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What changed in BOK FINANCIAL CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BOK FINANCIAL CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+469 added−452 removedSource: 10-K (2024-02-21) vs 10-K (2023-03-01)

Top changes in BOK FINANCIAL CORP's 2023 10-K

469 paragraphs added · 452 removed · 335 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

56 edited+15 added−12 removed65 unchanged
Biggest changeBSA requires banks to maintain records and file suspicious activity reports that are of use to law enforcement and regulators in combating money laundering and other financial crimes. The PATRIOT Act is intended to deny terrorists and criminals the ability to access the U.S. financial services system and places significantly greater requirements on financial institutions.
Biggest changeBank Secrecy Act and USA PATRIOT Act The BSA and the PATRIOT Act impose many requirements on financial institutions in the interest of national security and law enforcement. BSA requires banks to maintain records and file suspicious activity reports that are of use to law enforcement and regulators in combating money laundering and other financial crimes.
In addition to base salaries, these programs may include incentive compensation, discretionary bonuses, equity, 401(k), health and wellness benefits, health savings and flexible 3 spending accounts, paid time off, family leave, flexible work schedules, employee assistance programs and tuition reimbursement. Talent Development Our talent development programs provide employees with resources they need to achieve their career goals.
In addition to base salaries, these programs may include incentive compensation, discretionary bonuses, equity, 401(k), health and wellness benefits, health savings and flexible spending accounts, paid time off, family leave, flexible work schedules, employee assistance programs and tuition reimbursement. Talent Development Our talent development programs provide employees with resources they need to achieve their career goals.
The OCC has primary supervisory responsibility for national banks and must approve certain corporate or structural changes including changes in capitalization, payment of dividends, change of place of business, and establishment of a branch or operating subsidiary. The OCC performs examinations concerning safety and soundness, the quality of management and directors, 4 information technology and compliance with applicable regulations.
The OCC has primary supervisory responsibility for national banks and must approve certain corporate or structural changes including changes in capitalization, payment of dividends, change of place of business, and establishment of a branch or operating subsidiary. The OCC performs examinations concerning safety and soundness, the quality of management and directors, information technology and compliance with applicable regulations.
Such regulations establish various degrees of corrective action to be taken when an institution is considered under-capitalized. Stress Testing The Regulatory Relief Act eliminated the requirement for periodic company run capital stress tests known as the Dodd-Frank Act Stress Test for banks with assets less than $250 billion.
Such regulations establish various degrees of corrective action to be taken when an institution is considered under-capitalized. 9 Stress Testing The Regulatory Relief Act eliminated the requirement for periodic company run capital stress tests known as the Dodd-Frank Act Stress Test for banks with assets less than $250 billion.
Additional capital rules were effective for banks and bank holding companies, including BOK Financial, on January 1, 2015 as part of a package of regulatory reforms developed by the Basel Committee on Banking Supervision ("BCBS") to strengthen the regulation, supervision and risk management of the banking sector, commonly referred to as the Basel III framework.
Additional capital rules were effective for banks and bank holding companies, including BOK Financial, on January 1, 2015 as part of a package of regulatory reforms developed by the BCBS to strengthen the regulation, supervision and risk management of the banking sector, commonly referred to as the Basel III framework.
Tier 1 capital consists of CET1 capital plus certain additional capital instruments and related surplus. Supplementary capital ("Tier 2") consists of preferred stock not qualifying as Tier 1 capital, qualifying mandatory convertible debt securities, limited amounts of subordinated debt, other qualifying term debt and allowances for credit losses, subject to limitations.
Tier 1 capital consists of CET1 capital plus certain additional capital instruments and related surplus. Tier 2 consists of preferred stock not qualifying as Tier 1 capital, qualifying mandatory convertible debt securities, limited amounts of subordinated debt, other qualifying term debt and allowances for credit losses, subject to limitations.
BOKF, NA operates banking divisions across eight states: Bank of Albuquerque, Bank of Oklahoma, Bank of Texas and BOK Financial in Arizona, Arkansas, Colorado, Kansas and Missouri; as well as having limited purpose offices in Nebraska, Wisconsin and Connecticut.
BOKF, NA operates banking divisions across eight states: Bank of Albuquerque, Bank of Oklahoma, Bank of Texas and BOK Financial in Arizona, Arkansas, Colorado, Kansas and Missouri; as well as having limited purpose offices in Nebraska, Wisconsin, Connecticut and Tennessee.
We compete against numerous financial institutions in the state of Texas, including some of the largest in the United States, and have a market share of approximately 2% in the Dallas, Fort Worth area and less than 1% in the Houston area.
We compete against numerous financial institutions in the state of Texas, including some of the largest in the United States, and have a market share of approximately 1% in the Dallas, Fort Worth area and less than 1% in the Houston area.
This support may be required at times when a bank holding company may not be able to provide such support. Transactions with Affiliates The Federal Reserve Board regulates transactions between the Company and its subsidiaries.
This support may be required at times when a bank holding company may not be able to provide such support. 10 Transactions with Affiliates The Federal Reserve Board regulates transactions between the Company and its subsidiaries.
The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports are available on the Company’s website at www.bokf.com as soon as reasonably practicable after the Company electronically files such material with or furnishes it to the Securities and Exchange Commission. 1 Operating Segments BOK Financial operates three principal lines of business: Commercial Banking, Consumer Banking and Wealth Management.
The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports are available on the Company’s website at www.bokf.com as soon as reasonably practicable after the Company electronically files such material with or furnishes it to the Securities and Exchange Commission. 3 Operating Segments BOK Financial operates three principal lines of business: Commercial Banking, Consumer Banking and Wealth Management.
Wealth Management also provides fiduciary services, private bank services, investment advisory services and insurance services in all markets. Additionally, Wealth Management underwrites state and municipal securities.
Wealth Management also provides fiduciary services, private bank services and investment advisory services in all markets. Additionally, Wealth Management underwrites state and municipal securities.
Capital amounts and classifications are also subject to qualitative judgments by regulators regarding components, risk weighting and other factors. 6 Federal Reserve Board risk-based guidelines define four capital metrics based on three categories of regulatory capital. Common equity Tier 1 capital ("CET1") includes common shareholders' equity, less goodwill, most intangible assets and other adjustments.
Capital amounts and classifications are also subject to qualitative judgments by regulators regarding components, risk weighting and other factors. Federal Reserve Board risk-based guidelines define four capital metrics based on three categories of regulatory capital. CET1 includes common shareholders' equity, less goodwill, most intangible assets and other adjustments.
Other wholly owned subsidiaries of BOK Financial include BOK Financial Securities, Inc., a broker/dealer that primarily engages in retail and institutional securities sales and municipal bond underwriting; BOK Financial Private Wealth, Inc., an investment adviser to high net worth clients; and BOK Financial Insurance, Inc., a broker providing insurance services.
Other wholly owned subsidiaries of BOK Financial include BOK Financial Securities, Inc., a broker/dealer that primarily engages in retail and institutional securities sales and municipal bond underwriting; and BOK Financial Private Wealth, Inc., an investment adviser to high net worth clients.
CoP also provide exposure opportunities for employees to interact with others across the organization at all levels. As of December 31, 2022, we had 20 active CoP, including: Advancing Minority Owned Businesses, Mentoring, Practicing Inclusion, Diverse Recruiting Practices, Engagement Practices and Culture Ambassadors.
CoP also provide exposure opportunities for employees to interact with others across the organization at all levels. As of December 31, 2023, we had 21 active CoP, including: Advancing Minority Owned Businesses, Mentoring, Practicing Inclusion, Diverse Recruiting Practices, Engagement Practices and Culture Ambassadors.
General As a financial holding company, BOK Financial is regulated under the BHCA and is subject to regular inspection, examination and supervision by the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"). Under the BHCA, BOK Financial files quarterly reports and other information with the Federal Reserve Board.
General As a financial holding company, BOK Financial is regulated under the BHCA and is subject to regular inspection, examination and supervision by the Federal Reserve Board. Under the BHCA, BOK Financial files quarterly reports and other information with the Federal Reserve Board.
Communities of Practice (CoP) In 2020, we introduced a concept from Harvard Business Review called ‘Communities of Practice’ ("CoP") as a way for our organization to build inclusive groups to harness the collective power of diverse skills, styles, strengths and experiences – and leverage those strengths into advancing our business.
Communities of Practice In 2020, we introduced a concept from Harvard Business Review called ‘CoP’ as a way for our organization to build inclusive groups to harness the collective power of diverse skills, styles, strengths and experiences – and leverage those strengths into advancing our business.
Title VII of the Dodd-Frank Act, commonly known as the Swap Rule, subjects nearly all derivative transactions to the regulations of the Commodity Futures Trading Commission ("CFTC") or SEC. This includes registration, recordkeeping, reporting, capital, margin and business conduct requirements on swap dealers and major swap participants.
Title VII of the Dodd-Frank Act, commonly known as the Swap Rule, subjects nearly all derivative transactions to the regulations of the CFTC or SEC. This includes registration, recordkeeping, reporting, capital, margin and business conduct requirements on swap dealers and major swap participants.
The Company and other non-bank subsidiaries are also subject to other federal and state laws and regulations. For example, BOK Financial Securities, Inc. is regulated by the Securities and Exchange Commission ("SEC"), the Financial Industry Regulatory Authority ("FINRA"), the Federal Reserve Board, and state securities regulators. Such regulations generally include licensing of certain personnel, customer interactions and trading operations.
The Company and other non-bank subsidiaries are also subject to other federal and state laws and regulations. For example, BOK Financial Securities, Inc. is regulated by the SEC, the FINRA, the Federal Reserve Board, and state securities regulators. Such regulations generally include licensing of certain personnel, customer interactions and trading operations.
BOK Financial offers full service banking in Oklahoma, Texas, New Mexico, Northwest Arkansas, Colorado, Arizona, and Kansas/Missouri. At December 31, 2022, the Company reported total consolidated assets of $48 billion. BOKF, NA is a wholly owned subsidiary bank of BOK Financial. BOKF, NA operates TransFund, Cavanal Hill Investment Management and BOK Financial Asset Management, Inc.
BOK Financial offers full service banking in Oklahoma, Texas, New Mexico, Northwest Arkansas, Colorado, Arizona, and Kansas/Missouri. At December 31, 2023, the Company reported total consolidated assets of $50 billion. BOKF, NA is a wholly owned subsidiary bank of BOK Financial. BOKF, NA operates TransFund and Cavanal Hill Investment Management.
Additional discussion of the Company’s activities during the current year appears within Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations." Description of Business BOK Financial is a financial holding company incorporated in the state of Oklahoma in 1990 whose activities are governed by the Bank Holding Company Act of 1956 ("BHCA"), as amended by the Financial Services Modernization Act or Gramm-Leach-Bliley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act").
Additional discussion of the Company’s activities during the current year appears within Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations." Description of Business BOK Financial is a financial holding company incorporated in the state of Oklahoma in 1990 whose activities are governed by the BHCA, as amended by the Financial Services Modernization Act or Gramm-Leach-Bliley Act and the Dodd-Frank Act.
In 2022, BOK Financial was again recognized by ‘Diversity, Inc.’ as one of the ‘Top Regional Companies’ with respect to scoring criteria related to DEI organizational practices. Community Engagement In 2022, the Company and the BOKF Foundation gave a combined $6.1 million to organizations making a difference in our communities.
In 2023, BOK Financial was again recognized by ‘Diversity, Inc.’ as one of the ‘Top Regional Companies’ with respect to scoring criteria related to DEI organizational practices. Community Engagement In 2023, the Company and the BOKF Foundation gave a combined $9.0 million to organizations making a difference in our communities.
We have an 11% market share in the Albuquerque area and compete with four large national banks, some regional banks and several locally-owned smaller community banks. Our market share is approximately 4% in the Denver area. We serve Benton and Washington counties in Arkansas with a market share of approximately 1%.
We have a 9% market share in the Albuquerque area and compete with four large national banks, some regional banks and several locally-owned smaller community banks. Our market share is approximately 3% in the Denver area. We serve Benton and Washington counties in Arkansas with a market share of approximately 1%.
ITEM 1. BUSINESS General Developments relating to individual aspects of the business of BOK Financial Corporation ("BOK Financial" or "the Company") are described below.
ITEM 1. BUSINESS General Developments relating to individual aspects of the business of BOK Financial are described below.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the "FDICIA"), among other things, identifies five capital categories for insured depository institutions from well capitalized to critically under-capitalized and requires the respective federal regulatory agencies to implement systems for prompt corrective action for institutions failing to meet minimum capital requirements within such categories.
The FDICIA, among other things, identifies five capital categories for insured depository institutions from well capitalized to critically under-capitalized and requires the respective federal regulatory agencies to implement systems for prompt corrective action for institutions failing to meet minimum capital requirements within such categories.
The Federal Reserve Board has statutory objectives to maximize employment and maintain price stability. Among the instruments of monetary policy used by the Federal Reserve Board to implement these objectives are: open-market operations in U.S. government securities, changes in the discount rate and federal funds rate on bank borrowings, and changes in reserve requirements on bank deposits.
Among the instruments of monetary policy used by the Federal Reserve Board to implement these objectives are: open-market operations in U.S. government securities, changes in the discount rate and federal funds rate on bank borrowings, and changes in reserve requirements on bank deposits.
The following categories represent areas of focus for Diversity, Equity and Inclusion ("DEI"): community engagement, senior leader engagement, Communities of Practice and diverse recruiting practices and education. 2 As of December 31, 2022, 56% of our overall workforce was female, and 32% of our overall workforce was comprised of people of color.
The following categories represent areas of focus for DEI: community engagement, senior leader engagement, Communities of Practice and diverse recruiting practices and education . As of December 31, 2023, 55% of our overall workforce was female, and 32% of our overall workforce was comprised of people of color.
BOKF, NA is organized as a national banking association under the National Banking Act, and is subject to regulation, supervision and examination by the Office of the Comptroller of the Currency (the "OCC"), the FDIC, the Federal Reserve Board, the Consumer Financial Protection Bureau ("CFPB") and other federal and state regulatory agencies.
BOKF, NA is organized as a national banking association under the National Banking Act, and is subject to regulation, supervision and examination by the OCC, the FDIC, the Federal Reserve Board, the CFPB and other federal and state regulatory agencies.
Development offerings are focused on supporting career development goals, increasing skill sets, and preparing employees to expand in their current role or develop for future roles. We offer a variety of learning modalities, from on demand resources to interactive sessions facilitated by Talent Development Consultants. Our employees are provided many opportunities to advance their careers within our organization.
Development offerings are focused on supporting career development goals, increasing skill sets, and preparing employees to expand in their current role or develop for future roles. We offer a variety of learning resources, from on demand content from LinkedIn ® and GetAbstract ® , to interactive sessions facilitated by Talent Development Consultants.
Supervision and Regulation BOK Financial and its subsidiaries are subject to extensive regulations under federal and state laws. Both the scope of the laws and regulations and the intensity of the supervision to which our business is subject have increased in recent years. Regulatory enforcement and fines have also increased across the banking and financial services sector.
Both the scope of the laws and regulations and the intensity of the supervision to which our business is subject have increased in recent years. Regulatory enforcement and fines have also increased across the banking and financial services sector.
All market share information presented below is based upon share of deposits in specified areas according to the Federal Deposit Insurance Corporation ("FDIC") as of June 30, 2022. We are the largest financial institution in the state of Oklahoma with 13% of the state’s total deposits.
All market share information presented below is based upon share of deposits in specified areas according to the FDIC as of June 30, 2023. We are the largest financial institution in the state of Oklahoma with 13% of the state’s total deposits. We have 30% and 12% of the market share in the Tulsa and Oklahoma City areas, respectively.
Current rules adopted by the OCC require heightened standards for financial institutions that report at least $50 billion of average consolidated assets over a four quarter period after an 18-month grace period.
Current rules adopted by the OCC require heightened standards for financial institutions that report at least $50 billion of average consolidated assets over a four quarter period after an 18-month grace period. These heightened standards require establishing and implementing a risk governance framework to cover the bank's risk-taking activities.
Under CFTC and SEC rules, entities transacting in less than $8 billion in notional value of swaps over any 12 month period are exempt from the definition of and registration as a "swap dealer." The Company currently estimates that the nature and volume of its swaps activity will not require it to register as a swap dealer. 8 Governmental Policies and Economic Factors The operations of BOK Financial and its subsidiaries are affected by legislative changes and by the policies of various regulatory authorities and, in particular, the policies of the Federal Reserve Board.
Under CFTC and SEC rules, entities transacting in less than $8 billion in notional value of swaps over any 12 month period are exempt from the definition of and registration as a "swap dealer." The Company currently estimates that the nature and volume of its swaps activity will not require it to register as a swap dealer.
Any person from across the organization can join any CoP; these groups highlight our enterprise focus on inclusivity. Diverse Recruiting Practices Our recruiting organization is fully AIRS® (Advanced Internet Recruitment Strategies) Certified and held accountable to monthly recruitment outreach efforts to diverse organizations, including HBCUs (Historically Black Colleges and Universities).
Any person from across the organization can join any CoP; these groups highlight our enterprise focus on inclusivity. Diverse Recruiting Practices Our recruiting organization is fully AIRS® Certified and held accountable to monthly recruitment outreach efforts to diverse organizations, including HBCUs. University recruiting has been a focal point for our diversity efforts.
Mentor matches are prioritized for females and people of color. In 2022, we launched Cohort 4 and 5 with 127 mentors/mentees participating in the program. In 2022, 26% of our participants were people of color and 53% were female.
Mentor matches are prioritized for females and people of color. In 2023, we launched Cohort 6 with 225 mentors/mentees participating in the program. In 2023, 34% of our participants were people of color and 50% were female.
Products and services include loans and deposits, cash management services, fiduciary and insurance services, mortgage banking and brokerage and trading services to middle-market businesses, financial institutions and consumers. Commercial banking represents a significant part of our business.
Our primary focus is to provide a comprehensive range of nationally competitive financial products and services in a personalized and responsive manner. Products and services include loans and deposits, cash management services, fiduciary services, mortgage banking and brokerage and trading services to middle-market businesses, financial institutions and consumers. Commercial banking represents a significant part of our business.
During 2022, 32% of all of positions filled were with internal employees. Connecting with Our Employees Engagement is an important component of our culture. We encourage our employees to provide feedback in a survey format with the last one completed in 2021.
Our employees are provided many opportunities to advance their careers within our organization. During 2023, 31% of all of positions filled were with internal employees. Connecting with Our Employees Engagement is an important component of our culture. We encourage our employees to provide feedback in a survey format with the last one completed in 2023.
In reviewing applications seeking approval of merger and acquisition transactions, the bank regulatory authorities consider, among other things, the competitive effect and public benefits of the transactions, the capital position of the combined organization, the applicant’s performance record under the Community Reinvestment Act and fair housing laws and the effectiveness of the subject organizations in combating money laundering activities.
In reviewing applications seeking approval of merger and acquisition transactions, the bank regulatory authorities consider, among other things, the competitive effect and public benefits of the transactions, the capital position of the combined organization, the applicant’s performance record under the Community Reinvestment Act and fair housing laws and the effectiveness of the subject organizations in combating money laundering activities. 7 A financial holding company and its subsidiaries are prohibited under the BHCA from engaging in certain tie-in arrangements in connection with the provision of any credit, property or services.
The rule will become effective as of January 1, 2023. 7 Dividends A key source of liquidity for BOK Financial is dividends from BOKF, NA, which is limited by various banking regulations to net profits, as defined, for the year plus retained profits for the preceding two years.
Dividends A key source of liquidity for BOK Financial is dividends from BOKF, NA, which is limited by various banking regulations to net profits, as defined, for the year plus retained profits for the preceding two years. Dividends are further restricted by minimum capital requirements and the Company's internal capital policy.
On October 18, 2022, the FDIC finalized a rule that would increase initial base deposit insurance assessment rates by 2 basis points beginning with the first quarterly assessment period of 2023.
On October 18, 2022, the FDIC finalized a rule that increased the initial base deposit insurance assessment rates by 2 basis points beginning with the first quarterly assessment period of 2023. The increased assessment improves the likelihood that the DIF reserve ratio would reach the required minimum by the statutory deadline, consistent with the FDIC's Amended Restoration Plan.
Inflation pressures cause modest declines in real household income compared to pre-pandemic levels, resulting in below-trend GDP growth. See "Summary of Credit Loss Experience" section in Management's Discussion and Analysis for further discussion around our economic forecast. Foreign Operations BOK Financial does not engage in operations in foreign countries, nor does it lend to foreign governments. 9
See "Summary of Credit Loss Experience" section in "Management's Discussion and Analysis" for further discussion around our economic forecast. Foreign Operations BOK Financial does not engage in operations in foreign countries, nor does it lend to foreign governments. 12
We also compete with regional and locally-owned banks in both the Tulsa and Oklahoma City areas as well as in every other community in which we do business throughout the state.
We compete with two banks that have operations nationwide and have greater access to funds at lower costs, higher lending limits, and greater access to technology resources. We also compete with regional and locally-owned banks in both the Tulsa and Oklahoma City areas as well as in every other community in which we do business throughout the state.
At December 31, 2022, we had 4,791 full-time and part-time employees, the majority of which are full-time employees. None of the Company’s employees are represented by collective bargaining agreements. Management considers its employee relations to be good. Our employees are primarily distributed over our eight state footprint, to include: Oklahoma, Texas, Arkansas, Kansas, Missouri, Colorado, New Mexico and Arizona.
At December 31, 2023, we had 4,966 full-time and part-time employees, the majority of which are full-time employees. None of the Company’s employees are represented by collective bargaining agreements. Management considers its employee relations to be good.
Financial institutions, such as the Company and its subsidiaries, must have a designated BSA Officer, internal controls, independent testing and training programs commensurate with their size and risk profile.
The PATRIOT Act is intended to deny terrorists and criminals the ability to access the U.S. financial services system and places significantly greater requirements on financial institutions. Financial institutions, such as the Company and its subsidiaries, must have a designated BSA Officer, internal controls, independent testing and training programs commensurate with their size and risk profile.
These heightened standards require establishing and implementing a risk governance framework to cover the bank's risk-taking activities. 5 Consumer Financial Protection We are subject to a number of federal and state consumer protection laws that extensively govern our relationship with our customers.
Consumer Financial Protection We are subject to a number of federal and state consumer protection laws that extensively govern our relationship with our customers.
We provide additional growth opportunities by hiring talent to enhance competitiveness, adding locations and broadening product offerings. Our operating philosophy embraces local decision-making in each of our geographic markets while adhering to common Company standards. Our primary focus is to provide a comprehensive range of nationally competitive financial products and services in a personalized and responsive manner.
Our acquisition strategy targets fairly priced quality organizations with demonstrated solid growth that would supplement our principal lines of business. We provide additional growth opportunities by hiring talent to enhance competitiveness, adding locations and broadening product offerings. Our operating philosophy embraces local decision-making in each of our geographic markets while adhering to common Company standards.
Our employees donated more than 33,000 volunteer hours, and more than 358 employees served in 665 leadership roles with 430 nonprofit boards. Over the past ten years, we have committed $768 million in loan funding to support affordable housing projects and $362 million in affordable housing investments.
Since 2013, we have committed more than $1.0 billion in loan funding to support affordable housing projects and $391 million in affordable housing investments. In 2023, our employees donated more than 50,000 volunteer hours, and more than 400 employees served in 732 leadership roles with 495 nonprofit organizations.
Deposit Insurance Substantially all of the deposits held by the subsidiary banks are insured up to applicable limits by the Deposit Insurance Fund ("DIF") of the FDIC and are subject to deposit insurance assessments to maintain the DIF.
Deficiencies in compensation practices may affect supervisory ratings and enforcement actions may be taken if incentive compensation arrangements pose a risk to safety and soundness. Deposit Insurance Substantially all of the deposits held by the subsidiary banks are insured up to applicable limits by the DIF of the FDIC and are subject to deposit insurance assessments to maintain the DIF.
Community Reinvestment Act The Community Reinvestment Act of 1977 ("CRA") requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practice.
The CFPB may also institute a civil action against an entity in violation of federal consumer financial laws in order to impose a civil penalty or injunction. 8 Community Reinvestment Act The CRA requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practices.
The CFPB can issue cease-and-desist orders against banks and other entities that violate consumer financial laws. The CFPB may also institute a civil action against an entity in violation of federal consumer financial laws in order to impose a civil penalty or injunction.
The CFPB can issue cease-and-desist orders against banks and other entities that violate consumer financial laws.
The effect of future changes in such policies on the business and earnings of BOK Financial and its subsidiaries is uncertain. Economic variables have changed vastly throughout 2022.
The effect of future changes in such policies on the business and earnings of BOK Financial and its subsidiaries is uncertain. 11 In an effort to reduce the four-decade inflation high, the Federal Reserve continued raising the Federal Funds rate in 2023.
University recruiting has been a focal point for our diversity efforts. In 2022, 35% of our class of interns and early career associates identified as people of color. Diversity Education Unconscious bias education was introduced to all managers in order to provide tools that support awareness of the automatic patterns of thinking related to hiring practices.
In 2023, 28% of our class of interns and early career associates identified as people of color. 5 Diversity Education As we continue our DEI journey, our custom course of Leveraging Inclusion and Mitigating Unconscious Bias is assigned to all new managers to provide tools that support awareness of the automatic patterns of thinking as they learn to manage teams at BOK Financial.
Other non-bank subsidiary operations do not have a significant effect on the Company’s financial statements. Our overall strategic objective is to emphasize growth in long-term value by building on our leadership position in Oklahoma through expansion into other high-growth markets in contiguous states.
Our overall strategic objective is to emphasize growth in long-term value by building on our leadership position in Oklahoma through expansion into other high-growth markets in contiguous states. We operate primarily in the metropolitan areas of Tulsa and Oklahoma City, Oklahoma; Dallas, Fort Worth, Houston and San Antonio, Texas; Albuquerque, New Mexico; Denver, Colorado; Phoenix, Arizona, and Kansas City, Kansas/Missouri.
In 2021, 91% of our workforce participated in the survey, and results were shared and discussed across the Company. We will seek feedback in the same format in 2023. We have consistently had employee participation in excess of 80% since the inception of our engagement survey.
In 2023, 94% of our workforce participated in the survey, and results were shared and discussed across the Company. We are proud to say the level of our employees' engagement is considered world class.
We also partner with LinkedIn Learning to ensure all employees across the company have equal access to development opportunities.
We also partner with LinkedIn Learning® to ensure all employees across the Company have equal access to development opportunities, including two custom on demand learning paths focused on DEI concepts, and over 3,000 on demand DEI courses available as of December 2023. Benefits and Compensation Offerings BOK Financial is committed to the health and wellness of our employees.
Unemployment remains low, coming in at 3.5% for December 2022. Our base case economic forecast for the fourth quarter of 2022 assumes the Russia-Ukraine conflict remains isolated. Inflation continues to improve from the peak experienced in the third quarter of 2022 and reaches 3.0% by end of 2023.
Our base case economic forecast for the fourth quarter of 2023 assumed geopolitical conflicts remain isolated. Inflation continues to improve from previous peaks and reaches 2.6% by the end of 2024. The federal funds rate target range of 5.25% to 5.50% is held flat for the remainder of 2024.
There are two additional federal funds rate increases in the first quarter of 2023 and is held flat for the remainder of 2023. Job openings revert to more normalized levels and overall hiring levels decline, causing the national unemployment rate to modestly increase over the next four quarters.
Job openings revert to more normalized levels and overall hiring levels decline, causing the national unemployment rate to modestly increase over the next four quarters. Inflation pressures ease and help stabilize real household income compared to pre-pandemic levels, while a restrictive credit environment slows economic activity resulting in below-trend GDP growth.
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We operate primarily in the metropolitan areas of Tulsa and Oklahoma City, Oklahoma; Dallas, Fort Worth and Houston, Texas; Albuquerque, New Mexico; Denver, Colorado; Phoenix, Arizona, and Kansas City, Kansas/Missouri. Our acquisition strategy targets fairly priced quality organizations with demonstrated solid growth that would supplement our principal lines of business.
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During the fourth quarter of 2023, BOK Financial sold its wholly owned subsidiary BOKF Insurance, a broker providing insurance services. Other non-bank subsidiary operations do not have a significant effect on the Company’s financial statements.
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We have 31% and 11% of the market share in the Tulsa and Oklahoma City areas, respectively. We compete with two banks that have operations nationwide and have greater access to funds at lower costs, higher lending limits, and greater access to technology resources.
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Our employees are primarily distributed over our eight state footprint, to include: Oklahoma, Texas, Arkansas, Kansas, Missouri, Colorado, New Mexico and Arizona. 4 Diversity and Inclusion Efforts Diversity, equity, and inclusion are essential to our vision and purpose and are a core leadership competency for BOK Financial. We believe our organization should reflect the diversity of the communities we serve.
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Diversity and Inclusion Efforts We believe that our organization should reflect the diversity of the communities we serve. We also recognize that in order for a diverse workforce to thrive, we must prioritize inclusion efforts.
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Our DEI Council seeks to excel and grow our company by valuing and leveraging the power of diversity, equity, and inclusion. The DEI Council works to ensure our company continues to foster and support an environment that is inclusive of the diverse values, opinions, experiences, cultures, and needs of our employees, clients, and communities.
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The concept of ‘inclusion’ is woven into many of the learning opportunities offered by our Talent and Organizational Development team; examples include: ‘Leveraging Inclusion and Mitigating Unconscious Bias,’ ‘Emergenetics Applications,’ ‘Emotional Intelligence Skills’ and ‘Crucial Conversations.’ Benefits and Compensation Offerings BOK Financial is committed to the health and wellness of our employees.
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The Council is chaired by Stacy Kymes, President and Chief Executive Officer, with membership comprising leaders and influencers representing divisions across the Company. Members each serve a three-year term. We also recognize that for a diverse workforce to thrive, we must prioritize inclusion efforts.
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In 2022, over 1,700 employees nominated and voted on 165 nonprofit organizations to receive funding. This was the second year of the Company’s pilot program where we accelerated resources to underserved minority communities by supporting nonprofit organizations providing programs to help close gaps in four key areas: income inequality, workforce development, education and mentoring, and social justice inequities.
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BOK Financial is a certifying organization for the President’s Volunteer Service Award, a program to celebrate individual volunteerism and commitment to community service. For 2023, the company recognized 142 employees who volunteered 100 hours or more with numerous nonprofit organizations across our footprint .
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A financial holding company and its subsidiaries are prohibited under the BHCA from engaging in certain tie-in arrangements in connection with the provision of any credit, property or services.
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Our custom Conscious Inclusion Toolkit provides an opportunity for all employees to focus on inclusion through strategies, activities, and resources that deepen their knowledge and skills around inclusive conversations.
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Deficiencies in compensation practices may affect supervisory ratings and enforcement actions may be taken if incentive compensation arrangements pose a risk to safety and soundness.
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During 2023, the Company launched Dollars for Doers, a program which rewards our employees for living our core value to actively advance the communities we serve. In 2023, the company matched employee volunteer hours with a total of $4,547 in contributions to employees' chosen non-profit organizations across our footprint.
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The increased assessment would improve the likelihood that the DIF reserve ratio would reach the required minimum by the statutory deadline, consistent with the FDIC's Amended Restoration Plan.
Added
In 2023, over 1,500 employees nominated and voted on 112 nonprofit organizations to receive funding.
Removed
Dividends are further restricted by minimum capital requirements and the Company's internal capital policy.
Added
We continue to strategically focus on charitable contributions to accelerate resources to underserved minority communities of color by supporting nonprofit organizations providing programs to help close gaps in two key areas – income inequality and workforce development – identified as the most crucial to help break the cycle of poverty and put people on the path for long term success, sustainability, and wealth creation. 6 Supervision and Regulation BOK Financial and its subsidiaries are subject to extensive regulations under federal and state laws.
Removed
Bank Secrecy Act and USA PATRIOT Act The Bank Secrecy Act ("BSA") and The USA PATRIOT Act of 2001 ("PATRIOT Act") impose many requirements on financial institutions in the interest of national security and law enforcement.
Added
The rule became effective as of January 1, 2023.
Removed
At the beginning of the year, the Federal Funds rate was near zero, and the housing market was in a boom with elevated levels of originations and an acceleration in the rise of home prices. Consumer spending was also high.
Added
On November 16, 2023, the FDIC approved a final rule to implement a special assessment on certain banking organizations with financial institution subsidiaries with more than $5 billion in assets in order to recover the costs associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank in March 2023.
Removed
Starting in March 2022, the Federal Reserve raised the Federal Funds rate seven times through the end of the year for a total of 425 basis points due to a four-decade inflation high. While oil prices soared in the first half of the year fueled by the Russia-Ukraine conflict, they began to subside in the second half of the year.
Added
The special assessment will be collected beginning with the first quarterly assessment period of 2024 at an annual rate of approximately 13.4 basis points for an anticipated total of eight quarterly periods and is subject to periodic adjustments. The assessment base is equal to uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion.

… 3 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

30 edited+26 added−11 removed67 unchanged
Biggest changeThe overall economic impact of the LIBOR transition to the organization is expected to be minimal as the Company is implementing appropriate credit spread adjustments to exposures that are being transitioned from LIBOR to SOFR. 13 Changes in mortgage interest rates could adversely affect mortgage banking operations along with mortgage servicing rights as well as BOK Financial's substantial holdings of residential mortgage-backed securities, and brokerage and trading revenue.
Biggest changeChanges in mortgage interest rates could adversely affect mortgage banking operations along with mortgage servicing rights as well as BOK Financial's substantial holdings of residential mortgage-backed securities, and brokerage and trading revenue. BOK Financial derives a substantial amount of revenue from mortgage banking activities, the production and sale of mortgage loans and the servicing of mortgage loans.
Mr. Kaiser's ability to prevent an unsolicited bid for BOK Financial or any other change in control could have an adverse effect on the market price for BOK Financial's common stock. A substantial majority of BOK Financial's directors are not officers or employees of BOK Financial or any of its affiliates. However, because of Mr.
Kaiser's ability to prevent an unsolicited bid for BOK Financial or any other change in control could have an adverse effect on the market price for BOK Financial's common stock. A substantial majority of BOK Financial's directors are not officers or employees of BOK Financial or any of its affiliates. However, because of Mr.
We mitigate the market risk of holding trading securities through appropriate economic hedging techniques, which may not be effective. Models may fail to reasonably predict changes in values caused by changes in interest rates, prepayment speeds, and other relevant stimuli, which could adversely affect our business or results of operations.
We mitigate the market risk of holding trading securities through appropriate economic hedging techniques, which may not be effective. 16 Models may fail to reasonably predict changes in values caused by changes in interest rates, prepayment speeds and other relevant stimuli, which could adversely affect our business or results of operations.
Transition risks specific to BOK Financial include: • Compliance, operating, maintenance and remediation costs may require a significant amount of capital affecting BOK Financial's liquidity position. 11 • BOK Financial's credit portfolios include carbon-intensive industries, which could be adversely impacted by the transition to a low-carbon economy.
Transition risks specific to BOK Financial include: • Compliance, operating, maintenance and remediation costs may require a significant amount of capital affecting BOK Financial's liquidity position. • BOK Financial's credit portfolios include carbon-intensive industries, which could be adversely impacted by the transition to a low-carbon economy.
Kaiser sells or transfers his shares of BOK Financial's common stock as a block, another person or entity could become BOK Financial's controlling shareholder. Statutory restrictions on subsidiary dividends and other distributions and debts of BOK Financial's subsidiaries could limit amounts BOK Financial's subsidiaries may pay to BOK Financial.
Kaiser sells or transfers his shares of BOK Financial's common stock as a block, another person or entity could become BOK Financial's controlling shareholder. 19 Statutory restrictions on subsidiary dividends and other distributions and debts of BOK Financial's subsidiaries could limit amounts BOK Financial's subsidiaries may pay to BOK Financial.
These changes could have a significant effect on the general economic conditions within our footprint. • Reputational risk may increase as stakeholders become more focused on climate risk. Credit Risk Factors Adverse regional economic developments could negatively affect BOK Financial's business.
These changes could have a significant effect on the general economic conditions within our footprint. • Reputational risk may increase as stakeholders become more focused on climate risk. 14 Credit Risk Factors Adverse regional economic developments could negatively affect BOK Financial's business.
In the event of liquidation, creditors of the subsidiary banks and other non-bank subsidiaries of BOK Financial are entitled to receive distributions from the assets of that subsidiary before BOK Financial, as holder of an equity interest in the subsidiaries, is entitled to receive any distributions. 16
In the event of liquidation, creditors of the subsidiary banks and other non-bank subsidiaries of BOK Financial are entitled to receive distributions from the assets of that subsidiary before BOK Financial, as holder of an equity interest in the subsidiaries, is entitled to receive any distributions.
They will also consider our financial condition and our future prospects, including projected capital ratios and levels; the competence, experience, and integrity of our management; and our record of compliance with laws and regulations. 10 Regulatory authorities may change their interpretation of these statutes and regulations, including the OCC, our primary regulator, and the CFPB, our regulator for certain designated consumer laws and regulations.
They will also consider our financial condition and our future prospects, including projected capital ratios and levels; the competence, experience, and integrity of our management; and our record of compliance with laws and regulations. 13 Regulatory authorities may change their interpretation of these statutes and regulations, including the OCC, our primary regulator, and the CFPB, our regulator for certain designated consumer laws and regulations.
Other adverse economic factors affecting particular industries could have a negative effect on BOK Financial customers and their ability to make payments to BOK Financial. Certain industry-specific economic factors also affect BOK Financial. For example, BOK Financial's loan portfolio includes commercial real estate loans.
Other adverse economic factors affecting particular industries, including commercial real estate and healthcare, could have a negative effect on BOK Financial customers and their ability to make payments to BOK Financial. Certain industry-specific economic factors also affect BOK Financial. For example, BOK Financial's loan portfolio includes commercial real estate loans.
A regional economic downturn could also adversely affect revenue from brokerage and trading activities, mortgage loan originations and other sources of fee-based revenue. Extended oil and gas commodity price downturns could negatively affect BOK Financial customers. At December 31, 2022, 15% of BOK Financial's total loan portfolio is comprised of loans to borrowers in the energy industry.
A regional economic downturn could also adversely affect revenue from brokerage and trading activities, mortgage loan originations and other sources of fee-based revenue. Extended oil and gas commodity price downturns could negatively affect BOK Financial customers. At December 31, 2023, 14% of BOK Financial's total loan portfolio is comprised of loans to borrowers in the energy industry.
At December 31, 2022, loans to businesses and individuals with collateral primarily located in Texas represented approximately 32% of the total loan portfolio, loans to businesses and individuals with collateral primarily located in Oklahoma represented approximately 16% of our total loan portfolio and loans to businesses and individuals with collateral primarily located in Colorado represented approximately 11% of our total loan portfolio.
At December 31, 2023, loans to businesses and individuals with collateral primarily located in Texas represented approximately 32% of the total loan portfolio, loans to businesses and individuals with collateral primarily located in Oklahoma represented approximately 14% of our total loan portfolio and loans to businesses and individuals with collateral primarily located in Colorado represented approximately 11% of our total loan portfolio.
We outsource a significant portion of our information systems, communications, data management and transaction processing to third parties. These third parties are sources of risk associated with operational errors, system interruptions or breaches, unauthorized disclosure of confidential information and misuse of intellectual property.
We outsource a significant portion of our information systems, communications, data management and transaction processing to third parties. We are heavily reliant on a single vendor for many of these functions. These third parties are sources of risk associated with operational errors, system interruptions or breaches, unauthorized disclosure of confidential information and misuse of intellectual property.
Forced shutdowns or regulations limiting business could have an adverse effect on our customers, limiting their ability to satisfy obligations and limiting growth or demand for our loans and other services, which could affect our liquidity, financial condition and results of operations. The effects of climate change and resulting government regulations could adversely affect BOK Financial and BOK Financial customers.
Forced shutdowns or regulations limiting business could have an adverse effect on our customers, limiting their ability to satisfy obligations and limiting growth or demand for our loans and other services, which could affect our liquidity, financial condition and results of operations. 20
A further downgrade, or a downgrade by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide.
A further downgrade, or a downgrade by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide. The effects of climate change and resulting government regulations could adversely affect BOK Financial and BOK Financial customers.
BOK Financial's business is highly sensitive to: • the monetary policies implemented by the Federal Reserve Board, including the discount rate on bank borrowings and changes in reserve requirements, which affect BOK Financial's ability to make loans and the interest rates we may charge; • changes in prevailing interest rates, due to the dependency of the subsidiary banks on interest income; • changes in depositor behavior; and • open market operations in U.S. government securities.
BOK Financial's business is highly sensitive to: • the monetary policies implemented by the Federal Reserve Board, including the discount rate on bank borrowings and changes in reserve requirements, which affect BOK Financial's ability to make loans and the interest rates we may charge; • changes in prevailing interest rates, due to the dependency of the subsidiary bank on interest income; • changes in depositor behavior; and • open market operations in U.S. government securities. 15 A significant increase in market interest rates, or the perception that an increase may occur, could adversely affect both BOK Financial's ability to originate new loans and BOK Financial's ability to grow.
BOK Financial's principal shareholder controls a majority of BOK Financial's common stock. Mr. George B. Kaiser owns approximately 57% of the outstanding shares of BOK Financial's common stock at December 31, 2022. Mr. Kaiser is able to elect all of BOK Financial's directors and effectively control the vote on all matters submitted to a vote of BOK Financial's common shareholders.
Kaiser owns approximately 58% of the outstanding shares of BOK Financial's common stock at December 31, 2023. Mr. Kaiser is able to elect all of BOK Financial's directors and effectively control the vote on all matters submitted to a vote of BOK Financial's common shareholders. Mr.
If significant inflation continues, the creditworthiness of our borrowers and their ability to repay loans timely may be affected. The Company, its customers and counterparties may also be adversely affected by global events, such as natural disasters, and other external events beyond our control, including public health issues, terrorist attacks and acts of war.
The Company, its customers and counterparties may also be adversely affected by global events, such as natural disasters, and other external events beyond our control, including public health issues, terrorist attacks and acts of war.
The adverse effect of these events on the Company may include narrowing of the spread between interest income and interest expense, a reduction in fee income, an increase in credit losses and a decrease in demand for loans and other products and services. 12 Liquidity, Price, and Interest Rate Risk Factors Fluctuations in interest rates could adversely affect BOK Financial's business.
The adverse effect of these events on the Company may include narrowing of the spread between interest income and interest expense, a reduction in fee income, an increase in credit losses and a decrease in demand for loans and other products and services.
A relatively small fraction of BOK Financial's outstanding common stock is actively traded. The risks of low liquidity include increased volatility of the price of BOK Financial's common stock. Low liquidity may also limit holders of BOK Financial's common stock in their ability to sell or transfer BOK Financial's shares at the price, time and quantity desired.
The risks of low liquidity include increased volatility of the price of BOK Financial's common stock. Low liquidity may also limit holders of BOK Financial's common stock in their ability to sell or transfer BOK Financial's shares at the price, time and quantity desired. BOK Financial's principal shareholder controls a majority of BOK Financial's common stock. Mr. George B.
Revenue generated from the production and sale of mortgage loans is affected by mortgage interest rates and government policies related to economic stimulus and home ownership. Falling interest rates tend to increase mortgage lending activities and related revenue while rising interest rates have an opposite effect. Mortgage servicing revenue is a fee earned over the life of the related loan.
Falling interest rates tend to increase mortgage lending activities and related revenue while rising interest rates have an opposite effect. Mortgage servicing revenue is a fee earned over the life of the related loan.
If the service providers encounter any of these issues, we could be exposed to disruption of service, reputation damages, and litigation risk that could be material to our business. Our business may be adversely affected if we are unable to hire and retain qualified employees.
If the service providers encounter any of these issues, we could be exposed to disruption of service, reputation damages, and litigation risk that could be material to our business. 18 We may be adversely affected and experience losses related to fraud or theft.
We continue to invest in fraud prevention in the form of people and systems designed to prevent, detect and mitigate the customer and financial impacts. Risks Related to an Investment in Our Stock Although publicly traded, BOK Financial's common stock has substantially less liquidity than the average trading market for a stock quoted on the NASDAQ National Market System.
Risks Related to an Investment in Our Stock Although publicly traded, BOK Financial's common stock has substantially less liquidity than the average trading market for a stock quoted on the NASDAQ National Market System. A relatively small fraction of BOK Financial's outstanding common stock is actively traded.
The inability to borrow funds at market interest rates could have a material adverse effect on our operations. 14 Operating and Transaction Risk Factors Dependence on technology increases cybersecurity, data privacy and technology failure risk.
The inability to borrow funds at market interest rates could have a material adverse effect on our operations.
BOK Financial derives a substantial amount of revenue from mortgage banking activities, the production and sale of mortgage loans and the servicing of mortgage loans. In addition, as part of BOK Financial's mortgage banking business, BOK Financial has substantial holdings of mortgage servicing rights.
In addition, as part of BOK Financial's mortgage banking business, BOK Financial has substantial holdings of mortgage servicing rights. Revenue generated from the production and sale of mortgage loans is affected by mortgage interest rates and government policies related to economic stimulus and home ownership.
Pandemics, such as the COVID-19 pandemic, may affect economies around the world. The Russia-Ukraine conflict has resulted in volatile oil prices as well as affected other global economic factors. BOK Financial, its customers and counterparties may be negatively affected by the volatility and uncertainty related to inflation and the effects of inflation.
Economic conditions globally could impact BOK Financial’s customers and counterparties with which we do business. Pandemics, such as the COVID-19 pandemic, may affect economies around the world. The Russia-Ukraine conflict and Israel-Hamas conflict have resulted in volatile oil prices as well as affected other global economic factors.
A downturn in the real estate industry in general or in certain segments of the commercial real estate industry in the southwest region could also have an adverse effect on BOK Financial's operations. Regulatory changes in healthcare may negatively affect our customers.
A downturn in the real estate industry in general or in certain segments of the commercial real estate industry could also have an adverse effect on BOK Financial's operations. The development of remote work or hybrid work models may cause volatility in vacancy rates and rents in certain urban markets.
Legislation affecting reimbursement rates along with the continued transition to managed care in place of fee for service payments could affect their ability to pay. Adverse global economic factors could have a negative effect on BOK Financial customers and counterparties. Economic conditions globally could impact BOK Financial’s customers and counterparties with which we do business.
Regulatory changes in healthcare may negatively affect our customers. Legislation affecting reimbursement rates along with the continued transition to managed care in place of fee for service payments could affect their ability to pay. Liquidity, Price, and Interest Rate Risk Factors Fluctuations in interest rates could adversely affect BOK Financial's business.
Prolonged periods of inflation may impact our profitability by negatively affecting our fixed costs and expenses, including increasing funding costs and expenses related to talent acquisition and retention. Additionally, inflation may lead to a decrease in consumer purchasing power and negatively impact the need or demand for our products or services.
BOK Financial, its customers and counterparties may be negatively affected by the volatility and uncertainty related to inflation and the effects of inflation. Prolonged periods of inflation may impact our profitability by negatively affecting our fixed costs and expenses, including increasing funding costs and expenses related to talent acquisition and retention.
An increasing competitive factor in the financial services industry is the ability to attract and retain talented and diverse employees across several lines of business. The transition by many employers to remote work and work-from-home that occurred during the COVID-19 pandemic seems likely to continue.
General Risk Factors Our business may be adversely affected if we are unable to hire and retain qualified employees. An increasing competitive factor in the financial services industry is the ability to attract and retain talented and diverse employees across several lines of business.
Employers, now less constrained by physical geography, particularly those in markets with elevated employee compensation, may increasingly compete for our employees. 15 We may be adversely affected and experience losses related to fraud or theft.
The transition by many employers to remote work and work-from-home that occurred during the COVID-19 pandemic seems likely to continue. Employers, now less constrained by physical geography, particularly those in markets with elevated employee compensation, may increasingly compete for our employees. Adverse global economic factors could have a negative effect on BOK Financial customers and counterparties.
Removed
A significant increase in market interest rates, or the perception that an increase may occur, could adversely affect both BOK Financial's ability to originate new loans and BOK Financial's ability to grow.
Added
On August 1, 2023, Fitch Ratings announced its decision to downgrade the U.S. long-term credit ratings from AAA to AA+, but maintained the country credit ceiling at AAA.
Removed
On March 5, 2021, the U.K. Financial Conduct Authority ("FCA") confirmed that the publication of the principal tenors of the U.S. dollar London Interbank Offered Rate ("LIBOR") will cease immediately following a final publication on June 30, 2023.
Added
These types of loans may expose a lender to a higher degree of credit risk of non-payment or loss as commercial real estate loans are subject to cyclical downturns, are generally more sensitive to interest rates and usually do not fully amortize over the loan term.
Removed
Further, U.S. regulators released a joint inter-agency statement about their expectations that banks cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021.
Added
Weakening of the commercial real estate market may increase the likelihood of default of these loans, which could negatively impact our loan portfolio’s performance and asset quality. If we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values, we could incur material losses.
Removed
On March 15, 2022, the President of the United States of America signed into law the Adjustable Interest Rate (LIBOR) Act ("LIBOR Act").
Added
In addition, idiosyncratic factors, as well as other factors outside of BOK Financial’s control, such as a general market disruption or an operational problem that affects third parties, could impair the Company’s ability to access short-term funding or create an unforeseen outflow of cash due to, among other factors, draws on unfunded commitments or deposit attrition.
Removed
Under the LIBOR Act, on the first London banking day after June 30, 2023 ("LIBOR Replacement Date"), a benchmark replacement recommended by the Board of Governors of the Federal Reserve System ("Board") will replace LIBOR in specific contracts. In the fourth quarter of 2022, the Board issued its final regulations ("Final Regulations") implementing the LIBOR Act.
Added
Withdrawals of brokered or institutional deposits could require us to pay significantly higher interest rates on our retail deposits or on other wholesale funding sources, which would have an adverse impact on our net interest income and net income.
Removed
The Final Regulations: (i) address the applicability of the LIBOR Act to various LIBOR contracts, (ii) identify the Board-selected benchmark replacements for various types of LIBOR contracts, (iii) include specific benchmark replacement conforming changes, (iv) address the issue of preemption and (v) provide other clarifications, definitions, and information.
Added
Furthermore, changes to the FHLB’s underwriting guidelines for wholesale borrowings or lending policies may limit or restrict our ability to borrow, and therefore could have a significant adverse impact on our liquidity.
Removed
The regulations will become effective thirty (30) days after the publication of the Final Regulation in the Federal Register.
Added
In the event of future turmoil in the banking industry or other idiosyncratic events, there is no guarantee that the U.S. government will invoke the systemic risk exception, create additional liquidity programs, or take any other action to stabilize the banking industry or provide liquidity.
Removed
The Company ceased production of new LIBOR-based exposure as of December 31, 2021 and now offers floating rate products in various alternative reference rates with the majority of volume being observed thus far in simple or term rate versions of the Secured Overnight Financing Rate ("SOFR").
Added
The Company’s inability to monetize liquid assets or to access short-term funding or capital markets could constraint the Company’s ability to make new loans or meet existing lending commitments and could ultimately jeopardize BOK Financial’s overall liquidity and capitalization. Loss of deposits or a change in deposit mix could increase BOK Financial’s funding costs.
Removed
Key loan provisions have been modified so that new and renewed loans include LIBOR fallback language designed to ensure the smoothest possible transition from LIBOR to the new benchmark when such transition occurs. All existing financial contracts with direct exposure to LIBOR have been inventoried.
Added
Deposits are a low cost and stable source of funding. BOK Financial competes with banks and other financial institutions for deposits and as a result, the Company could lose deposits in the future, clients may shift their deposits into higher cost products, or the Company may need to raise interest rates to avoid deposit attrition.
Removed
The Company has taken action to transition these exposures to an alternative reference rate in advance of the June 30, 2023 deadline. However, if exposures are not transitioned as of the LIBOR Replacement Date, the organization expects to implement the fallback language of each contract or follow the LIBOR Act as appropriate.
Added
Funding costs may also increase if deposits lost are replaced with wholesale funding. Higher funding costs reduce BOK Financial’s net interest margin, net interest income and net income.
Removed
Additionally, the Company has some debt instruments subject to the LIBOR Act.
Added
In addition, recent events impacting the banking industry, including the bank failures in March and April 2023, have resulted in significant disruption and volatility in the capital markets, reduced current valuations of bank securities, and decreased confidence in banks among depositors and other counterparties as well as investors.
Added
A decrease in the supply of deposits or significant increase in competition for deposits could result in substantial increases in costs to retain and service deposits.
Added
Increased adoption of consumer banking technology can result in reduced deposit stickiness due to the relative ease with which depositors may transfer deposits to a different depository institution in the event that confidence is lost in BOKF, NA.
Added
The cost of resolving the recent bank failures has also prompted the FDIC to issue a special assessment to recover costs to the Deposit Insurance Fund.
Added
For information on the FDIC’s special assessment, refer to the "Management’s Discussion and Analysis of Financial Condition and Results of Operations." A downgrade in our credit ratings may increase our funding costs and limit our business activities. We are regularly evaluated by ratings agencies.
Added
Our credit ratings are based on a number of factors such as the financial strength of BOKF and BOKF, NA and conditions generally affecting the financial services industry. Many qualitative and quantitative factors are used by the ratings agencies including capital adequacy, liquidity, asset quality, business mix, and earnings.
Added
These ratings are subject to change at any time and we may not be able to maintain our current credit ratings.
Added
Reductions in one or more of our credit ratings could adversely affect our ability to borrow funds and increase our cost of capital and limit the number of investors or counterparties willing to do business with or lend to us. This could also affect our ability to attract or retain customers, including deposits.
Added
In addition, if we were downgraded below investment grade, certain counterparty contracts may require renegotiation or require additional posting of collateral. 17 Operating and Transaction Risk Factors Dependence on technology increases cybersecurity, data privacy and technology failure risk.
Added
We continue to invest in fraud prevention in the form of people and systems designed to prevent, detect and mitigate the customer and financial impacts. Recent events impacting the financial services industry could adversely affect BOK Financial's business.
Added
Recent events affecting the financial services industry have generated significant market volatility among publicly traded bank holding companies with particular focus on regional banks. These events occurred following a period of rapidly rising interest rates, which resulted in unrealized losses in longer duration securities and loans held by banks as well as more competition for bank deposits.
Added
These recent events have, and may continue to adversely impact the market price and volatility of the Company’s stock.
Added
Potentially adverse changes to laws or regulations governing banks and bank holding companies may occur, including but not limited to, new regulations directed towards banks of similar size in areas such as deposit composition, the level of uninsured deposits, brokered deposits, unrealized losses in securities portfolios, liquidity, CRE composition and concentration and capital, which could increase the costs of doing business.
Added
The Company could also face increased scrutiny, or be viewed as higher risk, by regulators and the investor community, which could negatively affect our future results.
Added
As a result of recent bank failures the FDIC proposed and finalized a special assessment to replenish the Deposit Insurance Fund, which increased FDIC insurance premiums above the recently increased levels which will result in higher costs.
Added
Additionally, inflation may lead to a decrease in consumer purchasing power and negatively impact the need or demand for our products or services. If significant inflation continues, the creditworthiness of our borrowers and their ability to repay loans timely may be affected.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−0 removed0 unchanged
Biggest changeBanking offices are primarily located in Tulsa and Oklahoma City, Oklahoma; Dallas, Fort Worth and Houston, Texas; Albuquerque, New Mexico; Denver, Colorado; Phoenix, Arizona; and Kansas City, Kansas/Missouri. Primary operations facilities are located in Tulsa and Oklahoma City, Oklahoma; Dallas, Texas and Albuquerque, New Mexico. The Company's facilities are suitable for their respective uses and present needs.
Biggest changeBanking offices are primarily located in Tulsa and Oklahoma City, Oklahoma; Dallas, Fort Worth, Houston and San Antonio, Texas; Albuquerque, New Mexico; Denver, Colorado; Phoenix, Arizona; and Kansas City, Kansas/Missouri. Primary operations facilities are located in Tulsa and Oklahoma City, Oklahoma; Dallas, Texas and Albuquerque, New Mexico. The Company's facilities are suitable for their respective uses and present needs.
The information set forth in Note 5 of the Company's Notes to Consolidated Financial Statements, which appear elsewhere herein, provides further discussion related to properties.
The information set forth in Note 5 to the Company's Notes to Consolidated Financial Statements, which appear elsewhere herein, provides further discussion related to properties.
ITEM 2. PROPERTIES BOK Financial and its subsidiaries own and lease improved real estate that is carried at $386 million, net of depreciation and amortization. The Company’s principal offices are located in leased premises in the Bank of Oklahoma Tower in Tulsa, Oklahoma.
ITEM 2. PROPERTIES BOK Financial and its subsidiaries own and lease improved real estate that is carried at $430 million, net of depreciation and amortization. The Company’s principal offices are located in leased premises in the Bank of Oklahoma Tower in Tulsa, Oklahoma.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−3 removed0 unchanged
Biggest changeThe highest and lowest quarterly closing bid price for shares and cash dividends declared per share of BOK Financial common stock follows: First Second Third Fourth 2022: Low $ 93.95 $ 74.40 $ 71.14 $ 90.41 High 115.68 92.60 95.05 109.57 Cash dividends declared 0.53 0.53 0.53 0.54 2021: Low $ 68.97 $ 83.71 $ 77.86 $ 90.31 High 97.60 92.25 91.80 108.91 Cash dividends declared 0.52 0.52 0.52 0.53 18 Shareholder Return Performance Graph Set forth below is a line graph comparing the change in cumulative shareholder return of the NASDAQ Composite Index, the Keefe, Bruyette & Woods (KBW) NASDAQ Bank Index and the KBW NASDAQ Regional Banking Index for the period commencing December 31, 2017 and ending December 31, 2022.* We are adding in the KBW Regional Bank Index this year, to eventually replace KBW NASDAQ Bank Index in our performance graph as the composition of the KBW Regional Bank index is more relevant to our size and market cap.
Biggest changeThe highest and lowest quarterly closing bid price for shares and cash dividends declared per share of BOK Financial common stock follows: First Second Third Fourth 2023: Low $ 81.54 $ 75.61 $ 78.38 $ 63.93 High 105.14 90.40 91.54 86.27 Cash dividends declared 0.54 0.54 0.54 0.55 2022: Low $ 93.95 $ 74.40 $ 71.14 $ 90.41 High 115.68 92.60 95.05 109.57 Cash dividends declared 0.53 0.53 0.53 0.54 The information set forth under the heading "Equity Compensation Plan Information" in BOK Financial's 2024 Annual Proxy Statement is incorporated herein by reference. 23 Shareholder Return Performance Graph Set forth below is a line graph comparing the change in cumulative shareholder return of the NASDAQ Composite Index and the KBW NASDAQ Regional Banking Index for the period commencing December 31, 2018 and ending December 31, 2023.* Period Ending December 31, Index 2018 2019 2020 2021 2022 2023 BOK Financial Corporation 100.00 122.09 98.93 155.90 156.82 132.90 NASDAQ Composite 100.00 136.69 198.10 242.03 163.28 236.17 KBW NASDAQ Regional Banking Index 100.00 123.81 113.03 154.45 143.75 143.17 * Graph assumes value of an investment in the Company's Common Stock for each index was $100 on December 31, 2018.
Cash dividends on Common Stock are assumed to have been reinvested in BOK Financial Common Stock. 19 The following table provides information with respect to purchases made by or on behalf of the Company or any "affiliated purchaser" (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of the Company's common stock during the three months ended December 31, 2022.
Cash dividends on Common Stock are assumed to have been reinvested in BOK Financial Common Stock. 24 The following table provides information with respect to purchases made by or on behalf of the Company or any "affiliated purchaser" (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of the Company's common stock during the three months ended December 31, 2023.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES BOK Financial's $0.00006 par value common stock is traded on the NASDAQ Stock Market under the symbol BOKF. As of January 31, 2023, common shareholders of record numbered 647 with 66,971,817 shares outstanding.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES BOK Financial's $0.00006 par value common stock is traded on the NASDAQ Stock Market under the symbol BOKF. As of January 31, 2024, common shareholders of record numbered 621 with 65,064,299 shares outstanding.
Future repurchases of the Company's common stock will vary based on market conditions, regulatory limitations and other factors. 2 The Company may repurchase shares from employees to cover the exercise price and taxes in connection with employee shared-based compensation. 20
As of December 31, 2023, the Company had repurchased 2,428,214 shares under this plan. Future repurchases of the Company's common stock will vary based on market conditions, regulatory limitations and other factors. 2 The Company may repurchase shares from employees to cover the taxes in connection with employee equity compensation.
Period Total Number of Shares Purchased 2 Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 1 Maximum Number of Shares that May Yet Be Purchased Under the Plans October 1, 2022 to October 31, 2022 — $ — — 348,535 November 1, 2022 to November 30, 2022 244,406 $ 104.26 244,406 4,755,594 December 1, 2022 to December 31, 2022 70,000 $ 99.25 70,000 4,685,594 Total 314,406 314,406 1 On November 1, 2022, the Company's board of directors authorized the Company to repurchase up to five million shares of the Company's common stock.
Period Total Number of Shares Purchased 2 Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 1 Maximum Number of Shares that May Yet Be Purchased Under the Plans October 1, 2023 to October 31, 2023 140,169 $ 65.65 140,000 3,132,023 November 1, 2023 to November 30, 2023 372,155 $ 69.30 372,155 2,759,868 December 1, 2023 to December 31, 2023 190,401 $ 78.59 188,082 2,571,786 Total 702,725 700,237 1 On November 1, 2022, the Company's board of directors authorized the Company to repurchase up to five million shares of the Company's common stock.
Removed
Furthermore, BOKF is included in the KBW Regional Banking Index.
Removed
Period Ending December 31, Index 2017 2018 2019 2020 2021 2022 BOK Financial Corporation 100.00 81.02 98.92 80.15 126.31 127.05 NASDAQ Composite 100.00 97.16 132.81 192.47 235.15 158.65 KBW NASDAQ Bank Index 100.00 82.29 112.01 100.46 138.97 109.23 KBW NASDAQ Regional Banking Index 100.00 82.50 102.15 93.25 127.42 118.59 * Graph assumes value of an investment in the Company's Common Stock for each index was $100 on December 31, 2017.
Removed
As of December 31, 2022, the Company had repurchased 314,406 shares under this plan. This authorization replaces a previous authorization for the repurchase of five million common shares, under which 4,651,465 shares were repurchased.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

208 edited+89 added−84 removed73 unchanged
Biggest changeOther borrowings increased $994 million while funds purchased and repurchase agreements increased $246 million. 30 Table 4 - Quarterly Financial Summary Consolidated Daily Average Balances, Average Yields and Rates (In thousands, except per share data) Three Months Ended December 31, 2022 September 30, 2022 Average Balance Revenue/ Expense Yield/ Rate Average Balance Revenue/ Expense Yield/ Rate Assets Interest-bearing cash and cash equivalents $ 568,307 $ 5,822 4.06 % $ 748,263 $ 3,520 1.87 % Trading securities 3,086,985 28,473 3.70 % 3,178,068 22,772 2.72 % Investment securities 2,535,305 9,223 1.46 % 2,593,989 9,207 1.42 % Available for sale securities 10,953,851 73,317 2.54 % 10,306,257 59,144 2.21 % Fair value option securities 92,012 931 4.40 % 36,846 286 2.98 % Restricted equity securities 216,673 3,088 5.70 % 173,656 2,703 6.23 % Residential mortgage loans held for sale 98,613 1,390 5.56 % 132,685 1,684 5.05 % Loans 21,976,004 331,649 5.99 % 21,599,232 265,997 4.89 % Allowance for loan losses (242,450) (241,136) Loans, net of allowance 21,733,554 331,649 6.06 % 21,358,096 265,997 4.94 % Total earning assets 39,285,300 453,893 4.53 % 38,527,860 365,313 3.71 % Receivable on unsettled securities sales 194,996 219,113 Cash and other assets 5,729,322 6,372,229 Total assets $ 45,209,618 $ 45,119,202 Liabilities and equity Interest-bearing deposits: Transaction $ 18,898,315 $ 60,893 1.28 % $ 19,556,806 $ 31,266 0.63 % Savings 969,275 205 0.08 % 978,596 135 0.05 % Time 1,417,606 4,476 1.25 % 1,409,069 3,314 0.93 % Total interest-bearing deposits 21,285,196 65,574 1.22 % 21,944,471 34,715 0.63 % Funds purchased and repurchase agreements 1,046,447 5,407 2.05 % 800,759 1,445 0.72 % Other borrowings 2,523,195 25,961 4.08 % 1,528,887 8,988 2.33 % Subordinated debentures 131,180 2,038 6.16 % 131,199 1,677 5.07 % Total interest-bearing liabilities 24,986,018 98,980 1.57 % 24,405,316 46,825 0.76 % Non-interest bearing demand deposits 14,176,189 15,105,305 Due on unsettled securities purchases 575,957 331,428 Other liabilities 853,134 501,731 Total equity 4,618,320 4,775,422 Total liabilities and equity $ 45,209,618 $ 45,119,202 Tax-equivalent net interest revenue $ 354,913 2.96 % $ 318,488 2.95 % Tax-equivalent net interest revenue to earning assets 3.54 % 3.24 % Less tax-equivalent adjustment 2,287 2,163 Net interest revenue 352,626 316,325 Provision for credit losses 15,000 15,000 Other operating revenue 197,086 189,698 Other operating expense 318,456 294,751 Net income before taxes 216,256 196,272 Federal and state income taxes 47,864 39,681 Net income 168,392 156,591 Net income (loss) attributable to non-controlling interests (37) 81 Net income attributable to BOK Financial Corp. shareholders $ 168,429 $ 156,510 Earnings Per Average Common Share Equivalent: Basic $ 2.51 $ 2.32 Diluted $ 2.51 $ 2.32 Yield calculations are shown on a tax equivalent at the statutory federal and state rates for the periods presented.
Biggest changeYield/rate calculations are generally based on the conventions that determine how interest income and expense is accrued 36 Table 4 - Quarterly Financial Summary (continued) Consolidated Daily Average Balances, Average Yields and Rates Three Months Ended June 30, 2023 March 31, 2023 December 31, 2022 Average Balance Revenue /Expense Yield / Rate Average Balance Revenue / Expense Yield / Rate Average Balance Revenue / Expense Yield / Rate $ 708,475 $ 9,552 5.41 % $ 616,596 $ 6,506 4.28 % $ 568,307 $ 5,822 4.06 % 4,274,803 47,882 4.50 % 3,031,969 34,073 4.52 % 3,086,985 28,473 3.70 % 2,408,122 8,659 1.44 % 2,473,796 9,017 1.46 % 2,535,305 9,223 1.46 % 12,033,597 94,849 3.00 % 11,738,693 89,112 2.87 % 10,953,851 73,317 2.54 % 245,469 3,116 5.07 % 300,372 3,893 5.17 % 92,012 931 4.40 % 351,944 6,429 7.31 % 316,724 5,808 7.34 % 216,673 3,088 5.70 % 72,959 1,092 5.85 % 65,769 979 5.79 % 98,613 1,390 5.56 % 22,889,054 400,988 7.03 % 22,476,247 369,626 6.67 % 21,976,004 331,649 5.99 % (252,890) (238,909) (242,450) 22,636,164 400,988 7.10 % 22,237,338 369,626 6.74 % 21,733,554 331,649 6.06 % 42,731,533 572,567 5.29 % 40,781,257 519,014 5.06 % 39,285,300 453,893 4.53 % 163,903 177,312 194,996 5,012,671 5,023,899 5,729,322 $ 47,908,107 $ 45,982,468 $ 45,209,618 $ 18,368,592 $ 119,272 2.60 % $ 18,639,900 $ 87,936 1.91 % $ 18,898,315 $ 60,893 1.28 % 926,882 490 0.21 % 958,443 248 0.10 % 969,275 205 0.08 % 2,076,037 16,904 3.27 % 1,477,720 7,090 1.95 % 1,417,606 4,476 1.25 % 21,371,511 136,666 2.56 % 21,076,063 95,274 1.83 % 21,285,196 65,574 1.22 % 3,670,994 41,905 4.58 % 1,759,237 14,450 3.33 % 1,046,447 5,407 2.05 % 5,275,291 67,316 5.12 % 4,512,280 52,588 4.73 % 2,523,195 25,961 4.08 % 131,153 2,219 6.79 % 131,166 2,069 6.40 % 131,180 2,038 6.16 % 30,448,949 248,106 3.27 % 27,478,746 164,381 2.43 % 24,986,018 98,980 1.57 % 10,998,201 12,406,408 14,176,189 436,353 316,738 575,957 1,079,692 939,553 853,134 4,944,912 4,841,023 4,618,320 $ 47,908,107 $ 45,982,468 $ 45,209,618 $ 324,461 2.02 % $ 354,633 2.63 % $ 354,913 2.96 % 3.00 % 3.45 % 3.54 % 2,200 2,285 2,287 322,261 352,348 352,626 17,000 16,000 15,000 209,049 177,865 197,086 318,673 305,812 318,456 195,637 208,401 216,256 44,001 45,905 47,864 151,636 162,496 168,392 328 128 (37) $ 151,308 $ 162,368 $ 168,429 $ 2.27 $ 2.43 $ 2.51 $ 2.27 $ 2.43 $ 2.51 37 Table 5 – Quarterly Volume/Rate Analysis (In thousands) Three Months Ended Dec. 31, 2023 / Sep. 30, 2023 Change Due To 1 Change Volume Yield / Rate Tax-equivalent interest revenue: Interest-bearing cash and cash equivalents $ (103) $ 95 $ (198) Trading securities 3,712 (282) 3,994 Investment securities (251) (249) (2) Available for sale securities 6,318 1,469 4,849 Fair value option securities (353) (262) (91) Restricted equity securities (106) (193) 87 Residential mortgage loans held for sale (198) (256) 58 Loans 12,159 5,491 6,668 Total tax-equivalent interest revenue 21,178 5,813 15,365 Interest expense: Transaction deposits 22,090 8,826 13,264 Savings deposits 89 (39) 128 Time deposits 2,862 1,633 1,229 Funds purchased and repurchase agreements (2,833) (2,695) (138) Other borrowings 3,271 2,075 1,196 Subordinated debentures 22 (1) 23 Total interest expense 25,501 9,799 15,702 Tax-equivalent net interest revenue (4,323) (3,986) (337) Change in tax-equivalent adjustment (102) Net interest revenue $ (4,221) 1 Changes attributable to both volume and yield/rate are allocated to both volume and yield/rate on an equal basis. 38 Other Operating Revenue 2023 Other Operating Revenue Other operating revenue was $789.9 million for 2023, an increase of $146.7 million or 23% compared to 2022.
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.
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.
General business loans primarily consist of $2.1 billion of wholesale/retail loans and $1.4 billion of loans from other commercial industries. We participate in shared national credits when appropriate to obtain or maintain business relationships with local customers.
General business loans primarily consist of $2.2 billion of wholesale/retail loans and $1.4 billion of loans from other commercial industries. We participate in shared national credits when appropriate to obtain or maintain business relationships with local customers.
As more fully discussed under Customer Derivative Programs in Note 6 of the Consolidated Financial Statements, we offer commodity, interest rate, foreign exchange and equity derivatives to our customers. Derivative contracts executed with customers are offset with contracts between selected counterparties and exchanges to minimize market risk from changes in commodity prices, interest rates or foreign exchange rates.
As more fully discussed under Customer Derivative Programs in Note 6 to the Consolidated Financial Statements, we offer commodity, interest rate, foreign exchange and equity derivatives to our customers. Derivative contracts executed with customers are offset with contracts between selected counterparties and exchanges to minimize market risk from changes in commodity prices, interest rates or foreign exchange rates.
Please note that although non-GAAP financial measures provide useful insight to analysts, investors and regulators, they should not be considered in isolation or relied upon as a substitute for analysis using GAAP measures. Table 32 following provides a reconciliation of the non-GAAP measures with financial measures defined by GAAP.
Please note that although non-GAAP financial measures provide useful insight to analysts, investors and regulators, they should not be considered in isolation or relied upon as a substitute for analysis using GAAP measures. Table 32 provides a reconciliation of the non-GAAP measures with financial measures defined by GAAP.
See additional discussion in "Lines of Business" section of Management's Discussion and Analysis. Customer hedging revenue is based primarily on realized and unrealized changes in the fair value of derivative contracts held for customer risk management programs.
See additional discussion in "Lines of Business" section of Management's Discussion and Analysis. 39 Customer hedging revenue is based primarily on realized and unrealized changes in the fair value of derivative contracts held for customer risk management programs.
All these terms are used for convenience only and are not intended as a precise description of any of the separate companies, each of which manages its own affairs. 72
All these terms are used for convenience only and are not intended as a precise description of any of the separate companies, each of which manages its own affairs.
In addition to management’s quarterly assessment of credit risk, banking regulators annually review a sample of shared national credits for proper risk grading. 53 Commercial Real Estate Commercial real estate represents loans for the construction of buildings or other improvements to real estate and property held by borrowers for investment purposes generally within our geographical footprint.
In addition to management’s quarterly assessment of credit risk, banking regulators annually review a sample of shared national credits for proper risk grading. 57 Commercial Real Estate Commercial real estate represents loans for the construction of buildings or other improvements to real estate and property held by borrowers for investment purposes generally within our geographical footprint.
Net charge-offs of loans to individuals include deposit account overdraft losses. 62 Nonperforming Assets As more fully described in Note 1 to the Consolidated Financial Statements, loans are generally classified as nonaccruing when it becomes probable that we will not collect the full contractual principal and interest.
Net charge-offs of loans to individuals include deposit account overdraft losses. 65 Nonperforming Assets As more fully described in Note 1 to the Consolidated Financial Statements, loans are generally classified as nonaccruing when it becomes probable that we will not collect the full contractual principal and interest.
We have evaluated the recoverability of our deferred tax assets based on the generation of future taxable income during the periods in which those temporary differences become deductible and determined that no valuation allowance was required in 2022 or 2021.
We have evaluated the recoverability of our deferred tax assets based on the generation of future taxable income during the periods in which those temporary differences become deductible and determined that no valuation allowance was required in 2023 or 2022.
Based on dollars committed, approximately 80% of shared national credits are to borrowers with local market relationships and we serve as the agent lender in approximately 22% of our shared national credits. We hold shared national credits to the same standard of analysis and perform the same level of review as internally originated credits.
Based on dollars committed, approximately 79% of shared national credits are to borrowers with local market relationships and we serve as the agent lender in approximately 22% of our shared national credits. We hold shared national credits to the same standard of analysis and perform the same level of review as internally originated credits.
We retain off-balance sheet credit risk related to losses in excess of amounts guaranteed by the U.S. Department of Veteran's Affairs ("VA"). We also have off-balance sheet credit risk related to certain residential mortgage loans primarily originated under community development loan programs that were sold to a U.S. government agency with full recourse prior to 2007.
We retain off-balance sheet credit risk related to losses in excess of amounts guaranteed by the VA. We also have off-balance sheet credit risk related to certain residential mortgage loans primarily originated under community development loan programs that were sold to a U.S. government agency with full recourse prior to 2007.
No credit impairment of available for sale securities was identified in 2022. 50 Certain residential mortgage-backed securities issued by U.S. government agencies and included in Fair value option securities on the Consolidated Balance Sheets have been segregated and designated as economic hedges of changes in the fair value of our mortgage servicing rights.
No credit impairment of available for sale securities was identified in 2023. Certain residential mortgage-backed securities issued by U.S. government agencies and included in Fair value option securities on the Consolidated Balance Sheets have been segregated and designated as economic hedges of changes in the fair value of our mortgage servicing rights.
While commercial loans are generally secured by the customer’s assets including real property, inventory, accounts receivable, operating equipment, interests in mineral rights and other property and may also include personal guarantees of the owners and related parties, the primary source of repayment of the loans is the on-going cash flow from operations of the customer’s business.
While commercial loans are generally secured by the customer’s assets including real property, inventory, accounts receivable, operating equipment, interests in mineral rights and other property and may also include personal guarantees of the owners and related parties, the primary source of repayment of the loans is the ongoing cash flow from operations of the customer’s business.
The fair value of derivative contracts reported as assets under these programs, net of cash margin held by the Company, by category of debtor at December 31, 2022 follows in Table 25.
The fair value of derivative contracts reported as assets under these programs, net of cash margin held by the Company, by category of debtor at December 31, 2023 follows in Table 25.
At December 31, 2022, based on the most restrictive limitations as well as management’s internal capital policy, BOKF, NA could declare up to $227 million of dividends without regulatory approval. Dividend constraints may be alleviated through increases in retained earnings, capital issuances or changes in risk weighted assets.
At December 31, 2023, based on the most restrictive limitations as well as management’s internal capital policy, BOKF, NA could declare up to $405 million of dividends without regulatory approval. Dividend constraints may be alleviated through increases in retained earnings, capital issuances or changes in risk weighted assets.
Additional discussion of fair value measurement and disclosure is included in Notes 7 and 19 of the Consolidated Financial Statements. Mortgage Servicing Rights We have a significant investment in mortgage servicing rights ("MSRs"). Our MSRs are primarily retained from sales in the secondary market of residential mortgage loans we have originated or purchased from correspondent lenders.
Additional discussion of fair value measurement and disclosure is included in Notes 7 and 19 to the Consolidated Financial Statements. Mortgage Servicing Rights We have a significant investment in MSRs. Our MSRs are primarily retained from sales in the secondary market of residential mortgage loans we have originated or purchased from correspondent lenders. MSRs may be purchased from other lenders.
We evaluate this risk through extensive modeling of risk both before making an investment and throughout the life of the security. Our best estimate of the effective duration of the combined residential mortgage-backed securities portfolio held in investment and available for sale securities portfolios at December 31, 2022 is 3.2 years.
We evaluate this risk through extensive modeling of risk both before making an investment and throughout the life of the security. Our best estimate of the effective duration of the combined residential mortgage-backed securities portfolio held in investment and available for sale securities portfolios at December 31, 2023 is 3.4 years.
Shared national credits are defined by banking regulators as credits of more than $100 million and with three or more non-affiliated banks as participants. At December 31, 2022, the outstanding principal balance of these loans totaled $5.3 billion, including $2.5 billion in the energy sector.
Shared national credits are defined by banking regulators as credits of more than $100 million and with three or more non-affiliated banks as participants. At December 31, 2023, the outstanding principal balance of these loans totaled $5.7 billion, including $2.5 billion in the energy sector.
As part of our evaluation of credit quality, we analyze rigorous stress tests over a range of commodity prices and take proactive steps to mitigate risk when appropriate. Outstanding energy loans totaled $3.4 billion or 15% of total loans at December 31, 2022.
As part of our evaluation of credit quality, we analyze rigorous stress tests over a range of commodity prices and take proactive steps to mitigate risk when appropriate. Outstanding energy loans totaled $3.4 billion or 14% of total loans at December 31, 2023.
Approximately $1.6 billion of the services category is made up of loans with individual balances of less than $10 million. Service sector loans are generally secured by the assets of the borrower with repayment coming from the cash flows of ongoing operations of the customer’s business. General business loans increased $779 million to $3.5 billion or 16% of total loans.
Approximately $1.6 billion of the services category is made up of loans with individual balances of less than $10 million. Service sector loans are generally secured by the assets of the borrower with repayment coming from the cash flows of ongoing operations of the customer’s business. General business loans increased $136 million to $3.6 billion or 15% of total loans.
Fiduciary and asset management revenue is earned through managing or holding of assets for customers and executing transactions or providing related services. Approximately 80% of fiduciary and asset management revenue is primarily based on the fair value of assets. Rates applied to those asset values vary based on the nature of the relationship.
Fiduciary and asset management revenue is earned through managing or holding of assets for customers and executing transactions or providing related services. Fiduciary and asset management revenue is largely based on the fair value of assets. Rates applied to those asset values vary based on the nature of the relationship.
During the height of the COVID-19 pandemic, we voluntarily waived certain administration fees on the Cavanal Hill money market funds in order to maintain positive yields on these funds in the low short-term interest rate environment. This practice subsided in 2022.
During the height of the COVID-19 pandemic, we voluntarily waived certain administration fees on the Cavanal Hill money market funds in order to maintain positive yields on these funds in the low short-term interest rate environment.
The Company generally retains nonperforming assets to maximize potential recovery, which may cause future nonperforming assets to decrease more slowly. 63 A rollforward of nonperforming assets for the years ended December 31, 2022 and December 31, 2021 follows in Table 28.
The Company generally retains nonperforming assets to maximize potential recovery, which may cause future nonperforming assets to decrease more slowly. 66 A rollforward of nonperforming assets for the years ended December 31, 2023 and December 31, 2022 follows in Table 28.
At December 31, 2022, residential mortgage-backed securities represented 56% of total fair value of available for sale securities. A primary risk of holding residential mortgage-backed securities comes from extension during periods of rising interest rates or prepayment during periods of falling interest rates.
At December 31, 2023, residential mortgage-backed securities represented 62% of total fair value of available for sale securities. A primary risk of holding residential mortgage-backed securities comes from extension during periods of rising interest rates or prepayment during periods of falling interest rates.
Generally, we loan to borrowers with a portfolio of multiple facilities that serves to help diversify risks specific to a single facility. The services sector of the loan portfolio increased $64 million to $3.4 billion or 15% of total loans.
Generally, we loan to borrowers with a portfolio of multiple facilities that serves to help diversify risks specific to a single facility. The services sector of the loan portfolio increased $145 million to $3.6 billion or 15% of total loans.
Derivative contracts are carried at fair value. At December 31, 2022, the net fair values of derivative contracts, before consideration of cash margin, reported as assets under these programs totaled $1.0 billion compared to $1.1 billion at December 31, 2021.
Derivative contracts are carried at fair value. At December 31, 2023, the net fair values of derivative contracts, before consideration of cash margin, reported as assets under these programs totaled $593 million compared to $1.0 billion at December 31, 2022.
Dept. of Veteran's Affairs 1,005,368 1,095,877 57 Customer Derivative Programs We offer programs that permit our customers to hedge various risks including fluctuations in energy, interest rates, foreign exchange rates, and other commodities. Each of these programs work essentially the same way. Derivative contracts are executed between the customers and the Company.
Dept. of Veteran's Affairs 959,256 1,005,368 60 Customer Derivative Programs We offer programs that permit our customers to hedge various risks including fluctuations in energy, interest rates, foreign exchange rates, and other commodities. Each of these programs work essentially the same way. Derivative contracts are executed between the customers and the Company.
Models incorporate base case, downside, and upside macroeconomic variables such as real gross domestic product ("GDP") growth, civilian unemployment rate and West Texas Intermediate ("WTI") oil prices on a probability weighted basis. See Note 4 to the Consolidated Financial Statements for additional discussion of methodology of allowance for loan losses.
Models incorporate base case, downside, and upside macroeconomic variables such as real GDP growth, civilian unemployment rate and WTI oil prices on a probability weighted basis. See Note 4 to the Consolidated Financial Statements for additional discussion of methodology of allowance for loan losses.
MSRs may be purchased from other lenders. Both originated and purchased MSRs are initially recognized at fair value. We carry all MSRs at fair value. Changes in fair value are recognized in earnings as they occur. MSRs are not traded in active markets. The fair value of MSRs is determined by discounting the projected cash flows.
Both originated and purchased MSRs are initially recognized at fair value. We carry all MSRs at fair value. Changes in fair value are recognized in earnings as they occur. MSRs are not traded in active markets. The fair value of MSRs is determined by discounting the projected cash flows.
The loan to deposit ratio increased to 65% at December 31, 2022 from 49% at December 31, 2021, and continues to provide significant on-balance sheet liquidity to meet future loan demand and contractual obligations.
The loan to deposit ratio increased to 70% at December 31, 2023 from 65% at December 31, 2022, and continues to provide significant on-balance sheet liquidity to meet future loan demand and contractual obligations.
Net interest margin is typically greater than net interest spread due to interest income earned on assets funded by non-interest bearing liabilities such as demand deposits and equity. Tax-equivalent net interest revenue totaled $1.2 billion for 2022, an increase of $92.9 million over the prior year.
Net interest margin is typically greater than net interest spread due to interest income earned on assets funded by non-interest bearing liabilities such as demand deposits and equity. Tax-equivalent net interest revenue totaled $1.3 billion for 2023, an increase of $61.1 million over the prior year.
In response to rising inflation, the Federal Reserve increased the federal funds rate 425 basis points since the beginning of the year. The resulting impact on market interest rates has increased net interest margin as our earning assets, led by our significant percentage of variable-rate commercial loans, reprice at a higher rate and faster pace than our interest-bearing liabilities.
In response to rising inflation, the Federal Reserve increased the federal funds rate 525 basis points since the beginning of 2022. The resulting impact on market interest rates increased net interest margin at first as our earning assets, led by our significant percentage of variable-rate commercial loans, repriced at a higher rate and faster pace than our interest-bearing liabilities.
This debt bears interest at the rate of 5.625% through June 25, 2025 and thereafter, the notes will bear an annual floating rate equal to 3-month LIBOR plus 317 basis points. We also acquired $72 million of junior subordinated debentures.
This debt bears interest at the rate of 5.625% through June 25, 2025 and thereafter, the notes will bear an annual floating rate equal to 3-month SOFR plus 317 basis points and a 26 basis point tenor adjustment. We also acquired $72 million of junior subordinated debentures.
Management estimates the combined portfolios' duration extends to 3.7 years assuming an immediate 200 basis point upward shock. The estimated duration contracts to 2.9 years assuming a 100 basis point decline in the current rate environment.
Management estimates the combined portfolios' duration extends to 3.8 years assuming an immediate 200 basis point upward shock. The estimated duration contracts to 2.5 years assuming a 200 basis point decline in the current rate environment.
The aggregate gross amount of unrealized losses on available for sale securities totaled $894 million at December 31, 2022, a $780 million increase compared to December 31, 2021. On a quarterly basis, we perform an evaluation on debt securities to determine if the unrealized losses are temporary as more fully described in Note 2 of the Consolidated Financial Statements.
The aggregate gross amount of unrealized losses on available for sale securities totaled $669 million at December 31, 2023, a $225 million decrease compared to December 31, 2022. On a quarterly basis, we perform an evaluation on debt securities to determine if the unrealized losses are temporary as more fully described in Note 2 to the Consolidated Financial Statements.
The average outstanding principal balance of mortgage loans serviced for others totaled $17.9 billion at December 31, 2022, a $2.5 billion increase compared to December 31, 2021. During 2022, we acquired $3.8 billion in unpaid principal balance of mortgage servicing rights.
The average outstanding principal balance of mortgage loans serviced for others totaled $20.8 billion at December 31, 2023, a $2.9 billion increase compared to December 31, 2022. During 2023, we acquired $2.8 billion in unpaid principal balance of mortgage servicing rights.
Based on current prices, a decrease in market prices down to an equivalent of $60.93 per barrel of oil would decrease the fair value of derivative assets by $328 million with lending customers comprising the bulk of the assets.
Based on current prices, a decrease in market prices down to an equivalent of $54.72 per barrel of oil would decrease the fair value of derivative assets by $11 million with lending customers comprising the bulk of the assets.
An increase in prices up to the equivalent of $91.25 per barrel of oil would increase the fair value of derivative assets by $601 million. Liquidity requirements of this program are also affected by our credit rating.
An increase in prices up to the equivalent of $88.58 per barrel of oil would increase the fair value of derivative assets by $397 million. Liquidity requirements of this program are also affected by our credit rating.
Based on the average balances for 2022, approximately 80% of our funding was provided by deposit accounts, 6% from borrowed funds, less than 1% from long-term subordinated debt and 10% from equity.
Based on the average balances for 2023, approximately 69% of our funding was provided by deposit accounts, 18% from borrowed funds, less than 1% from long-term subordinated debt and 10% from equity.
Before consideration of cash margin paid to counterparties, the aggregate net fair values of derivative contracts held under these programs reported as liabilities totaled $1.0 billion.
Before consideration of cash margin paid to counterparties, the aggregate net fair values of derivative contracts held under these programs reported as liabilities totaled $587 million.
Internal and external factors that might cause such a difference include, but are not limited to changes in government, consumer or business responses to, and ability to treat or prevent further outbreak of the COVID-19 pandemic, commodity prices, interest rates and interest rate relationships, inflation, demand for products and services, the degree of competition by traditional and nontraditional competitors, changes in banking regulations, tax laws, prices, levies and assessments, the impact of technological advances, and trends in customer behavior as well as their ability to repay loans.
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, 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.
At December 31, 2022, total derivative assets were reduced by $182 million of cash collateral received from counterparties, and total derivative liabilities were reduced by $484 million of cash collateral paid to counterparties related to instruments executed with the same counterparty under a master netting agreement.
At December 31, 2023, total derivative assets were reduced by $265 million of cash collateral received from counterparties, and total derivative liabilities were reduced by $6.4 million of cash collateral paid to counterparties related to instruments executed with the same counterparty under a master netting agreement.
Approximately $2.7 billion or 78% of energy loans were to oil and gas producers, a $478 million increase compared to December 31, 2021. The majority of this portfolio is first lien, senior secured, reserve-based lending, which we believe is the lowest risk form of energy lending.
Approximately $2.7 billion or 78% of energy loans were to oil and gas producers, largely unchanged compared to December 31, 2022. The majority of this portfolio is first lien, senior secured, reserve-based lending, which we believe is the lowest risk form of energy lending.
See "Summary of Credit Loss Experience" section of Management's Discussion and Analysis for additional discussion around our economic forecast. 21 Performance Summary Net income for the year ended December 31, 2022 totaled $520.3 million or $7.68 per diluted share compared with net income of $618.1 million or $8.95 per diluted share for the year ended December 31, 2021.
See "Summary of Credit Loss Experience" section of Management's Discussion and Analysis for additional discussion around our economic forecast. 26 Performance Summary Net income for the year ended December 31, 2023 totaled $530.7 million or $8.02 per diluted share compared with net income of $520.3 million or $7.68 per diluted share for the year ended December 31, 2022.
The net cost of change in fair value of mortgage servicing rights and related economic hedges, as more fully presented in Table 10, was $12.5 million for 2022 compared to a net benefit of $21.0 million in 2021.
The net cost of the change in fair value of mortgage servicing rights and related economic hedges, as more fully presented in Table 10, was $18.2 million for 2023 compared to a net cost of $12.5 million in 2022.
Healthcare loans increased $430 million over December 31, 2021, primarily due to growth in loans to senior housing and care facilities. Healthcare sector loans consist primarily of loans for the development and operation of senior housing and care facilities including independent living, assisted living and skilled nursing.
Healthcare loans increased $298 million over December 31, 2022, primarily due to growth in loans to senior housing and other medical practices. Healthcare sector loans consist primarily of loans for the development and operation of senior housing and care facilities including independent living, assisted living and skilled nursing.
Interest is based on spreads over 3-month LIBOR ranging from 145 basis points to 295 basis points and mature September 17, 2033 through September 30, 2035. The junior subordinated debentures are subject to early redemption prior to maturity.
Interest is based on spreads over 3-month SOFR ranging from 145 basis points to 295 basis points with a tenor adjustment of 26 basis points and mature September 17, 2033 through September 30, 2035. The junior subordinated debentures are subject to early redemption prior to maturity.
For example, compared to a 100% Base Case scenario, a 100% Downside case would result in an additional $117 million in quantitative reserve, while a 100% Upside Case would result in $18 million less in quantitative reserve at December 31, 2022.
For example, compared to a 100% Base Case scenario, a 100% Downside case would result in an additional $172 million in quantitative reserve, while a 100% Upside Case would result in $19 million less in quantitative reserve at December 31, 2023.
Such sensitivity calculations do not necessarily reflect the nature and extent of future changes in the related allowance for a number of reasons including (1) management's weighting of multiple forecasted economic scenarios in estimating expected credit losses; (2) management's predictions of future economic trends and relationships among the scenarios may differ from actual events; and (3) management's application of subjective measures to modeled results when appropriate.
Such sensitivity calculations do not necessarily reflect the nature and extent of future changes in the related allowance for a number of reasons including (1) management's weighting of multiple forecasted economic scenarios in estimating expected credit losses; (2) management's predictions of future economic trends and relationships among the scenarios may differ from actual events; and (3) management's application of subjective measures to modeled results when appropriate. 29 Fair Value Measurement Certain assets and liabilities are recorded at fair value in the Consolidated Financial Statements.
We have elected to carry these securities at fair value with changes in fair value recognized in current period income. These securities are held with the intent that gains or losses will offset changes in the fair value of mortgage servicing rights and related derivative contracts. Fair value option securities totaled $297 million, an increase of $253 million over 2021.
We have elected to carry these securities at fair value with changes in fair value recognized in current period income. These securities are held with the intent that gains or losses will offset changes in the fair value of mortgage servicing rights and related derivative contracts.
At December 31, 2022, the carrying value of investment (held-to-maturity) securities was $2.5 billion, including a $558 thousand allowance for expected credit losses, compared to $211 million at December 31, 2021 with a $555 thousand allowance for expected credit losses. The fair value of investment securities was $2.3 billion at December 31, 2022 and $231 million at December 31, 2021.
At December 31, 2023, the carrying value of investment (held-to-maturity) securities was $2.2 billion, including a $336 thousand allowance for expected credit losses, compared to $2.5 billion at December 31, 2022 with a $558 thousand allowance for expected credit losses. The fair value of investment securities was $2.1 billion at December 31, 2023 and $2.3 billion at December 31, 2022.
The benefit to net interest margin from earning assets funded by non-interest bearing liabilities was 26 basis points for 2022, up from 7 basis points for 2021. Average earning assets for 2022 decreased $3.7 billion or 9% compared 2021.
The benefit to net interest margin from earning assets funded by non-interest bearing liabilities was 98 basis points for 2023, up from 26 basis points for 2022. Average earning assets for 2023 increased $2.9 billion or 7% compared 2022.
Derivative contracts carried as assets include energy contracts with fair values of $638 million, foreign exchange contracts with fair values of $217 million and interest rate swaps primarily sold to loan customers with fair values of $159 million.
Derivative contracts carried as assets include energy contracts with fair values of $437 million, interest rate swaps primarily sold to loan customers with fair values of $102 million and foreign exchange contracts with fair values of $54 million.
The Company's accounting policies are more fully described in Note 1 of the Consolidated Financial Statements. Management makes significant assumptions and estimates in the preparation of the Consolidated Financial Statements and accompanying notes in conformity with GAAP that may be highly subjective, complex and subject to variability. Actual results could differ significantly from these assumptions and estimates.
Management makes significant assumptions and estimates in the preparation of the Consolidated Financial Statements and accompanying notes in conformity with GAAP that may be highly subjective, complex and subject to variability. Actual results could differ significantly from these assumptions and estimates.
Appropriateness of the allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments is determined by a senior management Allowance Committee which requires judgment about effects of uncertain matters, resulting in a subjective calculation which is inherently imprecise.
Quarterly, a senior management Allowance Committee assesses the appropriateness of the allowance for loan losses and accrual for off-balance sheet credit risk. This assessment requires judgment about effects of uncertain matters, resulting in a subjective calculation which is inherently imprecise.
Other real estate loans decreased $35 million or 8%. Approximately 67% of commercial real estate loans are in our geographic footprint based on collateral location. The largest concentration of loans in this segment outside our footprint is Utah, totaling 10% of the segment. All other states represent less than 5% individually.
Approximately 66% of commercial real estate loans are in our geographic footprint based on collateral location. The largest concentration of loans in this segment outside our footprint is Utah, totaling 9% of the segment. All other states represent less than 5% individually.
Although the resulting expected credit loss estimate represents management's best estimates at the time, actual credit losses will differ from management's estimate. Portfolio composition will change over time, actual economic conditions will differ from probability-weighted assumptions, borrower-specific circumstances will change, as well as other factors.
Although the resulting expected credit loss estimate represents management's best estimates at the time, actual credit losses will differ from management's estimate. Portfolio composition will change over time, actual economic conditions will differ from probability-weighted assumptions, borrower-specific circumstances will change, as well as other factors. Differences between actual losses and management's estimates may materially affect the Company's results of operations.
Real Estate and Other Repossessed Assets Real estate and other repossessed assets totaled $14 million at December 31, 2022, composed primarily of $9.5 million of developed commercial real estate. Real estate and other repossessed assets decreased $10 million compared to December 31, 2021, primarily related to the sale of developed commercial real estate and oil and gas properties.
Real Estate and Other Repossessed Assets Real estate and other repossessed assets totaled $2.9 million at December 31, 2023, composed primarily of $2.1 million of developed commercial real estate. Real estate and other repossessed assets decreased $11 million compared to December 31, 2022, primarily related to the sale of developed commercial real estate and oil and gas properties.
Unfunded commercial real estate loan commitments were $3.1 billion at December 31, 2022, a $1.2 billion increase over the prior year. We take a disciplined approach to managing our concentration of commercial real estate loan commitments as a percentage of Tier 1 Capital.
Unfunded commercial real estate loan commitments were $1.8 billion at December 31, 2023, a $1.3 billion decrease compared to the prior year. We take a disciplined approach to managing our concentration of total commercial real estate loan commitments as a percentage of Tier 1 Capital.
Capital is managed to maximize long-term value to the shareholders. Factors considered in managing capital include projections of future earnings, asset growth and acquisition strategies, and regulatory and debt covenant requirements. Capital management may include subordinated debt issuance, share repurchase and stock and cash dividends.
Factors considered in managing capital include projections of future earnings, asset growth and acquisition strategies, and regulatory and debt covenant requirements. Capital management may include subordinated debt issuance, share repurchase and stock and cash dividends.
Personal loans consist primarily of loans to Wealth Management clients secured by the cash surrender value of insurance policies and marketable securities. It also includes direct loans secured by and for the purchase of automobiles, recreational and marine equipment as well as unsecured loans.
These loans are secured by a first or second mortgage on the customer's primary residence. Personal loans consist primarily of loans to Wealth Management clients secured by the cash surrender value of insurance policies and marketable securities. It also includes direct loans secured by and for the purchase of automobiles, recreational and marine equipment as well as unsecured loans.
The amortized cost of available for sale securities totaled $12.4 billion at December 31, 2022, a decrease of $705 million compared to December 31, 2021. Available for sale securities consist primarily of U.S. government agency residential mortgage-backed securities and U.S. government agency commercial mortgage-backed securities.
The amortized cost of available for sale securities totaled $12.9 billion at December 31, 2023, an increase of $544 million compared to December 31, 2022. Available for sale securities consist primarily of U.S. government agency residential mortgage-backed securities and U.S. government agency commercial mortgage-backed securities.
Table 9 – Mortgage Banking Revenue (Dollars in thousands) Year Ended December 31, 2022 2021 2020 Mortgage production revenue $ (1,838) $ 60,712 $ 125,848 Mortgage loans funded for sale $ 1,180,403 $ 2,818,789 $ 3,764,112 Add: Current year end outstanding commitments 45,492 171,412 380,637 Less: Prior year end outstanding commitments 171,412 380,637 158,460 Total mortgage production volume 1,054,483 2,609,564 3,986,289 Production revenue as a percentage of production volume (0.17) % 2.33 % 3.16 % Realized margin on funded mortgage loans 0.63 % 2.71 % 2.87 % Mortgage loan refinances to mortgage loans funded for sale 24 % 54 % 58 % Primary mortgage interest rates: Average 5.34 % 2.96 % 3.10 % Period end 6.41 % 3.11 % 2.67 % Mortgage servicing revenue $ 51,203 $ 45,184 $ 56,512 Average outstanding principal balance of mortgage loans serviced for others 17,871,306 15,404,548 18,422,210 Average mortgage servicing fee rates 0.29 % 0.29 % 0.31 % Primary rates disclosed in Table 9 above represent rates generally available to borrowers on 30 year conforming mortgage loans.
Table 9 – Mortgage Banking Revenue (Dollars in thousands) Year Ended December 31, 2023 2022 2021 Mortgage production revenue $ (5,339) $ (1,838) $ 60,712 Mortgage loans funded for sale $ 666,391 $ 1,180,403 $ 2,818,789 Add: Current year end outstanding commitments 34,783 45,492 171,412 Less: Prior year end outstanding commitments 45,492 171,412 380,637 Total mortgage production volume $ 655,682 $ 1,054,483 $ 2,609,564 Production revenue as a percentage of production volume (0.81) % (0.17) % 2.33 % Realized margin on funded mortgage loans (0.75) % 0.63 % 2.71 % Mortgage loan refinances to mortgage loans funded for sale 9 % 24 % 54 % Primary mortgage interest rates: Average 6.79 % 5.34 % 2.96 % Period end 6.42 % 6.41 % 3.11 % Mortgage servicing revenue $ 61,037 $ 51,203 $ 45,184 Average outstanding principal balance of mortgage loans serviced for others 20,779,627 17,871,306 15,404,548 Average mortgage servicing fee rates 0.29 % 0.29 % 0.29 % Primary rates disclosed in Table 9 above represent rates generally available to borrowers on 30 year conforming mortgage loans.
Approximately 72% of the committed production loans are secured by properties primarily producing oil and 28% of the committed production loans are secured by properties primarily producing natural gas. Loans to midstream oil and gas companies totaled $575 million or 17% of energy loans, a decrease of $71 million compared to the prior year.
Approximately 69% of the committed production loans are secured by properties primarily producing oil and 31% of the committed production loans are secured by properties primarily producing natural gas. Loans to midstream oil and gas companies totaled $551 million or 16% of energy loans, a decrease of $24 million compared to the prior year.
Unfunded energy loan commitments were $3.8 billion at December 31, 2022, up $806 million over December 31, 2021. While utilization levels remain low, this provides ample capacity for growth from our current customer base. The healthcare sector of the loan portfolio totaled $3.8 billion or 17% of total loans.
Unfunded energy loan commitments were $4.5 billion at December 31, 2023, up $687 million over December 31, 2022. Utilization levels remain low, providing ample capacity for growth from our current customer base. The healthcare sector of the loan portfolio totaled $4.1 billion or 17% of total loans.
Changes in the fair value of these instruments are generally expected to partially offset changes in the fair value of MSRs. 37 Table 10 – Gain (Loss) on Mortgage Servicing Rights, Net of Economic Hedge (In thousands) Year Ended December 31, 2022 2021 2020 Gain (loss) on mortgage hedge derivative contracts, net $ (72,987) $ (19,632) $ 42,096 Gain (loss) on fair value option securities, net (20,358) (2,239) 53,248 Gain (loss) on economic hedge of mortgage servicing rights (93,345) (21,871) 95,344 Gain (loss) on change in fair value of mortgage servicing rights 80,261 41,637 (79,524) Gain (loss) on changes in fair value of mortgage servicing rights, net of economic hedges included in other operating revenue (13,084) 19,766 15,820 Net interest revenue on fair value option securities 1 569 1,279 9,085 Total economic benefit (cost) of changes in the fair value of mortgage servicing rights, net of economic hedges $ (12,515) $ 21,045 $ 24,905 1 Actual interest earned on fair value option securities less internal transfer-priced cost of funds.
Changes in the fair value of these instruments are generally expected to partially offset changes in the fair value of MSRs. 42 Table 10 – Gain (Loss) on Mortgage Servicing Rights, Net of Economic Hedge (In thousands) Year Ended December 31, 2023 2022 2021 Loss on mortgage hedge derivative contracts, net $ (10,514) $ (72,987) $ (19,632) Loss on fair value option securities, net (4,292) (20,358) (2,239) Loss on economic hedge of mortgage servicing rights (14,806) (93,345) (21,871) Gain (loss) on change in fair value of mortgage servicing rights (3,115) 80,261 41,637 Gain (loss) on changes in fair value of mortgage servicing rights, net of economic hedges included in other operating revenue (17,921) (13,084) 19,766 Net interest revenue (expense) on fair value option securities 1 (258) 569 1,279 Total economic benefit (cost) of changes in the fair value of mortgage servicing rights, net of economic hedges $ (18,179) $ (12,515) $ 21,045 1 Actual interest earned on fair value option securities less internal transfer-priced cost of funds.
We expect an $8.2 million decrease in the fair value of our MSRs from a 50 basis point decrease in primary mortgage interest rates. 25 Results of Operations Net Interest Revenue and Net Interest Margin 2022 Net Interest Revenue Net interest revenue is the interest earned on debt securities, loans and other interest-earning assets less interest paid for interest-bearing deposits and other borrowings.
We expect a $9.9 million decrease in the fair value of our MSRs from a 50 basis point parallel rate shock. 30 Results of Operations Net Interest Revenue and Net Interest Margin 2023 Net Interest Revenue Net interest revenue is the interest earned on debt securities, loans and other interest-earning assets less interest paid for interest-bearing deposits and other borrowings.
Macro-economic factors – GDP is forecasted to grow by 0.9% over the next 12 months. – Civilian unemployment rate of 3.9% in the first quarter of 2023 increasing to 4.1% by the fourth quarter of 2023. – WTI oil prices are projected to generally follow the NYMEX forward curve that existed at the end of December 2022 and are expected to average $75.05 per barrel over the next 12 months. – GDP is forecasted to contract 1.3% over the next 12 months. – Civilian unemployment rate of 4.8% in the first quarter of 2023 worsens to 6.0% by the fourth quarter of 2023. – WTI oil prices are projected to average $65.87 per barrel over the next twelve months, peaking at $70.78 in the first quarter of 2023 and falling 15% over the following three quarters. – GDP is forecasted to grow by 1.6% over the next 12 months. – Civilian unemployment rate of 3.7% in the first quarter of 2023 increases slightly to 3.8% by the fourth quarter of 2023. – WTI oil prices are projected to average $83.58 per barrel over the next 12 months.
Macro-economic factors – GDP is forecasted to grow by 1.6% over the next 12 months. – Civilian unemployment rate of 3.9% in the first quarter of 2024 increasing to 4.2% by the fourth quarter of 2024. – WTI oil prices are projected to generally follow the NYMEX forward curve that existed at the end of December 2023 and are expected to average $71.34 per barrel over the next 12 months. – GDP is forecasted to contract 1.8% over the next 12 months. – Civilian unemployment rate of 4.7% in the first quarter of 2024 worsens to 6.1% by the fourth quarter of 2024. – WTI oil prices are projected to average $54.46 per barrel over the next twelve months, with a peak of $62.44 in the first quarter of 2024 and falling 22% over the following three quarters. – GDP is forecasted to grow by 1.9% over the next 12 months. – Civilian unemployment rate of 3.8% in the first quarter of 2024 increases slightly to 4.0% by the fourth quarter of 2024. – WTI oil prices are projected to average $74.75 per barrel over the next 12 months.
We believe that a variety of fee revenue sources provides an offset to changes in interest rates, values in the equity markets, commodity prices and consumer spending, all of which can be volatile.
We believe that a variety of fee revenue sources provides diversification to changes resulting from market or economic conditions such as interest rates, values in the equity markets, commodity prices and consumer spending, all of which can be volatile.
A summary of changes in assets under management or administration for the year ended December 31, 2022, 2021, and 2020 follows: Table 8 – Changes in Assets Under Management or Administration (In thousands) Year Ended December 31, 2022 2021 2020 Beginning balance $ 104,917,721 $ 91,592,247 $ 82,740,961 Net inflows (outflows) 572,812 4,786,237 1,859,868 Net change in fair value (5,755,493) 8,539,237 6,991,418 Ending balance $ 99,735,040 $ 104,917,721 $ 91,592,247 Assets under management as of December 31, 2022 consist of 45% fixed income, 32% equities, 14% cash and 9% alternative investments.
A summary of changes in assets under management or administration for the year ended December 31, 2023, 2022, and 2021 follows: Table 8 – Changes in Assets Under Management or Administration (In thousands) Year Ended December 31, 2023 2022 2021 Beginning balance $ 99,735,040 $ 104,917,721 $ 91,592,247 Net inflows (outflows) (3,105,170) 572,812 4,786,237 Net change in fair value 8,107,129 (5,755,493) 8,539,237 Ending balance $ 104,736,999 $ 99,735,040 $ 104,917,721 Assets under management as of December 31, 2023 consist of 42% fixed income, 33% equities, 16% cash and 9% alternative investments.
Table 24 – Off-Balance Sheet Credit Commitments (In thousands) December 31, 2022 2021 Loan commitments $ 15,424,431 $ 12,471,482 Standby letters of credit 740,039 699,743 Unpaid principal balance of residential mortgage loans sold with recourse 44,742 54,619 Unpaid principal balance of residential mortgage loans transferred into mortgage-backed securities guaranteed by U.S.
Table 24 – Off-Balance Sheet Credit Commitments (In thousands) December 31, 2023 2022 Loan commitments $ 14,793,025 $ 15,424,431 Standby letters of credit 710,543 740,039 Unpaid principal balance of residential mortgage loans sold with recourse 39,333 44,742 Unpaid principal balance of residential mortgage loans transferred into mortgage-backed securities guaranteed by U.S.
Cash-based incentive compensation plans, which are either intended to provide current rewards to employees who generate long-term business opportunities for the Company based on growth in loans, deposits, customer relationships and other measurable metrics or intended to compensate employees with commissions on completed transactions, decreased $15.4 million or 8% compared 2021, primarily related to a decline in institutional trading activity, partially offset by increased incentives from growth in loans and loan commitments in the current year.
Cash-based incentive compensation plans, which are either intended to provide current rewards to employees who generate long-term business opportunities for the Company based on growth in loans, deposits, customer relationships and other measurable metrics or intended to compensate employees with commissions on completed transactions, increased $23.8 million or 14% compared to 2022, primarily related to higher loan and trading volumes.
The combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $289 million or 1.43% of outstanding loans and 241% of nonaccruing loans. 61 A summary of macroeconomic variables considered in developing our estimate of expected credit losses at December 31, 2022 follows: Base Downside Upside Scenario probability weighting 50% 40% 10% Economic outlook The Russia-Ukraine conflict remains isolated.
The combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments was $297 million or 1.31% of outstanding loans and 278% of nonaccruing loans. 64 A summary of macroeconomic variables considered in developing our estimate of expected credit losses at December 31, 2023 follows: Base Downside Upside Scenario probability weighting 50% 35% 15% Economic outlook Geopolitical conflicts remain isolated.
Customer hedging revenue, which is largely volume driven, totaled $45.7 million for 2022, an increase of $25.3 million or 124% compared to 2021 and was primarily attributed to our energy and interest rate derivative customers. Customer hedging revenue includes credit valuation adjustments of the fair value of derivatives to reflect the risk of counterparty default.
Customer hedging revenue, which is largely volume driven, totaled $36.5 million for 2023, a decrease of $9.2 million or 20% compared to 2022 and was primarily attributed to our energy and interest rate derivative customers. Customer hedging revenue includes credit valuation adjustments of the fair value of derivatives to reflect the risk of counterparty default.
Prior to January 1, 2020, general allowances and nonspecific allowances were based on incurred credit losses. See Note 4 to the Consolidated Financial Statements for the description of the expected credit losses calculation of the allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments.
See Note 4 to the Consolidated Financial Statements for the description of the expected credit losses calculation of the allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments.
Unrealized gains or losses, net of deferred taxes, are recorded as Accumulated Other Comprehensive Income in shareholders’ equity. At December 31, 2022, the fair value of available for sale securities was $11.5 billion, a decrease of $1.7 billion compared to December 31, 2021.
Unrealized gains or losses, net of deferred taxes, are recorded as Accumulated Other Comprehensive Income in shareholders’ equity. At December 31, 2023, the fair value of available for sale securities was $12.3 billion, an increase of $793 million compared to December 31, 2022.
The stable value wrap is provided by a domestic financial institution. 51 Loans The aggregate loan portfolio before allowance for loan losses totaled $22.6 billion at December 31, 2022, an increase of $2.4 billion compared to December 31, 2021, driven by growth in commercial loans, commercial real estate loans and loans to individuals.
The stable value wrap is provided by an investment grade financial institution. 55 Loans The aggregate loan portfolio before allowance for loan losses totaled $23.9 billion at December 31, 2023, an increase of $1.3 billion compared to December 31, 2022, driven by growth in commercial loans, commercial real estate loans and loans to individuals.
Based on our assessment as of December 31, 2022, changes in interest rates would not materially impact regulatory capital or liquidity needed to support this portion of our customer derivative program. 59 Summary of Credit Loss Experience Table 26 – Summary of Credit Loss Experience (In thousands) Year Ended Dec. 31, 2022 Dec. 31, 2021 Allowance for loan losses: Beginning balance $ 256,421 $ 388,640 Loans charged off (28,746) (51,351) Recoveries of loans previously charged off 7,601 14,334 Net loans charged off (21,145) (37,017) Provision for credit losses 428 (95,202) Ending balance $ 235,704 $ 256,421 Accrual for off-balance sheet credit risk from unfunded loan commitments: Beginning balance $ 32,977 36,921 Provision for credit losses 27,942 (3,944) Ending balance $ 60,919 $ 32,977 Accrual for off-balance sheet credit risk associated with mortgage banking activities: Beginning balance $ 3,382 $ 4,282 Loans charged off (105) (179) Provision for credit losses 1,627 (721) Ending balance $ 4,904 $ 3,382 Allowance for credit losses related to held-to-maturity (investment) securities: Beginning balance $ 555 $ 688 Provision for credit losses 3 (133) Ending balance $ 558 $ 555 Total provision for credit losses $ 30,000 $ (100,000) Average loans by portfolio segment : Commercial $ 13,393,796 $ 13,304,596 Commercial real estate 4,345,783 4,075,831 Paycheck protection program 13,501 293,976 Loans to individuals 3,526,107 3,820,753 Net charge-offs (annualized) to average loans 0.10 % 0.17 % Net charge-offs (annualized) to average loans by portfolio segment: Commercial 0.13 % 0.25 % Commercial real estate — % 0.04 % Paycheck protection program — % — % Loans to individuals 0.10 % 0.05 % Recoveries to gross charge-offs 26.44 % 27.91 % Provision for loan losses (annualized) to average loans — % (0.44) % Allowance for loan losses to loans outstanding at period-end 1.04 % 1.27 % Accrual for unfunded loan commitments to loan commitments 0.39 % 0.26 % Combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments to loans outstanding at period-end 1.31 % 1.43 % 60 Allowance for Loan Losses and Accrual for Off-Balance Sheet Credit Risk from Unfunded Loan Commitments Expected credit losses on assets carried at amortized cost are recognized over their expected lives based on models that measure the probability of default and loss given default over a 12-month reasonable and supportable forecast period.
Based on our assessment as of December 31, 2023, changes in interest rates would not materially impact regulatory capital or liquidity needed to support this portion of our customer derivative program. 62 Summary of Credit Loss Experience Table 26 – Summary of Credit Loss Experience (In thousands) Year Ended Dec. 31, 2023 Dec. 31, 2022 Allowance for loan losses: Beginning balance $ 235,704 $ 256,421 Loans charged off (27,316) (28,746) Recoveries of loans previously charged off 9,217 7,601 Net loans charged off (18,099) (21,145) Provision for credit losses 59,518 428 Ending balance $ 277,123 $ 235,704 Accrual for off-balance sheet credit risk from unfunded loan commitments: Beginning balance $ 60,919 32,977 Provision for credit losses (11,942) 27,942 Ending balance $ 48,977 $ 60,919 Accrual for off-balance sheet credit risk associated with mortgage banking activities: Beginning balance $ 4,904 $ 3,382 Net loans charged off (58) (105) Provision for credit losses (1,354) 1,627 Ending balance $ 3,492 $ 4,904 Allowance for credit losses related to held-to-maturity (investment) securities: Beginning balance $ 558 $ 555 Provision for credit losses (222) 3 Ending balance $ 336 $ 558 Total provision for credit losses $ 46,000 $ 30,000 Average loans by portfolio segment : Commercial $ 14,320,970 $ 13,407,297 Commercial real estate 5,163,569 4,345,783 Loans to individuals 3,640,810 3,526,107 Net charge-offs (annualized) to average loans 0.08 % 0.10 % Net charge-offs (annualized) to average loans by portfolio segment: Commercial 0.07 % 0.13 % Commercial real estate 0.10 % — % Loans to individuals 0.09 % 0.10 % Recoveries to gross charge-offs 33.74 % 26.44 % Provision for loan losses (annualized) to average loans 0.26 % — % Allowance for loan losses to loans outstanding at period-end 1.16 % 1.04 % Accrual for unfunded loan commitments to loan commitments 0.33 % 0.39 % Combined allowance for loan losses and accrual for off-balance sheet credit risk from unfunded loan commitments to loans outstanding at period-end 1.36 % 1.31 % 63 Allowance for Loan Losses and Accrual for Off-Balance Sheet Credit Risk from Unfunded Loan Commitments Expected credit losses on assets carried at amortized cost are recognized over their expected lives based on models that measure the probability of default and loss given default over a 12-month reasonable and supportable forecast period.
Commercial loans totaled $14.2 billion or 63% of the loan portfolio at December 31, 2022, increasing $1.7 billion or 14% compared to December 31, 2021, primarily related to growth in general business loan balances, with healthcare, energy and services loans also increasing. 52 Approximately 73% of commercial loans are located within our geographic footprint, based on collateral location.
Commercial loans totaled $14.8 billion or 62% of the loan portfolio at December 31, 2023, increasing $591 million or 4% compared to December 31, 2022, led by growth in healthcare loan balances, with services, general business and energy loans also increasing. Approximately 70% of commercial loans are located within our geographic footprint, based on collateral location.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeTable 36 –VaR and SVaR Measures (In thousands) Three Months Ended Three Months Ended Dec. 31, 2022 Sep. 30, 2022 Dec. 31, 2021 Sep. 30, 2021 10 day 99% VaR 10 day 99% SVaR 10 day 99% VaR 10 day 99% SVaR 10 day 99% VaR 10 day 99% SVaR 10 day 99% VaR 10 day 99% SVaR Average 1 $ 3,927 $ 7,091 $ 2,644 $ 7,555 $ 8,930 $ 40,010 $ 9,600 $ 19,230 Low 933 3,210 1,044 4,051 6,100 21,390 5,220 9,050 High 9,077 15,396 5,930 14,030 15,060 67,440 16,350 37,810 Period End 8,000 13,819 1,584 5,478 9,770 45,050 5,690 22,200 The Company monitors the accuracy of internal VaR models and modeling processes by back-testing model performance.
Biggest changeIn the fourth quarter of 2023, the period-end VaR and SVaR measures decreased relative to the previous quarter mainly due to a decrease in interest rate risk exposure in the trading businesses. 79 Table 36 - VaR and SVaR Measures (In thousands) Three Months Ended Three Months Ended Dec. 31, 2023 Sep. 30, 2023 Dec. 31, 2022 Sep. 30, 2022 10 day 99% VaR 10 day 99% SVaR 10 day 99% VaR 10 day 99% SVaR 10 day 99% VaR 10 day 99% SVaR 10 day 99% VaR 10 day 99% SVaR Average 1 $ 4,757 $ 8,154 $ 5,954 $ 6,118 $ 3,927 $ 7,091 $ 2,644 $ 7,555 Low 2,338 4,067 3,893 4,027 933 3,210 1,044 4,051 High 7,776 13,045 9,312 9,312 9,077 15,396 5,930 14,030 Period End 2,977 4,925 6,455 6,455 8,000 13,819 1,584 5,478 1 Average represents the simple average of each daily value observed during the reporting period.
A simulation model is used to estimate the effect of changes in interest rates on our performance across multiple interest rate scenarios. Our current internal policy limit for net interest revenue variation due to a 200 basis point parallel change in market interest rates over twelve months is a maximum decline of 5%.
A simulation model is used to estimate the effect of changes in interest rates on our performance across multiple interest rate scenarios. Our current internal policy limit for net interest revenue variation due to a 200 basis point parallel change in market interest rates over twelve months is a maximum decline of 6.5%.
A variety of methods are used to monitor and manage the market risk of trading activities. These methods include daily marking of all positions to market value, independent verification of inventory pricing, and position limits for each trading activity. Risk management tools include Value at Risk ("VaR"), stress testing and sensitivity analysis.
A variety of methods are used to monitor and manage the market risk of trading activities. These methods include daily marking of all positions to market value, independent verification of inventory pricing and position limits for each trading activity. Risk management tools include VaR, stress testing and sensitivity analysis.
These methods include daily marking of all positions to market value, independent verification of inventory pricing, and revenue sensitivity limits. Management performs a stress test to measure market risk due to changes in interest rates inherent in the mortgage production pipeline.
These methods include daily marking of all positions to market value, independent verification of inventory pricing and revenue sensitivity limits. 78 Management performs a stress test to measure market risk due to changes in interest rates inherent in the mortgage production pipeline.
Stressed VaR is calculated using the same internal models as used for the VaR-based measure. Stressed VaR is calculated over a ten-day holding period at a one-tail, 99% confidence level and employs a historical simulation approach based on a continuous twelve-month historical window selected to reflect a period of significant financial stress for the Company’s trading portfolio.
SVaR is calculated using the same internal models as used for the VaR-based measure. SVaR is calculated over a ten-day holding period at a one-tail, 99% confidence level and employs a historical simulation approach based on a continuous twelve-month historical window selected to reflect a period of significant financial stress for the Company’s trading portfolio.
Due to inherent limitations of the VaR methodology, including its reliance on past market behavior which might not be indicative of future market performance, VaR is only one of several tools used to measure and manage market risk. Other tools used to actively manage market risk include stress testing ("Stressed VaR"), and sensitivity analysis.
Due to inherent limitations of the VaR methodology, including its reliance on past market behavior which might not be indicative of future market performance, VaR is only one of several tools used to measure and manage market risk. Other tools used to actively manage market risk include stress testing (SVaR) and sensitivity analysis.
The trading portfolio’s VaR and Stressed VaR profiles are influenced by a variety of factors, including the size and composition of the portfolio, market volatility, and the correlation between different positions.
The trading portfolio’s VaR and SVaR profiles are influenced by a variety of factors, including the size and composition of the portfolio, market volatility and the correlation between different positions.
The team validates models through an evaluation process that assesses the data, theory, implementation, outcomes and governance of each scenario. MRGR assigns each model a model risk score, which determines the frequency and scope of each validation. Validations comprise an assessment of model performance as well as a model’s potential limitations given its particular assumptions or weaknesses.
Models are validated through an evaluation process that assesses the data, theory, implementation, outcomes and governance of each scenario. Each model receives a model risk score, which determines the frequency and scope of validation activities. Validations comprise an assessment of model performance as well as a model's potential limitations given its particular assumptions or weaknesses.
Interest Rate Risk – Other than Trading As previously noted in the Net Interest Revenue section of this report, management has implemented strategies to manage the Company’s balance sheet to have relatively limited exposure to changes in interest rates over a twelve-month period.
Interest Rate Risk – Other than Trading As previously noted in the Net Interest Revenue section of this report, management has implemented strategies to manage the Company’s balance sheet exposure to changes in interest rates over a twelve-month period within established policy limits.
Model Risk Governance and Review BOK Financial has an internal but independent Model Risk Governance and Review ("MRGR") team that validates models to verify they are conceptually sound, computationally accurate, performing as expected and in line with their intended use.
Model Risk Management BOK Financial has an internal independent Model Risk Management staff that validates models to verify they are conceptually sound, computationally accurate, are performing as expected and are in line with their intended use.
The Bank has ceased production of new LIBOR-based exposure as of December 31, 2021 and now offers floating rate products in various alternative reference rates with the majority of volume being observed thus far in simple or term rate versions of the Secured Overnight Financing Rate ("SOFR").
The Company ceased production of new LIBOR-based exposure as of December 31, 2021 and now offers floating rate products in various alternative reference rates, with the majority of volume being observed thus far in term rate versions of SOFR.
MRGR also enforces the Company’s model risk governance program that defines roles and responsibilities, including the authority to levy findings requiring remediation and to restrict model usage. Model Validation MRGR is independent of both the developers and users of the models.
Model Risk Management staff also enforces the Company's model risk governance program that defines roles and responsibilities, including the authority to levy findings requiring remediation and to restrict model usage. Model Validation Model validation staff maintain independence from both the developers and users of the models.
Table 35 - Mortgage Pipeline Sensitivity Analysis (In thousands) Year Ended December 31, 2022 2021 Up 50 bp Down 50 bp Up 50 bp Down 50 bp Average 1 $ (75) $ (183) $ (430) $ (439) Low 2 381 91 103 13 High 3 (402) (779) (1,244) (1,097) Period End (71) (30) (85) (181) 1 Average represents the simple average of each daily value observed during the reporting period. 2 Low represents least risk of loss in fair value measured as the smallest negative value or the largest positive value observed daily during the reporting period. 3 High represents the greatest risk of loss in fair value measured as the largest negative value or the smallest positive value observed daily during the reporting period.
Table 35 - Mortgage Pipeline Sensitivity Analysis (In thousands) Year Ended December 31, 2023 2022 Up 50 bp Down 50 bp Up 50 bp Down 50 bp Average 1 $ (61) $ (38) $ (75) $ (183) Low 2 49 61 381 91 High 3 (186) (168) (402) (779) Period End 14 (41) (71) (30) 1 Average represents the simple average of each daily value observed during the reporting period. 2 Low represents least risk of loss in fair value measured as the smallest negative value or the largest positive value observed daily during the reporting period. 3 High represents the greatest risk of loss in fair value measured as the largest negative value or the smallest positive value observed daily during the reporting period.
Based on the results of the review, the team determines the use case for the model. The ultimate validation results may require remediation actions from the business line. MRGR communicates their result as one of the following three outcomes: "Approved for use," "Approved with findings," or "Unapproved." 77
Based on the results of the review, the team determines whether the use case for the model is appropriate. The ultimate validation results may require remediation actions from the business line. Model validation results are communicated with one of the following three outcomes: "Approved for use," "Approved with findings" or "Unapproved." 80
The impact of planned growth and new business activities is factored into the simulation model. The interest rate sensitivity in Table 33 indicates management’s estimation of the impact of rate changes on net interest revenue.
The simulation incorporates assumptions regarding the effects of such changes based on a combination of historical analysis and expected behavior. The impact of planned growth and new business activities is factored into the simulation model. The interest rate sensitivity in Table 33 indicates management’s estimation of the impact of rate changes on net interest revenue.
Should deposit costs be 10%more sensitive to changes in rates, the variation in net interest revenue over the next twelve months would be (1.75)%, or ($27.2 million) for the 200 basis point increase scenario.
Should deposit costs be 10% more sensitive to changes in rates, the variation in net interest revenue over the next twelve months would be 0.00%, or flat for the 100 basis point decrease scenario.
Basis Risk can result when trading asset values and the instruments used to hedge them move at different rates. 75 VaR measures the potential loss of a given position or portfolio of positions at a specified confidence level and time horizon. BOK Financial utilizes a historical VaR methodology to measure and aggregate risks across its covered trading positions.
VaR measures the potential loss of a given position or portfolio of positions at a specified confidence level and time horizon. BOK Financial utilizes a historical VaR methodology to measure and aggregate risks across its covered trading positions.
Alternatively, should deposit funding costs be 10% less sensitive to changes in rates, the variation in net interest revenue over the next twelve months would be an increase of 0.34%, or $5.2 million for the 200 basis point increase scenario.
Alternatively, should deposit funding costs be 10% less sensitive to changes in rates, the variation in net interest revenue over the next twelve months would be (1.32)%, or ($15.8 million) for the 100 basis point decrease scenario.
The Company updates historical data used by the VaR model on a regular basis and model validators independent of business lines perform regular modeled validations to access model input, processing, and reporting components. These models are required to be independently validated and approved prior to implementation.
The Company monitors the accuracy of internal VaR models and modeling processes by back-testing model performance. The Company updates historical data used by the VaR model on a regular basis and model validators independent of business lines perform regular modeled validations to access model input, processing and reporting components.
The Board has approved an $8 million market risk limit for the trading portfolio, net of economic hedges. 76 Table 37 – Trading Securities Sensitivity Analysis (In thousands) Year Ended December 31, 2022 2021 Up 50 bp Down 50 bp Up 50 bp Down 50 bp Average 1 $ 790 $ 280 $ (852) $ 3,364 Low 2 8,643 12,277 8,631 13,323 High 3 (11,253) (6,325) (9,345) (5,392) Period End 3,507 (3,458) 1,587 355 1 Average represents the simple average of each daily value observed during the reporting period. 2 Low represents least risk of loss in fair value measured as the smallest negative value or the largest positive value observed daily during the reporting period. 3 High represents the greatest risk of loss in fair value measured as the largest negative value or the smallest positive value observed daily during the reporting period.
Table 37 - Trading Securities Sensitivity Analysis (In thousands) Year Ended December 31, 2023 2022 Up 50 bp Down 50 bp Up 50 bp Down 50 bp Average 1 $ (1,144) $ 1,881 $ 790 $ 280 Low 2 4,513 8,955 8,643 12,277 High 3 (8,223) (4,538) (11,253) (6,325) Period End (527) 1,920 3,507 (3,458) 1 Average represents the simple average of each daily value observed during the reporting period. 2 Low represents least risk of loss in fair value measured as the smallest negative value or the largest positive value observed daily during the reporting period. 3 High represents the greatest risk of loss in fair value measured as the largest negative value or the smallest positive value observed daily during the reporting period.
The simulations used to manage market risk are based on numerous assumptions regarding the effects of changes in interest rates on the timing and extent of repricing characteristics, future cash flows and customer behavior. These assumptions are inherently uncertain and, as a result, models cannot precisely estimate or precisely predict the impact of higher or lower interest rates.
These plans are subject to escalation to and approval by the Board. The simulations used to manage market risk are based on numerous assumptions regarding the effects of changes in interest rates on the timing and extent of repricing characteristics, future cash flows and customer behavior.
In addition, the impact on the level and composition of demand deposit accounts and other core deposit balances resulting from a significant increase in short-term market interest rates and the overall interest rate environment is likely to be material. The simulation incorporates assumptions regarding the effects of such changes based on a combination of historical analysis and expected behavior.
Derivative financial instruments and other financial instruments used for purposes other than trading are included in this simulation. In addition, the impact on the level and composition of demand deposit accounts and other core deposit balances resulting from a significant increase in short-term market interest rates and the overall interest rate environment is likely to be material.
BOK Financial has no material investments in assets that are affected by changes in foreign exchange rates or equity prices. Energy and other commodity derivative contracts, which are affected by changes in commodity prices, are matched against offsetting contracts as previously discussed.
BOK Financial has no material investments in assets that are affected by changes in foreign exchange rates or equity prices.
Economic hedges in either the futures or cash markets may be used to reduce the risk associated with some trading programs.
Economic hedges in either the futures or cash markets may be used to reduce the risk associated with some trading programs. Basis risk can result when trading asset values and the instruments used to hedge them move at different rates.
The Board has approved a $20 million market risk limit for mortgage servicing rights, net of economic hedges. 74 Table 34 - MSR Asset and Hedge Sensitivity Analysis (In thousands) December 31, 2022 2021 Up 50 bp Down 50 bp Up 50 bp Down 50 bp MSR Asset $ 6,100 $ (8,195) $ 31,856 $ (41,815) MSR Hedge (7,400) 6,810 (38,213) 36,692 Net Exposure (1,300) (1,385) (6,357) (5,123) Trading Activities The Company bears market risk by originating residential mortgages held for sale ("RMHFS").
Table 34 - MSR Asset and Hedge Sensitivity Analysis (In thousands) December 31, 2023 2022 Up 50 bp Down 50 bp Up 50 bp Down 50 bp MSR Asset $ 7,974 $ (9,877) $ 6,100 $ (8,195) MSR Hedge (8,444) 8,606 (7,400) 6,810 Net Exposure $ (470) $ (1,271) $ (1,300) $ (1,385) Trading Activities The Company bears market risk by originating residential mortgages held for sale.
Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes, market conditions and management strategies, among other factors.
These assumptions are inherently uncertain and, as a result, models cannot precisely estimate or precisely predict the impact of higher or lower interest rates. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes, market conditions and management strategies, among other factors.
Table 33 – Interest Rate Sensitivity (Dollars in thousands) December 31, 2022 December 31, 2021 200 bp Increase 100 bp Increase 100 bp Decrease 200 bp Increase 100 bp Increase 100 bp Decrease Anticipated impact over the next twelve months on net interest revenue $ (10,980) $ 8,440 $ (42,660) $87,241 $54,213 $(24,759) (0.71) % 0.54 % (2.75) % 7.60% 4.72% (2.16)% Anticipated impact over months twelve through twenty-four $ 4,090 $ 40,190 $ (129,900) $185,054 $129,850 $(74,983) 0.24 % 2.39 % (7.71) % 16.03% 11.25% (6.50)% BOK Financial is also subjected to market risk through changes in the fair value of mortgage servicing rights.
Additionally, in a flattening yield curve scenario where long-term rates increase by 100 basis points and short-term rates increase by 200 basis points, net interest revenue would decrease approximately 5.86%, or $69.8 million. 77 Table 33 – Interest Rate Sensitivity (Dollars in thousands) December 31, 2023 December 31, 2022 200 bp Increase 100 bp Increase 100 bp Decrease 200 bp Decrease 200 bp Increase 100 bp Increase 100 bp Decrease 200 bp Decrease Anticipated impact over the next twelve months on net interest revenue $ (36,100) $ (8,900) $ (7,900) $ (2,900) $(10,980) $8,440 $(42,660) $(73,772) (3.03) % (0.75) % (0.66) % (0.24) % (0.71)% 0.54% (2.75)% (4.76)% Anticipated impact over months twelve through twenty-four $ (9,600) $ 15,300 $ (53,700) $ (84,900) $4,090 $40,190 $(129,900) $(239,320) (0.74) % 1.18 % (4.16) % (6.57) % 0.24% 2.39% (7.71)% (14.21)% BOK Financial is also subjected to market risk through changes in the fair value of mortgage servicing rights.
Limit Structure Beyond VaR and SVaR described above, Management also performs a sensitivity analysis to measure market risk from changes in interest rates on its trading portfolio. Applicable interest rates are shocked up and down 50 basis points calculating an estimated change in fair value, net of economic hedging activity that may result.
Applicable interest rates are shocked up and down 50 basis points, calculating an estimated change in fair value, net of economic hedging activity that may result. The Board has approved an $11 million interest rate risk limit for the trading portfolio, net of economic hedges.
Table 36 below summarizes certain VaR and Stressed VaR based measures for the three months ended December 31, 2022, September 30, 2022, December 31, 2021 and September 30, 2021. In the fourth quarter of 2022, the period-end VaR and SVaR measures increased relative to the previous quarter mainly due to an increase in total trading assets.
Table 36 below summarizes certain VaR- and SVaR-based measures for the three months ended December 31, 2023, September 30, 2023, December 31, 2022 and September 30, 2022.
Financial Conduct Authority ("FCA") confirmed that the publication of the principal tenors of the U.S. dollar London Interbank Offered Rate ("LIBOR") will cease immediately following a final publication on June 30, 2023.
Management also reviews alternative rate changes and time periods. The FCA ceased publication of the principal tenors of the U.S. dollar LIBOR immediately following the final publication on June 30, 2023.
These limits also set maximum levels for short-term borrowings, short-term assets, public funds and brokered deposits and establish minimum levels for un-pledged assets, among other things. Further, the Board approved market risk limits for fixed income trading, mortgage pipeline and mortgage servicing assets inclusive of economic hedge benefits. Exposure is measured daily and compliance is reviewed monthly.
Further, the Board has approved market risk limits for fixed income trading, mortgage pipeline and mortgage servicing assets inclusive of economic hedge benefits. Exposure is measured daily and compliance is reviewed monthly. Deviations from the Board approved limits, which periodically occur throughout the reporting period, may require management to develop and execute plans to reduce exposure.
The Asset/Liability Committee is responsible for managing market risk in accordance with policy limits established by the Board of Directors. The Committee monitors projected variation in net interest revenue, net income and economic value of equity due to specified changes in interest rates.
Energy and other commodity derivative contracts, which are affected by changes in commodity prices, are matched against offsetting contracts as previously discussed. 76 The Asset/Liability Committee is responsible for managing market risk in accordance with policy limits established by the Board of Directors.
All existing financial contracts with direct exposure to LIBOR have been inventoried, and the Company has taken action to transition these exposures to an alternative reference rate in advance of the June 30, 2023 deadline. 73 The Company’s primary interest rate exposures include the Federal Funds rate, which affects short-term borrowings, and the prime lending rate, LIBOR and SOFR, which are the basis for much of the variable rate loan pricing.
The Company's primary interest rate exposures include the Federal Funds rate, which affects short-term borrowings, and the prime lending rate, SOFR, which is the basis for much of the variable rate loan pricing. Additionally, residential mortgage rates directly affect the prepayment speeds for residential mortgage-backed securities and mortgage servicing rights.
Removed
Deviations from the Board approved limits, which periodically occur throughout the reporting period, may require management to develop and execute plans to reduce exposure. These plans are subject to escalation to and approval by the Board.
Added
The Committee monitors projected variation in net interest revenue, net income and economic value of equity due to specified changes in interest rates. These limits also set maximum levels for short-term borrowings, short-term assets, public funds and brokered deposits and establish minimum levels for unpledged assets, among other things.
Removed
The results of a 200 basis point decrease in interest rates in the current low deposit rate environment are not meaningful. Until such time as it becomes meaningful, we will instead report the effect of a 100 basis point decrease in interest rates. Management also reviews alternative rate changes and time periods. On March 5, 2021, the U.K.
Added
Before the June 30, 2023 deadline, the Company mitigated its remaining LIBOR exposure, with any outstanding or committed exposure being proactively moved to an alternative rate or falling back per the terms of their contract or as per the LIBOR Act.
Removed
Further, U.S. regulators released a joint inter-agency statement about their expectations that banks cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021.
Added
The Board has approved a $20 million market risk limit for mortgage servicing rights, net of economic hedges.
Removed
Key loan provisions have been modified so that new and renewed loans include LIBOR fallback language designed to ensure the smoothest possible transition from LIBOR to the new benchmark when such transition occurs.
Added
These models are required to be independently validated and approved prior to implementation. Limit Structure Beyond VaR and SVaR described above, management also performs a sensitivity analysis to measure market risk from changes in interest rates on its trading portfolio.
Removed
Additionally, residential mortgage rates directly affect the prepayment speeds for residential mortgage-backed securities and mortgage servicing rights. Derivative financial instruments and other financial instruments used for purposes other than trading are included in this simulation.
Removed
Additionally, in a flattening yield curve scenario where long-term rates increase by 100 basis points and short-term rates increase by 200 basis points, net interest revenue would decrease approximately 2.52%, or $39.1 million.
Removed
Both VaR and SVaR measures decreased relative to 2021 due to a decrease in basis risk between trading assets and their economic hedges.

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