Reportable Segments

12 Months Ended

Dec. 31, 2019

Reportable Segments

BOK Financial operates 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 to 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 the consumer branch network and all mortgage banking activities. Wealth Management provides fiduciary services, private bank services, insurance and investment advisory services in all markets. Wealth Management also underwrites state and municipal securities and engages in brokerage and trading activities.

In addition to its lines of business, BOK Financial has a Funds Management unit. The primary purpose of this unit is to manage overall liquidity needs and interest rate risk. Each line of business borrows funds from and provides funds to the Funds Management unit as needed to support their operations. Operating results for Funds Management and Other include the effect of interest rate risk positions and risk management activities, securities gains and losses including impairment charges, the provision for credit losses in excess of net loans charged off, tax planning strategies and certain executive compensation costs that are not attributed to the lines of business.

BOK Financial allocates resources and evaluates performance of its lines of business after allocation of funds, actual net credit losses and capital costs. In addition, we measure the performance of our business lines after allocation of certain indirect expenses and taxes on statutory rates. The allocation for the prior comparable periods have been revised on a comparable basis.

The cost of funds borrowed from the Funds Management unit by the operating lines of business is transfer priced at rates that approximate market rates for funds with similar duration. Market rates are generally based on the applicable LIBOR or interest rate swap rates, adjusted for prepayment risk. This method of transfer-pricing funds that support assets of the operating lines of business tends to insulate them from interest rate risk.

The value of funds provided by the operating lines of business to the Funds Management unit is based on rates which approximate the wholesale market rates for funds with similar duration and re-pricing characteristics. Market rates are generally based on LIBOR or interest rate swap rates. The funds credit formula applied to deposit products with indeterminate maturities is established based on their re-pricing characteristics reflected in a combination of the short-term LIBOR rates and a moving average of an intermediate term swap rate, with an appropriate spread applied to both. Shorter duration products are weighted towards the short-term LIBOR rate and longer duration products are weighted towards intermediate swap rates. The expected duration ranges from 30 days for certain rate-sensitive deposits to five years.

Substantially all revenue is from domestic customers. No single external customer accounts for more than 10% of total revenue.

Net loans charged off and provision for credit losses represents net loans charged off as attributed to the lines of business and the provision for credit losses in excess of net charge-offs attributed to Funds Management and Other.

The operations of CoBiz, acquired on October 1, 2018 were allocated to the operating segments in the second quarter of 2019. Prior to April 1, 2019, CoBiz operations were included in Funds Management and other.

Reportable segments reconciliation to the Consolidated Financial Statements for the year ended December 31, 2019 is as follows (in thousands):



	Commercial			Consumer			Wealth Management			Funds Management and Other			BOK Financial Consolidated
Net interest and dividend revenue from external sources	$	919,148		$	99,679		$	61,277		$	32,775		$	1,112,879
Net interest revenue (expense) from internal sources	(242,907		)	95,775			38,815			108,317			—
Net interest and dividend revenue	676,241			195,454			100,092			141,092			1,112,879
Provision for credit losses	39,011			6,271			(308		)	(974		)	44,000
Net interest and dividend revenue after provision for credit losses	637,230			189,183			100,400			142,066			1,068,879
Other operating revenue	170,412			187,500			341,389			(4,931		)	694,370
Other operating expense	252,459			230,916			277,267			371,739			1,132,381
Net direct contribution	555,183			145,767			164,522			(234,604		)	630,868
Gain (loss) on financial instruments, net	106			30,375			2			(30,483		)	—
Change in fair value of mortgage servicing rights	—			(53,517		)	—			53,517			—
Gain (loss) on repossessed assets, net	331			496			—			(827		)	—
Corporate expense allocations	43,055			47,169			36,239			(126,463		)	—
Net income before taxes	512,565			75,952			128,285			(85,934		)	630,868
Federal and state income taxes	137,759			19,346			32,954			(59,876		)	130,183
Net income	374,806			56,606			95,331			(26,058		)	500,685
Net income attributable to non-controlling interests	—			—			—			(73		)	(73		)
Net income attributable to BOK Financial Corp. shareholders	$	374,806		$	56,606		$	95,331		$	(25,985	)	$	500,758

Average assets	$	22,807,589		$	9,301,341		$	10,204,426		$	(219,009	)	$	42,094,347

Reportable segments reconciliation to the Consolidated Financial Statements for the year ended December 31, 2018 is as follows (in thousands):



	Commercial			Consumer			Wealth Management			Funds Management and Other			BOK Financial Consolidated
Net interest and dividend revenue from external sources	$	726,855		$	83,231		$	81,528		$	93,253		$	984,867
Net interest revenue (expense) from internal sources	(159,954		)	73,448			31,480			55,026			—
Net interest and dividend revenue	566,901			156,679			113,008			148,279			984,867
Provision for credit losses	30,358			5,143			(288		)	(27,213		)	8,000
Net interest and dividend revenue after provision for credit losses	536,543			151,536			113,296			175,492			976,867
Other operating revenue	162,701			178,123			296,369			(20,409		)	616,784
Other operating expense	202,095			231,075			257,650			337,346			1,028,166
Net direct contribution	497,149			98,584			152,015			(182,263		)	565,485
Gain (loss) on financial instruments, net	26			(25,021		)	7			24,988			—
Change in fair value of mortgage servicing rights	—			4,668			—			(4,668		)	—
Gain (loss) on repossessed assets, net	(6,532		)	247			—			6,285			—
Corporate expense allocations	36,670			44,398			35,920			(116,988		)	—
Net income before taxes	453,973			34,080			116,102			(38,670		)	565,485
Federal and state income taxes	120,458			8,681			30,075			(40,153		)	119,061
Net income	333,515			25,399			86,027			1,483			446,424
Net income attributable to non-controlling interests	—			—			—			778			778
Net income attributable to BOK Financial Corp. shareholders	$	333,515		$	25,399		$	86,027		$	705		$	445,646

Average assets	$	18,432,035		$	8,303,263		$	8,447,784		$	(245,552	)	$	34,937,530

Reportable segments reconciliation to the Consolidated Financial Statements for the year ended December 31, 2017 is as follows (in thousands):



	Commercial			Consumer			Wealth Management			Funds Management and Other			BOK Financial Consolidated
Net interest and dividend revenue from external sources	$	618,325		$	84,286		$	45,024		$	94,066		$	841,701
Net interest revenue (expense) from internal sources	(92,055		)	53,916			38,344			(205		)	—
Net interest and dividend revenue	526,270			138,202			83,368			93,861			841,701
Provision for credit losses	13,877			4,786			(696		)	(24,967		)	(7,000		)
Net interest and dividend revenue after provision for credit losses	512,393			133,416			84,064			118,828			848,701
Other operating revenue	208,404			184,878			301,434			378			695,094
Other operating expense	235,793			241,805			254,495			293,424			1,025,517
Net direct contribution	485,004			76,489			131,003			(174,218		)	518,278
Gain (loss) on financial instruments, net	52			(2,052		)	—			2,000			—
Change in fair value of mortgage servicing rights	—			172			—			(172		)	—
Gain on repossessed assets, net	(2,681		)	223			387			2,071			—
Corporate expense allocations	28,060			49,344			32,693			(110,097		)	—
Net income before taxes	454,315			25,488			98,697			(60,222		)	518,278
Federal and state income taxes	186,518			9,915			38,848			(52,688		)	182,593
Net income	267,797			15,573			59,849			(7,534		)	335,685
Net loss attributable to non-controlling interests	—			—			—			1,041			1,041
Net income attributable to BOK Financial Corp. shareholders	$	267,797		$	15,573		$	59,849		$	(8,575	)	$	334,644

Average assets	$	17,766,027		$	8,544,117		$	7,072,622		$	(435,272	)	$	32,947,494