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 SeptemberJune 30, 20172018
OR
¨ 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: 65,456,78665,439,090 shares of common stock ($.00006 par value) as of SeptemberJune 30, 20172018.



BOK Financial Corporation
Form 10-Q
Quarter Ended SeptemberJune 30, 20172018

Index

Part I.  Financial Information
Management’s Discussion and Analysis (Item 2)        
1
Market Risk (Item 3)                                                                                              
43
Controls and Procedures (Item 4)
46
Consolidated Financial Statements – Unaudited (Item 1)
4748
Quarterly Financial Summary – Unaudited (Item 2)
125120
Quarterly Earnings Trend – Unaudited
129123
  
Part II.  Other Information
Item 1.  Legal Proceedings
129123
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
129123
Item 6.  Exhibits
129123
Signatures
130124


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

BOK Financial Corporation (“the Company”) reported net income of $85.6114.4 million or $1.31$1.75 per diluted share for the thirdsecond quarter of 20172018, compared to $74.3 million or $1.13 per diluted share for the third quarter of 2016 and $88.1 million or $1.35 per diluted share for the second quarter of 2017 and $105.6 million or $1.61 per diluted share for the first quarter of 2018. 

On June 18, 2018, the Company announced the signing of a definitive merger agreement with CoBiz Financial Inc. CoBiz is headquartered in Denver with a presence in Colorado and Arizona and has approximately $3.8 billion in assets. Upon completion of the merger, CoBiz shareholders will receive 0.17 shares of BOK Financial common stock and $5.70 in cash for each share of CoBiz common stock. The merger is subject to customary closing conditions including regulatory approval.

Highlights of the thirdsecond quarter of 20172018 included:
Net interest revenue totaled $218.5$238.6 million,, up from $187.8$205.2 million in the third quarter of 2016 and $205.2 million in the second quarter of 2017 and $219.7 million in the first quarter of 2018. The increase in net interest revenue over the prior year was driven by both improving yields and growth in average earning assets. Net interest margin was 3.013.17 percent for the thirdsecond quarter of 20172018. Recoveries of foregone interest primarily related to nonaccruing energy loans added 6 basis points to the net interest margin for the third quarter. Net interest margin was 2.64 percent for the third quarter of 2016 and 2.89 percent for the second quarter of 2017 and 2.99 percent for the first quarter of 2018. Average earning assets were $29.6$30.3 billion for the third quarter of 2017 compared to $29.1 billion for the third quarter of 2016.
Fees and commissions revenue totaled $173.5 million, a $7.8 million decrease compared to the third quarter of 2016, primarily due to a $13.6 million decrease in mortgage banking revenue. This decrease was partially offset by growth in fiduciary and asset management revenue. Fees and commissions revenue decreased $4.0 million compared to the second quarter of 2017, primarily due to mortgage banking revenue. Increased transaction card revenue and brokerage and trading revenue was partially offset by lower fiduciary and asset management revenue and other revenue.
Other operating expense totaled $265.9 million, up $7.8 million over the third quarter of 2016. Personnel expense increased $8.7 million, primarily due to $5.9 million of equity compensation charges caused by changes in the probability that certain performance-based equity awards will vest and growth in BOKF's stock price. Other operating expense increased $15.0 million over the previous quarter. Personnel expense was up $4.2 million. Non-personnel expense increased $10.9 million. Deposit insurance expense for the second quarter of 2017 included $5.1 million in credits related to the revision of certain inputs to the assessment calculation filed in previous periods. Net losses and operating expenses of repossessed assets was up $3.8 million over the prior quarter primarily due to a $4.7 million write-down of one set of repossessed oil and gas properties.
No provision for credit losses was recorded in the third quarter of 2017 or the second quarter of 2017. A $10.0 million provision for credit losses was recorded in the third quarter of 2016. Gross charge-offs were $5.8 million in the third quarter of 2017, $8.1 million in the third quarter of 2016 and $2.9 million in the second quarter of 20172018. Recoveries were $2.4 million in the third quarter of 2017, compared to $2.0 million in the third quarter of 2016 and $1.2 million in$29.2 billion for the second quarter of 2017.
Fees and commissions revenue totaled $157.9 million. Adoption of the new revenue recognition accounting standard in the first quarter of 2018 resulted in interchange fees we pay to issuing banks being netted against transaction card revenue. Previously these fees were included in data processing and communications expense. Excluding this impact, fees and commissions revenue decreased $9.4 million compared to the second quarter of 2017. Brokerage and trading revenue decreased $5.3 million while mortgage banking revenue decreased $3.9 million, both affected by rising interest rates. Fees and commissions revenue decreased $1.1 million compared to the first quarter of 2018. Modest changes in revenue from other business lines was offset by decreased brokerage and trading revenue.
Other operating expense totaled $246.5 million, a $5.8 million or 2 percent increase over the second quarter of 2017 on a comparable basis. Personnel expense decreased $4.8 million, primarily due to decreased incentive compensation expense. Non-personnel expense increased $10.6 million due largely to an increase in deposit insurance expense as a result of credits in the second quarter of 2017 along with increased project and acquisition costs. Operating expense increased $2.0 million compared to the first quarter of 2018 on a comparable basis. Personnel expense decreased $1.0 million and non-personnel expense increased $3.0 million. Professional fees and services expense and mortgage banking costs were higher in the second quarter.
Income tax expense was $33.3 million or 22.4 percent of net income before taxes for the second quarter of 2018 compared to $47.7 million or 34.9 percent for the second quarter of 2017. Beginning January 1, 2018, the Tax Cuts and Jobs Act ("the Act") decreased the corporate income tax rate from 35% to 21%.
The Company recorded no provision for credit losses in the second quarter of 2018. A $5.0 million negative provision for credit losses was recorded in the first quarter of 2018. Net charge-offs totaled $10.5 million or 0.24 percent of average loans on an annualized basis in the second quarter of 2018 compared to net charge-offs of $1.3 million or 0.03 percent of average loans on an annualized basis for the first quarter of 2018. Net charge-offs were $26.9 million or 0.16 percent of average loans over the last four quarters.
The combined allowance for credit losses totaled $253$218 million or 1.471.21 percent of outstanding loans at SeptemberJune 30, 2017,2018 compared to $256$228 million or 1.491.32 percent of outstanding loans at June 30, 2017. 
March 31, 2018.
Nonperforming assets that are not guaranteed by U.S. government agencies totaled $249$186 million or 1.461.04 percent of outstanding loans and repossessed assets at SeptemberJune 30, 20172018 and $276$195 million or 1.621.13 percent of outstanding loans and repossessed assets at March 31, 2018. Potential problem loans decreased $82 million to $140 million at June 30, 2017. The decrease in nonperforming assets was2018.
Average loan balances grew by $490 million over the previous quarter, primarily due to nonaccruing energy loans.
Average loans were largely unchanged compared to the previous quarter.growth in commercial and commercial real estate loan balances. Period-end outstanding loan balances were $17.2totaled $18.0 billion at SeptemberJune 30, 2017,2018, an increase of $23more than $665 million over June 30, 2017.March 31, 2018.


Average deposits were largely unchanged compared to the previous quarter. Growth inAverage demand deposit balances was offset byincreased $72 million, while interest-bearing transaction deposit balances decreased time deposit balances.$155 million. Period-end deposits were $21.8$22.2 billion at SeptemberJune 30, 2017,2018, a $468$36 million decrease compared to June 30, 2017.March 31, 2018.
The Company's common equity Tier 1 capital ratio at June 30, 2018 was 11.90% at September 30, 2017. In addition,11.92 percent. Other regulatory capital ratios were Tier 1 capital ratio, 11.92 percent, total capital ratio, 13.26 percent, and leverage ratio, 9.57 percent. At March 31, 2018, the Company'scommon equity Tier 1 capital ratio was 11.90%, total capital ratio was 13.47% and leverage ratio was 9.30% at September 30, 2017. The Company's common equity Tier 1 ratio was 11.76% at June 30, 2017. In addition,12.06 percent, the Company's Tier 1 capital ratio was 11.76%,12.06 percent, total capital ratio was 13.36%13.49 percent, and leverage ratio was 9.27% at June 30, 2017.9.40 percent.


The Companycompany paid a regular quarterly cash dividend of $29$29.3 million or $0.44$0.45 per common share during the thirdsecond quarter of 2017.2018. On October 31, 2017,July 24, 2018, the board of directors approved an increase in the regular quarterly cash dividend to $0.45$0.50 per common share payable on or about NovemberAugust 27, 20172018 to shareholders of record as of NovemberAugust 13, 2017.
2018.
The company repurchased 8,257 common shares at an average price of $99.84 per share during the second quarter of 2018. The company repurchased 82,583 common shares at an average price of $91.83 per share during the first quarter of 2018.


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 $218.5$238.6 million for the thirdsecond quarter of 20172018, up from $187.8$205.2 million in the third quarter of 2016 and $205.2 million in the second quarter of 2017 and $219.7 million in the first quarter of 2018. Net interest margin was 3.013.17 percent for the thirdsecond quarter of 20172018,2.64 percent for the third quarter of 2016 and 2.89 percent for the second quarter of 2017 and 2.99 percent for the first quarter of 2018. Approximately $4.7Recoveries of foregone interest on nonaccruing loans added $5.3 million or 7 basis points to net interest margin in the second quarter of 2018. Recoveries of foregone interest were not significant in the first quarter of 2018 or the second quarter of 2017. The discussion following excludes the impact of recoveries of foregone interest in the second quarter of 2018 on net interest margin.

In addition to the impact of foregone interest recoveries primarily related to nonaccruing energy loans added 6 basis points toon the second quarter of 2018, net interest margin forwas 4 basis points lower in the thirdsecond quarter of 2017. Interest recoveries from nonaccruing loans were not significant for2018 compared to the third quarter of 2016 and second quarter of 2017. This due to the impact is excludedof lower effective tax rates from the discussion following.implementation of the Tax Cut and Jobs Act on the tax-equivalent yield of our tax-exempt loans and securities. However, net interest margin was 4 basis points higher in the second quarter of 2018 as we reduced our excess cash balances at the Federal Reserve. Beginning in 2014, the Company increased borrowings from the Federal Home Loan Banks, depositing the excess cash balances in the Federal Reserve to earn a spread. In conjunction with the Federal Reserve's monetary policy normalization, this spread narrowed in the second quarter of 2018.

Tax-equivalent net interest revenue increased $30.5$31.0 million over the thirdsecond quarter of 20162017. 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. Changes in interest rates and yields increased net interest revenue by $19.1$20.5 million. The benefit of an increase in short-term interest rates on the floating-rate earning assets was partially offset by higher borrowing costs. Tax-equivalent net interest revenue increased $11.3 million.$10.5 million due to growth in average assets. Growth in the average balances of loans, fair value optiontrading securities and trading securitiesloans was partially offset by decreases in available for sale securitiesinterest-bearing cash and residential mortgage loans held for sale.cash equivalents.

Excluding the impact of net interest recoveries in the third quarter of 2017, theThe tax-equivalent yield on earning assets was 3.443.84 percent, up 51 54 basis points over the thirdsecond quarter of 20162017, primarily due to increases in short-term interest rates resulting from three 25 basis point increases in the federal funds rate by the Federal Reserve. Loan yields increased 5765 basis points to 4.204.68 percent. The yield on interest-bearing cash and cash equivalents increased 7882 basis points. The available for sale securities portfolio yield was up 1619 basis points to 2.172.30 percent. The yield on the fair value option securities portfolio increased 127 basis points primarily related to a change in the mix of securities and an increase in average rates. Funding costs were up31 48 basis points over the thirdsecond quarter of 20162017. Growth in theThe cost of interest-bearing deposits was limited to 13increased 26 basis points by a lack of market pricing pressure. Theand the cost of other borrowed funds increased70 82 basis points. The cost of the subordinated debt was up 184 basis points as higher fixed rate debt issued in the second quarter of 2016 replaced lower variable rate debt paid off in third quarter of 2016.points. The benefit to net interest margin from earning assets funded by non-interest bearing liabilities was 2637 basis points for the thirdsecond quarter of 20172018, up 1115 basis points over the thirdsecond quarter of 2016. Average non-interest bearing deposits comprised 28% of total liabilities and equity for the third quarter of 2017, up from 26% for the third quarter of 2016.

Average earning assets for the thirdsecond quarter of 2018 increased $1.1 billion or 4 percent over the second quarter of 2017increased$559 million or 2 percent over the third quarter of 2016, including $482 million related to the Mobank acquisition in the fourth quarter of 2016. Average loans, net of allowance for loan losses, increased$806 million due primarily to growth in commercial and personal loans, partially offset by lower commercial real estate loan balances. Loan growth included $482 million related to the Mobank acquisition. Fair value option securities held as an economic hedge of our mortgage servicing rights increased $418 million.. The average balance of trading securities increased $125 milliongrew by $1.0 billion, primarily due to expansion of U.S. agency residential mortgage-backed securities trading activities. Average loans, net of allowance for loan losses, increased $650 million, due primarily to growth in commercial loans. Restricted equity security balances were up $53 million. Interest-bearing cash and cash equivalent balances decreased $334 million. Available for sale securities decreased $434221 million. The average balanceInvestment securities balances decreased $100 million.

Average deposits decreased $37 million compared to the second quarter of residential mortgage loans held for sale2017. Demand deposit balances decreased $190$115 million and time deposit balances decreased $66 million. Interest-bearing cash and cash equivalents decreased $82transaction account balances increased $102 million and investment securities decreased $77savings account balances increased $42 million. Average borrowed funds increased $1.0 billion over the second quarter of 2017, primarily due to the net impact of increased borrowings from the Federal Home Loan Banks. Funds purchased and repurchase agreement balances also increased over the prior year.



Average deposits increased$1.4 billion over the third quarter of 2016, including $514 million from the Mobank acquisition. Demand deposit balances grew by $893 million, including $248 million from Mobank. Interest-bearing transaction account balances increased $438 million, including $233 million from Mobank. Savings account balances also grew over the prior year and time deposit balances were largely unchanged. Average borrowed funds decreased$360 million compared to the third quarter of 2016, primarily due to decreased borrowings from the Federal Home Loan Banks and lower average repurchase agreement balances. The average balance of subordinated debentures decreased $111 million.

Excluding the impact of net interest recoveries in the third quarter of 2017, net interest margin increased 6 basis points over the second quarter of 2017. The yield on average earning assets increased 14was 3.84 percent, a 23 basis points.point increase over the prior quarter. The loan portfolio yield also increased by 1723 basis points primarily due to increases in the 30 day and 90 day LIBOR.4.68 percent. The yield on the available for sale securities portfolio increased 67 basis points.points to 2.30 percent. The yield on interest-bearing cash and cash equivalents increased 2529 basis points. Funding costs were 0.751.11 percent, up 1218 basis points. The cost of interest-bearing deposits increased 9 basis points over the prior quarter.to 0.66 percent. The cost of other borrowed funds was up 34 basis points to 1.84 percent. The benefit to net interest margin from earning assets funded by non-interest bearing liabilities increased 46 basis points over the prior quarter.
Average earning assets increased $395$423 million compared toover the secondfirst quarter of 2017.2018. Trading securities balances increased $549 million. Average loan balances grew by $490 million. Average interest-bearing cash and cash equivalents balances decreased $386 million. Fair value option securities held as an economic hedge of our mortgage servicing rights increased $208 million. Average loan balances grew by $127decreased $139 million. Available for sale securities increased $44 million, trading securities increased $36 million and restricted equity securities were up $33 million over the prior quarter. These increases were partially offset by a $42 million decrease in average interest-bearing cash and cash equivalents balances.decreased $74 million.
Average deposits increased $27decreased $72 million overcompared to the previous quarter. Interest-bearing transaction account balances decreased by $155 million. Demand deposit balances increased $51 million, partially offset by a $28 million decrease in time deposit balances. Interest-bearing transaction account balances were largely unchanged compared to the prior quarter.$72 million. The average balance of borrowed funds increased $511$231 million over the secondfirst quarter of 20172018, primarily due to increased borrowings from the Federal Home Loan Banks partially offset by lower averageand funds purchased and repurchase agreement balances.

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%82% of our commercial and commercial real estate loan portfolios are either variable rate or fixed rate that will reprice within one year. These loans are funded primarily by deposit accounts that are either non-interest bearing, or that reprice more slowly than the loans. The result is a balance sheet that would be asset sensitive, which means that assets generally reprice more quickly than liabilities. One of the strategies that we use to manage toward a relative rate-neutral position is to purchase fixed-rate residential mortgage-backed securities issued primarily by U.S. government agencies and fund them with market-rate-sensitive liabilities. The liability-sensitive nature of this strategy provides an offset to the asset-sensitive characteristics of our loan portfolio. We also may use derivative instruments to manage our interest rate risk. For the remainder of 2018, we expect low-to-mid single digit expansion in net interest margin for each 25 basis point increase in the federal funds rate.

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.



Table 1 -- Volume/Rate Analysis
(In thousands)
 Three Months Ended
September 30, 2017 / 2016		 Nine Months Ended
September 30, 2017 / 2016		 Three Months Ended
June 30, 2018 / 2017		 Six Months Ended
June 30, 2018 / 2017
   
Change Due To1
   
Change Due To1
   
Change Due To1
   
Change Due To1
 Change Volume Yield/Rate Change Volume Yield/Rate Change Volume Yield/Rate Change Volume Yield/Rate
Tax-equivalent interest revenue:                        
Interest-bearing cash and cash equivalents $3,724
 $(204) $3,928
 $7,891
 $(172) $8,063
 $2,542
 $(1,215) $3,757
 $6,280
 $(1,190) $7,470
Trading securities 965
 3,813
 (2,848) 8,349
 12,645
 (4,296) 9,567
 8,625
 942
 12,007
 12,203
 (196)
Investment securities:                        
Taxable securities (58) (40) (18) (358) (246) (112) (86) (24) (62) (143) 45
 (188)
Tax-exempt securities (201) (452) 251
 (413) (1,058) 645
 (661) (609) (52) (1,346) (1,160) (186)
Total investment securities (259) (492) 233
 (771) (1,304) 533
 (747) (633) (114) (1,489) (1,115) (374)
Available for sale securities:                        
Taxable securities 2,066
 (1,536) 3,602
 (364) (4,819) 4,455
 4,402
 247
 4,155
 7,290
 (1,009) 8,299
Tax-exempt securities (301) (275) (26) (586) (771) 185
 (584) (354) (230) (1,119) (681) (438)
Total available for sale securities 1,765
 (1,811) 3,576
 (950) (5,590) 4,640
 3,818
 (107) 3,925
 6,171
 (1,690) 7,861
Fair value option securities 3,535
 1,881
 1,654
 4,803
 2,532
 2,271
 388
 93
 295
 2,827
 1,725
 1,102
Restricted equity securities 316
 (168) 484
 850
 (294) 1,144
 1,009
 817
 192
 1,817
 1,376
 441
Residential mortgage loans held for sale (1,520) (1,597) 77
 (3,506) (3,641) 135
 (53) (260) 207
 (45) (438) 393
Loans 37,429
 8,320
 29,109
 86,798
 24,936
 61,862
 40,127
 6,745
 33,382
 65,682
 8,062
 57,620
Total tax-equivalent interest revenue 45,955
 9,742
 36,213
 103,464
 29,112
 74,352
 56,651
 14,065
 42,586
 93,250
 18,933
 74,317
Interest expense:                        
Transaction deposits 4,645
 211
 4,434
 9,719
 816
 8,903
 7,556
 164
 7,392
 13,836
 (29) 13,865
Savings deposits (10) 5
 (15) (23) 36
 (59) —
 4
 (4) 1
 9
 (8)
Time deposits 83
 (43) 126
 (1,541) (659) (882) 785
 (193) 978
 1,369
 (492) 1,861
Funds purchased 83
 (26) 109
 134
 (92) 226
Repurchase agreements 87
 (37) 124
 26
 (62) 88
Funds purchased and repurchase agreements 618
 81
 537
 1,044
 39
 1,005
Other borrowings 11,000
 (384) 11,384
 21,439
 (1,190) 22,629
 16,637
 3,532
 13,105
 29,831
 5,223
 24,608
Subordinated debentures (398) (1,331) 933
 2,042
 (2,823) 4,865
 45
 (1) 46
 23
 1
 22
Total interest expense 15,490
 (1,605) 17,095
 31,796
 (3,974) 35,770
 25,641
 3,587
 22,054
 46,104
 4,751
 41,353
Tax-equivalent net interest revenue 30,465
 11,347
 19,118
 71,668
 33,086
 38,582
 31,010
 10,478
 20,532
 47,146
 14,182
 32,964
Change in tax-equivalent adjustment (141)     (140)     (2,348)     (4,766)    
Net interest revenue $30,606
     $71,808
     $33,358
     $51,912
    
1 
Changes attributable to both volume and yield/rate are allocated to both volume and yield/rate on an equal basis.


Other Operating Revenue

Other operating revenue was $175.7$156.4 million for the thirdsecond quarter of 20172018, an $11.6 million decrease compared to the third quarter of 2016 and a $6.5$15.6 million decrease compared to the second quarter of 2017 and largely unchanged compared to the first quarter of 2018. Fees and commissions revenue decreased $7.8$9.4 million compared to the third quarter of 2016 and decreased $4.0 million compared to the prior quarter. The change in the fair value of mortgage servicing rights, net of economic hedges, increased other operating revenue by $1.0 million in the third quarter of 2017, increased other operating revenue by $1.2 million in the third quarter of 2016 and decreased other operating revenue $1.7 million in the second quarter of 2017. and was very consistent compared to the prior quarter. 

Table 2 – Other Operating Revenue 
(In thousands)
 Three Months Ended
September 30,		 Increase (Decrease) % Increase (Decrease) Three Months Ended
June 30, 2017		 Increase (Decrease) % Increase (Decrease) Three Months Ended
June 30,		 Increase (Decrease) % Increase (Decrease) Three Months Ended Mar 31, 2018 Increase (Decrease) % Increase (Decrease)
 2017 2016  2018 2017 
Brokerage and trading revenue $33,169
 $38,006
 $(4,837) (13)% $31,764
 $1,405
 4 % $26,488
 $31,764
 $(5,276) (17)% $30,648
 $(4,160) (14)%
Transaction card revenue 37,826
 33,933
 3,893
 11 % 35,296
 2,530
 7 %
Transaction card revenue1
 20,975
 20,009
 966
 5 % 20,990
 (15) — %
Fiduciary and asset management revenue 40,687
 34,073
 6,614
 19 % 41,808
 (1,121) (3)% 41,699
 41,808
 (109) — % 41,832
 (133) — %
Deposit service charges and fees 23,209
 23,668
 (459) (2)% 23,354
 (145) (1)% 27,827
 28,422
 (595) (2)% 27,161
 666
 2 %
Mortgage banking revenue 24,890
 38,516
 (13,626) (35)% 30,276
 (5,386) (18)% 26,346
 30,276
 (3,930) (13)% 26,025
 321
 1 %
Other revenue 13,670
 13,080
 590
 5 % 14,984
 (1,314) (9)% 14,518
 14,984
 (466) (3)% 12,330
 2,188
 18 %
Total fees and commissions revenue 173,451
 181,276
 (7,825) (4)% 177,482
 (4,031) (2)% 157,853
 167,263

(9,410) (6)% 158,986

(1,133) (1)%
Other gains (losses), net (1,283) 2,442
 (3,725) N/A
 6,108
 (7,391) N/A
 3,983
 6,108
 (2,125) N/A
 (664) 4,647
 N/A
Gain on derivatives, net 1,033
 2,226
 (1,193) N/A
 3,241
 (2,208) N/A
Gain (loss) on fair value option securities, net 661
 (3,355) 4,016
 N/A
 1,984
 (1,323) N/A
Loss on derivatives, net (3,057) 3,241
 (6,298) N/A
 (5,685) 2,628
 N/A
Loss on fair value option securities, net (3,341) 1,984
 (5,325) N/A
 (17,564) 14,223
 N/A
Change in fair value of mortgage servicing rights (639) 2,327
 (2,966) N/A
 (6,943) 6,304
 N/A
 1,723
 (6,943) 8,666
 N/A
 21,206
 (19,483) N/A
Gain on available for sale securities, net 2,487
 2,394
 93
 N/A
 380
 2,107
 N/A
Gain (loss) on available for sale securities, net (762) 380
 (1,142) N/A
 (290) (472) N/A
Total other operating revenue $175,710
 $187,310
 $(11,600) (6)% $182,252
 $(6,542) (4)% $156,399
 $172,033
 $(15,634) (9)% $155,989
 $410
 — %
              
Non-GAAP Reconciliation:1
              
Transaction card revenue on income statement $20,975
 $30,228
 N/A
 N/A
 $20,990
 N/A
 N/A
Netting adjustment —
 (10,219) N/A
 N/A
 —
 N/A
 N/A
Transaction card revenue after netting adjustment $20,975
 $20,009
 966
 5 % $20,990
 (15) — %
1
Non-GAAP measure to net interchange charges from prior quarters between transaction card revenue and data processing and communications expense. This measure has no effect on net income or earnings per share.

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 4440 percent of total revenue for the thirdsecond quarter of 20172018, 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 causesuch as rising interest rates resulting in growth in net interest revenue compression such as falling interest ratesor fiduciary and asset management revenue, may also drive growth in ourdecrease mortgage banking revenue.production volumes. 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

Brokerage and trading revenue, which includes revenues from trading, customer hedging, retail brokerage and investment banking, decreased $4.8$5.3 million or 1317 percent compared to the thirdsecond quarter of 20162017.

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 $11.9$6.3 million for the thirdsecond quarter of 20172018, a $98 thousand$3.7 million or 137 percent decrease compared to the thirdsecond quarter of 20162017. Rising mortgage interest rates narrowed trading margins and slowed turnover of our trading inventory. However, the longer average hold time of trading securities increased net interest revenue by $3.1 million.



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 $10.5$9.8 million for the thirdsecond quarter of 20172018, a $3.2$1.8 million or 2316 percent decrease compared to the thirdsecond quarter of 2016 primarily attributed to decreased activity related to our mortgage banking customers.2017.

Revenue earned from retail brokerage transactions decreased $1.7$1.2 million or 2520 percent compared to the thirdsecond quarter of 20162017 to $5.2 million.$4.8 million. Retail brokerage revenue includes 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 implementation of the new Department of Labor ("DOL") fiduciary rule in the second quarter of 2017 has negatively impacted retail brokerage revenue. New regulation issued by the DOL amended the definition of investment advice under the Employee Retirement Income Security Act ("ERISA"). The new rule is designed to provide better protection to plans, participants, beneficiaries and individual retirement account ("IRA") owners against conflicts of interest, imprudence and disloyalty.

Investment banking revenue, which includes fees earned upon completion of underwriting and financial advisory services and loan syndication fees, totaled $5.5$5.5 million for the thirdsecond quarter of 20172018, a $214 thousand$1.5 million or 437 percent increase over the thirdsecond quarter of 20162017. InvestmentChanges in investment banking revenue isare primarily related to the timing and volume of completed transactions.

Brokerage and trading revenue increased $1.4decreased $4.2 million overcompared to the secondfirst quarter of 20172018, primarily due to increases of $1.8 millionlargely driven by a decrease in trading revenue and $1.5 million in investment banking revenue, partially offset by a decrease of $1.1 million indue primarily to customer hedging revenue.reaction to higher interest rates.

Transaction Card Revenue

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 forincreased $966 thousand or 5 percent over the thirdsecond quarter of 2017 increased $3.9 million or 11.5 percent, including a $2.1 million early termination penalty, over the third quarter of 2016. Excluding the penalty, TransFund revenue was up $1.0 million or 5.3 percent. TransFund electronic funds transfer ("EFT") network revenue totaled $20.8 million, up $3.1 million or 17.3 percent over the prior year. Merchant services fees totaled $12.0 million, a $712 thousand or 6 percent increase. Revenue from interchange fees paid by merchants for transactions processed from debit cards issued by the Company totaled $5.0 million, an increase of $114 thousand or 2 percent.
Transaction card revenue increased $2.5 million over the prior quarter, primarily due to aincreases in transaction volumes. Transaction card was largely unchanged compared to the first quarter of 2018. The increase in transaction card revenue from the first quarter of 2018 due to an early customer early termination fee was matched in the thirdsecond quarter of 2017. with a seasonal increase in the volume of transactions processed.

Fiduciary and Asset Management Revenue

Fiduciary and asset management revenue is earned through managing or holding of assets for customers and executing transactions or providing related services. Approximately 80 percent of fiduciary and asset management revenue is primarily based on the fair value of assets. Rates applied to asset values vary based on the nature of the relationship. Fiduciary relationships and managed asset relationships generally have higher fee rates than non-fiduciary and/or managed relationships.
Fiduciary and asset management revenue grew by $6.6 million or 19 percent over the third quarter of 2016, primarily due to growth in assets under management, improved pricing discipline and decreased fee waivers.

Fiduciary and asset management revenue decreased $1.1 millionwas largely unchanged compared to the second quarter of 2017. The annual assessment of tax preparation fees added $1.0 million in and the secondfirst quarter of 20172018.



A distribution of assets under management or administration and related fiduciary and asset management revenue follows:

Table 3 -- Assets Under Management or Administration
Three Months Ended
September 30,		Three Months Ended
2017 2016June 30, 2018 June 30, 2017 Mar. 31, 2018
Balance 
Revenue1
 
Margin2
 Balance 
Revenue1
 
Margin2
Balance 
Revenue1
 
Margin2
 Balance 
Revenue1
 
Margin2
 Balance 
Revenue1
 
Margin2
Managed fiduciary assets:                            
Personal$7,611,265
 $21,299
 1.12% $7,502,577
 $19,521
 1.04%$7,791,094
 $23,307
 1.20% $7,581,555
 $21,698
 1.14% $7,577,717
 22,632
 1.19%
Institutional12,747,679
 5,585
 0.18% 11,732,295
 4,366
 0.15%13,448,068
 5,596
 0.17% 12,265,037
 5,475
 0.18% 13,322,472
 5,469
 0.16%
Total managed fiduciary assets20,358,944
 26,884
 0.53% 19,234,872
 23,887
 0.50%21,239,162
 28,903
 0.54% 19,846,592
 27,173
 0.55% 20,900,189
 28,101
 0.54%
                            
Non-managed assets:                            
Fiduciary24,818,241
 13,214
 0.21% 23,164,851
 9,692
 0.17%25,292,738
 12,426
 0.20% 25,242,561
 14,049
 0.22% 25,748,101
 12,997
 0.20%
Non-fiduciary16,458,382
 589
 0.01% 17,289,854
 494
 0.01%16,422,810
 370
 0.01% 16,579,586
 586
 0.01% 16,321,458
 734
 0.02%
Safekeeping and brokerage assets under administration16,015,342
 —
 —% 15,584,153
 —
 —%15,918,736
 —
 —% 16,143,023
 —
 —% 15,909,241
 —
 —%
Total non-managed assets57,291,965
 13,803
 0.10% 56,038,858
 10,186
 0.07%57,634,284
 12,796
 0.09% 57,965,170
 14,635
 0.10% 57,978,800
 13,731
 0.09%
                            
Total assets under management or administration$77,650,909
 $40,687
 0.21% $75,273,730
 $34,073
 0.18%$78,873,446
 $41,699
 0.21% $77,811,762
 $41,808
 0.21% $78,878,989
 $41,832
 0.21%
1 
Fiduciary and asset management revenue includes asset-based and other fees associated with the assets.
2 
Annualized revenue divided by period-end balance.

A summary of changes in assets under management or administration for the three months ended SeptemberJune 30, 20172018 and 20162017 follows:

Table 4 -- Changes in Assets Under Management or Administration
 Three Months Ended
September 30,		 Three Months Ended
June 30,
 2017 2016 2018 2017
Beginning balance $77,811,762
 $73,001,516
 $78,878,989
 $77,418,956
Net inflows (outflows) (1,781,037) 870,819
 (746,477) (918,076)
Net change in fair value 1,620,184
 1,401,395
 740,934
 1,310,882
Ending balance $77,650,909
 $75,273,730
 $78,873,446
 $77,811,762

Deposit service charges and fees were $23.2 million for the third quarter of 2017, a decrease of $459 thousand or 2 percent compared to the third quarter of 2016. Commercial account service charge revenue totaled $11.8 million, up $400 thousand or 4 percent. Overdraft fees were $9.7 million, an $895 thousand or 8.5 percent decrease compared to the third quarter of 2016. Service charges on deposit accounts with a standard monthly fee were $1.7 million, an increase of $33 thousand or 2 percent. Deposit service charges and fees decreased $145 thousand compared to the prior quarter.Mortgage Banking Revenue

Mortgage banking revenue decreased $13.6$3.9 million or 3513 percent compared to the thirdsecond quarter of 2016. Mortgage2017 due to a decrease in mortgage production revenue decreased $13.6 million.revenue. Mortgage loan production volumes decreased $725$157 million including a $539 million decrease related to the Company's strategic decision to exit the correspondent lending channel during the third quarter of 2016.or 18 percent. Production volumes in the retail channel decreased compared to the prior year as average primary mortgage interest rates were up 4356 basis points over the thirdsecond quarter of 2016. Gain on sale margin decreased 41 basis points compared to the prior year. The margin decrease was primarily due to market pricing pressure.2017. Mortgage servicing revenue was relatively consistent compared to the thirdsecond quarter of 2016.2017. The outstanding principal balance of mortgage loans serviced for others totaled $22.1$22.0 billion, an increase of $212 million or 1 percent.


Mortgage banking revenue decreased $5.4 million compared toconsistent with the second quarter of 2017. Mortgage production revenue decreased $5.5 million. Production volume decreased $78 million primarily due to increased competition. Gain on sale margin decreased due to increased market pricing pressure. Revenue from mortgage loan servicing increased $125 thousand over the prior quarter.




Table 5 – Mortgage Banking Revenue 
(In thousands)
 Three Months Ended
September 30,		 Increase (Decrease) % Increase (Decrease) Three Months Ended
June 30, 2017		 Increase (Decrease) % Increase (Decrease) Three Months Ended
June 30,		 Increase (Decrease) % Increase (Decrease) Three Months Ended Mar. 31, 2018 Increase (Decrease) % Increase (Decrease)
 2017 2016  2018 2017 
Mortgage production revenue $8,329
 $21,958
 $(13,629) (62)% $13,840
 $(5,511) (40)% $9,915
 $13,840
 $(3,925) (28)% $9,452
 $463
 5 %
                            
Mortgage loans funded for sale $832,796
 $1,864,583
 

 

 $902,978
     $773,910
 $902,978
 

 

 $664,958
    
Add: Current period end outstanding commitments 334,337
 630,804
     362,088
     251,231
 362,088
     298,318
    
Less: Prior period end outstanding commitments 362,088
 965,631
     381,732
     298,318
 381,732
     222,919
    
Total mortgage production volume $805,045
 $1,529,756
 $(724,711) (47)% $883,334
 $(78,289) (9)% $726,823
 $883,334
 $(156,511) (18)% $740,357
 $(13,534) (2)%
                            
Mortgage loan refinances to mortgage loans funded for sale 38% 51% (1,300) bps   33% 500 bps   22% 33% (1,100) bps   42% (2,000) bps  
Gains on sale margin 1.03% 1.44% (41) bps   1.57% (54) bps   1.36% 1.57% (21) bps   1.28% 8 bps  
Primary mortgage interest rates:                            
Average 3.88% 3.45% 43 bps   3.98% (10) bps   4.54% 3.98% 56 bps   4.28% 26 bps  
Period end 3.83% 3.42% 41 bps   3.88% (5) bps   4.55% 3.88% 67 bps   4.44% 11 bps  
                            
Mortgage servicing revenue $16,561
 $16,558
 $3
 — % $16,436
 $125
 1 % $16,431
 $16,436
 $(5) — % $16,573
 $(142) (1)%
Average outstanding principal balance of mortgage loans serviced for others 22,079,177
 21,514,962
 564,215
 3 % 22,055,127
 24,050
 — % 21,986,065
 22,055,127
 (69,062) — % 22,027,726
 (41,661) — %
                            
Average mortgage servicing revenue rates 0.30% 0.31% (1) bp   0.30% —
   0.30% 0.30% —
   0.31% (1) bp  
1 
Actual interest earned on fair value option securities less internal transfer-priced cost of funds.

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

Net gains on other assets, securities and derivatives

Other net lossesgains totaled $1.3$4.0 million in the thirdsecond quarter of 2017, which includes a $1.1 million write-down related2018 compared to recent tornado damage. Other net gains totaledof $6.1 million in the second quarter of 2017. The second quarter of 2017 due toincluded the sale of a merchant banking investment. Other net losses totaled $664 thousand in the first quarter of 2018.

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 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 $3.6 million in the third quarter of 2017, including a $639 thousand decrease in the fair value of mortgage servicing rights, offset by a $1.7 million increase in the fair value of securities and derivative contracts held as an economic hedge and $2.5 million of related net interest revenue.

The net economic benefit of changes in the fair value of mortgage servicing rights and related economic hedges was $2.1 million for the third quarter of 2016. The fair value of mortgage servicing rights increased $2.3 million.The fair value of securities and interest rate derivative contracts held as an economic hedge decreased $1.1 million. Net interest earned on securities held as an economic hedge was $861 thousand.


The net economic benefit of changes in the fair value of mortgage servicing rights and related economic hedges was $247 thousand for the second quarter of 2017. The fair value of mortgage servicing rights decreased by $6.9 million. The fair value of securities and interest rate derivative contracts held as an economic hedge increased by $5.2 million.

Table 6 - Gain (Loss) on Mortgage Servicing Rights
(In thousands)
 Three Months Ended Three Months Ended
 Sept. 30, 2017 June 30, 2017 Sept. 30, 2016 June 30, 2018 Mar. 31, 2018 June 30, 2017
Gain on mortgage hedge derivative contracts, net $1,025
 $3,241
 $2,268
Gain (loss) on mortgage hedge derivative contracts, net $(3,070) $(5,698) $3,241
Gain (loss) on fair value option securities, net 661
 1,984
 (3,355) (3,341) (17,564) 1,984
Gain (loss) on economic hedge of mortgage servicing rights, net 1,686
 5,225
 (1,087) (6,411) (23,262) 5,225
Gain (loss) on change in fair value of mortgage servicing rights (639) (6,943) 2,327
 1,723
 21,206
 (6,943)
Gain (loss) on changes in fair value of mortgage servicing rights, net of economic hedges included in other operating revenue 1,047
 (1,718) 1,240
Loss on changes in fair value of mortgage servicing rights, net of economic hedges included in other operating revenue (4,688) (2,056) (1,718)
Net interest revenue on fair value option securities1
 2,543
 1,965
 861
 1,203
 1,800
 1,965
Total economic benefit of changes in the fair value of mortgage servicing rights, net of economic hedges $3,590
 $247
 $2,101
Total economic benefit (cost) of changes in the fair value of mortgage servicing rights, net of economic hedges $(3,485) $(256) $247
1 Actual interest earned on fair value option securities less internal transfer-priced cost of funds.
During the second quarter of 2018, we changed certain assumptions used in our prepayment speed model to better align with current market expectations. During the second quarter of 2018 the fair value of our mortgage servicing rights was reduced by $3.7 million due primarily to an update of assumptions in our prepayment model designed to better align our model with current market behavior and observed portfolio performance.



Other Operating Expense

Other operating expense for the thirdsecond quarter of 2018 totaled $246.5 million, an increase of $5.8 million or 2 percent compared to the second quarter of 2017 totaled $265.9 million, an increase of $7.8. Personnel expense decreased $4.8 million or 3 percent over the third quarter of 2016. Personnel expense increased $8.7 million or 6 percent. Non-personnel expense decreased $852 thousandincreased $10.6 million or 111 percent compared to the prior year.

Other operating expense increased $15.0$2.0 million over the previous quarter. Personnel expense was up $4.2decreased $1.0 million and non-personnel expense increased $10.9$3.0 million.

In addition to $1.1 million of losses included in other gain (losses), net, operating expense for the third quarter of 2017 included $1.3 million of additional expense related to tornado damage sustained on our Tulsa operations center and the impact of the hurricane in the Houston market.

Table 7 – Other Operating Expense
(In thousands)
  Three Months Ended
September 30,		 Increase (Decrease) 
%
Increase (Decrease)
 Three Months Ended
June 30, 2017		 Increase (Decrease) 
%
Increase (Decrease)
  2017 2016     
Regular compensation $83,583
 $83,123
 $460
 1 % $83,630
 $(47) — %
Incentive compensation:     

 

      
Cash-based 33,643
 33,240
 403
 1 % 29,954
 3,689
 12 %
Share-based 8,407
 1,839
 6,568
 357 % 7,380
 1,027
 14 %
Deferred compensation 975
 1,059
 (84) N/A
 1,000
 (25) N/A
Total incentive compensation 43,025
 36,138
 6,887
 19 % 38,334
 4,691
 12 %
Employee benefits 21,302
 19,951
 1,351
 7 % 21,780
 (478) (2)%
Total personnel expense 147,910
 139,212
 8,698
 6 % 143,744
 4,166
 3 %
Business promotion 7,105
 6,839
 266
 4 % 7,738
 (633) (8)%
Professional fees and services 11,887
 14,038
 (2,151) (15)% 12,419
 (532) (4)%
Net occupancy and equipment 21,325
 20,111
 1,214
 6 % 21,125
 200
 1 %
Insurance 6,005
 9,390
 (3,385) (36)% 689
 5,316
 772 %
Data processing and communications 37,327
 33,331
 3,996
 12 % 36,330
 997
 3 %
Printing, postage and supplies 3,917
 3,790
 127
 3 % 4,140
 (223) (5)%
Net losses (gains) and operating expenses of repossessed assets 6,071
 (926) 6,997
 (756)% 2,267
 3,804
 168 %
Amortization of intangible assets 1,744
 1,521
 223
 15 % 1,803
 (59) (3)%
Mortgage banking costs 13,450
 15,963
 (2,513) (16)% 12,072
 1,378
 11 %
Other expense 9,193
 14,819
 (5,626) (38)% 8,558
 635
 7 %
Total other operating expense $265,934
 $258,088
 $7,846
 3 % $250,885
 $15,049
 6 %
               
Average number of employees (full-time equivalent) 4,887
 4,928
 (41) (1)% 4,910
 (23) — %
  Three Months Ended
June 30,		 Increase (Decrease) 
%
Increase (Decrease)
 Three Months Ended Mar. 31, 2018 Increase (Decrease) 
%
Increase (Decrease)
  2018 2017     
Regular compensation $86,231
 $83,630
 $2,601
 3 % $84,991
 $1,240
 1 %
Incentive compensation:     

 

      
Cash-based 31,933
 29,954
 1,979
 7 % 29,549
 2,384
 8 %
Share-based (1,361) 7,380
 (8,741) (118)% 2,902
 (4,263) (147)%
Deferred compensation 900
 1,000
 (100) N/A
 44
 856
 N/A
Total incentive compensation 31,472
 38,334
 (6,862) (18)% 32,495
 (1,023) (3)%
Employee benefits 21,244
 21,780
 (536) (2)% 22,461
 (1,217) (5)%
Total personnel expense 138,947
 143,744
 (4,797) (3)% 139,947
 (1,000) (1)%
Business promotion 7,686
 7,738
 (52) (1)% 6,010
 1,676
 28 %
Professional fees and services 14,978
 12,419
 2,559
 21 % 10,200
 4,778
 47 %
Net occupancy and equipment 22,761
 21,125
 1,636
 8 % 24,046
 (1,285) (5)%
Insurance 6,245
 689
 5,556
 806 % 6,593
 (348) (5)%
Data processing and communications1
 27,739
 26,111
 1,628
 6 % 27,817
 (78) — %
Printing, postage and supplies 4,011
 4,140
 (129) (3)% 4,089
 (78) (2)%
Net losses (gains) and operating expenses of repossessed assets 2,722
 2,267
 455
 20 % 7,705
 (4,983) (65)%
Amortization of intangible assets 1,386
 1,803
 (417) (23)% 1,300
 86
 7 %
Mortgage banking costs 12,890
 12,072
 818
 7 % 10,149
 2,741
 27 %
Other expense 7,111
 8,558
 (1,447) (17)% 6,574
 537
 8 %
Total other operating expense $246,476
 $240,666
 $5,810
 2 % $244,430
 $2,046
 1 %
               
Average number of employees (full-time equivalent) 4,875
 4,910
 (35) (1)% 4,899
 (24) — %
               
Non-GAAP Reconciliation:1
              
Data processing and communications expense on income statement 27,739
 36,330
 N/A
 N/A
 27,817
 N/A
 N/A
Netting adjustment —
 (10,219) N/A
 N/A
 —
 N/A
 N/A
Data processing and communications expense after netting adjustment 27,739
 26,111
 N/A
 N/A
 27,817
 N/A
 N/A
1
Non-GAAP measure to net interchange charges from prior quarters between transaction card revenue and data processing and communications expense. This measure has no effect on net income or earnings per share.

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



Personnel expense

Regular compensation, which consists of salaries and wages, overtime pay and temporary personnel costs, increased $460 thousand$2.6 million or 13 percent over the thirdsecond quarter of 20162017. The average number of employees was relatively unchanged compared to the prior year. Standard annual merit increases in regular compensation were effective for the majority of our staff on March 1.



Incentive compensation increaseddecreased $6.9 million or 1918 percent overcompared to the thirdsecond quarter of 20162017, primarily due to increaseddecreased share-based compensation expense.expense based on changes in assumptions of certain performance-based equity awards. 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. The number of shares that will ultimately vest is determined by BOKF's change in earnings per share relative to a defined group of peer banks. In addition, compensation costs related to certain shares isare variable based on changes in the the fair value of BOK Financial common shares. Third quarter 2017 equity compensation expense included charges of $4.0 million from changes in the vesting assumptions for performance-based awards and $1.9 million from an increase in the fair value of BOK Financial common shares.

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. Cash-based incentive compensation expense increased $403 thousand$2.0 million or 17 percent over the thirdsecond quarter of 20162017.

Employee benefits expense increased $1.4 milliondecreased $536 thousand or 72 percent over thecompared to the thirdsecond quarter of 20162017, primarily due to an increase in employee medical costs..
Personnel expense increased $4.2decreased $1.0 million overcompared to the secondfirst quarter of 2017. Cash-based incentive2018. Incentive compensation increased $3.7 million due to continued improvement of performance metrics against internal targets.expense decreased $1.0 million. Regular compensation expense was largely unchanged compared to the prior quarter.increased $1.2 million. A $1.5$2.3 million seasonal decrease in payroll tax expense was partially offset by a $740 thousand$1.3 million increase in employee healthcare costs. The Company is self-insured and these costs may be volatile.

Non-personnel operating expense

Non-personnel operating expense decreased $852 thousandincreased $10.6 million or 1%11 percent compared to the thirdsecond quarter of 20162017.

Deposit insurance expense decreased $3.4 million due to improvement in risk factors including the benefit of decreased criticized and classified asset levels. Mortgage banking expense decreased $2.5 million primarily due to lower prepayments as average mortgage interest rates trended upward. Professional fees and servicing expense decreased $2.2 million.

Data processing and communications expense increased $4.0 million. Occupancy and equipment expense increased $1.2 million. Increases in these expense categories were primarily due to information technology infrastructure and cybersecurity project costs and increased data processing transaction activity.

Other expense decreased $5.6 million compared to the third quarter of 2016, primarily due to a $5.0 million legal settlement accrual concerning the manner in which the Company posted charges to certain consumer and small business deposit accounts in the third quarter of 2016.
Non-personnel expense increased $10.9 million over the second quarter of 2017. Deposit insurance expense increased $5.3$5.6 million primarily due toover the second quarter of 2017. The second quarter of 2017 included $5.1 million in credits received during the second quarter of 2017 related to the revision of certain inputs to the assessment calculation filed for years 2013 through 2016.

Professional fees and services expense increased $2.6 million or 21 percent mainly due to the inclusion of CoBiz acquisition costs and an increase in previous periods. Consumer Banking related project costs in the second quarter of 2018.

Data processing and communications expense increased $1.6 million or 6 percent. Occupancy and equipment expense increased $1.6 million or 8 percent. These increases were primarily related to increased project costs and data processing transaction activity.
Non-personnel expense increased $3.0 million compared to the first quarter of 2018. Professional fees and services expense increased $4.8 million mainly due to expenses related to project costs of $1.8 million, CoBiz acquisition expenses of $1.0 million and $953 thousand in seasonal tax preparation charges from trust operations. Mortgage banking costs increased $2.7 million primarily due to a $1.9 million increase in accruals related to default servicing and loss mitigation costs on loans serviced for others.
Net losses and operating expenses of repossessed assets increased $3.8decreased $5.0 million, mainlyprimarily due to a $4.7 million write-down of a set of repossessed oil and gas properties. Mortgage banking expense increased $1.4 million and data processing and communication expense increased $1.0 million.properties in the first quarter of 2018.



Income Taxes

The Company's income tax expense was $42.4$33.3 million or 33.122.4 percent of net income before taxes for the thirdsecond quarter of 20172018 compared to $32.0 million or 29.8 percent of net income before taxes for the third quarter of 2016 and $47.7 million or 34.9 percent of net income before taxes for the second quarter of 2017.

The statute of limitations expired on uncertain income tax positions and the Company adjusted its current income tax liability amounts on filed tax returns for 2016 during the third quarter of 2017. These adjustments reduced income tax expense by $3.1$30.9 million in the third quarter of 2017. Adjustments reduced income tax expense by $4.1 million in the third quarter of 2016 related to filed tax returns for 2015. Excluding these adjustments, income tax expense would have been 35.5or 22.7 percent of net income before taxes for the thirdfirst quarter of 2018.

The Tax Cut and Jobs Act ("the Act") enacted on December 22, 2017 reduced the federal corporate tax rate from 35 percent to 21 percent beginning January 1, 2018. The Company continues to evaluate the impact the Act will have on its financial position and 33.7 percentresults of operations, including recognition and measurement of deferred tax assets and liabilities and the determination of effective current and deferred federal and state income tax rates. We initially recorded provisional adjustments of $11.7 million as a charge to income tax expense in the fourth quarter of 2017. We recorded an additional $1.9 million of net income before taxestax expense for changes in provisional adjustments identified in the thirdfirst quarter of 2016.2018. No adjustments to provisional amounts were made during the second quarter of 2018.

The Company's effective tax rate is affected by recurring items such as tax-exempt income, net amortization related to its investments in affordable housing investments net of affordablelow-income housing tax creditscredit investments and other tax benefits, bank-owned life insurance and tax-exempt income.share-based compensation. 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 $18$20 million at SeptemberJune 30, 2017,2018, $20 million at March 31, 2018 and $17 million at June 30, 2017 and $14 million at September 30, 2016.2017.



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 and liquidity risk. This method of transfer-pricing funds that supports 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 repricing 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-term 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 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 8, net income attributable to our lines of business increased $18.1was up $20.4 million or 2522% percent over the thirdsecond quarter of 20162017. Net interest revenue grew by $34.9$25.6 million over the prior year.year, primarily due to loan growth. Other operating revenue decreased $6.9by $12.4 million while operating expensesprimarily due to decreased $3.2 million. Net charge-offs were down $2.8 million comparedmortgage banking revenue and brokerage and trading revenue. The second quarter of 2017 included a gain on a merchant banking investment. Operating expense decreased by $153 thousand. Income tax expense attributable to the prior year.lines of business was down $23 million, primarily due to lower corporate tax rates related to tax reform.

Table 8 -- Net Income by Line of Business
(In thousands)
 Three Months Ended Nine Months Ended Three Months Ended Six Months Ended
 September 30, September 30, June 30, June 30,
 2017 2016 2017 2016 2018 2017 2018 2017
Commercial Banking $69,689
 $55,995
 $201,603
 $145,885
 $87,577
 $71,345
 $166,822
 $139,756
Consumer Banking 6,734
 8,761
 18,900
 13,103
 6,102
 6,332
 15,478
 9,577
Wealth Management 15,576
 9,108
 45,684
 26,865
 20,119
 15,689
 39,728
 29,848
Subtotal 91,999
 73,864
 266,187
 185,853
 113,798
 93,366
 222,028
 179,181
Funds Management and other (6,350) 413
 (4,035) (3,211) 574
 (5,219) (2,094) (2,678)
Total $85,649
 $74,277
 $262,152
 $182,642
 $114,372
 $88,147
 $219,934
 $176,503


Commercial Banking

Commercial Banking contributed $69.7$87.6 million to consolidated net income in the thirdsecond quarter of 2018, an increase of $16.2 million or 23 percent over the second quarter of 2017, an increase of $13.7 million or 25 percent over the third quarter of 2016. The increase in Commercial Banking's contribution was largely due to an increaseGrowth in net interest revenue.revenue was partially offset by higher net charge-offs. In addition, the second quarter of 2017 included a $5.6 million gain on the sale of a merchant banking investment.

Table 9 -- Commercial Banking
(Dollars in thousands)
 Three Months Ended Increase (Decrease) Nine Months Ended Increase (Decrease) Three Months Ended Increase (Decrease) Six Months Ended Increase (Decrease)
 September 30,  September 30,  June 30,  June 30, 
 2017 2016 2017 2016  2018 2017 2018 2017 
Net interest revenue from external sources $157,080
 $123,599
 $33,481
 $435,946
 $358,713
 $77,233
 $182,127
 $154,377
 $27,750
 $342,541
 $301,753
 $40,788
Net interest expense from internal sources (24,173) (15,052) (9,121) (61,803) (44,259) (17,544) (37,102) (21,715) (15,387) (65,445) (39,831) (25,614)
Total net interest revenue 132,907
 108,547
 24,360
 374,143
 314,454
 59,689
 145,025
 132,662
 12,363
 277,096
 261,922
 15,174
Net loans charged off 3,217
 5,601
 (2,384) 2,983
 34,024
 (31,041)
Net interest revenue after net loans charged off 129,690
 102,946
 26,744
 371,160
 280,430
 90,730
Net loans charged off (recovered) 10,108
 1,228
 8,880
 10,735
 (236) 10,971
Net interest revenue after net loans charged off (recovered) 134,917
 131,434
 3,483
 266,361
 262,158
 4,203
                        
Fees and commissions revenue 53,928
 47,710
 6,218
 148,193
 144,215
 3,978
Other gains, net 163
 1,932
 (1,769) 7,946
 2,033
 5,913
Fees and commissions revenue1
 42,874
 40,303
 2,571
 82,891
 76,303
 6,588
Other gains (losses), net 173
 5,831
 (5,658) (169) 7,473
 (7,642)
Other operating revenue 54,091
 49,642
 4,449
 156,139
 146,248
 9,891
 43,047
 46,134
 (3,087) 82,722
 83,776
 (1,054)
                        
Personnel expense 28,902
 28,365
 537
 83,935
 82,513
 1,422
 29,584
 28,271
 1,313
 58,505
 55,633
 2,872
Non-personnel expense 28,050
 25,010
 3,040
 84,582
 79,526
 5,056
Non-personnel expense1
 17,899
 21,021
 (3,122) 35,445
 37,361
 (1,916)
Other operating expense 56,952
 53,375
 3,577
 168,517
 162,039
 6,478
 47,483
 49,292
 (1,809) 93,950
 92,994
 956
                        
Net direct contribution 126,829
 99,213
 27,616
 358,782
 264,639
 94,143
 130,481
 128,276
 2,205
 255,133
 252,940
 2,193
Gain on financial instruments, net 4
 —
 4
 46
 —
 46
 9
 3
 6
 16
 41
 (25)
Gain (loss) on repossessed assets, net (4,126) 1,486
 (5,612) (2,728) 806
 (3,534) (67) 1,403
 (1,470) (4,232) 1,398
 (5,630)
Corporate expense allocations 8,650
 9,054
 (404) 26,144
 26,681
 (537) 11,269
 8,955
 2,314
 23,776
 17,674
 6,102
Income before taxes 114,057
 91,645
 22,412
 329,956
 238,764
 91,192
 119,154
 120,727
 (1,573) 227,141
 236,705
 (9,564)
Federal and state income tax 44,368
 35,650
 8,718
 128,353
 92,879
 35,474
 31,577
 49,382
 (17,805) 60,319
 96,949
 (36,630)
Net income $69,689
 $55,995
 $13,694
 $201,603
 $145,885
 $55,718
 $87,577
 $71,345
 $16,232
 $166,822
 $139,756
 $27,066
                        
Average assets $17,558,390
 $16,934,587
 $623,803
 $17,525,658
 $16,958,999
 $566,659
 $18,072,155
 $17,791,671
 $280,484
 $17,933,756
 $17,716,738
 $217,018
Average loans 14,274,896
 13,737,081
 537,815
 14,157,340
 13,542,719
 614,621
 14,900,918
 14,390,452
 510,466
 14,665,144
 14,297,634
 367,510
Average deposits 8,683,331
 8,317,341
 365,990
 8,656,144
 8,392,558
 263,586
 8,379,584
 8,696,691
 (317,107) 8,521,231
 8,688,028
 (166,797)
Average invested capital 1,353,525
 1,285,627
 67,898
 1,334,056
 1,234,962
 99,094
 1,345,840
 1,290,167
 55,673
 1,352,648
 1,313,997
 38,651
1
Fees and commission revenue for 2017 has been adjusted on a comparable basis with 2018 (Non-GAAP measure) to net $10.2 million and $19.4 million of interchange fees paid to issuing banks on card transactions processed by our TransFund merchant processing services for the three and six months ended June 30, 2017, respectively. The discussion following is based on this comparable basis.

Net interest revenue increased $24.4increased $12.4 million or 229 percent over the prior year. Growth in net interest revenue was primarily due to increased yields on commercial loans due to rising short-term interest ratesin excess of funding costs and a $538$510 million or 4 percent increase in average loan balances. Average deposit balances increased $366 million or 4 percent. The Mobank acquisition increased loans by $390 million and deposits by $396 million. Yields on deposits sold to the funds management unit also went up due to the increase in short-term interest ratesrates. Net loans charged-off increased $8.9 million. Over half of 2018 net charge-offs was from the Federal Reserve increase in the federal funds rate.an energy loan previously identified as impaired and appropriately reserved.

Fees and commissions revenue increased $6.2increased $2.6 million or 136 percent compared toover the thirdsecond quarter of 20162017, primarily due to a $3.9 million increaseincreases in transaction card revenue and a $1.5 million increase in brokerage and trading revenue. The increase in transaction card revenue included a $2.1 million early customer termination fee received in the third quarter of 2017. The increase in brokerage and trading revenue was largely due a $1.2 million increase involumes. In addition, loan syndication fees.fees and commercial deposit service charges and fees were up over the prior year.



Operating expenses increased $3.6decreased $1.8 million or 74 percent percent compared to the thirdsecond quarter of 20162017. Personnel expense increased $537 thousand or 2 percent. Non-personnel expense increased $3.0 million or 12 percent. Net repossession expense increased $1.3 million related mainly to the repossession of certain oil and gas properties. Deposit insurance expense increased $1.4 millionor 5 percent, primarily due to increased granularity inincentive compensation expense. Non-personnel expense decreased $3.1 million or 15 percent.

Corporate expense allocations were up $2.3 million or 26 percent over the allocationprior year, primarily due to enhancements of activity based costing drivers to better reflect services being utilized by the segments.Commercial Banking line of business.

The average outstanding balance of loans attributed to Commercial Banking grew by $538were up $510 million or 4 percent over the thirdsecond quarter of 20162017 to $14.3$14.9 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 $8.7$8.4 billion for the thirdsecond quarter of 20172018, an increase of $366 million or 4 percenta 4% decrease compared to the thirdsecond quarter of 20162017. 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 $6.7$6.1 million to consolidated net income for the thirdsecond quarter of 20172018, down $2.0 milliona decrease of $230 thousand compared to the thirdsecond quarter of 20162017. Growth in net interest revenue of $6.4 million was partially offset by decreased mortgage banking revenue. Changes in the fair value of mortgage servicing rights, net of economic hedges, decreased pre-tax net income for second quarter of 2018 $4.7 million compared to a $1.7 million decrease in other operating revenuepre-tax net income in the second quarter of $13.6 million while operating expense decreased by $4.2 million.2017

.

Table 10 -- Consumer Banking
(Dollars in thousands)
 Three Months Ended Increase (Decrease) Nine Months Ended Increase (Decrease) Three Months Ended Increase (Decrease) Six Months Ended Increase (Decrease)
 September 30,  September 30,  June 30,  June 30, 
 2017 2016  2017 2016  2018 2017  2018 2017 
Net interest revenue from external sources $25,576
 $22,098
 $3,478
 $70,208
 $65,897
 $4,311
 $21,746
 $20,756
 $990
 $43,499
 $39,348
 $4,151
Net interest revenue from internal sources 12,213
 9,263
 2,950
 35,002
 27,492
 7,510
 17,548
 13,447
 4,101
 32,772
 25,864
 6,908
Total net interest revenue 37,789
 31,361
 6,428
 105,210
 93,389
 11,821
 39,294
 34,203
 5,091
 76,271
 65,212
 11,059
Net loans charged off 1,315
 1,157
 158
 3,512
 4,177
 (665) 1,139
 926
 213
 2,440
 2,199
 241
Net interest revenue after net loans charged off 36,474
 30,204
 6,270
 101,698
 89,212
 12,486
 38,155
 33,277
 4,878
 73,831
 63,013
 10,818
                        
Fees and commissions revenue 47,134
 60,773
 (13,639) 146,605
 172,114
 (25,509) 46,332
 50,745
 (4,413) 91,296
 95,939
 (4,643)
Other gains (losses), net (101) (170) 69
 (165) (42) (123)
Other losses, net (12) (1) (11) (27) (60) 33
Other operating revenue 47,033
 60,603
 (13,570) 146,440
 172,072
 (25,632) 46,320
 50,744
 (4,424) 91,269
 95,879
 (4,610)
                        
Personnel expense 25,547
 26,604
 (1,057) 76,490
 77,675
 (1,185) 24,995
 25,133
 (138) 49,336
 50,052
 (716)
Non-personnel expense 31,238
 34,360
 (3,122) 89,537
 101,812
 (12,275) 30,911
 29,992
 919
 56,424
 57,939
 (1,515)
Total other operating expense 56,785
 60,964
 (4,179) 166,027
 179,487
 (13,460) 55,906
 55,125
 781
 105,760
 107,991
 (2,231)
                        
Net direct contribution 26,722
 29,843
 (3,121) 82,111
 81,797
 314
 28,569
 28,896
 (327) 59,340
 50,901
 8,439
Gain (loss) on financial instruments, net 1,686
 (1,087) 2,773
 5,242
 30,539
 (25,297) (6,411) 5,224
 (11,635) (29,672) 3,557
 (33,229)
Change in fair value of mortgage servicing rights (639) 2,327
 (2,966) (5,726) (41,944) 36,218
 1,723
 (6,943) 8,666
 22,929
 (5,087) 28,016
Gain on repossessed assets, net 292
 161
 131
 253
 566
 (313)
Gain (loss) on repossessed assets, net 174
 98
 76
 66
 (39) 105
Corporate expense allocations 17,039
 16,905
 134
 50,947
 49,513
 1,434
 15,867
 16,912
 (1,045) 31,897
 33,658
 (1,761)
Income before taxes 11,022
 14,339
 (3,317) 30,933
 21,445
 9,488
 8,188
 10,363
 (2,175) 20,766
 15,674
 5,092
Federal and state income tax 4,288
 5,578
 (1,290) 12,033
 8,342
 3,691
 2,086
 4,031
 (1,945) 5,288
 6,097
 (809)
Net income $6,734
 $8,761
 $(2,027) $18,900
 $13,103
 $5,797
 $6,102
 $6,332
 $(230) $15,478
 $9,577
 $5,901
                        
Average assets $9,115,319
 $8,827,816
 $287,503
 $8,871,470
 $8,763,564
 $107,906
 $8,353,558
 $8,441,831
 $(88,273) $8,410,513
 $8,360,022
 $50,491
Average loans 1,961,265
 1,893,431
 67,834
 1,945,122
 1,888,693
 56,429
 1,716,259
 1,733,165
 (16,906) 1,731,115
 1,736,870
 (5,755)
Average deposits 6,707,859
 6,660,514
 47,345
 6,651,177
 6,623,724
 27,453
 6,579,635
 6,618,958
 (39,323) 6,558,980
 6,576,664
 (17,684)
Average invested capital 327,667
 356,788
 (29,121) 321,420
 328,752
 (7,332) 293,420
 298,165
 (4,745) 284,797
 300,990
 (16,193)

Net interest revenue from Consumer Banking activities grew by $6.4$5.1 million or 2115 percent over the the thirdsecond quarter of 20162017, primarily due to increased rates received on deposit balances sold to the Funds Management unit. Average loan balances grew by $68 million or 4 percent and average deposits increased $47 million or 1% over the prior year.



Fees and commissions revenue decreased $13.6decreased $4.4 million or 229 percent compared to the thirdsecond quarter of 20162017 due to a $13.6 million decrease. Higher interest rates in the second quarter of 2018 decreased mortgage banking revenue. Mortgage loan production volumes decreased $725 million, largely due to the exit from the correspondent lending channel. Gainand gains on sale margin decreased 41 basis points due to market pricing pressure. Revenue from interchange fees paid by merchants for transactions processed from debit cards issued by the Company and deposit service charges and fees were relatively unchangedlower compared to the prior year.

Operating expenses decreased $4.2 millionincreased $781 thousand or 71 percent compared toover the thirdsecond quarter of 20162017. Personnel expenses decreased $1.1 million or 4 percent. Non-personnel expense decreased $3.1 million or 9 percentwere largely unchanged compared to the second quarter of 2017. Non-personnel expenses increased $919 thousand or 3 percent over the prior year. Professional fees increased $904 thousand. Mortgage banking costs were down $2.5 millionup $818 thousand, primarily due to lower prepayments ofa decrease in accruals related to default servicing and loss mitigation costs on loans serviced for others. A $1.8 million decrease in professional fees and services expense wasThese increases were partially offset by an increase of $575 thousand inlower data processing and communications expense and $569 thousand in business promotionmiscellaneous expense.

Corporate expense allocations were $1.0 million or 6 percent lower than the prior year.

Average consumer deposits were largely unchanged compared to the second quarter of 2017. Demand deposit balances grew by $126 million or 7 percent and savings deposit balances were up $42 million or 10 percent. Higher-costing time deposit balances decreased $129 million or 13 percent and interest-bearing transaction account balances decreased $79 million or 2 percent.



Changes in the fair value of our mortgage servicing rights, net of economic hedge, resulted in a $640 thousand increase in Consumer Banking net income in the third quarter of 2017 compared to a $758 thousand increase in Consumer Banking net income in the third quarter of 2016.

Average consumer deposits grew by $47 million over the third quarter of 2016. Higher-costing time deposit balances decreased $114 million or 10 percent, offset by an $80 million or 5 percent increase in demand deposit balances, a $42 million or 11 percent increase in savings account balances and a $39 million or 1 percent increase in interest-bearing transaction accounts.


Wealth Management

Wealth Management contributed $15.6$20.1 million to consolidated net income in the thirdsecond quarter of 2018, up $4.4 million or 28 percent over the second quarter of 2017, up $6.5 million or 71 percent over the third quarter of 2016, largely due to growth. Growth in net interest revenue was partially offset by a decrease in brokerage and trading revenue.

Table 11 -- Wealth Management
(Dollars in thousands)
 Three Months Ended Increase (Decrease) Nine Months Ended Increase (Decrease) Three Months Ended Increase (Decrease) Six Months Ended Increase (Decrease)
 September 30,  September 30,  June 30,  June 30, 
 2017 2016  2017 2016  2018 2017  2018 2017 
Net interest revenue from external sources $11,169
 $9,274
 $1,895
 $33,130
 $21,620
 $11,510
 $18,754
 $10,475
 $8,279
 $34,161
 $21,960
 $12,201
Net interest revenue from internal sources 9,604
 7,401
 2,203
 28,784
 22,258
 6,526
 10,232
 10,325
 (93) 20,164
 19,181
 983
Total net interest revenue 20,773
 16,675
 4,098
 61,914
 43,878
 18,036
 28,986
 20,800
 8,186
 54,325
 41,141
 13,184
Net loans charged off (recovered) (623) (89) (534) (676) (479) (197) (105) (92) (13) (153) (53) (100)
Net interest revenue after net loans charged off (recovered) 21,396
 16,764
 4,632
 62,590
 44,357
 18,233
 29,091
 20,892
 8,199
 54,478
 41,194
 13,284
                        
Fees and commissions revenue 75,915
 73,331
 2,584
 225,390
 217,519
 7,871
 70,489
 75,553
 (5,064) 145,296
 149,474
 (4,178)
Other gains (losses), net (208) 192
 (400) 44
 523
 (479)
Other gains, net 153
 16
 137
 113
 253
 (140)
Other operating revenue 75,707
 73,523
 2,184
 225,434
 218,042
 7,392
 70,642
 75,569
 (4,927) 145,409
 149,727
 (4,318)
                        
Personnel expense 46,494
 48,969
 (2,475) 136,758
 142,235
 (5,477) 45,653
 45,477
 176
 92,600
 90,264
 2,336
Non-personnel expense 15,297
 15,457
 (160) 46,058
 44,289
 1,769
 15,838
 15,139
 699
 31,695
 30,761
 934
Other operating expense 61,791
 64,426
 (2,635) 182,816
 186,524
 (3,708) 61,491
 60,616
 875
 124,295
 121,025
 3,270
                        
Net direct contribution 35,312
 25,861
 9,451
 105,208
 75,875
 29,333
 38,242
 35,845
 2,397
 75,592
 69,896
 5,696
Loss on financial instruments, net —
 (42) 42
 —
 (42) 42
Corporate expense allocations 9,819
 10,912
 (1,093) 30,438
 31,864
 (1,426) 11,142
 9,947
 1,195
 22,097
 20,619
 1,478
Income before taxes 25,493
 14,907
 10,586
 74,770
 43,969
 30,801
 27,100
 25,898
 1,202
 53,495
 49,277
 4,218
Federal and state income tax 9,917
 5,799
 4,118
 29,086
 17,104
 11,982
 6,981
 10,209
 (3,228) 13,767
 19,429
 (5,662)
Net income $15,576
 $9,108
 $6,468
 $45,684
 $26,865
 $18,819
 $20,119
 $15,689
 $4,430
 $39,728
 $29,848
 $9,880
                        
Average assets $6,992,021
 $6,413,735
 $578,286
 $6,971,369
 $5,916,545
 $1,054,824
 $8,495,557
 $6,960,872
 $1,534,685
 $8,296,780
 $6,960,872
 $1,335,908
Average loans 1,324,574
 1,139,396
 185,178
 1,301,549
 1,109,410
 192,139
 1,413,170
 1,289,846
 123,324
 1,401,613
 1,289,846
 111,767
Average deposits 5,495,250
 4,913,409
 581,841
 5,535,979
 4,710,893
 825,086
 5,834,669
 5,556,680
 277,989
 5,749,045
 5,556,680
 192,365
Average invested capital 244,976
 202,168
 42,808
 231,608
 198,167
 33,441
 248,367
 230,228
 18,139
 249,827
 230,228
 19,599

Net interest revenue for the third quarter of 2017increased $4.1increased $8.2 million or 2539 percent over the thirdsecond quarter of 20162017. Average trading securities increased $1.0 billion and average loans attributed to the Wealth Management segment increased $123 million or 10 percent. Average deposit balances increased by $278 million or 5 percent over the second quarter of 2017, primarily due to thea $217 million or 6 percent increase in the average loan volume of $185 million coupled with the increase in rates. Additionally, earnings on net funds invested grew by $2.2 million. Average deposit balances grew by $582 million or 12 percent over the third quarter of 2016. Non-interest bearing demand deposits grew by $240 million or 21 percent, interest-bearing transaction account balances increased $264and a $75 million or 910 percent andincrease in time deposit balances grew by $76 million or 11 percent. Average loan balances balances.increased $185 million or 16 percent over the prior year.


Fees and commissions revenue increased $2.2decreased $5.1 million or 37 percent overcompared to the third quarter of 2016. Fiduciary and asset management revenue increased $6.5 million or 19 percent 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 $4.8 million or 14 percent primarily due to decreased activity related to our mortgage banking customers along with a decrease in brokerage fees due to the implementation of the DOL fiduciary rule in the second quarter of 2017.2017. Rising mortgage interest rates narrowed margins on securities and slowed turnover of our trading inventory.



Fees and commissions revenue above 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 thirdsecond quarter of 20172018, the Wealth Management division participated in 7993 state and municipal bond underwritings that totaled $1.7$1.3 billion. As a participant, the Wealth Management division was responsible for facilitating the sale of approximately $454$493 million of these underwritings. The Wealth Management division also participated in 76 corporate debt underwritings that totaled $2.6$3.0 billion. Our interest in these underwritings was $69$55 million. In the thirdsecond quarter of 20162017, the Wealth Management division participated in 10774 state and municipal bond underwritings that totaled approximately $5.2$1.4 billion. Our interest in these underwritings totaled approximately $708$397 million. The Wealth Management division also participated in 116 corporate debt underwritings that totaled $4$2.3 billion. Our interest in these underwritings was $93$47 million.

Operating expense decreased $2.6 millionincreased $875 thousand or 41 percent compared toover the thirdsecond quarter of 2016.2017. Personnel expense decreased $2.5 million primarily due to decreased incentive compensation expense. Non-personnel expense decreased $160 thousand.

Corporate expense allocations decreased $1.1 million or 10 percentwas largely unchanged compared to the prior year. Non-personnel expense increased $699 thousand or 5 percent.

Corporate expense allocations were up $1.2 million or 12 percent 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 statementsConsolidated Financial Statements for the composition of the securities portfolio as of SeptemberJune 30, 20172018, December 31, 20162017 and SeptemberJune 30, 20162017.

We hold an inventory of trading securities in support of sales to a variety of customers, including banks, corporations, insurance companies, money managers and others. Trading securities increased $617 million to $1.9 billion during the second quarter of 2018 in response to expanded relationships with mortgage loan originator clients as well as slower inventory turnover rates. As discussed in the Market Risk section of this report, trading activities involve risk of loss from adverse price movement. We mitigate this risk within board-approved limits through the use of derivative contracts, short-sales and other techniques. These limits remain unchanged from levels set before our expanded trading activities.

At SeptemberJune 30, 2017,2018, the carrying value of investment (held-to-maturity) securities was $467$392 million and the fair value was $490$403 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 $99$92 million of the $198$199 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$8.3 billion at SeptemberJune 30, 2017,2018, a $44$54 million increasedecrease compared to March 31, 2018. At June 30, 2017. At September 30, 2017,2018, the available for sale securities portfolio consisted primarily of U.S. government agency residential mortgage-backed securities with an amortized cost of $5.3 billion and U.S. government agency commercial mortgage-backed securities with an amortized cost of $2.9 billion.securities. Both residential and commercial 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. Commercial mortgage-backed securities have prepayment penalties similar to commercial loans.

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 SeptemberJune 30, 20172018 is 3.23.5 years. Management estimates the duration extends to 3.94.2 years assuming an immediate 200 basis point upward shock. The estimated duration contracts to 2.83.2 years assuming a 50 basis point decline in the current low rate environment.



We also hold amortized cost of $81 million in residential mortgage-backed securities privately issued by publicly-owned financial institutions, a decrease of $5.9 million from June 30, 2017 due to cash payments received during the quarter. The fair value of our portfolio of privately issued residential mortgage-backed securities totaled $100 million at September 30, 2017.

The aggregate gross amount of unrealized losses on available for sale securities totaled $51 million at September 30, 2017, compared to $50205 million at June 30, 20172018, compared to $177 million at March 31, 2018. On a quarterly basis, we perform separate evaluationsan evaluation 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 thirdsecond quarter of 20172018.

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 $37 million and holdings of FHLB stock totaled $311 million at September 30, 2017. Holdings of FHLB stock increased $37 million compared to June 30, 2017. We are required to hold stock in the FHLB in proportion to our borrowings with the FHLB.
Bank-Owned Life Insurance

We have approximately $314 million of bank-owned life insurance at September 30, 2017. This investment is expected to provide a long-term source of earnings to support existing employee benefit programs. Approximately $286 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 September 30, 2017, the fair value of investments held in separate accounts was approximately $292 million. As the underlying fair value of the investments held in a separate accounts at September 30, 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 $1718.0 billion at SeptemberJune 30, 20172018, an increase of $23up more than $665 million over June 30, 2017. The outstanding balance ofMarch 31, 2018, primarily due to growth in commercial loans increased by $158 million, offset by a $170 million decrease inand commercial real estate loan balances. ResidentialPersonal loan balances grew slightly while residential mortgage loans increased $6.6 million and personal loans grew by $29 million. were largely unchanged.

Table 12 -- Loans
(In thousands)
 Sept. 30, 2017 June 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016 June 30, 2018 Mar. 31, 2018 Dec. 31, 2017 Sept. 30, 2017 June 30, 2017
Commercial:                    
Energy $2,867,981
 $2,847,240
 $2,537,112
 $2,497,868
 $2,520,804
 $3,147,219
 $2,969,618
 $2,930,156
 $2,867,981
 $2,847,240
Services 2,967,513
 2,958,827
 3,013,375
 3,108,990
 2,936,599
 2,944,499
 2,928,294
 2,986,949
 2,967,513
 2,958,827
Healthcare 2,239,451
 2,221,518
 2,265,604
 2,201,916
 2,085,046
 2,353,722
 2,359,928
 2,314,753
 2,239,451
 2,221,518
Wholesale/retail 1,658,098
 1,543,695
 1,506,243
 1,576,818
 1,602,030
 1,699,554
 1,531,576
 1,471,256
 1,658,098
 1,543,695
Manufacturing 519,446
 546,137
 543,430
 514,975
 499,486
 647,816
 559,695
 496,774
 519,446
 546,137
Other commercial and industrial 543,445
 520,538
 461,346
 490,257
 476,198
 556,229
 570,556
 534,087
 543,445
 520,538
Total commercial 10,795,934
 10,637,955
 10,327,110
 10,390,824
 10,120,163
 11,349,039
 10,919,667
 10,733,975
 10,795,934
 10,637,955
                    
Commercial real estate:  
  
  
  
  
  
  
  
  
  
Retail 725,865
 722,805
 745,046
 761,888
 801,377
Multifamily 999,009
 952,380
 922,991
 903,272
 873,773
 1,056,984
 1,008,903
 980,017
 999,009
 952,380
Office 797,089
 862,973
 860,889
 798,888
 752,705
 820,127
 737,144
 831,770
 797,089
 862,973
Retail 768,024
 750,396
 691,532
 725,865
 722,805
Industrial 591,080
 693,635
 871,463
 871,749
 838,021
 653,384
 613,608
 573,014
 591,080
 693,635
Residential construction and land development 112,102
 141,592
 135,994
 135,533
 159,946
 118,999
 117,458
 117,245
 112,102
 141,592
Other commercial real estate 292,997
 315,207
 334,680
 337,716
 367,776
 294,702
 279,273
 286,409
 292,997
 315,207
Total commercial real estate 3,518,142
 3,688,592
 3,871,063
 3,809,046
 3,793,598
 3,712,220
 3,506,782
 3,479,987
 3,518,142
 3,688,592
                    
Residential mortgage:  
  
  
  
  
  
  
  
  
  
Permanent mortgage 1,013,965
 989,040
 977,743
 1,006,820
 969,558
 1,068,412
 1,047,785
 1,043,435
 1,013,965
 989,040
Permanent mortgages guaranteed by U.S. government agencies 187,370
 191,729
 204,181
 199,387
 190,309
 169,653
 177,880
 197,506
 187,370
 191,729
Home equity 744,415
 758,429
 764,350
 743,625
 712,926
 704,185
 720,104
 732,745
 744,415
 758,429
Total residential mortgage 1,945,750
 1,939,198
 1,946,274
 1,949,832
 1,872,793
 1,942,250
 1,945,769
 1,973,686
 1,945,750
 1,939,198
                    
Personal 947,008
 917,900
 847,459
 839,958
 678,232
 1,000,187
 965,632
 965,776
 947,008
 917,900
                    
Total $17,206,834
 $17,183,645
 $16,991,906
 $16,989,660
 $16,464,786
 $18,003,696
 $17,337,850
 $17,153,424
 $17,206,834
 $17,183,645

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 ongoing 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 ongoing 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 $10.8$11.3 billion or 63 percent of the loan portfolio at SeptemberJune 30, 2017,2018, an increase of $158$429 million over June 30, 2017. Wholesale/retailMarch 31, 2018. Energy loan balances grew by $114$178 million. OtherWholesale/retail sector loan balances grew by $168 million. Manufacturing sector loan balances were up $88 million. Service sector loans increased $16 million, mostly offset by a $14 million decrease in other commercial and industrial loans increased by $23 million, energy loan balances increased by $21 million and healthcare sector loan balances increased $18 million. This growth was offset by a $27 million decrease in manufacturing sector loan balances.loans.



Table 13 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 13 -- Commercial Loans by Collateral Location
(In thousands)
 Oklahoma Texas New Mexico Arkansas Colorado Arizona Kansas/Missouri Other Total Oklahoma Texas New Mexico Arkansas Colorado Arizona Kansas/Missouri Other Total
Energy $515,667
 $1,538,977
 $16,971
 $4,020
 $334,392
 $8,606
 $72,259
 $377,089
 $2,867,981
 $632,907
 $1,709,471
 $40,449
 $2,926
 $340,671
 $3,966
 $72,024
 $344,805
 $3,147,219
Services 661,654
 856,253
 187,561
 5,965
 316,468
 231,846
 314,463
 393,303
 2,967,513
 716,767
 781,431
 169,346
 9,984
 346,505
 235,767
 303,911
 380,788
 2,944,499
Healthcare 265,166
 394,476
 131,983
 96,446
 122,688
 127,707
 263,705
 837,280
 2,239,451
 247,040
 344,481
 112,149
 79,734
 161,539
 109,858
 259,972
 1,038,949
 2,353,722
Wholesale/retail 422,993
 587,592
 44,080
 31,501
 71,908
 62,706
 88,834
 348,484
 1,658,098
 403,298
 598,929
 41,197
 29,880
 92,243
 63,295
 80,879
 389,833
 1,699,554
Manufacturing 109,034
 150,554
 410
 3,121
 61,398
 32,885
 95,558
 66,486
 519,446
 86,310
 197,925
 157
 4,638
 95,007
 91,147
 90,100
 82,532
 647,816
Other commercial and industrial 107,925
 160,797
 2,371
 71,194
 26,610
 19,204
 58,728
 96,616
 543,445
 107,355
 142,321
 2,504
 61,951
 8,341
 1,288
 61,947
 170,522
 556,229
Total commercial loans $2,082,439
 $3,688,649
 $383,376
 $212,247
 $933,464
 $482,954
 $893,547
 $2,119,258
 $10,795,934
 $2,193,677
 $3,774,558
 $365,802
 $189,113
 $1,044,306
 $505,321
 $868,833
 $2,407,429
 $11,349,039
 
The majority of the collateral securing our commercial loan portfolio is located within our geographical footprint with 3433 percent concentrated in the Texas market and 19 percent concentrated in the Oklahoma market. At SeptemberJune 30, 2017,2018, the Other category is primarily composed of California - $310$287 million or 2.873 percent of the commercial loan portfolio, Florida - $195$228 million or 1.812 percent of the commercial loan portfolio, Louisiana - $171$160 million or 1.581 percent of the commercial loan portfolio, Pennsylvania - $119$142 million or 1.101 percent of the commercial loan portfolio, Ohio - $125 million or 1 percent of the commercial loan portfolio and TennesseeNorth Carolina - $114$111 million or 1.051 percent of the commercial loan portfolio. All other states individually represent less than 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 $2.9$3.1 billion or 17 percent of total loans at SeptemberJune 30, 2017.2018. Unfunded energy loan commitments of $2.7were $3.0 billion at September 30, 2017 were largely unchanged compared to June 30, 2017.2018, up $80 million over March 31, 2018. Approximately $2.3$2.6 billion of energy loans were to oil and gas producers, largely unchanged compared to June 30, 2017.growing $104 million over March 31, 2018. 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 5756 percent of the committed production loans are secured by properties primarily producing oil and 4344 percent of the committed production loans are secured by properties primarily producing natural gas. Loans to midstream oil and gas companies totaled $314$370 million at SeptemberJune 30, 2017,2018, an increase of $36$71 million over June 30, 2017.March 31, 2018. Loans to borrowers that provide services to the energy industry totaled $163$139 million at SeptemberJune 30, 2017, down $152018, up $26 million compared toover the prior quarter. Loans to other energy borrowers, including those engaged in wholesale or retail energy sales, totaled $52$36 million, a $14$23 million increase overdecrease compared to the prior quarter.

The services sector of the loan portfolio totaled $3.0$2.9 billion or 1716 percent of total loans and consists of a large number of loans to a variety of businesses, including governmental, educational services, consumer services, financial services and loans to entities providing services for real estate and construction and commercial services.construction. Service sector loans increased by $8.7$16 million over June 30, 2017.March 31, 2018. Loans to governmental entities totaled $571$537 million at SeptemberJune 30, 2017.2018. Approximately $1.5$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. 



The healthcare sector of the loan portfolio totaled $2.2$2.4 billion or 13%13 percent 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$100 million and with three or more non-affiliated banks as participants. At SeptemberJune 30, 20172018, the outstanding principal balance of these loans totaled $4.1$3.9 billion. Substantially all of these loans are to borrowers with local market relationships. We serve as the agent lender in approximately 1716 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 35 percent33% and 13 percent12% of the total commercial real estate portfolio at SeptemberJune 30, 20172018, 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 $3.53.7 billion or 20 percent21% of the loan portfolio at SeptemberJune 30, 20172018. The outstanding balance of commercial real estate loans decreased $170increased $205 million during the thirdsecond quarter of 2017 as borrowers continue to refinance2018. Loans secured by office buildings increased $83 million. Multifamily residential loans in the permanent market.increased $48 million. Loans secured by industrial properties decreased $103grew by $40 million. Loans secured by office buildings decreased $66 million. Residential construction and land development loansretail facilities and other commercial real estate loans also decreased compared to the prior quarter. These decreases were partially offset by a $47increased $18 million increase in multifamily residential loans.and $15 million, respectively. The commercial real estate loan balance as a percentage of our total loan portfolio has ranged from 1819 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 14.

Table 14 -- Commercial Real Estate Loans by Collateral Location
(In thousands)
 Oklahoma Texas New Mexico Arkansas Colorado Arizona Kansas/Missouri Other Total Oklahoma Texas New Mexico Arkansas Colorado Arizona Kansas/Missouri Other Total
Retail $68,768
 $291,284
 $103,151
 $6,419
 $31,647
 $27,583
 $19,923
 $177,090
 $725,865
Multifamily 115,182
 485,063
 19,464
 25,930
 48,855
 56,321
 111,260
��136,934
 999,009
 $127,373
 $485,735
 $26,653
 $26,641
 $81,571
 $66,414
 $129,248
 $113,349
 $1,056,984
Office 93,693
 222,094
 76,416
 5,928
 30,903
 68,080
 51,787
 248,188
 797,089
 106,169
 222,686
 88,374
 12,870
 31,988
 72,274
 40,348
 245,418
 820,127
Retail 56,301
 284,347
 121,079
 7,338
 42,941
 29,617
 15,620
 210,781
 768,024
Industrial 97,399
 154,007
 23,161
 —
 10,151
 10,245
 47,044
 249,073
 591,080
 71,500
 180,920
 23,278
 104
 9,087
 7,142
 43,777
 317,576
 653,384
Residential construction and land development 11,483
 26,153
 18,138
 1,995
 15,633
 6,892
 16,018
 15,790
 112,102
 18,049
 20,601
 18,216
 2,102
 23,817
 2,026
 12,908
 21,280
 118,999
Other commercial real estate 61,464
 38,617
 14,645
 3,301
 14,397
 24,480
 28,311
 107,782
 292,997
 51,810
 35,019
 10,956
 1,580
 12,102
 24,035
 20,183
 139,017
 294,702
Total commercial real estate loans $447,989
 $1,217,218
 $254,975
 $43,573
 $151,586
 $193,601
 $274,343
 $934,857
 $3,518,142
 $431,202
 $1,229,308
 $288,556
 $50,635
 $201,506
 $201,508
 $262,084
 $1,047,421
 $3,712,220

The Other category is primarily composed of Utah and California which represent $120- $203 million or 3.4 percent and $118 million or 3.35 percent of the commercial real estate portfolio, respectively.Florida - $114 million or 3 percent of the commercial real estate portfolio and Utah - $103 million or 3 percent of the commercial real estate portfolio. All other states represent less than 3% individually.

While recent changes nationally in consumer purchasing trends from brick-and-mortar stores to online has created concern with regards to retail lending, our credit quality remains very good. The portfolio is highly diversified with no material exposure to a single borrower or tenant.


Based on Moody's U.S. Retail Industry Classifications, approximately 60 percent of $726 million of outstanding retail commercial real estate loans have services-based tenants, which are considered less susceptible to online competition. Additionally, 61 percent of the $718 million of outstanding retail loans included in our commercial wholesale/retail sector are service-based.
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 to wealth management clients 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 totaled $1.9 billion, largely unchangeda decrease of $3.5 million compared to June 30, 2017March 31, 2018. 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 percent95% 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 SeptemberJune 30, 20172018, $187170 million of permanent residential mortgage loans are guaranteed by U.S. government agencies. We have minimallimited 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 decreased $4.4$8.2 million compared to June 30, 2017March 31, 2018.

Home equity loans totaled $744704 million at SeptemberJune 30, 20172018, a $14$16 million decrease compared to June 30, 2017March 31, 2018. 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 SeptemberJune 30, 20172018 by lien position and amortizing status follows in Table 15.

Table 15 -- Home Equity Loans
(In thousands)
 Revolving Amortizing Total Revolving Amortizing Total
First lien $71,921
 $406,132
 $478,053
 $69,587
 $363,904
 $433,491
Junior lien 140,791
 125,571
 266,362
 149,676
 121,018
 270,694
Total home equity $212,712
 $531,703
 $744,415
 $219,263
 $484,922
 $704,185

Personal loans totaled $947 million, a $29 million increase over the prior quarter primarily due to growth in loans to wealth management customers for investment in businesses that will be repaid from personal income.


The distribution of residential mortgage and personal loans at SeptemberJune 30, 20172018 is as follows in Table 16. Residential mortgage loans are distributed by collateral location. Personal loans are generally distributed by borrower location.

Table 16 -- Residential Mortgage and Personal Loans by Collateral Location
(In thousands)
 Oklahoma Texas New Mexico Arkansas Colorado Arizona Kansas/Missouri Other Total Oklahoma Texas New Mexico Arkansas Colorado Arizona Kansas/Missouri Other Total
Residential mortgage:                                    
Permanent mortgage $178,762
 $420,529
 $46,567
 $12,765
 $168,312
 $93,812
 $52,951
 $40,267
 $1,013,965
 $170,130
 $434,582
 $52,890
 $13,430
 $186,125
 $100,536
 $61,394
 $49,325
 $1,068,412
Permanent mortgages guaranteed by U.S. government agencies 54,803
 26,028
 41,887
 7,029
 5,744
 1,987
 13,128
 36,764
 187,370
 42,443
 31,875
 33,138
 7,374
 3,781
 843
 11,065
 39,134
 169,653
Home equity 387,021
 134,753
 95,537
 5,098
 38,346
 9,100
 71,904
 2,656
 744,415
 373,250
 132,689
 85,643
 5,794
 39,189
 9,921
 55,093
 2,606
 704,185
Total residential mortgage $620,586
 $581,310
 $183,991
 $24,892
 $212,402
 $104,899
 $137,983
 $79,687
 $1,945,750
 $585,823
 $599,146
 $171,671
 $26,598
 $229,095
 $111,300
 $127,552
 $91,065
 $1,942,250
                                    
Personal $287,080
 $403,033
 $12,803
 $10,438
 $62,598
 $47,182
 $77,992
 $45,882
 $947,008
 $316,308
 $420,736
 $11,251
 $12,480
 $62,136
 $59,626
 $64,596
 $53,054
 $1,000,187



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 BankCompany are centrally managed by the Bank of Oklahoma.

Table 17 -- Loans Managed by Primary Geographical Market
(In thousands)
 Sept. 30, 2017 June 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016 June 30, 2018 Mar. 31, 2018 Dec. 31, 2017 Sept. 30, 2017 June 30, 2017
Bank of Oklahoma:                    
Commercial $3,408,973
 $3,369,967
 $3,189,183
 $3,370,259
 $3,545,924
 $3,465,407
 $3,265,013
 $3,238,720
 $3,408,973
 $3,369,967
Commercial real estate 712,915
 667,932
 691,332
 684,381
 795,806
 662,665
 668,031
 682,037
 712,915
 667,932
Residential mortgage 1,405,900
 1,398,021
 1,404,054
 1,407,197
 1,401,166
 1,403,658
 1,419,281
 1,435,432
 1,405,900
 1,398,021
Personal 322,320
 318,016
 310,708
 303,823
 271,420
 362,846
 353,128
 342,212
 322,320
 318,016
Total Bank of Oklahoma 5,850,108
 5,753,936
 5,595,277
 5,765,660
 6,014,316
 5,894,576
 5,705,453
 5,698,401
 5,850,108
 5,753,936
                    
Bank of Texas:  
  
  
  
  
  
  
  
  
  
Commercial 4,434,595
 4,339,634
 4,148,316
 4,022,455
 3,903,218
 4,922,451
 4,715,841
 4,520,401
 4,434,595
 4,339,634
Commercial real estate 1,236,702
 1,360,164
 1,452,988
 1,415,011
 1,400,709
 1,336,101
 1,254,421
 1,261,864
 1,236,702
 1,360,164
Residential mortgage 229,993
 232,074
 231,647
 233,981
 229,345
 243,400
 229,761
 233,675
 229,993
 232,074
Personal 375,173
 354,222
 312,092
 306,748
 278,167
 394,021
 363,608
 375,084
 375,173
 354,222
Total Bank of Texas 6,276,463
 6,286,094
 6,145,043
 5,978,195
 5,811,439
 6,895,973
 6,563,631
 6,391,024
 6,276,463
 6,286,094
                    
Bank of Albuquerque:  
  
  
  
  
  
  
  
  
  
Commercial 367,747
 369,370
 407,403
 399,256
 398,147
 305,167
 315,701
 343,296
 367,747
 369,370
Commercial real estate 319,208
 324,405
 307,927
 284,603
 299,785
 386,878
 348,485
 341,282
 319,208
 324,405
Residential mortgage 101,983
 103,849
 106,432
 108,058
 110,478
 90,581
 93,490
 98,018
 101,983
 103,849
Personal 12,953
 12,439
 11,305
 11,483
 11,333
 11,107
 11,667
 11,721
 12,953
 12,439
Total Bank of Albuquerque 801,891
 810,063
 833,067
 803,400
 819,743
 793,733
 769,343
 794,317
 801,891
 810,063
                    
Bank of Arkansas:  
  
  
  
  
  
  
  
  
  
Commercial 91,051
 85,020
 88,010
 86,577
 83,544
 93,217
 94,430
 95,644
 91,051
 85,020
Commercial real estate 80,917
 73,943
 74,469
 73,616
 72,649
 90,807
 88,700
 87,393
 80,917
 73,943
Residential mortgage 6,318
 6,395
 6,829
 7,015
 6,936
 6,927
 7,033
 6,596
 6,318
 6,395
Personal 10,388
 11,993
 6,279
 6,524
 6,757
 12,331
 9,916
 9,992
 10,388
 11,993
Total Bank of Arkansas 188,674
 177,351
 175,587
 173,732
 169,886
 203,282
 200,079
 199,625
 188,674
 177,351
                    
Colorado State Bank & Trust:  
  
  
  
  
  
  
  
  
  
Commercial 1,124,200
 1,065,780
 998,216
 1,018,208
 1,013,314
 1,165,721
 1,180,655
 1,130,714
 1,124,200
 1,065,780
Commercial real estate 186,427
 255,379
 266,218
 265,264
 254,078
 267,065
 210,801
 174,201
 186,427
 255,379
Residential mortgage 63,734
 63,346
 62,313
 59,631
 59,838
 64,839
 64,530
 63,350
 63,734
 63,346
Personal 60,513
 56,187
 49,523
 50,372
 42,901
 60,504
 63,118
 63,115
 60,513
 56,187
Total Colorado State Bank & Trust 1,434,874
 1,440,692
 1,376,270
 1,393,475
 1,370,131
 1,558,129
 1,519,104
 1,431,380
 1,434,874
 1,440,692
                    
Bank of Arizona:  
  
  
  
  
  
  
  
  
  
Commercial 634,809
 617,759
 643,222
 686,253
 680,447
 681,852
 624,106
 687,792
 634,809
 617,759
Commercial real estate 706,188
 705,858
 737,088
 747,409
 726,542
 710,784
 672,319
 660,094
 706,188
 705,858
Residential mortgage 40,730
 37,034
 36,737
 36,265
 39,206
 47,010
 39,227
 41,771
 40,730
 37,034
Personal 55,050
 55,528
 51,386
 52,553
 31,205
 65,541
 57,023
 57,140
 55,050
 55,528
Total Bank of Arizona 1,436,777
 1,416,179
 1,468,433
 1,522,480
 1,477,400
 1,505,187
 1,392,675
 1,446,797
 1,436,777
 1,416,179
                    
Mobank (Kansas City):  
  
  
  
  
  
  
  
  
  
Commercial 734,559
 790,425
 852,760
 807,816
 495,569
 715,224
 723,921
 717,408
 734,559
 790,425
Commercial real estate 275,785
 300,911
 341,041
 338,762
 244,029
 257,920
 264,025
 273,116
 275,785
 300,911
Residential mortgage 97,092
 98,479
 98,262
 97,685
 25,824
 85,835
 92,447
 94,844
 97,092
 98,479
Personal 110,611
 109,515
 106,166
 108,455
 36,449
 93,837
 107,172
 106,512
 110,611
 109,515
Total Mobank (Kansas City) 1,218,047
 1,299,330
 1,398,229
 1,352,718
 801,871
 1,152,816
 1,187,565
 1,191,880
 1,218,047
 1,299,330
                    
Total BOK Financial loans $17,206,834
 $17,183,645
 $16,991,906
 $16,989,660
 $16,464,786
 $18,003,696
 $17,337,850
 $17,153,424
 $17,206,834
 $17,183,645


Loan Commitments

We enter into certain off-balance sheet arrangements in the normal course of business. These arrangements included unfunded loan commitments, which totaled $9.7 billion and standby letters of credit, which totaled $666 million at September 30, 2017.business as shown in Table 18. 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 $55 thousand of the outstanding standby letters of credit were issued on behalf of customers whose loans are nonperforming at September 30, 2017.

Table 18 – Off-Balance Sheet Credit Commitments
(In thousands)
 Sept. 30, 2017 June 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016 June 30, 2018 Mar. 31, 2018 Dec. 31, 2017 Sept. 30, 2017 June 30, 2017
Loan commitments $9,693,489
 $9,632,911
 $9,403,641
 $9,404,665
 $8,697,322
 $10,294,211
 $10,249,729
 $9,958,080
 $9,693,489
 $9,632,911
Standby letters of credit 665,513
 614,852
 595,746
 585,472
 499,990
 659,867
 664,342
 647,653
 665,513
 614,852
Mortgage loans sold with recourse 128,681
 133,896
 134,631
 139,486
 139,306
 116,269
 121,197
 125,127
 128,681
 133,896

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 $79$70 million to borrowers in Oklahoma, $14$12 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 balance sheetsConsolidated Balance Sheets and totaled $3.8$3.5 million at SeptemberJune 30, 20172018 and 3.7 million at March 31, 2018 and $3.9 million at June 30, 2017.

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 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. 

For the period from 2010 through the thirdsecond quarter of 20172018 combined, approximately 18 percent17% of repurchase requests have currently resulted in actual repurchases or indemnification by the Company. The CompanyThere were no loans repurchased five loans from the agencies for $1.2 million during the thirdsecond quarter of 20172018. There were four indemnifications onno loans with indemnification paid during the thirdsecond quarter of 20172018. Losses recognized on repurchases were insignificant.

A summary of unresolved deficiency requests from the agencies follows (in thousands, except for number of unresolved deficiency requests):
September 30,June 30,
2017 20162018 2017
Number of unresolved deficiency requests180
 221
179
 206
Aggregate outstanding principal balance subject to unresolved deficiency requests$8,899
 $15,750
$8,394
 $13,370
Unpaid principal balance subject to indemnification by the Company5,206
 5,399
4,741
 5,074

The accrual for potential loan repurchases under representations and warranties totaled $1.4$1.1 million at SeptemberJune 30, 20172018, $1.2 million at March 31, 2018, and $1.6 million at June 30, 2017.


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 scenarios 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.

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 SeptemberJune 30, 20172018, the net fair values of derivative contracts, before consideration of cash margin, reported as assets under these programs totaled $322382 million compared to $265292 million at June 30, 2017March 31, 2018. At SeptemberJune 30, 20172018, the net fair value of our derivative contracts included $250$171 million for foreign exchange contracts, $29$131 million of to-be-announced residential mortgage-backed securities, $27for energy contracts, $41 million for interest rate swaps and $10$35 million for energy contracts..of to-be-announced residential mortgage-backed securities. The aggregate net fair value of derivative contracts, before consideration of cash margin, held under these programs reported as liabilities totaled $312 million at September 30, 2017 and $257364 million at June 30, 20172018 and $280 million at March 31, 2018.

At SeptemberJune 30, 20172018, total derivative assets were reduced by $4.0$13 million of cash collateral received from counterparties and total derivative liabilities were reduced by $18150 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 SeptemberJune 30, 20172018 follows in Table 19.

Table 19 -- Fair Value of Derivative Contracts
(In thousands)
Customers $253,096
Banks and other financial institutions $163,232
 96,206
Customers 132,215
Exchanges and clearing organizations 22,478
 19,724
Fair value of customer risk management program asset derivative contracts, net $317,925
 $369,026
 
At SeptemberJune 30, 20172018, our largest derivative exposure was to a financial institutionan exchange for equity optioninterest rate swap derivative contracts which totaled $3.8of $19 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 $27.71$34.26 per barrel of oil would decrease the fair value of derivative assets by $106 million. An increase in prices equivalent to $84.27 per barrel of oil would increase the fair value of derivative assets by $5.5 million. An increase in prices equivalent to $77.25 per barrel of oil would increase the fair value of derivative assets by $298$118 million as current prices move further away from the fixed prices embedded in our existing contracts. Liquidity requirements of this program may also be affected by our credit rating. At SeptemberJune 30, 2017,2018, a decrease in our credit rating to below investment grade did not have a significant impact on our obligation to post cash margin on existing contracts. 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 SeptemberJune 30, 20172018, changes in interest rates would not materially impact regulatory capital or liquidity needed to support this portion of our customer derivative program.


Summary of Loan Loss Experience

We maintain an allowance for loan losses and an accrual for off-balance sheet credit risk. At SeptemberJune 30, 2017,2018, the combined allowance for loan losses and off-balance sheet credit losses totaled $253218 million or 1.471.21 percent of outstanding loans and 117138 percent of nonaccruing loans, excluding loans guaranteed by U.S. government agencies. The allowance for loan losses was $248215 million and the accrual for off-balance sheet credit losses was $5.42.4 million. At June 30, 2017March 31, 2018, the combined allowance for credit losses was $256228 million or 1.491.32 percent of outstanding loans and 109133 percent of nonaccruing loans, excluding loans guaranteed by U.S. government agencies. The allowance for loan losses was $250224 million and the accrual for off-balance sheet credit losses was $6.44.1 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. Based on an evaluation of all credit factors, including changesoverall loan growth, the continued trend of improvements in nonaccruing and potential problem loans, overall loan growth and net charge-offs, the Company determined that no provision for credit losses was necessary in the third quarter of 2017 orappropriate for the second quarter of 2017.2018. The Company recorded a $5.0 million negative provision for the first quarter of 2018.




Table 20 -- Summary of Loan Loss Experience
(In thousands)
 Three Months Ended Three Months Ended
 Sept. 30, 2017 June 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016 June 30, 2018 Mar. 31, 2018 Dec. 31, 2017 Sept. 30, 2017 June 30, 2017
Allowance for loan losses:                    
Beginning balance $250,061
 $248,710
 $246,159
 $245,103
 $243,259
 $223,967
 $230,682
 $247,703
 $250,061
 $248,710
Loans charged off:          
          
Commercial (4,429) (1,703) (424) (81) (6,266) (13,775) (1,563) (13,254) (4,429) (1,703)
Commercial real estate —
 (76) —
 —
 —
 —
 —
 —
 —
 (76)
Residential mortgage (168) (40) (236) (208) (285) (135) (100) (205) (168) (40)
Personal (1,228) (1,053) (1,493) (1,362) (1,550) (1,195) (1,227) (1,290) (1,228) (1,053)
Total (5,825) (2,872) (2,153) (1,651) (8,101) (15,105) (2,890) (14,749) (5,825) (2,872)
Recoveries of loans previously charged off:          
          
Commercial 1,014
 283
 1,182
 839
 177
 298
 488
 1,982
 1,014
 283
Commercial real estate 739
 208
 735
 395
 521
 3,097
 183
 258
 739
 208
Residential mortgage 134
 169
 228
 986
 650
 505
 242
 229
 134
 169
Personal 550
 554
 755
 593
 690
 678
 663
 592
 550
 554
Total 2,437
 1,214
 2,900
 2,813
 2,038
 4,578
 1,576
 3,061
 2,437
 1,214
Net loans recovered (charged off) (3,388) (1,658) 747
 1,162
 (6,063) (10,527) (1,314) (11,688) (3,388) (1,658)
Provision for loan losses 1,030
 3,009
 1,804
 (106) 7,907
 1,702
 (5,401) (5,333) 1,030
 3,009
Ending balance $247,703
 $250,061
 $248,710
 $246,159
 $245,103
 $215,142
 $223,967
 $230,682
 $247,703
 $250,061
Accrual for off-balance sheet credit losses:          
          
Beginning balance $6,431
 $9,440
 $11,244
 $11,138
 $9,045
 $4,135
 $3,734
 $5,401
 $6,431
 $9,440
Provision for off-balance sheet credit losses (1,030) (3,009) (1,804) 106
 2,093
 (1,702) 401
 (1,667) (1,030) (3,009)
Ending balance $5,401
 $6,431
 $9,440
 $11,244
 $11,138
 $2,433
 $4,135
 $3,734
 $5,401
 $6,431
Total combined provision for credit losses $—
 $—
 $—
 $—
 $10,000
 $—
 $(5,000) $(7,000) $—
 $—
Allowance for loan losses to loans outstanding at period-end 1.44% 1.46% 1.46 % 1.45 % 1.49% 1.19% 1.29 % 1.34 % 1.44% 1.46%
Net charge-offs (recoveries) (annualized) to average loans 0.08% 0.04% (0.02)% (0.03)% 0.15% 0.24% 0.03 % 0.27 % 0.08% 0.04%
Total provision for credit losses (annualized) to average loans —% —% — % — % 0.24% —% (0.12)% (0.16)% —% —%
Recoveries to gross charge-offs 41.84% 42.27% 134.70 % 170.38 % 25.16% 30.31% 54.53 % 20.75 % 41.84% 42.27%
Accrual for off-balance sheet credit losses to off-balance sheet credit commitments 0.05% 0.06% 0.09 % 0.11 % 0.12% 0.02% 0.04 % 0.04 % 0.05% 0.06%
Combined allowance for credit losses to loans outstanding at period-end 1.47% 1.49% 1.52 % 1.52 % 1.56% 1.21% 1.32 % 1.37 % 1.47% 1.49%
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 original 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 SeptemberJune 30, 20172018, impaired loans totaled $404328 million, including $9060 million with specific allowances of $15 million and $268 million with no specific allowances. At March 31, 2018, impaired loans totaled $349 million, including $74 million of impaired loans with specific allowances of $13 million and $315 million with no specific allowances. At June 30, 2017, impaired loans totaled $428 million, including $73 million of impaired loans with specific allowances of $9.7 million and $355275 million with no specific allowances.

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 $45 million of impaired energy loans required no allowance for credit losses based on the adequacy of collateral and $66 million of impaired loans with a $4.9 million allowance for credit losses. In addition, $53 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 $206184 million at September 30, 2017, a decrease of $6.7 million compared to June 30, 20172018. The general allowance attributedfor unimpaired loans decreased $6.2 million compared to March 31, 2018, primarily related to the commercial loan segment, decreased $4.5 million and the general allowance attributedpartially offset by an increase related to the commercial real estate loan segment decreased $2.2 million.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 $2815 million at SeptemberJune 30, 20172018, an increase of $704 thousand overa $4.5 million decrease compared to June 30, 2017March 31, 2018. The nonspecific allowance includes considerationdecreased related to the reversal of the indirectnonspecific allowance related to the estimated long-term impact of the prolonged low energy price environmentHurricane Harvey in 2017 on the broader economies within our geographical footprint that are highly dependent on the energy industry and theHouston, Texas market as this impact of the recent hurricane on borrowersis now fully reflected in the Houston market.estimated loss rates.

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 $285140 million at SeptemberJune 30, 20172018 and were primarily composed of $207$93 million or 73 percent of energy loans, $33 million or 1 percent of healthcare sector loans and $17 million or 3 percent of manufacturing sector loans and $17 million or 1 percent of healthcare sector loans. Potential problem loans totaled $327$222 million at June 30, 2017March 31, 2018.

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 $198$124 million at SeptemberJune 30, 20172018 and were composed primarily of $114$52 million or 42 percent of outstanding energy loans, $32$31 million or 1 percent of outstanding healthcareservice sector loans and $26$21 million or less than 13 percent of outstanding services loans.commercial real estate loans secured by retail facilities. Other loans especially mentioned totaled $199$78 million at June 30, 2017.March 31, 2018.

We updated our semi-annual energy loan portfolio stress test at June 30, 20172018 to estimate how the energy portfolio may respond in a prolonged low-price environment. Stress test assumptions includeapplied the five year forward pricing curve which decreases from a starting price of $2.00$2.29 per million BTUs for natural gas and $35.87$51.70 per barrel of oil gradually escalating over twelve to fifteen$2.17 per million BTUs for natural gas and $43.37 per barrel of oil in year 5 and then escalated 3 percent annually for years six through ten to a maximum of $3.00$2.50 and $55.00,$49.99, respectively. The portionResults of the combinedstress test were considered in conjunction with the determination of the allowance for credit losses attributable to the energy portfolio totaled 2.41 percent of outstanding energy loans at September 30, 2017, compared to 2.84 percent of outstanding energy loans at June 30, 2017.losses.


Net Loans Charged OffCommercial Real Estate

Loans are charged off againstCommercial real estate represents loans for the allowanceconstruction of buildings or other improvements to real estate and property held by borrowers for loan losses wheninvestment purposes generally within our geographical footprint, with larger concentrations in Texas and Oklahoma which represent 33% and 12% of the total commercial real estate portfolio at June 30, 2018, respectively. We require collateral values in excess of the loan balance oramounts, demonstrated cash flows in excess of expected debt service requirements, equity investment in the project and a portion of the loan balance is no longer covered byproject 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 paying capacityrisks 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 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 charge-offs of $3.4 million in the third quarter of 2017, compared to net charge-offs of $1.7 million in the second quarter of 2017 and net loans charged off of $6.1 million in the third quarter of 2016. The ratio of net loans charged off to average loans on an annualized basis was 0.08 percentfor the third quarter of 2017, comparedcompliance with 0.04 percent for the second quarter of 2017 and 0.15 percent for the third quarter of 2016. applicable lending policies.

Net charge-offsCommercial real estate loans totaled $3.7 billion or 21% of the loan portfolio at June 30, 2018. The outstanding balance of commercial real estate loans were $3.4increased $205 million induring the third quarter of 2017, primarily due to $4.3 million of charge-offs related to two energy borrowers. Commercial loans had net charge-offs of $1.4 million in the second quarter of 2017 primarily due to a single healthcare borrower. Net2018. Loans secured by office buildings increased $83 million. Multifamily residential loans increased $48 million. Loans secured by industrial properties grew by $40 million. Loans secured by retail facilities and other commercial real estate loans increased $18 million and $15 million, respectively. The commercial real estate loan recoveries were $739 thousand inbalance as a percentage of our total loan portfolio has ranged from 19 percent to 23 percent over the third quarter of 2017, compared to net recoveries of $132 thousand in the second quarter of 2017. Net charge-offs of residential mortgage loans were $34 thousand and net charge-offs of personal loans were $678 thousand for the third quarter. Personal loan net charge-offs include deposit account overdraft losses.past five years. 



Nonperforming AssetsThe commercial real estate sector of our loan portfolio distributed by collateral location follows in Table 14.

Table 2114 -- Nonperforming AssetsCommercial Real Estate Loans by Collateral Location
(In thousands)
  Sept. 30, 2017 June 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016
Nonaccruing loans:          
Commercial $176,900
 $197,157
 $156,825
 $178,953
 $176,464
Commercial real estate 2,975
 3,775
 4,475
 5,521
 7,350
Residential mortgage 45,506
 44,235
 46,081
 46,220
 52,452
Personal 255
 272
 235
 290
 686
Total nonaccruing loans 225,636
 245,439
 207,616
 230,984
 236,952
Accruing renegotiated loans guaranteed by U.S. government agencies 69,440
 80,624
 83,577
 81,370
 80,306
Real estate and other repossessed assets 32,535
 39,436
 42,726
 44,287
 31,941
Total nonperforming assets $327,611
 $365,499
 $333,919
 $356,641
 $349,199
Total nonperforming assets excluding those guaranteed by U.S. government agencies $249,280
 $275,823
 $240,234
 $263,425
 $253,461
           
Nonaccruing loans by loan portfolio segment and class:      
  
Commercial:        
  
Energy $110,683
 $123,992
 $110,425
 $132,499
 $142,966
Services 1,174
 7,754
 7,713
 8,173
 8,477
Wholesale / retail 1,893
 10,620
 11,090
 11,407
 2,453
Manufacturing 9,059
 9,656
 5,907
 4,931
 274
Healthcare 24,446
 24,505
 909
 825
 855
Other commercial and industrial 29,645
 20,630
 20,781
 21,118
 21,439
Total commercial 176,900
 197,157
 156,825
 178,953
 176,464
           
Commercial real estate:        
  
Residential construction and land development 1,924
 2,051
 2,616
 3,433
 3,739
Retail 289
 301
 314
 326
 1,249
Office 275
 396
 413
 426
 882
Multifamily —
 10
 24
 38
 51
Industrial —
 —
 76
 76
 76
Other commercial real estate 487
 1,017
 1,032
 1,222
 1,353
Total commercial real estate 2,975
 3,775
 4,475
 5,521
 7,350
           
Residential mortgage:        
  
Permanent mortgage 24,623
 23,415
 24,188
 22,855
 25,956
Permanent mortgage guaranteed by U.S. government agencies 8,891
 9,052
 10,108
 11,846
 15,432
Home equity 11,992
 11,768
 11,785
 11,519
 11,064
Total residential mortgage 45,506
 44,235
 46,081
 46,220
 52,452
Personal 255
 272
 235
 290
 686
Total nonaccruing loans $225,636
 $245,439
 $207,616
 $230,984
 $236,952
           
  Oklahoma Texas New Mexico Arkansas Colorado Arizona Kansas/Missouri Other Total
Multifamily $127,373
 $485,735
 $26,653
 $26,641
 $81,571
 $66,414
 $129,248
 $113,349
 $1,056,984
Office 106,169
 222,686
 88,374
 12,870
 31,988
 72,274
 40,348
 245,418
 820,127
Retail 56,301
 284,347
 121,079
 7,338
 42,941
 29,617
 15,620
 210,781
 768,024
Industrial 71,500
 180,920
 23,278
 104
 9,087
 7,142
 43,777
 317,576
 653,384
Residential construction and land development 18,049
 20,601
 18,216
 2,102
 23,817
 2,026
 12,908
 21,280
 118,999
Other commercial real estate 51,810
 35,019
 10,956
 1,580
 12,102
 24,035
 20,183
 139,017
 294,702
Total commercial real estate loans $431,202
 $1,229,308
 $288,556
 $50,635
 $201,506
 $201,508
 $262,084
 $1,047,421
 $3,712,220

The Other category is primarily composed of California - $203 million or 5 percent of the commercial real estate portfolio, Florida - $114 million or 3 percent of the commercial real estate portfolio and Utah - $103 million or 3 percent of the commercial real estate portfolio. All other states represent less than 3% individually.

While recent changes nationally in consumer purchasing trends from brick-and-mortar stores to online has created concern with regards to retail lending, our credit quality remains very good. The portfolio is highly diversified with no material exposure to a single borrower or tenant.


Residential Mortgage and Personal
  Sept. 30, 2017 June 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016
Nonaccruing loans as % of outstanding balance for class:          
Commercial:          
Energy 3.86% 4.35% 4.35% 5.30% 5.67%
Services 0.04% 0.26% 0.26% 0.26% 0.29%
Wholesale / retail 0.11% 0.69% 0.74% 0.72% 0.15%
Manufacturing 1.74% 1.77% 1.09% 0.96% 0.05%
Healthcare 1.09% 1.10% 0.04% 0.04% 0.04%
Other commercial and industrial 5.46% 3.96% 4.50% 4.31% 4.50%
Total commercial 1.64% 1.85% 1.52% 1.72% 1.74%
           
Commercial real estate:          
Residential construction and land development 1.72% 1.45% 1.92% 2.53% 2.34%
Retail 0.04% 0.04% 0.04% 0.04% 0.16%
Office 0.03% 0.05% 0.05% 0.05% 0.12%
Multifamily —% —% —% —% 0.01%
Industrial —% —% 0.01% 0.01% 0.01%
Other commercial real estate 0.17% 0.32% 0.31% 0.36% 0.37%
Total commercial real estate 0.08% 0.10% 0.12% 0.14% 0.19%
           
Residential mortgage:          
Permanent mortgage 2.43% 2.37% 2.47% 2.27% 2.68%
Permanent mortgage guaranteed by U.S. government agencies 4.75% 4.72% 4.95% 5.94% 8.11%
Home equity 1.61% 1.55% 1.54% 1.55% 1.55%
Total residential mortgage 2.34% 2.28% 2.37% 2.37% 2.80%
Personal 0.03% 0.03% 0.03% 0.03% 0.10%
Total nonaccruing loans 1.31% 1.43% 1.22% 1.36% 1.44%
           
Ratios:        
  
Allowance for loan losses to nonaccruing loans1
 114.28% 105.78% 125.92% 112.33% 110.65%
Accruing loans 90 days or more past due1
 $253
 $1,414
 $95
 $5
 $3,839

1
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 to wealth management clients 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.
Excludes residential mortgages guaranteed by agencies of the U.S. Government.

Nonperforming assets totaled $328 million or 1.90 percent of outstanding loans and repossessed assets at September 30, 2017. Nonaccruing loans totaled $226 million, accruing renegotiated residentialResidential mortgage loans totaled $691.9 billion, a decrease of $3.5 million compared to March 31, 2018. In general, we sell the majority of our conforming fixed rate loan originations in the secondary market and real estateretain the majority of our non-conforming and other repossessed assets totaledadjustable-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 95% 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 June 30, 2018, $33 million. All accruing renegotiated residential mortgage loans and $8.9170 million of nonaccruingpermanent residential mortgage loans are guaranteed by U.S. government agencies. Excluding assetsWe have limited 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 nonperformingdecreased $8.2 million compared to March 31, 2018.

Home equity loans totaled $704 million at June 30, 2018, a $16 million decrease compared to March 31, 2018. 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 June 30, 2018 by lien position and amortizing status follows in Table 15.

Table 15 -- Home Equity Loans
(In thousands)
  Revolving Amortizing Total
First lien $69,587
 $363,904
 $433,491
Junior lien 149,676
 121,018
 270,694
Total home equity $219,263
 $484,922
 $704,185




The distribution of residential mortgage and personal loans at June 30, 2018 is as follows in Table 16. Residential mortgage loans are distributed by collateral location. Personal loans are generally distributed by borrower location.

Table 16 -- 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 $170,130
 $434,582
 $52,890
 $13,430
 $186,125
 $100,536
 $61,394
 $49,325
 $1,068,412
Permanent mortgages  guaranteed by U.S. government agencies 42,443
 31,875
 33,138
 7,374
 3,781
 843
 11,065
 39,134
 169,653
Home equity 373,250
 132,689
 85,643
 5,794
 39,189
 9,921
 55,093
 2,606
 704,185
Total residential mortgage $585,823
 $599,146
 $171,671
 $26,598
 $229,095
 $111,300
 $127,552
 $91,065
 $1,942,250
                   
Personal $316,308
 $420,736
 $11,251
 $12,480
 $62,136
 $59,626
 $64,596
 $53,054
 $1,000,187



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 Company are centrally managed by the Bank of Oklahoma.

Table 17 -- Loans Managed by Primary Geographical Market
(In thousands)
  June 30, 2018 Mar. 31, 2018 Dec. 31, 2017 Sept. 30, 2017 June 30, 2017
Bank of Oklahoma:          
Commercial $3,465,407
 $3,265,013
 $3,238,720
 $3,408,973
 $3,369,967
Commercial real estate 662,665
 668,031
 682,037
 712,915
 667,932
Residential mortgage 1,403,658
 1,419,281
 1,435,432
 1,405,900
 1,398,021
Personal 362,846
 353,128
 342,212
 322,320
 318,016
Total Bank of Oklahoma 5,894,576
 5,705,453
 5,698,401
 5,850,108
 5,753,936
           
Bank of Texas:  
  
  
  
  
Commercial 4,922,451
 4,715,841
 4,520,401
 4,434,595
 4,339,634
Commercial real estate 1,336,101
 1,254,421
 1,261,864
 1,236,702
 1,360,164
Residential mortgage 243,400
 229,761
 233,675
 229,993
 232,074
Personal 394,021
 363,608
 375,084
 375,173
 354,222
Total Bank of Texas 6,895,973
 6,563,631
 6,391,024
 6,276,463
 6,286,094
           
Bank of Albuquerque:  
  
  
  
  
Commercial 305,167
 315,701
 343,296
 367,747
 369,370
Commercial real estate 386,878
 348,485
 341,282
 319,208
 324,405
Residential mortgage 90,581
 93,490
 98,018
 101,983
 103,849
Personal 11,107
 11,667
 11,721
 12,953
 12,439
Total Bank of Albuquerque 793,733
 769,343
 794,317
 801,891
 810,063
           
Bank of Arkansas:  
  
  
  
  
Commercial 93,217
 94,430
 95,644
 91,051
 85,020
Commercial real estate 90,807
 88,700
 87,393
 80,917
 73,943
Residential mortgage 6,927
 7,033
 6,596
 6,318
 6,395
Personal 12,331
 9,916
 9,992
 10,388
 11,993
Total Bank of Arkansas 203,282
 200,079
 199,625
 188,674
 177,351
           
Colorado State Bank & Trust:  
  
  
  
  
Commercial 1,165,721
 1,180,655
 1,130,714
 1,124,200
 1,065,780
Commercial real estate 267,065
 210,801
 174,201
 186,427
 255,379
Residential mortgage 64,839
 64,530
 63,350
 63,734
 63,346
Personal 60,504
 63,118
 63,115
 60,513
 56,187
Total Colorado State Bank & Trust 1,558,129
 1,519,104
 1,431,380
 1,434,874
 1,440,692
           
Bank of Arizona:  
  
  
  
  
Commercial 681,852
 624,106
 687,792
 634,809
 617,759
Commercial real estate 710,784
 672,319
 660,094
 706,188
 705,858
Residential mortgage 47,010
 39,227
 41,771
 40,730
 37,034
Personal 65,541
 57,023
 57,140
 55,050
 55,528
Total Bank of Arizona 1,505,187
 1,392,675
 1,446,797
 1,436,777
 1,416,179
           
Mobank (Kansas City):  
  
  
  
  
Commercial 715,224
 723,921
 717,408
 734,559
 790,425
Commercial real estate 257,920
 264,025
 273,116
 275,785
 300,911
Residential mortgage 85,835
 92,447
 94,844
 97,092
 98,479
Personal 93,837
 107,172
 106,512
 110,611
 109,515
Total Mobank (Kansas City) 1,152,816
 1,187,565
 1,191,880
 1,218,047
 1,299,330
           
Total BOK Financial loans $18,003,696
 $17,337,850
 $17,153,424
 $17,206,834
 $17,183,645


Loan Commitments

We enter into certain off-balance sheet arrangements in the normal course of business as shown in Table 18. 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.

Table 18 – Off-Balance Sheet Credit Commitments
(In thousands)
  June 30, 2018 Mar. 31, 2018 Dec. 31, 2017 Sept. 30, 2017 June 30, 2017
Loan commitments $10,294,211
 $10,249,729
 $9,958,080
 $9,693,489
 $9,632,911
Standby letters of credit 659,867
 664,342
 647,653
 665,513
 614,852
Mortgage loans sold with recourse 116,269
 121,197
 125,127
 128,681
 133,896

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 $70 million to borrowers in Oklahoma, $12 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 Balance Sheets and totaled $3.5 million at June 30, 2018 and 3.7 million at March 31, 2018 and $3.9 million at June 30, 2017.

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 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. 

For the period from 2010 through the second quarter of 2018 combined, approximately 17% of repurchase requests have currently resulted in actual repurchases or indemnification by the Company. There were no loans repurchased from the agencies during the second quarter of 2018. There were no loans with indemnification paid during the second quarter of 2018. 

A summary of unresolved deficiency requests from the agencies follows (in thousands, except for number of unresolved deficiency requests):
 June 30,
 2018 2017
Number of unresolved deficiency requests179
 206
Aggregate outstanding principal balance subject to unresolved deficiency requests$8,394
 $13,370
Unpaid principal balance subject to indemnification by the Company4,741
 5,074

The accrual for potential loan repurchases under representations and warranties totaled $1.1 million at June 30, 2018, $1.2 million at March 31, 2018, and $1.6 million at June 30, 2017.


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 scenarios 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.

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 June 30, 2018, the net fair values of derivative contracts, before consideration of cash margin, reported as assets decreasedunder these programs totaled $27382 million compared to the third$292 million quarter primarily dueat March 31, 2018. At June 30, 2018, the net fair value of our derivative contracts included $171 million for foreign exchange contracts, $131 million for energy contracts, $41 million for interest rate swaps and $35 million of to-be-announced residential mortgage-backed securities. The aggregate net fair value of derivative contracts, before consideration of cash margin, held under these programs reported as liabilities totaled $364 million at June 30, 2018 and $280 million at March 31, 2018.

At June 30, 2018, total derivative assets were reduced by $13 million of cash collateral received from counterparties and total derivative liabilities were reduced by $150 million of cash collateral paid to counterparties related to instruments executed with the same counterparty under a decreasemaster 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 nonaccruing energy loans. 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, generally retains nonperforming assetsby category of debtor at June 30, 2018 follows in Table 19.

Table 19 -- Fair Value of Derivative Contracts
(In thousands)
Customers $253,096
Banks and other financial institutions 96,206
Exchanges and clearing organizations 19,724
Fair value of customer risk management program asset derivative contracts, net $369,026
At June 30, 2018, our largest derivative exposure was to maximize potential recovery, which may cause future nonperforming assets to decrease more slowly.an exchange for interest rate swap derivative contracts of $19 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 $34.26 per barrel of oil would decrease the fair value of derivative assets by $106 million. An increase in prices equivalent to $84.27 per barrel of oil would increase the fair value of derivative assets by $118 million as current prices move further away from the fixed prices embedded in our existing contracts. Liquidity requirements of this program may also be affected by our credit rating. At June 30, 2018, a decrease in our credit rating to below investment grade did not have a significant impact on our obligation to post cash margin on existing contracts. 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 June 30, 2018, changes in interest rates would not materially impact regulatory capital or liquidity needed to support this portion of our customer derivative program.
Summary of Loan Loss Experience

We maintain an allowance for loan losses and an accrual for off-balance sheet credit risk. At June 30, 2018, the combined allowance for loan losses and off-balance sheet credit losses totaled $218 million or 1.21 percent of outstanding loans and 138 percent of nonaccruing loans, excluding loans guaranteed by U.S. government agencies. The allowance for loan losses was $215 million and the accrual for off-balance sheet credit losses was $2.4 million. At March 31, 2018, the combined allowance for credit losses was $228 million or 1.32 percent of outstanding loans and 133 percent of nonaccruing loans, excluding loans guaranteed by U.S. government agencies. The allowance for loan losses was $224 million and the accrual for off-balance sheet credit losses was $4.1 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. Based on an evaluation of all credit factors, including overall loan growth, the continued trend of improvements in nonaccruing and potential problem loans, and net charge-offs, the Company determined that no provision for credit losses was appropriate for the second quarter of 2018. The Company recorded a $5.0 million negative provision for the first quarter of 2018.




Table 20 -- Summary of Loan Loss Experience
(In thousands)
  Three Months Ended
  June 30, 2018 Mar. 31, 2018 Dec. 31, 2017 Sept. 30, 2017 June 30, 2017
Allowance for loan losses:          
Beginning balance $223,967
 $230,682
 $247,703
 $250,061
 $248,710
Loans charged off:          
Commercial (13,775) (1,563) (13,254) (4,429) (1,703)
Commercial real estate —
 —
 —
 —
 (76)
Residential mortgage (135) (100) (205) (168) (40)
Personal (1,195) (1,227) (1,290) (1,228) (1,053)
Total (15,105) (2,890) (14,749) (5,825) (2,872)
Recoveries of loans previously charged off:          
Commercial 298
 488
 1,982
 1,014
 283
Commercial real estate 3,097
 183
 258
 739
 208
Residential mortgage 505
 242
 229
 134
 169
Personal 678
 663
 592
 550
 554
Total 4,578
 1,576
 3,061
 2,437
 1,214
Net loans recovered (charged off) (10,527) (1,314) (11,688) (3,388) (1,658)
Provision for loan losses 1,702
 (5,401) (5,333) 1,030
 3,009
Ending balance $215,142
 $223,967
 $230,682
 $247,703
 $250,061
Accrual for off-balance sheet credit losses:          
Beginning balance $4,135
 $3,734
 $5,401
 $6,431
 $9,440
Provision for off-balance sheet credit losses (1,702) 401
 (1,667) (1,030) (3,009)
Ending balance $2,433
 $4,135
 $3,734
 $5,401
 $6,431
Total combined provision for credit losses $—
 $(5,000) $(7,000) $—
 $—
Allowance for loan losses to loans outstanding at period-end 1.19% 1.29 % 1.34 % 1.44% 1.46%
Net charge-offs (recoveries) (annualized) to average loans 0.24% 0.03 % 0.27 % 0.08% 0.04%
Total provision for credit losses (annualized) to average loans —% (0.12)% (0.16)% —% —%
Recoveries to gross charge-offs 30.31% 54.53 % 20.75 % 41.84% 42.27%
Accrual for off-balance sheet credit losses to off-balance sheet credit commitments 0.02% 0.04 % 0.04 % 0.05% 0.06%
Combined allowance for credit losses to loans outstanding at period-end 1.21% 1.32 % 1.37 % 1.47% 1.49%
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 generally classified as nonaccruingconsidered to be impaired when it becomesis probable that we will not collect all amounts due according to the fulloriginal 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 June 30, 2018, impaired loans totaled $328 million, including $60 million with specific allowances of $15 millionand interest. As more$268 million with no specific allowances. At March 31, 2018, impaired loans totaled $349 million, including $74 million of impaired loans with specific allowances of $13 million and $275 million with no specific allowances.


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 $184 million at June 30, 2018. The general allowance for unimpaired loans decreased $6.2 million compared to March 31, 2018, primarily related to the commercial loan segment, partially offset by an increase related to the commercial real estate 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 $15 million at June 30, 2018, a $4.5 million decrease compared to March 31, 2018. The nonspecific allowance decreased related to the reversal of the nonspecific allowance related to the estimated long-term impact of Hurricane Harvey in 2017 on the Houston, Texas market as this impact is now fully discussedreflected in estimated loss rates.

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

Our loan monitoring process also identified certain accruing substandard loans that possess more than the normal amount of risk due to deterioration 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 capacityfinancial condition of the borrower based on a quarterly evaluationor the value of available cash resources and collateral value. All nonaccruing loans generally remain on nonaccrual status until full collection of principal and interestthe collateral. Because the borrowers are still performing 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 atof the directionloan agreements, and no loss 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 continuesanticipated, these loans were not included in nonperforming assets. Known information does, however, cause management concern as to accrue based on the modified terms of the loan. Modifiedborrowers’ ability to comply with current repayment terms. These potential problem 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 and nine months endedtotaled September 30, 2017$140 million follows in Tableat 22June 30, 2018 and were primarily composed of $93 million or 3 percent of energy loans, $17 million or 3 percent of manufacturing sector loans and $17 million or 1 percent of healthcare sector loans. Potential problem loans totaled $222 million at March 31, 2018.

Table 22 -- RollforwardBased on regulatory guidelines, other loans especially mentioned are in compliance with the original terms of Nonperforming Assets
(In thousands)
  Three Months Ended
  September 30, 2017
  
 
Nonaccruing Loans
 
 
Renegotiated Loans
 Real Estate and Other Repossessed Assets Total Nonperforming Assets
Balance, June 30, 2017 $245,439
 $80,624
 $39,436
 $365,499
Additions 24,366
 11,329
 —
 35,695
Transfers from premises and equipment —
 —
 —
 —
Payments (34,686) (760) —
 (35,446)
Charge-offs (5,825) —
 —
 (5,825)
Net gains, losses and write-downs —
 —
 (3,810) (3,810)
Foreclosure of nonperforming loans (2,600) —
 2,600
 —
Foreclosure of loans guaranteed by U.S. government agencies (1,221) (930) —
 (2,151)
Proceeds from sales —
 (21,053) (5,210) (26,263)
Net transfers to nonaccruing loans 136
 (136) —
 —
Return to accrual status —
 —
 —
 —
Other, net 27
 366
 (481) (88)
Balance, September 30, 2017 $225,636
 $69,440
 $32,535
 $327,611


  Nine Months Ended
  September 30, 2017
  
 
Nonaccruing Loans
 
 
Renegotiated Loans
 Real Estate and Other Repossessed Assets Total Nonperforming Assets
Balance, December 31, 2016 $230,984
 $81,370
 $44,287
 $356,641
Additions 106,098
 37,683
 —
 143,781
Transfers from premises and equipment —
 —
 452
 452
Payments (84,848) (2,546) —
 (87,394)
Charge-offs (10,850) —
 —
 (10,850)
Net gains, losses and write-downs —
 —
 (2,206) (2,206)
Foreclosure of nonperforming loans (4,197) —
 4,197
 —
Foreclosure of loans guaranteed by U.S. government agencies (5,201) (5,220) —
 (10,421)
Proceeds from sales —
 (42,459) (12,912) (55,371)
Net transfers to nonaccruing loans 136
 (136) —
 —
Return to accrual status (6,556) —
 —
 (6,556)
Other, net 70
 748
 (1,283) (465)
Balance, September 30, 2017 $225,636
 $69,440
 $32,535
 $327,611
the agreement but may have a weakness that deserves management's close attention. Other loans especially mentioned totaled $124 million at June 30, 2018 and were composed primarily of $52 million or 2 percent of outstanding energy loans, $31 million or 1 percent of service sector loans and $21 million or 3 percent of commercial real estate loans secured by retail facilities. Other loans especially mentioned totaled $78 million at March 31, 2018.

We foreclose on loans guaranteed by U.S. government agenciesupdated our semi-annual energy loan portfolio stress test at June 30, 2018 to estimate how the energy portfolio may respond in accordance with agency guidelines. Generally these loans are not eligiblea prolonged low-price environment. Stress test assumptions applied the five year forward pricing curve which decreases from a starting price of $2.29 per million BTUs for modification programs or have failednatural gas and $51.70 per barrel of oil to comply with modified loan terms. Principal is guaranteed by agencies$2.17 per million BTUs for natural gas and $43.37 per barrel of oil in year 5 and then escalated 3 percent annually for years six through ten to a maximum of $2.50 and $49.99, respectively. Results of the U.S. government, subject to limitations andstress test were considered in conjunction with the determination of the allowance for credit risk is minimal. These properties will be conveyed to the agencies once applicable criteria have been met. losses.
Commercial

Nonaccruing commercial loans totaled $177 million or 1.64 percent of total commercial loans at September 30, 2017 and $197 million or 1.85 percent of commercial loans at June 30, 2017. There were $15 million in newly identified nonaccruing commercial loans during the quarter, offset by $31 million in payments and $4.4 million of charge-offs. Newly identified nonaccruing commercial loans were primarily other commercial & industrial loans and energy loans.

Nonaccruing commercial loans at September 30, 2017 were primarily composed of $111 million or 3.86 percent of total energy loans, $30 million or 5.46 percent of total other commercial and industrial sector loans and $24 million or 1.09 percent of total healthcare sector loans.
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 33% and 12% of the total commercial real estate portfolio at June 30, 2018, 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 $3.7 billion or 21% of the loan portfolio at June 30, 2018. The outstanding balance of commercial real estate loans increased $205 million during the second quarter of 2018. Loans secured by office buildings increased $83 million. Multifamily residential loans increased $48 million. Loans secured by industrial properties grew by $40 million. Loans secured by retail facilities and other commercial real estate loans increased $18 million and $15 million, respectively. The commercial real estate loan balance as a percentage of our total loan portfolio has ranged from 19 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 14.

Table 14 -- Commercial Real Estate Loans by Collateral Location
(In thousands)
  Oklahoma Texas New Mexico Arkansas Colorado Arizona Kansas/Missouri Other Total
Multifamily $127,373
 $485,735
 $26,653
 $26,641
 $81,571
 $66,414
 $129,248
 $113,349
 $1,056,984
Office 106,169
 222,686
 88,374
 12,870
 31,988
 72,274
 40,348
 245,418
 820,127
Retail 56,301
 284,347
 121,079
 7,338
 42,941
 29,617
 15,620
 210,781
 768,024
Industrial 71,500
 180,920
 23,278
 104
 9,087
 7,142
 43,777
 317,576
 653,384
Residential construction and land development 18,049
 20,601
 18,216
 2,102
 23,817
 2,026
 12,908
 21,280
 118,999
Other commercial real estate 51,810
 35,019
 10,956
 1,580
 12,102
 24,035
 20,183
 139,017
 294,702
Total commercial real estate loans $431,202
 $1,229,308
 $288,556
 $50,635
 $201,506
 $201,508
 $262,084
 $1,047,421
 $3,712,220

The Other category is primarily composed of California - $203 million or 5 percent of the commercial real estate portfolio, Florida - $114 million or 3 percent of the commercial real estate portfolio and Utah - $103 million or 3 percent of the commercial real estate portfolio. All other states represent less than 3% individually.

While recent changes nationally in consumer purchasing trends from brick-and-mortar stores to online has created concern with regards to retail lending, our credit quality remains very good. The portfolio is highly diversified with no material exposure to a single borrower or tenant.


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 to wealth management clients 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 totaled $1.9 billion, a decrease of $3.5 million compared to March 31, 2018. 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 95% 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 June 30, 2018, $170 million of permanent residential mortgage loans are guaranteed by U.S. government agencies. We have limited 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 decreased $8.2 million compared to March 31, 2018.

Home equity loans totaled $704 million at June 30, 2018, a $16 million decrease compared to March 31, 2018. 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 June 30, 2018 by lien position and amortizing status follows in Table 15.

Table 15 -- Home Equity Loans
(In thousands)
  Revolving Amortizing Total
First lien $69,587
 $363,904
 $433,491
Junior lien 149,676
 121,018
 270,694
Total home equity $219,263
 $484,922
 $704,185




The distribution of residential mortgage and personal loans at June 30, 2018 is as follows in Table 16. Residential mortgage loans are distributed by collateral location. Personal loans are generally distributed by borrower location.

Table 16 -- 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 $170,130
 $434,582
 $52,890
 $13,430
 $186,125
 $100,536
 $61,394
 $49,325
 $1,068,412
Permanent mortgages  guaranteed by U.S. government agencies 42,443
 31,875
 33,138
 7,374
 3,781
 843
 11,065
 39,134
 169,653
Home equity 373,250
 132,689
 85,643
 5,794
 39,189
 9,921
 55,093
 2,606
 704,185
Total residential mortgage $585,823
 $599,146
 $171,671
 $26,598
 $229,095
 $111,300
 $127,552
 $91,065
 $1,942,250
                   
Personal $316,308
 $420,736
 $11,251
 $12,480
 $62,136
 $59,626
 $64,596
 $53,054
 $1,000,187



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 Company are centrally managed by the Bank of Oklahoma.

Table 17 -- Loans Managed by Primary Geographical Market
(In thousands)
  June 30, 2018 Mar. 31, 2018 Dec. 31, 2017 Sept. 30, 2017 June 30, 2017
Bank of Oklahoma:          
Commercial $3,465,407
 $3,265,013
 $3,238,720
 $3,408,973
 $3,369,967
Commercial real estate 662,665
 668,031
 682,037
 712,915
 667,932
Residential mortgage 1,403,658
 1,419,281
 1,435,432
 1,405,900
 1,398,021
Personal 362,846
 353,128
 342,212
 322,320
 318,016
Total Bank of Oklahoma 5,894,576
 5,705,453
 5,698,401
 5,850,108
 5,753,936
           
Bank of Texas:  
  
  
  
  
Commercial 4,922,451
 4,715,841
 4,520,401
 4,434,595
 4,339,634
Commercial real estate 1,336,101
 1,254,421
 1,261,864
 1,236,702
 1,360,164
Residential mortgage 243,400
 229,761
 233,675
 229,993
 232,074
Personal 394,021
 363,608
 375,084
 375,173
 354,222
Total Bank of Texas 6,895,973
 6,563,631
 6,391,024
 6,276,463
 6,286,094
           
Bank of Albuquerque:  
  
  
  
  
Commercial 305,167
 315,701
 343,296
 367,747
 369,370
Commercial real estate 386,878
 348,485
 341,282
 319,208
 324,405
Residential mortgage 90,581
 93,490
 98,018
 101,983
 103,849
Personal 11,107
 11,667
 11,721
 12,953
 12,439
Total Bank of Albuquerque 793,733
 769,343
 794,317
 801,891
 810,063
           
Bank of Arkansas:  
  
  
  
  
Commercial 93,217
 94,430
 95,644
 91,051
 85,020
Commercial real estate 90,807
 88,700
 87,393
 80,917
 73,943
Residential mortgage 6,927
 7,033
 6,596
 6,318
 6,395
Personal 12,331
 9,916
 9,992
 10,388
 11,993
Total Bank of Arkansas 203,282
 200,079
 199,625
 188,674
 177,351
           
Colorado State Bank & Trust:  
  
  
  
  
Commercial 1,165,721
 1,180,655
 1,130,714
 1,124,200
 1,065,780
Commercial real estate 267,065
 210,801
 174,201
 186,427
 255,379
Residential mortgage 64,839
 64,530
 63,350
 63,734
 63,346
Personal 60,504
 63,118
 63,115
 60,513
 56,187
Total Colorado State Bank & Trust 1,558,129
 1,519,104
 1,431,380
 1,434,874
 1,440,692
           
Bank of Arizona:  
  
  
  
  
Commercial 681,852
 624,106
 687,792
 634,809
 617,759
Commercial real estate 710,784
 672,319
 660,094
 706,188
 705,858
Residential mortgage 47,010
 39,227
 41,771
 40,730
 37,034
Personal 65,541
 57,023
 57,140
 55,050
 55,528
Total Bank of Arizona 1,505,187
 1,392,675
 1,446,797
 1,436,777
 1,416,179
           
Mobank (Kansas City):  
  
  
  
  
Commercial 715,224
 723,921
 717,408
 734,559
 790,425
Commercial real estate 257,920
 264,025
 273,116
 275,785
 300,911
Residential mortgage 85,835
 92,447
 94,844
 97,092
 98,479
Personal 93,837
 107,172
 106,512
 110,611
 109,515
Total Mobank (Kansas City) 1,152,816
 1,187,565
 1,191,880
 1,218,047
 1,299,330
           
Total BOK Financial loans $18,003,696
 $17,337,850
 $17,153,424
 $17,206,834
 $17,183,645


Loan Commitments

We enter into certain off-balance sheet arrangements in the normal course of business as shown in Table 18. 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.

Table 18 – Off-Balance Sheet Credit Commitments
(In thousands)
  June 30, 2018 Mar. 31, 2018 Dec. 31, 2017 Sept. 30, 2017 June 30, 2017
Loan commitments $10,294,211
 $10,249,729
 $9,958,080
 $9,693,489
 $9,632,911
Standby letters of credit 659,867
 664,342
 647,653
 665,513
 614,852
Mortgage loans sold with recourse 116,269
 121,197
 125,127
 128,681
 133,896

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 $70 million to borrowers in Oklahoma, $12 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 Balance Sheets and totaled $3.5 million at June 30, 2018 and 3.7 million at March 31, 2018 and $3.9 million at June 30, 2017.

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 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. 

For the period from 2010 through the second quarter of 2018 combined, approximately 17% of repurchase requests have currently resulted in actual repurchases or indemnification by the Company. There were no loans repurchased from the agencies during the second quarter of 2018. There were no loans with indemnification paid during the second quarter of 2018. 

A summary of unresolved deficiency requests from the agencies follows (in thousands, except for number of unresolved deficiency requests):
 June 30,
 2018 2017
Number of unresolved deficiency requests179
 206
Aggregate outstanding principal balance subject to unresolved deficiency requests$8,394
 $13,370
Unpaid principal balance subject to indemnification by the Company4,741
 5,074

The accrual for potential loan repurchases under representations and warranties totaled $1.1 million at June 30, 2018, $1.2 million at March 31, 2018, and $1.6 million at June 30, 2017.


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 scenarios 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.

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 June 30, 2018, the net fair values of derivative contracts, before consideration of cash margin, reported as assets under these programs totaled $382 million compared to $292 million at March 31, 2018. At June 30, 2018, the net fair value of our derivative contracts included $171 million for foreign exchange contracts, $131 million for energy contracts, $41 million for interest rate swaps and $35 million of to-be-announced residential mortgage-backed securities. The aggregate net fair value of derivative contracts, before consideration of cash margin, held under these programs reported as liabilities totaled $364 million at June 30, 2018 and $280 million at March 31, 2018.

At June 30, 2018, total derivative assets were reduced by $13 million of cash collateral received from counterparties and total derivative liabilities were reduced by $150 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 June 30, 2018 follows in Table 19.

Table 19 -- Fair Value of Derivative Contracts
(In thousands)
Customers $253,096
Banks and other financial institutions 96,206
Exchanges and clearing organizations 19,724
Fair value of customer risk management program asset derivative contracts, net $369,026
At June 30, 2018, our largest derivative exposure was to an exchange for interest rate swap derivative contracts of $19 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 $34.26 per barrel of oil would decrease the fair value of derivative assets by $106 million. An increase in prices equivalent to $84.27 per barrel of oil would increase the fair value of derivative assets by $118 million as current prices move further away from the fixed prices embedded in our existing contracts. Liquidity requirements of this program may also be affected by our credit rating. At June 30, 2018, a decrease in our credit rating to below investment grade did not have a significant impact on our obligation to post cash margin on existing contracts. 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 June 30, 2018, changes in interest rates would not materially impact regulatory capital or liquidity needed to support this portion of our customer derivative program.
Summary of Loan Loss Experience

We maintain an allowance for loan losses and an accrual for off-balance sheet credit risk. At June 30, 2018, the combined allowance for loan losses and off-balance sheet credit losses totaled $218 million or 1.21 percent of outstanding loans and 138 percent of nonaccruing loans, excluding loans guaranteed by U.S. government agencies. The allowance for loan losses was $215 million and the accrual for off-balance sheet credit losses was $2.4 million. At March 31, 2018, the combined allowance for credit losses was $228 million or 1.32 percent of outstanding loans and 133 percent of nonaccruing loans, excluding loans guaranteed by U.S. government agencies. The allowance for loan losses was $224 million and the accrual for off-balance sheet credit losses was $4.1 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. Based on an evaluation of all credit factors, including overall loan growth, the continued trend of improvements in nonaccruing and potential problem loans, and net charge-offs, the Company determined that no provision for credit losses was appropriate for the second quarter of 2018. The Company recorded a $5.0 million negative provision for the first quarter of 2018.




Table 20 -- Summary of Loan Loss Experience
(In thousands)
  Three Months Ended
  June 30, 2018 Mar. 31, 2018 Dec. 31, 2017 Sept. 30, 2017 June 30, 2017
Allowance for loan losses:          
Beginning balance $223,967
 $230,682
 $247,703
 $250,061
 $248,710
Loans charged off:          
Commercial (13,775) (1,563) (13,254) (4,429) (1,703)
Commercial real estate —
 —
 —
 —
 (76)
Residential mortgage (135) (100) (205) (168) (40)
Personal (1,195) (1,227) (1,290) (1,228) (1,053)
Total (15,105) (2,890) (14,749) (5,825) (2,872)
Recoveries of loans previously charged off:          
Commercial 298
 488
 1,982
 1,014
 283
Commercial real estate 3,097
 183
 258
 739
 208
Residential mortgage 505
 242
 229
 134
 169
Personal 678
 663
 592
 550
 554
Total 4,578
 1,576
 3,061
 2,437
 1,214
Net loans recovered (charged off) (10,527) (1,314) (11,688) (3,388) (1,658)
Provision for loan losses 1,702
 (5,401) (5,333) 1,030
 3,009
Ending balance $215,142
 $223,967
 $230,682
 $247,703
 $250,061
Accrual for off-balance sheet credit losses:          
Beginning balance $4,135
 $3,734
 $5,401
 $6,431
 $9,440
Provision for off-balance sheet credit losses (1,702) 401
 (1,667) (1,030) (3,009)
Ending balance $2,433
 $4,135
 $3,734
 $5,401
 $6,431
Total combined provision for credit losses $—
 $(5,000) $(7,000) $—
 $—
Allowance for loan losses to loans outstanding at period-end 1.19% 1.29 % 1.34 % 1.44% 1.46%
Net charge-offs (recoveries) (annualized) to average loans 0.24% 0.03 % 0.27 % 0.08% 0.04%
Total provision for credit losses (annualized) to average loans —% (0.12)% (0.16)% —% —%
Recoveries to gross charge-offs 30.31% 54.53 % 20.75 % 41.84% 42.27%
Accrual for off-balance sheet credit losses to off-balance sheet credit commitments 0.02% 0.04 % 0.04 % 0.05% 0.06%
Combined allowance for credit losses to loans outstanding at period-end 1.21% 1.32 % 1.37 % 1.47% 1.49%
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 original 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 June 30, 2018, impaired loans totaled $328 million, including $60 million with specific allowances of $15 million and $268 million with no specific allowances. At March 31, 2018, impaired loans totaled $349 million, including $74 million of impaired loans with specific allowances of $13 million and $275 million with no specific allowances.


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 $184 million at June 30, 2018. The general allowance for unimpaired loans decreased $6.2 million compared to March 31, 2018, primarily related to the commercial loan segment, partially offset by an increase related to the commercial real estate 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 $15 million at June 30, 2018, a $4.5 million decrease compared to March 31, 2018. The nonspecific allowance decreased related to the reversal of the nonspecific allowance related to the estimated long-term impact of Hurricane Harvey in 2017 on the Houston, Texas market as this impact is now fully reflected in estimated loss rates.

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 $140 million at June 30, 2018 and were primarily composed of $93 million or 3 percent of energy loans, $17 million or 3 percent of manufacturing sector loans and $17 million or 1 percent of healthcare sector loans. Potential problem loans totaled $222 million at March 31, 2018.

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 $124 million at June 30, 2018 and were composed primarily of $52 million or 2 percent of outstanding energy loans, $31 million or 1 percent of service sector loans and $21 million or 3 percent of commercial real estate loans secured by retail facilities. Other loans especially mentioned totaled $78 million at March 31, 2018.

We updated our semi-annual energy loan portfolio stress test at June 30, 2018 to estimate how the energy portfolio may respond in a prolonged low-price environment. Stress test assumptions applied the five year forward pricing curve which decreases from a starting price of $2.29 per million BTUs for natural gas and $51.70 per barrel of oil to $2.17 per million BTUs for natural gas and $43.37 per barrel of oil in year 5 and then escalated 3 percent annually for years six through ten to a maximum of $2.50 and $49.99, respectively. Results of the stress test were considered in conjunction with the determination of the allowance for credit losses.
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 charge-offs of $10.5 million in the second quarter of 2018, compared to net charge-offs of $1.3 million in the first quarter of 2018 and a net charge-offs of $1.7 million in the second quarter of 2017. The ratio of net loans charged off to average loans on an annualized basis was 0.24 percent for the second quarter of 2018, compared with 0.03 percent for the first quarter of 2018 and 0.04 percent for the second quarter of 2017. 

Net charge-offs of commercial loans were $13.5 million in the second quarter of 2018, primarily related to a single energy production borrower and single healthcare sector borrower. Net commercial real estate loan recoveries were $3.1 million in the second quarter of 2018. Net charge-offs of residential mortgage loans were $370 thousand and net charge-offs of personal loans were $517 thousand for the second quarter. Personal loan net charge-offs include deposit account overdraft losses.


Nonperforming Assets

Table 21 -- Nonperforming Assets
(In thousands)
  June 30, 2018 Mar. 31, 2018 Dec. 31, 2017 Sept. 30, 2017 June 30, 2017
Nonaccruing loans:          
Commercial $120,978
 $131,460
 $137,303
 $176,900
 $197,157
Commercial real estate 1,996
 2,470
 2,855
 2,975
 3,775
Residential mortgage 42,343
 45,794
 47,447
 45,506
 44,235
Personal 340
 340
 269
 255
 272
Total nonaccruing loans 165,657
 180,064
 187,874
 225,636
 245,439
Accruing renegotiated loans guaranteed by U.S. government agencies 75,374
 74,418
 73,994
 69,440
 80,624
Real estate and other repossessed assets 27,891
 23,652
 28,437
 32,535
 39,436
Total nonperforming assets $268,922
 $278,134
 $290,305
 $327,611
 $365,499
Total nonperforming assets excluding those guaranteed by U.S. government agencies $185,981
 $194,833
 $207,132
 $249,280
 $275,823
           
Nonaccruing loans by loan portfolio segment and class:      
  
Commercial:        
  
Energy $65,597
 $89,942
 $92,284
 $110,683
 $123,992
Services 4,377
 2,109
 2,620
 1,174
 7,754
Healthcare 16,125
 15,342
 14,765
 24,446
 24,505
Wholesale/retail 14,095
 2,564
 2,574
 1,893
 10,620
Manufacturing 2,991
 3,002
 5,962
 9,059
 9,656
Other commercial and industrial 17,793
 18,501
 19,098
 29,645
 20,630
Total commercial 120,978
 131,460
 137,303
 176,900
 197,157
           
Commercial real estate:        
  
Multifamily —
 —
 —
 —
 10
Retail 1,068
 264
 276
 289
 301
Office 275
 275
 275
 275
 396
Industrial —
 —
 —
 —
 —
Residential construction and land development 350
 1,613
 1,832
 1,924
 2,051
Other commercial real estate 303
 318
 472
 487
 1,017
Total commercial real estate 1,996
 2,470
 2,855
 2,975
 3,775
           
Residential mortgage:        
  
Permanent mortgage 23,105
 24,578
 25,193
 24,623
 23,415
Permanent mortgage guaranteed by U.S. government agencies 7,567
 8,883
 9,179
 8,891
 9,052
Home equity 11,671
 12,333
 13,075
 11,992
 11,768
Total residential mortgage 42,343
 45,794
 47,447
 45,506
 44,235
Personal 340
 340
 269
 255
 272
Total nonaccruing loans $165,657
 $180,064
 $187,874
 $225,636
 $245,439
           
Ratios:        
  
Allowance for loan losses to nonaccruing loans1
 136.09% 130.84% 129.09% 114.28% 105.78%
Accruing loans 90 days or more past due1
 $879
 $90
 $633
 $253
 $1,414
1
Excludes residential mortgages guaranteed by agencies of the U.S. Government.



Nonperforming assets totaled $269 million or 1.49 percent of outstanding loans and repossessed assets at June 30, 2018. Nonaccruing loans totaled $166 million, accruing renegotiated residential mortgage loans totaled $75 million and real estate and other repossessed assets totaled $28 million. All accruing renegotiated residential mortgage loans and $7.6 million of nonaccruing loans are guaranteed by U.S. government agencies. Excluding assets guaranteed by U.S. government agencies, nonperforming assets decreased $8.9 million compared to the first quarter, primarily due to a decrease in nonaccruing energy and wholesale/retail sector loans. The Company generally retains nonperforming assets to maximize potential recovery, which may cause future nonperforming assets to decrease more slowly.

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 currently 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. 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 currently 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 and six months ended June 30, 2018 follows in Table 22.

Table 22 -- Rollforward of Nonperforming Assets
(In thousands)
  Three Months Ended
  June 30, 2018
  
 
Nonaccruing Loans
 
 
Renegotiated Loans
 Real Estate and Other Repossessed Assets Total Nonperforming Assets
Balance, March 31, 2018 $180,064
 $74,418
 $23,652
 $278,134
Additions 41,728
 13,600
 —
 55,328
Payments (31,099) (707) —
 (31,806)
Charge-offs (15,105) —
 —
 (15,105)
Net gains, losses and write-downs —
 —
 180
 180
Foreclosure of nonperforming loans (6,587) —
 6,587
 —
Foreclosure of loans guaranteed by U.S. government agencies (1,658) (1,964) —
 (3,622)
Proceeds from sales —
 (10,362) (3,069) (13,431)
Net transfers to nonaccruing loans 153
 (153) —
 —
Return to accrual status (1,839) —
 —
 (1,839)
Other, net —
 542
 541
 1,083
Balance, June 30, 2018 $165,657
 $75,374
 $27,891
 $268,922


  Six Months Ended
  June 30, 2018
  
 
Nonaccruing Loans
 
 
Renegotiated Loans
 Real Estate and Other Repossessed Assets Total Nonperforming Assets
Balance, December 31, 2017 $187,874
 $73,994
 $28,437
 $290,305
Additions 52,148
 30,621
 —
 82,769
Payments (43,538) (1,375) —
 (44,913)
Charge-offs (17,995) —
 —
 (17,995)
Net gains, losses and write-downs —
 —
 (4,006) (4,006)
Foreclosure of nonperforming loans (8,743) —
 8,743
 —
Foreclosure of loans guaranteed by U.S. government agencies (3,186) (3,791) —
 (6,977)
Proceeds from sales —
 (24,085) (5,516) (29,601)
Net transfers to nonaccruing loans 936
 (936) —
 —
Return to accrual status (1,839) —
 —
 (1,839)
Other, net —
 946
 233
 1,179
Balance, June 30, 2018 $165,657
 $75,374
 $27,891
 $268,922

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 limited. These properties will be conveyed to the agencies once applicable criteria have been met. 
Commercial

Nonaccruing commercial loans totaled $121 million or 1.07 percent of total commercial loans at June 30, 2018 and $131 million or 1.20 percent of commercial loans at March 31, 2018. There were $36 million in newly identified nonaccruing commercial loans during the quarter, offset by $26 million in payments $14 million of charge-offs and $4.9 million foreclosures of nonaccruing commercial loans during the second quarter.

Nonaccruing commercial loans at June 30, 2018 were primarily composed of $66 million or 2.08 percent of total energy loans, $18 million or 3.20 percent of total other commercial and industrial sector loans, $16 million or 0.69 percent of total healthcare sector loans and $14 million or 0.83 percent of total wholesale/retail sector loans.
Commercial Real Estate

Nonaccruing commercial real estate loans totaled $3.0$2.0 million or 0.08 percent of outstanding commercial real estate loans at September 30, 2017, down from $3.8 million or 0.100.05 percent of outstanding commercial real estate loans at June 30, 20172018, compared to $2.5 million or 0.07 percent of outstanding commercial real estate loans at March 31, 2018. Newly identified nonaccruing commercial real estate loans of $2.0 million902 thousand were offset by $1.71.3 million of cash payments received and $1.1$1.8 million foreclosures.of loans returned to accruing status. There were no charge-offs or foreclosures of nonaccruing commercial real estate loans during the thirdsecond quarter.

Nonaccruing commercial real estate loans were primarily composed of $1.9$1.1 million or 1.720.14 percent of residential construction and land development loans.loans secured by retail facilities.

Residential Mortgage and Personal

Nonaccruing residential mortgage loans totaled $46$42 million or 2.342.18 percent of outstanding residential mortgage loans at SeptemberJune 30, 20172018, a $1.3$3.5 million increase overdecrease compared to June 30, 2017March 31, 2018. Newly identified nonaccruing residential mortgage loans totaling $5.73.2 million were partially offset by $2.8$3.3 million of foreclosures, $1.7$3.3 million of payments and $168135 thousand of loans charged off during the quarter. 

Nonaccruing residential mortgage loans primarily consist of non-guaranteed permanent residential mortgage loans, which totaled $2523 million or 2.432.16 percent of outstanding non-guaranteed permanent residential mortgage loans at SeptemberJune 30, 20172018. Nonaccruing home equity loans totaled $12 million or 1.611.66 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 23. Substantially all non-guaranteed residential loans past due 90 days or more are nonaccruing. Residential mortgage loans 30 to 59 days past due increased $3.2 million$481 thousand in the thirdsecond quarter to $6.84.2 million at SeptemberJune 30, 20172018. Residential mortgage loans 60 to 89 days past due decreasedincreased by $489$504 thousand. Personal loans past due 30 to 59 days increaseddecreased by $2.8 million$616 thousand and personal loans 60 to 89 days decreased $208increased $136 thousand.

Table 23 -- Residential Mortgage and Personal Loans Past Due
(In thousands)
 September 30, 2017 June 30, 2017 June 30, 2018 March 31, 2018
 90 Days or More 60 to 89 Days 30 to 59 Days 90 Days or More 60 to 89 Days 30 to 59 Days 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
 $—
 $454
 $3,705
 $132
 $1,026
 $2,024
 $84
 $796
 $2,568
 $—
 $—
 $2,322
Home equity 28
 445
 3,066
 —
 362
 1,564
 65
 94
 1,612
 22
 386
 1,377
Total residential mortgage $28
 $899
 $6,771
 132
 $1,388
 $3,588
 $149
 $890
 $4,180
 22
 $386
 $3,699
  
    
  
    
  
    
  
    
Personal $8
 $81
 $3,296
 $—
 $289
 $487
 $—
 $150
 $178
 $62
 $14
 $794
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 $3328 million at SeptemberJune 30, 20172018, a decreasecomposed primarily of $6.9$12 million compared to June 30, 2017. The distribution of oil and gas properties, $6.0 million of 1-4 family residential properties, $5.4 million of developed commercial real estate and $4.5 million of undeveloped land primarily zoned for commercial development. Real estate and other repossessed assets attributed by geographical market is included in Table 24 following.totaled $24 million at March 31, 2018.

Table 24 -- 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 $2,735
 $882
 $—
 $418
 $1,185
 $692
 $160
 $358
 $6,430
Developed commercial real estate properties 71
 —
 1,116
 —
 —
 207
 —
 —
 1,394
Undeveloped land 1,116
 1,215
 —
 —
 1,057
 135
 1,197
 —
 4,720
Residential land development properties 101
 —
 —
 —
 —
 102
 1
 —
 204
Oil and gas properties 5,645
 13,060
 

 

 

 

 1,075
 —
 19,780
Other 7
 —
 —
 —
 —
 —
 —
 —
 7
Total real estate and other repossessed assets $9,675
 $15,157
 $1,116
 $418
 $2,242
 $1,136
 $2,433
 $358
 $32,535

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 thirdsecond quarter of 20172018, approximately 6765 percent of our funding was provided by deposit accounts, 2021 percent from borrowed funds, less than 1 percent is from long-term subordinated debt and 1110 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.Subsidiary Bank

Deposits and borrowed funds are the primary sources of liquidity for BOKF, NA, the wholly owned subsidiary bank of BOK Financial. 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 BankExpressBank 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 thirdsecond quarter of 20172018 totaled $22.1 billion, largely unchanged compared to the secondfirst quarter of 20172018. Demand deposit balances grew by $51increased $72 million during the third quarter of 2017 partiallyand saving account balances were up $24 million. This growth was offset by a $155 million decrease in interest-bearing transaction account balances and a $12 million decrease in time deposits of $28 million.deposits.
Table 2524 - Average Deposits by Line of Business
(In thousands)
Three Months EndedThree Months Ended
Sept. 30, 2017 June 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016June 30, 2018 Mar. 31, 2018 Dec. 31, 2017 Sept. 30, 2017 June 30, 2017
Commercial Banking$8,683,331
 $8,652,811
 $8,631,724
 $8,543,532
 $8,317,341
$8,379,584
 $8,664,452
 $8,799,166
 $8,727,221
 $8,696,691
Consumer Banking6,707,859
 6,662,838
 6,581,446
 6,659,380
 6,660,514
6,579,635
 6,538,096
 6,622,149
 6,663,969
 6,618,958
Wealth Management5,495,250
 5,531,091
 5,582,554
 5,333,095
 4,913,409
5,834,669
 5,662,470
 5,457,566
 5,495,250
 5,531,091
Subtotal20,886,440
 20,846,740
 20,795,724
 20,536,007
 19,891,264
20,793,888
 20,865,018
 20,878,881
 20,886,440
 20,846,740
Funds Management and other1,232,881
 1,245,591
 1,573,698
 1,167,409
 873,750
1,261,344
 1,261,877
 1,282,179
 1,232,881
 1,245,591
Total$22,119,321
 $22,092,331
 $22,369,422
 $21,703,416
 $20,765,014
$22,055,232
 $22,126,895
 $22,161,060
 $22,119,321
 $22,092,331

Average Commercial Banking deposit balances were largely unchangeddecreased $285 million compared to the secondfirst quarter of 2017. The average balance of interest-bearing2018. Interest-bearing transaction accounts increased $60account balances decreased $231 million partially offset by a $26 million decrease inand demand deposits. Average deposit balances attributed to commercial and industrial customers decreased by $145 million, offset by a $114 million increase in balances attributed to energy customers and a $45 million increase in average balances attributed to commercial real estate customers.$55 million. Commercial customers continue to retain large cash reserves primarily due to a combination of factors including uncertainty about the economic environment and potential for growth, lack of preferable liquid alternatives and a desire 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 deposit balances may decrease onceas the economic outlook improvescontinues to improve and customers deploy cash or short-term market interest rates rise and related earnings credit rates rise, reducing the amount of deposits required to offset service charges.

Average Consumer Banking deposit balances increased by $45 million.$42 million over the prior quarter. Demand deposit balances grew by $51$81 million partiallyand savings deposit balances were up $22 million. This growth was offset by a $17$55 million decrease in time deposit balances.deposits. Interest-bearing transaction and savings accountdeposit balances were also up slightly over the prior quarter.largely unchanged.

Average Wealth Management deposits decreased $36increased $172 million compared toover the secondfirst quarter of 2017. A $68 million decrease in interest-bearing2018. Interest-bearing transaction account balances was partially offsetgrew by a $39$90 million, increase intime deposits balances were up $45 million, and demand deposit balances.

Average deposits attributed to Funds Management and Other decreased $13balances increased $36 million.

Average time deposits for the thirdsecond quarter of 20172018 included $602$252 million of brokered deposits, an increasea decrease of $12$406 million overcompared to the secondfirst quarter of 20172018. Average interest-bearing transaction accounts for the thirdsecond quarter included $1.4 billion$828 million of brokered deposits, an increasea decrease of $26$783 million overcompared to the first quarter of 2018. The decrease in average brokered deposits balances was largely driven by a change in the regulatory definition of brokered deposits in the second quarter of 2017.2018.

The distribution of our period end deposit account balances among principal markets follows in Table 2625.




Table 2625 -- Period End Deposits by Principal Market Area
(In thousands)
 Sept. 30, 2017 June 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016 June 30, 2018 Mar. 31, 2018 Dec. 31, 2017 Sept. 30, 2017 June 30, 2017
Bank of Oklahoma:                    
Demand $4,061,612
 $4,353,421
 $4,320,666
 $3,993,170
 $4,158,273
 $3,867,933
 $4,201,842
 $3,885,008
 $4,061,612
 $4,353,421
Interest-bearing:                    
Transaction 5,909,259
 5,998,787
 6,114,288
 6,345,536
 5,701,983
 5,968,460
 6,051,302
 5,901,293
 5,909,259
 5,998,787
Savings 265,023
 263,664
 265,014
 241,696
 242,959
 289,202
 289,351
 265,870
 265,023
 263,664
Time 1,131,547
 1,170,014
 1,189,144
 1,118,355
 1,091,464
 1,207,471
 1,203,534
 1,092,133
 1,131,547
 1,170,014
Total interest-bearing 7,305,829
 7,432,465
 7,568,446
 7,705,587
 7,036,406
 7,465,133
 7,544,187
 7,259,296
 7,305,829
 7,432,465
Total Bank of Oklahoma 11,367,441
 11,785,886
 11,889,112
 11,698,757
 11,194,679
 11,333,066
 11,746,029
 11,144,304
 11,367,441
 11,785,886
                    
Bank of Texas:                    
Demand 3,094,184
 3,121,890
 3,091,258
 3,137,009
 2,734,981
 3,317,656
 3,015,869
 3,239,098
 3,094,184
 3,121,890
Interest-bearing:                    
Transaction 2,272,987
 2,272,185
 2,317,576
 2,388,812
 2,240,040
 2,168,488
 2,208,480
 2,397,071
 2,272,987
 2,272,185
Savings 93,400
 91,491
 89,640
 83,101
 84,642
 97,809
 98,852
 93,620
 93,400
 91,491
Time 521,072
 502,128
 511,037
 535,642
 528,380
 445,500
 475,967
 502,879
 521,072
 502,128
Total interest-bearing 2,887,459
 2,865,804
 2,918,253
 3,007,555
 2,853,062
 2,711,797
 2,783,299
 2,993,570
 2,887,459
 2,865,804
Total Bank of Texas 5,981,643
 5,987,694
 6,009,511
 6,144,564
 5,588,043
 6,029,453
 5,799,168
 6,232,668
 5,981,643
 5,987,694
                    
Bank of Albuquerque:                    
Demand 659,793
 612,117
 593,117
 627,979
 584,681
 770,974
 695,060
 663,353
 659,793
 612,117
Interest-bearing:                    
Transaction 551,884
 558,523
 623,677
 590,571
 555,326
 586,593
 555,414
 552,393
 551,884
 558,523
Savings 53,532
 54,136
 53,683
 49,963
 54,480
 59,415
 60,596
 55,647
 53,532
 54,136
Time 224,773
 229,616
 233,506
 238,408
 244,706
 212,689
 216,306
 216,743
 224,773
 229,616
Total interest-bearing 830,189
 842,275
 910,866
 878,942
 854,512
 858,697
 832,316
 824,783
 830,189
 842,275
Total Bank of Albuquerque 1,489,982
 1,454,392
 1,503,983
 1,506,921
 1,439,193
 1,629,671
 1,527,376
 1,488,136
 1,489,982
 1,454,392
                    
Bank of Arkansas:                    
Demand 31,442
 40,511
 42,622
 26,389
 32,203
 39,896
 35,291
 30,384
 31,442
 40,511
Interest-bearing:                    
Transaction 126,746
 129,848
 106,804
 105,232
 313,480
 143,298
 94,206
 85,095
 126,746
 129,848
Savings 1,876
 2,135
 2,304
 2,192
 2,051
 1,885
 1,960
 1,881
 1,876
 2,135
Time 14,434
 14,876
 15,067
 16,696
 17,534
 10,771
 11,878
 14,045
 14,434
 14,876
Total interest-bearing 143,056
 146,859
 124,175
 124,120
 333,065
 155,954
 108,044
 101,021
 143,056
 146,859
Total Bank of Arkansas 174,498
 187,370
 166,797
 150,509
 365,268
 195,850
 143,335
 131,405
 174,498
 187,370
                    
Colorado State Bank & Trust:          
Demand 540,300
 577,617
 601,778
 576,000
 517,063
Interest-bearing:          
Transaction 628,807
 626,343
 610,510
 616,679
 623,055
Savings 34,776
 35,651
 37,801
 32,866
 31,613
Time 231,927
 228,458
 234,740
 242,782
 247,667
Total interest-bearing 895,510
 890,452
 883,051
 892,327
 902,335
Total Colorado State Bank & Trust 1,435,810
 1,468,069
 1,484,829
 1,468,327
 1,419,398
          


 June 30, 2018 Mar. 31, 2018 Dec. 31, 2017 Sept. 30, 2017 June 30, 2017
Colorado State Bank & Trust:          
Demand 529,912
 521,963
 633,714
 540,300
 577,617
Interest-bearing:          
Transaction 701,362
 687,785
 657,629
 628,807
 626,343
Savings 38,176
 37,232
 35,223
 34,776
 35,651
Time 208,049
 215,330
 224,962
 231,927
 228,458
Total interest-bearing 947,587
 940,347
 917,814
 895,510
 890,452
Total Colorado State Bank & Trust 1,477,499
 1,462,310
 1,551,528
 1,435,810
 1,468,069
 Sept. 30, 2017 June 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016          
Bank of Arizona:                    
Demand 335,740
 366,866
 342,854
 366,755
 418,718
 387,952
 330,196
 334,701
 335,740
 366,866
Interest-bearing:                    
Transaction 174,010
 154,457
 180,254
 305,099
 303,750
 194,353
 248,337
 274,846
 174,010
 154,457
Savings 4,105
 3,638
 3,858
 2,973
 2,959
 3,935
 4,116
 3,343
 4,105
 3,638
Time 20,831
 19,911
 26,112
 27,765
 27,935
 22,447
 21,009
 20,394
 20,831
 19,911
Total interest-bearing 198,946
 178,006
 210,224
 335,837
 334,644
 220,735
 273,462
 298,583
 198,946
 178,006
Total Bank of Arizona 534,686
 544,872
 553,078
 702,592
 753,362
 608,687
 603,658
 633,284
 534,686
 544,872
                    
Mobank (Kansas City):                    
Demand 462,410
 496,473
 514,278
 508,418
 235,445
 459,636
 505,802
 457,080
 462,410
 496,473
Interest-bearing:                    
Transaction 361,391
 346,996
 406,105
 513,176
 86,526
 401,545
 381,447
 382,066
 361,391
 346,996
Savings 12,513
 13,603
 13,424
 12,679
 1,645
 13,052
 13,845
 13,574
 12,513
 13,603
Time 27,705
 31,119
 34,242
 42,152
 11,945
 20,805
 22,230
 27,260
 27,705
 31,119
Total interest-bearing 401,609
 391,718
 453,771
 568,007
 100,116
 435,402
 417,522
 422,900
 401,609
 391,718
Total Mobank (Kansas City) 864,019
 888,191
 968,049
 1,076,425
 335,561
 895,038
 923,324
 879,980
 864,019
 888,191
Total BOK Financial deposits $21,848,079
 $22,316,474
 $22,575,359
 $22,748,095
 $21,095,504
 $22,169,264
 $22,205,200
 $22,061,305
 $21,848,079
 $22,316,474

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. The largest single source of wholesale federal funds purchased totaled $13$200 million at SeptemberJune 30, 20172018. 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 termshort-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 $6.1$6.5 billion during the quarter, up from $5.5$6.3 billion in the secondfirst quarter of 20172018.

At SeptemberJune 30, 20172018, the estimated unused credit available to BOKF, NA from collateralized sources was approximately $6.1$6.5 billion.

A summary of other borrowings for BOK Financial on a consolidated basis follows in Table 2726.



Table 2726 -- Borrowed Funds
(In thousands)
   Three Months Ended
September 30, 2017		   Three Months Ended
June 30, 2017		   Three Months Ended
June 30, 2018		   Three Months Ended
March 31, 2018
 Sept. 30, 2017 
Average
Balance
During the
Quarter
 Rate 
Maximum
Outstanding
At Any Month
End During
the Quarter
 June 30, 2017 
Average
Balance
During the
Quarter
 Rate 
Maximum
Outstanding
At Any Month
End During
the Quarter
 Jun 30,
2018		 
Average
Balance
During the
Quarter
 Rate 
Maximum
Outstanding
At Any Month
End During
the Quarter
 Mar 31,
2018		 
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 $—
 $—
 —% $—
 $—
 $6,084
 3.49% $7,217
Other 3,103
 947
 11.23% $3,104
 878
 867
 11.06% 881
Total other borrowings 3,103
 947
 11.23%   878
 6,951
 5.14% 

Subordinated debentures 144,668
 144,663
 5.68% $144,668
 144,658
 144,654
 5.55% 144,658
 144,697
 144,692
 5.67% $144,697
 144,687
 144,682
 5.61% 144,687
Total parent company and other non-bank subsidiaries 147,771
 145,610
 5.83%   145,536
 151,605
 5.53% 

                                
BOKF, NA:                                
Funds purchased 62,356
 49,774
 0.92% 62,356
 67,990
 63,263
 0.61% 67,990
 305,668
 133,064
 1.44% 305,668
 130,561
 106,362
 1.20% 160,087
Repurchase agreements 328,189
 361,512
 0.15% 381,340
 396,333
 427,353
 0.06% 489,814
 574,359
 460,186
 0.26% 574,359
 415,763
 426,051
 0.20% 415,763
Other borrowings:                                
Federal Home Loan Bank advances 6,200,000
 6,127,174
 1.27% 6,200,000
 5,200,000
 5,532,967
 1.07% 5,600,000
 5,900,000
 6,470,330
 1.96% 6,500,000
 5,700,000
 6,295,556
 1.58% 5,700,000
GNMA repurchase liability 22,705
 19,083
 4.55% 22,908
 16,056
 16,734
 4.65% 17,693
 14,386
 11,658
 4.47% 14,386
 12,020
 16,434
 4.64% 15,011
Other 15,467
 15,437
 2.38% 15,467
 15,409
 15,379
 2.40% 15,409
 15,059
 15,032
 2.35% 15,059
 15,005
 14,977
 2.33% 15,005
Total other borrowings 6,238,172
 6,161,694
 1.29% 

 5,231,465
 5,565,080
 1.09% 

 5,929,445
 6,497,020
 1.96% 

 5,727,025
 6,326,967
 1.60% 

Total BOKF, NA 6,628,717
 6,572,980
 1.22%   5,695,788
 6,055,696
 1.01%   6,809,472
 7,090,270
 1.84%   6,273,349
 6,859,380
 1.50%  
                                
Total other borrowed funds and subordinated debentures $6,776,488
 $6,718,590
 1.32%   $5,841,324
 $6,207,301
 1.12%   $6,954,169
 $7,234,962
 1.92%   $6,418,036
 $7,004,062
 1.59%  
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

At SeptemberJune 30, 2017,2018, cash and interest-bearing cash and cash equivalents held by the parent company totaled $162$241 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 SeptemberJune 30, 2017,2018, based upon the most restrictive limitations as well as management's internal capital policy, the bank could declare up to $343$248 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.

Our equity capital at SeptemberJune 30, 20172018 was $3.5$3.6 billion, ana $58 million increase of $66 million over June 30, 2017March 31, 2018. Net income less cash dividends paid increasedincreased equity $57$85 million during the thirdsecond quarter of 20172018. Changes in interest rates resulted in an increase in the accumulated other comprehensive loss to $135 million at June 30, 2018, compared to $111 million at March 31, 2018. Capital is managed to maximize long-term value to the shareholders. Factors considered in managing capital include projections of future earnings including expected benefits from lower federal income tax rates, asset growth and acquisition strategies, and regulatory and debt covenant requirements. Capital management may include subordinated debt or perpetual preferred stock 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 SeptemberJune 30, 2017,2018, a cumulative total of 2,879,2433,050,083 shares have been repurchased under this authorization. NoThe Company repurchased 8,257 shares were repurchased in the thirdsecond quarter of 20172018. at an average of $99.84 per share. The Company repurchased 82,583 shares in the first quarter of 2018 at an average price of $91.83 per share.



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, regulatoryRegulatory 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. Components of the capital consistentrules effective January 1, 2015 for the Company will phase in through January 1, 2019, with the treatment under previous capital rules.certain exceptions.

A summary of minimum capital requirements, including capital conservation buffer follows in Table 28.27. 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 2827.

Table 2827 -- Capital Ratios
 Minimum Capital Requirement Capital Conservation Buffer Minimum Capital Requirement Including Capital Conservation Buffer Sept. 30, 2017 June 30, 2017 Sept. 30, 2016 Minimum Capital Requirement Capital Conservation Buffer Minimum Capital Requirement Including Capital Conservation Buffer June 30, 2018 Mar. 31, 2018 June 30, 2017
Risk-based capital:                        
Common equity Tier 1 4.50% 2.50% 7.00% 11.90% 11.76% 11.99% 4.50% 2.50% 7.00% 11.92% 12.06% 11.76%
Tier 1 capital 6.00% 2.50% 8.50% 11.90% 11.76% 11.99% 6.00% 2.50% 8.50% 11.92% 12.06% 11.76%
Total capital 8.00% 2.50% 10.50% 13.47% 13.36% 13.65% 8.00% 2.50% 10.50% 13.26% 13.49% 13.36%
Tier 1 Leverage 4.00% N/A
 4.00% 9.30% 9.27% 9.06% 4.00% N/A
 4.00% 9.57% 9.40% 9.27%
                        
Average total equity to average assets       10.56% 10.53% 10.39%       10.36% 10.31% 10.53%
Tangible common equity ratio       9.23% 9.24% 9.19%       9.21% 9.18% 9.24%

At March 31, 2018, the company exceeded the $1 billion regulatory capital rules threshold for trading assets plus liabilities. This subjects the company to the market risk rule, which imposes additional modeling, systems, oversight and reporting requirements effective for the second quarter of 2018 and results in an increase in risk weighted assets associated with trading.

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 2928 provides a reconciliation of the non-GAAP measures with financial measures defined by GAAP.



Table 2928 -- Non-GAAP Measure
(Dollars in thousands)
 Sept. 30, 2017 June 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016 June 30, 2018 Mar. 31, 2018 Dec. 31, 2017 Sept. 30, 2017 June 30, 2017
Tangible common equity ratio:                    
Total shareholders' equity $3,488,814
 $3,422,469
 $3,341,744
 $3,274,854
 $3,398,311
 $3,553,431
 $3,495,029
 $3,495,367
 $3,488,814
 $3,422,469
Less: Goodwill and intangible assets, net 485,710
 487,452
 488,294
 495,830
 424,716
 481,366
 477,088
 476,088
 485,710
 487,452
Tangible common equity 3,003,104
 2,935,017
 2,853,450
 2,779,024
 2,973,595
 3,072,065
 3,017,941
 3,019,279
 3,003,104
 2,935,017
Total assets 33,005,515
 32,263,532
 32,628,932
 32,772,281
 32,779,231
 33,833,107
 33,361,492
 32,272,160
 33,005,515
 32,263,532
Less: Goodwill and intangible assets, net 485,710
 487,452
 488,294
 495,830
 424,716
 481,366
 477,088
 476,088
 485,710
 487,452
Tangible assets $32,519,805
 $31,776,080
 $32,140,638
 $32,276,451
 $32,354,515
 $33,351,741
 $32,884,404
 $31,796,072
 $32,519,805
 $31,776,080
Tangible common equity ratio 9.23% 9.24% 8.88% 8.61% 9.19% 9.21% 9.18% 9.50% 9.23% 9.24%

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 un-pledged 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. Exposure is measured daily and compliance is reviewed monthly. Deviations from the Board approved limits, which periodically occur throughout the reporting period, may require management to develop and execute plans to reduce exposure. These plans are subject to escalation to and approval by the Board.

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 repricing 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.



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. Our current internal policy limit for net interest revenue variation due to a 200 basis point parallel change in market interest rates over twelve months is a maximum decline of 5%. The results of a 200 basis point decrease in interest rates in the current low-rate environment are not meaningful. Until such time as it becomes meaningful, we will instead report the effect of a 50 basis point decrease in interest rates.

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 3029 -- Interest Rate Sensitivity
(Dollars in thousands)
  200 bp Increase 50 bp Decrease
  September 30, September 30,
  2017 2016 2017 2016
Anticipated impact over the next twelve months on net interest revenue $652
 $551
 $(18,117) $(25,147)
  0.08% 0.07% (2.10)% (3.22)%
  200 bp Increase 50 bp Decrease
  June 30, June 30,
  2018 2017 2018 2017
Anticipated impact over the next twelve months on net interest revenue $1,118
 $(104) $(17,227) $(17,632)
  0.11% (0.01)% (1.75)% (2.07)%

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 debt securities issued by the U.S. government or its agencies 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.




Table 3130 -- MSR Asset and Hedge Sensitivity Analysis
(Dollars in thousands)
 September 30, June 30,
 2017 2016 2018 2017
 Up 50 bp Down 50 bp Up 50 bp Down 50 bp Up 50 bp Down 50 bp Up 50 bp Down 50 bp
MSR Asset $26,449
 $(33,561) $30,597
 $(52,609) $22,858
 $(25,967) $25,977
 $(31,851)
MSR Hedge (32,790) 29,132
 (37,529) 34,948
 (23,730) 21,281
 (31,507) 32,312
Net Exposure (6,341) (4,429) (6,932) (17,661) (872) (4,686) (5,530) 461

Trading Activities

The Company bears market risk by originating residential mortgages held for sale (RMHFS)("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 3231 -- Mortgage Pipeline Sensitivity Analysis
(Dollars in thousands)
 Three Months Ended
September 30,		 Nine Months Ended
September 30,		 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2017 2016 2017 2016 2018 2017 2018 2017
 Up 50 bp Down 50 bp Up 50 bp Down 50 bp Up 50 bp Down 50 bp Up 50 bp Down 50 bp Up 50 bp Down 50 bp Up 50 bp Down 50 bp Up 50 bp Down 50 bp Up 50 bp Down 50 bp
Average1
 $(167) $(881) $(590) $(449) $21
 $(1,172) $(2,778) $(542) $663
 $(1,240) $(3) $(1,439) $422
 $(932) $117
 $(1,316)
Low2
 1,314
 187
 930
 1,055
 1,314
 187
 930
 1,815
 2,077
 (567) 1,030
 (679) 2,077
 699
 1,030
 (398)
High3
 (1,533) (1,993) (2,563) (2,030) (1,553) (2,377) (6,858) (2,953) (374) (2,447) (810) (2,377) (1,015) (2,447) (810) (2,377)
Period End (744) (374) (76) 360
 (744) (374) (76) 360
 216
 (678) (263) (1,025) 216
 (678) (263) (1,025)
1 
Average represents the simple average of each daily value observed during the reporting period.
2 
Low represents least risk of loss in fair value measured as the smallest negative value or the largest positive value observed daily during the reporting period.
3 
High represents the greatest risk of loss in fair value measured as the largest negative value or the smallest positive value observed daily during the reporting period.

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 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.

Table 3332 -- Trading Sensitivity Analysis
(Dollars in thousands)
 Three Months Ended
September 30,		 Nine Months Ended
September 30,		 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2017 2016 2017 2016 2018 2017 2018 2017
 Up 50 bp Down 50 bp Up 50 bp Down 50 bp Up 50 bp Down 50 bp Up 50 bp Down 50 bp Up 50 bp Down 50 bp Up 50 bp Down 50 bp Up 50 bp Down 50 bp Up 50 bp Down 50 bp
Average1
 $(1,152) $1,171
 $(3,541) $3,756
 $(1,711) $1,884
 $(3,172) $3,070
 $(1,566) $1,405
 $(1,359) $1,592
 $(1,062) $874
 $(1,991) $2,241
Low2
 328
 3,509
 (954) 7,013
 328
 5,210
 146
 7,013
 1,518
 4,333
 (219) 3,833
 1,518
 4,333
 86
 5,210
High3
 (3,404) (486) (6,130) 430
 (4,386) (486) (6,130) (107) (4,242) (2,472) (2,916) 91
 (4,242) (2,472) (4,386) 2
Period End (1,395) 945
 (1,718) 2,469
 (1,395) 945
 (1,718) 2,469
 (2,602) 2,719
 (1,842) 1,727
 (2,602) 2,719
 (1,842) 1,727
1 
Average represents the simple average of each daily value observed during the reporting period.
2 
Low represents least risk of loss in fair value measured as the smallest negative value or the largest positive value observed daily during the reporting period.
3 
High represents the greatest risk of loss in fair value measured as the largest negative value or the smallest positive value observed daily during the reporting period.
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,within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not limited to, CoBiz Financial Inc.’s and projections about BOK Financial theCorporation’s expectations or predictions of future financial services industry and the economy in general. Wordsor business performance or conditions. Forward-looking statements are typically identified by words such as “anticipates,“believe,” “believes,“expect,” “estimates,“anticipate,” “expects,“intend,” “forecasts,“target,” “plans,“estimate,” “projects,“continue,” “positions,” “plan,” “predict,” “project,” “forecast,” “guidance,” “goal,” “objective,” “prospects,” “possible” or “potential,” by future conditional verbs such as “assume,” “will,” “intends,“would,” “should,” “could” or “may”, or by variations of such words or by similar expressions. These forward-looking statements are subject to numerous assumptions, risks and similar expressionsuncertainties, which change over time. Forward-looking statements speak only as of the date they are intendedmade and we assume no duty to identify suchupdate forward-looking statements. Management judgments relatingActual results may differ materially from current projections.

In addition to factors previously disclosed in CoBiz Financial Inc.’s and discussion ofBOK Financial Corporation’s reports filed with the provisionSEC and allowancethose identified elsewhere in this communication, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: the ability to obtain regulatory approvals and meet other closing conditions to the merger, including approval by CoBiz Financial Inc.’s shareholders on the expected terms and schedule, including the risk that regulatory approvals required for credit losses, allowance for uncertain tax positions, accruals for loss contingenciesthe merger are not obtained or are obtained subject to conditions that are not anticipated; delay in closing the merger; difficulties and valuation of mortgage servicing rights involve judgments as to expected events and are inherently forward-looking statements. Assessments that BOK Financial’s acquisitionsdelays in integrating CoBiz Financial Inc.’s business or fully realizing cost savings and other growth endeavors will be profitable are necessary statements of belief as tobenefits; business disruption following 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 tomerger; changes in commodity prices,asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and interest rate relationships, demand forcapital markets; inflation; customer acceptance of BOK Financial Corporation’s products and services,services; customer borrowing, repayment, investment and deposit practices; customer disintermediation; the degreeintroduction, withdrawal, success and timing of competition by traditionalbusiness initiatives; competitive conditions; the inability to realize cost savings or revenues or to implement integration plans and nontraditional competitors, changes in banking regulations, tax laws, prices, leviesother consequences associated with mergers, acquisitions and assessments,divestitures; economic conditions; and the impact, extent and timing of


technological changes, capital management activities, and other actions of technological advances,the Federal Reserve Board and trendslegislative and regulatory actions and reforms.

Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results.

In this report we may sometimes use non-GAAP Financial information. Please note that although non-GAAP financial measures provide useful insight to analysts, investors and regulators, they should not be considered in customer behaviorisolation or relied upon as a substitute for analysis using GAAP measures. If applicable, we provide GAAP reconciliations for non-GAAP financial measures.

IMPORTANT ADDITIONAL INFORMATION AND WHERE TO FIND IT

In connection with the proposed merger, BOK Financial Corporation has filed with the SEC a Registration Statement on Form S-4 that will include the Proxy Statement of CoBiz Financial Inc. and a Prospectus of BOK Financial Corporation, as well as their abilityother relevant documents concerning the proposed transaction. This communication does not constitute an offer to repay loans.sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. INVESTORS AND SHAREHOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND THE PROXY STATEMENT/PROSPECTUS REGARDING THE MERGER E AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.

A free copy of the Proxy Statement/Prospectus, as well as other filings containing information about BOK Financial Corporation and CoBiz Financial Inc., may be obtained at the SEC’s Internet site (http://www.sec.gov). You will also be able to obtain these documents, free of charge, from CoBiz Financial Inc. at ir.cobizfinancial.com or from BOK Financial Corporation by accessing BOK Financial Corporation’s website at www.bokf.com. Copies of the Proxy Statement/Prospectus can also be obtained, free of charge, by directing a request to CoBiz Financial Inc. Investor Relations at CoBiz Financial Inc. Investor Relations, 1401 Lawrence Street, Suite 1200, Denver, CO, by calling (303) 312-3412, or by sending an e-mail to info@cobizfinancial.com or to BOK Financial Corporation Investor Relations at Bank of Oklahoma Tower, Boston Avenue at Second Street, Tulsa, Oklahoma, by calling (918) 588-6000 or by sending an e-mail to investorrelations@bokf.com.

CoBiz Financial Inc. and BOK Financial Corporation and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of CoBiz Financial Inc. in respect of the transaction described in the Proxy Statement/Prospectus. Information regarding CoBiz Financial Inc.’s directors and executive officers is contained in CoBiz Financial Inc.’s Annual Report on Form 10-K for the year ended December 31, 2017 and its affiliates undertake no obligation to update, amend or clarify forward-looking statements, whetherProxy Statement on Schedule 14A, dated March 9, 2018, which are filed with the SEC.  Information regarding BOK Financial Corporation’s directors and executive officers is contained in BOK Financial Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017 and its Proxy Statement on Schedule 14A, dated March 15, 2018, which are filed with the SEC. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the Proxy Statement/Prospectus regarding the proposed merger when it becomes available. Free copies of this document may be obtained as a result of new information, future events, or otherwise.described in the preceding paragraph.



     
Consolidated Statements of Earnings (Unaudited)                
(In thousands, except share and per share data) Three Months Ended Nine Months Ended Three Months Ended Six Months Ended
 September 30, September 30, June 30, June 30,
Interest revenue 2017 2016 2017 2016 2018 2017 2018 2017
Loans $184,200
 $146,840
 $514,047
 $427,512
 $210,694
 $168,952
 $398,785
 $329,847
Residential mortgage loans held for sale 2,095
 3,615
 6,317
 9,823
 2,333
 2,386
 4,177
 4,222
Trading securities 3,975
 2,996
 12,497
 4,136
 12,988
 3,339
 20,726
 8,522
Investment securities 3,951
 4,132
 12,127
 12,736
 3,663
 4,005
 7,520
 8,176
Available for sale securities 44,925
 43,042
 131,660
 132,381
 47,427
 43,363
 93,386
 86,735
Fair value option securities 5,066
 1,531
 10,985
 6,182
 3,927
 3,539
 8,746
 5,919
Restricted equity securities 4,826
 4,510
 13,534
 12,684
 5,408
 4,399
 10,525
 8,708
Interest-bearing cash and cash equivalents 6,375
 2,651
 15,817
 7,926
 7,740
 5,198
 15,722
 9,442
Total interest revenue 255,413
 209,317
 716,984
 613,380
 294,180
 235,181
 559,587
 461,571
Interest expense  
  
  
  
  
  
  
  
Deposits 14,530
 9,812
 38,506
 30,351
 20,963
 12,622
 39,182
 23,976
Borrowed funds 20,361
 9,191
 47,542
 25,943
 32,607
 15,352
 58,056
 27,181
Subordinated debentures 2,070
 2,468
 6,098
 4,056
 2,048
 2,003
 4,051
 4,028
Total interest expense 36,961
 21,471
 92,146
 60,350
 55,618
 29,977
 101,289
 55,185
Net interest revenue 218,452
 187,846
 624,838
 553,030
 238,562
 205,204
 458,298
 406,386
Provision for credit losses —
 10,000
 —
 65,000
 —
 —
 (5,000) —
Net interest revenue after provision for credit losses 218,452
 177,846
 624,838
 488,030
 238,562
 205,204
 463,298
 406,386
Other operating revenue  
  
  
  
  
  
  
  
Brokerage and trading revenue 33,169
 38,006
 98,556
 109,877
 26,488
 31,764
 57,136
 65,387
Transaction card revenue 37,826
 33,933
 105,249
 101,237
 20,975
 30,228
 41,965
 57,608
Fiduciary and asset management revenue 40,687
 34,073
 121,126
 100,942
 41,699
 41,808
 83,531
 80,439
Deposit service charges and fees 23,209
 23,668
 69,593
 68,828
 27,827
 28,422
 54,988
 56,199
Mortgage banking revenue 24,890
 38,516
 80,357
 105,500
 26,346
 30,276
 52,371
 55,467
Other revenue 13,670
 13,080
 40,406
 38,336
 14,518
 14,984
 26,848
 26,736
Total fees and commissions 173,451
 181,276
 515,287
 524,720
 157,853
 177,482
 316,839
 341,836
Other gains, net (1,283) 2,442
 8,452
 5,309
 3,983
 6,108
 3,319
 9,735
Gain on derivatives, net 1,033
 2,226
 3,824
 20,130
Gain (loss) on derivatives, net (3,057) 3,241
 (8,742) 2,791
Gain (loss) on fair value option securities, net 661
 (3,355) 1,505
 10,367
 (3,341) 1,984
 (20,905) 844
Change in fair value of mortgage servicing rights (639) 2,327
 (5,726) (41,944) 1,723
 (6,943) 22,929
 (5,087)
Gain on available for sale securities, net 2,487
 2,394
 4,916
 11,684
Gain (loss) on available for sale securities, net (762) 380
 (1,052) 2,429
Total other operating revenue 175,710
 187,310
 528,258
 530,266
 156,399
 182,252
 312,388
 352,548
Other operating expense  
  
  
  
  
  
  
  
Personnel 147,910
 139,212
 428,079
 411,987
 138,947
 143,744
 278,894
 280,169
Business promotion 7,105
 6,839
 21,560
 19,238
 7,686
 7,738
 13,696
 14,455
Professional fees and services 11,887
 14,038
 35,723
 39,955
 14,978
 12,419
 25,178
 23,836
Net occupancy and equipment 21,325
 20,111
 64,074
 58,554
 22,761
 21,125
 46,807
 42,749
Insurance 6,005
 9,390
 13,098
 23,784
 6,245
 689
 12,838
 7,093
Data processing and communications 37,327
 33,331
 108,559
 98,150
 27,739
 36,330
 55,556
 71,232
Printing, postage and supplies 3,917
 3,790
 11,908
 11,586
 4,011
 4,140
 8,100
 7,991
Net losses (gains) and operating expenses of repossessed assets 6,071
 (926) 9,347
 1,732
Net losses and operating expenses of repossessed assets 2,722
 2,267
 10,427
 3,276
Amortization of intangible assets 1,744
 1,521
 5,349
 5,304
 1,386
 1,803
 2,686
 3,605
Mortgage banking costs 13,450
 15,963
 38,525
 44,039
 12,890
 12,072
 23,039
 25,075
Other expense 9,193
 14,819
 25,308
 37,714
 7,111
 8,558
 13,685
 16,115
Total other operating expense 265,934
 258,088
 761,530
 752,043
 246,476
 250,885
 490,906
 495,596
Net income before taxes 128,228
 107,068
 391,566
 266,253
 148,485
 136,571
 284,780
 263,338
Federal and state income taxes 42,438
 31,956
 128,246
 83,881
 33,330
 47,705
 64,278
 85,808
Net income 85,790
 75,112
 263,320
 182,372
 115,155
 88,866
 220,502
 177,530
Net income (loss) attributable to non-controlling interests 141
 835
 1,168
 (270)
Net income attributable to non-controlling interests 783
 719
 568
 1,027
Net income attributable to BOK Financial Corporation shareholders $85,649
 $74,277
 $262,152
 $182,642
 $114,372
 $88,147
 $219,934
 $176,503
Earnings per share:  
  
  
  
  
  
  
  
Basic $1.31
 $1.13
 $4.01
 $2.77
 $1.75
 $1.35
 $3.36
 $2.70
Diluted $1.31
 $1.13
 $4.00
 $2.76
 $1.75
 $1.35
 $3.36
 $2.69
Average shares used in computation:                
Basic 64,742,822
 65,085,392
 64,729,391
 65,208,774
 64,901,975
 64,729,752
 64,874,567
 64,722,744
Diluted 64,805,172
 65,157,841
 64,793,893
 65,263,566
 64,937,226
 64,793,134
 64,912,552
 64,788,322
Dividends declared per share $0.44
 $0.43
 $1.32
 $1.29
 $0.45
 $0.44
 $0.90
 $0.88

See accompanying notes to consolidated financial statements.


Consolidated Statements of Comprehensive Income (Unaudited)Consolidated Statements of Comprehensive Income (Unaudited)    Consolidated Statements of Comprehensive Income (Unaudited)    
(In thousands, except share and per share data)                
 Three Months Ended Nine Months Ended Three Months Ended Six Months Ended
 September 30, September 30, June 30, June 30,
 2017 2016 2017 2016 2018 2017 2018 2017
Net income $85,790
 $75,112
 $263,320
 $182,372
 $115,155
 $88,866
 $220,502
 $177,530
Other comprehensive income (loss) before income taxes:                
Net change in unrealized gain (loss) 512
 (33,458) 33,881
 133,108
 (33,117) 21,958
 (130,523) 33,369
Reclassification adjustments included in earnings:                
Interest revenue, Investment securities, Taxable securities —
 —
 —
 (112)
Gain on available for sale securities, net (2,487) (2,394) (4,916) (11,684)
Loss (gain) on available for sale securities, net 762
 (380) 1,052
 (2,429)
Other comprehensive income (loss) before income taxes (1,975) (35,852) 28,965
 121,312
 (32,355) 21,578
 (129,471) 30,940
Federal and state income taxes (768) (13,947) 11,241
 47,172
 (8,241) 8,393
 (33,049) 12,009
Other comprehensive income (loss), net of income taxes (1,207)
(21,905)
17,724

74,140
 (24,114)
13,185

(96,422)
18,931
Comprehensive income 84,583
 53,207
 281,044
 256,512
 91,041
 102,051
 124,080
 196,461
Comprehensive income (loss) attributable to non-controlling interests 141
 835
 1,168
 (270)
Comprehensive income attributable to non-controlling interests 783
 719
 568
 1,027
Comprehensive income attributable to BOK Financial Corp. shareholders $84,442
 $52,372
 $279,876
 $256,782
 $90,258
 $101,332
 $123,512
 $195,434

See accompanying notes to consolidated financial statements.


Consolidated Balance Sheets
(In thousands, except share data)
Consolidated Balance Sheets
(In thousands, except share data)
Consolidated Balance Sheets
(In thousands, except share data)
 Sept. 30, 2017 Dec. 31, 2016 Sept. 30, 2016 June 30, 2018 Dec. 31, 2017 June 30, 2017
 (Unaudited) (Footnote 1) (Unaudited) (Unaudited) (Footnote 1) (Unaudited)
Assets            
Cash and due from banks $547,203
 $620,846
 $535,916
 $585,801
 $602,510
 $561,587
Interest-bearing cash and cash equivalents 1,926,779
 1,916,651
 2,080,978
 872,999
 1,714,544
 2,078,831
Trading securities 614,117
 337,628
 546,615
 1,909,615
 462,676
 441,414
Investment securities (fair value: September 30, 2017 – $489,895; December 31, 2016 – $565,493 ; September 30, 2016 – $580,310)
 466,562
 546,145
 546,457
Investment securities (fair value: June 30, 2018 – $403,384; December 31, 2017 – $480,035 ; June 30, 2017 – $515,675)
 392,013
 461,793
 490,426
Available for sale securities 8,383,199
 8,676,829
 8,862,283
 8,162,866
 8,321,578
 8,341,041
Fair value option securities 819,531
 77,046
 222,409
 482,227
 755,054
 445,169
Restricted equity securities 347,542
 307,240
 333,391
 347,721
 320,189
 311,033
Residential mortgage loans held for sale 275,643
 301,897
 447,592
 223,301
 221,378
 287,259
Loans 17,206,834
 16,989,660
 16,464,786
 18,003,696
 17,153,424
 17,183,645
Allowance for loan losses (247,703) (246,159) (245,103) (215,142) (230,682) (250,061)
Loans, net of allowance 16,959,131
 16,743,501
 16,219,683
 17,788,554
 16,922,742
 16,933,584
Premises and equipment, net 320,060
 325,849
 318,196
 320,810
 317,335
 321,038
Receivables 314,251
 772,952
 650,368
 212,893
 178,800
 170,094
Goodwill 446,697
 448,899
 382,739
 453,093
 447,430
 446,697
Intangible assets, net 39,013
 46,931
 41,977
 28,273
 28,658
 40,755
Mortgage servicing rights 245,858
 247,073
 203,621
 278,719
 252,867
 245,239
Real estate and other repossessed assets, net of allowance (September 30, 2017 – $11,738; December 31, 2016 – $9,562; September 30, 2016 – $9,524)
 32,535
 44,287
 31,941
Real estate and other repossessed assets, net of allowance (June 30, 2018 – $17,656; December 31, 2017 – $12,648; June 30, 2017 – $8,576)
 27,891
 28,437
 39,436
Derivative contracts, net 352,559
 689,872
 655,078
 373,373
 220,502
 280,289
Cash surrender value of bank-owned life insurance 314,201
 308,430
 310,211
 321,024
 316,498
 312,774
Receivable on unsettled securities sales 230,225
 7,188
 19,642
 604,552
 340,077
 158,125
Other assets 370,409
 353,017
 370,134
 447,382
 359,092
 358,741
Total assets $33,005,515
 $32,772,281
 $32,779,231
 $33,833,107
 $32,272,160
 $32,263,532
            
Liabilities and Equity            
Liabilities:            
Noninterest-bearing demand deposits $9,185,481
 $9,235,720
 $8,681,364
 $9,373,959
 $9,243,338
 $9,568,895
Interest-bearing deposits:  
  
  
  
  
  
Transaction 10,025,084
 10,865,105
 9,824,160
 10,164,099
 10,250,393
 10,087,139
Savings 465,225
 425,470
 420,349
 503,474
 469,158
 464,318
Time 2,172,289
 2,221,800
 2,169,631
 2,127,732
 2,098,416
 2,196,122
Total deposits 21,848,079
 22,748,095
 21,095,504
 22,169,264
 22,061,305
 22,316,474
Funds purchased 62,356
 57,929
 109,031
Repurchase agreements 328,189
 668,661
 504,573
Funds purchased and repurchase agreements 880,027
 574,964
 464,323
Other borrowings 6,241,275
 4,846,072
 6,533,443
 5,929,445
 5,134,897
 5,232,343
Subordinated debentures 144,668
 144,640
 144,631
 144,697
 144,677
 144,658
Accrued interest, taxes and expense 152,029
 146,704
 191,276
 160,568
 164,895
 133,198
Derivative contracts, net 336,327
 664,531
 573,987
 234,856
 171,963
 285,819
Due on unsettled securities purchases 160,781
 6,508
 677
 571,034
 338,745
 31,214
Other liabilities 217,372
 182,784
 193,698
 167,171
 162,380
 205,958
Total liabilities 29,491,076
 29,465,924
 29,346,820
 30,257,062
 28,753,826
 28,813,987
Shareholders' equity:  
  
  
  
  
  
Common stock ($.00006 par value; 2,500,000,000 shares authorized; shares issued and outstanding: September 30, 2017 – 75,129,535; December 31, 2016 – 74,993,407; September 30, 2016 – 74,866,429)
 4
 4
 4
Common stock ($.00006 par value; 2,500,000,000 shares authorized; shares issued and outstanding: June 30, 2018 – 75,313,559; December 31, 2017 – 75,147,686; June 30, 2017 – 75,089,152)
 4
 4
 4
Capital surplus 1,028,489
 1,006,535
 995,680
 1,040,202
 1,035,895
 1,017,495
Retained earnings 2,999,005
 2,823,334
 2,801,931
 3,212,653
 3,048,487
 2,942,447
Treasury stock (shares at cost: September 30, 2017 – 9,672,749; December 31, 2016 – 9,655,975; September 30, 2016 – 8,955,975)
 (545,441) (544,052) (495,031)
Accumulated other comprehensive income (loss) 6,757
 (10,967) 95,727
Treasury stock (shares at cost: June 30, 2018 – 9,874,469; December 31, 2017 – 9,752,749; June 30, 2017 – 9,672,749)
 (564,123) (552,845) (545,441)
Accumulated other comprehensive gain (loss) (135,305) (36,174) 7,964
Total shareholders’ equity 3,488,814
 3,274,854
 3,398,311
 3,553,431
 3,495,367
 3,422,469
Non-controlling interests 25,625
 31,503
 34,100
 22,614
 22,967
 27,076
Total equity 3,514,439
 3,306,357
 3,432,411
 3,576,045
 3,518,334
 3,449,545
Total liabilities and equity $33,005,515
 $32,772,281
 $32,779,231
 $33,833,107
 $32,272,160
 $32,263,532

See accompanying notes to consolidated financial statements.


Consolidated Statements of Changes in Equity (Unaudited)
(In thousands)
Consolidated Statements of Changes in Equity (Unaudited)
(In thousands)
Consolidated Statements of Changes in Equity (Unaudited)
(In thousands)
 Common Stock 
Capital
Surplus
 
Retained
Earnings
 Treasury Stock Accumulated
Other
Comprehensive
Income (Loss)		 
Total
Shareholders’
Equity
 
Non-
Controlling
Interests
 Total Equity Common Stock 
Capital
Surplus
 
Retained
Earnings
 Treasury Stock Accumulated
Other
Comprehensive
Income (Loss)		 
Total
Shareholders’
Equity
 
Non-
Controlling
Interests
 Total Equity
 Shares Amount Shares Amount  Shares Amount Shares Amount 
                                        
Balance, December 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) —
 —
 —
 182,642
 —
 —
 —
 182,642
 (270) 182,372
Other comprehensive income —
 —
 —
 —
 —
 —
 74,140
 74,140
 —
 74,140
Repurchase of common stock —
 —
 —
 —
 305
 (17,771) —
 (17,771) —
 (17,771)
Share-based compensation plans:           ��        
Stock options exercised 108
 —
 5,513
 —
 —
 —
 —
 5,513
 —
 5,513
Non-vested shares awarded, net 228
 —
 —
 —
 —
 —
 —
 —
 —
 —
Vesting of non-vested shares —
 —
 —
 —
 15
 (95) —
 (95) —
 (95)
Tax effect from equity compensation, net —
 —
 589
 —
 —
 —
 —
 589
 —
 589
Share-based compensation —
 —
 7,569
 —
 —
 —
 —
 7,569
 —
 7,569
Cash dividends on common stock —
 —
 —
 (84,832) —
 —
 —
 (84,832) —
 (84,832)
Capital calls and distributions, net —
 —
 —
 —
 —
 —
 —
 —
 (2,713) (2,713)
                    
Balance, September 30, 2016 74,866
 $4
 $995,680
 $2,801,931
 8,956
 $(495,031) $95,727
 $3,398,311
 $34,100
 $3,432,411
                    
Balance, December 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
 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) —
 —
 —
 262,152
 —
 —
 —
 262,152
 1,168
 263,320
Net income —
 —
 —
 176,503
 —
 —
 —
 176,503
 1,027
 177,530
Other comprehensive income —
 —
 —
 —
 —
 —
 17,724
 17,724
 —
 17,724
 —
 —
 —
 —
 —
 —
 18,931
 18,931
 —
 18,931
Share-based compensation plans:                                        
Stock options exercised 80
 —
 4,564
 —
 —
 —
 —
 4,564
 —
 4,564
 41
 —
 1,977
 —
 —
 —
 —
 1,977
 —
 1,977
Non-vested shares awarded, net 57
 —
 —
 —
 —
 —
 —
 —
 —
 —
 55
 —
 —
 —
 —
 —
 —
 —
 —
 —
Vesting of non-vested shares —
 —
 —
 —
 17
 (1,389) —
 (1,389) —
 (1,389) —
 —
 —
 —
 17
 (1,389) —
 (1,389) —
 (1,389)
Share-based compensation —
 —
 17,390
 —
 —
 —
 —
 17,390
 —
 17,390
 —
 —
 8,983
 —
 —
 —
 —
 8,983
 —
 8,983
Cash dividends on common stock —
 —
 —
 (86,481) —
 —
 —
 (86,481) —
 (86,481) —
 —
 —
 (57,390) —
 —
 —
 (57,390) —
 (57,390)
Capital calls and distributions, net —
 —
 —
 —
 —
 —
 —
 —
 (7,046) (7,046) —
 —
 —
 —
 —
 —
 —
 —
 (5,454) (5,454)
Balance, June 30, 2017 75,089
 $4
 $1,017,495
 $2,942,447
 9,673
 $(545,441) $7,964
 $3,422,469
 $27,076
 $3,449,545
                                        
Balance, September 30, 2017 75,130
 $4
 $1,028,489
 $2,999,005
 9,673
 $(545,441) $6,757
 $3,488,814
 $25,625
 $3,514,439
Balance, December 31, 2017 75,148
 $4
 $1,035,895
 $3,048,487
 9,753
 $(552,845) $(36,174) $3,495,367
 $22,967
 $3,518,334
Transition adjustment of net unrealized gains on equity securities —
 —
 —
 2,709
 —
 —
 (2,709) —
 —
 —
Balance, December 31, 2017, Adjusted 75,148

4

1,035,895

3,051,196

9,753

(552,845)
(38,883)
3,495,367

22,967

3,518,334
Net income (loss) —
 —
 —
 219,934
 —
 —
 —
 219,934
 568
 220,502
Other comprehensive loss —
 —
 —
 —
 —
 —
 (96,422) (96,422) —
 (96,422)
Repurchase of common stock —
 —
 —
 —
 90
 (8,408) —
 (8,408) —
 (8,408)
Share-based compensation plans:                    
Stock options exercised 46
 —
 2,426
 —
 —
 —
 —
 2,426
 —
 2,426
Non-vested shares awarded, net 120
 —
 —
 —
 —
 —
 —
 —
 —
 —
Vesting of non-vested shares —
 —
 —
 —
 31
 (2,870) —
 (2,870) —
 (2,870)
Share-based compensation —
 —
 1,881
 —
 —
 —
 —
 1,881
 —
 1,881
Cash dividends on common stock —
 —
 —
 (58,477) —
 —
 —
 (58,477) —
 (58,477)
Capital calls and distributions, net —
 —
 —
 —
 —
 —
 —
 —
 (921) (921)
Balance, June 30, 2018 75,314

4

1,040,202

3,212,653

9,874

(564,123)
(135,305)
3,553,431

22,614

3,576,045

See accompanying notes to consolidated financial statements.


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

 Nine Months Ended
  September 30,
  2017 2016
Cash Flows From Operating Activities:    
Net income $263,320
 $182,372
Adjustments to reconcile net income to net cash provided by (used in) operating activities:  
  
Provision for credit losses —
 65,000
Change in fair value of mortgage servicing rights due to market changes 5,726
 41,944
Change in the fair value of mortgage servicing rights due to loan runoff 24,928
 29,385
Net unrealized gains from derivative contracts (3,937) (9,755)
Share-based compensation 17,390
 7,569
Depreciation and amortization 39,154
 35,158
Net amortization of securities discounts and premiums 22,149
 31,373
Net realized gains on financial instruments and other net gains (1,930) (13,663)
Net gain on mortgage loans held for sale (35,778) (61,775)
Mortgage loans originated for sale (2,446,793) (4,927,442)
Proceeds from sale of mortgage loans held for sale 2,503,759
 4,855,682
Capitalized mortgage servicing rights (29,439) (56,345)
Change in trading and fair value option securities (1,019,906) (204,030)
Change in receivables 459,480
 (483,836)
Change in other assets (18,991) (17,931)
Change in accrued interest, taxes and expense (99) 27,780
Change in other liabilities 43,767
 7,262
Net cash provided by (used in) operating activities (177,200) (491,252)
Cash Flows From Investing Activities:  
  
Proceeds from maturities or redemptions of investment securities 94,243
 65,104
Proceeds from maturities or redemptions of available for sale securities 1,345,575
 1,120,917
Purchases of investment securities (18,802) (18,599)
Purchases of available for sale securities (2,001,160) (1,860,287)
Proceeds from sales of available for sale securities 966,044
 1,027,379
Change in amount receivable on unsettled securities transactions (223,037) 20,551
Loans originated, net of principal collected (156,404) (551,351)
Net payments on derivative asset contracts 334,709
 (79,512)
Acquisitions, net of cash acquired —
 (7,700)
Proceeds from disposition of assets 162,793
 131,761
Purchases of assets (170,937) (159,263)
Net cash provided by (used in) investing activities 333,024
 (311,000)
Cash Flows From Financing Activities:  
  
Net change in demand deposits, transaction deposits and savings accounts (850,505) 243,779
Net change in time deposits (49,511) (236,433)
Net change in other borrowed funds 957,859
 1,015,822
Repayment of subordinated debentures —
 (226,550)
Issuance of subordinated debentures —
 145,331
Net proceeds on derivative liability contracts (339,566) 76,144
Net change in derivative margin accounts (8,583) (129,141)
Change in amount due on unsettled security transactions 154,273
 (16,220)
Issuance of common and treasury stock, net 3,175
 5,418
Repurchase of common stock —
 (17,771)
Dividends paid (86,481) (84,832)
Net cash provided by (used in) financing activities (219,339) 775,547
Net increase (decrease) in cash and cash equivalents (63,515) (26,705)
Cash and cash equivalents at beginning of period 2,537,497
 2,643,599
Cash and cash equivalents at end of period $2,473,982
 $2,616,894
     
Supplemental Cash Flow Information:    
Cash paid for interest $89,901
 $61,522
Cash paid for taxes $95,967
 $43,096
Net loans and bank premises transferred to repossessed real estate and other assets $4,649
 $20,580
Residential mortgage loans guaranteed by U.S. government agencies that became eligible for repurchase during the period $101,299
 $79,710
Conveyance of other real estate owned guaranteed by U.S. government agencies $32,033
 $50,855
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)

 Six Months Ended
  June 30,
  2018 2017
Cash Flows From Operating Activities:    
Net income $220,502
 $177,530
Adjustments to reconcile net income to net cash provided by (used in) operating activities:  
  
Provision for credit losses (5,000) —
Change in fair value of mortgage servicing rights due to market changes (22,929) 5,087
Change in the fair value of mortgage servicing rights due to principal payments 16,797
 16,261
Net unrealized losses (gains) from derivative contracts 6,674
 (5,928)
Share-based compensation 1,881
 8,983
Depreciation and amortization 27,459
 25,864
Net amortization of securities discounts and premiums 12,855
 15,377
Net losses (gains) on financial instruments and other losses (gains), net 4,530
 (4,351)
Net gain on mortgage loans held for sale (19,314) (25,229)
Mortgage loans originated for sale (1,438,868) (1,613,997)
Proceeds from sale of mortgage loans held for sale 1,456,312
 1,651,018
Capitalized mortgage servicing rights (19,720) (19,514)
Change in trading and fair value option securities (1,174,526) (472,682)
Change in receivables (335,369) 479,774
Change in other assets 1,737
 (17,548)
Change in accrued interest, taxes and expense (4,327) (19,703)
Change in other liabilities 334,765
 27,420
Net cash provided by (used in) operating activities (936,541) 228,362
Cash Flows From Investing Activities:  
  
Proceeds from maturities or redemptions of investment securities 71,722
 71,654
Proceeds from maturities or redemptions of available for sale securities 819,596
 899,096
Purchases of investment securities (3,968) (18,802)
Purchases of available for sale securities (1,020,018) (1,242,070)
Proceeds from sales of available for sale securities 187,533
 700,412
Change in amount receivable on unsettled available for sale securities transactions 38,075
 (25,989)
Loans originated, net of principal collected (847,351) (159,924)
Net payments on derivative asset contracts (70,987) 420,996
Acquisitions, net of cash acquired (13,870) —
Proceeds from disposition of assets 97,027
 127,699
Purchases of assets (121,889) (106,362)
Net cash provided by (used in) investing activities (864,130) 666,710
Cash Flows From Financing Activities:  
  
Net change in demand deposits, transaction deposits and savings accounts 78,643
 (405,943)
Net change in time deposits 29,316
 (25,678)
Net change in other borrowed funds 1,057,118
 64,833
Net proceeds on derivative liability contracts 64,144
 (422,016)
Net change in derivative margin accounts (118,628) 27,327
Change in amount due on unsettled available for sale securities transactions (100,847) 26,128
Issuance of common and treasury stock, net (444) 588
Repurchase of common stock (8,408) —
Dividends paid (58,477) (57,390)
Net cash provided by (used in) financing activities 942,417
 (792,151)
Net increase (decrease) in cash and cash equivalents (858,254) 102,921
Cash and cash equivalents at beginning of period 2,317,054
 2,537,497
Cash and cash equivalents at end of period $1,458,800
 $2,640,418
     
Supplemental Cash Flow Information:    
Cash paid for interest $100,532
 $54,881
Cash paid for taxes $29,623
 $60,654
Net loans and bank premises transferred to repossessed real estate and other assets $3,886
 $2,049
Residential mortgage loans guaranteed by U.S. government agencies that became eligible for repurchase during the period $42,493
 $59,171
Conveyance of other real estate owned guaranteed by U.S. government agencies $23,845
 $22,602
See accompanying notes to consolidated financial statements.


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 20162017 Form 10-K filed with the Securities and Exchange Commission, which contains audited financial statements. Amounts presented as of December 31, 20162017 have been derived from the audited financial statements included in BOK Financial’s 20162017 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 ninesix-month period ended SeptemberJune 30, 20172018 are not necessarily indicative of the results that may be expected for the year ending December 31, 20172018.

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 revenueRevenue from financial assets and liabilities is explicitly excluded from the scope of ASU 2014-09. Management expects that there will beadopted the standard in the first quarter of 2018 using the modified retrospective transition method. There were no material impact on the timingsignificant cumulative effect adjustments as a result of revenue recognizedimplementation as of January 1, 2018 as our current revenue recognition policies generally conform with the principals in the standard. Management will adopt the standard in the first quarter of 2018 with a cumulative effect adjustment to opening retained earnings if such adjustment is significant. Currently, we do not anticipate any significant adjustments.ASU 2014-09.

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 forManagement adopted the Company for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Management expects that interchangestandard in the first quarter of 2018. Interchange fees paid to issuing banks for card transactions processed related to its merchant processing services currentlypreviously included in data processing and communication expense will beare now netted against the amounts charged to the merchant in transaction card processing revenue. For 2016, interchange fees related to merchant processing services were approximately $27 million.



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 forManagement adopted the Company for interim and annual periods beginning after December 15, 2017.standard in the first quarter of 2018. Upon adoption, net unrealized gains and lossesof $2.7 million from equity securities will bewere reclassified from other comprehensive income to retained earnings. At September 30, 2017, the Company had $2.2 million of net 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 adoptioncurrently estimates that implementation of ASU 2016-02 will have on the Company's financial statements.

FASB Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvementsincrease reported right of use assets and liabilities by approximately $100 million 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 for 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 $2.5 million in the first nine months of 2017.$150 million.
 
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 evaluatinghas established a CECL implementation team in order to evaluate the impact the adoption of ASU 2016-13 will have on the Company's financial statements.

The CECL implementation team, overseen by the Chief Credit Officer, Chief Financial Officer, and Chief Risk Officer, has developed a project plan that incorporates input from various departments within the bank including Credit, Financial Reporting, Risk, and Information Technology among others. Key implementation activities for 2018 include portfolio segmentation, model development, as well as process and information systems enhancements.
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 forManagement adopted the Company for interim and annual reporting periods beginning after December 15, 2017. Entities generally must apply the guidance retrospectively to all periods presented.standard in first quarter of 2018. Adoption of ASU 2016-15 isdid not expected to have a material impact on the Company's financial statements.



FASB Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12")

On August 28, 2017, the FASB issued ASU 2017-12, which amends the hedge accounting recognition and presentation requirements in ASC815ASC 815 in order to improve transparency and understandability of information and reduce the complexity. The update expands the types of transactions eligible for hedge accounting, eliminates the requirement to separately measure and present hedge ineffectiveness, simplifies hedge effectiveness assessments and updates documentation and presentation requirements. The update allows the reclassification of certain debt securities from held to maturity to available for sale if the debt security is eligible to be hedged under the last-of-layer method. ASU 2017-12 is effective for the Company for fiscal years beginning after December 15, 2018, and interim periods therein; however, early adoption is permitted. The Company is evaluating the impact the adoption of ASU 2017-12 will have on the Company's financial statements.

FASB Accounting Standards Update No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (SAB 118).

On March 13, 2018, the FASB issued ASU 2018-05, which adds SEC guidance related to SAB 118 - Income Tax Accounting Implications of the Tax Cuts and Jobs Act. ASU 2018-05 was effective upon issuance.

 


(2) Securities
Trading Securities
 
The fair value and net unrealized gain (loss) included in trading securities are as follows (in thousands):
 
 September 30, 2017 December 31, 2016 September 30, 2016 June 30, 2018 December 31, 2017 June 30, 2017
 Fair Value Net Unrealized Gain (Loss) Fair Value Net Unrealized Gain (Loss) 
Fair
Value
 Net Unrealized Gain (Loss) Fair Value Net Unrealized Gain (Loss) Fair Value Net Unrealized Gain (Loss) 
Fair
Value
 Net Unrealized Gain (Loss)
U.S. government agency debentures $30,162
 $(101) $6,234
 $(4) $15,705
 $(7) $28,750
 $10
 $21,196
 $8
 $20,954
 $(9)
U.S. government agency residential mortgage-backed securities 516,760
 723
 310,067
 635
 464,749
 876
 1,605,001
 1,923
 392,673
 (517) 365,171
 (1,032)
Municipal and other tax-exempt securities 56,148
 153
 14,427
 50
 54,856
 (100) 70,606
 231
 13,559
 83
 45,444
 230
Asset-backed securities 193,271
 250
 23,885
 (26) —
 —
Other trading securities 11,047
 23
 6,900
 57
 11,305
 14
 11,987
 32
 11,363
 4
 9,845
 (175)
Total trading securities $614,117
 $798
 $337,628
 $738
 $546,615
 $783
 $1,909,615
 $2,446
 $462,676
 $(448) $441,414
 $(986)
Investment Securities
 
The amortized cost and fair values of investment securities are as follows (in thousands):

 September 30, 2017 June 30, 2018
 Amortized Fair 
Gross Unrealized1
 Amortized Fair Gross Unrealized
 Cost Value Gain Loss Cost Value Gain Loss
Municipal and other tax-exempt $246,000
 $249,250
 $3,415
 $(165) $173,097
 $174,205
 $1,779
 $(671)
U.S. government agency residential mortgage-backed securities – Other 16,926
 17,458
 594
 (62)
U.S. government agency residential mortgage-backed securities 13,989
 13,984
 232
 (237)
Other debt securities 203,636
 223,187
 20,141
 (590) 204,927
 215,195
 12,259
 (1,991)
Total investment securities $466,562
 $489,895
 $24,150
 $(817) $392,013
 $403,384
 $14,270
 $(2,899)
1
Gross unrealized gains and losses are not recognized in Accumulated Other Comprehensive Income "AOCI" in the Consolidated Balance Sheets.
 December 31, 2016 December 31, 2017
 Amortized Fair 
Gross Unrealized1
 Amortized Fair Gross Unrealized
 Cost Value Gain Loss Cost Value Gain Loss
Municipal and other tax-exempt $320,364
 $321,225
 $2,272
 $(1,411) $228,186
 $230,349
 $2,967
 $(804)
U.S. government agency residential mortgage-backed securities – Other 20,777
 21,473
 767
 (71)
U.S. government agency residential mortgage-backed securities 15,891
 16,242
 446
 (95)
Other debt securities 205,004
 222,795
 18,115
 (324) 217,716
 233,444
 17,095
 (1,367)
Total investment securities $546,145
 $565,493
 $21,154
 $(1,806) $461,793
 $480,035
 $20,508
 $(2,266)
1
Gross unrealized gains and losses are not recognized in AOCI in the Consolidated Balance Sheets.
 September 30, 2016 June 30, 2017
 Amortized Fair 
Gross Unrealized1
 Amortized Fair Gross Unrealized
 Cost Value Gain Loss Cost Value Gain Loss
Municipal and other tax-exempt $323,225
 $327,788
 $4,745
 $(182) $267,375
 $270,531
 $3,384
 $(228)
U.S. government agency residential mortgage-backed securities – Other 22,166
 23,452
 1,286
 —
U.S. government agency residential mortgage-backed securities 18,035
 18,642
 668
 (61)
Other debt securities 201,066
 229,070
 28,014
 (10) 205,016
 226,502
 22,040
 (554)
Total investment securities $546,457
 $580,310
 $34,045
 $(192) $490,426
 $515,675
 $26,092
 $(843)
1


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


The amortized cost and fair values of investment securities at SeptemberJune 30, 20172018, 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
 
Less than
One Year
 
One to
Five Years
 
Six to
Ten Years
 
Over
Ten Years
 Total 
Weighted
Average
Maturity²
Municipal and other tax-exempt:                        
Amortized cost $84,786
 $107,938
 $16,132
 $37,144
 $246,000
 3.51
 $60,535
 $62,005
 $28,117
 $22,440
 $173,097
 4.02
Fair value 84,835
 108,352
 16,776
 39,287
 249,250
   60,487
 61,736
 29,038
 22,944
 174,205
  
Nominal yield¹ 1.75% 2.15% 4.68% 5.21% 2.64%   2.07% 2.58% 5.81% 5.12% 3.25%  
Other debt securities:  
  
  
  
  
    
  
  
  
  
  
Amortized cost 13,546
 47,077
 130,494
 12,519
 203,636
 6.40
 14,877
 52,170
 123,762
 14,118
 204,927
 5.99
Fair value 13,688
 50,230
 147,066
 12,203
 223,187
   15,023
 54,233
 132,912
 13,027
 215,195
  
Nominal yield 4.10% 4.86% 5.75% 4.47% 5.35%   3.99% 4.69% 5.67% 4.34% 5.21%  
Total fixed maturity securities:  
  
  
  
  
    
  
  
  
  
  
Amortized cost $98,332
 $155,015
 $146,626
 $49,663
 $449,636
 4.82
 $75,412
 $114,175
 $151,879
 $36,558
 $378,024
 5.08
Fair value 98,523
 158,582
 163,842
 51,490
 472,437
  
 75,510
 115,969
 161,950
 35,971
 389,400
  
Nominal yield 2.08% 2.97% 5.63% 5.02% 3.87%  
 2.45% 3.54% 5.69% 4.82% 4.31%  
Residential mortgage-backed securities:  
  
  
  
  
  
  
  
  
  
  
  
Amortized cost  
  
  
  
 $16,926
 ³
  
  
  
  
 $13,989
 ³
Fair value  
  
  
  
 17,458
  
  
  
  
  
 13,984
  
Nominal yield4
  
  
  
  
 2.76%  
  
  
  
  
 2.76%  
Total investment securities:  
  
  
  
  
  
  
  
  
  
  
  
Amortized cost  
  
  
  
 $466,562
  
  
  
  
  
 $392,013
  
Fair value  
  
  
  
 489,895
  
  
  
  
  
 403,384
  
Nominal yield  
  
  
  
 3.83%  
  
  
  
  
 4.26%  
1 
Calculated on a taxable equivalent basis using a 3925 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 4.75.0 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.



Available for Sale Securities 

The amortized cost and fair value of available for sale securities are as follows (in thousands):
 September 30, 2017 June 30, 2018
 Amortized Fair 
Gross Unrealized1
   Amortized Fair Gross Unrealized  
 Cost Value Gain Loss 
OTTI²
 Cost Value Gain Loss OTTI
U.S. Treasury $1,000
 $999
 $—
 $(1) $—
 $494
 $490
 $—
 $(4) $—
Municipal and other tax-exempt 28,411
 28,368
 240
 (283) —
 10,590
 10,697
 111
 (4) —
Residential mortgage-backed securities:  
  
  
  
  
  
  
  
  
  
U. S. government agencies:  
  
  
  
  
  
  
  
  
  
FNMA 3,103,869
 3,108,822
 25,510
 (20,557) —
 3,088,585
 3,007,885
 2,774
 (83,474) —
FHLMC 1,331,212
 1,330,159
 6,630
 (7,683) —
 1,580,185
 1,538,582
 738
 (42,341) —
GNMA 864,256
 862,394
 3,254
 (5,116) —
 772,785
 758,093
 915
 (15,607) —
Other 25,000
 25,009
 51
 (42) —
Total U.S. government agencies 5,324,337
 5,326,384
 35,445
 (33,398) —
 5,441,555
 5,304,560
 4,427
 (141,422) —
Private issue:  
  
  
  
  
Alt-A loans 35,853
 46,695
 10,842
 —
 —
Jumbo-A loans 44,944
 53,299
 8,355
 —
 —
Total private issue 80,797
 99,994
 19,197
 —
 —
Private issue 65,376
 83,224
 18,221
 —
 (373)
Total residential mortgage-backed securities 5,405,134
 5,426,378
 54,642
 (33,398) —
 5,506,931

5,387,784

22,648

(141,422)
(373)
Commercial mortgage-backed securities guaranteed by U.S. government agencies 2,899,828
 2,889,346
 5,577
 (16,059) —
 2,799,953
 2,738,451
 1,815
 (63,317) —
Other debt securities 4,400
 4,153
 —
 (247) —
 25,500
 25,444
 12
 (68) —
Perpetual preferred stock 12,562
 16,245
 3,683
 —
 —
Equity securities and mutual funds 17,803
 17,710
 655
 (748) —
Total available for sale securities $8,369,138
 $8,383,199
 $64,797
 $(50,736) $—
 $8,343,468
 $8,162,866
 $24,586
 $(204,815) $(373)
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.
  December 31, 2017
  Amortized Fair Gross Unrealized  
  Cost Value Gain Loss OTTI
U.S. Treasury $1,000
 $1,000
 $—
 $—
 $—
Municipal and other tax-exempt 27,182
 27,080
 181
 (283) —
Residential mortgage-backed securities:    
  
  
  
U. S. government agencies:  
  
  
  
  
FNMA 3,021,551
 2,997,563
 11,549
 (35,537) —
FHLMC 1,545,971
 1,531,009
 3,148
 (18,110) —
GNMA 787,626
 780,580
 1,607
 (8,653) —
Total U.S. government agencies 5,355,148
 5,309,152
 16,304
 (62,300) —
Private issue 74,311
 93,221
 19,301
 —
 (391)
Total residential mortgage-backed securities 5,429,459

5,402,373

35,605

(62,300)
(391)
Commercial mortgage-backed securities guaranteed by U.S. government agencies 2,858,885
 2,834,961
 1,963
 (25,887) —
Other debt securities 25,500
 25,481
 50
 (69) —
Perpetual preferred stock 12,562
 15,767
 3,205
 —
 —
Equity securities and mutual funds 14,487
 14,916
 515
 (86) —
Total available for sale securities $8,369,075
 $8,321,578
 $41,519
 $(88,625) $(391)



 December 31, 2016 June 30, 2017
 Amortized Fair Gross Unrealized¹   Amortized Fair Gross Unrealized  
 Cost Value Gain Loss 
OTTI²
 Cost Value Gain Loss OTTI
U.S. Treasury $1,000
 $999
 $—
 $(1) $—
 $1,000
 $998
 $—
 $(2) $—
Municipal and other tax-exempt 41,050
 40,993
 343
 (400) —
 32,885
 32,765
 293
 (413) —
Residential mortgage-backed securities:    
  
  
  
          
U. S. government agencies:  
  
  
  
  
  
  
  
  
  
FNMA 3,062,525
 3,055,676
 25,066
 (31,915) —
 3,005,920
 3,008,531
 24,213
 (21,602) —
FHLMC 1,534,451
 1,531,116
 8,475
 (11,810) —
 1,412,376
 1,412,472
 7,785
 (7,689) —
GNMA 878,375
 873,594
 2,259
 (7,040) —
 938,086
 936,365
 3,641
 (5,362) —
Other 25,000
 25,009
 52
 (43) —
Total U.S. government agencies 5,475,351
 5,460,386
 35,800
 (50,765) —
 5,381,382
 5,382,377
 35,691
 (34,696) —
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)
Private issue 86,656
 103,383
 16,727
 —
 —
Total residential mortgage-backed securities 5,576,543
 5,575,921
 50,377
 (50,781) (218) 5,468,038

5,485,760

52,418

(34,696)
—
Commercial mortgage-backed securities guaranteed by U.S. government agencies 3,035,750
 3,017,933
 5,472
 (23,289) —
 2,788,543
 2,782,070
 7,804
 (14,277) —
Other debt securities 4,400
 4,152
 —
 (248) —
 4,400
 4,152
 —
 (248) —
Perpetual preferred stock 15,561
 18,474
 2,913
 —
 —
 12,562
 16,568
 4,006
 —
 —
Equity securities and mutual funds 17,424
 18,357
 1,060
 (127) —
 17,572
 18,728
 1,219
 (63) —
Total available for sale securities $8,691,728
 $8,676,829
 $60,165
 $(74,846) $(218) $8,325,000
 $8,341,041
 $65,740
 $(49,699) $—
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.

  September 30, 2016
  Amortized Fair 
Gross Unrealized1
  
  Cost Value Gain Loss 
OTTI²
U.S. Treasury $1,000
 $1,002
 $2
 $—
 $—
Municipal and other tax-exempt 41,943
 42,092
 602
 (453) —
Residential mortgage-backed securities:          
U. S. government agencies:  
  
  
  
  
FNMA 3,035,041
 3,101,136
 67,859
 (1,764) —
FHLMC 1,611,887
 1,641,178
 29,640
 (349) —
GNMA 924,176
 926,358
 3,530
 (1,348) —
Total U.S. government agencies 5,571,104
 5,668,672
 101,029
 (3,461) —
Private issue:  
  
  
  
  
Alt-A loans 47,039
 54,065
 7,230
 —
 (204)
Jumbo-A loans 61,377
 67,538
 6,187
 (26) —
Total private issue 108,416
 121,603
 13,417
 (26) (204)
Total residential mortgage-backed securities 5,679,520
 5,790,275
 114,446
 (3,487) (204)
Commercial mortgage-backed securities guaranteed by U.S. government agencies 2,942,988
 2,986,495
 45,329
 (1,822) —
Other debt securities 4,400
 4,151
 —
 (249) —
Perpetual preferred stock 15,562
 19,578
 4,016
 —
 —
Equity securities and mutual funds 17,337
 18,690
 1,370
 (17) —
Total available for sale securities $8,702,750
 $8,862,283
 $165,765
 $(6,028) $(204)
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.



The amortized cost and fair values of available for sale securities at SeptemberJune 30, 20172018, 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
Less than
One Year
 
One to
Five Years
 
Six to
Ten Years
 
Over
Ten Years
 Total 
Weighted
Average
Maturity4
U.S. Treasuries:                      
Amortized cost$1,000
 $—
 $—
 $—
 $1,000
 0.29
$—
 $494
 $—
 $—
 $494
 1.59
Fair value999
 —
 —
 —
 999
  —
 490
 —
 —
 490
  
Nominal yield0.87% —% —% —% 0.87%  —% 1.99% —% —% 1.99%  
Municipal and other tax-exempt: 
  
  
  
     
  
  
  
    
Amortized cost$8,754
 $4,163
 $—
 $15,494
 $28,411
 9.00
$4,574
 $2,303
 $—
 $3,713
 $10,590
 6.53
Fair value8,780
 4,313
 —
 15,275
 28,368
  4,580
 2,401
 —
 3,716
 10,697
  
Nominal yield¹3.25% 5.13% —% 2.26%
6 
2.99%  3.45% 6.27% —% 3.98%
5 
4.25%  
Commercial mortgage-backed securities:                      
Amortized cost$59,483
 $978,565
 $1,616,383
 $245,397
 $2,899,828
 6.90
$8,070
 $987,244
 $1,548,520
 $256,119
 $2,799,953
 6.89
Fair value59,402
 976,466
 1,610,642
 242,836
 2,889,346
  8,041
 968,540
 1,512,106
 249,764
 2,738,451
  
Nominal yield1.25% 1.85% 1.92% 1.92% 1.88%  1.67% 1.96% 2.17% 2.20% 2.10%  
Other debt securities: 
  
  
  
     
  
  
  
    
Amortized cost$—
 $—
 $—
 $4,400
 $4,400
 29.91
$—
 $—
 $—
 $25,500
 $25,500
 14.18
Fair value—
 —
 —
 4,153
 4,153
  —
 —
 —
 25,444
 25,444
  
Nominal yield—% —% —% 1.71%
6 
1.71%  —% —% —% 1.59%
5 
1.59%  
Total fixed maturity securities: 
  
  
  
     
  
  
  
    
Amortized cost$69,237
 $982,728
 $1,616,383
 $265,291
 $2,933,639
 6.96
$12,644
 $990,041
 $1,548,520
 $285,332
 $2,836,537
 6.95
Fair value69,181
 980,779
 1,610,642
 262,264
 2,922,866
  12,621
 971,431
 1,512,106
 278,924
 2,775,082
  
Nominal yield1.50% 1.86% 1.92% 1.93% 1.88%  2.31% 1.97% 2.17% 2.17% 2.10%  
Residential mortgage-backed securities: 
  
  
  
     
  
  
  
    
Amortized cost 
  
  
  
 $5,405,134
 
2 

 
  
  
  
 $5,506,931
 
2 

Fair value 
  
  
  
 5,426,378
   
  
  
  
 5,387,784
  
Nominal yield4
 
  
  
  
 1.99%  
Equity securities and mutual funds: 
  
  
  
  
  
Amortized cost 
  
  
  
 $30,365
 ³
Fair value 
  
  
  
 33,955
  
Nominal yield 
  
  
  
 —%  
Nominal yield3
 
  
  
  
 2.16%  
Total available-for-sale securities: 
  
  
  
    
 
  
  
  
    
Amortized cost 
  
  
  
 $8,369,138
  
 
  
  
  
 $8,343,468
  
Fair value 
  
  
  
 8,383,199
  
 
  
  
  
 8,162,866
  
Nominal yield 
  
  
  
 1.95%  
 
  
  
  
 2.14%  
1 
Calculated on a taxable equivalent basis using a 3925 percent effective tax rate.
2 
The average expected lives of mortgage-backed securities were 4.04.3 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.
54 
Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty.
65 
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.



Sales of available for sale securities resulted in gains and losses as follows (in thousands):
Three Months Ended
September 30,		 Nine Months Ended
September 30,		Three Months Ended
June 30,		 Six Months Ended
June 30,
2017 2016 2017 20162018 2017 2018 2017
Proceeds$265,632
 $232,239
 $966,044
 $1,027,379
$142,743
 $460,402
 $187,533
 $700,412
Gross realized gains2,768
 2,415
 7,623
 11,705
257
 2,763
 450
 4,855
Gross realized losses(281) (21) (2,707) (21)(1,019) (2,383) (1,502) (2,426)
Related federal and state income tax expense967
 931
 1,912
 4,545
Related federal and state income tax expense (benefit)(194) 148
 (268) 945



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):
Sept. 30, 2017 Dec. 31, 2016 Sept. 30, 2016June 30, 2018 Dec. 31, 2017 June 30, 2017
Investment:          
Amortized cost$237,525
 $322,208
 $301,754
$172,906
 $226,852
 $251,684
Fair value241,208
 323,808
 307,264
174,240
 229,429
 255,097
          
Available for sale:          
Amortized cost6,559,615
 7,353,116
 7,098,721
6,821,287
 7,151,468
 6,327,666
Fair value6,551,240
 7,327,470
 7,213,520
6,653,875
 7,089,346
 6,317,623

The secured parties do not have the right to sell or repledge these securities.

At SeptemberJune 30, 2017,2018, trading securities and receivables collateralized by securities with a fair value of $224$889 million were pledged as collateral at the Federal Home Loan Bank (FHLB) for the trading activities of BOK Financial Securities, Inc.activities. No trading securities were pledged as collateral as of December 31, 20162017 and no trading securities were pledged as collateral at SeptemberJune 30, 2016.

2017.

Temporarily Impaired Securities as of SeptemberJune 30, 20172018
(in thousands):
 Number of Securities Less Than 12 Months 12 Months or Longer Total Number of Securities Less Than 12 Months 12 Months or Longer Total
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
Investment:                            
Municipal and other tax-exempt 63
 $80,235
 $70
 $9,795
 $95
 $90,030
 $165
 84
 $98,325
 $484
 $5,007
 $187
 $103,332
 $671
U.S. government agency residential mortgage-backed securities – Other 1
 3,578
 62
 —
 —
 3,578
 62
U.S. government agency residential mortgage-backed securities 3
 6,979
 110
 2,809
 127
 9,788
 237
Other debt securities 28
 10,022
 566
 427
 24
 10,449
 590
 80
 36,131
 1,795
 3,324
 196
 39,455
 1,991
Total investment securities 92
 $93,835
 $698
 $10,222
 $119
 $104,057
 $817
 167
 $141,435
 $2,389
 $11,140
 $510
 $152,575
 $2,899

  Number of Securities Less Than 12 Months 12 Months or Longer Total
   
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 11
 576
 1
 4,785
 282
 5,361
 283
Residential mortgage-backed securities:    
  
  
  
 

 

U. S. government agencies:    
  
  
  
 

 

FNMA 81
 1,054,171
 10,288
 480,994
 10,269
 1,535,165
 20,557
FHLMC 42
 477,823
 3,546
 198,478
 4,137
 676,301
 7,683
GNMA 17
 166,565
 1,718
 124,037
 3,398
 290,602
 5,116
Other 1
 19,958
 42
 —
 —
 19,958
 42
Total U.S. government agencies 141

1,718,517

15,594

803,509

17,804

2,522,026

33,398
Private issue:  
  
  
  
  
 

 

Alt-A loans —
 —
 —
 —
 —
 —
 —
Jumbo-A loans —
 —
 —
 —
 —
 —
 —
Total private issue —
 —
 —
 —
 —
 —
 —
Total residential mortgage-backed securities 141
 1,718,517
 15,594
 803,509
 17,804
 2,522,026
 33,398
Commercial mortgage-backed securities guaranteed by U.S. government agencies 137
 1,154,911
 7,194
 559,984
 8,865
 1,714,895
 16,059
Other debt securities 2
 —
 —
 4,153
 247
 4,153
 247
Perpetual preferred stocks —
 —
 —
 —
 —
 —
 —
Equity securities and mutual funds 91
 3,672
 696
 1,428
 52
 5,100
 748
Total available for sale securities 383
 $2,878,675

$23,486

$1,373,859

$27,250

$4,252,534

$50,736




Temporarily Impaired Securities as of December 31, 2016
(In thousands)
  Number of Securities Less Than 12 Months 12 Months or Longer Total
   
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 Less Than 12 Months 12 Months or Longer Total
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
  
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
Available for sale:  
  
  
  
  
 

 

  
  
  
  
  
  
  
U.S. Treasury 1
 $999
 $1
 $—
 $—
 $999
 $1
 1
 $490
 $4
 $—
 $—
 $490
 $4
Municipal and other tax-exempt 24
 15,666
 22
 4,689
 378
 20,355
 400
 10
 4,784
 3
 495
 1
 5,279
 4
Residential mortgage-backed securities:  
  
  
  
  
 

 

    
  
  
  
 

 

U. S. government agencies:  
  
  
  
  
 

 

    
  
  
  
 

 

FNMA 91
 1,787,644
 30,238
 72,105
 1,677
 1,859,749
 31,915
 174
 2,049,432
 44,860
 710,962
 38,614
 2,760,394
 83,474
FHLMC 58
 964,017
 11,210
 18,307
 600
 982,324
 11,810
 93
 1,116,337
 26,663
 339,515
 15,678
 1,455,852
 42,341
GNMA 31
 548,637
 6,145
 25,796
 895
 574,433
 7,040
 33
 275,104
 5,611
 220,740
 9,996
 495,844
 15,607
Total U.S. government agencies 180
 3,300,298
 47,593
 116,208
 3,172
 3,416,506
 50,765
 300

3,440,873

77,134

1,271,217

64,288

4,712,090

141,422
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
Private issue1
 8
 5,409
 373
 —
 —
 5,409
 373
Total residential mortgage-backed securities 186
 3,308,229
 47,767
 129,716
 3,232
 3,437,945
 50,999
 308
 3,446,282
 77,507
 1,271,217
 64,288
 4,717,499
 141,795
Commercial mortgage-backed securities guaranteed by U.S. government agencies 171
 1,904,584
 22,987
 38,875
 302
 1,943,459
 23,289
 211
 1,675,839
 42,732
 554,819
 20,585
 2,230,658
 63,317
Other debt securities 2
 —
 —
 4,152
 248
 4,152
 248
 2
 —
 —
 20,434
 68
 20,434
 68
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
 532
 $5,127,395

$120,246

$1,846,965

$84,942

$6,974,360

$205,188
1 
Includes securities for which an unrealized loss remains in AOCI after an other-than-temporary credit loss has been recognized in income.




Temporarily Impaired Securities as of September 30, 2016December 31, 2017
(In thousands)
 Number of Securities Less Than 12 Months 12 Months or Longer Total Number of Securities Less Than 12 Months 12 Months or Longer Total
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
Investment:                            
Municipal and other tax-exempt 75
 $100,624
 $106
 $4,359
 $76
 $104,983
 $182
 100
 $145,960
 $643
 $5,833
 $161
 $151,793
 $804
U.S. government agency residential mortgage-backed securities – Other —
 —
 —
 —
 —
 —
 —
U.S. government agency residential mortgage-backed securities 1
 —
 —
 3,356
 95
 3,356
 95
Other debt securities 3
 444
 6
 856
 4
 1,300
 10
 49
 20,091
 1,238
 3,076
 129
 23,167
 1,367
Total investment securities 78
 $101,068
 $112
 $5,215
 $80
 $106,283
 $192
 150
 $166,051
 $1,881
 $12,265
 $385
 $178,316
 $2,266

 Number of Securities Less Than 12 Months 12 Months or Longer Total Number of Securities Less Than 12 Months 12 Months or Longer Total
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
Available for sale:  
  
  
  
  
 

 

  
  
  
  
  
 

 

U.S. Treasury —
 $—
 $—
 $—
 $—
 $—
 $—
 —
 $—
 $—
 $—
 $—
 $—
 $—
Municipal and other tax-exempt1
 20
 2,210
 3
 6,396
 450
 8,606
 453
Municipal and other tax-exempt 19
 12,765
 18
 4,802
 265
 17,567
 283
Residential mortgage-backed securities:  
  
  
  
  
 

 

  
  
  
  
  
 

 

U. S. government agencies:  
  
  
  
  
 

 

  
  
  
  
  
 

 

FNMA 14
 365,201
 1,712
 14,229
 52
 379,430
 1,764
 113
 1,203,041
 9,618
 824,029
 25,919
 2,027,070
 35,537
FHLMC 6
 122,713
 91
 20,306
 258
 143,019
 349
 69
 863,778
 7,297
 385,816
 10,813
 1,249,594
 18,110
GNMA 16
 230,043
 1,157
 212,705
 191
 442,748
 1,348
 27
 201,887
 1,452
 248,742
 7,201
 450,629
 8,653
Total U.S. government agencies 36
 717,957
 2,960
 247,240
 501
 965,197
 3,461
 209
 2,268,706
 18,367
 1,458,587
 43,933
 3,727,293
 62,300
Private issue1:
  
  
  
  
  
 

 

Alt-A loans 5
 8,231
 141
 7,773
 63
 16,004
 204
Jumbo-A loans 1
 6,583
 26
 —
 —
 6,583
 26
Total private issue 6
 14,814
 167
 7,773
 63
 22,587
 230
Private issue1
 8
 5,898
 391
 —
 —
 5,898
 391
Total residential mortgage-backed securities 42
 732,771
 3,127
 255,013
 564
 987,784
 3,691
 217
 2,274,604
 18,758
 1,458,587
 43,933
 3,733,191
 62,691
Commercial mortgage-backed securities guaranteed by U.S. government agencies 33
 372,805
 1,656
 60,851
 166
 433,656
 1,822
 185
 1,465,703
 11,824
 652,296
 14,063
 2,117,999
 25,887
Other debt securities 2
 —
 —
 4,151
 249
 4,151
 249
 2
 19,959
 41
 472
 28
 20,431
 69
Perpetual preferred stocks —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Equity securities and mutual funds 33
 86
 —
 886
 17
 972
 17
 111
 911
 7
 2,203
 79
 3,114
 86
Total available for sale securities 130
 $1,107,872
 $4,786
 $327,297
 $1,446
 $1,435,169
 $6,232
 534
 $3,773,942

$30,648

$2,118,360

$58,368

$5,892,302

$89,016
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.

Temporarily Impaired equity securities, including perpetual preferred stocks, are evaluated based on the near-term prospectsSecurities as of the investment in relation to the severity and duration of the impairment and management's ability and intent to hold the securities until fair value recovers. June 30, 2017
(In thousands)
  Number of Securities Less Than 12 Months 12 Months or Longer Total
   
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
Investment:              
Municipal and other tax-exempt 82
 $111,078
 $149
 $3,000
 $79
 $114,078
 $228
U.S. government agency residential mortgage-backed securities 1
 3,810
 61
 —
 —
 3,810
 61
Other debt securities 22
 8,384
 554
 —
 —
 8,384
 554
Total investment securities 105
 $123,272
 $764
 $3,000
 $79
 $126,272
 $843

  Number of Securities Less Than 12 Months 12 Months or Longer Total
   
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
Available for sale:  
  
  
  
  
 

 

U.S. Treasury 1
 $997
 $2
 $—
 $—
 $997
 $2
Municipal and other tax-exempt 13
 1,957
 1
 4,655
 412
 6,612
 413
Residential mortgage-backed securities:  
  
  
  
  
 

 

U. S. government agencies:  
  
  
  
  
 

 

FNMA 75
 1,381,687
 20,288
 87,371
 1,314
 1,469,058
 21,602
FHLMC 42
 731,853
 7,213
 16,388
 476
 748,241
 7,689
GNMA 21
 291,806
 3,766
 76,605
 1,596
 368,411
 5,362
Other 1
 19,957
 43
 —
 —
 19,957
 43
Total U.S. government agencies 139
 2,425,303
 31,310
 180,364
 3,386
 2,605,667
 34,696
Private issue1
 —
 —
 —
 —
 —
 —
 —
Total residential mortgage-backed securities 139
 2,425,303
 31,310
 180,364
 3,386
 2,605,667
 34,696
Commercial mortgage-backed securities guaranteed by U.S. government agencies 121
 1,388,406
 12,690
 78,828
 1,587
 1,467,234
 14,277
Other debt securities 2
 —
 —
 4,152
 248
 4,152
 248
Perpetual preferred stocks —
 —
 —
 —
 —
 —
 —
Equity securities and mutual funds 91
 1,668
 22
 887
 41
 2,555
 63
Total available for sale securities 367
 $3,818,331
 $44,025
 $268,886
 $5,674
 $4,087,217
 $49,699
1
Includes securities for which an unrealized loss remains in AOCI after an other-than-temporary credit loss has been recognized in income.

Based on this evaluationevaluations of impaired securities as of SeptemberJune 30, 2017,2018, the Company does not intend to sell any impaired available for sale debt 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.
 
  


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):
  September 30, 2017 December 31, 2016 September 30, 2016
  Fair Value Net Unrealized Gain (Loss) Fair Value Net Unrealized Gain (Loss) 
Fair
Value
 Net Unrealized Gain (Loss)
U.S. Treasury $—
 $—
 $—
 $—
 $222,409
 $(2,397)
U.S. government agency residential mortgage-backed securities 819,531
 1,671
 77,046
 (1,777) —
 —
Total $819,531
 $1,671
 $77,046
 $(1,777) $222,409
 $(2,397)
  June 30, 2018 December 31, 2017 June 30, 2017
  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 $482,227
 $(5,509) $755,054
 $(1,877) $445,169
 $1,247


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):

Sept. 30, 2017 Dec. 31, 2016 Sept. 30, 2016June 30, 2018 Dec. 31, 2017 June 30, 2017
Federal Reserve stock$36,676
 $36,498
 $36,283
$41,178
 $40,746
 $36,676
Federal Home Loan Bank stock310,622
 270,541
 296,907
306,543
 279,200
 274,113
Other244
 201
 201
—
 243
 244
Total$347,542

$307,240

$333,391
$347,721

$320,189

$311,033


(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. Deterioration in the credit rating of customer or other counterparties reduced the fair value of asset contracts. Deterioration of our credit rating could decrease the fair value of our derivative liabilities.

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.
 
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 otherOther operating revenue – brokerageBrokerage 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 hedgeto mitigate the market risk of holding trading securities. AsChanges in the fair value of September 30, 2017, derivative contracts under the internal risk management programs were primarilyinstruments used in managing interest rate sensitivity and as part of the economic hedgeshedge of the changechanges in the fair value of the mortgage servicing rights are included in Other operating revenue – Gain (loss) on derivatives, net in the Consolidated Statements of Earnings. Changes in the fair value of derivative instruments used to mitigate the market risk of holding trading securities are included in Other operating revenue – Brokerage and trading securities.revenue.

As discussed in Note 6, certain derivative contracts not designated as hedging instruments related to mortgage loan commitments and forward sales contracts are included in Residential mortgage loans held for sale on the Consolidated Balance Sheets. See Note 6 for additional discussion of notional, fair value and impact on earnings of these contracts.


The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in the balance sheet at SeptemberJune 30, 20172018 (in thousands):
 Assets Assets
 
Notional1
 Gross Fair Value Netting Adjustments Net Fair Value Before Cash Collateral Cash Collateral Fair Value Net of Cash Collateral 
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 $14,244,442
 $38,875
 $(9,547) $29,328
 $—
 $29,328
 $15,027,678
 $52,681
 $(17,382) $35,299
 $—
 $35,299
Interest rate swaps 1,368,210
 27,016
 —
 27,016
 (2,820) 24,196
 1,745,237
 43,040
 (2,193) 40,847
 (11,737) 29,110
Energy contracts 983,794
 45,368
 (35,166) 10,202
 (238) 9,964
 1,465,826
 200,640
 (69,991) 130,649
 —
 130,649
Agricultural contracts 60,745
 1,870
 (1,172) 698
 —
 698
 23,508
 1,164
 (181) 983
 (741) 242
Foreign exchange contracts 252,525
 249,788
 —
 249,788
 —
 249,788
 174,851
 170,556
 —
 170,556
 (290) 170,266
Equity option contracts 101,841
 4,871
 —
 4,871
 (920) 3,951
 93,943
 4,121
 —
 4,121
 (660) 3,461
Total customer risk management programs 17,011,557
 367,788
 (45,885) 321,903
 (3,978) 317,925
 18,531,043
 472,202
 (89,747) 382,455
 (13,428) 369,027
Internal risk management programs 11,941,260
 34,634
 —
 34,634
 —
 34,634
 9,672,639
 14,760
 (10,413) 4,347
 —
 4,347
Total derivative contracts $28,952,817
 $402,422
 $(45,885) $356,537
 $(3,978) $352,559
 $28,203,682
 $486,962
 $(100,160) $386,802
 $(13,428) $373,374
                        
 Liabilities Liabilities
 Notional¹ Gross Fair Value Netting Adjustments Net Fair Value Before Cash Collateral Cash Collateral Fair Value Net of Cash Collateral 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 $14,244,442
 $34,948
 $(9,547) $25,401
 $(374) $25,027
 $14,443,478
 $49,343
 $(17,382) $31,961
 $(31,808) $153
Interest rate swaps 1,368,230
 27,056
 —
 27,056
 (16,599) 10,457
 1,745,237
 43,043
 (2,193) 40,850
 (4,946) 35,904
Energy contracts 939,350
 42,744
 (35,166) 7,578
 —
 7,578
 1,434,980
 199,119
 (69,990) 129,129
 (112,481) 16,648
Agricultural contracts 60,746
 1,846
 (1,172) 674
 —
 674
 23,496
 1,142
 (181) 961
 —
 961
Foreign exchange contracts 249,269
 245,925
 —
 245,925
 (1,395) 244,530
 161,567
 157,174
 (1) 157,173
 (517) 156,656
Equity option contracts 101,841
 4,871
 —
 4,871
 —
 4,871
 93,943
 4,121
 —
 4,121
 —
 4,121
Total customer risk management programs 16,963,878
 357,390
 (45,885) 311,505
 (18,368) 293,137
 17,902,701
 453,942
 (89,747) 364,195
 (149,752) 214,443
Internal risk management programs 9,180,531
 43,190
 —
 43,190
 —
 43,190
 11,648,514
 30,826
 (10,413) 20,413
 —
 20,413
Total derivative contracts $26,144,409
 $400,580
 $(45,885) $354,695
 $(18,368) $336,327
 $29,551,215
 $484,768
 $(100,160) $384,608
 $(149,752) $234,856
1 
Notional amounts for commodity contracts are converted into dollar-equivalent amounts based on dollar prices at the inception of the contract.




The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in the balance sheet at December 31, 20162017 (in thousands):

 Assets Assets
 
Notional 1
 Gross Fair Value Netting Adjustments Net Fair Value Before Cash Collateral Cash Collateral Fair Value Net of Cash Collateral 
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
 $12,347,542
 $23,606
 $(18,096) $5,510
 $—
 $5,510
Interest rate swaps 1,403,408
 34,442
 —
 34,442
 (4,567) 29,875
 1,478,944
 28,278
 —
 28,278
 (4,964) 23,314
Energy contracts 835,566
 64,140
 (28,298) 35,842
 (71) 35,771
 1,190,067
 103,044
 (47,873) 55,171
 (196) 54,975
Agricultural contracts 53,209
 1,382
 (515) 867
 —
 867
 53,238
 1,576
 (960) 616
 —
 616
Foreign exchange contracts 580,886
 494,349
 —
 494,349
 (5,183) 489,166
 132,397
 129,551
 —
 129,551
 (448) 129,103
Equity option contracts 100,924
 4,357
 —
 4,357
 (730) 3,627
 99,633
 5,503
 —
 5,503
 (920) 4,583
Total customer risk management programs 19,923,145
 779,365
 (89,368) 689,997
 (10,551) 679,446
 15,301,821
 291,558
 (66,929) 224,629
 (6,528) 218,101
Internal risk management programs 2,514,169
 10,426
 —
 10,426
 —
 10,426
 4,736,701
 9,494
 (7,093) 2,401
 —
 2,401
Total derivative contracts $22,437,314
 $789,791
 $(89,368) $700,423
 $(10,551) $689,872
 $20,038,522
 $301,052
 $(74,022) $227,030
 $(6,528) $220,502
                        
 Liabilities Liabilities
 
Notional 1
 Gross Fair Value Netting Adjustments Net Fair Value Before Cash Collateral Cash Collateral Fair Value Net of Cash Collateral 
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
 $11,537,742
 $20,367
 $(18,096) $2,271
 $(704) $1,567
Interest rate swaps 1,403,408
 34,442
 —
 34,442
 (11,977) 22,465
 1,478,944
 28,298
 —
 28,298
 (12,896) 15,402
Energy contracts 820,365
 64,306
 (28,298) 36,008
 (31,534) 4,474
 1,166,924
 101,603
 (47,873) 53,730
 (42,767) 10,963
Agricultural contracts 53,216
 1,365
 (515) 850
 (769) 81
 48,552
 1,551
 (960) 591
 —
 591
Foreign exchange contracts 580,712
 494,695
 —
 494,695
 (3,630) 491,065
 126,251
 123,321
 —
 123,321
 (53) 123,268
Equity option contracts 100,924
 4,357
 —
 4,357
 —
 4,357
 99,633
 5,503
 —
 5,503
 —
 5,503
Total customer risk management programs 19,596,157
 776,093
 (89,368) 686,725
 (47,910) 638,815
 14,458,046
 280,643
 (66,929) 213,714
 (56,420) 157,294
Internal risk management programs 2,582,202
 25,716
 —
 25,716
 —
 25,716
 5,728,421
 21,762
 (7,093) 14,669
 —
 14,669
Total derivative contracts $22,178,359
 $801,809
 $(89,368) $712,441
 $(47,910) $664,531
 $20,186,467
 $302,405
 $(74,022) $228,383
 $(56,420) $171,963
1 
Notional amounts for commodity contracts are converted into dollar-equivalent amounts based on dollar prices at the inception of the contract.






The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in the balance sheet at SeptemberJune 30, 20162017 (in thousands):
 Assets Assets
 
Notional1
 Gross Fair Value Netting Adjustments Net Fair Value Before Cash Collateral Cash Collateral Fair Value Net of Cash Collateral 
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 $20,078,974
 $90,999
 $(38,678) $52,321
 $—
 $52,321
 $16,174,687
 $57,948
 $(29,034) $28,914
 $—
 $28,914
Interest rate swaps 1,323,045
 49,279
 —
 49,279
 (794) 48,485
 1,450,193
 29,932
 —
 29,932
 (2,206) 27,726
Energy contracts 729,202
 41,775
 (28,464) 13,311
 (288) 13,023
 891,480
 56,824
 (20,546) 36,278
 (21,267) 15,011
Agricultural contracts 53,002
 3,950
 (1,571) 2,379
 (1,076) 1,303
 45,250
 3,541
 (1,027) 2,514
 —
 2,514
Foreign exchange contracts 550,828
 536,264
 —
 536,264
 (7,577) 528,687
 169,529
 162,429
 —
 162,429
 (7) 162,422
Equity option contracts 103,464
 4,654
 —
 4,654
 (730) 3,924
 100,159
 4,437
 —
 4,437
 (920) 3,517
Total customer risk management programs 22,838,515
 726,921
 (68,713) 658,208
 (10,465) 647,743
 18,831,298
 315,111
 (50,607) 264,504
 (24,400) 240,104
Internal risk management programs 2,298,038
 7,335
 —
 7,335
 —
 7,335
 10,680,498
 40,185
 —
 40,185
 —
 40,185
Total derivative contracts $25,136,553
 $734,256
 $(68,713) $665,543
 $(10,465) $655,078
 $29,511,796
 $355,296
 $(50,607) $304,689
 $(24,400) $280,289
                        
 Liabilities Liabilities
 
Notional1
 Gross Fair Value Netting Adjustments Net Fair Value Before Cash Collateral Cash Collateral Fair Value Net of Cash Collateral 
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 $19,776,883
 $86,812
 $(38,678) $48,134
 $(39,042) $9,092
 $16,174,687
 $53,829
 $(29,034) $24,795
 $—
 $24,795
Interest rate swaps 1,323,045
 49,518
 —
 49,518
 (34,457) 15,061
 1,450,193
 29,982
 —
 29,982
 (15,396) 14,586
Energy contracts 695,835
 40,888
 (28,464) 12,424
 (3,857) 8,567
 874,625
 53,895
 (20,546) 33,349
 —
 33,349
Agricultural contracts 52,997
 3,943
 (1,571) 2,372
 —
 2,372
 45,262
 3,538
 (1,027) 2,511
 (2,511) —
Foreign exchange contracts 550,943
 536,660
 —
 536,660
 (5,396) 531,264
 169,553
 162,276
 —
 162,276
 (3,188) 159,088
Equity option contracts 103,464
 4,654
 —
 4,654
 —
 4,654
 100,159
 4,437
 —
 4,437
 ���
 4,437
Total customer risk management programs 22,503,167
 722,475
 (68,713) 653,762
 (82,752) 571,010
 18,814,479
 307,957
 (50,607) 257,350
 (21,095) 236,255
Internal risk management programs 1,485,691
 2,977
 —
 2,977
 —
 2,977
 8,310,950
 49,564
 —
 49,564
 —
 49,564
Total derivative contracts $23,988,858
 $725,452
 $(68,713) $656,739
 $(82,752) $573,987
 $27,125,429
 $357,521
 $(50,607) $306,914
 $(21,095) $285,819
1 
Notional amounts for commodity contracts are converted into dollar-equivalent amounts based on dollar prices at the inception of the contract.








The following summarizes the pre-tax net gains (losses) on derivative instruments and where they are recorded in the income statement (in thousands):
 Three Months Ended Three Months Ended
 September 30, 2017 September 30, 2016 June 30, 2018 June 30, 2017
 
Brokerage
and Trading Revenue
 Gain (Loss) on Derivatives, Net 
Brokerage
and Trading
Revenue
 Gain (Loss)on Derivatives, Net 
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 $9,181
 $—
 $11,584
 $—
 $7,586
 $—
 $9,205
 $—
Interest rate swaps 767
 —
 710
 —
 683
 —
 665
 —
Energy contracts 378
 —
 1,222
 —
 1,416
 —
 1,666
 —
Agricultural contracts 38
 —
 25
 —
 15
 —
 11
 —
Foreign exchange contracts 164
 —
 218
 —
 96
 —
 90
 —
Equity option contracts —
 —
 —
 —
 —
 —
 —
 —
Total customer risk management programs 10,528
 —
 13,759
 —
 9,796
 —
 11,637
 —
Internal risk management programs (711) 1,033
 (1,608) 2,226
 (981) (3,057) 6,485
 3,241
Total derivative contracts $9,817
 $1,033
 $12,151
 $2,226
 $8,815
 $(3,057) $18,122
 $3,241
        
 Nine Months Ended Six Months Ended
 September 30, 2017 September 30, 2016 June 30, 2018 June 30, 2017
 
Brokerage
and Trading Revenue
 Gain (Loss) on Derivatives, Net 
Brokerage
and Trading
Revenue
 Gain (Loss) on Derivatives, Net 
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 $26,413
 $—
 $28,886
 $—
 $14,405
 $—
 $17,232
 $—
Interest rate swaps 1,891
 —
 1,758
 —
 1,439
 —
 1,124
 —
Energy contracts 4,917
 —
 4,667
 —
 4,556
 —
 4,539
 —
Agricultural contracts 58
 —
 86
 —
 30
 —
 20
 —
Foreign exchange contracts 524
 —
 730
 —
 272
 —
 360
 —
Equity option contracts —
 —
 —
 —
 —
 —
 —
 —
Total customer risk management programs 33,803
 —
 36,127
 —
 20,702
 —
 23,275
 —
Internal risk management programs 5,307
 3,824
 (1,617) 20,130
 (2,864) (8,742) 6,018
 2,791
Total derivative contracts $39,110
 $3,824
 $34,510
 $20,130
 $17,838
 $(8,742) $29,293
 $2,791



(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. 

Occasionally, loans, other than residential mortgage loans, may be held for sale in order to manage credit concentration. These loans are carried at the lower of cost or fair value with gains or losses recognized in other gains (losses), net in the Statements of Earnings.

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. Amortization does not anticipate loan prepayments. Net unamortized fees are recognized in full at time of payoff.

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. 



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

 September 30, 2017 December 31, 2016 June 30, 2018 December 31, 2017
 
Fixed
Rate
 
Variable
Rate
 Non-accrual Total 
Fixed
Rate
 
Variable
Rate
 Non-accrual Total 
Fixed
Rate
 
Variable
Rate
 Non-accrual Total 
Fixed
Rate
 
Variable
Rate
 Non-accrual Total
Commercial $2,225,470
 $8,393,564
 $176,900
 $10,795,934
 $2,327,085
 $7,884,786
 $178,953
 $10,390,824
 $2,206,735
 $9,021,326
 $120,978
 $11,349,039
 $2,217,432
 $8,379,240
 $137,303
 $10,733,975
Commercial real estate 564,681
 2,950,486
 2,975
 3,518,142
 624,187
 3,179,338
 5,521
 3,809,046
 583,782
 3,126,442
 1,996
 3,712,220
 548,692
 2,928,440
 2,855
 3,479,987
Residential mortgage 1,589,013
 311,231
 45,506
 1,945,750
 1,647,357
 256,255
 46,220
 1,949,832
 1,567,216
 332,691
 42,343
 1,942,250
 1,608,655
 317,584
 47,447
 1,973,686
Personal 153,750
 793,003
 255
 947,008
 154,971
 684,697
 290
 839,958
 168,171
 831,676
 340
 1,000,187
 154,517
 810,990
 269
 965,776
Total $4,532,914
 $12,448,284
 $225,636
 $17,206,834
 $4,753,600
 $12,005,076
 $230,984
 $16,989,660
 $4,525,904
 $13,312,135
 $165,657
 $18,003,696
 $4,529,296
 $12,436,254
 $187,874
 $17,153,424
Accruing loans past due (90 days)1
  
  
  
 $253
  
  
  
 $5
  
  
  
 $879
  
  
  
 $633
 September 30, 2016 June 30, 2017
 
Fixed
Rate
 
Variable
Rate
 Non-accrual Total 
Fixed
Rate
 
Variable
Rate
 Non-accrual Total
Commercial $1,991,423
 $7,952,276
 $176,464
 $10,120,163
 $2,198,066
 $8,242,732
 $197,157
 $10,637,955
Commercial real estate 565,429
 3,220,819
 7,350
 3,793,598
 594,542
 3,090,275
 3,775
 3,688,592
Residential mortgage 1,572,288
 248,053
 52,452
 1,872,793
 1,597,587
 297,376
 44,235
 1,939,198
Personal 104,408
 573,138
 686
 678,232
 150,728
 766,900
 272
 917,900
Total $4,233,548
 $11,994,286
 $236,952
 $16,464,786
 $4,540,923
 $12,397,283
 $245,439
 $17,183,645
Accruing loans past due (90 days)1
  
  
  
 $3,839
  
  
  
 $1,414
1 
Excludes residential mortgage loans guaranteed by agencies of the U.S. government

At SeptemberJune 30, 20172018, $5.9$6.0 billion or 3433 percent of our total loan portfolio is to businesses and individuals attributed to the Texas market and $3.4$3.5 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 ongoing 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 ongoing 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 SeptemberJune 30, 20172018, commercial loans attributed to the Texas market totaled $3.7$3.8 billion or 3433 percent of the commercial loan portfolio segment and commercial loans attributed to the Oklahoma market totaled $2.1$2.2 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 $2.93.1 billion or 17 percent of total loans at SeptemberJune 30, 20172018, including $2.32.6 billion of outstanding loans to energy producers. Approximately 5756 percent of committed production loans are secured by properties primarily producing oil and 4344 percent are secured by properties producing natural gas. The services loan class totaled $3.02.9 billion or 1716 percent of total loans at SeptemberJune 30, 20172018. Approximately $1.51.4 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, educational services, consumer services, financial services and loans to entities providing services for real estate and construction and commercial services.construction. The healthcare loan class totaled $2.2$2.4 billion or 13 percent of total loans at SeptemberJune 30, 2017.2018. 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.



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 SeptemberJune 30, 20172018, 3533 percent of commercial real estate loans are secured by properties primarily located in the Dallas and Houston areas of Texas. An additional 1312 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 SeptemberJune 30, 20172018, residential mortgage loans included $187170 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 $744704 million at SeptemberJune 30, 20172018. Approximately 6462 percent of the home equity loan portfolio is comprised of first lien loans and 3638 percent of the home equity portfolio is comprised of junior lien loans. Junior lien loans are distributed 4745 percent to amortizing term loans and 5355 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 SeptemberJune 30, 20172018, outstanding commitments totaled $9.7$10.3 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.



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 SeptemberJune 30, 20172018, outstanding standby letters of credit totaled $666660 million. Commercial letters of credit are used to facilitate customer trade transactions with the drafts being drawn when the underlying transaction is consummated. At September 30, 2017, outstanding commercial letters of credit totaled $2.3 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 ongoing quarterly evaluation of the probable estimated losses inherent in the portfolio, including probable losses on both outstanding loans and unused commitments.

The allowance for loan losses consists of specific allowances attributed to impaired loans that have not yet been charged down to amounts we expect to recover, general allowances for unimpaired loans based on estimated loss rates by loan class and nonspecific allowances based on general economic conditions, risk concentration and related factors. There have been no material changes in the approach or techniques utilized in developing the allowance for loan losses and the accrual for off-balance sheet credit losses for the three and ninesix months ended SeptemberJune 30, 20172018.

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.



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 SeptemberJune 30, 20172018 is summarized as follows (in thousands):
 Commercial Commercial Real Estate Residential Mortgage Personal Nonspecific Allowance Total Commercial Commercial Real Estate Residential Mortgage Personal Nonspecific Allowance Total
Allowance for loan losses:                        
Beginning balance $137,742
 $58,580
 $18,259
 $8,106
 $27,374
 $250,061
 $120,083
 $57,070
 $18,431
 $8,408
 $19,975
 $223,967
Provision for loan losses 2,474
 (2,914) 168
 598
 704
 1,030
 7,116
 (1,409) (257) 755
 (4,503) 1,702
Loans charged off (4,429) —
 (168) (1,228) —
 (5,825) (13,775) —
 (135) (1,195) —
 (15,105)
Recoveries 1,014
 739
 134
 550
 —
 2,437
 298
 3,097
 505
 678
 —
 4,578
Ending balance $136,801
 $56,405
 $18,393
 $8,026
 $28,078
 $247,703
 $113,722
 $58,758
 $18,544
 $8,646
 $15,472
 $215,142
Allowance for off-balance sheet credit losses:  
  
  
  
  
  
  
  
  
  
  
  
Beginning balance $6,301
 $84
 $38
 $8
 $—
 $6,431
 $4,027
 $44
 $62
 $2
 $—
 $4,135
Provision for off-balance sheet credit losses (976) (49) 1
 (6) —
 (1,030) (1,666) (27) (9) —
 —
 (1,702)
Ending balance $5,325
 $35
 $39
 $2
 $—
 $5,401
 $2,361
 $17
 $53
 $2
 $—
 $2,433
                        
Total provision for credit losses $1,498
 $(2,963) $169
 $592
 $704
 $—
 $5,450
 $(1,436) $(266) $755
 $(4,503) $—



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 ninesix months ended SeptemberJune 30, 20172018 is summarized as follows (in thousands):
 Commercial Commercial Real Estate Residential Mortgage Personal Nonspecific Allowance Total 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
 $124,269
 $56,621
 $18,451
 $9,124
 $22,217
 $230,682
Provision for loan losses 665
 4,050
 82
 1,168
 (122) 5,843
 4,005
 (1,143) (419) 603
 (6,745) (3,699)
Loans charged off (6,556) (76) (444) (3,774) —
 (10,850) (15,338) —
 (235) (2,422) —
 (17,995)
Recoveries 2,479
 1,682
 531
 1,859
 —
 6,551
 786
 3,280
 747
 1,341
 —
 6,154
Ending balance $136,801
 $56,405
 $18,393
 $8,026
 $28,078
 $247,703
 $113,722
 $58,758
 $18,544
 $8,646
 $15,472
 $215,142
Allowance for off-balance sheet credit losses:  
  
  
  
  
  
  
  
  
  
  
  
Beginning balance $11,063
 $123
 $50
 $8
 $—
 $11,244
 $3,644
 $45
 $43
 $2
 $—
 $3,734
Provision for off-balance sheet credit losses (5,738) (88) (11) (6) —
 (5,843) (1,283) (28) 10
 —
 —
 (1,301)
Ending balance $5,325
 $35
 $39
 $2
 $—
 $5,401
 $2,361
 $17
 $53
 $2
 $—
 $2,433
                        
Total provision for credit losses $(5,073) $3,962
 $71
 $1,162
 $(122) $—
 $2,722
 $(1,171) $(409) $603
 $(6,745) $(5,000)

The activity in the allowance for loan losses and the allowance for off-balance sheet credit losses related to loan commitments and standby letters of credit for the three months ended SeptemberJune 30, 20162017 is summarized as follows (in thousands):
 Commercial Commercial Real Estate Residential Mortgage Personal Nonspecific Allowance Total Commercial Commercial Real Estate Residential Mortgage Personal Nonspecific Allowance Total
Allowance for loan losses:                        
Beginning balance $145,139
 $46,745
 $18,690
 $6,001
 $26,684
 $243,259
 $137,616
 $58,343
 $18,177
 $7,247
 $27,327
 $248,710
Provision for loan losses 2,420
 2,551
 (466) 1,900
 1,502
 7,907
 1,546
 105
 (47) 1,358
 47
 3,009
Loans charged off (6,266) —
 (285) (1,550) —
 (8,101) (1,703) (76) (40) (1,053) —
 (2,872)
Recoveries 177
 521
 650
 690
 —
 2,038
 283
 208
 169
 554
 —
 1,214
Ending balance $141,470
 $49,817
 $18,589
 $7,041
 $28,186
 $245,103
 $137,742
 $58,580
 $18,259
 $8,106
 $27,374
 $250,061
Allowance for off-balance sheet credit losses:  
  
  
  
  
  
  
  
  
  
  
  
Beginning balance $8,752
 $203
 $62
 $28
 $—
 $9,045
 $9,288
 $106
 $40
 $6
 $—
 $9,440
Provision for off-balance sheet credit losses 2,170
 (53) (7) (17) —
 2,093
 (2,987) (22) (2) 2
 —
 (3,009)
Ending balance $10,922
 $150
 $55
 $11
 $—
 $11,138
 $6,301
 $84
 $38
 $8
 $—
 $6,431
                        
Total provision for credit losses $4,590
 $2,498
 $(473) $1,883
 $1,502
 $10,000
 $(1,441) $83
 $(49) $1,360
 $47
 $—



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 ninesix months ended SeptemberJune 30, 20162017 is summarized as follows (in thousands):

 Commercial Commercial Real Estate Residential Mortgage Personal Nonspecific Allowance Total 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
 $140,213
 $50,749
 $18,224
 $8,773
 $28,200
 $246,159
Provision for loan losses 45,995
 7,538
 (829) 4,809
 (1,940) 55,573
 (1,809) 6,964
 (86) 570
 (826) 4,813
Loans charged off (35,747) —
 (1,104) (4,086) —
 (40,937) (2,127) (76) (276) (2,546) —
 (5,025)
Recoveries 888
 888
 1,013
 2,154
 —
 4,943
 1,465
 943
 397
 1,309
 —
 4,114
Ending balance $141,470
 $49,817
 $18,589
 $7,041
 $28,186
 $245,103
 $137,742
 $58,580
 $18,259
 $8,106
 $27,374
 $250,061
Allowance for off-balance sheet credit losses:  
  
  
  
  
  
  
  
  
  
  
  
Beginning balance $1,506
 $153
 $30
 $22
 $—
 $1,711
 $11,063
 $123
 $50
 $8
 $—
 $11,244
Provision for off-balance sheet credit losses 9,416
 (3) 25
 (11) —
 9,427
 (4,762) (39) (12) —
 —
 (4,813)
Ending balance $10,922
 $150
 $55
 $11
 $—
 $11,138
 $6,301
 $84
 $38
 $8
 $—
 $6,431
                        
Total provision for credit losses $55,411
 $7,535
 $(804) $4,798
 $(1,940) $65,000
 $(6,571) $6,925
 $(98) $570
 $(826) $—

The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment measurement method at SeptemberJune 30, 20172018 is as follows (in thousands):
 
Collectively Measured
for Impairment
 
Individually Measured
for Impairment
 Total 
Collectively Measured
for Impairment
 
Individually Measured
for Impairment
 Total
 Recorded Investment Related Allowance Recorded Investment Related Allowance Recorded Investment 
Related
Allowance
 Recorded Investment Related Allowance Recorded Investment Related Allowance Recorded Investment 
Related
Allowance
Commercial $10,619,034
 $123,517
 $176,900
 $13,284
 $10,795,934
 $136,801
 $11,228,061
 $98,522
 $120,978
 $15,200
 $11,349,039
 $113,722
Commercial real estate 3,515,167
 56,405
 2,975
 —
 3,518,142
 56,405
 3,710,224
 58,758
 1,996
 —
 3,712,220
 58,758
Residential mortgage 1,900,244
 18,393
 45,506
 —
 1,945,750
 18,393
 1,899,907
 18,544
 42,343
 —
 1,942,250
 18,544
Personal 946,753
 8,026
 255
 —
 947,008
 8,026
 999,847
 8,646
 340
 —
 1,000,187
 8,646
Total 16,981,198
 206,341
 225,636
 13,284
 17,206,834
 219,625
 17,838,039
 184,470
 165,657
 15,200
 18,003,696
 199,670
                        
Nonspecific allowance —
 —
 —
 —
 —
 28,078
 —
 —
 —
 —
 —
 15,472
                        
Total $16,981,198
 $206,341
 $225,636
 $13,284
 $17,206,834
 $247,703
 $17,838,039
 $184,470
 $165,657
 $15,200
 $18,003,696
 $215,142

The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment measurement method at December 31, 20162017 is as follows (in thousands):
 
Collectively Measured
for Impairment
 
Individually Measured
for Impairment
 Total 
Collectively Measured
for Impairment
 
Individually Measured
for Impairment
 Total
 Recorded Investment Related Allowance Recorded Investment Related Allowance Recorded Investment 
Related
Allowance
 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
 $10,596,672
 $115,438
 $137,303
 $8,831
 $10,733,975
 $124,269
Commercial real estate 3,803,525
 50,749
 5,521
 —
 3,809,046
 50,749
 3,477,132
 56,621
 2,855
 —
 3,479,987
 56,621
Residential mortgage 1,903,612
 18,178
 46,220
 46
 1,949,832
 18,224
 1,926,239
 18,451
 47,447
 —
 1,973,686
 18,451
Personal 839,668
 8,773
 290
 —
 839,958
 8,773
 965,507
 9,124
 269
 —
 965,776
 9,124
Total 16,758,676
 217,116
 230,984
 843
 16,989,660
 217,959
 16,965,550
 199,634
 187,874
 8,831
 17,153,424
 208,465
                        
Nonspecific allowance —
 —
 —
 —
 —
 28,200
 —
 —
 —
 —
 —
 22,217
                        
Total $16,758,676
 $217,116
 $230,984
 $843
 $16,989,660
 $246,159
 $16,965,550
 $199,634
 $187,874
 $8,831
 $17,153,424
 $230,682


The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment measurement method at SeptemberJune 30, 20162017 is as follows (in thousands):
 
Collectively Measured
for Impairment
 
Individually Measured
for Impairment
 Total 
Collectively Measured
for Impairment
 
Individually Measured
for Impairment
 Total
 Recorded Investment Related Allowance Recorded Investment Related Allowance Recorded Investment 
Related
Allowance
 Recorded Investment Related Allowance Recorded Investment Related Allowance Recorded Investment 
Related
Allowance
Commercial $9,943,699
 $134,968
 $176,464
 $6,502
 $10,120,163
 $141,470
 $10,440,798
 $128,049
 $197,157
 $9,693
 $10,637,955
 $137,742
Commercial real estate 3,786,248
 49,817
 7,350
 —
 3,793,598
 49,817
 3,684,817
 58,580
 3,775
 —
 3,688,592
 58,580
Residential mortgage 1,820,341
 18,527
 52,452
 62
 1,872,793
 18,589
 1,894,963
 18,259
 44,235
 —
 1,939,198
 18,259
Personal 677,546
 7,041
 686
 —
 678,232
 7,041
 917,628
 8,106
 272
 —
 917,900
 8,106
Total 16,227,834
 210,353
 236,952
 6,564
 16,464,786
 216,917
 16,938,206
 212,994
 245,439
 9,693
 17,183,645
 222,687
                        
Nonspecific allowance —
 —
 —
 —
 —
 28,186
 —
 —
 —
 —
 —
 27,374
                        
Total $16,227,834
 $210,353
 $236,952
 $6,564
 $16,464,786
 $245,103
 $16,938,206
 $212,994
 $245,439
 $9,693
 $17,183,645
 $250,061
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 SeptemberJune 30, 20172018 is as follows (in thousands):
 Internally Risk Graded Non-Graded Total Internally Risk Graded Non-Graded Total
 Recorded Investment Related Allowance Recorded Investment Related Allowance Recorded Investment 
Related
Allowance
 Recorded Investment Related Allowance Recorded Investment Related Allowance Recorded Investment 
Related
Allowance
Commercial $10,750,657
 $135,846
 $45,277
 $955
 $10,795,934
 $136,801
 $11,323,917
 $112,842
 $25,122
 $880
 $11,349,039
 $113,722
Commercial real estate 3,518,142
 56,405
 —
 —
 3,518,142
 56,405
 3,712,220
 58,758
 —
 —
 3,712,220
 58,758
Residential mortgage 226,306
 3,068
 1,719,444
 15,325
 1,945,750
 18,393
 250,081
 3,082
 1,692,169
 15,462
 1,942,250
 18,544
Personal 856,030
 6,043
 90,978
 1,983
 947,008
 8,026
 917,620
 6,621
 82,567
 2,025
 1,000,187
 8,646
Total 15,351,135
 201,362
 1,855,699
 18,263
 17,206,834
 219,625
 16,203,838
 181,303
 1,799,858
 18,367
 18,003,696
 199,670
                        
Nonspecific allowance —
 —
 —
 —
 —
 28,078
 —
 —
 —
 —
 —
 15,472
                        
Total $15,351,135
 $201,362
 $1,855,699
 $18,263
 $17,206,834
 $247,703
 $16,203,838
 $181,303
 $1,799,858
 $18,367
 $18,003,696
 $215,142
 


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, 20162017 is as follows (in thousands):
 Internally Risk Graded Non-Graded Total Internally Risk Graded Non-Graded Total
 Recorded Investment Related Allowance Recorded Investment Related Allowance Recorded Investment 
Related
Allowance
 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
 $10,706,035
 $123,383
 $27,940
 $886
 $10,733,975
 $124,269
Commercial real estate 3,809,046
 50,749
 —
 —
 3,809,046
 50,749
 3,479,987
 56,621
 —
 —
 3,479,987
 56,621
Residential mortgage 243,703
 2,893
 1,706,129
 15,331
 1,949,832
 18,224
 234,477
 2,947
 1,739,209
 15,504
 1,973,686
 18,451
Personal 744,602
 5,035
 95,356
 3,738
 839,958
 8,773
 877,390
 6,461
 88,386
 2,663
 965,776
 9,124
Total 15,158,076
 197,970
 1,831,584
 19,989
 16,989,660
 217,959
 15,297,889
 189,412
 1,855,535
 19,053
 17,153,424
 208,465
                        
Nonspecific allowance —
 —
 —
 —
 —
 28,200
 —
 —
 —
 —
 —
 22,217
                        
Total $15,158,076
 $197,970
 $1,831,584
 $19,989
 $16,989,660
 $246,159
 $15,297,889
 $189,412
 $1,855,535
 $19,053
 $17,153,424
 $230,682

The allowance for loan losses and recorded investment of the related loans by portfolio segment for risk graded and non-risk graded loans at SeptemberJune 30, 20162017 is as follows (in thousands):
 Internally Risk Graded Non-Graded Total Internally Risk Graded Non-Graded Total
 Recorded Investment Related Allowance Recorded Investment Related Allowance Recorded Investment 
Related
Allowance
 Recorded Investment Related Allowance Recorded Investment Related Allowance Recorded Investment 
Related
Allowance
Commercial $10,093,884
 $140,552
 $26,279
 $918
 $10,120,163
 $141,470
 $10,612,477
 $136,819
 $25,478
 $923
 $10,637,955
 $137,742
Commercial real estate 3,793,598
 49,817
 —
 —
 3,793,598
 49,817
 3,688,592
 58,580
 —
 —
 3,688,592
 58,580
Residential mortgage 206,430
 3,028
 1,666,363
 15,561
 1,872,793
 18,589
 216,007
 2,976
 1,723,191
 15,283
 1,939,198
 18,259
Personal 586,869
 4,182
 91,363
 2,859
 678,232
 7,041
 824,318
 5,742
 93,582
 2,364
 917,900
 8,106
Total 14,680,781
 197,579
 1,784,005
 19,338
 16,464,786
 216,917
 15,341,394
 204,117
 1,842,251
 18,570
 17,183,645
 222,687
                        
Nonspecific allowance —
 —
 —
 —
 —
 28,186
 —
 —
 —
 —
 —
 27,374
                        
Total $14,680,781
 $197,579
 $1,784,005
 $19,338
 $16,464,786
 $245,103
 $15,341,394
 $204,117
 $1,842,251
 $18,570
 $17,183,645
 $250,061

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.



The following table summarizes the Company’s loan portfolio at SeptemberJune 30, 20172018 by the risk grade categories (in thousands): 
 Internally Risk Graded Non-Graded   Internally Risk Graded Non-Graded  
 Performing         Performing        
 Pass Other Loans Especially Mentioned Accruing Substandard Nonaccrual Performing Nonaccrual Total Pass Other Loans Especially Mentioned Accruing Substandard Nonaccrual Performing Nonaccrual Total
Commercial:                            
Energy $2,436,465
 $114,065
 $206,768
 $110,683
 $—
 $—
 $2,867,981
 $2,936,184
 $52,350
 $93,088
 $65,597
 $—
 $—
 $3,147,219
Services 2,932,577
 26,372
 7,390
 1,174
 —
 —
 2,967,513
 2,903,168
 30,564
 6,390
 4,377
 —
 —
 2,944,499
Wholesale/retail 1,637,698
 9,021
 9,486
 1,893
 —
 —
 1,658,098
 1,679,834
 900
 4,725
 14,095
 —
 —
 1,699,554
Manufacturing 486,383
 7,181
 16,823
 9,059
 —
 —
 519,446
 620,687
 7,559
 16,579
 2,991
 —
 —
 647,816
Healthcare 2,150,099
 31,855
 33,051
 24,446
 —
 —
 2,239,451
 2,319,035
 2,030
 16,532
 16,125
 —
 —
 2,353,722
Other commercial and industrial 458,796
 52
 9,820
 29,500
 45,132
 145
 543,445
 513,027
 400
 —
 17,680
 25,009
 113
 556,229
Total commercial 10,102,018
 188,546
 283,338
 176,755
 45,132
 145
 10,795,934
 10,971,935
 93,803
 137,314
 120,865
 25,009
 113
 11,349,039
                            
Commercial real estate:  
    
  
  
  
  
  
    
  
  
  
  
Residential construction and land development 110,178
 —
 —
 1,924
 —
 —
 112,102
 116,821
 1,828
 —
 350
 —
 —
 118,999
Retail 724,887
 689
 —
 289
 —
 —
 725,865
 745,691
 21,173
 92
 1,068
 —
 —
 768,024
Office 788,539
 8,275
 —
 275
 —
 —
 797,089
 812,848
 7,004
 —
 275
 —
 —
 820,127
Multifamily 998,125
 —
 884
 —
 —
 —
 999,009
 1,056,953
 —
 31
 —
 —
 —
 1,056,984
Industrial 591,080
 —
 —
 —
 —
 —
 591,080
 653,384
 —
 —
 —
 —
 —
 653,384
Other commercial real estate 292,509
 —
 1
 487
 —
 —
 292,997
 294,399
 —
 —
 303
 —
 —
 294,702
Total commercial real estate 3,505,318
 8,964
 885
 2,975
 —
 —
 3,518,142
 3,680,096
 30,005
 123
 1,996
 —
 —
 3,712,220
                            
Residential mortgage:  
    
  
  
  
  
  
    
  
  
  
  
Permanent mortgage 224,235
 393
 462
 1,216
 764,252
 23,407
 1,013,965
 246,470
 —
 2,555
 1,056
 796,282
 22,049
 1,068,412
Permanent mortgages guaranteed by U.S. government agencies —
 —
 —
 —
 178,479
 8,891
 187,370
 —
 —
 —
 —
 162,086
 7,567
 169,653
Home equity —
 —
 —
 —
 732,423
 11,992
 744,415
 —
 —
 —
 —
 692,514
 11,671
 704,185
Total residential mortgage 224,235
 393
 462
 1,216
 1,675,154
 44,290
 1,945,750
 246,470
 —
 2,555
 1,056
 1,650,882
 41,287
 1,942,250
                            
Personal 855,857
 49
 38
 86
 90,809
 169
 947,008
 917,459
 48
 34
 79
 82,306
 261
 1,000,187
                            
Total $14,687,428
 $197,952
 $284,723
 $181,032
 $1,811,095
 $44,604
 $17,206,834
 $15,815,960
 $123,856
 $140,026
 $123,996
 $1,758,197
��$41,661
 $18,003,696



The following table summarizes the Company’s loan portfolio at December 31, 20162017 by the risk grade categories (in thousands): 
 Internally Risk Graded Non-Graded   Internally Risk Graded Non-Graded  
 Performing         Performing        
�� Pass Other Loans Especially Mentioned Accruing Substandard Nonaccrual Performing Nonaccrual Total
 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
 $2,632,986
 $60,288
 $144,598
 $92,284
 $—
 $—
 $2,930,156
Services 3,052,002
 10,960
 37,855
 8,173
 —
 —
 3,108,990
 2,943,869
 13,927
 26,533
 2,620
 —
 —
 2,986,949
Wholesale/retail 1,535,463
 16,886
 13,062
 11,407
 —
 —
 1,576,818
 1,443,917
 19,263
 5,502
 2,574
 —
 —
 1,471,256
Manufacturing 468,314
 26,532
 15,198
 4,931
 —
 —
 514,975
 472,869
 6,653
 11,290
 5,962
 —
 —
 496,774
Healthcare 2,140,458
 44,472
 16,161
 825
 —
 —
 2,201,916
 2,253,497
 3,186
 43,305
 14,765
 —
 —
 2,314,753
Other commercial and industrial 433,789
 5,309
 —
 21,060
 30,041
 58
 490,257
 478,951
 7
 8,161
 19,028
 27,870
 70
 534,087
Total commercial 9,567,816
 223,742
 390,272
 178,895
 30,041
 58
 10,390,824
 10,226,089
 103,324
 239,389
 137,233
 27,870
 70
 10,733,975
                            
Commercial real estate:  
    
  
  
  
  
  
    
  
  
  
  
Residential construction and land development 131,630
 —
 470
 3,433
 —
 —
 135,533
 113,190
 1,828
 395
 1,832
 —
 —
 117,245
Retail 756,418
 4,745
 399
 326
 —
 —
 761,888
 686,915
 4,243
 98
 276
 —
 —
 691,532
Office 798,462
 —
 —
 426
 —
 —
 798,888
 824,408
 7,087
 —
 275
 —
 —
 831,770
Multifamily 898,800
 —
 4,434
 38
 —
 —
 903,272
 979,969
 —
 48
 —
 —
 —
 980,017
Industrial 871,673
 —
 —
 76
 —
 —
 871,749
 573,014
 —
 —
 —
 —
 —
 573,014
Other commercial real estate 336,488
 —
 6
 1,222
 —
 —
 337,716
 285,506
 145
 286
 472
 —
 —
 286,409
Total commercial real estate 3,793,471
 4,745
 5,309
 5,521
 —
 —
 3,809,046
 3,463,002
 13,303
 827
 2,855
 —
 —
 3,479,987
                            
Residential mortgage:  
    
  
  
  
  
  
    
  
  
  
  
Permanent mortgage 238,769
 1,186
 2,331
 1,417
 741,679
 21,438
 1,006,820
 232,492
 —
 822
 1,163
 784,928
 24,030
 1,043,435
Permanent mortgages guaranteed by U.S. government agencies —
 —
 —
 —
 187,541
 11,846
 199,387
 —
 —
 —
 —
 188,327
 9,179
 197,506
Home equity —
 —
 —
 —
 732,106
 11,519
 743,625
 —
 —
 —
 —
 719,670
 13,075
 732,745
Total residential mortgage 238,769
 1,186
 2,331
 1,417
 1,661,326
 44,803
 1,949,832
 232,492
 —
 822
 1,163
 1,692,925
 46,284
 1,973,686
                            
Personal 743,451
 —
 1,054
 97
 95,163
 193
 839,958
 875,696
 1,548
 63
 83
 88,200
 186
 965,776
                            
Total $14,343,507
 $229,673
 $398,966
 $185,930
 $1,786,530
 $45,054
 $16,989,660
 $14,797,279
 $118,175
 $241,101
 $141,334
 $1,808,995
 $46,540
 $17,153,424



The following table summarizes the Company’s loan portfolio at SeptemberJune 30, 20162017 by the risk grade categories (in thousands): 
 Internally Risk Graded Non-Graded   Internally Risk Graded Non-Graded  
 Performing         Performing        
 Pass Other Loans Especially Mentioned Accruing Substandard Nonaccrual Performing Nonaccrual Total Pass Other Loans Especially Mentioned Accruing Substandard Nonaccrual Performing Nonaccrual Total
Commercial:                            
Energy $1,869,598
 $147,153
 $361,087
 $142,966
 $—
 $—
 $2,520,804
 $2,376,368
 $120,473
 $226,407
 $123,992
 $—
 $—
 $2,847,240
Services 2,882,065
 14,861
 31,196
 8,477
 —
 —
 2,936,599
 2,921,510
 12,452
 17,111
 7,754
 —
 —
 2,958,827
Wholesale/retail 1,557,067
 15,337
 27,173
 2,453
 —
 —
 1,602,030
 1,507,063
 16,224
 9,788
 10,620
 —
 —
 1,543,695
Manufacturing 470,702
 8,774
 19,736
 274
 —
 —
 499,486
 513,442
 6,540
 16,499
 9,656
 —
 —
 546,137
Healthcare 2,022,757
 42,224
 19,210
 855
 —
 —
 2,085,046
 2,130,339
 33,554
 33,120
 24,505
 —
 —
 2,221,518
Other commercial and industrial 415,769
 2,478
 10,302
 21,370
 26,210
 69
 476,198
 453,712
 2,961
 17,861
 20,526
 25,374
 104
 520,538
Total commercial 9,217,958
 230,827
 468,704
 176,395
 26,210
 69
 10,120,163
 9,902,434
 192,204
 320,786
 197,053
 25,374
 104
 10,637,955
                            
Commercial real estate:  
    
  
  
  
  
  
    
  
  
  
  
Residential construction and land development 155,737
 —
 470
 3,739
 —
 —
 159,946
 138,790
 —
 751
 2,051
 —
 —
 141,592
Retail 794,920
 4,802
 406
 1,249
 —
 —
 801,377
 720,730
 1,774
 —
 301
 —
 —
 722,805
Office 750,924
 899
 —
 882
 —
 —
 752,705
 859,722
 2,855
 —
 396
 —
 —
 862,973
Multifamily 868,501
 —
 5,221
 51
 —
 —
 873,773
 947,950
 —
 4,420
 10
 —
 —
 952,380
Industrial 837,945
 —
 —
 76
 —
 —
 838,021
 693,635
 —
 —
 —
 —
 —
 693,635
Other commercial real estate 366,416
 —
 7
 1,353
 —
 —
 367,776
 314,187
 —
 3
 1,017
 —
 —
 315,207
Total commercial real estate 3,774,443
 5,701
 6,104
 7,350
 —
 —
 3,793,598
 3,675,014
 4,629
 5,174
 3,775
 —
 —
 3,688,592
                            
Residential mortgage:  
    
  
  
  
  
  
    
  
  
  
  
Permanent mortgage 200,590
 1,192
 2,134
 2,514
 739,686
 23,442
 969,558
 212,563
 1,693
 478
 1,273
 750,891
 22,142
 989,040
Permanent mortgages guaranteed by U.S. government agencies —
 —
 —
 —
 174,877
 15,432
 190,309
 —
 —
 —
 —
 182,677
 9,052
 191,729
Home equity —
 —
 —
 —
 701,862
 11,064
 712,926
 —
 —
 —
 —
 746,661
 11,768
 758,429
Total residential mortgage 200,590
 1,192
 2,134
 2,514
 1,616,425
 49,938
 1,872,793
 212,563
 1,693
 478
 1,273
 1,680,229
 42,962
 1,939,198
                            
Personal 585,287
 228
 923
 431
 91,108
 255
 678,232
 823,304
 49
 877
 88
 93,398
 184
 917,900
                            
Total $13,778,278
 $237,948
 $477,865
 $186,690
 $1,733,743
 $50,262
 $16,464,786
 $14,613,315
 $198,575
 $327,315
 $202,189
 $1,799,001
 $43,250
 $17,183,645




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 generally 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 For theAs of For the For the
September 30, 2017 Three Months Ended Nine Months EndedJune 30, 2018 Three Months Ended Six Months Ended
  Recorded Investment   September 30, 2017 September 30, 2017  Recorded Investment   June 30, 2018 June 30, 2018
Unpaid
Principal
Balance
 Total With No
Allowance		 With Allowance Related Allowance Average Recorded
Investment		 Interest Income Recognized Average Recorded
Investment		 Interest Income Recognized
Unpaid
Principal
Balance
 Total With No
Allowance		 With Allowance Related Allowance Average Recorded
Investment		 Interest Income Recognized Average Recorded
Investment		 Interest Income Recognized
Commercial:                                  
Energy$133,643
 $110,683
 $45,169
 $65,514
 $4,944
 $117,338
 $—
 $121,591
 $—
$84,285
 $65,597
 $19,735
 $45,862
 $9,460
 $77,770
 $—
 $78,940
 $—
Services3,838
 1,174
 1,174
 —
 —
 4,464
 —
 4,674
 —
7,211
 4,377
 4,296
 81
 79
 3,243
 —
 3,498
 —
Wholesale/retail8,418
 1,893
 1,893
 —
 —
 6,256
 —
 6,650
 —
14,523
 14,095
 2,822
 11,273
 4,075
 8,329
 —
 8,334
 —
Manufacturing9,674
 9,059
 9,059
 —
 —
 9,357
 —
 6,995
 —
2,995
 2,991
 2,734
 257
 257
 2,996
 —
 4,476
 —
Healthcare24,591
 24,446
 474
 23,972
 8,323
 24,476
 —
 12,635
 —
26,212
 16,125
 13,583
 2,542
 1,329
 15,734
 —
 15,445
 —
Other commercial and industrial38,222
 29,645
 29,626
 19
 17
 25,138
 —
 25,382
 —
26,983
 17,793
 17,793
 —
 —
 18,147
 —
 18,446
 —
Total commercial218,386
 176,900
 87,395
 89,505
 13,284
 187,029
 —
 177,927
 —
162,209
 120,978
 60,963
 60,015
 15,200
 126,219
 —
 129,139
 —
                                  
Commercial real estate: 
  
  
  
  
  
  
  
  
 
  
  
  
  
  
  
  
  
Residential construction and land development3,532
 1,924
 1,924
 —
 —
 1,988
 —
 2,679
 —
1,764
 350
 350
 —
 —
 982
 —
 1,091
 —
Retail513
 289
 289
 —
 —
 295
 —
 308
 —
8,134
 1,068
 1,068
 —
 —
 666
 —
 672
 —
Office287
 275
 275
 —
 —
 335
 —
 351
 —
287
 275
 275
 —
 —
 275
 —
 275
 —
Multifamily—
 —
 —
 —
 —
 5
 —
 19
 —
—
 —
 —
 —
 —
 —
 —
 —
 —
Industrial—
 —
 —
 —
 —
 —
 —
 38
 —
—
 —
 —
 —
 —
 —
 —
 —
 —
Other commercial real estate671
 487
 487
 —
 —
 752
 —
 855
 —
509
 303
 303
 —
 —
 311
 —
 387
 —
Total commercial real estate5,003
 2,975
 2,975
 —
 —
 3,375
 —
 4,250
 —
10,694
 1,996
 1,996
 —
 —
 2,234
 —
 2,425
 —
                                  
Residential mortgage: 
  
  
  
  
  
  
  
  
 
  
  
  
  
  
  
  
  
Permanent mortgage29,861
 24,623
 24,623
 —
 —
 24,019
 315
 23,739
 912
28,402
 23,105
 23,105
 —
 —
 23,841
 322
 24,149
 628
Permanent mortgage guaranteed by U.S. government agencies1
193,594
 187,370
 187,370
 —
 —
 188,461
 1,884
 199,532
 5,809
174,589
 169,653
 169,653
 —
 —
 170,856
 1,574
 180,671
 3,422
Home equity13,332
 11,992
 11,992
 —
 —
 11,880
 —
 11,755
 —
13,362
 11,671
 11,671
 —
 —
 12,002
 —
 12,373
 —
Total residential mortgage236,787
 223,985
 223,985
 —
 —
 224,360
 2,199
 235,026
 6,721
216,353
 204,429
 204,429
 —
 —
 206,699
 1,896
 217,193
 4,050
                                  
Personal290
 255
 255
 —
 —
 263
 —
 273
 —
387
 340
 340
 —
 —
 340
 —
 305
 —
                                  
Total$460,466
 $404,115
 $314,610
 $89,505
 $13,284
 $415,027
 $2,199
 $417,476
 $6,721
$389,643
 $327,743
 $267,728
 $60,015
 $15,200
 $335,492
 $1,896
 $349,062
 $4,050
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 SeptemberJune 30, 2017, $8.92018, $7.6 million of these loans were nonaccruing and $178$162 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.



A summary of impaired loans at December 31, 20162017 follows (in thousands): 
   Recorded Investment   Recorded Investment
 
Unpaid
Principal
Balance
 Total 
With No
Allowance
 With Allowance Related Allowance 
Unpaid
Principal
Balance
 Total 
With No
Allowance
 With Allowance Related Allowance
Commercial:                    
Energy $146,897
 $132,499
 $121,418
 $11,081
 $762
 $111,011
 $92,284
 $40,968
 $51,316
 $8,814
Services 11,723
 8,173
 8,173
 —
 —
 5,324
 2,620
 2,620
 —
 —
Wholesale/retail 17,669
 11,407
 11,407
 —
 —
 9,099
 2,574
 2,574
 —
 —
Manufacturing 5,320
 4,931
 4,931
 —
 —
 6,073
 5,962
 5,962
 —
 —
Healthcare 1,147
 825
 825
 —
 —
 25,140
 14,765
 14,765
 —
 —
Other commercial and industrial 29,006
 21,118
 21,083
 35
 35
 27,957
 19,098
 19,080
 18
 17
Total commercial 211,762
 178,953
 167,837
 11,116
 797
 184,604
 137,303
 85,969
 51,334
 8,831
                    
Commercial real estate:  
  
  
  
  
  
  
  
  
  
Residential construction and land development 4,951
 3,433
 3,433
 —
 —
 3,285
 1,832
 1,832
 —
 —
Retail 530
 326
 326
 —
 —
 509
 276
 276
 —
 —
Office 521
 426
 426
 —
 —
 287
 275
 275
 —
 —
Multifamily 1,000
 38
 38
 —
 —
 —
 —
 —
 —
 —
Industrial 76
 76
 76
 —
 —
 —
 —
 —
 —
 —
Other commercial real estate 7,349
 1,222
 1,222
 —
 —
 670
 472
 472
 —
 —
Total commercial real estate 14,427
 5,521
 5,521
 —
 —
 4,751
 2,855
 2,855
 —
 —
                    
Residential mortgage:  
  
  
  
  
  
  
  
  
  
Permanent mortgage 28,830
 22,855
 22,809
 46
 46
 30,435
 25,193
 25,193
 —
 —
Permanent mortgage guaranteed by U.S. government agencies1
 205,564
 199,387
 199,387
 —
 —
 203,814
 197,506
 197,506
 —
 —
Home equity 12,611
 11,519
 11,519
 —
 —
 14,548
 13,075
 13,075
 —
 —
Total residential mortgage 247,005
 233,761
 233,715
 46
 46
 248,797
 235,774
 235,774
 —
 —
                    
Personal 332
 290
 290
 —
 —
 307
 269
 269
 —
 —
                    
Total $473,526
 $418,525
 $407,363
 $11,162
 $843
 $438,459
 $376,201
 $324,867
 $51,334
 $8,831
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, 20162017, $129.2 million of these loans were nonaccruing and $188 million were accruing based on the guarantee by U.S. government agencies.



A summary of impaired loans at SeptemberJune 30, 20162017 follows (in thousands): 
  For the For the  For the For the
As of September 30, 2016 Three Months Ended Nine Months EndedAs of June 30, 2017 Three Months Ended Six Months Ended
  Recorded Investment   September 30, 2016 September 30, 2016  Recorded Investment   June 30, 2017 June 30, 2017
Unpaid Principal Balance Total 
With No
Allowance
 With Allowance Related Allowance 
Average Recorded
Investment
 Interest Income Recognized 
Average Recorded
Investment
 Interest Income RecognizedUnpaid Principal Balance Total 
With No
Allowance
 With Allowance Related Allowance 
Average Recorded
Investment
 Interest Income Recognized 
Average Recorded
Investment
 Interest Income Recognized
Commercial:                                  
Energy$179,578
 $142,966
 $100,300
 $42,666
 $6,502
 $155,555
 $—
 $85,333
 $—
$141,091
 $123,992
 $56,988
 $67,004
 $8,874
 $117,209
 $—
 $128,246
 $—
Services11,858
 8,477
 8,477
 —
 —
 8,932
 —
 9,384
 —
11,209
 7,754
 7,754
 —
 —
 7,734
 —
 7,964
 —
Wholesale/retail8,528
 2,453
 2,453
 —
 —
 2,613
 —
 2,686
 —
17,392
 10,620
 10,620
 —
 —
 10,855
 —
 11,013
 —
Manufacturing642
 274
 274
 —
 —
 284
 —
 303
 —
10,223
 9,656
 9,656
 —
 —
 7,781
 —
 7,293
 —
Healthcare1,168
 855
 855
 —
 —
 865
 —
 964
 —
24,795
 24,505
 18,883
 5,622
 802
 12,707
 —
 12,665
 —
Other commercial and industrial29,176
 21,439
 21,439
 —
 —
 10,978
 —
 11,031
 —
28,933
 20,630
 20,609
 21
 17
 20,706
 —
 20,874
 —
Total commercial230,950
 176,464
 133,798
 42,666
 6,502
 179,227
 —
 109,701
 —
233,643
 197,157
 124,510
 72,647
 9,693
 176,992
 —
 188,055
 —
                                  
Commercial real estate:             
    
             
    
Residential construction and land development6,090
 3,739
 3,739
 —
 —
 4,000
 —
 4,074
 —
3,676
 2,051
 2,051
 —
 —
 2,334
 —
 2,742
 —
Retail1,914
 1,249
 1,249
 —
 —
 1,257
 —
 1,284
 —
518
 301
 301
 —
 —
 308
 —
 314
 —
Office1,187
 882
 882
 —
 —
 744
 —
 766
 —
499
 396
 396
 —
 —
 404
 —
 411
 —
Multifamily1,000
 51
 51
 —
 —
 58
 —
 163
 —
1,000
 10
 10
 —
 —
 17
 —
 24
 —
Industrial76
 76
 76
 —
 —
 76
 —
 76
 —
—
 —
 —
 —
 —
 38
 —
 38
 —
Other commercial real estate7,375
 1,353
 1,353
 —
 —
 1,430
 —
 1,813
 —
1,212
 1,017
 1,017
 —
 —
 1,024
 —
 1,119
 —
Total commercial real estate17,642
 7,350
 7,350
 —
 —
 7,565
 —
 8,176
 —
6,905
 3,775
 3,775
 —
 —
 4,125
 —
 4,648
 —
                                  
Residential mortgage:             
    
             
    
Permanent mortgage32,372
 25,956
 25,847
 109
 62
 26,592
 292
 27,470
 923
28,603
 23,415
 23,415
 —
 —
 23,801
 307
 23,135
 598
Permanent mortgage guaranteed by U.S. government agencies1
196,162
 190,309
 190,309
 —
 —
 190,547
 2,098
 193,879
 5,893
197,659
 191,729
 191,729
 —
 —
 202,946
 2,021
 205,159
 3,925
Home equity12,099
 11,064
 11,064
 —
 —
 10,578
 —
 10,710
 —
13,064
 11,768
 11,768
 —
 —
 11,776
 —
 11,643
 —
Total residential mortgage240,633
 227,329
 227,220
 109
 62
 227,717
 2,390
 232,059
 6,816
239,326
 226,912
 226,912
 —
 —
 238,523
 2,328
 239,937
 4,523
                                  
Personal724
 686
 686
 —
 —
 520
 —
 575
 —
307
 272
 272
 —
 —
 253
 —
 281
 —
                                  
Total$489,949
 $411,829
 $369,054
 $42,775
 $6,564
 $415,029
 $2,390
 $350,511
 $6,816
$480,181
 $428,116
 $355,469
 $72,647
 $9,693
 $419,893
 $2,328
 $432,921
 $4,523
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 SeptemberJune 30, 2016, $152017, $9.1 million of these loans were nonaccruing and $175$183 million were accruing based on the guarantee by U.S. government agencies.



Troubled Debt Restructurings

A summary ofAt June 30, 2018 the Company had $152 million in troubled debt restructurings ("TDRs")(TDRs), of which $75 million were accruing residential mortgage loans guaranteed by accruing status asU.S. government agencies. Approximately $80 million of TDRs were performing in accordance with the modified terms.September 30, 2017 is as follows (in thousands):
  As of September 30, 2017 Amounts Charged Off During:
  
Recorded
Investment
 Performing in Accordance With Modified Terms 
Not
Performing in Accordance With Modified Terms
 
Specific
Allowance
 Three Months Ended
Sept. 30, 2017		 Nine Months Ended
Sept. 30, 2017
Nonaccruing TDRs:            
             
Commercial:            
Energy $9,582
 $9,506
 $76
 $—
 $4,322
 $4,322
Services 720
 103
 617
 —
 7
 10
Wholesale/retail 1,802
 —
 1,802
 —
 —
 —
Manufacturing 180
 180
 —
 —
 —
 —
Healthcare —
 —
 —
 —
 —
 —
Other commercial and industrial 20,097
 19,890
 207
 —
 —
 —
Total commercial 32,381
 29,679
 2,702
 —
 4,329
 4,332
             
Commercial real estate:  
  
  
  
  
  
Residential construction and land development 327
 91
 236
 —
 —
 —
Retail 289
 289
 —
 —
 —
 —
Office —
 —
 —
 —
 —
 —
Multifamily —
 —
 —
 —
 —
 —
Industrial —
 —
 —
 —
 —
 —
Other commercial real estate 353
 353
 —
 —
 —
 —
Total commercial real estate 969
 733
 236
 —
 —
 —
             
Residential mortgage:  
  
  
  
  
  
Permanent mortgage 14,765
 10,188
 4,577
 —
 —
 —
Permanent mortgage guaranteed by U.S. government agencies 5,601
 523
 5,078
 —
 —
 —
Home equity 5,625
 4,213
 1,412
 —
 39
 70
Total residential mortgage 25,991
 14,924
 11,067
 —
 39
 70
             
Personal 205
 195
 10
 —
 2
 10
             
Total nonaccruing TDRs $59,546
 $45,531
 $14,015
 $—
 $4,370
 $4,412
             
Accruing TDRs:            
Permanent mortgages guaranteed by U.S. government agencies 69,440
 14,948
 54,492
 —
 —
 —
             
Total TDRs $128,986
 $60,479
 $68,507
 $—
 $4,370
 $4,412


At December 31, 2017, the Company had $126 million in TDRs, of which $74 million were accruing residential mortgage loans guaranteed by U.S. government agencies. Approximately $48 million of TDRs were performing in accordance with the modified terms.

A summaryAt June 30, 2017, TDRs totaled $169 million, of troubled debt restructuringswhich $81 million were accruing residential mortgage loans guaranteed by accruing status asU.S. government agencies. Approximately $71 million 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 commercial real estate 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
TDRs were performing in accordance with the modified terms.



A summary of troubled debt restructurings by accruing status as of September 30, 2016 is as follows (in thousands):
  As of September 30, 2016 Amounts Charged Off During:
  
Recorded
Investment
 Performing in Accordance With Modified Terms 
Not
Performing in Accordance With Modified Terms
 
Specific
Allowance
 Three Months Ended
Sept. 30, 2016		 Nine Months Ended
Sept. 30, 2016
Nonaccruing TDRs:            
             
Commercial:            
Energy $1,746
 $—
 $1,746
 $—
 $500
 $1,000
Services 7,761
 7,034
 727
 —
 —
 —
Wholesale/retail 2,327
 2,287
 40
 —
 —
 —
Manufacturing 238
 238
 —
 —
 —
 —
Healthcare 623
 —
 623
 —
 —
 —
Other commercial and industrial 497
 61
 436
 —
 —
 57
Total commercial 13,192
 9,620
 3,572
 —
 500
 1,057
             
Commercial real estate:  
  
  
  
  
  
Residential construction and land development 794
 359
 435
 —
 —
 —
Retail 1,249
 892
 357
 —
 —
 —
Office 149
 149
 —
 —
 —
 —
Multifamily —
 —
 —
 —
 —
 —
Industrial —
 —
 —
 —
 —
 —
Other commercial real estate 666
 666
 —
 —
 —
 —
Total commercial real estate 2,858
 2,066
 792
 —
 —
 —
             
Residential mortgage:  
  
  
  
  
  
Permanent mortgage 16,109
 11,944
 4,165
 62
 —
 2
Permanent mortgage guaranteed by U.S. government agencies 8,220
 2,331
 5,889
 —
 —
 —
Home equity 5,168
 4,667
 501
 —
 34
 153
Total residential mortgage 29,497
 18,942
 10,555
 62
 34
 155
             
Personal 273
 271
 2
 —
 9
 18
             
Total nonaccruing TDRs $45,820
 $30,899
 $14,921
 $62
 $543
 $1,230
             
Accruing TDRs:            
Permanent mortgages guaranteed by U.S. government agencies 80,306
 29,020
 51,286
 —
 —
 —
             
Total TDRs $126,126
 $59,919
 $66,207
 $62
 $543
 $1,230



Troubled debt restructuringsTDRs generally consist of interest rate concessions, payment stream concessions or a combination of concessions to distressed borrowers. The following tables detailDuring the recorded balancethree and six months ended June 30, 2018, $19 million and $32 million of loans at Septemberwere restructured and $5.5 million and $5.6 million of loans designated as TDRs were charged off. During the three and six months ended June 30, 2017, by class that $34 million and $53 million of loans were restructured during the three months ended September 30, 2017 by primary typeand $10 thousand and $42 thousand of concession (in thousands):

 Three Months Ended
Sept. 30, 2017
 Accruing Nonaccrual Total
 Payment Stream Combination & Other Total Payment Stream Combination & Other Total 
Commercial:             
Energy$—
 $—
 $—
 $—
 $—
 $—
 $—
Services—
 —
 —
 —
 —
 —
 —
Wholesale/retail—
 —
 —
 —
 —
 —
 —
Manufacturing—
 —
 —
 —
 —
 —
 —
Healthcare—
 —
 —
 —
 —
 —
 —
Other commercial and industrial—
 —
 —
 —
 60
 60
 60
Total commercial—
 —
 —
 —
 60
 60
 60
              
Commercial real estate:             
Residential construction and land development—
 —
 —
 —
 —
 —
 —
Retail—
 —
 —
 —
 —
 —
 —
Office—
 —
 —
 —
 —
 —
 —
Multifamily—
 —
 —
 —
 —
 —
 —
Industrial—
 —
 —
 —
 —
 —
 —
Other commercial real estate—
 —
 —
 —
 —
 —
 —
Total commercial real estate—
 —
 —
 —
 —
 —
 —
              
Residential mortgage:             
Permanent mortgage—
 —
 —
 969
 506
 1,475
 1,475
Permanent mortgage guaranteed by U.S. government agencies8,205
 620
 8,825
 315
 —
 315
 9,140
Home equity—
 —
 —
 —
 469
 469
 469
Total residential mortgage8,205
 620
 8,825
 1,284
 975
 2,259
 11,084
              
Personal—
 —
 —
 —
 4
 4
 4
              
Total$8,205
 $620
 $8,825
 $1,284
 $1,039
 $2,323
 $11,148
loans designated as TDRs were charged off.



 Nine Months Ended
Sept. 30, 2017
 AccruingNonaccrual Total
  Payment Stream Combination & Other Total Payment Stream Combination & Other Total 
Commercial:              
Energy $—
 $—
 $—
 $7,781
 $—
 $7,781
 $7,781
Services —
 —
 —
 —
 —
 —
 —
Wholesale/retail —
 —
 —
 —
 —
 —
 —
Manufacturing —
 —
 —
 —
 —
 —
 —
Healthcare —
 —
 —
 —
 —
 —
 —
Other commercial and industrial —
 —
 —
 19,825
 60
 19,885
 19,885
Total commercial —
 —
 —
 27,606
 60
 27,666
 27,666
               
Commercial real estate:              
Residential construction and land development —
 —
 —
 —
 —
 —
 —
Retail —
 —
 —
 —
 —
 —
 —
Office —
 —
 —
 —
 —
 —
 —
Multifamily —
 —
 —
 —
 —
 —
 —
Industrial —
 —
 —
 —
 —
 —
 —
Other commercial real estate —
 —
 —
 —
 —
 —
 —
Total commercial real estate —
 —
 —
 —
 —
 —
 —
               
Residential mortgage:              
Permanent mortgage —
 —
 —
 153
 1,559
 1,712
 1,712
Permanent mortgage guaranteed by U.S. government agencies 18,678
 2,649
 21,327
 443
 85
 528
 21,855
Home equity —
 —
 —
 104
 1,468
 1,572
 1,572
Total residential mortgage 18,678
 2,649
 21,327
 700
 3,112
 3,812
 25,139
               
Personal —
 —
 —
 —
 48
 48
 48
               
Total $18,678
 $2,649
 $21,327
 $28,306
 $3,220
 $31,526
 $52,853



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 September 30, 2016 by primary type of concession (in thousands):

 Three Months Ended
Sept. 30, 2016
 Accruing Nonaccrual Total
 Payment Stream Combination & Other Total Payment Stream Combination & Other Total 
Commercial:             
Energy$—
 $—
 $—
 $—
 $—
 $—
 $—
Services—
 —
 —
 —
 —
 —
 —
Wholesale/retail—
 —
 —
 —
 —
 —
 —
Manufacturing—
 —
 —
 —
 —
 —
 —
Healthcare—
 —
 —
 —
 —
 —
 —
Other commercial and industrial—
 —
 —
 —
 —
 —
 —
Total commercial—
 —
 —
 —
 —
 —
 —
              
Commercial real estate:             
Residential construction and land development—
 —
 —
 —
 —
 —
 —
Retail—
 —
 —
 —
 —
 —
 —
Office—
 —
 —
 —
 —
 —
 —
Multifamily—
 —
 —
 —
 —
 —
 —
Industrial—
 —
 —
 —
 —
 —
 —
Other commercial real estate—
 —
 —
 —
 —
 —
 —
Total commercial real estate—
 —
 —
 —
 —
 —
 —
              
Residential mortgage:             
Permanent mortgage—
 —
 —
 —
 151
 151
 151
Permanent mortgage guaranteed by U.S. government agencies3,527
 4,211
 7,738
 —
 287
 287
 8,025
Home equity—
 —
 —
 —
 920
 920
 920
Total residential mortgage3,527
 4,211
 7,738
 —
 1,358
 1,358
 9,096
              
Personal—
 —
 —
 —
 19
 19
 19
              
Total$3,527
 $4,211
 $7,738
 $—
 $1,377
 $1,377
 $9,115



 Nine Months Ended
Sept. 30, 2016
 Accruing Nonaccrual Total
 Payment Stream Combination & Other Total Payment Stream Combination & Other Total 
Commercial:             
Energy$—
 $—
 $—
 $501
 $—
 $501
 $501
Services—
 —
 —
 —
 —
 —
 —
Wholesale/retail—
 —
 —
 —
 —
 —
 —
Manufacturing—
 —
 —
 —
 —
 —
 —
Healthcare—
 —
 —
 —
 —
 —
 —
Other commercial and industrial—
 —
 —
 —
 —
 —
 —
Total commercial—
 —
 —
 501
 —
 501
 501
              
Commercial real estate:             
Residential construction and land development—
 —
 —
 —
 —
 —
 —
Retail—
 —
 —
 —
 —
 —
 —
Office—
 —
 —
 —
 —
 —
 —
Multifamily—
 —
 —
 —
 —
 —
 —
Industrial—
 —
 —
 —
 —
 —
 —
Other commercial real estate—
 —
 —
 —
 —
 —
 —
Total commercial real estate—
 —
 —
 —
 —
 —
 —
              
Residential mortgage:             
Permanent mortgage—
 —
 —
 1,037
 1,051
 2,088
 2,088
Permanent mortgage guaranteed by U.S. government agencies9,687
 9,350
 19,037
 —
 982
 982
 20,019
Home equity—
 —
 —
 48
 1,630
 1,678
 1,678
Total residential mortgage9,687
 9,350
 19,037
 1,085
 3,663
 4,748
 23,785
              
Personal—
 —
 —
 —
 82
 82
 82
              
Total$9,687
 $9,350
 $19,037
 $1,586
 $3,745
 $5,331
 $24,368



The following table summarizes, by loan class, the recorded investment at September 30, 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 September 30, 2017 and 2016, respectively (in thousands):

 Three Months Ended
Sept. 30, 2017		 Nine Months Ended
Sept. 30, 2017
 Accruing Nonaccrual Total Accruing Nonaccrual Total
Commercial:           
Energy$—
 $7,857
 $7,857
 $—
 $9,582
 $9,582
Services—
 —
 —
 —
 —
 —
Wholesale/retail—
 —
 —
 —
 —
 —
Manufacturing—
 —
 —
 —
 —
 —
Healthcare—
 —
 —
 —
 —
 —
Other commercial and industrial—
 —
 —
 —
 19,825
 19,825
Total commercial—
 7,857
 7,857
 —
 29,407
 29,407
            
Commercial real estate:           
Residential construction and land development—
 —
 —
 —
 —
 —
Retail—
 —
 —
 —
 —
 —
Office—
 —
 —
 —
 —
 —
Multifamily—
 —
 —
 —
 —
 —
Industrial—
 —
 —
 —
 —
 —
Other commercial real estate—
 —
 —
 —
 —
 —
Total commercial real estate—
 —
 —
 —
 —
 —
            
Residential mortgage:           
Permanent mortgage—
 1,511
 1,511
 —
 1,511
 1,511
Permanent mortgage guaranteed by U.S. government agencies23,620
 878
 24,498
 24,349
 878
 25,227
Home equity—
 1,030
 1,030
 —
 1,139
 1,139
Total residential mortgage23,620
 3,419
 27,039
 24,349
 3,528
 27,877
            
Personal—
 10
 10
 —
 10
 10
            
Total$23,620
 $11,286
 $34,906
 $24,349
 $32,945
 $57,294

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.


 Three Months Ended
Sept. 30, 2016		 Nine Months Ended
Sept. 30, 2016
 Accruing Nonaccrual Total Accruing Nonaccrual Total
Commercial:           
Energy$—
 $1,746
 $1,746
 $—
 $1,746
 $1,746
Services—
 —
 —
 —
 —
 —
Wholesale/retail—
 —
 —
 —
 —
 —
Manufacturing—
 —
 —
 —
 —
 —
Healthcare—
 —
 —
 —
 —
 —
Other commercial and industrial—
 —
 —
 —
 —
 —
Total commercial—
 1,746
 1,746
 —
 1,746
 1,746
            
Commercial real estate:           
Residential construction and land development—
 —
 —
 —
 —
 —
Retail—
 —
 —
 —
 —
 —
Office—
 —
 —
 —
 —
 —
Multifamily—
 —
 —
 —
 —
 —
Industrial—
 —
 —
 —
 —
 —
Other commercial real estate—
 —
 —
 —
 —
 —
Total commercial real estate—
 —
 —
 —
 —
 —
            
Residential mortgage:           
Permanent mortgage—
 298
 298
 —
 542
 542
Permanent mortgage guaranteed by U.S. government agencies17,491
 1,095
 18,586
 19,352
 1,121
 20,473
Home equity—
 258
 258
 —
 258
 258
Total residential mortgage17,491
 1,651
 19,142
 19,352
 1,921
 21,273
            
Personal—
 11
 11
 —
 11
 11
            
Total$17,491
 $3,408
 $20,899
 $19,352
 $3,678
 $23,030


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 SeptemberJune 30, 20172018 is as follows (in thousands):
   Past Due       Past Due    
 Current 
30 to 59
Days
 60 to 89 Days 
90 Days
or More
 Nonaccrual Total Current 
30 to 59
Days
 60 to 89 Days 
90 Days
or More
 Nonaccrual Total
Commercial:                        
Energy $2,752,259
 $—
 $5,039
 $—
 $110,683
 $2,867,981
 $3,081,622
 $—
 $—
 $—
 $65,597
 $3,147,219
Services 2,963,746
 2,343
 250
 —
 1,174
 2,967,513
 2,937,699
 1,619
 106
 698
 4,377
 2,944,499
Wholesale/retail 1,654,018
 1,748
 409
 30
 1,893
 1,658,098
 1,685,175
 284
 —
 —
 14,095
 1,699,554
Manufacturing 508,231
 —
 2,156
 —
 9,059
 519,446
 644,825
 —
 —
 —
 2,991
 647,816
Healthcare 2,214,849
 156
 —
 —
 24,446
 2,239,451
 2,322,580
 —
 15,017
 —
 16,125
 2,353,722
Other commercial and industrial 513,748
 52
 —
 —
 29,645
 543,445
 538,269
 52
 105
 10
 17,793
 556,229
Total commercial 10,606,851
 4,299
 7,854
 30
 176,900
 10,795,934
 11,210,170
 1,955
 15,228
 708
 120,978
 11,349,039
                        
Commercial real estate:  
  
    
  
  
  
  
    
  
  
Residential construction and land development 109,994
 184
 —
 —
 1,924
 112,102
 118,649
 —
 —
 —
 350
 118,999
Retail 724,850
 726
 —
 —
 289
 725,865
 766,956
 —
 —
 —
 1,068
 768,024
Office 796,687
 127
 —
 —
 275
 797,089
 819,852
 —
 —
 —
 275
 820,127
Multifamily 999,009
 —
 —
 —
 —
 999,009
 1,056,984
 —
 —
 —
 —
 1,056,984
Industrial 591,080
 —
 —
 —
 —
 591,080
 653,384
 —
 —
 —
 —
 653,384
Other commercial real estate 292,322
 1
 —
 187
 487
 292,997
 294,377
 —
 —
 22
 303
 294,702
Total commercial real estate 3,513,942
 1,038
 —
 187
 2,975
 3,518,142
 3,710,202
 —
 —
 22
 1,996
 3,712,220
                        
Residential mortgage:  
  
    
  
  
  
  
    
  
  
Permanent mortgage 985,183
 3,705
 454
 —
 24,623
 1,013,965
 1,041,859
 2,568
 796
 84
 23,105
 1,068,412
Permanent mortgages guaranteed by U.S. government agencies 25,169
 17,346
 13,343
 122,621
 8,891
 187,370
 38,717
 14,757
 12,878
 95,734
 7,567
 169,653
Home equity 728,884
 3,066
 445
 28
 11,992
 744,415
 690,743
 1,612
 94
 65
 11,671
 704,185
Total residential mortgage 1,739,236
 24,117
 14,242
 122,649
 45,506
 1,945,750
 1,771,319
 18,937
 13,768
 95,883
 42,343
 1,942,250
                        
Personal 943,368
 3,296
 81
 8
 255
 947,008
 999,519
 178
 150
 —
 340
 1,000,187
                        
Total $16,803,397
 $32,750
 $22,177
 $122,874
 $225,636
 $17,206,834
 $17,691,210
 $21,070
 $29,146
 $96,613
 $165,657
 $18,003,696



A summary of loans currently performing, loans past due and accruing and nonaccrual loans as of December 31, 20162017 is as follows (in thousands):

   Past Due       Past Due    
 Current 
30 to 59
Days
 60 to 89 Days 
90 Days
or More
 Nonaccrual Total 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
 $2,833,668
 $—
 4,204
 $—
 $92,284
 $2,930,156
Services 3,099,605
 191
 1,021
 —
 8,173
 3,108,990
 2,983,222
 514
 486
 107
 2,620
 2,986,949
Wholesale/retail 1,561,650
 3,761
 —
 —
 11,407
 1,576,818
 1,468,284
 398
 —
 —
 2,574
 1,471,256
Manufacturing 509,662
 382
 —
 —
 4,931
 514,975
 490,739
 —
 73
 —
 5,962
 496,774
Healthcare 2,201,050
 —
 41
 —
 825
 2,201,916
 2,284,770
 15,218
 —
 —
 14,765
 2,314,753
Other commercial and industrial 468,981
 155
 3
 —
 21,118
 490,257
 514,701
 85
 78
 125
 19,098
 534,087
Total commercial 10,205,838
 4,968
 1,065
 —
 178,953
 10,390,824
 10,575,384
 16,215
 4,841
 232
 137,303
 10,733,975
                        
Commercial real estate:  
  
    
  
  
  
  
    
  
  
Residential construction and land development 132,100
 —
 —
 —
 3,433
 135,533
 115,213
 200
 —
 —
 1,832
 117,245
Retail 761,562
 —
 —
 —
 326
 761,888
 691,256
 —
 —
 —
 276
 691,532
Office 798,462
 —
 —
 —
 426
 798,888
 831,118
 254
 —
 123
 275
 831,770
Multifamily 903,234
 —
 —
 —
 38
 903,272
 979,625
 22
 370
 —
 —
 980,017
Industrial 871,673
 —
 —
 —
 76
 871,749
 573,014
 —
 —
 —
 —
 573,014
Other commercial real estate 336,488
 6
 —
 —
 1,222
 337,716
 285,937
 —
 —
 —
 472
 286,409
Total commercial real estate 3,803,519
 6
 —
 —
 5,521
 3,809,046
 3,476,163
 476
 370
 123
 2,855
 3,479,987
                        
Residential mortgage:  
  
    
  
  
  
  
    
  
  
Permanent mortgage 979,386
 3,299
 1,280
 —
 22,855
 1,006,820
 1,014,588
 3,435
 219
 —
 25,193
 1,043,435
Permanent mortgages guaranteed by U.S. government agencies 40,594
 17,465
 13,803
 115,679
 11,846
 199,387
 22,692
 18,978
 13,468
 133,189
 9,179
 197,506
Home equity 729,493
 2,276
 337
 —
 11,519
 743,625
 717,007
 2,206
 440
 17
 13,075
 732,745
Total residential mortgage 1,749,473
 23,040
 15,420
 115,679
 46,220
 1,949,832
 1,754,287
 24,619
 14,127
 133,206
 47,447
 1,973,686
                        
Personal 838,811
 589
 263
 5
 290
 839,958
 964,374
 681
 191
 261
 269
 965,776
                        
Total $16,597,641
 $28,603
 16,748
 $115,684
 $230,984
 $16,989,660
 $16,770,208
 $41,991
 19,529
 $133,822
 $187,874
 $17,153,424



A summary of loans currently performing, loans past due and accruing and nonaccrual loans as of SeptemberJune 30, 20162017 is as follows (in thousands):

   Past Due       Past Due    
 Current 
30 to 59
Days
 60 to 89 Days 
90 Days
or More
 Nonaccrual Total Current 
30 to 59
Days
 60 to 89 Days 
90 Days
or More
 Nonaccrual Total
Commercial:                        
Energy $2,365,850
 $11,988
 —
 $—
 $142,966
 $2,520,804
 $2,723,248
 $—
 —
 $—
 $123,992
 $2,847,240
Services 2,923,874
 502
 39
 3,707
 8,477
 2,936,599
 2,949,562
 50
 180
 1,281
 7,754
 2,958,827
Wholesale/retail 1,599,356
 221
 —
 —
 2,453
 1,602,030
 1,532,986
 89
 —
 —
 10,620
 1,543,695
Manufacturing 499,212
 —
 —
 —
 274
 499,486
 536,481
 —
 —
 —
 9,656
 546,137
Healthcare 2,083,556
 635
 —
 —
 855
 2,085,046
 2,196,088
 925
 —
 —
 24,505
 2,221,518
Other commercial and industrial 454,538
 34
 68
 119
 21,439
 476,198
 499,743
 45
 119
 1
 20,630
 520,538
Total commercial 9,926,386
 13,380
 107
 3,826
 176,464
 10,120,163
 10,438,108
 1,109
 299
 1,282
 197,157
 10,637,955
                        
Commercial real estate:  
  
  
  
  
  
  
  
  
  
  
  
Residential construction and land development 156,207
 —
 —
 —
 3,739
 159,946
 139,070
 471
 —
 —
 2,051
 141,592
Retail 796,362
 3,766
 —
 —
 1,249
 801,377
 722,504
 —
 —
 —
 301
 722,805
Office 751,823
 —
 —
 —
 882
 752,705
 862,577
 —
 —
 —
 396
 862,973
Multifamily 868,591
 —
 5,131
 —
 51
 873,773
 952,370
 —
 —
 —
 10
 952,380
Industrial 837,945
 —
 —
 —
 76
 838,021
 693,635
 —
 —
 —
 —
 693,635
Other commercial real estate 366,416
 7
 —
 —
 1,353
 367,776
 314,187
 3
 —
 —
 1,017
 315,207
Total commercial real estate 3,777,344
 3,773
 5,131
 —
 7,350
 3,793,598
 3,684,343
 474
 —
 —
 3,775
 3,688,592
                        
Residential mortgage:  
  
  
  
  
  
  
  
  
  
  
  
Permanent mortgage 939,853
 3,547
 202
 —
 25,956
 969,558
 962,443
 2,024
 1,026
 132
 23,415
 989,040
Permanent mortgages guaranteed by U.S. government agencies 41,150
 17,364
 12,963
 103,400
 15,432
 190,309
 36,867
 18,416
 13,581
 113,813
 9,052
 191,729
Home equity 700,031
 1,526
 305
 —
 11,064
 712,926
 744,735
 1,564
 362
 —
 11,768
 758,429
Total residential mortgage 1,681,034
 22,437
 13,470
 103,400
 52,452
 1,872,793
 1,744,045
 22,004
 14,969
 113,945
 44,235
 1,939,198
                        
Personal 677,194
 191
 148
 13
 686
 678,232
 916,852
 487
 289
 —
 272
 917,900
                        
Total $16,061,958
 $39,781
 18,856
 $107,239
 $236,952
 $16,464,786
 $16,783,348
 $24,074
 15,557
 $115,227
 $245,439
 $17,183,645


(5)Acquisitions

On DecemberJune 18, 2018, the Company announced the signing of a definitive merger agreement with CoBiz Financial Inc. CoBiz is headquartered in Denver with a presence in Colorado and Arizona and has approximately $3.8 billion in assets. Upon completion of the merger, CoBiz shareholders will receive 0.17 shares of BOK Financial common stock and $5.70 in cash for each share of CoBiz common stock. The merger is subject to customary closing conditions including regulatory approval.

On May 1, 2016,2018, the Company acquired MBT Bancshares (“MBT”), parent company of Missouri Banka majority voting interest in Switchgrass Holdings, LLC, a restaurant franchise owner and Trust of Kansas City (“Mobank”) following regulatory approval of the transaction. Mobank operated fouroperator, pursuant to merchant banking branches in the Kansas City, Mo. area. BOK Financial paid $102.5 million in an all-cash dealregulations and restrictions. The purchase price for all outstanding shares of MBT stock. MBTthis acquisition 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.$14 million. The preliminary purchase price allocation was updated in the first quarterincluded $6.1 million 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 salesales 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):
 September 30, 2017 December 31, 2016 September 30, 2016 June 30, 2018 December 31, 2017 June 30, 2017
 
Unpaid Principal Balance/
Notional
 Fair Value 
Unpaid Principal Balance/
Notional
 Fair Value 
Unpaid
Principal
 Balance/
Notional
 Fair Value 
Unpaid Principal Balance/
Notional
 Fair Value 
Unpaid Principal Balance/
Notional
 Fair Value 
Unpaid
Principal
 Balance/
Notional
 Fair Value
Residential mortgage loans held for sale $261,868
 $265,783
 $286,414
 $286,971
 $422,523
 $433,040
 $214,717
 $216,983
 $212,525
 $215,113
 $269,772
 $275,179
Residential mortgage loan commitments 334,337
 9,066
 318,359
 9,733
 630,804
 18,598
 251,231
 7,473
 222,919
 6,523
 362,088
 10,993
Forward sales contracts 524,878
 794
 569,543
 5,193
 929,907
 (4,046) 440,735
 (1,155) 380,159
 (258) 587,595
 1,087
  
 $275,643
  
 $301,897
  
 $447,592
  
 $223,301
  
 $221,378
  
 $287,259

No residential mortgage loans held for sale were 90 days or more past due or considered impaired as of SeptemberJune 30, 20172018, December 31, 20162017 or SeptemberJune 30, 20162017. No credit losses were recognized on residential mortgage loans held for sale for the three and ninesix month periodsperiod ended SeptemberJune 30, 20172018 and 20162017.



Mortgage banking revenue was as follows (in thousands):
 Three Months Ended
September 30,		 Nine Months Ended
September 30,		 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2017 2016 2017 2016 2018 2017 2018 2017
Production revenue:                
Net realized gains on sale of mortgage loans $12,041
 $23,110
 $32,443
 $47,424
 $10,718
 $11,787
 $19,636
 $20,402
Net change in unrealized gain on mortgage loans held for sale (1,492) (2,518) 3,335
 4,649
 1,047
 985
 (322) 4,827
Net change in the fair value of mortgage loan commitments (1,927) (6,901) (667) 10,464
 (1,124) (3,274) 950
 1,260
Net change in the fair value of forward sales contracts (293) 8,267
 (4,399) (4,846) (726) 4,342
 (897) (4,106)
Total production revenue 8,329
 21,958
 30,712
 57,691
 9,915
 13,840
 19,367
 22,383
Servicing revenue 16,561
 16,558
 49,645
 47,809
 16,431
 16,436
 33,004
 33,084
Total mortgage banking revenue $24,890
 $38,516
 $80,357
 $105,500
 $26,346
 $30,276
 $52,371
 $55,467

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):
 September 30,
2017		 December 31, 2016 September 30,
2016		 June 30,
2018		 December 31, 2017 June 30,
2017
Number of residential mortgage loans serviced for others 137,359
 139,340
 139,587
 134,868
 136,528
 138,335
Outstanding principal balance of residential mortgage loans serviced for others $22,063,121
 $21,997,568
 $21,851,536
 $21,963,309
 $22,046,632
 $22,095,232
Weighted average interest rate 3.95% 3.97% 4.01% 3.96% 3.94% 3.95%
Remaining term (in months) 298
 301
 302
 295
 297
 299

ActivityThe following represents activity in capitalized mortgage servicing rights during the three months ended September 30, 2017 was as follows (in thousands):
  Purchased Originated Total
Balance, June 30, 2017 $7,995
 $237,244
 $245,239
Additions, net —
 9,925
 9,925
Change in fair value due to principal payments (470) (8,197) (8,667)
Change in fair value due to market assumption changes 303
 (942) (639)
Balance, September 30, 2017 $7,828
 $238,030
 $245,858
  Purchased Originated Total
Balance, December 31, 2016 $8,909
 $238,164
 $247,073
Additions, net —
 29,439
 29,439
Change in fair value due to principal payments (1,443) (23,485) (24,928)
Change in fair value due to market assumption changes 362
 (6,088) (5,726)
Balance, September 30, 2017 $7,828
 $238,030
 $245,858


Activity in capitalized mortgage servicing rights during the three months ended September 30, 2016 was as follows (in thousands):
  Purchased Originated Total
Balance, June 30, 2016 $4,067
 $186,680
 $190,747
Additions, net —
 21,990
 21,990
Change in fair value due to scheduled payments and full-balance payoffs (753) (10,690) (11,443)
Change in fair value due to market assumption changes 251
 2,076
 2,327
Balance, September 30, 2016 $3,565
 $200,056
 $203,621
  Purchased Originated Total
Balance, December 31, 2015 $9,911
 $208,694
 $218,605
Additions, net —
 56,345
 56,345
Change in fair value due to scheduled payments and full-balance payoffs (2,109) (27,276) (29,385)
Change in fair value due to market assumption changes (4,237) (37,707) (41,944)
Balance, September 30, 2016 $3,565
 $200,056
 $203,621
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2018 2017 2018 2017
Beginning Balance$274,978
 $249,403
 $252,867
 $247,073
Additions, net10,820
 11,078
 19,720
 19,514
Change in fair value due to principal payments(8,802) (8,299) (16,797) (16,261)
Change in fair value due to market assumption changes1,723
 (6,943) 22,929
 (5,087)
Ending Balance$278,719
 $245,239
 $278,719
 $245,239

Changes in the fair value of mortgage servicing rights due to market assumption changes are included in Other operating revenue in the Consolidated Statements of Earnings. Changes in fair value due to actual loanprincipal 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

Mortgage servicing rights after origination.are not traded in active markets. Fair value is determined by discounting the projected net cash flows. Significant market assumptions used to determine fair value based on significant unobservable inputs were as follows:
 September 30,
2017		 December 31, 2016 September 30,
2016		 June 30,
2018		 December 31, 2017 June 30,
2017
Discount rate – risk-free rate plus a market premium 9.84% 10.08% 10.08% 9.91% 9.84% 9.84%
Prepayment rate - based upon loan interest rate, original term and loan type 8.71%-15.43% 8.98%-16.91% 9.16%-47.15% 8.12% - 15.08% 8.72% - 15.16% 8.61%-15.91%
Loan servicing costs – annually per loan based upon loan type:  
Performing loans $65-$120 $63 - $120 $63 - $120 $65 - $88 $65 - $88 $65-$120
Delinquent loans $150-$500 $150 - $500 $150 - $500 $150 - $500 $150 - $500 $150-$500
Loans in foreclosure $1,000-$4,250 $650 - $4,250 $650 - $4,250 $1,000 - $4,000 $1,000 - $4,000 $1,000-$4,250
Escrow earnings rate – indexed to rates paid on deposit accounts with comparable average life 2.00% 1.98% 1.18% 2.88% 2.24% 1.95%
Primary/secondary mortgage rate spread 105 bps 105 bps 115 bps 105 bps 105 bps 105 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 aging status of our mortgage loans serviced for others by investor at SeptemberJune 30, 20172018 follows (in thousands):
   Past Due     Past Due  
 Current 
30 to 59
Days
 
60 to 89
Days
 90 Days or More Total Current 
30 to 59
Days
 
60 to 89
Days
 90 Days or More Total
FHLMC $8,021,016
 $78,542
 $13,100
 $26,171
 $8,138,829
 $7,932,832
 $68,996
 $9,405
 $25,129
 $8,036,362
FNMA 6,635,428
 76,065
 10,398
 20,596
 6,742,487
 6,491,492
 77,424
 9,118
 20,918
 6,598,952
GNMA 6,376,127
 215,506
 59,659
 20,925
 6,672,217
 6,624,862
 198,852
 47,791
 15,204
 6,886,709
Other 502,768
 3,492
 1,167
 2,161
 509,588
 433,830
 4,989
 221
 2,246
 441,286
Total $21,535,339
 $373,605
 $84,324
 $69,853
 $22,063,121
 $21,483,016
 $350,261
 $66,535
 $63,497
 $21,963,309


(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 415,755411,089 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 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 (now estimated to be approximately $48$40 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. Two separate small groups of bondholders have filed arbitration complaints with the Financial Institutions Regulatory Association respecting the bonds and other bonds for which the Bank served as indenture trustee. Management has been advised by counsel that the Bank has valid defenses to the claims.
On September 15, 2017, the principal of the bond issuances filed for protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Georgia. The principal subsequently sought and obtained an order dismissing the Chapter 11 proceeding. The obligation of the principal to pay all principal and interest on the bonds is non-dischargeable in bankruptcy. 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 5, 2018, the Bank was sued in the Fulton, Georgia County District Court by the administratrix of a deceased resident who had sued for and obtained a judgment for wrongful death against one of the operators of a nursing home financed by one of the bonds which are the subject of the litigation discussed above. The judgment is alleged to total approximately $8 million in principal and interest at this time. Plaintiff alleges that BOKF, in its capacity as indenture trustee for the bonds, colluded with the borrower and others to defraud creditors of the nursing home by misleading the public about the solvency of the nursing home. Plaintiff alleges that this conduct has prevented her from collecting on her judgment. The Bank is advised by counsel that the Bank has valid defenses to the plaintiffs’ claims and no loss is probable.


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 representing a different set of municipal securities. 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.
The County of Bernalillo, New Mexico, commenced arbitration pursuant to the Arbitration Rules of FINRA seeking recovery of $5.6 million alleging that various municipal bonds purchased by the elected County Treasurer of Bernalillo County, New Mexico, from BOK Financial Securities, Inc. were unsuitable. The arbitration was conducted in July 2017. The arbitration panel found the County of Bernalillo’s complaint frivolous and awarded BOK Financial Securities, Inc. attorney fees and costs.  The County has sued in the United States District Court for New Mexico to set aside the award of fees and costs to BOK Financial Securities but not the finding that the County's complaint was frivolous.




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. Management has been advised by counsel that a loss is not probable and that the amount of the liability, if any, cannot be quantified at this time.
On March 7, 2017, a plaintiff filed a putative class action in the United States District Court for the Northern District of Texas alleging an extended overdraft fee charged by BOKF, NAthe Bank is interest and exceeds permitted rates. BOKF, NAThe Bank was previously sued in a class action in the United States District Court for the Northern District of Oklahoma making the same allegations. Pursuant to a motion to dismiss, the Northern District of Oklahoma Court action was dismissed. Other courts considering the question whether extended overdraft fees are interest have likewise determined such fees are not interest. BOKF, NAThe Bank has moved to dismiss the action. The Northern District of Texas Action was dismissed upon motion by the Bank with leave granted the plaintiff to file an amended complaint. The plaintiff filed an amended complaint. The Bank has again moved to dismiss the complaint, which motion to dismiss is pending before the Court. Management is advised by counsel that a loss is not probable and that the loss, if any, cannot be reasonably estimated.
On July 6, 2018, a plaintiff served a petition in a putative class action in the Oklahoma District Court for Tulsa County Oklahoma alleging BOKF NA breached its Demand Deposit Agreements by charging overdraft and not sufficient funds fees to deposit accounts on the day of the transaction triggering the fee and by the bank's debit hold process causing overdraft fees. Management is advised by counsel that a loss is not probable and that the loss, if any, cannot be reasonably estimated.

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 $3.4 million at SeptemberJune 30, 20172018. 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.



A summary of consolidated and unconsolidated alternative investments as of SeptemberJune 30, 20172018, December 31, 20162017 and SeptemberJune 30, 20162017 is as follows (in thousands):

 September 30, 2017 June 30, 2018
 Loans 
Other
assets
 
Other
liabilities
 
Other
borrowings
 
Non-controlling
interests
 Loans 
Other
assets
 
Other
liabilities
 
Other
borrowings
 
Non-controlling
interests
Consolidated:                    
Private equity funds $—
 $15,621
 $—
 $—
 $12,806
 $—
 $14,150
 $—
 $—
 $10,747
Tax credit entities 10,000
 11,119
 —
 10,963
 10,000
 10,000
 10,964
 —
 10,964
 10,000
Other —
 15,618
 1,588
 3,104
 2,819
 —
 17,608
 1,871
 —
 1,867
Total consolidated $10,000
 $42,358
 $1,588
 $14,067
 $25,625
 $10,000
 $42,722
 $1,871
 $10,964
 $22,614
                    
Unconsolidated:                    
Tax credit entities $65,247
 $145,479
 $61,364
 $—
 $—
 $62,188
 $147,071
 $49,472
 $—
 $—
Other —
 32,462
 13,657
 —
 —
 —
 45,070
 19,786
 —
 —
Total unconsolidated $65,247
 $177,941
 $75,021
 $—
 $—
 $62,188
 $192,141
 $69,258
 $—
 $—

  December 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
 $—
 $—

 September 30, 2016 December 31, 2017
 Loans 
Other
assets
 
Other
liabilities
 
Other
borrowings
 
Non-controlling
interests
 Loans 
Other
assets
 
Other
liabilities
 
Other
borrowings
 
Non-controlling
interests
Consolidated:                    
Private equity funds $—
 $18,420
 $—
 $—
 $15,946
 $—
 $14,783
 $—
 $—
 $11,927
Tax credit entities 10,000
 11,740
 —
 10,964
 10,000
 10,000
 10,964
 —
 10,964
 10,000
Other —
 30,978
 2,346
 1,063
 8,154
 —
 1,040
 —
 —
 1,040
Total consolidated $10,000
 $61,138
 $2,346
 $12,027
 $34,100
 $10,000
 $26,787
 $—
 $10,964
 $22,967
                    
Unconsolidated:                    
Tax credit entities $39,849
 $129,715
 $57,026
 $—
 $—
 $52,852
 $153,506
 $47,859
 $—
 $—
Other —
 30,272
 13,653
 —
 —
 —
 38,397
 22,968
 —
 —
Total unconsolidated $39,849
 $159,987
 $70,679
 $—
 $—
 $52,852
 $191,903
 $70,827
 $—
 $—



Other Commitments and Contingencies
  June 30, 2017
  Loans 
Other
assets
 
Other
liabilities
 
Other
borrowings
 
Non-controlling
interests
Consolidated:          
Private equity funds $—
 $16,905
 $—
 $—
 $14,199
Tax credit entities 10,000
 11,274
 —
 10,964
 10,000
Other —
 15,894
 1,621
 878
 2,877
Total consolidated $10,000
 $44,073
 $1,621
 $11,842
 $27,076
           
Unconsolidated:          
Tax credit entities $59,744
 $148,525
 $63,822
 $—
 $—
Other —
 33,155
 13,680
 —
 —
Total unconsolidated $59,744
 $181,680
 $77,502
 $—
 $—

At September 30, 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 September 30, 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 October 31, 2017,July 24, 2018, the Company declared a quarterly cash dividend of $0.450.50 per common share payable on or about NovemberAugust 27, 20172018 to shareholders of record as of NovemberAugust 13, 20172018.

Dividends declared were $0.440.45 per share and $1.32$0.90 per share during the three and ninesix months ended SeptemberJune 30, 20172018 and $0.430.44 per share and $1.29$0.88 per share during the three and ninesix months ended SeptemberJune 30, 20162017.

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   Unrealized Gain (Loss) on  
 Available for Sale Securities Investment Securities Transferred from AFS Employee Benefit Plans Total
Balance, December 31, 2015 $23,284
 $68
 $(1,765) $21,587
Net change in unrealized gain (loss) 133,108
 —
 —
 133,108
Reclassification adjustments included in earnings:        
Interest revenue, Investment securities, Taxable securities —
 (112) —
 (112)
Gain on available for sale securities, net (11,684) —
 —
 (11,684)
Other comprehensive income (loss), before income taxes 121,424
 (112) —
 121,312
Federal and state income taxes1
 47,216
 (44) —
 47,172
Other comprehensive income (loss), net of income taxes 74,208
 (68) —
 74,140
Balance, September 30, 2016 $97,492
 $—
 $(1,765) $95,727
         Available for Sale Securities Employee Benefit Plans Total
Balance, December 31, 2016 $(9,087) $—
 $(1,880) $(10,967) $(9,087) $(1,880) $(10,967)
Net change in unrealized gain (loss) 33,876
 —
 5
 33,881
 33,369
 —
 33,369
Reclassification adjustments included in earnings:             
Gain on available for sale securities, net (4,916) —
 —
 (4,916) (2,429) —
 (2,429)
Other comprehensive income, before income taxes 28,960
 —
 5
 28,965
Other comprehensive income (loss), before income taxes 30,940
 —
 30,940
Federal and state income taxes1
 11,239
 

 2
 11,241
 12,009
 —
 12,009
Other comprehensive income, net of income taxes 17,721
 —
 3
 17,724
Balance, September 30, 2017 $8,634
 $—
 $(1,877) $6,757
Other comprehensive income (loss), net of income taxes 18,931
 —
 18,931
Balance, June 30, 2017 $9,844
 $(1,880) $7,964
     
Balance, December 31, 2017 $(35,385) $(789) $(36,174)
Transition adjustment for net unrealized gains on equity securities (2,709) —
 (2,709)
Net change in unrealized gain (loss) (130,523) —
 (130,523)
Reclassification adjustments included in earnings:     
Loss on available for sale securities, net 1,052
 —
 1,052
Other comprehensive income (loss), before income taxes (129,471) —
 (129,471)
Federal and state income taxes2
 (33,049) —
 (33,049)
Other comprehensive income (loss), net of income taxes (96,422) —
 (96,422)
Balance, June 30, 2018 $(134,516)
$(789) $(135,305)
1 
Calculated using a 39 percent effectiveblended federal and state statutory tax rate.
2
Calculated using a 25 percent blended federal and state statutory tax rate.


(9)  Earnings Per Share
 
(In thousands, except share and per share amounts) Three Months Ended
September 30,		 Nine Months Ended
September 30,		 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2017 2016 2017 2016 2018 2017 2018 2017
Numerator:                
Net income attributable to BOK Financial Corp. shareholders $85,649
 $74,277
 $262,152
 $182,642
 $114,372
 $88,147
 $219,934
 $176,503
Less: Earnings allocated to participating securities 888
 916
 2,817
 2,275
 956
 926
 1,978
 1,929
Numerator for basic earnings per share – income available to common shareholders 84,761
 73,361
 259,335
 180,367
 113,416
 87,221
 217,956
 174,574
Effect of reallocating undistributed earnings of participating securities 1
 1
 2
 1
 1
 1
 1
 1
Numerator for diluted earnings per share – income available to common shareholders $84,762
 $73,362
 $259,337
 $180,368
 $113,417
 $87,222
 $217,957
 $174,575
                
Denominator:  
  
  
  
  
  
  
  
Weighted average shares outstanding 65,423,258
 65,895,430
 65,432,313
 66,031,497
 65,448,035
 65,416,274
 65,463,671
 65,436,909
Less: Participating securities included in weighted average shares outstanding 680,436
 810,038
 702,922
 822,723
 546,060
 686,522
 589,104
 714,165
Denominator for basic earnings per common share 64,742,822
 65,085,392
 64,729,391
 65,208,774
 64,901,975
 64,729,752
 64,874,567
 64,722,744
Dilutive effect of employee stock compensation plans1
 62,350
 72,449
 64,502
 54,792
 35,251
 63,382
 37,985
 65,578
Denominator for diluted earnings per common share 64,805,172
 65,157,841
 64,793,893
 65,263,566
 64,937,226
 64,793,134
 64,912,552
 64,788,322
                
Basic earnings per share $1.31
 $1.13
 $4.01
 $2.77
 $1.75
 $1.35
 $3.36
 $2.70
Diluted earnings per share $1.31
 $1.13
 $4.00
 $2.76
 $1.75
 $1.35
 $3.36
 $2.69
1 Excludes employee stock options with exercise prices greater than current market price.
 —
 —
 —
 —
 —
 —
 —
 —



(10)  Reportable Segments

Reportable segments reconciliation to the Consolidated Financial Statements for the three months ended SeptemberJune 30, 20172018 is as follows (in thousands):
 Commercial Consumer 
Wealth
Management
 Funds Management and Other 
BOK
Financial
Consolidated
 Commercial Consumer 
Wealth
Management
 Funds Management and Other 
BOK
Financial
Consolidated
Net interest revenue from external sources $157,080
 $25,576
 $11,169
 $24,627
 $218,452
 $182,127
 $21,746
 $18,754
 $15,935
 $238,562
Net interest revenue (expense) from internal sources (24,173) 12,213
 9,604
 2,356
 —
 (37,102) 17,548
 10,232
 9,322
 —
Net interest revenue 132,907
 37,789
 20,773
 26,983
 218,452
 145,025
 39,294
 28,986
 25,257
 238,562
Provision for credit losses 3,217
 1,315
 (623) (3,909) —
 10,108
 1,139
 (105) (11,142) —
Net interest revenue after provision for credit losses 129,690
 36,474
 21,396
 30,892
 218,452
 134,917
 38,155
 29,091
 36,399
 238,562
Other operating revenue 54,091
 47,033
 75,707
 (1,121) 175,710
 43,047
 46,320
 70,642
 (3,610) 156,399
Other operating expense 56,952
 56,785
 61,791
 90,406
 265,934
 47,483
 55,906
 61,491
 81,596
 246,476
Net direct contribution 126,829
 26,722
 35,312
 (60,635) 128,228
 130,481
 28,569
 38,242
 (48,807) 148,485
Gain on financial instruments, net 4
 1,686
 —
 (1,690) —
Gain (loss) on financial instruments, net 9
 (6,411) —
 6,402
 —
Change in fair value of mortgage servicing rights —
 (639) —
 639
 —
 —
 1,723
 —
 (1,723) —
Gain (loss) on repossessed assets, net (4,126) 292
 —
 3,834
 —
 (67) 174
 —
 (107) —
Corporate expense allocations 8,650
 17,039
 9,819
 (35,508) —
 11,269
 15,867
 11,142
 (38,278) —
Net income before taxes 114,057
 11,022
 25,493
 (22,344) 128,228
 119,154
 8,188
 27,100
 (5,957) 148,485
Federal and state income taxes 44,368
 4,288
 9,917
 (16,135) 42,438
 31,577
 2,086
 6,981
 (7,314) 33,330
Net income 69,689
 6,734
 15,576
 (6,209) 85,790
 87,577
 6,102
 20,119
 1,357
 115,155
Net income attributable to non-controlling interests —
 —
 —
 141
 141
 —
 —
 —
 783
 783
Net income attributable to BOK Financial Corp. shareholders $69,689
 $6,734
 $15,576
 $(6,350) $85,649
 $87,577
 $6,102
 $20,119
 $574
 $114,372
                    
Average assets $17,558,390
 $9,115,319
 $6,992,021
 $(657,560) $33,008,170
 $18,072,155
 $8,353,558
 $8,495,557
 $(1,015,235) $33,906,035



Reportable segments reconciliation to the Consolidated Financial Statements for the ninesix months ended SeptemberJune 30, 20172018 is as follows (in thousands):
 Commercial Consumer 
Wealth
Management
 Funds Management and Other 
BOK
Financial
Consolidated
 Commercial Consumer 
Wealth
Management
 Funds Management and Other 
BOK
Financial
Consolidated
Net interest revenue from external sources $435,946
 $70,208
 $33,130
 $85,554
 $624,838
 $342,541
 $43,499
 $34,161
 $38,097
 $458,298
Net interest revenue (expense) from internal sources (61,803) 35,002
 28,784
 (1,983) —
 (65,445) 32,772
 20,164
 12,509
 —
Net interest revenue 374,143
 105,210
 61,914
 83,571
 624,838
 277,096
 76,271
 54,325
 50,606
 458,298
Provision for credit losses 2,983
 3,512
 (676) (5,819) —
 10,735
 2,440
 (153) (18,022) (5,000)
Net interest revenue after provision for credit losses 371,160
 101,698
 62,590
 89,390
 624,838
 266,361
 73,831
 54,478
 68,628
 463,298
Other operating revenue 156,139
 146,440
 225,434
 245
 528,258
 82,722
 91,269
 145,409
 (7,012) 312,388
Other operating expense 168,517
 166,027
 182,816
 244,170
 761,530
 93,950
 105,760
 124,295
 166,901
 490,906
Net direct contribution 358,782
 82,111
 105,208
 (154,535) 391,566
 255,133
 59,340
 75,592
 (105,285) 284,780
Gain on financial instruments, net 46
 5,242
 —
 (5,288) —
 16
 (29,672) —
 29,656
 —
Change in fair value of mortgage servicing rights —
 (5,726) —
 5,726
 —
 —
 22,929
 —
 (22,929) —
Gain (loss) on repossessed assets, net (2,728) 253
 —
 2,475
 —
 (4,232) 66
 —
 4,166
 —
Corporate expense allocations 26,144
 50,947
 30,438
 (107,529) —
 23,776
 31,897
 22,097
 (77,770) —
Net income before taxes 329,956
 30,933
 74,770
 (44,093) 391,566
 227,141
 20,766
 53,495
 (16,622) 284,780
Federal and state income taxes 128,353
 12,033
 29,086
 (41,226) 128,246
 60,319
 5,288
 13,767
 (15,096) 64,278
Net income 201,603
 18,900
 45,684
 (2,867) 263,320
 166,822
 15,478
 39,728
 (1,526) 220,502
Net income attributable to non-controlling interests —
 —
 —
 1,168
 1,168
 —
 —
 —
 568
 568
Net income attributable to BOK Financial Corp. shareholders $201,603
 $18,900
 $45,684
 $(4,035) $262,152
 $166,822
 $15,478
 $39,728
 $(2,094) $219,934
                    
Average assets $17,525,658
 $8,871,470
 $6,971,369
 $(591,059) $32,777,438
 $17,933,756
 $8,410,513
 $8,296,780
 $(825,055) $33,815,994

Reportable segments reconciliation to the Consolidated Financial Statements for the three months ended SeptemberJune 30, 20162017 is as follows (in thousands):
 Commercial Consumer 
Wealth
Management
 Funds Management and Other 
BOK
Financial
Consolidated
 Commercial Consumer 
Wealth
Management
 Funds Management and Other 
BOK
Financial
Consolidated
Net interest revenue from external sources $123,599
 $22,098
 $9,274
 $32,875
 $187,846
 $154,377
 $20,756
 $10,475
 $19,596
 $205,204
Net interest revenue (expense) from internal sources (15,052) 9,263
 $7,401
 (1,612) —
 (21,715) 13,447
 10,325
 (2,057) —
Net interest revenue 108,547
 31,361
 16,675
 31,263
 187,846
 132,662
 34,203
 20,800
 17,539
 205,204
Provision for credit losses 5,601
 1,157
 (89) 3,331
 10,000
 1,228
 926
 (92) (2,062) —
Net interest revenue after provision for credit losses 102,946
 30,204
 16,764
 27,932
 177,846
 131,434
 33,277
 20,892
 19,601
 205,204
Other operating revenue 49,642
 60,603
 73,523
 3,542
 187,310
 56,353
 50,744
 75,569
 (414) 182,252
Other operating expense 53,375
 60,964
 64,426
 79,323
 258,088
 59,511
 55,125
 60,616
 75,633
 250,885
Net direct contribution 99,213
 29,843
 25,861
 (47,849) 107,068
 128,276
 28,896
 35,845
 (56,446) 136,571
Gain (loss) on financial instruments, net —
 (1,087) (42) 1,129
 —
 3
 5,224
 —
 (5,227) —
Change in fair value of mortgage servicing rights —
 2,327
 —
 (2,327) —
 —
 (6,943) —
 6,943
 —
Gain on repossessed assets, net 1,486
 161
 —
 (1,647) —
Gain (loss) on repossessed assets, net 1,403
 98
 —
��(1,501) —
Corporate expense allocations 9,054
 16,905
 10,912
 (36,871) —
 8,955
 16,912
 9,947
 (35,814) —
Net income before taxes 91,645
 14,339
 14,907
 (13,823) 107,068
 120,727
 10,363
 25,898
 (20,417) 136,571
Federal and state income taxes 35,650
 5,578
 5,799
 (15,071) 31,956
 49,382
 4,031
 10,209
 (15,917) 47,705
Net income 55,995
 8,761
 9,108
 1,248
 75,112
 71,345
 6,332
 15,689
 (4,500) 88,866
Net income attributable to non-controlling interests —
 —
 —
 835
 835
 —
 —
 —
 719
 719
Net income attributable to BOK Financial Corp. shareholders $55,995
 $8,761
 $9,108
 $413
 $74,277
Net income (loss) attributable to BOK Financial Corp. shareholders $71,345
 $6,332
 $15,689
 $(5,219) $88,147
                    
Average assets $16,934,587
 $8,827,816
 $6,413,735
 $470,335
 $32,646,473
 $17,791,671
 $8,441,831
 $6,960,872
 $(825,803) $32,368,571



Reportable segments reconciliation to the Consolidated Financial Statements for the ninesix months ended SeptemberJune 30, 20162017 is as follows (in thousands):
 Commercial Consumer 
Wealth
Management
 Funds Management and Other 
BOK
Financial
Consolidated
 Commercial Consumer 
Wealth
Management
 Funds Management and Other 
BOK
Financial
Consolidated
Net interest revenue from external sources $358,713
 $65,897
 $21,620
 $106,800
 $553,030
 $301,753
 $39,348
 $21,960
 $43,325
 $406,386
Net interest revenue (expense) from internal sources (44,259) 27,492
 $22,258
 (5,491) —
 (39,831) 25,864
 19,181
 (5,214) —
Net interest revenue 314,454
 93,389
 43,878
 101,309
 553,030
 261,922
 65,212
 41,141
 38,111
 406,386
Provision for credit losses 34,024
 4,177
 (479) 27,278
 65,000
 (236) 2,199
 (53) (1,910) —
Net interest revenue after provision for credit losses 280,430
 89,212
 44,357
 74,031
 488,030
 262,158
 63,013
 41,194
 40,021
 406,386
Other operating revenue 146,248
 172,072
 218,042
 (6,096) 530,266
 103,198
 95,879
 149,727
 3,744
 352,548
Other operating expense 162,039
 179,487
 186,524
 223,993
 752,043
 112,416
 107,991
 121,025
 154,164
 495,596
Net direct contribution 264,639
 81,797
 75,875
 (156,058) 266,253
 252,940
 50,901
 69,896
 (110,399) 263,338
Gain (loss) on financial instruments, net —
 30,539
 (42) (30,497) —
 41
 3,557
 —
 (3,598) —
Change in fair value of mortgage servicing rights —
 (41,944) —
 41,944
 —
 —
 (5,087) —
 5,087
 —
Gain on repossessed assets, net 806
 566
 —
 (1,372) —
Gain (loss) on repossessed assets, net 1,398
 (39) —
 (1,359) —
Corporate expense allocations 26,681
 49,513
 31,864
 (108,058) —
 17,674
 33,658
 20,619
 (71,951) —
Net income before taxes 238,764
 21,445
 43,969
 (37,925) 266,253
 236,705
 15,674
 49,277
 (38,318) 263,338
Federal and state income taxes 92,879
 8,342
 17,104
 (34,444) 83,881
 96,949
 6,097
 19,429
 (36,667) 85,808
Net income 145,885
 13,103
 26,865
 (3,481) 182,372
 139,756
 9,577
 29,848
 (1,651) 177,530
Net loss attributable to non-controlling interests —
 —
 —
 (270) (270)
Net income attributable to non-controlling interests —
 —
 —
 1,027
 1,027
Net income attributable to BOK Financial Corp. shareholders $145,885
 $13,103
 $26,865
 $(3,211) $182,642
 $139,756
 $9,577
 $29,848
 $(2,678) $176,503
                    
Average assets $16,958,999
 $8,763,564
 $5,916,545
 $410,075
 $32,049,183
 $17,716,738
 $8,360,022
 $6,960,872
 $(377,472) $32,660,160


(11) Fees and Commissions Revenue

Fees and commissions revenue is generated through the sales of products, consisting primarily of financial instruments, and the performance of services for customers under contractual obligations. Revenue from providing services for customers is recognized at the time services are provided in an amount that reflects the consideration we expect to be entitled to for those services. Revenue is recognized based on the application of five steps:
Identify the contract with a customer
Identify the performance obligations in the contract
Determine the transaction price
Allocate the transaction price to the performance obligations in the contract
Recognize revenue when (or as) the Company satisfies a performance obligation

For contracts with multiple performance obligations, individual performance obligations are accounted for separately if the customer can benefit from the good or service on its own or with other resources readily available to the customer and the promise to transfer goods and services to the customer is separately identifiable in the contract. The transaction price is allocated to the performance obligations based on relative standalone selling prices.

Revenue is recognized on a gross basis whenever we have primary responsibility and risk in providing the services or products to our customers and have discretion in establishing the price for the services or products. Revenue is recognized on a net basis whenever we act as an agent for products or services of others. 
Brokerage and trading revenue includes revenues from trading, customer hedging, retail brokerage and investment banking. Trading revenue includes net realized and unrealized gains primarily related to sales of securities to institutional customers and related derivative contracts. Customer hedging revenue includes realized and unrealized changes in the fair value of derivative contracts held for customer risk management programs including credit valuation adjustments, as necessary. We offer commodity, interest rate, foreign exchange and equity derivatives to our customers. These customer contracts are offset with contracts with selected counterparties and exchanges to minimize changes in market risk from changes in commodity prices, interest rates or foreign exchange rates. Retail brokerage revenue represents fees and commissions earned on sales of fixed income securities, annuities, mutual funds and other financial instruments to retail customers. Investment banking revenue includes fees earned upon completion of underwriting and financial advisory services. Investment banking revenue also includes fees earned in conjunction with loan syndications.
Transaction card revenue includes merchant discount fees and electronic funds transfer network fees, net of interchange fees paid to card issuers and assessments paid to card networks. Merchant discount fees represent fees paid by customers for account management and electronic processing of card transactions. Merchant discount fees are recognized at the time the customer’s transactions are processed or other services are performed. The Company also maintains the TransFund electronic funds transfer network for the benefit of its members, which includes the Bank. Electronic funds transfer fees are recognized as electronic transactions processed on behalf of its members. 
Fiduciary and asset management revenue includes fees from asset management, custody, recordkeeping, investment advisory and administration services. Revenue is recognized on an accrual basis at the time the services are performed and may be based on either the fair value of the account or the service provided.
Deposit service charges and fees include commercial account service charges, overdraft fees, check card fee revenue and automated service charge and other deposit service fees. Fees are recognized at least quarterly in accordance with published deposit account agreements and disclosure statements for retail accounts or contractual agreements for commercial accounts. Item charges for overdraft or non-sufficient funds items are recognized as items are presented for payment. Account balance charges and activity fees are accrued monthly and collected in arrears. Commercial account activity fees may be offset by an earnings credit based on account balances. Check card fees represent interchange fees paid by a merchant bank for transactions processed from cards issued by the Company. Check card fees are recognized when transactions are processed.  

Mortgage banking revenue includes revenues recognized in conjunction with the origination, marketing and servicing of conventional and government-sponsored residential mortgage loans. Mortgage production revenue includes net realized gains (losses) on sales of residential mortgage loans in the secondary market and the net change in unrealized gains (losses) on residential mortgage loans held for sale. Mortgage production revenue also includes changes in the fair value of derivative contracts not designated as hedging instruments related to residential mortgage loan commitments and forward sales contracts. Mortgage servicing revenue includes servicing fee income and late charges on loans serviced for others.



Fees and commissions revenue by reportable segment and primary service line is as follows for the three months ended June 30, 2018.
 Commercial Consumer Wealth Management Funds Management & Other Consolidated 
Out of Scope1
 
In Scope2
Trading revenue$—
 $—
 $6,338
 $—
 $6,338
 $6,338
 $—
Customer hedging revenue2,892
 —
 7,611
 (708) 9,795
 9,795
 —
Retail brokerage revenue—
 —
 4,886
 (75) 4,811
 —
 4,811
Investment banking revenue2,903
 —
 2,641
 —
 5,544
 2,300
 3,244
Brokerage and trading revenue5,795
 —
 21,476
 (783) 26,488
 18,433
 8,055
TransFund EFT network revenue18,048
 1,009
 (21) 2
 19,038
 —
 19,038
Merchant services revenue1,921
 16
 —
 —
 1,937
 —
 1,937
Transaction card revenue19,969
 1,025
 (21) 2
 20,975
 —
 20,975
Personal trust revenue—
 —
 20,558
 —
 20,558
 —
 20,558
Corporate trust revenue—
 —
 4,935
 —
 4,935
 —
 4,935
Institutional trust & retirement plan services revenue—
 —
 11,039
 —
 11,039
 —
 11,039
Investment management services and other—
 —
 5,217
 (50) 5,167
 —
 5,167
Fiduciary and asset management revenue—
 —
 41,749
 (50) 41,699
 —
 41,699
Commercial account service charge revenue10,912
 362
 610
 —
 11,884
 —
 11,884
Overdraft fee revenue98
 8,768
 32
 7
 8,905
 —
 8,905
Check card revenue—
 5,343
 —
 —
 5,343
 —
 5,343
Automated service charge and other deposit fee revenue38
 1,633
 24
 —
 1,695
 —
 1,695
Deposit service charges and fees11,048
 16,106
 666
 7
 27,827
 —
 27,827
Mortgage production revenue—
 9,915
 —
 —
 9,915
 9,915
 —
Mortgage servicing revenue—
 16,902
 —
 (471) 16,431
 16,431
 —
Mortgage banking revenue—
 26,817
 —
 (471) 26,346
 26,346
 —
Other revenue6,062
 2,384
 6,619
 (547) 14,518
 9,372
 5,146
Total fees and commissions revenue$42,874
 $46,332
 $70,489
 $(1,842) $157,853
 $54,151
 $103,702
1
Out of scope revenue generally relates to financial instruments or contractual rights and obligations within the scope of other applicable accounting guidance.
2
In scope revenue represents revenue subject to FASB ASC Topic 606, Revenue from Contracts with Customers.



Fees and commissions revenue by reportable segment and primary service line is as follows for the six months ended June 30, 2018.
 Commercial Consumer Wealth Management Funds Management & Other Consolidated 
Out of Scope1
 
In Scope2
Trading revenue$—
 $—
 $16,732
 $—
 $16,732
 $16,732
 $—
Customer hedging revenue4,914
 —
 14,576
 1,212
 20,702
 20,702
 —
Retail brokerage revenue—
 —
 9,738
 (173) 9,565
 —
 9,565
Investment banking revenue3,964
 —
 6,173
 —
 10,137
 3,361
 6,776
Brokerage and trading revenue8,878
 —
 47,219
 1,039
 57,136
 40,795
 16,341
TransFund EFT network revenue36,250
 1,996
 (40) 3
 38,209
 —
 38,209
Merchant services revenue3,725
 31
 —
 —
 3,756
 —
 3,756
Transaction card revenue39,975
 2,027
 (40) 3
 41,965
 —
 41,965
Personal trust revenue—
 —
 40,658
 —
 40,658
 —
 40,658
Corporate trust revenue—
 —
 10,576
 —
 10,576
 —
 10,576
Institutional trust & retirement plan services revenue—
 —
 22,489
 —
 22,489
 —
 22,489
Investment management services and other—
 —
 9,906
 (98) 9,808
 —
 9,808
Fiduciary and asset management revenue—
 —
 83,629
 (98) 83,531
 —
 83,531
Commercial account service charge revenue21,856
 721
 1,215
 —
 23,792
 —
 23,792
Overdraft fee revenue188
 17,252
 66
 10
 17,516
 —
 17,516
Check card revenue—
 10,261
 —
 —
 10,261
 —
 10,261
Automated service charge and other deposit fee revenue75
 3,292
 50
 2
 3,419
 —
 3,419
Deposit service charges and fees22,119
 31,526
 1,331
 12
 54,988
 —
 54,988
Mortgage production revenue—
 19,367
 —
 —
 19,367
 19,367
 —
Mortgage servicing revenue—
 33,929
 —
 (925) 33,004
 33,004
 —
Mortgage banking revenue—
 53,296
 —
 (925) 52,371
 52,371
 —
Other revenue11,919
 4,447
 13,157
 (2,675) 26,848
 17,727
 9,121
Total fees and commissions revenue$82,891
 $91,296
 $145,296
 $(2,644) $316,839
 $110,893
 $205,946
1
Out of scope revenue generally relates to financial instruments or contractual rights and obligations within the scope of other applicable accounting guidance.
2
In scope revenue represents revenue subject to FASB ASC Topic 606, Revenue from Contracts with Customers.



(12) Federal and State Income Taxes

The Tax Cuts and Jobs Act (the "Act") enacted on December 22, 2017, reduced the federal corporate income tax rate from 35% to 21% beginning January 1, 2018. Provisions of the Act are broad and complex, and we continue to evaluate its effect on the Company's financial statements. Results of this evaluation did not significantly impact the Company's financial position or results of operations for the three and six months ended June 30, 2018.

The reconciliations of income attributable to continuing operations at the U.S. federal statutory tax rate to income tax expense are as follows (in thousands):
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2018 2017 2018 2017
Amount:       
Federal statutory tax$31,182
 $47,800
 $59,804
 $92,168
Tax exempt revenue(1,653) (3,224) (3,465) (6,335)
Effect of state income taxes, net of federal benefit3,288
 2,944
 6,945
 5,389
Utilization of tax credits, net of proportional amortization of low-income housing limited partnership investments(1,334) (889) (2,667) (2,976)
Share-based compensation(424) 1,636
 (2,044) (2,301)
Adjustment to provisional amounts related to tax reform—
 —
 1,895
 —
Other, net2,271
 (562) 3,810
 (137)
Total income tax expense$33,330
 $47,705
 $64,278
 $85,808

 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2018 2017 2018 2017
Percent of pretax income:       
Federal statutory tax21.0 % 35.0 % 21.0 % 35.0 %
Tax exempt revenue(1.1) (2.4) (1.2) (2.4)
Effect of state income taxes, net of federal benefit2.2
 2.2
 2.4
 2.0
Utilization of tax credits, net of proportional amortization of low-income housing limited partnership investments(0.9) (0.7) (0.9) (1.1)
Share-based compensation(0.3) 1.2
 (0.7) (0.9)
Adjustment to provisional amounts related to tax reform—
 —
 0.7
 —
Other, net1.5
 (0.4) 1.3
 —
Total22.4 % 34.9 % 22.6 % 32.6 %


(1113) 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. An orderly transaction assumes exposure to the market for a customary period for marketing activities prior to the measurement date and not a forced liquidation or distressed sale. 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 and ninesix months ended SeptemberJune 30, 20172018 and 20162017, respectively. Transfers between significant other observable inputs and significant unobservable inputs during the three and ninesix months ended SeptemberJune 30, 20172018 and 20162017 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 SeptemberJune 30, 20172018, December 31, 20162017 or SeptemberJune 30, 20162017.



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 SeptemberJune 30, 20172018 (in thousands):
 Total Quoted Prices in Active Markets for Identical Instruments (Level 1) Significant Other Observable Inputs (Level 2) 
Significant Unobservable Inputs
(Level 3)
 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 $30,162
 $—
 $30,162
 $—
 $28,750
 $—
 $28,750
 $—
U.S. government agency residential mortgage-backed securities 516,760
 —
 516,760
 —
 1,605,001
 —
 1,605,001
 —
Municipal and other tax-exempt securities 56,148
 —
 56,148
 —
 70,606
 —
 70,606
 —
Asset-backed securities 193,271
 —
 193,271
 —
Other trading securities 11,047
 —
 11,047
 —
 11,987
 —
 11,987
 —
Total trading securities 614,117
 —
 614,117
 —
 1,909,615
 —
 1,909,615
 —
Available for sale securities:  
  
  
  
  
  
  
  
U.S. Treasury 999
 999
 —
 —
 490
 490
 —
 —
Municipal and other tax-exempt securities 28,368
 —
 23,583
 4,785
 10,697
 —
 8,667
 2,030
U.S. government agency residential mortgage-backed securities 5,326,384
 —
 5,326,384
 —
 5,304,560
 —
 5,304,560
 —
Privately issued residential mortgage-backed securities 99,994
 —
 99,994
 —
 83,224
 —
 83,224
 —
Commercial mortgage-backed securities guaranteed by U.S. government agencies 2,889,346
 —
 2,889,346
 —
 2,738,451
 —
 2,738,451
 —
Other debt securities 4,153
 —
 —
 4,153
 25,444
 —
 24,973
 471
Perpetual preferred stock 16,245
 —
 16,245
 —
Equity securities and mutual funds 17,710
 2,578
 15,132
 —
Total available for sale securities 8,383,199
 3,577
 8,370,684
 8,938
 8,162,866
 490
 8,159,875
 2,501
Fair value option securities – U.S. government agency residential mortgage-backed securities 819,531
 —
 819,531
 —
 482,227
 —
 482,227
 —
Residential mortgage loans held for sale 275,643
 —
 263,543
 12,100
 223,301
 —
 209,058
 14,243
Mortgage servicing rights1
 245,858
 —
 —
 245,858
 278,719
 —
 —
 278,719
Derivative contracts, net of cash collateral2
 352,559
 8,498
 344,061
 —
 373,373
 21,056
 352,317
 —
Liabilities:  
        
      
Derivative contracts, net of cash collateral2
 336,327
 6,903
 329,424
 —
 234,856
 17,214
 217,642
 —
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.
2 
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 energy and agricultural derivative contacts.contacts, net of cah margin. Derivative contacts in liability positions that were valued using quoted prices in active markets for identical instruments are exchange-traded energy and interest rate derivative contracts, net of cash margin.



The fair value of financial assets and liabilities measured on a recurring basis was as follows as of December 31, 20162017 (in thousands):
 Total Quoted Prices in Active Markets for Identical Instruments (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs
(Level 3)		 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
 $—
 $21,196
 $—
 $21,196
 $—
U.S. government agency residential mortgage-backed securities 310,067
 —
 310,067
 —
 392,673
 —
 392,673
 —
Municipal and other tax-exempt securities 14,427
 —
 14,427
 —
 13,559
 —
 13,559
 —
Asset-backed securities 23,885
 —
 23,885
 —
Other trading securities 6,900
 —
 6,900
 —
 11,363
 —
 11,363
 —
Total trading securities 337,628
 —
 337,628
 —
 462,676
 —
 462,676
 —
Available for sale securities:  
  
  
  
  
  
  
  
U.S. Treasury 999
 999
 —
 —
 1,000
 1,000
 —
 —
Municipal and other tax-exempt securities 40,993
 —
 35,204
 5,789
 27,080
 —
 22,278
 4,802
U.S. government agency residential mortgage-backed securities 5,460,386
 —
 5,460,386
 —
 5,309,152
 —
 5,309,152
 —
Privately issued residential mortgage-backed securities 115,535
 —
 115,535
 —
 93,221
 —
 93,221
 —
Commercial mortgage-backed securities guaranteed by U.S. government agencies 3,017,933
 —
 3,017,933
 —
 2,834,961
 —
 2,834,961
 —
Other debt securities 4,152
 —
 —
 4,152
 25,481
 —
 25,009
 472
Perpetual preferred stock 18,474
 —
 18,474
 —
 15,767
 —
 15,767
 —
Equity securities and mutual funds 18,357
 3,495
 14,862
 —
 14,916
 —
 14,916
 —
Total available for sale securities 8,676,829
 4,494
 8,662,394
 9,941
 8,321,578
 1,000
 8,315,304
 5,274
Fair value option securities – U.S. government agency residential mortgage-backed securities 77,046
 —
 77,046
 —
 755,054
 —
 755,054
 —
Residential mortgage loans held for sale 301,897
 —
 290,280
 11,617
 221,378
 —
 209,079
 12,299
Mortgage servicing rights1
 247,073
 —
 —
 247,073
 252,867
 —
 —
 252,867
Derivative contracts, net of cash collateral2
 689,872
 7,541
 682,331
 —
 220,502
 8,179
 212,323
 —
Liabilities: 

       

      
Derivative contracts, net of cash collateral2
 664,531
 6,972
 657,559
 —
 171,963
 —
 171,963
 —
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.
2 
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-rateinterest rate, energy and energyagricultural derivative contacts, net of cash margin.contacts. 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 agriculturalenergy derivative contracts, net offully offset by cash margin.




The fair value of financial assets and liabilities measured on a recurring basis was as follows as of SeptemberJune 30, 20162017 (in thousands):
 Total Quoted Prices in Active Markets for Identical Instruments (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs
(Level 3)		 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 $15,705
 $—
 $15,705
 $—
 $20,954
 $—
 $20,954
 $—
U.S. government agency residential mortgage-backed securities 464,749
 —
 464,749
 —
 365,171
 —
 365,171
 —
Municipal and other tax-exempt securities 54,856
 —
 54,856
 —
 45,444
 —
 45,444
 —
Other trading securities 11,305
 —
 11,305
 —
 9,845
 —
 9,845
 —
Total trading securities 546,615
 —
 546,615
 —
 441,414
 —
 441,414
 —
Available for sale securities:  
  
  
  
  
  
  
  
U.S. Treasury 1,002
 1,002
 —
 —
 998
 998
 —
 —
Municipal and other tax-exempt securities 42,092
 —
 36,379
 5,713
 32,765
 —
 28,110
 4,655
U.S. government agency residential mortgage-backed securities 5,668,672
 —
 5,668,672
 —
 5,382,377
 —
 5,382,377
 —
Privately issued residential mortgage-backed securities 121,603
 —
 121,603
 —
 103,383
 —
 103,383
 —
Commercial mortgage-backed securities guaranteed by U.S. government agencies 2,986,495
 —
 2,986,495
 —
 2,782,070
 —
 2,782,070
 —
Other debt securities 4,151
 —
 —
 4,151
 4,152
 —
 —
 4,152
Perpetual preferred stock 19,578
 —
 19,578
 —
 16,568
 —
 16,568
 —
Equity securities and mutual funds 18,690
 3,544
 15,146
 —
 18,728
 3,516
 15,212
 —
Total available for sale securities 8,862,283
 4,546
 8,847,873
 9,864
 8,341,041
 4,514
 8,327,720
 8,807
Fair value option securities:        
U.S. Treasury 222,409
 222,409
 —
 —
U.S. government agency residential mortgage-backed securities —
 —
 —
 —
Total fair value option securities 222,409
 222,409
 —
 —
Fair value option securities – U.S. government agency residential mortgage-backed securities 445,169
 —
 445,169
 —
Residential mortgage loans held for sale 447,592
 —
 438,291
 9,301
 287,259
 —
 274,524
 12,735
Mortgage servicing rights1
 203,621
 —
 —
 203,621
 245,239
 —
 —
 245,239
Derivative contracts, net of cash collateral2
 655,078
 5,575
 649,503
 —
 280,289
 46,366
 233,923
 —
Liabilities:  
        
      
Derivative contracts, net of cash collateral2
 573,987
 1,308
 572,679
 —
 285,819
 20,915
 264,904
 —
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.
2 
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 agriculturalinterest rate derivative contacts, net of cash margin.contacts. Derivative contracts in liability positions that were valued using quoted prices in active markets for identical instruments (Level 1) are exchange-traded interest rate and energyagricultural derivative contracts, net cash margin.




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 thecurrent fair value, probability of asset contracts. The reduction in fair value is recognized in earnings during the current period.default and loss given default.

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.


The following represents the changes for the three and ninesix months ended SeptemberJune 30, 20172018 related to assets measured at fair value on a recurring basis using significant unobservable inputs (in thousands):
 Available for Sale Securities �� Available for Sale Securities  
 Municipal and other tax-exempt securities Other debt securities Residential mortgage loans held for sale Municipal and other tax-exempt securities Other debt securities Residential mortgage loans held for sale
Balance, June 30, 2017 $4,655
 $4,152
 $12,735
Balance, March 31, 2018 $1,891
 $472
 $13,871
Transfer to Level 3 from Level 21
 —
 —
 176
 —
 —
 687
Purchases —
 —
 —
 —
 —
 —
Proceeds from sales —
 —
 (847) —
 —
 (488)
Redemptions and distributions —
 —
 —
 —
 —
 —
Gain recognized in earnings:      
Gain (loss) recognized in earnings:      
Mortgage banking revenue —
 —
 36
 —
 —
 173
Other comprehensive income:            
Net change in unrealized gain 130
 1
 —
 139
 (1) —
Balance, September 30, 2017 $4,785
 $4,153
 $12,100
Balance, June 30, 2018 $2,030
 $471
 $14,243
1  
Recurring 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.
 Available for Sale Securities   Available for Sale Securities  
 Municipal and other tax-exempt Other debt securities Residential mortgage loans held for sale Municipal and other tax-exempt Other debt securities Residential mortgage loans held for sale
Balance, December 31, 2016 $5,789
 $4,152
 $11,617
Balance, December 31, 2017 $4,802
 $472
 $12,299
Transfer to Level 3 from Level 21
 —
 —
 2,916
 —
 —
 2,843
Purchases —
 —
 —
 —
 —
 —
Proceeds from sales —
 —
 (2,549) —
 —
 (812)
Redemptions and distributions (1,100) —
 —
 (3,045) —
 —
Gain (loss) recognized in earnings:            
Mortgage banking revenue —
 —
 116
 —
 —
 (87)
Other comprehensive income (loss):            
Net change in unrealized gain (loss) 96
 1
 —
 273
 (1) —
Balance, September 30, 2017 $4,785
 $4,153
 $12,100
Balance, June 30, 2018 $2,030
 $471
 $14,243
1 
Recurring 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 and six months ended SeptemberJune 30, 20162017 related to assets measured at fair value on a recurring basis using significant unobservable inputs (in thousands):
 Available for Sale Securities   Available for Sale Securities  
 Municipal and other tax-exempt securities Other debt securities Residential mortgage loans held for sale Municipal and other tax-exempt securities Other debt securities Residential mortgage loans held for sale
Balance, June 30, 2016 $9,600
 $4,151
 $9,749
Balance, March 31, 2017 $5,722
 $4,153
 $12,679
Transfer to Level 3 from Level 21
 —
 —
 442
 —
 —
 853
Purchases —
 —
 —
 —
 —
 —
Proceeds from sales —
 —
 (1,003) —
 —
 (1,030)
Redemptions and distributions (3,975) —
 —
 (1,100) —
 —
Gain (loss) recognized in earnings:            
Mortgage banking revenue —
 —
 113
 —
 —
 233
Other comprehensive income (loss):            
Net change in unrealized gain (loss) 88
 —
 —
 33
 (1) —
Balance, September 30, 2016 $5,713
 $4,151
 $9,301
Balance, June 30, 2017 $4,655
 $4,152
 $12,735
1 
Recurring 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.

 Available for Sale Securities   Available for Sale Securities  
 Municipal and other tax-exempt Other debt securities Residential mortgage loans held for sale Municipal and other tax-exempt Other debt securities Residential mortgage loans held for sale
Balance, December 31, 2015 $9,610
 $4,151
 $7,874
Balance, December 31, 2016 $5,789
 $4,152
 $11,617
Transfer to Level 3 from Level 21
 —
 —
 3,982
 —
 —
 2,740
Purchases —
 —
 —
 —
 —
 —
Proceeds from sales —
 —
 (2,365) —
 —
 (1,702)
Redemptions and distributions (3,975) —
 —
 (1,100) —
 —
Gain (loss) recognized in earnings            
Mortgage banking revenue —
 —
 (190) —
 —
 80
Other comprehensive income (loss):            
Net change in unrealized gain (loss) 78
 —
 —
 (34) —
 —
Balance, September 30, 2016 $5,713
 $4,151
 $9,301
Balance, June 30, 2017 $4,655
 $4,152
 $12,735
1 
Recurring 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.




A summary of quantitative information about assets measured at fair value on a recurring basis using Significant Unobservable Inputs (Level 3) as of SeptemberJune 30, 20172018 follows (in thousands):
 
Par
Value
 
Amortized
Cost/Unpaid Principal Balance
 
Fair
Value
 Valuation Technique(s) Unobservable Input 
Range
(Weighted Average)
  
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 $5,095
 $5,067
 $4,785
 Discounted cash flows
1 
Interest rate spread 6.05%-6.05% (6.05%)
2 
 $2,050
 $2,033
 $2,030
 Discounted cash flows
1 
Interest rate spread 6.69%-6.69% (6.69%)
2 
92.25%-95.02% (93.91%)
3 
99.00%-99.00% (99.00%)
3 
Other debt securities 4,400
 4,400
 4,153
 Discounted cash flows
1 
Interest rate spread 6.65%-6.73% (6.72%)
4 
 500
 500
 471
 Discounted cash flows
1 
Interest rate spread 6.32%-6.32% (6.32%)
4 
94.38% - 94.38 (94.38%)
3 
94.36% - 94.36 (94.36%)
3 
              
Residential mortgage loans held for sale N/A
 12,612
 12,100
 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. 95.94%  N/A
 15,025
 14,252
 Quoted prices of loans sold in securitization transactions, with a liquidity discount applied Liquidity discount applied to the market value of mortgage loans qualifying for sale to U.S. government agencies. 94.86% 
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 352413 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, 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 $5,095
 $5,068
 $4,802
 Discounted cash flows
1 
Interest rate spread 6.60%-6.60% (6.60%)
2 
92.25%-94.76% (93.75%)
3 
Other debt securities 500
 500
 472
 Discounted cash flows
1 
Interest rate spread 6.85%-6.85% (6.85%)
4 
94.39% - 94.39 (94.39%)
3 
Residential mortgage loans held for sale N/A
 12,981
 12,299
 Quoted prices of loans sold in securitization transactions, with a liquidity discount applied Liquidity discount applied to the market value of mortgage loans qualifying for sale to U.S. government agencies. 94.75% 
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 372 to 467466 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, 2016June 30, 2017 follows (in thousands):
 
Par
Value
 Amortized
Cost/Unpaid Principal Balance		 
Fair
Value
 Valuation Technique(s) Unobservable Input 
Range
(Weighted Average)
  
Par
Value
 
Amortized
Cost
 
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 
 $5,095
 $5,067
 $4,655
 Discounted cash flows
1 
Interest rate spread 5.98%-5.98% (5.98%)
2 
90.00%-93.40% (92.20%)
3 
90.00%-94.90% (92.93%)
3 
Other debt securities 4,400
 4,400
 4,152
 Discounted cash flows
1 
Interest rate spread 6.01%-6.26% (6.23%)
4 
 4,400
 4,400
 4,152
 Discounted cash flows
1 
Interest rate spread 5.41%-6.72% (6.57%)
4 
94.34% - 94.36 (94.36%)
3 
94.31% - 94.38 (94.37%)
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%  N/A
 13,274
 12,735
 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. 95.94% 
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 467360 to 525446 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 13 percent.



A summary of quantitative information about Recurring Fair Value Measurements based on Significant Unobservable Inputs (Level 3) as of September 30, 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 $6,195
 $6,162
 $5,713
 Discounted cash flows
1 
Interest rate spread 5.60%-5.90% (5.85%)
2 
90.00%-93.79% (92.22%)
3 
Other debt securities 4,400
 4,400
 4,151
 Discounted cash flows
1 
Interest rate spread 5.98%-6.03% (6.02%)
4 
94.34% - 94.34 (94.34%)
3 
              
Residential mortgage loans held for sale N/A
 9,957
 9,301
 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. 93.41% 
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 437 to 484 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 SeptemberJune 30, 20172018 for which the fair value was adjusted during the ninesix months ended SeptemberJune 30, 20172018:
      Fair Value Adjustments for the      Fair Value Adjustments for the
Carrying Value at September 30, 2017 Three Months Ended
September 30, 2017
Recognized in:		 Nine Months Ended
September 30, 2017
Recognized in:		Carrying Value at June 30, 2018 Three Months Ended
June 30, 2018
Recognized in:		 Six Months Ended
June 30, 2018
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 Gross charge-offs against allowance for loan losses Net losses and expenses of repossessed assets, net
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 Gross charge-offs against allowance for loan losses Net losses and expenses of repossessed assets, net
Impaired loans$—
 $423
 $10,960
 $4,397
 $—
 $5,058
 $—
$—
 $1,045
 $11,763
 $6,701
 $—
 $7,198
 $—
Real estate and other repossessed assets—
 4,392
 6,845
 —
 4,683
 —
 4,915
—
 1,996
 6,838
 —
 118
 —
 5,242
 


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 SeptemberJune 30, 20162017 for which the fair value was adjusted during the ninesix months ended SeptemberJune 30, 20162017:
      Fair Value Adjustments for the
Carrying Value at September 30, 2016 Fair Value Adjustments for the Three Months Ended
September 30, 2016
Recognized in:		 Nine Months Ended
September 30, 2016
Recognized in:		Carrying Value at June 30, 2017 Three Months Ended
June 30, 2017
Recognized in:		 Six Months Ended
June 30, 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 Gross charge-offs against allowance for loan losses Net losses and expenses of repossessed assets, net
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 Gross charge-offs against allowance for loan losses Net losses and expenses of repossessed assets, net
Impaired loans$—
 $436
 $23,089
 $6,334
 $—
 $30,200
 $—
$—
 $464
 $3,570
 $232
 $—
 $676
 $—
Real estate and other repossessed assets—
 6,048
 1,927
 —
 480
 —
 1,260
—
 3,488
 530
 —
 772
 —
 906

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 SeptemberJune 30, 20172018 follows (in thousands):
 Fair Value Valuation Technique(s) Unobservable Input 
Range
(Weighted Average)
 Fair Value Valuation Technique(s) Unobservable Input 
Range
(Weighted Average)
Impaired loans $10,960
 Discounted cash flows Recoverable oil and gas reserves, forward-looking commodity prices, estimated operating costs 
64% - 88% (68%)1
 $11,763
 Discounted cash flows Management knowledge of industry and non-real estate collateral including but not limited to recoverable oil and gas reserves, forward-looking commodity prices, estimated operating costs 
43% - 84% (53%)1
Real estate and other repossessed assets 6,845
 Appraised value, as adjusted Recoverable oil and gas reserves, forward-looking commodity prices, estimated operating costs N/A 6,838
 Discounted cash flows Recoverable oil and gas reserves, forward-looking commodity prices, estimated operating costs N/A
1 
Represents fair value as a percentage of the unpaid principal balance.

A summary of quantitative information about Non-recurring Fair Value Measurements based on Significant Unobservable Inputs (Level 3) as of SeptemberJune 30, 20162017 follows (in thousands):
 Fair Value Valuation Technique(s) Unobservable Input 
Range
(Weighted Average)
 Fair Value Valuation Technique(s) Unobservable Input 
Range
(Weighted Average)
Impaired loans $23,089
 Discounted cash flows Recoverable oil and gas reserves, forward-looking commodity prices, estimated operating costs 
23% - 59% (43%)1
 $3,570
 Discounted cash flows Recoverable oil and gas reserves, forward-looking commodity prices, estimated operating costs 
75% - 90% (83%)1
Real estate and other repossessed assets 1,927
 Appraised value, as adjusted Marketability adjustments off appraised value2 68% - 80% (71%) 530
 Appraised value, as adjusted Marketability adjustments off appraised value2 65% - 88% (80%)
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.



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 SeptemberJune 30, 20172018 (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)		 
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 $547,203
 $547,203
 $547,203
 $—
 $—
 $585,801
 $585,801
 $585,801
 $—
 $—
Interest-bearing cash and cash equivalents 1,926,779
 1,926,779
 1,926,779
 —
 —
 872,999
 872,999
 872,999
 —
 —
Trading securities:       —
            
U.S. government agency debentures 30,162
 30,162
 —
 30,162
 —
 28,750
 28,750
 —
 28,750
 —
U.S. government agency residential mortgage-backed securities 516,760
 516,760
 —
 516,760
 —
 1,605,001
 1,605,001
 —
 1,605,001
 —
Municipal and other tax-exempt securities 56,148
 56,148
 —
 56,148
 —
 70,606
 70,606
 —
 70,606
 —
Asset-backed securities 193,271
 193,271
 —
 193,271
 —
Other trading securities 11,047
 11,047
 —
 11,047
 —
 11,987
 11,987
 —
 11,987
 —
Total trading securities 614,117
 614,117
 —
 614,117
 —
 1,909,615
 1,909,615
 —
 1,909,615
 —
Investment securities:  
  
        
  
      
Municipal and other tax-exempt securities 246,000
 249,250
 —
 249,250
 —
 173,097
 174,205
 —
 174,205
 —
U.S. government agency residential mortgage-backed securities 16,926
 17,458
 —
 17,458
 —
 13,989
 13,984
 —
 13,984
 —
Other debt securities 203,636
 223,187
 —
 223,187
 —
 204,927
 215,195
 —
 215,195
 —
Total investment securities 466,562
 489,895
 —
 489,895
 —
 392,013
 403,384
 —
 403,384
 —
Available for sale securities:  
  
        
  
      
U.S. Treasury 999
 999
 999
 —
 —
 490
 490
 490
 —
 —
Municipal and other tax-exempt securities 28,368
 28,368
 —
 23,583
 4,785
 10,697
 10,697
 —
 8,667
 2,030
U.S. government agency residential mortgage-backed securities 5,326,384
 5,326,384
 —
 5,326,384
 —
 5,304,560
 5,304,560
 —
 5,304,560
 —
Privately issued residential mortgage-backed securities 99,994
 99,994
 —
 99,994
 —
 83,224
 83,224
 —
 83,224
 —
Commercial mortgage-backed securities guaranteed by U.S. government agencies 2,889,346
 2,889,346
 —
 2,889,346
 —
 2,738,451
 2,738,451
 —
 2,738,451
 —
Other debt securities 4,153
 4,153
 —
 —
 4,153
 25,444
 25,444
 —
 24,973
 471
Perpetual preferred stock 16,245
 16,245
 —
 16,245
 —
Equity securities and mutual funds 17,710
 17,710
 2,578
 15,132
 —
Total available for sale securities 8,383,199
 8,383,199
 3,577
 8,370,684
 8,938
 8,162,866
 8,162,866
 490
 8,159,875
 2,501
Fair value option securities – U.S. government agency residential mortgage-backed securities 819,531
 819,531
 —
 819,531
 —
 482,227
 482,227
 —
 482,227
 —
Residential mortgage loans held for sale 275,643
 275,643
 —
 263,543
 12,100
 223,301
 223,301
 —
 209,058
 14,243
Loans:  
  
        
  
      
Commercial 10,795,934
 10,574,720
 —
 —
 10,574,720
 11,349,039
 11,116,828
 —
 —
 11,116,828
Commercial real estate 3,518,142
 3,467,009
 —
 —
 3,467,009
 3,712,220
 3,639,121
 —
 —
 3,639,121
Residential mortgage 1,945,750
 1,958,632
 —
 —
 1,958,632
 1,942,250
 1,917,099
 —
 —
 1,917,099
Personal 947,008
 938,819
 —
 —
 938,819
 1,000,187
 990,419
 —
 —
 990,419
Total loans 17,206,834
 16,939,180
 —
 —
 16,939,180
 18,003,696
 17,663,467
 —
 —
 17,663,467
Allowance for loan losses (247,703) —
 —
 —
 —
 (215,142) —
 —
 —
 —
Loans, net of allowance 16,959,131
 16,939,180
 —
 —
 16,939,180
 17,788,554
 17,663,467
 —
 —
 17,663,467
Mortgage servicing rights 245,858
 245,858
 —
 —
 245,858
 278,719
 278,719
 —
 —
 278,719
Derivative instruments with positive fair value, net of cash collateral 352,559
 352,559
 8,498
 344,061
 —
 373,373
 373,373
 21,056
 352,317
 —
Deposits with no stated maturity 19,675,790
 19,675,790
 —
 —
 19,675,790
 20,041,532
 20,041,532
 —
 —
 20,041,532
Time deposits 2,172,289
 2,138,367
 —
 —
 2,138,367
 2,127,732
 2,078,486
 —
 —
 2,078,486
Other borrowed funds 6,631,820
 6,609,642
 —
 —
 6,609,642
 6,809,472
 6,571,762
 —
 —
 6,571,762
Subordinated debentures 144,668
 146,693
 —
 146,693
 —
 144,697
 148,112
 —
 148,112
 —
Derivative instruments with negative fair value, net of cash collateral 336,327
 336,327
 6,903
 329,424
 —
 234,856
 234,856
 17,214
 217,642
 —


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 December 31, 20162017 (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)		 
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
 $—
 $—
 $602,510
 $602,510
 $602,510
 $—
 $—
Interest-bearing cash and cash equivalents 1,916,651
 1,916,651
 1,916,651
 —
 —
 1,714,544
 1,714,544
 1,714,544
 —
 —
Trading securities:       —
            
U.S. government agency debentures 6,234
 6,234
 —
 6,234
 —
 21,196
 21,196
 —
 21,196
 —
U.S. government agency residential mortgage-backed securities 310,067
 310,067
 —
 310,067
 —
 392,673
 392,673
 —
 392,673
 —
Municipal and other tax-exempt securities 14,427
 14,427
 —
 14,427
 —
 13,559
 13,559
 —
 13,559
 —
Asset-backed securities 23,885
 23,885
 —
 23,885
 —
Other trading securities 6,900
 6,900
 —
 6,900
 —
 11,363
 11,363
 —
 11,363
 —
Total trading securities 337,628
 337,628
 —
 337,628
 —
 462,676
 462,676
 —
 462,676
 —
Investment securities:  
  
        
  
      
Municipal and other tax-exempt securities 320,364
 321,225
 —
 321,225
 —
 228,186
 230,349
 —
 230,349
 —
U.S. government agency residential mortgage-backed securities 20,777
 21,473
 —
 21,473
 —
 15,891
 16,242
 —
 16,242
 —
Other debt securities 205,004
 222,795
 —
 222,795
 —
 217,716
 233,444
 —
 233,444
 —
Total investment securities 546,145
 565,493
 —
 565,493
 —
 461,793
 480,035
 —
 480,035
 —
Available for sale securities:  
  
        
  
      
U.S. Treasury 999
 999
 999
 —
 —
 1,000
 1,000
 1,000
 —
 —
Municipal and other tax-exempt securities 40,993
 40,993
 —
 35,204
 5,789
 27,080
 27,080
 —
 22,278
 4,802
U.S. government agency residential mortgage-backed securities 5,460,386
 5,460,386
 —
 5,460,386
 —
 5,309,152
 5,309,152
 —
 5,309,152
 —
Privately issued residential mortgage-backed securities 115,535
 115,535
 —
 115,535
 —
 93,221
 93,221
 —
 93,221
 —
Commercial mortgage-backed securities guaranteed by U.S. government agencies 3,017,933
 3,017,933
 —
 3,017,933
 —
 2,834,961
 2,834,961
 —
 2,834,961
 —
Other debt securities 4,152
 4,152
 —
 —
 4,152
 25,481
 25,481
 —
 25,009
 472
Perpetual preferred stock 18,474
 18,474
 —
 18,474
 —
 15,767
 15,767
 —
 15,767
 —
Equity securities and mutual funds 18,357
 18,357
 3,495
 14,862
 —
 14,916
 14,916
 —
 14,916
 —
Total available for sale securities 8,676,829
 8,676,829
 4,494
 8,662,394
 9,941
 8,321,578
 8,321,578
 1,000
 8,315,304
 5,274
Fair value option securities – U.S. government agency residential mortgage-backed securities 77,046
 77,046
 —
 77,046
 —
 755,054
 755,054
 —
 755,054
 —
Residential mortgage loans held for sale 301,897
 301,897
 —
 290,280
 11,617
 221,378
 221,378
 —
 209,079
 12,299
Loans:  
  
        
  
      
Commercial 10,390,824
 10,437,016
 —
 —
 10,437,016
 10,733,975
 10,524,627
 —
 —
 10,524,627
Commercial real estate 3,809,046
 3,850,981
 —
 —
 3,850,981
 3,479,987
 3,428,733
 —
 —
 3,428,733
Residential mortgage 1,949,832
 2,025,159
 —
 —
 2,025,159
 1,973,686
 1,977,721
 —
 —
 1,977,721
Personal 839,958
 864,904
 —
 —
 864,904
 965,776
 956,706
 —
 —
 956,706
Total loans 16,989,660
 17,178,060
 —
 —
 17,178,060
 17,153,424
 16,887,787
 —
 —
 16,887,787
Allowance for loan losses (246,159) —
 —
 —
 —
 (230,682) —
 —
 —
 —
Loans, net of allowance 16,743,501
 17,178,060
 —
 —
 17,178,060
 16,922,742
 16,887,787
 —
 —
 16,887,787
Mortgage servicing rights 247,073
 247,073
 —
 —
 247,073
 252,867
 252,867
 —
 —
 252,867
Derivative instruments with positive fair value, net of cash collateral 689,872
 689,872
 7,541
 682,331
 —
 220,502
 220,502
 8,179
 212,323
 —
Deposits with no stated maturity 20,526,295
 20,526,295
 —
 —
 20,526,295
 19,962,889
 19,962,889
 —
 —
 19,962,889
Time deposits 2,221,800
 2,218,303
 —
 —
 2,218,303
 2,098,416
 2,064,558
 —
 —
 2,064,558
Other borrowed funds 5,572,662
 5,556,327
 —
 —
 5,556,327
 5,709,861
 5,703,121
 —
 —
 5,703,121
Subordinated debentures 144,640
 128,903
 —
 128,903
 —
 144,677
 148,207
 —
 148,207
 —
Derivative instruments with negative fair value, net of cash collateral 664,531
 664,531
 6,972
 657,559
 —
 171,963
 171,963
 —
 171,963
 —



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 SeptemberJune 30, 20162017 (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)		 
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 $535,916
 $535,916
 $535,916
 $—
 $—
 $561,587
 $561,587
 $561,587
 $—
 $—
Interest-bearing cash and cash equivalents 2,080,978
 2,080,978
 2,080,978
 —
 —
 2,078,831
 2,078,831
 2,078,831
 —
 —
Trading securities:       —
            
U.S. government agency debentures 15,705
 15,705
 —
 15,705
 —
 20,954
 20,954
 —
 20,954
 —
U.S. government agency residential mortgage-backed securities 464,749
 464,749
 —
 464,749
 —
 365,171
 365,171
 —
 365,171
 —
Municipal and other tax-exempt securities 54,856
 54,856
 —
 54,856
 —
 45,444
 45,444
 —
 45,444
 —
Other trading securities 11,305
 11,305
 —
 11,305
 —
 9,845
 9,845
 —
 9,845
 —
Total trading securities 546,615
 546,615
 —
 546,615
 —
 441,414
 441,414
 —
 441,414
 —
Investment securities:  
  
        
  
      
Municipal and other tax-exempt securities 323,225
 327,788
 —
 327,788
 —
 267,375
 270,531
 —
 270,531
 —
U.S. government agency residential mortgage-backed securities 22,166
 23,452
 —
 23,452
 —
 18,035
 18,642
 —
 18,642
 —
Other debt securities 201,066
 229,070
 —
 229,070
 —
 205,016
 226,502
 —
 226,502
 —
Total investment securities 546,457
 580,310
 —
 580,310
 —
 490,426
 515,675
 —
 515,675
 —
Available for sale securities:  
  
        
  
      
U.S. Treasury 1,002
 1,002
 1,002
 —
 —
 998
 998
 998
 —
 —
Municipal and other tax-exempt securities 42,092
 42,092
 —
 36,379
 5,713
 32,765
 32,765
 —
 28,110
 4,655
U.S. government agency residential mortgage-backed securities 5,668,672
 5,668,672
 —
 5,668,672
 —
 5,382,377
 5,382,377
 —
 5,382,377
 —
Privately issued residential mortgage-backed securities 121,603
 121,603
 —
 121,603
 —
 103,383
 103,383
 —
 103,383
 —
Commercial mortgage-backed securities guaranteed by U.S. government agencies 2,986,495
 2,986,495
 —
 2,986,495
 —
 2,782,070
 2,782,070
 —
 2,782,070
 —
Other debt securities 4,151
 4,151
 —
 —
 4,151
 4,152
 4,152
 —
 —
 4,152
Perpetual preferred stock 19,578
 19,578
 —
 19,578
 —
 16,568
 16,568
 —
 16,568
 —
Equity securities and mutual funds 18,690
 18,690
 3,544
 15,146
 —
 18,728
 18,728
 3,516
 15,212
 —
Total available for sale securities 8,862,283
 8,862,283
 4,546
 8,847,873
 9,864
 8,341,041
 8,341,041
 4,514
 8,327,720
 8,807
Fair value option securities:          
U.S. Treasury 222,409
 222,409
 222,409
 —
 —
U.S. government agency residential mortgage-backed securities —
 —
 —
 —
 —
Total fair value option securities 222,409
 222,409
 222,409
 —
 —
Fair value option securities – U.S. government agency residential mortgage-backed securities 445,169
 445,169
 —
 445,169
 —
Residential mortgage loans held for sale 447,592
 447,592
 —
 438,291
 9,301
 287,259
 287,259
 —
 274,524
 12,735
Loans:  
  
        
  
      
Commercial 10,120,163
 9,926,548
 —
 —
 9,926,548
 10,637,955
 10,413,704
 —
 —
 10,413,704
Commercial real estate 3,793,598
 3,769,427
 —
 —
 3,769,427
 3,688,592
 3,636,365
 —
 —
 3,636,365
Residential mortgage 1,872,793
 1,905,786
 —
 —
 1,905,786
 1,939,198
 1,950,577
 —
 —
 1,950,577
Personal 678,232
 671,421
 —
 —
 671,421
 917,900
 909,055
 —
 —
 909,055
Total loans 16,464,786
 16,273,182
 —
 —
 16,273,182
 17,183,645
 16,909,701
 —
 —
 16,909,701
Allowance for loan losses (245,103) —
 —
 —
 —
 (250,061) —
 —
 —
 —
Loans, net of allowance 16,219,683
 16,273,182
 —
 —
 16,273,182
 16,933,584
 16,909,701
 —
 —
 16,909,701
Mortgage servicing rights 203,621
 203,621
 —
 —
 203,621
 245,239
 245,239
 —
 —
 245,239
Derivative instruments with positive fair value, net of cash collateral 655,078
 655,078
 5,575
 649,503
 —
 280,289
 280,289
 46,366
 233,923
 —
Deposits with no stated maturity 18,925,873
 18,925,873
 —
 —
 18,925,873
 20,120,352
 20,120,352
 —
 —
 20,120,352
Time deposits 2,169,631
 2,163,947
 —
 —
 2,163,947
 2,196,122
 2,164,115
 —
 —
 2,164,115
Other borrowed funds 7,147,047
 7,079,737
 —
 —
 7,079,737
 5,696,666
 5,664,273
 —
 —
 5,664,273
Subordinated debentures 144,631
 148,360
 —
 148,360
 —
 144,658
 147,204
 —
 147,204
 —
Derivative instruments with negative fair value, net of cash collateral 573,987
 573,987
 1,308
 572,679
 —
 285,819
 285,819
 20,915
 264,904
 —



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 $220 million at September 30, 2017, $218 million at December 31, 2016 and $217 million at September 30, 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
September 30, 2017:
Commercial0.38% - 30.00%0.620.78% - 4.59%
Commercial real estate0.38% - 18.00%0.771.04% - 4.38%
Residential mortgage1.74% - 18.00%2.121.79% - 4.09%
Personal0.25% - 21.00%0.240.55% - 4.78%
December 31, 2016:
Commercial0.38% - 30.00%0.700.64% - 4.60%
Commercial real estate0.38% - 18.00%0.710.94% - 4.27%
Residential mortgage1.74% - 18.00%2.271.71% - 4.26%
Personal0.25% - 21.00%0.401.03% - 4.59%
September 30, 2016:
Commercial0.38% - 30.00%0.690.54% - 3.93%
Commercial real estate0.38% - 18.00%0.720.80% - 3.90%
Residential mortgage1.74% - 18.00%1.951.57% - 3.55%
Personal0.25% - 21.00%0.350.75% - 4.15%
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.



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
September 30, 20170.03% - 9.64%1.951.86% - 2.18%
December 31, 20160.02% - 9.65%1.961.57% - 2.00%
September 30, 20160.03% - 9.65%2.101.37% - 1.66%

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 borrowings and subordinated debentures follows:

  Range of
Contractual
Yields		 Average
Re-pricing
(in years)		 Discount
Rate
September 30, 2017:      
Other borrowed funds 0.25% - 6.25% 0.02 1.06% - 3.70%
Subordinated debentures 5.38% 16.85 4.96%
       
December 31, 2016:      
Other borrowed funds 0.25% - 3.50% 0.00 0.55% - 3.22%
Subordinated debentures 5.38% 16.86 6.11%
       
September 30, 2016:      
Other borrowed funds 0.25% - 3.81% 0.02 0.29% - 2.99%
Subordinated debentures 5.38% 18.37 5.38%

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 September 30, 2017, December 31, 2016 or September 30, 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.




(12) Federal and State Income Taxes

The reconciliations of income attributable to continuing operations at the U.S. federal statutory tax rate to income tax expense are as follows (in thousands):
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2017 2016 2017 2016
Amount:        
Federal statutory tax $44,880
 $37,474
 $137,048
 $93,189
Tax exempt revenue (3,001) (2,391) (9,336) (7,491)
Effect of state income taxes, net of federal benefit 2,486
 1,364
 7,875
 5,222
Utilization of tax credits:        
Low-income housing tax credit, net of amortization (23) (623) (2,272) (2,505)
Other tax credits (364) (522) (1,091) (1,564)
Bank-owned life insurance (705) (813) (2,252) (2,414)
Share-based compensation (169) —
 (2,470) —
Other, net (666) (2,533) 744
 (556)
Total income tax expense $42,438
 $31,956
 $128,246
 $83,881


  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2017 2016 2017 2016
Percent of pretax income:        
Federal statutory tax 35.0 % 35.0 % 35.0 % 35.0 %
Tax exempt revenue (2.3) (2.2) (2.4) (2.8)
Effect of state income taxes, net of federal benefit 1.9
 1.3
 2.0
 2.0
Utilization of tax credits:        
Low-income housing tax credit, net of amortization —
 (0.6) (0.6) (0.9)
Other tax credits (0.3) (0.5) (0.3) (0.6)
Bank-owned life insurance (0.5) (0.8) (0.6) (0.9)
Share-based compensation (0.1) —
 (0.6) —
Other, net (0.6) (2.4) 0.3
 (0.3)
Total 33.1 % 29.8 % 32.8 % 31.5 %
(1314) Subsequent Events

The Company evaluated events from the date of the consolidated financial statements on SeptemberJune 30, 20172018 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.



Nine-Month Financial Summary – Unaudited
Consolidated Daily Average Balances, Average Yields and Rates
Six-Month Financial Summary – Unaudited
Consolidated Daily Average Balances, Average Yields and Rates
Six-Month Financial Summary – Unaudited
Consolidated Daily Average Balances, Average Yields and Rates
(In Thousands, Except Per Share Data) Nine Months Ended Six Months Ended
 September 30, 2017 September 30, 2016 June 30, 2018 June 30, 2017
 
Average
Balance
 
Revenue/
Expense
 
Yield/
Rate
 
Average
Balance
 
Revenue/
Expense
 
Yield/
Rate
 
Average
Balance
 
Revenue/
Expense
 
Yield/
Rate
 
Average
Balance
 
Revenue/
Expense
 
Yield/
Rate
Assets                        
Interest-bearing cash and cash equivalents $2,020,003
 $15,817
 1.05% $2,040,978
 $7,926
 0.52% $1,865,385
 $15,722
 1.70% $2,047,633
 $9,442
 0.93%
Trading securities 508,741
 13,008
 3.55% 264,525
 4,659
 2.48% 1,209,369
 20,893
 3.53% 517,447
 8,886
 3.59%
Investment securities                        
Taxable 220,892
 8,886
 5.36% 227,136
 9,244
 5.43% 222,299
 5,801
 5.22% 220,528
 5,944
 5.39%
Tax-exempt 280,910
 5,300
 2.52% 340,292
 5,713
 2.24% 197,733
 2,304
 2.33% 294,539
 3,650
 2.48%
Total investment securities 501,802
 14,186
 3.77% 567,428
 14,957
 3.52% 420,032
 8,105
 3.86% 515,067
 9,594
 3.73%
Available for sale securities                        
Taxable 8,407,421
 130,426
 2.09% 8,831,032
 130,790
 2.02% 8,179,361
 93,137
 2.26% 8,420,578
 85,847
 2.06%
Tax-exempt 51,891
 2,019
 5.58% 70,205
 2,605
 5.15% 20,476
 334
 3.26% 54,470
 1,453
 5.71%
Total available for sale securities 8,459,312
 132,445
 2.11% 8,901,237
 133,395
 2.04% 8,199,837
 93,471
 2.26% 8,475,048
 87,300
 2.08%
Fair value option securities 526,714
 10,985
 2.77% 361,623
 6,182
 2.11% 556,337
 8,746
 3.05% 446,478
 5,919
 2.62%
Restricted equity securities 312,365
 13,534
 5.78% 316,563
 12,684
 5.34% 349,134
 10,525
 6.03% 304,074
 8,708
 5.73%
Residential mortgage loans held for sale 240,822
 6,317
 3.55% 379,174
 9,823
 3.49% 209,043
 4,177
 4.01% 232,932
 4,222
 3.65%
Loans 17,174,450
 523,764
 4.08% 16,235,071
 436,966
 3.59% 17,507,714
 401,940
 4.63% 17,132,662
 336,258
 3.96%
Allowance for loan losses (250,538)     (242,508)     (225,909)     (250,512)    
Loans, net of allowance 16,923,912
 523,764
 4.14% 15,992,563
 436,966
 3.65% 17,281,805
 401,940
 4.69% 16,882,150
 336,258
 4.01%
Total earning assets 29,493,671
 730,056
 3.32% 28,824,091
 626,592
 2.92% 30,090,942
 563,579
 3.76% 29,420,829
 470,329
 3.23%
Receivable on unsettled securities sales 72,888
     141,957
     807,470
     373,022
    
Cash and other assets 3,210,879
     3,083,135
     2,917,582
     2,866,309
    
Total assets $32,777,438
     $32,049,183
     $33,815,994
     $32,660,160
    
Liabilities and equity  
  
  
  
  
  
  
  
  
  
  
  
Interest-bearing deposits:  
  
  
  
  
  
  
  
  
  
  
  
Transaction $10,246,125
 $19,713
 0.26% $9,666,048
 $9,994
 0.14% $10,266,484
 $25,487
 0.50% $10,326,232
 $11,651
 0.23%
Savings 455,740
 272
 0.08% 411,568
 295
 0.10% 491,955
 183
 0.08% 451,476
 182
 0.08%
Time 2,213,090
 18,521
 1.12% 2,286,844
 20,062
 1.17% 2,144,928
 13,512
 1.27% 2,231,526
 12,143
 1.10%
Total interest-bearing deposits 12,914,955
 38,506
 0.40% 12,364,460
 30,351
 0.33% 12,903,367
 39,182
 0.61% 13,009,234
 23,976
 0.37%
Funds purchased 56,161
 276
 0.66% 83,668
 142
 0.23%
Repurchase agreements 436,882
 240
 0.07% 598,631
 214
 0.05%
Funds purchased and repurchase agreements 562,999
 1,304
 0.47% 534,599
 260
 0.10%
Other borrowings 5,825,764
 47,026
 1.08% 6,002,018
 25,587
 0.57% 6,412,463
 56,752
 1.78% 5,654,534
 26,921
 0.96%
Subordinated debentures 144,653
 6,098
 5.64% 238,415
 4,056
 2.27% 144,687
 4,051
 5.65% 144,649
 4,028
 5.62%
Total interest-bearing liabilities 19,378,415
 92,146
 0.64% 19,287,192
 60,350
 0.42% 20,023,516
 101,289
 1.02% 19,343,015
 55,185
 0.58%
Non-interest bearing demand deposits 9,277,820
     8,255,859
     9,187,499
     9,220,877
    
Due on unsettled securities purchases 131,571
     150,994
     543,265
     127,824
    
Other liabilities 581,901
     1,001,282
     566,248
     599,806
    
Total equity 3,407,731
     3,353,856
     3,495,466
     3,368,638
    
Total liabilities and equity $32,777,438
     $32,049,183
     $33,815,994
     $32,660,160
    
Tax-equivalent Net Interest Revenue   $637,910
 2.68%   $566,242
 2.50%   $462,290
 2.74%   $415,144
 2.65%
Tax-equivalent Net Interest Revenue to Earning AssetsTax-equivalent Net Interest Revenue to Earning Assets   2.90%     2.64%Tax-equivalent Net Interest Revenue to Earning Assets   3.08%     2.85%
Less tax-equivalent adjustment   13,072
     13,212
     3,992
     8,758
  
Net Interest Revenue   624,838
     553,030
     458,298
     406,386
  
Provision for credit losses   —
     65,000
     (5,000)     —
  
Other operating revenue   528,258
     530,266
     312,388
     352,548
  
Other operating expense   761,530
     752,043
     490,906
     495,596
  
Income before taxes   391,566
     266,253
     284,780
     263,338
  
Federal and state income taxes   128,246
     83,881
     64,278
     85,808
  
Net income   263,320
     182,372
     220,502
     177,530
  
Net income (loss) attributable to non-controlling interests   1,168
     (270)     568
     1,027
  
Net income attributable to BOK Financial Corp. shareholders   $262,152
     $182,642
     $219,934
     $176,503
  
Earnings Per Average Common Share Equivalent:  
  
  
  
  
  
  
  
  
  
  
  
Net income:  
  
  
  
  
  
  
  
  
  
  
  
Basic  
 $4.01
  
  
 $2.77
  
  
 $3.36
  
  
 $2.70
  
Diluted  
 $4.00
  
  
 $2.76
  
  
 $3.36
  
  
 $2.69
  
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.


























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Quarterly Financial Summary – Unaudited
Consolidated Daily Average Balances, Average Yields and Rates
Quarterly Financial Summary – Unaudited
Consolidated Daily Average Balances, Average Yields and Rates
Quarterly Financial Summary – Unaudited
Consolidated Daily Average Balances, Average Yields and Rates
(In Thousands, Except Per Share Data) Three Months Ended Three Months Ended
 September 30, 2017 June 30, 2017 June 30, 2018 March 31, 2018
 
Average
Balance
 
Revenue/
Expense
 
Yield/
Rate
 
Average
Balance
 
Revenue/
Expense
 
Yield/
Rate
 
Average
Balance
 
Revenue/
Expense
 
Yield/
Rate
 
Average
Balance
 
Revenue/
Expense
 
Yield/
Rate
Assets                        
Interest-bearing cash and cash equivalents $1,965,645
 $6,375
 1.29% $2,007,746
 $5,198
 1.04% $1,673,387
 $7,740
 1.86% $2,059,517
 $7,982
 1.57%
Trading securities 491,613
 4,122
 3.47% 456,028
 3,517
 3.23% 1,482,302
 13,084
 3.63% 933,404
 7,809
 3.40%
Investment securities                        
Taxable 221,609
 2,942
 5.31% 219,385
 2,931
 5.34% 217,770
 2,845
 5.23% 226,877
 2,956
 5.21%
Tax-exempt 254,096
 1,650
 2.60% 279,987
 1,757
 2.51% 181,318
 1,096
 2.42% 214,330
 1,208
 2.25%
Total investment securities 475,705
 4,592
 3.86% 499,372
 4,688
 3.76% 399,088
 3,941
 3.95% 441,207
 4,164
 3.78%
Available for sale securities                        
Taxable 8,381,536
 44,579
 2.16% 8,332,709
 42,920
 2.09% 8,145,748
 47,322
 2.29% 8,213,346
 45,815
 2.22%
Tax-exempt 46,817
 566
 5.27% 51,348
 725
 6.09% 17,394
 141
 3.26% 23,592
 193
 3.26%
Total available for sale securities 8,428,353
 45,145
 2.17% 8,384,057
 43,645
 2.11% 8,163,142
 47,463
 2.30% 8,236,938
 46,008
 2.23%
Fair value option securities 684,571
 5,066
 2.97% 476,102
 3,539
 2.92% 487,192
 3,927
 3.16% 626,251
 4,819
 2.95%
Restricted equity securities 328,677
 4,826
 5.87% 295,743
 4,399
 5.95% 348,546
 5,408
 6.21% 349,176
 5,117
 5.86%
Residential mortgage loans held for sale 256,343
 2,095
 3.36% 245,401
 2,386
 3.92% 218,600
 2,333
 4.28% 199,380
 1,844
 3.71%
Loans 17,256,663
 187,506
 4.31% 17,129,533
 172,139
 4.03% 17,751,242
 212,266
 4.80% 17,261,481
 189,674
 4.45%
Allowance for loan losses (250,590)     (251,632)     (222,856)     (228,996)    
Loans, net of allowance 17,006,073
 187,506
 4.38% 16,877,901
 172,139
 4.09% 17,528,386
 212,266
 4.86% 17,032,485
 189,674
 4.51%
Total earning assets 29,636,980
 259,727
 3.50% 29,242,350
 239,511
 3.30% 30,301,191
 296,162
 3.91% 29,878,358
 267,417
 3.61%
Receivable on unsettled securities sales 76,622
     79,248
     618,240
     998,803
    
Cash and other assets 3,294,568
     3,046,973
     2,986,604
     2,847,791
    
Total assets $33,008,170
     $32,368,571
     $33,906,035
     $33,724,952
    
Liabilities and equity  
  
  
  
  
  
  
  
  
  
  
  
Interest-bearing deposits:  
  
  
  
  
  
  
  
  
  
  
  
Transaction $10,088,522
 $8,062
 0.32% $10,087,640
 $6,437
 0.26% $10,189,354
 $13,993
 0.55% $10,344,469
 $11,494
 0.45%
Savings 464,130
 90
 0.08% 461,586
 95
 0.08% 503,671
 95
 0.08% 480,110
 88
 0.07%
Time 2,176,820
 6,378
 1.16% 2,204,422
 6,090
 1.11% 2,138,880
 6,875
 1.29% 2,151,044
 6,637
 1.25%
Total interest-bearing deposits 12,729,472
 14,530
 0.45% 12,753,648
 12,622
 0.40% 12,831,905
 20,963
 0.66% 12,975,623
 18,219
 0.57%
Funds purchased 49,774
 116
 0.92% 63,263
 96
 0.61%
Repurchase agreements 361,512
 140
 0.15% 427,353
 68
 0.06%
Funds purchased and repurchase agreements 593,250
 782
 0.53% 532,412
 522
 0.40%
Other borrowings 6,162,641
 20,105
 1.29% 5,572,031
 15,188
 1.09% 6,497,020
 31,825
 1.96% 6,326,967
 24,927
 1.60%
Subordinated debentures 144,663
 2,070
 5.68% 144,654
 2,003
 5.55% 144,692
 2,048
 5.67% 144,682
 2,003
 5.61%
Total interest-bearing liabilities 19,448,062
 36,961
 0.75% 18,960,949
 29,977
 0.63% 20,066,867
 55,618
 1.11% 19,979,684
 45,671
 0.93%
Non-interest bearing demand deposits 9,389,849
     9,338,683
     9,223,327
     9,151,272
    
Due on unsettled securities purchases 145,155
     157,438
     527,804
     558,898
    
Other liabilities 540,463
     502,068
     575,865
     556,524
    
Total equity 3,484,641
     3,409,433
     3,512,172
     3,478,574
    
Total liabilities and equity $33,008,170
     $32,368,571
     $33,906,035
     $33,724,952
    
Tax-equivalent Net Interest Revenue   $222,766
 2.75%   $209,534
 2.67%   $240,544
 2.80%   $221,746
 2.68%
Tax-equivalent Net Interest Revenue to Earning Assets     3.01%     2.89%     3.17%     2.99%
Less tax-equivalent adjustment   4,314
     4,330
     1,983
     2,010
  
Net Interest Revenue   218,452
     205,204
     238,562
     219,736
  
Provision for credit losses   —
     —
     —
     (5,000)  
Other operating revenue   175,710
     182,252
     156,399
     155,989
  
Other operating expense   265,934
     250,885
     246,476
     244,430
  
Income before taxes   128,228
     136,571
     148,485
     136,295
  
Federal and state income taxes   42,438
     47,705
     33,330
     30,948
  
Net income   85,790
     88,866
     115,155
     105,347
  
Net income (loss) attributable to non-controlling interests   141
     719
     783
     (215)  
Net income attributable to BOK Financial Corp. shareholders   $85,649
     $88,147
     $114,372
     $105,562
  
Earnings Per Average Common Share Equivalent:  
  
  
  
  
  
  
  
  
  
  
  
Basic  
 $1.31
  
  
 $1.35
  
  
 $1.75
  
  
 $1.61
  
Diluted  
 $1.31
  
  
 $1.35
  
  
 $1.75
  
  
 $1.61
  
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.


Three Months Ended
March 31, 2017 December 31, 2016 September 30, 2016
Average Balance Revenue /Expense Yield / Rate Average Balance Revenue / Expense Yield / Rate Average Balance Revenue / Expense Yield / Rate
                 
$2,087,964
 $4,244
 0.82% $2,032,785
 $2,800
 0.55% $2,047,991
 $2,651
 0.51%
579,549
 5,369
 3.87% 476,498
 4,554
 3.91% 366,545
 3,157
 2.71%
                 
221,684
 3,013
 5.44% 224,376
 3,024
 5.39% 224,518
 3,000
 5.34%
309,252
 1,893
 2.45% 318,493
 1,854
 2.33% 328,074
 1,851
 2.26%
530,936
 4,906
 3.70% 542,869
 4,878
 3.60% 552,592
 4,851
 3.51%
                 
8,509,423
 42,927
 2.02% 8,706,449
 42,482
 1.98% 8,795,869
 42,513
 1.99%
57,626
 728
 5.37% 60,106
 748
 5.27% 66,721
 867
 5.47%
8,567,049
 43,655
 2.05% 8,766,555
 43,230
 2.00% 8,862,590
 43,380
 2.01%
416,524
 2,380
 2.27% 210,733
 541
 0.99% 266,998
 1,531
 1.70%
312,498
 4,309
 5.52% 334,114
 4,554
 5.45% 335,812
 4,510
 5.37%
220,325
 1,836
 3.35% 345,066
 2,835
 3.31% 445,930
 3,615
 3.28%
17,135,825
 164,119
 3.88% 16,723,588
 156,734
 3.67% 16,447,750
 150,077
 3.63%
(249,379)     (246,977)     (247,901)    
16,886,446
 164,119
 3.94% 16,476,611
 156,734
 3.72% 16,199,849
 150,077
 3.69%
29,601,291
 230,818
 3.15% 29,185,231
 220,126
 2.98% 29,078,307
 213,772
 2.93%
62,641
     33,813
     259,906
    
3,291,057
     3,742,032
     3,308,260
    
$32,954,989
     $32,961,076
     $32,646,473
    
                 
                 
$10,567,475
 $5,214
 0.20% $9,980,132
 $3,912
 0.16% $9,650,618
 $3,417
 0.14%
441,254
 87
 0.08% 421,654
 91
 0.09% 420,009
 100
 0.09%
2,258,930
 6,053
 1.09% 2,177,035
 6,140
 1.12% 2,197,350
 6,295
 1.14%
13,267,659
 11,354
 0.35% 12,578,821
 10,143
 0.32% 12,267,977
 9,812
 0.32%
55,508
 64
 0.47% 62,004
 44
 0.28% 68,280
 33
 0.19%
523,561
 32
 0.02% 560,891
 34
 0.02% 522,822
 53
 0.04%
5,737,955
 11,733
 0.83% 6,072,150
 9,315
 0.61% 6,342,369
 9,105
 0.57%
144,644
 2,025
 5.68% 144,635
 2,003
 5.51% 255,890
 2,468
 3.84%
19,729,327
 25,208
 0.52% 19,418,501
 21,539
 0.44% 19,457,338
 21,471
 0.44%
9,101,763
     9,124,595
     8,497,037
    
91,529
     77,575
     200,574
    
704,978
     1,004,212
     1,099,858
    
3,327,392
     3,336,193
     3,391,666
    
$32,954,989
     $32,961,076
     $32,646,473
    
  $205,610
 2.63%   $198,587
 2.54%   $192,301
 2.49%
    2.81%     2.69%     2.64%
  4,428
     4,389
     4,455
  
  201,182
     194,198
     187,846
  
  —
     —
     10,000
  
  170,296
     143,754
     187,310
  
  244,711
     265,547
     258,088
  
  126,767
     72,405
     107,068
  
  38,103
     22,496
     31,956
  
  88,664
     49,909
     75,112
  
  308
     (117)     835
  
  $88,356
     $50,026
     $74,277
  
                 
 
 $1.35
  
  
 $0.76
  
  
 $1.13
  
 
 $1.35
  
  
 $0.76
  
  
 $1.13
  
Three Months Ended
December 31, 2017 September 30, 2017 June 30, 2017
Average Balance Revenue /Expense Yield / Rate Average Balance Revenue / Expense Yield / Rate Average Balance Revenue / Expense Yield / Rate
                 
$1,976,395
 $6,311
 1.27% $1,965,645
 $6,375
 1.29% $2,007,746
 $5,198
 1.04%
560,321
 4,629
 3.38% 491,613
 4,122
 3.47% 456,028
 3,517
 3.23%
                 
228,388
 3,029
 5.31% 221,609
 2,942
 5.31% 219,385
 2,931
 5.34%
234,481
 1,577
 2.69% 254,096
 1,650
 2.60% 279,987
 1,757
 2.51%
462,869
 4,606
 3.98% 475,705
 4,592
 3.86% 499,372
 4,688
 3.76%
                 
8,392,231
 45,078
 2.19% 8,381,536
 44,579
 2.16% 8,332,709
 42,920
 2.09%
43,685
 545
 5.41% 46,817
 566
 5.27% 51,348
 725
 6.09%
8,435,916
 45,623
 2.21% 8,428,353
 45,145
 2.17% 8,384,057
 43,645
 2.11%
792,647
 5,770
 2.90% 684,571
 5,066
 2.97% 476,102
 3,539
 2.92%
337,673
 4,956
 5.87% 328,677
 4,826
 5.87% 295,743
 4,399
 5.95%
257,927
 2,389
 3.72% 256,343
 2,095
 3.36% 245,401
 2,386
 3.92%
17,181,007
 185,614
 4.29% 17,256,663
 187,506
 4.31% 17,129,533
 172,139
 4.03%
(246,143)     (250,590)     (251,632)    
16,934,864
 185,614
 4.35% 17,006,073
 187,506
 4.38% 16,877,901
 172,139
 4.09%
29,758,612
 259,898
 3.49% 29,636,980
 259,727
 3.50% 29,242,350
 239,511
 3.30%
821,275
     608,412
     372,894
    
2,872,228
     2,762,778
     2,753,327
    
$33,452,115
     $33,008,170
     $32,368,571
    
                 
                 
$10,142,744
 $8,914
 0.35% $10,088,522
 $8,062
 0.32% $10,087,640
 $6,437
 0.26%
466,496
 87
 0.07% 464,130
 90
 0.08% 461,586
 95
 0.08%
2,134,469
 6,296
 1.17% 2,176,820
 6,378
 1.16% 2,204,422
 6,090
 1.11%
12,743,709
 15,297
 0.48% 12,729,472
 14,530
 0.45% 12,753,648
 12,622
 0.40%
488,330
 340
 0.28% 411,286
 256
 0.25% 490,616
 164
 0.13%
6,209,903
 21,242
 1.36% 6,162,641
 20,105
 1.29% 5,572,031
 15,188
 1.09%
144,673
 2,025
 5.55% 144,663
 2,070
 5.68% 144,654
 2,003
 5.55%
19,586,615
 38,904
 0.79% 19,448,062
 36,961
 0.75% 18,960,949
 29,977
 0.63%
9,417,351
     9,389,849
     9,338,683
    
332,155
     145,977
     162,348
    
600,604
     539,641
     497,158
    
3,515,390
     3,484,641
     3,409,433
    
$33,452,115
     $33,008,170
     $32,368,571
    
  $220,994
 2.70%   $222,766
 2.75%   $209,534
 2.67%
    2.97%     3.01%     2.89%
  4,131
     4,314
     4,330
  
  216,863
     218,452
     205,204
  
  (7,000)     —
     —
  
  166,836
     175,710
     182,252
  
  263,987
     265,934
     250,885
  
  126,712
     128,228
     136,571
  
  54,347
     42,438
     47,705
  
  72,365
     85,790
     88,866
  
  (127)     141
     719
  
  $72,492
     $85,649
     $88,147
  
                 
 
 $1.11
  
  
 $1.31
  
  
 $1.35
  
 
 $1.11
  
  
 $1.31
  
  
 $1.35
  




Quarterly Earnings Trends – Unaudited
(In thousands, except share and per share data)
 Three Months Ended Three Months Ended
 Sept. 30, 2017 June 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sept. 30, 2016 June 30, 2018 Mar. 31, 2018 Dec. 31, 2017 Sept. 30, 2017 June 30, 2017
                    
Interest revenue $255,413
 $235,181
 $226,390
 $215,737
 $209,317
 $294,180
 $265,407
 $255,767
 $255,413
 $235,181
Interest expense 36,961
 29,977
 25,208
 21,539
 21,471
 55,618
 45,671
 38,904
 36,961
 29,977
Net interest revenue 218,452
 205,204
 201,182
 194,198
 187,846
 238,562
 219,736
 216,863
 218,452
 205,204
Provision for credit losses —
 —
 —
 —
 10,000
 —
 (5,000) (7,000) —
 —
Net interest revenue after provision for credit losses 218,452
 205,204
 201,182
 194,198
 177,846
 238,562
 224,736
 223,863
 218,452
 205,204
Other operating revenue  
  
  
  
  
  
  
  
  
  
Brokerage and trading revenue 33,169
 31,764
 33,623
 28,500
 38,006
 26,488
 30,648
 33,045
 33,169
 31,764
Transaction card revenue 37,826
 35,296
 32,127
 34,521
 33,933
Transaction card revenue1
 20,975
 20,990
 20,028
 22,929
 20,009
Fiduciary and asset management revenue 40,687
 41,808
 38,631
 34,535
 34,073
 41,699
 41,832
 41,767
 40,687
 41,808
Deposit service charges and fees 23,209
 23,354
 23,030
 23,365
 23,668
 27,827
 27,161
 27,685
 28,191
 28,422
Mortgage banking revenue 24,890
 30,276
 25,191
 28,414
 38,516
 26,346
 26,025
 24,362
 24,890
 30,276
Other revenue 13,670
 14,984
 11,752
 12,693
 13,080
 14,518
 12,330
 11,762
 13,670
 14,984
Total fees and commissions 173,451
 177,482
 164,354
 162,028
 181,276
 157,853
 158,986
 158,649
 163,536
 167,263
Other gains, net (1,283) 6,108
 3,627
 (1,279) 2,442
Other gains (losses), net 3,983
 (664) 552
 (1,283) 6,108
Gain (loss) on derivatives, net 1,033
 3,241
 (450) (35,815) 2,226
 (3,057) (5,685) (3,045) 1,033
 3,241
Gain (loss) on fair value option securities, net 661
 1,984
 (1,140) (20,922) (3,355) (3,341) (17,564) (4,238) 661
 1,984
Change in fair value of mortgage servicing rights (639) (6,943) 1,856
 39,751
 2,327
 1,723
 21,206
 5,898
 (639) (6,943)
Gain (loss) on available for sale securities, net 2,487
 380
 2,049
 (9) 2,394
 (762) (290) (488) 2,487
 380
Total other operating revenue 175,710
 182,252
 170,296
 143,754
 187,310
 156,399
 155,989
 157,328
 165,795
 172,033
Other operating expense  
  
  
  
  
  
  
  
  
  
Personnel 147,910
 143,744
 136,425
 141,132
 139,212
 138,947
 139,947
 145,329
 147,910
 143,744
Business promotion 7,105
 7,738
 6,717
 7,344
 6,839
 7,686
 6,010
 7,317
 7,105
 7,738
Charitable contributions to BOKF Foundation —
 —
 —
 2,000
 —
 —
 —
 2,000
 —
 —
Professional fees and services 11,887
 12,419
 11,417
 16,828
 14,038
 14,978
 10,200
 15,344
 11,887
 12,419
Net occupancy and equipment 21,325
 21,125
 21,624
 21,470
 20,111
 22,761
 24,046
 22,403
 21,325
 21,125
Insurance 6,005
 689
 6,404
 8,705
 9,390
 6,245
 6,593
 6,555
 6,005
 689
Data processing and communications 37,327
 36,330
 34,902
 33,691
 33,331
Data processing and communications1
 27,739
 27,817
 28,903
 27,412
 26,111
Printing, postage and supplies 3,917
 4,140
 3,851
 3,998
 3,790
 4,011
 4,089
 3,781
 3,917
 4,140
Net losses (gains) and operating expenses of repossessed assets 6,071
 2,267
 1,009
 1,627
 (926) 2,722
 7,705
 340
 6,071
 2,267
Amortization of intangible assets 1,744
 1,803
 1,802
 1,558
 1,521
 1,386
 1,300
 1,430
 1,744
 1,803
Mortgage banking costs 13,450
 12,072
 13,003
 17,348
 15,963
 12,890
 10,149
 14,331
 13,450
 12,072
Other expense 9,193
 8,558
 7,557
 9,846
 14,819
 7,111
 6,574
 6,746
 9,193
 8,558
Total other operating expense 265,934
 250,885
 244,711
 265,547
 258,088
 246,476
 244,430
 254,479
 256,019
 240,666
Net income before taxes 128,228
 136,571
 126,767
 72,405
 107,068
 148,485
 136,295
 126,712
 128,228
 136,571
Federal and state income taxes 42,438
 47,705
 38,103
 22,496
 31,956
 33,330
 30,948
 54,347
 42,438
 47,705
Net income 85,790
 88,866
 88,664
 49,909
 75,112
 115,155
 105,347
 72,365
 85,790
 88,866
Net income (loss) attributable to non-controlling interests 141
 719
 308
 (117) 835
 783
 (215) (127) 141
 719
Net income attributable to BOK Financial Corporation shareholders $85,649
 $88,147
 $88,356
 $50,026
 $74,277
 $114,372
 $105,562
 $72,492
 $85,649
 $88,147
                    
Earnings per share:  
  
  
  
  
  
  
  
  
  
Basic $1.31 $1.35 $1.35 $0.76 $1.13 $1.75 $1.61 $1.11 $1.31 $1.35
Diluted $1.31 $1.35 $1.35 $0.76 $1.13 $1.75 $1.61 $1.11 $1.31 $1.35
Average shares used in computation:                    
Basic 64,742,822
 64,729,752
 64,715,964
 64,719,018
 65,085,392
 64,901,975
 64,847,334
 64,793,005
 64,742,822
 64,729,752
Diluted 64,805,172
 64,793,134
 64,783,737
 64,787,728
 65,157,841
 64,937,226
 64,888,033
 64,843,179
 64,805,172
 64,793,134
1
Non-GAAP measure to net interchange charges from prior quarters between transaction card revenue and data processing and communications expense. This measure has no effect on net income or earnings per share.



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 SeptemberJune 30, 2017.2018.

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
July 1 to July 31, 2017—
$—
—
2,120,757
August 1 to August 31, 2017—
$—
—
2,120,757
September 1 to September 30, 2017—
$—
—
2,120,757
Total—

—

 
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
April 1 to April 30, 2018 7,629
 $91.46
 —
 1,958,174
May 1 to May 31, 2018 8,257
 $99.84
 8,257
 1,949,917
June 1 to June 30, 2018 —
 $—
 —
 1,949,917
Total 15,886
  
 8,257
  
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 SeptemberJune 30, 2017,2018, the Company had repurchased 2,879,2433,050,083 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

99.1
Agreement and Plan of Merger by and among CoBiz Financial Inc., BOK Financial Corporation and BOKF Merger Corporation Number Sixteen, dated as of June 17, 2018

101Interactive 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.




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:        OctoberJuly 31, 20172018                                                                 



/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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