86 percent, total capital ratio, 13.51 percent and leverage ratio, 9.06 percent. At March 31, 2016, the common equity Tier 1 capital ratio was 12.00 percent, the Tier 1 capital ratio was 12.00 percent, total capital ratio was 13.21 percent, and leverage ratio was 9.12 percent. The total capital ratio was supported by the issuance of $150 million of 40 year, fixed rate subordinated debt during the second quarter.
• The company paid a regular quarterly cash dividend of $28 million or $0.43 per common share during the second quarter of 2016. On July 26, 2016, the board of directors approved a quarterly cash dividend of $0.43 per common share payable on or about August 26, 2016 to shareholders of record as of August 12, 2016.
• The company repurchased 305,169 common shares at an average price of $58.23 per share during the second quarter of 2016. No shares were repurchased during the first quarter of 2016.

Net Interest Revenue

Net interest revenue was $182.6 million for the second quarter of 2016, unchanged compared to the first quarter of 2016.

Net interest margin was 2.63 percent for the second quarter of 2016, a decrease of 2 basis points compared to the first quarter of 2016. The yield on average earning assets was 2.91 percent, a decrease of 1 basis point. The loan portfolio yield increased 1 basis point to 3.58 percent. The yield on the available for sale securities portfolio decreased 4 basis points to 2.04 percent. In addition, the yield on average earning assets decreased 1 basis point due to a governmental policy decision to reduce dividends paid on Federal Reserve Bank stock. Funding costs were 0.41 percent, up 1 basis point.

Average earning assets increased $246 million during the second quarter of 2016. Average loan balances increased $271 million, primarily due to growth in commercial real estate balances. Average interest-bearing deposit balances decreased $215 million compared to the first quarter of 2016. The average balance of borrowed funds increased $399 million.

Fees and Commissions Revenue

Fees and commissions revenue totaled $183.5 million for the second quarter of 2016, an increase of $17.9 million over the first quarter of 2016.

Brokerage and trading revenue increased $7.2 million. Customer hedging revenue increased $4.6 million primarily due to increased volumes of contracts with our mortgage banking and energy customers. Investment banking revenue grew by $2.9 million primarily due to growth in loan syndication fees and bond underwriting fees, which are both dependent on the timing and volume of completed transactions.

Mortgage banking revenue totaled $38.2 million for the second quarter of 2016, a $3.8 million increase over the first quarter of 2016. Revenue from mortgage loan production increased $3.4 million due to growth in the volume of mortgage loans sold and mortgage loan commitments during the quarter. Average primary mortgage interest rates were 15 basis points lower than in the first quarter of 2016. Total mortgage loans originated during the second quarter increased $575 million or 46 percent over the prior quarter. Outstanding mortgage loan commitments at June 30 increased $63 million or 7 percent over March 31.

Fiduciary and asset management revenue increased $2.8 million largely due to an annual assessment of tax preparation fees and growth in assets under management. Transaction card revenue increased $2.6 million primarily due to a seasonal increase in transaction volumes along with a customer early termination fee.

Operating Expense

Total operating expense was $254.7 million for the second quarter of 2016, an increase of $9.8 million over the first quarter of 2016.

Personnel expense increased by $6.6 million over the first quarter of 2016 primarily due to an increase in incentive compensation expense. Revenue-driven cash-based incentive compensation increased $4.5 million. Share-based compensation expense increased $1.7 million primarily due to an increase in BOKF stock price. In addition, increased regular compensation expense and employee healthcare costs were offset by a decrease in payroll tax expense.

Non-personnel expense increased $3.2 million over the first quarter of 2016. Mortgage banking expense increased $3.4 million primarily from increased prepayments of loans serviced for others due to lower mortgage interest rates. Professional fees and services expense increased $2.4 million due largely to the annual cost of wealth management customer tax preparation services and costs incurred in preparation for the mobank acquisition. Business promotion expense had a seasonal increase of $1.0 million over the prior quarter. The $1.5 million increase in intangible asset amortization expense was from an adjustment to a consolidated merchant-banking investment.

Other expense decreased $7.2 million compared to the prior quarter. The first quarter of 2016 included $4.1 million of litigation accruals and a $2.7 million post-acquisition valuation adjustment to a consolidated merchant banking investment.

Loans, Deposits and Capital

Loans

Outstanding loans were $16.4 billion at June 30, 2016, an increase of $384 million over the previous quarter, primarily due to growth in commercial real estate. Personal, commercial and residential mortgage loan balances also grew over the prior quarter.

Outstanding commercial loan balances increased $68 million over March 31, 2016. Service sector loans increased $102 million and wholesale/retail sector loans increased $81 million. Healthcare sector loans grew by $56 million and other commercial and industrial loans increased $45 million. As expected, energy loan balances decreased $211 million compared to March 31, 2016. Unfunded energy loan commitments decreased by $161 million during the second quarter to $1.9 billion.

Commercial real estate loans grew by $211 million over March 31, 2016. Loans secured by industrial facilities grew by $81 million primarily in the Oklahoma, Texas and Arizona markets. Loans secured by office buildings increased $74 million primarily in the Texas and Arizona markets. Multifamily residential loans increased $54 million. Growth in other commercial real estate balances was offset by a decrease in retail sector and residential construction and land development loan balances.

Deposits

Period-end deposits totaled $20.8 billion at June 30, 2016, an increase of $341 million over March 31, 2016. Demand deposit balances grew by $474 million, partially offset by a $94 million decrease in time deposits and a $41 million decrease in interest-bearing transaction deposit balances. Among the lines of business, Wealth Management deposits grew by $522 million over March 31, 2016. Consumer Banking deposits decreased $89 million and Commercial Banking deposits decreased $62 million. The overall decrease in Commercial Banking deposits was due to decreased balances held by our commercial and industrial customers, partially offset by increases in balances held by our energy, commercial real estate and small business customers.

Capital

The company's common equity Tier 1 capital ratio was 11.86 percent at June 30, 2016. In addition, the company's Tier 1 capital ratio was 11.86 percent, total capital ratio was 13.51 percent and leverage ratio was 9.06 percent at June 30, 2016. At March 31, 2016, the company's common equity Tier 1 capital ratio was 12.00 percent, Tier 1 capital ratio was 12.00 percent, total capital ratio was 13.21 percent, and leverage ratio was 9.12 percent.

During the second quarter BOK Financial issued $150 million of 40 year, 5.375 percent fixed rate subordinated debt. The debt is callable at any time after 5 years. Proceeds of the debt increased the total capital ratio by 60 basis points.

The company's tangible common equity ratio, a non-GAAP measure, was 9.33 percent at June 30, 2016 and 9.34 percent at March 31, 2016. 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.

Credit Quality

Nonperforming assets totaled $350 million or 2.13 percent of outstanding loans and repossessed assets at June 30, 2016 compared to $349 million or 2.18 percent at March 31, 2016. Nonperforming assets that are not guaranteed by U.S. government agencies totaled $251 million or 1.55 percent of outstanding loans and repossessed assets (excluding those guaranteed by U.S. government agencies) at June 30, 2016 compared to $252 million or 1.59 percent at March 31, 2016. 

Nonaccruing loans totaled $247 million or 1.51 percent of outstanding loans at June 30, 2016, compared to $242 million or 1.51 percent of outstanding loans at March 31, 2016. The increase in nonaccruing loans was primarily due to an $8.6 million increase in nonaccruing energy loans. New nonaccruing loans identified in the second quarter totaled $33 million, offset by $12 million in payments received, $8.8 million in charge-offs and $3.2 million in foreclosures and repossessions. At June 30, 2016, nonaccruing commercial loans totaled $182 million or 1.76 percent of outstanding commercial loans, nonaccruing commercial real estate loans totaled $7.8 million or 0.22 percent of outstanding commercial real estate loans and nonaccruing residential mortgage loans totaled $57 million or 3.03 percent of outstanding residential mortgage loans.

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, increased to $501 million at June 30 from $460 million at March 31. The increase largely resulted from an $18 million increase in potential problem energy loans.

Net loans charged off totaled $7.5 million for the second quarter of 2016, compared to $22.5 million in the first quarter of 2016. Gross charge-offs totaled $8.8 million for the second quarter, compared to $24.0 million for the previous quarter. Charge-offs in both the second and first quarters largely came from the energy loan portfolio. Recoveries totaled $1.4 million for the second quarter of 2016 and $1.5 million for the first quarter of 2016.

After evaluating all credit factors, the company recorded a $20.0 million provision for credit losses during the second quarter of 2016. The company recorded a $35.0 million provision for credit losses in the previous quarter. The lower provision reflects improvement in credit metrics over the previous quarter, largely driven by energy price stability and decreased rates of newly identified nonaccruing and potential problem loans.

The combined allowance for credit losses totaled $252 million or 1.54 percent of outstanding loans and 111 percent of nonaccruing loans at June 30, 2016. The allowance for loan losses was $243 million and the accrual for off-balance sheet credit losses was $9.0 million.

Energy Portfolio Credit Quality

The company's $2.8 billion energy portfolio consists of 79 percent of loans to exploration and production companies, 9 percent to energy services companies and 12 percent to midstream and other energy borrowers. Substantially all of the loans to exploration and production companies are secured by first lien positions in established energy reserves. Only $10 million of these loans are in junior lien positions. None represent higher-risk mezzanine financing or subordinated debt and none are high-yield debt.

The company completed an energy loan portfolio redetermination during the second quarter. The redetermination supported that $136 million of impaired energy loans required no allowance for credit losses based on the adequacy of collateral, including $123 million that are current on all payments due. At June 30, 2016, the portion of the combined allowance for credit losses attributed to the energy portfolio totaled $101 million or 3.58 percent of outstanding energy loans.

Marc Maun, chief credit officer, noted, "We are pleased to see energy asset quality stabilize in the second quarter. Total criticized energy loans decreased from the first quarter and charge-offs were down significantly. We recognize that macroeconomic factors may result in additional pressure on commodity prices but we are pleased with how our portfolio has performed through the extended energy downturn."

Securities and Derivatives

The fair value of the available for sale securities portfolio totaled $8.8 billion at June 30, 2016, a $55 million decrease compared to March 31, 2016. At June 30, 2016, the available for sale portfolio consisted primarily of $5.7 billion of residential mortgage-backed securities fully backed by U.S. government agencies and $2.9 billion of commercial mortgage-backed securities fully backed by U.S. government agencies.

At June 30, 2016, the available for sale securities portfolio had a net unrealized gain of $195 million compared to a net unrealized gain of $155 million at March 31, 2016. The increase in net unrealized gain was primarily due to changes in interest rates during the quarter. Net unrealized gains on residential mortgage-backed securities issued by U.S. government agencies at June 30, 2016 increased $19 million during the second quarter to $123 million. Commercial mortgage-backed securities had a net unrealized gain of $58 million at June 30, 2016, up from $38 million at March 31, 2016.

In the second quarter of 2016, the company recognized $5.3 million of net gains from sales of $326 million of available for sale securities. Securities were sold either because they had reached their expected maximum potential return or to move into securities that will perform better in the current rate environment. The company recognized $4.0 million of net gains from sales of $469 million of available for sale securities in the first quarter of 2016.

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. Changes in the fair value of mortgage servicing rights are highly dependent on primary mortgage interest rates offered to borrowers and other factors. Changes in the fair value of securities and interest rate derivatives are highly dependent on secondary mortgage rates, or rates required by investors. Changes in the spread between primary and secondary mortgage rates cannot be effectively hedged and can cause significant earnings volatility.

The fair value of mortgage servicing rights decreased by $16.3 million during the second quarter of 2016 as primary mortgage rates fell during the quarter. The fair value of securities and interest rate derivative contracts held as an economic hedge increased by $15.0 million during the quarter due to a decrease in average secondary mortgage and interest rate swap rates. Hedge coverage was increased during the second quarter to improve its effectiveness. The fair value of mortgage servicing rights, net of economic hedges, decreased $11.4 million in the first quarter of 2016, primarily due to falling primary residential mortgage interest rates and we narrowed the forward-looking spread between primary mortgage interest rates and yields on mortgage-backed securities.

Conference Call and Webcast

The company will hold a conference call at 9 a.m. Central time on Wednesday, July 27, 2016 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 1-412-902-6611. A conference call and webcast replay will also be available shortly after conclusion of the live call at www.bokf.com or by dialing 1-412-317-0088 and referencing conference ID # 10088478.

About BOK Financial Corporation

BOK Financial Corporation is a $32 billion regional financial services company based in Tulsa, Oklahoma. The company's stock is publicly traded on NASDAQ under the Global Select market listings (symbol: BOKF). BOK Financial's holdings include BOKF, NA, BOK Financial Securities, Inc. and The Milestone Group, Inc. BOKF, NA operates TransFund, Cavanal Hill Investment Management, BOK Financial Asset Management, Inc. and seven banking divisions: Bank of Albuquerque, Bank of Arizona, Bank of Arkansas, Bank of Kansas City, Bank of Oklahoma, Bank of Texas and Colorado State Bank and Trust. Through its subsidiaries, the company provides commercial and consumer banking, investment and trust 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, 2016 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, the financial services industry and the economy generally. 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 BOK Financial's acquisitions and other 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 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 commodity prices, interest rates and interest rate relationships, demand for products and services, the degree of competition by traditional and nontraditional competitors, changes in banking regulations, tax laws, prices, levies and assessments, the impact of technological advances, and trends in customer behavior as well as their ability to repay loans. BOK Financial and its affiliates undertake no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.

BALANCE SHEETS -- UNAUDITED BOK FINANCIAL CORPORATION (In thousands)
		June 30, 2016				Mar. 31, 2016				June 30, 2015
ASSETS
Cash and due from banks		$	498,713			$	481,510			$	443,577
Interest-bearing cash and cash equivalents		1,907,838				1,831,162				2,119,072
Trading securities		211,622				279,539				158,209
Investment securities		560,711				576,047				625,664
Available for sale securities		8,830,689				8,886,036				9,000,117
Fair value option securities		263,265				418,887				436,324
Restricted equity securities		319,639				314,590				231,520
Residential mortgage loans held for sale		430,728				332,040				502,571
Loans:
Commercial		10,356,437				10,288,425				9,775,721
Commercial real estate		3,581,966				3,370,507				3,033,497
Residential mortgage		1,880,923				1,869,309				1,884,728
Personal		587,423				494,325				430,190
Total loans		16,406,749				16,022,566				15,124,136
Allowance for loan losses		(243,259		)		(233,156		)		(201,087		)
Loans, net of allowance		16,163,490				15,789,410				14,923,049
Premises and equipment, net		315,199				311,161				284,238
Receivables		173,638				167,209				149,629
Goodwill		382,739				383,789				385,454
Intangible assets, net		43,372				44,944				46,061
Mortgage servicing rights		190,747				196,055				198,694
Real estate and other repossessed assets, net		24,054				29,896				35,499
Derivative contracts, net		883,673				790,146				630,435
Cash surrender value of bank-owned life insurance		307,860				305,510				298,606
Receivable on unsettled securities sales		142,820				5,640				8,693
Other assets		319,653				270,374				248,151
TOTAL ASSETS		$	31,970,450			$	31,413,945			$	30,725,563
LIABILITIES AND EQUITY
Deposits:
Demand		$	8,424,609			$	7,950,675			$	8,156,401
Interest-bearing transaction		9,668,869				9,709,766				9,899,777
Savings		419,262				416,505				379,172
Time		2,247,061				2,341,374				2,624,379
Total deposits		20,759,801				20,418,320				21,059,729
Funds purchased		56,780				62,755				64,677
Repurchase agreements		472,683				630,101				712,033
Other borrowings		5,830,736				5,633,862				4,332,162
Subordinated debentures		371,812				226,385				226,278
Accrued interest, taxes and expense		197,742				148,711				124,568
Due on unsettled securities purchases		11,757				19,508				37,571
Derivative contracts, net		719,159				705,578				620,277
Other liabilities		147,242				212,460				135,435
TOTAL LIABILITIES		28,567,712				28,057,680				27,312,730
Shareholders' equity:
Capital, surplus and retained earnings		3,251,201				3,228,446				3,323,840
Accumulated other comprehensive income		117,632				93,109				51,792
TOTAL SHAREHOLDERS' EQUITY		3,368,833				3,321,555				3,375,632
Non-controlling interests		33,905				34,710				37,201
TOTAL EQUITY		3,402,738				3,356,265				3,412,833
TOTAL LIABILITIES AND EQUITY		$	31,970,450			$	31,413,945			$	30,725,563

AVERAGE BALANCE SHEETS -- UNAUDITED BOK FINANCIAL CORPORATION (in thousands)
		Three Months Ended
		June 30, 2016				Mar. 31, 2016				Dec. 31, 2015				Sept. 30, 2015				June 30, 2015
ASSETS
Interest-bearing cash and cash equivalents		$	2,022,028			$	2,052,840			$	1,995,945			$	2,038,611			$	2,002,456
Trading securities		237,808				188,100				150,402				179,098				127,391
Investment securities		562,391				587,465				602,369				616,091				628,489
Available for sale securities		8,890,112				8,951,435				8,971,090				8,942,261				9,063,006
Fair value option securities		368,434				450,478				435,449				429,951				435,294
Restricted equity securities		319,136				294,529				262,461				255,610				221,911
Residential mortgage loans held for sale		401,114				289,743				310,425				401,359				464,269
Loans:
Commercial		10,265,782				10,268,793				10,024,756				9,685,768				9,634,306
Commercial real estate		3,550,611				3,364,076				3,186,629				3,198,200				2,989,615
Residential mortgage		1,864,458				1,865,742				1,835,195				1,847,696				1,857,464
Personal		582,281				493,382				540,418				460,647				423,967
Total loans		16,263,132				15,991,993				15,586,998				15,192,311				14,905,352
Allowance for loan losses		(245,448		)		(234,116		)		(207,156		)		(202,829		)		(198,400		)
Total loans, net		16,017,684				15,757,877				15,379,842				14,989,482				14,706,952
Total earning assets		28,818,707				28,572,467				28,107,983				27,852,463				27,649,768
Cash and due from banks		507,085				505,522				514,629				487,283				492,737
Derivative contracts, net		823,584				632,102				657,780				669,264				475,687
Cash surrender value of bank-owned life insurance		306,318				304,141				301,793				299,424				297,022
Receivable on unsettled securities sales		49,568				115,101				62,228				64,591				94,374
Other assets		1,480,780				1,379,138				1,435,763				1,396,708				1,454,484
TOTAL ASSETS		$	31,986,042			$	31,508,471			$	31,080,176			$	30,769,733			$	30,464,072
LIABILITIES AND EQUITY
Deposits:
Demand		$	8,162,134			$	8,105,756			$	8,312,961			$	7,994,607			$	7,996,717
Interest-bearing transaction		9,590,855				9,756,843				9,527,491				9,760,839				10,063,589
Savings		417,122				397,479				382,284				379,828				381,833
Time		2,297,621				2,366,543				2,482,714				2,557,874				2,651,820
Total deposits		20,467,732				20,626,621				20,705,450				20,693,148				21,093,959
Funds purchased		70,682				112,211				73,220				70,281				63,312
Repurchase agreements		611,264				662,640				623,921				672,085				773,977
Other borrowings		6,076,028				5,583,917				4,957,175				4,779,981				4,001,479
Subordinated debentures		232,795				226,368				226,332				226,296				307,903
Derivative contracts, net		791,313				544,722				632,699				597,908				455,431
Due on unsettled securities purchases		93,812				158,050				248,811				90,135				151,369
Other liabilities		298,170				268,705				251,953				240,704				235,173
TOTAL LIABILITIES		28,641,796				28,183,234				27,719,561				27,370,538				27,082,603
Total equity		3,344,246				3,325,237				3,360,615				3,399,195				3,381,469
TOTAL LIABILITIES AND EQUITY		$	31,986,042			$	31,508,471			$	31,080,176			$	30,769,733			$	30,464,072

STATEMENTS OF EARNINGS -- UNAUDITED BOK FINANCIAL CORPORATION (in thousands, except per share data)
		Three Months Ended									Six Months Ended
		June 30,									June 30,
		2016				2015					2016				2015
Interest revenue		$	202,267			$	191,813				$	404,063			$	376,382
Interest expense		19,655				16,082					38,879				32,925
Net interest revenue		182,612				175,731					365,184				343,457
Provision for credit losses		20,000				4,000					55,000				4,000
Net interest revenue after provision for credit losses		162,612				171,731					310,184				339,457
Other operating revenue:
Brokerage and trading revenue		39,530				36,012					71,871				67,719
Transaction card revenue		34,950				32,778					67,304				63,788
Fiduciary and asset management revenue		34,813				32,712					66,869				64,181
Deposit service charges and fees		22,618				22,328					45,160				44,012
Mortgage banking revenue		38,224				36,846					72,654				76,166
Other revenue		13,352				11,871					25,256				22,672
Total fees and commissions		183,487				172,547					349,114				338,538
Other gains, net		1,307				1,457					2,867				2,212
Gain (loss) on derivatives, net		10,766				(1,032		)			17,904				(121		)
Gain (loss) on fair value option securities, net		4,279				(8,130		)			13,722				(5,483		)
Change in fair value of mortgage servicing rights		(16,283		)		8,010					(44,271		)		(512		)
Gain on available for sale securities, net		5,326				3,433					9,290				7,760
Total other-than-temporary impairment losses		—				—					—				(781		)
Portion of loss recognized in other comprehensive income		—				—					—				689
Net impairment losses recognized in earnings		—				—					—				(92		)
Total other operating revenue		188,882				176,285					348,626				342,302
Other operating expense:
Personnel		142,490				132,695					278,333				261,243
Business promotion		6,703				7,765					12,399				13,513
Professional fees and services		14,158				9,560					25,917				19,619
Net occupancy and equipment		19,677				18,927					38,443				37,971
Insurance		7,129				5,116					14,394				10,096
Data processing and communications		32,802				30,655					64,819				60,427
Printing, postage and supplies		3,889				3,553					7,796				7,014
Net losses and operating expenses of repossessed assets		1,588				223					2,658				836
Amortization of intangible assets		2,624				1,090					3,783				2,180
Mortgage banking costs		15,809				8,227					28,188				18,394
Other expense		7,856				9,302					22,895				16,085
Total other operating expense		254,725				227,113					499,625				447,378
Net income before taxes		96,769				120,903					159,185				234,381
Federal and state income taxes		30,497				40,630					51,925				79,014
Net income		66,272				80,273					107,260				155,367
Net income (loss) attributable to non-controlling interests		471				1,043					(1,105		)		1,294
Net income attributable to BOK Financial Corporation shareholders		$	65,801			$	79,230				$	108,365			$	154,073
Average shares outstanding:
Basic		65,245,887				68,096,341					65,271,214				68,175,327
Diluted		65,302,927				68,210,353					65,317,177				68,277,386
Net income per share:
Basic		$	1.00			$	1.15				$	1.64			$	2.23
Diluted		$	1.00			$	1.15				$	1.64			$	2.23

FINANCIAL HIGHLIGHTS -- UNAUDITED BOK FINANCIAL CORPORATION (in thousands, except ratio and share data)
		Three Months Ended
		June 30, 2016				Mar. 31, 2016				Dec. 31, 2015				Sept. 30, 2015				June 30, 2015
Capital:
Period-end shareholders' equity		$	3,368,833			$	3,321,555			$	3,230,556			$	3,377,226			$	3,375,632
Risk weighted assets		$	24,191,016			$	23,707,824			$	23,429,897			$	22,706,537			$	22,533,295
Risk-based capital ratios:
Common equity tier 1		11.86		%		12.00		%		12.13		%		12.78		%		13.01		%
Tier 1		11.86		%		12.00		%		12.13		%		12.78		%		13.01		%
Total capital		13.51		%		13.21		%		13.30		%		13.89		%		14.11		%
Leverage ratio		9.06		%		9.12		%		9.25		%		9.55		%		9.75		%
Tangible common equity ratio1		9.33		%		9.34		%		9.02		%		9.78		%		9.72		%
Common stock:
Book value per share		$	51.15			$	50.21			$	49.03			$	49.88			$	48.96
Tangible book value per share		44.68				43.73				42.51				43.52				42.70
Market value per share:
High		$	65.14			$	60.16			$	74.73			$	70.26			$	71.66
Low		$	51.00			$	43.74			$	58.25			$	57.04			$	59.59
Cash dividends paid		$	28,241			$	28,294			$	28,967			$	28,766			$	28,841
Dividend payout ratio		42.92		%		66.47		%		48.60		%		38.41		%		36.40		%
Shares outstanding, net		65,866,317				66,155,103				65,894,032				67,713,031				68,945,139
Stock buy-back program:
Shares repurchased		305,169				—				1,874,074				1,258,348				—
Amount		$	17,771			$	—			$	119,780			$	80,276			$	—
Average price per share		$	58.23			$	—			$	63.91			$	63.79			$	—
Performance ratios (quarter annualized):
Return on average assets		0.83		%		0.54		%		0.76		%		0.97		%		1.04		%
Return on average equity		8.00		%		5.21		%		7.12		%		8.84		%		9.50		%
Net interest margin		2.63		%		2.65		%		2.64		%		2.61		%		2.61		%
Efficiency ratio		68.45		%		69.05		%		67.93		%		64.34		%		64.21		%
Reconciliation of non-GAAP measures:
1  Tangible common equity ratio:
Total shareholders' equity		$	3,368,833			$	3,321,555			$	3,230,556			$	3,377,226			$	3,375,632
Less: Goodwill and intangible assets, net		426,111				428,733				429,370				430,460				431,515
Tangible common equity		$	2,942,722			$	2,892,822			$	2,801,186			$	2,946,766			$	2,944,117
Total assets		$	31,970,450			$	31,413,945			$	31,476,128			$	30,566,905			$	30,725,563
Less: Goodwill and intangible assets, net		426,111				428,733				429,370				430,460				431,515
Tangible assets		$	31,544,339			$	30,985,212			$	31,046,758			$	30,136,445			$	30,294,048
Tangible common equity ratio		9.33		%		9.34		%		9.02		%		9.78		%		9.72		%
Other data:
Fiduciary assets		$	39,924,734			$	39,113,305			$	38,333,638			$	37,780,669			$	38,772,018
Tax equivalent adjustment		$	4,372			$	4,385			$	3,222			$	3,244			$	3,035
Net unrealized gain on available for sale securities		$	195,385			$	155,236			$	38,109			$	144,884			$	89,158
Mortgage banking:
Mortgage servicing portfolio		$	21,178,387			$	20,294,662			$	19,678,226			$	18,928,726			$	17,979,623
Mortgage commitments		$	965,631			$	902,986			$	601,147			$	742,742			$	849,619
Mortgage loans funded for sale		$	1,818,844			$	1,244,015			$	1,365,431			$	1,614,225			$	1,828,230
Mortgage loan refinances to total fundings		44		%		49		%		41		%		30		%		40		%
Mortgage loans sold		$	1,742,582			$	1,239,391			$	1,424,527			$	1,778,099			$	1,861,968
Net realized gains on mortgage loans sold		$	19,205			$	10,779			$	15,705			$	18,968			$	23,856
Change in net unrealized gain on mortgage loans held for sale		3,221				8,198				(5,615		)		(251		)		(743		)
Total production revenue		22,426				18,977				10,090				18,717				23,113
Servicing revenue		15,798				15,453				14,949				14,453				13,733
Total mortgage banking revenue		$	38,224			$	34,430			$	25,039			$	33,170			$	36,846
Gain (loss) on mortgage servicing rights, net of economic hedge:
Gain (loss) on mortgage hedge derivative contracts, net		$	10,766			$	7,138			$	(732	)		$	1,460			$	(1,005	)
Gain (loss) on fair value option securities, net		4,279				9,443				(4,127		)		5,926				(8,130		)
Gain (loss) on economic hedge of mortgage servicing rights		15,045				16,581				(4,859		)		7,386				(9,135		)
Gain (loss) on changes in fair value of mortgage servicing rights		(16,283		)		(27,988		)		7,416				(11,757		)		8,010
Gain (loss) on changes in fair value of mortgage servicing rights, net of economic hedges		$	(1,238	)		$	(11,407	)		$	2,557			$	(4,371	)		$	(1,125	)
Net interest revenue on fair value option securities		$	1,348			$	2,033			$	2,137			$	2,140			$	1,985

QUARTERLY EARNINGS TREND -- UNAUDITED BOK FINANCIAL CORPORATION (in thousands, except ratio and per share data)
		Three Months Ended
		June 30, 2016				Mar. 31, 2016				Dec. 31, 2015				Sept. 30, 2015				June 30, 2015
Interest revenue		$	202,267			$	201,796			$	196,782			$	193,664			$	191,813
Interest expense		19,655				19,224				15,521				15,028				16,082
Net interest revenue		182,612				182,572				181,261				178,636				175,731
Provision for credit losses		20,000				35,000				22,500				7,500				4,000
Net interest revenue after provision for credit losses		162,612				147,572				158,761				171,136				171,731
Other operating revenue:
Brokerage and trading revenue		39,530				32,341				30,255				31,582				36,012
Transaction card revenue		34,950				32,354				32,319				32,514				32,778
Fiduciary and asset management revenue		34,813				32,056				31,165				30,807				32,712
Deposit service charges and fees		22,618				22,542				22,813				23,606				22,328
Mortgage banking revenue		38,224				34,430				25,039				33,170				36,846
Other revenue		13,352				11,904				14,233				12,978				11,871
Total fees and commissions		183,487				165,627				155,824				164,657				172,547
Other gains, net		1,307				1,560				2,329				1,161				1,457
Gain (loss) on derivatives, net		10,766				7,138				(732		)		1,283				(1,032		)
Gain (loss) on fair value option securities, net		4,279				9,443				(4,127		)		5,926				(8,130		)
Change in fair value of mortgage servicing rights		(16,283		)		(27,988		)		7,416				(11,757		)		8,010
Gain on available for sale securities, net		5,326				3,964				2,132				2,166				3,433
Total other-than-temporary impairment losses		—				—				(2,114		)		—				—
Portion of loss recognized in other comprehensive income		—				—				387				—				—
Net impairment losses recognized in earnings		—				—				(1,727		)		—				—
Total other operating revenue		188,882				159,744				161,115				163,436				176,285
Other operating expense:
Personnel		142,490				135,843				133,182				129,062				132,695
Business promotion		6,703				5,696				8,416				5,922				7,765
Charitable contributions to BOKF Foundation		—				—				—				796				—
Professional fees and services		14,158				11,759				10,357				10,147				9,560
Net occupancy and equipment		19,677				18,766				19,356				18,689				18,927
Insurance		7,129				7,265				5,415				4,864				5,116
Data processing and communications		32,802				32,017				31,248				30,708				30,655
Printing, postage and supplies		3,889				3,907				3,108				3,376				3,553
Net losses and operating expenses of repossessed assets		1,588				1,070				343				267				223
Amortization of intangible assets		2,624				1,159				1,090				1,089				1,090
Mortgage banking costs		15,809				12,379				11,496				9,107				8,227
Other expense		7,856				15,039				8,547				10,601				9,302
Total other operating expense		254,725				244,900				232,558				224,628				227,113
Net income before taxes		96,769				62,416				87,318				109,944				120,903
Federal and state income taxes		30,497				21,428				26,242				34,128				40,630
Net income		66,272				40,988				61,076				75,816				80,273
Net income (loss) attributable to non-controlling interests		471				(1,576		)		1,475				925				1,043
Net income attributable to BOK Financial Corporation shareholders		$	65,801			$	42,564			$	59,601			$	74,891			$	79,230
Average shares outstanding:
Basic		65,245,887				65,296,541				66,378,380				67,668,076				68,096,341
Diluted		65,302,927				65,331,428				66,467,729				67,762,483				68,210,353
Net income per share:
Basic		$	1.00			$	0.64			$	0.89			$	1.09			$	1.15
Diluted		$	1.00			$	0.64			$	0.89			$	1.09			$	1.15

LOANS TREND -- UNAUDITED BOK FINANCIAL CORPORATION (In thousands)
		June 30, 2016				Mar. 31, 2016				Dec. 31, 2015				Sept. 30, 2015				June 30, 2015
Commercial:
Energy		$	2,818,656			$	3,029,420			$	3,097,328			$	2,838,167			$	2,902,143
Services		2,830,864				2,728,891				2,784,276				2,706,624				2,681,126
Healthcare		2,051,146				1,995,425				1,883,380				1,741,680				1,646,025
Wholesale/retail		1,532,957				1,451,846				1,422,064				1,461,936				1,533,730
Manufacturing		595,403				600,645				556,729				555,677				579,549
Other commercial and industrial		527,411				482,198				508,754				493,338				433,148
Total commercial		10,356,437				10,288,425				10,252,531				9,797,422				9,775,721
Commercial real estate:
Retail		795,419				810,522				796,499				769,449				688,447
Multifamily		787,200				733,689				751,085				758,658				711,333
Office		769,112				695,552				637,707				626,151				563,085
Industrial		645,586				564,467				563,169				563,871				488,054
Residential construction and land development		157,576				171,949				160,426				153,510				148,574
Other commercial real estate		427,073				394,328				350,147				363,428				434,004
Total commercial real estate		3,581,966				3,370,507				3,259,033				3,235,067				3,033,497
Residential mortgage:
Permanent mortgage		969,007				948,405				945,336				937,664				946,324
Permanent mortgages guaranteed by U.S. government agencies		192,732				197,350				196,937				192,712				190,839
Home equity		719,184				723,554				734,620				738,619				747,565
Total residential mortgage		1,880,923				1,869,309				1,876,893				1,868,995				1,884,728
Personal		587,423				494,325				552,697				465,957				430,190
Total		$	16,406,749			$	16,022,566			$	15,941,154			$	15,367,441			$	15,124,136

LOANS BY PRINCIPAL MARKET AREA -- UNAUDITED BOK FINANCIAL CORPORATION (in thousands)
		June 30, 2016				Mar. 31, 2016				Dec. 31, 2015				Sept. 30, 2015				June 30, 2015
Bank of Oklahoma:
Commercial		$	3,698,215			$	3,656,034			$	3,782,687			$	3,514,391			$	3,529,406
Commercial real estate		781,458				747,689				739,829				677,372				614,995
Residential mortgage		1,415,766				1,411,409				1,409,114				1,405,235				1,413,690
Personal		246,229				204,158				255,387				185,463				190,909
Total Bank of Oklahoma		6,141,668				6,019,290				6,187,017				5,782,461				5,749,000
Bank of Texas:
Commercial		3,901,632				3,936,809				3,908,425				3,752,193				3,738,742
Commercial real estate		1,311,408				1,211,978				1,204,202				1,257,741				1,158,056
Residential mortgage		222,548				217,539				219,126				222,395				228,683
Personal		233,304				210,456				203,496				194,051				156,260
Total Bank of Texas		5,668,892				5,576,782				5,535,249				5,426,380				5,281,741
Bank of Albuquerque:
Commercial		398,427				402,082				375,839				368,027				392,362
Commercial real estate		322,956				323,059				313,422				312,953				291,953
Residential mortgage		114,226				117,655				120,507				121,232				123,376
Personal		10,569				10,823				11,557				10,477				11,939
Total Bank of Albuquerque		846,178				853,619				821,325				812,689				819,630
Bank of Arkansas:
Commercial		81,227				79,808				92,359				76,044				99,086
Commercial real estate		69,235				66,674				69,320				82,225				85,997
Residential mortgage		6,874				7,212				8,169				8,063				6,999
Personal		7,025				918				819				4,921				5,189
Total Bank of Arkansas		164,361				154,612				170,667				171,253				197,271
Colorado State Bank & Trust:
Commercial		1,076,620				1,030,348				987,076				1,029,694				1,019,454
Commercial real estate		237,569				219,078				223,946				229,835				229,721
Residential mortgage		59,425				52,961				53,782				50,138				54,135
Personal		35,064				24,497				23,384				30,683				30,373
Total Colorado State Bank & Trust		1,408,678				1,326,884				1,288,188				1,340,350				1,333,683
Bank of Arizona:
Commercial		670,814				656,527				606,733				608,235				572,477
Commercial real estate		639,112				605,383				507,523				482,918				472,061
Residential mortgage		38,998				40,338				44,047				41,722				37,493
Personal		24,248				18,372				31,060				17,609				12,875
Total Bank of Arizona		1,373,172				1,320,620				1,189,363				1,150,484				1,094,906
Bank of Kansas City:
Commercial		529,502				526,817				499,412				448,838				424,194
Commercial real estate		220,228				196,646				200,791				192,023				180,714
Residential mortgage		23,086				22,195				22,148				20,210				20,352
Personal		30,984				25,101				26,994				22,753				22,645
Total Bank of Kansas City		803,800				770,759				749,345				683,824				647,905
TOTAL BOK FINANCIAL		$	16,406,749			$	16,022,566			$	15,941,154			$	15,367,441			$	15,124,136
Loans attributed to a geographical region may not always represent the location of the borrower or the collateral.