BOKF 10-Q Quarterly Report Sept. 30, 2012

BOK FINANCIAL CORP ET AL

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10-Q 1 bokf-20120930x10q.htm 10-Q BOKF-2012.09.30-10Q

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 September 30, 2012



¨		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
P.O. Box 2300
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 ¨

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: 68,215,354 shares of common stock ($.00006 par value) as of September 30, 2012 .

BOK Financial Corporation

Form 10-Q

Quarter Ended September 30, 2012

Index



Part I. Financial Information
Management’s Discussion and Analysis (Item 2)	1
Market Risk (Item 3)	56
Controls and Procedures (Item 4)	58
Consolidated Financial Statements – Unaudited (Item 1)	59
Nine Month Financial Summary – Unaudited (Item 2)	140
Quarterly Financial Summary – Unaudited (Item 2)	141
Quarterly Earnings Trend – Unaudited	143

Part II. Other Information
Item 1. Legal Proceedings	144
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	144
Item 6. Exhibits	144
Signatures	145

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

Performance Summary

BOK Financial Corporation (“the Company”) reported net income of $87.4 million or $1.27 per diluted share for the third quarter of 2012 , compared to $85.1 million or $1.24 per diluted share for the third quarter of 2011 and $97.6 million or $1.43 per diluted share for the second quarter of 2012 . Net income for the second quarter included a $14 million pretax gain on sale of common stock received in settlement of a defaulted loan and an $8.0 million negative provision for credit losses.

Net income for the nine months ended September 30, 2012 totaled $268.6 million or $3.92 per diluted share compared with net income of $218.9 million or $3.19 per diluted share for the nine months ended September 30, 2011 .

Highlights of the third quarter of 2012 included:

•

Net interest revenue totaled $176.0 million for the third quarter of 2012 , compared to $175.4 million for the third quarter of 2011 and $181.4 million for the second quarter of 2012 . Net interest margin was 3.12% for the third quarter of 2012 . Net interest margin was 3.34% for the third quarter of 2011 and 3.30% for the second quarter of 2012 . Net interest revenue in the second quarter of 2012 included $2.9 million from the full recovery of a nonaccruing commercial loan. Excluding this recovery, net interest margin was 3.25%. Net interest earned from the increase in average loan and securities balances was largely offset by the reinvestment of cash flows from the securities portfolio at lower current market rates and decreased loan yield.

•

Fees and commissions revenue totaled $166.3 million for the third quarter of 2012 , compared to $146.0 million for the third quarter of 2011 and $154.5 million for the second quarter of 2012 . Mortgage banking revenue increased $20.8 million over the third quarter of 2011 and $10.7 million over the second quarter of 2012 due primarily to an increase in loan production volume and improved pricing of loans sold. Nearly all other fee-based revenue sources increased over the prior year and quarter.

•

Operating expenses, excluding changes in the fair value of mortgage servicing rights, totaled $212.8 million , up $17.1 million over the third quarter of 2011 and up $1.2 million over the previous quarter. Personnel costs increased $19.5 million over the third quarter of 2011 due largely to incentive compensation and were flat compared to the second quarter of 2012 . Non-personnel expenses decreased $2.5 million compared to the third quarter of 2011 and increased $725 thousand over the prior quarter.

•

No provision for credit losses was recorded in the third quarter of 2012 or the third quarter of 2011 . An $8.0 million negative provision for credit losses was recorded in the second quarter of 2012 . Net loans charged off totaled $5.7 million or 0.19% of average loans on an annualized basis for the third quarter of 2012 compared to $4.8 million or 0.17% on an annualized basis in the second quarter of 2012 and $10.2 million or 0.37% of average loans on an annualized basis in the third quarter of 2011 .

•

The combined allowance for credit losses totaled $236 million or 1.99% of outstanding loans at September 30, 2012 compared to $241 million or 2.09% of outstanding loans at June 30, 2012 . Nonperforming assets totaled $264 million or 2.21% of outstanding loans and repossessed assets at September 30, 2012 compared to $279 million or 2.38% of outstanding loans and repossessed assets at June 30, 2012 .


•	Outstanding loan balances were $11.8 billion at September 30, 2012 , up $256 million over June 30, 2012 . Commercial loan balances increase d $221 million or 13% on an annualized basis. Commercial real estate loans increased $39 million and residential mortgage loans increase d $14 million over June 30, 2012 . Consumer loans decreased $18 million .


•	The available for sale securities portfolio increase d by $1.1 billion during the third quarter to $11.5 billion at September 30, 2012 . The Company increased its holdings of low duration residential mortgage-backed securities guaranteed by U.S. government agencies during the third quarter.


•	Period-end deposits totaled $19.1 billion at September 30, 2012 compared to $18.4 billion at June 30, 2012 . Interest-bearing transaction accounts increase d $451 million and demand deposit accounts increase d $408 million , partially offset by an $86 million decrease in time deposits.


•	The tangible common equity ratio was 9.67% at September 30, 2012 and 10.07% at June 30, 2012 . The tangible common equity ratio is a non-GAAP measure of capital strength used by the Company and investors based on shareholders’ equity

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as defined by generally accepted accounting principles in the United States of America (“GAAP”) minus intangible assets and equity that does not benefit common shareholders.


•	The Company and its subsidiary bank continue to exceed the regulatory definition of well capitalized. The Company’s Tier 1 capital ratios as defined by banking regulations were 13.21% at September 30, 2012 and 13.62% at June 30, 2012 .

•

The Company paid a cash dividend of $26 million or $0.38 per common share during the third quarter of 2012 . On October 30, 2012 the board of directors approved a quarterly cash dividend of $0.38 per common share payable on or about November 30, 2012 to shareholders of record as of November 16, 2012. In addition, on October 30, 2012, the board of directors approved a special cash dividend of $1.00 per common share payable on or about November 30, 2012 to shareholders of record as of November 16, 2012.

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 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 $176.0 million for the third quarter of 2012 compared to $175.4 million for the third quarter of 2011 and $181.4 million for the second quarter of 2012 . Net interest margin was 3.12% for the third quarter of 2012 , 3.30% for the second quarter of 2012 and 3.34% for the third quarter of 2011 . Net interest revenue for the second quarter of 2012 included $2.9 million from a full recovery of a nonaccruing commercial loan. Excluding this recovery, net interest margin was 3.25% for the second quarter of 2012.

Net interest revenue increase d $643 thousand over the third quarter of 2011 . Net interest revenue increased $18.3 million primarily due to the growth in average loan and securities balances. Net interest decreased $17.4 million due to interest rates. Cash flows from the securities portfolio were reinvested at lower current market rates and loan yields decreased due to renewal of maturing fixed-rate loans at current lower rates and narrowing credit spreads, partially offset by lower funding costs.

Net interest margin declined compared to the the third quarter of 2011 due primarily to lower yields on our available for sale securities portfolio and loan portfolio, partially offset by lower funding costs. The tax-equivalent yield on earning assets was 3.47% for the third quarter of 2012 , down 44 basis points from the third quarter of 2011 . The available for sale securities portfolio yield decreased 45 basis points to 2.38% . Cash flows from these securities were reinvested at current lower rates. Loan yields decreased 38 basis points due primarily to a combination of narrowing credit spreads and lower market interest rates. Funding costs were down 24 basis points from the third quarter of 2011 . The cost of interest-bearing deposits decreased 15 basis points and the cost of other borrowed funds decreased 18 basis points . The average rate of interest paid on subordinated debentures decreased 281 basis points compared to the third quarter of 2011 . The interest rate on $233 million of these subordinated debentures converted from a fixed rate of interest of 5.75% to a floating interest rate based on LIBOR plus 0.69% as of May 15, 2012. The benefit to net interest margin from earning assets funded by non-interest bearing liabilities was 17 basis points in the third quarter of 2012 compared to 19 basis points in the third quarter of 2011 .

Average earning assets for the third quarter of 2012 increased $2.3 billion or 11% over the third quarter of 2011 . The average balance of available for sale securities, which consists largely of U.S. government agency issued residential mortgage-backed securities, increased $1.4 billion . We purchase these securities to supplement earnings and to manage interest rate risk. Securities were purchased to productively deploy liquidity provided by recent deposit growth and the Company's strong capital position. Growth was primarily in short-duration U.S. government agency residential mortgage-backed securities and U.S. government agency commercial mortgage-backed securities. Average loans, net of allowance for loan losses, increased $921 million over the third quarter of 2011 due primarily to growth in average commercial loans.

Average deposits increased $545 million over the third quarter of 2011 , including a $1.6 billion increase in average demand deposit balances, partially offset by a $590 million decrease in average interest-bearing transaction accounts and a $549 million decrease in average time deposits. Average borrowed funds increased $637 million over the third quarter of 2011 .

- 2 -

Net interest margin decreased 18 basis points compared to the second quarter of 2012 . Excluding the impact of the interest recovery in the second quarter, net interest margin decreased 13 basis points. The yield on average earning assets was down 17 basis points. The yield on the available for sale securities portfolio decreased 16 basis points primarily due to reinvestment of the cash flows from the securities portfolio at lower current rates. The loan portfolio yield decreased 15 basis points largely due to renewals of maturing fixed-rate loans at current lower rates and narrowing credit spreads in this prolonged low interest rate environment, and a reduction in fees recognized when loans prepay. The cost of interest-bearing liabilities decreased 4 basis points from the previous quarter, including a 116 basis point decrease in the average rate paid on subordinated debentures due to the change from a fixed to floating rate of interest.

Average earning assets for the third quarter of 2012 increased $1.2 billion over the second quarter of 2012 . The average balance of the available for sale securities portfolio increased $967 million . Average outstanding loans, net of allowance for loan losses, increased $136 million largely due to growth in average commercial loan balances. Average deposits increased by $325 million during the third quarter of 2012 , including a $440 million increase in demand deposits, partially offset by a $60 million decrease in interest-bearing transaction accounts and a $63 million decrease in time deposits. The average balance of borrowed funds decreased $34 million and the average balance of subordinated debentures decrease d by $5.2 million .

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 two-thirds of our commercial and commercial real estate loan portfolios are either variable rate or fixed rate that will re-price within one year. These loans are funded primarily by deposit accounts that are either non-interest bearing, or that re-price more slowly than the loans. The result is a balance sheet that would be asset sensitive, which means that assets generally re-price more quickly than liabilities. Among the strategies that we use to manage toward a relatively rate-neutral position, we purchase fixed rate residential mortgage-backed securities issued primarily by U.S. government agencies and fund them with market rate sensitive liabilities. The liability-sensitive nature of this strategy provides an offset to the asset-sensitive characteristics of our loan portfolio. We also may use derivative instruments to manage our interest rate risk.

The effectiveness of these strategies is reflected in the overall change in net interest revenue due to changes in interest rates as shown in Table 1 and in the interest rate sensitivity projections as shown in the Market Risk section of this report. As shown in Table 1, increases in net interest revenue have been based on growth in average earning assets. Net interest margin may continue to decline as our ability to further decrease funding costs are limited. Assuming short and intermediate interest rates stay low, net interest margin could migrate below 3%. Although we have sufficient capital and liquidity, our ability to continue net interest revenue support through asset growth without accepting excessive risk in a rising interest rate environment may be constrained.

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Table 1 – Volume / Rate Analysis (In thousands)

	Three Months Ended Sept. 30, 2012 / 2011									Nine Months Ended Sept. 30, 2012 / 2011
				Change Due To ¹									Change Due To ¹
	Change			Volume			Yield / Rate			Change			Volume			Yield /Rate
Tax-equivalent interest revenue:
Funds sold and resell agreements	$	(2	)	$	2		$	(4	)	$	(3	)	$	2		$	(5	)
Trading securities	66			272			(206		)	(100		)	878			(978		)
Investment securities:
Taxable securities	1,365			1,251			114			4,936			5,055			(119		)
Tax-exempt securities	(471		)	(210		)	(261		)	(1,775		)	(1,524		)	(251		)
Total investment securities	894			1,041			(147		)	3,161			3,531			(370		)
Available for sale securities:
Taxable securities	(6,558		)	4,565			(11,123		)	(24,311		)	13,819			(38,130		)
Tax-exempt securities	174			220			(46		)	210			425			(215		)
Total available for sale securities	(6,384		)	4,785			(11,169		)	(24,101		)	14,244			(38,345		)
Fair value option securities	(3,413		)	(1,820		)	(1,593		)	(6,088		)	(1,744		)	(4,344		)
Residential mortgage loans held for sale	694			1,022			(328		)	1,402			2,196			(794		)
Loans	(1,257		)	9,702			(10,959		)	9,548			29,765			(20,217		)
Total tax-equivalent interest revenue	(9,402		)	15,004			(24,406		)	(16,181		)	48,872			(65,053		)
Interest expense:
Transaction deposits	(2,082		)	(294		)	(1,788		)	(8,398		)	(704		)	(7,694		)
Savings deposits	(56		)	35			(91		)	(157		)	101			(258		)
Time deposits	(4,352		)	(2,397		)	(1,955		)	(11,249		)	(6,137		)	(5,112		)
Funds purchased	497			175			322			887			519			368
Repurchase agreements	(214		)	(6		)	(208		)	(1,238		)	87			(1,325		)
Other borrowings	(962		)	(328		)	(634		)	(1,793		)	(2,005		)	212
Subordinated debentures	(3,152		)	(494		)	(2,658		)	(5,206		)	(1,081		)	(4,125		)
Total interest expense	(10,321		)	(3,309		)	(7,012		)	(27,154		)	(9,220		)	(17,934		)
Tax-equivalent net interest revenue	919			18,313			(17,394		)	10,973			58,092			(47,119		)
Change in tax-equivalent adjustment	276									40
Net interest revenue	$	643								$	10,933

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

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Other Operating Revenue

Other operating revenue was $179.9 million for the third quarter of 2012 compared to $173.6 million for the third quarter of 2011 and $186.3 million for the second quarter of 2012 . Fees and commissions revenue increased $20.3 million over the third quarter of 2011 . Net gains on securities, derivatives and other assets decreased $24.1 million compared to the third quarter of 2011 due primarily to a decrease in gains on sale of fair value option securities which are primarily held as an economic hedge against changes in the fair value of mortgage servicing rights. Other-than-temporary impairment charges recognized in earnings in the third quarter of 2012 were $10.2 million less than charges recognized in the third quarter of 2011 .

Other operating revenue decreased $6.3 million compared to the second quarter of 2012 . Fees and commissions revenue increased $11.9 million . Net gains on securities, derivatives and other assets decreased $17.9 million . The second quarter of 2012 included a $14.2 million gain from the sale of $26 million of stock received in settlement of a defaulted loan. Other-than-temporary impairment charges recognized in earnings were $246 thousand more than charges recognized in the second quarter of 2012 .

Table 2 – Other Operating Revenue

(In thousands)



	Three Months Ended Sept. 30,											Three Months Ended
	2012			2011			Increase(Decrease)			% Increase(Decrease)		June 30, 2012			Increase(Decrease)			% Increase(Decrease)
Brokerage and trading revenue	$	31,261		$	29,451		$	1,810		6	%	$	32,600		$	(1,339	)	(4	)%
Transaction card revenue	27,788			31,328			(3,540		)	(11	)%	26,758			1,030			4	%
Trust fees and commissions	19,654			17,853			1,801			10	%	19,931			(277		)	(1	)%
Deposit service charges and fees	25,148			24,614			534			2	%	25,216			(68		)	—	%
Mortgage banking revenue	50,266			29,493			20,773			70	%	39,548			10,718			27	%
Bank-owned life insurance	2,707			2,761			(54		)	(2	)%	2,838			(131		)	(5	)%
Other revenue	9,476			10,535			(1,059		)	(10	)%	7,559			1,917			25	%
Total fees and commissions revenue	166,300			146,035			20,265			14	%	154,450			11,850			8	%
Gain on other assets, net	125			351			(226		)	N/A		2,990			(2,865		)	N/A
Gain on derivatives, net	464			4,048			(3,584		)	N/A		2,345			(1,881		)	N/A
Gain on fair value option securities, net	6,192			17,788			(11,596		)	N/A		6,852			(660		)	N/A
Gain on available for sale securities	7,967			16,694			(8,727		)	N/A		20,481			(12,514		)	N/A
Total other-than-temporary impairment	—			(9,467		)	9,467			N/A		(135		)	135			N/A
Portion of loss recognized in (reclassified from) other comprehensive income	(1,104		)	(1,833		)	729			N/A		(723		)	(381		)	N/A
Net impairment losses recognized in earnings	(1,104		)	(11,300		)	10,196			N/A		(858		)	(246		)	N/A
Total other operating revenue	$	179,944		$	173,616		$	6,328		4	%	$	186,260		$	(6,316	)	(3	)%

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 49% of total revenue for the third quarter of 2012 , excluding provision for credit losses and gains and losses on asset sales, securities and derivatives. We believe that a variety of fee revenue sources provide 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 are causing net interest revenue compression are also driving strong growth in our mortgage banking

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revenue. We expect continued growth in other operating revenue through offering new products and services and by further development of our presence in markets outside of Oklahoma. However, current and future economic conditions, regulatory constraints, increased competition and saturation in our existing markets could affect the rate of future increases.

Brokerage and trading revenue, which includes revenues from securities trading, retail brokerage, customer hedging and investment banking increased $1.8 million or 6% over the third quarter of 2011 .

Securities trading revenue totaled $18.9 million for the third quarter of 2012 , up $3.2 million over the third quarter of 2011 . Securities trading revenue represents 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. We believe these activities will be permitted under the Volcker Rule of the Dodd-Frank Act.

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 $2.0 million for the third quarter of 2012 compared to $3.3 million for the third quarter of 2011 .

Revenue earned from retail brokerage transactions decreased $697 thousand or 9% compared to the third quarter of 2011 to $6.7 million . Retail brokerage revenue is primarily based on fees and commissions earned on sales of fixed income securities, annuities and mutual funds to retail customers. Revenue is primarily based on the volume of customer transactions during the quarter. The number of transactions typically increases with market volatility and decreases with market stability.

Investment banking, which includes fees earned upon completion of underwriting and financial advisory services, totaled $3.6 million for the third quarter of 2012 , a $641 thousand or 21% increase over the third quarter of 2011 related to the timing and volume of completed transactions. The increased volume of transactions is primarily the result of the Company's expansion of its municipal financial advisory service capacity, particularly in the Texas market.

Brokerage and trading revenue decreased $1.3 million compared to the second quarter of 2012 . Securities trading revenue increased $2.9 million over the second quarter of 2012 . Excluding the impact of a $2.9 million recovery from the Lehman Brothers bankruptcy in the second quarter of 2012 related to derivative contract losses incurred in 2008, customer hedging revenue increased $673 thousand. Revenue from energy derivative contracts were up $2.2 million as a result of growth in contract volumes, partially offset by a $1.5 million decrease in revenue related to interest rate derivative contracts. Net gains from securities and derivative contracts sold to our mortgage banking customers were up $703 thousand over the second quarter of 2012 . Retail brokerage fees were down $1.4 million and investment banking fees were down $577 thousand .

We continue to monitor the on-going development of rules to implement the Volcker Rule in Title VI of the Dodd-Frank Act which prohibits banking entities from engaging in proprietary trading as defined by the Dodd-Frank Act and restricts sponsorship of, or investment in, private equity funds and hedge funds, subject to limited exceptions. Based on the proposed rules, we expect the Company's trading activity to be largely unaffected, as our trading activities are all done for the benefit of the customers and securities traded are mostly exempted under the proposed rules. The Company's private equity investment activity may be curtailed, but is not expected to result in a material impact to the Company's financial statements. Final regulations will likely impose additional operating and compliance costs as presently proposed.

Title VII of the Dodd-Frank Act subjects nearly all derivative transactions to Commodity Futures Trading Commission (“CFTC”) or Securities and Exchange Commission (“SEC”) regulations. Title VII, among other things, imposes registration, recordkeeping, reporting, capital and margin, as well as business conduction requirements on major swap dealers and major swap participants. The CFTC and SEC delayed the effective dates of a large portion of the proposed regulations under Title VII until December 31, 2012. On April 18, 2012, the CFTC and SEC both approved interim final rules on the definition of swaps dealers. Under these rules, entities transacting, as a dealer, less than $8 billion in notional value of swaps over any 12 month period during the first three years after the rules are effective will be exempt from the definition of swaps dealer; after that three year period, the $8 billion amount may become $3 billion, subject to the results of studies the commissions intend to undertake once the derivatives rules are effective. For purposes of the foregoing test, certain derivatives transactions entered into by a customer in connection with a loan from the Company are not considered dealing activity. The “swap dealer” definitional rules are scheduled to go into effect in October 2012. The Company currently estimates that its volume of swap activities (excluding transactions entered into in connection with a loan from the Company to its customers) are unlikely to require it to register as a “swap dealer”, at least at any time prior to October 2015 (the minimum period for which the $8 billion notional value threshold will be in effect). Although the ultimate impact of Title VII remains uncertain, we currently believe its full implementation is likely not to impose significantly higher compliance costs on the Company.

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Transaction card revenue depends largely on the volume and amount of transactions processed, the number of TransFund automated teller machine (“ATM”) locations and the number of merchants served. Transaction card revenue for the third quarter of 2012 decreased $3.5 million or 11% compared to the third quarter of 2011 . Revenues from the processing of transactions on behalf of the members of our TransFund electronic funds transfer ("EFT") network totaled $14.5 million , up $1.6 million or 12% over the third quarter of 2011 , due primarily to increased transaction volumes. Merchant services fees paid by customers for account management and electronic processing of card transactions and revenue from interchange fees from debit cards issued by the Company were both down primarily due to the impact of interchange fee regulations, commonly referred to as the Durbin Amendment, which became effective on October 1, 2011. Merchant services fees totaled $8.9 million , down $255 thousand or 3% compared to the prior year. Revenue from interchange fees paid by merchants for transactions processed from debit cards issued by the Company totaled $4.4 million for the third quarter of 2012 compared to $9.3 million for the third quarter of 2011 .

Transaction card revenue increased $1.0 million over the second quarter of 2012 due primarily to increased revenue from processing transactions on behalf of members of our TransFund EFT network. Merchant services fees for account management and electronic processing of card transactions and revenue from interchange fees paid by merchant banks for transactions processed from debit cards issued by the Company were largely unchanged compared to the previous quarter.

Trust fees and commissions increased $1.8 million or 10% over the third quarter of 2011 primarily due to the growth in the fair value of assets administered by the Company. The fair value of trust assets administered by the Company totaled $37.7 billion at September 30, 2012 , $32.0 billion at September 30, 2011 and $35.7 billion at June 30, 2012 . Trust fees and commissions decreased $277 thousand compared to the second quarter of 2012 . We continue to voluntarily waive administration fees on the Cavanal Hill money market funds in order to maintain positive yields on these funds in the current low short-term interest rate environment. Waived fees totaled $1.9 million for the third quarter of 2012 compared to $2.1 million for the third quarter of 2011 and $2.2 million for the second quarter of 2012 .

Deposit service charges and fees increased $534 thousand or 2% over the third quarter of 2011 . Overdraft fees totaled $14.3 million for the third quarter of 2012 , down $950 thousand or 6% compared to the third quarter of 2011 . Commercial account service charge revenue totaled $8.7 million , up $780 thousand or 10% over the prior year. The average earnings credit, a non-cash method for commercial customers to avoid incurring charges for deposit services based on account balances, decreased 23 basis points compared to the prior year to better align with market interest rates. Service charges on deposit accounts with a standard monthly fee were $2.1 million , up $701 thousand or 49% over the third quarter of 2011 . Deposit service charges and fees were largely unchanged compared to the prior quarter.

Mortgage banking revenue increased $20.8 million over the third quarter of 2011 . Continued low interest rates have resulted in a record level of mortgage originations. The current high demand for mortgage origination industry-wide has resulted in improved pricing on sales of mortgage loans in the secondary market. Revenue from originating and marketing mortgage loans totaled $40.4 million , up $20.7 million or 105% over the third quarter of 2011 . Mortgage loans funded for sale totaled $1.0 billion in the third quarter of 2012 and $637 million in the third quarter of 2011 . In addition to growth in loans funded, outstanding commitments to originate mortgage loans were up $139 million or 44% over September 30, 2011 . Mortgage servicing revenue increased $118 thousand or 1% over the third quarter of 2011 . The outstanding principal balance of mortgage loans serviced for others totaled $11.8 billion , up $507 million over September 30, 2011 .

Mortgage banking revenue increased $10.7 million over the second quarter of 2012 primarily due to an increase in revenue from originating and marketing residential mortgage loans. Residential mortgage loans funded for sale increased $205 million over the previous quarter. Outstanding commitments to originate mortgage loans were up $60 million or 15% over June 30, 2012 . Mortgage servicing revenue was largely unchanged compared to the prior quarter. The outstanding balance of mortgage loans serviced for others was up $192 million over June 30, 2012 .

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Table 3 – Mortgage Banking Revenue

(In thousands)



	Three Months Ended Sept. 30,								%		Three Months Ended					%
	2012			2011			Increase (Decrease)		Increase (Decrease)		June 30, 2012			Increase (Decrease)		Increase (Decrease)
Originating and marketing revenue	$	40,358		$	19,703		$	20,655	105	%	$	29,689		$	10,669	36	%
Servicing revenue	9,908			9,790			118		1	%	9,859			49		—	%
Total mortgage revenue	$	50,266		$	29,493		$	20,773	70	%	$	39,548		$	10,718	27	%

Mortgage loans funded for sale	$	1,046,608		$	637,127		$	409,481	64	%	$	841,959		$	204,649	24	%
Mortgage loan refinances to total funded	61		%	54		%					51		%



	June 30,
	2012		2011		Increase		% Increase		June 30, 2012		Increase		% Increase
Outstanding principal balance of mortgage loans serviced for others	$	11,756,350	$	11,249,503	$	506,847	5	%	$	11,564,643	$	191,707	2	%

Net gains on securities, derivatives and other assets

In the third quarter of 2012 , we recognized an $8.0 million gain from sales of $209 million of available for sale securities. Securities were sold either because they had reached their expected maximum potential return or to mitigate exposure to prepayment risk. We recognized $16.7 million of gains on sales of $654 million of available for sale securities in the third quarter of 2011 . In the second quarter of 2012 , we recognized a $14.2 million gain on the sale of $26 million of common stock received in 2009 in partial satisfaction of a defaulted commercial loan. In addition, we recognized $6.1 million in gains on sales of $433 million of residential mortgage-backed securities guaranteed by U.S. government agencies.

We also maintain a portfolio of residential mortgage-backed securities issued by U.S. government agencies and interest rate derivative contracts designated as an economic hedge of the changes in the fair value of our mortgage servicing rights. The fair value of our mortgage servicing rights fluctuate due to changes in prepayment speeds and other assumptions as more fully described in Note 6 to the Consolidated Financial Statements. As benchmark mortgage rates increase, prepayment speeds slow and the value of our mortgage servicing rights increase. As benchmark mortgage rates fall, prepayment speeds increase and the value of our mortgage servicing rights decrease.

Changes in the fair value of mortgage servicing rights are highly dependent on changes in primary mortgage rates, rates offered to borrowers, and assumptions about servicing revenues, servicing costs and discount rates. Changes in the fair value of residential mortgage-backed securities and interest rate derivative contracts are highly dependent on changes in secondary mortgage rates, or rates required by investors. 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 assumptions and the spread between the primary and secondary rates can cause significant quarterly earnings volatility.

Table 4 following shows the relationship between changes in the fair value of mortgage servicing rights and the fair value of fair value option residential mortgage-backed securities and interest rate derivative contracts designated as an economic hedge.

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Table 4 – Gain (Loss) on Mortgage Servicing Rights (In thousands)

	Three Months Ended
	September 30, 2012			June 30, 2012			September 30, 2011
Gain (loss) on mortgage hedge derivative contracts, net	$	645		$	2,623		$	4,048
Gain (loss) on fair value option securities, net	5,455			6,908			17,788
Gain (loss) on economic hedge of mortgage servicing rights	6,100			9,531			21,836
Gain (loss) on change in fair value of mortgage servicing rights	(9,576		)	(11,450		)	(24,822		)
Gain (loss) on changes in fair value of mortgage servicing rights, net of economic hedges	$	(3,476	)	$	(1,919	)	$	(2,986	)

Net interest revenue on fair value option securities	$	1,750		$	2,148		$	5,036

Average primary residential mortgage interest rate	3.55		%	3.79		%	4.29		%
Average secondary residential mortgage interest rate	2.28		%	2.74		%	3.44		%

Primary rates disclosed in Table 4 above represent rates generally available to borrowers on 30 year conforming mortgage loans and affect the value of our mortgage servicing rights. Secondary rates represents rates generally paid on 30 year residential mortgage-backed securities guaranteed by U.S. government agencies and affect the value of securities and derivative contracts used as an economic hedge of our mortgage servicing rights. The difference between average primary and secondary rates for the third quarter of 2012 was 127 basis points compared to 105 basis points for the second quarter of 2012 and 85 basis points for the third quarter of 2011.

As more fully discussed in Note 2 to the Consolidated Financial Statements, we recognized other-than-temporary impairment losses on certain private-label residential mortgage-backed securities of $1.1 million in earnings during the third quarter of 2012 . These losses primarily related to additional declines in projected cash flows of private-label mortgage-backed securities as a result of increased home price depreciation on privately issued residential mortgage-backed securities that we do not intend to sell. We recognized other-than-temporary impairment losses in earnings of $11.3 million in the third quarter of 2011 and $858 thousand in the second quarter of 2012 .

Other Operating Expense

Other operating expense for the third quarter of 2012 totaled $222.3 million , up $1.8 million or 1% over the third quarter of 2011 . Changes in the fair value of mortgage servicing rights increased operating expense $9.6 million in the third quarter of 2012 and $24.8 million in the third quarter of 2011 . Excluding changes in the fair value of mortgage servicing rights, operating expenses were up $17.1 million or 9% over the third quarter of 2011 . Personnel expenses increased $19.5 million or 19% . Non-personnel expenses decreased $2.5 million or 3% .

Excluding changes in the fair value of mortgage servicing rights, operating expenses were up $1.2 million over the previous quarter. Personnel expenses increased $478 thousand and non-personnel expenses increased $725 thousand .

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Table 5 – Other Operating Expense (In thousands)

	Three Months Ended Sept. 30,					Increase			% Increase		Three Months Ended June 30,		Increase			% Increase
	2012		2011			(Decrease)			(Decrease)		2012		(Decrease)			(Decrease)
Regular compensation	$	66,708	$	62,002		$	4,706		8	%	$	65,218	$	1,490		2	%
Incentive compensation:
Cash-based	30,756		26,257			4,499			17	%	27,950		2,806			10	%
Stock-based	7,214		(595		)	7,809			(1,312	)%	11,349		(4,135		)	(36	)%
Total incentive compensation	37,970		25,662			12,308			48	%	39,299		(1,329		)	(3	)%
Employee benefits	18,097		15,596			2,501			16	%	17,780		317			2	%
Total personnel expense	122,775		103,260			19,515			19	%	122,297		478			—	%
Business promotion	6,054		5,280			774			15	%	6,746		(692		)	(10	)%
Charitable contribution to BOKF Foundation	—		4,000			(4,000		)	(100	)%	—		—			—	%
Professional fees and services	7,991		7,418			573			8	%	8,343		(352		)	(4	)%
Net occupancy and equipment	16,914		16,627			287			2	%	16,906		8			—	%
Insurance	3,690		2,206			1,484			67	%	4,011		(321		)	(8	)%
Data processing & communications	26,486		24,446			2,040			8	%	25,264		1,222			5	%
Printing, postage and supplies	3,611		3,780			(169		)	(4	)%	3,903		(292		)	(7	)%
Net losses & operating expenses of repossessed assets	5,706		5,939			(233		)	(4	)%	5,912		(206		)	(3	)%
Amortization of intangible assets	742		896			(154		)	(17	)%	545		197			36	%
Mortgage banking costs	11,566		9,349			2,217			24	%	11,173		393			4	%
Change in fair value of mortgage servicing rights	9,576		24,822			(15,246		)	(61	)%	11,450		(1,874		)	(16	)%
Other expense	7,229		12,512			(5,283		)	(42	)%	6,461		768			12	%
Total other operating expense	$	222,340	$	220,535		$	1,805		1	%	$	223,011	$	(671	)	—	%

Number of employees (full-time equivalent)	4,627		4,454			173			4	%	4,585		42			1	%

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 $4.7 million or 8% over the third quarter of 2011 primarily due to increases in headcount and standard annual merit increases which were fully effective in the second quarter of 2012. The Company generally awards annual merit increases during the first quarter for a majority of its staff.

Incentive compensation increased $12.3 million or 48% over the third quarter of 2011 . Cash-based incentive compensation plans are either intended to provide current rewards to employees who generate long-term business opportunities for the Company based on growth in loans, deposits, customer relationships and other measurable metrics or intended to compensate employees with commissions on completed transactions. Total cash-based incentive compensation increased $4.5 million or 17% over the third quarter of 2011 . Cash-based incentive compensation related to brokerage and trading revenue was up $975 thousand over the third quarter of 2011 and all other cash-based incentive compensation was up $3.5 million over the prior year.

The Company also provides stock-based incentive compensation plans. Stock-based compensation plans include both equity and liability awards. Compensation expense for equity awards decreased $694 thousand compared to the third quarter of 2011 . Expense for equity awards is based on the grant-date fair value of the awards and is unaffected by subsequent changes in fair value. Compensation expense related to liability awards increased $8.5 million over the third quarter of 2011 . Expense

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based on changes in the fair value of BOK Financial common stock and other investments increased $4.0 million over the prior year. In addition, $4.5 million was accrued in third quarter of 2012 related to the BOK Financial Corp. 2011 True-Up Plan. Approved by shareholders on April 26, 2011, the True-Up Plan is designed to adjust annual and long-term performance-based incentive compensation for certain senior executives either upward or downward based on the earnings per share performance and compensation of comparable senior executives at peer banks.

Employee benefit expense was up $2.5 million or 16% over the third quarter of 2011 primarily due to increased employee medical insurance costs. The Company self-insures a portion of its employee health care coverage and these costs may be volatile.

Personnel expenses were unchanged compared to the second quarter of 2012 . Regular compensation expense increased $1.5 million over the second quarter of 2012 due primarily to headcount increases. Incentive compensation decreased $1.3 million compared to the second quarter of 2012 . Stock-based compensation decreased $4.1 million due to the timing of accruals and cash-based incentive compensation increased $2.8 million . Employee benefit expenses increased $317 thousand over the second quarter of 2012 due to higher employee medical costs partially offset by a seasonal decrease in payroll tax expense.

Non-personnel operating expenses

Non-personnel operating expenses, excluding changes in the fair value of mortgage servicing rights, decreased $2.5 million compared to the third quarter of 2011 . During the third quarter of 2011, the company accrued $5.0 million for exposure to overdraft litigation which was ultimately settled in the second quarter of 2012 and made a $4.0 million discretionary contribution to the BOKF Charitable Foundation. The BOKF Charitable Foundation partners with charitable organizations supporting needs within our communities. Mortgage banking costs increase d $2.2 million due primarily to an increase in the provision for potential losses on loans sold to government sponsored entities under standard representation and warranties. While the number of actual repurchases has remained low, the loss severity has continued to trend higher. The accrual for potential losses totaled $4.8 million at September 30, 2012 . Data processing and communication expense increase d $2.0 million primarily due to the impairment of two discontinued software projects during the third quarter. Insurance expense increased $1.5 million due to the increase in asset balances. Net losses and operating expenses of repossessed assets were down $233 thousand compared to the third quarter of 2011 . Losses on sales of write-downs primarily due to the timing of regularly scheduled appraisal updates were offset by decreased operating expenses of repossessed assets.

Excluding changes in the fair value of mortgage servicing rights, non-personnel operating expenses increased $725 thousand over the second quarter of 2012 . Data processing and communication expense increase d $1.2 million primarily due to the impairment of two discontinued software projects during the third quarter. Net losses and operating expenses on repossessed properties were down $206 thousand compared to the second quarter of 2012 . Increased losses due to write-downs of repossessed assets due to the timing of regularly scheduled appraisal updates were offset by decreased losses on sales of repossessed assets and decreased operating expenses of repossessed assets.

Income Taxes

Income tax expense was $45.8 million or 34% of book taxable income for the third quarter of 2012 compared to $43.0 million or 33% of book taxable income for the third quarter of 2011 and $53.1 million or 35% of book taxable income for the second quarter of 2012 . The statute of limitations expired on uncertain income tax positions and the Company adjusted its current income tax liability to amounts on filed tax returns for 2011 during the third quarter of 2012. These adjustments reduced income tax expense by $1.0 million in the third quarter of 2012 and $1.8 million in the third quarter of 2011. Excluding these adjustments, income tax expense would have been 35% of book taxable income for the third quarters of 2012 and 2011.

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 $12 million at September 30, 2012 , $13 million at June 30, 2012 and $12 million at September 30, 2011 .

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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 and all mortgage banking activities. Wealth Management provides fiduciary services, brokerage and trading, private bank services and investment advisory services in all markets. Wealth Management also originates loans for high net worth clients.

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 after allocation of funds, certain indirect expenses, taxes based on statutory rates, actual net credit losses and capital costs. The cost of funds borrowed from the Funds Management unit by the operating lines of business is transfer priced at rates that approximate market rates for funds with similar duration. Market rates are generally based on the applicable LIBOR or interest rate swap rates, adjusted for prepayment risk. This method of transfer-pricing funds that support assets of the operating lines of business tends to insulate them from interest rate risk.

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

Economic capital is assigned to the business units by a capital allocation model that reflects management’s assessment of risk. This model assigns capital based upon credit, operating, interest rate and 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 6, net income attributable to our lines of business increased $7.9 million over the third quarter of 2011 . The increase in net income attributed to our lines of business was due primarily to growth in mortgage banking revenue and decreased net loans charged off, partially offset by increased personnel expense.

Table 6 – Net Income by Line of Business (In thousands)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
Commercial Banking	$	33,505	$	33,136	$	110,149	$	93,314
Consumer Banking	21,226		14,707		55,421		28,322
Wealth Management	5,132		4,080		15,427		12,273
Subtotal	59,863		51,923		180,997		133,909
Funds Management and other	27,519		33,178		87,629		84,973
Total	$	87,382	$	85,101	$	268,626	$	218,882

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Commercial Banking

Commercial Banking contributed $33.5 million to consolidated net income in the third quarter of 2012 , up $369 thousand or 1% over the third quarter of 2011 .

Table 7 – Commercial Banking (Dollars in thousands)

	Three Months Ended										Nine Months Ended
	September 30,						Increase				September 30,						Increase
	2012			2011			(Decrease)				2012			2011			(Decrease)
Net interest revenue from external sources	$	91,378		$	85,560		$	5,818			$	274,411		$	254,143		$	20,268
Net interest expense from internal sources	(10,747		)	(6,702		)	(4,045		)		(33,667		)	(23,420		)	(10,247		)
Total net interest revenue	80,631			78,858			1,773				240,744			230,723			10,021
Net loans charged off	3,253			5,041			(1,788		)		10,393			16,646			(6,253		)
Net interest revenue after net loans charged off	77,378			73,817			3,561				230,351			214,077			16,274

Fees and commissions revenue	40,091			37,924			2,167				116,635			109,345			7,290
Gain on financial instruments and other assets, net	—			—			—				14,407			9			14,398
Other operating revenue	40,091			37,924			2,167				131,042			109,354			21,688

Personnel expense	25,655			23,701			1,954				76,003			70,796			5,207
Net losses and expenses of repossessed assets	4,908			3,081			1,827				10,577			12,271			(1,694		)
Other non-personnel expense	19,571			19,633			(62		)		56,131			55,738			393
Corporate allocations	12,499			11,094			1,405				38,406			31,903			6,503
Total other operating expense	62,633			57,509			5,124				181,117			170,708			10,409

Income before taxes	54,836			54,232			604				180,276			152,723			27,553
Federal and state income tax	21,331			21,096			235				70,127			59,409			10,718

Net income	$	33,505		$	33,136		$	369			$	110,149		$	93,314		$	16,835

Average assets	$	10,134,288		$	9,526,993		$	607,295			$	10,050,873		$	9,222,883		$	827,990
Average loans	9,117,046			8,338,344			778,702				9,001,100			8,195,347			805,753
Average deposits	8,446,680			7,834,992			611,688				8,338,034			7,640,843			697,191
Average invested capital	865,157			886,538			(21,381		)		866,346			874,259			(7,913		)
Return on average assets	1.32		%	1.38		%	(6		)	bp	1.46		%	1.35		%	11			bp
Return on invested capital	15.41		%	14.83		%	58			bp	16.98		%	14.27		%	271			bp
Efficiency ratio	51.88		%	49.24		%	264			bp	50.68		%	50.20		%	48			bp
Net charge-offs (annualized) to average loans	0.14		%	0.24		%	(10		)	bp	0.15		%	0.27		%	(12		)	bp

Net interest revenue increased $1.8 million or 2% over the third quarter of 2011 . Growth in net interest revenue was due to a $779 million increase in average loan balances and a $612 million increase in average deposits over the third quarter of 2011 balances was partially offset by low yields on deposits sold to our Funds Management unit.

Fees and commissions revenue increased $2.2 million or 6% over the third quarter of 2011 . Transaction card revenue increased $1.0 million due to increased customer transactions and commercial deposit service charges and fees increased $828 thousand . The average earnings credit, a non-cash method for commercial customers to avoid incurring charges for deposit services based

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on account balances, decreased 23 basis points compared to the prior year to better align with market interest rates.

Operating expenses increase d $5.1 million or 9% over the third quarter of 2011 . Personnel costs increased $2.0 million or 8% primarily due to increased headcount, standard annual merit increases and increased incentive compensation. Net losses and operating expenses on repossessed assets increased $1.8 million over the third quarter of 2011 , primarily due to the write-down of a single commercial real estate project in the Arizona market as the result of a regularly scheduled appraisal update. Other non-personnel expenses were flat compared to the third quarter of 2011 . Corporate expense allocations increased $1.4 million primarily due to increased customer loan and deposit activity.

The average outstanding balance of loans attributed to Commercial Banking increase d $779 million to $9.1 billion for the third quarter of 2012 . 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. Net Commercial Banking loans charged off decreased $1.8 million compared to the third quarter of 2011 to $3.3 million or 0.14% of average loans attributed to this line of business on an annualized basis. Net charge-offs for the third quarter included the return of a $7.1 million loan settlement received in 2008 as discussed in greater detail in in Management's Discussion & Analysis of Financial Condition – Summary of Loan Loss Experience following. Excluding the impact of this item, the decrease in net loans charged off was primarily due to a decrease in losses on commercial real estate loans.

Average deposits attributed to Commercial Banking were $8.4 billion for the third quarter of 2012 , up $612 million or 8% over the third quarter of 2011 . Average balances attributed to our commercial & industrial loan customers increased $584 million or 21% and average balances attributed to our energy customers increased $310 million or 33% . Average balances held by treasury services customers were down $339 million compared to the third quarter of 2011 . Commercial customers continue to maintain high account balances due to continued economic uncertainty and persistently low yields available on high quality investments.

Consumer Banking

Consumer banking services are provided through five primary distribution channels: traditional branches, supermarket branches, the 24-hour ExpressBank call center, Internet banking and mobile banking.

Consumer banking contributed $21.2 million to consolidated net income for the third quarter of 2012 , up $6.5 million primarily due to growth in mortgage banking revenue. Revenue from mortgage loan production was up $20.6 million over the third quarter of 2011 . Changes in fair value of our mortgage servicing rights, net of economic hedge, decreased net income attributed to consumer banking by $2.1 million in the third quarter of 2012 and $1.8 million in the third quarter of 2011 .

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Table 8 – Consumer Banking (Dollars in thousands)

	Three Months Ended											Nine Months Ended
	September 30,							Increase				September 30,						Increase
	2012				2011			(Decrease)				2012			2011			(Decrease)
Net interest revenue from external sources	$	22,195			$	24,553		$	(2,358	)		$	69,154		$	64,574		$	4,580
Net interest revenue from internal sources	6,457				8,108			(1,651		)		18,462			25,188			(6,726		)
Total net interest revenue	28,652				32,661			(4,009		)		87,616			89,762			(2,146		)
Net loans charged off	485				3,837			(3,352		)		6,137			9,568			(3,431		)
Net interest revenue after net loans charged off	28,167				28,824			(657		)		81,479			80,194			1,285

Fees and commissions revenue	75,942				58,601			17,341				196,163			148,318			47,845
Gain on financial instruments and other assets, net	4,698				21,165			(16,467		)		9,237			25,923			(16,686		)
Other operating revenue	80,640				79,766			874				205,400			174,241			31,159

Personnel expense	23,270				22,166			1,104				67,481			64,101			3,380
Net losses and expenses of repossessed assets	379				519			(140		)		775			2,177			(1,402		)
Change in fair value of mortgage servicing rights	9,576				24,822			(15,246		)		13,899			35,186			(21,287		)
Other non-personnel expense	29,604				24,324			5,280				81,378			68,291			13,087
Corporate allocations	11,238				12,689			(1,451		)		32,641			38,327			(5,686		)
Total other operating expense	74,067				84,520			(10,453		)		196,174			208,082			(11,908		)

Income before taxes	34,740				24,070			10,670				90,705			46,353			44,352
Federal and state income tax	13,514				9,363			4,151				35,284			18,031			17,253

Net income	$	21,226			$	14,707		$	6,519			$	55,421		$	28,322		$	27,099

Average assets	$	5,705,781			$	5,914,337		$	(208,556	)		$	5,739,833		$	5,965,955		$	(226,122	)
Average loans	2,129,179				2,086,135			43,044				2,129,965			2,040,375			89,590
Average deposits	5,586,485				5,706,676			(120,191		)		5,592,910			5,761,204			(168,294		)
Average invested capital	292,281				273,143			19,138				289,337			272,167			17,170
Return on average assets	1.48		%		0.99		%	49			bp	1.29		%	0.63		%	66			bp
Return on invested capital	28.89		%		21.36		%	753			bp	25.61		%	13.91		%	1,170			bp
Efficiency ratio	61.66		%		65.41		%	(375		)	bp	64.23		%	72.62		%	(839		)	bp
Net charge-offs (annualized) to average loans	0.09		%		0.73		%	(64		)	bp	0.38		%	0.63		%	(25		)	bp
Residential mortgage loans funded for sale	$	1,046,608		483,808,000	$	637,127		$	409,481			$	2,634,808		$	1,540,619		$	1,094,189



	September 30, 2012		September 30, 2011		Increase (Decrease)
Banking locations	214		209		5
Residential mortgage loans servicing portfolio ¹	$	12,853,987	$	12,281,346	$	572,641


¹	Includes outstanding principal for loans serviced for affiliates

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Net interest revenue from consumer banking activities decreased $4.0 million compared to the third quarter of 2011 . Net interest earned on residential mortgage-backed securities held as an economic hedge of mortgage servicing rights declined by $3.8 million due to a $323 million reduction in the average balance of this portfolio. The yield on loans was lower compared to the third quarter of 2011 , partially offset by an increase in average loan balances of $43 million or 2% over the third quarter of 2011 . The average balance of residential mortgage loans increased over the prior year. Other consumer loans also increased, offset by decreased balances of indirect automobile loans due to pay-downs. The Company previously disclosed its decision to exit the indirect automobile loan business in the first quarter of 2009. Net interest earned on deposits sold to our Funds Management unit decreased $1.4 million primarily due to lower yields on funds invested.

Net loans charged off by the Consumer Banking unit decreased $3.4 million compared to the third quarter of 2011 . Net consumer banking charge-offs also includes indirect automobile loans, overdrawn deposit accounts and other direct consumer loans.

Fees and commissions revenue increased $17.3 million or 30% over the third quarter of 2011 . Mortgage banking revenue was up $21.2 million or 72% over the prior year primarily due to increased residential mortgage loan originations and commitments and improved pricing of loans sold. Transaction card revenues were down $4.6 million or 45% from the prior year primarily due to the impact of interchange fee regulations which became effective on October 1, 2011.

Excluding the change in the fair value of mortgage servicing rights, operating expenses increased $4.8 million over the third quarter of 2011 . Personnel expenses were up $1.1 million or 5% primarily due to expansion of our mortgage banking division, which positioned us to benefit from increased demand as the result of continued low mortgage interest rates. Non-personnel expense increase d $5.3 million or 22% . Mortgage banking expenses were up $2.2 million due to increased costs of servicing residential mortgage loans sold to U.S. government agencies and decreases in our mortgage servicing rights due to refinancing activity as a result of the low interest rate environment. Corporate expense allocations were down $1.5 million compared to the third quarter of 2011 . Net losses and operating expenses of repossessed assets were down $140 thousand compared to the prior year.

Average consumer deposits decreased $120 million or 2% compared to the third quarter of 2011 . Average interest-bearing transaction accounts increased $117 million or 4% and average demand deposits increase d $70 million or 11% . Average time deposit balances were down $354 million or 16% compared to the prior year.

Our Consumer Banking division originates, markets and services conventional and government-sponsored residential mortgage loans for all of our geographical markets. We funded $1.1 billion of residential mortgage loans in the third quarter of 2012 and $533 million in the third quarter of 2011 . Mortgage loan fundings included $1.0 billion of mortgage loans funded for sale in the secondary market and $64 million funded for retention within the consolidated group. Approximately 33% of our mortgage loans funded were in the Oklahoma market, 14% in the New Mexico market, 13% in the Texas market and 13% in the Colorado market. In addition, 8% of our mortgage loan fundings came from correspondent lenders. Expansion of our mortgage banking division in the Texas, Colorado and Kansas/Missouri markets positioned us to benefit from increased demand as the result of continued low mortgage interest rates.

At September 30, 2012 , the Consumer Banking division serviced $11.8 billion of mortgage loans for others and $1.1 billion of loans retained within the consolidated group. Approximately 97% of the mortgage loans serviced by the Consumer Banking division were to borrowers in our primary geographical market areas. Loans past due 90 days or more totaled $135 million or 1.15% of loans serviced for others at September 30, 2012 compared to $109 million or 0.94% of loans serviced for others at June 30, 2012 . Mortgage servicing revenue, including revenue on loans serviced for the consolidated group, increased $568 thousand or 6% over the third quarter of 2011 to $10.4 million.

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Wealth Management

Wealth Management contributed $5.1 million to consolidated net income in third quarter of 2012 , up $1.1 million or 26% over the third quarter of 2011 .

Table 9 – Wealth Management (Dollars in thousands)

	Three Months Ended										Nine Months Ended
	September 30,						Increase				September 30,						Increase
	2012			2011			(Decrease)				2012			2011			(Decrease)
Net interest revenue from external sources	$	7,064		$	7,113		$	(49	)		$	21,340		$	23,263		$	(1,923	)
Net interest revenue from internal sources	5,554			4,682			872				15,834			11,348			4,486
Total net interest revenue	12,618			11,795			823				37,174			34,611			2,563
Net loans charged off	509			1,247			(738		)		1,680			2,308			(628		)
Net interest revenue after net loans charged off	12,109			10,548			1,561				35,494			32,303			3,191

Fees and commissions revenue	49,979			46,002			3,977				147,653			128,193			19,460
Gain on financial instruments and other assets, net	178			110			68				452			675			(223		)
Other operating revenue	50,157			46,112			4,045				148,105			128,868			19,237

Personnel expense	37,053			34,020			3,033				108,986			94,295			14,691
Net losses (gains) and expenses of repossessed assets	19			—			19				39			(4		)	43
Other non-personnel expense	7,833			7,107			726				22,159			21,194			965
Corporate allocations	8,962			8,855			107				27,167			25,599			1,568
Other operating expense	53,867			49,982			3,885				158,351			141,084			17,267

Income before taxes	8,399			6,678			1,721				25,248			20,087			5,161
Federal and state income tax	3,267			2,598			669				9,821			7,814			2,007

Net income	$	5,132		$	4,080		$	1,052			$	15,427		$	12,273		$	3,154

Average assets	$	4,301,283		$	4,254,954		$	46,329			$	4,230,874		$	3,995,054		$	235,820
Average loans	926,197			1,008,318			(82,121		)		927,016			1,026,176			(99,160		)
Average deposits	4,193,744			4,153,548			40,196				4,129,188			3,894,598			234,590
Average invested capital	188,638			175,478			13,160				180,234			175,478			4,756
Return on average assets	0.47		%	0.38		%	9			bp	0.49		%	0.41		%	8			bp
Return on invested capital	10.82		%	9.22		%	160			bp	11.43		%	9.35		%	208			bp
Efficiency ratio	86.05		%	86.48		%	(43		)	bp	85.68		%	86.66		%	(98		)	bp
Net charge-offs (annualized) to average loans	0.22		%	0.49		%	(27		)	bp	0.24		%	0.30		%	(6		)	bp

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	September 30, 2012		September 30, 2011		Increase (Decrease)
Trust assets in custody for which BOKF has sole or joint discretionary authority	$	10,946,350	$	9,167,946	$	1,778,404
Trust assets not in custody for which BOKF has sole or joint discretionary authority	1,588,625		216,458		1,372,167
Non-managed trust assets in custody	12,673,301		11,757,170		916,131
Trusts assets held in safekeeping	12,513,504		10,825,520		1,687,984
Trust assets	37,721,780		31,967,094		5,754,686
Other assets held in safekeeping	8,376,674		7,055,305		1,321,369
Brokerage accounts under BOKF administration	4,329,872		3,284,154		1,045,718
Assets under management or in custody	$	50,428,326	$	42,306,553	$	8,121,773

Net interest revenue for the third quarter of 2012 was up $823 thousand or 7% over the third quarter of 2011 . Growth in average assets was largely due to funds sold to the Funds Management unit. Average deposit balances were up $40 million or 1% over the prior year. Average time deposit balances decrease d $98 million and average interest-bearing transaction account balances decrease d $92 million . These higher costing deposits were replaced by growth of $228 million in non-interest bearing demand deposits resulting in an increase in the yield on deposits sold to the Funds Management unit. Average loan balances were down $82 million . The decrease is primarily due to loans previously originated by our Private Bank and retained by the Wealth Management segment being refinanced, including refinancings performed by the mortgage division of our Consumer Banking segment. Net loans charged off decreased $738 thousand from the third quarter of 2011 to $509 thousand or 0.22% of average loans on an annualized basis.

Fees and commissions revenue was up $4.0 million or 9% over the third quarter of 2011 , primarily due to a $2.3 million or 9% increase in brokerage and trading revenues and a $1.8 million or 10% increase in trust fees primarily due to timing of fees.

Other operating revenue includes fees earned from state and municipal bond underwriting and financial advisory services, primarily in the Oklahoma and Texas markets. In the third quarter of 2012 , the Wealth Management division participated in 132 underwritings that totaled $1.8 billion. As a participant, the Wealth Management division was responsible for facilitating the sale of approximately $542 million of these underwritings. In the third quarter of 2011 , the Wealth Management division participated in 97 underwritings that totaled approximately $1.1 billion. Our interest in these underwritings totaled approximately $448 million.

Operating expenses increased $3.9 million or 8% over the third quarter of 2011 . Personnel expenses increased $3.0 million . Regular compensation costs increased $1.7 million primarily due to increased headcount and annual merit increases. Incentive compensation increased $898 thousand over the prior year. Non-personnel expenses increased $726 thousand or 10% due primarily to additional expenses incurred related to expansion of the Wealth Management business line and increased customer transaction activity.

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Geographical Market Distribution

The Company secondarily evaluates performance by primary geographical market. Loans are generally attributed to geographical markets based on the location of the customer and may not reflect the location of the underlying collateral. Brokered deposits and other wholesale funds are not attributed to a geographical market. Funds Management and other also includes insignificant results of operations in locations outside our primary geographic regions.

Table 10 – Net Income by Geographic Region (In thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Bank of Oklahoma	$	26,941		$	32,435		$	96,968		$	85,299
Bank of Texas	12,842			10,630			37,768			30,961
Bank of Albuquerque	6,697			3,519			15,182			9,285
Bank of Arkansas	2,014			2,643			9,636			3,494
Colorado State Bank & Trust	6,441			2,549			13,480			6,417
Bank of Arizona	(40		)	(2,109		)	(2,735		)	(6,078		)
Bank of Kansas City	2,723			1,467			7,216			3,394
Subtotal	57,618			51,134			177,515			132,772
Funds Management and other	29,763			33,967			91,111			86,110
Total	$	87,381		$	85,101		$	268,626		$	218,882

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Bank of Oklahoma

Our Oklahoma offices are located primarily in the Tulsa and Oklahoma City metropolitan areas. Oklahoma is a significant market to the Company, representing 47% of our average loans, 55% of our average deposits and 31% of our consolidated net income in the third quarter of 2012 . In addition, all of our mortgage servicing activity, TransFund EFT network and 66% of our trust assets are attributed to the Oklahoma market.

Table 11 – Bank of Oklahoma (Dollars in thousands)

	Three Months Ended										Nine Months Ended
	September 30,						Increase				September 30,						Increase
	2012			2011			(Decrease)				2012			2011			(Decrease)
Net interest revenue	$	58,395		$	62,658		$	(4,263	)		$	174,569		$	176,961		$	(2,392	)
Net loans charged off	6,486			6,446			40				11,566			14,691			(3,125		)
Net interest revenue after net loans charged off	51,909			56,212			(4,303		)		163,003			162,270			733

Fees and commissions revenue	85,818			85,701			117				246,500			234,087			12,413
Gain on financial instruments and other assets, net	4,876			21,274			(16,398		)		26,297			27,178			(881		)
Other operating revenue	90,694			106,975			(16,281		)		272,797			261,265			11,532

Personnel expense	37,465			37,765			(300		)		112,704			108,964			3,740
Net losses and expenses of repossessed assets	257			48			209				2,251			2,966			(715		)
Change in fair value of mortgage servicing rights	9,577			24,821			(15,244		)		13,899			35,186			(21,287		)
Other non-personnel expense	43,455			37,723			5,732				122,758			107,055			15,703
Corporate allocations	7,755			9,745			(1,990		)		25,484			29,759			(4,275		)
Total other operating expense	98,509			110,102			(11,593		)		277,096			283,930			(6,834		)

Income before taxes	44,094			53,085			(8,991		)		158,704			139,605			19,099
Federal and state income tax	17,153			20,650			(3,497		)		61,736			54,306			7,430

Net income	$	26,941		$	32,435		$	(5,494	)		$	96,968		$	85,299		$	11,669

Average assets	$	11,349,724		$	11,236,934		$	112,790			$	11,426,032		$	10,793,211		$	632,821
Average loans	5,472,371			5,261,183			211,188				5,465,454			5,202,248			263,206
Average deposits	10,241,369			10,078,755			162,614				10,256,872			9,710,938			545,934
Average invested capital	548,058			543,632			4,426				545,831			537,512			8,319
Return on average assets	0.94		%	1.15		%	(21		)	bp	1.13		%	1.06		%	7			bp
Return on invested capital	19.56		%	23.67		%	(411		)	bp	23.73		%	21.22		%	251			bp
Efficiency ratio	61.67		%	57.48		%	419			bp	62.51		%	60.51		%	200			bp
Net charge-offs (annualized) to average loans	0.47		%	0.49		%	(2		)	bp	0.28		%	0.38		%	(10		)	bp
Residential mortgage loans funded for sale	$	459,368		$	310,004		$	149,364			$	1,189,223		$	751,089		$	438,134

Net income generated by the Bank of Oklahoma in the third quarter of 2012 decreased $5.5 million or 17% compared to the third quarter of 2011 . Net interest revenue decreased and operating expenses, excluding changes in the fair value of mortgage servicing rights were up.

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Net interest revenue decreased $4.3 million or 7% compared to the third quarter of 2011 . Lower funding costs were offset by decreased yield on residential mortgage-backed securities held as an economic hedge of mortgage servicing rights. The average balance of these securities decreased $286 million compared to the third quarter of 2011 . Average loan balances were up $211 million and loan yields were down. The favorable net interest impact of the $163 million increase in average deposit balances was offset by lower yield on funds sold to the Funds Management unit.

Fees and commission revenue was largely unchanged compared to the third quarter of 2011 . Mortgage banking revenue was up $1.5 million over the third quarter of 2011 primarily due to increased mortgage loan origination and commitment volumes and increased gains on sales of residential mortgage loans in the secondary market. Brokerage and trading revenue was up $508 thousand primarily due to increased customer hedging revenue and securities trading revenue. Retail brokerage fees were also up, mostly offset by decreased investment banking revenue. Deposit service charges and fees increased $352 thousand over the third quarter of 2011 . Deposits accounts with a standard monthly fee and commercial account service charges were up over the prior year, partially offset by decreased overdraft charges. Transaction card revenue was down $2.0 million primarily due to changes in interchange fee regulations which were effective October 1, 2011.

Change in the fair value of the mortgage servicing rights, net of economic hedge, decreased net income by $2.1 million for the third quarter of 2012 and decreased net income by $1.8 million in the third quarter of 2011 .

Excluding the change in the fair value of mortgage servicing rights, other operating expenses increased $3.7 million or 4% over the prior year. Personnel expenses were down $300 thousand or 1% compared to the prior year primarily due to decreased incentive compensation, partially offset by increased regular compensation expense due to annual merit increases. Non-personnel expenses were up $5.7 million or 15% due primarily to increased mortgage banking costs and impairment charges on two discontinued software projects. Corporate expense allocations were down $2.0 million compared to the prior year. Net losses and operating expenses of repossessed assets were up $209 thousand over the third quarter of 2011 primarily due to write-downs related to regularly scheduled appraisal updates.

Net loans charged off totaled $6.5 million or 0.47% of average loans on an annualized basis for third quarter of 2012 , largely unchanged from the prior year. Net charge-offs for the third quarter included the return of $7.1 million received from the City of Tulsa in 2008 to settle claims related to a defaulted loan. The settlement agreement between BOK Financial and the City of Tulsa was invalidated by the Oklahoma Supreme Court in 2011 as discussed further in Note 8 to the Consolidated Financial Statements. Excluding this item, Bank of Oklahoma had a net recovery of $614 thousand for the third quarter of 2012 . Net charge-offs totaled $6.4 million or 0.49% of average loans on an annualized basis for the third quarter of 2011 .

Average deposits attributed to the Bank of Oklahoma for the third quarter of 2012 increase d $163 million over the third quarter of 2011 . Commercial Banking deposit balances increased $207 million or 4% over the prior year. Deposits related to commercial and industrial customers and energy customers increased over the prior year, partially offset by decreased average balances related to treasury services customers. Consumer deposits also increased $108 million over the third quarter of 2011 . Wealth Management deposits decreased $153 million compared to the third quarter of 2011 primarily due to decreased trust deposits.

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Bank of Texas

Our Texas offices are located primarily in the Dallas, Fort Worth and Houston metropolitan areas. Texas is our second largest market with 33% of our average loans, 24% of our average deposits and 15% of our consolidated net income in the third quarter of 2012 .

Table 12 – Bank of Texas (Dollars in thousands)

	Three Months Ended										Nine Months Ended
	September 30,						Increase				September 30,						Increase
	2012			2011			(Decrease)				2012			2011			(Decrease)
Net interest revenue	$	35,717		$	34,633		$	1,084			$	107,042		$	101,573		$	5,469
Net loans charged off	1,780			1,195			585				4,911			2,838			2,073
Net interest revenue after net loans charged off	33,937			33,438			499				102,131			98,735			3,396

Fees and commissions revenue	23,033			17,389			5,644				64,303			49,880			14,423
Gain (loss) on financial instruments and other assets, net	—			—			—				188			(70		)	258
Other operating revenue	23,033			17,389			5,644				64,491			49,810			14,681

Personnel expense	20,003			17,749			2,254				59,068			52,002			7,066
Net losses and expenses of repossessed assets	1,124			602			522				1,542			1,877			(335		)
Other non-personnel expense	6,024			6,217			(193		)		17,983			17,727			256
Corporate allocations	9,753			9,649			104				29,017			28,563			454
Total other operating expense	36,904			34,217			2,687				107,610			100,169			7,441

Income before taxes	20,066			16,610			3,456				59,012			48,376			10,636
Federal and state income tax	7,224			5,980			1,244				21,244			17,415			3,829

Net income	$	12,842		$	10,630		$	2,212			$	37,768		$	30,961		$	6,807

Average assets	$	5,102,452		$	4,924,959		$	177,493			$	5,058,204		$	4,870,261		$	187,943
Average loans	3,827,175			3,466,036			361,139				3,786,717			3,372,419			414,298
Average deposits	4,538,400			4,349,738			188,662				4,500,972			4,305,556			195,416
Average invested capital	476,027			472,392			3,635				477,502			468,800			8,702
Return on average assets	1.00		%	0.86		%	14			bp	1.00		%	0.85		%	15			bp
Return on invested capital	10.73		%	8.93		%	180			bp	10.57		%	8.83		%	174			bp
Efficiency ratio	62.82		%	65.77		%	(295		)	bp	62.80		%	66.14		%	(334		)	bp
Net charge-offs (annualized) to average loans	0.19		%	0.14		%	5			bp	0.17		%	0.11		%	6			bp
Residential mortgage loans funded for sale	$	145,638		$	57,671		$	87,967			$	358,144		$	143,852		$	214,292

Net income for the Bank of Texas increased $2.2 million or 21% over the third quarter of 2011 primarily due to increased mortgage banking revenue partially offset by increased personnel expenses.

Net interest revenue increased $1.1 million or 3% over the third quarter of 2011 primarily due to decreased deposit costs and growth of the loan portfolio. Average outstanding loans grew by $361 million or 10% over the third quarter of 2011 and average deposits increase d by $189 million or 4% .

Fees and commissions revenue increased $5.6 million or 32% over the third quarter of 2011 primarily due to increased mortgage banking revenue. Transaction card revenue was down compared to the prior year primarily due to debit card

- 22 -

interchange fee regulations which became effective in the third quarter of 2011, mostly offset by increased trust fees and commissions. Brokerage and trading revenue and deposit service charges and fees were largely unchanged compared to the prior year.

Operating expenses increased $2.7 million or 8% over the third quarter of 2011 . Personnel costs were up $2.3 million or 13% primarily due to incentive compensation expense and increased head count related to higher residential mortgage loan origination activity. Net losses and operating expense of repossessed assets increased $522 thousand over the third quarter of 2011 due primarily to write-downs related to regularly scheduled appraisal updates. Decreased non-personnel expenses were offset by increased corporate expense allocations.

Net loans charged off totaled $1.8 million or 0.19% of average loans for the third quarter of 2012 on an annualized basis, compared to $1.2 million or 0.14% of average loans for the third quarter of 2011 on an annualized basis.

- 23 -

Bank of Albuquerque

Net income attributable to the Bank of Albuquerque totaled $6.7 million or 8% of consolidated net income, a $3.2 million or 90% increase over the third quarter of 2011 . Net interest income was up $503 thousand over the third quarter of 2011 . Average loan balances were unchanged compared to the prior year. Average deposit balances were up $59 million or 5% over the prior year. Net loans charged off totaled $232 thousand or 0.13% of average loans on annualized basis in the third quarter of 2012 compared to net loans charged off of $707 thousand or 0.39% of average loans on an annualized basis in the third quarter of 2011 .

Fees and commission revenue increased $4.9 million or 55% over the prior year primarily due to a $5.5 million increase in mortgage banking revenue, partially offset by decreased transaction card revenue due to debit card interchange fee regulations. Other operating expense increased $646 thousand or 6% . Personnel expenses were up $700 thousand primarily due to increased incentive compensation. Increased corporate allocation expenses were offset by lower non-personnel expenses.

Table 13 – Bank of Albuquerque (Dollars in thousands)

	Three Months Ended										Nine Months Ended
	September 30,						Increase				September 30,						Increase
	2012			2011			(Decrease)				2012			2011			(Decrease)
Net interest revenue	$	8,928		$	8,425		$	503			$	25,917		$	25,081		$	836
Net loans charged off	232			707			(475		)		2,529			1,707			822
Net interest revenue after net loans charged off	8,696			7,718			978				23,388			23,374			14

Other operating revenue – fees and commission	13,685			8,816			4,869				34,793			24,225			10,568

Personnel expense	5,207			4,507			700				14,883			12,909			1,974
Net losses (gains) and expenses of repossessed assets	22			61			(39		)		(112		)	1,424			(1,536		)
Other non-personnel expense	1,985			2,120			(135		)		6,055			6,577			(522		)
Corporate allocations	4,206			4,086			120				12,507			11,492			1,015
Total other operating expense	11,420			10,774			646				33,333			32,402			931

Income before taxes	10,961			5,760			5,201				24,848			15,197			9,651
Federal and state income tax	4,264			2,241			2,023				9,666			5,912			3,754

Net income	$	6,697		$	3,519		$	3,178			$	15,182		$	9,285		$	5,897

Average assets	$	1,431,251		$	1,401,640		$	29,611			$	1,392,713		$	1,386,561		$	6,152
Average loans	708,760			711,735			(2,975		)		707,809			706,764			1,045
Average deposits	1,295,201			1,236,172			59,029				1,251,766			1,243,415			8,351
Average invested capital	78,457			82,159			(3,702		)		78,887			81,967			(3,080		)
Return on average assets	1.86		%	1.00		%	86			bp	1.46		%	0.90		%	56			bp
Return on invested capital	33.96		%	16.99		%	1,697			bp	25.71		%	15.15		%	1,056			bp
Efficiency ratio	50.50		%	62.49		%	(1,199		)	bp	54.91		%	65.72		%	(1,081		)	bp
Net charge-offs to average loans (annualized)	0.13		%	0.39		%	(26		)	bp	0.48		%	0.32		%	16			bp
Residential mortgage loans funded for sale	$	153,460		$	95,624		$	57,836			$	394,701		$	236,469		$	158,232

- 24 -

Bank of Arkansas

Net income attributable to the Bank of Arkansas decreased $629 thousand compared to the third quarter of 2011 . Net interest revenue decreased $209 thousand as loans in the Arkansas market continued to decrease primarily due to the run-off of indirect automobile loans. Average deposits attributed to the Bank of Arkansas were down $6.1 million or 3% compared to the third quarter of 2011 . Higher costing time deposits decrease d $19 million compared to the prior year, partially offset by a $9.3 million increase in interest-bearing transaction deposits and a $2.8 million increase in demand deposit balances. Net loans charged off totaled $934 thousand or 1.82% of average loans on an annualized basis in the third quarter of 2012 compared to $159 thousand or 0.24% of average loans on an annualized basis in the third quarter of 2011 .

Fees and commissions revenue was up $1.4 million over the prior year primarily due to increased mortgage banking revenue and increased securities trading revenue at our Little Rock office. Other operating expenses were up $1.4 million primarily due to increased incentive compensation costs related to trading activity.

Table 14 – Bank of Arkansas (Dollars in thousands)

	Three Months Ended										Nine Months Ended
	September 30,						Increase				September 30,						Increase
	2012			2011			(Decrease)				2012			2011			(Decrease)
Net interest revenue	$	1,758		$	1,967		$	(209	)		$	8,267		$	6,191		$	2,076
Net loans charged off (recovered)	934			159			775				(1,168		)	2,648			(3,816		)
Net interest revenue after net loans charged off (recovered)	824			1,808			(984		)		9,435			3,543			5,892

Other operating revenue – fees and commissions	12,681			11,308			1,373				36,432			28,269			8,163

Personnel expense	6,100			4,819			1,281				17,731			14,119			3,612
Net losses and expenses of repossessed assets	86			(16		)	102				162			478			(316		)
Other non-personnel expense	1,125			1,234			(109		)		3,709			3,446			263
Corporate allocations	2,898			2,753			145				8,494			8,051			443
Total other operating expense	10,209			8,790			1,419				30,096			26,094			4,002

Income before taxes	3,296			4,326			(1,030		)		15,771			5,718			10,053
Federal and state income tax	1,282			1,683			(401		)		6,135			2,224			3,911

Net income	$	2,014		$	2,643		$	(629	)		$	9,636		$	3,494		$	6,142

Average assets	$	226,875		$	286,337		$	(59,462	)		$	249,103		$	292,164		$	(43,061	)
Average loans	204,278			265,536			(61,258		)		229,222			274,645			(45,423		)
Average deposits	208,229			214,330			(6,101		)		210,193			208,190			2,003
Average invested capital	18,306			24,374			(6,068		)		19,678			23,473			(3,795		)
Return on average assets	3.53		%	3.66		%	(13		)	bp	5.17		%	1.60		%	357			bp
Return on invested capital	43.77		%	43.02		%	75			bp	65.41		%	19.90		%	4,551			bp
Efficiency ratio	70.70		%	66.21		%	449			bp	67.33		%	75.72		%	(839		)	bp
Net charge-offs (recoveries) to average loans (annualized)	1.82		%	0.24		%	158			bp	(0.68		)%	1.29		%	(197		)	bp
Residential mortgage loans funded for sale	$	28,789		$	18,645		$	10,144			$	79,542		$	49,573		$	29,969

- 25 -

Colorado State Bank & Trust

Net income attributed to Colorado State Bank & Trust increased $3.9 million over the third quarter of 2011 to $6.4 million . Colorado State Bank & Trust experienced a net recovery of $2.4 million compared to net loans charged off of $372 thousand or 0.19% of average loans on an annualized basis in third quarter of 2011 . Net interest revenue increased $942 thousand due primarily to a $172 million or 22% increase in average loans outstanding and lower deposit costs, partially offset by decreased yield on funds sold to the Funds Management unit. Average deposits attributable to Colorado State Bank & Trust were largely unchanged compared to the third quarter of 2011 . Demand deposits grew by $77 million during the second quarter due primarily to increased commercial account balances, offset by a $75 million decrease in time deposits and a $3.7 million decrease in interest-bearing transaction deposit account balances.

Fees and commissions revenue was up $5.9 million over the third quarter of 2011 primarily related to a $4.5 million increase in mortgage banking revenue and a $1.2 million increase in trust fees and commissions due to the acquisition of the Milestone Group during the third quarter of 2012 . The Milestone Group is a Denver-based registered investment adviser which provides wealth management services to high net worth clients in Colorado and Nebraska. Operating expenses were up $3.2 million over the prior year primarily due to the Milestone Group acquisition. Personnel expenses were up $1.2 million , corporate expense allocations increased $921 thousand and non-personnel expenses were up $448 thousand . Net losses and operating expenses of repossessed assets totaled $144 thousand during the third quarter of 2012 compared to a net gain of $448 thousand in the third quarter of 2011 .

- 26 -

Table 15 – Colorado State Bank & Trust (Dollars in thousands)

	Three Months Ended										Nine Months Ended
	September 30,						Increase				September 30,						Increase
	2012			2011			(Decrease)				2012			2011			(Decrease)
Net interest revenue	$	9,382		$	8,440		$	942			$	27,335		$	24,839		$	2,496
Net loans charged off (recovered)	(2,367		)	372			(2,739		)		(1,711		)	2,026			(3,737		)
Net interest revenue after net loans charged off (recovered)	11,749			8,068			3,681				29,046			22,813			6,233

Other operating revenue – fees and commissions revenue	12,277			6,380			5,897				28,846			18,053			10,793

Personnel expense	7,085			5,838			1,247				19,123			16,186			2,937
Net losses (gains) and expenses of repossessed assets	144			(448		)	592				216			(170		)	386
Other non-personnel expense	2,046			1,598			448				4,823			4,572			251
Corporate allocations	4,209			3,288			921				11,667			9,775			1,892
Total other operating expense	13,484			10,276			3,208				35,829			30,363			5,466

Income before taxes	10,542			4,172			6,370				22,063			10,503			11,560
Federal and state income tax	4,101			1,623			2,478				8,583			4,086			4,497

Net income	$	6,441		$	2,549		$	3,892			$	13,480		$	6,417		$	7,063

Average assets	$	1,350,521		$	1,346,750		$	3,771			$	1,356,250		$	1,332,971		$	23,279
Average loans	958,842			786,846			171,996				890,021			775,110			114,911
Average deposits	1,276,068			1,274,667			1,401				1,288,010			1,264,000			24,010
Average invested capital	130,633			118,486			12,147				121,362			117,865			3,497
Return on average assets	1.90		%	0.75		%	115			bp	1.33		%	0.64		%	69			bp
Return on invested capital	19.62		%	8.54		%	1,108			bp	14.84		%	7.28		%	756			bp
Efficiency ratio	62.26		%	69.34		%	(708		)	bp	63.77		%	70.79		%	(702		)	bp
Net charge-offs (recoveries) to average loans (annualized)	(0.98		)%	0.19		%	(117		)	bp	(0.26		)%	0.35		%	(61		)	bp
Residential mortgage loans funded for sale	$	145,306		$	91,009		$	54,297			$	338,121		$	199,226		$	138,895

- 27 -

Bank of Arizona

Bank of Arizona had a net loss of $40 thousand for the third quarter of 2012 compared to a net loss of $2.1 million for the third quarter of 2011 . Bank of Arizona experienced a net recovery of $1.4 million for the third quarter of 2012 compared to net loans charged off of $1.2 million or 0.83% of average loans on an annualized basis for the third quarter of 2011 . Net losses and operating expenses on repossessed assets remain elevated totaling $3.6 million in the third quarter of 2012 compared to $3.4 million in the third quarter of 2011 . Write-downs of repossessed assets increased compared to the prior year primarily due to regularly scheduled appraisal updates.

Net interest revenue increase d $35 thousand or 1% over the third quarter of 2011 . Average loan balances were down $23 million or 4% compared to the third quarter of 2011 . Average deposits were up $95 million or 37% over the third quarter of 2011 . Interest-bearing transaction account balances increase d $77 million and demand deposit balances increase d $27 million both primarily due to growth in commercial deposits. Higher costing time deposits balances were down $10 million compared to the prior year.

Fees and commissions revenue was up $1.1 million primarily due to increased mortgage banking revenue. Other operating expense increase d $348 thousand or 4% over the third quarter of 2011 .

We continue to focus on growth in commercial and small business lending in the Arizona market and have significantly scaled back commercial real estate lending activities which were not contemplated in our initial expansion into this market. Loan and repossessed asset losses have been largely due to commercial real estate lending. Growth is primarily related to commercial loans and deposits. Assets attributable to the Bank of Arizona included $16 million of goodwill that may be impaired in future periods if our commercial and small business lending growth plans are unsuccessful.

- 28 -

Table 16 – Bank of Arizona (Dollars in thousands)

	Three Months Ended										Nine Months Ended
	September 30,						Increase				September 30,						Increase
	2012			2011			(Decrease)				2012			2011			(Decrease)
Net interest revenue	$	4,330		$	4,295		$	35			$	12,691		$	12,003		$	688
Net loans charged off (recovered)	(1,391		)	1,229			(2,620		)		3,029			4,613			(1,584		)
Net interest revenue after net loans charged off (recovered)	5,721			3,066			2,655				9,662			7,390			2,272

Other operating revenue – fees and commissions	2,596			1,518			1,078				6,949			5,039			1,910

Personnel expense	2,639			2,617			22				7,634			8,207			(573		)
Net losses and expenses of repossessed assets	3,617			3,354			263				7,284			7,736			(452		)
Other non-personnel expense	860			805			55				2,484			2,805			(321		)
Corporate allocations	1,267			1,259			8				3,686			3,628			58
Total other operating expense	8,383			8,035			348				21,088			22,376			(1,288		)

Loss before taxes	(66		)	(3,451		)	3,385				(4,477		)	(9,947		)	5,470
Federal and state income tax	(26		)	(1,342		)	1,316				(1,742		)	(3,869		)	2,127

Net loss	$	(40	)	$	(2,109	)	$	2,069			$	(2,735	)	$	(6,078	)	$	3,343

Average assets	$	625,593		$	656,604		$	(31,011	)		$	609,922		$	642,239		$	(32,317	)
Average loans	567,198			590,615			(23,417		)		553,260			574,902			(21,642		)
Average deposits	354,865			259,613			95,252				288,533			256,444			32,089
Average invested capital	60,261			65,628			(5,367		)		59,417			65,158			(5,741		)
Return on average assets	(0.03		)%	(1.27		)%	124			bp	(0.60		)%	(1.27		)%	67			bp
Return on invested capital	(0.26		)%	(12.75		)%	1,249			bp	(6.15		)%	(12.47		)%	632			bp
Efficiency ratio	121.04		%	138.22		%	(1,718		)	bp	107.37		%	131.30		%	(2,393		)	bp
Net charge-offs (recoveries) to average loans (annualized)	(0.98		)%	0.83		%	(181		)	bp	0.73		%	1.07		%	(34		)	bp
Residential mortgage loans funded for sale	$	29,340		$	23,307		$	6,033			$	70,260		$	69,377		$	883

- 29 -

Bank of Kansas City

Net income attributed to the Bank of Kansas City increase d by $1.3 million or 86% over the third quarter of 2011 . Net interest revenue increase d $498 thousand or 17% . Average loan balances increase d $83 million or 24% and average deposits balances were up $31 million or 11% . Demand deposit balances grew $121 million due primarily to commercial account balances. Interest-bearing transaction account balances were down $79 million and higher costing time deposit balances decrease d by $12 million . Net charge-offs remained low, totaling $43 thousand or 0.04% of average loans on an annualized basis for the third quarter of 2012 compared to $6 thousand or 0.01% on an annualized basis for the third quarter of 2011 .

Fees and commissions revenue increase d $3.0 million or 39% over the prior year primarily due to increased mortgage banking revenue. Trust fees and commissions and deposit service charges and fees were also up over the prior year, partially offset by a decrease in brokerage and trading revenue. Personnel costs were up $394 thousand primarily due to increase d headcount and incentive compensation. Corporate expense allocations increase d by $823 thousand on higher customer transaction volume and non-personnel expense increased $110 thousand .

Table 17 – Bank of Kansas City (Dollars in thousands)

	Three Months Ended										Nine Months Ended
	September 30,						Increase				September 30,						Increase
	2012			2011			(Decrease)				2012			2011			(Decrease)
Net interest revenue	$	3,401		$	2,903		$	498			$	9,751		$	8,483		$	1,268
Net loans charged off	43			6			37				(113		)	237			(350		)
Net interest revenue after net loans charged off	3,358			2,897			461				9,864			8,246			1,618

Other operating revenue – fees and commission	10,679			7,700			2,979				28,418			17,817			10,601

Personnel expense	5,462			5,068			394				15,018			12,387			2,631
Net losses and expenses of repossessed assets	58			1			57				49			132			(83		)
Other non-personnel expense	1,202			1,092			110				3,286			2,919			367
Corporate allocations	2,858			2,035			823				8,119			5,070			3,049
Total other operating expense	9,580			8,196			1,384				26,472			20,508			5,964

Income before taxes	4,457			2,401			2,056				11,810			5,555			6,255
Federal and state income tax	1,734			934			800				4,594			2,161			2,433

Net income	$	2,723		$	1,467		$	1,256			$	7,216		$	3,394		$	3,822

Average assets	$	460,744		$	363,633		$	97,111			$	446,770		$	366,310		$	80,460
Average loans	433,798			350,847			82,951				425,597			355,806			69,791
Average deposits	312,775			281,939			30,836				263,785			308,102			(44,317		)
Average invested capital	33,460			27,892			5,568				32,467			26,607			5,860
Return on average assets	2.35		%	1.60		%	75			bp	2.16		%	1.24		%	92			bp
Return on invested capital	32.38		%	20.87		%	1,151			bp	29.69		%	17.05		%	1,264			bp
Efficiency ratio	68.04		%	77.30		%	(926		)	bp	69.35		%	77.98		%	(863		)	bp
Net charge-offs (annualized) to average loans	0.04		%	0.01		%	3			bp	(0.04		)%	0.09		%	(13		)	bp
Residential mortgage loans funded for sale	$	84,707		$	40,867		$	43,840			$	204,817		$	91,033		$	113,784

- 30 -

Financial Condition

Securities

We maintain a securities portfolio to enhance profitability, support customer transactions, manage interest rate risk, provide liquidity and comply with regulatory requirements. Securities are classified as trading, held for investment, or available for sale. See Note 2 to the consolidated financial statements for the composition of the securities portfolio as of September 30, 2012 , December 31, 2011 and September 30, 2011 .

At September 30, 2012 , the carrying value of investment (held-to-maturity) securities was $432 million and the fair value was $460 million . Investment securities consist primarily of long-term, fixed rate Oklahoma 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 $89 million of the Texas school construction bonds are 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 $11.2 billion at September 30, 2012 , an increase of $1.1 billion over June 30, 2012 . The increase was primarily in short-duration U.S. government agency residential mortgage-backed securities and U.S. government agency backed commercial mortgage-backed securities. At September 30, 2012 , residential mortgage-backed securities represented 95% of total available for sale securities.

A primary risk of holding residential mortgage-backed securities comes from extension during periods of rising interest rates or prepayment during periods of falling interest rates. We evaluate this risk through extensive modeling of risk both before making an investment and throughout the life of the security. Current interest rates are historically low and prices for residential mortgage-backed securities are historically high resulting in low effective durations. Our best estimate of the duration of the residential mortgage-backed securities portfolio at September 30, 2012 is 1.9 years. Management estimates the duration extends to 3.6 years assuming an immediate 200 basis point upward shock. The estimated duration contracts to 1.4 years assuming a 50 basis point decline in the current low rate environment. Net unamortized premiums are less than 1% of the available for sale securities portfolio amortized cost.

Residential mortgage-backed securities also have credit risk from delinquency or default of the underlying loans. We mitigate this risk by primarily investing in securities issued by U.S. government agencies. Principal and interest payments on the underlying loans are fully guaranteed. At September 30, 2012 , approximately $10.4 billion of the amortized cost of the Company’s residential mortgage-backed securities were issued by U.S. government agencies. The fair value of these residential mortgage-backed securities totaled $10.7 billion at September 30, 2012 .

We also hold amortized cost of $337 million in residential mortgage-backed securities privately issued by publicly-owned financial institutions, a decrease of $17 million from June 30, 2012 . The decline was primarily due to $16 million of cash received and $1.1 million of other-than-temporary impairment losses charged against earnings during the third quarter of 2012 . The fair value of our portfolio of privately issued residential mortgage-backed securities totaled $332 million at September 30, 2012 .

The amortized cost of our portfolio of privately issued residential mortgage-backed securities included $209 million of Jumbo-A residential mortgage loans and $128 million of Alt-A residential mortgage loans. Jumbo-A residential mortgage loans generally meet government underwriting standards, but have loan balances that exceed agency maximums. Alt-A mortgage loans generally do not have sufficient documentation to meet government agency underwriting standards. Credit risk on residential mortgage-backed securities originated by private issuers is mitigated by investment in senior tranches with additional collateral support. All of our Alt-A residential mortgage-backed securities were issued with credit support from additional layers of loss-absorbing subordinated tranches, including all Alt-A residential mortgage-backed securities held that were originated in 2007 and 2006. The weighted average original credit enhancement of the Alt-A residential mortgage-backed securities was 10.2% and currently stands at 0.4%. The Jumbo-A residential mortgage-backed securities had original credit enhancement of 9.4% and the current level is 5.4%. Approximately 79% of our Alt-A mortgage-backed securities represent pools of fixed rate residential mortgage loans. None of the adjustable rate mortgages are payment option adjustable rate mortgages (“ARMs”). Approximately 24% of our Jumbo-A residential mortgage-backed securities represent pools of fixed rate residential mortgage loans and none of the adjustable rate mortgages are payment option ARMs.

- 31 -

The aggregate gross amount of unrealized losses on available for sale securities totaled $13 million at September 30, 2012 , down $39 million from June 30, 2012 . On a quarterly basis, we perform separate evaluations on debt and equity securities to determine if the unrealized losses are temporary as more fully described in Note 2 of the Consolidated Financial Statements. Other-than-temporary impairment charges of $1.1 million were recognized in earnings in the third quarter of 2012 related to certain privately issued residential mortgage-backed securities that we do not intend to sell.

Certain residential mortgage-backed securities issued by U.S. government agencies and included in fair value option securities on the Consolidated Balance Sheets, have been segregated and designated as economic hedges of changes in the fair value of our mortgage servicing rights. We have elected to carry these securities at fair value with changes in fair value recognized in current period income. These securities are held with the intent that gains or losses will offset changes in the fair value of mortgage servicing rights and related derivative contracts.

Bank-Owned Life Insurance

We have approximately $272 million of bank-owned life insurance at September 30, 2012 . This investment is expected to provide a long-term source of earnings to support existing employee benefit programs. Approximately $241 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, 2012 , the cash surrender value represented by the underlying fair value of investments held in separate accounts was approximately $265 million. As the underlying fair value of the investments held in a separate account at September 30, 2012 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 $31 million primarily represents the cash surrender value of policies held in general accounts and other amounts due from various insurance companies.

- 32 -

Loans

The aggregate loan portfolio before allowance for loan losses totaled $11.8 billion at September 30, 2012 , up $256 million over June 30, 2012 .

Table 18 – Loans (In thousands)

	September 30, 2012		June 30, 2012		March 31, 2012		December 31, 2011		September 30, 2011
Commercial:
Energy	$	2,433,473	$	2,278,336	$	2,166,406	$	2,005,041	$	1,749,203
Services	1,891,728		1,931,520		1,912,537		1,761,538		1,872,947
Wholesale/retail	1,079,267		960,184		1,027,170		967,426		1,021,070
Manufacturing	363,092		362,877		352,297		336,733		373,074
Healthcare	1,037,288		1,009,128		1,000,854		978,160		914,346
Integrated food services	213,832		216,978		211,288		204,311		192,200
Other commercial and industrial	254,537		293,521		288,540		301,861		298,762
Total commercial	7,273,217		7,052,544		6,959,092		6,555,070		6,421,602

Commercial real estate:
Construction and land development	289,544		287,059		318,539		342,054		370,465
Retail	525,051		492,377		466,444		509,402		457,176
Office	406,007		384,392		369,179		405,923		422,284
Multifamily	398,513		362,165		435,946		369,028		388,304
Industrial	187,166		231,033		288,650		278,186		224,222
Other real estate	359,245		369,188		354,925		386,710		410,382
Total commercial real estate	2,165,526		2,126,214		2,233,683		2,291,303		2,272,833

Residential mortgage:
Permanent mortgage	1,134,519		1,141,371		1,134,934		1,153,644		1,180,310
Permanent mortgages guaranteed by U.S. government agencies	169,393		168,059		186,119		188,462		173,540
Home equity	715,068		695,667		647,319		632,421		596,051
Total residential mortgage	2,018,980		2,005,097		1,968,372		1,974,527		1,949,901

Consumer:
Indirect automobile	47,281		62,924		81,792		105,149		130,296
Other consumer	327,363		329,652		334,505		343,694		349,937
Total consumer	374,644		392,576		416,297		448,843		480,233

Total	$	11,832,367	$	11,576,431	$	11,577,444	$	11,269,743	$	11,124,569

Outstanding commercial loan balances increase d $221 million over June 30, 2012 or 13% on an annualized basis, growing in all of our geographical markets. Commercial loan growth in our Oklahoma and Texas markets was particularly strong. Commercial real estate loans also increased by $39 million during the third quarter of 2012 primarily in our Texas market. Residential mortgage loans were up $14 million over June 30, 2012 . Consumer loans decreased $18 million from June 30, 2012 primarily related to the continued runoff of indirect automobile loans related to the previously announced decision to curtail that business.

A breakdown by geographical market follows on Table 19 with discussion of changes in the balance by portfolio and geography. This breakdown may not always represent the location of the borrower or the collateral. The previous periods have been reclassified to conform to the current period loan classification and market attribution.

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Table 19 – Loans by Principal Market (In thousands)

	September 30, 2012		June 30, 2012		March 31, 2012		December 31, 2011		September 30, 2011
Bank of Oklahoma:
Commercial	$	3,141,217	$	3,098,651	$	3,107,726	$	2,826,649	$	2,865,740
Commercial real estate	639,156		644,761		631,891		607,030		615,848
Residential mortgage	1,477,583		1,460,173		1,426,827		1,411,560		1,378,519
Consumer	200,217		205,436		215,693		235,909		250,048
Total Bank of Oklahoma	5,458,173		5,409,021		5,382,137		5,081,148		5,110,155

Bank of Texas:
Commercial	2,529,473		2,414,824		2,354,593		2,249,888		2,116,377
Commercial real estate	712,895		678,745		802,979		830,642		759,574
Residential mortgage	266,791		268,639		262,556		268,053		276,721
Consumer	108,854		115,602		124,692		126,570		133,454
Total Bank of Texas	3,618,013		3,477,810		3,544,820		3,475,153		3,286,126

Bank of Albuquerque:
Commercial	267,469		262,144		273,284		258,668		279,319
Commercial real estate	294,731		285,871		282,834		303,500		302,980
Residential mortgage	117,783		113,987		106,754		104,695		99,191
Consumer	15,883		15,828		18,378		19,369		19,393
Total Bank of Albuquerque	695,866		677,830		681,250		686,232		700,883

Bank of Arkansas:
Commercial	48,097		49,305		64,595		76,199		80,304
Commercial real estate	119,305		119,895		139,670		136,170		134,028
Residential mortgage	12,408		12,513		14,557		15,772		15,793
Consumer	19,720		24,270		28,783		35,911		44,445
Total Bank of Arkansas	199,530		205,983		247,605		264,052		274,570

Colorado State Bank & Trust:
Commercial	616,321		610,384		541,280		544,020		495,429
Commercial real estate	145,077		149,541		144,757		156,013		189,948
Residential mortgage	57,637		60,893		61,329		64,627		66,491
Consumer	19,028		20,612		19,790		21,598		22,183
Total Colorado State Bank & Trust	838,063		841,430		767,156		786,258		774,051

Bank of Arizona:
Commercial	300,557		278,119		269,099		271,914		269,381
Commercial real estate	186,553		181,513		180,830		198,160		227,085
Residential mortgage	65,234		67,822		76,699		89,315		92,293
Consumer	6,150		6,227		5,381		5,633		6,670
Total Bank of Arizona	558,494		533,681		532,009		565,022		595,429

Bank of Kansas City:
Commercial	370,083		339,117		348,515		327,732		315,052
Commercial real estate	67,809		65,888		50,722		59,788		43,370
Residential mortgage	21,544		21,070		19,650		20,505		20,893
Consumer	4,792		4,601		3,580		3,853		4,040
Total Bank of Kansas City	464,228		430,676		422,467		411,878		383,355

Total BOK Financial loans	$	11,832,367	$	11,576,431	$	11,577,444	$	11,269,743	$	11,124,569

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Commercial

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

The commercial loan portfolio grew by $221 million during the third quarter of 2012 . Energy sector loans increased $155 million over June 30, 2012 , growing primarily in the Texas and Colorado markets. Wholesale/retail sector loans were up $119 million primarily due to growth in the Oklahoma and Texas markets. Healthcare sector loans were up $28 million over June 30, 2012 growing in primarily in the Kansas City and Oklahoma markets, partially offset by a decrease in the Colorado market. Service sector loans decreased $40 million . Service sector loans in the Texas market grew by $31 million offset by a $36 million decrease in service sector loans in the Oklahoma market and a $24 million decrease in service sector loans in the Colorado market. Other commercial and industrial loans were down $39 million primarily in the Texas market. Growth in manufacturing sector loans in the Arizona market were offset by a decrease in manufacturing sector loans in the Oklahoma market.

The commercial sector of our loan portfolio is distributed as follows in Table 20.

Table 20 – Commercial Loans by Principal Market (In thousands)

	Oklahoma		Texas		New Mexico		Arkansas		Colorado		Arizona		Kansas/ Missouri		Total
Energy	$	1,068,773	$	964,697	$	4,783	$	229	$	394,546	$	—	$	445	$	2,433,473
Services	652,855		718,188		172,924		10,411		138,444		143,230		55,676		1,891,728
Wholesale/retail	490,247		390,143		48,682		31,760		17,105		65,349		35,981		1,079,267
Healthcare	632,661		256,567		25,447		4,345		52,146		43,374		22,748		1,037,288
Manufacturing	171,201		110,673		5,824		1,166		8,363		47,246		18,619		363,092
Integrated food services	3,574		6,735		—		—		2,865		—		200,658		213,832
Other commercial and industrial	121,906		82,470		9,809		186		2,852		1,358		35,956		254,537
Total commercial loans	$	3,141,217	$	2,529,473	$	267,469	$	48,097	$	616,321	$	300,557	$	370,083	$	7,273,217

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.

Energy loans totaled $2.4 billion or 21% of total loans at September 30, 2012 . Outstanding energy loans increased $155 million during the third quarter of 2012 . Unfunded energy loan commitments increased by $76 million to $2.2 billion at September 30, 2012 . Approximately $2.2 billion of energy loans were to oil and gas producers, up $170 million over June 30, 2012 . Approximately 55% of the committed production loans are secured by properties primarily producing oil and 45% of the committed production loans are secured by properties primarily producing natural gas. Loans to borrowers engaged in wholesale or retail energy sales increased $2.8 million to $140 million . Loans to borrowers that provide services to the energy industry increased $10 million during the third quarter of 2012 to $76 million and loans to borrowers that manufacture

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equipment primarily for the energy industry increased $1.0 million during the third quarter of 2012 to $35 million .

The services sector of the loan portfolio totaled $1.9 billion or 16% of total loans and consists of a large number of loans to a variety of businesses, including community foundations, gaming, public finance, insurance and heavy equipment dealers. Service sector loans decreased $40 million over June 30, 2012 . Approximately $1.1 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. Loans in this sector may also be secured by personal guarantees of the owners or related parties.

We participate in shared national credits when appropriate to obtain or maintain business relationships with local customers. Shared national credits are defined by banking regulators as credits of more than $20 million and with three or more non-affiliated banks as participants. At September 30, 2012 , the outstanding principal balance of these loans totaled $2.5 billion. Substantially all of these loans are to borrowers with local market relationships. We serve as the agent lender in approximately 19% 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, grading of shared national credits is provided annually by banking regulators.

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. 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 $2.2 billion or 18% of the loan portfolio at September 30, 2012 . The outstanding balance of commercial real estate loans increased $39 million over the second quarter of 2012 primarily due to growth in multifamily residential properties in the Texas market. The commercial real estate loan balance as a percentage of our total loan portfolio is currently below its historical range of 20% to 23% over the past five years. The commercial real estate sector of our loan portfolio is distributed as follows in Table 21.

Table 21 – Commercial Real Estate Loans by Principal Market (In thousands)

	Oklahoma		Texas		New Mexico		Arkansas		Colorado		Arizona		Kansas/ Missouri		Total
Construction and land development	$	94,549	$	58,038	$	56,813	$	17,695	$	43,173	$	11,782	$	7,494	$	289,544
Retail	162,397		191,352		60,902		12,203		16,893		63,017		18,287		525,051
Office	105,053		177,782		70,878		11,632		12,581		28,023		58		406,007
Multifamily	128,890		127,441		22,174		45,117		25,175		28,021		21,695		398,513
Industrial	46,248		67,692		35,140		1,674		6,613		19,037		10,762		187,166
Other real estate	102,019		90,590		48,824		30,984		40,642		36,673		9,513		359,245
Total commercial real estate loans	$	639,156	$	712,895	$	294,731	$	119,305	$	145,077	$	186,553	$	67,809	$	2,165,526

Construction and land development loans, which consist primarily of residential construction properties and developed building lots, increased $2.5 million over June 30, 2012 to $290 million at September 30, 2012 . Charge-offs of construction and land development loans totaled $1.4 million for the third quarter of 2012 and $3.9 million were transferred to other real estate owned.

Loans secured by multifamily residential properties increased $36 million primarily in the Texas market, partially offset by a decrease in the Oklahoma market. Loans secured by retail facilities grew by $33 million primarily in the Oklahoma market.

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Loans secured by offices increased $22 million during the third quarter of 2012 , primarily in the Oklahoma and Texas markets.

Loans secured by and loans secured by industrial properties decrease d $44 million from June 30, 2012 , primarily in the Texas and Oklahoma market.

Residential Mortgage and Consumer

Residential mortgage loans totaled $2.0 billion , up $14 million over June 30, 2012 . 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.

The majority of our permanent mortgage loan portfolio is primarily 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. The aggregate outstanding balance of loans in these programs is $984 million. Jumbo loans may be fixed or variable rate and are fully amortizing. The size of jumbo loans exceed 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%. Loan-to-value ratios (“LTV”) are tiered from 60% to 100%, 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.

Approximately $74 million or 7% of the non-guaranteed portion of the permanent mortgage loans consist of first lien, fixed-rate residential mortgage loans originated under various community development programs. The outstanding balance of these loans is down from $78 million at June 30, 2012 . These loans were underwritten to standards approved by various U.S. government agencies under these programs and include full documentation. However, these loans do have a higher risk of delinquency and losses in the event of default than traditional residential mortgage loans. The initial maximum LTV of loans in these programs was 103%.

At September 30, 2012 , $169 million of permanent residential mortgage loans are guaranteed by U.S. government agencies. We have minimal credit exposure on loans guaranteed by the agencies. This amount includes $20 million of residential mortgage loans previously sold into GNMA mortgage pools. The Company may repurchase these loans 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. The remaining amount represents loans that the Company has repurchased from GNMA mortgage pools. Permanent residential mortgage loans guaranteed by U.S. government agencies increased $1.3 million over June 30, 2012 .

Home equity loans totaled $715 million at September 30, 2012 , a $19 million increase over June 30, 2012 . Growth was primarily in first-lien, fully amortizing home equity loans. Home equity loans generally require a minimum FICO score of 700 and a maximum DTI of 40%. The maximum loan amount available for our home equity loan products is generally $400 thousand. A summary of our home equity loan portfolio at September 30, 2012 by lien position and amortizing status follows in Table 23.

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Table 22 – Home Equity Loans (In thousands)

	Revolving		Amortizing		Total
First lien	$	35,696	$	433,171	$	468,867
Junior lien	53,940		192,261		246,201
Total home equity	$	89,636	$	625,432	$	715,068

Indirect automobile loans decreased $16 million from June 30, 2012 , primarily due to the previously-disclosed decision by the Company to exit the business in the first quarter of 2009. Approximately $47 million of indirect automobile loans remain outstanding at September 30, 2012 . Other consumer loans decreased $2.3 million during the third quarter of 2012 .

The composition of residential mortgage and consumer loans at September 30, 2012 is as follows in Table 23. All permanent residential mortgage loans originated and serviced by our mortgage banking unit are attributed to the Oklahoma market. Other permanent residential mortgage loans originated by the Bank are attributed to their respective principal market.

Table 23 – Residential Mortgage and Consumer Loans by Principal Market (In thousands)

	Oklahoma		Texas		New Mexico		Arkansas		Colorado		Arizona		Kansas/ Missouri		Total
Residential mortgage:
Permanent mortgage	$	875,726	$	144,273	$	10,529	$	6,674	$	31,359	$	52,592	$	13,366	$	1,134,519
Permanent mortgages guaranteed by U.S. government agencies	169,393		—		—		—		—		—		—		169,393
Home equity	432,464		122,518		107,254		5,734		26,278		12,642		8,178		715,068
Total residential mortgage	$	1,477,583	$	266,791	$	117,783	$	12,408	$	57,637	$	65,234	$	21,544	$	2,018,980

Consumer:
Indirect automobile	$	23,972	$	8,879	$	—	$	14,430	$	—	$	—	$	—	$	47,281
Other consumer	176,245		99,975		15,883		5,290		19,028		6,150		4,792		327,363
Total consumer	$	200,217	$	108,854	$	15,883	$	19,720	$	19,028	$	6,150	$	4,792	$	374,644

Loan Commitments

We enter into certain off-balance sheet arrangements in the normal course of business. These arrangements included unfunded loan commitments which totaled $6.4 billion and standby letters of credit which totaled $448 million at September 30, 2012 . 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 $739 thousand of the outstanding standby letters of credit were issued on behalf of customers whose loans are nonperforming at September 30, 2012 .

As more fully described in Note 6 to the Consolidated Financial Statements, 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 other than obligations under standard representations and warranties. 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. At September 30, 2012 , the principal balance of residential mortgage loans sold subject to recourse obligations totaled $238 million, down from $241 million at June 30, 2012 . Substantially all of these loans are to borrowers in our primary markets including $167 million to borrowers in Oklahoma, $24 million to borrowers in Arkansas, $15 million to borrowers in New Mexico, $13 million to borrowers in the Kansas/Missouri area and $11 million to borrowers in Texas.

Under certain conditions, we also have an off-balance sheet obligation to repurchase residential mortgage loans sold to

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government sponsored entities through our mortgage banking activities due to standard representations and warranties made under contractual agreements. At September 30, 2012 , we have unresolved deficiency requests from the agencies on 344 loans with an aggregate outstanding balance of $42 million . At June 30, 2012 , we had unresolved deficiency requests from the agencies on 303 loans with an aggregate outstanding balance of $40 million . For all of 2012, 2011 and 2010 combined, approximately 12% of repurchase requests have currently resulted in actual repurchases or indemnification by the Company. We repurchased 11 loans from the agencies during the third quarter of 2012 with an unpaid principal balance of $1.4 million at September 30, 2012 and recognized losses of $166 thousand. Our accrual for credit losses related to potential loan repurchases under representations and warranties totaled $4.8 million at September 30, 2012 and $5.0 million at June 30, 2012 .

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, or to take positions in derivative contracts. 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 the risk to us of changes in commodity prices, interest rates or foreign exchange rates. The counterparty contracts are identical to the customer contracts, except for a fixed pricing spread or a fee paid to us as compensation for administrative costs, credit risk and profit.

The customer derivative programs create credit risk for potential amounts due to the Company from our customers and from the counterparties. Customer credit risk is monitored through existing credit policies and procedures. The effects of changes in commodity prices, interest rates or foreign exchange rates are evaluated across a range of possible options to determine the maximum exposure we are willing to have individually to any customer. Customers may also be required to provide margin collateral 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 counterparty’s ability to provide margin collateral was impaired. Credit losses on customer derivatives reduce brokerage and trading revenue in the Consolidated Statement of Earnings.

Derivative contracts are carried at fair value. At September 30, 2012 , the net fair values of derivative contracts reported as assets under these programs totaled $427 million , compared to $409 million at June 30, 2012 . Derivative contracts carried as assets included to-be-announced residential mortgage-backed securities sold to our mortgage banking customers considered interest rate derivative contracts with fair values of $155 million , interest rate swaps sold to loan customers with fair values of $79 million , energy contracts with fair values of $39 million and foreign exchange contracts with fair values of $150 million . The aggregate net fair values of derivative contracts held under these programs reported as liabilities totaled $254 million .

At September 30, 2012 , total derivative assets were reduced by $11 million of cash collateral received from counterparties and total derivative liabilities were reduced by $185 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 September 30, 2012 follows in Table 24.

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Table 24 – Fair Value of Derivative Contracts (In thousands)

Customers	$	265,548
Banks and other financial institutions	148,272
Exchanges	45,432
Energy companies	5,254
Fair value of customer hedge asset derivative contracts, net	$	464,506

The largest exposure to a single counterparty was to a loan customer for an interest rate swap which totaled $13 million at September 30, 2012 used to convert their variable rate loan to a fixed rate.

Our aggregate gross exposure to all European banks totaled $7.8 million at September 30, 2012. In addition, MF Global filed for bankruptcy protection on October 31, 2011. After partial distributions from the bankruptcy trustee, $8.5 million was owed to us by MF Global. This remaining amount due was written down in the fourth quarter of 2011 to $6.8 million based on our evaluation of the amount we expect to recover. During the third quarter of 2012, we received a $2.0 million partial payment on our claim.

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 $25.74 per barrel of oil would increase the fair value of derivative assets by $39 million. An increase in prices equivalent to $160.08 per barrel of oil would increase the fair value of derivative assets by $375 million as current prices move away from the fixed prices embedded in our existing contracts. Liquidity requirements of this program are also affected by our credit rating. A decrease in credit rating to below investment grade would increase our obligation to post cash margin on existing contracts by approximately $35 million. The fair value of our to-be-announced residential mortgage-backed securities and interest rate swap derivative contracts is affected by changes in interest rates. Based on our assessment as of September 30, 2012, changes in interest rate 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. The combined allowance for loan losses and off-balance sheet credit losses totaled $236 million or 1.99% of outstanding loans and 179% of nonaccruing loans at September 30, 2012 . The allowance for loans losses was $234 million and the accrual for off-balance sheet credit losses was $1.9 million . At June 30, 2012 , the combined allowance for credit losses was $241 million or 2.09% of outstanding loans and 167% of nonaccruing loans at June 30, 2012 . The allowance for loan losses was $232 million and the accrual for off-balance sheet credit losses was $9.7 million . The accruals for off-balance sheet credit losses decreased $7.8 million during the third quarter of 2012 primarily due to $7.1 million refunded to the City of Tulsa in the third quarter of 2012 that was received in 2008 to settle claims related to a defaulted loan. The settlement agreement was invalidated by the Oklahoma Supreme Court in 2011 and the expected payment was accrued in 2011 in the accrual for off-balance sheet credit risk as the related loan had been charged off. The refund was reflected in net charge-offs in the third quarter.

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 and after exhaustion of collection efforts. No provision for credit losses was recorded in the third quarter of 2012 based on a continued trend of declining charge-offs, reduced nonaccruing loans and improvements in other credit quality factors. An $8.0 million negative provision for credit losses was recorded in the second quarter of 2012 and no provision for credit losses was recorded in the third quarter of 2011 . The previously noted recovery refund was expected and had been fully accrued in prior periods. Net recoveries recorded during the third quarter quarter offset an increase in required reserves due to loan portfolio growth. Credit quality indicators and most economic factors are stable or improving in our primary markets.

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Table 25 – Summary of Loan Loss Experience (In thousands)

	Three Months Ended
	September 30, 2012				June 30, 2012			March 31, 2012			December 31, 2011			September 30, 2011
Allowance for loan losses:
Beginning balance	$	231,669			$	244,209		$	253,481		$	271,456		$	286,611
Loans charged off:
Commercial	(812		)		(4,094		)	(2,934		)	(4,099		)	(5,083		)
Commercial real estate	(2,607		)		(1,216		)	(6,725		)	(3,365		)	(2,335		)
Residential mortgage	(1,600		)		(4,061		)	(1,786		)	(4,375		)	(3,403		)
Consumer	(3,902		)		(2,172		)	(2,229		)	(2,932		)	(3,202		)
Total	(8,921		)		(11,543		)	(13,674		)	(14,771		)	(14,023		)
Recoveries of loans previously charged off:
Commercial	(890		)	¹	4,125			1,946			2,316			1,404
Commercial real estate	2,684				544			1,312			1,220			911
Residential mortgage	298				750			411			715			283
Consumer	1,112				1,283			1,520			1,060			1,271
Total	3,204				6,702			5,189			5,311			3,869
Net loans charged off	(5,717		)		(4,841		)	(8,485		)	(9,460		)	(10,154		)
Provision for loan losses	7,804				(7,699		)	(787		)	(8,515		)	(5,001		)
Ending balance	$	233,756			$	231,669		$	244,209		$	253,481		$	271,456
Accrual for off-balance sheet credit losses:
Beginning balance	$	9,747			$	10,048		$	9,261		$	15,746		$	10,745
Provision for off-balance sheet credit losses	(7,804		)		(301		)	787			(6,485		)	5,001
Ending balance	$	1,943			$	9,747		$	10,048		$	9,261		$	15,746
Total combined provision for credit losses	$	—			$	(8,000	)	$	—		$	(15,000	)	$	—
Allowance for loan losses to loans outstanding at period-end	1.98		%		2.00		%	2.11		%	2.25		%	2.44		%
Net charge-offs (annualized) to average loans	0.19		%	¹	0.17		%	0.30		%	0.34		%	0.37		%
Total provision for credit losses (annualized) to average loans	—		%		(0.28		)%	—		%	(0.54		)%	—		%
Recoveries to gross charge-offs	35.92		%		58.06		%	37.95		%	35.96		%	27.59		%
Accrual for off-balance sheet credit losses to off-balance sheet credit commitments	0.03		%		0.15		%	0.15		%	0.14		%	0.25		%
Combined allowance for credit losses to loans outstanding at period-end	1.99		%		2.09		%	2.20		%	2.33		%	2.58		%


¹	Includes $7.1 million of negative recovery related to a refund of a settlement between BOK Financial and the City of Tulsa invalidated by the Oklahoma Supreme Court. Excluding this refund, BOK Financial had net charge-offs (recoveries) to average loans of (0.05%) on an annualized basis.

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 expected loss rates by loan class and non-specific allowances based on general economic, risk concentration and related factors.

At September 30, 2012 , risk graded impaired loans totaled $110 million , including $9.1 million with specific allowances of $3.7 million and $101 million with no specific allowances because the loans balances represent the amounts we expect to recover. At June 30, 2012 , risk graded impaired loans totaled $126 million , including $6.2 million of impaired loans with specific allowances of $1.8 million and $120 million with no specific allowances. The increase in specific allowances over June 30, 2012 is due primarily to a single industrial sector commercial real estate loan customer attributed to the Bank of Texas.

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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 $189 million at September 30, 2012 , largely unchanged from June 30, 2012 . Net charge-offs continue to decrease, resulting in decreased estimated loss rates. The general allowance for the commercial segment decreased by $1.6 million primarily due to lower estimated loss rates and improved risk grading, partially offset by growth in the portfolio balance. The general allowance for commercial real estate loans increased $3.1 million over June 30, 2012 primarily due to an increase in the balance of the multifamily loan class and an increase in estimated loss rates for the construction and land development. The general allowance for residential mortgage decreased $1.7 million from June 30, 2012 primarily due to lower estimated loss rates.

Nonspecific allowances are maintained for risks beyond factors specific to a particular loan 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 $41 million at September 30, 2012 , largely unchanged from June 30, 2012 as these risks were largely unchanged compared to the prior quarter. The nonspecific allowance at both September 30, 2012 and June 30, 2012 includes consideration of the bankruptcy filing by a major employer in the Tulsa, Dallas/Ft. Worth and Kansas City markets. Although, we have no direct exposure, the secondary effect on employees, retirees, vendors, suppliers and other business partners could be significant. The nonspecific allowance also considers the possible impact of the European debt crisis and similar economic factors on our loan portfolio. As demonstrated by continued domestic and European accommodative monetary policies, these factors remain a continued significant risk.

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

Our loan monitoring process also identified 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 loans 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. The potential problem loans totaled $150 million at September 30, 2012 . The current composition of potential problem loans by primary industry included services - $34 million , construction and land development - $26 million , other commercial real estate - $13 million , commercial real estate secured by office buildings - $13 million , residential mortgage - $12 million , manufacturing - $10 million and energy - $10 million . Potential problem loans totaled $159 million at June 30, 2012 .

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. Commercial and commercial real estate loans are evaluated quarterly and charge-offs are taken in the quarter in which the loss is identified. Residential mortgage and consumer loans are generally charged off when payments are between 90 days and 180 days past due, depending on loan class. In addition, residential mortgage loans are generally charged-down to collateral value within 60 days of being notified of a borrower's bankruptcy filing.

Net loans charged off during the third quarter of 2012 totaled $5.7 million , including the return of $7.1 million received from the City of Tulsa to settle claims related to a defaulted loan that was recorded as a recovery in 2008. The settlement agreement between BOK Financial and the City of Tulsa was invalidated by the Oklahoma Supreme Court in 2011. The return of this settlement was recorded as a negative recovery in the third quarter of 2012 when the funds were returned to the City of Tulsa. Excluding this item, BOK Financial had a net recovery of $1.4 million for the third quarter of 2012. Net charge-offs totaled $4.8 million in the previous quarter and $10.2 million in the third quarter of 2011 . Excluding the impact of the return of the invalidated settlement, the ratio of net loans charged off (recovered) to average outstanding loans on an annualized basis was (0.05%) for the third quarter of 2012 compared with 0.17% for the second quarter of 2012 and 0.37% for the third quarter of 2011 . Excluding the impact of the invalidated settlement, net loans charged off in the third quarter of 2012 decreased $6.2 million compared to the previous quarter.

Net loans charged off (recovered) by category and principal market area during the third quarter of 2012 follow in Table 26.

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Table 26 – Net Loans Charged Off (Recovered) (In thousands)

	Oklahoma		Texas			Colorado			Arkansas			New Mexico			Arizona			Kansas/ Missouri			Total
Commercial	$	4,824	$	113		$	(3,168	)	$	(8	)	$	(23	)	$	(35	)	$	(1	)	$	1,702
Commercial real estate	253		—			859			858			(1		)	(2,046		)	—			(77		)
Residential mortgage	687		(82		)	(78		)	10			54			685			26			1,302
Consumer	722		1,749			20			74			202			5			18			2,790
Total net loans charged off (recovered)	$	6,486	$	1,780		$	(2,367	)	$	934		$	232		$	(1,391	)	$	43		$	5,717

Excluding the impact of the return of the invalidated settlement attributed to the Oklahoma market, net commercial loans charged off during the third quarter of 2012 decreased $5.4 million compared to the prior quarter and were comprised primarily of a $3.2 million recovery from a single service sector customer in the Colorado market and a $1.8 million recovery from a single manufacturing sector customer in the Oklahoma market.

Net charge-offs of commercial real estate loans decrease d $749 thousand from the second quarter of 2012 and were primarily comprised of net charge-offs of land and residential construction sector loans in the Colorado and Arkansas markets. The Arizona market had a net recovery for the third quarter of 2012 due primarily due to a recovery from a single land and residential construction sector customer.

Residential mortgage net charge-offs were down $2.0 million over the previous quarter and consumer loan net charge-offs, which include indirect auto loan and deposit account overdraft losses, increase d $1.9 million over the previous quarter. All residential mortgage net charge-offs related to loans serviced by our mortgage company across our geographical footprint are attributed to the Oklahoma market.

During the third quarter of 2012, the Office of the Comptroller of the Currency issued interpretive guidance regarding accounting for and classification of retail loans to borrowers who have filed for Chapter 7 bankruptcy. This guidance states that these loans should be charged-down to collateral value and classified as nonaccruing and troubled debt restructurings, regardless of current payment status. Generally, we have been complying with this guidance by charging down such loans to collateral value within 60 days of being notified of the borrower's bankruptcy filing. Based on available information we do not expect implementation to significantly affect charge-offs or provision for credit losses. We estimate that nonaccruing loans and troubled debt restructuring may increase by $10 million to $15 million. At September 30, 2012, payments on approximately 89% of loans that may be classified as nonaccruing are current. We expect to implement this guidance in the fourth quarter.

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Nonperforming Assets

Table 27 – Nonperforming Assets (In thousands)

	September 30, 2012		June 30, 2012		March 31, 2012		December 31, 2011		September 30, 2011
Nonaccruing loans:
Commercial	$	21,762	$	34,529	$	61,750	$	68,811	$	83,736
Commercial real estate	75,761		80,214		86,475		99,193		110,048
Residential mortgage	29,267		22,727		27,462		29,767		31,731
Consumer	5,109		7,012		7,672		3,515		3,960
Total nonaccruing loans	131,899		144,482		183,359		201,286		229,475
Renegotiated loans ²	27,992		28,415		36,764		32,893		30,477
Total nonperforming loans	159,891		172,897		220,123		234,179		259,952
Real estate and other repossessed assets	104,128		105,708		115,790		122,753		127,943
Total nonperforming assets	$	264,019	$	278,605	$	335,913	$	356,932	$	387,895

Nonaccruing loans by principal market:
Bank of Oklahoma	$	41,599	$	49,931	$	64,097	$	65,261	$	73,794
Bank of Texas	28,046		24,553		29,745		28,083		29,783
Bank of Albuquerque	13,233		13,535		15,029		15,297		17,242
Bank of Arkansas	5,958		6,865		18,066		23,450		26,831
Colorado State Bank & Trust	22,878		28,239		28,990		33,522		36,854
Bank of Arizona	20,145		21,326		27,397		35,673		44,929
Bank of Kansas City	40		33		35		—		42
Total nonaccruing loans	$	131,899	$	144,482	$	183,359	$	201,286	$	229,475

Nonaccruing loans by loan portfolio sector:
Commercial:
Energy	$	3,063	$	3,087	$	336	$	336	$	3,900
Manufacturing	2,283		12,230		23,402		23,051		27,691
Wholesale / retail	2,007		4,175		15,388		21,180		27,088
Integrated food services	—		—		—		—		—
Services	10,099		10,123		12,890		16,968		18,181
Healthcare	3,305		3,310		7,946		5,486		5,715
Other	1,005		1,604		1,788		1,790		1,161
Total commercial	21,762		34,529		61,750		68,811		83,736
Commercial real estate:
Land development and construction	38,143		46,050		52,416		61,874		72,207
Retail	6,692		7,908		6,193		6,863		6,492
Office	9,833		10,589		10,733		11,457		11,967
Multifamily	3,145		3,219		3,414		3,513		4,036
Industrial	4,064		—		—		—		—
Other commercial real estate	13,884		12,448		13,719		15,486		15,346
Total commercial real estate	75,761		80,214		86,475		99,193		110,048

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Table 27 – Nonperforming Assets (In thousands)

	September 30, 2012			June 30, 2012			March 31, 2012			December 31, 2011			September 30, 2011
Residential mortgage:
Permanent mortgage	23,717			18,136			22,822			25,366			27,486
Home equity	5,550			4,591			4,640			4,401			4,245
Total residential mortgage	29,267			22,727			27,462			29,767			31,731
Consumer	5,109			7,012			7,672			3,515			3,960
Total nonaccrual loans	$	131,899		$	144,482		$	183,359		$	201,286		$	229,475

Ratios:
Allowance for loan losses to nonaccruing loans	177.22		%	160.34		%	133.19		%	125.93		%	118.29		%
Nonaccruing loans to period-end loans	1.11		%	1.25		%	1.58		%	1.79		%	2.06		%
Accruing loans 90 days or more past due ¹	$	1,181		$	691		$	6,140		$	2,496		$	1,401

¹ Excludes residential mortgages guaranteed by agencies of the U.S. Government.
² Includes residential mortgages guaranteed by agencies of the U.S. Government. These loans have been modified to extend payment terms and/or reduce interest rates.	$	24,590		$	24,760		$	32,770		$	28,974		$	26,670

Nonperforming assets decrease d $15 million during the third quarter of 2012 to $264 million or 2.21% of outstanding loans and repossessed assets at September 30, 2012 . Nonaccruing loans totaled $132 million , accruing renegotiated residential mortgage loans totaled $28 million (composed primarily of $25 million of residential mortgage loans guaranteed by U.S. government agencies) and real estate and other repossessed assets totaled $104 million . The Company generally retains nonperforming assets to maximize potential recovery which may cause future nonperforming assets to decrease more slowly.

Loans are 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 nonaccruing commercial and commercial real estate loans in troubled debt restructuring. Modifications may include extension of payment terms and rate concessions. We do not forgive principal or accrued but unpaid interest. We may also renew matured nonaccruing loans. Nonaccuring 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 consumer loans to troubled borrowers.

Renegotiated loans consist primarily of accruing residential mortgage loans modified in troubled debt restructurings. See Note 4 to the Consolidated Financial Statement 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. No unpaid principal or interest is forgiven. Interest continues to accrue based on the modified terms of the loan. If it becomes probable that we will not be able to collect all amounts due according to the modified loan terms, the loan is placed on nonaccrual status and included in nonaccrual loans. Modified loans guaranteed by U.S. government agencies under residential mortgage loan programs may be sold once they become eligible according to U.S. agency guidelines.

A rollforward of nonperforming assets for the third quarter of 2012 follows in Table 28.

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Table 28 – Rollforward of Nonperforming Assets (In thousands)

	Three Months Ended
	September 30, 2012
	Nonaccruing Loans			Renegotiated Loans			Real Estate and Other Repossessed Assets			Total Nonperforming Assets
Balance, June 30, 2012	$	144,482		$	28,415		$	105,708		$	278,605
Additions	19,699			3,560			—			23,259
Payments	(18,356		)	(91		)	—			(18,447		)
Charge-offs	(8,921		)	—			—			(8,921		)
Net write-downs and losses	—			—			(3,572		)	(3,572		)
Foreclosure of nonperforming loans	(6,959		)	(1,851		)	8,810			—
Foreclosure of loans guaranteed by U.S. government agencies	—			—			32,511			32,511
Proceeds from sales	—			(1,864		)	(8,441		)	(10,305		)
Conveyance to U.S. government agencies	—			—			(31,097		)	(31,097		)
Net transfers to nonaccruing loans	222			(222		)	—			—
Return to accrual status	(1,105		)	—			—			(1,105		)
Other, net	2,837			45			209			3,091
Balance, September 30, 2012	$	131,899		$	27,992		$	104,128		$	264,019



	Nine Months Ended
	September 30, 2012
	Nonaccruing Loans			Renegotiated Loans			Real Estate and Other Repossessed Assets			Total Nonperforming Assets
Balance, December 31, 2011	$	201,286		$	32,893		$	122,753		$	356,932
Additions	58,959			12,662			—			71,621
Payments	(75,902		)	(577		)	—			(76,479		)
Charge-offs	(34,138		)	—			—			(34,138		)
Net writedowns and losses	—			—			(7,334		)	(7,334		)
Foreclosure of nonperforming loans	(20,115		)	(5,816		)	25,931			—
Foreclosure of loans guaranteed by U.S. government agencies	—			—			71,211			71,211
Proceeds from sales	—			(8,184		)	(44,341		)	(52,525		)
Conveyance to U.S. government agencies	—			—			(65,344		)	(65,344		)
Net transfers to nonaccruing loans	454			(454		)	—			—
Return to accrual status	(2,055		)	—			—			(2,055		)
Other, net	3,410			(2,532		)	1,252			2,130
Balance, September 30, 2012	$	131,899		$	27,992		$	104,128		$	264,019

We foreclose on loans guaranteed by U.S. government agencies in accordance with agency guidelines. Generally these loans are not eligible for modification programs or have failed to comply with modified loan terms. Principal is guaranteed by agencies of the U.S. government, subject to limitations and credit risk is minimal. These properties will be conveyed to the agencies once applicable criteria have been met. During the third quarter of 2012 , $33 million of properties guaranteed by U.S. government agencies were foreclosed on and $31 million of properties were conveyed to the applicable U.S. government agencies during the third quarter of 2012 . For the nine months ended September 30, 2012 , $71 million of properties guaranteed by U.S. government agencies were foreclosed and $65 million of properties conveyed.

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Nonaccruing loans totaled $132 million or 1.11% of outstanding loans at September 30, 2012 and $144 million or 1.25% of outstanding loans at June 30, 2012 . Nonaccruing loans decrease d $13 million from June 30, 2012 due primarily to $18 million of payments, $8.9 million of charge-offs and $7.0 million of foreclosures. Newly identified nonaccruing loans totaled $20 million for the third quarter of 2012 .

The distribution of nonaccruing loans among our various markets follows in Table 29.

Table 29 – Nonaccruing Loans by Principal Market (Dollars In thousands)

	September 30, 2012				June 30, 2012				Change
	Amount		% of outstanding loans		Amount		% of outstanding loans		Amount			% of outstanding loans
Bank of Oklahoma	$	41,599	0.76	%	$	49,931	0.92	%	$	(8,332	)	(16	)	bp
Bank of Texas	28,046		0.78	%	24,553		0.71	%	3,493			7
Bank of Albuquerque	13,233		1.90	%	13,535		2.00	%	(302		)	(10	)
Bank of Arkansas	5,958		2.99	%	6,865		3.33	%	(907		)	(34	)
Colorado State Bank & Trust	22,878		2.73	%	28,239		3.36	%	(5,361		)	(63	)
Bank of Arizona	20,145		3.61	%	21,326		4.00	%	(1,181		)	(39	)
Bank of Kansas City	40		0.01	%	33		0.01	%	7			—
Total	$	131,899	1.11	%	$	144,482	1.25	%	$	(12,583	)	(14	)	bp

Nonaccruing loans attributed to the Bank of Oklahoma are primarily composed of $20 million of residential mortgage loans and $14 million of commercial real estate loans. All residential mortgage loans retained by the Company that were originated across our geographical footprint and serviced by our mortgage company are attributed to the Bank of Oklahoma. Nonaccruing loans attributed to the Bank of Texas included $12.4 million of commercial real estate loans, $7.0 million of commercial loans and $6.3 million of residential mortgage loans. Nonaccruing loans attributed to Colorado State Bank & Trust consisted primarily of commercial real estate loans. Nonaccruing loans attributed to the Bank of Arizona consisted of $13 million of commercial real estate loans and $5.8 million of commercial loans.

Commercial

Nonaccruing commercial loans totaled $22 million or 0.30% of total commercial loans at September 30, 2012 , down from $35 million or 0.49% of total commercial loans at June 30, 2012 . Nonaccruing commercial loans at September 30, 2012 were primarily composed of $10 million or 0.53% of total services sector loans primarily attributed to the Bank of Arizona. Nonaccruing manufacturing sector loans decreased $11 million from June 30, 2012 . Nonaccruing manufacturing loans were primarily composed of a single customer attributed to the Bank of Oklahoma totaling $9.5 million at June 30, 2012 that was paid off during the third quarter in addition to a $1.8 million partial recovery of amounts previously charged off.

Nonaccruing commercial loans decrease d $13 million in the third quarter of 2012 primarily due to $12 million in payments. Newly identified nonaccruing commercial loans of $1.5 million were partially offset by $812 thousand of charge-offs during the third quarter.

The distribution of nonaccruing commercial loans among our various markets was as follows in Table 30.

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Table 30 – Nonaccruing Commercial Loans by Principal Market (Dollars in thousands)

	September 30, 2012				June 30, 2012				Change
	Amount		% of outstanding loans		Amount		% of outstanding loans		Amount			% of outstanding loans
Bank of Oklahoma	$	6,445	0.21	%	$	17,320	0.56	%	$	(10,875	)	(35	)	bp
Bank of Texas	7,035		0.28	%	7,682		0.32	%	(647		)	(4	)
Bank of Albuquerque	1,148		0.43	%	2,137		0.82	%	(989		)	(39	)
Bank of Arkansas	341		0.71	%	358		0.73	%	(17		)	(2	)
Colorado State Bank & Trust	990		0.16	%	2,008		0.33	%	(1,018		)	(17	)
Bank of Arizona	5,803		1.93	%	5,024		1.81	%	779			12
Bank of Kansas City	—		—	%	—		—	%	—			—
Total commercial	$	21,762	0.30	%	$	34,529	0.49	%	$	(12,767	)	(19	)	bp

Commercial Real Estate

Nonaccruing commercial real estate loans totaled $76 million or 3.50% of outstanding commercial real estate loans at September 30, 2012 compared to $80 million or 3.77% of outstanding commercial real estate loans at June 30, 2012 . Nonaccruing commercial real estate loans continue to be largely concentrated in land development and residential construction loans. Nonaccruing commercial real estate loans were down $4.5 million compared to the prior quarter. Newly identified nonaccruing commercial real estate loans totaled $5.7 million , offset by $5.8 million of cash payments received, $2.6 million of charge-offs and $4.2 million of foreclosures. The distribution of our nonaccruing commercial real estate loans among our geographic markets follows in Table 31.

Table 31 – Nonaccruing Commercial Real Estate Loans by Principal Market (Dollars in thousands)

	September 30, 2012				June 30, 2012				Change
	Amount		% of outstanding loans		Amount		% of outstanding loans		Amount			% of outstanding loans
Bank of Oklahoma	$	13,573	2.12	%	$	15,180	2.35	%	$	(1,607	)	(23	)	bp
Bank of Texas	12,360		1.73	%	8,955		1.32	%	3,405			41
Bank of Albuquerque	10,722		3.64	%	9,843		3.44	%	879			20
Bank of Arkansas	4,730		3.96	%	5,588		4.66	%	(858		)	(70	)
Colorado State Bank & Trust	21,697		14.96	%	26,064		17.43	%	(4,367		)	(247	)
Bank of Arizona	12,679		6.80	%	14,584		8.03	%	(1,905		)	(123	)
Bank of Kansas City	—		—	%	—		—	%	—			—
Total commercial real estate	$	75,761	3.50	%	$	80,214	3.77	%	$	(4,453	)	(27	)	bp

Nonaccruing commercial real estate loans are primarily concentrated in the Colorado, Oklahoma, Arizona and Texas markets. Nonaccruing commercial real estate loans attributed to Colorado State Bank & Trust consist primarily of nonaccruing residential construction and land development loans. Nonaccruing commercial real estate loans attributed to the Bank of Oklahoma consisted primarily of residential construction and land development loans, loans secured by multifamily residential properties, other commercial real estate loans and loans secured by retail facilities. Nonaccruing commercial real estate loans attributed to the Arizona market primarily consist of other commercial real estate loans, loans secured by office buildings and residential construction and land development loans. Nonaccruing loans attributed to the Bank of Texas were primarily composed of residential construction and land development loans and other commercial real estate loans.

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Residential Mortgage and Consumer

Nonaccruing residential mortgage loans totaled $29 million or 1.45% of outstanding residential mortgage loans at September 30, 2012 compared to $23 million or 1.13% of outstanding residential mortgage loans at June 30, 2012 . Newly identified nonaccrual residential mortgage loans totaled $9.8 million were partially offset by $1.6 million of loans charged off and $1.2 million of foreclosures during the quarter. Nonaccruing residential mortgage loans primarily consist of non-guaranteed permanent residential mortgage loans which totaled $23 million or 2.05% of outstanding non-guaranteed permanent residential mortgage loans at September 30, 2012 . Nonaccruing home equity loans totaled $5.6 million or 0.78% of total home equity loans.

Payments of accruing residential mortgage loans and consumer loans may be delinquent. The composition of residential mortgage loans and consumer loans past due but still accruing is included in the following Table 32. Principally all non-guaranteed residential loans past due 90 days or more are nonaccruing. Residential mortgage loans 30 to 89 days past due increased $3.6 million to $21 million at September 30, 2012 . Consumer loans past due 30 to 89 days increased $1.1 million from June 30, 2012 .

Table 32 – Residential Mortgage and Consumer Loans Past Due (In thousands)

	September 30, 2012				June 30, 2012
	90 Days or More		30 to 89 Days		90 Days or More		30 to 89 Days
Residential mortgage:
Permanent mortgage ¹	$	250	$	17,953	$	495	$	15,130
Home equity	—		2,961		44		2,211
Total residential mortgage	$	250	$	20,914	539		$	17,341
Consumer:
Indirect automobile	$	32	$	1,729	$	1	$	1,771
Other consumer	—		1,878		14		718
Total consumer	$	32	$	3,607	$	15	$	2,489


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 date of foreclosure or current fair value, less estimated selling costs.

Real estate and other repossessed assets totaled $104 million at September 30, 2012 , a $1.6 million decrease from June 30, 2012 . The distribution of real estate and other repossessed assets attributed by geographical market is included in Table 33 following.

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Table 33 – Real Estate and Other Repossessed Assets by Principal Market (In thousands)

	Oklahoma		Texas		Colorado		Arkansas		New Mexico		Arizona		Kansas/ Missouri		Other		Total
Developed commercial real estate properties	$	2,015	$	6,989	$	2,172	$	1,111	$	3,103	$	12,329	$	1,309	$	—	$	29,028
1-4 family residential properties guaranteed by U.S. government agencies	4,500		1,220		114		729		13,340		403		1,731		782		22,819
1-4 family residential properties	6,101		3,283		1,510		1,873		1,788		2,010		633		451		17,649
Undeveloped land	361		4,417		2,826		123		200		9,864		3,678		—		21,469
Residential land development properties	517		2,850		2,114		46		1,360		4,664		153		—		11,704
Oil and gas properties	—		677		—		—		—		—		—		—		677
Multifamily residential properties	—		—		—		323		—		—		—		—		323
Vehicles	127		28		—		30		—		—		—		135		320
Construction equipment	—		—		—		—		—		—		119		—		119
Other	—		—		—		—		—		—		—		20		20
Total real estate and other repossessed assets	$	13,621	$	19,464	$	8,736	$	4,235	$	19,791	$	29,270	$	7,623	$	1,388	$	104,128

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

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Liquidity and Capital

Subsidiary Bank

Deposits and borrowed funds are the primary sources of liquidity for the subsidiary bank. Based on the average balances for the third quarter of 2012 , approximately 71% of our funding was provided by deposit accounts, 11% from borrowed funds, 1% from long-term subordinated debt and 11% from equity. Our funding sources, which primarily include deposits and borrowings from the Federal Home Loan Banks and other banks, provide adequate liquidity to meet our operating needs.

Deposit accounts represent our largest funding source. We compete for retail and commercial deposits by offering a broad range of products and services and focusing on customer convenience. Retail deposit growth is supported through our Perfect Banking sales and customer service program, free checking, online bill paying services, mobile banking services, an extensive network of branch locations and ATMs and a 24-hour Express Bank call center. Commercial deposit growth is supported by offering treasury management and lockbox services. We also acquire brokered deposits when the cost of funds is advantageous to other funding sources.

Average deposits for the third quarter of 2012 totaled $18.8 billion and represented approximately 71% of total liabilities and capital compared with $18.4 billion and 72% of total liabilities and capital for the second quarter of 2012 . Average deposits increased $325 million compared to the second quarter of 2012 . Average demand deposits increased $440 million . Average interest-bearing transaction deposit accounts decrease d $60 million and average time deposits decreased $63 million .

Average Commercial Banking deposit balances were up $235 million over the second quarter of 2012 . Average demand deposits grew by $367 million during the third quarter, partially offset by a $132 million decrease in time deposit balances and a $126 million decrease in interest-bearing transaction deposit account balances. Average balances related to our commercial and industrial customers increased $316 million partially offset by a $181 million decrease in balances attributed to our treasury services customers. Balances related to Small Business, Energy and Commercial Real Estate customers all increased over the prior quarter. Commercial customers continue to retain large cash reserves primarily due to continued economic uncertainty and low yields available on other high quality investment alternatives. Average Consumer Banking deposit balances were largely unchanged compared to the second quarter of 2012 . Demand deposit balances grew by $39 million primarily offset by a $33 million decrease in time deposits. Average Wealth Management deposits were up $107 million over the second quarter of 2012 . Interest-bearing transaction deposit account balances grew by $70 million and demand deposits grew by $35 million.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“DFA”) provided temporary unlimited deposit insurance coverage for noninterest-bearing transaction accounts at all FDIC-insured depository institutions effective December 31, 2010. This temporary program is set to expire on December 31, 2012 although an extension of this program is currently under consideration. Upon expiration, noninterest-bearing transaction accounts will be insured only up to $250,000. Demand deposits represent 36% of total average deposits for the third quarter of 2012 . The impact of the expiration of this temporary program is uncertain, but could result in a decrease in average demand deposits held by customers.

Brokered deposits included in time deposits averaged $170 million for the third quarter of 2012 , down $17 million compared to the second quarter of 2012 . Average interest-bearing transaction accounts for the third quarter include $247 million of brokered deposits, an increase of $50 million over the second quarter.

The distribution of our period end deposit account balances among principal markets follows in Table 34.

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Table 34 – Period End Deposits by Principal Market Area (In thousands)

	September 30, 2012		June 30, 2012		March 31, 2012		December 31, 2011		September 30, 2011
Bank of Oklahoma:
Demand	$	3,734,900	$	3,499,834	$	3,445,424	$	3,223,201	$	2,953,410
Interest-bearing:
Transaction	5,496,724		5,412,002		5,889,625		6,050,986		6,038,770
Savings	155,277		150,353		148,556		126,763		122,829
Time	1,274,336		1,354,148		1,370,868		1,450,571		1,489,486
Total interest-bearing	6,926,337		6,916,503		7,409,049		7,628,320		7,651,085
Total Bank of Oklahoma	10,661,237		10,416,337		10,854,473		10,851,521		10,604,495

Bank of Texas:
Demand	1,983,678		1,966,465		1,876,133		1,808,491		1,710,315
Interest-bearing:
Transaction	1,782,296		1,813,209		1,734,655		1,940,819		1,820,116
Savings	52,561		51,114		50,331		45,872		42,272
Time	789,725		772,809		789,860		867,664		938,200
Total interest-bearing	2,624,582		2,637,132		2,574,846		2,854,355		2,800,588
Total Bank of Texas	4,608,260		4,603,597		4,450,979		4,662,846		4,510,903

Bank of Albuquerque:
Demand	416,796		357,367		333,707		319,269		325,612
Interest-bearing:
Transaction	526,029		506,165		503,015		491,068		480,816
Savings	31,940		31,215		32,688		27,487		26,127
Time	375,611		383,350		392,234		410,722		431,436
Total interest-bearing	933,580		920,730		927,937		929,277		938,379
Total Bank of Albuquerque	1,350,376		1,278,097		1,261,644		1,248,546		1,263,991

Bank of Arkansas:
Demand	29,254		16,921		22,843		18,513		21,809
Interest-bearing:
Transaction	168,827		172,829		151,708		131,181		181,486
Savings	2,246		2,220		2,358		1,727		1,735
Time	45,719		48,517		54,157		61,329		74,163
Total interest-bearing	216,792		223,566		208,223		194,237		257,384
Total Bank of Arkansas	246,046		240,487		231,066		212,750		279,193

Colorado State Bank & Trust:
Demand	330,641		301,646		311,057		272,565		217,394
Interest-bearing:
Transaction	627,015		465,276		476,718		511,993		520,743
Savings	24,689		24,202		23,409		22,771		22,599
Time	476,564		491,280		498,124		523,969		547,481
Total interest-bearing	1,128,268		980,758		998,251		1,058,733		1,090,823
Total Colorado State Bank & Trust	1,458,909		1,282,404		1,309,308		1,331,298		1,308,217

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Table 34 – Period-end Deposits by Principal Market Area (In thousands)

	September 30, 2012		June 30, 2012		March 31, 2012		December 31, 2011		September 30, 2011
Bank of Arizona:
Demand	151,738		137,313		131,539		106,741		138,971
Interest-bearing:
Transaction	298,048		113,310		95,010		104,961		101,933
Savings	2,201		2,313		1,772		1,192		1,366
Time	33,169		31,539		34,199		37,641		40,007
Total interest-bearing	333,418		147,162		130,981		143,794		143,306
Total Bank of Arizona	485,156		284,475		262,520		250,535		282,277

Bank of Kansas City:
Demand	201,393		160,829		68,469		51,004		46,773
Interest-bearing:
Transaction	103,628		69,083		57,666		123,449		108,973
Savings	660		581		505		545		503
Time	27,202		26,307		26,657		30,086		33,697
Total interest-bearing	131,490		95,971		84,828		154,080		143,173
Total Bank of Kansas City	332,883		256,800		153,297		205,084		189,946
Total BOK Financial deposits	$	19,142,867	$	18,362,197	$	18,523,287	$	18,762,580	$	18,439,022

In addition to deposits, subsidiary bank 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 federal funds purchased totaled $330 million at September 30, 2012 . Securities repurchase agreements generally mature within 90 days and are secured by certain available for sale securities. Federal Home Loan Bank borrowings are generally short term and are secured by a blanket pledge of eligible collateral (generally unencumbered U.S. Treasury and 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 $50 million during the quarter.

At September 30, 2012 , the estimated unused credit available to the subsidiary bank from collateralized sources was approximately $9.3 billion.

A summary of other borrowing by the subsidiary bank follows in Table 35.

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Table 35 – Other Borrowings (In thousands)

			Three Months Ended								Three Months Ended
			September 30, 2012								June 30, 2012
	September 30, 2012		Average Balance During the Quarter		Rate		Maximum Outstanding At Any Month End During the Quarter		June 30, 2012		Average Balance During the Quarter		Rate		Maximum Outstanding At Any Month End During the Quarter
Parent Company and Other Non-Bank Subsidiaries - Other debt	$	—	$	—	—	%	$	—	$	—	$	279	—	%	$	—

Subsidiary Bank:
Funds purchased	1,680,626		1,678,006		0.15	%	1,810,793		1,453,750		1,740,354		0.16	%	1,675,049
Repurchase agreements	1,109,696		1,112,847		0.10	%	1,123,284		1,136,948		1,095,298		0.10	%	1,136,948
Federal Home Loan Bank advances	602,197		50,001		0.25	%	602,197		3,947		32,198		0.39	%	253,647
Subordinated debentures	347,592		352,432		2.79	%	353,396		353,378		357,609		3.95	%	355,452
GNMA repurchase liability	20,747		30,321		5.63	%	33,881		37,397		37,513		5.98	%	37,864
Other	16,310		16,681		5.02	%	16,762		16,712		16,677		4.58	%	16,713
Total Subsidiary Bank	3,777,168		3,240,288		0.51	%			3,002,132		3,279,649		0.65	%

Total Other Borrowings	$	3,777,168	$	3,240,288	0.51	%			$	3,002,132	$	3,279,928	0.65	%

In 2007, the Company issued $250 million of subordinated debt due May 15, 2017 to fund the Worth National Bank and First United Bank acquisitions and fund continued asset growth. Interest on this debt was based on a fixed rate of 5.75% through May 14, 2012 which then converted to a floating rate of three-month LIBOR plus 0.69%. At September 30, 2012 , $227 million of this subordinated debt remains outstanding.

Parent Company

The primary sources of liquidity for BOK Financial are cash on hand and dividends from the subsidiary bank. Dividends from the subsidiary 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 September 30, 2012 , based on the most restrictive limitations as well as management’s internal capital policy, the subsidiary bank could declare up to $242 million of dividends without regulatory approval. Future losses or increases in required regulatory capital at the subsidiary bank could affect its ability to pay dividends to the parent company.

The Company has a $100 million senior unsecured 364 day revolving credit facility with Wells Fargo Bank, National Association, administrative agent and other commercial banks (“the Credit Facility”). Interest on amounts outstanding under the Credit Facility is to be paid at a defined base rate minus 1.25% or LIBOR plus 1.25% based upon the Company’s option. Interest on amounts borrowed for certain acquisitions converted to a term loan at the Company's option is to be paid at a defined base rate minus 1.25% or LIBOR plus 1.50%. A commitment fee equal to 0.20% shall be paid quarterly on the unused portion of the credit commitment under the Credit Facility and there are no prepayment penalties. Any amounts outstanding at the end of the Credit Facility term shall be converted into a term loan which, except for amounts borrowed for certain acquisitions, shall be payable June 7, 2013. The Credit Agreement contains customary representations and warranties, as well as affirmative and negative covenants including limits on the Company’s ability to borrow additional funds, make investments and sell assets. These covenants also require BOKF to maintain minimum capital levels. No amounts were outstanding under the Credit Facility at September 30, 2012 and the Company met all of the covenants.

Our equity capital at September 30, 2012 was $3.0 billion , up $90 million over June 30, 2012 . Net income less cash dividends

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paid increase d equity $62 million during the third quarter of 2012 . Capital is managed to maximize long-term value to the shareholders. Factors considered in managing capital include projections of future earnings, asset growth and acquisition strategies, and regulatory and debt covenant requirements. Capital management may include subordinated debt issuance, share repurchase and stock and cash dividends.

On April 24, 2012, the Board of Directors authorized the Company to purchase up to two million shares of our common stock. The specific timing and amount of shares repurchased will vary based on market conditions, regulatory limitations and other factors. Repurchases may be made over time in open market or privately negotiated transactions. The repurchase program may be suspended or discontinued at any time without prior notice. As of September 30, 2012 , the Company has repurchased 39,496 shares for $2.1 million under this program. No shares were repurchased in the third quarter of 2012.

BOK Financial and subsidiary bank 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.

For a banking institution to qualify as well capitalized, its Tier 1, Total and Leverage capital ratios must be at least 6%, 10% and 5%, respectively. The Company’s banking subsidiary exceeded the regulatory definitions of well capitalized. The capital ratios for BOK Financial on a consolidated basis are presented in Table 36.

Table 36 – Capital Ratios

	Well Capitalized Minimums		September 30, 2012		June 30, 2012		March 31, 2012		December 31, 2011		September 30, 2011
Average total equity to average assets	—		11.08	%	11.23	%	11.11	%	10.81	%	11.12	%
Tangible common equity ratio	—		9.67	%	10.07	%	9.75	%	9.56	%	9.65	%
Tier 1 common equity ratio	—		13.01	%	13.41	%	12.83	%	13.06	%	12.93	%
Risk-based capital:
Tier 1 capital	6.00	%	13.21	%	13.62	%	13.03	%	13.27	%	13.14	%
Total capital	10.00	%	15.71	%	16.19	%	16.16	%	16.49	%	16.55	%
Leverage	5.00	%	9.34	%	9.64	%	9.35	%	9.15	%	9.37	%

In June, banking regulators issued a Notice of Proposed Rulemaking that will incorporate Basel III capital changes for substantially all U.S. banking organizations. If adopted as proposed, these changes will establish a 7% threshold for the Tier 1 common equity ratio consisting of a minimum level plus capital conservation buffer. BOK Financial's Tier 1 common equity ratio based on the existing Basel I standards was 13.01% as of September 30, 2012 . Our estimated Tier 1 common equity ratio under a fully phased in Basel III framework is approximately 12.35%, nearly 535 basis points above the 7% regulatory threshold. This estimate is subject to interpretation of rules that are not yet final. Additionally, the proposed definition of Tier 1 common equity includes unrealized gains and losses on available for sale securities which are subject to changes from market conditions and inherently volatile.

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. Tier 1 common equity is tier 1 equity as defined by banking regulations, adjusted for other comprehensive income (loss) and equity which does not benefit common shareholders. These non-GAAP measures are valuable indicators 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.

In accordance with the Dodd-Frank Act, the Federal Reserve must publish regulations that require bank holding companies with $10 billion to $50 billion in assets to perform annual capital stress tests. We expect to be subject to such regulations when they are finalized and effective. The resulting capital stress test process may place constraints on capital distributions or increases in required regulatory capital under certain circumstances.

Table 37 following provides a reconciliation of the non-GAAP measures with financial measures defined by GAAP.

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Table 37 – Non-GAAP Measures (Dollars in thousands)

	September 30, 2012			June 30, 2012			March 31, 2012			December 31, 2011			September 30, 2011
Tangible common equity ratio:
Total shareholders' equity	$	2,975,657		$	2,885,934		$	2,834,419		$	2,750,468		$	2,732,592
Less: Goodwill and intangible assets, net	392,158			344,699			345,246			345,820			346,716
Tangible common equity	2,583,499			2,541,235			2,489,173			2,404,648			2,385,876
Total assets	27,117,641			25,576,046			25,884,173			25,493,946			25,066,265
Less: Goodwill and intangible assets, net	392,158			344,699			345,246			345,820			346,716
Tangible assets	$	26,725,483		$	25,231,347		$	25,538,927		$	25,148,126		$	24,719,549
Tangible common equity ratio	9.67		%	10.07		%	9.75		%	9.56		%	9.65		%
Tier 1 common equity ratio:
Tier 1 capital	$	2,436,791		$	2,418,985		$	2,344,779		$	2,295,061		$	2,247,576
Less: Non-controlling interest	36,818			36,787			35,982			36,184			34,958
Tier 1 common equity	2,399,973			2,382,198			2,308,797			2,258,877			2,212,618
Risk weighted assets	$	18,448,854		$	17,758,118		$	17,993,379		$	17,291,105		$	17,106,533
Tier 1 common equity ratio	13.01		%	13.41		%	12.83		%	13.06		%	12.93		%

Off-Balance Sheet Arrangements

See Note 8 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 guidelines established by the Board of Directors. The Committee monitors projected variation in net interest revenue, net interest income and economic value of equity due to specified changes in interest rates. The internal policy limit for net interest revenue variation is a maximum decline of 5% to an up or down 200 basis point change over twelve months. These guidelines also set maximum levels for short-term borrowings, short-term assets, public funds and brokered deposits and establish minimum levels for unpledged assets, among other things. Compliance with these internal guidelines is reviewed monthly.

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, net income and economic value of equity. A simulation model is used to estimate the effect of changes in interest rates over the next 12 months and longer time periods based on multiple interest rate scenarios. Two specified interest rate scenarios are used to evaluate interest rate risk against policy guidelines. The first assumes a sustained parallel 200 basis point increase and the second assumes a sustained parallel 50 basis point decrease in

- 56 -

interest rates. Management historically evaluated interest rate sensitivity for a sustained 200 basis point decrease in interest rates. However, the results of a 200 basis point decrease in interest rates in the current low-rate environment are not meaningful.

The Company’s primary interest rate exposures included 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. The model incorporates assumptions regarding the effects of changes in interest rates and account balances on indeterminable maturity deposits 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. The effects of changes in interest rates on the value of mortgage servicing rights are excluded from Table 38 due to the extreme volatility over such a large rate range and our active risk management approach for that asset. The effects of interest rate changes on the value of mortgage servicing rights and financial instruments identified as economic hedges are presented in Note 6 to the Consolidated Financial Statements.

The simulations used to manage market risk are based on numerous assumptions regarding the effects of changes in interest rates on the timing and extent of re-pricing characteristics, future cash flows and customer behavior. These assumptions are inherently uncertain and, as a result, the model cannot precisely estimate net interest revenue, net income or economic value of equity or precisely predict the impact of higher or lower interest rates on net interest revenue, net income or economic value of equity. 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.

Table 38 – Interest Rate Sensitivity (Dollars in thousands)

	200 bp Increase						50 bp Decrease
	2012			2011			2012			2011
Anticipated impact over the next twelve months on net interest revenue	$	31,403		$	48,492		$	(15,663	)	$	(15,715	)
	4.76		%	7.34		%	(2.38		)%	(2.38		)%

Trading Activities

BOK Financial enters into trading activities both as an intermediary for customers and for its own account. As an intermediary, BOK Financial will 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, BOK Financial may also take trading positions in U.S. Treasury securities, residential mortgage-backed securities, municipal bonds and derivative contracts to enhance returns on its securities portfolios. Both of these activities involve interest rate risk. BOKF Financial has an insignificant exposure to foreign exchange risk and does not take positions in commodity derivatives.

A variety of methods are used to manage 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. Hedges in either the futures or cash markets may be used to reduce the risk associated with some trading programs.

Management uses a Value at Risk (“VAR”) methodology to measure the market risk due to changes in interest rates inherent in its trading activities. VAR is calculated based upon historical simulations over the past five years using a variance / covariance matrix of interest rate changes, a 10 business day holding period and a 99% confidence interval. It represents an amount of market loss that is likely to be exceeded in only one out of every 100 two-week periods. Trading positions are managed within guidelines approved by the Board of Directors. These guidelines limit the VAR to $7.3 million. There were no instances of VAR being exceeded during the three and nine months ended September 30, 2012 and 2011. At September 30, 2012 , there were no trading positions for the purposes of enhancing returns on the Company's securities portfolio.

The average, high and low VAR amounts for the three and nine months ended September 30, 2012 and 2011 are as follows in Table 39.

- 57 -

Table 39 – Value at Risk (VAR) (in thousands)

	Three Months Ended				Nine Months Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Average	$	3,072	$	2,597	$	2,776	$	2,366
High	5,193		3,683		5,193		5,507
Low	1,707		1,326		1,088		1,326

Controls and Procedures

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

Forward-Looking Statements

This report contains forward-looking statements that are based on management’s beliefs, assumptions, current expectations, estimates, and projections about BOK Financial, the financial services industry and the economy in general. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “plans,” “projects,” 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 loan losses involve judgments as to expected events and are inherently forward-looking statements. Assessments that BOK Financial’s acquisitions and other growth endeavors will be profitable are necessary statements of belief as to the outcome of future events, based in part on information provided by others that BOK Financial has not independently verified. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what is expressed, implied, or forecasted in such forward-looking statements. Internal and external factors that might cause such a difference include, but are not limited to: (1) the ability to fully realize expected cost savings from mergers within the expected time frames, (2) the ability of other companies on which BOK Financial relies to provide goods and services in a timely and accurate manner, (3) changes in interest rates and interest rate relationships, (4) demand for products and services, (5) the degree of competition by traditional and nontraditional competitors, (6) changes in banking regulations, tax laws, prices, levies, and assessments, (7) the impact of technological advances and (8) trends in customer behavior as well as their ability to repay loans. BOK Financial and its affiliates undertake no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

- 58 -

Consolidated Statements of Earnings (Unaudited)

(In thousands, except share and per share data)	Three Months Ended						Nine Months Ended
	September 30,						September 30,
Interest revenue	2012			2011			2012			2011
Loans	$	126,248		$	127,914		$	384,406		$	375,484
Residential mortgage loans held for sale	2,310			1,616			5,862			4,460
Trading securities	555			471			1,219			1,319
Taxable securities	4,124			2,759			12,840			7,904
Tax-exempt securities	764			1,061			2,662			3,781
Total investment securities	4,888			3,820			15,502			11,685
Taxable securities	59,482			66,040			180,721			205,032
Tax-exempt securities	699			584			1,931			1,791
Total available for sale securities	60,181			66,624			182,652			206,823
Fair value option securities	1,886			5,299			7,684			13,772
Funds sold and resell agreements	3			5			9			12
Total interest revenue	196,071			205,749			597,334			613,555
Interest expense
Deposits	15,917			22,407			49,805			69,609
Borrowed funds	1,652			2,331			5,033			7,177
Subordinated debentures	2,475			5,627			11,539			16,745
Total interest expense	20,044			30,365			66,377			93,531
Net interest revenue	176,027			175,384			530,957			520,024
Provision for credit losses	—			—			(8,000		)	8,950
Net interest revenue after provision for credit losses	176,027			175,384			538,957			511,074
Other operating revenue
Brokerage and trading revenue	31,261			29,451			94,972			78,552
Transaction card revenue	27,788			31,328			79,976			90,797
Trust fees and commissions	19,654			17,853			58,023			55,425
Deposit service charges and fees	25,148			24,614			74,743			70,951
Mortgage banking revenue	50,266			29,493			122,892			66,205
Bank-owned life insurance	2,707			2,761			8,416			8,496
Other revenue	9,476			10,535			26,062			26,709
Total fees and commissions	166,300			146,035			465,084			397,135
Gain (loss) on assets, net	125			351			(341		)	2,474
Gain on derivatives, net	464			4,048			336			2,860
Gain on fair value option securities, net	6,192			17,788			11,311			24,191
Gain on available for sale securities, net	7,967			16,694			32,779			27,064
Total other-than-temporary impairment losses	—			(9,467		)	(640		)	(9,541		)
Portion of loss reclassified from other comprehensive income	(1,104		)	(1,833		)	(5,044		)	(11,182		)
Net impairment losses recognized in earnings	(1,104		)	(11,300		)	(5,684		)	(20,723		)
Total other operating revenue	179,944			173,616			503,485			433,001
Other operating expense
Personnel	122,775			103,260			359,841			308,857
Business promotion	6,054			5,280			17,188			14,681
Contribution to BOKF Charitable Foundation	—			4,000			—			4,000
Professional fees and services	7,991			7,418			23,933			21,134
Net occupancy and equipment	16,914			16,627			49,843			47,785
Insurance	3,690			2,206			11,567			13,163
Data processing and communications	26,486			24,446			73,894			71,377
Printing, postage and supplies	3,611			3,780			10,825			10,448
Net losses and expenses of repossessed assets	5,706			5,939			13,863			17,813
Amortization of intangible assets	742			896			1,862			2,688
Mortgage banking costs	11,566			9,349			30,312			24,788
Change in fair value of mortgage servicing rights	9,576			24,822			13,899			35,186
Other expense	7,229			12,512			20,460			29,120
Total other operating expense	222,340			220,535			627,487			601,040
Income before taxes	133,631			128,465			414,955			343,035
Federal and state income tax	45,778			43,006			144,447			121,115
Net income	87,853			85,459			270,508			221,920
Net income attributable to non-controlling interest	471			358			1,882			3,038
Net income attributable to BOK Financial Corp. shareholders	$	87,382		$	85,101		$	268,626		$	218,882
Earnings per share:
Basic	$	1.28		$	1.24		$	3.94		$	3.20
Diluted	$	1.27		$	1.24		$	3.92		$	3.19
Average shares used in computation:
Basic	67,966,700			67,827,591			67,704,343			67,875,875
Diluted	68,334,989			68,037,419			67,981,558			68,127,754
Dividends declared per share	$	0.38		$	0.275		$	1.09		$	0.800

See accompanying notes to consolidated financial statements.

- 59 -



Consolidated Statements of Comprehensive Income (Unaudited)
(In thousands, except share and per share data)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Net income	$	87,853		$	85,459		$	270,508		$	221,920
Other comprehensive income before income taxes:
Net change in unrealized gain (loss)	46,064			33,810			86,098			97,753
Other–than–temporary impairment losses recognized in earnings	1,104			11,300			5,684			20,723
Reclassification adjustment for net gains realized and included in earnings	(7,899		)	(16,620		)	(32,380		)	(26,834		)
Amortization of unrealized gain on investment securities transferred from available for sale	(2,009		)	—			(5,430		)	—
Other comprehensive income before income taxes	37,260			28,490			53,972			91,642
Income tax expense	(14,057		)	(11,174		)	(20,558		)	(35,910		)
Other comprehensive income, net of income taxes	23,203			17,316			33,414			55,732
Comprehensive income	111,056			102,775			303,922			277,652
Comprehensive income attributable to non-controlling interests	471			358			1,882			3,038
Comprehensive income attributed to BOK Financial Corp. shareholders	110,585			102,417			302,040			274,614

See accompanying notes to consolidated financial statements.

- 60 -

Consolidated Balance Sheets

(In thousands, except share data)
	September 30, 2012			Dec 31, 2011			September 30, 2011
	(Unaudited)			(Footnote 1)			(Unaudited)
Assets
Cash and due from banks	$	596,590		$	976,191		$	953,688
Funds sold and resell agreements	18,904			10,174			19,193
Trading securities	204,242			76,800			109,659
Investment securities (fair value : Sept. 30, 2012 – $460,358; December 31, 2011 - $462,657; Sept. 30, 2011 – $483,234)	432,114			439,236			452,652
Available for sale securities	11,506,434			10,179,365			9,619,631
Fair value option securities	331,887			651,226			672,191
Residential mortgage loans held for sale	325,102			188,125			256,397
Loans	11,832,367			11,269,743			11,124,569
Less allowance for loan losses	(233,756		)	(253,481		)	(271,456		)
Loans, net of allowance	11,598,611			11,016,262			10,853,113
Premises and equipment, net	259,195			262,735			264,325
Receivables	116,243			123,257			111,427
Goodwill	358,962			335,601			335,601
Intangible assets, net	33,196			10,219			11,115
Mortgage servicing rights, net	89,653			86,783			87,948
Real estate and other repossessed assets	104,128			122,753			127,943
Bankers’ acceptances	1,605			1,881			211
Derivative contracts	435,653			293,859			370,616
Cash surrender value of bank-owned life insurance	271,830			263,318			260,506
Receivable on unsettled securities trades	32,480			75,151			172,641
Other assets	400,812			381,010			387,408
Total assets	$	27,117,641		$	25,493,946		$	25,066,265

Noninterest-bearing demand deposits	$	6,848,401		$	5,799,785		$	5,414,284
Interest-bearing deposits:
Transaction	9,002,567			9,354,456			9,252,837
Savings	269,573			226,357			217,431
Time	3,022,326			3,381,982			3,554,470
Total deposits	19,142,867			18,762,580			18,439,022
Funds purchased	1,680,626			1,063,318			1,318,668
Repurchase agreements	1,109,696			1,233,064			1,206,793
Other borrowings	639,254			74,485			80,276
Subordinated debentures	347,592			398,881			398,834
Accrued interest, taxes and expense	182,410			149,508			155,188
Bankers’ acceptances	1,605			1,881			211
Derivative contracts	254,422			653,371			341,822
Due on unsettled securities trades	556,998			236,522			218,097
Other liabilities	189,696			133,684			139,804
Total liabilities	24,105,166			22,707,294			22,298,715
Shareholders' equity:
Common stock ($.00006 par value; 2,500,000,000 shares authorized; shares issued and outstanding: Sept. 30, 2012 – 72,223,473; December 31, 2011 – 71,533,354; Sept. 30, 2011 – 71,154,137)	4			4			4
Capital surplus	849,390			818,817			799,272
Retained earnings	2,148,292			1,953,332			1,908,574
Treasury stock (shares at cost: Sept. 30, 2012 – 4,008,119; December 31, 2011 – 3,380,310; Sept. 30, 2011 – 3,147,747)	(184,422		)	(150,664		)	(138,829		)
Accumulated other comprehensive income	162,393			128,979			163,571
Total shareholders’ equity	2,975,657			2,750,468			2,732,592
Non-controlling interest	36,818			36,184			34,958
Total equity	3,012,475			2,786,652			2,767,550
Total liabilities and equity	$	27,117,641		$	25,493,946		$	25,066,265

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Changes in Equity (Unaudited)

(In thousands)
	Common Stock			Accumulated Other Comprehensive Income(Loss)		Capital Surplus			Retained Earnings			Treasury Stock				Total Shareholders’ Equity			Non- Controlling Interest			Total
	Shares	Amount		Accumulated Other Comprehensive Income(Loss)		Capital Surplus			Retained Earnings			Shares	Amount			Total Shareholders’ Equity			Non- Controlling Interest			Equity

Balance, December 31, 2010	70,816	$	4	$	107,839	$	782,805		$	1,743,880		2,608	$	(112,802	)	$	2,521,726		$	22,152		$	2,543,878
Net income	—	—		—		—			218,882			—	—			218,882			3,038			221,920
Other comprehensive income	—	—		55,732		—			—			—	—			55,732			—			55,732
Treasury stock purchases	—	—		—		—			—			492	(22,866		)	(22,866		)	—			(22,866		)
Exercise of stock options	338	—		—		8,842			—			48	(3,161		)	5,681			—			5,681
Tax benefit on exercise of stock options	—	—		—		494			—			—	—			494			—			494
Stock-based compensation	—	—		—		7,131			—			—	—			7,131			—			7,131
Cash dividends on common stock	—	—		—		—			(54,188		)	—	—			(54,188		)	—			(54,188		)
Capital calls and distributions, net	—	—		—		—			—			—	—			—			9,768			9,768

Balance, September 30, 2011	71,154	$	4	$	163,571	$	799,272		$	1,908,574		3,148	$	(138,829	)	$	2,732,592		$	34,958		$	2,767,550

Balances at December 31, 2011	71,533	$	4	$	128,979	$	818,817		$	1,953,332		3,380	$	(150,664	)	$	2,750,468		$	36,184		$	2,786,652
Net income	—	—		—		—			268,626			—	—			268,626			1,882			270,508
Other comprehensive income	—	—		33,414		—			—			—	—			33,414			—			33,414
Treasury stock purchases	—	—		—		—			—			384	(20,558		)	(20,558		)	—			(20,558		)
Exercise of stock options	690	—		—		24,726			—			244	(13,200		)	11,526			—			11,526
Tax benefit on exercise of stock options	—	—		—		(487		)	—			—	—			(487		)	—			(487		)
Stock-based compensation	—	—		—		6,334			—			—	—			6,334			—			6,334
Cash dividends on common stock	—	—		—		—			(73,666		)	—	—			(73,666		)	—			(73,666		)
Acquisition of minority interest	—	—		—		—			—			—	—			—			1,645			1,645
Capital calls and distributions, net	—	—		—		—			—			—	—			—			(2,893		)	(2,893		)

Balance, September 30, 2012	72,223	$	4	$	162,393	$	849,390		$	2,148,292		4,008	$	(184,422	)	$	2,975,657		$	36,818		$	3,012,475

See accompanying notes to consolidated financial statements.

- 62 -

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)	Nine Months Ended
	September 30,
	2012			2011
Cash Flows From Operating Activities:
Net income	$	270,508		$	221,920
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	(8,000		)	8,950
Change in fair value of mortgage servicing rights	13,899			35,186
Unrealized (gains) losses from derivatives	(2,665		)	(3,898		)
Tax benefit on exercise of stock options	487			(494		)
Change in bank-owned life insurance	(8,416		)	(8,496		)
Stock-based compensation	6,334			7,131
Depreciation and amortization	37,452			36,877
Net amortization of securities discounts and premiums	68,579			76,839
Net realized gains on financial instruments and other assets	(104,893		)	(6,992		)
Mortgage loans originated for resale	(2,634,809		)	(1,540,735		)
Proceeds from sale of mortgage loans held for resale	2,590,960			1,555,075
Capitalized mortgage servicing rights	(29,754		)	(17,966		)
Change in trading and fair value option securities	189,182			(298,334		)
Change in receivables	7,328			37,513
Change in other assets	(5,747		)	33,880
Change in accrued interest, taxes and expense	29,220			69,507
Change in other liabilities	28,980			(53,478		)
Net cash provided by operating activities	448,645			152,485
Cash Flows From Investing Activities:
Proceeds from maturities or redemptions of investment securities	67,571			54,639
Proceeds from maturities or redemptions of available for sale securities	3,444,670			2,698,067
Purchases of investment securities	(60,542		)	(37,085		)
Purchases of available for sale securities	(6,412,356		)	(5,238,649		)
Proceeds from sales of available for sale securities	1,660,876			2,058,661
Change in amount receivable on unsettled securities transactions	42,671			(37,582		)
Loans originated net of principal collected	(594,261		)	(457,430		)
Net proceeds from (payments on) derivative asset contracts	(108,296		)	(45,449		)
Acquisitions, net of cash acquired	(28,671		)	—
Proceeds from disposition of assets	135,760			91,410
Purchases of assets	(77,032		)	(52,857		)
Net cash used in investing activities	(1,929,610		)	(966,275		)
Cash Flows From Financing Activities:
Net change in demand deposits, transaction deposits and savings accounts	739,943			1,214,659
Net change in time deposits	(359,656		)	45,462
Net change in other borrowings	974,189			(670,791		)
Repayment of subordinated debt	(53,787		)	—
Net payments or proceeds on derivative liability contracts	90,646			42,849
Net change in derivative margin accounts	(101,683		)	(101,705		)
Change in amount due on unsettled security transactions	(96,373		)	57,672
Issuance of common and treasury stock, net	11,526			5,681
Tax benefit on exercise of stock options	(487		)	494
Repurchase of common stock	(20,558		)	(22,866		)
Dividends paid	(73,666		)	(54,188		)
Net cash provided by (used in) financing activities	1,110,094			517,267
Net decrease in cash and cash equivalents	(370,871		)	(296,523		)
Cash and cash equivalents at beginning of period	986,365			1,269,404
Cash and cash equivalents at end of period	$	615,494		$	972,881

Cash paid for interest	$	66,819		$	87,638
Cash paid for taxes	$	113,663		$	115,518
Net loans and bank premises transferred to repossessed real estate and other assets	$	97,142		$	57,651
Increase in U.S. government guaranteed loans eligible for repurchase	$	84,520		$	110,744
Increase in receivables from conveyance of other real estate owned guaranteed by U.S. government agencies	$	65,344		$	—

See accompanying notes to consolidated financial statements.

- 63 -

Notes to Consolidated Financial Statements (Unaudited)

( 1 ) Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed 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”), BOSC, 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, Bank of Kansas City 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 2011 Form 10-K filed with the Securities and Exchange Commission, which contains audited financial statements. Amounts presented as of December 31, 2011 have been derived from the audited financial statements included in BOK Financial’s 2011 Form 10-K but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Operating results for the three-month and six-month periods ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012 .

Newly Adopted and Pending Accounting Policies

Financial Accounting Standards Board (“FASB”)

FASB Accounting Standards Update No. 2011-03, Reconsideration of Effective Control for Repurchase Agreements (“ASU 2011-03”)

On April 29, 2011, the FASB issued ASU 2011-03 that eliminates the collateral maintenance requirement under GAAP for entities to consider in determining whether a transfer of financial assets subject to a repurchase agreement is accounted for as a sale or as a secured borrowing. ASU 2011-03 was effective for the Company January 1, 2012 and did not have a material impact on the Company’s consolidated financial statements.

FASB Accounting Standards Update No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04")

On May 12, 2011, the FASB issued ASU 2011-04 to provide clarified and converged guidance on fair value measurement and expand disclosures concerning fair value measurements. ASU 2011-04 is largely consistent with the existing fair value measurement principles contained in ASC 820, Fair Value Measurement . ASU 2011-04 was effective for the Company January 1, 2012.

FASB Accounting Standards Update No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”)

On June 16, 2011 the FASB issued ASU 2011-05 which revises the manner in which entities present comprehensive income in their financial statements by removing the presentation option in ASC 220, Comprehensive Income , and requires entities to report components of comprehensive income in either a continuous statement of comprehensive income or two separate but consecutive statements. ASU 2011-05 was effective for the Company January 1, 2012.

- 64 -

FASB Accounting Standards Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”)

On December 16, 2011, the FASB issued ASU 2011-11 which contains new disclosure requirements regarding the nature of an entity right of setoff and related arrangements associated with its financial instruments and derivative instruments. The new disclosures are anticipated to facilitate comparison between financial statements prepared under generally accepted accounting principles in the United States of America and financial statements prepared under International Financial Reporting Standards by providing information about gross and net exposures. The new disclosure requirements are effective for interim and annual reporting periods beginning on or after January 1, 2013.

FASB Accounting Standards Update No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards No. 2011-05 (“ASU 2011-12”)

On December 23, 2011, FASB issued ASU 2011-12, which defers the requirement in ASU 2011-05 for presentation of reclassification adjustments for each component of accumulated other comprehensive income (“AOCI”) in both net income and other comprehensive income on the face of the financial statements. This deferral will enable FASB to address certain concerns raised with regards to presentation requirements for reclassification adjustments. The amendment is effective at the same time as ASU 2011-05 which was effective for the Company on January 1, 2012.

( 2 ) Securities

Trading Securities

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



	September 30, 2012					December 31, 2011				September 30, 2011
	Fair Value		Net Unrealized Gain (Loss)			Fair Value		Net Unrealized Gain (Loss)		Fair Value		Net Unrealized Gain (Loss)
U.S. Government agency obligations	$	3,100	$	1		$	22,203	$	63	$	1,839	$	(43	)
U.S. agency residential mortgage-backed securities	119,835		566			12,379		59		49,501		(97		)
Municipal and other tax-exempt securities	58,150		118			39,345		652		57,431		(100		)
Other trading securities	23,157		(1		)	2,873		9		888		(1		)
Total	$	204,242	$	684		$	76,800	$	783	$	109,659	$	(241	)

Investment Securities

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



	September 30, 2012
	Amortized		Carrying		Fair		Gross Unrealized ²
	Cost		Value ¹		Value		Gain		Loss
Municipal and other tax-exempt	$	155,144	$	155,144	$	159,464	$	4,329	$	(9	)
U.S. agency residential mortgage-backed securities – Other	85,699		91,911		95,128		3,356		(139		)
Other debt securities	185,059		185,059		205,766		20,737		(30		)
Total	$	425,902	$	432,114	$	460,358	$	28,422	$	(178	)


¹	Carrying value includes $6.2 million of net unrealized gain which remains in Accumulated other comprehensive income (“AOCI”) related to certain securities transferred from the Available for Sale securities portfolio to the Investment securities portfolio as discussed in greater detail following.


²	Gross unrealized gains and losses are not recognized in AOCI in the Consolidated Balance Sheets.

- 65 -



	December 31, 2011
	Amortized		Carrying		Fair		Gross Unrealized ²
	Cost		Value ¹		Value		Gain		Loss
Municipal and other tax-exempt	$	128,697	$	128,697	$	133,670	$	4,975	$	(2	)
U.S. agency residential mortgage-backed securities – Other	110,062		121,704		120,536		602		(1,770		)
Other debt securities	188,835		188,835		208,451		19,616		—
Total	$	427,594	$	439,236	$	462,657	$	25,193	$	(1,772	)


¹	Carrying value includes $12 million of net unrealized gain which remains in Accumulated other comprehensive income (“AOCI”) in the Consolidated Balance Sheets related to certain securities transferred from the Available for Sale securities portfolio to the Investment securities portfolio as discussed in greater detail following.


²	Gross unrealized gains and losses are not recognized in AOCI in the Consolidated Balance Sheets.



	September 30, 2011
	Amortized		Carrying		Fair		Gross Unrealized ²
	Cost		Value ¹		Value		Gain		Loss
Municipal and other tax-exempt	$	133,394	$	133,394	$	138,461	$	5,067	$	—
U.S. agency residential mortgage-backed securities – Other	117,669		130,668		130,614		165		(219		)
Other debt securities	188,590		188,590		214,159		25,569		—
Total	$	439,653	$	452,652	$	483,234	$	30,801	$	(219	)


¹	Carrying value includes $13 million of net unrealized gain which remains in Accumulated other comprehensive income (“AOCI”) in the Consolidated Balance Sheets related to certain securities transferred from the Available for Sale securities portfolio to the Investment securities portfolio as discussed in greater detail following.


²	Gross unrealized gains and losses are not recognized in AOCI in the Consolidated Balance Sheets.

During the three months ended September 30, 2011, the Company transferred certain U.S. government agency residential mortgage-backed securities from the available for sale portfolio to the investment securities (held-to-maturity) portfolio as the Company has the positive intent and ability to hold these securities to maturity. No gains or losses were recognized in the Consolidated Statement of Earnings at the time of the transfer. Transfers of debt securities into the investment securities portfolio (held-to-maturity) are made at fair value at the date of transfer. The unrealized holding gain or loss at the date of transfer is retained in accumulated other comprehensive income and in the carrying value of the investment securities portfolio. Such amounts are amortized over the estimated remaining life of the security as an adjustment to yield, offsetting the related amortization of the premium or accretion of the discount on the transferred securities. At the time of transfer, the fair value totaled $131 million , amortized cost totaled $118 million and the pretax unrealized gain totaled $13 million .

- 66 -

The amortized cost and fair values of investment securities at September 30, 2012 , by contractual maturity, are as shown in the following table (dollars in thousands):



	Less than One Year		One to Five Years		Six to Ten Years		Over Ten Years		Total		Weighted Average Maturity²
Municipal and other tax-exempt:
Carrying value	$	30,564	$	80,138	$	41,105	$	3,337	$	155,144	3.50
Fair value	30,915		82,285		42,683		3,581		159,464
Nominal yield¹	4.20		3.15		2.59		6.43		3.28
Other debt securities:
Carrying value	10,185		31,025		35,131		108,718		185,059		9.44
Fair value	10,221		32,017		37,813		125,715		205,766
Nominal yield	4.05		5.22		5.57		6.24		5.82
Total fixed maturity securities:
Carrying value	$	40,749	$	111,163	$	76,236	$	112,055	$	340,203	6.73
Fair value	41,136		114,302		80,496		129,296		365,230
Nominal yield	4.16		3.73		3.96		6.25		4.66
Residential mortgage-backed securities:
Carrying value									$	91,911	³
Fair value									95,128
Nominal yield ⁴									2.71
Total investment securities:
Carrying value									$	432,114
Fair value									460,358
Nominal yield									4.25


^1.	Calculated on a taxable equivalent basis using a 39% 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 3.2 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.

- 67 -

Available for Sale Securities

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



	September 30, 2012
	Amortized		Fair		Gross Unrealized ¹
	Cost		Value		Gain		Loss			OTTI ²
U.S. Treasury	$	1,000	$	1,002	$	2	$	—		$	—
Municipal and other tax-exempt	86,326		87,969		2,760		(152		)	(965		)
Residential mortgage-backed securities:
U. S. government agencies:
FNMA	5,740,232		5,900,174		161,314		(1,372		)	—
FHLMC	3,322,692		3,400,215		77,523		—			—
GNMA	1,151,058		1,181,134		30,076		—			—
Other	167,262		173,298		6,036		—			—
Total U.S. government agencies	10,381,244		10,654,821		274,949		(1,372		)	—
Private issue:
Alt-A loans	128,090		123,583		663		—			(5,170		)
Jumbo-A loans	208,900		208,139		3,617		(152		)	(4,226		)
Total private issue	336,990		331,722		4,280		(152		)	(9,396		)
Total residential mortgage-backed securities	10,718,234		10,986,543		279,229		(1,524		)	(9,396		)
Commercial mortgage-backed securities guaranteed by U.S. government agencies	336,130		339,095		3,271		(306		)	—
Other debt securities	35,710		36,456		746		—			—
Perpetual preferred stock	22,170		25,288		3,118		—			—
Equity securities and mutual funds	25,409		30,081		4,998		(326		)	—
Total	$	11,224,979	$	11,506,434	$	294,124	$	(2,308	)	$	(10,361	)

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.

- 68 -



	December 31, 2011
	Amortized		Fair		Gross Unrealized¹
	Cost		Value		Gain		Loss			OTTI ²
U.S. Treasury	$	1,001	$	1,006	$	5	$	—		$	—
Municipal and other tax-exempt	66,435		68,837		2,543		(141		)	—
Residential mortgage-backed securities:
U. S. government agencies:
FNMA	5,823,972		5,987,287		163,319		(4		)	—
FHLMC	2,756,180		2,846,215		90,035		—			—
GNMA	647,569		678,924		31,358		(3		)	—
Other	69,668		75,751		6,083		—			—
Total U.S. government agencies	9,297,389		9,588,177		290,795		(7		)	—
Private issue:
Alt-A loans	168,461		132,242		—		—			(36,219		)
Jumbo-A loans	334,607		286,924		—		(11,096		)	(36,587		)
Total private issue	503,068		419,166		—		(11,096		)	(72,806		)
Total residential mortgage-backed securities	9,800,457		10,007,343		290,795		(11,103		)	(72,806		)
Other debt securities	36,298		36,495		197		—			—
Perpetual preferred stock	19,171		18,446		1,030		(1,755		)	—
Equity securities and mutual funds	33,843		47,238		13,727		(332		)	—
Total	$	9,957,205	$	10,179,365	$	308,297	$	(13,331	)	$	(72,806	)

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, 2011
	Amortized		Fair		Gross Unrealized ¹
	Cost		Value		Gain		Loss			OTTI ²
U.S. Treasury	$	1,001	$	1,006	$	5	$	—		$	—
Municipal and other tax-exempt	67,844		70,195		2,463		(112		)	—
Residential mortgage-backed securities:
U. S. government agencies:
FNMA	5,146,533		5,323,160		176,995		(368		)	—
FHLMC	2,773,674		2,884,641		110,967		—			—
GNMA	686,725		726,320		39,634		(39		)	—
Other	75,949		82,756		6,807		—			—
Total U.S. government agencies	8,682,881		9,016,877		334,403		(407		)	—
Private issue:
Alt-A loans	174,383		147,949		—		—			(26,434		)
Jumbo-A loans	350,293		309,383		249		(9,721		)	(31,438		)
Total private issue	524,676		457,332		249		(9,721		)	(57,872		)
Total residential mortgage-backed securities	9,207,557		9,474,209		334,652		(10,128		)	(57,872		)
Other debt securities	5,900		5,900		—		—			—
Perpetual preferred stock	19,224		19,080		884		(1,028		)	—
Equity securities and mutual funds	39,489		49,241		9,825		(73		)	—
Total	$	9,341,015	$	9,619,631	$	347,829	$	(11,341	)	$	(57,872	)


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.

- 69 -

The amortized cost and fair values of available for sale securities at September 30, 2012 , 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 ⁶		Total		Weighted Average Maturity ⁵
U.S. Treasuries:
Amortized cost	$	1,000	$	—	$	—	$	—	$	1,000	0.60
Fair value	1,002		—		—		—		1,002
Nominal yield	0.63		—		—		—		0.63
Municipal and other tax-exempt:
Amortized cost	786		27,992		12,632		44,916		86,326		15.04
Fair value	810		29,576		13,531		44,052		87,969
Nominal yield¹	—		0.94		0.81		2.82		1.89
Other debt securities:
Amortized cost	—		30,310		—		5,400		35,710		6.71
Fair value	—		31,056		—		5,400		36,456
Nominal yield	—		1.75		—		1.71		1.74
Total fixed maturity securities:
Amortized cost	$	1,786	$	58,302	$	12,632	$	50,316	$	123,036	12.50
Fair value	1,812		60,632		13,531		49,452		125,427
Nominal yield	0.35		1.36		0.81		2.70		1.84
Residential mortgage-backed securities:
Amortized cost									10,718,234
Fair value									10,986,543
Nominal yield ⁴									2.94
Commercial mortgage-backed securities:
Amortized cost									336,130		7.04
Fair value									339,095
Nominal yield									1.51
Equity securities and mutual funds:
Amortized cost									47,579		³
Fair value									55,369
Nominal yield									1.10
Total available-for-sale securities:
Amortized cost									$	11,224,979
Fair value									11,506,434
Nominal yield									2.88


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


²	The average expected lives of mortgage-backed securities were 2.3 years based upon current prepayment assumptions.


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


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


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


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

- 70 -

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

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2012		2011			2012			2011
Proceeds	$	209,325	$	611,588		$	1,660,876		$	2,058,661
Gross realized gains	7,967		16,798			40,133			34,968
Gross realized losses	—		(104		)	(7,354		)	(7,904		)
Related federal and state income tax expense	3,099		6,494			12,751			10,528

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):

	September 30, 2012		December 31, 2011		September 30, 2011
Investment:
Carrying value	$	153,224	$	197,192	$	201,966
Fair value	158,899		200,006		205,864

Available for sale:
Amortized cost	3,634,955		4,188,075		3,676,803
Fair value	3,763,664		4,334,553		3,844,805

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

- 71 -

Temporarily Impaired Securities as of September 30, 2012

(in thousands):



	Number of Securities	Less Than 12 Months				12 Months or Longer				Total
	Number of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Investment:
Municipal and other tax-exempt	6	$	7,548	$	9	$	—	$	—	$	7,548	$	9
U.S. Agency residential mortgage-backed securities – Other	1	—		—		19,066		139		19,066		139
Other debt securities	14	871		30		—		—		871		30
Total investment	21	$	8,419	$	39	$	19,066	$	139	$	27,485	$	178

Available for sale:
Municipal and other tax-exempt ¹	51	$	13,492	$	970	$	27,485	$	147	$	40,977	$	1,117
Residential mortgage-backed securities:
U. S. agencies:
FNMA	12	483,258		1,372		—		—		483,258		1,372
FHLMC	—	—		—		—		—		—		—
GNMA	—	—		—		—		—		—		—
Total U.S. agencies	12	483,258		1,372		—		—		483,258		1,372
Private issue ¹ :
Alt-A loans	13	—		—		105,862		5,170		105,862		5,170
Jumbo-A loans	15	—		—		121,746		4,378		121,746		4,378
Total private issue	28	—		—		227,608		9,548		227,608		9,548
Total residential mortgage-backed securities	40	483,258		1,372		227,608		9,548		710,866		10,920
Commercial mortgage-backed securities guaranteed by U.S. government agencies	8	42,445		306		—		—		42,445		306
Other debt securities	—	—		—		—		—		—		—
Perpetual preferred stocks	—	—		—		—		—		—		—
Equity securities and mutual funds	2	2,551		326		—		—		2,551		326
Total available for sale	101	$	541,746	$	2,974	$	255,093	$	9,695	$	796,839	$	12,669

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



Municipal and other tax-exempt	21	$	12,431	$	(965	)	$	—	$	—		$	12,431	$	(965	)
Alt-A loans	13	—		—			105,862		(5,170		)	105,862		(5,170		)
Jumbo-A loans	14	—		—			107,071		(4,226		)	107,071		(4,226		)

- 72 -

Temporarily Impaired Securities as of December 31, 2011

(In thousands)



	Number of Securities	Less Than 12 Months				12 Months or Longer				Total
	Number of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Investment:
Municipal and other tax- exempt	1	$	479	$	2	$	—	$	—	$	479	$	2
U.S. Agency residential mortgage-backed securities – Other	5	92,571		1,770		—		—		92,571		1,770
Other debt securities
Total investment	6	$	93,050	$	1,772	$	—	$	—	$	93,050	$	1,772

Available for sale:
Municipal and other tax-exempt ¹	26	$	5,008	$	7	$	21,659	$	134	$	26,667	$	141
Residential mortgage-backed securities:
U. S. agencies:
FNMA	2	68,657		4		—		—		68,657		4
FHLMC	—	—		—		—		—		—		—
GNMA	1	2,072		3		—		—		2,072		3
Total U.S. agencies	3	70,729		7		—		—		70,729		7
Private issue ¹ :
Alt-A loans	19	—		—		132,242		36,219		132,242		36,219
Jumbo-A loans	48	8,142		842		278,781		46,841		286,923		47,683
Total private issue	67	8,142		842		411,023		83,060		419,165		83,902
Total residential mortgage-backed securities	70	78,871		849		411,023		83,060		489,894		83,909
Perpetual preferred stocks	6	11,147		1,755		—		—		11,147		1,755
Equity securities and mutual funds	7	221		5		2,551		327		2,772		332
Total available for sale	109	$	95,247	$	2,616	$	435,233	$	83,521	$	530,480	$	86,137


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



Alt-A loans	19	$	—	$	—	$	132,242	$	36,219	$	132,242	$	36,219
Jumbo-A loans	36	3,809		256		202,874		36,331		206,683		36,587

- 73 -

Temporarily Impaired Securities as of September 30, 2011

(In thousands)



	Number of Securities	Less Than 12 Months				12 Months or Longer				Total
	Number of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Investment:
Municipal and other tax- exempt	—	$	—	$	—	$	—	$	—	$	—	$	—
U.S. Agency residential mortgage-backed securities – Other	4	86,566		219		—		—		86,566		219
Other debt securities	—	—		—		—		—		—		—
Total investment	4	$	86,566	$	219	$	—	$	—	$	86,566	$	219

Available for sale:
Municipal and other tax-exempt ¹	27	$	12,317	$	38	$	15,750	$	74	$	28,067	$	112
Residential mortgage-backed securities:
U. S. agencies:
FNMA	2	71,816		368		—		—		71,816		368
FHLMC	1	267		—		—		—		267		—
GNMA	5	9,405		39		—		—		9,405		39
Total U.S. agencies	8	81,488		407		—		—		81,488		407
Private issue ¹ :
Alt-A loans	19	27,024		7,828		120,925		18,606		147,949		26,434
Jumbo-A loans	43	29,897		2,022		268,632		39,137		298,529		41,159
Total private issue	62	56,921		9,850		389,557		57,743		446,478		67,593
Total residential mortgage-backed securities	70	138,409		10,257		389,557		57,743		527,966		68,000
Perpetual preferred stocks	6	11,927		1,028		—		—		11,927		1,028
Equity securities and mutual funds	1	37		73		—		—		37		73
Total available for sale	104	$	162,690	$	11,396	$	405,307	$	57,817	$	567,997	$	69,213


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



Alt-A loans	19	27,024	7,828	120,925	18,606	147,949	26,434
Jumbo-A loans	32	19,740	976	199,339	30,462	219,079	31,438

On a quarterly basis, the Company performs separate evaluations of impaired debt and equity investment and available for sale securities to determine if the unrealized losses are temporary.

For debt securities, management determines whether it intends to sell or if it is more-likely-than-not that it will be required to sell impaired securities. This determination considers current and forecasted liquidity requirements, regulatory and capital requirements and securities portfolio management. Based on this evaluation as of September 30, 2012 , we do not intend to sell any impaired available for sale securities before fair value recovers to our current amortized cost and it is more-likely-than-not that we will not be required to sell impaired securities before fair value recovers, which may be maturity.

Impairment of debt securities rated investment grade by all nationally-recognized rating agencies are considered temporary unless specific contrary information is identified. None of the debt securities rated investment grade were considered to be other-than-temporarily impaired at September 30, 2012 .

- 74 -

At September 30, 2012 , the composition of the Company’s investment and available for sale securities portfolios by the lowest current credit rating assigned by any of the three nationally-recognized rating agencies is as follows (in thousands):



	U.S. Govt / GSE ¹				AAA - AA				A - BBB				Below Investment Grade				Not Rated				Total
	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Investment:
Municipal and other tax-exempt	$	—	$	—	$	59,189	$	60,686	$	24,131	$	24,772	$	—	$	—	$	71,824	$	74,006	$	155,144	$	159,464
Mortgage-backed securities -- other	91,911		95,128		—		—		—		—		—		—		—		—		91,911		95,128
Other debt securities	—		—		174,573		195,140		600		600		—		—		9,886		10,026		185,059		205,766
Total investment securities	$	91,911	$	95,128	$	233,762	$	255,826	$	24,731	$	25,372	$	—	$	—	$	81,710	$	84,032	$	432,114	$	460,358

	U.S. Govt / GSE ¹				AAA - AA				A - BBB				Below Investment Grade				Not Rated				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available for Sale:
U.S. Treasury	$	1,000	$	1,002	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	1,000	$	1,002
Municipal and other tax-exempt	—		—		59,868		62,223		11,638		11,752		13,396		12,431		1,424		1,563		86,326		87,969
Residential mortgage-backed securities:
U. S. government agencies:
FNMA	5,740,232		5,900,174		—		—		—		—		—		—		—		—		5,740,232		5,900,174
FHLMC	3,322,692		3,400,215		—		—		—		—		—		—		—		—		3,322,692		3,400,215
GNMA	1,151,058		1,181,134		—		—		—		—		—		—		—		—		1,151,058		1,181,134
Other	167,262		173,298		—		—		—		—		—		—		—		—		167,262		173,298
Total U.S. government agencies	10,381,244		10,654,821		—		—		—		—		—		—		—		—		10,381,244		10,654,821
Private issue:
Alt-A loans	—		—		—		—		—		—		128,090		123,583		—		—		128,090		123,583
Jumbo-A loans	—		—		—		—		—		—		208,900		208,139		—		—		208,900		208,139
Total private issue	—		—		—		—		—		—		336,990		331,722		—		—		336,990		331,722
Total residential mortgage-backed securities	10,381,244		10,654,821		—		—		—		—		336,990		331,722		—		—		10,718,234		10,986,543
Commercial mortgage-backed securities guaranteed by U.S. government agencies	336,130		339,095		—		—		—		—		—		—		—		—		336,130		339,095
Other debt securities	—		—		5,400		5,400		30,310		31,056		—		—		—		—		35,710		36,456
Perpetual preferred stock	—		—		—		—		22,170		25,288		—		—		—		—		22,170		25,288
Equity securities and mutual funds	—		—		—		—		—		—		—		—		25,409		30,081		25,409		30,081
Total available for sale securities	$	10,718,374	$	10,994,918	$	65,268	$	67,623	$	64,118	$	68,096	$	350,386	$	344,153	$	26,833	$	31,644	$	11,224,979	$	11,506,434


¹	U.S. government and government sponsored enterprises are not rated by the nationally-recognized rating agencies as these securities are guaranteed by agencies of the U.S. government or government-sponsored enterprises.

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At September 30, 2012 , the entire $337 million portfolio of privately issued residential mortgage-backed securities (based on amortized cost after impairment charges) was rated below investment grade by at least one of the nationally-recognized rating agencies. The net unrealized loss on these securities totaled $5.3 million . Ratings by the nationally-recognized rating agencies are subjective in nature and accordingly ratings can vary significantly amongst the agencies. Limitations generally expressed by the rating agencies include statements that ratings do not predict the specific percentage default likelihood over any given period of time and that ratings do not opine on expected loss severity of an obligation should the issuer default. As such, the impairment of securities rated below investment grade by at least one of the nationally-recognized rating agencies was evaluated to determine if we expect not to recover the entire amortized cost basis of the security. This evaluation was based on projections of estimated cash flows based on individual loans underlying each security using current and anticipated increases in unemployment and default rates, decreases in housing prices and estimated liquidation costs at foreclosure.

The primary assumptions used in this evaluation were:


•	Unemployment rates – increasing to 8.5% over the next 12 months, dropping to 8% over the following 21 months, and holding at 8% thereafter. At December 31, 2011 and September 30, 2011, we assumed that unemployment rates would increase to 9.5% over the next 12 months, dropping to 8% over the following 21 months, and holding at 8% thereafter.

•

Housing price depreciation – starting with current depreciated housing prices based on information derived from the Federal Housing Finance Agency (“FHFA”) data, decreasing by an additional 2% over the next twelve months and then growing at 2% per year thereafter. At December 31, 2011 and September 30, 2011, we assumed that housing prices would decrease an additional 8% over the next twelve months and then grow at 2% per year thereafter.


•	Estimated Liquidation Costs – reflect actual historical liquidation costs observed on Jumbo and Alt-A residential mortgage loans in the securities owned by the Company.


•	Discount rates – estimated cash flows were discounted at rates that range from 2.00% to 6.25% based on our current expected yields.

We also consider the current loan-to-value ratio and remaining credit enhancement as part of the assessment of the cash flows available to recover the amortized cost of the debt securities. Each factor is considered in the evaluation.

The Company calculates the current loan-to-value ratio for each mortgage-backed security using loan-level data. Current loan-to-value ratio is the current outstanding loan amount divided by an estimate of the current home value. The current home value is derived from FHFA data. FHFA provides historical information on home price depreciation at both the Metropolitan Statistical Area and state level. This information is matched to each loan to estimate the home price depreciation. Data is accumulated from the loan level to determine the current loan-to-value ratio for the security as a whole.

Remaining credit enhancement is the amount of credit enhancement available to absorb current projected losses within the pool of loans that support the security. The Company acquires the benefit of credit enhancement by investing in super-senior tranches for many of our residential mortgage-backed securities. Subordinated tranches held by other investors are specifically designed to absorb losses before the super-senior tranches which effectively doubled the typical credit support for these types of bonds. Current projected losses consider depreciation of home prices based on FHFA data, estimated costs and additional losses to liquidate collateral and delinquency status of the individual loans underlying the security.

Credit loss impairment is recorded as a charge to earnings. Additional impairment based on the difference between the total unrealized loss and the estimated credit loss on these securities was charged against other comprehensive income, net of deferred taxes.

Based upon projected declines in expected cash flows from certain private-label residential mortgage-backed securities, the Company recognized $1.1 million of additional credit loss impairments in earnings during the three months ended September 30, 2012 .

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A distribution of the amortized cost (after recognition of the other-than-temporary impairment), fair value and credit loss impairments recognized on our privately issued residential mortgage-backed securities is as follows (in thousands, except for number of securities):

						Credit Losses Recognized
						Three months ended
						September 30, 2012			Life-to-date
	Number of Securities	Amortized Cost		Fair Value		Number of Securities	Amount		Number of Securities	Amount
Alt-A	17	$	128,090	$	123,583	1	$	245	16	$	48,042
Jumbo-A	38	208,900		208,139		4	859		31	23,400
Total	55	$	336,990	$	331,722	5	$	1,104	47	$	71,442

Impaired equity securities, including perpetual preferred stocks, are evaluated based on management's ability and intent to hold the securities until fair value recovers over periods not to exceed three years. The assessment of the ability and intent to hold these securities focuses on the liquidity needs, asset/liability management objectives and securities portfolio objectives. Factors considered when assessing recovery include forecasts of general economic conditions and specific performance of the issuer, analyst ratings and credit spreads for preferred stocks which have debt-like characteristics. The Company has evaluated the near-term prospects of the investments in relation to the severity and duration of the impairment and based on that evaluation has the ability and intent to hold these investments until a recovery in fair value. Accordingly, all impairment of equity securities was considered temporary at September 30, 2012 .

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012			2011
Balance of credit-related OTTI recognized on available for sale debt, beginning of period	$	72,915	$	62,047	$	76,131		$	52,624
Additions for credit-related OTTI not previously recognized	—		2,294		248			2,331
Additions for increases in credit-related OTTI previously recognized when there is no intent to sell and no requirement to sell before recovery of amortized cost	1,104		9,006		5,436			18,392
Sales	—		—		(7,796		)	—
Balance of credit-related OTTI recognized on available for sale debt securities, end of period	$	74,019	$	73,347	$	74,019		$	73,347

Fair Value Option Securities

Fair value option securities represent securities which the Company has elected to carry at fair value and separately identified on the Consolidated Balance Sheets with changes in the fair value recognized in earnings as they occur. Certain residential mortgage-backed securities issued by U.S. government agencies and derivative contracts are held as an economic hedge of the mortgage servicing rights. In addition, certain corporate debt securities are economically hedged by derivative contracts to manage interest rate risk. Derivative contracts that have not been designated as hedging instruments effectively modify these fixed rate securities into variable rate securities.

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



	September 30, 2012				December 31, 2011				September 30, 2011
	Fair Value		Net Unrealized Gain		Fair Value		Net Unrealized Gain		Fair Value		Net Unrealized Gain
U.S. agency residential mortgage-backed securities	$	305,445	$	13,827	$	626,109	$	19,233	$	672,191	$	18,875
Corporate debt securities	26,442		1,359		25,117		18		—		—
Total	$	331,887	$	15,186	$	651,226	$	19,251	$	672,191	$	18,875

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( 3 ) Derivatives

The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in the balance sheet at September 30, 2012 (in thousands):



	Gross Basis								Net Basis ²
	Assets				Liabilities				Assets			Liabilities
	Notional¹		Fair Value		Notional¹		Fair Value		Fair Value			Fair Value
Customer risk management programs:
Interest rate contracts ³
To-be-announced mortgage-backed securities	$	14,858,520	$	276,678	$	14,738,232	$	274,195	$	155,105		$	152,622
Interest rate swaps	1,301,109		79,350		1,301,109		79,937		79,350			79,937
Energy contracts	1,556,164		105,588		1,596,791		107,556		38,558			40,526
Agricultural contracts	198,735		6,835		195,068		6,750		824			739
Foreign exchange contracts	150,232		150,232		149,977		149,977		150,232			149,977
Equity option contracts	217,283		14,460		217,283		14,460		14,460			14,460
Total customer derivative before cash collateral	18,282,043		633,143		18,198,460		632,875		438,529			438,261
Less: cash collateral			—		—		—		(11,153		)	(184,622		)
Total customer derivatives	18,282,043		633,143		18,198,460		632,875		427,376			253,639
Interest rate risk management programs	66,000		8,277		25,000		783		8,277			783
Total derivative contracts	$	18,348,043	$	641,420	$	18,223,460	$	633,658	$	435,653		$	254,422


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


²	Derivative contracts are recorded on a net basis in the balance sheet in recognition of master netting agreements that enable the Company to settle all derivative positions with a given counterparty in total and to offset the net derivative position with the related cash collateral.


³	Includes interest rate swaps used by borrowers to modify interest rate terms of their loans and to be announced securities used by mortgage banking customers to hedge their loan production.

When bilateral netting agreements 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 counterparty basis.

Derivative contracts may also 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. As of September 30, 2012 , a decrease in credit rating to below investment grade would increase our obligation to post cash margin on existing contracts by approximately $35 million .

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The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in the balance sheet at December 31, 2011 (in thousands):



	Gross Basis								Net Basis ²
	Assets				Liabilities				Assets			Liabilities
	Notional¹		Fair Value		Notional¹		Fair Value		Fair Value			Fair Value
Customer risk management programs:
Interest rate contracts ³
To-be-announced residential mortgage-backed securities	$	9,118,627	$	101,189	$	9,051,627	$	99,211	$	68,519		$	66,541
Interest rate swaps	1,272,617		81,261		1,272,617		81,891		81,261			81,891
Energy contracts	1,554,400		158,625		1,799,367		171,050		62,945			75,370
Agricultural contracts	146,252		4,761		148,924		4,680		782			701
Foreign exchange contracts	73,153		73,153		72,928		72,928		73,153			72,928
Equity option contracts	208,647		12,508		208,647		12,508		12,508			12,508
Total customer derivative before cash collateral	12,373,696		431,497		12,554,110		442,268		299,168			309,939
Less: cash collateral	—		—		—		—		(11,690		)	(73,712		)
Total customer derivatives	12,373,696		431,497		12,554,110		442,268		287,478			236,227
Interest rate risk management programs	44,000		6,381		25,000		295		6,381			295
Total derivative contracts	$	12,417,696	$	437,878	$	12,579,110	$	442,563	$	293,859		$	236,522


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


²	Derivative contracts are recorded on a net basis in the balance sheet in recognition of master netting agreements that enable the Company to settle all derivative positions with a given counterparty in total and to offset the net derivative position with the related cash collateral.


³	Includes interest rate swaps used by borrowers to modify interest rate terms of their loans and to be announced securities used by mortgage banking customers to hedge their loan production.

The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in the balance sheet at September 30, 2011 (in thousands):



	Gross Basis								Net Basis ²
	Assets				Liabilities				Assets			Liabilities
	Notional¹		Fair Value		Notional¹		Fair Value		Fair Value			Fair Value
Customer risk management programs:
Interest rate contracts ³
To-be-announced residential mortgage-backed securities	$	12,189,827	$	195,580	$	12,054,557	$	192,333	$	134,052		$	130,805
Interest rate swaps	1,386,449		85,899		1,386,449		86,603		85,899			86,603
Energy contracts	1,726,402		200,142		1,965,233		198,725		102,938			101,521
Agricultural contracts	190,100		8,100		190,700		8,012		2,373			2,285
Foreign exchange contracts	65,747		65,747		65,787		65,787		65,747			65,787
Equity option contracts	198,518		10,645		186,192		10,645		10,645			10,645
Total customer derivative before cash collateral	15,757,043		566,113		15,848,918		562,105		401,654			397,646
Less: cash collateral	—		—		—		—		(37,298		)	(55,824		)
Total customer derivatives	15,757,043		566,113		15,848,918		562,105		364,356			341,822
Interest rate risk management programs	44,000		6,260		—		—		6,260			—
Total derivative contracts	$	15,801,043	$	572,373	$	15,848,918	$	562,105	$	370,616		$	341,822


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


²	Derivative contracts are recorded on a net basis in the balance sheet in recognition of master netting agreements that enable the Company to settle all derivative positions with a given counterparty in total and to offset the net derivative position with the related cash collateral.


³	Includes interest rate swaps used by borrowers to modify interest rate terms of their loans and to be announced securities used by mortgage banking customers to hedge their loan production.

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The following summarizes the pre-tax net gains (losses) on derivative instruments and where they are recorded in the income statement (in thousands):

	Three Months Ended					Three Months Ended
	September 30, 2012					September 30, 2011
	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	$	(803	)	$	—	$	1,225	$	—
Interest rate swaps	706			—		484
Energy contracts	1,856			—		1,360		—
Agricultural contracts	115			—		103		—
Foreign exchange contracts	124			—		155		—
Equity option contracts	—			—		—		—
Total Customer Derivatives	1,998			—		3,327		—
Interest Rate Risk Management Programs	—			464		—		4,048
Total Derivative Contracts	$	1,998		$	464	$	3,327	$	4,048



	Nine Months Ended				Nine Months Ended
	September 30, 2012				September 30, 2011
	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	$	504	$	—	$	(2,829	)	$	—
Interest rate swaps	2,850		—		2,026
Energy contracts	6,754		—		5,759			—
Agricultural contracts	298		—		263			—
Foreign exchange contracts	455		—		381			—
Equity option contracts	—		—		—			—
Total Customer Derivatives	10,861		—		5,600			—
Interest Rate Risk Management Programs	—		336		—			2,700
Total Derivative Contracts	$	10,861	$	336	$	5,600		$	2,700

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, or to take positions in derivative contracts. Derivative contracts are executed between the customers and BOK Financial. Offsetting contracts are executed between BOK Financial and other selected counterparties to minimize its risk of changes in commodity prices, interest rates or foreign exchange rates. The counterparty contracts are identical to customer contracts, except for a fixed pricing spread or fee paid to BOK Financial as profit and compensation for administrative costs and credit risk which is recognized over the life of the contracts and included in other operating revenue – brokerage and trading revenue in the Consolidated Statements of Earnings.

Interest Rate Risk Management Programs

BOK Financial may use interest rate swaps in managing its interest rate sensitivity and as part of its economic hedge of the change in the fair value of mortgage servicing rights. Interest rate swaps are generally used to reduce overall asset sensitivity by converting specific fixed-rate liabilities to floating-rate based on LIBOR. Net interest revenue was not significantly impacted by the settlement of amounts receivable or payable on interest rate swaps for the three and nine months ended September 30,

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2012 and 2011 , respectively. As of September 30, 2012 , BOK Financial had interest rate swaps with a notional value of $66 million used as part of the economic hedge of the change in the fair value of the mortgage servicing rights.

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

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

( 4 ) Loans and Allowances for Credit Losses

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.

Performing loans may be renewed under then current collateral value, debt service ratio and other underwriting standards. Nonperforming loans may be renewed and will remain on nonaccrual status. Nonperforming loans renewed will be evaluated and may be charged off if 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.

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

All distressed commercial and commercial real estate loans are placed on nonaccrual status. Modifications of nonaccruing loans to distressed borrowers generally consist of extension of payment terms, renewal of matured nonaccruing loans or interest rate concession. Principal and accrued but unpaid interest is not forgiven. Renewed or modified nonaccruing loans are charged off when the loan balance is no longer covered by the paying capacity of the borrower based on a quarterly evaluation of cash resources and collateral value. Renewed or modified nonperforming loans generally remain on nonaccrual status until full collection of principal and interest in accordance with original terms, including principal previously charged off, is probable. Consumer loans to troubled borrowers are not voluntarily modified.

Residential mortgage loans are modified in accordance with U.S. government agency guidelines by reducing interest rates and extending the number of payments. No unpaid principal or interest is forgiven. Interest guaranteed by U.S. government agencies under residential mortgage loan programs continues to accrue based on the modified terms of the loan. Modified residential mortgage loans are considered to be impaired. Impairment is measured based on cash flows expected to be received under the modified terms of the loans. Renegotiated loans may be sold after a period of satisfactory performance as defined by the agencies. If it becomes probable that all amounts due according to the modified loan terms will not be collected, the loan is placed on nonaccrual status and included in nonaccrual loans.

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.

Certain residential mortgage loans originated by the Company are held for sale and are carried at fair value based on sales commitments or market quotes and reported separately in the Consolidated Balance Sheets. Changes in fair value are recorded in other operating revenue – mortgage banking revenue in the Consolidated Statements of Earnings.

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

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monitoring and assessing credit risk.

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



	September 30, 2012								December 31, 2011
	Fixed Rate		Variable Rate		Non-accrual		Total		Fixed Rate		Variable Rate		Non-accrual		Total
Commercial	$	3,829,409	$	3,422,046	$	21,762	$	7,273,217	$	3,261,344	$	3,224,915	$	68,811	$	6,555,070
Commercial real estate	871,211		1,218,554		75,761		2,165,526		896,820		1,295,290		99,193		2,291,303
Residential mortgage	1,728,537		261,176		29,267		2,018,980		1,646,554		298,206		29,767		1,974,527
Consumer	181,923		187,612		5,109		374,644		245,711		199,617		3,515		448,843
Total	$	6,611,080	$	5,089,388	$	131,899	$	11,832,367	$	6,050,429	$	5,018,028	$	201,286	$	11,269,743
Accruing loans past due (90 days) ¹							$	1,181							$	2,496



	September 30, 2011
	Fixed Rate		Variable Rate		Non-accrual		Total
Commercial	$	3,052,708	$	3,285,158	$	83,736	$	6,421,602
Commercial real estate	854,800		1,307,985		110,048		2,272,833
Residential mortgage	1,606,799		311,371		31,731		1,949,901
Consumer	270,402		205,871		3,960		480,233
Total	$	5,784,709	$	5,110,385	$	229,475	$	11,124,569
Accruing loans past due (90 days) ¹							$	1,401


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

At September 30, 2012 , $5.5 billion or 46% of the total loan portfolio is to businesses and individuals in Oklahoma and $3.6 billion or 31% of our total loan portfolio is to businesses and individuals in Texas. These geographic concentrations subject the loan portfolio to the general economic conditions within these areas.

Commercial

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

At September 30, 2012 , commercial loans to businesses in Oklahoma totaled $3.1 billion or 43% of the commercial loan portfolio segment and loans to businesses in Texas totaled $2.4 billion or 35% of the commercial loan portfolio segment. The commercial loan portfolio segment is further divided into loan classes. The energy loan class totaled $2.3 billion or 21% of total loans at September 30, 2012 , including $2.2 billion of outstanding loans to energy producers. Approximately 55% of committed production loans are secured by properties primarily producing oil and 45% are secured by properties producing natural gas. The services loan class totaled $1.9 billion at September 30, 2012 . Approximately $1.0 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 community foundations, gaming, public finance, insurance and heavy equipment dealers..

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Commercial Real Estate

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

At September 30, 2012 , 33% of commercial real estate loans are secured by properties primarily located in the Dallas and Houston areas of Texas. An additional 30% of commercial real estate loans are secured by properties located primarily in the Tulsa and Oklahoma City metropolitan areas of Oklahoma.

Residential Mortgage and Consumer

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. Consumer loans include direct loans secured by and for the purchase of automobiles, recreational and marine equipment as well as other unsecured loans. Consumer loans also include indirect automobile loans made through primary dealers. Residential mortgage and consumer loans are made in accordance with underwriting policies we believe to be conservative and are fully documented. 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% . Loan-to-value (“LTV”) ratios are tiered from 60% to 100% , 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 September 30, 2012 , residential mortgage loans included $169 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 $715 million at September 30, 2012 . Approximately, 36% of the home equity portfolio is comprised of junior lien loans and 64% of the home equity loan portfolio is comprised of first lien loans. Junior lien loans are distributed 79% to amortizing term loans and 21% to revolving lines of credit. Home equity loans generally require a minimum FICO score of 700 and a maximum DTI of 40%. The maximum loan amount available for our home equity loan products is generally $400 thousand .

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 September 30, 2012 , outstanding commitments totaled $6.4 billion . Because some commitments are expected to expire before being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. BOK Financial uses the same credit policies in making commitments as it does loans.

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

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 September 30, 2012 , outstanding standby letters of credit totaled $448 million . Commercial

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letters of credit are used to facilitate customer trade transactions with the drafts being drawn when the underlying transaction is consummated. At September 30, 2012 , outstanding commercial letters of credit totaled $6 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 related to 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 is assessed by management based on an on-going quarterly evaluation of the probable estimated losses inherent in the portfolio, including probable losses on both outstanding loans and unused commitments.

The allowance for loan losses consists of specific allowances attributed to impaired loans that have not yet been charged down to amounts we expect to recover, general allowances for unimpaired loans based on estimated loss rates by loan class and nonspecific allowances based on general economic conditions, risk concentration and related factors. There have been no material changes in the approach or techniques utilized in developing the allowance for loan losses and the accrual for off-balance sheet credit losses for the three and nine months ended September 30, 2012 .

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.

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. This is substantially the same criteria used to determine when a loan should be placed on nonaccrual status. All commercial and commercial real estate loans that have been modified in a troubled debt restructuring are considered to be impaired and remain classified as nonaccrual. 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 not adjusted by the Company. 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. Updated appraisals are obtained at least annually or more frequently if market conditions indicate collateral values have declined. Historical statistics may be used in limited situations to assist in estimating future cash flows or collateral values, such as when an impaired collateral dependent loan is identified at the end of a reporting period. Historical statistics are a practical way to estimate impairment 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 are subject to volatility.

General allowances for unimpaired loans are based on estimated loss rates by loan class. The appropriate historical gross loss rate for each loan class is determined by the greater of the current loss rate based on the most recent twelve months or a ten-year gross loss rate. For risk graded loans, historical 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 risk in each loan class is increasing or decreasing. Historical loss rates are adjusted upward or downward in proportion to changes in average risk grading. Recoveries are not considered in the estimation of historical loss rates. Recoveries are recognized as increases in the allowance for loans losses when realized. General allowances for unimpaired loans also consider inherent risks identified for a given loan class. Inherent risks include consideration of the loss rates that most appropriately represent the current credit cycle. Inherent risks also consider factors attributable to specific loan class which have not yet been represented in the historical gross loss rates or risk grading. Examples include changes in commodity prices or engineering imprecision which may affected 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 products or underwriting standards.

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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. Changes in the accrual for off-balance sheet credit losses are recognized through the provision for credit losses in the Consolidated Statements of Earnings.

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 September 30, 2012 is summarized as follows (in thousands):



	Commercial				Commercial Real Estate			Residential Mortgage			Consumer			Nonspecific allowance		Total
Allowance for loan losses:
Beginning balance	$	83,477			$	55,806		$	42,688		$	8,840		$	40,858	$	231,669
Provision for loan losses	4				4,821			(370		)	3,293			56		7,804
Loans charged off	(812		)		(2,607		)	(1,600		)	(3,902		)	—		(8,921		)
Recoveries	(890		)	¹	2,684			298			1,112			—		3,204
Ending balance	$	81,779			$	60,704		$	41,016		$	9,343		$	40,914	$	233,756
Allowance for off-balance sheet credit losses:
Beginning balance	$	8,224			$	1,425		$	80		$	18		$	—	$	9,747
Provision for off-balance sheet credit losses	(7,823		)		18			(4		)	5			—		(7,804		)
Ending balance	$	401			$	1,443		$	76		$	23		$	—	$	1,943

Total provision for credit losses	$	(7,819	)		$	4,839		$	(374	)	$	3,298		$	56	$	—


¹	Includes $7.1 million of negative recovery related to a refund of a settlement between BOK Financial and the City of Tulsa invalidated by the Oklahoma Supreme Court. Excluding this refund, BOK Financial had net charge-offs (recoveries) to average loans of (0.05%) on an annualized basis.

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 nine months ended September 30, 2012 is summarized as follows (in thousands):



	Commercial				Commercial Real Estate			Residential Mortgage			Consumer			Nonspecific allowance			Total
Allowance for loan losses:
Beginning balance	$	83,443			$	67,034		$	46,476		$	10,178		$	46,350		$	253,481
Provision for loan losses	995				(322		)	528			3,553			(5,436		)	(682		)
Loans charged off	(7,840		)		(10,548		)	(7,447		)	(8,303		)	—			(34,138		)
Recoveries	5,181			¹	4,540			1,459			3,915			—			15,095
Ending balance	$	81,779			$	60,704		$	41,016		$	9,343		$	40,914		$	233,756
Allowance for off-balance sheet credit losses:
Beginning balance	$	7,906			$	1,250		$	91		$	14		$	—		$	9,261
Provision for off-balance sheet credit losses	(7,505		)		193			(15		)	9			—			(7,318		)
Ending balance	$	401			$	1,443		$	76		$	23		$	—		$	1,943

Total provision for credit losses	$	(6,510	)		$	(129	)	$	513		$	3,562		$	(5,436	)	$	(8,000	)


¹	Includes $7.1 million of negative recovery related to a refund of a settlement between BOK Financial and the City of Tulsa invalidated by the Oklahoma Supreme Court. Excluding this refund, BOK Financial had net charge-offs (recoveries) to average loans of (0.05%) on an annualized basis.

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	Commercial			Commercial Real Estate			Residential Mortgage			Consumer			Nonspecific allowance			Total
Allowance for loan losses:
Beginning balance	$	113,571		$	91,750		$	45,243		$	8,922		$	27,125		$	286,611
Provision for loan losses	(348		)	1,386			(1,835		)	1,304			(5,508		)	(5,001		)
Loans charged off	(5,083		)	(2,335		)	(3,403		)	(3,202		)	—			(14,023		)
Recoveries	1,404			911			283			1,271			—			3,869
Ending balance	$	109,544		$	91,712		$	40,288		$	8,295		$	21,617		$	271,456
Allowance for off-balance sheet credit losses:
Beginning balance	$	9,236		$	1,020		$	180		$	309		$	—		$	10,745
Provision for off-balance sheet credit losses	4,882			134			(30		)	15			—			5,001
Ending balance	$	14,118		$	1,154		$	150		$	324		$	—		$	15,746

Total provision for credit losses	$	4,534		$	1,520		$	(1,865	)	$	1,319		$	(5,508	)	$	—



	Commercial			Commercial Real Estate			Residential Mortgage			Consumer			Nonspecific allowance			Total
Allowance for loan losses:
Beginning balance	$	104,631		$	98,709		$	50,281		$	12,614		$	26,736		$	292,971
Provision for loan losses	10,488			4,051			(1,880		)	(65		)	(5,119		)	7,475
Loans charged off	(10,737		)	(12,608		)	(9,732		)	(8,952		)	—			(42,029		)
Recoveries	5,162			1,560			1,619			4,698			—			13,039
Ending balance	$	109,544		$	91,712		$	40,288		$	8,295		$	21,617		$	271,456
Allowance for off-balance sheet credit losses:
Beginning balance	$	13,456		$	443		$	131		$	241		$	—		$	14,271
Provision for off-balance sheet credit losses	662			711			19			83			—			1,475
Ending balance	$	14,118		$	1,154		$	150		$	324		$	—		$	15,746

Total provision for credit losses	$	11,150		$	4,762		$	(1,861	)	$	18		$	(5,119	)	$	8,950

A provision for credit losses is charged against earnings in amounts necessary to maintain an appropriate allowance for loan and accrual for off-balance sheet credit losses. All loans are charged off 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 90 days and 180 days past due, depending on loan class. Recoveries of loans previously charged off are added to the allowance.

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The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment measurement method at September 30, 2012 is as follows (in thousands):



	Collectively Measured for Impairment				Individually Measured for Impairment				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	7,251,528	$	81,575	$	21,689	$	204	$	7,273,217	$	81,779
Commercial real estate	2,089,802		57,587		75,724		3,117		2,165,526		60,704
Residential mortgage	2,009,125		40,799		9,855		217		2,018,980		41,016
Consumer	371,829		9,214		2,815		129		374,644		9,343
Total	11,722,284		189,175		110,083		3,667		11,832,367		192,842

Nonspecific allowance	—		—		—		—		—		40,914

Total	$	11,722,284	$	189,175	$	110,083	$	3,667	$	11,832,367	$	233,756

The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment measurement method at December 31, 2011 is as follows (in thousands):



	Collectively Measured for Impairment				Individually Measured for Impairment				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	6,486,311	$	81,907	$	68,759	$	1,536	$	6,555,070	$	83,443
Commercial real estate	2,192,110		63,092		99,193		3,942		2,291,303		67,034
Residential mortgage	1,967,086		46,178		7,441		298		1,974,527		46,476
Consumer	447,747		10,178		1,096		—		448,843		10,178
Total	11,093,254		201,355		176,489		5,776		11,269,743		207,131

Nonspecific allowance	—		—		—		—		—		46,350

Total	$	11,093,254	$	201,355	$	176,489	$	5,776	$	11,269,743	$	253,481

The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment measurement method at September 30, 2011 is as follows (in thousands):



	Collectively Measured for Impairment				Individually Measured for Impairment				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	6,338,063	$	107,745	$	83,539	$	1,799	$	6,421,602	$	109,544
Commercial real estate	2,162,785		87,513		110,048		4,199		2,272,833		91,712
Residential mortgage	1,940,998		39,653		8,903		635		1,949,901		40,288
Consumer	478,844		8,228		1,389		67		480,233		8,295
Total	10,920,690		243,139		203,879		6,700		11,124,569		249,839

Nonspecific allowance	—		—		—		—		—		21,617

Total	$	10,920,690	$	243,139	$	203,879	$	6,700	$	11,124,569	$	271,456

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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 September 30, 2012 is as follows (in thousands):



	Internally Risk Graded				Non-Graded				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	7,255,739	$	80,676	$	17,478	$	1,103	$	7,273,217	$	81,779
Commercial real estate	2,165,489		60,704		37		—		2,165,526		60,704
Residential mortgage	271,049		6,416		1,747,931		34,600		2,018,980		41,016
Consumer	205,656		2,711		168,988		6,632		374,644		9,343
Total	9,897,933		150,507		1,934,434		42,335		11,832,367		192,842

Nonspecific allowance	—		—		—		—		—		40,914

Total	$	9,897,933	$	150,507	$	1,934,434	$	42,335	$	11,832,367	$	233,756

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, 2011 is as follows (in thousands):



	Internally Risk Graded				Non-Graded				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	6,536,602	$	82,263	$	18,468	$	1,180	$	6,555,070	$	83,443
Commercial real estate	2,291,303		67,034		—		—		2,291,303		67,034
Residential mortgage	317,798		8,262		1,656,729		38,214		1,974,527		46,476
Consumer	217,195		2,527		231,648		7,651		448,843		10,178
Total	9,362,898		160,086		1,906,845		47,045		11,269,743		207,131

Nonspecific allowance	—		—		—		—		—		46,350

Total	$	9,362,898	$	160,086	$	1,906,845	$	47,045	$	11,269,743	$	253,481

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The allowance for loan losses and recorded investment of the related loans by portfolio segment for risk graded and non-risk graded loans at September 30, 2011 is as follows (in thousands):



	Internally Risk Graded				Non-Graded				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	6,402,534	$	105,695	$	19,068	$	3,849	$	6,421,602	$	109,544
Commercial real estate	2,272,833		91,712		—		—		2,272,833		91,712
Residential mortgage	368,466		7,356		1,581,435		32,932		1,949,901		40,288
Consumer	220,351		1,851		259,882		6,444		480,233		8,295
Total	9,264,184		206,614		1,860,385		43,225		11,124,569		249,839

Nonspecific allowance	—		—		—		—		—		21,617

Total	$	9,264,184	$	206,614	$	1,860,385	$	43,225	$	11,124,569	$	271,456

Loans are considered to be performing if they are in compliance with the original terms of the agreement which is consistent with the regulatory guideline of “pass.” Performing also includes loans considered to be “other loans especially mentioned” by regulatory guideline. 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. Performing loans also include past due residential mortgages that are guaranteed by agencies of the U.S. government.

The risk grading process identified certain criticized loans as potential problem loans. These loans 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 nonaccrual status. Known information does, however, cause concern as to the borrowers’ continued compliance with current repayment terms. Nonaccrual loans represent loans for which full collection of principal and interest is uncertain. This is substantially the same criteria used to determine whether a loan is impaired and includes certain loans considered “substandard” and all loans considered “doubtful” by regulatory guidelines.

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The following table summarizes the Company’s loan portfolio at September 30, 2012 by the risk grade categories (in thousands):



	Internally Risk Graded						Non-Graded
	Performing		Potential Problem		Nonaccrual		Performing		Nonaccrual		Total
Commercial:
Energy	$	2,419,960	$	10,450	$	3,063	$	—	$	—	$	2,433,473
Services	1,847,177		34,452		10,099		—		—		1,891,728
Wholesale/retail	1,073,019		4,241		2,007		—		—		1,079,267
Manufacturing	350,340		10,469		2,283		—		—		363,092
Healthcare	1,033,799		184		3,305		—		—		1,037,288
Integrated food services	213,148		684		—		—		—		213,832
Other commercial and industrial	230,690		5,437		932		17,405		73		254,537
Total commercial	7,168,133		65,917		21,689		17,405		73		7,273,217

Commercial real estate:
Construction and land development	225,833		25,568		38,143		—		—		289,544
Retail	510,163		8,196		6,692		—		—		525,051
Office	383,620		12,554		9,833		—		—		406,007
Multifamily	388,701		6,667		3,145		—		—		398,513
Industrial	178,659		4,443		4,064		—		—		187,166
Other commercial real estate	332,042		13,319		13,847		—		37		359,245
Total commercial real estate	2,019,018		70,747		75,724		—		37		2,165,526

Residential mortgage:
Permanent mortgage	249,418		11,776		9,855		850,118		13,352		1,134,519
Permanent mortgages guaranteed by U.S. government agencies	—		—		—		168,883		510		169,393
Home equity	—		—		—		709,518		5,550		715,068
Total residential mortgage	249,418		11,776		9,855		1,728,519		19,412		2,018,980

Consumer:
Indirect automobile	—		—		—		45,349		1,932		47,281
Other consumer	201,178		1,663		2,815		121,345		362		327,363
Total consumer	201,178		1,663		2,815		166,694		2,294		374,644

Total	$	9,637,747	$	150,103	$	110,083	$	1,912,618	$	21,816	$	11,832,367

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The following table summarizes the Company’s loan portfolio at December 31, 2011 by the risk grade categories (in thousands):



	Internally Risk Graded						Non-Graded
	Performing		Potential Problem		Nonaccrual		Performing		Nonaccrual		Total
Commercial:
Energy	$	2,003,288	$	1,417	$	336	$	—	$	—	$	2,005,041
Services	1,713,232		31,338		16,968		—		—		1,761,538
Wholesale/retail	912,090		34,156		21,180		—		—		967,426
Manufacturing	311,292		2,390		23,051		—		—		336,733
Healthcare	969,260		3,414		5,486		—		—		978,160
Integrated food services	203,555		756		—		—		—		204,311
Other commercial and industrial	281,645		10		1,738		18,416		52		301,861
Total commercial	6,394,362		73,481		68,759		18,416		52		6,555,070

Commercial real estate:
Construction and land development	252,936		27,244		61,874		—		—		342,054
Retail	499,295		3,244		6,863		—		—		509,402
Office	381,918		12,548		11,457		—		—		405,923
Multifamily	357,436		8,079		3,513		—		—		369,028
Industrial	277,906		280		—		—		—		278,186
Other commercial real estate	355,381		15,843		15,486		—		—		386,710
Total commercial real estate	2,124,872		67,238		99,193		—		—		2,291,303

Residential mortgage:
Permanent mortgage	294,478		15,879		7,441		817,921		17,925		1,153,644
Permanent mortgages guaranteed by U.S. government agencies	—		—		—		188,462		—		188,462
Home equity	—		—		—		628,020		4,401		632,421
Total residential mortgage	294,478		15,879		7,441		1,634,403		22,326		1,974,527

Consumer:
Indirect automobile	—		—		—		102,955		2,194		105,149
Other consumer	212,150		3,949		1,096		126,274		225		343,694
Total consumer	212,150		3,949		1,096		229,229		2,419		448,843

Total	$	9,025,862	$	160,547	$	176,489	$	1,882,048	$	24,797	$	11,269,743

- 91 -

The following table summarizes the Company’s loan portfolio at September 30, 2011 by the risk grade categories (in thousands):



	Internally Risk Graded						Non-Graded
	Performing		Potential Problem		Nonaccrual		Performing		Nonaccrual		Total
Commercial:
Energy	$	1,744,314	$	989	$	3,900	$	—	$	—	$	1,749,203
Services	1,820,569		34,197		18,181		—		—		1,872,947
Wholesale/retail	956,701		37,281		27,088		—		—		1,021,070
Manufacturing	342,878		2,505		27,691		—		—		373,074
Healthcare	905,129		3,502		5,715		—		—		914,346
Integrated food services	190,958		1,242		—		—		—		192,200
Other commercial and industrial	278,717		13		964		18,871		197		298,762
Total commercial	6,239,266		79,729		83,539		18,871		197		6,421,602

Commercial real estate:
Construction and land development	268,125		30,133		72,207		—		—		370,465
Retail	448,076		2,608		6,492		—		—		457,176
Office	395,891		14,426		11,967		—		—		422,284
Multifamily	375,253		9,015		4,036		—		—		388,304
Industrial	223,938		284		—		—		—		224,222
Other commercial real estate	377,688		17,348		15,346		—		—		410,382
Total commercial real estate	2,088,971		73,814		110,048		—		—		2,272,833

Residential mortgage:
Permanent mortgage	344,210		15,353		8,903		793,261		18,583		1,180,310
Permanent mortgages guaranteed by U.S. government agencies	—		—		—		173,540		—		173,540
Home equity	—		—		—		591,806		4,245		596,051
Total residential mortgage	344,210		15,353		8,903		1,558,607		22,828		1,949,901

Consumer:
Indirect automobile	—		—		—		127,878		2,418		130,296
Other consumer	215,643		3,319		1,389		129,433		153		349,937
Total consumer	215,643		3,319		1,389		257,311		2,571		480,233

Total	$	8,888,090	$	172,215	$	203,879	$	1,834,789	$	25,596	$	11,124,569

- 92 -

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.

A summary of risk-graded impaired loans follows (in thousands):

	As of										For the				For the
	September 30, 2012										Three Months Ended				Nine Months Ended
			Recorded Investment								September 30, 2012				September 30, 2012
	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	$	3,273	$	3,063	$	3,063	$	—	$	—	$	3,075	$	—	$	1,700	$	—
Services	13,135		10,099		9,978		121		120		10,111		—		13,534		—
Wholesale/retail	8,039		2,007		1,937		70		18		3,091		—		11,594		—
Manufacturing	6,548		2,283		2,283		—		—		7,257		—		12,667		—
Healthcare	4,395		3,305		2,159		1,146		66		3,308		—		4,396		—
Integrated food services	—		—		—		—		—		—		—		—		—
Other commercial and industrial	8,431		932		932		—		—		1,218		—		1,335		—
Total commercial	43,821		21,689		20,352		1,337		204		28,060		—		45,226		—

Commercial real estate:
Construction and land development	67,087		38,143		37,579		564		155		42,097		—		50,009		—
Retail	8,372		6,692		6,692		—		—		7,300		—		6,778		—
Office	13,736		9,833		9,608		225		21		10,211		—		10,645		—
Multifamily	3,259		3,145		3,145		—		—		3,182		—		3,329		—
Industrial	4,064		4,064		—		4,064		2,290		2,032		—		2,032		—
Other real estate loans	16,436		13,847		11,417		2,430		651		13,145		—		14,667		—
Total commercial real estate	112,954		75,724		68,441		7,283		3,117		77,967		—		87,460		—

Residential mortgage:
Permanent mortgage	10,721		9,855		9,554		301		217		8,533		—		8,648		—
Home equity	—		—		—		—		—		—		—		—		—
Total residential mortgage	10,721		9,855		9,554		301		217		8,533		—		8,648		—

Consumer:
Indirect automobile	—		—		—		—		—		—		—		—		—
Other consumer	4,857		2,815		2,686		129		129		3,643		—		1,956		—
Total consumer	4,857		2,815		2,686		129		129		3,643		—		1,956		—

Total	$	172,353	$	110,083	$	101,033	$	9,050	$	3,667	$	118,203	$	—	$	143,290	$	—

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

- 93 -

A summary of risk graded impaired loans at December 31, 2011 follows (in thousands):



			Recorded Investment
	Unpaid Principal Balance		Total		With No Allowance		With Allowance		Related Allowance
Commercial:
Energy	$	336	$	336	$	336	$	—	$	—
Services	26,916		16,968		16,200		768		360
Wholesale/retail	24,432		21,180		19,702		1,478		1,102
Manufacturing	26,186		23,051		23,051		—		—
Healthcare	6,825		5,486		5,412		74		74
Integrated food services	—		—		—		—		—
Other commercial and industrial	9,237		1,738		1,738		—		—
Total commercial	93,932		68,759		66,439		2,320		1,536

Commercial real estate:
Construction and land development	98,053		61,874		56,740		5,134		1,777
Retail	8,645		6,863		4,373		2,490		1,062
Office	14,588		11,457		9,567		1,890		291
Multifamily	3,512		3,513		3,513		—		—
Industrial	—		—		—		—		—
Other real estate loans	16,702		15,486		7,887		7,599		812
Total commercial real estate	141,500		99,193		82,080		17,113		3,942

Residential mortgage:
Permanent mortgage	8,697		7,441		4,980		2,461		298
Home equity	—		—		—		—		—
Total residential mortgage	8,697		7,441		4,980		2,461		298

Consumer:
Indirect automobile	—		—		—		—		—
Other consumer	1,727		1,096		1,096		—		—
Total consumer	1,727		1,096		1,096		—		—

Total	$	245,856	$	176,489	$	154,595	$	21,894	$	5,776

- 94 -

A summary of risk-graded impaired loans follows (in thousands):

	As of										For the				For the
	September 30, 2011										Three Months Ended				Nine Months Ended
			Recorded Investment								September 30, 2011				September 30, 2011
	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	$	3,900	$	3,900	$	3,900	$	—	$	—	$	2,123	$	—	$	2,183	$	—
Services	29,749		18,181		17,358		823		353		17,218		—		18,722		—
Wholesale/retail	32,226		27,088		25,345		1,743		1,104		26,113		—		17,787		—
Manufacturing	29,442		27,691		26,719		972		264		16,029		—		14,904		—
Healthcare	7,052		5,715		5,637		78		78		5,839		—		4,625		—
Integrated food services	—		—		—		—		—		—		—		7		—
Other commercial and industrial	8,462		964		964		—		—		1,031		—		2,705		—
Total commercial	110,831		83,539		79,923		3,616		1,799		68,353		—		60,933		—

Commercial real estate:
Construction and land development	110,052		72,207		62,056		10,151		1,978		74,236		—		85,893		—
Retail	8,161		6,492		3,631		2,861		1,122		5,567		—		5,735		—
Office	14,199		11,967		11,405		562		76		11,720		—		15,811		—
Multifamily	5,326		4,036		4,036		—		—		4,377		—		5,381		—
Industrial	—		—		—		—		—		—		—		2,044		—
Other real estate loans	16,197		15,346		6,738		8,608		1,023		14,306		—		15,345		—
Total commercial real estate	153,935		110,048		87,866		22,182		4,199		110,206		—		130,209		—

Residential mortgage:
Permanent mortgage	10,156		8,903		4,626		4,277		635		9,894		—		10,484		—
Home equity	—		—		—		—		—		—		—		—		—
Total residential mortgage	10,156		8,903		4,626		4,277		635		9,894		—		10,484		—

Consumer:
Indirect automobile	—		—		—		—		—		—		—		—		—
Other consumer	1,917		1,389		1,261		128		67		1,655		—		1,570		—
Total consumer	1,917		1,389		1,261		128		67		1,655		—		1,570		—

Total	$	276,839	$	203,879	$	173,676	$	30,203	$	6,700	$	190,108	$	—	$	203,196	$	—

- 95 -

Troubled Debt Restructurings

Loans to distressed borrowers may be modified in troubled debt restructurings ("TDRs"). All distressed commercial and commercial real estate loans are placed on nonaccrual status. Modifications of nonaccruing loans to distressed borrowers generally consist of extension of payment terms, renewal of matured nonaccruing loans or interest rate concession. Principal and accrued but unpaid interest is not forgiven. Renewed or modified nonaccruing loans are charged off when the loan balance is no longer covered by the paying capacity of the borrower based on a quarterly evaluation of cash resources and collateral value. Renewed or modified nonperforming loans generally remain on nonaccrual status until full collection of principal and interest in accordance with original terms, including principal previously charged off, is probable. In addition to TDRs classified as nonaccrual, certain residential mortgage loans may be modified, primarily in accordance with U.S. government agency guidelines. These loans continue to accrue interest in accordance with the modified loan terms based on the U.S. government agency guarantee. Consumer loans to troubled borrowers are not voluntarily modified.

The financial impact of troubled debt restructurings primarily consist of specific allowances for credit losses and principal amounts charged off. Internally risk graded loans that have been modified in troubled debt restructurings generally remain classified as nonaccruing. Other financial impacts, such as foregone interest, are not material to the financial statements.

A summary of troubled debt restructurings ("TDRs") by accruing status as of September 30, 2012 were as follows (in thousands):



	As of								Amounts Charged-off
	September 30, 2012								During:
	Recorded Investment		Performing in Accordance With Modified Terms		Not Performing in Accordance With Modified Terms		Specific Allowance		Three Months Ended Sept. 30, 2012		Nine Months Ended Sept. 30, 2012
Nonaccruing TDRs:

Commercial:
Energy	$	—	$	—	$	—	$	—	$	—	$	—
Services	2,594		2,109		485		—		—		—
Wholesale/retail	1,557		1,385		172		18		—		—
Manufacturing	—		—		—		—		—		—
Healthcare	72		72		—		—		—		—
Integrated food services	—		—		—		—		—		—
Other commercial and industrial	678		—		678		—		—		—
Total commercial	4,901		3,566		1,335		18		—		—

Commercial real estate:
Construction and land development	18,406		9,842		8,564		76		982		3,252
Retail	3,448		3,448		—		—		150		150
Office	3,376		1,368		2,008		—		—		269
Multifamily	—		—		—		—		—		—
Industrial	—		—		—		—		—		—
Other real estate loans	5,310		3,574		1,736		55		87		2,269
Total commercial real estate	30,540		18,232		12,308		131		1,219		5,940

- 96 -



	As of								Amounts Charged-off
	September 30, 2012								During:
	Recorded Investment		Performing in Accordance With Modified Terms		Not Performing in Accordance With Modified Terms		Specific Allowance		Three Months Ended Sept. 30, 2012		Nine Months Ended Sept. 30, 2012

Residential mortgage:
Permanent mortgage	6,925		4,245		2,680		54		—		24
Home equity	—		—		—		—		—		—
Total residential mortgage	6,925		4,245		2,680		54		—		24

Consumer:
Indirect automobile	—		—		—		—		—		—
Other consumer	2,213		443		1,770		88		1,345		1,345
Total consumer	2,213		443		1,770		88		1,345		1,345

Total nonaccruing TDRs	$	44,579	$	26,486	$	18,093	$	291	$	2,564	$	7,309

Accruing TDRs:

Residential mortgage:
Permanent mortgage	3,402		2,225		1,177		—		—		83
Permanent mortgages guaranteed by U.S. government agencies	24,590		7,684		16,906		—		—		—
Total residential mortgage	27,992		9,909		18,083		—		—		83

Total accruing TDRs	27,992		9,909		18,083		—		—		83

Total TDRs	$	72,571	$	36,395	$	36,176	$	291	$	2,564	$	7,392

- 97 -

A summary of troubled debt restructurings by accruing status as of December 31, 2011 were as follows (in thousands):



	As of
	December 31, 2011
	Recorded Investment		Performing in Accordance With Modified Terms		Not Performing in Accordance With Modified Terms		Specific Allowance
Nonaccruing TDRs:

Commercial:
Energy	$	—	$	—	$	—	$	—
Services	3,529		1,907		1,622		—
Wholesale/retail	1,739		961		778		24
Manufacturing	—		—		—		—
Healthcare	—		—		—		—
Integrated food services	—		—		—		—
Other commercial and industrial	960		—		960		—
Total commercial	6,228		2,868		3,360		24

Commercial real estate:
Construction and land development	25,890		3,585		22,305		1,577
Retail	1,070		—		1,070		—
Office	2,496		1,134		1,362		215
Multifamily	—		—		—		—
Industrial	—		—		—		—
Other real estate loans	8,171		387		7,784		662
Total commercial real estate	37,627		5,106		32,521		2,454

Residential mortgage:
Permanent mortgage	6,283		1,396		4,887		282
Home equity	—		—		—		—
Total residential mortgage	6,283		1,396		4,887		282

Consumer:
Indirect automobile	—		—		—		—
Other consumer	168		168		—		—
Total consumer	168		168		—		—

Total nonaccuring TDRs	$	50,306	$	9,538	$	40,768	$	2,760

- 98 -



	As of
	December 31, 2011
	Recorded Investment		Performing in Accordance With Modified Terms		Not Performing in Accordance With Modified Terms		Specific Allowance

Accruing TDRs:

Residential mortgage:
Permanent mortgage	3,917		2,445		1,472		—
Permanent mortgages guaranteed by U.S. government agencies	28,974		10,853		18,121		—
Total residential mortgage	32,891		13,298		19,593		—

Total accruing TDRs	32,891		13,298		19,593		—

Total TDRs	$	83,197	$	22,836	$	60,361	$	2,760

- 99 -

A summary of troubled debt restructurings by accruing status as of September 30, 2011 were as follows (in thousands):



	As of								Amounts Charged-off
	September 30, 2011								During:
	Recorded Investment		Performing in Accordance With Modified Terms		Not Performing in Accordance With Modified Terms		Specific Allowance		Three Months Ended Sept. 30, 2011		Nine Months Ended Sept. 30, 2011
Nonaccruing TDRs:

Commercial:
Energy	$	—	$	—	$	—	$	—	$	—	$	—
Services	3,747		2,010		1,737		—		—		301
Wholesale/retail	1,804		1,579		225		26		—		—
Manufacturing	—		—		—		—		—		—
Healthcare	65		65		—		—		—		—
Integrated food services	—		—		—		—		—		—
Other commercial and industrial	963		—		963		—		—		—
Total commercial	6,579		3,654		2,925		26		—		301

Commercial real estate:
Construction and land development	28,902		5,111		23,791		1,069		427		1,066
Retail	1,450		—		1,450		—		502		502
Office	3,085		1,421		1,664		—		—		—
Multifamily	—		—		—		—		—		—
Industrial	—		—		—		—		—		—
Other real estate loans	8,209		2,317		5,892		726		—		—
Total commercial real estate	41,646		8,849		32,797		1,795		929		1,568

Residential mortgage:
Permanent mortgage	6,201		6,201		—		282		—		54
Home equity	—		—		—		—		—		—
Total residential mortgage	6,201		6,201		—		282		—		54

Consumer:
Indirect automobile	—		—		—		—		—		—
Other consumer	38		12		26		—		—		—
Total consumer	38		12		26		—		—		—

Total nonaccruing TDRs	$	54,464	$	18,716	$	35,748	$	2,103	$	929	$	1,923

- 100 -



	As of								Amounts Charged-off
	September 30, 2011								During:
	Recorded Investment		Performing in Accordance With Modified Terms		Not Performing in Accordance With Modified Terms		Specific Allowance		Three Months Ended Sept. 30, 2011		Nine Months Ended Sept. 30, 2011

Accruing TDRs:

Residential mortgage:
Permanent mortgage	3,804		2,773		1,031		—		121		201
Permanent mortgages guaranteed by U.S. government agencies	26,670		10,873		15,797		—		—		—
Total residential mortgage	30,474		13,646		16,828		—		121		201

Total accruing TDRs	30,474		13,646		16,828		—		121		201

Total TDRs	$	84,938	$	32,362	$	52,576	$	2,103	$	1,050	$	2,124

- 101 -

Troubled debt restructurings generally consist of interest rates concessions, payment stream concessions or a combination of concessions to distressed borrowers. The following tables detail the recorded balance of loans at September 30, 2012 by class that were restructured during the three and nine months ended September 30, 2012 by primary type of concession (in thousands):



	Three Months Ended Sept. 30, 2012
	Accruing		Nonaccrual								Total
	Combination & Other		Interest Rate		Payment Stream		Combination & Other		Total
Commercial:
Energy	$	—	$	—	$	—	$	—	$	—	$	—
Services	—		875		—		—		875		875
Wholesale/retail	—		—		—		—		—		—
Manufacturing	—		—		—		—		—		—
Healthcare	—		—		—		—		—		—
Integrated food services	—		—		—		—		—		—
Other commercial and industrial	—		—		—		—		—		—
Total commercial	—		875		—		—		875		875

Commercial real estate:
Construction and land development	—		—		6,598		—		6,598		6,598
Retail	—		—		—		—		—		—
Office	—		—		—		—		—		—
Multifamily	—		—		—		—		—		—
Industrial	—		—		—		—		—		—
Other real estate loans	—		—		—		—		—		—
Total commercial real estate	—		—		6,598		—		6,598		6,598

Residential mortgage:
Permanent mortgage	—		—		—		—		—		—
Permanent mortgage guaranteed by U.S. government agencies	961		—		—		—		—		961
Home equity	—		—		—		—		—		—
Total residential mortgage	961		—		—		—		—		961

Consumer:
Indirect automobile	—		—		—		—		—		—
Other consumer	—		87		—		—		87		87
Total consumer	—		87		—		—		87		87

Total	$	961	$	962	$	6,598	$	—	$	7,560	$	8,521

- 102 -



	Nine Months Ended Sept. 30, 2012
	Accruing		Nonaccrual								Total
	Combination & Other		Interest Rate		Payment Stream		Combination & Other		Total
Commercial:
Energy	$	—	$	—	$	—	$	—	$	—	$	—
Services	—		875		70		—		945		945
Wholesale/retail	—		—		—		—		—		—
Manufacturing	—		—		—		—		—		—
Healthcare	—		—		—		72		72		72
Integrated food services	—		—		—		—		—		—
Other commercial and industrial	—		—		—		—		—		—
Total commercial	—		875		70		72		1,017		1,017

Commercial real estate:
Construction and land development	—		1,280		6,598		—		7,878		7,878
Retail	—		2,398		—		—		2,398		2,398
Office	—		1,368		—		—		1,368		1,368
Multifamily	—		—		—		—		—		—
Industrial	—		—		—		—		—		—
Other real estate loans	—		—		1,605		—		1,605		1,605
Total commercial real estate	—		5,046		8,203		—		13,249		13,249

Residential mortgage:
Permanent mortgage	151		—		—		781		781		932
Permanent mortgage guaranteed by U.S. government agencies	4,465		—		—		—		—		4,465
Home equity	—		—		—		—		—		—
Total residential mortgage	4,616		—		—		781		781		5,397

Consumer:
Indirect automobile	—		—		—		—		—		—
Other consumer	—		452		—		1,630		2,082		2,082
Total consumer	—		452		—		1,630		2,082		2,082

Total	$	4,616	$	6,373	$	8,273	$	2,483	$	17,129	$	21,745

- 103 -

Troubled debt restructurings generally consist of interest rates 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 the three and nine months ended September 30, 2011 by primary type of concession (in thousands):



	Three Months Ended Sept. 30, 2011
	Accruing		Nonaccrual								Total
	Combination & Other		Interest Rate		Payment Stream		Combination & Other		Total
Commercial:
Energy	$	—	$	—	$	—	$	—	$	—	$	—
Services	—		—		—		924		924		924
Wholesale/retail	—		—		—		525		525		525
Manufacturing	—		—		—		—		—		—
Healthcare	—		—		—		65		65		65
Integrated food services	—		—		—		—		—		—
Other commercial and industrial	—		—		—		—		—		—
Total commercial	—		—		—		1,514		1,514		1,514

Commercial real estate:
Construction and land development	—		—		—		3,694		3,694		3,694
Retail	—		—		—		—		—		—
Office	—		—		—		31		31		31
Multifamily	—		—		—		—		—		—
Industrial	—		—		—		—		—		—
Other real estate loans	—		—		—		333		333		333
Total commercial real estate	—		—		—		4,058		4,058		3,725

Residential mortgage:
Permanent mortgage	431		—		—		2,203		2,203		2,634
Permanent mortgage guaranteed by U.S. government agencies	6,366		—		—		—		—		6,366
Home equity	—		—		—		—		—		—
Total residential mortgage	6,797		—		—		2,203		2,203		9,000

Consumer:
Indirect automobile	—		—		—		—		—		—
Other consumer	—		—		—		12		12		12
Total consumer	—		—		—		12		12		—

Total	$	6,797	$	—	$	—	$	7,787	$	7,787	$	14,239

- 104 -



	Nine Months Ended Sept. 30, 2011
	Accruing		Nonaccrual								Total
	Combination & Other		Interest Rate		Payment Stream		Combination & Other		Total
Commercial:
Energy	$	—	$	—	$	—	$	—	$	—	$	—
Services	—		—		—		924		924		924
Wholesale/retail	—		—		—		525		525		525
Manufacturing	—		—		—		—		—		—
Healthcare	—		—		—		65		65		65
Integrated food services	—		—		—		—		—		—
Other commercial and industrial	—		—		—		—		—		—
Total commercial	—		—		—		1,514		1,514		1,514

Commercial real estate:
Construction and land development	—		—		—		6,733		6,733		6,733
Retail	—		—		—		—		—		—
Office	—		—		—		31		31		31
Multifamily	—		—		—		—		—		—
Industrial	—		—		—		—		—		—
Other real estate loans	—		—		—		2,398		2,398		2,398
Total commercial real estate	—		—		—		9,162		9,162		9,162

Residential mortgage:
Permanent mortgage	500		—		—		3,910		3,910		4,410
Permanent mortgage guaranteed by U.S. government agencies	13,123		—		—		—		—		13,123
Home equity	—		—		—		—		—		—
Total residential mortgage	13,623		—		—		3,910		3,910		17,533

Consumer:
Indirect automobile	—		—		—		—		—		—
Other consumer	—		—		—		39		39		39
Total consumer	—		—		—		39		39		39

Total	$	13,623	$	—	$	—	$	14,625	$	14,625	$	28,248

- 105 -

The following table summarizes, by loan class, the recorded investment at September 30, 2012 of loans modified as TDRs within the previous 12 months and for which there was a payment default during the three and nine months ended September 30, 2012 (in thousands):



	Three Months Ended Sept. 30, 2012						Nine Months Ended Sept. 30, 2012
	Accruing		Nonaccrual		Total		Accruing		Nonaccrual		Total
Commercial:
Energy	$	—	$	—	$	—	$	—	$	—	$	—
Services	—		70		70		—		70		70
Wholesale/retail	—		—		—		—		—		—
Manufacturing	—		—		—		—		—		—
Healthcare	—		—		—		—		—		—
Integrated food services	—		—		—		—		—		—
Other commercial and industrial	—		—		—		—		—		—
Total commercial	—		70		70		—		70		70

Commercial real estate:
Construction and land development	—		1,183		1,183		—		1,183		1,183
Retail	—		—		—		—		2,398		2,398
Office	—		—		—		—		1,368		1,368
Multifamily	—		—		—		—		—		—
Industrial	—		—		—		—		—		—
Other real estate loans	—		—		—		—		—		—
Total commercial real estate	—		1,183		1,183		—		4,949		4,949

Residential mortgage:
Permanent mortgage	151		—		151		151		—		151
Permanent mortgage guaranteed by U.S. government agencies	3,946		—		3,946		4,635		—		4,635
Home equity	—		—		—		—		—		—
Total residential mortgage	4,097		—		4,097		4,786		—		4,786

Consumer:
Indirect automobile	—		—		—		—		—		—
Other consumer	—		1,770		1,770		—		1,770		1,770
Total consumer	—		1,770		1,770		—		1,770		1,770

Total	$	4,097	$	3,023	$	7,120	$	4,786	$	6,789	$	11,575

A payment default is defined as being 30 days or more past due subsequent to the loan modification. Loans that experienced a payment default during the nine months ended September 30, 2012 above includes loans that were 30 days or more past due at any time during the period, but that are performing in accordance with the modified terms as of the balance sheet date.

- 106 -

The following table summarizes, by loan class, the recorded investment at September 30, 2011 of loans modified as TDRs within the previous 12 months and for which there was a payment default during the three and nine months ended September 30, 2011 (in thousands):



	Three Months Ended Sept. 30, 2011						Nine Months Ended Sept. 30, 2011
	Accruing		Nonaccrual		Total		Accruing		Nonaccrual		Total
Commercial:
Energy	$	—	$	—	$	—	$	—	$	—	$	—
Services	—		—		—		—		—		—
Wholesale/retail	—		—		—		—		—		—
Manufacturing	—		—		—		—		—		—
Healthcare	—		—		—		—		—		—
Integrated food services	—		—		—		—		—		—
Other commercial and industrial	—		—		—		—		—		—
Total commercial	—		—		—		—		—		—

Commercial real estate:
Construction and land development	—		2,888		2,888		—		3,120		3,120
Retail	—		—		—		—		—		—
Office	—		—		—		—		—		—
Multifamily	—		—		—		—		—		—
Industrial	—		—		—		—		—		—
Other real estate loans	—		258		258		—		258		258
Total commercial real estate	—		3,146		3,146		—		3,378		3,378

Residential mortgage:
Permanent mortgage	144		—		144		302		140		442
Permanent mortgage guaranteed by U.S. government agencies	4,907		—		4,907		7,856		—		7,856
Home equity	—		—		—		—		—		—
Total residential mortgage	5,051		—		5,051		8,158		140		8,298

Consumer:
Indirect automobile	—		—		—		—		—		—
Other consumer	—		26		26		—		26		26
Total consumer	—		26		26		—		26		26

Total	$	5,051	$	3,172	$	8,223	$	8,158	$	3,544	$	11,702

- 107 -

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 September 30, 2012 is as follows (in thousands):



			Past Due
	Current		30 to 89 Days		90 Days or More		Nonaccrual		Total
Commercial:
Energy	$	2,425,408	$	5,002	$	—	$	3,063	$	2,433,473
Services	1,880,350		741		538		10,099		1,891,728
Wholesale/retail	1,075,936		1,324		—		2,007		1,079,267
Manufacturing	359,975		834		—		2,283		363,092
Healthcare	1,029,208		4,775		—		3,305		1,037,288
Integrated food services	213,832		—		—		—		213,832
Other commercial and industrial	252,967		240		325		1,005		254,537
Total commercial	7,237,676		12,916		863		21,762		7,273,217

Commercial real estate:
Construction and land development	241,069		10,297		35		38,143		289,544
Retail	517,991		368		—		6,692		525,051
Office	394,984		1,190		—		9,833		406,007
Multifamily	395,333		35		—		3,145		398,513
Industrial	181,271		1,831		—		4,064		187,166
Other real estate loans	342,969		2,391		1		13,884		359,245
Total commercial real estate	2,073,617		16,112		36		75,761		2,165,526

Residential mortgage:
Permanent mortgage	1,093,109		17,953		250		23,207		1,134,519
Permanent mortgages guaranteed by U.S. government agencies	26,908		16,629		125,346		510		169,393
Home equity	706,557		2,961		—		5,550		715,068
Total residential mortgage	1,826,574		37,543		125,596		29,267		2,018,980

Consumer:
Indirect automobile	43,588		1,729		32		1,932		47,281
Other consumer	322,308		1,878		—		3,177		327,363
Total consumer	365,896		3,607		32		5,109		374,644

Total	$	11,503,763	$	70,178	$	126,527	$	131,899	$	11,832,367

- 108 -

A summary of loans currently performing, loans past due and accruing and nonaccrual loans as of December 31, 2011 is as follows (in thousands):



			Past Due
	Current		30 to 89 Days		90 Days or More		Nonaccrual		Total
Commercial:
Energy	$	2,003,192	$	1,065	$	448	$	336	$	2,005,041
Services	1,729,775		13,608		1,187		16,968		1,761,538
Wholesale/retail	945,776		470		—		21,180		967,426
Manufacturing	313,028		654		—		23,051		336,733
Healthcare	971,265		1,362		47		5,486		978,160
Integrated food services	204,306		—		5		—		204,311
Other commercial and industrial	298,105		1,966		—		1,790		301,861
Total commercial	6,465,447		19,125		1,687		68,811		6,555,070

Commercial real estate:
Construction and land development	278,901		1,279		—		61,874		342,054
Retail	502,167		372		—		6,863		509,402
Office	394,227		239		—		11,457		405,923
Multifamily	365,477		38		—		3,513		369,028
Industrial	278,186		—		—		—		278,186
Other real estate loans	367,643		3,444		137		15,486		386,710
Total commercial real estate	2,186,601		5,372		137		99,193		2,291,303

Residential mortgage:
Permanent mortgage	1,110,418		17,259		601		25,366		1,153,644
Permanent mortgages guaranteed by U.S. government agencies	20,998		12,163		155,301		—		188,462
Home equity	624,942		3,036		42		4,401		632,421
Total residential mortgage	1,756,358		32,458		155,944		29,767		1,974,527

Consumer:
Indirect automobile	98,345		4,581		29		2,194		105,149
Other consumer	340,087		2,286		—		1,321		343,694
Total consumer	438,432		6,867		29		3,515		448,843

Total	$	10,846,838	$	63,822	$	157,797	$	201,286	$	11,269,743

- 109 -

A summary of loans currently performing, loans past due and accruing and nonaccrual loans as of September 30, 2011 is as follows (in thousands):



			Past Due
	Current		30 to 89 Days		90 Days or More		Nonaccrual		Total
Commercial:
Energy	$	1,744,256	$	599	$	448	$	3,900	$	1,749,203
Services	1,847,318		6,980		468		18,181		1,872,947
Wholesale/retail	980,829		12,880		273		27,088		1,021,070
Manufacturing	345,355		28		—		27,691		373,074
Healthcare	908,542		89		—		5,715		914,346
Integrated food services	192,179		21		—		—		192,200
Other commercial and industrial	297,016		585		—		1,161		298,762
Total commercial	6,315,495		21,182		1,189		83,736		6,421,602

Commercial real estate:
Construction and land development	297,573		685		—		72,207		370,465
Retail	447,820		2,864		—		6,492		457,176
Office	409,965		352		—		11,967		422,284
Multifamily	384,268		—		—		4,036		388,304
Industrial	224,222		—		—		—		224,222
Other real estate loans	387,848		7,188		—		15,346		410,382
Total commercial real estate	2,151,696		11,089		—		110,048		2,272,833

Residential mortgage:
Permanent mortgage	1,130,567		22,127		130		27,486		1,180,310
Permanent mortgages guaranteed by U.S. government agencies	25,234		8,414		139,892		—		173,540
Home equity	589,656		2,150		—		4,245		596,051
Total residential mortgage	1,745,457		32,691		140,022		31,731		1,949,901

Consumer:
Indirect automobile	123,160		4,718		—		2,418		130,296
Other consumer	347,362		951		82		1,542		349,937
Total consumer	470,522		5,669		82		3,960		480,233

Total	$	10,683,170	$	70,631	$	141,293	$	229,475	$	11,124,569

( 5 ) Acquisitions

On August 15, 2012, the Company acquired a majority voting interest in a Delaware limited liability corporation and its wholly-owned subsidiary, a Tulsa-based aircraft parts supplier and repair facility.

On August 19, 2012, the Company acquired The Milestone Group, Inc. ("Milestone"), a Denver-based Registered Investment Adviser that provides wealth management services to high net worth customers in Colorado and Nebraska. Milestone manages approximately $1.3 billion in equity and fixed income securities for customers.

The purchase price for these acquisitions totaled $41 million , including $29 million paid in cash and $12 million of contingent consideration. The preliminary purchase price allocation included $25 million of identifiable intangible assets and $23 million of goodwill. The pro-forma impact of these transactions was not material to the Company's consolidated financial statements.

- 110 -

( 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 held for investment. All residential mortgage loans originated for sale by the Company are carried at fair value based on sales commitments and market quotes. Changes in the fair value of mortgage loans held for sale are included in Other operating revenue – Mortgage banking revenue. Residential mortgage loans held for sale also includes the fair value of residential mortgage loan commitments and forward sale commitments which are considered derivative contracts that have not been designated as hedging instruments. 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 loans 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, 2012					December 31, 2011					September 30, 2011
	Unpaid Principal Balance/ Notional		Fair Value			Unpaid Principal Balance/ Notional		Fair Value			Unpaid Principal Balance/ Notional		Fair Value
Residential mortgage loans held for sale	$	294,794	$	313,927		$	177,319	$	184,816		$	239,439	$	250,527
Residential mortgage loan commitments	452,129		22,319			189,770		6,597			313,574		11,176
Forward sales contracts	722,043		(11,144		)	349,447		(3,288		)	541,764		(5,306		)
			$	325,102				$	188,125				$	256,397

No residential mortgage loans held for sale were 90 days or more past due or considered impaired as of September 30, 2012 , December 31, 2011 or September 30, 2011 . No credit losses were recognized on residential mortgage loans held for sale for the three and nine month periods ended September 30, 2012 and 2011 .

Mortgage banking revenue was follows (in thousands):

	Three Months Ended						Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Originating and marketing revenue:
Residential mortgages loan held for sale	$	40,463		$	16,142		$	85,261		$	39,515
Residential mortgage loan commitments	6,512			8,383			15,722			8,925
Forward sales contracts	(6,618		)	(4,822		)	(7,856		)	(11,799		)
Total originating and marketing revenue	40,357			19,703			93,127			36,641
Servicing revenue	9,909			9,790			29,765			29,564
Total mortgage banking revenue	$	50,266		$	29,493		$	122,892		$	66,205

Originating and marketing 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 related to residential mortgage loan commitments and forward sales contracts. Servicing revenue includes servicing fee income and late charges on loans serviced for others.

- 111 -

Residential Mortgage Servicing

Mortgage servicing rights may be recognized when mortgage loans are originated pursuant to an existing plan for sale or, if no such plan exists, when the mortgage loans are sold. Mortgage servicing rights may also be purchased. Both originated or 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, 2012			December 31, 2011			September 30, 2011
Number of residential mortgage loans serviced for others	97,465			95,841			95,831
Outstanding principal balance of residential mortgage loans serviced for others	$	11,756,350		$	11,300,986		$	11,249,503
Weighted average interest rate	4.85		%	5.19		%	5.29		%
Remaining term (in months)	289			290			286

Activity in capitalized mortgage servicing rights during the three months ended September 30, 2012 is as follows

(in thousands):



	Purchased			Originated			Total
Balance at June 30, 2012	$	16,361		$	75,422		$	91,783
Additions, net	—			12,107			12,107
Change in fair value due to loan runoff	(998		)	(3,663		)	(4,661		)
Change in fair value due to market changes	(2,648		)	(6,928		)	(9,576		)
Balance, September 30, 2012	$	12,715		$	76,938		$	89,653

Activity in capitalized mortgage servicing rights during the nine months ended September 30, 2012 is as follows (in thousands):



	Purchased			Originated			Total
Balance, December 31, 2011	$	18,903		$	67,880		$	86,783
Additions, net	—			29,754			29,754
Change in fair value due to loan runoff	(2,958		)	(10,027		)	(12,985		)
Change in fair value due to market changes	(3,230		)	(10,669		)	(13,899		)
Balance, September 30, 2012	$	12,715		$	76,938		$	89,653

Activity in capitalized mortgage servicing rights during the three months ended September 30, 2011 is as follows (in thousands):



	Purchased			Originated			Total
Balance at June 30, 2011	$	32,866		$	76,326		$	109,192
Additions, net	—			7,199			7,199
Change in fair value due to loan runoff	(1,034		)	(2,587		)	(3,621		)
Change in fair value due to market changes	(10,395		)	(14,427		)	(24,822		)
Balance, September 30, 2011	$	21,437		$	66,511		$	87,948

- 112 -

Activity in capitalized mortgage servicing rights during the nine months ended September 30, 2011 is as follows (in thousands):



	Purchased			Originated			Total
Balance, December 31, 2010	$	37,900		$	77,823		$	115,723
Additions, net	—			17,966			17,966
Change in fair value due to loan runoff	(3,585		)	(6,970		)	(10,555		)
Change in fair value due to market changes	(12,878		)	(22,308		)	(35,186		)
Balance, September 30, 2011	$	21,437		$	66,511		$	87,948

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

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



	September 30, 2012	December 31, 2011	September 30, 2011
Discount rate – risk-free rate plus a market premium	10.32%	10.34%	10.3%
Prepayment rate – based upon loan interest rate, original term and loan type	9.14% - 46.42%	10.88% - 49.68%	11.33% - 47.70%
Loan servicing costs – annually per loan based upon loan type	$55 - $105	$55 - $105	$55 - $105
Escrow earnings rate – indexed to rates paid on deposit accounts with comparable average life	0.77%	1.21%	1.26%

The Company is exposed to interest rate risk as benchmark residential mortgage interest rates directly affect the prepayment speeds used in valuing our mortgage servicing rights, which is partially managed through forward sales of residential mortgage-backed securities and forward sales contracts. 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 daily for changes in market conditions and adjusted to better correlate with actual performance of BOK Financial’s servicing portfolio.

Stratification of the residential mortgage loan servicing portfolio and outstanding principal of loans serviced for others by interest rate at September 30, 2012 follows (in thousands):



	< 4.00%			4.00% - 4.99%			5.00% - 5.99%			> 5.99%			Total
Fair value	$	22,949		$	40,754		$	20,473		$	5,477		$	89,653
Outstanding principal of loans serviced for others	$	2,418,398		$	4,250,803		$	3,329,014		$	1,758,135		$	11,756,350
Weighted average prepayment rate ¹	9.14		%	12.02		%	28.94		%	46.42		%	21.36		%


¹	Annual prepayment estimates based upon loan interest rate, original term and loan type. Weighted average prepayment rate is determined by weighting the prepayment speed for each loan by its unpaid principal balance.

The interest rate sensitivity of our mortgage servicing rights and securities and derivative contracts held as an economic hedge is modeled over a range of +/- 50 basis points. At September 30, 2012 , a 50 basis point increase in mortgage interest rates is expected to increase the fair value of our mortgage servicing rights, net of economic hedge by $2.2 million . A 50 basis point decrease in mortgage interest rates is expected to decrease the fair value of our mortgage servicing rights, net of economic hedge by $3.9 million . In the model, changes in the value of servicing rights due to changes in interest rates assume stable relationships between residential mortgage rates and prepayment speeds. Changes in market conditions can cause variations from these assumptions. These factors and others may cause changes in the value of our mortgage servicing rights to differ from our expectations.

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The aging status of our mortgage loans serviced for others by investor at September 30, 2012 follows (in thousands):



			Past Due
	Current		30 to 59 Days		60 to 89 Days		90 Days or More		Total
FHLMC	$	4,783,550	$	56,493	$	12,786	$	42,081	$	4,894,910
FNMA	2,301,369		26,034		6,524		20,044		2,353,971
GNMA	3,774,396		155,146		35,604		19,349		3,984,495
Other	457,172		9,839		2,611		53,352		522,974
Total	$	11,316,487	$	247,512	$	57,525	$	134,826	$	11,756,350

The Company has off-balance sheet credit risk related to residential mortgage loans sold to U.S. government agencies with recourse prior to 2008 under various community development programs. These loans consist of first lien, fixed-rate residential mortgage loans underwritten to standards approved by the agencies including full documentation and originated under programs available only for owner-occupied properties. However, these loans have a higher risk of delinquency and loss given default than traditional residential mortgage loans. The Company no longer sells residential mortgage loans with recourse other than obligations under standard representations and warranties. The recourse obligation relates to loan performance for the life of the loan and the Company is obligated to repurchase the loan at the time of foreclosure for the unpaid principal balance plus unpaid interest. The principal balance of residential mortgage loans sold subject to recourse obligations totaled $238 million at September 30, 2012 , $259 million at December 31, 2011 and $262 million at September 30, 2011 . A separate accrual for these off-balance sheet commitments is included in Other liabilities in the Consolidated Balance Sheets totaling $18 million at September 30, 2012 , $19 million at December 31, 2011 and $19 million at September 30, 2011 . At September 30, 2012 , approximately 5% of the loans sold with recourse with an outstanding principal balance of $12 million were either delinquent more than 90 days, in bankruptcy or in foreclosure and 6% with an outstanding balance of $15 million were past due 30 to 89 days. The provision for credit losses on loans sold with recourse is included in Mortgage banking costs in the Consolidated Statements of Earnings.

The activity in the allowance for losses on loans sold with recourse included in Other liabilities in the Consolidated Balance Sheets is summarized as follows (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Beginning balance	$	17,832		$	17,540		$	18,683		$	16,667
Provision for recourse losses	1,055			3,246			3,495			6,572
Loans charged off, net	(1,255		)	(2,264		)	(4,546		)	(4,717		)
Ending balance	$	17,632		$	18,522		$	17,632		$	18,522

The Company also has off-balance sheet credit risk for residential mortgage loans sold to government sponsored entities due to standard representations and warranties made under contractual agreements. At September 30, 2012 , we have unresolved deficiency requests from the agencies on 344 loans with an aggregate outstanding principal balance of $42 million . At December 31, 2011, the Company had unresolved deficiency requests from the agencies on 247 loans with an aggregate principal balance of $37 million . For the nine months ended September 30, 2012 , the Company has repurchased 41 loans for $4.7 million from the agencies and provided indemnification for 3 loans for $270 thousand . Losses incurred on these loans as of September 30, 2012 totaled $1.5 million . The Company has established an accrual for credit losses related to potential loan repurchases under representations and warranties that is included in Other liabilities in the Consolidated Balance Sheets and in Mortgage banking costs in the Consolidated Statements of Earnings. While the level of repurchases and indemnifications related to standard representations and warranties has remained low, the severity of the losses have trended higher. Accordingly, the Company increased its accrual for credit losses related to potential loan repurchases under representations and warranties to $4.8 million at September 30, 2012 . The accrual was $2.2 million at December 31, 2011.

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( 7 ) Employee Benefits

BOK Financial has sponsored a defined benefit Pension Plan for all employees who satisfied certain age and service requirements. Pension Plan benefits were curtailed as of April 1, 2006. The Company recognized periodic pension expense of $1.0 million for the three months ended September 30, 2012 and 2011 , respectively, and $2.9 million for the nine months ended September 30, 2012 and 2011 , respectively. The Company made no Pension Plan contributions during the nine months ended September 30, 2012 and 2011 .

Management has been advised that the maximum allowable contribution for 2012 is $28 million. No minimum contribution is required for 2012.

( 8 ) Commitments and Contingent Liabilities

Litigation Contingencies

In 2010, the Bank was named as a defendant in three class actions alleging that the manner in which the bank posted charges to its consumer deposit accounts was improper. These actions were consolidated and settled on November 23, 2011 in Multi-District Litigation pending in the United States District Court for the Southern District of Florida. The settlement was approved by the Court on August 29, 2012. The settlement amount of $19 million was paid to the plaintiff class on May 4, 2012, with payment going out to the class in November 2012. The settlement was fully accrued for in 2011.

In an opinion dated October 11, 2011, the Oklahoma Supreme Court invalidated, pursuant to a petition brought by certain taxpayers, a $7.1 million settlement agreement between the Bank and the City of Tulsa (“the City”). The agreement settled claims asserted by the Bank against the City and against the Tulsa Airports Improvement Trust ("the Trust") related to a defaulted loan made by the Bank to a start-up airline. The Trust agreed to purchase the loan and its collateral from the Bank in the event of a default by the airline. The settlement amount was fully accrued for in 2011 in the accrual for off-balance sheet credit risk. On July 18, 2012, the Company paid the $7.1 million to the City and is pursuing its claims against the Trust.

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 251,837 Visa Class B shares which are convertible into 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.

In July 2012, Visa announced it had reached an agreement in principle to resolve pending litigation and provide for settlement payments from the previously funded litigation escrow account. In conjunction with this agreement, Visa deposited an additional $150 million to the litigation escrow account which reduced the exchange rate to approximately 0.4206 Class A shares for each Class B share.

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.

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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 $8.1 million at September 30, 2012 . 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 limits both the amount and structure of these type of investments. As a result, the Company's private equity activity might be curtailed.

Consolidated tax credit entities represent the Company's interest in entities earning federal new market tax credits related to qualifying loans for which 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.

The Company also has interests in various unrelated alternative investments generally consisting of unconsolidated limited partnership interest in or loans to entities for which investment return is 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 September 30, 2012 , December 31, 2011 and September 30, 2011 is as follows (in thousands):



	September 30, 2012
	Loans		Other assets		Other liabilities		Other borrowings		Non-controlling interest
Consolidated:
Private equity funds	$	—	$	28,792	$	—	$	—	$	24,777
Tax credit entities	10,000		14,094		—		10,964		10,000
Other	—		9,024		—		—		2,041
Total consolidated	$	10,000	$	51,910	$	—	$	10,964	$	36,818

Unconsolidated:
Tax credit entities	$	17,486	$	69,717	$	36,433	$	—	$	—
Other	—		9,902		2,062		—		—
Total unconsolidated	$	—	$	79,619	$	38,495	$	—	$	—



	December 31, 2011
	Loans		Other assets		Other liabilities		Other borrowings		Non-controlling interest
Consolidated:
Private equity funds	$	—	$	30,902	$	—	$	—	$	26,042
Tax credit entities	10,000		14,483		—		10,964		10,000
Other	—		7,206		—		—		143
Total consolidated	$	10,000	$	52,591	$	—	$	10,964	$	36,185

Unconsolidated:
Tax credit entities	$	10,575	$	37,890	$	16,084	$	—	$	—
Other	—		10,950		2,194		—		—
Total unconsolidated	$	—	$	48,840	$	18,278	$	—	$	—

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	September 30, 2011
	Loans		Other assets		Other liabilities		Other borrowings		Non-controlling interest
Consolidated:
Private equity funds	$	—	$	29,113	$	—	$	—	$	24,761
Tax credit entities	10,000		14,612		—		10,964		10,000
Other	—		7,332		—		—		197
Total consolidated	$	10,000	$	51,057	$	—	$	10,964	$	34,958

Unconsolidated:
Tax credit entities	$	7,746	$	38,121	$	18,481	$	—	$	—
Other	—		12,207		2,435		—		—
Total unconsolidated	$	—	$	50,328	$	20,916	$	—	$	—

Other Commitments and Contingencies

At September 30, 2012 , Cavanal Hill Funds’ assets included $917 million of U.S. Treasury, $955 million of cash management and $379 million of 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, 2012 . 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 2012 or 2011 .

Cottonwood Valley Ventures, Inc. (“CVV, Inc.”), an indirectly wholly-owned subsidiary of BOK Financial, is being audited by the Oklahoma Tax Commission (“OTC”) for tax years 2007 through 2009. CVV, Inc. is a qualified venture capital company under the applicable Oklahoma statute. As authorized by the statute, CVV, Inc. guarantees transferable Oklahoma state income tax credits by providing direct debt financing to private companies which qualify as statutory business ventures. Due to certain statutory limitations on utilization of such credits, CVV, Inc. must sell the majority of the credits to provide the economic incentives provided for by the statute. During the third quarter of 2012, CVV, Inc. and credit purchasers settled the assessment related to the 2008 tax credits disallowed with no material adverse impact to the consolidated financial statements. Management does not anticipate that the remaining issue under audit will have a material adverse impact to the consolidated financial statements.

The Company agreed to guarantee rents totaling $28.7 million through September of 2017 to the City as owner of a building immediately adjacent to the Bank’s main office for space currently rented by third-party tenants in the building. All rent payments are current. Remaining guaranteed rents totaled $15.0 million at September 30, 2012 . Current leases expire or are subject to lessee termination options at various dates in 2013 and 2014. Our obligation under the agreement would be affected by lessee decisions to exercise these options. In return for this guarantee, the Company will receive 80% of net cash flow as defined in an agreement with the City through September 2017 from rental of space that was vacant at the inception of the agreement. The maximum amount that the Company may receive under this agreement is $4.5 million .

( 9 ) Shareholders’ Equity

On October 30, 2012, the Board of Directors of BOK Financial approved a quarterly cash dividend of $0.38 per common share. The quarterly dividend will be payable on or about November 30, 2012 to shareholders of record as of November 16, 2012. In addition, on October 30, 2012, the Board of Directors approved a special cash dividend of $1.00 per common share payable on or about November 30, 2012 to shareholders of record as of November 16, 2012.

Dividends declared during the three and nine months ended September 30, 2012 were $0.38 per share and $1.09 per share, respectively. Dividends declared during the three and nine months ended September 30, 2011 were $0.275 per share and $0.800 per share, respectively.

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Accumulated Other Comprehensive Income (Loss)

AOCI includes unrealized gains and losses on available for sale ("AFS") securities. Unrealized gain (loss) on AFS securities also includes 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 will be amortized over the estimated remaining life of the security as an adjustment to yield, offsetting the related accretion of discount 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. Accumulated losses on the interest rate lock hedge of the 2005 subordinated debt issuance will be reclassified into income over the ten-year life of the debt. Gains and losses in AOCI are net of deferred income taxes.

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

	Unrealized Gain (Loss) on
	Available for Sale Securities			Investment Securities Transferred from AFS			Employee Benefit Plans			Loss on Effective Cash Flow Hedges			Total
Balance, December 31, 2010	$	122,494		$	—		$	(13,777	)	$	(878	)	$	107,839
Net change in unrealized gains (losses)	97,753			—			—			—			97,753
Other-than-temporary impairment losses recognized in earnings	20,723			—			—			—			20,723
Transfer of net unrealized gain from AFS to investment securities	(12,999		)	12,999			—			—			—
Reclassification adjustment for net (gains) losses realized and included in earnings	(27,064		)	—			—			230			(26,834		)
Income tax expense (benefit)	(30,764		)	(5,057		)	—			(89		)	(35,910		)
Balance, September 30, 2011	$	170,143		$	7,942		$	(13,777	)	$	(737	)	$	163,571

Balance, December 31, 2011	$	135,740		$	6,673		$	(12,742	)	$	(692	)	$	128,979
Net change in unrealized gains (losses)	86,390			—			(292		)	—			86,098
Other-than-temporary impairment losses recognized in earnings	5,684			—			—			—			5,684
Amortization of unrealized gain on investments securities transferred from AFS	—			(5,430		)	—			—			(5,430		)
Reclassification adjustment for net(gains) losses realized and included in earnings	(32,779		)	—			—			399			(32,380		)
Income tax benefit (expense)	(23,066		)	2,550			113			(155		)	(20,558		)
Balance, September 30, 2012	$	171,969		$	3,793		$	(12,921	)	$	(448	)	$	162,393

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( 10 ) Earnings Per Share



(In thousands, except share and per share amounts)	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Numerator:
Net income attributable to BOK Financial Corp.	$	87,382		$	85,101		$	268,626		$	218,882
Earnings allocated to participating securities	(278		)	(680		)	(1,994		)	(1,700		)
Numerator for basic earnings per share – income available to common shareholders	87,104			84,421			266,632			217,182
Effect of reallocating undistributed earnings of participating securities	1			2			6			5
Numerator for diluted earnings per share – income available to common shareholders	$	87,105		$	84,423		$	266,638		$	217,187

Denominator:
Weighted average shares outstanding	68,183,171			68,372,082			68,204,078			68,403,652
Less: Participating securities included in weighted average shares outstanding	(216,471		)	(544,491		)	(499,735		)	(527,777		)
Denominator for basic earnings per common share	67,966,700			67,827,591			67,704,343			67,875,875
Dilutive effect of employee stock compensation plans ¹	368,289			209,828			277,215			251,879
Denominator for diluted earnings per common share	68,334,989			68,037,419			67,981,558			68,127,754

Basic earnings per share	$	1.28		$	1.24		$	3.94		$	3.20
Diluted earnings per share	$	1.27		$	1.24		$	3.92		$	3.19
¹ Excludes employee stock options with exercise prices greater than current market price.	87,749			773,080			270,288			771,922

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( 11 ) Reportable Segments

Reportable segments reconciliation to the Consolidated Financial Statements for the three months ended September 30, 2012 is as follows (in thousands):



	Commercial			Consumer			Wealth Management			Funds Management and Other			BOK Financial Consolidated
Net interest revenue from external sources	$	91,378		$	22,195		$	7,064		$	55,390		$	176,027
Net interest revenue (expense) from internal sources	(10,747		)	6,457			5,554			(1,264		)	—
Net interest revenue	80,631			28,652			12,618			54,126			176,027
Provision for (reduction of ) allowances for credit losses	3,253			485			509			(4,247		)	—
Net interest revenue after provision for (reduction of) allowances for credit losses	77,378			28,167			12,109			58,373			176,027
Other operating revenue	40,091			80,640			50,157			9,056			179,944
Other operating expense	62,633			74,067			53,867			31,773			222,340
Income before taxes	54,836			34,740			8,399			35,656			133,631
Federal and state income tax	21,331			13,514			3,267			7,666			45,778
Net income	33,505			21,226			5,132			27,990			87,853
Net income attributable to non-controlling interest	—			—			—			471			471
Net income attributable to BOK Financial Corp.	$	33,505		$	21,226		$	5,132		$	27,519		$	87,382

Average assets	$	10,134,288		$	5,705,781		$	4,301,283		$	6,446,820		$	26,588,172
Average invested capital	865,157			292,281			188,638			1,600,577			2,946,653

Performance measurements:
Return on average assets	1.32		%	1.48		%	0.47		%				1.31		%
Return on average invested capital	15.41		%	28.89		%	10.82		%				11.80		%
Efficiency ratio	51.88		%	61.66		%	86.05		%				61.12		%

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Reportable segments reconciliation to the Consolidated Financial Statements for the nine months ended September 30, 2012 is as follows (in thousands):



	Commercial			Consumer			Wealth Management			Funds Management and Other			BOK Financial Consolidated
Net interest revenue from external sources	$	274,411		$	69,154		$	21,340		$	166,052		$	530,957
Net interest revenue (expense) from internal sources	(33,667		)	18,462			15,834			(629		)	—
Net interest revenue	240,744			87,616			37,174			165,423			530,957
Provision for (reduction of) allowances for credit losses	10,393			6,137			1,680			(26,210		)	(8,000		)
Net interest revenue after provision for (reduction of) allowances for credit losses	230,351			81,479			35,494			191,633			538,957
Other operating revenue	131,042			205,400			148,105			18,938			503,485
Other operating expense	181,117			196,174			158,351			91,845			627,487
Income before taxes	180,276			90,705			25,248			118,726			414,955
Federal and state income tax	70,127			35,284			9,821			29,215			144,447
Net income	110,149			55,421			15,427			89,511			270,508
Net income attributable to non-controlling interest	—			—			—			1,882			1,882
Net income attributable to BOK Financial Corp.	$	110,149		$	55,421		$	15,427		$	87,629		$	268,626

Average assets	$	10,050,873		$	5,739,833		$	4,230,874		$	5,862,092		$	25,883,672
Average invested capital	866,346			289,337			180,234			1,547,854			2,883,771

Performance measurements:
Return on average assets	1.46		%	1.29		%	0.49		%				1.39		%
Return on average invested capital	16.98		%	25.61		%	11.43		%				12.44		%
Efficiency ratio	50.68		%	64.23		%	85.68		%				60.75		%

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Reportable segments reconciliation to the Consolidated Financial Statements for the three months ended September 30, 2011 is as follows (in thousands):



	Commercial			Consumer			Wealth Management			Funds Management and Other			BOK Financial Consolidated
Net interest revenue from external sources	$	85,560		$	24,553		$	7,113		$	58,158		$	175,384
Net interest revenue (expense) from internal sources	(6,702		)	8,108			4,682			(6,088		)	—
Net interest revenue	78,858			32,661			11,795			52,070			175,384
Provision for (reduction of) allowances for credit losses	5,041			3,837			1,247			(10,125		)	—
Net interest revenue after provision for (reduction of) allowances for credit losses	73,817			28,824			10,548			62,195			175,384
Other operating revenue	37,924			79,766			46,112			9,814			173,616
Other operating expense	57,509			84,520			49,982			28,524			220,535
Income before taxes	54,232			24,070			6,678			43,485			128,465
Federal and state income tax	21,096			9,363			2,598			9,949			43,006
Net income	33,136			14,707			4,080			33,536			85,459
Net income attributable to non-controlling interest	—			—			—			358			358
Net income attributable to BOK Financial Corp.	$	33,136		$	14,707		$	4,080		$	33,178		$	85,101
Average assets	$	9,526,993		$	5,914,337		$	4,254,954		$	4,925,454		$	24,621,738
Average invested capital	886,538			273,143			175,478			1,403,247			2,738,406
Performance measurements:
Return on average assets	1.38		%	0.99		%	0.38		%				1.37		%
Return on average invested capital	14.83		%	21.36		%	9.22		%				12.33		%
Efficiency ratio	49.24		%	65.41		%	86.48		%				60.02		%

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Reportable segments reconciliation to the Consolidated Financial Statements for the nine months ended September 30, 2011 is as follows (in thousands):



	Commercial			Consumer			Wealth Management			Funds Management and Other			BOK Financial Consolidated
Net interest revenue from external sources	$	254,143		$	64,574		$	23,263		$	178,044		$	520,024
Net interest revenue (expense) from internal sources	(23,420		)	25,188			11,348			(13,116		)	—
Net interest revenue	230,723			89,762			34,611			164,928			520,024
Provision for (reduction of) allowances for credit losses	16,646			9,568			2,308			(19,572		)	8,950
Net interest revenue after provision for (reduction of) allowances for credit losses	214,077			80,194			32,303			184,500			511,074
Other operating revenue	109,354			174,241			128,868			20,538			433,001
Other operating expense	170,708			208,082			141,084			81,166			601,040
Income before taxes	152,723			46,353			20,087			123,872			343,035
Federal and state income tax	59,409			18,031			7,814			35,861			121,115
Net income	93,314			28,322			12,273			88,011			221,920
Net income attributable to non-controlling interest	—			—			—			3,038			3,038
Net income attributable to BOK Financial Corp.	$	93,314		$	28,322		$	12,273		$	84,973		$	218,882

Average assets	$	9,222,883		$	5,965,955		$	3,995,054		$	4,925,924		$	24,109,816
Average invested capital	874,259			272,167			175,478			1,330,097			2,652,001

Performance measurements:
Return on average assets	1.35		%	0.63		%	0.41		%				1.21		%
Return on average invested capital	14.27		%	13.91		%	9.35		%				11.03		%
Efficiency ratio	50.20		%	72.62		%	86.66		%				60.99		%

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( 12 ) Fair Value Measurements

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

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

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

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


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


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


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


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

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

Transfers between levels are recognized as of the end of the reporting period. There were no transfers in or out of quoted prices in active markets for identical instruments, significant other observable inputs or significant unobservable inputs during the nine months ended September 30, 2012 and 2011 , respectively.

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 price provided by third-party pricing services at September 30, 2012 , December 31, 2011 or September 30, 2011.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair value of financial assets and liabilities that are measured on a recurring basis are as follows as of September 30, 2012 (in thousands):



	Total		Quoted Prices in Active Markets for Identical Instruments			Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:
Trading securities:
U.S. Government agency debentures	$	3,100	$	—		$	3,100	$	—
U.S. agency residential mortgage-backed securities	119,835		—			119,835		—
Municipal and other tax-exempt securities	58,150		—			58,150		—
Other trading securities	23,157		—			23,157		—
Total trading securities	204,242		—			204,242		—
Available for sale securities:
U.S. Treasury	1,002		1,002			—		—
Municipal and other tax-exempt	87,969		—			46,690		41,279
U.S. agency residential mortgage-backed securities	10,654,821		—			10,654,821		—
Privately issued residential mortgage-backed securities	331,722		—			331,722		—
Commercial mortgage-backed securities guaranteed by U.S. government agencies	339,095		—			339,095		—
Other debt securities	36,456		—			31,056		5,400
Perpetual preferred stock	25,288		—			25,288		—
Equity securities and mutual funds	30,081		7,837			22,244		—
Total available for sale securities	11,506,434		8,839			11,450,916		46,679
Fair value option securities:
U.S. agency residential mortgage-backed securities	305,445		—			305,445		—
Corporate debt securities	26,442		—			26,442		—
Total fair value option securities	331,887		—			331,887		—
Residential mortgage loans held for sale	325,102		—			325,102		—
Mortgage servicing rights ¹	89,653		—			—		89,653
Derivative contracts, net of cash margin ²	472,783		8,301		³	464,482		—
Other assets – private equity funds	28,792		—			—		28,792
Liabilities:
Derivative contracts, net of cash margin ²	435,497		—			435,497		—


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.


³	Represents exchange-traded energy derivative contracts.

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The fair value of financial assets and liabilities that are measured on a recurring basis are as follows as of December 31, 2011 (in thousands):



	Total		Quoted Prices in Active Markets for Identical Instruments			Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:
Trading securities:
U.S. Government agency debentures	$	22,203	$	—		$	22,203	$	—
U.S. agency residential mortgage-backed securities	12,379		—			12,379		—
Municipal and other tax-exempt securities	39,345		—			39,345		—
Other trading securities	2,873		—			2,696		177
Total trading securities	76,800		—			76,623		177
Available for sale securities:
U.S. Treasury	1,006		1,006			—		—
Municipal and other tax-exempt	68,837		—			26,484		42,353
U.S. agency residential mortgage-backed securities	9,588,177		—			9,588,177		—
Privately issued residential mortgage-backed securities	419,166		—			419,166		—
Other debt securities	36,495		—			30,595		5,900
Perpetual preferred stock	18,446		—			18,446		—
Equity securities and mutual funds	47,238		23,596			23,642		—
Total available for sale securities	10,179,365		24,602			10,106,510		48,253
Fair value option securities:
U.S. agency residential mortgage-backed securities	626,109		—			626,109		—
Corporate debt securities	25,117		—			25,117		—
Total fair value option securities	651,226		—			651,226		—
Residential mortgage loans held for sale	188,125		—			188,125		—
Mortgage servicing rights ¹	86,783		—			—		86,783
Derivative contracts, net of cash margin ²	293,859		457		³	293,402		—
Other assets – private equity funds	30,902		—			—		30,902
Liabilities:
Derivative contracts, net of cash margin ²	236,522		—			236,522		—


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.


³	Represents exchange-traded agricultural derivative contracts.

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The fair value of financial assets and liabilities that are measured on a recurring basis are as follows as of September 30, 2011 (in thousands):



	Total		Quoted Prices in Active Markets for Identical Instruments			Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:
Trading securities:
U.S. Government agency debentures	$	1,839	$	—		$	1,839	$	—
U.S. agency residential mortgage-backed securities	49,501		—			49,501		—
Municipal and other tax-exempt securities	57,431		—			57,431		—
Other trading securities	888		888			—		—
Total trading securities	109,659		888			108,771		—
Available for sale securities:
U.S. Treasury	1,006		1,006			—		—
Municipal and other tax-exempt	70,195		—			26,483		43,712
U.S. agency residential mortgage-backed securities	9,016,877		—			9,016,877		—
Privately issued residential mortgage-backed securities	457,332		—			457,332		—
Other debt securities	5,900		—			—		5,900
Perpetual preferred stock	19,080		—			19,080		—
Equity securities and mutual funds	49,241		29,827			19,414		—
Total available for sale securities	9,619,631		30,833			9,539,186		49,612
Fair value option securities:
U.S. agency residential mortgage-backed securities	672,191		—			672,191		—
Corporate debt securities	—		—			—		—
Total fair value option securities	672,191		—			672,191		—
Residential mortgage loans held for sale	256,397		—			256,397		—
Mortgage servicing rights ¹	87,948		—			—		87,948
Derivative contracts, net of cash margin ²	370,616		34,770		³	335,846		—
Other assets – private equity funds	29,113		—			—		29,113
Liabilities:
Derivative contracts, net of cash margin ²	341,822		—			341,822		—


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.


³	Represents exchange-traded energy derivative contracts

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 options 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 reference 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

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Management and Finance departments assess the appropriateness of these inputs monthly.

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 use significant other observable market inputs.

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

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

Residential Mortgage Loans Held for Sale

Residential mortgage loans held for sale are carried on the balance sheet at fair value. The fair values of residential mortgage loans held for sale are based upon quoted market prices of such loans sold in securitization transactions, including related unfunded loan commitments.

Other Assets - Private Equity Funds

The fair value of the portfolio investments of the Company's two private equity funds are based upon net asset value reported by the underlying funds, as adjusted by the general partner when necessary to represent the price that would be received to sell the assets. 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.

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A summary of quantitative information about assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of September 30, 2012 follows (in thousands):

Quantitative Information about Level 3 Recurring Fair Value Measurements

Par

Value

Amortized

Cost ⁶

Fair

Value

Valuation Technique(s)

Unobservable Input

Range

(Weighted Average)

Available for sale securities

Municipal and other tax-exempt securities

Investment grade

29,100

28,999

28,848

Discounted cash flows

Interest rate spread

1.00%-1.50% (1.25%)

98.85%-99.47% (99.13%)

Below investment grade

17,000

13,396

12,431

Discounted cash flows

Interest rate spread

7.20%-9.88% (7.77%)

⁴

73.06%-73.30% (73.13%)

Total municipal and other tax-exempt securities

46,100

42,395

41,279

Other debt securities

5,400

Discounted cash flows

Interest rate spread

1.70%-1.73% (1.71%)

⁵

100% (100%)

Other assets - private equity funds

N/A

28,792

Net asset value reported by underlying fund

N/A


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 75 to 80 basis points over average yields for comparable tax-exempt securities.


³	Represents fair value as a percentage of par value


⁴	Interest rate yields determined using a spread of 700 basis points over comparable municipal securities of varying durations.


⁵	Interest rate yields used to value investment grade taxable securities based on comparable short-term taxable securities which are generally yielding less than 1% .


⁶	Amortized cost reduced by other-than-temporary impairments recorded in earnings. See Note 2 for additional discussion.

The fair value of these securities measured at fair value using significant unobservable inputs are sensitive primarily to changes in interest rate spreads. At September 30, 2012 , for tax-exempt securities rated investment grade by all nationally-recognized rating agencies, a 100 basis point increase in the spreads over average yields for comparable securities would result in an additional decrease in the fair value of $285 thousand . For taxable securities rated investment grade by all nationally-recognized rating agencies, a 100 basis point increase in the spreads over average yield for comparable securities would result in an additional decrease in the fair value of $53 thousand . For municipal and other tax-exempt securities rated below investment grade by at least one of the nationally-recognized rating agencies, a 100 basis point increase in the spread over average yields for comparable securities would result in an additional decrease in the fair value of these securities of $363 thousand .

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The following represents the changes for the three months ended September 30, 2012 related to assets measured at fair value on a recurring basis using significant unobservable inputs (in thousands):



	Available for Sale Securities
	Municipal and other tax-exempt			Other debt securities		Other assets – private equity funds
Balance, June 30, 2012	$	41,662		$	5,388	$	31,492
Purchases and capital calls	—			—		476
Redemptions and distributions	1			—		(3,906		)
Gain (loss) recognized in earnings:
Gain on other assets, net	—			—		730
Gain on available for sale securities, net	—			—		—
Other-than-temporary impairment losses	—			—		—
Other comprehensive gain (loss)	(384		)	12		—
Balance, September 30, 2012	$	41,279		$	5,400	$	28,792

The following represents the changes for the nine months ended September 30, 2012 related to assets measured at fair value on a recurring basis using significant unobservable inputs (in thousands):



	Available for Sale Securities
	Municipal and other tax-exempt			Other debt securities			Other assets – private equity funds
Balance, December 31, 2011	$	42,353		$	5,900		$	30,902
Purchases and capital calls	—			—			2,385
Redemptions and distributions	(462		)	(500		)	(7,072		)
Gain (loss) recognized in earnings:
Gain on other assets, net	—			—			2,577
Gain on available for sale securities, net	1			—			—
Other-than-temporary impairment losses	—			—			—
Other comprehensive (loss)	(613		)	—			—
Balance, September 30, 2012	$	41,279		$	5,400		$	28,792

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A summary of quantitative information about Recurring Fair Value Measurements based on Significant Unobservable Inputs (Level 3) as of December 31, 2011 follows (in thousands):



Quantitative Information about Level 3 Recurring Fair Value Measurements


	Par Value		Amortized Cost ⁶		Fair Value		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)

Available for sale securities
Municipal and other tax-exempt securities
Investment grade	$	29,200	$	29,466	$	29,327	Discounted cash flows ¹	Interest rate spread	1.00%-1.50% (1.33%)	²
									98.79%-99.60% (99.24%)	³
Below investment grade	17,000		13,026		13,026		Discounted cash flows ¹	Interest rate spread	6.25%-9.58% (6.93%)	⁴
									76.45%-76.99% (76.62%)	³
Total municipal and other tax-exempt securities	46,200		42,492		42,353
Other debt securities	5,900		5,900		5,900		Discounted cash flows ¹	Interest rate spread	1.60%-1.80% (1.76%)	⁵
									100% (100%)	³

Other assets - private equity funds	N/A		N/A		30,902		Net asset value reported by underlying fund	Net asset value reported by underlying fund	N/A


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 75 to 80 basis points over average yields for comparable tax-exempt securities.


³	Represents fair value as a percentage of par value


⁴	Interest rate yields determined using a spread of 600 basis points over comparable municipal securities of varying durations.


⁵	Interest rate yields used to value investment grade taxable securities based on comparable short-term taxable securities which are generally yielding less than 1% .


⁶	Amortized cost reduced by other-than-temporary impairments recorded in earnings. See Note 2 for additional discussion.

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A summary of quantitative information about Recurring Fair Value Measurements based on Significant Unobservable Inputs (Level 3) as of September 30, 2011 follows (in thousands):



Quantitative Information about Level 3 Recurring Fair Value Measurements


	Par Value		Amortized Cost ⁶		Fair Value		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)

Available for sale securities
Municipal and other tax-exempt securities
Investment grade	$	29,750	$	29,643	$	29,532	Discounted cash flows ¹	Interest rate spread	1.00%-1.30% (1.21%)	²
									98.99%-98.48% (99.35%)	³
Below investment grade	17,000		14,063		14,180		Discounted cash flows ¹	Interest rate spread	6.25%-9.55% (6.66%)	⁴
									83.35%-83.57% (83.41%)	³
Total municipal and other tax-exempt securities	46,750		43,706		43,712
Other debt securities	5,900		5,900		5,900		Discounted cash flows ¹	Interest rate spread	1.60%-1.73% (1.70%)	⁵
									100% (100%)	³

Other assets - private equity funds	N/A		N/A		33,415		Net asset value reported by underlying fund	Net asset value reported by underlying fund	N/A


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 75 to 80 basis points over average yields for comparable tax-exempt securities.


³	Represents fair value as a percentage of par value


⁴	Interest rate yields determined using a spread of 600 basis points over comparable municipal securities of varying durations.


⁵	Interest rate yields used to value investment grade taxable securities based on comparable short-term taxable securities which are generally yielding less than 1% .


⁶	Amortized cost reduced by other-than-temporary impairments recorded in earnings. See Note 2 for additional discussion.

The following represents the changes for the three months ended September 30, 2011 related to assets measured at fair value on a recurring basis using significant unobservable inputs (in thousands):



	Available for Sale Securities
	Municipal and other tax-exempt			Other debt securities		Other assets – private equity funds
Balance, June 30, 2011	$	43,658		$	5,893	$	28,313
Purchases, and capital calls	—			—		813
Redemptions and distributions	(100		)	—		(714		)
Gain (loss) recognized in earnings
Brokerage and trading revenue	—			—		—
Gain (loss) on other assets, net	—			—		701
Gain on available for sale securities, net	1			—		—
Other-than-temporary impairment losses	—			—		—
Other comprehensive (loss)	153			7		—
Balance, September 30, 2011	$	43,712		$	5,900	$	29,113

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The following represents the changes for the nine months ended September 30, 2011 related to assets measured at fair value on a recurring basis using significant unobservable inputs (in thousands):



	Available for Sale Securities
	Municipal and other tax-exempt			Other debt securities			Other assets – private equity funds
Balance, December 31, 2010	$	47,093		$	6,400		$	25,436
Purchases and capital calls	7,520			—			2,465
Redemptions and distributions	(10,075		)	(500		)	(2,899		)
Gain (loss) recognized in earnings
Brokerage and trading revenue	(576		)	—			—
Gain (loss) on other assets, net	—			—			4,111
Gain on available for sale securities, net	19			—			—
Other-than-temporary impairment losses	(521		)	—			—
Other comprehensive (loss)	252			—			—
Balance, September 30, 2011	$	43,712		$	5,900		$	29,113

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

Assets measured at fair value on a non-recurring basis include pension plan assets, which are based on quoted prices in active markets for identical instruments, 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. In addition, goodwill impairment is evaluated based on the fair value of the Company's reporting units.

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 June 30, 2012 for which the fair value was adjusted during the nine months ended September 30, 2012 :



	Carrying Value at September 30, 2012						Fair Value Adjustments for the three months ended September 30, 2012 Recognized in:						Fair Value Adjustments for the nine months ended September 30, 2012 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		Gross charge-offs against accrual for recourse loans		Net losses and expenses of repossessed assets, net		Gross charge-offs against allowance for loan losses		Gross charge-offs against accrual for recourse loans		Net losses and expenses of repossessed assets, net
Impaired loans	$	—	$	25,521	$	1,655	$	3,915	$	199	$	—	$	10,797	$	394	$	—
Goodwill	—		—
Real estate and other repossessed assets	—		38,386		6,617		—		—		4,398		—		—		11,068

The fair value of collateral-dependent impaired loans 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 estimate 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. These inputs are developed by asset management and workout professional and approved by senior Credit Administration executives.

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A summary of quantitative information about Non-recurring Fair Value Measurements based on Significant Unobservable Inputs (Level 3) as of September 30, 2012 follows (in thousands):



Quantitative Information about Level 3 Non-recurring Fair Value Measurements
	Fair Value		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)

Impaired loans	$	1,655	Appraised value, as adjusted	Broker quotes and management's knowledge of industry and collateral.	N/A
Real estate and other repossessed assets	6,617		Listing value, less cost to sell	Marketability adjustments off appraised value	68%-100% (85%) ¹


¹	$796 thousand of real estate and other repossessed assets at September 30, 2012 are based on uncorroborated expert opinions or management's knowledge of the collateral or industry and do not have an independently appraised value.

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 September 30, 2011 for which the fair value was adjusted during the nine months ended September 30, 2011 :



	Carrying Value at September 30, 2011						Fair Value Adjustments for the Three Months Ended September 30, 2011 Recognized in:						Fair Value Adjustments for the Nine Months Ended September 30, 2011 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		Gross charge-offs against accrual for recourse loans		Net losses and expenses of repossessed assets, net		Gross charge-offs against allowance for loan losses		Gross charge-offs against accrual for recourse loans		Net losses and expenses of repossessed assets, net
Impaired loans	$	—	$	13,605	$	2,086	$	3,734	$	305	$	—	$	4,090	$	305	$	—
Real estate and other repossessed assets	—		24,968		—		—		—		4,052		—		—		11,683

A summary of quantitative information about Non-recurring Fair Value Measurements based on Significant Unobservable Inputs (Level 3) as of September 30, 2011 follows (in thousands):



Quantitative Information about Level 3 Non-recurring Fair Value Measurements
	Fair Value		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)

Impaired loans	$	2,086	Appraised value, as adjusted	Adjustments to appraised value	0%-41%(17%)

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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 September 30, 2012 (dollars in thousands):



	Carrying Value			Range of Contractual Yields	Average Re-pricing (in years)	Discount Rate		Estimated Fair Value
Cash and cash equivalents	$	615,494						$	615,494
Trading securities:
Obligations of the U.S. government	3,100							3,100
U.S. agency residential mortgage-backed securities	119,835							119,835
Municipal and other tax-exempt securities	58,150							58,150
Other trading securities	23,157							23,157
Total trading securities	204,242							204,242
Investment securities:
Municipal and other tax-exempt	155,144							159,464
U.S. agency residential mortgage-backed securities	91,911							95,128
Other debt securities	185,059							205,766
Total investment securities	432,114							460,358
Available for sale securities:
U.S. Treasury	1,002							1,002
Municipal and other tax-exempt	87,969							87,969
U.S. agency residential mortgage-backed securities	10,654,821							10,654,821
Privately issued residential mortgage-backed securities	331,722							331,722
Commercial mortgage-backed securities guaranteed by U.S. government agencies	339,095							339,095
Other debt securities	36,456							36,456
Perpetual preferred stock	25,288							25,288
Equity securities and mutual funds	30,081							30,081
Total available for sale securities	11,506,434							11,506,434
Fair value option securities:
U.S. agency residential mortgage-backed securities	305,445							305,445
Corporate debt securities	26,442							26,442
Total fair value option securities	331,887							331,887
Residential mortgage loans held for sale	325,102							325,102
Loans:
Commercial	7,273,217			0.25 - 30.00	0.64	0.58 - 3.50		7,232,761
Commercial real estate	2,165,526			0.38 - 18.00	0.93	1.30 - 3.17		2,142,239
Residential mortgage	2,018,980			0.38 - 18.00	3.31	0.99 - 3.17		2,084,251
Consumer	374,644			0.38 - 21.00	0.32	1.43 - 3.69		368,546
Total loans	11,832,367							11,827,797
Allowance for loan losses	(233,756		)					—
Net loans	11,598,611							11,827,797
Mortgage servicing rights	89,653							89,653
Derivative instruments with positive fair value, net of cash margin	472,783							472,783
Other assets – private equity funds	28,791							28,791
Deposits with no stated maturity	16,120,541							16,120,541
Time deposits	3,022,326			0.01 - 9.64	2.14	0.85 - 1.15		3,099,183
Other borrowings	3,429,575			0.09 - 5.25	—	0.09 - 2.67		3,420,135
Subordinated debentures	347,592			1.12 - 5.00	3.79	2.26	%	345,852
Derivative instruments with negative fair value, net of cash margin	435,497							435,497

- 135 -



	Carrying Value			Range of Contractual Yields	Average Re-pricing (in years)	Discount Rate		Estimated Fair Value
Cash and cash equivalents	$	986,365						$	986,365
Trading securities:
Obligations of the U.S. government	22,203							22,203
U.S. agency residential mortgage-backed securities	12,379							12,379
Municipal and other tax-exempt securities	39,345							39,345
Other trading securities	2,873							2,873
Total trading securities	76,800							76,800
Investment securities:
Municipal and other tax-exempt	128,697							133,670
U.S. agency residential mortgage-backed securities	121,704							120,536
Other debt securities	188,835							208,451
Total investment securities	439,236							462,657
Available for sale securities:
U.S. Treasury	1,006							1,006
Municipal and other tax-exempt	68,837							68,837
U.S. agency residential mortgage-backed securities	9,588,177							9,588,177
Privately issued residential mortgage-backed securities	419,166							419,166
Other debt securities	36,495							36,495
Perpetual preferred stock	18,446							18,446
Equity securities and mutual funds	47,238							47,238
Total available for sale securities	10,179,365							10,179,365
Fair value option securities:
U.S. agency residential mortgage-backed securities	626,109							626,109
Corporate debt securities	25,117							25,117
Total fair value option securities	651,226							651,226
Residential mortgage loans held for sale	188,125							188,125
Loans:
Commercial	6,571,454			0.25 - 30.00%	0.57	0.63 - 3.85%		6,517,795
Commercial real estate	2,279,909			0.38 - 18.00%	1.26	0.28 - 3.51%		2,267,375
Residential mortgage	1,970,461			0.38 - 18.00%	3.26	1.14 - 3.70%		2,034,898
Consumer	447,919			0.38 - 21.00%	0.42	1.88 - 3.88%		436,490
Total loans	11,269,743							11,256,558
Allowance for loan losses	(253,481		)					—
Net loans	11,016,262							11,256,558
Mortgage servicing rights	86,783							86,783
Derivative instruments with positive fair value, net of cash margin	293,859							293,859
Other assets – private equity funds	30,902							30,902
Deposits with no stated maturity	15,380,598							15,380,598
Time deposits	3,381,982			0.01 - 9.64%	2.07	1.02 - 1.43%		3,441,610
Other borrowings	2,370,867			0.25 - 6.58%	—	0.04 - 2.76%		2,369,224
Subordinated debentures	398,881			5.19 - 5.82%	1.44	3.29	%	411,243
Derivative instruments with negative fair value, net of cash margin	236,522							236,522

- 136 -



	Carrying Value			Range of Contractual Yields	Average Re-pricing (in years)	Discount Rate		Estimated Fair Value
Cash and cash equivalents	$	972,881						$	972,881
Trading securities:
Obligations of the U.S. government	1,839							1,839
U.S. agency residential mortgage-backed securities	49,501							49,501
Municipal and other tax-exempt securities	57,431							57,431
Other trading securities	888							888
Total trading securities	109,659							109,659
Investment securities:
Municipal and other tax-exempt	133,394							138,461
U.S. agency residential mortgage-backed securities	130,668							130,614
Other debt securities	188,590							214,159
Total investment securities	452,652							483,234
Available for sale securities:
U.S. Treasury	1,006							1,006
Municipal and other tax-exempt	70,195							70,195
U.S. agency residential mortgage-backed securities	9,016,877							9,016,877
Privately issued residential mortgage-backed securities	457,332							457,332
Other debt securities	5,900							5,900
Perpetual preferred stock	19,080							19,080
Equity securities and mutual funds	49,241							49,241
Total available for sale securities	9,619,631							9,619,631
Fair value option securities:
U.S. agency residential mortgage-backed securities	672,191							672,191
Corporate debt securities	—							—
Total fair value option securities	672,191							672,191
Residential mortgage loans held for sale	256,397							256,397
Loans:
Commercial	6,475,689			0.25 - 30.00%	0.56	0.64 - 3.81%		6,406,679
Commercial real estate	2,259,902			0.38 - 18.00%	1.23	0.28 - 3.39%		2,227,367
Residential mortgage	1,911,896			0.38 - 18.00%	3.24	0.88 - 3.78%		1,984,949
Consumer	477,082			0.38 - 21.00%	0.48	1.90 - 3.68%		477,058
Total loans	11,124,569							11,096,053
Allowance for loan losses	(271,456		)					—
Net loans	10,853,113							11,096,053
Mortgage servicing rights	87,948							87,948
Derivative instruments with positive fair value, net of cash margin	370,616							370,616
Other assets – private equity funds	29,113							29,113
Deposits with no stated maturity	14,884,552							14,884,552
Time deposits	3,554,470			0.01 - 9.64%	2.02	0.87 - 1.28%		3,620,327
Other borrowings	2,605,737			0.25 - 6.58%	—	0.06 - 2.70%		2,605,739
Subordinated debentures	398,834			5.19 - 5.82%	1.67	3.24	%	413,701
Derivative instruments with negative fair value, net of cash margin	341,822							341,822

- 137 -

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 sheet 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 $193 million at September 30, 2012 , $207 million at December 31, 2011 and $250 million at September 30, 2011 .

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.

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

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, 2012 , December 31, 2011 or September 30, 2011 .

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 which have been designated as economic hedges against changes in the fair value of mortgage servicing rights, certain corporate debt securities economically hedged by derivative contracts to manage interest rate risk and all residential mortgage loans originated for sale at fair value. Changes in the fair value of these financial instruments are recognized in earnings.

- 138 -

( 13 ) Federal and State Income Taxes

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Amount:
Federal statutory tax	$	46,771		$	44,963		$	145,234		$	120,062
Tax exempt revenue	(1,398		)	(1,395		)	(3,996		)	(4,089		)
Effect of state income taxes, net of federal benefit	3,640			2,593			10,210			7,969
Utilization of tax credits	(718		)	(602		)	(3,282		)	(1,695		)
Bank-owned life insurance	(931		)	(950		)	(2,886		)	(2,914		)
Reduction of tax accrual	(950		)	(1,764		)	(950		)	(1,764		)
Other, net	(636		)	161			117			3,546
Total	$	45,778		$	43,006		$	144,447		$	121,115



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
Percent of pretax income:
Federal statutory tax	35	%	35	%	35	%	35	%
Tax exempt revenue	(1	)	(1	)	(1	)	(1	)
Effect of state income taxes, net of federal benefit	3		2		2		2
Utilization of tax credits	(1	)	(1	)	(1	)	—
Bank-owned life insurance	(1	)	(1	)	(1	)	(1	)
Reduction of tax accrual	(1	)	(1	)	—		(1	)
Other, net	—		—		1		1
Total	34	%	33	%	35	%	35	%

During the first quarter of 2012, the Internal Revenue Service completed an audit of the Company's federal income tax return for the year ended December 31, 2008 with no adjustments.

( 14 ) Subsequent Events

The Company evaluated events from the date of the consolidated financial statements on September 30, 2012 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 other than those previously discussed in Note 8 .

- 139 -

Nine-Month Financial Summary – Unaudited

Consolidated Daily Average Balances, Average Yields and Rates



(Dollars in Thousands, Except Per Share Data)	Nine Months Ended
	September 30, 2012							September 30, 2011
	Average Balance		Revenue/ Expense ¹			Yield/ Rate		Average Balance		Revenue/ Expense ¹		Yield/ Rate
Assets
Funds sold and resell agreements	$	16,142	$	9		0.07	%	$	13,916	$	12	0.12	%
Trading securities	123,790		1,697			1.83	%	76,588		1,797		3.14	%
Investment securities
Taxable ³	291,551		12,840			5.88	%	177,485		7,904		5.95	%
Tax-exempt ³	127,019		4,222			4.64	%	164,670		5,997		4.88	%
Total investment securities	418,570		17,062			5.52	%	342,155		13,901		5.44	%
Available for sale securities
Taxable ³	10,286,996		180,721			2.46	%	9,458,269		205,032		2.99	%
Tax-exempt ³	81,052		2,880			4.83	%	68,339		2,670		5.22	%
Total available for sale securities ³	10,368,048		183,601			2.47	%	9,526,608		207,702		3.01	%
Fair value option securities	408,853		7,684			2.59	%	503,988		13,772		3.94	%
Residential mortgage loans held for sale	212,757		5,862			3.68	%	139,142		4,460		4.29	%
Loans ²	11,597,586		388,274			4.47	%	10,736,544		378,726		4.72	%
Less: allowance for loan losses	242,067							290,596
Loans, net of allowance	11,355,519		388,274			4.57	%	10,445,948		378,726		4.85	%
Total earning assets ³	22,903,679		604,189			3.60	%	21,048,345		620,370		4.00	%
Cash and other assets	2,979,993							3,061,471
Total assets	$	25,883,672						$	24,109,816

Liabilities and equity
Interest-bearing deposits:
Transaction	$	8,938,958	$	10,804		0.16	%	$	9,374,413	$	19,202	0.27	%
Savings	256,151		416			0.22	%	209,816		573		0.37	%
Time	3,148,858		38,585			1.64	%	3,622,287		49,834		1.84	%
Total interest-bearing deposits	12,343,967		49,805			0.54	%	13,206,516		69,609		0.70	%
Funds purchased	1,585,663		1,618			0.14	%	995,213		731		0.10	%
Repurchase agreements	1,130,576		811			0.10	%	1,065,192		2,049		0.26	%
Other borrowings	85,569		2,604			4.06	%	153,511		4,397		3.83	%
Subordinated debentures	369,099		11,539			4.18	%	398,767		16,745		5.61	%
Total interest-bearing liabilities	15,514,874		66,377			0.57	%	15,819,199		93,531		0.79	%
Non-interest bearing demand deposits	6,283,126							4,638,405
Other liabilities	1,201,901							1,000,211
Total equity	2,883,771							2,652,001
Total liabilities and equity	$	25,883,672						$	24,109,816

Tax-equivalent Net Interest Revenue ³			$	537,812		3.03	%			$	526,839	3.21	%
Tax-equivalent Net Interest Revenue to Earning Assets ³						3.20	%					3.40	%
Less tax-equivalent adjustment ¹			6,855							6,815
Net Interest Revenue			530,957							520,024
Provision for (reduction of) allowance for credit losses			(8,000		)					8,950
Other operating revenue			503,485							433,001
Other operating expense			627,487							601,040
Income before taxes			414,955							343,035
Federal and state income tax			144,447							121,115
Net income before non-controlling interest			270,508							221,920
Net income attributable to non-controlling interest			1,882							3,038
Net income attributable to BOK Financial Corp.			$	268,626						$	218,882
Earnings Per Average Common Share Equivalent:
Net income:
Basic			$	3.94						$	3.20
Diluted			$	3.92						$	3.19


^1.	Tax equivalent at the statutory federal and state rates for the periods presented. The taxable equivalent adjustments shown are for comparative purposes.


^2.	The loan averages included loans on which the accrual of interest has been discontinued and are stated net of unearned income.


^3.	Yield calculations exclude security trades that have been recorded on trade date with no corresponding interest income.

- 140 -

Quarterly Financial Summary – Unaudited

Consolidated Daily Average Balances, Average Yields and Rates



(In Thousands, Except Per Share Data)	Three Months Ended
	September 30, 2012						June 30, 2012
	Average Balance		Revenue/ Expense ¹		Yield/ Rate		Average Balance		Revenue/ Expense ¹			Yield/ Rate
Assets
Funds sold and resell agreements	$	17,837	$	3	0.07	%	$	19,187	$	4		0.08	%
Trading securities	132,213		703		2.12	%	143,770		548			1.53	%
Investment securities
Taxable ³	281,347		4,124		5.83	%	290,557		4,282			5.93	%
Tax-exempt ³	127,299		1,212		4.12	%	125,727		1,461			4.90	%
Total investment securities	408,646		5,336		5.33	%	416,284		5,743			5.63	%
Available for sale securities
Taxable ³	10,969,610		59,482		2.36	%	10,007,368		61,583			2.52	%
Tax-exempt ³	88,445		1,044		4.70	%	83,911		943			4.69	%
Total available for sale securities ³	11,058,055		60,526		2.38	%	10,091,279		62,526			2.54	%
Fair value option securities	336,160		1,886		2.27	%	335,965		2,311			2.62	%
Residential mortgage loans held for sale	264,024		2,310		3.48	%	191,311		1,784			3.75	%
Loans ²	11,739,662		127,816		4.33	%	11,614,722		132,391			4.58	%
Less allowance for loan losses	231,177						242,605
Loans, net of allowance	11,508,485		127,816		4.42	%	11,372,117		132,391			4.68	%
Total earning assets ³	23,725,420		198,580		3.47	%	22,569,913		205,307			3.69	%
Cash and other assets	2,862,752						2,968,604
Total assets	$	26,588,172					$	25,538,517
Liabilities and equity
Interest-bearing deposits:
Transaction	$	8,719,648	$	3,406	0.16	%	$	8,779,659	$	3,572		0.16	%
Savings	267,498		127		0.19	%	259,386		147			0.23	%
Time	3,068,870		12,384		1.61	%	3,132,220		12,671			1.63	%
Total interest-bearing deposits	12,056,016		15,917		0.53	%	12,171,265		16,390			0.54	%
Funds purchased	1,678,006		632		0.15	%	1,740,354		674			0.16	%
Repurchase agreements	1,112,847		281		0.10	%	1,095,298		265			0.10	%
Other borrowings	97,003		739		3.03	%	86,667		853			3.96	%
Subordinated debentures	352,432		2,475		2.79	%	357,609		3,512			3.95	%
Total interest-bearing liabilities	15,296,304		20,044		0.52	%	15,451,193		21,694			0.56	%
Non-interest bearing demand deposits	6,718,572						6,278,342
Other liabilities	1,626,643						940,249
Total equity	2,946,653						2,868,733
Total liabilities and equity	$	26,588,172					$	25,538,517
Tax-equivalent Net Interest Revenue ³			$	178,536	2.95	%			$	183,613		3.13	%
Tax-equivalent Net Interest Revenue to Earning Assets ³					3.12	%						3.30	%
Less tax-equivalent adjustment ¹			2,509						2,252
Net Interest Revenue			176,027						181,361
Provision for (reduction of ) allowance for credit losses			—						(8,000		)
Other operating revenue			179,944						187,035
Other operating expense			222,340						223,786
Income before taxes			133,631						152,610
Federal and state income tax			45,778						53,149
Net income before non-controlling interest			87,853						99,461
Net income (loss) attributable to non-controlling interest			471						1,833
Net income attributable to BOK Financial Corp.			$	87,382					$	97,628
Earnings Per Average Common Share Equivalent:
Net income:
Basic			$	1.28					$	1.43
Diluted			$	1.27					$	1.43


^1.	Tax equivalent at the statutory federal and state rates for the periods presented. The taxable equivalent adjustments shown are for comparative purposes.


^2.	The loan averages included loans on which the accrual of interest has been discontinued and are stated net of unearned income.


^3.	Yield calculations exclude security trades that have been recorded on trade date with no corresponding interest income.

- 141 -



Three Months Ended
March 31, 2012							December 31, 2011							September 30, 2011
Average Balance		Revenue /Expense ¹			Yield / Rate		Average Balance		Revenue / Expense ¹			Yield / Rate		Average Balance		Revenue / Expense ¹		Yield / Rate

$	11,385	$	2		0.07	%	$	12,035	$	3		0.10	%	$	12,344	$	5	0.16	%
95,293		446			1.88	%	97,972		689			2.79	%	88,576		637		2.85	%

302,861		4,434			5.89	%	314,217		4,677			5.91	%	194,371		2,759		5.63	%
128,029		1,549			4.87	%	129,109		1,565			4.81	%	135,256		1,683		4.94	%
430,890		5,983			5.59	%	443,326		6,242			5.59	%	329,627		4,442		5.35	%

9,876,508		59,656			2.48	%	9,845,351		54,839			2.37	%	9,586,411		66,040		2.82	%
70,719		893			5.17	%	69,172		896			5.14	%	70,181		870		4.92	%
9,947,227		60,549			2.50	%	9,914,523		55,735			2.39	%	9,656,592		66,910		2.83	%
555,233		3,487			2.79	%	660,025		4,877			2.98	%	594,629		5,299		3.66	%
182,372		1,768			3.90	%	201,242		2,032			4.01	%	156,621		1,616		4.09	%
11,436,811		128,067			4.50	%	11,152,315		130,736			4.65	%	10,872,805		129,073		4.71	%
252,538							266,473							285,570
11,184,273		128,067			4.61	%	10,885,842		130,736			4.76	%	10,587,235		129,073		4.84	%
22,406,673		200,302			3.64	%	22,214,965		200,314			3.69	%	21,425,624		207,982		3.91	%
3,109,910							3,422,475							3,196,114
$	25,516,583						$	25,637,440						$	24,621,738


$	9,319,978	$	3,826		0.17	%	$	9,276,608	$	4,213		0.18	%	$	9,310,046	$	5,488	0.23	%
241,442		142			0.24	%	220,236		146			0.26	%	214,979		183		0.34	%
3,246,362		13,530			1.68	%	3,485,059		14,922			1.70	%	3,617,731		16,736		1.84	%
12,807,782		17,498			0.55	%	12,981,903		19,281			0.59	%	13,142,756		22,407		0.68	%
1,337,614		312			0.09	%	1,197,154		186			0.06	%	994,099		135		0.05	%
1,183,778		265			0.09	%	1,189,861		404			0.13	%	1,128,275		495		0.17	%
72,911		1,012			5.58	%	88,489		1,059			4.75	%	128,288		1,701		5.26	%
397,440		5,552			5.62	%	398,858		5,640			5.61	%	398,812		5,627		5.60	%
15,799,525		24,639			0.63	%	15,856,265		26,570			0.66	%	15,792,230		30,365		0.76	%
5,847,682							5,588,596							5,086,538
1,034,143							1,422,092							1,004,564
2,835,233							2,770,487							2,738,406
$	25,516,583						$	25,637,440						$	24,621,738
		$	175,663		3.01	%			$	173,744		3.03	%			$	177,617	3.15	%
					3.19	%						3.20	%					3.34	%
		2,094							2,274							2,233
		173,569							171,470							175,384
		—							(15,000		)					—
		140,381							138,027							173,977
		185,237							219,197							220,896
		128,713							105,300							128,465
		45,520							37,396							43,006
		83,193							67,904							85,459
		(422		)					911							358
		$	83,615						$	66,993						$	85,101


		$	1.22						$	0.98						$	1.24
		$	1.22						$	0.98						$	1.24

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Quarterly Earnings Trends – Unaudited

(In thousands, except share and per share data)



	Three Months Ended
	September 30, 2012			June 30, 2012			March 31, 2012			December 31, 2011			September 30, 2011

Interest revenue	$	196,071		$	203,055		$	198,208		$	198,040		$	205,749
Interest expense	20,044			21,694			24,639			26,570			30,365
Net interest revenue	176,027			181,361			173,569			171,470			175,384
Provision for (reduction of) allowance for credit losses	—			(8,000		)	—			(15,000		)	—
Net interest revenue after provision for (reduction of) credit losses	176,027			189,361			173,569			186,470			175,384
Other operating revenue
Brokerage and trading revenue	31,261			32,600			31,111			25,629			29,451
Transaction card revenue	27,788			26,758			25,430			25,960			31,328
Trust fees and commissions	19,654			19,931			18,438			17,865			17,853
Deposit service charges and fees	25,148			25,216			24,379			24,921			24,614
Mortgage banking revenue	50,266			39,548			33,078			25,438			29,493
Bank-owned life insurance	2,707			2,838			2,871			2,784			2,761
Other revenue	9,476			7,559			9,027			9,189			10,535
Total fees and commissions	166,300			154,450			144,334			131,786			146,035
Gain (loss) on other assets, net	125			2,990			(3,456		)	1,682			351
Gain (loss) on derivatives, net	464			2,345			(2,473		)	(174		)	4,048
Gain (loss) on fair value option securities, net	6,192			6,852			(1,733		)	222			17,788
Gain on available for sale securities, net	7,967			20,481			4,331			7,080			16,694
Total other-than-temporary impairment losses	—			(135		)	(505		)	(1,037		)	(9,467		)
Portion of loss reclassified from other comprehensive income	(1,104		)	(723		)	(3,217		)	(1,747		)	(1,833		)
Net impairment losses recognized in earnings	(1,104		)	(858		)	(3,722		)	(2,784		)	(11,300		)
Total other operating revenue	179,944			186,260			137,281			137,812			173,616
Other operating expense
Personnel	122,775			122,297			114,769			121,129			103,260
Business promotion	6,054			6,746			4,388			5,868			5,280
Contribution to BOKF Charitable Foundation	—			—			—			—			4,000
Professional fees and services	7,991			8,343			7,599			7,664			7,418
Net occupancy and equipment	16,914			16,906			16,023			16,826			16,627
Insurance	3,690			4,011			3,866			3,636			2,206
Data processing and communications	26,486			25,264			22,144			26,599			24,446
Printing, postage and supplies	3,611			3,903			3,311			3,637			3,780
Net losses and operating expenses of repossessed assets	5,706			5,912			2,245			6,180			5,939
Amortization of intangible assets	742			545			575			895			896
Mortgage banking costs	11,566			11,173			7,573			10,154			9,349
Change in fair value of mortgage servicing rights	9,576			11,450			(7,127		)	5,261			24,822
Other expense	7,229			6,461			6,771			11,133			12,512
Total other operating expense	222,340			223,011			182,137			218,982			220,535
Income before taxes	133,631			152,610			128,713			105,300			128,465
Federal and state income tax	45,778			53,149			45,520			37,396			43,006
Net income before non-controlling interest	87,853			99,461			83,193			67,904			85,459
Net income (loss) attributable to non-controlling interest	471			1,833			(422		)	911			358
Net income attributable to BOK Financial Corp.	$	87,382		$	97,628		$	83,615		$	66,993		$	85,101

Earnings per share:
Basic	$1.28			$1.43			$1.22			$0.98			$1.24
Diluted	$1.27			$1.43			$1.22			$0.98			$1.24
Average shares used in computation:
Basic	67,966,700			67,472,665			67,665,300			67,526,009			67,827,591
Diluted	68,334,989			67,744,828			67,941,895			67,774,721			68,037,419

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PART II. Other Information

Item 1. Legal Proceedings

See discussion of legal proceedings at Note 8 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 September 30, 2012.



Period	Total Number of Shares Purchased ²	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ¹	Maximum Number of Shares that May Yet Be Purchased Under the Plans
July 1 to July 31, 2012	24,823	$	58.32	—	1,960,504
August 1 to August 31, 2012	5,901	$	58.78	—	1,960,504
September 1 to September 30, 2012	114,926	$	58.08	—	1,960,504
Total	145,650			—


¹	On April 24, 2012, the Company’s board of directors authorizing the Company to repurchase up to two million shares of the Company’s common stock. As of September 30, 2012, the Company had repurchased 39,496 shares under this plan.


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

Item 6. Exhibits


10.7.14	BOK Financial Corporation 2003 Executive Incentive Plan, as amended and restated, for the Chief Executive Officer and for Direct Reports to the Chief Executive Officer, incorporated by reference to the Schedule 14 A Definitive Proxy Statement filed on March 15, 2011.


10.7.15	BOK Financial Corporation 2011 True-Up Plan, for the Chief Executive Officer and his Direct Reports, incorporated by reference to the Schedule 14A Definitive Proxy Statement filed on March 15, 2011.


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(a)	Credit Agreement dated June 9, 2011 between BOK Financial Corporation and participating lenders, filed herewith.


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

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

* As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Section 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

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Signatures

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

BOK FINANCIAL CORPORATION

(Registrant)

Date: November 6, 2012

/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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TABLE OF CONTENTS

Part II. Other Information Item 1. Legal Proceedings Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 6. Exhibits

BOKF 10-Q Quarter ended Sept. 30, 2012