BOK Financial - 10-Q quarterly report FY2017 Q1

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017



¨		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to ______________

Commission File No. 0-19341

BOK FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)



Oklahoma		73-1373454
(State or other jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

Bank of Oklahoma Tower
Boston Avenue at Second Street
Tulsa, Oklahoma		74192
(Address of Principal Executive Offices)		(Zip Code)

(918) 588-6000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý Accelerated filer ¨

Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 65,408,019 shares of common stock ($.00006 par value) as of March 31, 2017.

BOK Financial Corporation

Form 10-Q

Quarter Ended March 31, 2017

Index



Part I. Financial Information
Management’s Discussion and Analysis (Item 2)	1
Market Risk (Item 3)	41
Controls and Procedures (Item 4)	44
Consolidated Financial Statements – Unaudited (Item 1)	45
Quarterly Financial Summary – Unaudited (Item 2)	118
Quarterly Earnings Trend – Unaudited	121

Part II. Other Information
Item 1. Legal Proceedings	121
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	121
Item 6. Exhibits	121
Signatures	122

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Performance Summary

BOK Financial Corporation (“the Company”) reported net income of $88.4 million or $1.35 per diluted share for the first quarter of 2017, compared to $42.6 million or $0.64 per diluted share for the first quarter of 2016 and $50.0 million or $0.76 per diluted share for the fourth quarter of 2016.

Highlights of the first quarter of 2017 included:

•

Net interest revenue totaled $201.2 million for the first quarter of 2017, up from $182.6 million in the first quarter of 2016 and $194.2 million in the fourth quarter of 2016. The increase in net interest revenue over the prior year was driven by both growth in average earning assets and improving yields. Average earning assets were $29.6 billion for the first quarter of 2017 and $28.6 billion for the first quarter of 2016. Net interest margin was 2.81 percent for the first quarter of 2017. Net interest margin was 2.65 percent for the first quarter of 2016 and 2.69 percent for the fourth quarter of 2016.

•

Fees and commissions revenue totaled $164.4 million for the first quarter of 2017, up $1.1 million over the first quarter of 2016. Growth in fiduciary and asset management revenue and brokerage and trading revenue was partially offset by lower mortgage banking revenue. Fees and commissions revenue increased $2.3 million over the fourth quarter of 2016. Brokerage and trading revenue for the fourth quarter of 2016 included the $5.0 million negative impact of an unexpected 85 basis point increase in the 10-year U.S. Treasury interest rate and related rates. Growth in fiduciary and asset management revenue was offset by a decrease in mortgage banking revenue and transaction card revenue.

•

The change in the fair value of mortgage servicing rights, net of economic hedges, increased pre-tax net income by $188 thousand in the first quarter of 2017. The improvement versus prior quarters was driven primarily by materially higher long–term interest rates and a relatively stable rate environment during the quarter. The change in the fair value of mortgage servicing rights, net of economic hedges, decreased pre-tax net income by $11.4 million in the first quarter of 2016, largely driven by a decrease in mortgage interest rates during the first quarter of 2016 and a narrowing of the forward-looking spread between the primary mortgage interest rates offered to borrowers and secondary mortgage interest rates required by investors. The change in the fair value of mortgage servicing rights, net of economic hedges, decreased pre-tax net income by $17.0 million in the fourth quarter of 2016. The unexpected increase in long-term interest rates increased the fair value of our mortgage servicing rights by $39.8 million. The fair value of our economic hedges decreased $56.8 million.

•

Operating expense totaled $244.7 million for the first quarter of 2017, an increase of $2.1 million over the first quarter of 2016. Personnel expense increased $2.9 million and non-personnel expense decreased $722 thousand. Operating expense decreased $20.8 million compared to the fourth quarter of 2016. Expenses related to the Mobank acquisition, severance and a contribution to the BOKF Foundation added $11.7 million to the fourth quarter of 2016. Excluding these items, operating expense decreased $9.1 million, primarily due to lower mortgage banking and deposit insurance costs.

•

Income tax expense was $38.1 million or 30.1% of net income before taxes for the first quarter of 2017, compared to $21.4 million or 34.3% in the first quarter of 2016 and $22.5 million or 31.1% in the fourth quarter of 2016. The first quarter included a $3.9 million benefit related to the implementation of a new accounting standard that includes the tax effect of vested equity compensation awards in income tax expense. Previously the tax effect of these awards was included in stockholders' equity.

•

No provision for credit losses was recorded in the first quarter of 2017 or the fourth quarter of 2016 based on continued improvement in credit metric trends. A $35.0 million provision for credit losses was recorded in the first quarter of 2016 due to falling energy prices. Gross charge-offs were $2.2 million in the first quarter of 2017, $24.0 million in the first quarter of 2016 and $1.7 million in the fourth quarter of 2016. Recoveries were $2.9 million in the first quarter of 2017, compared to $1.5 million in the first quarter of 2016 and $2.8 million in the fourth quarter of 2016.


•	The combined allowance for credit losses totaled $258 million or 1.52 percent of outstanding loans at March 31, 2017, compared to $257 million or 1.52 percent of outstanding loans at December 31, 2016.

- 1 -

•

Nonperforming assets that are not guaranteed by U.S. government agencies totaled $240 million or 1.43 percent of outstanding loans and repossessed assets (excluding those guaranteed by U.S. government agencies) at March 31, 2017 and $263 million or 1.56 percent of outstanding loans and repossessed assets (excluding those guaranteed by U.S. government agencies) at December 31, 2016. The decrease in nonperforming assets was primarily due to a $22 million decrease in nonaccruing energy loans during the first quarter.


•	Average loans increased by $412 million over the previous quarter, primarily due to a full quarter's impact of the Mobank acquisition. Period-end outstanding loan balances were $17.0 billion at March 31, 2017, largely unchanged compared to December 31, 2016.

•

Average deposits grew by $666 million over the previous quarter primarily, including $390 million related to the impact of a full quarter of deposits from the Mobank acquisition. Excluding this impact, growth in interest-bearing transaction account balances and time deposits was partially offset by a decrease in demand deposit balances. Period-end deposits were $22.6 billion at March 31, 2017, a $173 million decrease compared to December 31, 2016.

•

The Company's common equity Tier 1 ratio was 11.60% at March 31, 2017. In addition, the Company's Tier 1 capital ratio was 11.60%, total capital ratio was 13.26% and leverage ratio was 8.89% at March 31, 2017. The Company's common equity Tier 1 ratio was 11.21% at December 31, 2016. In addition, the Company's Tier 1 capital ratio was 11.21%, total capital ratio was 12.81% and leverage ratio was 8.72% at December 31, 2016.


•	The Company paid a regular quarterly cash dividend of $29 million or $0.44 per common share during the first quarter of 2017. On April 25, 2017, the board of directors approved a regular quarterly cash dividend of $0.44 per common share payable on or about May 26, 2017 to shareholders of record as of May 12, 2017.

Results of Operations

Net Interest Revenue and Net Interest Margin

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.

Net interest revenue totaled $201.2 million for the first quarter of 2017, up from $182.6 million in first quarter of 2016 and $194.2 million in the fourth quarter of 2016. Net interest margin was 2.81 percent for the first quarter of 2017, 2.65 percent for the first quarter of 2016 and 2.69 percent for the fourth quarter of 2016.

Tax-equivalent net interest revenue increased $18.7 million over the first quarter of 2016. 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. Tax-equivalent net interest revenue increased $13.7 million primarily due to the growth in average loan and trading securities balances. Changes in interest rates and yields increased net interest revenue by $4.9 million. The benefit of an increase in short-term interest rates on the loan portfolio and interest-bearing cash and cash equivalents was partially offset by higher borrowing costs.

The tax-equivalent yield on earning assets was 3.15 percent for the first quarter of 2017, up 23 basis points over the first quarter of 2016 primarily due to an increase in the federal funds rate by the Federal Reserve in the fourth quarter of 2016. Loan yields increased 31 basis points to 3.88 percent primarily due to the growth in variable rate loans and an increase in short-term interest rates. The yield on interest-bearing cash and cash equivalents increased 29 basis points. The available for sale securities portfolio yield decreased 3 basis points to 2.05 percent. Funding costs were up 12 basis points over the first quarter of 2016. Growth in the cost of interest-bearing deposits was limited to 1 basis point by a lack of market pricing pressure. The cost of other borrowed funds increased 25 basis points. The cost of the subordinated debt was up 442 basis points as lower variable rate debt was replaced in the second quarter of 2016 by higher fixed rate debt. The benefit to net interest margin from earning assets funded by non-interest bearing liabilities was 18 basis points for the first quarter of 2017, up 5 basis points over the first quarter of 2016. Average non-interest bearing deposits comprised 28% of total liabilities and equity for the first quarter of 2017, up from 26% for the first quarter of 2016.

- 2 -

Average earning assets for the first quarter of 2017 increased $1.0 billion or 4 percent over the first quarter of 2016, including $570 million related to the Mobank acquisition. Average loans, net of allowance for loan losses, increased $1.1 billion due primarily to growth in commercial real estate and commercial loans and included $486 million related to the Mobank acquisition. The average balance of trading securities increased $391 million primarily due to the addition of a new group trading in U.S. agency residential mortgage-backed securities in the third quarter of 2016. The average balance of available for sale securities decreased $384 million. The average balance of residential mortgage loans held for sale decreased $69 million and the investment securities portfolio balance decreased $57 million.

Average deposits increased $1.7 billion over the first quarter of 2016. Demand deposit balances grew by $996 million and interest-bearing transaction account balances increased, $811 million, partially offset by a $108 million decrease in average time deposits. Savings account balances also grew over the prior year. Average borrowed funds decreased $42 million compared to the first quarter of 2016. Increased borrowings from the Federal Home Loan Banks were partially offset by decreased repurchase agreement and federal funds purchased balances. The average balance of subordinated debentures decreased $82 million.

Net interest margin increased 12 basis points over the fourth quarter of 2016. The yield on average earning assets increased 17 basis points. The loan portfolio yield increased by 21 basis points to 3.88 percent primarily due to increases in the 30 day and 90 day LIBOR and improved energy loan yields. The yield on the available for sale securities portfolio increased 5 basis points to 2.05 percent. The yield on interest-bearing cash and cash equivalents increased 27 basis points. Funding costs were 0.52 percent, up 8 basis points over the prior quarter. The benefit to net interest margin from earning assets funded by non-interest bearing liabilities increased 3 basis points over the prior quarter.

Average earning assets increased $416 million over the fourth quarter of 2016. Average loan balances increased $412 million, primarily due a full quarter's impact of the Mobank acquisition. The average balance of fair value option securities held as an economic hedge of our mortgage servicing rights increased $206 million. Average trading securities portfolio balances increased $103 million and interest-bearing cash and cash equivalents balances were up $55 million. These increases were offset by a $200 million decrease in available for sale securities portfolio balances and a $125 million decrease in the average balance of residential mortgage loans held for sale.

Average deposits increased $666 million over the previous quarter. Interest-bearing transaction account balances increased $587 million and time deposit balances increased $82 million, partially offset by a $23 million decrease in demand deposit balances. The average balance of borrowed funds decreased $378 million compared to the fourth quarter of 2016 primarily due to decreased borrowings from the Federal Home Loan Banks.

Our overall objective is to manage the Company’s balance sheet to be relatively neutral to 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 re-price within one year. These loans are funded primarily by deposit accounts that are either non-interest bearing, or that re-price more slowly than the loans. The result is a balance sheet that would be asset sensitive, which means that assets generally re-price more quickly than liabilities. Among the strategies that we use to manage toward a relatively rate-neutral position, we 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.

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.

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Table 1 -- Volume/Rate Analysis

(In thousands)



	Three Months Ended March 31, 2017 / 2016
				Change Due To¹
	Change			Volume			Yield/Rate
Tax-equivalent interest revenue:
Interest-bearing cash and cash equivalents	$	1,538		$	58		$	1,480
Trading securities	4,642			5,488			(846		)
Investment securities:
Taxable securities	(162		)	(111		)	(51		)
Tax-exempt securities	(91		)	(279		)	188
Total investment securities	(253		)	(390		)	137
Available for sale securities:
Taxable securities	(2,005		)	(1,200		)	(805		)
Tax-exempt securities	(148		)	(211		)	63
Total available for sale securities	(2,153		)	(1,411		)	(742		)
Fair value option securities	(209		)	(93		)	(116		)
Restricted equity securities	(2		)	246			(248		)
Residential mortgage loans held for sale	(864		)	(606		)	(258		)
Loans	21,938			9,891			12,047
Total tax-equivalent interest revenue	24,637			13,183			11,454
Interest expense:
Transaction deposits	1,897			367			1,530
Savings deposits	(6		)	7			(13		)
Time deposits	(1,079		)	(350		)	(729		)
Funds purchased	(12		)	(53		)	41
Repurchase agreements	(57		)	(13		)	(44		)
Other borrowings	3,926			211			3,715
Subordinated debentures	1,315			(703		)	2,018
Total interest expense	5,984			(534		)	6,518
Tax-equivalent net interest revenue	18,653			13,717			4,936
Change in tax-equivalent adjustment	43
Net interest revenue	$	18,610


¹	Changes attributable to both volume and yield/rate are allocated to both volume and yield/rate on an equal basis.

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Other Operating Revenue

Other operating revenue was $170.3 million for the first quarter of 2017, a $12.9 million increase over the first quarter of 2016 and a $26.5 million increase over the fourth quarter of 2016. Fees and commissions revenue was up $1.1 million over the first quarter of 2016 and increased $2.3 million over the prior quarter. The change in the fair value of mortgage servicing rights, net of economic hedges, increased other operating revenue by $188 thousand in the first quarter of 2017, decreased other operating revenue by $11.4 million in the first quarter of 2016 and decreased other operating revenue $17.0 million in the fourth quarter of 2016.

Table 2 – Other Operating Revenue

(In thousands)



	Three Months Ended March 31,						Increase (Decrease)			% Increase (Decrease)		Three Months Ended Dec. 31, 2016			Increase (Decrease)			% Increase (Decrease)
	2017			2016			Increase (Decrease)			% Increase (Decrease)		Three Months Ended Dec. 31, 2016			Increase (Decrease)			% Increase (Decrease)
Brokerage and trading revenue	$	33,623		$	32,341		$	1,282		4	%	$	28,500		$	5,123		18	%
Transaction card revenue	32,127			32,354			(227		)	(1	)%	34,521			(2,394		)	(7	)%
Fiduciary and asset management revenue	38,631			32,056			6,575			21	%	34,535			4,096			12	%
Deposit service charges and fees	23,030			22,542			488			2	%	23,365			(335		)	(1	)%
Mortgage banking revenue	25,191			32,100			(6,909		)	(22	)%	28,414			(3,223		)	(11	)%
Other revenue	11,752			11,904			(152		)	(1	)%	12,693			(941		)	(7	)%
Total fees and commissions revenue	164,354			163,297			1,057			1	%	162,028			2,326			1	%
Other gains (losses), net	3,627			1,560			2,067			N/A		(1,279		)	4,906			N/A
Gain (loss) on derivatives, net	(450		)	7,138			(7,588		)	N/A		(35,815		)	35,365			N/A
Gain (loss) on fair value option securities, net	(1,140		)	9,443			(10,583		)	N/A		(20,922		)	19,782			N/A
Change in fair value of mortgage servicing rights	1,856			(27,988		)	29,844			N/A		39,751			(37,895		)	N/A
Gain on available for sale securities, net	2,049			3,964			(1,915		)	N/A		(9		)	2,058			N/A
Total other operating revenue	$	170,296		$	157,414		$	12,882		8	%	$	143,754		$	26,542		18	%

Certain percentage increases (decreases) in non-fees and commissions revenue are not meaningful for comparison purposes based on the nature of the item.

Fees and commissions revenue

Diversified sources of fees and commissions revenue are a significant part of our business strategy and represented 45 percent of total revenue for the first quarter of 2017, excluding provision for credit losses and gains and losses on other assets, securities and derivatives and the change in the fair value of mortgage servicing rights. We believe that a variety of fee revenue sources provides an offset to changes in interest rates, values in the equity markets, commodity prices and consumer spending, all of which can be volatile. As an example of this strength, many of the economic factors that cause net interest revenue compression such as falling interest rates may also drive growth in our mortgage banking revenue. We expect growth in other operating revenue 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.

Brokerage and trading revenue, which includes revenues from trading, customer hedging, retail brokerage and investment banking, increased $1.3 million or 4 percent over the first quarter of 2016.

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Trading revenue includes net realized and unrealized gains primarily related to sales of U.S. government securities, residential mortgage-backed securities guaranteed by U.S. government agencies and municipal securities to institutional customers and related derivative instruments. Trading revenue was $11.0 million for the first quarter of 2017, a $1.9 million or 15 percent decrease compared to the first quarter of 2016. The Company added a new group trading in U.S. government agency residential mortgage-backed securities and related to-be-announced derivatives in the third quarter of 2016. The addition of this group added $2.5 million of net interest revenue and $769 thousand of trading revenue in the first quarter. This new group increased our trading securities portfolio by $550 million and receivable for unsettled trades by $215 million at March 31, 2017. This increase was offset by lower volumes of U.S. agency residential mortgage-backed securities sold to our institutional customers.

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 Derivative 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 $11.6 million for the first quarter of 2017, a $2.8 million or 31 percent increase over the first quarter of 2016 primarily due to increased hedging activity by our energy customers.

Revenue earned from retail brokerage transactions increased $393 thousand or 6 percent over the first quarter of 2016 to $6.9 million. Retail brokerage revenue is primarily based on fees and commissions earned on sales of fixed income securities, annuities, mutual funds and other financial instruments to retail customers. Revenue is primarily based on the volume of customer transactions and applicable commission rate for each product type. The increase in revenue due to transaction volume growth was partially offset by a change in product mix to products that pay a lower commission rate. In addition, volume has shifted from sales of products that pay a one-time transaction fee to accounts that pay us an on-going management fee.

Investment banking revenue, which includes fees earned upon completion of underwriting and financial advisory services and loan syndication fees, totaled $4.1 million for the first quarter of 2017, largely unchanged compared to the first quarter of 2016. Investment banking revenue is primarily related to the timing and volume of completed transactions.

Brokerage and trading revenue increased $5.1 million over the fourth quarter of 2016 primarily due to a $5.3 million increase in trading revenue. The fourth quarter of 2016 included the $5.0 million decrease in the fair value of trading assets caused by an unexpected 85 basis point increase in the 10-year Treasury interest rate and related rates. Customer hedging revenue increased $570 thousand. An increase in the valuation of energy derivative contracts was partially offset by a decrease in volumes of contracts with our mortgage banking customers. Retail brokerage fees were up $995 thousand over the prior quarter. Investment banking revenue decreased $1.7 million primarily due to the timing and volume of completed transactions.

Transaction card revenue depends largely on the volume and amount of transactions processed, the number of TransFund automated teller machine (“ATM”) locations and the number of merchants served. Transaction card revenue for the first quarter of 2017 was largely unchanged compared to the first quarter of 2016. Revenues from the processing of transactions on behalf of the members of our TransFund electronic funds transfer ("EFT") network totaled $16.3 million, unchanged from the prior year. Merchant services fees totaled $11.0 million, a $178 thousand or 2 percent decrease based on lower transaction activity. Revenue from interchange fees paid by merchants for transactions processed from debit cards issued by the Company totaled $4.7 million, an increase of $83 thousand or 2 percent over the first quarter of 2016.

Transaction card revenue decreased $2.4 million compared to the prior quarter, primarily due to a seasonal decrease in transaction volumes on our TransFund EFT network and from processing transactions on behalf of merchants.

Fiduciary and asset management revenue grew by $6.6 million or 21 percent over the first quarter of 2016, primarily due to growth in assets under management, improved pricing discipline and decreased fee waivers. We earn fees as administrator to and investment adviser for the Cavanal Hill Funds, a diversified, open-ended investment company established as a business trust under the Investment Company Act of 1940. The Bank is custodian and Cavanal Hill Distributors, Inc. is distributor for the Cavanal Hill Funds. Products of the Cavanal Hill Funds are offered to customers, employee benefit plans, trusts and the general public in the ordinary course of business. We have voluntarily waived administration fees on the Cavanal Hill money market funds in order to maintain positive yields on these funds in the current low short-term interest rate environment. Waived fees totaled $445 thousand for the first quarter of 2017, compared to $2.0 million for the first quarter of 2016 and $1.4 million for the fourth quarter of 2016. The decrease in fee waivers was related to increased interest rates as a result of the Federal Reserve's federal funds rate increases. In addition, our mineral management team recognized revenue of $800 thousand during the first quarter of 2017 from the successful completion of lease negotiations.

Fiduciary and asset management revenue increased $4.1 million compared to the fourth quarter of 2016 primarily due to growth in assets under management and decreased fee waivers.

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The fair value of fiduciary assets administered by the Company totaled $44.4 billion at March 31, 2017, $39.1 billion at March 31, 2016 and $41.8 billion at December 31, 2016. Fiduciary assets are assets for which the Company possesses investment discretion on behalf of another or any other similar capacity.

Deposit service charges and fees were $23.0 million for the first quarter of 2017, an increase of $488 thousand or 2 percent over the first quarter of 2016. Commercial account service charge revenue totaled $11.6 million, up $308 thousand or 3 percent. Overdraft fees were $9.7 million for the first quarter of 2017, an increase of $105 thousand or 1 percent. Service charges on deposit accounts with a standard monthly fee were $1.7 million, an increase of $76 thousand or 5 percent. Deposit service charges and fees decreased $335 thousand compared to the prior quarter primarily due to a seasonal decrease in overdraft fee volumes, partially offset by an increase in commercial account service charge revenue.

Mortgage banking revenue decreased $6.9 million or 22% compared to the first quarter of 2016. Mortgage production revenue decreased $8.1 million. Mortgage loan production volumes decreased $771 million due primarily to a strategic decision to exit the correspondent lending channel during the third quarter of 2016 based on careful consideration of continued pressure on margins and due to the competitive landscape and regulatory costs. Gains on sale margins increased 2 basis points over the prior year. The margin increase was primarily due to exiting the correspondent lending channel, the lowest margin of our three sales channels, partially offset by a decrease in margins from our Home Direct online origination channel. Mortgage servicing revenue was up $1.2 million or 8 percent over the first quarter of 2016. The outstanding principal balance of mortgage loans serviced for others totaled $22.0 billion, an increase of $1.7 billion or 8.5%.

Mortgage banking revenue decreased $3.2 million compared to the fourth quarter of 2016. Mortgage production revenue decreased $3.4 million. Production volume decreased $103.1 million in response to higher average primary mortgage interest rates. Gains on sale margins narrowed due to increased competition, largely in the Home Direct online channel. Revenue from mortgage loan servicing grew by $171 thousand due to an increase in the volume of loans serviced. The outstanding balance of mortgage loans serviced for others increased $17 million over December 31, 2016.

Table 3 – Mortgage Banking Revenue

(In thousands)



	Three Months Ended March 31,						Increase (Decrease)			% Increase (Decrease)		Three Months Ended Dec. 31,			Increase (Decrease)			% Increase (Decrease)
	2017			2016			Increase (Decrease)			% Increase (Decrease)		Three Months Ended Dec. 31,			Increase (Decrease)			% Increase (Decrease)
Mortgage production revenue	$	8,543		$	16,647		$	(8,104	)	(49	)%	$	11,937		$	(3,394	)	(28	)%

Mortgage loans funded for sale	$	711,019		$	1,244,015							$	1,189,975
Add: Current period end outstanding commitments	381,732			902,986								318,359
Less: Prior period end outstanding commitments	318,359			601,147								630,804
Total mortgage production volume	$	774,392		$	1,545,854		$	(771,462	)	(50	)%	$	877,530		$	(103,138	)	(12	)%

Mortgage loan refinances to mortgage loans funded for sale	44		%	49		%	(5		) bps			63		%	(19		) bps
Gains on sale margin	1.10		%	1.08		%	2		bps			1.36		%	(26		) bps
Primary mortgage interest rates:
Average	4.17		%	3.74		%	43		bps			3.83		%	34		bps
Period end	4.14		%	3.71		%	43		bps			4.32		%	(18		) bps

Mortgage servicing revenue	$	16,648		$	15,453		$	1,195		8	%	$	16,477		$	171		1	%
Average outstanding principal balance of mortgage loans serviced for others	22,006,295			19,986,444			2,019,851			10	%	21,924,552			81,743			—	%

Average mortgage servicing revenue rates	0.31		%	0.31		%	—					0.30		%	1		bps


¹	Actual interest earned on fair value option securities less internal transfer-priced cost of funds.

Primary rates disclosed in Table 3 above represent rates generally available to borrowers on 30 year conforming mortgage loans.

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Net gains on other assets, securities and derivatives

Other net gains totaled $3.6 million in the first quarter of 2017, related to holdings of two consolidated private equity funds and the sale of certain merchant banking investments in the first quarter of 2017. The sales of merchant banking investments included a consolidated entity that reduced goodwill by $2.7 million, identifiable intangible assets by $4.6 million and other assets by $5.6 million.

In the first quarter of 2017, we recognized a $2.0 million net gain from sales of $240 million of available for sale securities. Securities were sold either because they had reached their expected maximum potential or to move into securities that are expected to perform better in the current rate environment. In the first quarter of 2016, we recognized a $4.0 million net gain from sales of $469 million of available for sale securities. There were no sales of available for sale securities in the fourth quarter of 2016.

As discussed in the Market Risk section following, the fair value of our mortgage servicing rights ("MSRs") changes in response to changes in primary mortgage loan rates and other assumptions. We attempt to mitigate the earnings volatility caused by changes in the fair value of MSRs to a $20 million limit approved by the Board of Directors by designating certain financial instruments as an economic hedge. Changes in the fair value of these instruments are generally expected to partially offset changes in the fair value of MSRs.

The net economic benefit of the changes in fair value of mortgage servicing rights and related economic hedges was $1.5 million in the first quarter of 2017, including a $1.9 million increase in the fair value of the mortgage servicing rights, a $1.7 million decrease in the fair value of securities and derivative contracts held as an economic hedge and $1.3 million of related net interest revenue. The improvement over the prior quarter was due primarily to materially higher long-term interest rates and a relatively stable rate environment during the first quarter.

The net economic cost of changes in the fair value of mortgage servicing rights and related economic hedges was $9.4 million for the first quarter of 2016. The fair value of mortgage servicing rights decreased $28.0 million.The fair value of securities and interest rate derivative contracts held as an economic hedge increased $16.6 million. Net interest earned on securities held as an economic hedge was $2.0 million. Both period end primary and secondary residential mortgage interest rates fell during the first quarter of 2016. However, we observed a narrowing of the forward-looking spreads, a risk that we cannot effectively hedge.

The net economic cost of changes in the fair value of mortgage servicing rights and related economic hedges was $16.9 million for the fourth quarter of 2016. The fair value of mortgage servicing rights increased by $39.8 million, primarily due to an increase in residential mortgage rates. The fair value of securities and interest rate derivative contracts held as an economic hedge decreased by $56.8 million. The significant increase in long-term interest rates in the fourth quarter resulted in a loss on this hedge, partially offset by an increase in the fair value of mortgage servicing rights.

Table 4 - Gain (Loss) on Mortgage Servicing Rights

(In thousands)



	Three Months Ended
	March 31, 2017			Dec. 31, 2016			March 31, 2016
Gain (loss) on mortgage hedge derivative contracts, net	$	(528	)	$	(35,868	)	$	7,138
Gain (loss) on fair value option securities, net	(1,140		)	(20,922		)	9,443
Gain (loss) on economic hedge of mortgage servicing rights, net	(1,668		)	(56,790		)	16,581
Gain (loss) on change in fair value of mortgage servicing rights	1,856			39,751			(27,988		)
Gain (loss) on changes in fair value of mortgage servicing rights, net of economic hedges included in other operating revenue	188			(17,039		)	(11,407		)
Net interest revenue on fair value option securities¹	1,271			114			2,033
Total economic benefit (cost) of changes in the fair value of mortgage servicing rights, net of economic hedges	$	1,459		$	(16,925	)	$	(9,374	)

- 8 -

Other Operating Expense

Other operating expense for the first quarter of 2017 totaled $244.7 million, a $2.1 million or 1 percent increase over the first quarter of 2016. Personnel expenses increased $2.9 million or 2 percent. Non-personnel expenses decreased $722 thousand or 1 percent compared to the prior year. The first quarter of 2016 included $4.1 million of litigation accruals and $2.8 million post-acquisition valuation adjustments to a consolidated merchant banking investment, $1.1 million of which is attributable to non-controlling interests.

Operating expenses decreased $20.8 million compared to the previous quarter. Expenses related to the completion of the Mobank acquisition were $2.0 million in the first quarter of 2017 and $4.7 million in the fourth quarter of 2016. In addition, operating expenses in the fourth quarter of 2016 included $5.0 million of severance and other expenses related to staff reductions and a $2.0 million contribution to the BOKF Foundation.

The discussion following excludes the impact of these items.

Table 5 – Other Operating Expense

(In thousands)



	Three Months Ended March 31,				Increase (Decrease)			% Increase (Decrease)		Three Months Ended Dec. 31, 2016		Increase (Decrease)			% Increase (Decrease)
	2017		2016		Increase (Decrease)			% Increase (Decrease)		Three Months Ended Dec. 31, 2016		Increase (Decrease)			% Increase (Decrease)
Regular compensation	$	83,228	$	80,559	$	2,669		3	%	$	87,328	$	(4,100	)	(5	)%
Incentive compensation:
Cash-based	28,836		28,972		(136		)	—	%	33,270		(4,434		)	(13	)%
Share-based	1,603		2,022		(419		)	(21	)%	2,902		(1,299		)	(45	)%
Deferred compensation	792		69		723			N/A		348		444			N/A
Total incentive compensation	31,231		31,063		168			1	%	36,520		(5,289		)	(14	)%
Employee benefits	21,966		21,940		26			—	%	17,284		4,682			27	%
Total personnel expense	136,425		133,562		2,863			2	%	141,132		(4,707		)	(3	)%
Business promotion	6,717		5,696		1,021			18	%	7,344		(627		)	(9	)%
Charitable contributions to BOKF Foundation	—		—		—			N/A		2,000		(2,000		)	N/A
Professional fees and services	12,379		11,759		620			5	%	16,828		(4,449		)	(26	)%
Net occupancy and equipment	21,624		18,766		2,858			15	%	21,470		154			1	%
Insurance	6,404		7,265		(861		)	(12	)%	8,705		(2,301		)	(26	)%
Data processing and communications	33,940		32,017		1,923			6	%	33,691		249			1	%
Printing, postage and supplies	3,851		3,907		(56		)	(1	)%	3,998		(147		)	(4	)%
Net losses (gains) and operating expenses of repossessed assets	1,009		1,070		(61		)	(6	)%	1,627		(618		)	(38	)%
Amortization of intangible assets	1,802		1,159		643			55	%	1,558		244			16	%
Mortgage banking costs	13,003		12,330		673			5	%	17,348		(4,345		)	(25	)%
Other expense	7,557		15,039		(7,482		)	(50	)%	9,846		(2,289		)	(23	)%
Total other operating expense	$	244,711	$	242,570	$	2,141		1	%	$	265,547	$	(20,836	)	(8	)%

Average number of employees (full-time equivalent)	4,910		4,821		89			2	%	4,893		17			—	%

Certain percentage increases (decreases) are not meaningful for comparison purposes.

- 9 -

Personnel expense

Regular compensation, which consists of salaries and wages, overtime pay and temporary personnel costs, increased $3.0 million or 2 percent over the first quarter of 2016. The average number of employees increased 2 percent over the prior year. Recent additions from the Mobank acquisition and in mortgage and technology were partially offset by the impact of staff reductions in the fourth quarter of 2016. In addition, standard annual merit increases in regular compensation were effective for the majority of our staff on March 1.

Incentive compensation was largely unchanged compared to the first quarter of 2016. Cash-based incentive compensation plans are either intended to provide current rewards to employees who generate long-term business opportunities for the Company based on growth in loans, deposits, customer relationships and other measurable metrics or intended to compensate employees with commissions on completed transactions. Total cash-based incentive compensation was unchanged compared to the first quarter of 2016.

Share-based compensation expense represents expense for equity awards based on grant-date fair value. Non-vested shares generally cliff vest in 3 years and are subject to a two year holding period after vesting. Compensation costs related to certain shares is variable based on changes in the the fair value of BOK Financial common shares. Share-based compensation expense decreased $419 thousand or 21% compared to the prior year, primarily due to the decrease in the vesting probability of certain performance-based share awards.

The Company currently offers a deferred compensation plan for certain executive and senior officers. Deferred compensation expense increased $723 thousand. Deferred compensation expense is largely offset by changes in the fair value of assets held in rabbi trusts for the benefit of participants included in other income in the consolidated statements of earnings.

Employee benefits expense was also largely unchanged compared to the first quarter of 2016. Increased payroll tax expense and retirement plan costs were offset by a decrease in employee medical costs.

Personnel expense increased $1.9 million over the fourth quarter of 2016. Employee benefit costs were up $4.7 million primarily due to a seasonal increase in payroll tax expense and increased employee retirement plan costs, partially offset by lower employee medical costs. Regular compensation increased $2.5 million and included a full quarter impact of the Mobank acquisition. Incentive compensation expense decreased $5.3 million primarily due to lower cash-based incentive compensation expense and share-based compensation expense.

Non-personnel operating expenses

Non-personnel operating expenses increased $4.3 million or 4 percent over the first quarter of 2016. Occupancy and equipment expense increased $2.7 million and data processing and communications expense increased $1.9 million. The increases were primarily due to information technology infrastructure and cybersecurity project costs. Deposit insurance expense decreased $861 thousand. The benefit of decreased criticized and classified assets levels related to the stabilization of energy prices was partially offset by a new surcharge for banks with more than $10 billion in assets that became effective in the third quarter of 2016.

Non-personnel expense decreased $13.1 million compared to the fourth quarter of 2016. Mortgage banking expense decreased $4.3 million, primarily due to the effect of slowing actual residential mortgage loan prepayments on the fair value of mortgage servicing rights. Deposit insurance expense was $2.3 million lower due to improvements in credit quality and other risk factors. Professional fees were down $2.3 million and other expense decreased $2.3 million.

- 10 -

Income Taxes

The Company's income tax expense from continuing operations was $38.1 million or 30.1% of book taxable income for the first quarter of 2017 compared to $21.4 million or 34.3% of book taxable income for the first quarter of 2016 and $22.5 million or 31.1% of book taxable income for the fourth quarter of 2016. The first quarter of 2017 included a $3.9 million benefit related to the implementation of a new accounting standard that includes the tax effect of vested equity compensation awards in income tax expense. Previously, the tax effect of these awards was included in stockholders' equity. The tax benefit resulted from an increase in the company's stock price to over $80 per share which exceeded compensation costs based on grant date fair value of these awards. Additionally, awards granted in two different years vested in the first quarter of 2017. Excluding this benefit, tax expense would have been 33.2% of book taxable income for the first quarter of 2017. The accounting standard was adopted prospectively without restatement of prior periods.

The Company's effective tax rate is affected by recurring items such as amortization related to its investments in affordable housing investments net of affordable housing tax credits and other tax benefits, bank-owned life insurance and tax-exempt income. The effective tax rate is also affected by items that may occur in any given period but are not consistent from period to period. Accordingly, the comparability of the effective tax rate from period to period may be impacted.

BOK Financial operates in numerous jurisdictions, which requires judgment regarding the allocation of income, expense and earnings under various laws and regulations of each of these taxing jurisdictions. Each jurisdiction may audit our tax returns and may take different positions with respect to these allocations. The reserve for uncertain tax positions was $17 million at March 31, 2017, $16 million at December 31, 2016 and $13 million at March 31, 2016.

Lines of Business

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.

In addition to our lines of business, we have a Funds Management unit. The primary purpose of this unit is to manage our 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.

We allocate resources and evaluate the performance of our lines of business using the net direct contribution, which includes the 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 based on statutory rates.

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 repricing and cash flow characteristics. 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 also based on rates that approximate wholesale market rates for funds with similar repricing and cash flow 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 rate 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 the intermediate swap rates. The expected duration ranges from 30 days for certain rate-sensitive deposits to five years.

Economic capital is assigned to the business units 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 business lines

- 11 -

and recognizes the diversification benefits among the units. The level of assigned economic capital is a combination of the risk taken by each business line, 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 lines of business.

As shown in Table 6, net income attributable to our lines of business increased $38.8 million or 88 percent over the first quarter of 2016. Net interest revenue grew by $23.8 million over the prior year. Other operating revenue was relatively flat while operating expenses decreased $6.1 million and net charge-offs decreased $23.3 million.

Table 6 -- Net Income by Line of Business

(In thousands)



	Three Months Ended
	March 31,
	2017		2016
Commercial Banking	$	63,916	$	37,054
Consumer Banking	4,746		109
Wealth Management	14,283		6,977
Subtotal	82,945		44,140
Funds Management and other	5,411		(1,576		)
Total	$	88,356	$	42,564

- 12 -

Commercial Banking

Commercial Banking contributed $63.9 million to consolidated net income in the first quarter of 2017, an increase of $26.9 million or 73% over the first quarter of 2016. Commercial Banking had net recoveries of $1.5 million in the first quarter of 2017 compared to net charge-offs of $21.6 million in the first quarter of 2016. Growth in net interest revenue and lower operating expense also contributed to increased net direct contribution by Commercial Banking.

Table 7 -- Commercial Banking

(Dollars in thousands)



	Three Months Ended						Increase (Decrease)
	March 31,
	2017			2016
Net interest revenue from external sources	$	134,704		$	116,637		$	18,067
Net interest expense from internal sources	(16,793		)	(14,632		)	(2,161		)
Total net interest revenue	117,911			102,005			15,906
Net loans charged off (recovered)	(1,462		)	21,572			(23,034		)
Net interest revenue after net loans charged off (recovered)	119,373			80,433			38,940

Fees and commissions revenue	44,473			45,476			(1,003		)
Other gains (losses), net	1,797			(368		)	2,165
Other operating revenue	46,270			45,108			1,162

Personnel expense	27,027			26,628			399
Non-personnel expense	25,409			29,442			(4,033		)
Other operating expense	52,436			56,070			(3,634		)

Net direct contribution	113,207			69,471			43,736
Gain on financial instruments, net	38			—			38
Loss on repossessed assets, net	(5		)	(82		)	77
Corporate expense allocations	8,631			8,744			(113		)
Income before taxes	104,609			60,645			43,964
Federal and state income tax	40,693			23,591			17,102
Net income	$	63,916		$	37,054		$	26,862

Average assets	$	17,438,776		$	16,969,015		$	469,761
Average loans	14,016,652			13,317,338			699,314
Average deposits	8,631,724			8,457,750			173,974
Average invested capital	1,214,056			1,155,572			58,484

Net interest revenue increased $15.9 million or 16% over the prior year. Growth in net interest revenue was primarily due to a $699 million or 5% increase in average loan balances and increased yields on commercial loans due to rising short-term interest rates. Average deposit balances increased $174 million or 2% and the yields on deposits sold to the funds management unit increased due to an increase in short-term interest rates.

Fees and commissions revenue decreased $1.0 million or 2% compared to the first quarter of 2016, primarily due to a decrease in revenue from merchant banking activity. Increased brokerage and trading revenue and commercial deposit service charge fees were partially offset by a decrease in transaction card revenue from our TransFund electronic fund transfer network.

Operating expenses decreased $3.6 million or 7% compared to the first quarter of 2016. Personnel expense increased $399 thousand or 2% primarily due to standard annual merit increases and increased incentive compensation expense. Non-personnel expense decreased $4.0 million or 14%. The first quarter of 2016 included $3.9 million of litigation settlements and $2.7 million of post-acquisition valuation adjustments to a consolidated merchant banking investment. Deposit insurance expense increased $1.7 million.

- 13 -

The average outstanding balance of loans attributed to Commercial Banking grew by $699 million or 5% over the first quarter of 2016 to $14.0 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.

Average deposits attributed to Commercial Banking were $8.6 billion for the first quarter of 2017, an increase of $174 million or 2% compared to the first quarter of 2016. See Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital for further discussion of change.

Consumer Banking

Consumer Banking provides retail banking services through four primary distribution channels: traditional branches, the 24-hour ExpressBank call center, Internet banking and mobile banking. Consumer Banking also conducts mortgage banking activities through offices located outside of our consumer banking markets and through Home Direct Mortgage, an online origination channel.

Consumer Banking contributed $4.7 million to consolidated net income for the first quarter of 2017, up $4.6 million over the first quarter of 2016. Changes in the fair value of our mortgage servicing rights, net of economic hedge, resulted in a $115 thousand increase in Consumer Banking net income in the first quarter of 2017 compared to a $7.0 million decrease in Consumer Banking net income in the first quarter of 2016.

- 14 -

Table 8 -- Consumer Banking

(Dollars in thousands)



	Three Months Ended						Increase (Decrease)
	March 31,
	2017			2016
Net interest revenue from external sources	$	21,129		$	21,449		$	(320	)
Net interest revenue from internal sources	10,952			9,353			1,599
Total net interest revenue	32,081			30,802			1,279
Net loans charged off	1,272			1,702			(430		)
Net interest revenue after net loans charged off	30,809			29,100			1,709

Fees and commissions revenue	47,391			54,171			(6,780		)
Other losses, net	(85		)	(142		)	57
Other operating revenue	47,306			54,029			(6,723		)

Personnel expense	25,398			24,844			554
Non-personnel expense	28,134			30,874			(2,740		)
Total other operating expense	53,532			55,718			(2,186		)

Net direct contribution	24,583			27,411			(2,828		)
Gain (loss) on financial instruments, net	(1,667		)	16,581			(18,248		)
Change in fair value of mortgage servicing rights	1,856			(27,988		)	29,844
Gain (loss) on repossessed assets, net	(136		)	153			(289		)
Corporate expense allocations	16,868			15,978			890
Income before taxes	7,768			179			7,589
Federal and state income tax	3,022			70			2,952
Net income	$	4,746		$	109		$	4,637

Average assets	$	8,648,562		$	8,687,289		$	(38,727	)
Average loans	1,927,750			1,883,904			43,846
Average deposits	6,581,446			6,575,893			5,553
Average invested capital	276,914			258,888			18,026

Net interest revenue from Consumer Banking activities grew by $1.3 million or 4% over the the first quarter of 2016 primarily due to increased rates on deposit balances sold to the Funds Management unit. Average loan balances grew by $43.8 million or 2% and average deposits remained relatively flat.

Fees and commissions revenue decreased $6.8 million or 13% over the first quarter of 2016, primarily due to a $6.9 million decrease in mortgage banking revenue. Mortgage loan production volumes decreased $771 million due primarily to a strategic decision to exit the correspondent lending channel during the third quarter of 2016. Revenue from interchange fees paid by merchants for transactions processed from debit cards issued by the Company and deposit service charges and fees were largely unchanged from the prior year.

Operating expenses decreased $2.2 million or 4% over the first quarter of 2016. Personnel expenses increased $554 thousand or 2%. Regular compensation expense was up $741 thousand primarily due to an increase in regular compensation partially offset by a decrease in incentive compensation expense. Non-personnel expense decreased $2.7 million or 9% over the prior year. Data processing and communications expenses decreased $1.1 million and professional fees and services were down $959 thousand over the prior year. The first quarter of 2016 also included $1.8 million in litigation settlements.

Corporate expense allocations increased $890 thousand compared to the first quarter of 2016.

- 15 -

Average consumer deposits were largely unchanged compared to the first quarter of 2016. Average time deposit balances decreased $190 million or 15%, offset by a $114 million or 7% increase in demand deposit balances, a $49 million or 1% increase in interest-bearing transaction accounts and a $32 million or 9% increase in savings account balances.

Wealth Management

Wealth Management contributed $14.3 million to consolidated net income in the first quarter of 2017, up $7.3 million or 105% over the first quarter of 2016. Net interest revenue grew over the prior year. Growth in fiduciary and asset management revenue was partially offset by a decrease in brokerage and trading revenue.

Table 9 -- Wealth Management

(Dollars in thousands)



	Three Months Ended					Increase (Decrease)
	March 31,
	2017		2016
Net interest revenue from external sources	$	11,485	$	6,078		$	5,407
Net interest revenue from internal sources	8,856		7,663			1,193
Total net interest revenue	20,341		13,741			6,600
Net loans charged off (recovered)	40		(150		)	190
Net interest revenue after net loans charged off (recovered)	20,301		13,891			6,410

Fees and commissions revenue	73,921		68,721			5,200
Other gains, net	237		26			211
Other operating revenue	74,158		68,747			5,411

Personnel expense	44,787		45,119			(332		)
Non-personnel expense	15,623		15,565			58
Other operating expense	60,410		60,684			(274		)

Net direct contribution	34,049		21,954			12,095
Corporate expense allocations	10,672		10,535			137
Income before taxes	23,377		11,419			11,958
Federal and state income tax	9,094		4,442			4,652
Net income	$	14,283	$	6,977		$	7,306

Average assets	$	7,160,849	$	5,565,047		$	1,595,802
Average loans	1,266,579		1,090,326			176,253
Average deposits	5,582,554		4,696,013			886,541
Average invested capital	250,899		233,079			17,820



	March 31,				Increase (Decrease)
	2017		2016		Increase (Decrease)
Fiduciary assets in custody for which BOKF has sole or joint discretionary authority	$	15,193,307	$	13,847,023	$	1,346,284
Fiduciary assets not in custody for which BOKF has sole or joint discretionary authority	4,001,956		3,653,228		348,728
Non-managed trust assets in custody	25,176,247		21,613,054		3,563,193
Total fiduciary assets	44,371,510		39,113,305		5,258,205
Assets held in safekeeping	26,883,350		27,115,904		(232,554		)
Brokerage accounts under BOKF administration	6,164,096		5,639,804		524,292
Assets under management or in custody	$	77,418,956	$	71,869,013	$	5,549,943

- 16 -

Net interest revenue for the first quarter of 2017 increased $6.6 million or 48% over the first quarter of 2016, primarily due to an increase in the size of the U.S. agency mortgage-backed portfolio related to a new trading group that began operations during the third quarter of 2016 and growth in deposit balances sold to the Funds Management unit. Average deposit balances grew by $887 million or 19% over the first quarter of 2016. Non-interest bearing demand deposits grew by $139 million or 12%, interest-bearing transaction account balances increased $681 million or 24% and time deposit balances grew by $64 million or 9%. Average loan balances increased $176 million or 16% over the prior year.

Fees and commissions revenue was up $5.2 million or 8% over the first quarter of 2016. Fiduciary and asset management revenue increased $6.6 million or 21% over the prior year primarily due to growth in assets under management, improved pricing discipline and decreased fee waivers. Brokerage and trading revenue decreased by $1.5 million or 5%.

Other operating revenue includes fees earned from state and municipal bond and corporate debt underwritings and financial advisory services, primarily in the Oklahoma and Texas markets. In the first quarter of 2017, the Wealth Management division participated in 38 state and municipal bond underwritings that totaled $1.6 billion. As a participant, the Wealth Management division was responsible for facilitating the sale of approximately $316 million of these underwritings. The Wealth Management division also participated in 5 corporate debt underwritings that totaled $3.6 billion. Our interest in these underwritings was $111 million. In the first quarter of 2016, the Wealth Management division participated in 74 state and municipal bond underwritings that totaled approximately $5.4 billion. Our interest in these underwritings totaled approximately $598 million.

Operating expense decreased $274 thousand or 1% compared to the first quarter of 2016. Personnel expenses decreased $332 thousand and non-personnel expense increased $58 thousand. The first quarter of 2016 included $1.6 million of litigation accruals. This impact was offset by increased occupancy and equipment costs and higher data processing and communications expense.

Corporate expense allocations increased $137 thousand or 1% over the prior year.

Financial Condition

Securities

We maintain a securities portfolio to enhance profitability, manage interest rate risk, provide liquidity and comply with regulatory requirements. Securities are classified as trading, held for investment, or available for sale. See Note 2 to the consolidated financial statements for the composition of the securities portfolio as of March 31, 2017, December 31, 2016 and March 31, 2016.

At March 31, 2017, the carrying value of investment (held-to-maturity) securities was $519 million and the fair value was $541 million. Investment securities consist primarily of long-term, fixed rate Oklahoma and Texas municipal bonds, taxable Texas school construction bonds and residential mortgage-backed securities issued by U.S. government agencies. The investment security portfolio is diversified among issuers. The largest obligation of any single issuer is $30 million. Substantially all of these bonds are general obligations of the issuers. Approximately $96 million of the $195 million portfolio of Texas school construction bonds is also guaranteed by the Texas Permanent School Fund Guarantee Program supervised by the State Board of Education for the State of Texas.

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 $8.4 billion at March 31, 2017, a $249 million decrease compared to December 31, 2016. Available for sale securities consist primarily of U.S. government agency residential mortgage-backed securities and U.S. government agency commercial mortgage-backed securities. Commercial mortgage-backed securities have prepayment penalties similar to commercial loans. At March 31, 2017, residential mortgage-backed securities represented 65 percent of total available for sale securities.

A primary risk of holding residential mortgage-backed securities comes from extension during periods of rising interest rates or prepayment during periods of falling interest rates. We evaluate this risk through extensive modeling of risk both before making an investment and throughout the life of the security. Our best estimate of the duration of the combined residential mortgage-backed securities portfolio held in investment and available for sale securities at March 31, 2017 is 3.1 years. Management

- 17 -

estimates the duration extends to 3.4 years assuming an immediate 200 basis point upward shock. The estimated duration contracts to 2.9 years assuming a 50 basis point decline in the current low rate environment.

Residential mortgage-backed securities also 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. At March 31, 2017, approximately $5.4 billion of the amortized cost of the Company’s residential mortgage-backed securities were issued by U.S. government agencies. The fair value of these residential mortgage-backed securities totaled $5.4 billion at March 31, 2017.

We also hold amortized cost of $93 million in residential mortgage-backed securities privately issued by publicly-owned financial institutions, a decrease of $7.8 million from December 31, 2016. The decrease was due to cash payments received during the quarter. The fair value of our portfolio of privately issued residential mortgage-backed securities totaled $109 million at March 31, 2017.

The aggregate gross amount of unrealized losses on available for sale securities totaled $67.9 million at March 31, 2017, compared to $75.1 million at December 31, 2016. On a quarterly basis, we perform separate evaluations on debt and equity securities to determine if the unrealized losses are temporary as more fully described in Note 2 of the Consolidated Financial Statements. No other-than-temporary impairment charges were recognized in earnings during the first quarter of 2017.

BOK Financial is required to hold stock as members of the Federal Reserve system and the Federal Home Loan Banks ("FHLB"). These restricted equity securities are carried at cost as these securities do not have a readily determined fair value because the ownership of these shares is restricted and they lack a market. Federal Reserve Bank stock totaled $36 million and holdings of FHLB stock totaled $247 million at March 31, 2017. Holdings of FHLB stock decreased $23 million compared to December 31, 2016. We are required to hold stock in the FHLB in proportion to our borrowings with the FHLB.

Bank-Owned Life Insurance

We have approximately $311 million of bank-owned life insurance at March 31, 2017. This investment is expected to provide a long-term source of earnings to support existing employee benefit programs. Approximately $283 million is held in separate accounts. Our separate account holdings are invested in diversified portfolios of investment-grade fixed income securities and cash equivalents, including U.S. Treasury and Agency securities, residential mortgage-backed securities, corporate debt, asset-backed and commercial mortgage-backed securities. The portfolios are managed by unaffiliated professional managers within parameters established in the portfolio’s investment guidelines. The cash surrender value of certain life insurance policies is further supported by a stable value wrap, which protects against changes in the fair value of the investments. At March 31, 2017, the fair value of investments held in separate accounts was approximately $287 million. As the underlying fair value of the investments held in a separate account at March 31, 2017 exceeded the net book value of the investments, no cash surrender value was supported by the stable value wrap. The stable value wrap is provided by a domestic financial institution. The remaining cash surrender value of $28 million primarily represents the cash surrender value of policies held in general accounts and other amounts due from various insurance companies.

Loans

The aggregate loan portfolio before allowance for loan losses totaled $17 billion at March 31, 2017 and was largely unchanged compared to December 31, 2016. The outstanding balance of commercial loans decreased by $64 million. Commercial real estate loan balances were up $62 million. Residential mortgage loans decreased $3.6 million and personal loans increased $7.5 million.

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Table 10 -- Loans

(In thousands)



	March 31, 2017		Dec. 31, 2016		Sept. 30, 2016		June 30, 2016		March 31, 2016
Commercial:
Energy	$	2,537,112	$	2,497,868	$	2,520,804	$	2,818,656	$	3,029,420
Services	3,013,375		3,108,990		2,936,599		2,830,864		2,728,891
Healthcare	2,265,604		2,201,916		2,085,046		2,051,146		1,995,425
Wholesale/retail	1,506,243		1,576,818		1,602,030		1,532,957		1,451,846
Manufacturing	543,430		514,975		499,486		595,403		600,645
Other commercial and industrial	461,346		490,257		476,198		527,411		482,198
Total commercial	10,327,110		10,390,824		10,120,163		10,356,437		10,288,425

Commercial real estate:
Retail	745,046		761,888		801,377		795,419		810,522
Multifamily	922,991		903,272		873,773		787,200		733,689
Office	860,889		798,888		752,705		769,112		695,552
Industrial	871,463		871,749		838,021		645,586		564,467
Residential construction and land development	135,994		135,533		159,946		157,576		171,949
Other commercial real estate	334,680		337,716		367,776		427,073		394,328
Total commercial real estate	3,871,063		3,809,046		3,793,598		3,581,966		3,370,507

Residential mortgage:
Permanent mortgage	977,743		1,006,820		969,558		969,007		948,405
Permanent mortgages guaranteed by U.S. government agencies	204,181		199,387		190,309		192,732		197,350
Home equity	764,350		743,625		712,926		719,184		723,554
Total residential mortgage	1,946,274		1,949,832		1,872,793		1,880,923		1,869,309

Personal	847,459		839,958		678,232		587,423		494,325

Total	$	16,991,906	$	16,989,660	$	16,464,786	$	16,406,749	$	16,022,566

Commercial

Commercial loans represent loans for working capital, facilities acquisition or expansion, purchases of equipment and other needs of commercial customers primarily located within our geographical footprint. Commercial loans are underwritten individually and represent on-going relationships based on a thorough knowledge of the customer, the customer’s industry and market. While commercial loans are generally secured by the customer’s assets including real property, inventory, accounts receivable, operating equipment, interests in mineral rights and other property and may also include personal guarantees of the owners and related parties, the primary source of repayment of the loans is the on-going cash flow from operations of the customer’s business. Inherent lending risks are centrally monitored on a continuous basis from underwriting throughout the life of the loan for compliance with commercial lending policies.

Commercial loans totaled $10.3 billion or 61 percent of the loan portfolio at March 31, 2017, a decrease of $64 million compared to December 31, 2016. Healthcare sector loans grew by $64 million. Energy loan balances increased $39 million. Manufacturing loans increased $28 million. This growth was offset by a $96 million decrease in service sector loan balances, a $71 million decrease in wholesale/retail sector loan balance and a $29 million decrease in other commercial and industrial loans.

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Table 11 presents the commercial sector of our loan portfolio distributed primarily by collateral location. Loans for which collateral location is less relevant, such as unsecured loans and reserve-based energy loans, are distributed by the borrower's primary operating location.

Table 11 -- Commercial Loans by Collateral Location

(In thousands)



	Oklahoma		Texas		New Mexico		Arkansas		Colorado		Arizona		Kansas/Missouri		Other		Total
Energy	$	503,759	$	1,300,374	$	16,781	$	4,482	$	269,559	$	9,369	$	94,330	$	338,458	$	2,537,112
Services	627,757		951,532		204,442		5,820		308,008		205,599		336,174		374,043		3,013,375
Healthcare	289,651		386,286		152,515		99,560		126,757		122,194		275,497		813,144		2,265,604
Wholesale/retail	317,196		542,804		49,701		59,539		65,993		61,929		97,568		311,513		1,506,243
Manufacturing	100,773		156,766		1,588		13,107		42,549		37,125		115,570		75,952		543,430
Other commercial and industrial	90,112		98,426		3,357		46,365		25,005		33,442		76,279		88,360		461,346
Total commercial loans	$	1,929,248	$	3,436,188	$	428,384	$	228,873	$	837,871	$	469,658	$	995,418	$	2,001,470	$	10,327,110

The majority of the collateral securing our commercial loan portfolio is located within our geographical footprint with 33 percent concentrated in the Texas market and 19 percent concentrated in the Oklahoma market. At March 31, 2017, the Other category is primarily composed of California - $296 million or 3 percent of the commercial loan portfolio, Louisiana - $150 million or 1 percent of the commercial loan portfolio, Florida - $135 million or 1 percent of the commercial loan portfolio, Pennsylvania - $112 million or 1 percent of the commercial loan portfolio and Ohio - $111 million or 1 percent of the commercial loan portfolio. All other states individually represent one percent or less of total commercial loans.

Supporting the energy industry with loans to producers and other energy-related entities has been a hallmark of the Company since its founding and represents a large portion of our commercial loan portfolio. In addition, energy production and related industries have a significant impact on the economy in our primary markets. Loans collateralized by oil and gas properties are subject to a semi-annual engineering review by our internal staff of petroleum engineers. This review is utilized as the basis for developing the expected cash flows supporting the loan amount. The projected cash flows are discounted according to risk characteristics of the underlying oil and gas properties. Loans are evaluated to demonstrate with reasonable certainty that crude oil, natural gas and natural gas liquids can be recovered from known oil and gas reservoirs under existing economic and operating conditions at current pricing levels and with existing conventional equipment and operating methods and costs. As part of our evaluation of credit quality, we analyze rigorous stress tests over a range of commodity prices and take proactive steps to mitigate risk when appropriate.

Outstanding energy loans totaled $2.5 billion or 15 percent of total loans at March 31, 2017. Unfunded energy loan commitments of $2.8 billion at March 31, 2017 were largely unchanged compared to December 31, 2016. Approximately $2.0 billion of energy loans were to oil and gas producers, largely unchanged compared to December 31, 2016. The majority of this portfolio is first lien, senior secured, reserve-based lending, which we believe is the lowest risk form of energy lending. The Company has largely avoided higher-risk energy lending areas including second-lien financing, mezzanine debt and subordinated debt. In addition, the Company has no direct exposure to energy company equity or to borrowers with deep-water offshore exposure. Approximately 58 percent of the committed production loans are secured by properties primarily producing oil and 42 percent of the committed production loans are secured by properties primarily producing natural gas. Loans to midstream oil and gas companies totaled $317 million at March 31, 2017, an increase of $53 million over December 31, 2016. Loans to borrowers that provide services to the energy industry decreased $8.8 million from the prior quarter to $176 million at March 31, 2017. Loans to other energy borrowers, including those engaged in wholesale or retail energy sales, totaled $53 million, a $6.4 million decrease compared to the prior quarter.

The services sector of the loan portfolio totaled $3.0 billion or 18 percent of total loans and consists of a large number of loans to a variety of businesses, including governmental, finance and insurance, educational services, loans to entities providing services for real estate and construction and professional services. Service sector loans decreased by $96 million compared to December 31, 2016. Loans to governmental entities totaled $566 million at March 31, 2017. Approximately $1.4 billion of the services category is made up of loans with individual balances of less than $10 million. Service sector loans are generally secured by the assets of the borrower with repayment coming from the cash flows of ongoing operations of the customer’s business.

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The healthcare sector of the loan portfolio totaled $2.3 billion or 13% of total loans and consists primarily of loans for the development and operation of senior housing and care facilities, including independent living, assisted living and skilled nursing. Healthcare also includes loans to hospitals and other medical service providers.

We participate in shared national credits when appropriate to obtain or maintain business relationships with local customers. Shared national credits are defined by banking regulators as credits of more than $20 million and with three or more non-affiliated banks as participants. At March 31, 2017, the outstanding principal balance of these loans totaled $3.8 billion. Substantially all of these loans are to borrowers with local market relationships. We serve as the agent lender in approximately 16 percent of our shared national credits, based on dollars committed. We hold shared credits to the same standard of analysis and perform the same level of review as internally originated credits. Our lending policies generally avoid loans in which we do not have the opportunity to maintain or achieve other business relationships with the customer. In addition to management’s quarterly assessment of credit risk, banking regulators annually review a sample of shared national credits for proper risk grading.

Commercial Real Estate

Commercial real estate represents loans for the construction of buildings or other improvements to real estate and property held by borrowers for investment purposes generally within our geographical footprint, with larger concentrations in Texas and Oklahoma which represent 31 percent and 12 percent of the total commercial real estate portfolio at March 31, 2017, respectively. We require collateral values in excess of the loan amounts, demonstrated cash flows in excess of expected debt service requirements, equity investment in the project and a portion of the project already sold, leased or permanent financing already secured. The expected cash flows from all significant new or renewed income producing property commitments are stress tested to reflect the risks in varying interest rates, vacancy rates and rental rates. As with commercial loans, inherent lending risks are centrally monitored on a continuous basis from underwriting throughout the life of the loan for compliance with applicable lending policies.

Commercial real estate loans totaled $3.9 billion or 23 percent of the loan portfolio at March 31, 2017. The outstanding balance of commercial real estate loans increased $62 million during the first quarter of 2017. Loans secured by office buildings increased by $62 million. Multifamily residential loans increased $20 million. Retail sector loans decreased $17 million.

The commercial real estate loan balance as a percentage of our total loan portfolio has ranged from 18 percent to 23 percent over the past five years.

The commercial real estate sector of our loan portfolio distributed by collateral location follows in Table 12.

Table 12 -- Commercial Real Estate Loans by Collateral Location

(In thousands)



	Oklahoma		Texas		New Mexico		Arkansas		Colorado		Arizona		Kansas/Missouri		Other		Total
Retail	$	94,041	$	277,496	$	101,414	$	6,619	$	19,824	$	31,962	$	19,531	$	194,159	$	745,046
Multifamily	110,848		356,553		11,635		25,022		56,998		73,468		130,215		158,252		922,991
Office	95,570		224,238		76,239		2,488		69,827		65,063		69,235		258,229		860,889
Industrial	84,093		268,396		27,795		31		33,086		17,974		61,753		378,335		871,463
Residential construction and land development	12,727		31,287		17,803		5,175		19,827		8,311		17,495		23,369		135,994
Other real estate	56,423		40,752		17,322		5,198		23,786		44,408		28,267		118,524		334,680
Total commercial real estate loans	$	453,702	$	1,198,722	$	252,208	$	44,533	$	223,348	$	241,186	$	326,496	$	1,130,868	$	3,871,063

The Other category is primarily composed of California and Utah which represent $186 million or 5 percent and $133 million or 3 percent, respectively. All other states individually represent less than 3% of the total commercial real estate portfolio.

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Residential Mortgage and Personal

Residential mortgage loans totaled $1.9 billion, largely unchanged compared to December 31, 2016. In general, we sell the majority of our conforming fixed rate loan originations in the secondary market and retain the majority of our non-conforming and adjustable-rate mortgage loans. We have no concentration in sub-prime residential mortgage loans. Our mortgage loan portfolio does not include payment option adjustable rate mortgage loans or adjustable rate mortgage loans with initial rates that are below market. Collateral for 96 percent of our residential mortgage loan portfolio is located within our geographical footprint.

The majority of our permanent mortgage loan portfolio is composed of various non-conforming mortgage programs to support customer relationships including jumbo mortgage loans, non-builder construction loans and special loan programs for high net worth individuals or certain professionals. Jumbo loans may be fixed or variable rate and are fully amortizing. The size of jumbo loans exceeds maximums set under government sponsored entity standards, but otherwise generally conform to those standards. These loans generally require a minimum FICO score of 720 and a maximum debt-to-income ratio (“DTI”) of 38 percent. Loan-to-value ratios (“LTV”) are tiered from 60 percent to 100 percent, depending on the market. Special mortgage programs include fixed and variable rate fully amortizing loans tailored to the needs of certain healthcare professionals. Variable rate loans are fully indexed at origination and may have fixed rates for three to ten years, then adjust annually thereafter.

At March 31, 2017, $204 million of permanent residential mortgage loans are guaranteed by U.S. government agencies. We have minimal credit exposure on loans guaranteed by the agencies. This amount includes residential mortgage loans previously sold into GNMA mortgage pools that the Company may repurchase when certain defined delinquency criteria are met. Because of this repurchase right, the Company is deemed to have regained effective control over these loans and must include them on the Consolidated Balance Sheet. Permanent residential mortgage loans guaranteed by U.S. government agencies increased $4.8 million compared to December 31, 2016.

Home equity loans totaled $764 million at March 31, 2017, an increase of $21 million over December 31, 2016. Our home equity loan portfolio is primarily composed of first-lien, fully amortizing home equity loans. Home equity loans generally require a minimum FICO score of 700 and a maximum DTI of 50 percent. The maximum loan amount available for our home equity loan products is generally $400 thousand. Revolving loans have a 10 year revolving period followed by a 15 year term of amortizing repayment. Interest-only home equity loans have a 5 year revolving period followed by a 15 year term of amortizing repayments and may not be extended for any additional revolving time. All other home equity loans may be extended at management's discretion for an additional 5 year revolving term subject to an update of certain credit information. A summary of our home equity loan portfolio at March 31, 2017 by lien position and amortizing status follows in Table 13.

Table 13 -- Home Equity Loans

(In thousands)



	Revolving		Amortizing		Total
First lien	$	69,245	$	434,922	$	504,167
Junior lien	127,469		132,714		260,183
Total home equity	$	196,714	$	567,636	$	764,350

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The distribution of residential mortgage and personal loans at March 31, 2017 is as follows in Table 14. Residential mortgage loans are distributed by collateral location. Personal loans are generally distributed by borrower location.

Table 14 -- Residential Mortgage and Personal Loans by Collateral Location

(In thousands)



	Oklahoma		Texas		New Mexico		Arkansas		Colorado		Arizona		Kansas/Missouri		Other		Total
Residential mortgage:
Permanent mortgage	$	185,577	$	409,671	$	39,907	$	13,761	$	158,329	$	93,741	$	45,203	$	31,554	$	977,743
Permanent mortgages guaranteed by U.S. government agencies	57,272		28,566		52,236		6,935		5,133		2,484		14,663		36,892		204,181
Home equity	397,930		135,838		100,569		5,494		37,692		8,235		75,398		3,194		764,350
Total residential mortgage	$	640,779	$	574,075	$	192,712	$	26,190	$	201,154	$	104,460	$	135,264	$	71,640	$	1,946,274

Personal	$	302,812	$	340,996	$	11,455	$	6,279	$	52,074	$	49,747	$	73,677	$	10,419	$	847,459

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The Company secondarily evaluates loan portfolio performance based on the primary geographical market managing the loan. Loans attributed to a geographical market may not represent the location of the borrower or the collateral. All permanent mortgage loans serviced by our mortgage banking unit and held for investment by the Bank are centrally managed by the Bank of Oklahoma.

Table 15 -- Loans Managed by Primary Geographical Market

(In thousands)



	March 31, 2017		Dec. 31, 2016		Sept. 30, 2016		June 30, 2016		March 31, 2016
Bank of Oklahoma:
Commercial	$	3,189,183	$	3,370,259	$	3,545,924	$	3,698,215	$	3,656,034
Commercial real estate	691,332		684,381		795,806		781,458		747,689
Residential mortgage	1,404,054		1,407,197		1,401,166		1,415,766		1,411,409
Personal	310,708		303,823		271,420		246,229		204,158
Total Bank of Oklahoma	5,595,277		5,765,660		6,014,316		6,141,668		6,019,290

Bank of Texas:
Commercial	4,148,316		4,022,455		3,903,218		3,901,632		3,936,809
Commercial real estate	1,452,988		1,415,011		1,400,709		1,311,408		1,211,978
Residential mortgage	231,647		233,981		229,345		222,548		217,539
Personal	312,092		306,748		278,167		233,304		210,456
Total Bank of Texas	6,145,043		5,978,195		5,811,439		5,668,892		5,576,782

Bank of Albuquerque:
Commercial	407,403		399,256		398,147		398,427		402,082
Commercial real estate	307,927		284,603		299,785		322,956		323,059
Residential mortgage	106,432		108,058		110,478		114,226		117,655
Personal	11,305		11,483		11,333		10,569		10,823
Total Bank of Albuquerque	833,067		803,400		819,743		846,178		853,619

Bank of Arkansas:
Commercial	88,010		86,577		83,544		81,227		79,808
Commercial real estate	74,469		73,616		72,649		69,235		66,674
Residential mortgage	6,829		7,015		6,936		6,874		7,212
Personal	6,279		6,524		6,757		7,025		918
Total Bank of Arkansas	175,587		173,732		169,886		164,361		154,612

Colorado State Bank & Trust:
Commercial	998,216		1,018,208		1,013,314		1,076,620		1,030,348
Commercial real estate	266,218		265,264		254,078		237,569		219,078
Residential mortgage	62,313		59,631		59,838		59,425		52,961
Personal	49,523		50,372		42,901		35,064		24,497
Total Colorado State Bank & Trust	1,376,270		1,393,475		1,370,131		1,408,678		1,326,884

Bank of Arizona:
Commercial	643,222		686,253		680,447		670,814		656,527
Commercial real estate	737,088		747,409		726,542		639,112		605,383
Residential mortgage	36,737		36,265		39,206		38,998		40,338
Personal	51,386		52,553		31,205		24,248		18,372
Total Bank of Arizona	1,468,433		1,522,480		1,477,400		1,373,172		1,320,620

Mobank:
Commercial	852,760		807,816		495,569		529,502		526,817
Commercial real estate	341,041		338,762		244,029		220,228		196,646
Residential mortgage	98,262		97,685		25,824		23,086		22,195
Personal	106,166		108,455		36,449		30,984		25,101
Total Mobank	1,398,229		1,352,718		801,871		803,800		770,759

Total BOK Financial loans	$	16,991,906	$	16,989,660	$	16,464,786	$	16,406,749	$	16,022,566

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Loan Commitments

We enter into certain off-balance sheet arrangements in the normal course of business. These arrangements included unfunded loan commitments which totaled $9.4 billion and standby letters of credit which totaled $596 million at March 31, 2017. Loan commitments may be unconditional obligations to provide financing or conditional obligations that depend on the borrower’s financial condition, collateral value or other factors. Standby letters of credit are unconditional commitments to guarantee the performance of our customer to a third party. Since some of these commitments are expected to expire before being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Approximately $322 thousand of the outstanding standby letters of credit were issued on behalf of customers whose loans are nonperforming at March 31, 2017.

Table 16 – Off-Balance Sheet Credit Commitments

(In thousands)



	March 31, 2017		Dec. 31, 2016		Sept. 30, 2016		June 30, 2016		March 31, 2016
Loan commitments	$	9,403,641	$	9,404,665	$	8,697,322	$	8,508,606	$	8,567,017
Standby letters of credit	595,746		585,472		499,990		491,002		509,902
Mortgage loans sold with recourse	134,631		139,486		139,306		145,403		152,843

We have off-balance sheet commitments related to certain residential mortgage loans originated under community development loan programs that were sold to a U.S. government agency with full recourse. These mortgage loans were underwritten to standards approved by the agencies, including full documentation and originated under programs available only for owner-occupied properties. The Company no longer sells residential mortgage loans with recourse. We are obligated to repurchase these loans for the life of these loans in the event of foreclosure for the unpaid principal and interest at the time of foreclosure. Substantially all of these loans are to borrowers in our primary markets including $84 million to borrowers in Oklahoma, $15 million to borrowers in Arkansas and $12 million to borrowers in New Mexico. An accrual related to this off-balance sheet risk is included in Other liabilities in the consolidated balances sheets and totaled $3.9 million at March 31, 2017 and $4.0 million at December 31, 2016.

We also have an off-balance sheet obligation to repurchase residential mortgage loans sold to government sponsored entities through our mortgage banking activities due to standard representations and warranties made under contractual agreements as described further in Note 6 to the Consolidated Financial Statements. For the period from 2010 through the first quarter of 2017 combined, approximately 21 percent of repurchase requests have currently resulted in actual repurchases or indemnification by the Company. The accrual for credit losses related to potential loan repurchases under representations and warranties totaled $2.6 million at March 31, 2017 and $2.8 million at December 31, 2016.

Customer Derivative Programs

We offer programs that permit our customers to hedge various risks, including fluctuations in energy, cattle and other agricultural product prices, interest rates and foreign exchange rates. Each of these programs work essentially the same way. Derivative contracts are executed between the customers and the Company. Offsetting contracts are executed between the Company and selected counterparties to minimize market risk due to changes in commodity prices, interest rates or foreign exchange rates. The counterparty contracts are identical to the customer contracts, except for a fixed pricing spread or a fee paid to us as compensation for administrative costs, credit risk and profit.

The customer derivative programs create credit risk for potential amounts due to the Company from our customers and from the counterparties. Customer credit risk is monitored through existing credit policies and procedures. The effects of changes in commodity prices, interest rates or foreign exchange rates are evaluated across a range of possible options to determine the maximum exposure we are willing to have individually to any customer. Customers may also be required to provide cash margin or other collateral in conjunction with our credit agreements to further limit our credit risk.

Counterparty credit risk is evaluated through existing policies and procedures. This evaluation considers the total relationship between BOK Financial and each of the counterparties. Individual limits are established by management, approved by Credit Administration and reviewed by the Asset/Liability Committee. Margin collateral is required if the exposure between the Company and any counterparty exceeds established limits. Based on declines in the counterparties’ credit ratings, these limits may be reduced and additional margin collateral may be required.

- 25 -

A deterioration of the credit standing of one or more of the customers or counterparties to these contracts may result in BOK Financial recognizing a loss as the fair value of the affected contracts may no longer move in tandem with the offsetting contracts. This occurs if the credit standing of the customer or counterparty deteriorated such that either the fair value of underlying collateral no longer supported the contract or the customer or the counterparty’s ability to provide margin collateral was impaired. Credit losses on customer derivatives reduce brokerage and trading revenue in the Consolidated Statements of Earnings.

Derivative contracts are carried at fair value. At March 31, 2017, the net fair values of derivative contracts, before consideration of cash margin, reported as assets under these programs totaled $304 million compared to $690 million at December 31, 2016. At March 31, 2017, the fair value of our derivative contracts included $205 million for foreign exchange contracts, $47 million of to-be-announced residential mortgage-backed securities, $32 million for interest rate swaps and $14 million for energy contracts. The aggregate net fair value of derivative contracts, before consideration of cash margin, held under these programs reported as liabilities totaled $296 million at March 31, 2017 and $687 million at December 31, 2016.

At March 31, 2017, total derivative assets were reduced by $4.9 million of cash collateral received from counterparties and total derivative liabilities were reduced by $39 million of cash collateral paid to counterparties related to instruments executed with the same counterparty under a master netting agreement.

A table showing the notional and fair value of derivative assets and liabilities on both a gross and net basis is presented in Note 3 to the Consolidated Financial Statements.

The fair value of derivative contracts reported as assets under these programs, net of cash margin held by the Company, by category of debtor at March 31, 2017 follows in Table 17.

Table 17 -- Fair Value of Derivative Contracts

(In thousands)



Customers	$	219,559
Banks and other financial institutions	67,009
Exchanges and clearing organizations	12,630
Fair value of customer risk management program asset derivative contracts, net	$	299,198

At March 31, 2017, our largest derivative exposure was to a customer for an interest rate derivative contract which totaled $6.5 million.

Our customer derivative program also introduces liquidity and capital risk. We are required to provide cash margin to certain counterparties when the net negative fair value of the contracts exceeds established limits. Also, changes in commodity prices affect the amount of regulatory capital we are required to hold as support for the fair value of our derivative assets. These risks are modeled as part of the management of these programs. Based on current prices, a decrease in market prices equivalent to $27.26 per barrel of oil would decrease the fair value of derivative assets by $5.3 million. An increase in prices equivalent to $76 per barrel of oil would increase the fair value of derivative assets by $220 million as current prices move further away from the fixed prices embedded in our existing contracts. Liquidity requirements of this program are also affected by our credit rating. A decrease in our credit rating to below investment grade would increase our obligation to post cash margin on existing contracts by approximately $10 million. The fair value of our to-be-announced residential mortgage-backed securities and interest rate swap derivative contracts is affected by changes in interest rates. Based on our assessment as of March 31, 2017, changes in interest rates would not materially impact regulatory capital or liquidity needed to support this portion of our customer derivative program.

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Summary of Loan Loss Experience

We maintain an allowance for loan losses and an accrual for off-balance sheet credit risk. At March 31, 2017, the combined allowance for loan losses and off-balance sheet credit losses totaled $258 million or 1.52 percent of outstanding loans and 131 percent of nonaccruing loans, excluding loans guaranteed by U.S. government agencies. The allowance for loan losses was $249 million and the accrual for off-balance sheet credit losses was $9.4 million. At December 31, 2016, the combined allowance for credit losses was $257 million or 1.52 percent of outstanding loans and 117 percent of nonaccruing loans, excluding loans guaranteed by U.S. government agencies. The allowance for loan losses was $246 million and the accrual for off-balance sheet credit losses was $11 million.

The provision for credit losses is the amount necessary to maintain the allowance for loan losses and an accrual for off-balance sheet credit risk at an amount determined by management to be appropriate based on its evaluation. The provision includes the combined charge to expense for both the allowance for loan losses and the accrual for off-balance sheet credit risk. All losses incurred from lending activities will ultimately be reflected in charge-offs against the allowance for loan losses following funds advanced against outstanding commitments. After evaluating all credit factors, the Company determined that no provision for credit losses was necessary in the first quarter of 2017 or the fourth quarter of 2016. No provision for credit losses was necessary based on continued improvement in credit metric trends largely driven by energy price stability. A $35 million provision for credit losses was recorded in the first quarter of 2016 due primarily to the effects of falling energy prices.

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Table 18 -- Summary of Loan Loss Experience

(In thousands)



	Three Months Ended
	March 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			March 31, 2016
Allowance for loan losses:
Beginning balance	$	246,159		$	245,103		$	243,259		$	233,156		$	225,524
Loans charged off:
Commercial	(424		)	(81		)	(6,266		)	(7,355		)	(22,126		)
Commercial real estate	—			—			—			—			—
Residential mortgage	(236		)	(208		)	(285		)	(345		)	(474		)
Personal	(1,493		)	(1,362		)	(1,550		)	(1,145		)	(1,391		)
Total	(2,153		)	(1,651		)	(8,101		)	(8,845		)	(23,991		)
Recoveries of loans previously charged off:
Commercial	1,182			839			177			223			488
Commercial real estate	735			395			521			282			85
Residential mortgage	228			986			650			200			163
Personal	755			593			690			681			783
Total	2,900			2,813			2,038			1,386			1,519
Net loans recovered (charged off)	747			1,162			(6,063		)	(7,459		)	(22,472		)
Provision for loan losses	1,804			(106		)	7,907			17,562			30,104
Ending balance	$	248,710		$	246,159		$	245,103		$	243,259		$	233,156
Accrual for off-balance sheet credit losses:
Beginning balance	$	11,244		$	11,138		$	9,045		$	6,607		$	1,711
Provision for off-balance sheet credit losses	(1,804		)	106			2,093			2,438			4,896
Ending balance	$	9,440		$	11,244		$	11,138		$	9,045		$	6,607
Total combined provision for credit losses	$	—		$	—		$	10,000		$	20,000		$	35,000
Allowance for loan losses to loans outstanding at period-end	1.46		%	1.45		%	1.49		%	1.48		%	1.46		%
Net charge-offs (recoveries) (annualized) to average loans	(0.02		)%	(0.03		)%	0.15		%	0.18		%	0.56		%
Total provision for credit losses (annualized) to average loans	—		%	—		%	0.24		%	0.49		%	0.88		%
Recoveries to gross charge-offs	134.70		%	170.38		%	25.16		%	15.67		%	6.33		%
Accrual for off-balance sheet credit losses to off-balance sheet credit commitments	0.09		%	0.11		%	0.12		%	0.10		%	0.07		%
Combined allowance for credit losses to loans outstanding at period-end	1.52		%	1.52		%	1.56		%	1.54		%	1.50		%

Allowance for Loan Losses

The appropriateness of the allowance for loan losses is assessed by management based on an ongoing quarterly evaluation of the probable estimated losses inherent in the portfolio. The allowance consists of specific allowances attributed to certain impaired loans, general allowances based on estimated loss rates by loan class and non-specific allowances based on general economic conditions, concentration in loans with large balances and other relevant factors.

Loans are considered to be impaired when it is probable that we will not collect all amounts due according to the contractual terms of the loan agreement. This includes all nonaccruing loans, all loans modified in troubled debt restructurings and all government guaranteed loans repurchased from GNMA pools. A specific allowance is required when the outstanding principal balance of the loan is not supported by either the discounted cash flows expected to be received from the borrower or the fair value of collateral for collateral dependent loans. At March 31, 2017, impaired loans totaled $402 million, including $52 million with specific allowances of $3.5 million and $350 million with no specific allowances. At December 31, 2016, impaired loans totaled $419 million, including $11 million of impaired loans with specific allowances of $843 thousand and $407 million with no specific allowances.

- 28 -

Risk grading guidelines in the Office of the Comptroller of the Currency ("OCC") Oil and Gas Lending Handbook updated at the beginning of 2016, heavily weight the ability to repay total borrower debt, regardless of collateral position. This change in grading methodology has increased loans especially mentioned, potential problem loans and nonaccrual loans. Because substantially all of our energy portfolio is supported by senior lien positions that, in general, have substantially lower loss exposure, the historical relationship between loan classification and loss exposure may be more difficult to correlate. The most recently completed energy portfolio redetermination supported that $58 million of impaired energy loans required no allowance for credit losses based on the adequacy of collateral. In addition, $77 million of impaired energy loans are current on all payments due.

General allowances for unimpaired loans are based on an estimated loss rate by loan class. Estimated loss rates for risk-graded loans are either increased or decreased based on changes in risk grading for each loan class. Estimated loss rates for both risk-graded and non-risk graded loans may be further adjusted for inherent risk identified for the given loan class which have not yet been captured in the loss rate.

The aggregate amount of general allowances for all unimpaired loans totaled $218 million at March 31, 2017, an increase of $770 thousand over December 31, 2016. The general allowance attributed to the commercial real estate loan segment increased by $7.6 million, offset by a $5.3 million decrease in the general allowance attributed to the commercial loan segment and a $1.5 million decrease in the general allowance attributed to the personal loan segment.

Nonspecific allowances are maintained for risks beyond factors specific to a particular portfolio segment 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. Nonspecific allowances totaled $27 million at March 31, 2017 compared to $28 million at December 31, 2016. The nonspecific allowance includes consideration of the indirect impact of the prolonged low energy price environment on the broader economies within our geographical footprint that are highly dependent on the energy industry.

An allocation of the allowance for loan losses by portfolio segment is included in Note 4 to the Consolidated Financial Statements.

Our loan monitoring process also identified certain accruing substandard loans that possess more than the normal amount of risk due to deterioration in the financial condition of the borrower or the value of the collateral. Because the borrowers are still performing in accordance with the original terms of the loan agreements, and no loss of principal or interest is anticipated, these loans were not included in nonperforming assets. Known information does, however, cause management concern as to the borrowers’ ability to comply with current repayment terms. These potential problem loans totaled $413 million at March 31, 2017, primarily composed of $294 million or 12 percent of energy loans, $32 million or 1 percent of healthcare sector loans, $31 million or 1 percent of service sector loans, $31 million or 6 percent of manufacturing sector loans and $13 million or 1 percent of wholesale/retail sector loans. Potential problem loans totaled $399 million at December 31, 2016.

Based on regulatory guidelines, other loans especially mentioned are in compliance with the original terms of the agreement but may have a weakness that deserves management's close attention. Other loans especially mentioned totaled $233 million at March 31, 2017 and were composed primarily of $144 million or 6 percent of outstanding energy loans, $36 million or 2 percent of outstanding healthcare loans, $22 million or 1 percent of outstanding wholesale/retail sector loans and $13.9 million or less than 1 percent of outstanding services loans. Other loans especially mentioned totaled $230 million at December 31, 2016.

We updated our semi-annual energy loan portfolio stress test at December 31, 2016 to estimate how the energy portfolio may respond in a prolonged low-price environment. Stress test assumptions include a starting price of $2.00 per million BTUs for natural gas and $37.50 per barrel of oil, gradually escalating over seven years to a maximum of $3.00 and $55.00, respectively. The results of the stress test are factored into our expectation that the loan loss provision could range from $15 million to $20 million for 2017. This expectation is based upon current observed conditions. The portion of the combined allowance for credit losses attributable to the energy portfolio totaled 3.37% of outstanding energy loans at March 31, 2017, compared to 3.68% of outstanding energy loans at December 31, 2016.

- 29 -

Net Loans Charged Off

Loans are charged off against the allowance for loan losses 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 60 days and 180 days past due, depending on loan class. In addition, non-risk graded loans are generally charged-down to collateral value within 60 days of being notified of a borrower's bankruptcy filing, regardless of payment status.

BOK Financial had net recoveries of $747 thousand in the first quarter of 2017, compared to net recoveries of $1.2 million in the fourth quarter of 2016 and net loans charged off of $22.5 million in the first quarter of 2016. The ratio of net loans charged off to average loans on an annualized basis was (0.02) percent for the first quarter of 2017, compared with (0.03) percent for the fourth quarter of 2016 and 0.56 percent for the first quarter of 2016.

Net recoveries of commercial loans were $758 thousand in the first quarter of 2017, compared to net recoveries of $758 thousand in the fourth quarter of 2016. Net commercial real estate loan recoveries were $735 thousand in the first quarter of 2017, compared to net recoveries of $395 thousand in the fourth quarter of 2016. Net charge-offs of residential mortgage loans were $8 thousand and net charge-offs of personal loans were $738 thousand for the first quarter. Personal loan net charge-offs include deposit account overdraft losses.

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Nonperforming Assets

Table 19 -- Nonperforming Assets

(In thousands)



	March 31, 2017		Dec. 31, 2016		Sept. 30, 2016		June 30, 2016		March 31, 2016
Nonaccruing loans:
Commercial	$	156,825	$	178,953	$	176,464	$	181,989	$	174,652
Commercial real estate	4,475		5,521		7,350		7,780		9,270
Residential mortgage	46,081		46,220		52,452		57,061		57,577
Personal	235		290		686		354		331
Total nonaccruing loans	207,616		230,984		236,952		247,184		241,830
Accruing renegotiated loans guaranteed by U.S. government agencies	83,577		81,370		80,306		78,806		77,597
Real estate and other repossessed assets	42,726		44,287		31,941		24,054		29,896
Total nonperforming assets	$	333,919	$	356,641	$	349,199	$	350,044	$	349,323
Total nonperforming assets excluding those guaranteed by U.S. government agencies	$	240,234	$	263,425	$	253,461	$	251,497	$	252,176

Nonaccruing loans by loan portfolio segment and class:
Commercial:
Energy	$	110,425	$	132,499	$	142,966	$	168,145	$	159,553
Services	7,713		8,173		8,477		9,388		9,512
Wholesale / retail	11,090		11,407		2,453		2,772		3,685
Manufacturing	5,907		4,931		274		293		312
Healthcare	909		825		855		875		1,023
Other commercial and industrial	20,781		21,118		21,439		516		567
Total commercial	156,825		178,953		176,464		181,989		174,652

Commercial real estate:
Residential construction and land development	2,616		3,433		3,739		4,261		4,789
Retail	314		326		1,249		1,265		1,302
Office	413		426		882		606		629
Multifamily	24		38		51		65		250
Industrial	76		76		76		76		76
Other commercial real estate	1,032		1,222		1,353		1,507		2,224
Total commercial real estate	4,475		5,521		7,350		7,780		9,270

Residential mortgage:
Permanent mortgage	24,188		22,855		25,956		27,228		27,497
Permanent mortgage guaranteed by U.S. government agencies	10,108		11,846		15,432		19,741		19,550
Home equity	11,785		11,519		11,064		10,092		10,530
Total residential mortgage	46,081		46,220		52,452		57,061		57,577
Personal	235		290		686		354		331
Total nonaccruing loans	$	207,616	$	230,984	$	236,952	$	247,184	$	241,830

- 31 -



	March 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			March 31, 2016
Nonaccruing loans as % of outstanding balance for class:
Commercial:
Energy	4.35		%	5.30		%	5.67		%	5.97		%	5.27		%
Services	0.26		%	0.26		%	0.29		%	0.33		%	0.35		%
Wholesale / retail	0.74		%	0.72		%	0.15		%	0.18		%	0.25		%
Manufacturing	1.09		%	0.96		%	0.05		%	0.05		%	0.05		%
Healthcare	0.04		%	0.04		%	0.04		%	0.04		%	0.05		%
Other commercial and industrial	4.50		%	4.31		%	4.50		%	0.10		%	0.12		%
Total commercial	1.52		%	1.72		%	1.74		%	1.76		%	1.70		%

Commercial real estate:
Residential construction and land development	1.92		%	2.53		%	2.34		%	2.70		%	2.79		%
Retail	0.04		%	0.04		%	0.16		%	0.16		%	0.16		%
Office	0.05		%	0.05		%	0.12		%	0.08		%	0.09		%
Multifamily	—		%	—		%	0.01		%	0.01		%	0.03		%
Industrial	0.01		%	0.01		%	0.01		%	0.01		%	0.01		%
Other commercial real estate	0.31		%	0.36		%	0.37		%	0.35		%	0.56		%
Total commercial real estate	0.12		%	0.14		%	0.19		%	0.22		%	0.28		%

Residential mortgage:
Permanent mortgage	2.47		%	2.27		%	2.68		%	2.81		%	2.90		%
Permanent mortgage guaranteed by U.S. government agencies	4.95		%	5.94		%	8.11		%	10.24		%	9.91		%
Home equity	1.54		%	1.55		%	1.55		%	1.40		%	1.46		%
Total residential mortgage	2.37		%	2.37		%	2.80		%	3.03		%	3.08		%
Personal	0.03		%	0.03		%	0.10		%	0.06		%	0.07		%
Total nonaccruing loans	1.22		%	1.36		%	1.44		%	1.51		%	1.51		%

Ratios:
Allowance for loan losses to nonaccruing loans¹	125.92		%	112.33		%	110.65		%	106.95		%	104.89		%
Accruing loans 90 days or more past due¹	$	95		$	5		$	3,839		$	2,899		$	8,019


¹	Excludes residential mortgages guaranteed by agencies of the U.S. Government.

Nonperforming assets totaled $334 million or 1.96 percent of outstanding loans and repossessed assets at March 31, 2017. Nonaccruing loans totaled $208 million, accruing renegotiated residential mortgage loans totaled $84 million and real estate and other repossessed assets totaled $43 million. All accruing renegotiated residential mortgage loans and $10 million of nonaccruing loans are guaranteed by U.S. government agencies. Excluding assets guaranteed by U.S. government agencies, nonperforming assets decreased $23 million during the first quarter primarily due to a decrease in nonaccruing energy loans. The Company generally retains nonperforming assets to maximize potential recovery which may cause future nonperforming assets to decrease more slowly.

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Loans are generally classified as nonaccruing when it becomes probable that we will not collect the full contractual principal and interest. As more fully discussed in Note 4 to the Consolidated Financial Statements, we may modify loans in troubled debt restructurings. Modifications may include extension of payment terms and rate concessions. We generally do not forgive principal or accrued but unpaid interest. All loans modified in troubled debt restructurings, except for residential mortgage loans guaranteed by U.S. government agencies, are classified as nonaccruing. We may also renew matured nonaccruing loans. All nonaccruing loans, including those renewed or modified in troubled debt restructurings, are charged off when the loan balance is no longer covered by the paying capacity of the borrower based on a quarterly evaluation of available cash resources and collateral value. All nonaccruing loans generally remain on nonaccrual status until full collection of principal and interest in accordance with the original terms, including principal previously charged off, is probable. We generally do not voluntarily modify personal loans to troubled borrowers. Personal loans modified at the direction of bankruptcy court orders are identified as troubled debt restructurings and classified as nonaccruing.

Renegotiated loans consist solely of accruing residential mortgage loans guaranteed by U.S. government agencies that have been modified in troubled debt restructurings. See Note 4 to the Consolidated Financial Statements for additional discussion of troubled debt restructurings. Generally, we modify residential mortgage loans primarily by reducing interest rates and extending the number of payments in accordance with U.S. government agency guidelines. Generally, no unpaid principal or interest is forgiven. Interest continues to accrue based on the modified terms of the loan. Modified loans guaranteed by U.S. government agencies under residential mortgage loan programs may be sold once they become eligible according to U.S. government agency guidelines.

A rollforward of nonperforming assets for the three months ended March 31, 2017 follows in Table 20.

Table 20 -- Rollforward of Nonperforming Assets

(In thousands)



	Three Months Ended
	March 31, 2017
	Nonaccruing Loans			Renegotiated Loans			Real Estate and Other Repossessed Assets			Total Nonperforming Assets
Balance, Dec. 31, 2016	$	230,984		$	81,370		$	44,287		$	356,641
Additions	22,964			11,322			—			34,286
Payments	(34,932		)	(953		)	—			(35,885		)
Charge-offs	(2,153		)	—			—			(2,153		)
Net gains and write-downs	—			—			(90		)	(90		)
Foreclosure of nonperforming loans	(909		)	—			909			—
Foreclosure of loans guaranteed by U.S. government agencies	(2,400		)	(1,538		)	—			(3,938		)
Proceeds from sales	—			(6,744		)	(1,873		)	(8,617		)
Net transfers to nonaccruing loans	—			—			—			—
Return to accrual status	(5,938		)	—			—			(5,938		)
Other, net	—			120			(507		)	(387		)
Balance, March 31, 2017	$	207,616		$	83,577		$	42,726		$	333,919

We foreclose on loans guaranteed by U.S. government agencies in accordance with agency guidelines. Generally these loans are not eligible for modification programs or have failed to comply with modified loan terms. Principal is guaranteed by agencies of the U.S. government, subject to limitations and credit risk is minimal. These properties will be conveyed to the agencies once applicable criteria have been met.

Commercial

Nonaccruing commercial loans totaled $157 million or 1.52 percent of total commercial loans at March 31, 2017 and $179 million or 1.72 percent of commercial loans at December 31, 2016. There were $16 million in newly identified nonaccruing commercial loans during the quarter, offset by $32 million in payments, $5.9 million of loans returned to accruing status and $424 thousand of charge-offs. Newly identified nonaccruing commercial loans were primarily other commercial and industrial loans and energy loans.

- 33 -

Nonaccruing commercial loans at March 31, 2017 were primarily composed of $110 million or 4.35 percent of total energy loans, $21 million or 4.50 percent of total other commercial and industrial sector loans and $11 million or 0.74 percent of wholesale/retail sector loans.

Commercial Real Estate

Nonaccruing commercial real estate loans totaled $4.5 million or 0.12 percent of outstanding commercial real estate loans at March 31, 2017, compared to $5.5 million or 0.14 percent of outstanding commercial real estate loans at December 31, 2016. Newly identified nonaccruing commercial real estate loans of $502 thousand were offset by $1.5 million of cash payments received. There were no charge-offs or foreclosures of nonaccruing commercial real estate loans during the first quarter.

Nonaccruing commercial real estate loans were primarily composed of $2.6 million or 1.92 percent of residential construction and land development loans.

Residential Mortgage and Personal

Nonaccruing residential mortgage loans totaled $46 million or 2.37 percent of outstanding residential mortgage loans at March 31, 2017, unchanged compared to December 31, 2016. Newly identified nonaccruing residential mortgage loans totaling $4.9 million were offset by $3.3 million of foreclosures, $1.5 million of payments and $236 thousand of loans charged off during the quarter.

Nonaccruing residential mortgage loans primarily consist of non-guaranteed permanent residential mortgage loans which totaled $24 million or 2.47 percent of outstanding non-guaranteed permanent residential mortgage loans at March 31, 2017. Nonaccruing home equity loans totaled $12 million or 1.54 percent of total home equity loans.

Payments of accruing residential mortgage loans and personal loans may be delinquent. The composition of residential mortgage loans and personal loans past due but still accruing is included in the following Table 21. Substantially all non-guaranteed residential loans past due 90 days or more are nonaccruing. Residential mortgage loans 30 to 59 days past due increased $1.2 million in the first quarter to $6.7 million at March 31, 2017 and residential mortgage loans 60 to 89 days past due decreased by $1.4 million. Personal loans past due 30 to 59 days decreased by $159 thousand compared to December 31, 2016 and personal loans 60 to 89 days decreased $158 thousand.

Table 21 -- Residential Mortgage and Personal Loans Past Due

(In thousands)



	March 31, 2017						December 31, 2016
	90 Days or More		60 to 89 Days		30 to 59 Days		90 Days or More		60 to 89 Days		30 to 59 Days
Residential mortgage:
Permanent mortgage¹	$	—	$	—	$	5,364	$	—	$	1,280	$	3,299
Home equity	9		266		1,376		—		337		2,276
Total residential mortgage	$	9	$	266	$	6,740	—		$	1,617	$	5,575

Personal	$	37	$	105	$	430	$	5	$	263	$	589


¹	Excludes past due residential mortgage loans guaranteed by agencies of the U.S. government.

Real Estate and Other Repossessed Assets

Real estate and other repossessed assets are assets acquired in partial or total forgiveness of loans. The assets are carried at the lower of cost as determined by fair value at the date of foreclosure or current fair value, less estimated selling costs.

Real estate and other repossessed assets totaled $43 million at March 31, 2017, a decrease of $1.6 million compared to December 31, 2016. The distribution of real estate and other repossessed assets attributed by geographical market is included in Table 22 following.

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Table 22 -- Real Estate and Other Repossessed Assets by Collateral Location

(In thousands)



	Oklahoma		Texas		Colorado		Arkansas		New Mexico		Arizona		Kansas/ Missouri		Other		Total
1-4 family residential properties	$	3,993	$	335	$	—	$	479	$	1,921	$	762	$	203	$	413	$	8,106
Developed commercial real estate properties	64		—		2,637		—		234		198		1,296		—		4,429
Undeveloped land	1,350		1,300		—		—		—		153		1,197		—		4,000
Residential land development properties	18		—		210		—		—		493		2		—		723
Oil and gas properties	—		25,416										—		—		25,416
Other	32		10		—		—		8		—		—		—		50
Total real estate and other repossessed assets	$	5,457	$	27,061	$	2,847	$	479	$	2,163	$	1,606	$	2,698	$	413	$	42,724

Undeveloped land is primarily zoned for commercial development. Developed commercial real estate properties are primarily completed with no additional construction necessary for sale.

Liquidity and Capital

Subsidiary Bank

Deposits and borrowed funds are the primary sources of liquidity for BOKF, NA, the wholly owned subsidiary bank of BOK Financial. Based on the average balances for the first quarter of 2017, approximately 68 percent of our funding was provided by deposit accounts, 19 percent from borrowed funds, less than 1 percent is from long-term subordinated debt and 10 percent from equity. Our funding sources, which primarily include deposits and borrowings from the Federal Home Loan Banks and other banks, provide adequate liquidity to meet our operating needs.

Deposit accounts represent our largest funding source. We compete for retail and commercial deposits by offering a broad range of products and services and focusing on customer convenience. Retail deposit growth is supported through personal and small business checking, online bill paying services, mobile banking services, an extensive network of branch locations and ATMs and our Express Bank call center. Commercial deposit growth is supported by offering treasury management and lockbox services. We also acquire brokered deposits when the cost of funds is advantageous to other funding sources.

Average deposits for the first quarter of 2017 totaled $22.4 billion and represented approximately 68 percent of total liabilities and capital, up from $21.7 billion and 66 percent of total liabilities and capital for the fourth quarter of 2016. Average deposits increased $666 million from the fourth quarter of 2016, including $390 million related to the impact of a full quarter of deposits from the Mobank acquisition. Excluding this impact, interest-bearing transaction account balances grew by $402 million and time deposit balances were up $63 million. This growth was partially offset by a $201 million decrease in demand deposit balances. A summary of average deposit balances by our lines of business follows in Table 23. The discussion following by line of business excludes the impact of allocating Mobank's deposits among the segments during first quarter of 2017.

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Table 23 - Average Deposits by Line of Business

(In thousands)



	Three Months Ended
	March 31, 2017		Dec. 31, 2016		Sept. 30, 2016		June 30, 2016		March 31, 2016
Commercial Banking	$	8,631,724	$	8,543,532	$	8,317,341	$	8,403,408	$	8,457,750
Consumer Banking	6,581,446		6,659,380		6,660,514		6,634,362		6,575,893
Wealth Management	5,582,554		5,333,095		4,913,409		4,521,031		4,696,013
Subtotal	20,795,724		20,536,007		19,891,264		19,558,801		19,729,656
Funds Management and other	1,573,698		1,167,409		873,750		908,931		896,965
Total	$	22,369,422	$	21,703,416	$	20,765,014	$	20,467,732	$	20,626,621

Average Commercial Banking deposit balances decreased by $120 million compared to the fourth quarter of 2016. Average demand deposit balances were down $87 million and average balances of interest-bearing transaction accounts decreased $40 million. Average deposit balances attributed to energy customers grew by $97 million and balances attributed to small business customers increased by $51 million. This growth was offset by a $93 million decrease in balances attributed to commercial and industrial customers, a $70 million decrease in balances attributed to treasury services customers and a $45 million decrease in commercial real estate customer balances. Commercial customers continue to retain large cash reserves primarily due to low yields available on other high quality investment alternatives and to minimize deposit service charges through the earnings credit. The earnings credit is a non-cash method that enables commercial customers to offset deposit service charges based on account balances. Commercial account balances may decrease as short-term interest rates rise and commercial customers redeploy cash to better yielding investment alternatives.

Average Consumer Banking deposit balances decreased by $108 million. Demand deposit balances decreased by $79 million and time deposit balances decreased by $38 million. These decreases were partially offset by a $14 million increase in saving account balances. Growth in Consumer Banking deposits includes escrow funds associated with mortgage loan servicing. These deposits tend to grow throughout the year and are largely disbursed near year end.

Average Wealth Management deposits grew by $216 million over the fourth quarter of 2016, primarily due to a $166 million increase in interest-bearing transaction account balances and an $84 million increase in time deposit balances, partially offset by a $37 million decrease in demand deposit balances.

Average deposits attributed to Funds Management and Other increased $288 million, excluding Mobank. Average time deposits for the first quarter of 2017 included $483 million of brokered deposits, an increase of $103 million over the fourth quarter of 2016. Average interest-bearing transaction accounts for the first quarter included $1.3 billion of brokered deposits, an increase of $359 million over the fourth quarter of 2016.

The distribution of our period end deposit account balances among principal markets follows in Table 24.

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Table 24 -- Period End Deposits by Principal Market Area

(In thousands)



	March 31, 2017		Dec. 31, 2016		Sept. 30, 2016		June 30, 2016		March 31, 2016
Bank of Oklahoma:
Demand	$	4,320,666	$	3,993,170	$	4,158,273	$	4,020,181	$	3,813,128
Interest-bearing:
Transaction	6,114,288		6,345,536		5,701,983		5,741,302		5,706,067
Savings	265,014		241,696		242,959		247,984		246,122
Time	1,189,144		1,118,355		1,091,464		1,167,271		1,198,022
Total interest-bearing	7,568,446		7,705,587		7,036,406		7,156,557		7,150,211
Total Bank of Oklahoma	11,889,112		11,698,757		11,194,679		11,176,738		10,963,339

Bank of Texas:
Demand	3,091,258		3,137,009		2,734,981		2,677,253		2,571,883
Interest-bearing:
Transaction	2,317,576		2,388,812		2,240,040		2,035,634		2,106,905
Savings	89,640		83,101		84,642		83,862		83,263
Time	511,037		535,642		528,380		516,231		530,657
Total interest-bearing	2,918,253		3,007,555		2,853,062		2,635,727		2,720,825
Total Bank of Texas	6,009,511		6,144,564		5,588,043		5,312,980		5,292,708

Bank of Albuquerque:
Demand	593,117		627,979		584,681		530,853		557,200
Interest-bearing:
Transaction	623,677		590,571		555,326		573,690		560,684
Savings	53,683		49,963		54,480		49,200		47,187
Time	233,506		238,408		244,706		250,068		259,630
Total interest-bearing	910,866		878,942		854,512		872,958		867,501
Total Bank of Albuquerque	1,503,983		1,506,921		1,439,193		1,403,811		1,424,701

Bank of Arkansas:
Demand	42,622		26,389		32,203		30,607		31,318
Interest-bearing:
Transaction	106,804		105,232		313,480		278,335		265,803
Savings	2,304		2,192		2,051		1,853		1,929
Time	15,067		16,696		17,534		18,911		21,035
Total interest-bearing	124,175		124,120		333,065		299,099		288,767
Total Bank of Arkansas	166,797		150,509		365,268		329,706		320,085

Colorado State Bank & Trust:
Demand	601,778		576,000		517,063		528,124		413,506
Interest-bearing:
Transaction	610,510		616,679		623,055		625,240		610,077
Savings	37,801		32,866		31,613		31,509		33,108
Time	234,740		242,782		247,667		254,164		271,475
Total interest-bearing	883,051		892,327		902,335		910,913		914,660
Total Colorado State Bank & Trust	1,484,829		1,468,327		1,419,398		1,439,037		1,328,166

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	March 31, 2017		Dec. 31, 2016		Sept. 30, 2016		June 30, 2016		March 31, 2016
Bank of Arizona:
Demand	342,854		366,755		418,718		396,837		341,828
Interest-bearing:
Transaction	180,254		305,099		303,750		302,297		313,825
Savings	3,858		2,973		2,959		3,198		3,277
Time	26,112		27,765		27,935		28,681		29,053
Total interest-bearing	210,224		335,837		334,644		334,176		346,155
Total Bank of Arizona	553,078		702,592		753,362		731,013		687,983

Mobank:
Demand	514,278		508,418		235,445		240,755		221,812
Interest-bearing:
Transaction	406,105		513,176		86,526		112,371		146,405
Savings	13,424		12,679		1,645		1,656		1,619
Time	34,242		42,152		11,945		11,735		31,502
Total interest-bearing	453,771		568,007		100,116		125,762		179,526
Total Mobank	968,049		1,076,425		335,561		366,517		401,338
Total BOK Financial deposits	$	22,575,359	$	22,748,095	$	21,095,504	$	20,759,802	$	20,418,320

In addition to deposits, liquidity is provided primarily by federal funds purchased, securities repurchase agreements and Federal Home Loan Bank borrowings. Federal funds purchased consist primarily of unsecured, overnight funds acquired from other financial institutions. Funds are primarily purchased from bankers’ banks and Federal Home Loan banks from across the country. There were no wholesale federal funds purchased outstanding at March 31, 2017. Securities repurchase agreements generally mature within 90 days and are secured by certain available for sale securities. Federal Home Loan Bank borrowings are generally short term and are secured by a blanket pledge of eligible collateral (generally unencumbered U.S. Treasury and agency mortgage-backed securities, 1-4 family residential mortgage loans, multifamily and other qualifying commercial real estate loans). Amounts borrowed from the Federal Home Loan Bank of Topeka averaged $5.7 billion during the quarter, compared to $6.0 billion in the fourth quarter of 2016.

At March 31, 2017, the estimated unused credit available to BOKF, NA from collateralized sources was approximately $6.2 billion.

A summary of other borrowings for BOK Financial on a consolidated basis follows in Table 25.

- 38 -

Table 25 -- Borrowed Funds

(In thousands)



			Three Months Ended March 31, 2017								Three Months Ended December 31, 2016
	Mar 31, 2017		Average Balance During the Quarter		Rate		Maximum Outstanding At Any Month End During the Quarter		Dec 31, 2016		Average Balance During the Quarter		Rate		Maximum Outstanding At Any Month End During the Quarter

Parent Company and Other Non-Bank Subsidiaries:
Trust preferred debt	$	7,217	$	7,217	3.32	%	$	7,217	$	7,217	$	2,432	3.27	%	$	7,217
Other	847		913		10.83	%	$	871	1,092		1,082		10.60	%	1,092
Total other borrowings	8,064		8,130		5.64	%			8,309		3,514		12.57	%
Subordinated debentures	144,649		144,644		5.68	%	$	144,649	144,640		144,635		5.51	%	144,640
Total parent company and other non-bank subsidiaries	152,713		152,774		5.68	%			152,949		148,149		5.68	%

BOKF, NA:
Funds purchased	47,629		55,508		0.47	%	50,154		57,929		62,004		0.28	%	57,929
Repurchase agreements	508,352		523,561		0.02	%	536,094		668,661		560,891		0.02	%	668,661
Other borrowings:
Federal Home Loan Bank advances	5,200,000		5,691,111		0.80	%	5,700,000		4,800,000		6,034,783		0.58	%	5,900,000
GNMA repurchase liability	15,532		23,392		4.61	%	24,139		22,471		18,168		4.60	%	22,471
Other	15,351		15,322		2.41	%	15,351		15,292		15,685		2.36	%	15,797
Total other borrowings	5,230,883		5,729,825		0.82	%			4,837,763		6,068,636		0.59	%
Total BOKF, NA	5,786,864		6,308,894		0.75	%			5,564,353		6,691,531		0.55	%

Total Other Borrowed Funds	$	5,939,577	$	6,461,668	0.87	%			$	5,717,302	$	6,839,680	0.66	%

BOKF, NA also has a liability related to the repurchase of certain delinquent residential mortgage loans previously sold in GNMA mortgage pools. Interest is payable monthly at rates contractually due to investors.

Parent Company

On June 27, 2016, the parent company completed the issuance and sale of $150 million of subordinated debt that will mature on June 30, 2056. Interest on this debt bears interest at the rate of 5.375%, payable quarterly. On June 30, 2021, the parent company will have the option to redeem the debt at the principal amount plus accrued interest, subject to regulatory approval.

At March 31, 2017, cash and interest-bearing cash and cash equivalents held by the parent company totaled $147 million. The primary sources of liquidity for BOK Financial are cash on hand and dividends from BOKF, NA. Dividends from the bank are limited by various banking regulations to net profits, as defined, for the year plus retained profits for the two preceding years. Dividends are further restricted by minimum capital requirements. At March 31, 2017, based upon the most restrictive limitations as well as management's internal capital policy, the bank could declare up to $292 million of dividends without regulatory approval. Dividend constraints may be alleviated through increases in retained earnings, capital issuances or changes in risk weighted assets. Future losses or increases in required regulatory capital at the bank could affect its ability to pay dividends to the parent company.

- 39 -

Our equity capital at March 31, 2017 was $3.4 billion, an increase of $65 million over December 31, 2016. Net income less cash dividends paid increased equity $60 million during the first quarter of 2017. Accumulated other comprehensive income decreased $5.7 million primarily related to the decrease in net unrealized losses on available for sale securities due to changes in interest rates. Capital is managed to maximize long-term value to the shareholders. Factors considered in managing capital include projections of future earnings, asset growth and acquisition strategies, and regulatory and debt covenant requirements. Capital management may include subordinated debt issuance, share repurchase and stock and cash dividends.

On October 27, 2015, the board of directors authorized the Company to purchase up to five million common shares, subject to market conditions, securities law and other regulatory compliance limitations. As of March 31, 2017, a cumulative total of 2,879,243 shares have been repurchased under this authorization. No shares were repurchased in the first quarter of 2017.

BOK Financial and BOKF, NA are subject to various capital requirements administered by federal agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that could have a material impact on operations. These capital requirements include quantitative measures of assets, liabilities and off-balance sheet items. The capital standards are also subject to qualitative judgments by the regulators.

Effective January 1, 2015 for BOK Financial, regulatory capital rules establish a 7 percent threshold for the common equity Tier 1 ratio consisting of a minimum level plus capital conservation buffer. The Company has elected to exclude unrealized gains and losses from available for sale securities from its calculation of Tier 1 capital, consistent with the treatment under previous capital rules.

A summary of minimum capital requirements, including capital conservation buffer follows in Table 26. A bank which falls below these levels, including the capital conservation buffer, would be subject to regulatory restrictions on capital distributions (including but not limited to dividends and share repurchases) and executive bonus payments.

The capital ratios for BOK Financial on a consolidated basis are presented in Table 26.

Table 26 -- Capital Ratios



	Minimum Capital Requirement		Capital Conservation Buffer¹		Minimum Capital Requirement Including Capital Conservation Buffer		March 31, 2017		Dec. 31, 2016		March 31, 2016
Risk-based capital:
Common equity Tier 1	4.50	%	2.50	%	7.00	%	11.60	%	11.21	%	12.00	%
Tier 1 capital	6.00	%	2.50	%	8.50	%	11.60	%	11.21	%	12.00	%
Total capital	8.00	%	2.50	%	10.50	%	13.26	%	12.81	%	13.21	%
Tier 1 Leverage	4.00	%	N/A		4.00	%	8.89	%	8.72	%	9.12	%

Average total equity to average assets							10.10	%	10.12	%	10.55	%
Tangible common equity ratio							8.88	%	8.61	%	9.34	%


¹	Effective January 1, 2016

Capital resources of financial institutions are also regularly measured by the tangible common shareholders’ equity ratio. Tangible common shareholders’ equity is shareholders’ equity as defined by generally accepted accounting principles in the United States of America (“GAAP”) less intangible assets and equity which does not benefit common shareholders. Equity that does not benefit common shareholders includes preferred equity. This non-GAAP measure is a valuable indicator of a financial institution’s capital strength since it eliminates intangible assets from shareholders’ equity and retains the effect of unrealized losses on securities and other components of accumulated other comprehensive income in shareholders’ equity.

Table 27 provides a reconciliation of the non-GAAP measures with financial measures defined by GAAP.

- 40 -

Table 27 -- Non-GAAP Measure

(Dollars in thousands)



	March 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			March 31, 2016
Tangible common equity ratio:
Total shareholders' equity	$	3,341,744		$	3,274,854		$	3,398,311		$	3,368,833		$	3,321,555
Less: Goodwill and intangible assets, net	488,294			495,830			424,716			426,111			428,733
Tangible common equity	2,853,450			2,779,024			2,973,595			2,942,722			2,892,822
Total assets	32,628,932			32,772,281			32,779,231			31,970,450			31,413,945
Less: Goodwill and intangible assets, net	488,294			495,830			424,716			426,111			428,733
Tangible assets	$	32,140,638		$	32,276,451		$	32,354,515		$	31,544,339		$	30,985,212
Tangible common equity ratio	8.88		%	8.61		%	9.19		%	9.33		%	9.34		%

On October 20, 2016, BOK Financial published the results of its annual capital stress test. In accordance with the Dodd-Frank Act, the Federal Reserve must publish regulations that require bank holding companies with $10 billion to $50 billion in assets to perform annual capital stress tests. The Dodd-Frank Act Stress Test ("DFAST") is a forward-looking exercise under which the Company and its banking subsidiary estimate the impact of a hypothetical severely adverse macroeconomic scenario provided by the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency on its financial condition and regulatory capital ratios over a nine-quarter time horizon. Under the scenario provided by the regulatory agencies, all capital ratio measures remain above minimum regulatory thresholds. Additional information concerning the annual stress test may be found on the Company's Investor Relations page at www.bokf.com under the "Presentations" tab. The results of subsequent capital stress tests may alter the Company's future capital management plans.

Off-Balance Sheet Arrangements

See Note 7 to the Consolidated Financial Statements for a discussion of the Company’s significant off-balance sheet commitments.

Market Risk

Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange rates, commodity prices or equity prices. Financial instruments that are subject to market risk can be classified either as held for trading or held for purposes other than trading. Market risk excludes changes in fair value due to credit of the individual issuers of financial instruments.

BOK Financial is subject to market risk primarily through the effect of changes in interest rates on both its assets held for purposes other than trading and trading assets. The effects of other changes, such as foreign exchange rates, commodity prices or equity prices do not pose significant market risk to BOK Financial. BOK Financial has no material investments in assets that are affected by changes in foreign exchange rates or equity prices. Energy and agricultural product derivative contracts, which are affected by changes in commodity prices, are matched against offsetting contracts as previously discussed.

The Asset/Liability Committee is responsible for managing market risk in accordance with policy limits established by the Board of Directors. The Committee monitors projected variation in net interest revenue, net income and economic value of equity due to specified changes in interest rates. These limits also set maximum levels for short-term borrowings, short-term assets, public funds and brokered deposits and establish minimum levels for unpledged assets, among other things. Further, the Board approved market risk limits for fixed income trading, mortgage pipeline and mortgage servicing assets inclusive of economic hedge benefits. Compliance is reviewed monthly. Deviations from the Board approved limits require Board escalation and approval.

The simulations used to manage market risk are based on numerous assumptions regarding the effects of changes in interest rates on the timing and extent of re-pricing characteristics, future cash flows and customer behavior. These assumptions are inherently uncertain and, as a result, models cannot precisely estimate or precisely predict the impact of higher or lower interest rates. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes, market conditions and management strategies, among other factors.

- 41 -

Interest Rate Risk – Other than Trading

As previously noted in the Net Interest Revenue section of this report, management has implemented strategies to manage the Company’s balance sheet to have relatively limited exposure to changes in interest rates over a twelve-month period. The effectiveness of these strategies in managing the overall interest rate risk is evaluated through the use of an asset/liability model. BOK Financial performs a sensitivity analysis to identify more dynamic interest rate risk exposures, including embedded option positions, on net interest revenue. A simulation model is used to estimate the effect of changes in interest rates on our performance across multiple interest rate scenarios. While the current internal policy limit for net interest revenue variation is a maximum decline of 5% due to a 200 basis point change in market interest rates over twelve months, the results of a 200 basis point decrease in interest rates in the current low-rate environment are not meaningful. We report the effect of a 50 basis point decrease in the interim.

The Company’s primary interest rate exposures include the Federal Funds rate, which affects short-term borrowings, and the prime lending rate and LIBOR, which are the basis for much of the variable rate loan pricing. Additionally, residential mortgage rates directly affect the prepayment speeds for residential mortgage-backed securities and mortgage servicing rights. Derivative financial instruments and other financial instruments used for purposes other than trading are included in this simulation. In addition, the impact on the level and composition of demand deposit accounts and other core deposit balances resulting from a significant increase in short-term market interest rates and the overall interest rate environment is likely to be material. The simulation incorporates assumptions regarding the effects of such changes based on a combination of historical analysis and expected behavior. The impact of planned growth and new business activities is factored into the simulation model.

Table 28 -- Interest Rate Sensitivity

(Dollars in thousands)



	200 bp Increase						50 bp Decrease
	March 31,						March 31,
	2017			2016			2017			2016
Anticipated impact over the next twelve months on net interest revenue	$	(4,411	)	$	(2,153	)	$	(18,474	)	$	(24,184	)
	(0.53		)%	(0.28		)%	(2.20		)%	(3.14		)%

BOK Financial is also subjected to market risk through changes in the fair value of mortgage servicing rights. Changes in the fair value of mortgage servicing rights are highly dependent on changes in primary mortgage rates offered to borrowers, intermediate-term interest rates that affect the value of custodial funds, and assumptions about servicing revenues, servicing costs and discount rates. As primary mortgage rates increase, prepayment speeds slow and the value of our mortgage servicing rights increases. As primary mortgage rates fall, prepayment speeds increase and the value of our mortgage servicing rights decreases.

We maintain a portfolio of financial instruments, which may include residential mortgage-backed securities issued by U.S. government agencies, U.S. Treasury securities and interest rate derivative contracts held as an economic hedge of the changes in the fair value of our mortgage servicing rights. Composition of this portfolio will change based on our assessment of market risk. Changes in the fair value of residential mortgage-backed securities are highly dependent on changes in secondary mortgage rates required by investors, and interest rate derivative contracts are highly dependent on changes in other market interest rates. While primary and secondary mortgage rates generally move in the same direction, the spread between them may widen and narrow due to market conditions and government intervention. Changes in the forward-looking spread between the primary and secondary rates can cause significant earnings volatility.

Management performs a stress test to measure market risk due to changes in interest rates inherent in its MSR portfolio and hedges. The stress test shocks applicable interest rates up and down 50 basis points and calculates an estimated change in fair value, net of economic hedging activity, that may result. The Board has approved a $20 million market risk limit for mortgage servicing rights, net of economic hedges.

- 42 -

Table 29 -- MSR Asset and Hedge Sensitivity Analysis

(Dollars in thousands)



	Year Ended March 31
	2017						2016
	Up 50 bp			Down 50 bp			Up 50 bp			Down 50 bp
Average	$	(2,851	)	$	(3,314	)	$	5,425		$	(10,581	)
Low	(114		)	491			12,963			1,213
High	(5,274		)	(6,189		)	(1,275		)	(23,199		)
Period End	(4,423		)	(4,504		)	(1,275		)	(13,920		)

Trading Activities

The Company bears market risk by originating residential mortgages held for sale (RMHFS). RMHFS are generally outstanding for 60 to 90 days which represents the typical period from commitment to originate a loan to sale of the closed loan to an investor. Primary mortgage interest rate changes during this period affect the value of RMHFS commitments and loans. We use forward sale contracts to mitigate market risk on all closed mortgage loans held for sale and on an estimate of mortgage loan commitments that are expected to result in closed loans.

A variety of methods are used to monitor market risk of mortgage origination activities. These methods include daily marking of all positions to market value, independent verification of inventory pricing, and revenue sensitivity limits.

Management performs a stress test to measure market risk due to changes in interest rates inherent in the mortgage production pipeline. The stress test shocks applicable interest rates up and down 50 basis points and calculates an estimated change in fair value, net of economic hedging activity that may result. The Board has approved a $7 million market risk limit for the mortgage production pipeline, net of forward sale contracts.

Table 30 -- Mortgage Pipeline Sensitivity Analysis

(Dollars in thousands)



	Year Ended March 31
	2017						2016
	Up 50 bp			Down 50 bp			Up 50 bp			Down 50 bp
Average	$	253		$	(1,215	)	$	(4,001	)	$	(434	)
Low	991			(398		)	(1,427		)	1,815
High	(456		)	(1,787		)	(6,326		)	(2,953		)
Period End	193			(1,656		)	(6,326		)	510

BOK Financial enters into trading activities both as an intermediary for customers and for its own account. As an intermediary, we take positions in securities, generally residential mortgage-backed securities, government agency securities and municipal bonds. These securities are purchased for resale to customers, which include individuals, corporations, foundations and financial institutions. On a limited basis, we may also take trading positions in U.S. Treasury securities, residential mortgage-backed securities, and municipal bonds to enhance returns on its securities portfolios. Both of these activities involve interest rate, liquidity and price risk. BOK Financial has an insignificant exposure to foreign exchange risk and does not take positions in commodity derivatives.

A variety of methods are used to monitor the interest rate risk of trading activities. These methods include daily marking of all positions to market value, independent verification of inventory pricing, and position limits for each trading activity. Economic hedges in either the futures or cash markets may be used to reduce the risk associated with some trading programs.

Management performs a stress test to measure market risk from changes in interest rates on its trading portfolio. The stress test shocks applicable interest rates up and down 50 basis points and calculates an estimated change in fair value, net of economic hedging activity that may result. The Board has approved an $8 million market risk limit for the trading portfolio, net of economic hedges.

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Table 31 -- BOKFS Trading Sensitivity Analysis

(Dollars in thousands)



	Year Ended March 31
	2017					2016
	Up 50 bp			Down 50 bp		Up 50 bp			Down 50 bp
Average	$	(2,643	)	$	2,912	$	(2,567	)	$	2,312
Low	86			5,210		146			5,274
High	(4,386		)	2		(5,607		)	(107		)
Period End	(3,222		)	3,364		(3,545		)	3,364

Controls and Procedures

As required by Rule 13a-15(b), BOK Financial’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation as of the end of the period covered by their report, of the effectiveness of the Company’s disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report. As required by Rule 13a-15(d), BOK Financial’s management, including the Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of the Company’s internal controls over financial reporting to determine whether any changes occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting. Based on that evaluation, there has been no such change during the quarter covered by this report.

Forward-Looking Statements

This report contains forward-looking statements that are based on management’s beliefs, assumptions, current expectations, estimates, and projections about BOK Financial, the financial services industry and the economy in general. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “plans,” “projects,” “will,” “intends,” variations of such words and similar expressions are intended to identify such forward-looking statements. Management judgments relating to and discussion of the provision and allowance for credit losses, allowance for uncertain tax positions, accruals for loss contingencies and valuation of mortgage servicing rights involve judgments as to expected events and are inherently forward-looking statements. Assessments that BOK Financial’s acquisitions and other growth endeavors will be profitable are necessary statements of belief as to the outcome of future events, based in part on information provided by others that BOK Financial has not independently verified. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what is expressed, implied, or forecasted in such forward-looking statements. Internal and external factors that might cause such a difference include, but are not limited to changes in commodity prices, interest rates and interest rate relationships, demand for products and services, the degree of competition by traditional and nontraditional competitors, changes in banking regulations, tax laws, prices, levies and assessments, the impact of technological advances, and trends in customer behavior as well as their ability to repay loans. BOK Financial and its affiliates undertake no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.

- 44 -



Consolidated Statements of Earnings (Unaudited)
(In thousands, except share and per share data)	Three Months Ended
	March 31,
Interest revenue	2017			2016
Loans	$	160,895		$	139,112
Residential mortgage loans held for sale	1,836			2,700
Trading securities	5,183			524
Investment securities	4,171			4,387
Available for sale securities	43,372			45,467
Fair value option securities	2,380			2,589
Restricted equity securities	4,309			4,311
Interest-bearing cash and cash equivalents	4,244			2,706
Total interest revenue	226,390			201,796
Interest expense
Deposits	11,354			10,542
Borrowed funds	11,829			7,972
Subordinated debentures	2,025			710
Total interest expense	25,208			19,224
Net interest revenue	201,182			182,572
Provision for credit losses	—			35,000
Net interest revenue after provision for credit losses	201,182			147,572
Other operating revenue
Brokerage and trading revenue	33,623			32,341
Transaction card revenue	32,127			32,354
Fiduciary and asset management revenue	38,631			32,056
Deposit service charges and fees	23,030			22,542
Mortgage banking revenue	25,191			32,100
Other revenue	11,752			11,904
Total fees and commissions	164,354			163,297
Other gains, net	3,627			1,560
Gain (loss) on derivatives, net	(450		)	7,138
Gain (loss) on fair value option securities, net	(1,140		)	9,443
Change in fair value of mortgage servicing rights	1,856			(27,988		)
Gain on available for sale securities, net	2,049			3,964
Total other operating revenue	170,296			157,414
Other operating expense
Personnel	136,425			133,562
Business promotion	6,717			5,696
Professional fees and services	12,379			11,759
Net occupancy and equipment	21,624			18,766
Insurance	6,404			7,265
Data processing and communications	33,940			32,017
Printing, postage and supplies	3,851			3,907
Net losses (gains) and operating expenses of repossessed assets	1,009			1,070
Amortization of intangible assets	1,802			1,159
Mortgage banking costs	13,003			12,330
Other expense	7,557			15,039
Total other operating expense	244,711			242,570
Net income before taxes	126,767			62,416
Federal and state income taxes	38,103			21,428
Net income	88,664			40,988
Net income (loss) attributable to non-controlling interests	308			(1,576		)
Net income attributable to BOK Financial Corporation shareholders	$	88,356		$	42,564
Earnings per share:
Basic	$	1.35		$	0.64
Diluted	$	1.35		$	0.64
Average shares used in computation:
Basic	64,715,964			65,296,541
Diluted	64,783,737			65,331,428
Dividends declared per share	$	0.44		$	0.43

See accompanying notes to consolidated financial statements.

- 45 -



Consolidated Statements of Comprehensive Income (Unaudited)
(In thousands, except share and per share data)
	Three Months Ended
	March 31,
	2017			2016
Net income	$	88,664		$	40,988
Other comprehensive income before income taxes:
Net change in unrealized gain (loss)	11,411			121,091
Reclassification adjustments included in earnings:
Interest revenue, Investment securities, Taxable securities	—			(69		)
Gain on available for sale securities, net	(2,049		)	(3,964		)
Other comprehensive income before income taxes	9,362			117,058
Federal and state income taxes	3,616			45,536
Other comprehensive income, net of income taxes	5,746			71,522
Comprehensive income	94,410			112,510
Comprehensive income (loss) attributable to non-controlling interests	308			(1,576		)
Comprehensive income attributable to BOK Financial Corp. shareholders	$	94,102		$	114,086

See accompanying notes to consolidated financial statements.

- 46 -

Consolidated Balance Sheets (In thousands, except share data)

	Mar. 31, 2017			Dec. 31, 2016			Mar. 31, 2016
	(Unaudited)			(Footnote 1)			(Unaudited)
Assets
Cash and due from banks	$	546,575		$	620,846		$	481,510
Interest-bearing cash and cash equivalents	2,220,640			1,916,651			1,831,162
Trading securities	677,156			337,628			279,539
Investment securities (fair value: March 31, 2017 – $540,663; December 31, 2016 – $565,493 ; March 31, 2016 – $609,743)	519,402			546,145			576,047
Available for sale securities	8,437,291			8,676,829			8,886,036
Fair value option securities	441,714			77,046			418,887
Restricted equity securities	283,936			307,240			314,590
Residential mortgage loans held for sale	248,707			301,897			332,040
Loans	16,991,906			16,989,660			16,022,566
Allowance for loan losses	(248,710		)	(246,159		)	(233,156		)
Loans, net of allowance	16,743,196			16,743,501			15,789,410
Premises and equipment, net	325,546			325,849			311,161
Receivables	394,394			772,952			167,209
Goodwill	445,738			448,899			383,789
Intangible assets, net	42,556			46,931			44,944
Mortgage servicing rights	249,403			247,073			196,055
Real estate and other repossessed assets, net of allowance (March 31, 2017 – $9,065; December 31, 2016 – $9,562; March 31, 2016 – $11,913)	42,726			44,287			29,896
Derivative contracts, net	304,727			689,872			790,146
Cash surrender value of bank-owned life insurance	310,537			308,430			305,510
Receivable on unsettled securities sales	9,921			7,188			5,640
Other assets	384,767			353,017			270,374
Total assets	$	32,628,932		$	32,772,281		$	31,413,945

Liabilities and Equity
Liabilities:
Noninterest-bearing demand deposits	$	9,506,573		$	9,235,720		$	7,950,675
Interest-bearing deposits:
Transaction	10,359,214			10,865,105			9,709,766
Savings	465,724			425,470			416,505
Time	2,243,848			2,221,800			2,341,374
Total deposits	22,575,359			22,748,095			20,418,320
Funds purchased	47,629			57,929			62,755
Repurchase agreements	508,352			668,661			630,101
Other borrowings	5,238,947			4,846,072			5,633,862
Subordinated debentures	144,649			144,640			226,385
Accrued interest, taxes and expense	140,235			146,704			148,711
Derivative contracts, net	276,422			664,531			705,578
Due on unsettled securities purchases	137,069			6,508			19,508
Other liabilities	189,376			182,784			212,460
Total liabilities	29,258,038			29,465,924			28,057,680
Shareholders' equity:
Common stock ($.00006 par value; 2,500,000,000 shares authorized; shares issued and outstanding: March 31, 2017 – 75,080,768; December 31, 2016 – 74,993,407; March 31, 2016 – 74,800,772)	4			4			4
Capital surplus	1,009,360			1,006,535			987,046
Retained earnings	2,883,042			2,823,334			2,718,301
Treasury stock (shares at cost: March 31, 2017 – 9,672,749; December 31, 2016 – 9,655,975; March 31, 2016 – 8,645,669)	(545,441		)	(544,052		)	(476,905		)
Accumulated other comprehensive income (loss)	(5,221		)	(10,967		)	93,109
Total shareholders’ equity	3,341,744			3,274,854			3,321,555
Non-controlling interests	29,150			31,503			34,710
Total equity	3,370,894			3,306,357			3,356,265
Total liabilities and equity	$	32,628,932		$	32,772,281		$	31,413,945

See accompanying notes to consolidated financial statements.

- 47 -

Consolidated Statements of Changes in Equity (Unaudited) (In thousands)

	Common Stock			Capital Surplus		Retained Earnings			Treasury Stock				Accumulated Other Comprehensive Income			Total Shareholders’ Equity			Non- Controlling Interests			Total Equity
	Shares	Amount		Capital Surplus		Retained Earnings			Shares	Amount			Accumulated Other Comprehensive Income			Total Shareholders’ Equity			Non- Controlling Interests			Total Equity

Balance, Dec. 31, 2015	74,530	$	4	$	982,009	$	2,704,121		8,636	$	(477,165	)	$	21,587		$	3,230,556		$	37,083		$	3,267,639
Net income (loss)	—	—		—		42,564			—	—			—			42,564			(1,576		)	40,988
Other comprehensive income	—	—		—		—			—	—			71,522			71,522			—			71,522
Share-based compensation plans:
Stock options exercised	24	—		1,191		—			—	—			—			1,191			—			1,191
Non-vested shares awarded, net	247	—		—		—			—	—			—			—			—			—
Vesting of non-vested shares	—	—		—		—			10	260			—			260			—			260
Tax effect from equity compensation, net	—	—		1,816		—			—	—			—			1,816			—			1,816
Share-based compensation	—	—		2,030		—			—	—			—			2,030			—			2,030
Cash dividends on common stock	—	—		—		(28,384		)	—	—			—			(28,384		)	—			(28,384		)
Capital calls and distributions, net	—	—		—		—			—	—			—			—			(797		)	(797		)

Balance, March 31, 2016	74,801	$	4	$	987,046	$	2,718,301		8,646	$	(476,905	)	$	93,109		$	3,321,555		$	34,710		$	3,356,265

Balance, Dec. 31, 2016	74,993	$	4	$	1,006,535	$	2,823,334		9,656	$	(544,052	)	$	(10,967	)	$	3,274,854		$	31,503		$	3,306,357
Net income (loss)	—	—		—		88,356			—	—			—			88,356			308			88,664
Other comprehensive income	—	—		—		—			—	—			5,746			5,746			—			5,746
Share-based compensation plans:
Stock options exercised	27	—		1,222		—			—	—			—			1,222			—			1,222
Non-vested shares awarded, net	61	—		—		—			—	—			—			—			—			—
Vesting of non-vested shares	—	—		—		—			17	(1,389		)	—			(1,389		)	—			(1,389		)
Share-based compensation	—	—		1,603		—			—	—			—			1,603			—			1,603
Cash dividends on common stock	—	—		—		(28,648		)	—	—			—			(28,648		)	—			(28,648		)
Capital calls and distributions, net	—	—		—		—			—	—			—			—			(2,661		)	(2,661		)

Balance, March 31, 2017	75,081	$	4	$	1,009,360	$	2,883,042		9,673	$	(545,441	)	$	(5,221	)	$	3,341,744		$	29,150		$	3,370,894

See accompanying notes to consolidated financial statements.

- 48 -

Consolidated Statements of Cash Flows (Unaudited) (in thousands)

	Three Months Ended
	March 31,
	2017			2016
Cash Flows From Operating Activities:
Net income	$	88,664		$	40,988
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for credit losses	—			35,000
Change in fair value of mortgage servicing rights due to market changes	(1,856		)	27,988
Change in the fair value of mortgage servicing rights due to loan runoff	7,962			8,144
Net unrealized gains from derivative contracts	1,093			(13,788		)
Share-based compensation	1,603			2,030
Depreciation and amortization	12,516			10,763
Net amortization of securities discounts and premiums	8,520			11,213
Net realized gains on financial instruments and other net gains	(2,308		)	(4,035		)
Net gain on mortgage loans held for sale	(12,457		)	(10,779		)
Mortgage loans originated for sale	(711,019		)	(1,244,015		)
Proceeds from sale of mortgage loans held for sale	772,752			1,239,391
Capitalized mortgage servicing rights	(8,436		)	(13,582		)
Change in trading and fair value option securities	(704,860		)	(132,436		)
Change in receivables	379,310			(3,264		)
Change in other assets	(6,805		)	(841		)
Change in accrued interest, taxes and expense	(6,469		)	(13,132		)
Change in other liabilities	13,059			67,409
Net cash provided by (used in) operating activities	(168,731		)	7,054
Cash Flows From Investing Activities:
Proceeds from maturities or redemptions of investment securities	39,651			32,308
Proceeds from maturities or redemptions of available for sale securities	396,410			335,565
Purchases of investment securities	(14,392		)	(12,189		)
Purchases of available for sale securities	(391,834		)	(536,078		)
Proceeds from sales of available for sale securities	240,010			469,382
Change in amount receivable on unsettled securities transactions	(2,733		)	34,553
Loans originated, net of principal collected	16,369			(92,648		)
Net payments on derivative asset contracts	361,996			(155,263		)
Acquisitions, net of cash acquired	—			(7,700		)
Proceeds from disposition of assets	103,521			38,903
Purchases of assets	(62,899		)	(75,893		)
Net cash provided by investing activities	686,099			30,940
Cash Flows From Financing Activities:
Net change in demand deposits, transaction deposits and savings accounts	(194,784		)	(605,148		)
Net change in time deposits	22,048			(64,690		)
Net change in other borrowed funds	191,785			246,609
Net proceeds on derivative liability contracts	(365,752		)	154,506
Net change in derivative margin accounts	(42,693		)	(75,876		)
Change in amount due on unsettled security transactions	130,561			2,611
Issuance of common and treasury stock, net	(167		)	1,451
Dividends paid	(28,648		)	(28,384		)
Net cash used in financing activities	(287,650		)	(368,921		)
Net increase (decrease) in cash and cash equivalents	229,718			(330,927		)
Cash and cash equivalents at beginning of period	2,537,497			2,643,599
Cash and cash equivalents at end of period	$	2,767,215		$	2,312,672

Supplemental Cash Flow Information:
Cash paid for interest	$	26,057		$	19,934
Cash paid for taxes	$	2,602		$	6,004
Net loans and bank premises transferred to repossessed real estate and other assets	$	909		$	2,211
Residential mortgage loans guaranteed by U.S. government agencies that became eligible for repurchase during the period	$	30,481		$	28,594
Conveyance of other real estate owned guaranteed by U.S. government agencies	$	11,704		$	15,147

See accompanying notes to consolidated financial statements.

- 49 -

Notes to Consolidated Financial Statements (Unaudited)

(1) Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements of BOK Financial Corporation (“BOK Financial” or “the Company”) have been prepared in accordance with accounting principles for interim financial information generally accepted in the United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

The unaudited consolidated financial statements include accounts of BOK Financial and its subsidiaries, principally BOKF, NA (“the Bank”), BOK Financial Securities, Inc., The Milestone Group, Inc. and Cavanal Hill Investment Management Inc. Operating divisions of the Bank include Bank of Albuquerque, Bank of Arizona, Bank of Arkansas, Bank of Oklahoma, Bank of Texas, Colorado State Bank and Trust, Mobank, BOK Financial Mortgage and the TransFund electronic funds network.

Certain reclassifications have been made to conform to the current period presentation.

The financial information should be read in conjunction with BOK Financial’s 2016 Form 10-K filed with the Securities and Exchange Commission, which contains audited financial statements. Amounts presented as of December 31, 2016 have been derived from the audited financial statements included in BOK Financial’s 2016 Form 10-K but do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Operating results for the three-month period ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

Newly Adopted and Pending Accounting Policies

Financial Accounting Standards Board (“FASB”)

FASB Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09")

On May 28, 2014, the FASB issued ASU 2014-09 to clarify the principles for recognizing revenue by providing a more robust framework that will give greater consistency and comparability in revenue recognition practices. In the new framework, an entity recognizes revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for goods or services. The new model requires the identification of performance obligations included in contracts with customers, a determination of the transaction price and an allocation of the price to those performance obligations. The entity recognizes revenue when performance obligations are satisfied. ASU 2014-09 is effective for the Company for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Net interest revenue from financial assets and liabilities is explicitly excluded from the scope of ASU 2014-09. Management expects that most fees and commissions revenue will not be affected. The Company continues to evaluate the impact of ASU 2014-09 on Fiduciary and Asset Management Revenue and Transaction Card Revenue, which represents 18% of gross revenue and 39% of fees and commissions revenue for 2016. Timing of revenue recognition and gross versus net presentation may be affected. Management expects to adopt the standard in the first quarter of 2018 with a cumulative effect adjustment to opening retained earnings if such adjustment is significant.

FASB Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) ("ASU 2016-08")

On March 17, 2016, the FASB Issued ASU 2016-08 to amend the principal versus agent implementation guidance in ASU 2014-09. The ASU clarifies that an entity should evaluate whether it is the principal or the agent for each specified good or service promised in a contract with a customer. ASU 2016-08 is effective for the Company for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company is evaluating the impact the adoption of ASU 2016-08 will have on the Company's financial statements along with ASU 2014-09.

- 50 -

FASB Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing ("ASU 2016-10")

On April 14, 2016, the FASB issued ASU 2016-10 which amends certain sections of ASU 2014-09 related to identifying performance obligations and licensing implementation. ASU 2016-10 is effective for the Company for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company is evaluating the impact the adoption of ASU 2016-10 will have on the Company's financial statements along with ASU 2014-09.

FASB Accounting Standards Update No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients ("ASU 2016-12")

On May 9, 2016, the FASB issued ASU 2016-12, which amends certain aspects of the Board's new revenue standard, ASU 2014-09. The amendments clarify information regarding collectability, presentation of sales tax and other similar taxes collected from customers, non-cash consideration, contract modifications and completed contracts at transition, and transition disclosures. ASU 2016-12 is effective for the Company for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company is evaluating the impact the adoption of ASU 2016-12 will have on the Company's financial statements along with ASU 2014-09.

FASB Accounting Standards Update No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01")

On January 5, 2016, the FASB issued ASU 2016-01 over the recognition and measurement of financial assets and liabilities. The update requires equity investments, in general, to be measured at fair value with changes in fair value recognized in earnings. It also eliminates the requirement to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost, requires entities to use the exit price notion when measuring fair value, requires an entity to present separately in other comprehensive income the portion of the total change in fair value of a liability resulting from a change in the instrument-specific credit risk when the fair value option has been elected, requires separate presentation of financial assets and liabilities by measurement category and form on the balance sheet or accompanying notes, clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets, and simplifies the impairment assessment of equity investments without readily determinable fair values. The ASU is effective for the Company for interim and annual periods beginning after December 15, 2017. Upon adoption, unrealized gains and losses from equity securities will be reclassified from other comprehensive income to retained earnings. At March 31, 2017, the Company had $3.1 million of unrealized gains included in accumulated other comprehensive income.

FASB Accounting Standards Update No. 2016-02, Leases (Topic 842) ("ASU 2016-02")

On February 25, 2016, the FASB issued ASU 2016-02 to increase transparency and comparability by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. Lessees will be required to recognize an obligation for future lease payments measured on a discounted basis and a right-of-use asset. The ASU is effective for the Company for interim and annual periods beginning after December 15, 2018 and requires transition through a modified retrospective approach for leases existing at or entered into after January 1, 2017. The Company is evaluating the impact the adoption of ASU 2016-02 will have on the Company's financial statements.

FASB Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09")

On March 30, 2016, the FASB issued ASU 2016-09 to simplify multiple aspects of accounting for employee share-based payment transactions including accounting income taxes, forfeitures, and statutory tax withholding requirements. The ASU became effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual reporting periods. Implementation of ASU 2016-09 decreased tax expense $3.9 million in the first quarter of 2017.

- 51 -

FASB Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Assets Measured at Amortized Cost ("ASU 2016-13")

On June 16, 2016, the FASB issued ASU 2016-13 in order to provide more timely recording of credit losses on loans and other financial instruments. The ASU adds an impairment model (known as the current expected credit loss ("CECL") model) that is based on expected credit losses rather than incurred credit losses. It requires measurement of all expected credit losses for financial assets carried at amortized cost, including loans and investment securities, based on historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13 also changes the recognition of other-than-temporary impairment of available for sale securities to an allowance methodology from a direct write-down methodology. ASU 2016-13 will be effective for the Company for annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for annual reporting periods beginning after December 15, 2018. ASU 2016-13 will be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is evaluating the impact the adoption of ASU 2016-13 will have on the Company's financial statements.

FASB Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15")

On August 26, 2016, the FASB issued ASU 2016-15, which amends guidance in ASC 230 on the classification of certain cash receipts and payments in the statement of cash flows. The amendments address eight cash flow issues. ASU 2016-15 is effective for the Company for interim and annual reporting periods beginning after December 15, 2017. Entities generally must apply the guidance retrospectively to all periods presented. Adoption of ASU 2016-15 did not have a material impact on the Company's financial statements.

- 52 -

(2) Securities

Trading Securities

The fair value and net unrealized gain (loss) included in trading securities is as follows (in thousands):



	March 31, 2017					December 31, 2016					March 31, 2016
	Fair Value		Net Unrealized Gain (Loss)			Fair Value		Net Unrealized Gain (Loss)			Fair Value		Net Unrealized Gain (Loss)
U.S. government agency debentures	$	18,365	$	(74	)	$	6,234	$	(4	)	$	59,733	$	71
U.S. government agency residential mortgage-backed securities	578,977		1,575			310,067		635			146,896		821
Municipal and other tax-exempt securities	45,114		171			14,427		50			58,797		546
Other trading securities	34,700		36			6,900		57			14,113		107
Total trading securities	$	677,156	$	1,708		$	337,628	$	738		$	279,539	$	1,545

Investment Securities

The amortized cost and fair values of investment securities are as follows (in thousands):



	March 31, 2017
	Amortized		Carrying		Fair		Gross Unrealized¹
	Cost		Value		Value		Gain		Loss
Municipal and other tax-exempt	$	298,811	$	298,811	$	301,128	$	2,872	$	(555	)
U.S. government agency residential mortgage-backed securities – Other	19,378		19,378		19,967		669		(80		)
Other debt securities	201,213		201,213		219,568		19,172		(817		)
Total investment securities	$	519,402	$	519,402	$	540,663	$	22,713	$	(1,452	)


¹	Gross unrealized gains and losses are not recognized in Accumulated Other Comprehensive Income "AOCI" in the Consolidated Balance Sheets.



	December 31, 2016
	Amortized		Carrying		Fair		Gross Unrealized¹
	Cost		Value		Value		Gain		Loss
Municipal and other tax-exempt	$	320,364	$	320,364	$	321,225	$	2,272	$	(1,411	)
U.S. government agency residential mortgage-backed securities – Other	20,777		20,777		21,473		767		(71		)
Other debt securities	205,004		205,004		222,795		18,115		(324		)
Total investment securities	$	546,145	$	546,145	$	565,493	$	21,154	$	(1,806	)


¹	Gross unrealized gains and losses are not recognized in AOCI in the Consolidated Balance Sheets.



	March 31, 2016
	Amortized		Carrying		Fair		Gross Unrealized¹
	Cost		Value		Value		Gain		Loss
Municipal and other tax-exempt	$	347,684	$	347,684	$	352,542	$	4,952	$	(94	)
U.S. government agency residential mortgage-backed securities – Other	25,323		25,366		26,794		1,428		—
Other debt securities	202,997		202,997		230,407		27,448		(38		)
Total investment securities	$	576,004	$	576,047	$	609,743	$	33,828	$	(132	)


¹	Gross unrealized gains and losses are not recognized in AOCI in the Consolidated Balance Sheets.

- 53 -

The amortized cost and fair values of investment securities at March 31, 2017, by contractual maturity, are as shown in the following table (dollars in thousands):



	Less than One Year			One to Five Years			Six to Ten Years			Over Ten Years			Total			Weighted Average Maturity²
Municipal and other tax-exempt:
Carrying value	$	89,707		$	151,490		$	12,314		$	45,300		$	298,811		3.49
Fair value	89,749			151,869			12,699			46,811			301,128
Nominal yield¹	1.62		%	2.16		%	4.73		%	5.02		%	2.54		%
Other debt securities:
Carrying value	14,536			45,388			125,874			15,415			201,213			6.75
Fair value	14,803			48,677			141,292			14,796			219,568
Nominal yield	3.74		%	4.98		%	5.81		%	4.46		%	5.37		%
Total fixed maturity securities:
Carrying value	$	104,243		$	196,878		$	138,188		$	60,715		$	500,024		4.80
Fair value	104,552			200,546			153,991			61,607			520,696
Nominal yield	1.91		%	2.81		%	5.71		%	4.88		%	3.68		%
Residential mortgage-backed securities:
Carrying value													$	19,378		³
Fair value													19,967
Nominal yield⁴													2.76		%
Total investment securities:
Carrying value													$	519,402
Fair value													540,663
Nominal yield													3.64		%


¹	Calculated on a taxable equivalent basis using a 39 percent effective tax rate.


²	Expected maturities may differ from contractual maturities, because borrowers may have the right to call or prepay obligations with or without penalty.


³	The average expected lives of residential mortgage-backed securities were 4.6 years based upon current prepayment assumptions.


⁴	The nominal yield on residential mortgage-backed securities is based upon prepayment assumptions at the purchase date. Actual yields earned may differ significantly based upon actual prepayments. See Quarterly Financial Summary - Unaudited for current yields on the investment securities portfolio.

- 54 -

Available for Sale Securities

The amortized cost and fair value of available for sale securities are as follows (in thousands):



	March 31, 2017
	Amortized		Fair		Gross Unrealized¹
	Cost		Value		Gain		Loss			OTTI²
U.S. Treasury	$	1,000	$	999	$	—	$	(1	)	$	—
Municipal and other tax-exempt	35,555		35,453		343		(445		)	—
Residential mortgage-backed securities:
U. S. government agencies:
FNMA	3,126,933		3,126,083		26,304		(27,154		)	—
FHLMC	1,401,752		1,399,011		7,836		(10,577		)	—
GNMA	851,498		847,822		2,499		(6,175		)	—
Total U.S. government agencies	5,380,183		5,372,916		36,639		(43,906		)	—
Private issue:
Alt-A loans	41,090		48,883		7,857		—			(64		)
Jumbo-A loans	52,282		59,743		7,475		(14		)	—
Total private issue	93,372		108,626		15,332		(14		)	(64		)
Total residential mortgage-backed securities	5,473,555		5,481,542		51,971		(43,920		)	(64		)
Commercial mortgage-backed securities guaranteed by U.S. government agencies	2,895,258		2,877,028		4,883		(23,113		)	—
Other debt securities	4,400		4,153		—		(247		)	—
Perpetual preferred stock	15,562		19,272		3,710		—			—
Equity securities and mutual funds	17,498		18,844		1,433		(87		)	—
Total available for sale securities	$	8,442,828	$	8,437,291	$	62,340	$	(67,813	)	$	(64	)

¹ Gross unrealized gain/loss recognized in AOCI in the consolidated balance sheet.

² Amounts represent unrealized loss that remains in AOCI after an other-than-temporary credit loss has been recognized in income.

- 55 -



	December 31, 2016
	Amortized		Fair		Gross Unrealized¹
	Cost		Value		Gain		Loss			OTTI²
U.S. Treasury	$	1,000	$	999	$	—	$	(1	)	$	—
Municipal and other tax-exempt	41,050		40,993		343		(400		)	—
Residential mortgage-backed securities:
U. S. government agencies:
FNMA	3,062,525		3,055,676		25,066		(31,915		)	—
FHLMC	1,534,451		1,531,116		8,475		(11,810		)	—
GNMA	878,375		873,594		2,259		(7,040		)	—
Total U.S. government agencies	5,475,351		5,460,386		35,800		(50,765		)	—
Private issue:
Alt-A loans	44,245		51,512		7,485		—			(218		)
Jumbo-A loans	56,947		64,023		7,092		(16		)	—
Total private issue	101,192		115,535		14,577		(16		)	(218		)
Total residential mortgage-backed securities	5,576,543		5,575,921		50,377		(50,781		)	(218		)
Commercial mortgage-backed securities guaranteed by U.S. government agencies	3,035,750		3,017,933		5,472		(23,289		)	—
Other debt securities	4,400		4,152		—		(248		)	—
Perpetual preferred stock	15,561		18,474		2,913		—			—
Equity securities and mutual funds	17,424		18,357		1,060		(127		)	—
Total available for sale securities	$	8,691,728	$	8,676,829	$	60,165	$	(74,846	)	$	(218	)

¹ Gross unrealized gain/loss recognized in AOCI in the consolidated balance sheet.

² Amounts represent unrealized loss that remains in AOCI after an other-than-temporary credit loss has been recognized in income.



	March 31, 2016
	Amortized		Fair		Gross Unrealized¹
	Cost		Value		Gain		Loss			OTTI²
U.S. Treasury	$	1,000	$	1,003	$	3	$	—		$	—
Municipal and other tax-exempt	51,197		51,308		814		(703		)	—
Residential mortgage-backed securities:
U. S. government agencies:
FNMA	2,983,694		3,051,280		68,479		(893		)	—
FHLMC	1,870,002		1,903,789		34,098		(311		)	—
GNMA	758,979		761,456		3,558		(1,081		)	—
Total U.S. government agencies	5,612,675		5,716,525		106,135		(2,285		)	—
Private issue:
Alt-A loans	54,288		59,049		5,434		—			(673		)
Jumbo-A loans	68,725		73,981		5,919		(59		)	(604		)
Total private issue	123,013		133,030		11,353		(59		)	(1,277		)
Total residential mortgage-backed securities	5,735,688		5,849,555		117,488		(2,344		)	(1,277		)
Commercial mortgage-backed securities guaranteed by U.S. government agencies	2,904,149		2,942,404		39,518		(1,263		)	—
Other debt securities	4,400		4,151		—		(249		)	—
Perpetual preferred stock	17,171		19,575		2,404		—			—
Equity securities and mutual funds	17,195		18,040		915		(70		)	—
Total available for sale securities	$	8,730,800	$	8,886,036	$	161,142	$	(4,629	)	$	(1,277	)


¹	Gross unrealized gain/loss recognized in AOCI in the consolidated balance sheet.


²	Amounts represent unrealized loss that remains in AOCI after an other-than-temporary credit loss has been recognized in income.

- 56 -

The amortized cost and fair values of available for sale securities at March 31, 2017, by contractual maturity, are as shown in the following table (dollars in thousands):



	Less than One Year			One to Five Years			Six to Ten Years			Over Ten Years				Total			Weighted Average Maturity⁵
U.S. Treasuries:
Amortized cost	$	1,000		$	—		$	—		$	—			$	1,000		0.79
Fair value	999			—			—			—				999
Nominal yield	0.87		%	—		%	—		%	—		%		0.87		%
Municipal and other tax-exempt:
Amortized cost	$	8,310		$	8,289		$	2,113		$	16,843			$	35,555		8.88
Fair value	8,379			8,415			2,167			16,492				35,453
Nominal yield¹	4.40		%	3.51		%	3.49		%	2.28		%	⁶	3.13		%
Commercial mortgage-backed securities:
Amortized cost	$	43,799		$	887,330		$	1,701,202		$	262,927			$	2,895,258		6.87
Fair value	43,637			883,337			1,690,697			259,357				2,877,028
Nominal yield	0.99		%	1.75		%	1.87		%	1.87		%		1.82		%
Other debt securities:
Amortized cost	$	—		$	—		$	—		$	4,400			$	4,400		30.41
Fair value	—			—			—			4,153				4,153
Nominal yield	—		%	—		%	—		%	1.71		%	⁶	1.71		%
Total fixed maturity securities:
Amortized cost	$	53,109		$	895,619		$	1,703,315		$	284,170			$	2,936,213		6.93
Fair value	53,015			891,752			1,692,864			280,002				2,917,633
Nominal yield	1.52		%	1.76		%	1.87		%	1.92		%		1.82		%
Residential mortgage-backed securities:
Amortized cost														$	5,473,555		²
Fair value														5,481,542
Nominal yield⁴														1.88		%
Equity securities and mutual funds:
Amortized cost														$	33,060		³
Fair value														38,116
Nominal yield														—		%
Total available-for-sale securities:
Amortized cost														$	8,442,828
Fair value														8,437,291
Nominal yield														1.85		%


¹	Calculated on a taxable equivalent basis using a 39 percent effective tax rate.


²	The average expected lives of mortgage-backed securities were 3.9 years years based upon current prepayment assumptions.


³	Primarily common stock and preferred stock of corporate issuers with no stated maturity.


⁴	The nominal yield on mortgage-backed securities is based upon prepayment assumptions at the purchase date. Actual yields earned may differ significantly based upon actual prepayments. See Quarterly Financial Summary –– Unaudited following for current yields on available for sale securities portfolio.


⁵	Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty.


⁶	Nominal yield on municipal and other tax-exempt securities and other debt securities with contractual maturity dates over ten years are based on variable rates which generally are reset within 35 days.

- 57 -

Sales of available for sale securities resulted in gains and losses as follows (in thousands):



	Three Months Ended March 31,
	2017			2016
Proceeds	$	240,010		$	469,382
Gross realized gains	2,092			3,964
Gross realized losses	(43		)	—
Related federal and state income tax expense	797			1,542

A summary of investment and available for sale securities that have been pledged as collateral for repurchase agreements, public trust funds on deposit and for other purposes, as required by law was as follows (in thousands):



	March 31, 2017		Dec. 31, 2016		March 31, 2016
Investment:
Carrying value	$	290,417	$	322,208	$	263,720
Fair value	293,352		323,808		268,422

Available for sale:
Amortized cost	6,647,659		7,353,116		7,307,788
Fair value	6,629,319		7,327,470		7,424,702

The secured parties do not have the right to sell or re-pledge these securities.

- 58 -

Temporarily Impaired Securities as of March 31, 2017

(in thousands):



	Number of Securities	Less Than 12 Months				12 Months or Longer				Total
	Number of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Investment:
Municipal and other tax-exempt	102	$	127,374	$	515	$	1,563	$	40	$	128,937	$	555
U.S. government agency residential mortgage-backed securities – Other	1	4,055		80		—		—		4,055		80
Other debt securities	43	14,440		817		—		—		14,440		817
Total investment securities	146	$	145,869	$	1,412	$	1,563	$	40	$	147,432	$	1,452



	Number of Securities	Less Than 12 Months				12 Months or Longer				Total
	Number of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Available for sale:
U.S. Treasury	1	$	999	$	1	$	—	$	—	$	999	$	1
Municipal and other tax-exempt	12	$	1,407	$	1	$	4,623	$	444	$	6,030	$	445
Residential mortgage-backed securities:
U. S. government agencies:
FNMA	83	1,595,879		25,623		68,215		1,531		1,664,094		27,154
FHLMC	51	795,586		10,001		17,284		576		812,870		10,577
GNMA	25	325,565		4,402		69,563		1,773		395,128		6,175
Total U.S. government agencies	159	2,717,030		40,026		155,062		3,880		2,872,092		43,906
Private issue¹:
Alt-A loans	5	6,805		37		7,848		27		14,653		64
Jumbo-A loans	1	—		—		5,613		14		5,613		14
Total private issue	6	6,805		37		13,461		41		20,266		78
Total residential mortgage-backed securities	165	2,723,835		40,063		168,523		3,921		2,892,358		43,984
Commercial mortgage-backed securities guaranteed by U.S. government agencies	161	1,828,685		22,758		36,305		355		1,864,990		23,113
Other debt securities	2	—		—		4,153		247		4,153		247
Perpetual preferred stocks	—	—		—		—		—		—		—
Equity securities and mutual funds	104	2,116		40		856		47		2,972		87
Total available for sale securities	445	$	4,557,042	$	62,863	$	214,460	$	5,014	$	4,771,502	$	67,877


¹	Includes securities for which an unrealized loss remains in AOCI after an other-than-temporary credit loss has been recognized in income.

- 59 -

Temporarily Impaired Securities as of December 31, 2016

(In thousands)



	Number of Securities	Less Than 12 Months				12 Months or Longer				Total
	Number of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Investment:
Municipal and other tax-exempt	151	$	219,892	$	1,316	$	4,333	$	95	$	224,225	$	1,411
U.S. government agency residential mortgage-backed securities – Other	1	4,358		71		—		—		4,358		71
Other debt securities	41	11,820		322		855		2		12,675		324
Total investment securities	193	$	236,070	$	1,709	$	5,188	$	97	$	241,258	$	1,806



	Number of Securities	Less Than 12 Months				12 Months or Longer				Total
	Number of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Available for sale:
U.S. Treasury	1	$	999	$	1	$	—	$	—	$	999	$	1
Municipal and other tax-exempt	24	$	15,666	$	22	$	4,689	$	378	$	20,355	$	400
Residential mortgage-backed securities:
U. S. government agencies:
FNMA	91	1,787,644		30,238		72,105		1,677		1,859,749		31,915
FHLMC	58	964,017		11,210		18,307		600		982,324		11,810
GNMA	31	548,637		6,145		25,796		895		574,433		7,040
Total U.S. government agencies	180	3,300,298		47,593		116,208		3,172		3,416,506		50,765
Private issue¹:
Alt-A loans	5	7,931		174		7,410		44		15,341		218
Jumbo-A loans	1	—		—		6,098		16		6,098		16
Total private issue	6	7,931		174		13,508		60		21,439		234
Total residential mortgage-backed securities	186	3,308,229		47,767		129,716		3,232		3,437,945		50,999
Commercial mortgage-backed securities guaranteed by U.S. government agencies	171	1,904,584		22,987		38,875		302		1,943,459		23,289
Other debt securities	2	—		—		4,152		248		4,152		248
Perpetual preferred stocks	—	—		—		—		—		—		—
Equity securities and mutual funds	104	2,127		41		817		86		2,944		127
Total available for sale securities	488	$	5,231,605	$	70,818	$	178,249	$	4,246	$	5,409,854	$	75,064


¹	Includes securities for which an unrealized loss remains in AOCI after an other-than-temporary credit loss has been recognized in income.

- 60 -

Temporarily Impaired Securities as of March 31, 2016

(In thousands)



	Number of Securities	Less Than 12 Months				12 Months or Longer				Total
	Number of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Investment:
Municipal and other tax-exempt	19	$	14,175	$	8	$	4,364	$	86	$	18,539	$	94
U.S. government agency residential mortgage-backed securities – Other	—	—		—		—		—		—		—
Other debt securities	7	—		—		1,876		38		1,876		38
Total investment securities	26	$	14,175	$	8	$	6,240	$	124	$	20,415	$	132



	Number of Securities	Less Than 12 Months				12 Months or Longer				Total
	Number of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Available for sale:
Municipal and other tax-exempt¹	17	$	1,010	$	3	$	10,307	$	700	$	11,317	$	703
Residential mortgage-backed securities:
U. S. government agencies:
FNMA	4	70,069		794		57,457		99		127,526		893
FHLMC	1	—		—		23,914		311		23,914		311
GNMA	12	265,293		585		99,088		496		364,381		1,081
Total U.S. government agencies	17	335,362		1,379		180,459		906		515,821		2,285
Private issue¹:
Alt-A loans	5	8,870		137		8,625		536		17,495		673
Jumbo-A loans	9	7,169		59		7,959		604		15,128		663
Total private issue	14	16,039		196		16,584		1,140		32,623		1,336
Total residential mortgage-backed securities	31	351,401		1,575		197,043		2,046		548,444		3,621
Commercial mortgage-backed securities guaranteed by U.S. government agencies	31	157,662		197		260,945		1,066		418,607		1,263
Other debt securities	2	—		—		4,151		249		4,151		249
Perpetual preferred stocks	—	—		—		—		—		—		—
Equity securities and mutual funds	37	3,241		49		1,029		21		4,270		70
Total available for sale securities	118	$	513,314	$	1,824	$	473,475	$	4,082	$	986,789	$	5,906


¹	Includes securities for which an unrealized loss remains in AOCI after an other-than-temporary credit loss has been recognized in income.

For debt securities, management determines whether it intends to sell or if it is more-likely-than-not that it will be required to sell impaired securities. This determination considers current and forecasted liquidity requirements, regulatory and capital requirements and securities portfolio management. Based on this evaluation as of March 31, 2017, the Company does not intend to sell any impaired available for sale securities before fair value recovers to the current amortized cost and it is more-likely-than-not that the Company will not be required to sell impaired securities before fair value recovers, which may be maturity.

At March 31, 2017, the entire portfolio of privately issued residential mortgage-backed securities was rated below investment grade by the nationally-recognized rating agencies. The gross unrealized loss on these securities totaled $78 thousand. Impairment of these securities was evaluated based on projections of estimated cash flows.

- 61 -

The primary assumptions used in this evaluation were:



	March 31, 2017	Dec. 31, 2016	March 31, 2016

Unemployment rate	Moving down to 4.5 percent over the next 12 months and remain at 4.5 percent thereafter.	Decreasing to 4.6 percent over the next 12 months and remain at 4.6 percent thereafter.	Moving down to 4.8 percent over the next 12 months and remain at 4.8 percent thereafter.
Housing price appreciation/depreciation	Starting with current depreciated housing prices based on information derived from the FHFA¹, appreciating 3.1 percent over the next 12 months, then flat for the following 12 months and then appreciating at 2 percent per year thereafter.	Starting with current depreciated housing prices based on information derived from the FHFA¹, appreciating 3.1 percent over the next 12 months, then flat for the following 12 months and then appreciating at 2 percent per year thereafter.	Starting with current depreciated housing prices based on information derived from the FHFA¹, appreciating 3.5 percent over the next 12 months, then flat for the following 12 months and then appreciating at 2 percent per year thereafter.
Estimated liquidation costs	Reflect actual historical liquidations costs observed on Jumbo and Alt-A residential mortgage loans in securities owned by the Company.	Reflect actual historical liquidations costs observed on Jumbo and Alt-A residential mortgage loans in securities owned by the Company.	Reflect actual historical liquidations costs observed on Jumbo and Alt-A residential mortgage loans in securities owned by the Company.
Discount rates	Estimated cash flows were discounted at rates that range from 2.00 percent to 6.25 percent based on our current expected yields.	Estimated cash flows were discounted at rates that range from 2.00 percent to 6.25 percent based on our current expected yields.	Estimated cash flows were discounted at rates that range from 2.00 percent to 6.25 percent based on our current expected yields.


¹	Federal Housing Finance Agency

No credit loss impairments were recognized in earnings on privately issued residential mortgage-backed securities during the three months ended March 31, 2017.

Impaired equity securities, including perpetual preferred stocks, are evaluated based on management's ability and intent to hold the securities until fair value recovers. Based on this evaluation, no other-than-temporary impairment loss related to equity securities was recorded to earnings during the three months ended March 31, 2017.

The following is a tabular roll forward of the amount of credit-related OTTI recognized on available for sale debt securities in earnings (in thousands):



	Three Months Ended
	March 31,
	2017		2016
Balance of credit-related OTTI recognized on available for sale debt securities, beginning of period	$	54,504	$	54,504
Additions for credit-related OTTI not previously recognized	—		—
Additions for increases in credit-related OTTI previously recognized when there is no intent to sell and no requirement to sell before recovery of amortized cost	—		—
Reductions for change in intent to hold before recovery	—		—
Sales	—		—
Balance of credit-related OTTI recognized on available for sale debt securities, end of period	$	54,504	$	54,504

Additions above exclude other-than-temporary impairment recorded due to change in intent to hold before recovery.

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Fair Value Option Securities

Fair value option securities represent securities which the Company has elected to carry at fair value and are separately identified on the Consolidated Balance Sheets. Changes in the fair value are recognized in earnings as they occur. Certain U.S. Treasury securities, residential mortgage-backed securities issued by U.S. government agencies and derivative contracts are held as an economic hedge of the mortgage servicing rights.

The fair value and net unrealized gain (loss) included in fair value option securities is as follows (in thousands):



	March 31, 2017					Dec. 31, 2016					March 31, 2016
	Fair Value		Net Unrealized Gain (Loss)			Fair Value		Net Unrealized Gain (Loss)			Fair Value		Net Unrealized Gain (Loss)
U.S. government agency residential mortgage-backed securities	$	441,714	$	(1,646	)	$	77,046	$	(1,777	)	$	418,887	$	4,136

Restricted Equity Securities

Restricted equity securities primarily include stock we are required to hold as members of the Federal Reserve system and the Federal Home Loan Banks. Restricted equity securities are carried at cost as these securities do not have a readily determined fair value because ownership of these shares are restricted and they lack a market. A summary of restricted equity securities follows (in thousands):



	March 31, 2017		Dec. 31, 2016		March 31, 2016
Federal Reserve stock	$	36,498	$	36,498	$	36,148
Federal Home Loan Bank stock	247,194		270,541		278,271
Other	244		201		171
Total	$	283,936	$	307,240	$	314,590

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(3) Derivatives

Derivative instruments may be used by the Company as part of its internal 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, 2017, 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 $10 million.

None of these derivative contracts have been designated as hedging instruments for accounting purposes.

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, interest rates and foreign exchange rates with 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.

Internal Risk Management Programs

BOK Financial may use derivative contracts in managing its interest rate sensitivity, as part of its economic hedge of the change in the fair value of mortgage servicing rights and as an economic hedge of trading securities. As of March 31, 2017, derivative contracts under the internal risk management programs were primarily used as part of the economic hedges of the change in the fair value of the mortgage servicing rights and trading securities.

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.

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The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in the balance sheet at March 31, 2017 (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	$	14,549,828	$	80,272	$	(33,143	)	$	47,129	$	—		$	47,129
Interest rate swaps	1,491,414		32,286		—			32,286		(3,349		)	28,937
Energy contracts	886,699		42,598		(28,455		)	14,143		(543		)	13,600
Agricultural contracts	51,679		2,031		(786		)	1,245		—			1,245
Foreign exchange contracts	211,837		204,774		—			204,774		(72		)	204,702
Equity option contracts	99,031		4,505		—			4,505		(920		)	3,585
Total customer risk management programs	17,290,488		366,466		(62,384		)	304,082		(4,884		)	299,198
Internal risk management programs	2,756,963		5,529		—			5,529		—			5,529
Total derivative contracts	$	20,047,451	$	371,995	$	(62,384	)	$	309,611	$	(4,884	)	$	304,727

	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	$	14,322,223	$	76,971	$	(33,143	)	$	43,828	$	(34,310	)	$	9,518
Interest rate swaps	1,491,414		33,036		—			33,036		—			33,036
Energy contracts	844,406		40,604		(28,455		)	12,149		(258		)	11,891
Agricultural contracts	51,509		2,015		(786		)	1,229		(1,040		)	189
Foreign exchange contracts	208,236		201,043		—			201,043		(3,726		)	197,317
Equity option contracts	99,031		4,505		—			4,505		—			4,505
Total customer risk management programs	17,016,819		358,174		(62,384		)	295,790		(39,334		)	256,456
Internal risk management programs	1,090,867		19,966		—			19,966		—			19,966
Total derivative contracts	$	18,107,686	$	378,140	$	(62,384	)	$	315,756	$	(39,334	)	$	276,422


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

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The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in the balance sheet at December 31, 2016 (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	$	16,949,152	$	180,695	$	(60,555	)	$	120,140	$	—		$	120,140
Interest rate swaps	1,403,408		34,442		—			34,442		(4,567		)	29,875
Energy contracts	835,566		64,140		(28,298		)	35,842		(71		)	35,771
Agricultural contracts	53,209		1,382		(515		)	867		—			867
Foreign exchange contracts	580,886		494,349		—			494,349		(5,183		)	489,166
Equity option contracts	100,924		4,357		—			4,357		(730		)	3,627
Total customer risk management programs	19,923,145		779,365		(89,368		)	689,997		(10,551		)	679,446
Internal risk management programs	2,514,169		10,426		—			10,426		—			10,426
Total derivative contracts	$	22,437,314	$	789,791	$	(89,368	)	$	700,423	$	(10,551	)	$	689,872

	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	$	16,637,532	$	176,928	$	(60,555	)	$	116,373	$	—		$	116,373
Interest rate swaps	1,403,408		34,442		—			34,442		(11,977		)	22,465
Energy contracts	820,365		64,306		(28,298		)	36,008		(31,534		)	4,474
Agricultural contracts	53,216		1,365		(515		)	850		(769		)	81
Foreign exchange contracts	580,712		494,695		—			494,695		(3,630		)	491,065
Equity option contracts	100,924		4,357		—			4,357		—			4,357
Total customer risk management programs	19,596,157		776,093		(89,368		)	686,725		(47,910		)	638,815
Internal risk management programs	2,582,202		25,716		—			25,716		—			25,716
Total derivative contracts	$	22,178,359	$	801,809	$	(89,368	)	$	712,441	$	(47,910	)	$	664,531


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

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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
Internal 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
Internal 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.

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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, 2017						March 31, 2016
	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	$	8,027		$	—		$	7,440	$	—
Interest rate swaps	459			—			325		—
Energy contracts	2,873			—			696		—
Agricultural contracts	9			—			29		—
Foreign exchange contracts	270			—			378		—
Equity option contracts	—			—			—		—
Total customer risk management programs	11,638			—			8,868		—
Interest risk management programs	(467		)	(450		)	—		7,138
Total derivative contracts	$	11,171		$	(450	)	$	8,868	$	7,138

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(4) Loans and Allowances for Credit Losses

Loans

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. Accounting policies for all loans, excluding residential mortgage loans guaranteed by U.S. government agencies, are as follows.

Interest is accrued at the applicable interest rate on the principal amount outstanding. Loans are placed on nonaccruing status when, in the opinion of management, full collection of principal or interest is uncertain. Internally risk graded loans are individually evaluated for nonaccruing status quarterly. Non-risk graded loans are generally placed on nonaccruing status when more than 90 days past due or within 60 days of being notified of the borrower's bankruptcy filing. Interest previously accrued but not collected is charged against interest income when the loan is placed on nonaccruing status. Payments on nonaccruing loans are applied to principal or recognized 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.

Loans to borrowers experiencing financial difficulties may be modified in troubled debt restructurings ("TDRs"). All TDRs are classified as nonaccruing, excluding loans guaranteed by U.S. government agencies. Modifications generally consist of extension of payment terms or interest rate concessions and may result either voluntarily through negotiations with the borrower or involuntarily through court order. Generally, principal and accrued but unpaid interest is not voluntarily forgiven.

Performing loans may be renewed under the current collateral value, debt service ratio and other underwriting standards. Nonaccruing loans may be renewed and will remain classified as nonaccruing.

All loans are charged off when the loan balance or a portion of the loan balance is no longer supported by the paying capacity of the borrower or when the required cash flow is reduced in a TDR. The charge-off amount is determined through a quarterly evaluation of available cash resources and collateral value and charge-offs are taken in the quarter in which the loss is identified. Non-risk graded loans that are past due between 60 days and 180 days, based on the loan product type, are charged off. Loans to borrowers whose personal obligation has been discharged through Chapter 7 bankruptcy proceedings are charged off within 60 days of notice of the bankruptcy filing, regardless of payment status.

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.

Qualifying residential mortgage loans guaranteed by U.S. government agencies have been sold into GNMA pools. Under certain performance conditions specified in government programs, the Company may have the right, but not the obligation to repurchase loans from GNMA pools. These loans no longer qualify for sale accounting and are recognized in the Consolidated Balance Sheets. Guaranteed loans are considered impaired because we do not expect to receive all principal and interest based on the loan's contractual terms. The principal balance continues to be guaranteed; however, interest accrues at a curtailed rate as specified in the programs. The carrying value of these loans is reduced based on an estimate of the expected cash flows discounted at the original note rate plus a liquidity spread. Guaranteed loans may be modified in TDRs in accordance with U.S. government agency guidelines. Interest continues to accrue based on the modified rate. Guaranteed loans may either be resold into GNMA pools after a performance period specified by the programs or foreclosed and conveyed to the guarantors.

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.

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Portfolio segments of the loan portfolio are as follows (in thousands):



	March 31, 2017								December 31, 2016
	Fixed Rate		Variable Rate		Non-accrual		Total		Fixed Rate		Variable Rate		Non-accrual		Total
Commercial	$	2,201,040	$	7,969,245	$	156,825	$	10,327,110	$	2,327,085	$	7,884,786	$	178,953	$	10,390,824
Commercial real estate	590,375		3,276,213		4,475		3,871,063		624,187		3,179,338		5,521		3,809,046
Residential mortgage	1,616,328		283,865		46,081		1,946,274		1,647,357		256,255		46,220		1,949,832
Personal	149,312		697,912		235		847,459		154,971		684,697		290		839,958
Total	$	4,557,055	$	12,227,235	$	207,616	$	16,991,906	$	4,753,600	$	12,005,076	$	230,984	$	16,989,660
Accruing loans past due (90 days)¹							$	95							$	5



	March 31, 2016
	Fixed Rate		Variable Rate		Non-accrual		Total
Commercial	$	1,932,757	$	8,181,016	$	174,652	$	10,288,425
Commercial real estate	643,033		2,718,204		9,270		3,370,507
Residential mortgage	1,592,706		219,026		57,577		1,869,309
Personal	87,092		406,902		331		494,325
Total	$	4,255,588	$	11,525,148	$	241,830	$	16,022,566
Accruing loans past due (90 days)¹							$	8,019


¹	Excludes residential mortgage loans guaranteed by agencies of the U.S. government

At March 31, 2017, $5.5 billion or 33 percent of our total loan portfolio is to businesses and individuals attributed to the Texas market and $3.3 billion or 20 percent of the total loan portfolio is to businesses and individuals attributed to the Oklahoma market. These geographic concentrations subject the loan portfolio to the general economic conditions within these areas.

Commercial

Commercial loans represent loans for working capital, facilities acquisition or expansion, purchases of equipment and other needs of commercial customers primarily located within our geographical footprint. Commercial loans are underwritten individually and represent on-going relationships based on a thorough knowledge of the customer, the customer’s industry and market. While commercial loans are generally secured by the customer’s assets including real property, inventory, accounts receivable, operating equipment, interest in mineral rights and other property and may also include personal guarantees of the owners and related parties, the primary source of repayment of the loans is the on-going cash flow from operations of the customer’s business. Inherent lending risk is centrally monitored on a continuous basis from underwriting throughout the life of the loan for compliance with commercial lending policies.

At March 31, 2017, commercial loans attributed to the Texas market totaled $3.4 billion or 33 percent of the commercial loan portfolio segment and commercial loans attributed to the Oklahoma market totaled $1.9 billion or 19 percent of the commercial loan portfolio segment.

The commercial loan portfolio segment is further divided into loan classes. The energy loan class totaled $2.5 billion or 15 percent of total loans at March 31, 2017, including $2.0 billion of outstanding loans to energy producers. Approximately 58 percent of committed production loans are secured by properties primarily producing oil and 42 percent are secured by properties producing natural gas. The services loan class totaled $3.0 billion or 18 percent of total loans at March 31, 2017. Approximately $1.4 billion of loans in the services category consist of loans with individual balances of less than $10 million. Businesses included in the services class include governmental, finance and insurance, not-for-profit, educational services and loans to entities providing services for real estate and construction. The healthcare loan class totaled $2.3 billion or 13 percent of total loans at March 31, 2017. The healthcare loan class consists primarily of loans for the development and operation of senior housing and care facilities, including independent living, assisted living and skilled nursing. Healthcare also includes loans to hospitals and other medical service providers.

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Commercial Real Estate

Commercial real estate loans are for the construction of buildings or other improvements to real estate and property held by borrowers for investment purposes primarily within our geographical footprint. We require collateral values in excess of the loan amounts, demonstrated cash flows in excess of expected debt service requirements, equity investment in the project and a portion of the project already sold, leased or permanent financing already secured. The expected cash flows from all significant new or renewed income producing property commitments are stress tested to reflect the risks in varying interest rates, vacancy rates and rental rates. As with commercial loans, inherent lending risks are centrally monitored on a continuous basis from underwriting throughout the life of the loan for compliance with applicable lending policies.

At March 31, 2017, 31 percent of commercial real estate loans are secured by properties primarily located in the Dallas and Houston areas of Texas. An additional 12 percent of commercial real estate loans are secured by properties located primarily in the Tulsa and Oklahoma City metropolitan areas of Oklahoma.

Residential Mortgage and Personal

Residential mortgage loans provide funds for our customers to purchase or refinance their primary residence or to borrow against the equity in their home. Residential mortgage loans are secured by a first or second mortgage on the customer’s primary residence. Personal loans consist primarily of loans secured by the cash surrender value of insurance policies and marketable securities. It also includes direct loans secured by and for the purchase of automobiles, recreational and marine equipment as well as unsecured loans. Residential mortgage and personal loans are made in accordance with underwriting policies we believe to be conservative and are fully documented. Loans may be individually underwritten or credit scored based on size and other criteria. Credit scoring is assessed based on significant credit characteristics including credit history, residential and employment stability. Residential mortgage loans retained in the Company’s portfolio are primarily composed of various mortgage programs to support customer relationships including jumbo mortgage loans, non-builder construction loans and special loan programs for high net worth individuals and certain professionals. Jumbo loans may be fixed or variable rate and are fully amortizing. Jumbo loans generally conform to government sponsored entity standards, except that the loan size exceeds maximums required under these standards. These loans generally require a minimum FICO score of 720 and a maximum debt-to-income ratio (“DTI”) of 38 percent. Loan-to-value (“LTV”) ratios are tiered from 60 percent to 100 percent, depending on the market. Special mortgage programs include fixed and variable fully amortizing loans tailored to the needs of certain healthcare professionals. Variable rate loans are fully indexed at origination and may have fixed rates for three to ten years, then adjust annually thereafter.

At March 31, 2017, residential mortgage loans included $204 million of loans guaranteed by U.S. government agencies previously sold into GNMA mortgage pools. These loans either have been repurchased or are eligible to be repurchased by the Company when certain defined delinquency criteria are met. Although payments on these loans generally are past due more than 90 days, interest continues to accrue based on the government guarantee.

Home equity loans totaled $764 million at March 31, 2017. Approximately 66 percent of the home equity loan portfolio is comprised of first lien loans and 34 percent of the home equity portfolio is comprised of junior lien loans. Junior lien loans are distributed 51 percent to amortizing term loans and 49 percent to revolving lines of credit. Home equity loans generally require a minimum FICO score of 700 and a maximum DTI of 40 percent. The maximum loan amount available for our home equity loan products is generally $400 thousand. Revolving loans have a 5 year revolving period followed by a 15 year term of amortizing repayments. Interest-only home equity loans may not be extended for any additional revolving time. All other home equity loans may be extended at management's discretion for an additional 5 year revolving term, subject to an update of certain credit information.

Credit Commitments

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. At March 31, 2017, outstanding commitments totaled $9.4 billion. Because some commitments are expected to expire before being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. BOK Financial uses the same credit policies in making commitments as it does loans.

The amount of collateral obtained, if deemed necessary, is based upon management’s credit evaluation of the borrower.

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Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Because the credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan commitments, BOK Financial uses the same credit policies in evaluating the creditworthiness of the customer. Additionally, BOK Financial uses the same evaluation process in obtaining collateral on standby letters of credit as it does for loan commitments. The term of these standby letters of credit is defined in each commitment and typically corresponds with the underlying loan commitment. At March 31, 2017, outstanding standby letters of credit totaled $596 million. Commercial letters of credit are used to facilitate customer trade transactions with the drafts being drawn when the underlying transaction is consummated. At March 31, 2017, outstanding commercial letters of credit totaled $3.8 million.

Allowances for Credit Losses

BOK Financial maintains an allowance for loan losses and an accrual for off-balance sheet credit risk. The accrual for off-balance sheet credit risk is maintained at a level that is appropriate to cover estimated losses associated with credit instruments that are not currently recognized as assets such as loan commitments, standby letters of credit or guarantees. As discussed in greater detail in Note 6, the Company also has separate accruals for 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 (collectively "allowance for 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 months ended March 31, 2017.

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. 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. Non-risk graded loans are identified as impaired based on performance status. Generally, non-risk graded loans 90 days or more past due or modified in a TDR or in bankruptcy are considered to be impaired.

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 generally not adjusted by the Company. Updated appraisals are obtained at least annually or more frequently if market conditions indicate collateral values have declined. 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. Historical statistics may be used as a practical way to estimate impairment in limited situations, such as when a collateral dependent loan is identified as impaired at the end of a reporting period, 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 may be volatile.

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General allowances for unimpaired loans are based on estimated loss rates by loan class. The gross loss rate for each loan class is determined by the greater of the current gross loss rate based on the most recent twelve months or a ten-year gross loss rate. Recoveries are not directly considered in the estimation of loss rates. Recoveries generally do not follow predictable patterns and are not received until well after the charge-off date as a result of protracted legal actions. For risk graded loans, gross loss rates are adjusted for changes in risk grading. For each loan class, the current weighted average risk grade is compared to the long-term average risk grade. This comparison determines whether credit risk in each loan class is increasing or decreasing. Loss rates are adjusted upward or downward in proportion to changes in average risk grading. General allowances for unimpaired loans also consider inherent risks identified for each loan class. Inherent risks consider loss rates that most appropriately represent the current credit cycle and other factors attributable to specific loan classes which have not yet been represented in the gross loss rates or risk grading. These factors include changes in commodity prices or engineering imprecision, which may affect the value of reserves that secure our energy loan portfolio, construction risk that may affect commercial real estate loans, changes in regulations and public policy that may disproportionately impact health care loans and changes in loan products.

Nonspecific allowances are maintained for risks beyond factors specific to a particular loan or loan class. These factors include trends in the economy of our primary lending areas, concentrations in large balance loans 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.

A provision for credit losses is charged against or credited to earnings in amounts necessary to maintain an appropriate allowance for credit losses. Recoveries of loans previously charged off are added to the allowance when received.

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 March 31, 2017 is summarized as follows (in thousands):



	Commercial			Commercial Real Estate			Residential Mortgage			Personal			Nonspecific Allowance			Total
Allowance for loan losses:
Beginning balance	$	140,213		$	50,749		$	18,224		$	8,773		$	28,200		$	246,159
Provision for loan losses	(3,355		)	6,859			(39		)	(788		)	(873		)	1,804
Loans charged off	(424		)	—			(236		)	(1,493		)	—			(2,153		)
Recoveries	1,182			735			228			755			—			2,900
Ending balance	$	137,616		$	58,343		$	18,177		$	7,247		$	27,327		$	248,710
Allowance for off-balance sheet credit losses:
Beginning balance	$	11,063		$	123		$	50		$	8		$	—		$	11,244
Provision for off-balance sheet credit losses	(1,775		)	(17		)	(10		)	(2		)	—			(1,804		)
Ending balance	$	9,288		$	106		$	40		$	6		$	—		$	9,440

Total provision for credit losses	$	(5,130	)	$	6,842		$	(49	)	$	(790	)	$	(873	)	$	—

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	Commercial			Commercial Real Estate		Residential Mortgage			Personal			Nonspecific Allowance			Total
Allowance for loan losses:
Beginning balance	$	130,334		$	41,391	$	19,509		$	4,164		$	30,126		$	225,524
Provision for loan losses	31,097			2,977		(731		)	1,466			(4,705		)	30,104
Loans charged off	(22,126		)	—		(474		)	(1,391		)	—			(23,991		)
Recoveries	488			85		163			783			—			1,519
Ending balance	$	139,793		$	44,453	$	18,467		$	5,022		$	25,421		$	233,156
Allowance for off-balance sheet credit losses:
Beginning balance	$	1,506		$	153	$	30		$	22		$	—		$	1,711
Provision for off-balance sheet credit losses	4,813			75		28			(20		)	—			4,896
Ending balance	$	6,319		$	228	$	58		$	2		$	—		$	6,607

Total provision for credit losses	$	35,910		$	3,052	$	(703	)	$	1,446		$	(4,705	)	$	35,000

The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment measurement method at March 31, 2017 is as follows (in thousands):



	Collectively Measured for Impairment				Individually Measured for Impairment				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	10,170,285	$	134,164	$	156,825	$	3,452	$	10,327,110	$	137,616
Commercial real estate	3,866,588		58,343		4,475		—		3,871,063		58,343
Residential mortgage	1,900,193		18,132		46,081		45		1,946,274		18,177
Personal	847,224		7,247		235		—		847,459		7,247
Total	16,784,290		217,886		207,616		3,497		16,991,906		221,383

Nonspecific allowance	—		—		—		—		—		27,327

Total	$	16,784,290	$	217,886	$	207,616	$	3,497	$	16,991,906	$	248,710

The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment measurement method at December 31, 2016 is as follows (in thousands):



	Collectively Measured for Impairment				Individually Measured for Impairment				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	10,211,871	$	139,416	$	178,953	$	797	$	10,390,824	$	140,213
Commercial real estate	3,803,525		50,749		5,521		—		3,809,046		50,749
Residential mortgage	1,903,612		18,178		46,220		46		1,949,832		18,224
Personal	839,668		8,773		290		—		839,958		8,773
Total	16,758,676		217,116		230,984		843		16,989,660		217,959

Nonspecific allowance	—		—		—		—		—		28,200

Total	$	16,758,676	$	217,116	$	230,984	$	843	$	16,989,660	$	246,159

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The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment measurement method at March 31, 2016 is as follows (in thousands):



	Collectively Measured for Impairment				Individually Measured for Impairment				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	10,113,773	$	137,191	$	174,652	$	2,602	$	10,288,425	$	139,793
Commercial real estate	3,361,237		44,435		9,270		18		3,370,507		44,453
Residential mortgage	1,811,732		18,401		57,577		66		1,869,309		18,467
Personal	493,994		5,022		331		—		494,325		5,022
Total	15,780,736		205,049		241,830		2,686		16,022,566		207,735

Nonspecific allowance	—		—		—		—		—		25,421

Total	$	15,780,736	$	205,049	$	241,830	$	2,686	$	16,022,566	$	233,156

Credit Quality Indicators

The Company utilizes loan class and risk grading as primary credit quality indicators. Substantially all commercial and commercial real estate loans and certain residential mortgage and consumer loans are risk graded based on a quarterly evaluation of the borrowers’ ability to repay the loans. Certain commercial loans and most residential mortgage and consumer loans are small, homogeneous pools that are not risk graded.

The allowance for loan losses and recorded investment of the related loans by portfolio segment for risk graded and non-risk graded loans at March 31, 2017 is as follows (in thousands):



	Internally Risk Graded				Non-Graded				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	10,302,774	$	136,672	$	24,336	$	944	$	10,327,110	$	137,616
Commercial real estate	3,871,063		58,343		—		—		3,871,063		58,343
Residential mortgage	211,846		2,958		1,734,428		15,219		1,946,274		18,177
Personal	749,028		5,136		98,431		2,111		847,459		7,247
Total	15,134,711		203,109		1,857,195		18,274		16,991,906		221,383

Nonspecific allowance	—		—		—		—		—		27,327

Total	$	15,134,711	$	203,109	$	1,857,195	$	18,274	$	16,991,906	$	248,710

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The allowance for loan losses and recorded investment of the related loans by portfolio segment for risk graded and non-risk graded loans at December 31, 2016 is as follows (in thousands):



	Internally Risk Graded				Non-Graded				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	10,360,725	$	139,293	$	30,099	$	920	$	10,390,824	$	140,213
Commercial real estate	3,809,046		50,749		—		—		3,809,046		50,749
Residential mortgage	243,703		2,893		1,706,129		15,331		1,949,832		18,224
Personal	744,602		5,035		95,356		3,738		839,958		8,773
Total	15,158,076		197,970		1,831,584		19,989		16,989,660		217,959

Nonspecific allowance	—		—		—		—		—		28,200

Total	$	15,158,076	$	197,970	$	1,831,584	$	19,989	$	16,989,660	$	246,159

The allowance for loan losses and recorded investment of the related loans by portfolio segment for risk graded and non-risk graded loans at March 31, 2016 is as follows (in thousands):



	Internally Risk Graded				Non-Graded				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	10,264,965	$	138,887	$	23,460	$	906	$	10,288,425	$	139,793
Commercial real estate	3,370,507		44,453		—		—		3,370,507		44,453
Residential mortgage	192,658		2,822		1,676,651		15,645		1,869,309		18,467
Personal	410,318		2,954		84,007		2,068		494,325		5,022
Total	14,238,448		189,116		1,784,118		18,619		16,022,566		207,735

Nonspecific allowance	—		—		—		—		—		25,421

Total	$	14,238,448	$	189,116	$	1,784,118	$	18,619	$	16,022,566	$	233,156

Loans are considered to be performing if they are in compliance with the original terms of the agreement and currently exhibit no factors that cause management to have doubts about the borrowers' ability to remain in compliance with the original terms of the agreement, which is consistent with the regulatory guideline of “pass.” Performing loans also include past due residential mortgages that are guaranteed by agencies of the U.S. government that continue to accrue interest based on criteria of the guarantors' programs. Other loans especially mentioned are currently performing in compliance with the original terms of the agreement but may have a potential weakness that deserves management’s close attention, consistent with regulatory guidelines.

The risk grading process identified certain loans that have a well-defined weakness (e.g. inadequate debt service coverage or liquidity or marginal capitalization; repayment may depend on collateral or other risk mitigation) that may jeopardize liquidation of the debt and represent a greater risk due to deterioration in the financial condition of the borrower. This is consistent with the regulatory guideline for “substandard.” Because the borrowers are still performing in accordance with the original terms of the loan agreements, these loans were not placed in nonaccruing status.

Nonaccruing loans represent loans for which full collection of principal and interest is uncertain. This is substantially the same criteria used to determine whether a loan is impaired and includes certain loans considered “substandard” and all loans considered “doubtful” by regulatory guidelines.

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The following table summarizes the Company’s loan portfolio at March 31, 2017 by the risk grade categories (in thousands):



	Internally Risk Graded								Non-Graded
	Performing
	Pass		Other Loans Especially Mentioned		Accruing Substandard		Nonaccrual		Performing		Nonaccrual		Total
Commercial:
Energy	$	1,988,392	$	144,157	$	294,138	$	110,425	$	—	$	—	$	2,537,112
Services	2,960,912		13,931		30,819		7,713		—		—		3,013,375
Wholesale/retail	1,459,703		21,970		13,480		11,090		—		—		1,506,243
Manufacturing	504,824		1,917		30,782		5,907		—		—		543,430
Healthcare	2,196,517		35,704		32,474		909		—		—		2,265,604
Other commercial and industrial	407,317		4,641		4,315		20,737		24,292		44		461,346
Total commercial	9,517,665		222,320		406,008		156,781		24,292		44		10,327,110

Commercial real estate:
Residential construction and land development	132,127		—		1,251		2,616		—		—		135,994
Retail	738,978		5,754		—		314		—		—		745,046
Office	857,582		2,894		—		413		—		—		860,889
Multifamily	918,542		—		4,425		24		—		—		922,991
Industrial	871,387		—		—		76		—		—		871,463
Other commercial real estate	333,554		—		94		1,032		—		—		334,680
Total commercial real estate	3,852,170		8,648		5,770		4,475		—		—		3,871,063

Residential mortgage:
Permanent mortgage	207,886		1,710		490		1,760		743,469		22,428		977,743
Permanent mortgages guaranteed by U.S. government agencies	—		—		—		—		194,073		10,108		204,181
Home equity	—		—		—		—		752,565		11,785		764,350
Total residential mortgage	207,886		1,710		490		1,760		1,690,107		44,321		1,946,274

Personal	748,000		49		888		91		98,287		144		847,459

Total	$	14,325,721	$	232,727	$	413,156	$	163,107	$	1,812,686	$	44,509	$	16,991,906

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The following table summarizes the Company’s loan portfolio at December 31, 2016 by the risk grade categories (in thousands):



	Internally Risk Graded								Non-Graded
	Performing
	Pass		Other Loans Especially Mentioned		Accruing Substandard		Nonaccrual		Performing		Nonaccrual		Total
Commercial:
Energy	$	1,937,790	$	119,583	$	307,996	$	132,499	$	—	$	—	$	2,497,868
Services	3,052,002		10,960		37,855		8,173		—		—		3,108,990
Wholesale/retail	1,535,463		16,886		13,062		11,407		—		—		1,576,818
Manufacturing	468,314		26,532		15,198		4,931		—		—		514,975
Healthcare	2,140,458		44,472		16,161		825		—		—		2,201,916
Other commercial and industrial	433,789		5,309		—		21,060		30,041		58		490,257
Total commercial	9,567,816		223,742		390,272		178,895		30,041		58		10,390,824

Commercial real estate:
Residential construction and land development	131,630		—		470		3,433		—		—		135,533
Retail	756,418		4,745		399		326		—		—		761,888
Office	798,462		—		—		426		—		—		798,888
Multifamily	898,800		—		4,434		38		—		—		903,272
Industrial	871,673		—		—		76		—		—		871,749
Other commercial real estate	336,488		—		6		1,222		—		—		337,716
Total commercial real estate	3,793,471		4,745		5,309		5,521		—		—		3,809,046

Residential mortgage:
Permanent mortgage	238,769		1,186		2,331		1,417		741,679		21,438		1,006,820
Permanent mortgages guaranteed by U.S. government agencies	—		—		—		—		187,541		11,846		199,387
Home equity	—		—		—		—		732,106		11,519		743,625
Total residential mortgage	238,769		1,186		2,331		1,417		1,661,326		44,803		1,949,832

Personal	743,451		—		1,054		97		95,163		193		839,958

Total	$	14,343,507	$	229,673	$	398,966	$	185,930	$	1,786,530	$	45,054	$	16,989,660

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The following table summarizes the Company’s loan portfolio at March 31, 2016 by the risk grade categories (in thousands):



	Internally Risk Graded								Non-Graded
	Performing
	Pass		Other Loans Especially Mentioned		Accruing Substandard		Nonaccrual		Performing		Nonaccrual		Total
Commercial:
Energy	$	2,197,870	$	269,039	$	402,958	$	159,553	$	—	$	—	$	3,029,420
Services	2,706,395		6,099		6,885		9,512		—		—		2,728,891
Wholesale/retail	1,415,832		12,383		19,946		3,685		—		—		1,451,846
Manufacturing	567,618		21,209		11,506		312		—		—		600,645
Healthcare	1,970,331		16,267		7,804		1,023		—		—		1,995,425
Other commercial and industrial	453,173		5,082		—		483		23,376		84		482,198
Total commercial	9,311,219		330,079		449,099		174,568		23,376		84		10,288,425

Commercial real estate:
Residential construction and land development	164,931		1,306		923		4,789		—		—		171,949
Retail	802,796		6,004		420		1,302		—		—		810,522
Office	694,670		253		—		629		—		—		695,552
Multifamily	726,933		—		6,506		250		—		—		733,689
Industrial	564,391		—		—		76		—		—		564,467
Other commercial real estate	392,095		—		9		2,224		—		—		394,328
Total commercial real estate	3,345,816		7,563		7,858		9,270		—		—		3,370,507

Residential mortgage:
Permanent mortgage	185,963		1,203		3,146		2,346		730,596		25,151		948,405
Permanent mortgages guaranteed by U.S. government agencies	—		—		—		—		177,800		19,550		197,350
Home equity	—		—		—		—		713,024		10,530		723,554
Total residential mortgage	185,963		1,203		3,146		2,346		1,621,420		55,231		1,869,309

Personal	410,094		1		100		123		83,799		208		494,325

Total	$	13,253,092	$	338,846	$	460,203	$	186,307	$	1,728,595	$	55,523	$	16,022,566

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Impaired Loans

Loans are considered to be impaired when it is probable that the Company will not be able to collect all amounts due according to the contractual terms of the loan agreement. This includes all nonaccruing loans, all loans modified in a TDR and all loans repurchased from GNMA pools.

A summary of impaired loans follows (in thousands):



	As of										For the
	March 31, 2017										Three Months Ended
			Recorded Investment								March 31, 2017
	Unpaid Principal Balance		Total		With No Allowance		With Allowance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Commercial:
Energy	$	125,579	$	110,425	$	58,324	$	52,101	$	3,435	$	121,462	$	—
Services	11,542		7,713		7,713		—		—		7,943		—
Wholesale/retail	17,582		11,090		11,090		—		—		11,248		—
Manufacturing	6,377		5,907		5,907		—		—		5,419		—
Healthcare	1,379		909		909		—		—		867		—
Other commercial and industrial	28,876		20,781		20,764		17		17		20,950		—
Total commercial	191,335		156,825		104,707		52,118		3,452		167,889		—

Commercial real estate:
Residential construction and land development	4,126		2,616		2,616		—		—		3,024		—
Retail	523		314		314		—		—		320		—
Office	515		413		413		—		—		420		—
Multifamily	1,000		24		24		—		—		31		—
Industrial	76		76		76		—		—		76		—
Other real estate loans	1,213		1,032		1,032		—		—		1,127		—
Total commercial real estate	7,453		4,475		4,475		—		—		4,998		—

Residential mortgage:
Permanent mortgage	29,355		24,188		24,143		45		45		23,521		291
Permanent mortgage guaranteed by U.S. government agencies¹	210,237		204,181		204,181		—		—		207,396		1,904
Home equity	13,008		11,785		11,785		—		—		11,652		—
Total residential mortgage	252,600		240,154		240,109		45		45		242,569		2,195

Personal	265		235		235		—		—		262		—

Total	$	451,653	$	401,689	$	349,526	$	52,163	$	3,497	$	415,718	$	2,195


¹	All permanent mortgage loans guaranteed by U.S. government agencies are considered impaired as we do not expect full collection of contractual principal and interest. At March 31, 2017, $10 million of these loans were nonaccruing and $194 million were accruing based on the guarantee by U.S. government agencies.

Generally, no interest income is recognized on impaired loans until all principal balances, including amounts charged-off, are recovered.

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A summary of impaired loans at December 31, 2016 follows (in thousands):



			Recorded Investment
	Unpaid Principal Balance		Total		With No Allowance		With Allowance		Related Allowance
Commercial:
Energy	$	146,897	$	132,499	$	121,418	$	11,081	$	762
Services	11,723		8,173		8,173		—		—
Wholesale/retail	17,669		11,407		11,407		—		—
Manufacturing	5,320		4,931		4,931		—		—
Healthcare	1,147		825		825		—		—
Other commercial and industrial	29,006		21,118		21,083		35		35
Total commercial	211,762		178,953		167,837		11,116		797

Commercial real estate:
Residential construction and land development	4,951		3,433		3,433		—		—
Retail	530		326		326		—		—
Office	521		426		426		—		—
Multifamily	1,000		38		38		—		—
Industrial	76		76		76		—		—
Other real estate loans	7,349		1,222		1,222		—		—
Total commercial real estate	14,427		5,521		5,521		—		—

Residential mortgage:
Permanent mortgage	28,830		22,855		22,809		46		46
Permanent mortgage guaranteed by U.S. government agencies¹	205,564		199,387		199,387		—		—
Home equity	12,611		11,519		11,519		—		—
Total residential mortgage	247,005		233,761		233,715		46		46

Personal	332		290		290		—		—

Total	$	473,526	$	418,525	$	407,363	$	11,162	$	843


¹	All permanent mortgage loans guaranteed by U.S. government agencies are considered impaired as we do not expect full collection of contractual principal and interest. At December 31, 2016, $12 million of these loans were nonaccruing and $188 million were accruing based on the guarantee by U.S. government agencies.

- 81 -

A summary of impaired loans at March 31, 2016 follows (in thousands):



											For the
	As of March 31, 2016										Three Months Ended
			Recorded Investment								March 31, 2016
	Unpaid Principal Balance		Total		With No Allowance		With Allowance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Commercial:
Energy	$	182,224	$	159,553	$	125,072	$	34,481	$	2,558	$	93,627	$	—
Services	12,824		9,512		9,512		—		—		9,901		—
Wholesale/retail	9,502		3,685		3,673		12		9		3,302		—
Manufacturing	658		312		312		—		—		322		—
Healthcare	1,338		1,023		905		118		35		1,048		—
Other commercial and industrial	8,235		567		567		—		—		595		—
Total commercial	214,781		174,652		140,041		34,611		2,602		108,795		—

Commercial real estate:
Residential construction and land development	7,621		4,789		4,789		—		—		4,599		—
Retail	1,923		1,302		1,302		—		—		1,311		—
Office	920		629		629		—		—		640		—
Multifamily	1,192		250		250		—		—		262		—
Industrial	76		76		76		—		—		76		—
Other real estate loans	8,348		2,224		2,068		156		18		2,248		—
Total commercial real estate	20,080		9,270		9,114		156		18		9,136		—

Residential mortgage:
Permanent mortgage	35,149		27,497		27,383		114		66		28,240		327
Permanent mortgage guaranteed by U.S. government agencies¹	203,396		197,350		197,350		—		—		199,697		1,772
Home equity	11,321		10,530		10,530		—		—		10,443		—
Total residential mortgage	249,866		235,377		235,263		114		66		238,380		2,099

Personal	363		331		331		—		—		397		—

Total	$	485,090	$	419,630	$	384,749	$	34,881	$	2,686	$	356,708	$	2,099


¹	All permanent mortgage loans guaranteed by U.S. government agencies are considered impaired as we do not expect full collection of contractual principal and interest. At March 31, 2016, $20 million of these loans were nonaccruing and $178 million were accruing based on the guarantee by U.S. government agencies.

- 82 -

Troubled Debt Restructurings

A summary of troubled debt restructurings ("TDRs") by accruing status as of March 31, 2017 is as follows (in thousands):



	As of March 31, 2017								Amounts Charged Off During the Three Months Ended March 31, 2017
	Recorded Investment		Performing in Accordance With Modified Terms		Not Performing in Accordance With Modified Terms		Specific Allowance
Nonaccruing TDRs:

Commercial:
Energy	$	28,529	$	22,883	$	5,646	$	271	$	—
Services	7,356		6,679		677		—		—
Wholesale/retail	10,984		10,984		—		—		—
Manufacturing	209		209		—		—		—
Healthcare	601		—		601		—		—
Other commercial and industrial	314		44		270		—		—
Total commercial	47,993		40,799		7,194		271		—

Commercial real estate:
Residential construction and land development	630		272		358		—		—
Retail	314		314		—		—		—
Office	138		138		—		—		—
Multifamily	—		—		—		—		—
Industrial	—		—		—		—		—
Other real estate loans	377		377		—		—		—
Total commercial real estate	1,459		1,101		358		—		—

Residential mortgage:
Permanent mortgage	14,457		9,876		4,581		45		—
Permanent mortgage guaranteed by U.S. government agencies	6,189		1,597		4,592		—		—
Home equity	5,663		4,236		1,427		—		20
Total residential mortgage	26,309		15,709		10,600		45		20

Personal	203		203		—		—		1

Total nonaccruing TDRs	$	75,964	$	57,812	$	18,152	$	316	$	21

Accruing TDRs:
Permanent mortgages guaranteed by U.S. government agencies	83,577		29,040		54,537		—		—

Total TDRs	$	159,541	$	86,852	$	72,689	$	316	$	21

- 83 -

A summary of troubled debt restructurings by accruing status as of December 31, 2016 is as follows (in thousands):



	As of
	December 31, 2016
	Recorded Investment		Performing in Accordance With Modified Terms		Not Performing in Accordance With Modified Terms		Specific Allowance
Nonaccruing TDRs:

Commercial:
Energy	$	16,893	$	10,867	$	6,026	$	—
Services	7,527		6,830		697		—
Wholesale/retail	11,291		11,251		40		—
Manufacturing	224		224		—		—
Healthcare	607		—		607		—
Other commercial and industrial	337		53		284		—
Total commercial	36,879		29,225		7,654		—

Commercial real estate:
Residential construction and land development	690		97		593		—
Retail	326		326		—		—
Office	143		143		—		—
Multifamily	—		—		—		—
Industrial	—		—		—		—
Other real estate loans	548		548		—		—
Total commercial real estate	1,707		1,114		593		—

Residential mortgage:
Permanent mortgage	14,876		10,175		4,701		46
Permanent mortgage guaranteed by U.S. government agencies	6,702		2,241		4,461		—
Home equity	5,346		4,458		888		—
Total residential mortgage	26,924		16,874		10,050		46

Personal	237		236		1		—

Total nonaccuring TDRs	$	65,747	$	47,449	$	18,298	$	46

Accruing TDRs:
Permanent mortgages guaranteed by U.S. government agencies	81,370		27,289		54,081		—

Total TDRs	$	147,117	$	74,738	$	72,379	$	46

- 84 -

A summary of troubled debt restructurings by accruing status as of March 31, 2016 is as follows (in thousands):



	As of March 31, 2016								Amounts Charged Off During the Three Months Ended March 31, 2016
	Recorded Investment		Performing in Accordance With Modified Terms		Not Performing in Accordance With Modified Terms		Specific Allowance
Nonaccruing TDRs:

Commercial:
Energy	$	2,829	$	—	$	2,829	$	—	$	—
Services	8,863		8,076		787		—		—
Wholesale/retail	2,619		2,567		52		9		—
Manufacturing	267		267		—		—		—
Healthcare	656		656		—		—		—
Other commercial and industrial	548		65		483		—		57
Total commercial	15,782		11,631		4,151		9		57

Commercial real estate:
Residential construction and land development	1,871		296		1,575		—		—
Retail	1,302		925		377		—		—
Office	160		160		—		—		—
Multifamily	—		—		—		—		—
Industrial	—		—		—		—		—
Other real estate loans	909		478		431		—		—
Total commercial real estate	4,242		1,859		2,383		—		—

Residential mortgage:
Permanent mortgage	16,242		11,451		4,791		66		3
Permanent mortgage guaranteed by U.S. government agencies	9,809		851		8,958		—		—
Home equity	5,078		4,207		871		—		66
Total residential mortgage	31,129		16,509		14,620		66		69

Personal	284		262		22		—		7

Total nonaccruing TDRs	$	51,437	$	30,261	$	21,176	$	75	$	133

Accruing TDRs:
Permanent mortgages guaranteed by U.S. government agencies	77,598		28,415		49,183		—		—

Total TDRs	$	129,035	$	58,676	$	70,359	$	75	$	133

- 85 -

Troubled debt restructurings generally consist of interest rate concessions, payment stream concessions or a combination of concessions to distressed borrowers. The following tables detail the recorded balance of loans at March 31, 2017 by class that were restructured during the three months ended March 31, 2017 by primary type of concession (in thousands):



	Three Months Ended March 31, 2017
	Accruing						Nonaccrual						Total
	Payment Stream		Combination & Other		Total		Payment Stream		Combination & Other		Total
Commercial:
Energy	$	—	$	—	$	—	$	13,242	$	—	$	13,242	$	13,242
Services	—		—		—		—		—		—		—
Wholesale/retail	—		—		—		—		—		—		—
Manufacturing	—		—		—		—		—		—		—
Healthcare	—		—		—		—		—		—		—
Other commercial and industrial	—		—		—		—		—		—		—
Total commercial	—		—		—		13,242		—		13,242		13,242

Commercial real estate:
Residential construction and land development	—		—		—		—		—		—		—
Retail	—		—		—		—		—		—		—
Office	—		—		—		—		—		—		—
Multifamily	—		—		—		—		—		—		—
Industrial	—		—		—		—		—		—		—
Other real estate loans	—		—		—		—		—		—		—
Total commercial real estate	—		—		—		—		—		—		—

Residential mortgage:
Permanent mortgage	—		—		—		16		31		47		47
Permanent mortgage guaranteed by U.S. government agencies	5,885		2,027		7,912		—		181		181		8,093
Home equity	—		—		—		124		531		655		655
Total residential mortgage	5,885		2,027		7,912		140		743		883		8,795

Personal	—		—		—		—		4		4		4

Total	$	5,885	$	2,027	$	7,912	$	13,382	$	747	$	14,129	$	22,041

- 86 -

Troubled debt restructurings generally consist of interest rate concessions, payment stream concessions or a combination of concessions to distressed borrowers. The following tables detail the recorded balance of loans by class that were restructured during three months ended March 31, 2016 by primary type of concession (in thousands):



	Three Months Ended March 31, 2016
	Accruing						Nonaccrual						Total
	Payment Stream		Combination & Other		Total		Payment Stream		Combination & Other		Total
Commercial:
Energy	$	—	$	—	$	—	$	525	$	—	$	525	$	525
Services	—		—		—		—		—		—		—
Wholesale/retail	—		—		—		—		—		—		—
Manufacturing	—		—		—		—		—		—		—
Healthcare	—		—		—		—		—		—		—
Other commercial and industrial	—		—		—		—		—		—		—
Total commercial	—		—		—		525		—		525		525

Commercial real estate:
Residential construction and land development	—		—		—		—		—		—		—
Retail	—		—		—		—		—		—		—
Office	—		—		—		—		—		—		—
Multifamily	—		—		—		—		—		—		—
Industrial	—		—		—		—		—		—		—
Other real estate loans	—		—		—		—		—		—		—
Total commercial real estate	—		—		—		—		—		—		—

Residential mortgage:
Permanent mortgage	—		—		—		367		62		429		429
Permanent mortgage guaranteed by U.S. government agencies	4,331		4,658		8,989		—		90		90		9,079
Home equity	—		—		—		—		622		622		622
Total residential mortgage	4,331		4,658		8,989		367		774		1,141		10,130

Personal	—		—		—		—		10		10		10

Total	$	4,331	$	4,658	$	8,989	$	892	$	784	$	1,676	$	10,665

- 87 -

The following table summarizes, by loan class, the recorded investment at March 31, 2017 and 2016, respectively, of loans modified as TDRs within the previous 12 months and for which there was a payment default during the three months ended March 31, 2017 and 2016, respectively (in thousands):



	Three Months Ended March 31, 2017						Three Months Ended March 31, 2016
	Accruing		Nonaccrual		Total		Accruing		Nonaccrual		Total
Commercial:
Energy	$	—	$	5,646	$	5,646	$	—	$	2,829	$	2,829
Services	—		—		—		—		—		—
Wholesale/retail	—		—		—		—		—		—
Manufacturing	—		—		—		—		—		—
Healthcare	—		—		—		—		—		—
Other commercial and industrial	—		—		—		—		—		—
Total commercial	—		5,646		5,646		—		2,829		2,829

Commercial real estate:
Residential construction and land development	—		—		—		—		—		—
Retail	—		—		—		—		—		—
Office	—		—		—		—		—		—
Multifamily	—		—		—		—		—		—
Industrial	—		—		—		—		—		—
Other real estate loans	—		—		—		—		—		—
Total commercial real estate	—		—		—		—		—		—

Residential mortgage:
Permanent mortgage	—		678		678		—		1,597		1,597
Permanent mortgage guaranteed by U.S. government agencies	17,106		1,136		18,242		22,606		1,346		23,952
Home equity	—		997		997		—		365		365
Total residential mortgage	17,106		2,811		19,917		22,606		3,308		25,914

Personal	—		—		—		—		—		—

Total	$	17,106	$	8,457	$	25,563	$	22,606	$	6,137	$	28,743

A payment default is defined as being 30 days or more past due. The table above includes loans that experienced a payment default during the period, but may be performing in accordance with the modified terms as of the balance sheet date.

- 88 -

Nonaccrual & Past Due Loans

Past due status for all loan classes is based on the actual number of days since the last payment was due according to the contractual terms of the loans.

A summary of loans currently performing, loans past due and accruing and nonaccrual loans as of March 31, 2017 is as follows (in thousands):



			Past Due
	Current		30 to 59 Days		60 to 89 Days		90 Days or More		Nonaccrual		Total
Commercial:
Energy	$	2,426,100	$	437	$	150	$	—	$	110,425	$	2,537,112
Services	3,002,984		2,395		234		49		7,713		3,013,375
Wholesale/retail	1,495,023		130		—		—		11,090		1,506,243
Manufacturing	537,168		115		240		—		5,907		543,430
Healthcare	2,264,266		—		429		—		909		2,265,604
Other commercial and industrial	440,484		—		81		—		20,781		461,346
Total commercial	10,166,025		3,077		1,134		49		156,825		10,327,110

Commercial real estate:
Residential construction and land development	133,064		314		—		—		2,616		135,994
Retail	744,732		—		—		—		314		745,046
Office	860,476		—		—		—		413		860,889
Multifamily	922,952		15		—		—		24		922,991
Industrial	871,362		25		—		—		76		871,463
Other real estate loans	333,648		—		—		—		1,032		334,680
Total commercial real estate	3,866,234		354		—		—		4,475		3,871,063

Residential mortgage:
Permanent mortgage	948,191		5,364		—		—		24,188		977,743
Permanent mortgages guaranteed by U.S. government agencies	45,643		29,853		—		118,577		10,108		204,181
Home equity	750,914		1,376		266		9		11,785		764,350
Total residential mortgage	1,744,748		36,593		266		118,586		46,081		1,946,274

Personal	846,652		430		105		37		235		847,459

Total	$	16,623,659	$	40,454	$	1,505	$	118,672	$	207,616	$	16,991,906

- 89 -

A summary of loans currently performing, loans past due and accruing and nonaccrual loans as of December 31, 2016 is as follows (in thousands):



			Past Due
	Current		30 to 59 Days		60 to 89 Days	90 Days or More		Nonaccrual		Total
Commercial:
Energy	$	2,364,890	$	479	—	$	—	$	132,499	$	2,497,868
Services	3,099,605		191		1,021	—		8,173		3,108,990
Wholesale/retail	1,561,650		3,761		—	—		11,407		1,576,818
Manufacturing	509,662		382		—	—		4,931		514,975
Healthcare	2,201,050		—		41	—		825		2,201,916
Other commercial and industrial	468,981		155		3	—		21,118		490,257
Total commercial	10,205,838		4,968		1,065	—		178,953		10,390,824

Commercial real estate:
Residential construction and land development	132,100		—		—	—		3,433		135,533
Retail	761,562		—		—	—		326		761,888
Office	798,462		—		—	—		426		798,888
Multifamily	903,234		—		—	—		38		903,272
Industrial	871,673		—		—	—		76		871,749
Other real estate loans	336,488		6		—	—		1,222		337,716
Total commercial real estate	3,803,519		6		—	—		5,521		3,809,046

Residential mortgage:
Permanent mortgage	979,386		3,299		1,280	—		22,855		1,006,820
Permanent mortgages guaranteed by U.S. government agencies	40,594		17,465		13,803	115,679		11,846		199,387
Home equity	729,493		2,276		337	—		11,519		743,625
Total residential mortgage	1,749,473		23,040		15,420	115,679		46,220		1,949,832

Personal	838,811		589		263	5		290		839,958

Total	$	16,597,641	$	28,603	16,748	$	115,684	$	230,984	$	16,989,660

- 90 -

A summary of loans currently performing, loans past due and accruing and nonaccrual loans as of March 31, 2016 is as follows (in thousands):



			Past Due
	Current		30 to 59 Days		60 to 89 Days	90 Days or More		Nonaccrual		Total
Commercial:
Energy	$	2,864,408	$	3,001	—	$	2,458	$	159,553	$	3,029,420
Services	2,714,697		4,682		—	—		9,512		2,728,891
Wholesale/retail	1,443,503		4,658		—	—		3,685		1,451,846
Manufacturing	600,029		—		—	304		312		600,645
Healthcare	1,994,402		—		—	—		1,023		1,995,425
Other commercial and industrial	481,286		266		79	—		567		482,198
Total commercial	10,098,325		12,607		79	2,762		174,652		10,288,425

Commercial real estate:
Residential construction and land development	167,160		—		—	—		4,789		171,949
Retail	809,220		—		—	—		1,302		810,522
Office	694,923		—		—	—		629		695,552
Multifamily	728,183		—		—	5,256		250		733,689
Industrial	564,391		—		—	—		76		564,467
Other real estate loans	392,104		—		—	—		2,224		394,328
Total commercial real estate	3,355,981		—		—	5,256		9,270		3,370,507

Residential mortgage:
Permanent mortgage	918,965		1,378		565	—		27,497		948,405
Permanent mortgages guaranteed by U.S. government agencies	43,259		14,835		12,490	107,216		19,550		197,350
Home equity	710,824		1,945		255	—		10,530		723,554
Total residential mortgage	1,673,048		18,158		13,310	107,216		57,577		1,869,309

Personal	493,722		266		5	1		331		494,325

Total	$	15,621,076	$	31,031	13,394	$	115,235	$	241,830	$	16,022,566

- 91 -

(5) Acquisitions

On December 1, 2016, the Company acquired MBT Bancshares (“MBT”), parent company of Missouri Bank and Trust of Kansas City (“Mobank”) following regulatory approval of the transaction. Mobank operated four banking branches in the Kansas City, Mo. area. BOK Financial paid $102.5 million in an all-cash deal for all outstanding shares of MBT stock. MBT was merged into BOK Financial and Mobank became a wholly owned subsidiary of BOK Financial on December 1, 2016. On February 21, 2017, Mobank was merged with the Bank of Kansas City division of BOKF, NA. All branches in the Kansas City market will operate under the Mobank name. The preliminary purchase price allocation was updated in the first quarter of 2017 resulting in a $2.0 million increase in identifiable intangibles, $1.5 million decrease in premises and equipment and other repossessed assets, and a $526 thousand decrease in goodwill.

(6) Mortgage Banking Activities

Residential Mortgage Loan Production

The Company originates, markets and services conventional and government-sponsored residential mortgage loans. Generally, conforming fixed rate residential mortgage loans are held for sale in the secondary market and non-conforming and adjustable-rate residential mortgage loans are retained for investment. Residential mortgage loans originated for sale by the Company are carried at fair value based on sales commitments and market quotes. Changes in the fair value of mortgage loans held for sale are included in Other operating revenue – Mortgage banking revenue. Residential mortgage loans held for sale also includes the fair value of residential mortgage loan commitments and forward sale commitments which are considered derivative contracts that have not been designated as hedging instruments for accounting purposes. The volume of mortgage loans originated for sale and secondary market prices are the primary drivers of originating and marketing revenue.

Residential mortgage loan commitments are generally outstanding for 60 to 90 days, which represents the typical period from commitment to originate a residential mortgage loan to when the closed loan is sold to an investor. Residential mortgage loan commitments are subject to both credit and interest rate risk. Credit risk is managed through underwriting policies and procedures, including collateral requirements, which are generally accepted by the secondary loan markets. Exposure to interest rate fluctuations is partially managed through forward sales of residential mortgage-backed securities and forward sales contracts. These latter contracts set the price for loans that will be delivered in the next 60 to 90 days.

The unpaid principal balance of residential mortgage loans held for sale, notional amounts of derivative contracts related to residential mortgage loan commitments and forward contract sales and their related fair values included in Mortgage loans held for sale on the Consolidated Balance Sheets were (in thousands):



	March 31, 2017					Dec. 31, 2016				March 31, 2016
	Unpaid Principal Balance/ Notional		Fair Value			Unpaid Principal Balance/ Notional		Fair Value		Unpaid Principal Balance/ Notional		Fair Value
Residential mortgage loans held for sale	$	237,811	$	237,695		$	286,414	$	286,971	$	309,040	$	318,191
Residential mortgage loan commitments	381,732		14,267			318,359		9,733		902,986		20,170
Forward sales contracts	586,517		(3,255		)	569,543		5,193		1,012,041		(6,321		)
			$	248,707				$	301,897			$	332,040

No residential mortgage loans held for sale were 90 days or more past due or considered impaired as of March 31, 2017, December 31, 2016 or March 31, 2016. No credit losses were recognized on residential mortgage loans held for sale for the three month periods ended March 31, 2017 and 2016.

- 92 -

Mortgage banking revenue was as follows (in thousands):



	Three Months Ended March 31,
	2017			2016
Production revenue:
Net realized gains on sale of mortgage loans	$	12,703		$	8,449
Net change in unrealized gain on mortgage loans held for sale	(246		)	3,283
Net change in the fair value of mortgage loan commitments	4,534			12,036
Net change in the fair value of forward sales contracts	(8,448		)	(7,121		)
Total production revenue	8,543			16,647
Servicing revenue	16,648			15,453
Total mortgage banking revenue	$	25,191		$	32,100

Production revenue includes gain (loss) on residential mortgage loans held for sale and changes in the fair value of derivative contracts not designated as hedging instruments for accounting purposes related to residential mortgage loan commitments and forward sales contracts. Servicing revenue includes servicing fee income and late charges on loans serviced for others.

Residential Mortgage Servicing

Mortgage servicing rights may be originated or purchased. Both originated and purchased mortgage servicing rights are initially recognized at fair value. The Company has elected to carry all mortgage servicing rights at fair value. Changes in the fair value are recognized in earnings as they occur. The unpaid principal balance of loans serviced for others is the primary driver of servicing revenue.

The following represents a summary of mortgage servicing rights (Dollars in thousands):



	March 31, 2017			Dec. 31, 2016			March 31, 2016
Number of residential mortgage loans serviced for others	138,778			139,340			134,040
Outstanding principal balance of residential mortgage loans serviced for others	$	22,015,021		$	21,997,568		$	20,294,662
Weighted average interest rate	3.96		%	3.97		%	4.10		%
Remaining term (in months)	300			301			300

Activity in capitalized mortgage servicing rights during the three months ended March 31, 2017 was as follows (in thousands):



	Purchased			Originated			Total
Balance, Dec. 31, 2016	$	8,909		$	238,164		$	247,073
Additions, net	—			8,436			8,436
Change in fair value due to scheduled payments and full-balance payoffs	(509		)	(7,453		)	(7,962		)
Change in fair value due to market assumption changes	(84		)	1,940			1,856
Balance, March 31, 2017	$	8,316		$	241,087		$	249,403

Activity in capitalized mortgage servicing rights during the three months ended March 31, 2016 was as follows (in thousands):



	Purchased			Originated			Total
Balance, Dec. 31, 2015	$	9,911		$	208,694		$	218,605
Additions, net	—			13,582			13,582
Change in fair value due to scheduled payments and full-balance payoffs	(626		)	(7,518		)	(8,144		)
Change in fair value due to market assumption changes	(3,336		)	(24,652		)	(27,988		)
Balance, March 31, 2016	$	5,949		$	190,106		$	196,055

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Changes in the fair value of mortgage servicing rights are included in Other operating revenue in the Consolidated Statements of Earnings. Changes in fair value due to actual loan payments are included in Mortgage banking costs. Changes in fair value due to market assumption changes are reported separately. Changes in fair value due to market assumption changes during the period relate to assets held at the reporting date.

There is no active market for trading in mortgage servicing rights after origination. Fair value is determined by discounting the projected net cash flows. Significant assumptions used to determine fair value based on significant unobservable inputs were as follows:



	March 31, 2017	Dec. 31, 2016	March 31, 2016
Discount rate – risk-free rate plus a market premium	10.08%	10.08%	10.11%
Prepayment rate - based upon loan interest rate, original term and loan type	8.66%-18.17%	8.98%-16.91%	8.88%-35.21%
Loan servicing costs – annually per loan based upon loan type:
Performing loans	$63-$120	$63 - $120	$63 - $120
Delinquent loans	$150-$500	$150 - $500	$150 - $500
Loans in foreclosure	$650-$4250	$650 - $4,250	$650 - $4,250
Escrow earnings rate – indexed to rates paid on deposit accounts with comparable average life	2.06%	1.98%	1.19%
Primary/secondary mortgage rate spread	105 bps	105 bps	120 bps

Changes in primary residential mortgage interest rates directly affect the prepayment speeds used in valuing our mortgage servicing rights. A separate third party model is used to estimate prepayment speeds based on interest rates, housing turnover rates, estimated loan curtailment, anticipated defaults and other relevant factors. The prepayment model is updated periodically for changes in market conditions and adjusted to better correlate with actual performance of BOK Financial’s servicing portfolio.

The interest rate sensitivity of our mortgage servicing rights is modeled over a range of +/- 50 basis points. At March 31, 2017, a 50 basis point decrease in mortgage interest rates is expected to decrease the fair value of our mortgage servicing rights by $30 million. A 50 basis point increase in mortgage interest rates is expected to increase the fair value of our mortgage servicing rights by $25 million. In the model, changes in the value of servicing rights due to changes in interest rates assume stable relationships between residential mortgage rates and prepayment speeds. Changes in market conditions can cause variations from these assumptions. These factors and others may cause changes in the value of our mortgage servicing rights to differ from our expectations.

The aging status of our mortgage loans serviced for others by investor at March 31, 2017 follows (in thousands):



			Past Due
	Current		30 to 59 Days		60 to 89 Days		90 Days or More		Total
FHLMC	$	8,052,339	$	48,670	$	12,098	$	24,705	$	8,137,812
FNMA	6,848,773		43,151		9,914		20,839		6,922,677
GNMA	6,253,924		156,821		43,016		15,492		6,469,253
Other	478,594		4,171		646		1,868		485,279
Total	$	21,633,630	$	252,813	$	65,674	$	62,904	$	22,015,021

The Company has obligations to repurchase or provide indemnification for residential mortgage loans sold to government sponsored entities due to standard representations and warranties made under contractual agreements and to service loans in accordance with investor guidelines. The Company has established accruals for losses related to these obligations that are included in Other liabilities in the Consolidated Balance Sheets and in Mortgage banking costs in the Consolidated Statements of Earnings.

The Company repurchased 5 loans from the agencies for $598 thousand during the first quarter of 2017. There were three indemnifications on loans paid during the first quarter of 2017. Losses recognized on repurchases were insignificant.

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A summary of unresolved deficiency requests from the agencies follows (in thousands, except for number of unresolved deficiency requests):



	March 31,
	2017		2016
Number of unresolved deficiency requests	185		220
Aggregate outstanding principal balance subject to unresolved deficiency requests	$	9,622	$	20,292
Unpaid principal balance subject to indemnification by the Company	5,249		4,668

The activity in the accruals for mortgage losses related to repurchases is summarized as follows (in thousands).



	Three Months Ended March 31,
	2017			2016
Beginning balance	$	2,788		$	3,359
Provision for losses	(199		)	(118		)
Charge-offs, net	(2		)	(267		)
Ending balance	$	2,587		$	2,974

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(7) Commitments and Contingent Liabilities

Litigation Contingencies

As a member of Visa, BOK Financial is obligated for a proportionate share of certain covered litigation losses incurred by Visa under a retrospective responsibility plan. A contingent liability was recognized for the Company’s share of Visa’s covered litigation liabilities. Visa funded an escrow account to cover litigation claims, including covered litigation losses under the retrospective responsibility plan, with proceeds from its initial public offering in 2008 and from available cash.

BOK Financial currently owns 252,233 Visa Class B shares which are convertible into 415,755 shares of Visa Class A shares after the final settlement of all covered litigation. Class B shares may be diluted in the future if the escrow fund is not adequate to cover future covered litigation costs. Therefore, no value has been currently assigned to the Class B shares and no value may be assigned until the Class B shares are converted into a known number of Class A shares.

On March 3, 2015, BOKF, NA and the Company were named as defendants in a class action alleging (1) that the manner in which the Bank posted charges to its consumer deposit accounts was improper from September 1, 2011 through July 8, 2014, the period after which the Bank and BOK Financial had settled a class action respecting a similar claim, and before it made changes to its posting order and (2) that the manner in which the Bank posted charges to its small business deposit accounts was improper from July 9, 2009 through July 8, 2014. Following mediation of the case in August 2016, the Class Representatives and the Bank reached a settlement of the action for $7.8 million. The Settlement has been approved by the Court in a final order, the Company has funded the settlement, and the settlement is being implemented.

On June 24, 2015, the Bank received a complaint alleging that an employee had colluded with a bond issuer and an individual in misusing revenues pledged to municipal bonds for which the Bank served as trustee under the bond indenture. The Company conducted an investigation and concluded that employees in one of its Corporate Trust offices had, with respect to a single group of affiliated bond issuances, violated Company policies and procedures by waiving financial covenants, granting forbearances and accepting without disclosure to the bondholders, debt service payments from sources other than pledged revenues. The relationship manager was terminated. The Company reported the circumstances to, and cooperated with an investigation by, the Securities and Exchange Commission ("SEC"). On December 28, 2015, in an action brought by the SEC, the United States District Court for the District of New Jersey entered a judgment against the principals involved in issuing the bonds, precluding the principals from denying the alleged violations of the federal securities laws and requiring the principals to pay all outstanding principal, accrued interest, and other amounts required under the bond documents (estimated to be approximately $73 million, less the value of the facilities securing repayment of the bonds), subject to oversight by a court appointed monitor. On September 7, 2016, the Bank agreed, and the SEC entered, a consent order finding that the Bank had violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act and requiring the Bank to disgorge $1,067,721 of fees and pay a civil penalty of $600,000. The Bank has disgorged the fees and paid the penalty. On August 26, 2016, the Bank was sued in the United States District Court for New Jersey by two bondholders in a putative class action on behalf of all holders of the bonds alleging the Bank participated in the fraudulent sale of securities by the principals. On September 14, 2016, the Bank was sued in the District Court of Tulsa County, Oklahoma by 19 bondholders alleging the Bank participated in the fraudulent sale of securities by the principals. Management has been advised by counsel that the Bank has valid defenses to the claims. The Bank expects the Court ordered payment plan will result in the payment of the bonds by the principals. Accordingly, no loss is probable at this time and no provision for loss has been made. If the payment plan does not result in payment of the bonds, a loss could become probable. A reasonable estimate cannot be made at this time though the amount could be material to the Company.

On March 14, 2017, the Bank was sued in the United States District Court for the Northern District of Oklahoma by bondholders in a second putative class action. The bondholders in this second action allege two individuals purchased facilities from the principals who are the subject of the SEC New Jersey proceedings by means of the fraudulent sale of $60 million of municipal securities for which the Bank also served as indenture trustee. The bondholders allege the Bank failed to disclose that the seller of the purchased facilities had engaged in the conduct complained of in the New Jersey action. The Bank properly performed all duties as indenture trustee of this second set of municipal securities, timely commenced proceedings against the issuer of the securities when default occurred, is cooperating with the SEC in actions against the two principals, is not a target of the SEC proceedings, and has been advised by counsel that the Bank has valid defenses to the claims of these bondholders. It is the opinion of management that no loss is probable at this time.

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The Director of the New Mexico Securities Division of the State of New Mexico Regulation and Licensing Department ("the Director") issued a Notice of Contemplated Action in connection with the purchases of various municipal bonds by the elected County Treasurer of Bernalillo County, New Mexico, from BOK Financial Securities, Inc., the Company’s broker-dealer affiliate. The Notice was settled by a $125,000 payment to the Division’s Educational fund, without any fine, penalty or sanction. The County of Bernalillo, New Mexico, has commenced arbitration pursuant to the Arbitration Rules of FINRA seeking recovery of $5.6 million arising out of the purchases. The Company has been advised that any recovery by the County is remote.

On March 30, 2017, two deposit customers of the Bank sued the Bank in the District Court of Harris County, Texas. A judgment creditor had served a garnishment summons on the Bank. The deposit customers allege that, because the Bank was unable to produce adequate documentation of ownership of a series of deposit accounts at the Bank owned by them, they were compelled to enter into a settlement agreement with the judgment creditor pursuant to which the Bank paid $4.2 million from the accounts to the judgment creditor. The two deposit customers seek $7 million. The amount of liability, if any, has not been quantified at this time. Although a loss may be probable, the amount of the liability, if any, cannot be quantified at this time.

In the ordinary course of business, BOK Financial and its subsidiaries are subject to legal actions and complaints. Management believes, based upon the opinion of counsel, that the actions and liability or loss, if any, resulting from the final outcomes of the proceedings, will not have a material effect on the Company’s financial condition, results of operations or cash flows.

Alternative Investment Commitments

The Company sponsors two private equity funds and invests in several tax credit entities and other funds as permitted by banking regulations. Consolidation of these investments is based on the variable interest model determined by the nature of the entity. Variable interest entities are generally defined as entities that either do not have sufficient equity to finance their activities without support from other parties or whose equity investors lack a controlling financial interest. Variable interest entities are consolidated based on the determination that the Company is the primary beneficiary including the power to direct the activities that most significantly impact the variable interest's economic performance and the obligation to absorb losses of the variable interest or the right to receive benefits of the variable interest that could be significant to the variable interest.

BOKF Equity, LLC, an indirect wholly-owned subsidiary, is the general partner of two consolidated private equity funds (“the Funds”). The Funds provide alternative investment opportunities to certain customers, some of which are related parties, through unaffiliated limited partnerships. These unaffiliated limited partnerships generally invest in distressed assets, asset buy-outs or venture capital companies. As general partner, BOKF Equity, LLC has the power to direct activities that most significantly affect the Funds' performance and contingent obligations to make additional investments totaling $4.0 million at March 31, 2017. Substantially all of the obligations are offset by limited partner commitments. The Company does not accrue its contingent liability to fund investments. The Volcker Rule in Title VI of the Dodd-Frank Act will limit both the amount and structure of these types of investments.

Consolidated tax credit investment entities represent the Company's interest in entities earning federal new market tax credits related to qualifying loans. The Company has the power to direct the activities that most significantly impact the variable interest's economic performance of the entity including being the primary beneficiary of or the obligation to absorb losses of the variable interest that could be significant to the variable interest.

Other consolidated alternative investments include entities held under merchant banking authority. While the Company owns a majority of the voting interest in these entities, its ability to manage daily operations is limited by applicable banking regulations. Consolidated other assets includes total tangible assets, identifiable intangible assets and goodwill held by these entities.

The Company also has interests in various unrelated alternative investments generally consisting of unconsolidated limited partnership interests in or loans to entities for which investment return is primarily in the form of tax credits or that invest in distressed real estate loans and properties, energy development, venture capital and other activities. The Company is prohibited by banking regulations from controlling or actively managing the activities of these investments and the Company's maximum exposure to loss is restricted to its investment balance. The Company's obligation to fund alternative investments is included in Other liabilities in the Consolidated Balance Sheets.

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A summary of consolidated and unconsolidated alternative investments as of March 31, 2017, December 31, 2016 and March 31, 2016 is as follows (in thousands):



	March 31, 2017
	Loans		Other assets		Other liabilities		Other borrowings		Non-controlling interests
Consolidated:
Private equity funds	$	—	$	17,816	$	—	$	—	$	14,119
Tax credit entities	10,000		11,430		—		10,964		10,000
Other	—		16,475		1,408		847		5,031
Total consolidated	$	10,000	$	45,721	$	1,408	$	11,811	$	29,150

Unconsolidated:
Tax credit entities	$	53,000	$	141,231	$	59,649	$	—	$	—
Other	—		29,611		14,045		—		—
Total unconsolidated	$	53,000	$	170,842	$	73,694	$	—	$	—



	Dec. 31, 2016
	Loans		Other assets		Other liabilities		Other borrowings		Non-controlling interests
Consolidated:
Private equity funds	$	—	$	17,357	$	—	$	—	$	13,237
Tax credit entities	10,000		11,585		—		10,964		10,000
Other	—		29,783		3,189		1,092		8,266
Total consolidated	$	10,000	$	58,725	$	3,189	$	12,056	$	31,503

Unconsolidated:
Tax credit entities	$	44,488	$	143,715	$	63,329	$	—	$	—
Other	—		31,675		15,028		—		—
Total unconsolidated	$	44,488	$	175,390	$	78,357	$	—	$	—



	March 31, 2016
	Loans		Other assets		Other liabilities		Other borrowings		Non-controlling interests
Consolidated:
Private equity funds	$	—	$	22,120	$	—	$	—	$	17,166
Tax credit entities	10,000		12,051		—		10,964		10,000
Other	—		36,238		2,663		2,738		7,544
Total consolidated	$	10,000	$	70,409	$	2,663	$	13,702	$	34,710

Unconsolidated:
Tax credit entities	$	32,679	$	105,505	$	33,091	$	—	$	—
Other	—		15,298		6,303		—		—
Total unconsolidated	$	32,679	$	120,803	$	39,394	$	—	$	—

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Other Commitments and Contingencies

At March 31, 2017, Cavanal Hill Funds’ assets included U.S. Treasury, cash management and tax-free money market funds. Assets of these funds consist of highly-rated, short-term obligations of the U.S. Treasury, corporate issuers and U.S. states and municipalities. The net asset value of units in these funds was $1.00 at March 31, 2017. An investment in these funds is not insured by the Federal Deposit Insurance Corporation or guaranteed by BOK Financial or any of its subsidiaries. BOK Financial may, but is not obligated to purchase assets from these funds to maintain the net asset value at $1.00. No assets were purchased from the funds in 2017 or 2016.

(8) Shareholders' Equity

On April 25, 2017, the Company declared a quarterly cash dividend of $0.44 per common share on or about May 26, 2017 to shareholders of record as of May 12, 2017.

Dividends declared were $0.44 per share during the three months ended March 31, 2017 and $0.43 per share during the three months ended March 31, 2016.

Accumulated Other Comprehensive Income (Loss)

AOCI includes unrealized gains and losses on available for sale ("AFS") securities and non-credit related unrealized losses on AFS securities for which an other-than-temporary impairment has been recorded in earnings. AOCI also includes unrealized gains on AFS securities that were transferred from AFS to investment securities in the third quarter of 2011. Such amounts are being amortized over the estimated remaining life of the security as an adjustment to yield, offsetting the related amortization of premium on the transferred securities. Unrealized losses on employee benefit plans will be reclassified into income as pension plan costs are recognized over the remaining service period of plan participants. Gains and losses in AOCI are net of deferred income taxes.

A rollforward of the components of accumulated other comprehensive income (loss) is included as follows (in thousands):



	Unrealized Gain (Loss) on
	Available for Sale Securities			Investment Securities Transferred from AFS			Employee Benefit Plans			Total
Balance, Dec. 31, 2015	$	23,284		$	68		$	(1,765	)	$	21,587
Net change in unrealized gain (loss)	121,091			—			—			121,091
Reclassification adjustments included in earnings:
Interest revenue, Investment securities, Taxable securities	—			(69		)	—			(69		)
Gain on available for sale securities, net	(3,964		)	—			—			(3,964		)
Other comprehensive income (loss), before income taxes	117,127			(69		)	—			117,058
Federal and state income taxes¹	45,563			(27		)	—			45,536
Other comprehensive income (loss), net of income taxes	71,564			(42		)	—			71,522
Balance, March 31, 2016	$	94,848		$	26		$	(1,765	)	$	93,109

Balance, Dec. 31, 2016	$	(9,087	)	$	—		$	(1,880	)	$	(10,967	)
Net change in unrealized gain (loss)	11,411			—			—			11,411
Reclassification adjustments included in earnings:
Interest revenue, Investment securities, Taxable securities	—						—			—
Gain on available for sale securities, net	(2,049		)	—			—			(2,049		)
Other comprehensive income (loss), before income taxes	9,362			—			—			9,362
Federal and state income taxes¹	3,616						—			3,616
Other comprehensive income (loss), net of income taxes	5,746			—			—			5,746
Balance, March 31, 2017	$	(3,341	)	$	—		$	(1,880	)	$	(5,221	)


¹	Calculated using a 39 percent effective tax rate.

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(9) Earnings Per Share



(In thousands, except share and per share amounts)	Three Months Ended March 31,
	2017		2016
Numerator:
Net income attributable to BOK Financial Corp. shareholders	$	88,356	$	42,564
Less: Earnings allocated to participating securities	1,003		538
Numerator for basic earnings per share – income available to common shareholders	87,353		42,026
Effect of reallocating undistributed earnings of participating securities	—		—
Numerator for diluted earnings per share – income available to common shareholders	$	87,353	$	42,026

Denominator:
Weighted average shares outstanding	65,457,772		66,131,166
Less: Participating securities included in weighted average shares outstanding	741,808		834,625
Denominator for basic earnings per common share	64,715,964		65,296,541
Dilutive effect of employee stock compensation plans¹	67,773		34,887
Denominator for diluted earnings per common share	64,783,737		65,331,428

Basic earnings per share	$	1.35	$	0.64
Diluted earnings per share	$	1.35	$	0.64
¹ Excludes employee stock options with exercise prices greater than current market price.	—		244,019

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(10) Reportable Segments

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



	Commercial			Consumer			Wealth Management		Funds Management and Other			BOK Financial Consolidated
Net interest revenue from external sources	$	134,704		$	21,129		$	11,485	$	33,864		$	201,182
Net interest revenue (expense) from internal sources	(16,793		)	10,952			8,856		(3,015		)	—
Net interest revenue	117,911			32,081			20,341		30,849			201,182
Provision for credit losses	(1,462		)	1,272			40		150			—
Net interest revenue after provision for credit losses	119,373			30,809			20,301		30,699			201,182
Other operating revenue	46,270			47,306			74,158		2,562			170,296
Other operating expense	52,436			53,532			60,410		78,333			244,711
Net direct contribution	113,207			24,583			34,049		(45,072		)	126,767
Gain (loss) on financial instruments, net	38			(1,667		)	—		1,629			—
Change in fair value of mortgage servicing rights	—			1,856			—		(1,856		)	—
Loss on repossessed assets, net	(5		)	(136		)	—		141			—
Corporate expense allocations	8,631			16,868			10,672		(36,171		)	—
Net income before taxes	104,609			7,768			23,377		(8,987		)	126,767
Federal and state income taxes	40,693			3,022			9,094		(14,706		)	38,103
Net income	63,916			4,746			14,283		5,719			88,664
Net income attributable to non-controlling interests	—			—			—		308			308
Net income attributable to BOK Financial Corp. shareholders	$	63,916		$	4,746		$	14,283	$	5,411		$	88,356

Average assets	$	17,438,776		$	8,648,562		$	7,160,849	$	(293,198	)	$	32,954,989

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Reportable segments reconciliation to the Consolidated Financial Statements for the three months ended March 31, 2016 is as follows (in thousands):



	Commercial			Consumer			Wealth Management			Funds Management and Other			BOK Financial Consolidated
Net interest revenue from external sources	$	116,637		$	21,449		$	6,078		$	38,408		$	182,572
Net interest revenue (expense) from internal sources	(14,632		)	9,353			$	7,663		(2,384		)	—
Net interest revenue	102,005			30,802			13,741			36,024			182,572
Provision for credit losses	21,572			1,702			(150		)	11,876			35,000
Net interest revenue after provision for credit losses	80,433			29,100			13,891			24,148			147,572
Other operating revenue	45,108			54,029			68,747			(10,470		)	157,414
Other operating expense	56,070			55,718			60,684			70,098			242,570
Net direct contribution	69,471			27,411			21,954			(56,420		)	62,416
Gain on financial instruments, net	—			16,581			—			(16,581		)	—
Change in fair value of mortgage servicing rights	—			(27,988		)	—			27,988			—
Gain (loss) on repossessed assets, net	(82		)	153			—			(71		)	—
Corporate expense allocations	8,744			15,978			10,535			(35,257		)	—
Net income before taxes	60,645			179			11,419			(9,827		)	62,416
Federal and state income taxes	23,591			70			4,442			(6,675		)	21,428
Net income	37,054			109			6,977			(3,152		)	40,988
Net loss attributable to non-controlling interests	—			—			—			(1,576		)	(1,576		)
Net income attributable to BOK Financial Corp. shareholders	$	37,054		$	109		$	6,977		$	(1,576	)	$	42,564

Average assets	$	16,969,015		$	8,687,289		$	5,565,047		$	287,120		$	31,508,471

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(11) Fair Value Measurements

Fair value is defined by applicable accounting guidance as the price to sell an asset or transfer a liability in an orderly transaction between market participants in the principal market for the given asset or liability at the measurement date based on market conditions at that date. Certain assets and liabilities are recorded in the Company’s financial statements at fair value. Some are recorded on a recurring basis and some on a non-recurring basis.

For some assets and liabilities, observable market transactions and market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. A hierarchy for fair value has been established which categorizes into three levels the inputs to valuation techniques used to measure fair value. The three levels are as follows:

Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) - Fair value is based on unadjusted quoted prices in active markets for identical assets or liabilities.

Significant Other Observable Inputs (Level 2) - Fair value is based on significant other observable inputs which are generally determined based on a single price for each financial instrument provided to us by an applicable third-party pricing service and is based on one or more of the following:


•	Quoted prices for similar, but not identical, assets or liabilities in active markets;


•	Quoted prices for identical or similar assets or liabilities in inactive markets;


•	Inputs other than quoted prices that are observable, such as interest rate and yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates;


•	Other inputs derived from or corroborated by observable market inputs.

Significant Unobservable Inputs (Level 3) - Fair value is based upon model-based valuation techniques for which at least one significant assumption is not observable in the market.

Transfers between levels are recognized as of the end of the reporting period. There were no transfers in or out of quoted prices in active markets for identical instruments to significant other observable inputs or significant unobservable inputs during the three months ended March 31, 2017 and 2016, respectively. Transfers between significant other observable inputs and significant unobservable inputs during the three months ended March 31, 2017 and 2016 are included in the summary of changes in recurring fair values measured using unobservable inputs.

The underlying methods used by the third-party pricing services are considered in determining the primary inputs used to determine fair values. Management has evaluated the methodologies employed by the third-party pricing services by comparing the price provided by the pricing service with other sources, including brokers' quotes, sales or purchases of similar instruments and discounted cash flows to establish a basis for reliance on the pricing service values. Significant differences between the pricing service provided value and other sources are discussed with the pricing service to understand the basis for their values. Based on all observable inputs, management may adjust prices obtained from third-party pricing services to more appropriately reflect the prices that would be received to sell assets or paid to transfer liabilities in orderly transactions in the current market. No significant adjustments were made to prices provided by third-party pricing services at March 31, 2017, December 31, 2016 or March 31, 2016.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair value of financial assets and liabilities measured on a recurring basis was as follows as of March 31, 2017 (in thousands):



	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Trading securities:
U.S. government agency debentures	$	18,365	$	—	$	18,365	$	—
U.S. government agency residential mortgage-backed securities	578,977		—		578,977		—
Municipal and other tax-exempt securities	45,114		—		45,114		—
Other trading securities	34,700		—		34,700		—
Total trading securities	677,156		—		677,156		—
Available for sale securities:
U.S. Treasury	999		999		—		—
Municipal and other tax-exempt securities	35,453		—		29,731		5,722
U.S. government agency residential mortgage-backed securities	5,372,916		—		5,372,916		—
Privately issued residential mortgage-backed securities	108,626		—		108,626		—
Commercial mortgage-backed securities guaranteed by U.S. government agencies	2,877,028		—		2,877,028		—
Other debt securities	4,153		—		—		4,153
Perpetual preferred stock	19,272		—		19,272		—
Equity securities and mutual funds	18,844		3,906		14,938		—
Total available for sale securities	8,437,291		4,905		8,422,511		9,875
Fair value option securities – U.S. government agency residential mortgage-backed securities	441,714		—		441,714		—
Residential mortgage loans held for sale	248,707		—		236,028		12,679
Mortgage servicing rights¹	249,403		—		—		249,403
Derivative contracts, net of cash collateral²	304,727		12,631		292,096		—
Liabilities:
Derivative contracts, net of cash collateral²	276,422		15,455		260,967		—


¹	A reconciliation of the beginning and ending fair value of mortgage servicing rights and disclosures of significant assumptions used to determine fair value are presented in Note 6, Mortgage Banking Activities.

See Note 3 for detail of fair value of derivative contracts by contract type. Derivative contracts in asset positions that were valued based on quoted prices in active markets for identical instruments (Level 1) are primarily exchange-traded interest rate and energy derivative contacts. Derivative contacts in liability positions that were valued using quoted prices in active markets for identical instruments are exchange-traded interest rate and agricultural derivative contracts, net of cash margin.

- 104 -

The fair value of financial assets and liabilities measured on a recurring basis was as follows as of December 31, 2016 (in thousands):



	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Trading securities:
U.S. government agency debentures	$	6,234	$	—	$	6,234	$	—
U.S. government agency residential mortgage-backed securities	310,067		—		310,067		—
Municipal and other tax-exempt securities	14,427		—		14,427		—
Other trading securities	6,900		—		6,900		—
Total trading securities	337,628		—		337,628		—
Available for sale securities:
U.S. Treasury	999		999		—		—
Municipal and other tax-exempt securities	40,993		—		35,204		5,789
U.S. government agency residential mortgage-backed securities	5,460,386		—		5,460,386		—
Privately issued residential mortgage-backed securities	115,535		—		115,535		—
Commercial mortgage-backed securities guaranteed by U.S. government agencies	3,017,933		—		3,017,933		—
Other debt securities	4,152		—		—		4,152
Perpetual preferred stock	18,474		—		18,474		—
Equity securities and mutual funds	18,357		3,495		14,862		—
Total available for sale securities	8,676,829		4,494		8,662,394		9,941
Fair value option securities – U.S. government agency residential mortgage-backed securities	77,046		—		77,046		—
Residential mortgage loans held for sale	301,897		—		290,280		11,617
Mortgage servicing rights¹	247,073		—		—		247,073
Derivative contracts, net of cash collateral²	689,872		7,541		682,331		—
Liabilities:
Derivative contracts, net of cash collateral²	664,531		6,972		657,559		—


¹	A reconciliation of the beginning and ending fair value of mortgage servicing rights and disclosures of significant assumptions used to determine fair value are presented in Note 6, Mortgage Banking Activities.

See Note 3 for detail of fair value of derivative contracts by contract type. Derivative contracts based on quoted prices in active markets for identical instruments (Level 1) are exchange-traded interest-rate and energy derivative contacts, net of cash margin. Derivative contracts in liability positions that were valued using quoted prices in active markets for identical instruments (Level 1) are exchange-traded interest rate, energy and agricultural derivative contracts, net of cash margin.

- 105 -

The fair value of financial assets and liabilities measured on a recurring basis was as follows as of March 31, 2016 (in thousands):



	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Trading securities:
U.S. government agency debentures	$	59,733	$	—	$	59,733	$	—
U.S. government agency residential mortgage-backed securities	146,896		—		146,896		—
Municipal and other tax-exempt securities	58,797		—		58,797		—
Other trading securities	14,113		—		14,113		—
Total trading securities	279,539		—		279,539		—
Available for sale securities:
U.S. Treasury	1,003		1,003		—		—
Municipal and other tax-exempt securities	51,308		—		41,694		9,614
U.S. government agency residential mortgage-backed securities	5,716,525		—		5,716,525		—
Privately issued residential mortgage-backed securities	133,030		—		133,030		—
Commercial mortgage-backed securities guaranteed by U.S. government agencies	2,942,404		—		2,942,404		—
Other debt securities	4,151		—		—		4,151
Perpetual preferred stock	19,575		—		19,575		—
Equity securities and mutual funds	18,040		3,216		14,824		—
Total available for sale securities	8,886,036		4,219		8,868,052		13,765
Fair value option securities – U.S. government agency residential mortgage-backed securities	418,887		—		418,887		—
Residential mortgage loans held for sale	332,040		—		323,941		8,099
Mortgage servicing rights¹	196,055		—		—		196,055
Derivative contracts, net of cash collateral²	790,146		29,533		760,613		—
Liabilities:
Derivative contracts, net of cash collateral²	705,578		3,084		702,494		—


¹	A reconciliation of the beginning and ending fair value of mortgage servicing rights and disclosures of significant assumptions used to determine fair value are presented in Note 6, Mortgage Banking Activities.

See Note 3 for detail of fair value of derivative contracts by contract type. Derivative contracts based on quoted prices in active markets for identical instruments (Level 1) are exchange-traded energy and agricultural derivative contacts, net of cash margin. Derivative contracts in liability positions that were valued using quoted prices in active markets for identical instruments (Level 1) were exchange-traded interest rate derivative contracts, fully offset by cash margin.

- 106 -

Following is a description of the Company's valuation methodologies used for assets and liabilities measured on a recurring basis:

Securities

The fair values of trading, available for sale and fair value option securities are based on quoted prices for identical instruments in active markets, when available. If quoted prices for identical instruments are not available, fair values are based on significant other observable inputs such as quoted prices of comparable instruments or interest rates and credit spreads, yield curves, volatilities, prepayment speeds and loss severities.

The fair value of certain available for sale municipal and other debt securities may be based on significant unobservable inputs. These significant unobservable inputs include limited observed trades, projected cash flows, current credit rating of the issuers and, when applicable, the insurers of the debt and observed trades of similar debt. Discount rates are primarily based on references to interest rate spreads on comparable securities of similar duration and credit rating as determined by the nationally-recognized rating agencies adjusted for a lack of trading volume. Significant unobservable inputs are developed by investment securities professionals involved in the active trading of similar securities. A summary of significant inputs used to value these securities follows. A management committee composed of senior members from the Company's Capital Markets, Risk Management and Finance departments assesses the appropriateness of these inputs quarterly.

Derivatives

All derivative instruments are carried on the balance sheet at fair value. Fair values for exchange-traded contracts are based on quoted prices. Fair values for over-the-counter interest rate, commodity and foreign exchange contracts are based on valuations provided either by third-party dealers in the contracts, quotes provided by independent pricing services, or a third-party provided pricing model that uses significant other observable market inputs.

Credit risk is considered in determining the fair value of derivative instruments. Management determines fair value adjustments based on various risk factors including but not limited to counterparty credit rating or equivalent loan grading, derivative contract notional size, price volatility of the underlying commodity, duration of the derivative contracts and expected loss severity. Expected loss severity is based on historical losses for similarly risk graded commercial loan customers. Decreases in counterparty credit rating or grading and increases in price volatility and expected loss severity all tend to increase the credit quality adjustment which reduces the fair value of asset contracts. The reduction in fair value is recognized in earnings during the current period.

We also consider our own credit risk in determining the fair value of derivative contracts. Changes in our credit rating would affect the fair value of our derivative liabilities. In the event of a credit downgrade, the fair value of our derivative liabilities would increase. The change in the fair value would be recognized in earnings in the current period.

Residential Mortgage Loans Held for Sale

Residential mortgage loans held for sale are carried on the balance sheet at fair value. The fair values of residential mortgage loans held for sale are based upon quoted market prices of such loans sold in securitization transactions, including related unfunded loan commitments and forward sales contracts. The fair value of mortgage loans that were unable to be sold to U.S. government agencies were determined using quoted prices of loans that are sold in securitization transactions with a liquidity discount applied.

Other Assets - Private Equity Funds

The fair value of the portfolio investments of the Company's two private equity funds is based upon net asset value reported by the underlying funds, as adjusted by the general partner when necessary, as a practical expedient to measure the fair value of the investments in the underlying funds. The Company's private equity funds provide customers alternative investment opportunities as limited partners of the funds. As fund of funds, the private equity funds invest in other limited partnerships or limited liability companies that invest substantially all of their assets in U.S. companies pursuing diversified investment strategies including early-stage venture capital, distressed securities and corporate or asset buy-outs. Private equity fund assets are long-term, illiquid investments. No secondary market exists for these assets. The private equity funds typically invest in funds that provide no redemption rights to investors. The fair value of the private equity investments may only be realized through cash distributions from the underlying funds.

See Note 7 for disclosure of the fair value of the private equity funds using the net asset value per share of the underlying investments, as a practical expedient, included in Other assets in the Consolidated Balance Sheets of the Company.

- 107 -

The following represents the changes for the three months ended March 31, 2017 related to assets measured at fair value on a recurring basis using significant unobservable inputs (in thousands):



	Available for Sale Securities
	Municipal and other tax-exempt securities			Other debt securities		Residential mortgage loans held for sale
Balance, Dec. 31, 2016	$	5,789		$	4,152	$	11,617
Transfer to Level 3 from Level 2¹	—			—		1,887
Purchases	—			—		—
Proceeds from sales	—			—		(589		)
Redemptions and distributions	—			—		—
Gain (loss) recognized in earnings:
Mortgage banking revenue	—			—		(236		)
Other comprehensive income (loss):
Net change in unrealized gain (loss)	(67		)	1		—
Balance, March 31, 2017	$	5,722		$	4,153	$	12,679

¹Recurring transfers to Level 3 from Level 2 consist of residential mortgage loans intended for sale to U.S. government agencies that fail to meet conforming standards.

The following represents the changes for the three months ended March 31, 2016 related to assets measured at fair value on a recurring basis using significant unobservable inputs (in thousands):



	Available for Sale Securities
	Municipal and other tax-exempt securities		Other debt securities		Residential mortgage loans held for sale
Balance, Dec. 31, 2015	$	9,610	$	4,151	$	7,874
Transfer to Level 3 from Level 2¹	—		—		460
Purchases	—		—		—
Proceeds from sales	—		—		(113		)
Redemptions and distributions	—		—		—
Gain (loss) recognized in earnings:
Mortgage banking revenue	—		—		(122		)
Other comprehensive income (loss):
Net change in unrealized gain (loss)	4		—		—
Balance, March 31, 2016	$	9,614	$	4,151	$	8,099

¹Recurring transfers to Level 3 from Level 2 consist of residential mortgage loans intended for sale to U.S. government agencies that fail to meet conforming standards.

- 108 -

A summary of quantitative information about assets measured at fair value on a recurring basis using Significant Unobservable Inputs (Level 3) as of March 31, 2017 follows (in thousands):



	Par Value		Amortized Cost/Unpaid Principal Balance		Fair Value		Valuation Technique(s)		Unobservable Input	Range (Weighted Average)

Available for sale securities
Municipal and other tax-exempt securities	$	6,195	$	6,163	$	5,722	Discounted cash flows	¹	Interest rate spread	7.64%-7.94% (7.89%)	²
										90.00%-91.22% (90.75%)	³
Other debt securities	4,400		4,400		4,153		Discounted cash flows	¹	Interest rate spread	6.00%-6.84% (6.75%)	⁴
										94.34% - 94.39 (94.38%)	³

Residential mortgage loans held for sale	N/A		13,623		12,679		Quoted prices of loans sold in securitization transactions, with a liquidity discount applied		Liquidity discount applied to the market value of a mortgage loans qualifying for sale to U.S. government agencies.	93.07%


¹	Discounted cash flows developed using discount rates primarily based on reference to interest rate spreads for comparable securities of similar duration and credit rating as determined by the nationally-recognized rating agencies, adjusted for lack of trading volume.


²	Interest rate yields used to value investment grade tax-exempt securities represent a spread of 632 to 685 basis points over average yields for comparable tax-exempt securities.


³	Represents fair value as a percentage of par value.


⁴	Interest rate yields used to value investment grade taxable securities based on comparable short-term taxable securities which are generally yielding less than 3 percent.

A summary of quantitative information about Recurring Fair Value Measurements based on Significant Unobservable Inputs (Level 3) as of December 31, 2016 follows (in thousands):



	Par Value		Amortized Cost/Unpaid Principal Balance		Fair Value		Valuation Technique(s)		Unobservable Input	Range (Weighted Average)

Available for sale securities
Municipal and other tax-exempt securities	$	6,195	$	6,163	$	5,789	Discounted cash flows	¹	Interest rate spread	5.91%-6.21% (6.16%)	²
										90.00%-93.40% (92.20%)	³
Other debt securities	4,400		4,400		4,152		Discounted cash flows	¹	Interest rate spread	6.01%-6.26% (6.23%)	⁴
										94.34% - 94.36 (94.36%)	³
Residential mortgage loans held for sale	N/A		12,431		11,617		Quoted prices of loans sold in securitization transactions, with a liquidity discount applied		Liquidity discount applied to the market value of a mortgage loans qualifying for sale to U.S. government agencies.	93.45%


¹	Discounted cash flows developed using discount rates primarily based on reference to interest rate spreads for comparable securities of similar duration and credit rating as determined by the nationally-recognized rating agencies, adjusted for lack of trading volume.


²	Interest rate yields used to value investment grade tax-exempt securities represent a spread of 467 to 525 basis points over average yields for comparable tax-exempt securities.


³	Represents fair value as a percentage of par value.


⁴	Interest rate yields used to value investment grade taxable securities based on comparable short-term taxable securities which are generally yielding less than 1 percent.

- 109 -

A summary of quantitative information about Recurring Fair Value Measurements based on Significant Unobservable Inputs (Level 3) as of March 31, 2016 follows (in thousands):



	Par Value		Amortized Cost		Fair Value		Valuation Technique(s)		Unobservable Input	Range (Weighted Average)

Available for sale securities
Municipal and other tax-exempt securities	$	10,370	$	10,311	$	9,614	Discounted cash flows	¹	Interest rate spread	5.40%-5.70% (5.66%)	²
										90.00%-93.20% (92.72%)	³
Other debt securities	4,400		4,400		4,151		Discounted cash flows	¹	Interest rate spread	5.51%-5.93% (5.88%)	⁴
										94.32% - 94.34 (94.34%)	³

Residential mortgage loans held for sale	N/A		8,742		8,099		Quoted prices of loans sold in securitization transactions, with a liquidity discount applied		Liquidity discount applied to the market value of a mortgage loans qualifying for sale to U.S. government agencies.	92.64%


¹	Discounted cash flows developed using discount rates primarily based on reference to interest rate spreads for comparable securities of similar duration and credit rating as determined by the nationally-recognized rating agencies, adjusted for lack of trading volume.


²	Interest rate yields used to value investment grade tax-exempt securities represent a spread of 480 to 519 basis points over average yields for comparable tax-exempt securities.


³	Represents fair value as a percentage of par value.


⁴	Interest rate yields used to value investment grade taxable securities based on comparable short-term taxable securities which are generally yielding less than 1 percent.

Fair Value of Assets and Liabilities Measured on a Non-Recurring Basis

Assets measured at fair value on a non-recurring basis include collateral for certain impaired loans and real property and other assets acquired to satisfy loans, which are based primarily on comparisons to completed sales of similar assets.

The following represents the carrying value of assets measured at fair value on a non-recurring basis (and related losses) during the period. The carrying value represents only those assets with a balance at March 31, 2017 for which the fair value was adjusted during the three months ended March 31, 2017:



	Carrying Value at March 31, 2017						Fair Value Adjustments for the Three Months Ended March 31, 2017 Recognized in:
	Quoted Prices in Active Markets for Identical Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs		Gross charge-offs against allowance for loan losses		Net losses and expenses of repossessed assets, net
Impaired loans	$	—	$	462	$	1,614	$	444	$	—
Real estate and other repossessed assets	—		777		418		—		293

- 110 -

The following represents the carrying value of assets measured at fair value on a non-recurring basis (and related losses) during the period. The carrying value represents only those assets with a balance at March 31, 2016 for which the fair value was adjusted during the three months ended March 31, 2016:



	Carrying Value at March 31, 2016						Fair Value Adjustments for the Three Months Ended March 31, 2016 Recognized in:
	Quoted Prices in Active Markets for Identical Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs		Gross charge-offs against allowance for loan losses		Net losses and expenses of repossessed assets, net
Impaired loans	$	—	$	604	$	32,836	$	22,157	$	—
Real estate and other repossessed assets	—		3,577		—		—		458

The fair value of collateral-dependent impaired loans secured by real estate and real estate and other repossessed assets and the related fair value adjustments are generally based on unadjusted third-party appraisals. Our appraisal review policies require appraised values to be supported by observed inputs derived principally from or corroborated by observable market data. Appraisals that are not based on observable inputs or that require significant adjustments or fair value measurements that are not based on third-party appraisals are considered to be based on significant unobservable inputs. Non-recurring fair value measurements of collateral-dependent impaired loans and real estate and other repossessed assets based on significant unobservable inputs are generally due to estimates of current fair values between appraisal dates. Significant unobservable inputs include listing prices for the same or comparable assets, uncorroborated expert opinions or management's knowledge of the collateral or industry. Non-recurring fair value measurements of collateral dependent loans secured by mineral rights are generally determined by our internal staff of engineers on projected cash flows under current market conditions and are based on significant unobservable inputs. Projected cash flows are discounted according to risk characteristics of the underlying oil and gas properties. Assets are evaluated to demonstrate with reasonable certainty that crude oil, natural gas and natural gas liquids can be recovered from known oil and gas reservoirs under existing economic and operating conditions at current prices with existing conventional equipment, operating methods and costs. Significant unobservable inputs are developed by asset management and workout professionals and approved by senior Credit Administration executives.

A summary of quantitative information about Non-recurring Fair Value Measurements based on Significant Unobservable Inputs (Level 3) as of March 31, 2017 follows (in thousands):



	Fair Value		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Impaired loans	$	1,614	Discounted cash flows	Recoverable oil and gas reserves, forward-looking commodity prices, estimated operating costs	76% - 81% (77%)¹
Real estate and other repossessed assets	418		Appraised value, as adjusted	Marketability adjustment off appraised value²	65% - 86% (78%)


¹	Represents fair value as a percentage of the unpaid principal balance.


²	Marketability adjustments include consideration of estimated costs to sell which is approximately 10% of the fair value.

A summary of quantitative information about Non-recurring Fair Value Measurements based on Significant Unobservable Inputs (Level 3) as of March 31, 2016 follows (in thousands):



	Fair Value		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Impaired loans	$	32,836	Discounted cash flows	Recoverable oil and gas reserves, forward-looking commodity prices, estimated operating costs	55% - 73% (60%)¹


¹	Represents fair value as a percentage of the unpaid principal balance.

- 111 -

Fair Value of Financial Instruments

The following table presents the carrying values and estimated fair values of all financial instruments, including those financial assets and liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis as of March 31, 2017 (dollars in thousands):



	Carrying Value			Estimated Fair Value		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and due from banks	$	546,575		$	546,575	$	546,575	$	—	$	—
Interest-bearing cash and cash equivalents	2,220,640			2,220,640		2,220,640		—		—
Trading securities:								—
U.S. government agency debentures	18,365			18,365		—		18,365		—
U.S. government agency residential mortgage-backed securities	578,977			578,977		—		578,977		—
Municipal and other tax-exempt securities	45,114			45,114		—		45,114		—
Other trading securities	34,700			34,700		—		34,700		—
Total trading securities	677,156			677,156		—		677,156		—
Investment securities:
Municipal and other tax-exempt securities	298,811			301,128		—		301,128		—
U.S. government agency residential mortgage-backed securities	19,378			19,967		—		19,967		—
Other debt securities	201,213			219,568		—		219,568		—
Total investment securities	519,402			540,663		—		540,663		—
Available for sale securities:
U.S. Treasury	999			999		999		—		—
Municipal and other tax-exempt securities	35,453			35,453		—		29,731		5,722
U.S. government agency residential mortgage-backed securities	5,372,916			5,372,916		—		5,372,916		—
Privately issued residential mortgage-backed securities	108,626			108,626		—		108,626		—
Commercial mortgage-backed securities guaranteed by U.S. government agencies	2,877,028			2,877,028		—		2,877,028		—
Other debt securities	4,153			4,153		—		—		4,153
Perpetual preferred stock	19,272			19,272		—		19,272		—
Equity securities and mutual funds	18,844			18,844		3,906		14,938		—
Total available for sale securities	8,437,291			8,437,291		4,905		8,422,511		9,875
Fair value option securities – U.S. government agency residential mortgage-backed securities	441,714			441,714		—		441,714		—
Residential mortgage loans held for sale	248,707			248,707		—		236,028		12,679
Loans:
Commercial	10,327,110			10,088,885		—		—		10,088,885
Commercial real estate	3,871,063			3,816,898		—		—		3,816,898
Residential mortgage	1,946,274			1,957,635		—		—		1,957,635
Personal	847,459			838,964		—		—		838,964
Total loans	16,991,906			16,702,382		—		—		16,702,382
Allowance for loan losses	(248,710		)	—		—		—		—
Loans, net of allowance	16,743,196			16,702,382		—		—		16,702,382
Mortgage servicing rights	249,403			249,403		—		—		249,403
Derivative instruments with positive fair value, net of cash margin	304,727			304,727		23,128		281,599		—
Deposits with no stated maturity	20,331,511			20,331,511		—		—		20,331,511
Time deposits	2,243,848			2,207,968		—		—		2,207,968
Other borrowed funds	5,794,928			5,790,533		—		—		5,790,533
Subordinated debentures	144,649			140,888		—		140,888		—
Derivative instruments with negative fair value, net of cash margin	276,422			276,422		11,628		264,794		—

- 112 -



	Carrying Value			Estimated Fair Value		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and due from banks	$	620,846		$	620,846	$	620,846	$	—	$	—
Interest-bearing cash and cash equivalents	1,916,651			1,916,651		1,916,651		—		—
Trading securities:								—
U.S. government agency debentures	6,234			6,234		—		6,234		—
U.S. government agency residential mortgage-backed securities	310,067			310,067		—		310,067		—
Municipal and other tax-exempt securities	14,427			14,427		—		14,427		—
Other trading securities	6,900			6,900		—		6,900		—
Total trading securities	337,628			337,628		—		337,628		—
Investment securities:
Municipal and other tax-exempt securities	320,364			321,225		—		321,225		—
U.S. government agency residential mortgage-backed securities	20,777			21,473		—		21,473		—
Other debt securities	205,004			222,795		—		222,795		—
Total investment securities	546,145			565,493		—		565,493		—
Available for sale securities:
U.S. Treasury	999			999		999		—		—
Municipal and other tax-exempt securities	40,993			40,993		—		35,204		5,789
U.S. government agency residential mortgage-backed securities	5,460,386			5,460,386		—		5,460,386		—
Privately issued residential mortgage-backed securities	115,535			115,535		—		115,535		—
Commercial mortgage-backed securities guaranteed by U.S. government agencies	3,017,933			3,017,933		—		3,017,933		—
Other debt securities	4,152			4,152		—		—		4,152
Perpetual preferred stock	18,474			18,474		—		18,474		—
Equity securities and mutual funds	18,357			18,357		3,495		14,862		—
Total available for sale securities	8,676,829			8,676,829		4,494		8,662,394		9,941
Fair value option securities – U.S. government agency residential mortgage-backed securities	77,046			77,046		—		77,046		—
Residential mortgage loans held for sale	301,897			301,897		—		290,280		11,617
Loans:
Commercial	10,390,824			10,437,016		—		—		10,437,016
Commercial real estate	3,809,046			3,850,981		—		—		3,850,981
Residential mortgage	1,949,832			2,025,159		—		—		2,025,159
Personal	839,958			864,904		—		—		864,904
Total loans	16,989,660			17,178,060		—		—		17,178,060
Allowance for loan losses	(246,159		)	—		—		—		—
Loans, net of allowance	16,743,501			17,178,060		—		—		17,178,060
Mortgage servicing rights	247,073			247,073		—		—		247,073
Derivative instruments with positive fair value, net of cash margin	689,872			689,872		7,541		682,331		—
Deposits with no stated maturity	20,526,295			20,526,295		—		—		20,526,295
Time deposits	2,221,800			2,218,303		—		—		2,218,303
Other borrowed funds	5,572,662			5,556,327		—		—		5,556,327
Subordinated debentures	144,640			128,903		—		128,903		—
Derivative instruments with negative fair value, net of cash margin	664,531			664,531		6,972		657,559		—

- 113 -



	Carrying Value			Estimated Fair Value		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and due from banks	$	481,510		$	481,510	$	481,510	$	—	$	—
Interest-bearing cash and cash equivalents	1,831,162			1,831,162		1,831,162		—		—
Trading securities:								—
U.S. government agency debentures	59,733			59,733		—		59,733		—
U.S. government agency residential mortgage-backed securities	146,896			146,896		—		146,896		—
Municipal and other tax-exempt securities	58,797			58,797		—		58,797		—
Other trading securities	14,113			14,113		—		14,113		—
Total trading securities	279,539			279,539		—		279,539		—
Investment securities:
Municipal and other tax-exempt securities	347,684			352,542		—		352,542		—
U.S. government agency residential mortgage-backed securities	25,366			26,794		—		26,794		—
Other debt securities	202,997			230,407		—		230,407		—
Total investment securities	576,047			609,743		—		609,743		—
Available for sale securities:
U.S. Treasury	1,003			1,003		1,003		—		—
Municipal and other tax-exempt securities	51,308			51,308		—		41,694		9,614
U.S. government agency residential mortgage-backed securities	5,716,525			5,716,525		—		5,716,525		—
Privately issued residential mortgage-backed securities	133,030			133,030		—		133,030		—
Commercial mortgage-backed securities guaranteed by U.S. government agencies	2,942,404			2,942,404		—		2,942,404		—
Other debt securities	4,151			4,151		—		—		4,151
Perpetual preferred stock	19,575			19,575		—		19,575		—
Equity securities and mutual funds	18,040			18,040		3,216		14,824		—
Total available for sale securities	8,886,036			8,886,036		4,219		8,868,052		13,765
Fair value option securities – U.S. government agency residential mortgage-backed securities	418,887			418,887		—		418,887		—
Residential mortgage loans held for sale	332,040			332,040		—		323,941		8,099
Loans:
Commercial	10,288,425			10,092,121		—		—		10,092,121
Commercial real estate	3,370,507			3,351,250		—		—		3,351,250
Residential mortgage	1,869,309			1,906,310		—		—		1,906,310
Personal	494,325			490,166		—		—		490,166
Total loans	16,022,566			15,839,847		—		—		15,839,847
Allowance for loan losses	(233,156		)	—		—		—		—
Loans, net of allowance	15,789,410			15,839,847		—		—		15,839,847
Mortgage servicing rights	196,055			196,055		—		—		196,055
Derivative instruments with positive fair value, net of cash margin	790,146			790,146		29,533		760,613		—
Deposits with no stated maturity	18,076,946			18,076,946		—		—		18,076,946
Time deposits	2,341,374			2,339,734		—		—		2,339,734
Other borrowed funds	6,326,718			6,309,208		—		—		6,309,208
Subordinated debentures	226,385			224,314		—		—		224,314
Derivative instruments with negative fair value, net of cash margin	705,578			705,578		3,084		702,494		—

- 114 -

Because no market exists for certain of these financial instruments and management does not intend to sell these financial instruments, the fair values shown in the tables above may not represent values at which the respective financial instruments could be sold individually or in the aggregate at the given reporting date.

The following methods and assumptions were used in estimating the fair value of these financial instruments:

Cash and Cash Equivalents

The book value reported in the consolidated balance sheets for cash and short-term instruments approximates those assets’ fair values.

Securities

The fair values of securities are generally based on Significant Other Observable Inputs such as quoted prices for comparable instruments or interest rates and credit spreads, yield curves, volatilities, prepayment speeds and loss severities.

Loans

The fair value of loans, excluding loans held for sale, are based on discounted cash flow analyses using interest rates and credit and liquidity spreads currently being offered for loans with similar remaining terms to maturity and risk, adjusted for the impact of interest rate floors and ceilings which are classified as Significant Unobservable Inputs. The fair values of loans were estimated to approximate their discounted cash flows less loan loss allowances allocated to these loans of $221 million at March 31, 2017, $218 million at December 31, 2016 and $208 million at March 31, 2016. A summary of assumptions used in determining the fair value of loans follows:



	Range of Contractual Yields	Average Re-pricing (in years)	Discount Rate
March 31, 2017:
Commercial	0.38% - 30.00%	0.67	0.62% - 4.68%
Commercial real estate	0.38% - 18.00%	0.73	1.00% - 4.37%
Residential mortgage	1.74% - 18.00%	2.26	1.83% - 4.26%
Personal	0.25% - 21.00%	0.30	0.77% - 4.71%

December 31, 2016:
Commercial	0.38% - 30.00%	0.70	0.64% - 4.60%
Commercial real estate	0.38% - 18.00%	0.71	0.94% - 4.27%
Residential mortgage	1.74% - 18.00%	2.27	1.71% - 4.26%
Personal	0.25% - 21.00%	0.40	1.03% - 4.59%

March 31, 2016:
Commercial	0.38% - 30.00%	0.73	0.46% - 3.92%
Commercial real estate	0.38% - 18.00%	0.72	0.85% - 3.60%
Residential mortgage	1.68% - 18.00%	2.07	1.23% - 3.73%
Personal	0.38% - 21.00%	0.37	0.78% - 4.01%

Deposits

The fair values of time deposits are based on discounted cash flow analyses using interest rates currently being offered on similar transactions which are considered Significant Unobservable Inputs. Estimated fair value of deposits with no stated maturity, which includes demand deposits, transaction deposits, money market deposits and savings accounts, is equal to the amount payable on demand. Although market premiums paid reflect an additional value for these low cost deposits, adjusting fair value for the expected benefit of these deposits is prohibited. Accordingly, the positive effect of such deposits is not included in the tables above.

- 115 -

A summary of assumptions used in determining the fair value of time deposits follows:



	Range of Contractual Yields	Average Re-pricing (in years)	Discount Rate
March 31, 2017	0.03% - 10.00%	1.90	1.67% - 2.09%
December 31, 2016	0.02% - 9.65%	1.96	1.57% - 2.00%
March 31, 2016	0.02% - 10.00%	2.05	1.15% - 1.47%

Other Borrowings and Subordinated Debentures

The fair values of these instruments are based upon discounted cash flow analyses using interest rates currently being offered on similar instruments which are considered Significant Unobservable Inputs. A summary of assumptions used in determining the fair value of other borrowing and subordinated debentures follows:



	Range of Contractual Yields	Average Re-pricing (in years)	Discount Rate
March 31, 2017:
Other borrowed funds	0.25% - 3.42%	0.02	0.82% - 3.44%
Subordinated debentures	5.38%	16.71	5.54%

December 31, 2016:
Other borrowed funds	0.25% - 3.50%	0.00	0.55% - 3.22%
Subordinated debentures	5.38%	16.86	6.11%

March 31, 2016:
Other borrowed funds	0.25% - 0.80%	0.00	0.25% - 2.89%
Subordinated debentures	1.31%	1.12	2.13%

Off-Balance Sheet Instruments

The fair values of commercial loan commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements. The fair values of these off-balance sheet instruments were not significant at March 31, 2017, December 31, 2016 or March 31, 2016.

Fair Value Election

As more fully disclosed in Note 2 and Note 6 to the Consolidated Financial Statements, the Company has elected to carry all residential mortgage-backed securities guaranteed by U.S. government agencies and U.S. Treasury securities held as economic hedges against changes in the fair value of mortgage servicing rights and all residential mortgage loans originated for sale at fair value. Changes in the fair value of these financial instruments are recognized in earnings.

- 116 -

(12) Federal and State Income Taxes

The reconciliations of income (loss) attributable to continuing operations at the U.S. federal statutory tax rate to income tax expense are as follows (in thousands):



	Three Months Ended March 31,
	2017			2016
Amount:
Federal statutory tax	$	44,368		$	21,846
Tax exempt revenue	(3,111		)	(2,532		)
Effect of state income taxes, net of federal benefit	2,445			2,301
Utilization of tax credits:
Low-income housing tax credit, net of amortization	(1,723		)	(1,310		)
Other tax credits	(364		)	(521		)
Bank-owned life insurance	(772		)	(791		)
Share-based compensation	(3,937		)	—
Other, net	1,197			2,435
Total income tax expense	$	38,103		$	21,428



	Three Months Ended March 31,
	2017		2016
Percent of pretax income:
Federal statutory tax	35.0	%	35.0	%
Tax exempt revenue	(2.4	)	(4.1	)
Effect of state income taxes, net of federal benefit	1.9		3.7
Utilization of tax credits:
Low-income housing tax credit, net of amortization	(1.4	)	(2.1	)
Other tax credits	(0.3	)	(0.8	)
Bank-owned life insurance	(0.6	)	(1.3	)
Share-based compensation	(3.1	)	—
Other, net	1.0		3.9
Total	30.1	%	34.3	%

(13) Subsequent Events

The Company evaluated events from the date of the consolidated financial statements on March 31, 2017 through the issuance of those consolidated financial statements included in this Quarterly Report on Form 10-Q. No events were identified requiring recognition in and/or disclosure in the consolidated financial statements.

- 117 -

Quarterly Financial Summary – Unaudited Consolidated Daily Average Balances, Average Yields and Rates

(In Thousands, Except Per Share Data)	Three Months Ended
	March 31, 2017							December 31, 2016
	Average Balance			Revenue/ Expense		Yield/ Rate		Average Balance			Revenue/ Expense			Yield/ Rate
Assets
Interest-bearing cash and cash equivalents	$	2,087,964		$	4,244	0.82	%	$	2,032,785		$	2,800		0.55	%
Trading securities	579,549			5,369		3.87	%	476,498			4,554			3.91	%
Investment securities
Taxable	221,684			3,013		5.44	%	224,376			3,024			5.39	%
Tax-exempt	309,252			1,893		2.45	%	318,493			1,854			2.33	%
Total investment securities	530,936			4,906		3.70	%	542,869			4,878			3.60	%
Available for sale securities
Taxable	8,509,423			42,927		2.02	%	8,706,449			42,482			1.98	%
Tax-exempt	57,626			728		5.37	%	60,106			748			5.27	%
Total available for sale securities	8,567,049			43,655		2.05	%	8,766,555			43,230			2.00	%
Fair value option securities	416,524			2,380		2.27	%	210,733			541			0.99	%
Restricted equity securities	312,498			4,309		5.52	%	334,114			4,554			5.45	%
Residential mortgage loans held for sale	220,325			1,836		3.35	%	345,066			2,835			3.31	%
Loans	17,135,825			164,119		3.88	%	16,723,588			156,734			3.67	%
Allowance for loan losses	(249,379		)					(246,977		)
Loans, net of allowance	16,886,446			164,119		3.94	%	16,476,611			156,734			3.72	%
Total earning assets	29,601,291			230,818		3.15	%	29,185,231			220,126			2.98	%
Receivable on unsettled securities sales	62,641							33,813
Cash and other assets	3,291,057							3,742,032
Total assets	$	32,954,989						$	32,961,076
Liabilities and equity
Interest-bearing deposits:
Transaction	$	10,567,475		$	5,214	0.20	%	$	9,980,132		$	3,912		0.16	%
Savings	441,254			87		0.08	%	421,654			91			0.09	%
Time	2,258,930			6,053		1.09	%	2,177,035			6,140			1.12	%
Total interest-bearing deposits	13,267,659			11,354		0.35	%	12,578,821			10,143			0.32	%
Funds purchased	55,508			64		0.47	%	62,004			44			0.28	%
Repurchase agreements	523,561			32		0.02	%	560,891			34			0.02	%
Other borrowings	5,737,955			11,733		0.83	%	6,072,150			9,315			0.61	%
Subordinated debentures	144,644			2,025		5.68	%	144,635			2,003			5.51	%
Total interest-bearing liabilities	19,729,327			25,208		0.52	%	19,418,501			21,539			0.44	%
Non-interest bearing demand deposits	9,101,763							9,124,595
Due on unsettled securities purchases	91,529							77,575
Other liabilities	704,978							1,004,212
Total equity	3,327,392							3,336,193
Total liabilities and equity	$	32,954,989						$	32,961,076
Tax-equivalent Net Interest Revenue				$	205,610	2.63	%				$	198,587		2.54	%
Tax-equivalent Net Interest Revenue to Earning Assets						2.81	%							2.69	%
Less tax-equivalent adjustment				4,428							4,389
Net Interest Revenue				201,182							194,198
Provision for credit losses				—							—
Other operating revenue				170,296							143,754
Other operating expense				244,711							265,547
Income before taxes				126,767							72,405
Federal and state income taxes				38,103							22,496
Net income				88,664							49,909
Net income (loss) attributable to non-controlling interests				308							(117		)
Net income attributable to BOK Financial Corp. shareholders				$	88,356						$	50,026
Earnings Per Average Common Share Equivalent:
Basic				$	1.35						$	0.76
Diluted				$	1.35						$	0.76

Yield calculations are shown on a tax equivalent at the statutory federal and state rates for the periods presented. The yield calculations exclude security trades that have been recorded on trade date with no corresponding interest income and the unrealized gains and losses. The yield calculation also includes average loan balances for which the accrual of interest has been discontinued and are net of unearned income. Yield / rate calculations are generally based on the conventions that determine how interest income and expense is accrued.

- 118 -



Three Months Ended
September 30, 2016							June 30, 2016							March 31, 2016
Average Balance			Revenue /Expense		Yield / Rate		Average Balance			Revenue / Expense		Yield / Rate		Average Balance			Revenue / Expense			Yield / Rate

$	2,047,991		$	2,651	0.51	%	$	2,022,028		$	2,569	0.51	%	$	2,052,840		$	2,706		0.53	%
366,545			3,157		2.71	%	237,808			775		1.89	%	188,100			727			2.47	%

224,518			3,000		5.34	%	227,103			3,069		5.41	%	229,817			3,175			5.53	%
328,074			1,851		2.26	%	335,288			1,878		2.25	%	357,648			1,984			2.22	%
552,592			4,851		3.51	%	562,391			4,947		3.52	%	587,465			5,159			3.51	%

8,795,869			42,513		1.99	%	8,819,135			43,345		2.01	%	8,878,478			44,932			2.06	%
66,721			867		5.47	%	70,977			862		5.06	%	72,958			876			4.95	%
8,862,590			43,380		2.01	%	8,890,112			44,207		2.04	%	8,951,435			45,808			2.08	%
266,998			1,531		1.70	%	368,434			2,062		2.19	%	450,478			2,589			2.38	%
335,812			4,510		5.37	%	319,136			3,863		4.84	%	294,529			4,311			5.85	%
445,930			3,615		3.28	%	401,114			3,508		3.53	%	289,743			2,700			3.75	%
16,447,750			150,077		3.63	%	16,263,132			144,708		3.58	%	15,991,993			142,181			3.57	%
(247,901		)					(245,448		)					(234,116		)
16,199,849			150,077		3.69	%	16,017,684			144,708		3.63	%	15,757,877			142,181			3.63	%
29,078,307			213,772		2.93	%	28,818,707			206,639		2.91	%	28,572,467			206,181			2.92	%
259,906							49,568							115,101
3,308,260							3,117,767							2,820,903
$	32,646,473						$	31,986,042						$	31,508,471


$	9,650,618		$	3,417	0.14	%	$	9,590,855		$	3,260	0.14	%	$	9,756,843		$	3,317		0.14	%
420,009			100		0.09	%	417,122			102		0.10	%	397,479			93			0.09	%
2,197,350			6,295		1.14	%	2,297,621			6,635		1.16	%	2,366,543			7,132			1.21	%
12,267,977			9,812		0.32	%	12,305,598			9,997		0.33	%	12,520,865			10,542			0.34	%
68,280			33		0.19	%	70,682			33		0.19	%	112,211			76			0.27	%
522,822			53		0.04	%	611,264			72		0.05	%	662,640			89			0.05	%
6,342,369			9,105		0.57	%	6,076,028			8,675		0.57	%	5,583,917			7,807			0.56	%
255,890			2,468		3.84	%	232,795			878		1.52	%	226,368			710			1.26	%
19,457,338			21,471		0.44	%	19,296,367			19,655		0.41	%	19,106,001			19,224			0.40	%
8,497,037							8,162,134							8,105,756
200,574							93,812							158,050
1,099,858							1,089,483							813,427
3,391,666							3,344,246							3,325,237
$	32,646,473						$	31,986,042						$	31,508,471
			$	192,301	2.49	%				$	186,984	2.50	%				$	186,957		2.52	%
					2.64	%						2.63	%							2.65	%
			4,455							4,372							4,385
			187,846							182,612							182,572
			10,000							20,000							35,000
			187,310							185,542							157,414
			258,088							251,385							242,570
			107,068							96,769							62,416
			31,956							30,497							21,428
			75,112							66,272							40,988
			835							471							(1,576		)
			$	74,277						$	65,801						$	42,564

			$	1.13						$	1.00						$	0.64
			$	1.13						$	1.00						$	0.64

- 119 -

Quarterly Earnings Trends – Unaudited

(In thousands, except share and per share data)



	Three Months Ended
	March 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			March 31, 2016

Interest revenue	$	226,390		$	215,737		$	209,317		$	202,267		$	201,796
Interest expense	25,208			21,539			21,471			19,655			19,224
Net interest revenue	201,182			194,198			187,846			182,612			182,572
Provision for credit losses	—			—			10,000			20,000			35,000
Net interest revenue after provision for credit losses	201,182			194,198			177,846			162,612			147,572
Other operating revenue
Brokerage and trading revenue	33,623			28,500			38,006			39,530			32,341
Transaction card revenue	32,127			34,521			33,933			34,950			32,354
Fiduciary and asset management revenue	38,631			34,535			34,073			34,813			32,056
Deposit service charges and fees	23,030			23,365			23,668			22,618			22,542
Mortgage banking revenue	25,191			28,414			38,516			34,884			32,100
Other revenue	11,752			12,693			13,080			13,352			11,904
Total fees and commissions	164,354			162,028			181,276			180,147			163,297
Other gains, net	3,627			(1,279		)	2,442			1,307			1,560
Gain (loss) on derivatives, net	(450		)	(35,815		)	2,226			10,766			7,138
Gain (loss) on fair value option securities, net	(1,140		)	(20,922		)	(3,355		)	4,279			9,443
Change in fair value of mortgage servicing rights	1,856			39,751			2,327			(16,283		)	(27,988		)
Gain on available for sale securities, net	2,049			(9		)	2,394			5,326			3,964
Total other operating revenue	170,296			143,754			187,310			185,542			157,414
Other operating expense
Personnel	136,425			141,132			139,212			139,213			133,562
Business promotion	6,717			7,344			6,839			6,703			5,696
Charitable contributions to BOKF Foundation	—			2,000			—			—			—
Professional fees and services	12,379			16,828			14,038			14,158			11,759
Net occupancy and equipment	21,624			21,470			20,111			19,677			18,766
Insurance	6,404			8,705			9,390			7,129			7,265
Data processing and communications	33,940			33,691			33,331			32,802			32,017
Printing, postage and supplies	3,851			3,998			3,790			3,889			3,907
Net losses (gains) and operating expenses of repossessed assets	1,009			1,627			(926		)	1,588			1,070
Amortization of intangible assets	1,802			1,558			1,521			2,624			1,159
Mortgage banking costs	13,003			17,348			15,963			15,746			12,330
Other expense	7,557			9,846			14,819			7,856			15,039
Total other operating expense	244,711			265,547			258,088			251,385			242,570
Net income before taxes	126,767			72,405			107,068			96,769			62,416
Federal and state income taxes	38,103			22,496			31,956			30,497			21,428
Net income	88,664			49,909			75,112			66,272			40,988
Net income (loss) attributable to non-controlling interests	308			(117		)	835			471			(1,576		)
Net income attributable to BOK Financial Corporation shareholders	$	88,356		$	50,026		$	74,277		$	65,801		$	42,564

Earnings per share:
Basic	$1.35			$0.76			$1.13			$1.00			$0.64
Diluted	$1.35			$0.76			$1.13			$1.00			$0.64
Average shares used in computation:
Basic	64,715,964			64,719,018			65,085,392			65,245,887			65,296,541
Diluted	64,783,737			64,787,728			65,157,841			65,302,926			65,331,428

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PART II. Other Information

Item 1. Legal Proceedings

See discussion of legal proceedings at Note 7 to the Consolidated Financial Statements.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information with respect to purchases made by or on behalf of the Company or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of the Company’s common stock during the three months ended March 31, 2017.



Period	Total Number of Shares Purchased²	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs¹	Maximum Number of Shares that May Yet Be Purchased Under the Plans
January 1 to January 31, 2017	16,774	$	82.84	—	2,120,757
February 1 to February 28, 2017	—	$	—	—	2,120,757
March 1 to March 31, 2017	—	$	—	—	2,120,757
Total	16,774			—


¹	On October 1, 2015, the Company's board of directors authorized the Company to repurchase up to five million shares of the Company's common stock. As of March 31, 2017, the Company had repurchased 2,879,243 shares under this plan. Future repurchases of the Company's common stock will vary based on market conditions, regulatory limitations and other factors.


²	The Company routinely repurchases mature shares from employees to cover the exercise price and taxes in connection with employee equity compensation.

Item 6. Exhibits


31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


32	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Earnings, (iii) the Consolidated Statements of Changes in Equity, (iv) the Consolidated Statement of Cash Flows and (v) the Notes to Consolidated Financial Statements

Items 1A, 3, 4 and 5 are not applicable and have been omitted.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BOK FINANCIAL CORPORATION

(Registrant)

Date: April 28, 2017

/s/ Steven E. Nell

Steven E. Nell

Executive Vice President and

Chief Financial Officer

/s/ John C. Morrow

John C. Morrow

Senior Vice President and

Chief Accounting Officer

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BOK Financial - 10-Q quarterly report FY2017 Q1

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