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Loans and Allowances for Credit Losses (Policies)
 6 Months Ended
Jun. 30, 2012
Loans Receivable, Net [Abstract]  
Loans Policy
Loans are either secured or unsecured based on the type of loan and the financial condition of the borrower. Repayment is generally expected from cash flow or proceeds from the sale of selected assets of the borrower. BOK Financial is exposed to risk of loss on loans due to the borrower’s difficulties, which may arise from any number of factors, including problems within the respective industry or local economic conditions. Access to collateral, in the event of borrower default, is reasonably assured through adherence to applicable lending laws and through sound lending standards and credit review procedures.

Performing loans may be renewed under then current collateral value, debt service ratio and other underwriting standards. Nonperforming loans may be renewed and will remain on nonaccrual status. Nonperforming loans renewed will be evaluated and may be charged off if the loan balance is no longer covered by the paying capacity of the borrower based on an evaluation of available cash resources and collateral value.

Interest is accrued at the applicable interest rate on the principal amount outstanding. Loans are placed on nonaccrual status when, in the opinion of management, full collection of principal or interest is uncertain. Internally risk graded loans are individually evaluated for nonaccrual status quarterly. Non-risk graded loans are generally placed on nonaccrual status when more than 90 days past due. Interest previously accrued but not collected is charged against interest income when the loan is placed on nonaccrual status. Payments on nonaccrual loans are applied to principal or reported as interest income, according to management’s judgment as to the collectability of principal. Loans may be returned to accruing status when, in the opinion of management, full collection of principal and interest, including principal previously charged off, is probable based on improvements in the borrower’s financial condition or a sustained period of performance.

All distressed commercial and commercial real estate loans are placed on nonaccrual status. Modifications of nonaccruing loans to distressed borrowers generally consists of extension of payment terms, renewal of matured nonaccruing loans or interest rate concession. Principal and accrued but unpaid interest is not forgiven. Renewed or modified nonaccruing loans are charged off when the loan balance is no longer covered by the paying capacity of the borrower based on a quarterly evaluation of cash resources and collateral value. Renewed or modified nonperforming loans generally remain on nonaccrual status until full collection of principal and interest in accordance with original terms, including principal previously charged off, is probable. Consumer loans to troubled borrowers are not voluntarily modified.

Residential mortgage loans are modified in accordance with U.S. government agency guidelines by reducing interest rates and extending the number of payments. No unpaid principal or interest is forgiven. Interest guaranteed by U.S. government agencies under residential mortgage loan programs continues to accrue based on the modified terms of the loan. Renegotiated loans may be sold after a period of satisfactory performance. If it becomes probable that all amounts due according to the modified loan terms will not be collected, the loan is placed on nonaccrual status and included in nonaccrual loans.

Loan origination and commitment fees and direct loan acquisition and origination costs are deferred and amortized as an adjustment to yield over the life of the loan or over the commitment period, as applicable.

Certain residential mortgage loans originated by the Company are held for sale and are carried at fair value based on sales commitments or market quotes and reported separately in the Consolidated Balance Sheets. Changes in fair value are recorded in other operating revenue – mortgage banking revenue in the Consolidated Statements of Earnings.

Loans are disaggregated into portfolio segments and further disaggregated into classes. The portfolio segment is the level at which the Company develops and documents a systematic method for determining its allowance for credit losses. Classes are a further disaggregation of portfolio segments based on the risk characteristics of the loans and the Company’s method for monitoring and assessing credit risk.
Allowances for Credit Losses
Allowances for Credit Losses

BOK Financial maintains an allowance for loan losses and an accrual for off-balance sheet credit risk related to commitments to extend credit and standby letters of credit. As discussed in greater detail in Note 5, the Company also has separate accruals related to off-balance sheet credit risk related to residential mortgage loans previously sold with full or partial recourse and for residential mortgage loans sold to government sponsored agencies under standard representations and warranties.

The appropriateness of the allowance for loan losses and accrual for off-balance sheet credit losses is assessed by management based on an on-going quarterly evaluation of the probable estimated losses inherent in the portfolio, including probable losses on both outstanding loans and unused commitments.

The allowance for loan losses consists of specific allowances attributed to impaired loans that have not yet been charged down to amounts we expect to recover, general allowances for unimpaired loans based on estimated loss rates by loan class and nonspecific allowances based on general economic conditions, risk concentration and related factors. There have been no material changes in the approach or techniques utilized in developing the allowance for loan losses and the accrual for off-balance sheet credit losses for the three and six months ended June 30, 2012.

Internally risk graded loans are evaluated individually for impairment. Substantially all commercial and commercial real estate loans and certain residential mortgage and consumer loans are risk graded based on evaluation of the borrowers' ability to repay. Certain commercial loans and most residential mortgage and consumer loans are small balance, homogeneous pools of loans that are not risk graded.

Loans are considered to be impaired when it becomes probable that BOK Financial will be unable to collect all amounts due according to the contractual terms of the loan agreements. This is substantially the same criteria used to determine when a loan should be placed on nonaccrual status. All commercial and commercial real estate loans that have been modified in a troubled debt restructuring are considered to be impaired and remain classified as nonaccrual. Specific allowances for impaired loans are measured by an evaluation of estimated future cash flows discounted at the loans’ initial effective interest rate or the fair value of collateral for certain collateral dependent loans. Collateral value of real property is generally based on third party appraisals that conform to Uniform Standards of Professional Appraisal Practice, less estimated selling costs. Appraised values are on an "as-is" basis and are not adjusted by the Company. Collateral value of mineral rights is generally determined by our internal staff of engineers based on projected cash flows under current market conditions. Collateral values and available cash resources that support impaired loans are evaluated quarterly. Updated appraisals are obtained at least annually or more frequently if market conditions indicate collateral values have declined. Historical statistics may be used in limited situations to assist in estimating future cash flows or collateral values, such as when an impaired collateral dependent loan is identified at the end of a reporting period. Historical statistics are a practical way to estimate impairment until an updated appraisal of collateral value is received or a full assessment of future cash flows is completed. Estimates of future cash flows and collateral values require significant judgments and are subject to volatility.

General allowances for unimpaired loans are based on estimated loss rates by loan class. For risk-graded loans, loss rates are developed using historical gross loss rates, as adjusted for changes in risk grading and inherent risks identified by loan class. Loss rates for each loan class are determined by the current loss rate based on the most recent twelve months or a long-term gross loss rate that most appropriately represents the current economic environment. For each loan class, current average risk grades are compared to long-term average risk grades to determine if risk is increasing or decreasing. Loss rates are accordingly adjusted upward or downward in proportion to increasing or decreasing risk. Historical loss rates may be further adjusted for inherent risks identified for the given loan class which have not yet been captured in the actual gross loss rates or risk gradings.

Nonspecific allowances are maintained for risks beyond factors specific to a particular loan or loan class. These factors include trends in the economy in our primary lending areas, concentrations in loans with large balances and other relevant factors.
An accrual for off-balance sheet credit losses is included in Other liabilities in the Consolidated Balance Sheets. The appropriateness of this accrual is determined in the same manner as the allowance for loan losses. Changes in the accrual for off-balance sheet credit losses are recognized through the provision for credit losses in the Consolidated Statements of Earnings.

The activity in the allowance for loan losses and the allowance for off-balance sheet credit losses related to loan commitments and standby letters of credit for the three months ended June 30, 2012 is summarized as follows (in thousands):

 
 
Commercial
 
Commercial Real Estate
 
Residential Mortgage
 
Consumer
 
Nonspecific allowance
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
85,972

 
$
62,742

 
$
41,628

 
$
9,517

 
$
44,350

 
$
244,209

Provision for loan losses
 
(2,526
)
 
(6,264
)
 
4,371

 
212

 
(3,492
)
 
(7,699
)
Loans charged off
 
(4,094
)
 
(1,216
)
 
(4,061
)
 
(2,172
)
 
—

 
(11,543
)
Recoveries
 
4,125

 
544

 
750

 
1,283

 
—

 
6,702

Ending balance
 
$
83,477

 
$
55,806

 
$
42,688

 
$
8,840

 
$
40,858

 
$
231,669

Allowance for off-balance sheet credit losses:
 
 

 
 

 
 

 
 

 
 

 
 

Beginning balance
 
$
8,362

 
$
1,575

 
$
82

 
$
29

 
$
—

 
$
10,048

Provision for off-balance sheet credit losses
 
(138
)
 
(150
)
 
(2
)
 
(11
)
 
—

 
(301
)
Ending balance
 
$
8,224

 
$
1,425

 
$
80

 
$
18

 
$
—

 
$
9,747

 
 
 
 
 
 
 
 
 
 
 
 
 
Total provision for credit losses
 
$
(2,664
)
 
$
(6,414
)
 
$
4,369

 
$
201

 
$
(3,492
)
 
$
(8,000
)

The activity in the allowance for loan losses and the allowance for off-balance sheet credit losses related to loan commitments and standby letters of credit for the six months ended June 30, 2012 is summarized as follows (in thousands):

 
 
Commercial
 
Commercial Real Estate
 
Residential Mortgage
 
Consumer
 
Nonspecific allowance
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
83,443

 
$
67,034

 
$
46,476

 
$
10,178

 
$
46,350

 
$
253,481

Provision for loan losses
 
991

 
(5,143
)
 
898

 
260

 
(5,492
)
 
(8,486
)
Loans charged off
 
(7,028
)
 
(7,941
)
 
(5,847
)
 
(4,401
)
 
—

 
(25,217
)
Recoveries
 
6,071

 
1,856

 
1,161

 
2,803

 
—

 
11,891

Ending balance
 
$
83,477

 
$
55,806

 
$
42,688

 
$
8,840

 
$
40,858

 
$
231,669

Allowance for off-balance sheet credit losses:
 
 

 
 

 
 

 
 

 
 

 
 

Beginning balance
 
$
7,906

 
$
1,250

 
$
91

 
$
14

 
$
—

 
$
9,261

Provision for off-balance sheet credit losses
 
318

 
175

 
(11
)
 
4

 
—

 
486

Ending balance
 
$
8,224

 
$
1,425

 
$
80

 
$
18

 
$
—

 
$
9,747

 
 
 
 
 
 
 
 
 
 
 
 
 
Total provision for credit losses
 
$
1,309

 
$
(4,968
)
 
$
887

 
$
264

 
$
(5,492
)
 
$
(8,000
)

The activity in the allowance for loan losses and the allowance for off-balance sheet credit losses related to loan commitments and standby letters of credit for the three months ended June 30, 2011 is summarized as follows (in thousands):

 
 
Commercial
 
Commercial Real Estate
 
Residential Mortgage
 
Consumer
 
Nonspecific allowance
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
113,706

 
$
94,535

 
$
45,649

 
$
10,410

 
$
25,249

 
$
289,549

Provision for loan losses
 
980

 
289

 
2,721

 
(286
)
 
1,876

 
5,580

Loans charged off
 
(3,302
)
 
(3,380
)
 
(3,381
)
 
(2,711
)
 
—

 
(12,774
)
Recoveries
 
2,187

 
306

 
254

 
1,509

 
—

 
4,256

Ending balance
 
$
113,571

 
$
91,750

 
$
45,243

 
$
8,922

 
$
27,125

 
$
286,611

Allowance for off-balance sheet credit losses:
 
 

 
 

 
 

 
 

 
 

 
 

Beginning balance
 
$
12,256

 
$
875

 
$
155

 
$
339

 
$
—

 
$
13,625

Provision for off-balance sheet credit losses
 
(3,020
)
 
145

 
25

 
(30
)
 
—

 
(2,880
)
Ending balance
 
$
9,236

 
$
1,020

 
$
180

 
$
309

 
$
—

 
$
10,745

 
 
 
 
 
 
 
 
 
 
 
 
 
Total provision for credit losses
 
$
(2,040
)
 
$
434

 
$
2,746

 
$
(316
)
 
$
1,876

 
$
2,700


The activity in the allowance for loan losses and the allowance for off-balance sheet credit losses related to loan commitments and standby letters of credit for the six months ended June 30, 2011 is summarized as follows (in thousands):

 
 
Commercial
 
Commercial Real Estate
 
Residential Mortgage
 
Consumer
 
Nonspecific allowance
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
104,631

 
$
98,709

 
$
50,281

 
$
12,614

 
$
26,736

 
$
292,971

Provision for loan losses
 
10,836

 
2,665

 
(45
)
 
(1,369
)
 
389

 
12,476

Loans charged off
 
(5,654
)
 
(10,273
)
 
(6,329
)
 
(5,750
)
 
—

 
(28,006
)
Recoveries
 
3,758

 
649

 
1,336

 
3,427

 
—

 
9,170

Ending balance
 
$
113,571

 
$
91,750

 
$
45,243

 
$
8,922

 
$
27,125

 
$
286,611

Allowance for off-balance sheet credit losses:
 
 

 
 

 
 

 
 

 
 

 
 

Beginning balance
 
$
13,456

 
$
443

 
$
131

 
$
241

 
$
—

 
$
14,271

Provision for off-balance sheet credit losses
 
(4,220
)
 
577

 
49

 
68

 
—

 
(3,526
)
Ending balance
 
$
9,236

 
$
1,020

 
$
180

 
$
309

 
$
—

 
$
10,745

 
 
 
 
 
 
 
 
 
 
 
 
 
Total provision for credit losses
 
$
6,616

 
$
3,242

 
$
4

 
$
(1,301
)
 
$
389

 
$
8,950


A provision for credit losses is charged against earnings in amounts necessary to maintain an appropriate allowance for loan and accrual for off-balance sheet credit losses. All loans are charged off when the loan balance or a portion of the loan balance is no longer covered by the paying capacity of the borrower based on an evaluation of available cash resources and collateral value. Internally risk graded loans are evaluated quarterly and charge-offs are taken in the quarter in which the loss is identified. Non-risk graded loans are generally charged off when payments are between 90 days and 180 days past due, depending on loan class. Recoveries of loans previously charged off are added to the allowance.
Minimum No of Days After Which Past Due Non-Risk Graded Loans Are Charged Off 90
Maximum No of Days After Which Past Due Non-Risk Graded Loans Are Charged Off 180