BOK FINANCIAL CORP
For the period ended Jun 30, 2024. Filed Jul 31, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Jul 31, 2024
BOKF$129.48-0.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-01.
0000875357-24-000023
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-07-31.
0000875357-24-000041
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 268 previous paragraphs and 263 current paragraphs.
153 unchanged; 93 reworded; 16 added; 22 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 31 previous and 32 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
•Other operating expense totaled $336.7 million, a decrease of $3.7 million. Personnel expense decreased $11.6 million due to lower incentive compensation, including deferred compensation plans, regular compensation, and employee benefits. Non-personnel expense increased $7.9 million, largely due to our contribution of converted Visa shares valued at $10.0 million to the BOKF Foundation.
Current report
•Other gains and losses, net increased $53.1 million to $57.4 million. The second quarter of 2024 included a $53.8 million pre-tax gain on the conversion of our Visa B shares under the recently announced exchange offer by Visa, Inc. The gain offsets losses of $45.2 million on the repositioning of the available for sale securities portfolio realized in the first quarter of 2024.
Current report
Other operating revenue was $259.7 million for the second quarter of 2024, an increase of $98.0 million over the first quarter of 2024. The second quarter of 2024 included $53.8 million pre-tax gain on the conversion of our Visa B shares under the recently announced exchange offer by Visa, Inc. The prior quarter included $45.2 million of losses from repositioning the available for sale securities portfolio.
Current report
Other gains, net, were $57.4 million for the second quarter of 2024 compared to $4.3 million in the first quarter of 2024. The second quarter of 2024 included a $53.8 million pre-tax gain on the conversion of our Visa B shares under the recently announced exchange offer by Visa, Inc. The gain offsets losses of $45.2 million on the repositioning of the available for sale securities portfolio realized in the first quarter of 2024. We donated 35,620 of the converted Visa shares valued at $10.0 million to the BOKF Foundation during the second quarter of 2024, allowing us to further invest in the communities we serve.
Current report
Other operating expense for the second quarter of 2024 totaled $336.7 million, a decrease of $3.7 million compared to the first quarter of 2024. Our efficiency ratio 1 was 59.83% for the second quarter of 2024, compared to 67.13% in the prior quarter.
Current report
Personnel expense decreased $11.6 million compared to the first quarter of 2024. Cash-based incentive compensation decreased $7.1 million due to a shift in the timing of expense recognition as commercial incentive compensation plans move to being primarily share-based rather than cash-based awards. Deferred compensation, which is offset by changes in the fair value of deferred compensation investments, decreased $2.3 million, directly related to market movements. Employee benefits expense decreased $2.0 million due to a seasonal decrease in payroll taxes, partially offset by higher healthcare costs. Regular compensation decreased $1.9 million. A greater amount of compensation expense was capitalized during the second quarter due to an annual update of standards costs for loan originations coupled with an increase in mortgage loan production volume. Share-based compensation was up $1.7 million reflecting changes in assumptions of certain performance-based equity awards.
Current report
Non-personnel expense was $145.6 million, an increase of $7.9 million. In addition to the $10.0 million share donation previously mentioned, we also made a $3.6 million contribution to the BOKF Foundation in the second quarter of 2024. Mortgage banking costs increased $2.2 million due to higher seasonal prepayments, and a rise in professional fees and services expense of $1.3 million was primarily due to project related expense. In the second quarter of 2024, we recognized $1.2 million of expense related to the FDIC special assessment compared to $6.5 million of expense in the prior quarter. Other expense decreased $3.0 million due to lower operational losses.
Current report
As shown in Table 8, net income attributable to our lines of business was consistent with the first quarter of 2024. Net interest income increased $1.9 million largely as a result of deposit repricing activity. Net loans charged off increased $1.4 million to $7.4 million. Operating revenue was relatively unchanged compared to the prior quarter and operating expense decreased $1.4 million. The increase in net income attributed to Funds Management and other is largely due to the $53.8 million pre-tax gain recognized on the conversion of our Visa B shares. The prior quarter included losses of $45.2 million on the repositioning of the available for sale securities portfolio.
Current report
Net interest income was consistent compared to the first quarter of 2024. Net loans charged-off were $6.1 million in the second quarter of 2024 compared to $4.2 million in the first quarter of 2024.
Current report
Fees and commissions revenue increased $3.1 million or 6%. Transaction card revenue increased $1.9 million driven by an increase in transaction volume processed during the quarter. Other gains (losses), net increased $1.4 million related to gains on alternative investments. Operating expense increased $6.0 million or 9% compared to the first quarter of 2024, primarily due to an increase in other expense. Personnel expense was consistent with the prior quarter.
Current report
Net interest income from Consumer Banking activities increased by $1.0 million or 2%. Operating revenue was relatively unchanged from the prior quarter. Operating expense increased $1.7 million or 3%, primarily due to an increase in mortgage banking costs resulting from higher seasonal prepayments.
Current report
Average loans increased $62 million or 3% to $2.0 billion over the previous quarter. Average deposits attributed to the Consumer Banking segment increased $173 million to 2% to $8.1 billion. See Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital for further discussion of the changes.
Current report
Wealth Management contributed $27.5 million to consolidated net income in the second quarter of 2024, an increase of $2.3 million or 9% compared to the first quarter of 2024.
Current report
Combined net interest income and fee revenue decreased $4.4 million or 3% compared to the first quarter of 2024. Total revenue from institutional trading activities decreased $7.9 million, largely due to compressed margins driven by market conditions during the second quarter. Other revenue decreased $2.0 million. Investment banking revenue increased $2.7 million, primarily due to increased underwriting fees. Fiduciary and asset management revenue grew $2.3 million driven by seasonal tax preparation fee income. Non-personnel expense decreased $9.2 million as the prior quarter included an increased level of operational losses. Personnel expense was consistent with the prior quarter.
Current report
On January 23, 2024, Visa, Inc. stockholders approved an exchange offer which provided holders of Class B-1 shares an option to convert up to 50% of its Class B-1 shares to Visa Class C shares and subsequently to freely transferable Visa Class A common shares subject to certain restrictions and holding period requirements (the "Exchange Offer"). The Exchange Offer opened on April 8, 2024 and expired on May 3, 2024. The Company tendered all of its 252,233 Class B-1 Visa shares under the Exchange Offer and received the equivalent of 200,212 shares of Visa common stock and 126,116 Visa B-2 shares in return. Following the receipt of the Visa common stock, the Company donated 35,620 shares valued at $10.0 million to the BOKF Foundation. This contribution is reported as Charitable contributions to BOKF Foundation in the Consolidated Statement of Earnings with a corresponding gain of $10.0 million in Other gains, net. The Company also sold 31,120 Visa shares realizing a pre-tax gain of $8.7 million. At June 30, 2024, the Company held the equivalent of 133,472 Visa common shares for which the Company recorded an unrealized gain of $34.9 million. These shares are subject to hold restrictions under the Exchange Offer which expire during the third quarter 2024. The Company also recognized income of $174 thousand for dividends received. The B-2 shares carry over the restrictions associated with the former B-1 shares. See Note 6 to the Consolidated Financial Statements.
Current report
Average deposits for the second quarter of 2024 totaled $35.7 billion, a $627 million increase compared to the first quarter of 2024. Interest-bearing transaction account balances grew by $742 million, partially offset by a $244 million decrease in demand deposit balances. Time deposit balances increased $140 million.
Removed paragraphs (22)
Previous report
•Other operating expense totaled $340.4 million, a decrease of $43.7 million. Personnel expense was relatively unchanged, while non-personnel expense decreased $43.3 million resulting from the recognition of the FDIC special assessment in the fourth quarter of 2023.
Previous report
•Other gains and losses, net decreased $36.2 million to $4.3 million. The prior quarter included a $31.0 million pre-tax gain, before related professional fees, on the sale of insurance brokerage and consulting business, BOKFI.
Previous report
•Losses on available for sale securities were $45.2 million in the first quarter of 2024 as we repositioned the available for sale securities portfolio by selling approximately $783 million of lower-yielding debt securities. We expect the gain on conversion of our Visa B shares under the recently announced exchange offer by Visa, Inc. (the "Exchange Offer") will offset the realized losses on the repositioning. The Exchange Offer opened on April 8, 2024 and is scheduled to expire at end of day on May 3, 2024.
Previous report
Other operating revenue was $161.7 million for the first quarter of 2024, a decrease of $43.2 million compared to the fourth quarter of 2023. The first quarter of 2024 included $45.2 million of losses from repositioning the available for sale securities portfolio. The prior quarter included a $31.0 million pre-tax gain on the sale of BOKFI and $1.8 million of insurance brokerage revenue recognized prior to the sale. We also recognized a $27.6 million loss on the sale of available for sale securities in the fourth quarter of 2023.
Previous report
Other revenue decreased $2.1 million or 14% compared to the fourth quarter of 2023, largely due to a reduction in fees earned on derivative counterparty margin.
Previous report
Other gains, net, were $4.3 million for the first quarter of 2024 compared to $40.5 million in the fourth quarter of 2023. The prior quarter included a $31.0 million pre-tax gain, before related professional fees, on the sale of BOKFI.
Previous report
Losses on available for sale securities were $45.2 million in the first quarter of 2024 as we repositioned the available for sale securities portfolio by selling approximately $783 million of lower-yielding debt securities. We expect the gain on conversion of our Visa B shares under the Exchange Offer will offset the realized losses on the repositioning. The Exchange Offer opened on April 8, 2024 and is scheduled to expire at end of day on May 3, 2024. Losses on available for sale securities were $27.6 million in the fourth quarter of 2023 related to repositioning of the securities portfolio, offsetting the gain from the sale of BOKFI.
Previous report
Other operating expense for the first quarter of 2024 totaled $340.4 million, a decrease of $43.7 million compared to the fourth quarter of 2023. Excluding the impact of the FDIC special assessment, other operating expense decreased $6.4 million. In the fourth quarter of 2023 we recognized $43.8 million of expense related to the FDIC special assessment. During the first quarter of 2024, we received notification from the FDIC that the previous assessed losses attributable to the protection of Silicon Valley Bank and Signature Bank uninsured depositors had increased, so an additional $6.5 million of estimated expense related to the special assessment was recognized.
Previous report
Our efficiency ratio 1 was 67.13% for the first quarter of 2024, compared to 71.62% in the prior quarter.
Previous report
1 See Explanation and Reconciliation of Non-GAAP Measures in "Non-GAAP Measures" section following.
Previous report
Personnel expense was largely unchanged compared to the fourth quarter of 2023. Cash-based incentive compensation decreased $5.2 million, driven by seasonally elevated incentive compensation in the fourth quarter. Share-based compensation was up $1.3 million reflecting changes in assumptions of certain performance-based equity awards. Regular compensation and deferred compensation, which is offset by changes in the fair value of deferred compensation investments, both remained relatively unchanged compared to the prior quarter. Employee benefits expense increased $5.0 million, primarily due to seasonally higher payroll taxes.
Previous report
Excluding the FDIC special assessment, non-personnel expense was $131.3 million, a decrease of $6.0 million. Professional fees and services expense decreased $4.3 million. The previous quarter included $2.2 million in expenses related to the sale of BOKFI. Mortgage banking costs decreased $1.7 million, primarily due to accruals related to default servicing and loss mitigation costs on loans serviced for others. We also made a $1.5 million contribution to the BOKF Foundation in the fourth quarter, which did not reoccur in the first quarter. Other expense increased $2.4 million, primarily due to increased operational losses.
Previous report
As shown in Table 8, net income attributable to our lines of business decreased $46.2 million or 9% compared to the fourth quarter of 2023. Net interest revenue decreased $36.5 million largely as a result of deposit repricing activity. Operating revenue decreased $37.4 million as the prior quarter included a pre-tax gain of $31.0 million, before related professional fees, on the sale of BOKFI. Operating expense decreased $10.2 million compared to the fourth quarter of 2023 with a $7.9 million decrease in personnel expense and a $2.2 million decrease in non-personnel expense.
Previous report
Net interest revenue decreased $22.8 million or 8% compared to the fourth quarter of 2023, primarily due to a shift in deposit balances from demand to interest-bearing accounts along with decreased spreads from a change in market conditions. Net loans charged-off were $4.2 million in the first quarter of 2024 compared to $3.0 million in the fourth quarter of 2023.
Previous report
Fees and commissions revenue decreased $10.3 million or 17%. Customer hedging revenue decreased $2.8 million due to a reduction in customer energy hedging, and transaction card revenue decreased $3.4 million following elevated fourth quarter transaction activity. Other revenue decreased $3.7 million, largely due to a reduction in fees earned on derivative counterparty margin. Operating expense decreased $11.8 million or 14% compared to the fourth quarter of 2023. Personnel expense decreased $7.7 million or 15%, largely driven by lower incentive compensation costs. Non-personnel expense decreased $4.1 million or 14% due to a decline in other expense and professional fees.
Previous report
Net interest revenue from Consumer Banking activities decreased by $12.2 million or 11%, largely due to increased customer demand for time deposits and a reduction in deposit spreads from a change in market conditions.
Previous report
Operating revenue increased $6.1 million or 20% driven by growth in mortgage banking revenue. Mortgage production volume increased $48 million to $172 million. Operating expense decreased $1.6 million or 3%, which was largely offset by an increase in corporate expense allocations.
Previous report
Wealth Management contributed $34.2 million to consolidated net income in the first quarter of 2024, a decrease of $28.5 million or 46% compared to the fourth quarter of 2023. The prior quarter included a pre-tax gain of $31.0 million, before related professional fees, on the sale of BOKFI.
Previous report
Combined net interest revenue and fee revenue decreased $2.7 million or 2% compared to the fourth quarter of 2023, largely due to declining spreads on deposits. Total revenue from institutional trading activities increased $1.4 million, primarily in U.S. government residential mortgage-backed securities trading activity. Other revenue decreased $8.2 million due to a reduction in customer hedging margin fees. Operating expense increased $3.3 million or 3% compared to the prior quarter. Personnel expense decreased $2.4 million as the prior quarter included transaction related employee costs on the sale of BOKFI. Non-personnel expense increased $5.6 million, primarily due to an increased level of operational losses, partially offset by a $2.7 million decrease in professional fees. Corporate expense allocations were consistent with the previous quarter.
Previous report
Average outstanding loans attributed to the Wealth Management segment increased $44 million or 2% to $2.2 billion. Average Wealth Management deposits increased $1.2 billion or 14% to $9.2 billion. See Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital for further discussion of the changes.
Previous report
At March 31, 2024, we hold 252,233 non-transferable Class B-1 (formerly Class B) shares of Visa, Inc. in connection with a restructuring and public offering by Visa U.S.A. As a member of Visa U.S.A., we received the Class B shares based on our interest in Visa U.S.A. On January 23, 2024, Visa, Inc. stockholders approved the Exchange Offer which provides holders of Class B-1 shares an option to convert up to 50% of its Class B-1 shares to Visa Class C shares and subsequently to freely transferable Visa Class A common shares subject to certain restrictions and holding period requirements. The Exchange Offer opened on April 8, 2024 and is scheduled to expire at the end of the day on May 3, 2024. The Company tendered its Class B-1 Visa shares under the Exchange Offer and expects to monetize up to 50% of the Class B-1 shares. The per share closing price of a Visa Class A common share was $279.08 at March 31, 2024. In light of uncertainties associated with certain ongoing litigation matters involving Visa and the timing and outcome of the aforementioned proposal, the ultimate impact of this gain contingency is unknown.
Previous report
Average deposits for the first quarter of 2024 totaled $35.0 billion, a $1.3 billion increase compared to the fourth quarter of 2023. Demand deposits decreased $747 million while interest-bearing transaction account balances increased $1.8 billion. Time deposit balances increased $285 million.
Reworded paragraphs (93)
Previous wording
BOK Financial reported net income of $83.7 million or $1.29 per diluted share for the first quarter of 2024 compared to $82.6 million or $1.26 per diluted share for the fourth quarter of 2023. Excluding the loss from repositioning of the available for sale securities portfolio and the additional FDIC special assessment expense, net income would have been $123.2 million or $1.91 per share for the first quarter of 2024, both of which are non-GAAP measures. PPNR, also a non-GAAP measure, decreased $2.6 million to $114.9 million compared to the fourth quarter of 2023.
Current wording
BOK Financial reported net income of $163.7 million or $2.54 per diluted share for the second quarter of 2024 compared to $83.7 million or $1.29 per diluted share for the first quarter of 2024. Excluding the gain on conversion of Visa shares, the additional FDIC special assessment expense, and the contribution of Visa shares to the BOKF Foundation, net income would have been $131.1 million or $2.02 per share for the second quarter of 2024, both of which are non-GAAP measures 1. PPNR 1, also a non-GAAP measure, increased $104.1 million to $219.0 million compared to the first quarter of 2024.
Previous wording
Highlights of the first quarter of 2024 compared to the fourth quarter of 2023 included:
Current wording
Highlights of the second quarter of 2024 compared to the first quarter of 2024 included:
Previous wording
•Net interest revenue totaled $293.6 million, a decrease of $3.1 million compared to the prior quarter. Net interest margin was 2.61% for the first quarter of 2024 compared to 2.64% for the prior quarter reflecting continued demand deposit migration and deposit repricing. For the first quarter of 2024, our core net interest margin excluding trading activities, a non-GAAP measure, was 2.97% compared to 3.03% in the prior quarter.
Current wording
•Net interest income totaled $296.0 million, an increase of $2.4 million over the prior quarter. Net interest margin was 2.56% for the second quarter of 2024 compared to 2.61% for the prior quarter. The pace of demand deposit migration and deposit repricing has slowed compared to the previous quarter and was offset by improving yields on the available for sale securities portfolio. For the second quarter of 2024, our core net interest margin excluding trading activities 1, a non-GAAP measure, was 2.94% compared to 2.97% in the prior quarter.
Previous wording
•Fees and commissions revenue totaled $200.6 million, an increase of $3.8 million. Higher mortgage banking and fiduciary and asset management revenue was partially offset by lower brokerage and trading and transaction card revenue.
Current wording
•Fees and commissions revenue totaled $200.0 million, consistent with the prior quarter. Higher fiduciary and asset management revenue and transaction card revenue was offset by lower brokerage and trading revenue.
Previous wording
•Period end outstanding loan balances totaled $24.2 billion at March 31, 2024, growing $268 million over December 31, 2023, largely due to growth in commercial loans, partially offset by a reduction in commercial real estate loans. Average loan balances increased $243 million to $23.9 billion.
Current wording
•Period end outstanding loan balances totaled $24.6 billion at June 30, 2024, growing $381 million over March 31, 2024, largely due to growth in commercial loans, partially offset by a reduction in commercial real estate loans. Average loan balances increased $437 million to $24.4 billion.
Previous wording
•The provision for credit losses of $8.0 million in the first quarter of 2024 reflects continued loan growth and a stable economic forecast. Net charge-offs were $5.5 million or 0.09% of average loans on an annualized basis in the first quarter. The resulting combined allowance for credit losses totaled $329 million or 1.36% of outstanding loans at March 31, 2024. The combined allowance for credit losses was $326 million or 1.36% of outstanding loans at December 31, 2023.
Current wording
•The provision for credit losses of $8.0 million in the second quarter of 2024 reflects continued loan growth and a stable economic forecast. Net charge-offs were $6.9 million or 0.11% of average loans on an annualized basis in the second quarter. The resulting combined allowance for credit losses totaled $330 million or 1.34% of outstanding loans at June 30, 2024. The combined allowance for credit losses was $329 million or 1.36% of outstanding loans at March 31, 2024.
Previous wording
•Nonperforming assets not guaranteed by U.S. government agencies were $113 million, a $25 million decrease compared to December 31, 2023. Potential problem loans increased by $40 million while other loans especially mentioned decreased by $28 million compared to December 31, 2023.
Current wording
•Nonperforming assets not guaranteed by U.S. government agencies were $86 million, a $27 million decrease compared to March 31, 2024. Potential problem loans increased by $6.0 million while other loans especially mentioned increased by $123 million compared to March 31, 2024.
Previous wording
•Period end deposits were $35.4 billion at March 31, 2024, a $1.4 billion increase over December 31, 2023. Average deposits increased $1.3 billion, including a $2.1 billion increase in average interest-bearing deposits, partially offset by a $747 million reduction in demand deposit balances. The loan to deposit ratio was 68% at March 31, 2024, compared to 70% at December 31, 2023.
Current wording
•Period end deposits were $36.2 billion at June 30, 2024, an $858 million increase over March 31, 2024. Average deposits increased $627 million, including an $872 million increase in average interest-bearing deposits, partially offset by a $244 million reduction in demand deposit balances. The loan to deposit ratio was 68% at June 30, 2024, unchanged from the prior quarter.
Previous wording
•Assets under management or administration totaled $105.5 billion at March 31, 2024, increasing $794 million compared to December 31, 2023.
Current wording
•Assets under management or administration totaled $107.5 billion at June 30, 2024, increasing $1.9 billion compared to March 31, 2024.
Previous wording
•The Company's tangible common equity ratio, a non-GAAP measure, was 8.21% at March 31, 2024 and 8.29% at December 31, 2023. The tangible common equity ratio is primarily based on total shareholders' equity, which includes unrealized gains and losses on available for sale securities. Adjusted for all securities portfolio losses, including the tax adjusted losses in the investment portfolio, the tangible common equity ratio would be 7.92% at March 31, 2024 and 8.02% at December 31, 2023.
Current wording
•The Company's tangible common equity ratio 1, a non-GAAP measure, was 8.38% at June 30, 2024 and 8.21% at March 31, 2024. The tangible common equity ratio is primarily based on total shareholders' equity, which includes unrealized gains and losses on available for sale securities. Adjusted for all securities portfolio losses, including the tax adjusted losses in the investment portfolio, the tangible common equity ratio 1 would be 8.06% at June 30, 2024 and 7.92% at March 31, 2024.
Previous wording
•The common equity Tier 1 capital ratio at March 31, 2024 was 11.99%. Other regulatory capital ratios include the Tier 1 capital ratio at 12.00%, total capital ratio at 13.15%, and leverage ratio at 9.42%. At December 31, 2023, the common equity Tier 1 capital ratio was 12.06%, the Tier 1 capital ratio was 12.07%, total capital ratio was 13.16%, and leverage ratio was 9.45%.
Current wording
•The common equity Tier 1 capital ratio at June 30, 2024 was 12.10%. Other regulatory capital ratios include the Tier 1 capital ratio at 12.11%, total capital ratio at 13.25%, and leverage ratio at 9.39%. At March 31, 2024, the common equity Tier 1 capital ratio was 11.99%, the Tier 1 capital ratio was 12.00%, total capital ratio was 13.15%, and leverage ratio was 9.42%.
Previous wording
•The Company repurchased 616,630 shares of common stock at an average price of $83.89 per share in the first quarter of 2024 and 700,237 shares at an average price of $70.99 in the fourth quarter of 2023. We view share buybacks opportunistically, but within the context of maintaining our strong capital position.
Current wording
•The Company repurchased 412,176 shares of common stock at an average price of $90.38 per share in the second quarter of 2024 and 616,630 shares at an average price of $83.89 in the first quarter of 2024. We view share buybacks opportunistically, but within the context of maintaining our strong capital position.
Previous wording
•The Company paid a regular cash dividend of $35.6 million or $0.55 per common share during the first quarter of 2024. On April 30, 2024, the board of directors approved a quarterly cash dividend of $0.55 per common share payable on or about May 30, 2024 to shareholders of record as of May 15, 2024.
Current wording
•The Company paid a regular cash dividend of $35.3 million or $0.55 per common share during the second quarter of 2024. On July 30, 2024, the board of directors approved a quarterly cash dividend of $0.55 per common share payable on or about August 30, 2024 to shareholders of record as of August 15, 2024.
Previous wording
Highlights of the three months ended March 31, 2024 compared to the three months ended March 31, 2023 included:
Current wording
Highlights of the six months ended June 30, 2024 compared to the six months ended June 30, 2023 included:
Previous wording
•Tax-equivalent net interest revenue totaled $295.7 million for the three months ended March 31, 2024 and $354.6 million for the three months ended March 31, 2023. Net interest revenue decreased $51.4 million from changes in interest rates and decreased $7.5 million from changes in earning assets. Net interest margin was 2.61% compared to 3.45%. 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. Throughout 2023 and into the first quarter of 2024, we have experienced margin compression reflecting deposit repricing activity and demand deposit migration into interest-bearing accounts. Loan yields increased 73 basis points while funding costs increased 165 basis points. Average earning assets increased $4.1 billion to $44.8 billion driven largely by higher average loan balances and trading securities balances. Total interest-bearing deposits increased $5.3 billion, offset by a decrease of $3.8 billion in demand deposit balances. Other borrowed funds increased $1.8 billion.
Current wording
•Net interest income totaled $589.6 million for the six months ended June 30, 2024 and $674.6 million for the six months ended June 30, 2023. Net interest income decreased $71.6 million from changes in interest rates and decreased $13.6 million from changes in earning assets. Net interest margin was 2.59% compared to 3.22%. 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. Throughout 2023 and into the second quarter of 2024, we have experienced margin compression reflecting deposit repricing activity and demand deposit migration into interest-bearing accounts. Loan yields increased 55 basis points while funding costs increased 125 basis points. Average earning assets increased $3.7 billion to $45.4 billion driven largely by higher average loan balances and trading securities balances. Total interest-bearing deposits increased $5.6 billion, offset by a decrease of $3.2 billion in demand deposit balances. Other borrowed funds increased $930 million.
Previous wording
•Fees and commissions revenue totaled $200.6 million for the three months ended March 31, 2024, a $14.6 million increase over the three months ended March 31, 2023. Brokerage and trading revenue increased $6.8 million, primarily due to increased trading activity and favorable market opportunities. Fiduciary and asset management revenue increased $4.6 million led by growth in Cavanal Hill fund fees and trust fees. Mortgage banking revenue increased $4.6 million, primarily due to higher production volume. Other revenue decreased $4.0 million, largely due to lower revenue on bank-owned life insurance and a reduction in fees earned on derivative counterparty margin.
Current wording
•Fees and commissions revenue totaled $400.6 million for the six months ended June 30, 2024, a $14.1 million increase over the six months ended June 30, 2023. Fiduciary and asset management revenue increased $9.2 million led by growth in trust fees and Cavanal Hill fund fees. Mortgage banking revenue increased $8.1 million, primarily due to higher production volume. Deposit service charges increased $5.2 million due to growth in commercial service charges. Brokerage and trading revenue decreased $5.2 million, largely due to decreased customer hedging revenue, primarily attributed to our energy and interest rate derivative customers. The prior period included $6.2 million of insurance brokerage revenue recognized prior to the sale of BOKFI. This decrease was fully offset by an increase of $6.9 million in investment banking revenue driven by growth in underwriting fees and financial advisory fees. Other revenue decreased $4.3 million, primarily due to a reduction in fees earned on derivative counterparty margin.
Previous wording
•Total operating expense was $340.4 million for the three months ended March 31, 2024, an increase of $34.6 million compared to the three months ended March 31, 2023. Personnel expense increased $20.5 million. Regular compensation increased $8.8 million, largely related to annual merit increases, salary adjustments, and business expansion in 2023. Cash-based incentive compensation grew $8.2 million due to higher sales activity. Share-based compensation expense decreased $2.0 million reflecting changes in assumptions of certain performance-based equity awards. Deferred compensation expense, which is offset by changes in fair value of deferred compensation investments, grew $2.7 million. Employee benefits expense increased $2.7 million related to higher retirement plan costs and employee healthcare costs. Non-personnel expense increased $14.1 million to $137.7 million, largely due to increased FDIC insurance costs, including the recognition of $6.5 million in additional special assessment expense in the first quarter of 2024. Other expense also increased $4.9 million due to higher operational losses.
Current wording
•Total operating expense was $677.1 million for the six months ended June 30, 2024, an increase of $52.6 million compared to the six months ended June 30, 2023. Personnel expense increased $20.9 million. Regular compensation increased $11.7 million, largely related to annual merit increases, salary adjustments, and business expansion in 2023. Employee benefits expense increased $5.8 million related to higher employee healthcare costs and retirement plan costs. Incentive compensation expense was up $3.4 million, primarily due to higher loan and trading volumes and deferred compensation expense, which is largely offset by changes in fair value of deferred compensation investments. Non-personnel expense increased $31.6 million to $283.3 million. Charitable contributions to the BOKF Foundation increased $12.5 million, largely due to the donation of Visa shares valued at $10.0 million. FDIC insurance costs grew due to recognition of $7.6 million in additional special assessment expense during 2024. Other expense also increased $6.7 million due to higher operational losses.
Previous wording
•The provision for expected credit losses was $8.0 million for the three months ended March 31, 2024, reflecting growth in loan balances and a stable economic forecast. A $16.0 million provision for expected credit losses was recorded for the three months ended March 31, 2023.
Current wording
•The provision for expected credit losses was $16.0 million for the six months ended June 30, 2024, reflecting growth in loan balances and a stable economic forecast. A $33.0 million provision for expected credit losses was recorded for the six months ended June 30, 2023.
Previous wording
Net Interest Revenue and Net Interest Margin
Current wording
Net Interest Income and Net Interest Margin
Previous wording
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. The net interest margin is calculated by dividing tax-equivalent net interest revenue by average interest-earning assets. Net interest spread is the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities. 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.
Current wording
Net interest income is the interest earned on debt securities, loans and other interest-earning assets less interest paid for interest-bearing deposits and other borrowings. The net interest margin is calculated by dividing tax-equivalent net interest income by average interest-earning assets. Net interest spread is the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities. Net interest margin is typically greater than net interest spread due to interest revenue earned on assets funded by non-interest bearing liabilities such as demand deposits and equity.
Previous wording
Tax-equivalent net interest revenue totaled $295.7 million for the first quarter of 2024, compared to $298.8 million for the prior quarter. Compared to the fourth quarter of 2023, net interest revenue decreased $3.4 million from changes in interest rates and increased $308 thousand from changes in earning assets. Table 1 shows the effect on net interest revenue from changes in average balances and interest rates for various types of earning assets and interest-bearing liabilities.
Current wording
Tax-equivalent net interest income totaled $298.2 million for the second quarter of 2024, compared to $295.7 million for the prior quarter. Net interest income increased $2.5 million from changes in interest rates and increased $49 thousand from changes in earning assets. Table 1 shows the effect on net interest income from changes in average balances and interest rates for various types of earning assets and interest-bearing liabilities.
Previous wording
Average earning assets increased $520 million compared to the fourth quarter of 2023. Average loan balances increased $243 million, largely due to growth in commercial loans, partially offset by a reduction in commercial real estate loans. The average balance of available for sale securities, which consists largely of residential and commercial mortgage-backed securities guaranteed by U.S. government agencies, increased $475 million while the average balance of trading securities decreased $77 million.
Current wording
Average earning assets increased $1.2 billion compared to the first quarter of 2024. Average loan balances increased $437 million, largely due to growth in commercial loans, partially offset by a reduction in commercial real estate loans. The average balance of available for sale securities, which consists largely of residential and commercial mortgage-backed securities guaranteed by U.S. government agencies, increased $218 million while the average balance of trading securities increased $552 million.
Previous wording
Total average deposits increased $1.3 billion over the fourth quarter of 2023, including a $2.1 billion increase in interest-bearing deposits, partially offset by a $747 million decrease in demand deposits. Funds purchased and repurchase agreements declined $1.2 billion while other borrowings decreased $276 million.
Current wording
Total average deposits increased $627 million over the first quarter of 2024, including an $872 million increase in interest-bearing deposits, partially offset by a $244 million decrease in demand deposits. Funds purchased and repurchase agreements grew $580 million while other borrowings increased $307 million.
Previous wording
Net interest margin was 2.61% compared to 2.64% in the fourth quarter of 2023 driven by continued demand deposit migration and deposit repricing. For the first quarter of 2024, our core net interest margin excluding trading activities, a non-GAAP measure, was 2.97% compared to 3.03% in the prior quarter. The tax-equivalent yield on earning assets was 5.73%, an increase of 9 basis points. Loan yields grew 4 basis points to 7.40%. The available for sale securities portfolio yield increased 21 basis points to 3.48%. The yield on trading securities grew 7 basis points to 5.12% and the yield on interest-bearing cash and cash equivalents decreased 34 basis points to 4.96%.
Current wording
Net interest margin was 2.56% compared to 2.61% in the first quarter of 2024. The pace of demand deposit migration and deposit repricing has slowed compared to the previous quarter and was offset by improving yields on the available for sale securities portfolio. For the second quarter of 2024, our core net interest margin excluding trading activities 1, a non-GAAP measure, was 2.94% compared to 2.97% in the prior quarter. The tax-equivalent yield on earning assets was 5.80%, an increase of 7 basis points. The available for sale securities portfolio yield increased 23 basis points to 3.71%. Loan yields grew 1 basis point to 7.41%. The yield on trading securities decreased 6 basis points to 5.06% and the yield on interest-bearing cash and cash equivalents increased 90 basis points to 5.86%.
Previous wording
Funding costs were 4.08%, a 10 basis point increase over the prior quarter. The cost of interest-bearing deposits increased 26 basis points to 3.69%. The cost of funds purchased and repurchase agreements decreased 74 basis points to 4.05% while the cost of other borrowings increased 1 basis point to 5.56%. This beneficial mix shift was enabled by the growth of interest-bearing deposits. The benefit to net interest margin from assets funded by non-interest liabilities was 96 basis points, a decrease of 2 basis points.
Current wording
Funding costs were 4.15%, a 7 basis point increase over the prior quarter. The cost of interest-bearing deposits increased 7 basis points to 3.76%. The cost of funds purchased and repurchase agreements increased 23 basis points to 4.28% while the cost of other borrowings increased 2 basis points to 5.58%. The benefit to net interest margin from assets funded by non-interest liabilities was 91 basis points, a decrease of 5 basis points.
Previous wording
The effectiveness of these strategies is reflected in the overall change in net interest revenue due to changes in interest rates as shown in Table 1 and in the interest rate sensitivity projections as shown in the Market Risk section of this report.
Current wording
The effectiveness of these strategies is reflected in the overall change in net interest income due to changes in interest rates as shown in Table 1 and in the interest rate sensitivity projections as shown in the Market Risk section of this report.
Previous wording
Diversified sources of fees and commissions revenue are a significant part of our business strategy and represented 41% of combined net interest revenue before provision for credit losses and fees and commissions revenue for the first quarter of 2024. 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. Many of the economic factors, such as decreasing interest rates, that we expect will result in a decline in net interest revenue or fiduciary and asset management revenue may also increase mortgage banking production volumes and related trading. The velocity of changes in market conditions and interest rates may result in timing differences between when offsetting impacts and benefits are realized. Generally, for operating revenues not as directly related to movement in interest rates, we expect growth to come through offering new products and services and by further development of our presence in other markets. However, current and future economic conditions, regulatory constraints, increased competition and saturation in our existing markets could affect the rate of future increases.
Current wording
Diversified sources of fees and commissions revenue are a significant part of our business strategy and represented 40% of combined net interest income before provision for credit losses and fees and commissions revenue for the second quarter of 2024. 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. Many of the economic factors, such as decreasing interest rates, that we expect will result in a decline in net interest income or fiduciary and asset management revenue may also increase mortgage banking production volumes and related trading. The velocity of changes in market conditions and interest rates may result in timing differences between when offsetting impacts and benefits are realized. Generally, for operating revenues not as directly related to movement in interest rates, we expect growth to come through offering new products and services and by further development of our presence in other markets. However, current and future economic conditions, regulatory constraints, increased competition and saturation in our existing markets could affect the rate of future increases.
Previous wording
Brokerage and trading revenue, which includes revenues from trading, customer hedging, retail brokerage, insurance brokerage and investment banking, decreased $1.7 million or 3% compared to the fourth quarter of 2023.
Current wording
Brokerage and trading revenue, which includes revenues from trading, customer hedging, retail brokerage and investment banking, decreased $6.2 million compared to the first quarter of 2024.
Previous wording
Trading revenue includes net realized and unrealized gains and losses primarily related to residential mortgage-backed securities guaranteed by U.S. government agencies and related derivative instruments that enable our mortgage banking customers to manage their production risk. Trading revenue also includes net realized and unrealized gains and losses on municipal securities and other financial instruments that we sell to institutional customers, along with changes in the fair value of financial instruments we hold as economic hedges against market risk of our trading securities. Trading revenue was $37.5 million, a $1.9 million increase over the prior quarter, primarily related to increased trading activity largely in U.S. government agency residential mortgage-backed securities.
Current wording
Trading revenue includes net realized and unrealized gains and losses primarily related to residential mortgage-backed securities guaranteed by U.S. government agencies and related derivative instruments that enable our mortgage banking customers to manage their production risk. Trading revenue also includes net realized and unrealized gains and losses on municipal securities and other financial instruments that we sell to institutional customers, along with changes in the fair value of financial instruments we hold as economic hedges against market risk of our trading securities. Trading revenue was $27.7 million, a $9.8 million decrease compared to the prior quarter, driven by margin compression due to market conditions in the second quarter of 2024.
Previous wording
Customer hedging revenue is based primarily on realized and unrealized changes in the fair value of derivative contracts held for customer risk management programs. As more fully discussed under Customer Risk Management Programs in Note 3 of the Consolidated Financial Statements, we offer commodity, interest rate, foreign exchange and equity derivatives to our customers. Customer hedging revenue totaled $6.3 million, a decrease of $1.3 million, driven by less energy customer activity. Customer hedging revenue includes credit valuation adjustments of the fair value of derivatives to reflect the risk of counterparty default.
Current wording
Customer hedging revenue is based primarily on realized and unrealized changes in the fair value of derivative contracts held for customer risk management programs. As more fully discussed under Customer Risk Management Programs in Note 3 of the Consolidated Financial Statements, we offer commodity, interest rate, foreign exchange and equity derivatives to our customers. Customer hedging revenue totaled $6.8 million for the second quarter of 2024 and was relatively consistent with the prior quarter. Customer hedging revenue includes credit valuation adjustments of the fair value of derivatives to reflect the risk of counterparty default.
Previous wording
Investment banking, which includes fees earned upon completion of underwriting, financial advisory services and loan syndication fees, totaled $10.7 million for the first quarter of 2024 and was relatively consistent with the prior quarter.
Current wording
Investment banking, which includes fees earned upon completion of underwriting, financial advisory services and loan syndication fees, totaled $13.7 million, an increase of $3.0 million over the first quarter of 2024, largely related to the timing and volume of completed underwriting and loan syndication transactions.
Previous wording
Transaction card revenue includes revenues from processing transactions on behalf of members of our TransFund electronic fund transfer network, merchant services fees paid by customers for account management and electronic processing of card transactions and interchange fees from our corporate card program. Transaction card revenue totaled $25.5 million for the first quarter of 2024, a $3.4 million decrease, primarily due to seasonally elevated fourth quarter activity and one less day in the quarter.
Current wording
Transaction card revenue includes revenues from processing transactions on behalf of members of our TransFund electronic fund transfer network, merchant services fees paid by customers for account management and electronic processing of card transactions and interchange fees from our corporate card program. Transaction card revenue totaled $27.2 million for the second quarter of 2024, a $1.8 million increase, primarily due to growth in the volume of transactions processed during the quarter.
Previous wording
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 asset values vary based on the nature of the relationship. Fiduciary relationships and managed asset relationships generally have higher fee rates than non-fiduciary and/or managed relationships. Fiduciary and asset management revenue was $55.3 million for the first quarter of 2024, a $3.9 million increase over the fourth quarter of 2023, largely related to movement in the equity markets.
Current wording
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 asset values vary based on the nature of the relationship. Fiduciary relationships and managed asset relationships generally have higher fee rates than non-fiduciary and/or managed relationships. Fiduciary and asset management revenue was $57.6 million for the second quarter of 2024, a $2.3 million increase over the first quarter of 2024, led by higher seasonal tax preparation fee income.
Previous wording
1 Assets under management or administration balance excludes certain assets under custody held by a sub-custodian where minimal revenue is recognized. $20 billion, $19 billion, and $18 billion of such assets are excluded from assets under management or administration at March 31, 2024, December 31, 2023, and March 31, 2023, respectively.
Current wording
1 Assets under management or administration balance excludes certain assets under custody held by a sub-custodian where minimal revenue is recognized. $21 billion, $20 billion, and $19 billion of such assets are excluded from assets under management or administration at June 30, 2024, March 31, 2024, and June 30, 2023, respectively.
Previous wording
A summary of changes in assets under management or administration for the three months ended March 31, 2024 and 2023 follows:
Current wording
A summary of changes in assets under management or administration for the three and six months ended June 30, 2024 and 2023 follows:
Previous wording
Assets under management as of March 31, 2024 consist of 42% fixed income, 34% equities, 15% cash, and 9% alternative investments.
Current wording
Assets under management as of June 30, 2024 consist of 42% fixed income, 35% equities, 15% cash, and 8% alternative investments.
Previous wording
Deposit service charges and fees increased $915 thousand or 3% over the fourth quarter of 2023, primarily due to growth in commercial service charges of $1.2 million, partially offset by a decrease in check card fees due to seasonality.
Current wording
Deposit service charges and fees increased $887 thousand or 3% over the first quarter of 2024, primarily due to growth in commercial service charges and check card fees.
Previous wording
Mortgage banking revenue increased $6.1 million to $19.0 million. Mortgage production volume increased $48 million to $172 million. Production revenue as a percentage of production volume, which includes unrealized gains and losses on our mortgage commitment pipeline and related hedges, increased 408 basis points to 2.05%. Margins have also increased as the repooling of COVID-19 forbearance loans we previously repurchased continues to migrate to a lower level than experienced in recent quarters.
Current wording
Mortgage banking revenue was relatively consistent with the first quarter of 2024. Mortgage production volume increased $63 million to $235 million. Production revenue as a percentage of production volume, which includes unrealized gains and losses on our mortgage commitment pipeline and related hedges, decreased 104 basis points to 1.01%.
Previous wording
The effective tax rate was 21.70% for the first quarter of 2024, 25.97% for thefourth quarter of 2023 and 22.03% for the first quarter of 2023. The fourth quarter of 2023 included an acceleration of $3.1 million of tax expense as a result of exiting three low income housing tax credit investments. When compared to the first quarter of 2023, the effective tax rate also decreased due to lower forecasted and actual pre-tax income.
Current wording
The effective tax rate was 22.41% for the second quarter of 2024, 21.70% for the first quarter of 2024 and 22.49% for the second quarter of 2023. When compared to the first quarter of 2024, the effective tax rate increased due to higher forecasted and actual pre-tax income. The effective rate for the six months ended June 30, 2024 and June 30, 2023 was 22.17% and 22.25%, respectively.
Previous wording
We operate three principal lines of business: Commercial Banking, Consumer Banking and Wealth Management. Commercial Banking includes lending, treasury and cash management services and customer risk management products for small businesses, middle market and larger commercial customers. Commercial Banking also includes the TransFund EFT network. Consumer Banking includes retail lending and deposit services, lending and deposit services to small business customers served through our consumer branch network and all mortgage banking activities. Wealth Management provides fiduciary services, private banking services, insurance and investment advisory services in all markets. Wealth Management also underwrites state and municipal securities and engages in brokerage and trading activities.
Current wording
We operate three principal lines of business: Commercial Banking, Consumer Banking and Wealth Management. Commercial Banking includes lending, treasury and cash management services and customer risk management products for small businesses, middle market and larger commercial customers. Commercial Banking also includes the TransFund EFT network. Consumer Banking includes retail lending and deposit services, lending and deposit services to small business customers served through our consumer branch network and all mortgage banking activities. Wealth Management provides fiduciary services, private banking services and investment advisory services in all markets. Wealth Management also underwrites state and municipal securities and engages in brokerage and trading activities.
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Current report — wording carried from elsewhere
38 - of operations between periods by isolating the impact of the provision for credit losses, which can vary significantly between periods.