BOK Financial Corporation Reports Annual Earnings of $435 million or $6.19 Per Share and Record Quarterly Earnings of $154 million or $2.21 Per Share in the Fourth Quarter

Tulsa, Oklahoma, UNITED STATES


TULSA, Okla., Jan. 20, 2021 (GLOBE NEWSWIRE) -- BOK Financial (NASDAQ: BOKF) today reported net earnings applicable to common shareholders for the fourth quarter of 2020 of $154.2 million, or $2.21 per diluted common share.

CEO Commentary  

Steven G. Bradshaw, president and chief executive officer stated, “Despite the macroeconomic challenges in the first half of the year, BOK Financial ended 2020 on a high note. The fourth quarter was the second-consecutive, record earnings quarter for the company, and ultimately culminated in record annual revenue in our wealth management and mortgage businesses, proving the value of our diversified revenue earnings model during times of economic uncertainty.” 

Bradshaw continued, “In addition to our earnings success, our differentiated credit culture was also a standout in the fourth quarter and throughout 2020. We once again proved the depth of our energy expertise as we navigated another steep commodities downturn with net charge-off performance near the top of our peer group of energy banks. Our success in 2020 proves why diversified revenue and strong credit culture have been the company’s defining hallmarks for decades. These guiding principles give us confidence for continued success in 2021.”  

2020 Financial Highlights

  • Net income for the year ended December 31, 2020 totaled $435.0 million or $6.19 per diluted share compared to $500.8 million or $7.03 per diluted share for the year ended December 31, 2019. A pre-tax provision for expected credit losses of $222.6 million was included in 2020 while a pre-tax provision for incurred losses of $44.0 million was included in 2019. The Company adopted the current expected credit loss ("CECL") model on January 1, 2020.
  • Net interest revenue totaled $1.1 billion, consistent with the prior year. Net interest margin was 2.83 percent for 2020 compared to 3.11 percent for 2019. The Federal Reserve reduced the federal funds rate to near zero early in the year putting pressure on the margin in 2020.
  • Fees and commissions revenue increased $108.1 million to $810.3 million in 2020, led by strong growth in mortgage banking revenue and brokerage and trading revenue. Declining mortgage interest rates have propelled mortgage production and related trading activities.
  • Operating expense totaled $1.2 billion in 2020, an increase of $33.6 million. Incentive compensation expense increased $41.7 million, largely related to the increase in trading and mortgage activity in 2020. This increase was partially offset by decreased business promotion expenses of $21.2 million related to lower advertising and travel and entertainment costs as a result of the ongoing pandemic.
  • The net economic benefit of the changes in the fair value of mortgage servicing rights and related economic hedges was $24.9 million during 2020 compared to an economic cost of $17.9 million during 2019.
  • Period-end loans were up $1.3 billion to $23.0 billion while average loans increased $1.3 billion to $23.4 billion. We are actively participating in programs initiated by the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), including the Small Business Administration's Paycheck Protection Program ("PPP"). PPP loans accounted for $1.7 billion at December 31, 2020 and averaged $1.4 billion for 2020.
  • Period-end deposits increased $8.5 billion to $36.1 billion and average deposits increased $7.1 billion to $32.8 billion. Deposit growth was largely due to customers retaining higher balances in the current economic environment combined with increases due to various COVID-19 related government program stimulus payments.
  • Commercial Banking added $306.0 million to net income in 2020 compared to $374.8 million in 2019. Combined net interest and fee revenue decreased $69.3 million compared to the prior year. A decrease in net interest revenue, largely due to compressed loan spreads, was partially offset by growth in customer energy hedging revenue. Transaction card revenue also increased $3.7 million. An increase in financial institution customer contracts during 2020 provides opportunities for future growth. Operating expense increased $6.4 million. Increased non-personnel expense was partially offset by decreased incentive compensation costs. Charge-offs increased $30.5 million, primarily due to energy loans. Average loans for 2020 increased $621 million to $18.7 billion. Average deposits increased $4.0 billion to $14.3 billion. Government stimulus payments were received during the year from the PPP and other government programs and customers are retaining higher cash balances due to the uncertain economic environment.
  • Consumer Banking added a record $95.4 million to net income during the year compared to $56.6 million in the prior year. Combined net interest and fee revenue increased $9.1 million over the prior year. Net interest revenue was significantly affected by lower yields on deposits sold to our Funds Management unit and compressed loan spreads. However, mortgage production revenue increased $83.1 million due to lower mortgage interest rates. Service charges declined $15.4 million as we waived certain fees in the midst of the pandemic. The net economic benefit of the changes in the fair value of mortgage servicing rights and related economic hedges was $24.9 million during 2020 compared to an economic cost of $17.9 million in 2019.
  • With revenues surpassing $500 million, Wealth Management produced a record year, contributing $115.6 million to net income in 2020 compared to $95.3 million in 2019. Combined net interest and fee revenue increased $75.1 million over the prior year. Low mortgage interest rates significantly increased mortgage trading activity, which led to an increase in both trading interest income and brokerage and trading revenue. This increase was partially offset by lower yields on deposits sold to our Funds Management unit. We increased our trading pipeline to provide greater liquidity to the housing market during a time of record loan production volumes. Fiduciary and asset management revenue decreased $7.9 million compared to 2019. The low rate environment has put pressure on our mutual fund revenue streams, partially offset by increased trust and managed account fees from higher client asset balances. Operating expense increased $48.3 million, primarily due to incentive compensation driven by growth in our trading business. Average deposits grew $2.2 billion to $8.7 billion in 2020, led by growth in interest-bearing transaction deposits.

Fourth Quarter 2020 Financial Highlights

  • Net income was $154.2 million or $2.21 per diluted share for the fourth quarter of 2020 and $154.0 million or $2.19 per diluted share for the third quarter of 2020. A negative pre-tax provision for expected credit losses of $6.5 million was recorded in the fourth quarter of 2020 compared to no provision in the prior quarter.
  • Net interest revenue totaled $297.2 million, an increase of $25.5 million, largely due to a $5.1 billion increase in average trading securities. Net interest margin was 2.72 percent compared to 2.81 percent in the third quarter of 2020. The increase in the trading securities portfolio combined with the repricing of our available for sale securities portfolio at current interest rates decreased the net interest margin in the fourth quarter. The company has been proactive in reducing deposit costs and implementing LIBOR floors in loan agreements to support the margin.
  • Fees and commissions revenue totaled $181.1 million, a decrease of $41.8 million. Brokerage and trading revenue decreased $30.0 million, largely due to a shift from trading revenue to interest income on trading securities. While still strong, mortgage banking revenue decreased $12.7 million compared to the prior quarter, primarily the result of seasonal declines in production coupled with market driven margin compression.
  • Operating expense was $300.7 million, consistent with the prior quarter. Personnel expense decreased $3.7 million, primarily due to lower incentive compensation and a seasonal decrease in employee benefits costs. Non-personnel expense increased $3.1 million compared to the third quarter of 2020. We made a $6.0 million charitable contribution to the BOKF Foundation in the fourth quarter. This increase, along with an increase in business promotion expense, was partially offset by lower FDIC insurance expense and net losses and expenses on repossessed assets.
  • Period-end loans decreased $796 million to $23.0 billion at December 31, 2020, primarily due to paydowns of commercial loans and PPP loans. Average loans were $23.4 billion, a $663 million decrease compared to the third quarter.
  • The allowance for loan losses totaled $389 million or 1.69 percent of outstanding loans at December 31, 2020. The combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $426 million or 1.85 percent of outstanding loans at December 31, 2020. Excluding PPP loans, the allowance for loan losses was 1.82 percent of outstanding loans and the combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was 2.00 percent. Excluding PPP loans, the allowance for loan losses was $420 million or 1.93 percent of outstanding loans and the combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $448 million or 2.06 percent of outstanding loans at September 30, 2020.
  • Average deposits increased $883 million to $35.5 billion and period-end deposits increased $1.2 billion to $36.1 billion, largely due to growth in wealth management balances. Continued deposit growth was due primarily to customers retaining higher balances in the current economic environment.
  • The company's common equity Tier 1 capital ratio was 11.94 percent at December 31, 2020. In addition, the company's Tier 1 capital ratio was 11.94 percent, total capital ratio was 13.81 percent, and leverage ratio was 8.28 percent at December 31, 2020. At September 30, 2020, the company's common equity Tier 1 capital ratio was 12.07 percent, Tier 1 capital ratio was 12.07 percent, total capital ratio was 14.05 percent, and leverage ratio was 8.39 percent.
  • The company repurchased 665,100 shares of common stock at an average price of $63.82 a share in the fourth quarter.
  • Commercial Banking contributed $74.9 million to net income in the fourth quarter of 2020, consistent with the third quarter. Combined net interest revenue decreased $8.9 million, primarily due to compressed loan spreads. This was partially offset by a decrease in net loans charged off of $6.4 million. Average Commercial Banking loans decreased $577 million due to purposeful deleveraging by our customers.
  • Consumer Banking contributed $14.3 million to net income in the fourth quarter of 2020, a decrease of $12.0 million compared to the third quarter. Combined net interest and fee revenue decreased $15.1 million. Net interest revenue decreased $2.5 million, mainly due to lower yields on deposits sold to our Funds Management unit and compressed loan spreads. Fees and commissions revenue decreased $12.6 million due to normal seasonality in mortgage production combined with reduced gain on sale margins. While mortgage production revenue decreased, it remained a strong quarter for our mortgage banking business.
  • Wealth Management contributed $28.4 million to net income in the fourth quarter of 2020, a decrease of $2.8 million compared to the third quarter. Combined net interest and fee revenue decreased $3.2 million. Deposit growth remains strong with total average deposits growing $500 million compared to the previous quarter. Assets under management or administration totaled $91.6 billion compared to $82.4 billion in the prior quarter.

Net Interest Revenue

Net interest revenue was $297.2 million for the fourth quarter of 2020, a $25.5 million increase compared to the third quarter of 2020, primarily due to the increase in average trading securities.

Average earning assets increased $4.8 billion compared to the third quarter of 2020. Average trading securities balances increased $5.1 billion due to continued growth in our trading of U.S. government issued mortgage-backed securities and timing of settlements. Average loan balances decreased $663 million, primarily from commercial loan payments. Available for sale securities increased $369 million and restricted equity securities increased $136 million. Average interest-bearing deposits grew by $676 million, primarily due to higher interest-bearing transaction deposits, partially offset by lower time deposits. Other borrowings increased $1.8 billion while funds purchased and repurchase agreements decreased $629 million.Net interest revenue was $297.2 million for the fourth quarter of 2020, a $25.5 million increase compared to the third quarter of 2020, primarily due to the increase in average trading securities.

Net interest margin was 2.72 percent compared to 2.81 percent in the third quarter of 2020. Growth in our trading securities portfolio contributed approximately $25.1 million to net interest revenue, but diluted the net interest margin by approximately 9 basis points. This, combined with the repricing of our available for sale securities portfolio to current interest rates has resulted in a decrease to net interest margin in the fourth quarter. However, the company has been proactive in reducing deposit costs and implementing LIBOR floors in loan agreements to support the margin.

The yield on average earning assets was 2.92 percent, a 12 basis point decrease from the prior quarter. The yield on the available for sale securities portfolio decreased 13 basis points to 1.98 percent. The loan portfolio yield increased 8 basis points to 3.68 percent due to the timing of loan fees and recovery of non-accrual interest. In addition, net purchase accounting discount accretion added $5.3 million or 9 basis points to the loan portfolio yield in the fourth quarter and $13.3 million or 22 basis points to the third quarter. Approximately $48 million of purchase accounting discount remains to be accreted.

Funding costs were 0.28 percent, down 3 basis points. The cost of interest-bearing deposits decreased 7 basis points to 0.19 percent. The cost of other borrowed funds was up 7 basis points to 0.38 percent. The benefit to net interest margin from assets funded by non-interest liabilities was 8 basis points for the fourth quarter of 2020, consistent with the prior quarter.

Fees and Commissions Revenue

Fees and commissions revenue totaled $181.1 million for the fourth quarter of 2020, a decrease of $41.8 million compared to the third quarter of 2020. Brokerage and trading revenue decreased $30.0 million to $39.5 million, largely due to the shift of brokerage and trading fee revenue to net interest revenue. In addition, customer hedging revenue decreased $4.0 million, primarily due to decreased energy customer hedging activities. Investment banking revenue grew by $1.9 million, mainly due to timing of loan syndication activity.

Mortgage banking revenue decreased $12.7 million compared to the prior quarter. While mortgage interest rates remain at record low levels, mortgage production experienced a normal seasonal decline and margins also started to compress. The gain on sale margin decreased 41 basis points to 3.26 percent. Transaction card revenue decreased $1.6 million, primarily due to lower transaction volumes.Fees and commissions revenue totaled $181.1 million for the fourth quarter of 2020, a decrease of $41.8 million compared to the third quarter of 2020. Brokerage and trading revenue decreased $30.0 million to $39.5 million, largely due to the shift of brokerage and trading fee revenue to net interest revenue. In addition, customer hedging revenue decreased $4.0 million, primarily due to decreased energy customer hedging activities. Investment banking revenue grew by $1.9 million, mainly due to timing of loan syndication activity.

Fiduciary and asset management revenue increased $1.9 million, primarily driven by the increase in the fair value of assets under management in the fourth quarter.

Operating Expense

Total operating expense was $300.7 million for the fourth quarter of 2020, consistent with the third quarter of 2020.

Personnel expense decreased $3.7 million. Share based incentive compensation decreased $7.4 million from elevated levels in the prior quarter due to vesting assumption changes. This decrease was partially offset by growth in cash based incentive compensation and deferred compensation, which is largely offset by a decrease in the value of related investments included in Other gains (losses).

Non-personnel expense increased $3.1 million over the third quarter of 2020. We made a charitable contribution of $6.0 million to the BOKF Foundation in the fourth quarter as we continue to focus on the communities we serve and the extreme needs created by the pandemic. Business promotion expense increased $1.1 million, largely due to increased advertising expense, while other expense increased $3.3 million.

Net losses and expenses on repossessed assets decreased $5.1 million, primarily due to write-downs on a set of oil and gas properties and a retail commercial real estate property in the third quarter. Insurance expense also decreased $1.8 million while mortgage banking costs dropped by $1.0 million.

Loans, Deposits and Capital

Loans

Outstanding loans were $23.0 billion at December 31, 2020, a $796 million decrease compared to September 30, 2020, primarily due to payoffs of commercial loans and PPP loans.

Outstanding core commercial loan balances decreased $488 million or 4 percent compared to September 30, 2020, primarily due to continued pay downs as borrowers continue to reduce leverage during the time of economic uncertainty. 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.

Energy loan balances decreased $248 million to $3.5 billion or 15 percent of total loans. Although the commodity price environment has improved considerably over the past few months, sourcing new loans remains a challenge in this environment and existing borrowers continue to pay down debt to reduce leverage. 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 67 percent of committed production loans are secured by properties primarily producing oil. The remaining 33 percent is secured by properties primarily producing natural gas. Unfunded energy loan commitments were $2.4 billion at December 31, 2020, a $136 million increase over September 30, 2020, and a $524 million decrease compared to December 31, 2019, largely as a result of the semi-annual borrowing base redetermination process in the second and fourth quarters.

Healthcare sector loan balances decreased $20 million to $3.3 billion or 14 percent of total loans. Growth in loans to senior housing and care facilities was offset by a decrease in loans to hospital systems. Our healthcare sector loans primarily consist of $2.6 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 most recent stimulus bill passed last month, like the CARES Act, has multiple revenue enhancement measures for both hospitals and skilled nursing facilities as they manage through the risks of the virus.

General business loans decreased $183 million to $2.8 billion or 12 percent of total loans. General business loans include $1.6 billion of wholesale/retail loans and $701 million of loans from other commercial industries. Broad pay downs across our core commercial and industrial loan book contracted the portfolio.

Services loan balances decreased $37 million to $3.5 billion or 15 percent of total loans. Services loans consist of a large number of loans to a variety of businesses, including Native American tribal and state and local municipal government entities, Native American tribal casino operations, educational services, foundations and not-for-profit organizations and specialty trade contractors.

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.

Commercial real estate loan balances were largely unchanged compared to September 30, 2020 and represent 20 percent of total loans at December 31, 2020. Loans secured by other commercial real estate properties increased $52 million to $559 million. Loans secured by industrial facilities increased $18 million to $811 million. Multifamily residential loans, our largest exposure in commercial real estate, decreased $59 million to $1.3 billion at December 31, 2020. Loans secured by office buildings decreased $14 million to $1.1 billion. Loans secured by retail facilities were $796 million at December 31, 2020, a $10 million increase over September 30. 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.

PPP loan balances decreased $415 million to $1.7 billion or 7 percent of total loans. The complexity of the forgiveness process and borrowers' reluctance to apply for forgiveness in hopes of further legislative action that would relax the requirements has made the forgiveness process slower than initially anticipated. The recent Economic Aid Act will provide substantial forgiveness process relief, particularly for those clients with existing loans of less than $150 thousand, which represents more the 70 percent of our total PPP loan volume. The Company expects to participate in the newest round of PPP, with largely the same strategy of focusing on our existing client base in order to timely meet our existing clients' needs.

Loans to individuals increased $103 million and represent 15 percent of total loans at December 31, 2020. Personal loans were up $64 million and residential mortgage loans guaranteed by U.S. government agencies increased $24 million. 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.

Deposits

Period-end deposits totaled $36.1 billion at December 31, 2020, a $1.2 billion increase over September 30, 2020. Continued deposit growth was due primarily to customers retaining higher balances in the current economic environment. Interest-bearing transaction account balances grew by $1.0 billion. Average deposits were $35.5 billion at December 31, 2020, an $883 million increase compared to September 30, 2020. Interest-bearing transaction deposits increased $1.0 billion.

Capital

The company's common equity Tier 1 capital ratio was 11.94 percent at December 31, 2020. In addition, the company's Tier 1 capital ratio was 11.94 percent, total capital ratio was 13.81 percent, and leverage ratio was 8.28 percent at December 31, 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 27 basis points to the company's common equity tier 1 capital ratio at December 31. At September 30, 2020, the company's common equity Tier 1 capital ratio was 12.07 percent, Tier 1 capital ratio was 12.07 percent, total capital ratio was 14.05 percent, and leverage ratio was 8.39 percent.

The company's tangible common equity ratio, a non-GAAP measure, was 9.02 percent at December 31, 2020 and 9.02 percent at September 30, 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 repurchased 665,100 shares of common stock at an average price of $63.82 a share in the fourth quarter. We view share buybacks opportunistically, but within the context of maintaining our strong capital position.

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. Our CECL models 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.

We recorded a $6.5 million negative provision for credit losses in the fourth quarter of 2020. Changes in our reasonable and supportable forecasts of macroeconomic variables, primarily due to an improved economic outlook related to the anticipated impact of the on-going COVID-19 pandemic offset by changes in the probability weighting of the economic scenarios and other assumptions, resulted in a $3.0 million increase in the provision for credit losses from lending activities. Changes in the loan portfolio characteristics, including specific impairment and losses, risk grading and loan balances resulted in an $8.6 million decrease in the provision for credit losses from lending activities.

Our base case reasonable and supportable forecast assumes that the COVID-19 pandemic maintains its current trajectory with localized and state-level hotspots. This scenario assumes approval of several more vaccines through the first half of 2021, with a large share of the U.S. population vaccinated by the end of the third quarter of 2021. Regional shutdown and consumer risk aversion weigh negatively on the economic and employment recovery in the first quarter of 2021. However, widespread vaccine distribution helps boost consumer confidence and GDP recovers to pre-COVID levels by the third quarter of 2021. We expect a 4.1 percent increase in GDP over the next twelve months. Our forecasted civilian unemployment rate is 6.8 percent for the first quarter of 2021, improving to 6.3 percent by the fourth quarter of 2021. WTI oil prices are projected to generally follow the NYMEX forward curve that existed at the end of December 2020, averaging $46.80 per barrel over the next twelve months. The probability weighting of our base case reasonable and supportable forecast increased to 60 percent for the fourth quarter compared to 50 percent in the third quarter.

The probability weighting of our downside case reasonable and supportable forecast increased to 30 percent from 25 percent, while the probability weighting of our upside case reasonable and supportable forecast decreased to 10 percent from 25 percent in the third quarter. There continues to be a high level of uncertainty in the current economic outlook. Our downside case assumes additional waves and hotspot emerge throughout the first half of 2021 and more constrained distribution of vaccines not reaching widespread distribution until the first quarter of 2022. This results in no GDP growth over the next twelve months and unemployment rates remaining elevated throughout 2021.

The allowance for loan losses totaled $389 million or 1.69 percent of outstanding loans and 171 percent of nonaccruing loans at December 31, 2020, excluding residential mortgage loans guaranteed by U.S. government agencies. The combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $426 million or 1.85 percent of outstanding loans and 188 percent of nonaccruing loans at December 31, 2020. The combined allowance for credit losses attributed to energy was 3.61 percent of outstanding energy loans at December 31 compared to 4.30 at September 30. Excluding PPP loans, the allowance for loan losses was 1.82 percent of outstanding loans and the combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was 2.00 percent.

At September 30, 2020, the allowance for loan losses was $420 million or 1.76 percent of outstanding loans and 195 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 $448 million or 1.88 percent of outstanding loans and 208 percent of nonaccruing loans.

Nonperforming assets totaled $477 million or 2.07 percent of outstanding loans and repossessed assets at December 31, 2020, compared to $417 million or 1.75 percent at September 30, 2020. Nonperforming assets that are not guaranteed by U.S. government agencies totaled $317 million or 1.51 percent of outstanding loans and repossessed assets at December 31, 2020, up from $268 million or 1.25 percent at September 30, 2020.

Nonaccruing loans were $235 million or 1.10 percent of outstanding loans, excluding PPP loans, at December 31, 2020. Nonaccruing commercial loans totaled $167 million or 1.28 percent of outstanding commercial loans. Nonaccruing commercial real estate loans totaled $27 million or 0.58 percent of outstanding commercial real estate loans. Nonaccruing loans to individuals totaled $40 million or 1.14 percent of outstanding loans to individuals.

Nonaccruing loans increased $14 million over September 30, 2020, primarily due to an increase in nonaccruing commercial real estate loans. New nonaccruing loans identified in the fourth quarter totaled $99 million, offset by $13 million in payments received, $18 million in charge-offs and $43 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 $478 million at December 31, down from $623 million at September 30. Almost all potential problem loan classes were down compared to the prior quarter, led by potential problem energy and general business loans.

Net charge-offs were $16.7 million or 0.31 percent of average loans on an annualized basis for the fourth quarter of 2020, excluding PPP loans. Net charge-offs were 0.32 percent of average loans over the last four quarters. Net charge-offs were $22.4 million or 0.41 percent of average loans on an annualized basis for the third quarter of 2020, excluding PPP loans. Gross charge-offs were $18.3 million for the fourth quarter compared to $26.7 million for the previous quarter. Recoveries totaled $1.6 million for the fourth quarter of 2020 and $4.2 million for the third quarter of 2020.

Loans in deferral status have dropped to just below 1 percent of total loans from a peak of more than 7 percent. More than 90 percent of the loans that were deferred have now moved back to payment status.

Securities and Derivatives

The fair value of the available for sale securities portfolio totaled $13.1 billion at December 31, 2020, a $233 million increase compared to September 30, 2020. At December 31, 2020, the available for sale securities portfolio consisted primarily of $9.3 billion of residential mortgage-backed securities fully backed by U.S. government agencies and $3.5 billion of commercial mortgage-backed securities fully backed by U.S. government agencies. At December 31, 2020, the available for sale securities portfolio had a net unrealized gain of $441 million compared to $481 million at September 30, 2020.

We hold an inventory of trading securities in support of sales to a variety of customers. At December 31, 2020, the trading securities portfolio totaled $4.7 billion compared to $2.2 billion in the prior quarter. We have increased our bond trading pipeline to provide greater liquidity to the housing market during a time of high mortgage loan production volumes.

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 $20 million to $115 million at December 31, 2020.

The net economic benefit of the changes in the fair value of mortgage servicing rights and related economic hedges was $6.5 million during the fourth quarter of 2020, including a $6.3 million increase in the fair value of mortgage servicing rights, $317 thousand decrease in the fair value of securities and derivative contracts held as an economic hedge, and $550 thousand of related net interest revenue.

Conference Call and Webcast

The company will hold a conference call at 9 a.m. Central time on January 20, 2021 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 # 13714612.

About BOK Financial Corporation

BOK Financial Corporation is a $47 billion regional financial services company headquartered in Tulsa, Oklahoma with $92 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 December 31, 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)

 Dec. 31, 2020 Sept. 30, 2020
ASSETS   
Cash and due from banks$798,757  $658,612 
Interest-bearing cash and cash equivalents381,816  347,759 
Trading securities4,707,975  2,245,480 
Investment securities, net of allowance244,843  256,001 
Available for sale securities13,050,665  12,817,269 
Fair value option securities114,982  134,756 
Restricted equity securities171,391  111,656 
Residential mortgage loans held for sale252,316  295,290 
Loans:   
Commercial13,077,535  13,565,706 
Commercial real estate4,698,538  4,693,700 
Paycheck protection program1,682,310  2,097,325 
Loans to individuals3,549,137  3,446,569 
Total loans23,007,520  23,803,300 
Allowance for loan losses(388,640) (419,777)
Loans, net of allowance22,618,880  23,383,523 
Premises and equipment, net551,308  542,625 
Receivables245,880  245,514 
Goodwill1,048,091  1,048,091 
Intangible assets, net113,436  118,524 
Mortgage servicing rights101,172  97,644 
Real estate and other repossessed assets, net90,526  52,847 
Derivative contracts, net810,688  593,568 
Cash surrender value of bank-owned life insurance398,758  396,497 
Receivable on unsettled securities sales62,386  1,934,495 
Other assets907,218  787,073 
TOTAL ASSETS$46,671,088  $46,067,224 
        
LIABILITIES AND EQUITY       
Deposits:       
Demand$12,266,338  $12,047,338 
Interest-bearing transaction21,158,422  20,196,740 
Savings751,992  720,949 
Time1,967,128  2,007,973 
Total deposits36,143,880  34,973,000 
Funds purchased and repurchase agreements1,662,386  973,652 
Other borrowings1,882,970  2,771,429 
Subordinated debentures276,005  275,986 
Accrued interest, taxes and expense323,667  335,914 
Due on unsettled securities purchases257,627  641,817 
Derivative contracts, net405,779  446,328 
Other liabilities427,213  422,989 
TOTAL LIABILITIES41,379,527  40,841,115 
Shareholders' equity:       
Capital, surplus and retained earnings4,930,398  4,853,617 
Accumulated other comprehensive gain335,868  365,170 
TOTAL SHAREHOLDERS' EQUITY5,266,266  5,218,787 
Non-controlling interests25,295  7,322 
TOTAL EQUITY5,291,561  5,226,109 
TOTAL LIABILITIES AND EQUITY$46,671,088  $46,067,224 


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

 Three Months Ended
 Dec. 31, 2020 Sept. 30, 2020 June 30, 2020 Mar. 31, 2020 Dec. 31, 2019
ASSETS         
Interest-bearing cash and cash equivalents$643,926  $553,070  $619,737  $721,659  $573,203 
Trading securities6,888,189  1,834,160  1,871,647  1,690,104  1,672,426 
Investment securities, net of allowance251,863  258,965  268,947  282,265  298,567 
Available for sale securities12,949,702  12,580,850  12,480,065  11,664,521  11,333,524 
Fair value option securities122,329  387,784  786,757  1,793,480  1,521,528 
Restricted equity securities280,428  144,415  273,922  429,133  479,687 
Residential mortgage loans held for sale229,631  213,125  288,588  129,708  203,535 
Loans:         
Commercial13,113,449  13,772,217  14,502,652  14,452,851  14,344,534 
Commercial real estate4,788,393  4,754,269  4,543,511  4,346,886  4,532,649 
Paycheck protection program1,928,665  2,092,933  1,699,369     
Loans to individuals3,617,011  3,491,044  3,353,960  3,143,286  3,358,817 
Total loans23,447,518  24,110,463  24,099,492  21,943,023  22,236,000 
Allowance for loan losses(414,225) (441,831) (367,583) (250,338) (205,417)
Loans, net of allowance23,033,293  23,668,632  23,731,909  21,692,685  22,030,583 
Total earning assets44,399,361  39,641,001  40,321,572  38,403,555  38,113,053 
Cash and due from banks742,432  723,826  678,878  669,369  690,806 
Derivative contracts, net553,779  581,839  642,969  376,621  311,542 
Cash surrender value of bank-owned life insurance397,354  394,680  391,951  390,009  388,012 
Receivable on unsettled securities sales1,094,198  4,563,301  4,626,307  3,046,111  1,973,604 
Other assets3,200,040  3,027,108  3,095,354  2,834,953  2,736,337 
TOTAL ASSETS$50,387,164  $48,931,755  $49,757,031  $45,720,618  $44,213,354 
          
LIABILITIES AND EQUITY         
Deposits:         
Demand$12,136,071  $11,929,694  $11,489,322  $9,232,859  $9,612,533 
Interest-bearing transaction20,718,390  19,752,106  18,040,170  16,159,654  14,685,385 
Savings737,360  707,121  656,669  563,821  554,605 
Time1,930,808  2,251,012  2,464,793  2,239,234  2,247,717 
Total deposits35,522,629  34,639,933  32,650,954  28,195,568  27,100,240 
Funds purchased and repurchase agreements2,153,254  2,782,150  5,816,484  3,815,941  4,120,610 
Other borrowings5,193,656  3,382,688  3,527,303  6,542,325  6,247,194 
Subordinated debentures275,998  275,980  275,949  275,932  275,916 
Derivative contracts, net399,476  458,390  836,667  379,342  276,078 
Due on unsettled securities purchases957,642  1,516,880  887,973  960,780  784,174 
Other liabilities656,147  712,674  690,087  642,764  561,654 
TOTAL LIABILITIES45,158,802  43,768,695  44,685,417  40,812,652  39,365,866 
Total equity5,228,362  5,163,060  5,071,614  4,907,966  4,847,488 
TOTAL LIABILITIES AND EQUITY$50,387,164  $48,931,755  $49,757,031  $45,720,618  $44,213,354 


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

 Three Months Ended Year Ended
 December 31, December 31,
 2020 2019 2020 2019
        
Interest revenue$319,020  $369,857  $1,269,000  $1,531,958 
Interest expense21,790  99,608  160,556  419,079 
Net interest revenue297,230  270,249  1,108,444  1,112,879 
Provision for credit losses(6,500) 19,000  222,592  44,000 
Net interest revenue after provision for credit losses303,730  251,249  885,852  1,068,879 
Other operating revenue:       
Brokerage and trading revenue39,506  43,843  221,833  159,826 
Transaction card revenue21,896  22,548  90,182  87,216 
Fiduciary and asset management revenue41,799  45,021  167,445  177,025 
Deposit service charges and fees24,343  27,331  96,805  112,485 
Mortgage banking revenue39,298  25,396  182,360  107,541 
Other revenue14,209  15,283  51,695  58,108 
Total fees and commissions181,051  179,422  810,320  702,201 
Other gains (losses), net5,383  (1,649) 7,675  9,351 
Gain (loss) on derivatives, net(339) (4,644) 42,320  14,951 
Gain (loss) on fair value option securities, net68  (8,328) 53,248  15,787 
Change in fair value of mortgage servicing rights6,276  9,297  (79,524) (53,517)
Gain on available for sale securities, net4,339  4,487  9,910  5,597 
Total other operating revenue196,778  178,585  843,949  694,370 
Other operating expense:       
Personnel176,198  168,422  688,474  660,565 
Business promotion3,728  8,787  14,511  35,662 
Charitable contributions to BOKF Foundation6,000  2,000  9,000  3,000 
Professional fees and services14,254  13,408  53,437  54,861 
Net occupancy and equipment27,875  26,316  112,722  110,275 
Insurance4,006  5,393  19,990  20,906 
Data processing and communications35,061  31,884  135,497  124,983 
Printing, postage and supplies3,805  3,700  15,061  16,517 
Net losses and operating expenses of repossessed assets1,168  2,403  10,709  6,707 
Amortization of intangible assets5,088  5,225  20,443  20,618 
Mortgage banking costs14,765  14,259  56,711  50,685 
Other expense8,713  6,998  29,382  27,602 
Total other operating expense300,661  288,795  1,165,937  1,132,381 
        
Net income before taxes199,847  141,039  563,864  630,868 
Federal and state income taxes45,138  30,257  128,793  130,183 
        
Net income154,709  110,782  435,071  500,685 
Net income (loss) attributable to non-controlling interests485  430  41  (73)
Net income attributable to BOK Financial Corporation shareholders$154,224  $110,352  $435,030  $500,758 
        
Average shares outstanding:       
Basic69,489,597  70,295,899  69,840,977  70,787,700 
Diluted69,493,050  70,309,644  69,844,172  70,802,612 
        
Net income per share:       
Basic$2.21  $1.56  $6.19  $7.03 
Diluted$2.21  $1.56  $6.19  $7.03 


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

  Three Months Ended
  Dec. 31, 2020 Sept. 30, 2020 June 30, 2020 Mar. 31, 2020 Dec. 31, 2019
Capital:         
 Period-end shareholders' equity$5,266,266  $5,218,787  $5,096,995  $5,026,248  $4,855,795 
 Risk weighted assets$32,501,807  $31,529,826  $32,180,602  $32,973,242  $31,673,425 
 Risk-based capital ratios:         
 Common equity tier 111.94% 12.07% 11.44% 10.98% 11.39%
 Tier 111.94% 12.07% 11.44% 10.98% 11.39%
 Total capital13.81% 14.05% 13.43% 12.65% 12.94%
 Leverage ratio8.28% 8.39% 7.74% 8.15% 8.40%
 Tangible common equity ratio19.02% 9.02% 8.79% 8.39% 8.98%
           
Common stock:         
 Book value per share$75.62  $74.23  $72.50  $71.49  $68.80 
 Tangible book value per share58.94  57.64  55.83  54.85  52.17 
 Market value per share:         
 High$73.07  $62.86  $67.62  $87.40  $88.28 
 Low$50.09  $48.41  $37.80  $34.57  $71.85 
 Cash dividends paid$36,219  $35,799  $35,769  $35,949  $36,011 
 Dividend payout ratio23.48% 23.24% 55.29% 57.91% 32.63%
 Shares outstanding, net69,637,600  70,305,833  70,306,690  70,308,532  70,579,598 
 Stock buy-back program:         
 Shares repurchased665,100      442,000  280,000 
 Amount$42,450  $  $  $33,380  $22,844 
 Average price per share$63.82  $  $  $75.52  $81.59 
           
Performance ratios (quarter annualized):
 Return on average assets1.22% 1.25% 0.52% 0.55% 0.99%
 Return on average equity11.75% 11.89% 5.14% 5.10% 9.05%
 Net interest margin2.72% 2.81% 2.83% 2.80% 2.88%
 Efficiency ratio62.36% 60.41% 59.57% 58.62% 63.65%
           
Reconciliation of non-GAAP measures:
1Tangible common equity ratio:         
 Total shareholders' equity$5,266,266  $5,218,787  $5,096,995  $5,026,248  $4,855,795 
 Less: Goodwill and intangible assets, net1,161,527  1,166,615  1,171,686  1,169,898  1,173,362 
 Tangible common equity$4,104,739  $4,052,172  $3,925,309  $3,856,350  $3,682,433 
           
 Total assets$46,671,088  $46,067,224  $45,819,874  $47,119,162  $42,172,021 
 Less: Goodwill and intangible assets, net1,161,527  1,166,615  1,171,686  1,169,898  1,173,362 
 Tangible assets$45,509,561  $44,900,609  $44,648,188  $45,949,264  $40,998,659 
           
 Tangible common equity ratio9.02% 9.02% 8.79% 8.39% 8.98%
           


 Three Months Ended
 Dec. 31, 2020 Sept. 30, 2020 June 30, 2020 Mar. 31, 2020 Dec. 31, 2019
Pre-provision net revenue:               
Net income before taxes$199,847  $204,644  $80,089  $79,284  $141,039 
Provision for expected credit losses(6,500)   135,321  93,771  19,000 
Net income (loss) attributable to non-controlling interests485  58  (407) (95) 430 
Pre-provision net revenue$192,862  $204,586  $215,817  $173,150  $159,609 
               
Other data:              
Tax equivalent interest$2,414  $2,457  $2,630  $2,715  $2,726 
Net unrealized gain on available for sale securities$440,814  $480,563  $487,334  $435,989  $138,149 
               
Mortgage banking:              
Mortgage production revenue$26,662  $38,431  $39,185  $21,570  $9,169 
               
Mortgage loans funded for sale$998,435  $1,032,472  $1,184,249  $548,956  $855,643 
Add: current period-end outstanding commitments380,637  560,493  546,304  657,570  158,460 
Less: prior period end outstanding commitments560,493  546,304  657,570  158,460  379,377 
Total mortgage production volume$818,579  $1,046,661  $1,072,983  $1,048,066  $634,726 
               
Mortgage loan refinances to mortgage loans funded for sale58% 54% 71% 57% 57%
Gain on sale margin3.26% 3.67% 3.65% 2.06% 1.44%
               
Mortgage servicing revenue$12,636  $13,528  $14,751  $15,597  $16,227 
Average outstanding principal balance of mortgage loans serviced for others16,518,208  17,434,215  19,319,872  20,416,546  20,856,446 
Average mortgage servicing revenue rates0.30% 0.31% 0.31% 0.31% 0.31%
               
Gain (loss) on mortgage servicing rights, net of economic hedge:              
Gain (loss) on mortgage hedge derivative contracts, net$(385) $2,295  $21,815  $18,371  $(4,714)
Gain (loss) on fair value option securities, net68  (754) (14,459) 68,393  (8,328)
Gain (loss) on economic hedge of mortgage servicing rights(317) 1,541  7,356  86,764  (13,042)
Gain (loss) on changes in fair value of mortgage servicing rights6,276  3,441  (761) (88,480) 9,297 
Gain (loss) on changes in fair value of mortgage servicing rights, net of economic hedges, included in other operating revenue5,959  4,982  6,595  (1,716) (3,745)
Net interest revenue on fair value option securities2550  1,565  2,702  4,268  1,544 
Total economic benefit (cost) of changes in the fair value of mortgage servicing rights, net of economic hedges$6,509  $6,547  $9,297  $2,552  $(2,201)

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

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

 Three Months Ended
 Dec. 31, 2020 Sept. 30, 2020 June 30, 2020 Mar. 31, 2020 Dec. 31, 2019
          
Interest revenue$319,020  $294,659  $306,384  $348,937  $369,857 
Interest expense21,790  22,909  28,280  87,577  99,608 
Net interest revenue297,230  271,750  278,104  261,360  270,249 
Provision for credit losses(6,500)   135,321  93,771  19,000 
Net interest revenue after provision for credit losses303,730   271,750   142,783   167,589   251,249  
Other operating revenue:         
Brokerage and trading revenue39,506  69,526  62,022  50,779  43,843 
Transaction card revenue21,896  23,465  22,940  21,881  22,548 
Fiduciary and asset management revenue41,799  39,931  41,257  44,458  45,021 
Deposit service charges and fees24,343  24,286  22,046  26,130  27,331 
Mortgage banking revenue39,298  51,959  53,936  37,167  25,396 
Other revenue14,209  13,698  11,479  12,309  15,283 
Total fees and commissions181,051  222,865  213,680  192,724  179,422 
Other gains (losses), net5,383  6,265  6,768  (10,741) (1,649)
Gain (loss) on derivatives, net(339) 2,354  21,885  18,420  (4,644)
Gain (loss) on fair value option securities, net68  (754) (14,459) 68,393  (8,328)
Change in fair value of mortgage servicing rights6,276  3,441  (761) (88,480) 9,297 
Gain (loss) on available for sale securities, net4,339  (12) 5,580  3  4,487 
Total other operating revenue196,778  234,159  232,693  180,319  178,585 
Other operating expense:         
Personnel176,198  179,860  176,235  156,181  168,422 
Business promotion3,728  2,633  1,935  6,215  8,787 
Charitable contributions to BOKF Foundation6,000    3,000    2,000 
Professional fees and services14,254  14,074  12,161  12,948  13,408 
Net occupancy and equipment27,875  28,111  30,675  26,061  26,316 
Insurance4,006  5,848  5,156  4,980  5,393 
Data processing and communications35,061  34,751  32,942  32,743  31,884 
Printing, postage and supplies3,805  3,482  3,502  4,272  3,700 
Net losses and operating expenses of repossessed assets1,168  6,244  1,766  1,531  2,403 
Amortization of intangible assets5,088  5,071  5,190  5,094  5,225 
Mortgage banking costs14,765  15,803  15,598  10,545  14,259 
Other expense8,713  5,388  7,227  8,054  6,998 
Total other operating expense300,661  301,265  295,387  268,624  288,795 
Net income before taxes199,847  204,644  80,089  79,284  141,039 
Federal and state income taxes45,138  50,552  15,803  17,300  30,257 
Net income154,709  154,092  64,286  61,984  110,782 
Net income (loss) attributable to non-controlling interests485  58  (407) (95) 430 
Net income attributable to BOK Financial Corporation shareholders$154,224  $154,034  $64,693  $62,079  $110,352 
          
Average shares outstanding:         
Basic69,489,597  69,877,866  69,876,043  70,123,685  70,295,899 
Diluted69,493,050  69,879,290  69,877,467  70,130,166  70,309,644 
Net income per share:         
Basic$2.21  $2.19  $0.92  $0.88  $1.56 
Diluted$2.21  $2.19  $0.92  $0.88  $1.56 


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

 Dec. 31, 2020 Sept. 30, 2020 June 30, 2020 Mar. 31, 2020 Dec. 31, 2019
Commercial:         
Services$3,508,583 $3,545,825 $3,779,881 $3,955,748 $3,832,031
Energy3,469,194 3,717,101 3,974,174 4,111,676 3,973,377
Healthcare3,305,990 3,325,790 3,289,343 3,165,096 3,033,916
General business2,793,768 2,976,990 3,115,112 3,563,455 3,192,326
Total commercial13,077,535 13,565,706 14,158,510 14,795,975 14,031,650
          
Commercial real estate:         
Multifamily1,328,045 1,387,461 1,407,107 1,282,457 1,265,562
Office1,085,257 1,099,563 973,995 962,004 928,379
Industrial810,510 792,389 723,005 728,026 856,117
Retail796,223 786,211 780,467 774,198 775,521
Residential construction and land development119,394 121,258 136,911 138,958 150,879
Other commercial real estate559,109 506,818 532,659 564,442 457,325
Total commercial real estate4,698,538 4,693,700 4,554,144 4,450,085 4,433,783
          
Paycheck protection program1,682,310 2,097,325 2,081,428  
          
Loans to individuals:         
Residential mortgage1,863,003 1,849,144 1,813,442 1,844,555 1,886,378
Residential mortgages guaranteed by U.S. government agencies408,687 384,247 322,269 197,889 197,794
Personal1,277,447 1,213,178 1,226,097 1,175,466 1,201,382
Total loans to individuals3,549,137 3,446,569 3,361,808 3,217,910 3,285,554
          
Total$23,007,520 $23,803,300 $24,155,890 $22,463,970 $21,750,987


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

 Dec. 31, 2020 Sept. 30, 2020 June 30, 2020 Mar. 31, 2020 Dec. 31, 2019
          
Texas:         
Commercial$5,445,132 $5,545,158 $5,771,691 $6,350,690 $6,174,894
Commercial real estate1,500,250 1,499,630 1,389,547 1,296,266 1,259,117
Paycheck protection program501,079 614,970 612,133  
Loans to individuals854,700 792,994 748,474 756,634 727,175
Total Texas8,301,161 8,452,752 8,521,845 8,403,590 8,161,186
          
Oklahoma:         
Commercial4,381,569 4,901,666 5,086,934 3,886,086 3,454,825
Commercial real estate628,727 647,228 636,021 593,473 631,026
Paycheck protection program413,108 487,247 442,518  
Loans to individuals2,054,205 2,036,452 1,967,665 1,788,518 1,854,864
Total Oklahoma7,477,609 8,072,593 8,133,138 6,268,077 5,940,715
          
Colorado:         
Commercial1,554,670 1,501,821 1,600,382 2,181,309 2,169,598
Commercial real estate877,610 890,746 937,742 955,608 927,826
Paycheck protection program377,111 494,910 488,279  
Loans to individuals263,872 257,345 264,872 268,674 276,939
Total Colorado3,073,263 3,144,822 3,291,275 3,405,591 3,374,363
          
Arizona:         
Commercial1,014,958 956,047 1,036,862 1,396,582 1,307,073
Commercial real estate718,548 692,987 689,121 714,161 728,832
Paycheck protection program211,725 272,114 318,961  
Loans to individuals177,900 166,115 177,066 181,821 186,539
Total Arizona2,123,131 2,087,263 2,222,010 2,292,564 2,222,444
          
Kansas/Missouri:         
Commercial400,555 414,038 404,860 556,255 527,872
Commercial real estate366,409 352,241 314,504 310,799 322,541
Paycheck protection program56,011 80,230 76,724  
Loans to individuals105,755 96,358 102,577 116,734 131,069
Total Kansas/Missouri928,730 942,867 898,665 983,788 981,482
          
New Mexico:         
Commercial195,846 157,322 182,688 327,164 305,320
Commercial real estate471,310 471,505 455,574 434,150 402,148
Paycheck protection program109,881 133,244 128,058  
Loans to individuals75,665 79,890 83,470 87,110 90,257
Total New Mexico852,702 841,961 849,790 848,424 797,725
          
Arkansas:         
Commercial84,805 89,654 75,093 97,889 92,068
Commercial real estate135,684 139,363 131,635 145,628 162,293
Paycheck protection program13,395 14,610 14,755  
Loans to individuals17,040 17,415 17,684 18,419 18,711
Total Arkansas250,924 261,042 239,167 261,936 273,072
          
TOTAL BOK FINANCIAL$23,007,520  $23,803,300  $24,155,890  $22,463,970  $21,750,987 

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

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

 Dec. 31, 2020 Sept. 30, 2020 June 30, 2020 Mar. 31, 2020 Dec. 31, 2019
Oklahoma:         
Demand$4,328,619 $4,493,691 $4,378,559 $3,669,558 $3,257,337
Interest-bearing:         
Transaction12,603,603 12,586,401 11,438,489 9,955,697 8,574,912
Savings420,996 401,062 387,557 329,631 306,194
Time1,134,453 1,081,176 1,330,619 1,137,802 1,125,446
Total interest-bearing14,159,052 14,068,639 13,156,665 11,423,130 10,006,552
Total Oklahoma18,487,671 18,562,330 17,535,224 15,092,688 13,263,889
          
Texas:         
Demand3,450,468 3,152,393 3,070,955 2,767,399 2,757,376
Interest-bearing:         
Transaction3,800,482 3,482,603 3,358,090 2,874,362 2,911,731
Savings139,173 136,787 128,892 115,039 102,456
Time383,062 438,337 476,867 505,565 495,343
Total interest-bearing4,322,717 4,057,727 3,963,849 3,494,966 3,509,530
Total Texas7,773,185 7,210,120 7,034,804 6,262,365 6,266,906
          
Colorado:         
Demand2,168,404 2,057,603 2,096,075 1,579,764 1,729,674
Interest-bearing:         
Transaction2,170,485 1,861,763 1,816,604 1,759,384 1,769,037
Savings69,384 68,230 67,477 58,000 53,307
Time208,778 226,780 254,845 279,105 283,517
Total interest-bearing2,448,647 2,156,773 2,138,926 2,096,489 2,105,861
Total Colorado4,617,051 4,214,376 4,235,001 3,676,253 3,835,535
          
New Mexico:         
Demand941,074 964,908 965,877 750,052 623,722
Interest-bearing:         
Transaction733,007 713,418 752,565 563,891 558,493
Savings91,646 85,463 80,242 67,553 63,999
Time186,307 200,525 222,370 235,778 238,140
Total interest-bearing1,010,960 999,406 1,055,177 867,222 860,632
Total New Mexico1,952,034 1,964,314 2,021,054 1,617,274 1,484,354
          
Arizona:         
Demand905,201 928,671 985,757 665,396 681,268
Interest-bearing:         
Transaction768,220 771,319 780,500 729,603 684,929
Savings12,174 11,498 15,669 8,832 10,314
Time32,721 36,929 42,318 47,081 49,676
Total interest-bearing813,115 819,746 838,487 785,516 744,919
Total Arizona1,718,316 1,748,417 1,824,244 1,450,912 1,426,187
          


 Dec. 31, 2020 Sept. 30, 2020 June 30, 2020 Mar. 31, 2020 Dec. 31, 2019
Kansas/Missouri:         
Demand426,738 405,360 427,795 318,985 384,533
Interest-bearing:         
Transaction960,237 616,797 526,635 537,552 784,574
Savings16,286 15,520 15,033 12,888 12,169
Time14,610 16,430 17,746 19,137 17,877
Total interest-bearing991,133 648,747 559,414 569,577 814,620
Total Kansas/Missouri1,417,871 1,054,107 987,209 888,562 1,199,153
          
Arkansas:         
Demand45,834 44,712 67,147 70,428 27,381
Interest-bearing:         
Transaction122,388 164,439 177,535 175,803 108,076
Savings2,333 2,389 2,101 1,862 1,837
Time7,197 7,796 7,995 8,005 7,850
Total interest-bearing131,918 174,624 187,631 185,670 117,763
Total Arkansas177,752 219,336 254,778 256,098 145,144
          
TOTAL BOK FINANCIAL$36,143,880 $34,973,000 $33,892,314 $29,244,152 $27,621,168


NET INTEREST MARGIN TREND -- UNAUDITED
BOK FINANCIAL CORPORATION

 Three Months Ended
 Dec. 31, 2020 Sept. 30, 2020 June 30, 2020 Mar. 31, 2020 Dec. 31, 2019
          
TAX-EQUIVALENT ASSETS YIELDS         
Interest-bearing cash and cash equivalents0.10% 0.12% 0.07% 1.33% 1.62%
Trading securities2.02% 1.92% 2.46% 2.89% 3.19%
Investment securities, net of allowance4.88% 4.85% 4.77% 4.73% 4.69%
Available for sale securities1.98% 2.11% 2.29% 2.48% 2.52%
Fair value option securities2.27% 1.92% 2.00% 2.67% 2.62%
Restricted equity securities3.25% 2.53% 2.75% 5.49% 5.37%
Residential mortgage loans held for sale2.75% 3.01% 3.10% 3.50% 3.55%
Loans3.68% 3.60% 3.63% 4.50% 4.75%
Allowance for loan losses         
Loans, net of allowance3.75% 3.67% 3.69% 4.55% 4.80%
Total tax-equivalent yield on earning assets2.92% 3.04% 3.12% 3.73% 3.93%
          
COST OF INTEREST-BEARING LIABILITIES        
Interest-bearing deposits:         
Interest-bearing transaction0.14% 0.17% 0.21% 0.89% 1.00%
Savings0.05% 0.05% 0.05% 0.09% 0.11%
Time0.89% 1.13% 1.36% 1.83% 1.94%
Total interest-bearing deposits0.19% 0.26% 0.34% 0.98% 1.09%
Funds purchased and repurchase agreements0.28% 0.17% 0.14% 1.14% 1.56%
Other borrowings0.42% 0.43% 0.56% 1.66% 2.01%
Subordinated debt4.87% 4.89% 5.16% 5.30% 5.40%
Total cost of interest-bearing liabilities0.28% 0.31% 0.37% 1.19% 1.40%
Tax-equivalent net interest revenue spread2.64% 2.73% 2.75% 2.54% 2.53%
Effect of noninterest-bearing funding sources and other0.08% 0.08% 0.08% 0.26% 0.35%
Tax-equivalent net interest margin2.72% 2.81% 2.83% 2.80% 2.88%

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

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

 Three Months Ended
 Dec. 31, 2020 Sept. 30, 2020 June 30, 2020 Mar. 31, 2020 Dec. 31, 2019
Nonperforming assets:         
Nonaccruing loans:         
Commercial:         
Energy$125,059  $126,816  $162,989  $96,448  $91,722 
Services25,598  25,817  21,032  8,425  7,483 
Healthcare3,645  3,645  3,645  4,070  4,480 
General business12,857  13,675  14,333  9,681  11,731 
Total commercial167,159  169,953  201,999  118,624  115,416 
          
Commercial real estate27,246  12,952  13,956  8,545  27,626 
          
Loans to individuals:         
Permanent mortgage32,228  31,599  33,098  30,721  31,522 
Permanent mortgage guaranteed by U.S. government agencies7,741  6,397  6,110  5,005  6,100 
Personal319  252  233  277  287 
Total loans to individuals40,288  38,248  39,441  36,003  37,909 
          
Total nonaccruing loans$234,693  $221,153  $255,396  $163,172  $180,951 
Accruing renegotiated loans guaranteed by U.S. government agencies151,775  142,770  114,571  91,757  92,452 
Real estate and other repossessed assets90,526  52,847  35,330  36,744  20,359 
Total nonperforming assets$476,994  $416,770  $405,297  $291,673  $293,762 
Total nonperforming assets excluding those guaranteed by U.S. government agencies317,478  267,603  284,616  194,911  195,210 
          
Accruing loans 90 days past due110,369  7,684  10,992  3,706  7,680 
          
Gross charge-offs$18,251  $26,661  $15,570  $18,917  $14,268 
Recoveries(1,592) (4,232) (1,491) (1,696) (1,816)
Net charge-offs$16,659  $22,429  $14,079  $17,221  $12,452 
          
Provision for loan losses$(14,478) $6,609  $134,365  $95,964  $18,779 
Provision for credit losses from off-balance sheet unfunded loan commitments8,952  (4,950) 4,405  3,377  221 
Provision for expected credit losses from mortgage banking acitivities2(923) (770) (3,575) (6,020)  
Provision for credit losses related to held-to maturity (investment) securities portfolio2(51) (889) 126  450   
Total provision for credit losses$(6,500) $  $135,321  $93,771  $19,000 
          


 Three Months Ended
 Dec. 31, 2020 Sept. 30, 2020 June 30, 2020 Mar. 31, 2020 Dec. 31, 2019
Allowance for loan losses to period end loans1.69% 1.76% 1.80% 1.40% 0.97%
Allowance for loan losses to period end loans excluding PPP loans31.82% 1.93% 1.97% 1.40% 0.97%
Combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments to period end loans1.85% 1.88% 1.94% 1.53% 0.98%
Combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments to period end loans excluding PPP loans32.00% 2.06% 2.12% 1.53% 0.98%
Nonperforming assets to period end loans and repossessed assets2.07% 1.75% 1.68% 1.30% 1.35%
Net charge-offs (annualized) to average loans0.28% 0.37% 0.23% 0.31% 0.22%
Net charge-offs (annualized) to average loans excluding PPP loans30.31% 0.41% 0.25% 0.31% 0.22%
Allowance for loan losses to nonaccruing loans1171.24% 195.47% 174.74% 199.35% 120.54%
Combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments to nonaccruing loans1187.51% 208.49% 187.94% 217.38% 121.44%

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  Metric meaningful due to the unique characteristics and short-term nature of the PPP loans.

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

 Three Months Ended
 4Q20 vs 3Q20
 Year Ended
 2020 vs 2019
Commercial BankingDec. 31, 2020 Sept. 30, 2020 $ change % change Dec. 31, 2020 Dec. 31, 2019 $ change % change
Net interest revenue$142,026 $149,946 $(7,920) (5.3)% $588,488 $676,241 $(87,753) (13.0)%
Fees and commissions revenue49,060 50,085 (1,025) (2.0)% 187,119 168,667 18,452  10.9%
Combined net interest and fee revenue191,086 200,031 (8,945) (4.5)% 775,607 844,908 (69,301) (8.2)%
Other operating expense68,372 66,846 1,526  2.3% 258,903 252,459 6,444  2.6%
Corporate expense allocations5,348 5,172 176  3.4% 24,862 43,055 (18,193) (42.3)%
Net income74,941 75,097 (156) (0.2)% 306,005 374,806 (68,801) (18.4)%
                    
Average assets27,693,742 28,000,183 (306,441) (1.1)% 26,994,075 22,807,589 4,186,486  18.4%
Average loans18,100,333 18,677,401 (577,068) (3.1)% 18,711,372 18,090,224 621,148  3.4%
Average deposits15,373,673 15,375,450 (1,777) % 14,319,729 10,319,677 4,000,052  38.8%
                    
Consumer Banking                   
Net interest revenue$30,672 $33,130 $(2,458) (7.4)% $147,004 $195,454 $(48,450) (24.8)%
Fees and commissions revenue55,326 67,974 (12,648) (18.6)% 245,554 187,996 57,558  30.6%
Combined net interest and fee revenue85,998 101,104 (15,106) (14.9)% 392,558 383,450 9,108  2.4%
Other operating expense59,857 59,839 18  % 233,425 230,916 2,509  1.1%
Corporate expense allocations10,527 10,812 (285) (2.6)% 42,638 47,169 (4,531) (9.6)%
Net income14,283 26,256 (11,973) (45.6)% 95,360 56,606 38,754  68.5%
                    
Average assets9,700,466 9,898,119 (197,653) (2.0)% 9,842,125 9,301,341 540,784  5.8%
Average loans1,840,492 1,825,865 14,627  0.8% 1,764,682 1,762,915 1,767  0.1%
Average deposits7,993,971 7,940,973 52,998  0.7% 7,599,937 6,876,676 723,261  10.5%
                    
Wealth Management                   
Net interest revenue$48,521 $22,985 $25,536  111.1% $117,290 $100,092 $17,198  17.2%
Fees and commissions revenue82,936 111,655 (28,719) (25.7)% 399,229 341,333 57,896  17.0%
Combined net interest and fee revenue131,457 134,640 (3,183) (2.4)% 516,519 441,425 75,094  17.0%
Other operating expense83,981 82,868 1,113  1.3% 325,608 277,267 48,341  17.4%
Corporate expense allocations9,465 9,397 68  0.7% 35,331 36,239 (908) (2.5)%
Net income28,449 31,212 (2,763) (8.9)% 115,628 95,331 20,297  21.3%
                    
Average assets18,101,182 16,204,510 1,896,672  11.7% 15,695,646 10,204,426 5,491,220  53.8%
Average loans1,839,695 1,777,008 62,687  3.5% 1,758,226 1,609,464 148,762  9.2%
Average deposits9,589,814 9,090,116 499,698  5.5% 8,676,047 6,447,987 2,228,060  34.6%
Fiduciary assets60,495,213 52,935,646 7,559,567  14.3% 60,495,213 52,352,135 8,143,078  15.6%
Assets under management or administration91,592,247 82,419,932 9,172,315  11.1% 91,592,247 82,740,961 8,851,286  10.7%