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BOK Financial Reports Quarterly Earnings of $111 million or $1.54 Per Share

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Net interest revenue was $278.1 million for the first quarter of 2019 , a $7.6 million decrease compared to the fourth quarter of 2018 . Net interest margin was 3.30 percent for the first quarter of 2019 , down 10 basis points compared to the previous quarter. A decrease in average non–interest bearing demand deposits and an increase in average trading securities and related receivables combined to decrease net interest revenue and to compress the net interest margin.

The decrease in non–interest bearing demand deposits appears to have been driven primarily by seasonal factors along with commercial customers putting their cash to use.

Due to the nature of the trading activity, much of the revenue associated with average trading assets is recognized as brokerage and trading revenue, rather than interest income, while all of the related funding costs remain in interest expense.

The yield on average earning assets was 4.46 percent , a 13 basis point increase . The yield on the loan portfolio was 5.26 percent , up 17 basis points primarily due to increases in short-term market interest rates. The yield on the available for sale securities portfolio increase d 6 basis points to 2.57 percent . The yield on the trading securities portfolio was down 22 basis points.

Funding costs were 1.66 percent , up 24 basis points. The cost of interest-bearing deposits increase d 17 basis points to 1.04 percent . The cost of other borrowed funds was up 21 basis points to 2.54 percent . The benefit to net interest margin from assets funded by non-interest liabilities was relatively unchanged at 50 basis points.

Average earning assets increase d $675 million compared to the fourth quarter of 2018 . Average loan balances were up $187 million . Available for sale securities increase d $178 million . Fair value option securities balances increased $317 million . Trading securities balances increase d $39 million . Average borrowed funds increase d $1.5 billion and average interest-bearing deposit balances increase d $180 million compared to the fourth quarter of 2018 . In addition, receivables from unsettled securities sales, primarily related to our U.S. agency residential mortgage back trading operations, were up $425 million . Growth in these non-interest bearing receivables was funded by increased borrowings.

Fees and commissions revenue totaled $160.6 million for the first quarter of 2019 , consistent with the fourth quarter of 2018 .

Brokerage and trading revenue increase d $3.5 million due to increased trading volumes. Lower mortgage interest rates have led to an increase in mortgage applications, which has positively affected mortgage banking revenue. Mortgage banking revenue increased $2.0 million over the fourth quarter of 2018 . Mortgage gain on sale margins increase d 18 basis points.

Other revenue decrease d $3.6 million , primarily due to a decrease in revenue earned on certain repossessed assets compared to the fourth quarter of 2018 . In addition, service charges were reduced by $1.2 million , primarily due to two less days in the quarter compared to the fourth quarter of 2018 .

Total operating expense was $287.2 million for the first quarter of 2019 , relatively consistent with the fourth quarter of 2018 . CoBiz integration costs were $12.7 million in the first quarter of 2019 compared to $14.5 million in the fourth quarter of 2018 . The following discussion excludes the impact of these costs.

Personnel expense increase d $10.9 million . Personnel expenses related to CoBiz operations decreased $2.0 million compared to the prior quarter. Incentive compensation expense increase d $9.6 million mainly due to changes in vesting assumptions related to the Company's earnings per share growth relative to a defined peer group. Employee benefits increase d $1.9 million due to a seasonal increase in payroll taxes partially offset by a decrease in health care costs.

Non-personnel expense decrease d $6.6 million . The fourth quarter of 2018 included a $2.8 million charitable donation to the BOKF Foundation. In addition, business promotion expense decreased $1.7 million and mortgage banking costs decrease d $1.6 million , both due to seasonality. Professional fees and services decreased $1.0 million . These decreases were partially offset by an increase in data processing and communications expense of $3.0 million .

Loans

Outstanding loans were $21.8 billion at March 31, 2019 , up $102 million over December 31, 2018 . Growth in outstanding commercial loan balances was partially offset by a decrease in commercial real estate loans.

Outstanding commercial loan balances grew by $326 million or 2 percent over December 31, 2018 . Energy loan balances were up $115 million , consistent with our ongoing support and commitment to the oil and gas industry. Healthcare sector loans increase d by $117 million and wholesale/retail sector loans increase d $86 million . This growth was partially offset by a $31 million decrease in other commercial and industrial loans.

Commercial real estate loan balances decreased $164 million or 3 percent compared to December 31, 2018 due to a cycle of pay-downs; however, commitment volume remains strong. Loans secured by multifamily residential properties decrease d $78 million . Loans secured by office buildings decrease d $40 million and loans secured by retail facilities decrease d $28 million .

Deposits

Period-end deposits totaled $25.3 billion at March 31, 2019 , a $68 million increase compared to December 31, 2018 . Demand deposit balances decreased $318 million . Interest-bearing transaction account balances increase d $270 million . Time deposit balances increased by $85 million .

Capital

The company's common equity Tier 1 capital ratio was 10.71 percent at March 31, 2019 . In addition, the company's Tier 1 capital ratio was 10.71 percent , total capital ratio was 12.24 percent , and leverage ratio was 8.76 percent at March 31, 2019 . At December 31, 2018 , the company's common equity Tier 1 capital ratio was 10.92 percent , Tier 1 capital ratio was 10.92 percent , total capital ratio was 12.50 percent , and leverage ratio was 8.96 percent .

The company's tangible common equity ratio, a non-GAAP measure, was 8.64 percent at March 31, 2019 and 8.82 percent at December 31, 2018 . The tangible common equity ratio is primarily based on total shareholders' equity, which includes unrealized gains and losses on available for sale securities. The company has elected to exclude unrealized gains and losses from available for sale securities from its calculation of Tier 1 capital for regulatory capital purposes, consistent with the treatment under the previous capital rules.

Nonperforming assets totaled $262 million or 1.20 percent of outstanding loans and repossessed assets at March 31, 2019 , compared to $267 million or 1.23 percent at December 31, 2018 . Nonperforming assets that are not guaranteed by U.S. government agencies totaled $163 million or 0.75 percent of outstanding loans and repossessed assets at March 31, 2019 , compared to $174 million or 0.81 percent at December 31, 2018 .

Nonaccruing loans were $153 million or 0.70 percent of outstanding loans at March 31, 2019 . Nonaccruing commercial loans totaled $90 million or 0.65 percent of outstanding commercial loans. Nonaccruing commercial real estate loans totaled $22 million or 0.47 percent of outstanding commercial real estate loans. Nonaccruing residential mortgage loans totaled $40 million or 1.84 percent of outstanding residential mortgage loans.

Nonaccruing loans decrease d $11 million from December 31, 2018 , primarily due to a $12 million decrease in energy loans. Healthcare sector loans increase d $2.2 million . New nonaccruing loans identified in the first quarter totaled $27 million , offset by $22 million in payments received and $12 million in charge-offs.

Potential problem loans, which are defined as performing loans that, based on known information, cause management concern as to the borrowers' ability to continue to perform, totaled $169 million at March 31 , compared to $215 million at December 31 . The decrease was primarily due to a $24 million decrease in healthcare sector loans, a $7.5 million decrease in permanent residential mortgage loans and a $5.3 million decrease in energy loans.

Net charge-offs were $10.1 million or 0.19 percent of average loans on an annualized basis for the first quarter of 2019 , compared to $12.3 million or 0.23 percent of average loans on an annualized basis for the fourth quarter of 2018 . Net charge-offs were 0.23 percent of average loans over the last four quarters. Net charge-offs for the first quarter were primarily related to a single energy production borrower and a single healthcare borrower, both of which had previously been identified as impaired and appropriately reserved. Gross charge-offs were $11.8 million for the first quarter compared to $14.5 million for the previous quarter. Recoveries totaled $1.7 million for the first quarter of 2019 and $2.2 million for the fourth quarter of 2018 .

Based on an evaluation of all credit factors, including overall loan portfolio growth, changes in nonaccruing and potential problem loans and net charge-offs, the company determined that an $8.0 million provision for credit losses was appropriate for the first quarter of 2019 . The company recorded a $9.0 million provision for credit losses in the fourth quarter of 2018 .

The combined allowance for credit losses totaled $207 million or 0.95 percent of outstanding loans and 142 percent of nonaccruing loans at March 31, 2019 , excluding residential mortgage loans guaranteed by U.S. government agencies. Excluding loans acquired in the CoBiz acquisition, which are measured at acquisition-date fair value, the combined allowance for loan losses was 1.09 percent of outstanding loans and 159 percent of nonaccruing loans at March 31, 2019 compared to 1.12 percent of outstanding loans and 146 percent of nonaccruing loans at December 31, 2018 . The allowance for loan losses was $205 million and the accrual for off-balance sheet credit losses was $1.8 million . At December 31, 2018 , the combined allowance for credit losses was $209 million or 0.97 percent of outstanding loans and 134 percent of nonaccruing loans, excluding loans guaranteed by U.S. government agencies. The allowance for loan losses was $207 million and the accrual for off-balance sheet credit losses was $1.8 million .

The fair value of the available for sale securities portfolio totaled $9.0 billion at March 31, 2019 , a $168 million increase compared to December 31, 2018 . At March 31, 2019 , the available for sale securities portfolio consisted primarily of $6.0 billion of residential mortgage-backed securities fully backed by U.S. government agencies and $2.9 billion of commercial mortgage-backed securities fully backed by U.S. government agencies. At March 31, 2019 , the available for sale securities portfolio had a net unrealized loss of $2.6 million compared to a $95 million net unrealized loss at December 31, 2018 .

Trading securities increase d $183 million to $2.1 billion during the first quarter of 2019 . The company holds an inventory of securities, predominately composed of U.S. agency residential mortgage-backed securities, in support of sales to a variety of customers, including banks, corporations, insurance companies, money managers, and others.

The company also maintains a portfolio of residential mortgage-backed securities issued by U.S. government agencies and interest rate derivative contracts as an economic hedge of the changes in the fair value of our mortgage servicing rights.

The net economic cost of the changes in fair value of mortgage servicing rights and related economic hedges was $5.4 million during the first quarter of 2019 , including a $20.7 million decrease in the fair value of mortgage servicing rights, a $14.1 million increase in the fair value of securities and derivative contracts held as an economic hedge, and $1.1 million of related net interest revenue.

Net income for Commercial Banking was $86.1 million for the first quarter of 2019 , an increase of $1.6 million over the fourth quarter of 2018 . Increased net interest revenue was partially offset by decreased fee revenue.

Average loans increase d $364 million or 2 percent . Average customer deposits were $8.3 billion , a decrease of $131 million or 2 percent . We continue to see a shift in the deposit mix with demand deposit balances declining $411 million and interest-bearing transaction deposits increasing $277 million .

Operating revenue decrease d $1.8 million , partially offset by a decrease in operating expenses of $1.5 million .

Net income from Consumer Banking was $15.6 million in the first quarter of 2019 , an increase of $12.8 million .

Net interest revenue from Consumer Banking activities increased $9.7 million , primarily due to increased yields on deposits sold to our Funds Management unit as consumer deposits are more valuable in a rising rate environment. In addition, lower recent interest rates have spurred mortgage application volume in the first quarter of 2019 . Average loans and average deposits were both relatively consistent with the fourth quarter of 2018 .

Revenues from mortgage banking activities increased $1.9 million over the prior quarter due to lower interest rates. Mortgage production volume increased $153 million or 33 percent and gain on sale margins climbed to 1.28 percent from 1.10 percent . Deposit service charges declined $1.6 million due to two less days in the quarter compared to the previous quarter.

Operating expenses decreased $2.6 million . A $4.1 million decrease in non-personnel expenses was partially offset by an increase of $1.6 million in personnel expenses. In the first quarter of 2019 , we made the decision to exit our lower margin online lead buying business, HomeDirect, to focus on our core competency of developing complete, long-term relationships with our clients.

The net economic cost of the changes in fair value of mortgage servicing rights and related economic hedges was $5.4 million for the first quarter of 2019 compared to $11.7 million for the fourth quarter of 2018 .

Net income for Wealth Management increase d $6.2 million to $23.7 million during the first quarter of 2019 . While fiduciary fees and commissions remained consistent with the fourth quarter of 2018 , we saw an increase of $6.4 million in brokerage and trading revenue. This increase was partially offset by a decrease in interest received on trading securities and increase in funding costs. Operating expenses decrease d $3.0 million , including $2.0 million related to personnel expenses and $1.1 million related to other operating expenses. Personnel expenses decreased primarily due to retention incentives accrued in the fourth quarter.

Average loans were stable at $1.4 billion . Average deposits increase d $176 million to $5.7 billion , primarily due to an increase in interest-bearing transaction account balances. Assets under management or administration were $78.9 billion at March 31, 2019 compared to $76.3 billion at December 31, 2018 . Fiduciary assets totaled $46.4 billion at March 31, 2019 and $44.8 billion at December 31, 2018 .

The company will hold a conference call at 9 a.m. Central time on Wednesday, April 24, 2019 to discuss the financial results with investors. The live audio webcast and presentation slides will be available on the company’s website at www.bokf.com . The conference call can also be accessed by dialing 1-201-689-8471. A conference call and webcast replay will also be available shortly after conclusion of the live call at www.bokf.com or by dialing 1-412-317-6671 and referencing conference ID # 13689382.

BOK Financial Corporation is a $40 billion regional financial services company headquartered in Tulsa, Oklahoma with $79 billion in assets under management and administration. The company's stock is publicly traded on NASDAQ under the Global Select market listings (BOKF). BOK Financial Corporation's holdings include BOKF, NA; BOK Financial Securities, Inc., The Milestone Group, Inc., CoBiz Wealth, LLC and BOK Financial Insurance, Inc. BOKF, NA operates TransFund, Cavanal Hill Investment Management and BOK Financial Asset Management, Inc. BOKF, NA operates banking divisions across eight states as: Bank of Albuquerque; Bank of Arkansas; Bank of Oklahoma; Bank of Texas; BOK Financial in Colorado and Arizona; and Mobank in Kansas and Missouri; as well as having limited purpose offices in Nebraska, Milwaukee and Connecticut. Through its subsidiaries, BOK Financial Corporation provides commercial and consumer banking, brokerage trading, investment, trust and insurance services, mortgage origination and servicing, and an electronic funds transfer network. For more information, visit www.bokf.com.

The company will continue to evaluate critical assumptions and estimates, such as the appropriateness of the allowance for credit losses and asset impairment as of March 31, 2019 through the date its financial statements are filed with the Securities and Exchange Commission and will adjust amounts reported if necessary.

This news release contains forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about BOK Financial, the financial services industry and the economy generally. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “plans,” “projects,” “will,” “intends,” variations of such words and similar expressions are intended to identify such forward-looking statements. Management judgments relating to and discussion of the provision and allowance for credit losses, allowance for uncertain tax positions, accruals for loss contingencies and valuation of mortgage servicing rights involve judgments as to expected events and are inherently forward-looking statements. Assessments that BOK Financial's acquisitions, including its latest acquisition of CoBiz Financial, Inc., and other growth endeavors will be profitable are necessary statements of belief as to the outcome of future events based in part on information provided by others which BOK Financial has not independently verified. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions which 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 expected, implied or forecasted in such forward-looking statements. Internal and external factors that might cause such a difference include, but are not limited to changes in commodity prices, interest rates and interest rate relationships, inflation, demand for products and services, the degree of competition by traditional and nontraditional competitors, changes in banking regulations, tax laws, prices, levies and assessments, the impact of technological advances, and trends in customer behavior as well as their ability to repay loans. There may also be difficulties and delays in integrating CoBiz Financial Inc.'s business or fully realizing cost savings and other benefits including, but

not limited to, business disruption and customer acceptance of BOK Financial Corporation's products and services. BOK Financial and its affiliates undertake no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.