BOK FINANCIAL CORP

Previous wording

BOK Financial reported net income of $140.0 million, or $2.18 per diluted share, for the third quarter of 2024 compared to $163.7 million, or $2.54 per diluted share, for the second quarter of 2024. PPNR 1, a non-GAAP measure, decreased $43.7 million to $175.3 million compared to the second quarter of 2024.

Current wording

BOK Financial reported net income of $119.8 million, or $1.86 per diluted share, for the first quarter of 2025 compared to $136.2 million, or $2.12 per diluted share, for the fourth quarter of 2024. PPNR 1, a non-GAAP measure, was $154.8 million for the first quarter of 2025, compared to $175.4 million in the fourth quarter of 2024.

Previous wording

•Period end outstanding loan balances totaled $24.0 billion at September 30, 2024, a decrease of $569 million compared to June 30, 2024, largely due to a reduction in commercial loans, partially offset by growth in commercial real estate loans and loans to individuals. Average loan balances decreased $80 million to $24.3 billion.

Current wording

•Period end outstanding loan balances totaled $23.7 billion at March 31, 2025, a decrease of $424 million compared to December 31, 2024. A decrease in commercial loans, primarily driven by energy balances, was partially offset by growth in commercial real estate loans and loans to individuals. Average loan balances increased $44 million to $24.1 billion.

Previous wording

•The provision for credit losses of $2.0 million in the third quarter of 2024 reflects continued strong credit quality, net loan paydowns, and relatively minor changes in economic forecast scenario assumptions. Net recoveries were $54 thousand, or less than 0.01% of average loans on an annualized basis, in the third quarter. The resulting combined allowance for credit losses totaled $332 million, or 1.39% of outstanding loans, at September 30, 2024. The combined allowance for credit losses was $330 million, or 1.34% of outstanding loans, at June 30, 2024.

Current wording

•No provision for expected credit losses was necessary for the first quarter of 2025. A worse economic outlook compared to the prior quarter was offset by decreased loan balances and further improvements in portfolio credit quality during the quarter. Net charge-offs were $1.1 million, or 0.02% of average loans on an annualized basis, in the first quarter. The resulting combined allowance for credit losses totaled $331 million, or 1.40% of outstanding loans, at March 31, 2025. The combined allowance for credit losses was $332 million, or 1.38% of outstanding loans, at December 31, 2024.

Previous wording

•Nonperforming assets not guaranteed by U.S. government agencies were $80 million, a $6.0 million decrease compared to June 30, 2024. Potential problem loans increased by $80 million while other loans especially mentioned decreased by $55 million compared to June 30, 2024.

Current wording

•Nonperforming assets not guaranteed by U.S. government agencies were $79 million, a $36 million increase compared to December 31, 2024. Potential problem loans decreased by $23 million while other loans especially mentioned decreased by $83 million compared to December 31, 2024.

Previous wording

•Period end deposits were $37.2 billion at September 30, 2024, growing $985 million over June 30, 2024. Average deposits increased $1.1 billion, including a $1.2 billion increase in average interest-bearing deposits, partially offset by a $113 million reduction in demand deposit balances. The loan to deposit ratio was 64% at September 30, 2024, compared to 68% at June 30, 2024.

Current wording

•Period end deposits were $38.3 billion at March 31, 2025, growing $90 million over December 31, 2024. Average deposits increased $540 million, including a $762 million increase in average interest-bearing deposits, partially offset by a $222 million reduction in demand deposit balances. The loan to deposit ratio was 62% at March 31, 2025, compared to 63% at December 31, 2024.

Previous wording

•The Company's tangible common equity ratio 1, a non-GAAP measure, was 9.22% at September 30, 2024, and 8.38% at June 30, 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 9.01% at September 30, 2024, and 8.06% at June 30, 2024.

Current wording

•The Company's tangible common equity ratio 1, a non-GAAP measure, was 9.48% at March 31, 2025, and 9.17% at December 31, 2024. The tangible common equity ratio is primarily based on total shareholders' equity, which includes unrealized gains and losses on AFS securities. Adjusted for all securities portfolio losses, including the tax adjusted losses in the investment portfolio, the tangible common equity ratio 1 would be 9.23% at March 31, 2025, and 8.86% at December 31, 2024.

Previous wording

•The common equity Tier 1 capital ratio at September 30, 2024, was 12.73%. Other regulatory capital ratios include the Tier 1 capital ratio at 12.74%, total capital ratio at 13.91%, and leverage ratio at 9.67%. At June 30, 2024, the common equity Tier 1 capital ratio was 12.10%, the Tier 1 capital ratio was 12.11%, total capital ratio was 13.25%, and leverage ratio was 9.39%.

Current wording

•The common equity Tier 1 capital ratio at March 31, 2025, was 13.31%. Other regulatory capital ratios include the Tier 1 capital ratio at 13.31%, total capital ratio at 14.54%, and leverage ratio at 10.02%. At December 31, 2024, the common equity Tier 1 capital ratio was 13.03%, the Tier 1 capital ratio was 13.04%, the total capital ratio was 14.21%, and the leverage ratio was 9.97%.

Previous wording

•The Company paid a regular cash dividend of $35.1 million, or $0.55 per common share, during the third quarter of 2024. On October 29, 2024, the board of directors approved a quarterly cash dividend of $0.57 per common share payable on or about November 27, 2024, to shareholders of record as of November 15, 2024.

Current wording

•The Company paid a regular cash dividend of $36.5 million, or $0.57 per common share, during the first quarter of 2025. On April 29, 2025, the board of directors approved a quarterly cash dividend of $0.57 per common share payable on or about May 28, 2025, to shareholders of record as of May 15, 2025.

Previous wording

Highlights of the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, included:

Current wording

Highlights of the three months ended March 31, 2025, compared to the three months ended March 31, 2024, included:

Previous wording

•Net interest income totaled $897.7 million for the nine months ended September 30, 2024, and $975.5 million for the nine months ended September 30, 2023. Net interest income decreased $62.4 million from changes in interest rates and decreased $15.4 million from changes in earning assets. Net interest margin was 2.62% compared to 3.03%. 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 third quarter of 2024, we have experienced margin compression reflecting deposit repricing activity and demand deposit migration into interest-bearing accounts. Loan yields increased 43 basis points, while funding costs increased 91 basis points. Average earning assets increased $3.1 billion to $45.6 billion, driven largely by higher average loan balances and trading securities balances. Total interest-bearing deposits increased $5.5 billion, partially offset by a decrease of $2.7 billion in demand deposit balances. Other borrowed funds decreased $152 million.

Current wording

•Net interest income totaled $316.3 million for the three months ended March 31, 2025, and $293.6 million for the three months ended March 31, 2024. Net interest income increased $16.5 million from changes in interest rates and increased $6.6 million from changes in earning assets. Net interest margin was 2.78% compared to 2.61% reflecting the funding shift from wholesale borrowings to interest-bearing deposits, along with improving yields on the AFS securities portfolio. The AFS securities portfolio yield increased 34 basis points and loan yields decreased 69 basis points, while funding costs decreased 66 basis points. Average earning assets increased $759 million to $45.6 billion, driven largely by higher average trading securities and AFS securities balances, along with growth in loan balances. Total interest-bearing deposits increased $3.8 billion, partially offset by a decrease of $475 million in demand deposit balances. Other borrowed funds decreased $2.5 billion.

Previous wording

•The provision for expected credit losses was $18.0 million for the nine months ended September 30, 2024. A $40.0 million provision for expected credit losses was recorded for the nine months ended September 30, 2023.

Current wording

•No provision for expected credit losses was necessary for the three months ended March 31, 2025. An $8.0 million provision for expected credit losses was recorded for the three months ended March 31, 2024.

Previous wording

Tax-equivalent net interest income totaled $310.5 million for the third quarter of 2024, compared to $298.2 million for the prior quarter. Net interest income increased $9.9 million from changes in interest rates and increased $2.4 million 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.

Current wording

Tax-equivalent net interest income totaled $318.8 million for the first quarter of 2025, compared to $315.5 million for the prior quarter. Net interest income increased $6.8 million from changes in interest rates and decreased $3.6 million 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

Total average deposits increased $1.1 billion over the second quarter of 2024, including a $1.2 billion increase in interest-bearing deposits, partially offset by a $113 million decrease in demand deposits. Funds purchased and repurchase agreements decreased $822 million while other borrowings decreased $785 million.

Current wording

Total average deposits increased $540 million over the fourth quarter of 2024, including a $762 million increase in interest-bearing deposits, partially offset by a $222 million decrease in demand deposits. Funds purchased and repurchase agreements decreased $141 million while other borrowings increased $137 million.

Previous wording

Funding costs were 4.11%, a 4 basis point decrease compared to the prior quarter. The cost of interest-bearing deposits increased 3 basis points to 3.79%. The cost of funds purchased and repurchase agreements decreased 39 basis points to 3.89% while the cost of other borrowings decreased 3 basis points to 5.55%. The benefit to net interest margin from assets funded by non-interest liabilities was 90 basis points, a decrease of 1 basis point.

Current wording

Funding costs were 3.42%, a 27 basis point decrease compared to the prior quarter. The cost of interest-bearing deposits decreased 24 basis points to 3.24%. The cost of funds purchased and repurchase agreements decreased 73 basis points to 3.05% while the cost of other borrowings decreased 38 basis points to 4.57%. The benefit to net interest margin from assets funded by non-interest liabilities was 75 basis points, a decrease of 10 basis points.

Previous wording

Our overall objective is to manage the Company's balance sheet for changes in interest rates as is further described in the Market Risk section of this report. Approximately 81% of our commercial and commercial real estate loan portfolios are either variable rate or fixed rate that will reprice within one year. These loans are funded primarily by deposit accounts that are either non-interest bearing, or that reprice more slowly than the loans. The result is a balance sheet that is asset sensitive, which means that assets generally reprice more quickly than the liabilities. One of the strategies that we use to manage toward a relative rate-neutral position is to purchase fixed-rate residential mortgage-backed securities issued primarily by U.S. government agencies and fund them with market rate-sensitive liabilities. The liability-sensitive nature of this strategy provides an offset to the asset-sensitive characteristics of our loan portfolio. We also may use derivative instruments to manage our interest rate risk.

Current wording

Our overall objective is to manage the Company's balance sheet for changes in interest rates as is further described in the Market Risk section of this report. Approximately 82% of our commercial and commercial real estate loan portfolios are either variable rate or fixed rate that will reprice within one year. These loans are funded primarily by deposit accounts that are either non-interest bearing, or that reprice more slowly than the loans. The result is a balance sheet that is asset sensitive, which means that assets generally reprice more quickly than the liabilities. One of the strategies that we use to manage toward a relative rate-neutral position is to purchase fixed-rate residential mortgage-backed securities issued primarily by U.S. government agencies and fund them with market rate-sensitive liabilities. The liability-sensitive nature of this strategy provides an offset to the asset-sensitive characteristics of our loan portfolio. We also may use derivative instruments to manage our interest rate risk.

Previous 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 third 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.

Current wording

Diversified sources of fees and commissions revenue are a significant part of our business strategy and represented 37% of combined net interest income before provision for credit losses and fees and commissions revenue for the first quarter of 2025. 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, and investment banking, decreased $2.6 million compared to the second quarter of 2024.

Current wording

Brokerage and trading revenue, which includes revenues from trading, customer hedging, retail brokerage, and investment banking, decreased $24.4 million compared to the fourth 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 $23.6 million, a $4.1 million decrease compared to the prior quarter. A decline in U.S. agency residential mortgage-backed securities trading volumes, driven by market conditions in the third quarter of 2024, was partially offset by an increase in municipal trading revenue led by strong activity in this sector.

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 $8.1 million, a $25.0 million decrease compared to the prior quarter, driven by lower trading volumes and compressed spreads for U.S. agency residential mortgage-backed securities, as demand slowed due to market volatility from major geopolitical risks. We also experienced seasonally weaker municipal pipelines during the first quarter of 2025.

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 $7.4 million for the third quarter of 2024, an increase of $662 thousand, and was primarily attributed to our interest rate derivative customers. 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 $8.4 million for the first quarter of 2025, an increase of $1.2 million, and was primarily attributed to our energy derivative customers. 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 $14.4 million, up $680 thousand over the prior quarter, largely related to the timing and volume of transactions.

Current wording

Investment banking, which includes fees earned upon completion of underwriting, financial advisory services, and loan syndication fees, totaled $9.6 million, a decrease of $638 thousand compared to the prior quarter, largely related to the timing and volume of 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 $28.5 million for the third quarter of 2024, a $1.2 million increase, primarily due to growth in the volume of transactions processed during 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 $27.1 million for the first quarter of 2025, a $539 thousand decrease, led by seasonally lower transaction volumes 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 $57.4 million for the third quarter of 2024, consistent with the second quarter of 2024. Growth in our trust fee income this quarter nearly fully offset prior quarter's seasonal tax preparation fees.

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 $61.0 million for the first quarter of 2025, consistent with the fourth quarter of 2024.

Previous 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, $21 billion, and $18 billion of such assets are excluded from assets under management or administration at September 30, 2024, June 30, 2024, and September 30, 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. $14 billion, $21 billion, and $20 billion of such assets are excluded from assets under management or administration at March 31, 2025, December 31, 2024, and March 31, 2024, respectively.

Previous wording

A summary of changes in assets under management or administration for the three and nine months ended September 30, 2024, and 2023 follows:

Current wording

A summary of changes in assets under management or administration for the three months ended March 31, 2025, and 2024 follows:

Previous wording

Assets under management as of September 30, 2024, consist of 40% fixed income, 39% equities, 13% cash, and 8% alternative investments.

Current wording

Assets under management as of March 31, 2025, consist of 43% fixed income, 34% equities, 15% cash, and 8% alternative investments.

Previous wording

Mortgage banking revenue was consistent with the second quarter of 2024. Mortgage production volume decreased $3.2 million to $232 million. Production revenue as a percentage of production volume, which includes unrealized gains and losses on our mortgage commitment pipeline and related hedges, decreased 34 basis points to 0.67%.

Current wording

Mortgage banking revenue increased $1.7 million over the fourth quarter of 2024, led by higher production as client demand begins to grow and inventory constraints start to ease. Mortgage production volume increased $8.9 million to $184 million. Production revenue as a percentage of production volume, which includes unrealized gains and losses on our mortgage commitment pipeline and related hedges, increased 70 basis points to 1.43%.

Previous wording

Primary rates disclosed in Table 5 above represent rates generally available to borrowers on 30 year conforming mortgage loans.

Current wording

1 Primary rates disclosed in Table 5 above represent rates generally available to borrowers on 30 year conforming mortgage loans.

Previous wording

Net Gains on Other Assets, Securities and Derivatives

Current wording

Net Gains and Losses on Other Assets, Securities and Derivatives

Previous wording

Other operating expense for the third quarter of 2024 totaled $341.0 million, an increase of $4.3 million compared to the second quarter of 2024. Our efficiency ratio 1 was 65.11% for the third quarter of 2024, compared to 59.83% in the prior quarter.

Current wording

Other operating expense for the first quarter of 2025 totaled $347.5 million, consistent with the fourth quarter of 2024. Our efficiency ratio 1 was 68.31% for the first quarter of 2025, compared to 65.61% in the prior quarter.

Previous wording

We operate three principal segments: 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.

Current wording

We operate three principal segments: 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 loan origination and servicing 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.

Previous wording

We allocate resources and evaluate the performance of our reportable segments using the net direct contribution, which includes the allocation of funds and capital costs. Credit costs are attributed to the segments based on net loans charged off or recovered. The difference between credit costs attributed to the segment and the consolidated provision for credit losses is attributed to Funds Management. In addition, we measure the performance of our segments after allocations of certain indirect expenses and taxes based on statutory rates.

Current wording

We allocate resources and evaluate the performance of our reportable segments using net income before taxes, which includes the allocation of cost of funds, capital costs, and certain indirect allocations. Credit costs are attributed to the segments based on net loans charged off or recovered. The difference between credit costs attributed to the segment and the consolidated provision for credit losses is attributed to Funds Management.

Previous wording

Economic capital is assigned to the segments by a capital allocation model that reflects management's assessment of risk. This model assigns capital based upon credit, operating, interest rate, and other market risk inherent in our segments and recognizes the diversification benefits among the units. The level of assigned economic capital is a combination of the risk taken by each segment based on its actual exposures and calibrated to its own loss history where possible. Average invested capital includes economic capital and amounts we have invested in segment.

Current wording

Economic capital is assigned to the segments by a capital allocation model that reflects management's assessment of risk. This model assigns capital based upon credit, operating, interest rate, and other market risk inherent in our segments and recognizes the diversification benefits among the segments. The level of assigned economic capital is a combination of the risk taken by each segment based on its actual exposures and calibrated to its own loss history where possible. Average invested capital includes economic capital and amounts we have invested in the segment.

Previous wording

Average outstanding loan balances attributed to Commercial Banking were relatively consistent with the prior quarter at $20.3 billion. See the Loans section of Management's Discussion and Analysis of Financial Condition following for additional discussion of changes in commercial and commercial real estate loans, which are primarily attributed to the Commercial Banking segment.

Current wording

Average outstanding loan balances attributed to Commercial Banking were relatively consistent with the prior quarter at $20.0 billion. See the Loans section of Management's Discussion and Analysis of Financial Condition and Results of Operations following for additional discussion of changes in commercial and commercial real estate loans, which are primarily attributed to the Commercial Banking segment.

Previous wording

Average deposits attributed to Commercial Banking grew by $942 million, or 6%, over the second quarter of 2024 to $17.1 billion. See Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital for further discussion of changes.

Current wording

Average deposits attributed to Commercial Banking declined by $173 million, or 1%, compared to the fourth quarter of 2024, to $17.8 billion. See Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital for further discussion of changes.

Previous wording

The net cost of the changes in the fair value of mortgage servicing rights and related economic hedges was $4.5 million compared to a net cost of $221 thousand for the second quarter of 2024.

Current wording

Net interest income from Consumer Banking decreased by $8.2 million, or 13%, from the prior quarter largely due to a reduction in the spread on deposits. Other operating revenue increased $5.2 million, or 15%, partially due to an increase in mortgage banking revenue from higher production volumes. The net benefit of the changes in the fair value of mortgage servicing rights and related economic hedges was $2.2 million compared to a net cost of $2.2 million for the fourth quarter of 2024. Other operating expense decreased $2.7 million, or 4%, primarily due to lower mortgage banking costs.

Previous wording

Average loans increased $83 million, or 4% over the prior quarter, to $2.1 billion. Average deposits attributed to the Consumer Banking segment increased $63 million, or 1%, 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 wording

Average loans increased $59 million, or 3%, over the prior quarter, to $2.2 billion. Average deposits attributed to the Consumer Banking segment were largely unchanged from the previous quarter. See Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital for further discussion of the changes.

Previous wording

Average outstanding loans attributed to the Wealth Management segment decreased $49 million, or 2%, to $2.2 billion compared to the prior quarter. Average Wealth Management deposits increased $287 million, or 3%, to $9.8 billion. See Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital for further discussion of the changes.

Current wording

Average outstanding loans attributed to the Wealth Management segment increased $27 million, or 1%, to $2.2 billion compared to the prior quarter. Average Wealth Management deposits increased $719 million, or 7%, to $10.7 billion. See Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital for further discussion of the changes.

Previous wording

We hold an inventory of trading securities in support of sales to a variety of customers, including banks, corporations, insurance companies, money managers, and others. Trading securities decreased $73 million to $5.1 billion during the third quarter of 2024. As discussed in the Market Risk section of this report, trading activities involve risk of loss from adverse price movement. We mitigate this risk within board-approved limits through the use of derivative contracts, short-sales, and other techniques.

Current wording

We hold an inventory of trading securities in support of sales to a variety of customers, including banks, corporations, insurance companies, money managers, and others. Trading securities increased $953 million to $5.9 billion during the first quarter of 2025. As discussed in the Market Risk section of this report, trading activities involve risk of loss from adverse price movement. We mitigate this risk within board-approved limits through the use of derivative contracts, short-sales, and other techniques.

Previous wording

At September 30, 2024, the carrying value of investment securities was $2.1 billion, including a $234 thousand allowance for expected credit losses, compared to $2.1 billion at June 30, 2024, with a $287 thousand allowance for expected credit losses. The fair value of investment securities was $1.9 billion at September 30, 2024, a $13 million increase compared to the prior quarter. Investment securities consist primarily of residential mortgage-backed securities issued by U.S. government agencies, intermediate and long-term, fixed-rate Oklahoma and Texas municipal bonds, and taxable Texas school construction bonds.

Current wording

At March 31, 2025, the carrying value of investment securities was $2.0 billion, including a $193 thousand allowance for expected credit losses, compared to $2.0 billion at December 31, 2024, with a $223 thousand allowance for expected credit losses. The fair value of investment securities was $1.8 billion at March 31, 2025, a $30 million decrease compared to the prior quarter. Investment securities consist primarily of residential mortgage-backed securities issued by U.S. government agencies, intermediate and long-term, fixed-rate Oklahoma and Texas municipal bonds, and taxable Texas school construction bonds.

Previous wording

Available-for-sale securities, which may be sold prior to maturity, are carried at fair value. Unrealized gains or losses, net of deferred taxes, are recorded as accumulated other comprehensive income in shareholders' equity. The amortized cost of available-for-sale securities totaled $13.3 billion at September 30, 2024, a $120 million decrease compared to June 30, 2024. At September 30, 2024, the available-for-sale securities portfolio consisted primarily of U.S. government agency residential mortgage-backed securities and U.S. government agency commercial mortgage-backed securities. Both residential and commercial mortgage-backed securities have credit risk from delinquency or default of the underlying loans. We mitigate this risk by primarily investing in securities issued by U.S. government agencies. Principal and interest payments on the underlying loans are fully guaranteed. Commercial mortgage-backed securities have prepayment penalties similar to commercial loans.

Current wording

AFS securities, which may be sold prior to maturity, are carried at fair value. Unrealized gains or losses, net of deferred taxes, are recorded as accumulated other comprehensive income in shareholders' equity. The amortized cost of AFS securities totaled $13.5 billion at March 31, 2025, a $77 million increase compared to December 31, 2024. At March 31, 2025, the AFS securities portfolio consisted primarily of U.S. government agency residential mortgage-backed securities and U.S. government agency commercial mortgage-backed securities. Both residential and commercial mortgage-backed securities have credit risk from delinquency or default of the underlying loans. We mitigate this risk by primarily investing in securities issued by U.S. government agencies. Principal and interest payments on the underlying loans are fully guaranteed. Commercial mortgage-backed securities have prepayment penalties similar to commercial loans.