XML 20 R10.htm IDEA: XBRL DOCUMENT v3.4.0.3
Derivatives
 3 Months Ended
Mar. 31, 2016
Derivative Instrument Detail [Abstract]  
Derivatives [Text Block]
(3) Derivatives
 
Derivative instruments may be used by the Company as part of its interest rate risk management programs or may be offered to customers. All derivative instruments are carried at fair value and changes in fair value are reported in earnings as they occur. Credit risk is also considered in determining fair value.

When bilateral netting agreements or similar arrangements exist between the Company and its counterparties that create a single legal claim or obligation to pay or receive the net amount in settlement of the individual derivative contracts, the Company reports derivative assets and liabilities on a net by derivative contract type by counterparty basis.

Derivative contracts may require the Company to provide or receive cash margin as collateral for derivative assets and liabilities. Derivative assets and liabilities are reported net of cash margin when certain conditions are met. In addition, derivative contracts executed with customers under Customer Risk Management Programs may be secured by non-cash collateral in conjunction with a credit agreement with that customer. Access to collateral, in the event of default is reasonably assured. As of March 31, 2016, a decrease in BOK Financial's credit rating to below investment grade would increase our obligation to post cash margin on existing contracts by approximately $18 million.
 
None of these derivative contracts have been designated as hedging instruments.

Customer Risk Management Programs
 
BOK Financial offers programs to permit its customers to manage various risks, including fluctuations in energy, cattle and other agricultural products, and foreign exchange rates, or to take positions in derivative contracts. Customers may also manage interest rate risk through interest rate swaps used by borrowers to modify interest rate terms of their loans or to-be-announced securities used by mortgage banking customers to hedge their loan production. Derivative contracts are executed between the customers and BOK Financial. Offsetting contracts are executed between BOK Financial and other selected counterparties to minimize the risk of changes in commodity prices, interest rates or foreign exchange rates. The counterparty contracts are identical to customer contracts, except for a fixed pricing spread or fee paid to BOK Financial as profit and compensation for administrative costs and credit risk which is recognized over the life of the contracts and included in other operating revenue – brokerage and trading revenue in the Consolidated Statements of Earnings.
 
Interest Rate Risk Management Programs
 
BOK Financial may use derivative contracts in managing its interest rate sensitivity and as part of its economic hedge of the change in the fair value of mortgage servicing rights. As of March 31, 2016, derivative contracts under the interest rate risk management program were primarily used as part of the economic hedge of the change in the fair value of the mortgage servicing rights.

As discussed in Note 6, certain derivative contracts not designated as hedging instruments related to mortgage loan commitments and forward sales contracts are included in Residential mortgage loans held for sale on the Consolidated Balance Sheets. See Note 6 for additional discussion of notional, fair value and impact on earnings of these contracts.
The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in the balance sheet at March 31, 2016 (in thousands):
 
 
Assets
 
 
Notional1
 
Gross Fair Value
 
Netting Adjustments
 
Net Fair Value Before Cash Collateral
 
Cash Collateral
 
Fair Value Net of Cash Collateral
Customer risk management programs:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
 
 
 
 
 
 
 
 
 
 
 
 
To-be-announced residential mortgage-backed securities
 
$
16,235,517

 
$
111,188

 
$
(44,570
)
 
$
66,618

 
$
—

 
$
66,618

Interest rate swaps
 
1,335,259

 
48,270

 
—

 
48,270

 
—

 
48,270

Energy contracts
 
533,355

 
62,365

 
(21,374
)
 
40,991

 
(11,340
)
 
29,651

Agricultural contracts
 
104,927

 
1,859

 
(1,175
)
 
684

 
—

 
684

Foreign exchange contracts
 
682,457

 
639,322

 
—

 
639,322

 
(4,970
)
 
634,352

Equity option contracts
 
128,623

 
4,006

 
—

 
4,006

 
(376
)
 
3,630

Total customer risk management programs
 
19,020,138

 
867,010

 
(67,119
)
 
799,891

 
(16,686
)
 
783,205

Interest rate risk management programs
 
772,000

 
6,941

 
—

 
6,941

 
—

 
6,941

Total derivative contracts
 
$
19,792,138

 
$
873,951

 
$
(67,119
)
 
$
806,832

 
$
(16,686
)
 
$
790,146

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
Notional¹
 
Gross Fair Value
 
Netting Adjustments
 
Net Fair Value Before Cash Collateral
 
Cash Collateral
 
Fair Value Net of Cash Collateral
Customer risk management programs:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
 
 
 
 
 
 
 
 
 
 
 
 
To-be-announced residential mortgage-backed securities
 
$
16,323,807

 
$
107,541

 
$
(44,570
)
 
$
62,971

 
$
(61,380
)
 
$
1,591

Interest rate swaps
 
1,335,259

 
48,619

 
—

 
48,619

 
(28,572
)
 
20,047

Energy contracts
 
526,103

 
62,528

 
(21,374
)
 
41,154

 
—

 
41,154

Agricultural contracts
 
104,922

 
1,847

 
(1,175
)
 
672

 
(420
)
 
252

Foreign exchange contracts
 
682,354

 
638,892

 
—

 
638,892

 
(364
)
 
638,528

Equity option contracts
 
128,623

 
4,006

 
—

 
4,006

 
—

 
4,006

Total customer risk management programs
 
19,101,068

 
863,433

 
(67,119
)
 
796,314

 
(90,736
)
 
705,578

Interest rate risk management programs
 
—

 
—

 
—

 
—

 
—

 
—

Total derivative contracts
 
$
19,101,068

 
$
863,433

 
$
(67,119
)
 
$
796,314

 
$
(90,736
)
 
$
705,578

1 
Notional amounts for commodity contracts are converted into dollar-equivalent amounts based on dollar prices at the inception of the contract.


The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in the balance sheet at December 31, 2015 (in thousands):

 
 
Assets
 
 
Notional 1
 
Gross Fair Value
 
Netting Adjustments
 
Net Fair Value Before Cash Collateral
 
Cash Collateral
 
Fair Value Net of Cash Collateral
Customer risk management programs:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
 
 
 
 
 
 
 
 
 
 
 
 
To-be-announced residential mortgage-backed securities
 
$
14,583,052

 
$
43,270

 
$
(28,305
)
 
$
14,965

 
$
—

 
$
14,965

Interest rate swaps
 
1,332,044

 
31,744

 
—

 
31,744

 
(1,424
)
 
30,320

Energy contracts
 
470,613

 
83,045

 
(22,970
)
 
60,075

 
(18,606
)
 
41,469

Agricultural contracts
 
61,662

 
2,591

 
(1,158
)
 
1,433

 
—

 
1,433

Foreign exchange contracts
 
546,572

 
498,830

 
—

 
498,830

 
(4,140
)
 
494,690

Equity option contracts
 
137,278

 
3,780

 
—

 
3,780

 
(470
)
 
3,310

Total customer risk management programs
 
17,131,221

 
663,260

 
(52,433
)
 
610,827

 
(24,640
)
 
586,187

Interest rate risk management programs
 
22,000

 
83

 
—

 
83

 
—

 
83

Total derivative contracts
 
$
17,153,221

 
$
663,343

 
$
(52,433
)
 
$
610,910

 
$
(24,640
)
 
$
586,270

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
Notional 1
 
Gross Fair Value
 
Netting Adjustments
 
Net Fair Value Before Cash Collateral
 
Cash Collateral
 
Fair Value Net of Cash Collateral
Customer risk management programs:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
 
 
 
 
 
 
 
 
 
 
 
 
To-be-announced residential mortgage-backed securities
 
$
14,168,927

 
$
40,141

 
$
(28,305
)
 
$
11,836

 
$
(1,308
)
 
$
10,528

Interest rate swaps
 
1,332,044

 
31,928

 
—

 
31,928

 
(20,530
)
 
11,398

Energy contracts
 
463,703

 
81,869

 
(22,970
)
 
58,899

 
—

 
58,899

Agricultural contracts
 
61,657

 
2,579

 
(1,158
)
 
1,421

 
(1,248
)
 
173

Foreign exchange contracts
 
546,405

 
498,574

 
—

 
498,574

 
(1,951
)
 
496,623

Equity option contracts
 
137,278

 
3,780

 
—

 
3,780

 
—

 
3,780

Total customer risk management programs
 
16,710,014

 
658,871

 
(52,433
)
 
606,438

 
(25,037
)
 
581,401

Interest rate risk management programs
 
75,000

 
300

 
—

 
300

 
—

 
300

Total derivative contracts
 
$
16,785,014

 
$
659,171

 
$
(52,433
)
 
$
606,738

 
$
(25,037
)
 
$
581,701

1 
Notional amounts for commodity contracts are converted into dollar-equivalent amounts based on dollar prices at the inception of the contract.




The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in the balance sheet at March 31, 2015 (in thousands):
 
 
Assets
 
 
Notional1
 
Gross Fair Value
 
Netting Adjustments
 
Net Fair Value Before Cash Collateral
 
Cash Collateral
 
Fair Value Net of Cash Collateral
Customer risk management programs:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
 
 
 
 
 
 
 
 
 
 
 
 
To-be-announced residential mortgage-backed securities
 
$
18,144,202

 
$
115,693

 
$
(38,135
)
 
$
77,558

 
$
—

 
$
77,558

Interest rate swaps
 
1,174,975

 
39,880

 
—

 
39,880

 
—

 
39,880

Energy contracts
 
651,548

 
133,391

 
(47,576
)
 
85,815

 
(62,118
)
 
23,697

Agricultural contracts
 
37,545

 
837

 
(367
)
 
470

 
—

 
470

Foreign exchange contracts
 
379,243

 
311,739

 
—

 
311,739

 
—

 
311,739

Equity option contracts
 
185,043

 
8,939

 
—

 
8,939

 
(100
)
 
8,839

Total customer risk management programs
 
20,572,556

 
610,479

 
(86,078
)
 
524,401

 
(62,218
)
 
462,183

Interest rate risk management programs
 
22,000

 
203

 
—

 
203

 
—

 
203

Total derivative contracts
 
$
20,594,556

 
$
610,682

 
$
(86,078
)
 
$
524,604

 
$
(62,218
)
 
$
462,386

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
Notional1
 
Gross Fair Value
 
Netting Adjustments
 
Net Fair Value Before Cash Collateral
 
Cash Collateral
 
Fair Value Net of Cash Collateral
Customer risk management programs:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
 
 
 
 
 
 
 
 
 
 
 
 
To-be-announced residential mortgage-backed securities
 
$
17,920,104

 
$
111,977

 
$
(38,135
)
 
$
73,842

 
$
(61,094
)
 
$
12,748

Interest rate swaps
 
1,174,975

 
40,134

 
—

 
40,134

 
(23,121
)
 
17,013

Energy contracts
 
634,459

 
130,396

 
(47,576
)
 
82,820

 
—

 
82,820

Agricultural contracts
 
37,536

 
830

 
(367
)
 
463

 
—

 
463

Foreign exchange contracts
 
378,406

 
310,940

 
—

 
310,940

 
(13,716
)
 
297,224

Equity option contracts
 
185,043

 
8,939

 
—

 
8,939

 
—

 
8,939

Total customer risk management programs
 
20,330,523

 
603,216

 
(86,078
)
 
517,138

 
(97,931
)
 
419,207

Interest rate risk management programs
 
25,000

 
144

 
—

 
144

 
—

 
144

Total derivative contracts
 
$
20,355,523

 
$
603,360

 
$
(86,078
)
 
$
517,282

 
$
(97,931
)
 
$
419,351

1 
Notional amounts for commodity contracts are converted into dollar-equivalent amounts based on dollar prices at the inception of the contract.






The following summarizes the pre-tax net gains (losses) on derivative instruments and where they are recorded in the income statement (in thousands):
 
 
Three Months Ended
 
 
March 31, 2016
 
March 31, 2015
 
 
Brokerage
and Trading Revenue
 
Gain (Loss) on Derivatives, Net
 
Brokerage
and Trading
Revenue
 
Gain (Loss)on Derivatives, Net
Customer risk management programs:
 
 
 
 
 
 
 
 
Interest rate contracts
 
 
 
 
 
 
 
 
To-be-announced residential mortgage-backed securities
 
$
7,440

 
$
—

 
$
8,250

 
$
—

Interest rate swaps
 
325

 
—

 
473

 
—

Energy contracts
 
696

 
—

 
1,341

 
—

Agricultural contracts
 
29

 
—

 
12

 
—

Foreign exchange contracts
 
378

 
—

 
245

 
—

Equity option contracts
 
—

 
—

 
—

 
—

Total customer risk management programs
 
8,868

 
—

 
10,321

 
—

Interest rate risk management programs
 
—

 
7,138

 
—

 
911

Total derivative contracts
 
$
8,868

 
$
7,138

 
$
10,321

 
$
911


 

Net interest revenue was not significantly impacted by the settlement of amounts receivable or payable on interest rate swaps for the three months ended March 31, 2016 and 2015, respectively.